HIGH COURT OF AUSTRALIA COMMISSIONER OF TAXATION APPELLANT AND TRUDY AMANDA HART & ANOR RESPONDENTS Commissioner of Taxation v Hart [2004] HCA 26 27 May 2004 ORDER 1. Appellant's application for special leave to appeal on the ground set out in paragraph (2) in his draft notice of appeal filed with that application refused. 2. Appeal allowed. 3. Set aside the orders made by the Full Court of the Federal Court of Australia on 26 November 2002 and, in their place, order that the appeal to that Court be dismissed with costs. 4. Appellant to pay respondents' costs in this Court. On appeal from the Federal Court of Australia Representation: B J Shaw QC and G T Pagone QC with J Davies for the appellant (instructed by Australian Government Solicitor) R F Edmonds SC with M Richmond for the respondents (instructed by Gadens Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Commissioner of Taxation v Hart Income tax – Avoidance of tax – Tax benefit under Income Tax Assessment Act 1936 (Cth) – Whether scheme entered into for the dominant purpose of obtaining a tax benefit – Meaning of "scheme" – Split loan facility – Where money borrowed in part to purchase a principal place of residence and in part to refinance investment property used to produce assessable income – Where expenditure in relation to producing assessable income deductible – Where repayments on loan applied solely in satisfaction of that part of the loan not used to produce assessable income. Words and phrases – "scheme". Income Tax Assessment Act 1936 (Cth), ss 177A, 177C, 177D, 177F. GLEESON CJ AND McHUGH J. The issues in this appeal, and the relevant facts, are set out in the reasons of Gummow and Hayne JJ. We agree that the Commissioner's appeal on the Pt IVA issue should succeed, and that the question relating to the deductibility, in the circumstances, of interest upon interest (which was answered by all four members of the Federal Court in favour of the respondents) does not arise. It is convenient to begin a consideration of Pt IVA, in its application to the present problem, by reference to a matter on which Gyles J, at first instance, and all the members of the Full Court were in agreement. It relates to the tax benefit that was obtained by the respondents. An accurate understanding of that benefit is important to a resolution of the difference of opinion between Gyles J and the Full Court on the ultimate outcome. It is part of the scheme of the Income Tax Assessment Act 1936 (Cth) that, as a general rule, interest on money borrowed to finance the purchase of a taxpayer's private dwelling house is not an allowable deduction, and interest on money borrowed to finance an investment property, such as a dwelling house to be let for rental purposes, is an allowable deduction1. That being so, other things being equal, it may make commercial sense for a taxpayer who is considering the relative levels of borrowing to be undertaken for the purposes of acquiring a residential property, and an investment property, respectively, to arrange for the latter to be more highly geared than the former. If such a taxpayer took out two separate loans, and the terms of the loan for the investment property were different from the terms of the loan for the residential property in that they provided for a higher ratio of debt to equity, and for payments of interest only, rather than interest and principal, during a lengthy term, then ordinarily that would give rise to no adverse conclusion under s 177D. It may mean no more than that, in considering the terms of the borrowing for investment purposes, the taxpayer took into account the deductibility of the interest in negotiating the terms of the loan. How could a borrower, acting rationally, fail to take it into account? The argument for the respondents is that, stripped of immaterial complexities, in essence there is little more to the present case than that. The respondents wanted to borrow money for two purposes: to buy a new house; and to finance the retention of their former home as an income-producing property. They simply arranged for the second part of the borrowing to be more highly geared than the first, and it would not be concluded that their dominant purpose was other than to borrow money to enable them to buy a new house and retain their old house as an investment. cf Steele v Deputy Commissioner of Taxation (1999) 197 CLR 459. McHugh The appellant says there is much more to it than that. The tax benefit cancelled by the appellant in the s 177F determination (putting to one side the compound interest question) was a benefit of the kind referred to in s 177C(1) as "a deduction being allowable to the taxpayer ... where ... a part of that deduction would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer ... if the scheme had not been entered into or carried out". As Hill J correctly pointed out2, the definition of the scheme is important, because any tax benefit identified must be related to the scheme, as must any conclusion of dominant purpose, and also the ultimate determination. The significance of the definition of the scheme extends beyond a question of procedural fairness to the taxpayer. It is central to the application of ss 177C, 177D and 177F. However, the identification of the tax benefit is also of central importance. In this case, the benefit in question was not the deduction for interest on that part of the loan referable to the investment property (referred to in the evidence as loan account 2). It was part of that deduction. It was described by Hill J3 as "the amount of interest representing the difference between the interest payable on the principal sum applied to refinancing Jerrabomberra [the sum the subject of loan account 2] calculated as if there had been rateable principal and interest payable on that sum and the interest in fact claimed as a deduction". In the Federal Court, there were concurrent findings that such a tax benefit had been obtained by the respondents. Hill J, with whom the other members of the Full Court agreed, said that the finding of Gyles J on the point should not be disturbed4. That finding turned upon what was found to be a reasonable expectation as to what deduction would have been allowable if the relevant scheme had not been entered into or carried out. Gyles J based his finding as to that expectation on the information given to the respondents about the proposed loan, which invited them to compare the financing of a home loan and an investment/business loan using "standard financing arrangements", on the one hand, with the "wealth optimiser structure" that was ultimately adopted, on the other5. The identification of the tax benefit, and the identification of the scheme, are inter-related. The benefit was not the whole of the interest on loan account 2 (the investment part of the borrowing); it was that part of the interest which resulted from the special, or non-standard, features of the arrangements between 2 Hart v Commissioner of Taxation (2002) 121 FCR 206 at 221 [41]. (2002) 121 FCR 206 at 223 [49]. (2002) 121 FCR 206 at 222-223 [49]. 5 Hart v Commissioner of Taxation (2001) 189 ALR 584 at 603 [41]. McHugh the lender and the borrowers. Those were the features to which the respondents were invited to pay attention in deciding whether to enter into the particular transaction. Those features, which defined the "wealth optimiser structure" and distinguished it from "standard financing arrangements", were definitive of the scheme in connection with which the tax benefit, identified by all four members of the Federal Court, was obtained. Gyles J found that there was no evidentiary basis for accepting, as a realistic possibility, that, if the respondents had not taken up the offer of the "wealth optimiser structure", they could have arranged finance, on the terms applicable to loan account 2, for their investment property. He said6: "There is no support in the evidence for the proposition that the [respondents] would have financed the home by a credit foncier arrangement, and the investment property by a separate interest only loan for a fixed term in relation to which no capital repayments are made and where the only payments which are made are interest payments. There is no evidence as to the availability of such interest only loans on terms which would suit [the respondents] or any similar borrower. Indeed, there is no evidence that interest only loans are made for periods of 25 years or anything like it. Having in mind inflation, it is most unlikely that any such loan would be available. Furthermore, there is not any evidence as to precisely how a package of that sort would be tailored to suit the budget of the [respondents]. A feature of a credit foncier loan is the certainty of the periodic payments for the whole of the period, subject to some variation if interest rates change. This is a feature of the Austral loan as well as the posited 'ordinary financing arrangements' with which it was compared [by Austral]. The actual loan was a credit foncier arrangement with fixed periodic payments over 25 years. It was only one loan with one interest rate. This is the true comparison. The contractual provisions involving the split between loan accounts 1 and 2 are an artificial feature of the arrangements." Hill J, in the Full Court, with whom Hely J and Conti J agreed, described the finding of Gyles J on the question of the tax benefit as a finding that, but for the "wealth optimiser structure", the respondents would have borrowed on the basis that (whether there was one borrowing or two) the borrowing would be on terms that the respondents would have made monthly repayments of principal and interest, so that interest would have been spread rateably over the total of the borrowed moneys in the proportion that these moneys were used to purchase the (2001) 189 ALR 584 at 603 [43]. McHugh new home and refinance the Jerrabomberra property7. This finding, Hill J held, should not be disturbed8. The point of departure between the reasoning of Gyles J and that of the Full Court concerned the application of s 177D to the facts of the case. In that respect, the Full Court accepted an argument that Gyles J appeared to have found that the scheme was to be defined in a way that omitted the actual borrowing9. The members of the Full Court were correct to insist that it is inappropriate to exclude the fact of borrowing from the putative scheme. The tax benefit in question was the obtaining of part of a deduction of interest on borrowed money. A taxpayer is not allowed such a deduction for agreeing to a term in a contract of loan, or giving a direction about allocation of payments, or taking some other step in the exercise of rights conferred under the contract. The definition of "scheme" in s 177A is wide, but it must be related to the tax benefit obtained. The deduction here was for the incurring of a liability to pay interest on borrowed money. The tax benefit in connection with the relevant scheme was part of an allowable deduction for interest. This, it seems to us, is what was meant by references in the judgments in the Full Court to the scheme being capable of standing on its own feet. The judges were making the point, which is undoubtedly correct, that, where the tax benefit in question is part of an allowable deduction for interest, a search for the purpose of a scheme, identified in a manner that does not include the borrowing, is not an undertaking that conforms with the requirements of the legislation. In a given case, a wider or narrower approach may be taken to the identification of a scheme, but it cannot be an approach which divorces the scheme from the tax benefit. Here, the borrowing was an indispensable part of that which produced the tax benefit. A description of the scheme that did not include the borrowing would make no sense. However, we do not accept that Gyles J made the error attributed to him. Nor is such an error implicit in the appellant's argument in this Court. While the fact of the borrowing cannot be left out of consideration, it was what the mortgage broker described as the "wealth optimiser structure" of the loan arrangements that secured the tax benefit, that is, not the deduction of the interest on loan account 2, but part of that deduction. (2002) 121 FCR 206 at 222 [47]. (2002) 121 FCR 206 at 222-223 [49]. (2002) 121 FCR 206 at 226 [64]. McHugh "In one aspect, the gist of the scheme lies in the availability of the unencumbered residential property to act as security for the grossly inflated investment loan account after the period of capitalisation of interest and, for that matter, to provide a margin of security during the period of capitalisation as the investment loan account principal increases. Put another way, the scheme depended upon interest being deferred (although incurred and deductible for tax purposes) in order to enable what purported to be capital payments to be made in relation to the other loan. ... Thus, the real effect and substance of the arrangements was to make the payment of interest on the capital sum paid in reduction of the residential loan deductible for taxation purposes." That description of the commercial substance of the transaction is closely related to what the appellant submitted, and Gyles J and the Full Court accepted, was the tax benefit obtained by the respondents. It was the tax benefit so obtained, and applied in reduction of the home loan, that was the wealth optimising aspect of the structure. It was the wealth optimising aspect of the structure, not divorced from the borrowing, but giving the borrowing its distinctive character, that constituted the scheme. In applying s 177D, Hill J said11: "While the scheme did permit the borrowing of moneys for the two purposes indicated, one private and the other income producing, the manner in which the scheme was formulated and thus entered into or carried out is certainly explicable only by the taxation consequences. By 'manner' here I refer to splitting what might commercially be seen as one advance into the two separate advances with interest on the income producing advance being permitted to remain unpaid, to be capitalised and the capitalised amount then attracting the compound interest with the amount which would otherwise have gone towards payment of that interest being directed towards the repayment of the capital outstanding on the private advance." Notwithstanding that finding, the Full Court, after taking account of all the factors listed in s 177D, held that it would be concluded that the dominant purpose of the respondents in entering into or carrying out the scheme was the 10 (2001) 189 ALR 584 at 604 [47]. 11 (2002) 121 FCR 206 at 226 [65]. McHugh obtaining of borrowed money to purchase a new home and refinance what was to become a rental property12. We are unable to share that opinion. As Hely J correctly observed in the Full Court13, the fact that a particular commercial transaction is chosen from a number of possible alternative courses of action because of tax benefits associated with its adoption does not of itself mean that there must be an affirmative answer to the question posed by s 177D. Taxation is part of the cost of doing business, and business transactions are normally influenced by cost considerations. Furthermore, even if a particular form of transaction carries a tax benefit, it does not follow that obtaining the tax benefit is the dominant purpose of the taxpayer in entering into the transaction. A taxpayer wishing to obtain the right to occupy premises for the purpose of carrying on a business enterprise might decide to lease real estate rather than to buy it. Depending upon a variety of circumstances, the potential deductibility of the rent may be an important factor in the decision. Yet, if there were nothing more to it than that, it would ordinarily be impossible to conclude, having regard to the factors listed in s 177D, that the dominant purpose of the lessee in leasing the land was to obtain a tax benefit. The dominant purpose would be to gain the right to occupy the premises, not to obtain a tax deduction for the rent, even if the availability of the tax deduction meant that leasing the premises was more cost- effective than buying them. Even so, a transaction may take such a form that there is a particular scheme in respect of which a conclusion of the kind described in s 177D is required, even though the particular scheme also advances a wider commercial objective. In Federal Commissioner of Taxation v Spotless Services Ltd, Brennan CJ, Dawson, Toohey, Gaudron, Gummow and Kirby JJ, after noting that revenue law considerations influence the form of most business transactions, and that the presence of a fiscal objective does not mean that a person entered into or carried out a scheme for the dominant purpose of obtaining a tax benefit, said14: "Much turns upon the identification, among various purposes, of that which is 'dominant'. In its ordinary meaning, dominant indicates that purpose which was the ruling, prevailing, or most influential purpose. In the present case, if the taxpayers took steps which maximised their after- tax return and they did so in a manner indicating the presence of the 12 (2002) 121 FCR 206 at 228 [73]. 13 (2002) 121 FCR 206 at 230 [81]. 14 (1996) 186 CLR 404 at 416. McHugh 'dominant purpose' to obtain a 'tax benefit', then the criteria which were to be met before the Commissioner might make determinations under s 177F were satisfied." Their Honours went on to say of the facts of that case15: "In those circumstances, a reasonable person would conclude that the taxpayers in entering into and carrying out the particular scheme had, as their most influential and prevailing or ruling purpose, and thus their dominant purpose, the obtaining thereby of a tax benefit, in the statutory sense. The scheme was the particular means adopted by the taxpayers to obtain the maximum return on the money invested after payment of all applicable costs, including tax. The dominant purpose in the adoption of the particular scheme was the obtaining of a tax benefit ... It is true that the taxpayers were concerned with obtaining what was regarded as adequate security for an investment made 'off-shore'. However, the circumstance that the Midland Letter of Credit afforded the necessary assurance to the taxpayers does not detract from the conclusion that, viewed objectively, it was the obtaining of the tax benefit which directed the taxpayers in taking steps they otherwise would not have taken by entering into the scheme." (emphasis added) Let it be assumed that, in the present case, even if the "wealth optimiser structure" had not been available, the respondents would have borrowed money to buy their new home, and also borrowed money in order to retain their former home as an income-earning investment. The "wealth optimiser structure" depended entirely for its efficacy upon tax benefits generated by arrangements between the respondents and the lender that had no explanation other than their fiscal consequences. What "optimised" the respondents' "wealth" was the tax benefit earlier described: not the deductibility of interest as such; but the deductibility of additional interest on loan account 2 contrived by the particular form of the borrowing transaction. It is for those reasons that we would allow the appeal. We agree with the consequential orders proposed by Gummow and Hayne JJ. 15 (1996) 186 CLR 404 at 423. The issue The principal issue in this appeal is whether the general anti-avoidance provisions of Pt IVA of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act") may be applied to disallow tax benefits obtained by taxpayers under what have become known as "split loan facilities". If that issue were to be resolved against the appellant ("the Commissioner") the Commissioner would seek special leave to raise a further issue about whether amounts charged as interest on interest could be claimed by the respondents as deductions where both the interest, and the interest on interest, were charged under an agreement to lend money which was applied by the respondents in purchasing an asset used to gain or produce assessable income. The application for special leave to appeal on a ground raising that issue was referred to this Court. Under a "split loan facility" a taxpayer borrowed money, applied part to a private or domestic venture (often, as in this case, the purchase of a principal place of residence), and applied the balance to the acquisition (here the refinancing) of an asset to be used for the purpose of gaining or producing assessable income. The loan agreement provided for the borrower to direct the application of the whole of the periodical payments required under the loan agreement to the satisfaction of that part of the loan used for private or domestic purposes. Interest on the balance of the loan was allowed to accrue and be capitalised and compounded. Because the periodical payments required under the loan agreement would suffice to repay the whole of the capital sum lent, and the whole of the interest which would accrue during the term of the loan, the application of periodical payments to only part of the sum lent (and the interest accruing on that part) would repay that part of the loan quickly. In the meantime, the amount of interest charged on the balance of the loan would increase, and the capital sum owing on that account would rise, as interest was capitalised and then compounded. On the basis that this second part of the sum lent was applied to acquiring an asset used for the purpose of gaining or producing assessable income, the taxpayer claimed the amount of interest charged on this account as a deduction against assessable income pursuant to s 51 of the 1936 Act or, later, s 8-1 of the Income Tax Assessment Act 1997 (Cth) ("the 1997 Act"). These reasons will seek to demonstrate that the Commissioner was entitled to make the determinations under Pt IVA which he made in relation to each of the respondents. The subsidiary issue about the deductibility of interest on interest does not arise. The particular facts In 1996, the respondents borrowed $298,000 from Permanent Custodians Limited. Austral Mortgage Corporation Pty Ltd ("Austral") acted as agent for the lender and negotiated the terms on which the respondents borrowed the money. The respondents applied $95,112 of that sum to repay the amount outstanding on the mortgage of a house which they then owned and which they intended to hold for the purposes of letting and thus gaining assessable income. It is convenient to refer to this house as "the investment property". The balance of the amount borrowed ($202,888) was applied to pay the purchase price of a house which the respondents intended to occupy, some expenses they incurred, and an amount owing on a property which the first respondent's mother owned which was to be provided as an additional security for the transaction. The rate of interest payable on the loan could be varied by the lender. Interest accrued daily but was to be debited to the borrowers' loan account monthly. The respondents were bound to repay the loan by 300 monthly payments. The amount of each payment was calculated according to the prevailing interest rate at an amount which would repay the whole of the loan, and interest, over its term. The loan agreement provided that upon request by the respondents, the lender would split the loan balance into a maximum of four separate loan accounts, and allocate the loan balance between those loan accounts in accordance with the respondents' request. It went on to provide that, while the loan amount was split into loan accounts, the loan agreement applied to each account as if the balance of each account was a separate loan and that, provided that the lender was not entitled to require the respondents to repay the loan in full immediately, the lender would credit all payments received by it among the loan accounts in accordance with the respondents' directions. Pursuant to these provisions the respondents requested the lender to split the loan amount and requested that payments which they made should be allocated all to an account having as its opening balance $202,888. That is, the respondents directed that their monthly repayments be applied in satisfaction of that part of the loan which they had used for purposes other than their refinancing the investment property. In consequence, the monthly repayments which the respondents made were credited to that part of the loan which they had used for private or domestic purposes. Interest charged on the part of the loan which the respondents had used to refinance the acquisition of an income-producing asset accrued and was capitalised and compounded. In their amended returns for the year ended 30 June 1997, and again for the year ended 30 June 1998, the respondents claimed as deductions from assessable income interest which was charged on that part of the loan which had been applied to the investment property. In 1999, the Commissioner made determinations that amounts which, but for the operation of Pt IVA, would have been allowable to the respondents as deductions in the 1997 and 1998 tax years not be allowable. The Commissioner issued amended assessments for the 1997 tax year and assessments for the the 1998 determinations. The respondents objected against these assessments; those objections, so far as now relevant, were disallowed. tax year which reflected Pursuant to Div 5 of Pt IVC of the Taxation Administration Act 1953 (Cth) the respondents appealed to the Federal Court of Australia against the Commissioner's decision disallowing their objections. At first instance, the respondents' appeals were dismissed16. They appealed to the Full Court of the Federal Court. That Court (Hill, Hely and Conti JJ) allowed17 the appeals and ordered that the Commissioner's objection decisions be set aside, the respondents' objections be allowed and the matters be remitted to the Commissioner to assess in accordance with law. The tax benefits disallowed It is important to notice the way in which the Commissioner calculated the amount of the deduction which was disallowed. The amount disallowed was part of the amount of interest claimed by each respondent as a deduction in each of the 1997 and 1998 tax years. The Pt IVA determinations made by the Commissioner did not state how the amounts disallowed were calculated. The reasons given for the Commissioner's objection decisions did reveal the basis of the calculations. Those reasons drew a distinction between what was called "additional interest" and what was called "the further interest amount". The former (the "additional interest") was identified as the difference between the interest incurred on that part of the loan which related to the investment property, and "the interest that would have been incurred if the borrower had applied the payments to the separate accounts". The interest that accrued on unpaid interest was referred to as "the further interest amount", which we will refer to as the "compound interest amount". It is important to note that the additional interest ($96 and $365 for each of the respondents in the 1997 and 1998 financial years respectively) included the compound interest amounts ($67 16 Hart v Commissioner of Taxation (2001) 189 ALR 584. 17 Hart v Commissioner of Taxation (2002) 121 FCR 206. and $315 for each of the respondents in the 1997 and 1998 financial years respectively). The Commissioner's reasons, having distinguished between these two types of interest, went on to conclude that the interest on interest (the compound interest amount) was not deductible under the general deduction provision (s 51 of the 1936 Act, which applied in the 1997 tax year, and s 8-1 of the 1997 Act, which applied in the 1998 tax year). But the Commissioner concluded that Pt IVA should be applied to disallow the additional interest which, as noted, includes the compound interest. (That is why the deductibility of interest on interest is a question which arises only if the Pt IVA issue is resolved against the Commissioner.) The amount of tax benefit identified, and disallowed, was calculated by taking the difference between the interest which the respondents claimed to be deductible (all interest charged to that part of the loan used for the investment property) and the interest which would have been charged on that part of the loan had it been a loan requiring periodical payments sufficient to pay both principal and interest over the term of the loan which the respondents had taken. Part IVA Part IVA is engaged only where a tax benefit has been obtained, or would but for s 177F(1) be obtained. The tax benefit must be one obtained by a taxpayer in connection with a scheme to which the Part applies. In those circumstances the Commissioner may exercise the power given by s 177F to determine that either an amount is to be included in the taxpayer's assessable income or a deduction is to be disallowed in whole or in part. The schemes to which Pt IVA applies are identified in s 177D. Leaving aside what s 177D says about the time and place at which a scheme is entered into or carried out, there are two elements that must be satisfied. First, it must be shown that the relevant taxpayer has obtained, or would but for s 177F obtain, a tax benefit in connection with the scheme. Secondly, it must be shown that having regard to eight matters "it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of enabling the relevant taxpayer to obtain a tax benefit in connection with the scheme" or enabling the relevant taxpayer and one or more other taxpayers to obtain a tax benefit in connection with the scheme. The "person" whose purpose is to be identified under s 177D is the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme. Section 177D makes plain that the person whose purpose is to be identified may be (but need not be) the relevant taxpayer or one of the other taxpayers mentioned in the section. The meaning of some of the expressions found in s 177D is amplified by some other provisions of the Part. Particular reference will be necessary to three of those provisions: first, the elucidation in s 177C of how a reference to "the obtaining by a taxpayer of a tax benefit in connection with a scheme" should be read; secondly, the definition of "scheme" in s 177A(1); and, thirdly, the elucidation in s 177A(5) of how a reference to a scheme or a part of "a scheme being entered into or carried out by a person for a particular purpose" should be read. Although it will often be convenient to begin any consideration of the application of the Part by attending to the operation of these elucidating and definitional provisions, approaching a particular case in this way must not be allowed to obscure the way in which the Part as a whole is evidently intended to operate. Taking Pt IVA as a whole, it is clear that ss 177D and 177F(1) are the two provisions about which the Part pivots. Section 177F(1) provides: "Where a tax benefit has been obtained, or would but for this section be obtained, by a taxpayer in connection with a scheme to which this Part applies, the Commissioner may— in the case of a tax benefit that is referable to an amount not being included in the assessable income of the taxpayer of a year of income — determine that the whole or a part of that amount shall be included in the assessable income of the taxpayer of that year of income; or in the case of a tax benefit that is referable to a deduction or a part of a deduction being allowable to the taxpayer in relation to a year of income — determine that the whole or a part of the deduction or of the part of the deduction, as the case may be, shall not be allowable to the taxpayer in relation to that year of income; and, where the Commissioner makes such a determination, he shall take such action as he considers necessary to give effect to that determination." Part IVA falls for consideration only where the Commissioner has made a determination under s 177F(1). A determination can be made only where a tax benefit has been obtained (or, but for s 177F(1), would be obtained) by a taxpayer in connection with a scheme to which Pt IVA applies. It follows, of course, that the concepts of "tax benefit", "scheme" and "scheme to which this Part applies" all have their part to play in deciding whether the power given to the Commissioner by s 177F(1) can be exercised. But it is important to consider what the Act says about those concepts having regard to two considerations. First, the various defined terms must be given operation in the interrelated way which s 177F(1) requires. Each of the defined terms takes its place in a single provision permitting the making of a determination. Secondly, each of the definitions must be understood bearing in mind that the inquiry required by Pt IVA is an objective, not subjective, inquiry. The objective nature of the inquiry required is evident from s 177D, which identifies the schemes to which Pt IVA applies. It provides: "This Part applies to any scheme that has been or is entered into after 27 May 1981, and to any scheme that has been or is carried out or commenced to be carried out after that date (other than a scheme that was entered into on or before that date), whether the scheme has been or is entered into or carried out in Australia or outside Australia or partly in Australia and partly outside Australia, where— a taxpayer (in this section referred to as the 'relevant taxpayer') has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme; and having regard to— the manner in which the scheme was entered into or carried out; the form and substance of the scheme; (iii) (vii) the time at which the scheme was entered into and the length of the period during which the scheme was carried out; the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme; any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme; any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme; relevant any other consequence taxpayer, or for any person referred to in subparagraph (vi), of the scheme having been entered into or carried out; and the for (viii) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in subparagraph (vi), it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of enabling the relevant taxpayer to obtain a tax benefit in connection with the scheme or of enabling the relevant taxpayer and another taxpayer or other taxpayers each to obtain a tax benefit in connection with the scheme (whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers)." "Scheme" is defined in s 177A(1) as meaning: agreement, any arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and any scheme, plan, proposal, action, course of action or course of conduct". It includes a reference to a unilateral scheme, plan, proposal, action, course of action or course of conduct18. A reference to a scheme or a part of a scheme being entered into or carried out by a person for a particular purpose is to be read19 as including a reference to the scheme, or part of the scheme, being entered into or carried out by the person for two or more purposes of which the particular purpose is the dominant purpose. The last of the definitional provisions which must be noticed is s 177C(1) which describes how a reference in Pt IVA to the obtaining by a taxpayer of a tax benefit in connection with a scheme is to be read. It is to be read as a reference an amount not being included in the assessable income of the taxpayer of a year of income where that amount would have been 18 s 177A(3). 19 s 177A(5). included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out; or a deduction being allowable to the taxpayer in relation to a year of income where the whole or a part of that deduction would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer in relation to that year of income if the scheme had not been entered into or carried out". The limitations on the reference that are identified in s 177C(2) were not said to be relevant and their detail need not be noticed. Identifying the "scheme" It has become customary in Pt IVA cases to begin the inquiry by identifying what is said to be the "scheme". And often enough the Commissioner has sought to identify, as he did in these cases, both a "wider scheme" and a "narrower scheme". This practice can be traced to what was said, both in this Court, and in the Full Court of the Federal Court, in Federal Commissioner of Taxation v Peabody20. And because what was said in this Court's decision in Peabody appears to have been taken to decide more than it did, it is necessary to pause to identify what was at issue in that appeal. In Peabody, the Full Court of the Federal Court decided that the Commissioner should be held to the "scheme" which he had identified at trial and that, in an appeal against the disallowance of an objection to an assessment, the Commissioner could not seek to rely on only some of the steps or elements which had been identified as constituting the scheme, as themselves constituting a scheme. The Commissioner succeeded on this point in his appeal to this Court. This Court, in its joint reasons, pointed out21 that "Pt IVA does not provide that a scheme includes part of a scheme". Noting that the Commissioner might be required to supply particulars of the scheme upon which he relied22 the Court 20 (1994) 181 CLR 359; on appeal from Peabody v Commissioner of Taxation (1993) 40 FCR 531. 21 (1994) 181 CLR 359 at 383. 22 Bailey v Federal Commissioner of Taxation (1977) 136 CLR 214. said23 that the Commissioner was entitled to put his case in alternative ways and that: "[i]f, within a wider scheme which has been identified, the Commissioner seeks also to rely upon a narrower scheme as meeting the requirements of Pt IVA, ... there is no reason why the Commissioner should not be permitted to do so24, provided it causes no undue embarrassment or surprise to the other side." The actual decision in Peabody was that the Commissioner was not bound to the precise way in which he had identified the relevant scheme in that case. The Court said25: "The erroneous identification by the Commissioner of a scheme as being one to which Pt IVA applies or a misconception on his part as to the connexion of a tax benefit with such a scheme will result in the wrongful exercise of the discretion conferred by s 177F(1) only if in the event the tax benefit which the Commissioner purports to cancel is not a tax benefit within the meaning of Pt IVA. That is unlikely to be the case if the error goes to the mere detail of a scheme relied upon by the Commissioner. An error of a more fundamental kind, however, may have that result – where, for example, it leads to the identification of the wrong taxpayer as the recipient of the tax benefit. But the question in every case must be whether a tax benefit which the Commissioner has purported to cancel is in fact a tax benefit obtained in connexion with a Pt IVA scheme and so susceptible to cancellation at the discretion of the Commissioner." (emphasis added) As the Court pointed out26 in Peabody, this conclusion follows from the fact that the discretion given to the Commissioner by Pt IVA does not depend upon the formation of an opinion; it depends upon objective facts. Moreover, it is important to notice that "scheme" is defined, in s 177A(1), in terms that may not always permit the precise identification of what are said to be all of the integers of a particular "scheme". So much follows from the 23 (1994) 181 CLR 359 at 382. 24 See XCO Pty Ltd v Federal Commissioner of Taxation (1971) 124 CLR 343 at 349 25 (1994) 181 CLR 359 at 382. 26 (1994) 181 CLR 359 at 382. inclusion, within the statutory meaning, not only of arrangements that are not and are not intended to be enforceable by legal proceedings, but also of "any scheme, plan, proposal, action, course of action or course of conduct". This definition is very broad. It encompasses not only a series of steps which together can be said to constitute a "scheme" or a "plan" but also (by its reference to "action" in the singular) the taking of but one step. The very breadth of the definition of "scheme" is consistent with the objective nature of the inquiries that are to be made under Pt IVA. Nothing in subsequent decisions of the Court detracts from these conclusions about the operation of the definition of "scheme". In Federal Commissioner of Taxation v Consolidated Press Holdings Ltd, the Court held27 that part only of the total plan or course of conduct involved in the corporate arrangements that had been made within a group of companies could be identified as a scheme to which Pt IVA applied. Nor do we understand subsequent decisions of the Court as having sought to elevate the Commissioner's identification of the scheme upon which he relies beyond the purpose identified in Peabody: the purpose of preventing embarrassment or surprise to the opposite party in the conduct of the proceedings28. The fundamental question remains whether, having regard to the eight matters listed in s 177D(b), "it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of enabling the relevant taxpayer [alone or with others] to obtain a tax benefit in connection with the scheme". Against this background it is necessary to come to one other aspect of what was said in Peabody which appears to have loomed large in the argument of the present matters below. The Court said29 that it was possible, despite the very wide definition of a scheme, to conceive of a set of circumstances which constitutes only part of a scheme and not a scheme in itself. That will occur, the Court continued30, "where the circumstances are incapable of standing on their own without being 'robbed of all practical meaning'31". 27 (2001) 207 CLR 235 at 254 [52], 264 [96]. 28 Federal Commissioner of Taxation v Peabody (1994) 181 CLR 359 at 382. 29 (1994) 181 CLR 359 at 383. 30 (1994) 181 CLR 359 at 383-384. 31 See Inland Revenue Commissioners v Brebner [1967] 2 AC 18 at 27. This statement must be understood as having been directed to the issues of procedural fairness which underlay the issue presented in that case. Could the Commissioner, at trial or on appeal, point to some steps (narrower than those first identified by the Commissioner as the relevant scheme) and say that those steps constituted a scheme? As the Court went on to say32, immediately after its reference to circumstances being incapable of standing on their own feet without being robbed of all practical meaning: "In that event, it is not possible in our view to say that those circumstances constitute a scheme rather than part of a scheme merely because of the provision made by ss 177D and 177A. The fact that the relevant purpose under s 177D may be the purpose or dominant purpose under s 177A(5) of a person who carries out only part of the scheme is insufficient to enable part of a scheme to be regarded as a scheme on its own. That, of course, does not mean that if part of a scheme may be identified as a scheme in itself the Commissioner is precluded from relying upon it as well as the wider scheme." (emphasis added) The last sentence of this passage reveals that the Court's focus, not surprisingly, was upon the question raised in the appeal: was the Commissioner precluded from advancing a particular argument. The reference to circumstances being "robbed of all practical meaning" appears to have been understood in the Full Court33 in the present matters as a criterion which must be applied in deciding whether there is a scheme to which Pt IVA applies. That is not right. First, it is far from clear what legal test is intended by saying that a scheme must "stand on its own feet". It is not clear how the metaphor is to be translated into legal principle. Secondly, as the Full Court pointed out34 in the present matters, the words "robbed of all practical meaning", which were adopted in Peabody, were taken from Inland Revenue Commissioners v Brebner35. There they were used in a very different context and with a clearly intended meaning. The legislation in question in Brebner required comparison with what the statute36 called "bona fide commercial reasons". Part IVA, of course, contains no equivalent expression. What Lord Pearce said 32 (1994) 181 CLR 359 at 384. 33 (2002) 121 FCR 206 at 221 [42]. 34 (2002) 121 FCR 206 at 221 [42]. 35 [1967] 2 AC 18 at 27. 36 Finance Act 1960 (UK), s 28(1). would be "robbed of all practical meaning", if one part of an arrangement were to be isolated from other parts, was the sub-section, not the arrangement. Thirdly, and most importantly, there is no basis to be found in the words used in Pt IVA for the introduction of some criterion additional to those identified in the Act itself. There is no reference to a scheme having some commercial or other coherence. Far from the Part requiring reference only to the purpose of those who carry out all of whatever is identified as the scheme, s 177D(b) specifically refers to it being concluded "that the person, or one of the persons, who entered into or carried out ... any part of the scheme" did so for the purpose of enabling the relevant taxpayer (alone or with others) to obtain a tax benefit in connection with the scheme (emphasis added). Identifying the scheme in the present matters At the trial of these matters the Commissioner had identified37 a "wider scheme" and a "narrower scheme". The wider scheme was said to be "all the steps leading to, and the entering into, and the implementation of the loan arrangements" between the lender's agent and the respondents, including five particular steps. Those steps were: (a) the marketing of the loan to the respondents; (b) splitting the loan; (c) acceptance by the lender's agent of capitalisation of interest on that part of the loan used for investment purposes on the basis that it received another predetermined amount in reduction of the home loan portion; (d) the respondents' election to allocate all repayments to the home loan portion until that portion of the loan was paid; and (e) the consequential incurring of additional interest (including compound interest) on the investment loan portion. The narrower scheme was said to be "the provision in the loan for the division into two portions and the direction of the repayments to one or other portion and the direction by the [respondents] of the repayments to the home loan portion". In the Full Court, emphasis was given38 to whether the narrower definition of the scheme could "stand on its own feet". It was said that it could not, because it "did not include the loan itself". And because it was said that the narrower scheme could not stand on its own feet, the Full Court concluded39 that the wider scheme should be considered. The wider scheme was said to be all the steps leading to, and the entering into, and the implementation of the loan 37 (2001) 189 ALR 584 at 594 [29]. 38 (2002) 121 FCR 206 at 221 [44]. 39 (2002) 121 FCR 206 at 222 [45] per Hill J, 229 [76] per Hely J, 232 [94] per arrangements. It therefore included, among its elements, the making of the loan to the respondents. This in turn led the Full Court to conclude40 that, because the borrowing was for use in financing and refinancing the two properties, the dominant purpose conclusion required by s 177D(b) could not be reached. It will be necessary to notice some aspects of the way in which these conclusions were reached and expressed. But before doing that it is necessary to stay a little longer with the question of identifying the relevant scheme. The scheme to be identified must, of course, meet the definition of "scheme" set out in s 177A(1). But, in addition, the scheme to be identified must be a "scheme to which this Part applies": one which is entered into or carried out by a person for a purpose of the kind identified in s 177D(b) where a taxpayer has obtained, or would but for s 177F obtain, a tax benefit in connection with the scheme. It is important to bear steadily in mind that, as was pointed out in the joint reasons of six members of the Court in Federal Commissioner of Taxation v Spotless Services Ltd41, "Part IVA is to be construed and applied according to its terms, not under the influence of 'muffled echoes of old arguments' concerning other legislation42". That applies to all aspects of Pt IVA. Whether considering what is a "scheme", or considering other provisions of Pt IVA, it is necessary to eschew arguments that proceed from unstated premises about choice43 or the drawing of false dichotomies44 between "rational commercial decisions" and obtaining a tax benefit. It is important to identify why that is so. There is no doubt that "tax laws affect the shape of nearly every business transaction"45. But as was said in the joint reasons in Spotless46: 40 (2002) 121 FCR 206 at 228 [73] per Hill J, 229 [76], 231 [85]-[88] per Hely J, 232 [94] per Conti J. 41 (1996) 186 CLR 404 at 414. 42 Ex parte Professional Engineers' Association (1959) 107 CLR 208 at 276. 43 W P Keighery Pty Ltd v Federal Commissioner of Taxation (1957) 100 CLR 66. 44 Federal Commissioner of Taxation v Spotless Services Ltd (1996) 186 CLR 404 at 45 Frank Lyon Co v United States 435 US 561 at 580 (1978) cited in Spotless (1996) 186 CLR 404 at 416. 46 (1996) 186 CLR 404 at 416. "A particular course of action may be, to use a phrase found in the Full Court judgments, both 'tax driven' and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine the answer to the question whether, within the meaning of Pt IVA, a person entered into or carried out a 'scheme' for the 'dominant purpose' of enabling the taxpayer to obtain a 'tax benefit'." (emphasis added) Always the question must be whether the terms of the Act apply to the facts and circumstances of the particular case. The bare fact that a taxpayer pays less tax, if one form of transaction rather than another is made, does not demonstrate that Pt IVA applies. Simply to show that a taxpayer has obtained a tax benefit does not show that Pt IVA applies. With these considerations in mind, it is sometimes said that it is necessary to read Pt IVA in a way that will not bring "ordinary" transactions to tax. It is obvious that the content of such a proposition turns entirely upon what is meant by "ordinary". Similar considerations can be seen to lie behind contentions that it is necessary to read the definition of "scheme" more narrowly than the terms used in the Act would require. In the present matters, Hely J said47 that "[t]he more the scheme can be confined to the essential elements by which the tax benefit is obtained, the more likely it will be that the conclusion will be drawn that the dominant purpose for a person entering into a scheme so defined was to obtain the tax benefit". Whether or not that proposition is universally true may be open to debate. Even if, however, it is true, the solution to the difficulty which would be revealed lies not in attempting to seek some additional criterion of completeness or coherence which would inform or restrict the otherwise general terms of the definition of "scheme". As has been pointed out earlier, the words of the provisions give no basis for doing so. If there is a difficulty, its solution must be found in the construction and operation of other provisions of the Part, most particularly s 177D(b). What the Commissioner identified in these matters as the wider scheme falls within the definition of "scheme". That is, all of the steps leading to, and the entering into, and the implementation of the loan arrangements can be understood as together constituting a "scheme". Those steps were a scheme, plan, or course of action. One of the purposes of that scheme was, of course, to provide money for the financing and refinancing of the two properties. But so, 47 (2002) 121 FCR 206 at 231 [85]. too, the steps said by the Commissioner to have constituted the narrower scheme (the provision of the loan permitting both the division of the loan and the direction of repayments to one portion, coupled with the respondents' direction of their repayments to the home loan portion of the loan) can also be identified as a course of action, scheme, plan or action. Not only is that so, the steps identified as constituting the narrower scheme can be seen to have formed a part of the wider scheme. The central question then becomes, would it be concluded, having regard to the eight matters listed in s 177D(b), that a person who entered into or carried out the wider scheme, the narrower scheme, or any part of either scheme, did so for the dominant purpose of enabling the respondents to obtain a tax benefit in connection with the scheme? The application of s 177D(b) It is convenient to consider the application of s 177D(b) in these matters by reference to the discussion of that subject in the Full Court. Hill J, with whose reasons in relation to Pt IVA the other members of the Court agreed, directed chief attention to three aspects of s 177D(b). They were, first, the manner in which the scheme was entered into or carried out (s 177D(b)(i)); secondly, changes in the financial position of the respondents, the lender and the lender's agent (s 177D(b)(v) and (vi)) and other consequences (s 177D(b)(vii)); and, thirdly, the conclusion that was to be reached having regard to those features. Of the first of these matters, Hill J said48 that "the manner in which the scheme was formulated and thus entered into or carried out is certainly explicable only by the taxation consequences" (emphasis added). No doubt this single aspect of the matter could not be treated as decisive. The Act requires that all of the eight matters listed in s 177D(b) be considered in deciding what conclusion would be reached about the purpose of the relevant persons. Yet it is important to notice the strength of the conclusion which Hill J reached about this matter: "the manner in which the scheme was formulated ... is ... explicable only by the taxation consequences". It will be necessary to return to consider what other considerations could be seen as denying the conclusion to which the manner in which the scheme was entered into or carried out pointed. Of the second group of considerations (those referred to in s 177D(b)(v), (vi) and (vii)) his Honour noted49 that, as a result of the scheme, the respondents 48 (2002) 121 FCR 206 at 226 [65]. 49 (2002) 121 FCR 206 at 227 [69]. had obtained and applied the funds in the manner earlier described. He said that there was no suggestion that the interest rate charged by the lender was other than a commercial rate. He noted that the respondents paid off the home loan faster than they otherwise would. No other financial or other kind of consequence was mentioned. In this Court, the Commissioner submitted that there were three other relevant changes in the financial position of the respondents that had been brought about by the scheme. Those changes were, first, that, if the respondents were entitled to deduct all of the interest (including compound interest) attributed to that part of the loan used in connection with the investment property, they would pay less tax and would have more disposable income than they would have had if they had taken a loan on other terms. The second change, so the Commissioner submitted, was that, because interest would continue to accrue and be capitalised on that part of the loan used for the investment property, the amount owing on that account would increase to an amount well above the value of the investment property. Thirdly, as noted above, although the interest rate charged was commercially competitive, it was nevertheless marginally higher than would have been charged under the Austral standard principal and interest loans (for both home and investment financing) that were available to the respondents. In other words, so the Commissioner submitted, the respondents willingly agreed to pay a higher rate of interest than was available to them. No doubt account can and should be taken of these consequences of the scheme. Hill J said that taking what, in substance, was a single advance and permitting its division into two parts might, "[t]o some extent"50, support the conclusion that the obtaining of the additional tax deduction was the dominant purpose of the scheme. But this consideration, too, was evidently not treated as decisive. Any other considerations of form and substance, timing, and the nature of any connection between the respondents and any other relevant persons were not regarded as important. Having said51 that there was no doubt that the respondents and others involved in the transactions were aware of, and wanted the respondents to have, the tax deductions that were available for interest incurred on that part of the loan used for investment purposes, Hill J held52 that "a reasonable person would [not] conclude that any person entered into or carried out the scheme or any part of it with the dominant purpose of ensuring that [the respondents] merely obtained a 50 (2002) 121 FCR 206 at 227 [66]. 51 (2002) 121 FCR 206 at 228 [73]. 52 (2002) 121 FCR 206 at 228 [73]. higher deduction for interest" (emphasis added). (It is by no means clear why the word "merely" was added.) He went on: "On any view of the matter the dominant purpose of the scheme which included the borrowing by [the respondents] of funds used to finance and refinance the two properties was the obtaining of funds to permit them to do so. ... The scheme was directed to a commercial end, the borrowing of money for use in financing and refinancing the two properties. That is what a reasonable person would conclude was the ruling, prevailing or most influential purpose of [the respondents] in entering into or carrying out the scheme." (emphasis added) Several points must be made about this reasoning. First, if some distinction was intended to be drawn between identifying the dominant purpose of a relevant person and the dominant purpose of the scheme, the latter inquiry is not required by s 177D and is irrelevant. Section 177D requires consideration of the purposes to be attributed to relevant persons who entered into or carried out the scheme or any part of the scheme. Secondly, as his Honour had earlier noted53, "[t]here is a false dichotomy between obtaining the maximum after tax return on money invested after payment of tax and obtaining a tax benefit". But so too, as was held in Spotless54, there is a false dichotomy between a "rational commercial decision" and "the obtaining of a tax benefit as 'the dominant purpose of the taxpayers in making the investment'". Pointing to the "commercial end" of the scheme reveals the adoption of the same, or at least a substantially similar, false dichotomy. The presence of a discernible commercial end does not determine the answer to the question posed by s 177D. As Hely J rightly said55: "A particular course of action may be both tax driven, and bear the character of a rational commercial decision. The presence of the latter characteristic does not determine in favour of the taxpayer whether, within the meaning of Pt IVA, a person entered into or carried out a 'scheme' for the dominant purpose of enabling a taxpayer to obtain a tax benefit." In these matters, it is, of course, true that the money was borrowed to finance and refinance the two properties. Of course the loan was structured in the way it was in order to achieve the most desirable taxation result. But those 53 (2002) 121 FCR 206 at 223 [54]. 54 (1996) 186 CLR 404 at 415. 55 (2002) 121 FCR 206 at 230 [81]. are statements about why the respondents acted as they did or about why the lender (or its agent) structured the loan in the way it was. They are not statements which provide an answer to the question posed by s 177D(b). That provision requires the drawing of a conclusion about purpose from the eight identified objective matters; it does not require, or even permit, any inquiry into the subjective motives of the relevant taxpayers or others who entered into or carried out the scheme or any part of it. In the present matters, the respondents would obtain a tax benefit if, in the terms of s 177C(1)(b), had the scheme not been entered into or carried out, the deductions "might reasonably be expected not to have been allowable". When that is read with s 177D(b) it becomes apparent that the inquiry directed by Pt IVA requires comparison between the scheme in question and an alternative postulate. To draw a conclusion about purpose from the eight matters identified in s 177D(b) will require consideration of what other possibilities existed. To say, as Hill J did, that "the manner in which the scheme was formulated and thus entered into or carried out is certainly explicable only by the taxation consequences" assumes that there were other ways in which the borrowing of moneys for two purposes (one private and the other income producing) might have been effected. And it further assumes that those other ways of borrowing would have had less advantageous taxation consequences. In these matters, demonstrating that there was another way in which the money might have been borrowed was very easy. Austral (the lender's agent) went to great lengths to give to the respondents (and presumably anyone else interested in similar proposals to borrow money for two purposes) material that identified the advantages that would be obtained by taking a split loan instead of other forms of loan. Much of this material was tendered in evidence at trial. It included elaborately worked examples illustrating how quickly the home loan could be paid off and how large were the tax benefits which could be obtained. As one of the brochures published by Austral, and given to the respondents, put it (by reference to a "working example"): "By structuring your loan using Wealth Optimiser you obtain these potential benefits: Your home loan portion is paid off in 4 years, 6 months ... This is approximately 20 years less than the old way, and You obtain increased deductible interest on your investment loan portion ... All by paying exactly the same monthly amount as you would have normally." There could be no doubt in these matters that the terms on which the loan was made available were explicable only by the taxation consequences for the respondents. If the scheme was identified as "all the steps leading to, and the entering into, and the implementation of the loan arrangements" the manner in which that scheme was entered into strongly suggested that the respondents (each a relevant taxpayer) entered into that scheme for the dominant purpose of obtaining a tax benefit. Further, if the scheme was identified in this way, the respondents, by giving the directions they did, carried out the scheme for that same dominant purpose. But so too, if the scheme is identified more narrowly (as the making of the relevant provisions in the loan agreement and the giving of directions under those provisions) the like conclusion would be reached. Both the manner in which that (narrower) scheme was entered into, and the manner in which it was carried out, strongly suggested the conclusion described. It is then important to return, for a moment, to an aspect of the issues discussed earlier concerning the identification of the scheme. The conclusions just described, as being indicated by the manner in which the scheme was entered into or carried out, are indicated by a consideration of how else the loan might have been arranged. They are not conclusions which depend upon identifying the scheme in one of the ways put forward by the Commissioner rather than another. As has already been pointed out, it would be wrong to treat any conclusion drawn from the first of the eight matters mentioned in s 177D(b) as determinative. All eight must be considered. When the remaining seven are examined in these matters it will be seen that either they tend to point to the same conclusion as the manner in which the scheme was entered into or carried out, or they are neutral. None points against the conclusion that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of enabling each respondent to obtain a tax benefit in connection with the scheme. As Hill J rightly pointed out, the form and substance of the scheme (s 177D(b)(ii)) also point to the purpose of a relevant person obtaining a tax advantage. What was one advance, to be repaid by 300 instalments, was treated as if it were two separate loans. The only persons obtaining any advantage from the treatment were the respondents. And the only advantages which they obtained depended upon the taxation treatment resulting from the application of payments and accumulation of interest for which the scheme (however identified) provided. It was these results in relation to the operation of the Act (but for Pt IVA) which would be achieved (s 177D(b)(iv)) and these results would improve the financial position of the respondents (each a relevant taxpayer) (s 177D(b)(v)). The only other consequence for them would be the compounding of interest attributable to the investment portion of the loan (s 177D(b)(vii)). No other person (in particular, neither the lender nor the lender's agent) would gain or suffer financially (s 177D(b)(vi)) or sustain any other consequence (s 177D(b)(vii)). And the only connection between the lender, the lender's agent and the respondents was that created by the loan arrangement, apart, of course, from the relationship of marriage between the respondents. Conclusion and orders It follows that the conclusion required by having regard to the eight identified matters was that asserted by the Commissioner. Having regard to those matters it would be concluded that the dominant purpose of the respondents in entering into and in carrying out the scheme was to obtain the tax benefit which the Commissioner's determination cancelled. It is, therefore, not necessary to consider the further question which the Commissioner sought to raise about allowing a deduction for interest on interest. The Commissioner's application for special leave to appeal on the ground that the Full Court erred in its treatment of this question should be dismissed. The appeal should be allowed. The Commissioner agreed that he should pay the respondents' costs in this Court in any event. The orders made by the Full Court on 26 November 2002 should be set aside and the appeal to that Court be dismissed with costs. Callinan CALLINAN J. The Court has before it an appeal and an application for special leave to appeal by the appellant. The former raises questions as to the nature of a scheme under the Income Tax Assessment Act 1936 (Cth) ("the Act") and the identification of the dominant purpose of it. The latter relates to the basis of an assessment of a taxation benefit claimed in respect of compound interest. If the appellant succeeds on his appeal, the issue sought to be resolved by the application for special leave to appeal need not be. Facts The respondents owned a residential property at Jerrabomberra that was mortgaged to the ANZ Banking Group Ltd ("ANZ"). They decided to buy another residence at Fadden and to make their current residence available for rent. On 21 August 1996 the respondents paid a holding deposit on the Fadden residence. Only then did they explore ways and means of financing the purchase. They obtained a brochure from a mortgage broker, Austral Mortgage Corporation Pty Ltd ("Austral") which promoted a particular arrangement of lending and repayment which it described as a "Wealth Optimiser". The inescapable purpose of the Wealth Optimiser was, as will appear, to facilitate the repayment of a loan to be used not exclusively for the derivation of income but so as to derive the maximum tax benefits possible. The accurate description by the broker of the arrangements and terms of a Wealth Optimiser in this way, which it provided in its promotional material, almost alone establishes this: "'Lets you better manage your after tax dollars' Under the Wealth Optimiser way, your loan is split into two portions, a home loan portion and an investment loan portion. You have the choice of allocating the repayments to either the home loan portion, the investment loan portion, or both. By choosing to allocate all of your repayments to your home loan portion, the home loan portion is paid off quickly, usually in around 5 or 6 years instead of 15 to 25 years. During this period, interest continues to accrue and is capitalised monthly on your investment loan portion. Once your home loan portion is paid off, all of your repayments are allocated to paying off your investment loan portion. Your home remains as security for your investment loan portion. The size of your repayments remains the same throughout the loan (unless you wish to increase them, or interest rates vary). HOW DOES WEALTH OPTIMISER WORK? Callinan The home loan portion needs to be used for financing residential real estate, which will be security for both loan portions. The investment loan portion can be used for investment in shares, managed funds, etc. However for Wealth Optimiser to work most effectively, you need to be paying off a home loan and also a loan used to finance an income producing investment." On 23 August 1996 the respondents were provided with a schedule of the benefits of a Wealth Optimiser compared with a standard loan. It showed that the financing of a borrowing for the purchase of a residence of $145,023, and a loan of $120,592 to finance the purchase of an investment property over 25 years would generate for the borrower $169,470 in increased income tax deductions above those that the borrower would have been entitled to receive under a conventional borrowing if the loan were to extend to its full term. It showed that the amount of interest paid under a Wealth Optimiser and under a conventional loan was the same. It also showed that, after eight years, the amount owing in respect of the property bought for the derivation of income would have increased from $120,592 to $233,085. A likely consequence would be that the amount outstanding in respect of the investment property would come to exceed its value. The respondents were offered a Wealth Optimiser loan of $298,000. Approximately $95,000 and $203,000 were to be respectively utilized to discharge the mortgage on the respondents' current residence which was then to be let and in purchasing the respondents' proposed replacement of it. Permanent Custodians Limited ("the lender") was a legal personality quite separate from Austral. Principal and interest were to be repayable in full 25 years from the date of settlement. Interest would be payable at a variable rate. It was then 9.15%, a slightly, but not significantly higher rate than the respondents had been paying on their current loan by ANZ (8.69%). The respondents were informed that: "If you ask us to, we will split this amount into a maximum of 2 separate loan accounts. We will calculate interest on each loan account separately and give you a separate statement for each loan account." Interest was to be calculated daily on the unpaid balance of the loan ("or if applicable on the unpaid balance of each loan account") and was to be debited monthly in arrears. Repayments would be $2533 per month, subject to variations of interest rates. On 2 October 1996, the respondents confirmed that they wished to accept the offer. On 4 September 1996 they had entered into a contract to purchase the Fadden property. On 7 October 1996 the respondents made a request to Austral to split the loan into two accounts, one for $202,888 (to be applied to the purchase of the new residential property) ("loan account 1") and the other for $95,112 (to be applied to the refinancing of the investment property) Callinan ("loan account 2") with payments to be allocated to loan account 1 (until the balance in that account was paid off). The terms providing for the splitting of the loan into separate loan accounts and the capitalization of all interest accruing on the loan balance were cll 4.3 and 8.6. "4.3 Loan Accounts If you ask us to, we will: split the Loan Balance into a maximum of four separate Loan Accounts; and allocate the Loan Balance between those Loan Accounts in accordance with your request. 8.6 Capitalisation of Interest On each Payment Date, we will capitalise all interest accrued on the Loan Balance during the immediately preceding Interest Period by debiting your Loan Accounts. Capitalising interest means that interest is added to the amount on which the interest is accruing, and interest then accrues on the total amount." Because the respondents had nominated that the whole of their repayments should be allocated to loan account 1, all payments of principal and interest were applied in reduction of that account, while interest on the amount owing on loan account 2 was capitalized, and compound interest was debited. The consequence was that, as no reductions of the principal outstanding on loan account 2 occurred in the 1997 or 1998 financial years, interest accrued on the whole of the amount of that account. Nor were any payments of interest made in respect of loan account 2 in those years. Compound interest accordingly accrued. The respondents claimed deductions for the whole of the unpaid interest accruing in loan account 2. The appellant was of the opinion that the compound interest was not deductible on any view and disallowed it. He also made determinations under Pt IVA of the Act disallowing as a deduction the interest which would not have accrued on loan account 2 had the agreed periodical payments made by the respondents been allocated proportionally to the two accounts. First instance in the Federal Court The respondents objected. The appellant rejected their objections. The respondents appealed pursuant to Pt IVC of the Taxation Administration Act 1953 (Cth) to the Federal Court. There, the appellant contended that on any view there was a scheme in place and that it was possible to characterize it as such, Callinan either broadly or narrowly. The primary judge (Gyles J) summarized the appellant's contentions which are maintained in this Court in these ways56: "The [appellant] contends that the scheme is all the steps leading to and the entering into and the implementation of the loan arrangements between Austral and the [respondents], including: the marketing of the 'wealth optimiser' loan to the [respondents]; the splitting of the loan into the home loan portion and the investment loan portion; the acceptance by Austral of capitalisation of interest on the investment loan portion, on the basis that it receives another predetermined amount in reduction of the home loan portion; the election by the [respondents] to allocate the whole of the repayments to the home loan portion until that portion of the loan has been paid; and the consequential incurring of an amount of additional interest and further interest on the investment loan portion. Alternatively, the scheme is said to be the provision in the loan for the division into two portions and the direction of the repayments to one or other portion and the direction by the [respondents] of the repayments to the home loan portion. The parties to the scheme are alleged to be the [respondents], and/or Austral and/or its directors, and/or [the lender] and/or its directors. The [appellant] contends that the tax benefit is either of the following: if all the interest on the investment loan portion is deductible (including the additional interest and the further interest), the tax benefit is the difference between: the interest incurred on the investment loan portion; and the interest that would have been incurred on the investment loan portion if the [respondents] had allocated the total minimum payment proportionally across both accounts. 56 Hart v Commissioner of Taxation (2001) 189 ALR 584 at 594-595 [29]-[30]. Callinan Under this scenario, the tax benefit for each of the [respondents] would be $96 for the 1997 year and $365 for the 1998 year; if the additional interest is not deductible but the further interest is deductible, the tax benefit is the difference between: the interest the [respondents] would have incurred on the investment the [respondents] had a conventional interest only investment loan; and loan portion the interest the [respondents] would have incurred on the investment loan portion if the [respondents] had operated the accounts as separate conventional principal and interest loans. Under this scenario the tax benefit for each of the [respondents] would be $29 for the 1997 year and $50 for the 1998 year." His Honour held that compound interest was deductible under s 51(1) of the Act (for the 1997 year) and under s 8-1 of the Income Tax Assessment Act 1997 (Cth) for the 1998 year57, but that the appellant was entitled to apply the provisions of Pt IVA to disallow the deductions for the compound and further interest58. The appeal to the Full Court of the Federal Court On appeal, the Full Court of the Federal Court (Hill, Hely and Conti JJ) affirmed the decision of the primary judge as to the deductibility of the compound interest under s 51(1) and s 8-1, but held that the provisions of Pt IVA did not apply to disallow the deductions for either the compound interest or the further interest. Its opinion was that the narrower scheme was not a scheme for the purposes of Pt IVA, and that the scheme had to be the wider one, if any. Their Honours held that the wider "scheme [as suggested by the appellant] was directed to a commercial end, the borrowing of money for use in financing and refinancing the two properties" and "[t]hat is what a reasonable person would conclude was the ruling, prevailing or most influential purpose of the [respondents] in entering into or carrying out the scheme"59. 57 Hart v Commissioner of Taxation (2001) 189 ALR 584 at 592 [26]. 58 Hart v Commissioner of Taxation (2001) 189 ALR 584 at 609 [59]. 59 Hart v Commissioner of Taxation (2002) 121 FCR 206 at 228 [73] per Hill J. Callinan The appeal to this Court In almost every respect the language of the legislature is expressed in the widest possible terms. The sections with which the Court is particularly concerned are: "177A Interpretation In this Part, unless the contrary intention appears: 'scheme' means: any agreement, arrangement, understanding, promise or undertaking, whether express or implied and whether or not enforceable, or intended to be enforceable, by legal proceedings; and any scheme, plan, proposal, action, course of action or course of conduct. The reference in the definition of 'scheme' in subsection (1) to a scheme, plan, proposal, action, course of action or course of conduct shall be read as including a reference to a unilateral scheme, plan, proposal, action, course of action or course of conduct, as the case may be. (4) A reference in this Part to the carrying out of a scheme by a person shall be read as including a reference to the carrying out of a scheme by a person together with another person or other persons. (5) A reference in this Part to a scheme or a part of a scheme being entered into or carried out by a person for a particular purpose shall be read as including a reference to the scheme or the part of the scheme being entered into or carried out by the person for 2 or more purposes of which that particular purpose is the dominant purpose. 177C Tax benefits Subject to this section, a reference in this Part to the obtaining by a taxpayer of a tax benefit in connection with a scheme shall be read as a reference to: Callinan an amount not being included in the assessable income of the taxpayer of a year of income where that amount would have been included, or might reasonably be expected to have been included, in the assessable income of the taxpayer of that year of income if the scheme had not been entered into or carried out; or a deduction being allowable to the taxpayer in relation to a year of income where the whole or a part of that deduction would not have been allowable, or might reasonably be expected not to have been allowable, to the taxpayer in relation to that year of income if the scheme had not been entered into or carried out; and, for the purposes of this Part, the amount of the tax benefit shall be taken to be: in a case to which paragraph (a) applies – the amount referred to in that paragraph; and in a case to which paragraph (b) applies – the amount of the whole of the deduction or of the part of the deduction, as the case may be, referred to in that paragraph. 177D Schemes to which Part applies This Part applies to any scheme that has been or is entered into after 27 May 1981, and to any scheme that has been or is carried out or commenced to be carried out after that date (other than a scheme that was entered into on or before that date), whether the scheme has been or is entered into or carried out in Australia or outside Australia or partly in Australia and partly outside Australia, where: a taxpayer (in this section referred to as the 'relevant taxpayer') has obtained, or would but for section 177F obtain, a tax benefit in connection with the scheme; and having regard to: the manner in which the scheme was entered into or carried out; the form and substance of the scheme; (iii) the time at which the scheme was entered into and the length of the period during which the scheme was carried out; Callinan the result in relation to the operation of this Act that, but for this Part, would be achieved by the scheme; any change in the financial position of the relevant taxpayer that has resulted, will result, or may reasonably be expected to result, from the scheme; any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant taxpayer, being a change that has resulted, will result or may reasonably be expected to result, from the scheme; (vii) any other consequence for the relevant taxpayer, or for any person referred to in subparagraph (vi), of the scheme having been entered into or carried out; and (viii) the nature of any connection (whether of a business, family or other nature) between the relevant taxpayer and any person referred to in subparagraph (vi); it would be concluded that the person, or one of the persons, who entered into or carried out the scheme or any part of the scheme did so for the purpose of enabling the relevant taxpayer to obtain a tax benefit in connection with the scheme or of enabling the relevant taxpayer and another taxpayer or other taxpayers each to obtain a tax benefit in connection with the scheme (whether or not that person who entered into or carried out the scheme or any part of the scheme is the relevant taxpayer or is the other taxpayer or one of the other taxpayers). 177F Cancellation of tax benefits etc. (1) Where a tax benefit has been obtained, or would but for this section be obtained, by a taxpayer in connection with a scheme to which this Part applies, the Commissioner may: in the case of a tax benefit that is referable to an amount not being included in the assessable income of the taxpayer of a year of income – determine that the whole or a part of that amount shall be included in the assessable income of the taxpayer of that year of income; or in the case of a tax benefit that is referable to a deduction or a part of a deduction being allowable to the taxpayer in Callinan relation to a year of income – determine that the whole or a part of the deduction or of the part of the deduction, as the case may be, shall not be allowable to the taxpayer in relation to that year of income; and, where the Commissioner makes such a determination, he shall take such action as he considers necessary to give effect to that determination. (2) Where the Commissioner determines under paragraph (1)(a) that an amount is to be included in the assessable income of a taxpayer of a year of income, that amount shall be deemed to be included in that assessable income by virtue of such provision of this Act as the Commissioner determines. (2C) Notice of the determination must be given to the taxpayer and … to the person who paid the amount. (2D) More than one determination may be included in the same notice. (2E) A failure to comply with subsection (2C) does not affect the validity of a determination. (3) Where the Commissioner has made a determination under subsection (1) … in respect of a taxpayer in relation to a scheme to which this Part applies, the Commissioner may, in relation to any taxpayer (in this subsection referred to as the 'relevant taxpayer'): if, in the opinion of the Commissioner: there has been included, or would but for this subsection be included, in the assessable income of the relevant taxpayer of a year of income an amount that would not have been included or would not be included, as the case may be, in the assessable income of the relevant taxpayer of that year of income if the scheme had not been entered into or carried out; and it is fair and reasonable that that amount or a part of that amount should not be included in the assessable income of the relevant taxpayer of that year of income; Callinan determine that that amount or that part of that amount, as the case may be, should not have been included or shall not be included, as the case may be, in the assessable income of the relevant taxpayer of that year of income; or if, in the opinion of the Commissioner: an amount would have been allowed or would be allowable to the relevant taxpayer as a deduction in relation to a year of income if the scheme had not been entered into or carried out, being an amount that was not allowed or would not, but for this subsection, be allowable, as the case may be, as a deduction to the relevant taxpayer in relation to that year of income; and it is fair and reasonable that that amount or a part of that amount should be allowable as a deduction to the relevant taxpayer in relation to that year of income; determine that that amount or that part, as the case may be, should have been allowed or shall be allowable, as the case may be, as a deduction to the relevant taxpayer in relation to that year of income; and the Commissioner shall take such action as he considers necessary to give effect to any such determination. (4) Where the Commissioner makes a determination under subsection (3) by virtue of which an amount is allowed as a deduction to a taxpayer in relation to a year of income, that amount shall be deemed to be so allowed as a deduction by virtue of such provision of this Act as the Commissioner determines. (5) Where, at any time, a taxpayer considers that the Commissioner ought to make a determination under subsection (3) in relation to the taxpayer in relation to a year of income, the taxpayer may post to or lodge with the Commissioner a request in writing for the making by the Commissioner of a determination under that subsection. The Commissioner shall consider the request and serve on the taxpayer, by post or otherwise, a written notice of his decision on the request. Callinan If the taxpayer is dissatisfied with the Commissioner's decision on the request, the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953." In the Explanatory Memorandum to the Income Tax Laws Amendment Bill (No 2) 1981 (Cth) which introduced Pt IVA (in which the relevant sections appear) into the Act, the Treasurer said this60: "The proposed new Part IVA, which this Bill will insert into the Principal Act, is designed to overcome [limitations on the scope of s 260, as exposed by judicial decisions] and provide – with paramount force in the income tax law – an effective general measure against those tax avoidance arrangements that – inexact though the words be in legal terms – are blatant, artificial or contrived. In other words, the new provisions are designed to apply where, on an objective view of the particular arrangement and its surrounding circumstances, it would be concluded that the arrangement was entered into for the sole or dominant purpose of obtaining a tax deduction or having an amount left out of assessable income. That test for application of the new provisions is intended to have the effect that arrangements of a normal business or family kind, including those of a tax planning nature, will be beyond the scope of Part IVA. In this respect, Part IVA may be seen as effectuating in general anti-avoidance provisions of the income tax law a position akin to that which appears to emerge from the decision of the Privy Council in Newton v Federal Commissioner of Taxation (1958) 98 CLR 1. The essence of the views expressed in that case was that a tax avoidance situation covered by section 260 exists only if it can be predicated from looking at an arrangement that it was implemented in that particular way so as to avoid tax. In coming to a conclusion about the application of Part IVA in particular situations, it will be necessary to examine all relevant external evidence of the purposes for which a person entered into an arrangement and carried it out in the way it was carried out. The manner in which the scheme was entered into, its form and substance, timing aspects, its practical results, including changes in the financial positions of the taxpayer and connected persons and the nature of those connections (eg, business, family) are all to be considered. 60 House of Representatives, Income Tax Laws Amendment Bill (No 2) 1981, Explanatory Memorandum at 2-18. Callinan It will be necessary, if Part IVA is to apply, that a taxpayer has obtained a 'tax benefit'. A tax benefit will have been obtained by a taxpayer in connection with a scheme if, after applying the other provisions of the Principal Act to the taxpayer, either an amount is not included in assessable income of the taxpayer that might reasonably be expected to have been included if the scheme had not been entered into, or a deduction is allowable to the taxpayer the whole or a part of which might reasonably be expected not to have been allowable if the scheme had not been entered into. The relevant purpose, already referred to, that is to be enquired into is a purpose of obtaining a tax benefit, in the sense just mentioned. Specification of what constitutes a tax benefit and that the relevant purpose is one of obtaining such a benefit is designed to eliminate the uncertainties associated with the use in section 260 of less precise expressions, eg, 'altering the incidence of any income tax' and 'defeating, evading or avoiding any duty or liability imposed on any person by this Act' and which appear to be at the root of the development by the courts of the 'choice principle' … Section 177A: Interpretation This section contains a number of provisions of a definitional nature. By sub-section (1), 'scheme' is to be defined in a way that covers the various forms in which tax avoidance arrangements may be found. It is to mean any agreement, arrangement, understanding, promise or undertaking whether it is express or implied and whether or not legally enforceable. Any scheme, plan, proposal, action, course of action or course of conduct is also to be treated as a 'scheme'. Under sub-section 177A(3) 'scheme' in the sense just referred to is to include such arrangements when they are of a unilateral kind. Proposed sub-section (4) is addressed to the fact that schemes of the kind to which Part IVA is directed usually involve a number of parties. Accordingly, references to the carrying out of a scheme by a person are to be taken as including references to the carrying out of a scheme by a person together with others. Sub-section (5) is a provision of some consequence and is designed as part of the measures necessary to give effect to the intention that the relevant tax-motivated purpose that may bring Part IVA into operation is a sole or dominant purpose. Sub-section (5) relates principally to the words at the end of proposed section 177D which refer to a person having acted Callinan for 'the purpose' of enabling a taxpayer to obtain a tax benefit. That language refers to a person's sole purpose but, by reason of sub-section 177A(5) the expression is in the case of a scheme with more than one purpose to include also a dominant purpose, ie, a purpose that outweighs all other purposes put together. Section 177C: Tax benefits The significance of the term 'tax benefit', which this section defines, is that it represents the kind of tax consequence which a person must have the sole or dominant purpose to achieve, and which must have been achieved, if Part IVA is to apply by reason of section 177D. In brief, a 'tax benefit' represents the non-inclusion in assessable income of an amount that, but for the scheme, might reasonably be expected to have been included and a deduction being allowable that, but for the scheme, might reasonably be expected not to have been allowable. A tax consequence other than non-inclusion of an amount in assessable income or allowance of a deduction will not be a 'tax benefit', and will thus be outside the scope of Part IVA. In other words, Part IVA applies only in relation to things that go to make up a person's taxable income, and not to rebates of or credits against the tax on a person's taxable income. Withholding taxes, being taxes that are not based on the difference between assessable income and allowable deductions will also be outside the scope of Part IVA. The main part of section 177C is in sub-section (1). Taking the income and allowable deduction items separately, assessable sub-section is designed as follows. First, a 'scheme' (see sub-section 177A(1)) must be identified. Then, it has to be found that an amount would have been included, or might reasonably be expected to have been included, in assessable income of a taxpayer but for the scheme. For the purposes of answering the twin questions posed by section 177D, viz, whether a tax benefit has been obtained, and whether a person has a purpose of obtaining a tax benefit, that amount, to the extent that it is not, or is not to be, included in assessable income, is to represent a tax benefit in relation to the taxpayer concerned. It follows that if there is a scheme designed so that an amount is not included in assessable income and another provision of the Principal Act operates to counter that scheme by requiring that it be so included, the amount cannot be a tax benefit obtained by the taxpayer concerned, and Callinan Part IVA will be inapplicable. In other words, Part IVA is a 'last resort' measure. Section 177D: Schemes to which Part applies This section will identify schemes to which Part IVA is to apply. Supplemented by section 177E in the particular area of the stripping of company profits it will provide the basis on which action is to be taken under section 177F to cancel the relevant tax benefit. In brief, section 177D makes Part IVA applicable as a matter of law to a scheme if a taxpayer has obtained a tax benefit under it and, on the basis of an objective view of features of the scheme and its surrounding circumstances, it would be concluded that the scheme was, in tax terms, a 'blatant' one, that is, it was entered into by a person for the sole or dominant purpose of enabling the taxpayer to obtain a tax benefit. In more detail, for a scheme to be one to which Part IVA applies by reason of section 177D it must be a scheme entered into after the date of introduction of the Bill or a scheme that technically is not 'entered into' (eg, one constituted by a unilateral course of action) but is carried out or commenced to be carried out after that date. … Under paragraph (a) it is a condition for the application of Part IVA that a taxpayer has obtained, or would otherwise obtain, a 'tax benefit' (section 177C) in connection with the scheme concerned. Paragraph (b) sets out the range of matters to which regard is to be had in coming to a conclusion whether a relevant person had the degree of taxation purpose that must exist if section 177D is to make Part IVA apply. These are – the manner in which the scheme was entered into or carried out; its form and substance; the particular time at which the scheme was entered into and the period during which it was carried out; the tax result that, but for Part IVA, would be achieved by the scheme; any change resulting from the scheme in the financial position of the taxpayer; Callinan any such change in the financial position of a person with whom the taxpayer has business, family or other connections; any other consequence of the scheme for the taxpayer or a connected person; the nature of any connections between the taxpayer and a connected person whose financial position changes as a result of the scheme. the Against this background, remaining provisions of sub-paragraph (b) of section 177D operate so that Part IVA will effectively strike down a scheme that on its face, and considered in the light of the designated surrounding circumstances just outlined, is one of which it is appropriate to say that it must have been engaged in for tax purposes. In more detail, if on the basis of the matters to which regard is to be had it would be concluded that the person or one of the persons who entered into or carried out the scheme, or any part of it, did so for the sole or (by reason of sub-section 177A(5)) dominant purpose of enabling the taxpayer or any taxpayer concerned to obtain a tax benefit then (the other tests of section 177D having been satisfied), Part IVA will apply. Section 177F: Cancellation of tax benefits, etc. Section 177F is the 'reconstruction' provision of Part IVA and will come into play once section 177D, together with section 177C (for the general run of cases), or section 177E (for dividend stripping and similar schemes) has done its work of both exposing for annihilation a sought-for 'non-taxable' position and quantifying the amount of the 'tax benefit' that stands to be cancelled. The essential function of section 177F is to enable the Commissioner of Taxation, against the background of the other sections mentioned, to determine precisely what tax adjustments should be made in the assessments of the taxpayer concerned and of other taxpayers affected by the scheme. Sub-section (1) effectively calls on the Commissioner to make a formal determination as to how much of the amount of the identified tax benefit is to be cancelled and directs him, where he has made such a determination, to take such assessing and other action as he considers necessary to give effect to it. There are two kinds of determination possible – under paragraph (a), that the whole or a part of an amount that is not otherwise included in assessable income be so included and, under Callinan paragraph (b), that the whole or a part of a deduction or of a part of a deduction that is otherwise allowable be not allowable. By sub-section (2), the Commissioner is required, where a determination has been made under paragraph (1)(a), to further determine the appropriate provision of the Principal Act under which the amount in question is to be included in assessable income. A corresponding provision is not called for in relation to a determination that is made under paragraph (1)(b) because the process of cancelling a tax benefit (by disallowing a deduction) under the latter paragraph does not involve the same degree of positive reconstruction to a taxable position as will be necessary where, under a scheme, an amount has not been included in assessable income. An example of where a determination of the provision under which an amount is to be included in assessable income would be relevant is where there is a question of whether or not an amount to be included in the assessable income of a company has the character of a dividend on which the rebate of tax on intercorporate dividends (section 46) is allowable. Where the Commissioner has made a determination under sub- section (1), he is also authorised, by sub-section (3), to make a compensating adjustment in favour of either the taxpayer against whom the determination has been made, or any other taxpayer, if he is of the opinion that the person concerned has suffered a taxation disadvantage as a result of the scheme and that it is fair and reasonable that the adjustment be made. The Commissioner again is empowered to take whatever action is necessary to give full and proper reconstructive effect to the determination. Paragraph (a) deals with a disadvantage in the form of an amount having been included in a person's assessable income that would not have been included if the scheme had not been entered into. The Commissioner is empowered, if it is fair and reasonable to do so, to determine that the amount or part of the amount should not be included in the taxpayer's assessable the Commissioner is empowered, if it is fair and reasonable to do so, to make a determination to reverse either wholly or partially a disadvantage in the form of a deduction not having been allowed to a taxpayer that would have been allowable if the scheme had not been entered into. Correspondingly, under paragraph income. Where the Commissioner is to make an adjustment in favour of a person under paragraph (3)(b) by allowing a deduction not otherwise allowable, sub-section (4) will have the effect that the reconstruction of the taxpayer's taxation position is to be effected by allowing a deduction Callinan under such provision of the Principal Act as the Commissioner determines. This serves a purpose corresponding with that served by sub- section (2) in the reconstruction process accompanying the cancellation of a tax benefit attributable to the exclusion of an amount of assessable income. The next four sub-sections (5) to (8), are designed to extend the benefit of the ordinary objection and appeal provisions to a taxpayer who is dissatisfied with any decision of the Commissioner to not make a determination under sub-section (3) in favour of the taxpayer. As background, any assessment action by the Commissioner in reliance on section 177F – whether adverse to or in favour of the taxpayer – will be subject to the usual rights of objection, review by an independent Taxation Board of Review and appeal to a Court. These procedures include the power of a Board of Review to substitute its determinations and decisions for those of the Commissioner. However, these procedures may not be available to a taxpayer in a situation where Part IVA has been applied against another taxpayer and the Commissioner considers that the case is not one calling for him to make a compensating adjustment under sub-section (3) in favour of the first taxpayer, ie, an adjustment which that taxpayer considers should be made. Under proposed sub-section (5) such a taxpayer may ask the Commissioner to make a determination under sub-section (3). By sub-section (6) the Commissioner is to consider the request and give written notice of his decision. If the taxpayer is dissatisfied with the decision he may, under sub-section (7), and within 60 days, lodge a formal objection with the Commissioner. By sub-section (8) the objection, review and appeal provisions of the Principal Act are to apply in relation to such an objection." Read literally, the definition of a scheme is easily wide enough to include something much less than an agreement or arrangement: indeed to include an "action", or "course of action", or a promise made pursuant to, or as part of an agreement or arrangement, or of a scheme. A scheme, however it is to be described, must nonetheless be something which is, or can be the object of a particular, that is to say, a dominant purpose as required by s 177A(5). Further requirements are that what is sought to be identified as a scheme, must be something to which the matters referred to in s 177D(b) can or may be relevant. Those matters, especially those of relevance here, do not operate, however, to narrow the meaning of a scheme. The reference in s 177D(b)(ii) to the "substance of the scheme" invites attention to what in fact the taxpayer may achieve by carrying it out, that is to matters whether forming part of, or not to be Callinan found within the four corners of an agreement or an arrangement. They also require that substance rather than form be the focus. And s 177D(b)(v) requires reference to the financial position, actual or prospective, of the taxpayer before and after the scheme. The first step is to ascertain whether the transactions, or any action taken in relation to, or as part of them, are capable of constituting a scheme within the meaning of s 177A(1). In my opinion there is no doubt that there was a scheme here within that meaning, and that there is more than one way in which what passed between the respondents, Austral and the lender, can be seen to answer the statutory definition of a scheme. The arrangement that the respondents might elect to have interest debited exclusively to one account was each of, an "agreement", "understanding", "promise" or "undertaking", and although the definition does not require as an element of it, legal enforceability, each was legally enforceable as such. The election as to the application of the payments also answers the description of an "action" or "course of action" within the meaning of those words in s 177A(1)(b). This was so despite that the Court said in Federal Commissioner of Taxation v Peabody61, that "Pt IVA does not provide that a scheme includes part of a scheme". An action or course of action undertaken in the course of, or as part of a transaction or series of transactions, is not the same as part of a scheme. The use of the singular, narrow words, proposal, action or course of action in s 177A(1)(b) in juxtaposition with, for example, agreement or arrangement in s 177A(1)(a) indicates that something done which is less than the whole of an arrangement or agreement may be capable of itself being a scheme. This view is I think not only consistent with, and a true reflection of the statutory language, but also with the legislative intention discernible from the Explanatory Memorandum. It is also consistent with the approach of this Court in Federal Commissioner of Taxation v Consolidated Press Holdings Ltd62 in which the Court looked to part only of the activity of the corporate taxpaying group. Furthermore, there is no reason why the promotion of the Wealth Optimiser, its utilization by the respondents, the agreements and mortgages giving effect to it, and the election as to the repayments and debiting of interest, should not be collectively regarded as an arrangement, a course of action or a course of conduct. The arrangement was in fact a tripartite one, involving the broker, the respondents and the lender. Under s 177A(3) a unilateral course of action, for example, the giving of notice of election and payment according to it, by the respondents would have been sufficient to constitute a scheme. 61 (1994) 181 CLR 359 at 383. 62 (2001) 207 CLR 235 at 254 [52], 264 [96]. Callinan The respondents sought to emphasize, in attacking the appellant's submissions, that the election by them, or their splitting of the loan in the way in which they did could constitute a scheme, a statement of the Court in Peabody63 in effect that, if "the circumstances are incapable of standing on their own without being 'robbed of all practical meaning'" then those circumstances although they may be a part of a scheme, cannot constitute a scheme itself. All that I would take the Court to mean in making this statement is that it is not for the appellant to attempt to seize upon and isolate one event, or a series of events, which, standing alone may appear to have a complexion which it or they cannot truly bear when other, relevant, connected events are taken, as they should be, into account. Nor is there any doubt that the respondents obtained a tax benefit under s 177C "in connection with a scheme". The use of the word "connection" is significant. It is a word of wider import than, for example, "result". The benefit is obvious: a deduction from each respondent's taxable income of the whole of the interest payable in respect of a loan to finance not just the acquisition or holding of an investment property but of both it and a residence, the interest on the financing of which is not tax deductible. The next question, which is of purpose, is whether under s 177D the scheme is one to which Pt IVA applies. This will, in my view, in most cases be the critical question. The answer to it, both as a matter of statutory interpretation and as the Explanatory Memorandum indicates, was intended to be the fulcrum upon which most Pt IVA cases will turn, because the definition of a scheme, being as wide as it is, will relatively easily be satisfied, and the presence or absence of a tax advantage will also usually be readily apparent. The Act requires that questions raised by s 177D be answered by reference to the indicia stated in the section. It is not necessary of course that every one of them be relevant to every scheme. Indeed the presence or overwhelming weight of one factor alone may of itself in an appropriate case be of such significance as to expose a relevant dominant purpose. The first of the indicia is "the manner in which the scheme was entered into" (s 177D(b)(i)). The [wider] scheme was entered into by a transaction between arms length parties who were agreed that its manner of operation, by the making of the election, would lead to maximum tax deductibility. A narrower scheme was the election itself and payment in accordance with it, these being actions of the respondents. The "form and substance" (s 177D(b)(ii)) of the scheme were to this end and effect: tax deductibility. It is also relevant that the scheme, however it is to 63 (1994) 181 CLR 359 at 384. Callinan be defined, was apparently tax neutral for the lender. And it was not suggested that the broker would be disadvantaged financially by the form it took. The contrary was probably the case but it is unnecessary to decide whether that is so. An aspect of the question to which s 177D(b)(ii) gives rise, is whether the substance of the transaction (tax implications apart) could more conveniently, or commercially, or frugally have been achieved by a different transaction or form of transaction. At least arguably it could have been. If it had, compound interest would have been avoided. Non-recourse by the lender to both (on default by the respondents), rather than to one of the properties only, may have been able to be negotiated. The absence of adversion by the respondents to such a consideration is itself some indication of the purpose to be inferred from the circumstances. The scheme was intended to endure for many years. Its duration had this significance. Although the debt in respect of the residence would be relatively quickly discharged, the mortgage on it would have to remain as security for the outstanding debt because of the very real chance that the sum of the principal owing on the investment property and the accumulating interest, would come to exceed the latter's value and would provide insufficient security for the debt. This, it may be observed, was a matter to which the Full Court did not have sufficient regard in identifying the respondents' dominant purpose. Each of ss 177D(b)(iii), (iv) and (vii) require that all of these matters be taken into account in determining whether Pt IVA applies. From the matters to which I have referred it is easy to conclude, inevitable in fact that a court do so, that the respondents entered into a scheme for the [dominant] purpose of obtaining a tax benefit. What other purpose or purposes could have made commercial or other sense? There was no material before the Court to show that the purchase of the investment property was in fact a good investment in the sense that even if it did not yield a rental sufficient to cover interest and other outgoings there was a reasonable chance that it would appreciate in value. Repayment of the principal owing in respect of the residence did not make it immune to recourse by the lender in the event of default or shortfall in payment or value of the investment property. It may be that the respondents did wish to make an investment and to change their residence. These were entirely irreproachable and proper objectives. But the means adopted to achieve these results could readily, and should be objectively concluded to be a scheme for the [dominant] purpose of enabling the respondents to obtain a tax benefit, and that is so no matter which of the alternative definitions as to the width of the schemes, within which what occurred here falls, is preferred. I would allow the appellant's appeal. The appellant agreed that he should pay the respondents' costs in this Court in any event. The orders made by the Full Court of the Federal Court on 26 November 2002 should be set aside and the appeal to that Court be dismissed with costs. Callinan Having reached this conclusion, it is unnecessary to resolve the questions which the appellant's application for special leave raises. That application should therefore be dismissed.
HIGH COURT OF AUSTRALIA APPLICANT AND THE QUEEN RESPONDENT Yates v The Queen [2013] HCA 8 14 March 2013 ORDER Dispense with compliance with the time limit for filing the application for special leave to appeal and grant the application, treat the appeal as instituted and heard instanter and allowed. Set aside the order of the Court of Criminal Appeal of the Supreme Court of Western Australia declining to interfere with the order made by Wallace J under s 662 of the Criminal Code (WA) and in lieu thereof quash that order. On appeal from the Supreme Court of Western Australia Representation K J Farley for the applicant (instructed by Legal Aid WA) B Fiannaca SC with S H Linton for the respondent (instructed by Director of Public Prosecutions (WA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Yates v The Queen Criminal law – Sentence – Detention during Governor's pleasure on expiration of sentence under s 662 of Criminal Code (WA) – Whether evidence capable of supporting conclusion that applicant a constant danger to community – Whether order demonstrably necessary to protect society from physical harm. Criminal Code (WA), s 662. FRENCH CJ, HAYNE, CRENNAN AND BELL JJ. The applicant is an intellectually disabled man. He has been in continuous custody since 8 August 1986 when he was charged with two related offences arising out of the aggravated sexual assault of a seven year old child. He was convicted on 12 February 1987 and sentenced on 13 March 1987 for these offences in the Supreme Court of Western Australia (Wallace J). The term of the sentences expired in June 1993. His custody since that time has been authorised by an order made by Wallace J pursuant to s 662 of the Criminal Code (WA) ("the Code") directing his indefinite detention at the Governor's pleasure. Wallace J imposed concurrent sentences of seven years' imprisonment for each of the offences1. The applicant appealed against the severity of the sentences and against the making of the s 662 order to the Court of Criminal Appeal of the Supreme Court of Western Australia (Burt CJ, Brinsden and Smith JJ). On 29 July 1987, the Court of Criminal Appeal allowed the appeal against the severity of the sentences and reduced each by nine months to give the applicant credit for a period of pre-sentence custody2. The majority (Brinsden and Smith JJ) declined to interfere with the s 662 order. On 20 June 2012, the applicant filed an application for special leave to appeal from the Court of Criminal Appeal's refusal to set aside the s 662 order. He seeks an order dispensing with the time for filing an application for special leave to appeal3. In support of this dispensation the applicant relies on the affidavit of his solicitor, Karen Farley, who is employed by Legal Aid WA. Ms Farley states that the applicant first came to the attention of Legal Aid WA in 1 The applicant was convicted of one count of "deprivation of liberty" contrary to s 333 of the the Code and one count of "aggravated sexual assault" contrary to s 324E of the Code – the circumstances of aggravation were that bodily harm was done to the complainant and that the complainant was under the age of 16 years. 2 The applicant had been in custody for seven months and five days at the date of the sentencing. 3 The High Court Rules 2004 (Cth) at r 41.02.1 provide that an application for special leave to appeal shall be filed within 28 days after the judgment below was pronounced. At the date the judgment of the Court of Criminal Appeal was handed down, O 69A rr 3(1) and 5(1) of the High Court Rules 1952 (Cth) required an application for special leave to appeal to be filed and served within 21 days after the date of the judgment below. Rule 4.02 of the current Rules provides that any period of time may be enlarged by order of the Court whether made before or after the expiration of the time fixed. Hayne Crennan Bell early 2011. On 1 June 2011, the Director of Legal Aid WA wrote to the Attorney-General of Western Australia asking that the applicant's case be referred to the Court of Appeal pursuant to s 140 of the Sentencing Act 1995 (WA). On 14 September 2011, the Attorney-General notified the Director that his petition was declined. Thereafter an application was made on the applicant's behalf for a grant of legal aid to institute the present proceedings. That grant was made on 26 March 2012. Delays in filing the application were occasioned by the need to retrieve copies of documents held by the Court of Appeal from archival storage. On 16 November 2012, Hayne, Crennan and Bell JJ referred the application to an enlarged Court for further hearing and argument as on an appeal. For the reasons that follow, the requirement of the Rules respecting time should be dispensed with, special leave to appeal should be granted, and the appeal should be allowed. Indefinite sentencing – s 662 of the Code Section 662 of the Code provided: "When any person is convicted of any indictable offence, (whether such person has been previously convicted of any indictable offence or not), the court before which such person is convicted may, if it thinks fit, having regard to the antecedents, character, age, health, or mental condition of the person convicted, the nature of the offence or any special circumstances of the case – direct that on the expiration of the term of imprisonment the imposed upon him he be detained during then Governor's pleasure in a prison; or, (b) without imposing any term of imprisonment upon him sentence him to be forthwith committed to a prison, and to be detained there during the Governor's pleasure." Section 662 was inserted into the Code in 19184 at the same time as amendments to the Prisons Act 1903 (WA) established reformatory prisons and the Indeterminate Sentences Board5. The history is discussed in Tunaj v The 4 Criminal Code Amendment Act 1918 (WA), s 27. 5 Prisons Act Amendment Act 1918 (WA). Hayne Crennan Bell Queen6. Burt CJ (with whose reasons Pidgeon and Rowland JJ agreed) commented that the scheme as enacted reflected the idea that with appropriate training and treatment in custody prisoners could be "reformed"7. In deciding whether to recommend the release of a person serving an indeterminate sentence, the Indeterminate Sentences Board was required to consider not only the safety of the public but also "the welfare of the person whom it is proposed to release"8. Burt CJ doubted that the scheme had authorised the detention of a person in a reformatory prison for the "single purpose" of advancing the person's "welfare"9. His Honour concluded that any such idea could not have survived the enactment of the Offenders Probation and Parole Act 1963 (WA), which established the Parole Board as the successor to the Indeterminate Sentences Board10. Tunaj held that an order under s 662 should be made "only in very exceptional circumstances" and that those circumstances must "firmly indicate that the convicted person ha[d] shown himself to constitute a danger to the public"11. The requirement of proof of dangerousness stated in Tunaj was affirmed by this Court in Chester v The Queen12. In Chester it was said that the "extraordinary power"13 to make an order authorising indefinite detention is "confined to very exceptional cases where the exercise of the power is demonstrably necessary to protect society from physical harm"14. Acceptable evidence of one or more of the matters specified in s 662 was required to establish that the convicted person was "so likely to commit further crimes of [1984] WAR 48. 7 Tunaj v The Queen [1984] WAR 48 at 51. 8 Tunaj v The Queen [1984] WAR 48 at 51 citing s 64E(5) of the Prisons Act 1903 9 Tunaj v The Queen [1984] WAR 48 at 51. 10 Tunaj v The Queen [1984] WAR 48 at 51 citing the Prisons Act Amendment Act 1963 (WA), s 9 of which effected the repeal of s 64E of the Prisons Act. 11 Tunaj v The Queen [1984] WAR 48 at 51. 12 (1988) 165 CLR 611; [1988] HCA 62. 13 Chester v The Queen (1988) 165 CLR 611 at 617. 14 Chester v The Queen (1988) 165 CLR 611 at 618. Hayne Crennan Bell violence (including sexual offences) that he constitutes a constant danger to the community"15. The primary issue raised by the application is the sufficiency of the evidence to satisfy that test. The offences The offences were committed on 7 August 1986. The applicant was then aged 25 years. The complainant, a seven year old girl, was inside a cubicle in the ladies toilets at a suburban shopping centre. She became aware that the applicant was looking at her through a hole in the cubicle door. He entered the cubicle. His penis was exposed and he put it into the complainant's mouth, telling her to suck on it and drink or swallow what came out. After ejaculating the applicant struck the complainant about the head. She screamed and the applicant fled. The applicant was arrested on the following day and charged with the two offences. He had been observed openly masturbating in the public toilets of another shopping centre in the period immediately before the commission of the offences. The proceedings before Wallace J The applicant was arraigned before Wallace J and a jury on 11 February 1987. He entered pleas of not guilty to each count. At the close of the prosecution case, the applicant elected to give evidence. During his examination- in-chief the applicant admitted that he had watched the complainant walk into the ladies toilets and that he had waited and then walked into the toilet. He said that the complainant "sucked me off". The evidence was inconsistent with the applicant's instructions to his counsel. Following a short adjournment the applicant was re-arraigned and he entered pleas of guilty to each count. The jury returned verdicts of guilty consistently with his pleas. The sentencing of the applicant took place one month after the verdicts. The evidence at the sentence hearing included an antecedent report prepared by the officer in charge of the investigation. The report recorded that the applicant was an invalid pensioner who "is retarded to [a] certain degree". Annexed to the antecedent report form was a copy of the applicant's criminal history. A fuller 15 Chester v The Queen (1988) 165 CLR 611 at 619. Hayne Crennan Bell account of the nature of much of that history16 was contained in a pre-sentence report prepared by Mr Levitt17. Mr Levitt reported that the applicant had been placed on 12 months' probation in July 1980 following his conviction for stealing three packets of cigarettes. The applicant successfully completed his probation, which in light of his "behavioural problems" had been "a commendable effort on his part". In March 1985, the applicant was convicted in the District Court of an offence of gross indecency with a male person. He was released on probation for a period of three years. He did not successfully complete his probation on this occasion. He was convicted on separate occasions of stealing and receiving, stealing money, fraudulent trick and evil designs. In all, he was fined $130 for these offences. He was called up before the District Court for breaching his probation and fined $500. In January 1986 he was charged with wilful exposure. The offence occurred in a car park. Also in January 1986 he was charged with being on the curtilage of premises without lawful excuse. In July 1986 he was charged with stealing $12 worth of newspapers. He was subsequently convicted of these offences and fined $400. Mr Levitt reported that the applicant had been diagnosed by the Division for the Intellectually Handicapped as having "minimal brain damage" when he was three years old. At the date of report the applicant was assessed as functioning at the level of a 14 year old. Mr Levitt recommended that the applicant, as a prospective parolee, should be referred to a psychiatrist for ongoing assessment. No current psychiatric evidence was before Wallace J. Several reports prepared in connection with the applicant's earlier court appearances were in 16 The antecedent report recorded convictions, to which no reference is made in the pre-sentence report, for stealing, unlawful use of a motor vehicle, insulting behaviour, riding a pushbike in a reckless manner, and breaking and entering with intent (for which the applicant was fined $150). 17 The copy of the pre-sentence report contained in the material filed in support of the application is dated 23 March 1987, 10 days after the date of sentence. However, it appears that an earlier copy of Mr Levitt's report was before Wallace J. Brinsden J recorded that his Honour obtained a pre-sentence report. On the hearing of the application in this Court senior counsel for the respondent informed the Court that reference to the pre-sentence report appears in the transcript of the sentence hearing. Hayne Crennan Bell evidence. These included a report prepared in October 1982 by SK Robertson, a psychologist. The applicant was described in this report as functioning in the "mild to borderline intellectually handicapped range". The report confirmed that the applicant had been known to the Division for the Intellectually Handicapped since he was three years old. The whole of his schooling had been at special schools. At the date of the report the applicant was living in a residential facility for intellectually handicapped adults and participating in a Community Skills Training Program. He was being trained in preparation for employment in a Sheltered Workshop. SK Robertson reported concerns expressed by the applicant's parents about the applicant's "sexual associations" with young children. The police were said to have been informed of "incidents" in 1976, 1977, 1978 and 1981. No further description of the nature of these incidents was given save that one had led to a charge in 1978. This appears to be a reference to a charge of loitering for which the applicant appeared before the Fremantle Children's Court in May 1978. The charge was dismissed under s 26 of the Child Welfare Act 1947 (WA). Following this, the applicant was placed in a residential facility where he received counselling about sexual conduct. He also participated in "Human Relationships/Sex Education" programs. SK Robertson concluded that the applicant's participation in sex education programs and counselling had failed to modify his behaviour. for his In June 1985, Professor German, a psychiatrist, prepared a report on the applicant for the Division for the Intellectually Handicapped. The applicant was late event, Professor German's report was based on a consultation with the applicant lasting "a few minutes". Professor German considered the applicant was suffering from "a variety of personality trait disorder[s] resulting from diffuse brain damage". He doubted that the condition was treatable. He commented: consultation with Professor German. the "[The applicant] really presents the problem of the young brain-damaged person in our society who is not sufficiently damaged to obviously require custodial or other institutional care. At this juncture I would be inclined to agree with his parents that he is likely to end up in gaol, as many of these persons do." Dr Booth, a consultant psychiatrist with the Prison Health Service, prepared a report in December 1986 in connection with the applicant's forthcoming sentencing on charges of "being on the curtilage", "wilful exposure", and "stealing and receiving". Dr Booth assessed the applicant as "a man of low normal intelligence who has a life-long history of psychiatric abnormality resulting in poor socialization". Hayne Crennan Bell Ms McHugh, a clinical psychologist in training, prepared a report in December 1986 in connection with the pending sentencing hearing for the same charges. She referred to the applicant's long history with the Authority for Intellectually Handicapped Persons and reported that minimal progress had been achieved in modifying his offending behaviour and improving his ability to cope with independent living. She concluded that unless the applicant could be persuaded to complete "adaptive functioning programmes", he would be at risk of re-offending on his release into the community. Wallace J's reasons for sentence Wallace J's reasons for sentence were brief. His Honour referred to the circumstances of the offence and said: "Unfortunately you are in some ways retarded as the result of having suffered brain damage. You have a record of frequently offending against the law and at the time in question you were on parole. From a community point of view you appear unable to control your deviant sexual instincts. In my opinion you represent a danger to the community and in particular to young people." His Honour noted that the maximum sentence for the offence of deprivation of liberty was 10 years' imprisonment and that the maximum sentence for the offence of aggravated sexual assault had been increased to 20 years' imprisonment. In determining the punishment for the offences, he took into account the community's abhorrence of the offences, general deterrence, and protection of the community. After pronouncing the s 662 order, his Honour said: "It may be that you can receive and accept counselling and treatment for your unfortunate deviant conduct whilst you are incarcerated and in that event earn your release upon a reasonable period of parole to be served within the community. That will be up to you." The applicant's submissions The applicant's primary submission is that the evidence before Wallace J was incapable of supporting the order for his indefinite detention. His alternative submission is that Wallace J's discretion miscarried in that his Honour, wrongly, took into account that an order under s 662 would permit the Parole Board to fix a more appropriate parole period than that applicable to the determinate Hayne Crennan Bell sentences18. The applicant points to a statement made by his Honour at the sentence hearing as casting light on the reference in his remarks on sentence to the possibility that the applicant might earn his release "upon a reasonable period of parole". In response to the prosecutor's submission that determinate sentences should be coupled with a s 662 order, Wallace J said: "I am inclined to agree with you there where the prisoner is viewed as a danger to the community, and the benefit that flows, which I think is largely misunderstood, is that instead of having the useless formality of a long term of parole to be served the authorities can fix at the appropriate time the proper period of parole". At the time, the Parole Board was empowered to release a prisoner who was subject to a s 662 order after two-thirds of any determinate sentence had been served. In such a case the parole period could not exceed two years19. By contrast, a sentence of seven years' imprisonment would result, in the ordinary course, in a parole period of three and a half years20. The applicant's contention 18 Offenders Probation and Parole Act 1963 (WA), s 37 and s 41(1)(c) and (3)(b). 19 Offenders Probation and Parole Act 1963 (WA), s 41(1)(c) and (3)(b). 20 Offenders Probation and Parole Act 1963 (WA), s 37. At the relevant time, the Offenders Probation and Parole Act did not prescribe the length of any minimum term imposed under that Act. Rather, s 37(1) merely stated that the court may impose a minimum term for a sentence of 12 months or more if it considered that course to be appropriate, having regard to the nature of the offence, the circumstances of its commission, and the antecedents of the convicted person (see also R v Simpson unreported, Court of Criminal Appeal of the Supreme Court of Western Australia, 20 June 1984 at 4 per Wallace J; Power v The Queen (1974) 131 CLR 623 at 627 per Barwick CJ, Menzies, Stephen and Mason JJ; [1974] HCA 26). It appears at the time that there was an "accepted practice" in Western Australia that minimum sentences would generally be fixed at half of the head sentence (Hayden v Byfield unreported, Supreme Court of Western Australia, 24 September 1984 at 2 per Wallace J). No doubt that practice took into account the combined operation of s 29 of the Prisons Act 1981 (WA) and s 39 of the Offenders Probation and Parole Act. At the time, s 29 of the Prisons Act provided that a prisoner would generally be entitled to remission of one-third of the period of his or her sentence. Section 39(3) of the Offenders Probation and Parole Act provided that s 29 of the Prisons Act did not apply to any sentence for which a minimum term was fixed, but that if a prisoner had served the minimum term but had not been released on parole, the prisoner should be released on the date he or (Footnote continues on next page) Hayne Crennan Bell is that Wallace J considered it likely that, given the applicant's intellectual disability, he would struggle to successfully complete a lengthy period on parole and that an order under s 662 would give him the benefit of release subject to a shorter period of supervision on parole. The respondent submitted that no inference should be drawn from observations made by Wallace J in the course of the hearing and that his Honour's reference in his sentencing remarks to the applicant's possible release on parole was a conventional exhortation. Regardless of whether Wallace J erred in the specific respect identified by the applicant, his Honour's contemplation that the applicant might "earn [his] release upon a reasonable period of parole" may be thought to be inconsistent with satisfaction that it was demonstrably necessary to direct that the applicant be detained indefinitely to protect the community from physical harm. The Court of Criminal Appeal The applicant applied for leave to appeal against the severity of the sentences imposed by Wallace J. He appealed as of right against the making of the s 662 order21. He contended that Wallace J erred in the exercise of his discretion in that the s 662 order was not justified having regard to his antecedents, character, age, health and mental condition, the nature of the offences or any special circumstances. On the hearing of the application in this Court, the respondent correctly acknowledged that Wallace J's reasons were insufficient to support the making of the s 662 order. His Honour's brief references to the circumstances of the offences and to the applicant's mental condition were made with respect to the imposition of the determinate sentences. His reasons do not serve to show which of the factors specified in s 662 were taken into account in making the indefinite detention order. No point was taken respecting the sufficiency of Wallace J's reasons before the Court of Criminal Appeal. The ground of challenge in the Court of Criminal Appeal was that the evidence was not capable of supporting the order applying the Tunaj test. The respondent contended that the majority rejected that challenge in terms which made clear that they were satisfied, taking into account she would have been released if the head sentence had been remitted in accordance with s 29 of the Prisons Act. 21 Code, s 688(1a)(a). Hayne Crennan Bell several of the factors specified in s 662, that the order was appropriate judged by the Tunaj test. Brinsden J expressed his conclusion in this way: "In my view his Honour's decision to utilize s 662 was appropriate in this case as it is one that meets the requirements discussed in Tunaj. Counsel for the applicant, as well as the experts who have examined him, have expressed little confidence that he could undergo a long period of parole without re-offending. The provisions of s 662 coupled with the Offenders' Probation and Parole Act enable the Parole Board to fix a term of parole more readily suitable to his requirements than would be so if a minimum term had been fixed which could not have been less than three years." In the Court of Criminal Appeal the prosecutor argued that the s 662 order conferred a practical benefit on the applicant. Burt CJ, in dissent, recorded the prosecutor's submission that the applicant would be unlikely to complete three and a half years on parole without re-offending, and that re-offending would see him "permanently locked into the system both legally and as a fact"22. It had been suggested that this outcome might be avoided by a s 662 order23. Burt CJ put this "essentially pragmatic" submission to one side. Since the applicant's primary challenge must succeed, it is unnecessary to determine whether, as the applicant asserts, Brinsden J is to be understood as adopting the prosecutor's pragmatic submission in the concluding two sentences of the passage above. At the commencement of his reasons, Brinsden J identified the issue in the appeal against the s 662 order by reference to the test articulated in Tunaj. In purporting to apply that test, his Honour took into account three of the factors specified in s 662: the nature of the offence, and the applicant's character and mental condition. His Honour said that the applicant was "a man with serious sexual problems which in the past have resulted in the commission of sexual offences". The reference to past sexual offences appears to be to the offences of gross indecency and wilful exposure and, perhaps, "evil designs". His Honour noted that the applicant had not been prepared to admit these offences, indicating that he had not developed insight into the factors that had led to their commission. Added to this was the applicant's "inability to accept the 22 Offenders Probation and Parole Act 1963 (WA), s 44(4). 23 Offenders Probation and Parole Act 1963 (WA), s 41(1)(c) and (3)(b). Hayne Crennan Bell advantages offered to him in hostel and workshop settings". In the light of these "The applicant is a man about whom it is very difficult to have any real confidence that his behaviour pattern will improve and that he will not re- offend, and seriously offend, when released into the community." This was not a conclusion that the nature of the offence and the applicant's character and mental condition made it so likely that he would commit further crimes of violence, including sexual offences, that he was a constant danger to society24. Again, contemplation that the applicant might be released on a relatively short period of parole "more readily suitable to his requirements" does not sit with satisfaction of the demonstrable necessity to make an order authorising his indefinite detention. Burt CJ, in dissent, adhered to the views he had expressed in Tunaj. He observed that the applicant's criminal record did not include previous offences of personal violence and that his past offences appeared to be devoid of any sexual element, save for the convictions for gross indecency, "evil designs" and wilful exposure. His Honour concluded that there was nothing in the applicant's record of prior convictions which could justify a conclusion that he had "shown himself to be a danger to the public". The respondent's submissions The respondent submitted that the applicant had not adequately explained the inordinate delay in bringing the present application. The extension of time was opposed. The respondent pointed out that s 662 was repealed in 199525 and provision for the making of an order authorising indefinite detention is now found in the Sentencing Act 1995 (WA)26. The terms of the latter differ from the terms of s 662 and it follows that the grant of special leave will have no wider significance. The respondent also opposed the grant of special leave, contending that setting aside the order for indefinite detention would produce an anomalous result: the applicant would be released into the community without parole supervision. 24 Chester v The Queen (1988) 165 CLR 611 at 618-619. 25 Sentencing (Consequential Provisions) Act 1995 (WA), s 26. 26 Section 98. Hayne Crennan Bell The respondent acknowledged that the material before the courts below, judged by today's standards, was not as "rigorous" as might be expected. It is now the practice to apply for orders in the case of dangerous sexual offenders under the Dangerous Sexual Offenders Act 2006 (WA) ("the DSO Act"). An offender who is found to be a "serious danger to the community" may be subject to indefinite detention or to a supervision order under the DSO Act27. The court may not make such an order unless satisfied by acceptable and cogent evidence to a high degree of the probability that the person is a serious danger to the community28. The respondent submitted that the relative paucity of material concerning the applicant's character, antecedents and mental condition when compared with the evidence that would be required to support an order under the DSO Act should not undermine the validity of the majority's conclusion. The respondent maintained that, by the standards of 1987, the majority was right to conclude that the s 662 order had been properly made. The respondent put it this way in written submissions: "The combination of the nature of the offending and the applicant's mental state, which did not augur well for rehabilitation, provided a sufficient basis for the order of an indefinite sentence." The submission must be rejected. In 1987 courts in Western Australia were not authorised to make orders for the indefinite detention of a convicted person other than on acceptable evidence proving the demonstrable necessity for the order. The respondent correctly acknowledged that the nature of the offences in this case could not alone support a conclusion of the necessity for the order. The evidence respecting the applicant's antecedents, character, age, health and mental condition did not support a conclusion that he posed a constant danger of physical harm to the community29. The applicant's past record of offences, which included relatively minor sexual offences, did not involve violence. Such psychiatric and psychological evidence as was before the Supreme Court did not identify the applicant as a person who posed a danger to the community of physical harm including by serious sexual offending. Ms McHugh's opinion that the applicant was at risk of re-offending was not an opinion that he was a constant danger to the community. Ms McHugh was addressing the applicant's denial that he had wilfully exposed himself and his denial of "the on curtilage offences". She considered that his denials limited his insight into the factors that had contributed to the commission of these offences. Her conclusion also took 27 Dangerous Sexual Offenders Act 2006 (WA), s 17(1). 28 Dangerous Sexual Offenders Act 2006 (WA), s 7(1) and (2). 29 Chester v The Queen (1988) 165 CLR 611 at 618-619. Hayne Crennan Bell into account the applicant's denial of participation in homosexual activities and his unwillingness to discuss his sexuality. The significance of the last-mentioned considerations to Ms McHugh's conclusion needs to be understood in the context that homosexual acts between consenting males in private were criminal offences in Western Australia in 198630. Burt CJ was plainly correct to conclude that the evidence did not support the making of the order. The evidence was not capable of demonstrating that the applicant was so likely to commit further crimes of violence, including sexual offences, that he constituted a constant danger to the community31. From the time when Legal Aid WA became aware of the applicant's circumstances in early 2011, it has acted with reasonable dispatch in seeking to pursue an appropriate remedy for him. Given unchallenged evidence of the applicant's intellectual disability, his failure to more actively pursue redress while in prison should not stand in the way of the grant of leave. The applicant has now served six years more than the maximum sentence that a court could have imposed for the offence of aggravated sexual assault. The s 662 order should not have been made. Notwithstanding the great delay in bringing the application, the interests of the administration of justice require that special leave to appeal be granted. The appeal must be allowed. In the result, the order made under s 662 will be set aside and the applicant will be released from custody without parole supervision. The applicant has served the sentences for the serious offences of which he was convicted in 1987. The respondent's submission that to release him almost 20 years after completing those sentences would produce an anomalous result cannot be countenanced. It may be assumed that the applicant will receive such support and assistance as he may require from the Disability Services Commission on his 30 Section 184 of the Code made it an offence for a male, whether in public or private, to commit an "act of gross indecency with another male person" or to procure another male person to commit an act of gross indecency with him. The Law Reform (Decriminalization of Sodomy) Act 1989 (WA) repealed s 184 and replaced it with a provision limited to criminalising homosexual acts of gross indecency committed in public. 31 Chester v The Queen (1988) 165 CLR 611 at 618-619. Hayne Crennan Bell release32. In the event that there are grounds for considering the applicant poses a risk to the sexual safety of one or more children, or children generally, it is open to the proper authorities to bring an application for a child protection prohibition order before a court33. The court making such an order may prohibit certain conduct, including associating with specified persons, being in specified locations and engaging in specified behaviour34. Orders may prohibit conduct absolutely or on the terms that the court considers appropriate35. To observe that there is a statutory scheme designed to protect the community from the risk of harm posed by persons who have been convicted of sexual offences and who are at liberty in the community is to say nothing about whether the scheme should be engaged in this case. Orders Orders should be made as follows: Dispense with compliance with the time limit for filing the application for special leave to appeal and grant the application, treat the appeal as instituted and heard instanter and allowed. Set aside the order of the Court of Criminal Appeal of the Supreme Court of Western Australia declining to interfere with the order made by Wallace J under s 662 of the Criminal Code (WA) and in lieu thereof quash that order. 32 The Court was informed during the hearing that the Commission is the successor to the Authority for Intellectually Handicapped Persons. 33 Community Protection (Offender Reporting) Act 2004 (WA), s 87. 34 Community Protection (Offender Reporting) Act 2004 (WA), s 93(1). 35 Community Protection (Offender Reporting) Act 2004 (WA), s 93(3). The discretion to grant special leave to appeal, which "cannot be reduced to a formula", "must always make allowance for the exceptional case of manifest injustice"36. This is such a case. Unless special leave to appeal from the judgment of the Court of Criminal Appeal of the Supreme Court of Western Australia is granted 25 years out of time, the applicant will remain in indefinite detention by reason of a court order that should never have been made. The Court of Criminal Appeal gave its judgment in 198737. In 1988 the High Court decided Chester v The Queen38 . In 1989 Brinsden J stated his view since Chester to have become that s 662(a) of the Criminal Code (WA) "should not be used if the [sentencing] judge is not clearly satisfied that the [convicted person] will remain a constant danger to the community in the future" and "cannot be used where there is only the probability of the offender re-offending as he must be seen as a constant danger to the community"39. That view correctly reflected Chester. The misfortune of the applicant is that Chester had not been decided at the time that the Court of Criminal Appeal gave its judgment in 1987. If it had been, Brinsden J could not have upheld the sentencing judge's order under s 662(a) on the basis that "[t]he applicant is a man about whom it is very difficult to have any real confidence … that he will not re-offend, and seriously offend, when released into the community"40. That formulation by Brinsden J, with whom Smith J agreed, reflected their Honours' adoption of what, in the light of Chester, was a wrong test. The other member of the Court of Criminal Appeal was Burt CJ. He adopted the correct test. He dissented. He was right. The correct test, properly applied, could have led to only one conclusion. The highest the evidence before the sentencing judge went was an expression, by a clinical psychologist in training, of "fear" that the applicant "will be at risk of re-offending on his release to the community". The sentencing judge could not possibly have been satisfied that the applicant would remain a constant danger to the community. The order made under s 662(a) should have been quashed. I therefore agree with the orders proposed in the joint reasons for judgment. 36 Lowe v The Queen (1984) 154 CLR 606 at 611; [1984] HCA 46. 37 Yates (1987) 25 A Crim R 361. 38 (1988) 165 CLR 611; [1988] HCA 62. 39 Gooch (1989) 43 A Crim R 382 at 396. 40 (1987) 25 A Crim R 361 at 369.
HIGH COURT OF AUSTRALIA INSURANCE COMMISSION OF WESTERN AUSTRALIA APPELLANT AND CONTAINER HANDLERS PTY LTD & ORS RESPONDENTS Insurance Commission of Western Australia v Container Handlers Pty Ltd [2004] HCA 24 26 May 2004 1. The appeal is allowed. ORDER 2. Container Handlers Pty Ltd is to bear the costs of Insurance Commission of Western Australia. 3. Orders 1, 2 and 3 of the Full Court of the Supreme Court of Western Australia made on 3 October 2001 are set aside and, in place thereof, it is ordered that the appeal to that Court by Container Handlers Pty Ltd against Insurance Commission of Western Australia is dismissed with costs. On appeal from Supreme Court of Western Australia Representation: B W Walker SC with P J Brereton for the appellant (instructed by Phillips Fox) D F Jackson QC with G R Hancy for the first respondent (instructed by Mullins Handcock) No appearance for the second and third respondents Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Insurance Commission of Western Australia v Container Handlers Pty Ltd Insurance – Motor vehicles – Third party liability insurance – Prime mover and low loader – Where plaintiff injured while making repairs to vehicle – Directly caused by, or by the driving of, motor vehicle. Insurance – Motor vehicles – Third party liability insurance – Construction of term of insurance contract in light of legislative policy. Statutes – Construction – Purposive construction – Use of extrinsic materials to aid statutory construction. Words and phrases – "Directly caused by, or by the driving of, [a] motor vehicle", "caused by [a] motor vehicle if a consequence of the driving of that vehicle or of the vehicle running out of control", "a consequence of", "driving". Motor Vehicle (Third Party Insurance) Act 1943 (WA), ss 3(1), 3(7), 4(1), 6(1), Schedule. McHUGH J. During the course of transporting a truck on a low loader attached to a prime mover in outback Western Australia, Mr Ashley Sutton suffered a "brutal injury" when, after having stopped to repair the low loader, a jack slipped and caused an axle of the low loader to fall, crushing his left hand against the chassis1. The injury was the result of the negligence of Container Handlers Pty Ltd ("Container Handlers"), the owner of the prime mover and low loader, and its employee, Mr Jason Reibel2. Mr Reibel was the driver of the prime mover which was hauling the low loader. Mr Sutton and Mr Reibel were carrying out the repair work after Mr Sutton noticed smoke and fumes coming off one of the left rear wheel hubs of the low loader. Mr Sutton said that there was a lot of grease everywhere and that the wheels "were sort of out of shape, so it looked pretty serious."3 When Mr Sutton told Mr Reibel what he had seen, Mr Reibel said that they would have to take both wheels off the low loader. The injury to Mr Sutton occurred shortly after Mr Reibel and Mr Sutton commenced the repair work. The issue in this appeal, brought against an order of the Full Court of the Supreme Court of Western Australia, is whether the bodily injury suffered by Mr Sutton was "directly caused by, or by the driving of, [a] motor vehicle" within the meaning of the standard form policy set out in the Schedule to the Motor Vehicle (Third Party Insurance) Act 1943 (WA) ("the Act"). Policies in that form had been issued by the appellant, the Insurance Commission of Western Australia ("the ICWA"), to Container Handlers, the first respondent, in respect of each of the prime mover and low loader4. The Full Court held that the policy indemnified Container Handlers in respect of its liability for Mr Sutton's injury5. In my opinion, the Full Court erred in finding that liability for the injury was within the scope of the indemnity given by the policy. Container Handlers conceded that the injury was not directly caused by the driving of the vehicle, but claimed that it was directly caused by the vehicle. However, under the Act, bodily injury is not to be taken to be directly caused by the vehicle unless it is "a consequence of the driving of that vehicle or of the vehicle running out of 1 Sutton v Container Handlers Pty Ltd [2000] WADC 254 at [7] per Nisbet DCJ. 2 Nisbet DCJ's judgment refers to the driver as "Mr Reiball"; however, this appears to be an error, as the pleadings and transcript before his Honour refer to "Mr Reibel". 3 Sutton [2000] WADC 254 at [3]. It is convenient to refer to these policies as one policy. 5 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 56 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. McHugh control."6 In my opinion, the injury to Mr Sutton was not a consequence of the driving of the vehicle because it did not result from any feature of the driving of the vehicle7. Statement of the case Mr Sutton successfully sued Container Handlers for damages for negligence in the District Court of Western Australia8. In the action, Container Handlers brought a third party claim against its insurer, the ICWA, claiming that it was entitled to be indemnified under the policy in respect of its liability to Mr Sutton. The trial judge, Nisbet DCJ, dismissed the third party claim. His Honour held that the injury to Mr Sutton was not directly caused by the driving of the vehicle9. The trial judge said that the most that could be said is that, if the vehicle had not been driven, or at least driven on such bad roads, the repairs would not have been necessary10. His Honour also found that the injury was not directly caused by the motor vehicle because the true direct cause of the injury was the negligent repair by Mr Reibel11. Container Handlers appealed to the Full Court of the Supreme Court of Western Australia against the dismissal of the third party claim. The Full Court (Wallwork, Wheeler and Roberts-Smith JJ) unanimously upheld the appeal in relation to the third party claim against the ICWA12. Roberts-Smith J (with whom Wallwork and Wheeler JJ agreed) said13: "In my opinion, on the facts in this case, the injury was directly caused by the vehicle and was a consequence of the driving of it. The driving of the vehicle along unsealed desert roads in extreme heat causing 6 Section 3(7). 7 There was no suggestion that at the relevant time the vehicle was running out of control. 8 Sutton [2000] WADC 254. 9 Sutton [2000] WADC 254 at [27]. 10 Sutton [2000] WADC 254 at [27]. 11 Sutton [2000] WADC 254 at [27]. 12 Container Handlers Pty Ltd (2001) 25 WAR 42 at 56 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. 13 Container Handlers Pty Ltd (2001) 25 WAR 42 at 56. McHugh the wheel hubs to overheat and seize up necessitating removal of the wheels and chaining the axle are matters which fall within the operation of the vehicle. Unlike the factual situation in [State Government Insurance Commission v Sinfein Pty Ltd14], the distinct acts of negligence by Container Handlers, or those of its employee driver for which it was liable in tort, were aspects of the fact of operation of the vehicle and so of the driving of it. These included the unserviceable nature of the hydraulic power unit of the low loader and those findings of [Nisbet DCJ] as to the driver's negligence ... In my view there was here a sufficient proximate or direct connection between the driving and [Mr Sutton's] injuries for them to have been regarded as directly caused by the driving. There were no matters of intervening negligence sufficient to remove the injuries from proximity to the driving of the vehicle. This was not a situation in which the vehicle was being worked upon independently of the driving of it. The mechanical problem occurred in the course of the driving from Telfer to Port Hedland. The breakdown occurred in a remote desert location. Repairs had to be effected for the purpose of enabling the vehicle to complete its journey and as part of the driving of it. The events were not merely preparatory, nor did they involve some activity associated with the vehicle (such as merely loading or unloading it) and nor was there some intervening cause or event (such as repair work being undertaken in a mechanical workshop or garage during a break in the journey) nor lapse of time sufficient to break the direct chain of causation between the driving and the injury. The injury was caused by the vehicle as a direct consequence of the driving of it." Subsequently, this Court granted the ICWA special leave to appeal against the decision of the Full Court in relation to the third party claim. The material facts Mr Sutton was a crane driver employed by Brambles Australia Ltd ("Brambles") at Port Hedland in Western Australia. Brambles had secured a contract for one of its cranes to undertake work at Camp Tracey, which is located in the remote outback of north-west Western Australia. At Camp Tracey, Mr Sutton was to load three or four uranium containers onto a truck and then proceed to the Nifty Strikes Copper Mine ("Nifty"), where he was to do lifting work during a mining processing works maintenance shutdown. 14 (1996) 15 WAR 434. McHugh Brambles contracted with Container Handlers for the crane to be transported to Camp Tracey and then on to Nifty. Mr Sutton was to accompany the crane while it was transported. Container Handlers provided a prime mover with an attached low loader onto which the crane was loaded. Both vehicles were owned by Container Handlers and were registered vehicles under the Road Traffic Act 1974 (WA). It is convenient to refer to the vehicles jointly as "the vehicle". Mr Reibel was the driver of the vehicle. On the morning of 12 March 1998, after loading the crane onto the low loader, Mr Sutton and Mr Reibel drove from Port Hedland to Camp Tracey. The following day, after completing the work at Camp Tracey, they drove to Nifty. At various times during the journey, the roads were so bad that the crane had to tow the vehicle. Mr Sutton gave evidence that breakdowns occurred "quite a lot" and that the men worked as a team in order to keep going15. On 14 March 1998, Mr Sutton received instructions to leave the crane at Nifty and return to Port Hedland with Mr Reibel. The following day, Mr Sutton and Mr Reibel loaded a large mine transport truck known as a "Haulpak" onto the low loader for transportation back to Port Hedland. They then set off from Nifty. At approximately midday, Mr Reibel stopped the vehicle in order to carry out a routine inspection. This was his usual practice and such inspections had been carried out during the earlier parts of the journey. It was an exceptionally hot day and the road was rough and sandy. During the course of the inspection, Mr Sutton noted smoke and fumes coming off one of the left rear wheel hubs of the low loader, the third set from the rear. He gave evidence that there was a lot of grease everywhere and that the wheels "were sort of out of shape, so it looked pretty serious." He told Mr Reibel. Mr Reibel inspected the wheels and decided that they would have to come off and that the axle would have to be chained so as to prevent it from dragging along the road. Mr Sutton assisted Mr Reibel to remove both wheels. Mr Reibel put a chain through two load-securing holes located in the side of the low loader. There were hooks on the ends of the chain. Mr Reibel's plan was to jack up the axle and then connect the hooks with each other to form a cradle to hold the axle. Mr Reibel jacked up the axle while Mr Sutton attempted to connect the hooks. Mr Sutton was precariously positioned in the wheel hub area of the low loader. He steadied himself by placing his left hand on the chassis. It soon became evident that the chain was not long enough. While Mr Reibel was attempting to jack the axle higher so that the ends of the chain would meet, the axle slipped off the jack. This caused the trail arm assembly that was connected to the axle to drop onto the chassis, crushing Mr Sutton's hand. 15 Sutton v Container Handlers Pty Ltd, District Court of Western Australia, Transcript, 21 August 2000 at 38. McHugh It is upon these facts that the question arises as to whether the ICWA is liable to indemnify Container Handlers under the policy it issued. The ICWA was established by the Insurance Commission of Western Australia Act 1986 (WA). One of its functions is to issue, and to undertake liability under, policies of insurance as required by the Act16. There was a statutory policy of insurance in the form of the Schedule to the Act in relation to each of the prime mover and the low loader. The third party claim was based on those policies. As noted earlier, it is convenient to refer to them as one policy. The construction of the policy requires an examination of the Act as well as the contents of the standard form policy set out in the Schedule ("the statutory policy"). The Act The Act relevantly provides: Interpretation For the purposes of this Act, the death of or bodily injury to any person shall not be taken to have been caused by a vehicle if it is not a consequence of the driving of that vehicle or of the vehicle running out of control. Insurance against third party risks (1) When any motor vehicle is on a road there is required to be in force in relation to the motor vehicle a contract of insurance entered into by the owner of the motor vehicle under which the owner has insured subject to and in accordance with this Act against any liability which may be incurred by the owner or any person who drives the motor vehicle in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the motor vehicle. Requirements in respect of policies In order to comply with this Act a policy of insurance must – 16 Insurance Commission of Western Australia Act, s 6(a). McHugh be issued by the Commission; except as provided in this section insure the owner of the vehicle mentioned in the policy and any other person who at any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the vehicle in any part of the Commonwealth; and be in a form substantially similar to that contained in the Schedule. Schedule INSURANCE POLICY – issued under the MOTOR VEHICLE (THIRD PARTY INSURANCE) ACT 1943 The INSURANCE COMMISSION OF WESTERN AUSTRALIA, subject to the warranties and conditions contained in this Policy and to the provisions of the Motor Vehicle (Third Party Insurance) Act 1943, in this Policy referred to as 'the Act', agrees to insure the owner of the motor vehicle described in the Traffic Licence issued herewith and any other person who drives that motor vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by the owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, that motor vehicle in any part of the Commonwealth during the period from the date of the issue of this Policy to the date of expiry of the said Traffic Licence. CONDITIONS The Commission is entitled to all rights remedies and benefits which may accrue to it by virtue of the Act. This contract of insurance is subject to the provisions of the Act." The formula "directly caused by, or by the driving of, [a] motor vehicle" was introduced into the Act by the Motor Vehicle (Third Party Insurance) McHugh Amendment Act 1987 (WA) ("the Amendment Act"). The formula is used throughout the Act17. Before the Amendment Act, the statutory policy used the phrase "caused by or arising out of the use of such [a] motor vehicle"18. This Court considered those words in Dickinson v Motor Vehicle Insurance Trust19 and held that injuries caused to a child left in a stationary vehicle, which subsequently caught fire as a result of another child playing with matches, arose out of the use of the vehicle. The Court stated in a joint judgment20: "Thus the occupation of the motor car by the appellant and her brother as passengers whilst the car was stationary and their father was absent, was a use of the vehicle within the meaning of the [Motor Vehicle (Third Party Insurance) Act 1943 (WA)]. The interior of the motor car caught fire whilst it was in use in that way. The injuries which the appellant sustained as a result arose out of that use." The second reading speech made by the Deputy Premier, Mr Malcolm Bryce, in relation to the Motor Vehicle (Third Party Insurance) Amendment Bill 1987 (WA) ("the Amendment Bill") indicates that the Amendment Act was intended to overcome the decision in Dickinson and to tighten the scope of the statutory policy. The Deputy Premier said21: "The need to amend the Act arose from the now well-known High Court of Australia judgment in Dickinson v Motor Vehicle Insurance Trust handed down on 13 October 1987. ... The decision in the Dickinson case is generally considered to have opened the floodgates for the entitlement of persons injured in stationary motor vehicles to recover damages from the State Government Insurance Commission ... 17 See long title, ss 3(4), 3A, 4(1), 7(1), 7(2), 7(3), 7(6), 8(1), 8(5), 8A(1) (now repealed), 10(1), 11(3), 12(1), 14, 15, 16(1), 17, 29(1), 29A, 33(3) and the Schedule. 18 See, eg, s 4(1) of the Act as at 15 December 1987. 19 (1987) 163 CLR 500. 20 Dickinson (1987) 163 CLR 500 at 505. 21 Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 12 November 1987 at 5759-5760. The same second reading speech was given in the Legislative Council: Western Australia, Legislative Council, Parliamentary Debates (Hansard), 2 December 1987 at 7070-7072 per Kay Hallahan. McHugh It is important to consider historically the purpose for which [the Act] was introduced. In moving the second reading of the Motor Vehicle (Third Party Insurance) Bill, the Minister for Works said in the Legislative Assembly on 28 September 1943 – The general principle laid down in the Bill is that before a licence can be issued a policy of insurance must be taken out by the owner of every motor vehicle, which will cover the legal liability of any person driving the vehicle, whether lawfully or unlawfully, in the event of death or bodily injury occurring to any third person. It is clear, therefore, that the Parliament thus intended that the liability of the Motor Vehicle Insurance Trust was to be limited to the payment of damages for injury or death sustained by persons in consequence of the negligent driving of motor vehicles. ... In some sections of [the Act] appears 'caused by the use of', 'in the use of', 'arising out of the use of', 'in the use of a motor vehicle', 'caused by or arises out of the use of', 'as the result of the use of a motor vehicle', 'caused by or arising out of the use of'. This wording must be deleted from the insurance policy and [the Act] so that similar claims against the third party insurance fund of the State Government Insurance Commission will be outlawed. The full implications of [Dickinson] are still largely unknown. Unless [the Act] is suitably amended, it is anyone's guess as to the scope of claims which may ultimately be found to fall within the meaning of the words 'in the use of a motor vehicle'." Operation of s 6(1)(b) of the Act and the Schedule The phrase "directly caused by, or by the driving of, [a] motor vehicle" can be broken into two separate and distinct limbs. The statutory policy therefore applies where the death or bodily injury is: directly caused by the motor vehicle; or directly caused by the driving of the vehicle. In this Court, Container Handlers correctly conceded that the driving of the motor vehicle did not directly cause the injury to Mr Sutton. Accordingly, the only question in the appeal is whether the injury was directly caused by the motor vehicle. McHugh As the second reading speech indicates, the Act was amended to delete expressions such as "caused by the use of", "in the use of", "arising out of the use of", "in the use of a motor vehicle", "caused by or arises out of the use of", "as the result of the use of a motor vehicle" and "caused by or arising out of the use of". In their place was substituted the expression "directly caused by, or by the driving of, [a] motor vehicle". In addition, the meaning of the expression "directly caused by ... [a] vehicle" was restricted by the terms of s 3(7). The expressions "directly caused by ... the vehicle" and "directly caused by ... that vehicle" are curious. At first sight, they seem to proceed on the same theory as the law of deodands – that inanimate objects are the cause of the harm that people suffer by coming into contact with them. Both scientific and modern common law doctrines of causation as well as common sense, however, deny that inert objects such as vehicles cause anything. Whilst the use of inert objects may have effects, this is because they are the instruments by which living creatures bring about those effects. Dynamic physical events such as floods, earthquakes, volcanoes and tidal waves may bring about effects and properly may be regarded as causing those effects. Nevertheless, the notion that a vehicle may cause death or bodily injury without human intervention is not easy to understand. What, then, do the words in s 6(1)(b) and the Schedule mean when they refer to "the death of or bodily injury to any person directly caused by ... [a] vehicle"? There are two views as to the meaning of the expression "the death of or bodily injury to any person directly caused by ... [a] vehicle". The first view is that the expression simply looks to the vehicle as the harm-causing instrument and requires a direct and immediate connection between the vehicle as the harm- causing instrument and the death or bodily injury. Two considerations support this view. One is that the expression "directly caused by ... [a] vehicle" is in apposition to the expression "directly caused by ... the driving of ... [a] vehicle". The apposition of the two expressions indicates that the first limb means what it says and that, for the purpose of the Act, the vehicle itself can be regarded as causing death or bodily injury. The second consideration is that the expression "directly caused by ... [a] vehicle" was substituted for expressions such as "caused by the use of" and "arising out of the use of" which had implied a causal connection between a human actor and the death or bodily injury. The absence of a reference, express or implied, to an actor in the first limb in s 6(1)(b) and the Schedule indicates that it is the vehicle itself that is deemed to cause the death or bodily injury. The second view of s 6(1)(b) and the Schedule is that they look to s 3(7) and require the words of that sub-section to be read into their provisions so that the causal agent is always a driver or at least a person controlling the vehicle. One considerable difficulty with this view is that it renders redundant the second limb in s 6(1)(b) and the Schedule. McHugh In my view, for the reasons set out above and more particularly because of the relationship of s 3(7) to s 6(1)(b) and the Schedule, the first of these two views is the correct one. The expression "directly caused by ... [a] vehicle" looks to the vehicle as the harm-causing instrument and requires a direct and immediate connection between the vehicle as the harm-causing instrument and the death or bodily injury. Operation of s 3(7) of the Act Section 3(7) of the Act provides that the death of or bodily injury to any person shall not be taken to have been "caused by" a vehicle if it is not a consequence of the driving of that vehicle or of the vehicle running out of control. The trial judge held that there was no occasion to refer to s 3(7) of the Act in interpreting "caused by" a motor vehicle because the policy contained all the terms of the insurance22. The Full Court rejected this approach and concluded that the proper approach was to regard the cover provided by the statutory policy and the liability created by the Act as coterminous23. Roberts-Smith J said that it would be anomalous if the cover provided by the statutory policy was more or less than the liability imposed by the Act24. In my opinion, the Full Court was correct in holding that it is necessary to refer to s 3(7) in interpreting the statutory policy25. Indeed, the issue in this Court largely concerns the manner in which s 3(7) operates in the context of the Act. In the Full Court, Roberts-Smith J said26: "It is to be noted that the definition in s 3(7) applies to the phrase 'caused by a vehicle' – not 'directly caused by a vehicle'. The word 'directly' still has work to do which must be more than a reiteration of the words 'caused by'. The approach required is to pose the question in two parts: first, was the injury directly caused by the vehicle; secondly, was 22 Sutton [2000] WADC 254 at [22] per Nisbet DCJ. 23 Container Handlers Pty Ltd (2001) 25 WAR 42 at 53 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. 24 Container Handlers Pty Ltd (2001) 25 WAR 42 at 53. 25 Container Handlers Pty Ltd (2001) 25 WAR 42 at 53 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. See also references to the Act in the opening words of the governing clause of the standard policy and in conditions 3 and 4. See also s 4(1) of the Act and Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 at 441-442, 444 per Barwick CJ. 26 Container Handlers Pty Ltd (2001) 25 WAR 42 at 54. McHugh the injury a consequence of the driving of the vehicle or of the vehicle running out of control? Here, [Mr Sutton's] injury was directly caused by the low loader. The axle of the vehicle fell and crushed his hand against the chassis. It is the second question which is difficult. Was the injury a consequence of the driving of the vehicle? I accept it does not have to be a direct consequence of the driving." (original emphasis) The ICWA submits that the question "was the injury directly caused by the motor vehicle?" cannot logically be broken into two parts – it is the whole and only question to be asked. The ICWA contends that, on the proper construction of the policy, that question falls to be determined by asking whether the injury was a "direct consequence" of the driving of the vehicle or of the vehicle running out of control. On this hypothesis, s 3(7) operates to differentiate between those consequences that are causal and those that are not. Container Handlers, on the other hand, submits that the two-stage approach taken by the Full Court is correct. It contends that, although the driving of the vehicle did not directly cause the injury to Mr Sutton, the vehicle did directly cause the injury and the injury was a consequence of the driving of the vehicle. Section 3(7) appears under the heading "Interpretation", which suggests that it is a definitional provision. However, in State Government Insurance Commission v Wagner, Olsson J said in obiter that a similar sub-section in the legislation was essentially an exclusionary equivalent South Australian provision27. His Honour articulated the two-stage test to be applied for the purpose of determining whether liability arises under the statutory cover28: "It is at once to be observed that, in determining whether liability arises under the statutory cover in this case, a successive, two stage, process of evaluation necessarily arises. In the first instance ... the question must be asked: 'Did any relevant liability in respect of bodily injury "arise out of the use" of the vehicle in question?' in the sense in which that phrase is used in the Schedule. If the answer to that question is in the affirmative a second question must then be posed and answered. That question is: 'Has it been demonstrated that the bodily injury is not a consequence of the driving of the vehicle?'" 27 (1993) 62 SASR 175 at 180. 28 Wagner (1993) 62 SASR 175 at 179. McHugh In Motor Accident Commission v ANI Corp Ltd, Cox J in the Full Court of the Supreme Court of South Australia refused to follow the dicta of Olsson J29. Cox J said that the sub-section of the South Australian legislation in question did not express a qualification, condition or exception to a general obligation, undertaking or liability created by the policy of insurance set out in the relevant Schedule to that legislation; rather, the sub-section limited the scope or meaning that would otherwise be given to the expression "caused by or arising out of the use of"30. His Honour said that in substance the legislature had defined a term or expression used in the Schedule31. Lander J agreed that the sub-section was a definitional provision and said that it did not purport to include any condition for indemnity under the statutory policy, but merely provided for the scope of the indemnity under that policy32. In my opinion, the true construction of s 3(7) is one somewhere between these competing views. To regard s 3(7) as a mere definition of the words "caused by ... [a] vehicle" is to overlook its content, structure and effect. First, s 3(7) does not use the term "directly". It is therefore at best a definition of only part of the first limb of the statutory formula, namely, "directly caused by ... [a] vehicle". Second, unlike a true definitional clause, it does not take the expression "caused by ... [a] vehicle" and declare that it means "a consequence of the driving of that vehicle or of the vehicle running out of control." Instead, its structure assumes that what is "not [to] be taken to have been caused by a vehicle" is within the expression "directly caused by ... [a] vehicle". Then, by using a double negative in the passive voice, it excludes what would otherwise be within the ordinary meaning of that expression. Third, s 3(7) cannot be sensibly used as a definition without excising certain words in s 6(1)(b) and the Schedule – particularly the word "caused" in the first limb – and reversing the passive tense and negative structure of s 3(7) and then rewriting the words of s 6(1)(b) and the Schedule. Thus, to read s 3(7) as a true definitional provision requires s 6(1)(b) and the Schedule to be rewritten as follows: "insure ... in respect of all liability ... in respect of the death of or bodily injury to any person directly in consequence of the driving of that vehicle or of the vehicle running out of control or directly caused by the driving of the motor vehicle." 29 (1997) 26 MVR 57 at 63-64. 30 ANI Corp Ltd (1997) 26 MVR 57 at 64. 31 ANI Corp Ltd (1997) 26 MVR 57 at 64. 32 ANI Corp Ltd (1997) 26 MVR 57 at 74. See also WorkCover Corporation v Reiter (1997) 70 SASR 347 at 363-364. McHugh Thus, to treat s 3(7) as a true definitional provision has the result that the first limb – "directly caused by ... [a] vehicle" – is completely covered by the second limb – "directly caused by ... the driving of ... [a] vehicle" – except for those cases where the vehicle runs out of control. In other words, it renders redundant the first limb, that is, "directly caused by ... [a] vehicle". I cannot believe that any parliamentary drafter would go to such trouble to achieve the effect that the true definition theory of s 3(7) requires. The drafter could have achieved that effect simply by using the words "death of or bodily injury to any person directly caused by the driving of the vehicle or by the vehicle running out of control". It would require a low estimate of the drafter's drafting ability to believe that he or she would have used the first limb and the ungainly language of s 3(7) to achieve this result when it could have been achieved so simply. All these considerations point strongly – indeed overwhelmingly – against the view that s 3(7) is a true definitional provision. The better view of the relationship between s 3(7) and s 6(1)(b) and the statutory policy is that s 3(7) limits rather than defines or excludes the operation of s 6(1)(b) and the statutory policy. If the indemnity is activated only because the death or bodily injury was directly caused by the vehicle, s 3(7) makes it necessary to determine whether the death or injury was a consequence of the driving of the vehicle or of the vehicle's running out of control. Thus, s 3(7) limits the scope of the words "directly caused by ... [a] vehicle" in s 6(1)(b) and the statutory policy by imposing an additional requirement. Even if the vehicle directly caused the death or bodily injury, the statutory policy applies only if the person suing on the indemnity also shows that the death or bodily injury was a consequence of the driving of the vehicle or of the vehicle's running out of control. The interpretation put forward by the ICWA effectively merges the two separate and distinct limbs of the statutory formula into one broad question: was the death or bodily injury directly caused by the driving of the vehicle or the vehicle's running out of control? As I have indicated, this would render the first limb of the statutory formula superfluous unless the death or injury were a direct consequence of the vehicle's running out of control. Moreover, acceptance of the ICWA's interpretation requires reading the term "directly" – which does not appear in s 3(7) – into that sub-section. That interpretation effectively seeks to replace the words "a consequence of" with the words "a direct consequence of" or "directly caused by". It gives the words "caused by ... [a] motor vehicle" in the statutory policy no content at all, except that which can be derived from s 3(7). It is clear that under the first limb of the statutory formula, "directly" is relevant only to the question whether the injury was caused by the motor vehicle. That question looks to the direct connection between the injury and the motor vehicle, not the injury and the driving of the McHugh motor vehicle. It is not correct for the ICWA to submit, as it did, that Container Handlers' interpretation gives "directly" no work to do. In support of its construction argument, the ICWA refers to statements in the second reading speech to the Amendment Bill that the object of the 1987 amendments was to indemnify in respect of "the payment of damages for injury or death sustained by persons in consequence of the negligent driving of motor vehicles."33 (emphasis added) However, while statements in second reading speeches concerning legislative intent are a guide – often a useful and sometimes a definitive guide – as to the meaning of the legislation, they do not replace the words of the Act34. Under s 6(1)(b) and the Schedule, the cover provided by the statutory policy is for "all liability for negligence", not merely liability for negligent driving. In the seminal case of Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd, this Court considered the wording of legislation similar to the predecessor of s 635. Barwick CJ, who gave the leading judgment, said that it is the bodily injury that must be caused by, or arise out of, the use of the motor vehicle, not the liability for that injury36. His Honour said that liability may arise from a tortious act other than the negligent use of a motor vehicle37. In the present case, the Full Court accepted that this distinction is maintained in the present statutory formulation38. The Full Court therefore concluded that under the statutory policy, cover may apply where the death or injury was directly caused by a vehicle, even if liability in negligence arises out of an unsafe system of work39. The statutory policy will also apply if, by reason of a defective 33 Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 12 November 1987 at 5759 per Malcolm Bryce. 34 Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518 per Mason CJ, Wilson and 35 (1966) 114 CLR 437. 36 R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 at 444. See also Sinfein Pty Ltd (1996) 15 WAR 434 at 460 per Parker J; Government Insurance Commission (WA) v CSR Ltd (1999) 29 MVR 29 at 32 per Pidgeon J, Ipp and Wallwork JJ agreeing. 37 R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 at 444. See also Dickinson (1987) 163 CLR 500 at 504-505. 38 Container Handlers Pty Ltd (2001) 25 WAR 42 at 56 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. 39 Container Handlers Pty Ltd (2001) 25 WAR 42 at 56 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. McHugh inspection system, the brakes on a vehicle fail and cause a collision, even though the driver was not negligent with respect to the collision. The interpretation proposed by the ICWA may be contrasted with the interpretation adopted by the Full Court. The Full Court's interpretation recognises the separate areas of operation of the two limbs. At the same time the Full Court's approach gives effect to the intention of the legislature as it was expressed through the Amendment Act. That intention was to narrow the scope of the statutory policy by connecting liability under the statutory policy with the locomotion of the vehicle insured. The link with the locomotion of the motor vehicle is maintained through the requirement that the injury be a consequence of the driving of the vehicle or its running out of control. This interpretation of s 3(7) reverses the effect of the decision in Dickinson and earlier cases40 while maintaining the distinction in s 6(1)(b) and the statutory policy between death or injury directly caused by driving and death or injury directly caused by the vehicle. It effectively adopts part of the argument of the insurer that failed in R J Green & Lloyd Pty Ltd41. In that case, the insurer argued42 that: "injury will not be caused by or arise out of the use of a motor vehicle within the meaning of the policy unless the motor vehicle is in motion, or some part of it is in operation so that the injury is caused by or arises out of the use involving that motion or that operation." Under the 1987 amendments, the insured must show that the death or injury was either directly caused by the driving or directly caused by the vehicle in consequence of the driving or uncontrolled motion of the vehicle. Accordingly, the Full Court was correct in its articulation of two questions the answers to which determine whether liability arises under the statutory cover. It is appropriate to consider each question in turn. 40 See, eg, Fawcett v BHP By-Products Pty Ltd (1960) 104 CLR 80 at 87 per Menzies J; R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 at 441-442 per Barwick CJ; Commercial and General Insurance Co Ltd v Government Insurance Office (NSW) (1973) 129 CLR 374 at 379 per Menzies, Walsh and Mason JJ. In Dickinson, although the lighting of the match was not a consequence of the driving of the motor vehicle, the plaintiff's subsequent injuries were held to have arisen out of the use of the vehicle. 41 (1966) 114 CLR 437. 42 R J Green & Lloyd Pty Ltd (1966) 114 CLR 437 at 441 per Barwick CJ. McHugh Question 1: Was the injury directly caused by the motor vehicle? There is no doubt that "motor vehicle" as defined in s 3(1) of the Act encompasses both the prime mover and the low loader. Although the low loader is not propelled by its own power, the definition of "motor vehicle" in s 3(1) "includes a caravan, trailer or semi-trailer drawn or hauled by a motor vehicle." Nisbet DCJ said43: "Whether [Mr Sutton's] injuries were directly caused by the vehicle ie. the low loader represents a greater difficulty because in one complete sense they were: part of the low loader crushed [Mr Sutton's] hand, but it seems to me that the true direct cause was the negligent repair of the vehicle by [Mr Reibel]. On the face of it this may be a fine distinction but it is a distinction I draw nevertheless, and not without some misgiving as to its correctness, because I am mindful of what Parker J foreshadowed in [Sinfein Pty Ltd44] when he said: 'I expect that the significance to be properly attached to the phrase "directly caused by" will only emerge from a course of decision involving a variety of factual situations.'" The Full Court reversed this finding. Roberts-Smith J said that Mr Sutton's injury was directly caused by the low loader because its axle fell and crushed his hand against the chassis45. The ICWA argues that a vehicle does not cause an injury simply because part of the vehicle falls on the injured person. However, as I have indicated, this conclusion is based on a faulty analysis of the effect of s 3(7), so as to require that the injury be "directly caused" by or a "direct consequence of" the driving of the vehicle. In my view, the Full Court correctly concluded that Mr Sutton's injury was directly caused by the vehicle. Question 2: Was the injury a consequence of the driving of the vehicle? Meaning of "a consequence of" The ICWA contends that the falling of the axle was not a direct (or even indirect) consequence of the driving of the vehicle. It submits that common sense and experience show there was no causal connection at all between the 43 Sutton [2000] WADC 254 at [27]. 44 (1996) 15 WAR 434 at 462. 45 Container Handlers Pty Ltd (2001) 25 WAR 42 at 54. McHugh driving of the vehicle and the injury, once regard is had to the intervening acts associated with the repair of the vehicle. The ICWA contends that the injury was a consequence of the negligent acts of Container Handlers and Mr Reibel, namely, the failure to provide a safe system of work and the negligent carrying out of the repairs, and that the driving of the vehicle was merely the occasion for that negligence to operate. In reply, Container Handlers submits that the relationship between the driving and the consequent injury need not be immediate, nor need it be direct. It contends that the injury may be a consequence of the driving even though other causally relevant events intervene. It argues that in this case the injury was a consequence of the driving of the low loader, because there was an unbroken sequence of causally connected events commencing with the driving and leading to the injury. It submits that the driving caused a mechanical problem which required immediate action. The driving of the vehicle therefore generated a risk that Mr Sutton or Mr Reibel might be injured when attempting to correct such a mechanical problem. That risk eventuated. The intervening acts of the driver and Mr Sutton, therefore, did not preclude a finding that there was a relationship of cause and consequence between the driving and the injury, as they were elements in the sequence of causally related events. In support of its argument, Container Handlers refers to a number of tort cases which address the issue of the requisite causal connection for the purpose of establishing liability46. It submits that in this case the fact that the vehicle had to be repaired was "the very kind of thing" likely to result from Container Handlers' negligence. The ICWA answers that submission by contending that "consequence of" is not the same as the requisite causal connection for the purpose of establishing tortious liability. A negligent act can be a direct or indirect contributing cause of the intervening act and therefore remain a cause of the damage in an action in tort. The ICWA also submits that the chaining of the axle cannot possibly be described as the very risk arising from the manner of driving. In my view, cases which deal with causation in tort provide little assistance in the present appeal. Those cases consider the causal connection between a particular breach of duty and a particular loss or damage. As I have stated, under the Act it is necessary to establish a link between the driving of the vehicle and the death or bodily injury in question, not between the basis for liability and the death or injury. 46 Chapman v Hearse (1961) 106 CLR 112; Caterson v Commissioner for Railways (1973) 128 CLR 99; March v E & M H Stramare Pty Ltd (1991) 171 CLR 506; Medlin v State Government Insurance Commission (1995) 182 CLR 1. McHugh The word "consequence" is an ordinary English word and should be interpreted as such. The Australian Oxford Dictionary47 defines "consequence" as "the result or effect of an action". It is therefore necessary to determine whether a reasonable person, properly instructed as to the meaning of s 3(7), would regard the death or injury as an effect of the driving of the vehicle. The statutory context of the words tends against the view of Olsson J in Wagner that the injury must result from the driving in terms of proximate cause and effect48. To equate consequence with proximate cause is tantamount to saying that there must be a direct, dominant or immediate connection between the driving and the death or injury. If the words "in consequence of" were given that interpretation, the first limb of the statutory formula would again merge with the second. The legislature has chosen to use the term "a consequence" in s 3(7) in preference to the terms "direct cause" or "proximate cause"; in doing so, it is likely that it intended the term "a consequence" to have a different meaning from "direct cause" or "proximate cause"49. In Wagner, King CJ said that it may be true that the phrase "in consequence of" emphasises the sequential as distinct from the causal nature of the required link to a greater extent than the expression "caused by or arising out of"50. However, his Honour went on to say that he found it "difficult to envisage concrete examples in which bodily injury could be said to be 'in consequence of' driving although it could not at least be said to be 'arising out of' the driving."51 Whether or not this is so, in the context of the Act the expression "a consequence of" emphasises the result or effect of the driving rather than the driving causing the result. This distinction is important in an insurance context where cause is frequently – perhaps usually – equated with "proximate" or "dominant" cause. 47 The Australian Oxford Dictionary, (1999) at 284. 48 (1993) 62 SASR 175 at 182. 49 See also the comments of King CJ in Wagner (1993) 62 SASR 175 at 176: "I have no difficulty in accepting that injury is in consequence of driving if it is caused by some act, such as adjusting a seat belt, which is preparatory to driving and is immediately connected with the intended driving. The same can be said of actions subsequent to the driving but flowing from it and closely connected with it, such as applying a locking device or handbrake or closing windows immediately after bringing the vehicle to a standstill even after switching off the motor." 50 (1993) 62 SASR 175 at 176. 51 Wagner (1993) 62 SASR 175 at 176. McHugh Although "consequence" involves notions of causation, the term "consequence" – with its emphasis on effect – places less emphasis on the proximity of cause and effect than the term "cause" may do in various contexts. As Taylor J explained in The Commonwealth v Butler52: "an 'effect' may be caused, in the legal sense, by circumstances apparently remote for the chain of causation may be shown to have continued unbroken by any other intervening cause to the effect in question." (emphasis added) Meaning of "driving" The Full Court held that "driving" within the meaning of the Act extended to include both the manner of control of a motor vehicle and the fact of its "In the present case it is arguable that it was the manner of control of the rig which commenced the chain of causation which culminated in the bodily injury to [Mr Sutton]. I refer to the 'manner of control' in the sense of the way in which the rig was driven along unsealed, rough, desert tracks in extreme heat causing the wheel hubs to overheat and seize up so as to require removal of the wheels and the chaining of the axle." Later in his reasons, his Honour said55: "The driving of the vehicle along unsealed desert roads in extreme heat causing the wheel hubs to overheat and seize up necessitating removal of the wheels and chaining the axle are matters which fall within the operation of the vehicle. Unlike the factual situation in [Sinfein Pty Ltd], the distinct acts of negligence by Container Handlers, or those of its employee driver for which it was liable in tort, were aspects of the fact of operation of the vehicle and so of the driving of it. These included the unserviceable nature of the hydraulic power unit of the low loader and those findings of [Nisbet DCJ] as to the driver's negligence". 52 (1958) 102 CLR 465 at 476. 53 Container Handlers Pty Ltd (2001) 25 WAR 42 at 53 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. 54 Container Handlers Pty Ltd (2001) 25 WAR 42 at 53. 55 Container Handlers Pty Ltd (2001) 25 WAR 42 at 56. McHugh The ICWA submits that the Full Court erred in regarding acts that were "aspects of the fact of operation of the vehicle" as acts of "driving". It submits that such a conclusion does great violence to what is ordinarily understood to be the "driving" of a motor vehicle. Further, such a conclusion would defeat the legislative intention expressed through the 1987 amendments. The Amendment Act replaced the word "use" with "driving" in order to avoid the result for which Container Handlers contends. In response, Container Handlers argues that "driving" includes all the normal incidents of driving. It submits that the nature of the vehicle in this case meant that parts had to be checked and fixed in order that the vehicle could continue to be driven, and that the checking and fixing were part of the driving. Alternatively, it submits that the injury was a consequence of the driving of the vehicle in the sense that the driving led to the need to chain the axle56. In support of its conclusion that "driving" includes both the manner of control of a motor vehicle and the fact of its operation, the Full Court57 referred to the following statement of Parker J in Sinfein Pty Ltd58: "In the context of ss 3 and 4 of the Act it is possible that the notion of 'the driving of' a motor vehicle could be confined to denoting the quality, nature or manner of the control exercised by the driver over the motor vehicle (relating to the manner of control), or it could extend to the wider denotation of mere fact or circumstance that a motor vehicle is operated or driven (relating to the fact of operating). The wider includes the narrower denotation. While the history and in particular s 3(7) could possibly be seen as affording some justification for adopting the narrower denotation of driving, there is no convincing basis for taking such a limited view so that it must be accepted that 'driving' within the meaning of the sections extends to include both the manner of control of a motor vehicle and the fact of operation of a motor vehicle." It seems that Parker J, in referring to the "mere fact or circumstance that a motor vehicle is operated or driven", was referring to an act that can properly be 56 This submission was raised during the course of oral argument: Insurance Commission of Western Australia v Container Handlers Pty Ltd [2003] HCATrans 415 at lines 2149-2156, 1943-1979 and 1948-1985 respectively. Container Handlers' written submissions seemed to indicate that it agreed with the ICWA's submission that the relevant repair work did not form part of the act of driving. 57 Container Handlers Pty Ltd (2001) 25 WAR 42 at 52 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. 58 (1996) 15 WAR 434 at 460. McHugh called an act of "driving". In my view, the Full Court misinterpreted his Honour's judgment so as to encompass acts that do not fall within the meaning of "driving", acts such as equipping the vehicle and undertaking repairs. The amendments enacted by the Amendment Act were intended to reduce the scope of indemnity imported by the word "use". The intention was effected by replacing the word "use" with the word "driving". "Driving" is a much narrower concept than "use". Under earlier legislation dealing with the insurance of motor vehicles – particularly under compulsory third party insurance legislation – courts had interpreted the word "use" to include activities with respect to a motor vehicle that would not ordinarily be regarded as acts of driving59. The Act does not define "driving". The debate regarding the Amendment Bill in the Legislative Council indicates that the word was to have its ordinary English meaning60. The Australian Oxford Dictionary61 and The New Shorter Oxford English Dictionary62 relevantly define "drive" as to "operate and direct the course of" and to "operate and control the course of" a vehicle respectively. Thus, when the Act refers to a consequence of the "driving" of the vehicle, it refers to a consequence of the actual operation and control of the direction and speed of the vehicle. This is confirmed by the expression "or of the vehicle running out of control" in the second part of s 3(7), which conveys the notion of a vehicle in motion. This meaning of the word "driving" also finds support in a number of cases, in which the notion of driving has been held to comprehend the controlling of the movement and direction of the vehicle in a substantial sense63. Reconciling the outcomes in these cases, however, is probably impossible. The inconsistencies in the conclusions reached by the courts when applying the concept of "driving" show that it is not always easy to draw a line between an 59 Heath v Corporation of City of Tea Tree Gully (1996) 66 SASR 548 at 549 per 60 Western Australia, Legislative Council, Parliamentary Debates (Hansard), 10 December 1987 at 7716 per John Williams. 61 The Australian Oxford Dictionary, (1999) at 399. 62 The New Shorter Oxford English Dictionary, (1993), vol 1 at 751. 63 Ames v MacLeod [1969] SC 1 at 3 per Lord Justice-General (Clyde), 3-4 per Lord Guthrie; R v MacDonagh [1974] QB 448 at 451 per Lord Widgery CJ; MacNaughtan v Garland; Ex parte MacNaughtan [1979] Qd R 240 at 244 per Kelly J, Stable SPJ and Dunn J agreeing; Bassell v McGuiness (1981) 29 SASR 508 at 512 per King CJ (Mohr J agreeing), 522-523 per Matheson J; Tink v Francis [1983] 2 VR 17 at 19 per Young CJ, 27-29 per McInerney J, 57 per Southwell J. McHugh activity that can be described as "driving" and one that cannot be so described. In any event, neither the decisions nor the reasoning in each case support the proposition that, after the driver has stopped and got out of the vehicle, he or she is still driving it. Application to the facts In order for the low loader to be "driven", it had to be attached to a prime mover and towed or hauled. The controlling of the direction and movement of the prime mover with the low loader attached was the driving of the low loader for the purposes of the policy. While the repair of a vehicle during the course of a journey may fall within the meaning of "use"64, it clearly does not amount to the "driving" of the vehicle. Nor can it be said that the preceding acts of negligence by Container Handlers constituted the driving of the vehicle. As the ICWA submits, such an interpretation leads to absurd results. It would mean, for example, that an owner is driving the vehicle for the purpose of the Act when he or she fails to inspect repair equipment before the commencement of the journey that gives rise to the relevant injury. In my view, the Full Court erred in finding that65: "the distinct acts of negligence by Container Handlers, or those of its employee driver for which it was liable in tort, were aspects of the fact of operation of the vehicle and so of the driving of it. These included the unserviceable nature of the hydraulic power unit of the low loader and those findings of [Nisbet DCJ] as to the driver's negligence". However, as long as the death or injury was the effect of conduct that properly can be categorised as the "driving" of the vehicle, the statutory policy would encompass liability for that death or injury. The question then is whether the injury suffered by Mr Sutton was a consequence of Mr Reibel's control of the movement and direction of the vehicle. In the District Court, Nisbet DCJ said66: "[I]f the vehicle had not been driven and, probably, driven along such bad roads, the low loader's wheel bearings (I presume that's what failed) would 64 See, eg, Government Insurance Office of NSW v King (1960) 104 CLR 93 at 96 per Dixon CJ, 100-101 per Menzies J, 105 per Windeyer J. 65 Container Handlers Pty Ltd (2001) 25 WAR 42 at 56 per Roberts-Smith J, Wallwork and Wheeler JJ agreeing. 66 Sutton [2000] WADC 254 at [27]. McHugh not have developed the problems they did necessitating the wheels being removed." said67: In the Full Court, Roberts-Smith J expressed a similar view. His Honour "I refer to the 'manner of control' in the sense of the way in which the rig was driven along unsealed, rough, desert tracks in extreme heat causing the wheel hubs to overheat and seize up so as to require removal of the wheels and the chaining of the axle." Transport Accident Commission v Treloar68 gives some support for these views. In that case McGarvie and Gobbo JJ held that an incident is caused by the driving of a motor car if it is "caused by some feature of the driving such as the speed at which, the inattention with which or the place to which the car is driven."69 Container Handlers relies on a number of South Australian cases which consider whether an injury was "in consequence of the driving" of a vehicle70 in support of its submission that it is sufficient that a connection between the injury and the control and movement of the vehicle exists that is not merely a temporal connection. In WorkCover Corporation v Reiter71, for example, the plaintiff was injured in the course of unloading wool bales from a stationary trailer, which was attached to a prime mover. The motion of the driving of the prime mover had destabilised a bale of wool. As the bale was unloaded, it fell off the trailer, striking the plaintiff. The Full Court of the Supreme Court of South Australia held that the required connection was present between the control and movement of the prime mover and the plaintiff's injury72. Section 99(3) of the Motor Vehicles Act 1959 (SA), the sub-section considered in the South Australian cases, is different from s 3(7) of the Act. Section 99(3) provided at the relevant time that "death or bodily injury will not 67 Container Handlers Pty Ltd (2001) 25 WAR 42 at 53. 69 Treloar [1992] 1 VR 447 at 450 (emphasis added). 70 Wagner (1993) 62 SASR 175; Heath (1996) 66 SASR 548; Reiter (1997) 70 SASR 71 (1997) 70 SASR 347. 72 Reiter (1997) 70 SASR 347 at 367 per Lander J, Doyle CJ and Bleby J agreeing. McHugh be regarded as being caused by or as arising out of the use of a motor vehicle if it is not a consequence of" the driving of the vehicle (emphasis added). Despite the difference in wording between the South Australian legislation and s 3(7) of the Act, statements in the South Australian cases construing the words "consequence of" assist in construing the same term in s 3(7). However, the decisions in the South Australian cases do not otherwise support Container Handlers' submissions. On the contrary, the cases deny the broad proposition for which Container Handlers contends. Thus, in Wagner73, the Full Court of the Supreme Court of South Australia held that an injury sustained while a backhoe was being prepared for digging was not a consequence of the driving of the vehicle. In that case the plaintiff was employed to operate a front-end loader equipped with a backhoe. The loader was registered as a motor vehicle. When the backhoe was to be used, the wheels of the vehicle were raised and it was incapable of being driven along a road. After driving the vehicle to a work site, the plaintiff sustained injury when the vehicle had been so stabilised and he was preparing to use the backhoe for digging. The Court unanimously held that the injury was not a consequence of the driving of the vehicle. The Court held that there was a distinct separation between the activity of driving and the activity of preparing the vehicle for digging74. In Heath v Corporation of City of Tea Tree Gully75, the plaintiff sustained injury while loading the bucket of a front-end loader with concrete slabs. The driver of the loader had tilted the bucket in order to assist the plaintiff. At the time, the loader was stationary at the kerb, but the driver intended to drive it to a truck "to drop off the load"76. A majority of the Full Court of the Supreme Court of South Australia (Cox and Debelle JJ, Prior J dissenting) held that the injury was not "a consequence of" the driving of the loader. Cox J said77: "Whatever the words 'a consequence of' connote, it must be more than a mere temporal relationship. It is important, in my view, to ensure that the clear policy of the subsection is not undermined by straining the terms 'a consequence of' and 'driving' and the composite expression beyond their normal meaning." 73 (1993) 62 SASR 175. 74 Wagner (1993) 62 SASR 175 at 176 per King CJ, 177 per Millhouse J, 182 per 75 (1996) 66 SASR 548. 76 Heath (1996) 66 SASR 548 at 556 per Debelle J. 77 Heath (1996) 66 SASR 548 at 550, Debelle J agreeing at 555. McHugh His Honour went on to say78: "I do not think that anyone would say that the plaintiff's mishap was a consequence of the driving of the vehicle. On the contrary, it would be regarded purely as a consequence of the loading operation." indemnifying against Although cases in other States may be useful when considering whether death or injury is a consequence of the driving of a vehicle, those cases must be read in the light of the legislative history and purpose of the Act. That history and purpose is found in the scope of the Act as perceived when it was enacted in 1943, the decision in Dickinson79 and the Amendment Act enacted in response to that case. According to the second reading speech for the Amendment Bill, the Act was originally perceived as confined the consequences of negligent driving. However, Dickinson held that injuries sustained by a passenger when a stationary car caught fire while the driver was absent arose out of the "use" of the vehicle. This was seen as repudiating the purpose of the Act. To overcome the effect of Dickinson, the legislature repealed all expressions such as "caused by the use of", "arising out of the use of", "in the use of a motor vehicle", "caused by or arises out of the use of" and "as the result of the use of a motor vehicle". It then narrowed the indemnity by requiring that death or injury be directly caused by the driving of the vehicle or, if directly caused by the vehicle, that death or injury be a consequence of the driving of the vehicle or of the vehicle's running out of control. The legislative history of the Act shows, therefore, that the indemnities given by policies issued under the Act no longer cover liabilities that merely arise out of the use of motor vehicles. To come within the indemnity given by a policy, there must be a causal connection between the death or injury and the driving of a motor vehicle. It is true that, if death or injury is directly caused by the vehicle, it is not necessary that it be directly caused by the driving of the vehicle. It is sufficient if the death or injury is a consequence of the driving. Whichever limb of the indemnity is invoked, however, the legislative history and purpose of the Act demonstrate that there must be a causal link between the death or injury and some feature of the driving of the vehicle. It is not enough that the death or injury is the result of the use of the vehicle. The death or injury must be a consequence of the driving of the vehicle. The definite article "the" in front of "driving" emphasises the need to find a causal connection between the death or injury and some feature of the driving of the vehicle. It is at this stage that the case for Container Handlers fails. 78 Heath (1996) 66 SASR 548 at 551. 79 (1987) 163 CLR 500. McHugh Nothing in the evidence suggests that any particular feature of the driving of the vehicle brought about the injury to Mr Sutton. Nothing in the evidence suggests that some feature of the driving, such as running into a drain or avoidable pothole or driving at excessive speed, caused the low loader's wheel bearings to fail or the wheels to lose their shape. If some feature of the driving had this effect, it might plausibly be suggested that Mr Sutton's injury was a consequence of that driving, because it led to the repair work which in turn led to the injury. On that hypothesis, the injury was arguably a consequence, although not a direct consequence, of the driving of the vehicle. Nevertheless, nothing in the evidence suggests that the injury to Mr Sutton was the result or effect of some feature of the driving of the vehicle. The mere fact that Mr Sutton's injury would not have occurred if the vehicle had not been driven from Port Hedland to Camp Tracey and then to Nifty or from Nifty to Port Hedland does not mean that, for the purpose of the Act, the injury to Mr Sutton was a consequence of the driving of the vehicle. The use of the vehicle to transport a heavy crane and a mine transport truck on bad roads was a necessary pre-condition for the sustaining of the injury. However, the injury was not a consequence of any feature of the driving of the prime mover and its attached load. The injury was not a result or effect of some feature of the driving of the vehicle. Taylor J's remarks in Butler80, although phrased in terms of "cause" and "effect" rather than "consequence", are instructive in this context: "[T]he cause of an event is not established in the legal sense by showing, without more, that in the absence of a proved set of circumstances the event would or may not have happened, or, that a proved set of circumstances, in the widest sense, contributed to the happening of the event." Once it is understood that using the vehicle is not equivalent to the driving of it, it is impossible to hold that the injury to Mr Sutton was a consequence of the driving of the prime mover and low loader. His injury was not a consequence of any feature of the driving of the vehicle. On the evidence, therefore, the injury to Mr Sutton was not a consequence of the driving of the vehicle for the purposes of determining liability under the policy. Accordingly, the Full Court erred in holding that Container Handlers was entitled to indemnity under the policy. Order The appeal must be allowed. 80 (1958) 102 CLR 465 at 476-477. McHugh GUMMOW J. This is an appeal from the orders of the Full Court of the Supreme Court of Western Australia (Wallwork, Wheeler and Roberts- Smith JJ)81 upholding in part an appeal from the orders of the District Court of Western Australia (Nisbet DCJ)82. The facts The facts giving rise to this appeal fall within a narrow compass. On an exceptionally hot day in March 1998, Mr Ashley Sutton was travelling as a passenger in a prime mover driven by Mr Jason Reiball, an employee of the first respondent, Container Handlers Pty Ltd ("Container Handlers"), in a remote part of Western Australia inland from Port Hedland. Attached to the rear of the prime mover was a form of trailer known as a low loader. At about midday, Mr Reiball brought the prime mover and low loader to a halt and carried out an inspection of both vehicles. That inspection revealed that smoke and fumes were coming from one of the rear wheel hubs of the low loader. Mr Reiball determined that the two wheels behind the wheel hub were out of shape and would have to be removed. The axle that was supported by the two damaged wheels would then have to be "chained up" in order to prevent it from dragging against the ground during the remainder of the journey. Mr Sutton assisted Mr Reiball to remove both wheels. Both men then attempted to use a chain to secure the axle. That process involved using a jack to lift the axle to a height sufficient to allow the chain to fit beneath it. However, during this process, the axle slipped off the jack and the trail arm assembly that was connected to the axle fell against the chassis of the low loader, trapping Mr Sutton's hand beneath it. Mr Sutton's hand was severely injured. The litigation Mr Sutton commenced in the District Court of Western Australia proceedings against Container Handlers alleging negligence. Nisbet DCJ gave judgment in favour of Mr Sutton and awarded him damages of $926,043.36. His Honour found that a prudent employer in the position of Container Handlers would have properly equipped its vehicles for the carrying out of emergency roadside repairs to wheels and axles and that Container Handlers had failed to do so in the present case. The trial judge also found Container Handlers vicariously liable for the negligence of Mr Reiball in failing, among other things, to ensure Mr Sutton was clear of the chassis of the low loader prior to Mr Reiball's attempt 81 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42. 82 Sutton v Container Handlers Pty Ltd [2000] WADC 254. to jack up the axle. Neither the judgment in favour of Mr Sutton, nor the findings against Container Handlers or Mr Reiball in respect of negligence, were the subjects of an appeal to the Full Court. As part of the proceedings at trial, Container Handlers brought two third-party claims upon several policies of insurance. The first was brought against the appellant, the Insurance Commission of Western Australia ("the Insurance Commission"), upon compulsory third-party insurance policies, and the second against Union des Assurances de Paris ("UAP") upon a policy entitled "General and Products Liability Policy". Both claims failed at first instance. On appeal, the Full Court upheld the third-party claim against the Insurance Commission but dismissed the appeal in so far as it concerned UAP. The Insurance Commission now appeals to this Court against the orders of the Full Court obliging it to indemnify Container Handlers for the damages payable to Mr Sutton. The Insurance Commission joined UAP as second respondent and Mr Sutton as third respondent. After the conclusion of argument on the appeal, the Insurance Commission discontinued its appeal against Mr Sutton. He had played no active part in the appeal. The primary issue in this appeal is the extent to which policies of insurance issued by the Insurance Commission in respect of the prime mover and low loader respond to the injury suffered by Mr Sutton. By virtue of the provisions of the Motor Vehicle (Third Party Insurance) Act 1943 (WA) ("the Motor Vehicles Act"), to which it will be necessary to refer below, the policies will only apply if the injury suffered by Mr Sutton was "directly caused by, or by the driving of, [a] motor vehicle". The Insurance Commission submits that the injury suffered by Mr Sutton falls outside that expression. As will appear from these reasons, that submission should be accepted with the result that the appeal should be allowed with costs, the relevant orders of the Full Court should be set aside and, in place thereof, the appeal by Container Handlers to that Court against the Insurance Commission should be dismissed with costs. The Motor Vehicles Act Since its enactment, the Motor Vehicles Act has provided for a regime of compulsory third-party insurance in respect of motor vehicles. However, the extent of the liability covered by insurance policies issued pursuant to the Act has changed over time. Prior to 1987, the Motor Vehicles Act was concerned with insuring against liability in respect of deaths or bodily injuries "caused by or arising out of the use of" a motor vehicle. A policy of insurance in that form and issued pursuant to the Act was considered by this Court in Dickinson v Motor Vehicle Insurance Trust83. The Court held that injuries sustained by a child inside a parked car as a result of the child playing with a box of matches left by the child's father (who had gone shopping) fell within the terms of the policy. In reaching this conclusion, Mason CJ, Wilson, Brennan, Dawson and Toohey JJ said84: "Whether or not the appellant's injuries were actually caused by the use of the motor car, it is sufficient to say that they arose out of such use. The test posited by the words 'arising out of' is wider than that posited by the words 'caused by' and the former, although it involves some causal or consequential relationship between the use of the vehicle and the injuries, does not require the direct or proximate relationship which would be necessary to conclude that the injuries were caused by the use of the vehicle85." The construction adopted in Dickinson echoed a similar conclusion reached by Windeyer J in Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd in the context of the Motor Vehicles (Third Party Insurance) Act 1942 (NSW)86. His Honour had said87: "The words 'injury caused by or arising out of the use of the vehicle' postulate a causal relationship between the use of the vehicle and the injury. 'Caused by' connotes a 'direct' or 'proximate' relationship of cause and effect. 'Arising out of' extends this to a result that is less immediate; but it still carries a sense of consequence." The imposition of a requirement of directness or proximity in respect of the expression "caused by" no doubt reflected the common law rule that, in the words of Lord Lindley, "[i]n an action on a policy [of insurance] the causa proxima is alone considered in ascertaining the cause of loss"88. 83 (1987) 163 CLR 500. 84 (1987) 163 CLR 500 at 505. 85 State Government Insurance Commission v Stevens Bros Pty Ltd (1984) 154 CLR 86 (1966) 114 CLR 437. 87 (1966) 114 CLR 437 at 447. 88 Fenton v Thorley & Co Ltd [1903] AC 443 at 454. See Clover, Clayton & Co Ltd v Hughes [1910] AC 242 at 245; Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 534-535. The legislative materials89 disclose that it was as a result of the Court's decision in Dickinson, and the apprehended adverse impact of the decision on the price of compulsory third-party insurance premiums, that the Motor Vehicle (Third Party Insurance) Amendment Act 1987 (WA) ("the Amendment Act") was enacted by the Parliament of Western Australia. That statute brought into force the regime with which this appeal is concerned. The principal changes effected by the Amendment Act to the Motor Vehicles Act and to the terms of insurance policies issued pursuant to the regime are reflected in the long title to the revised Motor Vehicles Act. The long title now indicates that the purpose of the legislation is to ensure that "owners of motor vehicles whilst on a road, [are] insured against liability in respect of deaths or bodily injuries directly caused by, or by the driving of, such motor vehicles, whether caused on or off a road" (emphasis added). Section 4(1) of the revised Motor Vehicles Act describes the obligation to acquire insurance in the following terms: "When any motor vehicle is on a road there is required to be in force in relation to the motor vehicle a contract of insurance entered into by the owner of the motor vehicle under which the owner has insured subject to and in accordance with this Act against any liability which may be incurred by the owner or any person who drives the motor vehicle in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the motor vehicle." (emphasis added) "Motor vehicle" is defined in s 3(1) to mean any vehicle propelled by gas, oil, electricity or any other motive power, not being animal power, required to be licensed, and complying with the requirements necessary for licensing under the Road Traffic Act 1974 (WA)90, and includes caravans, trailers or semi-trailers drawn or hauled by a motor vehicle. It has been accepted throughout the course of the litigation that both the prime mover and low loader fell within this definition of motor vehicle and that, as a result, both vehicles were required to be insured in accordance with s 4(1) of the Motor Vehicles Act. Section 6(1) of the Motor Vehicles Act sets out the requirements that a policy of insurance must fulfil in order to comply with the terms of s 4(1). First, the policy must be issued by the Insurance Commission. Secondly, the policy must insure the owner of the vehicle mentioned in the policy and any other 89 In particular, the Second Reading Speech of the Deputy Premier: Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 12 November 90 See ss 15, 16 with the First Schedule. person who at any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or any other person in respect of the death of, or bodily injury to, any person "directly caused by, or by the driving of, the vehicle" in any part of the Commonwealth. Lastly, the policy must be in a form substantially similar to that contained in the Schedule to the Motor Vehicles Act. Given the terms of the policy contained in the Schedule, compliance with this latter requirement will result in compliance with the balance of s 6(1). The policies It is accepted by both parties that the Insurance Commission issued policies in favour of Container Handlers in respect of the prime mover and low loader in the terms contained in the Schedule to the Motor Vehicles Act. The policy contained in the Schedule is headed "INSURANCE POLICY – issued under the MOTOR VEHICLE (THIRD PARTY INSURANCE) ACT 1943". The governing clause provides as follows: "The [Insurance Commission], subject to the warranties and conditions contained in this Policy and to the provisions of the [Motor Vehicles Act], in this Policy referred to as 'the Act', agrees to insure the owner of the motor vehicle described in the Traffic Licence issued herewith and any other person who drives that motor vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by the owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, that motor vehicle in any part of the Commonwealth during the period from the date of the issue of this Policy to the date of expiry of the said Traffic Licence." (emphasis added) The policy then sets out several warranties as follows: "The owner warrants that the vehicle will not be – used for any other purpose than that stated by the owner in his application for this Policy; driven in an unsafe or damaged condition; driven by or in charge of himself or any other person who is unlicensed to drive or who is under the influence of intoxicating liquor. It shall be a defence to any action in respect of the warranty contained in subclause (c) if the owner proves that the vehicle was so driven or in charge of such other person without his knowledge or consent." The final section of the policy is headed "CONDITIONS" and provides that: The owner and any other person claiming indemnity under this Policy shall comply with the provisions of sections 10 and 11 of the Act. Sections 7(5) and 15 of the Act are deemed to be incorporated in this insurance. The [Insurance Commission] is entitled to all rights remedies and benefits which may accrue to it by virtue of the Act. This contract of insurance is subject to the provisions of the Act." No reliance is placed upon conditions 1 and 2 of the policy. However, conditions 3 and 4, together with the opening words of the governing clause, indicate that the policy must be read in conjunction with, and subject to, the provisions of the Motor Vehicles Act. That approach to the construction of the policy is supported by s 4(1), which, as indicated earlier in these reasons, requires the insuring of a motor vehicle to be carried out "subject to and in accordance with this Act". The result is that provisions of the statute, including s 3(7) to which further reference will be made, are to be "read into" the policies. The Full Court concluded that the policies issued by the Insurance Commission in respect of each vehicle were "coterminous" with the provisions of the Motor Vehicles Act91. That approach may be accepted so long as it is remembered that it is the policy issued in respect of each vehicle, as construed in accordance with the Act, which grounds any liability of the Insurance Commission in the present case. It is convenient now to consider the extent of the Insurance Commission's liability under the policies. Extent of liability There is no dispute that the damage suffered to Mr Sutton's hand amounted to a bodily injury within the meaning of the policy. What remains in issue is the meaning of the expression in the governing clause set out above, "directly caused by, or by the driving of, [a] motor vehicle". In the submission of the Insurance Commission, that expression can be separated into two criteria so that the policy responds if an injury is either: (a) directly caused by a motor vehicle or (b) directly caused by the driving of a 91 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 53. vehicle. Container Handlers accepts that bifurcation and has sought to place no reliance upon the second of the two criteria. Accordingly, attention only need be focused on the extent to which Mr Sutton's injury was directly caused by the vehicle. The phrase "caused by … [a] motor vehicle" appears in numerous places throughout the Motor Vehicles Act and in the policy. On its face, the phrase would appear to contemplate injuries caused by a vehicle in a wide variety of circumstances. However, the phrase must be read in the light of s 3 of the Motor Vehicles Act. That section is headed "Interpretation". Sub-section (7) provides: "For the purposes of this Act, the death of or bodily injury to any person shall not be taken to have been caused by a vehicle if it is not a consequence of the driving of that vehicle or of the vehicle running out of control." (emphasis added) The phrase "caused by … [a] motor vehicle" is preceded in the governing clause of the policy by the adverb "directly". This word qualifies the whole of what follows. That is divided into two branches; the first has just been stated. The second is "caused … by the driving of" the motor vehicle. However, s 3(7) applies according to its terms only to one of those branches. That is the first branch and, as noted above, it is with that branch that this appeal is concerned. Roberts-Smith J, with whom Wallwork and Wheeler JJ agreed, held that the effect of s 3(7) was quite different. Their Honours treated it as dividing the question of whether an injury was directly caused by a motor vehicle into two parts: first, was the injury "directly caused" by a vehicle, and secondly, was the injury a consequence of the driving of the vehicle or of the vehicle running out of control92. Their Honours accepted that, by virtue of s 3(7), the injury need not be a direct consequence of the driving or of the vehicle running out of control for the purposes of the second question93. The Full Court's approach, which is adopted in modified form by Container Handlers in this Court, should not be accepted. Section 3(7) is an interpretation provision. It does not enjoy a substantive effect independently of the phrase "caused by … [a] motor vehicle" as found in the policies. Rather, the sub-section operates to limit the meaning otherwise to be attributed to that phrase, which has been identified above as "the first branch". 92 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 54. 93 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 54. It follows that, contrary to the reasoning of the Full Court, s 3(7) does not operate as a criterion separate from, and in addition to, the requirement that the injury be caused by a vehicle. The absence of the word "directly" from s 3(7) is significant. That circumstance indicates that s 3(7) is concerned with the cause of the injury (being the driving of a vehicle or the vehicle running out of control), rather than the quality of the connection between that cause and the injury. As a result, s 3(7) does not remove the requirement that an injury be "directly" caused by a vehicle or, to frame the requirement in terms of s 3(7), that the injury be directly caused by the driving of a vehicle or by a vehicle running out of control. In its written submissions, Container Handlers conceded that Mr Sutton's injury was not directly caused by the driving of the prime mover and low loader. Nor is it suggested that Mr Sutton's injury was directly caused by the vehicles running out of control. Once there is appreciated the proper construction of the phrase "directly caused by … [a] motor vehicle " in the light of s 3(7), Container Handlers' concession is fatal to its success in this appeal. Therefore it is unnecessary to consider the submissions made by the parties as to the proper meaning of "driving" and the existence or otherwise of a causal connection between that driving and Mr Sutton's injury sufficient to give rise to liability under the policies. Conclusion The appeal should be allowed. Container Handlers should pay the costs of the Insurance Commission. Orders 1, 2 and 3 of the Full Court should be set aside and, in place thereof, the appeal by Container Handlers to that Court against the Insurance Commission should be dismissed with costs. Kirby KIRBY J. This appeal concerns the operation of a policy of compulsory motor vehicle insurance. The context of a statutory policy of insurance The law books are full of disputes over the meaning of insurance policies. Because disputes about language are notoriously liable to produce different outcomes94, a rule of construction was long ago adopted by the English courts to the effect that intractable ambiguities in printed instruments, such as insurance policies, should be resolved in favour of the person receiving them and against the person propounding them95. This was a useful rule. Amongst other things, it encouraged insurers to express policy conditions clearly where they limited recovery, so that the insured would know precisely whether it was entitled to indemnity or not. The maxim was applied by this Court from its earliest years96. It may occasionally still be useful where dictionaries and logic alone do not resolve an ambiguity97. However, the limitations and defects of the maxim were also recognised long ago98. It did not afford an alternative to proper legal analysis. This appeal, which concerns a statutory policy of insurance, illustrates another limitation in the usefulness of the maxim. 94 News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 77 ALJR 1515 at 1524 [42] per McHugh J; 200 ALR 157 at 168. 95 The applicable maxim was verba cartarum fortius accipiuntur contra proferentem (the words of a deed should be construed strongly against the grantor). See Co Litt 36a; Bac Max 3. See further Cornish v Accident Insurance Co (1889) 23 QBD 453 at 456 per Lindley LJ; Elderslie Steamship Co Ltd v Borthwick [1905] AC 93 at 96 per Lord Macnaghten, 96-97 per Lord Lindley. 96 Western Australian Bank v Royal Insurance Co (1908) 5 CLR 533 at 554, 559, 97 Halford v Price (1960) 105 CLR 23 at 30; Federation Insurance Ltd v R Banks [1984] VR 525 at 528, 543; Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500 at 510; CE Heath Underwriting & Insurance (Aust) Pty Ltd v Edwards Dunlop & Co Ltd (1993) 176 CLR 535 at 548; Johnson v American Home Assurance Co (1998) 192 CLR 266 at 274-275 [19]; McCann v Switzerland Insurance Australia Ltd (2000) 203 CLR 579 at 602 [74]; Siemens Ltd v Schenker International (Australia) Pty Ltd (2004) 78 ALJR 508 at 537 [167]; 205 ALR 232 98 Taylor v Corporation of St Helens (1877) 6 Ch D 264 at 270-271 per Sir George Jessel MR; A/S Ocean v Black Sea & Baltic General Insurance Co Ltd (1935) 51 Ll L Rep 305 at 310; Parkinson v Barclays Bank Ltd [1951] 1 KB 368 at 375. Kirby In construing a policy, issued in terms adopted by a Parliament to achieve legislative objectives, the interpreter enters a different realm of discourse. The object there is not, as such, to uphold a bargain fairly defined between private parties. Ultimately, it is to uphold the purpose of the legislature in enacting that form of policy. This is the context in which the problem presented by this appeal99 must be decided. The facts and circumstances giving rise to the controversy are explained by McHugh J100, Gummow J101, Callinan J102 and Heydon J103. The key provisions of the statutory policy issued by the appellant (Insurance Commission of Western Australia) to the first respondent (Container Handlers Pty Ltd) are set out104. So are the relevant provisions of the Motor Vehicle (Third Party Insurance) Act 1943 (WA) ("the Act")105, as amended following the decision of this Court in Dickinson v Motor Vehicle Insurance Trust106. It is unnecessary to repeat this material again. I can go straight to the controversy for decision. Dickinson was a case addressed to the previous, more familiar and broader language of the Act before its amendment in Western Australia in 1987107. As the passages from the legislative records cited by Heydon J demonstrate108, it was 99 From the Full Court of the Supreme Court of Western Australia: Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 100 Reasons of McHugh J at [7]-[10]. 101 Reasons of Gummow J at [70]-[71]. 102 Reasons of Callinan J at [121]-[125]. 103 Reasons of Heydon J at [138]-[140]. 104 Reasons of McHugh J at [12]; reasons of Gummow J at [82]-[85]; reasons of Callinan J at [129]; reasons of Heydon J at [140]. 105 Reasons of McHugh J at [12]; reasons of Gummow J at [80]-[81]; reasons of Callinan J at [126]-[128]; reasons of Heydon J at [140]. 106 (1987) 163 CLR 500. 107 By the Motor Vehicle (Third Party Insurance) Amendment Act 1987 (WA). 108 Reasons of Heydon J at [148]-[152]. Kirby a clear purpose of those amendments to reduce the scope of the indemnity offered by the policy then provided by the Act. The proponents of the change aimed to lower the costs of premiums levied in respect of the policy. This measure was one of many enacted throughout Australia to diminish the burdens of insurance premiums for motor vehicle owners, employers and others involved in risk109. Because there are so many motorists, obliged by the Act to obtain third party policies, the reduction or containment of insurance premiums became an electoral issue110. The limitation of the scope of the indemnity provided by the policy was clearly deliberate. Necessarily, it would sometimes leave persons unprotected whose injuries arose out of the use of a motor vehicle who would have been protected by the Act in its earlier form. However, that was no more than the necessary consequence of the change in the legislation. Mr Ashley Sutton suffered such an injury. It gave rise to his action the first respondent and the first respondent's demand on the against Commission111. So far as is known, Mr Sutton, an employee of an independent contractor and not an employee of the first respondent, will recover his judgment from the first respondent, following the negligence found at trial and unchallenged in this appeal. He will do so whatever is the outcome of the appeal. Nevertheless, cases will arise, and can readily be imagined, where, unless recovery could be secured from an insurer, under the policy issued pursuant to the Act, no monetary damages would be available to the injured person or that person's dependants. In such a case, the insured and the injured person would be unable to look to the insurer for indemnity. A judgment in negligence would be valueless. These facts, and the large number of policies issued by the Commission under the Act, warranted the grant of special leave. In my opinion, the appeal must be allowed. My reasoning is substantially the same as that of Heydon J. The critical consideration that, for me, resolves the construction of the policy contrary to the propositions advanced by the first respondent, is the fact that it was the clear purpose of the Western Australian Parliament, in adopting 109 Masel (ed), The Laws of Australia: Torts, (2003) at 596 [33.10:7]. 110 There have been similar amendments to the law governing third party compulsory motor vehicle insurance in other States: see eg Motor Accidents Compensation Act 1999 (NSW); Motor Accident Insurance Act 1994 (Q), s 5; Motor Vehicles Act 1959 (SA), Sched 4. 111 Reasons of Gummow J at [72]-[75]. Kirby the amendments that introduced the words now in contention, to reduce the ambit of the indemnity. Those words restricted the Commission's liability by reference to the limiting notions of causation (directly)112 and locomotion (driving) of the insured motor vehicle113. Although the use of words such as "direct" and "proximate" has been criticised by courts in the context of the legal notion of causation at common law, the introduction of the word "directly" into the Act obliges courts to give that word due meaning114. It cannot be ignored simply because courts disapprove of such notions. In this case, it confines the scope of the indemnity provided by the statutory policy. Within the principles adopted by this Court in Dickinson, in explaining the former language of the Act ("caused by or arising out of the use of" a motor vehicle), the injury to Mr Sutton would almost certainly have qualified for indemnity of the first respondent by the Commission. Mr Sutton's injury, even if not "caused by" the use of a motor vehicle, would then have been viewed as one "arising out of" such use. The latter concept was wider than the concept of causation, appearing on its own115. But what of the protection under the Act as amended? The adoption of the present language, by the 1987 amendments, signalled a change in two important respects. First, the broader words of connection ("arising out of") were deleted; secondly the adverb "directly" was inserted to modify the words "caused by". In the context of the purposes of Parliament, and the terms of the repeated references in the Act and in the statutory policy to these changes, it is clear that the word "directly" governed not only the words "caused by" but also the phrase within commas (", or by the driving of,"). In this Court, the first respondent conceded as much. In my view, that was a proper concession. 112 Reasons of Heydon J at [154]-[157]. See further Weld-Blundell v Stephens [1920] AC 956 at 983-984; Duce v Rourke (1951) 1 WWR (NS) 305 at 306, 351; Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 521, 534-535; Keeton et al (eds), Prosser and Keeton on the Law of Torts, 5th ed (1984) at 113 "[I]n respect of the … bodily injury to any person directly caused by, or by the driving of, the motor vehicle": the Act, s 4(1) (emphasis added). See Transport Accident Commission v Treloar [1992] 1 VR 447 at 449-450. 114 See March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 at 509-510; Medlin v State Government Insurance Commission (1995) 182 CLR 1 at 6-7. 115 Dickinson (1987) 163 CLR 500 at 505. See reasons of Gummow J at [77]. Kirby Confined to the terms of s 4(1) of the Act and the insuring clause of the statutory policy, the first respondent could arguably contend that Mr Sutton's injuries were "directly caused by" the motor vehicle, in the usual sense of those words. Under the Act, the term "motor vehicle" included the "low-loader" ("trailer"). The trailer had developed a defect during driving. It was whilst attempting to repair that defect that the incident occurred that caused the chassis of the trailer to fall. It was that event, in turn, that trapped Mr Sutton's hand and injured him. Without more, an argument would arise that, viewed in isolation, the uncontested "bodily injury" to Mr Sutton was "directly caused by" the motor vehicle, in the sense that it was immediately caused by contact with part of that vehicle. Arguments to the contrary would lay emphasis on the intervening causative agents, namely the first respondent's employee, Mr Reiball, or the first respondent itself, in failing to provide proper equipment for the eventuality of breakdown that occurred. However, I would accept direct causation "by … the motor vehicle", in the sense of the direct physical engagement of part of the trailer with the hand of Mr Sutton. The statutory limitation of the ambit of indemnity The critical phrase in the statutory policy does not, however, appear in isolation. By condition 3 of the policy, it is provided that the Commission is entitled to "all rights remedies and benefits that may accrue to it by virtue of the Act". By condition 4, the contract of insurance is rendered (as it would in any case have been) "subject to the provisions of the Act"116. And once the Act is incorporated, it imports s 3(7) into the policy. It is in that sub-section that a clear indication is provided limiting still further the ambit of the insuring clause in respect of that part of the cover in the policy concerned with bodily injury "caused by a vehicle". Those who drafted the insuring clause were presumably concerned about the potential risk inherent in the expression "caused by a vehicle". Hence the language of s 3(7), with its confusing double-negative. The provision in s 3(7) of the Act that a bodily injury shall not be "taken" to have been "caused by a vehicle" is clearly in the nature of a limiting definition of that phrase as it appears elsewhere. It imports a requirement that would not otherwise have been read into that expression. This is that, to call on the policy, the injury must be "a consequence of the driving of that vehicle or of the vehicle running out of control". It was never suggested that the last mentioned expression could apply to the circumstances in which Mr Sutton was injured. This left as the only basis for claiming indemnity from the Commission a suggestion that the injury had been "caused by a vehicle" in the sense of being "a 116 Reasons of Heydon J at [140]. Kirby consequence of the driving of that vehicle". But does Mr Sutton's injury fall within that phrase? The Commission advanced two answers to this question. First, the injury to Mr Sutton was not "a consequence of the driving" of the vehicle in the ordinary sense of those words. It was a consequence of the failure of the first respondent to provide proper equipment for a predictable breakdown of the vehicle and a consequence of the negligent way in which Mr Reiball performed the repair of the trailer, the doing of which directly caused the injury to Mr Sutton's hand. Secondly, even if, contrary to this contention, the first respondent could come within s 3(7), taken on its own, the Commission urged that the purpose and operation of that sub-section was not designed to afford a distinct, separate and free-standing criterion of indemnity117. Its language ("shall not be taken") makes it clear that the sub-section was a special definition of the phrase "caused by a vehicle". Accordingly, the operative provisions of the sub-section are to be inserted into the statutory insuring clause where that phrase appears. Doing this leaves the remaining words still governed by the adverb "directly", appearing before the defined words. Indemnity is not provided unless the bodily injury was directly a consequence of the driving of that vehicle. It is unsurprising that "directly" was not repeated in s 3(7) of the Act. There was no need to do so. That word, appearing in the substantive provisions of the Act (ss 4(1) and 6(1)) and in the statutory policy, already governed the defined expression. The error of the Full Court To the extent that the Full Court mistook s 3(7) of the Act as a separate foundation for indemnity, and not as a definitional provision confining still further the ambit of that indemnity, it erred. Its error is made plain by an analysis of the language of the policy read in the light of the Act, understood so as to achieve the statutory purposes. The purposive construction of legislation is now the settled approach of this Court118. There is no reason to withhold that approach in this case because the subject of the legislation concerns a policy of insurance or because that insurance is compulsory for motor vehicle owners or because it is important to provide 117 Reasons of Gummow J at [92]-[94]. 118 Bropho v Western Australia (1990) 171 CLR 1 at 20; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382 [69]-[70]. See also Interpretation Act 1984 (WA), s 18. Kirby effective coverage for relevant events involving motor vehicles and injured persons. All of these considerations may be accepted. Faced with real ambiguities, the Act would be treated as beneficial and protective. In other contexts, its words might be given a broad construction119. However, in deriving the meaning of the words of the Act critical to this appeal, it is impossible to ignore the statutory history and legislative purpose of the 1987 amendments that introduced those words. The purpose of reducing the ambit of coverage, and hence the amount of premiums, was clearly intentional. Courts must give effect to, and not frustrate, such a purpose when it is clear from the language of the legislation. They must do so whatever their views may be about the wisdom of its policy120. Of course, each case of causation, including direct causation, depends on its own facts. Line-drawing is inescapable in the determination of issues of causation for legal purposes121. In respect of compulsory motor vehicle insurance, it frequently arose under the previous insuring clause122. The present Act, with its new formula, is no different in this respect. Approaching the application of the policy in this way, I would accept that Mr Sutton's injury was directly caused by the motor vehicle. However, it was not a consequence of the driving of the vehicle. The Commission must succeed. Hard and fast rules cannot be provided by particular instances. Cases, such as the present, may sometimes suggest the way that courts should approach the statutory its purpose. Nevertheless, individual instances are no more than that. They do not afford binding precedents to be used in resolving cases involving different facts123. the standpoint of achieving language from 119 Ricketts v Laws (1988) 14 NSWLR 311 at 315, 319; State Government Insurance Commission v Sweeny (1989) 52 SASR 139 at 143, 147. 120 Purvis v New South Wales (Department of Education and Training) (2003) 78 ALJR 1 at 6-7 [18]-[20] per McHugh and Kirby JJ (diss); 202 ALR 133 at 121 See eg Chappel v Hart (1998) 195 CLR 232; Rosenberg v Percival (2001) 205 CLR 434. 122 See eg Government Insurance Office of NSW v King (1960) 104 CLR 93 at 99-101, 123 Joslyn v Berryman (2003) 77 ALJR 1233 at 1251 [100], 1262 [158]; 198 ALR 137 Kirby Inevitably, borderline cases will continue to present124. However, this was not one of them. Orders It follows that I agree that the appeal must be allowed. 124 See Workcover Corporation v Reiter (1997) 70 SASR 347. Callinan CALLINAN J. The real issue in this case is the extent to which the legislature of Western Australia, in enacting the Motor Vehicle (Third Party Insurance) Amendment Act 1987 (WA) ("the Amendment Act"), confined or reduced the liability, ultimately of the insurers of motor vehicles, for injuries associated with the use or driving of them. Facts On 15 March 1998 Mr Sutton was a passenger in a prime mover which was towing a low loader on a roadway in a remote part of Western Australia. The day was extremely hot and the road was rough and sandy. At about midday the driver, Mr Reiball, stopped the prime mover to make an inspection in accordance with his usual practice. Smoke and fumes were being emitted from one of the rear wheel hubs of the low loader. He noticed that the wheels were out of shape. He decided that they would have to be removed, and that the axle would need to be chained up so that it would not drag on the ground when they recommenced driving. Mr Sutton assisted Mr Reiball to remove both wheels. They then tried to secure the axle with a chain which was not quite long enough to enable it to be easily clasped in position. Mr Sutton steadied himself by placing his left hand against the chassis of the low loader. While Mr Reiball was trying to jack the axle higher, the axle slipped from the jack and the trail arm assembly connected to the axle dropped on to the chassis, trapping and seriously damaging Mr Sutton's hand. Proceedings at first instance Mr Sutton sued the first respondent ("Container Handlers") in negligence. Container Handlers was Mr Reiball's employer. Mr Sutton was successful. The judge at first instance held that an injury of the kind sustained was entirely foreseeable: that Container Handlers should have equipped its vehicles so that emergency repairs could be safely carried out. An additional default on the employer's part was a failure to provide an hydraulic power unit in good working order and condition. The trial judge held that Container Handlers was vicariously liable for the negligence of Mr Reiball. As the person in charge, he should have told Mr Sutton to leave the position that he had taken up and to attempt to connect the chain only when it was safe for him to do so. He should not have used the faulty jack without first ensuring that the ground on which it stood was stable. Had Mr Reiball inspected the equipment before embarking on the journey he would have ascertained that it was inadequate: and, he could and should have then requisitioned appropriate equipment from his employer. Judgment was given in favour of Mr Sutton against Container Handlers in the sum of $926,043.36. Container Handlers brought two third party claims, the first against the Insurance Commission. The Insurance Commission was Callinan established by the Insurance Commission of Western Australia Act 1986 (WA). The prime mover and the low loader were both registered under that Act. A statutory policy of insurance in a form in the Schedule to the Motor Vehicle (Third Party Insurance) Act 1943 (WA) ("the Act") had been issued. The second third party claim was brought against another insurer, the second respondent, Union des Assurances de Paris. That claim was for indemnity under a policy of insurance issued in respect of Container Handlers' business. Both third party claims failed at first instance. The Full Court of Western Australia Container Handlers appealed against the dismissal of the third party claims. There was no appeal against the judgment in favour of Mr Sutton and none of the trial judge's findings of fact as to negligence were challenged in the Full Court. The Full Court upheld the appeal with respect to the first third party claim but dismissed the appeal in so far as it concerned the second of them. The decision was unanimous: Wallwork and Wheeler JJ agreeing with the reasons for judgment of Roberts-Smith J. The appeal to this Court It is convenient to set out the relevant provisions of the Act. Section 3(7) provides: "For the purposes of this Act, the death of or bodily injury to any person shall not be taken to have been caused by a vehicle if it is not a consequence of the driving of that vehicle or of the vehicle running out of control." Section 4(1) provides: "When any motor vehicle is on a road there is required to be in force in relation to the motor vehicle a contract of insurance entered into by the owner of the motor vehicle under which the owner has insured subject to and in accordance with this Act against any liability which may be incurred by the owner or any person who drives the motor vehicle in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the motor vehicle." And s 6 states: In order to comply with this Act a policy of insurance must — be issued by the Commission; except as provided in this section insure the owner of the vehicle mentioned in the policy and any other person who at Callinan any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the vehicle in any part of the Commonwealth; and be in a form substantially similar to that contained in the Schedule." The statutory form of policy set out in the Schedule contained this clause. "The INSURANCE COMMISSION OF WESTERN AUSTRALIA, subject to the warranties and conditions contained in this Policy and to the provisions of the Motor Vehicle (Third Party Insurance) Act 1943, in this Policy referred to as 'the Act', agrees to insure the owner of the motor vehicle described in the Traffic Licence issued herewith and any other person who drives that motor vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by the owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, that motor vehicle in any part of the Commonwealth during the period from the date of the issue of this Policy to the date of expiry of the said Traffic Licence." Construction and legislative intent The words "directly caused by, or by the driving of, [a] motor vehicle" in the policy were inserted by the Amendment Act to commence on 16 December 1987. Dickinson v Motor Vehicle Insurance Trust125, which had just been decided by this Court, was the catalyst for the changes brought about by the Amendment Act. At the same time, the word "directly" was inserted in the places in which it now appears in the Act. In moving the second reading of the Bill for it the Deputy Premier said this126: "The need to amend the Act arose from the now well-known High Court of Australia judgment in Dickinson v Motor Vehicle Insurance Trust handed down on 13 October 1987. 125 (1987) 163 CLR 500. 126 Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 12 November 1987 at 5759-5760. Callinan … The decision in the Dickinson case is generally considered to have opened the floodgates for the entitlement of persons injured in stationary motor vehicles to recover damages from the State Government Insurance Commission ... It is important to consider historically the purpose for which the Motor Vehicle (Third Party Insurance) Act was introduced. In moving the second reading of the Motor Vehicle (Third Party Insurance) Bill, the Minister for Works said in the Legislative Assembly on 28 September The general principle laid down in the Bill is that before a licence can be issued a policy of insurance must be taken out by the owner of every motor vehicle, which will cover the legal liability of any person driving the vehicle, whether lawfully or unlawfully, in the event of death or bodily injury occurring to any third person. It is clear, therefore, that the Parliament thus intended that the liability of the Motor Vehicle Insurance Trust was to be limited to the payment of damages for injury or death sustained by persons in consequence of the negligent driving of motor vehicles … Government policy is to minimise future increases in compulsory third party insurance premiums ... The full implications of [Dickinson] are still largely unknown. Unless the Motor Vehicle (Third Party Insurance) Act is suitably amended, it is anyone's guess as to the scope of claims which may ultimately be found to fall within the meaning of the words 'in the use of a motor vehicle'." The legislature therefore clearly set out to arrest the judicial trend, of which Dickinson is, if not the high water mark, not much less than a lap of the tide below it, of regarding the merest connexion of a motor vehicle with the infliction of personal injury as an occasion for holding that the injury was caused by, through, or in connexion with, or as arising out of, the use of a motor vehicle. There are many examples of this in cases in which similar statutory formulae have been considered. In Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd127 it was held that an injury sustained during the loading of a stationary truck was an injury arising out of the "use" of a motor vehicle for the purposes of the Motor Vehicles (Third Party Insurance) Act 1942 (NSW). Similarly, in Commercial and General Insurance Co Ltd v Government Insurance Office (NSW)128 an injury arising out of the negligent use of a mobile 127 (1966) 114 CLR 437. 128 (1973) 129 CLR 374. Callinan crane was also held to be an injury arising out of the use of a motor vehicle within the meaning of that Act. In South Australia, the Motor Vehicles Act 1959 (SA) also used the formula injury "arising out of the use of" a motor vehicle. This Court held in State Government Insurance Commission v Stevens Bros Pty Ltd129 that an injury caused by a mobile compressor that was being transported on a truck fell within the statutory formula because the machine was designed to be transported from place to place as required by a motor vehicle. To give the relevant provisions the meaning Container Handlers seeks to place upon them would be to ignore, or to give insufficient weight to the repeated use of the word "directly". But of greater significance it would also be to fail to give effect to the intention manifest in s 3(7) of the Act, that the injury is not to be taken to have been caused by a vehicle if it is not a consequence of the driving of the vehicle, or of the vehicle running out of control. The words "running out of control" clearly refer to and are confined to the notion of a vehicle in motion. The word "driving" should be read to the same effect. The two phrases in which the words separately occur are plainly related and the word used in the latter, "running", conveying the idea of motion, strongly suggests that "driving" in the former is used in the same sense. The structure and language of s 3(7) also lead to the same conclusion. It may be readily accepted that the legislature was well aware of the expansive meaning that the courts have given to the word "cause"130. The selection of the word "consequence" was no doubt carefully considered. It was intended to cut down the expansive meaning which might otherwise, consistently with the approach in other cases, have been adopted. If it were otherwise, and "driving" were to be given the meaning that Container Handlers contends it to have, a relevant injury might be taken to have been sustained absent any negligent human agency in the driving of a motor vehicle: even if, for example, as a result of wear and tear flowing from the driving of it over a long period, an axle fractured while it was stationary in a garage and caused the body of it to collapse and fall upon a passer by. This would be a highly unlikely and unintended result. What is required is more than a sine qua non. The word "directly" and the language of s 3(7) are imperious: the insurer will only be 129 (1984) 154 CLR 552. 130 See for example the gloss that has been applied to the word "caused". Material contribution may constitute a cause: Chappel v Hart (1998) 195 CLR 232 at 239- 240 [9]-[12] per Gaudron J. A contributory cause may be sufficient to constitute a cause for the purposes of the law of tort: Fitzgerald v Penn (1954) 91 CLR 268 at 276. See also Chappel v Hart (1998) 195 CLR 232 at 243-245 [24]-[28] per McHugh J and also, in a criminal context, Osland v The Queen (1998) 197 CLR 316 at 403-404 [221]-[225] per Callinan J. Callinan liable if a personal injury or death has been directly caused by the driving, that is the operation of a motor vehicle while it is in the control of a driver in the course of putting it into, keeping it in, or bringing its motion to a conclusion, or if the motion is uncontrolled. The correct way of characterizing Mr Reiball's activities was not as driving either of the vehicles, but of preparing them for driving, that is of being put in motion131. What happened to Mr Sutton in the course of that was not a consequence of the driving or the running out of control of the vehicles. The first respondent's argument Container Handlers submitted that significance should be attached to the indefinite article before "consequence" in s 3(7). The policy did not require that the injury be the consequence of the driving. All that was required was that it be a consequence of the driving. Mr Sutton's injury was a consequence of the driving of the low loader. There was an unbroken sequence of causally connected events commencing with the driving and culminating in the injury. The low loader was driven in the desert on rough unsealed roads, and in conditions of great heat. But for that "driving" of the combined vehicles there would not have been a mechanical problem requiring an immediate response. The first respondent's argument rejected That approach would require the Court to do what the Act directs it not to do, in effect to look to and give effect to the indirect and more remote causes and to ignore the direct ones: the negligence of Mr Reiball and his employer in relation to the chain and the provision of the other equipment, and the method chosen to make the vehicle safe to be put in motion. It would require the Court to read "a consequence" as meaning "cause", a word already used and not repeated in s 3(7), and to invite courts to give to the former the same sort of expansive meaning as they have given "cause" from time to time. It would also require the Court to treat the words "a consequence" as if they required the application of a "but for" test, a test which in general this Court has rejected132. The appeal should be allowed with costs. Orders 1, 2 and 3 of the Full Court of the Supreme Court of Western Australia made on 3 October 2001 should be set aside and, in lieu thereof, it should be ordered that the first respondent's appeal to that Court against the appellant be dismissed with costs. 131 cf Government Insurance Office of NSW v King (1960) 104 CLR 93 at 99-100. 132 See March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 at 516-517 per Mason CJ, 522-523 per Deane J, 524 per Toohey J, 525 per Gaudron J. 137 HEYDON J. This appeal from a decision of the Full Court of the Supreme Court of Western Australia concerns the proper construction of a policy of insurance contained in the Schedule to the Motor Vehicle (Third Party Insurance) Act 1943 (WA) ("the Act"). The issue arises because of a physical injury suffered by the plaintiff in the following circumstances. Background On 15 March 1998, in the course of a journey in the north-west of Western Australia, the plaintiff, a crane driver, was travelling as a passenger in a prime mover to which was attached a low loader. The driver was an employee of the defendant ("Container Handlers"). Container Handlers owned and operated the vehicles, and used them in a transport business. In the previous three days, pursuant to a contract between the plaintiff's employer and Container Handlers, the vehicles had transported a crane from Port Hedland to various places in which time the plaintiff operated the crane. The crane had then been unloaded and left behind, and on 15 March 1998 the vehicles were carrying a back load to Port Hedland. The weather was extremely hot and the road was rough and sandy. Around midday the driver brought the vehicles to a halt in order to conduct a routine inspection. The plaintiff noticed the emission of smoke and fumes from one of the rear wheel hubs of the low loader. The driver, after examining the wheels, decided that both wheels on that end of the axle would have to be removed and that the relevant axle should be chained up before the journey recommenced. This was not the first occasion over the four days on which mechanical faults had emerged. The plaintiff began to assist the driver in the chaining up process. While they were carrying it out, the axle slipped, jammed the plaintiff's left hand against the chassis, and injured it badly. The plaintiff sued the defendant, alleging that the defendant was directly liable for negligently breaking a duty of care it owed the plaintiff, and that the defendant was vicariously liable for the driver's negligent breach of a duty of care which he owed the plaintiff. The trial judge (Nisbet DCJ) upheld these allegations and rejected a plea of contributory negligence133. These conclusions were not challenged in the Full Court or this Court. Nor was the verdict in the plaintiff's favour of $926,043.36. The defendant made a third party claim against the present appellant ("the Insurance Commission"). The claim was made under two policies of insurance with the Insurance Commission which were compulsory under s 4(1) of the Act. It provided: 133 Sutton v Container Handlers Pty Ltd [2000] WADC 254 at [9]-[18]. "When any motor vehicle is on a road there is required to be in force in relation to the motor vehicle a contract of insurance entered into by the owner of the motor vehicle under which the owner has insured subject to and in accordance with this Act against any liability which may be incurred by the owner or any person who drives the motor vehicle in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the motor vehicle." It was common ground that both the prime mover and low loader fell within the meaning of "motor vehicle" as defined in s 3(1) of the Act134. Section 6(1) of the Act provided: "In order to comply with this Act a policy of insurance must – be issued by the Commission; except as provided in this section insure the owner of the vehicle mentioned in the policy and any other person who at any time drives that vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, the vehicle in any part of the Commonwealth; and be in a form substantially similar to that contained in the Schedule." The Schedule to the Act set out the terms of a policy of insurance ("the policy"). The insuring clause was: "The INSURANCE COMMISSION OF WESTERN AUSTRALIA, subject to the warranties and conditions contained in this Policy and to the provisions of the Motor Vehicle (Third Party Insurance) Act 1943, in this Policy referred to as 'the Act', agrees to insure the owner of the motor vehicle described in the Traffic Licence issued herewith and any other person who drives that motor vehicle, whether with or without the consent of the owner, in respect of all liability for negligence which may be incurred by the owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of, that motor vehicle in any part of the Commonwealth during the period from the date 134 However, the courts below and the parties in this Court analysed the controversy as though there was one vehicle and one policy. These reasons also adopt this convenient course. of the issue of this Policy to the date of expiry of the said Traffic Licence." Conditions 3 and 4 provided: "3. The Commission is entitled to all rights remedies and benefits which may accrue to it by virtue of the Act. This contract of insurance is subject to the provisions of the Act." Section 3(7) of the Act contained a provision relevant to the construction of the expression "caused". It provided: "For the purposes of this Act, the death of or bodily injury to any person shall not be taken to have been caused by a vehicle if it is not a consequence of the driving of that vehicle or of the vehicle running out of control." The defendant's third party claim against the Insurance Commission was based on the contention that the plaintiff's injuries were caused by, or by the driving of, the defendant's vehicle. The trial judge rejected that contention. He said that though the defect in the low loader would not have developed but for its having been driven along bad roads, driving was not the "proximate" cause of the plaintiff's injuries, and though in one sense the low loader caused the injury when it crushed the plaintiff's hand, the "true direct cause" was the driver's negligent repair of the defect. Hence the defendant's claim for indemnity against the Insurance Commission failed135. The Full Court (Wallwork, Wheeler and Roberts-Smith JJ) disagreed136. The trial judge also rejected claims by the defendant against a second third party on an insurance policy137. The Full Court agreed with that conclusion138 and that outcome is not challenged in this Court. The issue The present controversy turns on the meaning of the expression "in respect of the death of or bodily injury to any person directly caused by, or by the driving 135 Sutton v Container Handlers Pty Ltd [2000] WADC 254 at [27]-[28]. 136 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 48-56 [14]-[52]. 137 Sutton v Container Handlers Pty Ltd [2000] WADC 254 at [29]-[38]. 138 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 56-64 [53]-[93]. of," a motor vehicle. That expression relevantly appears three times – in s 4(1), in s 6(1) and in the Schedule containing the policy. In the courts below the trial judge did, but the Full Court did not, exclude s 3(7) as being irrelevant to the construction of the policy139. The Full Court thought the cover provided by the policy and the duty created by s 4(1) were coterminous. It did so because the contrary position would be anomalous, because the duty created by s 4(1) is to enter a contract of insurance "subject to and in accordance with this Act", and because Condition 4 of the policy provided that the contract was "subject to the provisions of the Act". Further, the requirement of s 4(1) and s 6(1)(b) that the policy is to respond to liability "in respect of all liability for negligence which may be incurred by that owner or other person in respect of the death of or bodily injury to any person directly caused by, or by the driving of," a motor vehicle, and the requirement of s 6(1)(c) that the policy is to be in a form substantially similar to that contained in the Schedule, suggest that the interpretative aid supplied by s 3(7) should be employed in construing the expression "caused" not only in s 4(1) and s 6(1)(b), but also in the policy. That conclusion is further supported by the reference to the Act in Condition 3 of the policy. It was correctly agreed in this Court that that approach was sound. It was also common ground that the word "directly" in the policy governs both "caused by … that motor vehicle" and "caused by … the driving of … that motor vehicle". That approach too is correct. Taken at its widest, then, the issue posed by the policy in relation to the present facts is whether the liability of Container Handlers in respect of the bodily injury to the plaintiff was: directly caused by the insured vehicle – and, pursuant to s 3(7), the injury is not to be taken to have been so caused if it is not a consequence of the driving of the vehicle, or of the vehicle running out of control; or directly caused by the driving of the insured vehicle. The Full Court's reasoning The Full Court held that the plaintiff's injury was directly caused by the insured vehicle. "The axle of the vehicle fell and crushed his hand against the 139 Compare Sutton v Container Handlers Pty Ltd [2000] WADC 254 at [22] and Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 53 [36]-[37]. chassis."140 The Full Court then turned to the inquiry called for by s 3(7), identified in issue (a)(i) above, namely whether the injury was a consequence of the driving of the vehicle. On this, the Full Court found that the injury did "not have to be a direct consequence of the driving"141 and that the injury was a consequence of the driving of the vehicle142: "The driving of the vehicle along unsealed desert roads in extreme heat causing the wheel hubs to overheat and seize up necessitating removal of the wheels and chaining the axle are matters which fall within the operation of the vehicle … [T]he distinct acts of negligence by Container Handlers, or those of its employee driver for which it was liable in tort, were aspects of the fact of operation of the vehicle and so of the driving of The Full Court continued143: "[T]here was here a sufficient proximate or direct connection between the driving and [the plaintiff's] injuries for them to have been regarded as directly caused by the driving. There were no matters of intervening negligence sufficient to remove the injuries from proximity to the driving of the vehicle. This was not a situation in which the vehicle was being worked upon independently of the driving of it. The mechanical problem occurred in the course of the driving … to Port Hedland. The breakdown occurred in a remote desert location. Repairs had to be effected for the purpose of enabling the vehicle to complete its journey and as part of the driving of it. The events were not merely preparatory, nor did they involve some activity associated with the vehicle (such as merely loading or unloading it) and nor was there some intervening cause or event (such as repair work being undertaken in a mechanical workshop or garage during a break in the journey) nor lapse of time sufficient to break the direct chain of causation between the driving and the injury." 140 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 54 [40]. 141 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 54 [40] (emphasis in original). 142 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 56 [50]. 143 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 56 [51]. In this Court Container Handlers correctly conceded that the injury was not a consequence of the vehicle running out of control, thus rendering issue (a)(ii) above irrelevant. Container Handlers also conceded in this Court that the injury was not directly caused by the driving of the insured vehicle; so far as that concession went, issue (b) also became irrelevant. This latter concession, if sound, cast a shadow over the validity of the Full Court's reasoning, since its conclusion that the injury was a consequence of the driving of the vehicle rested on its view that the injury was "directly caused by the driving". The Second Reading Speech The division in the lower courts and the character of the opposing arguments in this Court are such that the statutory language may fairly be called "ambiguous or obscure", thereby permitting recourse to the Second Reading Speech introducing the relevant parts of the legislation when they were enacted: see the Interpretation Act 1984 (WA), s 19. In any event, the Second Reading Speech may be resorted to in order to examine the mischief which Parliament may have considered to be inherent in the then state of the law144. The immediate background to the relevant provisions so far as they were affected by amendments made in 1987 was the decision in Dickinson v Motor Vehicle Insurance Trust145. In that case a father had parked his car and left it temporarily in order to do some shopping. He left in the car his four and a half year old son and his two year old daughter. The son found a box of matches, played with them, and caused a floor mat to catch alight. The daughter (who was asleep) was burned in the ensuing fire. The father was held negligent. The trial judge and the High Court, but not the Full Court of the Supreme Court of Western Australia, held that the respondent was obliged to indemnify the father by reason of the Act as it then stood and by reason of the statutory policy in place under the Act, which covered "all liability for negligence which may be incurred … in respect of … bodily injury to any person caused by or arising out of the use of" the vehicle. The High Court said that the question was not whether the father's negligence was in the use of the motor car, but whether the daughter's injuries were caused by or arose out of the use of the motor car146: 144 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ. 145 (1987) 163 CLR 500. 146 (1987) 163 CLR 500 at 505 per Mason CJ, Wilson, Brennan, Dawson and "The test posited by the words 'arising out of' is wider than that posited by the words 'caused by' and the former, although it involves some causal or consequential relationship between the use of the vehicle and the injuries, does not require the direct or proximate relationship which would be necessary to conclude that the injuries were caused by the use of the vehicle … There can, in our view, be no doubt that the motor car was being used within the meaning of the Act at the time at which the appellant sustained her injuries. It was in use to carry the appellant and her brother as passengers in the course of a journey which was interrupted to enable the father to do some shopping. There is no suggestion that the interruption was other than temporary. 'Use' for the purposes of the Act extends to everything that fairly falls within the conception of the use of a motor vehicle and may include a use which does not involve locomotion … Thus the occupation of the motor car by the appellant and her brother as passengers whilst the car was stationary and their father was absent, was a use of the vehicle within the meaning of the Act. The interior of the motor car caught fire whilst it was in use in that way. The injuries which the appellant sustained as a result arose out of that use." The High Court gave judgment in that case on 13 October 1987 and the Government of Western Australia responded quickly. On 12 November 1987 the Deputy Premier delivered the Second Reading Speech in the Legislative Assembly on the Motor Vehicle (Third Party Insurance) Amendment Bill ("the Bill") which, on enactment, inserted s 3(7), and brought s 4, s 6 and the Schedule into the form of the Act relevant to this case. In summary, the Bill replaced references in those and many other parts of the Act to injury caused by or arising out of the use of vehicles with references to injury directly caused by, or by the driving of, vehicles. In his Second Reading Speech the Deputy Premier said147: "This Bill amends the Motor Vehicle (Third Party Insurance) Act 1943. The need to amend the Act arose from the now well-known High Court of Australia judgment in Dickinson v Motor Vehicle Insurance Trust handed down on 13 October 1987. … The decision in the Dickinson case is generally considered to have opened the floodgates for the entitlement of persons injured in stationary motor vehicles to recover damages from the State Government Insurance Commission – by way of simple example, the loading and unloading of 147 Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 12 November 1987 at 5759-5760. goods-carrying motor vehicles, which in ordinary circumstances would be the subject of workers' compensation claims … It is important to consider historically the purpose for which the Motor Vehicle (Third Party Insurance) Act was introduced. In moving the second reading of the Motor Vehicle (Third Party Insurance) Bill, the Minister for Works said in the Legislative Assembly on 28 September The general principle laid down in the Bill is that before a licence can be issued a policy of insurance must be taken out by the owner of every motor vehicle, which will cover the legal liability of any person driving the vehicle, whether lawfully or unlawfully, in the event of death or bodily injury occurring to any third person. It is clear, therefore, that the Parliament thus intended that the liability of the Motor Vehicle Insurance Trust was to be limited to the payment of damages for injury or death sustained by persons in consequence of the negligent driving of motor vehicles. Although the terminology appearing in the Motor Vehicle (Third Party Insurance) Act 1943 successfully withstood the test of time, all that has now changed with the High Court of Australia judgment of Dickinson v the Motor Vehicle Insurance Trust. The Motor Vehicle Insurance Trust statutory third party insurance policy currently states – caused by or arising out of the use of such motor vehicle. In some sections of the Motor Vehicle (Third Party Insurance) Act appears 'caused by the use of', 'in the use of', 'arising out of the use of', 'in the use of a motor vehicle', 'caused by or arises out of the use of', 'as the result of the use of a motor vehicle', 'caused by or arising out of the use of'. This wording must be deleted from the insurance policy and the Motor Vehicle (Third Party Insurance) Act so that similar claims against the third party insurance fund of the State Government Insurance Commission will be outlawed. insurance The High Court of Australia decision in the case of Dickinson v the Motor Vehicle Insurance Trust can only be described as a landmark ruling for the third party Insurance Commission. The full implications of this decision are still largely unknown. Unless the Motor Vehicle (Third Party Insurance) Act is suitably amended, it is anyone's guess as to the scope of claims which may ultimately be found to fall within the meaning of the words 'in the use of a motor vehicle'." the State Government fund of It is evident from this Second Reading Speech that the Deputy Premier was concerned to remove the words "arising out of" from the Act because they were, as the High Court said in Dickinson v Motor Vehicle Insurance Trust148, wider than the words "caused by". The suggestion by the High Court that "arising out of" does not require the "direct or proximate relationship" conveyed by the word "caused" evidently stimulated Parliament not merely to narrow the indemnity, by limiting recovery by the word "caused", but also either to emphasise that narrowing of indemnity or further to limit the indemnity by requiring that the death or injury be "directly caused". It is plain that at the very least the amendments were not to be construed as favourable to any possibility of wide recovery. On the true construction of the policy in the light of s 3(7), it will not indemnify the owner or driver in respect of liability for negligence which may be incurred by that owner or driver in respect of death or bodily injury to any person caused by the motor vehicle, unless the death or injury is directly caused by the driving of the vehicle or by its running out of control. The full range of possible causes of injury by the agency of a motor vehicle is cut down to those which can be characterised as being a consequence of its driving or its running out of control, and further cut down by the requirement that the causal relationship must be characterised as being direct and not something wider. Since the language of the Schedule and s 3(7) is plainly intended as a means of narrowing the scope of indemnity, it is further appropriate to construe the word "consequence" as referring to something narrower than the wide ideas often encompassed in law by references to "causation" and its derivatives: "consequence" here refers to a narrower segment of the wider class of "causes". So far as the process of cutting down is effected by the reference to the driving of the vehicle, the expression is preceded by the definite article, and is used in the composite phrase "a consequence of the driving of that vehicle or of the vehicle running out of control". In that context at least, the words "the driving" refer to the actual control and management of the vehicle while it is in locomotion. "The driving" of a vehicle, in at least its core meaning in this context, is the activity conducted by a human being in the driver's seat who manages and directs the course of its movement by operating the controls – preparing to start, starting, accelerating, braking, steering, giving appropriate signals, operating the horn and lights appropriately, stopping and turning the engine off. In contrast, when the vehicle runs out of control, it is because the course of its movement has ceased to be managed and directed by the operation of the controls, or because, while stationary, its brakes have failed or it has been struck by another vehicle and it has moved off out of control. 148 (1987) 163 CLR 500 at 505. The Second Reading Speech revealed an antipathy to the result in Dickinson v Motor Vehicle Insurance Trust149 and a desire to adopt a narrower test for indemnity than the test ("caused by or arising out of the use") which led to that result. The 1987 amendments are also to be read against the background of authority of this Court distinguishing between driving a vehicle, which was using it, and doing an act intended to make it fit to be driven, which was not using it150. The concerns expressed in the Second Reading Speech point strongly against a construction of the legislation which would widen indemnity by overturning that distinction. It is true that there is an overlap between the two limbs of the policy in relation to driving. This is not an effective answer to the construction advanced above. The overlap exists whatever the construction of "directly" and whatever the construction of "driving". Here the injury was not "directly" caused by "the driving" of the motor vehicle. It is necessary to commence with the Full Court's analysis, for its orders are not to be set aside merely by reason of Container Handlers having declined to support part of its reasoning and having advanced a more truncated posture. Errors in the reasoning of the Full Court can be identified in three ways. First, the Full Court fails to give full effect to the word "directly" in the policy, and construes it as if it meant "directly or indirectly". It does so by noting that the word "consequence" in s 3(7) is not qualified by the adjective "direct", and by adopting a process of elision between the reference to non-direct consequences in s 3(7) and the reference to direct causation in the policy. The Full Court's reasoning construes the words "directly" and "consequence of the driving" so broadly as to encompass relationships of causation which are much wider than those words will accommodate. This can be illustrated by the Full Court's statement that arguably it was the way in which the vehicle was driven along rough roads in extreme heat which caused the wheel hub to overheat so as to require its removal and the securing of the axle151. The word "directly" points against the inclusion of so long a causal chain. 149 (1987) 163 CLR 500. 150 Government Insurance Office of NSW v King (1960) 104 CLR 93 at 96 per Dixon CJ, 99-100 per Menzies J, 105-106 per Windeyer J. In particular at 100 Menzies J said: "the greaser who is crushed by the car when a power hoist supporting it fails" does "not suffer bodily injury caused by or arising out of the use of the motor vehicle that is being … serviced". 151 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 53 [35]. Secondly, the Full Court adopted an untenable construction of "driving". It said that the "distinct acts of negligence by Container Handlers, or those of its employee driver … were aspects of the fact of operation of the vehicle and so of the driving of it. These included the unserviceable nature of the hydraulic power unit of the low loader and those findings of his Honour as to the driver's negligence … referred [to] above."152 These findings were153: "[The driver] should have instructed [the plaintiff] to get out of the position that he was in and to attempt to connect the chains securing the axle to the tray only if it was safe for him to do so. He should not have used the particular jack that was used without first ensuring that it had a firm, stable footing and could get sufficient purchase on an appropriate part of the axle so as to prevent it from slipping. The driver should not have commenced to jack the axle without ensuring [the plaintiff] was in the clear. Finally, … the driver had failed to inspect his emergency repair equipment before commencing the journey, because had he done so, he would have ascertained that he did not have sufficient equipment to effect any emergency roadside repairs with wheels and tyres and should have requisitioned the appropriate materials from his employer." And "the distinct acts of negligence by Container Handlers" were described thus154: "[I]t was entirely foreseeable that an injury of the type sustained by [the plaintiff] could be sustained by persons attempting to effect emergency roadside repairs to a vehicle such as this. A prudent employer in the position of the defendant should have properly equipped its vehicles for the carrying out of emergency roadside repairs to the wheels and axles of its low loader. The defendant had failed to do that. There was no trolley jack of sufficient lifting capacity to lift an axle of the prime mover and the low loader. The only jack which was available was inadequate. Additionally, braces or supports should have been provided so that the axle was at all times supported. There were no such braces or supports; nor were any planks or blocks provided to afford the trolley jack a secure 152 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 56 [50]. 153 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 46 [9]. 154 Container Handlers Pty Ltd v Insurance Commission of Western Australia (2001) 25 WAR 42 at 45 [6]. footing and nor were chains of sufficient length provided to enable an axle to be secured to the bed of the tray." The Insurance Commission submitted that to say that the acts of negligence of Container Handlers and its driver were aspects of "driving" entailed the following absurd consequences: Container Handlers was driving the vehicle when it failed, months or days before the injury and before any movement of the vehicle on the three days before the day the injury occurred, properly to equip the vehicle for carrying out emergency repairs by failing to supply a proper trolley jack, or braces or supports for the axle, or planks or blocks for the trolley jack, or sufficiently long chains; (ii) when, at the same time, it failed to provide a hydraulic power unit in working order; the driver was "driving" the vehicle when he failed to inspect his emergency repair equipment before the commencement of the journey. In substance these arguments are sound. Each of these items of conduct falls well outside the reach of the expressions "driving" or "consequence of the driving". They go no closer to "driving" than being acts preparatory to driving. They are not consequences of the driving, for it cannot be the case that everything related to wear and tear caused by the driving of a vehicle at any time since it was new was a consequence of the driving in this context. They are items of negligence in relation to which the aftermath of the relevant driving merely affords an occasion for the negligence to cause injury. Thirdly, even the events which took place after the time when the plaintiff noticed the smoke and fumes until the time when the plaintiff was injured cannot be described as a "consequence of the driving". No doubt the driver stopped the vehicle so as to inspect it with a view to ensuring that it was capable of resuming its movements when he restarted the engine. No doubt his perception that there might be some problem which inspection might detect or avert was in part a perception that driving which had already been undertaken in rough and hot conditions could have caused such a problem, and no doubt that perception was accurate. No doubt the smoke and fumes noticed by the plaintiff were a consequence of the driving. But in the context of the policy and s 3(7), the conduct of a person, after a vehicle has come to a stop and the engine has been turned off, who checks for defects in it with a view to improving its performance before it is placed in motion again, is not "driving". Hence the failure of the driver to give the plaintiff proper instructions, to use the jack with an appropriate footing, and to ensure that the plaintiff was in the clear before jacking commenced, were not within the expression "driving". It was perhaps as part of an endeavour to sidestep these criticisms, made in the Insurance Commission's written submissions, of the Full Court's reasoning that Container Handlers in its answer to them for the first time declined to support part of that reasoning and conceded that the driving of the vehicle did not directly cause the plaintiff's injury. But its truncated posture is equally open to criticism. It contended that the injury was directly caused by the vehicle and was a consequence of the driving of the vehicle, even though other causally relevant events had occurred before the injury, and that there need not be an immediate relationship between the driving and the injury. The driving of the vehicle on rough roads in conditions of extreme heat caused the risk and the actuality of a mechanical problem requiring immediate action. Alternatively, it contended that the chaining up process which resulted in the injury was part of the ordinary driving of the vehicle. The difficulties in those arguments are that they dilute the meaning of "directly" too much, by extending it to include "indirectly", thereby impermissibly overlooking the significance of that word in s 4, s 6 and the Schedule, and attribute to the words "the driving" in that context a meaning which is wrong. Orders The following orders should be made. The appeal is allowed. The first respondent is to pay the costs of the appellant. Orders 1, 2 and 3 of the Full Court of the Supreme Court of Western Australia made on 3 October 2001 should be set aside and, in lieu thereof, the appeal by the present first respondent to that Court against the present appellant is dismissed with costs.
HIGH COURT OF AUSTRALIA Matter No M25/2008 EDWIN PHILIP KENNON AND IAN CHARLES FOWELL SPRY (IN THEIR CAPACITY AS THE TRUSTEES OF THE CATHARINE SPRY TRUST, THE CAROLINE SPRY TRUST AND THE PENELOPE SPRY TRUST) & ORS AND APPELLANTS HELEN MARIE SPRY & ORS RESPONDENTS Matter No M26/2008 APPELLANT AND EDWIN PHILIP KENNON AND IAN CHARLES FOWELL SPRY (IN THEIR CAPACITY AS TRUSTEES OF THE CATHARINE SPRY TRUST, THE CAROLINE SPRY TRUST AND THE PENELOPE SPRY TRUST) & ORS RESPONDENTS Spry v Kennon [2008] HCA 56 3 December 2008 M25/2008 & M26/2008 ORDER Matter No M25/2008 Appeal dismissed. Appellants to pay the costs of the appeal of the first respondent. Application by first respondent for special leave to cross-appeal dismissed with no order as to costs. Matter No M26/2008 Appeal dismissed. Appellant to pay the costs of the appeal of the third respondent. Application by third respondent for special leave to cross-appeal dismissed with no order as to costs. On appeal from the Family Court of Australia Representation Matter No M25/2008 D F Jackson QC with M C Hines for the appellants (instructed by the appellants) J T Gleeson SC with P Kulevski for the first respondent (instructed by Kennedy Wisewoulds) A J Myers QC with S Smith for the second respondent (instructed by Nedovic & I J Hardingham QC with M C Hines for the third to sixth respondents (instructed by Victor Ismailovic) Matter No M26/2008 A J Myers QC with S Smith for the appellant (instructed by Nedovic & Co) D F Jackson QC with M C Hines for the first and second respondents (instructed by the first and second respondents) J T Gleeson SC with P Kulevski for the third respondent (instructed by Kennedy Wisewoulds) I J Hardingham QC with M C Hines for the fourth to seventh respondents (instructed by Victor Ismailovic) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Spry v Kennon Family law – Courts having jurisdiction in matrimonial causes – Powers – Jurisdiction under s 79(1) of Family Law Act 1975 (Cth) to make orders – "Proceedings with respect to the property of the parties to the marriage or either of them" – Definition of "property" of parties to marriage – Whether right of wife with respect to due administration of trust and discretionary power of husband to appoint whole of trust assets to wife constituted part of the property of the parties to the marriage. Family law – Courts having jurisdiction in matrimonial causes – Powers – s 85A of Family Law Act 1975 (Cth) – Court's power to make orders respecting property the subject of "ante-nuptial or post-nuptial settlements made in relation to the marriage" – Whether contributions by parties to existing trust are post- nuptial settlements – Whether just and equitable – Interests of third parties. Family law – Courts having jurisdiction in matrimonial causes – Powers – s 79(1) of Family Law Act 1975 (Cth) – Whether "parties to the marriage or either of them" includes reference to persons who were parties to marriage since dissolved before court makes an order – Power of court to proceed in property settlement "as if" changes to property rights otherwise brought about by anterior divorce had not yet occurred. Family law – Divorce and other matrimonial causes – Division of assets – Trusts and trustees – Wife one of the class of objects of discretionary trust – Right in equity to due administration of trust – Whether existence of such a right depends on entitlement to any fixed and transmissible beneficial interest in trust fund. Statutory construction – Family Law Act 1975 (Cth) – Policy regarding contributions to property – Relevance to provisions relating to orders with respect to settlement of property. Statutory construction – Family Law Act 1975 (Cth) – s 85A – Purposes with respect to settlement – Degree of association ("made in relation to") between settlement of property and marriage. Words and phrases – "ante-nuptial or post-nuptial settlements"; "made in relation to"; "parties to the marriage or either of them"; "property"; "with respect to the property of the parties to the marriage". Family Law Act 1975 (Cth), Pt VIII, ss 4, 79, 80, 85A, 106B. Introduction Ian Charles Fowell Spry is a retired barrister and Queen's Counsel in the State of Victoria. He was born on 17 January 1940. In 1968 he created by parol a trust called the ICF Spry Trust of which he was settlor and trustee ("the Trust"). Its terms were reflected in an instrument made in October 1981 ("the 1981 Instrument"). The beneficiaries were himself and his siblings, his and their issue, and the spouses of all of them. On 29 December 1978 he married Helen Marie Spry who was born on 20 August 1956. There were four children of the marriage: Elizabeth, born 23 September 1980. Catharine, born 18 August 1982. Caroline, born 25 October 1984. Penelope, born 3 November 1987. By a deed varying the Trust in 1983 ("the 1983 Deed"), Dr Spry excluded himself as a beneficiary. He appointed his wife to be trustee on his death or resignation and his daughter Elizabeth to succeed her upon her death or resignation. In December 1998, at a time when his marriage was in difficulty, Dr Spry made a further variation to the Trust excluding himself and his wife as capital beneficiaries ("the 1998 Instrument"). On 30 October 2001 he and his wife separated. Subsequently she applied to dissolve the marriage. In January 2002 Dr Spry established trusts in favour of his four children ("the Children's Trusts") and applied to them one quarter each of all of the capital and income of the Trust ("the 18 January 2002 Dispositions"). On 20 January 2002 Dr Spry conveyed to the four children shares held by him beneficially ("the 20 January 2002 Dispositions"). On 20 May 2002 he appointed Mr Edwin Kennon as joint trustee with him of each of the Children's Trusts from 1 July 2002. The marriage was dissolved when the decree nisi became absolute on 17 February 2003. In April 2002, Mrs Spry filed an application in the Family Court of Australia seeking orders for property settlement and maintenance. The application relevant to these proceedings was a second amended version of that application. In particular she sought orders under s 106B of the Family Law Act 1975 (Cth) ("the Family Law Act") setting aside the 1998 Instrument, the instruments creating the Children's Trusts and the 18 January 2002 Dispositions. She asked for an order that her husband pay her, inter alia, 50% of the assets and resources held in their individual or joint names, the Trust and the Children's Trusts. Following procedural steps, which are not material for present purposes, Carter J made orders on 30 October 2003 granting leave to the three adult children, Elizabeth, Catharine and Caroline Spry, to intervene and be made parties to the proceeding. On 10 November 2003 Carter J also gave leave to Penelope Spry to intervene by a next friend. After a hearing extending over five days in August 2005 in the Family Court at Melbourne, Strickland J delivered judgment on 30 November 2005. His Honour set aside the 1998 Instrument. He also set aside the 18 January 2002 Dispositions and ordered that on or before 28 February 2006 Dr Spry pay his wife the sum of $2,182,302. Dr Spry appealed against the decision. Dr Spry and Mr Kennon cross- appealed jointly in their capacities as trustees of the Catharine Spry Trust, the Caroline Spry Trust and the Penelope Spry Trust. Dr Spry cross-appealed jointly with his daughter Elizabeth in their capacity as trustees of the Elizabeth Spry Trust. On 13 July 2007 the Full Court of the Family Court (Bryant CJ and Warnick J, Finn J dissenting) dismissed the appeal and cross-appeal and ordered the appellant and cross-appellants jointly to pay Mrs Spry's costs of and incidental to the appeal and cross-appeal. On 7 March 2008 special leave to appeal to this Court from the decision of the Full Court of the Family Court was granted to the joint trustees of the Children's Trusts in matter No M25 of 2008 and to Dr Spry in matter No M26 of For the reasons that follow I would dismiss the appeals with costs in favour of Mrs Spry but not the other respondents. I would also dismiss Mrs Spry's applications for special leave to cross-appeal with no order as to costs. The relevant provisions of the Family Law Act are set out in the joint judgment of Gummow and Hayne JJ. The Trust and the 1981 Instrument The Trust was created on 21 June 1968. It was created by parol although Dr Spry had prepared a trust instrument. He did not execute the instrument then because of the stamp duty that would be applicable to it. It was eventually signed and stamped in October 1981. It was not in dispute that the 1981 Instrument was not a deed. By cl 1 of the 1981 Instrument, Dr Spry designated himself as settlor and trustee. He could appoint any other person as an additional trustee and could remove any such person as he saw fit. Clause 2, which assumed importance in the argument, provided: "The settlor may at any time vary the terms of this trust but not in such a manner as to increase in any way his rights under this trust to the beneficial enjoyment of the fund." The fund was defined in cl 3 as "the trust fund from time to time in existence". The beneficiaries were defined in cl 4 as "all issue" of Dr Spry's father, Charles Chambers Fowell Spry, which of course included Dr Spry, and all persons married to such issue. The class would extend to their further issue and any persons married to them, as well as the Attorney-General as parens patriae. As at 30 May 2005, when Dr Spry swore his affidavit in the proceedings in the Family Court, the beneficiaries comprised his living sister and her children, the daughter of his deceased sister and his four daughters. This contraction of the class to exclude himself and his wife followed upon the 1983 Deed and the 1998 Instrument which are discussed below. The "date of distribution" was defined in cl 4 as the earlier of 100 years from 21 June 1968 and 21 years after the death of the last survivor of all children alive at 21 June 1968 of three named persons (unrelated to the beneficiaries). Clause 6 provided: "The trustee shall have the power from time to time, as he in his absolute discretion sees fit, to apply all or any part of the income and/or capital of the fund to or for all or any of the beneficiaries, either by making payments to or applications for the benefit of the beneficiary in question or payments to a trust set up substantially for the benefit of such beneficiary; and income not from time to time lawfully paid or applied shall be accumulated." Clause 7 provided for division of the fund at the date of distribution equally between such beneficiaries "as the trustee thinks fit" and, in default, equally among all male beneficiaries save for the settlor. Clause 9 provided: "The trustee may from time to time invest or deal with the fund in any way as if it were his own absolute property, save that it shall be held beneficially by him on the trusts hereof." The 1983 Deed Dr Spry said that he suggested to his wife in 1983 that she become a trustee upon his death or resignation until one or more of the children was old enough to take over. On 4 March 1983, as settlor and trustee, he executed with his wife the 1983 Deed as a deed under seal. It was entitled "The ICF Spry Trust". It included provisions to the following effect: Dr Spry as settlor of the Trust released the trustee from any loans advanced by him. He acknowledged that no amount was or remained owing to him by the trustee or in relation to the Trust fund and that he had "no rights to or interest in the trust fund or the income thereof" (cl 1). He released and abandoned all and any beneficial interest or rights which he might as settlor have held under the Trust or in the Trust fund or income and confirmed that by reason thereof he ceased to be a beneficiary of the Trust or a person to whom or for whose benefit all or any part of the Trust fund and income thereof could be applied (cl 2). Clause 3 provided: "For the purpose of removing doubts it is confirmed and provided that the expression 'issue' used in the said instrument includes all descendents [sic] however remote, and not merely children; that appointments by the settlor of a trustee or trustees may be revocable or irrevocable; and that any variation of the trusts of the said instrument shall be invalid to the extent to which it purports to confer directly or indirectly any right or benefit upon the settlor." The deed confirmed that no loans to the trustee by Mrs Spry or any other person were outstanding (cl 4). Dr Spry, as settlor, appointed Mrs Spry to be the trustee on his death or resignation and their daughter Elizabeth upon the death or resignation of Mrs Spry, provided that the appointment was revocable by the settlor at any time (cl 5). In all other respects the trusts of the 1981 Instrument were confirmed. The 1998 Instrument By an instrument of variation dated 7 December 1998 Dr Spry provided that, after his death or resignation as trustee, the trustees of the Trust would be his two eldest daughters, Elizabeth and Catharine, jointly. If he ceased to be trustee no payment or distribution or application of the income or capital of the fund or exercise of any powers under cl 6 or cl 7 of the 1981 Instrument could be made during his lifetime without his prior written consent. The power of variation in cl 2 of the 1981 Instrument was itself varied as follows: "The power of variation set out in clause 2 of the trust instrument is hereby varied so that (a) it may be exercised by the settlor either in writing during his lifetime or by his will, and (b) any exercise of that power of variation may be either revocable or irrevocable (but unless expressly stated to be irrevocable any such exercise shall be revocable)." Clause 4 excluded Dr Spry and his wife from the receipt of any part of the capital of the Trust: "Clauses 6 and 7 and the other terms of the trust set out in the trust instrument are hereby varied so that no power or discretion to pay or apply the capital of the fund or any part thereof shall be exercised in favour of the settlor or Helen Marie Spry or in favour of any trust in which either of them has any interest, right or possibility, and the settlor and the said Helen Marie Spry are hereby excluded absolutely and irrevocably from all and any interests, rights and possibilities in the capital of the fund. The variation made by this clause 4 of this instrument of variation shall be irrevocable, and no future purported variation purporting to amend this clause 4 or purporting to confer any interest, right or possibility in the capital of the fund on the settlor on [sic] on the said Helen Marie Spry shall be valid in any way." The Children's Trusts – 18 January 2002 On 18 January 2002, Dr Spry established four separate trusts in identical terms save for the name of each primary beneficiary. Each trust related to one of his four daughters. It is sufficient to refer to the terms of the Elizabeth Spry Trust. By the trust deed he appointed himself as trustee. On his death, he was to be succeeded by a person or persons specified in his will and, absent such specification, by Helen Spry. Elizabeth Spry was to become a trustee upon her attaining 32 years. The beneficiaries were defined as the primary beneficiary, Elizabeth Spry, and her children, grandchildren, sisters, nephews and nieces and their spouses (cl 2). The trustees had a power of appointment from time to time in their absolute discretion to apply all or any part of the income and/or capital of the fund for the benefit of all or any of the beneficiaries and income not from time to time so applied was to be accumulated (cl 3). Dr Spry and Elizabeth were empowered to appoint or remove trustees from time to time (cl 1). They also had a power to amend any of the provisions of the trust instrument (cl 8). Dr Spry was "excluded absolutely" from any interest or benefit in or from the fund. Neither the fund nor any part thereof was to be paid or applied for his benefit in any way, or for the benefit of any company or trust in which he might have any beneficial interest or from which he might receive any benefit (cl 9). The trust was amended on 20 May 2002 so that Edwin Philip Kennon, a solicitor, became a further trustee from 1 July 2002. The age at which Elizabeth Spry would become a further trustee was reduced to 25 years. On that basis she became a trustee on 23 September 2005. Mr Kennon has evidently not continued as a trustee of that trust although he continued as a joint trustee with Dr Spry of the other Children's Trusts. The 18 January 2002 Dispositions By a document executed on 18 January 2002 Dr Spry, as trustee of the Trust, confirmed that in his personal capacity he had forgiven and released all and any amounts owing to him by the Trust and that no amount was owing by him to the Trust or by the Trust to him (cl 1). He also declared that Mrs Spry was forgiven and released from all or any amounts owing by her to the Trust and that no amount was owing by her to the Trust or by the Trust to her (cl 2). Clause 3 of the document provided that Dr Spry applied all of the income and capital of the Trust fund of the Trust: by applying one-quarter thereof by assigning it hereby to the Trustees of the Elizabeth Spry Trust constituted on 18 January 2002 so as to be held by them from the execution hereof by them beneficially on the trusts of the Elizabeth Spry Trust". By cl 4 he varied the terms of the Trust by providing that from the execution of the instrument: one-quarter of the income and capital as at the execution hereof of the trust fund of that Trust is held for the Trustees of the Elizabeth Spry Trust (and is hereby assigned to them) to be held by them beneficially on the trusts of the Elizabeth Spry Trust". Identical provisions were made in relation to each of the other Children's Trusts. Further dispositions and appointment to the Children's Trusts By the 20 January 2002 Dispositions, Dr Spry conveyed to his four children shares held by him beneficially. By an instrument of 20 May 2002 he appointed Mr Kennon as joint trustee with him of each of the Children's Trusts. Judgment of the primary judge The learned primary judge made extensive findings of fact and law. Key findings for present purposes are summarised in the following paragraphs. As to the effect of the 1983 Deed, his Honour held: Prior to the 18 January 2002 Dispositions Dr Spry was able to benefit from the assets of the Trust to an extent that, if the Family Court were to set aside the 1998 Instrument, the assets could be treated as his property. In that case, Dr Spry would then be reinstated as capital beneficiary subject to the terms of the Trust and the 1983 Deed. There was nothing to prevent Dr Spry from revoking the 1983 Deed or just cl 2 of it. Clause 2 was not a variation of the terms of the Trust. Its revocation could not be invalidated by cl 3. Clause 3 was invalid to the extent it attempted to vary the power of variation. If cl 2 were a variation, Dr Spry was not thereby validly excluded as a beneficiary and remained a person to whom any part of the Trust fund and income could be applied. Even if cl 2 of the 1983 Deed remained, Dr Spry sufficiently controlled the Trust such that once the instruments and dispositions of 7 December 1998 and 18 January 2002 were set aside its assets could be treated as his property. In the alternative, Dr Spry's level of control over the assets of the Trust meant that they could be treated as "a financial resource". Although his Honour regarded the Trust assets as "at the very least" able to be taken into account as a financial resource of Dr Spry, he proceeded on the basis of treating them as Dr Spry's property. As to the 1998 Instrument, his Honour found, inter alia: Dr Spry did not tell his wife of the instrument. Its primary effect was to exclude Dr and Mrs Spry as capital beneficiaries and create a situation where that could not be changed. 3. Mrs Spry remained an income beneficiary. Dr Spry made the 1998 Instrument knowing the marriage was in trouble and that an order dealing with the property of the parties, including the assets of the Trust, was likely. He wanted to remove the assets of the Trust from the reach of the Family Court and considered the instrument would achieve that result. He was looking to defeat an anticipated order for property settlement. All the necessary elements of s 106B were satisfied in relation to the 1998 Instrument and it was open to make an order setting it aside. As to the Children's Trusts and the 18 January 2002 Dispositions, his Honour found: There was no need for Mrs Spry to pursue an application to set aside the Children's Trusts under s 106B. The crucial step was the transfer of assets to those trusts. Dr Spry, as trustee of the Trust, applied one quarter of all of its income and capital to each of the Children's Trusts. As a result each of the Children's Trusts acquired assets to the value of approximately $875,000 which included $1,888,000, being net proceeds of the sale of a property at Mathoura Road, Toorak. That property had been purchased by the Trust in December 1979 for about $152,000, then rented until occupied by the family from 1983. There was no money owing by the Trust to either Dr Spry or his wife. Dr Spry had not made an agreement with his wife that the assets of the Trust could be passed to the children when Dr Spry determined to do so. Dr Spry did not adequately explain why it was necessary to set up the Children's Trusts and apply the capital and income of the Trust to them. At a time not long after separation at which it could clearly be anticipated an order would be made dealing with the parties' property, Dr Spry determined, without informing Mrs Spry, that it was time to move approximately $3,500,000 from the Trust and place it in the Children's Trusts. He was concerned that despite the 1998 variation the assets of the Trust might still have been within the reach of Mrs Spry and the Family Court. The instruments were made to defeat an anticipated order in future proceedings. Dr Spry and the children argued that s 106B was not applicable in respect of either the 1998 Instrument or the 18 January 2002 Dispositions as the divorce was a supervening event which defeated any anticipated orders. His Honour did not accept that submission. As long as the elements of s 106B were satisfied it did not matter that there might have been a supervening event to defeat the order. In any event the divorce could only affect Mrs Spry's ability to benefit from the capital and income of the Trust. The Trust assets could still be treated as Dr Spry's property. The instrument and dispositions were made with the intention of defeating an anticipated order and should not be allowed to stand. In respect of the 20 January 2002 Dispositions and the appointment of Mr Kennon as joint trustee of the Children's Trusts, his Honour found: There was no agreement between Dr Spry and his wife, as claimed by Dr Spry, that his personal assets would go to the children and that he would determine when. Dr Spry did not adequately explain why the transfer of shares (to the value of $500,000) had to take place at that time. Dr Spry intended to defeat a contemplated order at the time he entered into these transactions. The wife's entitlement, on her case, would be met even if the disposition of the shares were not set aside, provided the assets of the Trust were treated as Dr Spry's property. Therefore this was a case where s 106B did not need to be applied to the disposition of the shares. The current value of the shares should be notionally added to the pool of assets for distribution between the parties. 6. Mr Kennon's appointment as joint trustee of the Children's Trusts would only need to be set aside if the alternative position that the assets of the children had to be taken into account as a financial resource of Dr Spry were to apply. His Honour rejected a contention that orders could be made under s 90AE in Pt VIIIAA of the Family Law Act. He then summarised the basis upon which he proposed to proceed as follows: The instrument executed by the husband as settlor on 7 December 1998 should be set aside. The effect of this is that subject to the 1983 instrument the husband remains a capital and income beneficiary of the ICF Spry Trust. The instrument executed by the husband as trustee on 18 January 2002 whereby the income and capital of the ICF Spry Trust was applied to the four children's trusts should be set aside. The effect of this is to return the capital and income of the children's trusts to the ICF Spry Trust. The instrument executed by the husband on 20 January 2002 whereby he assigned to the four children shares held by him beneficially can be set aside to the extent of the assignment of those shares. The effect of this would be to return to the husband all of the shares save and except those which were the subject of the inheritance to the children from the husband's father. However, given that the assets of the Trust will be available for distribution between the parties there is no need to in fact apply Section 106B, and these assets can be notionally added back to the pool of assets pursuant to the principles espoused in TOWNSEND." His Honour considered the assets, liabilities and financial resources of Dr and Mrs Spry at the dates of their marriage and separation and at the date of the hearing. A schedule prepared by Dr Spry, reflecting agreements reached between the parties (subject to some points of difference with the wife), showed: Wife's assets ........................................... $ 2,530,466.80 Husband's assets .................................... $ 1,790,108.15 Total assets ......................................................................... $ 4,320,574.95 Assets held by wife as nominee for trusts .............................................................. $ 308,084.00 Children's trusts ..................................... $ 4,760,152.00 Deduction owing by trusts representing distributions of income to beneficiaries accrued but unpaid ................................. $ 114,000.00 Total .................................................................................... $ 4,646,152.00 Shares transferred by husband to children as at 28 July 2005 less inheritance from husband's father plus interest as calculated by husband ....................................................... $ 429,333.42 His Honour found, after adding back the sum of $114,000 referred to above, a net asset pool which amounted to a money equivalent of $9,818,144.371. He considered the respective contributions of Dr and Mrs Spry for the purposes of s 79(4) of the Family Law Act. They were assessed at 52%/48% in Dr Spry's favour. The effect was that the first 4% of the net asset pool would be treated as In their reasons for judgment on appeal, the Full Court of the Family Court noted that it was common ground between Dr and Mrs Spry that there had been a double counting of the value of the shares held by Mrs Spry as nominee, such that the value of the pool should be reduced to $9,527,356. It was suggested that this matter be addressed by consent: Stephens v Stephens (2007) 212 FLR 362 at 386 [75] per Finn J, 429 [306] per Warnick J. having been contributed by Dr Spry and the parties would be taken as entitled equally to the remaining 96%. His Honour did not alter the percentages after considering the factors prescribed in s 75(2). On this basis his Honour found Dr Spry entitled to net assets totalling $5,105,435 and Mrs Spry to $4,712,709. Orders of the primary judge On 30 November 2005 his Honour ordered, inter alia: That pursuant to the provisions of Section 106B of the Act the ICF Spry Trust Instrument of Variation dated 7 December 1998 be set aside. That pursuant to the provisions of Section 106B of the Act the instrument entitled 'The ICF Spry Trust' dated 18 January 2002 and the dispositions made pursuant thereto whereby the husband: Forgave and released all amounts owing by him to the said Trust; Forgave and released all amounts owing by the wife to the said Trust; and 3.3 Applied all of the income and capital of the trust fund of the said Trust; as to one quarter thereof to the Elizabeth Spry Trust; as to one quarter thereof to the Catharine Spry Trust; as to one quarter thereof to the Caroline Spry Trust; as to one quarter thereof to the Penelope Spry Trust; be set aside. That on or before 28 February 2006 the husband pay to the wife the sum of $2,182,302.00." Other orders were made relating to specific assets to be retained respectively by Mrs Spry and by Dr Spry and the division of paintings owned by them. Ancillary orders were also made. Mrs Spry was directed to transfer to the trustees of the Children's Trusts 14,600 shares in Westpac Banking Corporation held by her as nominee of the Trust together with dividends and interest. The judgment of the Full Court The Full Court, by majority (Bryant CJ and Warnick J, Finn J dissenting), dismissed the appeals from the judgment of Strickland J. Relevantly to the appeals to this Court, Warnick J, who wrote the principal majority judgment, came to the following conclusions: Dr Spry was able, notwithstanding the 1983 Deed, to reverse his election not to be considered in the exercise of the trustee's discretion. This would not involve a variation of the Trust. He would not so much be reinstating himself as a beneficiary as declaring himself again available as an object of the exercise of the trustee's discretion. The trial judge was wrong to conclude that even if cl 2 of the 1983 Deed remained in place, the assets of the Trust could be treated as Dr Spry's property. The trial judge did not err in setting aside the 1998 Instrument. The trial judge was not in error in setting aside the 18 January 2002 Dispositions. In summary, Warnick J was of the view that the trial judge correctly: found that the release by Dr Spry in the 1983 Deed of his entitlements as a beneficiary of the Trust could be rescinded; set aside the 1998 Instrument and the 18 January 2002 Dispositions; found that the assets of the Trust could then be included in the pool of assets for division; and made orders that did not require of the husband any fraud on the powers that the husband could exercise in respect of the Trust. Bryant CJ agreed with Warnick J save as to one point. She did not consider that Dr Spry could simply "reverse his election" under the 1983 Deed. However, it remained open to Dr Spry and his wife, as parties to the 1983 Deed, to cancel it. Her Honour held that once it was accepted that the effect of the 1983 Deed could be reversed, the case became one like any other where assets were held in a discretionary trust and the husband had control of them as trustee and was capable of having the capital and income distributed to him as a beneficiary. Finn J dissented. Her Honour held that the release in cl 2 of the 1983 Deed could not be withdrawn. She rejected Mrs Spry's submission that Dr Spry could amend the Trust to reinstate himself as a beneficiary notwithstanding the 1983 Deed. The relevant words of cl 2 of the 1981 Instrument did not speak as at the date of the original settlement but referred to "this trust" as constituted from time to time. Moreover, cl 2 of the 1983 Deed effected a total abandonment of all Dr Spry's rights and entitlements under the Trust. To reinstate his rights would be contrary to the covenant he made as settlor in cl 2 of the 1983 Deed. Her Honour disagreed with the trial judge's conclusion that even if the 1983 Deed remained in place the Trust assets could still be treated as the property of Dr Spry. Control of the Trust was not sufficient for that purpose. Earlier authorities in the Family Court, relied upon by the trial judge, involved a spouse who also had some capacity to benefit from the trust. Control alone, without the capacity to benefit from the assets of the Trust, was not sufficient to permit those assets to be treated as the property of Dr Spry. Her Honour was not prepared to entertain, at that late stage, submissions that Pt VIIIAA of the Family Law Act could be invoked. Her Honour considered that if, after 1983, the Trust assets could not be regarded as the property of Dr Spry, there would be no point in making the orders under s 106B setting aside the 1998 Instrument and the 18 January 2002 Dispositions. Nor was there any utility in setting aside the 1998 Instrument insofar as it removed Mrs Spry as a capital beneficiary. Because of the divorce, she could no longer be a beneficiary. "The correct approach would have been for his Honour to treat the assets of the children's trust [sic] as a financial resource of the husband. This approach would have been available in light of earlier authorities, given the husband's control as trustee and the indirect benefits he had received from the trusts such as housing and payment of his children's educational expenses. Such an outcome would have necessitated some adjustment in favour of the wife on account of the s 75(2) matters." The issues in the appeals The notices of appeal raised the same issues. In summary, Dr Spry and the trustees of the Children's Trusts asserted: The 1983 Deed could not be revoked or cancelled. The Trust assets therefore could not be treated as Dr Spry's property. (2007) 212 FLR 362 at 400 [142]. The trustee of the Trust could not be compelled or empowered by the Family Court to add Dr Spry as a beneficiary or otherwise confer upon him beneficial interests or rights. In Mrs Spry's notices of contention, she argued: The assets of the Trust or property returned to it, pursuant to orders under s 106B, should have been treated as property of the parties to the marriage or either of them. The power of variation within cl 2 of the 1981 Instrument was wide enough to be exercised lawfully within its terms or pursuant to orders authorised by the Family Law Act by the husband as settlor varying the terms of the Trust so that the beneficiaries within cl 4 would include all issue of Charles Chambers Fowell Spry irrespective of whether they had sought to release, disclaim or abandon any beneficial interest or rights under the Trust and all persons presently or previously married to such issue. Amended notices of contention and applications for special leave to cross-appeal In the course of oral submissions to this Court, counsel for Mrs Spry invoked s 85A as a basis for orders sought in the second amended application. Section 85A had not been raised in Mrs Spry's notices of contention. An amendment to those notices was required. To the extent that a new order was sought, in each matter an application was required for special leave to cross- appeal and a draft notice of cross-appeal to be filed. Directions were given to allow amended notices of contention to be filed and served together with applications for special leave to cross-appeal. Directions were also made as to written submissions. In her amended notices of contention Mrs Spry asserted that the Full Court ought to have found that s 79 and/or s 85A of the Family Law Act enabled and permitted Dr Spry to deal with the assets of the Trust and the Children's Trusts so as to comply with all four of the orders made by Strickland J. Draft notices of cross-appeal in both matters were also filed by Mrs Spry after the hearing along with submissions in support of the grant of special leave. The single ground stated in each draft notice was: That s 79 and/or s 85A of the Family Law Act 1975 (Cth) ('the Act') authorise Dr Spry to appoint to Mrs Spry, or himself, monies from the ICF Spry trust, including realising the corpus or income of the ICF Spry trust, so as [to] provide for a just and equitable settlement on Mrs Spry in respect of the settlements made in relation to the marriage, including varying the ICF Spry Trust if necessary." The Trust Dr Spry created the Trust. He was the settlor. He so designated himself in cl 1 of the 1981 Instrument. He appointed himself as trustee. He assumed the power to appoint and remove further trustees. He did so, according to the terms of the 1981 Instrument, in his personal capacity. The power to vary the Trust he conferred upon himself personally as "the settlor". That power was not constrained by fiduciary duties3. It was, however, limited so as not to authorise an increase in his rights to the beneficial enjoyment of the fund. Under the terms of the Trust neither he nor any of the other "beneficiaries" had any rights to the beneficial enjoyment of the fund or any portion of it except upon his decision as trustee to apply all or any of it to himself or one or more of the other beneficiaries pursuant to cl 6. While the character of the Trust remained unchanged and Dr Spry remained as trustee there was, as counsel for Mrs Spry submitted, no beneficial interest in possession in any of the objects of the Trust including Dr Spry. The Trust fell within the genus of "discretionary trust", a term which has "no fixed meaning and is used to describe particular features of certain express trusts"4. Absent an obligation on the part of the trustee to apply any of the income or capital of the Trust to any of the beneficiaries at any time it answered the description "purely discretionary"5 or "non-exhaustive"6. The class of beneficiaries was "open". It extended to the spouses from time to time of the issue of Charles Chambers Fowell Spry and further issue of that issue, including persons unborn when the Trust was created, and their spouses from time to time. As sole trustee of the Trust Dr Spry had the legal title. He was the only person entitled in possession to the assets. His power as trustee to apply the income or capital under the terms of the Trust was not a species of property according to the general law7 but his legal title was. 3 On the other hand a trustee exercising such a power would owe a fiduciary duty to the beneficiaries: Lock v Westpac Banking Corporation (1991) 25 NSWLR 593 at 609 per Waddell CJ in Eq. 4 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 234 [8]; [1998] HCA 4. 5 Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 at 552. 6 Thomas and Hudson, The Law of Trusts, (2004) at 184. 7 O'Grady v Wilmot [1916] 2 AC 231 at 270. Absent a specific application of Trust capital or income to one of the objects of the Trust, there was no equitable interest in its assets held by anyone. There did not need to be. In Glenn v Federal Commissioner of Land Tax8 Griffith CJ declined to accept "the assumption that whenever the legal estate in land is vested in a trustee there must be some person other than the trustee entitled to it in equity"9. The Privy Council, in similar vein, pointed out in Commissioner of Stamp Duties (Q) v Livingston10 that the law does not require for all purposes and at every moment in time, the separate existence of two different kinds of estate or interest in property, the legal and the equitable. In CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic)11 the Court described the observation of Griffith CJ in Glenn as "a prescient rejection of a 'dogma' that, where ownership is vested in a trustee, equitable ownership must necessarily be vested in someone else because it is an essential attribute of a trust that it confers upon individuals a complex of beneficial legal relations which may be called ownership"12. Against that background it is necessary to consider the question at the heart of the present appeals, namely whether Dr Spry or his wife or both of them had, prior to 1998, interests in or in relation to the assets of the Trust that could answer the description of "property of the parties to the marriage" in s 79(1). The assets of the Trust as property The word "property" is used in different ways in different statutory contexts. There have been, for example, many cases in which the question has arisen whether and when the objects of a discretionary trust have "property" interests for the purpose of revenue legislation13. Section 79(1) of the Family Law Act and the non-exhaustive definition of "property" in s 4(1) of the Act had their antecedent in s 86(1) of the Matrimonial (1915) 20 CLR 490; [1915] HCA 57. (1915) 20 CLR 490 at 497. 10 (1964) 112 CLR 12 at 22; [1965] AC 694 at 712-713. 11 (2005) 224 CLR 98; [2005] HCA 53. 12 (2005) 224 CLR 98 at 112 [25]. 13 See generally Hardingham and Baxt, Discretionary Trusts, 2nd ed (1984) at 134- Causes Act 1959 (Cth). The collocation "property to which the parties are, or either of them is, entitled (whether in possession or reversion)" can be traced back to its gendered ancestor in s 45 of the Matrimonial Causes Act 1857 (UK) which applied to the property of an adulterous wife. Section 79 confers a wide discretionary power to vary the legal interests in any property of the parties to a marriage or either of them and to make orders for a settlement of property in substitution for any interest in the property. It is subject to the limitation that it validly applies only with respect to a claim based on circumstances arising out of the marriage relationship14. The word "property", appearing in the section, construed by reference to its ancestry in matrimonial causes statutes, has been given a wide meaning. In 1977 the Full Court of the "The word has also been comprehensively defined in statutes both State and Imperial relating to married women's property. We do not propose to instance those definitions here, but in Jones v Skinner16 Langdale MR said: 'Property is the most comprehensive of all terms which can be used inasmuch as it is indicative and descriptive of every possible interest which the party can have.' This is a definition which commends itself to us as being descriptive of the nature of the concept of 'property' to which it is intended that the Family Law Act 1975 should relate and over which the Family Court of Australia should have jurisdiction to intervene when disputes arise in relation to the property of spouses as between themselves or when the court is asked to exercise the powers conferred upon it under Pt VIII or its injunctive powers under s 114 so far as they are expressed to relate to a property of the party to a marriage." In Kelly (No 2)17 the Full Court of the Family Court did not think the word wide enough to cover the assets of a trust in which the relevant party to the marriage was neither settlor nor appointor nor beneficiary and over which he or she had no control18. The Court was concerned, inter alia, with the assets of a family company and family trust which were under the "de facto control" of the 14 Dougherty v Dougherty (1987) 163 CLR 278 at 286 per Mason CJ, Wilson and Dawson JJ; [1987] HCA 33. 15 In the Marriage of Duff (1977) 15 ALR 476 at 484. 16 (1835) 5 LJ Ch 87 at 90. 17 In the Marriage of Kelly (No 2) (1981) 7 Fam LR 762. 18 (1981) 7 Fam LR 762 at 764, 768. husband. The assets could be taken into consideration as a "financial resource" of the husband within the meaning of s 75(2)(b) of the Family Law Act. The trust assets, however, did not fall within the description of the "property" of the husband for the purposes of s 79 because "the husband could not assert any legal or equitable right in respect of them"19. That was a case in which the husband had neither a legal nor a beneficial interest. In Ashton20 a husband who had been the trustee of a family trust replaced himself as trustee with a company but continued as sole appointor. He was not a beneficiary but received income from the trust. It was conceded that he was "in full control of the assets of the trust"21. The evidence made clear that he applied the assets and income from them as he wished and for his own benefit22. The Full Court held that "[n]o person other than the husband has any real interest in the property or income of the trust except at the will of the husband"23. Special leave to appeal from that decision was refused by the High Court on 5 December 1986 (Gibbs CJ, Wilson and Brennan JJ)24. Where the husband was not entitled to be a trustee but was sole appointor and also a beneficiary, the Full Court of the Family Court in Goodwin upheld a finding that "the trust property was, in reality, the property of the husband"25 and in so doing applied as a statement of principle the perhaps unremarkable "[T]he question whether the property of the trust is, in reality, the property of the parties or one of them … is a matter dependent upon the facts and circumstances of each particular case including the terms of the relevant trust deed." 19 (1981) 7 Fam LR 762 at 768. 20 In the Marriage of Ashton (1986) 11 Fam LR 457. 21 (1986) 11 Fam LR 457 at 461. 22 (1986) 11 Fam LR 457 at 461. 23 (1986) 11 Fam LR 457 at 462. 24 See also In Marriage of Davidson (No 2) (1990) 101 FLR 373 for a similar conclusion on a similar trust deed. 25 In Marriage of Goodwin (1990) 101 FLR 386 at 392. 26 (1990) 101 FLR 386 at 392. In that case the husband had the sole power of appointment of the trustee which was a creature under his control and he was a beneficiary to whom the trustee could make payments exclusive of other beneficiaries as the husband saw fit27. Although a settlor is taken to transfer to the trustee the property in respect of which he or she creates a trust, there may be retained a right to take a benefit under it. Prior to the 1983 Deed Dr Spry as sole trustee had the "absolute discretion" to apply all or any part of the income and/or capital of the fund to himself as one of the "beneficiaries". On the basis of that power, and consistently with authority including the decisions of the Full Court referred to above, the assets of the Trust would properly have been regarded as his property as a party to the marriage for the purposes of s 79. But the coexistence of the power together with Dr Spry's status as a beneficiary does not define a necessary condition of that conclusion. By the 1983 Deed Dr Spry removed himself as a beneficiary of the Trust. In terms the 1983 Deed provided that he "releases and abandons all and any beneficial interest … in the trust fund or income". This left him, however, in possession of the assets, with the legal title to them and to the income which they generated unless and until he should decide to apply any of the capital or income to any of the continuing beneficiaries. The question remains whether the Trust fund was part of the "property of the parties to the marriage" at that time within the meaning of s 79. Counsel for Mrs Spry submitted that when the primary judge determined the proceedings the assets of the Trust were the property of a party to the marriage as Dr Spry was the only person entitled in possession to them. On that basis the Family Court had the power to make the order it did. No object in the Trust had any fixed or vested entitlement. Dr Spry was not obliged to distribute to anyone. The default distribution (cl 7) gave male beneficiaries other than Dr Spry no more than a contingent remainder. None had a vested interest subject to divestiture. The application of s 79, as a matter of construction, to the Trust assets was said to be supported by a number of considerations. Among these was the "true character" of the Trust as a vehicle for "Dr and Mrs Spry and their children". In response, counsel for Dr Spry submitted that his legal title, absent any beneficial interest, did not justify treating the Trust property as his own. A policy question was said to be raised. It would be "inappropriate" for the Court to treat the assets of a trust as a trustee's property where the trustee had no interest under the trust. The Court was invited to consider the implications of Mrs Spry's submissions for the case of a trustee with no personal relationship to 27 (1990) 101 FLR 386 at 392. the beneficial objects of the trust. The Family Court, it was said, must take the property of a party to the marriage as it finds it. It cannot ignore the interests of third parties nor the existence of conditions or covenants limiting the rights of the party who owns the property. In this connection reference was made to Ascot Investments Pty Ltd v Harper28. In my opinion the argument advanced on behalf of Mrs Spry should be accepted save that it is the Trust assets, coupled with the trustee's power, prior to the 1998 Instrument, to appoint them to her and her equitable right to due consideration, that should be regarded as the relevant property. It should be accepted that, in the unusual circumstances of this case and but for the 1998 Instrument and the 18 January 2002 Dispositions, s 79 would have had effective application to the Trust assets. Dr Spry was the sole trustee of a discretionary family trust and the person with the only interest in those assets as well as the holder of a power, inter alia, to appoint them entirely to his wife. This is perhaps not quite the same as the second argument advanced on behalf of Mrs Spry which is accepted by Gummow and Hayne JJ in their joint judgment. But the distinction may not amount to a difference. Even on the second argument the power of appointment and the right to due consideration, absent a legal estate upon which they can operate, are meaningless. The terms "dry legal title" or "dry legal estate or interest" have sometimes been used to describe the legal estate in property held on trust29. The term describes a legal title divorced from any powers or duties. Under the general law such a title could not be treated as property of the trustee. But where a statute is involved the matter is one of interpretation. Even under the general law, where the legal title is associated with substantial powers or duties, the "dry" metaphor may not be appropriate30. The word "property" in s 79 is to be read as part of the collocation "property of the parties to the marriage". It is to be read widely and conformably with the purposes of the Family Law Act. In the case of a non-exhaustive discretionary trust with an open class of beneficiaries, there is no obligation to apply the assets or income of the trust to anyone. Their application may serve a 28 (1981) 148 CLR 337 at 354 per Gibbs J; [1981] HCA 1. 29 Molloy v Federal Commissioner of Land Tax (1937) 58 CLR 352 at 360; [1937] HCA 62; Burke v Dawes (1938) 59 CLR 1 at 21; [1938] HCA 6; Perpetual Trustee Co Ltd v Commissioner of Stamp Duties (NSW) (1941) 64 CLR 492 at 510; [1941] HCA 15; Re Australian Elizabethan Theatre Trust (1991) 30 FCR 491 at 501. 30 Minnesota v United States 305 US 382 at 386 fn 1 (1939). wide range of purposes. In the present case, prior to the 1998 Instrument those purposes could have included the maintenance or enrichment of Mrs Spry. Where property is held under such a trust by a party to a marriage and the property has been acquired by or through the efforts of that party or his or her spouse, whether before or during the marriage, it does not, in my opinion, necessarily lose its character as "property of the parties to the marriage" because the party has declared a trust of which he or she is trustee and can, under the terms of that trust, give the property away to other family or extended family members at his or her discretion. For so long as Dr Spry retained the legal title to the Trust fund coupled with the power to appoint the whole of the fund to his wife and her equitable right, it remained, in my opinion, property of the parties to the marriage for the purposes of the power conferred on the Family Court by s 79. The assets would have been unarguably property of the marriage absent subjection to the Trust. An exercise of the power under s 79 requiring the application of the assets of the Trust in whole or in part in favour of Mrs Spry would, prior to the 1998 Instrument, have been consistent with the proper exercise of Dr Spry's powers as trustee and would have involved no breach by him of his duty to the other beneficiaries. As to the position of the other beneficiaries, it has long been accepted that in some circumstances the Family Court has power to make an order which will indirectly affect the position of a third party. That acceptance, which predated the enactment of Pt VIIIAA of the Family Law Act, is reflected in the judgment of Gibbs J in Ascot Investments Pty Ltd v Harper31. That case concerned the validity of an order in favour of a wife made by the Family Court requiring directors of a company not completely controlled by the husband to register a transfer of shares into her name. It is in that context that the passage relied upon by Dr Spry is to be understood32: "Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it." 31 (1981) 148 CLR 337 at 354. 32 (1981) 148 CLR 337 at 355 per Gibbs J. The Articles of the company in that case gave to its directors a discretion to register or refuse to register a transfer of any shares in the company. The Family Court was found to have no power to direct them as to the manner in which their discretion should be exercised. Giving full effect to the generality of the passage quoted from the judgment of Gibbs J, the case does not stand against the proposition that s 79 would apply in the circumstances of this case where the only property interests are those of the trustee who is a party to the marriage, and where no other beneficiary has any legal or equitable interest apart from a right to due consideration and administration. That, of course, is a right which is a relevant consideration informing the exercise of the Court's discretion as is any indirect effect upon a third party's rights: R v Dovey; Ex parte Ross33. The preceding conclusion does not involve some general extension of s 79 which would require that it be hedged about with protective discretions of uncertain application to prevent its intrusion into trust arrangements affecting assets foreign or extraneous to those acquired by the parties to the marriage in their own right. So if the husband were trustee of a charitable trust or executor of the will of a friend or client the mere legal title to the assets of such trusts, because of their origins and character, could not be regarded as part of the husband's property as a party to the marriage within the meaning of the Family Law Act. Importantly, in such a trust there could be no power of appointment to his wife and no corresponding equitable right enjoyed by her. The question of a trust involving a combination of purposes and family and extraneous assets does not arise. The characterisation of the assets of the Trust, coupled with Dr Spry's power to appoint them to his wife and her equitable right to due consideration, as property of the parties to the marriage is supported by particular factors. It is supported by his legal title to the assets, the origins of their greater part as property acquired during the marriage, the absence of any equitable interest in them in any other party, the absence of any obligation on his part to apply all or any of the assets to any beneficiary and the contingent character of the interests of those who might be entitled to take upon a default distribution at the distribution date. I agree with Gummow and Hayne JJ that the conclusion reached by the primary judge, that Dr Spry could have applied the whole or part of the Trust assets to or for his own benefit, was inconclusive of the outcome. It is not necessary for me to express a view on whether the primary judge's finding in that respect was erroneous. The conclusion I have reached is independent of any 33 (1979) 141 CLR 526 at 534 per Gibbs J, Barwick CJ and Mason J agreeing; [1979] HCA 14. question whether Dr Spry could have reinstated himself at any time as a beneficiary of the Trust. I agree also with Gummow and Hayne JJ that the reference in s 79 to "the parties to the marriage or either of them" includes a reference to a marriage terminated by divorce at a time before the court makes an order under that section. As their Honours point out, the Family Court, when it is just and equitable to do so, can make orders in property settlement proceedings as if changes to property rights otherwise effected by the divorce had not occurred. In light of the trial judge's findings about the purposes of the 1998 Instrument and the 18 January 2002 Dispositions, the preceding conclusion is sufficient to support the trial judge's orders and the dismissal of these appeals. They are also supported by a consideration of Mrs Spry's equitable right to due consideration as an object of the Trust prior to the 1998 Instrument and, for the reasons enunciated by Gummow and Hayne JJ, by consideration of that right in conjunction with Dr Spry's power as trustee to apply the assets or income of the Trust to any of the beneficiaries in his discretion. It is desirable to say something further specifically about that. The rights to due consideration and due administration as "property" Each of the beneficiaries had the right to compel the trustee to consider whether or not to make a distribution to him or her and a right to the proper administration of the Trust34. In Gartside v Inland Revenue Commissioners, Lord Wilberforce put it thus35: "No doubt in a certain sense a beneficiary under a discretionary trust has an 'interest': the nature of it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity. Certainly that is so, and when it is said that he has a right to have the trustees exercise their discretion 'fairly' or 'reasonably' or 'properly' that indicates clearly enough that some objective consideration (not stated explicitly in declaring the discretionary trust, but latent in it) must be applied by the trustees and that the right is more than a mere spes. But that does not mean that he has an interest which is capable of being taxed by reference to its extent in the trust fund's income: it may be a right, with some degree of concreteness or solidity, one which attracts the 34 Gartside v Inland Revenue Commissioners [1968] AC 553 at 617. 35 [1968] AC 553 at 617-618; see also Sainsbury v Inland Revenue Commissioners [1970] Ch 712 at 725. protection of a court of equity, yet it may still lack the necessary quality of definable extent which must exist before it can be taxed." The rights to consideration and to due administration are in the nature of equitable choses in action. There has been considerable judicial discussion about the nature of a beneficiary's right to due administration in the case of the residuary legatee of an unadministered deceased estate and members of superannuation funds whose benefits have not vested. The residuary legatee has an equitable right36, "a chose in action, capable of being invoked for any purpose connected with the proper administration of [the] estate"37. Such a right has been treated as property for the purposes of the Bankruptcy Act 1966 (Cth)38. In the case of a residuary legatee the right to due administration is connected to a real expectancy of an interest in the property. The same is true for the members of a superannuation fund although vesting of a benefit may be many years in the future. However, the right to due administration taken by itself in relation to a superannuation fund was described by the Full Court of the Family Court in 1986, in a brief consideration of the question, as "an empty present right of no relevance"39. In Evans40 the majority in the Full Court of the Family Court found that consideration of the right to due administration of a superannuation fund offered "no solution as to how realistically to make practical orders under s 79 about that 'property' until it is in fact received"41. The case concerned a future entitlement to benefits from a superannuation fund. Nygh J drew the analogy between the unvested interest in a superannuation fund protected by a right of due administration and "the interest which a potential beneficiary has in the proper administration of a trust"42. 36 Livingston v Commissioner of Stamp Duties (Q) (1960) 107 CLR 411 at 444 per Fullagar J; [1960] HCA 94. 37 Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12 at 27; [1965] AC 694 at 717. 38 Official Receiver in Bankruptcy v Schultz (1990) 170 CLR 306 at 314. 39 In the Marriage of Hauff (1986) 10 Fam LR 1076 at 1081. 40 In Marriage of Evans (1991) 104 FLR 130. 41 (1991) 104 FLR 130 at 139. 42 (1991) 104 FLR 130 at 144. The beneficiary of a non-exhaustive discretionary trust who does not control the trustee directly or indirectly has a right to due consideration and to due administration of the trust but it is difficult to value those rights when the beneficiary has no present entitlement and may never have any entitlement to any part of the income or capital of the trust. Gummow and Hayne JJ, in their joint reasons, characterise Mrs Spry's right with respect to the due administration of the Trust as part of her property for the purposes of the Family Law Act. I respectfully agree with their Honours that prior to the 1998 Instrument the equitable right to due administration of the Trust fund could be taken into account as part of the property of Mrs Spry as a party to the marriage. So too could her equitable entitlement to due consideration in relation to the application of the income and capital. In so agreeing, however, I acknowledge, consistently with the observations of the Full Court in Hauff and Evans, that it is difficult to put a value on either of these rights though a valuation might not be beyond the actuarial arts in relation to the right to due consideration. Dr Spry's power as trustee to apply assets or income of the Trust to Mrs Spry prior to the 1998 Instrument was, as pointed out by Gummow and Hayne JJ, able to be treated for the purposes of the Family Law Act as a species of property held by him as a party to the marriage, albeit subject to the fiduciary duty to consider all beneficiaries. This is so even though it may not be property according to the general law. So characterised for the purposes of the Family Law Act it had an attribute in common with the legal estate he had in the assets as trustee. He could not apply them for his own benefit but that did not take them out of the realm of property of a party to the marriage for the purposes of s 79. Insofar as Gummow and Hayne JJ rely upon the property comprised by Dr Spry's power as trustee and Mrs Spry's equitable rights prior to 1998, I agree that these property rights were capable of providing a basis for the orders which Strickland J made. I do so, as already indicated, by considering that power and the equitable rights, in conjunction with Dr Spry's legal title to the Trust assets, without which the power and the rights were meaningless. Mrs Spry's right to due consideration as an object of the Trust could also be taken into account in determining whether it was just and equitable to make an order under s 79 on the basis that the assets of the Trust were property of the marriage. As noted in the preceding section the equitable entitlement of the children and other existing beneficiaries to due consideration could also be taken into account in making that judgment. There is no reason to suggest that his Honour did not do so appropriately. Conclusions The assets of the Trust, coupled with Dr Spry's power to appoint them to his wife and her right to due consideration, were, until the 1998 Instrument, the property of the parties to the marriage for the purposes of s 79. The fact that Dr Spry removed himself as a beneficiary by the 1983 Deed does not affect that conclusion. Because the 1998 Instrument effectively disposed of Mrs Spry's equitable right to be considered in the application of the Trust fund, and having regard to the trial judge's conclusions about the purpose of the instrument, the order setting it aside was an appropriate exercise of the Family Court's power under s 106B. Mrs Spry's equitable right could then be considered as part of the property of the parties to the marriage. The setting aside of the 18 January 2002 Dispositions was also appropriate. The ancillary order that Dr Spry pay his wife the sum of $2,182,302 was appropriate for the reasons stated by Gummow and Hayne JJ in their joint judgment. It is not necessary in the light of the preceding conclusions to consider whether s 85A has any application. I am, however, inclined to doubt that s 79 and s 85A have mutually exclusive areas of operation notwithstanding the concerns that led to the enactment of s 85A. I would dismiss the applications for special leave to cross-appeal but with no order as to the costs of those applications. I would dismiss the appeals with costs in favour of Mrs Spry in each case. There should be no order for costs in favour of the other respondents. GUMMOW AND HAYNE JJ. These appeals from a decision of the Full Court of the Family Court of Australia (Bryant CJ and Warnick J, Finn J dissenting)43 were heard together. The Full Court dismissed an appeal and cross-appeal against orders made on 30 November 2005 by a judge of the Family Court (Strickland J) in litigation the parties to which, in addition to the former spouses, included their children and the trustees of certain trusts. The matrimonial relationship and the course of the proceedings The husband was born in 1940 and the wife in 1956. They married in 1978. At that time the husband was in practice at the Bar of Victoria and he was appointed Queen's Counsel in 1979. There were four children of the marriage, Elizabeth (born 1980), Catharine (born 1982), Caroline (born 1984) and The husband retired from legal practice in 1998. After various matrimonial difficulties over several years, the parties separated on 30 October 2001 and the husband left the matrimonial home. In December 2002 the wife filed her divorce application in the Federal Magistrates Court of Australia. This was a "matrimonial cause" within the meaning of par (a)(i) of the definition of that term in s 4(1) of the Family Law Act 1975 (Cth) ("the Act") and jurisdiction to entertain it was conferred upon that Court by s 39(1A) and s 39(5AA) of the Act. A decree nisi was granted on 16 January 2003 and it became absolute on 17 February 2003. Whilst the divorce proceedings were pending, on 19 April 2002 the wife applied to the Family Court for an order that the husband pay to her: "by way of lump sum maintenance and property settlement such sum as the Court shall determine to be just and equitable". The wife sought orders on the basis that the assets of the parties to the marriage be divided 60 per cent to the wife and 40 per cent to the husband. The Family Court application was a "matrimonial cause" within the meaning of par (ca) of the definition of that term in s 4(1) of the Act, being "proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them, being proceedings ... arising out of the marital relationship ... [and also] in relation to concurrent, pending or completed divorce ... proceedings between those parties". Jurisdiction with respect to the matrimonial cause was conferred upon the Family Court by s 39(1)(a) of the Act. 43 Reported under the title Stephens v Stephens (2007) 212 FLR 362. In many provisions of the Act reference is made to the "court"; in relation to any proceedings this means a court exercising jurisdiction in those proceedings by virtue of the Act, in particular, by one or more of the operations of s 3944. "With respect to the property of the parties to the marriage" The phrase in par (ca) "with respect to the property of the parties to the marriage or either of them" should be read in a fashion which advances rather than constrains the subject, scope and purpose of the legislation. In particular, as statements by this Court45 illustrate, the term "property" is not a term of art with one specific and precise meaning. It is always necessary to pay close attention to any statutory context in which the term is used46. In particular it is, of course, necessary to have regard to the subject matter, scope and purpose of the relevant statute. The questions that arise in these matters raise a dispute about construction of the Act. That dispute is not resolved by considering only the ways in which the term "property" may be used in relation to trusts of the kinds described as "discretionary trusts". As Binnie J, writing for the Supreme Court of Canada, has recently said47 (albeit in a different statutory context): "The task is to interpret [the relevant statutes] in a purposeful way having regard 'to their entire context, in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament'48." And as Binnie J also said, because an interest (in that case, a fishing licence)49: 44 See the definition of "court" in s 4(1). 45 These include Yanner v Eaton (1999) 201 CLR 351 at 365-367 [17]-[19], 388-389 [85]-[86]; [1999] HCA 53, 69; Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at 577 [135]; [2004] HCA 56. 46 Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 509 at 518-519 [29]; Saulnier v Royal Bank of Canada 2008 SCC 58 47 Saulnier v Royal Bank of Canada 2008 SCC 58 at [16]. 48 Sullivan, Sullivan and Driedger on the Construction of Statutes, 4th ed (2002) at 1. 49 Saulnier 2008 SCC 58 at [16]. "may not qualify as 'property' for the general purposes of the common law does not mean that it is also excluded from the reach of the statutes. For particular purposes Parliament can and does create its own lexicon." Section 4(1) of the Act provides: "property, in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion." Shortly after the commencement of the Act, the Full Court in In the Marriage of Duff50 considered that definition and said that an understanding of the term "property" in a comprehensive sense: "commends itself to us as being descriptive of the nature of the concept of 'property' to which it is intended that [the Act] should relate and over which the Family Court of Australia should have jurisdiction to intervene when disputes arise in relation to the property of spouses as between themselves or when the court is asked to exercise the powers conferred upon it under Pt VIII or its injunctive powers under s 114 so far as they are expressed to relate to a property of the party to a marriage. We are of the view that the intention of s 79 is to enable the court to take into account and assess all the property of the parties upon being asked by either of them to make an order altering the interests of the parties in the property. We are further of the view that when s 4 defines property as being 'property to which the parties are entitled whether in possession or reversion' the words 'whether in possession or reversion' are not intended to indicate that the kind of property with which this Act can deal must be property to which a party is entitled in possession or reversion but rather the phrase 'whether in possession or reversion' is, as a matter of grammar, an adverbial phrase which qualifies the word 'entitled'. The phrase means that the entitlement to the property may be either in possession or reversion, ie the phrase is descriptive of the entitlement and not of the property and it removes any fetter upon the court in dealing with property under this Act by limiting the nature of the entitlement thereto to entitlement in possession." Subsequently, in In the Marriage of Kelly (No 2)51, the Full Court remarked that, nevertheless, what had been said in Duff as to the definition of 50 (1977) 29 FLR 46 at 55-56. 51 (1981) 7 Fam LR 762 at 768. "property" was not broad enough to cover the assets held by a family company or held by trustees of a discretionary trust. That may be accepted but, as will appear, will not be a sufficient answer to issues arising on these appeals. Part VIII of the Act Part VIII of the Act (ss 71-90) is headed "Property, spousal maintenance and maintenance agreements"52. The reference in the application by the wife to payment by way of property settlement of a sum determined to be just and equitable attracted the operation of s 79 of the Act. So far as material s 79(1) states: "In property settlement proceedings, the court may make such order as it considers appropriate: in the case of proceedings with respect to the property of the parties to the marriage or either of them – altering the interests of the parties to the marriage in the property; or including: an order for a settlement of property in substitution for any interest in the property; and an order requiring: either or both of the parties to the marriage; or to make, for the benefit of either or both of the parties to the marriage or a child of the marriage, such settlement or transfer of property as the court determines." (emphasis added) The reference in s 79(1) to "the parties to the marriage" is given by s 4(2) an application in a situation where, as in the present case, the marriage is dissolved before the court makes its order in property settlement proceedings. 52 With effect 17 December 2004, the Family Law Amendment Act 2003 (Cth), Sched 6, supplemented Pt VIII by adding Pt VIIIAA (ss 90AA-90AK). The new Part is headed "Orders and injunctions binding third parties". No reliance was placed upon Pt VIIIAA in submissions to this Court. The effect of s 4(2) is that the phrase in s 79(1) "the parties to the marriage" includes a reference to a person who was a party to a marriage which has been terminated by divorce at a time before the court makes its order under s 79(1). Section 79(2) provides that "[t]he court shall not make an order under this section unless it is satisfied that, in all the circumstances, it is just and equitable to make the order". The phrase "just and equitable" appears to have its origins in the principles of equity which were developed with respect to the dissolution of partnerships, where they remained general words which were not to be reduced to the sum of particular instances53. However, in considering what order if any should be made under s 79 in property settlement proceedings the court is obliged by s 79(4) to take into account various matters detailed in pars (a)-(g). In particular, par (a) requires the court to take into account "the financial contribution made directly or indirectly by or on behalf of a party to the marriage or a child of the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage or either of them, or otherwise in relation that last-mentioned property has, since the making of the contribution, ceased to be the property of the parties to the marriage or either of them". last-mentioned property, whether or not to any of that Paragraph (e) of s 79(4) directs consideration to "the matters referred to in subsection 75(2) so far as they are relevant"; par (b) of s 75(2) refers to "the income, property and financial resources of each of the parties". The term "financial resources" is apt to include more than assets which answer the definition of "property" to which reference has been made. Section 81 enjoins the court, in proceedings under Pt VIII of the Act, including s 79, to "as far as practicable, make such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them". In exercising its powers under Pt VIII of the Act, the court is authorised, among the other matters spelled out in pars (b)-(l) of s 80(1), to "order payment of a lump sum, whether in one amount or by instalments" (s 80(1)(a)). Additional powers conferred by other paragraphs of s 80(1) are mentioned below. Section 79 also is supplemented by s 106B. Section 106B appears in Pt XIII of the Act (ss 105-109B) which is headed "Enforcement of decrees". At all material times54 s 106B(1) and (3) stated: 53 Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 at 374-375 per Lord Wilberforce. 54 Section 106B was introduced by the Family Law Amendment Act 2000 (Cth) and was substantially amended by the Family Law Amendment Act 2005 (Cth), (Footnote continues on next page) In proceedings under this Act, the court may set aside or restrain the making of an instrument or disposition by or on behalf of, or by direction or in the interest of, a party, which is made or proposed to be made to defeat an existing or anticipated order in those proceedings or which, irrespective of intention, is likely to defeat any such order. The court must have regard to the interests of, and shall make any order proper for the protection of, a bona fide purchaser or other person interested." The orders of the primary judge The orders of the primary judge which are principally in contention are orders numbered 2 and 3 and expressed to be made pursuant to s 106B ("the s 106B orders") and an order ("order 4") that on or before 28 February 2006 the husband pay the wife the sum of $2,182,302. It will be noted that order 4 mandates no variation in the terms of any trust instrument. On its face order 4 may appear not to mandate a "settlement" of property in substitution for any interest in the property of the parties to the marriage or either of them and so not to amount to an exercise of powers conferred by pars (c) and (d) of s 79(1). There was no order for a settlement in the conveyancing sense of a disposition by deed vesting property in trustees to be held for a succession of interests55. Rather, order 4 requires the payment of money by the husband but does not attach that obligation to any fund or other source of payment. In 1983 in Mullane v Mullane it was said that when s 79 refers to a settlement of property this is in a sense "which is closely related to the meaning which the expression bears in the law of real and personal property"56. But s 79 was extensively amended thereafter57 and always had to be read with the Sched 1, items 20 and 21, but with no application to dispositions before 3 August 55 Brooks v Brooks [1996] AC 375 at 391. 56 (1983) 158 CLR 436 at 445; [1983] HCA 4. 57 Particularly by the Family Law Amendment Act 1983 (Cth) ("the 1983 Act"). range of powers conferred by s 80(1). More recently, in Brooks v Brooks58, Lord Nicholls of Birkenhead emphasised that in English law "settlement" is not a term of art, with one specific precise meaning, and that its meaning depends upon the context, particularly any statutory context, in which it is used59. Accordingly, some further reference to legislative history is of assistance here. A power with some similarities to s 79 had been included in s 86(1) of the Matrimonial Causes Act 1959 (Cth) ("the 1959 Act")60. Of that provision in Smee v Smee61 Sugerman J said: "The origins of legislation of the type of s 86(1) go back to s 45 of the original Matrimonial Causes Act 1857 (Eng), which gave the court power, when it pronounced a decree for divorce or judicial separation on the ground of the wife's adultery, to order such settlement of her property or of part thereof as it thought reasonable for the benefit of the innocent party and the children of the marriage. To this power to order a settlement of the wife's free property, s 5 of the Matrimonial Causes Act 1859 (Eng), added a power to vary existing ante-nuptial and post-nuptial settlements (cf [the 1959 Act], s 86(2))." In Sanders v Sanders62 Windeyer J said he agreed with what had been said by Sugerman J in this passage, but cautioned against the "colouring" of s 86 of 58 [1996] AC 375 at 391-392. See also the remarks of Mason J in R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 344; [1982] HCA 69. 59 [1996] AC 375 at 391. 60 Section 86(1) and (2) read: "(1) The court may, in proceedings under this Act, by order require the parties to the marriage, or either of them, to make, for the benefit of all or any of the parties to, and the children of, the marriage, such a settlement of property to which the parties are, or either of them is, entitled (whether in possession or reversion) as the court considers just and equitable in the circumstances of the case. (2) The court may, in proceedings under this Act, make such order as the court considers just and equitable with respect to the application for the benefit of all or any of the parties to, and the children of, the marriage of the whole or part of property dealt with by ante-nuptial or post-nuptial settlements on the parties to the marriage, or either of them." 61 (1965) 7 FLR 321 at 325. the 1959 Act by history. In particular, as Barwick CJ stressed in Sanders63, in the exercise of the powers conferred by the modern legislation there is no occasion for elements of punishment or deprivation of a party. However, what has been carried forward is what, with reference to Dewar v Dewar64, Windeyer J said65 was the "very wide denotation" given in this context to the word "settlement". In Dewar66 Dixon CJ, Kitto and Menzies JJ made reference to the empowering of the court: "to inquire into post-nuptial and ante-nuptial dispositions of property in favour of one or other or both of the parties to the marriage which because of the dissolution of that marriage should be reconsidered and to empower the Court to make orders for what appears in the changed circumstances a just application of the property". The primary judge also made orders (numbered 8 and 9 respectively) that each party "do all such acts and things and sign all such documents as may be necessary to give effect to the terms of this order", and that each party have "[l]iberty ... to apply as to consequential matters". Reservation of liberty to apply is directed to questions of machinery which may arise from the other orders which the court in question has made67. Orders 8 and 9 reflect provision made by s 80(1) of the Act, in particular by pars (d) and (k) which state that the court may: "(d) order that any necessary deed or instrument be executed and that such documents of title be produced or such other things be done as are necessary to enable an order to be carried out effectively or to provide security for the due performance of an order; 62 (1967) 116 CLR 366 at 380; [1967] HCA 33. 63 (1967) 116 CLR 366 at 374-375. 64 (1960) 106 CLR 170; [1960] HCA 79. 65 (1967) 116 CLR 366 at 382. 66 (1960) 106 CLR 170 at 174. See also Lansell v Lansell (1964) 110 CLR 353 at 361-362 per Kitto J; [1964] HCA 42; and cf In the Marriage of Knight (1987) 90 FLR 313. 67 Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518 at 537 [58]; [2003] HCA 11; Abigroup Ltd v Abignano (1992) 39 FCR 74 at 88. (k) make any other order (whether or not of the same nature as those mentioned in the preceding paragraphs of this section), which it thinks it is necessary to make to do justice". ICF Spry Trust The s 106B orders made by the primary judge were expressed to "set aside" an instrument dated 7 December 1998 executed by the husband and identified as "the ("the 1998 Instrument"), and an instrument executed by the husband on 18 January 2002 ("the 2002 Instrument"), together with certain dispositions then made pursuant to that second instrument. These dispositions included the application of all of the income and capital of what was known as "the ICF Spry Trust" ("the Trust") as to one quarter to each of four trusts known as the Elizabeth Spry Trust, the Catharine Spry Trust, the Caroline Spry Trust and the Penelope Spry Trust ("the Children's Trusts"). Instrument of Variation" Clause 3 of the 2002 Instrument declared that as trustee of the Trust the husband applied all of the income and capital of the Trust as it stood on 18 January 2002 by assigning one quarter to the trustees of each of the Children's Trusts. Each of these trusts for a child of the marriage thereby acquired assets of approximately $875,000. Also in January 2002, the husband effectively assigned to the four children by declaration of trust some $500,000 of his own assets. Each child derived an interest worth approximately $125,000. That disposition was not set aside by the court for reasons given by the primary judge in a passage in his reasons which is set out below. The reasons of the primary judge With respect to the terms of s 106B(1), the primary judge found that, as to the 1998 Instrument, at the relevant time the husband "was looking to defeat an anticipated order for property settlement". His Honour also made adverse findings with respect to the steps taken in 2002, saying that the husband had been concerned that despite what he had done in December 1998 certain assets "may have still been within the reach of the wife and the Family Court". The primary judge used the expressions "the Trust" and "the ICF Spry Trust" to identify a trust declared orally by the husband on 21 June 1968 with himself as trustee and subsequently reduced to writing by an instrument executed by him on 15 October 1981 ("the 1981 Instrument"). This had been followed by an instrument executed by the husband and the wife on 4 March 1983 ("the 1983 Instrument"). It will be necessary to make further reference to these instruments later in these reasons. However, it should be noted here that the primary judge accepted that the Trust had been established in 1968 well before the marriage. He found that the Trust (the assets of which included the family home at Toorak purchased in 1979) was maintained "to allow the parties to accumulate assets for the benefit of the family in the most tax effective way" and that the 1983 Instrument was designed to ensure that the Toorak property was not, for land tax purposes, aggregated with other properties owned personally by the husband. The 1998 Instrument and the 2002 Instrument and accompanying dispositions, which together were the subject of the s 106B orders, had operated directly or indirectly upon or by reference to the state of affairs of the Trust which otherwise had been established and administered under the 1981 Instrument and the 1983 Instrument. The primary judge proceeded upon the "guidelines" that the court first determine "the assets, liabilities and financial resources of the parties to the marriage", then consider "all relevant contributions of each of the parties", and "the prospective components of the claims of each of the parties", identify any "alteration" having regard to relevant s 75(2) factors and, finally, consider whether the proposed order was "just and equitable" (s 79(2)). The primary judge under the heading "Conclusion" stated: net "The assets divided the 52 per cent/48 per cent in the husband's favour. As a result ... it is necessary to exercise the discretion to set aside the instrument and disposition[s] of 18 January 2002. The assets of the Trust need to be actually in the asset pool for division to allow the wife to receive her entitlement as the figures will shortly indicate." should parties Under the heading "Just and equitable", his Honour said that pursuant to s 79 an order could not be made unless the court was satisfied that in all the circumstances it was "just and equitable" to make the order. His Honour continued: "The net asset pool comprises a monetary equivalent of $9,818,144.37. Thus, the effect of my decision is that the husband is entitled to net assets to the value of $5,105,435 (in round dollars) and the wife is entitled to net assets to the value of $4,712,709 (in round dollars). The wife has or has had the benefit of net assets totalling $2,530,406.80 and the husband has or has had the benefit of net assets totalling $1,790,108.15. Thus, the husband will have to pay to the wife the sum of $2,182,302 (in round dollars). Where that will come from though is entirely up to the husband. On the figures he has assets to the value of $1,790,108.15 less $57,727.15 being the amount he has paid for legal costs, but I have found that the assets of the ICF Spry Trust can be treated as his property once the relevant instruments and dispositions are set aside, and thus that is a source of funds for the husband. My orders though will not permit the husband to apply the assets that he assigned to the children because he himself successfully argued that the discretion to set aside that disposition should not be exercised where the husband has the ability to otherwise meet the order. That of course will not prevent the husband reaching some arrangement with the children about this given that I have still notionally added back these assets to the net asset pool of the parties. The husband's position as a result of my proposed orders is therefore somewhat unclear given that it will depend on what he does in relation to the ICF Spry Trust and its assets. However, that is entirely a consequence of the husband's own actions in attempting to remove assets from the reach of the wife and the Family Court, and this cannot prejudice the position of the wife in any way. In any event, on the basis of the applicable figures the proposed orders leave the husband with substantial assets but, of course, with a large proportion of those assets being assets in the ICF Spry Trust. To repeat, it is entirely up to the husband what he then does about this." (emphasis added) The primary judge then turned to consider the impact his proposed orders would have on the children of the marriage. The effect of his Honour's reasoning is that it was neither unjust nor inequitable against the children that there be applied out of the augmented assets of the Trust the lump sum provided in order 4 for the benefit of the wife. The primary judge said: "The assets of [the Children's Trusts] will be returned to the ICF Spry Trust, and depending on what the husband does in response to the orders there may or may not be assets retained in that trust for the benefit of the children and the other beneficiaries. Further, although prima facie the children will still have the shares assigned to them by the husband, again the husband may choose to make other arrangements with them about that given that those assets have been notionally treated as the husband's property. In these circumstances it might be tempting to feel some sympathy for the children, but when analysed that does not necessarily follow. There is simply no basis on which the children can complain about the effect of the orders that I propose. Prima facie they were the innocent victims of the husband's actions. The husband used them initially in his attempt to remove assets from the reach of the wife and the Family Court, and for that the children cannot be criticised, but it is sad that the children have chosen to thereafter become involved in what is essentially a dispute between their parents. The husband's actions were to divert assets that the parties had accumulated for the benefit of the entire family, yet the children have sought in these proceedings to maintain the position created by the husband. That is unfortunate to say the least given that in reality the children have had the ability as much as the husband has had to prevent this dispute not only from occurring at all but certainly from reaching the heights that it has ... The consequences of the children's attempts to in effect hold on to assets which they had no direct input in accumulating and which should still be under the control of their parents has been a bitterly fought and extremely costly court case, let alone the negative impact on the family and the relationships between the members of that family." The appeals to this Court The appellants in Appeal No M25 of 2008 are the trustees of the Children's Trusts, for whom Mr D F Jackson QC appeared. The appellant in Appeal No M26 of 2008 is the husband, for whom Mr A J Myers QC appeared. He largely adopted the submissions of Mr Jackson. The wife is a respondent in each appeal and was represented by Mr J T Gleeson SC. Dr I J Hardingham QC appeared for the children of the marriage; they are among the respondents to each appeal. He adopted, and supplemented, the submissions of Mr Jackson. In this Court, as before the Full Court, the husband and other parties supporting his submissions contend to the effect that in the passages set out above the primary judge erred by acting upon a wrong principle or was guided or affected by extraneous or irrelevant matters68. In particular, it is said that his Honour erred by treating the assets of the Trust, supplemented by the setting aside of the dispositions in favour of the Children's Trusts, as part of the "asset pool". The reasoning is said to be flawed because it contains as a necessary step the erroneous proposition that the husband could in law apply the assets of the Trust to or for himself. The falsity of that proposition may be accepted. But as will appear in these reasons that is not determinative of success in the appeals to this Court. 68 See House v The King (1936) 55 CLR 499 at 504-505; [1936] HCA 40. The 1981 Instrument and the 1983 Instrument To assist an appreciation of the issues in the appeals to this Court, something more should be said respecting the terms of the 1981 Instrument and the 1983 Instrument, followed by further reference to the 1998 Instrument and the 2002 Instrument which were "set aside" by the s 106B orders. First, as to the 1981 Instrument. This identified the husband as settlor and as the present trustee. He was empowered by cl 2 to vary the terms of the Trust "but not in such a manner as to increase in any way his rights under this trust to the beneficial enjoyment of the fund". The "beneficiaries" were identified in cl 4 as meaning all "issue" of the father of the settlor, "and all persons married to such issue". There is a question on the appeals as to whether, since her divorce became effective on 17 February 2003, the wife any longer answers that description. Clause 6 states: "The trustee shall have the power from time to time, as he in his absolute discretion sees fit, to apply all or any part of the income and/or capital of the fund to or for all or any of the beneficiaries, either by making payments to or applications for the benefit of the beneficiary in question or payments to a trust set up substantially for the benefit of such beneficiary; and income not from time to time lawfully paid or applied shall be accumulated." At the date of distribution the fund is to be divided amongst such of the beneficiaries as the trustee shall think fit, and, in default, shall be divided equally amongst all male beneficiaries, with the exception of the settlor (cl 7). Clause 3 of the 1983 Instrument provided that the "issue" identified in cl 4 of the 1981 Instrument included "all descendants however remote", and stated that any variation in the trusts of that instrument would be invalid to the extent that it purported to confer any right or benefit upon the husband. This supplemented the provision made in cl 2 of the 1983 Instrument as follows: "The [husband as] settlor hereby releases and abandons all and any beneficial interest or rights held by him or which may hereafter be held by him under the trust instrument or under the said trust or in the trust fund or income thereof and confirms that by reason hereof he ceases to be a beneficiary of the trust or a person to whom or for whose benefit all or any part of the trust fund and income thereof may be applied." It should be noted that the wife remained a beneficiary within the terms of cl 4 of the 1981 Instrument. However, one consequence of cl 4 of the 1998 Instrument had been to remove any power or discretion under cl 6 of the 1981 Instrument to pay or apply the capital of the fund in favour of the husband or the wife or in favour of any trust in which either of them had any interest, right or possibility. Clause 3 of the 2002 Instrument had applied all of the capital and income of the trust fund by assigning a quarter to each of the Children's Trusts constituted on 18 January 2002 and cl 4 varied the terms of the Trust accordingly. What then are the 1981 Instrument and the 1983 Instrument, of the s 106B orders which set aside what was done in 1998 and 2002? relevant consequences, particularly the for In considering that question it should be appreciated that order 8 of those orders requires the husband (and other parties) to do all such acts and sign all documents as may be necessary to give effect to the terms of the s 106B orders and the lump sum provision in order 4, and order 9 confers liberty to each party to apply as to consequential matters. Orders 8 and 9 illustrate the proposition that the grant of federal jurisdiction by s 39 of the Act carries with it the power to do all things necessary to determine conclusively the issue in controversy which attracts it69. This state of affairs is supplemented by the terms of s 81 of the Act to which reference has been made earlier in these reasons70. Further, relevant common law rights and duties which may otherwise subsist must accommodate compliance with orders made in the exercise of federal jurisdiction. In addition, any State law providing that the rights and liabilities of the parties to the litigation were to be other than as established by or pursuant to the orders of the Family Court would be inoperative by operation of s 109 of the Constitution; the State law would alter, impair or detract from the operation of s 39 of the Act defining the jurisdiction of the Family Court71. In her dissenting reasons in the Full Court, Finn J rejected (with respect correctly) the submission that, given the 1983 Instrument remained in effect according to its terms, the assets of the Trust could be treated by the court as 69 Fencott v Muller (1983) 152 CLR 570 at 608-609; [1983] HCA 12; Stack v Coast Securities (No 9) Pty Ltd (1983) 154 CLR 261 at 293; [1983] HCA 36. 71 See Re Macks; Ex parte Saint (2000) 204 CLR 158 at 186 [54]; [2000] HCA 62; APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 406 [231]; [2005] HCA 44. property of the husband for the purposes of s 79 by reason of the "control" he exercised. However, having rejected that submission her Honour then concluded that there could have been no point in making the s 106B orders and the assets of the Children's Trusts should not have been brought into the asset pool. Rather, the assets of the Children's Trusts should have been treated as a "financial resource" of the husband within the meaning of s 75(2)(b) as applied by s 79(4)(e), and an adjustment then should have been made in favour of the wife. The effect of some of the submissions by the wife is to side-step the reasoning which commended itself to Finn J. Those submissions should be accepted. Conclusions The wife was an eligible object of benefaction of the Trust. She was one of the class of "beneficiaries" identified in cl 4 of the 1981 Instrument. The use in that document of the term "beneficiaries" was inapt insofar as it suggested the existence of any vested beneficial interest in the assets held on the trust of the 1981 Instrument. Dr Hardingham correctly identified the wife as one of the class of objects of the discretionary power conferred upon the trustee by cl 6 of the 1981 Instrument. She also was one of the class of objects for division of the fund at the distribution date (cl 7). Furthermore, as an object of these powers the wife had a right in equity to due administration of the Trust72. The existence of such a right did not depend upon entitlement to any fixed and transmissible beneficial interest in the trust fund73. The right of the wife was accompanied at least by a fiduciary duty on the part of the trustee, the husband, to consider whether and in what way he should exercise the power conferred by cl 674. Reference was made earlier in these reasons to the comprehensive sense in which the term "property" is defined in s 4(1) of the Act75. And it will also be recalled that the "property" which may be the subject of orders under s 79(1) of the Act is "the property of the parties to the marriage or either of them" (emphasis added). The right of the wife with respect to the due administration of the Trust was included in her property for the purposes of the Act. The 72 Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR 73 CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98 at 110 [17]; [2005] HCA 53; Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 74 In re Baden's Deed Trusts [1971] AC 424 at 456 per Lord Wilberforce; cf Kain v Hutton [2008] NZSC 61 at [25]. 75 See [91]. submissions by Mr Gleeson to this effect should be accepted. The submissions to the contrary by Mr Myers should not be accepted. And in considering what is the property of the parties to the marriage (as distinct from what might be identified as the property of the husband) it is important to recognise not only that the right of the wife was accompanied at least by the fiduciary duty of the husband to consider whether and in what way the power should be exercised, but also that, during the marriage, the power could have been exercised by appointing the whole of the Trust assets to the wife. Observing that the husband could not have conferred the same benefit on himself as he could on his wife denies only that he had property in the assets of the Trust, it does not deny that part of the property of the parties to the marriage, within the meaning of the Act, was his power to appoint the whole of the property to his wife and her right to a due administration of the Trust. The further submission was made by counsel opposed to Mr Gleeson that by the time the primary judge made his orders on 30 November 2005 the parties were divorced and, as a result, the husband as trustee could not then treat the wife as one of the class of "beneficiaries" under the Trust and her property as identified above no longer existed for the purposes of the Act. However, as indicated at an early stage in these reasons, by force of s 4(2) of the Act, the reference in provisions such as s 79 to "the parties to the marriage or either of them" includes a reference to the parties to a marriage terminated by divorce at a time before the court makes its order. Further, the detailed provisions in s 79 respecting adjournment of property settlement proceedings76 assume that the parties to those proceedings may be parties to the pending divorce proceedings which are completed before the grant of relief in the property settlement proceedings. In such circumstances, which apply in the present case, it is within the power of the court to proceed in the property settlement proceedings "as if"77 changes to property rights otherwise brought about by the anterior divorce had not yet occurred; this is so, provided it otherwise is just and equitable to proceed in this manner. The order which is made in the property settlement proceedings speaks from the time it is made, but the considerations which govern its formulation are governed by reference to the kind of controversy to be quelled by 76 Section 79(1B), (1C). 77 cf Langley v Langley (1892) 18 VLR 712 at 715, a decision under s 98 of the Marriage Act 1890 (Vic) and Dormer v Ward [1901] P 20 at 33 and Blood v Blood [1902] P 78 at 82, cases under s 5 of the Matrimonial Causes Act 1859 (UK). See also Rayden's Practice and Law in the Divorce Division, 2nd ed (1926) at 360-361. the court – a matrimonial cause in the defined sense – and by the imperative indicated by s 81 of the Act – the final determination of financial relationships between the parties to the dissolved marriage and the avoidance of further proceedings between them. In the circumstances of the present case, it was open to the primary judge to formulate his orders, as he did, on the basis that the "asset pool" comprised $9,818,144.37 and included the assets of the Trust as supplemented by the operation of the s 106B orders. To proceed on that basis properly reflected what was "the property of the parties to the marriage or either of them" as if the changes to property rights otherwise brought about by the divorce of those parties had not yet occurred. To proceed on the basis propounded by the husband would confine attention to what was his property. Some reference was made in argument to the significance to be attached to the presence of s 85A(1). This was introduced by the 1983 Act and states: "The court may, in proceedings under this Act, make such order as the court considers just and equitable with respect to the application, for the benefit of all or any of the parties to, and the children of, the marriage, of the whole or part of property dealt with by ante-nuptial or post-nuptial settlements made in relation to the marriage." The provision appears to have been a legislative response in part to apprehensions that as s 79 stood the court could not "deal directly" with the unascertained interest which a spouse may have in a discretionary trust78. However that may be, s 85A should not be read as confining the powers otherwise given by ss 79 and 80 in any relevant respect. In particular, it should not be read as confining the power to make an order for payment of a money sum in a way that would preclude the making of an order that either permits or requires the application of an element of the property of one or other of the parties to a marriage in satisfaction of the order for payment. Section 85A should be read as focused upon the variation of settlements of the kinds identified in the provision. No relevant implication of the kind considered in Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia79 now arises. Of Anthony Hordern and the subsequent 78 Australia, Parliament, Family Law in Australia: Report of the Joint Select Committee on the Family Law Act, July 1980, vol 1, §5.117. 79 (1932) 47 CLR 1 at 7, 20-21; [1932] HCA 9. cases, it was said in Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom80: "Anthony Hordern and the subsequent authorities have employed different terms to identify the relevant general principle of construction. These have included whether the two powers are the 'same power'81, or are with respect to the same subject matter82, or whether the general power encroaches upon the subject matter exhaustively governed by the special power83. However, what the cases reveal is that it must be possible to say that the statute in question confers only one power to take the relevant action, necessitating the confinement of the generality of another apparently applicable power by reference to the restrictions in the former power. In all the cases considered above, the ambit of the restricted power was ostensibly wholly within the ambit of a power which itself was not expressly subject to restrictions." The relationship between s 85A and the other provisions of Pt VIII of the Act is not of the character described in this passage. The situation of the children of the marriage did not render it other than just and equitable to make the s 106B order with respect to the 2002 Instrument and application of the Trust fund between the Children's Trusts. The interests of no other third parties were involved in setting those transactions aside. As already remarked in these reasons, order 4 in providing for payment by the husband of a lump sum to the wife does not earmark any particular asset of the husband and oblige him to apply it in satisfaction of that order. Nor was there any mandatory order of the nature considered in Ascot Investments Pty Ltd v Harper84 which extinguished the rights or enlarged the obligations of third parties. 80 (2006) 228 CLR 566 at 589 [59]; [2006] HCA 50. 81 Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7. 82 R v Wallis (1949) 78 CLR 529 at 550; [1949] HCA 30. 83 Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672 at 678; [1979] HCA 26; Refrigerated Express Lines (A/asia) Pty Ltd v Australian Meat and Live-Stock Corporation (1980) 29 ALR 333 at 347. 84 (1981) 148 CLR 337 at 354; [1981] HCA 1. The conclusion reached by the trial judge (erroneously) that the husband could have applied the whole or part of the Trust fund to or for his own benefit is inconclusive of the outcome. The jurisdiction being exercised by the Family Court was, as earlier indicated, jurisdiction over "proceedings between the parties to a marriage with respect to the property of the parties to the marriage or either of them"85 (emphasis added). What matters in this case is that once the 1998 Instrument and the 2002 Instrument were set aside by the s 106B orders, the property of the parties to the marriage or either of them was to be identified as including the right of the wife to due administration of the Trust, accompanied by the fiduciary duty of the husband, as trustee, to consider whether and in what way the power should be exercised. And because, during the marriage, the husband could have appointed the whole of the Trust fund to the wife, the potential enjoyment of the whole of that fund was "property of the parties to the marriage or either of them". Furthermore, because the relevant power permitted appointment of the whole of the Trust fund to the wife absolutely, the value of that property was the value of the assets of the Trust. In deciding what orders should be made under ss 79 and 80 of the Act, the value of that property was properly taken into account. Wrongly attributing its value to the husband is irrelevant to the ultimate orders made. If the husband wishes to satisfy his obligations to the wife under order 4 by recourse to the augmented assets of the Trust then it is open to him to approach the court for an appropriate order to assist him in doing so. By such an order the court would provide the machinery whereby the Trust was to be administered "as if" the wife had not ceased to be the spouse of the husband, and there was an application by the husband as trustee of a stipulated sum in favour of the wife in pro tanto discharge of his obligation to her under order 4. It would be for the court to determine whether, putting aside the interests of the children of the marriage for the reasons already given, it was just and equitable to make the order having regard to the interests of any third parties who may also fall within the defined class of "beneficiaries". Whether or in what circumstances the wife may apply for orders of this nature need not be further considered here. The result is that upon the basis explained above the challenged orders made by the Full Court are to be supported as a proper exercise of the powers conferred by the Act. The majority of the Full Court reached the correct result in dismissing the appeal and cross-appeal. 85 Section 4(1) definition of "matrimonial cause", par (ca). That conclusion makes to consider further (i) the submissions by Mr Gleeson in support of a remitter to consider the "financial resources" issue to which Finn J referred, and (ii) applications by the wife for special leave to cross-appeal against the orders of the Full Court and to rely upon a case supported by s 85A of the Act. it unnecessary Orders The applications for special leave to cross-appeal should be dismissed but with no order as to costs. The appeals should be dismissed. The matter of costs is for this Court and is not controlled by provisions respecting costs in the Act86. In each appeal the appellants should pay the costs of the wife and there should be no costs order in favour of the other respondents. 86 De L v Director-General, NSW Department of Community Services [No 2] (1997) 190 CLR 207 at 222-223; [1997] HCA 14. 143 HEYDON J. The background to these appeals is set out in the reasons for judgment of Gummow and Hayne JJ. It is convenient to adopt the abbreviations there employed. The question in the appeals The question in the appeals is whether the Family Court of Australia had power to make the orders it did under s 79(1) of the Family Law Act 1975 (Cth) ("the Act"). That depends on whether, in the language of s 79(1): the proceedings were "proceedings with respect to the property of the parties to the marriage or either of them"; and the orders could be described as "altering the interests of the parties to the marriage in the property". Section 4(1) of the Act defines "property" thus: "property, in relation to the parties to a marriage or either of them, means property to which those parties are, or that party is, as the case may be, entitled, whether in possession or reversion." The proceedings before Strickland J Strickland J treated the property of the ICF Spry Trust ("the Trust") as part of the asset pool of the parties. By par 4 of his Honour's orders, the husband was ordered to pay the wife $2,182,302. That sum was significantly in excess of his net assets of $1,732,381 ($1,790,108.15 less $57,727.15 for legal costs). Strickland J considered, however, that the husband's assets were not limited to $1,732,381. He thought that the assets of the Trust could be "treated as his property" once the 1998 Instrument (excluding himself and the wife from having or obtaining any interest in capital) and the 2002 Instrument (setting up the Children's Trusts) were set aside. The setting aside of the 2002 Instrument caused the assets of the Trust to increase by $4,760,152. Strickland J implicitly accepted that the order to pay $2,182,302 would not be just and equitable to the husband unless the assets of the Trust could be "treated as his property". He appears to have concluded that the assets could be "treated as his property" for two reasons, which are not entirely consistent. The first reason was that Strickland J considered it was open to the husband to reinstate himself as a beneficiary of the Trust by revoking the 1983 Instrument or cl 2 of it. The second reason was that even though the husband was, after the 1983 Instrument, no longer a beneficiary of the Trust, his powers as trustee gave him sufficient "control" to cause the Trust property to be regarded as his own property. The proceedings before the Full Court The second of Strickland J's reasons was expressly disfavoured in the Full Court by both Bryant CJ and Finn J, and apparently also disfavoured by Warnick J. However, Strickland J's first reason, or a variant of it, was upheld by Warnick J who considered that the husband could "reverse his election". Bryant CJ, while disagreeing with Warnick J, advanced another reason: that the 1983 Instrument could be cancelled by agreement between husband and wife. Finn J disagreed with both Warnick J and Bryant CJ in these latter respects. The position of the husband and the wife after the 1983 Instrument The central issue is whether, even if the 1998 Instrument and the 2002 Instrument are set aside, it can be said for s 79(1) purposes that by 1983 either spouse had "property" in the assets of the Trust. The 1983 Instrument was not set aside by the courts below. The wife has not attempted to have it set aside at any stage. It deprived the husband of any possibility of beneficial interest in the Trust. That left the wife as one of the "beneficiaries" of the Trust as defined in cl 4 of the Trust, being a person married to one of the issue of the husband's father. But she had no entitlement to any part of the income or capital before the "date of distribution" as defined in cl 4 or at the time when the Trust was terminated under cl 5. She could only receive income or capital if the husband, as trustee, decided to pay it, and that lay in "his absolute discretion": cl 687. If the Trust were terminated before the date of distribution pursuant to cl 5, she had no entitlement: the fund was to be equally distributed amongst the male beneficiaries other than the husband88. At the date of distribution the fund was to be divided amongst such of the beneficiaries as the trustee thought fit – a class which included the wife – and, in default, 87 See [13] above. 88 Clause 5 provides: "At any time this trust may be terminated if all the beneficiaries then alive and being sui juris unanimously so consent; and none of the fund shall in such event be paid to or applied for the settlor, but it shall be distributed equally amongst the male beneficiaries." amongst the male beneficiaries other than the husband: cl 789. Should cl 6 and cl 7 fail, the fund was to be held for charitable purposes90. Under the Trust, the wife was the object of a bare fiduciary power of appointment. So was the husband. These are not propositions which the wife did or could contest. Indeed, she accepted them. From 1983 the husband ceased even to be an object of the power. If in 1983 neither spouse had "property" in the assets of the Trust, it would not be necessary to engage in tasks which consumed the energies of the parties to a very large extent, namely to consider the correctness of Strickland J's reasons for concluding that the assets could be "treated as" the husband's property, or Warnick J's reason, or Bryant CJ's reason. If neither spouse had "property" in the assets, the proceedings could not have been proceedings with respect to the assets, and the parties would have no interests in the assets to be altered. The courts below did not examine this line of thought. Perhaps the parties did not invite them to. But in this Court it was raised. The positive argument of the trustees and the husband, and the positive argument of the wife The trustees and the husband to some extent advanced a positive argument that neither spouse had property in the assets of the Trust. That argument concentrated on the position of the spouses as objects of the trustee's power of appointment (as they both were before 1983, and as she was thereafter). The wife advanced a separate positive argument as her "primary fundamental submission". It concentrated not on the position of the spouses as objects of the trustee's power of appointment, but on the position of the husband as trustee coupled with the absence of any beneficial interest in any person. It is convenient to examine these arguments in turn. 89 Clause 7 provides: "At the date of distribution the fund shall be divided amongst such of the beneficiaries as the trustee thinks fit and, in default, shall be divided amongst all male beneficiaries equally with the exception of the settlor." 90 Clause 8 provides: "In the event of the failure of the trusts set out in clauses 6 and 7 the fund shall be held for charitable purposes, that is, to be applied for scholarships for the sons of persons who have both been pupils of Melbourne Church of England Grammar School and also resident students of Trinity College, Parkville, Victoria." The positive argument of the trustees and the husband summarised Mr D F Jackson QC, who appeared for the trustees of the Children's Trusts, submitted that no-one was entitled in possession or reversion under the 1981 Instrument, but that the objects of the trustee's power of appointment merely had hopes or expectations coupled with a right of due administration of the Trust. Mr A J Myers QC, who appeared for the husband, supported that submission. Although one of the orders sought by each of Mr Jackson and Mr Myers in their respective written submissions in chief was consistent with these submissions91, the submissions were put somewhat briefly, largely in answer to questions from the Court and only in oral address in reply. Messrs Jackson and Myers did accept that a word like "property" is a word of very general and shifting meaning and that when used in a statute it takes its meaning from the context and objects of the statute. They contended that even if the wife's right of due administration of the Trust were assumed to be a right of property, it would not fall within s 79(1)(a) of the Act. That is because the "proceedings with respect to the property of the trustees or either of them" in this case were not proceedings with respect to the right of due administration. They were proceedings with respect to assets – land, shares and money – not proceedings with respect to the right to ensure that those assets were duly administered. That is, the wife had no proprietary right in "the assets in respect of which the right to due administration exists"; she only had a right to due administration, and that was not property the subject of the proceedings. Mr Myers adopted a submission of the judges of the Family Court to a Joint Select Committee of the Parliament of the Commonwealth. The Committee's Report records the submission thus92: "Although the court has wide powers to deal with property under s 79 it can deal directly only with legal and equitable interest [sic] which a spouse holds in relation to property. The court cannot deal directly with the unascertained interest which a spouse may have in a discretionary trust". 91 A declaration "that none of the assets of the … Trust … forms part of the property of either or both of Dr Spry and Mrs Spry for the purposes of sections 4, 75 or 79 of the [Act] or financial resources of either or both of Dr Spry and Mrs Spry for the purposes of sections 75 or 79". 92 Australia, Parliament, Family Law in Australia: Report of the Joint Select Committee on the Family Law Act, July 1980, vol 1 at 97 [5.117]. The attitude of the wife to the positive argument of the trustees and the husband In Gartside v Inland Revenue Commissioners93, Lord Wilberforce (Lord Hodson concurring) held that the death of one of the objects of a bare power of appointment of income did not fall within the following words in s 43 of the Finance Act 1940 (UK): "an interest limited to cease on a death has been … determined … after becoming an interest in possession". In his opinion the objects had no "interest" because no single member of the class had any right to income, and, even if they were considered collectively, they had no right to income because the trustees could accumulate the whole of it94. The objects did not have "an interest in more than the broadest popular sense, in the fund."95 Lord Reid (Lords Morris of Borth-y-Gest and Guest concurring) held that the object of a bare power of appointment did not have an "interest", and even if there were an "interest" it was not an "interest in possession". He said96: "'In possession' must mean that your interest enables you to claim now whatever may be the subject of the interest. For instance, if it is the current income from a certain fund your claim may yield nothing if there is no income, but your claim is a valid claim, and if there is any income you are entitled to get it. But a right to require trustees to consider whether they will pay you something does not enable you to claim anything. If the trustees do decide to pay you something, you do not get it by reason of having the right to have your case considered: you get it only because the trustees have decided to give it to you." The wife accepted the applicability to the Trust of what Lords Reid and Wilberforce said. She submitted, citing what their Lordships said97: "No member of the nominated class of objects had a beneficial or proprietary interest in any of the corpus or income of the Trust. What any object had under the Trust was a mere expectancy; an expectation or hope that the trustee may exercise his discretion in his or her favour by the making of a gift". 94 [1968] AC 553 at 617-618. See [74] above. 95 [1968] AC 553 at 618 (emphasis in original). 96 [1968] AC 553 at 607. 97 And also citing Federal Commissioner of Taxation v Ramsden (2005) 58 ATR 485 at 493-494 [35] to the same effect. The wife thus accepted that "the objects had no interest in possession nor an immediate entitlement to income as it accrued, receiving a vested interest only when and to the extent the trustee, in exercising his discretion, distributed trust capital or income to them". For that proposition the wife relied on a statement in Pearson v Inland Revenue Commissioners by Viscount Dilhorne98 that in the legislation there under consideration the words "'interest in possession' … should be given their ordinary natural meaning which I take to be a present right of present enjoyment". The wife, then, agreed with the contention of the trustees and the husband that she had no beneficial interest in possession arising out of her right to "be considered as a potential recipient of benefit by the [trustee] and a right to have [her] interest protected by a court of equity."99 Members of the Court did raise with counsel for the wife the question whether her right to due administration meant that she was "entitled" to property. Counsel then said he wanted to put the matter on two levels or in two ways. The first way was his "primary fundamental submission"100. "The second way is that it may be that the wife's right to due administration of itself can be treated as a matter to which [she] is entitled in possession" (emphasis added). But, although alluded to once later, this was no more than a courteous acknowledgment of, or a forensically tactful gesture to, the idea advanced by members of the Court. Counsel for the wife never in fact put the "second way" in detail. Indeed, he never returned to the subject in any significant fashion. This course was not the result of oversight. It was taken because counsel for the wife did not wish to advance the "second way". He did not wish to advance it because the contrary of it was seen as a necessary step towards acceptance of his "primary fundamental submission". That primary submission was that if there were no owner in equity for an estate of freehold in possession, "the trustee is entitled to the whole estate in possession, both legal and equitable."101 And counsel for the wife never put a submission that once the 1998 Instrument and the 2002 Instrument were set aside, the wife's potential enjoyment of the whole of the assets of the Trust (in the event that the trustee's power of appointment was exercised in her favour to that extent) was property of a party to the marriage. Any submission of that kind would have been equally damaging to the wife's primary argument. However, the case is not to be decided merely in accordance with the tactical manoeuvrings of the parties, or their 98 [1981] AC 753 at 775; see also at 786 per Lord Keith of Kinkel. 99 Gartside v Inland Revenue Commissioners [1968] AC 553 at 617 per Lord Wilberforce (Lord Hodson concurring). 100 See above at [151] and below at [166]-[167]. 101 Glenn v Federal Commissioner of Land Tax (1915) 20 CLR 490 at 497 per Griffith CJ; [1915] HCA 57. agreement on particular legal outcomes. The wife's agreement with the positive argument of the trustees and the husband does not make it right. Is it right? The positive argument of the trustees and the husband is correct The position of an object of a bare power. The proposition asserted by Lords Reid and Wilberforce in Gartside v Inland Revenue Commissioners102 was that the object of a bare power of appointment out of assets has no proprietary interest in those assets, but only has a mere expectancy or hope that one day the power will be exercised in that object's favour. In that case it was asserted in an estate duty context. It has been asserted many times and in many contexts. Thus a settlement of an "interest whether vested or contingent" does not capture a payment of money pursuant to a bare power of appointment103. The object of a bare power of appointment cannot assign the "rights" the object has104. An injunction restraining a defendant from removal of "assets" was not contravened by transactions causing the defendant to cease to be an object of a bare power of appointment105. The "interest" of the object of a bare power of appointment did not fall within the following definition of "property" in the Corporations Act 2001 (Cth): "any legal or equitable estate or interest (whether present or future and whether vested or contingent) in real or personal property of any description and includes a thing in action."106 The position of a residuary beneficiary of an unadministered estate compared. It is true that the object of a bare power of appointment has "a right to be considered as a potential recipient of benefit by the trustees and a right to have 102 See [156] above. 103 In re Brooks' Settlement Trusts; Lloyds Bank Ltd v Tillard [1939] Ch 993. 104 Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 726 [40]-[41], 729 [51] and 734 [66]. By analogy with the position in relation to expectancies (In re Ellenborough, Towry Law v Burne [1903] 1 Ch 697 at 700), assignment for value may be possible (In re Coleman; Henry v Strong (1888) 39 Ch D 443 at 447), although Thomas and Hudson, The Law of Trusts, (2004) at [7.34] questioned this unless the trust instrument expressly authorises the trustee to pay an assignee. 105 R & I Bank of Western Australia Ltd v Anchorage Investments Pty Ltd (1993) 10 WAR 59 at 79-80. 106 Australian Securities and Investments Commission v Carey (No 6) (2006) 153 FCR his interest protected by a court of equity."107 But although the position of the object of a bare power of appointment is sometimes compared with that of a residuary beneficiary of an unadministered estate, it is very different. The right of a residuary beneficiary of an unadministered estate to have the estate duly administered108 can be assigned109 or devolve upon death110. The residuary beneficiary, while having no beneficial interest in any particular asset of the unadministered estate111, is correctly described as being entitled to the appropriate share of the residuary estate112 and hence as having "property" within the meaning of a broad legislative definition of that expression113. None of these characteristics are shared by the object of a bare power of appointment. The object's position depends on the discretion of another. The position of the residuary beneficiary of an unadministered estate does not. Assignability. In particular, it is of some significance that the object of a bare power of appointment is incapable of assigning the relevant rights114. In National Provincial Bank Ltd v Ainsworth, Lord Wilberforce said115: "Before a right or an interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability." 107 Gartside v Inland Revenue Commissioners [1968] AC 553 at 617 per Lord Wilberforce (Lord Hodson concurring). 108 Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12; [1965] AC 109 In re Leigh's Will Trusts [1970] Ch 277. 110 In re Maye [2008] 1 WLR 315 at 321 [16]. 111 Commissioner of Stamp Duties (Q) v Livingston (1964) 112 CLR 12; [1965] AC 112 In re Maye [2008] 1 WLR 315 at 321 [16]. 113 In re Maye [2008] 1 WLR 315 at 321-322 [17]. 114 Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 726 [40]-[41], 729 [51] and 734 115 [1965] AC 1175 at 1247-1248. Of course, what "property" means depends on the context in which and the purpose for which the word is being used. But Lord Wilberforce's statement has been approved more than once in this Court116. And on one of those occasions "Assignability is not in all circumstances an essential characteristic of a right of property. By statute some forms of property are expressed to to say, as Lord Wilberforce said, that a proprietary right must be 'capable in its nature of assumption by third parties'". (emphasis added) is generally correct Nonetheless, inalienable. That points against treating the rights of the wife, as an object of a bare power of appointment, as falling within the words of the definition of "property" in s 4(1) of the Act: "property to which [she] is … entitled, whether in possession or reversion." Unreasonable results of extending "property". If the arguments of Mr Jackson and Mr Myers under consideration were to be rejected, it could only be because the definition of "property" was given an extended meaning. It would be an extended meaning which would lead to a wholly unreasonable result. For it would mean that if a discretionary trust existed under which a wife was among a class of objects of a bare power of appointment having thousands of members who had nothing to do with her family or the husband's family, the Family Court of Australia would have power to make a s 79(1)(a) order altering her "interests" in the assets of that discretionary trust favourably to her. It may be suggested that the absurdity can be overcome by postulating that the Court, properly exercising its discretion, would never do so if its order was adverse to the interests of objects other than the husband and the wife. That is to postulate a "discretion" which can only be exercised one way. A "discretion" which can only be exercised one way is not a discretion at all. The result that the Court has a "discretion" which it can only exercise one way is wholly unreasonable. It is an outcome which strongly suggests that there is in truth no power to consider exercising so empty a "discretion" because the wife's status as an object of the bare power of appointment is not within the definition of "property". "If giving an extended meaning to a word in an Act … leads to a wholly unreasonable 116 R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342; [1982] HCA 69; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 165; [1992] HCA 45. 117 R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 342-343; approved in Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 165-166. result, that is a very strong indication that the word was not intended to have that extended meaning."118 The wrong property rights. Even if, contrary to the reasoning employed above119, the wife's rights are "property" rights, they are not forms of property to which the proceedings were directed. The proceedings were directed to obtaining orders enabling the wife to gain access, directly or indirectly, to the assets of the Trust. In those assets she had no property. Ultimately, then, the question what "property" means must be understood in the context in which the word is used in the legislation containing it. In s 79(1)(a) of the Act the word "property" is used in the context of granting a power to make an order altering the interests of the parties, or one party, in the property. Where the enjoyment by the wife of the property of the Trust after the 1983 Instrument depended not on any decision by her, but on a decision to be made by the trustee in his "absolute discretion" – and the husband need not have remained either the trustee or her husband – there appears to be no work for s 79(1)(a) to do. The difficulty of altering anything which the wife had in a manner useful to the wife suggests that she had no "property" to be altered. What language would do? It is possible to conceive of statutory language which could go as far as the wife's goals require. Thus s 163U(1) of the Duties Act 1997 (NSW) provides: "A person or a member of a class of persons in whose favour, by the terms of a discretionary trust, capital the subject of the trust may be applied: in the event of the exercise of a power or discretion in favour of the person or class, or in the event that a discretion conferred under the trust is not exercised, is, for the purposes of this section, a beneficiary of the trust." Section 163U(2) provides: "A beneficiary of a discretionary trust is taken to own or to be otherwise entitled to the property the subject of the trust." 118 Gartside v Inland Revenue Commissioners [1968] AC 553 at 605 per Lord Reid (Lords Morris of Borth-y-Gest and Guest concurring). 119 See [160]-[163] above. The Dictionary defines "discretionary trust" as meaning: "a trust under which the vesting of the whole or any part of the capital of the trust estate, or the whole or any part of the income from that capital, or both: is required to be determined by a person either in respect of the identity of the beneficiaries, or the quantum of interest to be taken, or both, or (b) will occur if a discretion conferred under the trust is not exercised, has occurred but under which the whole or any part of that capital or the whole or any part of that income, or both, will be divested from the person or persons in whom it is vested if a discretion conferred under the trust is exercised." Had the Act contained language of that kind, the wife would have been a "beneficiary". But no equivalent to that language appears in any relevant provision of the Act. The language actually employed in the Act is not apt to give the court power to make s 79 orders in relation to the assets of a "discretionary trust"120 of the type illustrated by the Trust by reason merely of the right of objects of the power of appointment to enforce due administration and to be considered for favourable exercise of the power. Accordingly the submission made by the judges of the Family Court to Parliament was correct121. So are the arguments of Mr Jackson and Mr Myers. The wife's primary submission Submission not put below. Counsel who appeared for the wife in this Court did not appear in the courts below. Although the primary argument which he advanced in this Court was formulated, both in the notices of contention122 and 120 The meaning of "discretionary trust" can be protean. In Federal Commissioner of Taxation v Vegners (1989) 90 ALR 547 at 552 Gummow J said that "the usage of the term … is essentially descriptive rather than normative. The meaning of the term is primarily a matter of usage, not doctrine." This approach was adopted in Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 234 [8]; [1998] HCA 4. However, to describe the provisions contained in the Trust as a "discretionary trust" is a standard usage. 121 See above at [155]. 122 In them the wife contended that the Full Court's judgment should be affirmed but on the ground that it "failed to decide … that … the assets in the Trust were (Footnote continues on next page) in argument, in terms capable of being read as suggesting that it had been put to the Full Court, nothing in either the three judgments delivered in that Court or in Strickland J's judgment suggests that it was put in either court below. A perusal of those of the voluminous oral and written arguments of the parties in both courts which have been placed before this Court supports the view that it was not put. At trial the husband simply denied that the assets of the Trust were property of either party to the marriage since neither had a beneficial interest in them. The wife appeared simply to have assumed that s 79 was capable of being applied. The wife seems to have done so on the basis of the "control" theory relied upon by Strickland J. However, although the written submissions of the trustees and the husband in this Court gave the argument so little attention as to suggest that they did not recognise it, they did not contend that this Court could not entertain it. It is regrettable that this Court is deprived of the views of the courts below on the wife's primary submission, but in the present circumstances that is no bar to its being considered. Submission summarised. In its simplest terms, the primary submission of the wife was as follows. The husband was trustee of the Trust, with the powers of an absolute owner to invest or deal in the Trust property (cl 9). Because the trustee's power of appointment under the Trust was a bare power of appointment only in relation to both income and capital, none of the objects of the power had any beneficial interest in possession or reversion. Nor did the classes which were to take in default of appointment in the event of the Trust being terminated under cl 5 or on the date of distribution under cl 7. If the legal estate in property is vested in a trustee, and there is no person entitled to the property in equity, then in Griffith CJ's words in Glenn v Federal Commissioner of Land Tax, "the trustee is entitled to the whole estate in possession, both legal and equitable."123 (d) Accordingly Strickland J had power to make the orders he did regardless of whether the husband was an object of the power of appointment or not. property, within the meaning of the law, to which the husband was owner and entitled in possession, with no other person having a vested interest in the corpus or income of the Trust". 123 (1915) 20 CLR 490 at 497. Rejection of the wife's primary submission Amplitude of orders. These contentions were supplemented by arguments about the amplitude of the orders that may be made under s 79. Their potential amplitude may be conceded; but whether orders, however ample, can be made depends on whether there are interests of the parties in "property". The potential amplitude of the orders does not necessarily point to amplitude in the meaning of "property", and may point against it. Griffith CJ's qualification. When considering what Griffith CJ said as a general matter, independently of any particular statutory context, it is necessary to note one additional thing which he said: "The essential element of an 'estate in possession' is … that the owner of it has a present right of beneficial enjoyment"124. The expression "present right of beneficial enjoyment" is ambiguous. It can mean a right of personal enjoyment. Or it can mean enjoyment subject to a trust which narrows or negates any right of personal enjoyment. While in the example Griffith CJ was considering the trustee had "a present right of beneficial enjoyment", it would be a right qualified, perhaps severely, by the terms of the trust. For example, in the Trust under consideration in these appeals the husband had no right after 1983 to beneficial enjoyment in the sense of being able to take for himself any of the assets. His only right of beneficial enjoyment was to hold the assets and accumulate the income, so far as appointments were not made out of it, for the benefit of the objects of the power of appointment and for those who would take in default. Even before 1983 the husband had no right of beneficial enjoyment in the sense of personal enjoyment until he decided to make an appointment to himself – a decision not to be made without some consideration of whether or not appointments should be made to any other member of the class of objects125. Vested interests. There is another aspect of the Trust to be borne in mind in considering the wife's argument. Clause 7 provides that at the date of distribution (which may be as late as 2068: cl 4) the fund shall be divided amongst such of the beneficiaries as the trustee thinks fit, and, in default, "shall be divided amongst all male beneficiaries equally with the exception of the settlor." At the time of the trial there were two male beneficiaries alive, namely two nephews of the husband, Andrew and Richard Gardner. They were then over 18. What, if any, is their interest in the assets of the Trust? 124 (1915) 20 CLR 490 at 498. 125 See [156], [161] and [165] above. In re Brooks' Settlement Trusts; Lloyds Bank Ltd v Tillard126 is a case in which Farwell J considered a marriage settlement giving the income of the fund to the wife for life; directing that the fund be held in trust for such of her issue as she might by deed or will appoint; and providing that in default of appointment the fund be held in trust for all her children who being sons should attain the age of 21 years or being daughters should attain that age or marry in equal shares. One of her children, a son, executed a voluntary settlement whereby he assigned to trustees: "all the part or share, parts or shares and other interest whether vested or contingent to which the settlor is now or may hereafter become entitled whether in default of appointment, or under any appointment hereafter to be made or on failure of any such appointment of and in the trust property … subject to the wife's settlement". The question was whether a sum of money which his mother applied to him pursuant to her power under the marriage settlement fell within the voluntary settlement. Farwell J held that it did not, because until the appointment was made, the son had no interest in the fund other than a vested interest in default of appointment127: "[F]or the rest, he had nothing more than a mere expectancy, the hope that at some date his mother might think fit to exercise the power of appointment in his favour; but, until she did so choose, he had nothing other than his interest in default of appointment … Apart from this he was not contingently entitled at all; he had no interest whatever in the fund until the appointment had been executed." However, before reaching this conclusion, Farwell J said128: "[I]n the case of a special power the property is vested in the persons who take in default of appointment, subject, of course, to any prior life interest, but liable to be divested at any time by a valid exercise of the power, and the effect of such an exercise of the power is to defeat wholly or pro tanto the interests which up to then were vested in the persons entitled in default of appointment and to create new estates in those persons in whose favour the appointment had been made." 127 [1939] Ch 993 at 997-998. 128 [1939] Ch 993 at 997. Farwell J quoted129 the following passage from his own edition of Farwell on Powers: "The exercise of a power of appointment divests (either wholly or partially according to the terms of the appointment) the estates limited in default of appointment and creates a new estate, and that, too, whether the property be real or personal." One other passage from Farwell on Powers is relevant130: "The existence of a power of appointment does not prevent the vesting of the property subject to the power in the persons entitled in default of appointment, until the power be exercised". Further, Lord St Leonards was adamant that the interest of the class taking in default of appointment was not contingent, but vested131. The donee of the power in In re Brooks' Settlement Trusts was not, unlike the donee of the power in this case, a trustee, but that makes no difference132. The husband's two nephews are not entitled in possession. Their interests are vested, but vested only in interest, not possession. Their position, though, highlights the fact that even if Griffith CJ's words are considered as a general or abstract proposition, under the Trust the entitlement of the trustee "to the whole estate in possession, both legal and equitable", is a highly qualified entitlement. The context of Griffith CJ's words. But it is not satisfactory merely to consider Griffith CJ's words as a general or abstract proposition. The meaning of words in statutes, and the application of general equitable conceptions in relation to those words, must depend on the nature and context of the particular statute. Griffith CJ was seeking to determine whether the appellants in the case before the Court – the testator's three sons, among whom the testator's residuary estate was to be divided after a period in which the trust income was to be accumulated – were liable to pay land tax. Griffith CJ was considering the meaning of the word "owner" in the Land Tax Assessment Act 1910 (Cth). In particular he was considering the following words in the definition of "owner" in s 3: "every 129 [1939] Ch 993 at 996-997, quoting from Farwell, A Concise Treatise on Powers, 3rd ed (1916) at 310-311. 130 Farwell, A Concise Treatise on Powers, 3rd ed (1916) at 310. 131 Sugden, A Practical Treatise on Powers, 8th ed (1861) at 453. 132 Thomas and Hudson, The Law of Trusts, (2004) at [7.28]-[7.29] (especially text accompanying notes 104 and 105). person who … whether at law or in equity … is entitled to the land for any estate of freehold in possession". He considered that "estate in possession" in s 3 had the meaning which Butler's notes to the 10th edition of Fearne on Contingent Remainders gave it: "a right of present enjoyment"133. Griffith CJ said134: "This is not only the natural, but the only just, interpretation that can be put on the words. For the tax is an annual tax, and the 'owner' of the land is the person who is in the present enjoyment of the fruits which presumably afford the fund from which it is to be paid." The present context. Accepting the correctness of what Griffith CJ said, it does not follow from the fact that the trustee of the Trust in these appeals was entitled to the whole of the Trust assets, both legal and equitable, and hence to the present enjoyment of them, subject to his duties as trustee, that for the purposes of the definition of "property" in s 4(1) of the Act the assets comprised property to which he was entitled in possession or reversion. That is because the purpose of the definition is to enable the parts of the Act to which it relates to function. The interests of one spouse as trustee, even in circumstances giving that spouse entitlement to the whole of the assets in possession, are not "property" of the type contemplated by the Act. If they were, it would follow in divorce proceedings that the assets of the Trust could be disposed of to the wife at the expense of other members of the class of objects of the power of appointment. That class did not include only the wife and the children. It included the husband's two sisters, their spouses, and their children (of whom, by the time of the trial, there were four)135. The conclusion that a power of this kind exists, even if, as the wife submitted, the court would not as a matter of discretion exercise it adversely to third parties, is surprising. It is surprising that the court should even have to consider the exercise of discretion in those circumstances. It is so surprising that there must be a flaw in the reasoning that led to it. The flaw is the transposition of Griffith CJ's words from the context of the land tax legislation he was considering to s 4(1). Conclusion. The definition of "property" in s 4(1) contemplates interests in property either owned otherwise than as trustee, or owned as beneficial interests in a trust, so that those interests can be adjusted by orders made under s 79. The definition does not contemplate entitlements as trustee. The wife's submissions would enable a trustee who is not in law entitled to any personal enjoyment of the trust property, and who could never by his or her own act 133 (1915) 20 CLR 490 at 497, discussing Fearne, An Essay on the Learning of Contingent Remainders and Executory Devises, 10th ed (1844), vol 1 at 2, note (a). 134 (1915) 20 CLR 490 at 497. 135 See below at [186]. become entitled to any personal enjoyment of it, to be treated as though he or she were so entitled. The wife's submission would mean that if a husband (or a wife) were trustee of a discretionary trust having a bare power of appointment among persons who are not related to the trustee, and who did not include the trustee, the trustee would be, within the meaning of the definition of "property" in s 4(1), "entitled" to the assets, and the "interests" of the trustee reflected in that entitlement would be altered to the advantage of the other party to the marriage. In Ascot Investments Pty Ltd v Harper, Gibbs J said136: "[I]t would be unreasonable to impute to the Parliament an intention to give power to the Family Court to extinguish the rights, and enlarge the obligations, of third parties, in the absence of clear and unambiguous words … Except in the case of shams, and companies that are mere puppets of a party to the marriage, the Family Court must take the property of a party to the marriage as it finds it. The Family Court cannot ignore the interests of third parties in the property, nor the existence of conditions or covenants that limit the rights of the party who owns it."137 Mr Jackson cited these statements. Counsel for the wife attempted to distinguish them, but not convincingly. The words used to define "property" in s 4(1) are not sufficiently "clear and unambiguous" to validate the wife's argument. Further, just as s 79 does not permit the Family Court to ignore the existence of conditions and covenants affecting property which limit the rights of the party who owns the property, so too it cannot ignore the existence of trust obligations which limit the rights of a party who owns the property and holds the office of trustee. A subsidiary argument advanced by the wife The wife drew attention to the fact that so long as the husband remained trustee he, being both trustee and one of the objects of the power of appointment, would be free lawfully to distribute income and capital to himself. This proposition was only true for the pre-1983 period, for after the 1983 Instrument (which was not set aside below and which the wife never asked to be set aside) the husband was no longer an object of the power of appointment. Even in the pre-1983 period, however, the husband did not have any property. His position, by reason of being both trustee and object, was not that of a person entitled in 136 (1981) 148 CLR 337 at 354-355 (Stephen, Aickin and Wilson JJ agreeing); [1981] HCA 1. 137 There was no allegation of sham, and no employment of any puppet company, in the present case. possession or reversion. A "general power of appointment" is sometimes said to be "equivalent to property"138, because it enables the donee of the power to appoint to any legal person or charitable purpose in the world, including the donee. That is true in the sense that if a general power is exercised in favour of the donee, the donee becomes owner. But a general power is not the same thing as ownership. Thus in Ex parte Gilchrist; In re Armstrong139 Fry LJ said: "No two ideas can well be more distinct the one from the other than those of 'property' and 'power' … A 'power' is an individual personal capacity of the donee of the power to do something. That it may result in property becoming vested in him is immaterial; the general nature of the power does not make it property. The power of a person to appoint an estate to himself is … no more his 'property' than the power to write a book or to sing a song. The exercise of any one of those three powers may result in property, but in no sense which the law recognises are they 'property.' In one sense no doubt they may be called the 'property' of the person in whom they are vested, because every special capacity of a person may be said to be his property; but they are not 'property' within the meaning of that word as used in law. Not only in law but in equity the distinction between 'power' and 'property' is perfectly familiar, and I am almost ashamed to deal with such an elementary proposition … That being so, have the Courts ever said that such powers are 'property?' If they have, it would be our duty to follow their decision. But no such imputation can with propriety be cast on the Courts of Law or Equity; they have always recognised the distinction between 'power' and 'property.'" As Lord Sumner said, "the right to exercise a power is not property"140. Thus a covenant to settle after-acquired property does not catch any property over which the covenantor has a general power of appointment unless and until the power is exercised in favour of the covenantor141. Hence a general power of appointment is not ownership. It is truer to say that the donee of a general power of appointment is "for all practical purposes in the position of beneficial owner of 138 Thus in Tatham v Huxtable (1950) 81 CLR 639 at 646-647; [1950] HCA 56 Latham CJ quoted words to that effect from Jarman on Wills, 7th ed (1930), vol 1 at 458. See also the authorities referred to by Kitto J at 654, and In re Beatty (decd) [1990] 1 WLR 1503 at 1507; [1990] 3 All ER 844 at 847-848. 139 (1886) 17 QBD 521 at 531-532. 140 O'Grady v Wilmot [1916] 2 AC 231 at 270. 141 Tremayne v Rashleigh [1908] 1 Ch 681. the property"142, has "a right of disposition which is in many respects the equivalent of property"143 and is "virtually the owner"144. In any event, the husband's power was not a general power of appointment. It was only a power to appoint among a class of objects to which he belonged, not anyone in the world. And he had no entitlement to any more than any other member of the class. Applications to amend notices of contention and for special leave to cross-appeal The applications. The wife sought leave to amend her notices of contention. The contention she wished to advance was that ss 79 and 85A of the Act enabled and permitted the husband to deal with the assets of the Trust and the Children's Trusts so as to comply with par 4 of the orders made by Strickland J. She also sought special leave to cross-appeal with a view to this Court making new orders based on s 79 or s 85A or both. Section 79. So far as these applications rest on a desire to invoke s 79, they are futile in view of the conclusion reached above that the assets of the Trust were not property in which the husband or the wife had interests. Section 85A: Suttor v Gundowda Pty Ltd. So far as these applications rest on a desire to invoke s 85A145, they face the difficulty that s 85A was not relied on in the trial or in the Full Court. It was first raised by the wife in the course of oral argument before this Court. The wife argued that the nature of the orders she sought at trial was clearly brought to the attention of the other parties. That is true; but in the Second Amended Application for Final Orders which does this, while s 106B and Pt VIIIAA of the Act are referred to, s 85A is not. No order specifically depending on s 85A was applied for. This has some significance, because the application of s 85A depends on characterising the Trust as an 142 Tatham v Huxtable (1950) 81 CLR 639 at 654 per Kitto J (emphasis added). 143 Grey v Federal Commissioner of Taxation (1939) 62 CLR 49 at 63 per Dixon J; [1939] HCA 14 (emphasis added). 144 Muir or Williams v Muir [1943] AC 468 at 483 per Lord Romer (emphasis added). 145 Section 85A(1) provides: "The court may, in proceedings under this Act, make such order as the court considers just and equitable with respect to the application, for the benefit of all or any of the parties to, and the children of, the marriage, of the whole or part of property dealt with by ante-nuptial or post-nuptial settlements made in relation to the marriage." ante-nuptial or post-nuptial settlement. That is a question arguably capable of having factual elements not investigated at trial. The wife submitted that it was "essentially" a question of construction. However, in seeking to answer it favourably, she did not rely only on the terms of the Trust, but also relied on evidence, including testimony. If she was right to rely on evidence – a proposition contested at least by the trustees – then it would have been open to the husband to have called evidence on the point. The trustees and the husband contended that since no s 85A questions had been agitated at trial, they could not be agitated on appeal. They relied on the rule that "[w]here a point is not taken in the court below and evidence could have been given there which by any possibility could have prevented the point from succeeding, it cannot be taken afterwards."146 Beyond a reference to the adducing of evidence as to the likely future needs of the possible beneficiaries under the Trust, the trustees and the husband did not specifically identify what the evidence would have been which by any possibility could have prevented any s 85A point from succeeding, but the wife's reliance on evidence dehors the terms of the Trust itself gives plausibility to what the other parties claimed. There are other difficulties with these applications. In view of the fact that this judgment dissents from the orders proposed by the other members of the Court, it will be brief in dealing with the other difficulties. Post-nuptial settlement? The Trust was not created in 1981. As the courts below found, it was created in 1968, when the husband prepared the document recording the terms of the Trust which he did not sign until 1981. Since the husband did not marry until 1978, the Trust was not post-nuptial (contrary to the wife's submission). It was made 10 years before the husband married. This difficulty cannot be overcome by treating each disposition of property to the trustee of the Trust after the marriage as the creation of a separate trust. To do so is artificial. And to do so is foreclosed by cl 3 of the Trust, which defines "the fund" as meaning "the trust fund from time to time in existence." There was one "Trust" on which various items of property were held as a mass, not several "trusts" in identical terms in each of which a series of individual items of property were held separately. Further, there is a factual obstacle to accepting the multi-trust theory. Strickland J's mind was admittedly not focused on this precise issue because the parties had not raised it. But the language he used in making findings of fact is consistent only with the assets being transferred from time to time into one trust – the Trust – not a series of trusts. Thus he said: 146 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35. "A trust vehicle was used in order to accumulate and use the assets and the income, and … this does not detract from the circumstance that the assets were the assets of the parties when they went into the Trust. Instead of accumulating those assets in their own names, a tax effective family trust was used with a view to benefiting the family." (emphasis added) It was not submitted that this conclusion was wrong. This point, incidentally, reinforces the view that the principles stated in Suttor v Gundowda Pty Ltd147 do not permit s 85A issues to be considered at this stage. Ultimately the validity of the "multi-trust" theory would depend on the terms upon which the owners of the assets from time to time transferred them to the husband. There is a difference between transferring an asset to the husband as trustee of the Trust, and transferring an asset to the husband as trustee, to be held on a separate trust having the same terms as the Trust. It would be necessary to examine what was written and said when the transfers took place. It has not been shown that the evidence called in that respect is complete. Made in relation to the marriage? But can the Trust be said to be ante- nuptial? For a settlement to be an ante-nuptial or post-nuptial settlement, it must have a nuptial character: it must have been "made in relation to the marriage". That is, it must have been made in contemplation of the particular marriage in relation to which s 85A is invoked148. There is nothing in the "recitals or substance"149 of the Trust to suggest that it was. The fact that there are persons who are not connected with the marriage to which the settlement is said to relate who are "substantial potential beneficiaries" prevents it being ante-nuptial or post-nuptial150. At the time of the trial, apart from the four children of the husband and wife, the beneficiaries included the husband's sister, her three children, and the daughter of the husband's deceased sister. The beneficiaries in future would include any person who married those five people, together with the issue of those marriages. In 1968 it was foreseeable that the beneficiaries would in due course be as numerous as they have turned out to be, and are likely to be in future. Further, however wide the words "made in relation to the marriage" in s 85A(1) are, and their breadth can vary from statute to statute, they cannot be stretched to establish the necessary relationship between the making of the Trust in 1968 and the marriage in 1978. The relevant settlement must be made in relation to the marriage, not simply in relation to marriage. 147 (1950) 81 CLR 418. 148 Brooks v Brooks [1996] AC 375 at 392. 149 Joss v Joss [1943] P 18 at 20 per Henn Collins J. 150 In the Marriage of Knight (1987) 90 FLR 313 at 318 per Nygh J. Conclusion The conclusions just arrived at indicate that there was no point in setting aside the 1998 Instrument and the 2002 Instrument as a means of giving the wife indirect access to the assets of the Trust: those assets were not "property" within the meaning of that word in s 79. That makes it unnecessary to consider the four bases on which Strickland J, Bryant CJ and Warnick J sought to defend Strickland J's orders. In view of the fact that this is a dissenting judgment, it is not necessary to deal with what was called the "financial resources" issue, in relation to which Finn J held that if the 2002 Instrument were not to be set aside, so that the assets of the Children's Trusts were not to be treated as property subject to s 79(1)(a) orders, those assets should have been treated as a financial resource of the husband, with the result that there would be some adjustment in favour of the wife by reason of s 75(2)(b) of the Act. Nor is it necessary to consider whether the matter should be remitted to the Full Court, and on what issues. There is also no point in considering whether, if the appeals were allowed, the wife should have to pay the costs of all the appellants, or only one set. It is sufficient to indicate that the appeals should be allowed, the applications to amend the notices of contention should be dismissed, and the applications for special leave to cross-appeal should be dismissed. 189 KIEFEL J. The issues on these appeals concern the inclusion by the primary judge (Strickland J)151 of the property of the ICF Spry Trust ("the Trust") in the "net asset pool" to which the parties to the marriage had contributed and the treatment of it as property available to Dr Spry ("the husband") to meet an order for payment of a sum of money to Mrs Spry ("the wife") in settlement of her claims to property consequent upon the parties' divorce. The Trust was created in 1968. The parties were married in 1978. His Honour found that the husband made all the financial contributions to the Trust but the wife made indirect contributions to the Trust assets through her efforts in the marriage. His Honour did not make a finding as to the extent of the husband's contribution to the Trust prior to the marriage. The husband's evidence did not suggest that it was substantial. He said that only some small parcels of shares had been acquired by the Trust prior to the marriage. His Honour recorded the purchase of a house property by the Trust, after the marriage and in December 1979, from savings accumulated by the husband prior to the marriage. This subsequently became the matrimonial home. Additions later made to the Trust assets, mostly in the form of investments, were the product of the parties' direct and indirect contributions. His Honour found that the Trust was maintained to allow the parties to accumulate assets for the benefit of the family in the most tax-effective way. The "net asset pool", to which the primary judge had regard in assessing the parties' contributions, included the Trust assets. His Honour found that the parties' contributions were 52 per cent by the husband and 48 per cent by the wife. The net result was that the husband was entitled to $5,105,435 and the wife $4,712,709. After taking account of the assets of which the wife had the benefit, the husband was ordered to pay the wife $2,182,302152. Although his Honour said "[w]here that will come from though is entirely up to the husband", he clearly had in mind the Trust assets, which he considered could be treated as the property of the husband. His Honour had found that the Trust was at all times subject to the control of the husband. The husband's evidence, that the Trust was created by him, orally, in June 1968, was not challenged and the primary judge accepted that it had occurred. On 15 October 1981 the husband executed an instrument of the Trust earlier declared. In it he appears as settlor and trustee. The description of "the 151 The decision of the primary judge was not reported. The decision of the Full Court was reported, in altered form, under the name of Stephens v Stephens (2007) 212 FLR 362; [2007] FamCA 680. 152 The Full Court records an error in calculation which is not presently material: see Stephens v Stephens (2007) 212 FLR 362 at 429 [306] per Warnick J. beneficiaries" included the husband and any future wife, for it referred to all the issue of his father and all persons married to such issue. The trustee had an absolute discretion to apply the capital and income of the Trust fund. By a deed executed on 4 March 1983 ("the 1983 Deed") it was said that the husband as settlor "releases and abandons" any beneficial interest or rights held by him under the Trust instrument or in the Trust fund and "confirms that by reason hereof he ceases to be a beneficiary of the trust or a person to whom or for whose benefit all or any part of the trust fund and income thereof may be applied" (cl 2). It further provided that "any variation of the trusts of the said instrument shall be invalid to the extent to which it purports to confer directly or indirectly any right or benefit upon the settlor" (cl 3). The purpose of the 1983 Deed, which both the husband and wife signed, was to prevent the Trust property being aggregated with other properties, held in the name of the husband, for land tax purposes. The wife remained a beneficiary as to capital and income. On 7 December 1998 the husband executed an Instrument of Variation of the Trust which excluded both the husband and the wife from benefiting from a distribution of capital from the Trust. The instrument was said to be irrevocable. The husband's explanation as to the need for these changes was not accepted by the primary judge, who found that it was done without notice to the wife and when the marriage was already in difficulty. The parties separated on 30 October 2001. On 18 January 2002 the husband, again without notice to the wife, set up trusts for each of the four children of the marriage and on the same day executed a document providing for the forgiveness and release of all amounts owing to the husband and the wife by the Trust and applying one quarter of the income and capital of the Trust to each of the trusts set up for the children. At the time of these appeals, Mr Kennon was a trustee of three of those trusts. The primary judge found that the husband's actions with respect to the distribution of the Trust property to the children and the steps he had taken in December 1998 were attempts to ensure that that property was beyond the reach of the wife and the Family Court. His Honour made orders setting aside the Instrument of Variation of 7 December 1998 and the dispositions made on 18 January 2002153. In doing so his Honour considered the position of the children, but observed that the assets had been accumulated by their parents. Contrary to the husband's assertion, it had not been their intention to benefit the children in their lifetime. In the course of his reasons the primary judge considered the courses open with respect to the Trust property, on the basis that the property would be returned to the Trust. His Honour said that an order directing the trustee to distribute the assets of the Trust, or part of them, directly to the wife would be 153 Pursuant to the Family Law Act 1975 (Cth), s 106B. "just and equitable"154. His Honour considered treating them as a "financial resource" of the husband155 but determined to proceed upon the basis that they be treated as the property of the husband and as available to meet an order for the settlement of property. A Full Court of the Family Court dismissed the husband's appeal (Bryant CJ and Warnick J, Finn J dissenting)156. The majority did not consider that the orders setting aside the 1998 Instrument of Variation and the dispositions from the Trust were the result of a wrong exercise of discretion157. Attention then focussed upon whether it was possible for the husband to be re-established as a beneficiary, despite his release and renunciation in the 1983 Deed, in order that effect could be given to the primary judge's orders. Warnick J held that the husband was able to rescind the release158. Bryant CJ did not agree with this conclusion, but considered that it remained open to the husband and wife, as parties to the 1983 Deed, to cancel it159. In her dissent Finn J held that neither rescission nor variation of the 1983 Deed or of the Trust by the husband was possible so that he could be reinstated as a beneficiary. In her Honour's view the release contained in cl 2 of the 1983 Deed was effective upon execution and could not now be withdrawn160. The power of variation contained in the Trust instrument was referable to the Trust as constituted from time to time161 and must therefore be applied to the situation which applied after the execution of the 1983 Deed. In these conclusions her Honour was correct, with respect. The Deed was effective in its terms. A later cancellation by the parties to the Deed could not alter the effectiveness of the release. Finn J concluded that his Honour the primary judge was in error when he said, at one point, that there was nothing to prevent the husband from revoking 154 See Family Law Act 1975 (Cth), s 79(2). 155 Family Law Act 1975 (Cth), s 75(2)(b). 156 Stephens v Stephens (2007) 212 FLR 362. 157 Stephens v Stephens (2007) 212 FLR 362 at 430 [313] per Warnick J, 366 [3] per 158 Stephens v Stephens (2007) 212 FLR 362 at 443 [371]. 159 Stephens v Stephens (2007) 212 FLR 362 at 369 [27]. 160 Stephens v Stephens (2007) 212 FLR 362 at 398 [128]. 161 Stephens v Stephens (2007) 212 FLR 362 at 398-399 [131]. the 1983 Deed, or part of it162. But, as her Honour observed, that possibility was not integral to his Honour's reasoning. The approach which his Honour took, in determining to make the order for the payment of the monies to the wife, was to leave it to the husband to determine how to find the payment of the net amount, although his Honour clearly had in mind that the husband controlled the Trust. Finn J did not consider control, absent the potential for the husband to benefit from the Trust, to be a sufficient foundation for the order. Her Honour noted that no authority in that Court had gone that far163. It followed, in her Honour's view, that there was no utility to the orders made under s 106B of the Family Law Act 1975 (Cth) ("the Act"), setting aside the dispositions of the Trust property to the children's trusts164. In arriving at that view, her Honour expressed agreement with the submission that, because a divorce order had been made, the wife no longer qualified as a beneficiary165. It would follow that neither the husband nor the wife could receive any benefit from the Trust. The wife applied to the Family Court ("the Court"), for orders by way of lump sum maintenance and property settlement, on 19 April 2002. While that application was pending, she filed an application for a divorce order in December 2002, in the Federal Magistrates Court. That Court granted a decree nisi on 16 January 2003, which became absolute on 17 February 2003. The proceedings below were conducted upon the basis that the wife was disqualified as an object of the Trust, following upon the termination of the marriage and the loss of her status as a spouse, but prior to the determination of her claim to property. It may be inferred that the primary judge and the Full Court considered that the reference to "spouse" in the Trust instrument is intended to refer to persons having a marital relationship to the issue identified. If it be correct, the provisions of the Act, which do not postpone the making of a divorce order to the resolution of property claims166, may have a consequence with respect to some rights. This may have been unintended. Alternatively the timing of orders may have been a matter left to the parties. 162 Stephens v Stephens (2007) 212 FLR 362 at 399 [135]. 163 Stephens v Stephens (2007) 212 FLR 362 at 400 [137] referring to Ashton and Ashton [1986] FLC ¶91-777; Stein and Stein [1986] FLC ¶91-779; In Marriage of Davidson (No 2) (1990) 101 FLR 373; In Marriage of Goodwin (1990) 101 FLR 386; Webster v Webster [1998] FLC ¶92-832; JEL and DDF (No 2) [2001] FLC ¶93-083; Milankov and Milankov [2002] FLC ¶93-095. 164 Stephens v Stephens (2007) 212 FLR 362 at 400 [141]. 165 Stephens v Stephens (2007) 212 FLR 362 at 400 [140]. 166 Compare the Matrimonial Causes Act 1959 (Cth), s 68(4). The primary judge made a number of orders with respect to the parties' property interests. The order with which these appeals are concerned was made under s 80(1)(a) of the Act, namely an order for payment by the husband of a lump sum. It is an order made by the Court in the exercise of its powers under Pt VIII of the Act. Those powers extend to orders for the maintenance of a party to the marriage (s 74(1)), and for the settlement of property in proceedings between the parties to the marriage with respect to the property of the parties to the marriage (s 79(1)). Jurisdiction is given to the Court167 and to the Federal Magistrates Court168, subject to Pt V of the Act, with respect to a "matrimonial cause". That term is defined in s 4(1) to include (a) proceedings between the parties to a marriage for a divorce order in relation to the marriage; (c) proceedings between those parties with respect to the maintenance of one of the parties; and (ca) proceedings between the parties with respect to the property of the parties to the marriage. The proceedings concerning property are relevantly those "(i) arising out of the marital relationship; (ii) in relation to concurrent, pending or completed divorce or validity of marriage proceedings between those parties". It is evident from these provisions that the Court's powers are directed to persons and their property as "parties to the marriage" regardless of whether a divorce order has been made. The power of the Court is not affected by whether proceedings for a divorce order, "proceedings for principal relief"169, have been determined. The Act makes provision for adjournment of property settlement proceedings170, including where the Court is of the opinion that there may be a significant change in the financial circumstances of the parties. This may allow the Court to treat the parties as if they continued to be parties to the marriage for the purpose of finalising proceedings concerning property. But it may not prevent some legal effects flowing from the dissolution of the marriage. At least this will be so where the Court is unable itself to deal with property because the interests of a party to the marriage, or their ability to benefit from it, depend upon their status as a party to the marriage. The Act does not deem persons to remain parties to the marriage for all purposes relating to property interests. Courts exercising matrimonial jurisdiction have for some time had the power with respect to property which was the subject of a settlement upon one or 167 Family Law Act 1975 (Cth), s 39(1)(a). 168 Family Law Act 1975 (Cth), s 39(1A). 169 Family Law Act 1975 (Cth), s 4(1). 170 Family Law Act 1975 (Cth), s 79(5). other of the parties to the marriage, or which made provision for the parties, to apply some or all of it to the benefit of a party to the marriage following upon the termination of the marriage. And the courts have been able to do so despite the loss of status of that party, where it appeared as a condition of the settlement. So long as a settlement remained in existence the courts, if necessary, would vary the condition. The need to do so would most commonly arise where the settlement made continuing provision for that party. Section 5 of the Matrimonial Causes Act 1859 (UK) provided that, after a decree of nullity or dissolution of marriage, the court could inquire into the existence of ante-nuptial or post-nuptial settlements of property "made on the parties whose marriage is the subject of the decree" and make orders with respect to the application of the property settled. That provision has been maintained in successive legislation. In Dormer v Ward171 a settlement was made in consideration of a marriage which was subsequently declared a nullity. The settlement was read as varied and extending to "parties whose marriage" was no marriage. The Court of Appeal held that it had power to vary the settlement so long as the settlement was in existence at the time of the decree172. That is to say, for the purpose of its inquiry into the settlement, the Court could have regard to a state of affairs which existed before the order was pronounced and vary it. Dormer v Ward was followed in Jacobs v Jacobs173. There the settlement was of covenants to pay annuities to the wife after the husband's death, so long as she remained a widow. The parties were divorced at the time of the husband's death and the wife did not acquire the status of a widow. It was contended that the covenants terminated upon the husband's death. The Court of Appeal upheld the decision of the judge below which omitted the words "a widow" from the condition174. More recently, in C v C (Ancillary Relief: Nuptial Settlement)175 it was held that where the husband and wife were removed as beneficiaries from a settlement prior to their divorce, orders of variation could be made176. The 172 Dormer v Ward [1901] P 20 at 33 per Vaughan Williams LJ. 173 [1943] P 7, which dealt with the corresponding provision in the Supreme Court of Judicature (Consolidation) Act 1925 (UK), s 192. 174 Jacobs v Jacobs [1943] P 7 at 11 per Goddard LJ, du Parcq LJ agreeing. 175 [2004] Fam 141; affirmed on appeal in [2005] Fam 250. 176 Under the Matrimonial Causes Act 1973 (UK). settlement was held to have continued in existence at the date of the orders, notwithstanding that the features which made it nuptial had been removed177. In each of these cases the statute provided the court with the power to deal with property the subject of a nuptial settlement. The continuing status of a party to the marriage did not affect the exercise of that power. In the Family Law Act 1975 such a provision is found in s 85A, which provides: "(1) The court may, in proceedings under this Act, make such order as the court considers just and equitable with respect to the application, for the benefit of all or any of the parties to, and the children of, the marriage, of the whole or part of property dealt with by ante-nuptial or post-nuptial settlements made in relation to the marriage. In considering what order (if any) should be made under subsection (1), the court shall take into account the matters referred to in subsection 79(4) so far as they are relevant. (3) A court cannot make an order under this section in respect of matters that are included in a financial agreement." The section was introduced by the Family Law Amendment Act 1983 (Cth). Neither the Explanatory Memorandum nor the Second Reading Speech concerning that Act discuss the reason for its inclusion. The Explanatory Memorandum says that the provision which became s 85A is similar in terms to s 86(2) of the Matrimonial Causes Act 1959 (Cth). Section 86(2) was not in the same terms. It provided that the court could make such orders as it considers just and equitable with respect to the application for the benefit of the parties to and children of the marriage of property dealt with by ante-nuptial or post-nuptial settlements "on the parties to the marriage, or either of them". In this latter respect it followed the English provision. Section 85A refers to "settlements made in relation to the marriage". It is not apparent why a provision in similar terms to s 86(2) of the 1959 Act did not appear in the Act of 1975 as passed. It may have been assumed that the reference to the "property of the parties to the marriage" in s 79(1), the interests in which the Court could alter, was wide enough to extend to settlements. But s 79 is limited by the definition in s 4(1) of "property", in relation to the parties to a marriage, as being property to which they are entitled in possession or reversion. In the present case the wife sought to rely upon the 177 C v C (Ancillary Relief: Nuptial Settlement) [2004] Fam 141 at 148 [24] per Wilson J; see also Radziej v Radziej [1967] 1 WLR 659; [1967] 1 All ER 944. husband's entitlement as trustee to possession of the Trust property, but that would be in his capacity as trustee and not as a party to the marriage. The Report of the Joint Select Committee on the Family Law Act178, which predated the 1983 amendment, discussed the need for powers to be given to the Court with respect to family trust or company arrangements. It followed upon the receipt of submissions, including submissions from the Family Court179. It is not difficult to infer that s 85A was directed to the use of discretionary family trusts and other structures used for holding assets acquired in the course of a marriage, for tax-related and other purposes. Vehicles such as these had been in common use for some time prior to 1983. It is apparent that s 85A was intended to give the Court power to deal with property which could not be the subject of an order under s 79, but which accorded with current conceptions of what was a "settlement" of property in matrimonial law. A nuptial "settlement" of property does not equate with the term as conveyancers would understand it180. It may have in common with such settlements a disposition of property for the purposes of regulating the enjoyment of the settled property and it may provide for succession181. It limits the alienation and transferability of the property182. It cannot involve an absolute interest in property, given that the statutory provisions referred to give the courts power to vary it183. The form that a settlement takes has not been regarded as of importance; rather it is necessary that it provide for the financial benefit of one or other of the spouses184. It may imply some kind of continuing provision for them185. Beyond these characteristics, no definition of a settlement is possible. 178 Australia, Parliament, Family Law in Australia: Report of the Joint Select Committee on the Family Law Act, July 1980, vol 1. 179 Australia, Parliament, Family Law in Australia: Report of the Joint Select Committee on the Family Law Act, July 1980, vol 1 at [5.117]-[5.123]. 180 See Brooks v Brooks [1996] AC 375 at 391, 392 per Lord Nicholls of Birkenhead. 181 Halsbury's Laws of England, 3rd ed, vol 34 at 428. 182 Micklethwait v Micklethwait (1858) 4 CB (NS) 790 [140 ER 1302]. 183 Brooks v Brooks [1996] AC 375 at 391. 184 Prinsep v Prinsep [1929] P 225 at 232 per Hill J. 185 Brooks v Brooks [1996] AC 375 at 391. Necessarily the settlement spoken of must have the "essential character" of being nuptial186. In the past, settlements made in consideration of a marriage were commonly made by others, such as a member of the families concerned, upon one of the parties to the marriage. This may account for the language employed by the English provision which refers to a settlement "on the parties whose marriage is the subject of the decree"187. In more recent times a settlement has been applied to a wide variety of dealings with property by the parties to the marriage in making provision for their or their family's benefit. The provision respecting the parties and their family may provide a "nuptial" element. Although the term "settlement" in this area of law may defy definition, much is to be gained from the context in which it appears and the statutory purpose. In Brooks v Brooks188 the width of the meaning given to the term by the authorities was considered to accord with its statutory purpose, which is to provide the court with power to deal with the changed situation brought about by divorce, where it is desirable that the court have power to alter the terms of a settlement. This object does not suggest any narrow meaning should be given to the term189. The liberal meaning given to "settlement", having regard to the purposes of the legislation, has been stated on many occasions in English authority190. In Dewar v Dewar191, it was observed by Dixon CJ, Kitto and Menzies JJ that "the conception of 'settlement' had been carried to lengths which might seem a little surprising"192. But, their Honours said, "it must be borne in mind that the essential purpose of [the provision193] is to enable the Court to inquire into post-nuptial and ante-nuptial dispositions of property in favour of one or other or both of the parties to the marriage" which should be reconsidered because of the dissolution of the marriage. 186 See C v C (Ancillary Relief: Nuptial Settlement) [2005] Fam 250 at 262-263 [44], 265 [53]; [2004] Fam 141 at 147 [20]-[22]. 187 Matrimonial Causes Act 1859 (UK), s 5. 188 [1996] AC 375 at 392. 189 Brooks v Brooks [1996] AC 375 at 392 per Lord Nicholls of Birkenhead. 190 Bosworthick v Bosworthick [1927] P 64; Prescott (formerly Fellowes) v Fellowes [1958] P 260 at 281-282; C v C (Ancillary Relief: Nuptial Settlement) [2005] Fam 191 (1960) 106 CLR 170; [1960] HCA 79. 192 Dewar v Dewar (1960) 106 CLR 170 at 174. 193 Section 9 of the Matrimonial Causes Act 1875 (Q) which is in terms similar to the English provision. In Dewar a transfer of land into the names of a husband and wife as joint tenants was held to be a settlement to which the section referred. There were no trusts, no successive interests and no express limitations. It was considered sufficient that joint ownership was itself a fetter upon alienation and it involved survivorship. Their Honours said that the surrounding circumstances showed that the land was bought and the house was built as a future or continued provision for the husband and wife and that "joint ownership was adopted as the appropriate expression for the provision"194. On those facts, it was not to go too far to regard the transfer to joint ownership as a post-nuptial settlement195. The case for the wife has not sought to rely upon the Court's power under s 85A of the Act until this point. The trustees submit that she should not be permitted to ventilate an issue not raised below. In addition to matters of policy, about the due administration of justice196, it is said that the wife should be held to the conduct of the proceedings below197, having regard to the position of the other parties, including her husband as trustee of the Trust and the children. In particular it is said that the other parties may have conducted their case on a different basis, or called other or additional evidence. It is further put that leave to amend the notices of contention, or special leave to cross-appeal, should be refused because the wife's reliance upon s 85A is misplaced. It is submitted that the Trust predated the marriage but it is neither an ante-nuptial nor a post-nuptial settlement and that s 85A can have no application. It is convenient first to consider this contention. The point made by the trustees is that it is not sufficient that Dr Spry had in mind the prospect of his future marriage and children of that marriage, as he did, when he settled the Trust orally in 1968. Cases dealing with the English provisions have made it plain that the settlor must have in mind the marriage in 194 Dewar (1960) 106 CLR 170 at 174 per Dixon CJ, Kitto and Menzies JJ. 195 Dewar (1960) 106 CLR 170 at 174. 196 Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at 1608 [51] per Gleeson CJ, McHugh and Gummow JJ; 200 ALR 447 at 461; [2003] HCA 48. 197 Water Board v Moustakas (1988) 180 CLR 491 at 497; [1988] HCA 12; Owners "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 68 ALJR 311 at 313; 120 ALR 12 at 14; [1994] HCA 5, referred to in Owners of "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 181 CLR 404 at 415; [1994] HCA 54; Suvaal v Cessnock City Council (2003) 77 ALJR 1449 at 1467 [105]; 200 ALR 1 at 27; [2003] HCA 41; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598 at 1608 [52]; 200 ALR 447 at 461. question for the settlement to qualify as ante-nuptial198. In Joss v Joss199 it was explained that a settlement made before the marriage, but not in relation to the particular marriage, is not within the section because the particular marriage must be a fact of which a settlor takes account in making the settlement200. One of the differences between the English provisions and s 85A of the Act, as earlier noted, is that the former refer to settlements of property "made on the parties whose marriage is the subject of the decree", whereas s 85A provides power with respect to property dealt with by ante-nuptial settlements (or post-nuptial settlements) "made in relation to the marriage". These words201 may require a less direct connection between a settlement and the marriage. It cannot be doubted that the connection required by "in relation to" must be as between the settlement and the particular marriage, that which is the subject of the divorce (or nullity) proceedings, for the purposes of s 85A. The Act has as its subject marriage and s 85A has application in proceedings under the Act202. That leaves the question of the degree of association which is necessary and its relevance to the question of the temporal relationship between settlement and marriage, which arises in the present case. The expression "in relation to" is of wide and general import and should not be read down in the absence of some compelling reason for doing so203. As Toohey and Gummow JJ said in PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service204, the words are prima facie broad and designed to catch things which have a sufficient nexus to the subject. The question of nexus is dependent upon statutory context. Amongst the examples 198 Hargreaves v Hargreaves [1926] P 42; Melvill v Melvill and Woodward [1930] 200 Joss v Joss [1943] P 18 at 20 per Henn Collins J. 201 Which did not appear in s 86(2) of the 1959 Act as earlier mentioned. 202 See Lansell v Lansell (1964) 110 CLR 353 at 359, 361-362 per Kitto J, 367 per Taylor J (in connection with s 86(1) of the 1959 Act); [1964] HCA 42. 203 See, for example, Fountain v Alexander (1982) 150 CLR 615 at 629 per Mason J; [1982] HCA 16; Perlman v Perlman (1984) 155 CLR 474 at 484 per Gibbs CJ, 489 per Mason J; [1984] HCA 4; PMT Partners Pty Ltd (In liq) v Australian National Parks and Wildlife Service (1995) 184 CLR 301 at 330, 331 per Toohey and Gummow JJ; [1995] HCA 36. 204 (1995) 184 CLR 301 at 330-331. given by their Honours was the consideration given by Gibbs CJ, in Perlman v Perlman, to the meaning of the words "in relation to" in the Family Law Act with reference to two sets of proceedings. His Honour said that they "import the existence of a connection or association between the two proceedings, or in other words that the proceedings in question must bear an appropriate relationship to completed proceedings of the requisite kind"205. The process of construing s 85A, in order to determine its intended operation and the degree of connection necessary between settled property and the marriage, requires consideration of the language and purpose of the Act206. The process of construction should begin with examining the context of the provision in question207. "Context" includes the existing state of the law and the problem that the statute was intended to remedy208. It has earlier been observed that s 85A was intended to extend the Court's powers to property which did not fall within s 79, but which nevertheless fell within the conception of a nuptial settlement of property. There is another feature of the Act introduced in 1975 which informs a reading of s 85A and which reflects the focus of the section as being on the property dealt with by the settlement. An important aspect of the Act, so far as concerns settlements of property, is that it requires the Court to make orders respecting property by reference to the contributions of the parties to the marriage to property which is accumulated in the course of the marriage. And as s 85A(2) shows, the relevance of the parties' contributions is not limited to "property" of the parties as strictly defined in s 4. This policy, which facilitates a distribution and settlement of property, was not present in the 1959 Act or in the English legislation. Section 86(1) of the Matrimonial Causes Act 1959 (Cth) provided that the court could require a party to the marriage to make such a settlement of property to which they are entitled (in possession or reversion) as the court considers just and equitable in the circumstances of the case. Section 86(2) dealt with ante-nuptial and post-nuptial settlements, as earlier mentioned. "Settlement", in 205 Perlman v Perlman (1984) 155 CLR 474 at 484. 206 Dewar (1960) 106 CLR 170; Brooks v Brooks [1996] AC 375; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28. 207 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ. 208 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2. s 86(1), had a wider meaning than in s 86(2). Toose, Watson and Benjafield209 observed that the view which prevailed until 1965, was that the court's jurisdiction under s 86(1), to make an order that was just and equitable, was at large. This was partly arrested by the decision in Smee v Smee210, where Sugerman J explained that the purpose of s 86 was to provide for the settlement and adjustment of all matters arising out of the marital relationship; proprietary relationships "whether in relation to free property of the spouses or to settled property" were to be adjusted and dealt with211. The 1959 Act did not require the court to take account of the parties' contributions to property acquired during the marriage. However, in Smee, Sugerman J said that the "material consideration affecting the property itself would commonly be that the claiming spouse has assisted in its acquisition or accumulation, not necessarily by monetary contribution … and not necessarily so as to give rise to a proprietary interest in the strict sense"212. The Act passed in 1975 contains express and detailed provisions for the assessment of contribution to property in s 79(4)213. It requires the Court, in proceedings with respect to the settlement of property, to take into account the contributions, financial and otherwise, direct and indirect, which a party has made to the acquisition, conservation or improvement of the property214, amongst other matters. The Court is not to make an order altering the interests of the parties in their property unless satisfied that it is just and equitable to do so215. More recent English legislation216 introduced a reference to contributions by the parties to the welfare of the family as relevant to property proceedings217. 209 Australian Divorce Law and Practice, (1968) at 521 [761]. 210 (1965) 7 FLR 321. 211 Smee v Smee (1965) 7 FLR 321 at 326. 212 Smee v Smee (1965) 7 FLR 321 at 327. 213 And see Family Law Act 1975 (Cth), s 75(2)(j) in connection with orders for maintenance. 214 Family Law Act 1975 (Cth), s 79(4)(a), (b). 215 Family Law Act 1975 (Cth), s 79(2). 216 Matrimonial Proceedings and Property Act 1970 (UK), ss 4, 5; Matrimonial Causes Act 1973 (UK), ss 24, 25. 217 Matrimonial Proceedings and Property Act 1970, s 5(1)(f); Matrimonial Causes Act 1973, s 25(1)(f). It was thought to shift the emphasis from the previous concept of the maintenance of a spouse and children to the redistribution of assets218, but does not go so far as the Australian legislation in the latter's concentration upon the parties' contributions to property219. Of particular importance for present purposes is the requirement that the Court consider the parties' contributions in exercising its power under s 85A(1). Section 85A(2) requires that the matters referred to in s 79(4) be taken into account "so far as they are relevant" in the Court's consideration as to what (if any) order should be made under sub-s (1). It must be taken as intended that the Court consider any contributions, direct or indirect, to the property the subject of a nuptial settlement. The contributions of the parties to the marriage, direct or indirect, are central to the means by which the Court is to determine proceedings with respect to property. Reference to those contributions serves both to identify the property in question and to provide one means of assessment for the purpose of decision. Property which the Court is intended to deal with extends beyond property in which the parties have a legal interest. By the wide meaning given to the term "settlement" in this context, it is sought to give the Court power to deal with all property held for the use and benefit of the parties to the marriage and which may represent an accumulation of their assets in the course of the marriage. The purpose of s 85A is to ensure that, since the previous arrangements for the property cannot continue, the property is applied equitably to the benefit of the parties, or the children. Whether a disposition or other settlement qualifies as an ante-nuptial (or post-nuptial) settlement made in relation to the marriage is informed by these purposes, rather than by reference to authorities dealing with statutes employing different language and having purposes which cannot be regarded as wholly the same. Each of the features necessary to render the property of the Trust settled property within the purview of s 85A is present in this case. In reaching this conclusion, one must look to the individual words of the section in light of their context and purpose. "Settlement" is to be given a broad meaning consonant with the intention of s 85A to bring discretionary family trusts within the ambit of the Act. "Property" is to be read as including those assets to which the parties have contributed throughout the course of their marriage and which are held for their use and benefit. The Trust assets constitute property, much of which was 218 Wachtel v Wachtel [1973] Fam 72 at 77 per Ormrod J. 219 And see Parkinson, "The Yardstick of Equality: Assessing Contributions in Australia and England", (2005) 19 International Journal of Law, Policy and the Family 163. obtained by way of the parties' contributions to the marriage. The assets therefore attract the operation of s 85A. Further, as shall become clear, on each occasion that property was transferred to the Trust, the parties "dealt with" their property, and effected settlements within the meaning of s 85A. The Trust property represents contributions of the parties and is held on terms of a settlement. It is "property dealt with by … settlements". The settlement in this case may also be regarded as having the requisite nuptial element. The approach for which the trustees contend, which would deny the application of the section to the Trust as an ante-nuptial settlement, is one which has regard to the situation at the time the Trust was made. At that point it could not have been referable to the marriage. Such an approach is literal and emphasises the words "ante-nuptial … settlements" and "made in relation to the marriage". It may assume importance where the settlor's intention is relevant, but no such issue arises here. It could hardly be said that the settlor's intentions here were unfulfilled. A preferable approach is one which gives effect to the purposes of the section. If necessary, particular words in the section should be adjusted to that end220. Section 85A(1) is intended to have a wide operation, to property held for the benefit of the parties on a settlement and to which they have contributed. It is intended to apply to settlements whether they occur before or during marriage. The essential requirement of the section is that there be a sufficient association between the property the subject of a settlement and the marriage the subject of proceedings. It does not require that a settlement made prior to marriage be directed to the particular marriage at the point it is made. It is sufficient for the purposes of the section that the association of which it speaks ("made in relation to") be present when the Court comes to determine the application of the property settled under s 85A(1). In the present case the Trust was used to hold property for the benefit of the parties to the marriage upon the terms of the Trust. It thereby acquired the nuptial element. Section 85A(1) applies. The submissions for the trustees would also deny that the property held by the Trust was settled after marriage, by viewing the original settlement of the Trust as the only one to which s 85A(1) can apply. It may be accepted that the Trust was the form adopted as the expression of the nature of the provision the parties intended for themselves221, but it does not reflect the continuous nature of the parties' contributions to the Trust throughout the marriage. An approach which recognises settlements of property made from time to time by the parties 220 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 382 [70] per McHugh, Gummow, Kirby and Hayne JJ. 221 Dewar (1960) 106 CLR 170 at 174 per Dixon CJ, Kitto and Menzies JJ. to the marriage is more consonant with the focus of the Act on the property which is the subject of a settlement and the contributions which the parties make to that property during the course of a marriage. Such an approach is therefore better able to give effect to the goals of the Act222. It facilitates both an identification of property the subject of contributions and a means of assessing that contribution, as earlier observed. There appears to be no reason why each disposition of property to the Trust, from the time of the parties' marriage, cannot be viewed as a separate trust created at that time, albeit on the terms of the Trust223. It has been said that it is sufficient for the establishment of a trust that property is impressed with a trust obligation224. In any event the conception of a settlement in s 85A is substantially informed by statutory context and purposes. In construing s 85A(1) it should be borne in mind that the property to which it refers will in many cases be property which reflects the contributions of the parties to the marriage, whether direct or indirect. A settlement coming within the section may take many forms so long as it has the essential characteristics earlier spoken of. The words "ante-nuptial or post-nuptial" should be taken to refer to all settlements made before or after marriage which have the connection of which the following words speak. The settlement must be associated with the marriage the subject of the proceedings. The necessary association will often be provided by the allocation of property into a trust or other fund and by the provision the settlement makes for the benefit of the parties to the marriage, or their children. The trustees also placed reliance upon the description of the beneficiaries of the Trust, which extended beyond the husband and wife and the children of the marriage. By this means it was sought to deny the necessary nuptial element of the Trust. The husband's sisters and their issue also fell within the class of beneficiaries. The question of the impact of any order under s 85A upon those 222 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 382 [70] per McHugh, Gummow, Kirby and Hayne JJ. 223 See Atwill v Commissioner of Stamp Duties (1970) 72 SR (NSW) 415 at 426 per Mason JA, reversed in Atwill v Commissioner of Stamp Duties (NSW) (1971) 125 CLR 203, but not on this point; [1971] HCA 63; reversed Commissioner of Stamp Duties (NSW) v Atwill (1972) 126 CLR 665; [1973] AC 558. 224 Baldwin v Commissioner of Inland Revenue [1965] NZLR 1 at 6 per Macarthur J, referring to Underhill's Law relating to Trusts and Trustees, 11th ed (1959) at 3; applied in Tucker v Commissioner of Inland Revenue [1965] NZLR 1027 at 1030 persons may be put to one side for present purposes. So far as concerns the character of the Trust, their inclusion does not deny the nuptial element. Regard must be had to the circumstances pertaining to the Trust, for the purposes of s 85A. The nuptial element can readily be seen by the contribution made by the parties to the marriage to the Trust and the holding of that property for their benefit. The fact that the other beneficiaries may have received some, undisclosed, distribution from the Trust at some point does not detract from its essential character. It is necessary at this point to return to the question of whether the wife should be permitted to place reliance upon s 85A for the first time on the final appeal. The rule, that this should not be permitted, is strictly applied unless the point sought to be raised is one of construction of law and the facts necessary have been established225 or, as was said in Minister Administering the Crown Lands Act v NSW Aboriginal Land Council226, where the point sought to be raised is about the legal characterisation of the facts established in the courts below. This would not be so if there was a discretion to be exercised in relation to these facts, and the primary judge had not had an opportunity of exercising that discretion227. The question raised by s 85A is whether it is just and equitable for the Court to apply the settled property for the benefit of the parties to or the children of the marriage. In doing so the Court is required to take into account the matters referred to in s 79(4), so far as they are relevant228. In the present case the primary judge had undertaken that exercise, not only with respect to what might properly be called the property of the parties to the marriage, but also with respect to the Trust property. It is difficult to comprehend what further evidence the husband, the trustees and the children could have put forward in connection with the Trust, its property or the parties' contribution to it. The Trust, and the wife's claim to it, was central to the parties' cases. The primary judge found that the wife should receive a sum of money, in addition to specific property, representing her contribution to the pool of assets which had been created by the endeavours of the husband and wife. The problem that faced his Honour was how the husband could meet that sum from the assets 225 Water Board v Moustakas (1988) 180 CLR 491 at 497-498 per Mason CJ, Wilson, 226 (2008) 82 ALJR 1505 at 1518 [66]; 249 ALR 602 at 617; [2008] HCA 48. 227 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438 per Latham CJ, Williams and Fullagar JJ; [1950] HCA 35. 228 Family Law Act 1975 (Cth), s 85A(2). at his disposal. His Honour's answer to that question was that it could, and should, come from the Trust property. His Honour found that the wife should be paid out of the Trust, but considered that that result could only be effected by the husband. That was not a correct view, having regard to s 85A(1). Action, on the part of the husband, was not necessary to appropriate so much of the Trust property as was necessary to meet the primary judge's order. The Court could make an order directly applying that property to her benefit. It did not need to have regard to the status of either the wife or the husband as beneficiaries in order to do so. Section 85A(1) provided the power and the means by which the trial judge's findings and intention could be carried into effect. The question sought to be raised is one which does not depend upon the establishment of further facts. All that was involved in the exercise of the discretion in s 85A(1) had been dealt with by the primary judge, who had determined that the settled property, or part of it, should be applied to the benefit of the wife. The primary judge had taken into account the interests of the children in connection with the application of the Trust property, as s 85A(1) requires. The position of the other beneficiaries under the Trust had not assumed importance in his Honour's reasons, no doubt because of the view he took of the true nature and purpose of the Trust229. It was submitted for the husband that it was not intended that the Court should make orders that would operate to the detriment of third parties. Ascot Investments Pty Ltd v Harper230, to which reference was made, was not concerned with a situation such as concerns the third parties in this case. It was there held that the Family Court had no power to order directors of a company to register shares, where the Memorandum and Articles of Association of the company enabled them to decline to do so, at least where the company was not controlled by the husband231. It was not doubted that the rights of third parties may be indirectly affected by orders of the Court232. It has long been accepted that third party interests could be altered by courts dealing with property the subject of a nuptial settlement233. Whether, and the 229 Part VIIIAA of the Family Law Act 1975 (Cth), which deals with orders binding third parties, did not apply to these proceedings. 230 (1981) 148 CLR 337; [1981] HCA 1. 231 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 at 343 per Barwick CJ, 232 Ascot Investments Pty Ltd v Harper (1981) 148 CLR 337 at 343 per Barwick CJ, 233 Blood v Blood [1902] P 78. extent to which, a court would alter such interests might depend upon the remoteness or uncertainty of those interests234. Here the interests of the other beneficiaries, in the due administration of the Trust, were always subject to the husband's control. The extent of that control, to the detriment of the third parties' interests, was shown by the attempted distribution of the entire Trust property to the children's trusts. This litigation has been lengthy and costly, involving as it did parties in addition to those to the marriage. In the unusual circumstances of this case the wife should be permitted to rely upon s 85A. It may be inferred that a failure to do so at an earlier point was the result of a misapprehension about the applicability of the section, a misapprehension which may not be limited to the parties to these proceedings. The proper construction of the section, in order to explain its intended operation, is a matter of general importance. All that was outstanding in this case, and which s 85A resolves, was how effect could be given to the primary judge's orders. The only variation required to the orders made is that the sum to be paid to the wife be applied from the Trust property. Orders I would dismiss the appeals and grant special leave to cross-appeal in each matter on the ground that s 85A of the Act enabled the Court to deal with the Trust property. I would allow the cross-appeals; vary the orders of the primary judge by deleting the order numbered 4 and order in lieu that the wife be paid the sum of $2,182,302 out of the assets of the ICF Spry Trust and that the husband do all such things as are necessary to effect that payment. In each appeal the appellants should pay the costs of the wife, including the costs of the cross-appeal. There should be no order for the costs of the other respondents. 234 Prinsep v Prinsep [1929] P 225.
HIGH COURT OF AUSTRALIA COMMISSIONER OF TAXATION APPELLANT AND CONSOLIDATED MEDIA HOLDINGS LTD RESPONDENT Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55 5 December 2012 ORDER Appeal allowed with costs. Set aside the orders made by the Full Court of the Federal Court of Australia on 20 March 2012 and in their place order that the appeal from the orders made by Emmett J on 14 April 2011 be dismissed with costs. On appeal from the Federal Court of Australia Representation B J Sullivan SC with T M Thawley SC for the appellant (instructed by Australian Government Solicitor) D H Bloom QC with K J Deards and C A Burnett for the respondent (instructed by King & Wood Mallesons) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Commissioner of Taxation v Consolidated Media Holdings Ltd Taxation – Income tax – Share buy-back – Off-market purchase – Company's financial record of transaction – Whether dividend or capital gain – Whether purchase price "debited against amounts standing to the credit of … the company's share capital account" – Meaning of "share capital account" – Relevance of legislative history. Words and phrases – "account", "buy-back", "combined share capital account", "debited against amounts standing to the credit of", "financial records", "financial statements", "purchase price", "share capital account". Corporations Act 2001 (Cth), Pt 2J.1 of Ch 2J, Pt 2M.2 of Ch 2M. Income Tax Assessment Act 1936 (Cth), ss 6D, 159GZZZP. FRENCH CJ, HAYNE, CRENNAN, BELL AND GAGELER JJ. This appeal concerns the characterisation for income tax purposes of consideration received by the respondent, then Publishing and Broadcasting Ltd ("PBL"), for shares sold to Crown Melbourne Ltd, then Crown Ltd ("Crown"), in an off-market buy-back in the year of income ended 30 June 2002. Legislative setting The legislative setting for the off-market buy-back comprised the Corporations Act 2001 (Cth) ("the Corporations Act") as well as the Income Tax Assessment Act 1936 (Cth) ("the ITAA 1936") and the Income Tax Assessment Act 1997 (Cth) ("the ITAA 1997"). The Corporations Act allows a company to buy back its own shares if the buy-back does not materially prejudice the company's ability to pay its creditors and if the company follows procedures laid down in Div 2 of Pt 2J.1 of Ch 2J. The way a company accounts for a buy-back is governed by the general obligations of the company under Pt 2M.2 of Ch 2M. Under Pt 2M.2 of Ch 2M, the company has an obligation to keep "written financial records" that "correctly record and explain its transactions and financial position and performance" and that "would enable true and fair financial statements to be prepared and audited"1. The company also usually has an obligation to prepare an annual financial report, consisting of financial statements for a financial year as well as notes to those statements and a directors' declaration about those statements and notes2. The financial statements and notes for a financial year must comply with accounting standards made for the purposes of the Corporations Act and any further requirements in regulations made under that Act3 and must give a true and fair view of the financial position and performance of the company4. The expression "financial records" includes "documents of prime entry" as well as "other documents needed to explain … the methods by which financial 1 Section 286(1) of the Corporations Act. 2 Sections 292 and 295 of the Corporations Act. 3 Sections 9, 296 and 334 of the Corporations Act. 4 Section 297 of the Corporations Act. Hayne Crennan Bell statements are made up … and … adjustments to be made in preparing financial statements"5. For the purposes of the ITAA 1936 and the ITAA 1997, the effect of a company buying a share in itself from a shareholder in the company is addressed in Div 16K of Pt III of the ITAA 1936. Within Div 16K: such a "purchase" is a "buy-back"6; the shareholder is the "seller"7; the amount or the sum of the amounts the seller is entitled to receive as a result of or in respect of the buy-back is the "purchase price"8; and, except where the buy-back is an "on-market purchase" (made in the ordinary course of trading on a stock exchange on which the share is quoted in an official list), the buy-back is an "off-market purchase"9. The effect of an off-market purchase is addressed in Subdiv C. The pivotal provision of Subdiv C of Div 16K of Pt III of the ITAA 1936 is s 159GZZZP. Section 159GZZZP(1) provides that, for the purposes of the ITAA 1936 and the ITAA 199710, where a buy-back of a share by a company is an off-market purchase, the difference between the purchase price and "the part (if any) of the purchase price … which is debited against amounts standing to the credit of … the company's share capital account" is taken to be a dividend paid by the company to the seller on the day the buy-back occurs out of profits derived by the company. Section 159GZZZP(2) provides that the remainder of the purchase price is taken not to be a dividend. The consequences of the classification of the purchase price by s 159GZZZP for the operation of the ITAA 1936 and the ITAA 1997, in respect of a seller that is an Australian resident company, can be sufficiently summarised for present purposes as follows. To the extent that the purchase price is taken by force of s 159GZZZP(1) to be a dividend, the amount of the purchase price is 5 Section 9 of the Corporations Act. 6 Section 159GZZZK(a) of the ITAA 1936. 7 Section 159GZZZK(b) of the ITAA 1936. 8 Section 159GZZZM(a) of the ITAA 1936. 9 Section 159GZZZK of the ITAA 1936. 10 Section 6(1) of the ITAA 1936 ("this Act"). Hayne Crennan Bell ordinarily included in the seller's assessable income11 and the seller is ordinarily entitled to a corresponding rebate of income tax12. To the extent that the purchase price is taken by force of s 159GZZZP(2) not to be a dividend, and subject to adjustments, an amount equal to the purchase price is ordinarily taken to be the amount the seller has received or is entitled to receive as consideration in respect of the sale of the shares in determining whether the seller makes a capital gain or a capital loss in respect of the buy-back as worked out in accordance with Pts 3-1 and 3-3 of the ITAA 199713. In the year of income ended 30 June 2002, "share capital account" was defined in s 6D of the ITAA 1936. Section 6D(1) provided: "A share capital account is: an account which the company keeps of its share capital; or any other account (whether or not called a share capital account), created on or after 1 July 1998, where the first amount credited to the account was an amount of share capital." Section 6D(2) provided: "If a company has more than one account covered by subsection (1), the accounts are taken, for the purposes of this Act, to be a single account." Section 6D(3) qualified ss 6D(1) and 6D(2) by providing that an account that was "tainted" for the purposes of Div 7B of Pt IIIAA of the ITAA 1936 was not a share capital account other than for specified purposes. A company's share capital account ordinarily became tainted for the purposes of Div 7B of Pt IIIAA if the company transferred "an amount to its share capital account from any of its other accounts"14. A note to s 6D(2), which formed part of the ITAA 193615, 11 Section 44 of the ITAA 1936. 12 Section 46 of the ITAA 1936. 13 Section 159GZZZQ of the ITAA 1936. 14 Section 160ARDM of the ITAA 1936. 15 Sections 2-35, 2-45 and 995-1 ("this Act") of the ITAA 1997. Hayne Crennan Bell explained that "[b]ecause the accounts are taken to be a single account (the combined share capital account) tainting any of the accounts has the effect of tainting the combined share capital account". Buy-back For the whole of the year ended 30 June 2002, PBL owned all of the nearly three billion issued and paid-up ordinary shares in Crown. On 28 June 2002, PBL and Crown entered into a share buy-back agreement which provided for the sale by PBL to Crown of just over 840 million of those shares for a purchase price of $1 billion ("the share buy-back agreement"). The share buy- back agreement provided for completion on 1 August 2002 or such other date as might be agreed between the parties. Before 28 June 2002, Crown had established accounts in its general ledger which included those labelled a "Shareholders Equity Account" and an "Inter- company Loan (Payable) Account". On 28 June 2002, Crown established a new account in its general ledger labelled a "Share Buy-Back Reserve Account". On 28 June 2002, Crown debited $1 billion to the newly established Share Buy-Back Reserve Account. On the same day, Crown made a corresponding credit entry in its ledger which, as subsequently corrected with effect from 30 June 2002, was shown as a $1 billion credit to the Inter-company Loan (Payable) Account. No entry was made in the Shareholders Equity Account, which retained a constant credit balance throughout the year ended 30 June 2002 in excess of $2.4 billion. The share buy-back agreement was completed on 6 August 2002. On that date, amongst other things, PBL transferred to Crown the shares the subject of the share buy-back agreement for a consideration of $1 billion and Crown cancelled those shares. Crown's audited financial statements for the financial year ended 30 June 2002 showed a reduction in "Contributed Equity" of $1 billion from an opening figure of just over $2.4 billion (corresponding with the balance shown in the Shareholders Equity Account) to a closing figure of just over $1.4 billion. Notes against "Contributed Equity" explained it to refer to issued and paid up capital comprising ordinary shares fully paid, and recorded that: "On 28 June 2002, 840,336,000 ordinary shares (28.6% of total shares on issue) were bought back by Crown … The shares were repurchased from [PBL] for a total consideration of $1,000,000,000." Hayne Crennan Bell There is no dispute that Crown followed the procedures laid down in Div 2 of Pt 2J.1 of Ch 2J of the Corporations Act in entering into and giving effect to the share buy-back agreement. There was an unresolved dispute on the evidence at first instance as to whether the method of accounting for the share buy-back adopted by Crown was appropriate as a matter of accounting practice, but it was common ground that the method was neither expressly permitted nor expressly prohibited by the applicable accounting standards. Assessment and appeal proceedings The Commissioner of Taxation ("the Commissioner") took the view that s 159GZZZP(2) of the ITAA 1936 applied to the $1 billion PBL was entitled to receive under the share buy-back agreement as at 30 June 2002 and went on to assess PBL to have made a capital gain in respect of the buy-back. PBL objected to the assessment on the ground that it was s 159GZZZP(1) that applied, with the result that the $1 billion was taken to be a dividend to be included in its assessable income and entitling it to a rebate of income tax. The Commissioner disallowed the objection, following which PBL commenced a proceeding in the Federal Court under Pt IVC of the Taxation Administration Act 1953 (Cth) appealing against that disallowance. The proceeding was dismissed at first instance by Emmett J. The Full Court (Stone, Greenwood and Logan JJ) allowed an appeal from that dismissal and allowed the objection. The present appeal is brought from the orders of the Full Court. Issue The issue in the appeal is whether the $1 billion PBL was entitled to receive under the share buy-back agreement was, as at 30 June 2002, "debited against amounts standing to the credit of [Crown's] share capital account" within the meaning of s 159GZZZP(1) of the ITAA 1936. The resolution of that issue by Emmett J at first instance proceeded on the basis that, as at 30 June 2002, Crown's "share capital account", as defined in s 6D, comprised, for the purposes of s 159GZZZP(1) of the ITAA 1936, its Shareholders Equity Account to which the amount in excess of $2.4 billion stood credited together with its newly created Share Buy-Back Reserve Account. That was because each was an "account" kept by Crown "of its share capital" within the meaning of s 6D(1)(a) and because the two accounts were to be taken by s 6D(2) for the purposes of the ITAA 1936 to be a single account. The $1 billion debited to the Share Buy-Back Reserve Account was therefore debited against the amount in excess of $2.4 billion standing to the credit of what was, for the Hayne Crennan Bell purposes of s 159GZZZP(1) of the ITAA 1936, taken to be that single share capital account16. The resolution of the issue by the Full Court was different because the Full Court took a narrower view of s 6D of the ITAA 1936. In the view of the Full Court: s 6D(1)(a) referred to no more than "the company account, however described, to which the paid up capital of the company was originally credited"; s 6D(1)(b) applied "to any other post 30 June 1998 account … to which the first amount credited was an amount of share capital"; and s 6D(2) did no more than to treat "each of those accounts as a single account thereby facilitating transfers between them"17. Applying that view, the Full Court concluded that: the Shareholders Equity Account was Crown's share capital account because it was "in terms of s 6D(1)(a) … an account in which Crown kept its share capital"; the Share Buy-Back Reserve Account was "neither such an account nor was it an account to which s 6D(1)(b) … applied"; and s 6D(2) therefore had no application18. The Full Court added that, even if the Share Buy-Back Reserve Account did fall within s 6D(1)(b) so as to be required by s 6D(2) to be taken with the Shareholders Equity Account to be a single account, the statutory fiction of a single account created by s 6D(2) did not go so far as to "deem the act of debiting against one account to have occurred against an amount standing to the credit of another account"19. The Full Court was persuaded to that narrower view of s 6D of the ITAA 1936 by arguments presented on behalf of PBL which relied on a detailed analysis of the historical development of corporations and taxation legislation in their application to share buy-backs and other capital reductions up to the year of income ended 30 June 2002. PBL and the Commissioner both adopted a similar historical approach to the presentation of competing arguments in the appeal. Although addressed in these reasons, consideration of the historical development of corporations and taxation legislation ultimately contributes little 16 Consolidated Media Holdings Ltd v Commissioner of Taxation (2011) 82 ACSR 17 Consolidated Media Holdings Ltd v Federal Commissioner of Taxation (2012) 201 FCR 470 at 484 [40], 485 [43]. 18 (2012) 201 FCR 470 at 486 [45]. 19 (2012) 201 FCR 470 at 486 [46]. Hayne Crennan Bell to the construction and application of either s 6D or s 159GZZZP(1) of the ITAA 1936. Legislative history In the year of income ended 30 June 2002, the provisions of the Corporations Act and the ITAA 1936 relating to share buy-backs were of relatively recent origin. So were the provisions in Div 7B of Pt IIIAA of the ITAA 1936 and the definition of "share capital account" in s 6D of that Act. The preceding two decades had seen developments in corporations law to which sequential amendments to the ITAA 1936 were largely responsive. The Companies Code, in the form in which it commenced in 198120, followed earlier companies legislation in: requiring the share capital of a company to be divided into shares of a fixed amount21, known as the "nominal value" or "par value" of the shares; requiring the confirmation of a court for the company to reduce its share capital including by paying off any paid-up share capital in excess of the needs of the company22; and prohibiting a company from acquiring its own shares or interests in its own shares23. A company (other than a no liability company) could issue shares at a "discount" from their par value only if specified conditions were satisfied24 and a company that issued shares at a "premium" to their par value was required to transfer the aggregate amount of that premium to a "share premium account" to which provisions relating to the reduction of capital applied as if the share premium account were paid-up share capital of the company25. Save only that the share premium account could be 20 Companies Act 1981 (Cth). See also Companies (Application of Laws) Act 1981 (NSW); Companies (Application of Laws) Act 1981 (Vic); Companies (Application of Laws) Act 1981 (Q); Companies (Application of Laws) Act 1981 (WA); Companies (Application of Laws) Act 1982 (SA); Companies (Application of Laws) Act 1982 (Tas); Companies (Application of Laws) Act (NT). 21 Section 37(1)(c) of the Companies Code. 22 Section 123 of the Companies Code. 23 Section 129 of the Companies Code. 24 Section 118 of the Companies Code. 25 Section 119 of the Companies Code. Hayne Crennan Bell applied in the payment of dividends satisfied by the issue of shares, the company was prohibited from paying dividends to shareholders except out of profits26. Another requirement of the Companies Code was that, where a company redeemed preference shares otherwise than out of the proceeds of a fresh issue of shares, the nominal value of the shares redeemed was to be transferred out of profits otherwise available for dividends to a "capital redemption reserve", to which the provisions relating to the reduction of capital applied as if the capital redemption reserve were paid-up share capital of the company27. An exception to the prohibition against a company acquiring its own shares or interests in its own shares was created by an amendment to the Companies Code in 198928. The Companies Code, as then amended, permitted a company to buy back its shares if prescribed conditions were satisfied29 with the consequence that, immediately after their transfer to the company, the shares bought back were automatically cancelled and the company's issued share capital was reduced by their nominal value30. The exception created by that amendment was reflected in the Corporations Law, which commenced in 199131. Until 1995, any premium paid by the company over the nominal value of the shares bought back had to be written-off by the company first against any amount standing to the credit of its share premium account and only after that against its distributable 26 Sections 119 and 565 of the Companies Code. 27 Section 120 of the Companies Code. 28 Section 16 of the Co-operative Scheme Legislation Amendment Act 1989 (Cth). 29 Division 3A of Pt IV of the Companies Code. 30 Section 133PC of the Companies Code. 31 Division 4B of Pt 2.4 of the Corporations Law, inserted into the Corporations Act 1989 (Cth) from 1 January 1991 by Sched 5 to the Corporations Legislation Amendment Act 1990 (Cth), and applied by the Corporations (New South Wales) Act 1990 (NSW), Corporations (Victoria) Act 1990 (Vic), Corporations (South Australia) Act 1990 (SA), Corporations (Queensland) Act 1990 (Q), Corporations (Western Australia) Act 1990 (WA), Corporations (Tasmania) Act 1990 (Tas), and Corporations (Northern Territory) Act 1990 (NT). Hayne Crennan Bell profits32. Under simplified provisions substituted in 199533: that latter requirement was omitted; providing for consideration payable by the company on a buy-back of its shares became a permissible but not mandatory application of a share premium account34; and, immediately after the registration of the transfer to the company of the shares bought back, the shares were automatically cancelled but without reducing the company's nominal share capital35. The concept of shares in a company having a par value was abolished as part of a major revision of the Corporations Law effected by amending legislation which commenced on 1 July 199836. On and after that date: shares in a company no longer had a par value37; a company was no longer required to have a share premium account or a capital redemption reserve; a company was able to capitalise profits without issuing shares38; and the requirement that a dividend only be paid out of profits of the company became unqualified39. Section 1446 of the Corporations Law, a transitional provision, provided that immediately after the commencement of the amending legislation, "any amount standing to the credit of the company's share premium account and capital redemption reserve [became] part of the company's share capital". The same amending legislation repealed the simplified share buy-back provisions that had been substituted in 1995 and re-enacted those provisions, with some changes, as Pt 2J.1 of Ch 2J of the Corporations Law. It remained the 32 Section 133PD of the Companies Code (inserted by s 16 of the Co-operative Scheme Legislation Amendment Act 1989 (Cth)) and s 206PD of the Corporations Law. 33 First Corporate Law Simplification Act 1995 (Cth). 34 Section 191(2)(ea) of the Corporations Law. 35 Section 206I of the Corporations Law. 36 Company Law Review Act 1998 (Cth). 37 Section 254C of the Corporations Law as amended by Sched 5 to the Company Law Review Act 1998 (Cth). 38 Section 254S of the Corporations Law. 39 Section 254T of the Corporations Law. Hayne Crennan Bell case that, immediately after the registration of the transfer to the company of the shares bought back, the shares were automatically cancelled40 but no reference was made to the effect on the company's nominal share capital, which had ceased to be a relevant concept. The same amending legislation also replaced, with Pt 2M.2 of Ch 2M of the Corporations Law, various accounting and reporting obligations which had largely been carried over into the Corporations Law from the Companies Code. Those earlier obligations had included an obligation for a company to keep such "accounting records" as correctly recorded and explained the transactions and financial position of the company and to do so in a manner as would enable the preparation from time to time and auditing or review of "true and fair accounts" comprising "profit and loss accounts" and "balance sheets" together with statements, reports and notes attached to or intended to be read with them41. Part 2M.2 of Ch 2M of the Corporations Law substituted the broader concept of "financial records" for the earlier concept of "accounting records" and correspondingly substituted the concept of "true and fair financial statements" for the earlier concept of "true and fair accounts". The form and structure of Pt 2J.1 of Ch 2J and Pt 2M.2 of Ch 2M of the Corporations Law were replicated in the Corporations Act, which commenced on 15 July 2001. Amendments to the ITAA 1936 over the same period tracked the amendments to the Companies Code and the Corporations Law. At the commencement of the Companies Code, the ITAA 1936 ordinarily included dividends paid by a company out of profits derived by the company within the assessable income of a shareholder42. As defined since 196743, "dividend" excluded (amongst other to exceptions) distributions where the amount of the moneys paid was "debited against an amount standing to the credit of a share premium account of the company" and things and subject 40 Section 257H of the Corporations Law. 41 Sections 9 ("accounts" and "accounting records") and 289(1) of the Corporations Law. See also ss 266 and 267(1) of the Companies Code. 42 Section 44(1) of the ITAA 1936. 43 Income Tax Assessment Act (No 4) 1967 (Cth). Hayne Crennan Bell "moneys paid … by way of repayment … of moneys paid up on a share" but otherwise included "any distribution made by a company to [a] shareholder"44. A "share premium account" was defined to mean "an account … to which the company [had], in respect of premiums received by the company on shares issued by it, credited amounts, being amounts not exceeding the respective amounts of the premiums" but not an account "where any other amount is included in the amount standing to the credit of such an account" or an account "where an amount that has been credited to such an account in respect of a premium received by the company on a share issued by it … could not, at any time before it was so credited, be identified in the books of the company as such a premium"45. The overall effect was that a distribution made by a company to a shareholder in a reduction of capital was ordinarily a dividend if and to the extent that the distribution exceeded the sum of the amount paid up on cancelled shares and any amount debited against an amount standing to the credit of a dedicated share premium account. Division 16K of Pt III was inserted into the ITAA 1936 in 199046 in consequence of the amendment to the Companies Code for the first time permitting a company to buy back its shares. Section 159GZZZP(1) as enacted provided that, for the purposes of the ITAA 1936, where a buy-back of a share by a company was an off-market purchase, the amount taken to be a dividend paid by the company to the seller out of profits derived by the company was so much of the purchase price as exceeded the sum of the amount to which the share was paid up immediately before the buy-back and the part (if any) of the purchase price which was debited against amounts standing to the credit of the company's share premium account. Division 7B of Pt IIIAA was introduced into the ITAA 1936, and s 159GZZZP(1) was amended to take the form in which it relevantly remained, by amending legislation enacted in consequence of, and which commenced with, the amendment of the Corporations Law on 1 July 199847. The same amending 44 Section 4(2)(a) of the Income Tax Assessment Act (No 4) 1967 (Cth), amending s 6(1) of the ITAA 1936. 45 Section 4(2)(b) of the Income Tax Assessment Act (No 4) 1967 (Cth), amending s 6(1) of the ITAA 1936. 46 Taxation Laws Amendment Act (No 3) 1990 (Cth). 47 Taxation Laws Amendment (Company Law Review) Act 1998 (Cth). Hayne Crennan Bell Act inserted into the ITAA 1936 a definition of "share capital account" which, so far as relevant, was to the effect that "share capital account … [did] not include an account that [was] tainted for the purposes of [Div 7B of Pt IIIAA]"48. The Explanatory Memorandum for that amending legislation in 1998 described one of its purposes as being to "ensure that existing provisions within the tax laws dependent on the concept of par value (and associated terms such as share premiums, share premium account and paid-up capital) continue to operate appropriately"49. The Explanatory Memorandum went on to explain the purpose of Div 7B of Pt IIIAA. It stated50: "The current definition of 'share premium account' in the Act operates in such a way that the tainting of the account by amounts other than share premiums (eg by crediting the account with profits) results in the account ceasing to be a share premium account for tax purposes. Under the new Corporations Law, companies will be permitted … to capitalise profits by transferring an amount from their profit account to their share capital account. For the same reason that a share premium account is tainted by the transfer of profits into the account, a tainting rule will also apply in respect of a company's share capital account." The definition of "share capital account" as introduced from 1 July 1998 was repealed, and s 6D was introduced into the ITAA 1936 in its place, by further amending legislation in 199951, which was given retrospective effect to 48 Section 6(1) of the ITAA 1936. 49 Australia, House of Representatives, Taxation Laws Amendment (Company Law Review) Bill 1998 (Cth), Explanatory Memorandum at [1.5]. 50 Australia, House of Representatives, Taxation Laws Amendment (Company Law Review) Bill 1998 (Cth), Explanatory Memorandum at [1.59]-[1.60]. 51 Taxation Laws Amendment Act (No 7) 1999 (Cth). Hayne Crennan Bell 1 July 199852. The Explanatory Memorandum for that further amending legislation explained its purpose as including to ensure that53: "a share capital account does not become tainted by the merger of tainted share premiums with share capital unless the share capital account ceases to be more than the total of the tainted share premium account immediately before the merger". It went on to explain54: "The tainting rule within [Div 7B of Pt IIIAA of the ITAA 1936] prevents companies disguising a profit distribution as a tax-preferred capital distribution from the share capital account by first transferring profits into that account and then distributing from it. A similar rule applied to share premium accounts before their abolition on 1 July 1998: in cases where the share premium account contained amounts other than share premiums ('tainted share premium accounts') the share premium account was also treated as a profit account. Since the tainting rule's inception two unintended outcomes have emerged. First, the merger of tainted share premiums with share capital on 1 July 1998 has the effect of tainting the new share capital account for tax purposes, thereby preventing the distribution of profits in the guise of share capital. This has the inappropriate flow-on effect of producing an automatic franking debit upon merger and it removes the ability of companies to defer distribution of tainted amounts already transferred to share premium accounts. Second, under the rules formerly applicable to share premium accounts before 1 July 1998, a share premium account did not become tainted when share premiums were credited to another account and then transferred to the share premium account, provided they could be 52 Section 2(2) of, and items 1 and 2 of Sched 1 to, the Taxation Laws Amendment Act (No 7) 1999 (Cth). 53 Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.1]. 54 Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.6]-[1.8]. Hayne Crennan Bell identified in the books of the company at all times as such a premium. The law in its present form does not expressly provide for this exception." The first of the two "unintended outcomes" identified in the Explanatory Memorandum for the further amending legislation in 1999 was an outcome of the application of Div 7B of Pt IIIAA in circumstances where the transitional provision in s 1446 of the Corporations Law caused an amount standing to the credit of a company's share premium account or capital redemption reserve automatically to become part of the company's share capital on 1 July 199855. It was addressed by a transitional provision in the further amending legislation56. The second of the two "unintended outcomes" identified in the Explanatory Memorandum for the further amending legislation in 1999 – the tainting of a share capital account occurring by reason of an amount of share capital first credited to another account being transferred to the share capital account in circumstances where the amount could at all times be identified in the books of the company as share capital – was addressed by a combination of the insertion of the new definition in s 6D and the creation of a new exception to the rule in Div 7B of Pt IIIAA that a company's share capital account would ordinarily become tainted if the company transferred an amount to it from another account57. By virtue of the new definition in s 6D, notwithstanding the transfer to it of an amount first credited to another account, an account would be and remain a share capital account (by operation of s 6D(1)(a)) if it was "an account which the company [kept] of its share capital" or (by operation of s 6D(1)(b)) if it was created on or after 1 July 1998 and the first amount credited to it was share capital. Because two or more share capital accounts were to be taken (by operation of s 6D(2)) to be a single account, transfers between them would fall outside the scope of the ordinary rule that a company's share capital account would become tainted if the company transferred an amount to that account from any of its other accounts. Even if an amount of share capital were transferred to a share capital account from another account that fell outside the 55 Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.34]-[1.35]. 56 Item 7 of Sched 1 to the Taxation Laws Amendment Act (No 7) 1999 (Cth), amending item 9 of Sched 2 to the Taxation Laws Amendment (Company Law Review) Act 1998 (Cth). 57 Australia, House of Representatives, Taxation Laws Amendment Bill (No 7) 1999 (Cth), Explanatory Memorandum at [1.23]-[1.28]. Hayne Crennan Bell new definition in s 6D, by virtue of the new exception the rule would not apply if the amount "could be identified in the books of the company as an amount of share capital at all times before it was credited to the share capital account"58. Resolution "This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the [statutory] text"59. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself. The Commissioner in the appeal emphasised that Div 7B of Pt IIIAA of the ITAA 1936 as enacted treated a share buy-back in much the same way as the ITAA 1936 had since 1967 treated a distribution made in a reduction of capital and that there was nothing in the extrinsic material accompanying the amendment of s 159GZZZP(1) in 1998 to indicate a legislative intention to alter that similarity of treatment. In a reprise of its argument to the Full Court, PBL emphasised that the legislation amending the ITAA 1936 on 1 July 1998 in response to changes in the Corporations Law had the immediate result, in the language of a contemporary discussion paper60, that "the source of funds for distributions (profits or contributed capital) is a matter of choice for companies, and operates by reference to the company's accounts" and that the legislative focus of the retrospective enactment of s 6D in 1999 was on the interaction of the new definition of "share capital account" it introduced with Div 7B of Pt IIIAA, not with s 159GZZZP(1). Each of those aspects of legislative history may be acknowledged. The problem is that none is of much assistance in fixing the meaning of s 6D or in 58 Section 160ARDM(2)(a) of the ITAA 1936, inserted by item 3 of Sched 1 to the Taxation Laws Amendment Act (No 7) 1999 (Cth). 59 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46 [47]; [2009] HCA 41. 60 See Australia, Review of Business Taxation, A Platform for Consultation, Discussion Paper 2 (1999), vol 2 at [19.2]. Hayne Crennan Bell applying s 159GZZZP(1) in the light of that meaning. Section 159GZZZP(1) was to apply from 1 July 1998 in accordance with its amended terms. The definition of "share capital account" in s 6D, introduced in 1999 retrospectively to 1 July 1998, applied to that expression in s 159GZZZP(1) as much as it applied to the use of that expression elsewhere in the ITAA 1936. An aspect of legislative history that is of greater utility in the construction and application of ss 6D and 159GZZZP(1) of the ITAA 1936 is the contemporaneous commencement on 1 July 1998 of Pt 2M.2 of Ch 2M of the Corporations Law. Section 6D must be read in light of that Part's replacement of the previous notions of a company having "accounts" and "accounting records" with the broader and more functional notion of a company having "financial statements" and "financial records". The reference in s 6D(1)(a) to "an account which the company keeps of its share capital" (emphasis added) cannot in that light be confined, in the manner suggested by the Full Court, to the account "to which the paid up capital of the company was originally credited"61 or to "one in which a company ordinarily keeps its share capital on contribution"62 (emphasis added). Much less can it be confined, as PBL argued in the appeal, to an account which the company kept of its share capital on 1 July 1998. The word "account" in s 6D doubtless referred to a record of debits and credits relating to a designated topic. Neither limb of s 6D(1) turned on how the topic of a particular record of debits or credits was designated. Section 6D(1)(b) applied only to an account created after 1 July 1998, and turned entirely on the nature of the amount first credited. Section 6D(1)(a) applied irrespective of when an account was created, and was not confined to turn on any amount having been credited to the account, whether first or at all. In a context in which the relevant record-keeping obligation of a company under Pt 2M.2 of Ch 2M of the Corporations Law was to keep written financial records that correctly recorded and explained its transactions and financial position and performance and that would enable true and fair financial statements to be prepared and audited, it was sufficient for an account to answer the description in s 6D(1)(a) of "an account which the company keeps of its share capital" (emphasis added) that the account, whether debited or credited with one or more amounts, be either a record of a transaction into which the company had 61 (2012) 201 FCR 470 at 484 [40]. 62 (2012) 201 FCR 470 at 485 [43]. Hayne Crennan Bell entered in relation to its share capital, or a record of the financial position of the company in relation to its share capital. Section 6D(2) required that all share capital accounts that individually answered the description in either s 6D(1)(a) or s 6D(1)(b) be treated as a single account for all purposes of the ITAA 1936. Section 6D(2) could not be confined in a way that made it merely facilitative of transfers between share capital accounts. That the operation of s 6D(2) in combination with Div 7B of Pt IIIAA might result in a transfer from a profit account to a reserve account tainting the whole company's combined share capital account was not, as PBL argued, "anomalous". It was the outcome specifically foreshadowed in the note to s 6D(2) forming part of the statutory text. Crown's Share Buy-Back Reserve Account in which, as corrected, the only entry as at 30 June 2002 was a $1 billion debit was a record of the transaction by which Crown had on 28 June 2002 entered into an executory contract to reduce its share capital by that amount. As illustrated by the derivation of the figure for "Contributed Equity" later shown in Crown's audited financial statements, the financial position of Crown in relation to its share capital as at 30 June 2002 could only be understood by subtracting the $1 billion debit balance in its Share Buy-Back Reserve Account from the credit balance of just over $2.4 billion in its Shareholders Equity Account. On either basis, the Share Buy-Back Reserve Account answered the description of an account which Crown kept of its share capital within s 6D(1)(a). The Share Buy-Back Reserve Account was therefore a share capital account. its As Crown's Share Buy-Back Reserve Account, along with Shareholders Equity Account, was, as at 30 June 2002, a share capital account, the Share Buy-Back Reserve Account and the Shareholders Equity Account were, by the operation of s 6D(2), to be taken for the purposes of s 159GZZZP(1) of the ITAA 1936 to be Crown's single combined share capital account. Taken as a single account, Crown's combined share capital account had an amount of just over $2.4 billion standing to its credit and a debit of $1 billion to the same combined share capital account. To characterise that debit as a debit "against" the amount standing to the credit of the combined share capital account is not to extend the fiction created by s 6D(2), but to apply it. In addition to reiterating the construction of s 6D to which it had persuaded the Full Court, PBL sought to raise a new argument in the appeal to this Court to the effect that s 159GZZZP(1) of the ITAA 1936 was not engaged as at 30 June 2002 given that the share buy-back agreement was not completed and the shares held by PBL were not cancelled until 6 August 2002. Assuming Hayne Crennan Bell without deciding that it is open to PBL to raise the new argument, the new argument must be rejected. PBL accepted that the share buy-back agreement was a "buy-back" within the meaning of Div 16K of Pt III of the ITAA 1936 that occurred when the share buy-back agreement was entered into on 28 June 2002. PBL also accepted that the amount of $1 billion PBL was then entitled to receive under the share buy-back agreement on completion was a "purchase price" within the meaning of Div 16K of Pt III of the ITAA 1936. Just how in those circumstances the executory nature of the share buy-back agreement resulted in s 159GZZZP(1) not being engaged as at 30 June 2002 was not articulated by PBL and is not apparent. The $1 billion PBL was entitled to receive under the share buy-back agreement was, as at 30 June 2002, therefore "the purchase price in respect of the buy-back of the share[s] … which [was] debited against amounts standing to the credit of … [Crown's] share capital account" within the meaning of s 159GZZZP(1) of the ITAA 1936. It was not to the point that the share buy- back agreement remained to be completed and the shares had not been cancelled. Orders The following orders should be made: Appeal allowed with costs. Set aside the orders made by the Full Court of the Federal Court of Australia on 20 March 2012 and in their place order that the appeal from the orders made by Emmett J on 14 April 2011 be dismissed with costs.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Orreal v The Queen [2021] HCA 44 Date of Hearing: 11 November 2021 Date of Judgment: 16 December 2021 ORDER Appeal allowed. Set aside the order of the Court of Appeal of the Supreme Court of Queensland made on 8 May 2020 and, in its place, order that: the appeal be allowed; the appellant's convictions be set aside; and a new trial be had. On appeal from the Supreme Court of Queensland Representation S J Keim SC with P F Richards for the appellant (instructed by Legal Aid Queensland) C W Heaton QC with C W Wallis for the respondent (instructed by Office of the Director of Public Prosecutions (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Orreal v The Queen Criminal practice – Appeal – Miscarriage of justice – Application of proviso that no substantial miscarriage of justice actually occurred – Where appellant convicted of unlawfully and indecently dealing with child under age of 16 years and rape – Where evidence admitted by consent that both appellant and complainant tested positive for herpes simplex virus type 1 ("impugned evidence") – Where impugned evidence irrelevant and inadmissible – Where Court of Appeal found miscarriage of justice because trial judge failed to direct jury to disregard impugned evidence in its entirety – Where Court of Appeal applied proviso because it concluded impugned evidence could not have impacted jury's assessment of reliability or credibility of complainant – Whether no substantial miscarriage of justice had actually occurred. Words and phrases – "contested credibility", "jury's assessment of the reliability or credibility of the complainant", "miscarriage of justice", "natural limitations", "nature and effect of the error", "proviso", "substantial miscarriage of justice". Criminal Code (Qld), s 668E(1A). KIEFEL CJ AND KEANE J. After a trial in the District Court of Queensland, the appellant was convicted of three counts of indecent dealing with a child under 16 years and two counts of rape. In the course of his trial, evidence that both he and the complainant had tested positive for the presence of the herpes simplex virus type 1 ("HSV-1") was admitted ("the HSV-1 evidence"). It is not now disputed that the HSV-1 evidence had no probative value and was inadmissible. The prosecutor's address and the trial judge's summing up left the question of what use was to be made of the evidence to the jury. The trial judge did not direct the jury that it was to be disregarded. A majority in the Court of Appeal of the Supreme Court of Queensland (Mullins JA and Bond J, McMurdo JA dissenting) held that a miscarriage of justice had occurred but that no substantial miscarriage of justice had actually occurred for the purposes of s 668E(1A) of the Criminal Code (Qld) and dismissed the appeal from conviction1. The prosecution evidence on the charges The complainant was 12 years old at the time of the alleged offences. She and her family were staying at the appellant's house on the evening that the offences were said to have occurred. She gave evidence that she had been watching a movie on television whilst lying on the appellant's bed. The appellant turned the television off when the complainant became tired. He then proceeded to rub and tickle her back and legs before rolling her onto her back. He touched her genitals and had her touch his erect penis and then put his finger into her vagina. The appellant then pulled down her shorts and pushed his penis into her vagina, causing her pain. He then stopped. Whilst this was happening, the complainant said, she was crying and upset. He then started rubbing his fingers on the outside of her vagina. He then stopped and asked her to promise not to tell anyone and went outside. After the appellant left, the complainant went outside the appellant's bedroom and ascertained that her mother, who was present in another room in the house, was not awake. Upon hearing the appellant returning, the complainant went back into the bedroom and lay back down on the bed. The appellant also returned to the bed. After a short period of time the complainant left the bedroom and the appellant, and went to sleep with her younger sister. The sister gave evidence that the complainant was crying quietly and shaking and that she comforted the complainant. The following day the complainant told her mother what had happened. Her mother took her to the police, who interviewed her. The complainant was 1 R v Orreal [2020] QCA 95 at [29] per Mullins JA, [104] per Bond J. medically examined that day, and again some ten days later. The evidence at trial was that those examinations revealed that the initial redness to her genitals, observed at the first medical examination, was consistent with blunt force trauma and a traumatic break of her hymen. Evidence of other sexual activity In her evidence-in-chief the complainant was asked whether anyone other than the appellant had touched her vagina. She said that a 15 year old boy, who had been her boyfriend, had touched her vagina with his tongue. It had occurred on one occasion. She was asked whether anything was inserted into her vagina in the three or four days before the night when the events concerning the appellant had taken place and she answered "no". This evidence came to be led by leave sought by the Crown and given by the trial judge under s 4 of the Criminal Law (Sexual Offences) Act 1978 (Qld) to adduce evidence as to the sexual activities of the complainant with any person. Leave was granted after discussions had taken place between the prosecutor and defence counsel. Defence counsel did not object to leave being granted. Leave was said to be justified because the evidence was relevant to whether there were innocent explanations for her physical condition when she was medically examined after the alleged offending and whether there was any other explanation for the fact that the complainant and the appellant both had HSV-1. The complainant had been tested for the virus at the time of her first medical examination and the appellant had also been tested twice for the virus a number of days after the alleged offences. Bond J, with whom Mullins JA agreed, was to observe that, objectively assessed, there was an obvious forensic advantage to the defence in having the HSV-1 evidence admitted. Without it, the evidence of the complainant's sexual contact with the 15 year old boy could not have been elicited, and that evidence provided the defence with some basis for impugning the complainant's account and her credit. It may also be observed that the evidence carried risks for the defence, but weighing risks is part of the process leading to a forensic choice being made by counsel. The evidence relating to HSV-1 Before evidence relating to HSV-1 was given by a specialist paediatrician, the jury were informed that the prosecution and the appellant formally admitted three facts: (1) that, just over a week after the alleged incident, a swab was taken of the appellant's urethra and the result was negative for HSV-1; (2) that, a few days after that swab, the appellant's blood was tested for HSV-1 and it was positive; and (3) that it was not known whether the male child who performed oral sex on the complainant had or has HSV-1. The evidence that the complainant had a swab taken during her first medical examination and had tested positive for HSV-1 was then adduced during the examination-in-chief of the specialist paediatrician. The evidence given by the specialist paediatrician included that HSV-1 causes cold sores but is also commonly found as a genital infection. The virus remains in the body of the infected person, who becomes immune to it. The virus may come back at various times during the person's life and be "shed" for a few days, during which the person is infectious. HSV-1 can be spread to the genitals by oral-to-genital spread and genital-to-genital spread from someone who is "shedding" the virus. All that could be said about the appellant was that at some point in the past he had been infected with HSV-1 and was not shedding when the swab was taken and that it was not possible to say when he had acquired the virus. It was not possible to say whether he was shedding the virus when the alleged offences occurred. Likewise, it was not possible to say when the complainant acquired the virus or from whom she acquired it. As the virus was found in her genitals, transmission must have occurred through contact with her genitals. The prosecution address In the course of addressing the jury about the HSV-1 evidence, the prosecutor said that "[t]he herpes thing is not the lynchpin in this case. It's very neutral, really", and referred to the evidence of the specialist paediatrician. It was said that the jury might think the complainant was infected by contact with her boyfriend's mouth rather than the appellant's penis. Nevertheless, the prosecutor confirmed that "it's still a factor for you to take into account". "[T]he point", she said, "is that both of them do have the same virus." The prosecutor went on: "It's a sexually transmissible virus, and the allegation in here is that the defendant forced her to engage in sexual contact and conduct, and so it's a matter for you with your life experience what you make of that. But I don't suggest that you would really put any weight on it." The summing up In her summing up the trial judge reminded the jury of the admissions relating to the test results and the medical evidence about the virus. Her Honour identified three aspects of the specialist paediatrician's evidence as important: that it is not possible to say with any certainty when the complainant contracted the virus; nor when the appellant contracted it; and it is not possible to say from whom the complainant contracted it. The trial judge then said to the jury: "where does that leave you? You might think that evidence does not really help you one way or the other. You are left with evidence that both the defendant and the complainant child both tested positive for the same herpes virus, but on the state of the evidence, you cannot know when she contracted it, you cannot know when the defendant contracted it and you cannot know who she contracted it from. You just take that evidence into account along with all of the other evidence." A miscarriage of justice? There were two grounds of appeal before the Court of Appeal. The first ground related to the conduct of the defence counsel at trial. It included an allegation that counsel had failed to object to the admissibility of the HSV-1 evidence. The difficulty with that contention, Bond J observed, was that defence counsel decided not to object, having made an assessment that there was a forensic advantage for the defence in doing so. In his Honour's view the appellant should be regarded as bound by his counsel's forensic choices. No miscarriage of justice could be said to result2. There can be no doubt about the correctness of his Honour's reasoning in this regard, as is evidenced by the fact that the ground is not pressed on the appeal to this Court. Save for exceptional cases, in our system of justice, parties are bound by the conduct of their counsel, who exercise a wide discretion in deciding matters such as what evidence to lead or have excluded3. It is usually only when an appellate court is persuaded that no rational forensic justification can be discerned for counsel's decision that consideration will be given to whether it gave rise to a miscarriage of justice4. The second ground of appeal was that there was a miscarriage of justice and prejudice because of the admission of the HSV-1 evidence. Bond J held that a 2 R v Orreal [2020] QCA 95 at [91]-[92]. 3 Nudd v The Queen (2006) 80 ALJR 614 at 618 [9]; 225 ALR 161 at 164; R v Baden-Clay (2016) 258 CLR 308 at 324 [48]; Hamilton (a pseudonym) v The Queen (2021) 95 ALJR 894 at 906 [54]; 394 ALR 194 at 207-208. 4 Craig v The Queen (2018) 264 CLR 202 at 211-212 [23]. miscarriage of justice within the third limb of s 668E(1) of the Criminal Code (Qld)5 was established6. No doubt because of the way the grounds were framed his Honour did not consider whether the forensic choice which had prevented a finding of miscarriage of justice with respect to the first ground was also operative with respect to the second ground. Logically one would think that must be so. His Honour appears to have based his decision that there was a miscarriage of justice not only on the fact that the evidence was adduced but also on the fact that it was not corrected by the trial judge in summing up7. Arguably this is a matter relevant to the application of the proviso in s 668E(1A)8. Had the second ground also been dealt with on the basis of the forensic choice of defence counsel to not object to the admission of the HSV-1 evidence, no miscarriage of justice within s 668E(1) could be said to have occurred. It would follow that no question of whether there had been a substantial miscarriage of justice within s 668E(1A) could arise. That was not the course taken. In its submissions the respondent accepted that a miscarriage of justice was established and properly does not seek to resile from that concession. Attention must therefore be directed to the application of the proviso. The proviso and its application An appellate court must be persuaded that evidence properly admitted at trial establishes guilt to the requisite standard before it can conclude that no substantial miscarriage of justice has actually occurred. It must consider the whole of the record of the trial and the nature and effect of the error which gives rise to 5 That sub-section provides: "The Court on any such appeal against conviction shall allow the appeal if it is of opinion that the verdict of the jury should be set aside on the ground that it is unreasonable, or can not be supported having regard to the evidence, or that the judgment of the court of trial should be set aside on the ground of the wrong decision of any question of law, or that on any ground whatsoever there was a miscarriage of justice, and in any other case shall dismiss the appeal." 6 R v Orreal [2020] QCA 95 at [94]. 7 R v Orreal [2020] QCA 95 at [94]. 8 That sub-section provides: "However, the Court may, notwithstanding that it is of the opinion that the point or points raised by the appeal might be decided in favour of the appellant, dismiss the appeal if it considers that no substantial miscarriage of justice has actually occurred." the miscarriage of justice in the particular case9. As explained in Kalbasi v Western Australia10, this is because some errors will prevent the appellate court from being able to assess whether guilt was proved beyond reasonable doubt. The examples there given include cases which turn on issues of contested credibility11 or cases where there has been a wrong direction on an element of liability in issue12. What they have in common is that the appellate court cannot be satisfied that guilt has been proved. The appellant did not give evidence. The evidence tendered of the results of his blood test could not rationally affect the probability of the existence of a fact in issue at his trial13. Yet both the prosecutor and the trial judge told the jury that use could be made of it when they ought to have been told in unequivocal terms to disregard it. That should have occurred because, not only was the evidence irrelevant and therefore inadmissible, it was also prejudicial to the appellant. The nature of the evidence, that both the complainant and the appellant tested positive to HSV-1, combined with the jury being told that it was able to be taken into account, gave rise to a significant possibility that the evidence could be misused by the jury to support acceptance of the complainant's account, as McMurdo JA in His Honour also correctly pointed out that although an appellate court has the record, from which it may make some assessment of the prosecution's case, there are "natural limitations" when proceeding wholly or substantially on the record15. This is not a case like Hofer v The Queen16 where it may be apparent to an appellate court that the evidence of a witness is glaringly improbable. In such a 9 Weiss v The Queen (2005) 224 CLR 300 at 317 [43]-[44]. See Kalbasi v Western Australia (2018) 264 CLR 62 at 71 [15]. (2018) 264 CLR 62 at 71 [15]. 11 See Castle v The Queen (2016) 259 CLR 449. 12 See Pollock v The Queen (2010) 242 CLR 233. 13 Goldsmith v Sandilands (2002) 76 ALJR 1024 at 1025 [2]; 190 ALR 370 at 371. 14 R v Orreal [2020] QCA 95 at [10]-[12]. 15 R v Orreal [2020] QCA 95 at [13], referring to Weiss v The Queen (2005) 224 CLR 300 at 315-316 [40] citing Fox v Percy (2003) 214 CLR 118 at 125-126 [23]. (2021) 95 ALJR 937 at 952 [61]. case the court is not usurping the function of a jury in rejecting evidence that is so improbable as to be incapable of belief. This case is one which turns on the jury's acceptance of the evidence of the complainant. In such a case the appellate court should not seek to duplicate the function of the jury, because it does not perform the same function in the same way nor have the same advantages17. The respondent submits that the impugned evidence was neutral and logically incapable of assisting the jury in support of their ultimate determination as to the guilt or otherwise of the appellant. This submission mirrors what was said by the majority in the Court of Appeal18. It may be accepted that, logically, the evidence could not assist the jury, but often the nature of prejudicial evidence means that it may not be rationally applied. Uninstructed by the trial judge, the jury may well have reasoned that the test results were no coincidence and pointed to the complainant having contracted the virus from the appellant. Had the jury been directed to disregard the evidence, such prejudice would almost certainly have been overcome, but that did not occur. Orders The appeal from the decision of the Court of Appeal should be allowed and the order of that Court dismissing the appeal should be set aside. In lieu thereof, it should be ordered that the appeal to that Court be allowed, the verdicts be quashed and a new trial be held. 17 Pell v The Queen (2020) 268 CLR 123 at 144-145 [37]. 18 R v Orreal [2020] QCA 95 at [27] per Mullins JA, [102] per Bond J. Gordon Steward Gleeson GORDON, STEWARD AND GLEESON JJ. The appellant was convicted by a jury of three counts of unlawfully and indecently dealing with a child under the age of 16 years contrary to s 210(1)(a) of the Criminal Code (Qld) ("the Code"), and two counts of rape contrary to s 349 of the Code. The question raised by this appeal is whether the Court of Appeal of the Supreme Court of Queensland (Mullins JA and Bond J, McMurdo JA dissenting) erred by applying the proviso in s 668E(1A) of the Code to dismiss the appellant's appeal against conviction. Section 668E(1A) provides relevantly that, if the court on an appeal against conviction is of the opinion, on any ground whatsoever, that there was a miscarriage of justice, the court may dismiss the appeal if it considers that "no substantial miscarriage of justice has actually occurred". At the trial, evidence was admitted with the appellant's consent19, the substance of which was that both the complainant and the appellant had tested positive for the presence of the herpes simplex virus type 1 ("HSV-1") ("the impugned evidence"). The Court of Appeal found that the impugned evidence was irrelevant and inadmissible20, and that there had been a miscarriage of justice because the trial judge failed to direct the jury that they were obliged to disregard the impugned evidence in its entirety21. For the following reasons, the Court of Appeal erred in its application of s 668E(1A) and therefore the appeal must be allowed. Trial The alleged offences occurred on 29 January 2017, when the complainant was 12 years old. The appellant was a family friend, and the complainant, along with her mother and siblings, were staying at the appellant's home that evening. At the trial, which was conducted over four days, the jury heard a recording of the complainant's police interview from 30 January 2017 and also pre-recorded evidence she gave when she was 14 years old. The complainant's evidence was that she was watching a movie on television in the appellant's bedroom, when the appellant entered the room, lay down beside her on the bed and then committed the five counts of alleged offending. Afterwards, the complainant went to the lounge room where her mother and sister were sleeping, and lay down next to her sister on the couch. The complainant's sister, who was 11 years old at the time, 19 R v Orreal [2020] QCA 95 at [20]. 20 R v Orreal [2020] QCA 95 at [22], [24]. 21 R v Orreal [2020] QCA 95 at [10], [29], [94]. Gordon Steward Gleeson gave evidence that the complainant was crying when she lay down beside her. The next day, the complainant reported the alleged offending to her mother. The complainant also submitted two physical vaginal examinations, on 30 January 2017 and 9 February 2017, which revealed initial redness to her genitals consistent with blunt force trauma and a traumatic break of her hymen. A specialist paediatrician, Dr Waugh, gave evidence that the redness was unlikely to have been caused by a single finger inserted once and was more consistent with multiple fingers having been inserted, or possibly a single finger inserted multiple times. The injuries were consistent with penetration by a penis, and that penetration having been effected "a matter of days" preceding the first examination. The prosecution case rested on the evidence of the complainant and, accordingly, her reliability and credibility were central issues in the trial. The appellant's case theory at trial was that the complainant was a depressed and troubled young girl who had, at the least, a troubled relationship with her mother and who could not be regarded as a reliable narrator, and that there might be innocent explanations for the physical condition of the complainant's genitals as identified by the medical examinations. The impugned evidence comprised several items of evidence. One was a vaginal swab taken from the complainant which detected the presence of HSV-1 in the complainant's vagina. There was evidence from Dr Waugh that the swab indicated contact in the area of the swab by a person who, at some stage, had become infected with HSV-1 and was, at the time of that contact, shedding the virus. There was also evidence of a swab of the appellant's urethra, taken on 8 February 2017, which yielded a negative result for HSV-1 and a sample of the appellant's blood, tested on 10 February 2017, which yielded a positive result for HSV-1. Additionally, Dr Waugh gave evidence, both in chief and under cross-examination, about HSV-1 and the implications of the positive test results. Finally, the exhibits included a page ("exhibit 7") that recorded four facts agreed by the prosecution and the appellant22. Three of those four facts form part of the impugned evidence, being the results of the appellant's blood test and urethral swab respectively, and that it was unknown whether a male child who performed oral sex on the complainant had or has HSV-1. This last agreed fact concerned evidence given by the complainant of a single occasion of oral sex performed on her by a 15 year old boy. That evidence was adduced by the 22 R v Orreal [2020] QCA 95 at [56]. Gordon Steward Gleeson prosecution with the trial judge's leave23, and without any objection from the appellant. Each of the prosecutor, defence counsel and the trial judge addressed the jury about the impugned evidence. The prosecutor dealt with that evidence in the following terms in her closing address: "So then let's go to the medical evidence, and that's where the problem really lies for the [appellant]. I'm going to get to the problem in a moment, but I'll deal first with this herpes thing. The herpes thing is not the lynchpin in this case. It's very neutral, really. We know from Dr Waugh's evidence that we can't say whether the [appellant] gave [the complainant] the virus or even whether [the complainant] gave the [appellant] the virus or even if they both independently had the virus of each other. We also know from [the complainant] that she'd had one instance of sexual contact before and that involved her boyfriend performing oral sex on her. That's the one sexual instance that she spoke about or the only other sexual instance that she's been involved in. And you might well think that given the evidence that we heard about herpes simplex virus type 1 generally being associated with oral herpes, you might well think that she caught it from her boyfriend's mouth rather than the [appellant's] penis. There are plenty of explanations here. It's almost like a chicken and egg argument, but it's still a factor for you to take into account because the point is that both of them do have the same virus. It's a sexually transmissible virus, and the allegation in here is that the [appellant] forced her to engage in sexual contact and conduct, and so it's a matter for you with your life experience what you make of that. But I don't suggest that you would really put any weight on it." (emphasis added) The transcript records the following submissions by defence counsel, including the trial judge's interjection: "[Defence counsel]: Now, just briefly in relation to the evidence regarding the herpes virus. The fact that the [appellant] and complainant have the herpes virus doesn't prove anything. You've heard how common the virus is from the expert and you've also heard how the virus can be transmitted separately, even by having oral sex which, you know, she had with her boyfriend at some point in time. There's no evidence from the prosecution how old the boy was, or that that boy was even tested, who she 23 See Criminal Law (Sexual Offences) Act 1978 (Qld), s 4. Gordon Steward Gleeson had the oral sex with, for the virus. If you had the results for the boy and he was also positive for herpes virus, what would you think then? Then again [Trial judge]: Don't invite them to speculate, [defence counsel]. [Defence counsel]: I suggest to you that the evidence of the herpes virus doesn't help you with your decision making process at all. It certainly doesn't strengthen the [prosecution] case as you don't know where – you don't know where she got it from, or how long she's even had it." In summing up, after identifying the charges, the trial judge commenced by reciting the agreed facts (three of which, as previously noted, comprised part of the impugned evidence), observing that the jury "must treat those facts as proved". The trial judge then referred to the impugned evidence in addressing the evidence of Dr Waugh, noting that he gave evidence about two issues, being the presence of the herpes virus and the injuries he observed to the complainant's genitals. The relevant passage of the summing up is as follows: "I am going to deal first with the evidence about herpes virus. Before referring to [Dr Waugh's] evidence on that issue, I will remind you of the admissions in exhibit 7. They are that the [appellant] had a swab taken of his urethra on 8 February 2017 which returned a negative result for the herpes virus, but he then had a blood test two days later on 10 February 2017 which returned a positive result for the herpes virus. There is also an admission that it is not known whether the male child who performed oral sex on the complainant ... had or has herpes virus. That is, herpes virus type 1. Now, what was Dr Waugh's evidence about that? He gave evidence that the complainant ... also tested positive for herpes virus 1 on a swab taken from her vagina. So that is the same herpes virus that the [appellant] returned a positive blood test for. He said that that virus, herpes virus 1, causes common cold sores around the mouth. It can also cause genital infections. He said the virus is also commonly found as a genital infection. In that case, it would normally be spread oral to genital or genital to genital. He did not see any evidence of herpes on the complainant's physical examination. He said you can have that herpes virus without knowing that you have it; that is, you can have no symptoms. This is probably the most important part of his evidence, and there are three parts of it. First, it is not possible to say with any certainty when ... the complainant, contracted the virus. Second, he said it is not possible to say when the [appellant] contracted the virus. Third, he said it is not Gordon Steward Gleeson possible to say who the complainant ... contracted the virus from. He said for a child her age, it would be unlikely for her to have had a genital herpes virus infection for a long period beforehand. He said it does require genital contact to acquire it, but he does not know when that happened. So where does that leave you? You might think that evidence does not really help you one way or the other. You are left with evidence that both the [appellant] and the complainant child both tested positive for the same herpes virus, but on the state of the evidence, you cannot know when she contracted it, you cannot know when the [appellant] contracted it and you cannot know who she contracted it from. You just take that evidence into account along with all of the other evidence." (emphasis added) Court of Appeal's reasons The majority of the Court of Appeal considered that, on an assessment of the whole of the appellate record (but making due allowance for the limitations of proceeding wholly by reference to the record) and giving weight to the jury's guilty verdicts, they were able to be persuaded that the evidence properly admitted at trial proved, beyond reasonable doubt, the appellant's guilt of the counts on which the jury returned their verdicts24. Critical to the analysis of Bond J, who wrote the principal reasons for the majority, was the finding that the impugned evidence did not impact upon the credibility of the complainant or the reliability of her evidence25. His Honour explicitly recognised that a different conclusion on the operation of the proviso would have been necessary if the impugned evidence could have impacted on the jury's assessment of the reliability or credibility of the complainant26. Bond J considered that there was no suggestion made by counsel in closing addresses before the jury or by the trial judge that the impugned evidence was relevant to an assessment of the reliability or credibility of the complainant's evidence and therefore concluded that "the jury, acting rationally and following the directions given to them, could not have had their view of the reliability or credibility of the complainant's evidence affected by the HSV-1 evidence"27. 24 R v Orreal [2020] QCA 95 at [18], [29], [99], [102]. 25 R v Orreal [2020] QCA 95 at [99]. 26 R v Orreal [2020] QCA 95 at [100]. 27 R v Orreal [2020] QCA 95 at [102]. Gordon Steward Gleeson Mullins JA, who agreed with Bond J, considered that it was patent from the content of the impugned evidence that it could not assist the prosecution case "when almost 80 per cent of the male population would test positive to HSV-1 and it was not known whether the 15 year old boy with whom the complainant had a sexual encounter had or has HSV-1"28. Her Honour's assessment was also that the impugned evidence "was not evidence that could have had any bearing on the jury's assessment of the reliability and credibility of the complainant's evidence"29. Her Honour concluded that there was no risk that the jury would use the evidence in a way that was adverse to the appellant30. In dissent, McMurdo JA found that there was a "significant possibility" that the impugned evidence assisted the prosecution to persuade the jury to accept the complainant's evidence. In those circumstances, his Honour reasoned that the jury's verdicts might have been affected by the misuse of the evidence so that the guilty verdicts which were returned could not be used in reasoning that the evidence properly admitted at trial proved, beyond reasonable doubt, the appellant's guilt31. McMurdo JA concluded that the nature of the error or irregularity in the trial prevented the Court of Appeal from concluding that there was no substantial miscarriage of justice because of the natural limitations that attended the Court of Appeal's task32. Respondent's submissions In this Court, the respondent accepted that there had been a miscarriage of justice at the trial. The respondent submitted that the Court of Appeal was able to assess the complainant's evidence in the context of the whole of the evidence at the trial and particularly having regard to the corroborating evidence of opportunity to offend as alleged, the observations of the complainant's younger sister of the complainant's distressed condition, the timely complaint made by the complainant to her mother and the evidence of physical injuries to the complainant's vagina. The respondent submitted that, in the context of the corroborating evidence, the impugned evidence was, at best, neutral and was logically incapable of assisting the jury in their assessment of the complainant's credibility and reliability. Alternatively, the respondent submitted that any capacity for the impugned 28 R v Orreal [2020] QCA 95 at [27]. 29 R v Orreal [2020] QCA 95 at [27]. 30 R v Orreal [2020] QCA 95 at [28]. 31 R v Orreal [2020] QCA 95 at [12]. 32 R v Orreal [2020] QCA 95 at [16]. Gordon Steward Gleeson evidence to have impacted upon the jury's assessment of the complainant was negligible. The respondent also submitted that, even if the impugned evidence had the capacity to affect the jury's verdicts, such that the Court of Appeal was not permitted to afford significant weight to the guilty verdicts returned, the properly admitted evidence was nonetheless sufficient to enable the appellate court to be persuaded of the appellant's guilt. Whether no substantial miscarriage of justice actually occurred While there is no single universally applicable description of what constitutes "no substantial miscarriage of justice", an appellate court is precluded from concluding that no substantial miscarriage of justice actually occurred unless the court itself is persuaded that the evidence properly admitted at trial established guilt beyond reasonable doubt33. In addressing that question, it is necessary to consider the nature and effect of the error34. In cases which turn on contested credibility, the nature and effect of the error may render an appellate court unable to assess whether guilt was proved beyond reasonable doubt due to the "'natural limitations' that exist in the case of any appellate court proceeding wholly or substantially on the record"35. Further, as explained in Pell v The Queen36: "[T]he assessment of the credibility of a witness by the jury on the basis of what it has seen and heard of a witness in the context of the trial is within the province of the jury as representative of the community. Just as the 33 Weiss v The Queen (2005) 224 CLR 300 at 317 [44]-[45]; Baiada Poultry Pty Ltd v The Queen (2012) 246 CLR 92 at 104 [29]; Kalbasi v Western Australia (2018) 264 CLR 62 at 69-70 [12]-[13]; Lane v The Queen (2018) 265 CLR 196 at 206-207 [38]; Hofer v The Queen (2021) 95 ALJR 937 at 951 [59], 955-956 [84], 965 34 Kalbasi v Western Australia (2018) 264 CLR 62 at 71 [15]; Lane v The Queen (2018) 265 CLR 196 at 206-207 [38]-[39]; Hofer v The Queen (2021) 95 ALJR 937 35 Fox v Percy (2003) 214 CLR 118 at 125-126 [23]; Weiss v The Queen (2005) 224 CLR 300 at 316 [41]; Castle v The Queen (2016) 259 CLR 449 at 472-473 [65]-[68]; Kalbasi v Western Australia (2018) 264 CLR 62 at 71 [15]; Hofer v The Queen (2021) 95 ALJR 937 at 957-958 [91]-[93], 965-966 [133]. (2020) 268 CLR 123 at 144-145 [37]-[38]. Gordon Steward Gleeson performance by a court of criminal appeal of its functions does not involve the substitution of trial by an appeal court for trial by a jury, so, generally speaking, the appeal court should not seek to duplicate the function of the jury in its assessment of the credibility of the witnesses where that assessment is dependent upon the evaluation of the witnesses in the witness- box. The jury performs its function on the basis that its decisions are made unanimously, and after the benefit of sharing the jurors' subjective assessments of the witnesses. Judges of courts of criminal appeal do not perform the same function in the same way as the jury, or with the same advantages that the jury brings to the discharge of its function. ... The assessment of the weight to be accorded to a witness' evidence by reference to the manner in which it was given by the witness has always been, and remains, the province of the jury." (footnote omitted) Where proof of guilt is wholly dependent on acceptance of the complainant's evidence, and a misdirection may have affected that acceptance, the appellate court cannot accord the weight to the verdict of guilty which it otherwise might37. The majority of the Court of Appeal erred in placing weight on the verdicts because, as McMurdo JA observed, those verdicts might have been affected by the misuse of the impugned evidence in the absence of a direction to disregard that evidence. The majority of the Court of Appeal's assessment that the impugned evidence did not impact upon the credibility or reliability of the complainant's evidence ignored the significantly prejudicial nature and effect of that evidence, as do the respondent's submissions that the evidence was "neutral" and "incapable" of affecting the jury's assessment. It could only have been the potentially prejudicial effect of the impugned evidence that made it a miscarriage of justice for the trial judge to have failed to direct the jury to ignore that evidence. When regard is had to the young age of the complainant and the evidence of her previous single experience of oral sex, it is not difficult to envisage one or more jurors using "life experience", in accordance with the prosecutor's invitation, to conclude that the impugned evidence supported the complainant's version of events, or that it dispelled doubts that they might otherwise have held about her version of events. For example, one or more jurors may have applied what they considered to be "life experience" about the relative likelihood of possible explanations for the complainant's positive test for HSV-1. The prospect that one or more jurors relied upon the impugned evidence is enhanced by the volume of 37 Collins v The Queen (2018) 265 CLR 178 at 191-192 [36]; Hofer v The Queen (2021) 95 ALJR 937 at 951-952 [60], 965-966 [133]. Gordon Steward Gleeson that evidence and the attention that was given to the impugned evidence over the course of the trial. Further, and contrary to the majority's reasoning, the absence of any clear direction from the trial judge to the jury to disregard the impugned evidence left the jury free to "make of that" what they would with the benefit of their "life experience", as the prosecutor had suggested the jury might do. In effect, the jury were invited to employ the impugned evidence as they saw fit. In those circumstances, it was not possible for the Court of Appeal to assess whether guilt was proved beyond reasonable doubt at trial. Conclusion The appeal must be allowed. The order of the Court of Appeal dated 8 May 2020 dismissing the appeal must be set aside and, in lieu thereof, there will be an order that the appellant's appeal to that Court be allowed, the appellant's convictions be set aside and a new trial be had.
HIGH COURT OF AUSTRALIA APPELLANT AND COMMISSIONER OF TAXATION RESPONDENT Macoun v Commissioner of Taxation [2015] HCA 44 2 December 2015 ORDER Leave granted to the respondent to file out of time the Notice of Contention annexed to the affidavit of Stephen Vorreiter filed 15 June 2015. Appeal dismissed. On appeal from the Federal Court of Australia Representation R J Ellicott QC with M J Hirschhorn and M E Ellicott for the appellant (instructed by Hazan Hollander) J T Gleeson SC, Solicitor-General of the Commonwealth with J O Hmelnitsky SC and T L Phillips for the respondent (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Macoun v Commissioner of Taxation Income tax – International Organisations (Privileges and Immunities) Act 1963 (Cth) – Exemption from taxation on salaries and emoluments received from certain international organisations – Whether monthly pension payments exempt from taxation. International law – Treaty interpretation – Privileges and immunities of specialized agencies – Whether Convention on the Privileges and Immunities of the Specialized Agencies requires Australia not to tax monthly pension payments received by former officer of specialized agency. Words and phrases – "emolument", "pension", "salary". International Organisations (Privileges and Immunities) Act 1963 (Cth), s 6(1)(d)(i), Fourth Schedule. Specialized Agencies (Privileges and Immunities) Regulations (Cth), reg 8(1). Convention on the Privileges and Immunities of the Specialized Agencies [1988] ATS 41, Sections 18-19, 22. FRENCH CJ, BELL, GAGELER, NETTLE AND GORDON JJ. Introduction Section 6(1)(d)(i) of the International Organisations (Privileges and Immunities) Act 1963 (Cth) ("the IOPI Act") and reg 8(1) of the Specialized Agencies ("the SAPI Regulations") confer upon a person who holds an office in an international organisation to which the IOPI Act applies1 an exemption from taxation on salaries and emoluments received from the organisation. Immunities) Regulations (Privileges and (Cth) The International Bank for Reconstruction and Development ("the IBRD"), part of the World Bank, is an international organisation to which the IOPI Act applies. The appellant, Mr Macoun, a former sanitary engineer with the IBRD, received monthly pension payments from a Retirement Fund established under the IBRD's Staff Retirement Plan ("the SRP") in the 2009 and 2010 income years, when he no longer held an office in the IBRD. The respondent ("the Commissioner") sought to include the monthly pension payments in Mr Macoun's assessable income for the 2009 and 2010 income years2. The issue was whether that part of the monthly pension payments which was otherwise liable to tax under s 27H of the Income Tax Assessment Act 1936 (Cth) ("the ITAA 1936") became exempt income under s 6-20(1) of the Income Tax Assessment Act 1997 (Cth) ("the ITAA 1997") by reason of the IOPI Act and the SAPI Regulations. Three questions were raised on appeal. First, do s 6(1)(d)(i) and the Fourth Schedule to the IOPI Act and reg 8(1) of the SAPI Regulations together confer a taxation exemption in respect of that part of the monthly pension payments Mr Macoun received from the Retirement Fund at a time when he had ceased to hold an office in the IBRD? The answer is 1 Defined as a "Specialized Agency" by regs 2 and 3 and Item 6 of the Schedule to the SAPI Regulations. 2 The Commissioner accepts that the effect of s 27H of the Income Tax Assessment Act 1936 (Cth) is that the proportion of the pension payments that represents the return of Mr Macoun's contributions is not subject to taxation. Bell Nettle Gordon Second, do those monthly pension payments fall outside the phrase "salaries and emoluments received from the organisation" in Item 2 of Pt I of the Fourth Schedule to the IOPI Act? The answer is yes. Third, does the Convention on the Privileges and Immunities of the Specialized Agencies3 ("the Agencies Convention"), properly construed in accordance with the principles under the Vienna Convention on the Law of Treaties4 ("the Vienna Convention"), require Australia not to tax Mr Macoun's monthly pension payments? The answer is no. The second and third of these questions are raised by a notice of contention filed by the Commissioner out of time. The Commissioner should be given leave to raise those questions. These reasons will consider the facts, the decisions below, the statutory framework and the Conventions and then turn to consider each question. Facts The facts are not in dispute. Between 1992 and 2007, Mr Macoun worked overseas as a sanitary engineer for the IBRD. During his employment with the IBRD, Mr Macoun participated in the SRP5. The SRP was a contributory defined benefit plan under which participants were required to make regular contributions equivalent to 7 per cent of their gross salary6. These contributions were deducted each pay period from the participants' salary7. During his employment with the IBRD, Mr Macoun contributed US$200,842 to the SRP. [1988] ATS 41. [1974] ATS 2. 5 The SRP was amended with effect from 1 July 1997 ("the 1997 SRP"). Accordingly, subsequent citations of the SRP contain references to relevant provisions of both the SRP and the 1997 SRP. 6 Art 6.1(a) of the SRP; Art 9.1 of the 1997 SRP. 7 Art 6.1(a) of the SRP; Art 9.1 of the 1997 SRP. Bell Nettle Gordon Participation in the SRP was optional for employees under the age of 62 on fixed term appointments8. Participation in the SRP was mandatory for employees who had regular appointment status prior to attaining the age of 629, as did Mr Macoun from September 1993 onwards. The IBRD provided the SRP as an "integral part of the total compensation and benefits package offered to staff"10. After salaries, the IBRD regarded the SRP as "the most valuable element of that package"11. The SRP required the IBRD to make contributions to fund the liabilities of the SRP that were not funded by the participants' contributions12, to pay the administrative expenses of the SRP13 and to hold the assets of the SRP as a Retirement Fund14. A participant ceased to participate in the SRP upon termination of their service15 and was thereafter referred to as a "retired participant". Upon termination at the "normal retirement date" of 62 years, the retired participant was "retired on a normal pension"16. If the participant retired between the ages of 55 and 62, or after having completed at least three years of eligible service, 8 Art 2.1(b)(iii) of the SRP; Art 2.1(b)(iii) of the 1997 SRP. 9 Art 2.1(a) of the SRP; Art 2.1(a) of the 1997 SRP. 10 World Bank Group Staff Retirement Plan Handbook, (1993) at 1. 11 World Bank Group Staff Retirement Plan Handbook, (1993) at 1. 12 Art 6.2(a) of the SRP; Art 9.2(a) of the 1997 SRP. 13 Art 6.2(b) of the SRP; Art 9.2(b) of the 1997 SRP. 14 Arts 6.2(c) and 8.1 of the SRP; Art 11.1 of the 1997 SRP. 15 Art 2.3 of the SRP; Art 2.3 of the 1997 SRP. 16 Art 4.1 of the SRP; Art 3.1(a) of the 1997 SRP. See also Art 5 of the SRP and Art 8 of the 1997 SRP, which provide that if a retired participant becomes a participant again (ie is restored to service) the pension shall cease. Bell Nettle Gordon participation in the SRP was also terminated and they "retired under the Plan on an early retirement pension"17. The early retirement pension became effective on the normal retirement date unless the retired participant elected to receive monthly pension payments from the date of their retirement, calculated in accordance with formulae in the SRP18. Mr Macoun retired from the IBRD in 2007, aged 60, and elected to receive monthly pension payments. At the time of Mr Macoun's retirement, Art 5.1 of the 1997 SRP addressed the payment of pensions and Art 5.1(b) provided: "All pensions … shall be payable at one-twelfth the annual rate, prorated for fractions of months, at the end of each calendar month beginning with the month in which they become effective". The pension did not become "effective" until the participant became a "retired participant"19. All payments under the SRP were paid only from the Retirement Fund20. In the 2009 income year, Mr Macoun received pension payments from the Retirement Fund of A$131,302 and, in the 2010 income year, he received pension payments from the Retirement Fund of A$134,970. He originally lodged returns for those income years that included as assessable income the pension payments received in each of those years. He subsequently lodged requests to amend those returns to exclude the pension payments as assessable income. The Commissioner refused those requests and issued amended assessments which included the monthly pension payments in Mr Macoun's assessable income for the 2009 and 2010 income years. Mr Macoun objected against Commissioner disallowed the objection. the amended assessments. The 17 Art 4.2(a) of the SRP. Under Art 3.2(a) of the 1997 SRP, the participant "is retired on an early retirement pension". 18 Art 4.2 of the SRP; Art 3.2 of the 1997 SRP. 19 Arts 4.1(a) and 4.2(b) of the SRP; Arts 3.1(a) and 3.2(b) of the 1997 SRP. 20 Art 12.1 of the SRP; Art 5.1(a) of the 1997 SRP. Bell Nettle Gordon Earlier decisions Mr Macoun sought review of the Commissioner's decision in the Administrative Appeals Tribunal ("the AAT"). The AAT set aside the decision under review and substituted the decision that the monthly pension payments Mr Macoun received in the 2009 and 2010 income years did not form part of his assessable income and were exempt from Australian income tax21. The Commissioner appealed to the Full Court of the Federal Court of Australia. The Full Court allowed the appeal, set aside the decision of the AAT and affirmed the Commissioner's decision22. As the parties had reached an agreement that the Commissioner was to pay Mr Macoun's costs of the appeal irrespective of the outcome, a further order was made accordingly. Edmonds and Nicholas JJ held that reg 8(1) of the SAPI Regulations confined the privileges specified in Pt I of the Fourth Schedule to the IOPI Act to persons holding an office in a specialized agency and that Mr Macoun did not hold an office in the IBRD (a specialized agency) in the 2009 and 2010 income years. As a result, the privilege conferred by Item 2 of Pt I of the Fourth Schedule to the IOPI Act was not available to Mr Macoun in respect of the monthly pension payments received by him in the 2009 and 2010 income years, "even if such payments continued to be 'emoluments' to which he became entitled while holding office in the IBRD"23. The third member of the Full Court, Perram J, also allowed the appeal. His Honour agreed24 with Edmonds and Nicholas JJ but concluded, by way of obiter, that as a matter of public international law the Commonwealth is not permitted to levy income tax on Mr Macoun's pension25. This matter is addressed in the third question in this appeal. 21 Macoun v Federal Commissioner of Taxation 2014 ATC ¶10-354. 22 Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265. 23 Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265 at 275 [44]. 24 Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265 at 276 [49]. 25 Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265 at 278 [58]. Bell Nettle Gordon Statutory framework and the Conventions This appeal is concerned with the proper construction of the IOPI Act and the SAPI Regulations. They have a post-World War II genesis. Their legislative history may be summarised as follows. Legislative history The International Organizations (Privileges and Immunities) Act 1948 (Cth) ("the 1948 Act") (and the regulations made under it) conferred privileges and immunities on officials of the United Nations ("the UN") in accordance with the Convention on the Privileges and Immunities of the United Nations26 ("the UN Convention"). Article V of the UN Convention is entitled "Officials". Sections 18 and 20 in that Article relevantly provide: "18. Officials of the United Nations shall: be immune from legal process in respect of words spoken or written and all acts performed by them in their official capacity; be exempt from taxation on the salaries and emoluments paid to them by the United Nations; Privileges and immunities are granted to officials in the interests of the United Nations and not for the personal benefit of the individuals themselves. The Secretary-General shall have the right and the duty to waive the immunity of any official in any case where, in his opinion, the immunity would impede the course of justice and can be waived without prejudice to the interests of the United Nations. …" 26 [1949] ATS 3. Bell Nettle Gordon In 1961, the regulations made under the 1948 Act were expanded to confer juridical personality and legal capacity on international organisations including the IBRD27. In 1962, Australia sought to accede28 to the Agencies Convention. At around that time, the International Organizations (Privileges and Immunities of Specialized Agencies) Regulations (Cth)29 ("the 1962 Regulations") were made. Australia's accession to the Agencies Convention was not accepted by the UN, due to reservations that were attached with Australia's accession notification30. The 1962 Regulations were still made and, like the 1961 regulations, conferred juridical personality and legal capacity on specialized agencies including the IBRD31. The Agencies Convention relevantly provided in Art VI: "18. Each specialized agency will specify the categories of officials to which the provisions of this article and of article VIII shall apply. It shall communicate them to the Governments of all States parties to this Convention in respect of that agency and to the Secretary- General of the United Nations. The names of the officials included in these categories shall from time to time be made known to the above-mentioned Governments. 19. Officials of the specialized agencies shall: Be immune from legal process in respect of words spoken or written and all acts performed by them in their official capacity; 27 SR No 64 of 1961 (Cth) amending the International Organizations (Privileges and Immunities) Regulations (Cth) (SR No 20 of 1959). 28 [1962] ATS 13. 29 SR No 105 of 1962. 30 See Australia's Instrument of Accession (and Reservation) to the Agencies Convention (1962); UN Response to Australia's Instrument of Accession (1962). 31 reg 3 of the 1962 Regulations. Bell Nettle Gordon Enjoy the same exemptions from taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations; Privileges and immunities are granted to officials in the interests of the specialized agencies only and not for personal benefit of the individuals themselves. Each specialized agency shall have the right and the duty to waive the immunity of any official in any case where, in its opinion, the immunity would impede the course of justice and can be waived without prejudice to the interests of the specialized agency." The Agencies Convention was attached as a schedule to the 1962 Regulations. The privileges and immunities in the Agencies Convention were given force of law in Australia by operation of reg 4(1). However, reg 4(3) of the 1962 Regulations provided that reg 4(1) did not apply to the extent that any Act or regulation (other than the 1948 Act or regulations made under it) "makes provision in relation to privileges and immunities of a Specialized Agency or a person in relation to whom the Convention applies". As at 1962, s 23(y) of the ITAA 193632 provided: "23. The following income shall be exempt from income tax:— the official salary and emoluments of an official of a prescribed organization of which Australia and one or more other countries are members, to the prescribed extent and subject to the prescribed conditions". At the time when the 1962 Regulations (including reg 4(3)) came into force, reg 4AB(2)(c)33 of the Income Tax and Social Services Contribution 32 At this time the ITAA 1936 was called the Income Tax and Social Services Contribution Assessment Act 1936 (Cth). 33 Inserted by SR No 39 of 1957 (Cth). Bell Nettle Gordon Regulations (Cth) ("the ITAA 1936 Regulations") prescribed the IBRD as an organisation to which s 23(y) of the ITAA 1936 applied and exempted from income tax the official salary and emoluments of an official of the IBRD who was a resident of Australia only "to the extent that the official salary and emoluments are for services rendered out of Australia". Therefore, by reason of s 23(y) of the ITAA 1936, reg 4AB of the ITAA 1936 Regulations and reg 4(3) of the 1962 Regulations, the tax exemption applicable to IBRD officials in respect of official salaries and emoluments derived from s 23(y) and not from the 1962 Regulations. In 1963, the IOPI Act was enacted. It repealed the 1948 Act but by s 2(2) continued in force any regulations that had been made under the 1948 Act and which were still in force at the time of the enactment of the IOPI Act. The IOPI Act, as enacted, contained schedules providing for categories of privileges and immunities that could be conferred by regulations on persons, including officers and former officers of international organisations. The 1962 Regulations, s 23(y) of the ITAA 1936 and reg 4AB of the ITAA 1936 Regulations continued in force. The 1962 Regulations were repealed in 198634 and the SAPI Regulations were made. Shortly after the making of the SAPI Regulations, Australia again deposited an instrument of accession (without reservation) to the Agencies Convention with the UN, which this time was accepted, leading to Australia's accession on 9 May 198635. That accession was significant. Australia's international obligations could no longer be satisfied by continued adherence to the scheme introduced in 1962. If payments were properly characterised as salaries or emoluments of a person holding a relevant office, they should be exempt from tax even if the person was an Australian resident rendering the service in Australia. From 24 April 1986, being the date when the 1962 Regulations (including reg 4(3)) were repealed and the SAPI Regulations came into force, the IOPI Act and the SAPI Regulations together conferred a tax exemption for the salaries and emoluments received international organisations by current officers of those from prescribed 34 International Organizations (Privileges and Immunities of Specialized Agencies) Regulations (Repeal) (Cth) (SR No 64 of 1986). 35 [1988] ATS 41. Bell Nettle Gordon organisations, wherever the service was rendered. Without reg 4(3) of the 1962 Regulations, the limited exemption afforded by s 23(y) of the ITAA 1936 and reg 4AB of the ITAA 1936 Regulations no longer operated to exclude the broader exemption consistent with Australia's obligations under the Agencies Convention. Accordingly, s 23(y) of the ITAA 1936 and reg 4AB of the ITAA 1936 Regulations were repealed in 198836. Since that time, the IOPI Act and the SAPI Regulations have been the source of any privilege or immunity conferred on officers or former officers of the IBRD in relation to official salaries and emoluments. Neither the IOPI Act nor the SAPI Regulations have been relevantly amended since their enactment. Relevant provisions of the IOPI Act and the SAPI Regulations What then do the IOPI Act and the SAPI Regulations provide? Section 6(1)(d) of the IOPI Act provides the mechanism by which privileges may be conferred on officers of international organisations and is in the following terms: "(1) Subject to this section, the regulations may, either without restriction or to the extent or subject to the conditions prescribed by the regulations: confer: upon a person who holds an office in an international organisation to which this Act applies (not being an office prescribed by the regulations to be a high office) all or any of the privileges and immunities specified in Part I of the Fourth Schedule; and upon a person who has ceased to hold such an office the immunities specified in Part II of the Fourth Schedule". (emphasis added) 36 Taxation Laws Amendment Act (No 2) 1988 (Cth), s 10; Income Tax Regulations (Amendment) 1988 (Cth) (SR No 196 of 1988). Bell Nettle Gordon Regulation 8 of the SAPI Regulations37 is in the following terms: "Privileges and immunities of officers (other than high officers) of Specialized Agencies Subject to subregulation (2), a person who holds an office in a Specialized Agency, other than a person who holds, or is performing the duties of, an office specified in Column 3 of an item in the Schedule[38], has the privileges and immunities specified in Part I of the Fourth Schedule to the [IOPI] Act. (2) A person to whom subregulation (1) applies does not have the right to export furniture and effects free of duties when leaving Australia on the termination of his or her functions in relation to a Specialized Agency. A person who has ceased to hold an office in a Specialized Agency, other than an office specified in Column 3 of an item in the Schedule, has the immunities specified in Part II of the Fourth Schedule to the [IOPI] Act." (emphasis added) The Fourth Schedule to the IOPI Act is in two parts and provides: "Part I Privileges and Immunities of Officer (other than High Officer) of International Organisation Immunity from suit and from other legal process in respect of acts and things done in his capacity as such an officer. Exemption from taxation on salaries and emoluments received from the organisation. 37 The SAPI Regulations were made pursuant to the regulation-making powers in ss 6(1) and 13 of the IOPI Act. 38 The relevant office specified in Column 3 of Item 6 in the Schedule to which attention is directed by reg 8(1) and (3) is the President of the IBRD, an office never held by Mr Macoun. Bell Nettle Gordon Exemption (including exemption of a spouse and any dependent relatives) from the application of laws relating to immigration and the registration of aliens. Exemption from the obligation to perform national service. Exemption from currency or exchange restrictions to such extent as is accorded to an official, of comparable rank, forming part of a diplomatic mission. The like repatriation facilities (including repatriation facilities for a spouse and any dependent relatives) in time of international crisis as are accorded to a diplomatic agent. The right to import furniture and effects free of duties when first taking up a post in Australia and to export furniture and effects free of duties when leaving Australia on the termination of his functions. Part II Immunities of Former Officer (other than High Officer) of International Organisation Immunity from suit and from other legal process in respect of acts and things done in his capacity as such an officer." (emphasis added) The IOPI Act applies to "international organisations" that are declared by the SAPI Regulations to be ones to which the IOPI Act applies39. The SAPI Regulations specify that the IBRD is a "Specialized Agency", and is therefore an international organisation to which the IOPI Act applies40. How do the IOPI Act and the SAPI Regulations interact with the ITAA 1997? The answer is found in s 6-20(1) of the ITAA 1997, which provides that an amount of ordinary income or statutory income is "exempt income" if it is made exempt from income tax by a provision of the ITAA 1997 or another Commonwealth law. Pension payments from a foreign fund would ordinarily be 39 s 5(1) of the IOPI Act. 40 regs 2 and 3 and Item 6 of the Schedule to the SAPI Regulations. Bell Nettle Gordon taxed as assessable income, unless a relevant exemption applied41. Mr Macoun claims exemption under another Commonwealth law, namely the IOPI Act read with the SAPI Regulations. It is against that background that the three questions on appeal are to be determined. Analysis – Question 1 The first question is – do s 6(1)(d)(i) and the Fourth Schedule to the IOPI Act and reg 8(1) of the SAPI Regulations together confer a taxation exemption in respect of that part of the monthly pension payments Mr Macoun received from the Retirement Fund at a time when he had ceased to hold an office in the IBRD? The answer, as has already been indicated, is no. A number of matters should be noted at the outset. First, s 6(1)(d) of the IOPI Act and reg 8 of the SAPI Regulations distinguish between a person who holds an office in an international organisation and a person who has ceased to hold such an office. A person who holds an office is given the "privileges and immunities" specified in Pt I of the Fourth Schedule to the IOPI Act. A person who has ceased to hold such an office is given the "immunities" specified in Pt II of the Fourth Schedule. A clear distinction is drawn between a person who holds an office and a person who has ceased to hold such an office. That distinction cannot be ignored. Second, although the Fourth Schedule to the IOPI Act forms part of the IOPI Act, it is only given operative effect by force of the SAPI Regulations. Section 6(1)(d)(ii) of the IOPI Act makes clear that regulations made under the IOPI Act cannot confer any of the "privileges" specified in Pt I of the Fourth Schedule upon a person who has ceased to hold a relevant office. The SAPI Regulations cannot confer upon a person who has ceased to hold a relevant office the privilege of "[e]xemption from taxation on salaries and emoluments received from the organisation" because that privilege is in Pt I of the Fourth Schedule but not replicated in Pt II. Third, the conclusion that the privilege of "[e]xemption from taxation on salaries and emoluments received from the organisation" in Item 2 of Pt I of the 41 s 27H(1)(a) and the definition of "annuity" in s 27H(4) of the ITAA 1936. See also ss 6-5 and 6-10 of the ITAA 1997. Bell Nettle Gordon Fourth Schedule is limited to "a person who holds an office" in a specialized agency is supported by the fact that the other privileges and immunities listed in Pt I of the Fourth Schedule relate, by their nature, to the period in which a person holds an office. These textual matters confirm that in seeking to identify whether a privilege or immunity is applicable under the IOPI Act and the SAPI Regulations, there are two important questions – what is the office, in what organisation, in relation to which the claim is made; and does the person currently hold (in the case of Pt I of the Fourth Schedule), or did the person formerly hold (in the case of Pt II of the Fourth Schedule), that office. In this appeal, Mr Macoun at one time held a relevant office but in the relevant income years he no longer held that office. As a result, Pt I of the Fourth Schedule does not apply to him. Fourth, the relevant exemption in Item 2 of Pt I of the Fourth Schedule is "from taxation on salaries and emoluments received from the organisation" (emphasis added). The text of the exemption is important. It is focused on receipt of the salaries and emoluments, and it is focused on their receipt from the organisation. The focus on receipt – in an exemption which applies only to officers currently holding office and which is not replicated in relation to officers who have ceased to hold office – points to the relevant consideration being receipt during the course of employment, rather than the entitlement arising during the course of employment. This fourth matter establishes that, factually, Mr Macoun faces two additional hurdles. He did not receive the monthly pension payments whilst he was an officer of the IBRD and he did not receive the monthly pension payments from the IBRD (rather he received them from the Retirement Fund established under the SRP, which is separate from the IBRD42). The fact that Mr Macoun cannot satisfy these two conditions to enable him to avail himself of the privilege of taxation exemption in Pt I of the Fourth Schedule is a complete answer to the view expressed by the AAT that the monthly pension payments were an emolument "arising from an office or 42 See Arts 6.2, 8.1, 8.2 and 12.1 of the SRP; Arts 5.1(a), 9.2, 11.1 and 11.2(a) of the 1997 SRP. Bell Nettle Gordon employment" or which "crystallised during the course of … employment"43. On that basis, the question whether a pension payment is an emolument is not relevant in the determination of the first question in this appeal. As the Commissioner submitted, the grant of the privilege in the form of taxation exemption contained in Pt I of the Fourth Schedule to the IOPI Act depends on the status of the grantee as the office holder as and when the relevant amount is received. That distinction is reinforced by the text of the immunity for former officers in Pt II of the Fourth Schedule, which is limited to "[i]mmunity from suit and from other legal process in respect of acts and things done in his [or her] capacity as such an officer". The immunity has two limitations. It is limited to immunity from suit and other legal process and, significantly, in respect only of acts and things done as an officer. It does not extend to acts and things done after the person ceases to be an officer. That construction is consistent with the statutory purpose or purposes of the IOPI Act. The IOPI Act sets the upper limits of the privileges and immunities which might be conferred by the regulations by reference to identified organisations and identified capacities of persons engaged in the work of those organisations44. The purpose of conferring the privileges and immunities in that manner is not for the benefit of, or personal to, the persons connected with those international organisations, but is rather to assist the organisations in the "performance of [their] functions"45. That purpose of functional necessity is reinforced by the inclusion in the IOPI Act46 and the SAPI Regulations47 of a provision allowing for a specialized agency to waive any 43 Macoun v Federal Commissioner of Taxation 2014 ATC ¶10-354 at 6,182-6,183 44 See also the Second Reading Speech for the International Organizations (Privileges and Immunities) Bill 1963: Australia, House of Representatives, Parliamentary Debates (Hansard), 8 May 1963 at 1161, 1163; Australia, Senate, Parliamentary Debates (Hansard), 21 August 1963 at 95-96. 45 See also the Second Reading Speech for the International Organizations (Privileges and Immunities) Bill 1963: Australia, House of Representatives, Parliamentary Debates (Hansard), 8 May 1963 at 1162; Australia, Senate, Parliamentary Debates (Hansard), 21 August 1963 at 96. See also s 22 of the Agencies Convention. 46 s 10 of the IOPI Act. 47 reg 10 of the SAPI Regulations. Bell Nettle Gordon privileges or immunities to which a current or former office holder is entitled under the IOPI Act and the SAPI Regulations. The privilege of exemption from taxation whilst an officer of a specialized agency is designed to ensure that the international organisation secures the services of an officer who remains independent by reason of not having to submit to the taxation jurisdiction of a Convention State (whether the State of his or her nationality or residence, or a State in which he or she is located whilst working for the organisation). Of course, when the officer ceases to hold the office, the interest of the international organisation disappears. In contrast, the interest of the international organisation in respect of the immunity from suit and other legal process for former officers in Pt II of the Fourth Schedule continues after an officer ceases to hold the office, because the independence of officers is served by confidence that they will not face civil liability or criminal prosecution for their official acts after they cease to hold that office. Mr Macoun's pension was not a vested right Contrary to Mr Macoun's submissions, his right to receive the pension was not a vested right which existed when he was an office holder48. During his time as an officer of the IBRD, Mr Macoun's right to the pension was not an accrued obligation; it was "at best an inchoate [right] in process of accrual but subject to a variety of contingencies"49. The right to the pension did not arise until Mr Macoun ceased to hold office and ceased to be a participant in the SRP. Indeed, when he ceased to hold an office, the inchoate right could mature into one of a number of different forms, payable to different people. Those forms included a disability pension50, a death benefit as a pension payable to a surviving spouse51 or in a lump sum52, or a withdrawal benefit53. 48 cf Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385 at 396; [1965] HCA 70. 49 See, by way of example, Federal Commissioner of Taxation v James Flood Pty Ltd (1953) 88 CLR 492 at 507-508; [1953] HCA 65. 50 Art 4.3 of the SRP; Art 3.4 of the 1997 SRP. 51 Art 4.4(a) of the SRP; Art 4.1(a) of the 1997 SRP. 52 Art 4.4(b) of the SRP; Art 4.1(b) of the 1997 SRP. 53 Art 4.5 of the SRP; Art 4.3 of the 1997 SRP. Bell Nettle Gordon On the other hand, whilst he was an officer of the IBRD, Mr Macoun had the right, indeed the obligation, to be a participant in the SRP and to contribute 7 per cent of his gross remuneration to the SRP. The IBRD was obliged to fund the balance of the SRP54. Whilst Mr Macoun was an officer of the IBRD, his salary and emoluments received from the IBRD were exempt from tax under Item 2 of Pt I of the Fourth Schedule to the IOPI Act. The Commissioner did not tax his inchoate right to the pension. Accidents of timing Mr Macoun submitted that if the question posed by the exemption in the IOPI Act and the SAPI Regulations was answered simply by an enquiry as to the timing of the receipt of salary or emolument, any payment of salary or emolument after the officer ceased to hold an office (but which was undoubtedly salary or emolument earned before the officer ceased to hold an office) would be taxable. Mr Macoun submitted that this "anomaly" weighed against the interpretation of the IOPI Act adopted in these reasons and by the Full Court. These "accidents of timing" were said by Mr Macoun to be inconsistent with the view that, on the proper construction of the IOPI Act and the SAPI Regulations, that part of the monthly pension payments Mr Macoun received from the Retirement Fund that did not reflect a return of his contributions to the SRP in the 2009 and 2010 income years did not attract the privilege of exemption from taxation. That contention should be rejected for at least two reasons. First, it proceeds from a false premise. The privileges and immunities granted to an officer are granted "in the interests of the specialized agencies only and not for personal benefit of the individuals themselves"55. It is the specialized agency that may waive any privileges or immunities, not the individual officer56. Second, as the Commissioner submitted, it is always possible for an international organisation to order its affairs to ensure that any payment of salaries or emoluments to an officer is received by that officer while they continue to hold an office, even if the officer has ceased to perform their usual duties. It may also 54 See [11]-[13] above. 55 Section 22 of the Agencies Convention. 56 s 10 of the IOPI Act; reg 10 of the SAPI Regulations; Section 22 of the Agencies Convention. Bell Nettle Gordon be, although for present purposes it is unnecessary to decide, that if salary or emoluments were both due and payable while an officer continued to hold office, they should be regarded as "received" during office even though not in fact paid until after the officer ceased to hold office57. For those reasons, that part of the monthly pension payments Mr Macoun received under the Retirement Fund that did not reflect a return of Mr Macoun's contributions to the SRP in the 2009 and 2010 income years does not attract the privilege of exemption from taxation under the IOPI Act and the SAPI Regulations. Analysis – Question 2 The second question is – do the monthly pension payments Mr Macoun received at a time when he no longer held an office in the IBRD fall outside the phrase "salaries and emoluments received from the organisation" in Item 2 of Pt I of the Fourth Schedule to the IOPI Act? For the reasons set out in relation to question 1, the answer is yes. Mr Macoun did not receive the monthly pension payments whilst he was an officer of the IBRD and he did not receive the monthly pension payments from the IBRD. There is, though, another reason why those monthly pension payments fall outside the phrase "salaries and emoluments received from the organisation" in Item 2 of Pt I of the Fourth Schedule to the IOPI Act. The monthly pension payments do not fall within the phrase "salaries and emoluments". A distinction may be drawn between each of the terms "pension", "salary" and "emolument". This issue was addressed in Nette v Howarth58. The context was different but the decision is instructive. Rich J described a "pension" as "in the nature of deferred pay, and usually given upon retirement for past services"59. "Salary" was described as "a definite payment for personal services arising under some contract, and … computed by time"60. Finally, "emoluments" were 57 cf Coles Myer Finance Ltd v Federal Commissioner of Taxation (1993) 176 CLR 640 at 662; [1993] HCA 29. 58 (1935) 53 CLR 55 at 60, 65; [1935] HCA 22. 59 Nette v Howarth (1935) 53 CLR 55 at 60. 60 Nette v Howarth (1935) 53 CLR 55 at 60. Bell Nettle Gordon described as "the advantages in money or money's-worth which flow from occupation of an office or the like"61. In the present appeal, Mr Macoun relied upon a finding by the AAT that his monthly pension payments were an emolument62 and the Federal Court's refusal to consider that question on appeal63. The notice of contention filed by the Commissioner in this Court seeks to affirm the decision below on the additional ground that the Federal Court ought to have decided that the AAT erred in law in finding that the monthly pension payments received by Mr Macoun were "emoluments received from the organisation" within the meaning of Item 2 of Pt I of the Fourth Schedule to the IOPI Act. Mr Macoun contended that this Court should not reconsider that question as it involved a finding of fact by the AAT. Mr Macoun's contention should be rejected64. As Mason J pointed out in Hope v Bathurst City Council65, when it is necessary to engage in a process of construction to determine the meaning of a word (or phrase) in a statute (as in this appeal), a question of law will be involved where it is contended that there is only one conclusion open. The phrase "salaries and emoluments" in Item 2 of Pt I of the Fourth Schedule to the IOPI Act recognises that the payments which an international organisation may make to a person who holds an office may be of a variety of characters. It is apparent that "emolument", appearing as it does in the phrase "salaries and emoluments", is intended to capture a broader range of additional benefits than "salaries". However, in the context of Item 2 of Pt I of the Fourth Schedule to the IOPI Act and the SAPI Regulations, that phrase is subject to the two conditions referred to earlier – the emolument must be received whilst the person is an officer of a specialized agency and the emolument must be received from the specialized agency. A monthly pension payment does not, and cannot, 61 Nette v Howarth (1935) 53 CLR 55 at 60. 62 Macoun v Federal Commissioner of Taxation 2014 ATC ¶10-354 at 6,182 [32]. 63 Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265 at 273-274 64 See, for example, Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 450-451 [24]-[27]; [2001] HCA 12. 65 (1980) 144 CLR 1 at 8-10; [1980] HCA 16. See also Vetter v Lake Macquarie City Council (2001) 202 CLR 439 at 451 [27]. Bell Nettle Gordon satisfy those conditions. Indeed, adapting the language of Rich J in Nette v Howarth, monthly pension payments are not "advantages in money or money's- worth which flow from occupation of an office or the like"66. A pension does not flow from occupation of an office. It flows only on and from cessation of that Analysis – Question 3 The third question – does the Agencies Convention properly construed in accordance with the principles under the Vienna Convention require Australia not to tax Mr Macoun's monthly pension payments – was not the subject of detailed submissions and debate before the AAT and the Full Court below, but was discussed by Perram J in the Federal Court68. It was common ground that the Court should seek to construe the IOPI Act in a manner which accords with Australia's international obligations if such a construction is open69. Mr Macoun submitted that Australia's international obligations under the Agencies Convention required that the monthly pension payments be exempt from taxation, and that s 6(1)(d)(i) and the Fourth Schedule to the IOPI Act and reg 8 of the SAPI Regulations should be given a beneficial and purposive meaning designed to implement those obligations. The answers to the first and second questions raised in this appeal show that such a construction is not open. international obligations demonstrates that, in any event, those obligations do not require Australia to exempt Mr Macoun's monthly pension payments from tax. But examination of Australia's What then are Australia's international obligations? 66 (1935) 53 CLR 55 at 60. 67 See [14]-[16], [63] above. 68 Federal Commissioner of Taxation v Macoun (2014) 227 FCR 265 at 275-278 69 Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 CLR 1 at 15 [34]; [2006] HCA 53; Minister for Immigration and Border Protection v WZAPN (2015) 89 ALJR 639 at 649 [53]; 320 ALR 467 at 478; [2015] HCA 22. Bell Nettle Gordon The applicable principles of construction are not in dispute. The meaning of the Agencies Convention is to be construed according to the rules of construction in the Vienna Convention70. Article 31(1) provides that a treaty must be interpreted "in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose". Article 31(2) of the Vienna Convention states: "The context for the purpose of the interpretation of a treaty shall comprise, in addition to the text, including its preamble and annexes: any agreement relating to the treaty which was made between all the parties in connexion with the conclusion of the treaty; any instrument which was made by one or more parties in connexion with the conclusion of the treaty and accepted by the other parties as an instrument related to the treaty." Article 31(3) provides that, together with the context, the following is also to be considered: any subsequent agreement between the parties regarding the interpretation of the treaty or the application of its provisions; any subsequent practice in the application of the treaty which establishes the agreement of the parties regarding its interpretation; any relevant rules of international law applicable in the relations between the parties." Finally, reference should be made to Art 32 of the Vienna Convention, which provides that recourse may be had to supplementary means of interpretation, including the preparatory work of the treaty and the circumstances of its conclusion, in order to confirm the meaning resulting from the application of Art 31 or to determine the meaning when the interpretation according to Art 31 is ambiguous or obscure or leads to a result that is manifestly absurd or unreasonable. 70 Maloney v The Queen (2013) 252 CLR 168 at 180-181 [14], 255-256 [235]; [2013] HCA 28. Bell Nettle Gordon What then is the proper construction of the Agencies Convention arising from the application of the Vienna Convention? It is necessary to turn first to the words of the Agencies Convention. Section 19(b) of the Agencies Convention provides that "[o]fficials" of specialized agencies shall "[e]njoy the same exemptions from taxation in respect of the salaries and emoluments paid to them by the specialized agencies and on the same conditions as are enjoyed by officials of the United Nations". Section 18 provides that specialized agencies will specify the categories of officials to which Art VI (which contains Sections 18 and 19) applies and from time to time make known to the governments of all State parties to the Agencies Convention the names of the officials to be included in these categories. On the ordinary meaning of the words, the Agencies Convention does not prohibit States distinguishing between officers and former officers and does not prohibit a State taxing a pension received by a former officer of a specialized agency. That construction is consistent with both State practice and the preparatory works. Although these materials were not debated before the AAT or the Full Court, they assist in the interpretation of the Agencies Convention. The starting point in understanding the context of the text, object and purpose of the Agencies Convention is the UN Convention. Its terms have been addressed earlier71 and are relevant because Section 19(b) of the Agencies Convention picks up for officials of specialized agencies the "same exemptions from taxation ... enjoyed by officials of the United Nations". The Sixth Committee reported to the General Assembly on the work of the Sub-Committee on Privileges and Immunities as follows72: "The Sub-Committee on privileges and immunities examined another proposal submitted by the Advisory Group of Experts on administrative and budgetary matters, made with a view to exempting all members of the staff of the Organization from taxation on retirement benefits and exempting their beneficiaries from taxation on death benefits, either in the form of a lump sum or benefits paid by the Organizations to widows and orphans. The Sub-Committee decided, without prejudice to 71 See [25] above. 72 United Nations, Privileges and Immunities of the United Nations: Report of the the General Assembly, UN Docs A/43/Rev.1, Sixth Committee A/43/Rev.1/Corr.1, A/43/Rev.1/Corr.2 and A/43/Corr.1 (1946) at 643-644. Bell Nettle Gordon this question being taken up and considered separately at a later stage, that a provision to this effect should not be included in the general Convention." As the Commissioner submitted, this confirms the UN Convention was drafted on the basis that the phrase "salaries and emoluments" did not extend to retirement or death benefits. Next, the preparatory works in relation to the Agencies Convention must be considered. Its terms have been addressed earlier73. A Sub-Committee of the Sixth Committee reported in 194774. It recorded that the Sub-Committee agreed that the immunity from suit in Section 19(a) would continue after the officials had ceased to be officials75. The last sentence of [22] of the report stated that "[i]t was thought, further, that this interpretation in fact followed from the wording of the Section as a whole and it was pointed out that paragraph (b), dealing with exemption of official salaries from taxation, required a similar interpretation if it was to receive its proper effect". That sentence must be read with the next paragraph, which in fact addressed the applicable provision in the Agencies Convention (Section 19(b)) by reference to the corresponding provision in the UN Convention. The report recorded that there was still debate about the final form and effect of the provision in the UN Convention and then went on to state: "The majority of the Sub-Committee considered that the position of officials of the Specialized Agencies with regard to this matter should be the same as that of officials of the United Nations and therefore they adopted the following text: 73 See [28] above. 74 United Nations General Assembly, Sixth Committee, Co-ordination of the Privileges and Immunities of the United Nations and of the Specialized Agencies: Final Report of Sub-Committee 1 of the Sixth Committee, UN Doc A/C.6/191 75 United Nations General Assembly, Sixth Committee, Co-ordination of the Privileges and Immunities of the United Nations and of the Specialized Agencies: Final Report of Sub-Committee 1 of the Sixth Committee, UN Doc A/C.6/191 Bell Nettle Gordon '(b) Officials of the Specialized Agencies shall enjoy the same exemption from taxation in respect of the salaries and emoluments paid to them by the Specialized Agencies and on the same conditions as is enjoyed by officials of the United Nations.' The effect of this text is to make whatever system is in force in respect of officials of the United Nations automatically be applicable to officials of the Specialized Agencies." As seen earlier, the officials of the UN were not to get an exemption from taxation on their pensions. In each preparatory work, the taxation exemption was not extended to pensions. Next, the State practice of parties to the Agencies Convention in dealing with exemption from taxation for periodic pensions must be considered. The State practice is not consistent. The position adopted by the UN may be illustrated by reference to Powell v Secretary-General of the United Nations76. This decision is significant for a number of reasons. First, it records that it was not in dispute that nearly all States which are parties to the UN Convention tax periodic pension payments77. Second, after citing the passage from the preparatory works for the UN Convention referred to above, the decision records the Secretary-General of the UN's argument that the preparatory works "clearly excluded pension paid to former staff members from section 18(b) of the [UN] Convention"78. Third, the decision records that it was admitted by the parties that periodic pension payments are subject to national taxation79. 76 Judgment No 237 of (13 February 1979). the Administrative Tribunal of the United Nations 77 Powell v Secretary-General of the United Nations, Judgment No 237 of the Administrative Tribunal of the United Nations (13 February 1979) at 69 [XVIII]. 78 Powell v Secretary-General of the United Nations, Judgment No 237 of the Administrative Tribunal of the United Nations (13 February 1979) at 70 [XIX]. 79 Powell v Secretary-General of the United Nations, Judgment No 237 of the Administrative Tribunal of the United Nations (13 February 1979) at 70 [XX]. Bell Nettle Gordon A similar view was reached in later decisions of courts in France and the Netherlands80, and in a decision of an arbitral tribunal constituted by the Government of the French Republic and the United Nations Educational, Scientific and Cultural Organization ("UNESCO") to consider the question of the tax regime governing pensions paid to retired UNESCO officials residing in France81. Of particular significance was the statement that the Secretary-General of the UN had "left it to the parties to an agreement on privileges and immunities to decide what provision to make … particularly with regard to the exemption of retirement pensions from taxation"82. For present purposes, it is sufficient to record, as is the fact, that there is still no generally accepted State practice with regard to the exemption of retirement pensions from taxation83. It cannot be said that the Agencies Convention properly construed in accordance with the principles identified in the Vienna Convention requires Australia not to tax Mr Macoun's pension. 80 See, eg, Decision 01PA04215 of the Paris Administrative Court of Appeal (7 November 2003); X v State Secretary for Finance, Supreme Court of the Netherlands (16 January 2009), in (2010) 41 Netherlands Yearbook of International Law 394 at 400 [3.3.5]-[3.3.6]. 81 United Nations Juridical Yearbook, (2001) 421 at 430 [40], 431 [47], 432 [48]- [49], 434 [52]-[55]. At 434 [54], it is recorded that the provision in dispute in that decision was modelled on Section 18(b) of the UN Convention. 82 Arbitration Tribunal constituted by the Government of the French Republic and UNESCO to consider the question of the tax regime governing pensions paid to retired UNESCO officials residing in France, United Nations Juridical Yearbook, 83 See, for example, X v State Secretary for Finance, Supreme Court of the Netherlands (16 January 2009), in (2010) 41 Netherlands Yearbook of International Law 394 at 399-400 [3.3.4]-[3.3.6]. See also Commissioner of Income-tax v Kolhatkar (1994) 211 ITR 850 (High Court of Bombay); Serafin and Yolanda, Supreme Court of Andalusia (appeal number 478/2001, 17 January 2003); Enrique, Supreme Court of Catalonia (appeal number 1227/2003, 28 March Bell Nettle Gordon Orders The appeal should be dismissed. The parties agreed that there should be no order as to costs.
HIGH COURT OF AUSTRALIA APPELLANT AND IAIN STEWART ALEXANDER RESPONDENT [2005] HCA 79 14 December 2005 ORDER Appeal dismissed with costs. On appeal from the Supreme Court of Western Australia Representation: B W Walker QC with P Kulevski for the appellant (instructed by Edward John Myers) C L Zelestis QC with B G Bradley for the respondent (instructed by Bradley & Bayly) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Negligence – Accident – Respondent struck and injured by a vehicle driven by the appellant – Respondent lying on road carriageway at time of accident – Respondent heavily intoxicated at time of accident – Appellant's attention drawn to a third person at the side of the road – Appellant continued to drive vehicle at same speed – Appellant changed vehicle direction by veering to the centre of the road – Whether appellant had exercised reasonable care in carrying out his duty to other road users. GUMMOW, KIRBY AND HAYNE JJ. At about 4.15 am on 7 October 2000 the respondent was struck and injured by a tow truck driven by the appellant. When he was struck, the respondent was lying down on the carriageway of Middleton Beach Road, Albany, near the intersection with Vine Street. By his own account the respondent had drunk 12 stubbies of beer in the preceding eight hours. He had no recollection of how he came to be on the roadway. At about 4.00 am he had set out to walk home with a housemate, Mr Cameron Turner. The route home took them along Middleton Beach Road. At the trial in the District Court of Western Australia of the respondent's claim for damages, the appellant gave the only account of what happened when the respondent was struck. As noted earlier, the respondent had no memory of what had happened immediately before he was struck. Mr Turner was not called as a witness. He had, it seems, moved interstate before the respondent's action came to be tried. At trial, and on appeal to the Full Court, reference was made to the absence of evidence from Mr Turner, it being submitted by the defendant in the action (the appellant in this Court) that Mr Turner's absence weakened the plaintiff's case. In the appeal to this Court, however, nothing turns on Mr Turner's not having given evidence. The appellant in this Court did not submit that the Full Court acted upon erroneous findings of fact. The appellant said, in the evidence he gave at the trial, that he was driving along Middleton Beach Road when he saw a man standing on the side of the road. (It has always been accepted that the man the appellant saw was Mr Turner.) Because the man that the appellant saw was "moving around a fair bit like he had been drinking", the appellant kept his eye on him. The appellant did not slow down; he maintained his speed of about 55 to 60 kilometres per hour. Rather, the appellant started to veer to the centre of the road. When he looked back at the roadway ahead of his truck, he saw something lying on the road. He said he "went to brake ... thought I shouldn't brake, so I lifted my foot ... and then I felt that I ran over something". Upon the trial of the respondent's action, the trial judge, O'Sullivan DCJ, held that the appellant was not negligent. The reasoning which led to that conclusion was expressed in the following terms: "In my view as the defendant [the present appellant] drove his vehicle along Middleton [Beach] Road towards the scene of the accident his attention would naturally have been drawn to the figure of Cameron Turner standing on the side of the road near the junction with Vine Street. There is no evidence to justify the conclusion that at that time the Kirby Hayne defendant was not keeping a proper lookout. While it seems that the lighting at the scene was adequate, whether or not the street light near the Gull Service Station was burning, the plaintiff [the present respondent] was wearing dark clothing and his presence on the road could hardly have been expected nor easily perceived in the conditions which prevailed. There is no evidence of excessive speed on the part of the defendant nor of any failure by him to handle his vehicle in a reasonable manner. In all the circumstances I am not satisfied that the defendant was negligent in the respects pleaded or at all." The respondent's claim was therefore dismissed. On appeal to the Full Court of the Supreme Court of Western Australia (Steytler, E M Heenan and Le Miere JJ) the appeal was allowed1, the judgment entered at trial was set aside, judgment was entered for the plaintiff in the District Court (the respondent to the present appeal) and an order made that the defendant (the appellant in this Court) pay the plaintiff 30 per cent of his damages to be assessed. From that order the appellant now appeals. The appeal should be dismissed. No error is shown in the reasoning of the Full Court. The statutory provisions that govern the task that was to be undertaken by the Full Court in deciding the appeal to that Court2 are set out in the reasons of Callinan J in Commissioner of Main Roads v Jones3. As Callinan J recorded in Jones4, the principles governing the appeal to the Full Court were stated by this Court in Fox v Percy5. It is unnecessary to repeat what is said in either Jones or Fox v Percy. The principal reasons of the Full Court in relation to the issue of negligence were given by Le Miere J. The steps in that reasoning were as follows: 1 Alexander v Manley (2004) 29 WAR 194. 2 District Court of Western Australia Act 1969 (WA), s 79; Supreme Court Act 1935 (WA), s 58(1)(a); Rules of the Supreme Court (WA), O 63 r 10(2). (2005) 79 ALJR 1104 at 1117-1118 [71]-[75]; 215 ALR 418 at 434-436. (2005) 79 ALJR 1104 at 1117-1118 [72]-[73]; 215 ALR 418 at 435-436. (2003) 214 CLR 118 at 126-127 [24]-[25] per Gleeson CJ, Gummow and Kirby JJ. Kirby Hayne the trial judge made no express finding about when the respondent moved onto the road6; because movement attracts attention, and the appellant did not see the respondent move onto the road, it should be inferred that the respondent was already on the roadway when the appellant saw Mr Turner standing on the side of the road7; the appellant having continued to drive at the same speed, changing the direction of his vehicle while taking his eyes off the road, and having taken his eyes off the road for some two to three seconds, the appellant failed to take reasonable care in breach of his duty to other road users who might, however unexpectedly, happen to be on the road8. In this Court, the appellant did not contend that the Full Court had failed to apply proper principles of appellate review. That is, the appellant did not contend that the Full Court had failed to "conduct the appeal by way of rehearing"9 and "give the judgment which in its opinion ought to have been given in the first instance"10 having regard to its power11 to draw inferences of fact. And, as noted earlier, the appellant did not contend that the factual bases underpinning the reasoning of Le Miere J were flawed. In particular, the appellant did not contest the findings that he had continued to drive his vehicle at the same speed, changing direction by veering to the centre of the road, while taking his eyes off the road for some two to three seconds. Rather, the appellant contended that it had not been open to the Full Court to conclude from those facts that the appellant had failed to take reasonable care. No doubt the appellant's attention was drawn to the figure of Mr Turner standing at the side of the road and behaving in a way that suggested that he (2004) 29 WAR 194 at 204 [44]. (2004) 29 WAR 194 at 205 [46]. (2004) 29 WAR 194 at 206 [51]. 9 Fox v Percy (2003) 214 CLR 118 at 127 [27] per Gleeson CJ, Gummow and 10 Dearman v Dearman (1908) 7 CLR 549 at 561 per Isaacs J, cited in Fox v Percy (2003) 214 CLR 118 at 125 [23]. 11 Rules of the Supreme Court (WA), O 63 r 10(2). Kirby Hayne might act in some way that would require the appellant to respond. But recognising one possible source of danger does not mean that a driver can or must give exclusive attention to that danger. Driving requires reasonable attention to all that is happening on and near the roadway that may present a source of danger. And much more often than not, that will require simultaneous attention to, and consideration of, a number of different features of what is already, or may later come to be, ahead of the vehicle's path. It may readily be accepted that the possibility that someone would be found lying on a roadway like Middleton Beach Road at 4.00 am is properly to be described as remote. But the reasonable care that a driver must exercise when driving a vehicle on the road requires that the driver control the speed and direction of the vehicle in such a way that the driver may know what is happening in the vicinity of the vehicle in time to take reasonable steps to react to those events. When driving at night, the driver must take account of how well the road is illuminated: both by the vehicle's lights and by any street or other lighting. In the present case, there was a street light close to where the respondent lay on the road. Its light illuminated the area where the respondent was. Of course, it is important to remember that the respondent was wearing dark clothing and lying down, generally parallel with the direction the appellant's truck was travelling. The contour of the road gave the appellant an uninterrupted view of the road ahead for a distance considerably greater than the light cast by his low beam headlights. The light cast by those headlights extended about 60 metres ahead of his vehicle. The respondent, even clad in dark clothing and lying parallel to the direction of travel, could have been seen as some form of obstruction to be avoided at least by the time the headlight beams illuminated where he was. But the appellant did not see him. For two to three seconds the appellant continued to look to the side of the road rather than to the roadway over which his vehicle would travel and he maintained his vehicle's speed while veering towards the centre of the road. It was well open to the Full Court to conclude, as it did, that the appellant had failed to exercise reasonable care. In this appeal, this Court's function is to correct any error that has been shown in the decision and hence the resulting orders of the Full Court. It is not, as such, to exercise for itself the powers of the Full Court, absent demonstrated error. The very large discount that the Full Court allowed for contributory negligence on the respondent's part was not challenged in this Court. The appeal should be dismissed with costs. CALLINAN AND HEYDON JJ. The question in this appeal is whether, in the particular circumstances of the case, an intermediate court of appeal was justified in taking a different view of substantially undisputed facts from that taken by the trial judge, and reversing his decision in an action for damages for personal injuries arising out of the driving of a motor vehicle. Facts and previous proceedings The respondent who was then about 29 years old spent about four hours until midnight on 6 October 2000 talking to a friend and drinking alcohol. Immediately afterwards he went to a nightclub in Albany where he remained until about 4 am. Among other people, he there met Mr Turner, who shared the house he owned and rented rooms in it from him. While he was there he continued to drink alcohol. When the respondent left the nightclub he and Mr Turner decided to walk home. Beyond walking for a period along a footpath with Mr Turner, the respondent has no recollection of the events of that early morning. He denied that he was intoxicated when he left the nightclub despite the fact that he had drunk about 12 small bottles of full strength beer between 8 pm and 4 am. Shortly after 4 am, the respondent was struck by a tow truck driven by the appellant on Middleton Beach Road, near its junction with Vine Street in the town of Albany. The respondent suffered serious injuries in the collision. He sued for damages in the District Court of Western Australia. Because the injuries sustained by the respondent in the collision have deprived him of any memory of the events immediately leading up to it, and because of Mr Turner's absence from the witness box, it is necessary to turn to the evidence of the appellant at the trial before the trial judge, O'Sullivan DCJ for an account of them. The appellant's evidence The appellant was an experienced driver of large vehicles. He was 22 years old. In the early morning of 7 October he answered a call to come to the assistance of a driver of a motor vehicle, but, on reaching the given location, found no vehicle there. On his return journey he proceeded along Middleton Beach Road at a speed of between 55 and 60 kilometres per hour. This is the appellant's account of the collision: "I was driving along Middleton Beach Road and there was a male standing on the side of the road which I spotted, so I was keeping my eye on the male because he was moving around a fair bit like he had been drinking. I was veering. The man didn't do any movements, nothing. He just stared at me through the windscreen of the vehicle, looking at me, didn't wave his hands or nothing like that. So I started to veer because I thought he was going to walk out. I started to veer to the centre of the road. Then I looked back on the road. I was braking this time – not at this time. I seen something laying on the road. I went to brake. I thought I shouldn't brake, so I lifted my foot off the thing and then I felt I ran over something. Once I went over what I ran over, I jammed on the brakes, put the emergency lights on the truck, so no-one else could run it over, rang 000, spoke to the Albany police station and told them that ... I grabbed a torch out of the truck, ran back to the victim, to the thing that was laying on the road. There was a male laying face down with his head facing towards the town. There was a lot of blood on the road." He said that at the time the road was wet, but rain was not then falling. The headlights on the tow truck were functioning normally. The respondent was dressed in a black shirt and other dark clothing. The respondent admitted that at the time he had dark coloured hair. The appellant was cross examined on a written statement that he had made to a police officer. In it, he had said that light rain was falling at the time of the accident, and that his windscreen wipers were working intermittently. His attention was drawn to his omission to say in the statement what he had said in his evidence in chief, that one nearby street light was out and another was illuminated at the time. In the same statement, the appellant had said that he had kept his eye on Mr Turner for a couple of seconds to make sure "he wasn't going to step out in front of me". He admitted that, in consequence, he had taken his eyes from the road for a couple of seconds or so. Some brief reference may be made to some further evidence called on behalf of the respondent. It was given by Dr Chew who held a doctorate in philosophy in mechanical engineering from the University of Canterbury in New Zealand. Dr Chew had apparently travelled as a passenger in a motor vehicle driven along the road in the same direction, and at about the same speed as the appellant, in June 2002, in an attempt to replicate the appellant's course immediately before the collision, with a view to expressing an opinion in evidence as to what the appellant could and should have seen of the respondent as he lay upon the roadway. That attempt involved the placement on the roadway of an object approximately the same size and shape as the respondent in the assumed position of the respondent when he was struck. Counsel for the appellant objected to the reception of the evidence on the basis that it was, in effect, a reconstruction (and an imperfect one at that) and not admissible as expert evidence. The trial judge decided to receive the evidence provisionally, postponing a ruling upon it pending further submissions. According to Dr Chew, and on the basis of the attempted replication, the respondent would have been visible to the appellant when the latter was about 116 metres away. It was also his opinion that the combined effect of the headlights of the tow truck, and the street lighting, would have provided adequate illumination for the appellant to see the respondent, and to stop in time to avoid striking him after making allowance for reaction time. The premise for this conclusion was that the driver of the vehicle in which Dr Chew was a passenger was able to do so. Photographs of the roadway where the respondent was struck were tendered in evidence. It was not disputed that these accurately showed that the road was quite wide, and that there were no obstructions or topographical features to impair an approaching motorist's view of it. The photographs also verified another matter that could not be disputed, that the area in question was not one where, particularly at 4 am, a motorist would ordinarily expect to encounter pedestrians. The trial judge's reasons In his reasons for dismissing the respondent's action, his Honour referred to the fact that the respondent had given evidence that he did not know where Mr Turner could be found: he believed that he had returned to the eastern States from which he had earlier come. With respect to the appellant's objection to Dr Chew's evidence, his Honour held that there was little or nothing of it that could legitimately be described as expert opinion evidence12. He accepted that Dr Chew could give evidence of the observations that he had made, but that it was of little weight. Dr Chew had never been at the scene between 4 am and 4.30 am, and the weather conditions on the night of the accident were quite different from those at the time that he made his observations. Furthermore, Dr Chew knew of and was no doubt looking for, the object which had been placed on the roadway in the position where the respondent was believed to have been struck, and was not distracted by any activity on the side of the road; on the other hand, the appellant did not know of the respondent's position on the road and was distracted by Mr Turner. In all of the circumstances, his Honour, although not excluding the evidence of Dr Chew, thought it of little or no value. 12 cf Fox v Percy (2003) 214 CLR 118 at 166-167 [149]-[150]; Anikin v Sierra (2004) 79 ALJR 452 at 465-466 [84]; 211 ALR 621 at 639. The critical findings which led his Honour to dismiss the respondent's claim were as follows13: "I have given careful consideration to the evidence of the [appellant] and in particular to the significance of his statement to the police and his answers to interrogatories which were the subject of extensive cross-examination. While the absence of any reference in the statement to the street light being out is puzzling I am not prepared to conclude that the [appellant] has sought to mislead anyone so as to deflect blame for the accident. He stated in an answer to interrogatories that he believed that the light was out and he has freely conceded in evidence that the scene was lit by the light at the junction itself, an illumination which was of course augmented by the headlamps of the truck as it approached the scene. Nor am I persuaded that by his answers to interrogatories the [appellant] knowingly conceded that he must have seen the [respondent] on the road before he passed through the junction. The answer to interrogatory 5 is inconsistent with the statement he had already made to the police and which was substantially repeated by him in his evidence at trial. Cameron Turner may, of course, have been able to give valuable evidence in this case. He was standing on the side of the road and would have been in a position to see the [appellant's] vehicle pass over the [respondent]. His absence as a witness, it seems to me has not been well explained and in those circumstances the discharge by the [respondent] of the onus which he bears is made harder. In my view as the [appellant] drove his vehicle along Middleton Road towards the scene of the accident his attention would naturally have been drawn to the figure of Cameron Turner standing on the side of the road near the junction with Vine Street. There is no evidence to justify the conclusion that at that time the [appellant] was not keeping a proper lookout. While it seems that the lighting at the scene was adequate, whether or not the street light near the Gull Service Station was burning, the [respondent] was wearing dark clothing and his presence on the road could hardly have been expected nor easily perceived in the conditions which prevailed. There is no evidence of excessive speed on the part of the [appellant] nor of any failure by him to handle his vehicle in a 13 Alexander v Manley [2003] WADC 109 at [33]-[37]. reasonable manner. In all the circumstances I am not satisfied that the [appellant] was negligent in the respects pleaded or at all." The Full Court of the Supreme Court The respondent appealed, successfully, to the Full Court of the Supreme Court of Western Australia (Steytler, E M Heenan and Le Miere JJ). The principal judgment was given by Le Miere J who was of the opinion that both the appellant and the respondent had been negligent, the appellant to the extent of 30 per cent and the respondent 70 per cent. Steytler and Heenan JJ agreed with this conclusion and the reasons for it of Le Miere J, giving separate consideration only to a controversy at the trial as to the admissibility of evidence of statements attributed to Mr Turner, and to which it is unnecessary for this Court to give consideration. Le Miere J said this of the trial judge's reasons14: "The learned trial Judge made no express finding as to when the [respondent] moved onto the road. Counsel for the [respondent] at trial submitted that the [appellant] must have seen the [respondent] lying on the road as he approached the junction of Middleton Road and Vine Street, that the [appellant] had a clear view of the road for up to 200 m before the scene of the accident, that the lighting at the scene was good and that there was no reason why the [appellant] should not have been able to avoid driving over the [respondent]. His Honour rejected that submission on the basis that it wrongly assumed that the [respondent] was lying on the road as the [appellant] approached the junction. His Honour said that there was no evidence as to when the [respondent] came to be on the road and thus there was no basis for concluding that the [appellant] should have seen him earlier than he did." His Honour then criticised the trial judge's reference to Mr Turner's absence from the trial15: "The learned trial judge observed that Mr Turner may have been able to give valuable evidence. His Honour said that: 'His absence as a witness, it seems to me, has not been well explained. In those circumstances the discharge by the [respondent] of the onus which he bears is made harder.' 14 Alexander v Manley (2004) 29 WAR 194 at 204-205 [44]. 15 (2004) 29 WAR 194 at 205 [47]-[48]. It is difficult to know what his Honour meant by that observation. The absence of Mr Turner as a witness could not place any greater or different onus on the [respondent] to make out his case. Nor could the absence of Mr Turner as a witness permit an inference that his evidence would in fact have been damaging to the [respondent]. Mr Turner was an eyewitness. It was open to either party to call him as a witness. Neither party did. That may be explained by Mr Turner having returned to the Eastern States. Whatever the reason for his absence as a witness it did not permit the drawing of any inference adverse to the [respondent]." The basis upon which Le Miere J concluded that the appellant was negligent appeared from this passage16: "One can readily accept, as his Honour did, that as the [appellant] drove his vehicle along Middleton Road towards the scene of the accident his attention would naturally have been drawn to the figure of Cameron Turner standing on the side of the road near the junction with Vine Street. However, that does not extinguish the [appellant's] duty of care to all users of the road, including the inattentive and those whose faculties were impaired by alcohol. In my view the appeal must succeed. The [appellant] continued at the same speed and changed the direction of his vehicle while taking his eyes off the road for some two to three seconds. He thereby breached the duty of care he owed to any other motorist or pedestrian who might happen to be on the road, however unexpectedly." The appeal to this Court It is accepted on both sides that the Full Court had power to do what it did here, that is, to find the facts differently, and to draw different inferences from them from those of the trial judge: Commissioner of Main Roads v Jones17. The appellant submits however that, as in that case, the Full Court erred in doing so. That submission should, as it was in Jones' case, be accepted. It should be accepted for a number of reasons. It seems to have been part of the reasoning of Le Miere J that the trial judge erred in saying that the absence of Mr Turner as a witness made it harder for the respondent to discharge the burden of proof which he bore. It may be that either party could have called Mr Turner. As a housemate and social companion of the respondent however, and a person unknown to the appellant, the more logical expectation, in the absence of any contrary explanation, is that the respondent would be the one to do so, 16 (2004) 29 WAR 194 at 206 [51]. 17 (2005) 79 ALJR 1104; 215 ALR 418. particularly when the respondent could not give any account of the accident himself, and the appellant could do so relatively completely, and without any need to call evidence from anyone else to supplement his evidence about it. The trial judge did not fall into error in saying what he did. It was open to him to find that Mr Turner's absence was not well explained, and, in any event it was objectively true that his absence did make it harder for the respondent to make out his case. The trial judge was not suggesting that the respondent was confronted by a higher or different onus by reason of Mr Turner's absence. His Honour was simply recording the fact of the difficulties with which the respondent was faced by the absence of another eyewitness to the accident. In the judgment of Le Miere J there also seems to be an implied criticism of an omission, on the part of the trial judge, to make an "express finding as to when the [respondent] moved onto the road". The criticism is unjustified. There was no evidence as to that at all. Any conclusion about it could be speculative only. Again onus is relevant. If the respondent who bore it left the Court in such a state of uncertainty as to make it impossible for the trial judge to find relevant facts, the respondent's case failed18. When and how the respondent came to be upon the roadway was not however decisive. Even if it were to be assumed, contrary to the only evidence on this aspect of the case, that of the appellant, that the respondent moved on to the roadway as the appellant approached, there would have needed to be an inquiry whether he did so suddenly and upright, and how soon before the accident. Even if the assumption were open, a finding of negligence on the basis of it by no means followed. The better view, and one not itself unfavourable to the respondent, was taken by the trial judge, that the respondent was lying upon the roadway and visible to an approaching motorist, subject of course to distraction by the need to deal with different situations as they emerged. The trial judge did not fall into error in not making a finding about when and how the respondent came to be on the roadway. The approaches identified by Le Miere J as erroneous on the part of the trial judge, on examination, can be seen to have been orthodox and correct, and certainly not such as to justify interference with his decision. There are however further reasons why the decision of the Court of Appeal should be set aside and the trial judge's decision restored. 18 cf Nesterczuk v Mortimore (1965) 115 CLR 140 at 149-150 per Kitto J, 153 per Credibility was relevant to the outcome of the case. The trial judge accepted that the appellant's recollection on factual matters was a generally correct one. He rejected the evidence of the expert for the respondent on the basis that it was unreliable. Acceptance of the appellant's evidence involved acceptance of his professed inability to see the respondent sooner than he did, in the circumstances of the distraction of Mr Turner's unsteady presence beside the roadway which not unreasonably engaged his attention. The decision of the Full Court cannot stand for yet another reason. It assumes that a motorist is not entitled to give attention to a particular and potentially dangerous emergency situation in priority to an apparently benign one. To the appellant the situation on the road itself appeared benign, because it was extremely unlikely that at the time and place in question, a mature adult dressed in dark clothing, whether drunk or sober, would be lying in the centre of a wet roadway, approximately parallel to it, and unable to move, or uninterested in moving, out of the way of a relatively slow moving large motor vehicle with its headlights illuminated. In these circumstances it was reasonable for the appellant to concentrate his attention for a time on the peril presented by the risk of Mr Turner, who had apparently been drinking, moving on to the road. We would accordingly allow the appeal with costs. The orders of the Court should be: Appeal allowed with costs; The orders of the Full Court of the Supreme Court of Western Australia be set aside and in place thereof order that the appeal to that Court be dismissed with costs.
HIGH COURT OF AUSTRALIA GUMMOW ACJ NBGM AND APPLICANT MINISTER FOR IMMIGRATION AND MULTICULTURAL AFFAIRS & ANOR RESPONDENTS NBGM v Minister for Immigration and Multicultural Affairs [2006] HCA 54 15 November 2006 ORDER Special leave to appeal from the whole of the judgment and orders of the Full Court of the Federal Court of Australia given on 12 May 2006 be granted. The appeal be treated as having been instituted and heard instanter and be dismissed with costs. On appeal from the Federal Court of Australia Representation G C Lindsay SC with L J Karp for the applicant (instructed by Legal Aid Commission of New South Wales) S J Gageler SC with S B Lloyd for the first respondent (instructed by Sparke Helmore) Submitting appearance for the second respondent. Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS NBGM v Minister for Immigration and Multicultural Affairs Immigration – Refugees – Application for permanent protection visa – Statute requiring Minister to be satisfied Australia owes protection obligations to the applicant under the Convention – Applicant previously granted temporary protection visa for a specified period – Whether previous grant of temporary protection visa entitles applicant on application for a new visa to a presumption of being owed protection obligations under the Convention – Construction of Migration Act 1958 (Cth), s 36 – Construction of the Convention. Words and phrases – "refugee", "protection obligations", "cessation". Migration Act 1958 (Cth), ss 5(1), 36. Convention relating to the Status of Refugees, Art 1A, Art 1C(5). Protocol relating to the Status of Refugees. GUMMOW ACJ. I agree generally with the reasons for judgment of Callinan, Heydon and Crennan JJ and in particular with the conclusion that the reasoning in Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 20041 produces the result that this appeal must fail. This conclusion is reached independently of any view of the construction of sub-ss (3), (4) and (5) of s 36 of the Migration Act 1958 (Cth) ("the Act"). The sufficiently decisive consideration is found in the use of the present tense in s 36(2) and the supporting considerations discussed in QAAH. Sub-sections (3), (4) and (5) were added by the Border Protection Legislation Amendment Act 1999 (Cth)2. It would be a curious result if the outcome in the present case was owed only to such recent amendments and would have differed before the making of those amendments. Further, there are various issues of construction of sub-ss (3), (4) and (5) of s 36. Some of these I referred to in Minister for Immigration and Multicultural and Indigenous Affairs v Al Khafaji3. Others divided the Full Court in the present case. These matters do not require determination for an outcome in the present appeal which favours its dismissal. Special leave to appeal should be granted. The appeal should be taken as instituted and heard instanter and dismissed with costs. However, that would leave to the Full Court the question of costs as reserved by order 3 of its orders made on 12 May 2006. [2006] HCA 53. 2 Sched 1, Pt 6, Item 65. (2004) 219 CLR 664 at 669 [9], 672-673 [19]-[20]. Kirby KIRBY J. This is an appeal from orders of the Full Court of the Federal Court of Australia, exceptionally constituted by five judges4. The Full Court had been so constituted because of doubts that had arisen in respect of the divided decision of an earlier Full Court in QAAH of 2004 v Minister for Immigration and Multicultural and Indigenous Affairs5. By inference, it was hoped that a Full Court of larger numbers would settle clearly the point upon which the Full Court in QAAH had divided. In the result, however, the Full Court in the present matter was also divided6. The same issues that had led to the divisions in QAAH re-emerged and, indeed, were sharpened. Accordingly, when this Court granted special leave to the Minister to appeal in QAAH, an order was made returning an application for special leave to appeal on the part of the putative refugee in the present matter, NBGM ("the applicant")7 to be heard at the time as the appeal in QAAH. Argument in the appeal in QAAH, and in the application in NBGM, was accordingly heard together. Substantially, the issues are common. The outcome in QAAH controls the outcome in NBGM's application. In my opinion, that application should succeed. Special leave should be granted. NBGM's appeal should be allowed and a new hearing, before the Refugee Review Tribunal ("the Tribunal"), should be ordered. Interpretative principles Recourse to the Convention and Australian law: In Plaintiff S157/2002 v The Commonwealth8, Gleeson CJ, in stating the first of "established principles … 4 NBGM v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 150 FCR 522. (2005) 145 FCR 363 (Wilcox and Madgwick JJ; Lander J dissenting). Two other appeals were heard by the Full Court of the Federal Court and were stood over pending the determination of the appeal in these proceedings. See NBGM (2006) 150 FCR 522 at 561 [153]. 6 Black CJ, Mansfield and Stone JJ; Marshall and Allsop JJ dissenting. 7 The name of the applicant is anonymised in accordance with s 91X of the Migration Act 1958 (Cth). (2003) 211 CLR 476 at 492 [28]-[29]. See also Shipping Corporation of India Ltd v Gamlen Chemical Co (A/Asia) Pty Ltd (1980) 147 CLR 142 at 159; Coleman v Power (2004) 220 CLR 1 at 27-30 [17]-[24], 91-93 [240]-[242]; NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 222 CLR 161 at 189 [89]. Kirby relevant to the resolution of the question of statutory construction" presented by that case, observed: "[W]here legislation has been enacted pursuant to, or in contemplation of, the assumption of international obligations under a treaty or international convention, in cases of ambiguity a court should favour a construction which accords with Australia's obligations". This was by no means a new idea. It is orthodox, and the same principle has been stated by this Court, and applied, many times. It was so expressed in Chu Kheng Lim v Minister for Immigration9 and in Minister for Immigration and Ethnic Affairs v Teoh10, where the principle was identified in even wider language11. In the context of the Refugees Convention12, this Court has hitherto accepted that, through s 36, the Migration Act 1958 (Cth) ("the Act") has "transpose[d] the text of a treaty or a provision of a treaty into the statute so as to enact it as part of domestic law"13. Obviously, the Act did not incorporate the Convention in its totality. But it did so for the purpose of giving meaning to the status of a person (a "refugee"), in respect of whom Australia has protection obligations. To that extent, the Act is the vehicle for fulfilling Australia's obligations as a State party to the Convention and giving its provisions effect in this nation's domestic law. This is why, in countless cases, Australian courts faced with the interpretation of s 36 of the Act have proceeded directly to the (1992) 176 CLR 1 at 38 per Brennan, Deane and Dawson JJ. 10 (1995) 183 CLR 273. 11 (1995) 183 CLR 273 at 287 per Mason CJ and Deane J: "[T]he fact that the Convention has not been incorporated into Australian law does not mean that its ratification holds no significance for Australian law. Where a statute or subordinate legislation is ambiguous, the courts should favour that construction which accords with Australia's obligations under a treaty or international convention to which Australia is a party … That is because Parliament, prima facie, intends to give effect to Australia's obligations under international law." 12 Convention relating to the Status of Refugees, opened for signature 28 July 1951, 189 UNTS 150; 1954 ATS 5 (entered into force 22 April 1954), read with the Protocol relating to the Status of Refugees, opened for signature 31 January 1967, 606 UNTS 267; 1973 ATS 37 (entered into force 4 October 1967). 13 Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 230-231; cf Koowarta v Bjelke-Petersen (1982) 153 CLR 168 at 265 per Kirby Convention provisions concerning refugee status14. Because those provisions appear in a treaty, this Court has consistently interpreted them in accordance with the rules contained in the Vienna Convention on the Law of Treaties15. In Applicant A v Minister for Immigration and Ethnic Affairs16, a case which dealt with a claim to Australia's protection based on the applicant's alleged refugee status, Gummow J said17: "It is necessary to begin with the construction of the definition as it appears in the Convention and Protocol. Regard primarily is to be had to the ordinary meaning of the terms used therein, albeit in their context and in the light of the object and purpose of the Convention. Recourse may also be had to the preparatory work for the treaty and the circumstances of its conclusion, whether to confirm the meaning derived by the above means or to determine a meaning so as to avoid obscurity, ambiguity or manifestly absurd or unreasonable results. However, as McHugh J demonstrates by the analysis of the subject in his reasons for judgment, with which I agree, it is important to appreciate the primacy to be given to the text of the treaty." In a footnote to these observations18, Gummow J made reference to the fact that "[t]hese rules of interpretation are applicable both under customary international law and as it is now stated in the Vienna Convention on the Law of 14 To do so, as Allsop J did in the Court below, fully conforms to the orthodox approach proposed in the joint reasons at [6], that is, first ascertaining the relevant Australian law; and then construing so much of the Convention as Australian law requires. 15 Opened for signature 23 May 1969, 1155 UNTS 331 (entered into force 27 January 1980), art 32. See Applicant A (1997) 190 CLR 225 at 231 per Brennan CJ, 240 per Dawson J, 252 per McHugh J, 277 per Gummow J and 294 of my own reasons. See also Morrison v Peacock (2002) 210 CLR 274 at 279 [16]; Minister for Immigration v Khawar (2002) 210 CLR 1 at 16 [45]. 16 (1997) 190 CLR 225. 17 (1997) 190 CLR 225 at 277. 18 (1997) 190 CLR 225 at 277 fn 189. Kirby Treaties[19]: see Thiel v Federal Commissioner of Taxation20". His Honour's reference, in the cited passage, to the reasons of McHugh J, imports a lengthy and oft-cited passage in Applicant A21 containing "interpretative principles" for the ascertainment of the meaning of the term "refugee", as that word is used in the Act. The Act incorporates the concept of "refugee", as defined in the Convention and Protocol (together "the Convention"), both of which Australia has signed and ratified. Practice of this and other courts: Countless cases in this Court have proceeded in the foregoing manner. They have addressed immediately the meaning of the composite notion of "refugee" as provided in the Convention. In doing so, they have not bypassed Australian municipal law. That law has uncontested primacy in Australian courts22. No one doubts that. But by proceeding directly to the Convention definition, those courts have not questioned that primacy. On the contrary, they have done what Australian law itself requires in defining the persons relevantly entitled (and not entitled) to protection as "refugees" under Australian law. This approach is by no means confined to Australian courts. A similar approach has been taken in the United Kingdom and elsewhere23. Indeed, until now, the approach to be taken in cases such as the present has been clear. It has obliged the decision-maker to address immediately the Convention definition of "refugee" and, therefore, to consider the understanding of that expression as it appears in the Convention24. 19 But contrast Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53 at [34] per Gummow ACJ, Callinan, Heydon and 20 (1990) 171 CLR 338 at 348-350, 356-357. 21 (1997) 190 CLR 225 at 251-256. 22 cf Minister for Immigration and Multicultural and Indigenous Affairs v B (2004) 219 CLR 365 at 414 [136]. 23 T v Secretary of State for the Home Department [1996] AC 742; R (Hoxha) v Special Adjudicator [2005] 1 WLR 1063; [2005] 4 All ER 580. The same principle is applied throughout the Commonwealth of Nations. For example, the position in India is explained in Vellore Citizens Welfare Forum v Union of India AIR 1996 SC 2715 at 2720, 2722; 1996 (5) SCC 647; Peoples' Union for Civil Liberties v Union of India AIR 2005 FC 2419 at 2426; cf Singh, Principles of Statutory Interpretation, 10th ed (1996) at 584-587; cf R v Chief Immigration Officer; Ex parte Bibi [1976] 1 WLR 979 at 984. 24 See, eg, Khawar (2002) 210 CLR 1 at 15-16 [42]-[43], 37 [111]. Kirby In the joint reasons in this Court of Callinan, Heydon and Crennan JJ ("the joint reasons"), Allsop J in the Full Court of the Federal Court is taken to task for proceeding to decide this case by reference to the interpretation of the Convention25. His Honour is criticised for stating that the Convention provides the framework within which the Act in this respect is to be understood26. The joint reasons state that the "Convention does not provide any of the framework for the operation of the Act. The contrary is the case"27. Facilitation of international law: I cannot agree with these criticisms. They fly in the face of long established general principles for the construction of municipal legislation referring to treaty provisions which have been ratified by the nation concerned. They are contrary to the long-standing authority of this Court and of other courts of high authority throughout the common law world. They are inimical to the effective participation of this country in the growing body of international, regional and bilateral treaties which substantially depend, in Australia, on municipal law to bring them into local effect. The new approach is harmful to the consistent development of international law. And that law is of critical importance for the protection of the peace, security, human rights and economic progress of all humanity. We in this Court, at this time, should not be hostile to the provisions of international law. After all, the treaty expressing the applicable obligations of international law has been ratified by this country in accordance with its Constitution and the requisite legal procedures and practices. Moreover, the Australian Parliament has incorporated the relevant definition of "refugee" by reference in a municipal enactment, and the validity of that enactment has not been challenged in these proceedings. Hostility is entirely out of place. Facilitation and implementation constitute the correct legal approach. The facts, legislation and issues The facts and legislation: The facts of NBGM's case are similar to those in QAAH. They are substantially set out in the joint reasons28. The important fact is that NBGM was granted a temporary protection visa pursuant to the Act on 24 March 2000 by a delegate of the Minister. Accordingly, as at that date, a 25 Joint reasons at [56]-[65], referring to (2006) 150 FCR 522 at 564 [165] per 26 Joint reasons at [60]. 27 Joint reasons at [69]. 28 Joint reasons at [38]. Kirby conclusion had been arrived at, in accordance with Australia's own legal procedures, that Australia owed the applicant protection obligations under the Convention as a "refugee" (as defined in art 1A(2) of the Convention). In light of the evidence as to his experiences before leaving Afghanistan, as appearing in the record, the acceptance of the applicant's refugee status was scarcely surprising. In accordance with the Convention, and therefore in accordance with the Act, that status could only thereafter be lost (in a case such as the present) by the operation of the cessation provision appearing in art 1C(5) of the Convention. The joint reasons explain that on 16 September 2003, a delegate of the Minister purportedly refused to grant the applicant a permanent protection visa. The delegate refused that visa, finding that NBGM was not a person to whom Australia had protection obligations29. NBGM promptly applied to the Tribunal for review of the delegate's decision. On 5 April 2004, the Tribunal affirmed that decision. It refused to grant NBGM a permanent protection visa30. Pursuant to the Judiciary Act 1903 (Cth), NBGM then applied to the Federal Court seeking relief in the nature of a constitutional writ, on the ground of error by the Tribunal in its understanding of its jurisdiction31. The primary judge of the Federal Court (Emmett J32) refused the relief claimed. On appeal, as has been stated, the Full Court by majority upheld those orders33. The applicable issues: The decisional history of the proceedings in the Federal Court is described in the joint reasons34. The same issues emerge in the divided opinions of the judges in NBGM as have been identified in QAAH35. They include: 29 NBGM (2006) 150 FCR 522 at 543 [78]. 30 NBGM (2006) 150 FCR 522 at 543 [78]. 31 NBGM (2006) 150 FCR 522 at 543 [79]. 32 NBGM v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1373. In the Full Court, Allsop J noted that the primary judge did not have access to this Court's decision in NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 222 CLR 161 or the decision of the House of Lords in Hoxha [2005] 1 WLR 106; [2005] 4 All ER 580. 33 (2006) 150 FCR 522. 34 Joint reasons at [44]-[48]. 35 Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53 at [14], reasons of Kirby J. Kirby The proper approach to the relationship between the Act and the Convention for the issues presented in the appeal; The propriety and utility of the use of materials produced by, and submitted on behalf of, the United Nations High Commissioner for Refugees ("UNHCR"); The interrelationship between arts 1A(2) and 1C(5) of the Convention in circumstances where a person has already been recognised as a "refugee" within the Convention definition (as NBGM had been); The approach to the establishment of changed circumstances in the country of nationality where this is asserted by the Minister as a ground for cessation of "refugee" status; and The availability of relief directed to the Tribunal, in any event, on the basis that it had correctly considered, and rejected, NBGM's arguments in terms of the way they are now propounded in this Court36. Identical issues were argued in QAAH, by reference to the facts in that appeal. There is no need for me, in these reasons, to elaborate the statement of the issues; or to repeat the arguments of the parties or the considerations of authority, legal principle and policy relevant to their disposition in this application. Conclusion: jurisdictional error is established Identical resolution of issues: I would resolve all of the foregoing issues in these proceedings in the same way as I have resolved them in QAAH. In my opinion, the majority in the Full Court in QAAH37 approached the issues for decision in the correct way. Most especially, they recognised (as the dissenting judges in the Full Court in NBGM also did38), that the correct starting point for legal analysis was, in accordance with the Act itself, to understand and apply the accurate meaning of the Convention provisions by which the status of "refugee" is defined for international, as well as municipal law, and hence the 36 Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53 at [50]. 37 Wilcox and Madgwick JJ. See QAAH (2005) 145 FCR 363 at 386 [88]. 38 NBGM (2006) 150 FCR 522 at 562 [156] per Allsop J, 530 [26] per Marshall J agreeing. Kirby circumstances in which that status, having been recognised, may cease, by international and municipal law, to apply to the person concerned. For the reasons I gave in QAAH, the minority judges in this matter asked the correct questions and came to the correct conclusion in finding jurisdictional error. The majority judges (and the primary judge) by approaching the matter in an incorrect way, and asking incorrect questions, unsurprisingly arrived at erroneous conclusions. The Tribunal decision issue: Only one issue has caused me to pause in reaching this conclusion. In accordance with the approach that I upheld in QAAH, the Tribunal, in NBGM, correctly identified the first question that it had to answer as being posed not (as the Minister would assert) as a repeated application of art 1A(2) but the application of art 1C(5) dealing with cessation of refugee status39. The Minister now contests that this is the correct approach where questions of cessation arise. However, it is my opinion, for the reasons stated in QAAH40, that the Tribunal was correct in primarily adopting this approach. As I demonstrated in QAAH, this opinion is strongly supported by available materials produced by the office of UNHCR, by expert and scholarly opinion and by judicial authority in other countries41. Can it therefore be said that the Tribunal, to this extent, accurately identified the ambit of its jurisdiction; proceeded to exercise that jurisdiction; and that any error which followed was one made within jurisdiction and not one that took intervention for jurisdictional error? In my opinion, this issue presents the only arguable ground in NBGM's application for refusing special leave or for dismissing an appeal. thus requiring jurisdiction, it outside judicial its In the end, however, I am convinced on this issue (as on the others) by what Allsop J wrote in his dissent in the Full Court. Relevantly, his Honour said42: "The flaw in the approach of the Tribunal was its failure to recognise the characteristics of the task before it in assessing whether [art 1]C(5) led to 39 NBGM (2006) 150 FCR 522 at 526 [2]. 40 Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53 at [65]-[72]. 41 Such as Hoxha [2005] 1 WLR 1063. 42 NBGM (2006) 150 FCR 522 at 575 [215]. Kirby the cessation of the application of the Convention. The Tribunal did not direct itself to, or deal with, the matter exhibiting an appreciation of the need to be satisfied that there had been made out a demonstrably clear and durable change of circumstances to warrant the likely permanent cessation of application of the Convention. This is best revealed by how it treated the killing and beheading of 12 Hazaras by the Taliban in late 2003. The Taliban, it would appear, were still an operating threat in a neighbouring district." Allsop J then quoted, at some length, from the Tribunal's reasons for decision in this case43. In those reasons, the Tribunal described the killing and beheading of 12 Hazaras as "isolated examples". As Allsop J remarked, the reasons given by the Tribunal in this respect "exhibit an approach whereby it was for [NBGM] to show that there was a real chance of persecution, rather than it being necessary for the Tribunal to be satisfied that durable change in the relevant circumstances had been revealed with the necessary clarity"44. From the text and structure of the Convention45, Allsop J concluded that a clear demonstration of durable change was required to warrant the serious (second) step envisaged by Art 1C(5) of the Convention, permitting a conclusion to be reached that the "refugee" status (that had been acknowledged by the initial grant of protection) was now to be treated as having ceased. In effect, Allsop J's approach to the content of art 1C(5) of the Convention is identical to that accepted by the majority judges in the Full Court in QAAH46. For the reasons I gave in QAAH47, this approach was correct. It was not inconsistent with the text of the Convention, incorporated in this respect by the provisions of s 36(2) of the Act. On the contrary, the opposite conclusion, now favoured by a majority of this Court, is inconsistent with the language, history and purpose of the Convention. The majority conclusion is also difficult to reconcile with the policy of the Convention that persons accorded refugee status will not be plunged into constant and repeated uncertainty by the grant and later withdrawal of recognition as "refugees", with consequent removal to the country of nationality in potential breach of the basic principle of non-refoulement. 43 NBGM (2006) 150 FCR 522 at 575 [215]. 44 NBGM (2006) 150 FCR 522 at 576 [216]. 45 NBGM (2006) 150 FCR 522 at 577 [220]. 46 QAAH (2005) 145 FCR 363 at 376 [41] per Wilcox J, 392 [110] per Madgwick J. 47 Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53 at [110]-[122]. Kirby To an Australian decision-maker, in the safety of this country, the established fact that 12 persons of the applicant's particular minority racial and religious identity were killed and beheaded in a district of Afghanistan neighbouring his own might seem an unimportant, "isolated incident". But to a person whose experience had already invoked a "well-founded fear" of persecution, occasioning flight to Australia to seek refuge and official acceptance and recognition of refugee status, such an instance might be indicative of more widespread, systematic violent activity apt to occasion a well-founded fear of continuing persecution. It demonstrates, as Marshall and Allsop JJ concluded in the Full Court, why the Tribunal needs to be very sure before deciding that a "change of circumstances" has been established, warranting withdrawal of refugee status and the return of NBGM to his country of nationality. Conclusion: jurisdictional error shown: Although, therefore, there are arguments for and against the submission that the Tribunal mistook its jurisdiction, I am ultimately persuaded that it did. NBGM's application for judicial review of the Tribunal's decision should therefore be upheld. His claim should be returned to the Tribunal so that it might, unequivocally, apply the correct standard for cessation of refugee status in accordance with art 1C(5) of the Convention48. That standard obliges a clear conviction on the part of the Tribunal that a suggested change of circumstances has occurred that is "substantial, effective and durable"49. Orders The application for special leave to appeal should be granted. The appeal should be allowed. The orders of the Full Court of the Federal Court of Australia should be set aside. In place of those orders, this Court should order that the appeal to the Full Court of the Federal Court be allowed; the orders of the primary judge set aside; a writ of certiorari should issue to the Refugee Review 48 As incorporated by the Act, s 36(2). See NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 222 CLR 161 at 176 [42] where "the adjectival phrase" in the sub-section "to whom Australia has protection obligations under [the Convention]" was held to describe "no more than a person who is a refugee within the meaning of Art 1 of the Convention". The inter-position of the opinion of the Minister cannot inject subjective or personal factors without restoring the discredited doctrine of the majority in Liversidge v Anderson [1942] AC 206. On this, see George v Rockett (1990) 170 CLR 104 at 112 and Inland Revenue Commissioners v Rossminster Ltd [1980] AC 952 at 1011. 49 See Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 [2006] HCA 53 at [110]-[122], reasons of Kirby J. Kirby Tribunal quashing its decision. The proceedings should be returned to the Tribunal with an order that it hear and determine the application before it in accordance with law. CALLINAN, HEYDON AND CRENNAN JJ. This application for special leave to appeal was heard at the same time as the appeal in Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 200450 ("QAAH") because it raised similar questions to those for determination in the latter. These reasons should be read with the reasons in that case. The facts The applicant is a citizen of Afghanistan, a Shi'a Muslim and of Hazara ethnicity. He arrived in Australia in October 1999 without a passport or a visa. He was granted a temporary protection visa on 24 March 2000. A week or so later he applied for a permanent protection visa. On 16 September 2003 a delegate of the first respondent refused that application. The applicant then sought review of the delegate's decision by the Refugee Review Tribunal ("the Tribunal"). The Tribunal affirmed the decision of the first respondent's delegate on 5 April 2004. The Tribunal's reasoning The Tribunal accepted that at the time when the applicant first applied for a visa he was a person to whom Australia owed obligations of protection under the Convention relating to the Status of Refugees51, taken with the Protocol relating to the Status of Refugees52 (together, "the Convention"). The question, the Tribunal said, however, was whether the applicant was, in accordance with Art 1C(5) of the Convention, a person who could continue to refuse to avail himself of the protection of Afghanistan because the circumstances in connexion with which he was recognized by Australia as a refugee had ceased to exist. At the hearing conducted by the Tribunal it was suggested to the applicant that the Taliban, the oppressive extremist movement in Afghanistan, had been removed from power by mid-November 2001, and was no longer a political or other force. It was further suggested that such of the Taliban as were active did not pose a direct threat to the civilian population and that its targets were members of the government, its security forces and international aid workers. The Tribunal put these matters to the applicant in terms, as well as the suggestion that the Taliban was not in any event active in the applicant's region. The 50 [2006] HCA 53. 51 Done at Geneva on 28 July 1951. 52 Done at New York on 31 January 1967. applicant sought to reject this last suggestion, referring to some deaths that had occurred in his region not long before. The Tribunal made findings generally in accord with the suggestions that it had made to the applicant, that the Taliban was no longer in a position to massacre people in the manner referred to in the decision of the delegate of 16 September 2003, and that the Taliban was unlikely to re-emerge as a viable political movement in Afghanistan in the reasonably foreseeable future. On the basis of those circumstances, the Tribunal concluded that Art 1C(5) of the Convention applied to the applicant. It also gave consideration to the question whether, assuming that Art 1C(5) of the Convention was not applicable, s 36(3) of the Migration Act 1958 (Cth) ("the Act") applied to the applicant. The answer to that question, the Tribunal decided, was the same as the answer to the question that it had first posed, that Australia had ceased to owe obligations of protection to the applicant because of the changed circumstances in Afghanistan. There was apparently a further hearing undertaken by the Tribunal to consider other claims made by the applicant, in substance that because his uncles had been active in a Sepah faction of the Wahdat he would be at risk of the opposing Nasr faction of the Wahdat. The applicant elaborated upon that claim by saying that before the Taliban had taken control of his region the two factions had fought over it. He alleged that unless he were prepared to join one of the factions he would be accused by the other of being against it. It was part of his claim that the government was not in control of the region, that the Pashtun and Tajik people were, and that they would be likely to persecute him because he was a Shi'a Muslim. The Tribunal did not accept any of these claims. It decided that there was not a real chance of persecution of the applicant by any of the people whom he had identified: if there were any discrimination against Hazara people, it fell short of persecution under the Convention. It was the Tribunal's opinion that on the basis of the information available to it the situation of Shi'a Muslims in Afghanistan was generally good. It is for these reasons that the Tribunal affirmed the decision of the delegate. The Federal Court The applicant then made application for certiorari to quash the Tribunal's decision and for associated relief. This application was heard at first instance by the Federal Court (Emmett J)53. After setting out the facts and summarizing the 53 NBGM v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1373. reasons of the Tribunal his Honour turned to a construction of the Convention. He said, correctly in our opinion, this54: "Articles 33.1, 1A(2) and 1C(5) of the Refugees Convention turn upon the same basic notion; protection is afforded to persons in relevant need, who do not have access to protection, apart from the Refugees Convention. A person is relevantly in need of protection if that person has a well-founded fear of being persecuted, for Convention Reasons, in the country, or countries, in respect of which the person has a right or ability to access. On the other hand, the Refugees Convention is not designed to provide protection to those with no such need. In practical terms, the limited places for, and resources available to, refugees are to be given to those in need and not to those who either can access protection elsewhere or are no longer in need of international protection." Later his Honour said this55: "When Article 33.1 speaks in terms of a territory where the life or freedom of a person would be threatened on account of Convention Reasons, while the language is not identical, the concept is intended to correspond with the concept that underlies Article 1A(2). That is to say, where a person, owing to well founded fear of being persecuted for Convention Reasons is outside the country of his or her nationality and is unable or unwilling to avail himself or herself of the protection of that country, a Contracting State must not expel or return that person to another territory where he or she would have a well founded fear of being persecuted for Convention Reasons namely, his or her life or freedom would be threatened on account of any Convention Reasons. There is a similar relationship between Articles 1A(2) and 1C(5). Thus, the latter refers to the circumstances in conne[x]ion with which a person has been recognised as a refugee. That refers back to the concept that the person has a well founded fear of being persecuted for Convention Reasons and is therefore unable, or owing to such fear, unwilling, to avail himself of the protection of his own country. The two provisions should be construed as having some symmetry in their effect. 54 [2004] FCA 1373 at [34]. 55 [2004] FCA 1373 at [36]-[37] and [39]-[40]. While there is a certain lack of symmetry in the actual language of the three provisions, there is a rationale underlying the basic object and scheme of the Refugees Convention. That rationale is that, so long as the relevant well-founded fear exists, such that a person is unable or unwilling to avail himself or herself of the protection of the country of his or her nationality, he or she will be permitted to remain in the Contracting State. However, if circumstances change, such that it can no longer be said that the person is unable to avail himself or herself of the protection of his or her country of nationality owing to well-founded fear of persecution for Convention Reasons, the Contracting State's obligation of protection comes to an end. That is to say, the obligations to a person that arise under, inter alia, Articles 32.1 and 33.1 continue only for so long as the person is a refugee within the meaning of Article 1A(2). It may be appropriate, when considering the possible application of Art 1C(5), to assess whether a change in circumstances in the country of nationality is such as can properly be characterised as 'substantial, effective and durable'. However, the object of the enquiry is to determine whether the person who has been recognised as a refugee can still claim to have a well-founded fear of being persecuted, for a Convention Reason, in his or her country of nationality such that there is justification for his or her being unable or unwilling to avail himself or herself of the protection of that country." (original emphasis) His Honour then gave consideration to whether under Art 1C(5) relevant changes in circumstances must be "substantial, effective and durable". This language is the same language as used in a paper prepared by the first respondent's department, entitled Interpreting the Refugees Convention – an Australian Contribution56 and elsewhere. The answer to the question was, his Honour said, that the Convention does not actually refer to the need for the change in circumstances to be "substantial, effective and durable". All that it does refer to is "particular circumstances ceasing to exist". His Honour's next step was to consider at some length the evidence which had been before the Tribunal, concluding that57: "It is not for the Court to second guess the significance attached by the Tribunal to the evidentiary material before it. That, in essence, is what the applicant has asked the Court to do. It was open to the Tribunal, on 56 Department of Immigration and Multicultural Affairs, Canberra, (2002). 57 [2004] FCA 1373 at [54]. the material before it, to conclude, as it did, that the applicant did not, as [at] April 2004, have a well-found [sic] fear of being persecuted for one of the Convention Reasons if he returns to Afghanistan now or in the reasonably foreseeable future." (original emphasis) Notwithstanding the conclusions which he had already reached, his Honour dealt with an argument advanced by the applicant with respect to the operation given by the Tribunal to s 36(3), (4) and (5) of the Act, as to the first of which it had been submitted that it was directed to a person who had entered Australia to seek protection only in circumstances in which there were other countries in which that person could have sought protection, whether they were countries in which he had been on his journey to Australia or in which he had a right to enter and reside, whether temporarily or permanently. It was part of the applicant's argument with which his Honour dealt that s 36(3) could in effect only have operation if a question of "forum shopping"58 arose, an expression which had been used in the Explanatory Memorandum of the Bill for the amendments that were made to the Act59 inserting s 36(3), (4) and (5). Emmett J rejected the argument, holding that recourse to the Memorandum was neither necessary nor desirable in view of the absence of any ambiguity of s 3660. As to Art 1C(5) his Honour said that the scheme of the Act which contemplated fresh applications when temporary visas expired, whilst it might not necessarily sit comfortably with the framework of the Convention, was clear: Art 1C(5) was an article that could be invoked by the first respondent as circumstances changed, albeit that in practice a contracting state might seek to apply it sparingly61. That, it may be inferred, was the operation which Art 1C(5) had. It could not in argument be used to contradict clear language of the Act. His Honour, in the result, was unable to identify any jurisdictional error on the part of the Tribunal and refused to grant the applicant any of the relief claimed. The Full Court of the Federal Court The applicant appealed to the Full Court of the Federal Court which was judges (Black CJ, Marshall, Mansfield, Stone and constituted by five 58 [2004] FCA 1373 at [56]. 59 Border Protection Legislation Amendment Act 1999 (Cth). 60 [2004] FCA 1373 at [58]. 61 [2004] FCA 1373 at [60]-[64]. Allsop JJ)62. The appeal was heard after a differently constituted Full Court (Wilcox, Madgwick and Lander JJ) had decided the appeal in QAAH v Minister for Immigration and Multicultural and Indigenous Affairs63. The Full Court in these proceedings was divided in the result, the majority (Black CJ, Mansfield and Stone JJ) disallowing the appeal. The reasoning of the members of the majority differed somewhat. Both Black CJ and Mansfield J were of the opinion that the words in s 36(3) "any country apart from Australia, including countries of which the non- citizen is a national" should be construed according to its ordinary meaning and could not be confined, as the applicant argued, to situations in which an applicant had a right to enter and reside in a "third country"64. Black CJ pointed out, correctly, that by s 36 the legislature has laid down the test, as a matter of domestic law, that must be satisfied under s 36(2) of an applicant's entitlement to a visa: that "[t]he circumstances to be established are presently existing circumstances, as to which the past may well illuminate the present; but the question remains in the present."65 It was his Honour's opinion, as it was of Mansfield J, that the reasons of the Tribunal did disclose that it had properly undertaken the task prescribed by s 36 of the Act and that it had neither misunderstood nor misapplied the law: that even if the Tribunal's processes and reasons were insufficient to enliven Art 1C(5) of the Convention, s 36 was an independent foundation for the Tribunal's decision66. Black CJ and Mansfield J were satisfied however that if the Convention fell to be applied in an unqualified way the analysis and meaning of it adopted by Allsop J were correct67. It is unnecessary to refer any further to the reasons of Mansfield J because they were generally in accord with those of the Chief Justice. 62 NBGM v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 150 FCR 522. 63 (2005) 145 FCR 363. 64 (2006) 150 FCR 522 at 528 [12] per Black CJ, 536 [54] per Mansfield J. 65 (2006) 150 FCR 522 at 529 [18]. 66 (2006) 150 FCR 522 at 530 [22] per Black CJ, 534 [42] per Mansfield J. 67 (2006) 150 FCR 522 at 530 [23] per Black CJ, 534 [41] per Mansfield J. The other member of the majority, Stone J, referred to a number of other provisions of the Act and Regulations, including some of those to which we referred in QAAH and which are concerned with statutory temporal limitations on visas. Her Honour, correctly, pointed out that the Convention does not apply directly and in an unqualified way in Australia, and that the fundamental question was the proper construction of the Act. She then discussed68 a number of authorities of this Court69 in which the construction of international and other instruments had been considered, concluding that it was difficult to discern any material difference between the principles governing the interpretation of international treaties and domestic legislation. As to the argument advanced by the applicant that Art 1C(5) would be otiose on the construction given to it by the primary judge, her Honour said that on the occurrence of events, that is, relevant changes of circumstances, predicated by it and not inconsistently with it, the cancellation provisions of the Act will apply notwithstanding that an applicant may hold a visa for a period which is still not expired70. Her Honour then went on to say that she agreed with the interpretation of the Convention and the statutory scheme prescribed by the Act and Regulations adopted by the primary judge: she was not prepared to, and did not, regard herself as bound, sitting as a member of the Full Court, to apply the reasoning and decision of the majority in QAAH, preferring the reasoning of the primary judge there, Dowsett J, which was in substance the same as that of Emmett J, at first instance in this case. 68 (2006) 150 FCR 522 at 549-554 [107]-[123]. 69 Simsek v Macphee (1982) 148 CLR 636; Koowarta v Bjelke-Petersen (1982) 153 CLR 168; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1; Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225; Minister for Immigration and Multicultural Affairs v Haji Ibrahim (2000) 204 CLR 1; Minister for Immigration and Multicultural Affairs v Khawar (2002) 210 CLR 1; Morrison v Peacock (2002) 210 CLR 274; Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273; Coleman v Power (2004) 220 CLR 1; NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 222 CLR 161. 70 (2006) 150 FCR 522 at 558-559 [141]-[142]. Allsop J (in dissent) embarked first upon a detailed consideration of the use which might be made of extrinsic materials in aid of the interpretation of the Convention71. As to the proper interpretation of the Act and Regulations, he said that in understanding their operation it was "of central importance to appreciate the content and intended operation of the Convention"72. His Honour then set himself the task of construing Arts 1A(2) and 1C(5), citing and adopting73 the approach and words of Lord Brown of Eaton-under-Heywood in R (Hoxha) v Special Adjudicator ("Hoxha")74: "The whole scheme of the Convention points irresistibly towards a two- stage rather than composite approach to 1A(2) and 1C(5). Stage 1, the formal determination of an asylum-seeker's refugee status, dictates whether a 1A(2) applicant ... is to be recognised as a refugee. 1C(5), a cessation clause, simply has no application at that stage, indeed no application at any stage unless and until it is invoked by the State against the refugee in order to deprive him of the refugee status previously accorded to him." (original emphasis) His Honour took as supporting the position, which he ultimately adopted, the United Nations High Commission for Refugees 1979 Handbook ("the Handbook"), and Lord Brown's references to and uses of it75. Allsop J then said this76: "The cessation of the Convention, and the cessation of the obligations of the host state to afford the person the benefits and protections provided for by the Convention (through its domestic law) can be seen to be a matter of great seriousness, and likely finality. The circumstances which have given rise to the recognition of the person as a refugee may raise matters of life and death. Section C(5) can be seen to operate to the disadvantage of someone who has been recognised as a 71 (2006) 150 FCR 522 at 562-564 [156]-[163]. 72 (2006) 150 FCR 522 at 564 [165]. 73 (2006) 150 FCR 522 at 565 [168]. 74 [2005] 1 WLR 1063 at 1082 [60]; [2005] 4 All ER 580 at 600-601. 75 (2006) 150 FCR 522 at 565-567 [169]-[173]. 76 (2006) 150 FCR 522 at 566 [171], 567 [174], 568 [181]. refugee, in a way which can be seen to be final and irrevocable: 'he can no longer ... continue to refuse' the protection of his country of nationality. As Lord Brown set out at [65] in Hoxha, the two stage approach to the operation of ss A(2) and C(5) contemplates the possibility of cessation. It does not contemplate, within its terms, multiple determinations of the application of s A(2). Domestic law could, of course, provide for recognition of application of s A(2) to lapse and for such recognition to be reapplied for. It might provide for yearly, monthly, weekly or even daily reassessments in which, on each occasion, the applicant would be required to make out afresh his or her claims for protection. The Convention does not contemplate that. It contemplates recognition as a refugee (with the engagement thereupon of the Convention) and cessation of the application of the Convention thus recognised, in circumstances provided for in s C, one of those being s C(5). The text and purposes of the Convention, reinforced by the views of jurists (based, in part, on international jurisprudence), the Handbook viewed as the work of jurists, and the unanimous view of the House of Lords all point to the same way of viewing the Convention. Once the host State recognises the application of s A(2) that the applicant is a refugee, the protection provided for by the Convention is engaged and is only lost by an application of a cessation clause, here s C(5). Nothing in Mayer[77] or Simsek[78] is to the contrary of this." Having said that, his Honour acknowledged that "[t]he context of domestic law in Australia is, however, somewhat different"79. One difference is that Australian law holds that the proceedings before the Tribunal were inquisitorial and its function is simply to decide whether a claim is made out. His Honour next referred80 to s 36 of the Act, having first said that the content 77 Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290. 78 Simsek v Macphee (1982) 148 CLR 636. 79 (2006) 150 FCR 522 at 569 [182]. 80 (2006) 150 FCR 522 at 569-570 [186]. and intended operation of the Convention was the framework against which the Act and delegated legislation under the Act may be read81. It is appropriate to point out at this stage that to approach the matter in that way was to invert the steps which an Australian court should take in situations in which international instruments have been referred to in, or adopted wholly or in part by, enactments. The first step is to ascertain, with precision, what the Australian law is, that is to say what and how much of an international instrument Australian law requires to be implemented, a process which will involve law by the extent constitutionally valid enactment adopts, qualifies or modifies the instrument. The subsequent step is the construction of so much only of the instrument, and any qualifications or modifications of it, as Australian law requires. The first step is not, contrary to his Honour's express holding82, to derive an understanding of the proper interpretation and operation of the Convention. the ascertainment of to which Australian Notwithstanding the repeated references in the Act and Regulations to the respective durations of various visas and a non-citizen's obligation to apply for a visa, his Honour stated this view83: "Thus, read together, s 36(2) and the Regulations place Art 1 (as a whole) at the centre of the granting of both temporary and permanent protection visas. Importantly, the Regulations themselves, in terms, require the decision-maker to assess, by reference to the Convention (properly interpreted), whether Australia has protection obligations at the time of the decision. Thus, both the Act and the Regulations require the assessment of the relevant question (the existence of protection obligations at the time of decision) to be undertaken according to the Convention and its operation based on its proper interpretation." "The visa being applied for had its limitations, but the recognition of the applicant as a refugee was not in terms of the Act or Regulations an interim, provisional, interlocutory or temporally limited recognition. 81 (2006) 150 FCR 522 at 564 [164]-[165]. 82 (2006) 150 FCR 522 at 570 [188]. 83 (2006) 150 FCR 522 at 571 [196]. 84 (2006) 150 FCR 522 at 571 [197]-[198], 575 [212]. Through the Minister’s decision, the applicant was recognised by Australia as a refugee. There is nothing in the Act or Regulations to the effect that that recognition lapsed or ceased to be relevant at any particular point in time, or, perhaps more importantly, that the recognition had a more limited effect or consequence than contemplated by the Convention. The legislative regime provided for the further application for a permanent visa. It is important to ascertain whether this regime is to be seen as intended to operate differently to the operation of the Convention and, in particular, Art 1 as a whole. There was a need, or opportunity, to apply for a different and longer protection visa (five years – reg 866.511). The temporary protection visa would expire in the context of that further application. The whole of Art 1 was at the centre of both applications (for a temporary protection visa and a permanent protection visa) as providing the content for the phrase 'a person to whom Australia has protection obligations under the Refugees Convention'. At the time of the determination of his application for a permanent protection visa, the [applicant] had been recognised as a refugee. He was not a claimant seeking recognition of the application of s A(2). He had that recognition. No provision of the Act or Regulations stated that that recognition ceased to have relevance to the operation of the Convention and to the question whether Australia had protection obligations to him under the Convention (though indirectly as obligations under international law as a host state) and under the Act and Regulations. Thus, unless and until the Convention ceases to apply by operation of s C(5), s 36(3) does not operate in respect of the [applicant] because s 36(4) makes it inapplicable, there being an existing recognition of the matters with which s 36(4) is concerned." With respect to the reasons of the Tribunal, his Honour was of the opinion that they did not "disclose a direction to itself as to the clarity with which it must be satisfied of the change of circumstances"85. Further, he said, the reasons exhibited an approach "whereby it was for the applicant to show that there was a real chance of persecution, rather than it being necessary for the Tribunal to be satisfied that durable change in the relevant circumstances had been revealed with the necessary clarity"86. 85 (2006) 150 FCR 522 at 576 [216]. 86 (2006) 150 FCR 522 at 576 [216]. Accordingly it followed, his Honour concluded, that the primary judge had erred in deciding that the Tribunal's reasoning and approach were correct. With this view, general reasoning and conclusion, Marshall J agreed87. Disposition of the application by this Court The applicant made application for special leave to appeal to this Court. It is unnecessary to repeat what we have said in QAAH, as our reasoning there applies to this application, and produces the result that if special leave were granted the appeal would fail. It is desirable to say something further, however, about the proper approach to the construction of the Act and the Convention. Section 36 of the Act must be considered in context. The context is provided by other provisions of it. Some of those provisions, particularly the ones which we emphasized in QAAH, make it clear that a grant for a protection visa offers no promise or obligation to continue to afford protection or grant residence, whether permanent or otherwise, in the event that circumstances change. The Convention does not provide any of the framework for the operation of the Act. The contrary is the case. That does not mean that the Convention in and to the extent of its application to Australia should be narrowly construed. It simply means that Australian law is determinative, and it is that which should be clearly ascertained before attention is turned to the Convention. This application for special leave should be granted but the appeal should be dismissed with costs leaving the Full Court to determine the question of costs reserved in order 3 of the orders of 12 May 2006. 87 (2006) 150 FCR 522 at 530 [26].
HIGH COURT OF AUSTRALIA DIRECTOR OF PUBLIC PROSECUTIONS (CTH) INFORMANT AND DEFENDANT Director of Public Prosecutions (Cth) v Keating [2013] HCA 20 8 May 2013 ORDER The questions in the stated case dated 19 December 2012 be answered as follows: Question 1 Does section 66A of the Administration Act create a duty, from 20 March 2000, for the purposes of section 4.3(b) of the Commonwealth Criminal Code, such that a failure to inform the Department of the occurrence of an event or a change of circumstances as the Administration Act amounts to "engaging in conduct" for the the Commonwealth purposes of section 135.2(1)(a) of Criminal Code? section 66A of required by Answer Question 2 If yes to Question 1, is section 66A of the Administration Act invalid, insofar as it has retrospective effect, because it infringes the separation of judicial and legislative powers mandated by the Constitution? Answer Does not arise. Question 3 Did the notices issued to the defendant, as identified in paragraphs 13 and 15 of the stated case, or any of them, create a duty for the purposes of section 4.3(b) of the Commonwealth Criminal Code, such that a failure to perform the act or acts required by the notice or notices amounts to "engaging in conduct" for the purposes of section 135.2(1)(a) of the Commonwealth Criminal Code? Answer issued the defendant, as The notices paragraphs 13 and 15 of the stated case, were, in each case, capable of creating a duty for the purposes of s 4.3(b) of the Code such that a failure to perform the act or acts required by the notice or notices amounts to "engaging in conduct" for the purposes of s 135.2(1)(a) of the Code. identified Question 4 What order for costs, if any, should be made? Answer Each party should bear its own costs of the stated case. Remit the whole of the cause in Action No A13050181 in which Kelli the Director of Public Prosecutions (Cth) appears for the informant to the Magistrates' Court of Victoria. the defendant and Representation W J Abraham QC with G A Hill for the informant (instructed by Director of Public Prosecutions (Cth)) D S Mortimer SC with K L Walker and F I Gordon for the defendant (instructed by Victoria Legal Aid) Interveners J T Gleeson SC, Solicitor-General of the Commonwealth with R C A Higgins and D M Forrester for the Attorney-General of the Commonwealth, (instructed by Australian Government Solicitor) intervening M G Hinton QC, Solicitor-General for the State of South Australia with C Jacobi for the Attorney-General for the State of South Australia, intervening (instructed by Crown Solicitor (SA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Director of Public Prosecutions (Cth) v Keating Criminal law – Physical element of offence – Omission – Defendant charged on multiple counts of obtaining financial advantage from Commonwealth entity contrary to s 135.2(1) of Criminal Code (Cth) ("Code") – Defendant failed to advise Department of changes in income – Section 4.3(b) of Code provided that omission to perform act could not be physical element of Commonwealth offence unless offence committed by omission to perform act that by law there is duty to perform – Whether s 66A of Social Security (Administration) Act 1999 (Cth) ("Administration Act") created duty for purposes of s 4.3(b) of Code prior to date on which Act inserting s 66A received Royal Assent. Criminal law – Physical element of offence – Omission – Centrelink sent notices to defendant under ss 67(2) and 68(2) of Administration Act requiring defendant to perform certain actions – Section 74 of Administration Act made it offence to refuse or fail to comply with notices in certain circumstances – Defendant did not respond to notices – Whether notices issued under ss 67(2) and 68(2) of Administration Act capable of creating duty for purposes of s 4.3(b) of Code. Words and phrases – "engages in conduct", "obtains a financial advantage", "omission", "omission to perform an act that by law there is a duty to perform", "presumption against retrospectivity". Criminal Code (Cth), ss 4.3(b), 135.2(1). Social Security (Administration) Act 1999 (Cth), ss 66A, 67(2), 68(2), 74. Social Security and Other Legislation Amendment (Miscellaneous Measures) Act 2011 (Cth), s 2(1), Sched 1. FRENCH CJ, HAYNE, CRENNAN, KIEFEL, BELL AND KEANE JJ. On 14 December 2012, the whole of the cause pending in the Magistrates' Court of Victoria in which Kelli Anne Keating is the defendant and the Commonwealth Director of Public Prosecutions ("the Director") appears for the informant was removed into this Court by order of Hayne, Heydon and Bell JJ1. The defendant is charged with three offences under s 135.2(1) of the Criminal Code (Cth) ("the Code"). That sub-section makes it an offence for a person to "engage[] in conduct" and thereby to obtain a financial advantage from a Commonwealth entity, knowing or believing that the person is not eligible to receive that financial advantage2. The prosecution arises from the defendant's failure to inform the Department3 of increases in her income during the period in which she was in receipt of a social security payment known as the Parenting Payment Single ("the PPS"). It is one of a number of pending prosecutions for "social security fraud" offences charged under s 135.2(1) that are said to engage the Social Security (Administration) Act 1999 (Cth) ("the s 66A(2) of Administration Act"). Judiciary Act 1903 (Cth), s 40(1). 2 Section 135.2 relevantly provides: A person is guilty of an offence if: the person engages in conduct; and as a result of that conduct, the person obtains a financial advantage for himself or herself from another person; and the person knows or believes that he or she is not eligible to receive that financial advantage; and the other person is a Commonwealth entity. Penalty: Imprisonment for 12 months. (1A) Absolute liability applies to the paragraph (1)(b) element of the offence." 3 The Department is not defined for the purposes of the social security law. Hayne Crennan Bell Section 66A was inserted into the Administration Act by the Social Security and Other Legislation Amendment (Miscellaneous Measures) Act 2011 (Cth) ("the Amendment Act") following the decision of the Full Court of the Supreme Court of South Australia in Poniatowska v Director of Public Prosecutions (Cth)4, which held that the use of the expression "engages in conduct" in s 135.2(1)(a) did not overcome the requirement that the conduct charged must be the omission of an act that a person is under a legal duty to perform5. The decision was affirmed by this Court in Director of Public Prosecutions (Cth) v Poniatowska ("Poniatowska")6. Poniatowska was reserved at the time the Amendment Act was enacted. The decision Section 66A(2) of the Administration Act relevantly provides: a social security payment … is being paid to a person; [and] an event or change of circumstances occurs that might affect the payment of that social security payment …; the person must, within 14 days after the day on which the event or change occurs, inform the Department of the occurrence of the event or change." The Amendment Act, Sched 1 of which inserted s 66A into the Administration Act, received the Royal Assent on 4 August 2011. Schedule 1 is taken to have commenced on 20 March 20007. Schedule 1 provides that s 66A (2010) 107 SASR 578. 5 Poniatowska v Director of Public Prosecutions (Cth) (2010) 107 SASR 578 at 584 (2011) 244 CLR 408; [2011] HCA 43. 7 Amendment Act, s 2(1). Hayne Crennan Bell "applies in relation to an event or change of circumstances that occurs on or after 20 March 2000"8. the defendant with "engag[ing] The defendant was charged on 7 October 2010 with offences that are alleged to have been committed between May 2007 and September 2009. Following the delivery of judgment in Poniatowska, the Director substituted three charges formulated in terms more closely following the terms of s 135.2(1). Relevantly, each charges in conduct", particularised as the intentional failure to advise the Department of a change in her circumstances "as required by law". Again, the charges cover periods between May 2007 and September 2009. At issue is proof of the first element of the offence: "the person engages in conduct". "Engages in conduct" means to do an act or to omit to perform an act9. It is a physical element of conduct10 to which the fault element of intention applies11: the person must mean to do the act or mean not to perform the act. The averment that the relevant conduct was the failure to advise the Department of a matter as "required by law" recognises that the Code incorporates the general law principle that "criminal liability does not attach to an omission, save the omission of an act that a person is under a legal obligation to perform"12. The principle and its exceptions are found in s 4.3 of the Code13: 8 Amendment Act, Sched 1, item 3. 9 Code, s 4.1(2). 10 Code, s 4.1(1). 11 Code, s 5.6(1). 12 Poniatowska (2011) 244 CLR 408 at 421 [29] per French CJ, Gummow, Kiefel and 13 By Sched 1 to the Crimes Legislation Amendment (Slavery, Slavery-like Conditions and People Trafficking) Act 2013 (Cth), s 4.3(b) was amended in a manner that does not bear on the determination of the questions reserved in the stated case. From 8 March 2013, s 4.3 provides that: "An omission to perform an act can only be a physical element if: (Footnote continues on next page) Hayne Crennan Bell "An omission to perform an act can only be a physical element if: the law creating the offence makes it so; or the law creating the offence impliedly provides that the offence is committed by an omission to perform an act that by law there is a duty to perform." Poniatowska held that the omission to perform an act is not made a physical element of the offence created by s 135.2(1) within the exception provided by par (a)14. This proceeding is concerned with the exception provided by par (b). Poniatowska allowed that the expression "engages in conduct" in s 135.2(1)(a) implies that the offence is committed by an omission to perform an act that by law there is a duty to perform15. It was not contended in Poniatowska that the respondent had been subject to a legal duty to act16. In this proceeding the Director submits that a duty engaging s 4.3(b) is imposed by s 66A(2) of the Administration Act. The defendant challenges the application of s 66A to the prosecution of the charges against her. She submits that liability for the offence created by s 135.2(1) requires that the person is subject to the duty at the time of the omission. In the event that her construction argument fails, the defendant challenges the validity of s 66A, contending that its "retroactive" operation amounts to a usurpation of or interference with the judicial power of the Commonwealth contrary to the separation of powers for which the Constitution provides. the law creating the offence impliedly provides that the offence is committed by an omission to perform an act that there is a duty to perform by a law of the Commonwealth, a State or a Territory, or at common law." 14 (2011) 244 CLR 408 at 422-423 [33]-[37] per French CJ, Gummow, Kiefel and 15 (2011) 244 CLR 408 at 423 [39] per French CJ, Gummow, Kiefel and Bell JJ. 16 (2011) 244 CLR 408 at 422 [34] per French CJ, Gummow, Kiefel and Bell JJ. Hayne Crennan Bell An alternative way in which the prosecution puts its case respecting the duty to inform the Department of an event or change of circumstances depends upon proof of the service of notices under the social security law17 ("information notices") on the defendant. The failure to comply with an information notice is made an offence by s 74(1) of the Administration Act. The defendant disputes that s 74 imposes a duty to advise the Department of a change in the recipient's circumstances for the purpose of liability for the Code offence. The reserved questions On 19 December 2012, Hayne J stated a case and reserved the following questions for the consideration of the Full Court: the purposes of section 4.3(b) of "(1) Does section 66A of the Administration Act create a duty, from 20 March 2000, for the Commonwealth Criminal Code, such that a failure to inform the Department of the occurrence of an event or a change of circumstances as required by section 66A of the Administration Act amounts to 'engaging in conduct' for the purposes of section 135.2(1)(a) of the Commonwealth Criminal Code? If yes to Question 1, is section 66A of the Administration Act invalid, insofar as it has retrospective effect, because it infringes the separation of judicial and legislative powers mandated by the Constitution? (3) Did the notices issued to the [defendant] … create a duty for the purposes of section 4.3(b) of the Commonwealth Criminal Code, such that a failure to perform the act or acts required by the notice or notices amounts to 'engaging in conduct' for the purposes of section 135.2(1)(a) of the Commonwealth Criminal Code? (4) What order for costs, if any, should be made?" 17 "Social security law" means the Social Security Act 1991 (Cth), the Administration Act, and any other Act expressed to form part of the social security law: see Social Security Act 1991 (Cth), s 23(17); Administration Act, ss 3(3) and 4; Social Security (International Agreements) Act 1999 (Cth), ss 3(2) and 4. Hayne Crennan Bell The Attorneys-General for the Commonwealth and South Australia intervened to support the validity of s 66A. For the reasons to be given, the second question does not arise. It is convenient to first deal with the third reserved question, which concerns the effect of the issue of information notices. The effect of the information notices Section 67(2) of the Administration Act provides that the Secretary may give a notice in writing to a claimant for a social security payment requiring the person to inform the Department if a specified event or change of circumstances occurs, or if the claimant becomes aware that a specified event or change of circumstances is likely to occur. Section 68(2) of the Administration Act provides that the Secretary may give a notice in writing to a person in receipt of a social security payment requiring the person to inform the Department if a specified event or change of circumstances occurs, or if the recipient becomes aware that a specified event or change of circumstances is likely to occur. Section 72 of the Administration Act makes detailed provision respecting the content of information notices. Certain notices under s 68(2) must specify the date by which the person is to give statements to the Department18, and in all other cases notices must specify the period within which the person is to give the information or statement to the Department19. A notice must specify that it is an information notice given under the social security law20. The Administration Act provides that the Secretary may arrange for the use of computer programs under his or her control for any purposes for which the Secretary may make decisions under the social security law21. A decision made 18 Administration Act, s 72(1)(d)(i). 19 Administration Act, s 72(1)(d)(ii). 20 Administration Act, s 72(1)(e). 21 Administration Act, s 6A(1). Hayne Crennan Bell by the operation of a computer program under such an arrangement is taken to be a decision made by the Secretary22. When a claim for a social security payment is granted, a s 67(2) notice is automatically generated by Centrelink's computer system and issued to the claimant. Thereafter, certain events automatically generate the creation of s 68(2) notices that are issued to the recipients of social security payments. On 7 October 2005, the defendant lodged a claim form for the PPS with Centrelink23. In the claim form she stated that she was employed on a part-time basis. She did not disclose her income in the claim form. On the same date, a Centrelink customer service adviser informed the defendant that further documentation was required in support of her claim. On 14 October 2005, the defendant supplied Centrelink with a payslip which showed her fortnightly income as $760.15. Her claim for the PPS was granted and backdated to 6 October 2005. The defendant was in continuous receipt of the PPS until 1 September 2010. The PPS is paid fortnightly for periods known as "entitlement periods". Entitlement periods do not necessarily correspond to the pay periods for a given PPS recipient. The defendant's income from her part-time employment varied from one fortnight to the next. Sometimes it was less than $760.15 and at other times it was more than that sum. She did not inform Centrelink of any of the changes in her income. Centrelink did not at any time notify the defendant that she was required to report her income at any specified interval, such as fortnightly. The first charge pleads that: "Between the 17th day of May 2007 and the 4th day of October 2007 at Epping in Victoria, whilst in receipt of Parenting Payment Single you engaged in conduct, namely you intentionally failed to advise the 22 Administration Act, s 6A(2). 23 At the time, s 8(1)(a) of the Commonwealth Services Delivery Agency Act 1997 (Cth) stated that a function of the Chief Executive Officer of Centrelink is to provide Commonwealth services, which under s 3 include pensions, allowances, concessions or payments provided the Commonwealth. to members of the public by Hayne Crennan Bell Department of a change in your circumstances as required by law, in that you failed to advise that your income increased and as a result of that conduct you obtained a financial advantage from the Commonwealth, namely payments of Parenting Payment Single to which you were not eligible knowing or believing that you were not eligible, contrary to section 135.2(1) of the Criminal Code." The charge covers ten fortnightly pay periods. In two periods, the defendant's income was less than $760.15 and in the remaining periods it exceeded that sum. The prosecution alleges that in total the defendant obtained the amount of $1,624.39 for which she was not eligible. The second count charges the defendant in the same terms as the first and relates to the receipt of the PPS between 3 April 2008 and 2 October 2008. This charge covers thirteen fortnightly pay periods. In each period, the defendant's income exceeded $760.15. The prosecution alleges that in total the defendant obtained $2,870.66 for which she was not eligible. The third count charges the defendant in the same terms as the other counts and relates to the receipt of the PPS between 16 April 2009 and 3 September 2009. This charge covers ten fortnightly pay periods. In two periods, the defendant earned less than $760.15. In the remaining pay periods her income exceeded that amount. The prosecution alleges that in total the defendant obtained $1,797.74 for which she was not eligible. The stated case sets out particulars of information notices issued to the defendant. A notice under s 67(2) was issued on 14 October 2005 and addressed to the defendant at premises in Mill Park, Victoria ("the grant notice"). The grant notice included a statement that: "You must tell us about any changes to our [sic] earnings within 14 days (28 days if residing outside Australia) if any of these things happen, or may happen. … CHANGES TO INCOME AND ASSETS your income, not including financial investments or maintenance, increases". Hayne Crennan Bell A notice under s 68(2) also dated 14 October 2005 was sent to the defendant at the Mill Park address as the result of an event described as "[c]ustomer advice of earnings at grant". The notice contained a statement that "[y]ou must tell us within 14 days … if any of these things happen, or may happen. ... your income ... increases". A notice under s 68(2) dated 18 December 2006 was sent to the defendant at the Mill Park address as the result of an event described as "[a]dvice of rejection of Special Employment Advance" ("a particular event notice"). It contained a statement "[y]ou must tell us within 14 days ... if any of the things listed below happen. If you get a fortnightly Reporting and Income Statement, report your earnings or changes in circumstances on your reporting day". Whether an event involving an increase in income was subject to the 14 day requirement may be a matter for debate. The notice included a statement "YOU ALSO NEED TO TELL US … [i]f ... your income ... increases". Particular event notices pursuant to s 68(2) were sent to the defendant at an address in Epping, Victoria on 19 September 2007 and 22 October 2007 as the result of events described as "[a]dvice of advance payment" and "[b]enefit restoration" respectively. Each contained statements in substantially the same terms as the particular event notice dated 18 December 2006. On 26 November 2007, 18 April 2008 and 24 July 2008, quarterly account statements under s 68(2) were sent to the defendant at the Epping address. Each contained a statement "[y]ou must tell Centrelink within 14 days … if any of the things listed below happen or are likely to happen to you ... any change to your income from employment (the amount you earn goes up or down)". Quarterly account statements in the same terms as earlier account statements were issued to the defendant at an address in Coburg North, Victoria on 30 October 2008, 6 November 2008 and 5 February 2009. A particular event notice under s 68(2) was sent to the defendant at the Coburg North address on 29 April 2009. It contained statements in the same terms as earlier particular event notices. On 14 May 2009 and 18 August 2009, quarterly account statements were sent to the defendant at the Coburg North address. Each contained statements in the same terms as those in earlier account statements. Hayne Crennan Bell Each of the information notices issued to the defendant under s 68(2) contained a statement that it was an information notice given under the social security law. The receipt of any of the information notices by the defendant is an issue between the parties. The duty imposed under s 74 of the Administration Act Section 74 of the Administration Act provides: "Offence—failure to comply with notice (1) A person must not refuse or fail to comply with a notice under section 67, 68, 69, 70 or 70A. Penalty: Imprisonment for 6 months. Subsection (1) applies only to the extent to which the person is capable of complying with the notice. Subsection (1) does not apply if the person has a reasonable excuse. Subsection (1) is an offence of strict liability." The defendant offers three reasons in support of her contention that the act which an information notice requires the recipient to perform is not "an act that by law there is a duty to perform" within the exclusion provided by s 4.3(b) of the Code. First, she submits that a legal duty to act must be certain and it is unclear when the duty under an information notice arises and when it ceases. Secondly, the duty is "qualified" in that it does not apply to the extent that a person is incapable of complying with the notice, and does not apply to a person who has a reasonable excuse for non-compliance. Thirdly, the creation of the lesser offence under the Administration Act for a failure to comply with an information notice is inconsistent with the same conduct attracting criminal responsibility for the more serious offence under the Code. The defendant says that to interpret the offence under s 74 as providing a "general duty" for the purposes of s 4.3(b) would subvert the scheme of the Administration Act. Section 74(1) of the Administration Act imposes a duty on a person to comply with an information notice. The limitations on the duty for which s 74 provides do not deny that there is a legal obligation on a person to comply with Hayne Crennan Bell an information notice to the extent that the person is capable of so doing, subject only to the person having a reasonable excuse for refusing or failing to comply with the notice. A conviction for an offence under s 135.2(1) based on the intentional failure to comply with an information notice may bar a subsequent prosecution for an offence under s 74(1) of the Administration Act based on the same omission24. This is not to say that the Code and the Administration Act are inconsistent merely because the conduct that constitutes the offence under the Administration Act also constitutes an element of the more serious offence under the Code. Imposing liability under s 135.2(1) does not "subvert" the scheme of the Administration Act because the offence under s 135.2(1) contains different elements. The recipient of an information notice is under a legal duty to comply with the notice. What is required in order to discharge the duty will depend upon the terms of the notice. The intentional failure to comply with the notice, where the failure results in the recipient obtaining a financial advantage from a Commonwealth entity knowing or believing that he or she is not eligible to receive the financial advantage, is an offence contrary to s 135.2(1) of the Code. The third question in the stated case asks whether the notices issued to the defendant, or any of them, create a duty for the purposes of s 4.3(b) such that a failure to perform the act or acts required by the notice or notices amounts to engaging in conduct within s 135.2(1)(a). The stated case does not raise consideration of the scope of the obligation created by the notices, which are in varying terms. Nor does it raise any issue respecting the form of the charges. Any issue in either of these respects is for determination by the Magistrates' Court on the remitter. The stated case records that the defendant was sent the information notices. Information notices may be given to a recipient by post25. Service is deemed to have been effected at the time at which the notice would have been delivered in the ordinary course of post26. It remains that there is no agreement 24 Pearce v The Queen (1998) 194 CLR 610 at 616-620 [18]-[28] per McHugh, Hayne and Callinan JJ; [1998] HCA 57. 25 Administration Act, s 72(1)(b). 26 Acts Interpretation Act 1901 (Cth), s 29(1). Hayne Crennan Bell between the parties about whether the defendant in fact received the notices. In the event that a notice was not received the defendant would not be subject to a duty to comply with it as the fact that she had not received it would provide a reasonable excuse for non-compliance. The third question assumes the existence of a fact that is in issue between the parties. This makes it inappropriate to answer the question "yes". It should be answered in this way: "The notices issued to the defendant, as identified in paragraphs 13 and 15 of the stated case, were, in each case, capable of creating a duty for the purposes of s 4.3(b) of the Code such that a failure to perform the act or acts required by the notice or notices amounts to 'engaging in conduct' for the purposes of s 135.2(1)(a) of the Code." The duty imposed by s 66A The Director submits that on and from 20 March 2000, s 66A(2) imposes a duty to inform the Department of an event or change of circumstances affecting eligibility for a social security payment. The duty engages s 4.3(b) of the Code. He submits that the clear terms of the Amendment Act rebut the presumption against retrospectivity27. The mischief which the retrospective operation of the provision is designed to redress is identified as the successful challenge to convictions for "social security fraud" in cases in which the physical element of the offence was not established. In this respect the Director refers to extrinsic material28. The explanatory memorandum to the Amendment Act stated29: "The Commonwealth has appealed the Poniatowska decision to the High Court, which has reserved its decision. The current position is that a large number of past convictions are at risk of being overturned on appeal on the basis of the decision in Poniatowska. … 27 Maxwell v Murphy (1957) 96 CLR 261 at 267 per Dixon CJ; [1957] HCA 7; Fisher v Hebburn Ltd (1960) 105 CLR 188 at 194 per Fullagar J; [1960] HCA 80. 28 Acts Interpretation Act 1901 (Cth), s 15AB. 29 Australia, Senate, Social Security and Other Legislation Amendment (Miscellaneous Measures) Bill 2011, Explanatory Memorandum at 4-5. Hayne Crennan Bell The CDPP did not, in past prosecutions, rely on the notices given to the person by Centrelink to establish the person was under a duty to inform Centrelink as it was understood that this was not required. It is not possible to defend past convictions appealed on the basis of the reasoning in Poniatowska by seeking to introduce such notices into evidence to establish the duty. In addition, it has become apparent that it may not be able to be proved beyond reasonable doubt that such notices have complied with the requirements of section 6A of the Administration Act during the relevant period of time." The Director submits that: "the usual criticism of retrospective criminal legislation (that people would be unaware that their conduct was an offence) did not apply here – the convicted persons would have all been aware that they should have informed the Department of the specified events and changes of circumstances listed in the notices given to them by Centrelink". This submission assumes the person's awareness of the obligation to inform the Department of a specified event or change of circumstances without the necessity of proof of the fact. The Director characterises the duty imposed by s 66A(2) as "reinforcing" the duty imposed by information notices served on a recipient of social security payments. That characterisation is apt to mislead. On the Director's analysis, s 66A imposes the duty on and from 20 March 2000 regardless of whether the person received an information notice and regardless of the capacity to comply with the notice in the event it was received. Section 4.3 governs the circumstances in which the omission to perform an act may constitute a physical element of an offence. The Director submits that to all is a general principle of criminal responsibility applying Commonwealth offences and should be construed so as to accommodate the possibility of legislation having a retroactive operation. A valid retroactive law operates with effect that "at a past date the law shall be taken to have been that which it was not"30. Section 66A applies on and from 20 March 2000, such that the defendant's failure in the period 17 May 2007 to 3 September 2009 to inform 30 R v Kidman (1915) 20 CLR 425 at 443 per Isaacs J; [1915] HCA 58, citing West v Gwynne [1911] 2 Ch 1 at 12 per Buckley LJ. Hayne Crennan Bell the Department that her income had increased was the omission of an act that by law she is taken to have been under a duty to perform. The Director observes that ignorance of the content of a law affecting the scope or operation of an offence does not relieve a person of criminal responsibility31. He notes that proof of the element stated in s 135.2(1)(a) requires the prosecution to establish (i) as a matter of fact, a person intentionally does not perform an act, and (ii) as a matter of law, there is a duty to perform the act. His point is that the prosecution is not required to prove an intention to breach a legal duty. These considerations support his principal contention, which is that s 4.3(b) is silent as to the point in time at which the duty to act is imposed. On the Director's construction, s 66A creates a statutory fiction32 with the effect of attaching criminal liability to the defendant for her failure to advise the Department of an event within 14 days of its occurrence. This is so notwithstanding that at the time of the failure she was not required by law to inform the Department of the event (putting to one side receipt of any information notice) and that the duty is incapable of discharge. A clear statement of legislative intention is required before the courts will find that liability for a serious Commonwealth offence is imposed by means of a statutory fiction33. The ascertainment of such an intention proceeds by the application of well-understood principles34. In issue is proof of an offence under 31 Code, s 9.3(1). 32 See Hunter Douglas Australia Pty Ltd v Perma Blinds (1970) 122 CLR 49 at 65-66 per Windeyer J; [1970] HCA 63. 33 CTM v The Queen (2008) 236 CLR 440 at 446-447 [7] per Gleeson CJ, Gummow, Crennan and Kiefel JJ; [2008] HCA 25, citing Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476 at 492 [30] per Gleeson CJ; [2003] HCA 2; Al-Kateb v Godwin (2004) 219 CLR 562 at 577 [19] per Gleeson CJ; [2004] HCA 37; and Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at 553 [11] per Gleeson CJ, Gaudron, Gummow and Hayne JJ, 562-563 [43] per McHugh J, 576 [88] per Kirby J, 592-593 [134] per Callinan J; [2002] HCA 49. 34 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 31 [4] per French CJ, 46-47 [47] per Hayne, Heydon, Crennan and Kiefel JJ; [2009] HCA 41. Hayne Crennan Bell the Code. This directs attention to the law creating the offence and to the general principles of criminal responsibility under the Code. To observe that s 66A of the Administration Act operates with retrospective effect is not to conclude that the deemed duty it imposes engages with s 135.2(1)(a) and s 4.3 of the Code so as to render the latter nugatory in the case of an omission to inform the Department of an event or change in circumstances on and from 20 March 2000 to 4 August 2011, the date on which the Amendment Act received the Royal Assent. It is not to the point to observe that ignorance of the law affords no excuse or that the prosecution is not required to prove an intention to breach a legal duty. The submission ignores that the failure to do a thing is not an offence in the absence of a legal duty to do the thing35. As explained in Poniatowska, s 4.3 of the Code is a reflection of an idea that is fundamental to criminal responsibility: that the criminal law should be certain and its reach ascertainable by those who are subject to it36. This idea underpins the strength of the presumption against retrospectivity in the interpretation of statutes that impose criminal liability. Mr Bennion explains the principle in this way37: "A person cannot rely on ignorance of the law and is required to obey the law. It follows that he or she should be able to trust the law and that it should be predictable. A law that is altered retrospectively cannot be predicted. If the alteration is substantive it is therefore likely to be unjust. It is presumed that Parliament does not intend to act unjustly." Section 4.3 provides that the omission to perform an act cannot be a physical element of a Commonwealth offence unless, relevantly, the offence is committed by an omission to perform an act that by law there is a duty to perform. The submission that s 4.3 is silent as to the time at which the obligation is imposed should be rejected. The use of the present tense in s 4.3(b) is important. The exception to the general principle for which it provides applies to 35 Code, s 4.3(b). 36 (2011) 244 CLR 408 at 424 [44] per French CJ, Gummow, Kiefel and Bell JJ; and see Glanville Williams, Criminal Law: The General Part, 2nd ed (1961) at 579-580; Ashworth, "Public Duties and Criminal Omissions: Some Unresolved Questions", [2011] Journal of Commonwealth Criminal Law 1. 37 Bennion on Statutory Interpretation, 5th ed (2008) at 807 (footnotes omitted). Hayne Crennan Bell the failure to act where there is a presently existing legal duty to act. Criminal responsibility under s 4.3 is confined to the failure to do a thing that at the time of the failure the law requires the person to do. The obligation is coincident with the failure to discharge it. The first reserved question should be answered "no". This conclusion makes it inappropriate to answer the second reserved question. Orders The following orders should be made. The questions in the stated case dated 19 December 2012 be answered as follows: Question 1 Does section 66A of the Administration Act create a duty, from 20 March 2000, for the purposes of section 4.3(b) of the Commonwealth Criminal Code, such that a failure to inform the Department of the occurrence of an event or a change of circumstances as required by section 66A of the Administration Act amounts to "engaging in conduct" for the purposes of section 135.2(1)(a) of the Commonwealth Criminal Code? Answer Question 2 If yes to Question 1, is section 66A of the Administration Act invalid, insofar as it has retrospective effect, because it infringes the separation of judicial and legislative powers mandated by the Constitution? Answer Does not arise. Hayne Crennan Bell Question 3 Did the notices issued to the defendant, as identified in paragraphs 13 and 15 of the stated case, or any of them, create a duty for the purposes of section 4.3(b) of the Commonwealth Criminal Code, such that a failure to perform the act or acts required by the notice or notices amounts to "engaging in conduct" for the purposes of section 135.2(1)(a) of the Commonwealth Criminal Code? Answer The notices issued to the defendant, as identified in paragraphs 13 and 15 of the stated case, were, in each case, capable of creating a duty for the purposes of s 4.3(b) of the Code such that a failure to perform the act or acts required by the notice or notices amounts to "engaging in conduct" for the purposes of s 135.2(1)(a) of the Code. Question 4 What order for costs, if any, should be made? Answer Each party should bear its own costs of the stated case. Remit the whole of the cause in Action No A13050181 in which Kelli Anne Keating is the defendant and the Director of Public Prosecutions (Cth) appears for the informant to the Magistrates' Court of Victoria.
HIGH COURT OF AUSTRALIA INCORPORATED APPELLANT AND GRAHAM JAMES McDERMOTT & ORS RESPONDENTS Robinson Helicopter Company Incorporated v McDermott [2016] HCA 22 8 June 2016 ORDER Appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of Queensland made on 19 December 2014, and in their place order that the appeal be dismissed with costs. On appeal from the Supreme Court of Queensland Representation S L Doyle QC with M T Hickey for the appellant (instructed by Meridian Lawyers) W Sofronoff QC with M E Eliadis and C K George for the respondents (instructed by Shine Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Robinson Helicopter Company Incorporated v McDermott Torts – Negligence – Personal injury – Breach of duty of care – Duty to take precautions against risk – Where first respondent seriously injured in crash of helicopter manufactured by appellant – Where crash resulted from defect caused by third party – Where helicopter subject to multiple routine inspections but defect not detected – Whether appellant's maintenance manual for helicopter provided sufficient instruction to facilitate detection of defect – Whether appellant breached duty of care. Torts – Negligence – Causation – Where majority of Court of Appeal found multiple possible causes of damage suffered – Whether open to majority of Court of Appeal to find one particular possibility more likely to have occurred than other possibilities – Whether causation established by failure to take precautions against risk other than that which in fact occurred. Appeal – Rehearing – Where primary judge drew inferences and made findings of fact based on lay and expert evidence – Whether majority of Court of Appeal erred by overturning primary judge's findings of fact. Words and phrases – "causation", "contrary to compelling inferences", "glaringly improbable", "incontrovertible facts or uncontested testimony", "real review". Civil Liability Act 2003 (Q), ss 9(1)(c), 12. Civil Aviation Regulations 1988 (Cth), regs 31, 42V(1), 42ZC. FRENCH CJ, BELL, KEANE, NETTLE AND GORDON JJ. This is an appeal from a judgment of the Court of Appeal of the Supreme Court of Queensland. It arises out of the crash of a Robinson R22 helicopter ("the helicopter") which resulted in the death of the pilot and in the first respondent ("Mr McDermott") suffering serious injuries. The essential question at first instance and on appeal was whether the Maintenance Manual for the helicopter ("the Manual") provided an adequate inspection procedure for the detection of the defect which caused the crash. judge (Peter Lyons J) dismissed Mr McDermott's1 claims against the appellant ("Robinson"), in negligence and under the Trade Practices Act 1974 (Cth) ("the TPA"), holding that the Manual provided adequate instructions to identify the defect2. On appeal, a majority of the Court of Appeal (McMurdo P and Alan Wilson J) allowed the appeal, holding that the Manual did not provide adequate instructions to detect the defect and, ultimately, that Robinson was liable either in negligence or under the TPA3. the primary At first instance, For the reasons which follow, the majority of the Court of Appeal erred in their interpretation of the evidence, and thus in overturning the judge's findings of fact, and also in relation to causation. The facts On 30 May 2004, Mr McDermott was a passenger in the helicopter, from which he was inspecting fences on a cattle station in the Northern Territory where he lived with his wife. During the course of the flight, the helicopter crashed and, as a result, the pilot was killed and Mr McDermott suffered serious injuries. The crash was caused by the failure of the helicopter's forward flex plate ("the flex plate"). The flex plate and associated parts had been removed and reassembled on 17 February 2004. After reassembly, but before the crash, the flex plate had been subject to two "100 hourly" inspections on 27 March 2004 and 12 May 2004. Such inspections were known as 100 hourly inspections because they were 1 Mr McDermott's wife and employer were also plaintiffs at first instance and are respondents in this appeal. References in this judgment to Mr McDermott are to be understood as referring to all three respondents. 2 McDermott v Robinson Helicopter Company [2014] QSC 34. 3 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357. Bell Nettle Gordon carried out approximately every 100 hours that the helicopter was in operation. After reassembly, but before the crash, the helicopter had also been subject to a number of routine pre-flight checks by pilots who flew the helicopter during that period. The flex plate The flex plate was part of the helicopter's drive system which transferred torque from the helicopter's engine to the main rotor gearbox, which in turn drove the main rotor shaft, causing the rotor blades to rotate. The flex plate operated as a universal joint coupling between the clutch yoke and the drive shaft. Its function was to allow the main rotor shaft to be aligned at a different angle from the engine drive shaft. The flex plate was made of thin, flexible metal in the approximate shape of a four-pointed star. At each point of the star there was a bolt (also known as a fastener) with a washer and nut to secure the flex plate between the clutch yoke and the drive shaft. The flex plate was required to withstand considerable stress. Other things being equal, it was capable of withstanding the stress as long as each of the four bolts was tightened to the requisite degree. If, however, a bolt were not sufficiently tightened, it was likely to rotate, place stress on the bolt hole and generate cracks in the flex plate. In order to guard against a bolt becoming loose, the Manual required that each bolt and nut of the flex plate be fitted with a secondary fastener, called a palnut. A bolt fitted with a palnut could not become loose without the palnut becoming loose. Consequently any observable movement in a palnut, or the absence of a palnut, served as an indicator of possible bolt rotation. It is not disputed that the flex plate failed and the crash occurred because, contrary to instructions given in the Manual, one of the four bolts securing the flex plate ("Bolt 4") was incorrectly assembled and, when so assembled, was not tightened to the requisite degree ("the defect"). Robinson did not cause the defect and it was not known who did. There was evidence from which the judge inferred that Bolt 4 was not tightened to the requisite degree when the flex plate and associated parts were removed and reassembled on 17 February 2004. The focus of these proceedings, however, was not so much on when and how the defect arose as upon whether the Manual provided sufficient instruction to facilitate detection of the defect at subsequent inspections. Bell Nettle Gordon Inspection procedures for the helicopter At relevant times, the maintenance requirements for the helicopter were governed by the Civil Aviation Regulations 1988 (Cth) ("the Regulations"). Perforce of reg 42ZC, only certain classes of person were permitted to carry out maintenance work on the helicopter. One such class of person was licensed aircraft maintenance engineers ("LAMEs"). A LAME was a tradesperson who was sufficiently skilled and qualified to have been issued a licence pursuant to reg 31 of the Regulations. Each LAME who performed maintenance work on the helicopter was required by the Regulations to do so consistently with instructions given in the Manual4. Importantly, the Manual required that during 100 hourly inspections the LAMEs "verify security" of the flex plate. The 100 hourly inspections performed on the helicopter on 27 March 2004 and 12 May 2004 were conducted by LAMEs Mr Fisher and Mr Bray respectively. Torque, torque wrenches and torque stripes Torque is a measure of the twisting or rotational force acting upon an object. It was used in the Manual as a measure of the tightness of a bolt. Used as a verb in the Manual it referred to the action of applying torque to tighten the bolt. The Manual specified various degrees of torque (or tightness) required for the various bolts and other fasteners within the helicopter. Although bolts can be torqued with a range of tools, including spanners, the Manual provided for the use of a torque wrench. A torque wrench can be set to a particular torque setting so that when applied to a bolt it will tighten the bolt to that torque and no further. Under the heading "1.300 FASTENER TORQUE REQUIREMENTS" the Manual provided that: "Fasteners shall be torqued to standard dry values listed in Section 1.320 unless otherwise specified." The torque setting for Bolt 4 was otherwise specified as 240 inch pounds. Section 1.310 of the Manual further provided that: "A secondary locking mechanism is required on all critical fasteners. B330 stamped nuts (palnuts) serve as the secondary locking mechanism ... Torque seal (paint) is applied to all critical fasteners after palnut installation in a stripe across both nuts and exposed bolt threads. The 4 Civil Aviation Regulations 1988 (Cth), reg 42V(1). Bell Nettle Gordon stripe should extend to the part being fastened to show bolt rotation. Any subsequent rotation of the nut or bolt can be detected visually." Bolt 4 was a critical fastener. The portion of the Manual pertaining to torque stripes was amended after the crash but, as the judge observed, there was no material difference between the two versions. As was established at trial, and is apparent from the Manual, the purpose of a torque stripe is to signify that a fastener has been correctly torqued and to provide a visual indication of the possibility of a loss of torque and resulting bolt rotation. When applied correctly, the part of the stripe which is painted across the palnut, nut and bolt aligns with the part of the stripe which is painted on the horizontal clamped surface that the bolt is meant to fasten. A loss of torque leads to rotation of the bolt relative to the horizontal clamped surface with consequent misalignment between the sections of the stripe. The presence of that kind of misalignment is a visual indication of the possibility of a loss of torque and the consequent need for the fastener to be examined and re-torqued and a new torque stripe applied. At trial, there was an issue as to whether a torque stripe is a sufficient indicator of a loss of torque. One suggestion, which the judge rejected as quite unlikely, was that the horizontal clamped surface to which the horizontal section of the stripe is applied might be so dirty or greasy that the stripe does not adhere to it and so is able to rotate with the vertical section of the stripe as the bolt rotates. There was, however, also evidence, which the judge accepted, that torque stripes may sometimes so deteriorate, chip or disappear in service that they cease to be a reliable indicator of whether a bolt has rotated. It will be necessary to say more of each of those possibilities later in these reasons. The decision at first instance The judge found that the Manual required a torque stripe to be applied to each of the four flex plate bolts following fitting of the palnuts, but that it was probable that a torque stripe was not applied to Bolt 4 when it was incorrectly assembled. His Honour found in the alternative that, if a torque stripe were applied to Bolt 4 when it was incorrectly assembled, it was "quite unlikely" that it was applied to a dirty or greasy surface, and, therefore, quite unlikely that the bolt could have rotated without the stripe breaking and misaligning. Bell Nettle Gordon The judge held that the explanation given in the Manual of the function of torque stripes, coupled with the instruction given in the Manual to "verify security" of the flex plate during 100 hourly inspections, was sufficient to convey to a LAME carrying out a 100 hourly inspection that it was necessary to look for a torque stripe on each flex plate bolt and, if it were "missing, damaged, or incomplete"5, to take steps to determine whether the bolt was correctly torqued, to re-torque the bolt, and then to apply a fresh torque stripe. The judge found that it was probable that Bolt 4 commenced rotating relatively shortly after it was incorrectly assembled but that it did not fail until more than 100 hours of subsequent operation. Consequently, if a torque stripe were not applied to Bolt 4 when it was incorrectly assembled, the absence of the torque stripe should have been sufficient to indicate to a LAME, if competently carrying out a subsequent 100 hourly inspection, that it was necessary to take steps to check whether the bolt was correctly torqued. In the alternative, the judge found that, if a torque stripe were applied when Bolt 4 was incorrectly assembled, the stripe would have broken and misaligned relatively shortly afterwards; that the consequent misalignment between the relevant vertical and horizontal sections of the stripe would have been visible during the following 100 hourly inspections; and that its appearance should therefore have been sufficient to indicate to a LAME competently carrying out the subsequent 100 hourly inspections that it was necessary to take steps to check whether the bolt was correctly torqued. The judge also considered possibilities that if a torque stripe had been applied it might have been incompletely applied, or it might have been difficult to see (by which the judge should be understood to have been referring to the possibility of a deteriorated torque stripe). The judge held that those possibilities were not materially different from a missing or misaligned torque stripe, because all such possibilities would have indicated to a LAME the need to take steps to check whether the bolt was correctly torqued. It followed, the judge held, that it was not established that the Manual was inadequate to address the risk of flex plate failure resulting from an inadequately torqued bolt. 5 McDermott v Robinson Helicopter Company [2014] QSC 34 at [159]. Bell Nettle Gordon The decision of the Court of Appeal The majority of the Court of Appeal, McMurdo P and Alan Wilson J, held that the judge erred in finding that it was probable that a torque stripe was not applied when Bolt 4 was incorrectly assembled. In their Honours' view, there was not sufficient evidence to support the finding. They also held that there was error in the judge's reasoning in what they conceived to be an inconsistency between the judge's conclusion that it was probable that a torque stripe was not applied when Bolt 4 was incorrectly assembled and the judge's observation later in his Honour's reasons that the weight to be attributed to certain of the evidence given by Mr Fisher and Mr Bray was diminished by the fact that, if they had examined Bolt 4 as part of those 100 hourly inspections, the condition of the torque stripe would have indicated that Bolt 4 had rotated. McMurdo P stated that she did not consider that the judge was correct in limiting the range of possibilities to a missing or misaligned torque stripe. In her Honour's view, it was possible that, when Bolt 4 was incorrectly assembled, the torque stripe was applied to a dirty or greasy surface such that the section of the stripe applied to that surface was able to rotate with the bolt. On that basis, her Honour held that the Manual was defective in failing to make clear to LAMEs "verifying security in the context of a periodic service that a visual inspection of torque stripes may not be sufficient to indicate whether critical fasteners like bolt 4 were correctly assembled"6. McMurdo P also found that, if the Manual had contained an additional simple instruction to check the torque of critical fasteners like Bolt 4 with "a torque wrench or a simple spanner"7, the LAMEs would have followed that instruction and inevitably detected movement in the incorrectly assembled Bolt 4. Like McMurdo P, Alan Wilson J found it was possible that, if a torque stripe were applied to Bolt 4, it was incorrectly applied so as not to adhere to both the bolt and the fixed component, and therefore that the horizontal section of the torque stripe was able to rotate with the bolt. His Honour observed that it was also possible for a torque stripe otherwise to deteriorate due to ageing, 6 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at 7 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at Bell Nettle Gordon fading or cracking, or by pieces chipping off, in a manner which would not necessarily indicate that "a defect"8 existed. Alan Wilson J rejected the possibility that failure to discover the defect might have been due to Mr Fisher or Mr Bray not sufficiently inspecting Bolt 4 at the two 100 hourly inspections immediately preceding the crash. His Honour considered that finding to be precluded by the absence of cross-examination of either man to the effect that he may have overlooked an absent or misaligned torque stripe. Alan Wilson J held that, since the evidence of Mr Fisher and Mr Bray, and also the evidence of two pilots (Mr McKendry and Mr Lewis) who conducted the previously mentioned pre-flight checks of the helicopter not long before the crash, was that they could not recall seeing anything amiss, the only finding open to be made about the condition of the torque stripe on Bolt 4 at the relevant time was that, whatever its condition, it did not alert either Mr Fisher or Mr Bray or the pilots to the fact that Bolt 4 had lost torque and was rotating. In his Honour's view, it followed that a torque stripe was an inadequate means of guarding against bolt rotation. On that basis, Alan Wilson J held that the Manual was defective in failing to warn that torque stripes were not an accurate indicator of loss of torque and in failing to state that bolt security "could only be confirmed by applying a torque wrench (with, or without, an adaptor tool) or, simply, a spanner"9. Alan Wilson J did not refer to the issue of causation as such, but, in view of the orders made by the Court of Appeal, it must be assumed that his Honour considered that it was the absence of such a warning from the Manual that caused the crash. Like the judge, Holmes JA held it was likely either that there was no torque stripe present at the time of the 100 hourly inspections, or that there was a torque stripe present which was misaligned, incomplete or deteriorated. 8 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at 9 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at Bell Nettle Gordon Holmes JA found that, on the evidence, each of Mr Fisher and Mr Bray was at relevant times aware that, if he saw that there was no torque stripe on Bolt 4, or saw that there was a torque stripe which was misaligned, incomplete or deteriorated, he could have no confidence in the stripe as an indicator of bolt security, and that he would need to take action by checking that the bolt was tight – in Mr Fisher's case, with the use of a torque wrench and, in Mr Bray's case, with the use of a spanner. Her Honour reasoned accordingly that10: "The fact that others might regard the manual as conveying something different was immaterial. If Mr Bray and Mr Fisher understood that it was essential that anything less than a complete stripe required checking of the bolt's security, any failure of the manual to communicate that necessity to a wider audience could not be causative of [Mr McDermott's] damage." On that basis, Holmes JA held that, whatever might have been the shortcomings of the Manual in the hands of other users, they did not cause Mr Fisher or Mr Bray to fail to detect that the torque stripe was missing or defective and they did not cause either man's failure to take further action to check that Bolt 4 was sufficiently torqued. Holmes JA rejected the notion that the absence of cross-examination of Mr Fisher and Mr Bray to that effect precluded that conclusion. As her Honour said, given that Mr McDermott had alleged in his Statement of Claim and Robinson had admitted in its Defence that neither Mr Fisher nor Mr Bray carried out his 100 hourly inspection in a manner sufficient to detect the defect, and since Mr Fisher and Mr Bray each professed a lack of any specific recollection of having carried out the inspection, it was beside the point that neither of them was cross-examined to the effect that his failure to detect the defect was due to his failure sufficiently to inspect Bolt 4. The point was in issue and given that neither man had a specific recollection of the inspection it was open to conclude that they had not sufficiently inspected Bolt 4. The appellant's contentions Before this Court, Robinson contended that the majority of the Court of Appeal erred in rejecting the judge's finding that it was likely that there was no torque stripe on Bolt 4 when the two relevant 100 hourly inspections were carried 10 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at Bell Nettle Gordon out. In Robinson's submission, there was sufficient evidence to sustain that inference, comprised of the probability (which was not disputed) that Bolt 4 was incorrectly assembled on 17 February 2004; the further fact (which was also not disputed) that Bolt 4 was so misassembled as to be incapable of being torqued to the specified degree, and therefore was not torqued to the specified degree; uncontested expert opinion evidence that the usual and expected procedure to be followed upon installation of a bolt like Bolt 4 is to apply a torque wrench once it is assembled, torque the bolt to the specified setting, and then apply a torque stripe as an indication that the bolt has been so torqued; and uncontested expert opinion evidence that it was inconceivable that a competent LAME would put a torque stripe on an assembly that was not properly torqued. Robinson also contended that the majority erred in overturning the judge's finding that, if a torque stripe were applied to Bolt 4, it was quite unlikely that it was applied to a dirty or greasy surface such that the bolt could rotate without breaking the stripe. In Robinson's submission, it was indicative of the error that neither McMurdo P nor Alan Wilson J dealt at all with the substantial reasons which the judge gave for rejecting that possibility as quite unlikely. Robinson further contended that the majority erred in holding that, because the Manual did not specifically direct LAMEs to apply a torque wrench or spanner to Bolt 4 during 100 hourly inspections, Robinson had breached its duty of care to Mr McDermott. In Robinson's submission, the majority failed to take into account that the Manual directed LAMEs to "verify [the] security" of Bolt 4; that the evidence was clear that both Mr Fisher and Mr Bray knew that Bolt 4 had to be torqued to the specified degree; and that the evidence was also clear that both men knew that the way to ascertain whether Bolt 4 was torqued to the specified degree was with the use of a torque wrench. Robinson complained that the majority failed to confront evidence that Robinson had considered the possibility of including an express instruction in the Manual that during 100 hourly inspections each of the flex plate bolts should be re-torqued with a torque wrench, but had rejected the idea because of countervailing risks which might have been created by such an instruction. In Robinson's submission, the majority thereby erred in failing to consider, for the purposes of s 9(1)(c) of the Civil Liability Act 2003 (Q), why it was reasonable for Robinson not to include an instruction to check the security of the bolts with a torque wrench. Robinson argued that the majority erred, too, insofar as they based their reasoning on evidence that another manufacturer of helicopters included an instruction in its service manual to check torque with a torque wrench during 100 Bell Nettle Gordon hourly inspections. In Robinson's submission, the comparison was erroneous because it was made without reference to, and in disregard of, evidence that the other manufacturer's helicopter was of a different, older design, which employed older fastener technology, and so had maintenance requirements which were significantly different from the maintenance requirements of a Robinson R22 helicopter. Finally, Robinson contended that the majority erred in concluding, without appropriate analysis of the evidence and without reference to Robinson's detailed submissions as to the lack of proof of causation, that the omission from the Manual of an express instruction to check the torque of the flex plate bolts with a torque wrench during 100 hourly inspections caused the helicopter to crash. In Robinson's submission, the judge was correct to find that the most likely cause of the crash was that Mr Fisher and Mr Bray failed to inspect Bolt 4 in the manner which both men knew to be required by the Manual. The respondents' submissions Mr McDermott argued that the majority of the Court of Appeal were bound to and did conduct a "real review"11 of the evidence and of the judge's reasons and that they were right to conclude that the evidence did not support the judge's findings. In Mr McDermott's submission, the majority were also correct in holding that, because of the propensity of torque stripes to deteriorate over time, a torque stripe could not be regarded as a sufficient indicator that a bolt was incorrectly torqued, and thus that, whatever the condition of the Bolt 4 torque stripe at the time of the 100 hourly inspections, the only finding open on the evidence was that its condition was insufficient to alert Mr Fisher and Mr Bray to the fact that Bolt 4 was loose and rotating. Mr McDermott contended that the majority were correct in holding that Robinson was negligent in failing to include an express instruction in the Manual that the security of Bolt 4 be verified with a torque wrench during 100 hourly inspections; and correct in holding that it was Robinson's failure to do so which caused the crash. In Mr McDermott's submission, given the way the case was 11 Fox v Percy (2003) 214 CLR 118 at 126 [25] per Gleeson CJ, Gummow and Kirby JJ; [2003] HCA 22. Bell Nettle Gordon run at trial, it was unnecessary for the majority to devote any greater analysis to the issue of causation than they did. The majority's rejection of the judge's findings of fact In summary, what emerged from the trial and as a result of the appeal was that, in theory, there were perhaps five possibilities regarding the absence or presence and condition of a torque stripe on Bolt 4 at the time of the relevant 100 hourly inspections. They were: the absence of a torque stripe, due to a failure to apply a torque stripe when the bolt was incorrectly assembled; a misaligned torque stripe, resulting from a correctly applied torque stripe misaligning due to subsequent bolt rotation; (iii) an incomplete torque stripe, resulting from the application of torque paint to only one relevant surface; (iv) a deteriorated torque stripe, resulting from chipping or other deterioration in service; and a slipped torque stripe, resulting from a torque stripe being applied to a dirty or greasy surface so as to allow it to slip across the surface as the bolt rotated. The judge found that possibility (i) was most likely and, in the alternative, that possibilities (ii), (iii) or (iv) (which his Honour referred to collectively as the possibility of a "damaged, or incomplete"12 torque stripe) may have occurred. By contrast, in the Court of Appeal, Alan Wilson J found that there was "only one possible finding open: that the condition of the torque stripe on Bolt 4 was not such as to alert any of them [the LAMEs and pilots] to the need to investigate further"13. That finding implicitly encompassed possibility (v). McMurdo P agreed with the reasons of Alan Wilson J and also explicitly entertained possibility (v). 12 McDermott v Robinson Helicopter Company [2014] QSC 34 at [159]. 13 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at [78] (emphasis in original). Bell Nettle Gordon The fact that the judge and the majority of the Court of Appeal came to different conclusions is in itself unremarkable. A court of appeal conducting an appeal by way of rehearing is bound to conduct a "real review"14 of the evidence given at first instance and of the judge's reasons for judgment to determine whether the judge has erred in fact or law. If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings15. But a court of appeal should not interfere with a judge's findings of fact unless they are demonstrated to be wrong by "incontrovertible facts or uncontested testimony"16, or they are "glaringly improbable" or "contrary to compelling inferences"17. In this case, they were not. The judge's findings of fact accorded to the weight of lay and expert evidence and to the range of permissible inferences. The majority of the Court of Appeal should not have overturned them. In order to demonstrate why that is so, it is convenient to deal in turn with the way the judge and the majority of the Court of Appeal approached the several possibilities. (i) Missing torque stripe Contrary to the reasoning of the majority of the Court of Appeal, there was evidence sufficient to found the judge's inference that it was likely that a torque stripe was not applied to Bolt 4 when it was incorrectly assembled. The instructions in the Manual for the assembly of Bolt 4 were not complex, even for a layperson. They were clearly written and accompanied by a readily comprehensible schematic diagram which identified the components that comprised the bolt assemblage and the order in which they were required to be assembled. Given the clarity of the instructions, and given that whoever 14 Fox (2003) 214 CLR 118 at 126 [25] per Gleeson CJ, Gummow and Kirby JJ. 15 Devries v Australian National Railways Commission (1993) 177 CLR 472 at 479- 481 per Deane and Dawson JJ; [1993] HCA 78; Fox (2003) 214 CLR 118 at 128 [29] per Gleeson CJ, Gummow and Kirby JJ; Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at 381 [76] per Heydon, Crennan and Bell JJ; [2010] HCA 31. 16 Fox (2003) 214 CLR 118 at 128 [28] per Gleeson CJ, Gummow and Kirby JJ. 17 Fox (2003) 214 CLR 118 at 128 [29]. See also Miller & Associates (2010) 241 CLR 357 at 381 [76]. Bell Nettle Gordon incorrectly assembled Bolt 4 did not follow them, it is probable that he or she did not consult the Manual. And, for that reason, it is also likely that he or she did not pay attention to the requirement stated in the Manual that Bolt 4 be tensioned to a torque of 240 inch pounds or to the requirement stated in the Manual that Bolt 4 be marked with a torque stripe to signify correct tensioning and as an indicator of subsequent bolt rotation. Accordingly, it was open to the judge to find, as his Honour did, that it was more probable than not that a torque stripe was not applied to Bolt 4; and, consequently, that if a LAME had examined Bolt 4 in accordance with the Manual as part of the following 100 hourly inspections, he or she would have understood that it was necessary to check it with a torque wrench, or at least a simple spanner, in order to gauge whether further examination was required. (ii), (iii) and (iv) "Damaged or incomplete" torque stripe Contrary also to the reasoning of the majority of the Court of Appeal, it was open to the judge to find, as his Honour did in the alternative, that if a torque stripe were applied when Bolt 4 was incorrectly assembled, the torque stripe would likely have misaligned a relatively short time after misassembly when the bolt (and thus the vertical section of the stripe) began to rotate relative to the horizontal surface; and thus that it would have been apparent to a LAME carrying out a subsequent 100 hourly inspection in accordance with the Manual that Bolt 4 was rotating, or at least that further investigation was required to exclude the possibility that it was rotating. Certainly, as the majority of the Court of Appeal observed, there was evidence that torque stripes can and sometimes do deteriorate in a manner that is not necessarily indicative of a loss of torque. But, even so, as the judge found, the fact that the Manual identified the role of a torque stripe on a critical fastener, coupled with the instruction to "verify security" of the flex plate, was sufficient to convey to a LAME carrying out a 100 hourly inspection that it was necessary to look for a torque stripe on each critical fastener and, if it were missing, damaged (whether by misalignment or deterioration) or incomplete, to take steps to verify that the torque was as specified and then to reapply the torque stripe. That conclusion was borne out by Mr Fisher and Mr Bray's evidence. Mr Fisher said that, as a LAME, he had seen many torque stripes and that they varied a lot, and that if he saw a deteriorated torque stripe after 50 or 100 hours of operation, "you would have to check the torque of the bolt, put the palnut back on, retorque stripe it". Mr Bray said that, in his experience, "[t]he torque stripe can come off", although they did not do so normally, and that if a torque stripe were missing on a critical fastener "you would probably remove the bolt ... and Bell Nettle Gordon inspect the area, make sure it was all correct, and torque the bolt up again". He added that, if a torque stripe were deteriorated, but not broken, "it shouldn't be a problem but you would still check the torque on that bolt if it was the critical part". There was also expert opinion evidence to the same effect given by Dr Orloff, Mr Lay and Mr Ogier. Dr Orloff was a highly qualified aeronautical engineer who had worked for more than 13 years for the National Aeronautics and Space Administration (NASA) in the area of low-speed aircraft research. He was also a pilot with approximately 8,000 hours of flying time on both fixed wing and helicopter aircraft and he held a flight instructor's certificate for instructing in helicopters as well as a number of fixed wing ratings up to airline transport pilot. He had obtained his airframe and power plant mechanic's licence in 1979 and, in 1982, he had obtained the United States equivalent of the LAME qualification. At the time of the trial he remained active in the servicing and repair of fixed wing and helicopter aircraft. He gave evidence that it was standard practice in the industry for a mechanic to assemble something and, in doing so, to torque each thing in the correct order before applying the torque stripe to indicate that the specified torque had been achieved. He said that there was also an industry standard practice to investigate further if a torque stripe is missing, misaligned or cracked. On the subject of deterioration, he said that if a torque stripe is discoloured from age but it is perfectly intact and it appears to be adhering to the surface, it may be assumed that "everything is fine". But he said that if parts of the torque stripe had chipped or broken away due to age, "I would remove it, ... verify the torque, I would make sure the junction is okay, I would look at the parts and make sure they're all right, not cracked, not deteriorated themselves", and that "[i]t is basically industry standard practice on torque striping to do what I've just told you". Mr Lay was an airframe and power plant mechanic who had also obtained the United States equivalent of the LAME qualification. He too was a helicopter pilot and had been so since war service in Vietnam. He said that from time to time in his experience in servicing helicopters, including Robinson R22 helicopters, he saw torque stripes that had deteriorated to some extent and he said that, if a torque stripe were broken, it was an alert to investigate further in order to determine why it is broken, especially where misaligned. If it looked to him like the torque stripe had cracked or broken on the bolt, he said he "would just remove the palnut and check the torque and then reapply the torque striping". If it looked to him like the torque stripe was missing, he agreed that would also be "an alert". Bell Nettle Gordon Mr Ogier, who was a LAME from the early 1960s until the early 1980s, said that, based on prior industry knowledge, it would cause him concern if there were no torque stripe at all because "[o]n a Robinson helicopter ... that's the methods [sic] used". Just as significantly, none of the witnesses suggested that it would ever be appropriate for a LAME to ignore an absent, broken, incomplete or deteriorated torque stripe. Contrary, too, to the majority's reasoning, the judge's finding – that, if a torque stripe were applied, the condition of the torque stripe, whether missing, damaged or incomplete, would have been adequate to alert a LAME to the need for further investigation – was not foreclosed by the fact that it was not put to Mr Fisher or Mr Bray in cross-examination that he had not adequately inspected Bolt 4. As Holmes JA reasoned, since it was alleged by Robinson and admitted by Mr McDermott that each man did not properly examine for and identify the defect18; since each man professed a lack of specific recollection of having carried out the relevant 100 hourly inspection19; and since Mr Fisher admitted that, although he would like to think it was not the case, it was possible that he had missed some telltale sign, there was nothing more which needed to be put to either witness. It was open to conclude that both of them may have done less than they should. Alan Wilson J characterised Mr Fisher's admission – that it was possible that some telltale sign was missed – as "nothing more than an acknowledgement of human fallibility by an, otherwise, apparently honest witness"20. But the meaning to be attributed to an admission of that kind depends as much on the way it is stated as on its content; and, in this case, the judge had the significant advantage of seeing and hearing Mr Fisher make the admission21. The majority 18 Seymour v Australian Broadcasting Commission (1977) 19 NSWLR 219 at 224- 225 per Glass JA (Reynolds JA agreeing at 220), 236 per Mahoney JA; Trade Practices Commission v Mobil Oil Australia Ltd (1984) 3 FCR 168 at 180. 19 Trade Practices Commission v Mobil Oil Australia Ltd (1984) 3 FCR 168 at 181; cf R v Morrow (2009) 26 VR 526 at 540 [50] per Redlich JA (Nettle JA agreeing at 528 [1], Lasry AJA agreeing at 550 [88]). 20 McDermott v Robinson Helicopter Company Incorporated [2014] QCA 357 at 21 Cf Fox (2003) 214 CLR 118 at 129 [31] per Gleeson CJ, Gummow and Kirby JJ. Bell Nettle Gordon appear to have overlooked that advantage. Moreover, at an objective level, if the admission really were as anodyne as Alan Wilson J suggested, it is remarkable that Mr Fisher was not moved to say something further to the effect that, although anything was possible, he invariably took so much care in carrying out critical work like a 100 hourly inspection that he was confident that nothing was missed. To the contrary, however, although the Manual specifically required that the 100 hourly inspection be carried out "per Section 2.410" and directed the person performing the inspection to "[u]se checklist in Section 2.420 to ensure all items are complete" (the check list included more than 180 individual checks and processes), Mr Fisher agreed in cross-examination that he "didn't necessarily refer to the checklist because this was something that [he] knew", and similarly, he "wouldn't necessarily refer to the Maintenance Manual itself because [he] understood what was required". His practice was to complete the paperwork "at the end of the completion of the work" so as "not to interrupt the workflow". In sum, the evidence supported an interpretation of Mr Fisher's admission as a genuine concession that he might have missed a significant telltale sign in the course of his 100 hourly inspection of the helicopter. (v) Slipped torque stripe The majority of the Court of Appeal did not refer to the judge's reasons for rejecting as quite unlikely the possibility that, if a torque stripe were applied to Bolt 4, it was applied to a dirty or greasy surface which enabled the bolt to rotate without misalignment of the stripe, and that, if it were, the stripe would have remained intact and, as it were, floating above the surface after 100 hours of the helicopter's operation. Nor did the majority give any reasons of their own for finding that the application of a torque stripe to a dirty or greasy surface was a realistic possibility, or that, if it were so applied, the stripe was likely to have remained intact, floating above the surface, after more than 100 hours of the helicopter's operation. In those respects their Honours did not give the respect and weight to the judge's analysis of the issue which it deserved22. The trial lasted for five weeks, during which close to 20 witnesses gave oral evidence. The judge alone had the opportunity of hearing and seeing those witnesses giving their evidence. There were also a very large number of exhibits, 22 Warren v Coombes (1979) 142 CLR 531 at 551 per Gibbs ACJ, Jacobs and Murphy JJ; [1979] HCA 9. See also Bell, "Appellate review of the facts", (2014) 39 Australian Bar Review 132 at 141. Bell Nettle Gordon including physical exhibits and extensive documentary exhibits, which only the judge had the opportunity to read and consider completely. The judge had the unique benefit of a viewing of two helicopters of the kind which crashed. And the judge alone had the opportunity to consider all of the evidence in its totality and to reflect at length upon its interaction. As the judge observed, only one of the expert witnesses referred to the possibility of a torque stripe being applied to a dirty or greasy surface. That was Mr Ogier, who had not practised as a LAME in approximately 30 years and had no experience in the servicing of Robinson R22 helicopters. Mr McDermott did not cross-examine any of the other expert witnesses as to whether he agreed it was a possibility. It was also unclear what Mr Ogier conceived would be the result of such a possibility. In his report of 25 August 2012, Mr Ogier said that: "In general, torque stripe compound (paint or lacquer) is difficult to adhere to surfaces unless they are clean (from oil[,] water and other like contaminants), and dry at the time of application. The compound is designed to be brittle and crack. Depending on the thickness of the stripe it may not break but rather slip as the surface below it moves. If the stripe is relatively thin it may not fill a void as direction changes between surfaces and therefore is made to support its own weight with the potential for it to crack under vibration in service." (emphasis added) That could mean that, if a torque stripe were applied to a dirty or greasy surface, it might not crack, or it could mean that, because the stripe would be required to support its own weight, it would be likely to crack. But in a subsequent Conference Call Report of 30 August 2012, Mr Ogier added that: "The stripes can slip over time if the surface they are placed on is contaminated with oil or water. I am inclined to agree with Mr Lay's experience because that's what I see in the helicopters in the Australian fleet; missing, partially applied, broken and correctly applied stripes." That suggests that, if a torque stripe were applied to a dirty or greasy surface in such a way as to be able to float above it, over time, and certainly within 100 hours of operation, the rotation and vibration would likely result in a missing, misaligned or incomplete stripe – or, as the judge put it, a stripe which is missing, damaged, or incomplete – which would act as a sufficient indicator to a LAME of the need to take steps to determine whether the torque was adequate and to re-apply the torque stripe. Bell Nettle Gordon Furthermore, as the judge said, if the person who misassembled Bolt 4 had been sufficiently familiar with the role that the Manual assigned to a torque stripe, it was quite unlikely that that person would apply the stripe to a dirty or greasy surface. The majority should have recognised that it was open to the judge to conclude as he did. The significance of the pilots' evidence Counsel for Mr McDermott contended that it was apparent from the evidence of one of the helicopter pilots, Mr McKendry, who carried out pre-flight checks and flew the helicopter shortly before the flight on which it crashed, that the condition of the torque stripe on Bolt 4 was not sufficient to warn of the possibility that Bolt 4 was rotating. The evidence of the other pilot who flew the helicopter during the relevant period was that he did not look for torque stripes. Although Mr McKendry had no specific recollection of carrying out the pre-flight checks in question, he stated that his usual practice was to use a light and a mirror to look for the presence of palnuts and to observe the condition of the torque stripes, and, if he observed a broken torque stripe, to report it to a LAME. Counsel for Mr McDermott submitted that, since it was apparent that the judge had accepted Mr McKendry as a credible and reliable witness concerning his usual practice for the inspection of palnuts, it would be illogical for the judge not also to accept Mr McKendry as a credible and reliable witness concerning his usual practice for the inspection of torque stripes. In counsel's submission, it followed that the judge should have found it was probable that, whatever the condition of the torque stripe on Bolt 4 when Mr McKendry inspected it, it was incapable of indicating that Bolt 4 was or might be rotating. And, in counsel's submission, when that evidence was combined with Mr Fisher and Mr Bray's testimony of their usual practices during a 100 hourly inspection, and with the expert evidence of the many ways in which torque stripes may deteriorate in service without necessarily signifying bolt rotation, it appeared probable, and the judge should logically have inferred, that when Mr Fisher and Mr Bray inspected Bolt 4 during the 100 hourly inspections preceding the crash, the condition of the torque stripe was equally incapable of indicating that Bolt 4 was or might be rotating. Those submissions should be rejected. The judge did not specifically refer to Mr McKendry's evidence of his usual practice of looking for broken torque stripes. But, in dealing with whether it was likely that a palnut had been fitted to Bolt 4, his Honour said that it appeared to him that it would be easier for a pilot Bell Nettle Gordon to detect a missing palnut than to detect a crack in, or misalignment of, a torque stripe. Hence, his Honour accepted that, if the palnut were missing, it was likely that Mr McKendry would have discovered that it was missing. By contrast, it appears implicit in his Honour's reasoning that, because it was harder for a pilot to detect a crack in, or misalignment of, a torque stripe than to detect a missing palnut, his Honour did not accept that Mr McKendry would necessarily have observed a misaligned torque stripe. And the likelihood of that being so is fortified by the judge's further observation, later in his reasons, that "the failure of a pilot to detect that [the torque stripe] was broken (or, perhaps, missing) does not demonstrate inadequacy in the inspection carried out by the pilot"23. Just as importantly, whether or not Mr McKendry should be taken to have looked for a broken torque stripe, there was no evidence that he would have looked for a missing torque stripe, still less that he did so during the pre-flight checks in question. Nor was there evidence as to what significance he might have attributed to a missing torque stripe if he had observed one to be missing. And as has been seen, it is more likely that a torque stripe was not applied to Bolt 4 and so was missing at the time of the pre-flight checks than that one was present and misaligned. It is true, as counsel for Mr McDermott submitted, that Mr McKendry was not cross-examined as to whether he would have attributed any significance to a missing torque stripe. But it was not for Robinson to establish that he would or would not have attributed any significance to it. It was for Mr McDermott to exclude the possibility that he may not have considered it to be significant24. No inconsistency in the judge's reasons Counsel for Mr McDermott emphasised what the majority of the Court of Appeal identified as error in the judge's reasoning in what were said to be two inconsistent findings: first, that it was probable that a torque stripe was not applied when Bolt 4 was incorrectly assembled, and hence that the LAMEs conducting the two subsequent 100 hourly inspections, Mr Fisher and Mr Bray, had failed to detect its absence; and secondly, that the weight to be attributed to certain of the evidence given by Mr Fisher and Mr Bray was diminished by the fact that, if they had examined Bolt 4 as part of those 100 hourly inspections, the 23 McDermott v Robinson Helicopter Company [2014] QSC 34 at [233]. 24 Tabet v Gett (2010) 240 CLR 537 at 578 [111] per Kiefel J (Hayne and Bell JJ agreeing at 564 [65]); [2010] HCA 12. Bell Nettle Gordon condition of the torque stripe would have indicated that Bolt 4 had rotated. According to the majority, the latter statement contradicted his Honour's earlier finding that it was probable that a torque stripe was not applied to Bolt 4. In truth, however, there was no contradiction. The judge made that latter observation in response to a contention by Robinson that it was probable that palnuts were missing from some of the flex plate bolts when the relevant 100 hourly inspections were carried out, and thus that Mr Fisher and Mr Bray were negligent in failing to detect their absence. As part of his analysis of that possibility, the judge referred to evidence of Mr Bray that it was his usual practice, when he observed that a palnut was missing, to take out the relevant bolt and make a thorough inspection of it; and also to evidence of Mr Fisher that it was his usual practice to check for missing palnuts and, if one were missing, to use a torque wrench to check the torque of the bolt. His Honour observed that the weight to be given to that evidence was25: "affected by the fact that each of them failed to detect the condition of the torque stripe for Bolt 4, which, on my findings must have at the time of their inspections indicated that Bolt 4 had rotated." Evidently, the judge's reference to "my findings" in the latter context was a reference to both of his principal findings: scil, it was probable that the torque stripe was missing; and, in the alternative, if a torque stripe were present, it would have misaligned shortly after installation. Hence the significance of his Honour's holding, quoted in full earlier in these reasons, that, whether the torque stripe was "missing, damaged, or incomplete"26, it would have been sufficient to indicate to a LAME the need to investigate further. Perhaps it would have been more accurate to say "might have rotated" rather than "had rotated". But such minor infelicity as that may represent is not an inconsistency or contradiction, properly understood. Alan Wilson J suggested that the contradiction was put beyond doubt by a later reference by the judge to "my earlier findings". But that is not the case either. The judge made the later reference to "my earlier findings" when dealing with a further submission by Robinson that, if the torque stripe were present and broken (misaligned), the fact that it was broken should have been detected by the deceased helicopter pilot in the course of his mandated pre-flight checks; and, 25 McDermott v Robinson Helicopter Company [2014] QSC 34 at [202]. 26 McDermott v Robinson Helicopter Company [2014] QSC 34 at [159]. Bell Nettle Gordon therefore, that the pilot's failure to detect the break caused or contributed to the crash. His Honour rejected that submission as follows27: "If the submissions for Robinson on this issue are correct, then on each occasion after the torque stripe broke (which, on my earlier findings, was relatively shortly after Bolt 4 was incorrectly assembled), the pilot should have detected the condition of the torque stripe. In other words, on each of these occasions, the pre-flight inspection required by the [Pilot's Operating Handbook] was carried out inadequately. There is, in my view, a substantial degree of improbability about this." There was no contradiction because it is apparent that "findings" in this latter context was used in a different sense from that described earlier. As has been remarked, in the earlier context of what competent LAMEs would have perceived, "findings" logically referred to both the finding that it was probable that a torque stripe was not applied and the alternative finding that, if a torque stripe were applied, it was probable that it misaligned shortly after installation. By contrast, in the latter context of the judge's rejection of the submission that the deceased pilot should have observed that the torque stripe applied to Bolt 4 had broken, the reference to "my earlier findings" can logically only have meant those of his Honour's earlier findings that bore on the alternative possibility that a torque stripe was applied to Bolt 4 but had broken by the time of the pre-flight check. To use "findings" in a different sense in the latter context did not contradict the judge's earlier finding that it was probable that a torque stripe was not present. It reflected that, in order to deal with the latter submission, it was necessary for the judge to assume that the torque stripe was present (as was posited by the submission). For the purposes of addressing that submission, the conclusion that the torque stripe was broken when the pilot undertook the pre- flight check was based on his "earlier findings" that, if it were present, the torque stripe would have broken shortly after installation. An alternate approach? In addition to its complaints about the findings of fact made by the majority of the Court of Appeal, Robinson submitted that there was error in the 27 McDermott v Robinson Helicopter Company [2014] QSC 34 at [234]. Bell Nettle Gordon failure of the majority of the Court of Appeal to consider s 9(1)(c) of the Civil Liability Act. Section 9(1)(c) provides that: "A person does not breach a duty to take precautions against a risk of harm unless – in the circumstances, a reasonable person in the position of the person would have taken the precautions." Robinson argued that it was not shown to have acted unreasonably because there was evidence that applying a torque wrench to Bolt 4 at each 100 hourly inspection could give rise to countervailing risks; and, in the same vein, Robinson contended that the fact that another helicopter manufacturer included such an instruction in its manual was irrelevant because that helicopter used older technology and required a significantly different maintenance regime from that required by the Robinson R22 helicopter. Whether unreasonable not to require check with torque wrench It is not clear that the majority failed to consider Robinson's submission that there was good reason for Robinson to eschew including a direction in the Manual to check the security of the bolts with a torque wrench as part of the 100 hourly inspection or the consequential submission that, perforce of s 9 of the Civil Liability Act, there was no breach of duty in failing to include that instruction. Robinson relied on evidence of its technical representative Mr Cox to the effect that the reason why the Manual did not include an express instruction to check the torque of the flex plate bolts with a torque wrench was a combination of difficulty of access, potential damage while a LAME was working in the area, and risk of an additional error being introduced. But in answer to questions put to him in cross-examination, Mr Cox agreed that, compared to the catastrophic consequences which occurred in this case, the risk of causing damage by applying a torque wrench would be relatively minimal. There was also uncontested evidence given by Dr Gilmore, a mechanical engineer called by Mr McDermott, that to check the torque of the flex plate bolts would be a relatively rapid procedure, using a short open-end adaptor of the kind shown in the Manual, which would not require disassembly of the joint. Alan Wilson J referred to all of that evidence. Consequently, although his Honour did not mention s 9 of the Civil Liability Act as such, it appears implicit that, because of Dr Gilmore's evidence, his Honour did not consider that the Bell Nettle Gordon considerations mentioned by Mr Cox were sufficient reason for Robinson not to include a direction to check the torque of the flex plate bolts with a torque wrench. Whether comparison with other manufacturer relevant There is more substance, however, in Robinson's complaint that the majority erred in basing their conclusion on the fact that another manufacturer, Schweizer, required that the torque of the bolts on its 269C-1 model helicopter be checked with a torque wrench. Mr Cox gave detailed evidence, to which the majority did not refer, to the effect that the fastener technology used in the Schweizer helicopter was AN-style hardware which dated from the 1950s and which is torqued to approximately only half of the torque applied to the more modern NAS hardware employed in Robinson helicopters. In addition, Dr Orloff gave uncontradicted evidence that the Schweizer helicopter was of a totally different design which did not employ a flex plate, idle pulley or clutch cable. The latter evidence carried particular weight because, apart from being a highly qualified aeronautical engineer and a licensed airframe and power plant mechanic, Dr Orloff had owned and serviced his own Schweizer helicopter for a number of years. Perhaps the majority considered that, despite the differences between the Schweizer helicopter and the Robinson R22 helicopter, the approach followed by Schweizer was a relevant point of comparison. But, in the absence of any explanation of why the differences did not render the comparison irrelevant, the majority's bare statement of conclusion that the comparison was pertinent is untenable. No breach of duty of care For those reasons, it should be concluded that it was open to the judge to find, as he did, either that there was no torque stripe applied to Bolt 4 when the bolt was incorrectly assembled on 17 February 2004 or, if there were a torque stripe completely applied to Bolt 4 at that time, that it would have cracked shortly afterwards and thus would have been misaligned (and potentially deteriorated) at the time of each of the two 100 hourly inspections immediately preceding the crash. Consequently, it was probable that, if Mr Fisher or Mr Bray had properly inspected Bolt 4 in accordance with the Manual, they would have seen the absence of a torque stripe or a torque stripe in such a condition as would have alerted them to the need for further examination. And, had they conducted such a further examination, it would have revealed that Bolt 4 was or might be rotating. Bell Nettle Gordon Thus, as Holmes JA held, whatever other inadequacies there might or might not have been in the Manual, it was not shown to have been inadequate to convey to Mr Fisher and Mr Bray that Bolt 4 needed attention. The judge was right to hold that it was not shown that the contents of the Manual fell short of what was required to discharge Robinson's duty of care in the circumstances of this case. Causation Having found that Mr McDermott had not established that Robinson breached its duty of care to him, the judge did not consider it necessary to deal with the question of causation. Equally, having concluded that the judge was not in error in holding that there was no breach of duty, it is, strictly speaking, unnecessary for this Court to consider causation. In deference, however, to the substantial arguments which were advanced on the issue, it is appropriate to say something brief about it. As has been seen, the judge's conclusion that Robinson was not shown to have breached its duty of care to Mr McDermott depended in part on his Honour's finding that it was quite unlikely that, if a torque stripe were applied, it was applied to a dirty or greasy surface in a manner which permitted the horizontal section of the stripe to rotate with the bolt and thereby convey the impression that Bolt 4 was not rotating. But it should be understood that even if that were accepted as a realistic possibility, Mr McDermott would still have failed to establish causation. The majority of the Court of Appeal concluded that, if the application of a torque stripe to a dirty or greasy surface were a realistic possibility, there would have been four possibilities, namely: that a torque stripe was not applied when the bolt was incorrectly assembled; that a torque stripe was correctly applied and misaligned so as to provide an adequate indication of bolt rotation; that a torque stripe was incorrectly applied, so as not to adhere to both the bolt as well as the fixed components, so that the torque stripe could move with the rotating bolt and not crack; and that a torque stripe was correctly applied but due to ageing, fading or chipping had to some degree deteriorated. Bell Nettle Gordon The majority did not conclude, however, and it cannot be inferred from the evidence, that possibility (3) was any more likely to have occurred than any of the other possibilities. At best from Mr McDermott's point of view, possibility (3) might be viewed as no less likely to have occurred than any of the others; and, for the reasons given by the judge, and reiterated by Holmes JA in the Court of Appeal, the Manual was adequate to deal with each of the other possibilities. On the assumption that it was a realistic possibility that a torque stripe was incomplete or applied to a dirty or greasy surface in a manner that permitted the horizontal section of the stripe to rotate with the bolt and thereby create a deceptive appearance of bolt security, it might have been concluded that Robinson owed a duty of care to take reasonable care to avoid that risk eventuating. It might also have been considered that Robinson breached its duty of care by failing to include a direction in the Manual that flex plate bolts be checked with a torque wrench at each 100 hourly inspection. But, since the Manual was adequate to cover possibilities (1), (2) and (4), and it was not established that possibility (3) was any more likely to have occurred than any of the other possibilities, it could not be concluded that the breach of duty in failing to provide for possibility (3) was causative of the crash28. Counsel for Mr McDermott argued to the contrary that, if there had been a requirement in the Manual to verify the torque of the flex plate bolts with a torque wrench during 100 hourly inspections, it was probable that that requirement would have been complied with. Thus, regardless of which of possibilities (1) to (4) in fact occurred, it was apparent that it was Robinson's breach of duty in failing to require that the bolts be re-torqued which caused the crash. That argument should be rejected. Essentially, it amounts to saying that, if a manufacturer recommends a simple procedure adequate for detection of a fault that in fact occurs, but does not recommend a more sophisticated procedure necessary to detect not only the fault that in fact occurs but also another fault that was a foreseeable possibility but that did not in fact occur, and, as a result of the user failing to adhere to the recommended procedure, the fault that in fact occurs is not detected, the manufacturer should nonetheless be held liable to the user for the consequences of the user's failure to discover the fault that in fact occurs. The logic of that is hardly self-evident. 28 Tabet (2010) 240 CLR 537 at 589 [151] per Kiefel J (Hayne and Bell JJ agreeing at Bell Nettle Gordon Conceivably, if a manufacturer recommended the more sophisticated procedure, the user might be more likely to follow the sophisticated procedure than the recommended procedure, possibly because the recommendation of the more sophisticated procedure may heighten the user's appreciation of the potential risks of failing to do what was recommended. On that basis, it might be conjectured that, because of the manufacturer's failure to recommend the more sophisticated procedure, the user would be deprived of a chance of avoiding the damage that the recommendation of the more sophisticated procedure may have avoided. But, in this case, there are at least two reasons why an argument of that kind is bound to fail. First, at the level of principle, this Court has set its face against recovery of loss of a chance in the law of negligence relating to personal injuries29. Although proof of causation may sometimes entail the robust, pragmatic drawing of inferences30, especially where there are a number of possible causes and there is difficulty in ascertaining which of them was the cause of damage suffered31, proof of causation still requires proof on the balance of probabilities that the alleged breach of duty was the cause of the damage suffered32. Secondly, at a factual level, such evidence as there was on the matter pointed against the likelihood that Mr Fisher and Mr Bray would have been any 29 Tabet (2010) 240 CLR 537 at 563 [61]-[62] per Gummow ACJ, 588-589 [150]- [151] per Kiefel J (Hayne and Bell JJ agreeing at 564 [65]); Badenach v Calvert [2016] HCA 18 at [38] per French CJ, Kiefel and Keane JJ. 30 Betts v Whittingslowe (1945) 71 CLR 637 at 649 per Dixon J; [1945] HCA 31; Wilsher v Essex Area Health Authority [1988] AC 1074 at 1090 per Lord Bridge of Harwich (Lord Fraser of Tullybelton, Lords Lowry, Griffiths and Ackner agreeing at 1092); Tabet (2010) 240 CLR 537 at 558 [42] per Gummow ACJ; cf Chappel v Hart (1998) 195 CLR 232 at 242 [23], 243-244 [26] per McHugh J; [1998] HCA 55. 31 See, eg, Birkholz v R J Gilbertson Pty Ltd (1985) 38 SASR 121 at 129-130 per King CJ, 138-139 per Matheson J, 144-145 per Bollen J. 32 Civil Liability Act, s 12; Tabet (2010) 240 CLR 537 at 578 [111] per Kiefel J (Hayne and Bell JJ agreeing at 564 [65]). Cf McGhee v National Coal Board [1973] 1 WLR 1 at 4-5 per Lord Reid, 5-7 per Lord Wilberforce; [1972] 3 All ER 1008 at 1010-1011, 1011-1013; Birkholz (1985) 38 SASR 121 at 130, 132 per King CJ, 146 per Bollen J. Bell Nettle Gordon more assiduous in adhering to a recommendation that they check the torque of the bolts with a torque wrench than they were in examining the torque stripes in accordance with the Manual. Although each of them gave evidence that he was familiar with the Manual, and that he followed it, both of them said that they did so without necessarily looking at the Manual and Mr Fisher said that he did not make use of the check list. Neither of them said that he would have been any more likely to adhere to a recommendation that he check the bolts with a torque wrench than he was likely to conduct a thorough examination of the torque stripes for indications of possible bolt rotation. Conclusion In the result, the appeal should be allowed with costs. The orders of the Court of Appeal should be set aside. In lieu, it should be ordered that the appeal to the Court of Appeal be dismissed with costs.
HIGH COURT OF AUSTRALIA Matter No S160/2019 AND THE QUEEN Matter No S163/2019 AND THE QUEEN APPELLANT RESPONDENT APPELLANT RESPONDENT Grech v The Queen [2020] HCA 1 Date of Hearing: 15 October 2019 Date of Judgment: 5 February 2020 S160/2019 & S163/2019 ORDER Matter No S160/2019 Appeal allowed in part. Set aside order 1 of the orders made by the Court of Criminal Appeal of the Supreme Court of New South Wales on 30 November 2017 and, in its place, order that the appeal from the ruling of Judge Buscombe made on 28 June 2017 with respect to the admissibility of the surveillance evidence be dismissed. Matter No S163/2019 Appeal allowed in part. Set aside order 1 of the orders made by the Court of Criminal Appeal of the Supreme Court of New South Wales on 30 November 2017 and, in its place, order that the appeal from the ruling of Judge Buscombe made on 28 June 2017 with respect to the admissibility of the surveillance evidence be dismissed. On appeal from the Supreme Court of New South Wales Representation G O'L Reynolds SC with D P Hume and R W Haddrick for the appellant in S160/2019 (instructed by Michael Bowe) T A Game SC with K J Edwards and K I H Lindeman for the appellant in S163/2019 (instructed by Legal Aid NSW) H Baker SC with H R Roberts and B K Baker for the respondent in both matters (instructed by Director of Public Prosecutions (NSW)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Grech v The Queen Evidence – Admissibility – Evidence obtained improperly or in contravention of Australian law – Evidence Act 1995 (NSW), s 138 – Where appellants jointly charged on indictment with acts of serious animal cruelty – Where prosecution proposes to tender video-recordings obtained in contravention of Australian law – Where prosecution proposes to tender search warrant evidence and alleged admissions obtained in consequence of contravention of Australian law – Whether difficulty of lawfully obtaining evidence weighs in favour of admission – Whether weighing of competing public interests under s 138 different for evidence obtained in contravention of law as compared to evidence obtained in consequence of contravention of law – Whether each item of evidence admissible. Words and phrases – "balancing test", "Bunning v Cross discretion", "causal link", "competing public interests", "deliberate contravention of the law", "desirability of admitting evidence", "difficulty of lawfully obtaining evidence", "ease of compliance", "evidence contravention of an Australian law", "false statement", "illegality", "improperly or illegally obtained", "impropriety", "in consequence of", "misconduct", "probative value", "public interest", "undesirability of admitting evidence", "vigilantism", "way in which the evidence was obtained". that was obtained improperly or Criminal Appeal Act 1912 (NSW), s 5F(3A). Evidence Act 1995 (NSW), s 138. KIEFEL CJ, BELL, KEANE, NETTLE AND EDELMAN JJ. The appellants are jointly charged on indictment with acts of serious animal cruelty1. The charges relate to the alleged use of rabbits as "live bait" in training racing greyhounds at Mr Kadir's Londonderry property ("the Londonderry property")2. At the trial, the prosecution proposes to tender seven video-recordings depicting activities at the Londonderry property ("the surveillance evidence"). The recordings were made by a documentary photographer, Sarah Lynch, who was acting on behalf of, and paid by, Animals Australia, a company limited by guarantee which includes the investigation of cruelty to animals among its objects. The making of the recordings contravened s 8(1) of the Surveillance Devices Act 2007 (NSW) ("the SDA"). Animals Australia supplied the Royal Society for the Prevention of Cruelty to Animals ("the RSPCA") with copies of the recordings. Armed with this material, officers of the RSPCA obtained a search warrant for the Londonderry property. Material supportive of the prosecution case was obtained as the result of the execution of the search warrant and the exercise of the powers conferred on RSPCA inspectors under s 24G of the Prevention of Cruelty to Animals Act 1979 (NSW) ("the PCAA") ("the search warrant evidence"). Acting at the request of Animals Australia, Ms Lynch attended the Londonderry property on two occasions where she engaged in conversations with Mr Kadir in which he is alleged to have made certain admissions ("the admissions"). On the first day of the trial in the District Court of New South Wales (Judge Buscombe), the appellants applied to have the surveillance evidence, the search warrant evidence and, in Mr Kadir's case, the admissions excluded pursuant to s 138 of the Evidence Act 1995 (NSW) ("the Act"). Section 138(1) relevantly provides contravention of an Australian law3, or in consequence of such an impropriety or contravention, is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained. Section 138(3) states that was obtained improperly or that evidence 1 Crimes Act 1900 (NSW), s 530(1). 2 Mr Kadir is also charged with one count involving an act of serious cruelty to a possum, which is alleged to have been used as live bait. 3 Evidence Act 1995 (NSW), Dictionary: "Australian law means a law of the Commonwealth, a State or a Territory." Bell Nettle Edelman eight factors which the court must take into account in determining whether the tendering party has established that the public interest in the admission of the evidence outweighs the public interest in not admitting the evidence. One factor, s 138(3)(h), requires the court to take into account the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law. Following a voir dire hearing, the trial judge rejected each of the three categories of evidence. His Honour found that the surveillance evidence had been obtained improperly or in contravention of an Australian law4, and the search warrant evidence and the admissions had been obtained in consequence of that contravention5. The focus at the hearing was on the application of s 138(3)(h). The parties appear to have approached the determination upon the view that proof of the improbability that the police or the RSPCA would have been able to lawfully obtain evidence of acts of animal cruelty was a factor which weighed in favour of admitting the evidence. The trial judge found that there would have been some difficulty in obtaining the evidence without contravening the law, but the degree of difficulty was not easy to gauge because no steps had been taken in an endeavour to obtain evidence lawfully. His Honour ruled in relation to each of the three categories that the desirability of admitting the evidence was outweighed by the undesirability of admitting evidence obtained in the way the evidence had been obtained6. The effect of the ruling was to eliminate the prosecution case on most of the joint counts in the indictment, and to substantially weaken the case on a thirteenth count, which charged Mr Kadir alone with an act of serious animal cruelty. Section 5F(3A) of the Criminal Appeal Act 1912 (NSW) ("the CAA") confers a right of appeal on the Director of Public Prosecutions against an evidentiary ruling that substantially weakens the prosecution case. The respondent appealed to the Court of Criminal Appeal of the Supreme Court of New South Wales (Ward JA, Price and Beech-Jones JJ) under s 5F(3A) of the CAA contending, among other grounds, that the trial judge failed to properly 4 Evidence Act 1995 (NSW), s 138(1)(a). 5 Evidence Act 1995 (NSW), s 138(1)(b). 6 Evidence Act 1995 (NSW), s 138(1). Bell Nettle Edelman assess the difficulty of obtaining the evidence without contravening an Australian law. The Court of Criminal Appeal upheld this ground in part, finding that the difficulty of lawfully obtaining evidence of acts of animal cruelty at the Londonderry property "tip[ped] the balance" in favour of admitting the first recording7. Their Honours were critical of the trial judge's failure to consider the admissibility of the first recording separately from the subsequent recordings8. Their Honours reasoned that, once the first recording was obtained, Animals Australia might have approached the authorities with a view to further evidence being obtained by lawful means9. Their Honours agreed with the trial judge's conclusion that s 138(1) required exclusion of the balance of the recordings10. The Court of Criminal Appeal also held that the trial judge erred in his analysis of the admissibility of the search warrant evidence and the admissions: his Honour directly applied the findings respecting the surveillance evidence in balancing the competing public interests under s 138(1)11. The effect, their Honours said, was that the trial judge failed to take account of material differences between the surveillance evidence, the search warrant evidence and the admissions in the "way" each was obtained12. The Court of Criminal Appeal re-determined the admissibility of the first recording, the search warrant evidence and, in Mr Kadir's case, the admissions. Their Honours held that, in each instance, the desirability of admitting the evidence outweighed the undesirability of admitting evidence obtained in the way the evidence was obtained13. On 17 May 2019, Bell and Keane JJ gave the appellants special leave to appeal. The appeals are each brought on three grounds, which assert that the Court of Criminal Appeal erred by: (i) finding that the trial judge did not assess 7 R v Grech; R v Kadir [2017] NSWCCA 288 at [111]. 8 R v Grech; R v Kadir [2017] NSWCCA 288 at [103]-[105]. 9 R v Grech; R v Kadir [2017] NSWCCA 288 at [102]-[103]. 10 R v Grech; R v Kadir [2017] NSWCCA 288 at [112]. 11 R v Grech; R v Kadir [2017] NSWCCA 288 at [121], [138]. 12 R v Grech; R v Kadir [2017] NSWCCA 288 at [128], [141]. 13 R v Grech; R v Kadir [2017] NSWCCA 288 at [111], [130], [142]. Bell Nettle Edelman the first recording individually; (ii) finding that his Honour erred in directly applying the s 138(3) factors found in relation to the surveillance evidence to the search warrant evidence and the admissions; and (iii) failing to correctly apply the onus of proof in re-determining the admissibility of the evidence and taking into account considerations contrary to the evidence and, in Mr Kadir's case, failing to take into account a material consideration. By Notices of Contention, the respondent argues in each appeal that the Court of Criminal Appeal erred in holding that it was required to demonstrate House v The King14 error. The contention overstates the Court of Criminal Appeal's position. The respondents to the appeal (the appellants in this Court) submitted in the Court of Criminal Appeal that the prosecution was required to demonstrate House v The King error and the respondent accepted that was so. The Court of Criminal Appeal noted Bathurst CJ's observation in Gedeon v The Queen that the nature of a review of a decision to admit or reject evidence under s 138 cannot be said to be finally settled15. Their Honours proceeded upon the assumption that the determination was a discretionary ruling of the kind to which House v The King applies in circumstances in which the appeal had been argued on this footing and in which it was satisfied that error of that description was established16. For the reasons to be given, the basis upon which the parties and the Courts below approached s 138(3)(h) was misconceived: demonstration of the difficulty of obtaining evidence of the commission of acts of animal cruelty lawfully at the Londonderry property did not weigh in favour of admitting evidence obtained in deliberate defiance of the law. The trial judge's conclusion that all of the surveillance evidence should be excluded was correct. The Court of Criminal Appeal was right to find that the trial judge's assessment of the admissibility of the search warrant evidence and the admissions was flawed. The Court of Criminal Appeal's conclusion that each of these items of evidence is admissible is correct. In the circumstances, it is unnecessary to determine (1936) 55 CLR 499 at 504-505. 15 R v Grech; R v Kadir [2017] NSWCCA 288 at [69], citing Gedeon v The Queen (2013) 237 A Crim R 326 at 361-362 [174]-[178] per Bathurst CJ, Beazley P, Hoeben CJ at CL, Blanch and Price JJ agreeing. 16 R v Grech; R v Kadir [2017] NSWCCA 288 at [69]. Bell Nettle Edelman whether, as the respondent contends, the balancing test under s 138(1) admits of "a unique outcome" such that it is not required to demonstrate House v The King error in an appeal under s 5F(3A) of the CAA17. Section 138 Section 138 is in Pt 3.11 of the Act, which is headed "Discretionary and mandatory exclusions". It provides: "(1) Evidence that was obtained: improperly or in contravention of an Australian law, or in consequence of an impropriety or of a contravention of an Australian law, is not to be admitted unless the desirability of admitting the evidence outweighs the undesirability of admitting evidence that has been obtained in the way in which the evidence was obtained. (2) Without limiting subsection (1), evidence of an admission that was made during or in consequence of questioning, and evidence obtained in consequence of the admission, is taken to have been obtained improperly if the person conducting the questioning: did, or omitted to do, an act in the course of the questioning even though he or she knew or ought reasonably to have 17 See Norbis v Norbis (1986) 161 CLR 513 at 518-519 per Mason and Deane JJ; Em v The Queen (2007) 232 CLR 67 at 101 [95] per Gummow and Hayne JJ; Dwyer v Calco Timbers Pty Ltd (2008) 234 CLR 124 at 138-139 [40] per Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ; Fleming v The Queen (2009) 197 A Crim R 282 at 289 [22] per McClellan CJ at CL, Grove and R A Hulme JJ agreeing; Director of Public Prosecutions v MD (2010) 29 VR 434 at 440-441 [27]-[30] per Maxwell P, Nettle and Harper JJA; Director of Public Prosecutions v Marijancevic (2011) 33 VR 440 at 444 [13]-[14] per Warren CJ, Buchanan and Redlich JJA; Gedeon v The Queen (2013) 237 A Crim R 326 at 361-362 [174]- [178] per Bathurst CJ, Beazley P, Hoeben CJ at CL, Blanch and Price JJ agreeing; R v Rapolti (2016) 317 FLR 79 at 120 [201] per N Adams J, Ward JA and Bell Nettle Edelman known that the act or omission was likely to impair substantially the ability of the person being questioned to respond rationally to the questioning, or (b) made a false statement in the course of the questioning even though he or she knew or ought reasonably to have known that the statement was false and that making the false statement was likely to cause the person who was being questioned to make an admission. (3) Without limiting the matters that the court may take into account under subsection (1), it is to take into account: the probative value of the evidence, and the importance of the evidence in the proceeding, and the nature of the relevant offence, cause of action or defence and the nature of the subject-matter of the proceeding, and the gravity of the impropriety or contravention, and (e) whether the impropriety or contravention was deliberate or reckless, and whether the impropriety or contravention was contrary to or inconsistent with a right of a person recognised by the International Covenant on Civil and Political Rights, and (g) whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention, and the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law. Note. The International Covenant on Civil and Political Rights is set out in Schedule 2 to the Human Rights and Equal Opportunity Commission Act 1986 of the Commonwealth." Bell Nettle Edelman Section 138 is modelled on cl 119 of the draft Bill proposed by the Australian Law Reform Commission ("the ALRC") in its final report on the law of evidence ("the Final Report")18. With one alteration, cl 119 mirrors cl 116 of the draft Bill appended to the ALRC's interim report ("the Interim Report")19. The ALRC proposed that the admissibility of improperly or illegally obtained evidence should be governed by a modified form of the common law exclusionary public policy discretion articulated in Bunning v Cross20. The two modifications that the ALRC proposed were to place the onus on the tendering party to justify admission and to clearly articulate the factors informing the competing public interests21. In the event, s 138 enacts a "discretion"22 which is wider than the modified Bunning v Cross discretion discussed by the ALRC in the Interim Report23. Bunning v Cross is an exclusionary discretion that applies in criminal proceedings and requires the court to balance the desirable goal of convicting wrongdoers against the undesirable effect of giving curial approval, or even encouragement, to the unlawful conduct of those whose task it is to enforce the law24. Section 138 provides for the conditional exclusion of evidence obtained by, or in consequence of, impropriety or illegality in any proceeding to which the Act applies. Notably, the exclusion is not confined to evidence that is improperly or illegally obtained by police or other law enforcement agencies. The 18 ALRC, Evidence, Report No 38 (1987) (Appendix A) at 190. 19 ALRC, Evidence, Report No 26 (Interim) (1985), vol 2 (Appendix A) at 57-58. 20 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 534-537 [964]; Bunning v Cross (1978) 141 CLR 54. 21 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 536-537 [964]. 22 See and compare Em v The Queen (2007) 232 CLR 67 at 101 [95] per Gummow and Hayne JJ; Parker v Comptroller-General of Customs (2009) 83 ALJR 494 at 522 [162] per Heydon J; 252 ALR 619 at 656. 23 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 260-261 [468]-[473], (1978) 141 CLR 54 at 74 per Stephen and Aickin JJ. Bell Nettle Edelman "discretion" conferred is to admit the evidence, should the court be persuaded that the balance of the competing public interests requires that outcome. As s 138 is not confined to criminal proceedings or to evidence obtained by, or in consequence of, the misconduct of those engaged in law enforcement, the public interests that the court is required to weigh are broader than those weighed in the exercise of the Bunning v Cross discretion. The desirability of admitting evidence recognises the public interest in all relevant evidence being before the fact-finding tribunal. The undesirability of admitting evidence recognises the public interest in not giving curial approval, or encouragement, to illegally or improperly obtaining evidence generally. In a criminal proceeding in which the prosecution seeks to adduce evidence that has been improperly or illegally obtained by the police (or another law enforcement agency), the more focussed public interests identified in Bunning v Cross remain apt. Recognition that s 138 is not confined to evidence obtained by the improper or illegal conduct of the police raises a number of issues. Whether evidence has been obtained improperly in such a case is determined by reference to "minimum standards of acceptable police conduct"25. The standard by which the court assesses the impropriety of the conduct of private individuals is less clear. That question is not raised in these appeals; it is common ground that the surveillance evidence was obtained in contravention of Australian law. The Act does not provide guidance as to the relative weighting of each s 138(3) factor or whether it is a factor that favours admission or exclusion. The Interim Report makes clear26 that each factor is drawn from the joint reasons of Stephen and Aickin JJ in Bunning v Cross27. Despite the wider reach of the exclusion for which s 138 provides, their Honours' analysis assists in understanding the significance of, and interplay between, each of them. The significance of some factors will vary depending upon whether the court is determining admissibility in criminal or civil proceedings or, as here, where the impropriety or illegality does not involve law enforcement officers. 25 Ridgeway v The Queen (1995) 184 CLR 19 at 37 per Mason CJ, Deane and 26 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 534-536 [964]. (1978) 141 CLR 54 at 74, 78-80. Bell Nettle Edelman Factor (g) requires the court to take into account whether any other proceeding (whether or not in a court) has been or is likely to be taken in relation to the impropriety or contravention. The ALRC identified the deterrence of police misconduct as a consideration informing the public interest in not admitting evidence that has been improperly or illegally obtained28. It proposed that the availability of alternatives to the exclusion of evidence, such as civil actions, criminal prosecutions and internal and external disciplinary procedures, should be an important factor in the exercise of the discretion. Where an officer is likely to be dealt with in another forum for his or her misconduct, the need to exclude evidence as a deterrent is reduced29. The significance of the availability of other proceedings in the case of misconduct by a private individual to the wider public interest under s 138(1) is less apparent. Here, the trial judge appears, correctly, to have treated the fact that no proceedings are likely to be taken against any person in relation to the contravention of the SDA as a neutral factor. As earlier noted, a focus of this case is s 138(3)(h), being the difficulty (if any) of obtaining the evidence without impropriety or contravention of an Australian law. In the equivalent provision of the draft Bill in the Interim Report, factor (h) was expressed as "whether the evidence could have been obtained in some other way"30. In the draft Bill in the Final Report, factor (h) is in the terms enacted in the Act31. There is little discussion of the treatment of improperly or illegally obtained evidence in the Final Report, and no explanation of the reason for the change. The provenance of factor (h) can be traced to the analysis in Bunning v Cross. It will be recalled that the illegal conduct in that case was the patrolman's failure to require the driver of a motor vehicle to undergo an "alcotest" before requiring that he undergo a "breathalyser" test32. In their joint reasons, Stephen 28 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 38 [80], 260 [468]- 29 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 260 [468], 536 [964(g)]. 30 ALRC, Evidence, Report No 26 (Interim) (1985), vol 2 (Appendix A) at 57-58, 31 ALRC, Evidence, Report No 38 (1987) (Appendix A) at 190, cl 119. (1978) 141 CLR 54 at 66. Bell Nettle Edelman and Aickin JJ identified as a relevant consideration the "ease with which the law might have been complied with in procuring the evidence in question"33. Their Honours explained that while a deliberate "cutting of corners" would tend against admission of the illegally obtained evidence, in the circumstances of this case, the fact that the driver had been unlawfully required to undergo a test which he could easily have lawfully been required to undergo was a factor of little significance. Their Honours said that there appeared to be no doubt that the results of an alcotest would have been positive and the course adopted by the officers may have been the result of their understandably mistaken assessment of the driver's condition (the officers were unaware that the driver had a chronic condition of the knee joints that may have affected his gait)34. In the circumstances, ease of compliance with the law was a "wholly equivocal factor"35. The ALRC, adopting the language of Bunning v Cross, proposed "ease of compliance" as a relevant factor to the assessment of the gravity of the misconduct, stating36: "Ease of Compliance. Evidence that it would have been easy to comply with legal requirements or other standards of behaviour may, depending on the circumstances, either support or detract from an argument for exclusion. A deliberate 'cutting of corners' would support exclusion, particularly from a deterrence perspective. But failure to comply with a rule which could have been simply complied with may suggest that the rule was trivial and that therefore the misconduct was not serious." The significance of factor (h) to the balancing of the competing public interests under s 138(1) will vary depending upon the circumstances. In a case in which action is taken in circumstances of urgency in order to preserve evidence from loss or destruction, it is possible that factor (h) would weigh in favour of admission, notwithstanding that the action involved deliberate impropriety or 33 Bunning v Cross (1978) 141 CLR 54 at 79. 34 Bunning v Cross (1978) 141 CLR 54 at 78-80. 35 Bunning v Cross (1978) 141 CLR 54 at 80. 36 ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 535 [964(e)(iv)] (footnote omitted). Bell Nettle Edelman illegality37. Putting such a case to one side, where the impropriety or illegality involved in obtaining the evidence is deliberate or reckless (factor (e)), proof that it would have been difficult to obtain the evidence lawfully will ordinarily weigh against admission38. By contrast, where the impropriety or illegality was neither deliberate nor reckless, the difficulty of obtaining the evidence lawfully is likely to be a neutral consideration. The assumption on which the parties and the Courts below proceeded, that proof that it would have been difficult to lawfully obtain the surveillance evidence was a factor which weighed in favour of admitting evidence obtained in deliberate defiance of the law, inverts the policy of the exclusion for which s 138 provides. The evidence at the voir dire hearing The surveillance evidence In November 2014, Animals Australia received an anonymous complaint that greyhounds were being trained with the use of live rabbits and other prey at the Londonderry property. Its Chief Investigator, Lyn White, engaged Ms Lynch to obtain the surveillance evidence. Ms Lynch entered the Londonderry property on 5 December 2014. She placed a video camera just outside the fence line of "the bullring", the running area where the greyhounds were trained. The video camera was an "optical surveillance device" under the SDA39. Section 8(1) of the SDA makes it an offence for a person to knowingly install, use or maintain an optical surveillance device on premises to record visually an activity if the installation, use or maintenance of the device involves entry onto the premises without the consent of the owner or occupier. Ms Lynch trespassed on the Londonderry property and a neighbouring property in order to place the video camera. 37 Bunning v Cross (1978) 141 CLR 54 at 79 per Stephen and Aickin JJ; Director of Public Prosecutions (NSW) v Tamcelik (2012) 224 A Crim R 350 at 370 [122] per 38 R v Borg (2012) 220 A Crim R 522 at 547-548 [103]-[108] per Lasry J; R v Gallagher [2015] NSWCCA 228 at [47]-[48] per Beech-Jones J, Gleeson JA and 39 Surveillance Devices Act 2007 (NSW), s 4(1). Bell Nettle Edelman Ms Lynch returned to the Londonderry property the following night and downloaded the recording onto a USB device. She gave the USB device to Animals Australia on 12 December 2014. The images depicted on the USB device are supportive of the prosecution case. Ms White did not approach the police or the RSPCA upon receiving the recording. She instructed Ms Lynch to obtain further recordings. Ms Lynch entered the Londonderry property on 11 occasions between December 2014 and 13 January 2015, and obtained seven recordings, all of which are supportive of the prosecution case. Ms White and Ms Lynch were each aware that recording the activity at the Londonderry property contravened the SDA. Ms White made no attempt to refer the anonymous complaint to the police or the RSPCA before engaging Ms Lynch to obtain the surveillance evidence. Ms White had served as a police officer in South Australia. Her police work had not involved applying for surveillance or listening device warrants. Nonetheless, it was Ms White's assessment that a judicial officer was highly unlikely to issue a surveillance device warrant on the strength of an anonymous complaint. In her experience, the police referred complaints concerning animal welfare to the RSPCA. Ms White understood that the RSPCA had a memorandum of understanding with Greyhound Racing NSW ("GRNSW") and that, under this arrangement, any information given to the RSPCA would be shared with GRNSW. Ms White believed that persons engaged in live baiting would be "tipped off" if GRNSW was made aware of the complaint. It was Ms White's understanding that live baiting had been rumoured to occur systemically in the greyhound racing industry for decades, but that there had not been any successful prosecution for such conduct. The search warrant evidence The RSPCA, a charitable organisation, has standing institute proceedings for offences under the PCAA and the regulations40. Under the PCAA, RSPCA officers and inspectors are given certain law enforcement powers41. These include the power to compel the production of information to 40 Prevention of Cruelty to Animals Act 1979 (NSW), s 34AA. 41 Prevention of Cruelty to Animals Act 1979 (NSW), s 34B(1). Bell Nettle Edelman ascertain the identity of persons who have committed, or who are reasonably the PCAA42. Inspectors are suspected of committing, offences against empowered to enter land for the purposes of exercising functions under the PCAA43 and to apply for the issue of a search warrant44. An inspector who is lawfully on land investigating a suspected offence is empowered to seize anything that will afford evidence of the commission of the offence45. David O'Shannessy, the Chief Inspector of the RSPCA New South Wales, explained that the RSPCA receives referrals from the police relating to allegations of animal cruelty. He said that the RSPCA will act on an anonymous complaint where the complaint relates to organised animal cruelty, as occurred here. Mr O'Shannessy acknowledged that the investigation of a complaint such as this anonymous complaint would include liaison with GRNSW. The RSPCA would not request the police to apply for an optical surveillance warrant based on no more than an anonymous complaint, but it might in such a case exercise its statutory power of entry and inspection. On 2 February 2015, Ms White met with Mr O'Shannessy. At the meeting she provided him with a letter alleging that breaches of the PCAA and the National Parks and Wildlife Act 1974 (NSW), involving live baiting, were taking place at the Londonderry property. The letter referred to statements made in connection with proceedings before the New South Wales Legislative Council's Select Committee on Greyhound Racing in New South Wales, to the effect that the RSPCA was unable to pursue an investigation into live baiting because of the "lack of first hand evidence". The letter continued: "Based on the above considerations, Animals Australia engaged an investigator to investigate the allegations relating to [Mr Kadir's property and another unrelated property] on the basis that any evidence gathered would be provided to the RSPCA NSW for further investigation and actioning. Animals Australia proceeded with the investigation on the type of determination the RSPCA could not undertake that the 42 Prevention of Cruelty to Animals Act 1979 (NSW), s 24A(1). 43 Prevention of Cruelty to Animals Act 1979 (NSW), s 24E(1). 44 Prevention of Cruelty to Animals Act 1979 (NSW), s 24F(2). 45 Prevention of Cruelty to Animals Act 1979 (NSW), s 24K(1). Bell Nettle Edelman surveillance necessary to document the alleged practices occurring on the properties, and we provide herewith the primary evidence gathered." At the meeting, Ms White supplied the RSPCA with an external hard drive containing unedited copies of the recordings made by Ms Lynch. She informed Mr O'Shannessy that "stewards and officials" involved in the regulation of the greyhound industry had been identified in the footage. Following the meeting, Mr O'Shannessy determined that the RSPCA would commence an investigation. In light of the suggestion that the integrity of the investigation might be compromised, the RSPCA did not inform GRNSW of the investigation. On 10 February 2015, an RSPCA inspector, Flett Turner, obtained a search warrant which authorised entry onto the Londonderry property and the seizure of items evidencing the commission of an offence under the PCAA. The search warrant was executed on 11 February 2015. A dead rabbit and the remains of two other dead rabbits were found in the bullring. Body parts of a dead rabbit were found on a mechanical lure. Two live rabbits in a cage were in a state of severe pain and distress and were put down. A diary recording the cost of boarding dogs and the cost of rabbits was seized. The admissions After viewing the recordings, Ms White instructed Ms Lynch to try to obtain information about who was using Mr Kadir's services and "what dogs were being broken in". Ms Lynch arranged to speak with Mr Kadir. She called to the Londonderry property on 13 January 2015 where she spoke with Mr Kadir. She posed as a greyhound owner who was seeking to have two dogs broken in and she asked about Mr Kadir's training methods. Mr Kadir is alleged to have responded, "I get 30 live rabbits a week from a guy and I put them in the bullring with the dogs". Ms Lynch returned to the Londonderry property on 18 January 2015 where she again spoke with Mr Kadir. On this occasion it is alleged that Mr Kadir stated, "[y]ou know, this is a coursing sport". "Coursing" is the pursuit of game or other animals by dogs. The trial judge's reasons The respondent conceded that the surveillance evidence was illegally obtained and that the search warrant evidence was obtained "as a consequence" of that illegally obtained evidence. Ms White's opinion of the difficulty of obtaining evidence of live baiting lawfully was relied on by the respondent as a factor that weighed in favour of admitting the surveillance evidence. The respondent conceded that after Animals Australia obtained the first recording, its Bell Nettle Edelman case for admission was less strong "in terms of arguing that what was done was done because of the difficulties in obtaining the evidence in some other way". The trial judge made findings that the probative value of the surveillance evidence was "very high", that it was "very important" in the proceeding, and that the offences were "serious". These factors favoured the admission of the recordings. In assessing the gravity of the contravention, his Honour took into account that the legislature has chosen to protect privacy by tightly controlling the lawful use of optical surveillance devices. Here, there had been repeated, deliberate breaches of the SDA without any attempt having been made to approach the authorities to conduct a lawful investigation. His Honour assessed the gravity of the contravention as "very high and serious". While the property did encompass Mr Kadir's home, the optical surveillance device did not record his home. While Mr Kadir's privacy had been interfered with, being a breach of Art 17 of the International Covenant on Civil and Political Rights ("the ICCPR"), his Honour did not consider this factor was one to which particular weight should be given. His Honour noted that no likely action was to be taken against either Ms White or Ms Lynch for the contravention and, as earlier noted, appears to have treated this factor as neutral. The trial judge approached factor (h), consistently with the way the matter was argued, upon a view that demonstration of the difficulty of obtaining evidence of live baiting lawfully favoured admission. Nonetheless, his Honour assessed Ms White's opinion of the difficulties in this respect as involving a significant degree of speculation. His Honour considered that, given Ms White's limited experience in relation to obtaining warrants of any type, she was not in a position to conclude that the only way to obtain the evidence was by breach of the SDA. His Honour found that there was some difficulty in obtaining the evidence lawfully but that the degree of difficulty was not easily determined. His Honour said that the court should be reluctant to give curial approval to the deliberately illegal conduct of bodies that are not subject to any form of legislative or executive oversight. His Honour held that the respondent had not discharged the onus of showing that the desirability of admitting the surveillance evidence outweighed the undesirability of admitting evidence obtained in the way in which the surveillance evidence had been obtained. His Honour was satisfied that "but for" the contravention of the SDA, no application for a search warrant would have been made, nor would the RSPCA have exercised its investigative powers under the PCAA. The balance of his Honour's assessment of the admissibility of the search warrant evidence is as follows: Bell Nettle Edelman "The findings I made in relation to the factors concerning the exercise of the discretion in s 138 of the Evidence Act in relation to the recordings are directly applicable to my consideration of the evidence seized as a consequence of the execution of the search warrant and the exercise of the power under s 24G. I therefore do not, for these reasons, propose to admit the evidence obtained as a consequence of the execution of the search warrant or the exercise of the power under s 24G." The respondent did not concede that the admissions were obtained in consequence of the contravention of the SDA. His Honour held that they were: Ms White asked Ms Lynch to return to the Londonderry property as a consequence of having watched the surveillance evidence because she wanted to obtain further information with which to brief the RSPCA. His Honour found that there was a sufficient causal connection under s 138(1)(b), as "but for" the surveillance evidence, Ms Lynch would not have been asked to return to the Londonderry property. His Honour went on to state that, for the reasons given in relation to the surveillance evidence and the search warrant evidence, the balancing test under s 138(1) resulted in the admissions not being admitted. The Court of Criminal Appeal The error which the Court of Criminal Appeal identified in the trial judge's determination of the admissibility of the surveillance evidence was the failure to weigh the gravity of the contravention (factor (d)) and the difficulty of obtaining the evidence without contravention of Australian law (factor (h)) separately in relation to the first video-recording46. The Court of Criminal Appeal observed that it stands to reason that once the first video-recording was obtained any perceived difficulty associated with the investigation of the anonymous complaint must have been lessened47. Their Honours reasoned that the difficulty of lawfully obtaining evidence of live baiting "tip[ped] the balance" in favour of that although admitting vigilantism (taking the law into one's own hands), even for laudable reasons, cannot and should not be encouraged, nevertheless there were "real concerns as to the unlikelihood of an anonymous complaint being able to be properly and the first video-recording48. Their Honours said 46 R v Grech; R v Kadir [2017] NSWCCA 288 at [102]-[105]. 47 R v Grech; R v Kadir [2017] NSWCCA 288 at [103]. 48 R v Grech; R v Kadir [2017] NSWCCA 288 at [111]. Bell Nettle Edelman effectively investigated" and the suspected criminal activities were of a "high degree of seriousness"49. the lawfully (factor (h)), along with whether The gravity of the contravention (factor (d)) and the difficulty of obtaining evidence impropriety or contravention was deliberate or reckless (factor (e)), are overlapping factors. In the circumstances of this case, the trial judge did not err in failing to weigh the s 138(3) factors separately in relation to the first video-recording. His Honour was right to find that each video-recording was the product of a serious contravention of Australian law. The seriousness of the contravention was in each case the greater because the recording was made in deliberate contravention of the law with a view to assembling evidence which it was believed the proper authorities would be unable to lawfully obtain. To the extent that it was more difficult to lawfully obtain evidence of live baiting before the first video- recording was made, this was a factor which weighed against admitting it. There is no suggestion that the trial judge erred in his assessment of the other s 138(3) factors. His Honour's determination that none of the surveillance evidence is admissible is correct. The balance of these reasons is concerned with the appeal against the Court of Criminal Appeal's orders admitting the search warrant evidence and, in Mr Kadir's case, the admissions. The Court of Criminal Appeal found that the trial judge erred in relation to each of these categories of evidence by reasoning that findings made in relation to the surveillance evidence were "directly applicable" to admissibility of the search warrant evidence and the admissions50. Their Honours observed that s 138(1) requires the court to address the undesirability of admitting evidence obtained by, or in consequence of, impropriety or illegality "in the way in which the evidence was obtained"51. The undesirability of receiving the search warrant evidence and the admissions, in the way each was obtained, materially differed from the undesirability of receiving the surveillance evidence in the way it was obtained. In the case of the search warrant evidence, while there was a serious breach of the SDA by Animals Australia which led to obtaining the search warrant, the RSPCA acted lawfully in 49 R v Grech; R v Kadir [2017] NSWCCA 288 at [111]. 50 R v Grech; R v Kadir [2017] NSWCCA 288 at [121], [141]. 51 R v Grech; R v Kadir [2017] NSWCCA 288 at [125] (emphasis added). Bell Nettle Edelman the performance of its regulatory functions52. In the case of the admissions, the causal connection between obtaining them, and the contravention of the SDA, was "tenuous"53. Mr Kadir submits that the Court of Criminal Appeal misapprehended the trial judge's reasons, and that the trial judge did not say that the surveillance evidence and search warrant evidence were obtained in the same way. Rather, the findings made with respect to the s 138(3) factors in relation to the surveillance evidence were, in fact, directly applicable to the admissibility of the search warrant evidence and the admissions. Ms Grech submits that the Court of Criminal Appeal's error was to read the reference in s 138(1) to "the way in which the evidence was obtained" narrowly, with the result that the legislative policy of excluding evidence obtained in consequence of impropriety or illegality is undermined. The "way" evidence is obtained, in Ms Grech's submission, is to be understood as referring to the entire chain of causation and not merely the final link in the chain. As the Court of Criminal Appeal observed, s 138 does not enact the doctrine that prevailed in the United States, requiring the exclusion of the "fruit" of official illegality unless the impugned evidence was derived "by means sufficiently distinguishable to be purged of the primary taint"54. Section 138 provides for the exclusion of evidence obtained by, or in consequence of, impropriety or illegality, unless the product of balancing the competing public interests favours admitting the evidence. The trial judge's analysis of the admissibility of the search warrant evidence and the admissions did not go beyond satisfaction of the causal link between the evidence and the contravention of the SDA. The causal link engages s 138, but the weighing of the competing public interests under s 138(1) involved considerations which are not the same as those applying to the admissibility of the surveillance evidence. As the Court of Criminal Appeal also observed, where the misconduct involves the same investigative body, the considerations relevant to weighing the 52 R v Grech; R v Kadir [2017] NSWCCA 288 at [124]. 53 R v Grech; R v Kadir [2017] NSWCCA 288 at [141]. 54 R v Grech; R v Kadir [2017] NSWCCA 288 at [120], citing Wong Sun v United States (1963) 371 US 471 at 484, 488; and see ALRC, Evidence, Report No 26 (Interim) (1985), vol 1 at 532-533 [961]. Bell Nettle Edelman public interests will commonly be the same in respect of evidence obtained under s 138(1)(a) or (b). Here, the surveillance evidence was obtained in contravention of the law by a private body (or persons engaged by it), whereas the search warrant evidence was obtained by a regulator acting lawfully and without prior knowledge of the contravention, albeit that it was procured on the strength of the surveillance evidence. The causal link between the contravention and the admissions was tenuous, a consideration which the Court of Criminal Appeal was right to find was capable of affecting the weighing of the public interest in not giving curial approval or encouragement to the unlawful conduct55. Self-evidently, factor (a), the probative value of the evidence, and factor (b), the importance of the evidence in the proceeding, cannot be picked up from findings made with respect to the surveillance evidence and applied to the search warrant evidence or the admissions. None of the s 138(3) factors can be considered in isolation. Evidence may possess high probative value but not be important in the proceeding in a case in which other equally probative evidence is available to the prosecution. In this case, the importance of the search warrant evidence, and, in Mr Kadir's case, the admissions, is greater by reason of the exclusion of the surveillance evidence. Moreover, the weighting of the factors that are concerned with the impropriety or illegality to the balancing of the public interests may differ as between the surveillance evidence, the search warrant evidence and the admissions. The appellants challenge the Court of Criminal Appeal's re-determination of the admissibility of the search warrant evidence and Mr Kadir challenges the re-determination of the admissibility of the admissions. It is unnecessary to address these grounds of complaint. The Court of Criminal Appeal's re-determination of the admissibility of each of these categories of evidence was based upon the assumption that the difficulty of obtaining the evidence lawfully mitigated the gravity of the contravention and that the first video-recording is admissible. Neither assumption is correct. The respondent submits that in the event error is found in the Court of Criminal Appeal's re-determination of the admissibility of any of the evidence, this Court should determine the matter itself or remit the proceeding to the Court of Criminal Appeal. The appellants submit that, in this event, the matter should be remitted to the trial judge for reconsideration. Mr Kadir submits that the trial 55 R v Grech; R v Kadir [2017] NSWCCA 288 at [141]. Bell Nettle Edelman judge is best placed to determine the admissibility of evidence and to take into account any matters which have occurred (or will occur) subsequent to the voir dire. Mr Kadir submits that new material may arise requiring the trial judge to revisit the issues that are the subject of the appeals and that the trial judge will "almost certainly need to evaluate the nature and extent of the RSPCA's knowledge of and involvement in criminal activity (a matter so far not fully or adequately explored)". Under s 5F(5) of the CAA, the Court of Criminal Appeal may vacate the ruling appealed against and make some other ruling, and this Court, in the exercise of its appellate jurisdiction, may give such judgment as ought to have been given in the first instance56. Taking into account the history of the proceedings, the appropriate course is for this Court to determine the admissibility of the search warrant evidence and the admissions. While there is the possibility of events occurring which may require the trial judge to revisit any evidentiary ruling, the suggestion that the admissibility of the search warrant evidence should be determined on remitter to enable the trial judge to evaluate matters which were not fully or adequately explored at the voir dire hearing is distinctly unpersuasive. Mr Kadir's opportunity to adduce such evidence, and put such submissions, respecting the conduct of the RSPCA was at the voir dire hearing. The Court of Criminal Appeal rejected Mr Kadir's submission that the search warrant evidence was obtained by contravention of Australian law within s 138(1)(a) because, in receiving the surveillance evidence, officers of the RSPCA were themselves in breach of the SDA57. Section 12 makes it an offence to possess a record of the carrying on of an activity knowing that it has been obtained by the use of an optical surveillance device in contravention of the SDA. Mr Kadir submits that it is apparent from the surveillance evidence that it is (or is likely to have been) the product of a breach of the SDA. On the hearing in this Court, senior counsel for Mr Kadir maintained the submission that there is no warrant for finding that the RSPCA was not itself involved in the contravention of Australian Mr O'Shannessy, and, as the Court of Criminal Appeal rightly held, in these law. Such a proposition was not put 56 Judiciary Act 1903 (Cth), s 37. 57 R v Grech; R v Kadir [2017] NSWCCA 288 at [116]-[117]. Bell Nettle Edelman circumstances it was not open to the trial judge to find that any breach of the SDA was deliberate, reckless or possibly even negligent58. The onus is upon the respondent to establish that the desirability of admitting the search warrant evidence outweighs the undesirability of admitting evidence obtained in the way it was obtained. The capacity of the search warrant evidence to rationally affect the assessment of the probability that the appellants committed acts of serious animal cruelty is high. The fact that the prosecution case does not include the surveillance evidence increases the importance of the search warrant evidence in the proceeding. Its importance is high. The nature of the offence is, as the trial judge found, serious. The gravity of the contravention is, as his Honour found, "very high". The contravention was repeated and deliberate. It interfered with Mr Kadir's privacy, a breach of Art 17 of the ICCPR. In circumstances in which the recording was confined to activity in the bullring and did not extend to Mr Kadir's home, and in light of the nature of the activity conducted in the area that was the subject of the recording, his Honour was right to accord this factor no particular weight. The circumstance that neither Ms White nor Ms Lynch is likely to be subject to any proceeding arising out of the contravention is a neutral consideration. In circumstances in which the RSPCA was not complicit in the contravention, factor (h) is also neutral. The admissibility of the search warrant evidence arises in criminal proceedings in which the desirability of admitting the evidence reflects the public interest in the conviction of wrongdoers. The undesirability of admitting evidence obtained in consequence of the deliberate unlawful conduct of a private "activist" entity is the effect of curial approval, or even encouragement, of vigilantism. The RSPCA had no advance knowledge of Animals Australia's plan to illegally record activities at the Londonderry property. There is nothing to suggest a pattern of conduct by which Animals Australia or other activist groups illegally collect material upon which the RSPCA takes action. The desirability of admitting evidence that is important to the prosecution of these serious offences outweighs the undesirability of not admitting evidence obtained in the way the search warrant evidence was obtained. Before turning, in Mr Kadir's appeal, to the factors bearing on the admissibility of the admissions, it is necessary to deal with one matter which appears to have been raised for the first time in Mr Kadir's submissions in reply. 58 R v Grech; R v Kadir [2017] NSWCCA 288 at [117]. Bell Nettle Edelman Mr Kadir invokes s 138(2)(b) of the Act, which deems evidence to have been obtained "improperly" if an admission is made during questioning, if the person conducting the questioning knowingly makes a false statement, knowing that making the false statement was likely to cause the person to make an admission. The submission is that Ms Lynch's "questioning" was conducted upon a knowingly false basis that was likely to elicit an admission about the use of live baiting in training greyhounds at the Londonderry property, and that this is a consideration to which substantial weight should be given in determining whether the prosecution has discharged its onus under s 138. Section 138(2) deems admissions made during or in consequence of questioning of the kind in para (a) or (b) to have been obtained improperly, thereby engaging conditional exclusion under s 138(1). These proceedings have been conducted on the basis that the admissions engage conditional exclusion under s 138(1)(b) because they were obtained in consequence of the illegality in obtaining the surveillance evidence. No attention was directed to the applicability of s 138(2) to circumstances in which the "person conducting the questioning" is not a police officer or other official59. On the hearing, senior counsel for Mr Kadir disavowed any suggestion that the provision applies to admissions obtained in "sting operations", or "pretext" telephone calls. Senior counsel submitted that the obtaining of the admissions by subterfuge was to be taken into account "as part of the panoply of factors". It is not apparent that the fact that the admissions were obtained by subterfuge has any relevant bearing on the competing public interests with which s 138 is concerned. The trial judge separately considered, and rejected, that the circumstances in which the admissions were made were unfair within s 90 of the Act or gave rise to the danger of unfair prejudice within s 137 of the Act. Since the evidence of the admissions is capable of rational acceptance60, consideration of the probative value of the admissions is to be assessed upon the 59 ALRC, Evidence, Report No 38 (1987) at xxxix [66]. IMM v The Queen (2016) 257 CLR 300 at 312 [39], 317 [58] per French CJ, Kiefel, Bell and Keane JJ; R v Bauer (2018) 92 ALJR 846 at 865 [69] per Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ; 359 ALR 359 at Bell Nettle Edelman assumption that the evidence will be accepted61. Their probative value is high and they are important evidence in the case against Mr Kadir. The remaining factors under s 138(3) have the same weight in relation to the admissions as to the search warrant evidence. The undesirability of admitting the admissions does not raise the same concerns with respect to condoning vigilantism as does the search warrant evidence. As the Court of Criminal Appeal rightly observed, the obtaining and viewing of the surveillance evidence was a step in the investigation by Animals Australia that led to Ms Lynch speaking with Mr Kadir, but that was all62. And as their Honours also observed, Ms Lynch did not make use of any knowledge that she gained from the surveillance evidence in her conversation with Mr Kadir63. Their Honours' conclusion, that the bare connection between the contravention of Australian law and obtaining the admissions is unlikely to convey curial approval or encouragement of the contravention, is apt64. The undesirability of admitting evidence obtained in the way the admissions were is outweighed by the desirability of the evidence being admitted in support of the prosecution case. For these reasons, each appeal should be allowed in part. In each matter, order 1 of the Court of Criminal Appeal of the Supreme Court of New South Wales made on 30 November 2017 should be set aside and, in its place, the appeal from the ruling of Judge Buscombe made on 28 June 2017 with respect to the admissibility of the surveillance evidence should be dismissed. IMM v The Queen (2016) 257 CLR 300 at 315 [52] per French CJ, Kiefel, Bell and 62 R v Grech; R v Kadir [2017] NSWCCA 288 at [140]. 63 R v Grech; R v Kadir [2017] NSWCCA 288 at [139]. 64 R v Grech; R v Kadir [2017] NSWCCA 288 at [141].
HIGH COURT OF AUSTRALIA NEWCREST MINING LIMITED APPELLANT AND RESPONDENT Newcrest Mining Limited v Thornton [2012] HCA 60 13 December 2012 ORDER Appeal dismissed with costs. On appeal from the Supreme Court of Western Australia Representation B W Walker QC with P Kulevski for the appellant (instructed by DLA Piper Australia) B L Nugawela with B W Ashdown for the respondent (instructed by Chapmans) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Newcrest Mining Limited v Thornton Negligence – Damages – Statutory limit on recoverability of damages – Section 7(1)(b) of Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) provides that person bringing more than one action in respect of damage suffered as the result of a tort cannot recover more than "the amount of the damages awarded by the judgment first given" – Settlement of claim against concurrent tortfeasor given effect by consent judgment – Subsequent claim brought against different concurrent tortfeasor – Whether statutory limitation on recoverability of damages applied to subsequent claim. Words and phrases – "award", "consent judgment", "damages awarded by the judgment first given". Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA), s 7(1)(b). Introduction A person who has suffered damage as the result of a tort or torts and brings separate actions against tortfeasors liable in respect of the damage cannot recover more than "the amount of the damages awarded by the judgment first given". That is the substance of s 7(1)(b) of the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) ("the WA Act"). It is a limit upon the recoverability of damages1 that has been part of the law of Western Australia since 1947. Similar provisions are found in New South Wales, Queensland and the Northern Territory2. They were all modelled on s 6(1)(b) of the Law Reform (Married Women and Tortfeasors) Act 1935 (UK) ("the 1935 UK Act"). The question in this case is whether the limit applies when the "judgment first given" is a consent judgment in proceedings in tort and/or contract where the proceedings have been commenced and the consent to judgment filed solely to give effect to an agreement to settle the claim. The answer in this case is no. The appeal by Newcrest Mining Ltd against the decision of the Court of Appeal of Western Australia which so found should be dismissed. Statutory framework – the section Section 7 of the WA Act provides: "(1) Subject to Part 1F of the Civil Liability Act 2002, where damage is suffered by any person as the result of a tort— judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage; if more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered … against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise) the sums recoverable under the judgments given in those actions by way of damages 1 Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 651 [29] per Gleeson CJ and Callinan J; [2001] HCA 66. 2 Law Reform (Miscellaneous Provisions) Act 1946 (NSW), s 5(1)(b); Law Reform Act 1995 (Q), s 6(b); Law Reform (Miscellaneous Provisions) Act (NT), s 12(3)(b). shall not in the aggregate exceed the amount of the damages awarded by the judgment first given: and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of opinion that there was reasonable grounds for bringing the action; any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is or would if sued have been liable in respect of the same damage whether as a joint tortfeasor or otherwise but so that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability for which contribution is sought." Factual and procedural background In February 2004 the respondent, who was employed as a rigger at the Telfer mine site in Western Australia, slipped in mud and injured his knee. He claimed workers' compensation payments and common law damages from his employer at the mine site, Simon Engineering (Australia) Pty Ltd ("Simon Engineering"). Eventually the respondent and Simon Engineering's insurer, Allianz Australia Insurance Ltd ("Allianz") agreed to settle his claims. The terms of the settlement, set out in a letter dated 17 May 2007 from the solicitors for Allianz to the respondent's solicitor, included the following: "2. By consent between the parties, judgment for [the respondent] against [Simon Engineering] in the sum of $250,000.00, in addition to all payments that have been made to date pursuant to the Workers' Compensation and Injury Management Act 1981 ... [Allianz] will make a contribution towards [the respondent's] legal costs in the sum of $10,000.00 and will pay the disbursements in the sum of $1,804.00. 4. Settlement is to be effected by way of Consent to Judgment filed and sealed at the District Court." Enclosed with the letter was a writ of summons to be issued out of the District Court of Western Australia and a form of consent to judgment in the proceedings which were to be commenced by that writ. The terms of settlement contained no admission of liability in respect of any cause of action. The writ was issued out of the District Court in the name of the respondent as plaintiff against Simon Engineering as defendant. The indorsement of claim on the writ stated: "The Plaintiff claims against the Defendant damages in respect of all personal injuries suffered by him arising out of or in the course of his employment with the Defendant on or around 16 February 2004 and in respect of all subsequent aggravations and/or recurrences of whatsoever nature, which injuries, aggravations and/or recurrences were caused by the negligence and/or breach of statutory duty and/or breach of contract of the Defendant." No statement of claim was filed. Contemporaneously with the issue of the writ, the consent to judgment was filed in the proceedings which it commenced. The consent to judgment was in the following terms: "WE THE PARTIES to this action consent to judgment being entered for the Plaintiff against the Defendant for the sum of $250,000.00, exclusive of weekly payments made to date pursuant to the Workers' Compensation & Injury Management Act 1981, plus legal costs in the sum of $11,804.00 inclusive of disbursements." It was signed by the solicitors for the respondent and for Simon Engineering. Simon Engineering at that time was subject to a Deed of Company Arrangement. The consent to judgment was subsequently endorsed with a statement signed by the Registrar of the District Court: "Order that judgment be entered accordingly", followed by the words: "JUDGMENT Dated the 31 day of May 2007. Pursuant to the aforesaid order of the Registrar IT IS THIS DAY ADJUDGED that judgment being entered for the Plaintiff against the Defendant for the sum of $250,000.00 exclusive of weekly payments made the Workers' Compensation & Injury Management Act 1981, plus legal costs in the sum of $11,804.00 inclusive of disbursements." to date pursuant On 23 June 2008, the respondent issued a writ against the appellant and others in respect of his injuries arising out of the same incident in respect of which he had sued Simon Engineering. The appellant had been operating the Telfer mine site. In a statement of claim filed with the writ, the respondent alleged that the appellant was negligent for failure, inter alia, to provide a safe work place and was in breach of a statutory duty said to be owed pursuant to s 9(1) of the Mines Safety and Inspection Act 1994 (WA). As is apparent, the appellant was sued as a "several concurrent tortfeasor"3 with Simon Engineering albeit Simon Engineering was also sued in tort and/or contract. The appellant's alleged liability arose out of a cause of action distinct from those which the respondent had asserted against Simon Engineering. The particulars of damages claimed against the appellant and the other defendants in the proceedings amounted to $1,989,746.00. A credit was given for the settlement monies received from Simon Engineering leaving a total outstanding claim of $1,739,746.00. The particulars were filed on 31 March 2009. On 11 May 2009, the appellant filed a chamber summons for summary judgment. The appellant invoked s 7(1)(b) of the WA Act. In a supporting affidavit sworn by its solicitor, the appellant referred to the consent judgment entered on 31 May 2007 against Simon Engineering and the satisfaction of that judgment by Simon Engineering's insurer. On 25 August 2009, a Deputy Registrar of the District Court ordered that the respondent's action against the appellant be dismissed with costs. The respondent appealed to a judge of the District Court (Mazza DCJ) who ordered that the appeal from the Deputy Registrar's decision be dismissed with costs. The respondent then appealed to the Court of Appeal of Western Australia. That Court allowed the appeal, quashed the order of the District Court dismissing the appeal from the decision of the Deputy Registrar, and dismissed the appellant's application for summary judgment in the District Court. The appellant was ordered to pay the respondent's costs of the summary judgment application, the appeal to the District Court and the appeal to the Court of Appeal. On 9 December 2011 this Court (Crennan and Kiefel JJ) granted special leave to the appellant to appeal from the judgment of the Court of Appeal. The decision of the Court of Appeal Two months after Mazza DCJ delivered his judgment in the District Court dismissing the respondent's appeal from the decision of the Deputy Registrar4, 3 A term which describes "independent tortfeasors whose acts concur to produce a single damage": Glanville Williams, Joint Torts and Contributory Negligence, 4 Thornton v Newcrest Mining Ltd [2010] WADC 61. judgment" the Court of Appeal of New South Wales delivered judgment in Nau v Kemp & Associates Pty Ltd5. The Court of Appeal of New South Wales held that the term the Law Reform "damages awarded by [a] (Miscellaneous Provisions) Act 1946 (NSW) ("the NSW Act"), relevantly identical to s 7(1)(b) of the WA Act, did not extend to a judgment entered by consent of the parties. The Court of Appeal of Western Australia followed the decision in Nau v Kemp on the basis that it was not "plainly wrong". In so doing, the Court of Appeal of Western Australia acted in accordance with what was said in this Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd6. in s 5(1)(b) of Consent judgments under the District Court Rules The District Court Rules 2005 ("DCR"), which are made under the District Court of Western Australia Act 1969 (WA), provide that the Rules of the Supreme Court 1971 ("RSC") apply to and in respect of any case in the District Court7. Order 42 of the RSC provides for entry of judgment to be made in a book to be kept by the Principal Registrar at the Central Office8. There is a specific requirement that in any case in which a defendant "has appeared by a solicitor, no order for entering judgment shall be made by consent unless the consent of the defendant is given by his solicitor or agent"9. Where a defendant is self- represented no such order shall be made unless the defendant appears before a judge and gives his consent in person or unless his written consent is attested by a solicitor acting on his behalf10. Those rules are calculated to ensure that an informed consent is given by the defendant. They do not require any assessment by the court of the merits of the compromise underlying the order. Order 43 provides for drawing up judgments and orders. Order 43 r 16 deals with consent orders. It provides that "[t]he parties to proceedings or their practitioners may file a written consent to the making of an order in those proceedings"11. The Registrar may "settle, sign and seal the order without any (2010) 77 NSWLR 687. (2007) 230 CLR 89; [2007] HCA 22. 7 DCR, r 6(1). 8 RSC, O 42 r 1(1). 9 RSC, O 42 r 7. 10 RSC, O 42 r 8. 11 RSC, O 43 r 16(1). other application being made in any case in which in his opinion the Court would make such an order upon consent of the parties"12. Alternatively, the Registrar may bring the matter before the court which, without any other application, may "direct the registrar to settle, sign, and seal the order"13. Order 43 r 16(3) provides: "The order shall state that it is made by consent and shall be of the same force and validity as if it had been made after a hearing by the Court." A consent order of the kind made in this case can properly be described as an order which expresses an agreement in a more formal way than usual. It may be set aside on any ground which could invalidate the agreement14. It is, nevertheless, an order. However, when a consent order in favour of a plaintiff gives effect to an agreement which does not involve any admission of liability in respect of any cause of action asserted by the plaintiff, it cannot be taken as reflecting an admission of liability or as a determination of liability by the court. In this case, the consent order was an order for the payment of a money sum. Order 43 r 16(3) gives the same legal effect to such an order as an order made after a hearing in the court. That does not impute any finding to the court. In this case, the causes of action asserted in the indorsement of claim on the writ were cumulatively, and alternatively, negligence, breach of statutory duty and breach of contract. It cannot be known whether underlying the terms of settlement was an unexpressed concession as to liability in respect of any of the causes of action. That gives rise to the question whether, for the purposes of s 7(1)(b) of the WA Act, it can be said, and if so on what basis, that the consent judgment was a judgment given in an action against a tortfeasor liable in respect of the damage suffered by the respondent. The answer is in the negative. Nor can it be said that the money sums specified in the consent judgment constituted "damages awarded by the judgment" within the meaning of s 7(1)(b) of the WA Act. The latter answer is fatal to this appeal. That answer flows from the construction of s 7(1)(b) in the light of its legislative history. Legislative history of s 7(1)(b) At common law a judgment in an action against one of several joint tortfeasors was a bar to an action against the others for the same cause whether or 12 RSC, O 43 r 16(2). 13 RSC, O 43 r 16(2). 14 Harvey v Phillips (1956) 95 CLR 235 at 244; [1956] HCA 27 quoting Huddersfield Banking Co Ltd v Henry Lister & Son Ltd [1895] 2 Ch 273 at 280 per Lindley LJ. not the judgment was satisfied. The rule, which dates back to the beginning of the 17th century15, was explained by Parke B in King v Hoare16: "[t]he judgment of a court of record changes the nature of that cause of action, and prevents it being the subject of another suit, and the cause of action, being single, cannot afterwards be divided into two". The rule was also said to be directed against the mischief of a plaintiff who had obtained judgment against one of several joint tortfeasors thereafter bringing a multiplicity of actions against the others in respect of the same tort17. It was nevertheless "highly technical" and was confined to cases in which there was only one cause of action18. An unintended by-product of the common law rule, as explained by the Privy Council in Wah Tat Bank Ltd v Chan19, was that20: "it prevented a plaintiff who had brought only one action against a number of joint tortfeasors from recovering final judgment, even by consent or default, against any of them without barring his right to judgment against the others". To avoid that difficulty, settlements were given effect by a "Tomlin Order"21 which would record the agreement of the parties in a schedule to a stay order 15 The first reported case in which the rule was established was Broome v Wooton (1605) Yelv 67 [80 ER 47] cited in Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 35-36. 16 (1844) 13 M&W 494 at 504 [153 ER 206 at 210]. 17 Brinsmead v Harrison (1872) LR 7 CP 547 at 551 per Kelly CB, 553 per Blackburn J, Mellor J, Cleasby B and Lush J agreeing at 554. 18 Gouldrei, Foucard & Son v Sinclair and Russian Chamber of Commerce in London [1918] 1 KB 180 at 186 per Pickford LJ, 189 per Bankes LJ and 192 per Sargant LJ who stigmatised the rule as "highly technical" and said it should not be extended to a case involving separate causes of action. 20 [1975] AC 507 at 516. 21 Named for Tomlin J who drafted Practice Directions for such orders following his decision in Dashwood v Dashwood [1927] WN 276 that an agreement set out in a schedule to a consent order staying an action on the terms of the agreement was not (Footnote continues on next page) rather than in the terms of a consent judgment. The common law rule, it seems, was seen as applying to consent and default judgments as well as to judgments entered after trial. The enactment of s 6 of the 1935 UK Act, upon which s 7 of the WA Act is modelled, followed recommendations made in the Third Interim Report of the Law Revision Committee of Great Britain published in 1934. The Report responded to a reference relating to denial of contribution between tortfeasors and the rule in Merryweather v Nixan22. However, the Committee also decided to deal with the rule that a joint tort merged in a judgment obtained against one tortfeasor, regardless of its satisfaction, with a resulting bar to recovery against other joint tortfeasors23. The Committee recommended, inter alia, that24: "[a] judgment recovered against one or more persons in respect of an actionable wrong committed jointly shall not, while unsatisfied, be a bar to an action against any others liable jointly in respect of the same wrong. Provided that the Plaintiff shall not be entitled to levy execution for, or to be paid, a sum exceeding, in the aggregate, the amount of the first judgment obtained against any of the persons so liable, nor to recover the costs of any subsequent action, unless the Judge before whom it is tried is of opinion that there was reasonable ground for bringing it." The proviso in the recommendation was limited in its application to joint tortfeasors. Its implementation in s 6(1)(b) of the UK Act and s 7(1)(b) of the WA Act extended to several concurrent tortfeasors. The object of the 1935 UK Act, as described by Professor Glanville Williams, was "to prevent injustice to a plaintiff who finds that the tortfeasor whom he has chosen to sue is insolvent"25. Relevantly to s 6(1)(b), however, he observed26: supportive of a motion for committal for contempt for non-compliance with the agreement. 22 (1799) 8 TR 186 [101 ER 1337]. 23 Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 611 per Gummow J; [1996] HCA 38. 24 Law Revision Committee, Third Interim Report, (1934) Cmd 4637 at 8. 25 Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 39. 26 Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 39. "It is no part of the policy of the Act that a plaintiff who has sued one tortfeasor, and who is dissatisfied with the assessment of his damages by the court, should be allowed to sue the other tortfeasor in the hope of obtaining a greater bite from the cherry. Accordingly it is expressly provided in s 6(1)(b) ... that the plaintiff cannot in any event recover more than the sum awarded by the judgment in the first action". The limit on recoverability imposed by s 6(1)(b) was described by Professor Glanville Williams as a curtailment of the common law rights of plaintiffs. He said27: "At common law judgment against one several concurrent tortfeasor did not bar an action against another, and in the second action the plaintiff might obtain a larger judgment than in the first. In such a case the plaintiff could presumably have required payment of the whole of the second judgment if the first were unsatisfied, or, if the first were satisfied, of the amount by which the second exceeded the first. Now, by the Act, the second judgment cannot effectively be for more than the first." The character of the limit on recoverability as a curtailment of common law rights indicates that s 7(1)(b) should not be construed so as to involve a greater incursion on such rights than is clearly mandated by the text. It is necessary now to refer more directly to the constructional question. The construction of s 7(1)(b) The limit on recoverability of tortious damages created by s 7(1)(b) is imposed when the following conditions are satisfied: a person has suffered damage as the result of a tort; more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered; the actions are brought against persons liable in respect of the damage (whether as joint tortfeasors or otherwise); an amount of damages is awarded by the judgment first given in one of those actions. The limit imposed when those conditions are met is that the sum recoverable under any subsequent judgments given in the other actions, shall not in the 27 Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 39. aggregate exceed the amount of the damages awarded by the judgment first given. It follows from the text of s 7(1)(b) that the person against whom damages are awarded by the judgment first given must be a tortfeasor liable in respect of the damage suffered by the plaintiff. That requirement raises the question: what is necessary to establish that the person against whom the first judgment is awarded is in that category? What is necessary to establish that condition has some bearing on the collocation "damages awarded by the judgment first given". It was that collocation which was the focus of constructional debate in this appeal. None of the authorities cited by the parties directly resolved that debate. Baxter v Obacelo Pty Ltd28, which involved a consideration of s 5(1)(b) of the NSW Act by this Court, concerned an action brought against a solicitor and his employee for professional negligence. The Court held that a settlement reached and a consent judgment entered against one of the co-defendants did not attract the application of s 5(1)(b) of the NSW Act so as to preclude recovery against the other. That was because, as the Court held, the words of s 5(1)(b) "should be given their ordinary meaning, as applying to cases where there is more than one action, that is to say, more than one proceeding"29. That case therefore has no direct bearing upon the constructional issue thrown up in this appeal. There have been a number of decisions in this and other jurisdictions concerning the conditions necessary to establish an entitlement in one person to recover contribution from another pursuant to s 7(1)(c) of the WA Act and its equivalents elsewhere. The course of that authority in Australia is at least of analogical significance when it comes to construing s 7(1)(b) although it is necessary to bear in mind the different purposes of pars (b) and (c). for Bitumen and Oil Refineries (Australia) Ltd v Commissioner Government Transport30 concerned the entitlement to contribution conferred under s 5(1)(c) of the NSW Act upon "any tort-feasor liable" in respect of damage suffered by a person as a result of the tort. The criterion of liability was found to be satisfied by a verdict and judgment after trial, which it was held could be pleaded in contribution proceedings against a concurrent tortfeasor. The Court said that the term "liable" where it first occurs in s 5(1)(c) "should be held at least to include ascertainment by judgment"31. The Court went on to observe 28 (2001) 205 CLR 635. 29 (2001) 205 CLR 635 at 652 [34] per Gleeson CJ and Callinan J, Gummow and Hayne JJ agreeing at 657 [52], 668 [87] per Kirby J. 30 (1955) 92 CLR 200; [1955] HCA 1. 31 (1955) 92 CLR 200 at 212. that it might be desirable to allow the plaintiff to amend the declaration sought in its pleading "to make it clear that the recovery pleaded was for tort"32. The Court left open the possibility that liability for the purposes of s 5(1)(c) could be established by arbitral award or by agreement amounting to accord and satisfaction, or agreement amounting to accord executory, followed by satisfaction. As subsequent dicta in this Court have made clear, the precondition of liability necessary to enliven the entitlement to contribution under s 7(1)(c) and its equivalents can be established by other than a final judgment following a contested hearing. In Thompson v Australian Capital Television Pty Ltd33, Gummow J observed that the phrase "any other tort-feasor … liable" appearing in s 11(4) of the Law Reform (Miscellaneous Provisions) Act 1955 (ACT)34: "includes a party whose liability has been ascertained upon a settlement whether or not reflected in a consent judgment, and ... this is so whether or not in reaching the settlement the party now seeking contribution admitted liability". His Honour, however, added the important caution, reflecting what Lord Denning MR said in Stott v West Yorkshire Car Co35: "Nevertheless, the party seeking contribution after such a settlement must be prepared in that proceeding to establish that, if the claim had been fought out, that party would have been held responsible in law and liable to pay in whole or in part for the damage referred to in s 11(4)." That approach had been followed in respect of Australian legislation and in New Zealand in Baylis v Waugh36. It has also been applied in the Court of Appeal of Northern Ireland in James P Corry & Co Ltd v Clarke37. In James Hardie & Coy Pty Ltd v Seltsam Pty Ltd38, which was another case concerned with contribution 32 (1955) 92 CLR 200 at 212. 33 (1996) 186 CLR 574. 34 (1996) 186 CLR 574 at 616. 35 [1971] 2 QB 651 at 657. 36 [1962] NZLR 44. 37 [1967] NILR 62 at 71 per Lord MacDermott LCJ, Curran LJ agreeing at 71, 79 per 38 (1998) 196 CLR 53; [1998] HCA 78. proceedings under s 5(1)(c) of the NSW Act, Gaudron and Gummow JJ said that39: "The reference to the right of a tortfeasor who is 'liable in respect of ... damage' to recover contribution is, as Windeyer J put it, 'to a person whose liability as a tortfeasor has been ascertained, ordinarily by judgment, perhaps in some cases in some other way'." Each of the authorities mentioned was concerned with the equivalent of s 7(1)(c) and the conditions necessary to establish one person's liability for a tort which is necessary to enliven that person's entitlement to contribution from a joint or concurrent tortfeasor. None of the authorities support the proposition that liability as a tortfeasor in such cases is established simply by a consent judgment or agreement without some basis from which it may be ascertained that the liability imposed relates to a tort. The character of the "judgment first given" referred to in s 7(1)(b) as a judgment against a tortfeasor liable in respect of the damage suffered by the plaintiff will not be established merely by a consent judgment reflecting an agreement to settle proceedings. Consistently with that approach, the term "damages awarded by the judgment" in s 7(1)(b) requires some connection between the debt created by the consent judgment and a tortious liability on the part of the defendant. The limit upon recoverability imposed by s 7(1)(b) is not enlivened by an agreement to make a payment in settlement of an action, even agreement involving an admission of liability40. It is therefore difficult to see how a consent judgment which merely gives effect to the agreement can, without more, amount to an award of damages for the purposes of s 7(1)(b). There is nothing in the procedure adopted by the Registrar of the District Court following lodgment of the consent order that requires that any consideration be given to the basis of the liability underpinning the order. Section 7(1)(b) is directed to successive actions in which a plaintiff, discontented with the outcome in the first action, seeks another bite of the cherry. A consent judgment which gives effect to an agreement between the parties, a 39 (1998) 196 CLR 53 at 65 [25] citing Brambles Construction Pty Ltd v Helmers (1966) 144 CLR 213 at 221; [1966] HCA 3. 40 The question whether a payment in settlement of a plaintiff's claim against one tortfeasor can be pleaded as a defence by a concurrent tortfeasor on the basis that there has been full satisfaction and that the plaintiff has been fully compensated is a distinct question outside the framework of s 7(1)(b) – see generally Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 658-663 [56]-[68] per Gummow and Hayne JJ and their Honours' consideration of Jameson v Central Electricity Generating Board [2000] 1 AC 455. fortiori an agreement which does not identify tort as the basis for liability, does not cross over into the area of policy concern to which s 7(1)(b) is directed. Absent a clear textual indication, it should not be so construed. As indicated earlier, s 7(1)(b) infringes the common law rights of a plaintiff to recover successively against several concurrent tortfeasors41. That infringement should not be broadly construed beyond what the text of s 7(1)(b) requires and beyond what is necessary to deal with the mischief to which it is directed. In my opinion the Court of Appeal was correct to allow the appeal against the decision of the District Court. Conclusion The appeal should be dismissed with costs. 41 It is not suggested that such common law rights extend to a right to recover against concurrent tortfeasors an aggregate amount exceeding full compensation for the damage suffered by the plaintiff. HEYDON J. The background and the relevant legislation are set out in other judgments. This appeal concerns the construction of the words "the damages awarded by the judgment first given" in s 7(1)(b) of the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) ("the Act")42. The appeal should be dismissed. The respondent's construction of s 7(1)(b) is correct. The quoted words do not encompass damages that a tortfeasor must pay to an injured person under a settlement which is reflected in a "consent judgment". Payment of those damages affects the quantum which the injured person may recover from other tortfeasors in later litigation, as the respondent concedes here, but it does not affect the right to bring the litigation. That is so for the following reasons. Reasons why the respondent's construction is correct Definition of "judgment first given". First, the definition of "judgment first given" in s 7(3)(b) of the Act supports the respondent's construction of s 7(1)(b). It is: "the reference in this section to the judgment first given shall, in a case where that judgment is reversed on appeal, be construed as a reference to the judgment first given which is not so reversed and, in a case where a judgment is varied on appeal, be construed as a reference to that judgment as so varied." (emphasis in original) A consent judgment is incapable of being reversed or varied on appeal, save in exceptional circumstances. In Nau v Kemp & Associates Pty Ltd, McColl JA gave examples of these exceptional circumstances from the law of New South Wales. As her Honour said43: "the limited circumstances in which such a power might be exercised supports the proposition that 'a judgment first given' in s [7(1)(b)] must be one given after a judicial determination on the merits." Hence damages dealt with in a consent judgment are not damages awarded by a judgment. Dictionary meanings. Secondly, the respondent's construction of s 7(1)(b) is consistent with ordinary English usage. The relevant meanings in The Macquarie Dictionary for "award" as a verb are44: 42 For the whole text of s 7(1) see below at [54]. 43 (2010) 77 NSWLR 687 at 696 [29]. 44 The Macquarie Dictionary, Federation ed (2001), vol 1 at 125. "1. to adjudge to be due or merited; assign or bestow: to award prizes. 2. to bestow by judicial decree; assign or appoint by deliberate judgment, as in arbitration." (emphasis in original) The idea of "adjudging" something as due or merited implies that a person or body will carry out the adjudging, and, after a process of analysing relevant considerations, will decide what should be awarded. It is an idea which excludes merely approving an amount of damages agreed between the tortfeasor and the injured person. That same idea is inherent in bestowing by judicial decree, or in assigning or appointing by deliberate judgment. It has been said of the second meaning – "to bestow by judicial decree" – that it "is consistent with the meaning extending to a judicial decree that is the result of the consent of the parties"45. I respectfully disagree. To speak of money being bestowed by judicial decree implies that the maker of that decree is doing the bestowing. Makers of judicial decrees do not act arbitrarily. They act after an exercise of judicial reasoning only. Where a consent judgment bestows money it is the party with the money who bestows it, not the court. Of the first meaning, which is exemplified by the expression "to award prizes", Campbell JA has said46: "Though one might say that the dignitary who hands out the prizes on a school's speech day, but has made no decision about who will receive the prizes, is 'awarding' them, that is a fairly stretched use, it would be more natural to say that he or she was 'presenting' them." However, it would be natural to say that those who decided who would receive the prizes were "awarding" them. That ordinary meaning is inconsistent with the idea that the expression "damages awarded by the judgment first given" includes damages received by way of a consent judgment. The relevant meanings in The Macquarie Dictionary for "award" as a noun are47: "4. Law a. the decision of arbitrators on points submitted to them. b. a decision after consideration; a judicial sentence. 5. Also, industrial award. a. the decision of an arbitrator regulating the future conduct of 45 Nau v Kemp & Associates Pty Ltd (2010) 77 NSWLR 687 at 734 [210] per Campbell JA. 46 Nau v Kemp & Associates Pty Ltd (2010) 77 NSWLR 687 at 734-735 [210]. 47 The Macquarie Dictionary, Federation ed (2001), vol 1 at 125. parties to an industrial dispute. b. the document embodying the findings of an arbitrator or industrial tribunal. c. what is awarded in terms of money, working conditions, etc, in such a document. See consent award." (emphasis in original) The idea of an award being the result of a judicial decision-making process, not of the agreement of the parties, is also inherent in these meanings. It is true that the definition of "consent award" is48: "an award made by an industrial tribunal where the parties have already reached agreement on the terms of a settlement but want it to have the force of an arbitrated award and hence submit it to a tribunal for ratification." But a "consent judgment" is only exceptionally submitted to a tribunal for ratification. For example, a "consent judgment" is submitted for ratification where infants or disabled people will be bound by it, but not generally. And the specific and specialised meaning of "consent award" does not necessarily extend to the more general expression "damages award by a judgment". In The Oxford English Dictionary, the relevant meanings of the verb "to award" a thing are49: "1. To examine a matter and adjudicate upon its merits; to decide, determine, after consideration or deliberation. 2. To determine upon and appoint by judicial sentence. 3. To grant or assign (to a person) by judicial or deliberate decision; to adjudge." (emphasis in original) Each of these meanings excludes consent judgments entered to reflect a prior agreement between litigants. Irrelevance of multiplicity problems. Thirdly, so far as the mischief that s 7(1)(b) deals with includes the need to discourage litigants seeking damages for a particular injury in more than one trial, that mischief does not arise where the 48 The Macquarie Dictionary, Federation ed (2001), vol 1 at 413. 49 The Oxford English Dictionary, 2nd ed (1989), vol I at 829. parties settle a dispute without instituting or completing a trial and have their settlement recorded as a consent judgment. The appellant's arguments against the respondent's construction of s 7(1)(b) It is now necessary to deal with various arguments advanced by the appellant against the respondent's construction of s 7(1)(b). Construing s 7(1) "harmoniously"? First, the appellant argued that in s 7(1)(c) the words "who is or would if sued have been liable" did not include a defendant who had obtained a consent judgment in its favour50. The appellant also argued that in s 7(1)(a) the words "any tortfeasor liable" included a defendant liable on a consent judgment. The appellant then argued that the three paragraphs of s 7(1) "should be construed harmoniously". The submission depended on a general assumption that a given expression bears the same meaning in each of the three paragraphs in s 7(1). That assumption is false. Lord Reid demonstrated its falsity in George Wimpey & Co Ltd v British Overseas Airways Corporation51: "There are two points in subsection (1)(a) which should, I think, be noted. In the first place, the word 'liable' occurs twice and in each case it is clear that it must mean held liable. And secondly, in the phrase 'who would if sued have been liable as a joint tortfeasor' it appears to me that 'if sued' most probably means if he had been sued together with the tortfeasor first mentioned, because a person cannot properly be said to be held liable 'as a joint tortfeasor' if he is sued alone. If that is right, not only must the words 'if sued' here have a temporal connotation but they must refer to the time when the other tortfeasor was sued. But that conclusion depends on an assumption that the language of the provision is used accurately, and looking to the defective drafting of other parts of the subsection it would, I think, be unsafe to rely on any inference from the form of drafting of subsection (1)(a). With regard to subsection (1)(b) I need only observe that the word 'liable' is there used in a context where it cannot possibly mean held liable. The context is 'if more than one action is brought … against tortfeasors liable in respect of the damage,' and liable there can only mean against whom there is a cause of action. So on any construction of the subsection the word 'liable' must be held to have quite different meanings in different places in the subsection. I am not prepared in this case to base my decision on any inference from similarities of 50 James Hardie & Coy Pty Ltd v Seltsam Pty Ltd (1998) 196 CLR 53; [1998] HCA 51 [1955] AC 169 at 188-189. expression in either subsection (1)(a) or subsection (1)(b)." (emphasis in original) That view was approved by the Privy Council (Lord Wilberforce, Viscount Dilhorne, Lord Kilbrandon and Lord Salmon) in Wah Tat Bank Ltd v Chan52. Further, each paragraph in s 7(1) relates to a different problem. Assume that before s 7(1) was enacted a plaintiff suffered damage as the result of a tort, and there are three persons who could be sued as joint tortfeasors53. If the plaintiff sued the first tortfeasor to judgment for damages but that tortfeasor did not satisfy the judgment, it was not open to the plaintiff to sue either the second or the third tortfeasor for the balance: Brinsmead v Harrison54. In the words of Lord Reid55: "if judgment was recovered against one joint tortfeasor that judgment was a bar to any action against another joint tortfeasor even although no sum had been or could be recovered under that judgment." And if the first tortfeasor satisfied the judgment, it was not open to that tortfeasor to get contribution from the second or the third: Merryweather v Nixan56. The impact of s 7(1) on this position was as follows. The mischief dealt with in s 7(1)(a) was the common law prohibition stated in Brinsmead v Harrison against a plaintiff who had recovered against one joint tortfeasor from recovering against another. Section 7(1)(a) improved the position of plaintiffs by abolishing that common law prohibition. The mischief dealt with in s 7(1)(c) was the rule in Merryweather v Nixan, which did not affect plaintiffs but tortfeasors. Section 7(1)(c) dealt with that mischief by abolishing the rule. Those changes to the common law position left the risk that plaintiffs, freed from the ban that Brinsmead v Harrison imposed on any action against joint tortfeasors after one tortfeasor had been sued to judgment, would abuse that new found freedom by pursuing a multiplicity of actions. But the solution achieved in s 7(1)(b) applied to both joint tortfeasors and several tortfeasors. Section 7(1)(b) does not prevent a multiplicity of actions. Rather, it tends to discourage them by limiting a plaintiff who commences a second action to the damages award that plaintiff received in the first. As the Privy Council said in Wah Tat Bank Ltd v Chan, 52 [1975] AC 507 at 517. 53 For the distinction between joint and several tortfeasors, see below at [72]. 54 (1872) LR 7 CP 547. 55 George Wimpey & Co Ltd v British Overseas Airways Corporation [1955] AC 169 56 (1799) 8 TR 186 [101 ER 1337]. s 7(1)(b) "is clearly devised merely to discourage the multiplicity of actions which the old rule [in Brinsmead v Harrison] was designed to prevent."57 Where an injured person persuades a tortfeasor to agree to a consent judgment, the fact that s 7(1)(c) enables that tortfeasor to obtain contribution from others does not mandate the conclusion that s 7(1)(b), in discouraging a multiplicity of actions, should be construed as applying to damages obtainable under consent judgments. And where an injured person persuades a tortfeasor to agree to a consent judgment, the fact that s 7(1)(a) enables the plaintiff to sue another tortfeasor does not mandate that conclusion either. "Adjudged". The appellant's second argument relied on the following words of the consent judgment: "IT IS THIS DAY ADJUDGED" that there be judgment in the sum of $250,000 plus costs. But those words obscure the reality. In reality that sum had not been adjudged. What had actually happened was that the parties had fixed the figure by agreement. The court had played no adjudicative role at all. The equivalence of consent and non-consent judgments. Thirdly, the appellant submitted that not enough consideration had been "given to the pervasiveness with which consent judgments stand in the same position as a judgment arising from judicial determination on the merits." To speak of "pervasiveness" is to exaggerate. In some respects, consent judgments operate like judgments arising from judicial determination on the merits. They can be enforced. They are final. The doctrine of res judicata applies. The appellant submitted that the respondent's construction of the Act deprived "a consent judgment of the force and effect that it would normally enjoy". That is not so. In every respect, a consent judgment has full force and effect. The only issue is whether the damages a consent judgment deals with are damages "awarded". Linguistic usage in the United States. Fourthly, the appellant submitted that in the United States "consent judgments are commonly spoken of as 'awarding' damages". That is far from conclusive. The appellant pointed to no common usage of that kind in Australia. Linguistic usage in this Court. Fifthly, the appellant relied on this Court's use of the expression "judicial determination (whether by consent or otherwise)" 57 [1975] AC 507 at 518 per Lord Salmon (Lord Wilberforce, Viscount Dilhorne and Lord Kilbrandon concurring); cf XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 458 per Gibbs CJ ("designed to prevent a multiplicity of actions"); [1985] HCA 12. in Amaca Pty Ltd v New South Wales58. That was a passing reference. It was not directed to the point presently in controversy. The risk of plaintiff abuse. Sixthly, the appellant submitted that on the respondent's construction of the Act, a plaintiff is "free to adopt a scatter gun approach to litigation against potential concurrent tortfeasors, knowing full well that a consent judgment procured will be no bar to further pursuing others, and always seeking to improve their position with each defendant." What is postulated is highly unrealistic. Even without s 7(1)(b), a plaintiff who behaved in the manner postulated would be at risk of adverse costs orders as each new action succeeded its predecessors. Even if the plaintiff received favourable costs orders, they would not provide full compensation for the plaintiff's own legal costs. And even if the postulation had any realism, the propositions asserted are not correct. On the respondent's construction of s 7(1)(b), a consent judgment against one defendant will leave the plaintiff free to pursue other defendants. But once a judgment other than a consent judgment is obtained against a defendant, the plaintiff will be unable to obtain a greater quantum of damages from any other defendant. Thus plaintiffs will not be able progressively "to improve their positions". Injustice? Finally, the appellant seemed to find some injustice in the respondent's construction of s 7(1)(b). That construction would allow a person in the respondent's position to institute proceedings if that person had not obtained damages under a consent judgment compensating fully for damage suffered. If there were serious injustices flowing from the respondent's construction of the Act, that would be a ground for questioning and perhaps rejecting it. But the appellant did not satisfactorily demonstrate any injustice of that kind. Orders The appeal should be dismissed with costs. 58 (2003) 77 ALJR 1509 at 1512 [18]; 199 ALR 596 at 600; [2003] HCA 44. CRENNAN AND KIEFEL JJ. This appeal concerns an issue of construction of the Law Reform (Contributory Negligence and Tortfeasors' s 7(1) of Contribution) Act 1947 (WA) ("the WA Act"). Section 7 is headed "Rules applicable if there are 2 or more tortfeasors", and sub-s (1) relevantly provides: "[W]here damage is suffered by any person as the result of a tort — judgment recovered against any tortfeasor liable in respect of that damage shall not be a bar to an action against any other person who would, if sued, have been liable as a joint tortfeasor in respect of the same damage; if more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered ... against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise) the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given: and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of opinion that there was reasonable ground for bringing the action; any tortfeasor liable in respect of that damage may recover contribution from any other tortfeasor who is or would if sued have been liable in respect of the same damage whether as a joint tortfeasor or otherwise but so that no person shall be entitled to recover contribution under this section from any person entitled to be indemnified by him in respect of the liability for which contribution is sought." In relation to damage suffered by a person as the result of a tort, s 7(1)(a) abolishes a plea in bar59 based on the common law defence of "release by judgment"60, s 7(1)(b) deters separate and successive actions against two or more 59 James Hardie & Coy Pty Ltd v Seltsam Pty Ltd ("James Hardie v Seltsam") (1998) 196 CLR 53 at 58 [2] per Gaudron and Gummow JJ; [1998] HCA 78. 60 See Great Britain, Law Commission, Law of Contract – Report on Contribution, Law Com No 79, (1977) at 11 [34]. tortfeasors who cause the same damage, and s 7(1)(c) creates a right and remedy of contribution between tortfeasors which did not exist at common law61. The question in this appeal is whether the restriction in s 7(1)(b) of the WA Act – that sums recoverable under judgments given in multiple actions for damages "shall not in the aggregate exceed the amount of the damages awarded by the judgment first given" – applies only to damages awarded by a court following a judicial assessment, or whether the restriction also applies to a judgment entered by the consent of the parties in a superior court of record. Provisions substantially identical to s 7(1) of the WA Act exist in the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) ("the NSW Act") (s 5(1)), the Law Reform Act 1995 (Q) (s 6), and the Law Reform (Miscellaneous Provisions) Act (NT) (s 12). As long ago as 1955, such provisions were described by this Court as representing "a piece of law reform which seems itself to call somewhat urgently for reform."62 The proceedings In 2004, the respondent, Mr Michael Thornton, was injured in an accident which occurred in the course of his employment on a mine site owned and operated by the appellant, Newcrest Mining Limited. At the time of the accident, the respondent was employed by Simon Engineering (Australia) Pty Ltd ("Simon Engineering"). The respondent claimed workers' compensation payments in relation to his injury, and also claimed damages from Simon Engineering for negligence and breach of statutory duty. In 2007, the respondent reached a settlement agreement with Simon Engineering in relation to his claim. At that stage, the respondent had not yet commenced court proceedings. On 11 May 2007, in order to give effect to the settlement agreement, the respondent commenced proceedings against Simon Engineering in the District Court of Western Australia, and Simon Engineering consented to judgment being entered against it. On 31 May 2007, a consent judgment was entered in the District Court in the following terms: "Pursuant to the aforesaid order of the Registrar IT IS THIS DAY ADJUDGED that judgment [be] entered for [the respondent] against [Simon Engineering] for the sum of $250,000.00 exclusive of weekly 61 James Hardie v Seltsam (1998) 196 CLR 53 at 58 [2] per Gaudron and 62 Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200 at 211; [1955] HCA 1. payments made to date pursuant to the Workers' Compensation & Injury Management Act 1981, plus legal costs in the sum of $11,804.00 inclusive of disbursements." Simon Engineering satisfied this judgment and made no claim for contribution against the appellant. Subsequently, in June 2008, the respondent commenced proceedings in the District Court against the appellant, claiming damages for negligence and breach of statutory duty in relation to the same injury. In the particulars of damages claimed in his proceedings against the appellant, the respondent reduced his damages by an amount described as "settlement monies received". Decisions below On 11 May 2009, the appellant applied for summary judgment against the respondent pursuant to O 16 r 1(1) of the Rules of the Supreme Court 1971 (WA). On 28 August 2009, a Deputy Registrar of the District Court (Deputy Registrar Hewitt) ruled in favour of the appellant on the basis that s 7(1)(b) of the WA Act prevented the respondent from recovering further damages from the appellant in relation to his injury. A single judge of the District Court (Mazza DCJ) heard the respondent's appeal by way of a hearing de novo. His Honour dismissed the appeal. Just over two months after Mazza DCJ handed down his decision, the Court of Appeal of the Supreme Court of New South Wales (McColl and Campbell JJA and Sackville AJA) ("the NSW Court of Appeal") published its reasons for decision in Nau v Kemp & Associates Pty Ltd63, which dealt with a similar issue arising under s 5(1)(b) of the NSW Act (which, as mentioned above, is substantially identical to s 7(1)(b) of the WA Act). The plaintiff in Nau v Kemp had brought two actions claiming damages from concurrent tortfeasors. One of the actions was settled and, pursuant to the settlement, a consent judgment for $220,000 was entered in favour of the plaintiff. Following that settlement, the defendant in the other action successfully applied to have the action summarily dismissed. The NSW Court of Appeal unanimously upheld the plaintiff's appeal from that decision. Their Honours found in favour of the plaintiff on the basis that the expression "damages awarded by the judgment first given" in s 5(1)(b) of the 63 ("Nau v Kemp") (2010) 77 NSWLR 687. NSW Act referred to damages awarded by a court after a judicial determination on the merits, and did not apply to an earlier consent judgment entered in favour In considering the text of s 5(1)(b), the members of the NSW Court of Appeal concentrated on the meaning of the word "awarded" occurring in the expression "damages awarded by the judgment first given". Various meanings of the word "awarded" were considered to support the proposition that the expression could only mean damages awarded by a court following a judicial assessment of the quantum of those damages65. Acknowledging that a judgment by consent, as part of a settlement, might not be a judgment for the full loss suffered by the plaintiff, all members of the NSW Court of Appeal considered that a provision limiting recovery in a subsequent action against a concurrent tortfeasor could work unjustly if the damages first awarded did not cover the full amount of a plaintiff's loss66. In considering the respondent's appeal from the decision of Mazza DCJ, the Court of Appeal of the Supreme Court of Western Australia (Pullin and Murphy JJA and Murray J) ("the WA Court of Appeal") complied with the direction given by the High Court in Farah Constructions Pty Ltd v Say-Dee Pty Ltd67 that an intermediate appellate court should not depart from an interpretation placed on uniform national legislation by another Australian intermediate appellate court unless convinced that interpretation is plainly wrong68. Although the WA Court of Appeal noted that s 7(1)(b) of the WA Act was not uniform throughout Australia, it regarded the fact that identical provisions existed in four Australian jurisdictions (including New South Wales) as warranting a similar approach in those four jurisdictions69. 64 Nau v Kemp (2010) 77 NSWLR 687 at 709 [100], 711 [109] per McColl JA, 739 [230] per Campbell JA, 747 [269] per Sackville AJA. 65 Nau v Kemp (2010) 77 NSWLR 687 at 695 [28] per McColl JA, 734-735 [206]- [211] per Campbell JA, 745-746 [259]-[266] per Sackville AJA. 66 Nau v Kemp (2010) 77 NSWLR 687 at 704-705 [75]-[79] per McColl JA, 739 [229] per Campbell JA, 747 [268] per Sackville AJA. 67 (2007) 230 CLR 89; [2007] HCA 22. 68 Thornton v Newcrest Mining Ltd [2011] WASCA 92 at [15]. 69 Thornton v Newcrest Mining Ltd [2011] WASCA 92 at [16]. The WA Court of Appeal criticised one aspect of the reasoning in Nau v Kemp – the suggestion by McColl JA and Campbell JA that applying s 5(1)(b) of the NSW Act to judgments entered by consent might discourage the settlement of litigation70. However, the members of the WA Court of Appeal otherwise unanimously endorsed the reasoning in Nau v Kemp because they considered that the construction of s 5(1)(b) of the NSW Act preferred by the NSW Court of Appeal ensured equality between plaintiffs. On the construction of s 7(1)(b) of the WA Act adopted by the WA Court of Appeal, a plaintiff who settles against one tortfeasor for less than the full loss suffered and agrees to a consent judgment against that tortfeasor will not be barred from subsequently pursuing the balance of his or her full loss against a concurrent tortfeasor. This was said to put that plaintiff in the same position as a plaintiff who settles against a tortfeasor for less than his or her full loss but does not agree to a consent judgment, and who is therefore free to pursue recovery of his or her full loss against a concurrent tortfeasor71. Section 7(1) The Court's task on this appeal is to construe a provision in a statute, not to develop the common law. Application of the canons of statutory construction will involve the identification of the purpose of a statute, or a provision, which purpose may be stated expressly or inferred from the terms of the statute or provision, and may be elucidated by appropriate reference to extrinsic materials72. Historical considerations or extrinsic materials should not displace the clear meaning of statutory text, the language of which is the surest guide to what is called, metaphorically, the "intention" of the legislature73. However, the meaning of a provision may require consideration of the context, which can 70 See Nau v Kemp (2010) 77 NSWLR 687 at 710 [103]-[104] per McColl JA, 738 [227] per Campbell JA; Thornton v Newcrest Mining Ltd [2011] WASCA 92 at 71 Thornton v Newcrest Mining Ltd [2011] WASCA 92 at [23]. 72 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 592 [44] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2011] HCA 10. 73 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46-47 [47] per Hayne, Heydon, Crennan and Kiefel JJ; [2009] HCA 41; Zheng v Cai (2009) 239 CLR 446 at 455-456 [28]; [2009] HCA 52. include the history and evident policy of a provision74, particularly where a statute alters the common law. Section 7(1) of the WA Act, like equivalent provisions in other Australian jurisdictions, has its origins in s 6(1) of the Law Reform (Married Women and Tortfeasors) Act 1935 (UK) ("the 1935 UK Act"). Section 6(1) of the 1935 UK Act altered certain common law rules in respect of proceedings against, and contribution between, two or more tortfeasors. It was introduced following recommendations made by the Law Revision Committee in its Third Interim Report, presented in 1934 ("the Report")75. As will be explained in more detail later, the focus of the Report was on the prevailing legal doctrine that there be no contribution between joint tortfeasors76. Where damage is caused as the result of torts committed by two or more tortfeasors, the tortfeasors may be either joint tortfeasors or several (in the sense of "separate" or "independent") tortfeasors. Three relevant categories are commonly identified77: joint tortfeasors (being two or more persons responsible for the same wrongful act which causes single damage to the plaintiff); several tortfeasors (being two or more persons responsible for different wrongful acts) whose separate wrongful acts combine to cause the same damage to the plaintiff; and 74 See Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46-47 [47] per Hayne, Heydon, Crennan and Kiefel JJ; Zheng v Cai (2009) 239 CLR 446 at 455-456 [28]. See also Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ; [1955] HCA 27; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28. 75 Great Britain, Law Revision Committee, Third Interim Report, (1934) Cmd 4637. 76 See Merryweather v Nixan (1799) 8 TR 186 [101 ER 1337]; Great Britain, Law Revision Committee, Third Interim Report, (1934) at 3 [1]-[2]. 77 See Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 1; Balkin and Davis, Law of Torts, 4th ed (2009) at 815-817; Clerk & Lindsell on Torts, 20th ed (2010) at 273-280. See also Baxter v Obacelo Pty Ltd ("Baxter v Obacelo") (2001) 205 CLR 635 at 646-647 [18] per Gleeson CJ and Callinan J; [2001] HCA 66. several tortfeasors whose separate wrongful acts cause different damage to the plaintiff. As Gleeson CJ and Callinan J observed in Baxter v Obacelo78, Glanville Williams used the term "concurrent tortfeasors" as a generic term to describe both the first and second of these categories79. In this judgment, the term "several concurrent tortfeasors" will be used to refer to the second category. It is not in contention that, if the appellant were liable to the respondent, the appellant and Simon Engineering would be several concurrent tortfeasors. The third category may be put to one side for the purposes of this appeal80. The common law background to the Report The common law background addressed in the Report and relevant to s 6(1) of the 1935 UK Act was explained by Gleeson CJ and Callinan J (with whom Gummow and Hayne JJ agreed) in Baxter v Obacelo81: "At common law, the liability of joint tortfeasors was joint and several. A plaintiff could sue joint tortfeasors separately, in independent actions, for the full amount of the loss. Or the plaintiff could sue all the 78 (2001) 205 CLR 635 at 646 [18]. 79 As to which, see Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 1. Cf Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 580-581; [1996] HCA 38, where Brennan CJ, Dawson and Toohey JJ used the expression "several tortfeasors" to refer to what Glanville Williams would describe as "several concurrent tortfeasors". 80 Section 7(1)(a) of the WA Act, with which s 7(1)(b) must be construed, is a provision concerning "the same damage" in respect of which a joint tortfeasor "would, if sued, have been liable". Notwithstanding the express reference to a joint tortfeasor in s 7(1)(a), s 7(1)(b) applies in all circumstances where there is "more than one action ... brought in respect of that damage" (that is, "the same damage" referred to in s 7(1)(a)) and where those actions are brought "against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise)". 81 (2001) 205 CLR 635 at 647-648 [19]-[21], [23] per Gleeson CJ and Callinan J, 657 [51]-[52] per Gummow and Hayne JJ. joint tortfeasors in the same action82. Several concurrent tortfeasors, on the other hand, could not be joined as defendants in the one action. That was because they were severally liable 'on separate causes of action'83. The difference between action and cause of action was significant. A person suffering injury as a result of the wrongdoing of joint tortfeasors had only one cause of action84. Some consequences of this will be considered below. Such a person might bring one action (ie proceeding), or more than one action. In the case of several concurrent tortfeasors, there was a separate cause of action against each, and if a plaintiff desired to sue more than one, it was necessary to commence separate actions. One corollary of the principle that a plaintiff had only one cause of action against a number of joint tortfeasors was that, where an action was brought against two or more joint tortfeasors, only one judgment for one sum of damages could be given in favour of the plaintiff85. In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd86 this Court had to consider the effect upon that rule of s 5 of the [NSW Act] in a case where one of two joint tortfeasors was liable for exemplary damages, but the other was not so liable. Another corollary, sometimes referred to as the rule in Brinsmead v Harrison87, was that the single cause of action resulting from the joint commission of a tort merged in the first judgment which the plaintiff obtained in respect of it. A plaintiff who recovered action against any one joint tortfeasor was 'barred from subsequently recovering judgment against any other joint tortfeasor responsible for that tort whether in an action commenced before, at the same time as, or after the action in which a final judgment had already been recovered'88. The Privy Council, in 82 Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 603-604 per Gummow J; Bryanston Finance Ltd v de Vries [1975] QB 703 at 730 per Lord Diplock. 83 Sadler v Great Western Railway Co [1896] AC 450 at 454 per Lord Halsbury LC. 84 Wah Tat Bank Ltd v Chan [1975] AC 507 at 515. 85 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 454 per Gibbs CJ; [1985] HCA 12. 86 (1985) 155 CLR 448. 87 (1872) LR 7 CP 547. 88 Wah Tat Bank Ltd v Chan [1975] AC 507 at 515. Wah Tat Bank Ltd v Chan89 described this common law rule as 'highly technical and unsatisfactory' and cited, as its only possible justification, what was said about it by Blackburn J in Brinsmead v Harrison90: 'Is it for the general interest that, having once established and made certain his right by having obtained a judgment against one of several joint wrongdoers, a plaintiff should be allowed to bring a multiplicity of actions in respect of the same wrong? I apprehend it is not; and that, having established his right against one, the recovery in that action is a bar to any further proceedings against the others.' One technique that was adopted to circumvent the rule in Brinsmead v Harrison was the Tomlin form of order by which a settlement agreement was made and recorded without entry of judgment. As the Privy Council observed in Wah Tat Bank, this was not a complete solution to the inconvenience and injustice caused by the common law rule. The rule was considered in England by the Law Revision Committee91 which recommended legislation which took effect as s 6(1) of the [1935 UK Act]." The Report and s 6(1) of the 1935 UK Act A brief consideration of the Report and the 1935 UK Act assists the present task of construction of s 7(1)(b) of the WA Act. In 1934, the Committee was asked to consider a number of legal doctrines which might require revision, including the doctrine that there be no contribution between joint tortfeasors92, which had been the subject of criticism93. The 89 [1975] AC 507 at 515-516. 90 (1872) LR 7 CP 547 at 553. 91 Great Britain, Law Revision Committee, Third Interim Report, (1934). For a discussion of the Report and legislation, see James Hardie v Seltsam (1998) 196 CLR 53. 92 See Merryweather v Nixan (1799) 8 TR 186 [101 ER 1337]; Great Britain, Law Revision Committee, Third Interim Report, (1934) at 3 [1]-[2]. 93 See Palmer v Wick and Pulteneytown Steam Shipping Co Ltd [1894] AC 318 at 324 per Lord Herschell LC. Committee recommended that, when two persons each contribute to the same damage suffered by a plaintiff, the one who pays more than his share should be entitled to recover contribution from the other94. The Committee further considered that the right should be conferred on several concurrent tortfeasors as well as joint tortfeasors95. That recommendation took effect as s 6(1)(c) of the It was in the context of its recommendations on contribution that the Committee considered it desirable to alter the rule in Brinsmead v Harrison97, described above, which had the effect that "the tort is merged in the judgment even though there is no satisfaction"98. The Committee recommended that99: "A judgment recovered against one or more persons in respect of an actionable wrong committed jointly shall not, while unsatisfied, be a bar to an action against any others liable jointly in respect of the same wrong. Provided that the Plaintiff shall not be entitled to levy execution for, or to be paid, a sum exceeding, in the aggregate, the amount of the first judgment obtained against any of the persons so liable, nor to recover the costs of any subsequent action, unless the Judge before whom it is tried is of opinion that there was reasonable ground for bringing it." This recommendation took effect as s 6(1)(b) of the 1935 UK Act100. The rationales for the rule in Brinsmead v Harrison were that it "prevented multiplicity of actions and that a second jury might award different damages from the first"101. This was the context in which the Committee suggested that the rule be altered only in respect of unsatisfied judgments – that 94 Great Britain, Law Revision Committee, Third Interim Report, (1934) at 4-6 [4]- 95 Great Britain, Law Revision Committee, Third Interim Report, (1934) at 5-6 [7]. 96 Section 6(1)(c) was in substantially identical terms to s 7(1)(c) of the WA Act. 97 (1872) LR 7 CP 547. 98 Great Britain, Law Revision Committee, Third Interim Report, (1934) at 7 [11]. 99 Great Britain, Law Revision Committee, Third Interim Report, (1934) at 8. 100 Section 6(1)(b) was in substantially identical terms to s 7(1)(b) of the WA Act. 101 Great Britain, Law Revision Committee, Third Interim Report, (1934) at 7 [11]. is, judgments in respect of which execution had wholly or partly failed102. The Committee also noted, by reference to The Koursk103, that the rule in Brinsmead v Harrison did not apply to several concurrent tortfeasors104. Before going further, something should be said about the use of the terms "satisfied" and "unsatisfied". In circumstances where a writ of execution which issues on behalf of a successful plaintiff results in less than full recovery of the amount of loss or damage awarded by a judgment, the judgment is readily described as "unsatisfied". A plaintiff can compromise or settle a claim for loss or damage and agree to entry of a judgment by consent for a lesser amount than that claimed, or that which might have been awarded after a trial. Such a judgment may subsequently be "satisfied", as was the consent judgment at issue in this appeal. However, a plaintiff who has settled for such a lesser amount can be said not to have received "full satisfaction" in respect of the loss or damage claimed. This distinction is important: the Committee's recommendation provided for judgments which were unsatisfied, but not for plaintiffs who did not receive full satisfaction. When the Committee's recommendations were given effect in s 6(1) of the 1935 UK Act, s 6(1)(b) deterred separate or successive proceedings against both joint tortfeasors and several concurrent tortfeasors. It did so not by barring such proceedings, but by providing that sums recoverable in them should not in the aggregate exceed the amount of damages awarded by the judgment first given, and that the plaintiff should not ordinarily be entitled to costs in any but the first proceeding. These two deterrents were described in a subsequent report as "the sanction in damages" and "the sanction in costs"105. In its terms, s 6(1)(b) proceeded on the assumption that the judgment first given would be a judgment in respect of an actionable wrong for a sum representing the amount of the loss or damage suffered by the plaintiff, reflecting the Committee's suggestion that such legislation cover unsatisfied judgments only. It did not deal with the circumstance that a plaintiff might not recover the full amount of his or her loss or damage under a judgment first given where that judgment was entered by consent as the result of a settlement or compromise. 102 See Great Britain, Law Revision Committee, Third Interim Report, (1934) at 7-8 104 Great Britain, Law Revision Committee, Third Interim Report, (1934) at 8 [11]. 105 Great Britain, Law Commission, Law of Contract – Report on Contribution, (1977) Construction of s 7(1)(b) Provisions identical to s 7(1) of the WA Act have been criticised since the remark made by this Court in Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport106, quoted above. In XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd107, Gibbs CJ described s 5(1)(b) of the NSW Act as being "elliptical and somewhat obscure"108. In approaching the issue of construction presented in James Hardie v Seltsam109, Gaudron and Gummow JJ said that s 5(1) of the NSW Act110: "ha[d] become notorious for the conceptual and practical difficulties it engenders ... Further, judicial decisions calculated to remove one anomaly by an apparent beneficent construction of the legislation have given rise to other anomalies." "Judicial interpretative techniques may come close to leaching the existing statutory text and structure of their content and, whilst answering that apparently hard case then before the court, unwittingly lay the ground for other hard cases. The present statute represents an attempt to adjust the tripartite rights and interests of P, D1 and D2. Any regime of this nature is at greater risk of generating anomalies where all those liable to suit are not sued at the same time and in the one proceeding." The appellant contends, as it did before the WA Court of Appeal, that Nau v Kemp112 was wrongly decided by the NSW Court of Appeal. It submits that, 106 (1955) 92 CLR 200 at 211. 107 (1985) 155 CLR 448. 108 (1985) 155 CLR 448 at 458. 109 (1998) 196 CLR 53. 110 (1998) 196 CLR 53 at 59 [7]. 111 (1998) 196 CLR 53 at 60-61 [11]-[12]. 112 (2010) 77 NSWLR 687. like s 5(1)(b) of the NSW Act, s 7(1)(b) of the WA Act was intended to avoid multiplicity of suits. The appellant's main argument is that, even if the expression "damages awarded by the judgment first given" in s 7(1)(b) could be said to be elliptical or ambiguous, that circumstance does not compel the result that judgments entered by consent should be treated differently from judgments resulting from a judicial determination on the merits. The respondent seeks to uphold the reasoning of the WA Court of Appeal. He urges that the text of s 7(1)(b) should not be displaced by historical considerations or extrinsic materials, and submits that the evident intention of s 7(1)(b) is to prevent plaintiffs from recovering more than their actual loss. As to the text, the respondent concedes that, when the word "damages" first appears in s 7(1)(b), it refers to damages however arrived at, including by a consent judgment following settlement. However, the respondent contends that, when the word "damages" appears the second time in s 7(1)(b), it must be confined to damages arrived at by judicial determination on the merits, as the word "awarded" qualifies "damages", or else it is otiose. The respondent concedes that a judgment entered by consent gives rise to a res judicata. The terms "it is this day adjudged", which appear in the consent judgment at issue in this appeal, are identical to those used in Chamberlain v Deputy Commissioner of Taxation113, in which a judgment entered by consent was held to be no less binding than a judgment given on, or as a result of, a trial on the merits. The respondent did not contest that a judgment entered by consent was capable of falling within s 7(1)(a) of the WA Act. Judgments entered by consent have also been held to satisfy the requirements of ss 5(1)(c) and 5(2) of the NSW Act114. The appellant's main argument must be accepted. The legislative purpose of s 7(1)(b) is to avoid multiplicity of suits and the possibility that a plaintiff may recover more than the actual loss or damage suffered. This is confirmed not only by the language of the provision, particularly the "sanction in damages", but also by its relationship with s 7(1)(a), and by the evident policy considerations behind ss 7(1)(a) and 7(1)(b). 113 (1988) 164 CLR 502; [1988] HCA 21. 114 Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 616 per Gummow J; James Hardie v Seltsam (1998) 196 CLR 53 at 69 [41] per Gaudron and Gummow JJ, 96-97 [124]-[127] per Callinan J. See also Amaca Pty Ltd v New South Wales (2003) 77 ALJR 1509 at 1512 [18]; 199 ALR 596 at 600-601; [2003] HCA 44. The appellant correctly submits that an error may occur in the construction of s 7(1)(b) if too much emphasis is laid on the word "awarded" as it occurs in the phrase "damages awarded by the judgment first given". Dictionary definitions of the verb "to award" can be expected to include the wide notion, "to adjudicate" between several competitors, or tenderers, for a prize or a contract115. However, that wide meaning is not necessarily apt as a qualifier of the word "judgment", encompassing as it does in its ordinary and natural meaning judgments entered by consent and judgments resulting from a trial on the merits, the salient common feature being the finality of a judgment obtained either way. Further, while the term "award of damages" has been used to describe a judicial assessment of the whole of a plaintiff's loss116, the expression is not confined to that circumstance. The respondent submits that this Court should read the words "the judgment first given" occurring in s 7(1)(b) to mean "the judgment first given on, or resulting from, a trial on the merits". This is an invitation to the Court to construe the language of s 7(1)(b) so as to allow a person in the respondent's position to sue in separate and successive actions if that person has not been awarded the full amount of his or her loss or damage under a judgment entered by consent in the first action. In construing a statute, the purpose of which is relatively clear, it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose117. To the extent that the respondent's submission highlights an aspect of s 7(1)(b) which may give rise to possible injustice, it has some force. This is particularly so given that, at common law, a plaintiff was not permitted to join several concurrent tortfeasors in the one action. However, the respondent's submission fails to read s 7(1)(b) as a whole, in the context of s 7(1). Like s 6(1)(b) of the 1935 UK Act, s 7(1)(b) proceeds on the basis that the judgment first given is a judgment in respect of the full amount of a plaintiff's loss or damage. There is no provision for the possibility that a judgment first given may not be such a judgment. No exception to the "sanction in damages" is made for a plaintiff who has achieved only partial satisfaction in the first action as a result of a judgment entered by consent. The 115 See, for example, The Oxford English Dictionary, 2nd ed (1989), vol 1 at 829, "award"; Black's Law Dictionary, 9th ed (2009) at 157, "award". 116 See Baxter v Obacelo (2001) 205 CLR 635 at 656 [47] per Gleeson CJ and 117 See Australian Education Union v Department of Education and Children's Services (2012) 86 ALJR 217 at 224 [28] per French CJ, Hayne, Kiefel and Bell JJ; 285 ALR 27 at 35; [2012] HCA 3. relatively clear purpose of deterring a multiplicity of suits has been effected without provision for, or recognition of, the need for separate and successive suits in these circumstances. While the respondent is correct in submitting that s 7(1)(b) operates to prevent a plaintiff recovering more than the actual loss or damage suffered, s 7(1)(b) achieves that result by proceeding on the basis described above. Imputing a statutory purpose to the legislature by reading language more narrowly than it might ordinarily be read may assist in the resolution of an anomaly occasioning apparent injustice to an individual only to leave unremedied, or to cause inadvertently, other injustice or hard cases118. For example, a plaintiff may be obliged, or have good reason, to sue first a tortfeasor in respect of whom the amount of damages recoverable is limited, where the amount recoverable from another tortfeasor is not so limited119. Separate or successive actions may follow from proportionate liability legislation enacted in Australia120, or be appropriate for some other reason. If s 7(1)(b) has the potential to cause injustice in that circumstance, the injustice does not depend on distinguishing between a judgment entered by consent and a judgment given on, or resulting from, a trial on the merits. In a subsequent report which preceded the enactment in the United Kingdom of the Civil Liability (Contribution) Act 1978 (UK), the Law Commission recognised that the limit set by s 6(1)(b) of the 1935 UK Act on the sum recoverable by execution in separate or successive actions could cause injustice121. The Law Commission recommended that the "sanction in costs" be retained to deter unnecessary proliferation of actions but that the "sanction in damages" be abolished because of the possible injustice which it might cause122. 118 James Hardie v Seltsam (1998) 196 CLR 53 at 59-61 [7], [11] per Gaudron and 119 See Great Britain, Law Commission, Law of Contract – Report on Contribution, 120 See, for example, the Civil Liability Act 2002 (NSW) and the Civil Liability Act 121 Great Britain, Law Commission, Law of Contract – Report on Contribution, (1977) 122 Great Britain, Law Commission, Law of Contract – Report on Contribution, (1977) at 11-13 [36]-[41], 23 [81(c)]. Notwithstanding criticism of the clarity of s 7(1)(b), the text of the provision, and its relationship to s 7(1)(a), make relatively clear its purpose of deterring separate and successive actions where two or more tortfeasors have caused the same damage to the plaintiff. In Nau v Kemp, the NSW Court of Appeal was right to observe that the application of s 5(1)(b) of the NSW Act was capable of causing injustice in circumstances where a plaintiff had not been awarded the full amount of his or her loss or damage under a judgment first given123. However, that Court erred in rewriting s 5(1)(b) to give effect to what it saw as a desirable additional purpose, namely excepting from the operation of s 5(1)(b) a plaintiff in whose favour a judgment first given had been entered by consent. While it may be contended that s 7(1)(b) might give rise to injustice in limited circumstances while it subsists, it is possible for persons in the respondent's position to take steps (discussed in Baxter v Obacelo124) to avoid the application of s 7(1)(b) to them, which do not appear to have been taken by the respondent in this case. Where s 7(1)(b) does not apply because several concurrent tortfeasors are sued in the one action, it would be anomalous if the consequences of a settlement with one tortfeasor should turn on the differences between a consent order and a Tomlin order125. However, where several concurrent tortfeasors are not sued in the one action, and s 7(1)(b) operates to deter a separate or successive action by depriving it of practical utility, a plaintiff who agrees to a settlement in the first action without reserving, if appropriate, rights to recoup full loss or damage imperils his or her own interests. Conclusion In all the circumstances, it is for the legislature of Western Australia to consider what anomalies flow from s 7(1)(b) of the WA Act and to decide upon the necessity for any amendment. 123 Nau v Kemp (2010) 77 NSWLR 687 at 704-705 [75]-[79] per McColl JA, 739 [229] per Campbell JA, 745-746 [259]-[266] per Sackville AJA. 124 (2001) 205 CLR 635 at 648-649 [23], 654-656 [42]-[46], 657 [49] per Gleeson CJ 125 See Baxter v Obacelo (2001) 205 CLR 635 at 648-649 [23], 654-656 [42]-[46] per Gleeson CJ and Callinan J. Orders The following orders should be made: Appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of Western Australia made on 12 April 2011 and, in their place, order that the appeal to that Court be dismissed with costs. Bell BELL J. Where a person suffers damage as the result of a tort and the person brings more than one action in respect of that damage, s 7(1)(b) of the Law Reform (Contributory Negligence and Tortfeasors' Contribution) Act 1947 (WA) ("the WA Act") restricts recovery in the successive actions of amounts that exceed the "damages awarded by the judgment first given". The question raised by the appeal is whether, when a plaintiff settles the first action and effect is given to the settlement by the entry of a consent judgment for a money sum, that amount is correctly characterised as "damages awarded by the judgment". The respondent, Mr Thornton, claims that an injury he suffered while working at a mine site ("the accident") owned and operated by the appellant, Newcrest Mining Limited ("Newcrest"), was occasioned by the separate and independent acts of negligence of his employer, Simon Engineering Pty Ltd ("Simon Engineering"), and Newcrest. He claims that Simon Engineering and Newcrest are concurrent tortfeasors severally liable for the whole of the damage that he suffered in the accident126. Mr Thornton agreed to settle any common law claim in tort against Simon Engineering for the sum of $250,000. Agreement in this respect was reached at an informal conference held on 11 May 2007. On or about 29 May 2007, in order to give effect to the settlement, proceedings were commenced on Mr Thornton's behalf against Simon Engineering by filing in the Registry of the District Court of Western Australia a writ indorsed with a claim for damages arising from the accident. On 31 May 2007, a minute consenting to the entry of consent judgment in the amount of $250,000 was filed in the proceeding. Judgment was entered for Mr Thornton in this sum on the same day. The judgment sum was paid to Mr Thornton on 6 June 2007. On 23 June 2008, Mr Thornton commenced proceedings in the District Court of Western Australia against Newcrest claiming damages for the injuries that he suffered in the accident, which he alleged were caused by Newcrest's negligent failure to provide a safe site. In the document particularising his damages127, Mr Thornton acknowledged the receipt of $250,000 "settlement monies" in reduction of his claim against Newcrest. Newcrest moved for the summary dismissal of Mr Thornton's claim in reliance on s 7(1)(b) of the WA Act, which provides that: 126 See Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 646-647 [18]-[19] per Gleeson CJ and Callinan J; [2001] HCA 66; Glanville Williams, Joint Torts and Contributory Negligence, (1951) at 49-50. 127 Filed pursuant to District Court Rules 2005 (WA), r 45C(3). Bell "(1) Subject to Part 1F of the Civil Liability Act 2002, where damage is suffered by any person as the result of a tort – if more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, parent or child of that person, against tortfeasors liable in respect of the damage (whether as joint tortfeasors or otherwise) the sums recoverable under the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given: and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of opinion that there was reasonable ground for bringing the action". Deputy Registrar Hewitt allowed Newcrest's application and dismissed the proceedings. He held that Mr Thornton was precluded by s 7(1)(b) from recovering damages exceeding the judgment sum in the action against Simon Engineering. An appeal by way of hearing de novo from the Deputy Registrar's orders was dismissed by Mazza DCJ128. In the proceedings before Mazza DCJ, Mr Thornton gave evidence that he had not decided to elect to pursue a common law claim against Simon Engineering at the time the latter's workers' compensation insurer raised the possibility of settlement of any such claim with him. He said that he either had applied, or was intending "to apply to Workcover to try and overcome the 30% degree of disability threshold."129 He said that his weekly workers' compensation payments were "running out" and that he decided to settle for an amount that was less than his loss and to pursue other defendants for the balance130. 128 Thornton v Newcrest Mining Ltd [2010] WADC 61. 129 Thornton v Newcrest Mining Ltd [2010] WADC 61 at [18]. The reference to 30% is to the threshold degree of disability that a plaintiff is required to establish in order to bring a common law claim in negligence against the plaintiff's employer under s 93E(3) of the Workers' Compensation and Injury Management Act 1981 130 Thornton v Newcrest Mining Ltd [2010] WADC 61 at [18]. Bell Mazza DCJ did not determine whether the amount of $250,000 was, as Mr Thornton asserts, less than the amount of loss and damage caused by the accident. His Honour observed that Mr Thornton had sued Simon Engineering for damages arising out of injuries sustained in the accident and that he had received $250,000 in satisfaction of that claim131. The claim against Newcrest was for the same damage that was the subject of the proceedings against Simon Engineering and it followed that Mr Thornton was precluded from recovery of any further sum by s 7(1)(b) of the WA Act132. The Court of Appeal of Western Australia, in a unanimous judgment, set aside Mazza DCJ's order and substituted an order dismissing Newcrest's application for summary judgment. The Court of Appeal followed the decision of the New South Wales Court of Appeal in Nau v Kemp & Associates Pty Ltd133, which was handed down two months after Mazza DCJ's decision. In Nau v Kemp, each member of the New South Wales Court of Appeal, in separate judgments, held that the words "damages awarded by the judgment" mean damages awarded by a court following a judicial assessment because the most common meaning of "award" when used as a verb conveys a process of deliberation on the part of the person or body doing the awarding134. The Western Australian Court of Appeal endorsed the reasoning of the New South Wales Court of Appeal and identified a further reason for concluding that a consent judgment does not "award" damages: in some circumstances a consent judgment may be for a money sum that does not include any component by way of damages135. Newcrest appeals by special leave granted on 9 December 2011. On the hearing of the special leave application, Newcrest submitted that the intermediate courts of appeal had overlooked the decision in James Hardie & Coy Pty Ltd v Seltsam Pty Ltd136 and "the anomalous and apparently unjust preclusion of contribution possibilities" which a construction that excluded consent judgments from the limitation under par (b) was apt to produce. 131 Thornton v Newcrest Mining Ltd [2010] WADC 61 at [33]. 132 Thornton v Newcrest Mining Ltd [2010] WADC 61 at [35]. 133 (2010) 77 NSWLR 687, interpreting s 5(1)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW). 134 (2010) 77 NSWLR 687 at 695 [27]-[28] per McColl JA, 734-735 [207]-[210] per Campbell JA, 745 [259]-[262] per Sackville AJA. 135 Thornton v Newcrest Mining Ltd [2011] WASCA 92 at [28(a)]. 136 (1998) 196 CLR 53; [1998] HCA 78. Bell On the hearing of the appeal, Newcrest abandoned the submission that the construction adopted by the courts below resulted in any unjust preclusion of contribution rights. Newcrest challenged the construction of the provision on two grounds. First, it submitted that the phrase "damages awarded by the judgment" is ambiguous and that "there is no reason to deprive a consent judgment of the force and effect that it would normally enjoy, not only generally in the law, but specifically in relation to paras 7(1)(a) and 7(1)(c) of the same legislation." Allied to this was an assertion that the intermediate courts of appeal had given too much emphasis to the word "awarded". Newcrest's second submission was that the construction adopted below promotes a multiplicity of actions. To the extent that Newcrest's first submission complains that the Court of Appeal's construction deprives consent judgments of force and effect, it is misconceived. It is not in question that the judgment entered in the action against Simon Engineering has full effect as between the parties bound by it137. As explained, in question is whether the amount for which Mr Thornton and Simon Engineering agreed to settle the claim against the latter is correctly characterised as "damages awarded by the judgment". In Nau v Kemp, Campbell JA and Sackville AJA set out the dictionary meanings of the word "award" when used as a verb138. It is sufficient to note that its genesis is given in the Shorter Oxford English Dictionary on Historical Principles as "Decide or determine (something, that, to do)"139 and that the first meaning given in the Macquarie Dictionary is "to adjudge to be due or merited; assign or bestow: to award prizes."140 The Courts of Appeal of New South Wales and Western Australia were right to consider that the more natural meaning of the expression "damages awarded by the judgment" is damages that are the product of judicial adjudication. Newcrest's submission that the intermediate courts of appeal gave too much emphasis to the verb "awarded" is an invitation to read par (b) as if it provided that the sums recoverable in succeeding actions "shall not exceed the judgment first given" or perhaps "the 137 Chamberlain v Deputy Commissioner of Taxation (1988) 164 CLR 502 at 508 per Deane, Toohey and Gaudron JJ; [1988] HCA 21; Shaw v Hertfordshire County Council [1899] 2 QB 282. 138 (2010) 77 NSWLR 687 at 734 [207]-[209] per Campbell JA, 745 [259]-[260] per Sackville AJA. 139 6th ed (2007), vol 1 at 162, "award", sense 1. 140 5th ed (2009) at 110. Bell judgment sum first given"141. It can hardly be an error for the courts of appeal to endeavour to give meaning to each word in the phrase142. Moreover, as McColl JA observed in Nau v Kemp, the definition of "judgment first given" in s 5(3)(b) of the equivalent New South Wales statute (which is identical to s 7(3)(b) of the WA Act) is more apt to a judgment on the merits than to one entered by consent143. Newcrest submitted that contextual and policy considerations favour the construction for which it contended. Some reference should be made to matters of history before returning to these submissions. the following report of Section 7(1) of the WA Act is based on s 6(1) of the Law Reform (Married Women and Tortfeasors) Act 1935 (UK) ("the UK Act"), which was ("the enacted Committee")144. The Committee had been asked to report on the rule that there could be no contribution between tortfeasors. The rule, traced to Lord Kenyon's statements in Merryweather v Nixan145, had attracted trenchant criticism146. The Committee recommended that the "rule should be altered as speedily as possible."147 The Committee considered that a right of contribution should be given not only to joint tortfeasors but also where the damage caused to the the Law Revision Committee 141 Civil Judgments Enforcement Act 2004 (WA), s 3, defines "judgment sum" to mean the "amount of money ordered to be paid under a monetary judgment, whether or not the money is or includes costs or pre-judgment interest". 142 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 382 [71] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28. 143 (2010) 77 NSWLR 687 at 696 [29]. Section 5(3)(b) of the Law Reform (Miscellaneous Provisions) Act 1946 (NSW) provides that: "the reference in this section to 'the judgment first given' shall, in a case where that judgment is reversed on appeal, be construed as a reference to the judgment first given which is not so reversed and, in a case where a judgment is varied on appeal, be construed as a reference to that judgment as so varied". 144 Law Revision Committee, Third Interim Report, (1934) Cmd 4637. 145 (1799) 8 TR 186 [101 ER 1337]. 146 Palmer v Wick and Pulteneytown Steam Shipping Co [1894] AC 318 at 324 per Lord Herschell LC. 147 Law Revision Committee, Third Interim Report, (1934) Cmd 4637 at 5 [7]. Bell plaintiff was occasioned by the separate wrongful acts of several persons148 ("several concurrent tortfeasors"). The Committee went beyond the question of contribution and made recommendations with respect to the alteration of another rule of the common law which was considered to work injustice to plaintiffs149. This was the rule in Brinsmead v Harrison150. It was a rule which was the product of the idea that the cause of action in the case of a joint tort was one and indivisible. It followed that the cause of action merged in the judgment against a joint tortfeasor, precluding recovery from any other joint tortfeasor. This was so even when the judgment remained unsatisfied. The Committee said of the rule151: "[Its] merits … were stated by the Exchequer Chamber, in [Brinsmead v Harrison], to be that it prevented multiplicity of actions and that a second jury might award different damages from the first. It is submitted that the rule might be altered in respect of an unsatisfied judgment only, with the provision that a plaintiff should not be entitled to obtain by execution, in the aggregate, more than the amount awarded in the first judgment." The Committee's Recommendation (I) was in these terms152: "A judgment recovered against one or more persons in respect of an actionable wrong committed jointly shall not, while unsatisfied, be a bar to an action against any others liable jointly in respect of the same wrong. Provided that the Plaintiff shall not be entitled to levy execution for, or to be paid, a sum exceeding, in the aggregate, the amount of the first judgment obtained against any of the persons so liable, nor to recover the costs of any subsequent action, unless the Judge before whom it is tried is of opinion that there was reasonable ground for bringing it." (emphasis added) Paragraphs (a) and (b) of s 6(1) of the UK Act can be seen to reflect aspects of Recommendation (I): judgment recovered against any tort-feasor liable in respect of that damage shall not be a bar to an action against any other person who 148 Law Revision Committee, Third Interim Report, (1934) Cmd 4637 at 5 [7]. 149 Wah Tat Bank Ltd v Chan [1975] AC 507 at 516. 150 (1872) LR 7 CP 547. 151 Law Revision Committee, Third Interim Report, (1934) Cmd 4637 at 7-8 [11]. 152 Law Revision Committee, Third Interim Report, (1934) Cmd 4637 at 8. Bell would, if sued, have been liable as a joint tort-feasor in respect of the same damage; if more than one action is brought in respect of that damage by or on behalf of the person by whom it was suffered, or for the benefit of the estate, or of the wife, husband, parent or child, of that person, against tort-feasors liable in respect of the damage (whether as joint tort-feasors or otherwise) the judgments given in those actions by way of damages shall not in the aggregate exceed the amount of the damages awarded by the judgment first given; and in any of those actions, other than that in which judgment is first given, the plaintiff shall not be entitled to costs unless the court is of opinion that there was reasonable ground for bringing the action". the sums recoverable under Paragraph (a) abolished the rule in Brinsmead v Harrison. By necessary implication, abolition of the rule did away with the underlying doctrine of the unitary cause of action in the case of joint tort liability. The allied rule that the release of one joint tortfeasor operated to release all joint tortfeasors was also swept away by the enactment in Australian jurisdictions of tortfeasor legislation modelled on s 6(1) of the UK Act153. In the result, the release and the entry of consent judgment against one joint tortfeasor in an action against two or more tortfeasors does not preclude recovery of the balance of the plaintiff's loss from the remaining defendant joint tortfeasor154. Paragraph (b) was said by the Privy Council to have been devised "merely to discourage the multiplicity of actions which the old rule was designed to prevent."155 The "old rule" is the rule in Brinsmead v Harrison, which was concerned with The Committee's joint Recommendation (I), which addressed the rule, was confined to the liability of joint tortfeasors. However, as the words in parentheses make clear, par (b) as enacted was not so confined. The restriction on the recovery of amounts exceeding the "damages awarded by the judgment first given" applies whether liability is as a joint or several concurrent tortfeasor. liability of tortfeasors. the At common law there does not appear to have been a bar to recovery of the full quantum of a plaintiff's loss in successive actions brought against several 153 Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 584 per Brennan CJ, Dawson and Toohey JJ, 591 per Gaudron J, 613-615 per Gummow J; [1996] HCA 38. 154 Baxter v Obacelo Pty Ltd (2001) 205 CLR 635. 155 Wah Tat Bank Ltd v Chan [1975] AC 507 at 518. Bell concurrent tortfeasors. In The Koursk156, the owners of a vessel that was sunk as the result of the negligent navigation of the Clan Chisholm and the Koursk recovered an amount less than the amount of their loss in an action against the owners of the Clan Chisholm. This did not preclude recovery of the balance in an action brought against the owners of the Koursk157. The second reading speech for the UK Act158 gives no explanation for the choice to depart from the Committee's recommendation and to restrict the rights of plaintiffs in favour of several concurrent tortfeasors by making recovery against the latter subject to the limitation of par (b). The second reading speech for the WA Act159 is also silent on the matter. What is the object of the restriction imposed by par (b)? It is not clear that it was to prevent double satisfaction. The "universal rule" against permitting a plaintiff to recoup more than his or her loss is of long standing160. Well before the enactment of s 6(1) of the UK Act, English courts had no difficulty in preventing a plaintiff from recovering more than the amount of his or her loss. The history is traced in Baxter v Obacelo Pty Ltd161. The legislative objects of par (b) may be discerned as the two purposes which were said to justify the rule in Brinsmead v Harrison: discouraging a multiplicity of actions162 and avoiding a second jury awarding damages in an amount that differed from the amount awarded by the jury in the first action163. The first-mentioned purpose was said by Kelly CB to be to prevent unprincipled attorneys from accumulating "a vast amount of useless costs" by the bringing of successive actions164. It is a concern that is reflected in 157 [1924] P 140 at 152 per Bankes LJ, 158 per Scrutton LJ, 162-163 per Sargant LJ. 158 United Kingdom, House of Commons Debates, 8 July 1935, vol 304, cc117-126. 159 Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 25 September 1947 at 949-951. 160 Morris v Robinson (1824) 3 B & C 196 [107 ER 706]; Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 659 [57] per Gummow and Hayne JJ. 161 (2001) 205 CLR 635 at 657-663 [53]-[68]. See also Tang Man Sit v Capacious Investments Ltd [1996] AC 514 at 522. 162 XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 457-458 per Gibbs CJ; [1985] HCA 12; Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 651 [29] per Gleeson CJ and Callinan J. 163 Law Revision Committee, Third Interim Report, (1934) Cmd 4637 at 7 [11]. 164 Brinsmead v Harrison (1872) LR 7 CP 547 at 551. Bell the costs restriction contained in par (b). More generally, the two purposes are complementary. Damages awarded by a jury (more commonly now by a judge) are for the full amount of the plaintiff's loss (subject to any reduction to take account of contributory negligence). That it is desirable that the resources of the court should be taken up only once with making that assessment and undesirable that a jury (or judge) should arrive at different assessments is evident. These are considerations which apply to the award of damages following trial. By contrast, judgment entered by consent is likely to be the product of compromise and is likely to be for an amount less than the full amount of the plaintiff's loss. In most cases, the entry of consent judgment will make little demand on the resources of the court. Newcrest submitted that the harmonious construction of s 7(1) favours the "recognition" of consent judgments in par (b) conformably with their recognition in pars (a) and (c). Paragraph (a), it will be recalled, removes the bar in the case of successive actions against joint tortfeasors. Paragraph (c) confers a right of contribution between tortfeasors. The reference to the "recognition" of consent judgments in par (c) is to the decision in James Hardie & Coy Pty Ltd v Seltsam Pty Ltd, in which it was held that a defendant who has obtained a consent judgment in its favour is not a person "who is or would if sued have been liable" for the purposes of contribution under par (c)165. As Lord Reid explained in George Wimpey & Co Ltd v British Overseas Airways Corporation, the drafting of sub-s (1) does not lend itself to an interpretation that draws on claimed textual similarities between each paragraph166. Moreover, each paragraph deals with a different subject matter. There is no reason in logic or policy why the removal of the bar, or the non-amenability of a person to contribution following the entry of judgment in his or her favour following trial or by consent, should favour construing the expression "damages awarded by the judgment" to mean damages awarded by judgment whether entered following trial or by consent. Newcrest's second submission was that the construction adopted by the courts of appeal is an invitation to a plaintiff to "adopt a scatter gun approach to litigation against potential concurrent tortfeasors, knowing full well that a consent judgment procured will be no bar to further pursuing others, and always seeking to improve their position with each defendant." Gleeson CJ and Callinan J observed in Baxter v Obacelo Pty Ltd that, where a plaintiff has suffered loss or damage caused by the conduct of a number of tortfeasors, the claims "may be pursued in one or a number of actions" and "[t]he timing and form of the proceedings may be affected by a variety of circumstances"167. 165 (1998) 196 CLR 53. 166 [1955] AC 169 at 188-189. 167 (2001) 205 CLR 635 at 653 [38]. Bell Those circumstances may include that a plaintiff is unaware of the identity of a tortfeasor at the time the choice is made to settle with another. Why should the provision be construed so that a consent judgment against one tortfeasor for an amount less than the full amount of the loss bars recovery of the balance from another tortfeasor? The mischief which s 7(1)(b) was intended to remedy − a multiplicity of actions draining the resources of the court, generating unnecessary costs and giving rise to differing assessments − has force when applied to damages awarded by judge or jury but has none when applied to a judgment entered by consent to give effect to the parties' agreement. Newcrest pointed out that Mr Thornton could have protected his position by settling with Simon Engineering on terms that did not involve the entry of consent judgment. So much may be accepted, but it is a submission that accords primacy to technicality over substance. Before the enactment of s 7(1) of the WA Act, an astute plaintiff seeking to protect his or her position could avoid the bar by various stratagems: the stay of proceedings on terms or, where proceedings had not been commenced, an agreement containing a covenant not to sue. There were unsatisfactory features associated with the former168 and the latter was apt to give rise to litigation over the characterisation of the agreement169. The Court of Appeal was right to disavow a construction that produces the arbitrary result that the plaintiff whose settlement is effected by entry of consent judgment is shut out, while another plaintiff similarly circumstanced whose settlement is given effect without entry of judgment retains the right to recover the balance of his or her loss from a tortfeasor liable for that loss. Section 6(1) of the UK Act and its counterparts have been the subject of judicial criticism and calls for legislative reform170. In James Hardie & Coy Pty Ltd v Seltsam Pty Ltd, Gaudron and Gummow JJ warned against the use of interpretive techniques that "leach" the text in answering the apparently hard case 168 Wah Tat Bank Ltd v Chan [1975] AC 507 at 516. 169 Duck v Mayeu [1892] 2 QB 511; Cutler v McPhail [1962] 2 QB 292; Bryanston Finance Ltd v de Vries [1975] QB 703 at 723 per Lord Denning MR, 732 per Lord Diplock; Thompson v Australian Capital Television Pty Ltd (1996) 186 CLR 574 at 582 per Brennan CJ, Dawson and Toohey JJ. 170 Bitumen and Oil Refineries (Australia) Ltd v Commissioner for Government Transport (1955) 92 CLR 200 at 207, 211-212; [1955] HCA 1; Brambles Constructions Pty Ltd v Helmers (1966) 114 CLR 213 at 217 per Barwick CJ; [1966] HCA 3; XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 at 458 per Gibbs CJ; Baxter v Obacelo Pty Ltd (2001) 205 CLR 635 at 663 [71]-[72] per Kirby J. Bell before the court and thereby "unwittingly lay the ground for other hard cases."171 No question of "leaching" the text is raised by this appeal. Newcrest did not submit that the courts below were wrong to conclude that the more natural interpretation of the phrase "damages awarded by the judgment" is that the aggregate limit is that which is fixed by judicial assessment of the plaintiff's damages. Newcrest's submission was that the statutory language is capable of bearing the meaning that the aggregate limit is fixed by the judgment sum, whether entered following judicial assessment or by consent following the parties' agreement. It is a construction that gives no work to the words "damages awarded by" and which operates to further confine the right which at common law a plaintiff possessed to recoup the full amount of his or her loss against several concurrent tortfeasors. The Court of Appeal was right to eschew a construction that has that effect172. It was right to conclude that a judgment for a money sum entered by consent gives legal effect to the parties' agreement but does not award damages. The appeal should be dismissed with costs. 171 (1998) 196 CLR 53 at 60-61 [11]. 172 Potter v Minahan (1908) 7 CLR 277 at 304 per O'Connor J; [1908] HCA 63; Baker v Campbell (1983) 153 CLR 52 at 123 per Dawson J; [1983] HCA 39; Balog v Independent Commission Against Corruption (1990) 169 CLR 625 at 635-636; [1990] HCA 28.
HIGH COURT OF AUSTRALIA APPELLANT AND WRECK BAY ABORIGINAL COMMUNITY COUNCIL & ANOR RESPONDENTS Williams v Wreck Bay Aboriginal Community Council [2019] HCA 4 13 February 2019 ORDER Appeal allowed. Set aside the order in paragraph 2 of the order of the Court of Appeal of the Supreme Court of the Australian Capital Territory made on 23 October 2017 and, in its place, order that the order in paragraph 1 of the order of the Supreme Court of the Australian Capital Territory made on 25 August 2016 be set aside, and, in its place, order that questions 3 and 4 in the amended special case be answered as follows: Question 3 [I]s the Residential Tenancies Act 1997 (ACT), in whole or in part, a law which is not capable of operating concurrently with the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) within the meaning of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth)? Answer Yes, the Residential Tenancies Act 1997 (ACT), in part, is a law that is not capable of operating concurrently with the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) within the meaning of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth). Question 4 If the answer to Question 3 is "yes", to what extent does the Residential Tenancies Act 1997 (ACT) not apply to Aboriginal Land for the purposes of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth)? Answer The Residential Tenancies Act 1997 (ACT) does not apply to Aboriginal Land for the purposes of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) to the extent that s 8(1)(a) read with Sch 1, cl 72 and further read with s 9 of the Residential Tenancies Act 1997 (ACT) would prohibit subletting, and ss 54 and 128 operate upon that prohibition, on Aboriginal Land. On appeal from the Supreme Court of the Australian Capital Territory Representation G R Kennett SC for the appellant (instructed by Clayton Utz) J K Kirk SC with R J Arthur and P D Herzfeld for the first respondent (instructed by Ken Cush & Associates) P J F Garrisson SC, Solicitor-General for the Australian Capital Territory, with P M Bindon for the second respondent (instructed by ACT Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Williams v Wreck Bay Aboriginal Community Council Constitutional law (Cth) – Powers of Commonwealth Parliament – Territories – Inconsistency between Commonwealth and Territory laws – Where Council empowered under Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) ("Land Grant Act") to grant leases over certain land within Jervis Bay Territory ("JBT") – Where Land Grant Act does not affect application of other laws to extent other laws "capable of operating concurrently" with Land Grant Act – Where Residential Tenancies Act 1997 (ACT) applies in JBT as if JBT formed part of Australian Capital Territory – Where Residential Tenancies Act provides that all leases to which it applies include "standard residential tenancy terms" including term requiring lessor to maintain premises in reasonable state of repair – Whether, and to what extent, Residential Tenancies Act is law which is not capable of operating concurrently with Land Grant Act. Words and phrases – "alter, impair or detract from", "anti-exclusivity provision", "capable of operating concurrently", "complete or exhaustive statement", "implicit negative proposition", "indirect inconsistency", "residential tenancy agreement", "standard residential tenancy terms", "statutory power". Constitution, s 109. Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth), ss 6, 7, 12, 38, 40, Australian Capital Territory (Self-Government) Act 1988 (Cth), s 28. Jervis Bay Territory Acceptance Act 1915 (Cth), s 4A. Residential Tenancies Act 1997 (ACT), ss 8, 9, 10, 54, 128, Sch 1. KIEFEL CJ, KEANE, NETTLE AND GORDON JJ. Wreck Bay is within the Jervis Bay Territory ("the JBT"). The Wreck Bay Aboriginal Community Council ("the Council") is empowered under the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) ("the Land Grant Act") to grant leases in respect of certain land within the JBT. In 1986, pursuant to s 8 of the Land Grant Act, an area of land was granted by the Commonwealth to the Council1. The land granted to the Council was declared to be "Aboriginal Land". By virtue of s 10 of the Land Grant Act, "that land (including all rights, title and interests in that land) [was] vested in the Council without any conveyance, transfer or assignment". The Council was established by the Land Grant Act as a body corporate with perpetual succession2. As originally established, it consisted of "the persons who [were] registered members at that time"3. Mr Glen Williams, the appellant, was not one of these persons; he joined the Council as a registered member in 19894. Since then the appellant has resided in premises on Aboriginal Land provided by the Council ("the premises"). The appellant remains in occupation of the premises5, which are in substantial disrepair6. In a dispute between the Council and the appellant concerning the obligation of the Council under the Residential Tenancies Act 1997 (ACT) to keep premises leased to the appellant in a reasonable state of repair, questions 1 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 2 Land Grant Act, s 4. 3 Land Grant Act, s 5. The term "registered member" is defined in s 2(1) to mean a person whose name is on the register kept in accordance with Div 2 of Pt IV of the Land Grant Act. 4 Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 62 5 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 6 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon arose as to whether, and to what extent, the Residential Tenancies Act applies to that lease. These questions were agitated in this Court between the appellant and the Attorney-General for the Australian Capital Territory, who were broadly on one side, and the Council on the other. The arguments of the parties involved consideration of the effect of s 46 of the Land Grant Act, which deals with the application of the laws in force in the JBT to Aboriginal Land, and of the effect of the Land Grant Act on the grant of leases of Aboriginal Land by the Council. The Council contended that s 46 does not allow the application to Aboriginal Land of provisions of the Residential Tenancies Act that would oblige the Council to maintain leased premises in a reasonable state of repair because, it was said, that would impair the operation of the Land Grant Act. The appellant and the Attorney-General argued that s 46 allows the operation of any law in force in the JBT that may be obeyed simultaneously with the provisions of the Land Grant Act. It is not necessary to resolve this aspect of the controversy between the parties because the provisions of the Land Grant Act, considered as a whole, do not require that a lease of Aboriginal Land contain no terms other than those imposed by the Land Grant Act or expressly agreed to by the Council. In order to explain this conclusion, it is necessary to begin with a brief explanation of how it is that the laws of the Australian Capital Territory ("the ACT") operate in the JBT. The Jervis Bay Territory The JBT consists of land which was previously part of New South Wales ("NSW"). The Seat of Government Act 1908 (Cth) required that the "territory to be granted to or acquired by the Commonwealth for the Seat of Government shall contain an area not less than nine hundred square miles, and have access to the sea"7. The 1909 agreement8 between the Commonwealth and NSW for the 7 See s 4. 8 The agreement was ratified and confirmed by s 3 of the Seat of Government Acceptance Act 1909 (Cth) and s 5 of the Seat of Government Surrender Act 1909 (NSW). Nettle Gordon surrender of the land that is now the ACT included a provision that NSW would grant the Commonwealth certain identified territory at Jervis Bay9. A further agreement for the surrender of the territory at Jervis Bay to the Commonwealth was reached in 191310. The territory was surrendered by NSW by s 6 of the Seat of Government Surrender Act 1915 (NSW) and accepted by the Commonwealth by s 4(1) of the Jervis Bay Territory Acceptance Act 1915 (Cth) ("the Acceptance Act"). Section 4(4) of the Acceptance Act provided that "[t]he territory so accepted shall be known as the Jervis Bay Territory". Since self-government was granted to the ACT11, the position with respect to the laws applicable in the JBT has been as stated in s 4A(1) of the Acceptance Act: "Subject to this Act, the laws (including the principles and rules of common law and equity) in force from time to time in the Australian Capital Territory are, so far as they are applicable to the Territory and are not inconsistent with an Ordinance, in force in the Territory as if the Territory formed part of the Australian Capital Territory." It was not controversial in the present case that the Residential Tenancies Act is in force in the JBT. The proceedings The appellant commenced proceedings Administrative Tribunal ("ACAT") seeking orders that12: the ACT Civil and 9 See cl 5 of the First Schedule to the Seat of Government Acceptance Act 1909 (Cth) and cl 5 of the First Schedule to the Seat of Government Surrender Act 1909 (NSW). 10 The agreement was ratified and confirmed by s 3 of the Jervis Bay Territory Acceptance Act 1915 (Cth) and s 5 of the Seat of Government Surrender Act 1915 (NSW). 11 The position before the granting of self-government is described in Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 211-212 12 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon pursuant to s 83(b) of the Residential Tenancies Act the Council undertake necessary repairs to the premises; and pursuant to s 83(d) of the Residential Tenancies Act the Council pay compensation for breaches of the residential tenancy agreement in the sum Initially, the Council contended that ACAT did not have jurisdiction because it was not established that there was a residential tenancy agreement between the Council and the appellant within the meaning of the Residential Tenancies Act. ACAT rejected that contention, concluding that while no written lease had been located there had been a written lease which required the appellant to pay $35 per week, that the appellant had paid rent for 12 weeks but had not paid any rent since then, and that no steps had been taken to remove him or his family from the property13. Having resolved that jurisdictional issue, ACAT referred questions of law to the Supreme Court of the ACT pursuant to s 84 of the ACT Civil and Administrative Tribunal Act 2008 (ACT). A special case was filed in the Supreme Court. In that Court, it was conceded by the Council that leases of Aboriginal Land granted by it under the Land Grant Act are within the definition of residential tenancy agreements in the Residential Tenancies Act14. Under the special case as amended, the parties agreed that only the following questions [I]s the [Residential Tenancies Act], in whole or in part, a law which is not capable of operating concurrently with the [Land Grant Act] within the meaning of s 46 of the [Land Grant Act]? If the answer to Question 3 is 'yes', to what extent does the [Residential Tenancies Act] not apply to Aboriginal Land for the purposes of s 46 of the [Land Grant Act]?" 13 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 210 [3]. See Williams v Wreck Bay Aboriginal Community Council [2015] ACAT 14 Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 62 15 Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 61 Nettle Gordon The primary judge (Elkaim J) answered question 3 "No"16. It was therefore unnecessary for his Honour to answer question 4. The Council appealed to the Court of Appeal of the Supreme Court of the ACT. The Court of Appeal (Murrell CJ, Burns and Mossop JJ) unanimously allowed the Council's appeal17. Before summarising the reasons of the Court of Appeal it is desirable to set out the material provisions of the Land Grant Act and the Residential Tenancies Act. The Land Grant Act The Land Grant Act sets out the functions of the Council in s 6. These include the holding of title to Aboriginal Land and the exercise, for the benefit of members of the Community18, of the Council's powers as owner of Aboriginal Land. The functions of the Council also include the provision of community services to members of the Community and the management and maintenance of Section 7(2) provides that the powers of the Council include the power to dispose of real and personal property and the power to enter into contracts for the purposes of the Act. Section 12 provides that, subject to s 13, where land vests in the Council under the Act, the buildings and improvements on that land also vest in the Council. 16 See Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 17 See Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 18 "Community" is defined in s 2(1) to mean "the community known as the Wreck Bay Aboriginal Community". 19 Land Grant Act, s 6(cb), (ce). Nettle Gordon Section 13 allows for the continued occupation by the Commonwealth or an Authority20 of land occupied or used by them on the vesting of the land in the Council under the Land Grant Act. Section 13(3) provides that nothing in s 13 prevents the granting by the Council under s 38 of a lease of land vested in the Council to the Commonwealth or an Authority. If such a lease is granted, the land ceases to be land to which s 13 applies. Part V of the Land Grant Act is entitled "Dealings with Aboriginal Land". It includes s 38, which provides: "(1) Except as provided by this Part, the Council shall not deal with or dispose of, or agree to deal with or dispose of, any estate or interest in Aboriginal Land. Subject to this section, the Council may grant a lease of Aboriginal Land (other than land within the Booderee National Park or the Booderee Botanic Gardens): to a registered member or registered members for use for domestic purposes; to a registered member or registered members for use for business purposes; to a registered member or registered members for use for the benefit of the members, or of a significant number of the members, of the Community; (d) with the consent in writing of the Minister – to a person other than a registered member, or to persons at least one of whom is not a registered member, for use for domestic purposes; (e) with the consent in writing of the Minister – to a person other than a registered member, or to persons at least one of whom is not a registered member, for use for business purposes; or to the Commonwealth or an Authority. 20 "Authority" is defined in s 2(1) to mean "an Authority established by or under a law of the Commonwealth or a law in force in the Territory". Nettle Gordon Except with the consent of the Minister, the term of a lease shall not exceed: in the case of a lease to which paragraph (2)(a) applies – 99 years; in the case of a lease to which paragraph (2)(b) or (c) applies – 25 years; or in any other case – 15 years. The Council may grant a person a licence to use Aboriginal Land (other than land within the Booderee National Park or the Booderee Botanic Gardens). (5) Where the Council grants a lease of, or a licence to use, Aboriginal Land to the Commonwealth or to an Authority under this section, the rent and other amounts payable under the lease or licence shall be determined by the Minister. The Lands Acquisition Act 1989 does not apply to the grant of a lease under this section." Section 40 of the Land Grant Act makes special provision for the rights of registered members of the Council who were in lawful occupation of land before it became Aboriginal Land. It obliges the Council to grant a lease for the maximum period permitted by s 38(3) to such persons. Section 40 also constrains the powers of the Council to require payment by such persons in respect of buildings or improvements on the land leased to them. These special provisions do not apply to the appellant because he was not in occupation immediately before the land became Aboriginal Land. Section 41 confers on lessees of Aboriginal Land a limited right to grant a sub-lease of that land. As will be seen, the Residential Tenancies Act does not permit subletting by a tenant. Section 42 provides for the transmission upon the death of a registered member who has the benefit of a lease or sub-lease of Aboriginal Land of that benefit to a relative. Nettle Gordon Section 46 provides: "This Act does not affect the application to Aboriginal Land of a law in force in the Territory to the extent that that law is capable of operating concurrently with this Act." The Residential Tenancies Act The Residential Tenancies Act commenced operation in the ACT on 25 May 1998. Subject to a number of limited exceptions which are not presently relevant, as enacted it was expressed to apply to "any residential tenancy agreement commencing on or after the commencement day" and, from 1 July 2000 onwards, to "all residential tenancy agreements"21. The term "residential tenancy agreement" is defined broadly as an agreement that confers on the tenant a right, for value, to occupy premises as a home22. As noted above, it is now common ground between the parties that the lease between the Council and the appellant is capable of falling within that definition. standard The Residential Tenancies Act provides by s 8(1)(a) that a residential tenancy agreement "must contain, and is taken to contain, terms to the effect of schedule 1"23. the Section 9(1)(a) provides that terms which are inconsistent with the standard residential tenancy terms are void. Section 10 makes provision for ACAT to endorse terms that are inconsistent with the standard residential tenancy terms upon a joint application by the parties. A term so endorsed is not void24. terms mentioned residential tenancy Relevantly for present purposes, the standard residential tenancy terms in Sch 1 include cl 55, which provides: "(1) The lessor must maintain the premises in a reasonable state of repair having regard to their condition at the commencement of the tenancy agreement. The tenant must notify the lessor of any need for repairs. 21 See Residential Tenancies Act, s 4(2) as enacted. 22 See Residential Tenancies Act, ss 6A to 6F. 23 Prior to 1 January 2006 such terms were referred to as "prescribed terms". 24 See Residential Tenancies Act, ss 8(1)(d)(ii), 9(1)(b). Nettle Gordon This section does not require the tenant to notify the lessor about anything that an ordinary tenant would reasonably be expected to do, for example, changing a light globe or a fuse." Clause 57 provides: "Subject to clause 55, the lessor must make repairs, other than urgent repairs, within 4 weeks of being notified of the need for the repairs (unless otherwise agreed)." Clause 59 provides: "The tenant must notify the lessor (or the lessor's nominee) of the need for urgent repairs as soon as practicable, and the lessor must, subject to clause 82, carry out those repairs as soon as necessary, having regard to the nature of the problem." And cl 72(1) provides: "The tenant must not assign or sublet the premises or any part of them without the written consent of the lessor." Section 83 of the Residential Tenancies Act empowers ACAT to make the following orders in relation to a tenancy dispute: "(b) an order requiring performance of a residential tenancy agreement or occupancy agreement; an order requiring the payment of compensation for loss of rent or any other loss caused by the breach of a residential tenancy agreement or occupancy agreement". The Court of Appeal It is now convenient to consider the reasons of the Court of Appeal. As to the operation of s 46 of the Land Grant Act, the Court said25: 25 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon "[I]t is clear that a law operating in the JBT will not be capable of operating concurrently if the rights, obligations, powers, privileges and immunities created by it conflict with those created by the [Land Grant Act] ... A conflict will exist where there is some not insignificant impairment of those rights and obligations, powers, privileges and immunities. To pick up the language used by Dixon CJ in Victoria v Commonwealth (1937) 58 CLR 618 at 630 in the context of s 109 of the Constitution, if the applied law 'would alter, impair or detract from' the operation of the [Land Grant Act] then it would be incapable of operating concurrently with the [Land Grant Act]." As to whether the application of the Residential Tenancies Act would impair the operation of the Land Grant Act, the Court of Appeal focussed on two issues26: "(a) First, whether the power of the Council to grant leases was a statutory power or simply an incident of ownership in common with any other holder of freehold title. Second, whether under the [Land Grant Act] the determination of the terms on which leases are granted is a statutory discretionary power of the Council (subject to the express provisions of the [Land Grant Act]) or simply a discretionary power equivalent to that of any other landlord and hence subject to qualification by the provisions of applied laws operating in the JBT?" As to the first issue, the Court of Appeal noted that the Land Grant Act does not use the expression "freehold" or "fee simple" in its description of the nature of the title that exists in Aboriginal Land27. It noted that the Land Grant Act was enacted after the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) ("the Northern Territory Act"), which refers to a grant of land as a "grant of an estate in fee simple"28. The Court of Appeal observed that, in contrast to the language used in the Northern Territory Act, the title granted by the Land Grant 26 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 27 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 28 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon Act is not expressly stated to be an estate in fee simple29. The Court of Appeal continued30: "The [Land Grant Act] creates the concept of Aboriginal Land and, where that statutory status is granted, provides for the vesting of the land in the Council under s 10. While the terms of s 10 reflect an intention to make as full a grant of property as possible, and hence a title which might be seen as equivalent to an estate in fee simple, there has been a deliberate decision not to characterise it as such and to give it a statutory description which departs from the approach adopted under the Northern Territory Act." The Court concluded that, notwithstanding the amplitude of the title vested in the Council, the terms of the Land Grant Act do not support the proposition that what was granted was an estate in fee simple intended to put the Council in a position equivalent to any other landowner, subject only to the specific qualifications upon its power specified in the Land Grant Act. Rather, it was said to be consistent with "an intention to define the nature of the interest given to the Council by reference to the terms of the statute"31. The Court held that the interest granted to the Council was best described as "a form of statutory title not necessarily picking up the general law incidents of ownership"32. Accordingly, the Court held that the powers of the Council to dispose of interests in the land are best characterised as "statutory powers forming part of a statutory scheme rather than the Council merely being placed in the position of any other landowner"33. 29 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 30 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 31 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 32 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 225-226 [70] (emphasis in original). 33 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon As to the second issue, the Court acknowledged that s 38 of the Land Grant Act does not state expressly that it is intended to exclude other laws that might apply in relation to the conditions of leases, and does not expressly confer power to grant leases "on terms that the Council thinks fit"34. While an express provision to that effect would have made it clear that the statutory power to lease would be inconsistent with a law that sought to dictate the terms of such a lease, the Court of Appeal nevertheless held that35: "there are features of the [Land Grant Act] that collectively indicate that the power of the Council to grant leases should not be treated as one subject to laws specifying mandatory terms for such leases. In other words, the power of the Council to grant a lease should be interpreted as including the power to determine for itself the terms of those leases and not subject to qualification by provisions which would alter the terms of those leases." The features of the Land Grant Act referred to by the Court of Appeal in this regard were: the power to deal with or dispose of any interest or estate in Aboriginal Land is taken away from the Council by s 38(1), and then given back by s 38(2), subject to conditions36; the Land Grant Act contemplates the granting of 99-year leases, and a lease of such length is practical only if the terms can be established by the contracting parties. It would be inconsistent with the purpose of providing secure tenure if the terms of such a long-term lease were subject to modification by a law of general application37; 34 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 35 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 36 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 37 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon the long-term nature of the leases is reinforced by the provisions which deny the right of the Council to payment for buildings existing upon the land at the time it becomes Aboriginal Land. This circumstance suggests that the lease is more analogous to ownership under a Crown lease than a residential tenancy38; and these provisions of the Land Grant Act exist in a context where the Council is controlled by its members in a reasonably direct manner. The circumstance that the fundamental purpose of the Land Grant Act is to extend long-term control of land to an Aboriginal community which acts through the vehicle of the Council is more consistent with interpreting s 38(2) as encompassing within it the power to determine the terms upon which leases to its own members are to be granted39. The Court of Appeal, having held that s 38(2) was to be understood as conferring a power upon the Council to grant leases on such terms and conditions as it thinks fit40, went on to conclude41: "Once s 38(2) is so interpreted, the modification of leases granted by the Council pursuant to the provisions of the [Residential Tenancies Act] would clearly involve a significant qualification or impairment of the statutory power of the Council." Accordingly, the Court of Appeal answered the questions posed in the special case as follows42: 38 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 39 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 40 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 41 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 42 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon (a) Question 3: "The [Residential Tenancies Act] is not capable of operating concurrently (within the meaning of s 46 of the [Land Grant Act]) with the [Land Grant Act] insofar as: s 8 requires a lease granted by the Council to contain the standard residential tenancy terms within the meaning of the [Residential Tenancies Act]; and s 9 renders void terms of a lease granted by the Council that are inconsistent with the standard residential tenancy terms." (b) Question 4: "The [Residential Tenancies Act] does not apply to Aboriginal Land for the purposes of s 46 of the [Land Grant Act] to the extent to which s 8 or s 9 of the former Act would apply to a lease granted by the Council." The appeal to this Court Pursuant to a grant of special leave to appeal to this Court, the appellant contended that the Court of Appeal erred in holding that: ss 8 and 9 of the Residential Tenancies Act are not capable of operating concurrently with the Land Grant Act in accordance with s 46 of the Land Grant Act; and the Residential Tenancies Act does not apply to Aboriginal Land for the purpose of s 46 of the Land Grant Act to the extent to which ss 8 and 9 of the Residential Tenancies Act would apply to a lease granted by the Council. The arguments as to s 46 of the Land Grant Act The appellant's submissions The appellant submitted that the Court of Appeal erred in asking whether the Residential Tenancies Act would "alter, impair or detract from" the operation of the Land Grant Act. It was said that s 46 poses a different question, namely, whether the provisions of each Act are capable of simultaneous operation. The appellant argued that the provisions of the Residential Tenancies Act upon which his claim for relief rests are capable of operating concurrently with the Land Grant Act, in relation to leases granted by the Council under s 38. Nettle Gordon that The appellant submitted the words "capable of operating concurrently" should be given their ordinary meaning and that on that basis, the question is whether a particular law in force in the JBT can work together, in conjunction, or in cooperation with any given provision of the Land Grant Act. Further, it was said that s 46 confirms that the Land Grant Act is not a complete and exhaustive statement of the law on any matter dealt with in that Act43. The Council's submissions The Council submitted that s 46 is not a provision which expresses an intention on the part of the Commonwealth Parliament that a Commonwealth Act should be construed so as to permit the concurrent operation of other laws. The Council argued that, in this context, as explained by Gummow J in Momcilovic v The Queen44 in a passage cited in The Commonwealth v Australian Capital Territory45 ("the Same-Sex Marriage Case"), the circumstance that the Commonwealth law evinces an intention to make exhaustive or exclusive provision upon a topic: "has come to be known as 'indirect inconsistency'. Here, the essential notion is that, upon its true construction, the federal law contains an implicit negative proposition that nothing other than what the federal law provides upon a particular subject matter is to be the subject of legislation; a State law which impairs or detracts from that negative proposition will enliven s 109." The Council argued that a law which is inconsistent with an "implicit negative proposition" in the Commonwealth law cannot operate concurrently with it. Accordingly, on the basis that the Land Grant Act is correctly understood to require that the only terms of a lease of Aboriginal Land are those imposed by the Land Grant Act or expressly agreed to by the Council, there was no error in the Court of Appeal's use of the expression "alter, impair or detract from". 43 See R v Credit Tribunal; Ex parte General Motors Acceptance Corporation (1977) 137 CLR 545 at 563-564; [1977] HCA 34. 44 (2011) 245 CLR 1 at 111 [244]; [2011] HCA 34. 45 (2013) 250 CLR 441 at 468 [59]; [2013] HCA 55. Nettle Gordon The Attorney-General's submissions The Attorney-General submitted that it is implicit in s 46 of the Land Grant Act that the Commonwealth Parliament did not intend the Land Grant Act to exhaustively or exclusively regulate Aboriginal Land in the JBT. He argued that to the extent that the Residential Tenancies Act is capable of operating concurrently with the Land Grant Act, the Residential Tenancies Act applies to Aboriginal Land under the Land Grant Act. The Attorney-General argued that s 46 evinces an intention that the Land Grant Act is to operate within the setting of (or alongside) laws such as the Residential Tenancies Act, and that both Acts are to be read to operate together so far as is possible. He argued that the critical question posed by s 46 is the extent to which the Residential Tenancies Act is capable of operating concurrently with the Land Grant Act. The Attorney-General argued that the Court of Appeal erred in substituting the test for s 109 inconsistency in place of the words actually contained in s 46 of the Land Grant Act. He argued that the task of assessing the extent to which the Residential Tenancies Act is capable of operating concurrently with the Land Grant Act for the purposes of s 46 is not to be dictated or controlled by reference to the jurisprudence relating to s 28 of the Australian Capital (Cth) (Self-Government) Territory ("the Self-Government Act") or s 109 of the Constitution. Act The Attorney-General acknowledged that where a Commonwealth law provides a comprehensive and exhaustive statement of the law in relation to a particular matter there can be no room left for concurrent operation. However, he submitted that if that field is not comprehensive and exhaustive, the provisions said to conflict can be laid side by side to determine whether there is a real conflict or whether, upon their proper construction, the provisions are non-conflicting and capable of concurrent operation. The arguments as to the effect of the Land Grant Act The appellant's submissions The appellant submitted that even if s 46 were to be understood as inviting an enquiry as to whether the law operated to "alter, impair or detract from" the scheme of the Land Grant Act, the result of the case would be the same because the Land Grant Act does not establish a scheme the operation of which would be compromised by the application of the ordinary laws that protect the interests of tenants against exploitation. Nettle Gordon The appellant argued that the Land Grant Act does not create a statutory source of power (outside the ordinary law of real property) in the Council as proprietor of Aboriginal Land. While some lease terms are dictated by ss 38(3) and 40, others are plainly not, and all these provisions assume the existence and applicability of the general body of contract and property law. It was said that, except where it does so expressly, the Land Grant Act does not purport to displace the general law pertaining to the relationship between landlord and tenant. The Council's submissions The Council submitted that the power to grant a lease that is conferred by s 38(2) of the Land Grant Act should be construed as including the power to determine for itself the terms of those leases and not subject to qualification by provisions which would alter the terms of those leases. The Council argued that, for the reasons given by the Court of Appeal, the powers of the Council to deal with Aboriginal Land are properly to be regarded as wholly statutory in origin, and that the application of the Residential Tenancies Act would impair the scheme of powers and restrictions in the Land Grant Act. The Attorney-General's submissions The Attorney-General submitted that the Land Grant Act does not manifest an intention to state exhaustively or comprehensively the law governing the relationship between the Council as landlord and its tenants on Aboriginal Land. As to the Residential Tenancies Act, the Attorney-General argued that it imposes a minimum default standard regulating the rights, duties and obligations of the landlord and tenant in a residential lease. The Attorney-General acknowledged, correctly, that the provisions of the Residential Tenancies Act and the Land Grant Act which deal with subletting and sub-leasing do reveal a real conflict when laid side by side, in that the provisions of the former Act prohibiting subletting are not capable of concurrent operation with the provisions of the Land Grant Act that permit sub-leasing. That aside, the standard residential tenancy terms do not detract from the operation of the provisions of the Land Grant Act discussed above. The Attorney-General contended that the questions posed in the amended special case should be answered as follows: Nettle Gordon (a) Question 3: "Yes, the [Residential Tenancies Act], in part, is a law that is not capable of operating concurrently with the Land Grant Act within the meaning of s 46 of the Land Grant Act." (b) Question 4: "The [Residential Tenancies Act] does not apply to Aboriginal Land for the purposes of s 46 of the Land Grant Act to the extent that s 8(1)(a) read with Sch 1, cl 72 and further read with s 9 of the [Residential Tenancies Act] would prohibit subletting, and ss 54 and 128 operate upon that prohibition, on Aboriginal Land." The effect of the Land Grant Act While there is force in the submissions of the appellant and the Attorney-General as to the operation of s 46 of the Land Grant Act, it is unnecessary to reach a firm view as to this aspect of the controversy between the parties. Whether or not s 46 of the Land Grant Act is to be construed strictly by reference to its own terms or in light of the jurisprudence relating to s 109 of the Constitution46 and s 28 of the Self-Government Act47, it is clear that the starting point for a consideration of its operation must be a determination of the legal meaning of the provisions of the Land Grant Act understood as a whole. If one asks whether there is a "textual"48 or "direct collision"49 with the Residential Tenancies Act it is readily apparent from a comparison of the provisions of the two pieces of legislation that there is no direct collision between the provisions of the Land Grant Act and cl 55 of Sch 1 to the Residential Tenancies Act. Clause 55 of Sch 1 to the Residential Tenancies Act does not 46 Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508 at 524-525 [39]-[43]; [2011] HCA 33. 47 The Commonwealth v Australian Capital Territory (2013) 250 CLR 441 at 465-467 48 Miller v Miller (1978) 141 CLR 269 at 275; [1978] HCA 44. 49 Blackley v Devondale Cream (Vic) Pty Ltd (1968) 117 CLR 253 at 258; [1968] HCA 2. Nettle Gordon create any right or obligation that cannot be given effect while at the same time effect is given to the provisions of the Land Grant Act. In the Same-Sex Marriage Case50, this Court held that the provisions of the ACT law which provided for marriage under that law could not operate concurrently with the Marriage Act 1961 (Cth) in accordance with s 28 of the Self-Government Act, and so were inoperative. That was because the provisions of the Marriage Act were "a comprehensive and exhaustive statement of the law of marriage" which necessarily contained "the implicit negative proposition that the kind of marriage provided for by the [Marriage Act] is the only kind of marriage that may be formed or recognised in Australia" (emphasis in original). If one asks whether the Land Grant Act contains the implicit negative proposition that the terms and conditions of leases for which it provides are to be the only terms and conditions applicable to those leases51, one can see that its provisions considered together do not purport to provide a complete statement of the law governing the rights and obligations of parties to leases granted by the Council so as to exclude the application of the law generally applicable to leases within the JBT. Accordingly, the ordinary law of the land in respect of the irreducible minimum level of habitability applies to leases granted pursuant to Australian Mutual Provident Society v Goulden The Council argued that this Court's decision in Australian Mutual Provident Society v Goulden52 supported its contention that to apply cl 55 of the standard residential tenancy terms would impair the operation of the Land Grant Act. In Goulden, Gibbs CJ, Mason, Brennan, Deane and Dawson JJ noted the circumstance that the Commonwealth statute there under consideration did not "establish a detailed and special code of contract or insurance law to be applied in relation to the contracts of insurance written by registered life companies". In relation to those contracts "the ordinary provisions of the local law of the particular State or Territory [were] left to apply except to the extent that they 50 (2013) 250 CLR 441 at 468 [58]-[59]. 51 The Commonwealth v Australian Capital Territory (2013) 250 CLR 441 at 467-468 52 (1986) 160 CLR 330 esp at 336-337; [1986] HCA 24. Nettle Gordon [might] be so modified or excluded by provisions dealing with particular subject-matters"53. Their Honours contrasted54 the approach of the statute in this regard with its approach to the matters in respect of which it made special provision, which included the statutory funds of life insurance companies and the rates of premium charged. In relation to such matters, their Honours concluded that the special provisions of the Commonwealth Act established the entitlement of registered life insurance companies to set their premiums as they saw fit in respect of the classes of risks which they were willing to underwrite. On that basis, their Honours concluded that it would "alter, impair or detract from" the scheme of Commonwealth regulation established55: "if a registered life insurance company was effectively precluded by the legislation of a State from classifying different risks differently, from setting different premiums for different risks or from refusing to insure risks which were outside the class of risk in respect of which it wished to offer insurance". The contrast drawn by the Court in Goulden is instructive. The contrast is between Commonwealth laws that operate within the framework of the general law and Commonwealth laws which operate to lay down a rule or rules in terms which convey that the rule or rules so stated, and no other rules, are to govern a given case. The provisions of the Land Grant Act are not of this latter character. They do not purport to state comprehensively and exhaustively what shall be the rules in relation to the rights and obligations of the parties to a lease56. In particular, they say nothing about the rights or obligations of the parties in relation to the maintenance of leased premises. In American Dairy Queen (Q'ld) Pty Ltd v Blue Rio Pty Ltd57, Mason J (as his Honour then was) said of Pt XI of the Land Act 1962 (Qld) that it "does not 53 (1986) 160 CLR 330 at 335. 54 (1986) 160 CLR 330 at 335-337. 55 (1986) 160 CLR 330 at 337. 56 cf R v Credit Tribunal; Ex parte General Motors Acceptance Corporation (1977) 137 CLR 545 at 563-564; Momcilovic v The Queen (2011) 245 CLR 1 at 116 57 (1981) 147 CLR 677 at 683; [1981] HCA 65. Nettle Gordon have the appearance of a code" intended to make comprehensive and exclusive provision for dealing with land regulated by it. The same observation can be made about the Land Grant Act. The provisions of the Land Grant Act relating to the terms and conditions of leases are plainly not comprehensive. For example, they do not state that a lessee of Aboriginal Land from the Council shall be entitled to quiet enjoyment and exclusive possession under the lease, or that the lessee is under an obligation to use the premises in a tenant-like manner. Yet, it was not suggested that these familiar incidents of a lease under the general law are not terms of a lease granted under s 38(2). Nor could such a suggestion be sustained given the legislature's use of the term "lease" to describe the subject of a grant under s 38(2) of the Land Grant Act58. In Minister for Lands and Forests v McPherson59, Kirby P (as his Honour then was) said: "In the case of an interest called a 'lease', long known to the law, the mere fact that it also exists under a statute will not confine its incidents exclusively to those contained in the statute. On the face of things, the general law, so far as it is not inconsistent with the statute, will continue to operate." In the same case, Mahoney JA observed60 that it is "not inconsistent with the statutory nature or origin of [the right of occupation called a lease] that other rights should be implied". Leasing as a statutory power As to the Court of Appeal's conclusion that "the power of the Council to grant a lease should be interpreted as including the power to determine for itself the terms of those leases and not subject to qualification by provisions which would alter the terms of those leases"61, it must be said that, to the extent that 58 See American Dairy Queen (Q'ld) Pty Ltd v Blue Rio Pty Ltd (1981) 147 CLR 677 59 (1991) 22 NSWLR 687 at 696. 60 (1991) 22 NSWLR 687 at 712, citing O'Keefe v Williams (1910) 11 CLR 171; [1910] HCA 40. 61 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon some of the language used by the Court of Appeal might be taken to suggest that the Council was empowered unilaterally to prescribe the terms and conditions of a lease not fixed by the Land Grant Act, the Council did not seek to support such a suggestion in this Court. Rather, the Council's position was that, to the extent that the Land Grant Act did not impose a term or condition, the Council might negotiate with a potential lessee to agree upon terms, but standard terms of the kind to be found in Sch 1 to the Residential Tenancies Act could not be imposed upon it. The Council, while accepting that the power conferred by s 38(2) operates within the milieu of the general law by reason of the deployment of the "long familiar" expression "lease", sought to confine this milieu to the common law and equity. To argue that the milieu of the general law should not include statutory provisions intended to provide standard protections to every lessee whose tenancy meets the description of a residential tenancy is to argue against the equal application to all tenants within the JBT of laws calculated to preserve the health, safety and dignity of tenants. It is also to argue for the drawing of a distinction between the sources of the general law in circumstances where the text of the Land Grant Act does not invite the drawing of such a distinction. As to the Court of Appeal's conclusion that the power conferred by s 38(2) is "not merely equivalent to that of any other landowner"62, it may be accepted for the sake of argument that the power conferred upon the Council by s 38(2) of the Land Grant Act is a statutory power rather than a "regrant" of the common law rights of a landowner taken away by s 38(1). But to say that is not to deny that the Land Grant Act is far from being "a comprehensive and exhaustive statement" of the terms and conditions which are to apply to the leases granted by the Council. Nor is it to suggest that a lease granted by the Council pursuant to s 38(2) must not contain any terms other than those expressly stated in the Land Grant Act or expressly agreed to by the Council. To adopt and adapt the words of Wilson, Deane and Dawson JJ in Commercial Radio Coffs Harbour v Fuller63, the relaxation by s 38(2) of the prohibition in s 38(1) does not confer an immunity from other laws, Commonwealth or State. Rather, the express provisions of ss 38 and 40 are readily understood as specific, and limited, qualifications upon the proposition that the terms and conditions of a lease are, 62 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 63 (1986) 161 CLR 47 at 57; [1986] HCA 42. Nettle Gordon like any other lease, determined under the general law by agreement of the parties subject to such statutory regulation as a competent legislature may enact. Some leases may be for 99 years The Court of Appeal considered that the circumstance that s 40 of the Land Grant Act contemplates leases for 99 years is inconsistent with the application of laws that might modify the terms established by the parties because "a lease of such a length is only practical if the terms can be established by the contracting parties"64. But that objection might be made to the application, to any long-term tenancy, of laws intended to protect the interests of lessees against the superior bargaining power of lessors. Further, the existence of a legal mechanism whereby the parties may customise the terms of their lease, such as that provided by s 10 of the Residential Tenancies Act, while not relevant to the proper construction of the Land Grant Act, does serve to illustrate the danger of approaching the construction of the latter Act by making a speculative assumption about what considerations of "practicality" require. In addition, s 38(2) contemplates the grant of leases which do not engage s 40. Indeed, in the present case the lease to the appellant is a lease which does not attract the benefit of s 40. Nothing in the text of the Land Grant Act suggests an intention to discriminate between the different classes of lease that may be granted under s 38(2) in favour of some classes of lessee and against others in terms of ensuring that the leased premises remain in a reasonable state of repair. A legislative intention to depart from fundamental notions of equality before the law so as to favour one class of lessee over another could be expected to have been stated in clear terms. The Land Grant Act does not contain any such terms. Indeed, given the operation of s 12 of the Land Grand Act to vest in the Council buildings and improvements on Aboriginal Land, and given, in addition, that it is the function of the Council under s 6(ce) "to manage and maintain Aboriginal Land", the maintenance of buildings on leased land within any of the categories in s 38(2) can be seen to be a function of the Council. It may be that the cost to the Council of performing this function will lessen its ability to carry out its other functions for the benefit of the Community. But that would not be a reason to take a different view of the effect of the Land Grant Act. To observe that the ability of the Council to choose to carry out 64 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon activities for the benefit of the Community will be circumscribed by the cost to it of performing its legal obligations is not to say anything useful about the extent of those obligations. Further, to give effect to the considerations of "inconvenience" to the Council referred to by the Court of Appeal to come to the conclusion that the Land Grant Act requires that the ordinary law of the land in the JBT not apply to leases of Aboriginal Land is erroneously to give effect to "a judicially constructed policy at the expense of the requisite consideration of the statutory text and its relatively clear purpose"65. Community control The Court of Appeal was influenced by the consideration that the Council is "controlled by its members in a reasonably direct manner" as "a matter which is more consistent with interpreting s 38(2) as encompassing within it the power to determine the terms upon which leases to its own members are to be granted"66. This consideration has no application in relation to leases to persons who are not registered members of the Council. Such leases may be granted under s 38(2)(d), (e) and (f). The notion of membership control of the Council affords no protection at all to these classes of lessee. The self-interest of Council members could not be relied upon to guarantee that the terms and conditions of these leases would be fair and just. Further, to the extent that the general law is available to protect these classes of lessee, nothing in the Land Grant Act suggests that the protection afforded to lessees by the general law should be available to lessees other than registered members but not to registered members. There is no reason to suppose that the Land Grant Act contemplates that leases to registered members might provide premises with a lower standard of maintenance, in terms of human habitability, than is required in leases to persons who are not registered members. 65 Australian Education Union v Department of Education and Children's Services (2012) 248 CLR 1 at 14 [28]; [2012] HCA 3. See also Certain Lloyd's Underwriters v Cross (2012) 248 CLR 378 at 390 [26]; [2012] HCA 56. 66 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Nettle Gordon Conclusion and orders For these reasons, the appeal should be allowed. The questions posed by the amended special case should be answered in the terms proposed by the Attorney-General for the ACT, as follows: Question 3: "[I]s the Residential Tenancies Act 1997 (ACT), in whole or in part, a law which is not capable of operating concurrently with the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) within the meaning of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth)?" Answer: "Yes, the Residential Tenancies Act 1997 (ACT), in part, is a law that is not capable of operating concurrently with the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) within the meaning of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth)." Question 4: "If the answer to Question 3 is 'yes', to what extent does the Residential Tenancies Act 1997 (ACT) not apply to Aboriginal Land for the purposes of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth)?" Answer: "The Residential Tenancies Act 1997 (ACT) does not apply to Aboriginal Land for the purposes of s 46 of the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) to the extent that s 8(1)(a) read with Sch 1, cl 72 and further read with s 9 of the Residential Tenancies Act 1997 (ACT) would prohibit subletting, and ss 54 and 128 operate upon that prohibition, on Aboriginal Land." The parties have agreed to bear their own costs. Bell BELL J. I gratefully adopt the facts and procedural history set out in the joint reasons. The Wreck Bay Aboriginal Community Council ("the Council") conceded before the primary judge that the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) ("the Land Grant Act") and the Residential Tenancies Act 1997 (ACT) are capable of simultaneous obedience. It did not put its case below, or in this Court, on the basis that the Land Grant Act "cover[s] the field"67. The case on which the Council succeeded before the Court of Appeal of the Supreme Court of the Australian Capital Territory is that the provisions of the Residential Tenancies Act on which Mr Williams relies68 are not capable of concurrent operation with the Land Grant Act because, relevantly, the imposition of a statutory obligation of repair on the Council would "alter, impair or detract from" the scheme of the Land Grant Act69. On Mr Williams' primary case, the Council's concession with respect to the capacity for simultaneous obedience to each Act is determinative. He contends that s 46 of the Land Grant Act states an interpretative rule that its provisions are to be understood as not displacing any other law in force in the Jervis Bay Territory ("the JBT"), save in the case of direct collision. Section 46 provides that the Land Grant Act does not affect the application to Aboriginal Land of a law in force in the JBT "to the extent that that law is capable of operating concurrently" with the Land Grant Act. Capacity for concurrent operation is said by Mr Williams to convey a concept that is narrower than inconsistency. He submits that the Court of Appeal erred by treating s 46 as a "constitutional" provision governing the relationship between laws enacted by different legislatures as s 109 of the Constitution and s 28 of the Australian Capital Territory (Self-Government) Act 1988 (Cth) ("the Self-Government Act") do. Mr Williams contends that s 46 serves to confirm that the Land Grant Act "is not a complete and exhaustive statement of the law on any subject" (emphasis in original) and "allows other laws in force in the JBT to operate to the greatest extent possible". Where a provision of the Land Grant Act is open to more than one construction, Mr Williams submits the construction that enables the law in force in the JBT to operate concurrently is to be preferred. The Attorney-General for the Australian Capital Territory generally supports this analysis. 67 Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 63 68 Residential Tenancies Act, ss 8, 9 and cl 55 of Sch 1. 69 Australian Mutual Provident Society v Goulden (1986) 160 CLR 330 at 337; [1986] HCA 24, citing Victoria v The Commonwealth (1937) 58 CLR 618 at 630 per Dixon J; [1937] HCA 82. Bell The submission that s 46 serves to secure the application of laws in force in the JBT to Aboriginal Land under the Land Grant Act to the greatest extent possible should be rejected. Section 46 is framed in similar terms to s 74 of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth). As Brennan J explained in R v Kearney; Ex parte Japanangka, s 74 of that Act, as a law of the Commonwealth, is given its full operation before the scope of a power created by a law of the Northern Territory, or the consequences of its exercise, are ascertained70. An enactment of the Australian Capital Territory ("Territory enactment") picked up by s 4A(1) of the Jervis Bay Territory Acceptance Act 1915 (Cth) applies to Aboriginal Land under s 46 of the Land Grant Act to the extent that the Territory enactment is capable of operating concurrently with the Land Grant Act. There is no reason to distinguish the operation of s 46 from that of s 28(1) of the Self-Government Act, which provides that a Territory enactment has no effect to the extent that it is inconsistent with a Commonwealth Act but that the Territory enactment "shall be taken to be consistent with such a law to the extent that it is capable of operating concurrently with that law". The work done by s 28(1) is explained in The Commonwealth v Australian Capital Territory71: "The text of s 28 thus makes plain that the section is directed to the effect which is to be given to an enactment of the Assembly; it is not directed to the effect which is to be given to a federal law. ... It does not say, and it is not to be understood as providing, that laws of the federal Parliament are to be read down or construed in a way which would permit concurrent operation of Territory enactments." As there further explained, the starting point in applying s 28(1) is ascertainment of the legal meaning of the federal Act72. The determinative question here is whether the power conferred by s 38(2) of the Land Grant Act is, as the Court of Appeal held73, a power to exclusively determine the terms on which a lease for use for domestic purposes is granted. The Land Grant Act vests land declared to be Aboriginal Land, including all 70 (1984) 158 CLR 395 at 420; [1984] HCA 13. 71 (2013) 250 CLR 441 at 466 [53]; [2013] HCA 55 (emphasis in original). 72 The Commonwealth v Australian Capital Territory (2013) 250 CLR 441 at 467 73 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Bell rights, title and interests in that land, in the Council74. The Council's power to deal with, or dispose of, any interest in Aboriginal Land is taken away by s 38(1). A limited power to grant a lease of Aboriginal Land (other than land within the Booderee National Park or the Booderee Botanic Gardens) is conferred by s 38(2). A lease for use for domestic purposes may only be granted to a registered member75 or to registered members76 or, with the consent in writing of the Minister, to a person other than a registered member, or to persons at least one of whom is not a registered member77. The term of a lease for use for domestic purposes granted to a registered member or members may not exceed 99 years and the term of such a lease granted with the Minister's consent to a person other than a registered member may not exceed 15 years78. A lessee and a sub-lessee of Aboriginal Land for use for domestic purposes may grant a sub- lease of the whole of the land without the consent of the Council79. Except with the consent in writing of the Minister, the sub-lease may only be granted to a registered member, the Commonwealth or an Authority80, and the land must be used for domestic purposes81. The benefit, or a share in the benefit, of a lease or a sub-lease of Aboriginal Land for use for domestic purposes may be transmitted by will or on intestacy to a relative of the registered member82. The Land Grant Act does not otherwise provide for the terms and conditions of leases or sub- leases of Aboriginal Land granted for use for domestic purposes under s 38. The Council acknowledges that the Land Grant Act is to be understood as enacted against a background of the common law of contract and property, including, to the extent that they may be applicable, implied covenants between landlord and tenant. On the Council's argument, it is the parties' ability to modify implied covenants by express agreement that permits their harmonious operation 74 Land Grant Act, s 10. 75 Section 2(1) of the Land Grant Act defines "registered member" to mean a person whose name is on the Register kept in accordance with Div 2 of Pt IV of that Act. 76 Land Grant Act, s 38(2)(a). 77 Land Grant Act, s 38(2)(d). 78 Land Grant Act, s 38(3). 79 Land Grant Act, s 41(1). 80 Land Grant Act, s 41(2). 81 Land Grant Act, s 41(3). 82 Land Grant Act, s 42(1). Bell under the legislative scheme of the Land Grant Act. By contrast, the Council submits, legislatively imposed conditions have the capacity to undermine the scheme83. The imposition of a term requiring the Council to maintain the leased premises in repair is said to have that effect. Features of the legislative scheme on which the Council's argument relies include the obligation imposed by s 40 to grant leases to registered members who were in occupation of land immediately before it became Aboriginal Land for a term of 99 years. The terms and conditions of these leases are precluded from providing for any payment by the lessee in respect of a building or improvements erected on the land solely at his or her expense84 but, in the case of buildings or improvements which have not been erected solely at the lessee's expense, may allow for payment by the lessee of a sum representing the value of the buildings and improvements at the time the land became Aboriginal Land85. The Council argues that its relationship with its registered member tenants is unlike the relationship between landlord and tenant under residential tenancy agreements of the kind contemplated by the Residential Tenancies Act. It identifies the policy of the Land Grant Act as being to secure Aboriginal land for present and future generations of Aboriginal people at Wreck Bay86, through the vehicle of a body corporate that is subject to a significant degree of community control. The means of giving effect to the policy is said to be by the grant of long-term tenure to registered members under statutory leases that confer rights having more in common with ownership of land than those conferred on a lessee under an "ordinary" residential lease. While registered members who were not in occupation of the land immediately before it became Aboriginal Land ("non- original registered members") do not have an entitlement to a lease for use for domestic purposes for a term of 99 years, the Land Grant Act contemplates the grant of leases for a term of that length to non-original registered members. The provisions that allow sub-letting and the benefit of the lease to pass to a relative on the death of the registered member are relied upon as indicative of the intention that leases granted for use for domestic purposes provide long-term security of tenure. 83 Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508 at 525 [41]; [2011] HCA 33. 84 Land Grant Act, s 40(b). 85 Land Grant Act, s 40(c). 86 Australia, House of Representatives, Parliamentary Debates (Hansard), 29 May Bell The claimed incapacity for concurrent operation of the Territory and federal Acts here is likened by the Council to the incapacity of State anti- discrimination legislation to operate concurrently with the regulation of life insurance companies under the Commonwealth legislation considered in Australian Mutual Provident Society v Goulden87. The State legislation in that case would have made unlawful the conduct of the business of registered life insurance companies in accord with the policy of the Commonwealth legislation. The inconsistency on which the Council relies here is not of that kind. The Council is required to act for the benefit of the Community in relation to housing, social welfare, education, training or health needs88 and to provide community services to members of the Community89. It contends that its capacity to carry out these functions in accordance with the priorities determined by its registered members will be impaired if leases of Aboriginal Land for use for domestic purposes are subject to the standard residential tenancy terms. The application of the standard residential tenancy terms to a lease of Aboriginal Land to an original occupier for use for domestic purposes for a term of 99 years may be thought to be incongruous. As the Court of Appeal observed, the incidents of these leases have more in common with "ownership under a Crown lease ... rather than a residential tenancy in the sense contemplated by the [Residential Tenancies Act]"90. A statutory obligation on the landlord, intended to protect the tenant against the former's superior bargaining power, is hardly apt to a lease for 99 years which the Council was obliged to grant subject to the terms and conditions specified in s 40(b) or (c). Why in the case of such a lease should the obligation not fall on the lessee to maintain the premises in repair? Nonetheless, it is accepted that no distinction may be drawn between the Council's power to grant a lease for use for domestic purposes under s 38(2)(a) and (d), and a lease granted in accord with s 38 to an original occupier of the land on the terms and conditions specified in s 40. Apart from limiting the classes of persons to whom leases of Aboriginal Land for use for domestic purposes may be granted, and specifying maximum terms, the Land Grant Act is largely silent as to the terms and conditions of leases granted to non-original registered members and, with ministerial approval, to persons other than registered members. The power extends to the grant of a lease for any term less than 99 or 15 years as the case may be. While it may be the fact, as the primary judge was informed, that 87 (1986) 160 CLR 330. 88 Land Grant Act, s 6(ca). 89 Land Grant Act, s 6(cb). 90 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Bell the Council has chosen to grant all "domestic leases" for a term of 99 years91, it is not constrained by the policy of the Land Grant Act to do so. The provisions of the Land Grant Act which permit sub-leasing without the Council's consent and the benefit of the lease or sub-lease to pass to a relative on the death of the lessee are an insufficient basis for the contrary conclusion. Application of the generally protective provisions of the Residential Tenancies Act to leases of Aboriginal Land for use for domestic purposes cannot be said to undermine the scheme of the Land Grant Act, given that the Council has the power to grant leases in the case of non-original registered members on terms and conditions which are of a kind "contemplated" by the Residential Tenancies Act92. As the primary judge noted, community control of the Council may be of little avail in the case of a small number of tenants who are adversely affected by the unduly detrimental conditions of their leases93. I agree with the orders proposed in the joint reasons and with their Honours' answers to the questions posed by the special case. 91 Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 61 92 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 93 Wreck Bay Aboriginal Community Council v Williams (2016) 312 FLR 60 at 66 GAGELER J. The Australian Capital Territory (Self-Government) Act 1988 (Cth) establishes the Australian Capital Territory as a self-governing polity with its own Legislative Assembly. Section 22 confers power on the Legislative Assembly to make laws for the peace, order and good government of the Australian Capital Territory. The power conferred by s 22 is "of the same quality as ... that enjoyed by the legislatures of the States"94. Section 22 is subject to s 28. Section 28 relevantly provides that a provision of a law made by the Legislative Assembly "has no effect to the extent that it is inconsistent" with a Commonwealth law in force in the Territory. However, "such a provision shall be taken to be consistent with such a law to the extent that it is capable of operating concurrently with that law". The holding in The Commonwealth v Australian Capital Territory95 made clear that a law made by the Legislative Assembly under s 22 that is "inconsistent" with a Commonwealth law in force in the Australian Capital Territory within the meaning of s 28 remains a law for the peace, order and good government of the Australian Capital Territory. The Territory law is rendered by s 28 not beyond power but merely the inconsistency96. And, although a narrower approach had been suggested in academic commentary97 and had been supported by comments in Northern Territory v GPAO98, the holding in The Commonwealth v Australian Capital Territory also made clear that the test of whether a Territory law is inconsistent with a Commonwealth law within the meaning of s 28 is the same as the test of whether a State law is inconsistent with a Commonwealth law within the meaning of s 109 of the Constitution: a Territory law is not "capable of operating concurrently" with a Commonwealth law, and is therefore "inconsistent" with the Commonwealth law within the meaning of s 28, if the Territory law would operate to "alter, impair or detract from" the Commonwealth law99. Of s 28 it the extent of inoperative 94 Capital Duplicators Pty Ltd v Australian Capital Territory (1992) 177 CLR 248 at 281; [1992] HCA 51, quoting R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 at 279; [1981] HCA 74. 95 (2013) 250 CLR 441; [2013] HCA 55. 96 (2013) 250 CLR 441 at 466 [52], 468 [59]. 97 See Lindell, "The Arrangements for Self-government for the Australian Capital Territory: A Partial Road to Republicanism in the Seat of Government?" (1992) 3 Public Law Review 5 at 10-11. 98 (1999) 196 CLR 553 at 583 [60]; [1999] HCA 8. 99 (2013) 250 CLR 441 at 468 [59]. can therefore be said, as it was said of s 109, that "[i]n the end" it has received a construction which accords with "essential conceptions of federalism"100. The Jervis Bay Territory Acceptance Act 1915 (Cth) provides that laws enacted by the Legislative Assembly for the peace, order and good government of the Australian Capital Territory will also operate in the Jervis Bay Territory. Section 4A does so by relevantly providing that the laws in force from time to time in the Australian Capital Territory, so far as they are applicable to the Jervis Bay Territory, are in force in the Jervis Bay Territory "as if" the Jervis Bay Territory formed part of the Australian Capital Territory. The words "as if" introduce a statutory fiction101. The fiction is for present purposes important. Section 4A gives no greater force to a law enacted under s 22 of the Australian Capital Territory (Self-Government) Act, as applied in the Jervis Bay Territory, than the law would have if the Jervis Bay Territory formed part of the Australian Capital Territory. In that way, the express qualification in s 4A incorporates the test for, and consequence of, inconsistency under s 28 of the Australian Capital Territory (Self-Government) Act. If the law of the Australian Capital Territory as applied in the Jervis Bay Territory would operate to alter, impair or detract from a Commonwealth law in force in the Jervis Bay Territory, then the transplanted law is to that extent inoperative in the Jervis Bay Territory – in the same way that s 28 would render the law inoperative if the Jervis Bay Territory formed part of the Australian Capital Territory. The central question in this appeal can therefore be stated as whether ss 8 and 9 of the Residential Tenancies Act 1997 (ACT) ("the RTA"), as applied in the Jervis Bay Territory by s 4A of the Jervis Bay Territory Acceptance Act and according to the conception of inconsistency transposed from s 109 of the Constitution into s 28 of the Australian Capital Territory (Self-Government) Act, are inconsistent with the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) ("the Land Grant Act"), to the extent that those sections of the RTA would require a lease of "Aboriginal Land" granted by the Wreck Bay Aboriginal Community Council under s 38(2) of the Land Grant Act to contain the standard residential terms mentioned in Sch 1 to the RTA and to the extent that the sections would render a term of such a lease void if it is inconsistent with such a standard residential term. I recently sought to expound the relevant conception 100 cf Momcilovic v The Queen (2011) 245 CLR 1 at 111 [241]; [2011] HCA 34, quoting Dixon, "Marshall and the Australian Constitution" (1955) 29 Australian Law Journal 420 at 427. 101 Re Macks; Ex parte Saint (2000) 204 CLR 158 at 203 [115]; [2000] HCA 62. of inconsistency in Work Health Authority v Outback Ballooning Pty Ltd102. The following reasons need to be read against the background of that exposition. The standard residential terms mentioned in Sch 1 to the RTA are highly prescriptive as to the rights and obligations of the lessor and of the lessee. The standard residential terms include that the lessor must ensure at the start of the tenancy that the premises let are fit for habitation, reasonably clean, in a reasonable state of repair and reasonably secure103. They include that the lessor must maintain the premises in a reasonable state of repair104, must make urgent repairs as soon as practicable105 and must make other repairs within four weeks of being notified of the need for repairs106. They include that the tenant must take reasonable care of the premises and their contents and keep them reasonably clean107, must not make any additions or alterations to the premises without the written consent of the lessor108, must not add any fixtures or fittings without the written consent of the lessor109, must not leave the premises vacant for more than three weeks without notifying the lessor110, and must not assign or sublet the premises or any part of them without the written consent of the lessor111. They include that the lessor or the tenant may each, by written notice, terminate the tenancy on a date specified in the notice on the ground that the premises are not fit for habitation112. The important feature of the standard residential terms in Sch 1 to the RTA for present purposes, however, is not the detail of the rights and obligations they impose but the circumstance that those rights and obligations are imposed 102 [2019] HCA 2 at [64]-[78]. 103 Clause 54(1) of Sch 1 to the RTA. 104 Clause 55(1) of Sch 1 to the RTA. 105 Clauses 59 and 82 of Sch 1 to the RTA. 106 Clauses 55 and 57 of Sch 1 to the RTA. 107 Clause 63(c) of Sch 1 to the RTA. 108 Clause 67 of Sch 1 to the RTA. 109 Clause 68(1) of Sch 1 to the RTA. 110 Clause 71 of Sch 1 to the RTA. 111 Clause 72(1) of Sch 1 to the RTA. 112 Clause 86(a) of Sch 1 to the RTA. and are enforceable as terms of the lease. The effect of each standard residential term that is binding on the landlord is, relevantly, "to include in the tenancy agreement a contractual obligation binding the landlord to the tenant, not to subject the landlord to a statutory duty of performance"113. The ultimate question of inconsistency needs to be addressed by asking whether mandatory incorporation of the standard residential terms in Sch 1 to the RTA into a lease granted under s 38(2) of the Land Grant Act would alter, impair or detract from the legal or practical operation of that section. The initial stage of the requisite analysis is to determine the scope and purpose of the power in s 38(2) of the Land Grant Act that "the Council may grant a lease of Aboriginal Land". The subsequent stage of the analysis is to determine whether mandatory inclusion of such standard residential terms in such a lease would detract from the scope of the power or substantially impair achievement of the purpose for which the power was conferred. In determining the scope and purpose of the power conferred by s 38(2) of the Land Grant Act, the statement in s 46 of the Land Grant Act that "[t]his Act does not affect the application to Aboriginal Land of a law in force in the Territory to the extent that that law is capable of operating concurrently with this Act" can immediately be put to one side. Section 46 is enacted on the assumption that a law in force in the Jervis Bay Territory will be inoperative to the extent that the law is not capable of operating concurrently with the Land Grant Act. The section does not instantiate some special test of inconsistency or repugnancy peculiar to the operation of the Land Grant Act. The import of s 46, like s 74 of the Aboriginal Land Rights (Northern Territory) Act 1976 (Cth) on which it was modelled, is to clarify that the Land Grant Act is not intended to make exhaustive or exclusive provision with respect to the subject-matter of Aboriginal Land114. The result of that clarification of Commonwealth legislative intention is that a law in force in the Jervis Bay Territory is not to be regarded as detracting from the full operation of the Land Grant Act merely because the law has application to Aboriginal Land115. Aboriginal Land is unlike what might have become of places within the exclusive power of the Commonwealth under s 52(i) of the Constitution, were it not for the Commonwealth Places (Application of Laws) Act 1970 (Cth) and the 113 Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 at 327; [1997] HCA 39, quoting McCarrick v Liverpool Corporation [1947] AC 219 at 230. 114 cf R v Credit Tribunal; Ex parte General Motors Acceptance Corporation (1977) 137 CLR 545 at 563; [1977] HCA 34. 115 cf Victoria v The Commonwealth ("The Kakariki") (1937) 58 CLR 618 at 630-631; [1937] HCA 82. Commonwealth Places (Mirror Taxes) Act 1998 (Cth). Aboriginal Land is not an Alsatia116. Like the Aboriginal Land Rights (Northern Territory) Act containing s 74, the Land Grant Act containing s 46 "must be given its full operation before the scope of a power created by a law of the Territory or the consequences of its exercise can be ascertained"117. Section 46 is agnostic as to whether a law in force in the Jervis Bay Territory is capable of operating concurrently with the Land Grant Act for a reason other than that the law has application to Aboriginal Land. For that reason, s 46 has no bearing on the determination of the scope and purpose of s 38(2) of the Land Grant Act. Understanding the scope and purpose of the power conferred by s 38(2) of the Land Grant Act begins with understanding the nature of the body on which it is conferred. Under the Land Grant Act118, the Wreck Bay Aboriginal Community Council is the body corporate in which the Aboriginal Land was vested on 14 March 1987119. The Aboriginal Land comprised "land [that] has always been regarded as a distinct Aboriginal area separate from other land in Jervis Bay Territory"120 and included all buildings then existing on that land. The Council is constituted solely by the persons who are registered members121. Persons who satisfied the Department administering the Act that they were Aboriginals over the age of 18 years residing in the Jervis Bay Territory became registered members shortly after the commencement of the Act122. Thereafter, a person has not been permitted to become a registered 116 cf Cowen, "Alsatias for Jack Sheppards?: The Law in Federal Enclaves in Australia" (1960) 2 Melbourne University Law Review 454. See Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630; [1996] HCA 58; Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) (2004) 220 CLR 388; [2004] HCA 53. 117 R v Kearney; Ex parte Japanangka (1984) 158 CLR 395 at 420; [1984] HCA 13. 118 Section 4(1)-(2) of the Land Grant Act. 119 Sections 8 and 10 of the Land Grant Act. See Commonwealth of Australia Gazette, G16, 28 April 1987. 120 Australia, House of Representatives, Parliamentary Debates (Hansard), 29 May 121 Section 5 of the Land Grant Act. 122 Section 17(2)-(3) of the Land Grant Act. member unless the registered members present and voting at a general meeting of the Council have voted by a two-thirds majority to permit registration123. Apart from decisions in relation to membership, all decisions of the Council are required to be taken by an ordinary majority of registered members present and voting at a general meeting124 or taken by the executive committee of the Council125, or such other committee as the Council might choose to establish126, acting within the scope of authority delegated by the Council127. The executive committee and any other committee can be comprised only of registered members128. As the Council is a creature of statute, its authority and the limits of that authority are defined by statute129. Under the Land Grant Act, the Council is given neither the capacities of a natural person nor the unfettered rights of a private holder of a fee simple. Rather, the Council is given specified functions, specified powers and specified duties required to be obeyed in the performance of those functions and in the exercise of those powers. The functions of the Council include "to hold title to Aboriginal Land"130 and "to exercise, for the benefit of the members of the Community, the Council's powers as owner of Aboriginal Land and of any other land owned by the Council"131. Those, however, are not the only functions of the Council. Its other functions include "in consultation with the Minister, to consider and, where practicable, take action for the benefit of the Community in relation to the housing, social welfare, education, training or health needs of the members of the 123 Sections 18(1) and 26(2) of the Land Grant Act. 124 Section 26(1) of the Land Grant Act. 125 Sections 28 and 34(6) of the Land Grant Act. 126 Section 35 of the Land Grant Act. 127 Section 36 of the Land Grant Act. 128 Sections 29(1) and 35(2) of the Land Grant Act. 129 Kathleen Investments (Aust) Ltd v Australian Atomic Energy Commission (1977) 139 CLR 117 at 128-131; [1977] HCA 55. 130 Section 6(a) of the Land Grant Act. 131 Section 6(b) of the Land Grant Act. Community"132, "to provide community services the Community"133, "to engage in land use planning in relation to Aboriginal Land"134, "to manage and maintain Aboriginal Land"135, and "to conduct business enterprises for the economic or social benefit of the Community"136. The "Community" the Wreck Bay Aboriginal Community137, which includes but is not limited to registered members of the Council. the community known as to members of Apparent from the description of those statutorily defined functions of the Council is that performance of each of them may involve a substantial commitment of financial resources and that performance of all of them will require the Council to prioritise between them in deploying such financial resources as are from time to time available to it. Decisions as to how best to allocate the Council's financial resources in the performance of its various functions are committed by the Land Grant Act to the Council itself, except that the Council must obtain approval of the Minister administering the Act to enter into a contract for an amount exceeding $100,000 or such higher amount as may be prescribed138. The powers of the Council with respect to dealings with Aboriginal Land are defined in Pt V of the Land Grant Act. That the powers of the Council with respect to dealings with Aboriginal Land are limited to those so defined is made plain by the prescription in s 38(1) that "[e]xcept as provided by this Part, the Council shall not deal with or dispose of, or agree to deal with or dispose of, any estate or interest in Aboriginal Land". The power conferred on the Council in Pt II by s 7(1) "to do all things necessary or convenient to be done for or in connection with the performance of its functions", which by s 7(2)(a) includes, subject to the Act, power "to acquire, hold or dispose of real and personal property", is expressed by s 7(1) to be in addition to other powers conferred on 132 Section 6(ca) of the Land Grant Act. 133 Section 6(cb) of the Land Grant Act. 134 Section 6(cd) of the Land Grant Act. 135 Section 6(ce) of the Land Grant Act. 136 Section 6(cf) of the Land Grant Act. 137 Section 2(1) of the Land Grant Act (definition of "Community"). 138 Section 7(3) of the Land Grant Act. the Council by the Land Grant Act and cannot be read as extending to the subject-matter of Pt V139. The power conferred on the Council by s 38(2) is therefore not just a power to grant a lease of Aboriginal Land. It is the only power which the Council has to grant a lease of Aboriginal Land. Within Pt V, it is expressly limited in three relevant respects. First, with two extensions, the power is limited to a power to grant a lease of Aboriginal Land to a registered member or to registered members. The grant of such a lease for domestic purposes is for a term of up to 99 years140, for business purposes is for a term of up to 25 years141, and for the benefit of the members or a significant number of the members of the Community is for a term of up to 25 years142. The power is thus at its core intramural. One extension of the Council's power to grant a lease, beyond its power to grant a lease to a registered member or to registered members, is the power to grant a lease for a term of up to 15 years to the Commonwealth or an Authority established by or under a Commonwealth law or a law in force in the Jervis Bay Territory143. In respect of a lease of Aboriginal Land within Booderee National Park granted to the Director of National Parks, the Minister is given power to grant a lease to the Director on behalf of the Council if the Minister is satisfied that the Council has refused, or is unwilling, to do so144. The other extension of the Council's power to grant a lease is the power to grant a lease for domestic purposes or for business purposes for a term of up to 15 years to a person other than a registered member, or to persons at least one of whom is not a registered member, with the consent in writing of the Minister145. Within the scope of the 139 cf Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672 at 678; [1979] HCA 26, applying Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7; [1932] HCA 140 Sections 38(2)(a) and 38(3)(a) of the Land Grant Act. 141 Sections 38(2)(b) and 38(3)(b) of the Land Grant Act. 142 Sections 38(2)(c) and 38(3)(b) of the Land Grant Act. 143 Sections 38(2)(f) and 38(3)(c) read with s 2(1) of the Land Grant Act (definition of "Authority"). 144 Sections 38A and 38C of the Land Grant Act. 145 Sections 38(2)(d)-(e) and 38(3)(c) of the Land Grant Act. power thereby conferred on the Minister is a power to give or withhold consent by reference to considerations which include the identity of the proposed lessee and the terms of the proposed lease146. Ministerial veto or override of either nature is noticeably lacking from the core area of the power to grant a lease to a registered member or to registered members, save in one potential operation of that power soon to be noted. The second limitation on the Council's power to grant a lease of Aboriginal Land is that its power to grant such a lease to a registered member for domestic or business purposes is hardened into a duty in the case of an existing occupier – a registered member who occupied land, with the consent of the Commonwealth or an Authority established by or under a Commonwealth law or a law in force in the Jervis Bay Territory, immediately before the land became Aboriginal Land. In such a case, the Council is obliged to grant the member a lease of that land for the maximum term permitted for a lease of that kind147. The terms and conditions of the lease must not provide for any payment by the member in respect of a building or improvements erected on the land solely at the member's expense148. However, the lease may include terms and conditions approved by the Minister which require the member to pay the Council, in respect of other buildings and improvements on the land, amounts in the aggregate equal to the value of those buildings and improvements at the time at which the land became Aboriginal Land149. The third limitation is that the terms and conditions of a lease of Aboriginal Land cannot undermine two specified prescriptions. One prescription is that the person to whom the lease has been granted has a right to grant a sub- lease to a registered member, to the Commonwealth or an Authority established by or under a Commonwealth law or a law in force in the Jervis Bay Territory and, with the consent of the Minister, to another person150. The other prescription is that the beneficial interest of a registered member in a lease or sub-lease for domestic purposes is capable of transmission to a relative of the member by will or under a law relating to intestacy in force in the Territory151. 146 cf Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 497-498, 500-501, 505-506; [1947] HCA 21. 147 Section 40 of the Land Grant Act. 148 Section 40(b) of the Land Grant Act. 149 Section 40(c) of the Land Grant Act. 150 Section 41(1)-(2) of the Land Grant Act. 151 Section 42(1) of the Land Grant Act. Part V is otherwise silent as to the terms and conditions on which the Council is able to grant a lease under s 38(2). The silence, in my opinion, bespeaks an area of discretion designedly committed to the Council. No doubt, the rights granted under s 38(2) need to answer the description of a "lease" at general law. One of the rights granted must be a right of exclusive possession for a term152. If the Council does not grant a right of exclusive possession, that grant cannot be the grant of a lease, and is therefore not within the scope of the power conferred by s 38(2), although it is possibly within the power separately conferred on the Council by s 38(4) to grant a licence. No doubt, also, the power conferred by s 38(2) is "framed on the basis that it will operate in the context of local laws of the various States and Territories of the Commonwealth"153. Those laws include laws in force from time to time in the Jervis Bay Territory which might prescribe the formalities to be observed for a lease to be made or take effect or be enforced. They also include laws in force from time to time in the Jervis Bay Territory which might supply implied terms and conditions of a lease – quiet possession and non-derogation from grant being examples – of a kind which when supplied by the common law "parties can, by specific arrangement, modify or vary"154 and which when supplied by statute are typically expressed to be able to be negatived, varied or extended by "express declaration"155. However, the whole scheme of the Land Grant Act tells, in my opinion, in favour of a construction of s 38(2) which leaves the terms and conditions of the grant by the Council of a lease of Aboriginal Land ultimately to be determined by agreement between the Council and the recipient of the grant, except to the limited extent that Pt V of the Act otherwise makes express provision. The purpose – that is, the legislatively intended practical operation – of conferring that measure of decision-making latitude on the Council, in my opinion, is to permit the Council to ensure that the terms and conditions of the grant of a lease impose no greater obligations on the Council as lessor than are sustainable and 152 Radaich v Smith (1959) 101 CLR 209 at 214, 217-220, 222; [1959] HCA 45; Chelsea Investments Pty Ltd v Federal Commissioner of Taxation (1966) 115 CLR 1 at 8; [1966] HCA 15; Western Australia v Ward (2002) 213 CLR 1 at 218-219 [489]; [2002] HCA 28. 153 cf Australian Mutual Provident Society v Goulden (1986) 160 CLR 330 at 335; [1986] HCA 24. 154 cf Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 218. 155 eg, s 74(2) of the Conveyancing Act 1919 (NSW). See Edgeworth, Butt's Land Law, 7th ed (2017) at 368 [7.760]. consistent with such priorities as the Council might from time to time set for the deployment of its limited financial resources in the exercise of its manifold functions. Negotiating the terms and conditions for the grant of a lease to a registered member or another person, the Council must be able to restrict the terms and conditions on which it is prepared to make the grant to those which it is satisfied do not impede its ability, for example, to provide contemplated community services to members of the Wreck Bay Aboriginal Community or to take contemplated action in relation to housing, social welfare, education, training or health for the benefit of the Wreck Bay Aboriginal Community as a whole. To use the language of Mason J in Ansett Transport Industries (Operations) Pty Ltd v Wardley156, picked up in Dao v Australian Postal Commission157, the "Commonwealth legislative intention which sustains the conclusion that the permission is granted by way of positive authority also sustains the conclusion that the positive authority was to take effect to the exclusion of any other law". The mandatory incorporation of the standard residential terms in Sch 1 to the RTA into a lease would, in my opinion, detract from the operation of s 38(2) of the Land Grant Act. It would so detract from the operation of the section by truncating, to the point of negating, the ability of the Council to determine by agreement the terms and conditions of the grant by the Council of a lease of Aboriginal Land. In so doing, it would detract from the intended practical operation of the section within the scheme of the Land Grant Act by requiring the Council to meet certain obligations in a way that has the potential to distort the Council's policy choices in carrying out its statutorily mandated functions and to impact detrimentally on its ability to carry out those functions. The conclusion that ss 8 and 9 of the RTA would in those ways operate to alter, impair or detract from the legal and intended practical operation of s 38(2) of the Land Grant Act is not in tension with the holding in Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority158 that the Residential Tenancies Act 1987 (NSW) was not inconsistent with the Defence Housing Authority Act 1987 (Cth). As recorded in the joint reasons for judgment in that case, the argument for inconsistency there was not based on "any specific provision" of the Defence Housing Authority Act but "upon the proposition that the Act is intended to be an exhaustive and exclusive law governing the 156 (1980) 142 CLR 237 at 260; [1980] HCA 8. 157 (1987) 162 CLR 317 at 335; [1987] HCA 13. 158 (1997) 190 CLR 410; [1997] HCA 36. fulfilment by the DHA of its function"159, which was to provide adequate and suitable housing for members of the Australian Defence Force and other designated persons. The answer recorded in the joint reasons for judgment was that "[w]hatever inconsistency might otherwise be demonstrated, the Defence Housing Authority Act makes it quite plain that it does not intend to be exhaustive or exclusive in relation to the means by which the DHA's function is to be performed"160. The closest analogy to the present case in the voluminous case law dealing with inconsistency under s 109 of the Constitution is found in Australian Broadcasting Commission v Industrial Court (SA)161. There provisions of the Industrial Conciliation and Arbitration Act 1972 (SA) empowering the Industrial Court of South Australia to determine whether the dismissal of an employee was harsh, unjust or unreasonable and to order the re-employment of a dismissed employee in his or her former position were held to be inconsistent with provisions of the Broadcasting and Television Act 1942 (Cth), which empowered the Australian Broadcasting Commission to appoint such temporary employees as it thought necessary and, with the approval of the Public Service Board, to determine the terms and conditions of employment of those temporary employees. Emphasising that the relevant provisions of the Broadcasting and Television Act were "not addressed to the community at large" and instead were "wholly domestic in nature, domestic to the Commission and concerned only with its staffing"162, Stephen J (whose reasoning was not materially different from that of the other members of the Court) discerned in those provisions "a legislative intent that the subject matter comprising the engagement of temporary employees of the Commission and their terms and conditions of employment should be exclusively within the province of the Commonwealth Act"163. His Honour described the case as one in which "powers conferred by Commonwealth legislation are disclosed as purporting to be dealt with by State legislation in a manner which impairs and may even inhibit their exercise"164. For these reasons, I would dismiss the appeal. 159 (1997) 190 CLR 410 at 433. 160 (1997) 190 CLR 410 at 433. 161 (1977) 138 CLR 399; [1977] HCA 51. 162 (1977) 138 CLR 399 at 406. 163 (1977) 138 CLR 399 at 411. 164 (1977) 138 CLR 399 at 406. See also Dao v Australian Postal Commission (1987) 162 CLR 317 at 337-339. Edelman EDELMAN J. Sometime in 1989, the Wreck Bay Aboriginal Community Council ("the Council") granted a lease over residential premises to one of its registered members, Mr Williams. Mr Williams has occupied the premises but has not paid rent for over 25 years. The premises are now in substantial disrepair. The lease to Mr Williams meets the requirements for a residential tenancy agreement under the Residential Tenancies Act 1997 (ACT). If the relevant provisions of the Residential Tenancies Act are capable of applying to the lease then they will have the retrospective effect165 of imposing a term that the lessor must maintain the premises in a reasonable state of repair having regard to their condition at the commencement of the tenancy agreement166. Before the Supreme Court of the Australian Capital Territory, and before the Court of Appeal of the Supreme Court of the Australian Capital Territory, the Council submitted that it was not bound by the obligation to maintain the premises because the relevant provisions of the Residential Tenancies Act are incapable of operating concurrently with the Aboriginal Land Grant (Jervis Bay Territory) Act 1986 (Cth) ("the Land Grant Act"). That submission was rejected in the Supreme Court but it was accepted by the Court of Appeal. I gratefully adopt the background set out in the joint judgment in this Court, including the facts of the case, the details of the legislative provisions, and the summaries of the decisions below. I agree with the conclusion in the joint judgment that the appeal should be allowed. The Residential Tenancies Act is not relevantly incapable of operating concurrently with the Land Grant Act. "Capable of operating concurrently": the two issues Mr Williams' tenancy is over land that "has always been regarded as a distinct Aboriginal area separate from other land in Jervis Bay Territory"167. It is part of the land granted by the Commonwealth to the Council in 1986 and declared to be "Aboriginal Land" pursuant to s 8 in Pt III of the Land Grant Act. The Land Grant Act defines "Aboriginal Land" in s 2(1) as "land that is Aboriginal Land because of a declaration under Part III". 165 Residential Tenancies Act, s 4(2)(b), as enacted. See Legislation Act 2001 (ACT), 166 Residential Tenancies Act, s 8(1)(a) and Sch 1, cl 55(1). 167 Australia, House of Representatives, Parliamentary Debates (Hansard), 29 May Edelman Section 46 of the Land Grant Act provides: "This Act does not affect the application to Aboriginal Land of a law in force in the [Jervis Bay] Territory to the extent that that law is capable of operating concurrently with this Act." The Council's submission was that the operation of the Residential Tenancies Act altered, impaired or detracted from the provisions of the Land Grant Act. Although the Council denied that it was alleging indirect inconsistency, the Council's submission was based upon an implicit assumption that the Land Grant Act exhaustively, and therefore exclusively, covered the subject matter of the terms and conditions of leases over Aboriginal Land. As the Court of Appeal expressed the point, the power of the Council to grant a lease carried the implication of a power "to determine for itself the terms of those leases and not subject to qualification by provisions which would alter the terms of those leases"168. Hence, the Council submitted, the obligation in the Residential Tenancies Act that the lessor must maintain the premises in a reasonable state of repair was not capable of operating concurrently with the Land Grant Act. the purportedly exclusive operation of the Land Grant Act over this subject matter for two reasons. First, in submissions that were adopted by the Attorney-General for the Australian Capital Territory, he submitted that s 46 of the Land Grant Act is, in effect, an anti-exclusivity provision, either preventing or militating against any implication that the Land Grant Act exclusively covers any subject matter. Secondly, and in any event, he submitted that the scheme of the Land Grant Act would not be compromised by the application of ordinary laws designed to protect tenants such as the Residential Tenancies Act. In other words, the Land Grant Act does not manifest an intention to cover exclusively any subject matter overlapping with that of leases over Aboriginal Land; nor does the operation of the Residential Tenancies Act alter, impair or detract from the Land Grant Act. The first issue: is s 46 of the Land Grant Act an anti-exclusivity provision? In considering whether a Commonwealth law is inconsistent with a State law for the purposes of s 109 of the Constitution, or with a law of a Territory, it is common to refer to the inconsistency as either "indirect" or "direct". As I explained in Work Health Authority v Outback Ballooning Pty Ltd169, it can be artificial to treat indirect inconsistency as if it did not involve altering, impairing, 168 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at 169 [2019] HCA 2 at [105]. Edelman or detracting from the Commonwealth law. However, the distinction is useful in that indirect inconsistency is often a logically anterior question. If a Commonwealth law, by expression or implication, provides that it is intended to operate exclusively over a subject matter, then within that subject matter there is no further need to examine whether any particular provisions in the State or Territory law alter, impair, or detract from those in the Commonwealth law. Commonwealth legislation sometimes contains a provision that negatives indirect inconsistency by making clear that no implication should be drawn that the Act, or a part of it, covers a subject matter exclusively. In other words, the Commonwealth law might provide "that it is not intended to make exhaustive or exclusive provision with respect to the subject with which it deals" and thereby enable the operation of State laws that are "not in direct conflict"170. An example of such an anti-exclusivity provision is s 51AAA of the Competition and Consumer Act 2010 (Cth). That section provides that "[i]t is the Parliament's intention that a law of a State or Territory should be able to operate concurrently with this Part unless the law is directly inconsistent with this Part". Another example is s 75(1) of the Trade Practices Act 1974 (Cth), which provided that, subject to an exception, "this Part is not intended to exclude or limit the concurrent operation of any law of a State or Territory". In R v Credit Tribunal; Ex parte General Motors Acceptance Corporation171, Mason J said that this was an expression of an intention that the Part "is not an exhaustive enactment on the topics with which it deals and that it is not intended to operate to the exclusion of State laws on those topics". Although every legislative provision must be construed in its own context, there are other provisions that refer to concurrent operation but which are not anti-exclusivity provisions. One example is s 28 of the Australian Capital Territory (Self-Government) Act 1988 (Cth), which provides, similarly to s 109 of the Constitution, that a provision of an enactment172 has no effect to the extent that it is inconsistent with, relevantly, a Commonwealth law. It then provides that a provision of an enactment "shall be taken to be consistent with [relevantly, a Commonwealth law] to the extent that it is capable of operating concurrently with that law". In The Commonwealth v Australian Capital Territory ("the Same Sex Marriage Case")173, this Court held that the text of s 28 "is not directed to the 170 Palmdale-AGCI Ltd v Workers' Compensation Commission (NSW) (1977) 140 CLR 236 at 243; [1977] HCA 69. 171 (1977) 137 CLR 545 at 564; [1977] HCA 34. 172 Defined by s 3 in terms that include a law made under the Act by the Legislative Assembly for the Australian Capital Territory. 173 (2013) 250 CLR 441 at 466 [53]; [2013] HCA 55 (emphasis in original). Edelman effect which is to be given to a federal law". As this Court said in the Same Sex Marriage Case, the starting point is, instead, determining the meaning and application of the Commonwealth Act, including whether the Commonwealth Act is intended to cover a subject matter exclusively. Only then is it possible to consider whether the Territory law can be given concurrent operation174. In effect, s 28 is a provision that declares a rule of recognition for inconsistency. like s 28 of A provision the Australian Capital Territory (Self-Government) Act is not intended to negate any implication of exclusivity of the Commonwealth law. It is not an anti-exclusivity provision. Instead, it provides for an inconsistency rule between Commonwealth laws and Territory laws in similar terms to s 109 of the Constitution, which applies between Commonwealth laws and State laws. The direction to focus upon the extent to which the Territory law is capable of operating concurrently with the Commonwealth law mirrors the provision in s 109 of the Constitution that a law of a State shall be invalid to the extent of the inconsistency with a Commonwealth law. Section 109 creates a contrast between Commonwealth laws that operate to the exclusion of State laws and Commonwealth laws that operate concurrently with State laws175. It is concerned with the federal system, "under which some of the legislative powers of the Parliament of the Commonwealth are exclusive of and others are concurrent with those of the State legislatures"176. inconsistency Another such provision, in the Northern Territory, that declares a rule of the Aboriginal Land Rights is s 74 of recognition for (Northern Territory) Act 1976 (Cth) ("the Land Rights Act"). Section 74 of the Land Rights Act immediately follows the self-government provision in s 73, which is concerned with the power of the Legislative Assembly of the Northern Territory to make a wide range of laws including those concerned with "Aboriginal land". Section 73(2) provides for a rule to reconcile the operation of the power in s 73(1) with the continued operation of Ordinances made before the Act. Section 74 then provides for a rule to reconcile the operation of the Land Rights Act, including the power in s 73, with other laws of the Northern Territory. Section 74 of the Land Rights Act provides that the Land Rights Act "does not affect the application to Aboriginal land of a law of the Northern Territory to the extent that that law is capable of operating concurrently with this Act". 174 (2013) 250 CLR 441 at 467 [54]. See also Momcilovic v The Queen (2011) 245 CLR 1 at 115 [258]; [2011] HCA 34. 175 Ex parte McLean (1930) 43 CLR 472 at 483; [1930] HCA 12. 176 Momcilovic v The Queen (2011) 245 CLR 1 at 104 [220]. Edelman Sections 73 and 74 do not reduce the operation of the Land Rights Act, as anti-exclusivity provisions, in order to permit the operation of Northern Territory laws to Aboriginal land. As Brennan J explained in R v Kearney; Ex parte Japanangka177, the Land Rights Act "must be given its full operation before the scope of a power created by a law of the Territory or the consequences of its exercise can be ascertained". Instead, s 74 is a "declaratory section"178 which declares the inconsistency test that applies. The declaratory effect of s 74 is that any inconsistency between the Land Rights Act and Northern Territory legislation will be subject to the same terms as the inconsistency rule that operates by s 109 of the Constitution in relation to the States. In summary, s 74 of the Land Rights Act is not an anti-exclusivity provision over the whole of the subject matter of "Aboriginal land". Nor is it an anti-exclusivity provision over some narrower subject matter related to Aboriginal land. Instead, like s 28 of the Australian Capital Territory (Self-Government) Act, it "declares" the inconsistency rule. Although s 46 of the Land Grant Act is not a provision directed at the powers of Territorial self-government, the model of the Land Rights Act was one which the Land Grant Act was described as being "on all fours with"179, including the description of the inalienable freehold title as Aboriginal Land180. Section 46 of the Land Grant Act was copied, almost verbatim, from the "declaratory" s 74 of the Land Rights Act. Section 46, like s 74 of the Land Rights Act and s 28 of the Australian Capital Territory (Self-Government) Act, is a provision that removes any doubt that might apply by declaring the rule of recognition for inconsistency. Section 46 of the Land Grant Act is not an anti-exclusivity provision. The second issue: does the Land Grant Act manifest an intention to cover the subject matter of Aboriginal Land? Clause 55 of Sch 1 to the Residential Tenancies Act, when read with s 8(1)(a), imposes a term in a lease over residential premises requiring the lessor to maintain the premises in a reasonable state of repair having regard to their condition at the commencement of the tenancy agreement. It was common 177 (1984) 158 CLR 395 at 420; [1984] HCA 13. 178 Attorney-General (NT) v Hand (1989) 25 FCR 345 at 399. 179 Australia, House of Representatives, Parliamentary Debates (Hansard), 5 June 1986 at 4689, see also at 4698. 180 See Gumana v Northern Territory (2007) 158 FCR 349 at 359 [25]. Edelman ground, and rightly so, that it was possible for the Council to obey the terms of cl 55 of Sch 1 to the Residential Tenancies Act and the provisions of the Land Grant Act. That lack of inconsistency in direct expression contrasts, for example, with the inconsistency between cl 72(1) of Sch 1 to the Residential Tenancies Act, which prohibits sub-leasing without the written consent of the lessor181, and s 41 of the Land Grant Act, which permits sub-leasing without consent of the lessor in particular circumstances. The Council's submission was, in effect, a submission of indirect inconsistency. An essential preliminary step in assessing indirect inconsistency is to characterise the subject matter over which the Commonwealth law is said to be exclusive. No implication could be drawn that the subject matter, characterised in the broadest terms, of Aboriginal Land in the Jervis Bay Territory was covered exclusively by the Land Grant Act. An example of laws intended to operate concurrently, deriving from an example of a subject matter intended to operate concurrently with the Land Rights Act, is local laws concerning Aboriginal Land "relating to matters such as water control, soil erosion, bushfire control and disease prevention"182. A narrower characterisation of the subject matter, in terms similar to s 38(1) of the Land Grant Act, might have been that the Land Grant Act covers exclusively only the subject matter of dealings with, or disposals of, any estate or interest in Aboriginal Land. Section 38(1) provides that the Council shall not deal with or dispose of an estate or interest in Aboriginal Land other than as provided by Pt V of the Act. The Council submitted that the effect of this provision was that all of the Council's relevant powers were to be found in Pt V. That may be so, but there is a large difference between a provision that confines the powers of the Council in dealing with, or disposing of, land and a provision that restricts the power of the Legislative Assembly of the Australian Capital Territory to impose any duties upon the Council in dealing with or disposing of land. An example of a concurrent law of the Legislative Assembly of the Australian Capital Territory that might impose a duty upon the Council in dealing with land is a law concerned with the method of granting an estate or interest in Aboriginal Land. For instance, the Land Grant Act would be subject 181 Subject to endorsement of an inconsistent term by the ACT Civil and Administrative Tribunal on joint application of the parties: Residential Tenancies Act, ss 9(1)(b), 10 and now s 8(1)(d)(ii). 182 Australia, House of Representatives, Aboriginal Land Rights (Northern Territory) Bill 1976, Clause Notes at 27, cl 74. Edelman to the successor laws to s 3 of the Statute of Frauds 1677183, requiring leases, including a demise for up to 99 years, to be in writing. The Court of Appeal's conclusion, and the Council's submission, was of an even narrower characterisation of the exclusive subject matter said to be the basis for the inconsistency. The inconsistency between cl 55 of Sch 1 to the Residential Tenancies Act and s 38 of the Land Grant Act was said to arise from the "implicit negative proposition" that the power conferred by s 38 was not subject to qualification by provisions that would alter the terms of the leases. In other words, the allegedly exclusive subject matter of the Land Grant Act was said to concern only the content of a grant of an estate or interest in Aboriginal Land. A conclusion of implied exclusivity over this narrower subject matter should not be accepted because it has no obvious rational basis in, and it is not consistent with, the text and structure of the Land Grant Act. For its conclusion of implied exclusivity, the Court of Appeal relied upon the "fundamental purpose" of the Land Grant Act being "to extend long-term control of land to an Aboriginal community which acts through the vehicle of the Council"184. That purpose can be accepted. But this does not translate into an implicit negative proposition concerning exclusivity from any local laws. To do so would require that the Council not be subject to local laws concerning the manner of the grant or other matters affecting and regulating the estate granted such as water control, soil erosion, bushfire control and disease prevention. As explained in the joint judgment, there are also difficulties in showing that such a characterisation of exclusivity is manifest from the text and structure of the Land Grant Act: (i) the general terms in which the content of a lease granted by the Council is expressed contrast with a detailed or specific code or scheme that indicates exclusivity; (ii) the Land Grant Act is not exclusive of common law and equitable rules concerning the content of a grant of an estate or interest; (iii) the function of the Council, by ss 6(ce) and 12, is to manage and maintain buildings on leased land within the categories in s 38(2), and there is no basis to discriminate between a lease under s 38(2) and a lease with the functional equivalent of a life tenancy due to s 40; and (iv) the Land Grant Act permits leases to be granted under s 38(2)(d), (e), and (f) to persons who are not registered members of the Council. 183 29 Car II c 3. See Civil Law (Property) Act 2006 (ACT), s 201(1). 184 Wreck Bay Aboriginal Community Council v Williams (2017) 12 ACTLR 207 at Conclusion The appeal from the judgment of the Court of Appeal should be allowed. I agree with the orders proposed in the joint judgment in this Court. Edelman
HIGH COURT OF AUSTRALIA APPELLANT AND RESPONDENTS Rozenblit v Vainer [2018] HCA 23 13 June 2018 ORDER Appeal allowed. Set aside orders 2 and 3 of the Court of Appeal of the Supreme Court of Victoria made on 17 March 2017 and in their place order that: the appeal be allowed with costs; and the orders of Cameron J made on 10 August 2016 be set aside and in their place it be ordered that: the appeal be allowed with costs; and in respect of the orders of Lansdowne AsJ made on 22 December 2015: (A) Orders 1, 6, 7 and 8 be set aside; (B) Order 2 be amended to delete the words "On payment of these amounts" and to add, after "within 14 days", the words "of the date of the final orders of the High Court of Australia in Matter No M114 of 2017"; and it be ordered that the defendants pay the plaintiff's costs in relation to the defendants' summons filed 17 July 2015 on a standard basis. The respondents pay the appellant's costs. On appeal from the Supreme Court of Victoria Representation J G Korman for the appellant (instructed by the appellant) R M Garratt QC with M G McNamara for the respondents (instructed by CIE Legal) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Rozenblit v Vainer Practice and procedure – Victoria – Stay of proceeding – Where appellant commenced proceeding in Supreme Court of Victoria – Where appellant made applications for leave to file and serve amended statement of claim – Where applications refused with costs taxed immediately – Where costs unpaid because appellant impecunious – Where appellant made further application – Where leave to amend statement of claim granted but proceeding stayed under Supreme Court (General Civil Procedure) Rules 2015 (Vic) r 63.03(3) until interlocutory costs orders paid – Whether primary judge erred in making order to stay proceedings. Words and phrases – "conduct which falls for condemnation", "costs taxed immediately", "impecunious", "interlocutory costs order", "only practical way to ensure justice between the parties", "stay of proceeding", "strong grounds". Civil Procedure Act 2010 (Vic), ss 7, 8, 9, 65C, 65E. Supreme Court Act 1986 (Vic), ss 24, 25. Supreme Court (General Civil Procedure) Rules 2015 (Vic), rr 63.03(3), 63.20.1. KIEFEL CJ AND BELL J. The background facts and relevant statutory provisions are set out in the reasons of Gordon and Edelman JJ. We need only refer to some of them for the purposes of these reasons. The appellant brought proceedings in the Supreme Court of Victoria in which he alleged that the first respondent had fraudulently and without his knowledge or consent transferred shares owned by him to the second respondent. He applied, unsuccessfully, on two occasions for leave to amend his statement of claim and was ordered to pay the respondents' costs. It was further ordered that the costs be taxed immediately, a course which is permitted by r 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ("the Rules"). The appellant did not pay the costs. The appellant applied a third time to amend, to add a claim which concerned the conduct of the respondents in placing the company in which the shares were held into voluntary liquidation. The primary judge, Lansdowne AsJ, observed that the amendment sought reflected the case the appellant had wished to advance at the outset, but had not on legal advice1. Although the respondents' objections to the amendment were overruled, unconditional leave to amend was not granted. An order was made staying the proceedings until the costs the subject of the orders were paid. There was no issue between the parties that the appellant's financial circumstances were such that he could not pay the costs. Rule 63.03(3) The application for the stay of the proceedings was brought by the respondents pursuant to r 63.03(3) of the Rules, which provides: "Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do if that party is the plaintiff, the proceeding shall be stayed or dismissed; if that party is a defendant, the defendant's defence shall be struck out." 1 Rozenblit v Vainer (No 3) [2015] VSC 731 at [60], [61]. Bell Rule 63.03(3)2 was considered by the Court of Appeal in Gao v Zhang3. Ormiston JA, with whom Vincent JA agreed, observed that the rule had been designed to overcome a limitation in the inherent jurisdiction of the court with respect to ordering a stay of proceedings. It did not necessarily follow, his Honour said, that whenever costs remain outstanding an order for a stay should be made4. Merely because the power to stay appears in a specific rule cannot deny the importance of looking to the consequences of such an order for the party affected5. Rule 63.20.1 and the CPA At the time Gao v Zhang was decided there was no rule which required an order of the court to permit immediate taxation of an order for costs. This changed with the introduction of r 63.20.1, which provides that interlocutory costs are not taxable until the proceeding has concluded unless the court orders otherwise. After Gao v Zhang, the Civil Procedure Act 2010 (Vic) ("the CPA") was also enacted. Rules 63.20.1 and 63.03(3) are now required6 to further the "overarching purpose" of the CPA, which is to "facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute"7. A court is required to further that purpose when making any order or giving any direction by having regard to matters such as the just and timely determination of the civil proceeding8, the efficient conduct of the business of the court9 and the efficient use of judicial and administrative resources10. 2 Supreme Court (General Civil Procedure) Rules 1996 (Vic). 4 Gao v Zhang (2005) 14 VR 380 at 383 [9]. 5 Gao v Zhang (2005) 14 VR 380 at 384 [12]. 6 Supreme Court Act 1986 (Vic), s 25(1)(ab). 7 Civil Procedure Act 2010 (Vic), s 7(1). 8 Civil Procedure Act 2010 (Vic), s 9(1)(a), s 9(1)(f). 9 Civil Procedure Act 2010 (Vic), s 9(1)(c). 10 Civil Procedure Act 2010 (Vic), s 9(1)(d). Bell The Court of Appeal11 (Whelan and McLeish JJA, Kyrou JA concurring) confirmed what had been said in Gao v Zhang, that a stay should not be ordered simply to give effect to an interlocutory costs order that is taxable immediately12. Gao v Zhang should, however, be understood in the context of the change to the rules. The risk that r 63.03(3) might be employed as a means of routine debt collection is now reduced by reason of r 63.20.1, which requires an order if costs are to be taxed immediately. At the same time, the making of an order for immediate taxation under that rule indicates that the case is unusual. It follows that the court's reasons for making the order under r 63.20.1 must be taken into account on an application for a stay13. The Court of Appeal recognised that the CPA requires that the courts give effect to its overarching purpose when exercising their power under the Rules. It acknowledged that the grant of a stay represents the extreme case where the real issues in dispute are not to be resolved at all, pending payment of the outstanding costs. Stay orders and the fundamental principle In Gao v Zhang14, Ormiston JA said that where a stay order may deny justice to the party affected by it, it ought not to be employed unless it is the only fair way of protecting the interests of the party seeking the order. This was said by his Honour to reflect the "basal principle" stated by Dixon J in Cox v The fundamental principle to which Dixon J referred in Cox v Journeaux16 is that, generally speaking, a person is entitled to submit a bona fide claim for determination by the courts. A litigant is entitled to a determination unless to allow the claim to proceed would amount to an abuse of process or would clearly inflict unnecessary injustice on the party seeking the stay, in which case the proceeding should be halted. 11 Rozenblit v Vainer [2017] VSCA 52. 12 Rozenblit v Vainer [2017] VSCA 52 at [61]. 13 Rozenblit v Vainer [2017] VSCA 52 at [61]. 14 (2005) 14 VR 380 at 384 [12]. 15 (1935) 52 CLR 713 at 720; [1935] HCA 48. 16 (1935) 52 CLR 713 at 720. Bell It does not follow from the continuing acceptance of this fundamental principle that the right or entitlement of a person to initiate an action is to be understood to be at large. In Batistatos v Roads and Traffic Authority (NSW)17 it was pointed out that any such entitlement is subject to the operation of the applicable procedural and substantive law administered by the courts. In Aon Risk Services Australia Ltd v Australian National University ("Aon") it was observed18 that it is more accurate to say that parties have the right to invoke the jurisdiction and the powers of the courts in order to seek a resolution of their dispute. Cox v Journeaux should not be understood to state a presumptive rule against the making of a stay order. In Cox v Journeaux, Dixon J held that the power to stay could and should be exercised when to allow an action to proceed would impose hardship which may be avoided without risk of injustice to a plaintiff, or when to permit an action to proceed would clearly inflict unnecessary injustice on the defendant19. Those statements of principle reflected the circumstances there present. The plaintiff in truth had no cause of action, as Dixon J found20. It followed that there could be no injustice to the plaintiff in staying his action and denying him a determination of it; on the other hand, not to do so would have put the defendants to unnecessary trouble and expense. In stating the fundamental principle as relevant to the making of a stay order, Dixon J has been understood, correctly in our view, to point to the grave consequences which may follow the exercise of the power21. Importantly, it follows from what his Honour said in Cox v Journeaux that where the consequence of a stay order is the effective termination of the proceedings, there must be strong grounds for its exercise. Cox v Journeaux did not involve considerations as to whether the manner of the conduct of the proceedings by a party might warrant the exercise of a power to order a stay. In Gao v Zhang, Ormiston JA said that where the conduct of the defaulting party is relied upon it must amount to conduct "which falls for 17 (2006) 226 CLR 256 at 280 [65]; [2006] HCA 27. 18 (2009) 239 CLR 175 at 212-213 [96]; [2009] HCA 27. 19 Cox v Journeaux [No 2] (1935) 52 CLR 713 at 720. 20 Cox v Journeaux [No 2] (1935) 52 CLR 713 at 718. 21 See eg Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 at 19. Bell condemnation" in order to warrant making an order as draconian as one for a stay22. In Gao v Zhang23, Ormiston JA observed that when an order for a stay is made in the context of costs rules, regard would be necessary to the conduct of the proceedings. It might be expected that there would be a series of orders for costs in interlocutory applications which did not involve the genuine resolution of disputes necessary to be resolved before the matter goes to trial. The pursuit of appeals from essentially peripheral issues may evidence an effective harassing of the other party of a kind which may justify bringing the litigation to an end. Conduct of this kind could warrant condemnation by an order for a stay of proceedings24. The conduct in Gao v Zhang satisfied that description. There had been a series of orders made in related interlocutory applications which appeared of less and less merit and more and more ill-conceived as they proceeded up through the appellate levels to this Court25. Ormiston JA held that the judge hearing the applications for stay could fairly have concluded that the defaulting party's persistent harassment of the other party should not be permitted unless and until the costs were paid. The Court of Appeal in this case did not doubt that the principle referred to in Cox v Journeaux, which was applied in Gao v Zhang, remained relevant to the exercise of the power to stay. Whelan and McLeish JJA observed26 that the potential consequences of a stay remain as profound as ever and the exercise of the power should be a last resort. In the view of the Court of Appeal, the primary judge was conscious of the requirement that a party's conduct must be such as to warrant condemnation by the court when her Honour made the order to stay the proceedings. The making of the stay order The primary judge described aspects of the appellant's conduct of the proceedings as requiring condemnation. In this regard, her Honour identified the 22 Gao v Zhang (2005) 14 VR 380 at 386 [17]. 23 (2005) 14 VR 380 at 386 [17]. 24 Gao v Zhang (2005) 14 VR 380 at 386 [17]. 25 Gao v Zhang (2005) 14 VR 380 at 386-387 [18]. 26 Rozenblit v Vainer [2017] VSCA 52 at [62]. Bell many changes the appellant made to his pleading and the errors and confusion which had been associated with his application27. The appellant had failed to disclose his financial circumstances in a timely way. Her Honour also pointed to the appellant's attitude towards the respondents' attempts to enforce the costs orders28. Other aspects of the appellant's conduct were said by her Honour to warrant criticism29. They were the absence of an explanation on oath as to the current, third, application for leave to amend and the fact that he allowed the matter to progress through various interlocutory steps before making plain his wish to amend. The latter deserved criticism, her Honour said, because it caused delay and wasted costs30. factors which Her Honour concluded at this point that reason had been shown, by reference to the appellant's conduct, for exercising the power to stay. In its exercise31, her Honour considering tended against acknowledged that the appellant was said to be so impecunious that a stay would prevent him litigating his claims32. The evidence did not suggest to her Honour that the respondents had been so seriously financially prejudiced by the non- payment of the costs orders that their ability to conduct their defence would be compromised33. The financial disparity between the parties was even more marked because the respondents had been jointly engaged in a commercial enterprise with the appellant when the alleged wrongful conduct occurred, her Honour observed34. It is clear that these matters weighed heavily with her Honour, but ultimately did not outweigh the matters tending towards the grant of a stay35 for 27 Rozenblit v Vainer (No 3) [2015] VSC 731 at [95]-[96]. 28 Rozenblit v Vainer (No 3) [2015] VSC 731 at [102], [113]. 29 Rozenblit v Vainer (No 3) [2015] VSC 731 at [97], [98]. 30 Rozenblit v Vainer (No 3) [2015] VSC 731 at [117]. 31 Rozenblit v Vainer (No 3) [2015] VSC 731 at [105]-[108]. 32 Rozenblit v Vainer (No 3) [2015] VSC 731 at [107]. 33 Rozenblit v Vainer (No 3) [2015] VSC 731 at [107]. 34 Rozenblit v Vainer (No 3) [2015] VSC 731 at [108]. 35 Rozenblit v Vainer (No 3) [2015] VSC 731 at [108]. Bell the reasons which her Honour then listed36. The first concerned the appellant's financial resources. Earlier in her reasons her Honour had discussed the possibility that the appellant might have some financial resources, from which he had funded disbursements in the litigation37. Her Honour now expressed herself to be satisfied that such an inference could be drawn and that the appellant had chosen not to disclose these resources38. The second matter might be seen to be connected with the first. It was that the amount of the costs unpaid was not insignificant and that the appellant had not put forward a proposal for their payment. If he failed in his claims, the respondents would have no prospects of recovering the further costs associated with the new claim39. The final factor to which her Honour referred was the appellant's attitude to the payment of the costs orders40. The CPA and stay orders The Court of Appeal was undoubtedly correct when it said that a stay should not be ordered under r 63.03(3) simply to give effect to a costs order made under r 63.20.1. A liability for costs may be a precondition for the exercise of the power under r 63.03(3), but there is more for a court to consider in exercising its discretion under the rule, especially where the effect of a stay order may be the practical termination of the proceedings. It is necessary when considering whether to make any order, including an order for a stay, to give consideration to the overarching purpose of the CPA and the means by which it might be achieved41. But the stated purpose of the CPA, "to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute"42, is more readily identified with the manner in which a dispute is to progress to its ultimate resolution by the court. It does not speak directly to the possibility that a dispute might not be determined at all. 36 Rozenblit v Vainer (No 3) [2015] VSC 731 at [108]-[110], [113]. 37 Rozenblit v Vainer (No 3) [2015] VSC 731 at [71]. 38 Rozenblit v Vainer (No 3) [2015] VSC 731 at [109]. 39 Rozenblit v Vainer (No 3) [2015] VSC 731 at [110]. 40 Rozenblit v Vainer (No 3) [2015] VSC 731 at [113]. 41 Civil Procedure Act 2010 (Vic), s 9(1). 42 Civil Procedure Act 2010 (Vic), s 7(1). Bell There is nothing in the CPA or the Rules which suggests that the principles which inform the exercise of the power to stay proceedings arising from the inherent jurisdiction of the courts should not be applied to the exercise of the same power given by r 63.03(3). In the absence of such an indication, it is to be inferred that these well-established principles are intended to apply. The principles are consistent with the overarching purpose of the CPA, for the concern of them both, where possible, is the resolution of the dispute between the parties by the court. The requirement that, in principle, a party should not be denied a determination of his or her dispute unless there are strong grounds for doing so is not inconsistent with the overarching purpose. It has been recognised that the manner of the conduct of proceedings might provide grounds for a stay. Any assessment of such conduct will require consideration to be given to the matters identified as relevant to achieving the purpose of the CPA. It is by reference to such facts that the purpose of the CPA may assume particular importance in some cases. But in every case where a stay which may effectively terminate a proceeding is sought, consideration must be given to the general principles and to whether the nature and effect of the conduct in question provides strong grounds for the making of the order. The appellant's conduct – strong grounds? Before turning to the characterisation of the appellant's conduct as necessitating an order for a stay, it is necessary to say something about the appellant's ground of appeal. It claims that where a plaintiff has not conducted a proceeding in a manner amounting to harassment, and it is not contested that the plaintiff does not have the means to meet interlocutory costs orders, it is not open to the court to stay proceedings. It could not be contended that a party's impecuniosity is relevant to and can detract from a finding of conduct of the kind referred to in Gao v Zhang. At most, a person's impecuniosity may explain what might otherwise be thought to be recalcitrant behaviour in not paying costs the subject of an order. The principal difficulty with the appellant's contention is that the discretion to order a stay, under r 63.03(3) or otherwise, is not confined to conduct amounting to harassment. It extends to any conduct which, when assessed overall, is considered sufficiently serious in its nature and effect to warrant the proceedings being brought to an end. It is this consideration which warrants a comparison between the conduct identified as relevant in the present case and that in Gao v Zhang. Here, the appellant's conduct was not persistent and it could not be described as harassment. There may have been changes to the appellant's pleading but there were only two unsuccessful applications to amend and no attempt to pursue them further. The third application to amend had merit. No doubt the respondents and Bell the primary judge may have been frustrated by aspects of the appellant's conduct and the errors, confusion and the delay that it caused. His attitude, obviously enough, was a cause of irritation. But it was not found that his conduct was so inefficient or so productive of delay that it had a serious impact upon the progress of the proceeding or that the costs occasioned by it caused real prejudice to the respondents. The reference by Ormiston JA in Gao v Zhang to conduct which "falls for condemnation" by the making of an order for a stay was a statement of conclusion. It referred to conduct which was sufficiently egregious to warrant such an order. An order for a stay is not justified by attributing these words to conduct of a different kind and magnitude without more. It is not obvious that the appellant's conduct compels such a conclusion and it is telling that in the reasons given for the stay in the present case, conduct warranting criticism appears to be equated with conduct warranting condemnation. The appellant's conduct may have warranted some criticism, indeed it attracted an order for immediate taxation, but that does not elevate it to the status of conduct of which Ormiston JA spoke. The gravity of an order which may bring proceedings to an end before their resolution by a court requires that the conduct be commensurately serious. At critical points in the reasoning with respect to the making of the stay order, this appears to have been lost sight of. What was said in Aon, albeit in the context of applications for amendment, is a useful reminder of the usual tolerances in litigation. It was there observed43 that some degree of delay and some wasted costs are inevitably associated with amendments. The pursuit of statutory objectives similar to those of the CPA does not mean that an application for amendment will be refused. It is the extent of the delay and costs, together with any prejudice that might be caused, which is relevant to the grant or refusal of permission to a party to alter its case. The Court of Appeal identified as relevant to an application for a stay the reasons why the court had ordered costs be taxed immediately, because such an order is not usual. Clearly an order under r 63.20.1 should be made for good reason and not as a matter of course when an order for costs is made on a failed application. Here, the basis for the order was said to be the manner in which the applications for leave to amend had been conducted, the delay occasioned and the fact that on the second occasion the appellant foreshadowed a third 43 Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR Bell application44. This is in large part the same conduct which was said to found the stay order. Those reasons can add nothing further to explain the basis for that order. Financial resources The making of the stay order did not in the end depend solely upon questions of the conduct in question. Even if the appellant's conduct of the litigation could be said to provide some warrant for the order for a stay, there were other matters which were influential to, if not decisive of, the outcome. Chief amongst them was the primary judge's view that the appellant had other financial resources which he had not disclosed to the respondents and to the Court. This view was expressed despite the fact that the appellant had given evidence as to his means and he was not cross-examined upon it. The respondents accepted that he was unable to pay the costs. It was not open to the primary judge to speculate as to whether the appellant was being candid. The primary judge's discretion under r 63.03(3) must be taken to have miscarried. Alternative means If a stay order is contemplated and its effect may be to bring the proceedings to an end it is necessary that all reasonable alternatives to such an order be investigated. As the reasons of Keane J and of Gordon and Edelman JJ show, there was an alternative course open, to grant leave to amend conditioned on payment of the costs orders. In the event, as seems likely, that they were not paid the respondents would be protected from the further expenses associated with the new claim, but the appellant would not be denied a determination on his existing claims. But in our view this point was not reached. There was no sufficient basis to consider the making of a stay order. Orders We agree with the orders proposed by Gordon and Edelman JJ. 44 Rozenblit v Vainer (No 3) [2015] VSC 731 at [101]. KEANE J. Rule 63.03 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ("the Rules") relevantly provides: "(3) Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do so – if that party is the plaintiff, the proceeding shall be stayed or dismissed; if that party is a defendant, the defendant's defence shall be struck out. In paragraph (3) – defendant includes any person against whom a claim is made in a proceeding; plaintiff includes any person who makes a claim in a proceeding." At the forefront of the argument for the appellant, Mr Rozenblit, was the contention that it is not open to a court to stay a proceeding, in reliance on r 63.03(3) of the Rules, where a plaintiff has failed to pay costs pursuant to an interlocutory order, in circumstances where the plaintiff is impecunious and has not conducted the proceedings in a manner amounting to harassment or for a collateral purpose. I gratefully adopt the summary by Gordon and Edelman JJ of the issues and arguments which arise in the appeal. I wish to state why, in my view, the discretion conferred by r 63.03(3) of the Rules is not subject to the limitation for which Mr Rozenblit contended; and why, notwithstanding that view, I agree with Gordon and Edelman JJ that the appeal must be allowed. The scope of r 63.03(3) To argue, as Mr Rozenblit did, that, as a matter of law, r 63.03(3) cannot be invoked to stay proceedings by an impecunious plaintiff that have not been conducted in a manner that amounts to harassment or for a collateral purpose is to fail to appreciate that the discretion conferred by the rule is not so confined. That the rule is not subject to such a limitation is apparent from the text of the provision itself. Of course, it may readily be accepted that the discretion must be exercised judicially, having regard to the considerations material to its exercise by reason of its subject matter and purpose. In this regard, it is evident from the terms of r 63.03(3) that it contemplates the making of orders the purpose of which is to protect a party from the burden of ongoing litigation by a party who has failed to discharge costs orders that have been made against him or her in circumstances where the court that made the order has concluded that the justice of the case requires that these costs be paid forthwith. An obvious example of a case where an order of that kind might be made is where one party has, without reasonable cause, put the other party to wasted expenditure in circumstances in which that other party should not be required to wait until the completion of the litigation for reimbursement. That would be so especially where there is reason for concern that the delinquent party has engaged in a cynical exercise of attempting to exhaust the innocent party's financial ability to prosecute the litigation to a conclusion on its merits; but such an order might be appropriate to protect the innocent party even if the other party was not acting cynically. This example is but one illustration of the power of the court to protect litigants against delinquent behaviour by another party to ensure that the offending party does not reap the rewards of its delinquency. The point for present purposes is that the exercise of the discretion conferred by r 63.03(3) must be informed by an appreciation of the protective purpose of orders for costs of this kind. It has long been accepted that an order for costs in favour of a party adversely affected by the manner in which litigation is conducted may be a necessary45 means of preventing injustice resulting from the consequences of incompetence or inefficiency falling short of deliberate harassment or the pursuit of a collateral purpose on the part of an opposing litigant. The decision of this Court in Aon Risk Services Australia Ltd v Australian National University46 was a reminder that inefficiency or incompetence in the conduct of litigation may unjustly burden the other parties to the litigation, and the administration of justice itself. That decision made it clear, to the extent that clarity was necessary, that orders for costs will not always be sufficient to prevent injustice occasioned by inefficiency or incompetence in the conduct of litigation. The broader point for which Aon Risk is presently relevant is that injustice in the conduct of litigation cannot be justified by invoking the interests of justice. Litigation is sufficiently stressful and expensive for all concerned47 without the unnecessary aggravations of additional cost, stress, distraction and delay occasioned by inefficiency, incompetence or sheer disregard of the rules. To the extent that the contention advanced on behalf of Mr Rozenblit reflects an 45 Cf Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 154-155; [1997] HCA 1. 46 (2009) 239 CLR 175; [2009] HCA 27. 47 As Learned Hand famously said: "After now some dozen years of experience I must say that as a litigant I should dread a lawsuit beyond almost anything else short of sickness and death." See "The Deficiencies of Trials to Reach the Heart of the Matter", in Rosenberg et al, Lectures on Legal Topics, (1926) 87 at 105. assumption that inefficiently or incompetently conducted litigation, and the waste in terms of time and money inflicted upon the other party or parties, is nevertheless consistent with the promotion of access to justice because the end may ultimately justify the means, that assumption must be rejected. Inefficient or incompetent conduct of litigation may cause injustice even if it is not intended to do so. Litigation that is conducted inefficiently, incompetently or in disregard of the rules by one party is no less oppressive to the other party because it is not intended to be oppressive. And it is no less oppressive because the litigant who engages in such conduct is impecunious. Rule 63.03(3) allows a court to stay proceedings in order to ensure that the defendant has the benefit of protective orders previously made in his or her favour. Where it appears to the court that the plaintiff's failure to pay the costs is due simply to recalcitrance on his or her part, it may be expected that a stay will readily be granted. On the other hand, where the failure of the plaintiff to pay is the result of that party's impecuniosity, the prospect that an order under r 63.03(3) will defeat a just claim is a consideration that weighs heavily against the making of an order. In Cox v Journeaux [No 2]48, Dixon J described as "in general paramount" the principle that "a claim honestly made by a suitor for judicial relief must be investigated and decided in the manner appointed". The discretion miscarried As Lansdowne AsJ, Cameron J and the Court of Appeal all rightly appreciated49, the potentially serious consequences of the exercise of the discretion to make an order under r 63.03(3) against an impecunious plaintiff mean that a stay should be granted as the "only practical way to ensure justice between the parties."50 In two respects, the approach to the resolution of this issue adopted by Lansdowne AsJ (and affirmed on appeal) was flawed. First, her Honour was distracted by a concern that Mr Rozenblit might actually not be impecunious, and might therefore be able to continue to prosecute his proceedings. Her Honour was concerned by the circumstance that Mr Rozenblit had been able to fund his case thus far. In particular, her Honour considered that it was not just that Mr Rozenblit should be able to rely on what might have been undisclosed 48 (1935) 52 CLR 713 at 720; [1935] HCA 48. 49 Rozenblit v Vainer (No 3) [2015] VSC 731 at [80]; Rozenblit v Vainer (No 4) [2016] VSC 451 at [47]; Rozenblit v Vainer [2017] VSCA 52 at [59]. 50 Gao v Zhang (2005) 14 VR 380 at 385 [15]. resources to prosecute his case but decline to use them to pay the respondents, the Vainers, the costs that had been ordered against him51. In this regard, it is apparent that Lansdowne AsJ was distinctly sceptical of Mr Rozenblit's evidence that he was unable to pay the orders for costs. That scepticism was significant because of its tendency to detract from the weight properly to be accorded to the consideration that the stay order would bring Mr Rozenblit's proceedings to an end. The exercise of her Honour's discretion should not have been affected in this way. There was no basis for any scepticism as to Mr Rozenblit's evidence of his impecuniosity or as to its effect upon his ability to pursue his claims should the order for a stay be made. Mr Rozenblit's evidence that he was unable to pay the orders for costs against him was unchallenged in cross-examination. No attempt was made to suggest that the circumstance that he had been able to prosecute his case to that point was inconsistent with his evidence of his inability to meet the orders for costs. The only conclusion fairly open was that a stay order under r 63.03(3) would result in the termination of his proceedings. The discretion whether or not to make the order should have been exercised without any reservations concerning the effect of making the order. Secondly, another, less draconian, order might well have been made to ensure justice between the parties. The inefficiency, delay and wasted expenditure of concern to Lansdowne AsJ was substantially, even if not entirely, associated with his inefficient pursuit of the amendments to the statement of claim. Leave to amend could have been conditioned on the payment of the costs wasted by the amendment. If those costs were not paid, Mr Rozenblit would not have been able to pursue the claim raised by the amendment, and the Vainers would have been substantially protected against the expenses wasted as a result of the inefficient conduct of the litigation in that regard by Mr Rozenblit. Importantly, Mr Rozenblit would have been at liberty to pursue the claim he had originally made, and the further pursuit of that claim would not, of itself, occasion any injustice to the Vainers. It may be said that such an order was not proposed by either party, but that circumstance did not relieve the courts below of the responsibility of ensuring that Mr Rozenblit should not be shut out from pursuing his case if there was another way of ensuring justice between the parties, and even though it did not represent the preferred position of either party. For these reasons, I conclude that the discretion conferred by r 63.03(3) miscarried, and that the Court of Appeal erred in failing to correct that miscarriage of justice. 51 Rozenblit v Vainer (No 3) [2015] VSC 731 at [109]. Orders I agree with the orders proposed by Gordon and Edelman JJ. GORDON AND EDELMAN JJ. The appellant, Mr Boris Rozenblit, brought proceedings in the Supreme Court of Victoria against the respondents. By three separate summonses, Mr Rozenblit sought leave to amend his statement of claim. Leave was twice refused and resulted in orders that the respondents' costs be taxed immediately. Subsequently, orders were made, by consent, to fix the costs, without the need for taxation ("the Costs"). The Costs were never paid. On the third occasion that Mr Rozenblit sought leave to amend his statement of claim, the respondents sought to have the proceeding stayed under r 63.03(3)(a) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) ("the 2015 SCR")52, pending payment of the Costs. Rule 63.03(3)(a) empowers the Court to stay a proceeding where the Court has made an interlocutory order for costs to be taxed immediately, and those costs have been fixed, but remain unpaid. Mr Rozenblit's third application for leave to amend was granted on condition that the proceedings be stayed until Mr Rozenblit paid the Costs. This appeal concerns the exercise of the discretion under r 63.03(3)(a) of the 2015 SCR. The question is whether, in the particular circumstances of this proceeding, it was open for the Court to permit Mr Rozenblit to amend his claim but on condition that the proceedings were stayed until he paid the Costs. As will be seen, the discretion miscarried. The Court could not be satisfied that granting a stay of the proceedings pending payment of the Costs was the "only practical way to ensure justice between the parties"53. respondents' summons but before 52 The Court of Appeal of the Supreme Court of Victoria referred to the Supreme Court (General Civil Procedure) Rules 2005 (Vic) ("the 2005 SCR"). That was an error. At the time the respondents' summons for dismissal was filed in the Supreme Court (17 July 2015), the rules in effect were the 2005 SCR. After the hearing of the judgment was handed down by Lansdowne AsJ (in December 2015), those rules were revoked and replaced by the 2015 SCR: see r 1.03 of, and Sched 1 to, the 2015 SCR. However, nothing turns on this legislative change as r 63.03(3) was, and remains, in identical terms immediately before, and subsequent to, the introduction of the 2015 SCR: see Rozenblit v Vainer (No 3) [2015] VSC 731 at [74]. It is common ground that the 2015 SCR were and remain the relevant rules. 53 Gao v Zhang (2005) 14 VR 380 at 385 [15]. See also Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at 277 [53], 280 [65], 281-282 [70]-[71]; [2006] HCA 27. Legislative framework and applicable principles It is important to recall that the default position on the question of costs is to be found in r 63.20.1 of the 2015 SCR: if an order for costs is made on an interlocutory application or hearing, the party in whose favour the order is made shall not tax those costs until the proceeding in which the order is made is completed, unless the Court orders that the costs may be taxed immediately. Rule 63.03(3)(a) then provides: "Where the Court makes an interlocutory order for costs, the Court may then or thereafter order that if the party liable to pay the costs fails to do if that party is the plaintiff, the proceeding shall be stayed or dismissed". The discretion in r 63.03(3)(a) is not exercised at large. It is to be exercised by reference not only to the applicable legislative framework but also to its broader context and purpose. The applicable legislative framework includes the 2015 SCR, the Supreme Court Act 1986 (Vic) ("the Supreme Court Act") and the Civil Procedure Act 2010 (Vic) ("the CPA Vic"). A proceeding to which the 2015 SCR apply must, despite anything in the Supreme Court Act or any other Act, be commenced and conducted in accordance with those Rules and not otherwise54. The power under s 25 of the Supreme Court Act to make the 2015 SCR includes the power, amongst others, to make rules "furthering the overarching purpose" set out in the CPA Vic and the conduct of civil proceedings in accordance with the principles set out in the CPA Vic55. The CPA Vic, enacted in 201056, applies to all civil proceedings in Victoria57 subject to some specified exceptions which presently may be put to one side. The overarching purpose of the CPA Vic, and of the 2015 SCR, is to 54 s 3(4) of the Supreme Court Act; r 1.01(1) of the 2015 SCR. 55 s 25(1)(ab) of the Supreme Court Act. 56 In operation from 1 January 2011. 57 s 4(1) of the CPA Vic. "facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute"58. In making any order or giving any direction in a civil proceeding, a court shall further that overarching purpose by having regard to, amongst other things, the just determination of the civil proceeding59, the efficient conduct of the business of the court60, the efficient use of judicial and administrative resources61 and the timely determination of the civil proceeding62. Part 4.5 of the CPA Vic addresses the court's powers as to costs. Section 65C, in that Part, relevantly provides that: In addition to any other power a court may have in relation to costs, a court may make any order as to costs it considers appropriate to further the overarching purpose. (2) Without limiting subsection (1), the order may— (a) make different awards of costs in relation to different parts of a proceeding or up to or from a specified stage of the proceeding; order that parties bear costs as specified proportions of costs; award a party costs in a specified sum or amount; fix or cap recoverable costs in advance." An order under s 65C(1) may be made at any time in a proceeding and in relation to any aspect of a proceeding, including, but not limited to, any interlocutory 58 s 7(1) of the CPA Vic. 59 s 9(1)(a) of the CPA Vic. 60 s 9(1)(c) of the CPA Vic. 61 s 9(1)(d) of the CPA Vic. 62 s 9(1)(f) of the CPA Vic. 63 s 65C(3) of the CPA Vic. Section 65E relevantly states that nothing in Pt 4.5 limits any power the Supreme Court may have to award costs in a proceeding under s 24 of the Supreme Court Act or any rules of the Court64, limits the Supreme Court's inherent jurisdiction, implied jurisdiction or statutory jurisdiction65 or limits any other powers of the Supreme Court or any other court arising or derived from the common law or under any other Act, rule of court, practice note or practice direction66. As is apparent, the 2015 SCR are influenced by, and to varying degrees restate, the characteristics of the Court's inherent power to stay or dismiss a proceeding. It is therefore necessary to say something about that inherent power that the courts retain to stay or dismiss a proceeding for abuse of process67. The principles relating to the inherent power inform not only the content but also the proper construction of the 2015 SCR, including the construction of r 63.03(3)(a). What amounts to abuse of process for the purposes of the inherent power is not restricted to "defined and closed categories"68. In Cox v Journeaux [No 2]69, Dixon J described the limits on the inherent power as follows: "The inherent jurisdiction of the Court to stay an action as vexatious is to be exercised only when the action is clearly without foundation and when to allow it to proceed would impose a hardship upon the defendants which may be avoided without risk of injustice to the plaintiff. The principle, in general paramount, that a claim honestly made by a suitor for judicial relief must be investigated and decided in the 64 s 65E(1)(a)(i) of the CPA Vic. 65 s 65E(2)(a) of the CPA Vic. 66 s 65E(2)(c) of the CPA Vic. 67 See Batistatos (2006) 226 CLR 256 at 263-265 [5]-[8]. 68 Batistatos (2006) 226 CLR 256 at 267 [14] quoting Ridgeway v The Queen (1995) 184 CLR 19 at 75; [1995] HCA 66. See also Hamilton v Oades (1989) 166 CLR 486 at 502; [1989] HCA 21; Jago v District Court (NSW) (1989) 168 CLR 23 at 25-26, 47-48, 74; [1989] HCA 46; Walton v Gardiner (1993) 177 CLR 378 at 393-395; [1993] HCA 77; Rogers v The Queen (1994) 181 CLR 251 at 255; [1994] HCA 42; D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 28 [74]-[75]; [2005] HCA 12. 69 (1935) 52 CLR 713 at 720; [1935] HCA 48. manner appointed, must be observed. A litigant is entitled to submit for determination according to the due course of procedure a claim which he believes he can establish, although its foundation may in fact be slender. It is only when to permit it to proceed would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party that a suit should be stopped." Cox was primarily concerned with whether to allow a claim to proceed when the claim was without merit. Subsequent cases70, adopting Dixon J's statement, have observed that references to this passage of Dixon J's reasons, or to similar passages from other cases71, were not intended to question the extent of the inherent power of the courts to grant a stay of proceedings in the interests of justice; rather, those references merely emphasised the gravity of an exercise of the power to grant such a stay. As this Court has said, the power to grant a stay exists to enable a court to "protect itself from abuse of its process thereby safeguarding the administration of justice"72. The power can be exercised at any time from the institution, and until the conclusion, of proceedings73. The injustice may arise from the taking of steps, or the failure to take steps, as well as delay, in the conduct of the proceedings74. And the injustice may "transcend the interest of any particular party to the litigation"75. The powers to stay a proceeding, or to dismiss a proceeding without trial, are both powers which, if exercised, in one way or another "deny justice to the 70 See Rochfort v John Fairfax & Sons Ltd [1972] 1 NSWLR 16 at 19; Gao (2005) 14 VR 380 at 384 [12]. 71 See, eg, Cohen v Rothfield [1919] 1 KB 410 at 416-417; St Pierre v South American Stores (Gath & Chaves) Ltd [1936] 1 KB 382 at 398. 72 Batistatos (2006) 226 CLR 256 at 266 [12]. 73 Batistatos (2006) 226 CLR 256 at 265 [9], 266-267 [14]-[15]. 74 Batistatos (2006) 226 CLR 256 at 267 [15]. 75 Batistatos (2006) 226 CLR 256 at 266 [12]. party affected and ought not to be employed unless it is the only fair way of protecting the interests of the party seeking such an order"76 (emphasis added). In Batistatos v Roads and Traffic Authority (NSW), this Court reinforced, and restated, what Dixon J had said in Cox: that only if the proceeding would amount to an abuse of jurisdiction, or would clearly inflict unnecessary injustice upon the opposite party, should a proceeding be stayed or dismissed77. Dixon J's statement in Cox was adopted and followed by the Court of Appeal of the Supreme Court of Victoria in Gao v Zhang78 in considering the exercise of power under r 63.03(3) of the Supreme Court (General Civil Procedure) Rules 1996 (Vic), which was in materially identical terms to the current rule. Ormiston JA (with whom Vincent JA agreed) recognised that unless the purpose of an order granting a temporary stay was to "force a wealthy, or at least not impecunious, but recalcitrant litigant to pay … then the power should be treated as one which will have the effect of bringing to an end litigation without the benefit of a trial to which a litigant is ordinarily entitled"79. His Honour cautioned that orders staying proceedings where there are outstanding costs orders should ordinarily be made only in extremely limited circumstances, namely where "the court believes or at least has reason strongly to suspect that the party refusing to pay the orders for costs is being recalcitrant and will in fact pay the order if it is forced to do so"80 (emphasis added). As his Honour said, "[i]f a party is clearly shown to be impecunious, then a court cannot act to grant even a temporary stay order under r 63.03(3) except upon the understanding that it will thereby be bringing the litigation effectively to an end"81. 76 Gao (2005) 14 VR 380 at 384 [12] citing Cox v Journeaux [No 2] (1935) 52 CLR 713 at 720. See also Batistatos (2006) 226 CLR 256 at 277 [53], 280 [65], 281-282 77 Batistatos (2006) 226 CLR 256 at 277 [53], 281 [71] citing Cox (1935) 52 CLR 78 (2005) 14 VR 380 at 384 [12]. 79 Gao (2005) 14 VR 380 at 385 [15]. 80 Gao (2005) 14 VR 380 at 385 [13]. 81 Gao (2005) 14 VR 380 at 385 [15]. His Honour added that the reason for making such an order must be serious and the making of the order must be "essentially the only practical way to ensure justice between the parties"82. In that sense, his Honour considered that for an order to be made in circumstances where there is an impecunious plaintiff, there "must be seen to have been some conduct on the part of the party in default which falls for condemnation to the extent of making so draconian an order"83. Batistatos, like Gao, recognises that in the exercise of the power to stay a proceeding – regardless of whether that power appears in a specific rule or is to be found in the inherent power of the court – it is necessary to have regard to the consequences of such an order. The consequence of a stay, whether a permanent stay or even a seemingly temporary stay, is serious; it "shuts a party out of court"84. That consequence demonstrates the gravity of an exercise of the power, and the need for the existence of proper grounds for its exercise85. Proper grounds include, but are not limited to, the institution of proceedings for an improper purpose, as well as proceedings that are frivolous, vexatious or oppressive86. It is unnecessary and undesirable to lay down a hard and fast definition as to what constitutes proper grounds87. The overarching purpose of the CPA Vic, and the obligation for a court to give effect to and further that overarching purpose88, reinforce that the power exists to enable a court to protect itself from abuse of its processes in order to safeguard the administration of justice, and that that purpose may "transcend the interest of any particular party to the litigation"89. 82 Gao (2005) 14 VR 380 at 385 [15]. 83 Gao (2005) 14 VR 380 at 386 [17]. 84 Gao (2005) 14 VR 380 at 384 [12]. 85 See, eg, Rochfort [1972] 1 NSWLR 16 at 19. 86 Batistatos (2006) 226 CLR 256 at 265 [9], 266-267 [14] quoting Ridgeway (1995) 184 CLR 19 at 74-75. See also Hamilton (1989) 166 CLR 486 at 502; Jago (1989) 168 CLR 23 at 25-26, 47-48, 74; Walton (1993) 177 CLR 378 at 393-395; Rogers (1994) 181 CLR 251 at 255; D'Orta-Ekenaike (2005) 223 CLR 1 at 28 [74]-[75]. 87 Batistatos (2006) 226 CLR 256 at 267 [14] quoting Ridgeway (1995) 184 CLR 19 88 ss 7-9 of the CPA Vic. 89 Batistatos (2006) 226 CLR 256 at 266 [12]. The CPA Vic requires the court to "facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute"90. In making any order, the court is to further that overarching purpose by having regard to, amongst other things, the just determination of the civil proceeding91, the efficient conduct of the business of the court92, the efficient use of judicial and administrative resources93 and the timely determination of the civil proceeding94. In modern litigation, not only must the court seek to give effect to95, and further96, the overarching purpose, but overarching obligations imposed by the CPA Vic also apply in all civil proceedings and throughout the conduct of proceedings, to each party, to each legal practitioner, to each law practice and to certain third parties who fund the proceedings97. Each of those participants98 must comply with the overarching obligations99, so as to "facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute". Those obligations include a requirement to cooperate in the conduct of civil proceedings100 and to ensure costs are reasonable and proportionate101. The overarching obligations do not displace the need for the court to safeguard the administration of justice in the context of ordering a stay for abuse of process. Rather, the obligations recognise that passive participation in 90 s 7(1) of the CPA Vic. 91 s 9(1)(a) of the CPA Vic. 92 s 9(1)(c) of the CPA Vic. 93 s 9(1)(d) of the CPA Vic. 94 s 9(1)(f) of the CPA Vic. 95 s 8 of the CPA Vic. 96 s 9 of the CPA Vic. 97 ss 10 and 11 of the CPA Vic. 98 s 10(1) of the CPA Vic. 99 ss 16-27 of the CPA Vic. 100 s 20 of the CPA Vic. 101 s 24 of the CPA Vic. litigation is no longer an option. There has been a "culture shift"102. It is therefore not surprising that in the conduct of modern litigation, there may well be circumstances where the granting of a stay is the only practical way to ensure justice between the parties even though the conduct was not intended to be oppressive. This does not displace or alter the primary consideration of the courts to safeguard the administration of justice. Rather, it underscores that considerations of efficiency and cost are relevant aspects of the inquiry. With those considerations in mind, it is necessary to assess what occurred in this litigation and, especially, to address the particular disputed issue103 that was before the Court – the third application for leave to amend the statement of claim. History of the litigation Mr Rozenblit was born in 1931 in the former Soviet Union, now Ukraine. He migrated to Australia in 1994. He lives with his wife in government housing. Neither he nor his wife has any appreciable assets. Their sole income is from Centrelink and a smaller pension from Russia. In 2006, Mr Rozenblit and the first respondent, Mr Michael Vainer, entered into an oral agreement and a written Heads of Agreement to jointly develop and commercialise tyre recycling technologies. Mr Rozenblit alleged he invented the technologies. The VR Tek Unit Trust was established in 2006, pursuant to the Heads of Agreement. VR Tek Global Pty Ltd was incorporated in 2009. Mr Rozenblit held units in the Trust and shares in VR Tek Global. VR Tek Global was placed into voluntary liquidation in November 2012. By a writ and statement of claim filed in the Supreme Court of Victoria on 23 December 2013, Mr Rozenblit alleged, relevantly, that his shares in VR Tek Global were transferred to the second respondent, Mr Alexander Vainer (the first respondent's father), fraudulently and without Mr Rozenblit's knowledge, approval or consent and for no consideration. 102 See, eg, Arbuthnot Latham Bank Ltd v Trafalgar Holdings Ltd [1998] 1 WLR 1426 at 1436; [1998] 2 All ER 181 at 191; Securum Finance Ltd v Ashton [2001] Ch 291 at 306-309 [28]-[34]; Bank of New Zealand v Savril Contractors Ltd [2005] 2 NZLR 475 at 496 [85]-[87], 500 [99]; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 217 [112]-[113]; [2009] HCA 27. 103 Aon (2009) 239 CLR 175 at 205-206 [71], [73]-[74]. After pleadings had closed, Mr Rozenblit sought leave to amend his statement of claim. On 29 August 2014, Mr Rozenblit filed his first summons seeking leave to amend his statement of claim in order to, among other things, insert new causes of action arising from the liquidation of VR Tek Global, the thrust of which was that the respondents were not authorised to place VR Tek Global into voluntary liquidation104. Five iterations of a proposed amended statement of claim were served on the respondents prior to the summons being returned. Leave to amend was refused by Lansdowne AsJ on 20 October 2014 and her Honour ordered that the costs be taxed immediately. Costs were subsequently fixed, by consent, in the sum of $22,000 on 15 December 2014. On 10 November 2014, Mr Rozenblit filed a second summons seeking leave to file and serve an amended statement of claim. Leave was refused by Lansdowne AsJ on 24 June 2015 and her Honour ordered that costs be taxed immediately. Costs were subsequently fixed by consent in the sum of $28,000 on 12 August 2015. On the third occasion that Mr Rozenblit sought leave to amend his statement of claim, the respondents sought to have the proceeding dismissed or stayed under r 63.03(3)(a) of the 2015 SCR, pending payment of the costs fixed on 15 December 2014 and 12 August 2015, namely the Costs. Before Lansdowne AsJ, Mr Rozenblit provided sworn evidence that he was unable to meet the Costs due to his limited means105. He was not cross-examined. Lansdowne AsJ accepted that Mr Rozenblit's attempts to amend his statement of claim were genuine and went to the heart of the case he wished to bring. Her Honour found that there was no evidence that Mr Rozenblit's intention was to harass or vex the respondents by his applications or the way he had conducted the proceeding. Importantly, Lansdowne AsJ also found that Mr Rozenblit was so impecunious that a stay of the proceeding until payment of the Costs would effectively terminate the proceeding and "prevent [Mr Rozenblit] from litigating 104 Rozenblit v Vainer [2014] VSC 510 at [22]-[29]; see generally at [17]-[34]. 105 Rozenblit (No 3) [2015] VSC 731 at [65]. his claims entirely"106, and that the respondents were not so seriously financially prejudiced that the refusal of a stay would prevent them defending the claims107. Lansdowne AsJ stayed the proceeding until Mr Rozenblit paid the Costs and further ordered that, on payment of those Costs, Mr Rozenblit had leave to file and serve his amended statement of claim. Lansdowne AsJ considered herself bound to apply the principles set out by the Court of Appeal of the Supreme Court of Victoria in Gao in the exercise of the discretion under r 63.03(3), and considered that Gao set down "two essential requirements"108 that must be met for the exercise of the power. First, the reason for the exercise of the power to stay the proceedings must be "serious" and the exercise of the power the "only practical way to ensure justice between the parties" and, second, there must have been some "conduct on the part of the party in default which falls for condemnation to the extent of making so draconian an order" in addition to the non-payment of costs109. As noted earlier, her Honour considered that Mr Rozenblit's attempts to amend his statement of claim were genuine and went to the heart of the case he wished to pursue. Her Honour acknowledged that there was no evidence that Mr Rozenblit's intention was to harass or vex the respondents. However, her Honour considered that Gao did not require the party seeking the stay to show "intentional harassment or conduct amounting to contemptuous disregard of court orders"110. Rather, the conduct needed to be such that it would fall for condemnation as a consequence of the manner of its exercise, or its result, not its intention. As a result, her Honour concluded that Mr Rozenblit's conduct required condemnation, irrespective of his genuine desire to expand the scope of his claims. This conclusion was as a result of, among other things, three factors: first, the sheer number of applications for leave to amend made by Mr Rozenblit and the number of iterations of amendments within each of those applications, 106 Rozenblit (No 3) [2015] VSC 731 at [106]. 107 Rozenblit (No 3) [2015] VSC 731 at [107]. 108 Rozenblit (No 3) [2015] VSC 731 at [80]. 109 Rozenblit (No 3) [2015] VSC 731 at [79]-[80] quoting Gao (2005) 14 VR 380 at 110 Rozenblit (No 3) [2015] VSC 731 at [94]. without proper explanation; second, Mr Rozenblit's almost "wanton disregard"111 for the prejudice suffered by the respondents; and third, the substantial delay occasioned by the applications. As to the exercise of power being the only practical way to do justice between the parties, her Honour considered that there were a number of significant factors that weighed against the exercise of the power, including that a stay of the proceedings would effectively terminate the proceedings and prevent Mr Rozenblit from litigating his claims, and that there was no evidence that the respondents' financial position would have prevented them from conducting their defence. Lansdowne AsJ also considered the financial disparity between the parties to be relevant in circumstances where it was alleged that the respondents' conduct had resulted in Mr Rozenblit being excluded from the commercialisation of his invention. However, on balance, her Honour concluded that these factors did not outweigh the need to grant a stay to do justice between the parties. Her Honour identified five factors in support of that conclusion. First, Mr Rozenblit had clearly funded his case to that point. Her Honour considered it "not just"112 for Mr Rozenblit to call on his, possibly undisclosed, resources for the conduct of his case but fail to use them to meet his obligations to the respondents. Second, the sum outstanding – $50,000 – was "not inconsiderable"113. Third, even if the non-payment of costs would not prevent the respondents from conducting their case, the risk of continued delay would impact them. Fourth, Mr Rozenblit gave no indication of a way to pay the Costs other than through the fruits of the litigation (were he ultimately successful). Fifth, Mr Rozenblit's attitude in refusing to pay the Costs was an "indignant assertion of his own rights, with cavalier disregard for the rights of the [respondents]"114. As already noted, Lansdowne AsJ ordered that the proceeding be stayed until Mr Rozenblit paid the Costs. Her Honour considered that leave to amend the statement of claim was justified in the circumstances, but that it would not be just to all of the parties to make the amendment conditional upon the payment of the Costs, as this would leave Mr Rozenblit the option of refraining from amending his statement of claim, leaving the Costs unpaid. Therefore, instead, 111 Rozenblit (No 3) [2015] VSC 731 at [69]. 112 Rozenblit (No 3) [2015] VSC 731 at [109]. 113 Rozenblit (No 3) [2015] VSC 731 at [110]. 114 Rozenblit (No 3) [2015] VSC 731 at [113]. her Honour ordered that first the Costs must be met and only thereafter could Mr Rozenblit amend his statement of claim. On appeal to a single judge of the Supreme Court, Cameron J held that Lansdowne AsJ had not fallen into error in the test that she applied115. Mr Rozenblit appealed to the Court of Appeal of the Supreme Court of Victoria. One of his appeal grounds was that Lansdowne AsJ had failed to apply the so-called "basal principle" (as Ormiston JA in Gao described it116) said to derive from the reasons of Dixon J in Cox. That "basal principle" was said to be to the effect that a suit should only be stayed when to permit it to proceed would amount to an abuse of jurisdiction or would clearly inflict unnecessary injustice upon the opposing party117. The plurality (Whelan and McLeish JJA, Kyrou JA delivering short concurring reasons) observed that it would be wrong to read the "basal principle" from Cox as imposing some stricter test than Gao, which it considered the leading authority. Instead, their Honours observed that "[i]n each case, it is apparent that the interests of justice require that the exercise of the power be a last resort"118. The plurality also recognised that the grant of a stay where there is an impecunious plaintiff is an extreme case in which the dispute is not resolved but suspended and, accordingly, such an order should only be made "when there is no other fair and practical way of ensuring justice between the parties"119. The plurality then went on to summarise what it considered to be the principles relevant to the power to order a stay under r 63.03(3), in the following terms120: a stay for failure to satisfy an order for costs in an interlocutory matter may only be ordered if it is the only fair and practical way of facilitating the just, efficient, timely and cost-effective resolution of the proceeding; 115 Rozenblit v Vainer (No 4) [2016] VSC 451. 116 (2005) 14 VR 380 at 384 [12]. 117 Gao (2005) 14 VR 380 at 384 [12] citing Cox (1935) 52 CLR 713 at 720. 118 Rozenblit v Vainer [2017] VSCA 52 at [65]. 119 Rozenblit [2017] VSCA 52 at [62]. 120 Rozenblit [2017] VSCA 52 at [67]. justice between the parties requires regard to be had to the interests of the party in whose favour the costs were ordered to be paid; the parties' conduct of the proceeding to date, and in particular the reasons for which costs were ordered to be taxed immediately, are relevant to the exercise of the power; a stay should not be ordered unless the conduct of the party in default warrants the condemnation inherent in such an order; the power is not to be used simply as a means of enforcing payment of the costs in question unless there are grounds for concluding that the party in default is recalcitrant and is capable of remedying the default." (emphasis added) As the plurality stated, the question the Court was required to ask itself, and answer, was whether, in the circumstances of the case, there was no other fair and practical way of ensuring justice between the parties than granting a stay of the proceedings. The Court of Appeal concluded that there was no other way to do justice between the parties. That was an error. What was missing from the formulation of principles (although it was acknowledged elsewhere121) was consideration of the fact that a stay would have the effect of permanently halting Mr Rozenblit's claim. Two applications to hear and determine: Mr Rozenblit's third application for leave to amend his statement of claim and the respondents' application for a stay or dismissal of the proceedings for non-payment of the Costs. The two applications were heard at the one time. That is not surprising. But each application raised different considerations. two applications The first question was whether Mr Rozenblit was to be granted leave to amend his statement of claim. It was common ground that, at the time of the application, Mr Rozenblit had a genuine claim, properly pleaded. If, as it would appear from the reasons for judgment, Lansdowne AsJ had taken the view that there were discretionary reasons to provide leave to amend only on condition, then in order not to shut Mr Rozenblit out of making his claim, one course would have been to grant leave on terms that the costs thrown 121 Rozenblit [2017] VSCA 52 at [40]. away by the amendment the subject of the third application be paid. Of course, they are not the Costs. They are different costs, incurred at a different time and not the subject of any previous interlocutory costs order. Consideration and resolution of the summons for leave to amend did not and does not address the respondents' summons for a stay or dismissal of the proceeding pending payment of the Costs. There is no dispute that the application by the respondents for an order under r 63.03(3)(a) could be made. The question was whether, in the circumstances just outlined, it was open to the Court to exercise its discretion and dismiss or stay the proceeding. In short, it was not. Mr Rozenblit's evidence to the effect that he did not have the means to pay the Costs was not contested. The effect, in those circumstances, is that a stay would bring the proceedings to an end, proceedings where Mr Rozenblit had a genuine claim that was properly pleaded. It was neither found, nor even alleged, that Mr Rozenblit's case amounted to an abuse of jurisdiction. Indeed, Lansdowne AsJ considered that Mr Rozenblit's attempts to amend his statement of claim were genuine, and went to the heart of the case he wished to bring. The case was not conducted in a manner amounting to harassment or for a collateral purpose. And there was no evidence that Mr Rozenblit's intention was to harass or vex the respondents by the applications that he made. There was also no evidence that the respondents were so seriously financially prejudiced that the refusal of a stay would prevent them from defending the claims. The court's task in considering what is necessary to ensure that there is "justice between the parties" is both retrospective and prospective. The court must assess the likely conduct of the parties, and any injustice that may arise if the matter were to proceed, rather than solely the past conduct that could be said to fall for condemnation. That is not to say that there will not be circumstances in which the historical conduct of a party demonstrates to the court that the proceeding is an abuse of jurisdiction or would inflict injustice. Gao is one such example: the plaintiff's conduct was clearly in the nature of "harassment" as a consequence of numerous interlocutory applications, each addressing very minor procedural matters and having relatively little merit. That is not the position here. Mr Rozenblit's conduct – although undesirable, and the cause of delay and frustration to the Court and the respondents – cannot be said to provide any foundation for a finding that he was pursuing a frivolous or vexatious claim, or that the respondents would suffer unnecessary hardship if the proceedings continued. The fact that r 63.03(3) only arises for consideration once the Court has already decided that a party's conduct justifies an order that interlocutory costs be taxed immediately122 does not change the Court's task. The fact that the Court had previously been willing to order that interlocutory costs be taxed indicates unsavoury conduct. But the grant of a stay does not necessarily follow such an order. The Court, when considering an application for a stay, must decide afresh (as part of considering whether to exercise the discretion to grant the stay) whether the conduct of an impecunious party is so extreme as to justify bringing the proceedings to an end, and whether so ending the claim is the only way to do justice between the parties. The effective end of a proceeding is a far more significant consequence for a party than an order that interlocutory costs be paid forthwith. It follows that the conduct justifying the grant of a stay will necessarily be more worthy of condemnation than the conduct justifying the making of an interlocutory costs order to be paid forthwith. While historical conduct may assist the Court's inquiry, it does not necessarily provide a final answer. In this case, the grant of the stay has prevented Mr Rozenblit from pursuing a claim honestly made. There were insufficient grounds for such an order. The result was not the only fair and practical way to ensure justice between the parties. Conclusion and orders For the foregoing reasons, the appeal should be allowed. The orders of the Court should be: Appeal allowed. Set aside orders 2 and 3 of the Court of Appeal of the Supreme Court of Victoria made on 17 March 2017 and in their place order that: the appeal be allowed with costs; and the orders of Cameron J made on 10 August 2016 be set aside and in their place it be ordered that: the appeal be allowed with costs; and 122 r 63.20.1 of the 2015 SCR. in respect of the orders of Lansdowne AsJ made on 22 December 2015: (A) Orders 1, 6, 7 and 8 be set aside; (B) Order 2 be amended to delete the words "On payment of these amounts" and to add, after "within 14 days", the words "of the date of the final orders of the High Court of Australia in Matter No M114 of 2017"; and it be ordered that the defendants pay the plaintiff's costs in relation to the defendants' summons filed 17 July 2015 on a standard basis. The respondents pay the appellant's costs.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT [2016] HCA 27 20 July 2016 ORDER Appeal dismissed. On appeal from the Supreme Court of Queensland Representation P J Davis QC with J R Jones for the appellant (instructed by Grigor Lawyers) P J Callaghan SC with V A Loury for the respondent (instructed by Director of Public Prosecution (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Appeal – Directions to jury – Where appellant convicted of attempted murder after firing shots during confrontation with man with knife – Where appellant relied on defence of self-defence under ss 271(1), 271(2) and 272(1) of Criminal Code (Q) – Where prosecutor suggested in closing address existence of "consensual confrontation" negated self-defence – Where trial judge did not direct jury that no evidence of consent – Where no redirection sought by defence counsel on this issue – Whether trial judge failed to properly direct jury as to self-defence – Whether trial judge erred in failing to direct jury as to defence of mistake under s 24 of Criminal Code. Words and phrases – "assault", "consensual confrontation", "consent to assault", "mistaken belief", "self-defence". Criminal Code (Q), ss 24, 245, 271, 272. FRENCH CJ, KIEFEL AND BELL JJ. Introduction The appellant was convicted after trial before a judge and jury in the Supreme Court of Queensland of attempted murder and unlawful wounding with intent to maim. The indictment expressed the offences as contrary to ss 306(a) and 317(b) and (e) of the Criminal Code (Q) respectively1. The convictions arose out of an incident at the Robina Town Centre at the Gold Coast in Queensland on 28 April 2012. The incident leading to the charges involved a confrontation between the appellant and one Jacques Teamo ("Teamo"). In the course of the confrontation, Teamo produced a knife and the appellant produced a hand gun and fired two shots. One of the bullets struck Teamo in the arm, albeit without inflicting a life threatening injury. The other struck and injured an innocent bystander, a shopper in the complex, Kathy Devitt. The appellant was sentenced to 12 years and three months imprisonment for the offence of attempted murder, seven years for the offence of unlawful wounding with intent to maim and one year and six months for the offence of unlawful possession of a weapon, to which he had previously pleaded guilty. All sentences were to be served concurrently. The appellant appealed to the Court of Appeal of the Supreme Court of Queensland against his convictions and applied to that Court for leave to appeal against the sentences. The application for leave to appeal against sentence was refused. His appeal against conviction was based upon allegedly inadequate directions by the trial judge as to his defence of self-defence. In particular, he complained of the trial judge's direction in relation to a suggestion by the prosecutor that Teamo's alleged production of the knife prior to the appellant shooting Teamo was part of a "consensual confrontation" and therefore not an assault. He also argued that the trial judge failed to leave to the jury the defence of honest and reasonable but mistaken belief as to fact under s 24 of the Criminal Code based upon a proposition that the appellant may have mistaken Teamo's conduct for an assault by threatened application of force and acted accordingly. The appellant was granted special leave to appeal in this Court on those questions on 11 March 2016. For the reasons that follow the appeal should be dismissed. 1 The reference to s 317(b) would appear to be incorrect and should have been a reference to s 317(a). Bell Evidence as to relevant facts The evidence relevant to the grounds of appeal was referred to in the judgment of Atkinson J in the Court of Appeal, with whom Morrison JA and Applegarth J agreed. It may be summarised briefly. On 28 April 2012 the appellant went shopping at the Robina Town Centre with members of his family. Teamo was at the shopping centre at the same time with his two young sons. He and the appellant were members of rival motorcycle clubs. Both were armed. The appellant was carrying a loaded hand gun in a pouch bag on a belt around his waist. Teamo was carrying a flick knife in a shoulder bag. Teamo entered a Sony store with his younger son. His older son was pushing a shopping trolley behind him. The appellant walked past, saw Teamo, stopped, paced up and down outside the store entrance, felt for something in his pouch, then entered the store. He walked around staring at Teamo. Teamo said "What are you looking at?" The appellant then left the store. Teamo said to his older son that he was going to "stab that guy". What he said was not heard by the appellant. Teamo then walked out of the store. He appeared to touch something in his shoulder bag, then followed the direction taken by the appellant. He stopped and gestured towards the appellant and said "What are you looking at? You got a problem?" Both were described by witnesses as puffing their chests and shouting at each other. The appellant walked towards Teamo. As the appellant reached into his bag he dropped a ten dollar note, which a passer-by picked up and gave to him. There was an issue at trial as to who took his weapon out first. At some point Teamo took his knife out and extended the blade, stopped and started backing away. The appellant held his gun in his right hand moving towards Teamo. He pointed it at him and shot him once at close range but not seriously injuring him. Another shot missed Teamo and struck Ms Devitt. Bullet fragments lodged in her right hip. It is not clear which shot hit which person. After firing, the appellant walked away holding his gun in his hand. Teamo returned to the entrance of the Sony store where his sons were waiting and left the store. The statutory provisions The principal issue at trial turned on the defence of self-defence. The burden lay upon the prosecution to negate self-defence beyond reasonable doubt. Three different types of self-defence, referred to in ss 271(1), 271(2) and 272 of Bell the Criminal Code, were in issue. They were self-defence against an unprovoked assault2, self-defence against an unprovoked assault where there is a reasonable apprehension of death or grievous bodily harm3 and self-defence against a provoked assault4. Section 271(1) provides that: "When a person is unlawfully assaulted, and has not provoked the assault, it is lawful for the person to use such force to the assailant as is reasonably necessary to make effectual defence against the assault, if the force used is not intended, and is not such as is likely, to cause death or grievous bodily harm." Section 271(2) applies where "... the nature of the assault is such as to cause reasonable apprehension of death or grievous bodily harm, and the person using force by way of defence believes, on reasonable grounds, that the person can not otherwise preserve the person defended from death or grievous bodily harm ...". In those circumstances, "it is lawful for the person to use any such force to the assailant as is necessary for defence, even though such force may cause death or grievous bodily harm." As appears from the terms of s 271(1) and (2), a person who has provoked an assault cannot invoke the defence of self-defence under either of those provisions. Reliance must be placed upon s 272. Section 272(1) provides: "When a person has unlawfully assaulted another or has provoked an assault from another, and that other assaults the person with such violence as to cause reasonable apprehension of death or grievous bodily harm, and to induce the person to believe, on reasonable grounds, that it is necessary for the person's preservation from death or grievous bodily harm to use force in self-defence, the person is not criminally responsible for using any such force as is reasonably necessary for such preservation, although such force may cause death or grievous bodily harm." It was common ground at the trial that the term "provoked" in each section attracted the application of the definition of "provocation" in s 268(1), which provides: 2 Criminal Code, s 271(1). 3 Criminal Code, s 271(2). 4 Criminal Code, s 272(1). Bell "The term provocation, used with reference to an offence of which an assault is an element, means and includes, except as hereinafter stated, any wrongful act or insult of such a nature as to be likely, when done to an ordinary person ... to deprive the person of the power of self-control, and to induce the person to assault the person by whom the act or insult is done or offered." The application of that definition was not in issue in this appeal. In Queensland it has been held to be applicable to the term "provoked" in s 2715. As appears below, however, there was confusion about its application in the closing address of counsel for the prosecution, who linked it to a non-existent defence of provocation on the part of the appellant. It is necessary to the defence of self-defence under each of ss 271 and 272 that the person claiming its benefit was "assaulted". That requirement engages the definition of the term "assault", which appears in s 245 of the Criminal Code and includes: "(1) A person ... who by any bodily act or gesture attempts or threatens to apply force of any kind to the person of another without the other person's consent, under such circumstances that the person making the attempt or threat has actually or apparently a present ability to effect the person's purpose, is said to assault that other person, and the act is called an assault." That limb of the definition, which was applicable in this case, requires that the act constituting the assault be done without the consent of the person assaulted. Obvious examples of consensual application of force which is therefore not an assault include surgery, dental treatment and sporting matches involving deliberate physical contact. Relevantly to this appeal, a threat by one person to apply force to another can constitute an assault. The defence of self-defence is not available if the threatened application of force was done with the consent of the person threatened. In that event there would be no assault. Counsels' closing addresses Counsel for the prosecution commenced his closing address on the issue of self-defence with the observation that: 5 R v Prow [1990] 1 Qd R 64 at 86 per Shepherdson J, 88 per Williams J; R v Dean [2009] QCA 309 at [25] per Fraser JA, Cullinane J agreeing at [50]; cf Gray v Smith [1997] 1 Qd R 485 at 489 per Pincus JA and Mackenzie J. Bell "Now, there's three central propositions that I want to put to you as to why you'd accept, beyond reasonable doubt, that none of the self-defence provisions apply. The first is that both the defendant and Teamo really, at least, started behaving as badly as each other, that what was occurring was, at least until the gun was pulled out, a consensual fight or consensual confrontation — conflict. From the time the gun was pulled out the defendant became the aggressor. He was not acting in self-defence. He was the aggressor. And flowing from the proposition that it was a consensual fight or conflict is that the production by Teamo of the knife was simply either part of that consensual assault — part of that consensual fight or did not raise enough provocation to require actions in self- defence." There were other references to a "consensual confrontation" in counsel's closing submission. At one point he described the incident as having started as a "consensual confrontation" and said: "That's not an unlawful assault. To be unlawful, there must be no consent." Counsel then went on to say that: "The production of the knife if it was not part of that consensual confrontation did not, in the circumstances, provide provocation for a man to lose his self control." The reference to consensual confrontation was at best puzzling given the state of the evidence. Its conflation with provocation of the appellant and loss of control on his part, when that was not an issue in the case, was inexplicable. Counsel turned specifically to the concept of assault and said: "In each case, there must be an unlawful — and I emphasise — unlawful assault which provokes the act said to be done in self-defence. As I say, the definition of assault is very important to understand: it doesn't only mean coming into contact; it can also mean — and I'm paraphrasing — a threatened application of force by one to another without the other's consent and in circumstances where the first person is in a position to carry out a threat. A threatened application of force; that's what was happening. They were both in puffing mode. But it must be without consent and they were both in it; they were both happy to be doing that." Counsel continued: "So if the production of the knife itself was not part of that consensual fight, in the circumstances of what had happened, it certainly was not Bell enough for that man to be losing self control when he knew, if not in his hand, sitting at the front of his waist is a loaded firearm. So issues of who pulled the weapon first and that sort of thing may well come into play, but in my submission to you, it was all consensual and it was all puffing. And any threatened application of force at that time was by consent. Once you're satisfied beyond that proposition beyond a reasonable doubt, any threatened application — that any threatened application of force was consensual, the assault is not unlawful and all forms of self-defence will be defeated; they would then no longer have any role to play in deliberations." Counsel for the prosecution then submitted that if the production of the knife was not part of "that lawful assault" it did not in the circumstances amount to "the provocation required to justify the use of force itself." Again, this was a misuse of the concept of provocation which might have conveyed to a jury the proposition that the appellant's actions could not be justified unless he suffered a loss of control in reaction to Teamo's assault. This aspect of the address was not raised in the grounds of appeal in the Court of Appeal. That is perhaps understandable. The compendious direction given by the trial judge included a comprehensive list of questions which the jury had to answer in order to reach the various verdicts open to them. Neither the directions nor those questions disclosed error relevant to the use of the concept of "provocation". Counsel for the appellant initially drew the attention of the jury to Teamo's state of mind as evidenced by his statement to his son that he was going to stab the appellant and his gestures and language when he came out of the Sony store. He observed that there were no words attributed to the appellant that suggested any intention, let alone an intention to kill. Counsel for the appellant submitted to the jury that, quite apart from self- defence, the evidence would not allow them to be satisfied that the appellant intended to kill Teamo or that he intended to maim, disfigure, disable or cause grievous bodily harm to him. The incident involved a "split-second response to an exposed flick-knife leaving little or no time for anything other than an instinctive act of survival." The act of survival was the raising of a weapon and the pulling of the trigger twice in the direction of Teamo. The case, as counsel put it to the jury, was about whether the appellant was acting in self-defence, his submission being that "at the very least, the Prosecution can't exclude self-defence beyond reasonable doubt." In any event, there were "all sorts of problems with identifying the precise state of mind in something that happened so quickly and so instinctively in the circumstances that unfolded." Bell Nothing in the closing address of counsel for the appellant was directed to negative the proposition that the confrontation between Teamo and the appellant was at any stage able to be characterised as "consensual". A fortiori, there was nothing in counsel's closing address to negative the proposition that the asserted unlawful assault by Teamo was consensual. That is not surprising. There was ample foundation for counsel for the appellant to form the judgment that the question whether the assault said to have been committed by Teamo was with the consent of the appellant would not detain the jury more than a moment and that the risk of an adverse finding on that basis was negligible. Although consent was raised by counsel for the prosecution and raised in a confusing way, it was plainly open to counsel for the appellant to form the judgment that it was simply not a real issue in the case. Following his closing address, counsel for the appellant drew to the trial judge's attention an observation in the address of prosecuting counsel that might have left the impression that the failure of the appellant to give evidence could give rise to an adverse inference. The trial judge agreed that he would add an additional sentence to his summing up to deal with that concern. In the discussion of the draft summing up no issue about the character of the incident or any aspect of it as consensual was raised. The trial judge's directions A list of 10 questions setting out a sequence of matters to be found by the jury, and the consequences of such findings for their verdicts, was given to the jury by the trial judge. In that list three questions were posed relevant to the defence of self-defence. None addressed the issue whether any assault by Teamo, necessary to enliven the defence, was consensual. The jury, however, were provided with separate printouts of ss 271(1) and (2), 272(1), 245(1) and 268(1). As noted earlier, the use of the term "provocation" arose only in the context of whether the appellant could be said to have provoked Mr Teamo so as to negative the application of the self-defence provisions in s 271(1) and (2). The trial judge asked the jury to consider whether the appellant was unlawfully assaulted by Teamo and if they were satisfied beyond reasonable doubt that whatever the appellant had done before the shooting constituted provocation of Teamo. His Honour then directed the jury on the question whether the force that the appellant used was not reasonably necessary to make an effectual defence against Teamo's assault. A further question with respect to self-defence under s 271(1) was whether the prosecution had established beyond reasonable doubt that the force used by the appellant was intended and was such as was likely to cause death or grievous bodily harm. The trial judge turned to s 271(2), where the "law recognises that in more extreme circumstances, people can on some occasions, be frightened for their lives and have to use whatever Bell force is necessary to save themselves." Specifically in relation to self-defence under s 271(2) the trial judge said: "The first matter that arises again is whether Mr Graham was unlawfully assaulted by Mr Teamo. Remember what I said to you about the meaning of assault. It doesn't have to involve actual physical assault and a movement or gesture may be enough, or a threat to apply force of any kind under circumstances where the person has actually or apparently an ability to affect a person's purpose can constitute an assault; and, in that context, you'll consider the evidence on the video of Mr Teamo and what is said to be a knife in his hand." The trial judge continued to address s 272. In no part of his directions on the law did his Honour put to the jury that they could find that the defence of self- defence was defeated on the basis that Teamo's alleged assault was not an assault because it was consensual. His Honour did, however, refer to the prosecutor's closing address and his reference to the term "consensual confrontation" as "not an unlawful assault so a self-defence doesn't apply." That and other matters to which his Honour referred were described by him as "matters of interpretation, construction and argument put to you by the Crown prosecutor." In re-directions, the trial judge gave the jury written directions on self- defence. Not surprisingly, there was no application by counsel for the appellant for a re-direction on the question whether the "consensual confrontation" referred to by counsel for the prosecution, and mentioned by the trial judge in the closing part of his address, required elaboration. Nor did he seek a direction that the disqualifying consent had to be related to Mr Teamo's alleged threatened use of the knife, which on the defence case constituted an unlawful assault and thereby engaged the self-defence provisions of the Criminal Code. No reference was made in the summing up or in closing addresses to the defence of honest and reasonable but mistaken belief on a question of fact, provided for in s 24 of the Criminal Code. The appeal to the Court of Appeal The appellant's complaint in the Court of Appeal was that the prosecutor's submission referring to a "consensual confrontation" was "wrong and misleading" and that the trial judge had erred in failing to deal properly with that submission. The trial judge, it was said, should have identified the relevant assault as the production of the flick knife. He should also have directed the jury on the defence of honest and reasonable but mistaken belief about a fact pursuant to s 24 of the Criminal Code. He should have directed them that if the production of the flick knife was not a threatened application of force but the Bell appellant honestly and reasonably mistook it to be so, then the jury had to proceed on the basis that there was an assault. The trial judge, it was said, should then have directed the jury that there would be no assault for the purposes of self- defence only if the appellant consented to the particular assault. There was no evidence of any such consent. The decision of the Court of Appeal The Court of Appeal dealt shortly with the appellant's arguments. The steps in the Court of Appeal's reasoning were as follows: The prosecutor's submissions directed the jury's attention to two alternative findings of fact on the question of whether there was an unlawful assault. The first was that Teamo's knife was drawn before the appellant drew his gun. The second was that the appellant's gun was drawn before Teamo produced his knife. If the knife was found to have been drawn before the gun, the question that arose was whether the mutual threats were part of a consensual confrontation. If the gun was drawn before the knife, the question was whether that was provocation for Teamo to pull out his knife. The Crown prosecutor correctly pointed out that lack of consent was an essential element of the offence of assault. There was no further need for the issue to be addressed by the trial judge and neither counsel asked him to do so whether by way of emphasis or correction. The trial judge directed the jury on the correct legal test as to the meaning of assault and directed them correctly on the relevance of whether it was the gun or the knife that was drawn first, inviting the jurors to make up their own minds about that. No direction in relation to s 24 of the Criminal Code was sought at the trial. There was no evidentiary basis for suggesting that if the production of the knife were not a threatened application of force, the appellant might nevertheless have honestly and reasonably believed it to be so. The contentions The appellant canvassed before this Court essentially the same arguments as were put to the Court of Appeal. The effect of the submissions by counsel for the prosecution at trial had been that there was a consent by the appellant to a "confrontation" comprising a series of events which led up to the shooting. Bell However, the question of consent had to be related to the "assault", which was the threatened application of force constituted by the production of the flick knife. There was no evidence to suggest that the appellant had consented to being threatened with the flick knife or being cut or stabbed. There was no evidence to suggest that the appellant knew that Teamo had a flick knife before it was produced immediately before the shooting. The appellant's submissions focussed upon the prosecutor's address and his characterisation of the conduct of the two men as a "consensual confrontation". He submitted that it was for the judge to properly fashion directions identifying the real issues for the jury and direct them on the necessary legal principles. The judge failed to do so because he did not identify the particular "assault" said to justify the appellant's action in self-defence. Moreover, he gave no direction to the jury as to the concept of consent. The trial judge's reiteration of the prosecutor's assertion that the series of events was a "consensual confrontation between the two actors" distracted the jury from the real issue in the case, namely whether the appellant had made proportionate self- defence to an assault constituted by the production of the flick knife. The appellant complained that the Court of Appeal had misunderstood both the submissions of the prosecutor and the directions of the trial judge. Both had left open to the jury the possibility that the production of the flick knife by Teamo was part of the "consensual fight" or "consensual confrontation" with the result that there was no "assault" by Teamo upon the appellant and that therefore self-defence was not available. On the question of mistake, the appellant argued that if the production of the flick knife was not a threatened application of force but just a brandishing with no threat to cut or stab the appellant, the appellant could honestly and reasonably have been of the mistaken belief that a physical assault was to ensue, such that s 24 of the Criminal Code was engaged. The respondent's submissions relied substantially upon the absence of any relevant objection to the trial judge's direction by counsel for the appellant at trial. The trial judge had concluded his references to the prosecutor's closing address by emphasising that they were matters of "interpretation, construction and argument". It would have been open for counsel for the appellant at trial to conclude that this was sufficient to confine the effect of whatever the prosecutor had said. For the same reason, counsel might have taken the view that the jury should not have had their attention directed back to the issue of "consent". The respondent said it was potentially relevant to ask whether the appellant was involved in a confrontation with Teamo in which there was an implied consent as between them to threaten each other. It was necessary to bear Bell in mind the circumstances. In a forensic situation where the appellant's state of mind was an element of the offences charged, counsel could reasonably take the view that it was better for the jury not to linger upon this aspect of the evidence — the appellant having walked into a shopping centre with a loaded hand gun. Conclusion The contentions can be dealt with in short compass. The Court of Appeal was correct to come to the conclusion that it did. It may be thought surprising that the prosecutor troubled to raise consent to an assault by Teamo as an issue negativing self-defence. It might have been open to treat the engagement between the appellant and Teamo as beginning with a kind of limited and largely blustering exchange involving aggressive statements and gestures. It is not clear, however, how the alleged production of the knife by Teamo could have been treated as consensual by any reasonable jury. Despite the reference to consent by counsel for the prosecution, it was, on the evidence, not a real issue in the case. Counsel for the appellant evidently perceived as much for he did not mention it in his own address nor ask the trial judge for a direction on that question. He, no doubt, had in mind to focus the attention of the jury on the question whether Teamo produced his flick knife before the appellant produced his gun and on the appellant's state of mind in the very short timeframe which, on his case, he had available to respond to the threat from Teamo. There was no misdirection by the trial judge. The relevant provisions of the Criminal Code were put before the jury, including the definition of assault in s 245 which incorporated the requirement of want of consent. In the circumstances of this case, no elaboration of that issue was required nor any elaborate discussion of what counsel for the prosecution had said beyond the rather dismissive observation that it was a matter of argument and interpretation. So far as s 24 of the Criminal Code is concerned, it may be engaged in relation to s 271 although the scope of that engagement is likely to be limited6. It is not necessary for present purposes to consider the limits of its application to the defence of self-defence. On the case at trial there was no material upon which the possibility of that defence was engaged. It was not raised by counsel for the appellant and there was no requirement for the judge to direct on it. For the preceding reasons, the appeal should be dismissed. 6 R v Allwood [1997] QCA 257. See also Marwey v The Queen (1977) 138 CLR 630 at 637 per Barwick CJ, Aickin J agreeing at 644; [1977] HCA 68. Nettle NETTLE J. I have had the advantage of reading in draft the reasons for judgment of the Chief Justice, Kiefel and Bell JJ. I gratefully adopt their Honours' statement of the facts of the matter. I agree with them that s 24 of the Criminal Code (Q) ("the Code") is not raised for consideration by this appeal. I have come, however, to a different conclusion as to the disposition of the appeal. No doubt, if the jury were satisfied beyond reasonable doubt that the appellant drew his weapon before Teamo produced his flick-knife, there would be no room for self-defence. The difficulty is that, because of the way in which the jury were directed, they might wrongly have concluded that it was open to exclude the possibility of self-defence on the basis that Teamo's production of the flick-knife was part of a "consensual confrontation". Counsel for the appellant submitted that the trial judge materially misdirected the jury by telling them that it was open to be satisfied beyond reasonable doubt that the appellant consented to Teamo's production of a flick-knife as part of a "consensual confrontation between the two actors" and, on that basis, that the possibility that the appellant shot Teamo in self-defence within the meaning of ss 271(1), 271(2) or 272(1) of the Code could be excluded beyond reasonable doubt. That submission should be accepted. It was not open on the evidence to be satisfied beyond reasonable doubt that the appellant consented to Teamo's production of the flick-knife as part of a "consensual confrontation" and, consequently, it was a material misdirection to direct the jury that they could exclude the possibility of self-defence on that basis. The Crown's closing address and the trial judge's summing up The first point in the trial at which there was any suggestion of the appellant having consented to Teamo's production of the flick-knife as part of a "consensual confrontation" was in the course of the Crown prosecutor's final address, as follows: "Now, there's three central propositions that I want to put to you as to why you'd accept, beyond reasonable doubt, that none of the self-defence provisions apply. The first is that both the defendant and Teamo really, at least, started behaving as badly as each other, that what was occurring was, at least until the gun was pulled out, a consensual fight or consensual confrontation – conflict. From the time the gun was pulled out the defendant became the aggressor. He was not acting in self-defence. He was the aggressor. And flowing from the proposition that it was a consensual fight or conflict is that the production by Teamo of the knife was simply ... part of that consensual assault – part of that consensual fight". (emphasis added) Nettle Later in the address, the prosecutor reiterated the point, thus: "His Honour will direct you as to the three different forms of self-defence that may be raised on the evidence depending on what view you take of the evidence ... but there are some limiting features to the various forms of self-defence that you will be instructed about. In each case, there must be an unlawful – and I emphasise – unlawful assault which provokes the act said to be done in self-defence. As I say, the definition of assault is very important to understand: it doesn't only mean coming into contact; it can also mean – and I'm paraphrasing – a threatened application of force by one to another without the other's consent and in circumstances where the first person is in a position to carry out a threat. A threatened application of force; that's what was happening. They were both in puffing mode. But it must be without consent and they were both in it; they were both happy to be doing that." (emphasis added) Then the prosecutor dealt with the point for a third time, as follows: "So if the production of the knife itself was not part of that consensual fight, in the circumstances of what had happened, it certainly was not enough for that man to be losing self control when he knew, if not in his hand, sitting at the front of his waist is a loaded firearm. So issues of who pulled the weapon first and that sort of thing may well come into play, but in my submission to you, it was all consensual and it was all puffing. And any threatened application of force at that time was by consent. Once you're satisfied beyond that proposition [sic] beyond a reasonable doubt, any threatened application – that any threatened application of force was consensual, the assault is not unlawful and all forms of self-defence will be defeated; they would then no longer have any role to play in deliberations." (emphasis added) In the course of summing up, the judge provided the jury with the definition of assault in s 245(1) of the Code and outlined the elements of each of the alleged offences. His Honour then turned to the issue of self-defence, as follows: "The burden remains on the prosecution at all times to prove that Mr Graham was not acting in self-defence, and the prosecution must do so beyond reasonable doubt before you could find him guilty. The first of those four elements is whether Mr Graham was unlawfully assaulted by Jacques Teamo. If you conclude that Mr Teamo did not assault the defendant, this defence is not open. ... And you will consider the evidence before you and find whether or not Mr Teamo actually assaulted Mr Graham, or did something by way of an Nettle act or gesture from which you could reasonably infer that Mr Teamo was attempting or threatening to apply force to Mr Graham. The first matter that arises again is whether Mr Graham was unlawfully assaulted by Mr Teamo. Remember what I said to you about the meaning of assault. ... This morning you heard addresses from the Crown prosecutor and defence counsel. I don't intend going over them in great detail. I'm sure they're fresh in your minds and as it happened, each – I say this with great respect – spoke clearly and well in making the particular points that they wanted to bring home to you. [The prosecutor] submitted to you that this was not a case in which any of the three, I'll call them again, arms of self-defence apply because this was not, in his view, a case in which there was anything other than a consensual confrontation between the two actors, not a case in which one provoked or one assaulted and the other provoked, any of those things that I was talking to you about at some length. Simply – and again he took you to evidence about this and showed you some film – in his submission, the evidence would lead you to conclude that you could forget about self-defence. Just look upon this as an occasion in which two men, for whatever reason and we don't need to know, became involved in a consensual confrontation which ended quite badly for one of them. A consensual confrontation, [the prosecutor] submitted to you, is not an unlawful assault so a self-defence doesn't apply." (emphasis added) By so directing the jury, the judge gave his authority to the Crown prosecutor's submission7 that it was open to conclude, beyond reasonable doubt, that Teamo's production of the flick-knife was just another part of a "consensual confrontation" that began with the two men "eyeballing" each other in the Sony store and, for that reason alone, that the issue of self-defence could be excluded at the outset. 7 See Fingleton v The Queen (2005) 227 CLR 166 at 205 [102] per McHugh J; [2005] HCA 34. Nettle Contrary, however, to the prosecutor's submission, and the judge's direction, it was not open on the evidence to be satisfied beyond reasonable doubt that Teamo's production of the flick-knife was something to which the appellant consented, either as part of a "consensual confrontation" or at all. As the video evidence shows, after the initial "eyeballing" in the Sony store, the appellant walked out of and away from the store in a manner which bespoke an intent to leave Teamo behind. It was only later, after Teamo had followed the appellant, gestured towards him and appeared to call out to him, that the appellant turned back towards Teamo and the latter produced his flick-knife. Contrary to the respondent's submission, there was nothing which suggested that the appellant knew before that point that Teamo was armed with the flick-knife, still less that the appellant consented to Teamo producing it with the apparent intention of using it against the appellant's person. To suppose as much would be to speculate. Logically, it cannot be inferred from the appellant's engagement in the "eyeballing" that took place in the Sony store that he consented to the production of a flick-knife or to being threatened with a flick-knife of which, ex hypothesi, he was unaware. It is, however, distinctly possible that the jury acted on the judge's endorsement of the prosecutor's submission that it was open to them to find that the production of the flick-knife was part of a "consensual confrontation" and, on that basis, open to them to be satisfied beyond reasonable doubt that the Crown had excluded the possibility of self-defence. No forensic advantage Much was made in argument by the respondent of the fact that counsel who represented the appellant at trial did not take exception to the prosecutor's final address, deal with the "consensual confrontation" point in his own final address, or seek a direction from the judge to correct the effect of it. It was submitted that there may well have been good forensic reason for defence counsel intentionally to adopt that course – lest, if the judge had emphasised the importance of the production of the flick-knife, and of the need to be satisfied beyond reasonable doubt that its production (as opposed to the general confrontational behaviour) was with the appellant's consent, it cause the jury to concentrate more closely on the evidence of the production of the flick-knife and, in view of that evidence, to come more readily to the conclusion that the appellant produced his weapon before Teamo produced his flick-knife. Those submissions should be rejected. To start with, as has been observed, the first time during the trial that it was suggested that the production of the flick-knife was part of a "consensual confrontation" was in the course of the prosecutor's final address. That being so, it would hardly be surprising if defence counsel simply failed to perceive the significance of the point, and for that reason failed to take exception or deal with it in his own address. Notably, the prosecutor's address came after the judge had provided a copy of his proposed Nettle final directions in draft to counsel and counsel had given them their approval. There was nothing in the draft directions about a "consensual confrontation". It is also impossible to conceive of defence counsel's failure to take exception to, or seek appropriate redirections on, the prosecutor's "consensual confrontation" submission as an apparently rational tactical decision8. For, on any rational view of the matter, proper directions to that end could only have been of assistance to the appellant. The respondent's suggestion that defence counsel may have refrained from seeking redirection on the issue for fear of the jury being led to concentrate more closely on Teamo's drawing of the flick-knife, and thereby being more likely to conclude that the appellant drew his weapon first, is untenable. It is conclusively contradicted by the fact that defence counsel spent the majority of his final address taking the jury frame by frame through the video evidence, and the oral evidence relating to each aspect of it, beseeching the jury to look closely at that evidence in order to see what had actually occurred. A direction from the judge to the same effect would have served only to support defence counsel's plea to the jury that they take the utmost care in studying the evidence of who drew his weapon first. By contrast, the idea that it was possible to resolve the issue of self-defence by treating the drawing of the flick-knife as part of the "consensual confrontation" which began with the "eyeballing" in the Sony store was of potentially very significant benefit to the Crown's case – as the prosecutor evidently intended it should be – by taking the focus off the difficult-to-resolve evidence of the sequence of the production of weapons and back to earlier, less critical events about which there was relatively little doubt. So much is made clear by the precise words of the prosecutor's invitation to the jury in his closing: "it was all consensual and it was all puffing. ... Once you're satisfied beyond that proposition [sic] ... all forms of self-defence will be defeated". 8 Cf Suresh v The Queen (1998) 72 ALJR 769 at 773 [22] per McHugh J; 153 ALR 145 at 151; [1998] HCA 23; Doggett v The Queen (2001) 208 CLR 343 at 346-348 [1]-[9] per Gleeson CJ; [2001] HCA 46; TKWJ v The Queen (2002) 212 CLR 124 at 130-131 [16] per Gleeson CJ, 135 [33] per Gaudron J, 155 [95] per McHugh J, 160-161 [115] per Hayne J; [2002] HCA 46; Ali v The Queen (2005) 79 ALJR 662 at 665 [11] per Gleeson CJ, 668 [38] per Hayne J (McHugh J agreeing at 665 [15]), 675 [85] per Callinan and Heydon JJ; 214 ALR 1 at 5, 10, 19; [2005] HCA 8; Nudd v The Queen (2006) 80 ALJR 614 at 618-619 [9] per Gleeson CJ, 624 [31] per Gummow and Hayne JJ, 636-637 [108] per Kirby J, 644 [158] per Callinan and Heydon JJ; 225 ALR 161 at 164-165, 172, 189, 199-200; [2006] HCA 9. Nettle Moreover, regardless of the way in which defence counsel conducted the defence case, the trial judge was required to be astute to secure for the appellant a fair trial according to law and, therefore, adequately to direct the jury "both as to the law and the possible use of the relevant facts upon any matter upon which the jury could in the circumstances of the case upon the material before them find or base a verdict in whole or in part"9. It was not conducive to a fair trial according to law, and it was not an adequate direction as to the law and the possible use of facts, wrongly to direct the jury that it was open to make a finding of fact beyond reasonable doubt that was dispositive of the case. It was contrary to law and it is "reasonably possible" that it may have affected the verdict10. The proviso Counsel for the respondent contended that, if that were so, this Court was in as good a position as the jury to determine the facts and that the Court should be prepared to apply the proviso11. Counsel submitted that, upon an examination of the whole of the record and giving such weight to the jury's verdict as was due, it was clear beyond reasonable doubt that the appellant drew his weapon before Teamo produced his flick-knife, or at least that he shot Teamo after Teamo had turned away and disengaged from any threat constituted of the introduction of the flick-knife; and therefore the appellant could not be found to have acted in self-defence. In counsel's submission, the most important evidence was the video evidence and, although there was also viva voce evidence, it was relatively inconsequential in light of the video evidence. Those submissions should also be rejected. Much of the viva voce evidence was concerned with the states of mind of Teamo and the appellant. As defence counsel emphasised in his final address to the jury, it was favourable to the appellant in that, although it was to the effect that Teamo was acting aggressively, none of it suggested that the appellant had exhibited any physical display of aggression. There was also important viva voce evidence given by Teamo's son that Teamo had said "I'll stab that guy" (meaning the appellant) before Teamo produced the flick-knife. None of that can be seen on the videos. 9 Pemble v The Queen (1971) 124 CLR 107 at 117-118 per Barwick CJ; [1971] HCA 20; see also Fingleton (2005) 227 CLR 166 at 198-199 [83] per 10 Dhanhoa v The Queen (2003) 217 CLR 1 at 13 [38] per McHugh and Gummow JJ; [2003] HCA 40 citing Simic v The Queen (1980) 144 CLR 319 at 332; [1980] HCA 25. 11 Criminal Code (Q), s 668E(1A). See, eg, Weiss v The Queen (2005) 224 CLR 300 at 316-318 [41]-[47]; [2005] HCA 81. Nettle Admittedly, one possible view of the video evidence was that Teamo turned and started to retreat before the appellant fired the shots. If the jury took that view, it would have been open to the jury to reason that, even if Teamo produced his flick-knife before the appellant drew his weapon, the appellant's response was more than was reasonably necessary to make effectual defence or went beyond such force as was necessary for defence12. But they were decisions for the jury to make on the basis of their assessment of the evidence and their perception of what was reasonable in the circumstances. They are not decisions which this Court should make in circumstances where there is a real possibility that the jury were deflected from the task by a misdirection that they were entitled to conclude that the drawing of the flick-knife was part of a consensual confrontation and, if so, that self-defence could be excluded in limine13. It was not contended that a verdict of not guilty was not open14. Nor should it be supposed that a verdict of guilty was inevitable15. Consequently, it cannot be concluded that the misdirection did not deprive the appellant of a chance of acquittal that was fairly open to him16. And, strong though the Crown case might appear to have been, in light of the limitations of the video evidence, the importance of hearing and seeing the witnesses who gave oral evidence, and the difficulty of assessing what was a reasonable reaction in the circumstances, this Court cannot and should not be satisfied beyond reasonable doubt on the record of the trial that the misdirection did not amount to a substantial miscarriage of justice17. 12 Criminal Code, s 271. 13 Gillard v The Queen (2003) 219 CLR 1 at 15 [29] per Gleeson CJ and Callinan J; [2003] HCA 64. 14 Weiss (2005) 224 CLR 300 at 313 [32]. 15 Baini v The Queen (2012) 246 CLR 469 at 480 [30] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; [2012] HCA 59. 16 Mraz v The Queen (1955) 93 CLR 493 at 514 per Fullagar J; [1955] HCA 59; Pollock v The Queen (2010) 242 CLR 233 at 252 [70]; [2010] HCA 35; Baiada Poultry Pty Ltd v The Queen (2012) 246 CLR 92 at 105-107 [31]-[39] per French CJ, Gummow, Hayne and Crennan JJ; [2012] HCA 14. 17 AK v Western Australia (2008) 232 CLR 438 at 457 [59] per Heydon J; [2008] HCA 8; Baini (2012) 246 CLR 469 at 481-482 [33] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; Baiada Poultry (2012) 246 CLR 92 at 104 [29] per French CJ, Gummow, Hayne and Crennan JJ. Nettle Conclusion In the result, I would allow the appeal, quash the convictions of attempted murder and unlawful wounding with intent to maim and order that a new trial be had on those counts. GORDON J. I agree with French CJ, Kiefel and Bell JJ that the appeal should be dismissed. I would add the following. The fundamental task of a trial judge is to ensure a fair trial of the accused18. In our system of criminal justice, the trial judge undertakes that task in a context where "a trial is conducted as a contest between the prosecutor (almost always a representative or agency of the executive government) and the accused (almost always an individual citizen)"19. It is the prosecution and the defence who "define jury for consideration"20. issues which are presented the the Against that background, "the adequacy of a summing up ought not to be judged upon a subtle examination of its transcript record or by undue prominence being given to any of its parts"21. It is not appropriate to scrutinise a trial judge's directions to the jury to "consider whether this or that phrase was the best that might have been chosen, or whether a direction which has been attacked might have been fuller or more conveniently expressed, or whether other topics which might have been dealt with on other occasions should be introduced"22. Rather, the summing up should be considered as a whole, in light of the issues raised and the manner in which the trial was conducted23, including "the addresses that have preceded it and the requests (if any) for redirection"24. As Gleeson CJ explained in Doggett v The Queen25: "The manner in which a trial is conducted, and in which the issues are shaped, especially where ... an accused is represented by experienced and competent counsel, has a major influence upon the way in which the case is ultimately left to the jury, and upon the directions, comments and 18 RPS v The Queen (2000) 199 CLR 620 at 637 [41]; [2000] HCA 3. 19 Doggett v The Queen (2001) 208 CLR 343 at 346 [1]; [2001] HCA 46. 20 Doggett (2001) 208 CLR 343 at 346 [1]. 21 La Fontaine v The Queen (1976) 136 CLR 62 at 73; [1976] HCA 52. 22 Stoddart (1909) 2 Cr App R 217 at 246. 23 La Fontaine (1976) 136 CLR 62 at 73, 78, 91; Barker v The Queen (1983) 153 CLR 338 at 368-369; [1983] HCA 18; Zoneff v The Queen (2000) 200 CLR 234 at 256 [55]; [2000] HCA 28. See also Stoddart (1909) 2 Cr App R 217 at 246. 24 Zoneff (2000) 200 CLR 234 at 256 [55]. 25 (2001) 208 CLR 343 at 346 [2]. warnings, from the trial judge to the jury, that may be appropriate or necessary. Directions are not ritualistic formularies. Their purpose is to assist the jury in the practical task of resolving fairly the issues which have been presented to them by the parties." Often, it will be open to contend that the directions could have been given differently. But that is not the question. No miscarriage of justice will arise unless the appellant demonstrates that the direction should have been given and it is "reasonably possible" that the failure to direct the jury "may have affected the verdict"26. The complaint made by the appellant was that the trial judge failed to properly direct the jury on the issue of consent to assault. The appellant submitted that the following directions should have been given by the trial judge to the jury: that the "assault" to which the appellant made self-defence was the threatened application of force constituted by the production of the flick knife by Teamo; and that there was no evidence upon which the jury could conclude that the appellant had consented to that assault; or that for consent to exclude self-defence, the appellant must have consented to the application of force with the knife. Those contentions should be rejected. In the present appeal, there was no contention that the verdicts were unreasonable, that any aspect of the law as explained by the trial judge to the jury was wrong, that the defences raised were not left to the jury or that the written directions provided to the jury were wrong. Instead, the appellant contended that the directions that should have been given were necessary to meet certain things said by the prosecutor in his closing address about a "consensual confrontation", which the trial judge also referred to in his summing up while summarising that address. The appellant's complaint was that the prosecutor's remarks were "confusing and unhelpful". But that complaint must be considered in context. That context includes the matters identified in the preceding paragraph of these reasons; that at the conclusion of the trial judge's reference to the prosecutor's submissions concerning a "consensual confrontation", the trial judge told the jury that these were "matters of interpretation, construction and argument put to [them] by the Crown 26 Dhanhoa v The Queen (2003) 217 CLR 1 at 13 [38]; [2003] HCA 40 citing Simic v The Queen (1980) 144 CLR 319 at 332; [1980] HCA 25. prosecutor"; and that copies of the relevant provisions of the Criminal Code (Q) were given to the jury, including the definition of assault in s 245 which incorporated the need to consider "without the other person's consent". No less significantly, experienced and competent senior counsel appearing for the appellant did not address the issue of consent in his final address and did not seek a direction about any of these matters, despite seeking an additional direction about another matter that arose from the prosecutor's address27. While it is ultimately the trial judge's role to ensure a fair trial, counsel for the appellant was well placed to determine whether the directions were adequate to ensure his client received a fair trial in light of what he, and others, considered to be the real issues in the trial. That experience of being at the trial cannot be replicated by consideration of the transcript in "the calm and inquisitive atmosphere" of an Finally, in any case, despite the references to a "consensual confrontation" in the summing up by the trial judge, the jury were told that a matter for them was whether there was an unlawful assault and, in that context, that they should try to reach a conclusion about whether the appellant produced the gun first or Teamo produced the flick knife first. The jury were told that was an issue which they should decide and, no less importantly, why that was such an important issue. That matter was raised in the context of self-defence under ss 271 and 272. After reminding the jury of the definition of assault, the trial judge identified the questions that the jury needed to answer under both limbs of s 271 of the Criminal Code. In both cases, that included whether the appellant was unlawfully assaulted by Teamo. The trial judge's approach to s 272 was in similar terms. The trial judge explained to the jury that there were six possible bases for excluding self-defence to a provoked assault: "The first is if the prosecution can satisfy you beyond reasonable doubt that the assault by Mr Teamo was not of such violence as to cause reasonable apprehension of death or grievous bodily harm; or that the assault did not induce [the appellant] to believe on reasonable grounds that it was necessary for his own preservation in [sic] death or grievous bodily harm to use the force he used in self-defence, or that the force he used was more than was reasonably necessary to save him from death or grievous bodily harm; or that [the appellant] first began the initial assault with intent to kill or to do grievous bodily harm to Mr Teamo, or that [the appellant] endeavoured to kill or do grievous bodily harm to 27 See La Fontaine (1976) 136 CLR 62 at 73. 28 La Fontaine (1976) 136 CLR 62 at 73. Mr Teamo before the necessity of so preserving himself arose; or, finally, in either case, unless when necessity for self-defence arose [the appellant] declined further conflict and quitted it or retreated as far as was practicable. If the prosecution satisfy you of any one of those six things or more, then the defence is excluded." The various references to the assault by Teamo were to the production of the flick knife. Whether the appellant produced the gun first or Teamo produced the flick knife first and the question of the reaction of the appellant were questions for the jury. The directions to the jury were complete. There was no risk of misunderstanding by the jury. The contention that the directions identified by the appellant should have been given should be rejected. Moreover, it cannot be said it is "reasonably possible" that the failure to direct the jury in those matters "may have affected" the verdicts29. 29 Dhanhoa (2003) 217 CLR 1 at 13 [38].
HIGH COURT OF AUSTRALIA APPELLANTS AND KINGSWAY GROUP LIMITED FORMERLY WILLIS & BOWRING MORTGAGE INVESTMENTS LIMITED & ORS RESPONDENTS Bofinger v Kingsway Group Limited [2009] HCA 44 13 October 2009 ORDER Appeal allowed. Set aside order 1 of the orders of the Court of Appeal of the Supreme Court of New South Wales entered 29 December 2008 and the orders of the Court of Appeal entered 8 July 2009 and in place thereof order that: appeal allowed; orders 1 and 2 of the orders made by Young CJ in Eq, entered 18 February 2008 be set aside; and the separate question stated on 16 November 2006 be answered as follows: Question: In the circumstances of the case, were the sums of $268,307.33 and $432,712.53 and the securities over Lots 1 and 14 SP75069 held by the second defendant in trust for the plaintiffs as at 8 February 2006? Answer: In the absence of prior consent or release by Mr and Mrs Bofinger, on 8 February 2006 Kingsway Group Limited was obliged to account to Mr and Mrs Bofinger as a constructive trustee for any dealing by it with the moneys and securities identified in the question for decision in favour of any other party, and to pay equitable compensation to Mr and Mrs Bofinger in respect of the denial or limitation by such dealing of recoupment from those moneys and securities of moneys paid by Mr and Mrs Bofinger to Kingsway Group Limited, in total $1,519,234.40, from the proceeds of sale of their properties at 407 Willarong Road, Caringbah and 2/41 Bulwarra Street, Caringbah. The first, second, fifth, sixth, seventh and eighth respondents pay the appellants' costs in this Court, in the Court of Appeal and of the proceedings to date in the Equity Division of the Supreme Court of New South Wales. On appeal from the Supreme Court of New South Wales Representation G J McVay with A Tsekouras for the appellants (instructed by Warren McKeon D R Sibtain with C K Amato for the first and eighth respondents (instructed by C M Harris SC with H P T Bevan for the second respondent (instructed by Bransgroves Lawyers) R J H Darke SC with G K J Rich for the fifth to seventh respondents (instructed by Middletons Lawyers) Submitting appearance for the third and fourth respondents Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Bofinger v Kingsway Group Limited Guarantee and indemnity – Surety – Right to subrogation to securities – Three separate loans made to company, each secured by mortgage over company's property – Appellants guarantors of each loan – Appellants sold personal properties and used proceeds to reduce first loan – First mortgagee exercised power of sale over company's property to satisfy outstanding amounts owing under first loan and transferred surplus to second mortgagee – Whether appellants have right to subrogation to securities in priority to puisne mortgagees – Whether appellants' right to subrogation excluded by terms of guarantees to puisne mortgagees – Whether rule in Otter v Lord Vaux (1856) 2 K & J 650 [69 ER 943] applied to prevent appellants from exercising right to subrogation or should be extended to so apply – Whether transfer of surplus required to be unconscionable for doctrine of subrogation to apply. Equity – Remedies – Constructive trust – Nature of constructive trust – Surplus transferred by first mortgagee to second mortgagee – Whether first mortgagee constructive trustee of surplus – Whether obligation to account. Words and phrases – "subrogation", "unconscientious", "unconscionable", "unjust enrichment". Statute of Frauds 1677, s 4. Conveyancing Act 1919 (NSW), s 10. Law Reform (Miscellaneous Provisions) Act 1965 (NSW), s 3. Real Property Act 1900 (NSW), ss 57(1), 58. Uniform Civil Procedure Rules 2005 (NSW), r 28.2. GUMMOW, HAYNE, HEYDON, KIEFEL AND BELL JJ. The resolution of this appeal calls for application of "the cardinal principle of equity that the remedy must be fashioned to fit the nature of the case and the particular facts"1. The nature of the present case and the particular facts engage the law respecting sureties, their obligation to indemnify the creditor and right to indemnity by the principal debtor, and the operation of the doctrine of equity associated with the term "subrogation". The appellants (Mr and Mrs Bofinger) are husband and wife. Mr Bofinger was a director of B & B Holdings Pty Ltd ("B & B Holdings"), which is now in liquidation. B & B Holdings borrowed consecutively from the first, second and third respondents ("first mortgagee", "second mortgagee" and "third mortgagee" respectively) on the security of mortgages over the same real property of B & B Holdings. The appellants gave guarantees to the first, second and third mortgagees. The guarantees were supported in each case by a mortgage over real property of the appellants. The appellants sold these properties and applied the proceeds in reduction of the indebtedness of B & B Holdings to the first mortgagee. Thereafter, the first mortgagee exercised its power of sale over certain of the properties mortgaged by B & B Holdings. After satisfying the balance of the indebtedness of B & B Holdings, the first mortgagee accounted to the second mortgagee by payment of the surplus sale proceeds and delivery of the certificates of title and discharges of the first mortgages over two unsold properties. The first mortgagee did not, as the appellants contend it should have done, account to them so that they might recoup what they had paid off the indebtedness of B & B Holdings. The right of subrogation in favour of a surety recently was described by Sir Andrew Morritt V-C as follows2: 1 Warman International Ltd v Dwyer (1995) 182 CLR 544 at 559; [1995] HCA 18. 2 Liberty Mutual Insurance Co (UK) Ltd v HSBC Bank plc [2001] Lloyd's Rep Bank 224 at 225; affd [2002] EWCA Civ 691. See Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-028 and, with respect to insurance, the statement by Kitto, Taylor and Owen JJ in British Traders' Insurance Co Ltd v Monson (1964) 111 CLR 86 at 94; [1964] HCA 24, that where there was no longer an outstanding right of action of the insured against a third party, "one might almost wish that some other word had been used as the label of a right which exists when it is too late for subrogation in the ordinary sense". Bell "The right operates so as to confer on the surety who has paid the debt in full the rights against the debtor formerly enjoyed by the creditor or by imposing on the creditor the obligation to account to the surety for any recovery in excess of the full amount of his debt." (emphasis added) That statement is important for this case because the indebtedness to the first mortgagee had been paid in full and the securities held by the first mortgagee discharged. The remedies equity provides must, as will appear, found upon the obligation of the first mortgagee to account. Before proceeding it is convenient to consider further the relevant principles respecting subrogation and guarantees. Subrogation and guarantees In Orakpo v Manson Investments Ltd3 Buckley LJ remarked that the relevant equitable considerations respecting a claim to subrogation may differ, for example, where the basis of subrogation is a contract of indemnity, or concerns ultra vires borrowings by a corporation, or the lending of funds to complete a purchase or pay off an existing mortgage. To that list may be added the subrogation of creditors of a trustee to the trustee's lien over the trust property4. Therefore, if for no other reason, it is unhelpful to speak of subrogation as if it were a "cause of action" in the sense recognised at common law5. In its widest sense, that apparently used by Buckley LJ in Orakpo, an indemnity includes a contract obliging one person to make good the loss suffered by another, and contracts of guarantee and those of insurance fall within that description. The authorities dealing with the writing requirements of s 4 of the Statute of Frauds 1677 with respect to guarantees (but not indemnities) sought to distinguish between guarantees and indemnities by emphasising the secondary liability of the guarantor and the primary liability of the indemnifier. But as [1977] 1 WLR 347 at 357; [1977] 1 All ER 666 at 676; affd [1978] AC 95. 4 Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 367; [1979] HCA 61. 5 Cf Boscawen v Bajwa [1996] 1 WLR 328 at 335; [1995] 4 All ER 769 at 777; Kation Pty Ltd v Lamru Pty Ltd (2009) 257 ALR 336 at 340-341. Bell Mason CJ pointed out in Sunbird Plaza Pty Ltd v Maloney6, there is in this distinction "an element of ambiguity ... unless the reference to primary liability is understood to mean ultimate liability". His Honour added7: "Once default has occurred, the party having the benefit of the guarantee can call on the guarantor to honour his promise before calling on the principal contracting party to perform his obligation, but the guarantor, having honoured his promise, can hold the principal contracting party to account by virtue of the doctrine of subrogation." This notion of the ultimate liability of the principal provides a foundation for the application of subrogation in aid of the surety. Thus, where a claim to the benefit of securities held by the creditor is made by a surety, it was said by Turner V-C8 that the equity for subrogation is derived from the obligation of the principal debtor to indemnify the surety9. There is "nothing hard" in the act of a court of equity in placing the surety in exactly the situation of the creditor with respect to those securities10, because it would be unconscientious for the debtor to recover back the securities from the creditor while the debtor was obliged to indemnify the surety11. What then are the equities where the creditor holds a first mortgage and there are puisne mortgagees? The authorities hold that a second mortgagee cannot complain where the surety utilises by subrogation the security held by the first mortgagee. In Drew v Lockett12 this was put on the basis that the second mortgagee took its interest with notice and by grant from the equity of (1988) 166 CLR 245 at 254; [1988] HCA 11. (1988) 166 CLR 245 at 254. 8 Yonge v Reynell (1852) 9 Hare 809 at 818-819 [68 ER 744 at 748-749]. 9 See also O'Day v Commercial Bank of Australia Ltd (1933) 50 CLR 200 at 223; [1933] HCA 37; Friend v Brooker (2009) 83 ALJR 724 at 735 [55]; 255 ALR 601 at 614; [2009] HCA 21. 10 Duncan Fox & Co v North and South Wales Bank (1880) 6 App Cas 1 at 12. 11 Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-017. 12 (1863) 32 Beav 499 [55 ER 196]. Bell redemption enjoyed by the principal debtor in its state remaining after giving full effect to the first mortgage. Thus, in de Colyar's work on guarantees it was said that the surety was entitled to all the equities the creditor could have enforced, adding13: "And this right prevails, not merely against the original creditor of the principal debtor, but also against all persons claiming under the latter14. A mortgaged his estate to C, and B became A's surety for the debt. Afterwards A mortgaged the estate to D, who had notice of the first mortgage. The first mortgage was subsequently paid off, partly by B, the surety, but D got a transfer of the legal estate. It was held that the surety had still priority over D for the amount paid by him under the first mortgage, as surety for A15. Again, on a purchase of goods by a broker for an undisclosed principal, in a market according to the usage of which such a broker is personally liable in default of his principal, and is, therefore, a surety for the latter, the unpaid vendor's lien will pass to the broker, on default made by his principal, even though the latter may have pledged his interest in the goods to the third persons, and indorsed the delivery order The appellants in the present appeal relied, in particular, upon the statement of principle by Sir John Romilly MR in Drew v Lockett17: "I am of opinion that a surety who pays off the debt for which he became surety must be entitled to all the equities which the creditor, whose debts he paid off, could have enforced, not merely against the 13 De Colyar, A Treatise on the Law of Guarantees and of Principal and Surety, 3rd ed (1897) at 330-331. See also Rowlatt on Principal and Surety, 5th ed (1999) at 160; Andrews and Millett, Law of Guarantees, 5th ed (2008), §11-015. 14 Drew v Lockett (1863) 32 Beav 499 [55 ER 196]; and see In re Kirkwood's Estate (1878) 1 LR Ir 108. 15 Drew v Lockett (1863) 32 Beav 499 [55 ER 196]; and see In re Kirkwood's Estate (1878) 1 LR Ir 108. [See also Aylwin v Witty (1861) 30 LJ Ch 860.] 16 Imperial Bank v London and St Katharine Docks Co (1877) 5 Ch D 195. 17 (1863) 32 Beav 499 at 505-506 [55 ER 196 at 198]. See also In re Davison's Estate (1893) 31 LR Ir 249 at 255. Bell principal debtor, but also as against all persons claiming under him. It is to be observed that the second and any subsequent mortgagee is in no respect prejudiced by the enforcement of this equity; when he advances his money he knows perfectly well that there is a prior charge on the property, and if he thinks fit to advance his money on such security, it is his own affair, and he cannot afterwards with justice complain. The amount being limited, it is a matter of indifference to him whether the first mortgagee or the surety is the prior claimant for that amount, and it would be, in my opinion, a violation of all principle if, when the surety pays off the debt, he were not to be entitled, as against the principal debtor and those who claim under him, to be paid the full amount due to him." (emphasis added) This statement is to be read with the earlier decision of the same judge in Gedye v Matson18. The immediate issue in that case was whether a foreclosure suit by a first mortgagee was defective for want of joinder of a surety who had paid off part of the mortgage. Sir John Romilly MR ruled that the surety "is entitled to stand in the place of the mortgagee, and is, therefore, interested in the equity of redemption ... [and] might afterwards come and redeem"19. He also held that the surety was "in the situation of a subsequent incumbrancer, and as if the mortgagor had executed a second mortgage to him. As against the principal debtor, the surety is entitled to a charge on the estate."20 More recently, in Aquilina Holdings Pty Ltd v Lynndell Pty Ltd21 Daubney J remarked that an opposite result to that in authorities such as Gedye v Matson would tend to undermine the operation of the equitable doctrine of subrogation. His Honour also said that the equitable doctrine did not do violence to the principles of the Torrens system22. Rather, the doctrine accepts the state of the register but enforces against registered proprietors conscientious obligations 18 (1858) 25 Beav 310 [53 ER 655]. 19 (1858) 25 Beav 310 at 311 [53 ER 655 at 655]. 20 (1858) 25 Beav 310 at 312 [53 ER 655 at 656]. 21 [2008] QSC 57 at [74]; noted Young, "Recent cases", (2008) 82 Australian Law Journal 760 at 762-763. 22 [2008] QSC 57 at [53]. Cf Westfield Management Ltd v Perpetual Trustee Co Ltd (2007) 233 CLR 528 at 538-541 [35]-[45]; [2007] HCA 45. Bell imposed upon them23. Under the Torrens system, the charge or equitable lien of the surety would support a caveat on the subject property24. The present dispute The respondents do not challenge these statements of principle. But by their Notices of Contention they submit that the statements do not speak to the circumstances of the present litigation. First, the debt secured by the first mortgage had been paid in full at the date when the entitlement of the appellant sureties was to be assessed and the first mortgage had been displaced on the register upon exercise of the power of sale of some of the lots and upon registration of discharges with respect to other lots. Secondly, surplus proceeds and assets had been distributed to the second mortgagee and thus had left the control of the first mortgagee. Thirdly, and unlike the situation in Drew v Lockett, the sureties also had guaranteed puisne mortgages and for that reason any entitlement they had in equity to the surplus would prejudice impermissibly the second and third mortgagees. The appellants complain that in upholding the decision of the primary judge (Young CJ in Eq)25 the New South Wales Court of Appeal (Giles JA, Handley AJA and Sackville AJA)26 did not give any effect to their equity as guarantors to subrogation to the rights of the first mortgagee against B & B Holdings. This result was reached by an answer in the negative to a question posed for separate decision in a suit in the Equity Division of the Supreme Court. The primary case of the appellants is that the first mortgagee had distributed the surplus in breach of the constructive trust in which the surplus was held for them as sureties. The reasons which follow lead to a conclusion which, without going to the length of accepting all of the appellants' submissions, favours allowing the appeal. 23 See, generally, Barry v Heider (1914) 19 CLR 197 at 213-214; [1914] HCA 79; Bahr v Nicolay [No 2] (1988) 164 CLR 604 at 613, 637-639, 653-655; [1988] HCA 16. 24 Cochrane v Cochrane (1985) 3 NSWLR 403 at 404. 25 Bofinger v Rekley Pty Ltd [2007] NSWSC 1138. 26 Bofinger v Kingsway Group Pty Ltd (2008) 14 BPR 26,167. Bell The agreed facts Something further now should be said respecting the agreed facts. These include attached documents and correspondence. There emerges what may be an incomplete account of events but it is upon this basis that the parties choose to present the question for separate determination. Part 28 r 28.2 of the Uniform Civil Procedure Rules 2005 empowered the Supreme Court to make orders for the decision of any question before trial. In such a proceeding care is to be taken that agreed facts are stated with precision27. This is important, not the least because the parties to such a proceeding will be bound by the determination of the question and will not be at liberty subsequently in the same proceedings to advance argument or adduce further evidence directed the separate question was wrongly determined28. to showing that B & B Holdings carried on business as a real estate developer and on land ("the Enmore land") in an inner suburb of Sydney constructed 17 town houses and one house. It was placed in liquidation by February 2006 and the joint liquidators are the fourth respondent in this Court. They have entered a submitting appearance. To finance the purchase of the Enmore land and the construction of the buildings thereon, in 2003 B & B Holdings borrowed $7,062,000 from the first mortgagee, Kingsway Group Limited. The interest rate initially was nine percent per annum. Then, as the project proceeded, B & B Holdings borrowed $1,400,000 from Rekley Pty Limited, the second mortgagee, and finally $350,000 from Mr John Edward Skehan, the third mortgagee. The indebtedness under these arrangements was secured in each case by registered mortgages against the title to the Enmore land and a property of B & B Holdings at Nullaburra Road, Caringbah. (There also appears to have been a fixed and floating charge in favour of the first mortgagee over the assets of B & B Holdings, but nothing turns upon this.) 27 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 357 [50]; [1999] HCA 9. 28 O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 244-247, 260, 298; [1991] HCA 14. Bell The fifth, sixth and seventh respondents ("the Solicitors") carried on their practice at 575 Kingsway, Miranda under the name "Willis and Bowring Solicitors". They acted for the first mortgagee and for the second mortgagee and, at least in February 2006, for the third mortgagee as well. The first mortgagee is Kingsway Group Limited but throughout this period was named "Willis and Bowring Mortgage Investments Limited" and carried on business also at 575 Kingsway. The fifth respondent, one of the Solicitors, was a director of the first mortgagee. The eighth respondent was an officer of the first mortgagee. The third mortgagee, the third respondent, entered a submitting appearance in this Court. In this Court, counsel for the Solicitors, for the first mortgagee and eighth respondent, and for the second mortgagee presented essentially a united front and divided the oral argument between them. The first, second and third mortgages were dated respectively 31 January 2003, 14 March 2003 and 28 April 2005. In addition, by an instrument of guarantee dated 31 January 2003 (the date of the first mortgage) the appellants guaranteed to the first mortgagee repayment of the amount owing from time to time under the first mortgage by B & B Holdings. The guarantee was supported by mortgages by the guarantors to the first mortgagee over residential premises at Caringbah ("the Willarong Road property") and over a home unit in the same suburb ("the Bulwarra Street property"). Both properties were owned by the appellants. Thereafter, by instruments of guarantee dated respectively 14 March 2003 (the date of the second mortgage) and 28 April 2005 (the date of the third mortgage) the appellants guaranteed to the second and third mortgagees respectively repayment of the amounts from time to time owing to those parties by B & B Holdings. The guarantees given by the appellants to the second and third mortgagees also were secured by second and third mortgages over the Willarong Road property and the Bulwarra Street property. All three guarantees were relevantly in the same form. The loan agreement between B & B Holdings and the first mortgagee had an expiry date of 1 February 2004. On 20 February 2004 the first mortgagee agreed to an increase in the loan amount to $8,288,000 with an increased interest rate and an extension to 1 October 2004. On 15 October 2004 it granted a further extension to 1 March 2005 and the loan amount was reduced to $8,278,000. On 23 March 2005, the first mortgagee agreed to a third extension to 1 October 2005, with a higher interest rate of 14.5 percent per annum; failure to pay the required interest amount by the 14th of each month would deprive the borrower of a lower interest rate of 9.5 percent and constitute an event of default. Bell Thereafter, on 28 April 2005, B & B Holdings entered into the loan agreement with the third mortgagee; this was secured by the third mortgage. It is not clear when in this period B & B Holdings defaulted on the second mortgage. However, it defaulted on the first mortgage on 1 October 2005, and on the third mortgage on 28 October 2005. In China and South Sea Bank Ltd v Tan Soon Gin (alias George Tan)29 Lord Templeman observed that a surety, worried, for example, by the decline in value of securities held by the creditor from the principal debtor, may "bustle about", pay off the debt and take over the benefit of the securities. In July 2005, that is to say during the currency of the third extension by the first mortgagee and after the apparent defaults which had occasioned the grant of the third extension, the appellants sold the Willarong Road property. From the proceeds they paid a total of $894,044.14 to the first mortgagee in reduction of the amount which was then owing to the first mortgagee by B & B Holdings and secured by the first mortgage. Thereafter, the appellants sold the Bulwarra Street property and on 5 October 2005 paid to the first mortgagee $625,190.26. This gave a total in payments to the first mortgagee by the appellants of $1,519,234.40. It is important to note that following the sales of the Willarong Road property and the Bulwarra Street property there were discharges of the mortgages over those properties which the appellants had given not only to the first but also to the second and third mortgagees. Thereafter the guarantees given by the appellants remained in force but were unsecured. This may be important for the final working out of liabilities between the appellants and the second and third mortgagees, and may emphasise the importance to the appellants of their claim against the Solicitors. But, given the limited framework of the case to date, these matters were not pursued in argument. There had been no call by the first mortgagee upon the guarantees, and in that sense the payments by the appellants were initiated by them. However, this was in the circumstances of default by B & B Holdings described above. The first mortgagee, necessarily involved so as to clear the titles, knew of the sales of the two properties by the appellants and also knew of the payment of the proceeds in reduction of the indebtedness of B & B Holdings. 29 [1990] 1 AC 536 at 545. Bell In November 2005 the first mortgagee went into possession of the Enmore land. On or about 2 February 2006, the first mortgagee completed the exercise of its power of sale of Lot 13 of the Enmore land. By 8 February 2006 the indebtedness of B & B Holdings to the first mortgagee had been satisfied. However, its indebtedness to the second and third mortgagees was $1,935,671.23 and $464,267.12 respectively. On 7 February 2006, the Solicitors wrote a letter directed to the attention of the eighth respondent, Mr Hatheier, an officer of the first mortgagee. The letter said, with reference to security over the Enmore land: "We advise that we act for the Second Mortgagee Rekley Pty Limited. This letter is to formally request possession of the 2 remaining unsold lots being lots 1 and 14 in the above development. Please pay the balance proceeds of sale in relation to lot 13 and the total proceeds of sale in relation to lot 5 to Willis & Bowring Trust Account." On the next day, 8 February 2006, Mr Hatheier, describing himself as "Business Development Manager" of the first mortgagee, wrote to Willis and Bowring Solicitors, for the attention of Mr Tosolini, the fifth respondent: "We acknowledge receipt of your letter dated 7th February. We consent to your client Rekley Pty Limited taking possession. We now enclose the following:- Keys Deeds and Discharges of Mortgage in relation to lots 1 and 14 We confirm that the balance proceeds of sale of lot 13 (after discharge of mortgage) and the proceeds of sale of lot 5 are to be paid to your trust account for the purpose of being disbursed to your client." (emphasis added) The discharges of these first mortgages were subsequently registered on or about 8 February 2006. Bell On 20 February 2006, Mr Hatheier, on behalf of the first mortgagee, wrote to one of the liquidators of B & B Holdings. He enclosed copies of the letters of 7 and 8 February and wrote that the Solicitors were acting on behalf of the second and third mortgagees. This presumably was in addition to their acting for his company as first mortgagee. The letter indicated that $268,307.30 had been provided to the second mortgagee at settlement. It attached a summary of receipts and payments of the first mortgagee as mortgagee in possession. This showed payments to the first mortgagee of $3,848,000 and to the second mortgagee of $268,307 and, significantly, made an allowance for the earlier receipt from the appellants of the proceeds of sale of their properties. On 21 February 2006, the whole of the proceeds of sale of Lot 5, $432,712.53, was paid to the Solicitors on behalf of the second mortgagee. The upshot was that by about 21 February or shortly thereafter the titles to Lots 1, 5, 13 and 14 of the Enmore land no longer showed the first mortgages by B & B Holdings and the second mortgagee had received surplus proceeds of sale of Lot 13 and the whole of the proceeds of Lot 5. Hence, as indicated in the opening passages of these reasons, the importance of the obligation to account to the appellants and of its nature and scope. Statutory provisions All the lands the subject of the various mortgages were lands under the provisions of the Real Property Act 1900 (NSW) ("the RP Act"), and the mortgages were registered mortgages. Section 57(1) of the RP Act provides that a mortgage has effect as a security but does not operate as a transfer of land. Section 58(1) provides for the exercise of a statutory power of sale. Section 58(2) protects the purchaser by denying any obligation to see to the application of the purchase money. Section 58(3) states that the purchase money from the sale of land by a mortgagee in exercise of power of sale "shall be applied", first in payment of the expenses of the sale, secondly in payment of the first mortgagee, thirdly in payment of subsequent mortgagees in order of priority and that any surplus is to be paid to the mortgagor. However, upon that first mortgagee equity may place requirements as to the disposition of the surplus purchase moneys. Adams v Bank of New South Wales30 is authority that s 58 is to be read in a manner consistent with the equitable duty of the first mortgagee to account to 30 [1984] 1 NSWLR 285 at 299, 302. Bell puisne mortgagees as a trustee for any surplus. The position in equity was described as follows by Kay J in Charles v Jones31 as follows: "I have never heard it doubted that where a mortgagee sells, and has a balance in his hands, he is a trustee of that balance for the persons beneficially interested. He takes his mortgage as a security for his debt, but, so soon as he has paid himself what is due, he has no right to be in possession of the estate, or of the balance of the purchase-money. He then holds them, to say the least, for the benefit of somebody else, of a second mortgagee, if there be one, or, if not, of the mortgagor. What, then, is he to do? Surely he has a duty cast upon him. His duty is to say, 'I have paid my debt: this property which is pledged to me, and in respect of which I now hold this surplus in my hands, is not my property. I desire to get rid of this surplus, and hand it back to the person to whom it belongs.' ... The duty of this mortgagee was at least to set this money apart in such a way as to be fruitful for the benefit of the persons beneficially entitled to it. To that extent and in that manner he was, according to my understanding of the law, in a fiduciary relation to the persons entitled to the money. It was so held in the case of Quarrell v Beckford32, and so far as I know has always been so held, and although I quite agree that the Court is very reluctant to treat a mortgagee as being a trustee in any sense while any money is due to him, still when he has paid himself, and has money remaining in his hands which is no longer his property, how can he be treated as other than a trustee of such money?" (emphasis added) The appellants sought to bring themselves, by reliance upon their subrogation rights, within the obligation of the first mortgagee to account to the person to whom the surplus belonged, and to place their rights in priority to any entitlement of the puisne mortgagees. The appellants sought to support their case by reliance upon the provisions now made by s 3 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW) respecting the entitlement of sureties to assignment of securities. Section 3 is the 31 (1887) 35 Ch D 544 at 549-550. See also Banner v Berridge (1881) 18 Ch D 254 at 269-270; Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 at 429-430; [1997] HCA 37; Lloyds Bank NZA Ltd v National Safety Council [1993] 2 VR 506 at 511, 514. 32 (1816) 1 Madd 269 [56 ER 100]. Bell descendant in New South Wales of s 5 of the Mercantile Law Amendment Act 1856 (UK)33. The provisions confer upon sureties statutory rights and remedies which furnish a summary mode of carrying into effect those otherwise available in courts of equity34. The second mortgagee correctly submitted that if, as it contended, the appellants lacked an equity supporting subrogation, s 3 would not supply that deficiency. The Supreme Court proceedings By proceedings instituted in the Equity Division of the Supreme Court of New South Wales the appellants complained that in the circumstances they had an entitlement to recoupment of what they had paid as sureties and that this was in the nature of a trust binding the first mortgagee. They contended that in accounting to the second mortgagee in the manner described above, the first mortgagee had committed breaches of trust and that the second mortgagee had received trust property of the appellants. They sued the Solicitors as accountable under the principles associated with Barnes v Addy35. The separate question was: "In the circumstances of the case, were the sums of $268,307.33 and $432,712.53 and the securities over Lots 1 and 14 SP75069 held by the second defendant in trust for the plaintiffs as at 8 February 2006?" The sense of the separate question was to ask whether, given that by 8 February 2006 the first mortgagee had been paid in full, it followed that in respect of surplus moneys attributable to the sale of Lots 5 and 13 of the Enmore land and the first mortgages over Lots 1 and 14, the first mortgagee was trustee for the appellants up to so much thereof as would give effect to their subrogation rights. There was an immediate difficulty respecting any trust by the first mortgagee over the mortgages to it of Lots 1 and 14. The discharges were 33 19 & 20 Vict c 97. 34 Embling v McEwan (1872) 3 VR (L) 52 at 53-54; Hardy v Johnston (1880) 6 VLR (L) 190 at 193. 35 (1874) LR 9 Ch App 244. Bell registered on or about 8 February and thus the subject matter of such a trust no longer existed. In the event, the primary judge answered the separate question wholly in the negative. The primary judge thereafter entered judgment for the defendants in the suit. The Court of Appeal dismissed an appeal and made a special costs order in favour of the Solicitors. In this Court, the appellants seek to have those orders set aside and to have an affirmative answer to the question. The appellants refer to the acceptance by Hodgson J that if a first mortgagee exercises its power of sale, the surety is entitled at least to a charge over the balance of the proceeds36. The respondents counter that even if there were such a charge it bound the subject matter only while it was in the hands of the first mortgagee. Further, the charge would confer no more than a security interest, would not entail fiduciary obligations owed by the chargor to the appellants, and would not support a proprietary interest which persisted against a third party such as the second mortgagee. Once the discharges of the first mortgages over Lots 1 and 14 reached the hands of the second mortgagee for registration, and the cash surplus reached its hands without the need for retention in an identifiable separate fund, any such charge would be spent37. (There may have been grounds in these circumstances for an action at law by the appellants against the second mortgagee for money had and received, but this was not considered in submissions to this Court38.) The preferred position of the appellants remained the trust in their favour. The respondents pointed to what were said to be the burdensome administration and investment duties this would entail39. The appropriate equitable remedy It is unnecessary to resolve all of these questions. The essential task is to identify the scope of equitable relief which, in the circumstances of this case, 36 Russet Pty Ltd (In liq) v Bach unreported, Supreme Court of New South Wales, Equity Division, 23 June 1988 at 12. 37 Cf Lord Napier and Ettrick v Hunter [1993] AC 713 at 738-739. 38 Cf Lord Napier and Ettrick v Hunter [1993] AC 713 at 752. 39 Cf Lord Napier and Ettrick v Hunter [1993] AC 713 at 738. Bell now adequately protects the position of the appellants that obtained on 8 February 2006, when the indebtedness of the first mortgagee had been satisfied. Equitable intervention is sought by the appellants and this would have an impact upon the position of not just the first mortgagee but of the other respondents. Further, while there were proceeds of sale of Lots 5 and 13 it is not apparent from the agreed facts that they remain capable of separate identification and, in any event, the first mortgages over Lots 1 and 14 could not provide subject matter for any trust after registration of the discharges on or about 8 February 2006. In this situation assistance is afforded by a point emphasised by four members of the Court in the joint reasons in Giumelli v Giumelli40 when considering the constructive trust as a remedial response to a claim to equitable intervention. The point is that the term "constructive trust" may be used not with respect to the creation or recognition of a proprietary interest but to identify the imposition of a personal liability to account upon a defaulting fiduciary. In Jones v Southall & Bourke Pty Ltd41, after reviewing the authorities, Crennan J said that they: "make plain [that] the term 'constructive trust' covers both trusts arising by operation of law and remedial trusts. Furthermore, a constructive trust may give rise to either an equitable proprietary remedy based on tracing or, whether based on or independently of tracing, an equitable personal remedy to redress unconscionable conduct. The equitable personal remedies include equitable lien or charge or a liability to account." 40 (1999) 196 CLR 101 at 111-112 [2]-[4] per Gleeson CJ, McHugh, Gummow and Callinan JJ; [1999] HCA 10. 41 (2004) 3 ABC (NS) 1 at 17. See also Giumelli v Giumelli (1999) 196 CLR 101 at 119-120 [31]-[32] and the form of the orders made at first instance by in United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 at 820-822. Bell Earlier in her reasons her Honour had noted that the term "constructive trust" had been applied to include the enforcement of the obligation of a defaulting fiduciary to make restitution by a personal rather than a proprietary remedy42. The obligation to account, here by a first mortgagee, is consistent with what was said by Kay J in Charles v Jones43 in the passage set out earlier in these reasons. On 8 February 2006 the first mortgagee was obliged in good conscience both to account to the appellants for surplus moneys and securities it held and not to undertake or perform any competing engagement in that respect without prior release by the appellants44. These obligations were fiduciary in character. As indicated by the correspondence of 7, 8 and 20 February 2006, to which reference has been made, the first mortgagee entered into and performed a conflicting engagement with the second mortgagee. The result was to cause loss to the appellants by denial of enjoyment of their entitlement to recoupment from the surplus moneys with respect to the sale of Lots 5 and 13 and first mortgages over Lots 1 and 14. In respect of its misapplication of the surplus moneys and securities and the consequent loss to the appellants the first mortgagee is to be treated as a constructive trustee to the extent that it must account to the appellants as a defaulting fiduciary. It is unnecessary to seek to determine upon the agreed facts whether the first mortgagee was a trustee in a fuller sense which afforded the appellants a beneficial interest in the assets in question. Breach by the first mortgagee of its above described fiduciary obligation to the appellants would suffice to engage the principles associated with the "second limb" in Barnes v Addy45, if at any further hearing the necessary further 42 (2004) 3 ABC (NS) 1 at 16. 43 (1887) 35 Ch D 544 at 549-550. 44 See Pilmer v Duke Group Ltd (In liq) (2001) 207 CLR 165 at 199 [78]; [2001] HCA 31; Commonwealth Bank of Australia v Smith (1991) 42 FCR 390 at 393; Bristol and West Building Society v Mothew [1998] Ch 1 at 19; Beach Petroleum NL v Kennedy (1999) 48 NSWLR 1 at 47; Finn, Fiduciary Obligations, (1977) at 253-254; Conaglen, "Fiduciary Regulation of Conflicts Between Duties", (2009) 125 Law Quarterly Review 111 at 119-122. 45 (1874) LR 9 Ch App 244. See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 159-161 [159]-[165]; [2007] HCA 22. Bell facts are established against other respondents. In Barnes v Addy itself, the two solicitors, Messrs Preston and Duffield, had not received any trust property; the question was whether their knowledge made them accountable as parties to the breach of trust by the trustee and bound to make good as constructive trustees the loss of the trust assets. The answer by the respondents' Notices of Contention The respondents seek to outflank any conclusion such as that just expressed in several ways. A starting point is provided by The Equity Trustees Executors & Agency Co Ltd v New Zealand Loan & Mercantile Agency Co Ltd46 "When a guaranteed debt is paid by the surety he is entitled, unless the right is excluded by agreement or his conduct makes it inequitable to enforce it, in respect of the amount he has paid under his guarantee to the securities which the creditor holds for the debt guaranteed. This right arises not from any agreement between the surety and the creditor, though it may be excluded by agreement between them. It rests on equitable principles." (emphasis added) That statement of principle is plainly correct. The respondents, however, draw from the emphasised words two propositions of exception and rely upon them as an answer to any success the appellants' submissions otherwise might enjoy. First, the respondents say any right of the appellants was excluded by agreement, in particular by the terms of their guarantee of the second mortgage. Secondly, the respondents contend that this and other circumstances rendered it inequitable as between the appellants and the first mortgagee to rely upon Drew v Lockett47. Thirdly, it is said to follow that there is no footing to attach liability upon the first mortgagee to account to the appellants in respect of the surplus and so no basis for any remedy against other respondents. The terms of the guarantee of 14 March 2003 to the second mortgagee It is convenient to turn first to the terms of the appellants' guarantee given by deed on 14 March 2003 to the second mortgagee. The instrument is described 46 [1940] VLR 201 at 205. 47 (1863) 32 Beav 499 [55 ER 196]. Bell on the cover sheet as a "Deed of Guarantee and Indemnity". The settled principle in Australia governing the interpretation of contracts of guarantee and indemnity has been stated by this Court in authorities the most recent of which is found in the joint reasons in Andar Transport Pty Ltd v Brambles Ltd48. The principle is that a doubt as to the construction of a provision in such a contract should be resolved in favour of the surety or indemnifier. It is implicit in this that the doubt may arise not only from the uncertain meaning of a particular expression but from its apparent width of possible application. Mr and Mrs Bofinger were each identified as "Guarantor", the second mortgagee as "Lender" and B & B Holdings as "Borrower". The "Mortgage" was the second mortgage by the Borrower, also dated 14 March 2003, and "Obligated Person" meant any of the Borrower, Guarantor, and any other person who was liable to the Lender for payment of the "Guaranteed Money", being the subject of the guarantee and indemnity in cl 3 and cl 5 respectively. Clause 3 stated: "3.1 The Guarantors guarantee to the Lender: the performance of all the obligations of the Borrower under the Mortgage; and the payment of all damages suffered by the Lender (including interest costs and expenses) arising from any breach or termination of the Mortgage. If the Borrower does not, on the date provided in the Mortgage, pay any amount payable the Guarantors must immediately pay that amount to the Lender." the Lender, Taken by itself cl 3 does not contain a covenant by the Guarantor to ensure that B & B Holdings meets its obligations to the second mortgagee in priority to those owed to the first mortgagee. Such a priority structure would have been at odds with the sequence of the registered mortgages and the circumstances of the borrowings to finance the development of the Enmore land. It would have required clear terms in a multi-party priority agreement. 48 (2004) 217 CLR 424 at 433-437 [17]-[23]; [2004] HCA 28. Bell Clause 5 stated: If the Borrower is not bound by some or all of the Borrower's obligations under the Mortgage, if for any other reason the guarantee is not effective, the Guarantors agree, by way of indemnity and principal obligation, to pay to the Lender the amount which would have been payable by the Guarantors to the Lender under the guarantee in clause 3 had the guarantee been effective and the Borrower been bound." The lengthy provisions of cl 6 are headed "Matters Not Affecting Guarantor's Liability". Clause 6.4 is headed "Waiver by Guarantor" and its provisions were relied on in particular in submissions by the second mortgagee. The sub-clause reads: "Each Guarantor waives the Guarantor's rights as surety whether legal, equitable, statutory or otherwise which may be inconsistent with the provisions of this deed or in any way restrict the Lender's rights, remedies or recourse." Counsel for the second mortgagee submitted that cl 6.4 extended to the waiver by the appellants of any surety rights they might have in respect of another instrument, namely the first mortgage. This was said to be the effect of the general words "the Guarantor's rights as surety". But the critical words which follow are "inconsistent with the provisions of this deed". They govern also the earlier words "Guarantor's rights as surety". The waiver effected by cl 6.4 is a waiver of such of the Guarantor's rights as surety under the guarantee to the second mortgagee as may be inconsistent with the provisions of the guarantee to the second mortgagee. It is not a waiver of any of the Guarantor's rights under the guarantee to the first mortgagee. This submission fails. Counsel for the Solicitors sought to achieve a similar application to the first mortgage by reference to cl 3.1 and par (2) of cl 7.1. Clause 7.1 is headed "Guarantors Not To Claim Benefits Or Enforce Rights" and reads: "Until the Guaranteed Money is paid in full and all obligations of the Borrower under the Mortgage are fully and finally discharged or released, a Guarantor must not in any way: claim the benefit or seek the transfer (in whole or in part) of any other guarantee, indemnity or security held or taken by the Lender; Bell (2) make a claim or enforce a right against any other Obligated Person or against the estate or any of the property of any of them (except for the benefit of the Lender); or raise or claim any set-off, counterclaim or defence available to any other Obligated Person in reduction of the Guarantor's liability under this deed." Clause 7.1, as the opening words indicate, bars the Guarantor from taking any of the steps described in pars (1), (2) and (3) until two events have taken place. The first is the full payment of the moneys secured by the terms of the guarantee in cl 3; these are identified by reference only to the second mortgage by B & B Holdings. The second event is the discharge or release of all obligations of B & B Holdings under that mortgage. These events had not occurred at 8 February 2006, with the result that the restraints in pars (1), (2) and (3) were operative. Paragraph (1) limits recourse to rights of the second mortgagee. Paragraph (3) is concerned with reduction of liability "under this deed". As the Solicitors accepted, neither paragraph constrains the exercise of rights under a guarantee of the first mortgage. However, the Solicitors contended that par (2), read with cl 3.1 and the definition of "Obligated Person", manifested a particular intention by B & B Holdings, the appellants, and the second mortgagee. This was that the second mortgagee would "go first" in relation to the property of B & B Holdings and that the second mortgagee be protected from what otherwise might be prior claims by the appellants in reliance upon subrogation to the rights of the first mortgagee. That submission also should be rejected. The Guarantor falls within the defined term "Obligated Person", as also does B & B Holdings. In asserting subrogation to the rights of the first mortgagee against B & B Holdings as Borrower, is the Guarantor making a claim against "any other Obligated Person" within the meaning of par (2)? The answer is suggested by the opening words of cl 7.1. These suspend engagement in this activity until full payment of the moneys guaranteed by cl 3, namely those secured by the second mortgage. Paragraph (1) then is directed to claims by the Guarantor to rights of the Lender (the second mortgagee), par (3) deals with claims to set-off and the like in reduction of the liability of the Guarantor to the Lender under the second mortgage, and par (2) with such matters relating to the guarantee of the second mortgage as claims by the Guarantor for indemnity for obligations under that guarantee by the Borrower or for contribution by any co-sureties. Bell If there be any doubt respecting the construction of cl 7.1 in this way, then, as indicated earlier in these reasons, the doubt is to be resolved in favour of the Guarantor. It follows that in asserting rights of subrogation with respect to the first mortgage, the appellants were not acting in breach of any restrictions binding them by reason of the terms of the guarantee of the second mortgage. It follows further that there was nothing inequitable as between the appellants and the first mortgagee and the Solicitors (not parties to that guarantee) in the appellants seeking the support of equity in the manner described earlier in these reasons. In particular, contrary to the submission by the Solicitors, the appellants were not bound to do equity by offering to perform an obligation to "protect" the second mortgagee as the price of any equitable relief founded on their subrogation rights in respect of the first mortgage. In Langman v Handover49 Rich and Dixon JJ said that the maxim that he who seeks equity must do equity "does not substitute moral for legal standards in the determination of the conditions of relief". Rather, those who ask for the assistance of a court of equity must be willing to do justice by accepting terms which flow from the legal or equitable rights of the defendant to the suit. The result is that the grounds in the Notices of Contention based upon the terms of the guarantee of the second mortgage fail. The question for this Court then becomes whether the grounds of decision by the Court of Appeal should be sustained. The reasoning of the Court of Appeal The members of the Court of Appeal gave differing reasons for upholding the decision of the primary judge. Giles JA observed that it was important that the appellants had given guarantees not only to the first mortgagee but also to the second and third mortgagees. This distinguished the present case from Drew v Lockett50. As between the appellants and the second mortgagee the "plain intention" was that the second mortgagee was to have resort to its security after 49 (1929) 43 CLR 334 at 351; [1929] HCA 42. 50 (1863) 32 Beav 499 [55 ER 196]. Bell the first mortgagee but "prior to any entitlement [the appellants] might have with respect to that property". The appellants had undertaken obligations to the second mortgagee "inconsistent" with the assertion of prior entitlement to subrogation and "the priority which would otherwise arise" was displaced. However, for the reasons already explained when dealing with the Notices of Contention, the terms of the guarantee given to the second mortgagee do not manifest any such intention. There was no displacement of priority between the mortgagees and the giving of the consecutive guarantees produced no inconsistency. Each guarantee operated in accordance with its terms. There was nothing in the circumstances rendering it inequitable for the appellants to enjoy the rights of subrogation. Handley AJA relied upon an application or extension of the rule in Otter v Lord Vaux51. Of that rule, his Honour said that it: "prevents the mortgagor derogating from his grant and obtaining an advantage from his breach of contract. The mortgagee is estopped by his grant and contract from claiming priority over the second mortgage." Handley AJA said that the estoppel was an estoppel by convention and added: "The position in the present case is substantially the same. The guarantors guaranteed each of the mortgages on the basis that one would be the first, another the second, and the other the third. The Principal Debtor could not have paid off the first and kept it alive for its own benefit. The guarantors, having guaranteed the second mortgage as a second mortgage, agreed in substance with the second mortgage[e] that once the first mortgagee was paid in full the second mortgagee would be paid next from one source or another before the guarantors got anything." There are several obscurities in this passage. The reference in the second sentence to "each of the mortgages", when read with "[t]he Principal Debtor" in the next sentence, appears to be to the securities given by B & B Holdings not those given by the appellants in support of their guarantees. As things stood at 8 February 2006 there was no indebtedness remaining of B & B Holdings on its first mortgage and no occasion for B & B Holdings to pay it off and keep it alive for its benefit. Nor, as already indicated, was there any agreement, in substance 51 (1856) 2 K & J 650 [69 ER 943]. Bell or otherwise, between the appellants as guarantors and the second mortgagee that once the first mortgage had been paid in full (with the contribution made by the guarantors from the proceeds of sale of their two properties) the second mortgagee would be paid next and before the guarantors could recoup that contribution. In Con-Stan Industries of Australia Pty Ltd v Norwich Winterthur Insurance (Australia) Ltd52 the Court said: "Estoppel by convention is a form of estoppel founded not on a representation of fact made by a representor and acted on by a representee to his detriment, but on the conduct of relations between the parties on the basis of an agreed or assumed state of facts, which both will be estopped from denying." The reference to an agreed or assumed state of facts (not of law) is significant. In any event, in the present case the agreed facts fall far short of what would be necessary to establish that the priority of the second mortgagee which is now asserted was the conventional basis of the transaction between it and the appellants as guarantors, so that the appellants had been estopped from asserting their right of subrogation. Nor does the rule in Otter v Lord Vaux depend upon reasoning which supplies any analogy for resolution of the present appeal. The rule is concerned with the merger of charges (including mortgages) in estates; the mortgages by B & B Holdings were of land under the provisions of the RP Act and thus were "creatures of statute" to which the general law principles of destruction by merger did not apply53. The rule of the common law is that whenever a greater and a lesser estate meet in the same person, without any intermediate estate, the lesser is sunk or drowned in the greater. Accordingly, at common law, where a person entitled to land acquires a security over it, a merger is conclusively presumed; the security merges and disappears in the greater estate. However, equity gives effect to an 52 (1986) 160 CLR 226 at 244; [1986] HCA 14. 53 English Scottish and Australian Bank Ltd v Phillips (1937) 57 CLR 302 at 322-323; [1937] HCA 6. Bell intention of the parties that there be no merger54. But to that acceptance of intention as controlling the outcome there is an exception. This is identified as the rule in Otter v Lord Vaux. A mortgagor who has paid off an encumbrance thereafter cannot set it up in priority to a puisne mortgage which the mortgagor has granted. Why is this so? The answer, which has the support of Viscount Haldane LC55 and Megarry J56, is as follows57: "a second mortgage, as between the parties, is a grant of the mortgagor's entire interest in the property, saving only the rights of the prior incumbrancer, and the mortgagor cannot derogate from his grant by holding the first mortgage against the second mortgagee". The rule in Otter v Lord Vaux has been applied to securities over personal property58. But as indicated above, there was no question in the present case of any merger by operation of law, with a contrary intention to which equity would not give effect. The preferred basis upon which Sackville AJA decided the appeal was that the conduct of the first mortgagee in accounting to the second mortgagee for the surplus proceeds was not "unconscionable". His Honour answered in the negative the question he posed as follows: 54 Commissioner of Stamp Duties (NSW) v Perpetual Trustee Co Ltd (1915) 21 CLR 69 at 87; [1915] HCA 91; Lewis v Keene (1936) 36 SR (NSW) 493 at 499. In New South Wales, s 10 of the Conveyancing Act 1919 (NSW) enacts that there shall be no "merger by operation of law only of any estate, the beneficial interest in which would not be deemed to be merged or extinguished in equity". 55 Whiteley v Delaney [1914] AC 132 at 144-145. 56 Brunner v Greenslade [1971] Ch 993 at 1002. 57 Waldock, The Law of Mortgages, 2nd ed (1950) at 437, quoted in Sussman v AGC Advances Ltd (1995) 37 NSWLR 37 at 51. 58 In re W Tasker & Sons Ltd [1905] 2 Ch 587 at 599-600, 603, where the property was corporate debentures. The law was altered retrospectively by s 15 of the Companies Act 1907 (UK): In re New London and Suburban Omnibus Company [1908] 1 Ch 621 at 625-626; White and Tudor's Leading Cases In Equity, 9th ed (1928), vol 2 at 34-35. Bell "But in what way is the doctrine of subrogation needed to avoid an unconscionable result? Or, to put the question another way, what would be unjust or inequitable about the net surplus from the sale of the Principal Debtor's assets going to the second mortgagee, as envisaged by s 58(3) of the [RP Act] ...?" The answer is that for the reasons already given the first mortgagee was required by equity to account for the net surplus to the appellants. That obligation was imposed upon the enjoyment by the second mortgagee of its entitlement under s 58(3) of the RP Act. His Honour also said: "The arrangements were plainly not intended to allow the appellants, by paying out the first mortgagee, to transform the second mortgagee from a secured creditor of [B & B Holdings] to an unsecured creditor presumably ranking equally with the other unsecured creditors of the appellants." There are difficulties with this passage. On the agreed facts the appellants had been able to sell their two properties and so raise the moneys paid by them in reduction of the indebtedness of B & B Holdings to the first mortgagee only because the three mortgagees had consented to the clearing of the title to those two properties. The second and third mortgagees had not, for example, protected their position by obtaining an agreement with the appellants and the first mortgagee expressly to deny to the appellants what otherwise would be their subrogation rights to the first mortgage over the assets of B & B Holdings. Sackville AJA referred to the passage in Tanwar Enterprises Pty Ltd v Cauchi59 where, after noting terms "unconscientious" and the "unconscionable" are used across a broad range of equity jurisdiction, Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ continued: that "They describe in their various applications the formation and instruction of conscience by reference to well developed principles. Thus, it may be said that breaches of trust and abuses of fiduciary position manifest unconscientious conduct; but whether a particular case amounts to a breach of trust or abuse of fiduciary duty is determined by reference to well developed principles, both specific and flexible in character. It is to 59 (2003) 217 CLR 315 at 324 [20]; [2003] HCA 57. Bell those principles that the court has first regard rather than entering into the case at in notions of unconscientious conduct in some loose sense where all principles are at large." level of abstraction that higher involved However, Sackville AJA appears to have proceeded, not in accordance with that passage, particularly its last sentence, but by asking whether and in what way the doctrine of subrogation was "needed to avoid an unconscionable result" and answering that there was nothing unconscionable or unjust in the first mortgagee applying the surplus proceeds of sale to the second mortgage. But this reasoning does not allow for the circumstance that the surplus was computed only after allowance for the payments which had been made by the appellants to reduce the secured indebtedness of B & B Holdings. These payments had enlivened the doctrine of subrogation, subject to the operation of which, and subject to contrary agreement or inequitable conduct, the parties were to be taken to have conducted their affairs. Sackville AJA referred to the judgment of Kearney J in Cochrane v Cochrane60. This is often, and correctly, cited as containing an orthodox statement and application of principles respecting the interrelation between the doctrines of subrogation and contribution. The remedy of one co-mortgagor who pays off the mortgage in full is not of subrogation to the rights of the mortgagee against the other mortgagor, but to contribution from that mortgagor. Kearney J also referred to the implied indemnity by the principal debtor which reflected the ultimate liability of that party in cases of suretyship61. It was that ultimate liability of B & B Holdings which in the present case founded the application of the doctrine of subrogation in favour of the appellants. Kearney J contrasted the right of subrogation with the right of contribution between those, such as the present appellants, who are subject to co-ordinate liabilities or common obligations. There equity is moved by concern that the common exposure of the contributors to the creditor and the equality of burden not be defeated by the accident or chance that the creditor select for recovery one or some rather than all of the contributors62. 60 (1985) 3 NSWLR 403. 61 (1985) 3 NSWLR 403 at 405. 62 Friend v Brooker (2009) 83 ALJR 724 at 732 [38]; 255 ALR 601 at 609-610. Bell Unjust enrichment and the English decisions The appeal to this Court in Friend v Brooker63, which concerned the equitable doctrine of contribution, was correctly conducted on the footing that the concept of unjust enrichment was not a principle supplying a sufficient premise for direct application in a particular case. The same is true of the equitable doctrine of subrogation. The oral submissions for the Solicitors correctly recognised this. In a passage in their reasons in David Securities Pty Ltd v Commonwealth Bank of Australia64, Mason CJ, Deane, Toohey, Gaudron and McHugh JJ rejected the submissions that in Australian law unjust enrichment was more than "just a concept" and that it was "a definitive legal principle according to its own terms". The use of the phrase "unifying legal concept" earlier in the joint reasons65 must be understood with what was said in that later passage66. In the years which have followed the Court has reaffirmed this position67 and all other Australian courts are bound accordingly. A not dissimilar fate met the attempt to adopt "proximity" as the "unifying theme" of the categories of case recognising a duty to take reasonable care to avoid a reasonably foreseeable risk of injury to another68. 63 (2009) 83 ALJR 724 at 728 [7]-[8]; 255 ALR 601 at 604. 64 (1992) 175 CLR 353 at 378-379; [1992] HCA 48. 65 (1992) 175 CLR 353 at 375. 66 Cf Ford (by his tutor Watkinson) v Perpetual Trustees Victoria Ltd (2009) 257 ALR 658 at 684. 67 Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 156 [151] per Gleeson CJ, Gummow, Callinan, Heydon and Crennan JJ; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 664-665 [83]-[85] per Gummow, Hayne, Crennan and Kiefel JJ; [2008] HCA 27. 68 See Bryan v Maloney (1995) 182 CLR 609 at 619; [1995] HCA 17, and the later decisions collected in Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 528-529 [18]; [2004] HCA 16. Bell The concept of unjust enrichment may provide a means for comparing and contrasting various categories of liability. Reference has been made to Cochrane v Cochrane69 and this provides an example. Subrogation may be seen as preventing the unjust enrichment of the principal debtor who otherwise might escape carriage of ultimate liability and contribution prevents one of equal obligors bearing more than its share of the burden. The two doctrines do not let matters lie where they would fall if the carriage of risk between the various actors involved were to be left entirely to be worked out within the limits of their contractual obligations. But as Cochrane shows, and as explained above, the two doctrines have different foundations in equity and operate with different results. The concept of unjust enrichment also may assist in the determination by the ordinary processes of legal reasoning of the recognition of obligations in a new or developing category of case70. An example is the conclusion reached in David Securities itself, that the vitiating factors which enliven the action for money had and received include mistakes of fact or law. But this appeal is not in that category. The principles of equity which govern the outcome are well developed and have the vitality to permit further development in an orthodox fashion. Subrogation, like other equitable doctrines, is applicable to a variety of circumstances, as explained earlier in these reasons. One circumstance concerns sureties, another the paying off of an existing mortgage. But that is not to say that subrogation is a "tangled web"71 in need of the imposition of the "top-down" reasoning which is a characteristic of some all-embracing theories of unjust Such all-embracing theories may conflict in a fundamental way with well-settled equitable doctrines and remedies. Reference was made in the opening paragraph of these reasons to the importance attached by equity to the 69 (1985) 3 NSWLR 403. 70 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 257; [1987] HCA 5; Lumbers v W Cook Builders Pty Ltd (In liq) (2008) 232 CLR 635 at 665 [85]. 71 See Goff and Jones, The Law of Restitution, 4th ed (1993) at 592. This statement was removed from subsequent editions. 72 See Farah Constructions Pty Ltd v Say-Dee Pty Ltd (2007) 230 CLR 89 at 156 Bell fashioning of the particular remedy to meet the nature of the case. The administration of the remedies of injunction and specific performance provides perhaps the most obvious examples. So also the remedial constructive trust, as these reasons have sought to demonstrate. Equity has been said to lack the necessary "exacting taxonomic mentality" when providing an appropriate remedy for unconscientious activity73. The better view is said to be that liability in "unjust enrichment" is strict, subject to particular defences74, while "[t]he unreliability of conscience" offends the precept that like cases must be decided alike and not by "a private and intuitive evaluation"75. But the experience of the law does not suggest debilitation by absence of a sufficiently rigid taxonomy in the application of equitable doctrines and remedies. And legislatures have taken the same view in Australia, notably by calling upon equitable analogues in framing the remedial provisions laid out in Pt VI of the Trade Practices Act 1974 (Cth). As these reasons have sought to show, the relevant principles of equity do not operate at large and in an idiosyncratic fashion. So it was that in Boscawen v Bajwa76, Millett LJ, after denying that subrogation is a remedy which the court has a general discretion to impose whenever it thinks fit to do so, went on: "The equity arises from the conduct of the parties on well settled principles and in defined circumstances which make it unconscionable for the defendant to deny the proprietary interest claimed by the plaintiff." 73 Birks, "Equity in the Modern Law: An Exercise in Taxonomy", (1996) 26 University of Western Australia Law Review 1 at 16-17. 74 Birks, "Equity in the Modern Law: An Exercise in Taxonomy", (1996) 26 University of Western Australia Law Review 1 at 67-68. 75 Birks, "Equity in the Modern Law: An Exercise in Taxonomy", (1996) 26 University of Western Australia Law Review 1 at 17. 76 [1996] 1 WLR 328 at 335; [1995] 4 All ER 769 at 777. Bell That was said in 1995. In England matters appear now to stand differently77. Banque Financière de la Cité v Parc (Battersea) Ltd78 concerned the application or extension of the reasoning in the authorities79 allowing subrogation of a third party to securities paid off by that party. Counsel for the successful appellants had submitted no more than that, while there is "an inevitable link" between unjust enrichment and subrogation, "the two are not co-extensive"80. It may well be that the result in that case could have been arrived at by development of orthodox equitable principles of subrogation81. However, Lord Hoffmann, who gave the most detailed opinion, referred82 to the use of the term "subrogation": "to describe an equitable remedy to reverse or prevent unjust enrichment which is not based upon any agreement or common intention of the party enriched and the party deprived". His Lordship then considered various cases in which securities were "kept alive" on the footing that a third party who paid off the security was presumed in equity to intend that it be so retained for the benefit of that party83. Lord Hoffmann concluded84: 77 The English authorities, of which the most recent was Cheltenham & Gloucester plc v Appleyard [2004] EWCA Civ 291, were analysed by Mr Tilley in his article "Restitution and the law of subrogation in England and Australia", (2005) 79 Australian Law Journal 518. 79 Notably, Ghana Commercial Bank v Chandiram [1960] AC 732. 80 [1999] 1 AC 221 at 223. 81 See the note by Jackman, "Restitution and subrogation", (1999) 73 Australian Law Journal 110 at 112. 82 [1999] 1 AC 221 at 231. 83 [1999] 1 AC 221 at 232-233. 84 [1999] 1 AC 221 at 234. Bell "I think it should be recognised that one is here concerned with a restitutionary remedy and that the appropriate questions are therefore, first, whether the defendant would be enriched at the plaintiff's expense; secondly, whether such enrichment would be unjust; and thirdly, whether there are nevertheless reasons of policy for denying a remedy." However, there is difficulty in identifying the "unjust" enrichment in subrogation cases, which necessarily involve multilateral, rather than bilateral, relationships85. Further, as Bryson J later explained, the reasoning of Lord Hoffmann in Banque Financière does not86: "provide an explanation for the mortgagor's being treated as bound, in equity, to treat the person who paid off the previous mortgage as entitled to security under it. Restitution would provide a basis for treating the mortgagor as obliged to restore to the person who paid it the amount which had been paid to the mortgagee: the concept is inadequate for also treating the mortgagor as obliged to hold the payer secured. This is particularly clear where, as in this case, and in other cases where subrogation has been held to exist, the mortgagor in fact had no dealings with the payer, or where the payer believed that he was getting security under arrangements in which the mortgagor was not in fact involved." In the present case, Giles JA described the understanding in Australia of the doctrinal basis of subrogation as "open to debate" by reason of the recent English authorities. However, for the above reasons, and contrary to the earlier suggestion in Highland v Exception Holdings Pty Ltd (In liq)87, the doctrinal basis of equitable subrogation in Australian law is not unsettled. The respondents, led by counsel for the Solicitors, in this Court correctly eschewed any attempt to support the outcome in the Court of Appeal by application of reasoning in the recent English cases. 85 See Goff and Jones, The Law of Restitution, 7th ed (2007) at 132, where the learned authors write that by reason of the tripartite relationship of the parties "it is not always easy to determine whether it is B or C who has been enriched and why a court should conclude that the enrichment is an unjust enrichment". 86 Challenger Managed Investments Ltd v Direct Money Corporation Pty Ltd (2003) 12 BPR 22,257 at 22,269. 87 (2006) 60 ACSR 223 at 239. Bell Orders The appeal should be allowed. Order 1 of the orders of the Court of Appeal entered 29 December 2008 and the further orders entered 8 July 2009 should be set aside. In their place, it should be ordered that: (a) the appeal to the Court of Appeal be allowed; (b) orders 1 and 2 of the orders made by the primary judge and entered on 18 February 2008 should be set aside; (c) the separate question stated on 16 November 2006 should be answered as follows: "In the absence of prior consent or release by Mr and Mrs Bofinger, on 8 February 2006 Kingsway Group Limited was obliged to account to Mr and Mrs Bofinger as a constructive trustee for any dealing by it with the moneys and securities identified in the question for decision in favour of any other party, and to pay equitable compensation to Mr and Mrs Bofinger in respect of the denial or limitation by such dealing of recoupment from those moneys and securities of moneys paid by Mr and Mrs Bofinger to Kingsway Group Limited, in total $1,519,234.40, from the proceeds of sale of their properties at 407 Willarong Road, Caringbah and 2/41 Bulwarra Street, Caringbah." The third and fourth respondents entered submitting appearances in this Court. The costs of the appellants in this Court, in the Court of Appeal and of the proceedings to date in the Equity Division of the Supreme Court, should be paid by the first, second, fifth, sixth, seventh and eighth respondents. It will be for the appellants to take such steps as may be appropriate to restore the proceedings in the Equity Division for consideration of remaining issues. These will include the rate and nature of an interest component of the sum for which there is to be equitable compensation to the appellants88. 88 See Hermann v Charny [1976] 1 NSWLR 261 at 270; and the authorities collected in Victorian Workcover Authority v Esso Australia Ltd (2001) 207 CLR 520 at 531-532 [24]; [2001] HCA 53.
HIGH COURT OF AUSTRALIA GUMMOW ACJ, CUMERLONG HOLDINGS PTY LTD APPELLANT AND DALCROSS PROPERTIES PTY LTD & ORS RESPONDENTS Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2011] HCA 27 3 August 2011 ORDER Appeal allowed. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made 2 September 2010, and in place thereof order that: the appeal be allowed; the first and second respondents pay the appellant's costs of the appeal to the Court of Appeal up to and including 11 July 2010 and the third respondent pay the appellant's costs thereafter; set aside order 3 of the orders of Smart AJ of the Supreme Court made 30 October 2009, and in place thereof: declare that the change expressed by LEP 194 to the zoning of the land of the appellant, identified as Lot 1 in DP302605, does not have effect to suspend the operation of the restrictive covenant burdening the land of the third respondent, identified as Lot 103 in DP834629; and order that the third respondent be restrained, by itself, its servants and agents, from using or permitting the use of Lot 103 in DP834629 for any hospital, or any ancillary or associated purpose, contrary to the restriction imposed by instrument registered on 10 November 1993 pursuant to s 88B of the Conveyancing Act 1919 (NSW); amend order 4 of the orders of Smart AJ made 30 October 2009 by deleting "Plaintiff pay the defendants' costs of these proceedings" and substituting "First and second defendants pay the plaintiff's costs of these proceedings". The third respondent is to pay the appellant's costs of the appeal to this Court. On appeal from the Supreme Court of New South Wales Representation P J McEwen SC with S B Nash and N M Eastman for the appellant (instructed by Allsop Glover) B W Walker SC with P Kulevski for the third respondent (instructed by Robert Napoli & Co Solicitors) Submitting appearance for the first and second respondents J E Griffiths SC with C C Spruce appearing as amicus curiae on behalf of the Minister for Planning and Infrastructure (instructed by Department for Planning) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd Local government – Town planning – Proprietary rights – Suspension of proprietary rights by planning instrument – Ku-ring-gai Local Environment Plan No 194 ("LEP 194") amended Ku-ring-gai Planning Scheme Ordinance ("Ordinance") to effect rezoning of certain land – Purported effect of rezoning was to render unenforceable a restrictive covenant which burdened land owned by third respondent for benefit of land owned by appellant – Section 28 of Environmental Planning and Assessment Act 1979 (NSW) required that planning instrument which rendered unenforceable a restrictive covenant be approved by Governor acting on advice of Executive Council – Whether LEP 194 "provide[d] that" restrictive covenant "shall not apply" – Whether restrictive covenant unenforceable where failure to comply with s 28 when amending Ordinance. Words and phrases – "environmental plan", "environmental planning instrument", "provide", "regulatory instrument". Environmental Planning and Assessment Act 1979 (NSW), s 28. Local Government Act 1919 (NSW), Pt XIIA. GUMMOW ACJ, HAYNE, CRENNAN AND BELL JJ. This litigation concerns a dispute between owners of neighbouring parcels of land in the vicinity of the intersection of Werona Avenue and Stanhope Road, Killara. This suburb is in the municipality of Ku-ring-gai on the North Shore of Sydney. The title to the parcels of land is held under the provisions of the Real Property Act 1900 (NSW), and so may be described as Torrens title. Dalcross Holdings Pty Limited ("the second respondent") operated a private hospital on one lot ("Lot 101"), and proposed to extend that activity to an area bounded by the corner of Stanhope Road and Werona Avenue. This area includes a lot in DP834629 ("Lot 103") which adjoins Lot 101. Dalcross Properties Pty Limited ("the first respondent") was the registered proprietor of Lot 103 when the litigation commenced. Both Lot 101 and Lot 103 front Stanhope Road. Cumerlong Holdings Pty Limited ("the appellant") is the registered proprietor of a lot in DP302605 ("Lot 1") which fronts Werona Avenue and has a rear boundary with Lot 101. Section 88B of the Conveyancing Act 1919 (NSW) provides, among other things, for the creation of restrictions on the use of Torrens title land, upon the registration of plans containing the required covenants. By force of s 88B and the registration of DP834629 on 10 November 1993, certain land which includes Lot 1 has the benefit of the restrictions imposed upon parcels of land which include Lot 103. It has been accepted in the litigation that the terms of the restriction prevent the use of Lot 103 for hospital and medical purposes. The course of the litigation By suit in the Equity Division of the Supreme Court of New South Wales, the appellant sought to enjoin the proposed development on the ground that it contravened the restriction on use imposed upon Lot 103. On 30 October 2009, the suit was dismissed by Smart AJ. On 28 June 2010, Australasian Conference Association Ltd ("the third respondent") acquired both Lot 101 and Lot 103 and is the present registered proprietor thereof. Thereafter, on 2 September 2010, an appeal by the appellant to the Court of Appeal was dismissed by majority (Tobias and McColl JJA; Handley AJA dissenting)1. By special leave granted on 11 March 2011, the appellant appeals to this Court. The first and second respondents entered submitting appearances and the opposition to the appeal was conducted by the third respondent. At the hearing, 1 Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2010] NSWCA 214. Gummow ACJ Hayne Crennan Bell leave was granted to the Minister for Planning and Infrastructure to appear as amicus curiae. Such leave had been granted at trial and in the Court of Appeal. The nature of the dispute The successful opposition to the appellant's case was based upon the operation of planning legislation and instruments made thereunder on what otherwise would be the enjoyment and enforcement by the appellant of its proprietary rights, being the benefit attached to its Lot 1 of the restrictions upon the use of Lot 103. The appellant challenges the reliance by the third respondent upon operation of the planning legislation and instruments made thereunder to defeat its suit for equitable relief. This dispute illustrates several points of general significance. It may be true to say that State planning legislation "is concerned with land as a topographical entity, indifferently to its proprietorship"2, and that this may entail interference with private property rights3. But legislation which operates to mitigate the extent of that interference, by prescription of a particular manner and form for the making of planning instruments, should be read in light of that purpose of mitigating the derogation of private rights4. On 27 August 2008, Ku-ring-gai Municipal Council approved a development application by the second respondent by granting a development consent to the construction on land including Lot 103 of, among other things, an extension of the hospital erected upon Lot 101. The majority of the Court of Appeal based its decision to refuse to grant an injunction to enforce the restrictive covenant upon the proposition that effect was given to the development consent by the terms of cl 68(2) of the Ku-ring-gai Planning Scheme Ordinance ("the Ordinance") as it stood after the changes to the relevant zoning of the land made by the Ku-ring-gai Local Environment Plan No 194 ("LEP 194"). LEP 194 had been gazetted on 28 May 2004. 2 Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2002) 55 NSWLR 446 at 449; reversed on other grounds: Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2004) 220 CLR 472; [2004] HCA 59. 3 Owens v Longhurst (1998) 9 BPR 16,731 at 16,732. 4 See Application of Thompson unreported, Supreme Court of New South Wales, 25 October 1993 at 4 per McLelland CJ in Eq. Gummow ACJ Hayne Crennan Bell Clause 2 of LEP 194 had as its stated aim: "to rezone land to facilitate the development of multi-unit housing and increase housing choice". Clause 3 applied the plan to certain areas within the municipality, including the land the subject of this dispute, and made changes to the zoning system provided by the Ordinance. Clause 4(a) stated that LEP 194 amended the Ordinance as set out in Sched 1. The result was that, if LEP 194 was otherwise effective in its terms, it and the Ordinance were to be read in combination5. Schedule 1 of LEP 194 did not amend the terms in which cl 68(2) of the Ordinance was expressed, but it otherwise amended the Ordinance by creating a new zone of land (Zone No 2(d3)) and altering the existing zoning of certain land which included the land in question. The result was that LEP 194 supplied a changed factum upon which cl 68(2) operated. Clause 68(2) in its terms excluded from its operation land in zones it listed, including Zone No 2(b), but this left cl 68(2) to operate in respect of land in zones not so specified. The effect of the changes made by LEP 194 was to remove the land burdened by the restrictive covenant from Zone No 2(b), which was listed as an excluded zone in cl 68(2), and to place that land in Zone No 2(d3), a zone which was not listed in, and so was not excluded from, cl 68(2). After the changes made by LEP 194, cl 68(2) now operated in respect of land within Zone No 2(d3), including the land the subject of this litigation. Clause 68(2) relevantly reads: "the operation of any covenant, agreement or instrument imposing restrictions as to the erection or use of buildings for certain purposes or as to the use of land for certain purposes is hereby suspended to the extent to which any such covenant, agreement or instrument is inconsistent with any provision of this Ordinance or with any consent given thereunder." Before LEP 194, cl 68(2) had not operated to "suspend" the operation of the restrictive covenant burdening Lot 103. In using the term "suspended", cl 68(2) appears to contemplate that if the relevant development consent later became inoperative for some reason, the suspension would cease and the covenant would again be enforceable according to its terms. The Minister contended that this meant that the rights the appellant enjoyed under the restrictive covenant were placed no more than in abeyance, which might be 5 See Commissioner of Stamps (SA) v Telegraph Investment Co Pty Ltd (1995) 184 CLR 453 at 463; [1995] HCA 44. Gummow ACJ Hayne Crennan Bell infinite or indefinite. This may be so, but that abeyance represents a serious inroad upon the property rights of the appellant6. The history of the Ordinance The Ordinance was a scheme prescribed in 1971 pursuant to powers conferred on the Governor (exercisable on the recommendation of the Minister) by Pt XIIA (ss 342A-342AT) of the Local Government Act 1919 (NSW) ("the 1919 Act"), in particular by s 342KD. Section 342G(4) provided that a scheme might "suspend", either generally or in any particular case or class of cases, the operation of any covenant or instrument "to the extent to which that provision is inconsistent with any of the provisions of the scheme". This provided the foundation for cl 68(2) of the Ordinance when it was prescribed. Division 9 (ss 342AC-342AE) of the 1919 Act made provision for compensation to those with an estate or interest in land injuriously affected by a prescribed scheme7. However, s 342G(4) also provided for the suspension by a scheme of the operation of any other provision of the 1919 Act (thus including Div 9) to the extent of its inconsistency with any of the provisions of the scheme. The statutory provision for compensation was not carried into the Environmental Planning and Assessment Act 1979 (NSW) ("the EPA Act"), and different methods were provided for the making of planning instruments. Parts XIIA and XIIB of the 1919 Act were repealed with effect from 1 September 1980 when the EPA Act came into force8. The EPA Act, s 28 LEP 194 is expressed to have been made by the Minister under the EPA Act. However, by the force of transitional provisions9, the Ordinance became a 6 See Pounder and Butt, "Planning Principles vs Private Property Rights: Environmental Planning and Assessment Act 1979 (NSW), s 28", (2004) 78 Australian Law Journal 560. 7 See Bingham v Cumberland County Council (1954) 20 LGR 1; Baker v Cumberland County Council (1956) 1 LGRA 321. 8 Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW), Sched 1. 9 Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW), Sched 3, cl 2. See Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2004) 220 CLR 472 at 486 Gummow ACJ Hayne Crennan Bell "deemed environmental planning instrument" and thus an "environmental planning instrument" as defined in s 4 of the EPA Act. Thereafter, and contrary to submissions by the Minister, the Ordinance derived its statutory support not from the 1919 Act but from the EPA Act. As the EPA Act stood when LEP 194 was made in 2004, Pt 3 (ss 24-74) was headed "Environmental planning instruments"10. Division 1 (ss 24-36) of Pt 3 was headed "General". Section 24 provided that an environmental planning instrument might be made in accordance with Pt 3 for the purposes of achieving any of the objects of the statute. Division 4 of Pt 3 (ss 53-72) was headed "Local environmental plans", and s 70 conferred power upon the Minister to make such a plan. Division 4 is relied upon in submissions by the third respondent and by the Minister to support the making of LEP 194. However, the appellant refers to the specific provision made in s 28, which is in Div 1, not Div 4. Section 28, as it stood when LEP 194 was made, provided: In this section, regulatory instrument means any Act (other than this Act), rule, regulation, by-law, ordinance, proclamation, agreement, covenant or instrument by or under whatever authority made. For the purpose of enabling development to be carried out in accordance with an environmental planning instrument or in accordance with a consent granted under this Act, an environmental planning instrument may provide that, to the extent necessary to serve that purpose, a regulatory instrument specified in that environmental planning instrument shall not apply to any such development or shall apply subject to the modifications specified in that environmental planning instrument. (3) A provision referred to in subsection (2) shall have effect according to its tenor, but only if the Governor has, before the making of the environmental planning instrument, approved of the provision. (4) Where a Minister is responsible for the administration of a regulatory instrument referred to in subsection (2), the approval of 10 Part 3 thereafter was substantially amended by the Environmental Planning and Assessment Amendment Act 2008 (NSW), but the effect of Sched 6 to the EPA Act as it thereafter stood was to continue in force the Ordinance and LEP 194. Gummow ACJ Hayne Crennan Bell the Governor for the purposes of subsection (3) shall not be recommended except with the prior concurrence in writing of that Minister. (5) A declaration in the environmental planning instrument as to the approval of the Governor as referred to in subsection (3) or the concurrence of a Minister as referred to in subsection (4) shall be prima facie evidence of the approval or concurrence." (double emphasis in original; other emphasis added) The reference to the Governor, by force of s 14 of the Interpretation Act 1987 (NSW), is to be read as a reference to the Governor with the advice of the Executive Council. The appellant points to the requirement in s 28 for approval by the Governor. It is not disputed that the procedures found in s 28 were not observed with respect to the creation of LEP 194. The appellant characterises s 28 as supplying a "brake" upon the power of the Minister to act alone under Div 4 to provide for the suspension of private rights, such as those under a restrictive covenant. The first question is whether the procedures detailed in s 28 were permissive rather than mandatory. The second is whether, in any event, s 28 had been engaged in the making of LEP 194. As to the first question, the third respondent accepts that an amendment to cl 68(2) which answered the description in s 28 would need to satisfy what the appellant relies upon as the "protection provisions" of s 28. That is to say, s 28 is an example of a particular regime which, where it applies, excludes the broader provisions (here, in Div 4) which might otherwise be engaged11. Something should be said respecting the phrase in s 28(3) "shall have effect according to its tenor". It may be accepted that "tenor" may identify no more than the meaning of words actually used in an instrument. But it may also identify the effect or drift of a provision, and the phrase in which "tenor" appears in s 28(3) makes it plain that this is how it is to be read in s 28(3). 11 Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7; [1932] HCA 9; Bruton Holdings Pty Ltd (In liq) v Federal Commissioner of Taxation (2009) 239 CLR 346 at 353 [17]; [2009] HCA 32. Gummow ACJ Hayne Crennan Bell The restrictive covenant binding Lot 103 in favour of the appellant's Lot 1 plainly is a "regulatory instrument" within the meaning of s 28(1). LEP 194 is an "environmental planning instrument" because it is a "local environmental plan" which was made by the Minister under s 70 of the EPA Act. This follows from the definitions in s 4. The Ordinance also, as indicated above, is an "environmental planning instrument". Conclusions The appeal should succeed. Within the meaning of s 28(2), LEP 194 is an environmental planning instrument which, by its engagement with the provisions of the Ordinance, including cl 68(2), provides and specifies that, to the extent necessary to serve the purpose of enabling development to be carried out in accordance with LEP 194, the restrictive covenant of which the appellant's land has the benefit shall not apply to the land which it is sought to develop and use for the purposes of a hospital. But LEP 194 cannot have this effect because approval, as required by s 28(3), was not given. LEP 194 did so provide and specify with respect to the suspension of the restrictive covenant in question because, as Handley AJA put it12, that was a necessary result of the making of LEP 194. This conclusion is contrary to the view of the majority in the Court of Appeal that s 28(3) is only engaged if there be in LEP 194 a statement in terms that a category of regulatory instrument, which includes the restrictive covenant, is not to apply to any development permissible under LEP 194. Some analogy with respect to the use of the term "provide" in s 28(2) is supplied by the construction which has been given to the power given to the Parliament to make laws with respect to "matters in respect of which [the] Constitution makes provision until the Parliament otherwise provides" (s 51(xxxvi))13. In King v Jones14, Barwick CJ rejected what he understood to be 12 Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2010] NSWCA 214 13 There are twenty-two provisions in the Constitution to which s 51(xxxvi) applies: Quick and Garran, The Annotated Constitution of the Australian Commonwealth, 14 (1972) 128 CLR 221 at 240; [1972] HCA 44. Gummow ACJ Hayne Crennan Bell the submission that, in order to "otherwise provide", the Parliament must make a law which in terms refers to the matter elsewhere in the Constitution, so as to expressly displace it; rather, it was enough that the result of the law, "of necessity", displaced the provision. Orders The appeal should be allowed, and the third respondent should pay the appellant's costs of the appeal to this Court. The orders of the Court of Appeal should be set aside. In place thereof, the appeal to the Court of Appeal should be allowed, and the first and second respondents should pay the appellant's costs of that appeal up to and including 11 July 2010 (when it appears the third respondent was joined) and the third respondent should pay those costs thereafter. Order 3 of the orders of Smart AJ made 30 October 2009 should be set aside and in place thereof there should be an order: declaring that the change expressed by LEP 194 to the zoning of the land of the appellant, identified as Lot 1 in DP302605, does not have effect to suspend the operation of the restrictive covenant burdening the land of the third respondent, identified as Lot 103 in DP834629; and that the third respondent be restrained, by itself, its servants and agents, from using or permitting the use of Lot 103 in DP834629 for any hospital, or any ancillary or associated purpose, contrary to the restriction imposed by instrument registered on 10 November 1993 pursuant to s 88B of the Conveyancing Act 1919 (NSW). Order 4 should be amended by deleting "Plaintiff pay the defendants' costs of these proceedings" and substituting "First and second defendants pay the plaintiff's costs of these proceedings". HEYDON J. The power to suspend restrictive covenants granted in 1971 by cl 68(2) of the Ku-ring-gai Planning Scheme Ordinance, made under s 342G(2) of the Local Government Act 1919 (NSW), was potentially capable of interfering adversely with proprietary rights of the kind which the appellant later acquired. The position of persons who had those proprietary rights, however, was protected by ss 342AC-342AE of the Local Government Act, which provided for compensation. When the relevant part of the Local Government Act was repealed with effect from 1980, those of its sections which provided for compensation were not replaced, but s 342G(2) was replaced by sub-ss (2) and (3) of s 28 of the Environmental Planning and Assessment Act 1979 (NSW)15. The restrictive covenant created on 10 November 1993 benefiting the appellant's land was a proprietary right of the appellant. The purported suspension of the appellant's restrictive covenant was effected by the combined operation of cl 68(2) and the making of Local Environment Plan 194 with effect from 28 May 2004. That suspension, if it took place, did not cause the total destruction of the restrictive covenant, but it affected it adversely. In Marshall v Director General, Department of Transport Gaudron J "Although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights. The right to compensation for injurious affection following upon the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all the generality that their words permit." And McHugh J said that legislation dealing with compensation for the compulsory acquisition of land17: 15 The provisions are set out at [17]. 16 (2001) 205 CLR 603 at 623 [38]; see also at 634 [67]; [2001] HCA 37. 17 (2001) 205 CLR 603 at 627 [48] (footnote omitted). "is intended to ensure that the person whose land has been taken is justly compensated. Such legislation should be construed with the presumption that the legislature intended the claimant to be liberally compensated." The present case does not concern the resumption of land, but it does concern something similar – governmental action pursuant to legislative power which affects proprietary rights in land adversely. And sub-ss (2) and (3) of s 28 do not provide for compensation, but they replace legislation which did provide for compensation. The principles stated in Marshall v Director General, Department of Transport apply as fully to the present case as they do to legislation providing land. Sub-sections (2) and (3) should be construed generously and liberally because they are protective of the interests of those whose property rights may be damaged by an environmental planning instrument. for compensation resumption of the for The protective function of s 28(3) ensures that before an environmental planning instrument enabling development to be carried out can contain a provision that a covenant does not apply to the development, a certain procedure must be carried out. By reason of s 14 of the Interpretation Act 1987 (NSW), the procedure requires Ministers to advise the Governor to approve the provision, and it requires that that approval be given formally, in a meeting of the Executive Council. If Ministers are determined to pursue a particular course, the procedure may not be much protection. But it is some protection, and in many circumstances it will be a significant protection. If s 28(2) is read narrowly, to require precision and specificity in what the environmental planning instrument provides, s 28(3) will also be narrow in its operation, and will afford relatively little protection to those enjoying covenants. The more widely s 28(2) is read, the fuller the protection afforded by s 28(3). The majority of the Court of Appeal of the Supreme Court of New South Wales may be said to have construed s 28(2) narrowly by requiring that there be a statement "in terms" in the environmental planning instrument that the restrictive covenant will not apply, and by holding that it was not enough that the environmental planning instrument would have "that effect". Handley AJA, on the other hand, considered that it was sufficient that the environmental planning instrument had the necessary and intended result of suspending the restrictive covenant. He pointed out that sub-ss (2) and (3) of s 28 provide some protection for persons having the benefit of what can be the important and valuable proprietary rights of restrictive covenants. He also pointed out the unattractiveness of a construction which would permit the Executive to avoid compliance with s 28(3) by mere drafting devices. The construction of Handley AJA is to be preferred, for the reasons he gives. On that construction, the prior approval of the Governor, acting on the advice of the Executive Council, was necessary. It was not obtained. Hence the appellant's restrictive covenant was not suspended by Local Environment Plan 194. The appeal should be allowed with costs. The appellant should have its costs at trial and in the Court of Appeal. An appropriate declaration should be made and an injunction granted.
HIGH COURT OF AUSTRALIA AND APPELLANT CHIEF OF ARMY RESPONDENT Li v Chief of Army [2013] HCA 49 27 November 2013 ORDER Appeal allowed with costs. Set aside the order of the Full Court of the Federal Court of Australia made on 26 February 2013 and, in its place, order that: the appeal to that Court be allowed; the appellant's conviction be quashed and the sentence imposed on 8 April 2011 be set aside; and the matter be remitted to the Defence Force Discipline Appeal Tribunal for the making of further orders, if any. Set aside the order of the Full Court of the Federal Court made on 19 April 2013 and, in its place, order that the respondent pay the appellant's costs of the appeal to that Court, including the costs of submissions concerning the issue of costs. On appeal from the Federal Court of Australia Representation A W Street SC with A K Flecknoe-Brown for the appellant (instructed by S B Lloyd SC with S G Callan for the respondent (instructed by Clayton Utz) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Li v Chief of Army Defence – Military forces – Discipline – Service offences – Offence of creating a disturbance on service land – Meaning of "disturbance" – Physical and fault elements of "creating" a disturbance – Whether violence or threat of violence necessary to existence of "disturbance" – Whether "creating" a disturbance has one or two physical elements. Words and phrases – "creating a disturbance", "disturbance". Criminal Code (Cth), Ch 2. Defence Force Discipline Act 1982 (Cth), s 33(b). Defence Force Discipline Appeals Act 1955 (Cth). FRENCH CJ, CRENNAN, KIEFEL, BELL AND GAGELER JJ. Introduction Major Ting Li, a member of the Australian Defence Force ("the ADF"), was involved one morning in an incident in the Campbell Park Offices in the Australian Capital Territory. He was subsequently charged before a restricted court martial constituted under the Defence Force Discipline Act 1982 (Cth) ("the DFDA") with the service offence of having created a disturbance on service land contrary to s 33(b) of the DFDA and, in the alternative, with the service offence of having acted in a manner likely to bring discredit on the ADF contrary to s 60(1) of the DFDA. The particulars of each charge were identical. They were that Major Li, after entering the office of Mr Snashall, a Commonwealth public servant: refused to leave that office when Mr Snashall requested him to do so; continued speaking to Mr Snashall in a raised voice; followed Mr Snashall and continued the conversation when Mr Snashall walked out of that office; forcefully pushed against the office door placing his head and shoulder in the doorway when Mr Snashall had returned to the office and was inside the office trying to close the door; re-entered the office and again refused to leave when requested to do so; and stood approximately three inches from Mr Snashall's face speaking with a raised voice and in an agitated and aggressive manner. It was not disputed that those particulars were established by the evidence before the court martial. The evidence also established that the incident was witnessed by a number of other public servants and members of the ADF working in the Campbell Park Offices. Major Li's own uncontested evidence before the court martial was that he was attempting on the morning in question to speak with Mr Snashall to raise his concern about statements Mr Snashall had previously made to him which he had found offensive and suspected to have been racially motivated. Major Li said that he did not anticipate that Mr Snashall "would not listen" to him and he "did not mean for the situation to deteriorate to that level and for everyone in the workplace to see that". Major Li was convicted of creating a disturbance on service land. He was sentenced to be severely reprimanded and fined. No finding was made with respect to the alternative charge. Crennan Bell Appeals Major Li appealed against his conviction to the Defence Force Discipline Appeal Tribunal ("the Tribunal") constituted under the Defence Force Discipline Appeals Act 1955 (Cth) ("the DFDAA"). The powers of the Tribunal relevantly included a power to quash the conviction if it appeared to the Tribunal "that, as a result of a wrong decision on a question of law ... the conviction ... was wrong in law and that a substantial miscarriage of justice [had] occurred"1. If the Tribunal quashed the conviction, the Tribunal had power to order a new trial if it considered it to be "in the interests of justice"2. If the Tribunal quashed the conviction without ordering a new trial, Major Li would have been deemed to have been acquitted of the offence of having created a disturbance on service land3. If the Tribunal considered that the court martial, by reason of finding Major Li guilty of having created a disturbance on service land, must have been satisfied beyond reasonable doubt of facts which proved that Major Li had acted in a manner likely to bring discredit on the ADF, the Tribunal also had power to substitute a conviction of that other offence4. The Tribunal (Tracey J, White JA and Cowdroy J) in fact dismissed the appeal5. Major Li then pursued a further "appeal" under the DFDAA, to the Full Court of the Federal Court. That further appeal, in truth a proceeding in the original jurisdiction of the Federal Court6, was limited to an "appeal ... on a question of law involved in [the] decision of the Tribunal"7. The Full Court, on hearing and determining the appeal, had power to "make such order as it [thought] appropriate by reason of its decision"8, including an order affirming or 1 Section 23(1)(b) of the DFDAA. 2 Section 24 of the DFDAA. 3 Section 41 of the DFDAA. 4 Section 26 of the DFDAA. 5 Li v Chief of Army (2012) 261 FLR 226. 6 Hembury v Chief of the General Staff (1998) 193 CLR 641 at 653 [31]; [1998] HCA 47. 7 Section 52(1) of the DFDAA. 8 Section 52(4) of the DFDAA. Crennan Bell setting aside the decision of the Tribunal or an order remitting the case to be heard and decided again by the Tribunal in accordance with directions of the Full Court9. The Full Court (Keane CJ, Jagot and Yates JJ, Dowsett and Logan JJ the appeal10, and subsequently ordered dissenting) (unanimously) that Major Li pay the costs of the Chief of Army as respondent to the appeal11. fact dismissed Appeal to this Court Major Li's appeal, by special leave, to this Court raises two questions about the service offence of creating a disturbance on service land contrary to s 33(b) of the DFDA of which Major Li was convicted: Is violence or a threat of violence necessary to the existence of a "disturbance"? (2) What physical and fault elements are involved in "creating" a disturbance? The Chief of Army faintly pressed a contention that this Court, standing in the shoes of the Full Court of the Federal Court under s 73 of the Constitution and doing again what the Full Court in the appeal ought to have done within its own limited original jurisdiction, is jurisdictionally constrained from determining those questions. The contention is rejected. Each question is plainly a question of law. Each was addressed by the Tribunal as a step in arriving at its decision. Although obscured by the prolixity of the grounds of appeal, each was in substance raised in the appeal to the Full Court of the Federal Court. Each therefore fell within the limited original jurisdiction of the Federal Court. In the event, each was in terms addressed by all members of the Full Court. Is violence or a threat of violence necessary to the existence of a disturbance? The DFDA, as its long title explains, is "[a]n Act relating to the discipline of the Defence Force". Section 33 is in Div 3 of Pt III of the DFDA. Other 9 Section 52(5)(a) and (b) of the DFDAA. 10 Li v Chief of Army (2013) 210 FCR 299. 11 Li v Chief of Army (No 2) (2013) 210 FCR 356. Crennan Bell sections in that Division create service offences of assaulting a superior officer12, insubordinate conduct13, disobeying a lawful command14, failing to comply with a direction in relation to a ship, aircraft or vehicle15, failing to comply with a general order16, assaulting a guard17, obstructing a police member18, dereliction in respect of guard duty19, and assaulting or ill-treating a subordinate20. Section 33 provides: "A person who is a defence member or a defence civilian is guilty of an offence if the person is on service land, in a service ship, service aircraft or service vehicle or in a public place and the person: assaults another person; or creates a disturbance or takes part in creating or continuing a disturbance; or (c) within the view or hearing of another person, engages in conduct that is obscene; or uses insulting or provocative words to another person." The section goes on to prescribe a maximum punishment of imprisonment for six months. 12 Section 25 of the DFDA. 13 Section 26 of the DFDA. 14 Section 27 of the DFDA. 15 Section 28 of the DFDA. 16 Section 29 of the DFDA. 17 Section 30 of the DFDA. 18 Section 31 of the DFDA. 19 Section 32 of the DFDA. 20 Section 34 of the DFDA. Crennan Bell It has been observed that21: "The word 'disturbance' encompasses a broad range of meanings. At one extreme, it may be something as innocuous as a false note or a jarring colour; something which disturbs in the sense of annoyance or disruption. At the other end of the spectrum are incidents of violence, inducing disquiet, fear and apprehension for physical safety. Between these extremes lies a vast variety of disruptive conduct." The answer to the first question in the appeal turns on where, within that spectrum, the "disturbance" to which s 33(b) of the DFDA refers is to be located. Major Li would have it at one extreme; the Chief of Army would have it closer to the middle of the range. The judge advocate, whose function was to rule on questions of law arising in the court martial22, directed the court martial that a disturbance included "disorderly disputation ... such as to be likely to cause a response from anyone present who saw or heard the incident". The Tribunal found no error in that direction, observing the instruction to be supported by "[t]he context of s 33(b) and its overall purpose of regulating discipline in the ADF"23. Four of the five judges who constituted the Full Court of the Federal Court held the Tribunal in that respect to be correct in law. Keane CJ, Jagot and Yates JJ concluded that s 33(b) was "apt to proscribe the disruption of the orderly conduct of defence personnel in and around defence facilities" and that "conduct which disrupts the orderly performance of their duties by those subject to, or witnessing it, is conduct which creates a disturbance"24. Dowsett J concluded that the relevant question, one of fact, was whether Major Li's conduct "interrupted or broke up the settled conditions in which persons employed in the relevant area usually performed their duties"25. 21 R v Lohnes [1992] 1 SCR 167 at 171. 22 Section 134 of the DFDA. 23 (2012) 261 FLR 226 at 241 [75]. 24 (2013) 210 FCR 299 at 317 [69]. 25 (2013) 210 FCR 299 at 327 [108]. Crennan Bell Logan J considered the Tribunal to have been wrong in law in failing to equate "disturbance" in s 33(b) with "a breach of the peace" requiring "some form of actual harm done to a person or his or her property in that person's presence or some other form of violent disorder"26. His Honour was persuaded to give the statutory language that narrower construction principally by historical considerations27, but was also influenced by considerations that "a soldier is gifted with all the rights of other citizens"28 and that "subject always to express or necessary implication to the contrary, a statute ought not to be construed so as to diminish personal rights and freedoms"29. The legislative history, to which Logan J referred, need not be repeated in detail. It shows that s 33 of the DFDA was framed by reference to s 13 of the Naval Discipline Act 1957 (UK), the antecedents of which can be traced to s 22 of the Naval Discipline Act 1661 (13 Car II c 9). Section 22 of the Act of 1661 required "any of the Fleet" with cause for complaint "quietly" to make that known to their superiors, who were in turn "to cause the same to be presently remedied accordingly", but added that "no person upon any such or other pretence shall privately attempt to stirr up any disturbance upon pain of such severe punishment as a Court martiall shall finde meete to inflict". Section 13 of the Act of 1957 made liable to a maximum punishment of imprisonment for two years "[e]very person" who "fights or quarrels with any other person" or "uses threatening, abusive, insulting or provocative words or behaviour likely to cause a disturbance". There appears nothing to suggest that "disturbance" acquired a narrow or technical meaning in the application of the Act of 1957 or its antecedents. Nor does there appear anything to suggest that the word was used to refer only to a breach of the peace, or "disturbance of the publick peace"30, in the 26 (2013) 210 FCR 299 at 342 [169], 350 [190]. 27 (2013) 210 FCR 299 at 338-341 [149]-[160]. 28 (2013) 210 FCR 299 at 341 [165], quoting Burdett v Abbot (1812) 4 Taunt 401 at 449 [128 ER 384 at 403]. 29 (2013) 210 FCR 299 at 342 [165], citing Coco v The Queen (1994) 179 CLR 427 at 436-438; [1994] HCA 15. 30 The Riot Act 1714 (1 Geo I stat 2 c 5), s 4. Crennan Bell sense understood to be a circumstance justifying military aid to the civil power31. Section 33 was explained in the explanatory memorandum to the DFDA as "spell[ing] out the elements of reprehensible conduct embraced by fighting and quarrelling" as prohibited by s 13 of the Act of 1957 as well as "confin[ing] the ambit of the offences to service land, etc, and public places"32. The legislative history suggests that the mischief to which s 33 of the DFDA is addressed is appropriately identified broadly as the maintenance of order and discipline rather than narrowly as the elimination of violence. What is "reprehensible" about the conduct prohibited by each of the paragraphs of s 33 is the likely disruptive effect of that conduct on others in or in the vicinity of the place where that conduct occurs. The confining of the service offences created by s 33 to conduct only on service land, in a service ship, aircraft or vehicle, or in a public place also tells against preferring a narrower construction of the conduct prohibited by each of that narrower construction would least diminish the personal rights and freedoms of those defence members and defence civilians whose conduct is governed by the section. those paragraphs merely because The better construction of s 33(b) of the DFDA is that preferred by the other four of the five judges who constituted the Full Court of the Federal Court. A disturbance is a non-trivial interruption of order. Violence or a threat of violence is not necessary to the existence of a disturbance. Quarrelling may, in a particular factual context, be enough. What physical and fault elements are involved in creating a disturbance? The DFDA applies Ch 2 of the Criminal Code (Cth) to all of the service offences it creates33. The relevant effect of Ch 2 of the Criminal Code so applying can be summarised as follows. 31 Cf Li v Chief of Army (2013) 210 FCR 299 at 340 [157], referring to Clode, The Military Forces of the Crown; their administration and government, (1869), vol 2 32 Australia, House of Representatives, Defence Force Discipline Bill 1982, Explanatory Memorandum at 89 [354]. 33 Section 10 of the DFDA. Crennan Bell To establish guilt of a service offence, the prosecution must prove each physical element of the offence as well as a fault element for each physical element34. A particular physical element may be: conduct (which may itself be an act, an omission to perform an act or a state of affairs); or a result of conduct; or a circumstance in which conduct, or a result of conduct, occurs35. A fault element for a particular physical element may be: intention; or knowledge; or recklessness; or negligence36. The fault element for a physical element that consists only of conduct is intention37. A person has intention with respect to conduct if the person means to The fault element for a physical element that consists of a circumstance or a result is recklessness39, although proof of intention will also satisfy that fault element40. A person has intention with respect to a circumstance if the person believes that the circumstance exists or will exist41, and has intention with respect to a result if the person means to bring that result about or is aware that it will occur in the ordinary course of events42. A person is reckless with respect to a circumstance or a result if the person is aware of a substantial risk that the circumstance exists or will exist, or that the result will occur, and, having regard to the circumstances known to the person, it is unjustifiable to take that risk43. 34 Section 3.2 of the Criminal Code. 35 Section 4.1 of the Criminal Code. 36 Section 5.1 of the Criminal Code. 37 Section 5.6(1) of the Criminal Code. 38 Section 5.2(1) of the Criminal Code. 39 Section 5.6(2) of the Criminal Code. 40 Section 5.4(4) of the Criminal Code. 41 Section 5.2(2) of the Criminal Code. 42 Section 5.2(3) of the Criminal Code. 43 Section 5.4(1) and (2) of the Criminal Code. Crennan Bell The judge advocate, the Tribunal and all of the five judges who constituted the Full Court of the Federal Court proceeded on the basis that the phrase "creates a disturbance" in s 33(b) of the DFDA refers to only one physical element, being conduct, in respect of which the fault element was therefore intention. The difference between the judge advocate, the Tribunal and the majority in the Full Court (on the one hand) and the minority in the Full Court (on the other hand) concerned the nature of the requisite intention. The judge advocate directed the court martial that the prosecution did not need to prove that Major Li intended to create a disturbance, but instead needed to prove only that Major Li "intended to engage in the acts that amounted to a disturbance". The Tribunal found that direction to be orthodox and to involve no error, saying that what the prosecution had to prove was not that Major Li intended "to create a disturbance" (emphasis in original) but that Major Li "intended to conduct himself as he did"44. Keane CJ, Jagot and Yates JJ concluded that the Tribunal did not err in that regard, the relevant intention being "the intention to engage in the conduct alleged in the particulars" and there being "no issue as to whether that conduct was intentional"45. Dowsett and Logan JJ each concluded that the Tribunal had erred in that it was incumbent on the prosecution to prove not merely that Major Li intended to engage in conduct that amounted to a disturbance but that Major Li intended by engaging in that conduct to create a disturbance46. Major Li challenges the common understanding of the judge advocate, the Tribunal and the Full Court that the phrase "creates a disturbance" in s 33(b) of the DFDA refers only to one physical element, which is properly classified as conduct. He presents alternative arguments. One is that the phrase refers to one physical element, which is properly classified as conduct consisting of both an act and a state of affairs. Another is that the phrase refers to two physical elements, one of which is properly characterised as conduct consisting of an act and the other of which is properly characterised as the result of that conduct, being a disturbance. The second of those alternative constructions is to be preferred. 44 (2012) 261 FLR 226 at 238 [61]. 45 (2013) 210 FCR 299 at 314 [57]. 46 (2013) 210 FCR 299 at 332-333 [122], 351-352 [199], 355 [216]. Crennan Bell Those who framed the Criminal Code47 recognised the difficulty of distinguishing between an act and the circumstances or results of an act48. They foresaw that the difficulty would be addressed in appropriate cases by reference to principles expounded and applied in R v Falconer49. There the word "act" as appearing in the Criminal Code (WA) was described as a "bodily action" as distinct from a "consequence caused by it"50. In the circumstances of that case, where the accused was charged with the wilful murder of her husband, who died as a result of a shotgun blast fired by her, the relevant act was held to be limited to the discharging of the loaded gun. The act did not extend to the fatal wounding of the husband51. In the context of the overall reference in s 33(b) of the DFDA to a person who "creates a disturbance or takes part in creating or continuing a disturbance", it is apparent that the disturbance, whether created or continuing, is something which extends beyond the mere bodily action of the person who commits the offence. The words "creates a disturbance" are naturally read as referring to the doing of an act which results in a disturbance. To create is to bring something new into existence. To create a disturbance – an interruption of order – is to do an act which results in an interruption of order. The service offence created by s 33(b) of the DFDA is therefore best construed as relevantly having two physical elements, to each of which the Criminal Code attaches a distinct fault element. The first physical element is conduct, for which the fault element is intention: it must be proved that the defence member or defence civilian charged did the act, and meant to do the act. The second physical element is the result of that conduct, for which the fault element is recklessness: it must be proved that the act resulted in a disturbance 47 See generally R v LK (2010) 241 CLR 177 at 220-223 [99]-[102]; [2010] HCA 17. 48 Criminal Law Officers Committee of the Standing Committee of Attorneys- General, Model Criminal Code, Chapter 2: General Principles of Criminal Responsibility, Final Report, (December 1992) at 9-13. 49 (1990) 171 CLR 30; [1990] HCA 49. 50 (1990) 171 CLR 30 at 38, adopting Vallance v The Queen (1961) 108 CLR 56 at 64; [1961] HCA 42 and Kaporonovski v The Queen (1973) 133 CLR 209 at 231, 241; [1973] HCA 35. 51 (1990) 171 CLR 30 at 39. Crennan Bell (being a non-trivial interruption of order), and that the defence member or defence civilian charged either believed that the act would result in a disturbance or was aware of a substantial risk that the act would result in a disturbance and, having regard to the circumstances known to him or her, it was unjustifiable to take that risk. The judge advocate did not direct the court martial in those terms. The Tribunal was therefore wrong to find that the direction given by the judge advocate involved no error. The Full Court ought to have held that for the Tribunal so to find was wrong in law. Was the Tribunal's error of law material? The Chief of Army argues that the legal error of the Tribunal was immaterial given that the Tribunal, having found the judge advocate's direction to be orthodox and to involve no error, went on without elaboration to express the opinion that "[e]ven if it were correct, as contended by [Major Li], that the physical element of the offence consists of a circumstance or a result, failure to direct on 'recklessness' did not give rise to any miscarriage of justice"52. There are two answers to that argument. First, it is impossible to be satisfied that the Tribunal's further unelaborated expression of opinion was unaffected by the error involved in its acceptance of the correctness of the judge advocate's direction53. Secondly, it was not in any event open to the Tribunal to conclude that the misdirection by the judge advocate did not give rise to "a substantial miscarriage of justice" within the meaning of the DFDAA. Contrary to the premise on which the argument of the Chief of Army proceeded54, the identity of that statutory language with the language of the common form "criminal proviso" deriving from the Criminal Appeal Act 1907 (UK) does not import an identity between the approach to be adopted by the Tribunal and the approach to be adopted by a 52 (2012) 261 FLR 226 at 238 [61]. 53 Cf Samad v District Court of New South Wales (2002) 209 CLR 140 at 155-156 [44]-[45]; [2002] HCA 24. 54 Relying on Weiss v The Queen (2005) 224 CLR 300; [2005] HCA 81. Crennan Bell Court of Criminal Appeal55. It was enough to establish "a substantial miscarriage of justice" within the meaning of the DFDAA that there was a real risk that the court martial was influenced in its finding of guilt by the misdirection56. In circumstances where the misdirection treated as irrelevant a critical fault element of the offence – recklessness as to the result of intentional acts – it is impossible to conclude that such a risk did not exist. Conclusion The Full Court of the Federal Court ought to have found that the Tribunal made a material error of law in finding that the direction given by the judge advocate involved no error. The appropriate order for the Full Court to have made was to quash the conviction and to remit the case to the Tribunal to allow the Tribunal to consider what, if any, further order should be made. The fact that the Tribunal was not previously asked to consider making further orders in the event that it quashed the conviction is a consideration to be weighed by the Tribunal in considering whether any further order should be now made but is insufficient to preclude remitter. The appeal is to be allowed. The orders of the Full Court of the Federal Court are to be set aside. In place of those orders, it is to be ordered that Major Li's appeal to that Court be allowed, his conviction quashed and the case remitted to the Tribunal for the making of further orders, if any. The Chief of Army is to pay Major Li's costs in this Court and in the Full Court of the Federal Court. 55 Hembury v Chief of the General Staff (1998) 193 CLR 641 at 656-657 [41], 673- 56 Hembury v Chief of the General Staff (1998) 193 CLR 641 at 656 [38]-[40], 673- 674 [84]; Jones v Chief of Navy (2012) 205 FCR 458 at 471 [54].
HIGH COURT OF AUSTRALIA OLD UGC, INC & ORS APPELLANTS AND THE INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES IN COURT SESSION & ANOR RESPONDENTS Old UGC, Inc v Industrial Relations Commission of New South Wales in Court Session [2006] HCA 24 18 May 2006 ORDER Appeal allowed. The second respondent pay the appellants' costs of the appeal to this Court. Set aside the orders of the Court of Appeal of New South Wales made on 21 July 2004 and in their place order that: the Industrial Relations Commission of New South Wales be prohibited from hearing or determining the proceeding under s 106 of the Industrial Relations Act 1996 (NSW), between Robert McRann as applicant and UnitedGlobalCom Inc and others as respondents, being proceeding numbered IRC 3104 of 2001 in the Industrial Relations Commission of New South Wales; the second opponent, Robert McRann, pay the claimants' costs. On appeal from the Supreme Court of New South Wales Representation: G J Hatcher SC with C S Ward for the appellants (instructed by Thomson Playford) Submitting appearance for the first respondent J N West QC with J D Smith for the second respondent (instructed by Harmers Workplace Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Old UGC, Inc v Industrial Relations Commission of New South Wales in Court Session Industrial law (NSW) – Industrial Relations Commission – Jurisdiction – Power given to the Commission by s 106(1) of the Industrial Relations Act 1996 (NSW) to declare wholly or partly void, or to vary, any contract whereby a person performs work in any industry if the contract is an unfair contract – Upon termination of an employment agreement, compensation and release agreement made for the purpose of resolving any legal disputes with respect to the employment agreement – Compensation and release agreement governed by the laws of the State of Colorado – Application to Commission alleging the compensation and release agreement was unfair, harsh and unconscionable – Whether compensation and release agreement was a "contract whereby a person performs work in any industry" – Relevance of the availability of other remedies. Prerogative writs – Prohibition – Excess of jurisdiction – Industrial Relations Commission (NSW) – Whether writ lies in the circumstances – Commission in Court Session a superior court of record of limited jurisdiction equivalent in status to the Supreme Court – Whether application for prohibition premature – Likelihood or danger of order being made in excess of jurisdiction – Relevance of privative provision purporting to exclude issue of writ – Relevance of specialist subject-matter of disputes before the Commission. Contract – Construction – Provision requiring parties to act in good faith. High Court – Appeal – Appeal from New South Wales Court of Appeal – Respondent raised privative provision before the Court of Appeal but not before High Court – Whether High Court can consider privative provision in the circumstances. Natural justice – Procedural fairness – Entitlement to trial on the merits. Private international law – Jurisdiction – Industrial Relations Commission (NSW) – Contract in question governed by the laws of the State of Colorado – Whether the power afforded to the Commission under s 106(1) of the Industrial Relations Act 1996 (NSW) extends to contracts for which the proper law is other than the law of New South Wales. Statutes – Construction – Interpretation – Remedial statute – Purposive approach to construction – Objects of statute. Statutes – Privative clause – Industrial Relations Commission (NSW) – Whether privative provision applicable. Statutes – Construction – Interpretation – Composite phrase incorporating technical words – Extrinsic matters – Legislative history – Minister's second reading speech – Relevance of Parliament's purpose of successive re-enactment in increasingly ample terms Words and phrases – "any contract whereby a person performs work in any industry", "arrangement", "decision or purported decision", "industry". Industrial Relations Act 1996 (NSW), ss 105-109A, 152-153, 179. Supreme Court Act 1970 (NSW), ss 25, 38, 39, 42. GLEESON CJ. I would dismiss this appeal. I agree with the reasons of Gummow, Hayne, Callinan and Crennan JJ on the issue as to the territorial reach of the relevant legislation. However, on the principal issue in the case, I would uphold the reasoning of Spigelman CJ, with whom Mason P and Handley JA agreed, in the New South Wales Court of Appeal1. The matter is of some procedural and factual complexity. In his reasons for judgment Spigelman CJ accepted that the Summons filed in the Industrial Relations Commission of New South Wales ("the Commission") invoked the Commission's jurisdiction by seeking a variation, not of the relevant employment agreement, but of a later agreement. Spigelman CJ, who treated the later agreement as a variation of the employment agreement, regarded the claim for relief as misdirected in this respect but pointed out that the Court of Appeal "would not prohibit proceedings in the Commission where jurisdiction can be established by an amendment asserting that undisputed facts have a particular legal effect". It is important to keep this aspect of the case in mind when examining the reasoning by which his Honour related the facts of the case to the statutory provisions conferring jurisdiction on the Commission. Section 106 of the Industrial Relations Act 1996 (NSW) ("the Act") empowers the Commission to make orders of certain kinds with respect to any contract whereby a person performs work in an industry if the contract is found to be unfair. The Commission may find that the contract, although not unfair at the time it was entered into, became unfair because of any variation of the contract (s 106(2)). A contract may be declared wholly or partly void, or varied, either from the commencement of the contract or from some other time (s 106(3)). "Contract" includes "arrangement" (s 105). In this statutory context, the concept of variation of a contract or arrangement, either by the parties, or by order of the Commission, is not to be given a formal or technical meaning. Mr McRann was employed, from 1995 until mid-1997, as Managing Director of the Australian affiliates of a group, headed by the first appellant, which conducted pay television operations in various countries. Mr McRann was in charge of the Australian operations. That Australian employment came to an end on 31 July 1997. Thereafter, until 31 December 1997, he was employed in Amsterdam as the Chief Operating Officer of the first appellant's Netherlands affiliate. Mr McRann's Australian employment was the subject of three contractual documents. The first was a letter of 21 February 1995 by which the first appellant offered him employment with a view to his being seconded to the 1 Old UGC Inc v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 620. television business of its Australian affiliates. He accepted on 3 March 1995. The "assignment" (or secondment) was to be for five years "subject to the terms of this agreement". Mr McRann was entitled to a base salary, an annual bonus and incentive compensation. (In this context, "compensation" means reward or remuneration, not recompense for harm.) That business was conducted by the Australian affiliates, later by Austar Entertainment Pty Ltd and, ultimately after a public float, by Austar United Communications Limited. The incentive compensation was related to the equity value of the Australian affiliates. In the event of Mr McRann's resignation, or the termination of his employment by the employer, he had the right to retain certain vested incentive entitlements. The incentive arrangements contemplated the possibility of options to acquire shares in the event of a public listing of an affiliate conducting the Australian business. into two further agreements. Following certain disagreements with his employer, on 2 July 1997 Mr McRann entered One was called a Compensation and Release Agreement ("the CRA"). The other was called a Termination of Employment Letter Agreement. These agreements were entered into "[i]n anticipation of [Mr McRann's] transfer to Amsterdam". The CRA was said to be for the purpose of resolving all disputes between Mr McRann and the first appellant and to provide him with certain compensation and benefits in exchange for his giving up all legal rights and claims arising out of the existing agreement. Included among such benefits was a provision that, if Austar went public, Mr McRann's incentive interest would be "restructured into stock options or any comparable incentive arrangement offered to then current employees of Austar". That provision is at the centre of the present dispute between Mr McRann and the first appellant. The substantive merits of that dispute are not presently in issue. The CRA varied, and in some respects advanced, Mr McRann's incentive entitlements. The Termination of Employment Letter Agreement said anticipation of the transfer to Amsterdam, Mr McRann and the first appellant mutually agreed to termination of the 1995 agreement, as from 31 July 1997, that his "new assignment" would be the subject of a further agreement (which is presently irrelevant) and that Mr McRann would receive the benefits contained in the CRA. that, "When the Employment Agreement and [the CRA] are compared ... it appears clear that the latter is, in substance, a variation of the former in view of the circumstance that Mr McRann will be leaving to join the UGC Dutch affiliate. It is of significance that under the original Employment Agreement, Mr McRann's rights extended beyond the time of the expiry of his five year term. That his rights under the later Agreement also extend beyond the cessation of his employment with Austar, is not a distinguishing characteristic." He concluded that there was a single contract of employment constituted by reading together the 1995 employment letter and the CRA. This, he said, was a contract whereby Mr McRann performed work in an industry, and was a contract with respect to which the Commission could make orders under s 106 of the Act. I see no error in that analysis of the facts. If it be correct, then the case does not appear to me to give rise to a jurisdictional difficulty of the kind identified in Fish v Solution 6 Holdings Ltd2 and Batterham v QSR Ltd3. Mr McRann's incentive entitlements were as much a part of the remuneration for which he worked in the Australian business of the group, headed by the first appellant, as his base salary. The circumstance that the alteration of those entitlements took place in the context of a resolution of certain disputes and a contemplated re-assignment from Australia to the Netherlands does not make the case different from, say, a consensual variation of the incentive arrangements a month after they were first entered into. The apparent jurisdictional problem arises because the Summons took the CRA as its focus of attention. Once the CRA is seen as effecting a variation of the original employment agreement and as altering the compensation (that is to say, remuneration) to which Mr McRann was entitled under that agreement, then it is the employment agreement as varied that should be the jurisdictional focus. Mr McRann performed work in an Australian industry. The employment agreement, including its terms and conditions as to compensation, was a contract whereby he performed that work. The appeal should be dismissed with costs. [2006] HCA 22. [2006] HCA 23. Callinan Crennan GUMMOW, HAYNE, CALLINAN AND CRENNAN JJ. In March 1995, the second respondent, Mr Robert McRann, made a written agreement with the first appellant, then called United International Holdings Inc ("UIH"), by which UIH would employ him for five years on secondment to UIH's Australian affiliate companies, CTV Pty Ltd and STV Pty Ltd. This agreement ("the employment agreement") provided for certain incentive compensation. terminate On 2 July 1997, UIH and Mr McRann agreed the employment agreement with effect from 31 July 1997. UIH, a number of its affiliates (including Austar Entertainment Pty Ltd, CTV Pty Ltd and STV Pty Ltd), and Mr McRann, made a "compensation and release agreement" ("the C & R Agreement") for the purpose, recorded in that agreement, of resolving any legal disputes with respect to the then still-existing employment agreement, and to provide Mr McRann "with the compensation and benefits" described in the C & R Agreement – compensation and benefits to which he would not otherwise be entitled. The compensation and benefits were said to be provided "in exchange for [Mr McRann] giving up any and all legal rights or claims" arising out of the employment agreement. The C & R Agreement provided that it was to be governed by the laws of the State of Colorado. Under the C & R Agreement, provision was made for Austar Entertainment Pty Ltd, CTV Pty Ltd and STV Pty Ltd (together referred to as "Austar") to buy from Mr McRann, for $US387,500, 50 per cent of what the agreement called the "Incentive Interest". The Incentive Interest was an amount of money calculated as 0.50 per cent of the residual equity value of Austar. The residual equity value of Austar was to be determined by valuing the assets of Austar as 10 times the preceding 12 months' earnings of Austar, before interest, taxation, depreciation and amortisation, less net liabilities and an amount equal to shareholder debt and equity capital, plus 12 per cent compounded annual rate of return on capital. Various other provisions were made if there were to be a change of control of Austar or if Austar "goes public". The detail of those other provisions is not now important. Provision had been made, in the employment agreement, for incentive compensation, also described as the "Incentive Interest", and comprising 0.75 per cent of the residual equity value of CTV Pty Ltd and STV Pty Ltd. Twenty per cent of that interest vested "at the date of hire" and the balance vested monthly over the next 48 months. The vested amount of the interest was payable upon Mr McRann's resignation and, at his option, upon termination of his employment for cause. The interest was to be calculated in a generally similar fashion to the way in which the Incentive Interest for which the C & R Agreement provided was to be calculated. Callinan Crennan In April 1998, Mr McRann brought proceedings in the United States District Court for the District of Colorado alleging (among other things) that his agreement to the C & R Agreement had been procured by fraudulent misrepresentation and asking that the C & R Agreement be avoided. Those proceedings have not yet finally been determined. In May 2001, Mr McRann made application to the Industrial Relations Commission of New South Wales ("the Commission") seeking relief under s 106 of the Industrial Relations Act 1996 (NSW) ("the Act"). He alleges that the C & R Agreement was, or had become, unfair, harsh and unconscionable. The proceedings in the Commission named the six appellants in this Court as respondents. It is convenient to refer to those parties as the "Old UGC parties". The Old UGC parties applied to the Commission for orders dismissing Mr McRann's application. They alleged that the Commission lacked jurisdiction. They further contended that, as a result of what had occurred in the Colorado proceedings, Mr McRann was estopped from contending that the proceedings brought in the Commission were "concerned with more than the interpretation and enforcement" of the C & R Agreement and that, in any event, the proceedings in the Commission should be stood over pending the conclusion of the Colorado proceedings. A single judicial member of the Commission (Peterson J) dismissed the application made by the Old UGC parties. The Old UGC parties sought leave to appeal to the Full Bench of the Commission. The Full Bench refused that leave, concluding4 that the proposed appeal did not raise "matters which should lead to the grant of leave to appeal as involving matters of such importance in the public interest that leave to appeal should be granted". The Old UGC parties then applied to the Court of Appeal of New South Wales for a declaration that the Commission has no jurisdiction to hear or determine the application made by Mr McRann and for prohibition or injunction restraining the Commission from proceeding further to hear the matter. The Court of Appeal (Spigelman CJ, Mason P and Handley JA) dismissed5 that application. The Court concluded6 that "there was a single contract of 4 United Globalcom Inc v McRann [2003] NSWIRComm 318 at [15]. 5 Old UGC Inc v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 620. (2004) 60 NSWLR 620 at 633 [57] per Spigelman CJ. Callinan Crennan employment constituted by reading together the Employment Agreement and the Compensation and Release Agreement". It followed, so the Court held7, that the parts of the C & R Agreement relied upon in the proceedings in the Commission were part of Mr McRann's contract of employment with Austar. By special leave the Old UGC parties now appeal to this Court. This appeal was heard at the same time as the appeals in Fish v Solution 6 Holdings Ltd8 and Batterham v QSR Ltd9. In the appeal to this Court the Old UGC parties made submissions about the territorial reach of the unfair contract provisions of the Act and about the consequences of the parties to the C & R Agreement stipulating that the agreement was governed by the law of Colorado. But those were submissions that treated the relevant agreement as the hinge about which the operation of s 106 of the Act turned. For the reasons given in Fish v Solution 6 Holdings Ltd, that is not the preferable construction of the section. Rather, the section hinges upon the performance of work in any industry and where, as here, the work said to be in question was work in an industry in New South Wales, no question arises of extraterritorial reach of the legislation. Nor is there any basis for concluding, as the Old UGC parties contended, that an agreement whose proper law is not the law of New South Wales but is an agreement whereby work is performed in an industry in New South Wales is not, on the true construction of s 106, within its reach10. As Dixon J pointed out in Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society11, there is a presumption that, unless a contrary intention appears, statutory provisions are understood as having no application to matters governed by foreign law. But that is a presumption about statutory construction and where, as here, the central conception upon which the relevant provisions fasten is the performance of work in an industry and the work in question was performed within the jurisdiction, no question of reading down the operation of the section according to territorial limitations arises. (2004) 60 NSWLR 620 at 633 [58] per Spigelman CJ. [2006] HCA 22. [2006] HCA 23. 10 cf Kay's Leasing Corporation Pty Ltd v Fletcher (1964) 116 CLR 124 at 142-143 11 (1934) 50 CLR 581 at 601. Callinan Crennan Rather, in this appeal, as in the other two appeals heard with it, the question of the Commission's jurisdiction turns upon whether the contract which it is sought to have the Commission avoid or vary is a contract whereby a person (here, Mr McRann) performs work in any industry. As noted earlier, the answer which the Court of Appeal12 made to that question depended upon the conclusion that the C & R Agreement formed a part of "a single contract of employment constituted by reading together the Employment Agreement and the [C & R] Agreement". But to answer the question in that way was to begin the investigation of whether s 106 could be engaged by first identifying what contractual stipulations or other arrangements were to be regarded as related one to the other. For the reasons given in Fish v Solution 6 Holdings Ltd, that begins the inquiry at the wrong point. And while it may be accepted that the C & R Agreement varied the terms governing the relationship between Mr McRann and the Old UGC parties in connection with his employment in an industry in New South Wales it by no means follows that all the resulting stipulations and arrangements fall within the expression a "contract whereby a person performs work in any industry". The stipulations which it is sought to attack in the proceedings in the Commission were agreed while Mr McRann's employment was still on foot. But, when read as a whole, it is plain that the C & R Agreement was made to resolve any and every claim he might have against the Old UGC parties in relation to not only the employment agreement that was terminated but also what was referred to as his secondment to Austar. So much is most clearly apparent from the release given by Mr McRann in the C & R Agreement. It provided: "Employee gives up his right to bring any legal claims against the Company of any nature and related in any way, directly or indirectly, to his employment relationship with the Company pursuant to the Existing Agreement or the termination thereof, and his secondment to Austar. This release in favor of the Company is intended to be interpreted in the broadest possible manner, to include all actual or potential legal claims that Employee may have against the Company in relation to the Existing Agreement and his secondment to Austar. For avoidance of doubt, Employee also releases all claims against the Company's officers, directors, agents and employees." (emphasis added) 12 (2004) 60 NSWLR 620 at 633 [57]. Callinan Crennan Thus when one asks what was the agreement according to which (or in fulfilment of which, or in consequence of which) Mr McRann performed the work he did in an industry in New South Wales, the terms agreed in the C & R Agreement and upon which that employment was to be terminated do not meet the statutory criterion. The terms agreed in the C & R Agreement were not terms according to which Mr McRann performed work; they were terms according to which the parties agreed that his employment (his secondment to Austar) would be terminated. That one of the matters dealt with in the C & R Agreement was a form of deferred reward to which Mr McRann may have been entitled under the original employment agreement does not alter that conclusion. The terms agreed to in the C & R Agreement were, therefore, not terms whereby he performed work in any industry and the Court of Appeal was wrong to reach the contrary conclusion. Mr McRann filed a notice of contention alleging four grounds on which he submitted that the decision of the Court of Appeal should be upheld. At the risk of undue abbreviation, the four grounds of contention can be understood as making two points: first, that the C & R Agreement took effect from the date of its execution and, secondly, that the C & R Agreement should be understood as a related condition or collateral arrangement the original employment agreement. Both these points are sufficiently addressed and answered by what is said earlier in these reasons. Mr McRann did not contend that the privative provisions of s 179 of the Act were engaged. And in any event, the procedural position in this matter is no different in any material way from that considered in Batterham v QSR Ltd. As in Batterham, there was no decision by the Commission that it has jurisdiction; there was no more than a decision that absence of jurisdiction had not so clearly been established as to warrant summary termination of the proceedings. It not being contended that s 179 precluded the grant of the relief sought by the Old UGC parties, the appeal to this Court should be allowed and the second respondent should pay the appellants' costs of the appeal to this Court. The orders which the Court of Appeal should have made were: the Industrial Relations Commission of New South Wales be prohibited from hearing or determining the proceeding under s 106 of the Industrial Relations Act 1996 (NSW), between Robert McRann as applicant and UnitedGlobalCom Inc and others as respondents, being proceeding numbered IRC 3104 of 2001 in the Industrial Relations Commission of New South Wales; the second opponent, Robert McRann, pay the claimants' costs. Callinan Crennan The orders of the Court of Appeal of New South Wales made on 21 July 2004 should be set aside. Having regard to the nature of the appeal to this Court, which is not an appeal by rehearing13, the orders of this Court should be: Appeal allowed. The second respondent pay the appellants' costs of the appeal to this Court. Set aside the orders of the Court of Appeal of New South Wales made on 21 July 2004 and in their place order that: the Industrial Relations Commission of New South Wales be prohibited from hearing or determining the proceeding under s 106 of the Industrial Relations Act 1996 (NSW), between Robert McRann as applicant and UnitedGlobalCom Inc and others as respondents, being proceeding numbered IRC 3104 of 2001 in the Industrial Relations Commission of New South Wales; the second opponent, Robert McRann, pay the claimants' costs. Whether or to what extent Mr McRann may take any advantage from the Industrial Relations Amendment Act 2005 (NSW) would at least in the first instance, but subject to the supervisory jurisdiction of the Supreme Court, be a matter for the Commission in Court Session (now, since that amending legislation14, known as the Industrial Court of New South Wales). 13 Judiciary Act 1903 (Cth), s 37; Victorian Stevedoring and General Contracting Co Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at 109-110 per Dixon J. 14 cl 4 of Sched 1 inserting s 151A. Kirby KIRBY J. This appeal from the New South Wales Court of Appeal15 is one of three heard, and decided, together16. The appeals present common issues concerning the jurisdiction and powers of the Industrial Relations Commission of New South Wales ("the Commission") to provide relief against unfair contracts. They also concern the proper relationship between the Court of Appeal, exercising the supervisory jurisdiction of the Supreme Court of New South Wales, and the Commission in Court Session17. Inter-related appeals As will appear, this appeal raises issues identical to those decided in the companion appeals. However, there is an additional issue that must be decided. It involves an argument special to the present case because the contract in question, impugned as "unfair" within the meaning of s 105 of the IR Act, contained a clause specifying that it would be governed by the laws of the State of Colorado in the United States of America. In the Court of Appeal, it was argued, unsuccessfully, that this clause of itself deprived the Commission of jurisdiction. As will appear18, that argument was correctly rejected. In this case, alone of the present series, the Court of Appeal unanimously refused to issue relief in the nature of prohibition directed to the Commission. It upheld the jurisdiction of the Commission under s 106 of the IR Act19. It also rejected an application for an anti-suit injunction, in purported defence of the proceedings in the courts of Colorado, brought to restrain the proceedings in New South Wales. The Colorado courts had themselves declined to issue such an injunction. By inference, they were content to leave the resolution of any legal 15 Old UGC Inc v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 620. 16 The other two are Fish v Solution 6 Holdings Ltd [2006] HCA 22 and Batterham v QSR Ltd [2006] HCA 23. 17 The Commission in Court Session was comprised at the relevant times of "a judicial member or members only for the purposes of exercising the functions that are conferred or imposed on the Commission in Court Session": see Industrial Relations Act 1996 (NSW), s 151(1) ("the IR Act"). By the Industrial Relations Amendment Act 2005 (NSW), the Court Session has been replaced by the Industrial Court of New South Wales: s 3, Sched 1, cl 4 inserting s 151A in the IR Act. 18 See below these reasons at [55]-[59]. 19 (2004) 60 NSWLR 620 at 633 [58]. Kirby rights in Australian jurisdiction to the courts of this country20. The claim for such an injunction was not pressed in this Court. It can be ignored. The Court of Appeal's decision in this case, that it should be left to the Commission to exercise its jurisdiction and to decide for itself the relief (if any) proper to that exercise, contrasts with that Court's contemporaneous decisions in Fish21 and Batterham22, in which writs in the nature of prohibition were issued forbidding the continuance of like proceedings in the Commission. In this case, as in Batterham, the party objecting to the jurisdiction of the Commission did not attempt a pre-emptive strike by proceeding first to the Court of Appeal to argue its jurisdictional objection. An application objecting to jurisdiction had been made to the Commission in Court Session in Batterham23, but without avail. Without tarrying to seek leave to appeal to the Full Bench of the Commission in Court Session, proceedings in Batterham were then taken to the Court of Appeal. In the present proceedings, the objection to jurisdiction was properly raised in the Commission in Court Session. It was rejected by a single judge (Peterson J24). An application was then made to the Full Bench of the Commission in Court Session for leave to appeal against the adverse interlocutory order. The Full Bench refused such leave25. Its order, subsequently undisturbed by the Court of Appeal's disposition, required, in effect, that the proceedings take their course in the Commission in the regular way. At that stage, therefore, the New South Wales and Colorado courts had both rejected attempts to prevent the claimant from having his claim heard before the Commission. He might win. He might lose. But the stakes were high 20 (2004) 60 NSWLR 620 at 633 [61]. 21 Solution 6 Holdings Ltd v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 558. 22 QSR Ltd v Industrial Relations Commission of New South Wales (2004) 208 ALR 23 Maylord Equity Management Pty Ltd v QSR Ltd [2003] NSWIRComm 366: see QSR (2004) 208 ALR 368 at 374-375 [22]. 24 McRann v UnitedGlobalcom Inc (2003) 124 IR 275. 25 United Globalcom Inc v McRann (2003) 132 IR 3. See reasons of Gummow, Hayne, Callinan and Crennan JJ ("the joint reasons") at [19]. Kirby (asserted to involve an additional employment benefit of about $10.5 million26). Attempts to prevent litigation from proceeding in the regular way in the ordinary venue provided by law are properly regarded as exceptional. The Court of Appeal's orders, on the face of things, gave effect to this familiar principle27 and to other "principles of restraint"28 applicable to such applications. The orders in this case, therefore, conform to an unexceptionable approach to claims for relief of the kind sought here. Now, by special leave, a challenge has been brought to this Court against the Court of Appeal's orders. By analogy with what I have said in Fish and Batterham, the Court of Appeal was correct to reject the challenge to the jurisdiction of the Commission. The appeal fails. The facts The importance of detailed evidence: Cases of the present type, more than most, depend for their outcome on a thorough understanding of the evidence. If the statement of facts is abbreviated, the decision-maker risks missing elements that are central to the application of s 106 of the IR Act. The first is the inter- relationship of the impugned "contract" with "work in any industry" in New South Wales, performed by the person claiming relief. Secondly, unless the detailed facts are appreciated, the decision-maker is liable to miss the elements that are said to render the "contract" either "unfair" at the time it was entered into or subsequently unfair "because of any conduct of the parties [or] any variation of the contract"29. To explain my conclusions, it is therefore necessary to state the facts in some little detail. The Employment Contract: By letter dated February 1995, Old UGC, Inc30 ("Old UGC") employed Mr Robert McRann (the respondent) as managing 26 Old UGC (2004) 60 NSWLR 620 at 626 [15]. 27 See, eg, Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1991) 28 NSWLR 443 at 447. 28 See Solution 6 Holdings (2004) 60 NSWLR 558 at 591 [136]. 29 IR Act, s 106(2). 30 Old UGC had previously been known as UnitedGlobalCom Inc and before that as United International Holdings Inc. It was not suggested that the nomenclature affected these proceedings: see Old UGC (2004) 60 NSWLR 620 at 622 [1]. Reports of later proceedings indicate that there has been still further restructuring of the first appellant: see Unitedglobalcom, Inc v Industrial Relations Commission (NSW) in Court Session (2005) 142 IR 204 at 206 [7]. Kirby director of its Australian affiliates conducting pay television operations in Australia31. Old UGC is the first appellant before this Court. The other appellants are companies which were, at some stage, subject to control by, or otherwise connected with, Old UGC. The document engaging Mr McRann was titled "Employment Letter Agreement" ("the Employment Contract"). The Employment Contract commenced on 19 March 1995. Mr McRann's remuneration was to include a base salary and, potentially, an annual bonus. He was also entitled to incentive compensation calculated by reference to the equity value of the first appellant's then two Australian affiliates, CTV Pty Ltd and STV Pty Ltd ("CTV and STV"). It was provided that if CTV and STV "went public" the parties were bound by a good faith agreement to the effect that the incentive compensation would be restructured into options or a comparable incentive arrangement. The termination agreements: In 1997, Mr McRann and Old UGC entered into discussions in relation to Mr McRann working for an affiliate of Old UGC in the Netherlands. By this stage, the Australian business was conducted by Austar Entertainment Pty Ltd ("Austar Entertainment"). In consequence of these discussions, on 2 July 1997 Mr McRann entered into two further agreements with Old UGC. The first of these was a contract entitled the Compensation & Release Agreement ("the C & R Agreement"). The second was called a Termination of Employment Letter Agreement ("Termination Agreement"). The effect of these agreements was to terminate the Employment Contract on 31 July 1997. The C & R Agreement provided32 that its purpose was to resolve all legal disputes between the first appellant and Mr McRann with respect to the Employment Contract. The C & R Agreement also provided that "[i]f Austar goes public", the parties "agree in good faith" that the incentive compensation would "be restructured into stock options or any comparable incentive arrangement offered to then current employees of Austar". For his part, Mr McRann gave up his right to bring any legal action and released all claims against Old UGC and its officers, directors, agents and employees. The governing law of the C & R Agreement was specified to be that of Colorado. Mr McRann acknowledged that he understood the "legally binding" character of the C & R Agreement and had been provided with an opportunity to consult a lawyer before executing it. 31 Old UGC (2004) 60 NSWLR 620 at 622 [5]. 32 The text of the C & R Agreement is set out in (2004) 60 NSWLR 620 at 623-625 Kirby The Termination Agreement anticipated Mr McRann's transfer to employment in the Netherlands and referred to the mutual agreement to terminate the Employment Contract. The Termination Agreement asserted that it and the C & R Agreement "set forth the terms and conditions of the termination of the [Employment Contract]." The suggested element of unfairness: In his proceedings in the Commission, Mr McRann asserted that the C & R Agreement became "unfair" because of the failure of the appellants to restructure his incentive compensation into options by reason of the float of CTV and STV by way of the listing of Austar United Pty Ltd ("Austar United") on the Australian Stock Exchange in July 1999. In his proceedings in the Commission, Mr McRann relied heavily on cl 6 of Chapter II of the C & R Agreement. By that clause, provision was made "[i]f Austar goes public". In his initiating document he recited events leading to the dispute between the parties33. When Austar United was floated, Mr McRann's successor as managing director of CTV and STV, Mr John Porter, was granted options of approximately 4.8 million shares in Austar United at a strike price of $1.80 per share. This was consequent on a restructuring of his incentive compensation. Mr McRann claimed that, if the same arrangement had applied to his own incentive compensation, he would have held options over some 2.4 million shares in Austar United. He would have been in a position to exercise those options. He claimed that he would have done so around June 2000 at a time when Austar United's shares were trading at approximately $6.10 per share. This would have resulted in a profit to Mr McRann of $4.30 per option or approximately $10.5 million in total. There would be obvious difficulties in securing orders for the legal enforcement of the promises contained in the C & R Agreement. The enforcement in the general courts of law in Australia of "good faith" promises in contractual stipulations is still comparatively undeveloped34. However, if 33 See Old UGC (2004) 60 NSWLR 620 at 627 [18]. 34 See, eg, Coal Cliff Collieries Pty Ltd v Sijehama Pty Ltd (1991) 24 NSWLR 1 at 27-28; cf at 42. The more recent cases and opinions are collected in Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 at 191- 193 and South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 695-696 [393]-[394]. See also Thomas, "Good Faith in Contract: A Non-Sceptical Commentary", (2005) 11 New Zealand Business Law Quarterly Kirby Mr McRann could bring the promises, which certainly concerned his successive employment arrangements with the affiliates of Old UGC, into the jurisdiction of the Commission, its large powers to make orders in respect of qualifying employment "contracts" and "arrangements" could better serve his purposes. Hence, the present proceedings. Because the Court of Appeal refused to grant the relief sought by the appellants, it was left to the Commission in Court Session to decide the contest about the claim brought by Mr McRann, including any continuing contest as to the Commission's jurisdiction and powers. Unquestionably, the Commission has jurisdiction and power for that purpose. Indeed, it is the first duty of judicial and quasi-judicial bodies, when a question of their jurisdiction and powers is raised, to satisfy themselves as to such jurisdiction and as to their power to afford the relief claimed35. Pre-emptive relief and merits: The appellants complained that there was no merit in the suggestion of unfairness to Mr McRann in the foregoing "contracts" and "arrangements". However, at this stage, neither the Court of Appeal nor this Court is concerned with the merits of Mr McRann's claim. Such questions are normally, and best, determined after a trial in which a party has the opportunity to adduce evidence and argument and appellate courts have the advantage of findings, conclusions and reasons of judges designated by law with the power to decide the contest36. To secure termination of the proceedings at this stage, an obligation lies on the appellants to exclude any reasonable possibility that Mr McRann could establish "unfairness" of the impugned "contracts" of the kind for which s 106 of the IR Act provides relief. It is not an insubstantial obligation given that it puts a party out of court, depriving it of the normal rights of a party in this country to a trial on the merits in the court or tribunal that enjoys jurisdiction in such a trial. For this Court, as for the Court of Appeal, the issue for decision is thus a technical and legal one. It is whether "on the facts no basis could exist for exercising the power"37. Merits belong elsewhere. By law, they belong to the Commission. 35 The Federated Amalgamated Government Railway and Tramway Service Association v The New South Wales Railway Traffic Employees Association (1906) 4 CLR 488 at 495; Federated Engine-Drivers and Firemen's Association of Australasia v Broken Hill Proprietary Co Ltd (1911) 12 CLR 398 at 415; Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629 at 656-657 [68]. 36 Cf R v Alley; Ex parte NSW Plumbers & Gasfitters Employees' Union (1981) 153 CLR 376 at 392-393. 37 R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 118. Kirby Three grounds were argued before this Court by the appellants to sustain their contention. Those grounds present the main issues for decision. The issues The issues in this appeal are as follows: The proper law issue: Whether the provisions in s 105 of the IR Act referring to a "contract" and an "unfair contract", and the powers of the Commission to make orders under s 106 in relation to such "contracts", are to be read so as to exclude from "contracts" so defined, contracts the proper law of which is other than the law of New South Wales. The premature intervention issue: Whether, having regard to the privative provisions of s 179 of the IR Act and the general legal principles governing restraint in the grant of supervisory orders before the trial and resolution of contested matters of jurisdiction by a superior court of record, this Court should intervene to provide a writ in the nature of prohibition at this stage, where the Court of Appeal has declined to do so. The qualifying contract issue: Whether, if it remains lawful and proper at this stage for this Court to concern itself with the merits of the attack on the jurisdiction of the Commission, a conclusion should be reached that no arguable basis exists, in the evidence placed before the Commission, for the claim that the C & R Agreement impugned by Mr McRann is a "contract or arrangement" attracting the jurisdiction of the Commission under s 106 of the IR Act. The decision on the proper law issue was correct The Court of Appeal's decision: The Court of Appeal rejected the submission that the nomination of the proper law of the impugned contract as that of Colorado placed that contract outside the jurisdiction of the Commission to grant relief under s 106 in respect of it38. I agree with the joint reasons that this conclusion was correct and that the argument to the contrary should be rejected39. It would be astonishing if the opposite were the case, given the remedial purposes of s 106 of the IR Act. A contrary rule would leave the statutory 38 Old UGC (2004) 60 NSWLR 620 at 630 [40]. 39 Joint reasons at [23]. Kirby provisions open, in many cases, to easy evasion by the simple nomination of a governing law other than that of New South Wales. In many cases, in the new economy, such a device could not be easily impugned40. From the earliest days of the consideration of the predecessors to s 106, both in the Commission itself41 and in this Court42, judges have resisted the notion that, by "clever drafting"43 or otherwise, the legislation could be rendered ineffective by such verbal devices. It is unlikely in the extreme that evasion of this kind would have been contemplated by the New South Wales Parliament. This is an obvious reason why the common law rule of construction, limiting legislation addressed to contracts as normally applicable only to those whose proper law is that of the jurisdiction44, does not apply in the case of s 106 of the IR Act. There are clear indications in ss 105 and 106 that Parliament did not import such a rule of construction in the present case. Indeed, the legislation shows that it did not45. It expanded the application of s 106 to an "arrangement" – a notion that includes agreements, such as the C & R Agreement in this case, containing provisions not necessarily enforceable in a court of law. As "There is no rule of private international law applicable to 'arrangements'." Further, as his Honour pointed out, the focus of s 106 is upon employment "arrangements", not only "contracts" in the conventional sense. The section is a provision enacted (indeed re-enacted and reinforced) to achieve social purposes that the Parliament of New South Wales has deemed important. The section is 40 McCallum, "Conflicts of Laws and Labour Law in the New Economy", (2003) 16 Australian Journal of Labour Law 50 at 66. 41 Davies v General Transport Development Pty Ltd [1967] AR (NSW) 371 at 374 42 Brown v Rezitis (1970) 127 CLR 157 at 164. 43 Davies [1967] AR (NSW) 371 at 374; cf Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249 at 280-284 [95]-[111]. 44 Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 423; Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 601. 45 (2004) 60 NSWLR 620 at 630 [35]-[38]. 46 (2004) 60 NSWLR 620 at 630 [35]. Kirby not to be whittled down by the imposition upon it of a common law rule of construction that would frustrate its operation and undermine its effectiveness. Conclusion: New South Wales law applied: I therefore agree that this Court should reject the appellants' submission that, because the C & R Agreement specified the law of Colorado as its proper law, s 106 of the IR Act could not attach and that, for that reason, the Commission had no jurisdiction. The Court of Appeal made no error in so concluding. Intervention at this stage is premature Grounds of prematurity: As demonstrated in the concurrent decisions in Fish47 and Batterham48, there are two legal bases, separate but mutually reinforcing, that indicate that the issue by this Court of a writ in the nature of prohibition in Court Session would be premature, inappropriate and unlawful. The bases are to be found in the privative provisions of s 179 of the IR Act and also in the principle of restraint that governs the issue of legal process, prerogative in nature, to a court or tribunal before that body has had the opportunity finally to determine its own jurisdiction. the Commission As pointed out in the other decisions49, the Commission in Court Session was at the relevant time, by force of the IR Act50, established in New South Wales as a superior court of record and as a court of a status equivalent to the Supreme Court of New South Wales, of which the Court of Appeal is part51. The Constitution Act 1902 (NSW) was amended to recognise that status. It provides constitutional protection to the judicial members of the Commission in Court Session52. Proceedings invoking relief for which s 106 of the IR Act provides were assigned by that Act to the Commission in Court Session53. That is where these 47 [2006] HCA 22 at [132]-[148]. 48 [2006] HCA 23 at [54]-[83]. 49 Fish [2006] HCA 22 at [134]; Batterham [2006] HCA 23 at [70]. 50 IR Act, s 152. 51 Supreme Court Act 1970 (NSW), ss 25, 38, 39 and 42. 52 See Constitution Act 1902 (NSW), Pt 9 as amended by IR Act, s 152(2), Sched 5, 53 IR Act, s 153(1)(c). Kirby proceedings have hitherto been heard. It is where, by order of the Court of Appeal, they stood remitted. It is thus for the Commission in Court Session, at first instance and, if leave is granted after the trial, for the Full Bench of the Commission, to determine finally questions of jurisdiction and to do so on the basis of the evidence and argument considered at first instance in the regular way. The right and duty of the Commission to decide contested issues of jurisdiction was not disputed. Yet now, before such a final determination within the Commission, the appellants ask this Court to intervene and to issue the writ that will terminate the proceedings. The proper approach: Section 179 of the IR Act expresses the exclusive character of the jurisdiction of the Commission in matters assigned to it by law. In the terms applicable at the time of the Court of Appeal's orders, the section "179 Finality of decisions (1) … [A] decision or purported decision of the Commission … is final, and (b) may not be appealed against, reviewed, quashed or called in question by any court or tribunal (whether on an issue of fact, law, jurisdiction or otherwise). (2) A judgment or order that, but for this section, might be given or made in order to grant a relief or remedy (whether by order the nature of prohibition, certiorari or mandamus, by injunction or declaration or otherwise) may not be given or made in relation to a decision or purported decision of the Commission ..." Here, therefore, were successive "decisions" of the Commission, made by judicial members, in a part of the Commission accorded a status equivalent to the State Supreme Court, repeatedly rejecting the appellants' submission that on no arguable basis could the Commission enjoy jurisdiction over the proceedings brought to it. 54 Section 179 was amended after this appeal was heard: see Industrial Relations Amendment Act 2005 (NSW), s 3, Sched 1, cl 5. Kirby Neither Peterson J55 nor the Full Bench purported to determine the issue of jurisdiction finally56. Each was dealing with the matter on an interlocutory basis at a preliminary stage. Each was engaged in proceedings in the nature of a "strike out" application for want of an arguable case. It was that objection to jurisdiction that was rejected. All that the Commission decided was that the matter should proceed to trial. Were this Court to intervene now, that trial would not be held. The judicial body assigned by Parliament with the responsibility (at least in the first instance) to decide questions as to its jurisdiction would never then make a final determination. Instead, the decision would be made by this This would deprive Court alone, necessarily on abbreviated evidence. Mr McRann of the opportunity that normally belongs to any litigant in an Australian court or tribunal to advance his claim, to call evidence and make submissions, to secure considered findings on contested points in the normal way and to appeal against the orders if dissatisfied with them. The foregoing are not only statutory rights envisaged in this case by the IR Act. They are basic or fundamental rights57. A party that has invoked the jurisdiction of the lawful court or tribunal should not be deprived of such rights by an abbreviated trial on limited evidence. Certainly, that should not happen except in a "very clear" case that demands such an outcome58. Especially where the law involved is novel and is in a state of development and exposition, special care must be exhibited in affording such pre-emptory relief59. 57 International Covenant on Civil and Political Rights done at New York on 19 December 1966, [1980] Australian Treaty Series No 23, Art 14(1). Article 14(1) applies to a "suit at law" and thus to non-criminal proceedings: see General Comment 13 of the United Nations Human Rights Committee noted in Joseph, Schultz and Castan, The International Covenant on Civil and Political Rights: Cases, Materials, and Commentary, 2nd ed (2004) at 390 [14.03]. 58 Cf Dey v Victorian Railways Commissioners (1949) 78 CLR 62 at 91 per Dixon J: "the power ... is not to be used in cases of doubt or difficulty or where the pleading raises a debatable question of law". 59 E (A Minor) v Dorset County Council [1995] 2 AC 633 at 694 per Sir Thomas Bingham MR; cf Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 565-566 [138]; D'Orta-Ekenaike v Victoria Legal Aid (2005) 79 ALJR 755 at 796 [228]-[229]; 214 ALR 92 at 149. Kirby The parties' arguments: It is true60 that, in this Court, Mr McRann did not explicitly rely on s 179 of the IR Act. This was doubtless because, in the many issues of the three related appeals, the prosecution of the privative provision point could safely be left by him to Mr Batterham and to Mr Fish. In their cases the Court of Appeal had issued prohibition. The offence to s 179 was therefore presented in sharp relief. No such writ, contrary to s 179, attracted a like complaint in Mr McRann's case. The failure to press the common point in Mr McRann's case cannot deprive that point of any force that it enjoys as a matter of law. In any event, by its terms, s 179 is addressed to courts, not, as such, to parties. It is courts and tribunals, ultimately, that are commanded not to "call in question" (nor to entertain an "appeal" against nor to "review or quash") any decision or purported decision of the Commission. The broad meaning given to the expression "call in question" makes it clear that the grant of relief in the nature of prohibition to the Commission by this Court would "call in question" decisions of the Commission made in these proceedings61. Those decisions rejected pre-emptory relief. They insisted on the determination of the issue of jurisdiction following a trial when relevant evidence would be adduced by which such decision could be accurately and fairly made. To decide that pre-emptory relief is nonetheless now available, and should be granted, calls in question (and effectively reverses as if on an appeal) the contrary conclusion of the Commission in Court Session, both at first instance and before the Full Bench. This is in clear contravention of s 179 of the IR Act. It was not suggested that, because of the federal character of this Court, the command in s 179 of the IR Act was not "picked up" and applied in the exercise of federal and constitutional jurisdiction62. In Batterham, a contest to the constitutional validity of s 179 was advanced. However, it was abandoned in the Court of Appeal and not renewed63. So long as s 179 is a valid law, it must be obeyed. It must be given effect by every court in the land, and that includes this Court64. 60 See joint reasons at [28]. 61 Houssein v Under Secretary of Industrial Relations and Technology (NSW) (1982) 148 CLR 88 at 93; South East Asia Fire Bricks Sdn Bhd v Non-Metallic Mineral Products Manufacturing Employees Union [1981] AC 363 at 370 (PC). 62 Judiciary Act 1903 (Cth), s 79. 63 QSR (2004) 208 ALR 368 at 369 [3]. 64 Constitution, ss 106, 107 and 108. Kirby The principle of restraint: Apart from the provisions of s 179 of the IR Act, and assuming that the attempts to construe its unloved commands virtually to vanishing point succeed, there remains the normal principle of restraint applicable to these proceedings. That principle is explained in the companion cases, both in the Court of Appeal65 and in this Court66. I will not repeat what is said there. It is sufficient to remember that, in the proper exercise of this Court's function in disposing of a constitutional appeal, the issue of a writ in the nature of prohibition to a superior court of record, equivalent in status to the Supreme Court of a State, is a step normally conserved (in the rare cases where it is available) until after a regular trial and, at the least, the final determination of contested questions of jurisdiction by the body to which that function is committed by law. In the present case, that body is the Commission in Court Session. Conclusion: restraint applies: It follows that the court in which was reposed the relevant power and duty to make a final determination on the issue of its jurisdiction, in the first instance, was the Commission in Court Session. It was not the Court of Appeal. And it is not this Court. The Commission in Court Session had not, at the stage of the challenges in the Court of Appeal and in this Court, made such a final decision. At the least, as a court of error, this Court should limit any intervention that it finds lawful and appropriate to the correction of the orders of the Court of Appeal so that the residual issues in these proceedings, concerning the privative provision, the principle of restraint, discretion and comity as between courts of equal status, are decided by the Court of Appeal. For this Court to provide for a writ in the nature of prohibition to the Commission in Court Session is premature, contrary to settled principle and inconsistent with s 179 of the IR Act. Whilst the 2005 amendments to s 179 of the Act, which came into force after the hearing of this appeal, may not govern these proceedings67, they surely illustrate once again the strengthened resolve of the Parliament of New South Wales to protect the Commission in Court Session (now the Industrial Court68) from the inappropriate, and especially the premature, intervention of the Court of Appeal (and, by analogy, of this Court). So long as 65 Solution 6 Holdings (2004) 60 NSWLR 558 at 591 [136]. 66 Fish [2006] HCA 22 at [141]-[142]; Batterham [2006] HCA 23 at [69]-[83]. 67 Fish [2006] HCA 22 at [45] per Gleeson CJ, Gummow, Hayne, Callinan and 68 See above these reasons at [32] fn 17. Kirby such statutory interventions are constitutionally valid, courts including this Court must give them effect. A relevant "contract" exists for relief under s 106 The requirement of "whereby": Assuming that the foregoing impediments to intervention in the proceedings before the Commission are not conclusive, the issue arises as to whether it can be said that on no possible basis could the facts of this case attract the exercise of the jurisdiction and powers conferred on the Commission in Court Session under s 106 of the IR Act. Such a conclusion could only be reached if this Court were to take the view of the jurisdiction and powers of the Commission under s 106 that a "related condition or collateral arrangement", within s 105 of the IR Act, must itself be one whereby a person performs work in any industry. For the reasons that I have explained in Fish69 and Batterham70, that approach to the meaning of the Act is contrary to the statutory language. It undermines the repeatedly re- enacted legislative purpose. It is inconsistent with the authority of this Court71. And it involves the very attitude to the Act and its beneficial provisions that has led to privative provisions to repel the intervention of the general courts in the work of industrial tribunals, now increasingly concerned not with awards but with employment arrangements of a broad and varied kind. In the present case, Mr McRann relied on the argument that the C & R Agreement, the primary subject of his application to the Commission, was a modification of his pre-existing contract of employment. In his evidence, even presented in its present abbreviated form, such a way of presenting the case in the Commission was clearly open to Mr McRann72. It is plain, from the language and purpose of ss 105 and 106 of the IR Act, that Parliament did not contemplate an approach to the meaning of a "contract" and of an "unfair contract", in respect of which relief might be granted under s 106, that expelled from consideration the operation of subsequent amendments and variations to a "contract" earlier made. The structure of the two sections of the IR Act, whereby successive definitions of "contract" and "unfair contract" are afforded in s 105 and those words are then used in s 106, makes it clear that reading the words in a narrow 69 [2006] HCA 22 at [79]-[93]. 70 [2006] HCA 23 at [84]-[99]. 71 Most especially in Stevenson v Barham (1977) 136 CLR 190 at 192, 201-202. 72 Reasons of Gleeson CJ at [10]. Kirby and strictly sequential and separated manner is impermissible. The fact that, in this context, "contract" includes an "arrangement" and extends to "any related condition or collateral arrangement" (whenever the word "contract" is used in s 106) makes this clear. It is equally obvious from s 105 that "contract", so defined, informs the meaning of that word appearing in the next defined phrase "unfair contract". The point is put beyond doubt by s 106 where, in sub-s (2), it is provided: "The Commission may find that it was an unfair contract at the time it was entered into or that it subsequently became an unfair contract because of any conduct of the parties, any variation of the contract or any other reason." (emphasis added) Where, therefore, in the present case, either because it amounted to "conduct of the parties" or a "variation of" the Employment Contract or for "any other reason", the C & R Agreement had an effect of terminating Mr McRann's Employment Contract on conditions that rendered that contract "an unfair contract", s 106(1) is arguably attracted. It follows that, at a minimum, Mr McRann is entitled to a trial in which he can advance that proposition73. This conclusion follows without reliance on the additional argument available to Mr McRann that, as contemplated by the C & R Agreement, at least for a short interval in July 1997, he continued to perform work in an industry directly under the application of the Employment Contract and the C & R Agreement74. The Court of Appeal found that, during Mr McRann's employment, the terms and conditions of that employment were eventually subject to three agreements. These were the Employment Contract, the C & R Agreement and the Termination Agreement. The effect of the Termination Agreement was to bring the earlier employment of Mr McRann to a close and to replace the employment with a new agreement (the C & R Agreement). In consideration of Mr McRann's entering into the C & R Agreement, he was to be provided with benefits and compensation in exchange for cancellation of the benefits to which he was otherwise entitled under the original Employment Contract. This is why Spigelman CJ correctly treated the C & R Agreement as, in substance, a "variation" of the Employment Contract75. As an arguable variation of that contract, it was open to Mr McRann to contend that it thereby rendered the 73 Old UGC (2004) 60 NSWLR 620 at 632 [51]. 74 Old UGC (2004) 60 NSWLR 620 at 631 [45]; cf at 623 [10]. In a notice of contention in this Court, Mr McRann asserted that the C & R Agreement came into effect, according to its terms, upon execution by Mr McRann on 2 July 1997. He continued to perform work under the Employment Contract until 31 July 1997. 75 Old UGC (2004) 60 NSWLR 620 at 633 [55]. Kirby original Employment Contract an "unfair contract". There is absolutely no doubt that Mr McRann performed work pursuant to ("whereby") the Employment Contract in an industry in New South Wales and (if that be required) "directly" The only argument that suggests a conclusion adverse to Mr McRann would be one by which the Commission was obliged to isolate each of the foregoing "contracts", ignoring the effects of any "variation" of an earlier "contract" and judging whether sequentially, and in each case in isolation, the posited "contract" and each variation of the "contract" answered to the description "whereby a person performs work in any industry". There is nothing in ss 105 and 106 that would justify the imposition of such an artificial construction on the sections. There is plain language that argues to the contrary. So does the large remedial purpose of the sections. Such an interpretation would be contrary to the express contemplation of the subsequent variations of a relevant "contract", as envisaged by s 106(2). It would also be contrary to the entitlement of the Commission, having before it any "contract" whereby a person performs work in any industry, to decide whether "because of any conduct of the parties" or for "any other reason", as distinct from a variation, the original (qualifying) contract "subsequently became ... unfair"77. Conclusion: an arguable case: It follows from this analysis that I agree with Peterson J in the Commission in Court Session, with Wright, Walton and Boland JJ in the Full Bench of the Commission, with Spigelman CJ, Mason P and Handley JA in the Court of Appeal and with the Chief Justice in this Court78 that, on the facts shown in the evidence adduced in the Commission, Mr McRann demonstrated a sufficiently arguable case to attract the jurisdiction of the Commission. The proceedings should go forward to a final decision in the Commission, reached in the regular way. That means on the basis of evidence and argument at trial, not in an abbreviated hearing in the Supreme Court or, still worse, in an appeal before this Court, necessarily decided on condensed materials. The course that I favour would ensure that the final decision on the Commission's jurisdiction and powers would be made where Parliament contemplated: in the Commission. Moreover, it would be made after a trial. And it would not be made where Parliament appears specifically to have 76 Stevenson v Barham (1977) 136 CLR 190 at 201; cf Solution 6 Holdings (2004) 60 NSWLR 558 at 570-572 [26]-[35]; Fish [2006] HCA 22 at [28], [107]. 77 IR Act, s 106(2) (emphasis added). 78 Reasons of Gleeson CJ at [10]. Kirby forbidden: in the general courts exercising exceptional and deliberately limited supervisory jurisdiction. Least of all would it be made in this nation's ultimate court. Having arrived at the foregoing conclusion, reached within the four walls of the reasoning of the Court of Appeal, it is unnecessary for me, in order to propose my own orders, to determine other questions reserved by Mr McRann in his notice of contention filed in this Court. Those questions included suggestions that the Court of Appeal should have found the C & R Agreement to be a "related condition" or "collateral arrangement" of the Employment Contract within the definition of "contract" in s 105 of the IR Act; that it should have found that the three separate agreements constituted a single "arrangement" as that word is used in the definition of "contract" in s 105; and that the reliance expressed in the Court of Appeal on its decision in Mr Fish's case79 was wrong. It is unnecessary to repeat what I said in Fish. The Court of Appeal erred in that case. But it did not err in this. Orders The appellants' arguments fail. As the Court of Appeal decided, the claim should be returned to the Commission in Court Session, now the Industrial Court. The appeal to this Court should be dismissed with costs. 79 (2004) 60 NSWLR 620 at 632 [50] citing Solution 6 Holdings (2004) 60 NSWLR HEYDON J. The appeal should be dismissed with costs. The background circumstances and the legislation are set out in other judgments. Section 179 Peterson J's hearing. On 24 April 2003, the Industrial Relations Commission of New South Wales in Court Session (Peterson J) dismissed notices of motion filed by the appellants. The notices of motion sought summary dismissal of the proceedings on various grounds, one of which was that the Commission lacked jurisdiction because the relevant agreement fell outside s 106 of the Industrial Relations Act 1996 (NSW). Peterson J held that to succeed on the notices of motion the appellants had to "establish, with certainty, that the summons for relief cannot succeed."80 He held that the appellants "have failed at this interlocutory stage to demonstrate that the [agreement] is necessarily outside the scope of the relief available under s 106."81 All the other grounds failed, and he dismissed the notices of motion. The Full Bench hearing. The Full Bench of the Commission (Wright, Walton and Boland JJ) refused leave to appeal82. It found no material errors of law or principle or fact. It held that it could not be said that the material conclusions of Peterson J were not open. The Court of Appeal. The appellants sought an order in the nature of a writ of prohibition in the Court of Appeal. The Court of Appeal (Spigelman CJ, Mason P and Handley JA) drew attention to s 179 of the Act, and recorded two arguments advanced by the appellants. The first was that83: "s 179 should be read down so that it does not preclude relief in relation to an exorbitant assumption of jurisdiction by the Commission, which [they] submitted was demonstrated in this case. The contract or arrangement in the proceedings before the Commission is not, it was said, in any sense an agreement under which work is done and accordingly is not protected by 80 McRann v UnitedGlobalcom Inc (2003) 124 IR 275 at 277 [7]. 81 McRann v UnitedGlobalcom Inc (2003) 124 IR 275 at 287 [47]. 82 United Globalcom Inc v McRann (2003) 132 IR 3. 83 Old UGC Inc v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 620 at 628 [24] per Spigelman CJ (Mason P and Handley JA concurring). The second was that84: "the judgment of Peterson J in the proceedings in the Commission, from which leave to appeal was refused by the Full Bench of the Commission, was not a 'decision' within the meaning of s 179." The Court of Appeal did not find it necessary to deal with these arguments. The first argument. The first argument is fallacious. Section 179 does not draw any distinction between exorbitant assumptions of jurisdiction and other assumptions of jurisdiction. Indeed, s 179(3) points positively against the existence of any such distinction. The second argument. The second argument is also fallacious. Peterson J made a decision that the appellants had not demonstrated that the proceedings in the Commission were necessarily outside its jurisdiction. That was one reason why he made another decision: to dismiss the appellants' notices of motion for summary dismissal. What he did can be characterised as involving a third decision: to permit the proceedings to go to trial. Other possible arguments. In Batterham v QSR Ltd85 other arguments for the non-application of s 179 were considered. They failed for the reasons given by me in that case86. Procedural difficulties. Since this appeal was heard at the same time as the appeals in Fish v Solution 6 Holdings Ltd and Batterham v QSR Ltd, the legal representatives of the second respondent in this appeal read and heard arguments advanced on the possible application of s 179. Despite this, the second respondent did not rely on s 179 in his notice of contention in this Court, or in his written or oral submissions. However, I would agree with Kirby J that the application of s 179 is a matter for a court to consider, even if the party in whose interest it is to raise the point does not do so87. Notwithstanding this, if the application of s 179 had been a crucial factor in the appellants' appeal being dismissed, it would be necessary to seek further submissions from the parties in relation to it. Since the appellants' appeal will not be dismissed, however, there is no need to take this course. 84 Old UGC Inc v Industrial Relations Commission of New South Wales (2004) 60 NSWLR 620 at 628 [25] per Spigelman CJ (Mason P and Handley JA concurring). 85 [2006] HCA 23. 86 [2006] HCA 23 at [107]-[111]. 87 See at [67]. Other issues In view of the conclusion that s 179 applies, the other issues debated by the parties do not arise.
HIGH COURT OF AUSTRALIA STUART ALEXANDER BLACK & ORS APPELLANTS AND BRYCE LACHLAN GARNOCK & ORS RESPONDENTS Black v Garnock [2007] HCA 31 1 August 2007 ORDER Appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 1 June 2006 and in their place order that: the appeal to that Court be dismissed with costs; and there be an inquiry into what damages, if any, the first to third respondents in the Court of Appeal (namely, Stuart Alexander Black, Vaughan Lee Chapman and Andrew Philip Carter) suffered by reason of either the injunction granted by Campbell J by order made on 7 October 2005 or the injunction granted by Basten JA by order made on 21 December 2005 which the appellants in the Court of Appeal (namely, Bryce Lachlan Garnock, Sarah Jane Garnock, Robert Leonard Luff and Lynette Anne Luff) ought to pay. On appeal from the Supreme Court of New South Wales Representation J Stoljar with K W Dawson for the appellants (instructed by SBA Lawyers) G C Lindsay SC with A J Grant and G F Mahony for the first to fourth respondents (instructed by Capon & Hubert) Submitting appearance for the fifth respondent No appearance for the sixth respondent Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Black v Garnock Conveyancing – Land titles under the Torrens system – Execution against land under the Torrens system – Recording of a writ for the levy of property in respect of land under the Real Property Act 1900 (NSW) ("the Act") – Appellants obtained judgment against the sixth respondent ("judgment debtor") – Judgment debtor was registered proprietor of land – Judgment debtor agreed to sell land to the first to fourth respondents ("purchasers") – Prior to settlement, a writ for the levy of property was recorded in respect of the land – Following settlement, Registrar-General refused to register transfers – Purchasers sought interlocutory injunction restraining appellants and Sheriff of NSW from executing the writ – Nature of interest of purchasers in land – Whether person claiming estate or interest not recorded in the Register and not preserved by the Act is entitled to an injunction to prevent execution of a writ for the levy of property. Practice and procedure – Enforcement – Enforcement of judgment debt by way of writ for the levy of property in respect of land – Purchasers of property sought interlocutory injunction restraining appellants and Sheriff of NSW from executing writ – Whether person claiming estate or interest not recorded in the Register and not preserved by the Act is entitled to an injunction to prevent execution of writ. Statutes – Interpretation – Meaning and effect of s 105A(2) of the Act – s 105A(2) prohibited the Registrar-General from registering, during a "protected period", a dealing that affected land subject to a writ for the levy of property – Whether person claiming estate or interest not recorded in the Register and not preserved by the Act is entitled to an injunction to prevent execution of writ. Words and phrases – "judgment creditor", "judgment debtor", "protected period", "writ for the levy of property", "writ of execution". Real Property Act 1900 (NSW), ss 42, 43A, 74F, 74H, 105, 105A, 105B. Civil Procedure Act 2005 (NSW), ss 112, 113, 115. GLEESON CJ. I have had the advantage of reading in draft form the reasons for judgment of Crennan J. I agree that the appeal should be dismissed with costs, for the reasons given by her Honour. I would add the following brief comments. The judgment creditors had, and have, no interest in the subject land. Section 105(1) of the Real Property Act 1900 (NSW) ("the Act") makes that clear. Nobody suggests otherwise. Furthermore, there having been no sale of the land by the Sheriff pursuant to the writ for levy of the property, there is no transferee to whom the provisions of s 105B(2) of the Act apply. At the time of the proceedings in the Court of Appeal, the only people with any interest in the land were the registered proprietor (the relevant judgment debtor) and the purchasers to whom she sold the land. It is, therefore, strictly inaccurate to speak of the dispute as one of "priorities"; of the principal contending parties to the litigation, only the purchasers have an interest in the land. That the purchasers have an interest in the land appears to be accepted. It is acknowledged, indeed asserted, that, prior to the recording of the writ for levy of the property, they could have lodged a caveat. The fact that they could have lodged a caveat is relied upon argumentatively to deflect criticism of the statutory construction for which the appellants (the judgment creditors) contend. Basten JA, who dissented in the Court of Appeal, qualified his conclusion about the effect of the legislation by reference to the possibility of a caveat. He said: "The apparent effect [of the 1976 amendments to the Act] is twofold. First, they preclude the purchaser for valuable consideration from the registered proprietor having his or her interest immediately recorded in the register, unless the application were lodged prior to the application to record the writ, or the transfer had the Sheriff's consent. Secondly, the Sheriff's purchaser will be entitled to have the transfer to him or her registered, pursuant to s 105A(1)(a) during the protected period. The purchasers from the registered owner will thus be pre- empted, unless they caveated their interest before the recording of the writ." To lodge a caveat, the purchasers from the registered proprietor required a caveatable interest. What might that interest have been, if not the interest described by Crennan J? Thus, by hypothesis, the purchasers (from the registered proprietor) have a caveatable interest in the land, the judgment creditors have no interest in the land, and there is no purchaser from the Sheriff. It may be accepted that the purpose of the 1976 amendments was to protect purchasers from the Sheriff; but in the events that occurred, there are no such persons requiring protection. There is no statutory provision forbidding intervention, of the kind undertaken by the Court of Appeal, to protect the interest of those who had purchased from the registered proprietor; and it is accepted that by lodging a caveat the purchasers could have obtained such protection. The complaint is not that the orders of the Court of Appeal contradicted any provision of the Act, but that they intercepted impermissibly a statutory process which had as its ultimate object the making of a sale by the Sheriff and the bringing into existence of a transferee who would in due course enjoy the protection of s 105B(2). That appears to me to overstate the purpose and the legal effect of the statutory scheme. This is demonstrated by the consideration mentioned above, that is, the acknowledged consequences of lodging a caveat. The appellants' argument proves too much. As appears from the speech of Minister Crabtree, the purpose of the 1976 amendments was to bring about the result that "a purchaser at a sale in execution takes the estate or interest then appearing upon the register"1. The purpose was not to turn unsecured creditors into secured creditors, or to defeat the interests of people who, to the knowledge of the judgment creditors and the Sheriff, had contracted to buy the land. It was not to require the Sheriff to sell land which the Sheriff knew had already been sold to a bona fide purchaser for full value, conduct that would ordinarily be regarded as improper. Injunctive relief of the kind given by the Court of Appeal did not negate the protection intended to be conferred on a purchaser from the Sheriff; there was no such purchaser. In J & H Just (Holdings) Pty Ltd v Bank of New South Wales2, Barwick CJ said of a caveat: "Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator's estate or interest though if noted on the certificate of title, it may operate to give such notice." It being accepted that, if the purchasers had lodged a caveat before the writ for levy of the property was recorded, then by that form of statutory injunction they would have protected their position against a threat of sale to a third party by the Sheriff, it is difficult to see why the injunction granted by the Court of Appeal was inconsistent with the legislative scheme, or subversive of 1 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 1976 at 1293. (1971) 125 CLR 546 at 552. the legislative purpose. It protected the interest of the purchasers, and it did not interfere with the legal rights of anyone else. There is a further matter, also related to legislative purpose. It is referred to at the end of the reasons of Crennan J. The land was sold by the registered proprietor to the purchasers for $1 million. It was heavily encumbered. Basten JA recorded that, on settlement, "[t]he funds distributed to those persons having secured interests [in the land] ... amounted to a figure in excess of $900,000". The judgment debtor (the registered proprietor) had very little "equity" in the land, using that term in its colloquial or commercial sense. If the appellants succeed in their arguments, then the practical result appears to be that, at the expense of the purchasers from their debtor, they will have obtained blood from a stone. This incongruous result seems unlikely to reflect any legislative intent. The response that is offered is to say that, although the result seems unjust, it could have been avoided by the timely lodging of a caveat by the purchasers. Yet, if that is so, it shows that the legislative scheme is not as far- reaching as the appellants contend. GUMMOW AND HAYNE JJ. The decision in this appeal turns upon the proper construction of provisions of the Real Property Act 1900 (NSW) ("the RP Act") concerning the recording of writs of execution in respect of land under the RP Act. The task of construction must be undertaken recognising and applying the fundamental proposition that: "The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration."3 The essential facts of the case may be stated shortly. The appellants ("the judgment creditors") obtained a judgment in the District Court of New South Wales for a money sum against the sixth-named respondent ("the judgment debtor"). The judgment debtor was the registered proprietor of some farming land comprised in three folios of the Register maintained under the RP Act. Some months after the judgment creditors obtained judgment against the judgment debtor, but before the issue of any writ of execution, the judgment debtor agreed to sell the land to the first to fourth-named respondents ("the purchasers"). The contract of sale was completed at about 2.00 pm on 24 August 2005. The purchasers paid the balance of the purchase price to or at the direction of the vendor of the land, the judgment debtor. The judgment debtor, as vendor, gave the purchasers memorandums of transfer, procured certain mortgagees to provide discharges of their mortgages, and procured the holder of a registered lease to provide an instrument of surrender. It is not suggested that any of these documents (the transfers, the discharges of mortgages or the surrender) was not in registrable form. At about 9.00 am on settlement day, the purchasers' solicitors obtained a title search with respect to the land. That search revealed no unexpected encumbrance. About half an hour after that search was made, the solicitor for the judgment creditors notified the purchasers' solicitors that the judgment creditors had an unsatisfied judgment against the judgment debtor, that a bankruptcy notice had been issued against the judgment debtor, and that the judgment creditors had obtained a charging order in respect of the deposit that had been paid under the contract of sale. At about 11.53 am on that day (about two hours before the settlement of the sale of the land by the judgment debtor to the purchasers) a writ of execution, issued out of the District Court of New South Wales on the previous day at the instance of the judgment creditors, was recorded in respect of the land in the 3 Breskvar v Wall (1971) 126 CLR 376 at 385 per Barwick CJ. See, further, Halloran v Minister Administering National Parks and Wildlife Act 1974 (2006) 80 ALJR 519 at 526 [35]; 224 ALR 79 at 88. Register maintained by the Registrar-General. It was not suggested in this Court, or in the courts below, that the judgment creditors acted unconscientiously in seeking the issue of the writ, or in having it recorded in the Register. On 8 September 2005, the purchasers' solicitors were told that the transfers they had lodged in respect of the land could not be registered because a writ was recorded against the title to the land. Three weeks later the purchasers commenced proceedings in the Supreme Court of New South Wales and on 7 October 2005 Campbell J granted an interlocutory injunction restraining the judgment creditors and the Sheriff of New South Wales from executing the writ4. Although the order that was taken out does not record any undertaking as to damages, it was common ground in the appeal to this Court that the purchasers gave an undertaking, in the usual form, as the price for obtaining the injunction. On 2 December 2005, Lloyd AJ dismissed5 the proceedings instituted by the purchasers, and discharged the interlocutory injunction that had been granted by The purchasers appealed to the Court of Appeal of New South Wales and on 21 December 2005, an interlocutory injunction was granted6 pending the determination of the appeal, or further order, restraining the judgment creditors and the Sheriff of New South Wales from executing the writ. The purchasers gave the usual undertaking as to damages. By majority (Beazley and Ipp JJA; Basten JA dissenting)7, the purchasers' appeal to the Court of Appeal was allowed. The Court of Appeal made a declaration that the purchasers "as holders of equitable interests in the land the subject of this appeal, are entitled to priority over any rights to the land that might be held" by the judgment creditors, and the judgment creditors and the Sheriff were restrained, for 60 days from the date of delivery of the Court of Appeal's reasons, from executing the writ of execution. It is against those orders that the judgment creditors appeal. Neither the judgment debtor nor the Sheriff played an active part in the appeal in this Court. While it will be necessary to examine the reasons given by the Court of Appeal for reaching the orders against which the judgment creditors appeal, it is essential to begin with the relevant statutory provisions. 4 Garnock v Black [2005] NSWSC 1052. 5 Garnock v Black (No 2) [2005] NSWSC 1218. 6 Garnock v Black [2005] NSWCA 475. 7 Garnock v Black (2006) NSW ConvR ¶56-158. The writ of execution The writ in issue in this case was a writ for the levy of property within the meaning of Pt 8 of the Civil Procedure Act 2005 (NSW) ("the CPA") and was, therefore, a "writ" as that term was defined in s 3(1)(a) of the RP Act. The writ was "sufficient authority for the Sheriff ... to enter into possession of, and to sell, land of or to which the judgment debtor is seized or entitled, or which the judgment debtor may, at law or in equity, assign or dispose of"8. The proceeds of enforcement of a writ for the levy of property were to be applied9, firstly, to the Sheriff to cover the Sheriff's fees and expenses in executing the writ, secondly, to the judgment creditor to satisfy the judgment debt and thirdly, to the judgment debtor as to any amount remaining. Subdivision 2 of Pt 8 of the CPA provided (s 112) for the effect of a judgment and a writ of execution on land and (s 113) for sale or mortgage by a judgment debtor of land the subject of a writ for the levy of property. The first of those provisions (s 112) must be considered; the second (s 113) need not. Section 112 provided: "(1) A writ of execution against land binds the land, as from the time the writ is delivered to the Sheriff, in the same way as a writ of execution against goods binds the property in the goods. (2) Despite subsection (1), a writ of execution does not affect the title to land acquired by a person in good faith and for valuable consideration unless, when the person acquires title, he or she has notice that such a writ has been delivered to the Sheriff and remains unexecuted. (3) A judgment in any action at law does not of itself bind or affect any land." These provisions derived from s 13 of the Judgment Creditors' Remedies Act 1901 (NSW). Section 13 of that earlier Act had provided, by sub-s (1), that no judgment recovered or to be recovered in any action at law shall bind or affect or be deemed to have bound or affected any land in New South Wales. Sub-section (2) of s 13 had provided, in effect, that a writ of execution, when delivered to the Sheriff, shall affect and be deemed to have bound such land, from the time of delivery, in a like manner as a writ of fieri facias binds chattels. By fixing upon the time of delivery of the writ as the time at which the writ 8 Civil Procedure Act 2005 (NSW), s 106(2). 9 Uniform Civil Procedure Rules 2005 (NSW), r 39.15. "bound" the land, the Judgment Creditors' Remedies Act abolished the rule, derived ultimately from the Statute of Westminster II in 1285, by which land was "affected" from the date of entry of judgment10. But neither under the old rule, nor under the Judgment Creditors' Remedies Act, did the judgment creditor obtain some proprietary interest in the land. Rather, the judgment creditor could take in execution what interest the judgment debtor had in the land at the time the writ was delivered to the Sheriff, and those who dealt with the debtor after that time would have their interests postponed to that of the judgment creditor, if the judgment creditor procured execution of the writ. As Sykes recorded in his 1953 article, "The Effect of Judgments on Land in Australia"11, s 189 of the Conveyancing Act 1919 (NSW) may have appeared to contradict s 13 of the Judgment Creditors' Remedies Act, by providing that no judgment shall operate as a "charge" on land unless and until the writ for the purpose of enforcing it was registered in the Register maintained under the Conveyancing Act. It is, however, not necessary to examine the resolution of that apparent contradiction. For present purposes, it suffices to recognise that under the Judgment Creditors' Remedies Act the judgment creditor obtained no interest in the land by delivering a writ of execution to the Sheriff. And likewise, when s 112 of the CPA provided that a writ of execution against land "binds" the land as from the time the writ is delivered to the Sheriff, the mere fact of delivery of the writ creates no interest in the land. If the land affected by a writ is not land under the RP Act, questions of priority of interests in the land, if the writ is executed, will be determined having regard to the fact that the standing of an execution creditor (as against third parties) is made retrospective to the date the writ is delivered to the Sheriff. But where, as here, the land in question is land under the RP Act and the writ was recorded in the Register, it is the RP Act which regulated the consequences of recording the writ and selling the land in execution. Recording of a writ under the RP Act Subject to some exceptions which are not now material, s 105(2) of the RP Act12 permitted the Registrar-General to "record a writ in the Register pursuant to an application in the approved form". Section 105(1) provided that "[a] writ, whether or not it is recorded in the Register, does not create any interest in land under the provisions of this Act". 10 Sykes, "The Effect of Judgments on Land in Australia", (1953) 27 Australian Law Journal 226 at 228-229. 11 (1953) 27 Australian Law Journal 226 at 229-230. 12 References are to the RP Act as it stood at the time of the recording of the writ. Section 105A provided for the effect of recording a writ. The central provision of that section was sub-s (2) which provided that: "Where a writ is recorded under section 105 and a dealing (other than a dealing to which, by the operation of subsection (1), this subsection does not apply) that affects the land to which the recording relates is lodged for registration within the protected period, the Registrar-General shall not, during the protected period, register the dealing unless the writ is referred to in the dealing as if it were a prior encumbrance." The "protected period" was defined in s 105A(9) as the period beginning when the writ is recorded in the Register and ending at the expiration of six months after the writ is recorded in the Register, or on the expiration of the writ, whichever first occurs. Section 105A(2) enjoins the Registrar-General not to register a dealing which is lodged for registration within that six month period. The order of events upon which the sub-section fixes is the recording of the writ and the subsequent lodgment of a dealing. There is no further temporal criterion, being the date of any dealing which, if registered, would give title by that registration. In particular, there is no requirement that the dealing post-date the recording of the writ. No warrant appears from the text or the purpose of the legislation to exclude from the prohibition upon registration imposed by the Registrar-General dealings which are lodged in the protected period but relate to a transaction, such as the settlement of the purchase in this case, occurring in the protected period, not before it commenced. However, that is how the majority in the Court of Appeal appeared to have construed s 105A(2). Later in these reasons attention is given to the difficulties said to arise unless the legislation be read in that fashion and it is seen that those difficulties are exaggerated. Several kinds of dealing were excepted from the application of the general prohibition imposed by s 105A(2) prohibiting the Registrar-General, during the protected period, from registering a dealing unless the writ was referred to in the dealing as if it were a prior encumbrance. Among the excepted dealings were "a dealing which, upon registration, will record the determination of a registered lease"13 and "a dealing by a mortgagee or chargee in exercise of the mortgagee's or chargee's powers under a mortgage or charge that was recorded in the Register before the writ was so recorded"14. The discharges of mortgage and the surrender 13 s 105A(1)(e). 14 s 105A(1)(f). of lease provided to the purchasers on settlement of the contract of sale they had made with the judgment debtor in this matter could, therefore, be registered despite the recording of the writ. It is not necessary to notice the detail of other exceptions to the general prohibition of s 105A(2) but it is desirable to say a little more about the significance of the "protected period". First, where a writ recorded under s 105 was not, within the protected period, executed by sale, a dealing with the land lodged for registration before the writ was executed could be registered notwithstanding the recording of the writ15. Secondly, upon registration of a transfer or other dealing that for valuable consideration disposed of the whole estate or interest in land affected by a recording of a writ (not being a transfer pursuant to a sale under the writ) the writ lapsed in relation to that land unless the transfer or other dealing referred to the writ as if it were a prior encumbrance16. It follows that when the protected period had ended and the Registrar-General was no longer prohibited by s 105A(2) from registering a transfer of the land, the writ would lapse upon registration of a transfer that, for valuable consideration, disposed of the whole estate or interest in the land. These provisions (of s 105A(6) and s 105C) revealed that the policy of the legislature was generally similar to the policy of other much earlier (and different) legislation concerning writs of execution and Torrens title land considered by the Privy Council in Registrar of Titles v Paterson17. Of that earlier legislation in Victoria, the Privy Council said18: "The policy of the Legislature in framing this section was obviously to prevent titles from being affected by the operation beyond a limited time of unexecuted writs of execution as charges on the land; and to reconcile the rights of a judgment creditor with those of a purchaser for value, whether with or without notice. Both objects are effected by compelling the creditor to proceed within a limited time to enforce an execution by actual sale of the land affected thereby." Section 105B made provisions about the registration of a transfer pursuant to a sale under a writ. Sub-section (1) of s 105B provided that a transfer pursuant to a sale under a writ is registered when it is recorded in the Register despite the 15 s 105A(6). 16 s 105C(1). 17 (1876) 2 App Cas 110. 18 (1876) 2 App Cas 110 at 118. relevant certificate or copy certificate not having been produced. Sub-section (2) of that section set out the consequences of registration of such a transfer. It provided that: "(2) Upon the registration of a transfer referred to in subsection (1), the transferee holds the land transferred free from all estates and interests except such as: are recorded in the relevant folio of the Register or on the relevant registered dealing, are preserved by section 42, and are, in the case of land comprised in a qualified folio of the Register, subsisting the meaning of section 28A."19 interests within Central to the proper understanding of s 105B(2) is the recognition that registration of a transfer pursuant to a sale under a writ leaves the transferee holding the land transferred "free from all estates and interests except" those specified in s 105B(2). Consonant with the fundamental premise of the Torrens system of land title, the transferee pursuant to a sale under a writ obtains a particular kind of title by registration. In particular, that transferee obtains a title that is not limited to whatever interest the judgment debtor would have been understood to have had in the land if account were to be taken of rights and interests not recorded in the Register and not preserved by the RP Act, particularly s 42. The essential purpose of the application which the purchasers made to the Supreme Court was to prevent s 105B(2) taking effect according to its terms. The purchasers claimed an estate or interest not recorded in the Register and not preserved by the RP Act (whether by s 42 or otherwise) and sought to prevent execution of the writ lest a transferee pursuant to the sale by the Sheriff obtain by operation of the RP Act, and s 105B(2) in particular, a title freed from the interest they claimed. The purchasers' claim to that relief was founded only in the proposition that was reflected in the declaration made by the Court of Appeal: that "as holders of equitable interests in the land ... [they] are entitled to priority over any rights to the land that might be held" by the judgment creditors. 19 Part 4A (ss 28A-28R) establishes a system for the creation of qualified folios upon certain applications to bring the land under the provisions of the RP Act and for the entry on qualified folios of "subsisting interests". The reasons of the Court of Appeal The hinge about which the reasons of the majority turned was the proposition20 that: "prior to the registration of the writ and the payment of the balance of the purchase price, the purchasers had an equitable interest in the land." This, without more, was held to be sufficient basis for the purchasers to take action to protect their equitable interest by restraining the judgment creditors from proceeding with a sale by the Sheriff21. To speak of the purchasers having an "equitable interest" in the land has the difficulties and limitations identified in Tanwar Enterprises Pty Ltd v Cauchi22. As five members of the Court pointed out in Tanwar23: "the 'interest' of the purchaser is commensurate with the availability of specific performance." Upon completion of the contract now under consideration the judgment debtor, as vendor, was bound to tender transfers in registrable form. In the events that happened, the transfers tendered could not be registered because of the intervening recording of the writ. To focus upon the rights and duties of the vendor and the purchasers, without regard to this intervening event, entails circularity of reasoning of the kind referred to in Tanwar. Furthermore, to speak of the purchasers' rights as having "priority" over the writ or the rights of the judgment creditors imposes upon the debate an assumption, contrary to the explicit terms of the Act, that there is some competition between the holders of different interests in land. Section 105 of the RP Act makes plain that a writ, whether or not recorded in the Register, does not create any interest in land. Hence counsel placed no reliance upon s 43A of the RP Act24. As interpreted in Meriton Apartments Pty Ltd v McLaurin & Tait 20 (2006) NSW ConvR ¶56-158 at 59,867 [33] per Ipp JA, Beazley JA agreeing. 21 (2006) NSW ConvR ¶56-158 at 59,867 [33]. 22 (2003) 217 CLR 315. 23 (2003) 217 CLR 315 at 333 [53]. 24 Section 43A(1) and (2) provided: "(1) For the purpose only of protection against notice, the estate or interest in land under the provisions of this Act, taken by a person under a dealing registrable, or which when appropriately signed by or on behalf of that person would be registrable under this Act shall, before registration of that dealing, be deemed to be a legal estate. (Footnote continues on next page) (Developments) Pty Ltd25, the section confers upon a purchaser who has received a registrable instrument and paid the purchase money the same protection against notice of an earlier unregistered interest as that achieved by a purchaser who acquires the legal estate at common law. In the present case, there is no competition between unregistered interests and the unregistered interest of the purchasers cannot defeat the statutory consequence of the earlier recording of the writ. The premises for the reasoning of the majority in the Court of Appeal were, therefore, flawed in fundamental respects. There was no competition between interests in the land. To identify the purchasers as having (as against the judgment debtor, the vendor) an interest in the land does not identify, with sufficient particularity, the nature or extent of the rights constituting that interest. In any event, to speak of the purchasers having an "interest" in the land either assumes the answer to the very question that must be decided (what is the consequence of recording the writ) or focuses upon the position as between vendor and purchasers to the exclusion of any consideration of the consequences of recording the writ. In considering the consequences that are to be attached to the recording of the writ, it is important to understand the mischief to which the relevant provisions of the RP Act were directed. It is therefore relevant to examine, as the Court of Appeal did, the history of provisions governing the effect of judgments and execution of judgments on land under the RP Act. But it is important to examine that history bearing at the forefront of consideration that it was not until 1971, by this Court's decision in Breskvar v Wall26, that the long-running controversy about indefeasibility of title, stemming at least from Clements v Ellis27, was finally resolved. Thus when it is observed that, in 1976, new provisions concerning writs of execution were made by the Real Property (Amendment) Act 1976 (NSW), it is necessary to recognise that by then, it was clearly established that the title obtained by registration under the RP Act was not historical or derivative, but (2) No person contracting or dealing in respect of an estate or interest in land under the provisions of this Act shall be affected by notice of any instrument, fact, or thing merely by omission to search in a register not kept under this Act." 25 (1976) 133 CLR 671 at 676. 26 (1971) 126 CLR 376. 27 (1934) 51 CLR 217. was a title which registration itself created in the proprietor. The competing view, expressed by Dixon J in Clements v Ellis28, had been rejected. When introducing the 1976 amending legislation the Minister for Lands said in his Second Reading Speech29: "Since the commencement of the Real Property Act on 1st January, 1863, it has generally been acknowledged that the machinery provided by that Act for giving effect to sales in execution has not worked effectively. The breakdown is largely due to a judicial decision in Coleman v. De Lissa[30] in 1885 that, irrespective of the provisions of the Real Property Act, a transferee taking under a sale by the sheriff or other court official selling pursuant to a writ of execution acquired only the beneficial interest of the execution debtor, burdened by any unregistered interests which might exist. The result of this judicial ruling has proved disastrous. Upon such a sale, because potential purchasers are buying an asset whose value cannot be ascertained, the maximum bid is usually a couple of dollars, not sufficient to cover the advertisement and conduct of the sale. As a result the judgment creditor usually gets nothing of the amount owing to him; the judgment debtor loses ownership of the land without any reduction of the judgment debt; a purchaser from the sheriff or from the district court bailiff may get a windfall or more probably, if unregistered interests affect the land, gets nothing. The obvious solution is to provide, legislatively, that a purchaser at a sale in execution takes the estate or interest then appearing upon the register. The provisions of the bill are designed to implement this principle." The reference to a purchaser at a Sheriff's sale taking "the estate or interest then appearing upon the register" is critical to understanding what the 1976 amending legislation was intended to achieve. It was by focusing attention on, and attaching legal consequences to, the registered estate or interest of a judgment debtor that the price to be paid at a sale in execution would more closely approximate the market value of the land. The judgment creditor may, then, recover what was owing and the judgment debtor would satisfy or at least reduce the judgment debt. The purchaser would obtain a title that could not be defeated. 28 (1934) 51 CLR 217 at 237. 29 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 1976 at 1293. 30 (1885) 6 LR (NSW) Eq 104. Two hypothetical cases Much of the oral argument of the appeal proceeded by examining what would have happened if orders restraining the Sheriff executing the writ had not been made in this case, and what would have happened if, before the writ was recorded on the Register, the purchasers had lodged caveats. It is convenient to address those questions now. If execution of the writ had not been restrained, and the Sheriff had sold the land, a purchaser at the Sheriff's sale would have found, on searching the title, that the land was encumbered by mortgages and was subject to a registered lease. Yet, at the settlement of the purchasers' contract with the judgment debtor, the mortgagees had been paid what was owing, and the lessee had been paid a substantial sum to surrender the lease. What would a purchaser at a subsequent Sheriff's sale have been buying? What would that purchaser have paid? Would the purchase price reflect the value of vacant land, tenanted land, mortgaged or unmortgaged land? Could the mortgagees and the lessee retain what they had received from the purchasers at the judgment debtor's direction? In the end, the answers to these questions are not relevant to the construction of the applicable provisions of the RP Act. They are questions that arise, and could arise, only because the purchasers settled the contract of sale with the judgment debtor in ignorance of the judgment creditors' procuring the recording of the writ. If the recording of the writ had been known, it may safely be assumed that settlement of that contract would not have proceeded. The several questions that would arise if, after the settlement of the sale, the Sheriff sold the land in execution of the writ are properly dismissed from consideration as not bearing upon the ordinary operation of the relevant provisions. In any event, it is not immediately evident why the intervening settlement would have significantly reduced the price a purchaser from the Sheriff would have paid for the land, regardless of whether the discharges of mortgage and surrender of lease provided at the settlement were to be given effect according to their terms. If the surrender of the lease was effective, presumably a new purchaser would not have paid significantly less for the land than the purchasers had agreed to pay to the judgment debtor. (The purchasers from the judgment debtor had paid a substantial additional sum to the lessee to obtain vacant possession.) And if the surrender was not effective, there is again no reason to think that the land subject to lease would realise less than the price payable under the original contract, even if the new purchaser were to allow for some additional sum to be paid to secure vacant possession of the land. And so far as the registered mortgages are concerned, if the mortgagees were owed nothing by the judgment debtor, the mortgages registered on the titles would, it may be assumed, be discharged at little cost to a purchaser at the Sheriff's sale. The other questions debated in argument are of more direct assistance in resolving the question of construction that must be decided. If, before the writ was recorded on the Register, the purchasers had lodged caveats on the titles to the land, claiming an interest as purchasers of the land, how would relevant provisions of the RP Act have operated? the Register would not have prevented The first point to notice is that the lodging of caveats and entry of particulars of caveats on the Registrar-General from recording the writ with respect to the land31. The second and more directly relevant point is that, if caveats had been lodged and particulars of the caveats entered on the Register, and if the Sheriff then sought to sell the land in execution of the writ, a purchaser at the Sheriff's sale would not have been able to obtain registration of a transfer of the land so long as those caveats remained in force. It is necessary to explain the basis for this conclusion. While a caveat lodged under s 74F remained in force, s 74H precluded the Registrar-General, except with the written consent of the caveator, from recording any dealing in the Register, if it appeared that the recording of the dealing was prohibited by the caveat. It would follow from s 74H, considered in isolation from the provisions of the RP Act which dealt with the recording of a writ (s 105A) and the registration of a transfer given pursuant to a sale under the writ (s 105B) that, if the purchasers in the present matter had lodged caveats over the land, before the writ was recorded, a purchaser at any sale by the Sheriff in execution of the writ could not have obtained a transfer that would be registered. Section 74H would have prohibited registration of a transfer tendered by a person who purchased the land at the Sheriff's sale. The provisions of s 105A and s 105B neither required nor permitted a different outcome. The prohibition in s 105A(2) focused upon a dealing that affects the land to which the recording of the writ related. As noted earlier, s 105A(2) was subject to various exceptions. But a transfer by the judgment debtor to a purchaser who had lodged a caveat and who had agreed to buy the land from the judgment debtor was not excepted from the general prohibition of s 105A(2). A transfer giving effect to a sale under the writ was excepted32. But the exception made by s 105A(1)(a) for a transfer giving effect to a sale under the writ was an exception to a prohibition: the prohibition directed by s 105A(2) to the Registrar-General against registering, during the protected period, a dealing that 31 s 74H(5)(f). 32 s 105A(1)(a). affected the land. The temporal duration of that limitation is not immediately significant. What is important is that neither s 105A(1)(a) nor s 105A(2) required the Registrar-General to register a transfer giving effect to a sale under the writ. Both sub-s (1) and sub-s (2) of s 105A (and the other provisions of that section) were consistent with effect being given to the separate and distinct prohibition contained in s 74H. Nor does any aspect of s 105B require some different conclusion. That section was cast in terms that first, fixed when a transfer pursuant to a sale is registered (it is registered when recorded) and second, fixed the consequences of registration (the transferee holds the land free from all estates and interests except those specified in s 105B(2)). But nothing in s 105B cut down the applicability of a prohibition against registration that would arise if the provisions of s 74H were engaged. It therefore follows that if caveats had been lodged, and if the Sheriff had then sought to sell the land in execution of a writ recorded after the caveats had been lodged, a purchaser at the Sheriff's sale could not have obtained registration of a transfer so long as the caveats remained in force. When this intersection of the provisions of the RP Act dealing with caveats and those dealing with the recording of writs is observed, much of the difficulty apparently presented by the circumstances of this case is resolved. In particular, the purchasers under the contract of sale made with the judgment debtor had steps available under the RP Act which, if taken, would have prevented a purchaser at a subsequent sale made in execution of the writ obtaining registration as owner of the land. In addition, of course, a search of the Register conducted immediately before settlement would have revealed the recording of the writ. It also follows from this examination of the provisions of the RP Act that the bare fact that the purchasers made their contract of sale with the judgment debtor before the writ was recorded did not constitute any sufficient reason to intercept what otherwise would have been the operation of the RP Act. And, as noted earlier, it was the bare fact of making the contract before the writ was recorded that was treated as determinative by the majority in the Court of Appeal. Neither in the Court of Appeal nor on appeal to this Court did the purchasers seek to make some alternative case. In particular, it was not said that the judgment creditors' procuring of the recording of the writ was unconscientious and it was not said that the purchasers' completion of their contract with the judgment debtor put them in any better position than their making of the contract. Nor was anything said to turn on the provisions of s 43 of the RP Act33. 33 Section 43(1) provided: (Footnote continues on next page) Conclusion and orders For these reasons the appeal should be allowed with costs. The orders of the Court of Appeal of the Supreme Court of New South Wales made on 1 June 2006 should be set aside. In their place there should be orders: that the appeal to that Court is dismissed with costs; and that there be an inquiry into what damages, if any, the first to third respondents in the Court of Appeal (namely, Stuart Alexander Black, Vaughan Lee Chapman and Andrew Philip Carter) suffered by reason of either the injunction granted by Campbell J by order made on 7 October 2005 or the injunction granted by Basten JA by order made on 21 December 2005 which the appellants in the Court of Appeal (namely, Bryce Lachlan Garnock, Sarah Jane Garnock, Robert Leonard Luff and Lynette Anne Luff) ought to pay. "Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see to the application of the purchase money or any part thereof, or shall be affected by notice direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding; and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud." Callinan CALLINAN J. It used to be the practice of careful conveyancers, acting for persons acquiring registrable estates or interests in Torrens title land, to lodge with the officials in charge of the Register, a caveat as soon as the agreement for the relevant dealing was made, in pre-emptive protection of their clients' prospective legal estates or interests pending completion of their agreements and registration of the instruments perfecting them. It was a further practice of those conveyancers to effect the actual settlement of the agreement by the exchange of all relevant instruments and funds at that office, simultaneously with a search of the Register, to verify that no other such caveat or record of dealing had been lodged as might obstruct, delay or detract from the registration of their clients' instruments to perfect their estates or interests. The questions raised in this case would be unlikely to have arisen had those salutary practices not fallen into disuse, whether by reason of electronic recording of dealings or otherwise, although it is difficult to understand why some comparable prudent practice could not equally, and perhaps more easily, have been adopted here to accommodate electronic lodgment, searching and recording. The questions are as to the effect of the registration of a writ of execution, and the rights of purchasers whose transfer of Torrens title land was lodged subsequent to that. Facts On 17 September 2004 the appellants obtained judgment in the District Court of New South Wales for about $228,000 against the sixth respondent and her husband. Between 11 October 2004 and 19 August 2005 the appellants moved to bankrupt the sixth respondent and her husband, but later agreed to adjourn the hearing of the bankruptcy petition in exchange for assurances that the sixth respondent would sell property, including the Torrens title land in question here ("the land"), to raise funds to discharge their liabilities. On 15 July 2005 the sixth respondent and the first to fourth respondents ("the purchasers") exchanged contracts for the sale of the land for the sum of $1,000,000. A deposit of $100,000 was paid by the purchasers. On 19 August 2005 the sixth respondent's solicitors informed the appellants' solicitors that although settlement of the land would occur on 24 August 2005, the appellants would probably receive little of the proceeds. In consequence, on 23 August 2005, the appellants obtained a writ of execution from the District Court of New South Wales. The next day, the purchasers' solicitors made a search of the Register on which, until then, the writ of execution had not been registered. At about 9.20 am on 24 August 2005 the appellants' solicitors notified the purchasers' solicitors of the judgment in favour of the appellants, the currency of the bankruptcy proceedings, and that the Callinan appellants had obtained a charging order in respect of the deposit. To reinforce that caution, the first appellant told the principal of the purchasers' solicitors that the price of the land was less than its market value, that the purchasers were related to the sixth respondent, that there were creditors other than the appellants, and that they intended to try to prevent the sale. At the purchasers' solicitors' request, the appellants' solicitors provided, by facsimile to them, a copy of the charging order. Entry of the writ of execution on the Register was effected at 11.53 am on 24 August 2005 and settlement of the sale, without any intervening search of the Register, occurred almost two hours later. Case History The purchasers commenced proceedings in the Supreme Court of New South Wales on 28 September 2005 for orders that the appellants be restrained from executing the writ, cancellation of the recording of the writ, and related relief. On 7 October 2005 the purchasers were granted an interlocutory injunction to restrain execution, but on 2 December 2005 the Court (Lloyd AJ) dismissed the proceedings and discharged the interlocutory injunction. The purchasers appealed to the Court of Appeal of New South Wales which granted an interlocutory injunction to them subject to an undertaking as to damages: "THE COURT ORDERS THAT: 1. Upon the [purchasers], by their counsel, giving the usual undertaking in accordance with rule 25.8 of the Uniform Civil Procedure Rules 2005, the [appellants] and their servants and agents be restrained from executing registered Writ for Levy on Property AB718530 (Writ No 908/03) issued on 23 August 2005 against any of the land contained in Folios 2/594272, 109/658087 and 110/658088 and known as 'Wanaka' via Bombala, New South Wales pending determination of this appeal; The costs of this application be the [purchasers] costs in this appeal; The hearing of the appeal be expedited and listed on 22 February The purchasers' appeal to the Court of Appeal (Beazley and Ipp JJA, Basten JA dissenting) was successful. The decision of that Court was given on 1 June 2006. All of the judges considered the statutory position before 1976. Ipp JA, for the majority, observed that it had been settled law in New South Wales that a Sheriff's sale under a registered writ of execution could confer no greater interest upon a purchaser than the judgment debtor had at the time of registration. That is, the purchaser under a writ of execution took the land subject to all interests, Callinan registered or unregistered, which subsisted at the time of the registration of the writ: Coleman v De Lissa34. The underlying principle was that equitable interests could not be seized under a writ of fieri facias: Scarlett v Hanson35; Miller & Company v Solomon36. The issue, therefore, was whether the amendments to the Real Property Act 1900 (NSW) ("the Act") in 1976, introducing ss 105 to 105D, had the effect of reducing or postponing the rights of holders of equitable interests in land, whether they had caveated or not, during the period prescribed by the Act. The purchasers argued that their equitable interests in the land as purchasers under an unexecuted but enforceable contract were untouched by the registration of the writ: in substance that the amendments made no relevant changes to the law as it had been settled for many years. Ipp JA sought to reconcile s 105(1) of the Act, expressly providing as it does, that a writ does not create any interest in land, with s 112(1) of the Civil Procedure Act 2005 (NSW), which provides that a writ of execution "binds the land". He referred to, and effectively adopted the meaning of "binds" in its application to a writ for the sale of goods37: "A [writ of execution] 'binds' the execution debtor's goods ... from delivery of the writ to the Sheriff ... ; but this means only that no dealing with any of the goods which belong to the debtor when the writ becomes binding can alter the fact that they are goods which the writ requires the Sheriff to seize and sell. It gives the creditor neither property in the goods nor possession of them ... ." Ipp JA went on to say38: "[T]he 'binds the land' provision of s 112(1) of the Civil Procedure Act does not give the [appellants] priority of any kind over holders of equitable interests in the land. It follows that, subject to any provision to the contrary, express or implied, in the Real Property Act and the Civil 34 (1885) 6 LR (NSW) Eq 104. 35 (1883) 12 QBD 213. 37 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,868 [39], quoting Hall v Richards (1961) 108 CLR 84 at 91 per Kitto J, Dixon CJ and Windeyer J agreeing. 38 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,868 [40]. Callinan Procedure Act, the interests of holders of equitable interests in the land have priority over whatever rights may accrue to judgment creditors upon registration of a writ … ." His Honour was of the further opinion that the conferral of a power upon the Registrar-General, by s 105(3) of the Act, to refuse to record a writ when it appears that the land is held by the registered holder as a fiduciary, shows that the Parliament intended to protect the rights of holders of equitable interests39. To allow the construction advanced by the appellants would, his Honour said, be "strange" in light of the purpose of s 105(3)40. Accordingly, holders of equitable interests in property subject to a registered writ are entitled to orders to protect their interests notwithstanding the statutory scheme41. Ipp JA expressly followed a decision of the Full Court of the Supreme Court of Queensland in Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd42 which turned upon the meaning of s 35 of the Real Property Act 1877 (Qld)43. His Honour held that the insertion of ss 105-105D in 1976 did nothing to reduce the rights of holders of equitable interests in land to seek orders to protect their interests before registration of a transfer by the Sheriff. He was of the opinion that the amendment was intended to deal with the specific problem of sales at an undervalue at a Sheriff's sale; a problem that did not require "changes to legal and equitable principle otherwise than by the express terms of the amendments"44. Given, his Honour said, that courts will recognize equitable rights and estates except insofar as they are prevented from doing so by legislation45, the amendments were not to be interpreted to diminish the rights of the holders of equitable interests in this way. 39 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,868-59,869 [41]. 40 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,868-59,869 [41]-[42]. 41 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,869 [43]. 42 [1984] 2 Qd R 507. 43 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,869-59,871 [44]-[56]. 44 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,871 [60]. 45 Butler v Fairclough (1917) 23 CLR 78 at 91 per Griffith CJ. Callinan Basten JA, who was of a different mind, quoted from the Second Reading Speech of the responsible Minister for the Bill introducing the amendments46: "Since the commencement of the Real Property Act on 1st January 1863, it has generally been acknowledged that the machinery provided by that Act for giving effect to sales in execution has not worked effectively. The breakdown is largely due to a judicial decision in Coleman v De Lissa[47] in 1885 that, irrespective of the provisions of the Real Property Act, a transferee taking under a sale by the Sheriff or other court official selling pursuant to a writ of execution acquired only the beneficial interest of the execution debtor, burdened by any unregistered interests which might exist. The result of this judicial ruling has proved disastrous. Upon such a sale, because potential purchasers are buying an asset whose value cannot be ascertained, the maximum bid is usually a couple of dollars, not sufficient to cover the advertisement and conduct of the sale. As a result the judgment creditor usually gets nothing of the amount owing to him; the judgment debtor loses ownership of the land without any reduction of the judgment debt; a purchaser from the Sheriff or from the district court bailiff may get a windfall or more probably, if unregistered interests affect the land, gets nothing. The obvious solution is to provide, legislatively, that a purchaser at a sale in execution takes the estate or interest then appearing upon the register. The provisions of the Bill are designed to implement this principle." His Honour weighed up the competing considerations48: "There are, in principle, three different ways of approaching the legal issues raised in this case. The first, adopting the perspective of the judgment debtor and the Sheriff, is to ask at what point in time the power of the judgment debtor, as the registered proprietor of the land, to convey the land to a third party, is suspended and vested in the Sheriff (assuming for present purposes that the withdrawal and conferral of such powers occurs at the same moment). The second approach is to look at the matter from the point of view of a purchaser from the registered proprietor and ask whether the statutory scheme demonstrates a clear intention to deprive a bona fide purchaser for value of the benefit of the purchase, obtained from the registered proprietor at a time when her power to convey an 46 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,881 [122]. See New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 47 (1885) 6 LR (NSW) Eq 104. 48 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,882 [126]-[127]. Callinan estate in the land was unconstrained. The third approach, is to take the perspective of a Sheriff's purchaser, namely that, by relying upon the register, he or she had no reason to suppose that the Sheriff could not convey the title of the registered proprietor, as established by the register at the date on which the writ was recorded. There are two other perspectives which could be considered. One is that of the judgment creditor, who seeks to assert an entitlement to have the Sheriff sell the property, in knowledge of the existing equitable interest in the purchasers. Another is that of the Registrar-General, who may be invited to register a transfer to a Sheriff's purchaser, whilst a transfer to the purchasers from the registered proprietor is awaiting registration, being the document lodged earlier for registration. However, for present purposes these can be put to one side." Referring to apparent effect, Basten JA said49: "The apparent effect of these provisions is twofold. First, they preclude the purchaser for valuable consideration from the registered proprietor having his or her interest immediately recorded in the register, unless the application were lodged prior to the application to record the writ, or the transfer had the Sheriff's consent. Secondly, the Sheriff's purchaser will be entitled to have the transfer to him or her registered, pursuant to s 105A(1)(a) during the protected period. The purchasers from the registered owner will thus be pre-empted, unless they caveated their interest before the recording of the writ." "The answer to the purchasers' submission is not that they had no 'title' because they had no registered title … Rather, they did have a title but, until their interest was recorded under the Real Property Act, it remained defeasible by the registration of another interest which obtained the protection of s 42(1) of the Real Property Act. The effect of recording the writ was to allow the Sheriff to sell precisely that interest which was vested in the then registered proprietor, subject to any registered encumbrance, but free of any unregistered estate or interest." His Honour was influenced by the purpose of the amendments discernible from the Second Reading Speech and the language of the amendments themselves51: 49 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,882 [129]. 50 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,883-59,884 [137]. Callinan "Given that the very purpose of the 1976 Amendment Act was to allow a sale in execution of a writ by the Sheriff to defeat any unregistered interest in the land, it is perhaps unfortunate that the Parliament did not expressly provide for that consequence. Nevertheless, the consequence follows inexorably from the statutory scheme and must be accepted. Unregistered interests in Real Property Act land have always been defeasible by registration of another interest. Where the holder of the unregistered interest controls the certificate of title or otherwise believes that the registered proprietor will not seek to create a later inconsistent interest which may be registered, a caveat to protect the unregistered interest may be thought unnecessary. The statutory scheme with respect to the registration of writs of levy, subverts such comfortable assumptions, by vesting in a third party, who does not hold the certificate of title and is not on the register, a right and obligation to sell the land as validly and effectually as if by the registered proprietor, as described in s 115(1) of the Civil Procedure Act." Basten JA pointed out, correctly, that reliance by the majority on Austral Lighting52 was misconceived53: "With respect, that conclusion is true, so far as it goes, but it is beside the point. In neither case was the interest of the purchasers (or the mortgagee) recorded on the register prior to the recording of the writ. That part of s 35 dealing with interests notified by caveat was irrelevant even in Austral Lighting itself, because it was limited to caveats lodged 'prior to the date of the registration of the writ'. In the present case, the fact that the purchasers had a caveatable interest is beside the point, because they did not seek to lodge a caveat prior to the registration of the writ. The discussion … of Part 7A of the Real Property Act, dealing with caveats, does not relevantly advance the argument." His Honour summarized his conclusions in this way54: "On the reasoning set out above, the recording of the writ on the register prevented, for a period of six months, the registration of any prior interest acquired by the purchasers. The delivery of the writ to the Sheriff empowered that officer to sell the interest of the judgment debtor in the 51 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,884 [138]. 52 [1984] 2 Qd R 507. 53 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,884 [140]. 54 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,886 [153]-[154]. Callinan land, as recorded in the register under the Real Property Act, subject to such encumbrances as were recorded on the title at the date of the recording of the writ. The equitable interest of the purchasers, not being identified in a dealing lodged before the lodgement of the writ, became, upon lodgement of the writ, defeasible by a sale in execution of the writ within the protected period. Accordingly, the purchasers were not entitled to the relief they sought in the Equity Division. The appeal should be dismissed with costs." The Appeal to this Court The appellants' appeal to this Court has as its object the obtaining of damages pursuant to the detailed undertaking given by the purchasers pending the determination of the appeal to the Court of Appeal. The purposes and objects of the Torrens system of title were to simplify conveyancing, to introduce a greater assurance, indeed certainty, of title and in consequence to reduce the expense of establishing and protecting title under the old land titles system. In his Second Reading Speech for the Bill which introduced the Real Property Act 1857 (SA), the model for like legislation throughout Australia, Sir Robert Torrens said this55: "The system of retrospective or derivative title is the grand source of complication, uncertainty, and expense, attending the existing practice. Whenever real estate is transferred, the history of the property has to be traced back to the original grant from the Crown, through all the intermediate hands, every mortgage deed, release, conveyance, settlement, must be produced and carefully examined, to see that there are no outstanding equities affecting the title. This renders conveyancing a laborious and costly process; but if after the labour has been expended and the cost incurred, the fruits of it could be secured and held available for future occasions, we should not have so much to complain of. The grievance is, that this labour and outlay has to be repeated again and again each time the property is dealt with. The solicitor of an intending purchaser or mortgagee is not content to accept the opinion given after full enquiry by the solicitor of a recent purchaser, it may be, only ten days before. He too must be furnished with an abstract and examine all documents for himself, and this process must be gone over again and again every time the property is dealt with, each transaction adding to the 55 South Australia, Legislative Council, Parliamentary Debates (Hansard), 4 June Callinan labour and cost of the subsequent one and increasing the risk and uncertainty. The chain of evidence, however lengthened, is no stronger than its weakest link, and in proportion as documents of title are multiplied, so are the risks that in one of them, an important word may have been omitted or some formality in execution neglected. Heavy as are the certain costs of conveyancing, the contingent risks of expensive costs in law and equity inherent in the system of derivative titles is probably much more burdensome to the land owner. The first and leading principle of the measure which I introduce is therefore designed to cut off the very source of all costliness, insecurity, and litigation by abolishing altogether the system of retrospective titles, and ordaining that as often as the fee simple is transferred the existing title must be surrendered to the Crown, and a fresh grant from the Crown issued to the new proprietor. The principle next in importance prescribes that Registration per se and alone shall give validity to transactions affecting land. … This method is designed to give confidence and security to purchasers and mortgagees through the certainty that nothing affecting the title can have existence beyond the transactions of which they have notice in the memoranda endorsed on the grant." The other States quickly moved to enact similar legislation. Of the New South Wales Act, the Land Titles Registration and Transfer Act 1862 (NSW), the Attorney-General, Mr Hargrave said56: "The object of the former bills and of the present measure [is] to facilitate and simplify the transfer of landed property; and thus [save] the country the great trouble and expense incurred in conveyancing. Measures almost identical with that introduced by Mr Torrens in South Australia [have] been passed in Queensland, Victoria and Tasmania, and, with some variations, in New Zealand, and [I feel] bound to say [that] … the colony would be benefited by the adoption of Mr Torrens' system." The legislation has served the country very well. It has generally achieved all of the objects that its author had hoped that it would57. 56 The Sydney Morning Herald, Wednesday, 17 September 1862 at 3. 57 Sir Robert Torrens had become familiar with the system for registering ownership of and dealings with ships under merchant shipping legislation. Initially, he envisaged a system of land registration based solely on this shipping system; but in time the advice of others (notably Dr Ulrich Hübbe, a German-born lawyer living in Adelaide) persuaded him that amendments were needed, and the scheme eventually formulated was in fact modelled as much on the centuries old system of land registration in the Hanseatic towns (especially Hamburg) as on the merchant shipping system: see Butt, Land Law, 5th ed (2006) at 717-720 [2001]-[2004]. Callinan The principal way in which the legislation has achieved its objects has been the elevation of the Register above all else. The Register has the first and last word on all relevant titles and interests. In general, it operates on the basis of "first in first served". It would be unfortunate if the best of its features were to be eroded by electronic registration of dealings. The practices did vary between the States, but one useful feature was the notation in pencil on the relevant folio in the original book of titles at the Registrar-General's office of any instrument, almost immediately after it was lodged, but before it could be fully processed and registered. Inevitably, processing took some time and checking, but in the meantime the pencil notation, which could be erased on registration of the instrument, served as a notice to anybody searching the Register that a caveat or instrument had been lodged and could, on request, be inspected. Provision was generally made in essentially the same sorts of ways for the lodgment and noting of a caveat, not just to forbid registration of dealings not yet the subject of an instrument lodged with the Registrar, but also to serve as a notice to anybody interested in the land, and troubling to search the Register, that there was some other dealing or transaction on foot of which any interested person should be aware. I respectfully disagree therefore with the limited operation and purpose of a caveat which Barwick CJ sought to attribute to it in J & H Just (Holdings) Pty Ltd v Bank of New South Wales, in which he said58: "Its purpose is to act as an injunction to the Registrar-General to prevent registration of dealings with the land until notice has been given to the caveator. This enables the caveator to pursue such remedies as he may have against the person lodging the dealing for registration. The purpose of the caveat is not to give notice to the world or to persons who may consider dealing with the registered proprietor of the caveator's estate or interest though if noted on the certificate of title, it may operate to give such notice." That the provisions relating to caveats have utility for the two purposes is apparent from the provisions which I will relevantly set out: "74F Lodgment of caveats against dealings, possessory applications, plans and applications easements or extinguishment of restrictive covenants cancellation of for (1) Any person who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act may lodge with the Registrar-General a caveat prohibiting the recording of any 58 (1971) 125 CLR 546 at 552. Callinan dealing affecting the estate or interest to which the person claims to be entitled. (6) On the lodgment of a caveat under subsection (1), the Registrar- General must give notice in writing of the lodgment of the caveat to the registered proprietor of the estate or interest affected by the caveat … (7) In subsection (6), a reference to the registered proprietor in relation to an estate or interest referred to in that subsection includes a reference to a person who claims to be entitled to such an estate or interest under a dealing lodged in the office of the Registrar-General for recording in the Register. 74G Registrar-General to enter particulars of caveat lodged under section 74F in Register For the purpose only of acknowledging the receipt of a caveat lodged under section 74F, the Registrar-General shall, if satisfied that the caveat complies with the requirements made in respect of it by and under this Act, record in the Register such particulars of the caveat as the Registrar- General considers appropriate. 74H Effect of caveat lodged under section 74F (1) Subject to this section, while a caveat lodged under section 74F remains in force: (a) the Registrar-General must not, except with the written consent of the caveator: (i) record in the Register any dealing, … if it appears to the Registrar-General that the recording of the dealing … is prohibited by the caveat, and (b) the caveat does not have the effect of prohibiting: (i) the recording in the Register of a dealing, … except to the extent that the recording of such a dealing … would affect the estate, interest or right claimed in the caveat. Callinan (4) Where, at the time when a caveat is lodged under section 74F to protect a particular legal or equitable estate or interest in land, a dealing which relates to the same land has been lodged for recording in the Register and is in registrable form, the caveat does not prohibit the recording in the Register of that dealing. (5) Except in so far as it otherwise specifies, a caveat lodged under section 74F to protect a particular legal or equitable estate or interest in land … does not prohibit the Registrar-General from recording in the Register with respect to the same land: (f) a writ or the cancellation of the recording of a writ in accordance with section 105D, (g) in relation to a mortgage, charge or covenant charge recorded or lodged in registrable form before the lodgment of the caveat – a dealing effected by the mortgagee, chargee or covenant chargee in the exercise of a power of sale or other power or a right conferred by the mortgage, charge or covenant charge or by or under law, (h) in relation to a lease recorded or lodged in registrable form before the lodgment of the caveat – a dealing effected by the lessee pursuant to a right conferred by the lease or by or under law, (t) an application under section 74I(1) or (2), 74J(1) or 74JA(2) for the preparation of a lapsing notice, (y) a dealing by a lessor or sub-lessor recording the determination of a lease or sublease if the caveat is not recorded against the lease or sublease that is the subject of the determination, or (z) a dealing recording the bankruptcy of a registered proprietor. 74I Lapse of caveat where dealing etc subsequently lodged for recording (1) Whenever: (a) a dealing … is lodged with the Registrar-General for recording or registration, and Callinan (b) the recording of the dealing … is prohibited by a caveat that has been lodged under section 74F, the Registrar-General shall, on an application being made in the approved form by the registered proprietor or by any person who is or claims to be entitled to an estate or interest in the land to which the dealing … relates, prepare for service on the caveator a notice to the effect that the dealing … has been lodged for recording or registration and that, unless, before the expiry of 21 days after the date of service of the notice, the caveator has: (c) obtained from the Supreme Court an order extending the operation of the caveat for such further period as is specified in the order or until the further order of that Court, and (d) lodged with the Registrar-General the order or an office copy of the order, the caveat will (subject to evidence of due service of the notice on the caveator) lapse in accordance with subsection (5) and the dealing or plan will be recorded or registered. (3) The applicant must, within 4 weeks after the issue of the notice, lodge with the Registrar-General, in the form of a statutory declaration or such other form as the Registrar-General may accept, evidence of the due service of the notice on the caveator. (4) If the applicant does not comply with subsection (3), the Registrar- General: (a) may refuse to take any further action in connection with the notice prepared under subsection (1) or (2) (as relevant), or (b) may serve on the applicant a notice allowing a further 4 weeks from the date of issue of that notice for lodgment of the evidence and, if the evidence is not lodged within the further period, may refuse to take any further action in connection with the notice prepared under subsection (1) or (2) (as relevant). (a) the evidence required by subsection (3) is lodged within the time permitted by this section, and (b) the caveator has not lodged with the Registrar-General the order or office copy of the order referred to in subsection (1) or (2) (as the case may require) in accordance with the relevant subsection, Callinan the Registrar-General is to make a recording in the Register to the effect that the caveat has, to the extent that it would prohibit the recording of the dealing or the registration of the delimitation plan, or the granting of the possessory application, lapsed, and the caveat so lapses on the making of that recording. 74J Lapse of caveat on application of proprietor of estate or interest (1) Where a caveat lodged under section 74F remains in force, the Registrar-General shall, on an application being made in the approved form by the registered proprietor of an estate or interest in the land described in the caveat, prepare for service on the caveator a notice to the effect that, unless the caveator has, before the expiry of 21 days after the date of service of the notice: (a) obtained from the Supreme Court an order extending the operation of the caveat for such further period as is specified in the order or until the further order of that Court, and (b) lodged with the Registrar-General the order or an office copy of the order, the caveat will (subject to evidence of due service of the notice on the caveator) lapse in accordance with subsection (4). (2) The applicant must, within 4 weeks after the issue of the notice, lodge with the Registrar-General, in the form of a statutory declaration or such other form as the Registrar-General may accept, evidence of the due service of the notice on the caveator. (3) If the applicant does not comply with subsection (2), the Registrar- General: (a) may refuse to take any further action in connection with the notice prepared under subsection (1), or (b) may serve on the applicant a notice allowing a further 4 weeks from the date of issue of that notice for lodgment of the evidence and, if the evidence is not lodged within the further period, may refuse to take any further action in connection with the notice prepared under subsection (1). (a) the evidence required by subsection (2) is lodged within the time permitted by this section, and Callinan (b) the caveator has not lodged with the Registrar-General the order or office copy of the order referred to in subsection (1) in accordance with that subsection, the Registrar-General is to make a recording in the Register to the effect that the caveat has lapsed, and the caveat so lapses on the making of that recording. 74K Power of Supreme Court to extend operation of a caveat lodged under section 74F (1) Where a caveator is served with a notice prepared under section 74I(1) or (2), 74J(1) or 74JA(3), the caveator may prepare, in the manner prescribed by rules of Court, an application to the Supreme Court for an order extending the operation of the caveat. (2) Subject to subsection (3), on the hearing of an application made under subsection (1), the Supreme Court may, if satisfied that the caveator's claim has or may have substance, make an order extending the operation of the caveat concerned for such period as is specified in the order or until the further order of that Court, or may make such other orders as it thinks fit, but, if that Court is not so satisfied, it shall dismiss the application. (3) Unless the Supreme Court has made an order dispensing with service, it may not hear an application made under subsection (1) unless it is satisfied that all interested parties disclosed by the notice which gave rise to the application have been served with copies of the application before the hearing. (4) An order under subsection (2) may be made ex parte or otherwise. (5) When making an order under subsection (2), the Supreme Court may make such ancillary orders as it thinks fit. 74MA Application to Court for withdrawal of caveat (1) Any person who is or claims to be entitled to an estate or interest in the land described in a caveat lodged under section … 74F may apply to the Supreme Court for an order that the caveat be withdrawn by the caveator ... (2) After being satisfied that a copy of the application has been served on the person who would be required to withdraw the caveat if the order Callinan sought were made or after having made an order dispensing with service, the Supreme Court may: (a) order the caveator or another person, who by virtue of section 74M is authorised to withdraw the caveat to which the proceedings relate, to withdraw the caveat within a specified time, and (b) make such other or further orders as it thinks fit. (3) If an order for the withdrawal of a caveat is made under subsection (2) and a withdrawal of the caveat is not, within the time limited by the order, lodged with the Registrar-General, the caveat lapses when an office copy of the order is lodged with the Registrar-General after that time expires. 74O Restrictions on lodgment of further caveats if earlier caveat lapses or is withdrawn (1) This section applies if a caveat lodged under a provision of this Part in respect of any particular estate or interest in land … : (a) subsequently lapses, or (b) is, after an application is lodged with the Registrar-General for the preparation of a notice under section 74C(3), 74I(1) or (2), 74J(1) or 74JA(3), withdrawn under another provision of this Part, or (c) is withdrawn or lapses under section 74MA, and the same caveator lodges a further caveat with the Registrar-General in respect of the same estate, interest or right and purporting to be based on the same facts as the first caveat. (2) A further caveat to which this section refers has no effect unless: (a) the Supreme Court has made an order giving leave for the lodgment of the further caveat and the order or an office copy of the order accompanies the further caveat when it is lodged with the Registrar-General, or (b) the further caveat is endorsed with the consent of the primary applicant or possessory applicant for, or the registered proprietor of, the estate or interest affected by the further caveat. 74P Compensation payable in certain cases (1) Any person who, without reasonable cause: Callinan (a) lodges a caveat with the Registrar-General under a provision of this Part, (b) procures the lapsing of such a caveat, or (c) being the caveator, refuses or fails to withdraw such a caveat after being requested to do so, is liable to pay to any person who sustains pecuniary loss that is attributable to an act, refusal or failure referred to in paragraph (a), (b) or (c) compensation with respect to that loss. (2) Compensation referred to in subsection (1) is recoverable in proceedings taken in a court of competent jurisdiction by the person who claims to have sustained the pecuniary loss. (3) A person who is a caveator is not entitled to bring proceedings under subsection (1)(b) if that person, having had an opportunity to do so, has failed to take all reasonable steps to prevent the caveat from lapsing. 74Q Registrar-General not obliged to ensure that caveator is entitled to the subsisting estate or interest claimed in a caveat Except to the extent of ensuring that a caveat lodged under a provision of this Part apparently complies on its face with the requirements of this Part and with the requirements of any regulations made for the purposes of this Part, the Registrar-General is not required to be satisfied that the caveator is in fact entitled to the estate or interest claimed in the caveat or otherwise as to the validity of the caveat. 74R Right to obtain injunction not affected In relation to a caveat lodged under a provision of this Part, nothing in this Part shall be construed as preventing or restricting the caveator from applying for and obtaining from the Supreme Court an injunction for the purpose of: (a) where the caveat relates to land that is the subject of a primary application – restraining the Registrar-General from bringing the land under the provisions of this Act, (b) where the caveat relates to the recording of dealings – restraining the Registrar-General from recording a dealing the recording of which is prohibited by the caveat, (c) where the caveat relates to a possessory application – restraining the granting of the possessory application, Callinan (d) where the caveat relates to a delimitation plan – restraining the Registrar-General from registering the delimitation plan, or (e) where the caveat relates to an application for the cancellation of the recording of an easement – restraining the cancellation of the recording of the easement, or (f) where the caveat relates to an application for the extinguishment of a restrictive covenant – restraining the extinguishment of the restrictive covenant." (emphasis added) It can be seen from those provisions that the Act contains a complete code for the lodgment, recording, maintenance, removal, renewal and lapsing of caveats. They mesh neatly with the system of registration of titles and dealings generally. In doing so, they also give effect to the purposes of the Act and the means by which it gives priority to instruments according to their time of lodgment. The provisions of the Act to which I referred in Hillpalm Pty Ltd v Heaven's Door Pty Ltd59, s 31B(2) defining the "Register" to include "dealings registered … under this or any other Act", and s 32(7) which requires the Registrar-General to maintain a record of "action taken in respect of, a computer folio and such other information, if any, relating to the folio as the Registrar- General thinks fit" similarly reflect the policy of the Act, of comprehensive notification to, and on the Register. In J & H Just (Holdings) Barwick CJ also said this60: "To hold that a failure by a person entitled to an equitable estate or interest in land under the Real Property Act to lodge a caveat against dealings with the land must necessarily involve the loss of priority which the time of the creation of the equitable interest would otherwise give, is not merely in my opinion unwarranted by general principles or by any statutory provision but would in my opinion be subversive of the well recognized ability of parties to create or to maintain equitable interests in such lands. Sir Owen Dixon's remarks in Lapin v Abigail[61] with which I respectfully agree, point in this direction." I must respectfully disagree. What is much more likely to be subversive of the whole of the scheme of the Torrens system is that a person interested in, or entitled to deal with, land, who has not acted fraudulently, might suddenly and 59 (2004) 220 CLR 472 at 509-510 [117]. 60 (1971) 125 CLR 546 at 554. 61 (1930) 44 CLR 166 at 205. Callinan unexpectedly be saddled with, or postponed to, an equitable estate or interest in land which could have been, but was not made the subject of protection by prompt lodgment of an instrument or the filing of a caveat pending the lodgment. I am not speaking of course about a contest between two holders of competing equitable interests or estates, neither of whom has thought to avail himself of either of the statutory means of protection of his interest that I have just mentioned. Subject to other registered estates or interest, their respective entitlements will fall to be adjusted according to ordinary equitable and proprietary principles. It is critical to keep in mind, in cases concerning land under the Torrens system, that, as Barwick CJ said on another occasion and Gummow and Hayne JJ repeat in this case62: "The Torrens system of registered title of which the Act is a form is not a system of registration of title but a system of title by registration." No one doubts that the purchasers here could have lodged a caveat immediately after the exchange of contracts. That they had that right, and that upon doing so an appropriate notation on the Register would have served as a notice to all others of their dealing with the land, is accepted on all sides. It is unnecessary in this case to define precisely the nature of their interest after the contracts were exchanged: whether it was an actual equitable interest in the land, or an interest measurable by their right, conditional or otherwise, to obtain specific performance, or whether it was an interest commensurate with the deposit that they paid, does not matter: on any view it gave rise to a caveatable interest63. The fact that the purchasers might have protected themselves by lodging a caveat here may not be decisive of this case, but that the Act enabled them to do so, and also provided for a comprehensive pubic register of information relating to the folio to which they could have had timely recourse to protect themselves, are factors relevant to the proper construction and reconciliation of the two enactments governing the respective rights and interest of the parties. I do not think it is any answer to say, in relation to the omissions of the purchasers, and to other matters to which I will refer, that, effectively, the interdiction against the registration of their interest by grant of an injunction of 62 Breskvar v Wall (1971) 126 CLR 376 at 385. 63 See KLDE Pty Ltd v Commissioner of Stamp Duties (Qld) (1984) 155 CLR 288 at 296-297 per Gibbs CJ, Mason, Wilson and Dawson JJ. Callinan the court is to be equated with, and is no different from, a caveat, and that therefore they should be entitled to registration without regard to, and not subject to, a, or the, writ of execution. An injunction does not serve as a general notice to all the sufficiently interested world, as a caveat does. An injunction may not be noted on the Register as a caveat may be. An injunction is not to be elevated to the same level as a caveat. The lodgment of a caveat does not preclude the seeking and granting, in an appropriate case, of an injunction as the provisions which I have set out show: in any event, an injunction, to be effective, needs to be sought and obtained with the same expedition as the lodgment of a caveat. The relevant legislation which is analyzed in the judgment of Gummow and Hayne JJ makes it clear, that although writs of execution do not create proprietary interests in land, they are capable of registration on the title and, for the period of their effective subsistence, confer rights upon the Sheriff to deal with the land by and on the face entirely of the Register. It is therefore of no relevance that the judgment which founds the writ may not in any particular case be for a large sum of money. I pointed out earlier that the majority in the Court of Appeal were influenced in reaching their conclusion by the Queensland case of Austral Lighting64. In that case the Full Court of Queensland (Connolly J, Campbell CJ and Demack J agreeing) considered s 35 of the Real Property Act 1877 (Qld) which provided that a transfer, in consequence of a sale under a writ of execution, "shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Registrar-General prior to the date of the registration of the writ of execution and to all other encumbrances liens and interests notified by memorandum entered on the register". It seems to me that there Connolly J failed, in the same way as the majority in the Court of Appeal did here, to give full effect to the words in the section that any transfer pursuant to a Sheriff's sale "shall be subject to all equitable mortgages and liens notified by any caveat lodged with the Register- General prior to the date of the registration of the writ of execution and to all other encumbrances liens and interests notified by memorandum entered on the register". All of this is to emphasize the importance of lodgment, and the priority that it confers. It also clearly implies that nothing lodged after the registration of the writ is to affect the title that the sale under the writ will pass, because it is only after lodgment, the step leading to notification, that "other encumbrances liens and interests" can be entered on the Register. To take the view of Connolly J that resort to the Court for protection and priority of an equitable interest should be available regardless that the writ of 64 [1984] 2 Qd R 507. Callinan execution has earlier been recorded on the Register, is to fail to give effect to the clear purposes of the legislation to clarify, provide certainty and avoid litigation65, and indeed to the language of the section itself. For these, and the reasons given by Gummow and Hayne JJ, I would allow the appeal and join in the orders proposed by them. 65 [1984] 2 Qd R 507 at 511. Crennan CRENNAN J. This is an appeal from a decision of the New South Wales Court of Appeal66 in which a majority (Beazley and Ipp JJA; Basten JA dissenting) upheld an appeal by the present first to fourth respondents from orders made by a judge in the Equity Division of the Supreme Court (Lloyd AJ)67 refusing to grant them relief against the present appellants. As the purchasers for valuable consideration68 of a rural property, Wanaka, the first to fourth respondents ("the purchasers") were unable to register the transfer after completion under the Real Property Act 1900 (NSW) ("the Act"). This was because a writ for levy of the property69 in respect of a total amount of $243,106.60 had been recorded in the Register on behalf of the appellants ("the judgment creditors") just over two hours before completion. In those circumstances, the purchasers sought to restrain any sale in execution of the writ together with related relief, until such time as their interest could be registered. The purchasers obtained an interlocutory judgment on 7 October 2005 before Campbell J upon the usual undertaking as to damages70. The injunction permitted the sheriff to take certain preliminary steps towards selling under the writ71, stopping short of fixing a date for sale72. On 2 December 2005, Lloyd AJ discharged that interlocutory judgment and dismissed the purchasers' summons73. A further interlocutory injunction was obtained pending an appeal to the Court of Appeal of New South Wales74. On the upholding of the appeal, the Court of Appeal enjoined the judgment creditors from executing the writ for 60 days75, 66 Garnock v Black (2006) NSW ConvR ¶56-158. 67 Garnock v Black (No 2) [2005] NSWSC 1218. 68 The price was $1,000,000.00. 69 See Pt 8 of the Civil Procedure Act 2005 (NSW). 70 Set out in Uniform Civil Procedure Rules 2005 (NSW), r 25.8. 71 Those permitted under Uniform Civil Procedure Rules 2005 (NSW), r 39.22(1)(a)-(d). 72 Garnock v Black [2005] NSWSC 1052. 73 Garnock v Black (No 2) [2005] NSWSC 1218. 74 Garnock v Black [2005] NSWCA 475. 75 Garnock v Black (2006) NSW ConvR ¶56-158. Crennan which had the effect that the transfer of land to the purchasers was able to be registered. Before the introduction of ss 105-105D into the Act in 197676 ("the 1976 provisions"), a transferee of land pursuant to a sale by the sheriff in execution of a writ acquired the beneficial interest of the judgment debtor subject to all interests, including unregistered interests, which subsisted at the time of the entry of the writ77. In an article dealing with the legislation as it was and remained until the 1976 provisions, Professor Sykes described the position of purchasers who acquired an interest in land before a writ was recorded78: "if a transaction conferring a proprietary interest came into existence before date of service or entry of writ it would be of no moment that the registrable instrument embodying it did not come into existence until afterwards. Thus if the debtor has agreed to sell the land before entry of writ it would not affect the priority of the purchaser that the transfer by him was executed only after such date." Whilst the 1976 provisions are not entirely free of obscurities, s 105B(2) provides that, subject to certain exceptions, a transferee of land pursuant to a sale by the sheriff in execution obtained an indefeasible title free of all estates and interests. However, the question which arose for determination on this appeal in respect of the facts set out immediately below was whether the holders of an unregistered equitable interest in the land, acquired by them prior to the recording of the writ, were entitled (prior to any sale by the sheriff) to the injunctive and declaratory relief granted by the Court of Appeal79. 76 By the Real Property (Amendment) Act 1976 (NSW), Sched 10; there were other provisions introduced by that Act. 77 Coleman v De Lissa (1885) 6 LR (NSW) Eq 104 at 111; Re Elliot (1886) 7 LR (NSW) 271 at 276 per Martin CJ; Smith v Deane (1889) 10 LR (NSW) Eq 207 at 209 per Owen CJ in Eq; Johnson v Johnson (1904) 4 SR (NSW) 585 at 588-589; Re Retallack and Real Property Act (1911) 11 SR (NSW) 332 at 333; In re Broughton (1916) 17 SR (NSW) 29 at 32; Bruce v Woods [1951] VLR 49 at 53. See also Sykes and Walker, The Law of Securities, 5th ed (1993) at 513-518. 78 Sykes, "The Effect of Judgments on Land in Australia: Part II", (1953) 27 Australian Law Journal 306 at 311. 79 Garnock v Black (2006) NSW ConvR ¶56-158. Crennan The facts On 15 July 2005 contracts were exchanged between the sixth respondent, Marilyn Smith, and the purchasers for the sale of Wanaka, being some 1,600 acres at South Bukalong, near Bombala, New South Wales. A deposit of $100,000 was paid. The purchasers did not lodge a caveat against dealings with the land, as they were entitled, but not obliged, to do under s 74F(1) of the Act80. Had the purchasers lodged a caveat that circumstance would not have prohibited the Registrar-General from recording a writ in the Register in respect of the same land (s 74H(5)(f))81. Some ten months earlier, on 17 September 2004, the judgment creditors had obtained judgment in the District Court of New South Wales in the sum of approximately $228,000 against the sixth respondent, Marilyn Smith (then the registered proprietor of Wanaka), and her husband, Peter Smith. Between October 2004 and August 2005 the judgment creditors used various processes in order to enforce the judgment debt. During this time, there was correspondence between the judgment creditors and Marilyn and Peter Smith to the effect that the latter would use the interests in Wanaka and their interests in another rural property, Toorallie, to meet the judgment debt. On 26 July 2005, Marilyn and Peter Smith's legal representatives advised the judgment creditors' solicitor of the abovementioned exchange of contracts between the purchasers and the sixth respondent and also advised that settlement was to occur on 26 August 2005. That date was brought forward to 24 August 2005. 80 Under s 74F(1) of the Act a caveat may be lodged by "[a]ny person who, by virtue of any unregistered dealing or by devolution of law or otherwise, claims to be entitled to a legal or equitable estate or interest in land under the provisions of this Act". See also Butt, Land Law, 5th ed (2006) at 736 [2028]. 81 Section 74H(5) provides: "Except in so far as it otherwise specifies, a caveat lodged under section 74F to protect a particular legal or equitable estate or interest in land, or a particular right arising out of a restrictive covenant, does not prohibit the Registrar-General from recording in the Register with respect to the same land: (f) a writ or the cancellation of the recording of a writ in accordance with section 105D". Crennan Then on 19 August 2005 Marilyn and Peter Smith's legal representatives advised the judgment creditors' solicitor that, following settlement, "funds will not be available to pay your client in full". On 23 August 2005 at about 4.53 pm the judgment creditors obtained a writ for levy of the property in the District Court of New South Wales which was enforceable against any property owned by Marilyn and Peter Smith situated in New South Wales. The events which took place the next day, 24 August 2005, and their sequence, are important. At 8.53 am the solicitor for the purchasers conducted a title search for Wanaka, the settlement being set down for 11.00 am. The search revealed prior encumbrances: two mortgages, a lender's caveat and a leasehold interest. A special condition in the contract provided that the lease registered on the title "must be surrendered on or before completion". The lease was surrendered on 24 August 2005 on payment of consideration of $109,258.19. That same morning the judgment creditors obtained a charging order against the deposit ("the charging order"). At about 9.30 am the judgment creditors' solicitor made a telephone call to the purchasers' solicitor. He advised her that he acted for the judgment creditors in relation to the judgment debt owed to them by Marilyn and Peter Smith, that a bankruptcy notice had been issued against Marilyn Smith, that the sale of Wanaka might be set aside if completed and that the charging order had been obtained. However, he did not notify her of the writ. She then conducted a bankruptcy search for Marilyn Smith at about 9.48 am. No entries were disclosed. She requested, and the judgment creditors' solicitor provided, a copy of the charging order between about 10.40 am and the writ was approximately 11.30 am the Registrar-General to be recorded in the Register, which occurred at about 11.53 am. At about 12.15 pm the purchasers' solicitor sent a facsimile to the judgment creditors' solicitor notifying him that she had received instructions to proceed to settlement which had been delayed in the abovementioned circumstances. The purchase was completed at about 2.00 pm. The proceeds of the balance of the purchase price were paid to discharge various encumbrances. lodged with The purchasers' solicitor obtained the documents received on completion from her Sydney agent on 25 August 2005 and forwarded these to her Sydney registration agents, Lawpoint Galloways, the following day. The writ was delivered to the sheriff on 26 August 2005. On 8 September 2005 Lawpoint Galloways informed the purchasers' solicitor that they had been unable to register the transfer as the writ was recorded on the Register. On 9 September 2005 the purchasers applied to lodge a caveat, the legal effect of which would have been Crennan to obtain "a statutory injunction"82. The recording of the writ precluded this course. On 28 September 2005 the purchasers commenced proceedings in the Supreme Court of New South Wales (Equity Division) to enjoin the judgment creditors and their agents from executing the writ and for ancillary declaratory relief. The ensuing controversy between the purchasers, as holders of an unregistered equitable interest in the land, and the judgment creditors, who had the benefit of a writ for levy of the property recorded on the Register, involved questions of statutory construction. While the parties construed the purposes of the 1976 provisions differently, and contended for different interpretations of s 105A(2), there was no dispute about certain uncontroversial principles, with which one commences a consideration of the submissions on the appeal. It was accepted that the Torrens system is a system of "title by registration"83 and that indefeasibility of title was "the foundation of the Torrens system of title"84. It was also not in dispute that the purchasers had a "caveatable interest" in Wanaka once they had exchanged contracts and paid the deposit of $100,00085 thereby, before completion, acquiring an equitable interest in land commensurate with what a court of equity would order to enforce the contract by way of specific performance86, injunction or otherwise87. 82 Hall v Richards (1961) 108 CLR 84 at 92 per Kitto J. 83 Breskvar v Wall (1971) 126 CLR 376 at 384 per Barwick CJ. 84 Bahr v Nicolay (No 2) (1988) 164 CLR 604 at 613 per Mason CJ and Dawson J. 85 Woodman and Nettle, The Torrens System in New South Wales, 2nd ed (2003) at [74F.100]; Butt, Land Law, 5th ed (2006) at 736 [2028]. 86 Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 334 [56] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ. 87 Chan v Cresdon Pty Ltd (1989) 168 CLR 242 at 253 per Mason CJ, Brennan, Deane and McHugh JJ; Stern v McArthur (1988) 165 CLR 489 at 522 per Deane and Dawson JJ; Legione v Hateley (1983) 152 CLR 406 at 446 per Mason and Crennan Background to the legislation As they were entitled to do88, the judgment creditors relied on the explanation of the purpose of the 1976 provisions given by the Minister for Lands, in the Second Reading Speech89: "Since the commencement of the Real Property Act on 1st January, 1863, it has generally been acknowledged that the machinery provided by that Act for giving effect to sales in execution has not worked effectively. The breakdown is largely due to a judicial decision in Coleman v De Lissa in 1885 that, irrespective of the provisions of the Real Property Act, a transferee taking under a sale by the sheriff or other court official selling pursuant to a writ of execution acquired only the beneficial interest of the execution debtor, burdened by any unregistered interests which might exist. The result of this judicial ruling has proved disastrous. Upon such a sale, because potential purchasers are buying an asset whose value cannot be ascertained, the maximum bid is usually a couple of dollars, not sufficient to cover the advertisement and conduct of the sale. As a result the judgment creditor usually gets nothing of the amount owing to him; the judgment debtor loses ownership of the land without any reduction of the judgment debt; a purchaser from the sheriff or from the district court bailiff may get a windfall or more probably, if unregistered interests affect the land, gets nothing. The obvious solution is to provide, legislatively, that a purchaser at a sale in execution takes the estate or interest then appearing upon the register. The provisions of the bill are designed to implement this principle." The Minister for Lands also said "the priority of the interest taken by a purchaser at a sale under a writ attaches at the time of the sale"90. Coleman v De Lissa91 concerned a priority contest between the plaintiff who was sold land by the registered proprietor under the Torrens system and failed to have the transfer registered, and a defendant who had purchased the property at a sale conducted by the sheriff pursuant to a writ. It was held that at 88 See s 34 of the Interpretation Act 1987 (NSW). 89 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 1976 at 1293. 90 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 1976 at 1294. 91 (1885) 6 LR (NSW) Eq 104. Crennan the time of the sale by the sheriff, the registered proprietor had already disposed of her interest in the land92. Prior to the enactment of the 1976 provisions, whilst a purchaser at a sheriff's sale obtained the benefits of indefeasibility in accordance with s 42 of the Act, according to the decision in Coleman v De Lissa such a purchaser was at risk of losing priority to the holder of an unregistered prior interest in the period between acquiring the property at a sheriff's sale and registration of the transfer from the sheriff. Thus the Minister for Lands envisaged much better "machinery" provisions designed to ensure that a purchaser at a sheriff's sale obtained priority over unregistered prior interests so as to encourage such a purchaser to offer full value at such a sale. The legislation It is convenient to extract the following applicable provisions93: "105 Recording of writ in Register (1) A writ, whether or not it is recorded in the Register, does not create any interest in land under the provisions of this Act. (3) Where application is made under subsection (2) for the recording of a writ and it appears to the Registrar-General that the land to which the application relates is held by the the registered proprietor Registrar-General may refuse to record the writ unless it is proved to the Registrar-General's satisfaction that the writ was issued pursuant to a judgment against the registered proprietor in that fiduciary capacity. fiduciary capacity (6) Where, at the time of lodgment of an application for the recording of a writ, a dealing for valuable consideration affecting the land … is awaiting registration and is in registrable form, the Registrar-General shall not record the writ [subject to exceptions of no relevance here]. 92 (1885) 6 LR (NSW) Eq 104 at 111. 93 As they stood at 24 August 2005 when the writ was recorded. Crennan 105A Effect of recording writ (2) Where a writ is recorded under section 105 and a dealing (other than a dealing to which, by the operation of subsection (1), this subsection does not apply) that affects the land to which the recording relates is lodged for the registration within Registrar-General shall not, during the protected period, register the dealing unless the writ is referred to in the dealing as if it were a prior encumbrance.94 protected period, the (6) Where a writ recorded under section 105 has not, within the protected period, been executed by sale of the land to which the recording relates, a dealing with that land lodged for registration before the writ is so executed may be registered notwithstanding the recording of the writ. In this section, protected period, in relation to a writ, means the period: that begins when the writ is recorded in the Register, and that ends at the expiration of 6 months after the writ is recorded in the Register, or on the expiration of the writ, whichever first occurs. 105B Registration of transfer pursuant to sale under writ (2) Upon the registration of a transfer referred to in subsection (1) [a transfer pursuant to a sale under a writ], the transferee holds the land transferred free from all estates and interests except such as: 94 Section 105A(1)(a)-(r) sets out numerous exceptions to the provisions of s 105A(2), none of which, in terms, cover the position of the purchasers here. Crennan are recorded in the relevant folio of the Register or on the relevant registered dealing, are preserved by section 42, and [not presently relevant]." It can also be noted that whereas custody of a certificate of title can protect holders of an unregistered interest95, s 105B(1) permits registration of a transfer from the sheriff without the production of a certificate of title. Section 105C provides for lapsing of the writ, and s 105C(1) provides that upon registration of a transfer or dealing for valuable consideration of the land affected by the recording of a writ (such as the purchasers here), the writ lapses unless the transfer or dealing refers to the writ as a prior encumbrance. Section 105D provides for the cancellation of the recording of a writ. The controversy Relying on s 105A(2), the primary judge concluded that having recorded the writ, which precluded the purchasers from registering their interest during the protected period, the judgment creditors were entitled to have the sheriff effect a sale in accordance with the statutory procedures laid down in ss 105-105D. On the purchasers' appeal, the majority in the Court of Appeal (Ipp JA with whom Beazley JA agreed) found that none of the 1976 provisions relied on by the judgment creditors expressly or impliedly prevented the purchasers, prior to a sale by the sheriff, from taking action to protect their equitable interest by restraining the judgment creditors and their agents from proceeding with a sale96. This conclusion was based on the Court's ability to "recognize equitable estates and rights except so far as they are precluded from doing so by the Statutes"97. Another consideration was that s 105(3) of the Act (providing that the Registrar-General may refuse to record a writ where it appears the land was held by the registered proprietor in a fiduciary capacity) signified an intention on the part of the legislature to protect equitable interests such as the interest obtained on an exchange of contracts98. The majority approved the opinion of Connolly J 95 As, for example, in J & H Just (Holdings) Pty Ltd v Bank of New South Wales (1971) 125 CLR 546. 96 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,871-59,872 [60]-[64]. 97 Butler v Fairclough (1917) 23 CLR 78 at 91 per Griffith CJ. 98 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,868-59,869 [41]-[42]; Tanwar Enterprises Pty Ltd v Cauchi (2003) 217 CLR 315 at 331 [48] per Gleeson CJ, (Footnote continues on next page) Crennan in Commonwealth Trading Bank of Australia v Austral Lighting Pty Ltd99 ("Austral Lighting") dealing with a priority contest between a holder of an unregistered interest and a judgment creditor on whose behalf a writ had been recorded. The relevant provision100, different in terms from s 105B(2), provided that a registered transfer pursuant to a sheriff's sale was subject to equitable interests notified by caveat. like s 105A(2) was under No provision consideration. In circumstances where the holder of a prior interest failed to lodge a caveat, Connolly J held that the holder of an unregistered interest created prior to the lodgment of the writ of execution may set up that interest against a judgment creditor until a sheriff's transfer has been registered101. Basten JA, dissenting, held that although the purchasers' interest in Wanaka arose prior to that of the judgment creditors, this is irrelevant under the statutory scheme set up by the 1976 provisions. He concluded that the purchasers' interest was to be treated like any other equitable interest not recorded on the Register, and would be defeasible by a sale by the sheriff during the statutory "protected period"102. His Honour said the purchasers' argument reflected the position before the 1976 provisions, as explained by Professor Sykes103, and he regarded Austral Lighting104 as a clear statement of accepted principle before the 1976 provisions105. Basten JA said the clear legislative intention of the 1976 provisions "was to allow a Sheriff's purchaser to take, through the Sheriff, the interest of the registered proprietor, subject to whatever limitations or encumbrances might be recorded on the register, but without the risk of unregistered interests taking priority"106. McHugh, Gummow, Hayne and Heydon JJ; KLDE Pty Ltd v Commissioner of Stamp Duties (Q) (1984) 155 CLR 288 at 296 per Gibbs CJ, Mason, Wilson and 99 [1984] 2 Qd R 507. 100 Real Property Act 1877 (Q), s 35. 101 [1984] 2 Qd R 507 at 511-512. 102 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,886 [153]. 103 Sykes, "The Effect of Judgments on Land in Australia: Part II", (1953) 27 Australian Law Journal 306. 104 [1984] 2 Qd R 507. 105 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,885 [143]. 106 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,883 [132]. Crennan The submissions in this Court The judgment creditors adopted the reasoning and conclusions of Basten JA in the Court of Appeal and contended that the purchasers were not entitled to protect their unregistered interest in the land by an injunction. The effect of this was to defeat the "interest" of the judgment creditors arising from the recording of the writ. The interest of the judgment creditors was said to be an interest, not in the land, but an interest which enables a statutory process to take place culminating in title107. It was submitted that the 1976 provisions constituted a statutory scheme, the purpose of which was to enable the sheriff to transfer to a purchaser at a sheriff's sale a title unencumbered by unregistered interests. Section 105A(2) was relied on to support that submission as it precluded the purchasers from recording their interest in "the protected period" described as the period during which their interest was defeasible by the registration of an interest obtained from a sale by the sheriff. The judgment creditors construed s 105B(2) as evincing a legislative intention to alter, not only the interests and right of holders of unregistered equitable interests after the registration of transfer to the sheriff's purchaser, but also to prevent holders of unregistered equitable interests from asserting their interest against a judgment creditor during the protected period. The purchasers contended that s 105A(2) did not have the significance ascribed to it by the judgment creditors. It was submitted that s 105A(2) did not give the judgment creditors any entitlement to insist upon a sale by the sheriff which would defeat unregistered estates or interests created prior to the recording of a writ. It was asserted that the fact that s 105A(2) deferred registration of the purchaser's entitlement did not deny the entitlement. It was submitted that nothing in the 1976 provisions conferred some priority or "indefeasibility of title" upon a judgment creditor. Rather, it was submitted that the purpose of s 105B(2) was to confer on a transferee from the sheriff, indefeasibility of title corresponding with that generally afforded by s 42; and it was this aspect of the statutory scheme which constituted the "reform" envisaged by the Minister. It was contended, more generally, that the statutory scheme evinced in the 1976 provisions simply provided machinery whereby steps towards a sale by the sheriff in execution of a writ could be taken in an orderly manner. Section 112(1) of the Civil Procedure Act 2005 (NSW) ("the CPA"), which provides that a writ of execution "binds" the land from the time the writ is delivered to the sheriff, was relied on as complementing these submissions. Further, it was said that the interpretation of s 105B(2) for which the purchasers contended was reinforced by s 43A of the Act and s 115(1) of the CPA. 107 This accords with the description by Kitto J of the interest of a judgment creditor after a seizure of property by the sheriff in Hall v Richards (1961) 108 CLR 84 at Crennan The question Simply stated, the question on the appeal to this Court was whether the purchasers were entitled to an injunction, before a sale to any other purchaser, to restrain the judgment creditors and the sheriff from execution of the writ which was recorded on the Register, after the purchasers had acquired an interest in the land, but before they had registered that interest. In the reasons which follow considerations of the purpose108 of the 1976 provisions, their context109, which includes consideration of the prior state of the law, the mischief which the provisions were intended to remedy110 and fairness111 lead to the conclusion that the result in the Court of Appeal should be upheld. The appeal to this Court should be dismissed. The interest of the judgment creditors – s 105(1) Section 105(1) of the Act makes it clear that a writ, recorded or not, does not create any proprietary interest in a judgment creditor. The ownership of the land passes from the judgment debtor to any purchaser via the sheriff, who has the power under the CPA to enter into possession of and sell the land112. Section 112(1) of the CPA complements s 105(1) by providing that a writ delivered to the sheriff "binds" the land. As explained by Kitto J in Hall v Richards113 a "binding" of property mentioned in a writ occurs both with the delivery of a writ to the sheriff and the actual seizure of the property by the sheriff. "Binding" means that no dealing with the property by the judgment 108 Section 33 of the Interpretation Act 1987 (NSW) provides "[i]n the interpretation of a provision of an Act … a construction that would promote the purpose or object underlying the Act … (whether or not that purpose or object is expressly stated in the Act …) shall be preferred to a construction that would not promote that purpose or object." 109 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 368 [21] per Brennan CJ, 381 [69] per McHugh, Gummow, Kirby and Hayne JJ. 110 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 384 [78] per McHugh, Gummow, Kirby and Hayne JJ. 111 Dixon CJ pointed out in Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 that "fairness" is one of the guides to the meaning of legislative provisions. 112 Sections 106(2)(d), 114 and 115 of the CPA. 113 (1961) 108 CLR 84 at 91. Crennan debtor when the writ becomes "binding" can alter the fact that the property referred to in the writ is that which the sheriff is required to seize and sell. Seizure places the property in custodia legis. As Kitto J explained, "[b]y the seizure the creditor acquires the legal right to have the sheriff's duty performed"114. In the case of land where the sheriff enters into possession, the creditor acquires a legal right against the sheriff to have the land sold and to be paid out of the proceeds. That legal right is not an interest in the land, a position recognised expressly in s 105(1). Whilst ss 105 and 105A eschew any reference to a writ "binding" the land, ss 105(2) and 105A(2) are machinery provisions which have the effect that the land is "bound" by the writ and therefore, subject to exceptions in s 105A(1), the judgment debtor cannot deal with the land during the protected period. Land held in trust – s 105(3) In coming to his conclusions in the Court of Appeal, Ipp JA treated s 105(3) as evidencing a legislative intention not to absolutely exclude consideration of prior unregistered equitable interests under the statutory scheme constituted by the 1976 provisions115. I agree. Whilst s 105(3) might be construed narrowly as referring only to matters which appear on the face of the Register, such as a description of a registered proprietor as a trustee, such a provision nevertheless raises the possibility that a beneficiary under a trust, for example, is not precluded by the 1976 provisions from approaching the Court for protection of his or her interest. Protected period – s 105A(2) and (9) As the Minister explained when introducing the 1976 provisions, a protected period during which the writ "bound" the land and during which the sheriff could execute the writ was not new116. What is being "protected" during 114 Hall v Richards (1961) 108 CLR 84 at 91. 115 Garnock v Black (2006) NSW ConvR ¶56-158 at 59,869 [42], 59,871-59,872 116 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 1976 at 1293, and see former s 105(5) of the Act, as repealed by the Real Property (Amendment) Act 1976 (NSW). See also Re Bosquet (1883) 17 SALR 173; National Bank of Australasia v Morrow (1887) 13 VLR 2 at 7-8; Clarke v Roe and Falkner (1899) 1 WALR 123 at 127-128 per Stone J, 128-129 per Hensman J; Austral Lighting [1984] 2 Qd R 507 at 510; Re Sang (1985) Q ConvR ¶54-191; McDonald v McNally [1990] WAR 365 at 367-369. Crennan the protected period is the potential priority of a purchaser from the sheriff against any dealings in the land by the judgment debtor during the protected period. Here the judgment debtor disposed of the land under a specifically enforceable contract before the writ was recorded and before the protected period commenced to run. The exceptions to the operation of s 105A(2) Numerous exceptions to the operation of s 105A(2) are referred to in s 105A(1). These function as statutory directions to the Registrar-General and govern disparate situations. For example, s 105A(1)(p) excepts from the provisions of s 105A(2) "a dealing the registration or recording of which is ordered or directed under section 122(4), 124 or 138". Although of no immediate application here, the nature of that exception, and the extent of the exceptions taken as a group, show that whilst the Registrar-General is comprehensively directed in respect of a range of situations, such policy considerations as inform s 105A(2) will be tempered in a number of specific circumstances. That said, it must be recognised that many of the exceptions are obvious and do not necessarily depend on any action by the judgment debtor. The machinery of s 105A(1) operates such that a judgment creditor's rights on the recording of a writ do not include a right to have the sheriff transfer land to a purchaser free of all interests, except those shown on the Register as at the date of the recording of the writ. Further, s 105A(1) and (2) considered together achieve the effect that the priority of a purchaser from a sheriff over holders of other interests (including a prior purchaser for valuable consideration whose interest is unregistered) attaches on the sale to a purchaser by the sheriff117. It is at that moment that protection is accorded to the purchaser from the sheriff against a prior purchaser for value whose interest is unregistered. Effect of registration of a transfer from a sheriff – s 105B Section 105B states the requirements for registration of a transfer from the sheriff and the effect of the registration. Whilst not using the epithet "paramount" (to be found in s 42) to describe the interest or estate of a purchaser from a sheriff upon registration, s 105B incorporates s 42 and operates in the same way as s 42 as the source of indefeasibility in favour of a purchaser from the sheriff. The purpose of the detailed machinery of the 1976 provisions is to ensure that at the date of a sale by the sheriff a purchaser from the sheriff takes priority 117 As contemplated by the Minister for Lands: New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 30 September 1976 at 1294. Crennan over prior unregistered purchasers for valuable consideration (or other interest holders). A purchaser from a sheriff under the previous regime acquired indefeasibility upon registration (s 42), but had no protection against prior purchasers for valuable consideration in the interim between the sale by the sheriff and registration of the transfer. A purchaser from a sheriff under the 1976 provisions not only acquires indefeasibility on the registration of the transfer (s 105B(2)) but also has priority over prior unregistered purchasers (or other interest holders) from the date of sale as a result of the operation of the machinery provisions (particularly s 105(2) and s 105A(1), (2) and (9)). Thus the effect of Coleman v De Lissa118 is overcome. These provisions work to ensure that, prior to the registration of a transfer from the sheriff, a purchaser from the sheriff is not vulnerable to a contest between unregistered interests in which the later purchaser from the sheriff may be defeated by a prior purchaser, who has not registered a transfer. The 1976 provisions construed as described do not preclude the holders of prior unregistered interests such as a beneficiary under a trust, a mortgagee holding an unregistered mortgage (with or without a certificate of title) or a purchaser, as here, with unregistered transfer documents, from seeking to raise their interests against a judgment creditor prior to any sale by the sheriff. The detailed operation of the 1976 provisions will, however, preclude the holders of such interests from setting them up against a purchaser between the date of the sale by the sheriff and the registration of the transfer. That is the import of the relationship between ss 105A(2) and 105B(2) which distinguishes the 1976 provisions from the repealed legislation, the position according to Coleman v De Lissa119 and the situation considered in Austral Lighting120 which was only concerned with a provision protecting a purchaser from a sheriff from prior purchasers after the transfer from the sheriff had been registered. The purchasers' failure to lodge a caveat The conclusions reached render it unnecessary to consider the purchasers' failure to lodge a caveat when contracts were exchanged or at any time thereafter before the recording of the writ. It was the recording of the writ, not the failure to caveat, which gave rise to the possibility that another interest could be created, 118 (1885) 6 LR (NSW) Eq 104. 119 (1885) 6 LR (NSW) Eq 104. 120 [1984] 2 Qd R 507. Crennan not by the registered proprietor, but by the sheriff121. Consideration of the precise interaction between ss 74F, 74H including 74H(5)(f), 105A(1)(a) and 105B(2) can be undertaken as necessary on another occasion. It also does not matter that the purchaser failed to make a second search of the Register just before completion. A further matter deserves mention. If s 105A(2) operated to preclude the purchasers from setting up their prior unregistered interest against the judgment creditors during the protected period but prior to a sheriff's sale, one possible result is that at a sheriff's sale, during that period, the price achieved for the land would be in the order of the price paid by the purchasers, $1,000,000. The prior encumbrances had all been cleared on completion of the sale to the purchasers on the same day as the recording of the writ. Alterations to the interests of holders of prior encumbrances were able to be recorded on the Register under s 105A(1)122. The result would be that after a sale, payment of the sheriff's fees and expenses and payment to the judgment creditors, the sheriff would be obliged to pay the balance to the judgment debtor123. Neither the detail of the 1976 provisions nor established principles concerning the Torrens system suggest that the legislature intended that result. Order I would dismiss the appeal with costs. 121 Cf Butler v Fairclough (1917) 23 CLR 78; Abigail v Lapin (1934) 51 CLR 58; Osmanoski v Rose [1974] VR 523. 122 Section 105A(1)(e) covers determination of a lease; s 105A(1)(f) covers dealings by a mortgagee or chargee. 123 Uniform Civil Procedure Rules (2005) NSW, r 39.15.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Evans v The Queen [2007] HCA 59 13 December 2007 ORDER 1. Appeal allowed. 2. Set aside the orders of the Court of Criminal Appeal made on 7 September 2006, and in their place order that: (a) the appeal to that Court be allowed, (b) the appellant's convictions be set aside, and (c) there be a new trial. On appeal from the Supreme Court of New South Wales Representation T A Game SC with G A Bashir for the appellant (instructed by Legal Aid Commission of NSW) D C Frearson SC with M M Hobart for the respondent (instructed by Solicitor for Public Prosecutions (NSW)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Evidence – Admissibility of in court demonstrations – An armed man wearing overalls, balaclava and sunglasses committed a robbery – During the trial the appellant was required to wear overalls and a balaclava found at his residence and sunglasses not in evidence as well as walk before the jury and say words attributed to the robber ("the in court demonstration") – Whether the in court demonstration was relevant – Whether the in court demonstration was unfairly prejudicial – Relevance of distinction between demonstrations, experiments, inspections, reconstructions and views – Whether s 53 of the Evidence Act 1995 (NSW) ("the Act") applied to in court demonstrations – Whether requiring the appellant to perform the in court demonstration was permitted either by s 53 of the Act or at common law. Criminal law – Evidence – Admissibility – Whether showing witnesses the overalls and balaclava found at the appellant's residence was relevant – Whether showing witnesses the overalls and balaclava was unfairly prejudicial. Criminal law – Appeals – Application of the proviso– Whether the trial judge's error in not admitting alibi evidence which the appellant proposed to call denied the application of the proviso – Whether the failure of the trial judge to give adequate reasons for rulings made during trial was a miscarriage of justice – Whether the judicial warnings to the jury were adequate – Whether the in court demonstration was so prejudicial as to deny the application of the proviso – Whether the trial so departed from the fundamental assumptions underpinning a fair trial that the proviso could not or should not be engaged. Words and phrases – "demonstration", "experiment", "inspection", "unfairly prejudicial", "reconstruction", "relevance", "view". Criminal Appeal Act 1912 (NSW), s 6(1). Evidence Act 1995 (NSW), ss 53, 55, 137. In February 2002, security cameras photographed an armed man robbing persons of money. The offender was wearing overalls, sunglasses, and a balaclava which covered all of his face except eyes and mouth. After the robbery, a baseball cap and a tissue were found on the floor near where the robber had stood. The security photographs, taken at intervals, show where these items were found. The photographs tendered in evidence were not very clear. In some of the photographs something that could be a cap can be seen on the floor; in other earlier photographs that item cannot be seen. In December 2003, nearly two years after the robbery, police went to the appellant's house. They found a red full-faced balaclava in his bedroom and a pair of blue overalls in the laundry. They were directed to a box of similar balaclavas kept in the basement of the house. The appellant provided a DNA sample. The profile of his DNA was the same as the profile of DNA recovered from the cap found at the scene of the robbery. The particular profile is expected to occur in fewer than one in ten billion individuals in the general population. Whether DNA recovered from the tissue was shown not to be his was disputed. In the District Court of New South Wales, the appellant was charged with, and convicted of, two counts of armed robbery and one count of assault with intent to rob whilst armed with an offensive weapon. The appellant appealed to the Court of Criminal Appeal of New South Wales against his conviction. He advanced several grounds of appeal and the Court of Criminal Appeal (James, Hidden and Hoeben JJ) held1 that two of the grounds were made out. The first concerned the appellant being required, in the course of cross-examination by the prosecutor, to put on not only the balaclava and overalls that had been found at his house but also a pair of sunglasses which were not in evidence but were produced by the prosecutor. The Court concluded2 that although there was no error in requiring the appellant to put on the balaclava and overalls, he should not have been asked to put on sunglasses that were not in evidence. 1 Evans v The Queen (2006) 164 A Crim R 489. (2006) 164 A Crim R 489 at 508-512 [163]-[197]. Secondly, the Court concluded3 that the trial judge had wrongly excluded evidence which the appellant proposed to call from his brother and father concerning the appellant's practice of preparing for display vehicles used in his brother's business. The evidence was intended to demonstrate that the appellant prepared the vehicles at the same time and on the same day each week, at a place far from where the robbery occurred, and that the time at and day on which he regularly did this coincided with the time and day of the robbery. The trial judge rejected the evidence on the basis that no notice had been given of alibi evidence in accordance with s 150 of the Criminal Procedure Act 1986 (NSW). The Court of Criminal Appeal concluded4 that "the exercise by the trial judge of the discretion under s 150 of the Criminal Procedure Act did miscarry". The correctness of this conclusion was not put in issue in this Court. The Court of Criminal Appeal concluded5 that neither of the errors it had identified was significant, and that6 "the evidence properly admitted at the trial proved the guilt of the appellant beyond reasonable doubt". Accordingly, the Court of Criminal Appeal applied the proviso to s 6(1) of the Criminal Appeal Act 1912 (NSW) and dismissed7 the appellant's appeal to that Court. By special leave, he appeals to this Court. The appeal should be allowed. In addition to the errors identified by the Court of Criminal Appeal, that Court should have held that the appellant should not have been required to put on the balaclava and overalls found at his house. Having the appellant dress in those items tendered no relevant evidence. The Court of Criminal Appeal should not have applied the proviso. Consideration of that issue will require examination not only of the error constituted by requiring the appellant to dress in the balaclava and overalls found at his house (and to put on sunglasses) but also two other issues. The first concerned the trial judge's rejection of the alibi evidence which the appellant proposed to call from his brother and father. The second concerned features of the trial which, the appellant submitted, showed that the trial so departed from the fundamental assumptions underpinning a fair trial that the proviso could not or should not be engaged. Because of the possible prejudice worked at trial by (2006) 164 A Crim R 489 at 516-519 [222]-[242]. (2006) 164 A Crim R 489 at 518 [236]. (2006) 164 A Crim R 489 at 523 [285]. (2006) 164 A Crim R 489 at 524 [288]. (2006) 164 A Crim R 489. having the appellant dress up like the robber, and the exclusion of the alibi evidence, the Court of Criminal Appeal erred in deciding that, on the material before it, the appellant was proved to be guilty beyond reasonable doubt. It will not be necessary to decide whether there was such a departure from the fundamental assumptions of a fair trial that the proviso could not or should not be engaged. Showing the balaclava and overalls to other witnesses In this Court, the appellant made two distinct points about the uses to which the balaclava and overalls found at the appellant's house were put at trial. The first concerned witnesses, who had seen the robber, being asked whether the articles produced at the trial were similar to those the robber had worn. The second concerned the appellant being required by the prosecution, in the course of cross-examination, to do three things: to put on the balaclava and the overalls (together with a pair of sunglasses that were not in evidence); to walk up and down in front of the jury; and to say some words the robber was said to have used. The appellant submitted that "the trial miscarried as a result of the admission of evidence of eyewitnesses" to the robbery concerning the items of clothing. The items were described in the notice of appeal as having "been randomly seized from the [appellant's] home twenty two months after the offence". At the trial, two witnesses were asked, without objection, whether the items shown to them were similar to those they had seen that day and in general terms each agreed they were. It is as well, however, to say a little more about the evidence of the first of these witnesses. Immediately before the robbery she had seen a man walking towards the place where it occurred. She said the man was wearing overalls, a bright red beanie, and sunglasses. The beanie had excess material sitting above the man's head. The witness described the man, when slightly hunched over, as about her height (which she gave as 5 feet 6½ inches), of normal build, and having smooth, well-tanned skin. She was not asked, and did not profess to be able, to identify the appellant as the man she had seen. She did say that the balaclava she was shown "could be the same beanie" and that the overalls she was shown "look a lot dirtier than what the man had worn and probably a little faded as well but they look exactly the same style ... the man was wearing". When the prosecution sought to show the balaclava and the overalls to a third witness, trial counsel for the appellant objected on the basis that the witness had given a description of the items that differed in some respects from the items that were to be shown. The objection was overruled but the subject was revisited later in the trial. Trial counsel for the appellant submitted that evidence should not be received of the police finding at the appellant's house the balaclava and overalls that had been shown to the witnesses or of their finding a box of similar balaclavas. It was submitted that the evidence lacked probative value and that its reception would be prejudicial. In this Court the appellant submitted that the items that had been produced at the trial were not then said or shown to have been worn by the robber. They were mass produced items. (The statement in the grounds of appeal that the items had "been randomly seized" is to be understood as implying that the balaclava tendered in evidence was not different in any relevant way from the others found at the house.) The appellant submitted that the Court of Criminal Appeal should have held that "the procedure adopted [in showing the items to witnesses and asking for their comments] was unfairly prejudicial". The short answer to the point is that the procedure followed at trial was not unfair. It may be accepted that the witnesses did not assert that what they were shown was what the robber had worn. The highest point this aspect of the evidence reached was that the items were similar to those the robber had worn. But there was no unfairness to the appellant in proving, as the prosecution did, that he had access to items of clothing like those worn by the robber. There were two steps in that proof. First, it was necessary to show that the items in question had been found at the appellant's house. Secondly, it was necessary to demonstrate how similar the items discovered were to those that had been worn by the robber. That second step required the eye witnesses to examine what had been seized and say whether and how the items were like those the robber had worn. Further, in the forensic setting of this trial, where the DNA evidence relating to the cap that had been found at the scene loomed so large, it may be thought that the finding of not just one balaclava but a whole box of them at the appellant's house, and the finding there of an otherwise unremarkable pair of mass produced overalls was not very damaging to the appellant. This ground of appeal fails. Dressing the appellant in the balaclava and overalls Other aspects of the use made at trial of the balaclava and overalls present more fundamental questions. In his notice of appeal, the appellant alleged that the Court of Criminal Appeal should have held that "the prosecutor should not have been permitted to require the [appellant]" to put on these items, walk up and down in front of the jury and say words which it was alleged that the robber had used. The grounds gave no particulars of why the prosecutor should not have been permitted to make these requirements but the respondent, correctly, understood the ground as challenging both the relevance and the admissibility of what was done. The respondent's written submissions sought to demonstrate that the relevance of what was done "lay in the comparison of what the jury saw and heard with the descriptions of the witnesses" and the respondent amplified that proposition in those submissions in a number of ways. The appellant, in his written submissions in reply, joined issue with the respondent's analysis. The chief weight of oral argument in the appeal to this Court was directed at whether asking the appellant to put on these items, and show himself to the jury, constituted a "demonstration, experiment or inspection"8 and whether, and how, Pt 2.3 of the Evidence Act 1995 (NSW) ("the Act") was engaged. Argument was also directed to whether any common law rules of evidence applied. But counsel for the appellant, in oral submissions, returned to the issues of relevance that had been debated in the written submissions and submitted that "none of these exercises [with the balaclava and overalls] were relevant"9. The particular reason then advanced by counsel for the appellant was that "no ... adequate foundation existed in the evidence for [these] exercise[s] to be conducted"10 but the whole question of relevance was plainly in issue between the parties as one of the several bases for the appellant's argument that the prosecutor should not have been permitted to require the appellant to put on these items. These reasons will demonstrate that the logically anterior question raised by the appellant – whether what was done was relevant – is determinative. It is as well, however, to begin by noticing a variety of steps sometimes taken in the course of a witness giving evidence that may be thought to provide (but on examination do not provide) the basis for sound analogical reasoning supporting what happened at the appellant's trial. Items of real evidence are often tendered and received in evidence. The balaclava and overalls found at the appellant's house are but one example of the tendering of such evidence. The photographs taken by the security cameras, and the cap found at the scene of the robbery, are other examples. As Wigmore explained11, there are many circumstances in which a tribunal of fact is asked to act upon what the tribunal itself perceives, rather than upon acceptance of testimonial evidence or inference from either testimonial or circumstantial evidence. Wigmore classified this as autoptic proference. (A party proffers something which the tribunal perceives for itself; Wigmore refers to the tribunal's self-perception of the thing as its autopsy of that thing.) 8 Evidence Act 1995 (NSW) ("the Act"), s 53. [2007] HCA Trans 368 at 1507. 10 [2007] HCA Trans 368 at 1507-1509. 11 Wigmore, Evidence in Trials at Common Law, (Chadbourn Rev) (1972), vol 4, Tender and reception of real evidence is one example of what Wigmore described as autoptic proference. But it is not the only example. Thus the tribunal of fact, asked to consider evidence about what kind of bladed weapon inflicted wounds, may look at a weapon found at the scene and tendered in evidence when considering evidence given that wounds were inflicted by a weapon with two sharp edges. In such a case the tribunal of fact may act, in part, upon what it observes for itself about the knife. Likewise, the tribunal of fact may act upon its own observation when a physically injured plaintiff is asked to show the tribunal of fact the injured part of the body. Why then not dress the appellant in this case in the same way as the robber? Why then not let the jurors observe for themselves how the appellant looks, and compare that with not only what the witnesses have said about the robber's appearance, but also what the jurors can see for themselves in the security photographs? The answer to the questions just posed is provided by proper application of the test of relevance. As this Court's decision in Smith v The Queen12 demonstrates, questions of relevance require careful analysis. In particular, they require careful identification of the process of reasoning that is invited. Only then can it be seen whether the evidence in question could "rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue"13 (emphasis added). In Smith, the disputed evidence was a witness's assertion that the person standing trial was the man depicted in security photographs. The majority of this Court held14 that, because the witness's assertion of identity was no different from the material available to the jury from its own observation, the witness's assertion that he recognised the appellant was not relevant. The fact that someone else reached the conclusion provided no logical basis for affecting the jury's decision when the conclusion was based on material not different in any substantial way from what was available to the jury. Knowing that another person had drawn the connection neither assisted nor hindered the process of reasoning that had to be undertaken. Showing the jury what the appellant looked like when wearing the balaclava and overalls that were in evidence (with or without the addition of sunglasses that had not been received in evidence) could not "rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact 12 (2001) 206 CLR 650. 13 The Act, s 55(1). 14 (2001) 206 CLR 650 at 655 [11]. in issue in the proceeding"15. The central issue at the appellant's trial was whether he was the robber. There was no dispute that there had been a robbery. There was no dispute that the robber had been wearing a balaclava, overalls and sunglasses. No one asserted, however, that the person wearing the disguise of balaclava, overalls and sunglasses could be identified by looking at that person during the robbery or could be identified by looking at the security photographs. None of the witnesses, not even the witness who had seen the robber without the balaclava pulled down over his face, said that they could recognise the man who was thus attired. None of the witnesses, and neither trial counsel, asserted that the person depicted in the security photographs could be identified. Looking at the appellant wearing the balaclava and overalls (with or without sunglasses) enabled a comparison between no more than the items he put on and what was depicted in the security photographs. But that comparison could be drawn without the appellant being asked to put them on. Dressing the appellant in the items provided no information to the jury that could rationally affect, directly or indirectly, the determination of any fact in issue because it revealed nothing about the wearer and nothing about the appellant that was not already apparent to the jury observing him in the dock. Requiring the appellant to put on the balaclava, overalls and sunglasses may be contrasted with requiring him to walk in front of the jury and requiring him to speak certain words. Observing how the appellant walked and how he spoke certain words might bear upon the jury's decision whether he was the man the witnesses had described. The jury could observe for itself these matters concerning the appellant; the jury could compare its observations with what the witnesses had said about the robber. This stands in sharp contrast with the balaclava, overalls and sunglasses, where the focus necessarily fell only upon the disguise and said nothing about who had worn it. Deciding who had worn the disguise was not assisted by having the appellant put on the items he was asked to put on. It follows that dressing the appellant in the balaclava and overalls (and producing a pair of sunglasses for him to wear) proffered no relevant evidence for consideration of the jury. It should not have been done. It is, then, not necessary to consider how Pt 2.3 of the Act would apply to this use of these items. 15 The Act, s 55(1). Not only was what was done not relevant, doing it cannot be assumed to have had no effect on the jury. Dressing the appellant like the robber may have depreciated his credibility as a witness. For the reasons given by Heydon J, neither the appellant being asked to walk in front of the jury nor his being asked to say certain words was a "demonstration, experiment or inspection" to which s 53 of the Act applied. As the reasons of Heydon J demonstrate, that section is engaged in respect of demonstrations, experiments or inspections which are conducted outside the courtroom and which are to constitute a part of the evidence adduced at trial. Again, as Heydon J demonstrates, such matters as experiments undertaken out of court by an expert witness for the purposes of forming an opinion which is proffered in evidence do not come within the section. (Experiments of that kind are not undertaken by order; they are undertaken to enable formation of an opinion which will be tendered in evidence.) Trial counsel for the appellant objected to the prosecution requiring the appellant to put on the balaclava and overalls and objected to the prosecution producing a pair of sunglasses for the appellant to wear. The trial judge overruled these objections. That was the wrong decision of a question of law16. The appellant's appeal against conviction was, then, to be allowed unless the Court of Criminal Appeal "considers that no substantial miscarriage of justice has actually occurred"17. It follows that the Court of Criminal Appeal considered the application of the proviso on an incorrect footing. The appellant should not have been required to put on the balaclava, overalls or sunglasses. Moreover, the application of the proviso in this matter must be considered not only with regard to these errors, but also the further error identified by the Court of Criminal Appeal: the wrongful rejection of evidence intended to bolster the appellant's denial of his presence at the scene of the robbery. The appellant further submitted, however, that the proviso could not or should not be engaged because the trial departed from the fundamental assumptions underpinning a fair trial. Some unsatisfactory features of the trial More than once during the trial the trial judge was required not only to decide disputed questions about the admissibility of evidence but also to rule upon applications that the jury be discharged without verdict. On some of these 16 Criminal Appeal Act 1912 (NSW), s 6(1). 17 Criminal Appeal Act, s 6(1). occasions the trial judge was asked to give reasons for decision, said that she would do so later, but did not. The Court of Criminal Appeal concluded18 that the trial judge "was remiss in not stating, even if quite succinctly, her reasons for a number of her rulings". But the Court went on to conclude19 that the failure did not amount "to such a fundamental procedural irregularity as to warrant setting aside the appellant's convictions". The Court said20: "All, or almost all, of the applications by counsel for the appellant at the trial were argued at considerable length. The competing submissions of the parties were stated and, indeed, often repeated a number of times. The views the trial judge was forming on each application were revealed by frequent remarks made by her in the course of the argument. ... [I]n the present case it can be inferred from the transcript of the argument what were her Honour's reasons for making each of her rulings and it is possible for this Court to determine whether her Honour erred in making the rulings." Not every ruling given at trial must be accompanied by reasons. Many issues about the admissibility of evidence are best resolved by simply allowing or disallowing a question to which objection is taken. But there are some evidentiary issues that arise in a trial where it is desirable to give reasons. It is not possible to formulate a single criterion of universal application that distinguishes between issues whose resolution should be accompanied by a statement of reasons and those where reasons need not be given. It suffices to say that cases in which a discretion must be exercised or the resolution of the issue depends upon some intermediate conclusion of fact or law will more likely warrant the giving of reasons than will an issue about the relevance of a question or the form in which it is posed. But what is of particular importance in the present matter is that the trial judge considered that she should give reasons for particular evidentiary rulings but did not. Apart from evidentiary issues, there were two applications to discharge the jury without verdict which the trial judge refused, indicating, in respect of one of the applications, that she would give reasons later. It may be doubted that an application for discharge of the jury could properly be determined without the judge stating reasons for the decision either when announcing the decision or at some later time. The reasons need not, indeed usually will not, be long. But the circumstances in which it would not be necessary to give reasons for the decision 18 (2006) 164 A Crim R 489 at 522 [272]. 19 (2006) 164 A Crim R 489 at 522 [272]. 20 (2006) 164 A Crim R 489 at 522 [272]. are not readily identified. And the trial judge in this case did not consider that the applications by trial counsel for the appellant were of that kind. Yet the trial judge did not give reasons for rejecting the first application that was made. There is a further aspect of the conduct of the appellant's trial that must be noticed. In the course of the trial, the trial judge made a number of incorrect statements of what had happened in the course of evidence to or in the presence of the jury. The chief error made, in the course of the trial judge's charge to the jury, was to tell the jury that the appellant had "also called evidence, that is his father and his brother in support of his case, to the effect to support his denial of his being present and committing the offence which is alleged against him". The trial judge had ruled that neither the father nor the brother of the appellant could give evidence of the kind described. Her Honour had concluded (wrongly as the Court of Criminal Appeal held) that the evidence was "not relevant to any issue before the court and before the jury, and secondly that if it was led it would be a breach of section 150 of the Criminal Procedure Act". Applying the proviso The application of the proviso must then be considered in the light of several different aspects of the way in which the appellant's trial proceeded. First, there was the wrong decision of the question of law about the relevance of having the appellant put on the balaclava and overalls found at his house and the sunglasses produced by the prosecutor. Secondly, there was the wrong decision of the question of law or the miscarriage of justice (it matters not which) constituted by the refusal to permit the appellant's father and brother to give evidence about his practice of working on vehicles far away from the scene of the robbery at the time and on the day when the robbery occurred. Thirdly, there is the combination of the trial judge's failure to give reasons for rulings which she considered required reasons and the misstatement to the jury of the effect of what had happened at the trial which together may suggest that the trial judge did not have sufficient mastery of the conduct of the trial to ensure a fair trial and that there was, therefore, "on any other ground whatsoever ... a miscarriage of justice"21. The appellant submitted that the combination of errors made at trial was such a "serious breach of the presuppositions of the trial"22 as to deny the application of the proviso. 21 Criminal Appeal Act, s 6(1). 22 Weiss v The Queen (2005) 224 CLR 300 at 317 [46]. Since at least Quartermaine v The Queen23, reference has been made in decisions of this Court to the possibility that the proviso may not be engaged if a trial was so irregular that no proper trial had taken place. In Wilde v The Queen24, three members of the Court spoke of "a proceeding which is fundamentally flawed" and said that "[t]he proviso has no application where an irregularity has occurred which is such a departure from the essential requirements of the law that it goes to the root of the proceedings". Neither Quartermaine nor Wilde was identified as such a case and this Court has not since authoritatively decided what kind of departures from essential requirements may be said to go to "the root of the proceedings". In Weiss25, it was not necessary to consider the question. In Libke v The Queen26, those members of the Court who decided that the conduct of the prosecutor at trial was such that an appellate court could not be satisfied that no substantial miscarriage of justice had actually occurred dissented from the Court's orders. As the joint reasons in Weiss show27, the proviso did away with the old Exchequer rule by which there was a "miscarriage of justice" whenever there was any departure from trial according to law, regardless of the nature or importance of the departure. But it is necessary to recognise that the common form criminal appeal provision presents what, on its face, is a conundrum. The provision requires an appeal to be allowed if any of three kinds of error is shown (verdict against the evidence or weight of the evidence, wrong decision of any question of law, or "on any other ground whatsoever there was a miscarriage of justice"). Yet on the hypothesis that such an error has occurred (including that there has been on any other ground whatsoever a "miscarriage of justice") the appeal may be dismissed if the proviso is satisfied. Weiss directed28 appellate courts to make an independent assessment of the evidence at trial and to "determine whether, making due allowance for the 'natural limitations' that exist in the case of an appellate court proceeding wholly 23 (1980) 143 CLR 595 at 600-601 per Gibbs J. 24 (1988) 164 CLR 365 at 373 per Brennan, Dawson and Toohey JJ. 25 (2005) 224 CLR 300 at 317 [46]. 26 (2007) 81 ALJR 1309; 235 ALR 517. 27 (2005) 224 CLR 300 at 308 [18]. 28 (2005) 224 CLR 300 at 316 [41]. or substantially on the record29, the accused was proved beyond reasonable doubt to be guilty of the offence on which the jury returned its verdict of guilty". And as was said in Weiss30, it is "neither right nor useful to attempt to lay down absolute rules or singular tests" that govern that task. But as was pointed out in Weiss31: "[O]ne negative proposition may safely be offered. It cannot be said that no substantial miscarriage of justice has actually occurred unless the appellate court is persuaded that the evidence properly admitted at trial proved, beyond reasonable doubt, the accused's guilt of the offence on which the jury returned its verdict of guilty." (emphasis added) Applying this negative proposition will very often resolve any question of applying the proviso where it is said that there has been a radical departure from the requirements of a fair trial. The graver the departure from the requirements of a fair trial, the harder it is for an appellate court to conclude that guilt is established beyond reasonable doubt. It is harder because the relevant premise for the debate about the proviso's application is that the processes designed to allow a fair assessment of the issues have not been followed at trial. The present case illustrates the point. Here the appellant was denied the opportunity to call alibi evidence. That denial might be characterised as refusing the appellant the opportunity to put his defence. So characterised, the refusal to admit the evidence could be described as a grave departure from the requirements of a fair trial. But applying that description to what happened may, in the end, serve only to distract attention from the closer analysis of the matter that the consideration and application of the proviso requires. On its face the DNA evidence appears overwhelming and the appellant's explanations for how a cap with his DNA came to be found at the scene of the robbery were thin. (He asserted that the robber must have planted the cap there and he offered some suggestions of who might have procured that.) But the apparent thinness of this explanation for the incriminating evidence of the cap may, we do not say must, have taken on a different appearance if his alibi witnesses had given evidence and were believed. 29 Fox v Percy (2003) 214 CLR 118 at 125-126 [23] per Gleeson CJ, Gummow and 30 (2005) 224 CLR 300 at 316 [42]. 31 (2005) 224 CLR 300 at 317 [44]. It may readily be accepted that the evidence called at the appellant's trial demonstrated, beyond reasonable doubt, that the cap found at the robbery scene was his cap. But a further question had to be decided. Was it the appellant who had taken the cap to and dropped it at the robbery scene? No one said the robber had worn the cap. Had someone else taken the cap there, whether in the overalls the robber wore or the bag the robber carried, and dropped the cap? That was what the appellant sought to put in issue with the alibi evidence, not whether the cap found was his. How should the Court of Criminal Appeal have approached that issue in deciding whether the proviso applied? First, the appellant's denial of committing the robbery may very well have been undermined by having him dress as the robber had dressed and show himself to the jury. It is not possible to say what effect this had on the jury's assessment of him as a witness. The verdicts returned by the jury at the appellant's trial thus provide little if any assistance in assessing the record of trial32. Secondly, in the Court of Criminal Appeal, the appellant relied on affidavits sworn by his brother and father deposing to the evidence that each would have given at trial. Those affidavits spoke of the appellant's practice rather than of any specific recollection about what happened on the day of the robbery. The brother swore that he did not recall the appellant "having any breaks from this job or ever not turning up for work"; the father swore that he could not recall the appellant ever missing a day of work. The evidence of both the brother and father invited challenge. Each deponent spoke only of what he could remember. How certain was that memory? May there not have been an occasion, now forgotten, when the practice was not followed? May not the memory be mistaken? But none of these challenges was made or answered at trial and the Court of Criminal Appeal could act only upon the basis that the deponents would have given evidence at trial in accordance with their affidavit and that that evidence could have been accepted by the jury. Did that evidence, taken at its highest, raise a reasonable doubt about who had taken the cap to the scene of the robbery and dropped it there? Because the alibi evidence was not called and was not tested at trial, the Court of Criminal Appeal could not decide from the record of the trial and the additional material received on the hearing of the appeal that the appellant was proved beyond reasonable doubt to be guilty of the offences on which the jury returned its verdicts of guilty. It could not do that because the material upon which it had to act was incomplete. An important element of the material had been excluded at trial and was necessarily presented to the Court of Criminal Appeal untested. Because it was untested the Court of Criminal Appeal could 32 Weiss (2005) 224 CLR 300 at 317 [43]. not say whether it could be taken at less than its face value. And at face value it left an issue about who took the cap to the scene and dropped it there not capable of resolution beyond reasonable doubt. The Court of Criminal Appeal could not determine beyond reasonable doubt that the appellant was the robber. The errors at trial both undermined his defence and in an important respect prevented him putting it fully. The sworn evidence the appellant had given may well have been undermined by having him dress as the robber. The alibi evidence it had to consider was necessarily incomplete. It is not then necessary to go on to decide what significance should be attached to the several features of the trial that suggest that the trial judge did not have sufficient mastery of the proceedings to ensure a fair trial. That is, it is not necessary to explore what kinds of failure in the trial process preclude the application of the proviso, beyond noting that in Weiss the Court said33 that "no single universally applicable criterion can be formulated which identifies cases in which it would be proper for an appellate court not to dismiss the appeal, even though persuaded that the evidence properly admitted at trial proved, beyond reasonable doubt, the accused's guilt". These issues need not be resolved in this matter. They need not be resolved because the errors made at trial undermined the appellant's defence and prevented him putting it fully. The Court of Criminal Appeal ought not to have decided that the appellant had been proved beyond reasonable doubt guilty of the offences charged. The Court of Criminal Appeal ought not to have decided that there had been no substantial miscarriage of justice. Orders The appeal should be allowed. The orders of the Court of Criminal Appeal should be set aside, and in their place there should be orders that (a) the appeal to that Court is allowed, (b) the appellant's convictions are set aside, and (c) a new trial be had. 33 (2005) 224 CLR 300 at 317 [45]. Kirby KIRBY J. This appeal challenges orders made by the Court of Criminal Appeal of New South Wales34. By those orders, that Court, whilst finding that error of law or a miscarriage of justice had been established by Mr Graham Evans ("the appellant"), dismissed his appeal. It did so by the application of the "proviso" to s 6(1) of the Criminal Appeal Act 1912 (NSW) ("the Criminal Appeal Act"). It follows that the Court concluded that "notwithstanding … that the … points raised by the appeal might be decided in favour of the appellant … no substantial miscarriage of justice has actually occurred". I agree with the conclusion expressed by Gummow and Hayne JJ ("the joint reasons") that the application of the "proviso" was erroneous35. The Court of Criminal Appeal ought to have ordered a retrial. That is the order that this Court should now make. In most respects, I agree in the joint reasons. However, I disagree with the analysis in the joint reasons where they strike out, for the first time, upon a line of reasoning that was not previously argued or considered36. On this aspect of the case, I agree in what Heydon J has written in his reasons, although I differ from the ultimate conclusion reached by his Honour37. Save for this difference, which reflects an earlier divergence in this Court on a like question38 (and which, as there, does not ultimately produce a different outcome) my own analysis and conclusion result in my agreement in the orders proposed in the joint reasons. The appeal must be allowed. The facts and legislation The facts relevant to the appeal are stated compendiously in other reasons39. It would be superfluous for me to restate them. 34 Evans v The Queen (2006) 164 A Crim R 489. 35 Joint reasons at [45]-[51]. 36 Namely, that the evidence proffered by having the appellant, at the prosecutor's request, wear a balaclava and overalls before the jury in court, was not relevant to any issue in the appellant's trial. See joint reasons at [23]-[24]. 37 Reasons of Heydon J at [262]-[264]. 38 Smith v The Queen (2001) 206 CLR 650 at 653-654 [6], 656 [12], 657-659 [20]- 39 Joint reasons at [11]-[14]; reasons of Heydon J at [129], [133]-[135], [137]-[150]. Kirby Similarly, the other reasons explain comprehensively the course followed in the appellant's trial including in the questions addressed to witnesses about the appearance of the clothing (overalls and a balaclava) worn by the offender when committing the offences and aspects of the trial judge's conduct of the proceedings about which complaint is made. I will repeat none of this material. The applicable provisions of the Criminal Appeal Act40 and of the Evidence Act 1995 (NSW)41 ("the Evidence Act") are also stated elsewhere. I incorporate all of those provisions by reference. Adopting this course allows me to proceed directly to the points of agreement with, and difference from, the views expressed by my colleagues. The issues The other reasons clarify the issues that now fall to be decided. Those issues are the ones expressed in the appellant's several grounds of appeal to this Court which are helpfully set out in the reasons of Heydon J42. So presented, the controversies that this Court is asked to resolve may be summarised as follows: The relevance of clothing issue: Whether the Court of Criminal Appeal erred in failing to hold that the trial had miscarried as a result of the admission of the evidence of witnesses concerning items of clothing taken from the appellant's home some 22 months after the offences, suggested to be similar to clothing worn by the offender at the time of the offences and, on that ground, relevant to questions for decision by the jury43; The demonstration issue: Whether the Court of Criminal Appeal erred in concluding that s 53 of the Evidence Act did not apply to an in-court demonstration in which the prosecutor required the appellant to perform by dressing up in a balaclava and overalls, walking in front of the jury and the offender by one witness44 ("the saying words attributed 40 See reasons of Heydon J at [130]. 41 Reasons of Heydon J at [148]. See also at [186]. 42 Reasons of Heydon J: ground 1 at [136], ground 2 at [168]; ground 3 at [228]; ground 4 at [237] and ground 5 at [249]. 43 cf reasons of Heydon J at [136]. 44 Reasons of Heydon J at [168]. The prosecutor also invited the appellant to wear her own sunglasses, evidently to mimic still further the appearance of the offender. Those sunglasses were not in evidence. Their introduction into the case by counsel was rightly criticised by the Court of Criminal Appeal. That error compounded the errors and prejudice of the demonstration upon which the prosecutor had embarked. Kirby demonstration"). If s 53 of that Act did not apply to the demonstration, did any residual rules of the common law apply to render such questioning and conduct impermissible? Whether, otherwise, such evidence was inadmissible as prejudicial and unfair, or as involving the splitting of the prosecution case, or as condoning improper conduct on the part of the prosecutor, in respect of which the Court of Criminal Appeal should have provided redress to the appellant? The judicial warnings issue: Whether the Court of Criminal Appeal ought to have held that a miscarriage of justice had occurred by reason of the failure of the trial judge to direct the jury concerning the specific dangers occasioned by the demonstration, questioning and procedures referred to in issues (1) and (2)45. In particular, whether, in the circumstances, the attempted warning given by the trial judge to the jury about the dangers inherent in the use of in-court evidence for a suggested similarity between descriptions and appearances of items of clothing, the appearance of the accused when dressed up, walking and speaking46, and the imperfect evidence of surveillance videotapes, taken at the time of the offences, were defective for the lack of specific warnings to the jury about the dangers of convicting the appellant on the basis of any such perceived resemblance or similarities; The sufficiency of reasons issue: Whether the Court of Criminal Appeal erred in failing to uphold the appellant's complaints about the omission of the trial judge to give adequate reasons for critical rulings made in the course of the trial (including in respect of some issues for which reasons were reserved but never subsequently stated)47; and The proviso issue: Whether, in light of the resolution of the foregoing issues and the appellant's complaints of consequential or other errors of law and miscarriage of justice (including the wrongful exclusion of alibi evidence) or for reasons of a departure of the appellant's trial from the fundamental assumptions of a fair trial48, the Court of Criminal Appeal erred in dismissing the appeal on the basis of the "proviso" to s 6(1) of the Criminal Appeal Act. 45 Reasons of Heydon J at [228]. 46 Reasons of Heydon J at [231]-[232]. 47 Reasons of Heydon J at [237]. 48 cf Weiss v The Queen (2005) 224 CLR 300 at 317-318 [46]; cf joint reasons at [10]. Kirby Narrowing the issues Reducing the differences: In the approach that I take, by reference to the foregoing, it is possible to confine the issues that I must decide still further. I can do this either because I am in substantial agreement with what my colleagues have written on some of the issues or because a decision on some of the issues is ultimately superfluous to the disposition of this appeal. The relevance of clothing questions: Alike with Heydon J49, I would reject the appellant's argument that the prosecution's questions, addressed to the description of the balaclava and overalls (including by comparison with items of the same type found much later in the appellant's residence), were not relevant to the issues in the trial. I agree with Heydon J's reasons in this respect. I also agree with the conclusion stated in the joint reasons50 that the procedures adopted, in showing the items recovered from the appellant's home to witnesses and asking for their comments, were not unfairly prejudicial to the appellant. They did not attract the application of s 137 of the Evidence Act so as to render the evidence inadmissible. Nor did they demonstrate that the trial judge had erred in declining to exercise her discretion under s 135 to exclude the evidence51. The first ground of appeal, and every element of the challenge on the first issue, therefore fails. In-court demonstrations: So far as the submissions on the second issue are concerned, it is convenient to isolate three subordinate submissions regarding which I do not demur from the conclusion reached in other reasons. Thus, alike with the joint reasons52, I accept the conclusion reached by Heydon J53 that s 53 of the Evidence Act does not apply to an in-court "demonstration, experiment or inspection". The section is not therefore applicable to the demonstration conducted in court pursuant to the prosecutor's request that the appellant dress up in overalls and a balaclava; wear them whilst seated in the dock; walk in the courtroom in front of the jury; and say words in their presence which had earlier been attributed to the offender. 49 Reasons of Heydon J at [154]-[161], [167]. 50 Joint reasons at [16]. See also reasons of Heydon J at [165]-[166]. 51 Reasons of Heydon J at [167]. 52 Joint reasons at [30]. 53 Reasons of Heydon J at [186]-[218]. Kirby Although there are arguments both ways (and the resulting gap in the application of the Evidence Act in respect of in-court demonstrations is awkward and arguably unintended), the powerful examination by Heydon J54 of the statutory text, the preceding common law and the reports of the Australian Law Reform Commission, bring me with a certain reluctance to the same conclusion as his Honour has reached. This is that s 53 of the Evidence Act is confined to demonstrations out of court. The section did not apply to such activities undertaken in court, necessarily in the presence of the judge and jury55. If this outcome is not what was intended as the operation of the Uniform Evidence Acts, that needs to be addressed by the legislators. Any resulting problem cannot be solved judicially, by the application of the canons of statutory interpretation. A reluctance to conclude that such a lacuna exists in the Evidence Act is assuaged somewhat because, as Heydon J points out, the common law rules governing the conduct of such demonstrations remain applicable to the subject trial, save so far as the provisions of that Act otherwise provide expressly or by necessary intendment56. Certainly, at common law a demonstration required careful attention to conditions of "equivalence", "substantial similarity" or "faithful reproduction" of the evidence being demonstrated57. No splitting of the prosecution case: I place to one side for the moment the application of the common law rules. Two further subordinate submissions, arising under the second issue, can be rejected immediately. Thus, the appellant's specific argument that the prosecutor, by requesting the demonstration during the cross-examination of the appellant, split the prosecution case, should be dismissed for the reasons given by Heydon J58. The objections at common law to the course adopted remain to be evaluated. However, the only point in the trial at which a prosecutor could have conducted any demonstration (assuming that to be legally permissible and otherwise proper) was during the cross-examination of the appellant, once he had elected to give evidence in his own case. Any 54 Reasons of Heydon J at [216]. 55 Thereby rendering inappropriate. the requirements of ss 53(2) and 53(3)(a) otiose or 56 Reasons of Heydon J at [224] setting out ss 9(1) and 11(1) of the Evidence Act. See eg Van Vliet v Griffiths (1978) 19 SASR 195 at 210. 57 Scott v Numurkah Corporation (1954) 91 CLR 300 at 312, 316; R v Alexander [1979] VR 615 at 622-623; Grosser v South Australian Police (1994) 63 SASR 243 58 Reasons of Heydon J at [227]; cf Shaw v The Queen (1952) 85 CLR 365 at 379- Kirby suggestion that some other person of similar build, appearance or characteristics could have been used in a demonstration conducted during the prosecution's case is fanciful. There was no substance in this point. No prosecutorial misconduct: Nor, in this case, has the appellant made good his submission that, by her request to him to undertake the demonstration, the prosecutor misused her functions, requiring judicial correction. In a number of recent cases, this Court59, the Court of Criminal Appeal itself60, as well as other courts of high authority61 have found it necessary to remind prosecutors in criminal proceedings about the legal and professional rules governing their conduct in representing a special public litigant bearing, on behalf of the community, a "greater personal responsibility" to contribute to "the seriousness and the justness of judicial proceedings" of this kind62. Australian courts should not accept any decline in those standards. In proper cases, evidence of serious lapses in standards by prosecutors, if uncorrected at trial, should result in appellate orders requiring a new trial that will conform to the fundamental standards of fairness postulated for the administration of criminal This said, the conduct of the prosecutor on this occasion falls far short of the type of lapse that would invite such a sanction. What occurred involved (as I hold) an error of judgment on the part of the prosecutor. It may require correction because of the unfairness to the appellant occasioned in what then ensued. However, it was not misconduct on the part of the prosecutor as, for example, the introduction of insulting or demeaning comments and personal opinions can be64. The appellant is entitled to relief, as I shall show. But this is 59 See Stanoevski v The Queen (2001) 202 CLR 115 at 129 [54]; Subramaniam v The Queen (2004) 79 ALJR 116 at 127-128 [52]-[54]; 211 ALR 1 at 16; Libke v The Queen (2007) 81 ALJR 1309 at 1320 [41], 1327 [83], 1333-1334 [121]-[126]; 235 ALR 517 at 530-531, 539-540, 547-549. See also Whitehorn v The Queen (1983) 152 CLR 657 at 663. 60 Kennedy (2000) 118 A Crim R 34 at 41 [37]-[38]; R v Livermore (2006) 67 NSWLR 659 at 667-669 [35]-[44]. 61 See eg Boucher v The Queen (1954) 110 CCC 263 (Supreme Court of Canada). 62 (1954) 110 CCC 263 at 270 per Rand J. 63 Weiss (2005) 224 CLR 300 at 318 [47]; Libke (2007) 81 ALJR 1309 at 1320 [38], 1336 [133]; 235 ALR 517 at 530, 552. 64 cf Evans (2006) 164 A Crim R 489 at 522 [275]. Kirby not a case where any relief should be given for prosecutorial misconduct. Where relief is sought on such a ground it should, in my opinion, be specifically pleaded as a ground of appeal. This was not done in the present appeal. Here the issue (such as it was) was only raised in the appellant's written submissions. The submission does not succeed. Inadequate judicial warnings: I can deal more peremptorily with the third and fourth issues65. So far as the third issue is concerned (the suggested omission of judicial warnings on the dangers of miscarriages of justice occasioned by identification or resemblance evidence), I respectfully differ from the conclusion of Heydon J that the inadequate (and in some respects inaccurate and confusing) directions given by the trial judge are to be discounted or passed by because of the failure of the appellant's trial counsel to seek further directions at the closing of the judge's summing up66. The concern evident in the statutes providing for appeals against conviction of criminal offences is fundamentally addressed to the substance of the outcome of such trials and whether they have miscarried for proved legal error or miscarriage of justice. It is not, at least solely, concerned with whether technical rules for making and recording objections at trial were observed by trial counsel67. In the present case, in the way the trial unfolded, defence counsel had many points to pursue. He appears to have fulfilled his duties with vigilance and diligence. On the other hand, as this Court and other appellate courts have repeatedly pointed out68, the history of miscarriages of justice is littered with cases where serious wrongs have occurred on the basis of imperfect evidence of identification of the accused or imperfect evidence of resemblance. It is for that reason that courts in this country have insisted, even in cases where the prosecution case is otherwise strong, upon clear and detailed, accurate and properly cautionary instructions to the jury about the special dangers of convicting an accused person on the basis of identification or resemblance evidence. The need for warnings or cautions about the dangers of evidence of 65 See above these reasons at [59]. 66 Reasons of Heydon J at [236]. 67 Gately v The Queen [2007] HCA 55 at [48]. 68 Alexander v The Queen (1981) 145 CLR 395 at 399; Domican v The Queen (1992) 173 CLR 555 at 561. See also Domican (No 3) (1990) 46 A Crim R 428 at 445; R v Clout (1995) 41 NSWLR 312 at 321; R v Stewart (2001) 52 NSWLR 301 at Kirby "resemblance" or "similarity" should not be diluted simply because they arise in new and different circumstances. Especially is this so because, as Heydon J has shown69, the prosecutor at the trial, very properly, discerned the imperfections of the trial judge's directions to the jury on this issue. The prosecutor sought to explain to the trial judge the need for more explicit warnings to the jury as to the special caution they should observe in drawing conclusions adverse to the appellant by reference, for example, to the evidence of witnesses concerning the apparent similarity of items of clothing found much later at the appellant's home and the overalls and balaclava worn by the offender, remembered from the time the crimes were committed. Despite the prudent interventions by the prosecutor in this respect, the trial judge did not subsequently provide the jury with supplementary directions of the kind the prosecutor correctly perceived to be necessary, so as to conform to the stringent standard stated in Domican v The Queen70 and other cases. Given that such a reminder had been given by the prosecutor, explicitly, it was unnecessary (or at least inessential) that the same point should also have been made by the appellant's trial counsel. I can put this issue aside because of the conclusion that I reach, on other grounds, that the appeal must be allowed. In any retrial of the appellant, it may be expected that, if like evidence of similarity between the items of clothing or personal appearance were adduced, the judge would give strong and clear warnings to the jury about the dangers inherent in the use of the identity and resemblance evidence. However, because of the view that I take about the demonstration that took place in the appellant's trial (and also the conclusion reached in the joint reasons on those issues), the need for a strong warning about the use of demonstrations is unlikely to arise in a second trial. Inadequate interlocutory reasons: Finally, I reach a similar conclusion in respect of the appellant's complaint concerning the suggested inadequacy of the trial judge's reasons for several of her rulings adverse to him71. On this issue, alike with the Court of Criminal Appeal72 and with the joint reasons in this 69 Reasons of Heydon J at [234]. 70 (1992) 173 CLR 555 at 565-566. 71 Joint reasons at [33]-[36]. 72 (2006) 164 A Crim R 489 at 522 [272]. Kirby Court73, I agree that the failure of the trial judge to give even brief and succinct rulings (if necessary later) on important questions, made during the hearing, amounted to "unsatisfactory features of the trial"74. It is not necessary for me to elaborate these points. In the conclusion that I reach, there must be a retrial. In that retrial it can be expected that, if something more than the recorded exchanges between the judge and counsel is necessary and appropriate, the judicial obligation to give reasons for important rulings will be observed in the normal way. The remaining issues: The foregoing reasoning brings me to the two remaining issues that I need to address. The first is the application to the demonstration of the common law rules that remain applicable because s 53 of the Evidence Act does not govern this case. The second is the resulting application of the "proviso" in s 6(1) of the Criminal Appeal Act, including to the erroneous exclusion at trial of the alibi evidence, pursuant to the Criminal Procedure Act 1986 (NSW), s 150. I turn to address these issues. In-court demonstration: relevant but unfairly prejudicial A new "relevance" issue: I now arrive at the point where I depart from the joint reasons. Those reasons75 conclude that no issue about the lawfulness of a "demonstration" arises (whether under the Evidence Act or the common law). For the joint reasons, an anterior legal question is presented. This is whether what was done at the prosecutor's request was "relevant". The joint reasons conclude that this is the "determinative" question. Those reasons answer the question adversely to the prosecution. That answer is fatal to the reception of such evidence. The evidence should not have been received not because it was unfairly prejudicial to the appellant but because it was legally irrelevant to the issues arising in the appellant's trial. I disagree with this analysis. Its only merit, as I see it, is that it obviates consideration of questions otherwise arising as to how Pt 2.3 of the Evidence Act 73 Joint reasons at [33]-[36]. 74 Joint reasons at [33]; cf Mraz v The Queen (1955) 93 CLR 493 at 514; Public Service Board of NSW v Osmond (1986) 159 CLR 656 at 666-667; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 259-262; Dinsdale v The Queen (2000) 202 CLR 321 at 329 [21]. 75 Joint reasons at [18]-[19]. Kirby (or the residual common law) would apply to the use of any "demonstration" actually carried out76. Rejection of irrelevance: There are several reasons why, in my view, this Court should not adopt the analysis embraced in the joint reasons. First, it is not an argument that is raised in any of the appellant's grounds of appeal before this Court. To the contrary, as the relevant ground (ground 2.2), set out in the reasons of Heydon J, demonstrates77, the appellant's objection to the demonstration before this Court was not made on the footing that such conduct proffered no relevant evidence for the consideration of the jury. His ground of appeal impliedly accepts that what the appellant was asked to do could be judged by the jury to be relevant to the critical issue for decision, namely the identification of the appellant as the offender. Instead, the attack in this Court, according to the applicable ground of appeal, was on the permissibility of the demonstration, measured on the footing that it was designed to elicit evidence that was relevant but unfairly prejudicial to the appellant. This Court is a court of error. Under the Constitution, appeals to this Court are limited to correcting errors of the courts below78. The purpose of a constitutional "appeal" is to quell a controversy between the parties, brought to this Court for resolution79. Ultimately, unless an issue is raised on the record, as for example by a ground of appeal (or cross-appeal or notice of contention) or where the parties and the court agree to a relaxation of the rules so as to allow an issue to be raised more informally, there is no relevant controversy for the Court to quell. This Court does not enjoy a roving commission to create new grounds of appeal so that it might decide an appeal upon some basis about which no party is complaining. This approach of this Court to its functions under the Constitution has been repeatedly stated by Justices of the Court, from early times to the present80. In effect, the judicial function that is enlivened in an appeal derives from the 76 Joint reasons at [32]. 77 Reasons of Heydon J at [168]. 78 Mickelberg v The Queen (1989) 167 CLR 259 at 267; Eastman v The Queen (2000) 203 CLR 1 at 13 [18], 51 [158], 58 [178]; cf 76 [232]. 79 Singh v The Commonwealth (2004) 222 CLR 322 at 383 [152] per Gummow, Hayne and Heydon JJ. See also Batistatos v RTA (NSW) (2006) 226 CLR 256 at 280 [63] per Gleeson CJ, Gummow, Hayne and Crennan JJ. 80 Since at least In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 265-266. Kirby constitutional character of "matters" which can only be decided by federal courts. This does not prevent (although it may limit) judicial observations by way of obiter dicta on matters not strictly in issue but regarded as pertinent (and perhaps overlooked). It does not prevent this Court from permitting a party to amend and enlarge the grounds that it wishes to advance, although doing so in criminal appeals has been said to be exceptional81. Where obedience to the Constitution, as the fundamental law, is raised, from which the Justices derive their own authority, different questions may sometimes arise82. However, this is not a case where the question of the relevance of the demonstration evidence is considered in the joint reasons by way of obiter dicta. The appellant made no application to amend or enlarge his grounds of appeal to rely on what is now described as the "anterior question" of relevance. Nor are any constitutional questions presented that could possibly warrant treating the issue of relevance as one of fundamental obedience to law. Respectfully, therefore, I consider that the relevance argument does not fall to be decided. It is not a controversy before the Court that we are asked to quell. Secondly, a question of procedural fairness is presented by the course taken in the joint reasons. Because the issue of relevance was not raised in the grounds of appeal, it was not addressed in the written submissions of the parties. In the respondent's submissions, the mention that is made of relevance is directed not to relevance, as such, but to whether the demonstration was identification evidence or not83. To the extent that it was mentioned at all in the appellant's oral submissions, this occurred but fleetingly and then in response to a question from the Court84. No application was made after the question to expand the grounds of appeal. It was not mentioned in oral argument by the respondent. In reply, the appellant returned to his invocation of s 5385. He made no reference to s 55 of the Evidence Act. It follows that no extensive treatment of the argument of relevance was ever placed before this Court. Nor do we have the considered opinion upon it of 81 Gipp v The Queen (1998) 194 CLR 106 at 116 [24], 154-155 [136]-[138], 161 [164]; contrast 125-126 [55]-[56]; Crampton v The Queen (2000) 206 CLR 161 at 82 Roberts v Bass (2002) 212 CLR 1 at 54 [143]. 83 cf joint reasons at [17]. 84 [2007] HCATrans 368 at 1485-1510. See also at 1055. 85 See [2007] HCATrans 368 at 2528. Kirby the Court of Criminal Appeal or of the trial judge, since it was not in issue, raised or argued there. If this appeal were to be decided on the "anterior question"86, an issue would arise as to whether the grounds of appeal require amendment. That issue would, in turn, raise questions as to whether any such amendment should be allowed at such a late stage in this litigation. I do not say that an amendment would necessarily be denied. However, bringing the record into a correct relationship with an issue belatedly perceived to be determinative is an obligation, ultimately, of the Court itself. Moreover, it is an obligation to be fulfilled with due respect to the requirements of procedural fairness to the opposing party which loses on a new point never earlier properly addressed. Leave to raise a new interpretation of the application of the Evidence Act might be granted, having regard to the broad view that this Court has taken of its powers in that respect87. But the correct procedural steps would have to be taken for otherwise there is no identified "controversy" that this Court can justly "quell". There is also a real risk of procedural unfairness to the losing party. Thirdly, the fact that, despite the many experienced minds that have been brought to bear on the controversies of this case, no one previously has seen fit to raise an objection to the demonstration evidence on the grounds of relevance, is (or should be) reason enough for this Court to pause before embracing such a new approach for itself. No one advanced such an argument at trial. It was not expressed in the grounds of appeal before the Court of Criminal Appeal. None of the judges of that Court (all of whom had substantial trial experience) raised the issue. This was so, although other arguments over the relevance of the clothing evidence were certainly addressed, as the reasons of Heydon J in this Court make plain88. Because there is no further appeal from the decision of this Court in which a party disaffected may challenge novel legal or factual analysis, it is especially important to observe care and procedural niceties before embarking for the first time upon completely new analyses that may seem attractive. 86 See the joint reasons at [19]. 87 Crampton (2000) 206 CLR 161 at 172 [14], 184 [51], 204-205 [116]-[117]. 88 Reasons of Heydon J at [151]-[153]; cf Port Jackson Stevedoring Pty Ltd v Salmond & Spraggon (Aust) Pty Ltd (1980) 144 CLR 300 at 303-304 (PC). Kirby Fourthly, the postulate of the "logically anterior question" embraced in the joint reasons89 does not appear convincing when it is remembered that the test of "relevance", expressed in the Evidence Act, is an extremely broad one. Thus, s 56 of that Act states: "(1) Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding. (2) Evidence that is not relevant in the proceeding is not admissible." The foregoing tests are stated in all their generality for application to millions of questions asked every year in the great variety of cases to which the Uniform Evidence Acts apply. According to s 55(1) of the Evidence Act, the test for relevance requires no more than that the evidence "if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding". That test must necessarily be given an extremely broad ambit. Other provisions of the Evidence Act reinforce the impression that the test of relevance is not a narrow or stringent one (see eg ss 57, 58). A broad interpretation alone is the one compatible with the purpose of the Act which is to aid the court process (effectively of quelling controversies brought to the court for that purpose, taking into account all evidence which has a bearing upon the questions in issue) rather than to delay or needlessly complicate the resolution of that process90. What is, or is not, relevant to an issue in proceedings is much more likely to be perceived by advocates and judges of trial than by an appellate court. Still more so than by the ultimate national appellate court, concluding for the first time for itself that an issue, which everyone else has considered to be relevant, is irrelevant. I cannot say that this course could not properly happen. Indeed, in the experience of this Court it has already happened, at least once, in Smith v The Queen91. I disagreed with the approach on that occasion92. In this appeal, I have 89 Joint reasons at [19]. 90 See eg Clark (2001) 123 A Crim R 506 at 566-567 [111]-[112] per Heydon JA. 91 (2001) 206 CLR 650. The approach in Smith "to read down the concept of relevance contained in s 55" has been criticised: Ligertwood, Australian Evidence, 4th ed (2004) at 56-57 [2.22]-[2.23]. 92 (2001) 206 CLR 650 at 658-659 [21]-[24]. Kirby considered whether the circumstances of the case are sufficiently analogous to require me to suppress my objection to the course favoured in the joint reasons and to conform to it. However, questions of relevance are always highly fact- specific. No general rule could be laid down that was not anchored in the proof of the facts in issue in the particular proceeding. Many of the reservations that I expressed in Smith can therefore be repeated in this appeal93: "[There are] reasons for caution in permitting a case to take on a completely new complexion, especially where the new point concerns the relevance of evidence. Questions of relevance raise the logical connection between proof of a propounded fact and a conclusion about a matter having persuasive significance for an issue for trial. Notions about the relevance of particular facts to ultimate conclusions in a trial can vary as between the parties, who may see the issues differently. Perspectives of relevance may also develop during the course of a trial as the issues become clearer, as immaterial issues fall away and as understandings of the applicable law become more certain. This is why appellate courts ordinarily defer to the rulings of trial judges about the issue of relevance. Such deference also rests upon a recognition of the fact that practical considerations usually require such rulings to be made on the run … Rulings as to relevance therefore depend substantially upon judicial impression. In the face of the fact that relevance is, in part at least, determined by impression, it is significant that neither the trial judge, nor the appellate judges nor counsel earlier perceived the evidence in question to be irrelevant. In now expressing an opinion about relevance, this Court has neither the advantages of an express ruling on the point by the trial judge nor analysis and opinion of the Court of Criminal Appeal." Every word in this extract applies to this appeal. Even more so because here the question of relevance did not arise (as in Smith) in a preliminary ruling, made before the trial evidence was adduced. Here, the question fell to be decided at an advanced stage in the conduct of the trial when the prosecution case had closed, when the appellant had given his evidence-in-chief and when the issues for the jury's verdict had been sharpened and clarified. It would be a bold decision for this Court to come to its own conclusion that the evidence proffered by the prosecution in the contested demonstration was irrelevant to the proof of a fact in issue (as distinct from unfairly prejudicial to the appellant or inadmissible on some other ground). 93 (2001) 206 CLR 650 at 658-659 [23]. Kirby Fifthly, when one reflects on whether the evidence that the prosecutor was seeking to adduce could "rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding", one such fact was clearly whether the appellant was the offender who had committed the crimes alleged. Relevant to that question was (to put it broadly) whether, when dressed in overalls and a balaclava; when walking in front of the jury; and when saying words ascribed to the offender at the scene, there were apparent similarities, in the jury's view, between the appearance and conduct of the appellant and the earlier evidence and descriptions given (or viewed on videotape) concerning the offender. Of course, there were differences. Thus, there was no relevant sound of the offender on the videotape; the words he was asked to utter were not exactly those said by the witness Mrs Gleeson to have been mis-stated by the offender. The video and photographic stills lacked sharpness and clarity. The circumstances of the appellant sitting (on one estimate) for 10 minutes in the witness box were seriously unfair. But depending on what evidence the jury accepted, it cannot be said that the evidence was irrelevant to the obvious purposes for which it was proffered by the prosecutor. It was open to the jury to consider that all or some of the evidence was relevant to their decision. Dangerous, unfair, humiliating and prejudicial, yes. But irrelevant, no. Some of the most prejudicial evidence in a trial is that which is potentially most relevant in the opinion of lay jurors. As in Smith, it is, in my view, a mistake to attempt to get the relevance test to do the work of excluding evidence such as that of the demonstration that took place in the appellant's trial. Such an approach would shift the debate of exclusion to unduly subtle preliminary argument. It would divert the decision- maker's mind from the real grounds provided by the law for exclusion of evidence which, although relevant, is unfairly prejudicial and to be excluded on that ground. Addressing unfair prejudice: The foregoing are the reasons why I am unable to avoid the balancing test of probative value and prejudice presented by the demonstration. Attractive as such avoidance might seem, it is neither presented by the grounds of appeal as framed nor sound in principle or in law. When I address the issues presented in the way that I regard to be correct (and as they were addressed below, and in the parties' real arguments before this Court) I nonetheless reach the same conclusion as that stated in the joint reasons. The Evidence Act did not apply to govern the demonstration. Instead, the common law principles applied. The conduct of demonstrations in court before a jury is subject to rules protecting the accused from unfair prejudice or from being engaged in conduct that is misleading, confusing, demeaning, prejudicial or unjust. In the context of a jury trial, such rules must be upheld by the trial judge. Kirby It can be expected that, in Australia, in the future, the common law rules in this respect will develop in ways generally harmonious with the provisions of the Uniform Evidence Acts94. Those provisions acknowledge the broad powers enjoyed by trial judges to ensure the fairness, applicability and utility of demonstrations95. They direct attention to whether the demonstration will "assist the court in resolving issues of fact or understanding the evidence". They demand vigilance against "the danger that the demonstration … might be unfairly prejudicial, might be misleading or confusing or might cause or result in undue waste of time" and the need to "properly reproduce the conduct or event to be demonstrated"96. All of these are considerations that are reflected in the common law principles that fall to be applied in this case. With due respect to Heydon J, who has reached the opposite conclusion97, it is my opinion that what the prosecutor required the appellant to do was a "demonstration" so far as the common law rules applying to in-court demonstrations are concerned. The prosecutor obliged him to dress up; to walk before the jury; and to say particular words. She did so for the manifest purpose of allowing the jury to draw their own comparisons between what they saw and heard for themselves and other available evidence relevant to the identity of the offender. It is not correct to dismiss the prejudice to the appellant as insubstantial because of the fact that he was obliged to sit in the witness box for a relatively short time, measured against the duration of the entire trial, during part of which the jury's attention would have been distracted and focused on the objections being voiced by the appellant's trial counsel98. Counsel protested that what was happening was "totally improper" and "patently unfair". The duration of the demonstration is not the essence of the appellant's complaint. The complaint is that the prosecutor's questions made him sit, in the jury's presence, in a garb often associated with armed robberies; inescapably similar to the appearance of the offender shown on the video film and photographic stills; and necessarily looking sinister and criminal-like. Even if glanced at for a moment, such an image (like images of hijackers, terrorists and murderers in well-remembered films, documentaries and news broadcasts) would etch an eidetic imprint on the jury's collective mind. It is an image unfairly prejudicial to the appellant. 94 R v Swaffield (1998) 192 CLR 159 at 208 [121]; cf 193-194 [67]-[68]. 95 See eg Evidence Act, s 53(3): "Without limiting the matters that the judge may take into account in deciding whether to make an order …". 96 Evidence Act, s 53(3)(b),(c) and (d). 97 Reasons of Heydon J at [223]. 98 Reasons of Heydon J at [185]. Kirby There have been cases where witnesses have been requested to engage in in-court demonstrations by revealing a particular part of the body, otherwise clothed99; providing a sample of handwriting; wearing a hat100 or where they have otherwise been tested on some idiosyncratic spoken or written reproduction of particular words101. However, never in my experience has conduct in which the accused person has been asked to engage come close to the serious prejudice to which the appellant was subjected by the questioning by the prosecutor and the demonstration that she led him to perform in his trial. When cases come before this Court, we must look beyond the instant case. We must examine what has happened recently against the standard of what will occur if, condoned, it becomes a general rule. In Livermore v The Queen102, the Court of Criminal Appeal in New South Wales addressed what it saw as repeated instances of Crown Prosecutors making extravagant and improper submissions in closing which, the Court said, caused it to "[think] that [its] repeated condemnation … appears to have fallen on deaf ears". In Livermore, the conduct of concern was the content of the prosecutor's closing address to the jury. Here, there is no complaint of such a kind. Indeed (as I have shown) the prosecutor in her closing observations attempted to assist the trial judge to provide directions to the jury on identification and resemblance evidence that were legally accurate and protective of the appellant. Nonetheless, where, as here, such a prejudicial course of demonstration and questioning has been allowed at trial and excused by the Court of Criminal Appeal, it falls to this Court to insist on a return to basic standards of fairness in prosecution practice and in the conduct of such trials. That means ensuring that serious potential prejudice to an accused person, by obliging him to dress in court in the presence of the jury as a villain, should not be allowed. It should be disallowed in the clearest of terms. We should not avoid such condemnation by taking a pathway around it, deploying reasoning never previously hinted at. If in trials of persons for armed robbery (now commonly captured by surveillance cameras on film and in still photographs) the accused could be required by prosecuting counsel to dress up like the offender and to present before the jury in the varying garments of criminal disguises, the trial of the 99 cf Sorby v The Commonwealth (1983) 152 CLR 281 at 292; Bulejcik v The Queen (1996) 185 CLR 375 at 380-381. 100 R v Kirby [2000] NSWCCA 330. 101 R v Voisin [1918] 1 KB 531; Bulejcik (1996) 185 CLR 375 at 381. 102 (2006) 67 NSWLR 659 at 669 [44]. Kirby accused would be gravely compromised. When the issue comes to this Court we should tackle it directly and say so clearly. No one suggested that the generality of the exclusionary language of ss 135 and 137 of the Evidence Act did not apply where the source of the governing rule lay in the common law rather than the Evidence Act itself. It follows that the Court of Criminal Appeal erred in failing to hold that any probative value of the evidence which the prosecutor sought to adduce by way of the demonstration was outweighed by the danger that the evidence might be unfairly prejudicial to the accused. On this ground, the trial judge should have declined to admit the evidence adduced by the prosecutor. She should have excluded that evidence and stopped the demonstration. Where the evidence was adduced, the trial judge was clearly required to give clear and firm directions to the jury in an attempt (if that were possible) to cure the prejudice to the accused that had been occasioned by the demonstration. As this was neither the approach taken at trial nor demanded by the Court of Criminal Appeal, the proceedings below miscarried. A serious injustice was done to the appellant. This requires reconsideration of the remaining issue presented by the prosecution's invocation of the "proviso". The proviso was not applicable to this appeal At the invitation of this Court, the parties provided supplementary written submissions addressed to the proper approach to the application of the "proviso" in the common form in which criminal appeal legislation is expressed in Australia103. Some concern and uncertainty appears to have arisen in intermediate courts104 over the reconciliation of earlier authority of this Court on the "proviso"105 and what was more recently said in the joint reasons in Weiss v 103 Criminal Appeal Act 1912 (NSW), s 6(1); Crimes Act 1958 (Vic), s 568(1); Criminal Law Consolidation Act 1935 (SA), s 353(1); Criminal Code 1899 (Q), s 668E(1); Criminal Appeals Act 2004 (WA), s 30(3); Criminal Code Act 1924 (Tas), s 402(1); Criminal Code (NT), s 411(1). 104 cf eg R v Tofilau (No 2) (2006) 13 VR 28 at 35-36 [15]. 105 Esp Maric v The Queen (1978) 52 ALJR 631 at 635; 20 ALR 513 at 521; Wilde v The Queen (1988) 164 CLR 365 at 371-372; Domican (1992) 173 CLR 555 at 566; Graham v The Queen (1998) 195 CLR 606 at 610 [10]; Lee (1998) 195 CLR 594 at 605 [44]; Stanoevski (2001) 202 CLR 115 at 128 [50]; Festa v The Queen (2001) 208 CLR 593 at 631-632 [121]. Kirby The Queen106. There was some consideration of this question in Libke v The Queen107. The central holding in Weiss, which followed suggestions to similar effect in relation to the role of appellate courts both in criminal108 and civil109 appeals, was that the appellate function must, in every case, be discharged by the intermediate court for itself. It must be done by reference to principles derived from the statutory language. It is not to be discharged by incantations involving speculation concerning what the jury or judge at trial (or a future jury or judge) would, or might, or should have done if this or that had happened or not happened. About this much, there is, I believe, unanimity in this Court. It has emphasised the very substantial role and duty of appellate courts to review the evidence and to reach conclusions for themselves by the application of the statutory tests. There is also unanimity (for the possibility is expressly reserved in Weiss110) that there may be cases where "errors or miscarriages of justice occurring in the course of a criminal trial may amount to such a serious breach of the presuppositions of the trial as to deny the application of the common form criminal appeal provision with its proviso". Beyond these points, there remain questions that I regard as still alive for final resolution if tendered to this Court in a suitable case. In a sense, those questions may be a product of the "conundrum" which the joint reasons in this appeal recognise as appearing on the face of the common form legislation in which criminal appeal jurisdiction is expressed throughout this country111. 106 (2005) 224 CLR 300 at 314 [35]. 107 (2007) 81 ALJR 1309 at 1321-1322 [42]-[53]; 235 ALR 517 at 531-533. 108 See eg Festa (2001) 208 CLR 593 at 631-632 [121]. See also Eastman (2000) 203 CLR 1 at 105 [315]. 109 Fox v Percy (2003) 214 CLR 118 at 126-127 [25]. 110 (2005) 224 CLR 300 at 317 [46], citing Wilde v The Queen (1988) 164 CLR 365 at 373; Conway v The Queen (2002) 209 CLR 203 at 241 [103]; R v Hildebrandt (1963) 81 WN (Pt 1) (NSW) 143 at 148 per Herron CJ; R v Henderson [1966] VR 41 at 43 per Winneke CJ; Couper (1985) 18 A Crim R 1 at 7-8 per Street CJ. 111 Joint reasons at [40]. Kirby Elsewhere and earlier, the "conundrum" was described as "a riddle of the kind which Plutarch records caused Homer to die of chagrin"112. However that may be, it is unnecessary to wrestle with such large questions in this appeal. The questions at issue here arise, ultimately, because of the very high value accorded by our law to the fair trial of a person accused of a criminal offence113 and the normal assumption that every person facing such an accusation will have a legally accurate and fair trial before being convicted and suffering punishment. Such expectations about criminal trials are even greater where the crime charged is serious, as it normally is in Australia when tried before a jury. Separate and constitutional questions may arise in the trial on indictment of federal crimes. Those questions, also reserved in Weiss114, are not material here. The parties' submissions on Weiss, Libke and past authority can be safely put aside to be reconsidered, perhaps, if a suitable case for addressing the "conundrum" or "riddle" presents in the future. Meantime, the resolution of the appellant's case, under the "proviso", can be reached without the necessity of anything more than the application of the language of the Criminal Appeal Act. Approaching the final issue in this way, alike with the joint reasons, I would conclude that the exercise by the Court of Criminal Appeal of the powers reposed in it by the Criminal Appeal Act, and specifically the "proviso", miscarried. That Court erred in failing to uphold the appellant's submission that the trial judge had erred in law in admitting evidence of the demonstration. That error being established, either this Court must, for its own part, re-exercise the powers reposed in the Court of Criminal Appeal, or it must remit that exercise to be performed by that Court correctly and in accordance with law. No party argued for remitter. There is no reason why this Court should not reach, and give effect to, its own view in disposing of this appeal. As in the joint reasons115, I do not find it essential to decide whether there was such a departure from the fundamental assumptions of a fair trial in the appellant's case that the "proviso" could not, or should not, be engaged. In view of what I have said about the gravely prejudicial and unfair effect of the demonstration, I am sympathetic to that analysis. However, it is not essential for 112 R v Gallagher [1998] 2 VR 671 at 672 per Brooking JA, noted in Eastman (2000) 203 CLR 1 at 105 [315] per Hayne J. 113 Dietrich v The Queen (1992) 177 CLR 292 at 298, 326-327. 114 (2005) 224 CLR 300 at 317-318 [46]. 115 Joint reasons at [10]. Kirby me to approach the arguments about the "proviso" in that way. So I refrain from doing so. One day, it may be necessary for this Court to address the requirements of that approach116. It is not essential in this appeal. As Heydon J has forcefully demonstrated, by reference in particular to the DNA evidence consistent only with a source derived from the appellant117, the prosecution case against the appellant at trial was, objectively, extremely powerful. To reconcile the DNA evidence on the cap, found at the crime scene, with the appellant's asserted absence from that scene, it was necessary, in effect, to postulate that the cap was deliberately planted there by someone maliciously seeking to inculpate the appellant in a serious criminal offence or, alternatively, secured through later transference of the appellant's DNA to the cap, either accidentally or deliberately. As against this extremely damaging evidence, the appellant, as the joint reasons point out118, was denied the opportunity to call the alibi evidence of his father and brother concerning their recollections as to his presence in a workshop in Campbelltown, far from the crime scene or, more accurately, their lack of recollection of his absenting himself from that place at the relevant time, when he would be expected to be working there. The exclusion of the alibi evidence (which the Court of Criminal Appeal accepted was erroneous119) constituted, in the circumstances, a radical departure from the requirements of a fair trial120. Those requirements are the postulate upon which the "proviso" operates. Because the alibi evidence was not called and tested at the time, but should have been, it is not available to this Court to be weighed in the balance in deciding whether no actual miscarriage of justice has occurred. I respect and understand the contrary conclusion of Heydon J. However, I prefer the decision reached in the joint reasons. I do so because I agree with 116 cf Weiss (2005) 224 CLR 300 at 317-318 [46]; Nudd v The Queen (2006) 80 ALJR 614 at 634 [90], 636-637 [108]-[109], 645 [162]; 225 ALR 161 at 185, 189, 200- 117 Reasons of Heydon J at [257]-[258]. 118 Joint reasons at [43]-[44]. 119 (2006) 164 A Crim R 489 at 519 [242], 524 [290]-[291], 524 [292]. Wrongly the trial judge appears to have considered that, without consent, leave to adduce evidence of the alibi could not be granted retrospectively. 120 Joint reasons at [43]. Kirby those reasons that "[t]he graver the departure from the requirements of a fair trial, the harder it is for an appellate court to conclude that guilt is established beyond reasonable doubt"121. Ultimately, there were two grave departures from the requirements of a fair trial in the appellant's case. First, the appellant was erroneously denied the chance to call evidence which would tend to exculpate him. And secondly, in being subjected to a demonstration in court, in the presence of his jury, the appellant was cast in a sinister light in a way that was seriously prejudicial to him. That error was never repaired, or attempted to be repaired, by accurate, corrective instructions from the trial judge. These were grave departures from the requirements of a fair trial. Taken together, such considerations make the case unsuitable for the application of the "proviso". Accordingly, a retrial must be had. Orders It follows that I agree in the orders proposed in the joint reasons122. 121 Joint reasons at [42]. It is worth noting that in its General Comment No 32 on Article 14 of the International Covenant on Civil and Political Rights, the Human Rights Committee of the United Nations treated such issues as important. It said at [30]: "Defendants should normally not be … kept in cages during trials or otherwise presented to the court in a manner indicating that they may be dangerous criminals." By analogy, they should not be presented looking like criminal offenders. 122 Joint reasons at [52]. 129 HEYDON J. Graham John Evans ("the accused"), after a jury trial in the District Court of New South Wales before Backhouse ADCJ, was convicted on two charges of armed robbery and one charge of assault with intent to rob. The events leading to these convictions took place on Thursday 28 February 2002 in the chambers of Strathfield Municipal Council. At about 4.10pm a man entered the chambers. He was wearing dark blue overalls. His head was covered by a red balaclava. He was wearing sunglasses. He was carrying a sawn-off rifle. He took cash belonging to the Council from Laura Gleeson, a Council employee. He then menaced a member of the public, Zbigniew Marszalek, with the rifle and robbed him of some of his cash. Finally, he menaced another member of the public, Bo Qin Huang, with the rifle and forced him to place some of his cash on a counter, though he did not in fact take this cash away. The appeals The accused appealed against his convictions to the Court of Criminal Appeal of New South Wales (James, Hidden and Hoeben JJ) under s 5(1) of the Criminal Appeal Act 1912 (NSW) ("the Criminal Appeal Act"). Section 6(1) of that Act provides: "The court on any appeal under section 5(1) against conviction shall allow the appeal if it is of opinion ... that the judgment of the court of trial should be set aside on the ground of the wrong decision of any question of law, or that on any other ground whatsoever there was a miscarriage of justice, and in any other case shall dismiss the appeal; provided that the court may, notwithstanding that it is of opinion that the point or points raised by the appeal might be decided in favour of the appellant, dismiss the appeal if it considers that no substantial miscarriage of justice has actually occurred." The accused's arguments that there had been an error of law or a miscarriage of justice succeeded in two respects. However, the Court of Criminal Appeal applied the proviso to s 6(1) in favour of the prosecution because it considered that no substantial miscarriage of justice had actually occurred. It therefore dismissed the appeal123. The accused appeals to this Court against that order. He seeks in lieu of it an order that his conviction be quashed and that either a verdict of acquittal be entered or a new trial be ordered. The appeal should be dismissed. Before turning to the grounds of appeal, and the reasons why the particular arguments advanced on behalf of the accused are to be rejected, it is desirable to explain the evidentiary background. 123 Evans v The Queen (2006) 164 A Crim R 489. The evidentiary background At the trial there was no dispute that the crimes alleged had occurred. The key issue was whether the accused had committed them. The prosecution case. The prosecution case rested principally on the following evidence. A cap had been dropped by the offender at the scene of the crime. The DNA profile of material lifted from that cap matched the DNA profile of a buccal swab which had been taken from the accused with his consent. That DNA profile would be expected to occur in fewer than one in 10 billion people. On 30 December 2003 police officers searched a house owned by the accused's father in which the accused resided: they found a red balaclava in his bedroom and a pair of blue overalls in the laundry. The accused said he owned the balaclava and that it had been there for two years. The balaclava was similar to a large number of red balaclavas found in a box in the basement. These balaclavas had been obtained by the accused in 2000. The accused had discolouration and scarring on his arms, giving him, if he were the offender, a reason for wearing the overalls – to cover up a possible means of identification. The prosecution contended that the balaclava and the overalls were at least similar to those worn by the offender. While under cross-examination, the accused was asked by prosecuting counsel to put on the balaclava and overalls. The jury were asked to compare the appearance and other traits of the accused at the trial in the balaclava and overalls with the appearance of the offender in film of the crimes taken on surveillance cameras, and in still photographs derived from that film, and with descriptions by seven eyewitnesses of the offender's gender, voice, height, age, build, skin complexion, hair and manner of walking. Two witnesses said the offender had an Australian accent. It was said that he spoke in a slow purposeful way and with a "very slow", "very dull" voice. One witness said the offender asked for the "serious cash" and three said he asked for "serious money" or otherwise used the word "serious". One witness said that when he said "'[T]his is serious', it almost came over as, 'sherious', or something like that". There was evidence from five witnesses that the offender was five feet six inches to five feet eight inches tall; on the other hand, one said he was five feet two inches tall and another 180 centimetres tall (ie nearly five feet 11 inches). There was evidence from two witnesses that the offender was aged 30 to 45. Six witnesses said that the offender was of slight or thin or slim or skinny or very slender build. Three said he had fair to medium or fair or pale or white skin. One said he had dark, almost black hair. His mode of walking was said by Mrs Gleeson to be "a real relaxed walk; it was not a run. It was just bouncing, walking out". She also agreed that it was "a swagger style of slow walk". Four witnesses said the overalls the offender was wearing appeared too large on him and one said the balaclava he was wearing was too big for his head. The defence position. The accused gave evidence. He advanced an alibi defence in the sense that he denied being at the Strathfield Council chambers on 28 February 2002 and he denied committing the offences, but he said he could not be sure where he was. He said his ordinary practice on Thursday afternoons was to work at his brother's business at Campbelltown, which is about 43 kilometres from Strathfield. Evidence from his father and brother of that practice was rejected because notice of intention to rely on the alibi defence had not been given124. An expert for the defence was called and said that while it was probable that the source of the DNA material found on the cap was that of the accused, it could have got there by some means other than the accused wearing it: it could have been transferred, probably in the form of saliva, from some other item which came into contact with the cap. The expert also said that the accused could be excluded as a contributor to the DNA on a tissue left behind at the scene of the crime; in this respect he disagreed with the prosecution expert, who said that the accused could not be excluded as a possible contributor. In his closing address to the jury defence counsel submitted that the offender had deliberately left a cap which was not his with the accused's DNA on it so as falsely to implicate the accused. Ground 2.1: showing the balaclava and overalls to witnesses The first ground of appeal was: "The Court of Criminal Appeal should have held that the trial miscarried as a result of the admission of evidence of eyewitnesses concerning items of clothing that had been randomly seized from the [accused's] home twenty two months after the offence." Pre-trial events. Defence counsel made a pre-trial application to exclude from evidence excerpts from a film of the police search of the accused's residence which resulted in the balaclava and overalls being removed. In the course of that application, however, he made it plain that he did not object to evidence that the police had located the balaclava and the overalls there, or evidence of what the accused said about that. It was implicit in this stance that he did not see the balaclava and overalls as inadmissible, for if he had, evidence of their finding would also be inadmissible. Prosecution's opening address. Prosecution counsel said in her opening address to the jury that the offender's overalls were blue and he was wearing a red balaclava. Then she said: "On Tuesday 30 December, 2003 the police attended the accused's home at Campbelltown and they found a red balaclava with eye and mouth holes 124 See Criminal Procedure Act 1986 (NSW), s 150. cut in it in a bedroom, and the accused then directed them to a box of similar red balaclavas which were in a storage area under the house. The police also found a pair of blue King Gee overalls in the laundry, and the accused told the police that they belonged to him." Defence counsel did not object to these statements. The eyewitness evidence. The balaclava and the overalls were marked for identification as MFI1 and MFI2 respectively during the examination in chief of the first prosecution witness, Helen Connell. She was an employee of the Council. She said the balaclava was similar in colour to the offender's headgear. She said it could be the same as the headgear worn by the offender because it was too big for him. It appeared to be of the same thickness. She said the overalls were of a similar style to those worn by the offender, although they were a lot dirtier and a little faded. Defence counsel did not object to the items being shown to the witness or to the questions about them. Indeed he asked questions of his own about them highlighting the evidence in chief so far as it pointed to differences between MFI2 and the overalls worn by the offender. The second prosecution witness, Patricia Smith, a Council employee, described the offender as wearing heavy duty dark coloured overalls that appeared to be too large for him. She described the balaclava as bright coloured and made of thick fabric. A little later she was shown both MFI1 and MFI2. She said that the knit of the fabric in the balaclava was similar to the fabric of the offender's balaclava. She said that the studs, pockets and collar of the overalls were similar in style to his overalls, although the colour of the offender's overalls was perhaps darker. Again there was no defence objection to this procedure. Defence counsel drew the witness's attention to a prior statement of hers in which she had said the overalls were red and clean. Eventually the witness said the balaclava was "red or a bright colour orange" and appeared to suggest that in her prior statement she was not intending to convey anything about the colour of the overalls. The third witness was Lesley Thompson, an employee of the Council. She said the offender wore a worn red balaclava and fairly old King Gee overalls which were a blue colour lighter than navy blue. She said the balaclava had white stitching around the opening of the eyes, nose and mouth. Prosecuting counsel then asked the witness to look at MFI1, the balaclava. Defence counsel objected on the ground that its appearance was inconsistent with the description which the witness had given of the offender's balaclava. The defence objection was overruled. The witness said that MFI1 was "very similar" to the offender's balaclava in that it was of exactly the same style, though she remembered white stitching. Defence counsel then contended that the condition of MFI2 was different from the condition of the overalls the witness said she observed on the offender. Hence he objected to questions about MFI2 as irrelevant, and also unfair, in view of the risk of what he called a "displacement effect" – the risk that showing an object to a witness would influence the witness towards an unreliable identification of it. This objection too was overruled. He continued to accept that evidence of the finding of MFI2 by the police at the accused's residence was admissible. Mrs Thompson said MFI2 looked like the offender's overalls, being of the "same style", but she remembered the offender's overalls to be a "bit paler". Defence counsel, in his cross-examination, highlighted the fact, in contrast to Mrs Thompson's recollection of what the offender was wearing, that MFI1 did not have white stitching and MFI2 was paler. The fourth witness was Mr Marszalek. He described the offender's balaclava as red, woollen, covering the whole face and thick. He described the overalls as "bluey grey", with the colour having gone out of them. MFI1 and MFI2 were shown to Mr Marszalek, but defence counsel neither objected nor asked the trial judge whether his position was protected without objection by reference to the ruling given on questions about MFI1 and MFI2 in relation to the third witness. Mr Marszalek said he thought MFI1 was the balaclava the offender was wearing, based on the colour and the texture of the wool. He said MFI2 corresponded with the type of overalls worn by the offender in style and colour. In cross-examination he accepted that, contrary to his initial observation, MFI1 was inside out, and that he did not recall the offender's balaclava as having white stitching. He accepted that the overalls which were MFI2 were stained with paint and oil or grease, but maintained they were "bluey grey". The fifth witness was Nasim Ibn Samad, an employee of the Council. He could not remember the colour of the balaclava, and said the overalls were deep blue. He was shown MFI1 and MFI2, again without objection or request for protection. He said MFI1 was similar to the offender's balaclava, and referred to the presence of two eyeholes and a nose hole. He said MFI2 was more or less similar to what he saw, but was more faded in colour. In cross-examination he said the offender's overalls were light blue, and the balaclava was red with some white. The sixth witness was Mrs Gleeson. She said the offender's balaclava was red. She said his overalls were fairly new blue King Gee overalls – "a darker blue, not a pale blue". MFI1 and MFI2 were shown to the witness, again without objection or request for protection. She said MFI1 had the same sort of knit as the offender's balaclava, and MFI2 was less clean and more faded than the offender's overalls. In cross-examination she said the offender's overalls were dark blue and clean, and the MFI2 overalls were nothing like the offender's overalls. In cross-examination she also said the only features which MFI1 and the offender's balaclava had in common were that they were red and of a similar knit. The seventh witness was Bo Qin Huang. He said his recollection of the balaclava was not as strong as his overall recollection, but that it was blue, that the overalls were dark blue, and that they were newer and brighter than MFI2. MFI2 was shown to the witness without objection or request for protection. In cross-examination the witness said that MFI2 was the same in style as the overalls worn by the offender. The position by that stage was that in opening prosecution counsel had referred to the balaclava and the overalls which became MFI1 and MFI2, and the circumstances of their finding, without objection. In the course of the pre-trial application, defence counsel had implied three times that he did not object to their admissibility. MFI1 had been shown to seven witnesses and MFI2 to six of those witnesses. Defence counsel had not objected to this procedure in relation to the first two witnesses, and had cross-examined the first witness by reference to MFI2. Counsel did object to this procedure in relation to the third witness, but, after the objection was overruled, he cross-examined the witness by reference to MFI1. Counsel did not object to or seek protection in relation to the procedure for the next four witnesses. The fourth, fifth and seventh witnesses were all cross-examined by specific reference to MFI2, and the sixth witness was cross-examined by specific reference to both MFI1 and MFI2. The defence objection. Despite this state of affairs, at the start of the following day defence counsel made an application which extended over that day and into part of the next day. Defence counsel began by saying that he wished to "renew the application that I made as a pretrial application" – that is, the application to exclude the videotape of the police search of the accused's residence which led to the discovery of MFI1 and MFI2. He said that since all the eyewitnesses had now given evidence, it was clear that MFI1 and MFI2 were not the balaclava and overalls worn by the offender in view of the dissimilarities revealed. It followed that the fact that they had been found at the accused's residence was so lacking in probative value as to merit its exclusion from evidence. Later this application revealed itself as or changed into an application that MFI1 and MFI2 should not be admitted into evidence (which appeared to involve a reversal of what was implied in counsel's stance on the pre-trial application), and then into an additional application that all of the evidence about MFI1 and MFI2 should be ruled inadmissible (even though in relation to six of the seven witnesses it had not been objected to). Prosecution counsel accepted that while none of the witnesses positively asserted that MFI1 was the offender's balaclava, the evidence showed they resembled each other. It was relevant within the meaning of "relevant" in the Evidence Act 1995 (NSW) ("the Act")125. It was circumstantial evidence which 125 Section 55(1) of the Act provides: "The evidence that is relevant in a proceeding is evidence that, if it were accepted, could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding." (Footnote continues on next page) the jury were entitled to take into account together with all the other evidence. Counsel contended that the evidence ought not to be excluded under s 135 or s 137 of the Act126. She also submitted that the application should have been made earlier, since defence counsel had in his possession before the start of the trial witness statements substantially conforming to the evidence of each witness about the offender's balaclava. In view of the stage the trial had reached, the evidence could not be excluded, and the only remedy would be to discharge the jury. This aspect of the submission was one with which both the trial judge and defence counsel agreed. The parties made similar submissions in relation to MFI2 and the questions about it. The trial judge overruled the objections. MFI1 became Ex M and MFI2 became Ex O. Submissions by counsel for the accused in this Court. In this Court counsel for the accused noted that the balaclava and overalls were shown to the witnesses two years and seven months after the offence; that the balaclava was inside out, and had black markings on it; that they were mass produced items found in premises where there were hundreds of balaclavas and half a dozen overalls; and that the trial judge, who had given no formal reasons for her ruling, had failed to assess the probative value of the evidence and whether that was Section 56 provides: "(1) Except as otherwise provided by this Act, evidence that is relevant in a proceeding is admissible in the proceeding. (2) Evidence that is not relevant in the proceeding is not admissible." 126 Section 135 provides: "The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party, or (b) be misleading or confusing, or (c) cause or result in undue waste of time." Section 137 provides: "In a criminal proceeding, the court must refuse to admit evidence adduced by the prosecutor if its probative value is outweighed by the danger of unfair prejudice to the defendant." outweighed by the danger of unfair prejudice. Counsel therefore submitted that the evidence was irrelevant and, in the alternative, that it was unfairly prejudicial. These submissions criticised the trial judge for failing to understand the nature of the defence application at the trial. It is true that at times she did misunderstand the state of argument. At one point she assumed that MFI1 and MFI2 had been tendered without objection, although they had not yet been tendered. She also wrongly said that they would never be tendered. She wrongly said there was no objection to any of the eyewitness evidence: there had been to that of the third witness. She also wrongly thought that the defence objected to all of the evidence relating to what the witnesses said about the balaclava and the overalls, as distinct merely from questions directed to MFI1 and MFI2. The terms of this criticism unfortunately make it necessary to say, as prosecution counsel in this Court correctly submitted, that the errors into which the trial judge fell in understanding the arguments were excusable, because the defence position was constantly fluctuating and obscure. An essential function of advocacy in adversarial trials, and of the extended debates about admissibility in which both counsel and the judge participated in this trial, is to thrash out and refine points of controversy. By the end of the argument just summarised this process had succeeded in clearing up all misunderstandings. Relevance of balaclava. The questions about MFI1 were relevant on three bases. First, they were relevant because they were capable of eliciting evidence that MFI1 was identical with the offender's balaclava. Secondly, they were relevant because they were capable of eliciting evidence that MFI1 resembled the offender's balaclava. Thirdly, the employment of MFI1 in questioning the witnesses assisted them to explain to the jury the colour, fabric and other features of the balaclava they observed on the offender by reference to the features of MFI1. These three bases may be explained as follows. Relevance: identity. The arguments advanced on this issue by the defence, both at trial and in this Court, concentrated on the supposedly unsatisfactory answers of the witnesses. That approach is fallacious in principle, but even on its own terms it fails. It is true that none of the witnesses said in terms that MFI1 was identical with the offender's balaclava. It is also true that some pointed to differences which the jury might think significant. But even if none of the witnesses unequivocally said there was identity, it does not follow that their evidence was not relevant. It is not the case that a body of evidence received in answer to relevant questions must be rejected merely because that evidence does not achieve the highest goals the tendering party may have had. The weight of that body of evidence, taken with the evidence as a whole, may have been slight or it may have had some circumstantial value in supporting a conclusion of identity. That was a question for the jury to resolve at the end of the trial, not for the judge to resolve halfway through it. In any event the approach advocated on behalf of the accused is wrong in principle. It concentrates on the answers given, not the questions asked. Criminal trials in Australia are largely oral, and a primary mode of tendering evidence is by addressing questions to witnesses. What controls the reception of oral evidence is a process of objection to the question, not the answer. That process directs attention to the way in which questions are formulated, and tends to compel precision. Once a question not objected to has been answered responsively, it is normally too late to object to either the question or the answer. The relevance of a question depends on whether one among a range of possible answers "could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue in the proceeding". It is not the case that a question is irrelevant because one possible answer is not relevant. If a witness answers a question "I did not see", that may not "rationally affect ... the assessment of the probability of the existence of a fact in issue", but the question remains relevant so long as one possible answer satisfies the quoted words. Thus a question to which one possible answer was "MFI1 is identical to the offender's balaclava" would have been a relevant question. Indeed the question would remain relevant if it could have been answered "I deny that MFI1 is the offender's balaclava". That is, a question asked by the prosecution can be a permissible question even if the answer does not favour the prosecution. And a question which is relevant does not lose its relevance if the witness says "I cannot remember". The relevance of a question is to be judged in its own terms by reference to the possible answers it might receive, not the answer actually given. Hence, although the prosecution did not put its arguments to the trial judge in this way, the questions were permissible – they were relevant questions – as going to the issue of identity. It follows that MFI1 itself was relevant, together with the circumstances of its being found in the accused's bedroom, since these circumstances established a link with the accused. Relevance: resemblance. The second basis on which the questions about MFI1 were relevant was that they were capable of eliciting evidence that MFI1 resembled the offender's balaclava. Even if the jury thought the eyewitness evidence about the balaclava was by itself weak if tendered to prove identity, it was open to them to conclude that MFI1 was the offender's balaclava in view of resemblances between them, and that the accused was the offender, after taking into account other evidence in the case. If the questions about MFI1 were relevant, so was MFI1 itself, and so were the circumstances in which it was found. Relevance: aid to witnesses. The third basis on which the questioning about MFI1 was relevant was that it assisted the witnesses to explain to the jury the particular features of the offender's balaclava which they remembered noting. A witness may be asked for a recollection of the distance between two things or people, and may be asked to express it by reference to the length of an object in the courtroom, such as a chattel which is an exhibit. A witness may be asked to express a shade of a colour observed in the past by reference to the colour of a carpet or a curtain or an item of clothing worn by someone in court. By parity of reasoning, it is not irrelevant to show a witness an object and ask that witness to explain the detail of the testimony being given by reference to the characteristics of that object. If this third basis were the only basis of relevance, while it would make the questioning about MFI1 relevant, and would make MFI1 itself relevant, it would not make the fact that MFI1 was discovered in the accused's bedroom relevant. In this the third basis differs from the first two. But the grounds of appeal do not complain about reception of the fact of discovery in the accused's bedroom as an independent matter. In any event, the first two bases support the reception of that fact. Section 137. Could the questions about MFI1, MFI1 itself, and the fact that it was discovered in the accused's bedroom be excluded under s 137127? Defence counsel at the trial argued that to show MFI1 to the witnesses was unfairly prejudicial. An argument of this kind is capable of having force, but the force would vary depending on how the witnesses were questioned. The more the questions were leading, the greater the chance that an analogy with the dangers arising in the identification of accused persons existed. Defence counsel at the trial called it a "displacement effect". That is inapposite. Stephen J's dissenting judgment in Alexander v The Queen described the "displacement effect" thus128: "Having been shown a photograph, the memory of it may be more clearly retained than the memory of the original sighting of the offender and may, accordingly, displace that original memory. Any subsequent face-to-face identification, in court or in an identification parade, may, on the identifying witness's part, in truth involve a matching of the man so identified with the remembered photograph, which has displaced in his memory his recollection of the original sighting." Had the witnesses been shown MFI1 before the trial, it might have been arguable that the memory of MFI1 might have been more clearly retained than the memory of the original sighting of the offender's balaclava, and might have displaced that original memory, so that the in court comparison of MFI1 with the memory of the offender's balaclava might be tainted by a displacement in the witness's mind of the memory of the original perception of the offender's 127 For the terms of the section see above [126]. 128 (1981) 145 CLR 395 at 409. balaclava by the memory of MFI1. Prosecution counsel said that none of the eyewitnesses had been shown MFI1 or MFI2 before entering the box. Several witnesses confirmed this. Defence counsel never cross-examined to the contrary, never complained of any failure by the prosecution to call evidence of that kind in relation to the other witnesses, and never denied prosecution counsel's assertion. Hence no displacement effect could have operated. A closer analogy is with dock identification. That analogy was relied on by counsel for the accused in this Court129. The danger was described thus by Mason J in Alexander v The Queen130: "Traditionally it has been accepted that a witness identifies the accused at the trial as the person whom he observed at the scene of, or in connexion with, the crime. This 'in court' identification, sometimes described as primary evidence, is of little probative value when made by a witness who has no prior knowledge of the accused, because at the trial circumstances conspire to compel the witness to identify the accused in the dock." In relying on that analogy, counsel for the accused in this Court drew attention to the dangers associated with the supposed identification of mass produced objects131. So, it might be said, a witness might reason that prosecution counsel would not be showing MFI1 to a witness unless the police thought the accused was connected with MFI1; hence the witness might feel pressure to exaggerate similarities between the two balaclavas, or to identify them as being the same. This analogy is not sound. A witness who is invited to identify the offender is under considerable pressure not to select anyone but the person sitting 129 Counsel for the accused at trial did not appear in the Court of Criminal Appeal or this Court; senior counsel for the accused in this Court did not appear in either court below; junior counsel for the accused in this Court did not appear at the trial, but did appear alone in the Court of Criminal Appeal. Prosecution counsel at the trial did not appear in the Court of Criminal Appeal or in this Court. Senior counsel for the prosecution in this Court appeared in the Court of Criminal Appeal, but junior counsel for the prosecution in this Court did not appear in either court below. 130 (1981) 145 CLR 395 at 426-427. See also Gibbs CJ at 399, and Davies and Cody v The King (1937) 57 CLR 170 at 181-183 per Latham CJ, Rich, Dixon, Evatt and 131 He referred to R v Clout (1995) 41 NSWLR 312 at 321 per Kirby ACJ. As the Court of Criminal Appeal pointed out (Evans v The Queen (2006) 164 A Crim R 489 at 506 [142]), the passage referred to dealt with the appropriate jury warning, and therefore assumed the admissibility of the evidence. in the dock: to do otherwise is to risk looking foolish. The witnesses in the trial of the accused were not under pressure to say anything about MFI1. The questions of prosecution counsel lacked any leading character. Taken as a whole, the seven eyewitnesses revealed a variety of recollected perceptions and a variety of capacities for testimonial expression, strongly suggestive of bona fide attempts to say what they could recollect about a frightening series of events which took place unexpectedly over a very short time more than two years earlier. The lack of uniformity in their evidence about MFI1 is a sign that they felt no pressure to give one particular set of answers. There might have been pressure of that kind if prosecution counsel had employed leading questions in relation to MFI1 – an error into which it is easy to fall when witnesses are questioned about chattels present in court. But counsel avoided that trap. The Court of Criminal Appeal correctly concluded that the eyewitnesses were not led into giving evidence which did not reflect their recollections132. Once these considerations are put aside, there is no unfair prejudice. The more the evidence of the eyewitnesses convincingly revealed similarities between what they described in MFI1, the more that evidence "prejudiced" the accused. The less it revealed similarities, the less it "prejudiced" the accused – indeed it benefited him. But this "prejudice" was not distinguishable from the probative value of the evidence; it is not prejudice as that term is used in s 137, and is certainly not unfair prejudice. "Evidence is not unfairly prejudicial merely because it makes it more likely that the defendant will be convicted."133 Since the witnesses had provided descriptions of the offender very soon after the crimes, and these were available to defence counsel, it was possible for him to cross-examine them effectively on any departures from these statements, as he did. While the defence tactics were not to object to the questioning of the first two witnesses, but to object to the questioning of the third, whose evidence was more favourable to the accused, the prosecution tactics of showing the third witness MFI1 were objectively fair in their tendency to elicit evidence favourable to the accused. For the same reason neither MFI1 nor the questions about it were "unfairly prejudicial" within the meaning of s 135. Nor were they "misleading or confusing". Nor did they "cause or result in undue waste of time": they comprised a small fraction of the evidence as a whole. Hence the trial judge's failure to exercise her discretion under s 135 to exclude the evidence has not been shown to be wrong. 132 Evans v The Queen (2006) 164 A Crim R 489 at 505 [136] per James J (Hidden 133 Papakosmas v The Queen (1999) 196 CLR 297 at 325 [91] per McHugh J. Admissibility of evidence about the overalls. For the same reasons as those given in relation to the balaclava, the questioning about MFI2 was relevant, as was MFI2 itself and the evidence about where it was found; s 137 did not apply to make the evidence inadmissible; and no error has been shown in the failure of the trial judge to exercise her discretion under s 135 to exclude the evidence. Ground 2.2: accused wearing balaclava, walking before the jury wearing overalls, and saying "serious" The second ground of appeal was: "The Court of Criminal Appeal should have held that: section 53 [of the Act] applies to 'in court' demonstrations; and/or the prosecutor should not have been permitted to require the applicant to put on a balaclava and overalls, walk up and down in front of the jury and say words which were attributed to the robber by one eyewitness." The events complained of came to pass in the following way. The physical features of the accused. Early in the cross-examination of the accused, he gave evidence that at the time of the crime he was 47, he was five feet eight inches tall, his hair was dark, his skin complexion was very fair and he weighed 73 kilograms. Without objection, he was asked to take his jacket off, roll up his sleeves and show the jury the insides of his arms. He said areas of pigmentation or discolouration were caused by industrial solvents and areas of scarring were caused by industrial accidents. The balaclava and the sunglasses. The first event complained of related to Ex M (the balaclava) and some sunglasses. First, the accused was asked to place the balaclava over his face. After a defence objection was overruled, the accused complied. Prosecution counsel then began to make a statement about what those in the courtroom could see, to which defence counsel objected. In the presence of the jury, debate about that objection proceeded over more than two pages (which in this Court counsel for the accused contended took 10 minutes and which certainly took some minutes). The debate concluded with prosecution counsel withdrawing her question and the trial judge saying she would not interfere. At that point prosecution counsel asked the accused to remove the balaclava. She then asked him to take a pair of sunglasses. Defence counsel objected, and prosecution counsel made it plain that she wanted the jury to compare the appearance of the accused wearing the sunglasses and the balaclava with what they saw on the video and the photographs taken during the crime. After a debate about admissibility in the absence of the jury, the trial judge permitted the course proposed by prosecution counsel to take place. The essence of counsel's objection was that it was "blatant unfairness" to dress the accused up so as to make him look like a robber. After putting on the sunglasses and the balaclava, the accused complied with requests to face the jury and turn side-on to the jury. The Court of Criminal Appeal held that the trial judge erred in asking the accused "to put on sunglasses which had not been admitted into evidence, which had not been shown to any witness and which were produced for the first time when the prosecutor asked the [accused] to put them on".134 That conclusion was not challenged by the prosecution on this appeal. "Give me the serious cash." The second event complained of followed soon after the accused had removed the sunglasses and the balaclava. Prosecution counsel asked the accused to say: "Give me the serious cash." A strongly-put defence objection was rejected. The accused then said, at the request of prosecution counsel, "Give me the serious cash" and "I want the serious cash". It will be remembered that Mrs Gleeson had suggested that the offender may have pronounced "serious" as "sherious"135. Walking in overalls before the jury. The third event took place when prosecution counsel asked the accused to put on the overalls (Ex O). Defence counsel objected unsuccessfully. The court adjourned so that the accused could remove his outer clothing and put on the overalls. When the court resumed, prosecution counsel asked him to walk in front of the jury. The accused's arguments in this Court. The objections made by counsel for the accused in this Court were that the three events just described were irrelevant, should have been excluded under s 137, contravened s 53 of the Act (which was not mentioned at trial), or, if s 53 did not apply, contravened similar common law requirements. It is convenient to examine the admissibility of the three events (apart from the use of the sunglasses) under those four heads in that order. The relevance of wearing the balaclava. In her final address, prosecution counsel submitted that there were several items of circumstantial evidence suggesting that the accused was the offender. She referred to them both being male, to their shared height, to their similar age, to their walk, to their build, to the bagginess of the overalls on them, to their hair colour, to their skin complexion, to the resemblances between the features of the balaclava and 134 Evans v The Queen (2006) 164 A Crim R 489 at 512 [193]. 135 See above [133]. overalls noticed by the witnesses and the features of Ex M and Ex O, and to the similarity between the offender's way of walking as described by Mrs Gleeson and the way the accused walked in front of the jury and between the witness box and the dock. Counsel analysed the evidence on all these matters quite closely in her final address. It is against that background that the relevance of the three items of evidence must be considered. Counsel for the accused in this Court submitted that the appearance of the accused in a balaclava which was not asserted to be the balaclava worn by the offender was irrelevant on the ground that it could not "rationally affect ... the assessment of the probability of the existence of a fact in issue", namely the identity of the offender. That is incorrect. If, attired in the balaclava, the accused had looked very different from the descriptions given by the eyewitnesses, that would have been material capable of raising a reasonable doubt. If, so attired, he had looked similar to the descriptions, it would, taken with other evidence, have been material capable of supporting a conclusion of identity. The relevance of evidence does not depend on its capacity by itself to prove the prosecution case on a particular issue, or to raise a reasonable doubt in favour of the defence on that issue. The effect on assessing probability which is to be looked for is the effect of the contested evidence taken with other evidence either admitted by the time the controversial evidence is tendered, or to be called. The relevance of saying "serious". The accused's objection to the relevance of the sentences he was asked to repeat centred on the contention that the eyewitnesses gave different accounts of what was said, and the accent, tone and volume with which it was said; only four of the seven eyewitnesses said that the offender used the word "serious"; only Mrs Gleeson referred to the peculiar pronunciation; and she merely said that when the offender said: "'This is serious', it almost came over as, 'sherious', or something like that". It was submitted that this did not amount to a demonstration of a speech idiosyncrasy by the offender; that the words which counsel asked the accused to say were not those recalled by Mrs Gleeson ("This is serious, give me the money"); and that the accused was not asked to repeat the words attributed to the offender by other witnesses, but only something similar to what they said. Counsel also noted that the jury asked to hear a tape of the accused's evidence, noted that they asked for the written transcript of the accused saying, "Give me your serious cash", and noted that there was no voice recording of the offender's voice with which the jury could compare the accused's voice. In her final address to the jury prosecution counsel apparently conceded that before the jury the accused had not mispronounced the word "serious", and said "it is possible that word was just slurred at that time". Prosecution counsel drew attention to Mrs Gleeson's description of the offender's voice as "very dull" and of other witnesses' descriptions of it as having an Australian accent. The relevance of what happened is not diminished by the differences – which, incidentally, the submission advanced for the accused exaggerates – in the accounts given by the eyewitnesses of what the offender said and how he said it. Prosecution counsel was entitled to invite the jury to accept Mrs Gleeson on the question of how the offender pronounced "serious" and on the dullness of the offender's voice, and the jury were entitled to accept those invitations. If so, the offender could be said to have one or two speech idiosyncrasies, though it or they might well be shared by other people. The jury were entitled to conclude that the offender said something along the lines of what the prosecution counsel asked the accused to say, even though the precise phrases recalled by each of the four witnesses were not put one after the other: in the circumstances precise accuracy of observation, and of recollection after more than two years, could not be expected. The accused's submissions concede that if the offender did have a speech idiosyncrasy it would be relevant that the accused shared it. An unusual pronunciation can be as much a circumstance which, taken with other circumstances, can point to identity as an unusual mode of spelling particular words136, or a marked accent or a speech impediment. But the fact that the accused apparently did not share the idiosyncrasy of pronunciation – for there was no suggestion by the prosecutor in final address that he did – favoured the accused. The questions thus were capable of eliciting, and apparently elicited, evidence that could have rationally affected "the assessment of the probability of the existence of a fact in issue", namely that the accused lacked a trait which the offender was said to possess. Prosecution counsel's requests were also relevant in being capable of eliciting answers favourable to the prosecution. The accused submitted, apparently relying on Bulejcik v The Queen137, that evidence of the speech idiosyncrasy shared by the accused and the offender was irrelevant unless the jury could compare the accused's voice in court with an out of court recording. That case affords no warrant for the submission, which is contrary to principle. The relevance of walking in overalls. Counsel for the accused submitted that a "demonstration" of what the accused looked like in overalls not asserted to have been worn by the offender was not relevant. That submission must be rejected. There was evidence of similarity as well as dissimilarity between what the offender wore and Ex O. There was evidence of many physical similarities between the offender and the accused. According to prosecution counsel's submission to the jury, there was a similarity between the way the accused 136 See R v Voisin [1918] 1 KB 531. 137 (1996) 185 CLR 375. walked in the overalls before the jury (and indeed in the way he walked between the dock and the witness box) and the gait which Mrs Gleeson observed. The evidence was that the offender was wearing a shirt or t-shirt under the overalls, and that the overalls looked baggy. According to prosecution counsel's final address, so did the overalls worn by the accused. And defence counsel said that the accused looked like "a Michelin man" in them. Prosecution counsel was careful to ensure, after the accused had expressed willingness to put the overalls on over what he was already wearing, that the accused remove his outer garments first. She was thus attempting to bring the conditions before the jury as close to the conditions described by the witnesses as possible. The appearance of the accused walking in overalls in front of the jury was capable of making an impression on the jury which was favourable to the accused (as his counsel submitted in final address) as much as it was capable of causing an impression adverse to him (as prosecution counsel submitted). Either way the evidence was relevant. Exclusion under s 137. Should the three events have been excluded under s 137? Save in one way, there was no respect in which those events created any danger of "unfair prejudice to the accused" – that is, prejudice over and above the damage to his position caused by the probative value of the evidence. The exception was the period during which the accused sat wearing the balaclava in the presence of the jury, until prosecution counsel told him to remove it, while debate took place about whether it was legitimate for prosecution counsel to describe what the accused looked like. If prosecution counsel was entitled to ask him to wear the balaclava, it was only necessary that he do it for a brief period, while the jury observed the accused. For the accused to sit with the balaclava on for some minutes during the debate should not have happened and was irregular. If this irregularity constituted a miscarriage of justice, it was not a serious one, for the following reasons. Defence counsel, who had objected to the balaclava being donned, failed to apply for it to be removed, his concentration being apparently absorbed by a fiery debate about the correctness of prosecution counsel's course. The vigorous character of that debate may have riveted the attention of the jurors on the exchanges between counsel and judge, and thus distracted them from gazing at the accused. The debate did not last long. Viewed in the context of the case as a whole, which lasted 10 days, the incident was brief and insignificant. It will, however, be returned to in relation to the application of the proviso138. Application of s 53. Did s 53 of the Act apply? It is desirable to set out the whole of Pt 2.3, in which it appears: 138 See below at [249]-[264]. "52 Adducing of other evidence not affected This Act (other than this Part) does not affect the operation of any Australian law or rule of practice so far as it permits evidence to be adduced in a way other than by witnesses giving evidence or documents being tendered in evidence. 53 Views experiment or inspection be held. judge may, on application, order that a demonstration, (2) A judge is not to make an order unless he or she is satisfied that: the parties will be given a reasonable opportunity to be present, and the judge and, if there is a jury, the jury will be present. (3) Without limiting the matters that the judge may take into account in deciding whether to make an order, the judge is to take into account the following: (a) whether the parties will be present, (b) whether the demonstration, experiment or inspection will, in the court's opinion, assist the court in resolving issues of fact or understanding the evidence, the danger that the demonstration, experiment or inspection might be unfairly prejudicial, might be misleading or confusing or might cause or result in undue waste of time, in the case of a demonstration – the extent to which the demonstration will properly reproduce the conduct or event to be demonstrated, in the case of an inspection – the extent to which the place or thing to be inspected has materially altered. (4) The court (including, if there is a jury, the jury) is not to conduct an experiment in the course of its deliberations. (5) This section does not apply in relation to the inspection of an exhibit by the court or, if there is a jury, by the jury. 54 Views to be evidence The court (including, if there is a jury, the jury) may draw any reasonable inference from what it sees, hears or otherwise notices during a demonstration, experiment or inspection." For the accused it was submitted in the Court of Criminal Appeal and this Court, though not at trial, that s 53 applied, and that it had not been complied with in that the trial judge did not follow the process mandated by s 53. In this Court it was also submitted for the first time that no consideration of s 192 had been undertaken139. Counsel submitted that "demonstration" evidence was a substantial limb of the prosecution case: this may be an exaggeration, for it took only a very short time, but it was referred to in prosecution counsel's final address. The Interpretation Act 1987 (NSW) ("the Interpretation Act"), s 34(1), provides: In the interpretation of a provision of an Act or statutory rule, if any material not forming part of the Act or statutory rule is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material: 139 Section 192 provides: "(1) If, because of this Act, a court may give any leave, permission or direction, the leave, permission or direction may be given on such terms as the court thinks fit. (2) Without limiting the matters that the court may take into account in deciding whether to give the leave, permission or direction, it is to take into account: the extent to which to do so would be likely to add unduly to, or to shorten, the length of the hearing; and the extent to which to do so would be unfair to a party or to a witness; and the importance of the evidence in relation to which the leave, permission or direction is sought; and the nature of the proceeding; and the power (if any) of the court to adjourn the hearing or to make another order or to give a direction in relation to the evidence." to confirm that the meaning of the provision is the ordinary meaning conveyed by the text of the provision (taking into account its context in the Act or statutory rule and the purpose or object underlying the Act or statutory rule and, in the case of a statutory rule, the purpose or object underlying the Act under which the rule was made), or to determine the meaning of the provision: if the provision is ambiguous or obscure, or if the ordinary meaning conveyed by the text of the provision (taking into account its context in the Act or statutory rule and the purpose or object underlying the Act or statutory rule and, in the case of a statutory rule, the purpose or object underlying the Act under which the rule was made) leads to a result that is manifestly absurd or is unreasonable." Section 34(2)(a) provides: "(2) Without limiting the effect of subsection (1), the material that may be considered in the interpretation of a provision of an Act, or a statutory rule made under the Act, includes: all matters not forming part of the Act that are set out in the document containing the text of the Act as printed by the Government Printer." Section 35(2)(c) provides that marginal notes shall be taken not to be part of the Act. Hence among the material not forming part of the Act is the marginal note to s 53 ("Views") and the marginal note to s 54 ("Views to be evidence"). Further, s 3(3) of the Act provides: "Without limiting the effect of, and subject to, section 34 of the Interpretation Act 1987, material that may be used in the interpretation of a provision of this Act includes any relevant report of a Law Reform Commission the Commonwealth before the provision was enacted." laid before either House of the Parliament of The Australian Law Reform Commission published two reports on evidence – an Interim Report (ALRC 26) and a Final Report (ALRC 38). The former was tabled in the Parliament of the Commonwealth on 21 August 1985 and the latter was tabled there on 5 June 1987. Hence, like the marginal notes, they may be used for the purposes stated in s 34(1). The law which pre-existed s 53. The starting point in construing s 53 must be the common law. At common law a "view" was an out of court examination of land, or of chattels too large to be taken into court and tendered as exhibits. The purpose of a view was to assist the trier of fact, by enabling an examination of the dimensions, appearance and relative positions of the features of the things viewed, "to understand and weigh the oral evidence"140. A "view" was distinguished from an out of court demonstration or reproduction of a past event which had been described by witnesses in court. According to Fullagar J, the court could not treat a demonstration or reproduction as in truth a demonstration or reproduction of what witnesses had described unless one of two conditions was satisfied. The first was that the parties specifically admit that "the demonstration was, or [agree] that it should be treated as, a reproduction of what the witnesses had attempted to describe". The second was that it be "proved by evidence ... that the demonstration really did reproduce what the witnesses had attempted to describe"141. On the other hand, Dixon CJ, Webb, Kitto and Taylor JJ favoured a stricter test: apart from power under rules of court, they said experiments or demonstrations (as distinct from views) could not be taken into account unless they took place "at the request of or with the complete concurrence" of all parties142. A demonstration was described thus by Lord Denning (delivering the judgment of the Privy Council) in Tameshwar v The Queen143: "It is very different when a witness demonstrates to the jury at the scene of a crime. By giving a demonstration he gives evidence just as much as when in the witness-box he describes the place in words or refers to it on a plan. Such a demonstration on the spot is more effective than words can ever be, because it is more readily understood. It is more vivid, as the witness points to the very place where he stood. It is more dramatic, as he re-enacts the scene. He will not, as a rule, go stolidly to the spot without saying a word. To make it intelligible he will say at least 'I stood here' or 'I did this,' and, unless held in check, he will start to give his evidence all over again as he remembers with advantages what things he did that day. But however much or however little the witness repeats that every his evidence or the fact remains improves upon 140 Scott v Numurkah Corporation (1954) 91 CLR 300 at 315 per Fullagar J. 141 Scott v Numurkah Corporation (1954) 91 CLR 300 at 316. 142 Scott v Numurkah Corporation (1954) 91 CLR 300 at 312. 143 [1957] AC 476 at 484. demonstration by a witness is itself evidence in the case. A simple pointing out of a spot is a demonstration and part of the evidence." In Karamat v The Queen, Lord Goddard (delivering the judgment of the Privy Council) gave the following example of a demonstration144 : "... the evidence of a police constable or other witness who might testify that he was keeping watch on a certain place and saw an incident might be challenged on the ground that from the place where he was concealed he could not possibly have seen what he said he had. It might be of the utmost value then to let the jury see the place with the witness in the position to which he had spoken; he might well be able to demonstrate that while a shorter man would not have been able to see the incident or a taller man might have been exposed to view, he could, though concealed, have seen what he said he did." Hence the expression "demonstration" includes the operating of a machine said to have caused an injury145. A reproduction or reconstruction goes further. Examples include the repetition of a pantomime146 and the screening of a film simultaneously with a performance by a band147. The common law, then, draws a distinction between views, demonstrations and reconstructions148: "It seems to be generally accepted that a view is an inspection of a scene or object without seeing it in operation or witnesses providing further explanation of the events. A demonstration is a view incorporating an explanation by a witness of the incident in question or a demonstration of 144 [1956] AC 256 at 263. 145 Goold v Evans & Co [1951] 2 TLR 1189; Buckingham v Daily News Ltd [1956] 2 146 Menzies-Stuart v Macleod (1901) 18 WN (NSW) 82. 147 Scott v Numurkah Corporation (1954) 91 CLR 300 (the majority, Dixon CJ, Webb, Kitto and Taylor JJ, however, referred to the event as "a demonstration" (at 307, 308, 309, 310, 312 and 314) and also as an "experiment or ... demonstration" (at 310, 314); Fullagar J called the event "a demonstration or reproduction of what the witnesses had described ... in court" (at 316)). 148 Ormerod, "A Prejudicial View?" [2000] Criminal Law Review 452 at 453. the machine or other object in operation. A reconstruction goes further still and is an attempt to recreate the incident (whether in full or part) with witnesses and testimony." The subject-matter of s 53. Section 53 uses the expressions "inspection", "demonstration" and "experiment", but none of these expressions is defined in the Act. Section 53 deals with views in the common law sense, although it calls them inspections: whether "inspection" in s 53 extends more widely, to any examination of an exhibit by a witness in court, is considered below149. Section 53 also deals with demonstrations. It does not deal with reconstructions under that name, and the word "experiment" is not apt to cover an attempt to recreate an incident, since it would seem that "experiment" in s 53 means a test or trial or tentative procedure or other operation for the purpose of discovering something But s 53(3)(d) suggests that reconstructions fall within the expression "demonstrations", since that paragraph assumes that the goal of a demonstration is to reproduce a particular piece of conduct or event. testing a principle or hypothesis150. The true construction of s 53. Section 53 does not apply to what happens in the courtroom at the trial, for the following reasons. First, if the word "inspection" in s 53 has the same meaning as "view" at common law – and it is hard to see how it can have any wider meaning – in that application s 53 is limited to visits outside the courtroom to inspect some place or 149 See below [195]-[218]. 150 Does s 53 operate harmoniously with the practice in relation to experiments in patent cases? It is common for rules of court to provide for the judge to regulate the conduct of experiments on which a party proposes to rely. Thus, under the Federal Court Rules, O 58 r 31(1), a party proposing to tender as evidence experimental proof of a fact must apply for directions about, inter alia, service of particulars of the experiment, persons who may attend it, its time and place, and the recording of its conduct and results. See also, eg, the Uniform Civil Procedure Rules 2005 (NSW), r 48.16; the Supreme Court (Intellectual Property) Rules (Vic) 2006, s 10.04; Blanco White, Patents for Inventions and the Protection of Industrial Designs, 4th ed (1974), at 420-421, par 12-118; and Thorley, Miller, Burkill, Birss and Campbell (eds), Terrell on the Law of Patents, 16th ed (2006), at 546, par 12-181. If s 53 applied to experiments of this type it would not be possible for them to be conducted without an order from the judge, a condition of which, under s 53(2)(b), would be that the judge be present. Probably s 53 does not apply: the "experiments" referred to in s 53 are limited to those conducted as part of the trial in front of the trier of fact, and do not include those conducted before the trial and described by witnesses at the trial. some thing which cannot conveniently be brought to court. This suggests that s 53 does not apply to what happens in the courtroom in any of its applications. Secondly, if s 53 did apply to conduct in the courtroom, s 53(2) would be otiose in that application of s 53. That is because in all litigation (except ex parte applications) the parties have a reasonable opportunity to be present in court, and the judge, and if there is a jury, the jury, will be present. The absurdity of imposing as a precondition to an order under s 53 a state of affairs which inevitably exists points against a construction of s 53 which would extend to courtroom conduct. Thirdly, if s 53 did apply to conduct in the courtroom, s 53(3)(a) would almost always be otiose in that application of s 53. That is because in most litigation (leaving aside special cases like those involving accused persons who have absconded, and leaving aside cases where defendants in civil cases have failed to attend the trial, or where an ex parte application is made) the parties will be present. There is serious implausibility in a construction of s 53 which would require the court to take account of a factor which almost always will exist. Fourthly, s 53(3)(e), so far as it concerns "places" to be inspected, points against the application of s 53 to conduct in the courtroom. The requirement that the judge take into account the extent to which a place to be inspected has materially altered is wholly inapplicable to conduct in the courtroom, for trials about the condition of a courtroom are rare, and are unlikely to take place in that courtroom. Fifthly, at common law the trier of fact could draw any reasonable inference from all evidentiary material in court. There was a restrictive common law rule adopted in some but not other English cases, and in this Court151, preventing an out of court view being used as evidence in its own right, as distinct from being an aid to understanding evidence given in court. That rule is abolished by s 54, but it was a rule which applied only to out of court activities. The enactment of s 54 thus points to the conclusion that s 53 only applies to out of court activities: the rule enacted by s 54 already existed for in court activities. Sixthly, all but the simplest "experiments" are impossible to perform in court. If they are to be performed at all, they have to be performed outside the courtroom. That suggests that no part of s 53 applies to in court activities. Seventhly, where s 53 applies, counsel for the accused submitted that it would be necessary for the court to comply with s 192. This submission would rest on the view that the "application" for an "order" under s 53(1) is an 151 For example, Scott v Numurkah Corporation (1954) 91 CLR 300. application for "leave" or "permission" or "direction" within the meaning of s 192(1). If sound, this would mean that the court must take into account the matters described in s 192(2). This submission does appear to be sound. Bearing in mind the need to construe s 53 in its context in the Act, it is desirable to examine what consequences the need to comply with s 192 would have. It was part of the argument advanced by counsel for the accused in this Court that when the accused was asked to say sentences containing the word "serious", s 53, and hence s 192, applied. Yet at common law a witness could be required "to speak ... so that the jury or another witness may hear his voice ..."152. There was no common law equivalent to the s 53/s 192 procedure, and the question arises whether a construction of s 53 which leads to the delays and inconveniences attendant upon the need to comply with that procedure is reasonable. Similarly, at common law a witness may be required "to write so that the jury or another witness may ... compare his handwriting"153. It has been held permissible, at least with the witness's consent, for a witness to demonstrate that he could type a record of interview in less than 36 minutes154. It has been held permissible for a witness, who claimed in the past to have signed his signature upside down and in reverse, to demonstrate this before the jury after also signing his ordinary signature155. Where an offender is said to have walked with a limp, it is permissible to ask the accused to walk a short distance in front of the jury156. Subject to questions of exclusion on grounds of prejudice, it is permissible for injured persons to be invited to show the extent of their injuries157 or for experts to explain them158 or for the evidence of paralysis or numbness to 152 Sorby v The Commonwealth (1983) 152 CLR 281 at 292 per Gibbs CJ. 153 Sorby v The Commonwealth (1983) 152 CLR 281 at 292 per Gibbs CJ. See also Osborne v Hosier (1705) Holt 194 [90 ER 1006]; Doe d Devine v Wilson (1855) 10 Moo PC 502 at 530 [14 ER 581 at 592]; Cobbett v Kilminster (1865) 4 F & F 490 [176 ER 659]; R v Whittaker [1924] 3 DLR 63. 154 R v Burles [1964] Tas SR 256 at 257. 155 R v Fernandes (1996) 133 FLR 477 at 482-484. 156 People v Hayes 818 NE 2d 916 (Ill, 2004). 157 For example, Mizner v Lohr 238 NW 584 (Iowa, 1931); Olson v Tyner 257 NW 538 (Iowa, 1934); Patterson v State 39 So 2d 709 (Ala App, 1949); Spaak v Chicago & NW Ry 231 F 2d 279 (7th Circ, 1956); Johnson v Clement F Sculley Construction Co 95 NW 2d 409 (Minn, 1959). 158 For example, Citizens' St R Co of Indianapolis v Willoeby 33 NE 627 (Ind, 1893); Sornberger v Canadian Pacific Ry (1897) 24 Ont App 263. be revealed by inserting pins into injured plaintiffs159 and for injured persons to indicate what their capacity to perform bodily movements was before the injury and after it160. A jury has been invited to feel a plaintiff's skull to assess whether a hole caused by trepanning was filled by bone or a softer tissue161. At common law a witness may be required "to show his face or some other part of his body so that he may be identified"162. At common law a witness can be compelled "to submit his foot for comparison with a foot print"163, or to demonstrate its formation164. It is permissible at common law for a tailor claiming payment for making a suit for a customer who resists the claim on the ground that the suit did not fit to ask the customer, while testifying, to try it on in the presence of the jury165. It is also permissible for an accused to demonstrate his inability to pull neither of two balaclavas left at the scene of a crime over his head166. Where the defence called evidence that clothing left at the scene of a crime did not fit the accused, it was permissible to require the accused to wear the clothing in order to see whether it fitted him167. The "wearing of a piece of clothing connected with a crime to see if it fits" is "commonplace" and "entirely unexceptional"168. It has been held permissible for a witness to leave the witness box in order to demonstrate how the accused committed an act of indecency on him169 or to 159 Osborne v City of Detroit 32 F 36 (CC Mich, 1886); Stephens v Elliott 92 P 45 (Mont, 1907); Wilson & Co Inc v Campbell 157 P 2d 465 (Okl, 1945). 160 Adams v City of Thief River Falls 86 NW 767 (Minn, 1901); R v Burles [1964] Tas SR 256 at 257 (bending a knee). 161 McAndrews v Leonard 134 A 710 (Vt, 1926). 162 Sorby v The Commonwealth (1983) 152 CLR 281 at 292 per Gibbs CJ. 163 R v Whittaker [1924] 3 DLR 63 at 68 per Walsh J. 164 Daniel v Guy 23 Ark 50 (1861) (relevant to prove race in a suit for freedom). 165 Brown v Foster 113 Mass 136 at 137 (1873); approved by Thayer, A Preliminary Treatise on Evidence at the Common Law (1898) at 263, n 1. 166 R v Hartwick unreported, Victorian Court of Appeal, 5 June 1995 per Crockett, 167 People v Warmack 413 NE 2d 1254 (Ill, 1980). 168 R v Kirby [2000] NSWCCA 330 at [47] per Wood CJ at CL (Beazley JA and O'Keefe J concurring): in that case the court assumed that s 53 did not apply where an accused person was asked to put on a hat. demonstrate the position in which a murdered person was found170. A witness who gave evidence about the effect of burning the horsehair stuffing of a chair was permitted to demonstrate that effect by setting on fire a hand full of horsehair from the chair171. During the present trial, without objection, the accused was asked to take off his jacket, revealing his stomach, as part of a cross-examination directed to showing that he was fair skinned, and was also asked to show the jury his discoloured and scarred arms; yet in this Court it was said that the jury's "inspection of the stomach" was something which "perhaps" fell within s 53. Counsel for the accused submitted that while he could see no unfairness in an accused person being asked to roll up a sleeve to see whether there was a distinctive tattoo there, s 53 would apply (and therefore s 192). In short, "[d]emonstrations are frequently given in the witness box ..., both by ordinary witnesses and by professional witnesses such as medical or pathological experts. It is common for an ordinary witness by physical actions ... to support oral evidence of an observed action ..."172. On the accused's argument, "demonstrating" how a car accident occurred by the use of models173, "demonstrating" distances by the use of the hands, or "demonstrating" distances by the making of comparisons of the distances between features of the courtroom, "demonstrating" with an arm how high something was, or "demonstrating" what the posture of a person was, or how a knife or a gun was held, or how a blow was struck, or where an organ in the body is, or what kind of blow may have caused a particular kind of injury174 – all these common forensic events, which are illustrations of witnesses communicating more clearly by actions than they can in words, would call for a s 53/s 192 inquiry. It would be extraordinarily cumbersome if s 192 had to be complied with in relation to the very common and speedy methods of eliciting evidence just set out. That points against the application of s 53 to courtroom conduct. 169 R v Brett, unreported, Queensland Court of Criminal Appeal, 19 April 1991 per Thomas, Ambrose and Lee JJ (preferable that witness consent). 170 State v Richardson 84 P 2d 699 (Wash, 1938). 171 Tennyson Jesse (ed), Trial of Sidney Harry Fox (1930) (notable British Trials Series 1934) at 147-148. 172 R v Barker [1989] 3 NZLR 635 at 638. 173 R v Burles [1964] Tas SR 256 at 257. 174 R v Whittaker [1924] 3 DLR 63 at 66 per Walsh J. The last examples were given by the Court of Criminal Appeal: Evans v The Queen (2006) 164 A Crim R 489 at 510 [184] per James J (Hidden and Hoeben JJ concurring). See also R v Quinn [1962] 2 QB 245 at 257; R v Brett unreported, Queensland Court of Criminal Appeal, 19 April 1991 at 4 per Ambrose J. It is now necessary to deal with submissions advanced for the accused which relied on s 53(4) and (5). Counsel for the accused submitted: "The potential for the application of s 53 to in court demonstrations is also clear from the words in subsec (5) which allows the jury (or court) to inspect exhibits without an order from the court. This must apply to an inspection occurring in the courtroom, as well as in the jury room." He also submitted that s 53(4) "denotes a specific limit as to what it is permissible for a jury to do with an exhibit without an order from the court". Hence he said that both sub-sections "contemplate that an experiment, demonstration or inspection may be conducted in court". The argument is not clear, but it appears to have two elements. One is that the enactment of s 53(4) assumes that if it had not been enacted s 53 would have applied to the conduct of experiments whether in the jury room or in court; s 53(4) forbids experiments in the jury room, but leaves open their possible carrying out in court, to be regulated by s 53. The second element is that the enactment of s 53(5) assumes that if it had not been enacted s 53 would have applied to the inspection of exhibits by judge or by jury, whether that inspection took place in court, in the judge's chambers, or in the jury room; s 53(5) prevents s 53(1)-(3) from applying in the latter two places, but not to inspection of exhibits in court. The better view is that s 53(4) was inserted to deal with one specific problem which is distinct from those dealt with in s 53(1)-(3), and casts no light on the construction of those sub-sections. And s 53(5) is consistent with the proposition that s 53 applies only to events outside the courtroom: it was inserted to prevent the section applying to those events outside the courtroom which take place in the judge's chambers or the jury room, and assumes nothing about those events which take place inside the courtroom when the judge or jury examines an exhibit. Section 53(5) merely preserves the status quo in relation to inspections by judge and jury out of court. The argument advanced by counsel for the accused on the basis of s 53(5) goes too far: if it were sound, it would follow that the section applied to the "inspection" of an exhibit by a witness, so that every time a witness was asked to look at a documentary exhibit or a chattel which had been marked as an exhibit in order to answer some question about it, the s 53/s 192 procedure would have to be complied with. This cannot be correct. Whether or not s 53(5) was unnecessary, it does not follow from its existence that inspections of exhibits in court by witnesses are governed by s 53, or that any conduct in court is governed by it. Hence the ordinary meaning of the text of s 53, taking into account its context in the Act and the purpose or object underlying the Act, which includes the expeditious conduct of trials, is that s 53(1)-(3) does not apply to conduct inside the courtroom. The construction of s 53 in the light of extrinsic materials. But it was argued for the accused that that meaning is manifestly unreasonable, and that s 53 has a contrary meaning. For that reason, s 34(1)(b)(ii) of the Interpretation Act, as well as s 34(1)(a), permit recourse to the marginal notes to ss 53 and 54 and what the Australian Law Reform Commission wrote about the problem of "views". Do the marginal notes to s 53, "Views", and to s 54, "Views to be evidence", assist? Since the common law meaning of a "view" was an out of court inspection of a place or thing, while the marginal notes may not be decisive guides to meaning, so far as they go, they tend to support the construction of s 53 as not applying to in court conduct. More clear assistance comes from the relevant Australian Law Reform Commission Reports. ALRC 26, in Appendix C entitled "Differences and Uncertainties in the Laws of Evidence", under the heading "Inspection Out of Court", discussed, as that heading would suggest, various activities outside the courtroom. It discussed "inspections" of "property (including land)" and "the carrying out of 'experiments' on such property"175. Clearly these expressions are limited to property outside the courtroom. They therefore cover the ensuing subjects of discussion – "a 'view' where the fact finder uses his power of observation (and other senses) to help to understand and assess the value of evidence adduced in court" and "a 'demonstration' which involves actually taking additional evidence, whether by experience 'experiments'], demonstration or reconstruction"176. That the Commission was only discussing out of court visits is supported by the fact that the authorities it cited for the proposition that the court had an inherent power to order "an inspection" concerned out of court visits177. That is, the Commission treated "views" as out experiments, demonstrations or reconstructions, and it saw experiments, demonstrations or reconstructions as also taking place out of court. It then summarised178 what the majority said in Scott v Numurkah Corporation179 and other cases relating to out of court visits180, inspections not involving scil court [sic: 175 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 335, par 310. 176 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 335, par 310. 177 R v Sullivan (1869) 8 SCR (NSW) 131 at 136-137; R v Martin (1872) LR 1 CCR 178 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 335, par 311. 179 (1954) 91 CLR 300. 180 Commissioner for Railways v Murphy (1967) 41 ALJR 77 at 78; Kristeff v The Queen (1968) 42 ALJR 233; Denver v Cosgrove (1972) 3 SASR 130 at 133; Pope v Ewendt (1977) 17 SASR 45 at 49; R v Alexander [1979] VR 615. or to jury room experiments181. Under the subheading "Demonstration (at the Scene)", the Commission turned to the principles stated in Australian cases182 about experiments, demonstrations and reconstructions outside the court or in the jury room183. The Commission proceeded to analyse various English and Privy Council cases: some stated principles consistent with those stated in Australia and some did not, but all of them involved events outside the courtroom184, and in them the principal cases discussed involved events outside the all of courtroom185. When the Commission turned to make recommendations with a view to remedying the "Differences and Uncertainties" discussed in the passages just described, it did so in a section entitled "Views, Demonstrations and Experiments" containing five paragraphs. The discussion in the first paragraph commenced as follows186: 181 Kozul v The Queen (1981) 147 CLR 221. 182 Scott v Numurkah Corporation (1954) 91 CLR 300 at 310 and 316; R v Ireland (No 1) [1970] SASR 416 at 426; R v Alexander [1979] VR 615 at 632; Kozul v The Queen (1981) 147 CLR 221. 183 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 335-336, par 312. inspects machine 184 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 336, par 313: Goold v Evans & Co [1951] 2 TLR 1189 (judge sees operation purportedly similar to that which the plaintiff worker was engaged in at the time of the injury sued on); Buckingham v Daily News Ltd [1956] 2 QB 534 (judge in defendant's printing house and observes a demonstration by plaintiff of the manner in which he was cleaning its blades when he was injured); Karamat v The Queen [1956] AC 256 (visit to murder scene); Tameshwar v The Queen [1957] AC 476 (visit to scene of robbery); Salsbury v Woodland [1970] 1 QB 324 (visit by judge to scene of highway accident); Tito v Waddell [1975] 1 WLR 1303; [1975] 3 All ER 997 (visit to Ocean Island to examine physical conditions). 185 R v Whalley (1847) 2 Car & K 376 [175 ER 155] (visit to scene of alleged rape); R v Martin (1872) LR 1 CCR 378; London General Omnibus Co Ltd v Lavell [1901] 1 Ch 135 (inspection by judge hearing passing off cases of two omnibuses in the courtyard of the Royal Courts of Justice); Kessowji Issar v Great Indian Peninsula Railway Co (1907) 23 TLR 530 (visit by appellate judges to scene of railway accident); Hare v British Transport Commission [1956] 1 WLR 250 at 253; [1956] 1 All ER 578 at 580 (visit by judge to station). 186 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 565, par 1027. "The judge or jury may leave the court to observe places or objects that cannot be brought to or reproduced successfully in the court. Such an excursion is a view. At the scene of the view, evidence may be led in the form of a demonstration or an experiment. Although there is some uncertainty as to the existing law, particularly in England, a distinction is drawn between a view and a demonstration – only the latter is classified as evidence. The former is material assisting the tribunal of fact in understanding evidence adduced in the court." (emphasis added) The opening and closing words make it plain that the types of conduct which are made the subject of these distinctions are all conduct out of court. The balance of the paragraph developed arguments to the effect that it is wrong in principle that a view – an "excursion" beyond the courtroom – is not "classified as evidence". The second paragraph, on the strength of those arguments, proposed that "a view be treated as evidence"187, a recommendation now reflected in s 54 of the Act. Plainly the second paragraph, like the first, was concerned with out of court visits. That conclusion is supported by the opening words of the third paragraph: "But the use of out of court inspection must be subject to limitations ..."188. The limitations recommended correspond with those appearing in s 53(3)(b)-(e) of the Act. The fourth paragraph recommended, in relation to "an inspection out of court", what is now s 53(2)189 and the fifth paragraph190 dealt with what it called an "analogous area to out of court inspection", namely "inspection by a jury in the jury-room, considered by the High Court in Kozul v [The Queen]"191. The Commission said192: "While, under the proposal, such inspection by a jury would be considered part of the evidence in the proceeding, it would be impractical to require the presence of the trial judge, or to provide the parties or their counsel 187 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567, par 1028. 188 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567, par 1029 (emphasis added). 189 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567, par 1030 (emphasis added). 190 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567, par 1031. 191 (1981) 147 CLR 221. 192 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567-568, par 1031. with an opportunity to be present. There is always a risk, however, that the jury will not just inspect the relevant object but also experiment with The Commission dealt with the impracticality referred to in the first sentence just quoted by inserting in each of its draft Bills a clause which now corresponds with s 53(5). Of that clause as appearing in the draft Bill in its final report the Commission said that it "makes it clear that the existing practice of the jury or the court inspecting exhibits may continue"193. Hence s 53(5) cannot be read as suggesting that s 53(1)-(3) applies to in court conduct. The Commission dealt with the risk of jury experiments by recommending that the jury be directed not to carry out experiments with exhibits; this is consistent with s 53(4) of the Act. Two further points may be noted. The first is that to speak of the inspection of exhibits in the jury room as being part of the evidence in the proceeding is to reveal a misunderstanding of the problem: a jury which looks at the exhibits three times is not receiving three times as much evidence as if it looked at them once194. The point of the recommendation, adopted in s 54 of the Act, that the jury can draw inferences from what it sees, hears or otherwise notices during a demonstration, experiment or inspection, was to bring the common law rule for out of court views into line with the common law rule for out of court demonstrations and reconstructions. That recommendation could have no impact on what happened inside the courtroom, because there has never been any doubt that what happens inside the courtroom is more than an aid to understanding the evidence. And it cannot have sensible operation on what happens inside the jury room. That is because what the Commission calls "inspection by a jury in the jury-room" of a document or chattel which has become an exhibit is a totally different process from the out of court examination of premises or chattels which the common law calls a view and s 53 calls an inspection. The second point is that the issue of whether experiments conducted by the jury in the jury room should be allowed is an issue which is entirely distinct from the issue of whether the s 53 conditions apply in relation to events in court. 193 Australian Law Reform Commission, Evidence, Report No 38 (1987), App A, at 249, par 392. 194 "It is the thing produced ... and not its inspection by the court, or the inference derived from its inspection, which constitutes real evidence": Phipson, "'Real' Evidence", App A to Phipson (ed), Best's Principles of the Law of Evidence, 12th ed (1922) at 603. The solution propounded by the Commission in relation to the former issue says nothing about the latter. To seek to draw stray implications from passing remarks by the Commission ignores the fact that the overwhelming body of the discussion in ALRC 26 is directed, and directed only, to conduct outside the courtroom. If ALRC 26 is a permissible aid to the construction of s 53, it completely contradicts the construction of s 53 advanced on behalf of the accused. The Bill recommended by ALRC 26 contained two clauses (cll 138 and 139) which are substantially to the same effect as ss 53 and 54 of the Act, save that there was no reference to the judge's order being made on application195. The Bill recommended by ALRC 38 was the same196 save for an amendment to make it plain that the judge's power to order the holding of a demonstration, experiment or inspection was to be exercised on application197. Neither ALRC 38 itself198 nor the commentary on the clauses throws any light on the present issue, namely whether s 53 applies to in court demonstrations, experiments or inspections199. In summary, then, the Commission was seeking to overcome five problems in the common law. One problem related to the propriety of judges visiting scenes relevant to the litigation without notice to the parties200: that is met by s 53(1) and (2) (which derive partly from ALRC 26201 and partly from ALRC 38202). A second problem was whether an out of court view could be 195 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 196 Australian Law Reform Commission, Evidence, Report No 38, (1987), App A, cll 144 and 145, at 200. 197 Australian Law Reform Commission, Evidence, Report No 38, (1987) at 134, par 198 Australian Law Reform Commission, Evidence, Report No 38, (1987) at 134, pars 199 Australian Law Reform Commission, Evidence, Report No 38, (1987), App A at 249, pars 393-394. 200 Salsbury v Woodland [1970] 1 QB 324 at 343-344. 201 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567, pars 1029-1030. 202 Australian Law Reform Commission, Evidence, Report No 38, (1987) at 134, par ordered without the consent of the parties203: this too was met by s 53(1) and (2). A third problem was thought to be that guidance was needed on the factors relevant to making an order for "out of court ... inspections, including appropriate experiments and demonstrations"204: this was met by s 53(3). A fourth problem was considered to be that what was seen on sites outside the courtroom could only be used to understand the evidence given in court, not as evidence in its own right205: that was met by s 54. A fifth problem was described as arising in an "analogous area to out of court inspection", namely the conduct of the jury in the jury room. The Commission thought that "it would be impractical to require the presence of the trial judge, or to provide the parties or their counsel with an opportunity to be present", but it also thought that jury experiments with exhibits should be prohibited206. The ban on experiments was achieved by s 53(4). The common law capacity of the jury (and the judge) to examine exhibits was preserved by s 53(5)207. The first four of these problems relate, and relate only, to out of court activities of a particular kind. The fifth of these problems relates to out of court activities of a different kind. None of the problems relate to conduct in the courtroom. Indeed no problems have arisen in relation to conduct in the courtroom comparable with the above problems, and the Commission was not directing itself to conduct in the courtroom. Against this background it is clear that the recommendations in ALRC 26 apply only to out of court conduct, that the same is true of ALRC 38, that the language employed by the Commission in its draft Bills bear that meaning, and hence that s 53, which is not materially different, does as well. The Commission discussions also reveal that s 53(4) and (5) require no different view to be arrived 203 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 335, par 311: the relevant recommendation is in vol 1 at 567, par 204 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567, par 1029. 205 Scott v Numurkah Corporation (1954) 91 CLR 300, discussed in Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2, App C at 335, par 311, and the subject of a recommendation in vol 1 at 567, par 1028. 206 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at 567-568, par 1031. 207 See [205] above. The interrelation of s 26(b) and s 53. Apart from taking issue with the contention that s 53 applied in court, prosecution counsel advanced two other arguments for its non-application in this case. The first of these two prosecution arguments was that the three things which the accused was required to do fell outside s 53 but within s 26(b); and that they were simply an aspect of "the production and use of documents and things in connection with the questioning of witnesses" within the meaning of s 26(b) of the Act208. Even if that were so, there was still a failure by both counsel and the judge explicitly to advert to s 192. The requests to put on the balaclava and overalls did not, however, mean that they were used in connection with the questioning of the accused. They occurred during that questioning, but although the requests to put the items on and move in various ways were in the form of questions, no questions were asked about the balaclava itself while the accused was wearing it or about the overalls themselves while the accused was wearing them. Even if, which is far from certain, the fact that a forensic event can be analysed as falling within s 26 makes it impossible for it to fall within s 53, the requests to put the balaclava and overalls on do not plainly fall within s 26(b). And the requests in the form of questions to say "Give me the serious cash" and "I want the serious cash" also fall outside the language of s 26(b), since no document or thing was produced or used in connection with those requests. Section 53 did not apply in its terms. The second of the two arguments advanced by the prosecution was that the three events complained of were not demonstrations, experiments or inspections. The argument is sound in relation to inspections, for that refers to the inspection of land or chattels. The argument is also sound so far as experiments are concerned, for what happened could not be described as an experiment. But is the argument sound in relation to demonstrations? Prosecution counsel in this Court argued: "[A demonstration] involves an attempt to reproduce the conditions or features of the thing demonstrated to provide information about that thing, usually because the thing itself is not available or directly observable. The information provided by the demonstration allows the jury, or the fact finder, to draw some inference about the actual condition or features of the thing the demonstration was designed to recreate. However, that is 208 It provides: "The court may make such orders as it considers just in relation to: (b) the production and use of documents and things in connection with the questioning of witnesses ...". different to the situation where the thing is directly observable and there is no need to provide information or evidence about it." The submission continued: "[T]he appearance of the items as worn by the [accused] was not a demonstration of some thing, it was not designed to provide information about a thing not directly discernible. His appearance in the items was the thing itself and the jury could observe it for themselves. They were not being asked to infer from the appearance of the [accused] wearing the items something about the condition or appearance of something else, the presentation was not evidence about something not available to them. It was the very thing the jury were to observe so that they could have a direct perception of that appearance." Prosecution counsel said that the jury were being invited to compare what they could gather about the offender's appearance and voice from the evidence of the witnesses, the security video and the still photographs with what they could see of the accused. The accused agreed that there were similarities between his physical characteristics at the trial and those he had on 28 February 2002. When he was asked to don the balaclava and sunglasses to face the jury and turn side on to the jury, to don the overalls, to walk in the overalls, and to say "serious", an appeal was being made to the jury's direct observation of the accused so that the jury could weigh that direct observation against the evidence about the offender. The accused was not asked to point out any particular features of a place or an object. He was not asked to describe by reference to a place or object what happened at that place or to that object. Nor was he asked to recreate or repeat some event which had happened in the past. All that happened was that an attempt was made to highlight some features of the accused so that the jurors could judge for themselves whether they were features which the other evidence revealed the offender to have. The process is what Wigmore characteristically called "autoptic proference"209. This argument of prosecution counsel is correct. The evidence of the eyewitnesses about what they saw and heard, and the video film and photographs, were admitted without objection. In evaluating it (and counsel for the accused was correct to submit that the video film and photographs were of very poor quality), the jury were entitled to look at the accused in the dock – noting his age, the colour of his hair and skin, his build. When he walked from the dock to the witness box they could take note of his style of walking. The evidence elicited by prosecution counsel about his age, hair colour, skin colour 209 Wigmore, Evidence in Trials at Common Law, (Chadbourn Rev) (1972), vol 4 at 322, par 1150. and build was admissible and not objected to. As he answered questions the jury could compare his voice with the descriptions given by eyewitnesses of the offender's voice. All these matters could be taken into account because the "events that occur in the presence of a jury in the regular course of a trial are material which the jury can – as it no doubt does – take into account in the finding of contested facts"210. The three events to which exception is taken were nothing more than techniques for highlighting particular features of resemblance which the accused may or may not have had with the offender. They did not involve him demonstrating anything about what happened; they simply involved him revealing particular features of his appearance, gait and pronunciation, as revealed in sentences similar to those the offender was said to have uttered. Even if s 53 applies to in court conduct, they were not "demonstrations" designed, in the language of s 53(3)(d), to "reproduce the conduct or event to be demonstrated". Were common law rules as to the three events complied with? Counsel for the accused submitted that if s 53 did not apply, there were common law rules which did. That is correct. Section 9(1) of the Act provides: "This Act does not affect the operation of a principle or rule of common law or equity in relation to evidence in a proceeding to which this Act applies, except so far as this Act provides otherwise expressly or by necessary intendment." Section 11(1) of the Act provides: "The power of a court to control the conduct of a proceeding is not affected by this Act, except so far as this Act provides otherwise expressly or by necessary intendment." Nothing in Pt 2.3 provides that any common law rules which apply to in court conduct of the type challenged in this appeal are abolished, and that is so even if, contrary to the conclusion just stated211, that conduct is characterised as being a demonstration, experiment or inspection. Counsel for the accused then submitted that the impugned events were demonstrations, and the common law rules which applied were similar to those stated in s 53(3). That is true to the extent that even if the evidence were tendered under a common law rule, s 135 would have to be complied with, and its meaning in substance is the same as s 53(3)(c); and it is also true to the extent that the factors listed in the other paragraphs of s 53(3) are material at common 210 Bulejcik v The Queen (1996) 185 CLR 375 at 380 per Brennan CJ. 211 Above [195]-[218]. law, for they go to relevance. However, contrary to a submission by the accused, if the evidence were tendered under a common law rule, it would not be necessary to comply with s 192. the that for reasons given above212 One difficulty with the submission that common law rules similar to s 53 apply three events were not "demonstrations" or, more correctly, "reconstructions". It is true that if the attire the accused was asked to wear, the actions he was asked to perform and the things he was asked to say were significantly different from what the eyewitnesses had said the offender had worn, done and said, the requests that the events in court take place should have been refused – but on grounds of relevance, not any special rule about "demonstrations" or "reconstructions". However, there was evidence that the offender had worn a balaclava and overalls similar to those which the accused was asked to wear. There was evidence of how he walked and how he pronounced "serious". The jurors were entitled to make findings – by assembling a mosaic from small pieces of evidence given by different witnesses if they saw fit – about what the offender was wearing, how he walked and how he pronounced "serious". If what the accused looked like, walked like and spoke like corresponded with that mosaic, it would assist the prosecution case. If it did not, it would assist the accused. The evidence was sufficiently relevant. No specific "reconstruction" rule requiring equivalence to, substantial similarity with, or a faithful reproduction of, some earlier condition or event applied. The evidence was therefore admissible unless s 135 or s 137 applied. Putting aside the unduly long time during which the accused wore the balaclava, there was no unfair prejudice: the three impugned events took place very briefly; it was reasonably necessary for the case which the prosecution wished to advance for them to take place, and the conduct of prosecution counsel did not exceed those legitimate necessities; the events appeared to have generated evidence favourable to the accused in one respect, and defence counsel contended to the jury that they did so in more than one respect; and so far as they were prejudicial, the prejudice lay in their probative value. It is true that, as was submitted for the accused, the trial judge did not refer to s 137 (or, if it was relied on, s 135); nor perhaps did the trial judge analyse the issues coherently. But her decisions to allow the impugned events to take place were correct. Case-splitting. Finally, one distinct submission of the accused must be rejected. It was submitted that the three events complained of contravened the principle that the prosecution must present its case in full before the defence case opens213. It would have been impossible for the prosecution to ask the questions 212 Above [221]-[223]. 213 Shaw v The Queen (1952) 85 CLR 365 at 379-380 per Dixon, McTiernan, Webb now complained of, however, until the defence had been opened and the accused had entered the witness box. In answer to that point counsel for the accused made the following submission: "[I]f things are to occur such as how he looks in a balaclava ... one could easily ... get another person of his height and shape and put a balaclava on their head. One could actually lead evidence in the Crown case of some of these things, but the fact that it occurs in the defence case ... only makes the situation worse, not better." Whatever difficulties there were in the course adopted by prosecution counsel, they would have been accentuated if the person asked to wear the balaclava had been, not the accused, but someone said to share his height and shape. Ground 2.3: jury warnings This ground is: "The Court of Criminal Appeal should have held that there was a miscarriage of justice occasioned by failure to direct the jury on the dangers of the procedure outlined in ground 2.1 and/or 2.2 (above)." The first complaint, then, is that the trial judge failed to warn the jury about the dangers in the evidence of the eyewitnesses about the balaclava and the overalls. The second complaint is that there was a failure to warn the jury about the dangers of the accused wearing a balaclava, wearing overalls and walking in front of the jury, and saying two sentences containing the word "serious". These are narrow complaints. The first complaint is an afterthought. It is not a complaint made in the grounds of appeal in the Court of Criminal Appeal and the terms of the Court of Criminal Appeal's judgment suggest that it is not a complaint which that Court was conscious of having been made in argument to After counsel had addressed the jury and before the summing up, they made submissions about the directions which the trial judge should give on various points. Defence counsel did not at any stage request either of the directions which, it was said in this Court, should have been given. What he did say was that the case was a circumstantial case, there being "no direct evidence" that the accused was the offender. The trial judge then said that although all the circumstantial evidence was tendered to show that the accused was the offender, she did not see how "the usual direction given by judges in respect of identification" could be given. That view was correct. It may be accepted that an example of "identification evidence" arises where the identifying witness relies on the clothing worn by the person identified214. But no witness suggested that the accused was or resembled the offender; hence the definition of "identification evidence" in Pt 1 of the Dictionary to the Act was not satisfied, there was no need to give the warning that there is "a special need for caution before accepting identification evidence" mandated by s 116(1), the evidence did not fall within the words "identification evidence" in s 165(1)(b) of the Act, and thus no s 165(2) warning was required on that account215. At one point the trial judge and defence counsel agreed that there was a need to warn the jury to "[e]xercise caution", but whether it was caution about what the witnesses saw of the offender's balaclava and overalls or caution about something else is not clear. Later, prosecution counsel instigated a brief discussion of s 165. Defence counsel submitted in relation to s 165 that "whilst it's not intended to be exclusive, there is an indication of the types of evidence by the inclusions". The trial judge then said: "It's if they have given different evidence on another occasion, something like that. I don't think it is appropriate here. But is it substantially a circumstantial case?" Defence counsel said: "It is absolutely a circumstantial case in my submission." Defence counsel did not say anything more on the point. Hence, contrary to the submissions of counsel for the accused in this Court, there was no statutory requirement to give a s 165 direction because it cannot be said that his predecessor made a "request" for a 214 R v Lowe (1997) 98 A Crim R 300 at 317. 215 Section 165(1) provides: "This section applies to evidence of a kind that may be unreliable, including the following kinds of evidence: (b) identification evidence ...". Section 165(2) provides: "If there is a jury and a party so requests, the judge is to: warn the jury that the evidence may be unreliable, and inform the jury of matters that may cause it to be unreliable, and warn the jury of the need for caution in determining whether to accept the evidence and the weight to be given to it." Section 165(5) provides: "This section does not affect any other power of the judge to give a warning to, or to inform, the jury." s 165 warning within the meaning of s 165(2). The conditions necessary to satisfy the word "requests" in s 165(2) in relation to a warning about "evidence of a kind that may be unreliable" would involve counsel making the request identifying what the "kind" of evidence was, why it was unreliable, and what the terms of the warning requested were. None of these points were identified. Defence counsel certainly did not specifically ask for warnings on the subjects set out in ground 2.3, let alone formulate in terms what the content of those warnings might have been. Prosecution counsel did suggest, however, that the trial judge should "modify the identification evidence directions but refer to it as resemblance evidence, not identification evidence". In her summing up the trial judge said there was no positive evidence of visual identification. She then said: "Nevertheless you do have evidence from a number of witnesses describing the appearance of the person who came into the council demanding money on 28 February '04 [sic] and you do have witnesses who describe the wearing apparel and you have also got the security video and the stills, the still photographs. And when the accused gave evidence he was asked to do certain things in relation to exhibits M and O, that was to put on the red balaclava and the pair of overalls so a comparison could be made between the person described as the robber by the various witnesses and the accused." Later she said: "[A]lthough I have said to you there is no visual identification in the ordinary sense of the word ... I am still bound to give you a direction which in effect is a special caution about identification evidence. I say to you at the outset that in the case of identification evidence the warning of a need for special caution before accepting of [sic] identification is one which is given in every case in which such evidence is disputed by the accused. It is not given because of any particular view which I may have formed concerning the reliability of – when I say that I am not really giving you this direction at the moment. I am telling you this is the sort of direction that is given in every case and the principal reason for it being given is because of the nature of this type of evidence and I will direct you now specifically that the type of evidence that you have heard in this case here which goes to the identification in the Crown case which is led for the purpose of or the foundation of its submission in the evidence is of such a type that you could safely act on it providing you are satisfied yourselves about the evidence and you accept the evidence. What I am endeavouring to say to you is that for this type of evidence that you have had before you it also calls for a special caution and as I say that is not because I formed any view concerning the reliability of the evidence in this case. In other words it is given universally in relation to any identification. There is universally given a special caution. Now what I am going to say to you is this, the weight to be given to that evidence is a matter for your decision, not mine, and I have nothing to do with that decision which you have to make. You should not interpret these directions as indicating any particular view which I may have formed one way or another. As I said you must approach this evidence with special caution. There are however a number of matters in this case which I propose to draw to your attention which are relevant to the reliability of the evidence that has been given and my direction is that you are bound to consider those matters in determining whether you will accept that evidence as reliable." She then referred to the limited time which the eyewitnesses had to make observations and the particular circumstances they were in. These directions were correctly criticised by the Court of Criminal Appeal on grounds which it is unnecessary to repeat216. The criticisms were not criticisms made by defence counsel when the judge was hearing submissions about further directions after the close of the summing up. In this Court counsel for the accused made a broad ranging attack on these directions. The first criticism was that the trial judge's statement that she was giving the directions because she was required to and not because of any view of the facts she had formed weakened her directions217. The second was that the conventional identification warning had not been given. Neither of these are points of criticism identified by ground 2.3. A third criticism was that strong warnings are needed where claims of similarity are made in relation to voices218, clothing219 or objects220. None of these three criticisms grounded any request by defence counsel for a further direction at the close of the summing up; indeed he made no request for a further direction of any kind. Prosecution counsel, however, did draw attention to the trial judge's failure to give a "resemblance warning" about 216 Evans v The Queen (2006) 164 A Crim R 489 at 515 [211], 516 [218] and [220] per James J (Hidden and Hoeben JJ concurring). 217 Citing R v Stewart (2001) 52 NSWLR 301 at 333 [139]-[140]. 218 Citing Bulejcik v The Queen (1996) 185 CLR 375. 219 Citing R v Lowe (1997) 98 A Crim R 300 at 317; R v Kirby [2000] NSWCCA 330 220 Citing R v Clout (1995) 41 NSWLR 312 at 320-322; R v Whalen (2003) 56 NSWLR 454 at 467-468 [46]-[51]. what the eyewitnesses said about the balaclava and the overalls – the matter she had suggested as desirable in the debate before the summing up. The transcript records the following after the jury were asked to retire: "CROWN PROSECUTOR: One further direction. HER HONOUR: About the editing, that one? CROWN PROSECUTOR: No, about the resemblance evidence of the civilian witnesses concerning Exhibits M and O, your Honour hasn't given the direction concerning special caution in respect of that evidence." The jury then left the court, and the debate continued thus: "CROWN PROSECUTOR: Your Honour has referred to it generally in terms of the witnesses' descriptions of what the offender was wearing and carrying, in context of the special caution direction, but your Honour did not specifically include a reference to their evidence about Exhibits M and O. When they were shown them. HER HONOUR: You mean the sort of – where I think Mr Marszalek – are you thinking of his sort of answer? CROWN PROSECUTOR: All of their answers in – HER HONOUR: All of the evidence in relation to? CROWN PROSECUTOR: They all generally said, if I can use the expression, resembled. HER HONOUR: It resembled. CROWN PROSECUTOR: With what the offender was wearing. They each said varying things about the items, and we agreed that was to be referred to as resemblance evidence, and my suggestion is that your Honour needs to say that that special caution that you have given applies to that evidence as well. HER HONOUR: Applies especially to the evidence that each of them gave about – Did you want to say something? [DEFENCE COUNSEL]: My understanding of the caution your Honour did give was applied to the descriptions of the person, and apparel, that is as I heard the caution your Honour gave, it was applicable to both the description of the person and the apparel. HER HONOUR: Even if I didn't specify, I certainly had in mind. Well I think I would have had in mind both. Put it that way. [DEFENCE COUNSEL]: Your Honour did say apparel. HER HONOUR: You don't have any difficulty, do you, if I have them back in and I will just tell them that the – particularly the caution that related to the balaclava and the overalls." In fact there is nothing to suggest that the trial judge did thereafter give any "caution that related to the balaclava and the overalls". Contrary to a submission made by counsel for the accused in this Court, the Court of Criminal Appeal was correct to say that in that passage counsel for the accused "did not support and actually opposed" prosecution counsel's submission221. The relevant course of events before the summing up, then, was that prosecution counsel suggested a "resemblance warning" akin to an "identification warning", and raised the question of a s 165 warning; defence counsel asked for "the usual warnings" without saying what they were, and did not make any request for a s 165 warning. After the summing up, prosecution counsel reminded the trial judge of the need for a "resemblance warning" about what the eyewitnesses said about Exs M and O, but defence counsel twice indicated it was not necessary. Even though the trial judge said she would give it and did not, the failure of defence counsel to press for it after prosecution counsel raised the point, and thereafter to remind the trial judge of her failure to fulfil her promise that she would comply with prosecution counsel's request, disables counsel for the accused now from saying that the failure to give the two warnings which it is now said should have been given amounted to a miscarriage of justice. To examine witnesses by reference to the balaclava and overalls in the manner employed in this case, though permissible, is not a particularly common event. To ask the accused to don the items, walk before the jury and speak as requested is less common. On the other hand, the difficulties of drawing inferences from mass produced items are fairly obvious, and were stressed by counsel for the accused in address. The jury must have appreciated the diverse reactions of the eyewitnesses to the offender's clothing. Further, the events to which the two warnings which it is said should have been given related took up very small amounts of time – a miniscule fraction of the whole trial. Rather than asking for unspecified "usual warnings", it was incumbent on the defence, if it was thought the unusual nature of the events called for specific directions, to formulate the precise words of any direction sought and either read them to the judge at 221 Evans v The Queen (2006) 164 A Crim R 489 at 514 [207] per James J (Hidden dictation speed or hand up a document containing them. What McHugh JA said of civil jury trial is true for criminal cases as well222: "If a party is to rely as a ground of appeal on a misdirection in a summing-up, his counsel must specify at the trial that portion of the summing-up which he requires to be withdrawn. If any further direction is needed, counsel must specify with precision what direction the trial judge should give." The conduct of defence counsel, who at all times showed a vigilant determination to protect his client's interests as energetically as possible, suggests that he did not see his client's position as being damaged by the summing up, that he considered that the prosecution counsel's request might not advance it, and that he did not think his client's position would be improved by the very subtle and detailed warnings which it was submitted to this Court should have been given. Ground 2.4: failure to give reasons This ground was: "The Court of Criminal Appeal erred in: Inferring reasons for judgments of the trial judge in circumstances where on applications of substance, there were no such reasons given; Failing (as a matter of procedural fairness) to uphold the appeal in circumstances where on applications of substance there were no reasons given by the trial judge; (c) Holding that there was no error in the reasons of the trial judge where no reasons were ever given by the trial judge and those reasons were rather, the reasons that the Court of Criminal Appeal had itself inferred." Counsel for the accused submitted that the trial judge failed to give reasons or gave only incomplete reasons for: overruling the defence objection to the questioning of Mrs Thompson about the balaclava and the overalls; 222 Singleton v Ffrench (1986) 5 NSWLR 425 at 440. deciding not to rule inadmissible all the evidence given about the balaclava and the overalls, the items themselves, and their finding at the accused's residence; deciding to grant leave to the prosecution to amend the indictment; deciding to refuse to waive the notice requirements relating to alibi evidence and to refuse to allow evidence of alibi; deciding to overrule objections to the accused being made to wear the balaclava, the sunglasses and the overalls, to walk up and down and to say "serious"; refusing to give an identification direction either under s 116 of the Act; or s 165 and refusing an application to discharge the jury. Counsel for the accused submitted of these failures: "The rulings ... were central to the trial and the failure to give reasons, despite repeated request[s], pervaded the entire trial." In assessing the meaning and validity of this submission, the following matters are relevant. First, counsel for the accused does not now complain, and did not complain in the Court of Criminal Appeal, about the grant of leave to amend and the refusal to discharge the jury. The failure to give any reasons for the grant of leave or to give full reasons about the discharge application may thus be left out of consideration. Secondly, the Court of Criminal Appeal found that the trial judge had erred in relation to the alibi question and the sunglasses. The failure to give reasons for these rulings could scarcely improve the accused's position on these issues in this Court. Thirdly, of the remaining rulings, reasons were not sought by defence counsel in relation to the ruling about Mrs Thompson, the rulings about the accused wearing, doing and saying various things, or the identification directions. The only remaining ruling for which reasons were sought and promised was the decision not to hold inadmissible all the evidence given by eyewitnesses about Exs M and O, the exhibits themselves, and the circumstances of their finding. Fourthly, it is very unusual for trial judges to give reasons, beyond what they say in dealing with argument, about why they propose to give some directions to the jury but not others. It is not generally desirable to require them to go further. There are innumerable rulings given in trials in response to objections for which reasons should normally neither be requested nor given – those relating to the form of questions, those relating to their capacity to elicit inadmissible evidence, those relating to their tendency to infringe privilege. Sometimes reasons for rulings on relevance and privilege should be given, because they offer a guide to counsel in their future conduct, and the time lost in giving the ruling is outweighed by the time saved in ensuring future compliance with it. But if reasons were to be given for every ruling, trials would become interminable. Although no trial is perfect, if the present trial had any significant fault, it was the lengthy periods which the trial judge permitted counsel to take up in debating questions of admissibility. The Court of Criminal Appeal criticised the failure of the trial judge to give reasons for some of her rulings. That criticism was correct, at least in cases where defence counsel requested reasons and they were promised. However, the Court of Criminal Appeal held that the failure to give reasons was not "such a fundamental procedural irregularity as to warrant setting aside the [accused's] convictions"223. This was because, as the Court of Criminal Appeal correctly said, the relevant applications were usually argued at length, so that the evolving views of the trial judge were apparent from what she said in argument224. In criticising this reasoning, counsel for the accused cited several authorities. But, leaving aside cases concerning trials by judge alone, where statute may compel the giving of reasons225, the cases cited all turn on the need for reasons in relation to final orders, like a sentence226, an increased sentence227, an order denying an entitlement to workers' compensation228 and an order 223 Evans v The Queen (2006) 164 A Crim R 489 at 522 [272] per James J (Hidden 224 Evans v The Queen (2006) 164 A Crim R 489 at 522 [272] per James J (Hidden 225 Fleming v The Queen (1998) 197 CLR 250; R v Murphy [2000] NSWCCA 297. 226 R v Thomson (2000) 49 NSWLR 383 at 394 [42] per Spigelman CJ (Wood CJ at CL, Foster AJA, Grove and James JJ concurring); Harris v The Queen (2005) 158 A Crim R 454 at 459 [22] per Studdert J (Grove and Whealy JJ concurring). 227 Dinsdale v The Queen (2000) 202 CLR 321 at 329 [21] per Gaudron and 228 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 280 per McHugh JA. awarding damages229. It is in that type of case where the primary purposes for giving reasons have operation – to enable the parties to see whether their arguments have been understood and what the decision is based on, to further judicial accountability, and to ascertain how cases will be decided in future230. Counsel for the accused did cite cases indicating that reasons must be given where "that is necessary to enable the matter to be properly considered on appeal"231. Although many rulings on evidence or other interlocutory rulings in criminal jury trials are unlikely to form the basis of an even faintly arguable appeal, in relation to significant rulings, where a request for reasons is made, at least brief reasons should be given. But where the purpose of the reasons is to enable appellate courts to consider the appeal properly, if that purpose can be achieved in other ways, as where the course of argument makes the reasons plain, the failure to give reasons, though erroneous, will not constitute a miscarriage of justice. That was the case here. It cannot be said that the objections or applications made by defence counsel were peremptorily dismissed without being admitted to her Honour's mind. She gave full opportunity for the arguments to be developed. It was contended for the accused that the Court of Criminal Appeal erred in failing to uphold the appeal on grounds of procedural fairness and erred in inferring the reasons for the rulings from what was said in argument. One thing that matters is whether the rulings were correct: they were. Another thing that matters is that miscarriages of justice be avoided, as distinct from procedural errors which are regrettable but do not cause any miscarriage of justice. The failure to give reasons can be procedurally unfair, but procedural unfairness is not to be looked for in the air: counsel for the accused in this Court failed to demonstrate how either his predecessor or their client was in any way worse off because of the failure to give reasons in this case. Counsel for the accused submitted: 229 Carlson v King (1947) 64 WN (NSW) 65 at 66 per Jordan CJ, Davidson and Street JJ (failure to comply with counsel's request to note points of law); Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430. 230 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279 per McHugh JA. 231 Public Service Board of NSW v Osmond (1986) 159 CLR 656 at 666 per Gibbs CJ (Wilson, Brennan and Dawson JJ concurring); see also Carlson v King (1947) 64 WN (NSW) 65 at 66 per Jordan CJ, Davidson and Street JJ; Pettitt v Dunkley [1971] 1 NSWLR 376. "The approach adopted of 'inferring reasons' puts intolerable burdens on courts of appeal and leaves litigants unable to properly present their cases on appeal. The procedure adopted at trial and on appeal denied procedural fairness to the [accused]. A miscarriage of justice was thereby occasioned." The first sentence is correct in some circumstances, but was not shown to be correct in the circumstances of this trial. For that reason the conclusions in the second and third sentences do not follow. Ground 2.5: the proviso This ground was: "The Court of Criminal Appeal erred notwithstanding that it upheld the [accused's] complaint in relation to: in applying the proviso The prosecutor requiring the [accused] to put on the prosecutor's 'old skiing glasses' which had not been admitted into evidence, had not been shown to any witness and which were produced for the first time when the prosecutor asked the [accused] to put them on ... The error identified ... in refusing to waive the notice requirements relating to alibi evidence and the refusal to allow alibi evidence in the trial." The arguments of the accused in this Court concentrated on the alibi evidence232, and practically nothing was said about the sunglasses. It is necessary to approach the question of the proviso to s 6(1) of the Criminal Appeal Act on a slightly wider basis than the Court of Criminal Appeal did because it was concluded above that, apart from the two respects in which the Court of Criminal Appeal favoured the accused, an irregularity possibly amounting to a miscarriage of justice took place when the accused responded to prosecution counsel's request to put on the balaclava and sat with it on for some minutes in the presence of the jury while an objection was being debated233. The accused's alibi evidence. The accused said during examination in chief that he could not remember where he was on the afternoon of 28 February 2002, save that he was not at Strathfield. He said it was his practice on 232 For the Court of Criminal Appeal's reasoning, see Evans v The Queen (2006) 164 A Crim R 489 at 516-519 [222]-[242], 523-524 [284]-[288] per James J (Hidden and 233 See above [185]. Thursdays to prepare limousines for display from 5pm in his brother's car hire business at Campbelltown. This took him from 2 or 3pm to 5pm. After an adjournment, prosecution counsel submitted that the accused's alibi evidence had been given without complying with s 150 of the Criminal Procedure Act 1986 (NSW), which requires the leave of the court where notice has not been given. Counsel said she would cross-examine him about the evidence he had given, but would object to alibi evidence from other witnesses. The cross-examination in question was not directed to establishing that the practice about which the accused had testified did not exist. Instead it was directed, successfully, to establishing that there were no records to confirm that the accused had worked in accordance with his practice on that particular afternoon, and no evidence available from anyone working in nearby businesses to that effect. The alibi ruling. The trial judge refused to grant leave "retrospectively" to rely on alibi evidence, and refused leave to call evidence about alibi from the accused's father and brother. But she did not strike out the accused's evidence. Contrary to a submission advanced on behalf of the accused the Court of Criminal Appeal was right to say that the evidence which the accused gave in support of the alibi "was not withdrawn from the jury"234. Indeed, although neither counsel addressed the jury about the accused's evidence of practice, both referred to his evidence that he was not at Strathfield. The evidence of the accused's brother and father. The accused's brother gave evidence on various topics. But, conformably with the trial judge's refusal of leave to call alibi evidence, defence counsel elicited none. The same approach was taken with the father. The summing up. In her summing up the trial judge said: "The accused ... has given evidence himself and he's also called evidence, that is his father and his brother in support of his case, to the effect to support his denial of his being present and committing the offence ..." It was not correct to say that the father and brother had given evidence to support the accused's denial of being present. They had testified, but the trial judge had ruled that they could not give evidence on that particular point. The uncalled evidence of the father and the brother. In an affidavit read to the Court of Criminal Appeal, the father said that the accused had the task of preparing five cars for display outside the brother's shop on Thursdays, usually starting just after lunch and finishing between 4 and 5pm. He did not recall the 234 Evans v The Queen (2006) 164 A Crim R 489 at 523 [287] per James J (Hidden accused ever missing a day's work. An affidavit by the brother was to similar effect, save that he said the work took the accused five hours, and that he did not recall the accused having any breaks or not turning up for work. The accused's submission. Counsel for the accused submitted that the "defence case" was that the accused's practice on Thursdays was to work in his brother's business at Campbelltown at times inconsistent with being at Strathfield at 4.10pm. While the accused gave evidence supporting that case, he was prevented from putting it fully because he could not call his father and brother to support that practice. For that reason, it was submitted, the appeal fell within the following words in Weiss v The Queen235: "[T]here may be cases where it would be proper to allow the appeal and order a new trial, even though the appellate court was persuaded to the requisite degree of the appellant's guilt. Cases where there has been a significant denial of procedural fairness at trial may provide examples of cases of that kind." It was also submitted that the errors amounted to "such a serious breach of the presuppositions of the trial as to deny the application" of the proviso236. Thus, it was submitted, it did not matter how strong the other evidence against the accused was: the proviso could not be applied. If that argument were to fail, the question would be whether the evidence which the trial judge did not permit the accused to call could have raised a reasonable doubt about the prosecution case. Conclusion. There was extremely strong evidence against the accused, even assuming that no connection between the offender's balaclava and overalls and the accused was proved. The evidence was that before the robberies the floor of the chambers was clean. The surveillance video, and the sequence of photographs derived from it, showed that there were no items on the floor in front of the counter as the offender was standing there at 16.09:35, and that by 16.09:45 two items appeared in that area. One is clearly a tissue. Although there plainly is a second item, it is more difficult to discern. The inescapable inference is that the items were dropped by the offender. The area was cordoned off so that the items were not disturbed. They were photographed in situ and those photographs, taken close up and in colour, clearly depict a green baseball cap. In his final address to the jury, counsel for the accused said that the photographs appeared to show two items on the floor, and said: "One is probably the tissue 235 (2005) 224 CLR 300 at 317 [45] per Gleeson CJ, Gummow, Kirby, Hayne, 236 (2005) 224 CLR 300 at 317 [46] per Gleeson CJ, Gummow, Kirby, Hayne, and the other is probably the cap." In addition, after the robberies, three witnesses saw a green baseball cap on the floor. That cap – the cap photographed in the cordoned-off area – had the accused's DNA on it. Finally, when the cap was shown to the accused in the witness box, he said it was "vaguely familiar" and that his father may have had a hat like that. His father said that he had won similar caps, he had left them in the garage of the house where the accused resided, and that anyone could wear them. In this Court it was submitted for the accused that "there was no evidence at the trial that the robber dropped more than one item or specifically a cap". That submission is true if it means that there was no direct testimonial evidence to that effect. In every other sense it is untrue, because the video, the photographs, and the testimonial evidence established beyond doubt that the offender left the cap behind him. In those circumstances, what explanation for the presence of the cap with its incriminating DNA could be offered to suggest a reasonable doubt about the accused's guilt? In his final address to the jury counsel for the accused submitted that the cap was deliberately placed on the floor by the offender with DNA other than his own on it – that is, that false evidence was planted. This implies that the offender deliberately obtained a cap with the accused's DNA on it. If the evidence had not been planted, the only explanation capable of raising a reasonable doubt is that the cap left by the offender had, by accident, the accused's DNA on it. There is no evidentiary basis for treating either of these suggestions as possibilities, let alone reasonable possibilities. They are utterly implausible. The theory that the accused's DNA found on the cap could have been deposited there by transference of blood, semen or saliva, rather than from contact with the accused's skin faces the difficulties that there was no evidence of staining on the cap, that the DNA was found on the inside brim area, where one would expect to find it if it were worn facing forward, and that, in the words of the relevant defence expert, there "was a bucket of DNA present". In short, the defence's "explanation" for the presence of the accused's DNA on the cap has no evidentiary support. It goes no distance towards raising a reasonable doubt. The parties advanced, in written submissions filed by leave after the oral hearing, complex and detailed analyses of the law relating to the proviso. In the circumstances it is not necessary to set out and evaluate these submissions. The "procedural fairness" which counsel for the accused contends he was denied was an opportunity to call vague evidence of practice in relation to a specific day more than two years before the trial, by way of confirmation of his own evidence to that effect. His own evidence to that effect had not been challenged in cross-examination: all that the cross-examiner did was establish a lack of business records and a lack of useful information from inquiries. Not only was the alibi defence, as put both by the accused in his evidence and by his father and brother in their affidavits, vague: it was also weak – going only to practice more than two years earlier, not to a specific recollection of being present at a place other than Strathfield. The trial judge's failure to permit a full deployment of the defence is not the "significant" procedural unfairness spoken of in Weiss v The Queen. Nor is it "a serious breach of the presuppositions of the trial"237. As for the sunglasses, the trial judge's error was trivial, since the jury knew they were prosecution counsel's old ski glasses and had nothing to do with the accused. The Court of Criminal Appeal was right to apply the proviso in relation to the two respects in which it accepted defence arguments. The conclusion that there was one further irregularity does not alter the correctness of that conclusion in view of the fact that that irregularity was not serious238. Indeed, whether it is to be characterised as a miscarriage of justice within the meaning of the main part of s 6(1) of the Criminal Appeal Act at all need not be considered; for even if it were, it was certainly not "substantial", and the proviso applies. Order The appeal should be dismissed. 237 Compare the passages quoted above at [256] from Weiss v The Queen (2005) 224 CLR 300 at 317 [45]-[46]. 238 See above at [185]. Crennan CRENNAN J. I agree with Heydon J that the appeal should be dismissed and I agree with his Honour's reasons. The evidence of the accused referred to as evidence of an alibi was not evidence of an actual recollection of being elsewhere than at Strathfield on the afternoon of 28 February 2002. Rather, it was evidence of a practice of the accused to attend his brother's business at Campbelltown on a Thursday for a period of time inconsistent with being at Strathfield at 4.10 pm. The evidence of the accused's father and brother which was not called supported the accused's evidence of the practice. The accused was not challenged in cross-examination about the practice. Neither prosecution counsel nor defence counsel addressed the jury about the accused's evidence of his practice which went to the jury. When those matters are considered together with other evidence described by Heydon J as "extremely strong evidence against the accused"239, the errors complained of did not amount to "such a serious breach of the presuppositions of the trial as to deny the application of the common form criminal appeal provision with its proviso"240. 239 See above at [257]. 240 Weiss v The Queen (2005) 224 CLR 300 at 317 [46] per Gleeson CJ, Gummow, Kirby, Hayne, Callinan and Heydon JJ. (footnote omitted)
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT [2013] HCA 32 27 June 2013 ORDER Appeal allowed. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made in respect of the appellant on 18 December 2009 and, in their place, order that: leave to appeal to that Court against the appellant's convictions be granted; the appeal to that Court be allowed; the appellant’s convictions be quashed; and a new trial be had on both counts. On appeal from the Supreme Court of Victoria Representation O P Holdenson QC with C B Boyce for the appellant (instructed by Victoria Legal Aid) T Gyorffy SC with D I Piekusis for the respondent (instructed by Director of Public Prosecutions (Vic)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Murder – Practice and procedure – Directions to jury – Available alternative charge – Whether position of appellant and co-accused sufficiently distinguishable to affect adequacy of directions to jury – Whether reasonably open to jury to return alternative verdict of manslaughter – Whether failure to leave alternative verdict to jury constituted wrong decision on question of law – Whether substantial miscarriage of justice occurred. Words and phrases – "alternative verdict of manslaughter", "substantial miscarriage of justice". FRENCH CJ, KIEFEL, BELL, GAGELER AND KEANE JJ. In September and October 2007, Dang Khoa Nguyen ("the appellant"), Bill Ho and Dang Quang Nguyen ("Nguyen") were tried together before Williams J and a jury in the Supreme Court of Victoria. Each was charged with the murder of Hieu Trung Luu ("Luu") and the attempted murder of Chau Minh Nguyen ("Chau"). The Crown case was that on 8 November 2004 Bill Ho shot both Luu and Chau, and that the appellant and Nguyen were complicit in Bill Ho's crimes. The evidence at trial was that the three men had gone together to a flat in Carlton to collect a debt owed either to Bill Ho or to the appellant for drugs supplied to a man named Mau Duong ("Mau"). Mau was not at the flat, but seven other young people were. Some were asleep, and some were watching television. Nguyen entered the lounge room of the flat waving a Samurai sword with which he inflicted cuts on two or three of the occupants of the flat. Bill Ho produced a revolver that he had brought with him. He fired two shots, the first of which hit Chau; the second hit Luu. Chau survived; but Luu's wound was fatal. The case against the appellant and Nguyen was put on three different bases of criminal complicity: acting in concert, common purpose or extended common purpose and aiding and abetting. The contention was that they were both party to an agreement with Bill Ho to collect a drug debt and that, if necessary, they would kill to achieve that end. It was further argued that if such an arrangement had not been made before they entered the flat, it arose after they arrived at the flat and began terrorising the occupants with Nguyen's sword and The jury were instructed by the trial judge that, to convict Bill Ho of murder, they had to be satisfied that he shot Luu intending either to kill him or to inflict really serious injury upon him. The jury were also instructed that, to convict Bill Ho of the attempted murder of Chau, they had to be satisfied that he shot Chau intending to kill him1. The jury were further instructed that, if they were not satisfied of Bill Ho's guilt of the murder of Luu, they should consider whether he was guilty of manslaughter by unlawful or dangerous act. As to the trial judge's directions to the jury in respect of the appellant and Nguyen, the effect of those directions was to leave manslaughter to the jury as a 1 Alister v The Queen (1984) 154 CLR 404 at 421-422; [1984] HCA 85; McGhee v The Queen (1995) 183 CLR 82 at 85-86; [1995] HCA 69. Bell possible verdict only if the jury concluded that Bill Ho was guilty of manslaughter, not murder2. In other words, if Bill Ho was found to be guilty of murder, Nguyen and the appellant could be found either guilty of murder or not guilty of any crime in relation to the homicide of Luu. The jury returned verdicts of guilty on the counts of murder and attempted murder against all three accused. The appellant and Nguyen each sought leave to appeal against his convictions. The Court of Appeal of the Supreme Court of Victoria allowed Nguyen's appeal and quashed his convictions; but dismissed the appeal by the appellant. As to Nguyen, the Court of Appeal concluded3 that a jury, acting reasonably, must have had a reasonable doubt as to Nguyen's guilt of the murder of Luu. The Court of Appeal held that, whether the case against Nguyen was approached as a case in which Nguyen was said to have acted in concert with the others, or as a case of common purpose, or as a case in which Nguyen aided and abetted the murder committed by Bill Ho, the evidence did not permit the jury to be satisfied beyond reasonable doubt of his guilt of murder. The prosecution appealed from that decision to this Court pursuant to a grant of special leave against the Court of Appeal's orders in favour of Nguyen, who, in turn, sought to uphold the orders of the Court of Appeal in his favour. Nguyen submitted that the Court of Appeal should have allowed his appeal on the ground of a misdirection to the jury. This ground, which had been raised before the Court of Appeal by both Nguyen and the appellant, was to the effect that the trial judge had erred in law in failing to direct the jury to consider whether, in the event that the jury were satisfied that Bill Ho was guilty of murder, Nguyen and the appellant might be guilty of manslaughter rather than murder. 2 R v Nguyen (2010) 242 CLR 491 at 503 [43]-[44]; [2010] HCA 38. 3 R v Nguyen [2010] VSCA 23 at [104]-[112]. Bell This Court's decision in R v Nguyen In R v Nguyen4 this Court reviewed the evidence given at trial5, concluding that6: "On the whole of the evidence, it was open to the jury to be satisfied, beyond reasonable doubt, that all three men had come to the flat searching for Mau Duong for payment of a debt … and … [that] Nguyen used the sword in a way that showed his willingness to inflict cutting injuries on those in the flat … [and] that, before the first shooting, Bill Ho had produced a revolver and had spun the cylinder in an attempt to intimidate those who were in the room … and … that … Nguyen (like other occupants of the room) must have seen the gun that Bill Ho had produced and was manipulating in a threatening manner." On this basis, it was held that the Court of Appeal erred in concluding that the verdicts against Nguyen were unreasonable or could not be supported having regard to the evidence7. This Court went on to consider the directions given by the trial judge, concluding that the trial judge "made a wrong decision on a question of law" in failing "to leave manslaughter as an available verdict against [Nguyen], even if Bill Ho was guilty of murder."8 If Nguyen was party to an agreement, or had in contemplation, or provided assistance directed to some lesser assault than one intended to kill, it would have been open to the jury to conclude that, although he was not guilty of the charge of attempted murder, a verdict of manslaughter should be returned in respect of the count charging him with murder. As the Court said9: (2010) 242 CLR 491. 5 R v Nguyen (2010) 242 CLR 491 at 495-497 [13]-[24]. 6 R v Nguyen (2010) 242 CLR 491 at 498 [25]-[26]. 7 R v Nguyen (2010) 242 CLR 491 at 501 [39]. 8 R v Nguyen (2010) 242 CLR 491 at 505 [50]. 9 R v Nguyen (2010) 242 CLR 491 at 505 [49]. Bell "The trial judge's directions did not admit of that possibility." It was ordered that Nguyen should have special leave to cross-appeal, his cross-appeal be allowed, his convictions on both counts be quashed and a new trial be had10. The appellant's appeal to this Court Subsequent to this Court's decision in R v Nguyen, the appellant applied for, and was granted, special leave to appeal to this Court on the footing that he suffered a substantial miscarriage of justice by reason of the same error of law identified in R v Nguyen. The arguments of the parties The appellant's contention was that, so far as the sufficiency or otherwise of the trial judge's direction to the jury on the issue of complicity was concerned, the case against him was materially indistinguishable from the case against Nguyen. The prosecution resisted this contention, arguing that there was no viable alternative verdict of manslaughter open against the appellant on the evidence adduced at trial. On behalf of the appellant it was said that the prosecution's argument is conclusively answered by what was said by this Court in R v Nguyen11: "[Nguyen] submitted that the trial judge's instructions precluded the jury from considering what were described as 'viable and entirely apt alternative verdicts' on the charge of murder. Counsel for [Nguyen] offered three examples of findings of fact which were open, and if made, would have led to a verdict of manslaughter: one in respect of each of extended common purpose, concert and aiding and abetting. As to extended common purpose, it was said that if the jury were satisfied that [Nguyen] knew of the presence of the gun before the shootings occurred, and was party to a plan that violence would be threatened to recover a drug debt, it was possible that the purpose was to do no more than cause serious harm to another short of really serious injury. As to concert, it was 10 R v Nguyen (2010) 242 CLR 491 at 506 [56]-[57]. 11 (2010) 242 CLR 491 at 503-504 [45]-[46]. Bell said that it may have been that the arrangement was for Bill Ho to do no more than assault or threaten others in a dangerous fashion. As to aiding and abetting, it was said that [Nguyen's] words and actions may have encouraged or assisted Bill Ho to assault or threaten others but not to kill or do really serious injury. Contrary to the prosecution's submission in this Court, each of these conclusions was available to the jury. Again, the conclusions were not the only findings the jury could make, but they were open. That the prosecution had put its case on the footing that deadly force was always contemplated did not preclude the jury from finding the facts in a way that was consistent with any of the three ways put forward by [Nguyen] in argument in this Court." On behalf of the appellant it was said that these observations are equally applicable to the prosecution's case against the appellant. The prosecution submitted that there are material differences between the cases of Nguyen and the appellant. In this regard, the prosecution emphasised that there was evidence against the appellant that the drug debt, payment of which was being pursued on the morning of the offences, was owed to the appellant as a result of transactions arranged by him. Further, there was evidence given by Chau that he awoke to find the three men in the flat and that he heard the appellant say to Bill Ho "Get him off" or "Fuck him off". Bill Ho then pointed the gun at Chau, asking "That guy?". Chau's evidence was that the appellant nodded his head, and then Bill Ho shot him. It was also urged for the prosecution that some significance should be accorded to the circumstance that the appellant did not give any account of his involvement in the events of that day whether by way of an interview with police or by giving evidence. Discussion The prosecution's arguments are not compelling. First, evidence that the drug debt in question was owed to the appellant as a result of transactions arranged by him does not necessarily shed light on the nature of the arrangement between the appellant, Nguyen and Bill Ho in a way which is apt decisively to distinguish between the position of the appellant and Nguyen in relation to the criminal responsibility of each of them for Bill Ho's crimes. Next, it is to be emphasised that the reliability of Chau's evidence was disputed at trial: Bill Ho gave evidence denying that the appellant said anything Bell to him prior to his shooting Chau. None of the other five occupants of the flat gave evidence of the exchange which Chau said occurred between Bill Ho and the appellant before Bill Ho shot Chau. Accordingly, it was open to the jury to entertain a reasonable doubt as to the reliability of Chau's evidence. And importantly, Chau's evidence, even if it were accepted by the jury, would not preclude a jury concluding that Bill Ho's shooting of Luu, after he had shot Chau, was neither directed by the appellant nor part of any common purpose of collecting the drug debt owed by Mau. It was also open to the jury to entertain a reasonable doubt as to whether any plan as to debt collection to which the appellant was a party extended beyond the use of violence to really serious violence or homicide. The circumstance that the appellant gave no account of his involvement in the events of 8 November 2004 does not add weight to the prosecution case against the appellant12. And, in any event, the question of present concern is not whether the verdict against the appellant should be upheld as reasonable. Rather, the question is whether the direction of the trial judge was affected by a legal error in failing to explain to the jury that it was open to them to convict the appellant of manslaughter, even if they were satisfied that Bill Ho was guilty of murder, if they were satisfied that the appellant was a party to a plan that violence would be threatened or used to recover a drug debt which involved violence falling short of really serious violence or homicide. The answer to this question is that there was a viable case of manslaughter which should have been left to the jury. As was said in R v Nguyen13, "[t]his Court's decisions in Gilbert v The Queen14 and in Gillard v The Queen15 require the conclusion that, in giving the directions the trial judge did about complicity, her Honour made a wrong decision on a question of law. It was wrong not to leave manslaughter as an available verdict" against the appellant even if Bill Ho was found guilty of murder. Next, as in R v Nguyen, it cannot be said that a conviction of murder was inevitable if a correct direction had been given. The decisions in Gilbert and 12 Azzopardi v The Queen (2001) 205 CLR 50 at 64-65 [34]; [2001] HCA 25. 13 (2010) 242 CLR 491 at 505 [50]. 14 (2000) 201 CLR 414 at 416-417 [1]-[2], 434 [70]; [2000] HCA 15. 15 (2003) 219 CLR 1 at 14 [26], 15 [32], 34-35 [106], 40 [129]; [2003] HCA 64. Bell Gillard, as well as this Court's decision in R v Nguyen16, also require the further conclusion that it cannot be said that there was no substantial miscarriage of justice in the trial judge's not leaving manslaughter as an available verdict against the appellant. It follows that the appellant's submission that there is no material difference between the position of the appellant in this case and that of Nguyen in R v Nguyen should be accepted. As to the conviction for attempted murder, in Gillard17 it was held that where in relation to a count of attempted murder a jury has been deprived, by a wrong decision on a question of law, of the opportunity to consider the possibility of a conviction for manslaughter rather than murder on another count tried at the same time, the error could have affected the whole trial. The nature of the error in relation to the murder count was said to make it impossible to dismiss the possibility that it also affected the verdict on the count of attempted murder. The approach in Gillard was applied in R v Nguyen. There is no reason why this Court should not take the same course. Orders The appeal should be allowed. The orders of the Court of Appeal of the Supreme Court of Victoria made in respect of the appellant on 18 December 2009 should be set aside, and, in their place, it should be ordered that: leave to appeal to that Court against the appellant's convictions be granted; the appeal to that Court be allowed; the appellant's convictions be quashed; and a new trial be had on both counts. 16 (2010) 242 CLR 491 at 505 [50]. The prosecution sought an extension of time to file a notice of contention challenging the correctness of this Court's decision in Gilbert. On 5 June 2013 a differently constituted Court, French CJ, Hayne, Crennan, Kiefel, Bell, Gageler and Keane JJ, refused to grant an extension of time on the ground that it was not persuaded to grant leave to argue that Gilbert should be reconsidered. See [2013] HCATrans 127 at 6. 17 (2003) 219 CLR 1 at 14 [27], 33 [96].
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT [2009] HCA 17 29 April 2009 ORDER Appeal dismissed. On appeal from the Supreme Court of Queensland Representation P J Callaghan SC with P E Smith and A M Hoare for the appellant (instructed by Ryan & Bosscher Lawyers) A W Moynihan SC with B J Power for the respondent (instructed by Director of Public Prosecutions (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Evidence – Joint murder trial – Admissibility of evidence adduced by accused of bad character or propensity of co-accused – Whether appellant prevented by trial judge from fully adducing relevant admissible evidence – Whether jury misdirected as to use of evidence of appellant's bad character. Criminal law – Appeals – Application of proviso. Words and phrases – "substantial miscarriage of justice". Criminal Code (Q), s 668E(1A). FRENCH CJ, HEYDON, KIEFEL AND BELL JJ. On 1 April 2005 the decapitated body of a youth, Morgan Jay Shepherd, was found buried in a shallow grave in bushland near Dayboro, a township north of Brisbane. The deceased's head was found nearby. There were numerous stab wounds to the body. It was not possible to determine whether many, or all, save one, had been inflicted post-mortem. It was possible that death had been occasioned by a single stab wound to the neck. The deceased was last seen alive in the company of James Patrick Roughan ("Roughan") and the appellant at Roughan's home in Sandgate. The three had been drinking together. The appellant and Roughan were jointly charged with the murder of the deceased. Each pleaded not guilty to that charge. Each pleaded that he was guilty of being an accessory after the fact to the unlawful killing of the deceased by the other and to interfering with a corpse. The Crown case was that either or both the appellant and Roughan murdered the deceased or that one of them murdered him and the other enabled or aided that other in the attack with the intent of causing death or grievous In out of court statements tendered at the trial Roughan and the appellant each claimed that the other had assaulted the deceased and then obtained a knife and stabbed him in the neck. The appellant's account was that he was in fear of Roughan. He described Roughan as a "psycho" and he said that Roughan had been charged with stabbing "one of his mates" on another occasion. Roughan was on bail at the date of the offence on a charge of the attempted murder of a man named McKenna ("the McKenna assault"). The case against the appellant was a strong one. Apart from his admission to having been present at the time of the killing, there were a number of witnesses who gave evidence of admissions made by him to his involvement in the murder. Three of these witnesses had assisted in disposing of the body of the deceased. Each had pleaded guilty to being an accessory after the fact to the murder and received a reduction in sentence on the strength of each undertaking to give evidence in the prosecution of the appellant and Roughan2. Two of the witnesses who gave evidence of admissions made by the appellant were not criminally concerned in the offence. The appellant and Roughan travelled together in the same prison van on an occasion after each was charged with the murder. Their conversation was secretly recorded. The appellant's statements made in the course of the conversation may be thought supportive of the Crown case but did not include any unequivocal admission of guilt. 1 Section 7(1) of the Criminal Code (Q). 2 Under s 13A of the Penalties and Sentences Act 1992 (Q). Bell Neither the appellant nor Roughan gave evidence at the trial. Each was convicted of murder. Each appealed against his conviction to the Court of Appeal. Roughan's appeal was allowed and a new trial ordered. He has since been convicted of the murder of the deceased at the second trial. The appellant's appeal was dismissed. The appellant appeals by special leave from the orders made by the Court of Appeal on the ground that there was a miscarriage of justice arising as the result of two errors in the conduct of the trial3. These were, first, that the trial judge (Atkinson J) prevented the appellant's counsel from "fully adducing the evidence" that Roughan had attempted to murder a friend on another occasion. An examination of the course of the trial shows that this complaint is without substance. The second ground complains of a misdirection4. The impugned direction was found to be erroneous in the Court of Appeal. The appellant's complaint in this Court is with the Court of Appeal's decision to nonetheless dismiss his appeal. No error in the approach the Court of Appeal took to the application of s 668E(1A) of the Criminal Code (Q)5 is established. For the reasons that follow the appeal should be dismissed. The first ground of challenge At the trial the appellant's counsel sought to cross-examine Detective Sergeant Williams, the officer who had arrested Roughan and charged him with the murder, to elicit details of the circumstances of the McKenna assault. The trial judge allowed evidence to be adduced from Detective Williams of the fact that Roughan was on bail charged with an offence that involved the stabbing of a mate. The evidence was relevant to the credibility of the appellant's account that he was in fear of Roughan. In a series of rulings, she refused to allow cross- 3 The Notice of Appeal contains a third ground, 1(c), which was abandoned. 4 Notice of Appeal, par 1(b): "The Learned Trial Judge misdirected the jury in directing them that they could use the evidence of the Appellant's bad character to reason that the co-offender was a less violent and dishonest person than the appellant." 5 Section 668E(1A) of the Criminal Code (Q) provides that the court may, notwithstanding that it is of the opinion that the point or points raised by the appeal might be decided in favour of the appellant, dismiss the appeal if it considers that no substantial miscarriage of justice has actually occurred. Bell examination of Detective Williams about his knowledge of the circumstances of In the Court of Appeal, the appellant's ground of challenge was that the trial judge did not allow counsel to "fully cross-examine Det Williams about the Att murder charge that Roughan had been charged with especially after Roughan's counsel in effect led evidence of Roughan's good character." The Court held that the trial judge had been right to refuse to permit cross- examination of Detective Williams as to the detail of the allegations against Roughan because cross-examination on these lines could only have elicited hearsay6. The ground of challenge in this Court raises a different and wider complaint. Save in one respect, to which it is necessary to return, the appellant accepts that the ruling confining the cross-examination of Detective Williams was correct. His complaint is that the practical effect of the rulings was to foreclose any opportunity for his counsel to adduce admissible evidence of the facts of the McKenna assault. It appears that this wider ground was raised in the Court of Appeal. The course of the trial On the first day of the trial the appellant's counsel foreshadowed his intention of cross-examining Detective Williams "to get a background of the basis of why [Roughan] was charged [with the attempted murder of McKenna]". Counsel identified two bases for the admission of the evidence. The first was that the appellant's knowledge of Roughan was relevant to an understanding of why he behaved in the way that he did. The second was that "the jury, when weighing up who might be responsible for [the murder of the deceased], can look at this character and decide who they believe is responsible for the murder." In the course of exchanges with counsel, her Honour said: "[I]f you want to have a collateral trial of whether or not he committed those offences, then you take yourself out of, I would have thought, admissible evidence." Her Honour subsequently ruled: 6 R v Roughan and Jones (2007) 179 A Crim R 389 at 404 [73] per Keane JA, 406 [88] per Muir JA, 410 [101] per McMurdo J. Bell "With regard to Jones' interview and his expression of fear of Roughan because of his knowledge of Roughan being charged with attempted murder and grievous bodily harm, which is not objected to by [counsel for Roughan], I will allow evidence of that. It does appear as if it will have to be led by the Crown but it is not at the Crown's insistence to lead it because it is being requested by [counsel for the appellant] in furtherance of his case and not objected to by [counsel for Roughan]. At present I'm minded to allow limited questioning of the arresting officer on that matter but I haven't yet decided to what extent I will allow you to question him on that. I can see that it is a positive advantage to Jones' case that the arresting officer confirms that he was arrested for that offence and there may be some limited details that may be of assistance to Jones' case but to the extent that it then starts to become a collateral – a trial of collateral issues, that is, whether or not Roughan actually committed that offence I won't allow questions as to that." (Emphasis added) The appellant submits that this ruling ("the initial ruling") governed all that followed, because in the context of the discussion that preceded it, it was clear that her Honour viewed any evidence concerning the facts of the McKenna assault as involving a collateral issue. The initial ruling, it is said, made it pointless for counsel to consider options including calling McKenna or the other witnesses to the McKenna assault. There was further discussion of the scope of the cross-examination of Detective Williams on the fourth day of the trial. In the course of this the Crown Prosecutor gave her Honour a copy of a document titled "QP9", which contained a summary of the police brief of evidence against Roughan in relation to the McKenna assault. The allegation was that Roughan had stabbed McKenna in the back. The police had located the knife at the scene and obtained statements from McKenna and two witnesses. Roughan was alleged to have made admissions to being present and in possession of a fishing knife at the scene. His admissions fell short of an acknowledgment that he had intentionally stabbed McKenna. He said that he had the knife with him because he had been out fishing. He claimed that McKenna sustained the stab injury in the course of a struggle in which he, Roughan, was defending himself from unlawful attack by McKenna. After reading QP9 the trial judge pointed out to the appellant's counsel that "[t]he problems, though, are with the quality of the evidence that you're wanting to get out. I just want to think about that for a minute." Her Honour went on to say: Bell "[M]y view is that I should allow you to cross-examine the arresting officer about those matters [that Roughan was on bail on a charge of stabbing a mate], but any further than that I don't think it goes to anything that's relevant in this case and it's very prejudicial to Roughan. COUNSEL: Well, just on the prejudice aspect, that's not a basis for excluding it, your Honour, as I understand the authorities. HER HONOUR: Well, it's not relevant. I can't see how it goes to – positively goes to your case." Shortly after this ruling the appellant's counsel applied for a separate trial. He submitted: "I am not allowed as I understand your Honour's ruling to cross-examine the police officer about the attempted murder in detail, I'm not allowed to lead from the – or cross-examine the witness Hore about the statement [Roughan] made to her about the attempted murder charge". The reference to cross-examining the witness Hore was with a view to adducing evidence that Roughan had said to her "he thought he was going to get five years for that attempted murder". The appellant does not complain of this ruling. It is accepted that proof of this assertion would not serve to establish any relevant propensity on Roughan's part. The application for a separate trial was refused. After the close of the evidence counsel for the appellant made a further application: "Your Honour, I just renew my application to lead the evidence that your Honour ruled that I couldn't ask about in relation to Roughan's committing the – or being charged with the offence of stabbing his mate, and I wish to refer to the QP9 which your Honour ruled I couldn't. That there has been an attempt to put evidence of good character before the jury of Roughan and as the Crown Prosecutor has said, he will re-open the case if your Honour wishes to re-consider that ruling. I submit that it has been raised in that positive light albeit no convictions in Queensland and some minor discrepancies or minor touches with the law where he's only received a caution. HER HONOUR: It would be different I think if he'd been convicted of it but the problem with his being charged with it is that he is entitled to the presumption of innocence and the dangers of the prejudicial effect of it. The fact that he has been charged with stabbing a mate and was on bail is Bell itself, I think, relevant to your case and that's why I've allowed you to lead that. So I've tried to, in that difficult case, walk the line between allowing you to lead what's probative in your case but not allowing it to go over the line into something that's unduly prejudicial in Roughan's case and so I don't think I'll change my mind." Senior counsel for the appellant submitted that trial counsel's application was met by the same "flawed response" as the application which led to the initial ruling. He complained that her Honour had not inquired as to the nature of the evidence that was sought to be adduced. The reasoning of which he complained is that her Honour took into account that evidence of the McKenna assault would occasion prejudice in Roughan's trial and that she considered the evidence was not relevant to any issue in the appellant's trial. The first consideration would have substance if it had led to the rejection of relevant, admissible evidence in the appellant's case. However, it did not. The application was the renewal of the application to adduce hearsay evidence of the contents of QP9 in the event that the Crown case was re-opened. In this Court the appellant put in issue the characterisation of all of the assertions in QP9 as inadmissible hearsay. This was because the document included a summary of admissions said to have been made by Roughan. The appellant relied on the analysis in Freer and Weekes7 in support of the admissibility of an out of court third party confession. The question of whether evidence of third party confessions are an exception to the rule against hearsay was left open in Bannon v The Queen8. The question in that case involved an out of court confession to the offence with which the accused was charged. This appeal does not require determination of that question nor the question of the admissibility of declarations against penal interest which are not exculpatory of the accused. There was no application to examine Detective Williams to ascertain whether the admissions were made in his presence. There is nothing in QP9 to establish that they were. There was no application to cross-examine the police officer to whom the admissions were made on the basis of the point now taken. Indeed, the first time this point appears to have been taken was in the 7 R v Freer and Weekes [2004] QCA 97 at [81]-[91] per Jerrard JA (Jones and 8 Bannon v The Queen (1995) 185 CLR 1; [1995] HCA 27; see also Nicholls v The Queen (2005) 219 CLR 196 at 266 [183] per Gummow and Callinan JJ; [2005] HCA 1 and Ali v The Queen (2005) 79 ALJR 662 at 665 [11] per Gleeson CJ, 666 [21] per Hayne J (McHugh J agreeing); 214 ALR 1 at 5, 6; [2005] HCA 8. Bell appellant's submissions in reply in this Court. Furthermore, the admissions did not serve to establish any relevant propensity since Roughan gave an innocent explanation for being in possession of the knife and claimed to have been acting in self-defence. In the Court of Appeal each of their Honours accepted that evidence of the propensity of one accused may be relevant and admissible in the case of a co- accused9. They differed concerning the basis for the admission of evidence of this character. Keane JA considered that where the evidence is of conduct evidencing propensity the facts must exhibit the kind of "striking similarity" which makes it probable that the co-accused committed the crime with which he and the co-accused are charged10. McMurdo J considered11 that the propensity of a co-accused may be established by evidence that does not show striking similarity between the other matter and the subject charge, nor any other characteristic as described in the joint judgment in Hoch v The Queen12. In Pfennig v The Queen a tendency to treat evidence of similar facts, past criminal conduct and propensity as if they raise the same considerations in terms of admissibility was noted13. It was explained that the requirement that evidence of similar facts when adduced by the Crown possess a "striking similarity" is because the capacity of the evidence to establish a step in the proof of the prosecution case on the criminal standard depends upon the improbability of its having some innocent explanation. The appellant was not seeking to adduce similar fact evidence to prove Roughan's guilt by a process of improbability reasoning. He was seeking to demonstrate that Roughan was a person having a particular propensity which made it more likely that Roughan had killed the deceased, as the appellant claimed that he had done. The issue which appears to have troubled Keane JA was whether evidence of some general propensity in Roughan to behave violently had a capacity rationally to bear on the determination of the likelihood that it was he who carried out this murderous assault. 9 R v Roughan and Jones (2007) 179 A Crim R 389 at 403 [68]-[70] per Keane JA, 406 [88] per Muir JA, 410 [102] per McMurdo J. 10 R v Roughan and Jones (2007) 179 A Crim R 389 at 403 [72]. 11 R v Roughan and Jones (2007) 179 A Crim R 389 at 410 [102]. 12 (1988) 165 CLR 292 at 294-295; [1998] HCA 50. 13 Pfennig v The Queen (1995) 182 CLR 461 at 483 per Mason CJ, Deane and Dawson JJ; [1995] HCA 7. Bell In Lowery v The Queen14 expert evidence adduced by one accused of the personality of his co-accused was held to have been rightly admitted. The offence involved the motiveless, sadistic killing of a young girl. The expert evidence tended to establish that Lowery possessed a personality with sadistic traits and that his co-accused did not. Lowery has been said to be high authority for the proposition that the propensity to violence of a co-accused may be relevant to the issues between the Crown and the accused tendering the evidence15. In R v Randall it was said that there must be cases in which the propensity of one accused may be relied on by the other irrespective of whether he has put his character in issue16. As the admissible evidence of Roughan's propensity which the appellant claims to have been prevented from adducing is unknown, this appeal does not provide the occasion to consider the principles discussed in Randall. It is trite to observe that all evidence, including that adduced by an accused in order to raise a doubt as to guilt, must be relevant in the sense that it could rationally affect, directly or indirectly, the assessment of the probability of the existence of a fact in issue in the proceedings17. At the trial, in the course of the submissions made prior to the initial ruling, the appellant's counsel identified the propensity which he sought to establish as "a propensity to violence". On the appeal senior counsel identified it with greater particularity, as a propensity to form an intention to kill and to use a knife to give effect to that intention. Accepting for present purposes, that proof that Roughan was a person with a propensity to have this state of mind and to act in this way, may support a reasonable possibility that the appellant's account (given in his interview with the police) was true, the fact remains that counsel did not seek to adduce admissible evidence that Roughan had such a propensity. 15 R v Randall [2004] 1 WLR 56 at 65 [29] per Lord Steyn (the other members of the House of Lords concurring); [2004] 1 All ER 467 at 476; see, too, Knight v Jones; Ex parte Jones [1981] Qd R 98; Priestley and Mason (1985) 19 A Crim R 388; Winning v The Queen [2002] WASCA 44. 16 R v Randall [2004] 1 WLR 56 at 64 [29] per Lord Steyn; [2004] 1 All ER 467 at 17 Goldsmith v Sandilands (2002) 76 ALJR 1024 at 1029-1030 [31] per McHugh J; 190 ALR 370 at 377; [2002] HCA 31; Nicholls v The Queen (2005) 219 CLR 196 at 215 [37] per McHugh J. Bell The initial ruling and the subsequent rulings did not prevent the appellant's counsel from seeking to adduce direct evidence of the circumstances of the McKenna assault. Her Honour's remarks are to be understood in the context of the rulings that she was asked to make. The applications were to adduce hearsay evidence of the detail of the incident in cross-examination. The submission that her Honour should have inquired whether counsel wished to adduce direct evidence of the McKenna assault must be rejected. There was no indication at any time in the trial that counsel was seeking to lead evidence of the McKenna assault in the appellant's case. The renewed application to lead evidence of the contents of QP9 was made after the appellant had elected under s 618 of the Criminal Code (Q) not to adduce evidence in his defence. In Ali v The Queen, Gleeson CJ observed that an appellate court will generally not know what is in counsel's brief and speculation about why a particular line was not pressed will often be uninformed and fruitless18. It is simply not known whether trial counsel was in a position to lead direct evidence of the McKenna assault. It is to be noted that he had succeeded in adducing evidence that Roughan was on bail at the date of the offence on a charge involving the stabbing of a mate. A forensic decision not to adduce evidence in the defence case and thus preserve the right of last address19 would be understandable in the circumstances. The second ground of challenge At the trial, evidence was adduced of the appellant's bad character. This comprised evidence that the appellant had used, and supplied to others, cannabis and speed, that he smoked cannabis in front of his infant daughter, that he had bashed a person, and that he had a criminal history involving assault and offences relating to property. The trial judge directed the jury that20: "[E]vidence that is only admissible against James Roughan is evidence that you have heard in this case that Chris Jones has used illegal drugs such as speed and cannabis and has some criminal convictions. That is only relevant in the prosecution case against James Roughan to endeavour to demonstrate that James Roughan was a less violent and dishonest 18 Ali v The Queen (2005) 79 ALJR 662 at 664 [7]; 214 ALR 1 at 4. 19 Section 619 of the Criminal Code (Q). 20 R v Roughan and Jones (2007) 179 A Crim R 389 at 405-406 [80]. Bell person than Jones. You must not use it for any other purpose. You may not seek to draw some inference from it that because Chris Jones has committed other offences, or has been said to be involved in undesirable conduct, that he is therefore more likely to have committed the offence you are considering. In other words it would be quite wrong for you to say having heard that evidence that the defendant is the sort of person likely to have committed the offence. If you accept this evidence you may use it only to consider whether it [assists] the prosecution in the way I have described to prove its case against James Roughan." The evidence of the appellant's criminal convictions was led without objection. No application was made at the trial for a re-direction arising out of her Honour's direction concerning the evidence. The direction was not the subject of a ground of appeal in the Court of Appeal. Roughan challenged a direction in like terms relating to the evidence that he was on bail for another offence involving stabbing a mate. Keane JA pointed out that it was an error to invite the jury to reason from the fact that Roughan had been charged with an offence that he was a person of more violent disposition than the appellant. His Honour went on to observe that the direction – that evidence may be used to establish that the appellant was of a less violent disposition than Roughan, but not that Roughan was the sort of person likely to have committed the offence – involved a distinction so fine as to be illusory21. When his Honour came to consider the appellant's case he concluded that the direction relating to the appellant's bad character was wrong for the latter reason22. McMurdo J agreed with Keane JA's criticism of the direction relating to Roughan's bad character23. However, his Honour did not consider that the direction relating to the appellant's bad character was wrong. He considered that it was a direction that the jury would be able to understand and apply24. In McMurdo J's view, there was no risk that the jury would reason towards the appellant's guilt from knowledge of his convictions. This provided an explanation for the stance that his counsel had taken in not objecting to the evidence; he wished to have the jury compare the appellant's relatively minor matters with knowledge that Roughan was charged with an offence involving the stabbing of a mate25. 21 R v Roughan and Jones (2007) 179 A Crim R 389 at 401 [59]. 22 R v Roughan and Jones (2007) 179 A Crim R 389 at 406 [81]. 23 R v Roughan and Jones (2007) 179 A Crim R 389 at 408 [94]. 24 R v Roughan and Jones (2007) 179 A Crim R 389 at 410-411 [105]. 25 R v Roughan and Jones (2007) 179 A Crim R 389 at 410-411 [105]. Bell Muir JA expressed his general agreement with the reasons both of Keane JA and McMurdo J26. It was accepted on the appeal that this Court should treat the Court of Appeal as having held that the direction concerning the appellant's bad character was a misdirection and, accordingly, no occasion arises to consider the difference between the views expressed by Keane JA and McMurdo J on this question. Keane JA discussed the proviso in s 668E(1A) of the Criminal Code (Q) in the course of addressing Roughan's appeal27. Roughan's appeal succeeded because the admission of the evidence that he had been charged with stabbing a mate was irretrievably prejudicial. The prejudice was exacerbated by a direction that this evidence could be used, when considering the appellant's case, as confirming that the appellant was of a less violent disposition than Roughan. His Honour held upon a review of the trial that it was not possible to be satisfied of Roughan's guilt beyond reasonable doubt. In this context he observed that the Court was not in a position to assess the reliability of the evidence of the three accomplices. Keane JA did not think that the evidence of the appellant's bad character was significantly prejudicial. In his opinion it was not capable of supporting an inference that the appellant was disposed to engage in the kind of murderous assault to which the deceased was subject, much less that he was more likely to have done so than Roughan28. In Weiss v The Queen it was said that there are cases in which it is possible for an appellate court to conclude that an error at trial would have had no significance in determining the verdict29. This was such a case. Keane JA described the impugned direction in the appellant's case as innocuous. He observed that it had occasioned no real forensic disadvantage to the appellant30. Given the issues in the trial and the conduct of it, which included the trial judge's direction as to the use the jury might make of the evidence of Roughan's bad 26 R v Roughan and Jones (2007) 179 A Crim R 389 at 406 [88]. 27 R v Roughan and Jones (2007) 179 A Crim R 389 at 402 [62]. 28 R v Roughan and Jones (2007) 179 A Crim R 389 at 406 [82]-[83]. 29 Weiss v The Queen (2005) 224 CLR 300; [2005] HCA 81. 30 R v Roughan and Jones (2007) 179 A Crim R 389 at 406 [83]. Bell character, this assessment of the effect of the misdirection was well open. Moreover, after a detailed review of the evidence Keane JA concluded that the case against the appellant was one of overwhelming strength31. That conclusion was also well open. The Court of Appeal did not err in finding that no substantial miscarriage of justice actually occurred in the trial of the appellant. For these reasons the appeal should be dismissed. 31 R v Roughan and Jones (2007) 179 A Crim R 389 at 406 [83]. Hayne HAYNE J. I agree that the appeal should be dismissed. I agree with the joint reasons. There is no occasion in this case to decide whether or when evidence about the alleged propensity to violence of a co-accused would be admissible. The particular evidence which it was sought to lead about the alleged propensity to violence of the appellant's co-accused was hearsay and for that reason not admissible. In Lowery v The Queen, the Privy Council said32 that in the circumstances of that case it would be unjust to prevent either of two co-accused from calling any evidence of probative value which could point to the probability that the perpetrator was the one rather than the other. Accordingly, expert evidence said to show33 that one of two men accused of a brutal murder had a "basic callousness", and that the other did not, was held34 to be relevant and admissible. Some emphasis was given35 to the fact that the accused who was alleged to have a "basic callousness" had put his character in issue, but the proposition that it would be unjust to prevent the adducing of any evidence of this kind was not expressed in terms that readily admit of qualification. And as Lord Steyn later rightly pointed out in R v Randall36, it may be doubted that the Privy Council was correct to say in Lowery37 that the evidence in question was "not related to ... criminal tendencies". These questions apart, the House of Lords held in Randall38 that one of two co-accused jointly tried for murder was entitled to tender evidence of the propensity to violence of the other co-accused as relevant to the issues between the prosecution and the accused tendering the evidence. The evidence was treated as relevant not only to the co-accused's credibility, but also the likelihood of his having attacked the deceased. 32 [1974] AC 85 at 101. 33 [1974] AC 85 at 100. 34 [1974] AC 85 at 103. 35 [1974] AC 85 at 101-102. 36 [2004] 1 WLR 56 at 64 [29]; [2004] 1 All ER 467 at 476. 37 [1974] AC 85 at 101-102. 38 [2004] 1 WLR 56; [2004] 1 All ER 467. Hayne Whether the applicable principle is expressed as it was in Lowery or as it was in Randall, the adducing of evidence by one co-accused about the propensities of another co-accused presents real difficulties for the conduct of a trial, especially a joint trial. There may be a question about whether the admissibility of evidence of this kind depends upon the accused against whom the evidence is led having first put his or her character in issue. There are also other more deep-seated questions that may require examination. In particular, if it is suggested that where each of two co-accused attributes guilt of the offence to the other, one may tender evidence about the criminal propensities of the other, there is no little risk of the trial being diverted into the byways of collateral issues about the nature, extent and probative significance of those propensities. And questions like whether or how a rule of the kind described in Pfennig v The Queen39 could, or should, be applied in these circumstances, or whether a rule of that kind, if applied, would address the fears that the tribunal of fact would be diverted from focusing upon the central issues that are being tried in the matter, are questions that did not arise and were not examined in argument in this matter. Nor was there any consideration of whether or when, if evidence of the criminal propensities of one co-accused is to be admitted, the trial should nonetheless continue as a joint trial. These are questions that are to be reserved for another day. 39 (1995) 182 CLR 461; [1995] HCA 7.
HIGH COURT OF AUSTRALIA AUSTRALIAN CRIME COMMISSION APPELLANT AND LOUISE STODDART & ANOR RESPONDENTS Australian Crime Commission v Stoddart [2011] HCA 47 30 November 2011 1. Appeal allowed. ORDER 2. Set aside paragraphs 1, 2 and 3 of the order of the Full Court of the Federal Court of Australia made on 15 July 2010 and in their place order that the appeal to that Court be dismissed. 3. The appellant pay the first respondent's costs in this Court. On appeal from the Federal Court of Australia Representation S J Gageler SC, Solicitor-General of the Commonwealth with B Lim for the appellant (instructed by Australian Government Solicitor) B W Walker SC with N A Martin and T F N Pincus for the first respondent (instructed by Bernard Bradley & Associates) Submitting appearance for the second respondent Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Australian Crime Commission v Stoddart Evidence – Privilege – Spousal privilege – Witness summonsed pursuant to s 28(1) of Australian Crime Commission Act 2002 (Cth) ("Act") to give evidence regarding "federally relevant criminal activity" involving her husband – Witness declined to answer examiner's questions by claiming spousal privilege – Whether spousal privilege exists at common law and, if so, whether spousal privilege extends to non-curial proceedings – If spousal privilege exists at common law, whether Act restricts or abrogates spousal privilege. Words and phrases – "compellability", "competence", "spousal privilege". FRENCH CJ AND GUMMOW J. The first respondent ("Mrs Stoddart") was born in 1966 and for more than 20 years has been the wife of Mr Ewan Alisdair James Stoddart ("Mr Stoddart"). For some years Mr Stoddart was self-employed as an accountant carrying on a practice at several locations in Queensland. Mr Stoddart ceased to conduct his accountancy practice in about 2006; in the preceding couple of years Mrs Stoddart provided part-time secretarial assistance in the practice. The Summons On 3 April 2009, Mrs Stoddart appeared in response to a summons ("the Summons"), issued under s 28(1) of the Australian Crime Commission Act 2002 (Cth) ("the Act"). The appellant, the Australian Crime Commission ("the ACC"), is established by s 7(1) of the Act. One of its functions is to investigate matters related to "federally relevant criminal activity" (s 7A(c)), when authorised by its Board (established by s 7B). Section 24A of the Act empowers an examiner appointed by the Governor-General under s 46B to conduct an examination for the purposes of a "special ACC operation/investigation" (as defined in s 4(1)). This was identified in the present case as "Operation Grindelford". An examiner, in the exercise of powers in relation to an examination, has the same protection and immunity as a Justice of this Court (s 36(1)). The Summons was issued on 26 March 2009 by the second respondent, Mr W M Boulton, as examiner ("the Examiner")1, and required her to attend at the premises of the ACC in Brisbane to give evidence of "federally relevant criminal activity" including Mr Stoddart. The expression "federally relevant criminal activity" is defined in s 4(1) and s 4A of the Act in detailed terms. The expression includes offences against a law of the Commonwealth and certain offences against a law of a State, the Northern Territory and the Australian Capital Territory which potentially fall within federal legislative power. involving named corporations and persons, Before issuing the Summons, the Examiner was obliged by s 28(1A) to be satisfied that it was "reasonable in all the circumstances to do so" and to record in writing the reasons for the issue of the Summons. 1 The Examiner, as second respondent, has filed a submitting appearance. Section 28(1) states: "An examiner may summon a person to appear before an examiner at an examination to give evidence and to produce such documents or other things (if any) as are referred to in the summons." Failure to answer questions as required (s 30(2)) is an offence punishable on conviction by penalties including imprisonment for a term not exceeding five years (s 30(6)). Section 28(5) empowered the Examiner to take evidence on oath or affirmation and to require a person appearing to take an oath or make an affirmation administered by the Examiner. Mrs Stoddart was sworn by the Examiner. To refuse to take an oath or make an affirmation would have been: (i) an offence punishable on conviction by penalties including imprisonment for a term not exceeding five years (s 30(2), (6)), and (ii) a contempt which could have led to her being dealt with by the Federal Court or the Supreme Court of Queensland. Paragraphs (a) and (b) of s 25A(2) provided that as a person giving evidence Mrs Stoddart might be represented by a legal practitioner and she elected to do so. The law relating to legal professional privilege is preserved by s 30(9). With respect to the privilege against self-incrimination, s 30(5) limits the use that can be made of answers given or documents produced, but only if the requirements of s 30(4) are met. These include (par (c) of s 30(4)) the making at the time of a claim that answering the question or producing the document or thing "might tend to incriminate the person or make the person liable to a penalty" (emphasis added). After swearing in Mrs Stoddart, the Examiner explained to her that she had the privilege against self-incrimination in the terms provided by s 30(4) and (5) of the Act. She indicated that she wished to claim the privilege and the Examiner extended to her what he called "a blanket immunity". The claim to privilege against spousal incrimination It will be apparent from the terms of the provisions of the Act respecting a summons that the Act is drawn on the basis that, except as the Act might otherwise provide (and it is not said that it does otherwise provide), Mrs Stoddart was a competent and compellable witness2. cf Evidence Act 1995 (Cth), s 12. Further, the terms in which par (c) of s 30(4) is expressed show that the Act, in dealing with the self-incrimination privilege, proceeds upon the foundation supplied by the common law. This was stated by Lord Diplock in In re Westinghouse Uranium Contract3 as follows: "the privilege against self-incrimination was restricted to the incrimination of the person claiming it and not anyone else. There is no trace in the decided cases that it is of wider application; no textbook old or modern suggests the contrary. It is not for your Lordships to manufacture for the purposes of this instant case a new privilege hitherto unknown to the law." In Environment Protection Authority v Caltex Refining Co Pty Ltd4, McHugh J, after citing this passage, indicated that the apparent common law exception respecting rejection of evidence by the spouse of the accused rested upon a distinct principle, namely, lack of competence to testify. In Rumping v Director of Public Prosecutions5 the House of Lords rejected the proposition that at common law communications between spouses were protected against disclosure both in civil and criminal proceedings by the other spouse or by some third person. Lord Reid said with respect to the narrower protection afforded by s 3 of the Evidence Amendment Act 1853 (UK) ("the 1853 Act")6: "It is true that there are cases where it has been held that Parliament has legislated under a misapprehension of the existing law, but that can hardly be the case here." Yet that is the substance of what Mrs Stoddart so far has successfully contended in this litigation. In effect, she seeks extension of her common law privilege beyond that of her self-incrimination (which she maintained before the [1978] AC 547 at 637-638. This passage was cited with approval by Mason J in Rochfort v Trade Practices Commission (1982) 153 CLR 134 at 145; [1982] HCA 66 and by Brennan J in Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477 at 516; [1993] HCA 74. In his treatise on evidence, Wigmore likewise wrote that the privilege "is that of the person under examination as witness": Evidence in Trials at Common Law, McNaughton rev (1961), vol 8, §2270. (1993) 178 CLR 477 at 549. [1964] AC 814 at 834. 6 16 & 17 Vict c 83. Examiner) to that of incrimination of her spouse by her evidence, and then relies upon the failure of the legislature in s 30 of the Act to restrict or abrogate that extended privilege. In the course of her examination by counsel assisting, Mrs Stoddart was asked whether she was aware of invoices prepared at the premises of her husband's practice for services provided by other entities. Her counsel then objected that her client claimed "the privilege of spousal incrimination" and chose not to answer the question. The Examiner responded that the objection "on the basis of spousal privilege" needed to be determined elsewhere and adjourned the examination. The litigation On 14 May 2009 Mrs Stoddart commenced a proceeding in the Federal Court in which she sought an injunction restraining the Examiner from asking her questions relating to her husband and a declaration that "the common law privilege or immunity against spousal incrimination has not been abrogated by [the Act]". Reeves J dismissed the application on 1 October 20097. The Full Court (Spender and Logan JJ; Greenwood J dissenting)8 allowed an appeal by Mrs Stoddart and granted a declaration that "the common law privilege against spousal incrimination has not been abrogated by [the Act]". Implicit in the terms of this declaration is the assumption that the common law in question is that of Australia at the time of the passage of the Act. In granting this relief, the majority followed the Queensland Court of Appeal in Callanan v B9 and the Full Federal Court in S v Boulton10. In the latter case, the primary judge (Kiefel J) had expressed her preference for the contrary view as to the existence of such a privilege at common law and it will be necessary to return to her Honour's reasons in that case11. On its appeal to this Court, the ACC makes two distinct submissions. The first is that the Full Court erred in following Callanan and the Full Court 7 Stoddart v Boulton (2009) 260 ALR 268. 8 Stoddart v Boulton (2010) 185 FCR 409. [2005] 1 Qd R 348. 10 (2006) 151 FCR 364. 11 S v Boulton (2005) 155 A Crim R 152. decision in Boulton by recognising "a distinct common law privilege against spousal incrimination"; the second, and alternative, submission is that the Full Court should have held that s 30 of the Act, on its proper construction, does abrogate that privilege if it otherwise exists in the common law of Australia and, if so, it extends to non-curial proceedings such as those of the ACC. For the reasons which follow, the appeal should succeed on the first ground, so that the second ground does not arise. Essential distinctions A reading of the critical reasoning in Callanan12, the principal Australian authority upon which Mrs Stoddart relies, shows what appears to be an unremarked shift between the concept of competence and compellability of parties on the one hand and, on the other, that of testimonial privilege. The same even may be said of the treatment of the subject by Professor Julius Stone in Evidence: Its History and Policies13. As noted above, no question arises respecting competence and compellability of witnesses on this appeal. The question concerns the existence of a particular privilege. But in view of some looseness of expression apparent in some of the authorities, the distinctions involved are of considerable importance. They are stated as follows in the eighth Australian edition of Cross on Evidence14: "It is necessary to distinguish between three separate, though closely related, concepts – the competence, compellability and privilege of a witness. A person is competent if that person may lawfully be called to give evidence. Nowadays, most people are competent witnesses, but under the law which applied to civil cases down to the middle of the nineteenth century, and to criminal trials until the end of that century, many of those who could give relevant evidence were not allowed to do so. A person is compellable if that person can lawfully be obliged to give evidence. The general rule is that all competent witnesses are compellable, but there are a few exceptions which will have to be mentioned in due course. The essential difference between competence and compellability on the one hand, and privilege on the other, is that the two former matters must be resolved before the witness begins to testify. 12 [2005] 1 Qd R 348 at 352-353. Once the witness has entered the witness-box and has been sworn, has affirmed or is permitted by law to give unsworn evidence, the witness must answer all questions put unless excused or unless the refusal to answer is based upon a privilege conferred by law. Competence and compellability therefore attach to the witness and not to the evidence the witness may give." In Hoskyn v Metropolitan Police Commissioner15, Lord Wilberforce observed that: (i) the term "compellable" is of comparatively recent origin, first appearing in the Evidence Act 1851 (UK)16 to indicate that a spouse can be competent without being compellable; (ii) as a matter of fundamental principle, a competent witness is a compellable witness; and (iii) at general law, the only certain exception seemed to be in favour of the Sovereign and those protected by diplomatic immunity. In Shenton v Tyler17, Sir Wilfrid Greene MR distinguished four rules of evidence. The first was that neither a party nor the spouse of a party was a competent witness on behalf of that party; the second was that a party was not a compellable witness against that party; and the third was that one spouse was not a competent witness against the other spouse. The fourth, long uncertain but eventually upheld by the House of Lords in Rumping, denied the existence of a privilege which protected marital communications as such, and is not in issue in the present litigation. It should, however, be added that the equitable principles respecting the protection of confidences may apply, independently of the rules of evidence, to matrimonial confidences18, but that equity will not protect confidential communications involving crime or fraud19. The second rule identified by the Master of the Rolls was that in the common law courts, a party was not a compellable witness against that party. The rule did not apply in Chancery, where interrogatories might be administered to the opposite party and discovery ordered. This emphasises the importance, in the period before the fusion by the Judicature system of the administration of several court structures in England, of an appreciation that the rules of "the common law" primarily were those administered at jury trials by the courts of 15 [1979] AC 474 at 484-486. 16 14 & 15 Vict c 99. 17 [1939] Ch 620 at 626-627. 18 Argyll v Argyll [1967] Ch 302 at 329-330. 19 A v Hayden (1984) 156 CLR 532 at 544-545, 571-572; [1984] HCA 67. common law, and these rules were not necessarily followed in Chancery, Admiralty or the ecclesiastical courts20. The first rule identified by the Master of the Rolls in Shenton v Tyler was that in the common law courts neither a party nor the spouse of a party was a competent witness on behalf of that party. The third rule also came into operation where the other spouse was a party. That spouse was not a competent witness against the other. As rules affecting competence, they extended to the whole of the evidence the witness might be able to give, whether or not relating to marital communications. One reason given to support the rules, in an era when a party was seen as having an interest in the litigation rendering him or her incompetent as a witness, was that the interest of the spouse of a party was exactly the same. There were limited and indefinite exceptions to the incompetency of one spouse as witness for or against the other spouse. The early authorities were collected in 1796 as Note (a) to the report of a ruling in 170921. Subsequent authorities included Aveson v Kinnaird22, where in an action on an insurance policy taken out by a husband on the life of his wife there was admitted a dying declaration by the wife which tended to show fraud on the part of her husband. In Shenton v Tyler, the Master of the Rolls, in dealing with the fourth rule, referred23 to the Second Report of the Common Law Commissioners presented in 1853. The Commissioners recommended (at 13-14) that the law provide that all communications between spouses be privileged. That particular recommendation was acted upon by the Parliament (in s 3 of the 1853 Act), but only in a limited fashion24. Hence the statement in the eighth Australian edition of Cross on 20 See the discussion by Luxmoore LJ in Shenton v Tyler [1939] Ch 620 at 646. 21 Anonymous (1709) 11 Mod 224 [88 ER 1004]. In this action brought by the husband against the defendant for assault and battery by the defendant of the wife, she was admitted by Sir John Holt CJ to give evidence. In Thompson v Trevanion (1693) Skinner 402 [90 ER 179], his Lordship had admitted in an action by the husband and wife for assault and battery by the defendant, a statement by the wife made immediately upon receiving the hurt, as part of the res gestae. See Kent, Commentaries on American Law, (1827), vol 2, Lecture XXVIII at 151. 22 (1805) 6 East 188 [102 ER 1258]. 23 [1939] Ch 620 at 628-629. 24 [1939] Ch 620 at 629. Evidence25 that while "[f]rom time to time it has been suggested that there was a common law privilege attaching to marital communications ... the privilege is entirely the creature of statute"26. In the United States the development of the common law took a different course in many jurisdictions with the development of a privilege respecting communications between spouses27. Another point of present significance is that when reporting in 1853, the Common Law Commissioners (who included Sir John Jervis, then Chief Justice of the Court of Common Pleas, Sir Alexander Cockburn, then Attorney-General, Martin B, and practitioners who were to become Willes J and Lord Bramwell) made no reference to any then existing common law rule of privilege relating to communications between husband and wife, or to the protection of one spouse against incrimination of the other. It may be said that in the great majority of cases decided before the mid-Victorian era of statutory reform, evidence of this nature was effectively excluded by the first and third rules respecting spousal competency identified above, and that only in exceptional cases could evidence attracting the alleged privilege be given where neither spouse was a party. All Saints As Kiefel J noted in S v Boulton28, the critical authority said to favour the extension to one spouse of the privilege to the other against self-incrimination appears to be that of the Court of King's Bench in R v Inhabitants of All Saints, Worcester29. The case thus invites some attention, particularly to appreciate, despite the darkening of time elapsed since 1817, the setting in which that litigation took place. 26 For example, Evidence Act 1958 (Vic), s 27; Evidence Act 1906 (WA), s 18. Section 97(2) and (3) of the Matrimonial Causes Act 1959 (Cth) rendered each spouse competent and compellable to disclose communications made between them during the marriage, where both spouses were parties to proceedings under that statute. Section 100(2) of the Family Law Act 1975 (Cth) extends this competence and compellability to any proceedings under that Act. 27 Wigmore, Evidence in Trials at Common Law, McNaughton rev (1961), vol 8, 28 (2005) 155 A Crim R 152 at 156. 29 (1817) 6 M & S 194 [105 ER 1215]. It is necessary to begin with the "old" poor law30 before the reforms beginning with the Poor Law Amendment Act 1834 (UK)31, and so to refer to the Poor Relief Act 1662 (Eng)32. This confirmed that a parish must maintain its settled poor, so that settlement law underpinned both the right to poor relief and the duty to provide it; in particular, non-settled destitute people could be removed to their parish of settlement. Significantly for an understanding of All Saints, a wife undertook the settlement of her husband and, thus, usually of his birth place. The operation of the 1662 statute is described as follows by Sir Thomas Skyrme in his History of the Justices of the Peace33: "Under s 1 of the 1662 Act the churchwardens or overseers in any parish could complain to a single justice within 40 days after a person came 'to settle in any tenement under the yearly value of £10' in the parish, and the justice could then issue a warrant to bring the party before him for examination. It then required two justices, however, (one of the Quorum) to order the removal of the individual to the parish where he was last legally settled. If he failed to comply, a single justice might send him to a house of correction to be punished as a vagabond (s 3). There was a right of appeal to Quarter Sessions against the ruling of the two justices. It was common practice for the parish to which the pauper was to be sent to lodge an appeal, and many were successful." Further, Quarter Sessions might decide to send up a case for consideration by the Court of King's Bench, although mandamus did not lie to compel this to be done34. In All Saints, Quarter Sessions had confirmed an order for removal of Esther Newman (or Willis) from the parish of Cheltenham to that of All Saints. This, then, was an example of an unsuccessful appeal to Quarter Sessions by the receiving parish. The removal order bound Esther, but the contestants in Quarter 30 The term is used by Professor Cocks, in his account in The Oxford History of the Laws of England, (2010), vol 13 at 473-478. 31 4 & 5 Will IV c 76. 32 13 & 14 Car II c 12. The relevant text is conveniently set out in Montague, "The Law of Settlement and Removal", (1888) 4 Law Quarterly Review 40 at 41-42. 33 Volume II: England 1689-1989, (1991) at 101-102. 34 R v Justices of the County of Carnarvon (1820) 4 B & Ald 86 [106 ER 870]. Sessions were the two parishes. Quarter Sessions sent up the case for the opinion of the King's Bench, which confirmed the order for removal of Esther to the parish of All Saints. The case was fully argued in the King's Bench, with two counsel appearing for Cheltenham and three35 for All Saints. As a single woman, Esther, a pauper, had gained a settlement in All Saints. This would make that parish the appropriate destination on her removal from Cheltenham. All Saints sought to avoid that result by establishing her subsequent marriage to George Willis, who had a settlement in a third parish, which was that of his birth. However, Esther would have retained her All Saints settlement if her marriage to George was bigamous. This Cheltenham sought to establish by calling Ann Willis to prove her earlier marriage to George. Counsel for All Saints objected to the competency of that witness and unsuccessfully sought to have her evidence struck out. Neither Ann nor George Willis was a party to the litigation and neither had any other interest in the decision. Ann was a competent witness unless her competency was denied by some applicable principle. None was found in what the judges referred to as the policy of the law. However, Bayley J was of the view that Ann had not been a compellable witness36. Counsel for All Saints had submitted37 that to show that Ann Willis was a competent witness to prove her marriage to George Willis, it was not necessary to dispute the rule that spouses could not be witnesses for or against each other; this rule was limited to cases when the interest of the spouses was in controversy, as was the case where either was a party to the record. That argument prevailed. The subsequent significance of the case is limited to the opinion of Bayley J, unnecessary for the decision, respecting compellability. In the treatment of the competency of husband and wife, Starkie wrote in his treatise on The Law of Evidence38 that: "Where neither of them is either a party to the suit, or interested in the general result, the husband or wife is, it seems, competent to prove any 35 The leading counsel appears to have been Jervis KC, father of Sir John Jervis, who was to be chairman of the Common Law Commission which reported in 1853: see Holdsworth, A History of English Law, (1965), vol 15 at 450. 36 (1817) 6 M & S 194 at 200 [105 ER 1215 at 1217-1218]. 37 (1817) 6 M & S 194 at 197 [105 ER 1215 at 1216]. 38 A Practical Treatise on the Law of Evidence, 3rd ed (1842), vol 2 at 551. fact, provided the evidence does not directly criminate the other, or, as it seems, involve the disclosure of some communication made by the other." He added39, with respect to All Saints, that the evidence of Ann Willis did not directly criminate her husband, and could not be used against him afterwards or made the groundwork of any future prosecution. Starkie made no reference in this discussion to any distinction between competence and compellability. However, it later was said in the treatise by Taylor on The Law of Evidence that Bayley J had expressed "the better opinion" in distinguishing between competence and compellability40. That provides no firm foundation for the decision in Callanan41 recognising a privilege against spousal incrimination. In Hoskyn42 Lord Wilberforce treated All Saints as one of the sparse authorities bearing upon the question whether, the Sovereign and diplomats apart, there were common law exceptions to the general rule that competent witnesses were compellable. Hoskyn, like Riddle v The King43, in which Griffith CJ referred to All Saints, was concerned with charges of personal violence of husbands against wives and the compellability, in addition to the competence, of the victims as witnesses for the prosecution. The more recent New Zealand decision in Hawkins v Sturt44 appears to have turned upon the question whether on its proper construction a statutory provision that one spouse was not compellable "in any proceeding" to disclose any communication made by the other during marriage, applied to investigative proceedings under the Serious Fraud Office Act 1990 (NZ). Thereafter, the New Zealand Law Commission in its Report on Evidence, presented in 1999, did treat Hawkins as "some authority to the effect that a person may claim the privilege [against self-incrimination] on behalf of his or her spouse" but favoured (par 284) limiting the protection to the person claiming it. 40 A Treatise on the Law of Evidence, 10th ed (1906), vol 2, §1368. 41 [2005] 1 Qd R 348. 42 [1979] AC 474 at 485-489. 43 (1911) 12 CLR 622 at 627-628; [1911] HCA 33. 44 [1992] 3 NZLR 602. Conclusions In our view, it cannot be said that at the time of the enactment of the Act in 2002 the common law in Australia recognised the privilege asserted by Mrs Stoddart or that it does so now. We agree with the conclusion of Kiefel J in Boulton45 that in All Saints and the subsequent decisions, in particular Hoskyn and Riddle, the term "compellable" was used to indicate that the witness might be obliged to give evidence in the ordinary sense of the term, not that, in response to particular questions, a privilege might be claimed by the witness. Orders The appeal should be allowed, but in accordance with the undertaking it gave to this Court on the grant of special leave, the ACC should pay the first respondent's costs of the appeal to this Court and the costs order against it made in the Full Court should not be disturbed. Orders 1, 2 and 3 made by the Full Court should be set aside and in place thereof the appeal to that Court against order 1 made by Reeves J on 1 October 2009 should be dismissed. 45 (2005) 155 A Crim R 152 at 159. HEYDON J. Did the first respondent have the legal right to refuse to give to particular questions asked on behalf of the appellant answers which might have a tendency to expose her husband to conviction for a crime? That is the ultimate question in this appeal. Behind that ultimate question lie three issues. First, does a competent and compellable witness in proceedings before a court have a common law right to refuse to give to particular questions answers which might have a tendency to expose his or her spouse to conviction for a crime? (Below that alleged right will be called, as the appellant called it, "spousal privilege".) Secondly, if so, subject to any statute to the contrary, does a person appearing before an institution which is not a court bound by the rules of evidence have a right to invoke spousal privilege? Thirdly, if so, did the Australian Crime Commission Act 2002 (Cth) ("the Act") abolish that right? The answers to these questions are "Yes", "Yes" and "No". Some preliminary points arise before these three issues are examined. Must the privilege be certain? The appellant contended that this Court should not recognise spousal privilege unless it was "clear". It contended that "[a]ny doubt in the historical record should be resolved against the existence of spousal privilege." The submission spoke of any doubt, no matter how footling, far-fetched or fanciful. On this submission, the existence of the common law privilege should not be recognised unless that existence is certain. The submission has an initial attraction but must, with respect, be rejected. According to Griffith CJ, "the law is always certain although no one may know what it is"46. Putting aside that pronouncement, there is no requirement that the law be certain before its existence can be recognised. A court cannot recognise a rule of the common law unless it believes, after making due inquiries, that the rule exists. It is not necessary that that belief rise to the level of certainty. There is no analogy between the process of recognising a rule of the common law and the process of deciding whether the guilt of an accused person 46 Riddle v The King (1911) 12 CLR 622 at 629; [1911] HCA 33. has been established beyond reasonable doubt. A fortiori, there is no need to meet the higher standard of "certainty"47. Below it will be concluded that "clear" statutory language is required to abolish spousal privilege because it is one of the rules of common law to which the "principle of legality" applies48. But it does not follow that spousal privilege itself will not be found to exist at common law unless its existence is "clear". The test by which the existence of a common law rule, fundamental or non-fundamental, is recognised differs from the test which determines whether a statute has achieved the destruction of a rule of the fundamental kind to which the principle of legality applies. There are many cases in which appellate courts, after the most learned, earnest and bona fide examination, have concluded, but only by bare majority, that a rule of law exists49. From one point of view it is hard to describe the existence of that rule as "certain" or "clear". On the appellant's approach it should not have been recognised because just before it was recognised its existence could not be described as "certain" or "clear". Does the recognition of a rule of law depend on a series of rulings? It has been pointed out that Mr Justice Holmes said50: "A well settled legal doctrine embodies the work of many minds, and has been tested in form as well as substance by trained critics whose practical interest it is to resist it at every step." By "trained critics" he meant litigation lawyers seeking to advance the material interests of their clients. It has therefore been suggested that spousal privilege is not a "well settled legal doctrine". The suggestion assumes that spousal privilege is not the work of many legal minds and is untested by the type of trained critic he had in mind. The suggestion also assumes that those are the only relevant criteria. Those words were published when Mr Justice Holmes was 29 and had two years' standing as a practitioner. They are none the worse for that. They are, nonetheless, limited to "well settled legal doctrines". Those doctrines usually evolve over time. They come to develop limitations, qualifications and exceptions. The experience which lawyers have gained through examining and applying them on numerous past occasions makes them 47 Miller v Minister of Pensions [1947] 2 All ER 372 at 373-374; R v Summers [1990] 1 Qd R 92 at 94-95. 48 See below at [165]-[169]. 49 For example, Donoghue v Stevenson [1932] AC 562. 50 Holmes, "Codes, and the Arrangement of the Law", in Novick (ed), The Collected Works of Justice Holmes, (1995), vol 1, 212 at 213. easier to apply in future. But does that preclude legal doctrines at earlier stages of their evolution from embodying rules of law? The "well settled legal doctrine" theory, if advanced as an exhaustive test for identifying common law rules, does not explain how one ascertains what the law is before it becomes "well settled". A rule of law may exist even if it comes to be modified and matured in consequence of fresh considerations thrown up by the circumstances in which it has to be applied in later cases. The quoted passage was not the only thing Mr Justice Holmes said. Just before it he said51: "It is the merit of the common law that it decides the case first and determines the principle afterwards. Looking at the forms of logic it might be inferred that when you have a minor premise and a conclusion, there must be a major, which you are also prepared then and there to assert. But in fact lawyers, like other men, frequently see well enough how they ought to decide on a given state of facts without being very clear as to the ratio decidendi. In cases of first impression Lord Mansfield's often-quoted advice to the business man who was suddenly appointed judge, that he should state his conclusions and not give his reasons, as his judgment would probably be right and the reasons certainly wrong, is not without its application to more educated courts." In short, far from contending that a doctrine could not be recognised unless it could be seen to be the work of many minds, hammered out between expert rivals on the anvil of many contested cases, Mr Justice Holmes was stating that the outcome of legal problems could often be reached almost instinctively. What is more, this is the same Mr Justice Holmes who developed the "bad man" theory of the law. The bad man "does want to know what the Massachusetts or English courts are likely to do in fact. I am much of his mind. The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law."52 That assumes that lawyers who advise the bad man will seek to prophesy – to predict – what the courts, on the basis of the materials available to them, will do. Prophecy involves an element of uncertainty, not an assurance of certainty. In many instances among the materials available for consideration before the prophecy is made will not be any long stream of decided cases having a relevant ratio decidendi or even one such case. Rather the materials may include only prior dicta, arguments by analogy, 51 Holmes, "Codes, and the Arrangement of the Law", in Novick (ed), The Collected Works of Justice Holmes, (1995), vol 1, 212 at 212-213. 52 Holmes, "The Path of the Law", (1897) 10 Harvard Law Review 457 at 461. arguments seeking to avoid incoherence, moral criteria, the teachings of practical pressures, and the opinions of learned writers. Stare decisis This appeal does not involve any question of stare decisis. The only sense in which this Court is "bound" by any decision is that it will not lightly overrule one of its own. There is no decision of this Court precisely in point. There are in point dicta of Bayley J, sitting as one member of the Court of King's Bench in banc in R v Inhabitants of All Saints, Worcester53. Even if the propositions he stated had been part of the ratio decidendi, since Cook v Cook54 struck off the fetters of the vile servitude under which Australian courts had groaned before 1986, they would not now be binding on any Australian court. "If a court follows a previous decision, because a revered master has uttered it, because it is the right decision, because it is logical, because it is just, because it accords with the weight of authority, because it has been generally accepted and acted on, because it secures a beneficial result to the community, that is not an application of stare decisis. To make the act such an application, the previous decision must be followed because it is a previous decision and for no other reason". What Bayley J said is not to be followed because it is "a previous decision and for no other reason". It is to be followed because it is the work of "a revered master" which is "right", "logical", "just" and "beneficial". It accords with "the weight of authority", limited though that is. It has been "generally accepted and acted on" for many generations in the sense that only one judicial opinion is adverse to it56, until very recently no text writer had criticised it, and very many treatises have asserted it to be true. In that respect this unusual appeal is valuable in that it reveals how the weight of professional, and latterly academic, opinion can play a significant role in recognising common law rules. 53 (1817) 6 M & S 194 at 200-201 [105 ER 1215 at 1217-1218]. 54 (1986) 162 CLR 376 at 390; [1986] HCA 73. 55 "Case Law and Stare Decisis: Concerning Präjudizienrecht in Amerika", (1933) 33 Columbia Law Review 199 at 200. 56 S v Boulton (2005) 155 A Crim R 152. The distinction between competence, compellability, privilege and discretionary relief A person who desires not to give evidence adverse to another person – in particular, a spouse who seeks a ruling from the court that he or she not be compelled to give evidence which might incriminate the other spouse – might seek to rely on one of four doctrines. Three are clear. In 1977 a fourth was suggested in England. There are no others. Competence. First, the person may not be competent to give evidence of any kind – that is, may not lawfully be called to give evidence. In modern Australian law, the topic of non-competence is heavily regulated by statute. Instances of non-competence are limited to certain types of children, to persons of defective intellect, and to the accused or the accused's spouse when called as a prosecution witness (save in relation to particular offences). Compellability. Secondly, though competent, the person may not be compellable to give evidence – that is, the person may lawfully be called to give evidence, but may not lawfully be compelled to enter the witness box. The word "non-compellability" is often used in a loose and wider sense to mean "privilege", and vice versa, but it is desirable to be more precise. In modern Australian law, the topic of compellability, too, is heavily regulated by statute. Instances of witnesses who are competent but not compellable are probably limited to an accused (who is competent in the defence case, and competent but not compellable at the instance of co-accused persons); the spouse and other relatives and associates of the accused; the sovereign, foreign sovereigns, and the diplomatic representatives of foreign sovereigns; and to some extent members of Australian legislatures. Privilege. Thirdly, a person who is competent and compellable, and has entered the witness box, may have a privilege not to answer particular questions. In the last 16 years a fashion for creating new statutory privileges has grown up. They fall faster and pile up deeper than the leaves of Vallombrosa. But the best-known privileges are three of the privileges developed at common law – the privilege against self-incrimination, legal professional privilege and "without prejudice" privilege. A person who validly claims privilege is seeking vindication of a right, not supplicating for the favourable exercise of a discretion57. The right on which the claimant is relying may be waived, but if it is asserted by a properly formulated objection assigning valid grounds for refusing to answer, the right – ie the privilege claimed – must be upheld by the court. 57 Rank Film Distributors Ltd v Video Information Centre [1982] AC 380 at 442. Links between non-compellability and privilege. There are links between questions of non-compellability and privilege. A question of whether a witness is competent is for the parties and for the court, for the court has a duty to preserve the orderly administration of justice by ensuring that untoward events do not take place like the entry into the witness box of very youthful children, or mentally defective persons, or accused persons in the prosecution case. But questions of non-compellability and privilege are pre-eminently for witnesses, not the parties or the court. A person who is non-compellable and declines to enter the witness box is in effect refusing to answer any questions at all. A person who is non-compellable but decides to enter the witness box and claim privilege is refusing to answer only questions falling within the category for which privilege can be claimed. In some circumstances the court may have a duty to advise persons who are non-compellable or may claim a privilege of their rights, or may follow a practice of doing so. But in the end it is those persons who must exercise a choice to make a claim of non-compellability or of privilege. Like non-compellability, a privilege is personal to the person claiming it, or, in the case of legal professional privilege, the person on whose behalf it is claimed. Thus at least in the case of the privilege against self-incrimination, evidence given by a witness wrongly compelled to answer may not be used against the witness in other proceedings58. If the court wrongly fails to uphold the claim to privilege, and the witness whose claim was wrongly rejected is a party, there is a right of appeal. A witness whose claim was wrongly rejected who is not a party obviously cannot appeal. And there is authority suggesting that a party adversely affected by the wrongful rejection (or acceptance) of a claim for privilege may not appeal59. The personal character of spousal non-compellability and spousal privilege is significant. If spousal privilege exists, the fundamental reasons for it overlap with the existence of spousal reasons non-compellability. Indeed much of the argument for the first respondent proceeded on the assumption that that overlap conclusively established the existence of spousal privilege. It is a suggestive factor, but it is not conclusive. fundamental the for Discretionary power of rejection. Where a competent and compellable witness cannot claim any privilege but desires not to give evidence adverse to another, a party may contend that the court has a discretionary power to reject the question seeking that evidence. There is a statement of Hoffmann J that "in a 58 R v Garbett (1847) 2 Car & K 474 [175 ER 196]; R v Coote (1873) LR 4 PC 599; Brebner v Perry [1961] SASR 177 at 181; R v Clyne (1985) 2 NSWLR 740. 59 R v Kinglake (1870) 22 LT 335; Markovina v The Queen (No 2) (1997) 19 WAR 119 at 126. See also Doe d Earl of Egremont v Date (1842) 3 QB 609 [114 ER civil action the court does not have a discretion to permit a witness giving evidence at the trial to refuse to disclose relevant and admissible facts which are not covered by any recognised privilege."60 That is an impeccably orthodox statement. Statute apart, are there any exceptions to it? Over the years since R v Christie61 was decided in 1914 there have developed discretions in criminal cases to exclude evidence if its prejudicial effect would exceed its probative value62 and to exclude evidence if the strict rules of admissibility would operate unfairly against the accused63. But it is not easy to point to the existence of these discretions in general form before 1914, and in large measure before quite recent periods. Their existence at common law outside criminal proceedings has been termed "highly doubtful"64 in this Court and was emphatically denied in 1914 by both the House of Lords65 and the Privy Council66. There has been, however, recognition of a limited discretion in civil cases concerning the special field of similar fact evidence to exclude evidence which, though relevant, is only remotely relevant or has small probative value compared to the additional issues which it would raise and the additional time required for their investigation, or might tend to confuse the jury as to the real issues67. The first respondent did not rely on these discretions. And they are not privileges because they can be invoked only by a party, not a witness. In 1977 an exception in civil cases to Hoffmann J's statement swam into view as a possibility in England. It concerns claims by witnesses to refuse to answer which, though falling outside any relevant category of privilege strictly 60 Arab Monetary Fund v Hashim (No 2) [1990] 1 All ER 673 at 681. 62 R v Swaffield (1998) 192 CLR 159 at 191-193 [62]-[64]; [1998] HCA 1. 63 Driscoll v The Queen (1977) 137 CLR 517 at 541; [1977] HCA 43; Stephens v The Queen (1985) 156 CLR 664 at 669; [1985] HCA 30. 64 CDJ v VAJ (1998) 197 CLR 172 at 215 [142] n 106 per McHugh, Gummow and Callinan JJ; [1998] HCA 67. There are many authorities to the same effect, and only a handful to the contrary: Mood Music Publishing Co Ltd v De Wolfe Ltd [1976] Ch 119 at 127; Pearce v Button (1985) 8 FCR 388 at 402; Taylor v Harvey [1986] 2 Qd R 137. 65 R v Christie [1914] AC 545 at 564. 66 Ibrahim v The King [1914] AC 599 at 610. 67 D F Lyons Pty Ltd v Commonwealth Bank of Australia (1991) 28 FCR 597 at 604 and 607. so called, nonetheless attract sympathy. In D v National Society for the Prevention of Cruelty to Children68, Lord Hailsham of St Marylebone approved the following views of the Law Reform Committee69: "Privilege in the main is the creation of the common law whose policy, pragmatic as always, has been to limit to a minimum the categories of privileges which a person has an absolute right to claim, but to accord to the judge a wide discretion to permit a witness, whether a party to the proceedings or not, to refuse to disclose information where disclosure would be a breach of some ethical or social value and non-disclosure would be unlikely to result in serious injustice in the particular case in which it is claimed." Lord Kilbrandon agreed with Lord Hailsham70. Lord Simon of Glaisdale (with whom Lord Edmund-Davies was in substantial agreement71) emphatically differed72. He said: "it must be law, not discretion, which is in command." He also said73: "the true position is that the judge may not only rule as a matter of law or practice on the admissibility of evidence, but can also exercise a considerable moral authority on the course of a trial. For example, in the situations envisaged the judge is likely to say to counsel: 'You see that the witness feels that he ought not in conscience to answer that question. Do you really press it in the circumstances?' Such moral pressure will vary according to the circumstances – on the one hand, the relevance of the evidence; on the other, the nature of the ethical or professional inhibition. Often indeed such a witness will merely require a little gentle guidance from the judge to overcome his reluctance. I have never myself known this procedure to fail to resolve the situations acceptably." 68 [1978] AC 171 at 227. 69 Law Reform Committee, Sixteenth Report (Privilege in Civil Proceedings), (1967) Cmnd 3472 at 3 [1] (footnote omitted). 70 [1978] AC 171 at 242. 71 [1978] AC 171 at 243. Lord Diplock did not deal with the matter. The House of Lords was thus evenly divided. 72 [1978] AC 171 at 239. 73 [1978] AC 171 at 239. But judges who by "moral pressure" persuade counsel not to ask the question are not exercising a discretion to reject the question. And judges who with "a little gentle guidance" propel the witness towards a willingness to answer are not exercising a discretion to allow the question. The authorities cited by the Law Reform Committee were Attorney-General v Clough74 and Attorney-General v Mulholland75. Do these cases support the proposition for which they were cited? They agree with the well-established rule that at common law a journalist while testifying has no privilege to refuse to disclose the source of that journalist's information76. But they contain three relevant passages. First, in the former case Lord Parker CJ said77: "it … would remain open to this court to say in the special circumstances of any particular case that public policy did demand that the journalist should be immune". Secondly, in the latter case Lord Denning MR said of members of the clergy, bankers and doctors78: "The judge will respect the confidences which each member of these honourable professions receives in the course of it, and will not direct him to answer unless not only it is relevant but also it is a proper and, indeed, necessary question in the course of justice to be put and answered. A judge is the person entrusted, on behalf of the community, to weigh these conflicting interests – to weigh on the one hand the respect due to confidence in the profession and on the other hand the ultimate interest of the community in justice being done or, in the case of a tribunal such as this, in a proper investigation being made into these serious allegations. If the judge determines that the journalist must answer, then no privilege will avail him to refuse." 76 McGuinness v Attorney-General (Vict) (1940) 63 CLR 73; [1940] HCA 6; British Steel Corp v Granada Television Ltd [1981] AC 1096; Independent Commission Against Corruption v Cornwall (1993) 38 NSWLR 207. 77 Attorney-General v Clough [1963] 1 QB 773 at 792. 78 Attorney-General v Mulholland [1963] 2 QB 477 at 489-490. And, thirdly, in the latter case Donovan LJ said79: "While the journalist has no privilege entitling him as of right to refuse to disclose the source, so I think the interrogator has no absolute right to require such disclosure. In the first place the question has to be relevant to be admissible at all: in the second place it ought to be one the answer to which will serve a useful purpose in relation to the proceedings in hand – I prefer that expression to the term 'necessary.' Both these matters are for the consideration and, if need be, the decision of the judge. And over and above these two requirements, there may be other considerations, impossible to define in advance, but arising out of the infinite variety of fact and circumstance which a court encounters, which may lead a judge to conclude that more harm than good would result from compelling a disclosure or punishing a refusal to answer." These three statements are very vague. They are largely limited to the questioning of journalists about their sources. In Australia they have been treated as resting on a power in the trial judge to control the propriety of the proceedings by disallowing irrelevant or improper questions80. Thus Clancy ACJ, Brereton "It has never been suggested that if the question is relevant and proper any further discretion remains in the trial judge as to whether or not the witness should be compelled to answer, and if it did it is difficult to see upon what material it could be exercised." It is plain that irrelevant questions are impermissible and open to objection, independently of any discretion. So are improper questions. The proposition asserted by the Law Reform Committee may be a questionable transplant into a new area of a practice relating to discovery – a process which does have a discretionary element, since orders for discovery result from a procedure based on enactments with an equitable history82. There is a practice in defamation proceedings where qualified privilege or fair comment is relied on of limiting discovery which might reveal the source of a journalist's 79 Attorney-General v Mulholland [1963] 2 QB 477 at 492. 80 Re Buchanan (1964) 65 SR (NSW) 9. 81 (1964) 65 SR (NSW) 9 at 11. 82 British Steel Corp v Granada Television Ltd [1981] AC 1096 at 1174. information. Dixon J refused to treat this practice as the basis for a rule of evidence excluding the testimonial revelation of the material83. In short, although there are indications that the discretion of which the Law Reform Committee spoke has been introduced by judicial fiat into English law84, the Australian authorities are against it85. There is no reason to doubt the correctness of the Australian authorities. Does a curial spousal privilege exist at common law? The question as debated between the parties was whether there is a common law privilege by which one spouse can decline to answer questions the answers to which may have a tendency to expose the other spouse to conviction for a crime. The common law privilege against self-incrimination extends beyond convictions for crime to the imposition of a civil penalty. Since modern legislatures often seek to deal with misconduct, particularly commercial misconduct, by creating, in addition to crimes backed by criminal sanctions, civil contraventions backed by civil penalties, the question whether there is a common law spousal privilege relating to answers tending to expose the other spouse to the imposition of a civil penalty may be important in some circumstances. But it did not have to be debated in this appeal, and it was not. It is generally not safe to embark on an examination of pre-19th century authorities in the law of evidence without the assistance of modern legal historians. That assistance usually demonstrates that earlier accounts call for significant revision86. And it is not necessary to examine pre-19th century authorities in order to resolve this appeal in favour of either party. Hence the debate between the parties about the opinions of Dalton87 and "Lord [sic] 83 McGuinness v Attorney-General (Vict) (1940) 63 CLR 73 at 104-105, quoted with approval by Viscount Dilhorne in British Steel Corp v Granada Television Ltd [1981] AC 1096 at 1180. 84 Science Research Council v Nassé [1980] AC 1028 at 1067; British Steel Corp v Granada Television Ltd [1981] AC 1096 at 1129, 1168-1169 and 1175. 85 McGuinness v Attorney-General (Vict) (1940) 63 CLR 73 at 104; Re Buchanan (1964) 65 SR (NSW) 9. 86 For example, Helmholz et al, The Privilege Against Self-Incrimination: Its Origins and Development, (1997); Langbein, The Origins of Adversary Criminal Trial, 87 Countrey Justice, (1619) London Professional Books Ltd 1973 ed at 270. Coke"88 (as the parties persistently called Sir Edward), and about early bankruptcy practice, need not be examined. The appellant argued, first, that there is no spousal privilege at common law, and, secondly, that the Court should not now create one. The appellant did not argue that if there were spousal privilege at common law the Court should now abolish it. The appellant argued that the common law "never had occasion to develop spousal privilege" because until the mid-19th century spouses were generally not competent or compellable witnesses against each other in civil cases and until the late 19th century they were generally not competent witnesses against each other in criminal cases. During the periods of spousal incompetence which preceded those changes, no occasion could rationally arise for assuming that, contrary to the legal position, a spouse was competent and compellable to enter the witness box, and then considering, on that assumption, whether that spouse could claim a privilege against answering particular questions the answers to which incriminate the other spouse. But the rule of incompetence was less wide than the appellant's argument assumed. The rule of spousal incompetence did not prevent one spouse ever testifying about the conduct of the other spouse. It left some room for occasions on which a privilege question might arise. Hence, the submission that the common law "never had occasion" to consider spousal privilege is incorrect. The occasions were relatively limited, but they could arise. They could arise when a spouse was competent and compellable. They could also arise when a spouse was competent and, though not compellable, chose to enter the witness box, while reserving a desire not to answer particular questions which might incriminate the other spouse. In R v Inhabitants of All Saints, Worcester89 Bayley J discussed an instance of the latter kind. Bayley J's dicta in R v Inhabitants of All Saints, Worcester In that case Ann Willis was called to give evidence that she had married George Willis. If that evidence were accepted, it would follow that a later marriage by George Willis was bigamous. It was contended that she was not competent to give evidence. The contention failed. Neither Ann Willis nor George Willis were parties. There was no controversy or adverseness of interest between them in the proceedings. Hence, according to the principles of 88 Coke, The First Part of the Institutes of the Lawes of England. Or, a Commentarie Upon Littleton, Not the Name of a Lawyer Onely, but of the Law It Selfe, (1628) at 6b. 89 (1817) 6 M & S 194 at 200-201 [105 ER 1215 at 1217-1218]. competence then in force90, there was no bar to her entering the witness box. The court overruled R v Inhabitants of Cliviger91, which was to the contrary. Bayley J, however, went further92: "Ann Willis was a competent witness, and I found this opinion not upon the order of time in which she was called, for in my judgment she would have been equally competent after the second wife had given her testimony. It does not appear that she objected to be examined, or demurred to any question. If she had thrown herself on the protection of the Court on the ground that her answer to the question put to her might criminate her husband, in that case I am not prepared to say that the Court would have compelled her to answer; on the contrary, I think she would have been entitled to the protection of the Court. But as she did not object, I think there was no objection arising out of the policy of the law, because by possibility her evidence might be the means of furnishing information, and might lead to enquiry, and perhaps to the obtaining of evidence against her husband. It is no objection to the information that it has been furnished by the wife." The appellant described this as a "snippet" incapable of supporting spousal privilege. What was Bayley J talking about in this passage – non-competence, non-compellability, privilege, or discretionary protection? Bayley J cannot have been talking about non-competence, because he, like Lord Ellenborough CJ and Abbott J, decided that Ann Willis was a competent witness. Though his references to "thrown herself on the protection of the Court" might suggest an appeal to discretionary protection, he cannot have been talking about discretionary protection. That is partly because no lawyer has thought that any such thing was possible until the last four decades of the 20th century. And it is partly because a claimant to a favourable exercise of discretion is merely an object of hoped-for advantage, not someone who is, in the words of Bayley J, "entitled to the protection of the Court." Contrary to the specific submission of the appellant, Bayley J cannot have been talking about non-compellability. If Ann Willis were not compellable she 90 Bentley v Cooke (1784) 3 Dougl 422 [99 ER 729]. 91 (1788) 2 T R 263 [100 ER 143]. 92 (1817) 6 M & S 194 at 200-201 [105 ER 1215 at 1217-1218]. would not have been sworn. Yet Bayley J's assumption was that she had been sworn and had been asked a question. The references to "protection" do not point unequivocally and exhaustively to non-compellability. A court which upholds the claim of a witness to privilege is giving the witness "protection" as much as a court which upholds the claim of a person to non-compellability. By that process of negative elimination, privilege remains. But as well as what flows from negative elimination, there are positive indications that Bayley J was speaking of privilege. To say: "the spouse did not demur to any question" is to imply that she had willingly entered the witness box, for otherwise no question could have been asked. Privilege can be waived, and a failure to "demur to a question", or to "object" to a question, amounts to a waiver. When Bayley J said: "It does not appear that she objected to be examined", he meant the same thing as not demurring or not objecting to a question. That is, he meant that a privilege had been waived. Where a witness has demurred or objected to a question and the court compels an answer, the most probable characterisation of what has happened is that the demurrer or objection has been overruled and a claim to privilege has failed. Where on the other hand a witness has demurred or objected to a question and the court concludes that she is "entitled" not to be compelled to answer, the most probable characterisation of what has happened is that a claim to privilege has succeeded. The wife's evidence could not directly incriminate her alleged husband, because if he were later to be prosecuted for bigamy she would not be either a competent or a compellable witness against him and her evidence would not have been admissible hearsay at the bigamy trial. But her evidence of the first marriage could indirectly incriminate him by causing inquiries to be instituted and other persons to be located – guests at the first marriage ceremony, the person who performed it, witnesses who could give evidence of cohabitation and repute to support a presumption of marriage. That is what the concluding words of the passage refer to. Bayley J was thus assuming that an objection or demurrer by the spouse witness of whom he was speaking to answering a question on the ground that it might incriminate her husband was sufficiently based on a risk of that incrimination. In the words of Cockburn CJ in R v Boyes93 about the privilege against self-incrimination 44 years later, he was assuming that there was a "danger [which was] real and appreciable, with reference to the ordinary operation of law in the ordinary course of things – not a danger of an imaginary and unsubstantial character, having reference to some extraordinary and barely possible contingency, so improbable that no reasonable man would suffer it to influence his conduct." Bayley J was saying that that danger was insufficient to 93 (1861) 1 B & S 311 at 330 [121 ER 730 at 738]. support a conclusion of incompetence or non-compellability, but sufficient to render a claim to privilege valid. Bayley J's language has been called "notably tentative"94. But that is to read bits of it in isolation. "I am not prepared to say that the Court would have compelled her to answer" may be, taken by itself, tentative. But the next words negate any tentativeness and are quite firm: "on the contrary, I think she would have been entitled to the protection of the Court." It is therefore necessary, with respect, to reject the appellant's submission that Bayley J was stating a proposition about non-compellability, not privilege95. It is also necessary to disagree with the view that later legal writers treated Bayley J as having discussed only non-compellability, not privilege. Mr Justice Bayley For the reasons given by Radin, a dictum can make the law. The shrewd enunciation of dicta was a primary technique in Chief Justice Marshall's illustrious career. And legal writers, too, can make the law. Indeed, they can make the law by saying things which though they may be questionable at the outset become so widely accepted that they are the law. A most important consideration is the rational force of the opinion propounded in the dictum or the writings. But something may depend on the identity of the author of the dictum, or the writer. An opinion on a point of law of the early 20th century or the early 14th century by Maitland will naturally carry more weight than the opinion of … some others. 94 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 503 per Lord Edmund-Davies. 95 Apart from the materials to be examined in detail shortly, others have thought that Bayley J was dealing with privilege, not non-compellability: Metropolitan Police Commissioner per Lord Edmund-Davies; Tapper (ed), Cross and Tapper on Evidence, 12th ed (2010) in Hoskyn's case disagreed, Lord Edmund-Davies, it has been said, "convincingly demonstrated" that they were wrong: Buzzard, May and Howard (eds), Phipson on Evidence, 13th ed (1982) the majority the extent that In Riddle v The King96 Griffith CJ called Bayley J "a Judge of very great experience and learning". In Hoskyn v Metropolitan Police Commissioner97 Lord Salmon said of his dictum that "coming from such a master of the common law it deserves to be treated with the greatest respect: I regard it as being of the highest persuasive authority." In the same case Lord Edmund-Davies described him as "a judge of outstanding quality"98. But nothing will be known of Bayley J by most modern lawyers. This obstructs an understanding of the later significance of R v Inhabitants of All Saints, Worcester. John Bayley was born in 1763. After practising as a special pleader, he was called to the Bar in 1792. In 1789 he had published a Treatise on the Law of Bills of Exchange. That is a subject difficult enough for most lawyers even after its codification99, but much more so before codification. By 1836 there had been five English and two American editions. In 1790 he edited Lord Raymond's Reports, with notes. Around 1790 he "compiled a manuscript digest of the law of evidence, which was widely used by later pupils."100 Explaining legal doctrines, orally or in writing, to neophytes in the law is an excellent way of increasing the understanding not only of those who are taught, but of those who teach. In 1799 he was made a Serjeant-at-Law. In 1808 he became a puisne judge of the Court of King's Bench. When he sought to lighten his burdens by going to the Exchequer in 1823, 11 silks and 101 barristers practising in the King's Bench presented two memorials to him urging him to stay. In 1830, however, he did leave and became a Baron of the Exchequer – an occasion on which Brougham paid him great tributes on behalf of the Bar. Fearing a decline in his powers, he retired in 1834. He has been described as having had a "large practice", a "mastery of case law" and a "particular mastery of the common law."101 He had a habit which, in a minor way, was prevalent within living memory in New South Wales. Napier said that he always carried with him seven little red manuscript books "which are said to contain every case that ever was or 96 (1911) 12 CLR 622 at 628. 97 [1979] AC 474 at 496. 98 [1979] AC 474 at 502. 99 Bills of Exchange Act 1882 (UK); Bills of Exchange Act 1909 (Cth). 100 Lobban, "Sir John Bayley", in Matthew and Harrison (eds), Oxford Dictionary of National Biography, (2004), vol 4 at 448. 101 Lobban, "Sir John Bayley", in Matthew and Harrison (eds), Oxford Dictionary of National Biography, (2004), vol 4 at 448. ever will be decided in Westminster Hall"102. Information about cases that "will be decided" is information from which inferences as to future legal development can be drawn: that is, prophecies or predictions. Foss said of him103: "No judge since the act was passed in 1799 granting a pension on retirement after fifteen years' service has declined to avail himself of the privilege for so long a period as Sir John Bayley." How different, how very different, from the mercantile, even mercenary, retirement policies of some modern Australian judges. Lord Campbell regarded him as "among the best lawyers that have appeared in Westminster Hall" in his time104. Lord Campbell also said105: "When M. Cottu, the French advocate, went [to] the Northern Circuit, and witnessed the ease and delight with which Mr Justice Bayley got through his work, he exclaimed, 'Il s'amuse à juger'". Mr Justice Bayley, then, may be said to have seen men and cities. He was viewed as a happy warrior. He had popularity and reputation. Popularity and reputation do not guarantee quality, but they can engender trust and influence. The trust may turn out to be misplaced. The influence may turn out to be pernicious. But they can both be real. Mr Justice Bayley and legal writers The appellant submitted that Taylor in his work on evidence had said that "it seems" that spousal privilege may exist "on one view of what [Bayley J] was saying." What Taylor actually did say will be examined below106. Taylor was only one of many writers who have treated the dicta of Bayley J as reflecting the existence of spousal privilege. 102 Quoted from Napier's Manual of Improved Precedents, (1831) by Lobban, "Sir John Bayley", in Matthew and Harrison (eds), Oxford Dictionary of National Biography, (2004), vol 4 at 448. 103 The Judges of England; With Sketches of their Lives, and Miscellaneous Notices connected with the Courts at Westminster, From the Conquest to the present time, (1864), vol 9 at 75. 104 The Lives of the Chief Justices of England: From the Norman Conquest till the death of Lord Tenterden, (1857), vol 3 at 155. 105 The Lives of the Chief Justices of England: From the Norman Conquest till the death of Lord Mansfield, (1849), vol 2 at 397n. 106 See below at [91]-[93]. Some cases make a great impact at the time of decision, but gradually fade away. Others make no impact at the time of decision, nor for some time thereafter, but eventually become leading cases and pillars of the law. An example of the latter is the celebrated decision in Morice v Bishop of Durham107, which, although now seen as fundamental to the law of trusts, was originally cited only for purposes which are now obsolete108. R v Inhabitants of All Saints, Worcester has been much cited. But what was its initial reception in legal treatises? What was its subsequent career there? 1817-1852: Phillipps The first treatise to notice R v Inhabitants of All Saints, Worcester was published in the same year as that case was decided. It was the third edition of S M Phillipps's A Treatise on the Law of Evidence. After a lengthy discussion of R v Inhabitants of All Saints, Worcester, the author said109: "The result therefore appears to be, that, on the trial of an appeal against an order of removal [of a person to her maiden settlement], (and, upon the same principles, in any suit or proceeding between third persons,) a husband or wife is a competent witness to prove a former marriage, even after proof of a second marriage, although perhaps the witness would not be compellable to answer such questions." (emphasis in original) This is plainly a reference to Bayley J's dicta. It is clear that, like Bayley J, the author is assuming that the spouse has entered the witness box. That is plain from the second use of the word "witness". It is also plain from the reference to questions, for if the spouse had not entered the box, no questions could have been asked. Hence the word "compellable" is a reference to privilege, not compellability. The same passage appeared in the next four editions, published in 1820, 1822, 1824 and 1829110. In the eighth edition in 1838 (with Andrew Amos)111 and the ninth edition in 1843112 the entire discussion of R v Inhabitants 107 (1804) 9 Ves Jun 399 [32 ER 656]; (1805) 10 Ves Jun 522 [32 ER 947]. 108 Getzler, "Morice v Bishop of Durham", in Mitchell and Mitchell (eds), Landmark Cases in Equity (forthcoming). 109 3rd ed (1817) at 69. 110 4th ed (1820), vol 1 at 83; 5th ed (1822), vol 1 at 80; 6th ed (1824), vol 1 at 75; 7th ed (1829), vol 1 at 80. 111 8th ed (1838) at 165. 112 9th ed (1843), vol 1 at 73. of All Saints, Worcester was shortened and the passage quoted above was omitted. In 1852, in the tenth edition (with Thomas James Arnold, one of the Police Magistrates for the Metropolis), the following appeared113: "Although a wife is not to be rejected as a witness because her evidence has a tendency to criminate her husband, yet it seems she cannot be compelled to give such evidence." Bayley J's judgment in R v Inhabitants of All Saints, Worcester was cited in support. Again, it is likely that the words "cannot be compelled" referred to a privilege. Phillipps's Treatise must have been influential. Apart from its eight English editions from 1817 to 1852, there were several American editions114. In 1848 John Pitt Taylor, then a barrister, later a County Court judge, published the first edition of A Treatise on the Law of Evidence, as Administered in England and Ireland. It was based on Simon Greenleaf's A Treatise on the Law of Evidence, published in the United States of America in 1842. According to Twining, "[f]or nearly fifty years it was regarded as the leading practitioners' treatise, replacing Starkie and Phillipps and in due course being overtaken by Phipson."115 Taylor cited Bayley J for the following proposition116: "But although, in these cases, the wife will be permitted to testify against her husband, it by no means follows that she will be compelled to do so; and the better opinion is that she may throw herself upon the protection of the Court, and decline to answer any question, which would tend to expose her husband to a criminal charge."117 (emphasis in original) Below this will be called "the first proposition". A reading of the passage as a whole suggests that by "these cases" Taylor meant cases in which a wife who was competent and compellable wished to give evidence tending to incriminate 113 10th ed (1852), vol 1 at 73. 114 See generally Twining, Rethinking Evidence: Exploratory Essays, 2nd ed (2006) 115 Twining, Rethinking Evidence: Exploratory Essays, 2nd ed (2006) at 54. 116 (1848), vol 2 at 907 [997] (footnote omitted). 117 Taylor cited R v Inhabitants of All Saints, Worcester (1817) 6 M & S 194 at 200 [105 ER 1215 at 1218]. her husband. He read Bayley J's dicta as recognising the possession by a witness of a privilege, not as recognising a facility for the wife not to enter the witness box at all. Taylor repeated the first proposition in the second edition118, in 1855. He added a cross-reference to a later paragraph. To the footnote referring to R v Inhabitants of All Saints, Worcester, he added a further case in support of the first proposition, namely Cartwright v Green119. In Cartwright v Green one of the grounds on which Lord Eldon LC allowed a demurrer to a bill of discovery was that it would compel production of material by a wife which could incriminate her husband. The bill was against three defendants, the first two of whom were husband and wife. Lord Eldon LC said120: "Here the wife, if the act was a felony in the husband, would be protected: at all events she could not be called upon to make a discovery against her husband; and the third Defendant is directly implicated. The demurrer therefore is good as to all the Defendants". That is, the husband and the third defendant could claim the privilege against self-incrimination, and the wife could not be required to give discovery incriminating her husband. There is some controversy whether this decision supported the first proposition. Brennan J, for example, treated the case as authority for the proposition that discovery "is denied because the policy of the law requires that the court should not give discovery at all in" an action to recover a penalty121. Seton said that a party could object to giving discovery or answering interrogatories on the ground that "an answer or document would form evidence or links in a chain of evidence of facts that would expose the deft [to] criminal proceedings". In support he said, citing Cartwright v Green: "A wife may decline to answer on the ground that her answers might tend to convict her husband"122. But the question whether Cartwright v Green in truth supported the first proposition is less important than the fact that Taylor said it did. In the later paragraph to which Taylor's footnote cross-referred, Taylor said123: 118 2nd ed (1855), vol 2 at 1064 [1234]. 119 (1803) 8 Ves Jun 405 [32 ER 412]. 120 (1803) 8 Ves Jun 405 at 410 [32 ER 412 at 413]. 121 Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477 at 520; [1993] HCA 74. 122 Forms of Decrees in Equity and of Orders Connected With Them, 3rd ed (1862), vol II at 1056. 123 2nd ed (1855), vol 2 at 1131-1132 [1308] (footnotes omitted). "It has already been casually observed, that some questions a witness is not compellable to answer. First, this is the case, where the answers would have a tendency to expose the witness, or, as it seems, the husband or wife of the witness, to any kind of criminal charge, whether in the common-law or ecclesiastical Courts, or to a penalty or forfeiture of any nature whatsoever." (emphasis in original) Below this will be called "the second proposition". It plainly deals with privilege. The reference to "the husband or wife of the witness" is supported by a footnote referring to Cartwright v Green and R v Inhabitants of All Saints, Worcester, and also referring back to the first proposition. Taylor's use of the term "it seems" should not be taken to suggest doubt about the second proposition: for in stating the first proposition he had said it was the "better opinion", and that is a standard lawyer's technique for saying: "I am not absolutely certain about it, but my opinion is that it is so." There are many things lawyers think in the course of their professional lives which they are not absolutely certain about, but believe to be the case, and on which other people rely. Thereafter it became not uncommon for Cartwright v Green to be treated as an authority relevant to spousal privilege in trials, to be cited with cases specifically on that topic like R v Inhabitants of All Saints, Worcester124 and Taylor repeated the statement of the first and second propositions as they had appeared in the second edition in 1858 in the third edition126; in 1864 in the fourth edition127; in 1868 in the fifth edition128; in 1872 in the sixth edition129; in 1878 in the seventh edition130 and in 1885 in the eighth edition131. Following 124 For example, Thicknesse, A Digest of the Law of Husband and Wife, (1884) at 214 n 7 and 296. 125 (1882) 10 QBD 110 at 112-113, in which Stephen J relied on his own extra-curial statement of spousal privilege: see, for example, Bray, The Principles and Practice of Discovery, (1885) at 342. 126 3rd ed (1858), vol 2 at 1105 [1234] and 1174 [1308]. 127 4th ed (1864), vol 2 at 1165 [1234] and 1236 [1308]. 128 5th ed (1868), vol 2 at 1188-1189 [1234] and 1260 [1308]. 129 6th ed (1872), vol 2 at 1188 [1234] and 1258 [1308]. 130 7th ed (1878), vol 2 at 1150 [1369] and 1223 [1453]. 131 8th ed (1885), vol 2 at 1164 [1369] and 1242 [1453]. Taylor's death, the two propositions were retained by G Pitt-Lewis QC in 1897 in the ninth edition132, with one change to the first proposition – the replacement of "in these cases" with "by the common law rule of Incompetency". That expression was defined thus: "the common law rule of Incompetency renders husband and wife inadmissible as witnesses for or against each other."133 In 1906 the tenth edition appeared. It was edited by W E Hume-Williams KC, who was also to be an editor of the relevant title in the first edition of Halsbury's The Laws of England, and who was the Recorder of Norwich and a Bencher of the Middle Temple. The tenth edition stated the two propositions as they had appeared in the ninth134. The same was true of the eleventh edition in 1920, edited by J B Matthews KC and G F Spear135, although the first proposition reverted to the form in which it appeared in Taylor's lifetime. In 1931 the twelfth edition, edited by the future Mr Justice Croom-Johnson and G F L Bridgman, had the same form as the eleventh136. 1853: Starkie The fourth edition of Thomas Starkie's A Practical Treatise of the Law of Evidence (1853) was the first not to be prepared by the original author. It was prepared by G M Dowdeswell and J G Malcolm. It sets out the privilege against self-incrimination. In a long supporting footnote the following appears137: "The same rule applies if the husband or wife would be exposed in like manner". For that proposition Cartwright v Green is cited. 1862-1934: Roscoe In 1862 David Power QC, Recorder of Ipswich, edited the sixth edition of Roscoe's Digest of the Law of Evidence in Criminal Cases (having previously 132 9th ed (1897), vol 3 at 892 [1369] and 960 [1453]. 133 9th ed (1897), vol 3 at 891 [1368]. 134 10th ed (1906), vol 2 at 973 [1368] and 1052-1053 [1453]. It was from that edition that Griffith CJ quoted the two propositions in Riddle v The King (1911) 12 CLR 622 at 628 and Lord Wilberforce quoted the first proposition in Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 485-486. In the latter case at 491 Viscount Dilhorne quoted the first proposition from the ninth edition. 135 11th ed (1920), vol 2 at 923 [1368] and 997 [1453]. 136 12th ed (1931), vol 2 at 860-861 [1368] and 925-926 [1453]. 137 4th ed (1853) at 204 n (s). edited the fourth (1857) and the fifth (1861)). He inserted two new passages. The first was138: "A doubt has arisen whether the principle of law which considers husband and wife as one person, extends to protect persons who stand in that relation to each other from answering questions which tend to criminate either, even although they are neither of them upon trial, or in a situation in which the evidence can be used against them." He then set out a discussion of competence which had appeared in earlier editions. Then he set out the second new passage139: "But though the husband or wife be competent, it seems to accord with principles of law and humanity that they should not be compelled to give evidence which tends to criminate each other; and in R v All Saints, Worcester, Bayley, J, said that if in that case the witness had thrown herself on the protection of the court on the ground that her answer to the question put to her might criminate her husband, he thought she would have been entitled to the protection of the court. A similar opinion is expressed in 1 Phil & Arn Ev 73[140]". the editor edition, seventh published The 1868, was James Fitzjames Stephen QC, Recorder of Newark-on-Trent. He retained the two new passages from the sixth edition141. They also remained in the eighth edition (1874), prepared by Horace Smith142, and the ninth edition (1878), also prepared by Smith, with the addition of a reference to Cartwright v Green143. The tenth edition (1884), by Smith, was in the same form as the ninth144. The eleventh edition (1890), by Smith and G G Kennedy, a metropolitan magistrate, was the same145, as was the twelfth (1898), by 138 6th ed (1862) at 140. 139 6th ed (1862) at 141. 140 It is quoted above at [90]. 141 7th ed (1868) at 146. 142 8th ed (1874) at 150. 143 9th ed (1878) at 153. 144 10th ed (1884) at 153. 145 11th ed (1890) at 142-143. A P Perceval Keep146. The thirteenth edition (1908), by Herman Cohen, retained the first passage and substituted for the second the following147: "But the tendency of the courts is to spare such witnesses as much as possible." This was followed by a citation of Bayley J in R v Inhabitants of All Saints, Worcester and of Cartwright v Green. In 1866 the eleventh edition of Roscoe's Digest of the Law of Evidence on the Trial of Actions at Nisi Prius appeared. It was edited by William Mills and William Markby. William Markby was to become a puisne justice of the High Court of Calcutta, Vice-Chancellor of Calcutta University, and Reader in Indian Law at Oxford. For the first time, that edition of Roscoe's Digest contained148 a passage almost identical with the second passage in Power's edition of Roscoe's Digest of the Law of Evidence in Criminal Cases which appeared in the sixth edition of 1862. That passage in Roscoe's Digest was repeated in the twelfth, thirteenth and fourteenth editions, appearing in 1870, 1875 and 1879 respectively under the editorship of John C Day (who had taken silk by the time of the thirteenth edition) and Maurice Powell149. The same was true the eighteenth editions, prepared by Maurice Powell in 1884, 1891, 1900 and 1907 respectively150. In the nineteenth and twentieth editions, prepared by James S Henderson in 1922 and 1934, the passage was repeated, but without the reference to Phillipps and Arnold151. the fifteenth through In 1869 the third edition of Edmund Powell's The Principles and Practice of the Law of Evidence was published under the editorship of John Cutler and E F Griffin. Apart from being a barrister at law, Cutler was Professor of English Law and Jurisprudence and Professor of Indian Jurisprudence at King's College, London. E F Griffin was to become a Lecturer on English Law at King's College, London. The following passage appeared152: 146 12th ed (1898) at 132-133. 147 13th ed (1908) at 127. 148 11th ed (1866) at 106. 149 12th ed (1870) at 176; 13th ed (1875) at 186; 14th ed (1879) at 168. 150 15th ed (1884), vol 1 at 159; 16th ed (1891), vol 1 at 168; 17th ed (1900), vol 1 at 171; 18th ed (1907), vol 1 at 169. 151 19th ed (1922), vol 1 at 151; 20th ed (1934), vol 1 at 173. 152 3rd ed (1869) at 90-91 (footnotes omitted). "The question whether a wife is bound to answer questions criminating her husband is not in a satisfactory state. It was held at common law, in R v [Cliviger], that a wife could not be compelled to answer questions criminating her husband. In R v Worcester, Lord Ellenborough held that a wife was competent to answer such questions, and that the answers were not excluded on the ground of public policy: but Bayley, J, was of opinion that a wife who threw herself upon the protection of the court would not be compelled to answer. In equity there is no doubt that a wife cannot be compelled to answer any question, which may expose her husband to a charge of felony." The footnote to the last sentence referred to Cartwright v Green. Whether the statement is an accurate account of the case or not, the statement itself reveals a belief that there was support from equity for Bayley J's view of the common law. The quoted passage had not appeared in previous editions, the last being by In 1875 the fourth edition, by the same editors, repeated the passage153. In neither the third nor the fourth edition did the editors explain why the question whether a wife was bound to answer questions incriminating her husband was not in a satisfactory state. In 1885 the fifth edition, by the same editors, and in 1892 the sixth edition, by Cutler and Charles F Cagney, did not contain the sentence raising that question but the balance remained in substance154. The seventh and eighth editions of 1898 and 1904 were the same155. The ninth edition of 1910, by W Blake Odgers KC (Director of Legal Studies at the Inns of Court, Gresham Professor of Law, and Recorder of Plymouth), introduced a new sentence at the start of the passage156: "There seems to be some doubt as to how far a witness is privileged as to answering questions tending to criminate his or her wife or husband." A footnote to that sentence referred in a truncated way to Taylor (apparently the tenth edition of 1906)157, Phillipps (apparently the ninth edition of 1843 or the 153 4th ed (1875) at 110. 154 5th ed (1885) at 118; 6th ed (1892) at 123. 155 7th ed (1898) at 102; 8th ed (1904) at 97. 156 9th ed (1910) at 223. 157 See above at [93]. tenth of 1852)158 and "Roscoe, N. P." (apparently the eighteenth edition of Roscoe's Digest of the Law of Evidence on the Trial of Actions at Nisi Prius of 1907). Those three works cited, apart from Phillipps's use of the word "seems"159, do not suggest "some doubt". The footnote also referred to "Starkie, Ev 204". That appeared to refer to the fourth edition (1853) of Starkie's Practical Treatise of the Law of Evidence160. The relevant text and footnote was discussed above161. Again, that text and footnote scarcely suggests "some doubt". 1870-1922: Best In 1870 the fifth edition of W M Best's The Principles of the Law of Evidence was published. It was the last edition to come from Best's own hand. That edition for the first time contained the following passage162: "Whether a husband or wife is bound to answer questions tending to criminate each other seems unsettled." A footnote cited Bayley J in R v Inhabitants of All Saints, Worcester, Cartwright v Green, and R v Inhabitants of Cliviger163. The last-named case is in fact neutral on the point. It held that a wife was not a competent witness if her evidence incriminated her husband, but it was overruled on that point in R v Inhabitants of All Saints, Worcester. It is thus difficult to see why the question seemed unsettled. The passage was repeated in the sixth edition, edited by John A Russell QC, a County Court judge164. 158 See above at [90]. 159 See above at [90]. 160 4th ed (1853) at 204. 161 See above at [94]. 162 5th ed (1870) at 174 [126]. 163 (1788) 2 T R 263 [100 ER 143]. 164 6th ed (1875) at 175 [126]. In 1883 the seventh edition, edited by J M Lely, stated165: "Husbands and wives do not seem to be bound to answer questions tending to criminate each other; but the authorities are somewhat conflicting." This more positive assertion of the privilege was supported in a footnote by the three cases just mentioned and R v Halliday166. That was a case about competence, not privilege. It is therefore difficult to see how the authorities are conflicting. In 1893 the eighth edition, by Lely, repeated the passage in the seventh edition167. In 1902 in the ninth edition168, and in 1906 in the tenth edition169, Lely retained the passage quoted above and added after it: "They 'show that even under the old law which made the parties and their husbands and wives incompetent witnesses, a wife was not incompetent to prove matter which might tend to criminate her husband.' But they 'do not decide that if the wife claimed the privilege of not answering, she would be compelled to do so, and to some extent they suggest that they would not'." A footnote reveals that the quoted words within Best's text are from a footnote to Art 120 of Stephen's Digest; as will be seen immediately, those words had been in that work since the first edition in 1876. In 1911, the eleventh edition of Best's Principles, by Sidney L Phipson, retained the expanded passage170, and added to the supporting footnote a reference to Taylor171. In 1922, the twelfth edition172, again by Phipson, followed the eleventh, with an updated reference to Taylor173. 165 7th ed (1883) at 123 [126]. 166 (1860) Bell CC 257 [169 ER 1252]. 167 8th ed (1893) at 114 [126]. 168 9th ed (1902) at 114 [126]. 169 10th ed (1906) at 115 [126]. 170 11th ed (1911) at 118 [126]. 171 10th ed (1906), vol 2 at 973 [1368]. 172 12th ed (1922) at 116 [126]. 173 11th ed (1920), vol 2 at 923 [1368]. 1876-1948: Stephen The appearance of the two propositions in the fifth and sixth editions of Taylor174 is significant from the point of view of Stephen's work. It has been claimed that Stephen placed very heavy reliance on Taylor in drafting the Indian Evidence Act 1872175. The claim is extremely exaggerated. But the Indian Evidence Act 1872 did reveal that Stephen had a close familiarity with Taylor, although that Act departed in many respects from Taylor where Stephen followed Indian legislative models or acted on his own opinions as to what Indian law, as distinct from English law, should be. On Stephen's return from India to England in 1872, the Attorney-General, Sir John Coleridge, asked him to use the Indian Evidence Act 1872 as the basis for an evidence code for England. Stephen did draft an evidence code which Coleridge introduced into the House of Commons on 5 August 1873176. But it was not reintroduced after the fall of the first Gladstone government. Stephen then decided to adapt his Evidence Bill, omitting the amendments it made to English law, into A Digest of the Law of Evidence, published in 1876. The fifth and sixth editions of Taylor were the latest editions available at that time. Article 120 opened as follows177: "No one is bound to answer any question if the answer thereto would, in the opinion of the judge, have a tendency to expose the witness [or the wife or husband of the witness] to any criminal charge, or to any penalty or forfeiture which the judge regards as reasonably likely to be preferred or sued for". The square brackets were in the original. To the proposition just quoted was appended a footnote. That footnote read in part178: 174 See above at [93]. 175 Stokes (ed), The Anglo-Indian Codes, Vol II: Adjective Law, (1888) at 819 and Twining, Rethinking Evidence: Exploratory Essays, 2nd ed (2006) at 57. 176 HC Debates, 5 August 1873, vol 217 at c1559. "As to husbands and wives, see 1 Hale, PC 301; R v Cliviger, 2 TR 263; Cartwright v Green, 8 Ve 405; R v Bathwick, 2 B and Ad 639; R v All Saints, Worcester, 6 M & S 194. These cases show that even under the old law which made the parties and their husbands and wives incompetent witnesses, a wife was not incompetent to prove matter which might tend to criminate her husband. R v Cliviger assumes that she was, and was to that extent overruled. The cases, however, do not decide that if the wife claimed the privilege of not answering she would be compelled to do so, and to some extent they suggest that she would not." That "extent", of course, is the extent marked out by Bayley J. In short, the material on which the assertion in Art 120 is based may not be extensive, but it is itself quite clear, and so is Stephen's considered view stated in the Article itself. Stephen was responsible for the first four English editions of his Digest. Sir Herbert Stephen (Clerk of Assize for the Northern Circuit) and Harry Lushington Stephen (who became a judge of the High Court of Calcutta) were responsible for the fifth (1899), the sixth (1904), the seventh (1905), the eighth (1907), the ninth (1911), the tenth (1922) and the eleventh (1925). There are bibliographical difficulties with the early English and American editions of Stephen's Digest, but these difficulties are immaterial to the fundamental point that neither in the Article nor the footnote was any change made in either the English or, generally, foreign editions (such as American editions and Shaw's Australian edition179), apart from the addition to the footnote of a reference to R v Halliday180. Sir Harry Lushington Stephen and L F Sturge were responsible for the twelfth edition in 1936, reprinted with corrections in 1948. The same was true of that edition, save that the number of the relevant Article was changed from 120 to 129 and the material in the footnote was omitted. In his lifetime and for many years after his death, Stephen had a peculiar stature in relation to the law of evidence. Isaacs J spoke of Stephen's restatement of a proposition of Lord Mansfield CJ's as "clothed with the most eminent and the most authoritative recognition"181. In 1909 Phillimore J, after quoting a passage in the Digest which F E Smith KC had cited in oral argument, and referring to a passage in Taylor, said: "The authority of Taylor is not so high as that which I have just cited, and before accepting [Taylor's] statement as 179 The New South Wales edition published in 1909 by Henry Giles Shaw contained both Art 120 and the footnote unchanged, as well as an additional Art 120 for New South Wales to the same effect as the English one, but expanded. 180 (1860) Bell CC 257 [169 ER 1252] (as noted above at [100], this is a case on competence). 181 Houston v Wittner's Pty Ltd (1928) 41 CLR 107 at 123; [1928] HCA 34. conclusive one would prefer to look at the cases cited in support of his proposition."182 That is, a statement by Stephen was seen as authoritative independently of its sources; not so a statement by Taylor. In similar fashion, in 1954 Harman J was prepared to accept a statement in the Digest that there was no authority on a point as conclusive of the proposition that there was none183. These judges viewed Stephen's opinions not simply as those of an able writer, but as having a more fundamental significance. 1892-1970: Phipson Sidney L Phipson's The Law of Evidence was and remains a leading treatise. The first ten editions did not refer to R v Inhabitants of All Saints, Worcester, but they each stated the effect of what Bayley J said. The first stated184: "No witness (whether party or stranger) is, except in the cases hereafter mentioned, compellable to answer any question or to produce any document, the tendency of which is to expose the witness, or the wife or husband of the witness, to any criminal charge, penalty, or forfeiture." (emphasis in original) That statement was repeated in the next two editions185. It was also repeated in the fourth edition, supported186, in relation to the incrimination of a spouse, by reference specifically to passages in Taylor187, Best188 and Stephen189. That statement was repeated in the fifth edition190 with an additional reference to 182 Ex parte Bottomley [1909] 2 KB 14 at 21. 183 In re Overbury, decd; Sheppard v Matthews [1955] Ch 122 at 126. 185 2nd ed (1898) at 194; 3rd ed (1902) at 181. 186 4th ed (1907) at 193. 187 The reference is to [1368] and could be to either the ninth edition (1897) or the tenth edition (1906): see nn 132-134. 188 The reference is to [126] and could be to any edition from the sixth (1875) through to the tenth (1906): see nn 164-165, 167-169. 189 The note to Art 120. 190 5th ed (1911) at 198. Taylor191. The same was said in the sixth edition192. All these editions were from Phipson's hand. The seventh edition was by Roland Burrows, Recorder of Cambridge and Reader to the Inns of Court in, inter alia, evidence, who was assisted by C M Cahn. It repeated the sixth edition193. The eighth and ninth editions, by Burrows alone, repeated the passage without reference to prior works194. tenth edition, by Michael V Argyle QC, Recorder of Northampton, who was assisted by E Havers and P Benady195. The passage was also repeated the In the eleventh edition (1970), Phipson did not contain the traditional passage, but did quote s 14(1)(b) of the Civil Evidence Act 1968 (UK), which made the question of privilege at common law academic, at least in civil cases196. Thereafter the common law position was not dealt with in Phipson. In 1908 Phipson published his Manual of the Law of Evidence. It was intended for the use of students, and was described as an abridgement of the fourth edition of his treatise. It stated197: "No witness (whether party or stranger) is, except in the cases hereafter mentioned, compellable to answer any question … the tendency of which is to expose the witness, or the wife or husband of the witness, to any criminal charge, penalty, or forfeiture". (emphasis in original) 191 The reference is to [1453] and could be to any edition from the seventh (1878) through to the tenth (1906): see nn 130-134. 192 6th ed (1921) at 211. 193 7th ed (1930) at 205. 194 8th ed (1942) at 198; 9th ed (1952) at 213. 195 10th ed (1963) at 264 [611]. 196 Buzzard, Amlot and Mitchell, Phipson on Evidence, 11th ed (1970) at 260-261 The same statement appeared in the third through to the tenth editions198. The third and fourth editions were by Phipson199. Burrows and Cahn edited the fifth edition200. Burrows edited the sixth and seventh201. The next four editions were edited by D W Elliott202. Phipson's Manual is not a work of original learning, but it was used by generations of students. 1907-1963: Cockle The same is true of Ernest Cockle's Leading Cases on the Law of Evidence. The first edition stated203: "No witness, whether a party or stranger, is compellable to answer any question, or to produce any document, the tendency of which would be to expose the witness, or the wife or husband of the witness, to any criminal charge, penalty, or forfeiture reasonably likely to be brought, sued for, or enforced." The second edition repeated that statement, with the addition of the word "probably" before "the wife"204. The third edition was the same205, but the following note was added206: "As regards questions tending to criminate husbands and wives of witnesses, there may be some doubt. Probably the privilege exists in such cases." 198 It has not been possible to examine the second edition. 199 3rd ed (1921) at 58; 4th ed (1928) at 87. 200 5th ed (1935) at 94-95. 201 6th ed (1943) at 95; 7th ed (1950) at 81. 202 8th ed (1959) at 81; 9th ed (1966) at 93; 10th ed (1972) at 99-100; 11th ed (1980) 204 2nd ed (1911) at 235. 205 3rd ed (1915) at 290. 206 3rd ed (1915) at 292. The author then referred to Taylor, Best and Stephen. Phipson took over the fourth edition, and made no change but to add to the references to other authors a reference to the sixth edition of his treatise207. The fifth208 and sixth209 editions, by Cahn, were unchanged. Sturge prepared the seventh and eighth editions, with no change but the omission of the Phipson reference210. G D Nokes, Professor of Law in the University of London, edited the ninth, tenth and eleventh editions. Only the ninth and tenth editions contain material relevant to the common law. They omitted the first statement quoted above. They retained the second, but substituted "possibly" for "probably", and omitted the references to other works. No reason for these changes was stated211. 1910-2009: Halsbury In 1910 the first edition of Halsbury's The Laws of England stated212: "A witness may refuse to answer a question on the ground that the answer may tend to incriminate him, that is, may tend to expose the witness, or the husband or wife of the witness, to any kind of criminal charge, or to any kind of penalty or forfeiture." (emphasis added) R v Inhabitants of All Saints, Worcester was cited as one authority for the italicised words. The editors of that title were Hume-Williams, Phipson, J R V Marchant, A Clive Lawrence, Maurice L Gwyer, H G Robertson and W A Greene. Of these, Gwyer was editor of Anson's Law and Custom of the Constitution: Parliament and several editions of Anson's Law of Contract; Treasury Solicitor; First Parliamentary Counsel the Treasury; and Chief Justice of the Federal Court of India. Greene was to become Master of the Rolls. In 1934 that passage was repeated verbatim in the second edition with the same citation213. The editors were Mr Justice Roche, E Gibbs Kimber and T G Roche. In 1956 there was a passage to almost the same effect in the third 207 4th ed (1925) at 312 and 314. 208 5th ed (1932) at 318 and 320. 209 6th ed (1938) at 331 and 333. 210 7th ed (1946) at 331 and 333; 8th ed (1952) at 304 and 306. 211 9th ed (1957) at 295; 10th ed (1963) at 111. 212 (1910), vol 13 at 574 [784] (footnotes omitted). 213 (1934), vol 13 at 729 [804]. edition, which did not cite R v Inhabitants of All Saints, Worcester214. The editors were Nokes and James W Wellwood. In 1976 the fourth edition contained a passage to the same effect, with the deletion of a reference to forfeiture, but limited to non-criminal proceedings215. R v Inhabitants of All Saints, Worcester was cited, but so was s 14(1)(b) of the Civil Evidence Act 1968216. The editors were J Roy V McAulay, G Charles W Harris and Richard Inglis. In a reissue of the fourth edition in 1990, in the title on Criminal Law, Evidence and Procedure, the following appeared217: "It is not clear whether a spouse who gives evidence may refuse to answer a question on the grounds that to do so would incriminate the other spouse, but it seems probable that there is no such privilege." A footnote cited R v Pitt218, which appears to have caused the change; the other case cited, preceded by "Cf", was R v Inhabitants of All Saints, Worcester. It will be necessary to return to R v Pitt219. Further, Cartwright v Green220 was cited in all five editions of Halsbury for a proposition to the effect that the privilege against self-incrimination in relation to the inspection of documents "only extends to the party, and his or her wife or husband in the case of a criminal charge or penal proceedings"221. In the fifth edition, however, R v Inhabitants of All Saints, Worcester was relied on as an authority for spousal privilege222. 214 (1956), vol 15 at 422 [760]. 215 (1976), vol 17 at 167-168 [240]. 216 See below at [114]. 217 (1990), vol 11(2) at 993 [1186] (footnote omitted). 219 See below at [128]. 220 (1803) 8 Ves Jun 405 [32 ER 412]. 221 Halsbury, The Laws of England, (1910), vol 11, "Discovery, Inspection, and Interrogatories" at 84 [135]; 2nd ed (1933), vol 10, "Discovery, Inspection, and Interrogatories" at 396 [477]; 3rd ed (1955), vol 12, "Discovery, Inspection and Interrogatories" at 52 [72]; 4th ed (1975), vol 13, "Discovery, Inspection and Interrogatories" at 75 [92]; 5th ed (2009), vol 11, "Civil Procedure" at 468 [580]. 222 5th ed (2009), vol 11, "Civil Procedure" at 735-736 [974]. 1958-1979: Cross In the first edition of Evidence, Cross raised the question whether the privilege against self-incrimination "extends to answers which would criminate the witness's spouse"223. He answered it thus224: "There is no direct authority on the … point, but dicta suggest that the privilege does extend to answers tending to criminate the witness's spouse." He cited R v Inhabitants of All Saints, Worcester. He went on225: "The policy considerations underlying the existence of the privilege – conformity with public opinion and the encouragement of testimony appear to apply to such a case". That passage refers to an earlier passage226: "[T]he idea that a man should be compelled to give answers exposing himself to the risk of criminal punishment is probably still repellent to public opinion … There is the additional consideration that people must be encouraged to testify freely, and they might not be prepared to come forward as witnesses in the absence of some kind of privilege against incrimination." That is, Cross saw the privilege as existing. He saw its existence as justified by the repellent spectacle of one spouse giving answers exposing the other spouse to the risk of criminal punishment, and by the importance of encouraging the attendance of one spouse as a witness by enabling that spouse to give evidence on all topics except those involving the risk of incriminating the other spouse. To compel a competent witness to give evidence against that witness's wishes may be a fruitless enterprise. "The only good witness is a willing witness", says the practitioner's saw. But if that witness is prepared to give evidence on some issues, though not so as to incriminate the witness's spouse, there is some point in calling the witness if the witness can claim a privilege in the latter respect: it renders the witness less resistant to the idea of giving evidence at all. The passages from the first edition of Cross just quoted also appeared in the second, third and fourth editions227. In the fourth edition, Cross added the "To make assurance doubly sure with regard to the incrimination of the witness's spouse, section 14(1)(b) of the Civil Evidence Act, 1968 expressly extends the privilege to questions tending to have that effect." He also stated in a footnote: "There is a corresponding provision in clause 15(1)(b) of the draft Bill attached to the 11th Report of the Criminal Law Revision Committee; perhaps it is merely declaratory of the common law." Taken with the rest of the text, these additions do not suggest any doubt by Cross that the common law rule was as stated by Bayley J. The fifth edition was unchanged229. In a memorial address for Cross, A M Honoré said that Evidence was Cross's "major work". He said that it "broke new ground, and became the standard work not merely in Britain but throughout the English speaking Commonwealth." He said that it "established him as an authority in the eyes of academics, practitioners and those concerned with law reform." He said that "[m]any an English judge kept it by his side in court, and some, not finding the answer in the book, would even ring" the author at home. He went on: "Probably no living author has been so often cited by English judges in his own lifetime. … Evidence is the sort of book that is difficult to fault. Based on a complete mastery of the sources, legislative, judicial and literary, it sets out the law with virtually perfect precision. Every proposition incorporates all the appropriate qualifications, yet, in reading it, one is never in danger of losing the thread. [Cross] turned a subject which, in the hands of his predecessors, had been a confused jumble of doctrines, statutes, and decisions, into an academic discipline. A worthy successor of Blackstone, it was he who first in this country forced the 227 2nd ed (1963) at 231-232; 3rd ed (1967) at 229-230; 4th ed (1974) at 245. 228 4th ed (1974) at 246. 229 5th ed (1979) at 278. ragged strands of the law of evidence to speak the language of a scholar and a gentleman."230 H L A Hart added some points to be borne in mind in considering the significance of what Cross said on the present subject. He described Evidence as having presented "for the first time a fully comprehensive, lucid, and precise analytical account of the law. … To the successive editions of this renowned work, Cross devoted much thought and care, in effect reworking the subject each time he returned to it and often providing fresh evaluations even of the oldest and most obscure cases."231 Hart continued232: "He had an instinctive understanding, sharpened by practical experience as a solicitor, of what lawyers would find difficult and in need of explanation and what arguments would be acceptable to the Courts. Throughout, his main purpose was to formulate and explain clear rules, where the law as it stood was sufficiently settled to permit this, and to point out inconsistencies and to suggest acceptable principles for their resolution." There is no doubt that Cross had immense influence on the judges of his generation. To contend that any statement of his on the common law is erroneous is to assume a very heavy burden of persuasion. With respect, the appellant has not discharged it. 1985-2010: Cross and Tapper The sixth edition of Cross was published in 1985, after his death, and after two decisions which impelled the editor, Colin Tapper, then All Souls Reader in Law and Fellow of Magdalen College, Oxford, to change the text. The text now read233: 230 "Alfred Rupert Neale Cross 1912-1980", in Tapper (ed), Crime, Proof and Punishment: Essays in Memory of Sir Rupert Cross, (1981) xxi at xxiv. 231 "Alfred Rupert Neale Cross 1912-1980", (1984) 70 Proceedings of the British Academy 405 at 409. 232 "Alfred Rupert Neale Cross 1912-1980", (1984) 70 Proceedings of the British Academy 405 at 410-411. 233 Cross and Tapper, Cross on Evidence, 6th ed (1985) at 384 (two footnotes omitted). "In civil cases s 14(1)(b) of the Civil Evidence Act 1968 has extended the privilege to questions tending to criminate a spouse. The Criminal Law Revision Committee recommended a similar rule for witnesses in criminal proceedings, excepting only the accused and his spouse, though no such rule has as yet been enacted. It was unwilling to recommend such a general rule in respect of the accused or the spouse of the accused, nor has any such rule been included in the Police and Criminal Evidence Act 1984. Despite some old dicta to the contrary it seems that the privilege did not extend so far at common law. Thus in R v Pitt234 it was held that a spouse should be advised that if she chose to testify for the prosecution she would be treated like any other witness. In such circumstances she can be treated as hostile. All of this would be quite futile if she could nevertheless claim a privilege against incriminating her spouse." The reference to "old dicta" is to Bayley J in R v Inhabitants of All Saints, Worcester, given in a footnote to the text, followed by the words: "compare Lord Diplock in Rio Tinto Zinc Corpn v Westinghouse Electric Corpn [1978] AC 547 at 637 …, 'At common law … the privilege against self-incrimination was restricted to the person claiming it and not anyone else.'" The new material was repeated in succeeding editions235. The first of the decisions which impelled these changes was Rio Tinto Zinc Corp v Westinghouse Electric Corp236, where Lord Diplock said: "It was submitted that since the companies were entitled to withhold the documents from production, they had a privilege in English law to require their officers and servants to refuse to answer questions that might lead to the disclosure of the contents of the documents or provide evidence that would tend to expose the companies to a penalty. At common law, as declared in section 14(1) of the Civil Evidence Act 1968, the privilege against self-incrimination was restricted to the incrimination of the person claiming it and not anyone else. There is no trace in the decided cases that it is of wider application; no textbook old or modern 235 7th ed (1990) at 422; 8th ed (1995) at 458; 9th ed (1999) at 426-427; 10th ed (2004) at 452; 11th ed (2007) at 456; 12th ed (2010) at 425. The eleventh and twelfth editions added references to Callanan v B [2005] 1 Qd R 348, S v Boulton (2006) 151 FCR 364 and Lusty, "Is there a common law privilege against spouse-incrimination?", (2004) 27 University of New South Wales Law Journal 1. 236 [1978] AC 547 at 637-638. suggests the contrary. It is not for your Lordships to manufacture for the purposes of this instant case a new privilege hitherto unknown to the law." The following points may be made about this passage. First, it is part of reasons for judgment delivered on 1 December 1977. In its broad and dramatic statement of historical fact it is reminiscent of a statement he made earlier in the same year on 23 March in United Scientific Holdings Ltd v Burnley Borough Council237: "My Lords, if by 'rules of equity' is meant that body of substantive and adjectival law that, prior to 1875, was administered by the Court of Chancery but not by courts of common law, to speak of the rules of equity as being part of the law of England in 1977 is about as meaningful as to speak similarly … of Quia Emptores." As was soon pointed out, at that date, "Quia Emptores remained in force as a pillar of English real property law."238 Secondly, Lord Diplock was not dealing with an issue that had anything to do with the present question – whether one spouse could claim a privilege against answering questions, the answers to which might tend to incriminate the other. The question he was dealing with was whether companies which were entitled to withhold documents from production on the ground of a privilege against self-incrimination also had a privilege to require their officers and servants to refuse to answer questions that might lead to the disclosure of the contents of the documents or provide evidence that would tend to expose the company to a penalty. That is a very different question from the present question239. Thirdly, there is nothing to suggest that any argument on the present point was offered to the Court of Appeal or the House of Lords, or that Lord Diplock had it in mind. 237 [1978] AC 904 at 924. 238 Meagher, Gummow and Lehane, Equity: Doctrines and Remedies, 2nd ed (1984) at xi. 239 That consideration and the next consideration are also relevant in distinguishing Australian cases sometimes relied on to negate spousal privilege: Rochfort v Trade Practices Commission (1982) 153 CLR 134; [1982] HCA 66; Controlled Consultants Pty Ltd v Commissioner for Corporate Affairs (1985) 156 CLR 385; [1985] HCA 6; Master Builders Association (NSW) v Plumbers and Gas Fitters Employees' Union (Aust) (1987) 14 FCR 479; Concrete Constructions Pty Ltd v Plumbers and Gasfitters Employees' Union (1987) 15 FCR 31. Fourthly, from one point of view, it is not true that s 14(1) was restricted to the incrimination of the person claiming under s 14(1). Section 14(1)(b) specifically provided for its application in favour of one spouse in relation to the incrimination of the other. From another point of view, Lord Diplock's observation is true of s 14(1) omitting par (b); but the concept of a statutory provision "declaring" the common law is a contradiction in terms. A statute may preserve the common law. It may modify the common law. It may abolish the common law. But it cannot declare the common law. It is another branch of government which declares the common law. Fifthly, it is necessary to deal with Lord Diplock's statements that there is "no trace in the decided cases" and "no textbook old or modern" suggesting that the privilege against self-incrimination applies beyond the incrimination of the person claiming it. The materials examined above provide many illustrations of old and modern textbooks suggesting that it extends to the spouse, including the current edition of the leading textbook available when Lord Diplock spoke. And those materials all construe R v Inhabitants of All Saints, Worcester as a case stating a position which is to the contrary of Lord Diplock's. A statement, per incuriam, by a single member of the House of Lords on a point not argued without offering any reasoning cannot alter the law stated in the treatises described above. And, as will be seen below, it is not true that there is "no trace in the decided cases" of spousal privilege240. The other case which impelled the change in the sixth edition of Cross was R v Pitt. A husband was accused of assault occasioning actual bodily harm to his baby. His wife made a witness statement adverse to her husband. Although she was not a compellable witness241, she entered the witness box, was sworn, and was examined in chief. She then gave answers inconsistent with the witness statement. The trial judge acceded to a prosecution application that she be treated as a hostile witness, and she was cross-examined on the witness statement. The husband was convicted by the jury. The English Court of Appeal allowed an appeal. It reasoned that the verdict was unsafe and unsatisfactory on the ground that insufficient steps had been taken to ensure that the wife was in truth willing to enter the witness box and thus waive her right, as a person who was not compellable as a witness, not to do so. Hence she ought not to have been declared hostile. The consequence of declaring her hostile was to put before the jury the contents of the witness statement, which went only to credit, not to the truth of its contents, and this possibly affected the minds of the jury. The passage 240 See below at [141]-[150]. 241 Leach v The King [1912] AC 305; Hoskyn v Metropolitan Police Commissioner which persuaded Tapper to alter the text appears to have been the following242: "If [the wife] waives her right of refusal [to enter the witness box], she becomes an ordinary witness." This was not a necessary part of the reasoning leading towards the allowing of the appeal. The argument was presented by two juniors; judgment was reserved for only two days; and there is no trace in the argument of counsel or the reasoning of the Court that anyone had in mind the existence or otherwise of the type of privilege recognised by Bayley J in R v Inhabitants of All Saints, Worcester. These two English cases, not directed to the present problem and not containing any reasoning germane to it, cannot affect Australian law. 1964-1980: Cross and Wilkins In 1964, in An Outline of the Law of Evidence, Cross and Nancy Wilkins cited R v Inhabitants of All Saints, Worcester in support of the proposition that "probably" spousal privilege existed243. The same was true of the second edition244. In the third edition245 it was stated, citing R v Inhabitants of All Saints, Worcester, that spousal privilege existed in civil cases by reason of the Civil Evidence Act 1968, s 14(1)(b), and in criminal cases "probably … by virtue of the common law." The same was true of the fourth edition246. In the fifth edition Art 29 referred to spousal privilege. The explanation contained a statement similar to that appearing in the third and fourth editions247. Post-1980 questioning There has been some recent questioning, in England and elsewhere248, about whether spousal privilege exists at common law. That may have been stimulated by the English Law Reform Committee's statement in 1967 that the 242 [1983] QB 25 at 30. 244 2nd ed (1968) at 75. 245 3rd ed (1971) at 79-80. 246 4th ed (1975) at 83. 247 5th ed (1980) at 99-100. 248 For example, McNicol, Law of Privilege, (1992) at 224-227; Ligertwood and Edmond, Australian Evidence: A Principled Approach to the Common Law and the Uniform Acts, 5th ed (2010) at 458-459 [5.165]. position was "not clear"249 and by the English Criminal Law Revision Committee's statement in 1972 that the common law position was "doubtful"250. It may also have been stimulated by a feeling that if a law reform committee recommends legislation on a point, there can be no equivalent common law on that point. The feeling is surely irrational, particularly when those two Committees thought the spousal privilege to be, not pernicious, but desirable. But no one has explained why the position is unclear or doubtful. The weight of professional tradition The appellant did not point to any authority251 in which it has been held or even said that Bayley J was wrong. The appellant did not focus on writers, whose works were for it mostly very barren fields, but the above survey reveals that no writer has ever said, until the 1980s, that Bayley J was wrong either. Even writers who used expressions conveying less than certainty, like "seems", did not say "does not seem". Even less can it be said that any writer advanced an argument for why Bayley J might be wrong. And the modern English writers who cast a shadow over Bayley J do so only on the strength of decisions which are on this point unsatisfactory like the Rio Tinto Zinc case and R v Pitt. Hale justified the practice of holding jury trials mainly before the "twelve men in scarlet who sit in Westminster Hall"252 in the following way253: "[I]t keeps both the Rule and the Administration of the Laws of the Kingdom uniform; for those Men are employ'd as Justices, who as they have had a common Education in the Study of the Law, so they daily in Term-time converse and consult with one another; acquaint one another with their Judgments, sit near one another in Westminster-Hall, whereby their Judgments and Decisions are necessarily communicated to one another, either immediately or by Relations of others; and by this Means their Judgments and their Administrations of common Justice carry a Consonancy, Congruity and Uniformity one to another, whereby both the 249 Law Reform Committee, Sixteenth Report (Privilege in Civil Proceedings), (1967) Cmnd 3472 at 6 [9(1)]. 250 Criminal Law Revision Committee, Eleventh Report: Evidence (General), (1972) Cmnd 4991 at 103 [169]. 251 Apart from S v Boulton (2005) 155 A Crim R 152. 252 Simpson, "The Common Law and Legal Theory", in Simpson (ed), Oxford Essays in Jurisprudence (Second Series), (1973) 77 at 96. 253 Hale, The History of the Common Law of England, 2nd ed (1716) at 252-253. Laws and the Administrations thereof are preserv'd from that Confusion and Disparity that would unavoidably ensue, if the Administration was by several incommunicating Hands, or by provincial Establishments". That professional background continued to exist well after R v Inhabitants of All Saints, Worcester was decided. It supports Simpson's view that254: "the common law system is properly located as a customary system of law in this sense, that it consists of a body of practices observed and ideas received by a caste of lawyers, these ideas being used by them as providing guidance in what is conceived to be the rational determination of disputes litigated before them, or by them on behalf of clients, and in other contexts. These ideas and practices exist only in the sense that they are accepted and acted upon within the legal profession, just as customary practices may be said to exist within a group in the sense that they are observed, accepted as appropriate forms of behaviour, and transmitted both by example and precept as membership of the group changes." It is significant that included within the relevant "caste of lawyers" are those who act "on behalf of clients" – "the legal profession". Simpson continued255: "Now a customary system of law can function only if it can preserve a considerable measure of continuity and cohesion, and it can do this only if mechanisms exist for the transmission of traditional ideas and the encouragement of orthodoxy. There must exist within the group – particularly amongst its most powerful members – strong pressures against innovation; young members of the group must be thoroughly indoctrinated before they achieve any position of influence, and anything more than the most modest originality of thought treated as heresy. In past centuries in the common law these conditions were almost ideally satisfied. The law was the peculiar possession of a small, tightly organized group comprising those who were concerned in the operation of the Royal courts, and within this group the serjeants and judges were dominant. Orthodox ideas were transmitted largely orally, and even the available literary sources were written in a private language as late as the seventeenth century. A wide variety of institutional arrangements tended to produce cohesion of thought. The organization of the profession was gerontocratic, as indeed it still is, and promotion depended upon approval by the senior members of the profession. The system of education and 254 Simpson, "The Common Law and Legal Theory", in Simpson (ed), Oxford Essays in Jurisprudence (Second Series), (1973) 77 at 94. 255 Simpson, "The Common Law and Legal Theory", in Simpson (ed), Oxford Essays in Jurisprudence (Second Series), (1973) 77 at 95. apprenticeship, the residential arrangements, the organization of dispute and argument … all assisted in producing cohesion in orthodoxy and continuity." Hence Blackstone said that the "chief corner stone" of the laws of England was "general immemorial custom, or common law, from time to time declared in the decisions of the courts of justice; which decisions are preserved among our public records, explained in our reports, and digested for general use in the authoritative writings of the venerable sages of the law."256 By at least the 19th century a key mechanism for the transmission of traditional ideas and the encouragement of orthodoxy was the treatise, written by practitioners and for practitioners. Hence the relevant "caste" of experts is not only not limited to the twelve men in scarlet and those who appear in front of them, but includes those responsible for authoritative writings. And the status of those writings depended partly on the audience at which they were directed and its reaction to them. It has been contended, not without reason, "that the self-image of the common law as judge-made is incomplete. It is judge-and-jurist-made. The common law is to be found in its library, and the law library is nowadays not written only by its judges but also by its jurists." The same author said: "it is a fact that the author-practitioner is a rarity, and for its library the common law now relies for the most part on the university jurists."257 So far as this last proposition is true, it only became true quite recently. Its incorrectness for earlier times is illustrated, in a specific field, by the survey of the authors and editors attempted above. The subjects of that survey have all, until very recent times, been barristers. Not all became known to fame, but some did. Of evidence authors, as of others in the 19th century, it is true that258: "many authors were young men and not prestigious figures when they published their treatises (though some became celebrated later in life, either through success in practice, or through a reputation for learning acquired by means of their writings)." Some wrote or edited more than one of the works referred to above. As authors and editors, they were likely to be keeping an eye on each other's work and on 256 Blackstone, Commentaries on the Laws of England, (1765), bk 1 at 73. 257 Birks, "The academic and the practitioner", (1998) 18 Legal Studies 397 at 399-400. Cf Simpson, "The Rise and Fall of the Legal Treatise: Legal Principles and the Forms of Legal Literature", (1981) 48 University of Chicago Law Review 258 Simpson, "The Rise and Fall of the Legal Treatise: Legal Principles and the Forms of Legal Literature", (1981) 48 University of Chicago Law Review 632 at 667-668. any decision likely to affect their work. As barristers they belonged to a tightly knit class centralised in a small part of London. It was in many ways a class ideally suited for the protection of liberty and the rule of law. It was a moody murmurous class. Its members were prone to gossip and asperity amongst themselves, conscious of the infirmities of each other and of the judiciary, in constant touch at breakfast, dinner, lunch and tea, or while moving to and from court, and eager to pass on any errors in law books or developments which might affect their accuracy. Premchand said: "What does a thief get by killing another thief? Contempt. But a scholar who slanders another gets glory." The evidence writers sought no glory in that way in relation to the efforts of each other on spousal privilege. Their works reveal a general professional consensus. Writings of that kind generated out of that professional tradition are capable of constituting a source of law in their own right259. Best CJ said, speaking of an opinion of Coke on a point of real property law260: "The fact is, … Coke had no authority for what he states, but I am afraid we should get rid of a good deal of what is considered law in Westminster hall, if what … Coke says without authority is not law. He was one of the most eminent lawyers that ever presided as a judge in any court of justice, and what is said by such a person is good evidence of what the law is, particularly when it is in conformity with justice and common sense." If that is true of a single eminent lawyer, it is true also of a school of thought among a large number of less eminent lawyers, even leaving aside the authority, relatively limited though it may be, which supports it261. That proposition is not negated by the rule supposedly existing at various times in the past against citing 259 An illustration coming from the somewhat different conditions of modern-day Australia is Mr Lusty's first class article, "Is there a common law privilege against spouse-incrimination?", (2004) 27 University of New South Wales Law Journal 1. It furnished the first respondent with a considerable amount of ammunition. Rarely can one party have paid so great a tribute to a legal work by devoting so much of its argument to the attempted destruction of a single article as the appellant did. It is an article which may have led to this litigation: for McPherson JA said that he would have denied the existence of the common law spousal privilege had he not read it (Callanan v B [2005] 1 Qd R 348 at 352 [6]) and it may be surmised that if so scholarly and respected a judge had denied it no one else would have supported 260 Garland v Jekyll (1824) 2 Bing 273 at 296-297 [130 ER 311 at 320]. 261 See below at [141]-[150]. living authors, for there was no ban on taking their reasoning into account. As Lord Buckmaster said262: "the common law must be sought in law books by writers of authority and in judgments of the judges entrusted with its administration. … [T]he work of living authors, however deservedly eminent, cannot be used as authority, though the opinions they express may demand attention". Of course professional conditions began to change in the generations after R v Inhabitants of All Saints, Worcester was decided. But the opinions of Bayley J entered the common law in part through treatises, and changes in professional conditions alone – even changes much more radical than those which have occurred – could not remove them. The submissions of the appellant entail an assumption that the body of legal writing from 1817 to 1980 surveyed above represents a massive deception of the reading public – judiciary, practitioners and students – stemming from a general self-delusion on the part of nearly 70 writers and editors over nearly two centuries. With respect to the appellant's position, it is not possible to accept that assumption. The silence of the Commissioners One argument advanced by the appellant was that spousal privilege does not exist, because if it did it would have been mentioned in the second report of Her Majesty's Commissioners for inquiring into the process, practice and system of pleading in the superior courts of common law (1853). The report dealt with many topics over 46 pages. It treated the law of evidence in 17 pages, and those pages dealt with many subjects in that field. It recommended enactment of a statutory privilege for marital communications, but that is a very different thing from spousal privilege. The report did not deal with privilege against self-incrimination, with legal professional privilege or with "without prejudice" privilege; it does not follow that they did not know of the existence of these privileges. Their failure to discuss it is more consistent with a desire to leave it untouched than with a view that it did not exist. Pointers to spousal privilege of secondary significance It is possible to identify, but desirable only to assign secondary significance to, various instances on which the first respondent relied, and various other instances. One category comprises cases in which counsel whose client would have been advantaged by a denial of the privilege in fact assumed its 262 Donoghue v Stevenson [1932] AC 562 at 567. existence. An example is R v Wilde, in which the accused was charged with stealing some property of W Stallard. Mrs Stallard was called. "She appealed to the Court, that she should not be bound to answer questions which might have a tendency to criminate her husband." The Solicitor-General, who was counsel for the prosecution, "pledged himself not to put any question that could have such a tendency."263 Another category comprises circumstances in which counsel have claimed the privilege or advanced arguments which depend on its existence264. Another category comprises instances in which the court has assumed the privilege265. Another category of instances are those in which non-curial bodies have assumed the existence of spousal privilege266. These cases are pointers to a state of professional opinion which recognises the existence of the privilege. They have similarities in that respect with statutes which assume the existence of the privilege. Legislatures have assumed that spousal privilege exists at common law by enacting legislation preserving it in both curial267 and extra-curial268 contexts. Legislatures have also assumed that spousal privilege exists at common law by enacting legislation abolishing it in relation to particular curial269 263 Colonial Times (Hobart), 20 July 1831 at 3. 264 Re Robert Sterling Pty Ltd (in liq) and the Companies Act (No 2) [1979] 2 NSWLR 265 Re Wagner [1958] QWN 49. 266 The Southampton case (1842) Barr & Aust 376 at 399 (election petition heard by Members of Parliament). See also The Hobart Town Daily Mercury, 25 June 1859 at 3 (Coroner cautioned witness not to answer any questions which might criminate her husband); The Sydney Morning Herald, 11 September 1906 at 8 and The Mercury (Hobart), 12 September 1906 at 3 (Royal Commissioner "told witness she need not answer any question tending to incriminate her husband, whereupon she replied defiantly, 'I do not fear doing that.'"). 267 Evidence Act 1971 (ACT), s 57 (now repealed). 268 Australia: Coroners Act 1958 (Q), s 33(2) (now repealed); Parole Act 1976 (ACT), s 19(3)(b) (now repealed); Police (Complaints and Disciplinary Proceedings) Act 1985 (SA), ss 25(10) and 28(13). United Kingdom: Pensions Act 1995, s 102(1) (now amended); Jobseekers Act 1995, s 33(9) (now amended); National Minimum Wage Act 1998, s 14(2). New Zealand: Apple and Pear Marketing Act 1971, s 45(b) (now repealed); Petroleum Demand Restraint Act 1981, s 18. 269 Australia: Defamation Act 1974 (NSW), s 56 (now repealed); Local Government Regulations 1994 (Tas), reg 11 (now repealed). United Kingdom: Theft Act 1968, s 31(1); Criminal Damage Act 1971, s 9; Senior Courts Act 1981, s 72; Representation of the People Act 1983, s 141; Children Act 1989, s 48(2); (Footnote continues on next page) or extra-curial270 proceedings. A distinct category comprises authorities turning not on privilege but on whether a person is not competent or not compellable (for example, Riddle v The King271, Leach v The King272 and Hoskyn v Metropolitan Police Commissioner273). They are not useful save to the extent that they contain statements about, or capable of extension to, privilege. The authorities It is true that there is not a vast quantity of authority in the field of privilege (as distinct from non-compellability) to support Bayley J. Despite that, the first respondent correctly submitted that the appellant had failed to "identify any judicial statements, obiter or otherwise, to support its contention that there is no such privilege."274 She might have added: "nor any but very recent and scanty statements by legal writers". The fewness of the cases supporting Bayley J is a consequence of the relatively limited number of occasions on which the point can arise. In particular, a non-compellable spouse alert to protect the interests of the other spouse is more likely to rely on non-compellability to avoid entering the box at all than to rely on privilege after entering it. But there are authorities which support Bayley J. Contrary to one of the appellant's submissions, spousal privilege has been "applied". A claim to it was upheld in R v Hamp275. In Lamb v Munster276 Stephen J quoted his own Digest to the effect that the privilege against self-incrimination extends to questions which "have a European Parliamentary Elections Regulations 2004, reg 98. New Zealand: Destitute Persons Act 1910, s 69 (now repealed). 270 Australia: Workers Compensation Act 1951 (ACT), s 163(4) (now amended); Fair Trading (Consumer Affairs) Act 1973 (ACT), s 13(3) (now amended). New Zealand: Commerce Act 1986, s 106(4) (now amended); Takeovers Act 1993, s 11(4) (now amended). 271 (1911) 12 CLR 622. 274 Apart from S v Boulton (2005) 155 A Crim R 152. 275 (1852) 6 Cox CC 167 at 170. 276 (1882) 10 QBD 110 at 112-113. tendency to expose the witness, or the wife or husband of the witness, to any criminal charge". Self-corroboration has strictly limited virtues, but it cannot be said that he permitted any doubt to affect his expression of the privilege. What of the United States? In Commonwealth v Reid, Paxson J of the Supreme Court of Pennsylvania quoted Bayley J with approval277. The case concerned the evidence of a woman on whom an abortion had allegedly been performed by the defendant, and also by a man who was the defendant in a separate prosecution. The latter had married the woman shortly before the trial. She did not object to being examined: that is, the case did not concern non-compellability. Paxson J stated the following rule: in cases where "the husband or wife is a competent witness for the commonwealth, it is, notwithstanding, his or her privilege to decline to testify to such facts as will criminate the other."278 Paxson J also said279: "the District Attorney advised the witness when she went upon the stand that she was not bound to answer any questions which would criminate her husband. This was a proper instruction, and would have been given by the court, if asked for." In 1924 the law was stated thus280: "A witness may … refuse to disclose matters tending to show that the husband or wife of such witness is guilty of a crime." In the United States the privilege has been pushed from view by a formally different "privilege against adverse spousal testimony"281. Turning to Canadian authority, in Millette v Litle282, an action for civil libel, the defendants, who were married, were examined by way of oral discovery. The husband apparently answered some questions, but objected to 277 4 Am L Times Rep 141 at 147 (1871). 278 4 Am L Times Rep 141 at 149 (1871). 279 4 Am L Times Rep 141 at 150 (1871). See also State v Briggs 9 RI 361 at 366 (SCRI, 1869) (approving Bayley J in R v Inhabitants of All Saints, Worcester); Williams v State 69 Ga 11 (SC Ga, 1882); Woods v State 76 Ala 35 at 39-40 (SC Ala, 1884); Watson v State 61 S 334 at 335 (SC Ala, 1913); State v Deslovers 100 A 64 at 71-72 (SCRI, 1917). 280 McKelvey, Handbook of the Law of Evidence, 3rd ed (1924) at 443 [236]. See also Torcia (ed), Wharton's Criminal Evidence, 13th ed (1972), vol 2 at 237 [391]. 281 See Trammel v United States 445 US 40 (1980). 282 (1884) 10 Ont Pr Rep 265. others on the ground that the answers would tend to expose both himself and his wife to prosecution for criminal libel. The wife took the same approach. The Master in Chambers upheld the objection in relation to questions tending to incriminate the defendant questioned, but not in relation to questions tending to incriminate the spouse of the defendant questioned. Galt J, to whom the defendants cited R v Inhabitants of All Saints, Worcester and Lamb v Munster, allowed an appeal. His reasons are summarised thus in the report283: "the privilege of declining to answer questions of an incriminating tendency … extended to cases where the danger … apprehended was the criminal prosecution of the wife or husband of the witness." The judgment of Mills J in the Supreme Court of Canada (dissenting, but not on this point) in Gosselin v The King contained a dictum stating spousal privilege284. So did that of the Ontario Court of Appeal (Morden JA, speaking for himself, Porter CJO and LeBel JA) in R v Mottola285. There are dicta quoting Stephen J's statement in Lamb v Munster with approval286. There are remarks of McLachlin JA (as she then was) approving the dicta of Bayley J. Like Lord Edmund-Davies, she construed them287 as "not directed to compellability in the sense of whether a witness must take the stand and testify, but at the quite different question of privilege – what questions a witness properly on the stand may be compelled to answer."288 There are also remarks of McLachlin JA289 quoting with apparent approval the proposition that R v Inhabitants of All Saints, Worcester is "some authority for the proposition 283 (1884) 10 Ont Pr Rep 265 at 266. 284 (1903) 33 SCR 255 at 279-280. 285 [1959] OR 520 at 525. 286 Attorney-General v Kelly (No 2) (1915) 9 WWR 863 at 866; Bell v Klein [1954] 1 DLR 225 at 229-230; Thomson Newspapers Ltd v Canada (Director of Investigation and Research, Restrictive Trade Practices Commission) [1990] 1 SCR 425 at 472-473; R v S (RJ) [1995] 1 SCR 451 at 491 [57]. 287 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 502. 288 R v McGinty (1986) 27 CCC (3d) 36 at 51. See also at 58. 289 R v McGinty (1986) 27 CCC (3d) 36 at 51. that the privilege of a witness against self-incrimination extends at common law to questions which might incriminate the witness's spouse."290 Turning to Australia, in Tinning v Moran291 the Industrial Commission of New South Wales (Cantor, Ferguson and De Baun JJ), obiter, quoted with approval Stephen's formulation of spousal privilege as it appeared in Shaw's edition of Stephen's Digest292. In Re Intercontinental Development Corp Pty Ltd Bowen CJ in Eq uttered dicta supporting spousal privilege, citing Lamb v Munster293. His dicta have been quoted294 or referred to with approval295 in numerous later cases. Stephen J's formulation in Lamb v Munster has been quoted with approval quite recently296. There are also dicta taking the form of quotation from treatises which state that spousal privilege exists297. In New Zealand Tompkins J held that a wife examined by the Director of the Serious Fraud Office could not be forced to answer particular questions the answers to which could disclose any inter-spousal communication during marriage: s 29 of the Evidence Amendment Act (No 2) 1980 (NZ) created a statutory privilege to that effect. He treated that as "lawful justification or excuse" (within the meaning of s 45(d) of the Serious Fraud Office Act 1990 (NZ)) for not answering. He also held that she had a lawful excuse or justification for not providing answers "which may contain information that may assist in proving" charges against her husband. The latter holding does not 290 Williams, "Case and Comment" on Hoskyn v Metropolitan Police Commissioner, [1978] Criminal Law Review 429 at 430. 291 (1939) 38 IAR (NSW) 148 at 151. 292 Digest of the Law of Evidence, NSW edition (1909) at 156. 293 (1975) 1 ACLR 253 at 259. 294 Navair Pty Ltd v Transport Workers' Union of Australia (1981) 52 FLR 177 at 193; Metroplaza Pty Ltd v Girvan NSW Pty Ltd (in liq) (1992) 37 FCR 91 at 92; Re New World Alliance Pty Ltd; Sycotex Pty Ltd v Baseler (1993) 47 FCR 90 at 96. 295 Re Robert Sterling Pty Ltd (in liq) and the Companies Act (No 2) [1979] 2 NSWLR 723 at 726 (spousal privilege claimed in support of a stay application). 296 Australian Securities and Investments Commission v United Investment Funds Pty Ltd (2003) 46 ACSR 386 at 387 [2]. 297 Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 at 125. concern a statutory privilege, and can only relate to common law spousal privilege298. The appellant said that Stephen J's statement of spousal privilege in Lamb v Munster had been "uncritically" repeated in later cases and in texts. It does not follow from the fact that some judges did not engage in close reasoning about spousal privilege that they were merely mouthing formulae. In his own Digest Stephen – who was one of the least uncritical lawyers who ever lived, least of all about himself – set out briefly some competing considerations as well as a firm statement of spousal privilege. The memory of Sir Nigel Bowen remains green in contemporary minds, and his reputation stands high: it was not his practice uncritically to parrot the propositions of law to which he referred. Further, what is believed to be true does not necessarily have to be re-examined critically in every case. Some things can be so much the subject of agreement that they need not be re-agitated. "Uncritical" repetition can be a badge both of the universal acceptance of spousal privilege and of its importance. Apart from the explanations given above to account for the lack of authority for spousal privilege299, there is another possible explanation both for it and for the expression of such doubts about privilege as the writers expressed. Simpson, writing in 1973, put it thus300: "In a tightly cohesive group there will exist a wide measure of consensus upon basic ideas and values as well as upon what views are tenable. Argument and discussion will commonly produce agreement in the end, and so long as this is the case there will be little interest in how or why this consensus is achieved. There is no a priori reason for supposing that just because agreement is commonly reached this is because there in fact is a rational way of deciding disputes. When however cohesion has begun to break down, and a failure to achieve consensus becomes a commoner phenomenon, interest will begin to develop in the formulation of tests as to how the correctness of legal propositions can be demonstrated, and in the formulation of rules as to the use of authorities – that is to say warrants or proofs that this or that is the law. This is the phenomenon of laws of citation, and it has really struck the common law only in the last century. It seems to me to be a symptom of the breakdown of a system of customary or traditional law. For the only function served by rules telling 298 Hawkins v Sturt [1992] 3 NZLR 602 at 610. 299 See above at [72] and [142]. 300 Simpson, "The Common Law and Legal Theory", in Simpson (ed), Oxford Essays in Jurisprudence (Second Series), (1973) 77 at 98-99. lawyers how to identify correct propositions of law is to secure acceptance of a corpus of ideas as constituting the law. If agreement and consensus actually exist, no such rules are needed, and if it is lacking to any marked degree it seems highly unlikely that such rules, which are basically anti- rational, will be capable of producing it. It is therefore not surprising to find that today, when there is great interest in the formulation of source rules in the common law world, the law is less settled and predictable than it was in the past when nobody troubled about such matters. In a sense this is obvious. There is only a felt need for authority for a legal proposition when there is some doubt as to whether it is correct or not; in a world in which all propositions require support from authority, there must be widespread doubt. The explanation for the breakdown in the cohesion of the common law is complex, but it is easy to see that the institutional changes of the nineteenth century, and the progressive increase in the scale of operations, had much to do with the process." These institutional changes began after R v Inhabitants of All Saints, Worcester was decided. For much of the 19th century there was nothing like the modern obsession with the citation of authority, particularly recent authority. In that period there was no need for authority about spousal privilege. It was only when the factors referred to by Simpson began to generate that citation obsession that any doubts were expressed about spousal privilege. Conclusion on curial spousal privilege at common law The Queensland Court of Appeal301, the Federal Court of Australia302 and the Full Court of the Federal Court of Australia303 were correct to accept that for some time the common law has recognised one spouse as having a privilege not to answer questions the answers to which may incriminate the other spouse. It is therefore not necessary to consider the arguments advanced by the appellant against now creating spousal privilege for the first time. Is spousal privilege a "rule of evidence" or a "rule of substantive law"? The second of the three key issues in this appeal is whether spousal privilege is limited to trials in court, or is available before bodies other than courts. It has been said that the issue rests on a distinction between rules of 301 Callanan v B [2005] 1 Qd R 348. 302 Stoten v Sage (2005) 144 FCR 487. 303 S v Boulton (2006) 151 FCR 364; Stoddart v Boulton (2010) 185 FCR 409. evidence and rules of substantive law304. Examples of "rules of substantive law" in that sense include the privilege against self-incrimination and legal professional privilege. There are several reasons for treating spousal privilege as being, in this sense, a rule of substantive law. Within its narrow sphere it is at least as important a privilege as legal professional privilege. Its basis is different, but it lacks any of the unattractive features of legal professional privilege. One unattractive feature is its tendency to engender ex parte decisions by clients, or by the lawyers representing them, which, in borderline cases or even cases which are far from the borderline, almost always favour that party. Another is its tendency to stimulate false swearing when the opposing party challenges the claim to privilege. Another is its tendency to dominate not only the interlocutory stages of litigation to the exclusion of any other question, but to some extent trials as well. Yet another is its extraordinary and growing complexity. Spousal privilege reflects greater altruism than the privilege against self-incrimination. The privilege against self-incrimination gives witnesses a right to protect their self-interest. It is true that there may be elements of self-interest when spousal privilege is claimed – the claim by a wife with a view to keeping her husband out of gaol may be made to improve the wife's financial position, for his capacity to earn will be much greater out of gaol than in. But the claim may also be made to protect the children of the marriage, to preserve the family and to save a once-loved, perhaps still-loved, spouse from suffering. If the privilege against the incrimination of oneself is a fundamental right applying outside litigation in relation to all compulsory fact-finding, why not a privilege against the incrimination of another person or persons, who may, to the claimant for the privilege, be dearer than self? Then there are considerations underlying the non-compellability of spouses which, if sound, are relevant to spousal privilege. It is not proposed to set out fully all the considerations which might be marshalled on these points, including those which, though appropriate for the thinking of past periods, carry less or very little significance in many minds today. It is proposed merely to point to a few which have been adopted by final appellate courts. The question is not whether those considerations are in the end convincing, but whether, assuming that they are convincing, as one must in view of their adoption as the basis of rules of law, they mark out spousal non-compellability and spousal 304 Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at 552-553 [10], 563 [44] and 575-576 [85]; [2002] HCA 49. privilege as rules viewed by the courts as sufficiently important to be treated as "rules of substantive law", not merely "rules of evidence". One consideration identified by Griffith CJ in Riddle v The King was305: "it might … tend to disturb the peace of a great many families, if for every breach of the criminal law, however trivial, committed by a husband against his wife a stranger should be allowed to intervene and compel her to come into Court and give evidence against her husband." Another consideration is that courts have thought that to compel one spouse to give evidence against the other is to create a spectacle which, by reason of the interrelationship of the spouses, both emotional and financial, arising out of shared experiences in the past and the expectation of them for the future, would be repugnant to the public. Thus in Hoskyn v Metropolitan Police Commissioner Lord Wilberforce (Lord Keith of Kinkel concurring) said306: "a wife is in principle not a competent witness on a criminal charge against her husband. This is because of the identity of interest between husband and wife and because to allow her to give evidence would give rise to discord and to perjury and would be, to ordinary people, repugnant. Limited exceptions have been engrafted on this rule, of which the most important, and that now relevant, relates to cases of personal violence by the husband against her. This requires that, as she is normally the only witness and because otherwise a crime would go without sanction, she be permitted to give evidence against him. But does this permission, in the interest of the wife, carry the matter any further, or do the general considerations, arising from the fact of marriage and her status as a wife, continue to apply so as to negative compulsion?" In his view the answer to the latter question was "Yes". That approach would support spousal privilege as well as non-compellability. Viscount Dilhorne found it "very repugnant" if "a wife could be compelled at the instance of any prosecutor to testify against her husband on a charge involving violence, no matter how trivial and no matter the consequences to her and to her family."307 Lord Salmon said of the non-compellability rule308: 305 (1911) 12 CLR 622 at 631. 306 [1979] AC 474 at 488. 307 [1979] AC 474 at 494. 308 [1979] AC 474 at 495. "This rule seems to me to underline the supreme importance attached by the common law to the special status of marriage and to the unity supposed to exist between husband and wife. It also no doubt recognised the natural repugnance of the public at the prospect of a wife giving evidence against her husband in such circumstances." The repugnance referred to arises as much with inquiries conducted by a non-court in private as it does with litigation conducted before a court in public. To say there is "natural repugnance" is to make an empirical statement. It has never been empirically verified, but can it be doubted? Stone found it to be a very powerful proposition – not resting on the impact of a particular instance, but on a more general consideration. He said309: "Its real force lies, not in regard to the particular family on whom sordid tragedy has descended, but in the shock to all other citizens whose imagination is led to play upon the horror of such possibilities. Its evil lies in the blow, not to a concrete family, but to the idea of the family which society at large has built up. The evil thus aimed at is socio-psychological merely, but it is not thereby the less grave." Those considerations also underlie spousal privilege. Many might disagree with them, but the law assumes them to be sound. On that assumption, they are plainly important. There are other arguments which have received less explicit recognition in the authorities but which were referred to in Lord Salmon's allusion to "the special status of marriage". Janice Brabyn has convincingly submitted that "even, perhaps especially, our relatively fragmented, highly individualistic 21st century society has a real stake in the viability and stability of marriages."310 She argued that this was "because of the nature of modern marriages as intimate and committed relationships and the crucial roles such relationships play in the current and future stability, quality and development of human societies."311 After giving specific reasons for those conclusions she continued312: 309 Stone, Evidence: Its History and Policies, (1991) at 606-607. 310 Brabyn, "A Criminal Defendant's Spouse as a Prosecution Witness", [2011] Criminal Law Review 613 at 616 (footnote omitted). 311 Brabyn, "A Criminal Defendant's Spouse as a Prosecution Witness", [2011] Criminal Law Review 613 at 616 (footnote omitted; emphasis in original). 312 Brabyn, "A Criminal Defendant's Spouse as a Prosecution Witness", [2011] Criminal Law Review 613 at 617-618 (footnotes omitted). "Committed, intimate relationships both require and promote relatively high levels of intra-relationship interaction and trust. Intimate self-disclosures are common and necessary. Simply by virtue of close proximity and interaction intimate relationship participants are likely to observe or otherwise learn facts that could directly or circumstantially incriminate the defendant. … No doubt, those involved in preventing, investigating and prosecuting crime would often find such 'relationship information' useful – but forming and maintaining committed intimate relationships requires that potential and actual participants must be confident that relationship information is not generally accessible to the outside world. It is noteworthy that societies that have experienced widespread officially enforced intra family denunciations have found them extremely socially and individually destructive. So, fewer relationships may form. Certainly few will survive one spouse giving significant incriminating evidence against the other. That the spouse was compelled to testify will rarely assist – the defendant will likely deny the spouse was compelled to say the incriminating words actually uttered. In families that do carry on, the residual acrimony and distrust may destroy much of their value. Society has an interest in minimising such damage. Finally, at the level of particular families, all the arguments against compelling a spouse to sacrifice marriage and family interests, perhaps even risk physical injury from the defendant or other family members in the name of criminal justice are as strong as they ever were. Respect for 'personal and family life' must at least mean that imposing these exceptional burdens on spouses cannot be routinely justified whenever the defendant is accused of having broken any criminal law." These arguments for spousal non-compellability also support the existence of spousal privilege even in the case of compellable spouses; and, once it is accepted that spousal privilege exists, they demonstrate why it is thought to be important. In this age of human rights protection, arguments of the above kind might be said to require spousal privilege to be characterised as a human right. It favours liberty313. It preserves a small area of privacy and immunity from the great intrusive powers of the state, and those who invoke them. It fosters human dignity. It helps maintain self-respect. It avoids what is sometimes called a "trilemma" for a wife, for example. Without the privilege, if the wife tells the truth, the husband will be punished; if, to avoid that outcome, she contrives an 313 Rank Film Distributors Ltd v Video Information Centre [1982] AC 380 at 442. untrue answer to protect the husband, she will be punished; and if she seeks to avoid the first two consequences by refusing to answer, she will be punished. Many discount these considerations when the selfish interests of a claimant to the privilege against self-incrimination are involved. They have more force in the case of a spouse not wholly motivated by selfish considerations, but by considerations touching the protection of another and the maintenance of family unity. For those reasons, if legal professional privilege, with all the harm it causes, and the privilege against self-incrimination, with its dominant character of selfishness, are "rules of substantive law", and not merely "rules of evidence", spousal privilege is too. Did the Act abolish spousal privilege? The third of the three key issues in this appeal is whether spousal privilege, even though it has not been much invoked, is of sufficient importance to attract the "principle of legality". Tompkins J thought so in Hawkins v Sturt. He thought, with respect correctly, that it was not to be removed "save by a clear, definite and positive enactment" to that effect314. The appellant denied that spousal privilege was a fundamental right. It submitted that whether it was fundamental depended on whether it had "entrenched and consistent recognition in the decided cases as a fundamental right" (emphasis in original). But a right does not become fundamental merely because cases call it that. And a right does not cease to be fundamental merely because cases do not call it that. In any event, its sibling, spousal non-compellability, has been described in language pointing to the fundamental character of both spousal non-compellability and spousal privilege. The Act has specifically dealt with legal professional privilege (s 30(3)) and the privilege against self-incrimination (s 30(4)). In each case it has cut down the privilege, but with what the first respondent called "a trade-off". The Act has not referred to spousal privilege at all, with or without "a trade-off". If the Act is to be construed as modifying or abolishing spousal privilege it is necessary to find in it explicit language or a necessary implication to that effect. There is none. There are some negative propositions which it is not useful to develop at any length, and this is one of them. In Coco v The Queen Mason CJ, Brennan, Gaudron and McHugh JJ said that the principle of legality: 314 [1992] 3 NZLR 602 at 610. The quoted words are in substance those of Lord Atkinson in Leach v The King [1912] AC 305 at 311. from becoming "may be displaced by an implication if it is necessary to prevent the inoperative or meaningless. statutory provisions However, it would be very rare for general words in a statute to be rendered inoperative or meaningless if no implication of interference with fundamental rights were made, as general words will almost always be able to be given some operation, even if that operation is limited in scope."315 Here the survival of spousal privilege would limit the operation of the provisions slightly, but it would not make them inoperative. Hence, with respect to the detailed arguments of the appellant and the dissenting opinion in the Federal Court316 to the contrary, the Act has not abrogated spousal privilege, and the opinion of the majority of the Full Court of the Federal Court to that effect is to be preferred317. Orders The appeal should be dismissed with costs. 315 (1994) 179 CLR 427 at 438; [1994] HCA 15. 316 Stoddart v Boulton (2010) 185 FCR 409 at 416-433 [40]-[104]. 317 Stoddart v Boulton (2010) 185 FCR 409 at 410-413 [1]-[29] and 437-447 [130]- CRENNAN, KIEFEL AND BELL JJ. The factual background and statutory materials relevant to this appeal are set out in the reasons of French CJ and In response to a summons issued under s 28 of the Australian Crime Commission Act 2002 (Cth) ("the ACC Act") the first respondent attended before the second respondent, an examiner of the Australian Crime Commission, in connection with a "special ACC investigation", as the ACC Act obliged her to do. She took an oath, which was administered by the second respondent, and proceeded to answer questions put to her. Section 30(2)(b) of the ACC Act provides that a person appearing as a witness before an examiner shall not refuse or fail to answer a question that he or she is required to answer by the examiner. The common law has for some time extended certain privileges or immunities to witnesses in court proceedings, by which a witness may be entitled to refuse to answer a question of a particular kind or to produce a document. Some statutes recognise those privileges. The ACC Act expressly recognises legal professional privilege and provides that that privilege is not affected by the ACC Act318. The ACC Act does not preserve the common law privilege against self-incrimination; rather it provides a more limited immunity relating to the use to which an answer, or a document or other thing produced, may be put in criminal and other proceedings when the witness claims that the answer, or the production of the document or thing which is sought, may tend to incriminate him or her319. The first respondent was advised of her rights in this regard by the second respondent and made that claim. In the course of answering further questions concerning details of her husband's business activities, the first respondent claimed to be entitled to another privilege, described as "the privilege of spousal incrimination", which is to say the right not to give evidence that might incriminate her husband. The ACC Act contains no mention of such a privilege. The existence of a common law privilege of the kind claimed by the first respondent was accepted by the Queensland Court of Appeal in Callanan v B320 318 Australian Crime Commission Act 2002 (Cth), s 30(3) and (9). 319 Australian Crime Commission Act 2002, s 30(4) and (5). 320 [2005] 1 Qd R 348. and a Full Court of the Federal Court in S v Boulton followed that decision321. In Callanan v B, McPherson JA said322 that he was disposed to agree with the conclusion of the trial judge (Douglas J) that there was no privilege against incrimination of a spouse at common law. However, a paper then recently published323 influenced his Honour to a contrary view. The further question in S v Boulton was whether that privilege extended to de facto spouses. It was held that it did not. A majority in that case further considered that the privilege had, in any event, been abrogated by the ACC Act. It was against this background that the second respondent, whilst rejecting the first respondent's claim to a spousal privilege, adjourned the examination to enable her to bring proceedings in which the questions whether the claimed privilege existed, and if so whether it continued to have effect, might be determined. In the Federal Court324 the primary judge (Reeves J) dismissed the first respondent's application for declaratory and injunctive relief directed to the second respondent, holding that a spousal privilege existed at common law, but that it was abrogated by the ACC Act. The first question was not in contention on appeal, but a Full Court held, by a majority (Spender and Logan JJ, Greenwood J dissenting on this point), that the ACC Act had not abrogated that privilege325. The nature of the "privilege" claimed Questions about the competence and compellability of spouses to give evidence against one another have had a long history. Statutes of the Commonwealth, and of the States and Territories, now deal with these questions for the purposes of criminal proceedings, although the provisions are not uniform 321 (2006) 151 FCR 364. (As primary judge in that case Kiefel J did not share this view: S v Boulton (2005) 155 A Crim R 152.) 322 [2005] 1 Qd R 348 at 352 [6] per McPherson JA, 351 [1], 356 [17] per McMurdo P and Jerrard JA, respectively, agreeing. 323 Lusty, "Is There a Common Law Privilege Against Spouse-Incrimination?", (2004) 27 University of New South Wales Law Journal 1. 324 Stoddart v Boulton (Examiner, Australian Crime Commission) (2009) 260 ALR 325 Stoddart v Boulton (2010) 185 FCR 409. in their effect. The Evidence Act 1995 (Cth) makes provision for the compellability of spouses and others in certain criminal proceedings326 but the Act is not expressed to apply to an examination under the ACC Act327. Therefore, it is necessary to turn to the common law and the provisions of the ACC Act on these questions. The first respondent does not contend that the common law would regard her as incompetent to give evidence under examination. The rule relating to spousal competency, which will shortly be explained, does not apply to her situation. Whilst there may be a question whether the common law, at least as developed in England, might regard her as not compellable to give evidence such a determination could only operate as a rule of evidence. As such it is more readily negated by statute than is a substantive rule of law. In any event the provisions of the ACC Act require her to give evidence upon summons. Thus it is a right in the nature of a privilege which the first respondent seeks in the common law. If the privilege claimed is recognised by the common law, the parties do not dispute that it might apply to her examination328. It is necessary to be clear about what it is the first respondent claims as a "privilege", not the least because the term is sometimes used in a sense which does not correspond with that of a privilege in the strict sense, namely a substantive right or immunity of a witness which is provided by law. The first respondent claims a privilege in this sense. She claims that the common law long ago created a right of a fundamental nature which entitled a spouse to refuse to answer questions which might incriminate the other spouse. The principle of legality would therefore apply to it and require clear and definite statutory language to affect or negate it. The principle of legality "governs the relations between Parliament, the executive and the courts."329 It is an aspect of the rule of law. The presumption to which it gives rise, that it is highly improbable that Parliament would act to 326 Evidence Act 1995 (Cth), ss 18 and 19. 327 Evidence Act 1995, s 4. 328 In this regard see Callanan v B [2005] 1 Qd R 348 at 353 [8] per McPherson JA. 329 Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309 at 329 [21]; [2004] HCA 40, referring to R v Secretary of State for the Home Department; Ex parte Pierson [1998] AC 539 at 587, 589; Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 at 259 [15]; [2010] HCA 23. depart from fundamental rights or principles without expressing itself with "irresistible clearness"330, has been described as a working hypothesis, known to both the Parliament and the courts, upon which statutory language will be interpreted331. It would appear to accord with that principle and hypothesis that the fundamental right, freedom, immunity or other legal rule which is said to be the subject of the principle's protection, is one which is recognised by the courts and clearly so. The principal question on this appeal is whether that recognition is evident from the historical record. In the consideration of that record it is necessary to bear in mind the distinctions between competence, compellability and privilege. The distinction is explained in Cross on Evidence332. A person is not competent to give evidence if the law, for whatever reason, does not permit him or her to do so. A person is compellable if that person can lawfully be obliged to give evidence. In the absence of statutory provision, these questions are determined by the court and they are usually determined before the person enters the witness box. Thus both competency and compellability relate to the question whether a person gives evidence. Once sworn, a witness must answer all relevant and proper questions put to him or her unless their refusal to answer is based upon a privilege conferred by the law. A person's duty to provide answers, once he or she has been sworn as a witness, has also been referred to in connection with compellability at common law333. Used in this sense, compellability might, on occasions, involve the question whether a claimed privilege is available to the witness. But if a witness was held not to be obliged to answer on that account, one would expect to see a reference to a right in the witness in the reasons given by the court – a right which the court must recognise. In such a case the reasons ought not to suggest that the matter remains within the purview of the court. 330 Potter v Minahan (1908) 7 CLR 277 at 304; [1908] HCA 63. 331 Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309 at 329 [21] per Gleeson CJ. 332 8th Aust ed (2010) at 417 [13001]. 333 Phipson, The Law of Evidence, (1892) at 322; see also Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 2963 [2190]. A true privilege, such as legal professional privilege, operates as a substantive rule of law and not as a rule of evidence334. It enables a person, who is otherwise competent and compellable as a witness, to refuse to answer a question directed to a particular subject, a question which is otherwise relevant to the matters in issue. A privilege has been described as relating to an area of interrogation335. A privilege permits a witness to make a choice as to whether he or she will claim it, or provide the answer or produce the document. At an early point the common law established a rule of competency relating to the testimony of spouses. It may be more correct to refer to rules of competency, for husband and wife were prevented from giving evidence for or against each other and these rules may have been created separately and by reference to somewhat different policy considerations. We shall continue to refer to the rule of competency as a combined rule, as it has commonly been so described. There seems no reason to doubt that at the time of the development of the trial process, to which these rules were relevant, the common law courts distinguished between competence and compellability. And in the latter regard they appear also to have distinguished between a person's duty to attend and be sworn as a witness and a person's duty to disclose what he or she knows once sworn336. These duties were recognised by the early 1600s337. If a spousal privilege existed, the occasion for it to be claimed could only arise in a case where the rule of competency did not apply and the spouse was both competent and compellable to give evidence. Where the rule of competency applied no question of compellability, let alone privilege, could arise. The rule of competency was held in R v The Inhabitants of All Saints, Worcester338 not to apply where the wife's evidence would only indirectly incriminate her husband, by rendering him liable to charges. An analogy with 334 Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543 at 552 [9]-[10]; [2002] HCA 49. 335 McNicol, Law of Privilege, (1992) at 301. 336 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 2963 [2190]; see also Phipson, The Law of Evidence, (1892) at 322. 337 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 2963 [2190]. 338 (1817) 6 M & S 194 [105 ER 1215]. the evidence which might be given by the first respondent under examination is apparent. Observations made in that case, and references in later cases, are the principal source for the first respondent's argument that the claimed privilege has been recognised by the courts. Those observations and commentary upon them were later considered in connection with the compellability of a wife to give evidence against her husband when he was charged with injuring her person339. Such a circumstance is one of the few exceptions to the rule of competency. For the reasons which follow we conclude that the cases and historical materials do not provide a sufficient basis for a conclusion that the claimed privilege exists. The rule of competency Professor Holdsworth explains that considerable control came to be exercised by the common law courts in the 16th century, in the course of the development of the trial as a process and of the giving of oral evidence within it. That control extended to issues as to who was competent to testify, the compellability of witnesses and what evidence might be tendered as relevant in the proceedings. The control exercised over witnesses was a natural progression of the control, and the discretion, the courts had earlier exercised with respect to documentary evidence and in particular with respect to the averments of counsel which would be admitted in the proceedings340. In medieval times no means had been available to compel witnesses to come forward to testify. The Statute of Elizabeth of 1562-1563 established, at least in civil proceedings, that all competent witnesses were compellable to give evidence341. In aid of that power the common law courts borrowed procedures such as that of subpoena from the Chancery courts342. The common law courts developed their own rules, different from those of the canon law, concerning who 339 See for example Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 340 Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 131-132. 341 5 Eliz c 9; see also Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 131 and Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 2961 342 Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 131. was able to testify343. The variety of persons held by the courts not to be competent to testify was elaborated upon in the 16th and 17th centuries344. The courts determined that parties were incompetent as witnesses in their own cause. The rule may have owed something to the viewpoint of continental and of Roman law. It was extended to disqualify other witnesses who had an interest in the case and it was later applied in criminal proceedings345. It may have been thought to follow, logically, from the disqualification on account of interest, that a husband and wife should be disqualified in giving evidence in favour of the other. The source of the rule that spouses were disqualified from giving evidence against each other is not clear. But by the time of Coke's First Institute, in 1628, a single rule was expressed – that husband and wife were not competent to give evidence for or against each other. Coke stated346 that it had been resolved by the justices that a wife "cannot be produced either against or for her husband" and gave as reasons that husband and wife were regarded by the law as one flesh and that to allow her to give evidence might be a "cause of implacable discord and dissention between the husband and the wife, and a meane of great inconvenience". The firstmentioned reason was later adapted to the husband and wife having a common or unified interest. A text on evidence, of 1801347, stated the rule as: "no one can be a witness for himself; and it follows of course that husband and wife, whose interests the law has united, are incompetent to give evidence on behalf of each other … and the law, considering the policy of marriage, also prevents them from giving evidence against each other … [S]uch a rule would occasion implacable divisions". Professor Wigmore suggested that the explanation, for what he terms the "privilege" of a spouse not to give evidence against the other, is the repugnance which was felt "in those days of closer family unity and more rigid paternal authority" to condemning a man by "admitting to the witness-stand" those who 343 Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 186-187. 344 Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 187. 345 Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 194-195. 346 Coke, Commentary upon Littleton, (1628) at 6b. 347 Peake, A Compendium of The Law of Evidence, (1801) at 121. depended upon him348, although other family members and servants were not excluded from giving evidence. The policy of the law has regarded the prospect of a party to a marriage giving evidence against the other with distaste, and as reflecting community sentiment, although the ascertainment of the facts and the enforcement of the criminal law have been seen by some as competing policy objectives349. Professor Wigmore, in particular, described it as "an indefensible obstruction to truth, in practice."350 Nevertheless, in 1978, when the House of Lords came to consider the position of the common law on the question of compellability, in Hoskyn v Metropolitan Police Commissioner351, it was said that the rule was based upon "the identity of interest between husband and wife and because to allow her to give evidence would give rise to discord and to perjury and would be, to ordinary people, repugnant." Professor Wigmore used the word "privilege" in distinguishing the two aspects of the rule. He described the rule as it operated to prevent a spouse from giving evidence for the other as a "disqualification" and its operation to prevent a spouse giving evidence against the other as a "privilege"352. The latter term is maintained throughout the chapter on "Marital Relationship as a Testimonial Disqualification"353 and may have been influential with others354 to describe this aspect of the rule. A report of a ruling in a case355 which predates Coke's statement suggested to Professor Wigmore that a "privilege" may have existed prior to, and was 348 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 3035 [2227]. 349 See for example R v Lapworth [1931] 1 KB 117 at 122 per Avory J; Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 507 per Lord Edmund- Davies. 350 Wigmore, Evidence in Trials at Common Law, 3rd ed (1940), vol 8 at 232 [2228]. 351 [1979] AC 474 at 488 per Lord Wilberforce; see also at 494 per Viscount Dilhorne. 352 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 3034 [2227]. 353 Wigmore, Evidence in Trials at Common Law, (1904), vol 1 at 728-743 354 For example, Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 197-198, although he also refers to it as a "disqualification". 355 Bent v Allot (1580) Cary 94 at 94-95 [21 ER 50 at 50]: "The defendant's wife examined as a witness. – It is informed that Colston, one of the defendants, (Footnote continues on next page) therefore separate from, the "disqualification". He draws from the report the court's acknowledgement that a husband had a right to prevent his wife testifying against him356. Professor Wigmore suggested that Coke was in error in his statement and merged two rules357. Regardless of the correctness of that view, the matter of the testimony of a spouse, whether for or against the other, has long been treated as one of competence effecting a disqualification358, subject to certain exceptions and limitations upon that rule to which reference will be made. In Barker v Dixie359 Lord Hardwicke CJ refused to allow the plaintiff's wife to be called as a witness, although the defendant consented to that course: "The reason why the law will not suffer a wife to be a witness for or against her husband is, to preserve the peace of families; and therefore I shall never encourage such a consent; and she was not examined". In Shenton v Tyler360 Sir Wilfrid Greene MR denied that the privilege spoken of by Professor Wigmore had been part of English law and stated that the rules of evidence applied by the courts in connection with spouses related to competence and compellability361. examined his own wife as a witness: it is therefore ordered, the plaintant may take a subpoena against her on his behalf; and if Colston will not suffer her to be examined on the plaintant's party, then her examination on the said Colston's party is suppressed". 356 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 3034 [2227]. 357 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 3037 [2228]. 358 Stephen, A Digest of the Law of Evidence, 4th ed (1881) at 124 fn 1; Rumping v Director of Public Prosecutions [1964] AC 814 at 836 per Viscount Radcliffe; Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 484 per Lord Wilberforce, 489 per Viscount Dilhorne, 495 per Lord Salmon. 359 (1736) Cas T Hard 264 [95 ER 171]. 360 [1939] Ch 620, which concerned another claim of spousal privilege which Professor Wigmore supported, that of a marital communication: Wigmore, Evidence in Trials at Common Law, (1905), vol 4 at 3257-3270 [2332]-[2341]. 361 Shenton v Tyler [1939] Ch 620 at 626, 638. that privilege as Professor Wigmore does not suggest that the privilege of the husband to which he referred was derived from the privilege against self-incrimination. He regarded And Professor Holdsworth said that it is possible that that privilege may have followed upon the rules of incompetency363. Moreover, the privilege against self-incrimination has not been regarded as a privilege against incrimination by others, rather it is directed to the prospect of a person suffering a penalty or conviction out of his or her own mouth364. testimony362. to marital irrelevant If it were suggested that the claimed spousal privilege had its foundations in the privilege against self-incrimination, the question would arise whether a wife could maintain it for her husband when the ACC Act appears to abrogate, or severely curtail, the husband's privilege against self-incrimination. We do not understand the first respondent to contend that status for the claimed privilege is gained by some connection to the privilege against self-incrimination. The spouse as a compellable witness The rule of competency, when it applied, meant that a person could not be called to give evidence in proceedings, for or against his or her spouse. In such a circumstance questions of the compellability of a spouse, or any privilege he or she had to refuse to answer a question, would not arise. It has been suggested that an authoritative statement, earlier than that of Coke, appears in Michael Dalton's Countrey Justice, published in 1619365, to the effect that a wife was not to be bound to give evidence against her husband366. If the words "not to be bound" were understood as "not obliged" they might imply 362 Wigmore, Evidence in Trials at Common Law, (1904), vol 3 at 3039 [2228]. 363 Holdsworth, A History of English Law, 3rd ed (1944), vol 9 at 198. 364 Controlled Consultants Pty Ltd v Commissioner for Corporate Affairs (1985) 156 CLR 385 at 393; [1985] HCA 6; Rio Tinto Zinc Corp v Westinghouse Electric Corp [1978] AC 547 at 637. 365 Dalton, Countrey Justice, (1619) at 270. 366 Lusty, "Is There a Common Law Privilege Against Spouse-Incrimination?", (2004) 27 University of New South Wales Law Journal 1 at 12-13. some choice, on the part of the wife, consistent with a privilege. The particular passage relied upon in this regard367 is as follows368: "And yet the wife is not to be bound to give evidence, nor to be examined against her husband; for by the lawes of God, & of this land, she ought not to discover his counsell, or his offence in case of theft, (or other felony, as it seemeth) … I have knowen the Judge of Assise greatly to disallow, that the wife should be examined, or bound to give in any evidence against others in case of theft, wherein her husband was a partie, and yet her Evidence was pregnant and material to have proved the felony against others that were parties to the same felony, and not directly against the husband." However, the words which immediately precede this passage are369: "The Justices of Peace have authoritie (by the words of the Statute) to binde by Recognizance all such as do declare any thing materiall to proove the felony, to give evidence against the offendor". Dalton is describing the operation of the "Marian Committal Statute" of 1555370, which authorised the examination of witnesses for the purposes of criminal proceedings. It has been suggested that the reference to the wife "not to be bound to give evidence" may be to the act of binding her over by recognisance to attend trial371. The statement which follows would appear to be in the nature of a prohibition against her being examined as a witness at all and is consistent with a rule of competency. The first respondent submitted that Dalton ought to be taken to refer to the compellability of the wife, rather than her incompetence. Reference was made in this regard to Sir Matthew Hale's summary of Dalton's observations372 and to the following commentaries thereon: 367 Lusty, "Is There a Common Law Privilege Against Spouse-Incrimination?", (2004) 27 University of New South Wales Law Journal 1 at 12. 368 Dalton, Countrey Justice, (1619) at 270. 369 Dalton, Countrey Justice, (1619) at 270. 370 2 & 3 Ph & M c 10. 371 In argument in Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 481. 372 Hale, The History of the Pleas of the Crown, 2nd ed (1778), vol 1 at 301. "The wife of a receiver who is not indicted, cannot be compelled to give evidence against a prisoner accused of the larceny, nor to be sworn or give evidence against another in case of theft, &c if her husband be concerned, though material against another, and not directly against her husband"373 (emphasis added, footnote omitted) and "Lord Hale's … authority goes no further than this, that the wife is not compellable to give any evidence charging the husband with an offence"374. (emphasis in original) These commentaries, and the latter part of the passage from Dalton, appear to be directed to the question whether the wife should be compelled to give evidence which might indirectly incriminate her husband and lead to him being charged with an offence. The passage from Dalton and the first commentary raise the question whether the wife should give evidence in a case where her husband was a party to an offence, but is not charged, where that evidence would be relevant against his co-offenders. Dalton suggests that the court would not require her to give evidence in such a circumstance. This does not equate to a privilege. It has been observed that no authority dealt with the question of the compellability of the wife, where she is otherwise competent, until the 19th century375. The question whether a wife was competent to give evidence which might tend to, but not directly, incriminate her husband arose in All Saints376 and it was held that she was competent. The earlier decision in R v The Inhabitants of Cliviger377 had held to the contrary. A subsidiary question, which was 373 Talfourd, A Practical Guide to The Quarter Sessions, and Other Sessions of the Peace, 4th ed (1838) at 507. 374 Phillipps, A Treatise on the Law of Evidence, 3rd ed (1817) at 67. 375 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 485 per Lord Wilberforce. 376 R v The Inhabitants of All Saints, Worcester (1817) 6 M & S 194 [105 ER 1215]. 377 (1788) 2 T R 263 [100 ER 143]. addressed by Bayley J in All Saints378, was whether the wife ought then to be compelled to give such evidence. Each of Cliviger and All Saints concerned the obligation of a parish to maintain a woman, to which issue her status as a married woman was relevant. Neither she nor her husband were parties to the proceedings and the husband did not stand as accused in them. However, a person, said to be the husband's wife by an earlier and continuing marriage, was sought to be called as a witness to give evidence, the effect of which might be to expose him to a charge of bigamy. In Cliviger the evidence of the alleged first wife would also have contradicted the husband's sworn evidence that he had not been earlier married. Ashhurst J said that the situation presented "creates the doubt, whether it was competent to the wife to prove" that he had been married379. His Honour said that, although no question of those persons' interest in the proceedings arose, the proposed witness was incompetent to give evidence on the ground of public policy, which did not permit husband and wife to give evidence that "may even tend to criminate each other", observing that her evidence could prove him guilty of perjury, as well as bigamy380. Likewise, in Cartwright v Green381 a wife's demurrer against a bill of discovery was upheld by Lord Eldon LC, on the ground that disclosure might incriminate her husband of a felonious taking of monies. But in a later case, R v The Inhabitants of Bathwick382, Lord Tenterden CJ described the authority of the decision in Cliviger as "much shaken" by the decision in All Saints, which he followed, holding the wife to be a competent witness. Lord Ellenborough CJ, in All Saints, considered that it would be going too far to hold a wife incompetent "as to every fact which may possibly have a tendency to criminate her husband"383. To hold that a wife could give evidence 378 R v The Inhabitants of All Saints, Worcester (1817) 6 M & S 194 at 200-201 [105 ER 1215 at 1217-1218]. 379 R v The Inhabitants of Cliviger (1788) 2 T R 263 at 267 [100 ER 143 at 146]. 380 R v The Inhabitants of Cliviger (1788) 2 T R 263 at 268 [100 ER 143 at 146]. 381 (1803) 8 Ves Jun 405 [32 ER 412]. 382 (1831) 2 B & Ad 639 at 646 [109 ER 1280 at 1283]. 383 R v The Inhabitants of All Saints, Worcester (1817) 6 M & S 194 at 199 [105 ER would not cut across the rule of competency, that husband and wife shall not be permitted to be witnesses for or against or to incriminate each other, which he said was "founded in the policy of the law"384. Bayley and Abbott JJ were of like view. The ratio of All Saints is therefore that the rule of competency does not extend to a case where the evidence of a spouse may only indirectly incriminate the other spouse. In All Saints the wife gave evidence of the fact of the earlier marriage. She did not "refuse to be examined", as Lord Ellenborough observed385. Whether he was implying a choice in her not to do so is not plain in what followed in his reasons. Neither he nor Abbott J discussed the question whether she would have been compellable in any event, but Bayley J did say something on this topic. It is his statement upon which the first respondent's argument substantially relies. He said, by way of obiter dictum386: "It does not appear that she objected to be examined, or demurred to any question. If she had thrown herself on the protection of the Court on the ground that her answer to the question put to her might criminate her husband, in that case I am not prepared to say that the Court would have compelled her to answer; on the contrary, I think she would have been entitled to the protection of the Court. But as she did not object, I think there was no objection arising out of the policy of the law, because by possibility her evidence might be the means of furnishing information, and might lead to enquiry, and perhaps to the obtaining of evidence against her husband." Bayley J observed that the rule of competency did not avail the wife (there was "no objection arising out of the policy of the law"). In any event she was willing to, and did, give evidence. It was in this context that he raised the question, whether she may have been obliged to do so, had she not been willing. This would appear to point to considerations of her compellability as a witness. The first respondent rightly points out that the hypothesis of Bayley J is couched in terms as to whether the wife would be obliged to answer a question 384 R v The Inhabitants of All Saints, Worcester (1817) 6 M & S 194 at 199 [105 ER 385 R v The Inhabitants of All Saints, Worcester (1817) 6 M & S 194 at 198 [105 ER 386 R v The Inhabitants of All Saints, Worcester (1817) 6 M & S 194 at 200-201 [105 ER 1215 at 1217-1218]. put to her. This could only arise after she had been sworn as a witness. Posing the question in this way might imply that Bayley J had something like a privilege in mind. But this is not clear from other references he makes. He does not refer to the wife as being able to claim a right as a witness, but to her seeking the protection of the court, and he does so on two occasions. This more strongly suggests that he had in mind an exercise of the court's power. The occasion for its exercise would be as to the question of her compellability as a witness. This is the issue which later cases regard Bayley J as having addressed. It may be that the question of the wife's compellability had not been the subject of much consideration by the time of All Saints, given that the antecedent question as to the operation of the rule of competency had not been resolved. This may explain what Lord Edmund-Davies later observed in Hoskyn, that Bayley J expressed his view "in notably tentative language"387. These matters do not suggest the existence at this point of a recognised, freestanding privilege in a spouse as a witness as likely. The later cases of Riddle v The King388 and Hoskyn dealt with the question of the compellability of a wife in the circumstance where the rule of competency did not apply but for a different reason. In each case the husband was charged with offences against the wife. In Riddle the husband stood charged with wounding with intent to murder his wife; in Hoskyn the charge was of wounding the wife with intent to do her grievous bodily harm. In Hoskyn's case, notably, the marriage took place only a few days before the trial of the husband. In both cases the evidence of the wife could directly incriminate the husband on the charges and the rule of competency could therefore apply. Cases of personal violence against a wife have long been treated as an exception to the rule of competency. Three years after Coke's statement of the rule it was held that a wife was allowed to give evidence against her husband when he was charged with her rape389. Although the decision was doubted for a time it later came to be applied. In Bentley v Cooke390 Lord Mansfield said that a wife (or husband) had been permitted to be a witness when necessity required; 387 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 503 (his Lordship was in dissent in the outcome). 388 (1911) 12 CLR 622; [1911] HCA 33. 389 The Trial of Mervin Lord Audley (1631) 3 St Tr 401 at 414. 390 (1784) 3 Dougl 422 at 423-424 [99 ER 729 at 729]. and personal violence was a case of necessity for otherwise the wife would have no protection391. The question of whether the wife could, in these circumstances, then be compelled to give evidence was raised in Riddle and in Hoskyn. In each case the wife expressed herself as unwilling to give evidence when she was called as a witness, but the judge ruled that she was compellable and she gave her evidence392. The question was whether she ought to have been compelled to do so, which is to say whether she was compellable in the broader sense, mentioned at the outset of these reasons. No mention is made in the judgments and speeches in these cases of any privilege which might be claimed by the wife were she compelled to give evidence, nor is All Saints referred to in connection with any such privilege393. The decision in All Saints and the commentary upon it in Taylor on Evidence394 were referred to in some of the judgments in Riddle and in Hoskyn, in relation to the state of the common law on the question of the compellability of the wife395. Taylor's view of what was said in All Saints was clearly regarded as influential. The author, citing All Saints, had said396: "But although, by the common law rule of Incompetency, the wife may be permitted to give evidence which may indirectly criminate her husband, it by no means follows that she can be compelled to do so; and the better opinion is that under it she may throw herself upon the 391 See also Wharton, An Exposition Of The Laws Relating To The Women Of England, (1853) at 392. 392 See Riddle v The King (1911) 12 CLR 622 at 623; Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 482. 393 With the exception of Lord Edmund-Davies, who was in dissent in Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 502. 394 10th ed (1906), vol 2 at 973 [1368]. 395 Riddle v The King (1911) 12 CLR 622 at 628 per Griffith CJ; Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 485-486 per Lord Wilberforce (with whom Lord Keith of Kinkel agreed), 493 per Viscount Dilhorne, 496 per Lord Salmon, 502 per Lord Edmund-Davies. 396 Taylor on Evidence, 10th ed (1906), vol 2 at 973 [1368]. protection of the court, and decline to answer any question which would tend to expose her husband to a criminal charge." (emphasis in original) Like Bayley J's judgment in All Saints, Taylor's commentary might be taken to suggest something like a right in the wife, as he refers to her being able to decline to answer any question which might incriminate her husband. But Taylor also restated what Bayley J had said, that it was necessary for the wife to seek the protection of the court. For the reasons earlier given, this suggests a determination as to her compellability. The extract from Taylor does not suggest the existence of a rule concerning whether the wife is to be obliged, generally speaking, to give evidence. She might be able to do so because the rule of competency does not apply, the "permission" spoken of. But the question whether the court would compel her to do so is not considered by Taylor to have been resolved by All Saints ("it by no means follows that she can be compelled to do so"). Rather he favoured the view that she should not. Another authoritative writer on the law of evidence, Sir James Fitzjames Stephen, did not consider All Saints and other contemporaneous cases to be conclusive of the question of the wife's compellability: "The cases, however, do not decide that if the wife claimed the privilege of not answering she would be compelled to do so, and to some extent they suggest that she would not." 397 It is unsurprising that judgments of this Court in Riddle did not express any certainty about the state of the law on the subject. In Riddle two statutes dealt with the question of compellability in criminal proceedings398. They provided that a husband or wife of an accused was not a compellable witness, but one of the provisions of one of the Acts399 contained a proviso rendering it inapplicable where a person would be compellable at common law. The question whether a wife was compellable at common law "to give evidence" was thereby raised400. Griffith CJ considered that the "better 397 Stephen, A Digest of the Law of Evidence, 4th ed (1881) at 124 fn 1. 398 Crimes Act 1900 (NSW), s 407; Evidence Act 1898 (NSW), s 7. 399 Evidence Act 1898, s 7. 400 Riddle v The King (1911) 12 CLR 622 at 627 per Griffith CJ. opinion" was that a wife was not, by reference to Taylor401. Barton J could find no clear ruling by a court that a spouse is both competent ("allowable to testify") and compellable, and concluded that it was "not established" that she was402. O'Connor J did not consider that the law could be stated any more highly than that husband and wife "are competent witnesses against each other, but it is doubtful whether they are compellable."403 The House of Lords did not determine the question of spousal compellability in criminal proceedings until Hoskyn. In Leach v The King404, a case which involved a charge of incest, it was held that, by s 4 of the Criminal Evidence Act 1898 (UK), the wife of a person charged with an offence to which the Act applies is not compellable to give evidence against her husband. Reference was made in passing in that case to the position at common law and to the "fundamental and old principle" that the court "ought not to compel a wife to give evidence against her husband in matters of a criminal kind."405 That dicta was not followed in R v Lapworth406, in connection with charges of personal violence by a husband against his wife, and that position was maintained until Hoskyn. The first respondent pointed to a statement by Earl Loreburn LC in Leach, that a clearly stated law would be necessary "before the right of this woman can be affected"407, as indicative of the existence of a privilege. The statement must be read in context. At issue in that case was a statutory provision which said that a wife or husband of an accused person may be called as a witness for the prosecution or the defence. His Lordship observed that, without the provision, the wife could not have been allowed to give evidence and it followed that she could not have been compelled to do so "and was protected against 401 Riddle v The King (1911) 12 CLR 622 at 629. 402 Riddle v The King (1911) 12 CLR 622 at 633-634. 403 Riddle v The King (1911) 12 CLR 622 at 640. 405 Leach v The King [1912] AC 305 at 309 per Earl Loreburn LC; see also at 310-311 per Earl of Halsbury, 311 per Lord Atkinson. 406 [1931] 1 KB 117, nor in R v Algar [1954] 1 QB 279 at 285. 407 Leach v The King [1912] AC 305 at 310. compulsion."408 The protection referred to is that afforded by the rule of competency. It was against this background that he enquired whether it would have been intended by the provision to deprive her of this protection. The "right" of which he spoke was therefore what was provided by the rule of competency and this was not a privilege. The majority in Hoskyn did not consider that the courts should require a wife to give evidence against her husband, even when he was charged with injuring her. The principal question in Hoskyn was whether the fact that a wife was competent to give evidence, because of the exception to the rule, meant that she was thereby compellable and it was held she was not. It was in this context that reference was made to All Saints and to Taylor's comments upon that case409. No reference was made by the majority to All Saints in connection with a spousal privilege410. The decision in Hoskyn as to the wife's compellability ultimately rested upon policy considerations as to marriage. Lord Edmund-Davies dissented, regarding the gravity of crimes of personal violence of this kind and the duty to prosecute them as more important411. Lord Wilberforce412 acknowledged that there were arguments of policy either way413. He agreed with what had been said in Leach, that as a matter of principle a wife "ought not to be forced into the witness box"414, and approved the approach taken by Griffith CJ in Riddle415. He was clearly influenced by the view the law, historically, had taken to marriage and which had informed the rule of competency. Lord Salmon considered it would be inconsistent with the 408 Leach v The King [1912] AC 305 at 310. 409 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 485-486 per Lord Wilberforce, 490-491 per Viscount Dilhorne, 496 per Lord Salmon. 410 Although Lord Edmund-Davies, in dissent, did so: Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 502. 411 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 507. It has been observed that this policy has found more favour with Australian legislatures: see Cross on Evidence, 8th Aust ed (2010) at 443 [13125]. 412 With whom Lord Keith of Kinkel agreed. 413 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 483. 414 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 487-488. 415 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 488-489. common law's attitude to marriage, if a wife were to be compelled to give evidence incriminating her husband416. Viscount Dilhorne approved the statement of Griffith CJ in Riddle417 that "[t]he old doctrine of the unity of husband and wife[418], and the importance of preserving confidence between them, and the other reasons which have been variously given, have still a great deal of weight."419 The decision in Hoskyn is not directly applicable to a case such as this, for the reasons already mentioned. The first respondent did not suggest that it was. In argument for the first respondent it was put that the views of the majority regarding non-compellability were necessarily founded upon the privilege ("the underlying right"). That is to say, the considerations of marriage there referred to, which also informed the rule of competency, pointed to the existence of the claimed privilege. Later application of Hoskyn does not support such an inference. It has been taken to refer to the claim that a wife might make before she is sworn as a witness, which is to say to her non-compellability, by contrast with that of a holder of a privilege420. In any event the first respondent merely states an assumption. It needs to be shown that the common law addressed the question of the privilege claimed and provided the answer. They are the issues on this appeal. In Hoskyn Viscount Dilhorne observed that he would have expected Lord Ellenborough or Bayley J in All Saints to have referred to any existing rule, by which a wife, competent to give evidence, was compelled to do so421. Likewise, had a privilege not to answer questions existed, one would have expected that they would have made reference to it. 416 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 495. 417 Riddle v The King (1911) 12 CLR 622 at 630. 418 But see in this connection Tripodi v The Queen (1961) 104 CLR 1; [1961] HCA 419 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 494. 420 R v Pitt [1983] QB 25 at 30. 421 Hoskyn v Metropolitan Police Commissioner [1979] AC 474 at 491. The second report of the Common Law Commissioners422, of 1853, might have been expected to mention a spousal privilege, had it been recognised by the law at that time. Statutory reforms to that point had removed the incompetence of parties and witnesses on the ground of interest but had maintained an exception in the case of husbands or wives of parties423. It is of interest to observe that s 3 of the Evidence Act 1851 (UK)424 ("Lord Brougham's Act") had provided that neither a husband nor a wife was "competent or compellable to give evidence" for or against the other spouse425. The Commissioners recommended that the exception be abolished but that communications between spouses be privileged426. That privilege had not previously existed at common law, it was held in Shenton v Tyler427. As Sir Wilfrid Greene MR observed, the Common Law Commissioners made no mention of such a rule of law428, and one would have expected them to had it existed. The same observation may be made concerning spousal privilege. Legislation was introduced in the United Kingdom dealing with the competence and compellability of spouses as witnesses in civil and, later, criminal proceedings429. In Australia provision is made with respect to criminal proceedings in legislation, but not uniformly, as mentioned at the outset of these reasons. This reflects differences of opinion as to the importance to be afforded to different policy considerations as giving effect to the public interest. By way of example, in Queensland a spouse is generally compellable in criminal 422 Second Report of Her Majesty's Commissioners for Inquiring into the Process, Practice, and System of Pleading in the Superior Courts of Common Law, (1853). 423 Evidence Act 1843 (UK); Evidence Act 1851 (UK); see generally as to the history Shenton v Tyler [1939] Ch 620 at 627-628 per Sir Wilfrid Greene MR. 424 14 & 15 Vict c 99. 425 Wharton, An Exposition Of The Laws Relating To The Women Of England, (1853) 426 Second Report of Her Majesty's Commissioners for Inquiring into the Process, Practice, and System of Pleading in the Superior Courts of Common Law, (1853) at 428 Shenton v Tyler [1939] Ch 620 at 629, 639. 429 See Shenton v Tyler [1939] Ch 620 at 628-629. proceedings430. Under the Evidence Act 1995 (Cth), a spouse is competent and compellable as a witness with respect to certain offences, but the spouse of an accused is given a right to object to giving evidence as a witness for the prosecution431. The right is less than a privilege, however, for it is provided that the court determines the question of the compellability of the spouse, after considering certain facts and the consequences which might follow were the spouse obliged to give evidence432. It confirms the role of the court in determining the question of compellability, whilst providing the factors relevant to that determination. Summary of conclusion and orders Opinions may differ as to the interpretation of statements in older texts and cases. Such statements as there are, which suggest that one spouse might not be obliged to give evidence or answer questions which may tend to incriminate the other, do not provide a sufficient foundation for a conclusion that a spousal privilege of the kind claimed existed. Statements in All Saints were addressed to the question of compellability and later cases show that they have been so understood. Those observations are consistent with a view that the court retains the power to determine the question of the wife's compellability. Even so, the question of her compellability was not finally determined in that case. Its lack of resolution until much later, in England, does not suggest that the topic of a substantive witness privilege was likely to have been addressed. The later application of some of the old common law views towards marriage, which informed the rule of competency, and about which it is not necessary to proffer a view on this appeal, with respect to the compellability of a spouse in criminal proceedings, does not point to the existence of a privilege. It merely states an assumption that those views meant that a privilege arose. It has not been shown that that question has been addressed by the common law courts. The observations of Justice Oliver Wendell Holmes concerning the creation of legal doctrine are apposite here. He spoke of a statement of principle occurring only after a series of determinations on the same subject matter and by a process of induction and went on to say433: 430 Evidence Act 1977 (Q), s 8(2). 431 Evidence Act 1995, s 18(2). 432 Evidence Act 1995, s 18(6) and (7). 433 Holmes, "Codes, and the Arrangement of the Law", in Novick (ed), The Collected Works of Justice Holmes, (1995), vol 1, 212 at 213. "And this statement is often modified more than once by new decisions before the abstracted general rule takes its final shape. A well settled legal doctrine embodies the work of many minds, and has been tested in form as well as substance by trained critics whose practical interest it is to resist it at every step." No such developments are evident in the cases and materials to which reference has been made in this case. They suggest, at most, that a spouse might seek a ruling from the court that he or she not be compelled to give evidence which might incriminate the other spouse. No question of compellability arises in this case. The first respondent was a competent witness to be examined under the ACC Act and was compelled by the provisions of that Act to do so. No privilege of the kind claimed could be raised in answer to that obligation. We agree with the orders proposed by French CJ and Gummow J.
HIGH COURT OF AUSTRALIA AND Adams v Lambert [2006] HCA 10 4 April 2006 ORDER 1. Appeal allowed with costs. 2. Set aside the orders of the Full Court of the Federal Court of Australia made on 9 December 2004 and in their place order that: (a) the appeal to that Court be allowed with costs; and (b) the orders of Gyles J made on 1 July 2004 be set aside. 3. Remit the matter to a judge of the Federal Court of Australia for further hearing in accordance with the reasons of this Court. On appeal from the Federal Court of Australia Representation: D A Hassall for the appellant (instructed by Kinneally Miley) No oral argument for the respondent (represented by Marler & Darvall) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Bankruptcy – Bankruptcy notice – Formal defect or irregularity – Interest due on judgment debt – Misdescription in notice of statutory provision under which interest claimed – Validity of notice. Bankruptcy Act 1966 (Cth), ss 41(2), 306. Bankruptcy Regulations (Cth), reg 4.02. GLEESON CJ, GUMMOW, KIRBY, HAYNE, CALLINAN, HEYDON AND CRENNAN JJ. The issue in this appeal concerns the effect upon the validity of a bankruptcy notice of a misdescription of the statutory provision under which an amount of interest ($66.58) on a judgment debt was claimed. The bankruptcy notice referred to s 83A of the District Court Act 1973 (NSW). That section deals with interest up to judgment. The notice should have referred to s 85, which deals with interest after judgment. For reasons that will appear, the resolution of the issue turns on the application of s 306 of the Bankruptcy Act 1966 (Cth) ("the Act"), which provides that proceedings under that Act are not invalidated by a formal defect or an irregularity unless substantial injustice has been caused. There being no suggestion that any substantial injustice has been caused, the question is whether the error was a formal defect or an irregularity. The facts The appellant obtained judgment against the respondent, in the District Court of New South Wales, on 22 March 2004, in the amount of $54,000. That amount represented an agreed sum, being the balance of a loan together with interest and legal costs up to the date of judgment. On 1 April 2004, the appellant served on the respondent a bankruptcy notice claiming as a debt due and payable the amount of $54,066.58. That amount comprised the judgment debt of $54,000 plus interest from 22 March 2004 to 26 March 2004 (both dates inclusive) at the rate of 9 per cent per annum. It is not contended that the amount of interest claimed was erroneous. The date of 26 March 2004 was the date of issue by the Official Receiver of the bankruptcy notice. The respondent failed to comply with the requirements of the bankruptcy notice within the time specified. On 27 May 2004, the appellant filed a creditor's petition alleging that such failure was an act of bankruptcy, and seeking a sequestration order against the respondent's estate. The matter came for hearing before Gyles J in the Federal Court of Australia on 1 July 2004. Gyles J found that the bankruptcy notice was invalid, and dismissed the petition1. He was bound by the decision of the Full Court of the Federal Court in the indistinguishable case of The Australian Steel Company (Operations) Pty Ltd v Lewis ("Lewis")2 (a case in which Gyles J was part of a dissenting minority), 1 Adams v Lambert [2004] FCA 928. (2000) 109 FCR 33. Crennan which was followed by the Full Court in Marshall v General Motors Acceptance Corporation Australia3. An appeal to the Full Court from the decision of Gyles J In Lewis, the Full Court of the Federal Court was divided three (Black CJ, Heerey and Sundberg JJ) to two (Lee and Gyles JJ). All the members of the Full Court regarded the decision of this Court in Kleinwort Benson Australia Ltd v Crowl5 as laying down the principles to be applied. There are conflicting decisions within the Federal Court about the application of those principles to various errors in bankruptcy notices. To the forefront of the appellant's submissions in the present appeal was the proposition that Lewis was wrongly decided, and that the minority conclusions in that case are to be preferred. For reasons that will appear, that proposition should be accepted. The decision in Lewis should be overruled. The scope for error in a bankruptcy notice is as wide as the scope of the contents of such a notice. The cases provide examples of many different kinds and degrees of error. As Gyles J and the Full Court pointed out, there is no material difference between the error in the bankruptcy notice in this case and the error in the bankruptcy notice in Lewis. It seems to be a not uncommon mistake. An apparent source of confusion is the difference between pre-judgment interest and post-judgment interest. There is nothing to be gained by reviewing all the decisions in the Federal Court in recent years concerning different errors in bankruptcy notices. The error in this case is a convenient focus for an examination of the effect of s 306 of the Act. Because the error in the notice in this case is not materially different from the error in the notice in Lewis, success of the present appeal necessarily involves a conclusion that Lewis was wrongly decided. That may mean that a number of other decisions that followed Lewis and applied its reasoning to somewhat different errors were also incorrect, but those decisions are not directly under review. (2003) 127 FCR 453. 4 Adams v Lambert [2004] FCAFC 322. (1988) 165 CLR 71. Crennan It should be added that, in his reasons in the present case, Gyles J noted that there were other aspects of the matter that would need to be considered if the attack upon the validity of the notice did not succeed6. That fact is relevant to the form of order that should be made by this Court. The legislation Section 40 of the Act provides that a debtor commits an act of bankruptcy if a creditor who has obtained against the debtor a final judgment has served on the debtor a bankruptcy notice under the Act and the debtor does not, within the time specified in the notice, comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt, being one that he or she could not have set up in the action in which judgment was obtained (s 40(1)(g)). Where a debtor has committed an act of bankruptcy, the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the Section 41 empowers an Official Receiver to issue a bankruptcy notice (s 41(1)). In practice, as in the present case, the notice will often be prepared by a creditor's lawyers, but some creditors may not be legally represented. The section provides: "(2) The notice must be in accordance with the form prescribed by the regulations." In the form in which the Act stood at the time of the decision in Kleinwort Benson Australia Ltd v Crowl, s 41 provided that a bankruptcy notice "shall be in accordance with the prescribed form". There is no material difference between "shall" and "must". However, the prescribed form is different. The relevant regulation is reg 4.02 of the Bankruptcy Regulations (Cth) ("the Regulations"), which is as follows: "(1) For the purposes of subsection 41(2) of the Act, the form of bankruptcy notice set out in Form 1 is prescribed. [2004] FCA 928 at [3]. Crennan (2) A bankruptcy notice must follow Form 1 in respect of its format (for example, bold or italic typeface, underlining and notes). Subregulation (2) is not to be taken as expressing an intention contrary to section 25C of the Acts Interpretation Act 1901. Note Under section 25C of the Acts Interpretation Act 1901, where an Act prescribes a form, then, unless the contrary intention appears, strict compliance with the form is not required and substantial compliance is sufficient; see also paragraph 46(1)(a) of that Act for the application of that Act to legislative instruments other than Acts." Form 1 appears in Schedule 1 to the Regulations. It is reproduced in full in the reasons of the majority in Lewis7. It is, of course, necessary to pay regard to the entire form. For present purposes, however, the following features are of particular importance. The form requires the amount of the debt claimed to be stated, and a copy of the judgment or order relied upon by the creditor is to be attached. The form states that the debtor is required, within a specified number of days after service of the notice, to pay to the creditor the amount of the debt or to make an arrangement to the creditor's satisfaction. It warns the debtor of the possibility of bankruptcy proceedings if the requirements of the notice are not complied with. It contains other information and warnings. The prescribed form includes a Schedule giving particulars of the creditor's claim. This Schedule includes the following item in column 1: If claimed in this Bankruptcy Notice, interest accrued since the date of judgments or orders (see Note 2, below)." There is provision in column 2 for an amount to be included alongside item 3. Note 2 to the Schedule is in the following terms: "Note 2: Interest accrued (item 3 of the Schedule) (2000) 109 FCR 33 at 37-40. Crennan If interest is being claimed in this Bankruptcy Notice, details of the calculation of the amount of interest claimed are to be set out in a document attached to this Bankruptcy Notice. The document must state: the provision under which the interest is being claimed; and the principal sum on which, the period for which, and the interest rate or rates at which, the interest is being claimed. (NB: If different rates are claimed for different periods, full details must be shown)" The evident purpose of the requirement to state the provision under which interest is being claimed is to assist the debtor to check the claim8. Nevertheless, as Kiefel J pointed out in her dissenting judgment in Bendigo Bank v Williams9, such information is normally incomplete. It would tell a debtor who is represented by a lawyer something the lawyer would, or should, already know. It would set an unrepresented debtor upon a train of inquiry that, in most cases, would require further information in order to find the relevant rate of interest. The requirement in question is established by three levels of prescription. Sub-section 41(2) of the Act states that a bankruptcy notice must be in the form prescribed by the regulations. Regulation 4.02 states that, for the purposes of sub-s 41(2), the form set out in Form 1 is prescribed. Note 2 to the Schedule in Form 1 states that a document attached to the notice must state the provisions under which interest is being claimed. The use of the word "must" is significant, but it should be kept in perspective. A prescription as to a form to be followed will normally be expressed in language of obligation rather than of permission. That is the idea of a form. Such a prescription raises the question to be considered in the present case; it does not answer it. One potential kind of error in a bankruptcy notice is dealt with expressly by s 41. It is probably the most likely, and most significant, form of error: overstatement of the amount owed by the debtor. The way in which the Act 8 The Australian Steel Company (Operations) Pty Ltd v Lewis (2000) 109 FCR 33 at (2000) 98 FCR 377 at 404. Crennan deals with such an error is not directly relevant in this case, but it is part of the legislative context, and gives an indication of the legislative purpose. The section relevantly provides: "(5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement. (6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it." Section 306 The act of bankruptcy identified in s 40(1)(g) of the Act depends upon service on a debtor of "a bankruptcy notice under [the] Act". Bearing in mind the consequences which the Act attaches to such a notice, the courts have long insisted upon "strict compliance with the requisites of a bankruptcy notice"10 if it is to be valid, subject, of course, to the express provisions of s 41. At the same time, bankruptcy legislation in the United Kingdom11 and Australia12 has also, for a long time, contained a provision of a kind which is now found in s 306 of the Act. That section provides, so far as presently relevant: "(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been 10 James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644. 11 Bankruptcy Act 1869 (UK), s 82; Bankruptcy Act 1914 (UK), s 147. 12 Bankruptcy Act 1924 (Cth), s 7. Crennan caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court." It is well settled that a bankruptcy notice is a proceeding under the Act13. In Kleinwort Benson Australia Ltd v Crowl14 there was an understatement, rather than an overstatement, of the amount owing by the debtor. The error arose from a miscalculation of interest on a judgment. The interest was understated by some $23,000. That was treated by this Court as a formal defect or irregularity within s 306, and the error was held not to have invalidated the notice. In its application to a bankruptcy notice, s 306 assumes the possibility of some failure to comply with a statutory requirement; that is, some defect or irregularity. In the present case, if there had been no failure to comply with a requirement of the Act and Regulations, there would be no issue as to the effect of s 306. In the event of such a failure, it must be asked whether the defect or irregularity is a formal defect or irregularity within the purview of s 306. If it is, then it becomes necessary to consider whether substantial injustice has been caused by the defect or irregularity, and whether the injustice cannot be remedied by an order of the court. The questions whether the defect or irregularity is a formal defect or irregularity, and whether substantial injustice has been caused and cannot be remedied, are separate and distinct, the latter question arising only if the former is answered in the affirmative. It may be accepted that, if a defect could cause substantial injustice, it may not easily be classified as a formal defect or irregularity. But the absence of claimed injustice does not conclude the separate question that arises under s 306 about whether the defect or irregularity is a formal defect or irregularity. Neither in Lewis (where the provision under which the interest was being claimed was stated to be s 101 of the Supreme Court Act 1986 (Vic) whereas it should have been s 100(7) of the Magistrates' Court Act 1989 (Vic)) nor in the present case was it suggested that substantial injustice had been caused by the defect or irregularity. It is necessary to say something more about the error in the bankruptcy notice in this case. The calculation of post-judgment interest is a well-known 13 Pillai v Comptroller of Income Tax [1970] AC 1124 at 1131; Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 77. 14 (1988) 165 CLR 71. Crennan source of difficulty for some drafters of bankruptcy notices. The difficulty is sometimes avoided by refraining from including interest in the debt upon which the bankruptcy notice is based15. In this case, however, the calculation of interest was correct. Furthermore, the bankruptcy notice made it plain, in express terms, that the interest claimed was post-judgment interest. The document attached to the notice in compliance, or purported compliance, with the regulations was in the following terms: Interest Calculation (See Note 2:- Interest accrued (Item 3 of the Schedule) on page 5) Details of calculation of interest claimed: Interest is claimed pursuant to section 83A of the District Court Act 1973. The current rate of interest as at the date of preparation of this notice is 9% pa. Judgment was entered against Matthew Lambert in the District Court of New South Wales at Sydney on 22 March 2004 for the sum of $54,000.00 including interest and costs. Interest is being claimed for the period 22 March 2004 to 26 March 2004 (both dates inclusive). Summary of Interest Calculation Date from Date Number of Days Judgment Debt Interest Rate % Daily Increase Interest Amount Paragraph (b) made it clear that the judgment of $54,000 included pre- judgment interest. Paragraph (c), together with the Summary of Interest Calculation, showed that the claim for interest covered five days, commencing on 22 March 2004, which was shown as the date of judgment. The amount claimed was $66.58. It was obvious that the claim was for post-judgment interest. 15 Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 at 85. Crennan In Wright v Australia & New Zealand Banking Group Ltd16, Beaumont J pointed out that it is a well settled principle of construction that a written instrument must be construed as a whole, and that, as Dixon CJ and Fullagar J said in Fitzgerald v Masters17, "[w]ords may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency". A striking example of the application of a cognate principle of statutory construction in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation18. If a question had arisen in the present case as to whether, considered as a whole, the bankruptcy notice was claiming pre-judgment or post-judgment interest, the answer would be clear. That is not the precise question that arises. Rather, the question is whether the notice complies with the requirements of the Act. Even so, the consideration that, on the true construction of the notice as a whole, it is clear that the claim is for post-judgment interest, is part of the context in which s 306 is to be applied. to be found The argument for the appellant Counsel for the appellant attempted to persuade the Court that there was here no defect or irregularity. First, he argued that the error was in a document attached to the notice, and not in the notice itself. This argument fails. The document is part of the notice. Next, he said, the "provision" referred to in Note 2 was sufficiently identified by a reference to the District Court Act, and the reference to s 83A should be disregarded as mere surplusage. That argument is unpersuasive. The entire District Court Act is not a "provision". The requirement of Note 2 would not be satisfied by referring merely to the District Court Act. The drafter of the notice was right to suppose that reference to a section of the District Court Act was required. The problem is that the wrong section was identified. Next, it was argued that s 41(2) of the Act is to be read in the light of s 25C of the Acts Interpretation Act 1901 (Cth); that substantial compliance with requirements as to a form is all that is necessary; and that here there was substantial compliance. The difficulty is that in a case such as the present, where there is a specific requirement to state a provision, it is not 16 [2001] FCA 386. 17 (1956) 95 CLR 420 at 426-427. 18 (1981) 147 CLR 297. Crennan substantial compliance to state a different provision. In such a case, the problem cannot be avoided by looking at the form as a whole and observing that, like the curate's egg, it is bad only in part. At the same time, the kind and degree of error involved is relevant to a consideration of s 306. Formal defect or irregularity The appellant's principal argument turns upon s 306 of the Act. Accepting that the misdescription of the provision under which post-judgment interest was claimed, by referring to s 83A of the District Court Act rather than s 85, was a defect or irregularity, and noting that it caused no substantial injustice, is it a formal defect or irregularity within the meaning of s 306? The composite expression "a formal defect or an irregularity", in its application to a bankruptcy notice, conveys a meaning with elements of both inclusion and exclusion. A failure to comply with a requirement, to be found in the Act, imposed by reference to the regulations as to information to be furnished by the notice, is a defect or irregularity. So, in Kleinwort Benson Australia Ltd v Crowl, an erroneous statement of the amount of interest owing on a judgment debt was a defect or irregularity. What is excluded from the section is a defect or irregularity of such a nature that, reading s 306 in the context of the whole Act, it is not "a formal defect or an irregularity". What kind, or degree, of defect is to be regarded as having such a nature? In some cases the answer to that question may be easy. In others, a difficult question of judgment may be involved. The matter for judgment was identified by this Court in Kleinwort Benson Australia Ltd v Crowl19. In that case, the majority20 contrasted the concept of a formal defect or irregularity with a defect or irregularity that renders a bankruptcy notice a nullity that cannot be saved by s 306. To describe a defect as merely formal, or to describe a notice as a nullity, is, of course, to state a conclusion, rather than the reason for reaching that conclusion. Even so, it is necessary to identify the question that arises for judgment. The majority, referring to James v Federal Commissioner of 19 (1988) 165 CLR 71 at 79-81. 20 Mason CJ, Wilson, Brennan and Gaudron JJ. Crennan Taxation21, and Pillai v Comptroller of Income Tax22, summarised the exclusionary aspect of the meaning of "a formal defect or an irregularity" by saying23: "The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice." The question of construction raised by the words "a formal defect or an irregularity" is one to be decided by reading s 306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices. It is similar to the question that, in former times, would be explained by asking whether a statutory requirement was mandatory or directory. In Project Blue Sky Inc v Australian Broadcasting Authority24 it was said: "A better test ... is to ask whether it was a purpose of the legislation that an act done in breach of [a] provision should be invalid ... In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'". If, as in the present case, what is in question is an error in the form of a misdescription of a statutory provision, then a consideration of the general purpose of the Act, and the particular purpose of the legislative scheme relating to bankruptcy notices, leads readily to a conclusion that if the error could reasonably mislead a debtor as to what is necessary to comply with the notice it is not merely a formal defect or irregularity. Any error is capable of misleading somebody about something. When the respondent saw the bankruptcy notice in this case he may well have concluded that s 83A was the section of the District Court Act dealing with post-judgment interest. In that respect, he would have been misled. When Mr Crowl read the bankruptcy notice in his case, he might have been given the temporary satisfaction of believing that his debt was $23,000 21 (1955) 93 CLR 631 at 644. 22 [1970] AC 1124 at 1135. 23 (1988) 165 CLR 71 at 79. 24 (1998) 194 CLR 355 at 390-391, quoting Tasker v Fullwood [1978] 1 NSWLR 20 Crennan less than was in fact owing. In that respect, he would have been misled. (A debtor who receives a notice involving an overstatement of a kind expressly relieved against by s 41(5) of the Act might receive a very unpleasant surprise). What this Court regarded as relevant to s 306, however, was misleading a debtor about what is necessary to comply with the notice. That kind of misleading, the Court said, takes an error outside the concept of a formal defect or irregularity. However, that is not the full extent of the exclusion. The other exclusionary aspect of the expression "a formal defect or an irregularity" in s 306 was said to consist in a failure to meet a requirement made essential by the Act. Here again, the word "essential", in its application in a particular case, involves a conclusion. If a requirement is made essential by the Act, then a failure to meet that requirement is not a formal defect or an irregularity within the meaning of s 306. Whether a requirement is made essential is to be decided by a process of statutory construction undertaken in the manner described above. The majority in Lewis regarded the error in that case as involving a failure to meet a requirement made essential by the Act. To describe an error or a deficiency in a bankruptcy notice as involving a failure to meet a requirement made essential by the Act is to state a conclusion reached after a consideration of the legislative purpose and an evaluation of the significance or importance of the error or deficiency in the circumstances of the case. That question is not answered by observing that there has been a failure to meet a requirement. In this respect, the majority in Lewis placed undue emphasis on the imperative terms of the Act and Regulations. If there were no failure to meet a requirement, there would be no defect or irregularity. Furthermore, as noted earlier, the fact that the requirement is expressed by the use of the term "must" is not conclusive. How otherwise might a requirement as to form be expressed25? The misdescription of the relevant section of the District Court Act was not capable of misleading the respondent as to what he had to do to comply with the notice. This is not a matter of dispute. The question is whether the 25 In a different statutory context "must" will sometimes require an imperative interpretation: SAAP v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 79 ALJR 1009 at 1014 [16], 1024 [70], 1035 [136], 1040 [173], 1046 [208]; 215 ALR 162 at 166-167, 180, 196, 203, 211. Crennan misdescription involved a failure to meet a requirement made essential by the Act. On the true construction of the Act, is it essential that there be no misdescription of the relevant section? Is it the purpose of the legislation that any slip, such as giving a reference to the statutory provision governing pre- judgment interest when what is intended is a reference to the provision governing post-judgment interest, should invalidate the notice? Is this so no matter how clear it might be from other parts of the notice that the claim is for post-judgment interest? Section 306, in its application to bankruptcy notices, makes it plain that some instances of non-compliance with the requirements as to the form of a notice will not invalidate the notice. The practical significance of an error or deficiency could vary according to the circumstances of each particular case. Errors or deficiencies in compliance with requirements as to form may involve questions of degree as well as of kind. At the same time, the decision in Kleinwort Benson Australia Ltd v Crowl shows that an error may be covered by s 306 even though it involves a substantial misstatement of an amount of money. It was essential that the bankruptcy notice state the amount claimed. Was it essential that the amount be correct? Section 41(5) made it clear that an overstatement, even a large overstatement, would not necessarily invalidate the notice. This Court concluded that it was not the legislative purpose that a substantial understatement should necessarily invalidate the notice. That is to say, accurately stating the amount of interest owing was not a matter of such importance that error necessarily resulted in invalidity. In the present case, overstatement or understatement of the amount of post-judgment interest owing would not necessarily have invalidated the notice. That is part of the context in which legislative purpose is to be considered in deciding whether the reference to s 83A rather than s 85 was fatal. In Lewis26, Gyles J accurately identified the question as whether correct completion of the form prescribed by the regulations in every respect is a requirement made essential by the Act. Bearing in mind that, in the present case, the error could not have misled the respondent as to what it was necessary to do in order to comply with the requirements of the notice, it is difficult to understand how, consistently with Kleinwort Benson Australia Ltd v Crowl, the respondent could succeed without an affirmative answer to that question. In their 26 (2000) 109 FCR 33 at 70. Crennan dissenting reasons in Lewis, Lee J and Gyles J both gave a detailed account of the 1996 amendments to the Act and Regulations. It is unnecessary to repeat what they said in that respect. Lee J concluded27: "Properly construed, the Act and Regulations do not express an intention to create a new regime of strict compliance imposed on a judgment creditor issuing a bankruptcy notice. The tenor of the Act and Regulations is not consistent with that conclusion. An attempt has been made to recast the process of issue of a bankruptcy notice in terms more understandable to a judgment debtor, but the essential requirements of a bankruptcy notice remain as they have been stated by bankruptcy legislation over many years." "It cannot be correct that amendments to the Act that left undisturbed s 41(5) and (6) which state that a notice that demands payment of a sum that is unjustified or excessive is only invalid if a debtor gives notice within a prescribed period, introduced a new regime in respect of bankruptcy notices under which a judgment debtor could have such a notice set aside where the amount claimed is due in fact and there is no prospect that the debtor could be misled as to the steps to be taken to comply with the notice. The amending Act could not have contemplated that a mistaken citation of the source of entitlement to claim interest would be a substantive defect or irregularity in the notice so as to exclude the operation of s 306 of the Act." That view of the legislative purpose is persuasive. The effect of the majority view in Lewis is to attribute to the legislature an overwhelming preference for form over substance. That should not be done. Given that s 306 relieves against the invalidating consequences of some mistakes in the preparation of bankruptcy notices, the mistake that was made in this case falls within its terms. 27 (2000) 109 FCR 33 at 66. 28 (2000) 109 FCR 33 at 68. Crennan The appeal should be allowed with costs. The orders of the Full Court of the Federal Court of Australia should be set aside. In place of those orders it should be ordered that the appeal from the decision of Gyles J be allowed with costs and that the orders of Gyles J of 1 July 2004 be set aside. The proceedings should be remitted to a judge of the Federal Court of Australia for further hearing in accordance with the reasons of this Court. It will be for that judge to decide upon the appropriate orders as to the costs of the proceedings before Gyles J.
HIGH COURT OF AUSTRALIA Matter No M222/2004 & M223/2004 CPT CUSTODIAN PTY LTD (previously trading under the name SANDHURST NOMINEES (VIC) LIMITED) APPELLANT AND COMMISSIONER OF STATE REVENUE RESPONDENT Matter No M215/2004, M216/2004, M217/2004 & M218/2004 COMMISSIONER OF STATE REVENUE APPELLANT AND KARINGAL 2 HOLDINGS PTY LTD RESPONDENT CPT Custodian Pty Ltd v Commissioner of State Revenue Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd [2005] HCA 53 28 September 2005 M222/2004 & M223/2004 and M215/2004 to M218/2004 Matter No M222/2004: ORDER Appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made on 16 December 2003 and, in their place, order that: the appeal to that Court is dismissed with costs; the cross-appeal to that Court is allowed with costs; (iii) the orders of Nettle J made on 29 October 2002 are varied so that the appeal to the Supreme Court of Victoria in respect of amended assessment S 020601711-2 is allowed with costs, the amended assessment is set aside, and the subject-matter thereof is remitted to the Commissioner accordance with law. for reconsideration and determination Matter No M223/2004: Appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made on 16 December 2003 and, in their place, order that: the appeal to that Court is dismissed with costs; the cross-appeal to that Court is allowed with costs; (iii) the orders of Nettle J made on 29 October 2002 are varied so that the appeal to the Supreme Court of Victoria in respect of amended assessment S 020601703-2 is allowed with costs, the amended assessment is set aside, and the subject-matter thereof is remitted to the Commissioner accordance with law. for reconsideration and determination Matter No M215/2004: Appeal dismissed with costs. Cross-appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made on 16 December 2003 and, in their place, order that: the appeal to that Court is dismissed with costs; the cross-appeal to that Court is allowed with costs; (iii) the orders of Nettle J made on 29 October 2002 are varied so that the appeal to the Supreme Court of Victoria in respect of amended assessment S 012493235-2 is allowed with costs, the amended assessment is set aside, and the subject-matter thereof is remitted to the Commissioner for reconsideration and determination in accordance with law. Matter No M216/2004: Appeal dismissed with costs. Cross-appeal allowed with costs. Set aside the orders of the Court of Appeal of the Supreme Court of Victoria made on 16 December 2003 and, in their place, order that: the appeal to that Court is dismissed with costs; the cross-appeal to that Court is allowed with costs; (iii) the orders of Nettle J made on 29 October 2002 are varied so that the appeal to the Supreme Court of Victoria in respect of amended assessment S 014593439-2 is allowed with costs, the amended assessment is set aside, and the subject-matter thereof is remitted to the Commissioner for reconsideration and determination in accordance with law. Matter No M217/2004: Appeal dismissed with costs. Matter No M218/2004: Appeal dismissed with costs. On appeal from the Supreme Court of Victoria Representation: Matter No M223/2004 & M224/2004 D F Jackson QC with D R J O'Brien for the appellant (instructed by Gadens Lawyers) J D Merralls QC with C J Horan for the respondent (instructed by State Revenue Office) Matter No M215/2004 to M218/2004 J D Merralls QC with C J Horan for the appellant (instructed by State Revenue Office) D F Jackson QC with D R J O'Brien for the respondent (instructed by Gadens Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS CPT Custodian Pty Ltd v Commissioner of State Revenue Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd Land tax – Unit trusts – Registered proprietors of land were trustees of unit trusts in which taxpayers held issued units – Trustees also held issued units in similar trusts – Taxpayers assessed for land tax as owners of land – Whether holder of issued units in these trusts is an "owner" of the land for the purposes of the Land Tax Act 1958 (Vic) – Whether holder of issued units in a trust which itself holds issued units in a further trust, the trustee of which is the registered proprietor of land, is an "owner" of the land – Whether holder of only some of the issued units of a unit trust stands in a different position to a beneficiary owning all issued units – Relevance of the rule in Saunders v Vautier – Relevance of statutory definition of "joint owners". Trusts – Whether "unit trusts" form any distinct class of trust the characteristics of which inform the meaning of the statutory term "owner" – Whether whenever the legal estate in property is vested in a trustee there must be some person entitled to beneficial ownership. Trusts – Beneficiaries – Rule in Saunders v Vautier of beneficiaries' entitlement to terminate trust where sui juris and together absolutely entitled – Whether the rule applies when trust makes provision for trust property to be available for satisfaction of trustee's and manager's fees. Words and phrases – "owner", "joint owners", "unit trust". Land Tax Act 1958 (Vic), ss 3, 6, 8, 39, 49, 51, 52. GLEESON CJ, McHUGH, GUMMOW, CALLINAN AND HEYDON JJ. These appeals (and two cross-appeals) were heard together and with appearances by the same counsel. The appeals are brought from orders made by the Victorian Court of Appeal which had heard together six appeals and cross-appeals. The Court of Appeal (Phillips, Buchanan and Eames JJA) delivered the one set of reasons1. The appeals to the Court of Appeal were brought by the Commissioner of State Revenue ("the Commissioner") against orders of the Supreme Court (Nettle J)2 setting aside the disallowance of objections to certain amended assessments under the Land Tax Act 1958 (Vic) ("the Act") issued in 19993. Objections to the assessments had been made by Karingal 2 Holdings Pty Ltd ("Karingal") and CPT Custodian Pty Ltd ("CPT"). The Commissioner had issued amended assessments of Karingal in respect of the land tax years 1996, 1997, 1998 and 19994, and amended assessments of CPT in respect of the land tax years 1998 and 19995. On the same day as it delivered judgment in the present litigation, the Court of Appeal, constituted by the same bench, delivered judgment in Arjon Pty Ltd v Commissioner of State Revenue6, and there are cross-references between the two judgments. There is no appeal to this Court from Arjon, though it will be necessary to refer to what was said in that case. Phillips JA gave the leading judgment in both appeals. 1 Commissioner of State Revenue v Karingal 2 Holdings Pty Ltd (2003) 8 VR 532. 2 Karingal 2 Holdings Pty Ltd v Commissioner of State Revenue (2002) 51 ATR 190. 3 Section 25 of the Act provided for the treatment of objections as "appeals" to the Supreme Court. The Supreme Court was empowered by s 29 to make such order as it thought fit and by such order to confirm, reduce, increase or vary the assessment. 4 The amended assessments were numbered respectively S 012493235-2, S 014593439-2, S 015758105-2 and S 018290287-2. In turn, these amended assessments are represented respectively in this Court in Appeals M215, 216, 217 and 218 of 2004. 5 The amended assessments were numbered respectively S 020601703-2 and S 020601711-2 and in turn are represented respectively in Appeals M223 and 222 McHugh Callinan The litigation The litigation concerns the application of the taxing provisions of the Act to parcels of land on which stand a number of shopping centres. The shopping centres known as the Glen Shopping Centre at Glen Waverley, the Keilor Downs Plaza at Keilor Downs, the Cranbourne Park Shopping Centre at Cranbourne and the Mildura Centre Plaza at Mildura stand on land the registered proprietors of which are trustees under trust deeds constituting what have been identified as unit trusts. In making the assessments still in contention in this Court, the Commissioner relied upon ownership of issued units in these unit trusts and in unit trusts established on similar terms in which the first trust owns issued units. The Commissioner also relied upon s 44 of the Act. If the circumstances specified in s 44 apply and the Commissioner so determines, two or more related corporations may be taken to be a single corporation for the purposes of the Act. In this way, Karingal was assessed by reason of the holdings of its related corporations, 333 Queen Street Pty Ltd and Centro Properties Ltd. The taxing provisions of the Act do not suggest that there can be only one taxable "owner" of land at any one time7. The registered proprietor of the lands on which stood the shopping centres just mentioned had a liability to assessment as legal owner and trustee8 and there was no question of insolvency or other difficulty in recovery of tax in such cases. The suggestion was made in argument for the Commissioner that in issuing the assessments reliance had been placed upon ownership of units for ease of collection of the revenue. Two further points should be made here. The first is that it appears that the units were not in the years of assessment listed securities. No question arises respecting the managed investment schemes provisions introduced by the Managed Investments Act 1998 (Cth)9. The second point is that no reliance was cf Chief Commissioner of Land Tax v Macary Manufacturing Pty Ltd (1999) 48 NSWLR 299 at 311. 8 See s 52 of the Act. 9 That Act contained transitional provisions for the previous prescribed interests legislation. McHugh Callinan placed at any stage of the litigation upon the doctrine of merger between greater and lesser estates10 in instances where the trustee held 100 per cent of the issued units in a unit trust of which it was trustee. The Act Sections 6, 8 and 39 of the Act impose at rates specified in the Second Schedule land tax, to be collected as a debt owing to the Crown in right of Victoria by the Commissioner, in respect of the total unimproved value of all land of which the taxpayer is "the owner" at midnight on 31 December of the immediately preceding year for which the tax is assessed. Various provisions of the Act11 in terms deem certain persons to be the owner of land or the owner of a fee simple of land. These provisions are not directly in issue here. Thus it is upon the operation of the definition of "owner" that the outcome of the litigation largely turns. The Commissioner cannot prevail without success on this point. Section 51 of the Act subjects "the owner of any equitable estate or interest in land" to assessment "as if the estate or interest so owned by him was legal". Section 52 obliges trustees to make returns and to be assessed as if beneficially entitled to the trust land. The Court of Appeal noted12 the agreement of the parties that ss 51 and 52 were not charging provisions and that no party could be brought to tax under either provision unless it answered the definition of "owner" in s 3. Section 3 includes as owner every person who by virtue of the Act "is deemed to be an owner". As indicated above, those deeming provisions are not presently relevant. The definition also states that owner "means", among other things: every person entitled to any land for any estate of freehold in possession". Upon that component of the definition the Commissioner relies. It resembles par (a) of the definition of "owner" in s 3 of the Land Tax Assessment Act 1910 10 Property Law Act 1958 (Vic), s 185. 11 See ss 41, 42, 43. 12 (2003) 8 VR 532 at 540. McHugh Callinan (Cth) ("the 1910 Act"). This was construed in Glenn v Federal Commissioner of Land Tax13 and it will be necessary to return to that case. The Court of Appeal In the Court of Appeal, counsel for the taxpayers had, correctly, submitted that, rather than approach the issues by looking broadly at the characteristics of a "unit trust", it was necessary to begin with the terms of the relevant trust deeds and the rights, powers, and restrictions for which they provided14. However, the Court of Appeal first considered the characteristics of "a unit trust". The Court concluded, with reference to the detailed reasoning in Arjon, that "the holder of all of the units in a unit trust may be said to be entitled, in equity, to the freehold estate in possession in land which is an asset of the trust", and that the reasoning applied "with equal force both to the sole unit holder in a land-holding trust and to the sole unit holder in a trust which is itself the sole unit holder in a land-holding trust"15. The Court of Appeal contrasted the position of a holder of less than all of the units, and in this Court, the Commissioner contends that it erred in doing so. The Court of Appeal held that16: "The holder of some only of the units has no more than those entitlements afforded by the trust deed to a unit holder; they are surely personal property quite different from the realty held by the trustee." The result was that the Court of Appeal (a) upheld the holding of Nettle J that a unit holder with less than 100 per cent of the total issued units at the relevant date was not the owner of an estate of freehold in possession within the meaning of the statutory definition; and (b) set aside the holding of Nettle J with respect to the ownership of 100 per cent of issued units in a unit trust and instead held that in such a case the statutory definition was satisfied, and that this was so also where the land in question was vested in the trustee of a unit trust in which 13 (1915) 20 CLR 490. 14 (2003) 8 VR 532 at 539. 15 (2003) 8 VR 532 at 540 (original emphasis). 16 (2003) 8 VR 532 at 543. McHugh Callinan the first trust held the issued units. This last situation was described in submissions as a "sub-trust". The Commissioner and the two taxpayers, Karingal and CPT, challenge the outcome in the Court of Appeal, each to the extent that it was adverse to their interests. As noted above, there are six appeals and two cross-appeals, and there are also two notices of contention. Their resolution should produce a result that the Court of Appeal's holding (a) identified above should be affirmed and holding (b) reversed. The overall result would thus favour the taxpayers. Statutory construction and the general law Something now should be said respecting task of statutory construction which was presented to Nettle J and then to the Court of Appeal. There were two steps to be taken. They were correctly identified in the submissions by the taxpayers to the Court of Appeal17. The first step was to ascertain the terms of the trusts upon which the relevant lands were held. The second was to construe the statutory definition to ascertain whether the rights of the taxpayers under those trusts fell within that definition. the In taking those steps, a priori assumptions as to the nature of unit trusts under the general law and principles of equity would not assist and would be apt to mislead. All depends, as Tamberlin and Hely JJ put it in Kent v SS "Maria Luisa" (No 2)18, upon the terms of the particular trust. The term "unit trust" is the subject of much exegesis by commentators19. However, "unit trust", like "discretionary trust"20, in the absence of an applicable statutory definition, does 17 (2003) 8 VR 532 at 539-540. 18 (2003) 130 FCR 12 at 33. 19 See Ford, "Unit Trusts", (1960) 23 Modern Law Review 129; Ford, "Public Unit Trusts", in Austin and Vann (eds), The Law of Public Company Finance, (1986) 397; Sin, The Legal Nature of the Unit Trust, (1997); Thomas and Hudson, The Law of Trusts, (2003), Ch 51. 20 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 234 McHugh Callinan not have a constant, fixed normative meaning which can dictate the application to particular facts of the definition in s 3(a) of the Act21. To approach the case, as both Nettle J and the Court of Appeal appear to have done in response to submissions by the Commissioner, by asking first whether, as was said to be indicated by Costa & Duppe Properties Pty Ltd v Duppe22, the holder of a unit "in a unit trust" has "a proprietary interest in each of the assets which comprise the entirety of the trust fund", and answering it in the affirmative23, did not immediately assist in construing the definition of "owner" in the Act. That definition does not speak of ownership of proprietary interests at large, but of entitlement to any estate of freehold in possession. In Schmidt v Rosewood Trust Ltd24, the Privy Council recently stressed that the right to seek the intervention of a court of equity to exercise its inherent authority to supervise and, if necessary, to intervene in the administration of trusts, "does not depend on entitlement to a fixed and transmissible beneficial interest". In a sense, the Commissioner's submissions tend to prove too much25. In any event, as Lord Wilberforce emphasised in Gartside v Inland Revenue Commissioners26, it is one thing to identify rights protected by a court of equity, and another to identify an interest which has "the necessary quality of definable extent which must exist before it can be taxed". In the present case, the "definable extent" is that specified by the definition in the Act. No doubt, unit holders accurately may be said to have had rights protected by a court of equity, but that does not require the conclusion that in the statutory sense they were "owners" of the land held on the trusts in question27. 21 Section 102D(1) of the Income Tax Assessment Act 1936 (Cth), for the purposes of Pt III, Div 6B, defines a "unit" in relation to a "prescribed trust estate" as including "a beneficial interest, however described, in any of the income or property of the trust estate". Nothing for these appeals turns upon the income tax legislation. 23 (2003) 8 VR 532 at 539. 24 [2003] 2 AC 709 at 729. 25 cf Schmidt v Rosewood Trust Ltd [2003] 2 AC 709 at 729. 26 [1968] AC 553 at 617-618. 27 cf Kent v SS "Maria Luisa" (No 2) (2003) 130 FCR 12 at 34-35. McHugh Callinan The trust deeds The relevant trust deeds were not in identical form. However, their relevantly salient features appear sufficiently from a consideration of the Keilor Downs Deed ("the Deed") to which the Court was taken at the hearing of the appeals. At all material times the Trustee of the trusts of the Deed was CPT. The parties to the Deed were CPT and a party defined as "the Manager", in which the management of the Fund was vested exclusively (cll 2.5, 16.2). The Fund was vested in the Trustee upon trust for the Unit Holders (cll 2.4, 26.3). Both the Trustee (cl 23.2) and the Manager (cl 23.1) were entitled to fees in significant amounts to be paid out of the Fund, and also to monthly reimbursement from the Fund of their costs, charges and expenses (cl 23.5). The beneficial interest in the Fund was divided into units, each said to confer an equal interest in all property for the time being held by the Trustee upon the trusts of the Deed, but excluding that part of the Fund credited to a distribution account for distribution to unit holders (cl 3.2). But no unit conferred "any interest in any particular part of the Trust Fund or any investment" and each unit had "only such interest in the Trust Fund as a whole as [was] conferred on a Unit under the provisions contained in [the Deed]" (cl 3.2)28. Unit holders were not entitled to require the transfer of any property comprised in the Fund, save as provided by the Deed (cl 28.13) but, by agreement with the Manager, distributions in specie might be made upon determination of the Fund (cl 15.5.5). A unit holder was not entitled to lodge a caveat claiming an estate or interest in any investment, being realty (cl 7.1.3)29. Unit holders were bound by the terms of the Deed as if parties to it (cl 8). The 28 Clause 5 of the Cranbourne Park Unit Trust Deed stated that "each Unit Holder shall not be entitled to any particular asset, investment, or property of whatever kind of the Fund". 29 It is unnecessary to enter upon the question whether such a negative stipulation would be enforced in equity, given the policy of the law perceived from the scope and purpose of the Torrens system legislation: Nelson v Nelson (1995) 184 CLR 538; Fitzgerald v F J Leonhardt Pty Ltd (1997) 189 CLR 215. See, generally, Campbell, "Contracting Around the Right to Caveat", in Grinlinton (ed), Torrens in the Twenty-First Century, (2003) 203. McHugh Callinan Deed contemplated that all units might be held beneficially by a single unit holder (cl 29.4). Clause 20 provided for the distribution to unit holders of periodic income entitlements, and cl 15 for the realisation of the Fund upon its determination and distribution of the proceeds among unit holders. In the circumstances detailed in cl 14 the Manager was obliged to repurchase units which would then be cancelled or be available for resale by the Manager30. The Commissioner's submissions Counsel for the Commissioner, with reference to provisions such as those of the Deed just described, submitted in this Court that (i) as a matter of general law, because the trust deeds conferred upon each unit holder fixed and ascertainable rights, in relation to the distribution of income and capital, and not depending upon the exercise of discretion, the trust deeds conferred upon each unit holder an equitable estate or interest in each asset from time to time comprising the trust fund; (ii) no other person or class had any such rights or interests; and (iii) these equitable estates or interests answered the statutory requirement in the definition of "owner" of entitlement to land for any estate of freehold in possession. The Commissioner added that the position was no different where there was a sub-trust, with a unit holder holding units in a unit trust, the trustee of which in turn held units in a land-holding trust. Such a position arose in the 1996 and 1997 land tax years with respect to the Keilor Downs Plaza Land and in 1997 with respect to the Cranbourne Park Shopping Centre Land. The Commissioner's submissions respecting sub-trusts cannot succeed if the primary propositions (i), (ii) and (iii) fail. Propositions (i) and (ii) may be put to one side and attention first given to proposition (iii) which is the critical issue posed by the taxing law itself. It then is necessary to return to Glenn and what was said there respecting the similar definition of "owner" in the 1910 Act. 30 cf MSP Nominees Pty Ltd v Commissioner of Stamps (SA) (1999) 198 CLR 494. McHugh Callinan Glenn v Federal Commissioner of Land Tax31 In that case, Griffith CJ said of an argument for the Revenue that it was32: "based on the assumption that whenever the legal estate in land is vested in a trustee there must be some person other than the trustee entitled to it in equity for an estate of freehold in possession, so that the only question to be answered is who is the owner of that equitable estate. In my opinion, there is a prior inquiry, namely, whether there is any such person. If there is not, the trustee is entitled to the whole estate in possession, both legal and equitable." That statement was a prescient rejection of a "dogma" that, where ownership is vested in a trustee, equitable ownership must necessarily be vested in someone else because it is an essential attribute of a trust that it confers upon individuals a complex of beneficial legal relations which may be called ownership33. The current state of authority, exemplified by Commissioner of Taxation v Linter Textiles Australia Ltd (In liq)34, bears out what was said in Glenn by Griffith CJ. General remarks in Chief Commissioner of Stamp Duties v ISPT Pty Ltd35, a case referred to extensively in Arjon36, may be at odds with what was said in Glenn to the extent that they go beyond construction of the particular New South Wales stamp duty legislation, but it is unnecessary to pursue the question here. In Glenn, Griffith CJ construed the statutory expression "estate in possession" as denoting "an estate of which some person has the present right of enjoyment", saying that land tax being an annual tax, "the 'owner' of the land is the person who is in the present enjoyment of the fruits which presumably afford 31 (1915) 20 CLR 490. 32 (1915) 20 CLR 490 at 497. 33 See Harris, "Trust, Power and Duty", (1971) 87 Law Quarterly Review 31 at 47. 34 (2005) 79 ALJR 913 at 919 [30]; 215 ALR 1 at 9. See also Kent v SS "Maria Luisa" (No 2) (2003) 130 FCR 12 at 32-33. 35 (1998) 45 NSWLR 639 at 654. 36 (2003) 8 VR 502 at 515-517. McHugh Callinan the fund from which it is to be paid"37. Where a trust for accumulation was in operation, those who thereafter were to take the trust estate were not entitled to an "estate of freehold in possession" and were not "owners". The Chief Justice continued38: "In my opinion, therefore, when the equitable rights created by a will, which may be as diverse as the testator thinks fit, are such that the beneficial enjoyment of property by a particular object of his bounty cannot begin until the expiration of a determinate or indeterminate period, there is no present estate in possession in that property in any person other than the trustees of the will. In one sense, perhaps, the persons who are for the time being entitled to share in the fruits of the land may collectively be called the equitable owners, but that point is not material to the present case." Thereafter, this Court decided that it followed from Glenn that, while "in one sense" those between whom a testamentary estate would be appropriated at the end of a stipulated period of accumulation of income were equitable owners of land included in the estate, they were not taxable as owners under the 1910 Act39. In the present case, Nettle J, who was upheld on this issue by the Court of Appeal, applied to the definition of "owner" in s 3(a) of the Act the reasoning in Glenn. His Honour rejected the submission for the Commissioner, in essence renewed in this Court, that the entitlements of the unit holders made each unit holder an "owner" in the relevant sense. His Honour was correct in doing so. Hallmark of the unit trust? To a significant degree the proposition advanced by the Commissioner and encapsulated in proposition (iii) set out above depended upon what in propositions (i) and (ii) was treated as the hallmark of any unit trust. The alleged hallmark is that, unlike shareholders with respect to the property of the company, unit holders do have beneficial interests in the assets of the trust; no other 37 (1915) 20 CLR 490 at 496-497. 38 (1915) 20 CLR 490 at 498. 39 Union Trustee Co of Australia Ltd v Federal Commissioner of Land Tax (1915) 20 CLR 526 at 531. McHugh Callinan persons or class of persons has such an interest and, if not with the unit holders, where else rests the beneficial interest? Similar reasoning is manifest in what was said in Duppe40 concerning the interest of each unit holder in the three parcels of land comprising the assets of the unit trust considered in that case. That trust deed (in cll 7, 8) contained provisions in similar form to cl 3.2 of the Deed considered above. The issue in Duppe was whether each unit holder had an estate or interest in land within the meaning of s 89(1) of the Transfer of Land Act 1958 (Vic), which was necessary to support a caveat. Brooking J, in answering that question in the affirmative, "If there is a proprietary interest in the entirety, there must be a proprietary interest in each of the assets of which the entirety is composed." (emphasis added) However, in Gartside, Lord Wilberforce had said42: "It can be accepted that 'interest' is capable of a very wide and general meaning. But the wide spectrum that it covers makes it all the more necessary, if precise conclusions are to be founded upon its use, to place it in a setting: Viscount Radcliffe, delivering the Board's judgment in Commissioner of Stamp Duties (Queensland) v Livingston43 shows how this word has to do duty in several quite different legal contexts to express rights of very different characters and that to transfer a meaning from one context to another may breed confusion." In Livingston itself, Viscount Radcliffe had observed that44: "the terminology of our legal system has not produced a sufficient variety of words to represent the various meanings which can be conveyed by the 41 [1986] VR 90 at 96. 42 [1968] AC 553 at 617. 43 (1964) 112 CLR 12 at 28-29; [1965] AC 694 at 719. 44 (1964) 112 CLR 12 at 22; [1965] AC 694 at 712. McHugh Callinan words 'interest' and 'property'. Thus propositions are advanced or rebutted by the employment of terms that have not in themselves a common basis of definition." When Livingston had been before this Court, Fullagar J and Kitto J each had spoken to similar effect45. Hence, perhaps, the development of the "dogma" respecting concurrent and exhaustive legal and beneficial interests which has been referred to earlier in these reasons and which was decisively discounted by the Privy Council in Livingston. Terms are used here which lack a universal contemporary or historical meaning, divorced from the context, particularly any statutory context in which they are employed46. It is unnecessary for the instant appeals to determine whether Duppe correctly decided the requirements in Victoria for a caveatable interest. But what was said there provides, after Gartside and Livingston, and more recently Linter Textiles47, no authority of the general significance assumed for it by the submissions here by the Commissioner. However, something must be said here respecting the decision of this Court in Charles v Federal Commissioner of Taxation48. That case was referred to extensively in Duppe49 as the most important authority for the purposes of that case. Charles was said by the Commissioner to be consistent with the analysis urged in the Commissioner's submissions on the present appeals. The significant conclusions expressed by Dixon CJ, Kitto and Taylor JJ in Charles appear in a passage where, after emphasising that a share in a company 45 Livingston v Commissioner of Stamp Duties (Q) (1960) 107 CLR 411 at 438 per Fullagar J, 450 per Kitto J. 46 See Speed, "Beneficial Ownership", (1997) 26 Australian Tax Review 34. 47 (2005) 79 ALJR 913; 215 ALR 1. See also the remarks of Aickin J in DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 463. 48 (1954) 90 CLR 598. 49 [1986] VR 90 at 95. McHugh Callinan confers upon the holder no legal or equitable interest in the assets of the company, they continued50: "But a unit under the trust deed before us confers a proprietary interest in all the property which for the time being is subject to the trust of the deed51; so that the question whether moneys distributed to unit holders under the trust form part of their income or of their capital must be answered by considering the character of those moneys in the hands of the trustees before the distribution is made." (emphasis added) The reference by the Court in Charles to the first of the Archer-Shee cases52 cannot attribute to that decision a general significance which today, in the light of the more recent authorities to which reference has been made above, it does not have. Lady Archer-Shee held a life interest in the income of the residuary estate of her father. The will was in simple form, with one tenant for life and no other object of the trust to be considered53. The contrast between that situation and the trusts with which Karingal and CPT are concerned will be readily apparent. No one, as Kitto J later pointed out, doubted that Lady Archer-Shee had a beneficial interest in the income54. But, did the moneys paid by the trustees to her account answer the statutory description of income of Lady Archer-Shee "arising ... from"55 the stocks and shares in which the residuary estate was invested? Lord Wrenbury held that the answer was "yes" because she had "an equitable right in possession to receive during her life" the dividends, subject to deduction for the costs, charges and expenses of the trustees, and for United States tax56. 50 (1954) 90 CLR 598 at 609. 51 Baker v Archer-Shee [1927] AC 844. 52 Baker v Archer-Shee [1927] AC 844; Archer-Shee v Garland [1931] AC 212. 53 See the remarks of Viscount Sumner [1927] AC 844 at 853. 54 Livingston v Commissioner of Stamp Duties (Q) (1960) 107 CLR 411 at 450. 55 See the speech of Lord Wrenbury [1927] AC 844 at 863. 56 See [1927] AC 844 at 866. McHugh Callinan The deed considered in Charles divided the beneficial interest in the trust fund into units (cll 6, 7), and the trustees were bound to make half-yearly distributions to unit holders, in proportion to their respective numbers of units, of the "cash produce" which had been received by the trustees (cll 13A, 13B)57. Karingal and CPT rightly stress that the deeds with which this litigation is concerned were differently cast and in terms which do not support any direct and simple conclusion respecting proprietary interests of unit holders such as that reached in Charles. The interest of a unit holder under the Deed said58: On this issue, remarks by Nettle J are in point and conclusive. His Honour "It may well be that the income of the fund as finally constituted and distributed will include all of the rents and profits generated by a particular parcel of land within the fund. But it is distinctly possible that it will not. Each of the deeds gives power to the trustee to provide out of receipts for future and contingent liabilities; to apply receipts in the purchase of any property or business; to invest receipts in authorised investments and to deal with and transpose such investments; and the only right of the unit holder is to a proportionate share of the income of the fund for the year. The Commissioner contends that the trustees' powers of disposition and transposition make no difference. He submits that insofar as receipts from particular properties may be applied in making payments other than to a unit holder, they must be seen as made on behalf of the unit holder and in that sense as received by the unit holder. He says that it is in principle no different to the case of a simple trust of land with only one beneficiary, under the terms of which the trustee is entitled to apply receipts in the payment of obligations and in the making of provisions in connection with the management of the land. The Commissioner 57 (1954) 90 CLR 598 at 600, 606-607. See also the capital growth unit trust considered in Read v The Commonwealth (1988) 167 CLR 57 at 61, the terms of which were said by Mason CJ, Deane and Gaudron JJ to confer upon a unit holder a beneficial interest in the trust assets. 58 (2002) 51 ATR 190 at 205. McHugh Callinan contends that in such a case there can be no doubt that the beneficiary would be liable to tax as 'owner'. But I think there is a difference. In the case of a simple trust of the kind instanced by the Commissioner the entitlement of the trustee to apply part of the receipts in defined ways determines the amount of the income which the beneficiary has a right to receive. Contrastingly, in a case of a complex unit trust of the kind with which I am concerned, the entitlement of the trustee to apply receipts in defined ways informs the nature of the income that the unit holders have a right to receive: not a total of all of the receipts derived from each asset the subject of the fund but rather such if any income as may be derived from the product of the application of gross receipts in various ways." (footnotes omitted) The Commissioner referred to s 45 of the Act as essential to his case. Section 45 provides, among other things, for the separate assessment of each "joint owner" of land in respect of the individual interest of that owner in the land (s 45(3)). The term "joint owners" is so defined in s 3(1) as to identify persons "who own land jointly or in common, whether as partners or otherwise". The 1910 Act contained a definition in those terms. It is apparent from the reasoning of Knox CJ in Terry v Federal Commissioner of Taxation59, a case upon the 1910 Act, that in order to be a joint owner the person in question must jointly occupy the same position with regard to entitlement for an estate of freehold in possession (ie, as "owner" in the defined sense) as an individual would occupy in his own person. That requirement means that the notion of joint ownership in s 45 cannot overcome the failure of the Commissioner's case with respect to the definition of "owner" in s 3 of the Act. Further, the units are discrete bundles of rights; each unit is not held in joint ownership with the totality of issued units. It appeared to be conceded in argument by the Commissioner that unit holders did not hold any land as joint tenants. However, they were said necessarily to own together the whole of the beneficial ownership which, on the Commissioner's case, must subsist. The Commissioner further submitted that this ownership, however understood, was within the closing words of the definition of "joint owners", namely, "or otherwise". 59 (1920) 27 CLR 429 at 434-435. McHugh Callinan There are two answers to these submissions. First, the concluding words are no more than part of the phrase "whether as partners or otherwise", and do not lessen the requirement for ownership jointly or in common. Secondly, as already demonstrated, the assumption respecting beneficial ownership is misplaced. The sole owner of all issued units There remains the distinction upon which turned the outcome in the Court of Appeal. The distinction was drawn with reference to the reasons in Arjon where Phillips JA stated60: "where the trust deed itself declares that the trust fund as a whole is vested in all the unit holders together and there is but one person holding all the issued units, it seems to me to follow that that sole unit holder must be regarded as in equity entitled to an interest, vested in possession, in all of the trust assets". Earlier in his reasons, his Honour had said of the sole unit holder61: "As the only person beneficially interested in the assets, it also has the power to bring the trust to an end at will and to require the transfer to it of the assets (even if only after satisfying any claim that the trustee might have to reimbursement or recoupment for expenses incurred as trustee)." This meant that the unit holder of all issued units had more than the accumulation of the rights attaching to each of the units considered severally. In particular, with a reference to Saunders v Vautier62, Phillips JA said that63: "quite apart from the terms of the trust deed, the holder of all of the units will ordinarily have the power to bring the trust to an end and, if it so chooses, appropriate the trust assets to itself". 60 (2003) 8 VR 502 at 520. 61 (2003) 8 VR 502 at 515. 62 (1841) 4 Beav 115 [49 ER 282]; affd (1841) Cr and Ph 240 [41 ER 482]. 63 (2003) 8 VR 502 at 515. McHugh Callinan Karingal and CPT challenge these propositions and deny that the holder of all of the issued units was in a position to bring to an end the relevant unit trusts. The issue of statutory construction concerning the phrase "entitled to any land for any estate of freehold in possession" in the definition in the Act of "owner" must not be overlooked whilst pursuing any inquiry respecting Saunders v Vautier. The operation of the rule attributed to that case was taken by the Court of Appeal to override the complex stipulations of the Deed respecting its determination. The result was apparently that, because at each relevant 31 December there was an unrealised potential for the holder of all of the issued units to put the trusts to an end, the unit holders were on that date entitled to an estate of freehold in possession within the meaning of the statutory definition. Saunders v Vautier is a case which has given its name to a "rule" not explicitly formulated in the case itself, either by Lord Langdale MR (at first instance) or by Lord Cottenham LC (on appeal). In Anglo-Australian law the rule has been seen to embody a "consent principle" recently identified by Mummery LJ in Goulding v James64 as follows: "The principle recognises the rights of beneficiaries, who are sui juris and together absolutely entitled to the trust property, to exercise their proprietary rights to overbear and defeat the intention of a testator or settlor to subject property to the continuing trusts, powers and limitations of a will or trust instrument." A different view was taken long ago by the United States Supreme Court. In Shelton v King65, the Court repeated what had been said by Miller J in 1875 when speaking for the Supreme Court in Nichols v Eaton66. He saw no reason in the principles of public policy concerning frauds upon creditors, restraints upon alienation, the prevention of perpetuities and of excessive accumulations, or in the necessary incidents of equitable estates, which supported a rule of the width engrafted upon the law (then comparatively recently) by the English Court of Chancery as a limitation upon effecting the intent of testators and settlors67. 64 [1997] 2 All ER 239 at 247. 66 91 US 716 at 725 (1875). 67 See further Claflin v Claflin 20 NE 454 (1889); Scott on Trusts, 4th ed (1989), vol 4, §337.3; Sin, The Legal Nature of the Unit Trust, (1997) at 114-120. McHugh Callinan However that may be, there is force for Anglo-Australian law in the statement that the rule in Saunders v Vautier gives the beneficiaries a Hohfeldian "power" which correlates to a "liability" on the part of the trustees, rather than a "right" correlative to a "duty". This is because, in the words of Professor J W Harris68: "[b]y breaking up the trust, the beneficiaries do not compel the trustees to carry out any part of their office as active trustees; on the contrary, they bring that office to an end". (footnote omitted) Whilst the reasoning of the Court of Appeal respecting the special case of the holder of all issued units depended largely upon the rule in Saunders v Vautier, in oral argument in this Court the Commissioner said that, in effect, here the rule was a red herring. The rule was but a corollary of the beneficial ownership for which the Commissioner contended in his earlier submissions; this did not depend upon the exercise of the entitlement to terminate the trust. The submissions respecting the beneficial ownership by each unit holder have been rejected earlier in these reasons. The trusts exemplified in the Deed recognised (cl 29.4) that all issued units might be in the one beneficial ownership, but the trusts were drawn in terms conferring individual rights attached to each unit. They were not drawn to provide a single right of a cumulative nature so that the whole differed from the sum of the parts. There could be no such single right unless held jointly or in common, but the Deed was not cast in such terms69. There is a further consideration. The facts of the present cases do not, in any event, answer the modern formulation of the rule in Saunders v Vautier, stated as follows in Thomas on Powers70: "Under the rule in Saunders v Vautier71, an adult beneficiary (or a number of adult beneficiaries acting together) who has (or between them have) an absolute, vested and indefeasible interest in the capital and 68 "Trust, Power and Duty", (1971) 87 Law Quarterly Review 31 at 63. 69 cf Gartside v Inland Revenue Commissioners [1968] AC 553 at 605. 71 (1841) 4 Beav 115 [49 ER 282]; affd (1841) Cr and Ph 240 [41 ER 482]. McHugh Callinan income of property may at any time require the transfer of the property to him (or them) and may terminate any accumulation." Lightman J said in Don King Productions Inc v Warren72 that the rule only applies if, as was not so there, the beneficiaries were entitled to wind up the trust and require the trustee to assign to them the subject-matter of the trust. Notwithstanding these references to beneficiaries, the repositories of the power to override the terms of a trust by bringing to an end its further administration have been variously identified. For example, it has been asked to whom do the trustees owe their duties of administration? Looking at the testamentary trusts considered in Glenn, Isaacs J considered the scope of the duties of the trustees and asked whether the trusts were exclusively for the benefit of the appellants73. The appellants' interests in the residuary estate were subject to the payment of annuities to the widow of the testator for her life and to his unmarried daughters until marriage74. Isaacs J concluded75: "The trustees have prior duties to other legatees having definite interests, and the strict performance of those duties requires the trustees to retain possession of the property, to receive the profits, and to deal with them otherwise than by paying them to the appellants. … It is obvious, therefore, that the principle of Saunders v Vautier76 cannot apply, for the trusts are not exclusively for the appellants' benefit." More recently, in Sir Moses Montefiore Jewish Home v Howell and Co (No 7) Pty Ltd 77, Kearney J treated the power to achieve immediate payment of the trust property as reposed in the entire range of persons entitled to call for the due administration of the trust in question. 72 [2000] Ch 291 at 321; affd [2000] Ch 291 at 324ff. 73 (1915) 20 CLR 490 at 504. 74 (1915) 20 CLR 490 at 495. 75 (1915) 20 CLR 490 at 504. 76 (1841) 4 Beav 115 [49 ER 282]; affd (1841) Cr and Ph 240 [41 ER 482]. 77 [1984] 2 NSWLR 406 at 410-411. McHugh Callinan But that approach to the rule in Saunders v Vautier would not meet the case of the Deed considered in this litigation. In the Deed, the Manager covenanted with the Trustee (cl 23.4) to ensure that there were at all times sufficient readily realisable assets of the Trust available for the Trustee to raise the fees to which the Manager and the Trustee were entitled under cl 23.1 and cl 23.2 respectively. These stipulations made the Trustee and the Manager interested in due administration of the trusts of the Deed, in the sense identified by Kearney J in Moses Montefiore. Put somewhat differently, the unit holders were not the persons in whose favour alone the trust property might be applied by the trustee of the Deed78. The classic nineteenth century formulation by the English courts of the rule in Saunders v Vautier did not give consideration to the significance of the right of the trustee under the general law to reimbursement or exoneration for the discharge of liabilities incurred in administration of the trust. In Wharton v Masterman79, Lord Davey approached the rule in Saunders v Vautier from the viewpoint of the law respecting accumulations of income for an excessive period; if no person had any interest in the trust other than the legatee, the legatee might put an end to the accumulation which was exclusively for the benefit of that person and as a result there was no effective or enforceable direction for any accumulation80. However, his Lordship's discussion of the authorities81 does indicate that the rule in Saunders v Vautier could not apply if, by reason of the charging of legacies on the fund and accumulations, the persons seeking to put an end to the accumulations were "only entitled to an undetermined and uncertain surplus (if any) which might be left of the fund after payment of the legacies"82. In the present case, the unsatisfied trustees' right of indemnity was expressed as an actual liability in each of the relevant accounts at each 31 December date and rendered applicable the sense of the above words of Lord 78 See Blair v Curran (1939) 62 CLR 464 at 498, 501; Thomas on Powers, (1998) at 80 [1895] AC 186 at 198-200. 81 [1895] AC 186 at 200-201. 82 [1895] AC 186 at 201. McHugh Callinan Davey. Until satisfaction of rights of reimbursement or exoneration, it was impossible to say what the trust fund in question was83. There is a further, and related, point. This is suggested by remarks of Tamberlin and Hely JJ in Kent v SS "Maria Luisa" (No 2)84. It is one thing to say, as in Wharton v Masterman85, that a court of equity will not enforce a trust for accumulations in which no person has an interest but the legatee, and another to determine for a statutory purpose that there is a presently subsisting interest in all of the trust assets at a particular date (midnight on 31 December of the immediately preceding year) because of what could thereafter be done in exercise of a power of termination of the trust in question but at that date had not been done. Equity often regards as done that which ought to be done, but not necessarily that which merely could be done. In any event, what is at stake here is the operation of statutory criteria upon general law concepts of equitable ownership. Other issues These conclusions make it unnecessary, given the agreement noted by the Court of Appeal86 that ss 51 and 52 of the Act were not charging provisions, and that neither could apply unless there was first found to be an "owner" within the definition in s 3, to consider arguments concerning the construction of and relationship between ss 51 and 52. Orders In appeals M217 and 218, each appeal should be dismissed with costs. In appeals M215 and 216, each appeal should be dismissed with costs and the cross- appeal allowed with costs. On the cross-appeals, there should be consequential orders, including costs orders. The consequential orders are that the orders of the Court of Appeal are set aside and in place thereof the appeal to that Court is dismissed with costs, the cross-appeal to that Court is allowed with costs, and the 83 Chief Commissioner of Stamp Duties (NSW) v Buckle (1998) 192 CLR 226 at 246 84 (2003) 130 FCR 12 at 35-36. 85 [1895] AC 186 at 198. 86 (2003) 8 VR 532 at 540. McHugh Callinan orders of Nettle J are varied so that the appeal to the Supreme Court in respect of amended assessment S 012493235-2 (appeal M215) and S 014593439-2 (appeal M216) is allowed with costs, the amended assessment is set aside and the subject-matter thereof is remitted to the Commissioner for reconsideration and determination in accordance with law. In each of appeals M222 and 223, each appeal should be allowed with costs, the orders of the Court of Appeal set aside, the appeal to the Court of Appeal dismissed with costs, the cross-appeal allowed with costs, and the orders of Nettle J varied so that the appeal to the Supreme Court in respect of amended assessment S 020601703-2 (appeal M223) and S 020601711-2 (appeal M222) is allowed with costs, the amended assessment set aside and the subject-matter thereof remitted to the Commissioner for reconsideration and determination in accordance with law.
HIGH COURT OF AUSTRALIA NEWS LIMITED & ORS APPELLANTS AND SOUTH SYDNEY DISTRICT RUGBY LEAGUE FOOTBALL CLUB LIMITED & ORS RESPONDENTS News Limited v South Sydney District Rugby League Football Club Limited [2003] HCA 45 13 August 2003 1. Appeal allowed. ORDER 2. Set aside the orders of the Full Court of the Federal Court made on 6 July 2001 and, in lieu thereof, order that the appeal to that Court be dismissed. On appeal from the Federal Court of Australia Representation: A J Meagher SC with M J Leeming for the appellants (instructed by Allens D F Jackson QC with S A Glacken for the first respondent (instructed by Nicholas G Pappas & Company) No appearance for the second to twentieth respondents Intervener: N J Young QC with M H O'Bryan intervening on behalf of the Australian Competition and Consumer Commission (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS News Limited v South Sydney District Rugby League Football Club Limited Trade practices – Exclusionary provisions – Merger of competing sporting competitions – Provision that no more than a certain number of teams participate in new competition – Whether provision included for purpose of preventing, restricting or limiting supply of goods or services to, or acquisition of goods or services from, particular persons or classes of persons – Test for determining purpose – Trade Practices Act 1974 (Cth), ss 4D, 45(2)(a)(i), 45(2)(b)(i). Practice and procedure – Interveners – Whether intervener may advance on appeal argument not adopted by parties to appeal. Words and phrases – "purpose", "particular persons or classes of persons", "preventing, restricting or limiting". Trade Practices Act 1974 (Cth), ss 4D, 4F, 45(2)(a)(i), 45(2)(b)(i). GLEESON CJ. This appeal concerns the operation of s 45(2) of the Trade Practices Act 1974 (Cth) ("the Act"), read in the light of s 4D, which defines an "exclusionary provision". The four members of the Federal Court who considered the case were evenly divided on the outcome1. The Australian Competition and Consumer Commission ("the ACCC"), intervening by leave, acknowledged that "[i]t may be that the application of s 4D to the somewhat unusual circumstances of this case produces an unexpected result". The ACCC put an argument about the construction of the Act which, it submitted, could avoid such a result. That argument was not embraced by the parties on either side of the appeal. However, the ACCC also made some submissions as to the proper approach to the Act which were within the scope of the issues as defined by the parties. The facts are set out in the reasons for judgment of Callinan J. The litigation arises out of an agreement (to use a non-statutory term) made in 1997 between News Limited ("News") and Australian Rugby Football League Ltd ("ARL"). At the time of the agreement, News and ARL carried on competing businesses of conducting rugby league competitions. The reasons why conducting those sporting competitions was a business, and a very substantial business, are explained by Callinan J. It is unnecessary to expand upon them. It suffices to say that each business involved the supply and acquisition of valuable services. Each competition involved a certain number of clubs, which fielded teams. The activities of those clubs, in turn, involved commercial enterprises. In 1997, there were 10 clubs participating in the News competition, and 12 clubs (including the first respondent ("Souths")) participating in the ARL competition. Like most sporting competitions, each of the competitions conducted by News and ARL respectively was, of its nature, exclusive, in the sense that it was not open to any club that wished to join in. Very few sporting competitions, especially those which aspire to excellence of performance, and which seek to attract large spectator interest, extensive media coverage, and commercial sponsorship, are open to all. Of its nature, a football competition can only be conducted between a limited number of participants. The 22 clubs which participated in the two competing News and ARL competitions in 1997 themselves represented only a small fraction of the rugby league clubs in Australia. The manner in which those 22 clubs came to participate in their respective competitions is not material. The point is that the organisation of each of those competitions involved a process which, by limiting the numbers of competitors, excluded other clubs. The competing businesses of News and ARL necessarily involved defining the nature and size of their respective competitions and, in that sense, and in consequence of that process of definition, selecting 1 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611; (2001) 111 FCR 456. some, and excluding others, to or from whom services would be supplied or acquired. On 19 December 1997, News and ARL entered into an understanding that they would merge their two competitions. For commercial reasons, each accepted the need for a united competition. What was involved, however, was more than a merger. They designed a new and different competition. It was to be national. It was envisaged (as occurred) that Melbourne would field a team for the first time. It needed to be smaller than the aggregate of the clubs in the two existing competitions. In particular, the number of Sydney teams had to be reduced. The challenge to the legality of the 1997 understanding, and later agreements giving effect to it, was not based on s 45(2)(a)(ii) or s 45(2)(b)(ii) of the Act. It was not asserted that there was a contract, arrangement or understanding that had the purpose, or had or was likely to have the effect, of substantially lessening competition. It might have been thought that, in terms of competition law, the primary issue to be considered was whether the merger itself passed muster: it involved an agreement between two competing firms to cease their respective businesses and to create a new and different business which they (or related entities) would conduct jointly. If that involved a substantial lessening of competition in a market for goods or services then there would have been a contravention of s 45(2)(a)(ii) and s 45(2)(b)(ii). That was not alleged. Perhaps issues of market definition were thought to arise. Rugby league is only one form of sporting contest competing for the attention of the public. In fact, that is one of the reasons why the rivalry between the News and the ARL competitions was so damaging. Perhaps it was anticipated, as suggested in some of the evidence, that if there had been a continuation of the existing situation, before long the two rugby league competitions would have destroyed one another, and both would have gone out of existence. The challenge was made on a narrower ground, based on s 45(2)(a)(i) and s 45(2)(b)(i). It was directed towards that aspect of the contract, arrangement or understanding that dealt with the number of clubs to participate in the new the principal the Federal Court, summarised competition. characteristics of the structure of the new competition as follows: "(a) a progression from no more than twenty, to no more than sixteen, to no more than fourteen teams in 1998, 1999 and 2000 respectively – the 1998 figure giving all of the by then continuing ARL and Super League clubs (two had already dropped out from the 1997 number) an equal opportunity to participate in the rationalisation process; (b) provision for the national character of the competition – this to be secured through the 8-6/6-8 split; (c) the positive incentives given for entering mergers and joint ventures; and (d) the priority order in the grant of franchises, this being merged clubs, regional clubs and 'stand alone' Sydney clubs." The 8-6/6-8 split is a reference to the distribution of clubs in the competition between those based in Sydney and those based elsewhere. Finn J pointed out that the 8-6/6-8 split, and the 14 team limitation on team numbers for 2000, were defining characteristics of the new competition. The reference to "the grant of franchises" is to the choice of participating clubs. Souths was a stand-alone Sydney club. It was ultimately excluded from the 2000 competition. That is what gave rise to the present litigation. There were elaborate criteria for inclusion or exclusion, but they are not presently material. It is not claimed in this appeal that they were discriminatory, or that they were misapplied. Souths challenged the 14 team limitation on the basis that it was an exclusionary provision, and therefore contravened s 45(2)(a)(i) and s 45(2)(b)(i), regardless of whether there was a substantial lessening of competition. An exclusionary provision is defined in s 4D of the Act as follows: "(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if: the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and the provision has the purpose of preventing, restricting or limiting: the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions; by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate. A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first- mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates." The appeal was argued by the parties on the basis that, at the time of the 1997 understanding, News and ARL were in competition with each other in relation to the supply or acquisition of goods or services to which the 14 team term of the understanding related. That was disputed by the ACCC, but that dispute would have involved a widening of issues in a manner that was inappropriate, at this stage of the litigious process, at the instigation of an intervener. The 14 team term, which was reflected in the written documents signed at various times, was described by Souths in its pleadings as follows: "In the 2000 season and thereafter the number of teams to participate in the NRL competition would be restricted to 14, with no more than eight and no fewer than six teams from Sydney." It was not found, and is not suggested in this Court, that the purpose of the 14 team term was to exclude Souths, or any other particular club, from the competition in the 2000 season. Indeed, the process of merger, and the formation of joint ventures, intended to be fostered under the new arrangements, could have eliminated the need for active exclusion of any of the original 22 clubs. However, subject to that possibility, the consequence of the 14 team term was that no more than 14 clubs could compete in 2000, and, if more than 14 clubs wanted to compete, one or more would be excluded. So also, of course, would all the other rugby league clubs throughout Australia which, if they had wished, might have applied to join in the competition. As noted above, exclusivity is a necessary feature of such a competition, and unless, by coincidence or by force of other circumstances, the number of clubs wishing to compete was no greater than the number which those conducting the competition were willing to accept as participants, then exclusion was inevitable. Finn J made the following point: "Clearly, at the time of the 19 December [1997] Understanding no club had any right to have its team participate in the new competition's 1998 season, though it was envisaged that all available clubs would be offered participation. Thereafter for the 1999 and 2000 seasons there was to be a selection process in which clubs could participate. No club was in December 1997 given, or intended to be given, a right to have its team participate in 1999 and 2000 other than as a result of the admission process." We are not concerned with any challenge to the admission process. Finn J also found that a clear and intended effect of the 14 team term was that the (new) NRL partnership would not provide its competition-organising services to, or acquire team services from, a greater number of teams than the number so fixed. The real question was whether the term was included for the purpose, or for purposes that included the purpose, of preventing, restricting or limiting the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons. He answered that question in the negative. In the Full Court of the Federal Court, Heerey J agreed with Finn J. The majority (Moore and Merkel JJ) reached the opposite conclusion. The 14 team term was one of a number of provisions that defined the shape and structure of the new competition. There had to be some such provisions. The competition could not be open to any rugby league club in Australia that wanted to join in. In that respect, it is worth considering what difference there was between Souths, or any other of the 22 clubs which participated in one or other of the 1997 competitions, on the one hand, and, on the other hand, some rugby league club that had not previously participated in either the News or the ARL competitions, but wanted to participate, in 2000, in the NRL competition. In fact, one such club, Melbourne, participated in the NRL competition. Obviously there was a practical difference, in that exclusion of one of the original 22 clubs would be more likely to be a cause of complaint. However, for the purposes of ss 45 and 4D of the Act, it appears that the only potentially material difference, if there is one, is in the particularity of the persons or class of persons said to be the object of the proscribed purpose. Bearing in mind that it is not alleged that the 14 team term was aimed at excluding Souths, or any other particular club, it is necessary to examine the way Souths put its case on this point. The primary allegation, as summarised by Finn J, was that the designated persons or classes of persons that were the objects of ARL's and News' purpose of preventing the supply or acquisition of competition-organising, and the clubs which had participated in the 1997 ARL and Super League competitions and which had not withdrawn from those competitions, other than the 14 clubs which would be selected to participate in the competition in the year 2000. That is rather different from the way in which the case for Souths was put in this Court. Here it was argued that "the particular persons or particular class of persons were the Clubs that had fielded teams in the 1997 competition". team, services, were Although the arguments of the parties, and the reasoning in the Federal Court, addressed sequentially the issues of purpose and particularity of objects in considering the application of s 4D, and although in some respects that is a convenient method of analysis, it is to be remembered that what is involved is a compound concept: the purpose of preventing, restricting or limiting supply or acquisition of services to or from particular persons or classes of persons. We are concerned with the purpose of a provision (here, the 14 team term), in the context of a definition section (s 4D) of the Act defining an expression used in another section (s 45) which distinguishes between purpose and effect. The distinction between purpose and effect is significant. In a case such as the present, it is the subjective purpose of News and ARL in including the 14 team term, that is to say, the end they had in view, that is to be determined2. Purpose is to be distinguished from motive. The purpose of conduct is the end sought to be accomplished by the conduct. The motive for conduct is the reason for seeking that end. The appropriate description or characterisation of the end sought to be accomplished (purpose), as distinct from the reason for seeking that end (motive), may depend upon the legislative or other context in which the task is undertaken. Thus, for example, in describing, for the application of a law relating to tax avoidance, the purpose of an individual, or of an arrangement, it will be necessary to look at what is sought to be achieved that is of fiscal consequence, not at a more remote, but fiscally irrelevant, object, such as increasing a taxpayer's disposable income. Similarly, in the context of competition law, it is necessary to identify purpose by describing what is sought to be achieved by reference to what is relevant in market terms. The purpose of the 14 team term was the objective, in relation to the nature of their business arrangements, that News and ARL sought to achieve; not the reason why they sought to achieve that objective. They may have had different, and multiple, reasons for their conduct. The manifest effect of a provision in an agreement, in a given case, may be the clearest indication of its purpose. In other cases, it may be difficult, or even impossible, to determine the purpose (of a kind relevant to the operation of the Act) of a provision in a written contract merely by reading the document. And, of course, the legislation deals with contracts, arrangements or understandings. While the use of the term "boycott" may be a convenient method of exposition of some aspects of the operation of s 4D, and may be a useful means of explaining part of what it was intended to achieve, that term itself does not have a precise meaning, and there is a danger that argument might be directed towards seeking to find the meaning of "boycott" rather than the proper task, which is finding the meaning of the statutory language3. 2 Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 37-38; ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 474-477. See also s 4F of the Act. 3 Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32 at 55; Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 at 17 [26]. The particularity of the persons or classes of persons who are the objects of the purpose defined by s 4D and proscribed by s 45 is essential to the concept of an exclusionary provision. Suppose two firms conduct, in competition with each other, restaurant businesses, and each restaurant can accommodate 50 customers. Suppose they agree to close down their existing businesses, and, in partnership, open a new restaurant that can accommodate 60 customers. The effect will be to reduce their combined capacity from 100 to 60. Agreeing on the size of the new restaurant would be a necessary aspect of defining the scope of their new business venture. On the bare facts stated, it could not be predicated that the purpose of limiting the size of the new restaurant to one that would cater for 60 customers related to reducing the facilities to be made available to any particular persons or classes of persons, although it would clearly have the effect of reducing the accommodation for diners generally. It would not make any difference if the reason for the agreement was that the two competitors considered that their future profitability depended on it. In the present case, as in the example just given, specifying the number of clubs to be admitted to participation in the new competition was a necessary part of the definition of the new business venture to be undertaken by News and ARL (in effect) in partnership. It was not considered feasible to conduct a 22 club competition. It is not suggested that the method by which the 14 clubs were to be chosen for 2000 was discriminatory, or that the 14 team term, considered either alone or in the wider context of the whole plan, was aimed at Souths or at any other club. Bearing in mind that two clubs were to drop out anyway, any number less than 20, chosen as the number of participants in the 2000 competition, had the potential to require the exclusion of some of the clubs who competed in either the News or the ARL competitions in 1997. It is the fact that, when they were conducting two competitions, News and ARL, in aggregate, were supplying services to, and acquiring services from, 22 clubs (of which Souths was one), and that in 2000 their new joint business would only supply services to, and acquire services from, 14 clubs (not 14 of the same clubs, bearing in mind the geographical aspects of the new competition, the entry of Melbourne, and the possibilities of mergers and joint ventures), that must be said to make the difference. There had to be some definition of the size, geographical spread, and other characteristics of the new competition. Since no case is made under s 45(2)(a)(ii) or s 45(2)(b)(ii), it is accepted that putting an end to the two former competitions, and establishing a new competition, was of itself not in contravention of the Act. The contravention is said to lie in defining the size of the new competition in such a way that would mean that, in 2000, only 14 clubs could participate in that new competition. The purpose of the 14 team term was to define the size of the competition, (something that, in the nature of the competition, had to be done), and to do so in such a way as to produce the result that, in 2000, only 14 clubs would participate. Any limitation upon the size of the competition (even a limitation to 22 clubs) would have had the effect of potentially excluding some rugby league clubs in Australia that might have wanted to join the competition if given the opportunity. But exclusion of clubs of that kind would not have been the purpose of the provision, any more than designing a restaurant to accommodate 60 customers has the purpose of excluding people in excess of the number of 60 who turn up on a given occasion. In relation to such clubs, it cannot be said that, because the 14 team term had the effect of excluding them, it had that purpose. Exclusion of such teams was not the purpose; and there is no characteristic by reference to which they could be described as "particular" objects of any purpose at all. In any event, that is not the way Souths put its case in this Court. In the case of the 22 clubs, they are readily identifiable as being, in some respects, in the contemplation of News and ARL at the time of the 1997 understanding. It is, perhaps, more plausible to suggest that News and ARL had a purpose relating to them. Once again, any limitation upon the size of the new competition to a number less than 22 (or 20) could have had the effect of excluding some of the original 22. But the purpose of the 14 team term was not to exclude any particular club or clubs. Nor was a purpose of the 14 team term to limit or restrict the supply of services to, or the acquisition of services from, any particular club or clubs. If, as Souths argued in this Court, the particular persons said to be the object or objects of the proscribed purpose are the clubs that had fielded teams in the 1997 competitions, then there was no purpose of preventing supply to, or acquisition from, them. They were the aggregate of two groups of competitors in separate competitions. Most of them would continue to participate, and receive and supply services. Nor was there a purpose of restricting or limiting supply. There was no purpose of partial supply or acquisition of services to or from anyone. In the context of s 4D, restricting or limiting supply to one particular person must mean partial supply. The relationship between preventing, on the one hand, and restricting or limiting, on the other hand, is the same, whether the object is one person, or a number of persons. Although it does not cover the whole field of operation of s 4D, a paradigm case of an exclusionary provision would be one aimed at a particular person. Preventing supply to such a person would be a typical "boycott". But the legislation obviously had to cover something less than a complete boycott, and included restriction or limitation of supply as well as prevention. It appears to mean the same thing when applied to a number of particular persons, or a class. In the case of a number of persons, maintaining full supply to some, and preventing supply to others, would ordinarily be dealt with as a case of preventing supply to the second group. It may be that there are exceptional cases where it is appropriate to treat those who retain supply, and those who do not, as a single class to which supply is limited, but it is not easy to fit that in with the scheme of the Act as to prevention of supply. Even if it were possible to treat restriction or limitation of supply as covering, not merely partial supply, but also maintaining full supply to some and cutting off supply to others, then that would require both treating those who will continue to receive supply, and those who will no longer be supplied, as a single class, and treating the class as the object of the proscribed purpose. The clubs which participated in the 1997 competitions were not, either as a class, or as "particular persons", the object of a single purpose. There was to be a substantial re-structuring. The two competitions would become one. The geographical aspects would change. It was contemplated that some of the clubs would merge (as they did) between 1997 and 2000, and that at least one new club (Melbourne) would join the new competition. Merkel J expressed "some difficulty with the restriction or limitation case pleaded by Souths". It is a difficulty I share. As Finn J pointed out, it is possible to think of circumstances in which the method of selection of the clubs to participate in the 2000 competition could have demonstrated a purpose of preventing, restricting or limiting supply or acquisition which had as its object a particular club or particular clubs. But that is not the present case. Having regard to the absence of any criticism of the method of choosing the 14 participants for the 2000 competition, the present case, in point of law, is no different from what it would have been if the 14 teams were to be chosen by drawing lots. It is accepted that the occasion to put an end to the two existing competitions, and to create a new single competition, was, of itself, lawful. The parties had to specify the size of the new competition. They had to state how many clubs would participate. They were under no legal obligation to accept any particular clubs as participants. Nor were they under any legal obligation to accept all of the 22 clubs from 1997 as participants. As soon as they selected a number less than 22 (or 20), the possibility of exclusion of some club or clubs arose. But they had no purpose of excluding any particular club or clubs. The 22 clubs which participated in 1997, considered individually or together, did not constitute particular persons in respect of whom there was a proscribed purpose. The appeal should be allowed. The orders of the Full Court should be set aside. In place of those orders it should be ordered that the appeal to that Court be dismissed. The appellants seek no orders as to the costs of the proceedings before this Court or the Full Court of the Federal Court, and this Court was informed that the parties have agreed that, in the event that the appeal succeeds, the appellants will not enforce any of the costs orders of Finn J. McHugh 29 McHUGH J. The principal issue in this appeal is whether cl 7 of an agreement made between the News Limited ("News") and Australian Rugby Football League Limited ("ARL") parties is an "exclusionary provision" within the meaning of s 45 of the Trade Practices Act 1974 (Cth). The issue turns on whether those parties entered into cl 7 of the agreement for the purpose of "preventing, restricting or limiting" their services to South Sydney District Rugby League Football Club Limited or a "class of persons" which included Souths. If they did, they entered into an agreement containing an unenforceable exclusionary provision, as defined by s 4D of the Act. Clause 7 was a fundamental term of an agreement entered into by News and ARL after they agreed to end their competing Rugby League competitions and to bring into existence a new competition that would be limited to 14 teams for the 2000 football season. Souths alleges that cl 7 was inserted with the object of preventing the supply of the services of News and ARL to particular persons or to a particular "class of persons" – the 22 clubs that had participated in the two separate competitions in 1997. Souths alleges that it was either one of those persons or one of those clubs. It points out that those clubs that did not meet the specified criteria for the awarding of franchises were to be excluded. If more than 14 clubs met the criteria, those clubs whose "order of priority" fell below 14 in the rankings were also to be excluded. For that reason, Souths contends that the purpose of cl 7 was to limit the number of clubs eligible to compete in the 2000 competition to 14 clubs and to deny the organising services of the News/ARL parties to the remaining eight clubs. Because it was one of the 22 clubs, it contends that cl 7 had the purpose of denying to it the services of News/ARL. And, as it was either a "particular person" or a member of a particular "class of persons" within the meaning of s 4D of the Act, cl 7 was an exclusionary provision. As the judgment of Gummow J demonstrates, if the term "purpose" in s 4D means the subjective purpose of the News and ARL parties, the essential findings of the trial judge (Finn J) compel the conclusion that those parties did not have the purpose that Souths alleges. But does the term "purpose" in s 4D refer to the subjective purpose of the parties to the alleged exclusionary clause? Or is the purpose of the parties to be determined objectively without reference to their mental states? For 17 years, Federal Court judges have accepted that the test of purpose in s 4D is a subjective test. In 1986 in Hughes v Western Australian Cricket Association (Inc)4, Toohey J held that the purpose referred to in s 4D5: (1986) 19 FCR 10. (1986) 19 FCR 10 at 38. McHugh "is the subjective purpose of those engaging in the relevant conduct ... All other considerations aside, the use in s 45(2) of 'purpose' and 'effect' tends to suggest that a subjective approach is intended by the former expression. The application of a subjective test does not exclude a consideration of the circumstances surrounding the reaching of the understanding." Four years later in ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1)6, the Full Court of the Federal Court approved the interpretation that Toohey J had given to the term "purpose" in s 4D. The Court acknowledged that there would necessarily be some difficulty in establishing a single subjective purpose given that there will be two or more parties to the contract, arrangement or understanding. The Full Court pointed out that a question may arise "[w]here not all the parties have the necessary subjective purpose, how is one to describe the contract they make as having a particular purpose in this sense?"7 The Court also noted that s 260 of the Income Tax Assessment Act 1936 (Cth) (which, similarly to s 4D, speaks of contracts, agreements or arrangements which have a particular purpose) has generally been interpreted as requiring an objective test of purpose8. However, the Full Court thought that, as s 260 and s 45 concerned very different subject matters, the interpretation of s 260 did not necessarily support an objective construction of s 45. In Pont Data9, the Full Court thought that the critical factor was the wording of s 4F of the Act, which deems a provision to have a particular purpose in certain circumstances: "In its operation upon provisions stated to have a particular purpose, s 4F uses the words 'the provision was included in the contract ... for that purpose or for purposes that included or include that purpose'. This indicates that s 4F, in this operation, requires one to look to the purposes of the individuals by whom the provision was included in the contract, arrangement or understanding in question. It therefore directs attention to the 'subjective' purposes of those individuals." From time to time, judges of the Federal Court have queried whether the term "purpose" in s 4D refers to the subjective purposes of those who made the (1990) 27 FCR 460. (1990) 27 FCR 460 at 475. 8 Federal Commissioner of Taxation v Gulland (1985) 160 CLR 55 at 94. (1990) 27 FCR 460 at 476. McHugh impugned provision10. But, so far as I am aware, no judge has ever applied an objective test to the term "purpose" in s 4D since Hughes was decided in 1986. The problem courts have had in determining whether the "purpose" referred to in s 4D is subjective or objective derives from the contrasting wording of s 4D and s 4F. The terms of s 4D tend to suggest an objective purpose because it refers to the purpose of the provision. It does not refer to the purpose of those who actually made the provision. It tends to suggest that the purpose of the provision is to be determined by reference to the mind of a notional person who had drafted the provision. In that respect, it is different from s 4F(1)(b) which refers to "a person" and s 4F(1)(a) which refers to the purpose for which a provision was included in the contract, arrangement or understanding. These two clauses suggest that s 4F requires an inquiry into the actual purpose in the mind of those who made that contract, arrangement or understanding. One way of harmonising the apparently different meanings of purpose in s 4D and s 4F would be to read s 4D as the leading provision and s 4F as extending its scope. On that view, s 4D would require the court to look to the intended object of the parties by reference to the background of the transaction and the terms of the alleged exclusionary provision, independently of their mental states. If, read against that background, the provision pointed to the parties having a proscribed purpose, it would be an exclusionary provision for the purposes of the Act. On the other hand, if the provision were capable of an explanation other than the parties having a proscribed purpose, the provision would not fall within s 4D. Nevertheless, it might fall within s 4F and be an exclusionary provision if those who made the agreement subjectively had a proscribed purpose. An objective interpretation of s 4D is supported by the consequences that may flow from using a subjective test. Unless s 4D is read as requiring an objective test, then in some cases, it will be impossible to determine what was the purpose of a provision. If the parties have different subjective purposes11 or have never turned their minds to the purpose of the provision, neither s 4D nor s 4F would have any operation. Moreover, an objective interpretation of s 4D seems more in accord with the Act's object of promoting competition, an object that is weakened if what is objectively anti-competitive conduct escapes proscription only because the parties did not in fact intend to achieve such a proscribed purpose. 10 Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at 264 [98]. 11 As in Carlton and United Breweries (NSW) Pty Ltd v Bond Brewing New South Wales Ltd (1987) 16 FCR 351 at 356. But see ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 477. McHugh It is true that only persons can have a purpose, for the notion of purpose involves the intention of a person to achieve an object. That is to say, it involves an examination of the mental state of a person. Thus, in Chandler v Director of Public Prosecutions12, Lord Devlin said: "A purpose must exist in the mind. It cannot exist anywhere else. The word can be used to designate either the main object which a man wants or hopes to achieve by the contemplated act, or it can be used to designate those objects which he knows will probably be achieved by the act, whether he wants them or not." But in some cases – in the case of legislative purpose, for example – the tribunal of fact must attribute a purpose to an artificial or notional mind that is deemed responsible for some act or omission. In such contexts, the tribunal of fact deduces the purpose of the artificial or notional person from the background of the act or omission including relevant statements and what was done or not done. Similarly, when legislation refers to the purpose of a provision, it is not absurd to regard the legislature as referring to the purpose in the notional mind of those responsible for the provision. In such cases, the test must inevitably be an objective test. If the interpretation of s 4D was being considered for the first time, I would prefer the view that, for the purposes of s 4D, the purpose of an alleged exclusionary provision is to be determined objectively without regard to the mental state of the parties who made the provision. But the subjective interpretation has stood for 17 years, been approved by the Full Court of the Federal Court and been followed on numerous occasions. Given the terms of s 4F, s 4D is clearly open to the construction that "purpose" in both sections means the subjective purpose of the makers of the provision. Certainly, it is impossible to hold that the subjective interpretation is plainly wrong. Questions of construction are notorious for generating opposing answers, none of which can be said to be either clearly right or clearly wrong. Frequently, there is simply no "right" answer to a question of construction. The interpretation of s 4D falls into that category. For the above reasons, I would not overrule the subjective interpretation of the section. Moreover in practice, in most cases it will probably make little difference whether the courts consider only the subjective purpose of the parties or the 12 [1964] AC 763 at 804-805. McHugh subjective purpose and the objective purpose in the manner to which I have referred13. In News Ltd v Australian Rugby Football League Ltd14, the Full Court of the Federal Court said that, on the facts of that case, it made no difference whether a subjective or objective test was used. Moreover, as Toohey J pointed out in Hughes15, the application of a subjective test does not exclude a consideration of the understanding. By considering the surrounding circumstances, the court will be using objective considerations to determine whether the parties held the subjective purpose they claim. In Dowling v Dalgety Australia Ltd16, Lockhart J said: the circumstances surrounding reaching of the "The effect of a contract is a relatively simple concept requiring examination of the results, but proof of purpose is more difficult. It will generally be inferred from the nature of the contract, the circumstances in which it was made and its likely effect." Nor is it the case that the purpose of a provision has been examined objectively only where there is no evidence of subjective purpose. In Eastern Express Pty Ltd v General Newspapers Pty Ltd17, the party alleged to have breached s 46 of the Act made an admission of its intention to restrict the market. Lockhart and Gummow JJ warned that these statements were not to be taken at face value – their "probative force ... must be determined with regard to the circumstances in which they were made"18. And, in another decision, their Honours made a similar point in relation to s 45D, noting that19: "Where purpose or other state of mind of an individual in relation to a given transaction is in issue, the statements of that person in the 13 Robertson, "The Primacy of 'Purpose' in Competition Law – Part 2", (2002) 10 Competition and Consumer Law Journal 42; McMahon, "Church Hospital Board or Board Room?: The Super League Decision and Proof of Purpose under Section 4D", (1997) 5 Competition and Consumer Law Journal 129. 14 (1996) 64 FCR 410 at 576. 15 (1986) 19 FCR 10 at 38. 16 (1992) 34 FCR 109 at 134. 17 (1992) 35 FCR 43. 18 (1992) 35 FCR 43 at 68-69. 19 Australian Builders' Labourers' Federated Union of Workers (WA Branch) v J-Corp Pty Ltd (1993) 42 FCR 452 at 467. McHugh witness box, in a sense provide, the 'best evidence'. But the court may well take the view that these statements should be tested closely." Given the findings of fact made by Finn J and applying a subjective test of purpose, the appeal must be allowed for the reasons in the judgment of Order The appeal should be allowed. GUMMOW J. This appeal is brought from a decision of the Full Court of the Federal Court (Moore and Merkel JJ; Heerey J dissenting)20 which allowed an appeal from a decision of Finn J21. The appellants in this Court are News Limited ("News"), a large media company, National Rugby League Investments Pty Limited ("Investments"), Australian Rugby Football League Limited ("ARL") and National Rugby League Limited ("NRL"). Finn J dismissed an application brought by the present first respondent, South Sydney District Rugby League Football Club Limited ("Souths") against News, Investments, ARL and NRL and others. There had also been an application by Souths for interlocutory injunctive relief which had been dismissed by Hely J22. The only grounds amongst those relied upon by Souths at trial which remain alive in this Court concern alleged contraventions of Pt IV of the Trade Practices Act 1974 (Cth) ("the Act"). The Full Court, after allowing the appeal by Souths, went on to grant declaratory and injunctive relief and remitted to the primary judge the assessment of damages recoverable under s 82 of the Act. In particular, declarations were made to the effect that, in entering into a Memorandum of Understanding on 18 February 1998 and into a Merger Agreement dated 14 May 1998, the appellants in this Court contravened pars (a)(i) and (b)(i) of s 45(2) of the Act. Those provisions are concerned respectively with the making of contracts or arrangements and the arrival of understandings containing an exclusionary provision within the meaning of s 4D of the Act, and the giving effect to such an exclusionary provision. The Full Court also enjoined the present appellants from giving effect to an exclusionary provision identified as the "14-team term", whereby in the 2000 season and thereafter the number of teams to participate in the NRL competition would be restricted to 14. The appeal to this Court should be allowed, the orders of the Full Court set aside and, in place thereof, it should be ordered that the appeal to that Court be dismissed. The position respecting costs is explained in the reasons of the Chief Justice. 20 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456. 21 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611. 22 South Sydney District Rugby League Football Club Ltd v News Ltd (1999) 169 ALR 120. The circumstances surrounding the entering into the Memorandum of Understanding and the Merger Agreement and the relevant factual findings are detailed by Callinan J. His Honour also analyses the reasons of the primary judge and of the members of the Full Court and what follows in this judgment should be read with that analysis in mind. Like Callinan J, and subject to what follows, I am in general agreement with the approach to the issues of construction of the Act taken by Finn J and Section 4D The issues of construction primarily concern s 4D of the Act. This was inserted by s 6 of the Trade Practices Amendment Act 1977 (Cth) ("the Amendment Act"). It is convenient to begin with the text of s 4D. This defines an "exclusionary provision" as follows: "(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if: the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and the provision has restricting or limiting: the purpose of preventing, the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions; by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate." Section 4D is included in Pt I (ss 1-6AA) of the Act which is headed "Preliminary" and includes a number of definitions both in the usual sense (seen in s 4) and in the special sense exemplified in s 4D. Section 4D has no normative operation by itself. Rather, as the opening words of the section indicate (in particular, the phrase "shall be taken to be"), it operates upon those other substantive provisions which bear upon the criterion "exclusionary provision" and gives content to that criterion. What are important for this appeal are the prohibitions imposed by pars (a)(i) and (b)(i) of s 45(2) of the Act. The first prohibition (par (a)(i)) is upon a corporation making a contract or arrangement, or arriving at an understanding, if it contains an exclusionary provision. The second (par (b)(i)) is upon a corporation giving effect to a provision of a contract, arrangement or understanding which is an exclusionary provision. These are per se prohibitions in the sense that they apply without the operation of a further criterion that the provision have the purpose or effect or likely effect of substantially lessening competition in any market. In the present case, it is accepted by all parties that at all relevant times a contract, arrangement or understanding was in existence within the meaning of s 4D(1)(a). Section 4D(1) contains two relevant primary elements; the first concerns the character of the relevant actors and the second the purpose of the provision. Accordingly, there must exist a state of competition in relation to the supply or acquisition of the relevant goods or services between two or more parties to the contract, arrangement or understanding (s 4D(1)(a)); and, further, there must be the purpose of preventing, restricting or limiting the supply to, or acquisition of goods or services from, particular persons or classes of persons as spelt out in the precise terms of s 4D(1)(b). Section 4D(2) gives further content to the phrase "are competitive with each other" in par (a) of s 4D(1). It does so by requiring the satisfaction ("if, and only if") of a condition respecting the first party which is said to be competitive with another for the purposes of par (a). The condition is that the first party or a related corporation be, be likely to be, or would be or would be likely to be, (in the circumstances detailed in s 4D(2)) in competition in a specified sense with the second party or a related corporation. That specified sense is competition in relation to the supply or acquisition of all or any of certain goods or services. These are the goods or services to which there relates the alleged exclusionary provision identified in the opening words of s 4D(1) ("a provision") and carried into par (b) of s 4D(1) ("the provision"). Purpose Section 4D speaks of "the purpose" of the contract, arrangement or understanding, rather than any deleterious effect which it might have on the competition. the Parliament did not In so providing, implement recommendations of the 1976 Trade Practices Act Review Committee Report which commented23: "We consider that a collective boycott, ie an agreement that has the purpose of or the effect of or is likely to have the effect of restricting the persons or classes of persons who may be dealt with, or the circumstances in which, or the conditions subject to which, persons or classes of persons may be dealt with by parties to the agreement, or any of them, or by persons under their control, should be prohibited if it has a substantial adverse effect on competition between the parties to the agreement or any of them or competition between those parties or any of them and other persons." "Purpose" is not defined in the Act. At trial, Finn J stated24: "While the purpose of a provision may be evidenced in the effects it produces, the purpose for its inclusion in a contract etc is not to be determined necessarily by, or simply by reference to, its effects25. What is to be ascertained is the reason (or reasons) for its inclusion. And that reason, or those reasons, can be determined by ascertaining the effect or effects the parties subjectively sought to achieve through the inclusion of the provision in the understanding, etc26." It will be noted that Finn J focused on the subjective reasons of the parties to the contract in which the relevant provision is contained. At first glance, such an approach might appear to conflict with the terms of s 4D(1)(b), which speaks not of human or corporate actors but of the provision itself having the purpose of preventing, restricting or limiting the supply or acquisition of the relevant goods or services. A construction which fixes upon subjective intent also may be difficult to apply to a multipartite contract, arrangement or understanding. However, s 4F of the Act doubtless has a role to play in such circumstances. 23 Commonwealth, Report to The Minister for Business and Consumer Affairs, August 1976 at [4.116]. In 1993, the Independent Committee of Inquiry recommended against any change to the purpose element: Commonwealth, National Competition Policy, August 1993 at 46. 24 (2000) 177 ALR 611 at 659. 25 Dowling v Dalgety Australia Ltd (1992) 34 FCR 109. 26 cf ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR Nevertheless, Finn J's construction is not without support27 and was accepted as correct by each member of the Full Court28. Moreover, there are good reasons for a construction of s 4D which focuses upon the effect or effects the parties sought to achieve through the inclusion of the impugned provision in the contract, arrangement or understanding. Such a construction gives full effect to s 4F of the Act29. That section, which, with s 4D, is found in Pt I of the Act, is headed "References to purpose or reason". Like s 4D(2), s 4F uses the term "deemed". It does so, not to create a "statutory fiction", but for the definitional purpose identified by Windeyer J in Hunter Douglas Australia Pty Ltd v Perma Blinds, namely to "state the effect or meaning which some matter or thing has"30. Section 4F relevantly states: "(1) For the purposes of this Act: contract, a provision of arrangement or understanding or of a proposed contract, arrangement or understanding, or a covenant or a proposed covenant, shall be deemed to have had, or to have, a particular purpose if: the provision was included in the contract, arrangement or understanding or is to be included in the proposed contract, arrangement or understanding, or the covenant was required to be given or the proposed covenant is to be required to be given, as the case may be, for that purpose or for purposes that included or include that purpose; and 27 Hughes v WA Cricket Association (Inc) (1986) 19 FCR 10 at 37-38; ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 474-477; Adamson v NSW Rugby League Ltd (1991) 31 FCR 242 at 245, 261, 283; cf Newton v Commissioner of Taxation (Cth) [1958] AC 450 at 465 (in the context of s 260 of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth)). 28 (2001) 111 FCR 456 at 472 per Heerey J, 487 per Moore J, 518 per Merkel J. 29 Inserted by s 6 of the Amendment Act. 30 (1970) 122 CLR 49 at 65. See also Esanda Finance Corporation Ltd v Peat Marwick Hungerfords (1997) 188 CLR 241 at 308; Malika Holdings Pty Ltd v Stretton (2001) 204 CLR 290 at 320 [96]. that purpose was or is a substantial purpose". (emphasis added) The operation of s 4F upon provisions stated to have a particular purpose is significant. The phrase "the provision was included in the contract … for that purpose or for purposes that included or include that purpose" suggests that s 4F requires examination of the purposes of the individuals by whom the provision was included in the contract, arrangement or understanding in question31. Moreover, s 4F contemplates that a provision may be included in a contract, arrangement or understanding for a plurality of purposes and, in such circumstances, directs that the relevant purpose must be "substantial". This is a further indication that the Act requires examination of the purposes of individuals, the inevitable multiplicity of which may be contrasted with an examination of the "objective" purpose of an impugned provision. In this way, the introduction of a "substantial purpose" test avoids difficulties in discerning the relevant purpose of multiple parties to a contract, arrangement or understanding. Before this Court, the Australian Competition and Consumer Commission ("the ACCC"), as intervener, submits that both the subjective purpose of the parties to the relevant contract, arrangement or understanding and the objective purpose of the impugned provision are relevant when determining whether or not the provision falls within the purview of s 4D. However, a construction which, depending upon the facts of the case, may require examination of either the subjective purpose of the parties or the objective purpose of the provision, or both, is not the product of reasoned statutory interpretation and falls foul of the provisions in s 4F. In addition, there is a danger that an examination of the objective purpose of a provision will give undue significance to the substantive effect of the provision, as opposed to the effect that the parties sought to achieve through its inclusion. The consistent distinction drawn in the Act, particularly in s 45 when read with s 4D, between "purpose" and "effect" demonstrates the impermissibility of such an approach. At trial, Finn J accepted the evidence of relevant actors that they believed that the participation in 2000 of only 14 teams could or would be achieved without the necessity of excluding any club. Finn J said32: "I accept the evidence of Mr Whittaker that he believed the 14 teams for 2000 could be, and of Mr Frykberg that they would be, achieved 31 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 32 (2000) 177 ALR 611 at 675. without resort to exclusion. And I consider the early and continuing significance they attributed to the formation of mergers and joint ventures as being consistent with the absence of a proscribed purpose. The significance so attributed to mergers, etc, evidenced a form of recognition of both the wish and the need to maintain some level of participation of the established clubs in a competition not designed to accommodate them all individually." In the Full Court, one member of the majority, Merkel J, discerned error on the part of the trial judge. This was because Finn J had failed to determine whether the 14-team term had "a discrete purpose" and had looked more broadly at the Merger Agreement33. I agree with what is said by Callinan J in his reasons on this point. In particular, as his Honour points out, the discovery of the purpose of a provision is by no means necessarily to be gained by an examination of that provision divorced from an understanding of the contract, arrangement or understanding of which it forms part. Finn J concluded that the 14-team term had not been included for the purpose of, among other things, preventing the supply of competition-organising services or of the acquisition of team services34. It followed that the 14-team term did not satisfy the second of the two primary elements in s 4D, that concerned with purpose. This conclusion, which should be accepted, is sufficient to require the upholding of the present appeal. Particular classes of persons However, Finn J went on to hold that the case made by Souths must fail for a related reason35. This was because those said to be prevented from supplying or requiring the relevant services did not constitute a "particular class of persons" for the purposes of s 4D(1). There are dangers in splitting up the definition in s 4D by disjoining consideration of the purpose of preventing, restricting or limiting the supply or acquisition of the relevant services from the identification of those said to comprise the particular persons or classes of persons. The case pleaded by Souths had been that the 14-team term was an exclusionary provision because it had the purpose of preventing the acquisition of the services of teams to play in the NRL competition, the teams being all clubs willing and able to play in a top 33 (2001) 111 FCR 456 at 523. 34 (2000) 177 ALR 611 at 675. 35 (2000) 177 ALR 611 at 675. level rugby league competition other than the 14 clubs (including therein merged clubs) selected to participate in the NRL competition from the year 2000. Against that background, Finn J dealt with the purpose of the inclusion of the 14-team term and concluded that the evidence concerning its adoption was "bereft of any indication that its purpose was to prevent the supply of services to, or acquisition of services from, any person or class of persons"36. That conclusion, with respect correctly reached, foreclosed the need for any further inquiry as to whether, as a discrete step, it was necessary to consider whether the provision had been "aimed specifically" at particular clubs otherwise able and willing to compete with the objective of harming them37. "a size provision with its proposed ancillary criteria being designed with the substantial purpose in mind, not simply of limiting the size of the competition for reasons that are considered to be in the interests of the game and its stakeholders, but of specifically targeting a club or clubs that is or are anticipated to be applicants for selection". But he concluded39: "There is a significant difference between being merely an unsuccessful contender for selection in a process not designed to preordain that particular outcome and being a target for exclusion in a selection process designed to that end. The latter, but not the former, if otherwise the product of a s 4D understanding, is capable of being found to be an exclusionary provision." The earlier decision of the Full Court of the Federal Court in ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) proceeded upon similar lines of reasoning which did not involve any breaking up of the second primary element in s 4D, being that concerned with the necessary purpose of the alleged exclusionary provision. 36 (2000) 177 ALR 611 at 675. 37 (2000) 177 ALR 611 at 675-676. 38 (2000) 177 ALR 611 at 675. 39 (2000) 177 ALR 611 at 675. In Pont Data, ASX, by its subsidiary ASXO, provided information (known as Signal C) concerning stock transactions to, amongst others, Pont Data. That company in turn supplied the information to its own customers. ASXO competed with Pont Data in relation to the supply of such information in the downstream market. ASX and ASXO required Pont Data to enter into supply contracts obliging the latter to disclose to them the names of its customers. These customers in turn were required to enter tripartite agreements with ASXO and Pont Data pursuant to which the customers were prevented from reselling the information to third parties. Pont Data was also prevented by the supply contracts from selling information purchased from ASXO to any person other than a customer which had entered a tripartite agreement with Pont Data and ASXO. Pont Data and ASXO were both rivals and, at the same time, ASXO was the sole supplier to Pont Data and to the other subscribers of information essential to them if they were to continue to compete with ASXO in the services offered to third parties40. Pont Data alleged contravention of ss 45, 46 and 49 of the Act. One issue was whether the supply contracts entered into by Pont Data contained an exclusionary provision attracting the operation of s 45. Thus it was necessary for the Full Court to determine whether it was an answer to the attraction of par (b) of s 4D(1) that persons who would not be supplied with the information unless they accepted and became bound by the restraints were not a "particular class". The Full Court said41: "It was said that the persons or classes excluded must still be 'identified' if s 4D is to apply. That may be conceded, but they are identified, in the present case, by the characteristic that they may not be supplied with the information in question, unless they accept and become bound by the restraints imposed by the Dynamic Agreement. Such persons come within a particular category or description defined by a collective formula42. They ordinarily would be treated as constituting a particular class, even though at any one time the identity of all the members of the class might not readily be ascertainable. What distinguishes the class and makes it particular is that its members are objects of an anti-competitive purpose, with which s 4D is concerned." The Full Court in Pont Data considered43 the circumstances in which the phrase "or classes of persons" had been added to s 4D after the words "particular 40 (1990) 27 FCR 460 at 466. 41 (1990) 27 FCR 460 at 488. 42 cf Pearks v Moseley (1880) 5 App Cas 714 at 723. 43 (1990) 27 FCR 460 at 488. persons". The change was made by s 6 of the Trade Practices Revision Act 1986 (Cth) and appeared to respond to limitations upon the words "particular persons" which had been suggested in two cases. In Bullock v Federated Furnishing Trades Society of Australasia (No 1)44, the Full Court of the Federal Court left open the question whether Gray J had been correct in limiting those words to "persons whose identity is known or can be ascertained". In Trade Practices Commission v TNT Management Pty Ltd45, Franki J accepted that, because the arrangement or understanding proved was not limited to refusals to deal with Tradestock but extended to "a class of intermediaries", it did not satisfy the requirement in s 4D that it be one restricting dealing with "particular persons". Against this background, the use by the Full Court in Pont Data of the term "objects" recognised the legislative goal of removing a limitation upon s 4D which required the precise identification of those sought to be prevented, restricted or limited in their conduct by the purpose of the exclusionary provision. The goal was not to require the infliction of damage or harm to those persons by reason of the operation of the purpose. An object may be one on, or about whom, something (here, the purpose) acts or operates. In the present case, it appears to have been accepted (correctly in my view) that there may be a "particular class" notwithstanding that at any one time the identity of all of its members is not readily ascertainable. However, both Souths and the ACCC submit that the use of expressions in some of the later cases46 such as "targeted" and "aimed at" places an unwarranted gloss upon s 4D and law incorporates assumptions and requirements derived from case concerning collective boycotts. These submissions correctly emphasise the need to construe the terms of the legislation free from notions of anti-competitive conduct which are not necessarily incorporated in s 4D47. It is clear that s 4D is not limited to situations in which the traditional concept of a collective boycott would apply, for example where two or more competitors exclude or restrict the supply of goods or services to a rival competitor. In the Full Court in the present case, Heerey J described a boycott as a means of inflicting some adverse consequences on a person or class48. But, to 44 (1985) 5 FCR 464 at 473. 45 (1985) 6 FCR 1 at 75-76. 46 See News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 577. 47 Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32 at 41-43, 51-52, 55, 58. 48 (2001) 111 FCR 456 at 477. adapt a statement of Deane J made in Devenish v Jewel Food Stores Pty Ltd49, when dealing with s 45D(1): "[T]he literal effect of the words of [s 4D] should not be confined in a way which would exclude from the scope of the section any conduct which does not satisfy some superimposed requirement ascertained by reference to a perception of the kinds of conduct with which the section is primarily concerned." Nevertheless, the terms of s 4D take as a compound element the purpose of preventing, restricting or limiting the supply or acquisition of goods or services to or from particular persons or classes of persons. It is preferable to speak of the purpose of the provision being "directed toward" a particular class rather than "aimed at" or "targeted". This avoids the connotations of aggression or the inducement of harm, typically found in judicial discussions of boycotts, of which Souths and the ACCC rightly complain. The critical point for the present case is not found in pondering such questions as the defining characteristics that make a class "particular". What is important for this case is the notion that any selection process with more applicants than positions available will necessarily result in "winners" and "losers". There was an absence in the evidence of indications that the purpose of the adoption of the 14-team term was to prevent the supply of services to or acquisition of services from those clubs which under the operation of the selection process would turn out to be among the "losers". That brings me to the remaining issue of construction. Preventing, restricting or limiting In the Full Court, Moore J, one of the majority, considered50: "the question of whether competitors can have a purpose of restricting or limiting supply of services to particular persons and the acquisition of services from them if it is not known, when the exclusionary provision was agreed to, who of the particular persons would bear the burden of the restriction or limitation though it could be expected some of the particular people would not". His Honour continued51: 49 (1991) 172 CLR 32 at 51-52. 50 (2001) 111 FCR 456 at 507. 51 (2001) 111 FCR 456 at 507-508. "Arrangements could be entered that were intended to have an apparently proscribed effect on some but not all of the competitors' suppliers or customers. That is, it was proposed that supply or acquisition of goods would be reduced, by operation of the arrangement, on some but not all of the suppliers or customers because of events that had not yet occurred. Those events may be influenced by the conduct of the suppliers or customers. However the fundamental or underlying purpose of the competitors would have been to limit or restrict supply to or acquisition from particular persons with the burden of the limitation or restriction being revealed as the exclusionary provision was given effect to by the colluding competitors." "In my opinion, the fact that the 14-team term contemplated some of the 1997 clubs would continue to field their own teams in 2000 and following years does not remove the 14-team term from the scope of s 4D as enlivened by s 45(2)(a)(i)." Thus, it was no answer to the operation of the provision that, whereas 22 teams had supplied or been supplied with services in 1997, from 2000 only 14 would be in that situation. Heerey J pointed out that a case of this nature had not been pleaded or run at first instance53. His Honour also declared that it was too late to raise such an argument because it raised an infinite range of factual dispute. For that reason, this Court should decline to enter upon the matter. Submissions by the ACCC In its original submissions, the ACCC suggested, in effect, that any attack in respect of what had taken place should have been launched at an earlier stage and against the merger of the competitions. The ACCC questioned whether, as the litigation had been cast, the requirement contained in par (a) of s 4D(1), as further elucidated in s 4D(2), relating to the existence of a state of competition between two or more parties to the contract, arrangement or understanding, had been satisfied. Were the answer to that question in the negative, s 4D would not be engaged and the prohibition contained in par (b)(i) of s 45(2) would not apply. 52 (2001) 111 FCR 456 at 508. 53 (2001) 111 FCR 456 at 479. The ACCC stressed the need to identify with particularity the services to which the relevant provision in this case, the 14-team term, relates. Those services were to be provided from December 1997 as essential elements of a single new competition established and provided by News and ARL in partnership through a joint venture company, NRL. It followed, in the ACCC's submission, that News and ARL could not be considered competitors in relation to the supply or acquisition of goods or services by NRL. This was because NRL came into existence as a result of the cessation of the rugby league competition businesses of News and ARL. After the conclusion of the hearing, the appeal was relisted in order to allow each party to make further submissions concerning the proposition put by the ACCC. In further written submissions, News and the other appellants adopted the submissions of the ACCC. However, the appellants' subsequent written submissions, and their oral submissions during the further hearing, eschewed, and indeed sought to controvert, the ACCC's submissions. Souths took a similar stance to the appellants. In particular, Souths submitted that the reasoning in Re McBain; Ex parte Catholic Bishops54 indicated that it should not be open to a party in the position of the ACCC to seek to disturb the course taken by the litigation conducted by the parties at trial and on appeal. The grant of leave to the ACCC to intervene, made on the first day of the hearing, was in general terms. Nevertheless, in the light of what has subsequently transpired, that general grant should not be construed as permitting the entertainment on the appeal of these further arguments. Conclusion Orders should be made as indicated earlier in these reasons. 54 (2002) 209 CLR 372 at 395 [23]. Kirby KIRBY J. Once again I disagree with the majority of this Court on the application of the Trade Practices Act 1974 (Cth) ("the Act"). Once again, the Court reverses a decision of the Full Court of the Federal Court of Australia and favours a more limited application of the Act than was adopted by that Court55. The Act's purpose is stated to be "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection"56. Where the meaning of particular provisions is contested, the Act should be construed, so far as the words permit, to uphold these important economic and social objectives57. This appeal arises out of ongoing controversies within the code of rugby league football as played in Australia. The contest results from the attempt of those who took charge of the premiership competition to limit the number of participating teams. An earlier instance of a similar conflict, involving a challenge by the Western Suburbs District Rugby League Football Club, was rejected by this Court in Wayde v New South Wales Rugby League Ltd58. In that case different legislation was involved and distinct issues were decided59. In the present appeal, the dispute concerns South Sydney District Rugby League Football Club Limited ("Souths"), a decision to refuse it entry into the rugby league premiership competition for 2000 and whether such action involved a breach of the Act. The proceedings in the Federal Court Proceedings at first instance: Following its exclusion, Souths made application to the Federal Court for relief on a number of grounds. The only one of them still in issue concerns Souths' claim pursuant to s 45(2) of the Act. An initial application for an interlocutory injunction was dismissed by Hely J in 55 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1; Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 77 ALJR 623; 195 ALR 609; see also Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494. 56 The Act, s 2. 57 Bropho v Western Australia (1990) 171 CLR 1 at 20. See also Devenish v Jewel Food Stores Pty Ltd (1991) 172 CLR 32 at 44, 45. 58 (1985) 180 CLR 459 affirming New South Wales Rugby League Ltd v Wayde (1985) 1 NSWLR 86. 59 The case concerned the Companies (New South Wales) Code, s 320(2) and a claim of oppression of a minority. See Fridman, "Sport and the Law: The South Sydney Appeal", (2002) 24 Sydney Law Review 558. Kirby December 199960. His Honour found that there was a serious question to be tried as to whether what was described as "the 14-team term"61, in a merger agreement designed to merge competing national rugby league premiership competitions, ("the merger agreement") constituted an "exclusionary provision" contrary to the Act. However, Hely J concluded that the balance of convenience did not favour the grant of an interlocutory injunction. Nothing daunted, Souths sought final relief in the Federal Court in the form of injunctions, declarations and damages against News Limited ("News"), its subsidiaries, National Rugby League Investments Pty Ltd one of ("Investments"), Australian Rugby Football League Ltd ("ARL") and National Rugby League Ltd ("NRL"). NRL was jointly owned and controlled by Investments and ARL. The merger agreement provided for the conduct of a single national rugby league competition. Souths' proceedings sought relief as a result of its exclusion from the NRL competition for 2000. It claimed that such exclusion was a consequence of the making of, or giving effect to, the merger agreement and specifically the 14-team term with its provision for the funding of only those 14 teams selected to participate. In the Federal Court, the primary judge, Finn J, in November 2000, after a lengthy hearing, rejected Souths' application for relief62. Relevantly to the claim based on the alleged breach of s 45 of the Act (read with ss 4D and 4F), the primary judge accepted that Souths' claim was enlivened by the language of the 14-team term. However, he decided that the claim failed primarily because the "purpose" of the impugned provision was not the impermissible exclusionary purpose alleged by Souths but a permissible purpose. This was variously described as a purpose to establish a financially viable and sustainable rugby league competition; to avoid damage to the game of rugby league football caused by competing national competitions; and to satisfy the pressures and demands of media companies interested to broadcast the games and therefore to support the code of rugby league financially63. 60 South Sydney District Rugby League Football Club Ltd v News Ltd (1999) 169 ALR 120. 61 The relevant clause is set out in full in the reasons of Callinan J at [169]. See particularly cll 7.5 and 7.9. 62 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611. 63 (2000) 177 ALR 611 at 672 [270]. These were similar to the statement of objectives of the merger agreement: cl 2. Kirby Secondly, as an alternative basis for rejecting the claim, the primary judge found that Souths had not established that a purpose of the impugned provision was to limit the supply or acquisition of services to or from "particular … classes of persons"64 within the meaning of the Act65. Thirdly, the primary judge concluded that, even if Souths had made out its case based on s 45 of the Act, injunctive relief should be denied as inappropriate in the circumstances of the case, viewed as a whole66. Proceedings on appeal: Souths appealed to the Full Court of the Federal Court. By majority67, that Court, in July 2001, upheld the appeal68. All members of the Full Court held that the 14-team term enlivened s 45(2) of the Act, being a provision of a contract or arrangement made between parties who were competitive with each other69. They rejected the argument of News that, to attract s 4D of the Act, it was necessary to show that the parties were competitive with each other at the time when the exclusionary provision took effect70. But the concurrence in the reasoning of the judges of the Full Court ended at that point. By different routes, the majority in the Full Court came to the conclusion that Souths had made out its case for relief from the effects of the 14-team term as an exclusionary provision; that damages were not an adequate remedy71; that injunctive relief should be granted to restrain News, Investments, ARL and NRL from giving (or continuing to give) effect to the 14-team term72 and that, in 64 The Act, s 4D(1). 65 (2000) 177 ALR 611 at 675 [287]. 66 (2000) 177 ALR 611 at 682 [327]-[328]. 67 Moore and Merkel JJ; Heerey J dissenting. 68 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456. 69 (2001) 111 FCR 456 at 480-481 [110]-[116] per Heerey J, 508 [208] per Moore J, 516 [234] per Merkel J. 70 (2001) 111 FCR 456 at 480-481 [112]-[115] per Heerey J, 508 [208] per Moore J, 516 [234] per Merkel J. 71 (2001) 111 FCR 456 at 534 [304]. 72 (2001) 111 FCR 456 at 508 [210] per Moore J, 532 [300] per Merkel J. Kirby addition, Souths was entitled to damages, pursuant to s 82 of the Act. Such damages were ordered to be assessed73. The dissenting judge in the Full Court (Heerey J) substantially agreed with the reasoning of the primary judge. He rejected Souths' appeal. However, he concluded further that, if the construction of the Act by Souths were to succeed, an injunction should be withheld on discretionary grounds74. He added reasons to those given by the primary judge for limiting any remedies to which Souths was entitled to an award of damages. Proceedings in this Court: Special leave to appeal was then granted by this Court. The issues in the appeal overlap, to some extent, others in an appeal which stands for judgment75 and in another in respect of which special leave was later granted76. The Australian Competition and Consumer Commission ("the ACCC") sought and was granted leave to intervene in these proceedings. It provided written and oral argument. It drew attention to many cases, decided or pending, where the resolution of the issues raised in this appeal would be significant, or determinative. For Souths, the case was remarkably simple. Before the merger agreement it was a foundation member of the rugby league competition and a continuous participant in its premiership competition. As a result of the implementation of the 14-team term, it was excluded from the competition by an agreement reached between others that affected it. Souths submitted that such exclusion had the effect, and was intended and likely to have the effect, of preventing, restricting or limiting its supply of services to, and acquisition of services from, a class of persons. It would be forced to exit the competition. The basic argument on behalf of the appellants was that the 14-team term was not an exclusionary provision under the Act as it was not included in the merger agreement for the "purpose" of restricting the supply or acquisition of services. It was argued that its "purpose" was to further the game, to protect the 73 (2001) 111 FCR 456 at 508 [210] per Moore J, 534 [306] per Merkel J. 74 (2001) 111 FCR 456 at 484 [137]. 75 Visy Paper Pty Limited & Ors v Australian Competition and Consumer Commission reserved by the Court on 3 December 2002. 76 Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236. See Rutgers, "Case Notes – ACCC v Rural Press Limited", (2001) 9 Trade Practices Law Journal 273; Griggs, "Exclusionary provisions: The Full Federal Court awaits High Court deliberations – but is the solution to be found elsewhere?", (2002) 10 Competition and Consumer Law Journal 218 at 225. Kirby participants of the code of rugby league and to make the game both viable and sustainable. It was further argued that the 14-team term did not apply to a particular class of persons, as required by the Act. Unfortunately, as many cases show, the Act is not always given effect according to its broad purposes, such as the provisions in Pt IV ("Restrictive trade practices") suggest should happen. The history of this litigation demonstrates that it is necessary to descend into the detailed provisions of the Act. They have a substantial decisional history. Nevertheless, that history and the words of the Act must be read holding the broad statutory objectives steadily in mind. Those objectives include preventing concerted action by competitors designed to restrict the supply or acquisition of services for the purpose of raising their own profitability or damaging other participants in the relevant market. The emergence of sport as a major economic activity The detailed facts are set out in other reasons77. There too may be found the 14-team term78 as it was agreed between Super League Pty Ltd (backed by News and its interests) and ARL (which Souths had long supported before the merger). The essential provision states: "7.5 No more than 14 teams will participate in the 2000 NRL level of terms depending on the Competition on varying satisfaction of the franchise criteria. In a 14 team NRL Competition, there will be no less than six teams, and a maximum of eight teams, from Sydney. Conversely, there will be no less than six teams, and a maximum of eight teams, from regions outside Sydney." that The primary judge accepted the relevant officers of News (Mr Whittaker and Mr Frykberg) subjectively expected that the 14 teams for 2000 could and would be found without resort to exclusion, that is, by a process of club mergers, helped along by financial inducements79. Yet, however much that may have been their belief, expectation, hope or prayer, the 14-team term was central to the merger agreement and understanding. No 14-team term and no implementation of the term by 2000, no NRL, no merged rugby league competition and no financial rewards such as the merged competition promised. 77 Reasons of Callinan J at [165]-[184]. 78 Merger agreement, cl 7 set out in reasons of Callinan J at [169]. 79 (2000) 177 ALR 611 at 675 [284]-[285]. Kirby The 14-team term was therefore not a mere aspiration or expectation to be procured, if possible, only by a happy consensus amongst all concerned. It was, at all times, a provision of a contract, arrangement or understanding binding on the parties to it and intended, if need be, to be enforced. Necessarily, if enforced, it had the foreseeable, and foreseen, consequence and objective that teams supernumerary to 14 would be excluded from the premiership competition. They would then be prevented from supplying their services to ARL and NRL. Similarly, they would be prevented from acquiring the competition-organising services of those bodies, conducting the Australian national rugby league premiership competition. In 1908, when the New South Wales Rugby League began organising a competition in that State (in which Souths took part as a foundation team), any such purported exclusion from the supply and acquisition of services would have been fought out in suburban meetings of the unincorporated associations through which the game and individual teams were then organised80. By the 1980s the New South Wales Rugby League had become an incorporated body81. Thus, by that time such exclusions were contested in terms of the then applicable corporations law and its rules that prevented the oppression of minority members. However, by the 1990s, the game was one of several sports competing for huge national audiences on television, on radio and in the print media. As Callinan J points out, it had become a major commercial activity82. The "game" was a line of business participating in a market, annually worth millions of dollars, involving associated corporate bodies employing thousands of people competing for a share of very considerable revenues. The League and Souths were dressed in the raiments of football, surrounded by their cheering supporters. But, in truth, like all of the participants in this appeal, they were engaged in economic activity and in a business of great monetary value in a national and even international market. Like other corporations that enter the Australian economic market, the corporate parties to the present appeal were bound in their agreements and their 80 cf (2001) 111 FCR 456 at 460 [1]. 81 Wayde (1985) 180 CLR 459. 82 Reasons of Callinan J at [209]. There have been similar developments in connection with sporting bodies in the United States concerning the sale of television rights: Smith v Pro Football Inc 593 F 2d 1173 (1978) and National Collegiate Athletic Association v Board of Regents of the University of Oklahoma Kirby activities by the requirements of the Act83. No longer could their disputes be resolved amongst themselves at a local meeting or simply in accordance with corporations law. The mere fact that the office holders of the governing bodies of NRL, and anyone else, acted in what they regarded as being in the "best interests of the game" was no longer sufficient to throw a veil of immunity from the requirements of the Act over what they did. Henceforth, in making their merger agreement and in implementing the 14-team term, the participants to such arrangements had to expect that their conduct would be scrutinised against the standards of the Act. This appears to have come as a surprise to some of the appellants. They seem to have thought that good intentions towards "the game" were enough to immure them from the statutory obligations. However, once national rugby league in Australia entered the big economic league, as an adjunct to media and other commercial interests, its submission to the disciplines of the Act was simply a matter of the application to it of the statutory prescriptions. In effect, it was the inevitable consequence of turning a sporting game into a multimillion dollar corporate business. Whatever the interests of "the game", as such, the sportsmen and their associates were tied up with the profit-making interests of those entities organising and supporting that game. It follows that the key to the correct application of the Act to the present case is to be found in freeing the mind from devotion to a football code or loyalty to a particular club, team or players and applying the Act, according to its terms, neutrally, as one would to any other corporation. Unless this is done, there is a real risk that extraneous factors (such as evaluation of what is best for the rugby league code of football) will affect the decision maker's approach to the application of the Act. Those are considerations upon which a court, including this one, is unable to provide proper evaluation. If it were attempted, an erroneous precedent would be established with unfortunate consequences for other areas of the Act's operation. It is the duty of this Court, as it was of the Federal Court, to avoid such an error. In large part, it was to make this point that the ACCC intervened before this Court. I agree with that part of the ACCC's submissions. The applicable legislation The applicable provisions of the Act are also set out in other reasons84. I will not repeat the full provisions. However, in my view, it is possible to pare the 83 R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190. 84 Reasons of Gummow J at [54] and [61]; reasons of Callinan J at [175]-[178]. Kirby crucial terms down to a very short compass. Thus, s 45(2) prohibits corporations (including the appellants that agreed to the 14-team term) as follows: "A corporation shall not: (a) make a contract or arrangement, or arrive at an understanding, if: the proposed contract, arrangement or understanding contains an exclusionary provision; or give effect understanding ... if that provision: to a provision of a contract, arrangement or is an exclusionary provision ..." By s 4D(1) of the Act, an "exclusionary provision" for this purpose is defined as follows: "A provision ... shall be taken to be an exclusionary provision ... if: the contract or arrangement was made, or the understanding was arrived at ... between persons any 2 or more of whom are competitive with each other; and the provision has the purpose of preventing, restricting or limiting: the supply of ... services to, or the acquisition of ... services from, particular persons or classes of persons in particular circumstances or on particular conditions; by all or any of the parties to the contract, arrangement or understanding ... or, if a party ... is a body corporate, by a body corporate that is related to the body corporate." By s 4F of the Act a provision of a contract, arrangement or understanding is deemed to have had, or to have, a particular purpose if the provision in question was included in the contract, arrangement or understanding and that purpose "was or is a substantial purpose". A person is deemed to have engaged in conduct for a particular purpose or reason if the person engages in conduct for purposes that include that purpose and the purpose "was or is a substantial purpose". Kirby The history of the Australian provisions Competition law has traditionally looked with special disfavour upon agreements between competitors, and particularly such agreements as they relate to price or the level of output provided in the market. This is because of the tendency of such agreements, without more, to be anti-competitive and injurious to the public interest. The per se85 prohibition on exclusionary provisions is a product of this suspicion. One sub-class of such exclusionary provisions is described as "collective boycotts". As will be seen, there is no reference in ss 45 or 4D of the Act to the word "boycott". In its ordinary connotation, that word carries a lot of baggage. Some of it, in my respectful view, burdened the approach of Heerey J in the Full Court. Care should therefore be taken in using the word "boycott" in the context of s 45. As Toohey J noted in Devenish v Jewel Food Stores Pty Ltd86, in construing s 45D (where at least the word is used in the section heading), "boycott" is an expression "that lack[s] precision and may carry pejorative overtones". Mason CJ, to similar effect, noted that the concepts of primary and secondary boycotts were not necessarily susceptible of ready definition and that there were, therefore, dangers in construing the section by reference to such concepts87. This is why Mason CJ concluded that s 45D would be given a meaning consistent with "the wide, remedial and protective ambit that section is clearly intended to have"88. He pointed out that the purpose and policy underlying Pt IV of the Act demanded "a broad construction of its constituent sections"89 and required "strong reasons ... to justify an interpretation of the provision which would narrow the scope of the provision and exclude conduct falling within its literal terms"90. This Court should resist any temptation to introduce concepts extraneous to the statutory language or to introduce into s 45 notions that have an effect opposite to that expressed by the Parliament. 85 ie, by itself or of itself. If the facts attracting the application of the legislation are established, no inquiry is required as to whether the anti-competitive consequences have actually ensued: Pengilley, "Collective boycotts under the Australian Trade Practices Act: What our policy makers have failed to understand and what the Dawson Committee should do about it", (2002) 10 Competition and Consumer Law Journal 144 at 145 (hereafter Pengilley, "Collective Boycotts"). 86 (1991) 172 CLR 32 at 55. 87 Devenish (1991) 172 CLR 32 at 38. 88 Devenish (1991) 172 CLR 32 at 43. 89 Devenish (1991) 172 CLR 32 at 44. 90 Devenish (1991) 172 CLR 32 at 45. Kirby Under the Act, not all arrangements between competitors are treated as illegal per se. The reason for singling out exclusionary provisions for such treatment in Australia can be traced to United States anti-trust law. In that country the courts came to a conclusion that a per se prohibition of certain types of arrangements between participants in a market was warranted because of the predominantly anti-competitive consequences of such arrangements and because a per se prohibition had the advantage of avoiding the costs inherent in business uncertainty over the validity of particular agreements and the litigation necessary to elucidate the matter91. The imposition of per se prohibitions in United States anti-trust law has been regarded as exceptional because once the existence of such an arrangement is proved, no further inquiry needs to be undertaken, whether into the size or market position of the competitors involved, or the possible pro-competitive or other justifications for the impugned arrangement. Such an approach represents "the trump card of antitrust law. When an antitrust plaintiff successfully plays it, he need only tally his score."92 At the time that the Australian prohibition on exclusionary provisions was introduced into the Act, reference was made in the Parliament to the foregoing approach of United States law. The Minister introducing the Bill to amend the Act (Mr Howard) described the business activities involved in exclusionary contracts as "generally undesirable conduct", requiring a "firm line" where the relevant exclusion had the purpose "of restricting or limiting the trade of particular persons"93. Such were the terms in which the prohibition on exclusionary provisions was first enacted. Subsequently, this reference was extended to "particular classes of persons", an extension which, on Souths' argument, was relevant to the facts of this appeal94. The strong stance which the Minister (and the Parliament) took in relation to exclusionary contractual provisions finds its immediate source in the 1976 recommendations of the Swanson Committee proposing reform of the Act as 91 Arizona v Maricopa County Medical Society 457 US 332 (1982); Northwest Wholesale Stationers Inc v Pacific Stationery and Printing Co 472 US 284 (1985). 92 Pengilley, "Collective Boycotts" at 146 citing United States v Realty Multi-List Inc 629 F 2d 1351 (1980). 93 Australia, House of Representatives, Parliamentary Debates (Hansard), 3 May 94 Trade Practices Revision Act 1986 (Cth), s 6 inserting "classes of persons". This is relevant to the difference between the respective approaches of Moore and Merkel JJ in the Full Court. See also Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at 264 [100]. Kirby originally drafted. In its report, that Committee recommended that an agreement with the purpose of restricting the persons who may be dealt with should be precluded if it had "a substantial adverse effect on competition between the parties to the agreement or any of them or competition between those parties … and other persons"95. There were strongly arguable economic and social reasons to support the Swanson Committee's conclusion that the law in Australia should take a firm stand against "collective economic bullying"96. From an economic point of view, such exclusionary provisions diminish the potential of unilateral decisions by market players; impose on others the aggregation of power which individual players may lack; and tend to be introduced by powerful market entities exerting what is the antithesis of competition. Such activities are frequently engaged in to prevent innovative market entry and to permit powerful players to divide the market like the Popes of old divided the world, for their own convenience and advantage. In such circumstances, it was unsurprising that the Act should be amended to prohibit exclusionary provisions in contracts, arrangements and understandings subject to the Act. This Court should give full effect to those provisions. It should not whittle them down. The omission of "substantial" impact I have mentioned the foregoing legislative history for a purpose. The Swanson Committee recommended that the per se prohibition on exclusionary provisions be introduced into the Act subject to proof, in the particular case, of a "substantial adverse effect on competition". That last part of the Committee's recommendation was not enacted. The reasons for the omission are not entirely clear. It appears to have been a deliberate decision97. It may have been designed to provide a per se prohibition on arrangements between competitors related to restricting or sharing the output sold to consumers, which are, in substance, equivalent to arrangements fixing or tampering with prices, and are treated as per se illegal in United States jurisprudence. 95 Australia, Trade Practices Act Review Committee (T B Swanson, Chairman), Report to The Minister for Business and Consumer Affairs, (August 1976), pars 4.116-4.117 (emphasis added). The full passage is set out in the reasons of Gummow J at [59]. Note that the Independent Committee of Inquiry into National Competition Policy (1993) in its report, at 46, rejected proposals for change to the relevant provisions. 96 Pengilley, "Collective Boycotts" at 147; cf Clarke and Corones, Competition Law and Policy (1999) at 253. 97 Pengilley, "Collective Boycotts" at 158. Kirby However that may be, the consequence was to sweep into the per se prohibition of s 4D of the Act certain unobjectionable arrangements where it may be argued that such a prohibition was unnecessary or even inappropriate on the basis solely of competition analysis. But where Parliament has, apparently deliberately, omitted to include the recommended rider concerning substantial anti-competitive effects, it would be impermissible for the courts, by techniques of statutory interpretation, to effect a repair of a perceived defect of the Act on that ground. Any such repair must be left to the Parliament98. The task of courts is to give effect to the Act according to its purpose as that purpose is expressed in the statutory language. This is a fundamental rule99. It derives from the very nature of legislation as written law. It is not qualified by the modern purposive approach to statutory construction100. This conclusion is further reinforced if regard is had to the way similar exclusionary provisions are dealt with under equivalent laws in other countries. Thus, in the United States, such provisions in agreements are judged by reference to the extent to which they tend to exclude competition from actual or potential competitors at the same level of the market101. Also in the United States, case law has developed obliging the courts to evaluate whether the arrangement impugned is so destructive of competition that it should be banned per se102. There are no such criteria in the Australian Act. On the contrary, the suggested qualification was not adopted in 1977. It has not been adopted since. The point is made even more obvious by a comparison of the provisions of the Australian Act with the applicable law in New Zealand. The Commerce Act of that country initially copied the principles expressed in ss 45 and 4D of the Australian Act as they applied to exclusionary provisions. However, in 1990, the New Zealand Act was amended by the addition of s 29(1)(c). By that paragraph, per se breaches, in relation to exclusionary provisions, only arise where the impugned provision relates to a party in competition with one of the parties to the contract, arrangement or understanding. Arguably, Souths would fall outside 98 Trust Company of Australia Ltd v Commissioner of State Revenue (2003) 77 ALJR 1019 at 1029 [69]; 197 ALR 297 at 311. 99 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 100 Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518. 101 Smith v Pro Football Inc 593 F 2d 1173 (1978). 102 United States v Socony-Vacuum Oil Co Inc 310 US 150 (1940); see also Posner, Antitrust Law, 2nd ed (2001) at 230-232. Kirby such a class if a similar amendment had been enacted in Australia. In any case, by further amendment to the Commerce Act, made in 2001, a provision was included exempting an "exclusionary provision" which is shown not to have the purpose or effect "of substantially lessening competition in a market"103. None of these qualifications applies in the Australian context. On the contrary, the Australian Act provides otherwise. It remains resolutely unchanged. Commentators since the Swanson Committee's report have continued to urge that the Act, as it applies to exclusionary provisions, should be cut back as an over-zealous prohibition104. The perceived need for such amendments gives emphasis to the broad reach of the exclusionary provision sections of the Act, according to its present language. It is no part of the role of a court to deny the operation of the Act as its language commands. The most that a court can normally do, where an Act such as the present appears to have an over-ample application, is to conserve the remedies proper to the breach to circumstances in which a sound exercise of the remedial power indicates that relief is appropriate and just. A number of the commentaries that were critical of the decision of the Full Court in the present case should, in my view, have been directed at the legislature for its failure to reduce the suggested statutory overreach rather than at the majority judges who simply gave effect to the purpose of the Parliament as disclosed in the words adopted105. The Act is certainly wide. Seemingly, it is deliberately so. It has no explicit competition rider. The majority judges were therefore right to construe it as they did. 103 Commerce Act 1986 (NZ), s 29(1A). In Canada the Competition Act 1985 (Can) prohibits agreements where they "otherwise restrain or injure competition unduly" (s 45(1)(d)). In the United Kingdom there is an exemption for such agreements where they are shown to cause "substantial public benefit": Heydon, Trade Practices Law, vol 1 at [1.110], [4.710]. The textual point is reinforced by the insertion in s 45(2) of sub-pars (a)(ii) and (b)(ii) referring to "substantially lessening competition". Although these sub-paragraphs were not directly in issue in the proceedings, they were referred to: see (2000) 177 ALR 611 at 630 [80]. 104 eg Pengilley, "Collective Boycotts" at 165-166. 105 See eg Fridman, "Sport and the Law: The South Sydney Appeal", (2002) 24 Sydney Law Review 558; Oddie and McKeown, "Joint ventures and exclusionary provisions: Anti-competitive purpose or unintended effects?", (2002) 10 Competition and Consumer Law Journal 192; Pengilley, "Fifteen into fourteen will go: the Full Federal Court defies the laws of mathematics in the South Sydney case", (2001) 17 Australian and New Zealand Trade Practices Law Bulletin 25; cf Davies, "Case Note – Souths v News Ltd", (2001) 8 James Cook University Law Review 121. Kirby The narrowing of the points of difference Objective vs subjective purpose: Given the magnitude of this case, there are numerous legal and factual points that have been argued which, in other circumstances, would warrant close examination. However, as mine is a minority opinion, it is appropriate to put to one side a number of controversies that are inessential to the conclusions necessary to reach the orders that I favour. First, a controversy has existed under the Act as to whether the "purpose" referred to in s 4D(1)(b) is the subjective purpose of the parties to the contract, arrangement or understanding ("arrangement") or is an objective construct, deduced by a court when obliged to characterise the "purpose" in question. Based on an analysis of the statutory language (including reference to s 4F(1)(a) of the Act and the history and purpose of the provisions), arguments can be found for both constructions. The best textual argument for adopting an objective approach to the word "purpose" lies in the language of the Act itself. The relevant "purpose" is that of "the provision". It is not the purpose of identified persons. This strongly suggests a legal construct evoking a court's functions of characterisation. This view is reinforced by recognition that the "regulatory goals of the Act ... seem to be more readily achieved by provisions such as ss 45(2)(a)(ii) [and] (2)(b)(ii) ... which permit an objective characterisation of conduct … It is more difficult ... to understand how these regulatory goals are achieved by provisions which prohibit conduct which has an anti-competitive 'purpose' where 'purpose' has been invariably defined as involving the establishment of a 'subjective' purpose."106 The "arrangements" mentioned in the Act107 might involve multiple parties (and, in the case of corporations, multiple officers). They might have been made at different times, having slightly different subjective purposes that it would take many months of court hearings to unravel and then without any certainty of accurate ascertainment. Moreover, a subjective test might effectively allow parties an unwarranted escape from the provisions of the Act, defeating the attainment of its important national purposes. It would not make much sense to allow parties to enter anti-competitive "arrangements" and then to escape the consequences because their subjective purposes were something other than anti- 106 McMahon, "Church Hospital Board or Board Room?: The Super League Decision and Proof of Purpose under Section 4D", (1997) 5 Competition and Consumer Law Journal 129 at 130-131; Griggs, "Exclusionary provisions: The Full Federal Court awaits High Court deliberations – but is the solution to be found elsewhere?", (2002) 10 Competition and Consumer Law Journal 218 at 222. 107 Relevantly, ss 4D(1) and 45(2)(a) and (b). Kirby competitive. Such a construction would defeat attainment of the economic objectives of the Act. On the other hand, objective purposes, as defined by a judge, may represent, in practice, little more than an expression of the subjective evaluation of the deciding judge108. Although the "purpose" in question is defined by the Act to be the purpose of "the provision" (that is, a provision of an "arrangement"), the Full Court of the Federal Court has held that what has to be evaluated is the subjective purpose of the parties to the "arrangement" in adopting the provision in question109. It has concluded that, because of the provisions of s 4F of the Act, the search is for the significant operative purpose of the provision itself110. This approach has been applied in many cases. The present state of authority on this issue was applied by all of the judges in the Federal Court as they were bound to do in the light of the Full Court rulings. Of necessity, as their Honours recognised, this obliged acceptance of the primary judge's conclusions concerning the subjective beliefs of the important witnesses (such as Mr Whittaker and Mr Frykberg) who gave evidence111. In accordance with conventional principles governing an appellate rehearing, the impressions of the trial judge on such matters would be (as they were here) accepted and given appropriate effect. Left to myself, I would conclude, for textual and policy reasons, that the better view is that the court decides its own characterisation of the "provision" in question (that is an objective classification)112. In my view, the line of authority to the contrary in the Federal Court is wrong. However, in the present case, nothing turns on the difference. The conclusion which I favour can be reached by either approach. Obviously, even where an objective characterisation is required, it will still be necessary to take into account any admissible evidence of the subjective purposes of the relevant actors. The application of a subjective test by the judges of the Federal Court did not, therefore, in this case consitute a critical error. But in my opinion, it was an error. 108 Pengilley, "Hilmer and 'Essential Facilities'", (1994) 17 University of New South Wales Law Journal 1 at 24. 109 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460. 110 (2001) 111 FCR 456 at 519 [252]. 111 Reasons of Gummow J at [64] where the passages in the reasons of the primary judge are quoted: (2000) 177 ALR 611 at 675 [284]. 112 cf reasons of McHugh J at [32]-[43]. Kirby Particular persons vs class: Secondly, I can put out of consideration the way that Moore J in the Full Court approached the error that he found in the decision of the primary judge. According to Moore J, the primary judge had erred in failing to discern the purpose "of the 14-team term" as one of "restricting or limiting supply of services to particular persons and the acquisition of services from them" simply because, at the time the term was agreed to, it was not known when and upon whom the exclusionary provision would impose the burden of the restriction or limitation113. Relevant extracts from the analysis of Moore J appear in other reasons114. In essence, Moore J rejected the notion that the words "restricting or limiting" in s 4D(1) of the Act required that the supply or acquisition of services must be restricted or limited, not that the persons or class of persons must be the subject of the restriction or limitation. He said115: "The adoption of the 14-team term was effectively a declaration to Souths and each of the other clubs competing in the rival competitions that they collectively could not do what to that point each of them had done, namely field their team in a top level rugby league competition." Upon this analysis, the provision was an indication that teams, including Souths, could continue to provide a team in the premiership competition by merging or forming a joint venture. However116: "[T]he provision of a team of this character was not the provision of the same services that had been provided, and correspondingly acquired, before the adoption and implementation of the 14-team term. It would not be a team of that club but a hybrid team of two or more clubs. In this way, the services to be acquired by operation of the 14-team term, would, as to some of the 1997 clubs, not be the same services that had been acquired formerly when the two competitions conducted the rival competitions. The services acquired would be limited and restricted." The construction of the Act favoured by Moore J (also supported by the ACCC) is, in my opinion, correct. However, Heerey J complained that it represented an approach to the application of the Act different from that pleaded and presented by Souths at trial. In Heerey J's view, it could not be allowed on appeal because it could give rise to a different factual dispute involving, 113 (2001) 111 FCR 456 at 507-508 [201]-[204]. 114 Reasons of Gummow J at [82]; reasons of Callinan J at [205]-[206]. 115 (2001) 111 FCR 456 at 501 [185]. 116 (2001) 111 FCR 456 at 502 [186] (emphasis added). Kirby potentially, different evidence117. In his reasons, Moore J disputed this criticism118. In a convincing deployment of excerpts from the pleadings119, passages from the reasons of the primary judge120, and portions of the written submissions in the appeal121, Moore J concluded that the approach that he favoured had been a live issue in the trial. It was one mandated by the terms of the Act. It could therefore properly be considered on appeal. A majority in this Court has come to a contrary view122, preferring in this regard the approach of Heerey J. I am of the opposite opinion. However, because I can reach my conclusion by a different route, there is no point in pursuing the course that led Moore J to his conclusion. His Honour's approach, which is a direct and simple one, remains available in the record for future toilers in this legal vineyard. The legality of the merger: As other members of this Court have demonstrated, the ACCC sought to argue that the real flaw, from the point of view of competition law, in what had occurred affecting Souths, arose at the earlier point of the making of the contract merging the two rival competitions123. This submission was ultimately opposed by all parties to the appeal. It involved an attempt by a late entrant intervener, in effect, to shift the litigious goal posts in a way as impermissible in a court of law as it would be in a game of rugby league. I agree that we may not decide the appeal on that basis. In so far as the ACCC's submission carried resonances of the submission that News and the forces aligned with it had advanced (that the exclusionary provision needed to exist in an "arrangement" between parties in competition with each other at the time the provision takes its effect), that contention was rightly rejected by all of 117 (2001) 111 FCR 456 at 479 [104]-[105]. 118 (2001) 111 FCR 456 at 494-508 [161]-[205]. 119 (2001) 111 FCR 456 at 496 [164]. 120 (2001) 111 FCR 456 at 494-495 [161]-[162]. 121 (2001) 111 FCR 456 at 496-497 [165]-[166]. 122 Reasons of McHugh J at [46]; reasons of Gummow J at [83]; reasons of Callinan J 123 Reasons of Gummow J at [84]-[88]; reasons of Callinan J at [224]-[231]. Kirby the judges in the Full Court, explicitly or by implication124. News itself did not attempt to revive that argument in this Court. The emerging issues The foregoing analysis narrows the issues that I will decide in this appeal to two. They are whether the majority in the Full Court erred in concluding: that the impugned provision in the "arrangement" had a proscribed "purpose"; and that Souths constituted a "particular class of persons" for the purposes of s 4D(1). The proscribed "purpose" Purposes vs effects: After referring to the evidence of the negotiators125, the primary judge found that a foreseen consequence of the 14-team term was that, if more than 14 clubs sought selection for the 2000 premiership competition, the club or clubs in excess of 14 would be denied competition-organising services126. These clubs would also be denied the opportunity to provide team services. The primary judge therefore considered the case on the basis that, should more than 14 clubs seek to field teams in the 2000 NRL competition, the clear and intended effect of the 14-team term was that the NRL would not provide competition-organising services to, nor acquire team services from, a greater number of teams than the number fixed by that term127. Although the primary judge's search thereafter was for the "purpose" of the provision in question, not simply its "effect" (a distinction between those terms being mirrored in the language of the Act128), any rational elucidation of the "purpose" of the term would have to take into account the foreseen exclusionary effect which it was intended to have in the given contingencies. The primary judge was fully alive to this interrelationship between intended effect and purpose129. 124 (2001) 111 FCR 456 at 480-481 [110]-[116] per Heerey J, 508 [208] per Moore J, 516 [234]-[235] per Merkel J. 125 (2000) 177 ALR 611 at 668-670 [252]-[260]. 126 (2000) 177 ALR 611 at 671-672 [269]. 127 (2000) 177 ALR 611 at 671-672 [269]. 128 The Act, ss 45(2)(a)(ii) and 45(2)(b)(ii). 129 (2000) 177 ALR 611 at 674 [279]. Kirby Where the provisions of an "arrangement" are in writing, the "purpose" of a provision can be more readily ascertained from its terms than where it is made orally, whether partly so or wholly130. Yet even where the "arrangement" is not in writing, the "purpose" can be inferred from the circumstances of the case131. In Transfield Pty Ltd v Arlo International Ltd132, in the context of s 45 of the Act and of the question whether a provision had a "purpose" of substantially lessening competition, Wilson J said, "[i]ts purpose must be gleaned from the words used, and its context". That is how the "purpose" of the 14-team term should be ascertained. Immediate vs long-term purposes: The basic problem with the word "purpose", in this and in other contexts, was described by Evatt J in McKernan v Fraser133. If a soldier who shoots to kill in battle is asked whether his purpose is to kill the enemy or to defend his country, the answer will depend on the questioner, the occasion and the degree of particularity adopted in the response. Looking at the question generally, and with a view to the long term, the broader answer of defending the country might be given and accepted. But, focusing on the particular action of aiming the barrel of the rifle and pulling the trigger, killing the enemy will take on a compelling appearance as the soldier's immediate "purpose". In Mikasa (NSW) Pty Ltd v Festival Stores134 Menzies J observed that "in business affairs it is usual to find that a course of action has been adopted for a number of reasons". In the case of secondary boycotts, for example, an analogous problem has been addressed by this Court. In the context of s 45D of the Act, a question may arise as to the "purpose" of the person engaged in the impugned conduct. How is that question to be answered? By addressing the long-term or short-term purposes of the person concerned? The visionary or practical purposes? The purposes viewed as ends or as means? The purposes given a laudatory gloss by a party alleged to be in breach of a statute or those 130 Federal Commissioner of Taxation v Newton (1957) 96 CLR 577 at 630; Slutzkin v Federal Commissioner of Taxation (1977) 140 CLR 314 at 329. 131 R and Attorney-General v Associated Northern Collieries (1911) 14 CLR 387 at 132 (1980) 144 CLR 83 at 108. 133 (1931) 46 CLR 343 at 403; cf Tillmanns Butcheries Pty Ltd v Australasian Meat Industry Employees' Union (1979) 27 ALR 367 at 374; Jewel Food Stores Pty Ltd v Amalgamated Milk Vendors Association Inc (1989) 24 FCR 127 at 133-135. 134 (1972) 127 CLR 617 at 641. Kirby representing concerned? the actual, immediate hard-nosed objectives of the person In a secondary boycott case an industrial organisation of employees might assert that its "purpose" is to advance the economic interests of its members. But if, more immediately, the fulfilment of that "purpose" involves conduct that hinders or prevents the supply of goods or services to another person, in a way likely to cause damage to the business of that person, the existence of long-term, abstract, ethereal or self-laudatory "purposes", that are arguably well-intentioned, justifiable or even noble, will not prevent a court from looking in the context to the "purpose" with which the Act is concerned. In the case of s 45D and secondary boycotts, this will be the alleged hindering and prevention of the supply of services causing substantial loss or damage to a business. In the case of exclusionary provisions in "arrangements", it is preventing, restricting or limiting the supply of goods or services to or from particular persons or classes of persons, including in the case of future contingencies created by "particular circumstances" or "particular conditions"135. Consistency with the way in which this Court has approached the meaning of "purpose" in the case of secondary boycotts, suggests that the ascertainment of the prescribed "purpose" in s 4D of the Act must similarly be found in the context of the operative prohibitions in s 45 of the Act. This Court could not legitimately adopt a different approach, for example, because it views with more favour the proscribed activities of sporting organisations and their media supporters than it does the proscribed activities of trade unions and their supporters. the prohibition on a corporation making an "arrangement" that contains an exclusionary provision (or giving effect to such a provision) must also be viewed from the more immediate perspective of the prohibition stated in the Act. This Court must give effect to the Act impartially. Impartiality is important in a football referee. It is even more important in a court of law. Relevantly, The relevant purpose of the "provision": Read in this way, and keeping in mind that the "purpose" in question is not, as such, the "purpose" of the parties generally or the "purpose" of the "arrangement" but the purpose of the "provision" that is impugned136, it is my view that Merkel J was right in detecting error on the part of the primary judge. As Merkel J found, the primary judge conflated the "purpose" of beneficial provisions in the relevant "arrangement" joint ventures and regional (notably participation) with the 14-team term which was the "provision", and the only those encouraging club mergers, 135 The Act, s 4D(1)(b). 136 (2001) 111 FCR 456 at 522 [262]. Kirby provision, that Souths had identified as carrying the stain of the proscribed purpose that it alleged. This was the same mistake as it would be to excuse a secondary boycott by a trade union on the argument that its "purpose" was to advance the economic interests of its members, the rights of workers generally, or greater equity in Australian industrial life and not, as such, to put economic pressure on the target. With all respect, the inquiry by the primary judge as to the intention of the authors of the 14-team term for the objectives of the "arrangement" overall137, diverted his Honour from focusing on the term itself and how it might operate. It switched his concentration to why those persons thought that the term would not, in the end, prove necessary to secure what the team merger provisions sought to achieve overall. If the applicable "purpose" is to be ascertained from the reason why the parties included the 14-team term in the merger agreement, the evidence at trial compellingly suggested that such reason was that, if a 14-team competition could not be achieved through incentives such as mergers or by the operation of the basic selection criteria, it was to be achieved by a process of enforced exclusion. Thus Mr Frykberg, whose evidence was accepted, said: "It was an essential element of the agreement that there be in the absence of being able to reach a 14 team competition naturally that there be a mechanism in place which would arrive at a 14 team as agreed by both sides." Mr Macourt, likewise accepted, said that it was essential to have an exclusionary process if more than 14 teams applied for selection in the 2000 competition. Mr Whittaker agreed to the analogy that the funding was the "carrot". The threat of exclusion contained in the 14-team term was the "stick". The issue in these proceedings was not whether the overall objective of the merger or of the "arrangement", taken as a whole, was rational or beneficial or in the best interests of the game, its supporters or sport generally. Nor was it whether, subjectively, the officers of News or any of the other bodies in its camp had the hope, wish or expectation of avoiding the exclusion of a team with such a long history in the game of rugby league as Souths. The issue, and the only issue, was the "purpose" of the impugned clause that contained the exclusionary provision limiting the competition in 2000, and thereafter, to 14 teams and providing, if need be, for the removal of any team or teams beyond that number from the supply and acquisition of services which, at the time the "arrangement" was agreed, they enjoyed in the applicable market. I entirely agree that, in ascertaining the "purpose" of the "provision", regard should be had to relevant 137 (2000) 177 ALR 611 at 671-674 [269]-[276]. Kirby matters of context. But it is critical to focus on the "provision" in the midst of the context because that is what the language of the Act requires. When the attention of decision-making is focused in this precise way, there can only really be one answer to the "purpose" of the "provision" containing the 14-team term. It was exclusionary. True, it might have been justifiable in terms of the interests of the sport, the fans, the majority of the affected players and other employees in several clubs, the media interests, the nation, the wider watching world of global television and human happiness. It might even have been without substantial deleterious impact on the interests of market competition, viewed as a whole. But these are not the questions posed by the Act. In s 4D(1)(b), it addresses attention only to the purpose of the provision. So confined, the "purpose" of the provision was, upon its coming into effect (as must be postulated to attract the operation of the Act), exactly what those who agreed to it foresaw and contemplated and intended and what the provision stated. It was to exclude from the market supplying and receiving premiership services any team or teams beyond the number of 14. Omitting the element of sport: It is relatively easy to demonstrate that, when the context of sport is put in its correct place, such a provision is exclusionary138. If any two corporations that were business competitors agreed that there were too many suppliers in their industry or market, and they agreed to choose a supplier, or suppliers, according to predetermined criteria, and to refuse to deal with them in the future, such conduct would obviously fall within the proscription of the Act. Yet that is precisely what happened in the present case, when the context of sport is removed. Such a term would still be exclusionary even if the two competitors were acting according to their conception of the best interests of the market (for example, that too many suppliers had produced too much stock which lowered the quality of goods and services to customers). This "best interests of the market" argument would not protect other business competitors under the Act. It should not protect News and ARL. As is usually the case in such matters, the restricting competitors assert that the best interests of the market or game or participants happen conveniently to coincide with their own best economic interests. Such an opinion is not always universally shared. In this case, Souths vehemently denied it. The Act requires a precise focus in order to ascertain the "purpose" relevant to its provisions. Once that more precise focus is adopted (as Merkel J favoured) it identifies an error of law on the part of the primary judge. It was possible, adopting all of the primary judge's findings on credibility of witnesses and their motives and aspirations, for the Full Court to address for itself, 138 R v Federal Court of Australia; Ex parte WA National Football League (1979) 143 CLR 190 at 209-211 per Barwick CJ, 234-237 per Mason J, 239-240 per Murphy J. Kirby accurately, the "purpose" of the "provision" in question. Indeed, the primary judge's finding made it relatively easy to discern the "purpose" of the 14-team term, to decide that it was "a substantial purpose" amongst the provisions of the "arrangement" in question and to conclude that it was a proscribed exclusionary purpose, precisely as its terms indicated139. Exceptions and authorisations: To construe s 4D of the Act by reference to what was seen as the "necessary" restrictions to avoid its application to what might be judged as "legitimate" or "commercial" decisions distorted the approach both of the primary judge and of Heerey J in the Full Court140. Whilst s 45(2) of the Act has a wide operation in relation to exclusionary provisions, specific exceptions are envisaged by the Act. These exceptions relate to covenants, resale price maintenance, exclusive dealing arrangements, the acquisition of shares or assets of a company and arrangements between related companies141 and cases where specific authorisation has been obtained from the ACCC. That body has the power to authorise the making of, or giving effect to, an "exclusionary provision" where it is satisfied that such provision has resulted, or is likely to result, in a benefit to the public so that the contract, arrangement or understanding containing the exclusionary provision should be allowed to be given effect142. It has been held that the public benefit relevant to an authorisation by the ACCC may include the achievement of efficiencies, rationalisation or financial viability143. In such cases, the private interests of the parties to the "arrangement" are not irrelevant to an authorisation144. However, instead of seeking such an authorisation for their "arrangement" the merger parties pressed on without it. They may have been hoping that a problem would not arise. But when it did, their "arrangement" was governed by the Act. It applied without any applicable exception or authorisation. Conclusion: Full Court correct: It follows that I would uphold the reasoning and conclusion of Merkel J that the element of a proscribed "purpose" 139 (2001) 111 FCR 456 at 525 [274]. 140 (2000) 177 ALR 611 at 676 [293]; (2001) 111 FCR 456 at 477 [94]. 142 See the Act, ss 88(1) and 90(8); cf Heydon, Trade Practices Law, vol 1 at [4.1570]- 143 Re Rural Traders Co-operative (WA) Ltd (1979) 37 FLR 244 at 276, 281-283. 144 See Re Tooth & Co Ltd and Tooheys Ltd (1979) 39 FLR 1 at 25. Kirby of the impugned "provision" was established by the terms of that provision, read against compelling evidence that was not really in dispute. That conclusion justified, and required, the intervention of the Full Court. Services to or from "particular classes of persons" Operation of the exclusionary provision: But is the proscribed "purpose" contemplated by s 4D(1) inapplicable in this case because the impugned provision did not have the purpose of preventing, restricting or limiting relevantly the supply of services to, or the acquisition of services from, "particular ... classes of persons in particular circumstances or on particular conditions"? I agree with Gummow J145 that there are dangers in dissecting the concepts in the Act and reading them in isolation. They represent a compound idea. Each word and phrase takes its meaning from the entire provision. This, in turn, must be read in its context so as to achieve, as far as possible, its objective146. On the face of things, once the character of the "purpose" of the 14-team term is correctly identified as that foreseen and intended by the merger parties in their "arrangement", there is little difficulty in classifying the "purpose" as one of preventing the supply and acquisition of services to Souths in particular circumstances. The "particular circumstances" involved are those foreseen and contemplated by the 14-team term, namely, that in the run-up to the 2000 premiership rugby league competition, of the teams that were supplying and acquiring services in 1997, there would be one or more teams, beyond 14, which otherwise met the criteria for participation but had to be eliminated in the "particular circumstances" that had by then transpired. Such "circumstances" included those expressly contemplated by the relevant "arrangement". The inducements of merger had not operated to put Souths directly into the competition. The balance of Sydney and regional teams advantaged other remaining competitors. The considerations agreed by the merging parties therefore applied to eliminate Souths. Accordingly, by the provisions of the merger agreement (but not with the agreement of Souths) and by the application of the pre-existing standards that the merging parties had agreed, the exclusionary provision meant that there would be a number of clubs in 2000 which would be denied the supply or acquisition of services, just as the "arrangement" envisaged. This, in the event, affected Souths. 145 Reasons of Gummow J at [68]. 146 Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 397; Kirby, "Towards a Grand Theory of Interpretation: The Case of Statutes and Contracts", (2003) 24 Statute Law Review 95 at 97. Kirby Exclusion on pre-ordained criteria: What is the argument against this construction of the Act? It was put for News that Souths was not within a "particular class of persons". It was simply an excluded team to which, individually and alone, sensible criteria for the benefit of the game had been applied, requiring its exclusion on this occasion. With respect, this argument, and the suggested analogy to immigration law147, were unconvincing. Even if it were accepted that a "particular class" within the meaning of s 4D(1)(b) could not be defined by the fact of exclusion, this is irrelevant. If ever there was a case in which there were identified criteria for exclusion, that pre-existed the fact of exclusion, this was it. Those who drafted the 14-team term may have hoped that its provisions would not have to be invoked. But, if need be, they (and especially News) were insistent that, in the stated circumstances, the term would be applied, according to pre-ordained criteria. Those criteria existed separately from the exclusion. They identified a particular class of persons, being the club or clubs supernumerary to 14, which in 2000 would lose the right to supply and acquire services in the relevant market during that year. From what I have said it also follows that I agree with Gummow J that it is inappropriate to import notions of malice or to employ terms such as deliberately "targeting", "discriminating" or "aiming at" for the purposes of s 4D so as to limit its application to circumstances where the concerted action can be classified as a "boycott"148. Accordingly, on each of the grounds pressed in this Court, the appellants' attack fails. The discretionary provision of relief The grant of an injunction: News did not, in this appeal, canvass the orders made by the Full Court granting an injunction restraining those in its camp "from giving effect to, or continuing to give effect to, the 14-team term"149. No submissions were therefore addressed to the injunctive order. This means that an important part of the reasoning of Heerey J concerning the "discretionary remedy of injunction"150 is not, as such, before us. But I would not want to pass it by without comment. 147 Referring to Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 241 per Dawson J. See (2001) 111 FCR 456 at 474-478 [79]-[97] per 148 Reasons of Gummow J at [77]. 149 (2001) 111 FCR 456 at 534, order 4. 150 (2001) 111 FCR 456 at 482 [126]. Kirby In that section of his reasons, Heerey J picked up part of the reasoning of the primary judge151 to the effect that, even if Souths had made out its claims based on s 45 of the Act, injunctive relief should be refused and the relief confined to an applicable declaration as to the breach of the Act occasioned by the making of, arriving at and giving effect to, the 14-team term and an order for the ascertainment of the damages to which Souths was entitled under s 82 of the Act as a consequence. Such declaration and order were, in due course, made to formalise the conclusions of the majority of the Full Court. The majority agreed on their terms152. However, they also ordered the injunction. Remedies and sensible outcomes: Because of the state of the record, I will not explore this issue fully. Suffice it to say that there is force in the reasoning of Heerey J concerning the provision of injunctive relief in such circumstances, even where it is accepted that a breach of s 45 has been established153. In his reasons, Merkel J also recognised that injunctive relief could not extend to obliging the conduct in 2002 of a 15-team competition154. Moreover, he accepted that there could be other, lawful reasons for withholding an invitation to Souths to participate in the competition in 2002 or thereafter. It is possible that, in providing relief under the Act, in respect of which the trial judge has very large powers, just and sensible remedies may be fashioned to avoid the application of the Act to unwarranted circumstances. In default of legislative attention to the Act's suggested overreach, the remedies under the Act may, as Heerey J proposed, have an important part to play in the accommodation of the substantive provisions of the Act, and to ensure sensible outcomes that take into account the conduct of the parties and the larger objectives of competition law and policy. 151 (2000) 177 ALR 611 at 682 [327]-[328]. 152 (2001) 111 FCR 456 at 534 [307] per Merkel J, 508-509 [209]-[212] per Moore J. 153 (2001) 111 FCR 456 at 483-485 [130]-[138]. See also reasons of Callinan J at 154 (2001) 111 FCR 456 at 532 [300]; cf Pengilley, "Fifteen into fourteen will go: the Full Federal Court defies the laws of mathematics in the South Sydney case", (2001) 17 Australian and New Zealand Trade Practices Law Bulletin 25; Duns, "Super leagues and primary boycotts – a whole new ball game", (2002) 10 Trade Practices Law Journal 115 at 122. Kirby Orders No doubt because of supervening happenings, News made it clear that, in the event that it succeeded in this appeal, it sought no orders as to costs of the proceeding before this Court or in the Full Court of the Federal Court. Likewise, Souths asked that, if it should succeed, the appeal should simply be dismissed. For the foregoing reasons, I would so order. The appeal should be dismissed. In accordance with the parties' agreement there should be no order as to costs. Callinan CALLINAN J. This appeal is concerned with the construction of ss 4D and 45 of the Trade Practices Act 1974 (Cth) ("the Act") and their application to a sporting competition which replaced two competing competitions. The facts and relevant legislation The first respondent, South Sydney District Rugby League Football Club Ltd ("Souths"), is a sporting club which competed, from its inception in 1908 in a rugby league competition conducted in New South Wales by the New South Wales Rugby League ("NSWRL") (an incorporated body since 1982). Rugby League is essentially a winter sport. Souths had many successes over the years. It won the inaugural competition in 1908, and, by 1997 had won more premierships, and had produced more international players than any other club. In 1983 NSWRL resolved that each club would have to apply annually for a right to compete in the competition. From 1984 the rules governing the competition provided that participation in one year conferred no right to participate in the next or subsequent years. In 1995 a rival competition called Super League was also conducted. It was created and sponsored by Super League Limited ("Super League"), a subsidiary of the first appellant News Limited ("News Ltd") which is a large commercial organisation heavily involved in publishing and telecasting. By sponsoring or subsidizing sporting competitions and participants in them it obtains valuable telecasting rights and advertising revenue. Some clubs which had previously competed in the other, longstanding competition joined the new rival competition as did some clubs which came into existence for the first time. Souths continued to compete in the former. In this litigation the other clubs which had participated in either or both of the competitions were parties but played no active role in the conduct of the case. In 1997 the two competitions, the older of which was by then being conducted by the Australian Rugby League Ltd ("ARL") were merged to form the National Rugby League ("the NRL"). By 19 December 1997 ARL and News Ltd had reached an agreement in principle (the "Understanding") pursuant to which the second appellant National Rugby League Investments Pty Ltd ("NRLI"), effectively a joint venture company to be controlled equally by the other appellants, would conduct the merged competition. On 18 February 1998 the ARL and Super League executed a Memorandum of Understanding (the "Memorandum of Understanding"), which in terms provided for a unified competition to be conducted between, not initially, but ultimately, 14 teams only (the "14-teams term"). If only 14 teams were to play in the competition, it would be possible for each to play one another both at home and away, and for semi-finals, finals and a grand final to be conveniently conducted within a reasonable frame of time within the cooler months of the year. Another practical constraint is imposed by the nature of the game itself. As a body contact sport it requires a high level of Callinan physical fitness and hardness, and a reasonable interval between games to enable players to rest and recover from injuries inflicted from time to time. This can also be said of such an arrangement. The parties wished to establish a financially sustainable national competition of a very high standard which would attract the best players and clubs, and accordingly the support of News Ltd and other media companies: in substance a competition of the best. The competition would, self evidently, itself be in competition simultaneously, not only for athletes to participate in it, but also for sponsors, advertisers, spectators, radio stations and television channels, with other codes of football and other sports. And, as will appear, one at least of the appellants would assume an obligation of subsidizing in a considerable amount each of the participating clubs (see cl 7.7 of the agreement). It is easy to see therefore why the ultimate number 14 might commend itself to the appellants. The following was the term of the agreement between the appellants which made provision for the 14 teams: COMPETITION STRUCTURE The Parties agree that the structure of the NRL competition will be as set out in this clause 7 and each of ARL and NRLI agree to procure NRL to comply with this clause 7. 7.2 Before 30 June 1998, NRL must: inform Clubs that no less than 16 teams, but no more than 20 teams (the actual number to be determined by NRL and approved by the Partners), will be entitled to Franchises in 1999, and not more than 14 teams will be entitled to Franchises in 2000; and release the franchise criteria for 1999 and beyond. 7.3 No more than 20 teams will participate in the 1998 NRL Competition, each team being granted a Franchise for a term of one year. However, once the franchise criteria are determined, Brisbane, Newcastle and Auckland will be assessed by NRL against the franchise criteria and, if NRL is satisfied, the term of their Franchises will be extended to five years. 7.4 No less than 16 teams but no more than 20 teams, (the actual number to be determined by NRL and approved by the Partners), will participate in the 1999 NRL Competition, on varying terms depending on the level of satisfaction of the franchise criteria. These Franchises will be granted no later than 1 October 1998. NRL will be entitled to extend the Callinan term of Franchises at this time if it is in the best interests of the NRL Competition. 7.5 No more than 14 teams will participate in the 2000 NRL Competition on varying terms depending on the level of satisfaction of the franchise criteria. 7.6 Clubs entering into mergers or joint ventures before March 1998 with the approval of NRL are entitled to: receive grants of $4 million per annum in respect of the merged club in 1998 and 1999 rather than a single $2 million grant under clause 7.12(a); and a 5 year Franchise. 7.7 Clubs entering into mergers or joint ventures before 1 October 1998 with the approval of NRL are entitled to: receive a grant of $4 million in 1999 rather than a single $2 million grant under clause 7.12(a); and a 5 year Franchise. 7.8 On or before 1 October 1999 NRL must determine the Franchisees for 2000 (there being no more than 14 Franchisees). In a 14 team NRL Competition, there will be no less than six teams, and a maximum of eight teams, from Sydney. Conversely, there will be no less than six teams, and a maximum of eight teams, from regions outside Sydney. 7.10 Until 2001, the regions outside Sydney are: (a) Adelaide; (b) Melbourne; (c) Auckland; Canberra; Brisbane; North Queensland; (g) Newcastle; Callinan (h) Gold Coast; and Central Coast. 7.11 The Parties recognise that it is in the best interests of rugby league to prioritize the grant of Franchises, for example, to encourage: (a) mergers of Sydney clubs; and a national competition. If the number of applicants satisfying the franchise criteria exceed the number of available Franchises, the grant of available Franchises will be determined in the following order of priority: (a) merged clubs; regional clubs; and stand alone Sydney clubs. Otherwise, NRL will determine the grant of Franchises on the level of satisfaction of the franchise criteria. 7.12 A Franchise will entitle each Franchisee to: an annual grant of $2 million from NRL; and the payment of all travel costs and accommodation for the 1998 and 1999 NRL Competition seasons. The payment of travel and accommodation costs for 2000 and beyond will be reviewed by NRL in 1999. 7.13 Each of ARL, NRLI and News [Ltd] must make its decisions on the franchise criteria, the grant (or withdrawal) of Franchises, and any other matter to be determined under this clause 7 and, when executed, the Franchise Agreements, in the best interests of the NRL Competition, disregarding any conflicting (or potentially conflicting) interests, such as interests in Franchisees." The arrangements between the appellants included the provision of financial incentives to clubs which agreed to merge or form joint ventures. In September 1998, the NRL published criteria for the grant of a franchise to clubs wishing to participate in the merged competition. The criteria were generally objective. They were, in substance: spectator attendances home and away; Callinan competition points won; gate receipts; sponsorships and their value; and profitability. If by 2000 more than 14 clubs able to satisfy the criteria wished to compete then a descending order of priority would be applied: merged clubs, regional clubs, intact Sydney clubs. On 14 May 1998 a merger agreement (the "Merger Agreement"), largely fleshing out the arrangements contemplated by the Memorandum of Understanding, was executed between the ARL, NSWRL, Super League, NRLI and News Ltd. Some further facts, for their bearing upon an understanding of the purpose of the appellants and their relevance to the application of the Australian Competition and Consumer Commission ("ACCC"), should be noted. As the primary judge found, and as the ARL's entry into the merger suggests, the continuation of the competing competitions was doing "irreparable damage to the game". (It was common ground that the competing competitions were of the same or a similar standard). The purpose of the Merger Agreement was stated in recital B: "The Parties wish to merge the ARL Competition and the Super League Competition, on the terms set out in this Agreement, so that there is one the NRL premier rugby Competition, on and from the 1998 rugby league playing season in Australia." in Australia, called league competition On 15 October 1999, Souths was informed that it had been refused a place in the draw for the 2000 season. The remaining clubs were granted licences or franchises for three years. Souths commenced proceedings in the Federal Court for an injunction to require the NRL to allow it to field a team for the 2000 season in the merged competition. There were several issues litigated at the trial and an appeal to the Full Court of the Federal Court, but the principal issue in this Court is whether the 14- teams term was an exclusionary provision within the meaning of s 4D of the Act, and, whether therefore, in entering into the Understanding, and subsequent documents giving effect to the Understanding, the appellants had contravened s 45(2)(a)(i) or s 45(2)(b)(i) of the Act. In this Court the ACCC sought to intervene to raise a different issue not litigated previously. I will defer consideration of that issue until after I have dealt with the parties' cases. But first the relevant sections of the Act should be set out. Section 45 of the Act prohibits corporations from entering into anti-competitive arrangements. So far as is relevant it provides: "(2) A corporation shall not: Callinan (a) make a contract or arrangement, or arrive at an understanding, if: the proposed contract, arrangement or understanding contains an exclusionary provision; or a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or give effect to a provision of a contract, arrangement or understanding, whether the contract or arrangement was made, or the understanding was arrived at, before or after the commencement of this section, if that provision: is an exclusionary provision; or has the purpose, or has or is likely to have the effect, of substantially lessening competition. For the purposes of this section and section 45A, competition, in relation to a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, means competition in any market in which a corporation that is a party to the contract, arrangement or understanding or would be a party to the proposed contract, arrangement or understanding, or any body corporate related to such a corporation, supplies or acquires, or is likely to supply or acquire, goods or services or would, but for the provision, supply or acquire, or be likely to supply or acquire, goods or services. For the purposes of the application of this section in relation to a particular corporation, a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding shall be deemed to have or to be likely to have the effect of substantially lessening competition if that provision and any one or more of the following provisions, namely: the other provisions of that contract, arrangement or understanding or proposed contract, arrangement or understanding; and the provisions of any other contract, arrangement or understanding or proposed contract, arrangement or understanding to which the corporation or a body corporate related to the corporation is or would be a party; Callinan together have or are likely to have that effect." Section 4D defines an "exclusionary provision" as follows: "(1) A provision of a contract, arrangement or understanding, or of a proposed contract, arrangement or understanding, shall be taken to be an exclusionary provision for the purposes of this Act if: the contract or arrangement was made, or the understanding was arrived at, or the proposed contract or arrangement is to be made, or the proposed understanding is to be arrived at, between persons any 2 or more of whom are competitive with each other; and the provision has the purpose of preventing, restricting or limiting: the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons; or the supply of goods or services to, or the acquisition of goods or services from, particular persons or classes of persons in particular circumstances or on particular conditions; by all or any of the parties to the contract, arrangement or understanding or of the proposed parties to the proposed contract, arrangement or understanding or, if a party or proposed party is a body corporate, by a body corporate that is related to the body corporate." "Competitive" is also defined in s 4D: "(2) A person shall be deemed to be competitive with another person for the purposes of subsection (1) if, and only if, the first-mentioned person or a body corporate that is related to that person is, or is likely to be, or, but for the provision of any contract, arrangement or understanding or of any proposed contract, arrangement or understanding, would be, or would be likely to be, in competition with the other person, or with a body corporate that is related to the other person, in relation to the supply or acquisition of all or any of the goods or services to which the relevant provision of the contract, arrangement or understanding or of the proposed contract, arrangement or understanding relates." Section 4F defines "particular purpose" as follows: Callinan "(1) For the purposes of this Act: a provision of a contract, arrangement or understanding or of a proposed contract, arrangement or understanding, or a covenant or a proposed covenant, shall be deemed to have had, or to have, a particular purpose if: included the provision was the contract, arrangement or understanding or is to be included in the proposed contract, arrangement or understanding, or the covenant was required to be given or the proposed covenant is to be required to be given, as the case may be, for that purpose or for purposes that included or include that purpose; and that purpose was or is a substantial purpose; and a person shall be deemed to have engaged or to engage in conduct for a particular purpose or a particular reason if: the person engaged or engages in the conduct for purposes that included or include that purpose or for reasons that included or include that reason, as the case may be; and that purpose or reason was or is a substantial purpose or reason." It may be noted that par (a) of s 4F(1) speaks of a purpose, actual or deemed, of a "provision of a contract" whereas par (b) refers to the purposes of a person, but because nothing turns on that difference it is unnecessary to decide the significance or otherwise of it. In order to obtain injunctive relief under the Act, Souths had therefore to establish the following matters, the first two of which were not, in the circumstances, in contest: that the ARL and Super League were competitors prior to the execution of the Memorandum of Understanding; that the ARL and Super League had entered into a contract, arrangement or understanding; and that a substantial purpose of the contract, arrangement or understanding (or of the parties to the arrangements) was to prevent, restrict or limit the Callinan supply or acquisition of services to or from particular persons or classes of persons. The 14-team term was pleaded by Souths as having the purpose of: restricting or limiting the supply of services (namely organising and running top level rugby league competitions) by the NRL Partnership to particular persons …; and preventing the supply of services (namely, organising and running top level rugby league competitions) by the NRL Partnership to particular classes of persons…" and of: restricting or limiting the acquisition by the NRL Partnership of services (namely, the provision of rugby league teams to play in the NRL competition) from particular persons …; and preventing the acquisition by the NRL Partnership of the services of the provision of rugby league teams to play in the NRL competition from particular classes of persons …" The "competition-organising services" of the NRL partners were pleaded "the supply of the services of organising and running top level rugby league competitions to Souths, the clubs and franchisees which had participat[ed] in 1997 in the ARL Optus Cup and the Super League competition including the Clubs, and to any other rugby league club willing and able to provide a team to participate competitively in a top level rugby league competition." The "team services" were pleaded as: "the acquisition of services, being the provision of rugby league teams to play in the top level rugby league competitions organised and run by the ARL on the one hand, and News [Ltd] and [Super League] on the other hand, from Souths, the clubs and franchisees which had participat[ed] in 1997 in the ARL Optus Cup and the Super League competition including certain of the Clubs and any other rugby league club willing and able to provide a team to participate competitively in a top level rugby league competition." The "particular persons" or "class of persons" said to be affected by the exclusionary provision were: Callinan the clubs which participated in the 1997 ARL and Super League competitions and who had not withdrawn from those competitions before that date, other than the 14 clubs (including merged clubs as a single club), who would be selected to participate in the competition from the year 2000; and all rugby league clubs which were willing and able to participate competitively in a top level rugby league competition other than the 14 clubs (including merged clubs as a single club) who would be selected to participate in the NRL competition from the year 2000." The decision at first instance The primary judge, Finn J, held that although the 14-team term was part of a contract, arrangement or understanding made between News Ltd and the ARL, which were competitive with each other, it did not have the purpose of preventing, restricting or limiting the supply of services by News Ltd and the ARL, or the acquisition by News Ltd and the ARL of services from, particular persons or classes of persons. His Honour said this155: "A clear and intended effect of the 14-team term was that the NRL partnership would not provide its competition-organising services to, or acquire team services from, a greater number of teams than the number so fixed. This was a fundamental element of the peace deal. A foreseeable and, for ARL and News [Ltd], a foreseen consequence of the term was that if more than the stipulated number sought participation in the NRL (howsoever competition, the excess over the partnership's determined) would be denied competition-organising services and would not have its (their) team services acquired by the partnership. There can be no controversy about both the effect and the consequence I have described. The real matter in issue is whether the term was included in the 19 December understanding and its successor documents for the purpose, or for purposes that included the purpose, alleged by Souths. To resolve this it is necessary at the outset to place the 19 December understanding and the 14-team term within it, in their respective contexts. the stipulated number the provision of to bring The objective the 19 December understanding was working the separate towards was competitions of ARL/NSWRL and Super League, the latter at News [Ltd's] instigation having broken away from the former. The parties to the understanding clearly appreciated and, for somewhat varying reasons, in one competition together 155 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 671-672 [269]-[270], 673 [274]. Callinan accepted the need for a united competition. As the evidence of Mr Macourt, Mr Frykberg and Mr Whittaker indicates, as also did contemporary documentary evidence, a variety of factors informed that need. For present purposes I need mention only three and in general terms. First, positively, there was the perceived need to establish a financially viable and sustainable competition. Secondly, negatively, there was the wish to avert continuing damage to the game. And thirdly, there was the need both to satisfy and to respond to the pressures and demands of the media companies on whose financial support both the several and the proposed competitions had relied or would rely for their survival. Against this background, the purpose or purposes for which the 14- team term was included in the 19 December understanding become(s) more apparent. The primary purpose of the understanding itself was to constitute a partnership to own and conduct the proposed NRL competition. I need not further consider the reasons that led to the proposed formation of the partnership. I would note, though, that the proposed NRL competition structure served an important role in defining the scope of the partnership's business both in providing competition- organising services and in acquiring team services. While the NRL competition has variously been described as a 'merged' or 'unified' competition, it was in my view a new competition that supplanted the two competitions it was designed to replace." Finn J found persuasive the evidence that it was thought, by the parties to it at the time of execution of the Memorandum of Understanding, that the 14- team competition could be achieved without resort to exclusion. His Honour said156: "I accept the evidence of Mr Whittaker that he believed the 14 teams for 2000 could be, and of Mr Frykberg that they would be, achieved without resort to exclusion. And I consider the early and continuing significance they attributed to the formation of mergers and joint ventures as being consistent with the absence of a proscribed purpose. The significance so attributed to mergers, etc, evidenced a form of recognition of both the wish and the need to maintain some level of participation of the established clubs in a competition not designed to accommodate them all individually. 156 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 675 [284]-[285]. Callinan that that term was fundamental Further, while it may be said that the 14-team term was only a means to achieving the objectives I have mentioned, the evidence (i) does the 19 December establish understanding and (ii) does not establish that there was another means available not involving the 14-team term (or for that matter any maximum size stipulation) that would have been likely to secure either the merger itself or the objectives sought to be achieved in the competition structure. In these circumstances I am unable to conclude that a variety of means was available to the parties such that the adoption of the 14-team term was merely a means to an end and as such had another purpose as well as that of securing the objectives sought." What kind of provision, in his Honour's view, would have been an exclusionary provision? His Honour answered that question, correctly, in my opinion, in this way157: "There is a significant difference between being merely an unsuccessful contender for selection in a process not designed to preordain that particular outcome and being a target for exclusion in a selection process designed to that end. The latter, but not the former, if otherwise the product of a s 4D understanding, is capable of being found to be an exclusionary provision." His Honour also said158: "One can envisage a size provision with its proposed ancillary criteria being designed with the substantial purpose in mind, not simply of limiting the size of the competition for reasons that are considered to be in the interests of the game and its stakeholders, but of specifically targeting a club or clubs that is or are anticipated to be applicants for selection. Such is far from the present case. A selection process having more applicants than positions necessarily results in there being winners and losers. What for s 4D purposes is important for those who lose is the manner of their losing." His Honour also rejected Souths's attempt to set up that it was a particular person, or within a particular class of persons within the meaning of s 4D of the Act because it was an excluded person or a member of a class of excluded 157 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 675 [282]. 158 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 675 [281]. Callinan persons: in short that the fact of exclusion itself defined a relevant person or class of persons. Finn J said159: "I am unable to agree ... . In substance it is a submission that a class for s 4D(1) purposes can be constituted simply by the defining characteristic of failing to secure selection for entry into the 2000 competition. As a matter of language usage, where resort is had to a selection process that, as applied, could result in the failure of a number of persons (or teams) to be selected, those who might so fail could quite properly be described as a class in that in their failure they share a defining characteristic. But, in the setting of s 4D(1) of [the Act], to be able to say that one belongs to a class (whatever its defining characteristic) is of no practical significance unless that class is the object of the proscribed purpose – unless it is 'aimed at specifically'. In the present case while the purpose of having resort to the proposed selection criteria underpinning the 14-team term was to differentiate between those who would and those who would not be selected for participation in the 2000 competition, it did not on the evidence before me have or have as well the purpose of discriminating against a particular applicant or class of applicants for selection. … Not having that purpose, the fact that a group could exist that could be said to constitute a class by reason of the fact of their not being selected is without significance or consequence for s 4D purposes." (footnotes omitted) It was also his Honour's opinion that even if Souths had been able to make out that cl 7 of the agreement was an exclusionary provision, it would not be entitled to an injunction because it had no right to participate, and might be able to be excluded for other reasons. The Full Court of the Federal Court By majority, (Merkel and Moore JJ, Heerey J dissenting) the Full Court of the Federal Court, allowed Souths's appeal. It held that there had been a breach of s 45(2)(a)(i) by the appellants by the execution of the Memorandum of Understanding including as it did, the 14-team term, and which resulted in Souths's exclusion from the NRL 2000 season competition. As to the question whether the purpose of the 14-team term was a proscribed purpose under s 45(2), Merkel J said160: 159 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 676 [291]-[292]. Callinan "The purpose, of which s 4D speaks, requires consideration of the subjective purpose or purposes of the party or parties as a result of whose efforts the alleged exclusionary provision was included in the relevant contract, arrangement or understanding: ... [T]he Judicial Committee in Newton v Commissioner of Taxation (Cth)161 (which related to s 260 of the Income Tax Assessment Act 1936 (Cth)) [said]: 'The word "purpose" means, not motive but the effect which it is sought to achieve – the end in view. The word "effect" means the end accomplished or achieved.'" (some footnotes omitted) And later, in indicating that the effect of the provision informed the inquiry as to its purpose, his Honour said162: "Whichever phraseology is employed, the Court is required to consider, as a question of fact, the effect sought to be achieved or the result intended by the inclusion of the alleged exclusionary provision." The purpose to be considered, his Honour continued, is that of the impugned provision in isolation from the remainder of the agreement163: "Section 4D(1) mandates that the focus of the enquiry be the provision in question, rather than the contract, arrangement or understanding in which it was included. This distinction is critical as often the overall result or effect intended by a contract will be quite inconsistent with the result or effect intended by a particular provision in the contract." (original emphasis) (Moore J, the other judge of the majority, expressed a similar view on this issue164). 160 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 518 [243] and see also 486-487 [144] per Moore J. 161 [1958] AC 450 at 465. 162 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 518 [245]. 163 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 518 [245]. 164 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 486-487 [144]. Callinan Merkel J observed that this was an important point of departure from the reasoning of the trial judge. His Honour said165: "In my view, in reaching the conclusion at which he arrived the trial judge failed to distinguish between the purpose of the club merger, joint venture and regional participation provisions on the one hand and the purpose of the 14-team term on the other. His Honour appeared to assume that the purposes of the two sets of provisions can be conflated. ... It was in that context that the trial judge found that the evidence is bereft of any exclusionary purpose. But if the two sets of provisions have discrete purposes, which is a question of fact, his Honour would have fallen into error in conflating the purpose of the merger, joint venture and regional participation provisions with the purpose of the alleged exclusionary provision." As to the evidence that it was believed that the 14-team competition could be achieved without resort to exclusion, Merkel J said166: "His Honour [the trial judge] also drew some support for his conclusions from his finding that there were no other means available to achieve the NRL partners' objective. If there was an absence of any other means, which is not self-evident, that only serves to emphasise the significance attached by the parties to the means chosen by them to secure their objective." Merkel J decided that in the context of s 4F, substantial purpose means "a significant operative purpose".167 His Honour said168: "On the issue of substantiality of purpose the trial judge accepted that the means chosen to achieve the 14-team limitation was one of the 'defining characteristics of the new competition' and 'a fundamental element of the peace deal' between the ARL and News [Ltd]. It is clear 165 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 522-523 [264]. 166 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 525 [273]. 167 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 519 [252]. 168 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 528 [283]. Callinan the exclusionary purpose of the provision, the 'buttress' to secure the 14- team outcome, was a significant operative purpose and therefore, in my view, a 'substantial' purpose." His Honour held169: "In summary, the class aimed at by the NRL partners' exclusionary purpose of preventing the supply or acquisition of the relevant services by or from the NRL partners was a particular class of persons for the purposes of s 4D(1). Analogously to Pont Data170 the proscribed exclusionary purpose of the NRL partners was to prevent supply or acquisition to or from a particular class of persons (the excluded class) by restricting or limiting supply or acquisition to or from the clubs or entities selected to be included in the 2000 NRL competition. Accordingly, Souths has established that the trial judge erred in dismissing its case insofar as it relied upon s 4D(1) of the Act." "Before 19 December 1997 the services supplied by each of the 1997 clubs and acquired by the organisers of the rival competitions was the provision of a team. To indicate, as the adoption of the 14-team term did, that the 1997 clubs then supplying 22 teams could, in the year 2000, supply, and the organiser would only acquire, 14 teams (even if the clubs were able to do so as a merged club or through a joint venture) constituted, in my opinion, conduct which had the purpose of at least restricting or limiting the acquisition of team services from the 1997 clubs and probably the supply of organising services to them. This may be illustrated by referring to the position Souths was in though considered in the context of the position each of the other clubs (identified by reference to their circumstances at 19 December 1997) was in also. Souths had its own team and had fielded it in the 1997 competition. Souths (unlike some, but not all, of the other 1997 clubs) had fielded its team for decades. It had provided a team and the ARL had acquired the services (that is, the provision of a team) from Souths both in 1997 and earlier. The ARL had provided services which facilitated Souths 169 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 531 [295]. 170 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460. 171 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 501-502 [184]-[186]. Callinan competing with its team in a top level rugby league competition. The adoption of the 14-team term was effectively a declaration to Souths and each of the other clubs competing in the rival competitions that they collectively could not do what to that point each of them had done, namely field their team in a top level rugby league competition. The organisers of the rival competitions were indicating that they would no longer acquire the services the clubs had been providing and would both limit and restrict the services they would acquire. They would not acquire services manifest by the provision of 20 or 22 teams but would acquire services manifest by the provision of 14 teams. It may be accepted that under the 19 December Understanding any club, including Souths would, at the least, be able to continue to provide a team by merging or forming a joint venture. However the provision of a team of this character was not the provision of the same services that had been provided, and correspondingly acquired, before the adoption and implementation of the 14-team term. It would not be a team of that club but a hybrid team of two or more clubs. In this way, the services to be acquired by operation of the 14-team term, would, as to some of the 1997 clubs, not be the same services that had been acquired formerly when the two competitions conducted the rival competitions. The services acquired would be limited and restricted." Heerey J, in dissent, held that the exclusion of clubs from the 2000 competition "was not a purpose at all" under s 4D of the Act.172 Heerey J explained why he differed from Moore J and Merkel J in the following passages173: "Moore J has found a restricting or limiting of services in that the services in 2000 would relate, in the case of some clubs, to a hybrid team of two or more merged or joint venture clubs. This case was not pleaded and not run at first instance. I am not sure it was even put on appeal. Since the nature of the restricting or limiting is an aspect of the alleged proscribed purpose, and since the latter is a question of fact, it is too late to raise such an argument. It raises an infinite range of factual dispute. For example, it could be said that if St George providing in 2000 a team in conjunction with Illawarra called St George-Illawarra is to be characterised as a different team from that 172 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 474 [78]. 173 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 479 [104]-[106]. Callinan fielded in 1997, then equally a team fielded by St George in one week in 1997 (or 2000) might contain different players from that of the previous week and so be not the 'same service'. By the same token, a change in name, nickname, colours or sponsorship might all be said to make a team 'different' and thus not the 'same service'. Moreover, as already mentioned, reduction to 14 teams in 2000 by mergers and joint ventures was not the only possibility as at 1997. There could be a withdrawal of clubs. In any case, the prospect of clubs merging or entering into joint ventures was seen, in 1997, as one which would necessarily involve the voluntary choice of those clubs. Substantial financial incentives were offered. If clubs freely exercised that choice so as to get the money and avoid or lessen the risk of exclusion, then that was a matter for them. The concept of boycott in ss 4D and 45(2) does not seem to fit the situation where the supposed target is not a passive victim but freely enters into a mutually satisfactory agreement with the supposed boycotters." Heerey J also referred to passages from the judgment of Finn J which indicated that the primary judge had carefully distinguished between purpose and "His Honour observed … that while the purpose of a provision may be evidenced in the effects it produces, the purpose for its inclusion in a contract, arrangement or understanding is not to be determined necessarily by, or simply by reference to, its effects. What has to be ascertained is the reason (or reasons) for its inclusion. And that reason, or those reasons, could be determined by ascertaining the effect or effects the parties subjectively sought to achieve through the inclusion of the provision in the contract, arrangement or understanding." "His Honour [the primary judge] accepted that the 14-team term limited, and was intended to limit, the number of clubs for the supply to and acquisition of services by the NRL Partnership. It equally had that foreseeable, and foreseen, consequence. But it did not follow that a purpose for including the 14-team term was to prevent the supply of services to, or acquisition of services from clubs in excess of the stipulated 174 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 465 [29]. 175 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 467 [37]. Callinan 14. ARL and News [Ltd] proposed to create a new business running a new competition having particular characteristics, one of which was that it would have a maximum number of clubs. For present purposes it did not matter what the number was. What was important was that the competition so designed embodied a limit to the number of clubs to or from which the NRL Partnership would provide or acquire services." Turning their minds to the "particular persons" or "class of persons" said to be affected by the exclusionary provision, the majority in the Full Court held that the class could be defined with sufficient particularity for the purposes of s 45(2), and that it was permissible to define a class by the mere fact of its members' or a member's exclusion from the 2000 season competition. Merkel J first cited and then adopted a passage from the judgment of Hely J at an earlier stage of these proceedings176: "In the application for interlocutory relief in the present matter Hely J stated177: 'The respondents submitted that the distinguishing feature of the class cannot be the fact of exclusion itself. In other words, in order for persons the target of an exclusionary provision to be a class, there must be a common feature distinguishing those persons other than the mere fact of them being subjects of exclusion. It may be thought that there is some force in this submission. However, Pont Data provides otherwise: a class may be identified by reference to the fact that its members may not be supplied with services unless those members accept and become bound by restraints imposed by, in that case, the supply agreement. This suggests that the unifying characteristic of a group can include the fact of exclusion itself. Here, the unifying characteristic of the group is that the relevant clubs were participants in the 1997 competitions, and are not within the groups to be carved therefrom.'" 176 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 530 [290]. 177 South Sydney District Rugby League Football Club Ltd v News Ltd (1999) 169 ALR 120 at 133 [76]. 178 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 530 [291], 531 [294]. Callinan "On one view, as pleaded, the defining factor that distinguishes the class intended to be excluded from the 2000 NRL competition, and makes it particular, is the fact of exclusion. However, in the present case it is more accurate to identify the distinguishing exclusionary factor by reference to the reason for the intended exclusion, that is, a club's failure to meet the requisite level in the selection criteria for inclusion in the 14- team NRL competition as from 2000 by reason of 14 other clubs better satisfying the criteria. The characteristic that identified and distinguished the class intended to be excluded from participation, and makes it particular, was that its members, the top level rugby league clubs eligible to participate (for example, by meeting the 'Basic Criteria') but not achieving the requisite level in the selection criteria achieved by 14 other clubs or entities, would not be supplied with team organisation services and team services would not be acquired from them. Accordingly, the particular class the subject of the NRL partners' exclusionary purpose has a distinguishing or identifying characteristic in addition to the mere fact of exclusion." Moore J took a broader view of the meaning of "particular class" under s 45(2), excluding from its ambit such provisions as would "operate only on the generality of persons179". Moore J concluded180: identified persons or otherwise on whom "In my opinion the expression 'particular persons' is to be taken to be a reference to identified or identifiable persons whether or not there are the apparently other exclusionary provision is not intended to operate. That is, it is not necessary that a provision operate selectively in the way just discussed for it to be an exclusionary provision." In his Honour's view, s 45(2) would apply even if, at the time the contract, arrangement or understanding was entered into, it was not known who would bear the burden of the restriction or limitation181: 179 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 506 [197]. 180 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 507 [200]. 181 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 507 [201]-[202]. Callinan "This leads to a consideration of the second question posed … namely whether it can be said there existed a purpose of restricting or limiting of supply or acquisition to the 1997 clubs if it was in contemplation that some but not all of the 1997 clubs would field a team in conjunction or collaboration with other clubs though some of the 1997 clubs would continue to field a team in their own right. This really raises the question of whether competitors can have a purpose of restricting or limiting supply of services to particular persons and the acquisition of services from them if it is not known, when the exclusionary provision was agreed to, who of the particular persons would bear the burden of the restriction or limitation though it could be expected some of the particular people would not. The language of s 4D (when read with s 45(2)(a)(i)) does not, in my opinion, preclude its application in these circumstances nor would such an application be inconsistent with the apparent purpose of the provision. It may be accepted that if s 4D were to operate in this way, it would be because the expressions 'supply … to' and 'acquisition … from' are not to be read as meaning 'supply … to each of (or all)' or 'acquisition … from each of (or all)' the particular persons or members of the particular class. In relation to the parties to the contract, s 4D(1)(b) speaks of 'all or any of the parties', which might suggest the expressions just referred to should not, in the absence of the same or similar words, be given the same or a similar meaning. However there is no apparent reason for giving the expressions 'supply … to' and 'acquisition … from' that meaning, in a way that might limit the operation of s 4D as enlivened by s 45, in a statutory context where notions of purpose and preventing, hindering and restricting are central." Heerey J preferred the trial judge's view of what may constitute a class, or person or persons, for the purposes of s 45(2). His Honour said182: "A boycott necessarily involves a target, a person or persons 'aimed at specifically': News Ltd v Australian Rugby Football League Ltd183. It is hard to see how this notion can apply to a class not defined in advance but only defined in an essential respect by the fact of exclusion, if and when it happens. And if it is wrong, as I think it is, to have a class defined by the fact of exclusion, it is in principle no different when exclusion is one of a number of defining characteristics. Either way, the class cannot be 182 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 477 [90]-[91]. 183 (1996) 64 FCR 410 at 577. Callinan ascertained unless and until all putative members satisfy the test of exclusion – whether or not other tests must be satisfied. Looked at another way, if a particular class can be defined by the fact of exclusion, in effect the 'class' becomes the whole world, because anybody has the potential to be excluded." "If Souths' argument is correct, competitors who enter into a partnership and agree to provide a lesser range of goods or services (or deal with a narrower range of customers) will have contravened s 45(2). Nothing in the stated object of the Act ('to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection': s 2) would suggest such a startling result. Once attention is diverted from the essential elements of boycott proscribed by ss 4D and 45(2) – the targeting of a particular person or class of persons identified at the time the exclusionary provision is created – there is an inevitable slide into prohibition of conduct which amounts to no more than persons deciding the limits of the business in which they wish to engage." (original emphasis) Heerey J also held that an injunction would not lie in any event. To grant it would be to dictate that the competition have no fewer than 15 competitors or conceivably as many in addition to those as could satisfy the basic criteria. His Honour said185: " ... a Federal Court mandated 15-team rugby league competition, an outcome which confers no public benefit, contradicts the freely negotiated agreement of those who know the game and its commercial setting, and achieves no discernible purpose of the Act." Resolution of the issues in this Court It seems to me that the submissions of Souths with respect to "purpose" have about them in the circumstances of the case, something of an air of unreality. This is so despite the sympathy that one might feel for a club that has survived and flourished in times when sport was principally that, and not a major 184 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 477-478 [94]-[95]. 185 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 484 [137]. Callinan commercial enterprise, which, although providing entertainment to many, is also now a means of valuable advertising including indirect advertising by sponsorships and endorsement, and a source of revenue for many, including players, officials and telecasters. The reality is that a popular spectacle such as a game of rugby league played between superior teams has a monetary value transcending the pleasure that it may bring to its participants, whose rewards, it may be noted, nowadays often include substantial financial ones as well. The game is, as I mentioned earlier, essentially a winter game. That is no doubt why therefore, a contest of 14 teams requiring 28 match days for home and away games together with such other days as might be required for semi-finals, finals and a grand final, and time for players to rest and recover from injuries, might be regarded as the best possible sort of contest to conduct. In continuing competition with each other the prospects of each contest operator, and the game itself were bleak. That itself is enough to suggest that neither the "market" for the game, nor the number of players of a sufficiently high standard, could support two competitions in the long term. But in any event that was the evidence of the experts on the game and it was accepted by the trial judge. Furthermore, no one residing in the eastern states of this country in the last 10 years could be unaware of the fact that rugby league competes, not only commercially, and in respect of a finite number of sponsors and advertisers, but also for free-to-air time, and players, with other codes of football and winter games. There is nothing novel in the wish, for not only commercial reasons, but also to achieve better and excellent standards of sporting achievement, that organizers of sporting contests might, as here, by reference to objective criteria, the seasons, and the capacity of operators to accommodate a certain number of contestants only, decree that a certain number of teams only may compete. So called "masters" tournaments, and the attainment of particular levels of excellence as a qualification for entry into competitions, in golf and tennis for example have become familiar, as have, again as here, the issue of sporting franchises or licences. It does seem, to say the least, a little contradictory that an objective of establishing a very high, indeed excellent competition of the best, largely objectively ascertained, and itself in competition in the "sporting marketplace" for funds, sponsorship, and public exposure, should be regarded as proscribable in the public interest, and as directed against "particular persons or classes" of persons. Whether that is so or not however, effect must be given to the language of the Act. But that does not mean that the established factual background against which an agreement is made is irrelevant to the purpose of its making. That, and because of their relevance to the ACCC's application is why I have mentioned the matters that I have. Purpose of preventing supply I should say at the outset that I am generally in agreement with the reasoning of the primary judge. Callinan The "purpose" of the provision of the contract, arrangement or understanding to which s 4D directs attention is the parties' subjective reason for its inclusion of the provision in the contract, arrangement or understanding186. At first instance, Finn J accepted the evidence of Messrs Whittaker and Frykberg that they believed that an outcome, of the participation of 14 teams only in 2000, could or would be achieved without resort to the exclusion of any club187. Neither Heerey J188 nor (apparently) Moore J189 doubted the correctness of this finding of fact made by the trial judge. Merkel J however was of the view that the trial judge erred in failing to distinguish between the purpose of the merger agreement, in its entirety, and the 14-team term190. He held that the purpose of the merger was to act as the sanction ("carrot"), and the 14-team term as a buttress ("stick") to achieve "exclusion" if the sanction ("carrot") failed191. His Honour said that while the 14- team term was a means to the end of a viable and sustainable national competition, the trial judge erred because he failed to consider whether that means had a more immediate purpose, to exclude any clubs in excess of the 14 selected to provide teams to participate in 2000192. I am unable to agree that the trial judge failed to distinguish between the purpose of the 14-team term and the purpose of the merger provisions as a whole. 186 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 at 474-477 approving Toohey J in Hughes v Western Australian Cricket Association (Inc) (1986) 19 FCR 10 at 37-38; see also Dowling v Dalgety Australia Ltd (1992) 34 FCR 109 at 134; Newton v Commissioner of Taxation (Cth) [1958] AC 450 at 465. 187 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 675 [284] per Finn J. 188 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 472-473 [68]-[71]. 189 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 493 [158]. 190 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 522 [262], 522-523 [264]-[265]. 191 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 522 [263]. 192 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 526-527 [278]. Callinan His Honour identified the purpose of the 14-team term as the achievement of a viable and sustainable national competition. And that was also a substantial purpose of the merger agreement itself. A further purpose of both was that of encouraging mergers by clubs by providing incentives to those which agreed to merge, to obviate, if possible, the need for the exclusion, by, it should again be pointed out, reference largely to objective criteria, of any club193. This follows from the trial judge's finding of fact, not doubted by Heerey J and Moore J, that Messrs Whittaker and Frykberg believed the operation of the 14-team term could, or would be achieved without exclusion. In conducting an annual competition it was, and is necessary to set a limit on the number of participants. That number, because of the nature of the competition and competition itself is a defining characteristic of the competition. That the appellants may have nominated in advance of 2000 the maximum number of teams which would be permitted to compete does not mean that their purpose was to exclude any or any particular teams. That was neither the result that they expected nor the outcome that they desired. There was in my opinion, no conflation as Merkel J held, of the purpose of the merger overall, and the purpose of the 14-team term. The fact that s 45(2) of the Act refers to a provision does not mean that the provision has to be read in isolation. It is the purpose of the provision that is important. The discovery of that purpose is by no means necessarily to be gained by an examination of the provision itself only. As with any term of an agreement or arrangement, a provision may, sometimes must, be read with, and seen for its true meaning, effect and purpose, the relevant agreement or arrangement as a whole. Here, the 14-team term cannot be divorced from the agreement as a whole. It was no more than facilitative, and then only contingently so, of the purpose of establishing a viable competition of a superior kind within the temporal, financial, and other practical constraints which were operating. That something may happen, indeed that it may have even been a foreseeable happening, in the course of the effectuation of a purpose, or even that it may help to achieve that effectuation, does not mean that a provision designed to accommodate that happening, has the occurrence of that happening as its purpose. Preventing supply to a particular person or class of persons In my opinion to attract the operation of the proscriptive provisions, there must also be an identifiable person, or class of persons at whom the purpose is directed at the time of the making of the agreement or arrangement. This is one aspect or consequence of the use of the word "particular". For a provision to 193 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 672 [271] per Finn J. Callinan have a prohibited purpose with respect to a class, the class must have a defining characteristic distinguishing it from others, and marking out its members as the object of it: the class must be identifiable at the time the agreement or arrangement is made194. It follows, that in a case, as this one is, that is concerned with the prevention of supply, a class cannot be defined by the mere fact of non-supply or exclusion. Here the specification of the basic objective criteria and the possibility and encouragement of club mergers, had the consequence that there was no way of knowing, let alone specifying in advance, those that would come to fail to satisfy them. In this respect there was a randomness about the identity of the participants, and randomness is a concept remote from particularity of identity. Souths was not a particular person or a member of a class for the purposes of s 4D. Restricting or limiting supply to a particular person or class Souths further contended that a substantial purpose of the 14-team term was to restrict or limit the supply of competition-organising services to particular persons, being the 20 clubs which had participated in the two competitions in 1997. There was said to be a restriction or limitation on the supply of those services because, whereas 20 teams had been supplied with services in 1997, only 14 would be supplied from 2000, some of those clubs having merged in the meantime. This argument was rejected by the trial judge. It was also rejected by Heerey J on two grounds: first, because there was to be no restriction or limitation of the relevant services; although in 2000 some clubs would be fully supplied and some would not be supplied at all. Secondly, the 14-team term would of necessity operate with respect to "new" clubs coming into existence as a result of the mergers. Clubs, certainly in 1997, could not therefore be characterized as "particular" persons for the purposes of s 4D195. Moore J accepted Souths's argument that as a substantial purpose of the 14-team term was to bring about a situation in which some of the clubs fielding a 194 cf South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 477 [93] per Heerey J; Rural Press Ltd v Australian Competition and Consumer Commission (2002) 118 FCR 236 at 264 [99]-[100]. 195 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 677 [294]-[299] per Finn J; South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 478 [100]-[102] per Callinan team in 1997 would only field a team in 2000 in collaboration with other clubs, this would involve a "restricting or limiting" of supply in 2000 to the 20 1997 clubs, because some would only be supplied as a merged or joint venture club196. The opinions of Finn J and Heerey J are to be preferred. But further, as Heerey J pointed out197, and correctly so in my opinion, such a case was not pleaded or made at first instance, or on appeal to the Full Court. The evidence led at trial did not address the factual issues whether the services were restricted or limited as they were provided to the clubs in 2000, in comparison with the services supplied to the clubs in 1997. For that reason, the argument should not have been permitted to be raised on appeal to the Full Court of the Federal Court and should not be permitted to be urged in this Court now198. The relief sought Both Finn and Heerey J would not have granted an injunction even if they had held that cl 7 was an exclusionary provision. In view of what I have so far held it is unnecessary to say more than that a grant of the relief sought could have serious repercussions for other clubs. Which club or clubs would then face exclusion? How many clubs should the appellants admit to the competition? Would a club excluded by reason of Souths's admission have any, and if any, what remedies? These are serious questions which might have to be answered had Souths established a proscribed purpose. The application by and submissions of the ACCC What I have said is sufficient to dispose of the issues between the parties in this Court. But there remains the application of the ACCC to intervene and the matters which it would seek to raise. First, in its written submissions, the ACCC submitted that when a provision has the clear effect of preventing, restricting or limiting supply, and this is a foreseeable and foreseen eventuality of the implementation of the provision, the finding will be open that a substantial purpose of the provision is the prevention, restriction or limitation of supply, regardless whether that 196 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 507 [201]-[202], 508 [204]. 197 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 479 [105]. 198 Water Board v Moustakas (1988) 180 CLR 491 at 497; Bond v The Queen (2000) 201 CLR 213 at 223-224 [30]. Callinan eventuality is a means towards another end. That submission is answered by what I have already said and need not repeat. Next, the ACCC submitted that the inquiry as to "purpose" should not be coloured by a search for an antagonistic or hostile intent of the kind said to be introduced by Heerey J in asking the rhetorical question199: "Why would the men running rugby league want to exclude Souths, or any other club?" The answer to this question, it was submitted by the ACCC, was clear. ARL and News Ltd decided that only 14 teams would be permitted to participate in the competition in the year 2000. The ultimate aim of this decision was to make a profit. No hostility or antagonism toward the excluded clubs was necessary or relevant to the decision, which was a decision to exclude. So much may be accepted. But there must nonetheless be an object of the, or indeed any, purpose, and that object must be a particular person or class of persons, something which I have held to be absent here. Then the ACCC wished to contend that Finn J and Heerey J adopted too narrow a construction of the expression "particular classes of persons", and that in doing so they were influenced by two factors: a concern generated by the unusual circumstances of the case; and secondly, an inclination to interpret s 4D as a "boycott" provision, requiring the identification of a specific and narrowly defined target. In the case of Heerey J, this latter concern also led his Honour to superimpose a necessity for a hostile intent in the inquiry which s 4D dictated be made. It was sufficient that "[the classes be] identified ... by the characteristic that they may not be supplied with the [service] in question, unless they accept and become bound by the restraints imposed by the [relevant agreement]."200 This I take to be a slightly different expression of the conclusion of Merkel J that the fact of exclusion is determinative of the class, and accordingly one that I would reject for the reasons that I have stated. The ACCC made a fourth submission that the words "restrict" and "limit" should be broadly construed. It contended that the primary judge201 and 199 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 472 [70]. 200 ASX Operations Pty Ltd v Pont Data Australia Pty Ltd (No 1) (1990) 27 FCR 460 201 South Sydney District Rugby League Football Club Ltd v News Ltd (2000) 177 ALR 611 at 677 [299]. Callinan Heerey J202 erred in holding that the reference to "restricting or limiting" in s 4D(1) is concerned with partial supply of services to, or partial acquisition of services from, particular persons or classes of persons, and not with supply or acquisition of services to or from some only of the particular persons. The better view was that of Moore J, whose opinion was that the words "restricting or limiting" ought not to be confined to situations in which there is a partial supply, in the sense that all previous recipients or providers continue to acquire or supply the goods or services but in a reduced amount.203 Heerey J pointed to the possibility that evidence bearing on the question might have been adduced had it been raised at the hearing. In those circumstances it is not a matter which either the parties or an intervener should be permitted to raise now. In oral submissions, and less explicitly in revised written submissions it became apparent that the ACCC really wished to put that any attack upon, or in relation to, the arrangement should be or have been launched against the merger of the competitions. It was at that stage, and at that level that it was appropriate to test the validity under the Act of the arrangements to which it gave effect, including the exclusionary provision. All parties to the appeal were opposed to the ACCC's attempt to rely upon an argument of the last kind. They also submitted that it was misconceived and wrong. Disposition of the ACCC's application The ACCC sought leave to intervene at a late stage in the litigation despite the publicity which the proceedings attracted throughout. The appellants have proceeded in accordance with the arrangements for some years. In making their arrangements the appellants have had to operate within the practical constraints to which I have referred. The principal argument the ACCC sought to advance was not one which any of the appellants chose to advance or adopt. Evidence relevant to it might have been, but was not called. Intervention could have been sought at, or before the trial itself. This was not a case in the original jurisdiction of this Court. To allow the ACCC to argue the last mentioned matter would be tantamount to the addition of an unwanted ground of appeal to the Notice of Appeal. The ACCC has powers and responsibilities under the Act. It would be an overstatement to say that it 202 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 478 [101]-[102]. 203 South Sydney District Rugby League Football Club Ltd v News Ltd (2001) 111 FCR 456 at 499 [177], 501 [181]. Callinan administers the Act. This had been purely inter-parties litigation for a long time and throughout many hearings. In the circumstances the ACCC should not be permitted to intervene to argue any of the issues. I would allow the appeal and join in the orders proposed by the Chief Justice.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Banditt v The Queen [2005] HCA 80 15 December 2005 ORDER Appeal dismissed. On appeal from the Supreme Court of New South Wales Representation: S J Odgers SC with A Francis for the appellant (instructed by Legal Aid Commission of New South Wales) G E Smith SC with C McPherson for the respondent (instructed by Solicitor for Public Prosecutions (New South Wales)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Banditt v The Queen Criminal law – Break and enter and commit serious indictable offence – Sexual assault – Recklessness as to consent – Appellant broke and entered complainant's house at night while complainant asleep – Complainant alleged appellant commenced intercourse while complainant asleep – Appellant claimed that complainant was awake and consented to intercourse and that appellant thought complainant was consenting – Complainant had rejected appellant's advances on a previous occasion – Whether trial judge erred in directing jury that appellant could have known complainant was not consenting because he was reckless as to consent – Whether recklessness requires more than advertence to possibility of lack of consent or requires determination to proceed with intercourse regardless of lack of consent – Whether appropriate to direct juries to apply an ordinary understanding of "recklessness". Words and phrases – "reckless". Crimes Act 1900 (NSW), ss 61I, 61R, 112(1). GUMMOW, HAYNE AND HEYDON JJ. The term "reckless" has various uses as a criterion of legal liability. This appeal turns upon one such use of the term in the New South Wales criminal law, but it is convenient first to consider some aspects of the civil law. When "reckless" is used in applying the principles of the tort of negligence, the yardstick is objective rather than subjective. On the other hand, to sustain an action in deceit, fraud is proved when it is shown "that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false"1. But (3) is but an instance of (2) because, as Lord Herschell put it in Derry v Peek2: "[O]ne who makes a statement under such circumstances can have no real belief in the truth of what he states." This reasoning is akin to that which supports the evidentiary inference explained by Lord Esher MR as being that one who wilfully shuts his eyes to what would result from further inquiry may be found to know of that result3. To these expositions of the civil law by Lord Herschell and Lord Esher there may be added the following statement by Lord Edmund-Davies in his dissenting speech in R v Caldwell4: "So if a defendant says of a particular risk, 'It never crossed my mind,' a jury could not on those words alone properly convict him of recklessness simply because they considered that the risk ought to have crossed his mind, though his words might well lead to a finding of negligence. But a defendant's admission that he 'closed his mind' to a particular risk could prove fatal, for, 'A person cannot, in any intelligible meaning of the words, close his mind to a risk unless he first realises that 1 The formulation is that of Lord Herschell in Derry v Peek (1889) 14 App Cas 337 (1889) 14 App Cas 337 at 374. 3 English and Scottish Mercantile Investment Company v Brunton [1892] 2 QB 700 [1982] AC 341 at 358. The majority decision in Caldwell was unanimously overruled in R v G [2004] 1 AC 1034. there is a risk; and if he realises that there is a risk, that is the end of the matter'5." (original emphasis) In La Fontaine v The Queen6, Gibbs J discountenanced, in those States where legislation did not adopt terms such as "reckless" or "reckless indifference", their use in summing up at a trial on a murder count. His Honour said7: "To tell a jury that they may convict of murder when they are satisfied that the accused acted with recklessness or reckless indifference is to invite confusion between murder and manslaughter resulting from criminal negligence. In many, if not most, cases where the Crown alleges that the accused acted knowing that his act would probably cause death or grievous bodily harm it will also be alleged by the Crown, in the alternative, that the accused was guilty of criminal negligence. The expression 'reckless' is also used to describe that very high degree of negligence which, if it causes death, amounts to manslaughter8. It is not easy to explain to a jury the difference between the reckless indifference which, if it exists, may justify a conviction of murder and that recklessness which would warrant a conviction for manslaughter." Particular questions about recklessness in murder and disputes about distinctions between probable and possible consequences, which were considered in La Fontaine, do not presently arise. However, it may be noted that in R v Crabbe9 they were resolved consistently with the views of Gibbs J. As Gibbs J noted in La Fontaine, criminal offences may be created by statute with a criterion of recklessness or reckless indifference. One such law is s 1(1) of the Criminal Damage Act 1971 (UK) which was considered by the House of Lords in R v G10. Section 1(1) states: 5 See Glanville Williams, Textbook of Criminal Law, (1978) at 79. (1976) 136 CLR 62. (1976) 136 CLR 62 at 76-77. 8 See Andrews v Director of Public Prosecutions [1937] AC 576 at 583; Evgeniou v The Queen (1964) 37 ALJR 508 at 509. (1985) 156 CLR 464 at 468-469 per Gibbs CJ, Wilson, Brennan, Deane and "A person who without lawful excuse destroys or damages any property belonging to another intending to destroy or damage any such property or being reckless as to whether any such property would be destroyed or damaged shall be guilty of an offence." In G, the House of Lords held that foresight of consequences was an essential ingredient of recklessness in s 1(1) and that a formulation which made no allowance for a defendant's youth or lack of mental capacity when assessing obviousness of the risk of damage to property was erroneous. In his speech in G, Lord Bingham of Cornhill rejected the proposition that the above construction of the statute would lead to the acquittal of those whom public policy would require to be convicted. His Lordship said11: "There is no reason to doubt the common sense which tribunals of fact bring to their task. In a contested case based on intention, the defendant rarely admits intending the injurious result in question, but the tribunal of fact will readily infer such an intention, in a proper case, from all the circumstances and probabilities and evidence of what the defendant did and said at the time. Similarly with recklessness: it is not to be supposed that the tribunal of fact will accept a defendant's assertion that he never thought of a certain risk when all the circumstances and probabilities and evidence of what he did and said at the time show that he did or must have done." It is with the considerations canvassed in the above authorities in mind that the task of statutory construction upon which this appeal turns is to be undertaken. The foregoing demonstrates the general importance attached to the mental element for criminal culpability, but also the law's scepticism in accepting later assertions as to the existence or absence of a mental state which are at odds with practical experience of life. It should be added that, whereas in situations such as those in La Fontaine and G, the recklessness concerns the physical consequences of the acts in question, this appeal concerns recklessness as to the mental state of another. We turn now to the instant case. On 10 September 2003, the appellant was convicted at a jury trial in the District Court of New South Wales of an offence under s 112(1) of the Crimes Act 1900 (NSW) ("the Act"). An appeal 11 [2004] 1 AC 1034 at 1057. against conviction was dismissed by the New South Wales Court of Criminal Appeal (Bryson JA, James and Kirby JJ)12. The offence created by s 112(1) applies in various circumstances, which relevantly include breaking and entering any dwelling-house and committing therein "any serious indictable offence". That expression means "an indictable offence that is punishable by imprisonment for life or for a term of 5 years or more" (s 4(1)). Section 61I of the Act states: "Any person who has sexual intercourse with another person without the consent of the other person and who knows that the other person does not consent to the sexual intercourse is liable to imprisonment for 14 years." It follows that an offence under s 61I is a serious indictable offence within the meaning of s 112(1). The offence of which the appellant was convicted occurred in the early hours of 6 October 2001 at Bellingen, a New South Wales country town. The appellant broke into and entered the two storey dwelling-house where the complainant was sleeping upstairs. The complainant was alone in the house. The appellant committed a serious indictable offence there, namely sexual intercourse with the complainant without her consent and knowing that she was not consenting. The appellant was then aged 27 and the complainant 25. The appellant was a cousin of the complainant whom she had known, but not well, for about 15 years. At the trial, both the complainant and the appellant gave evidence and were cross-examined. The offence of which the appellant was convicted was not that for which he was indicted. The indictment alleged an aggravated offence under s 112(2) of the Act, namely knowledge of the appellant at the time of the breaking and entering that there was a person in the dwelling-house13. However, while the jury found the appellant not guilty of the aggravated offence charged in the indictment, it did, as permitted by s 115A of the Act, return a verdict of guilty of the offence under s 112(1). 12 R v Banditt (2004) 151 A Crim R 215. 13 Section 112(2) applies where an offence under s 112(1) is committed "in circumstances of aggravation", an expression defined in s 105A(1)(f) as including knowledge of the alleged offender that there is a person or that there are persons in the place where the offence is alleged to be committed. The appeal to this Court does not turn upon any of these provisions relating to property offences. Rather, it turns upon the interrelation between the sexual assault provisions in s 61I and s 61R(1). For purposes which include those of s 61I, s 61R(1) states: "[A] person who has sexual intercourse with another person without the consent of the other person and who is reckless as to whether the other person consents to the sexual intercourse is to be taken to know that the other person does not consent to the sexual intercourse." (emphasis added) In the course of his summing-up, the trial judge (Freeman DCJ) stated the substance of s 61R(1) and continued: "So if you just go ahead and do it willy-nilly, not even considering whether the person is consenting or not, you are reckless and the law says you are deemed to know that the person is not consenting." No objection at trial was taken to that statement and none is taken now. Later in the summing-up, his Honour said: "Now, recklessness is a [failure] to advert to ... the question of whether the person is consenting or not. It does not have to be the product of conscious thought. If the offender does not even consider whether the woman is going to consent or not then that is reckless and he is deemed to know that she is not consenting. If he is aware that there is a possibility that she is not consenting but he goes ahead anyway, that is recklessness. But it is his state of mind that you are obliged to consider and includ[ed] in that is the concept I discussed with you yesterday about the fact that he had had something to drink, just how drunk he was, how much he had sobered up, how capable he was of making this decision and so on." (emphasis added) The trial judge then went on to refer to the evidence of the complainant and continued: "So the Crown relies on her evidence to say that she was not consenting and the Crown suggests that you will be persuaded beyond reasonable doubt that he either knew, because he penetrated her before she woke up, or he was reckless in the sense that he did not even consider whether she was going to consent or not, or at least he recognised that there was a possibility that she may not consent but he went ahead and did it anyway and the accused['s] case is that he thought she had consented, and he had this belief." (emphasis added) In this Court, as in the Court of Criminal Appeal, but not at the trial, the appellant complains of the italicised passages as involving a misdirection in law as to the operation of s 61I and s 61R(1). In particular, it is said that there should have been an additional direction that the appellant had to be "indifferent" about the risk or determined to have sexual intercourse whether consent was present or not. In oral submissions to this Court, counsel for the appellant submitted that "recklessness" cannot be satisfied by an awareness of a risk; it is satisfied by "a discrete mental state which is, 'Even if I knew, I would continue. It does not matter to me'." The respondent counters that the appellant's submissions set up a false dichotomy between proceeding regardless of an awareness of a possibility of lack of consent and indifference as to whether there is consent. When used in the particular circumstances of the case, the term "reckless" may encompass various formulations, including "indifference as to whether or not there is consent", "determination to have intercourse with the person whether or not that person is consenting", and "awareness of the possibility of absence of consent and proceeding anyway". It will be necessary to return to that submission. Two questions thus arise. The first concerns the correct construction of s 61R(1); the second is whether the Court of Criminal Appeal erred in its dismissal of the appeal. Section 61R(1) has its provenance in s 61D(2) which was introduced into the Act by the Crimes (Sexual Assault) Amendment Act 1981 (NSW) ("the 1981 Act"). Before the 1981 Act, the Act had provided in s 63: "Whosoever commits the crime of rape shall be liable to penal servitude for life. The consent of the woman, if obtained by threats or terror, shall be no defence to a charge under this section." The 1981 Act repealed that provision and substituted a provision: "The common law offences of rape and attempted rape are abolished." The 1981 Act also created three new offences of sexual assault. In the Second Reading Speech to the Legislative Council on the Bill for the 1981 Act, the Minister referred to the desirability of making the law "gender neutral" and went "Though previously there was simply one offence of common law rape, with penalties ranging right up to penal servitude for life, under the new scheme a number of different levels of offences of sexual assault will be created, the maximum penalties reflecting the varying degrees of seriousness of each offence. The four categories will be, first, under proposed new section 61B, inflicting grievous bodily harm with intent to have sexual intercourse, for which the maximum penalty will be 20 years' penal servitude; second, inflicting actual bodily harm, or threatening to inflict such harm by means of an offensive weapon, with intent to have sexual intercourse, for which proposed new section 61C will provide a maximum penalty of 12 years' penal servitude. The third category of offence is under new section 61D(1), sexual intercourse without consent, for which the maximum penalty is 10 years' penal servitude when the victim is under 16 years of age. Proposed section 61E deals with the fourth category of offence, indecent assault, which carries the same penalties as now apply." The provisions of the 1981 Act were recast by the Crimes (Amendment) Act 1989 (NSW) ("the 1989 Act"). The previous ss 61A-61G were repealed and there were added provisions including ss 61I and 61R. A commentary on the 1981 Act titled Sexual Assault Law Reforms in New South Wales was issued by the Director of the Criminal Law Review Division of the Department of Attorney-General and of Justice, with a Foreword by the New South Wales Attorney-General. This, unlike the Second Reading Speech in the Legislative Council, did include a consideration of s 61D(2). It was said15 that s 61D(2) was not an attempt to reintroduce a notion of "sexual assault by negligence" which might be thought to have been supported by R v Sperotto16. 14 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 8 April 16 [1970] SR (NSW) 334. "That section 61D(2) should be supported by the statutory expression of the rule in R v Morgan[18] in section 1 of the UK Sexual Offences (Amendment) Act, 1976 ['the 1976 UK Act']: interpreted subjectively '... a man commits rape if – he has unlawful sexual intercourse with a woman who at the time of the intercourse does not consent to it; and at the time he knows that she does not consent to the intercourse or he is reckless as to whether she consents to it.' The latter words were certainly intended to, and have been interpreted so as to, require proof of subjective foresight of the possibility of non-consent. There is every reason why section 61D(2) should be similarly interpreted." (original emphasis) A similar provision to s 1 of the 1976 UK Act was introduced in South Australia in 1976 by amendment to the Criminal Law Consolidation Act 1935 (SA)19. Of the inclusion of the phrase "recklessly indifferent" in the law of South Australia, Bray CJ said in R v Wozniak20 that it had its own difficulties to be met when they arise. Section 1 of the 1976 UK Act was the recommendations in the Report of the Advisory Group on the Law of Rape21 which had reported in December 1975. The Advisory Group, of which Dame Rose Heilbron was chairman ("the Heilbron Committee"), had had in its terms of reference consideration of whether any change in the law of rape was desirable as a result of the judgment in Morgan. introduced following 19 By the Criminal Law Consolidation Act Amendment Act 1976 (SA), s 4. 20 (1977) 16 SASR 67 at 73. 21 Cmnd 6352. The Heilbron Committee noted that in England there had been no attempt at statutory definition of the common law offence of rape. They added22: "22. The actus reus in rape, which the prosecution must establish intercourse and for a conviction consists of (a) unlawful sexual (b) absence of the woman's consent. The mental element, which the prosecution must additionally establish is an intention by the defendant to have sexual intercourse with a woman either knowing that she does not consent, or recklessly not caring whether she consents or not. (Hereafter in the report we will refer to recklessness in this sense.) Although this was probably always the law, as we shall see, this alternative of recklessness as an aspect of the guilty mind in the crime of rape does not appear to have been emphasised before the decision in Morgan. 24. One further point needs explanation. If the defence contend in a rape case (as has always been possible and as they did in Morgan) that the accused genuinely believed, albeit wrongly, that the woman consented to sexual intercourse, this is commonly called the 'defence' of mistake or mistaken belief[23]. But strictly speaking in this type of case the accused is not putting forward a positive defence – he is arguing that the prosecution has not proved one of the essential elements in the offence, namely that he acted with the required guilty intention." Under the heading "Recklessness", the Heilbron Committee observed24: It seems to us that the most important aspect of the Morgan judgment, and one which has been almost wholly overlooked in comment on it, is that for the first time it has been stated clearly and unambiguously that recklessness as to whether the woman was consenting or not was sufficient mens rea for a conviction. This was a matter of very considerable significance, not only in strengthening the law relating to the crime of rape, but also in having very important wider implications for the criminal law as a whole, particularly in regard to crimes of personal violence. We believe that the emphasis on recklessness will in future 23 See, for example, the remarks respecting Morgan by Lord Steyn in R v G: [2004] 1 AC 1034 at 1062. cover a considerable range of cases. For example where a burglar has sexual intercourse with an occupant against her will, and the claim of belief in consent is raised, a direction as to recklessness in regard to the lack of consent will no doubt be included in the summing-up." (emphasis added) What is said in the emphasised portion of par 77 should be read in Australia so as to accommodate what had been said by the Victorian Full Court in R v Daly25. Although not using the term "reckless", their Honours had said that, to establish that it was the intention of the accused to have intercourse without the woman's consent26: "the Crown must establish beyond reasonable doubt that the accused either was aware that the woman was not consenting, or else realized she might not be, and determined to have intercourse with her whether she was consenting or not". It will be apparent that between this formulation and the remarks by the trial judge to which the appellant objects there is little, if any, difference in substance. Under the heading "Recommendations for declaratory legislation", the Heilbron Committee stated27: "81. Notwithstanding our conclusions that Morgan's case is right in principle, we nevertheless feel that legislation is required to clarify the law governing intention in rape cases, as it is now settled. We think this for two principal reasons. The first is that it would be possible in future cases to argue that the question of recklessness did not directly arise for decision in Morgan's case, in view of the form of the question certified: to avoid possible doubts the ruling on recklessness needs to be put in statutory form[28]. 26 [1968] VR 257 at 258-259. See also R v Flannery [1969] VR 31 at 33-34 and cf R v Wozniak (1977) 16 SASR 67 at 74. 28 The point of law certified under s 33(2) of the Criminal Appeal Act 1968 (UK) was "[w]hether in rape a defendant can properly be convicted notwithstanding that he in fact believed the woman consented, if such belief was not based on reasonable grounds": R v Morgan [1976] AC 182 at 192. Secondly, it will be unfortunate if a tendency were to arise to say to the jury 'that a belief, however unreasonable, that the woman consented, entitled the accused to acquittal'. Such a phrase might tend to give an undue or misleading emphasis to one aspect only and the law, therefore, should be statutorily restated in a fuller form that would obviate the use of those words." In Morgan, the House of Lords used various expressions when describing the requisite mental element of the offence. Lord Cross of Chelsea said that to his mind rape imported "at least indifference as to the woman's consent"29. Lord Hailsham of St Marylebone identified the mental element of the offence as an intention to commit the act or "the equivalent intention of having intercourse willy-nilly not caring whether the victim consents or no"30. His Lordship also said31 that an intention to have intercourse "recklessly and not caring whether the victim be a consenting party or not" was "equivalent on ordinary principles to an intent to do the prohibited act without the consent of the victim". Lord Edmund-Davies also said that the man would have the necessary mens rea32: "if he set about having intercourse either against the woman's will or recklessly, without caring whether or not she was a consenting party". The Heilbron Committee recommended legislation in terms of s 1 of the 1976 UK Act with the phrase "reckless as to whether she consents to it", on the footing that this restated the effect of Morgan. Thus, the Committee is to be taken as having accepted that the various expressions used by their Lordships could be within the scope of that statutory formulation. The subsequent decisions in England construing the phrase in s 1 of the 1976 UK Act "reckless as to whether she consents to it" have reflected some tension between what Lord Rodger of Earlsferry recently in G33 identified as conflicting legal policies. The first, associated particularly with the speech of Lord Diplock in Caldwell34 is that, if the criminal law is to operate with the 29 [1976] AC 182 at 203. 30 [1976] AC 182 at 215. 31 [1976] AC 182 at 209. 32 [1976] AC 182 at 225. 33 [2004] 1 AC 1034 at 1065. concept of recklessness it may properly treat as reckless "the man who acts without even troubling to give his mind to a risk that would have been obvious to him if he had thought about it"35. The opposing view is that "only advertent risk taking should ever be included within the concept of recklessness in criminal law"36 and that the first view diminishes the significance of the mental element in criminal culpability. In Satnam S and Kewal S37, the English Court of Criminal Appeal, when construing the 1976 UK Act, put Caldwell to one side. In the present case, the respondent does not seek to apply reasoning associated with Caldwell to the construction of the New South Wales statute. In England, a different situation now applies since the enactment of s 1 of the Sexual Offences Act 2003 (UK). This poses the question whether "A does not reasonably believe that B consents" and provides that whether such a belief is reasonable "is to be determined having regard to all the circumstances, including any steps A has taken to ascertain whether B consents". This provision has been said to be designed to reverse the common law position established in Morgan and implemented in the 1976 UK But in this appeal the question remains as to what degree or extent of advertence in the state of mind of the complainant will answer the statutory criterion of recklessness found in s 61R(1) of the Act. That sub-section is a deeming provision which extends what otherwise might be the limited denotation of the phrase "does not consent" in s 61I. A person who is reckless as to whether the other person consents to the sexual intercourse "is to be taken to know" of a critical matter for s 61I, namely, that the other person does not consent to the sexual intercourse. A starting point for further analysis of the legislation is that it was strongly influenced by developments in England, including Morgan and s 1 of the 1976 UK Act, and that those developments were not at odds with what was previously 35 [2004] 1 AC 1034 at 1065; cf R v Kitchener (1993) 29 NSWLR 696 at 703. 36 [2004] 1 AC 1034 at 1065. 37 (1983) 78 Cr App Rep 149 at 154. 38 Rook and Ward on Sexual Offences Law and Practice, 3rd ed (2004) at 55. understood in Australian common law jurisdictions, as exemplified in R v Daly39. Different considerations may apply in the Code jurisdictions40. Secondly, it may be possible, as is the case elsewhere in the law, to construe the term "reckless" as involving measurement against an objective criterion. But, it is evident from the formulations in Morgan that there is a need here to accommodate the term to the requisite mental element. This, as stated in s 61I, is knowledge of absence of consent and s 61R(1) is appendant, albeit explanatory, of s 61I. Thirdly, as Gibbs J emphasised in La Fontaine41: "The purpose of a summing up is not to endeavour to apprise the jury of fine legal distinctions but to explain to them as simply as possible so much of the law as they need to know in order to decide the case before them." Fourthly, the following words of Professor Sir John Smith respecting s 1 of the 1976 UK Act are in point in construing s 61R(1)42: "If D is aware that there is any possibility that P is not consenting and proceeds to have intercourse, he does so recklessly. Lord Hailsham in Morgan required an 'intention of having intercourse, willy-nilly, not caring whether the victim consents or [no]'.43 Another way of putting it is to ask, 'Was D's attitude one of "I could not care less whether she is consenting or not, I am going to have intercourse with her regardless."'44 What, however, of the man who knows that the woman may not be consenting but hopes, desperately, that she is? He could care much less; but is he not reckless?" 40 See Director of Public Prosecutions (NT) v WJI (2004) 219 CLR 43. 41 (1976) 136 CLR 62 at 77. See also Green v The Queen (1971) 126 CLR 28 at 32-33 per Barwick CJ, McTiernan and Owen JJ. 42 Smith and Hogan, Criminal Law, 10th ed (2002) at 471. 43 [1976] AC 182 at 215. 44 Taylor (1984) 80 Cr App Rep 327; Haughian (1985) 80 Cr App Rep 334. It may well be said that "reckless" is an ordinary term and one the meaning of which is not necessarily controlled by particular legal doctrines. However, in its ordinary use, "reckless" may indicate conduct which is negligent or careless, as well as that which is rash or incautious as to consequences; the former has an "objective", the latter a "subjective", hue. These considerations make it inappropriate for charges to juries to do no more than invite the application of an ordinary understanding of "reckless" when applying s 61R(1). A direction that "reckless" has the meaning to be given by the jury in the particular circumstances of the case would be erroneous, and the respondent does not contend otherwise45. In the present case, the trial judge properly emphasised that it was not the reaction of some notional reasonable man but the state of mind of the appellant which the jury was obliged to consider and that this was to be undertaken with regard to the surrounding circumstances, including the past relationship of the parties. The respondent's submission, recorded earlier in these reasons, is to the effect that in a particular case one or more of the expressions used in Morgan and by Professor Smith, as well as those recorded in the respondent's submission, may properly be used in explaining what is required by s 61R(1). That submission, as explained below, should be accepted. The appellant's submission that proceeding with an awareness of a risk of non-consent cannot suffice without the "discrete mental state" described as "Even if I know, I would continue. It does not matter to me", should not be accepted. The present case illustrates the point. The evidence of the complainant was that she was asleep and woke to find the appellant on top of her and then, for a few moments, "being half asleep", she was not sure who it was until she felt the appellant's head, realised who it was and pushed him off. The appellant's case was that the complainant was awake, she consented to intercourse and the appellant thought she was consenting. With respect to the past relationship of the parties, the trial judge directed the jury: "The Crown is entitled to argue as it does, that even if there had been some earlier act of sexual intercourse, although [the complainant] denies that there had been any such act and the accused said there had, but even if there had, the Crown is entitled to argue, the last time there was 45 cf Green v The Queen (1971) 126 CLR 28 at 32-33. any attempted intimacy between the two of them was this attempted kiss a few weeks before and she had rebuffed him. That, he says, the accused says in evidence, 'Well that doesn't mean that she was rejecting me for all time', but you might think, so the Crown is entitled to put, that it at least put him on notice that she might not be willing to have intercourse with him on 6 October. And that is important from this point of view, the Crown suggested to you late in the piece in his closing address, that even on the accused's point of view, you might find that he knew she was not consenting, because he was reckless." In this setting, as it will be in many other cases, it was proper for the trial judge to have gone on to direct the jury in the terms which the appellant challenges. The Court of Criminal Appeal did not err in dismissing the appeal and the further appeal to this Court should be dismissed. Callinan CALLINAN J. The appellant was convicted in the New South Wales District Court of breaking and entering a dwelling house, and committing the serious indictable offence of sexual intercourse with the complainant knowingly without her consent. He unsuccessfully appealed to the Court of Criminal Appeal on the ground that the trial judge's direction to the jury with respect to absence of consent was defective. It is against the dismissal of that appeal that he now appeals to this Court. The issue which the appeal raises is the proper construction of s 61R(1) of the Crimes Act 1900 (NSW), and in particular the meaning and effect to be given to the word "reckless" used in it. Facts and previous proceedings The Crown case The appellant was the complainant's cousin. They had been friends as well as relatives. On one occasion about two months before the alleged offence, the complainant had rejected the appellant when he had tried to kiss her. She had some difficulty in persuading him to leave her alone. The complainant told her mother about the appellant's advances. Some weeks afterwards the appellant visited the complainant's house late at night and "banged" on her door. He did not gain entry. When a neighbour told the appellant in coarse language to leave he did. On the night of the offences the complainant spent some time at a local tavern with friends. The appellant was also present with some of his family, including Mr and Mrs Sheridan, his uncle and aunt, the owners of the tavern. The complainant approached the appellant there, and complained to him about his conduct in coming to her house late at night and knocking loudly on her door. The complainant left the tavern at about 8:30 pm and went to an hotel which she left at about 10:00 pm. After spending about an hour at a friend's house she returned to her home. Before retiring for the evening she checked that the house was secure. She placed rods behind the sliding windows to prevent them from being opened from outside. The complainant's children were staying at their grandmother's house that evening and she was accordingly alone. It was her practice to sleep naked and she did so on that night. She fell asleep with the television in her room playing. The complainant recalled "waking up with somebody on top of me and not knowing who it was". That person was attempting to have vaginal intercourse with her. He effected penetration. The darkness prevented the Callinan complainant from seeing who it was. The television set had been turned off. Her evidence, of recognition, continued: "I realised who it was … when I'd sort of reached up and touched his head and realised that he had a bald head … I asked him how could he do this to me. I told him to get off and to get out." She said she could feel that the appellant was naked. She pushed him away and told him to leave. Only a few seconds passed between her awakening and his leaving the bed. The appellant stood up and dressed as the complainant continued to demand that he leave. After the appellant's departure the complainant found one of his pay slips at the end of her bed, and his glasses on the top of the television set. The window of a room downstairs was open. The complainant showered and went to the house of a neighbour to complain about what had happened to her. The next morning the complainant noticed that there was a chair outside the downstairs room, a window of which had been opened the previous evening. She also saw a can of alcohol on the top of her garbage bin. She told a male friend and her mother about the intrusion and intercourse. Her next step was to make a complaint to the police. The police arranged for her to be physically examined. Cross-examination of the complainant: Under cross-examination the complainant agreed that about three months previously she had seen the appellant at the tavern and had kissed him on the cheek. She denied suggestions that on other occasions she had told him that he could stay the night at her house if it was difficult for him to return to where he was living (which was several kilometres outside the town). She also denied that on a Friday night about six weeks before 6 October, she had invited the appellant to stay at her house, and that consensual sexual intercourse had then taken place. She gave evidence that about four weeks before making the complaint, the appellant had come to her house with some beer and that while he was there he had tried to kiss her, an advance which she rejected. She said that she had convinced him to leave. The complainant was closely cross-examined about the immediate events: "Q. You said that when you woke up you felt someone on top of you? That he was trying to push his penis into you? Callinan And kiss you? And then he did push it in? So do you recall having any – having a dream or anything like that, immediately before you woke up? It was – that was like a dream, cause I was half asleep. Q. Was there sort of a waking period where you weren't sure whether you were awake, or asleep? Yes. And I suppose you wouldn't know how long that went on for? It was only a matter of seconds. But you don't know that do you, if you were half asleep? A. Well I, something made me wake up, very quickly. So do you say – let's be clear about this, do you say that you were awake when his penis was placed inside your vagina? No I believe I was in like a half-asleep-dream sort of state. Still coming out of – You wouldn't say you were asleep though? I was, no. I was in that half-asleep sort of stage." She also repeated that when she woke she believed that a person other than the appellant was engaged in intercourse with her: it was not until she reached up and touched his bald head that she realised that it was the appellant. Other Crown witnesses: The neighbour to whom the complainant first complained gave evidence that the complainant knocked on her door "late in the evening or in the early morning" looking extremely distressed. She said the complainant told her that her "cousin raped me, they [sic] climbed into my bed, I didn't know or didn't realise who it was". The complainant's mother also gave evidence which included that, "about six to eight weeks before the incident … [the complainant] told me that [the appellant] had tried to kiss her and she wondered why, because he was her cousin, she was upset about that". The complainant's mother said that the complainant was crying as she spoke. The complainant's mother said that on the morning after the intrusion she had gone to the complainant's house to drop off the children. Upon her arrival the complainant was "visibly upset". The complainant said to her mother "I had sex with [the appellant]. I didn't know it was him. When I realised it was him I pushed him off. I'm sick about it". Callinan Her mother gave further evidence that a few days later she had spoken on the telephone to the appellant. He said then that he "didn't do anything. He did say that [the complainant] had invited him to stay at her house on a couch, if he needed a place to sleep … I said to him, 'You were there weren't you?' and he said 'Yes I was'". Police officers gave evidence at the trial. The appellant admitted to one of them that he had visited the complainant's house: "I went around there, tried the windows and doors, no one answered. I went and stayed at a mate's place". Constable Pearce conducted an electronically recorded interview of the appellant in the presence of his uncle Mr Sheridan at 7:45 pm on 6 October. The appellant said that he had met the complainant at the tavern, that he had spent several hours there and then gone to another hotel and a private party. He had later gone to the complainant's house to see if he could stay the night there. He knocked on the windows and doors but there was no answer. The back door of the house was unlocked and he went inside. He called out to the complainant. He went upstairs and found her asleep in her bedroom. He spoke to the complainant. She woke. He asked if he could stay the night. She said that he had better leave and this he did. On 6 October a detective inspected the complainant's house. He found a shoe print on the chair which had been placed outside the window which the complainant had found open on the morning of the intrusion. The imprint corresponded with the soles of the shoes the appellant had been wearing. Evidence was given that DNA testing of a stain on the appellant's underpants matched the respective DNA profiles of the complainant and the appellant. Fingerprint evidence established that palm prints taken at various places in the complainant's house were identical with those of the appellant. The positions of the palm prints were consistent with entry by the appellant through the window that was found to be open by the complainant the next morning. The evidence of the examining doctor was that the complainant was uninjured although there was some redness around the genital area not inconsistent with consensual sexual intercourse. A transcript of the proceedings in which the appellant was first arraigned and pleaded guilty before Hosking DCJ on 26 March 2003 was also admitted into evidence. On that occasion, the plea was rejected and a plea of not guilty entered. The appellant was subsequently tried by Freeman DCJ and a jury. That transcript disclosed that the appellant had given evidence that he saw the complainant once or twice a week at the tavern. They were on friendly terms. Callinan The complainant would usually greet him with a hug and a kiss. She had offered her townhouse to him if he needed somewhere to stay. He said in evidence at the trial that they had engaged in consensual sexual intercourse a few weeks after their first meeting at the tavern. He had gone to the complainant's house to find the front door unlocked. When he entered he saw that the complainant was asleep on a lounge downstairs. He assisted her upstairs. In the bedroom they hugged and kissed before sexual intercourse. Thereafter the appellant and the complainant saw each other regularly at the tavern. Each time the complainant greeted the appellant with a hug and a kiss. A couple of weeks after the consensual intercourse the appellant went to the complainant's house where he knocked on the front door. There was no answer. A neighbour came out and told the appellant to leave. Approximately a week later the appellant went again to the complainant's house with some beer. The complainant invited him into the house. He accepted that the complainant rejected his advances on this occasion. The appellant denied the disagreeable exchange at the tavern of which the complainant gave evidence. He said that after leaving a party he went to the complainant's house to take up her earlier offer to stay there. He knocked on the windows and doors, but there was no answer. He entered the house through a downstairs window using a chair to reach it. He saw no rod behind the window. Inside, he turned on some lights and called out to the complainant. There was no response. He went upstairs and saw the complainant in her bed asleep. He called her name and shook her leg to wake her. "She woke up a little bit – like she was a bit groggy". He asked her what she had done after she left the tavern. The complainant said that she had gone home. The appellant lay down beside the complainant on the bed. He asked the complainant where the children were. She said that they were at her mother's house. The following extract of the appellant's evidence should be reproduced: "Then I put my arm around her and we kissed again and hugged each other and then we were like stroking each other's upper bodies – like we were kissing. Then like [the complainant] when stroking me she lifted my shirt up a bit and then we were still kissing and then I've stopped kissing her and then we've pulled my shirt off and then I took my shoes and pants off while I was laying down beside her and hopped under the blankets with her. Callinan Some more kissing and hugging and then I hopped on top of her and we were engaged in – well getting to engage in having sex with her and then she's – minute or so later, she's pushed me and said 'No, stop'." The appellant agreed that penetration had occurred before the complainant pushed him away. The following questioning then took place: "Q. And did – did you do anything when she told you to stop? Yeah, I stopped having sex with her and sort of leant back and got off the bed and asked her what was – what was the problem, you know what's wrong. Did she answer that? No she just told me to leave. Told me to leave and get out and go – go home. And what did you do then? A. Me, I got my clothes and went out – oh I got dressed, went out the bedroom and down the stairs and out through the front door. Q. Where did you go? I went to a friend's place just down the road a little bit further towards [the country town] and stayed at his house." To that exchange should be added these questions and answers: I suggest to you that you were conceding that this lady hadn't woken up and she hadn't given any consent? No, that's not correct sir. So you were, in effect, in a situation I suggest, where you had intercourse with this lady when she initially was asleep and then woke up? No sir. And that you didn't get any consent from her at all? No sir. Callinan Do you think, at any stage, it might have been wise to have sort of made sure that she was a consenting party to this? That I what? Do you think it might have been wise to have made sure, by asking her, whether she was a consensual partner? I was aware that – at the time she was awake. I'm not asking you that, What I'm saying to you is, don't you think it would have been wise to have at least found out whether she was consenting or not? How do you do that sir? I'd suggest to you that by waiting until she wakes up might be a way? No, I was in the belief she was sir. You've said, on a previous occasion, 'that she was vaguely awake'? A. Well I did, I did, yeah. And if she was vaguely awake how would she give her consent to what you did? She was awake enough to have a brief conversation with me and rubbing my body, so – I'd suggest that there wasn't any rubbing of the body at all? Yes there was. You came into that bedroom, in the darkness, turned the television off so that she would not recognise you, took your clothes off and got onto the bed with her, didn't you? No sir. And you then started to have intercourse with her while she was asleep? No sir. And then she woke up and as soon as she realised what was happening she told you to stop and get off? Callinan That's what happened". The appellant's explanation for his earlier, different version of the evening was that he had been too embarrassed to admit the true facts in the presence of his uncle, Mr Sheridan. Counsel for the appellant submitted in his final address to the jury that, even if they were satisfied that the complainant did not consent to sexual intercourse with the appellant, they would not be satisfied that the appellant knew that she was not consenting. He referred to evidence of the appellant that he was affected by alcohol, and that "he thought she was consenting, he'd spoke[n] to her, he was of the genuine belief that she knew who he was, and that she was consenting to have sex with him because she was stroking him, she was putting her arm up under his shirt and he was stoking her and one thing led to another". Counsel also referred to the appellant's evidence that he "stopped as soon as he was told to". This compliance, it was submitted, was consistent with an honest belief that the complainant was consenting. Later, counsel referred to the appellant's claim of an earlier occasion of consensual intercourse, when the appellant had been invited to stay at the complainant's house and when both of them were intoxicated. The statutory provisions The only point taken on appeal to the Court of Criminal Appeal, and here, is that the trial judge erred in his directions in respect of s 61I and particularly s 61R of the Crimes Act, both of which should be set out: "61I Sexual assault Any person who has sexual intercourse with another person without the consent of the other person and who knows that the other person does not consent to the sexual intercourse is liable to imprisonment for 14 years." Section 61R states: "61R Consent (1) For the purposes of sections 61I, 61J and 61JA, a person who has sexual intercourse with another person without the consent of the other person and who is reckless as to whether the other person consents to the sexual intercourse is to be taken to know that the other person does not consent to the sexual intercourse. (2) For the purposes of sections 61I, 61J and 61JA and without limiting the grounds on which it may be established that consent to sexual intercourse is vitiated: Callinan (a) a person who consents to sexual intercourse with another person: (i) under a mistaken belief as to the identity of the other person, or (ii) under a mistaken belief that the other person is married to the person, is to be taken not to consent to the sexual intercourse, and (a1) a person who consents to sexual intercourse with another person under a mistaken belief that the sexual intercourse is for medical or hygienic purposes (or any other mistaken belief about the nature of the act induced by fraudulent means) is taken not to consent to the sexual intercourse, and (b) a person who knows that another person consents to sexual intercourse under a mistaken belief referred to in paragraph (a) or (a1) is to be taken to know that the other person does not consent to the sexual intercourse, and (c) a person who submits to sexual intercourse with another person as a result of threats or terror, whether the threats are against, or the terror is instilled in, the person who submits to the sexual intercourse or any other person, is to be regarded as not consenting to the sexual intercourse, and (d) a person who does not offer actual physical resistance to sexual intercourse is not, by reason only of that fact, to be regarded as consenting to the sexual intercourse". The summing up In summing up, the trial judge explained that on the Crown case the appellant had penetrated the complainant "when she was asleep and consequently no consent can arise." His Honour put the alternative Crown case based on s 61R(2)(a)(i), that if the jury thought that there was a period during which the complainant was in a waking state but not fully conscious, and appeared to be, but was not, consenting to intercourse with the appellant, although she may have been prepared to have intercourse with another person whom she believed the appellant to be, there could be no valid consent. Next, his Honour explained the element of knowledge of absence of consent as it related to this case: that if the complainant's evidence were accepted, the appellant must be taken to have known that the complainant was not consenting, because he had penetrated the complainant before she had woken Callinan The trial judge then reviewed some of the arguments put by the Crown and counsel for the appellant on the issue of whether it was reasonably possible that there had been an absence of knowledge that the complainant was not consenting. One of those arguments was that, even on the appellant's own evidence, on the last occasion before 6 October on which he had attempted intimacy with the complainant, she had rejected his advance. The trial judge said: "… the Crown suggested to you late in the piece in his closing address, that even on the accused's point of view, you might find that he knew she was not consenting, because he was reckless. The law says, a person who has sexual intercourse with another, without the consent of that other person and who is reckless as to whether that other person consents or not, is to be taken to know that the other person is not consenting. So if you just go ahead and do it willy-nilly, not even considering whether the person is consenting or not, you are reckless and the law says you are deemed to know that the person is not consenting. It is in that context that the Crown argues, as I understand it, that even on his own version of things, the last attempt at intimacy, he had been rebuffed. He had no right to assume that she was going to consent on this night; it was after all half past 2 in the morning, she was asleep when he got there. There had been no prior arrangement between them. She was only, in his terminology, 'vaguely awake' and he had no right to consider that she was likely to be consenting, indeed he was reckless as to whether she did or not express consent. Or he may not have even thought about it. If you do not think about it of course, that is reckless in the extreme. What you have to concentrate on is what was in his mind. It is not a question of deciding whether you would have acted in the same way or whether the notional reasonable man would have acted in the same way in the situation in which the accused found himself. You have to consider what was in his mind. Did he have any basis for a belief that she was consenting or has the Crown persuaded you that he had in fact no basis for any such belief, either because he had penetrated her before she woke up and because there had been no prior sexual act between them and it is relevant to consider, as [counsel for the appellant] said to you yesterday, that he had, in fact, taken alcohol that night, because if he is intoxicated, that certainly does have an effect, to a greater or lesser extent, upon his capacity to form judgments about whether this is a reasonable thing to do and so on, as to whether it is appropriate to believe that she is consenting." The judge then referred to the submissions of both parties. In relation to the Crown case his Honour said: Callinan "… the more likely scenario being that which the Crown sketched, with him entering the house, not making his presence known at all, but penetrating her before she was awake or fully awake and indeed on that basis he suggests to you that at the very least, you would find that he had been reckless and then the law would require you to find that he knew, because a person who is reckless about whether there is consent or not is deemed to know there is not consent." In relation to the appellant's case his Honour said: "… he had this belief that she was consenting, because of their prior experience [of sexual intercourse], because of the way in which she was physically reacting [on the night of 6 October, according to the appellant's evidence] and so on". Following the summing-up the jury asked some questions of the judge, of no present relevance. The following exchange occurred after his Honour had answered them: "Foreman: One of the jury members has asked us to ask this on their behalf, they want advice if a person in a partly awake partly asleep state gives non-verbal bodily response indications, can that be taken as being consent to sex. His Honour: No. Foreman: Thank you. His Honour: It cannot be taken as consent because that person is not making a conscious, willing acceptance of the act. The relevance of that question, I daresay, is whether the other party can have a reasonable belief that it represents consent. Do you understand the distinction? Now, I may need to say more to you about that when I listen to counsel because it is not, I am not satisfied that I have answered that completely fully until I have had the chance to talk to them about it. So would you like to retire and I will bring you back and give you a complete answer in a moment." The trial judge invited submissions from counsel. Each sought a redirection. Counsel for the appellant submitted: "And I think, your Honour, when you spoke to them about it, sorry in your summing-up earlier on, when talking about that aspect, your Honour put in some words based, I think you used the word 'based on' – if he had a belief based on reasonable grounds, in the context of the element of him knowing that she wasn't consenting. I think you said if he had a belief based on reasonable grounds that she was consenting then obviously Callinan they'd find him not guilty. It's my submission that because it's really only a subjective issue that it, in my submission it doesn't have to be based on anything. The fact is if they're not satisfied that he didn't have a genuine belief that she was consenting then they should find him not guilty even if that belief or the possibility that he did believe that she was consenting, wasn't, in their view, based on reasonable grounds". The trial judge then gave the following further directions to the jury: "Right, now the question you asked was whether it could be construed as consent if a woman, in a sort of half awake condition, non-verbally reacted in such a way as to appear to accommodate sexual intercourse, or words to that I think, and I said 'no, that's not consent'. That's not consent for two reasons: it's not a conscious decision, willingly, to co-operate in an act of sexual intercourse and or, perhaps these are alternatives, it may be a co-operative state brought about by a belief, for example, that the sexual partner is somebody else. You'll remember the evidence about dream states and her belief that, for at least a little while, that it was in fact somebody else. A mistake about the identity of the person with whom one is engaged in sex vitiates consent. There can be no consent to sex with the this actual person misunderstanding. So that's why it's not consent. The question that you framed. is brought about by the apparent consent But the other question that I adverted to is really whether that may give rise to a belief on the part of the accused in this case that there was consent. There are two answers to that as well; or two reasons for the answer. You will remember that I told you that knowing that a person is not consenting can consist of actually knowing – I mean you may have asked and they have said 'no' so you know perfectly well that they are not consenting or it may consist of being reckless. Remember the law that I told you was that if a person has sexual intercourse with another without the consent of that person and if the offender is reckless as to whether that other person consents or not then they are taken to know that the person is not consenting. Now, recklessness is a factor to advert to in the question of whether the person is consenting or not. It does not have to be the product of conscious thought. If the offender does not even consider whether the woman is going to consent or not, then that is reckless and he is deemed to know that she is not consenting. If he is aware that there is a possibility that she is not consenting but he goes ahead anyway, that is recklessness. But it is his state of mind that you are obliged to consider and including in that is the concept I discussed with you yesterday about the fact that he had had something to drink, just how drunk he was, how much he had sobered up, how capable he was of making this decision and so on. Callinan In the end the Crown has to prove to you beyond reasonable doubt (a) that she was not consenting – and it relies on her evidence for that, that she did not consent to sex with this accused. There may have been a time when she was under a misapprehension that she was consenting to sex with somebody else or having sex with somebody else, a sort of dream state, but that is not consent, as I have already explained to you. So the Crown relies on her evidence to say that she was not consenting and the Crown suggests that you will be persuaded beyond reasonable doubt that he either knew, because he penetrated her before she woke up, or he was reckless in the sense that he did not even consider whether she was going to consent or not, or at least he recognised that there was a possibility that she may not consent but he went ahead and did it anyway and the accused case is that he thought she had consented, and he had this belief." Following these directions the trial judge asked counsel whether any further ones were required. Neither sought any. The appellant was convicted and sentenced to a term of imprisonment of five years with a non-parole period of three years. The Court of Criminal Appeal The Court of Criminal Appeal of New South Wales (Bryson JA, James and Kirby JJ) dismissed the appellant's appeal46. James J, with whom Bryson JA and Kirby J agreed, said this47: "I accept counsel for the appellant's submission that recklessness was a real issue at the trial of the appellant and that it was necessary that the directions which the trial judge gave concerning recklessness and knowledge of absence of consent should have been correct. Even if recklessness had not been a real issue at the trial, the trial judge gave directions about recklessness and, those directions being given, it was important that those directions should have been correct. In Tolmie48 Kirby P observed that, having regard to the issues at the trial in that case, the direction the trial judge had given about recklessness was unnecessary and it would have been preferable if it had not been given. However, his Honour continued: 46 R v Banditt (2004) 151 A Crim R 215. 47 (2004) 151 A Crim R 215 at 228-229 [76]-[79]. 48 R v Tolmie (1995) 37 NSWLR 660 at 665. Callinan 'However, once given it was necessary that the direction should be made in accordance with the law, in case the jury might have acted upon it and been misled' The Crown can, of course, prove the element of an offence under s 61I, that the accused knew that the complainant did not consent to the sexual intercourse, by proving that the accused had that knowledge. However, s 61R of the Crimes Act provides that a person who is reckless as to whether the other person consents to the sexual intercourse is to be taken to know that the other person does not consent to the sexual intercourse. It is now well settled 'that, where the accused has not considered the question of consent and a risk that the complainant was not consenting to sexual intercourse would have been obvious to someone with the accused's mental capacity, if they had turned their mind to it, the accused is to be taken to have satisfied the requisite mens rea referred to by the word 'reckless' in s 61R of the Crimes Act 1900'49. Although it is necessary to be cautious in using labels, such a form of recklessness can be described as 'non-advertent' recklessness. In the present trial the trial judge gave directions about non-advertent recklessness. The trial judge told the jury that a person who does not even consider whether the other person is consenting or not to sexual intercourse is reckless as to whether the other person is consenting to sexual intercourse. No complaint was made on this appeal about the directions the trial judge gave about non- advertent recklessness. Apart from non-advertent recklessness, it is clear that a person can be taken to know that the other person is not consenting to sexual intercourse by virtue of a kind of recklessness in which the first person has actually adverted to whether the other person is consenting to sexual intercourse. In my opinion, it is sufficient to constitute this kind of recklessness that the first person realises that the second person might not be consenting and, notwithstanding that realisation, decides to proceed to have sexual intercourse with her and has such sexual intercourse, without there being some additional, determined to have sexual intercourse with her, whether or not she is consenting." independent requirement that he Later his Honour said this50: 49 R v Tolmie (1995) 37 NSWLR 660 at 672 per Kirby P citing inter alia R v Henning, unreported, New South Wales Court of Criminal Appeal, 11 May 1990; Hemsley (1988) 36 A Crim R 334 and R v Kitchener (1993) 29 NSWLR 696. 50 (2004) 151 A Crim R 215 at 232-233 [93]-[94]. Callinan "As I have already indicated, it was common ground on the hearing of the appeal that, if it was reasonably possible that the accused believed that the complainant was consenting, the accused would have to be acquitted, whether or not there were any reasonable grounds for such a belief51. I accept that some of the expressions the trial judge used [in] the summing-up had the potential to be misleading, that it would have been prudent for the trial judge to have given the direction he was asked by counsel to give and that the trial judge did not in his further directions give such a direction. However, I have concluded that the directions the trial judge did give were sufficient to ensure that the jury had a correct understanding that it was not necessary that any belief the appellant had that the complainant was consenting should be based on reasonable grounds. The trial judge in his earlier directions did not in fact go so far as to say, as was suggested by counsel for the appellant ... that it was necessary that any belief that the complainant was consenting be based on reasonable grounds. The trial judge would, of course, have been entitled to tell the jury that, in determining whether in fact the appellant had believed or might reasonably possibly have believed that the complainant was consenting, the jury could examine whether there would have been any grounds for such a belief. [In] the summing-up the trial judge, correctly, stressed that what the jury had to concentrate on was what was in the appellant's mind and not what might have been in the mind of the notional reasonable man. The trial judge further directed the jury that it would be relevant to take into account the extent to which the appellant was intoxicated and this direction would have reinforced the earlier direction that what the jury had to determine was the actual state of mind of the appellant. In ... further directions ... the trial judge again told the jury that 'it is his state of mind that you are obliged to consider' and again referred to the possible effect of intoxication on the mental capacity of the appellant. The trial judge concluded the further directions by saying that 'the accused's case is that he thought she had consented and he had this belief'. In these further directions the trial judge did not say anything which would have suggested that a belief that the complainant was consenting would have to be based on reasonable grounds. At the conclusion of these further directions the trial judge asked counsel whether any other direction was sought and counsel for the appellant replied in the negative." 51 R v Morgan [1976] AC 182. Callinan The appeal to this Court The respondent submits that the questions for this Court are, whether, on the one hand, in order for a person to be convicted of (reckless) rape it must be shown that the accused was aware that the complainant might not be consenting, and, indifference on the part of the accused to that risk, or a determination to have intercourse regardless of consent or not. On the other hand, can it be said, he asked, that the true question is whether recklessness consists of persistence in intercourse absent a belief in consent, or, is that a concept which is the same as either, "indifference to whether or not there is consent", "determination to have intercourse whether or not the complainant is consenting", or, "awareness of the possibility that the complainant is not consenting and proceeding anyway". It is a further question, he submitted, whether in any event, any of the formulations used are different in substance from one another. A consideration of recent developments of the law of rape should begin with the speeches in the House of Lords in R v Morgan52. The trial judge in that case had told the jury that if they came to the conclusion that the complainant had not consented to the intercourse in question, but that, the defendants believed, or may have believed, that she was consenting, they must nevertheless find the defendants guilty of rape if they were satisfied that they had no reasonable grounds for so believing. Lord Cross of Chelsea in his speech said that the point in dispute was as to the quality of belief entitling a defendant to be acquitted and the evidential burden of proof with regard to it53. After discussing a number of the authorities his Lordship said this54: "But, as I have said, section 1 of the Act of 1956 does not say that a man who has sexual intercourse with a woman who does not consent to it commits an offence; it says that a man who rapes a woman commits an offence. Rape is not a word in the use of which lawyers have a monopoly and the first question to be answered in this case, as I see it, is whether according to the ordinary use of the English language a man can be said to have committed rape if he believed that the woman was consenting to the intercourse and would not have attempted to have it but for this belief, whatever his grounds for so believing. I do not think that he can. Rape, to my mind, imports at least indifference as to the woman's consent." 53 [1976] AC 182 at 200. 54 [1976] AC 182 at 203. Callinan A little later his Lordship pointed out that recent cases in New South Wales and Victoria, with one exception, R v Daly55, made no reference to the fact that to include in the definition of the offence an intention to have intercourse whether or not the woman consents, and to say that a reasonable mistake with regard to consent is an available defence to a charge of rape, are two incompatible alternatives which cannot be combined in a single direction to a jury56. As the direction to the jury in Morgan failed to resolve that incompatibility, his Lordship concluded that the summing up contained a misdirection. It was only because his Lordship thought that the jury must have regarded the defendants' stories as a "pack of lies", that he applied the proviso and dismissed the appeal. After an extensive review of the authorities, Lord Hailsham of "Once one has accepted, what seems to me abundantly clear, that the prohibited act in rape is non-consensual sexual intercourse, and that the guilty state of mind is an intention to commit it, it seems to me to follow as a matter of inexorable logic that there is no room either for a 'defence' of honest belief or mistake, or of a defence of honest and reasonable belief or mistake. Either the prosecution proves that the accused had the requisite intent, or it does not. In the former case it succeeds, and in the latter if fails. Since honest belief clearly negatives intent, the reasonableness or otherwise of that belief can only be evidence for or against the view that the belief and therefore the intent was actually held, and it matters not whether, to quote Bridge J in the passage cited above, 'the definition of a crime includes no specific element beyond the prohibited act'. If the mental element be primarily an intention and not a state of belief it comes within his second proposition and not his third. Any other view, as for insertion of the word 'reasonable' can only have the effect of saying that a man intends something which he does not." Lord Simon of Glaisdale said this of recklessness58: "To say that, to establish a charge of rape, the Crown must show on the part of the accused 'an intention to have sexual intercourse with a 56 [1976] AC 182 at 203-204. 57 [1976] AC 182 at 214. 58 [1976] AC 182 at 216. Callinan woman without her consent' is ambiguous. It can denote either, first, an intention to have sexual intercourse with a woman who is not, in fact, consenting to it. This was the contention advanced on behalf of the Director of Public Prosecutions before your Lordships; but, for the reasons given by my noble and learned friends, I do not think that it is acceptable. Or, secondly, it can mean an intention to have sexual intercourse with a woman with knowledge that she is not consenting to it (or reckless as to whether or not she is consenting). I believe that this second meaning indicates what it is that the prosecution must prove." Lord Edmund-Davies (with whom Lord Simon of Glaisdale agreed on this point) said this59: "... the conclusion I have come to is that the necessary course is to uphold, as being in accordance with established law, the direction given in this case by the learned trial judge as to the necessity for the mistake of fact urged to be based on reasonable grounds. The approach which I should have preferred must, I think, wait until the legislature reforms this part of the law, just as it did in relation to the former presumption of intending the reasonable consequence of one's actions by section 8 of the Criminal Justice Act 1967. The proponents of such reform will doubtless have regard to the observations of Lord Reid in Sweet v Parsley60. On the other hand, those who oppose the notion that honest belief should per se suffice, on the ground that it facilitates the raising of bogus defences, should bear in mind the observations of Dixon J in Thomas v The King61 cited with approval by Lord Reid in Reg v Warner62. But, the law being as it now is and for a long time has been, I find myself obliged to say that the certified point of law should be answered in the affirmative." Lord Fraser of Tullybelton was of the same opinion as Lord Cross of Chelsea and Lord Hailsham of St Marylebone in saying this63: "That second direction, although not without precedent, is in my opinion impossible to reconcile with the first. If the defendant believed (even on unreasonable grounds) that the woman was consenting to intercourse then 59 [1976] AC 182 at 235. 60 [1970] AC 132 at 150. 61 (1937) 59 CLR 279 at 309. 62 [1969] 2 AC 256 at 274. 63 [1976] AC 182 at 237. Callinan he cannot have been carrying out an intention to have intercourse without her consent." These matters have to be kept in mind in considering Morgan. Each of their Lordships who discussed recklessness or like concepts used similar but far from identical language in describing or defining it. Furthermore, it was not the particular point in issue in that case. It follows that assertions that statements of their Lordships were templates for subsequent legislation, should be treated with caution, a matter to which I will refer again. In this Court the respondent adopted as part of his submissions a commentary by Dr G D Woods, a former director of the Criminal Law Review Division of the Department of Attorney-General and of Justice of New South Wales on the Crimes (Sexual Assault) Amendment Act 1981 (NSW), and cognate Act, which introduced the precursors to the two sections under particular consideration here, and relevantly used much the same language. In his commentary, Dr Woods said this64: "The proposition that recklessness as to consent suffices as the required mental element of rape is made quite clear in these decisions, and accordingly section 61D(2) is not a novelty. It is emphasized that recklessness for the purpose of that subsection is intended to mean, and clearly does mean, subjective recklessness. The erroneous use of the term 'recklessness' as synonymous with 'gross negligence' is unfortunate and to be avoided. It confuses the important distinction between a mental element requiring the jury to make an assessment as to the state of mind of the accused himself at the relevant time, and a mental element requiring the jury to determine what would have been the state of mind of a reasonable person transposed into the particular situation at the relevant time. The proper use of the term 'recklessness' in relation to the law of rape is in terms of a subjective requirement: the decisions in Morgan, Maes, Brown and McEwan make this clear. Section 61D(2) does not attempt to introduce into New South Wales law the notion of sexual assault by negligence, even though it could perhaps be argued that for the period of years while R v Sperotto65 was followed in New South Wales, we did have a law of rape by negligence. That decision is no longer law 64 Woods, "Sexual Assault Law Reforms in New South Wales: A Commentary on the Crimes (Sexual Assault) Amendment Act, 1981, and Cognate Act", (1981) at 16- 65 [1970] SR(NSW) 334. Callinan in New South Wales. Section 61D(2) is not an attempt to reintroduce its effect. That section 61D(2) should be interpreted subjectively is supported by the statutory expression of the rule in R v Morgan in section 1 of the UK Sexual Offences (Amendment) Act, 1976: '... a man commits rape if – he has unlawful sexual intercourse with a woman who at the time of the intercourse does not consent to it; and at the time he knows that she does not consent to the intercourse or he is reckless as to whether she consents to it.' The latter words were certainly intended to, and have been interpreted so as to, require proof of subjective foresight of the possibility of non-consent. There is every reason why section 61D should be similarly interpreted. Both in England and New South Wales it is a defence to a charge of rape if the accused honestly believed at the relevant time that the other person consented to the sexual act alleged. More accurately, the Crown must prove that the accused, at the relevant time, foresaw at least the possibility of non-consent, but went ahead regardless. Any reasonable possibility that at the relevant time the accused held an honest belief that the other person did consent, must be eliminated by the prosecution. It follows from the definition of the offence established in section 61D that the so-called 'defence of honest mistake as to consent' which applies in relation to rape will also apply in relation to the new offence. Some criminal jurists take the view that the use of the term 'defence' in this context is misleading, because the Crown must affirmatively prove that there was no such honest belief, reasonable or otherwise, even if the accused sits mute and unrepresented through his trial. But in the realistic sense that a 'defence' means whatever forensic tactics the accused adopts in order to escape liability, it is correct to speak of the 'defence' of honest mistake as to consent." In my opinion, it is less than clear that either the Sexual Offences (Amendment) Act 1976 (UK), the Crimes (Sexual Assault) Amendment Act 1981 (NSW) or the current sections of the Crimes Act with which the Court is concerned here are an attempt at a statutory expression of the rule in Morgan. If they are, two questions arise. First, whose statement of the rule in Morgan was enacted? The formulations of each of their Lordships were not identical. Secondly, why was not language in exactly the same form as stated by one of their Lordships adopted in the relevant Acts? In particular, why did the Callinan legislators omit such additional words as, for example, "not caring whether the victim be a consenting party or not" or "without caring whether or not she was a consenting party", which were used by Lord Hailsham of St Marylebone66 and Lord Edmund-Davies67 respectively, to qualify or amplify the meaning of "recklessly"? Whether the defendants in Morgan had been reckless, as I have already indicated, was not the way the principal issue was put. It was, rather, whether an honest belief as to consent had also to be a reasonable one. It cannot however be doubted that Morgan did provide the stimulus for the legislation to which Dr Woods referred, and which was introduced into the United Kingdom in the next year following the Report of the Advisory Group on the Law of Rape pursuant to the Parliament of the United Kingdom in December 1975 ("the It is not surprising in my opinion, that the speeches in Morgan and the ensuing legislation generated, so far as "recklessness" in rape is concerned, a plethora of academic writings and uncertainty68. In R v Pigg69 the English Court of Appeal (Lord Lane CJ, Talbot and McCowan JJ), by reference to R v Caldwell70 and R v Lawrence71, two cases on 66 [1976] AC 182 at 209, his Lordship said that: "[I]f the intention of the accused is to have intercourse nolens volens, that is recklessly and not caring whether the victim be a consenting party or not, that is equivalent on ordinary principles to an intent to do the prohibited act without the consent of the victim." 67 [1976] AC 182 at 225, his Lordship said that: "[T]he man would have the necessary mens rea if he set about having intercourse either against the woman's will or recklessly, without caring whether or not she was a consenting party." 68 See for example Yell, "'Recklessness' in the criminal law", (1981) 145 Justice of the Peace 243; McEwan and Robilliard, "Recklessness: the House of Lords and the criminal law", (1981) 1 Legal Studies 267; Williams, "Divergent Interpretations of Recklessness – 1", (1982) 132 New Law Journal 289; Williams, "Divergent Interpretations of Recklessness – 2", (1982) 132 New Law Journal 313; Williams, "Divergent Interpretations of Recklessness – 3", (1982) 132 New Law Journal 336; Ferguson, "Reasonable belief in rape and assault", (1985) 49 Journal of Criminal Law 156; Williams, "The unresolved problem of recklessness", (1988) 8 Legal Studies 74. 69 [1982] 1 WLR 762; [1982] 2 All ER 591. Callinan the new statutory definition which included recklessness, and which reached the House of Lords, said that a man is reckless if72: "... either he was indifferent and gave no thought to the possibility that the woman might not be consenting in circumstances where if any thought had been given to the matter it would have been obvious that there was a risk she was not, or, that he was aware of the possibility that she might not be consenting but nevertheless persisted regardless of whether she consented or not." Morgan had earlier been referred to in Australia by Bray CJ in the Supreme Court of South Australia (in Banco) in R v Wozniak73. His Honour there endorsed this passage from the trial judge's summing up74: "[An accused] cannot be convicted if he honestly believed that the female consented to the act of sexual intercourse. The Crown bears the onus of proving that the accused had unlawful sexual intercourse with the female concerned, without her consent, knowing that she was not consenting, or without any genuine belief on his part that she was consenting. Or that he went on and had intercourse with her, realizing that she might not be consenting, and with a determination to have intercourse with her, whether she was consenting or not." In that case the Court rejected an argument that it was not enough "for the accused to have realized the girl might not be consenting ... the jury had to be satisfied that he realized that she was probably not consenting"75. Bray CJ was of the opinion that the tests of recklessness adopted by the House of Lords in Morgan would not fail to be satisfied because the accused "thinks that there is only a 49 per cent chance that she is not consenting"76. The Chief Justice did not express a view as to "whatever degree of possibility is involved in the word 'might'". His Honour did say this however77: 72 [1982] 1 WLR 762 at 772 ; [1982] 2 All ER 591 at 599. 73 (1977) 16 SASR 67. 74 (1977) 16 SASR 67 at 69. 75 (1977) 16 SASR 67 at 69. 76 (1977) 16 SASR 67 at 74. 77 (1977) 16 SASR 67 at 74. Callinan "No doubt fantastic or remote possibilities of non-consent would not normally enter a man's mind in such a situation, nor do I think they would be regarded by a jury as fairly falling within the word 'might'. And a belief in consent is not inconsistent with preliminary doubt resolved after deliberation." The appellant's principal submission is that s 61R(1) should be construed as imposing the same mental element as is required for a conviction for rape under the common law as he submits it to be, that is, as requiring of an offender that he be indifferent about the risk, or determined to engage, in intercourse whether the complainant consented or not. Awareness of a risk would not suffice he submitted. He advances several reasons for this. The first is that his submission gives effect to the dictionary definitions of recklessness78. The second is that the absence of a statutory definition of recklessness implies a legislative intention to adopt the relevant common criminal law as propounded in Morgan which he takes as requiring the elements to which he referred. The appellant notes that in Satnam S and Kewal S79, the English Court of Appeal said that the analogue there of s 61R(1) was based on the recommendations of the Heilbron Report and was intended to be "declaratory of the existing law as stated The appellant provided examples of situations in which, he submitted, an accused might be aware of a possibility (or a "real" possibility) that consent is absent, but should not be regarded as reckless unless it could be concluded that he was indifferent to whether consent was not being given. It is unnecessary to repeat them. I did not find the examples helpful. They were in my view situations in which it would have been open to a jury to find recklessness on any reasonably arguable definition. The appellant further submitted that the approach of the Court of Criminal Appeal in this case requires the drawing of very fine distinctions between levels of possibility or probability in the mind of an accused. Recklessness would not be established if the accused were aware that there was "a slight possibility" of absence of consent but would be, if there were awareness of "a real possibility" of absence of consent. He argued that a man would be unlikely to engage in such 78 The Shorter Oxford English Dictionary, 3rd ed (1978), defines "Reckless" as "1. Of persons: Careless of the consequences of one's actions; heedless (of something); lacking in prudence or caution. 2. Of actions, conduct, things etc. Characterized or distinguished by (carelessness or) heedless rashness." 79 (1983) 78 Cr App R 149. 80 (1983) 78 Cr App R 149 at 154. Callinan fine levels of analysis in a sexual context. In contrast, it was contended, directions based on the judgment of the House of Lords in Morgan need not make any reference at all to awareness of possibilities or probabilities. A direction that the prosecution must prove that the accused did not believe that consent had been given, and simply did not care whether the complainant consented or not, would be sufficient. That test avoids, it was urged, a problematic distinction between "advertent" and "inadvertent" or "non-advertent" recklessness. The appellant helpfully drew attention to the position in other Australian Western Australia81, Queensland82 and Tasmania83 impose jurisdictions. objective tests, so that an honest belief in consent will not negate criminal responsibility unless it be reasonably held. Victoria adopts a statutory test of awareness that the other person "is not consenting or might not be consenting"84. South Australia has enacted a statutory formulation as to the mental element of rape similar to s 61R(1). Section 48 of the Criminal Law Consolidation Act 1935 (SA) as amended by Act No 83 of 1976, provides that the offence is made out by establishing knowledge of absence of consent, or reckless indifference as to whether the other person consents to sexual intercourse with him. In Egan85, White J (with whom Zelling and Mohr JJ agreed) said86: "Once it is clearly proved that she might not be consenting, then the man is recklessly indifferent if he presses on with intercourse without clearing up that difficulty of possible non-consent. ... Upon receiving notice of the possibility of her non-consent, he is put upon inquiry before he proceeds to intercourse." It may be noted that the law relating to sexual offences was changed in the United Kingdom by the Sexual Offences Act 2003, which replaced recklessness 81 Criminal Code (WA), ss 24, 319(2). 82 Criminal Code (Q), ss 24, 348. 83 Criminal Code (Tas), ss 2A, 14. 84 Crimes Act 1958 (Vic), s 38. 85 (1985) 15 A Crim R 20. 86 (1985) 15 A Crim R 20 at 24-25. Callinan by a test of "[If the accused] does not reasonably believe [the complainant] consents"87. The appellant submits in summary that the trial judge's direction that recklessness would be established if the appellant were aware there was a possibility that the complainant was not consenting to sexual intercourse with him, was wrong: there should have been an additional direction that the appellant had to be shown to be "indifferent" about the risk, or determined to have sexual intercourse whether consent was present or not. that attempts The fact that competing submissions can plausibly be made, the plethora of articles, and the different judicial and legislative formulations advanced or enacted, demonstrate only one matter clearly, to define "recklessness" are bound to give rise to, and have given rise to unnecessary uncertainty. "Reckless" is an old and well understood English word. It has been said that there are no true synonyms in the English language88. The search for a truly synonymous phrase or expression will equally, frequently be likely to be futile. It is true as Gummow, Hayne and Heydon JJ point out89 that in different branches of the law and different enactments recklessness may have different elements. It is equally true that on occasions in the law a word will need explanation, elaboration, or definition, but that need tends to arise most often by reason of an uncertain or ill-expressed context of which it forms part. Section 61R is not such a context. The clause "who is reckless as to whether the other person consents to the sexual intercourse" is a perfectly simple one. I do not accept that it is beyond the capacity of a jury to understand and give effect to it, without judicial exegesis, particularly in modern times when juries are composed indiscriminately of the sexes. 87 Sexual Offences Act 2003 (UK), s 1(1)(c). This provision was intended to reverse the decision in R v Morgan (see Temkin and Ashworth, "The Sexual Offences Act 2003", (2004) Criminal Law Review 328 at 340). 88 Fowler, A Dictionary of Modern English Usage, 2nd ed (1965) at 611-612 states: "Whether any such perfect synonyms exist is doubtful, except perhaps when more than one name is given to the same physical object or condition ... But if it is a fact that one is much more often used than the other, or prevails in a different geographical or social region, then exchange between them does alter the effect on competent hearers, and the synonymity is not perfect. At any rate, perfect synonyms are extremely rare." 89 See reasons of Gummow, Hayne and Heydon JJ at [2]-[7]. The authors of the Heilbron Report to which I have referred said this90: Callinan "However, the crime of rape does raise particular difficulties and this for a number of reasons. It involves an act – sexual intercourse – which is not in itself either criminal or unlawful, and can, indeed, be both desirable and pleasurable. Whether it is criminal depends on complex considerations, since the mental states of both parties and the influence of each upon the other as well as their physical interaction have to be considered and are sometimes difficult to interpret – all the more so since normally the act takes place in private. There can be many ambiguous situations in sexual relationships; hence however precisely the law may be stated, it cannot always adequately resolve these problems. In the first place there may well be circumstances where each party interprets the situation differently, and it may be quite impossible to determine with any confidence which interpretation is right." I do not doubt the accuracy of those statements. Whether in the ambiguous situations to which the authors refer, and having regard to the complexity of the considerations, the mental states of both parties, and the influence of each upon the other, one has been reckless as to the willingness of the other, strikes me as quintessentially a jury question, the answer to which a dozen or a thousand words of elaboration can add nothing, except perhaps uncertainty. "Reckless" means reckless, just as "beyond reasonable doubt" means exactly that, a matter only finally fully recognized and universally acknowledged after years of unhelpful judicial attempts at simplification and explanation in Green v The Queen91. It can have been no accident that the legislature enacted s 61R in the form that it did, simply using the word "reckless" alone, and in consequence eschewing all of the various judicial elaborations or explanations attempted over the years. In this case, the trial judge's formulation of "recklessness" reasonably approximated what had been said in a number of the cases. It was a reasonable approximation, although an unnecessary one, of the dictionary meaning, and the common understanding of recklessness. For that reason, and these further 90 Great Britain, Report of the Advisory Group on the Law of Rape, (1975) Cmnd 91 (1971) 126 CLR 28. Callinan reasons, I would dismiss the appeal. The case of intercourse knowingly without consent against the appellant was a very strong one. His breaking into the complainant's house, his advances, his false denials, his unsatisfactory subsequent explanation, and his surreptitious entry into the complainant's bed are powerful indications of this. The case on recklessness was in the nature of an unfortunate side-wind. The jury on any view must have rejected the appellant as a credible witness. The extended reference to recklessness by the trial judge, although unnecessary, was a sufficient approximation of the meaning of the word in the circumstances of the case, and not such as to cause any miscarriage of justice. The appeal should be dismissed.
HIGH COURT OF AUSTRALIA APPELLANT AND THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA RESPONDENT Howard v Commissioner of Taxation [2014] HCA 21 11 June 2014 ORDER Appeal dismissed with costs. On appeal from the Federal Court of Australia Representation A H Slater QC with D J McInerney for the appellant (instructed by Oakley Thompson & Co) J T Gleeson SC, Solicitor-General of the Commonwealth with P R Bender (instructed by Maddocks) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Howard v Commissioner of Taxation Taxation – Income tax – Taxpayer a member of joint venture – Taxpayer proposed involvement of company of which he was director in business opportunity arising from joint venture – Breach of fiduciary duty by joint venturers – Joint venture failed and opportunity lost – Taxpayer awarded equitable compensation for loss of joint venture opportunity – Commissioner included compensation in taxpayer's assessable income – Whether taxpayer held compensation on constructive trust for company – Whether compensation assessable income. Assignment – Where litigation agreement between company and directors assigned to company any award to directors of damages arising out of relevant proceedings – Whether agreement assignment of proceeds of action or assignment of rights under judgment obtained in action – Whether agreement assignment of present property for value or assignment of future income. Words and phrases – "assignment of future income", "conflict of duties", "conflict of duty and interest", "fiduciary duty", "unauthorised gain or profit". FRENCH CJ AND KEANE J. Introduction In his income tax assessment for the 2005 income year the appellant did not include, as part of his assessable income, his share of an award of equitable compensation under a judgment in proceedings in the Supreme Court of Victoria between parties to a joint venture of which he had been a member. The joint venture involved the proposed purchase, lease to a substantial tenant, and on-sale of the Kingston Links Golf Course. The appellant claimed that the equitable compensation awarded to him was impressed with a constructive trust in favour of a company, Disctronics Ltd ("Disctronics"), by reason of his fiduciary office as one of its directors. Two other directors, co-plaintiffs with the appellant, were parties to the joint venture in their personal capacities. The directors had decided, during the development of the joint venture, that they should endeavour to have Disctronics purchase the golf course from the joint venture provided it could do so at an affordable price and, in that event, to rebate to the company any entitlement they might have as a result of their involvement in the joint venture. The appellant also argued that he had assigned the fruits of the cause of action to Disctronics pursuant to an agreement made between the directors and the company when the litigation in the Supreme Court was pending ("the litigation agreement"). The respondent, the Commissioner of Taxation of the Commonwealth of Australia, did not accept the appellant's contentions and issued an amended assessment on 5 August 2009 on the basis that the appellant's award of damages was received by him beneficially and not as a fiduciary. He also imposed a penalty. The appellant succeeded in an appeal under s 14ZZ of the Taxation Administration Act 1953 (Cth) to a judge of the Federal Court of Australia (Jessup J)1, who held that the award of equitable compensation was not income in the appellant's hands. A Full Court (Middleton, Perram and Dodds- Streeton JJ) of the Federal Court, however, allowed the Commissioner's appeal from the decision of the primary judge, save as to penalty2. The appellant has appealed to this Court pursuant to a grant of special leave made on 8 November The appellant's argument that his fiduciary obligation to Disctronics extended to his involvement in the joint venture had nothing to do with the 1 Howard v Federal Commissioner of Taxation (No 2) (2011) 86 ATR 753. 2 Howard v Federal Commissioner of Taxation (2012) 206 FCR 329. [2013] HCATrans 269 per Crennan, Kiefel and Bell JJ. protective purposes for which such obligations exist in equity. That argument, advanced in his own interest, fell under the shadow of the cautionary observation of Deane J in Chan v Zacharia4: "There is 'no better mode of undermining the sound doctrines of equity than to make unreasonable and inequitable applications of them'". The appellant's obligation to Disctronics, as one of its directors, did not extend beyond taking appropriate steps to give effect to a decision of the directors to try to bring the company in as the ultimate purchaser from the joint venture and, in that event, to rebate to it their entitlements flowing from the joint venture. The company was not and was never intended to be a member of the joint venture. There was no relevant fiduciary obligation preventing the appellant from taking a share of the profits of the joint venture on his own account. The litigation agreement did not alter the character of the award of equitable compensation as income in the hands of the appellant. The appeal should be dismissed with costs. Factual history The litigious trail which has led to this appeal has its origins in a joint venture arrangement made in July 1999. Three of the joint venturers — the appellant, Donovan (who was based in the United Kingdom) and Quinert — were directors of Disctronics, a company that they used as an investment vehicle. The fourth joint venturer, Bucknall, was a self-employed consultant engaged by Donovan's company, Solette Pty Ltd ("Solette"), who had put the acquisition, lease and on-sale concept to Donovan, early in 1999. The fifth joint venturer was Edmonds, who had been invited by Donovan to provide advice on the financing of the proposed transaction. The sixth joint venturer, Cahill, a real estate agent, was engaged through Edmonds to make approaches with a view to acquiring a suitable property. A prospective tenant, Spotless Services Australia Limited ("Spotless"), had been identified in February 1999 when Bucknall sounded out Stuart Rose of that company. In April 1999, Rose told Bucknall that Spotless might be prepared to pay a rent of $900,000 per annum for the tenancy of a public golf course. The original principals of the proposed golf course project were the appellant, Donovan (utilising Solette as a vehicle for property development and investment) and Quinert. Bucknall, Edmonds and Cahill were involved as consultants and advisers. The arrangements with them, however, developed into (1984) 154 CLR 178 at 205; [1984] HCA 36 quoting Barnes v Addy (1874) LR 9 Ch App 244 at 251 per Lord Selborne LC. a joint venture involving all six men on terms ultimately agreed at a teleconference held on 20 July 1999. While the appellant did not participate in that teleconference, he agreed with the minutes of the meeting and thereafter was treated as a participant. The terms of the joint venture arrangement, to the extent that they were recorded in those minutes, involved the realisation of a "day-one" profit by the joint venture. The profit would arise out of the on-sale of the golf course to a third party purchaser who would be attracted by the income stream derived from the lease to Spotless, which could be used to service debt and provide a return on investment. The profit would be the difference between the purchase price paid by the joint venture and that paid by the ultimate purchaser. The profit share was to be split six ways. Immediately following the teleconference of 20 July 1999, Cahill began negotiating on behalf of the joint venture with Kevin Wood of Kingston Property Constructions Pty Ltd, the owner of the Kingston Links Golf Course. On 3 August 1999 a verbal agreement was reached for the sale of the golf course to the joint venture for the sum of $8,680,000. In the meantime, Rose had advised Bucknall, by letter dated 29 July 1999, that an annual rental of $1,165,000 was achievable, subject to various matters set out in the letter. The letter suggested that a minimum ten year lease was required along with a ten year option. The golf course project initially had not involved Disctronics at all. However, after April 1999, when Spotless' interest was confirmed, Donovan thought that Disctronics itself could acquire the Kingston Links Golf Course from the joint venture, rather than the joint venture selling the golf course to a third party purchaser. It was his view that, if the equity required of an investor in the golf course lay within the capacity of Disctronics to provide, acquisition by Disctronics might be a more productive investment for it than the insurance bonds which were then the company's only Australian investment other than cash. Quinert and the appellant thought that a sensible approach. However, Disctronics could only come in if the equity it had to put up, in addition to debt funding, did not exceed $1,500,000. Edmonds and Cahill reacted adversely to the idea, as Disctronics' involvement would limit the potential "day-one" profit in which they expected to share. Before the joint venture crystallised on 20 July 1999, Edmonds had prepared a memorandum dated 10 July 1999 positing a total outlay by the ultimate purchaser of $10,100,000, of which $7,700,000 would be debt finance and $2,400,000 equity injection. That scenario involved an equity injection by the ultimate purchaser which was higher than the amount contemplated by It therefore conflicted with Donovan's plans for Disctronics' directors. Disctronics' involvement and sowed the seeds of dissension. As Jessup J observed5: "If the transaction were to be considered as a speculation for 6 individuals, the higher the purchase price, the better. But, if the transaction were to be considered as an investment for Disctronics, the lower the purchase price, the better." The appellant, Donovan and Quinert met in London on or about 12 July 1999. Donovan told Quinert and the appellant that he wanted to make the golf course project available as an investment opportunity for Disctronics, provided that Disctronics could handle the equity investment that was required. He thought it could afford up to $1,500,000, raised mostly by redemption of its insurance bonds. The appellant and Quinert agreed. On 13, 14 and 15 July 1999 the appellant, Donovan and Quinert met as directors of Disctronics, together with a fourth director, David Mackie, who was the United Kingdom based Chief Executive Officer of the Disctronics group. Mackie had no objection to Disctronics' involvement in the golf course project. It is not in dispute, notwithstanding the absence of any note in the minutes of the meeting of directors, that they agreed that if the equity requirement to acquire the golf course was less than $1,500,000 they would seek to have Disctronics become the ultimate purchaser of the golf course. They also agreed that they would rebate their entitlements to Disctronics. Further exchanges occurred between the Disctronics directors and Edmonds leading up to the teleconference of 20 July 1999, at which time (and it was not in dispute before Warren J or in the Federal Court proceedings) the joint venture was established6. As Jessup J noted, Disctronics was not a member of the joint venture7. Jessup J summarised the position as at August 19998: "By early August … the members of the joint venture which had been formed on 20 July were in possession of the 2 key parameters by reference to which they could plot their future: the price at which (2011) 86 ATR 753 at 764 [21]. 6 Disctronics Ltd v Edmonds [2002] VSC 454 at [131]. (2011) 86 ATR 753 at 776–777 [56] referring to [2002] VSC 454 at [132]–[134] (2011) 86 ATR 753 at 769 [34]. Kingston Links was available for purchase, $8.68 million, and the annual rental which was likely to be paid by Spotless, $1.165 million." It was against this background that the inevitable disintegration of what was to be a short-lived joint venture arrangement began. Following a new proposal by Edmonds on 3 August 1999, Donovan said that Disctronics was to be the equity investor. He asked Quinert to tell Edmonds that Disctronics intended to take up its "entitlement" in respect of the golf course project, as by that time it appeared that an equity injection of less than $800,000 would be sufficient. There was no such "entitlement", as the acquisition of the golf course by Disctronics was dependent upon the joint venturers' agreement. Further exchanges followed but yielded no resolution of the differences between the appellant, Donovan, Quinert and Bucknall on the one hand, and Edmonds and Cahill on the other. On 19 August 1999, Quinert made a formal written offer to the owner of the Kingston Links Golf Course of $8,688,000 to purchase the golf course. In that offer he stated that the "equity investor" would be "an unlisted public company group which operates pre-dominantly in the United Kingdom and the United States of America." This was a reference to Disctronics and associated companies. A wholly owned Australian subsidiary of Disctronics, Corwen Grange Pty Ltd ("Corwen Grange"), had been incorporated. Quinert and the appellant were its directors. The offer was made in the name of Corwen Grange. The offer was not accepted. Instead the owner accepted an offer for the purchase of the golf course made by Edmonds and Cahill and a business acquaintance of Cahill's, Michael Buxton. The offer was made without the knowledge of the appellant and his associates. Kingston Links Country Club Pty Ltd ("KLCC"), which Edmonds, Cahill and Buxton had incorporated on 12 October 1999 and of which they were directors, executed a contract of sale for the purchase of the golf course on 29 October 1999. On 8 December 1999, KLCC entered into a lease with Spotless. A transfer of the land to KLCC was registered on 14 December 1999. Disctronics lodged a caveat on 22 December 2000 over the title to the land on which the golf course stood, asserting the existence of a constructive trust in its favour. On 8 June 2001, KLCC commenced proceedings against Disctronics in the Supreme Court of Victoria for removal of the caveat ("the caveat proceeding"). On 15 June 2001 the appellant, Donovan and Quinert executed the litigation agreement with Disctronics, identifying themselves in the agreement as its directors. Disctronics agreed to pay their legal fees and disbursements associated with proceedings they proposed to institute against Edmonds and Cahill, and KLCC and others in the Supreme Court of Victoria and to indemnify them against payment of any orders for costs. Paragraph 4 of the litigation agreement provided: "In consideration of [Disctronics'] promises set out in paras 1 and 3 hereof the directors, and each of them, assign absolutely unto and to the sole use of [Disctronics], any award of damages (whether on revenue or capital account), costs or interest made in their favour as a consequence of their participation in the joint venture or arising out of the proceedings and the ultimate outcome thereof". Recital B to the litigation agreement referred back to the meeting of the Disctronics directors in London in July 1999 and stated: "On or about 14.07.'99 in London meetings of [Disctronics], the directors agreed that if the equity requirement to acquire [Kingston Links Golf Course] was less than AUD$1.5m then the directors would seek to have [Disctronics] become the equity participant and purchaser of [Kingston Links Golf Course] (the 'Option'). The directors further agreed that if [Disctronics] exercised its Option then the directors would rebate to [Disctronics] any entitlement (whether on revenue or capital account) they may have as a consequence of their participation in the joint venture". It was not in dispute on the appeal to this Court that the recital was an accurate statement of the way in which the appellant and his fellow directors sought to involve Disctronics in the golf course project. Proceedings in the Supreme Court of Victoria On 26 June 2001 the appellant, Donovan, Quinert, Bucknall, Disctronics and Solette9 commenced proceedings in the Supreme Court of Victoria against Edmonds, Cahill, KLCC, Buxton, Emanbee Nominees Pty Ltd, MRB Life Pty Ltd and Domain Hill Property Services Pty Ltd 10. The appellant, Donovan, Quinert and Bucknall claimed relief arising out of breaches of fiduciary duties by 9 Originally, Solette was identified as a prospective purchaser of the golf course, although by July 1999 the company was no longer involved in the proposed acquisition. See [2002] VSC 454 at [181]. 10 The offer to purchase the golf course was made in the name of Buxton's company Emanbee Nominees Pty Ltd. Ultimately, MRB Life Pty Ltd was assigned that company's interest in the joint venture agreement between KLCC, Emanbee Nominees Pty Ltd, Buxton, Cahill, Edmonds and others. Cahill negotiated with Wood through Domain Hill Property Services Pty Ltd, which was subsequently de- registered. Edmonds and Cahill owed to them as joint venture participants and equitable compensation in amounts equal to their respective shares of the profit ("the main proceeding"). The land on which the golf course stood was ultimately sold by KLCC under a contract of sale dated 17 June 2002. On 23 October 2002, Warren J gave judgment in both the main proceeding and the caveat proceeding11. In that judgment, as summarised by Jessup J, her Honour found, inter alia12: A joint venture was formed initially between Donovan, the appellant, Quinert and Solette by about early June 1999 and possibly as early as April 199913. The joint venture, as originally formed, was varied to remove Solette and to consist therefrom of Donovan, the appellant, Quinert, Bucknall, Edmonds and Cahill from 20 July 199914. The joint venture was dissolved on 10 August 1999 as a result of actions by Edmonds and Cahill15. Edmonds and Cahill breached the fiduciary duty they owed to the appellant and other members of the joint venture to act honestly and in good faith by secretly and furtively approaching Wood, Rose and Buxton; by making an offer to Wood for the purchase of the golf course which they knew would exceed the plaintiffs' offer; and by not telling the 11 [2002] VSC 454. 12 (2011) 86 ATR 753 at 778 [58] referring to [2002] VSC 454 at [183]. 13 [2002] VSC 454 at [24]; (2011) 86 ATR 753 at 786 [74]–[75] where Jessup J stated that Solette was "possibly" included (referred to in (2012) 206 FCR 329 at 334–335 [11]). See also (2012) 206 FCR 329 at 332 [6(b)–(c)]. 14 [2002] VSC 454 at [43], [46], [131], [141], [165]–[166], [181]; (2011) 86 ATR 753 at 776–777 [56], 778–779 [59], 786 [76] (referred to in (2012) 206 FCR 329 at 334–335 [11]); (2012) 206 FCR 329 at 332 [6(e)]. 15 [2002] VSC 454 at [59]–[60], [64]–[65], especially [165]; Edmonds v Donovan (2005) 12 VR 513 at 532 [43], 538 [60], especially 532 [45] and 536 [55] per Phillips JA; (2011) 86 ATR 753 at 773 [48]. plaintiffs of their intentions, especially when the opportunity presented itself16. The basis upon which Warren J ordered Edmonds, Cahill and KLCC to pay equitable compensation to the appellant and other members of the joint venture was set out in a passage from her judgment quoted by Jessup J17: "I am satisfied that it will be necessary for an assessment to be made for an amount of equitable compensation to be paid to the plaintiffs, except Disctronics, by Edmonds, Cahill and KLCC after the deduction of outstanding debts, including any adjustments to allow for ANZ [KLCC's lender], in an amount equivalent to four-sixths of the value of the golf course and, after the ascertainment of profits, an amount equivalent to four-sixths of the profit derived from the golf course. This component of the compensation is not the taking of an account in the strict sense, rather, an assessment of the opportunity that the plaintiffs lost. These amounts ought be calculated from the date of formal acceptance of the offer by the Kingston Group on 9 September 1999 to the date of final orders. They ought place the plaintiffs, excluding Disctronics, in the position they would have been save for the breaches of fiduciary duty by Edmonds and Cahill." Jessup J, in the appeal against the Commissioner's amended assessment, held that the effect of the determinations made by Warren J was that there was no agreement, as between the individual joint venturers, that Disctronics would be accepted as the purchaser to whom the golf course was on-sold if it elected to be that party18. The appellant and his associates could not insist, as against Edmonds and Cahill, that the course be on-sold to Disctronics rather than to some third party who might have been prepared to pay more19. Warren J made final orders on 3 December 200220. Her Honour found against Disctronics in the caveat proceeding, held that the caveat had been lodged 16 [2002] VSC 454 at [68], [156], [159], [161]–[162], [166]; (2005) 12 VR 513 at 534–535 [50]–[52], 538 [61], especially 535–536 [54]. 17 (2011) 86 ATR 753 at 779 [60] quoting [2002] VSC 454 at [216]. 18 (2011) 86 ATR 753 at 778 [59]. 19 (2011) 86 ATR 753 at 778 [59]. 20 Disctronics Ltd v Edmonds (No 2) [2002] VSC 534. without reasonable cause and granted compensation to KLCC in the amount of Proceedings in the Court of Appeal of Victoria Edmonds, Cahill and KLCC appealed to the Court of Appeal of the Supreme Court of Victoria against the orders for equitable compensation made by Warren J in the main proceeding. The appellant, Donovan, Quinert and Bucknall cross-appealed against Warren J's refusal to order an account and against the award of equitable compensation in the main proceeding as being unduly generous to the unsuccessful defendants. Disctronics appealed against the orders for compensation made against it in the caveat proceeding. Judgment in the appeals was delivered on 22 February 200522. The appeal by Edmonds, Cahill and KLCC was dismissed23. The cross-appeal was allowed but only for the purpose of adjusting Warren J's award of compensation24. Disctronics' appeal against the compensation order in the caveat proceeding was allowed25. Phillips JA, with whom Winneke P and Charles JA agreed, observed in the course of his judgment that Disctronics was not a member of the joint venture established on 20 July26. It was not the beneficiary of the fiduciary duties of which Edmonds and Cahill stood in breach. Those duties were owed only as between members of the joint venture. On that basis, Disctronics was not a proper plaintiff for equitable relief against Edmonds, Cahill and KLCC. Further, at the time when the caveat was lodged, Disctronics had no interest of its own, even in equity, in the property itself. It had no claim as a plaintiff to compensation for breach of fiduciary duties. Nevertheless, Phillips JA held that the caveat had not been lodged without reasonable cause27. 21 [2002] VSC 534 at [47]–[49]. 23 (2005) 12 VR 513 at 516 [1] per Winneke P, 516 [3] per Charles JA, 546 [85] per Phillips JA. 24 (2005) 12 VR 513 at 516 [1] per Winneke P, 516 [3] per Charles JA, 546 [85] per Phillips JA. 25 (2005) 12 VR 513 at 516 [2] per Winneke P, 516 [3] per Charles JA, 552 [103] per Phillips JA. 26 (2005) 12 VR 513 at 549–550 [95] per Phillips JA (Winneke P at 516 [1] and Charles JA at 516 [3] agreeing). 27 (2005) 12 VR 513 at 550 [96]. Under the judgment of Warren J, as varied by the Court of Appeal, the appellant's share of the award of equitable compensation, including interest, was $861,853.35. The money was paid to Disctronics by the solicitors for the appellant and the other successful plaintiffs in the Supreme Court proceedings. Disctronics declared the amounts received as assessable income for tax purposes. Proceedings in the Federal Court In proceedings brought by the appellant under s 14ZZ of the Taxation Administration Act 1953 (Cth), Jessup J held that the appellant had received the award of equitable compensation as a constructive trustee for Disctronics28. That judgment was reversed by the Full Court, which held that, on the evidence accepted by the primary judge, the appellant's responsibility was to have Disctronics accepted as an equity participant by the other joint venturers29. It was in that circumstance that the appellant agreed to rebate his share of the "day- one" profit to Disctronics30. The Full Court said31: "Mr Howard's obligation to Disctronics only involved Mr Howard using his reasonable endeavours to have it become purchaser, which obligation he discharged." The Full Court held that Disctronics was simply a vehicle to be used in the event of certain contingencies occurring32. The company's only interest would have arisen if and when the equity required for the purchase of the golf course fell below $1,500,000. Their Honours said33: "In these circumstances, there could be no conflict of interest in the way contended for by Mr Howard, and no breach of Mr Howard's fiduciary duty to Disctronics. Accordingly, the award of damages in question had the character of assessable income in Mr Howard's hands, and was not received by him as trustee." 28 (2011) 86 ATR 753. 29 (2012) 206 FCR 329 at 336 [18]. 30 (2012) 206 FCR 329 at 336 [18]. 31 (2012) 206 FCR 329 at 336 [18]. 32 (2012) 206 FCR 329 at 337 [19]. 33 (2012) 206 FCR 329 at 337 [20]. The Full Court correctly rejected an argument that the litigation agreement reflected a pre-existing constructive trust or effected an assignment of the rights to the fruits of the litigation. In that respect their Honours said34: "This was an argument not raised before the primary judge. In any event, it has no substance. The effect of the litigation agreement cannot be to prevent the award of equitable damages from being derived by Mr Howard in his hands beneficially: see Booth v Commissioner of Taxation (1987) 164 CLR 159 at 167 (per Mason CJ)." The issues in the appeal The issues in the appeal are: Whether the appellant received the sum of equitable compensation awarded by the Supreme Court as constructive trustee for Disctronics. If not, whether the appellant had assigned the right to receive that amount such that the income was not derived by him beneficially. Whether the appellant incurred liability in respect of the costs of the proceedings in the Supreme Court which should properly have been taken into account in ascertaining the amount of any gain made by the appellant and, alternatively, whether those costs were an outgoing of a revenue nature incurred in gaining the income comprised in the award made by the Supreme Court. The appellant's fiduciary obligation to Disctronics The appellant submitted that, from the time it was decided by the directors to try to involve Disctronics as the end purchaser, it was not open to him to appropriate any benefit arising from the investment or the opportunity to invest in the golf course project. He was, he argued, constructive trustee of any benefit which accrued from the opportunity. That submission rested upon a broadly stated fiduciary obligation. In making it, the appellant had to confront the difficulty that the golf course project was at all relevant times a joint venture between himself and five others, who owed fiduciary duties to each other in relation to the joint venture. It was neither conceived nor pursued by the appellant or the other Disctronics directors in their capacity as directors. Nor was there any apparent conflict between the interest of the appellant as a member of the joint venture, and his fiduciary duties as a director of Disctronics. 34 (2012) 206 FCR 329 at 334 [9]. The respondent submitted that: The appellant acted solely in his own capacity in the joint venture from May 1999 until 13 or 14 July 1999, at which time the appellant, Donovan and Quinert decided to pursue the golf course project as a possible investment opportunity for Disctronics as the ultimate purchaser, subject to the proviso that the equity investment of the company not exceed The appellant's fiduciary relationship with Disctronics operated in relation to the golf course project only because of and consistently with the terms of the agreement made between the directors in London in July 1999. He owed a fiduciary duty to try to make the opportunity to acquire the golf course available to Disctronics and to bring about that acquisition. In early August 1999 it became clear that the conditions for Disctronics' possible involvement as the purchaser from the joint venture could not be met. Edmonds and Cahill would not accept Disctronics as the ultimate purchaser. The acquisition by Disctronics not being possible, the appellant's duty to the company in relation to the project was at an end. The relationship of director and company is one of a class of accepted relationships which attract proscriptive fiduciary duties, including a duty "not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict."35 Those proscriptive duties attach to the powers and discretions exercised by company directors. As fiduciary agents, directors must exercise their powers "honestly in furtherance of the purposes for which they are given"36 and not for their personal benefit or gain or for that of a third party37. The protective rationale for the proscriptive duties attaching to a fiduciary's powers was explained by Mason J in Hospital Products Ltd v United 35 Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ, see also at 137 per Gummow J; [1996] HCA 57. 36 Richard Brady Franks Ltd v Price (1937) 58 CLR 112 at 142 per Dixon J, see also at 135 per Latham CJ; [1937] HCA 42. 37 R v Byrnes (1995) 183 CLR 501 at 517 per Brennan, Deane, Toohey and Gaudron JJ; [1995] HCA 1. States Surgical Corporation38, and quoted with approval in Pilmer v Duke Group Ltd (in liq)39: "It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed". Fiduciary duties apply beyond the exercise of powers and discretions flowing from the fiduciary relationship. A fiduciary cannot in his or her personal capacity be the subject of a conflict of interest. The general principle of equity, by reference to the liability to account, was stated by Deane J in Chan v Zacharia40 and was echoed in the unanimous judgment of the Court in Warman International Ltd v Dwyer41: "A fiduciary must account for a profit or benefit if it was obtained either (1) when there was a conflict or possible conflict between his fiduciary duty and his personal interest, or (2) by reason of his fiduciary position or by reason of his taking advantage of opportunity or knowledge derived from his fiduciary position". The objective of the rule is "to preclude the fiduciary from being swayed by considerations of personal interest and from accordingly misusing the fiduciary position for personal advantage"42. The appellant's case was based upon the first limb of the principle stated in Warman and later restated in Pilmer43: 38 (1984) 156 CLR 41 at 97; [1984] HCA 64. 39 (2001) 207 CLR 165 at 196 [70] per McHugh, Gummow, Hayne and Callinan JJ; [2001] HCA 31. 40 (1984) 154 CLR 178 at 199; see also Keith Henry & Co Pty Ltd v Stuart Walker & Co Pty Ltd (1958) 100 CLR 342 at 350; [1958] HCA 33. 41 (1995) 182 CLR 544 at 557 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ; [1995] HCA 18. 42 (1995) 182 CLR 544 at 557–558 per Mason CJ, Brennan, Deane, Dawson and 43 (2001) 207 CLR 165 at 199 [78] per McHugh, Gummow, Hayne and Callinan JJ quoting in part Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103 per Mason J. "the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict' between personal interests of the fiduciary and those to whom the duty is owed." Despite their broad judicial formulations fiduciary duties are not infinitely extensible. That point was made in Chan v Zacharia44, which concerned the content of the fiduciary duties of members of a partnership inter se. The limits of those duties were to be determined by the character of the venture for which the partnership existed, the express agreement of the parties and the course of dealings actually pursued by the firm45. The scope of the fiduciary duty generally in relation to conflicts of interest must accommodate itself to the particulars of the underlying relationship which give rise to the duty so that it is consistent with and conforms to the scope and limits of that relationship. It is to be "moulded according to the nature of the relationship and the facts of the case"46. By way of example, company directors are frequently shareholders. The decisions they take as directors may therefore affect their personal interests. They do not breach their fiduciary obligations merely because in promoting the interests of the company they are also promoting their own47. On the other hand, a decision taken by directors to advantage themselves other than as members of the general body of shareholders would constitute an abuse of fiduciary powers48. 44 (1984) 154 CLR 178. 45 Chan v Zacharia (1984) 154 CLR 178 at 196 per Deane J. 46 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 102 per Mason J referred to in Clay v Clay (2001) 202 CLR 410 at 432–433 [46] per Gleeson CJ, McHugh, Gummow, Hayne and Callinan JJ; [2001] HCA 9; United Dominions Corporation Ltd v Brian Pty Ltd (1985) 157 CLR 1 at 11 per Mason, Brennan and Deane JJ (Gibbs CJ generally agreeing at 5), see also at 15 per Dawson J; [1985] HCA 49; Breen v Williams (1996) 186 CLR 71 at 135 per 47 Hirsche v Sims [1894] AC 654 at 660–661 referred to in Mills v Mills (1938) 60 CLR 150 at 164–165 per Latham CJ, 170 per Rich J (Evatt J agreeing at 188), 179 per Starke J; [1938] HCA 4; Ngurli Ltd v McCann (1953) 90 CLR 425 at 440 per Williams ACJ, Fullagar and Kitto JJ; [1953] HCA 39. 48 Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL (1968) 121 CLR 483 at 493–494 per Barwick CJ, McTiernan and Kitto JJ; [1968] HCA 37. Overbroad assertions of fiduciary duties, uninformed by a close consideration of the facts and circumstances of the particular case, are sometimes made for reasons which have nothing to do with the protective rationale of those duties. The plurality in Maguire v Makaronis referred to49: "attempts to throw a fiduciary mantle over commercial and personal relationships and dealings which might not have been thought previously to contain a fiduciary element." The forensic purposes of such attempts may include the availability of advantageous equitable remedies and the avoidance of stringent time limits. The appellant attempted to stretch the fiduciary mantle attaching to his position as director to his membership of the joint venture. He did so in order to defeat a claim that he was liable to pay income tax on the amount of equitable compensation awarded to him in the Supreme Court of Victoria. His purpose had nothing to do with the vindication or protection of Disctronics' interests. Taking the appellant's submissions at face value and disregarding his forensic purpose, it is important to heed the caution given by Deane J in Chan v Zacharia against excluding "the adjustment of general principles to particular facts and changing circumstances" and thereby converting equity into "an instrument of hardship and injustice in individual cases"50. If there is no possible conflict between personal interest and fiduciary duty, and if the gain or benefit is not obtained by use or by reason of the fiduciary position, the fiduciary is not liable to account for the gain or benefit. The directors of Disctronics51, acting in their personal capacities, conceived of a profit-making venture in which they would be involved in their personal capacities. Their entry into the joint venture did not involve the use of any knowledge or opportunity derived from their positions as directors. Acting as directors, they decided that the company could be benefited by being brought in as the ultimate purchaser of the golf course. The decision of the directors did not establish any basis, in principle, to impress their personal interests in the joint venture with fiduciary obligations to Disctronics in the event that it did not acquire the golf course. There is no suggestion that that decision involved an exercise of their powers as directors other than in the interests of the company. It 49 (1997) 188 CLR 449 at 463–464 per Brennan CJ, Gaudron, McHugh and Gummow JJ; [1997] HCA 23. 50 (1984) 154 CLR 178 at 205. 51 The relevant directors being the appellant, Donovan and Quinert, not including was the investment potential of the acquisition from Disctronics' perspective that led them to propose that it purchase the golf course for a price which was not necessarily as good a price as would have been obtained from an arms-length purchaser. That this was so was evidenced by the adverse reaction of Edmonds and Cahill and their eventual departure from the joint venture. Their interest was, of course, in sharing in the "day-one" profit, which would not be realised if Disctronics were to acquire the golf course and hold it as lessor to Spotless. The other joint venturers could not insist upon this change to the foundation of the relationship between the joint venturers. The directors never regarded the opportunity to garner the "day-one" profit as an opportunity which Disctronics might exploit. The present case is thus radically distinguished from the line of authority of which Keech v Sandford52 is the leading case. Once it became clear that Edmonds and Cahill would not agree to Disctronics as the ultimate purchaser, the potential for Disctronics to derive any benefit from the joint venture was at an end. By that time, or at least by the time Edmonds and Cahill had diverted the project to their own use, the appellant's duty to pursue any benefit or advantage for Disctronics by procuring its participation in the joint venture project could not further be performed. And the appellant did not obtain any gain or profit before these events occurred. These matters are sufficient to defeat the appellant's primary contention. The appellant fails upon the first and principal issue in the appeal. The litigation agreement The appellant submitted that the litigation agreement confirmed the constructive trust for which he contended in his primary submissions. For the reasons already given, there was no constructive trust of the equitable compensation awarded to the appellant. The appellant argued in the alternative that by the litigation agreement he assigned his right to the amount of the equitable compensation ultimately received in 2005 and not the sum itself. As a matter of construction of the agreement, that argument, which was made for the first time in the Full Court, should not be accepted. Under the terms of the agreement the appellant, Donovan and Quinert assigned "any award of damages (whether on revenue or capital account), costs or interest made in their favour as a consequence of their participation in the joint venture or arising out of the proceedings and the ultimate outcome thereof". The agreement did not assign the appellant's interest in the joint venture nor in the cause of action arising out of the breach of 52 (1726) Sel Cas T King 61 [25 ER 223]. fiduciary duties by Edmonds and Cahill and asserted in the main proceeding in the Supreme Court. It did not involve an assignment of a chose in action. This Court in Federal Commissioner of Taxation v Everett53 distinguished between an equitable assignment of present property for value, carrying with it a right to future income, and a like assignment of mere future income, dissociated from the proprietary interest with which it is ordinarily associated. The latter takes effect "when the entitlement to that income crystallizes or when it is received, and not before."54 Mason CJ observed in Booth v Federal Commissioner of Taxation55: "[I]n some cases it may be impossible to identify a present right to future income divorced from the proprietary right which generates that future income. In such cases an attempted assignment deals with future property or an expectancy and operates to vest the future income in the assignee as and when that future income accrues due, but not before it accrues due. Accordingly, the assignment would not be effective to prevent the income being derived or being deemed to be derived by the assignor." As the respondent submitted, that is this case. The appellant's submissions with respect to the litigation agreement should be rejected. The off-set of costs The appellant submitted shortly that if this Court were to otherwise dismiss his appeal, the amount of his assessable income from the judgment of the Supreme Court of Victoria should be reduced by what he contended was his share of the legal costs incurred in prosecuting the Supreme Court proceedings. The legal costs have been recouped from the amount paid to Disctronics in 2005. the appellant While the respondent, in the Full Federal Court, accepted that the legal costs the award of equitable incurred by compensation would have been a deduction from his income, he submitted that there was no evidence that the appellant had in fact incurred any costs. The legal costs were paid by Disctronics, which had presumably claimed a deduction. The Full Court accepted the respondent's contention56. The only evidence of in recovering 53 (1980) 143 CLR 440; [1980] HCA 6. 54 (1980) 143 CLR 440 at 450–451 per Barwick CJ, Stephen, Mason and Wilson JJ. 55 (1987) 164 CLR 159 at 167–168; [1987] HCA 61. 56 (2012) 206 FCR 329 at 337 [23]. expenditure on legal costs was of expenditure by Disctronics57. There was no evidence to demonstrate that the appellant had incurred any expense, by way of reimbursing Disctronics or otherwise, or that any such expenditure had occurred in the 2005 income year58. The appellant pointed out that the compensation was paid directly to Disctronics and the costs recouped from that payment. Disctronics' payments were said to have discharged the obligations of the plaintiffs. The respondent argued that the latter submission had not been made out. Disctronics was itself a litigant in the proceedings. The respondent referred to the appellant's affidavit of 27 May 2010 in the Federal Court, in which he stated that "[o]n a net basis Disctronics thus expended an amount in excess of $1.2 million in legal fees and disbursements in relation to the proceedings before the Supreme Court of Victoria and Court of Appeal." The appellant submitted in reply that if he were lawfully entitled to the equitable compensation he would have been obliged to recoup the costs incurred by Disctronics for his benefit. The appellant's submissions should not be accepted. He did not point to any error in what the Full Court had held nor suggest that it had failed to address submissions of the kind which he now puts to this Court. Given that Disctronics was a party in its own right, and given the terms of the litigation agreement, under which, in any event, Disctronics was to bear the relevant legal costs, there is no basis upon which this Court could conclude that the appellant had incurred any liability in relation to them. Conclusion For the preceding reasons, the appeal should be dismissed with costs. 57 (2012) 206 FCR 329 at 337 [24]. 58 (2012) 206 FCR 329 at 337 [24]. Hayne Crennan HAYNE AND CRENNAN JJ. In the Supreme Court of Victoria, the appellant taxpayer (and others) sued, and obtained judgment59, for equitable compensation from Christopher Edmonds and Peter Cahill for breaches of fiduciary duties. Messrs Edmonds and Cahill ("the defaulting venturers") were found to have breached fiduciary duties they owed the appellant and three others (Kevin Donovan, Michael Quinert and Richard Bucknall) in connection with a joint venture the six had agreed to undertake. The plaintiffs alleged that the defaulting venturers had diverted to their own use a business opportunity being pursued by the joint venture. Disctronics Ltd, a company of which the appellant and Messrs Donovan and Quinert were directors and shareholders, was a plaintiff in the Supreme Court proceedings. Its claim that the defaulting venturers owed it fiduciary duties was rejected. The Commissioner of Taxation assessed the appellant to income tax on the basis that the amount the appellant received in satisfaction of the judgment was part of his assessable income for the relevant year (2005). The appellant alleged that he received the amount as trustee for Disctronics and that it was, therefore, incorrectly included60 in his assessable income. The appellant appeals to this Court against orders of the Full Court of the Federal Court of Australia (Middleton, Perram and Dodds-Streeton JJ) allowing61, in part, the Commissioner's appeal against orders of a single judge of the Federal Court (Jessup J). The Full Court held, contrary to the decision62 of the trial judge, that the sum received by the appellant in satisfaction of the judgment of the Supreme Court of Victoria was correctly included in his assessable income. The appeal to this Court should be dismissed. The appellant's argument in support of the appeal had two principal strands. First, he submitted that the award of compensation made in his favour was a gain to him arising from a project in which Disctronics sought to invest and that he could not, consistently with his fiduciary duties to the company, retain that gain for himself to the exclusion of the company. Accordingly, so the argument continued, what the appellant received came to him as constructive 59 Disctronics Ltd v Edmonds [2002] VSC 454; Disctronics Ltd v Edmonds (No 2) [2002] VSC 534; Edmonds v Donovan (2005) 12 VR 513. 60 Income Tax Assessment Act 1936 (Cth), ss 6(1), definition of "trustee", 96 and 97. 61 Howard v Federal Commissioner of Taxation (2012) 206 FCR 329. 62 Howard v Federal Commissioner of Taxation (No 2) (2011) 86 ATR 753. Hayne Crennan trustee for Disctronics. Second, he submitted that an assignment agreement ("the litigation agreement") he had made with Disctronics and two of the other plaintiffs at about the time that the Supreme Court proceedings were instituted "operated as confirmation of the constructive trust arising from the directors' duties". Alternatively, he submitted that the agreement effected an assignment of the appellant's right to receive the amount of equitable compensation rather than the proceeds of that action. The appellant made a third, but subsidiary, submission, namely that if his principal arguments were rejected, the Commissioner's assessment was excessive because the appellant should have been, but was not, allowed a deduction for the legal costs incurred in prosecuting the claim for equitable compensation. This submission should be rejected for the reasons given by French CJ and Keane J. As Windeyer J said in Norman v Federal Commissioner of Taxation63, "[b]efore examining the transaction[s] in detail, it is as well to consider the legal doctrines around which the argument revolved". Fiduciary duties A director of a company owes statutory and other duties to the company. At the time of the events and transactions which lie behind the issues in this case, the statutory duties were set out in s 232 of the Corporations Law64. But, as s 232(11) of the Corporations Law made plain, that section had effect65 "in addition to, and not in derogation of, any rule of law relating to the duty or liability" of a director. Those other duties included fiduciary duties. As Dixon J said in Mills v Mills66, "[d]irectors of a company are fiduciary agents". Because the appellant was a director of Disctronics at all times material to this matter, he owed fiduciary (and other) duties to the company. As a director, the appellant was bound not to obtain any unauthorised benefit from the relationship and not to be in a position of conflict. These 63 (1963) 109 CLR 9 at 23-24; [1963] HCA 21. 64 See now Corporations Act 2001 (Cth), Pt 2D.1. 65 cf Corporations Act 2001, s 179(1). 66 (1938) 60 CLR 150 at 185; [1938] HCA 4. Hayne Crennan obligations are peculiar to fiduciaries67. The obligations are68 proscriptive, not prescriptive. They are not69 quasi-tortious duties to act solely in the best interests of the principal. Nor are they obligations directed only to providing redress for loss or damage proved to have been suffered by the person to whom the duties are owed. Whether there are two distinct obligations, or they are properly to be seen70 as "one 'fundamental rule' [which] embodies two themes", need not be explored. It is convenient, for the purposes of this case, to treat the obligations as if they are distinct, while recognising that both may, and often will, be engaged by the one set of facts. In this case, the appellant did not point to or rely upon any exercise of his powers as a director of Disctronics as being relevant to the arguments he advanced. No question arises in this case, therefore, of the application of the obligation or obligations, often compendiously described as the duty of directors to act in the interests of the company as a whole, examined and applied in Harlowe's Nominees Pty Ltd v Woodside (Lakes Entrance) Oil Co NL71. Rather, the appellant asserted that he was bound in equity to hold the compensation he received for Disctronics either because his duty and his interest conflicted or because the compensation was an unauthorised benefit obtained from the relationship. Conflict of duties or conflict of duty and interest It is well established72 that "[i]t is an inflexible rule of a Court of Equity that a person in a fiduciary position ... is not, unless otherwise expressly 67 Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ; [1996] HCA 57. See also Austin, "Moulding the Content of Fiduciary Duties", in Oakley (ed), Trends in Contemporary Trust Law, (1996) 153 at 156; Conaglen, Fiduciary Loyalty: Protecting the Due Performance of Non-Fiduciary Duties, (2010) at 68 Breen v Williams (1996) 186 CLR 71 at 113 per Gaudron and McHugh JJ. 69 Pilmer v Duke Group Ltd (In liq) (2001) 207 CLR 165 at 198 [74]; [2001] HCA 31. 70 Chan v Zacharia (1984) 154 CLR 178 at 198 per Deane J; [1984] HCA 36. 71 (1968) 121 CLR 483; [1968] HCA 37. 72 Bray v Ford [1896] AC 44 at 51. Hayne Crennan provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict". The majority in Pilmer v Duke Group Ltd (In liq) said73 of this obligation that "the fiduciary is under an obligation, without informed consent, not to promote the personal interests of the fiduciary by making or pursuing a gain in circumstances in which there is 'a conflict or a real or substantial possibility of a conflict'[74] between personal interests of the fiduciary and those to whom the duty is owed" or a conflict between competing duties. But, as the majority in Pilmer also pointed out75, it is necessary to recognise, and give due weight to the fact, that different minds may reach different conclusions as to the presence or absence of a real possibility of conflict between duty and interest or duty and duty. That is, the doctrine cannot "be inexorably applied and without regard to the particular circumstances of the situation"76. It follows that the working out of the application of the rule to company directors is not achieved by the bare repetition of its terms. Much closer attention must be given to the duties, interests and alleged manner of conflict than is given by simply observing that directors owe fiduciary duties. It is necessary to identify the duties or interests which are said to conflict or present a real possibility of conflict. Obtaining an unauthorised benefit It is equally well established that a fiduciary cannot profit from the relationship. A fiduciary must account for a profit or benefit obtained or received by reason or by use of the fiduciary position or by reason or by use of any opportunity or knowledge resulting from the position. This obligation is engaged when a company director diverts a business opportunity of the company to his or her personal advantage. It may be engaged 73 (2001) 207 CLR 165 at 199 [78]. 74 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 103 per Mason J; [1984] HCA 64. See also Clay v Clay (2001) 202 CLR 410 at 432-433 [46]-[47]; [2001] HCA 9. 75 (2001) 207 CLR 165 at 199 [79]. 76 Phelan v Middle States Oil Corporation 220 F 2d 593 at 602 (1955) per Judge Learned Hand, cited by Mason J in Hospital Products (1984) 156 CLR 41 at 104 and the majority in Pilmer (2001) 207 CLR 165 at 199 [79]. Hayne Crennan by other circumstances. A director's diversion of the company's business opportunity will also commonly (perhaps inevitably) engage the director's obligation not to be in a position of conflict. But regardless of whether the obligation to avoid conflicts is engaged, a critical question presented for consideration in relation to the obligation not to obtain unauthorised benefits will be whether the director has obtained a benefit by reason or by use of the relationship between that director and the company. That question requires careful attention to how and why it is said that the director obtained a benefit by reason or by use of the relationship. And as Regal (Hastings) Ltd v Gulliver77 demonstrates, if the opportunity came to the director in the course or as a result of holding office as a director, it is not to the point to establish that the company could not or would not have exploited the opportunity. In Regal (Hastings), the directors of the company were held bound to account to the company for their profit despite the company's inability to raise the capital necessary to undertake the venture from which the directors made their profit. The facts It is necessary to state, in summary form, the central facts relevant to the appellant's arguments. It is convenient to do so by reference to the findings made in the Supreme Court proceedings. Those findings were not challenged by the appellant in his proceedings against the Commissioner. In the Supreme Court proceedings, the appellant and other plaintiffs (including Disctronics) alleged that, in early 1999, Messrs Donovan and Bucknall conceived an investment idea involving buying an underperforming public golf course, leasing it to a financially sound operator and using the rental stream not only to fund the acquisition but also to generate a return on investment. By a series of intermediate steps and discussions, the details of which need not be traced, the appellant, Mr Quinert and the defaulting venturers were informed of, and expressed interest in pursuing, the idea. (The appellant and Messrs Donovan and Quinert were all associated with a firm of Melbourne solicitors.) During the discussions, there was talk about Disctronics participating in the exploitation of the idea. Disctronics was a company used by the appellant 77 [1967] 2 AC 134n. See also Warman International Ltd v Dwyer (1995) 182 CLR 544 at 558 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ; [1995] HCA 18. Hayne Crennan and Messrs Donovan and Quinert as an investment vehicle and each was a shareholder and director of the company. During these discussions, it was proposed that Disctronics would provide up to $1.5 million equity in the project. In the Supreme Court proceedings, the trial judge (Warren J) found78 that on 20 July 1999 "the parties resolved to embark on a joint venture involving Donovan, [the appellant], Quinert, Bucknall [and the defaulting venturers] in quite loose terms so as to acquire" the golf course. Her Honour found79 that "[t]he joint venture did not encompass Disctronics as a member" (emphasis added). The minutes of the meeting at which Warren J found the joint venture to be constituted recorded that the parties intended that the golf course, once bought and let to a tenant, would be sold and the resulting profit divided between the six venturers. This profit became known in the proceedings as a "day-one profit" divisible between the venturers. Warren J found80 that, at or soon after the making of the joint venture agreement, the venturers agreed upon the identity of the proposed tenant of the golf course and the proposed tenant agreed upon the terms on which it would take a lease (including the amount of rent it would pay). Her Honour found81 that the venturers knew that the owner of the golf course was willing to sell the land for a price which the venturers were willing to pay. Her Honour further found82 that the venturers had agreed that it would be necessary to raise both debt and equity finance but had not agreed upon who would provide the equity. Thereafter the venturers disagreed about how the project should be implemented. The appellant and others wanted Disctronics to participate, but the defaulting venturers did not agree. At least some of the proposals for Disctronics' involvement would have reduced the "day-one profit" available for division between the participants. The defaulting venturers diverted the venture to their own use by procuring a company which they controlled to buy and then lease the golf course. 78 [2002] VSC 454 at [43]. 79 [2002] VSC 454 at [43]. 80 [2002] VSC 454 at [43], [45]-[46]. 81 [2002] VSC 454 at [47]. 82 [2002] VSC 454 at [46]. Hayne Crennan Warren J ordered83 that the defaulting venturers (and the company to which they diverted the venture) pay the plaintiffs, but not Disctronics, equitable compensation in an amount based84 on the profit arising from the acquisition, management and eventual sale of the golf course. The defaulting venturers appealed to the Court of Appeal against the orders of Warren J. The Court of Appeal did not disturb any of the relevant findings made by Warren J and dismissed the defaulting venturers' appeal. The Court of Appeal did not disturb her Honour's conclusion that Disctronics was not entitled to equitable compensation. The Court accepted85 that at least Mr Donovan had intended that Disctronics would, if possible, be the ultimate purchaser of the tenanted golf course and that the proposals to bring about that result which were made after the formation of the joint venture were not repudiatory breaches of the joint venture agreement. It is, therefore, convenient to consider the appellant's appeal to this Court about his liability to income tax on the footing that Disctronics sought, at all times, to purchase the golf course subject to the tenancy which the joint venture sought to procure. For the purposes of deciding the appellant's liability to income tax, it is not necessary to explore why the joint venturers did not agree on Disctronics' involvement in the project. Further, it is at least convenient, and for the reasons given earlier86, it may well be legally necessary87, to ignore whether Disctronics could or would have reached terms for its involvement in the project which would have been commercially acceptable to it or both to it and to all of the participants in the joint venture. That is, it is convenient, and may be legally necessary, to put aside any consideration of some matters on which the Full Court of the Federal Court relied88 in reaching the decision against which the appellant appeals to this Court. In particular, whether the necessary equity investment would have exceeded the sum of $1.5 million which Disctronics had 83 [2002] VSC 454 at [216]-[217]; [2002] VSC 534. 84 [2002] VSC 534 at [6], [42]. 85 (2005) 12 VR 513 at 526-527 [30]-[31], 532-533 [45] per Phillips JA (Winneke P 87 Regal (Hastings) [1967] 2 AC 134n. 88 (2012) 206 FCR 329 at 336-337 [19]. Hayne Crennan available, and whether the conditions which Disctronics put upon its involvement could be or were met, should be treated as irrelevant. The appellant's argument The appellant's argument that he received the amount allowed as equitable compensation as constructive trustee for Disctronics proceeded in four steps. First, he submitted that a director has a fiduciary duty not to put his or her own interests in conflict with those of the company of which he or she is a director. Second, he submitted that "any gain which comes to [the director] from any venture in which the company has decided to invest is received as constructive trustee for the company" (emphasis added). This constructive trust, the appellant submitted, subsists whether or not the director breaches his or her duty. Third, the appellant submitted that Disctronics "pursued the investment in the golf course until final disposition of the Supreme Court proceedings" and that his duties to Disctronics "subsisted while it continued to pursue the investment". Fourth, the appellant submitted that the award of equitable compensation made by the Supreme Court was a gain to the appellant arising from the project in which Disctronics sought to invest. The fact that Disctronics could not, or did not, make the investment was said to be irrelevant. It followed, so the appellant argued, that, consistently with his duties to the company, the appellant could not retain the gain for himself to the exclusion of the company and what he received came to him as constructive trustee for the company. As expressed, the appellant's argument might be understood as turning on the proposition that the amount received as equitable compensation was a gain arising from a venture or project of Disctronics'. These reasons will show that this proposition was not established. But as the argument was developed, the appellant placed chief weight upon the proposition that, as a director of Disctronics, he was obliged not to put his own interests in conflict with those of the company. It is necessary, in these circumstances, to consider each of the obligations which were identified at the outset of these reasons: the obligation not to obtain unauthorised benefits and the obligation to avoid conflict of duties or of duty and interest. Before doing so, it is convenient to mention one other aspect of the matter with a view to putting it aside from further consideration. Gain or profit The gain or profit to which the appellant pointed was the appellant's receipt of equitable compensation in satisfaction of the judgment he (with others) had obtained against the defaulting venturers. It is convenient to treat the appellant's receipt of his proportionate part of the judgment sum as a gain or profit of a relevant kind without pausing to examine whether or how that is so. Hayne Crennan Given that the amount of compensation he was awarded was assessed89 by reference to the profit obtained by the defaulting venturers, it may very well be right to describe it (as these reasons will) as a "gain or profit", but that need not be decided in this case. As will later appear, it is also convenient to treat that gain or profit as arising90 when the defaulting venturers diverted the opportunity to pursue the venture to their own use by procuring the purchase of the golf course. Certainly, the gain or profit arose no earlier than then, and it is not necessary to examine whether it is better to treat it as arising only upon the Supreme Court's making its award of equitable compensation or upon that judgment's being satisfied. Again, these are matters which need not be decided. Obtaining an unauthorised benefit in this case? The appellant asserted that "the project" was one in which Disctronics sought to invest and, in at least some parts of the argument, the appellant appeared to treat that proposition as sufficient to engage the obligation not to obtain an unauthorised benefit from the relationship constituted by the appellant's being a director of Disctronics. The opportunity to invest in the golf course was, the appellant submitted, "a maturing business opportunity" which Disctronics was "actively pursuing". It was not open to the appellant, the submission continued, "to appropriate for his own benefit" either that opportunity or any benefit which came to him from it. It may be noted that, as expressed, the appellant's argument invites several further questions in order to reveal its precise content. So, for example, what exactly was the relevant "opportunity"? What was meant by saying that the opportunity was "maturing"91? Yet, leaving aside questions of this kind, the underlying proposition upon which this aspect of the appellant's argument depended was that for him to obtain and retain the equitable compensation which was awarded would constitute his diverting to his use a business opportunity which was properly described as Disctronics'. So expressed, the argument might be thought to have depended upon the engagement of some novel fiduciary principle about "diversion of opportunity" 89 [2002] VSC 454 at [216]; [2002] VSC 534 at [6], [42]. 90 cf Chan v Zacharia (1984) 154 CLR 178 at 199 per Deane J. 91 cf Canadian Aero Service Ltd v O'Malley [1974] SCR 592 at 607 per Laskin J; Pacifica Shipping Co Ltd v Andersen [1986] 2 NZLR 328 at 334, 338-339 per Hayne Crennan or some extension of existing principle. But at no point in the argument did the appellant suggest that his case depended upon engaging or developing any new principle. Rather, to the extent to which the appellant's argument depended upon notions of "appropriation" or "diversion", it sought principally to engage the obligation not to obtain unauthorised benefits. To the extent to which it depended upon the notion of Disctronics "actively pursuing" the opportunity, it sought principally to raise questions about conflict of duties or conflict of duty and interest. (Because the obligations intersect in their application, no more categorical statement can be made.) Asserting that Disctronics "sought" or "desired" to invest in "the project" (whether by becoming purchaser of the tenanted golf course or in some other role) does not demonstrate that the appellant's gain or profit was an unauthorised gain or profit which he held on trust for Disctronics. Instead, it is necessary to ask92 whether the identified gain or profit was obtained or received by reason or by use of the appellant's position as a director of Disctronics or by reason or by use of any opportunity or knowledge resulting from that position. It was not. Unlike Regal (Hastings), the appellant made no transaction in the course of his management of Disctronics. He did not obtain or receive the gain or profit by using in any way "the position and knowledge possessed by [him] in virtue of" his office as director93. And he did not obtain or receive the gain or profit by reason or by use of any opportunity or knowledge resulting from his office as a director of Disctronics. So much may be taken to have been rightly recognised by the appellant's concession in oral argument that "the opportunity did not come to [him] by reason of his office". By suing for and recovering equitable compensation from the defaulting venturers the appellant did not obtain a gain or profit by reason or by use of his position as a director of Disctronics. The award of compensation was for the diversion by the defaulting venturers of the joint venturers' opportunity to pursue a profitable venture by buying and leasing the golf course. As is explained below, the opportunity thus diverted was the joint venturers', not Disctronics'. The compensation awarded was for the defaulting venturers' diversion of the joint venturers' opportunity, not of Disctronics'. The appellant did not obtain that (or any other) gain or profit by use of any opportunity or knowledge resulting from his position as a director of Disctronics. The obligation not to obtain an unauthorised benefit from the fiduciary relationship was not engaged. 92 Chan v Zacharia (1984) 154 CLR 178 at 198 per Deane J. 93 Regal (Hastings) [1967] 2 AC 134n at 153 per Lord Macmillan. Hayne Crennan Was the gain or profit obtained or received in circumstances where there existed a conflict between the appellant's duties or between his duty as a director of Disctronics and his personal interests? Was the gain or profit obtained or received where there was a real possibility of such conflict? Conflict of duties or conflict of duty and interest in this case? In Furs Ltd v Tomkies, Rich, Dixon and Evatt JJ said94: "If, when it is his duty to safeguard and further the interests of the company, [a director] uses the occasion as a means of profit to himself, he raises an opposition between the duty he has undertaken and his own self interest, beyond which it is neither wise nor practicable for the law to look for a criterion of liability." But as that passage and later judicial95 and academic96 writing makes plain, it is necessary to identify with care the subject matter over which the fiduciary obligations extend. The duty which a fiduciary owes may not (and usually will not) attach to every aspect of the fiduciary's conduct. The venture which the defaulting venturers were found to have wrongly turned to their account was a venture between the six individuals. It was not a venture to which Disctronics was a party. Disctronics had asserted in the Supreme Court that it, too, had been one of the joint venturers and that the defaulting venturers should compensate it as well, but its claim was rejected. The appellant did not contend to the contrary in his proceedings against the Commissioner. And it followed from what was held in the Supreme Court litigation (to which Disctronics was a party) that if the appellant had diverted to Disctronics the business opportunity which the joint venturers sought to pursue, he would have been as much in breach of his fiduciary obligations to his co-venturers as the defaulting venturers were when they diverted the opportunity to their own advantage. Having agreed upon a venture with his co-venturers, the appellant attempted to have the others agree to Disctronics playing a part in that venture, 94 (1936) 54 CLR 583 at 592; [1936] HCA 3. 95 See, for example, Breen v Williams (1996) 186 CLR 71 at 82 per Brennan CJ, citing Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 at 409 per Dixon J; [1929] HCA 24. 96 Finn, Fiduciary Obligations, (1977) at 233-234 [540]-[541]; Conaglen, Fiduciary Loyalty: Protecting the Due Performance of Non-Fiduciary Duties, (2010) at 179. Hayne Crennan not as one of the venturers, but as purchaser of the golf course land. If it was his duty to seek to introduce Disctronics to the venture, he performed that duty. But he was not able to have Disctronics play a part in any venture concerning the golf course before the defaulting venturers diverted the opportunity to pursue the venture to their own use by themselves procuring the purchase of the golf course. It may be assumed that, before the defaulting venturers diverted the venture to their own use, the appellant's duty as a director of Disctronics was to seek to have the company acquire the golf course at least cost to it. And his interest as a joint venturer was to use the land (whether by sale subject to tenancy, or holding the land as landlord) in whatever way would provide greatest profit at least cost. It may also be assumed that his duty to his co-venturers was to do his part in bringing about that result. If the venture had not been diverted by the defaulting venturers, there may have been some conflict between his duty and his interests. If Disctronics had bought the tenanted golf course, there may have been some conflict between his duty and his interests. But the venture was diverted. Disctronics did not buy the golf course. The appellant made no gain or profit before the joint venturers' opportunity for profit (and any hope which Disctronics may have had for profit) was foreclosed by the defaulting venturers' conduct. Once the defaulting venturers had diverted the opportunity, there was no conflict thereafter between the appellant's duties or between his duty and his interests and there was no real possibility of conflict. It may be accepted that, as the appellant argued, Disctronics did not take "No" for an answer, and continued to pursue its desire to be involved in the venture at all times up to and including both the institution of the Supreme Court proceedings and their prosecution to final judgment. But, as the terms of the litigation agreement (to which later reference will be made) reveal, Disctronics, the appellant and other directors of the company made common cause against the defaulting venturers in the Supreme Court proceedings. By agreement, the plaintiffs in that action (including Disctronics and the appellant) were represented by the same legal representatives (necessarily assuming identity of interest between the plaintiffs in their pursuit of the proceedings). The agreement provided that the plaintiffs would be represented in the proceedings at the cost of Disctronics. The directors of Disctronics agreed that they would pay any sum awarded in their favour to Disctronics. And the claims which the appellant pursued in the suit were not contingent upon Disctronics succeeding in its claims. From the time of the defaulting venturers' diversion of the venture, up to and including the final determination of the Supreme Court proceedings, the appellant's duties to Disctronics, his duties to his co-venturers and his personal interests were all aligned. The appellant had no conflict between his duties or his duty and interests and there was no real possibility of conflict. Hayne Crennan It may be noted, in passing, that to the extent to which the appellant sought to have Disctronics play a part in the venture, his efforts in that regard may have all been authorised by Disctronics, which no doubt recognised that the appellant was to be, or was already, a party to the venture. Negotiation about the terms on which Disctronics would become involved took place with both Disctronics and the other venturers well aware that the appellant was negotiating about the terms on which a company of which he was a director would become involved in the venture. The better view may well be that there was informed consent by all parties to the appellant's taking the steps which he did. And the proposal by the appellant and other directors of Disctronics that they would "rebate their entitlements" to Disctronics may have ameliorated, perhaps even eliminated, any substantial possibility of conflict. Similarly, the litigation agreement (made shortly before the commencement of the Supreme Court proceedings) may be taken to show authorisation of any conflict if the gain or profit were taken to have been obtained only when the award was made in those proceedings or later satisfied. But, for the reasons which have been given, it is not necessary to pursue any of these questions about informed consent or the effect of the proposal to "rebate" entitlements. The gain or profit which the appellant received did not arise in circumstances where, at the time he became entitled to or received the gain or profit, he had any unauthorised conflict between his duties to Disctronics and to his co-venturers or his duty to Disctronics and his personal interests, or in circumstances where there was a real possibility of conflict. Even if, as has been assumed, the appellant became entitled to a gain or profit once the defaulting venturers diverted the venture to their own use, he made no gain or profit in circumstances where his duties or his duty and interest conflicted or where there was a real possibility of conflict. And, as has been demonstrated, the appellant obtained no gain or profit by reason or by use of his position as a director of Disctronics or by reason or by use of any opportunity or knowledge resulting from that position. That being so, the appellant did not hold the amount he received as equitable compensation on a constructive trust for Disctronics. The litigation agreement After the defaulting venturers had arranged for the purchase of the golf course (to the exclusion of their co-venturers), Disctronics lodged a caveat over the land on which the golf course stood. Disctronics claimed that the land was held subject to a constructive trust in its favour. The purchaser of the land instituted proceedings in the Supreme Court of Victoria for removal of the caveat. Disctronics, the appellant and the three other joint venturers who had been prevented by the steps taken by the defaulting venturers from pursuing the Hayne Crennan venture instituted the proceedings against the defaulting venturers which were mentioned at the outset of these reasons. Before the Supreme Court proceedings were commenced, Disctronics, the appellant and two of the other three plaintiffs made the litigation agreement. In the agreement, the appellant and those other two plaintiffs were referred to as "the directors" and, as has been noted, each was a director of Disctronics. The agreement recorded that the directors had agreed that the fourth individual plaintiff in the proceedings (Mr Bucknall) would not be liable for any legal costs or disbursements associated with the proceedings or for any damages or costs orders made in favour of the defaulting venturers. The agreement provided that Disctronics would pay all costs and disbursements associated with the prosecution of the proceedings. The agreement further provided that: "In consideration of [Disctronics'] promises [to pay all costs and disbursements] the directors, and each of them, assign absolutely unto and to the sole use of [Disctronics], any award of damages (whether on revenue or capital account), costs or interest made in their favour as a consequence of their participation in the joint venture or arising out of the proceedings and the ultimate outcome thereof". Did the appellant thus assign to Disctronics, as the appellant submitted, his right to receive equitable compensation, or did he assign any proceeds of the action, if and when they were received? The appellant rightly97 accepted that, for him to succeed in this branch of his argument, the litigation agreement must be construed as assigning to Disctronics the right to receive what was ultimately paid to him. If the litigation agreement provided for the present assignment for value of something to be acquired in the future, it must be "construed as an agreement to assign the thing when it is acquired"98 (emphasis added). If the litigation agreement provided for the assignment of future income, dissociated from the proprietary interest which produced the income, the proceeds of the action, when received in 2005, were income in the hands of the appellant99. 97 Norman (1963) 109 CLR 9 at 24-25 per Windeyer J; Federal Commissioner of Taxation v Everett (1980) 143 CLR 440 at 450-451 per Barwick CJ, Stephen, Mason and Wilson JJ; [1980] HCA 6; Booth v Federal Commissioner of Taxation (1987) 164 CLR 159 at 165-168 per Mason CJ; [1987] HCA 61. 98 Norman (1963) 109 CLR 9 at 24 per Windeyer J. 99 Booth (1987) 164 CLR 159 at 167 per Mason CJ. Hayne Crennan The appellant identified the subject matter of the assignment as "the rights under the award" made by the Supreme Court in 2002. That is, the appellant identified the subject matter of the assignment as the future judgment debt, not the cause or causes of action which the appellant pursued in the proceedings instituted in the Supreme Court. The better construction of the litigation agreement is that it provided for the assignment of any proceeds of the action, not for the assignment of the appellant's rights under any judgment obtained in the proceedings. The reference to "on revenue or capital account", coupled with the reference to the "ultimate outcome" of the proceedings, more readily fits with understanding the expression "any award of damages ... costs or interest made in their favour" as referring to sums received rather than the underlying rights to receive those sums. And although the litigation agreement was made before this Court's decision in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd100, adopting this preferred construction would not have presented any question of maintenance or champerty. Disctronics was no mere bystander to the litigation; it was itself a party to that litigation and it agreed to pay the costs of the litigation. This being the preferable construction of the litigation agreement, this branch of the appellant's argument must be rejected. Conclusion and orders For the reasons given, the appellant's appeal should be dismissed with costs. 100 (2006) 229 CLR 386; [2006] HCA 41. 107 GAGELER J. I agree that the appeal should be dismissed. I agree with Hayne and Crennan JJ as to the effect of the litigation agreement. I agree with French CJ and Keane J as to the deduction of legal costs. I prefer to state my own reasons for concluding that the appellant, Mr Howard, received and held the sum of equitable compensation awarded to him by the Supreme Court of Victoria on his own account. Mr Howard would have been liable to account to Disctronics for the sum of equitable compensation awarded to him only if obtaining or retaining that sum would have breached an obligation of loyalty Mr Howard owed to Disctronics as an incident of his fiduciary relationship as a director of Disctronics. The "overlapping themes" informing that liability to account were identified by Deane J in Chan v Zacharia101 "The first is that which appropriates for the benefit of the person to whom the fiduciary duty is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage." Mr Howard relied on the first of those themes. He disavowed reliance on the second. His counsel said of the second: "That theme does not arise in the present case because the opportunity did not come to [Mr Howard] by reason of his office. It is rather a matter of him having brought the opportunity to the company." Mr Howard's reliance solely on the existence of a conflict between his personal interest and his fiduciary duty as the basis of his asserted liability to account to Disctronics invites attention to the nature and scope of the fiduciary duty on which he relies. As the Full Court of the Federal Court (Finn, Stone and Perram JJ) explained in Grimaldi v Chameleon Mining NL (No 2)102: 101 (1984) 154 CLR 178 at 198-199; [1984] HCA 36. See also Warman International Ltd v Dwyer (1995) 182 CLR 544 at 557-558; [1995] HCA 18. 102 (2012) 200 FCR 296 at 345-346 [179], citing Birtchnell v Equity Trustees, Executors and Agency Co Ltd (1929) 42 CLR 384 at 408; [1929] HCA 24. See also Boardman v Phipps [1967] 2 AC 46 at 127; Industrial Development Consultants Ltd v Cooley [1972] 1 WLR 443 at 451; [1972] 2 All ER 162 at 173. "The concept of 'duty' in the 'conflict of duty and interest' formula of the first of these [themes] is convenient shorthand. It refers simply to the function, the responsibility, the fiduciary has assumed or undertaken to perform for, or on behalf of, his or her beneficiary. What that function or responsibility is, is a question of fact. It may be narrow and circumscribed, as is often the case with specific agencies; it may be broad and general, as is characteristically the case with the functions of company directors; its scope may have been antecedently defined or determined; it may have been ordained by past practice; it may be left to the fiduciary's discretion to determine; and it may evolve over time as is commonly the case with partnerships. Put shortly the actual function or responsibility assumed determines '[t]he subject matter over which the fiduciary obligations extend' for conflict of duty and interest and conflict of duty and duty purposes". Here, the identification of the subject matter over which Mr Howard's fiduciary obligations extended for conflict of duty and interest purposes requires identification of the relevant undertaking in which Disctronics was engaged. It was in respect of that undertaking that Mr Howard, as a director, had the responsibility of acting for and on behalf of Disctronics. It was in discharging that responsibility that Mr Howard was obliged to act in Disctronics' interest to the exclusion of his own interest. Mr Howard sought to characterise the undertaking of Disctronics as the pursuit of a "maturing business opportunity"103 for investment in the golf course. That characterisation, for present purposes, is too broad and imprecise. Disctronics never became a party to the joint venture and was never pursuing a business opportunity commensurate with that which was being pursued by the joint venture to which Mr Howard in his personal capacity had always been a party. The more limited business opportunity brought to and taken up by Disctronics was that mapped out for it by Mr Howard and the other joint venturers who were directors of Disctronics, as recorded in recital B to the litigation agreement. That business opportunity was for Disctronics to become the end-purchaser of the golf course and to receive a rebate of any entitlement the directors might have as a result of their participation in the joint venture if two contingencies were fulfilled: the equity contribution of the end-purchaser did not exceed $1.5 million; and the other joint venturers agreed. Through no failure on the part of Mr Howard to act in Disctronics' interest, those two contingencies were not fulfilled. The business opportunity of Disctronics did not come to fruition, and had been irrevocably lost by the time of 103 Cf Canadian Aero Service Ltd v O'Malley [1974] SCR 592 at 607. the commencement of the proceedings against Mr Edmonds and Mr Cahill in the Supreme Court of Victoria. In the proceedings in the Supreme Court of Victoria, again through no failure on the part of Mr Howard to act in Disctronics' interest, Mr Howard was successful in his claim that Mr Edmonds and Mr Cahill had breached fiduciary duties they owed to him104, while Disctronics was unsuccessful in its claim that Mr Edmonds and Mr Cahill owed fiduciary duties to Disctronics105. The sum of equitable compensation awarded to Mr Howard was compensation to Mr Howard for Mr Edmonds' and Mr Cahill's breach of their fiduciary duties to him, calculated as Mr Howard's one sixth share of what Mr Edmonds and Mr Cahill gained in breach of their fiduciary duties to Mr Howard and to the other three joint venturers106. It was not compensation for any loss to Disctronics. There was in those circumstances no conflict, and no substantial possibility of conflict, between the personal interest of Mr Howard in obtaining or retaining the sum of equitable compensation awarded to him and the fiduciary duty of Mr Howard as a director of Disctronics to act in the interest of Disctronics. 104 Disctronics Ltd v Edmonds [2002] VSC 454 at [156], [178]; Edmonds v Donovan (2005) 12 VR 513 at 539 [62]. 105 Disctronics Ltd v Edmonds [2002] VSC 454 at [179]-[180]; Edmonds v Donovan (2005) 12 VR 513 at 549-550 [95]. 106 Disctronics Ltd v Edmonds [2002] VSC 454 at [216]; Edmonds v Donovan (2005) 12 VR 513 at 544-545 [80]-[81].
HIGH COURT OF AUSTRALIA APPELLANT AND DIRECTOR OF PUBLIC PROSECUTIONS (NSW) RESPONDENT Grajewski v Director of Public Prosecutions (NSW) [2019] HCA 8 13 March 2019 ORDER Appeal allowed. Set aside the order of the Court of Criminal Appeal of the Supreme Court of New South Wales dated 24 October 2017 and in lieu thereof order that the questions submitted to the Court of Criminal Appeal by Judge Bright be answered as follows: Can these facts support a finding of guilt for an offence contrary to section 195(1)(a), Crimes Act, 1900? In particular, was the evidence capable of proving beyond reasonable doubt that Ship Loader 2 had been damaged by the conduct of Paul Olaf GRAJEWSKI? Unnecessary to answer. Quash the conviction and sentence of the District Court at Newcastle on 29 May 2017 on the appeal to the District Court. On appeal from the Supreme Court of New South Wales Representation T A Game SC with A T S Dawson SC and N D Funnell for the appellant (instructed by O'Brien Criminal & Civil Solicitors) D T Kell SC with E Jones for the respondent (instructed by Office of the Director of Public Prosecutions (NSW)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Grajewski v Director of Public Prosecutions (NSW) Criminal law – Appeal against conviction – Question of law referred to Court of Criminal Appeal – Case stated – Destroying or damaging property – Physical element of offence – Where appellant harnessed himself to ship loader – Where ship loader shut down due to safety concerns – Where ship loader inoperable until appellant removed – Where no alteration to physical integrity of ship loader – Whether property damaged. Words and phrases – "destroys or damages", "impairment of value", "physical derangement", "temporary functional derangement". Crimes Act 1900 (NSW), s 195(1). KIEFEL CJ, BELL, KEANE AND GORDON JJ. A person who intentionally or recklessly destroys or damages property belonging to another (or to that person and another) commits an offence contrary to s 195(1) of the Crimes Act 1900 (NSW). This appeal is concerned with the physical element of the offence. In issue is whether a person can be said to destroy or damage a thing if the person's conduct does not occasion any alteration to the physical integrity of the thing. Mr Grajewski, a protestor, harnessed himself to a ship loader at a coal terminal. Mr Grajewski was at risk of serious harm while he remained in this position. The ship loader was shut down as Mr Grajewski commenced to climb the machine and remained shut down until he was removed. Mr Grajewski was charged with an offence against s 195(1)(a), particularised as doing "damage [to] property causing the temporary impairment of the working machinery" of Ship Loader 2. He was convicted of this offence in the Newcastle Local Court, and fined a sum of $1,000. Mr Grajewski appealed against his conviction to the District Court of New South Wales (Judge Bright)1. Her Honour dismissed the appeal and confirmed the conviction. Under s 5B(2) of the Criminal Appeal Act 1912 (NSW) a party to appeal proceedings in the District Court may request that a question of law be submitted to the Court of Criminal Appeal for determination even though the proceedings during which the question arose have been determined. The Court of Criminal Appeal may, in connection with the determination of the question of law in such a case, quash any acquittal, conviction or sentence of the District Court on the appeal to the District Court2. At the request of Mr Grajewski, Judge Bright stated a case to the Court of Criminal Appeal setting out the facts and asking (i) can these facts support a finding of guilt for an offence contrary to s 195(1)(a); and (ii) was the evidence capable of proving beyond reasonable doubt that Ship Loader 2 had been damaged by the conduct of Mr Grajewski. The Court of Criminal Appeal (Leeming JA, Johnson and Adamson JJ) considered the stated case principally by reference to three Australian authorities. In Director of Public Prosecutions v Fraser & O'Donnell, Simpson J in the 1 Crimes (Appeal and Review) Act 2001 (NSW), s 11. 2 Criminal Appeal Act 1912 (NSW), s 5B(3). Bell Gordon Supreme Court of New South Wales3 dismissed the Director of Public Prosecutions' appeal against the dismissal of charges under s 195(1)(a) arising out of Ms Fraser's and Mr O'Donnell's conduct in chaining themselves to a conveyor belt at the site of a coal loader. Her Honour reviewed the authorities in the United Kingdom and Australia on the meaning of "damage" in cognate legislation ("criminal damage") and concluded that, with the possible exception of the decision of the Court of Appeal (Criminal Division) in R v Henderson and Battley, common to all is the requirement that there be "some physical change or alteration to the property", even if temporary4. The Court of Criminal Appeal acknowledged the force of Simpson J's conclusion that the words "destroys or damages" require that there be some physical interference with or alteration to the property. The Court of Criminal Appeal considered, however, that it should not depart from two decisions which were against acceptance of this "narrow" construction. In the first, R v Heyne5, an unreported decision to which it appeared Simpson J had not been referred, it was held that the "temporary functional derangement" of property suffices as criminal damage. In the second, Hammond v The Queen6, it was held that interference with functionality alone without any "derangement" of the property may constitute criminal damage. The Court of Criminal Appeal also considered that the purpose of s 195(1), understood in light of the legislative history, provides a further reason for rejecting the "narrow construction". The Court of Criminal Appeal determined that "physical interference causing property to be inoperable", whether temporarily or otherwise, satisfies the "destroys or damages" element of the offence7. In the Court of Criminal Appeal's analysis, Mr Grajewski's attachment to Ship Loader 2 amounted to an act of physical interference which caused it to be inoperable for some two hours. [2008] NSWSC 244. 4 Director of Public Prosecutions v Fraser & O'Donnell [2008] NSWSC 244 at [36], citing R v Henderson and Battley (unreported, Court of Appeal (Criminal Division), 29 November 1984). 5 Unreported, Court of Criminal Appeal of New South Wales, 18 September 1998, incorrectly named R v Hayne in Butterworths Unreported Cases – BC9807961. (2013) 85 NSWLR 313. 7 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at Bell Gordon The Court of Criminal Appeal answered question (i) "yes" and declined to answer question (ii) because it asked the Court to determine the question on the evidence as distinct from the facts stated by Judge Bright8. On 18 May 2018, Kiefel CJ and Bell J granted Mr Grajewski special leave to appeal from the judgment of the Court of Criminal Appeal. For the reasons to be given, damage to property within the meaning of s 195(1) of the Crimes Act requires proof that the defendant's act or omission has occasioned some alteration to the physical integrity of the property, even if only temporarily. It follows that the first question submitted by Judge Bright to the Court of Criminal Appeal should be answered "no" and in consequence that Mr Grajewski's conviction should be quashed. Section 195(1)(a) Part 4AD of the Crimes Act, headed "Criminal destruction and damage", comprises a number of Divisions concerning crimes against property generally; crimes relating to particular kinds of property; sabotage; and bushfires. Part 4AE concerns offences relating to transport services, including to aircraft and to railways. Parts 4AD and 4AE were inserted into the Crimes Act by the Crimes (Criminal Destruction and Damage) Amendment Act 1987 (NSW) ("the Amending Act"). Section 195(1) is in Pt 4AD. It provides: "195 Destroying or damaging property (1) A person who intentionally or recklessly destroys or damages property belonging to another or to that person and another is liable: to imprisonment for five years, or "Property" is broadly defined in s 4(1) of the Crimes Act to include every description of real and personal property. Section 194(1) provides that in Pt 4AD, "a reference to property does not include a reference to property that is 8 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [3]-[4], [66], citing R v Rigby (1956) 100 CLR 146 at 151-152; [1956] HCA 38 and Sasterawan v Morris (2007) 69 NSWLR 547. Bell Gordon not of a tangible nature". Apart from providing that for the purposes of Pt 4AD, "damaging property includes removing, obliterating, defacing or altering the unique identifier of the property"9, the Crimes Act does not define "damage". The unique identifier is any numbers, letters or symbols that are marked on, or attached to, the property to enable it to be distinguished from similar property. As a matter of ordinary English, to damage a thing means to injure or harm the thing in some way that, commonly, lessens the value of the thing10; a thing is not damaged if the physical integrity of the thing is not altered in any respect. Contrary to the Court of Criminal Appeal's analysis, the legislative history does not support a construction of the offence in s 195(1) that extends its reach to any "interference" with property that results in the property being inoperable. The legislative history Chapter II of Pt IV of the Crimes Act, as enacted, contained a plethora of offences of criminal damage to property. Its provisions can be traced to the Malicious Damage Act 1861 (UK) ("the 1861 UK Act")11, which amended and consolidated the Malicious Injuries to Property Act 1827 (UK)12. The latter was the first consolidation of many provisions largely enacted in the eighteenth and nineteenth centuries which made criminal damage to particular types of property an offence ("property-specific offences")13. like The 1861 UK Act, its predecessor, contained a range of property-specific offences: some criminalised "damaging" the thing and some criminalised "injuring" the thing. There is no reason to consider that the former was intended to have any wider meaning than the latter. The difference in wording merely reflects that the 1861 UK Act, like its predecessor, was a consolidation Act. Section 51 of the 1861 UK Act was novel. It made it an 9 Crimes Act, s 194(4). 10 Macquarie Dictionary, 7th ed (2017) at 387, defining "damage" as a transitive verb; Oxford English Dictionary, 2nd ed (1989), vol 4 at 225, defining "damage" as a transitive verb. 11 24 & 25 Vict c 97. 12 7 & 8 Geo 4 c 30. 13 Greaves, The Criminal Law Consolidation and Amendment Acts (1861) at ix, x. Bell Gordon offence for a person to "maliciously commit any Damage, Injury, or Spoil to or upon any Real or Personal Property whatsoever, either of a public or private Nature, for which no Punishment is herein-before provided". This general offence was said by its draftsman to recognise the "many very valuable instruments and machines daily invented" and the impracticality of making specific provision for each14. Section 247 in Ch II of Pt IV of the Crimes Act, as enacted, was framed in terms reminiscent of s 51 of the 1861 UK Act and provided that "[w]hosoever maliciously injures … any real or personal property whatsoever, either of a public or private nature for which act no punishment is hereinbefore provided, shall be liable to imprisonment". Chapter II of Pt IV was repealed by the Amending Act, which inserted Pt 4AD. On the second reading of the Bill for the Amending Act, the Attorney-General stated its object as the reformation and simplification of the law. The Attorney-General observed that Ch II of Pt IV contained "a large number of archaic and anomalous offences … based on damage to different types of property"15, and he described the s 195(1) offence as being "similar to the existing offence of malicious injury in section 247"16. The simplification of offences involving criminal damage under the Amending Act, in common with reforms introduced in Victoria17 and the Australian Capital Territory18, was based on the Criminal Damage Act 1971 (UK) ("the 1971 UK Act"), which replaced many antique property-specific offences with a general offence of intentionally or recklessly destroying or damaging any property belonging to another19. The Court of Criminal Appeal considered that s 195(1) is to be understood as having a broad meaning that is apt to capture all of the offences formerly 14 Greaves, The Criminal Law Consolidation and Amendment Acts (1861) at 199. 15 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 October 1987 at 15344. 16 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 October 1987 at 15344. 17 Crimes (Criminal Damage) Act 1978 (Vic). 18 Crimes (Amendment) Ordinance (No 4) 1985 (ACT). 19 Criminal Damage Act 1971 (UK), s 1(1). Bell Gordon contained in Ch II of Pt IV20. Their Honours noted that Ch II of Pt IV was headed "Malicious injuries to property", and they concluded there is no reason to find that the legislature intended "damage" to have a narrower meaning in Pt 4AD than "injury" in Ch II of Pt IV. Among the conduct proscribed in the repealed Chapter were offences of obstructing machinery and rendering machinery useless. The Court of Criminal Appeal identified a number of provisions in this respect. Sections 209 and 210 contained offences that were most apt to cover the conduct with which Mr Grajewski was charged21. These sections were expressed in terms "[w]hosoever maliciously cuts, breaks, or destroys, or damages, with intent to destroy or render useless, any … machine, engine …". Sections 223 and 224 were offences involving injuries to mines22. The former made it an offence to obstruct or damage "with intent to destroy, obstruct, or render useless, any airway, waterway, drain, pit, level, or shaft" and the latter made it an offence to destroy or damage "with intent to destroy, or render useless, any engine". Section 232 made it an offence to obstruct, or cause "to be obstructed, the passing, or working, of any engine, or carriage, on any railway"23. Against this background, the Court of Criminal Appeal concluded that physical interference which obstructs machinery, or which renders machinery useless, whether permanently or temporarily, should be understood as within the meaning of the expression "destroys or damages" in s 195(1)24. The legislative history cannot overcome the plain words of the provision. In any event, it is not apparent that the history supports the Court of Criminal Appeal's interpretation of the intended broad reach of s 195(1). The view that the offences formerly provided in ss 209 and 210 were most apt to capture the conduct with which Mr Grajewski was charged conflates the physical and mental elements of the repealed offences. The physical element of each offence was "cutting, breaking, destroying or damaging". It was the mental element that required that the conduct be accompanied by the intent, among others, to "render useless". 20 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [29], 21 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [23]. 22 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [24]. 23 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [25]. 24 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [58]. Bell Gordon While the evident intention of enacting s 195(1) was to provide a general offence of criminal damage to property25 applying to conduct which in many instances had been criminalised in the repealed property-specific offences, it is overstating its object as to apply to all of the conduct proscribed in the repealed Ch II of Pt IV26. The conduct proscribed by ss 223 and 224, obstructing or rendering useless machinery or structures involved in mining activity27, is proscribed under s 201 in Pt 4AD. The conduct proscribed by s 232, obstructing any engine or carriage on any railway, is proscribed under s 213 in Div 2 of Pt 4AE, which is headed "Offences relating to railways etc". The physical element of the offence created by s 195(1) is conduct which "destroys or damages". It strains the language of the provision to interpret the words "destroys or damages" as including conduct which obstructs or renders useless without in any way altering the physical integrity of the property. If the legislature intended to criminalise the obstruction of property or the rendering of it useless in s 195(1), it is to be expected that it would have so provided. While the Court of Criminal Appeal was correct to take from the legislative history that the word "damages" in s 195(1) does not have a narrower meaning than the word "injures" as the latter is used in the context of criminal damage to property, it remains that the legislative history does not warrant interpreting either word as applying to conduct which does not occasion any alteration to the physical integrity of the thing said to be damaged or injured. The authorities Mr Grajewski adopts Simpson J's analysis of the authorities and her Honour's conclusion in Fraser & O'Donnell that proof of criminal damage requires that there be some "physical derangement" of the property damaged. The respondent submits that it is not possible to explain a number of decisions 25 As enacted by the Amending Act, s 195 provided: "A person who maliciously destroys or damages property ...". The word "maliciously" was omitted and replaced by the words "intentionally or recklessly" by the Crimes Amendment Act 2007 (NSW), Sch 1 [2]-[3] and [21]. 26 cf Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at 27 The reference to "structure" in s 201(c) was inserted by the Inclosed Lands, Crimes and Law Enforcement Legislation Amendment (Interference) Act 2016 (NSW), Sch 2 [1]. Bell Gordon which have considered the meaning of criminal damage by reference to this criterion: R v Fisher28; Henderson and Battley29; Griffiths v Morgan30; Hardman v Chief Constable of Avon & Somerset Constabulary31; R v Fiak32 and Heyne33. Implicit in the submission is the further submission that in following the model of s 1(1) of the 1971 UK Act the legislature is presumed to have intended the words "destroys or damages" to have an extended meaning consistent with a settled line of authority. A difficulty with acceptance of the respondent's submission is, as Auld J observed in Morphitis v Salmon, the authorities show that what constitutes "damage" in this context is not always clear34. In Morphitis, the Queen's Bench set aside Mr Morphitis' conviction for an offence of criminal damage, particularised as damaging a scaffold clip and scaffold bar. These two items together with an upright had formed a barrier across an access road. Mr Morphitis dismantled the barrier and carried off the scaffold clip and scaffold bar, leaving the upright in position. The question on the appeal was whether the scaffold clip and scaffold bar, although not physically damaged as individual objects, were nevertheless damaged within the meaning of s 1(1) of the 1971 UK Act by their separation from the upright. Impairment of value or usefulness as a test In Morphitis, Auld J said the authorities show that "damage" is to be widely interpreted so as to include not only permanent or temporary physical harm but also permanent or temporary impairment of value or usefulness35. Mr Morphitis' appeal was allowed because the charge as framed did not allege 28 (1865) LR 1 CCR 7. 29 Unreported, Court of Appeal (Criminal Division), 29 November 1984. 30 Unreported, Supreme Court of Tasmania, 13 October 1972. 31 [1986] Crim LR 330. 32 [2005] EWCA Crim 2381. 33 Unreported, Court of Criminal Appeal of New South Wales, 18 September 1998. 35 (1989) 154 JP 365 at 368. Bell Gordon damage to the barrier. Had the allegation been of damage to the barrier, Auld J considered it was clear on the authorities that the offence could have been proved36. The analysis took into account decisions holding that dismantling a thing and removing a part from it amounts to criminal damage even where no other physical damage is done to the thing or the part removed37. In the earliest of these decisions, R v Tacey, the prisoner in company with others forcibly broke into a shop, where he and others dismantled two frames used for making knitted stockings and carried away an essential component of each known as the half-jack. The question of whether this amounted to damage to the stocking frames within the meaning of an eighteenth century statute38 was reserved for the consideration of the common law judges. Their Lordships were unanimously of the view that the taking out and carrying away of the half-jack was "damaging" as it made the frame "imperfect and inoperative"39. The conclusion that the dismantling and carrying away of the half-jack damaged the frame may be thought to accord with the ordinary meaning of the word. Nothing in the brief report of the reasoning in Tacey suggests that, in stating that the frame had been made "imperfect and inoperative", the common law judges were articulating a disjunctive test40. Auld J's analysis also took into account Fisher, in which the Court for Crown Cases Reserved, in an ex tempore judgment, held that stopping-up the feed pipe of a boiler by thrusting a stick into it, thereby preventing water passing into the boiler, amounted to damage to the boiler within the meaning of s 15 of the 1861 UK Act41. 36 Morphitis v Salmon (1989) 154 JP 365 at 369. 37 R v Tacey (1821) Russ & Ry 452 [168 ER 893]; Getty v Antrim County Council 38 Protection of Stocking Frames Act 1788 (28 Geo 3 c 55), s 4, which relevantly made it an offence to "wilfully and maliciously break, destroy, or damage any frame ... used in and for the working and making of any such framework-knitted pieces …". 39 R v Tacey (1821) Russ & Ry 452 at 454 [168 ER 893 at 894]. 40 (1821) Russ & Ry 452 at 454 [168 ER 893 at 894]. 41 R v Fisher (1865) LR 1 CCR 7. Bell Gordon The removal of the half-jack in Tacey and the introduction of the stick in Fisher were acts which undoubtedly involved impairment of the function or usefulness of the property. Equally undoubtedly the impairment of function or usefulness in each case was the result of a physical alteration to the integrity of the property albeit that in each instance the alteration was remediable. The English Court of Appeal in Whiteley approved Auld J's statement that damage is to be "widely interpreted so as to include not only permanent or temporary physical harm, but also permanent or temporary impairment of value or usefulness"42. Mr Whiteley, a computer hacker, appealed against his conviction for the malicious damage to discs in a computer system. Mr Whiteley had gained unauthorised access to the system and he had issued commands, impulses magnetising or de-magnetising particles, so as to alter data that had been written to the discs. Mr Whiteley contended that his activity had affected only intangible information contained on the discs. Lord Lane CJ rejected the "What the Act requires to be proved is that tangible property has been damaged, not necessarily that the damage itself should be tangible. There can be no doubt that the magnetic particles upon the metal discs were a part of the discs and if [Mr Whiteley] was proved to have intentionally and without lawful excuse altered the particles in such a way as to cause an impairment of the value or usefulness of the disc to the owner, there would be damage within the meaning of section 1". The impairment of the value or usefulness of the discs was brought about by a physical, albeit unseen, alteration to the magnetic particles on the discs. The Court of Appeal of England and Wales returned to the scope of the concept of "damage" in Fiak44. Mr Fiak appealed against his conviction for malicious damage contrary to s 1(1) of the 1971 UK Act. While he was held in a police cell Mr Fiak stuffed a blanket into the toilet and repeatedly flushed the toilet causing his cell and the adjoining cells to be flooded. The charge was particularised as damage to the blanket and the cells. The Court of Appeal referred to Auld J's statements in Morphitis and to the analysis in Whiteley and held that, while the effect on the property was remediable, the blanket could not 42 (1991) 93 Cr App R 25 at 29. 43 Whiteley (1991) 93 Cr App R 25 at 28. 44 [2005] EWCA Crim 2381. Bell Gordon be used until it was dried out (and cleaned) and the flooded cells were "out of action" until the water cleared45. Mr Fiak's appeal was dismissed. It will be recalled that Simpson J identified Henderson and Battley as a possible exception to the requirement for "physical derangement" of the property damaged. In that case, the Court of Appeal (Criminal Division) confirmed the defendants' convictions for criminal damage occasioned by the deposit of some 30 lorry-loads of soil, rubble and mud on a building site46. Their Lordships rejected an argument that there had been no damage because the condition of the land beneath the rubble had not been altered. Whether damage was done was said to be a question of fact and degree for the jury's assessment. Lord Lane CJ explained Henderson and Battley in Whiteley, observing47: "The trial judge['s] … decision was upheld on appeal, on the grounds that damage can be of various kinds and that the definition found in the Concise Oxford Dictionary … namely 'injury impairing value or usefulness,' was appropriate to cover the facts of the case." (emphasis added) The deposit of 30 lorry-loads of rubble on a site may be thought to have occasioned a temporary alteration to land beneath, which had been "cleared flat" in readiness for construction work48. So understood, in none of the decisions which have used, or been explained by, Auld J's formulation has the impairment of function or usefulness not been occasioned by some injury in the sense of some alteration to the physical integrity of the property, even if relatively slight as in Fiak. Has the property been rendered inoperative? There was no dispute that there must be some form of physical connection to the property. However, the decision in Hammond, where the Court stated that 45 R v Fiak [2005] EWCA Crim 2381 at [20]. 46 R v Henderson and Battley (unreported, Court of Appeal (Criminal Division), 29 November 1984). 47 Whiteley (1991) 93 Cr App R 25 at 28. 48 R v Henderson and Battley (unreported, Court of Appeal (Criminal Division), 29 November 1984) at 2. Bell Gordon to address inoperability or "temporary inoperability of the property alone could be considered "damage" under s 195(1), was influential in the reasoning of the Court of Criminal Appeal below. It is therefore necessary functional derangement" as a possible test under s 195(1). Hammond was a case stated to the New South Wales Court of Criminal Appeal which asked whether the facts stated were capable of supporting Mr Hammond's conviction for a s 195(1)(a) offence49. Those facts were that Mr Hammond spat on a stainless steel seat located in the dock of a police station. As the Court of Criminal Appeal noted50, the facts bore similarity to those in "A" (a Juvenile) v The Queen, in which the defendant was charged with criminal damage for spitting on the back of a police officer's raincoat51. "A" appealed against his conviction in the Juvenile Court to the Kent Crown Court. The Kent Crown Court acknowledged that spitting on a garment may damage the garment and instanced spitting on a satin wedding dress which leaves a mark or stain. In "A"'s case the spittle landed on a garment that was designed to resist the elements and there was no likelihood that if wiped with a damp cloth any trace of it would remain. The Kent Crown Court contemplated that criminal damage to a garment may be sustained if the garment is rendered "inoperative" until it is dry-cleaned. "A"'s conduct had not rendered the raincoat imperfect or inoperative and his appeal was allowed and his conviction quashed. In Hammond, the Court of Criminal Appeal said that a "new judicial approach" to the determination of criminal damage had been identified in "A" (a Juvenile): applying this approach, the court considers (i) whether the physical appearance of the property has changed as a result of the defendant's act so that it may be described as "imperfect"; or (ii) whether as a result of the defendant's act the property was rendered "inoperative"52. The stainless steel seat was not rendered imperfect or inoperative as the result of Mr Hammond's act and the Court of Criminal Appeal answered the question reserved in the stated case "no". Although not strictly necessary to the decision, their Honours said that interference with the functionality alone, even without physical harm to, or 49 Hammond v The Queen (2013) 85 NSWLR 313. 50 Hammond v The Queen (2013) 85 NSWLR 313 at 325 [49] per Slattery J. 51 [1978] Crim LR 689. 52 Hammond v The Queen (2013) 85 NSWLR 313 at 326 [50], citing "A" (a Juvenile) v The Queen [1978] Crim LR 689. Bell Gordon "derangement" of, property may suffice to establish damage within the meaning of s 195(1)53. As the Court of Criminal Appeal observed in Mr Grajewski's case, the decision in "A" (a Juvenile) has proved to be influential despite its limited precedential authority54. Important to acceptance of the "new judicial approach" was its approval by the Court of Criminal Appeal of Queensland in R v Zischke55. In Zischke56 the issue for the Queensland Court of Criminal Appeal was whether slogans spray painted on buildings, walls and footpaths at the Townsville Mall constituted criminal damage under the Criminal Code (Qld). Mr Zischke argued that an adhesive substance applied to a structure does not, without more, damage the structure. The Court of Criminal Appeal rejected the argument, observing that the authorities show that an article may be damaged even though the damage is remediable. Their Honours cited "A" (a Juvenile) with approval and concluded that the formula which "most nearly embraces all the attempts at definition [of criminal damage] is that a thing is damaged if it is rendered imperfect or inoperative"57. Their Honours considered that this formula accommodated the test which had been applied by the Supreme Court of South Australia in Samuels v Stubbs, which equates the "temporary functional derangement" of property with damage to the property58. The graffiti was held to have rendered the surfaces on which it was sprayed "imperfect"59. 53 Hammond v The Queen (2013) 85 NSWLR 313 at 331 [69]. 54 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [38], citing "The Binding Effect of Crown Court Decisions" [1980] Crim LR 402. 55 Hammond v The Queen (2013) 85 NSWLR 313 at 326 [51], citing R v Zischke [1983] 1 Qd R 240. 56 [1983] 1 Qd R 240. 57 R v Zischke [1983] 1 Qd R 240 at 246. 58 R v Zischke [1983] 1 Qd R 240 at 246, citing Samuels v Stubbs (1972) 4 SASR 200. 59 R v Zischke [1983] 1 Qd R 240 at 246. Bell Gordon "Temporary functional derangement" Samuels v Stubbs was an appeal from the dismissal of a complaint that charged the respondent with criminal damage to a police constable's cap60. The Special Magistrate found that the cap had fallen to the ground as the constable was attempting to arrest a demonstrator and that the respondent kicked the cap and jumped on it with both feet. The Special Magistrate recorded "it was crushed under his weight, it didn't spring back into its original shape; [and] it remained in a semi-crushed condition"61. The Special Magistrate dismissed the complaint, holding that the evidence did not establish "actual damage" to the cap. Walters J observed that it is difficult to lay down a "precise and absolute rule" as to what amounts to "damage" and that it is necessary to be guided by the circumstances of each case62. His Honour concluded that it suffices for the prosecution to establish "a temporary functional derangement" of the property. The cap was damaged in that it was "injured or harmed in such a way to cause temporary derangement of its function and of the purpose which it was normally to serve"63. Applying the ordinary meaning of the language of the provision64, the conclusion that the cap was damaged might be thought inevitable; it was crushed out of shape. The foundation for the test of "temporary functional derangement" as a criterion of criminal damage to property is less clear. Immediately before articulating the test, Walters J commented that "damage" in the context of property offences may not necessarily be employed interchangeably with "injury" in the context of offences against the person65. It may be that his Honour took the test from the rejection of counsel's argument in Fisher. Counsel is reported to have submitted unsuccessfully, by analogy with a decision of the Court for Crown Cases Reserved dealing with proof of the offence of occasioning bodily injury dangerous to life, that a "temporary functional 60 Police Offences Act 1953 (SA), s 43. 61 Samuels v Stubbs (1972) 4 SASR 200 at 202. 62 Samuels v Stubbs (1972) 4 SASR 200 at 203. 63 Samuels v Stubbs (1972) 4 SASR 200 at 204. 64 Section 43(1) of the Police Offences Act 1953 (SA) provided: "Any person who wilfully and without lawful authority destroys or damages any property shall be guilty of an offence." 65 Samuels v Stubbs (1972) 4 SASR 200 at 203. Bell Gordon derangement" of the boiler did not suffice to constitute criminal damage to property66. In Heyne the test of "temporary functional derangement" was approved as a criterion of criminal damage. The question arose in somewhat unlikely circumstances and the Court of Criminal Appeal's consideration of the criterion was brief. Mr Heyne was convicted of the manslaughter of his wife, who had died in consequence of being trapped inside their burning home. Mr Heyne had poured petrol on the carpet inside the house but the cause of its ignition was unknown. The prosecution contended that Mr Heyne was guilty of manslaughter by unlawful and dangerous act or criminal negligence. On the former case, the unlawful act was the malicious damage occasioned by pouring the petrol onto the carpet. The jury was directed that it was open to find that this act amounted to criminal damage in any of a number of ways, including by (i) wetting the carpet with petrol, which was temporary, (ii) any permanent staining of the carpet by the petrol, and (iii) the "temporary functional derangement" of the house occasioned by the presence of the petrol. On appeal against his conviction, Mr Heyne argued the trial judge erred in law in leaving the third basis for the jury's consideration since it could not support a finding that the act amounted to criminal damage. Handley JA, giving the leading judgment, saw no reason to doubt that the "temporary functional derangement" of property may suffice for liability for the s 195(1) offence. His Honour said the formulation is consistent with Hardman and Morphitis67. There could be no serious question that the pouring of the petrol on the carpet in Heyne occasioned damage to the carpet and, as Mr Grajewski argues, the three ways in which the trial judge invited the jury to consider that the foundational offence was made out might be thought to be cumulative. In any event, viewing the third way in isolation, the presence of the petrol vapour in the house occasioned a temporary physical alteration to the house. Neither Hardman nor Morphitis requires recourse to the concept of "temporary functional derangement" to explain the decision. As earlier noted, the analysis in Morphitis is that the dismantling and removal of a part of a thing damages the thing. In Hardman painting graffiti on a pavement with water 66 R v Fisher (1865) LR 1 CCR 7 at 8, citing R v Gray (1857) Dears & Bell 303 [169 67 R v Heyne (unreported, Court of Criminal Appeal of New South Wales, 18 September 1998) at 3. Bell Gordon soluble whitewash was held to damage the pavement notwithstanding that the whitewash would eventually have been eradicated by rainwater and pedestrian traffic. It is not apparent that there was any functional derangement of the pavement; however, the surface of the pavement was undoubtedly altered by the graffiti even though the damage thereby occasioned was not permanent. Whatever its origin, the concept of "temporary functional derangement" is not a useful criterion for the determination of criminal damage to property. It is an effect or product of damage. Interference with functionality alone can hardly be said to amount to damaging the thing; and, as indicated, this was not the contention of either party. If it were otherwise, as Simpson J has pointed out, removal of the ignition key of a motor vehicle might be within the reach of the s 195(1) offence68. The only other decision on which the respondent's submission, that there is no requirement that there be any "physical derangement" to property, is based is Neasey J's decision in Griffiths v Morgan69. Mr Griffiths filled his mouth with water before taking a breathalyser test and when asked to blow into the breathalyser machine he released the water or saliva or both into the tube thereby rendering the machine inoperative. It was sent to Hobart where it was dismantled, cleaned and adjusted before it became operational again. Neasey J held that the machine was injured within the meaning of s 37(1) of the Police Offences Act 1935 (Tas). Contrary to the respondent's submission, the introduction of the fluid into the machine brought about a physical albeit temporary alteration to the machine. As Neasey J reasoned, the case was analogous to Fisher. The Court of Criminal Appeal's test in Mr Grajewski's case In Mr Grajewski's case, the Court of Criminal Appeal was not prepared to embrace Hammond's conclusion that interference with functionality alone suffices to establish damage. The Court of Criminal Appeal said that there must be "some physical interference with the property" before liability under s 195(1) can be engaged. In this respect the Court of Criminal Appeal discerned a material distinction between the protestor who ties herself to the wheel or blade of a bulldozer and the protestor who lies down in front of the bulldozer. In each case the result may be the stopping of the bulldozer but it is only in the former case that there is a combination of "physical interference and temporary 68 Director of Public Prosecutions v Fraser & O'Donnell [2008] NSWSC 244 at [38]. 69 Unreported, Supreme Court of Tasmania, 13 October 1972. Bell Gordon inoperability" which suffices to satisfy the "destroys or damages" physical element of the offence70. Inoperability may be the product of damage done to property but it does not, of itself, constitute damage to property. Nothing in the authorities justifies an interpretation of the expression "destroys or damages" as extending to conduct which does not in any respect alter the physical integrity of the thing said to be damaged. The attempt to overcome the evident difficulty in the conclusion in Hammond, that interference with functionality alone suffices to establish the offence, by the addition of a requirement of "physical interference" does not solve the difficulty. The protestor who ties herself to the blade of the bulldozer does not damage the bulldozer just as the protestor who lies in front of the bulldozer does not damage the bulldozer. It may be that in each case the bulldozer is stopped while the protestor remains in position but that is not because of anything done by the protestor to affect the functioning of the bulldozer. It is because of the desire of the operator not to injure the protestor. Application to Mr Grajewski At this point the facts and the questions of law for determination stated by Judge Bright should be set out in full: "In determining the appeal against conviction by Paul Olaf GRAJEWSKI on 29 May 2017 I was satisfied of the following beyond reasonable doubt: Paul Olaf GRAJEWSKI was a protestor who attended the Carrington Coal Terminal on 8 May 2016. At 7:50am a machine known as Ship Loader 2 was being used to load a vessel on Dyke 5. Paul Olaf GRAJEWSKI climbed the stairs to the top of Ship Loader 2. As Paul Olaf GRAJEWSKI commenced to climb Ship Loader 2 the machine was shut down due to safety concerns. He then used a harness and roping device to lock himself to Ship Loader 2. 70 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [62]. Bell Gordon He then lowered himself down to about 10 metres above the platform. The actions of Paul Olaf GRAJEWSKI and his position posed a potential risk of serious harm to himself. The machine was inoperable whilst he remained in that position. NSW Police Rescue successfully removed Paul Olaf Grajewski from Ship Loader 2 at approximately 9:40am. 10. Carrington Coal Terminal Ship Loading Operations recommenced at 10:15am. QUESTION OF LAW FOR DETERMINATION The question I now submit is: Can these facts support a finding of guilt for an offence contrary to section 195(1)(a), Crimes Act, 1900. In particular, was the evidence capable of proving beyond reasonable doubt that Ship Loader 2 had been damaged by the conduct of Paul Olaf GRAJEWSKI." The Court of Criminal Appeal said that fact 4 established that Ship Loader 2 ceased operations because of a decision in the control room; fact 5 established that, thereafter, Mr Grajewski locked himself to the machine; fact 6 established that he lowered himself so that he was ten metres above the platform; and fact 8 established that Ship Loader 2 was inoperative while Mr Grajewski remained in that position. Notably, the Court did not refer to fact 7, that Mr Grajewski's actions and his position posed a potential risk of serious harm to him. The Court of Criminal Appeal's determination that the first question submitted by Judge Bright should be answered "yes" reflected their Honours' conclusion that Mr Grajewski caused Ship Loader 2 to cease operating by physically attaching himself to it and that this conduct sufficed to satisfy the physical element of the offence in s 195(1)(a) of the Crimes Act71. 71 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [6]. Bell Gordon The Court of Criminal Appeal considered that once the conclusion is reached that physical interference causing property to be inoperable is within s 195(1), "there is no occasion to imply fine distinctions based on precisely how that is achieved"72. The Court said that it would seem absurd to hold that letting out the air in a vehicle's tyre amounts to damage for the purposes of s 195(1) but that attaching a wheel clamp does not73. Equally, it may be thought absurd to hold that the protestor who ties herself to the wheel or to the blade of a bulldozer commits an offence contrary to s 195(1) while the same protestor who lies in front of the bulldozer does not. The physical element of the offence created by s 195(1) is conduct that "destroys or damages" some article of tangible property. A person does not damage a thing by conduct which does not bring about any alteration to the physical integrity of the thing. The alteration may be relatively minor and temporary as in letting the air out of a tyre, which physically alters the tyre and renders it imperfect74. By contrast, unless the attachment of a wheel clamp to the tyre causes some physical alteration to the tyre it has not damaged the tyre even though the vehicle may be inoperable while the clamp remains in place. The Court of Criminal Appeal's conclusion that Mr Grajewski's physical presence attached to Ship Loader 2 caused it to continue to be inoperable for some two hours does not establish that Mr Grajewski damaged Ship Loader 2. On the facts stated, nothing done by Mr Grajewski brought about any alteration to the physical integrity of Ship Loader 2. The decision to shut down Ship Loader 2 was taken due to safety concerns for Mr Grajewski (fact 4) and those same concerns led to Ship Loader 2 remaining shut down until Mr Grajewski was removed from it (facts 7 and 8). For these reasons the appeal must be allowed. As noted, the Court of Criminal Appeal has power to quash the conviction or sentence of the District Court on the appeal to the District Court. Section 37 of the Judiciary Act 1903 (Cth) permits this Court to give such judgment as ought to have been given in the first instance. The facts stated by Judge Bright cannot support Mr Grajewski's conviction. The conviction and the sentence of the District Court on the appeal to the District Court must be quashed. 72 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [63]. 73 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [63]. 74 See Director of Public Prosecutions (NSW) v Lucas [2014] NSWSC 1441 at [18]. Bell Gordon Mr Grajewski seeks an order for costs. The proceeding is not relevantly to be distinguished from an appeal and there is no reason to depart from the usual practice of making no order as to costs in criminal proceedings. Orders For these reasons, there should be the following orders: Appeal allowed. Set aside the order of the Court of Criminal Appeal of the Supreme Court of New South Wales dated 24 October 2017 and in lieu thereof order that the questions submitted to the Court of Criminal Appeal by Judge Bright be answered as follows: Can these facts support a finding of guilt for an offence contrary to section 195(1)(a), Crimes Act, 1900? In particular, was the evidence capable of proving beyond reasonable doubt that Ship Loader 2 had been damaged by the conduct of Paul Olaf GRAJEWSKI? Unnecessary to answer. Quash the conviction and sentence of the District Court at Newcastle on 29 May 2017 on the appeal to the District Court. Nettle NETTLE J. On 8 May 2016, the appellant, Mr Grajewski, participated in a protest at the Carrington Coal Terminal in Newcastle, New South Wales. At that time, a machine known as Ship Loader 2 was being used to load a vessel with coal. Despite the fact that the machine was in operation, the appellant climbed the stairs of the machine, thereby causing the operator to shut it down for safety reasons. The appellant then tied himself to the machine's structure, using a rope and harness, thereby causing the machine to continue to be inoperable for approximately two hours. The appellant was charged inter alia with an offence contrary to s 195(1)(a) of the Crimes Act 1900 (NSW) of intentionally or recklessly damaging property belonging to another and fined therefor $1,000. He appealed against conviction to the District Court of New South Wales but his appeal was judge dismissed. (Judge Bright) submitted the following facts and questions of law to the Court of Criminal Appeal of the Supreme Court of New South Wales75 with a view to determining whether the appellant's conduct in locking himself to the coal loading machine so that it was inoperable was conduct capable of constituting damage to property within s 195(1)(a) of the Crimes Act: the appellant's application, the District Court Upon "FACTS In determining the appeal against conviction by Paul Olaf GRAJEWSKI on 29 May 2017 I was satisfied of the following beyond reasonable doubt: Paul Olaf GRAJEWSKI was a protestor who attended the Carrington Coal Terminal on 8 May 2016. At 7:50am a machine known as Ship Loader 2 was being used to load a vessel on Dyke 5. Paul Olaf GRAJEWSKI climbed the stairs to the top of Ship Loader 2. As Paul Olaf GRAJEWSKI commenced to climb Ship Loader 2 the machine was shut down due to safety concerns. He then used a harness and roping device to lock himself to Ship Loader 2. He then lowered himself down to about 10 metres above the platform. 75 Pursuant to s 5B(2) of the Criminal Appeal Act 1912 (NSW). Nettle The actions of Paul Olaf GRAJEWSKI and his position posed a potential risk of serious harm to himself. The machine was inoperable whilst he remained in that position. NSW Police Rescue successfully removed Paul Olaf Grajewski from Ship Loader 2 at approximately 9:40am. 10. Carrington Coal Terminal Ship Loading Operations recommenced at 10:15am. QUESTION OF LAW FOR DETERMINATION The question I now submit is: Can these facts support a finding of guilt for an offence contrary to section 195(1)(a), Crimes Act, 1900. In particular, was the evidence capable of proving beyond reasonable doubt that Ship Loader 2 had been damaged by the conduct of Paul Olaf GRAJEWSKI." The Court of Criminal Appeal (Leeming JA, Johnson and Adamson JJ agreeing) answered76 the first question affirmatively and the second as inappropriate to decide. By grant of special leave, the appellant now appeals to this Court against their Honours' construction of s 195(1)(a). For the reasons which follow, I consider that the appeal should be dismissed. Relevant statutory provisions Division 2 of Pt 4AD of the Crimes Act, which is entitled "Crimes against property generally", comprises six sections: s 195, "Destroying or damaging property"; s 196, "Destroying or damaging property with intent to injure a person"; s 197, "Dishonestly destroying or damaging property"; s 198, "Destroying or damaging property with intention of endangering life"; s 199, "Threatening to destroy or damage property"; and s 200, "Possession etc of explosive or other article with intent to destroy or damage property". 76 Grajewski v Director of Public Prosecutions (NSW) [2017] NSWCCA 251 at [66], Nettle Section 194(1) states that "property" for the purposes of Pt 4AD does not include intangible property and s 194(4) states that "damaging property" includes "removing, obliterating, defacing or altering the unique identifier of the property". "Damage" is not otherwise defined. Section 195(1) provides that: "A person who intentionally or recklessly destroys or damages property belonging to another or to that person and another is liable: to imprisonment for 5 years, or if the destruction or damage is caused by means of fire or explosives, to imprisonment for 10 years." The history of s 195(1)(a) As Leeming JA observed77, s 195 and the other provisions that are now in Pt 4AD were inserted into the Crimes Act by the Crimes (Criminal Destruction and Damage) Amendment Act 1987 (NSW) ("the 1987 amendments") to replace provisions of the Crimes Act that, as originally enacted, were drawn from the Malicious Damage Act 1861 (24 & 25 Vict c 97). The 1987 amendments gave effect to recommendations of the Criminal Law Review Division of the Attorney-General's Department in a Discussion Paper titled "NSW Malicious Injuries to Property Provisions" consequent on an extensive review of criminal damage to property offences at common law, in England and in other Australian States and Territories. Consistently with developments in England, Victoria and the Criminal Law Review Division the Australian Capital Territory, recommended78 replacing the miscellany of damage to property offences drawn from the Malicious Damage Act, which were principally defined by reference to the type of property damaged, with a simpler legislative scheme of damage to property offences principally defined by reference to the mental state of the offender regardless of the nature of the property, with aggravating factors of dishonesty, use of fire or explosives, and malicious endangerment of life. 77 Grajewski [2017] NSWCCA 251 at [13]-[16]. See also Criminal Law Review Division, "Discussion Paper: NSW Malicious Injuries to Property Provisions" at 3, 34-38; New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 October 1987 at 15343-15344. 78 Criminal Law Review Division, "Discussion Paper: NSW Malicious Injuries to Property Provisions" at 34-38. Nettle Significantly, as Leeming JA observed79, the Discussion Paper proposed80 the following provision, the substance of which was enacted as s 195: "Offence One: Maliciously[81] destroying or damaging any property (maximum penalty: 5 years' imprisonment)." The commentary on the proposed provision was as follows82: "Whereas the current s 247 applies only in respect of property which is not the subject of another offence in Part IV Chapter II, the proposed offence would apply generally. A similar offence is found under the UK, Victorian and ACT legislation. The adoption of a simple offence with wide application provides clarity and virtual universal application, removes certain anomalies and obviates the need to prove that a particular type of property is involved. The proposed penalty is in accordance with the current penalty in respect of s 247." As his Honour further observed83, it is also significant that, prior to the 1987 amendments, s 194(1) – being the first section of Ch II of the Crimes Act – made reference to "[e]very act of malicious injury to property punishable under this Act" (emphasis added). That was followed by s 196 to s 247, which proscribed various injuries to various types of property. Some of those provisions were expressed in terms of conduct which "destroys or damages" property of a particular kind84. And others were expressed in terms of conduct which "injures" or "does injury to" property of a particular kind85. Section 247, which was the catch-all provision, proscribed conduct that "injures" any property. As originally enacted, it provided that: 79 Grajewski [2017] NSWCCA 251 at [16]. 80 Criminal Law Review Division, "Discussion Paper: NSW Malicious Injuries to Property Provisions" at 35. 81 "Maliciously" was replaced by "intentionally or recklessly" in 2008: see Crimes Amendment Act 2007 (NSW), Sch 1 [2]-[3]. 82 Criminal Law Review Division, "Discussion Paper: NSW Malicious Injuries to Property Provisions" at 35. 83 Grajewski [2017] NSWCCA 251 at [22]. 84 See, eg, Crimes Act, ss 209, 210, 215, 224, 225, 244. 85 See, eg, Crimes Act, ss 207, 226, 228, 241. Nettle "Injuries over five pounds not otherwise provided for. Whosoever maliciously injures, to an amount exceeding five pounds, any real or personal property whatsoever, either of a public or private nature for which act no punishment is hereinbefore provided, shall be liable to imprisonment for two years, and where such offence is committed in the night, shall be liable to penal servitude for five years." After some amendments and immediately before the 1987 amendments, s 247 stood as follows: "Other injuries Whosoever maliciously injures any real or personal property whatsoever, either of a public or private nature for which act no punishment is provided in this Chapter, shall be liable to penal servitude for five years." As has been seen, the 1987 amendments relocated the catch-all provision within the relevant part of the Act from the position of last to first and reconstituted it as s 195 expressed in terms of conduct which "destroys or damages" property. Evidently, it was intended that "damages" should be taken to include "injures" according to the natural and ordinary meanings of those words86. In Samuels v Stubbs, Walters J noted87 that where the word "damage" is used in legislation its meaning will be controlled by its context and, depending on the context, may not always be employed interchangeably with "injure". In this context, however, it is apparent that it was intended that the two terms should be interchangeable. Under legislation analogous to the Crimes Act as it previously stood, "injures" was taken to include "damages"88 and, as has been noticed, s 195 was proposed by the Criminal Law Review Division as in effect an expansion of the previous reach of s 247. The concept of "damage" In view of the cases canvassed in the Court of Criminal Appeal's reasons for judgment and in the arguments advanced before this Court, conceptually there arise five broad categories of conduct which arguably could amount to damage to property within the meaning of s 195(1). They are: 86 Concise Oxford English Dictionary, 11th ed (2004) at 361 meaning 1, 732 meaning 1. 87 (1972) 4 SASR 200 at 203. 88 See Getty v Antrim County Council [1950] NI 114 at 118 per Black LJ; Griffiths v Morgan (unreported, Supreme Court of Tasmania, 13 October 1972) at 12. Nettle conduct which involves physical interference with the property and which causes some alteration to the physical or chemical structure, or integrity, of the property, or, as otherwise termed, "physical derangement"89, whether permanent or temporary; conduct which changes the physical appearance of the property, so that it may be described as "imperfect"90; conduct which involves physical interference with the property and which has a direct impact on the ability of the property physically to operate or fulfil its function; conduct which involves physical interference with the property and which has some impact on the functionality of the property but which does not involve a direct impact on the ability of the property physically to operate or fulfil its function; and conduct which involves no physical interference with the property but has some impact on the functionality of the property. These categories are not intended to be rigid or prescriptive. It is not always possible to draw bright lines between them; for example, as is suggested by the majority in this case91, the second category could be conceived of as a subset of the first. Nor are the categories intended to undercut the proposition that whether damage is done in any particular case is a question of fact and degree92. Nonetheless, in my view the categories assist in understanding the extant cases and in determining the breadth of s 195(1)(a). In this case, the majority concludes93 that, for conduct to cause damage to property within the meaning of s 195(1)(a), it is necessary that it cause some alteration to the physical integrity of the property, which may include a change to the appearance of the property where that involves a change to the physical or 89 Director of Public Prosecutions v Fraser & O'Donnell [2008] NSWSC 244 at [38]. 90 "A" (a Juvenile) v The Queen [1978] Crim LR 689; R v Zischke [1983] 1 Qd R 240 at 246; Hammond v The Queen (2013) 85 NSWLR 313 at 326 [50] per Slattery J (Hoeben CJ at CL and Bellew J agreeing at 315 [1], 334 [80]). 91 See reasons of Kiefel CJ, Bell, Keane and Gordon JJ at [39]. 92 R v Henderson and Battley (unreported, Court of Appeal of England and Wales, 29 November 1984) at 3; Fraser & O'Donnell [2008] NSWSC 244 at [27]. 93 See reasons of Kiefel CJ, Bell, Keane and Gordon JJ at [53]. Nettle chemical structure of the property. I do not accept that conclusion. As I see it, the better view of the meaning of s 195(1)(a) is that it is enough to constitute damage to property if there be some physical interference with the property which affects the functionality of the property or the ability of the property physically to operate. In other words, whereas the majority accepts only the first category (and, to the extent that it falls within the first category, the second) as sufficient to constitute damage, in my view s 195(1)(a) can also encompass the third and fourth categories. As I explain in what follows, the decided cases extend to the third category and there is no reason in principle to suppose that the legislature intended to draw a line between the third and fourth. The need for "physical derangement" The appellant argued before this Court, as he did before the courts below, that the "common thread" of previous authority regarding offences of criminal damage to property was that the element of "damage" is not established without proof of some degree of physical derangement or alteration of the physical integrity of the relevant property. Up to a point that is so; but it is not entirely so. Clearly enough, there are cases which speak in terms of physical derangement or interference with the physical integrity of the property. For example, in R v Previsic, where the accused was charged with criminal damage caused by kicking a car, it was held94 that the jury were correctly directed that: "a dint such as was observable on the photographs put in evidence can amount to damage" (emphasis in original). There are also a number of cases in which the conduct has had an effect on the physical appearance of the property. In "A" (a Juvenile) v The Queen, the Kent Crown Court gave95 the example of a person spitting on a satin wedding dress so as to leave a mark or stain that could not be removed: this could amount to damage since it could render the dress "imperfect". And it has consistently been held96 that the painting of graffiti or slogans on the surface of property can amount to damage. In R v Zischke, this was explained97 on the basis that slogans painted on the surface of a building with aerosol spray had rendered the building 94 (2008) 185 A Crim R 383 at 388 [27] per Ashley JA (Dodds-Streeton JA and Lasry A-JA agreeing at 389 [30], [31]). 95 [1978] Crim LR 689 at 689. 96 See, eg, Zischke [1983] 1 Qd R 240; Hardman v Chief Constable of Avon & Somerset Constabulary [1986] Crim LR 330; Roe v Kingerlee [1986] Crim LR 97 [1983] 1 Qd R 240 at 246. Nettle "imperfect" until the slogans were removed. In Hardman v Chief Constable of Avon & Somerset Constabulary, the painting of silhouettes on an asphalt pavement with a soluble water paint designed to wash away in the rain was held98 to be damage to property on the basis that, although it caused no lasting effect, the paintings were productive of "mischief done to property". And in Roe v Kingerlee, the smearing of mud graffiti on a wall was held99 to be capable of amounting to criminal damage. While Zischke can be explained on the basis that the painting of the graffiti altered the physical or chemical structure of the surface of the property, it is more difficult to describe Hardman and Roe in that manner. By contrast, there are many cases which speak in terms of effect on function. For example, in R v Fisher, the Court for Crown Cases Reserved held100 that an accused who had interfered with the operation of a steam engine by over-tightening screws, shutting off a valve and blocking the flow of water to the boiler by placing a stick in a boiler feed pipe, was rightly convicted of an offence of "unlawfully and maliciously cut, break, or destroy, or damage with Intent to destroy or to render useless, any Machine or Engine" used for agriculture operation, contrary to s 15 of the Malicious Damage Act. Despite the fact that once the screws were loosened, the valve was opened and the stick was removed from the feed pipe, the steam engine was able to function just as well as before the interference, the Court held that there was damage to the engine because for a time it was rendered dysfunctional. Pollock CB equated101 what had been done to spiking a gun, where no physical damage is done to the weapon but it is rendered dysfunctional until the spike is removed: "there is no actual damage done to the gun, although it is rendered useless. ... Can it be said that the machine was not damaged, when it was placed in such a position that, if the water had gone on boiling, the boiler would have burst? Moreover, great injury may be done to a machine by the displacement of its parts; and in this case, until the parts were replaced, the machine was useless." In more recent times, there has been a succession of cases in which the basis of decision has been that it is enough to constitute damage to property in the relevant sense that there be some physical interference with the property that 98 [1986] Crim LR 330 at 330-331. 99 [1986] Crim LR 735. 100 (1865) LR 1 CCR 7 at 7. See also R v Tacey (1821) Russ & Ry 452 [168 ER 893]; Getty [1950] NI 114. 101 Fisher (1865) LR 1 CCR 7 at 8. Nettle temporarily affects its functionality. For example, in Samuels, the act of jumping on a policeman's cap and so putting the cap temporarily out of shape was held102 to amount to an offence of wilfully destroying or damaging property contrary to s 43(1) of the Police Offences Act 1953 (SA): on the basis that it prevented the cap serving its normal function of being worn as a policeman's cap until put back into shape. In overturning the decision of the Special Magistrate to dismiss the complaint against the accused, Walters J implicitly rejected the Special Magistrate's view103 that "the word 'damage' … denotes an actual physical interference to the structure or components of the hat, however small". In Griffiths v Morgan, an accused who rendered a breath analysis machine temporarily dysfunctional by blowing water or saliva into the mouthpiece was held104 to have been rightly convicted of unlawfully injuring property contrary to s 37(1) of the Police Offences Act 1935 (Tas) because "to cause the machine to become inoperative until it was cleaned and adjusted was ... to injure it". Significantly, there was no evidence that the parts of the machine were harmed. In R v Henderson and Battley, the accused were held105 to have been rightly convicted of damaging property contrary to s 1(1) of the Criminal Damage Act 1971 (UK) by dumping soil and rubble onto a parcel of land that had been cleared for development. The jury had been directed that damage "includes even the temporary rendering of the land less usable or, indeed, not usable; adversely affecting its character for the purpose for which the owner had it". In the Court of Appeal, Cantley J, delivering the judgment of the court, held106 that the direction accorded with "good sense" and with Fisher. In Morphitis v Salmon, while the accused's conduct in removing a scaffold clip and scaffold bar forming part of a barrier did not amount to damage to the clip and bar, the Queen's Bench Division considered107 that it could have amounted to damage to the barrier, noting108 that "[t]he authorities show that the term 'damage' for the purpose of [s 1(1) of the Criminal Damage Act 1971 (UK)], should be widely interpreted so as to include not only permanent or temporary physical harm, but also permanent or temporary impairment of value or usefulness". In R v Heyne, the Court of 102 (1972) 4 SASR 200 at 203-204. 103 Samuels (1972) 4 SASR 200 at 203. 104 Unreported, Supreme Court of Tasmania, 13 October 1972 at 12-13. 105 Unreported, Court of Appeal of England and Wales, 29 November 1984 at 4. 106 Henderson and Battley (unreported, Court of Appeal of England and Wales, 29 November 1984) at 4. 107 (1989) 154 JP 365 at 369. 108 (1989) 154 JP 365 at 368. Nettle Criminal Appeal of the Supreme Court of New South Wales upheld109 a trial judge's direction to the jury that tipping petrol onto a carpet constituted an offence of malicious damage to property: on the basis, among other considerations, that the temporary functional derangement of the house made the house unusable until the petrol vapour dispersed. In R v Fiak, the accused was held110 to have been rightly convicted of doing criminal damage to a blanket and a police cell by placing the blanket in the cell lavatory and flushing it repeatedly with clean water until the cell flooded: on the basis that the blanket could not be used until it had been dried out and the flooded cell remained out of action until the water was cleared. In Director of Public Prosecutions (NSW) v Lucas, the deflation of a motorcar tyre was held111 to be capable of constituting damage to property contrary to s 195(1) of the Crimes Act: on the basis that it was a physical interference with the tyre that rendered it unable to be used for its ordinary function until proper pressure was restored. Counsel for the appellant contended that, although the impugned conduct in each of those cases was held to be damage because it affected the functionality of the property in question, it was equally important to the result in each case that the impugned conduct caused a physical change to or derangement of the property even if only slight. Counsel prayed in aid the decision of Simpson J in Director of Public Prosecutions v Fraser & O'Donnell, where, after reviewing a number of the decisions just cited, her Honour held112 that the actions of protesters in activating a safety switch on a machine rendering it inoperable and then locking themselves to that machine did not amount to a sufficient degree of physical interference with the machinery to amount to damage to the machinery. Likewise, in counsel's submission, none of the appellant's actions on 8 May 2016 amounted to a sufficient degree of physical interference with the coal loader to amount to damage to the coal loader. The Crown responded by invoking the subsequent decision of the Court of Criminal Appeal of the Supreme Court of New South Wales in Hammond v The Queen, in which Slattery J, with whom Hoeben CJ at CL113 and Bellew J114 109 Unreported, Court of Criminal Appeal of the Supreme Court of New South Wales, 18 September 1998 at 5 per Handley JA (Levine J and James J agreeing). 110 [2005] EWCA Crim 2381 at [20]. 111 [2014] NSWSC 1441 at [18]. 112 [2008] NSWSC 244 at [49]. 113 (2013) 85 NSWLR 313 at 315 [1]. 114 (2013) 85 NSWLR 313 at 334 [80]. Nettle agreed, expressed115 disagreement with Simpson J's conclusions and, in obiter dicta, posited that the course of authority in England and Australia now supports the conclusion that interference with functionality of the property in question, even without physical harm or derangement of the property, is sufficient to establish damage within the meaning of s 195(1) of the Crimes Act. The sufficiency of effect on functionality As counsel for the appellant contended, in many of the cited cases in which it has been held that damage to property consisted in the effects of the accused's actions on the functionality of property there was also some degree of physical change or alteration to the property. But contrary to the appellant's submissions, not all of those cases involved an appreciable degree of physical derangement. What emerges from the totality of them is that although, in some circumstances, damage to property in the relevant sense may consist of interference with property resulting in physical derangement of the property, in other circumstances it is sufficient that there be some physical interference with the property – even without any appreciable physical derangement – if it affects the functionality of the property in a manner that renders it inoperative in the context in which it existed. Of the cases mentioned, the dumping of soil and rubble on a development site in Henderson and Battley, and the act of blowing water or saliva into the mouthpiece of a breath analysis machine in Griffiths, are perhaps the clearest exemplars. In each case, the impugned conduct went no further than the attachment of something extraneous to property by no more than the force of gravity, and so in a manner that meant that what had been so attached could readily be removed without alteration to the underlying physical or chemical structure of the property. There is good sense in these cases. If an offender physically attaches something to property (even if only by the force of gravity) and the attachment renders the property dysfunctional (even if only until the attachment is removed) it accords with the natural and ordinary sense of language to speak of the offender's actions as physical interference with property which affects the functionality of the property; and thus it accords with the apparent objectives of s 195(1), as construed against the background of its historical context, to conceive of the offender's action as damage to property within the meaning of the section. The question is whether the conduct of the appellant in this case can properly be conceived of as physical interference with property which rendered the property dysfunctional. 115 (2013) 85 NSWLR 313 at 331 [69]. Nettle When does conduct interfere with functionality? As Simpson J recognised116 in Fraser & O'Donnell and Leeming JA concluded117 in the Court of Criminal Appeal, it is not enough to constitute damage to property in the relevant sense for a protester to lie down in front of a bulldozer with the object of influencing the driver to stop the machine. Such conduct may be expected to affect the driver's operation of the machine, and may in fact cause him or her to change or cease its operation, but it does not physically interfere with the machine in a manner that affects the functionality of the machine. Is it any different, as in this case, where a protester climbs on or ties himself to a machine? To some extent, a protester climbing on a machine is analogous to a dump truck driver tipping soil and rubble on a development site. The two situations are alike in that, while no more than the force of gravity binds the intruded element to the property, the property cannot be used for the function for which it is intended until the intruded element has been removed. But whether the analogy is appropriate ultimately depends on the view properly to be taken of functionality. In a case where soil and rubble are dumped on a development site, the presence of the soil and rubble physically prevents the site being used for development until the soil and rubble are removed. In the case of a protester climbing on a machine, the position is more problematic. If functionality of the machine is to be conceived of as limited to the ability of its mechanism physically to operate, it could hardly be said that the protester climbing on or tying him or herself to the machine affected its functionality. At least in the case of a machine like a bulldozer or the coal loading machine in issue, it is improbable that the presence of a protester on the machine would have any effect on its mechanism unless and until the protester came into contact with some of the moving parts. And even then, the size and strength of the machine are such that the protester's contact with the mechanism would more probably result in the death or serious injury of the protester than any hindrance to the operation of the moving parts. Thus, at least in the majority of cases, the only thing about the protester climbing on or tying him or herself to the machine that would cause the machine to stop would be the entirely understandable disposition of the operator to shut down the machine for fear of harming the protester. And, in one sense, that is not relevantly different from what occurs where a protester lies in front of a machine, without physically coming into contact with the machine, causing the operator to stop the machine 116 [2008] NSWSC 244 at [42]. 117 Grajewski [2017] NSWCCA 251 at [62]. Nettle for fear of running over the protester. It may be obstruction of the machine but it is not damage to property. The alternative view is that the functionality of the machine includes its capacity to operate safely as it was designed to do. On that view of the matter, if a protester climbs onto or ties him or herself to a machine with the inevitable, consequent risk of falling off or coming into contact with part of the mechanism118, the protester thereby physically interferes with the machine in a manner which puts it into a condition unsafe to be operated as it was designed to do, and so affects its functionality. Presumably, the machine would have the capacity to keep pushing dirt or loading coal or carrying out some other intended operation until the protester came into contact with its mechanism. But even so, it could only do so in a manner that would be manifestly unsafe and hence contrary to the manufacturer's operating instructions and statutory occupational health and safety requirements119. Counsel for the appellant argued against that view that for a protester to climb on a machine in order to induce the driver to stop its operation is no different in point of principle from a protester standing in front of a machine in order to induce the driver to stop its operation. But there are two answers to that. The first is that, according to ordinary acceptation, to attach an object to property, even if only by force of gravity, is to interfere with the property. Dumping a load of soil and rubble on a property is a graphic example. So is standing on the roof of a motorcar. So, too, in the case of a protester climbing or tying him or herself to a machine, it is an act of interference with the machine which causes the machine to cease to be capable of safe operation and thereby affects its functionality. By contrast, standing in front of a machine in order to block its path, but without making contact, is not ordinarily perceived of or described as interfering with the machine, as opposed to obstructing its path, or as affecting the safety of the machine and therefore its functionality, as opposed to prejudicing the safety of the environment in which the machine is proposed to be operated. Therein lies the distinction. The second answer is that, given that damage in the relevant sense includes physical interference with property which, by bearing on its mechanism, prevents it being operated as it was designed to do, there is no apparent reason in principle to suppose a legislative intention to exclude physical interference with property which, although it does not bear on the mechanism, does by its physical attachment to the machine render the property incapable of operating as it was designed to do. Given that it is not infrequently difficult to draw a clear line 118 See and compare Fraser & O'Donnell [2008] NSWSC 244 at [47]. 119 See, eg, Work Health and Safety Act 2011 (NSW), ss 31-33. Nettle between such cases, there is no sound reason in principle for the Parliament to have intended to exclude the latter category of case. In my view, it is more likely that the object of the legislation was to criminalise physical interference with property that affects its functionality whether or not the effect on functionality is the result of physical impact. Conclusion By his actions in this case, the appellant interfered with Ship Loader 2 by physically attaching himself to it in a manner which rendered it incapable of being operated safely in the way it was designed to operate. For the reasons I have given, I would hold that the appellant was, therefore, rightly convicted of intentionally or recklessly damaging property contrary to s 195(1)(a) of the Crimes Act. Upon that basis, I would order that the appeal be dismissed.
HIGH COURT OF AUSTRALIA LIMITED & ANOR APPELLANTS AND GRANT RYAN AND ORS RESPONDENTS Graham Barclay Oysters Pty Ltd v Ryan [2002] HCA 54 5 December 2002 ORDER 1. Appeal by Graham Barclay Oysters Pty Ltd allowed in so far as it concerns the issue of negligence. 2. Appeal by Graham Barclay Distributors Pty Ltd allowed with costs. 3. Parties to have 28 days to file draft minutes of consequential orders to be made by this Court in respect of the orders (including costs orders) made by the Full Court of the Federal Court. 4. In default of agreement between the parties to this appeal as to the form of the draft minutes for that appeal, each party is to file within the 28 day period its draft with short written submissions in support, indicating how the drafts of the parties differ. On appeal from the Federal Court of Australia Representation: C R R Hoeben SC with A P Coleman for the appellants (instructed by PricewaterhouseCoopers Legal) T K Tobin QC with J B R Beach QC and B M Zipser for the first named first respondent (instructed by Slater & Gordon) No appearance for the second to seventh named first respondents W H Nicholas QC with T G R Parker for the second respondent (instructed by Coudert Brothers) B W Walker SC with P W Taylor SC and M J Windsor for the third respondent (instructed by Crown Solicitor for the State of New South Wales) Intervener: R J Meadows QC, Solicitor-General for the State of Western Australia with J C Pritchard intervening on behalf of the Attorney-General for the State of Western Australia (instructed by Crown Solicitor for the State of Western Australia) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. HIGH COURT OF AUSTRALIA GAUDRON, McHUGH, GUMMOW, KIRBY, HAYNE AND CALLINAN JJ GRANT RYAN AND APPELLANT GREAT LAKES COUNCIL AND ORS RESPONDENTS Ryan v Great Lakes Council 5 December 2002 ORDER 1. Appeal dismissed with costs. 2. Parties to have 28 days to file draft minutes of consequential orders to be made by this Court in respect of the orders (including costs orders) made by the Full Court of the Federal Court. 3. In default of agreement between the parties to this appeal as to the form of the draft minutes for that appeal, each party is to file within the 28 day period its draft with short written submissions in support, indicating how the drafts of the parties differ. On appeal from the Federal Court of Australia Representation: T K Tobin QC with J B R Beach QC and B M Zipser for the appellant (instructed by Slater & Gordon) W H Nicholas QC and T G R Parker for the first respondent (instructed by Coudert Brothers) C R R Hoeben SC with A P Coleman for the second and third respondents (instructed by PricewaterhouseCoopers Legal) B W Walker SC with P W Taylor SC and M J Windsor for the fourth respondent (instructed by Crown Solicitor for the State of New South Wales) Intervener: R J Meadows QC, Solicitor-General for the State of Western Australia with J C Pritchard intervening on behalf of the Attorney-General for the State of Western Australia (instructed by Crown Solicitor for the State of Western Australia) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. HIGH COURT OF AUSTRALIA GAUDRON, McHUGH, GUMMOW, KIRBY, HAYNE AND CALLINAN JJ STATE OF NEW SOUTH WALES APPELLANT AND GRANT RYAN AND ORS RESPONDENTS State of New South Wales v Ryan 5 December 2002 ORDER 1. Appeal allowed with costs. 2. Parties to have 28 days to file draft minutes of consequential orders to be made by this Court in respect of the orders (including costs orders) made by the Full Court of the Federal Court. 3. In default of agreement between the parties to this appeal as to the form of the draft minutes for that appeal, each party is to file within the 28 day period its draft with short written submissions in support, indicating how the drafts of the parties differ. On appeal from the Federal Court of Australia Representation: B W Walker SC with P W Taylor SC and M J Windsor for the appellant (instructed by the Crown Solicitor for the State of New South Wales) T K Tobin QC with J B R Beach QC and B M Zipser for the first named first respondent (instructed by Slater & Gordon) No appearance for the second to seventh named first respondents W H Nicholas QC with T G R Parker for the second respondent (instructed by Coudert Brothers) C R R Hoeben SC with A P Coleman for the third and fourth respondents (instructed by PricewaterhouseCoopers Legal) No appearance for the fifth to the fourteenth respondents Intervener: R J Meadows QC, Solicitor-General for the State of Western Australia with J C Pritchard intervening on behalf of the Attorney-General for the State of Western Australia (instructed by Crown Solicitor for the State of Western Australia) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Graham Barclay Oysters Pty Ltd v Ryan Negligence – Local authority – Duty of care – Harvesting of contaminated oysters – Oysters causing Hepatitis A infection – Knowledge of risk on part of officers of the authority – Failure by the authority to exercise statutory powers to control water pollution – Reasonableness – Class to whom duty owed when exercising power to control pollution – Causation – Whether minimisation of pollution and thus risk of viral contamination would have prevented infection. Negligence – Oyster grower and distributor – Breach of duty of care – Harvesting of contaminated oysters – Oysters causing Hepatitis A infection – Failure to refrain from harvesting and selling oysters during relevant period. Negligence – The State – Duty of care – Harvesting of contaminated oysters – Oysters causing Hepatitis A infection – Knowledge of risk on part of officers of the State – Failure to exercise general statutory powers – Relevance of State "control" of industry – Reasonableness – Justiciability – Failure to exercise specific statutory power of closure – Whether power enlivened – Class to whom duty owed when exercising power. Practice and procedure – Federal Court of Australia – Representative action – Declaration of legal right concerning individual entitlement to recovery – Whether the making of such a declaration inappropriate or beyond power – Whether statute and nature of representative proceeding sustain a declaratory order. GLEESON CJ. The principal facts, the nature of the proceedings, and the relevant legislative provisions, appear from the reasons for judgment of Gummow and Hayne JJ ("the joint judgment"). In December 1996, Mr Ryan consumed oysters that a relative had purchased from the companies described in the joint judgment as the Barclay companies. The oysters, which had been grown in Wallis Lake, near Forster, were contaminated. In consequence, Mr Ryan contracted the hepatitis A virus ("HAV"). The circumstances of the contamination are explained in the joint judgment. Heavy rainfall over a period in November 1996 had increased the risk of pollution of the lake from a number of sources, and had resulted in cessation of harvesting for four days. In February 1997, an HAV epidemic was notified, and on 14 February 1997 Wallis Lake growers ceased harvesting for the season. In seeking to assign legal responsibility for the harm he suffered, Mr Ryan blamed the growers and distributors of the oysters (the Barclay companies), the Great Lakes Council ("the Council"), which was the local government authority that exercised regulatory functions, including functions designed to protect the environment, under the Local Government Act 1993 (NSW) ("the Local Government Act"), and the State of New South Wales ("the State"). Claims were also made under the Trade Practices Act 1974 (Cth) ("the Trade Practices Act") against the Barclay companies. That is how the case came to be litigated in the Federal Court. The Trade Practices Act claims were not directly in contest in this Court. In the present appeals, the principal issue in relation to the claims against the Council and the State was whether there was a duty of care of such a nature that any act or omission shown to have been causally related to Mr Ryan's injury constituted a breach. In relation to the claims in tort against the Barclay companies, the existence of a duty of care was accepted; the principal issue was whether a breach had been established. It is convenient to deal with the claims against the various defendants in the following sequence: the State; the Council; the growers and distributors. There are important differences between claims made against the State and the Council, on the one hand, and those made against the Barclay companies, on the other. A consumer of food suffered personal injury because the food was unfit for human consumption. His case against the growers and distributors of the oysters is essentially a straightforward product liability case. He sued the producers and suppliers of the product, the form of contamination being such that it was not reasonably discoverable upon any intermediate inspection. The existence and content of a duty of care was not in contest. But the nature of the case against the other defendants is far less obvious. The consumer is suing the government; local and State. He seeks to make the government directly liable. Originally there were attempts to establish tortious conduct on the part of persons, authorities or instrumentalities, for whom, or for which, the State might be vicariously responsible, but those attempts failed on the facts, and have not been pursued in this Court. The allegations now pressed against the State, and the Council, do not involve allegations of carelessness in the exercise of a statutory power. The complaint is not about acts, but about omissions. In the particular circumstances of the case, the issues, raised by this assertion of direct governmental liability in negligence, include what are, in the final analysis, issues of justiciability. Citizens blame governments for many kinds of misfortune. When they do so, the kind of responsibility they attribute, expressly or by implication, may be different in quality from the kind of responsibility attributed to a citizen who is said to be under a legal liability to pay damages in compensation for injury. Subject to any insurance arrangements that may apply, people who sue governments are seeking compensation from public funds. They are claiming against a body politic or other entity whose primary responsibilities are to the public. And, in the case of an action in negligence against a government of the Commonwealth or a State or Territory, they are inviting the judicial arm of government to pass judgment upon the reasonableness of the conduct of the legislative or executive arms of government; conduct that may involve action or inaction on political grounds. Decisions as to raising revenue, and setting priorities in the allocation of public funds between competing claims on scarce resources, are essentially political. So are decisions about the extent of government regulation of private and commercial behaviour that is proper. At the centre of the law of negligence is the concept of reasonableness. When courts are invited to pass judgment on the reasonableness of governmental action or inaction, they may be confronted by issues that are inappropriate for judicial resolution, and that, in a representative democracy, are ordinarily decided through the political process. Especially is this so when criticism is addressed to legislative action or inaction. Many citizens may believe that, in various matters, there should be more extensive government regulation. Others may be of a different view, for any one of a number of reasons, perhaps including cost. Courts have long recognised the inappropriateness of judicial resolution of complaints about the reasonableness of governmental conduct where such complaints are political in nature. In Brodie v Singleton Shire Council1, I took the view that the non-feasance rule which previously applied to highway authorities was an aspect of a wider problem concerning the manner in which the law should relate the public responsibilities of persons or bodies invested by statute with a power to manage public facilities, including the responsibility to apply public funds for that purpose, and the rights of citizens who may be affected by the manner in which those responsibilities are exercised. In that case, three members of the majority expressly accepted that it may be proper and necessary for a court to decide (2001) 206 CLR 512 at 527 [12]. whether the priorities of a local council in dealing with road repairs in various locations were reasonable2. The decision in the case required that view. Even so, the scope for judicial examination of the reasonableness of governmental spending priorities was not held to be, and cannot be, at large. Raising and spending money for road repairs involves setting priorities, not only between parts of the road system, but also between all the claims upon an authority's resources, and between the interests of taxpayers and those of road users. My view remains that setting priorities by government for the raising of revenue and the allocation of resources is essentially a political matter, and that, if the reasonableness of such priorities is a justiciable issue, that can be so only within limits. The way in which the case against the State and the Council is put in the present appeals squarely raises the wider problem mentioned above. The claims against the State and the Council in the present case are based on non-feasance. Expressed in broad terms, they are that the State government, and local government, could and should have done more to prevent the outbreak of HAV. The potential political content of that statement is obvious. It may mean that the oyster industry was under-regulated; or that the local or State government should have introduced more stringent policies to control pollution; or that inadequate resources were devoted to protecting the quality of Wallis Lake as against other aspects of the environment. Expressed in legal terms, the complaint requires specification of a duty of care, breach of which was a cause of Mr Ryan's illness. Accepting that local government authorities, and State those governments, have responsibilities for public health and safety, responsibilities are owed to the public. Mr Ryan must establish that the State, and the Council, owed a duty of care to him, as a consumer of Wallis Lake oysters. If such a duty exists, then presumably a similar duty is owed to all consumers of all potentially contaminated food and, perhaps, to all persons whose health and safety might be affected in consequence of governmental action or inaction. What is the content of the duty owed to Mr Ryan, or to oyster consumers? If it is not possible to answer that question with reasonable clarity, that may cast doubt on the existence of the duty3. These are matters for separate consideration in relation to the State and the Council. One thing is clear. Reasonable foreseeability of harm of the kind suffered by Mr Ryan, whilst a necessary condition for the existence of a duty of care on the part of the Council or the State, is not sufficient4. In the case of a (2001) 206 CLR 512 at 580-581 [162]. 3 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 13 [5]. 4 Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 at 268 [35]; Sullivan v Moody (2001) 75 ALJR 1570 at 1575 [25], 1577 [42], 1581 [64]; 183 ALR 404 at 409-410, 412, 418. governmental authority, it may be a very large step from foreseeability of harm to the imposition of a legal duty, breach of which sounds in damages, to take steps to prevent the occurrence of harm. And there may also be a large step from the existence of power to take action to the recognition of a duty to exercise the power. Issues as to the proper role of government in society, personal autonomy, and policies as to taxation and expenditure may intrude. Even where a statute confers a specific power upon a public authority in circumstances where mandamus will lie to vindicate a public duty to give proper consideration to whether to exercise the power, it does not follow that the public authority owes a duty to an individual, or a class of persons, in relation to the exercise of the power5. In the case of both the State and the Council, it is failure to exercise those powers, not negligence in the manner of their exercise, that is said to constitute the breach. There is a further question which goes principally to the issue of causation, but which also reflects upon the issues of duty and breach. Let it be supposed that it is fair to say that both the Council and the State could have done more to seek to prevent the HAV outbreak. It does not follow that what they could, and should, have done, would have prevented the outbreak, or the harm to Mr Ryan. The evidence suggests that, where oysters are cultivated in areas of intensive human occupation and activity, there is always a risk of contamination. Depending upon exactly what it is said should have been done by the Council or the State, short of prohibiting the cultivation of oysters in Wallis Lake altogether, there may be difficulty in showing a causal relationship between the alleged shortcomings of government and the injury to Mr Ryan. This difficulty was one reason for the failure to establish tortious conduct on the part of persons or bodies for whom the State or the Council might have been vicariously responsible. The case against the State What was formerly a Crown immunity from tortious liability disappeared early in the history of New South Wales. Procedures for suing a nominal defendant on behalf of the government were first introduced in 18576. The Claims against the Government and Crown Suits Act 1912 (NSW) provided in "The petitioner may sue such nominal defendant at law or in equity in any competent court, and every such case shall be commenced in the same way, and the proceedings and rights of parties therein shall as nearly as 5 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 465 per Mason J. 6 Claims against the Government of New South Wales Act 1857 (NSW) (20 Vict c 15). possible be the same, and judgment and costs shall follow or may be awarded on either side as in an ordinary case between subject and subject." The Crown Proceedings Act 1988 (NSW) abolished the nominal defendant procedure but, in s 5, adhered to the formula that proceedings and rights should be as nearly as possible the same as in an ordinary case between subject and subject7. That formula reflects an aspiration to equality before the law, embracing governments and citizens, and also a recognition that perfect equality is not attainable. Although the first principle is that the tortious liability of governments is, as completely as possible8, assimilated to that of citizens, there are limits to the extent to which that is possible. They arise from the nature and responsibilities of governments. In determining the existence and content of a duty of care, there are differences between the concerns and obligations of governments, and those of citizens. Such differences led to an attempt to distinguish between matters of policy and operational matters. That distinction was never rigorous, and its validity and utility have been questioned9. Even so, the idea behind it remains relevant in some cases, such as the present. In Sutherland Shire Council v Heyman10, Mason J said: "The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognise that a public authority is under no duty of care in relation to decisions which involve or are dictated by financial, economic, social or political factors or constraints. Thus budgetary allocations and the constraints which they entail in terms of allocation of resources cannot be made the subject of a duty of care. But it may be otherwise when the courts are called upon to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness." One of the reasons why matters of the first kind are inappropriate as subjects of curial judgment about reasonableness is that they involve competing public interests in circumstances where, as Lord Diplock put it, "there is no 7 See also Judiciary Act 1903 (Cth) s 64. 8 Asiatic Steam Navigation Co Ltd v The Commonwealth (1956) 96 CLR 397 at 427. eg Pyrenees Shire Council v Day (1998) 192 CLR 330 at 393-394 [180]-[184]; Stovin v Wise [1996] AC 923 at 951-953. 10 (1985) 157 CLR 424 at 469. criterion by which a court can assess where the balance lies between the weight to be given to one interest and that to be given to another"11. There are forms of governmental activity, which courts in the past endeavoured to describe by the term "operational", where there is no reason for hesitating to assimilate the position of governments to that of citizens in imposing duties and standards of care. Such activity might involve budgetary considerations, but that does not prevent such assimilation. Individuals and corporations also have to watch their budgets, and decisions about what is reasonable may have to take account of that. As the other extreme, the reasonableness of legislative or quasi-legislative activity is generally non- justiciable. Here we are concerned with the problem of deciding, in a case where the government had certain powers, whether it is accountable, through the law of negligence, for not exercising its powers, or for not exercising them sufficiently. To apply that form of legal accountability requires the identification, not merely of a power, but also a duty; a duty of care owed to a citizen or a class of citizens. A conclusion that such a duty of care exists necessarily implies that the reasonableness or unreasonableness of the inaction of which complaint is made is a legitimate subject for curial decision. Such legitimacy involves questions of practicality and of appropriateness. There will be no duty of care to which a government is subject if, in a given case, there is no criterion by reference to which a court can determine the reasonableness of its conduct. That negative proposition leaves open other questions as to the circumstances in which the law will treat failure on the part of a public authority to exercise a power as a breach of a private law duty of care; but it is sufficient to resolve a substantial part of the case against the State in these proceedings. In the Federal Court, at first instance, Wilcox J described the primary case against the State as being that it failed to prepare or implement any proper oyster management plan for Wallis Lake. It had no statutory duty to take such action, but there were various powers available to it upon which it could have relied if it had decided to do so. Wilcox J also referred to arguments that sought to make the State responsible for alleged failures on the part of the Environmental Protection Authority and the Health Department. Those arguments were rejected on the facts, and it is unnecessary to say more about them. As to the primary case, it is to be noted that it was expressed in terms of breach. The formulation of the breach implies a legal duty, owed by the New South Wales government to Mr Ryan and all consumers of oysters grown in Wallis Lake, to "prepare and implement [a] proper oyster management plan". That case was later narrowed by reference to certain aspects of management. There was a separate argument that, given the deficiencies of the state of management as at November 1996, the State 11 Dorset Yacht Co v Home Office [1970] AC 1004 at 1067. should have exercised a power to close the fishery. That argument occupied more familiar territory, pointing to a specific statutory power, conferred for a purpose, and asserting a duty to exercise the power in the circumstances12. Wilcox J held that, "through various agencies, the New South Wales government exercised substantial managerial control over the Wallis Lake oyster industry". This was a key finding in his acceptance of the case against the State; an acceptance that was upheld by Lee and Kiefel JJ in the Full Court. Kiefel J rested her decision upon what she regarded as an obligation of the State to exercise its statutory power to prohibit harvesting of oysters until the Minister could be assured of the likelihood of the oysters' fitness for consumption. Lee J upheld the conclusion of Wilcox J that the State was under a duty of care to ensure that powers it had created were exercised to reduce the risk of harm being caused to consumers of oysters, and that the State had breached that duty by failing to manage the waters of the Lake by undertaking, or causing others to undertake, appropriate surveys, and by implementing harvesting controls. For the reasons that follow, I prefer the reasoning of Lindgren J, who dissented on the claim against the State. It is convenient to deal first with the matter of management of the fisheries, and to deal later with the argument concerning the power of closure. The proposition that the New South Wales government exercised substantial managerial control over the Wallis Lake oyster industry requires further analysis. If taken at face value, it virtually forecloses further debate. Control is a well established basis for the existence of a duty of care in a public authority or a private citizen13. Managerial control, if it existed, would seem to equate the position of the State with that of the Barclay companies, which admittedly owed a duty of care. But what exactly does it mean to say, in a market economy, that the State has substantial managerial control over an industry conducted by private enterprise? Does it mean any more than that the government has governmental power? Wilcox J referred to the following aspects of control: 12 cf Stovin v Wise [1996] AC 923; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1. 13 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 551-552; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 24-25 [43]-[46], 42-43 [104], 61 [166], 82 [227], 104 [304], 116 [357]; Modbury Triangle Shopping Centre Pty Ltd v Anzil (2000) 205 CLR 254 at 263 [18]; Brodie v Singleton Shire Council (2001) 206 CLR 512 at 558-559 [102]. the State owned, and had powers of control over, the lake; through the Department of Fisheries, it established, and supervised the operations of, a mosaic of oyster leases; through the Department of Fisheries, it issued, and enforced the provisions of, aquaculture permits; through the Department of Health, the State supervised the depuration process, including the nature and location of water intake points and the design, construction and maintenance of depuration tanks and ultra-violet facilities; through the EPA, the State had powers under the Clean Waters Act to remove, disperse, destroy or mitigate pollution of waters (s 27) and to carry out inspections and investigations of premises (s 29); through a number of agencies, the State was a participant in the Wallis Lake Estuary Management Committee, one of whose objectives was to prepare a management plan designed 'to sustain a healthy, productive and attractive estuary'; and, most importantly, through the Minister for Fisheries, it had the power - at any time, to prohibit the taking of oysters from the lake." It has already been noted that Wilcox J did not find the government departments and authorities mentioned guilty of tortious conduct for which the State was vicariously responsible. In order to understand the legal implications of various aspects of governmental control, it is necessary to examine the legislative and regulatory structure set up by the State Parliament, and the executive. This appears in the joint judgment. A statement that the State had managerial control over the oyster industry involves a degree of ambiguity. The State, the body politic, was the government. Its legislature had all the powers given to it by its Constitution, subject to the Commonwealth Constitution. Its executive had powers given by the legislature. But Mr Ryan seeks to make out a case based on non-feasance. What is the basis for saying that the State owed a legal duty to the consumers of Wallis Lake oysters to exercise to a greater extent governmental powers of regulation over, or affecting, the conduct of producers and distributors of oysters? Why could not the State have relied on self- regulation by the industry itself? The assumption that a State government owes to individual citizens a legal duty to care for the health and safety of all citizens, or all consumers of food, or all consumers of oysters, by exercising its regulatory powers to the extent judged reasonable by a court, has far-reaching implications. It emerged from the evidence that, for some years before 1996, there had been, within government and industry circles in New South Wales, a continuing debate about the appropriate boundaries between government regulation and industry self-regulation. In April 1992, an Advisory Committee drafted for the Minister for Health Services Management a report entitled "New South Wales Oyster Quality Assurance Program". It supported a large measure of industry self-regulation, with government involvement. It included the following: "… inherent in the move towards industry self regulation is a consideration of the role of government agencies, particularly the NSW Health Department because the Minister for Health is charged with a responsibility for protecting the public's health and has appropriate regulations under the Food Act to ensure that foods which reach the consumer are indeed fit for consumption. In short, irrespective of any industry endeavours it is the NSW Health Department that makes the final judgement about the product and has the powers to impose penalties. … if the industry can achieve via self regulation a situation whereby its product meets the desired standards and offers a high degree of assurance to the public then the active role of government must be greatly reduced with consequent savings to the public purse. It is hoped that government will recognise this and respond accordingly by fostering the quality assurance objective. In the Advisory Committee's view, non-participants however few or many they may be, negate the whole concept of a quality control program and will almost certainly compromise its integrity at some stage. It is recommended therefore that the government amends purification plant permit conditions so that all oysters treated in plants be cultivated, harvested and purified in accordance with an approved quality assurance program. As an incentive for industry to meet the costs of quality assurance programs, oysters produced under a quality assurance program could be appropriately endorsed. The endorsement is made through the quality assurance program and not the NSW Health Department, enhancing industry self-regulation and quality assurance program integrity." In February 1994 a report to the Minister recorded: "The NSW Oyster Quality Assurance Program is based on a concept of industry self-regulation at the estuary level, with a minimum of central supervision." An Advisory Committee made further recommendations as to the detail of a Quality Assurance Program. A Ministerial paper to Cabinet in November 1994 stated: "4.14 The QAP is to be industry run and industry funded. Funding for the program is required at three levels: (iii) to pay for meat testing prior to marketing the oysters - this is required now and, as now, will be funded by the individual oyster farmer; to pay for the environmental testing required by, and any other costs associated with, the estuary-based program - it is proposed that these funds will be collected at the local level by the local committee responsible for developing and implementing the program; to pay for statewide co-ordination of the estuary based programs and other costs associated with the QAP - it is proposed that this requirement would be met through an 'annual contribution' required from all oyster farmers by Regulation made under Section 156 of the Fisheries Management Act 1994." Other evidence to like effect is set out in the reasons of Lindgren J. It demonstrates that the nature and extent of State government involvement in oyster quality control was a matter of policy, that it received attention at the highest levels, that it had substantial budgetary implications, and that it involved government concern to encourage an important primary industry. This demonstrates two things. First, the proposition that the State government had substantial managerial control over the oyster industry is, at best, an over-simplification. Secondly, the proposition that the State had a legal duty of care, owed to oyster consumers, obliging it to exercise greater control (and, presumably, to permit less industry self-regulation) takes the debate into the area of political judgment. By what criterion can a court determine the reasonableness of a government's decision to allow an industry a substantial measure of self-regulation? This is not a case where past experience, in New South Wales or elsewhere, had demonstrated the inadequacy of a quality assurance program to which the State was a party. It was, of course, known that there were risks to consumers, which was why there was a need for a quality assurance program in the first place. But such knowledge does not warrant a conclusion that the State, as a body politic, directly owed a legal duty to consumers to increase the level of regulation of the industry, or to exercise, to a greater extent, the powers of control available to it. However, there is one respect in which there was said to have been a negligent failure to exercise a specific power. The Fisheries Management Act 1994 (NSW), by s 189, empowered the Minister to impose a prohibition, called a fishing closure, in relation to the taking of fish under an aquaculture permit if satisfied that the area was in such a condition that the taking of fish ought to be suspended, or that the fish were, or were likely to be, unfit for human consumption. The power was conditioned upon the existence of a certain state of satisfaction. No such state of satisfaction existed at any time relevant to the present proceedings. The Minister cannot have been under a legal duty to impose a fishing closure for the reason that, in the state of affairs that existed, he had no power to do so. Kiefel J considered that, if the Minister had been properly informed, the rainfall in November 1996 must have given him reason to be concerned about the fitness for human consumption of Wallis Lake oysters. She said that "the State thereby came under a duty to exercise its powers and prohibit harvesting until the Minister could be assured of the likelihood of the oysters' fitness for consumption". It is necessary to distinguish between a public duty, enforceable by mandamus, to give consideration to the exercise of a power, and a legal duty, owed to a citizen, to exercise the power. It is a duty of the second kind that is here asserted. Bearing in mind past experience, and industry practice, as known in November 1996, it is not entirely clear what her Honour had in mind as to the information the Minister would have had if properly informed, or from whom that information might have been expected to come. It appears that her Honour aggregated the sources of information potentially available to "the State" rather than the information actually before the Minister. And "reason for concern" is not the statutory condition for the existence of the power given by s 189. More fundamentally, however, the legislative grant to a Minister of a power to impose a fishing closure if satisfied of certain matters did not subject the State to a legal duty of care, owed to the plaintiff, or consumers of Wallis Lake oysters. It may be accepted that the reasonableness of a decision to exercise the power of closure would be a justiciable issue, and that the potential for judicial review of such a decision on public law grounds exists. But it is the existence of a common law duty of care that is presently in question. The power given by s 189 is a power to protect the public, not a specific class of persons. Similar powers, covering a wide range of activities, are given to Ministers and government authorities in the interests of public health and safety. A legislative grant of power to protect the general public does not ordinarily give rise to a duty owed to an individual or to the members of a particular class14. 14 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 39 [93]. The duty of care upon which the case against the State was based was not made out. The case against the Council Part of the basis of the holding in the Federal Court of a duty of care on the part of the State was what was said to be its managerial control over the oyster industry. No such control existed in the Council. However, a different form of control was said to be relevant: powers of control over the activities that constituted potential sources of pollution of Wallis Lake. From those powers, conferred in the main by the Local Government Act, coupled with foreseeability of harm, it was argued that there was a duty on the part of the Council to eliminate or reduce the risk of viral contamination of Wallis Lake; a duty owed to consumers of oysters grown in the lake and, presumably, all others (such as swimmers) who might suffer physical harm in consequence of such contamination. The content of the duty, thus asserted, raises difficulties. A legal duty to eliminate the risk of viral contamination of the waters of the lake seems far- fetched. The evidence showed that such a risk could never have been eliminated. Wilcox J did not accept that there was such a duty. But, if the duty were merely to reduce, or take reasonable steps to reduce, pollution of the lake, the problem of causation earlier mentioned arises. Who is to say that risk reduction would have spared Mr Ryan from illness? That question, in turn, points up the remoteness of the powers of control available to the Council from the cause of harm to Mr Ryan, that is to say, the consumption of oysters produced and distributed by the Barclay companies15. Furthermore, the same problem affects the case against the Council as affected the case against the State: the circumstance that, in the public interest, certain powers of regulation of activity within its area are vested by statute in the Council does not mean that the Council owes a legal duty to individuals or classes of person whose health may be affected, directly or indirectly, by decisions made as to the exercise of those powers. In the Full Court, Lindgren and Kiefel JJ both concluded that the Council was not subject to a duty of care of the kind alleged. I agree with that conclusion. The starting point for consideration is the statutory provisions conferring on the Council its relevant functions and powers. These provisions are set out in the joint judgment. 15 cf Agar v Hyde (2000) 201 CLR 552. In considering the powers and responsibilities of the Council, for the purpose of determining whether it owed a duty of care to oyster consumers, an aspect of the facts should be noted. Wallis Lake is large, and there were many different ways in which, and places at which, human activity on or around the lake could result in pollution of its waters. There was no particular place of pollution that was shown to be responsible, or mainly responsible, for contamination of the oysters. As Lindgren J pointed out, assertions of a duty to reduce or minimise pollution are difficult to give practical content of relevance to the harm suffered by Mr Ryan. As with the State, the complaint is that the Council did not do enough to reduce pollution, but it is not possible to point to any specific act or omission that would have prevented harm to Mr Ryan16. The powers conferred upon the Council, insofar as they are presently relevant, were conferred for the benefit of the public generally; not for the protection of a specific class of persons17. In Pyrenees Shire Council v Day18, there was a clearly identified cause of harm, specific action or inaction on the part of the Council, and, as Kiefel J pointed out, "coincidence between the action which was necessary to prevent the fire, the powers given to the Council and the purpose for which they were given". Here the Council had general powers for the protection of public health, which would have embraced activity of the kind thought should have been undertaken, such as regular and comprehensive surveys of sanitary facilities in areas around the lake, or water testing. But there is nothing in the relevant statutory provisions, or in the circumstances concerning the relationship between the Council and oyster consumers, to justify a conclusion that the Council's powers were given for the protection of oyster consumers, or any other particular class. The duty of care upon which the case against the Council was based was not made out. The case against the Barclay companies Here, the issue is one not of duty, but of breach. 16 cf Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307. 17 cf Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 39 18 (1998) 192 CLR 330. "The Barclay companies acknowledge they owed a duty of care to consumers of their oysters. They deny they breached that duty and assert that, if they did, this did not cause the HAV infection suffered by [Mr Ryan] and relevant group members." There was mention, in the course of argument in this Court, of the possible significance of the Trade Practices Act, and the causes of action it creates, upon the existence of a common law duty of care in the Barclay companies. That is an interesting topic, but in the light of the concession noted above, and the manner in which the case was argued, both in the Federal Court and in this Court, the present is not the occasion to pursue it. Although counsel for Mr Ryan argued that the Barclay companies were negligent in the decisions they made in November 1996 as to when to cease and when to re-commence harvesting, Wilcox J did not accept that there was any causal connection between that conduct and the HAV epidemic. Wilcox J noted that it was accepted that Mr Barclay was at all material times aware of the existence of potential sources of viral pollution to the lake, and he knew that depuration was not adequate to remove viruses, and that oyster meat testing would not necessarily show viruses. Wilcox J summarised the negligence of the Barclay companies in the following sentence: "In my opinion, in selling without warning oysters grown in waters known to be subject to possible undetectable viral contamination, both Barclay companies breached their duty of care to ultimate consumers of the oysters." It is not clear what the words "without warning" add to that finding. It is hard to imagine that Wilcox J contemplated that the oysters might have been sold with a warning. Jonathan Swift wrote: "He was a bold man that first eat an oyster"19. It would be a bold fish merchant that displayed oysters for sale accompanied by a warning that they might be subject to undetectable viral contamination. The negligence found was in selling the oysters in the prevailing circumstances as known to the Barclay companies. The corollary is that they should have stopped selling Wallis Lake oysters until such time as improved quality assurance procedures made it reasonable to re-commence. In the Full Court, Kiefel J decided the case on the basis "that even if the harvesting of oysters had not been prohibited in the circumstances prevailing, as it should have been, the Barclays companies should not have supplied oysters for sale until a sufficient period had elapsed by which the risk of contamination 19 Swift, Polite Conversation, Dialogue 2 (1738). could be regarded as acceptable or tests sufficiently indicated that to be the case". Lee J agreed with Kiefel J. Lindgren J was of a different view. He said: "Having regard to the fact that it is not possible anywhere where human beings are to guarantee that purity of the water, it seems to me that the critical question in the present case is whether, as a result of what Mr Barclay knew or should have known about the quality of the water in the Lake, the Barclay companies' duty of care required them to do more than simply to suspend harvesting following a 'fresh', to depurate in accordance with Mr Bird's booklet and to test the flesh of sample oysters before and after depuration. So far as Mr Barclay in fact knew, subject to the necessity of ceasing harvesting following a 'fresh', the water of the Lake was safe water in which to grow oysters. The Lake's oysters had never previously given rise to an outbreak of hepatitis A or of any other oyster-related disease, although no doubt there had previously been rainfall events similar to that of 23-25 November 1996. Mr Barclay testified that over the four year period from 1989 to 1993, he had regularly taken the Council's Mr Brooker out in his boat to test the water in the Lake at twelve locations and that the results were satisfactory. He said that in the 'paddock' where virtually all Barclay Oysters' harvesting was done, the results were always excellent. Apparently, depuration and suspension of harvesting following a 'fresh' had proved sufficient measures for the Lake's oyster growers to take in the past. Depuration, suspension of harvesting and flesh testing cannot guarantee that an oyster is safe to eat. As his Honour observed, the starting point was to attack faecal contamination of the Lake at source. Whether it was reasonable for the Barclay companies to involve themselves in that activity requires 'a consideration of the magnitude of the risk and the degree of the probability of its occurrence along with the expense, difficulty, and inconvenience of taking alleviating action …' (Wyong Shire Council v Shirt...20). 20 (1980) 146 CLR 40 at 47. His Honour thought that their duty of care required the Barclay companies to conduct their own sanitary survey of that part of the shoreline of the Lake, the rivers and islands that was publicly accessible, then attempt to procure governmental or local governmental involvement to ensure that any faecal contamination revealed by the survey was rectified. But, with respect, his Honour did not consider the matters referred to in the passage from Wyong Shire Council v Shirt set out above from the viewpoint of the Barclay companies. Other particular questions arise. What about the future, would the Barclay companies be obliged to update their sanitary survey frequently and regularly? At what point, if any, would they become entitled to assume that the issue of faecal contamination of the Lake could be left to the authorities? If it is accepted that they would become entitled to make that assumption at some time, why was Mr Barclay not entitled to make it in November 1996? His Honour had regard to the difficulty that there was no assurance that the authorities would act, saying that if they did not do so, Barclay Oysters should have re-laid the oysters in other waters for a period before sale. But this possibility was not put to any witness and the whereabouts of the other waters and the cost of relaying the oysters were matters not explored in the evidence. I think it appropriate, on the evidence, to regard the alternative as simply one of ceasing business entirely or of marketing the oysters with an effective warning that effectively brought home the risk that the oysters might carry the HAV. But such a warning would have put the Barclay companies out of business. Accordingly, in substance, the true alternative to the course of conduct in fact pursued was to cease business. It seems to me that on the evidence of the lack of any previous outbreak of health problems arising from the consumption of oysters grown in the Lake and the lack of knowledge otherwise of Mr Barclay of the existence of an actual problem as distinct from potential sources of faecal contamination of the Lake, the Barclay companies' duty of care did not reasonably require them either to take the course that his Honour outlined or to suffer a closure of their business until somehow they could be completely assured that they were putting into the market a product that was free of defects." The course of proceedings raises a question as to the approach this Court should take in an appeal where there are concurrent findings of negligence (or absence of negligence) at a trial and in an intermediate appellate court. A recent example of such an appeal was Woods v Multi-Sport Holdings Pty Ltd21. In that 21 (2002) 76 ALJR 483; 186 ALR 145. matter, a trial judge in Western Australia had decided that the owner of an indoor cricket facility, who undoubtedly owed a duty of care to an injured player, had not been negligent in failing to provide certain protective equipment and in failing to give a certain warning. That decision was unanimously upheld by the Full Court of the Supreme Court of Western Australia. By majority, a further appeal to this Court was dismissed. All members of this Court examined in detail the reasoning of the trial judge for the purpose of deciding whether error was shown. The two dissenting judges, McHugh and Kirby JJ, both found that there was error, and favoured reversing the decision of the trial judge and the Full Court. As Hayne J pointed out in Woods22, although a finding of negligence (or absence of negligence) is conventionally described as a finding of fact, it also involves a normative judgment. The reasons given by the minority in Woods in favour of reversing the decision of the Western Australian courts illustrate the point. There was no disagreement with the trial judge on any matter of primary fact. The disagreement was with the judge's appreciation of the reasonableness of the conduct of the respondent, and with the weight given, or not given, by the judge to certain considerations bearing upon that question. Concurrent findings may exist at different levels of particularity, and either with or without an element of normative judgment. In Bridgewater v Leahy23, a case concerning an allegation of unconscionable conduct, there were concurrent findings that a transferor of land was not under any special disability, and that a transaction was not unconscionable. Both findings were reversed, by majority, in this Court. In Waltons Stores (Interstate) Ltd v Maher24, Deane J, referring to concurrent findings that a party to litigation entertained a certain belief, and had acted on a certain inducement, (findings of primary fact, involving no value judgment), said: "This Court should not, in the absence of special reason such as plain injustice or clear error, disturb them. In a context [in which] the cost of litigation has gone a long way towards effectively denying access to the courts to the ordinary citizen who lacks access to government or corporate funding, it is in the overall interests of the administration of justice and of the preservation of at least some vestige of practical equality before the 22 (2002) 76 ALJR 483 at 506 [137]-[141]; 186 ALR 145 at 176-177. 23 (1998) 194 CLR 457. 24 (1988) 164 CLR 387 at 434-435. law that, in the absence of special circumstances, there should be an end to the litigation of an issue of fact at least when the stage is reached that one party has succeeded upon it both on the hearing before the court of first instance and on a rehearing before the court of first appeal." Later, in Louth v Diprose25, Deane J added that it was immaterial that the concurrent findings were of primary fact or involved conclusions and inferences drawn from primary facts, or that there were differences in the reasoning of the primary judge and the first appellate court, or that there was a dissentient in the first appellate court. He did not expressly refer to a difference between purely factual conclusions and conclusions that involved the application of standards of behaviour. However, in Baffsky v Brewis26, Barwick CJ, with whom Stephen, Mason, Jacobs and Aickin JJ agreed, referred to the rule in relation to "concurrent findings of fact or concurrent views as to the exercise of a discretion." There is no reason to deny the application of the rule to a finding of negligence. However, whether there is "plain injustice or clear error" might be affected by the extent to which the decision involves value judgment, explicit or implicit. The rule that an ultimate court of appeal will only disturb a finding of fact that is shown to be clearly erroneous appears to have originated in the nineteenth century in Privy Council appeals from India, and to have been gradually developed and extended to appeals to the Privy Council from all parts of the British Empire, and then to all courts of last resort27. In Owners of the "P Caland" and Freight v Glamorgan Steamship Co28 Lord Watson said: "[I]t is a salutary principle that judges sitting in a Court of last resort ought not to disturb concurrent findings of fact by the Courts below, unless they can arrive at - I will not say a certain, because in such matters there can be no absolute certainty - but a tolerably clear conviction that these findings are erroneous. And the principle appears to me to be specially applicable in cases where the conclusion sought to be set aside chiefly rests upon considerations of probability." The rule exists alongside, but is not co-extensive with, the requirement that an appellate court will recognise the limitations on its capacity to make factual judgments where they depend in part upon the observation of witnesses who have been seen only by the trial judge. It has a different rationale. The legal 25 (1992) 175 CLR 621 at 634. 26 (1976) 51 ALJR 170 at 172; 12 ALR 435 at 438. 27 See Major v Bretherton (1928) 41 CLR 62 at 68-70 per Isaacs J. 28 [1893] AC 207 at 216. system does not provide a second level of appeal in order to give any sufficiently determined litigant a third chance of success. Indeed, since the introduction of the requirement of special leave, there is no general right of appeal to this Court. The rule involves an acceptance that it is unjust that a litigant who has twice succeeded on an issue of fact should be deprived of the benefit of the success merely because an ultimate court of appeal would have taken a different view of the facts. A judgment as to the reasonableness of the conduct of the Barclay companies in response to the risk of contamination required an evaluation of "the magnitude of the risk and the degree of probability of its occurrence". It also required an examination of "the expense, difficulty and inconvenience" of the available alternatives. For practical purposes, the alternative was a cessation of harvesting for an indefinite period, or for the remainder of the harvesting season, of the kind that ultimately occurred on 14 February 1997. When Lindgren J said that the alternative was "to cease business", or "to suffer a closure of their business until somehow they could be completely assured that they were putting into the market a product that was free from defects", he can hardly have been referring to something different from that which was done by all growers of Wallis Lake oysters on 14 February 1997. By that time of course, viral contamination was no longer merely a risk; it was an established fact. Even so, the temporary cessation of harvesting in November 1996 was a response to a recognised increase in the risk of contamination. It was followed by a resumption of harvesting and selling over the Christmas and New Year periods. The critical question for the Federal Court was whether, in the light of what was known about the nature and degree of the risk of contamination, that resumption of commercial activity was reasonable. I am not persuaded that any of the four judges in the Federal Court misunderstood, or failed to address, that question. The answer given by the majority was fairly open. Lindgren J answered the question differently; but I am not persuaded that the majority view involved clear error or injustice. Conclusion I would dismiss the appeals of the Barclay Companies (No S258/2001) and of Mr Ryan (No S259/2001) with costs. I would allow the appeal of the State (No S261/2001) with costs. I agree with the concluding paragraph of the orders proposed by Gummow GAUDRON J. I agree with the orders proposed by Gummow and Hayne JJ and with their Honours' reasons. There is, however, one matter upon which I would make separate comment. That matter concerns the relationship between certain specific obligations cast upon a corporation by the Trade Practices Act 1974 (Cth) ("the Act") and the general law of negligence. For present purposes it is sufficient to refer to two provisions of the Act upon which Mr Ryan relied unsuccessfully at first instance. The first is s 52(1) which provides: A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive." Pursuant to s 82 of the Act, a person who suffers loss or damage by conduct that contravenes certain provisions of the Act, including s 52(1), is entitled to recover the amount of that loss or damage. The second provision of the Act which invites attention is s 75AD, which is in Pt VA of the Act. That Part is concerned with the liability of manufacturers and importers of defective goods. "Manufactured" is defined in s 75AA to include "grown, extracted, produced, processed and assembled." Section 75AD imposes liability on a corporation, which in trade or commerce supplies goods manufactured by it, to pay compensation to any individual who suffers injury because of a defect in those goods. By s 75AK(1), it is relevantly a defence to a claim for compensation under Pt VA of the Act, including s 75AD if it is established that: the defect in the ... goods that is alleged to have caused the loss did not exist at the supply time; or they had that defect only because there was compliance with a mandatory standard for them; or the state of scientific or technical knowledge at the time when they were supplied by their actual manufacturer was not such as to enable that defect to be discovered". Were the general law of negligence to develop to a point where, in circumstances in which ss 52 and 75AD operate, it imposed more onerous obligations than are imposed by those provisions, it would, in my view, be necessary to consider whether those provisions had supplanted the general law. And the same may well be true of other provisions in the Act. However, as the reasons of Gummow and Hayne JJ demonstrate, the general law of negligence has not yet developed to that point. To say that it is not yet necessary to consider whether particular provisions of the Act have supplanted the general law in the circumstances in which they operate is not to say that the questions posed by particular provisions of the Act are unrelated to those posed by the general law of negligence. Thus, if the supply of goods by a corporation in trade or commerce without warning as to their possible dangers or defects does not constitute conduct that is likely to mislead or deceive for the purposes of s 52(1) of the Act, as was held at first instance in this case29, it is difficult to conceive that, nonetheless, the general law would impose a duty to warn as to those dangers or defects. Although different concepts inform the law of negligence, ordinarily there is a duty to warn only if there is a foreseeable risk that a person will be led to believe that something is safe when it is not. And if conduct by a corporation would have that consequence, it would seem inevitable that that conduct would be likely to mislead or deceive for the purposes of s 52(1) of the Act. A somewhat different issue is raised by the defence provided by s 75AK(1)(c) to a claim for compensation under s 75AD for injury resulting from defective goods. At first instance, Mr Ryan's claim for compensation under s 75AD was dismissed because, in terms used in s 75AK(1)(c), "the state of scientific or technical knowledge at the time when [the oysters] were supplied ... was not such as to enable [the] defect to be discovered"30. Once it was concluded that scientific or technical knowledge did not permit discovery that the oysters grown at Wallis Lake had been contaminated by the hepatitis A virus, a question then arose as to what, if any, action could have been taken to avoid a risk of injury to Mr Ryan. As Gummow and Hayne JJ point out, the only possible courses, over and above the precautions already taken, were to cease selling oysters grown at Wallis Lake or, which was likely to have the same effect, to warn as to their possible viral contamination. A duty not to supply goods in circumstances where those goods are not inherently dangerous and neither science nor technology permits discovery of possible defects or dangers is not compatible with the notion that the law of negligence operates by imposing a duty to take reasonable care to avoid a foreseeable risk of injury. Nor is a duty not to supply goods in those circumstances readily compatible with the terms of s 75AK(1)(c) of the Act. 29 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 227 [378]. 30 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 226-227 [377]. McHugh 67 McHUGH J. These appeals arise out of actions in the Federal Court of Australia in which Mr Ryan sued Graham Barclay Oysters Pty Ltd and Graham Barclay Distributors Pty Ltd, the State of New South Wales and the Great Lakes Council for damages for injury suffered when he ate contaminated oysters. The Federal Court found that Graham Barclay Oysters Pty Ltd had contravened ss 74B and 74D of the Trade Practices Act 1974 (Cth)31 and that the Barclay companies breached the duty of care that they admittedly owed to Mr Ryan32. The Federal Court also held that the State of New South Wales33 and the Great Lakes Council34 had breached duties of care that each of them owed to Mr Ryan. Differently constituted majorities of the Full Court of the Federal Court35 allowed an appeal by the Great Lakes Council but dismissed appeals by the State of New South Wales and the Barclay companies. The issues in the appeal are whether the State or the Council owed a duty of care to Mr Ryan and whether the Barclay companies breached the duty of care that they admittedly owed to Mr Ryan. In my opinion, neither the State nor the Council owed a duty of care to Mr Ryan and the Barclay companies did not breach the duty of care they owed to him. Factual background In December 1996 and early January 1997, Mr Ryan and his family consumed oysters purchased from Barclay Distributors Pty Ltd. The oysters were grown in the Wallis Lake in New South Wales. In late January 1997, Mr Ryan began to feel unwell. Blood tests revealed that he was suffering from the hepatitis A virus ("HAV"). The Department of Health reported that notifications of HAV began to increase in the week commencing 20 January 1997, peaking on 3 February 1997. By 10 February 1997, the Department had established a link between those infected with HAV and the consumption of oysters grown in the Wallis Lake. A New South Wales government taskforce 31 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 224 [365]-[368], 226 32 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 220-221 [351]-[354] per 33 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 217 [336], 218 [337] per 34 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 208 [292], 209 [299] per 35 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307. McHugh ultimately attributed 444 cases of HAV to the consumption of oysters grown in the Lake. HAV and oysters HAV is spread by the "faecal-oral route" − it is contracted when humans ingest material contaminated with human faeces which contains the virus. It can only be transmitted through human faeces. HAV has an incubation period of between 15 and 50 days; most cases of infection occur within 30 days of contact. It is a resilient virus that can survive in the environment for periods of three months or longer. Oysters are filter feeders, processing 10 to 20 litres of water per hour by sucking water in and excreting particles through the oyster's normal digestive processes. Some particles, including those that contain HAV, are retained while others are excreted. HAV does not attack oysters; ordinarily the virus is retained in the oyster's flesh. Viral contamination of the oyster is likely to be at a level of concentration that far exceeds the concentration of the virus in the water. The geographic region Wallis Lake is the largest oyster growing area in New South Wales. Although oysters have been grown in the Lake for nearly a century, there was no record of HAV contamination before the outbreak in late 1996. Occasionally, however, faecal contamination occurred in the Lake. The catchment area of the Lake includes the major towns of Forster and Tuncurry, various smaller townships and homes built along the rivers and countryside but which are not part of any township. Sixty-five percent of the area of the Lake is within the boundaries of the Great Lakes Council. Faecal waste from septic tanks and treatment sites could escape at numerous points within the Lake's catchment area and enter the Lake through storm water drains. During the period 1989-1993, the Council occasionally detected faecal contamination when testing water in the Lake. It did no testing in 1996. Faecal waste was more likely to enter the Lake after periods of heavy rainfall. Between 23 and 25 November 1996 − shortly before the HAV outbreak occurred − heavy rain fell in the Lake catchment area. Methods of avoiding oyster contamination Since 1983, health regulations required oysters grown in New South Wales to be depurated for a period of at least 36 hours to avoid contamination. Under the depuration process the oysters are placed in tanks of clean and disinfected estuarine water to which ultra-violet light is applied to destroy viruses and bacteria in the water. However, the ultra-violet light does not destroy viruses McHugh unless it contacts them. Expert evidence established that while depuration, carefully performed, provides satisfactory results, shellfish can retain viruses after depuration when they are taken from heavily polluted waters. Polymerise chain reaction ("PCR") testing constitutes the only effective method of detecting HAV in oysters. In November 1996, however, that method was still in the research stage. Only a limited number of laboratories could carry out the tests. Moreover, PCR testing was very expensive, destroyed the oyster, and frequently returned false negatives. Following heavy rain − known as a "fresh" − the practice of the industry was to suspend harvesting until the water had cleared. In accordance with this practice, Graham Barclay Oysters Pty Ltd did not harvest oysters between 23 and 27 November 1996. On 11 February 1997, when the Barclay companies became aware of the HAV outbreak, they ceased harvesting and recalled oysters they had sent to distributors and retailers. On 14 February 1997, all Wallis Lake oyster growers voluntarily ceased harvesting. The Barclay companies did not resume harvesting until the 1997-98 season. Oyster flesh tests revealed that faecal contamination was widely disbursed throughout the estuary. A sanitary survey was conducted to locate the sources of the pollution and to eliminate them. The faecal contamination emanated from multiple points, the vast majority being land-based sources. Liability of public authorities − the Council and the State A public body invested with a discretionary statutory power may be in breach of a common law duty of care if it fails to exercise the power for the benefit of an individual or class of individuals. In these cases, failure to exercise the power given constitutes actionable negligence that sounds in damages36. In determining whether a public authority has breached a common law duty by failing to exercise a statutory power, it is essential to examine the words and policy of the legislation37. That is because the legislation may indicate that the 36 Sutherland Shire Council v Heyman (1985) 157 CLR 424; Pyrenees Shire Council v Day (1998) 192 CLR 330; Romeo v Conservation Commission (NT) (1998) 192 CLR 431; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1; Brodie v Singleton Shire Council (2001) 206 CLR 512. 37 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 377 [126] per Gummow J; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 19 [27] per Gaudron J, 59 [160] per Gummow J, 72 [203] per Kirby J; Brodie v Singleton Shire Council (2001) 206 CLR 512 at 540 [56] per Gaudron, McHugh and Gummow JJ. See also Stovin v Wise [1996] AC 923 at 934 per Lord Nicholls of Birkenhead, Lord Slynn of Hadley agreeing, 952 per Lord Hoffmann, Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreeing. McHugh legislature has legislated to cover the field and excluded all common law duties of care38. In other cases, the imposition of a common law duty may be inconsistent with or undermine the effectiveness of the duties imposed by the statute39. In some cases, the circumstances of the case − for example, active intervention by the authority or reliance by the plaintiff − may establish a duty of care. But the legislation may give the authority such a wide discretion to exercise the power in question that the tribunal of fact cannot find that the failure to exercise the power constituted a breach of the duty. Legislatures often vest discretionary powers in public authorities for the specific purpose of protecting the community. Some powers may be vested in the authorities for the protection of a specific class of persons who may be exposed to risks of harm that they are powerless to avoid and sometimes unable to identify. But the legislature has made these powers exercisable at the discretion of the authorities, and the common law does not seek to convert the statutory discretion into a positive common law duty to exercise it for the benefit of the public or one of its members. This is so even in those cases where mandamus will lie to compel the performance of the public duty to give proper consideration to whether a public authority should exercise a power40. Mandamus lies for breach of a duty owed to the public. Any person with a sufficient interest in the performance of the duty may bring an action for mandamus requiring that the public authority comply with the conduct that is the subject of the duty. But common law duties are owed to individuals. Unless the proper inference from the statute is that an individual has "a personal right to the due observance of the conduct, and consequently a personal right to sue for damages if he be injured by a contravention"41, breach of the statutory duty does not sound in damages. 38 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 18-19 [26]-[27] per Gaudron J; South Pacific Manufacturing Co Ltd v New Zealand Security Consultants & Investigations Ltd [1992] 2 NZLR 282 at 297-298 per 39 Sullivan v Moody (2001) 75 ALJR 1570; 183 ALR 404; Attorney-General v Prince and Gardner [1998] 1 NZLR 262 at 275-276 per Richardson P, Thomas and Keith JJ, Henry J agreeing. 40 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 465 per Mason J; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 35 [82] 41 Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 404 per Kitto J, Owen J agreeing. McHugh Despite this general rule, however, cases often arise where the failure to exercise a power will constitute a breach of a common law duty of care that a public authority independently owes to an individual. If a duty of care exists, discharging the duty may require the authority to exercise the power "to avert a danger to safety or to bring the danger to the knowledge of citizens otherwise at hazard from the danger"42. But it invites error to think that the common law has converted the discretionary statutory power into an affirmative duty to exercise the power. The common law cannot interfere with the exercise of the discretion and require the authority to enforce the power. To attempt to do so would bring the common law into conflict with the legislative intention that the exercise of the power be discretionary. The common law avoids the conflict by holding that in the circumstances the failure to exercise the power is a breach of a common law duty existing independently of the statute. The common law duty may or may not be an affirmative duty to take reasonable care to protect the plaintiff from harm. However, the existence of the statutory power does not create the common law duty although in some cases – particularly in reliance cases – it may be an important factor in finding that a duty of care was owed. Ordinarily, the common law does not impose a duty of care on a person to protect another from the risk of harm unless that person has created the risk. And public authorities are in no different position. A public authority has no duty to take reasonable care to protect other persons merely because the legislature has invested it with a power whose exercise could prevent harm to those persons. Thus, in most cases, a public authority will not be in breach of a common law duty by failing to exercise a discretionary power that is vested in it for the benefit of the general public43. But if the authority has used its powers to intervene in a field of activity and increased the risk of harm to persons, it will ordinarily come under a duty of care44. So also, if it knows or ought to know that a member of the public relies on it to exercise its power to protect his or her interests, the common law may impose a duty of care on the authority45. If the authority comes under a 42 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 559 [102] per Gaudron, 43 Stovin v Wise [1996] 1 AC 923 at 957 per Lord Hoffmann, Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreeing. 44 Knightley v Johns [1982] 1 WLR 349 at 357-358 per Stephenson LJ, Dunn LJ and Sir David Cairns agreeing; [1982] 1 All ER 851 at 857-858]; Marshall v Osmond [1983] QB 1034 at 1038 per Sir John Donaldson MR, Dillon LJ and Sir Denys Buckley agreeing; Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 460 per Mason J; Capital & Counties Plc v Hampshire County Council [1997] QB 1004 at 1031, 1042. 45 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 461 per Mason J. McHugh duty of care, the failure of the authority to exercise a discretionary statutory power may give rise to a breach of the common law duty of care. But subject to these exceptions, ordinarily the common law will not impose an affirmative duty of care on an authority which would have the result that a failure to exercise a statutory power constitutes a breach of that duty. The likelihood of the common law imposing an affirmative duty of care whose content may require the exercise of a statutory power increases where the power is invested to protect the community from a particular risk and the authority is aware of a specific risk to a specific individual. If the legislature has invested the power for the purpose of protecting the community, it obviously intends that the power should be exercised in appropriate circumstances46. If the authority is aware of a situation that calls for the protection of an individual from a particular risk, the common law may impose a duty of care. In that situation, failure to exercise the power may constitute negligence. This seems the best explanation of Pyrenees Shire Council v Day47 where the majority of the Court held that a Council which knew of a fire risk owed a duty of care and breached it by not exercising its powers. Kirby J said48: "The statutory power in question is not simply another of the multitude of powers conferred upon local authorities such as the Shire. It is a power addressed to the special risk of fire which, of its nature, can imperil identifiable life and property. Therefore, the nature of the power enlivens particular attention to its exercise and to the proper performance of a decision whether to give effect to it or not." Similarly, in Brodie v Singleton Shire Council49, Gaudron, Gummow JJ and I said that: "on occasions, the powers vested by statute in a public authority may give it such a significant and special measure of control over the safety of the person or property of citizens as to impose upon the authority a duty of care. This may oblige the particular authority to exercise those powers to avert a danger to safety or to bring the danger to the knowledge of citizens 46 Stovin v Wise [1996] AC 923 at 953 per Lord Hoffmann, Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreeing. 47 (1998) 192 CLR 330. 48 (1998) 192 CLR 330 at 423 [252]. 49 (2001) 206 CLR 512 at 559 [102]. McHugh otherwise at hazard from the danger. In this regard, the factor of control is of fundamental importance50." Where a plaintiff claims that a public authority owed him or her an affirmative duty of care in a situation that has not yet been recognised by the common law, the court must examine a number of matters to determine whether the duty existed. I pointed to these matters in Crimmins v Stevedoring Industry Finance Committee51: Would a reasonable public authority reasonably foresee that its act or omission, including a failure to exercise its statutory powers, might result in injury to the plaintiff or his or her interests? Was the authority in a position of control and did it have the power to control the situation that brought about the harm to the injured person? Was the injured person or his or her interests vulnerable in the sense that the injured person could not reasonably be expected to adequately safeguard himself or herself or those interests from harm? Did the public authority know, or ought it to have known, of an existing risk of harm to the plaintiff or, in some cases, to a specific class of persons who included the plaintiff (rather than a risk to the general public)? Would the imposition of the duty of care impose liability with respect to the defendant's exercise of "core policy-making" or "quasi-legislative" functions? Is there any supervening policy reason that denies the existence of a duty of care? If the first four of these questions are answered in the affirmative and the fifth and sixth questions in the negative, the court will ordinarily hold that the authority owed a duty of care to the plaintiff52. Conversely, if any of the first 50 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 551-552. 51 (1999) 200 CLR 1 at 39 [93]. cf Todd, "Liability in Tort of Public Bodies", in Mullany & Linden (eds), Torts Tomorrow – A Tribute to John Fleming (1998) 52 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 39 [94] McHugh four questions are answered in the negative or either of the fifth and sixth questions are answered in the affirmative, ordinarily no duty of care will arise. Reasonable foreseeability The first question in these appeals is whether the Council or the State should have reasonably foreseen that a failure to exercise its statutory powers might result in harm to oyster consumers by reason of the faecal contamination of oysters. If that question is answered in favour of the Council or the State, no duty of care existed. It would then be unnecessary to examine other features of the case to see if they pointed to a duty of care owed by the State or the Council to the plaintiff. In this and other cases, it is somewhat artificial to separate the issue of reasonable foreseeability from the issue whether the persons affected − oyster consumers − were so closely and directly affected by the conduct of the State or Council that either, or both, of them should have had the oyster consumers in mind when considering to act or not to act. However, in this case, the two issues seem sufficiently separate to warrant separate treatment. In determining whether a defendant should have reasonably foreseen a risk of injury, it is not necessary that the defendant should have foreseen the precise risk of injury or how it occurred. It is sufficient that the risk is one of a class of risk that in a general way the defendant should have foreseen53. If the authority should have foreseen the class of risk, a further question arises as to whether the risk could be reasonably disregarded54. Reasonable foreseeability involves more than a question of fact. It involves a value judgment. Would a reasonable person in the position of the defendant not only have foreseen that his or her conduct − including omissions − gave rise to a risk of injury, but regarded it as sufficiently serious to consider what steps should be taken to avoid or reduce On the evidence, both the State and the Council should have foreseen that the presence of faecal contamination gave rise to a risk of harm to the consumers of oysters. Oysters grown in waters, subject to the run-off of faecal matter, are subject to the risk of contamination from faecal pollution. That contamination carries with it the risk of HAV infection. Although depuration cleans oysters and makes them fit for human consumption, it does not guarantee the removal of contaminants. Both the State and the Council should reasonably have foreseen 53 Thompson v Bankstown Corporation (1953) 87 CLR 619 at 630 per Dixon CJ and Williams J; Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202 at 222 per Dixon CJ, McTiernan, Kitto and Taylor JJ. 54 Tame v New South Wales (2002) 76 ALJR 1348 at 1367 [108] per McHugh J; 191 ALR 449 at 475. McHugh the risk of injury to the consumers of oysters from the faecal contamination of the Lake. But would a reasonable public authority think that this risk of harm from faecal contamination was so negligible that it could be reasonably disregarded? In my opinion, although the risk of injury was very low, the consequences of faecal contamination were not so negligible that a reasonable authority would disregard the risk to anyone with whom it had a direct and close relationship. It is true that, in the history of oyster harvesting in the Wallis Lake region, no outbreak of the kind that occurred in this case had happened. However, health authorities and the industry knew the injurious consequences that could flow from the faecal contamination of oysters. One consequence was HAV infection. The likely effect of a HAV outbreak on oyster consumers makes it impossible to conclude that a public authority such as the State or the Council could reasonably disregard the risks of contaminated oysters being made available for consumption. No reasonable public authority would regard the risk of HAV from contaminated oysters as so small and inconsequential that it could be ignored without inquiring into what reasonable steps could be taken to avoid that risk, if other factors pointed to the existence of a duty of care. Control − the power to control and knowledge of harm to the plaintiff The State Central to the plaintiff's case that the State owed him a duty of care was the proposition that it exercised managerial control over the Wallis Lake oyster industry. Where an individual has control of land or chattels or undertakes a task, courts will usually find that that individual has a duty to take reasonable care for the safety of those entering the land or affected by the use of the chattels or the execution of the task55. Often enough the courts will have little difficulty in holding that a public authority that exercises its power to carry out, or an authority that undertakes to carry out, a task has a duty to take care for the safety of those affected by the task56. But the position of the Executive government of a polity is different from the position of individuals and other public authorities. 55 Hargrave v Goldman (1963) 110 CLR 40 at 66-67 per Windeyer J; Stovin v Wise [1996] AC 923 at 944 per Lord Hoffmann, Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreeing; Perre v Apand Pty Ltd (1999) 198 CLR 180 at 194 [11] per Gleeson CJ. 56 Pyrenees Shire Council v Day (1998) 192 CLR 330; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 24-25 [43]-[46] per Gaudron J, 42-43 [104] per McHugh J, 61 [166] per Gummow J, 82 [227] per Kirby J, 104 [304]-[305] per Hayne J, 116 [357] per Callinan J; Brodie v Singleton Shire (Footnote continues on next page) McHugh The powers and functions of the government of a polity are generally invested for the benefit of the general public. In the absence of a statutory direction, the mere existence of such a power in that government imposes no duty to exercise it for the protection of others. In that respect, its situation is analogous to a private citizen who, absent special circumstances, has no duty to take affirmative action to protect another person from harm57. Nor does the bare fact that the Executive government has exercised its powers from time to time create any duty to exercise its powers. Such exercises of power do not constitute "control" of an activity in the sense that that expression is used in the law of torts. They are merely particular exercises of powers that were invested in the Executive government for the benefit of the general public to be exercised at the discretion of the Executive government. Unless a particular exercise of power has increased the risk of harm to an individual, the Executive government of a polity does not ordinarily owe any common law duty to take reasonable care as to when and how it exercises its powers. No doubt circumstances may arise where conduct of the government, short of increasing a risk of harm, creates a duty of care. But such cases are less likely to arise than in the case of other public authorities. In particular, knowledge of specific risks of harm or the exercise of powers in particular situations is less likely to be a factor in creating a duty than in the case of an ordinary public authority. This is because the powers and functions of the Executive government are conferred for the benefit of the public generally and not for the benefit of individuals. The learned trial judge nevertheless held that the State owed a duty of care to oyster consumers58. This duty arose from the State's "control" of the oyster industry. His Honour pointed to the following matters as indicating that the State "controlled" oyster growing in the Lake59: the State owned, and had powers of control over, the lake; through the Department of Fisheries, it established, and supervised the operations of, a mosaic of oyster leases; Council (2001) 206 CLR 512 at 558-559 [102] per Gaudron, McHugh and 57 Hargrave v Goldman (1963) 110 CLR 40 at 66 per Windeyer J; Stovin v Wise [1996] AC 923 at 943-944 per Lord Hoffmann, Lord Goff of Chieveley and Lord 58 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 217 [336]. 59 Ryan v Great Lakes Council (1999) 102 LGERA 127 at 216 [332]. McHugh through the Department of Fisheries, it issued, and enforced the provisions of, aquaculture permits; through the Department of Health, the State supervised the depuration process, including the nature and location of water intake points and the design, construction and maintenance of depuration tanks and ultra-violet facilities; through the EPA, the State had powers under the Clean Waters Act to remove, disperse, destroy or mitigate pollution of waters (s 27) and to carry out inspections and investigations of premises (s 29); through a number of agencies, the State was a participant in the Wallis Lake estuary management committee, one of whose objectives was to prepare a management plan designed 'to sustain a healthy, productive and attractive estuary'; and, most importantly, through the Minister for Fisheries, it had the power − at any time, to prohibit the taking of oysters from the lake." But these matters mean no more than that the Executive government of the State was exercising or could exercise various powers given to it by its legislature. They do not constitute "control" of the industry in any relevant sense. The judgment of Gummow and Hayne JJ refers to the relevant legislation under which the Executive acted or could act60. In a political sense and for public law purposes, this legislation enabled the State to supervise and manage all fisheries in New South Wales and to control fisheries through the issuing of leases. However, supervision, management or control in this sense or for this purpose is different from the sorts of control that, in other cases concerning public authorities, have caused courts to hold that a duty of care existed. In Brodie, the legislation empowered the Council to design or construct roads and to carry out works or repairs upon them, powers that councils had frequently used. In those cases, councils had complete control over the state of the roads. They also had power to attend to any defects that would expose road users to injury. It was this combination of power, direct control and the undertaking of functions in accordance with their powers that gave rise to a duty of care. In Crimmins, the object of the powers vested in the Authority was to secure the expeditious, safe and efficient performance of stevedoring operations. The Authority could make whatever orders it saw fit including the regulation of stevedoring operations to encourage safe working conditions. The Authority had power to bring proceedings against any employer who did not comply with the provisions McHugh requiring safe working practices. But most important of all, the Authority had used its powers to direct waterside workers to places of work that contained reasonably foreseeable risks of injury to the workers. This last point alone was sufficient to create a duty of care although the case was not conducted on that basis. I do not regard Pyrenees as a "control" case. Rather it is a case where the Council came under a duty of care because it knew of the risk of harm to specific individuals, it had power to take steps to eliminate the risk and importantly, at an earlier stage, had given directions to eliminate the risk. In my opinion, the State had no relationship with the consumers of oysters that imposed on the State an affirmative duty to protect those consumers from harm created by the growers and distributors of oysters. That is so, even though the State ought to have reasonably foreseen that, unless it acted, oyster consumers might suffer harm. Knowledge or imputed knowledge that harm may result from a failure to take affirmative action is not itself sufficient to create an affirmative duty of care. The Council The Local Government Act 1993 (NSW) granted the Council a wide array of powers to control pollution. Nevertheless, the statutory powers of the Council gave it less "control" over the Wallis Lake oyster industry than the "control" that the State had over the industry. Indeed, the Council, unlike the State, had no specific powers or functions in respect of oysters or the oyster industry. Nor did the fact that the Council had monitored the water quality of the Lake from 1989 to 1993 constitute "control" of those waters for the purposes of this branch of the law. The monitoring was carried out in the exercise of discretionary powers. It was for the Council to decide if and when it should monitor the Lake. Its monitoring created no relationship with oyster consumers such that the failure to continue monitoring was a breach of a common law duty of care. The Council had no control over the industry in any relevant sense. However, the learned trial judge found61 that the Council owed a duty of care to Mr Ryan because it knew of the risk of harm from faecal pollution and it had the power to deal with the pollution problem. As formulated by his Honour, the Council owed a duty of care to oyster consumers to take reasonable steps to minimise human faecal contamination of Wallis Lake. His Honour pointed to a number of matters within the knowledge of the Council that in his view created the duty. They included62: 61 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 209 [297]-[298]. 62 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 208 [291]. McHugh Wallis Lake was used for growing oysters for human consumption; the catchment area contained many potential sources contaminating the Lake with human faecal material; for the HAV virus is commonly transmitted in the faeces of infected persons; the HAV virus is capable of surviving for long periods in estuarine waters; the HAV virus may concentrate in oysters; no procedure (such as depuration or testing) can prevent HAV contaminated oysters reaching the public; and the HAV virus can cause serious illness. His Honour also referred to the Council having extensive statutory powers to control the sources of pollution in the catchment area. However, a public authority does not come under an affirmative duty of care merely because the authority knows that unless it acts an individual will suffer harm63. Nor is the present case like Pyrenees where the Council knew of a risk of harm to certain individuals from a specific problem. In my opinion, the learned trial judge erred in finding that the Council owed any duty of care to Mr Ryan. There was simply no relationship between the Council and oyster consumers sufficient to create a duty of care. This Court no longer sees proximity as the criterion of a duty of care. But no duty of care can arise unless the relationship between the parties is one of neighbourhood in Lord Atkin's sense as stated in Donoghue v Stevenson64. To create a duty, the relationship between the public authority and persons affected by the conduct of the authority must be "so closely and directly affected by [its] act [or omission] that [it] ought reasonably to have them in contemplation as being so affected"65 when it directs its mind to the relevant conduct in question. In considering whether it should exercise its powers over pollution, the Council was no more concerned with oyster consumers than any other section of the public or individual. There was no close and direct relationship between oyster consumers 63 Sutherland Shire Council v Heyman (1985) 157 CLR 424. 64 [1932] AC 562 at 580. 65 [1932] AC 562 at 580. McHugh and the Council such that it had a duty to take care for the safety of each and every one of them. In that respect, the Council stood in a different position from that of the Barclay companies who had a direct relationship with the consumers of their product. Here there was nothing to suggest that the relationship between the Council and the consumers of Wallis Lake oysters imposed on the Council an affirmative duty to take reasonable care to protect those consumers from harm caused by eating those oysters. Accordingly, the Full Court did not err when it upheld the Council's appeal against the trial judge's finding that the Council owed Mr Ryan a duty of care. The liability of the growers The Barclay companies accepted that they owed oyster consumers a duty of care to ensure that the oysters were safe for human consumption. The issues in relation to the Barclay companies related to the scope of the duty of care that they owed to oyster consumers and whether there was a breach of that duty. At all material times, Mr Barclay knew that potential sources of viral pollution existed in Wallis Lake, that depuration was not adequate to remove viruses completely and that E-coli oyster meat testing would not necessarily reveal the existence of viruses. On this evidence, the learned trial judge held66 that a prudent oyster grower needed to do more than depurate and rely on E-coli flesh tests because those steps provided insufficient protection against a known danger. His Honour said that the only real protection to consumers was to prevent viral contamination from occurring and the Barclay companies were obliged to take the steps reasonably open to it to obtain a virus-free growing environment. Failing this, the companies had to refrain from selling oysters unless they contained a warning about the risks of consumption. His Honour saw the carrying out of a survey of sanitary sources as one way of reducing the risk of a contaminated environment. His Honour recognised that any sanitary survey would require State or local government involvement. But he said that, given that the Barclay companies produced a product that put consumers at risk, they could not say that the making of a sanitary survey was someone else's responsibility. The trial judge said that neither the Barclay companies nor any of the committees with which they were associated had attempted to procure any governmental involvement in making a survey67. His 66 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 221 [351]. 67 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 221 [352]-[353]. McHugh Honour concluded68 that in selling oysters, grown in waters known to be open to possibly undetectable viral contamination, and without any warning as to this danger, the Barclay companies had breached the duty of care they owed to oyster consumers. In the Full Court, Lee and Kiefel JJ formulated the duty differently from the trial judge but they dismissed the Barclay companies' appeal. Lee J said69 the content of the duty required the Barclay companies to refrain from harvesting and selling oysters from the Lake when conditions had arisen which they knew had increased the risk of oyster contamination. Until the Barclay companies had taken the necessary steps to show that the resumption of oyster harvesting was safe, sales of oysters should have been halted. His Honour said that, if the trial judge had intended to limit the scope of the duty to the provision of notice to consumers of the nature of the risk at the time of sale, his statement of the duty was inadequate. Kiefel J found70 that the duty required the Barclay companies to refrain from selling oysters for human consumption until a "sufficient period" had elapsed for the risk of contamination to be regarded as acceptable or testing indicated this to be so. Lindgren J would have allowed the Barclay companies' appeal. His Honour referred to the fact that no previous outbreak of health problems from the consumption of Wallis Lake oysters had occurred. And Mr Barclay did not know "of the existence of an actual problem as distinct from potential sources of faecal contamination of the Lake". Accordingly, the Barclay companies' duty of care did not reasonably require them to take steps to ensure that the Lake was free from contamination or to cease their operations until they could be "completely assured" that they were providing an uncontaminated product71. The duty of care owed by a manufacturer or producer to a consumer is a duty to take reasonable care to avoid injury to the consumer72. To formulate the duty in more specific terms invites error because it is likely to mix a question of law (whether a duty existed) with a question of fact (whether a breach occurred). If the duty is formulated in specific terms, the issue on breach is whether the duty has been performed in accordance with the terms of the duty as formulated. But, 68 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 221-222 [354]. 69 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 330 [68]. 70 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 461 [608]. 71 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 439 [503]. 72 Donoghue v Stevenson [1932] AC 562 at 599 per Lord Atkin. McHugh as Wyong Shire Council v Shirt73 shows, the question of breach is far more complex than an affirmative or negative answer to the question whether the defendant carried out the duty as formulated. It involves evaluating and weighing a number of competing considerations. Both the trial judge and the majority judges in the Full Court did not attempt to evaluate and weigh the competing considerations. In failing to do so, they erred in law. Because the facts are not in dispute, it is appropriate for this Court to determine the question of breach. As I have pointed out, the risk of injury from contaminated oysters was reasonably foreseeable to the State and the Council. The risk was also reasonably foreseeable by the Barclay companies. That they knew of the risk and consequences of faecal contamination appears from the facts that Mr Barclay was aware of potential sources of faecal contamination around the Lake, that he knew of Professor Brown's reports about the potential pollution of the Lake as at August 1994, that they ceased harvesting immediately after the heavy rainfall in November 1996 and they used salinity tests after the rainfall in addition to the usual practice of depuration. So the critical question is what would be the reasonable producer's response to this risk? As Mason J pointed out in Shirt74, the reasonable producer would consider the magnitude of the risk of contamination, the degree of probability that such contamination might occur and cause harm to individuals and the expense, difficulty and inconvenience to the Barclay companies of taking the suggested alleviating action. The Barclay companies conceded that it was not far-fetched or fanciful to think that oyster consumers could contract a viral disease such as HAV as the result of a "fresh". However, the evidence indicated that the rainfall and resultant fresh in November 1996 was no different to hundreds of others that had occurred for nearly a century. None of them had resulted in an outbreak of viral disease. Accordingly, although the magnitude of the risk was great, the probability of it eventuating was very low. The response of the Barclay companies was to cease harvesting during and immediately after the rainfall in November 1996. They resumed harvesting when they observed the water was clear, salinity tests showed that the fresh was spent and oyster-flesh tests for the E-coli bacteria were within normal limits. In addition, harvested oysters were subjected to depuration for 36 hours. While depuration does not fully protect oyster consumers, in the then state of technology it was the most effective method for doing so. As I earlier indicated, 73 (1980) 146 CLR 40 at 47-48 per Mason J, Stephen and Aickin JJ agreeing. (1980) 146 CLR 40 at 47-48. McHugh in November 1996 PCR testing was still in the research stage, was expensive and destroyed the oyster tested. Counsel for Mr Ryan contended that harvesting should not have resumed until a "sufficient period" had elapsed after the fresh to make the risk of contamination minimal. However, he accepted that the sufficient period would not elapse until the carrying out of a sanitary survey and the identification of the sources of pollution. The notion that the Barclay companies should have gone to the expense of doing these things and closing down its business in the meantime sounds like a counsel of perfection rather than a reasonable response to a risk of injury that had a low degree of probability of occurring. Be that as it may, the Barclay companies did not have the statutory powers of entry and inspection necessary to render a sanitary survey effective or the legal power to compel others to remedy the defects in sanitary systems that caused the Lake to become faecally contaminated. Given the Barclay companies' lack of power to do these things, it had only two realistic alternatives to what it did. It could have closed down indefinitely until the "sufficient period" elapsed or it could give a warning notice. Given the very low degree of probability of the risk occurring, it was not unreasonable for the Barclay companies to resume harvesting when they did. No doubt the magnitude of the risk, if it eventuated, was high. But so are the magnitudes of many risks that reasonable people run because the alternative is too costly or too inconvenient. The magnitude of the risk of being involved in a motor car accident is very high, and the risk could be minimised, if not eliminated, by no car ever travelling at more than 10 kilometres per hour. But few would contend that travelling at 10 kilometres per hour was the only reasonable response to the risk of a motor car accident. The question of reasonableness has to be looked at from the point of view of a reasonable producer considering the matter at the end of 1996 before the outbreak was notified. With great respect to the learned judges in the Federal Court, I do not think that any such producer would have contemplated shutting down his or her business for the "sufficient period". And I certainly do not think that any such producer would have thought it a reasonable response to sell the oysters accompanied by a warning of the danger of eating them. An oyster distributor would have little hope of selling oysters that carried a label stating that the oysters could be subject to viral contamination, for it would be a brave oyster consumer who purchased oysters with such a warning. More importantly, the risk was so low, that it was not unreasonable for the Barclay companies to sell their oysters without such a warning, a warning that would substantially harm, if it did not destroy, their sales. In my opinion, the steps that the Barclay companies took were a reasonable response to a very low risk of viral contamination. Reasonable care did not require them to go to the expense of conducting sanitary surveys − even if McHugh they could have done so effectively − or shutting down their business indefinitely or labelling their oysters with a warning concerning the risk of viral contamination. In nearly a century, no previous outbreak had occurred. What they did was in accordance with industry practice and at the time was a reasonable response to the slight possibility that consumers would suffer harm because of viral contamination caused by the heavy rain that occurred in November 1996. It follows that the appeal by Graham Barclay Distributors Pty Ltd must be allowed. However, Graham Barclay Oysters Pty Ltd did not appeal against the finding that it had breached ss 74B and 74D of the Trade Practices Act. Accordingly, the appeal by Graham Barclay Oysters Pty Ltd should be allowed only to the extent that it concerns the issue of negligence. Otherwise, the judgment in favour of Mr Ryan against that company should stand. Orders I would allow the appeals by the State and by Graham Barclay Distributors Pty Ltd with costs. I would dismiss the appeal by Mr Ryan with costs. I would allow the appeal by Graham Barclay Oysters Pty Ltd in so far as it concerns the issue of negligence but make no order as to costs. The outline of the litigation These three appeals are brought against a decision of the Full Court of the Federal Court75. They involve the alleged liability in negligence of particular growers and distributors of oysters, and relevant local and State governments, for harm suffered by consumers of oysters. The consumers contracted the hepatitis A virus as a consequence of eating oysters grown at Wallis Lake. This is located within the Shire of Great Lakes in New South Wales. The oysters were harvested from waters polluted by human faecal contamination. One consumer, Mr Grant Ryan, instituted a representative action in the Federal Court under Pt IVA of the Federal Court of Australia Act 1976 (Cth), on behalf of himself and other consumers. Additional representative applicants were, by leave, subsequently joined to the proceeding76. The respondents were Graham Barclay Oysters Pty Ltd ("Barclay Oysters") and Graham Barclay Distributors Pty Ltd ("Barclay Distributors") (together "the Barclay companies") and other oyster growers and distributors, the Great Lakes Council ("the Council") and the State of New South Wales ("the State"). The Barclay companies, the Council and the State entered cross-claims against one another. At first instance, the Federal Court (Wilcox J) held that the Council, the State and the Barclay companies were each liable in negligence to Mr Ryan and (subject to proof of damage) to the other 184 representative group members77. The Full Court of the Federal Court (Lee, Lindgren and Kiefel JJ), by differently constituted majorities, upheld an appeal by the Council, and dismissed appeals by the State and the Barclay companies. In this Court, Mr Ryan seeks to restore the initial finding of negligence against the Council, while the Barclay companies and the State seek to have the negligence findings against them overturned. The appeal by the State should be allowed and that by Mr Ryan against the Council should be dismissed. In the appeal by the Barclay companies, the appeal by Barclay Distributors should be allowed. (The appeal by Barclay Oysters raises other considerations with respect to the proper outcome to which reference later will be made.) In general terms, this result follows that favoured by Lindgren J in the Full Court. 75 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307. 76 This followed the decision in Ryan v Great Lakes Council (1997) 78 FCR 309. 77 Ryan v Great Lakes Council (1999) 102 LGERA 123. Oyster farming and hepatitis A The hepatitis A virus multiplies, and is symptomatic, only in humans. It is contracted when humans ingest material contaminated by infected human faeces. When grown in contaminated water, oysters retain pathogens, including the hepatitis A virus, in concentrated form. Hepatitis A is capable of surviving in food and in fresh or salt water for prolonged periods. There was evidence before the primary judge that the virus may survive in the environment for months or even years, remaining a potential threat for the whole of that time. The taste and appearance of oysters is not affected by the presence of hepatitis A. The oyster harvesting season at Wallis Lake ordinarily extends from mid-October until April. Barclay Oysters is the largest oyster grower at Wallis Lake. In the period 22-25 November 1996, there was heavy rainfall in the region. The run-off caused by heavy rain brings with it an increased risk of viral contamination of oysters. For this reason, oyster growers generally desist from harvesting during or after heavy rainfall. It appears that the Barclay companies ceased harvesting oysters by 9.00 am on 23 November 1996. They did not recommence harvesting until 27 November, two days after the rainfall had finished. Sample oysters tested by the Barclay companies between 26 November 1996 and 9 January 1997 tested negative for E-coli bacteria. This suggested, but did not establish, that the samples were free from viral contamination. During this period, the Barclay companies continued to harvest oysters and to supply them to distributors for sale to the public. In accordance with their usual practice, the Barclay companies depurated the oysters for 36 hours after harvesting them. Depuration involves the submersion of oysters in clean estuarine water, disinfected by ultra-violet radiation. The primary judge found that this is a useful but not entirely effective means of ensuring the safety of shellfish. On 21 December 1996, Mr Ryan's father purchased six dozen oysters from the Barclay companies. They were consumed by members of the Ryan family, including Mr Ryan, on Christmas Day. Mr Ryan's brother purchased a further 10 dozen oysters from the Barclay companies on 31 December, giving two dozen to Mr Ryan, who ate them a few nights later. On 30 January 1997, Mr Ryan began to feel unwell. On 3 February, he was diagnosed with Mr Ryan's diagnosis coincided with a general increase in hepatitis A notifications in New South Wales. By about 10 February 1997, the New South Wales Department of Health had established the probability of a connection between the hepatitis A epidemic and Wallis Lake oysters. On 11 February, Mr Barclay was informed of this connection by the Council and the Tamworth Area Health Service. The Barclay companies immediately recalled oysters from their customers. On 14 February 1997, the Wallis Lake growers decided to cease harvesting. The Barclay companies did not resume harvesting until the commencement of the 1997-1998 season. Flesh tests conducted on oysters harvested between 24 December 1996 and 18 February 1997 established hepatitis A contamination in oysters from widely dispersed sites at Wallis Lake. It is common ground that the Wallis Lake oysters were the source of the hepatitis A outbreak which affected Mr Ryan and the other consumers. Oyster farming had been conducted at Wallis Lake since early in the twentieth century. However, there had been no previous recorded hepatitis A outbreak arising from the consumption of oysters harvested from the region. The significance of that circumstance will appear later in these reasons, particularly when dealing with the position of the Barclay companies. The decision at trial The trial judge accepted expert evidence that the pollution of the lake emanated from multiple sources. His Honour found that inadequately treated human effluent entered the oyster-growing areas of the lake primarily from land- based locations, although faecal discharge from one or more watercraft may have contributed to the problem. Much of the pollution came from stormwater drains and local sewerage facilities, including septic tanks in caravan parks, tourist facilities and private residences. The Court dismissed claims by Mr Ryan that the Barclay companies were liable under s 74C (false descriptions) or s 75AD (defective goods causing injuries) of the Trade Practices Act 1974 (Cth) ("the Trade Practices Act") or had contravened s 52 (misleading or deceptive conduct) or the conditions implied by s 71 (merchantable quality and fitness for purpose) of that statute. As noted, the primary judge held each of the Council, the State and the Barclay companies liable in negligence to the relevant consumers. His Honour further held that Mr Ryan was entitled to succeed in his personal claims against Barclay Oysters under s 74B (fitness for purpose) and s 74D (unmerchantable quality) of the Trade Practices Act. As the application of those provisions to the circumstances of the group members in the representative action required further findings of fact, the Court ordered that the portion of Mr Ryan's representative claim respecting ss 74B and 74D be reserved. Wilcox J awarded damages in Mr Ryan's personal claims at $30,000, apportioned equally between the three respondents. Order 2 of the orders made by Wilcox J was as follows78: "it be declared that [Mr Ryan] is entitled to succeed against each of [the Council, the State and the Barclay companies] in respect of that portion of his representative claim that alleges negligence, but only on behalf of those group members who prove damage has been suffered by them". It is to be noted that, the dismissal of claims based on s 74C, s 75AD, s 52 and s 71 of the Trade Practices Act apart, the only final judgment at trial was that for Mr Ryan on his personal claims. The remaining claims the subject of the group proceeding were not finally decided. Orders that were made in connection with those other claims were, therefore, interlocutory orders. It then is apparent that it was inappropriate to make the order in the terms set out above which were expressed in the form of a declaration. "Interlocutory declaration" is a form of order not known to the law yet that, in effect, is the nature of the order that was made, expressed, as it was, in declaratory terms79. The making of an order in that form in this case was not only wrong, its making may obscure some questions which the claims made in the proceeding inevitably present. The Trade Practices Act and the general law The detailed provisions in the Trade Practices Act which were relied upon in this litigation may raise a question respecting the significance to be attached to comprehensive federal statutory provisions upon a particular subject where it is sought, concurrently, to develop the Australian common law in that field. In Perre v Apand Pty Ltd80, reference was made to what in the United States is known as a "pre-emption" doctrine. This restricts the development of the common law of the several States of the Union, in fields such as unfair competition, where federal legislation, respecting such matters as patents, copyright and designs, makes provision. In Australia, s 109 of the Constitution deals only with conflict between federal and State laws. It remains to be seen 78 (1999) 102 LGERA 123 at 231. 79 International General Electric Company of New York Ltd v Commissioners of Customs and Excise [1962] Ch 784 at 789-790; R v Inland Revenue Commissioners, Ex parte Rossminster Ltd [1980] AC 952 at 1000-1001, 1014, 1027; Magman International Pty Ltd v Westpac Banking Corporation (1991) 32 FCR 1 at 15. 80 (1999) 198 CLR 180 at 247 [183]. See also Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 at 62-63 [25]; The Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 532 [134]. whether some adaptation of the "pre-emption" doctrine may apply in the development of the Australian common law. The relationship between claims made for relief in respect of contravention of provisions of the Trade Practices Act and common law claims, whether in negligence, deceit or otherwise, has not been examined in detail in any decision of this Court and was not the subject of detailed argument in the present matters. In those circumstances, we proceed on the assumption (which was not challenged) that a plaintiff may frame alternative claims in negligence and under the provisions of the Trade Practices Act relied on here. But it is to be recognised that claims of the kind which were made in these matters, in negligence and under the Trade Practices Act, were alternative claims, and that, if a group member succeeds in establishing the elements of both claims, that group member must elect which remedy will be taken81. That election would have to be made no later than at the time of seeking final judgment in the action. The Full Court A majority of the Full Court of the Federal Court (Lindgren J and Kiefel J, Lee J dissenting) allowed an appeal by the Council, holding that it owed no relevant duty of care to the oyster consumers. A differently constituted majority (Lee J and Kiefel J, Lindgren J dissenting) dismissed an appeal by the State, upholding the primary judge's conclusion respecting its liability in negligence to the consumers. By majority, the Full Court (Lee J and Kiefel J, Lindgren J dissenting) also upheld the primary judge's conclusion that the Barclay companies were liable in negligence to Mr Ryan. Further, the Full Court upheld the primary judge's conclusion with respect to the liability of Barclay Oysters under ss 74B and 74D of the Trade Practices Act. In the result, the Full Court reduced the damages awarded to Mr Ryan in his personal claims by $3,000 to correct what the parties agreed was an error in the calculation of the interest payable. The grounds of the appeals to this Court are concerned only with the claims in negligence. It is convenient to consider the claims under three main headings: first, the position of the Council; secondly, the State; and, finally, the Barclay companies. 81 United Australia Ltd v Barclays Bank Ltd [1941] AC 1 at 19. A. THE COUNCIL The claims in the Federal Court against the Council These have fluctuated in the course of the litigation. By their re-amended statement of claim dated 21 April 1998, Mr Ryan and the other applicants submitted that the Council owed them (i) a duty regularly to monitor and test the waters, sediment and sea grasses of the Wallis Lake region for contamination and to monitor the impact of private landholders and the Council's sewerage systems on the water quality; (ii) at least in and after late November 1996, a duty to warn oyster farmers, wholesalers and retailers and the general public of the likely contamination of Wallis Lake and the likely unsafety of oysters harvested therefrom; (iii) a duty to take steps, directly or indirectly, to cause oyster farmers in the Wallis Lake region to cease the harvesting or supply of oysters in and after November 1996; (iv) a duty to set up and supervise the Wallis Lake Estuary Management Committee to report on and implement steps in respect of the management of water quality in the Wallis Lake region; and (v) a duty not to contaminate Wallis Lake and to ensure that the lake's water quality was not compromised by the Council's systems for the management of sewage (including by ensuring the maintenance of sewerage facilities in a proper state of repair). As will appear, not all of these claims were ultimately pursued in this Court. At trial, Wilcox J held that the Council owed a common law duty of care to oyster consumers to take those steps that were reasonably open to it to minimise human faecal contamination of the lake82. His Honour held that the Council had breached this duty by failing to take steps to identify pollution sources and by failing to take "whatever steps were necessary to ensure the problem was fixed", including through the exercise of certain statutory powers83. In particular, his Honour found that the "responsible reaction" to complaints which the Council was receiving in respect of malfunctioning septic tanks would have been to institute a "sanitary survey", especially of premises that drained to estuarine waters84. His Honour used the term "sanitary survey" to refer to a comprehensive inspection of the foreshores and tributaries of a waterway, complemented by a programme of water testing, to identify sources of pollution and determine their effect on the quality of the water. The trial judge found that, rather than instituting such a survey, the Council determined, in May 1996, to stop responding to complaints about malfunctioning septic tanks. Before this Court, the Council challenged that finding by Notice of Contention. 82 (1999) 102 LGERA 123 at 208-209. 83 (1999) 102 LGERA 123 at 210. 84 (1999) 102 LGERA 123 at 210. On appeal, a majority of the Full Court of the Federal Court (Lindgren J and Kiefel J, Lee J dissenting) held that the Council owed no relevant duty of care to the consumers. This conclusion followed, in large part, from the difficulties the majority perceived in defining the practical content of the putative duty. Lindgren J referred to the difficulty in identifying any particular class to whom the propounded duty would be owed, the complexity of assessing breach and causation in respect of a duty to "minimise" contamination issuing from numerous unidentified pollution sources, the financial burden of discharging such a duty, and the indirectness of the relationship between the Council and oyster consumers85. The statutory provisions Before identifying the precise way in which the alleged duty was formulated by counsel for Mr Ryan in submissions to this Court, it is appropriate to describe the statutory provisions which empowered the Council to act in respect of the situation at Wallis Lake. The Council is constituted as a body corporate under Ch 9 of the Local Government Act 1993 (NSW) ("the LG Act"). At the time of the events giving rise to this litigation, s 7 of that statute provided that the purposes of the LG Act included to provide the legal framework for an "environmentally responsible" system of local government (par (a)) and to require councils "to have regard to the protection of the environment in carrying out their responsibilities" (par (e)). Chapter 7 (ss 68-185) of the LG Act was headed "What are the regulatory functions of councils?". Section 68 set out a wide range of activities which generally required prior council approval; these included broadly defined categories of conduct in respect of water supply, sewerage and stormwater drainage work and the management of waste. Failure to obtain a requisite approval, and the carrying out of an activity otherwise than in accordance with an approval, were rendered criminal offences by ss 626 and 627. Clause 45 of the Local Government (Water, Sewerage and Drainage) Regulation 1993 (NSW), made under s 748 of the LG Act, relevantly directed the Council, in determining an application under s 68 of the LG Act for approval to carry out sewerage work, to have regard to, among other things, "the protection and promotion of public health" and "the protection of the environment". Further, the Council was empowered by s 124 of the LG Act to order specified persons to do or to refrain from doing a range of things in prescribed circumstances. The orders contemplated by that provision included: (i) orders 85 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 405-410. requiring owners, occupiers, managers or licensed contractors to bring sewerage systems into compliance with relevant standards or requirements set or made by or under the LG Act (Item 5); (ii) orders requiring owners or occupiers of land to do or to refrain from doing specified things to prevent or to repair environmental damage, in circumstances where work carried out on land had caused or was likely to cause drainage-related environmental damage (Item 11); (iii) orders against any person apparently engaged in promoting, conducting or carrying out an activity that constituted or was likely to constitute a threat to public health or safety (where the activity was not regulated or controlled under any other Act by a public authority) (Item 15); and (iv) orders requiring owners or occupiers of premises not to use or to permit the use of a human waste storage facility on premises after a specified date, where such an order was necessary to protect public health (Item 25). Chapter 17 (ss 672-733) of the LG Act was entitled "Enforcement". Section 678(1) provided that, if a person failed to comply with an order given under Pt 2 of Ch 7 (which included s 124), the Council could do all such things as were "necessary or convenient to give effect to the terms of the order, including the carrying out of any work required by the order". Any expenses incurred by the Council under s 678 were recoverable in any court of competent jurisdiction as a debt due to the Council by the person concerned (s 678(6)). Section 673 relevantly empowered the Council to bring proceedings in the Land and Environment Court for an order to remedy or to restrain a breach (or a threatened or apprehended breach) of an order under s 124. Chapter 8 (ss 186-203) of the LG Act was headed "What ancillary functions does a council have?". Sections 191 and 192 conferred powers of entry, inspection and investigation on the Council for the purpose of enabling it to exercise its functions. Together, those provisions appear to have empowered the Council to conduct a "sanitary survey" of the type which the primary judge held was necessary to discharge the duty of care which he identified. Pursuant to s 197, the Council could recover the reasonable costs of entry and inspection where, as a result of that inspection, the Council required any work to be carried out on or in the premises. Section 200 provided that the powers of entry and inspection were not exercisable in relation to residential premises except with the permission of the occupier, unless entry was necessary for the purpose of inspecting work being carried out under an approval or a search warrant had been obtained pursuant to s 201. The Council was also empowered to deal with the pollution of waters by s 27 of the Clean Waters Act 1970 (NSW) ("the Clean Waters Act"). That provision stated in sub-s (1) that "[w]here any waters … are polluted by any person, any … local authority[86] may and shall, if directed to do so by the [Environment Protection Authority ('the EPA')], take such action as is necessary to remove, disperse, destroy or mitigate the pollution and may recover all costs and expenses incurred by it in connection with the removal, dispersal, destruction or mitigation of the pollution from that person." Sub-section (2) provided that any such costs and expenses could be recovered as a debt in a court of competent jurisdiction. Section 29 conferred on "authorised officers" extensive powers of entry and inspection in relation to specified premises and provided that the wilful obstruction of an authorised officer, or a failure to comply with any requirement made by an authorised officer, were criminal offences. At least one employee of the Council, Mr Brooker, the Senior Environmental Health Officer, was an "authorised officer". The submissions in this Court Before this Court, counsel for Mr Ryan contended that the Council owed the oyster consumers a duty (i) to exercise the powers conferred by ss 191 and 192 of the LG Act to carry out a sanitary survey of Wallis Lake and its tributaries and (ii) after identifying sources of pollution, to exercise its powers under ss 124 and 678 of the LG Act or s 27 of the Clean Waters Act to remedy those problems. Similarly, counsel for the Barclay companies (in this respect supporting the case made by Mr Ryan) sought to apply to the present appeal a description in the joint judgment in Brodie v Singleton Shire Council87 of the duty owed by authorities of the type considered in that case. There, Gaudron, McHugh and Gummow JJ said88, in a passage with which Kirby J agreed89: "Authorities having statutory powers of the nature of those conferred by the [Local Government Act 1919 (NSW)] upon the present respondents to design or construct roads, or carry out works or repairs upon them, are obliged to take reasonable care that their exercise of or failure to exercise those powers does not create a foreseeable risk of harm to a class of persons (road users) which includes the plaintiff. Where the state of a roadway, whether from design, construction, works or non-repair, poses a 86 The Council fell within the definition of "local authority" in s 5 of the Clean Waters Act. 87 (2001) 206 CLR 512. 88 (2001) 206 CLR 512 at 577 [150]. 89 (2001) 206 CLR 512 at 605 [243]. risk to that class of persons, then, to discharge its duty of care, an authority with power to remedy the risk is obliged to take reasonable steps by the exercise of its powers within a reasonable time to address the risk. If the risk be unknown to the authority or latent and only discoverable by inspection, then to discharge its duty of care an authority having power to inspect is obliged to take reasonable steps to ascertain the existence of latent dangers which might reasonably be suspected to exist." By analogy to this reasoning, counsel for the Barclay companies envisaged a duty of care, owed by the Council to oyster consumers, to take reasonable care to identify and to remedy sources of pollution at Wallis Lake and its tributaries. Adopting and adapting the terms used in Brodie, the Barclay companies asserted a duty on the part of the Council to take reasonable care that the exercise of or failure to exercise its powers to carry out works and repairs on sewerage installations did not create a foreseeable risk of harm to a class of persons (consumers of produce from the lake, or, more narrowly, consumers of oysters) which included Mr Ryan and the other applicants in the Federal Court. Two factors in particular were said to justify a duty in these terms. These were that (i) the Council was the only party with actual knowledge of the progressive deterioration of the sewerage infrastructure which imperilled the purity of the waters of Wallis Lake, and (ii) the Council had extensive statutory powers to prevent or to redress that deterioration and to mitigate the effects of any pollution. The accuracy of these two observations may be accepted. However, the co-existence of knowledge of a risk of harm and power to avert or to minimise that harm does not, without more, give rise to a duty of care at common law. The totality of the relationship between the parties, not merely the foresight and capacity to act on the part of one of them, is the proper basis upon which a duty of care may be recognised. Were it otherwise, any recipient of statutory powers to licence, supervise or compel conduct in a given field, would, upon gaining foresight of some relevant risk, owe a duty of care to those ultimately threatened by that risk to act to prevent or minimise it. As will appear, the common law should be particularly hesitant to recognise such a duty where the relevant authority is empowered to regulate conduct relating to or impacting on a risk-laden field of endeavour which is populated by self-interested commercial actors who themselves possess some power to avert those risks. The existence or otherwise of a common law duty of care allegedly owed by a statutory authority turns on a close examination of the terms, scope and purpose of the relevant statutory regime. The question is whether that regime erects or facilitates a relationship between the authority and a class of persons that, in all the circumstances, displays sufficient characteristics answering the criteria for intervention by the tort of negligence. Where the question posed above is answered in the affirmative, the common law imposes a duty in tort which operates alongside the rights, duties and liabilities created by statute. In some instances, a statutory regime may itself, in express terms or by necessary implication, exclude the concurrent operation of a duty at common law. An example is provided by Sullivan v Moody90. The Court there said91: "The statutory scheme that formed the background to the activities of the present respondents was, relevantly, a scheme for the protection of children. It required the respondents to treat the interests of the children as paramount. Their professional or statutory responsibilities involved investigating and reporting upon, allegations that the children had suffered, and were under threat of, serious harm. It would be inconsistent with the proper and effective discharge of those responsibilities that they should be subjected to a legal duty, breach of which would sound in damages, to take care to protect persons who were suspected of being the sources of that harm." However, contrary to submissions put on behalf of the Attorney-General for Western Australia (as an intervener in this Court), the discernment of an affirmative legislative intent that a common law duty exists, is not, and has never been, a necessary pre-condition to the recognition of such a duty. This may be contrasted with the action for breach of statutory duty, the doctrinal basis of which is identified as legislative intention92. An evaluation of whether a relationship between a statutory authority and a class of persons imports a common law duty of care is necessarily a multi- faceted inquiry. Each of the salient features of the relationship must be considered. The focus of analysis is the relevant legislation and the positions occupied by the parties on the facts as found at trial93. It ordinarily will be necessary to consider the degree and nature of control exercised by the authority over the risk of harm that eventuated94; the degree of vulnerability of those who 90 (2001) 75 ALJR 1570; 183 ALR 404. 91 (2001) 75 ALJR 1570 at 1580 [62]; 183 ALR 404 at 417. 92 Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 405; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 459-461. 93 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 377 [126]. 94 Howard v Jarvis (1958) 98 CLR 177 at 183; Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 550-552, 556-557. depend on the proper exercise by the authority of its powers95; and the consistency or otherwise of the asserted duty of care with the terms, scope and purpose of the relevant statute96. In particular categories of cases, some features will be of increased significance. For example, in cases of negligent misstatement, such as Tepko Pty Ltd v Water Board97, reasonable reliance by the plaintiff on the defendant authority ordinarily will be a significant factor in ascertaining any relevant duty of care. The factor of control is of fundamental importance in discerning a common law duty of care on the part of a public authority98. It assumes particular significance in this appeal. This is because a form of control over the relevant risk of harm, which, as exemplified by Agar v Hyde99, is remote, in a legal and practical sense, does not suffice to found a duty of care. In Brodie, the council exercised physical control over the condition of the roads which it was empowered by statute to maintain and which themselves constituted the direct source of harm to road users100. The council's measure of control over the safety of the person or property of citizens was "significant and exclusive"101. So, too, the fact of control over, and knowledge of, land or premises has been significant in identifying the duty of care owed to users of land or premises by a statutory authority which controls and manages that land or 95 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 551; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 24-25 96 Sullivan v Moody (2001) 75 ALJR 1570 at 1580-1581 [55]-[62]; 183 ALR 404 at 97 (2001) 206 CLR 1 at 16-17 [47], 23-24 [76]. 98 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 551-552; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 24-25 [43]-[46], 42-43 [104], 61 [166], 82 [227], 104 [304], 116 [357]; Brodie v Singleton Shire Council (2001) 206 CLR 512 at 558-559 [102]. 99 (2000) 201 CLR 552 at 562 [16], 564 [21], 581-582 [81]-[83]. 100 (2001) 206 CLR 512 at 558-559 [102]-[103], 573-574 [140]. 101 (2001) 206 CLR 512 at 573-574 [140]. premises102. Again, in Pyrenees Shire Council v Day103, the Shire held a significant and special measure of control over the safety from fire of persons and property at the relevant premises. That degree of control was the touchstone of the Shire's duty to safeguard others from the risk of fire in circumstances where the Shire had entered upon the exercise of its statutory powers of fire prevention and it alone among the relevant parties knew of, and was responsible for, the continued existence of the risk of fire104. It will be recalled that, in Pyrenees, the only other party with that knowledge was the former tenants. They had not communicated it to the subsequent tenants or adjoining occupiers, who were the relevant parties in this Court. The Council in the present appeal, by contrast, exercised a much less significant degree of control over the risk of the harm that eventuated. At no stage did the Council exercise control, let alone significant or exclusive control, over the direct source of harm to consumers, that is, the oysters themselves. It may be that the predominantly land-based sources of pollution were all ultimately subject to Council control. That, however, is the start, not the end, of the inquiry. Control over some aspect of a relevant physical environment is unlikely to found a duty of care where the relevant harm results from the conduct of a third party beyond the defendant's control. Modbury Triangle Shopping Centre Pty Ltd v Anzil illustrates the point105. What is significant here is the extent of control which the Council had over the risk of contaminated oysters causing harm to the ultimate consumer; control in that sense is not established by noting the Council's powers in respect of some or most of the sources of faecal pollution. As Lindgren J observed in the Full Court, the relationship between the Council and the oyster consumers is indirect; it is mediated by intervening conduct on the part of others106. Between the Council on the one hand and the oyster consumers on the other, there stands, in the present case, an entire oyster- growing industry comprising numerous commercial enterprises, each of which, in pursuit of profit, engages in conduct that presents an inherent threat to public 102 See, eg, Voli v Inglewood Shire Council (1963) 110 CLR 74 at 89, 91-92; Nagle v Rottnest Island Authority (1993) 177 CLR 423 at 429-430; Romeo v Conservation Commission (NT) (1998) 192 CLR 431 at 453-454 [48]-[49], 487-488 [151]-[155]. 103 (1998) 192 CLR 330. 104 (1998) 192 CLR 330 at 389 [168]. 105 (2000) 205 CLR 254 at 263-264 [18]-[21], 270 [43], 291-293 [108]-[113]. 106 (2000) 102 FCR 307 at 407. safety. That threat arises from the insusceptibility of oysters to effective and reliable tests to identify contamination of the type that eventuated here. In broad terms, the Council's statutory powers enabled it to monitor and, where necessary, to intervene in order to protect, the physical environment of areas under its administration. However, the conferral on a local authority of statutory powers in respect of activities occurring within its boundaries does not itself establish in that authority control over all risks of harm which may eventuate from the conduct therein of independent commercial enterprises. As the course of this litigation itself indicates, control over the safety of the Wallis Lake oysters for human consumption has been fragmented. The conduct of the Council did not "so closely and directly [affect]" oyster consumers so as to warrant the imposition of a duty of care owed by the former to the latter107. There were "too many intervening levels of decision-making" between the conduct of the Council and the harm suffered by the consumers108. As the trial judge noted, the Council had no direct responsibility for the operation of the oyster industry or the quality or safety of Wallis Lake oysters109. It did not control the process by which commercial oyster growers cultivated, harvested and supplied oysters, nor the times or locations at which they did so. The Council has not been given, by virtue of its statutory powers, such a significant and special measure of control over the risk of danger that ultimately injured the oyster consumers so as to impose upon it a duty of care the breach of which may sound in damages at the suit of any one or more of those consumers. The Council owed no relevant duty of care to the consumers. Mr Ryan's appeal should be dismissed. The claims in the Federal Court against the State B. THE STATE These claims also have fluctuated in the course of the litigation. By their re-amended statement of claim dated 21 April 1998, Mr Ryan and the other applicants contended that the State, in its various manifestations, owed them a range of duties of care. The applicants asserted: 107 cf Agar v Hyde (2000) 201 CLR 552 at 579 [70]. 108 cf Agar v Hyde (2000) 201 CLR 552 at 581 [81]. 109 (1999) 102 LGERA 123 at 208. (iii) a duty on the part of the Minister for Fisheries ("the Minister") at all material times on and after 13 January 1995 to determine forthwith (1) a New South Wales Shellfish Quality Assurance Program, pursuant to reg 12B of the Fisheries Management (Aquaculture) Regulation 1995 (NSW) ("the Management Regulation") to which further reference will be made; the requisite programme was to include relevant local shellfish quality assurance programmes, and (2) a programme to ensure that shellfish were taken from estuarine waters to be sold for human consumption only if the shellfish met the quality standards specified in or under the programme and those waters met suitable environmental standards; duties on the part of the New South Wales Shellfish Quality Assurance Committee ("the State Committee"), which was formed by the Minister under reg 12C of the Management Regulation, to supervise the administration of any State quality assurance programme, to advise the Minister with respect to any such State or local programmes, and to develop and implement public health and environmental education programmes for aquaculture farmers, including Wallis Lake oyster farmers; a duty on the part of the Wallis Lake Shellfish Quality Assurance Committee, which also was formed by the Minister under reg 12C, to establish and administer a local shellfish quality assurance programme for the Wallis Lake region; a duty on the part of the EPA110 to take steps to ensure that the Council did not pollute the Wallis Lake region by its sewage treatment and depot facilities and that private land owners or users of the waters of the Wallis Lake region did not pollute the region, and a duty on the EPA to monitor in conjunction with the Council the quality of the water and environment in the region; duties on the part of the Director-General of the New South Wales Department of Health ("the Director-General") or the Minister for Health to ensure that (1) purification plant operators processing oysters from the Wallis Lake region complied with the conditions of their permits; (2) purification plants operated in such a way as to ensure that any bacteria or virus was removed from oysters so processed; and (3) Wallis Lake oysters were not harvested, sold or supplied at a time or times when 110 Constituted as a body corporate by s 5 of the Protection of the Environment Administration Act 1991 (NSW). the region was polluted or likely to be polluted such that it was likely that the oysters were not fit for human consumption. The re-amended statement of claim asserted that each of these duties had been breached, and that the injury to the consumers was consequent upon those breaches. The trial judge concluded that the State owed a duty of care to oyster consumers to take those steps that reasonably were open to it to minimise the risk of consumers contracting a viral infection from the oysters. This duty was said to arise from the "substantial managerial control" which Wilcox J found the State exercised over the Wallis Lake oyster industry111. The "substantial managerial control" was said to lie in the State's ownership of the lake, its grant of oyster leases, its administration of aquaculture permits, its supervision of the depuration process, its participation in the Wallis Lake Estuary Management Committee, and its statutory powers to mitigate pollution, to carry out inspections and investigations and to prohibit the harvesting of oysters112. The Court decided that the State's duty was "clearly breached" by its failure, "[l]ong before November 1996", either to ensure the making of a comprehensive sanitary survey or to close the Wallis Lake fishery113. A majority of the Full Court (Lee J and Kiefel J, Lindgren J dissenting) dismissed the State's appeal. Lee J held that the State owed the oyster consumers a duty of care to ensure that the powers it had created were exercised to reduce the risk of harm to those consumers114. His Honour said that the State breached this duty115: "by reason of its failure to manage the waters of the Lake by taking steps to have sanitary surveys of oyster-growing waters undertaken and sources of pollution, or potential pollution, identified and rectified and to implement controls on the harvesting of oysters in conditions known to increase the risk of oyster contamination and, in particular, in failing to close the Lake fishery when those conditions occurred in 1996 and keep 111 (1999) 102 LGERA 123 at 217. 112 (1999) 102 LGERA 123 at 216. 113 (1999) 102 LGERA 123 at 218-219. 114 (2000) 102 FCR 307 at 326-329. 115 (2000) 102 FCR 307 at 329. the fishery closed until circumstances existed that made it safe for the harvesting of oysters for sale to the public to resume". Kiefel J posited a narrower duty, which she defined in relation to events immediately subsequent to the heavy rainfall of November 1996. Her Honour expressed the view that, immediately following that rainfall, the Minister was empowered by the Fisheries Management Act 1994 (NSW) ("the Fisheries Management Act") to prohibit the harvesting of oysters from the Wallis Lake region for a specified period. Her Honour concluded that the State "thereby came under a duty to exercise its powers and prohibit harvesting until the Minister could be assured of the likelihood of the oysters' fitness for consumption"116. The State's failure to do so, in Kiefel J's view, constituted a breach of that duty. By notice of contention dated 16 November 2001, Mr Ryan and the other first respondents to the appeal now before this Court submit that the decision of the Full Court should be affirmed on grounds other than those relied upon by that Court. The notice contends that the State owed a duty to the consumers to take reasonable care to protect them from reasonably foreseeable risks of injury as a result of the consumption of oysters. A duty formulated in these terms is said to arise from (i) the State's ownership of Wallis Lake; (ii) its statutory powers of "control" over Wallis Lake and the Wallis Lake oyster industry; (iii) the "substantial managerial control" which Wilcox J found the State exercised over the Wallis Lake oyster industry; and (iv) the State's knowledge of the risk of harm to consumers of oysters taken from Wallis Lake. The State is said to have breached this duty of care by neither (a) taking steps to have sanitary surveys of oyster growing waters undertaken and sources of pollution or potential pollution identified and rectified; nor (b) implementing controls on the harvesting of oysters in conditions known to increase the risk of oyster contamination; nor (c) closing the Wallis Lake fishery when those conditions occurred in 1996 and keeping the fishery closed until circumstances existed that made it safe for the harvesting of oysters for sale to the public. In argument before this Court, the evolution of the case against the State continued. Counsel for Mr Ryan described the State's duty of care in the following terms. It was said that the State had relevantly embarked upon one limb of what was necessarily a two-limbed approach to oyster safety. That is, the State had instituted a system of compulsory 36-hour depuration of oysters prior to sale117, but it had failed to require what it knew was a necessary precondition 116 (2000) 102 FCR 307 at 460. 117 Food (General) Regulation 1992 (NSW), cl 79A. to the effectiveness of depuration, being the carrying out of sanitary surveys to detect and to remedy pollution in oyster growing areas. It was submitted that, having embarked upon the management of the oyster industry in the way that it had, the State came under a duty of care to carry out the sanitary surveys that it knew were necessary to effectuate the depuration process. Further, if, after having identified sources of pollution, the safety of a particular oyster growing area could not be assured, the State was said to come under a common law duty to close the relevant fishery until the problem could be remedied. Thus, as the case for Mr Ryan ultimately was advanced in this Court, the State's duty to consumers to take reasonable care to protect them from reasonably foreseeable risks of injury as a result of the consumption of oysters involved two related elements. These were (i) an obligation to conduct one or more sanitary surveys to identify and to remedy pollution sources and (ii) an obligation to close oyster fisheries that presented an unacceptable risk to public safety. The State was said to have breached its duty by its failure (a) to conduct a sanitary survey of the Wallis Lake region at some unspecified time before November 1996 and (b) to require the Wallis Lake growers to cease harvesting and selling oysters after the heavy rainfall of that month. Before dealing with each element of the duty of care said to be owed by the State, it is convenient to describe briefly the position which the State occupied in respect of the Wallis Lake oyster industry. The State leased areas of the lake for aquaculture purposes and authorised the growing and harvesting of oysters therein through the grant of aquaculture permits. Further, the State was empowered by statute industry development plans. Again, by statute, various organs and officers of the State were empowered to prevent or to mitigate pollution or to address threats to public health arising from contamination of waters or food. In some circumstances, the State could require oyster growers to cease harvesting oysters. to determine commercial aquaculture It is necessary to turn to the particular statutory provisions which are said to bring about a relationship, between the State on the one hand and the oyster consumers on the other, which imports a common law duty of care. It is useful to distinguish between those provisions which relate to the conduct of sanitary surveys and those which enable the State to close down or to suspend the operations of an oyster grower. Sanitary surveys Through the medium of the EPA, the State118 has powers under the Clean Waters Act to remove, disperse, destroy or mitigate pollution of waters (s 27), to direct the removal, dispersion, destruction or mitigation of water pollution (s 27A) and to carry out inspections and investigations of premises (s 29). Under cl 21 of the Clean Waters Regulations 1972 (NSW), the EPA may direct occupiers of premises to undertake measures to control or to prevent the discharge into waters of pollutants from those premises. Together, these provisions empowered the State itself to conduct regular sanitary surveys of oyster growing areas including those at Wallis Lake. Further, the State could require oyster growers to cooperate in the carrying out of a sanitary survey, or could make oyster harvesting in a particular area conditional on the prior completion of a sanitary survey. This could be achieved either as a condition of an aquaculture lease or permit or as an element of a commercial aquaculture industry development plan. Part 6 (ss 142-191) of the Fisheries Management Act is headed "Aquaculture management". Division 3 (ss 163-180) thereof is entitled "Leases of public water land for aquaculture". Section 163 empowers the Minister, on application or by auction, public tender or ballot, to lease an area of public water land for use for aquaculture119. A lease of that type vests in the lessee (i) the exclusive right during the currency of the lease to cultivate within, and to take from, the leased area the species of fish120 specified in the lease, subject to the provisions of or made under the Fisheries Management Act and the provisions of the lease and (ii) the ownership of all fish specified in the lease that are within the leased area (s 164). An aquaculture lease may be renewed by the Minister (s 167). The Minister may require as a condition of granting or renewing a lease that the lessee have a survey of the area carried out to a standard approved by the Minister or may, by notice, require the lessee to have such a survey carried out within a specified period (s 169). Failure to comply with such a notice is a breach of a condition of the lease (s 169(4)). The Minister is empowered by s 169(6) to enter into arrangements with representatives of the commercial 118 Section 13 of Protection of the Environment Administration Act 1991 (NSW) provides, subject to some exceptions that are not presently relevant, that the EPA is, in the exercise of its functions, subject to the control and direction of the Minister. 119 "Aquaculture" is defined in s 142 to include oyster farming. 120 "Fish" is defined in s 5 to include oysters. aquaculture industry for the payment of the cost of carrying out surveys under Section 163(3) provides that an aquaculture lease must specify the species of fish authorised to be cultivated within the leased area, but that this "does not authorise the use of a lease without an aquaculture permit". Aquaculture permits are provided for in Div 2 (ss 144-162) of Pt 6 of the statute. Section 144 proscribes the undertaking of aquaculture without an aquaculture permit. Applications for aquaculture permits are to be made to the Minister in the manner prescribed by s 145. Section 146 empowers the Minister to refuse to issue a permit on specified grounds. An aquaculture permit is relevantly subject to such conditions as are specified in the permit or as the Minister notifies to the permit holder while the permit is in force; those conditions may be varied or revoked by the Minister at any time (s 152). A permit holder is guilty of an offence if, without lawful excuse, a condition of the permit is contravened (s 152(3)). Section 156 provides that a permit holder must, if the regulations so require, pay to the Minister an annual contribution towards, among other things, the cost of monitoring the quality of the environment in which aquaculture is undertaken and the cost of testing the quality of the fish cultivated. Pursuant to s 160, the Minister may, by notice in writing to the permit holder, cancel or suspend a permit on a number of specified grounds including the contravention by the permit holder of a condition of the permit. Section 143 of the Fisheries Management Act empowers the Minister to determine plans for the development of the commercial aquaculture industry. Sub-section (2) of s 143 provides that a development plan may relate to any aspect of the commercial aquaculture industry, including aquaculture of a particular species or in a particular area. A development plan may include a wide range of matters that the Minister considers appropriate (sub-s (4)). A development plan is to be published in the Gazette (sub-s (7)) and may be amended or replaced by the Minister (sub-s (6)). Before determining a development plan (including any amendment or new plan), the Minister is required to give the commercial aquaculture industry and the public an opportunity to make submissions on the proposed plan (or proposed amendment) and to take those submissions into account in determining the plan (sub-s (8)). The Minister "is to have regard to" any relevant development plan in the exercise of his or her functions under Pt 6 of the Act (sub-s (3)), but the exercise of a function under that Part is not invalid merely because it is inconsistent with a development plan (sub-s (9)). Division 4 (regs 12A-12M) of Pt 2 of the Management Regulation is entitled "New South Wales Shellfish Quality Assurance Programs" and commenced operation on 1 May 1995. Regulation 12B states that the Minister "is required to determine", as a commercial aquaculture industry development plan under the Fisheries Management Act, a programme to assure the quality of shellfish taken from estuarine waters for sale for human consumption. The plan is to consist of the New South Wales Shellfish Quality Assurance Program which is to include local shellfish quality assurance programmes. The object of the New South Wales programme is to ensure that shellfish are taken from estuarine waters to be sold for human consumption only if (i) the shellfish meet the quality standards specified in or under the programme and (ii) those waters meet environmental standards so specified (reg 12B(3)). Regulation 12C states that the Minister "is required to appoint" a Statewide advisory committee (the State Committee) and a local shellfish quality assurance committee for each area or group of areas of estuarine waters to which a local shellfish quality assurance programme relates. Four of the six members of the State Committee are to be aquaculture permit holders (reg 12C(2)). The local committees are to consist entirely of local aquaculture permit holders (reg 12C(4)). The Minister may remove from office members of either the local or State committees (reg 12C(6)). The Minister may require those committees to reconsider any decision that they have made but the committees are declared not to be "subject to the control or direction of the Minister" (reg 12C(5)). Each local committee to be responsible for establishing and administering a local shellfish quality assurance programme for the estuarine waters for which the committee is appointed (reg 12E). The Minister may vary a local programme but only in consultation with the State Committee and the relevant local committee (reg 12F). Each local programme is required to include any minimum standards specified in the State programme for the quality of shellfish cultivated in the relevant estuarine waters and for the purity of those waters (reg 12E(2)). In the event of an inconsistency between the State programme and a local programme, the former is to prevail (reg 12B(5)). Aquaculture permit holders are required to comply with the local programme in respect of the area in which their farm is located (reg 12G). Neither the State programme nor a local Wallis Lake programme had been produced by November 1996. That date and state of affairs are important for the issues in this litigation. It will be recalled that the heavy rainfall in the region occurred late in November 1996. Lindgren J explained121 in his reasons for judgment that Div 4 of Pt 2 of the Management Regulation reflects a political decision by the State to enlist shellfish industry participants in a system of industry-funded self-regulation or co-regulation, rather than to impose on that industry a publicly funded regulatory regime. In particular, the State decided not to adopt the approach of some other 121 (2000) 102 FCR 307 at 420-423. Australian and foreign jurisdictions which require regular sanitary surveys of oyster growing regions pursuant to a classification structure based on water pollution levels. This decision was reached after much consideration and was based in part on budgetary concerns. In accordance with that decision by the Executive Government of New South Wales, which found partial expression in the Regulations referred to above, the State neither required regular sanitary surveys of oyster growing areas (whether as a condition of aquaculture leases or permits or otherwise) nor undertook to conduct such surveys itself. A decision of that nature involves a fundamental governmental choice as to the nature and extent of regulation of a particular industry. It is in a different category to those public resource allocation decisions which, in the manner described in Brodie v Singleton Shire Council122, may be considered in determining the existence and breach of a duty of care by a public authority. Once the nature of the decision by the State is appreciated, its observance by agents of the State in respect of any particular region falls outside the scope of any common law duty of care that may otherwise arise. The evidence did not establish that the State was aware of any particular risk of contamination in respect of the Wallis Lake fisheries. As already emphasised in these reasons, no No particular recorded hepatitis A outbreak had ever occurred circumstance indicated that the EPA's powers of compulsory inspection under s 29 of the Clean Waters Act ought to have been exercised in respect of any particular premises which drained into Wallis Lake. The region was a successful oyster growing area which appeared to present no particular or immediate risk of shellfish contamination. In those circumstances, the "failure" on the part of the State to conduct a sanitary survey of Wallis Lake reflected simply a continued adherence to a previously settled policy of general application. The scope of any common those circumstances necessarily accommodates itself to, and is controlled by, the insusceptibility of that decision by the State to curial review under the rubric of the tort of negligence123. It follows that the State was under no common law duty to conduct sanitary surveys of Wallis Lake. that may arise law duty there. Fishing closure Section 189 of the Fisheries Management Act provides: 122 (2001) 206 CLR 512 at 559-560 [104]. 123 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 393-394 [182]. See also Dalehite v United States 346 US 15 at 59 (1953); Welbridge Holdings Ltd v The Metropolitan Corporation of Greater Winnipeg [1971] SCR 957 at 967-968. "(1) The Minister may, by a fishing closure under Part 2, prohibit during a specified period the taking of fish or marine vegetation cultivated under an aquaculture permit from the area to which the permit applies if satisfied: that the area is in such a condition that the taking of fish or marine vegetation from the area ought to be suspended; or that the fish or marine vegetation are, or are likely to be, unfit for human consumption. (2) Any such fishing closure does not prevent the taking of fish or marine vegetation for any purpose authorised by the regulations or the fishing closure. This section does not limit the application of a fishing closure under Part 2 to the taking of fish or marine vegetation from an area subject to an aquaculture permit and to which the permit does not apply." (emphasis added) Part 2 (ss 8-40) is headed "General fisheries management". Division 1 thereof provides for fishing closures. Section 8 states: "(1) The Minister may from time to time, by notification, prohibit, absolutely or conditionally, the taking of fish, or of a specified class of fish, from any waters or from specified waters. (2) Any such prohibition is called a fishing closure." Read in isolation, s 8 does not, in terms, stipulate that ministerial satisfaction is a pre-condition to the exercise of the power which the provision confers. However, the effect of s 8 in the present context is to give the force of law to action taken by the Minister under s 189. That latter provision pivots on the existence of ministerial satisfaction of either of the circumstances specified in sub-par (a) or sub-par (b) of s 189(1). Where that satisfaction exists, the discretion to prohibit the taking of fish is enlivened and the Minister's decision thereunder becomes, by virtue of s 8, a "fishing closure" enforceable under Div 1 of Pt 2 of the Fisheries Management Act. Section 9 of that statute provides that notification of a fishing closure is to be published in the Gazette or, if the Minister considers that the closure is urgently required, in the local media or by notice in a prominent place adjacent to the applicable waters. The closure remains in force for the period (not exceeding five years) specified in the notification (s 10). It may be amended or revoked by the Minister (s 11). A person who takes fish in contravention of a fishing closure is guilty of an offence (s 14). At the time of the contamination at Wallis Lake, Pt 4 (ss 44-56) of the Food Act 1989 (NSW) ("the Food Act") was headed "Particular powers of the Director-General". Section 45(1)(b) thereof conferred power on the Director- General of Health, by order, to "prohibit the cultivation, taking, harvesting or obtaining, from an area specified in the order, of any food or of any food of a class or description so specified". Section 44 provided that any such order could "be made only when the Director-General has reasonable grounds to believe that the making of one or more such orders is necessary in order to prevent or mitigate a serious danger to public health". Successive provisions regulated the manner of making such orders (s 46), conferred a right of appeal to the District Court against an order (ss 47, 48), and rendered any failure to comply with an order a criminal offence (s 49). Mr Ryan and the other applicants in the Federal Court did not, in terms, plead an independent common law duty on the part of the Minister to prohibit under s 189 of the Fisheries Management Act oyster farming from Wallis Lake during the period of contamination. They did plead in par 47 of their re-amended statement of claim, however, that "but for" the negligence said to have occurred by virtue of the breaches of duties (i), (ii) and (iii) set out at the beginning of Pt B of these reasons, the Minister "would have" exercised his powers under s 189 to prohibit oyster farming during the period of contamination of Wallis Lake. The assumption appeared to be that, if the quality assurance programmes said to be required by those duties had properly been implemented by November 1996, they would have required the Minister, in the circumstances then pertaining, to close the fishery. Notwithstanding the absence of a pleading in those terms, a duty to close the Wallis Lake fishery under s 189 formed part of the duty held to exist by the primary judge and by Lee J in the Full Court. Further, the power to close the fishery appeared to comprise the entire content of the duty of care identified by Kiefel J in the Full Court. In argument before this Court, however, counsel for Mr Ryan disavowed reliance upon the powers of closure conferred by s 189 of the Fisheries Management Act and s 45 of the Food Act. That stance is understandable. The existence of satisfaction by the Minister or the Director-General as to the state of affairs specified in the respective provisions would be a jurisdictional fact upon which the exercise of their statutory powers was conditioned124. There was no 124 R v Connell; Ex parte The Hetton Bellbird Collieries Ltd (1944) 69 CLR 407 at 430, 432; Foley v Padley (1984) 154 CLR 349 at 353, 370, 375; Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at 650-654 case made that such a state of satisfaction had existed. There was no evidence, as at November 1996, either (i) that the Minister was satisfied that the Wallis Lake oysters were, or were likely to be, unfit for human consumption (s 189 of the Fisheries Management Act) or (ii) that the Director-General had reasonable grounds to believe that a prohibition on the harvesting of Wallis Lake oysters was necessary in order to prevent or to mitigate a serious danger to public health (s 44 of the Food Act). It follows that neither the discretion conferred by s 189 of the Fisheries Management Act nor that conferred by s 45 of the Food Act was at any relevant time engaged. In the absence of that engagement, the statutory provisions, in the circumstances of this case, supplied no relevant statutory power to which a common law duty of care could attach. In argument, counsel for Mr Ryan submitted that the State, through its various officers and agencies, enjoyed a range of non-coercive powers beyond those which have explicit legislative force. In particular, it was put that the State may, through its involvement in the oyster industry, persuade oyster fisheries voluntarily to cease harvesting for specified periods in the interests of public safety. This apparently is what occurred when the Wallis Lake fisheries temporarily ceased harvesting shellfish from 14 February 1997. That cessation of harvesting was voluntarily undertaken by the relevant aquaculture permit holders at the initiative of the State, and in particular of Dr Kerry Jackson, the State Coordinator of the New South Wales Shellfish Quality Assurance Program and an official in the Department of Fisheries. This was an instance of effective State action falling short of the invocation of ministerial powers under the Fisheries Management Act. However, the evidence did not establish that the State had assumed (even if it had the legal competence to do so) any day-to-day control of the commercial activities of any oyster growers in the Wallis Lake area or elsewhere. It may readily be accepted that public authorities, armed with statutory powers to compel, prevent or punish conduct, frequently exercise informal and non-coercive influence or persuasion over those persons and organisations against whom they are empowered formally to act. So much follows from the existence of an organised system of sanctions beneath which there is interaction between public authorities and industry participants. But the exercise or potential exercise of powers of supervision or persuasion of this type provides an insecure basis for a duty of care enforceable by the common law. This is so particularly where the duty allegedly is owed not to industry participants but to the ultimate consumer. That the practical content of any such duty would be elusive supports the conclusion that it does not exist125. As counsel for the State asked rhetorically during argument, is such a duty to be described as a duty to be persuasive, especially persuasive or successfully persuasive? 125 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 13 [5]. The State owed no relevant duty of care to the oyster consumers. Its appeal should be allowed. C. THE BARCLAY COMPANIES The Barclay companies concede that they owed a duty of care to their consumers, including Mr Ryan, to take reasonable care to ensure that the oysters they harvested and supplied were safe for human consumption. The immediate issue before this Court is whether the companies breached that duty. This requires consideration of the circumstances disclosed by the evidence before the primary judge. in waters known At trial, Wilcox J concluded that, in selling without warning oysters grown to possible undetectable viral contamination, the Barclay companies had breached their duty of care126. His Honour suggested that the proper discharge of the duty would have involved procuring, or attempting to procure, governmental agreement to conduct a sanitary survey of the relevant area127. to be subject By majority, the Full Court (Lee J and Kiefel J, Lindgren J dissenting) upheld the primary judge's conclusion that the Barclay companies were liable in negligence to Mr Ryan. Lee J described the duty of care owed by the companies as being to refrain from harvesting and selling oysters from Wallis Lake when conditions had arisen that to the knowledge of the Barclay companies increased the risk of the oysters being contaminated. In his Honour's view, this duty was breached by the sale to the public of oysters before the Barclay companies "had taken the steps that were necessary to show it was safe to resume the harvesting and sale of oysters"128. Kiefel J defined the duty and its breach in similar terms. Her Honour held that the companies "should not have supplied oysters for sale until a sufficient period had elapsed by which the risk of contamination could be regarded as acceptable or tests sufficiently indicated that to be the case"129. (emphasis added) 126 (1999) 102 LGERA 123 at 221-222. 127 (1999) 102 LGERA 123 at 221. 128 (2000) 102 FCR 307 at 330. 129 (2000) 102 FCR 307 at 461. The duty of the Barclay companies did not extend to ensuring the safety of oysters in all circumstances130. In Wyong Shire Council v Shirt, Mason J (with whom Stephen J and Aickin J agreed) stated131: "In deciding whether there has been a breach of the duty of care the tribunal of fact must first ask itself whether a reasonable man in the defendant's position would have foreseen that his conduct involved a risk of injury to the plaintiff or to a class of persons including the plaintiff. If the answer be in the affirmative, it is then for the tribunal of fact to determine what a reasonable man would do by way of response to the risk. The perception of the reasonable man's response calls for a consideration of the magnitude of the risk and the degree of the probability of its occurrence, along with the expense, difficulty and inconvenience of taking alleviating action and any other conflicting responsibilities which the defendant may have." Neither Lee J nor Kiefel J expressed themselves as approaching their task by the sequential reasoning process which Wyong Shire Council mandates. An analysis of the competing considerations referred to in Wyong Shire Council is impeded, not assisted, by formulating the relevant duty of care in terms of its breach, which was the approach that the majority in the Full Court appeared to adopt. The use by Kiefel J in the passage quoted in [189] above of the words "sufficient" and "could be regarded" does not deny the cogency of the submission by the Barclay companies that duty was identified in terms of breach. A duty of care that is formulated retrospectively as an obligation purely to avoid the particular act or omission said to have caused loss, or to avert the particular harm that in fact eventuated, is of its nature likely to obscure the proper inquiry as to breach132. That inquiry involves identifying, with some precision, what a reasonable person in the position of the defendant would do by way of response to the reasonably foreseeable risk. As Isaacs ACJ observed in 1924, "[n]o conclusion of negligence can be arrived at until, first, the mind conceives affirmatively what should have been done"133. The trial judge and the majority of the Full Court in the present case failed to identify with the necessary precision, 130 See Brodie v Singleton Shire Council (2001) 206 CLR 512 at 577-578 [151]. 131 (1980) 146 CLR 40 at 47-48. 132 See Brodie v Singleton Shire Council (2001) 206 CLR 512 at 627-628 [309]; 180 ALR 145 at 230-231. 133 Metropolitan Gas Co v Melbourne Corporation (1924) 35 CLR 186 at 194. by reference to considerations of the nature of those indicated in Wyong Shire Council, the reasonable response to the risk of harm that existed. In so failing, their Honours fell into an error of law. There is no serious dispute as to the facts to which the law is to be applied. Thus, it is appropriate for this Court to resolve the matter. For the reasons that follow, the proper application of principle requires a conclusion different to that reached in the Federal Court. The risk of injury which eventuated in this case was not far-fetched or fanciful; it was real and was therefore foreseeable134. The Barclay companies knew that viral contamination of oysters could result from human faecal pollution of the waters in which oysters are cultivated. The companies knew that depuration alone was an inadequate guarantee of oyster safety. They were aware that there existed, in the vicinity of Wallis Lake, septic tanks, stormwater drains and other facilities which, if defective, could cause faecal pollution of the waters. There was some dispute about whether or not the Barclay companies had actual knowledge that any of those facilities were defective, or actual knowledge about the existence of specific pollution problems. Nonetheless, it was reasonably foreseeable that the conduct of the business of the Barclay companies involved a risk of injury to oyster consumers. What was the reasonable response to this risk? The rainfall of November 1996 was not dissimilar to similar rainfall events in previous years. The Barclay companies ceased harvesting during and immediately after the rainfall but otherwise had no reason to suspect that it presented any greater risk of viral contamination The Barclay companies only recommenced harvesting after the water was observed to be clear, salinity tests of the water were above 18 parts per thousand ("p.p.t.") (indicating that the influx of fresh water had passed) and oyster flesh tests for E-coli were below 5 colony forming units ("c.f.u.") per gram. than previous rainfalls. In assessing the reasonableness of this response, it is noteworthy that no practicable test exists to detect the presence of hepatitis A in estuarine water. Bacteria in water can be detected, but this is an imperfect means of identifying the presence of viruses. The lack of bacterial indicators in water does not indicate the absence of viruses, but high bacterial levels ordinarily equates with high viral levels. Further, no reliable and practicable tests exist to confirm that hepatitis A is not present in oyster flesh. One potentially useful means of detecting hepatitis A in oyster flesh is polymerise chain reaction ("PCR") testing. But this was still in the research stage in November 1996. Tests could only be carried out in a limited number of laboratories by trained personnel and they were expensive. Because a PCR test destroys the oysters tested, it is suitable 134 See Wyong Shire Council v Shirt (1980) 146 CLR 40 at 48. only for testing samples and cannot establish that other oysters in the same bed are free from viral contamination. There was also evidence that PCR testing frequently gives false negatives. Further, it is possible for shellfish to retain viruses after depuration, depending on variables including the extent of pollution in the waters in which the oysters were grown. Although ultra-violet light, in appropriate conditions, will destroy all viruses with which it comes into contact, it will not destroy those with which it does not come into contact. Wilcox J found that the effectiveness of depuration therefore depends on: (i) the maintenance of the equipment used and the depuration tanks; (ii) the turbidity of the water in which the oysters are depurated; and (iii) the capacity for ultra-violet light to come into contact with each viral or bacterial particle. His Honour concluded that depuration of shellfish for 36 hours is not in itself an adequate protection for oyster consumers against the foreseeable risk of contracting viral diseases. Nonetheless, his Honour found that there was no deficiency in the Barclay companies' depuration plant in design, construction, maintenance or mode of operation. Further, his Honour found that at all times the Barclay companies endeavoured to implement the State's depuration requirements. Given the state of relevant scientific knowledge at November 1996, it was not possible (and apparently is still not possible) to eliminate entirely the risk of viral contamination of oysters grown at Wallis Lake. The possibility of viral contamination is ever present when oysters are grown in an area where humans live. Only oysters grown in pristine waters will be free from viral contamination. Contrary to the reasoning of Kiefel J in the Full Court, there was no readily identifiable "sufficient period" following the rainfall event of November 1996 after which the risk of contamination could be regarded as acceptable. There was no test of oyster flesh or water quality which would affirmatively establish an "acceptable" risk of contamination. Counsel for Mr Ryan submitted that a "sufficient period" would be at least until (i) a sanitary survey had been carried out, whether by the Barclay companies or by a third party; (ii) identified point sources of pollution were then eliminated or minimised; and (iii) testing demonstrated safety or minimal risk. It is significant that the carrying out of a sanitary survey was, on the case put for Mr Ryan, essential to rendering "acceptable" any risk of contamination. However, it is clear that the Barclay companies alone could not carry out an effective or comprehensive sanitary survey. The companies did not have the statutory powers of entry and inspection held by the Council and the State. Nor could the Barclay companies themselves compel owners or occupiers of land to remedy structural or other deficiencies causing faecal pollution. In the absence of a willingness by either or both the Council or the State to conduct regular and comprehensive sanitary surveys, there was little the Barclay companies could do effectively to address the pollution sources that were contaminating the lake. Counsel for Mr Ryan contended that, if interstate or international quality assurance programmes had been implemented in New South Wales, they would have required the cessation of harvesting at Wallis Lake in November 1996 because no sanitary survey had been conducted. This, however, does not assist in identifying what a reasonable oyster grower or distributor in the position of the Barclay companies would have done. The Barclay companies did not themselves have the capacity to conduct comprehensive sanitary surveys and they operated within a regulatory framework in which neither the local nor the State government was prepared to conduct such surveys. The preparedness of the Barclay companies to do what they could to further the interests of public safety within that regulatory framework is indicated by their involvement in the Wallis Lakes' Oyster Quality Assurance Committee. That body, established in December 1992, functioned as a precursor to the committee that ultimately was given legislative recognition under Div 4 of Pt 2 of the Management Regulation. Therefore, in practical terms, the alternatives open to the Barclay companies were (i) to cease harvesting and selling oysters after the November 1996 rainfall event until a sanitary survey was conducted and testing revealed an acceptable risk; or (ii) to sell oysters with a warning as to their possible viral contamination; or (iii) to cease growing oysters at Wallis Lake entirely, and, perhaps, to establish operations in pristine waters elsewhere. Given the attitude of both the Council and the State, and the apparent similarity between the November 1996 rainfall and previous rainfall events, option (i) effectively would have required the cessation of harvesting for an unspecified, potentially indefinite, period following any such heavy rainfall. Option (ii) is likely to have had the same effect as ceasing to sell oysters altogether. Option (iii) was not explored in any detail during argument and would have required relocation to some unspecified waterway isolated from human beings. Each of the three courses of action would have been either entirely destructive of, or highly disruptive to, the business of the Barclay companies. Each represents alleviating action of the most difficult, expensive and inconvenient type. According to the settled principles propounded in Wyong Shire Council, such alleviating action can only be required by the law of negligence if the magnitude of the risk and the degree of probability of its occurrence are great indeed. Although a risk of viral contamination was ever present, this was the first recorded outbreak of hepatitis A, or any other oyster-related disease, caused by Wallis Lake oysters in almost a century of oyster growing. It was a bare possibility of a known risk which, until the 1996-1997 season, had never eventuated. Hepatitis A is a serious, and potentially lethal, threat to public health. One person died as a result of the 1997 epidemic. Nonetheless, there was expert virologist evidence at trial that this epidemic was a very rare event in "world terms", and one which resulted from an unusual and random sequence of environmental factors. Notwithstanding the significant magnitude of the risk of harm that eventuated in this case, the degree of probability of its occurrence cannot be said to justify the difficult, expensive and inconvenient alleviating action contended for by the consumers. Indeed, the Barclay companies' response to the risk of viral contamination appears to be consistent with the requirements of the Wallis Lake Shellfish Quality Assurance Program which was ultimately approved by the Minister under Div 4 of Pt 2 of the Management Regulation on 19 March 1997. That programme does not require individual oyster growers or distributors to conduct sanitary surveys. Indeed, the document emphasises that the identification and rectification of potential pollution sources require a collaborative approach involving growers, the Council and the State. Had the programme been in operation at the time of the rainfall event of November 1996, it would have permitted, subject to one possible qualification, the recommencement of harvesting at Wallis Lake at the time the Barclay companies recommenced harvesting. The programme permits harvesting when E-coli testing returns negative results and salinity tests at 18 p.p.t. or greater. The qualification is that the programme requires this latter result to have been maintained for at least 48 hours before harvesting may recommence; the evidence does not appear affirmatively to establish that this temporal requirement was met in the present case. Nonetheless, the general consistency of the Barclay companies' conduct with the local quality assurance programme, which was itself formulated in response to the 1997 hepatitis A outbreak, reinforces the conclusion that the companies took reasonable care to ensure that their oysters were safe for human consumption. The trial judge and the majority of the Full Court erred in holding that the Barclay companies had breached their duty of care to the oyster consumers. The appeal by Barclay Distributors should be allowed. However, Barclay Oysters is in a different position. Given the finding at trial and in the Full Court, not challenged in this Court, that Barclay Oysters had contravened ss 74B and 74D of the Trade Practices Act, the judgment obtained by Mr Ryan against that company should not be disturbed. Conclusions Mr Ryan's appeal (No S259/2001) should be dismissed with costs. The State's appeal (No S261/2001) should be allowed with costs. In the appeal by the Barclay companies (No S258/2001), the appeal by Barclay Distributors should be allowed with costs and that by Barclay Oysters allowed in so far as it concerns the issue of negligence but with no order as to costs. The parties to each of these appeals should have 28 days within which to file draft minutes of consequential orders to be made by this Court in respect of the orders (including costs orders) made by the Full Court. In default of agreement between the parties to any of the appeals as to the form of the draft minutes for that appeal, each party is to file within that 28 day period its draft with short written submissions in support, indicating how the drafts of the parties differ. Kirby 209 KIRBY J. These appeals come from the Full Court of the Federal Court of Australia135. The most important question that they present concerns the principles governing the common law duty in negligence, both of a State of the Commonwealth and of a local government authority, where each is said to be liable for failing to exercise powers conferred upon it by legislation. Once again this Court is required to consider whether, in the particular circumstances of the case, the law entitles a person who can prove damage to bring home the consequences not only to any private organisation that owed him a duty of care which it breached but also to public authorities whose breaches are said to lie in their failure to properly discharge their statutory powers136. One day this Court may express a universal principle to be applied in determining such cases. Even if a settled principle cannot be fashioned, it would certainly be desirable for the Court to identify a universal methodology or approach, to guide the countless judges, legal practitioners, litigants, insurance companies and ordinary citizens in resolving contested issues about the existence or absence of a duty of care, the breach of which will give rise to a cause of action enforceable under the common law tort of negligence137. Courts such as this should recall the prayer of Ajax138: It is a supplication that must have occurred to many who have considered recent decisions on the subject of the duty of care: "[S]ave us from this fog and give us a clear sky, so that we can use our eyes"139. 135 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307. 136 Earlier cases include Sutherland Shire Council v Heyman (1985) 157 CLR 424; Pyrenees Shire Council v Day (1998) 192 CLR 330; Romeo v Conservation Commission (NT) (1998) 192 CLR 431; Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1; Brodie v Singleton Shire Council (2001) 206 CLR 137 cf Perre v Apand Pty Ltd (1999) 198 CLR 180 at 286 [288]. 138 Homer, The Iliad, (trans by Murray) (1957) Bk XVII at 645-647. 139 Homer, The Iliad, (trans by Rieu) (1956) at 333; cf Sorrell v Smith [1925] AC 700 at 716 where Lord Dunedin offered the translation "Reverse our judgment an it please you, but at least say something clear to help in the future." Kirby The differing approaches to the duty of care issue adopted in Perre v Apand Pty Ltd140, a case of economic loss, have been described as an instance of "doctrinal chaos"141. Such differences concerning claims in negligence against public authorities impose special burdens in finding, understanding and applying the law. These burdens are intolerable. This fact is illustrated by the present case. The unfortunate judges of the Federal Court (including Wilcox J, the primary judge142) were obliged to spend many hours (and many pages of their reasons) demonstrating their consideration of the differing approaches adopted in this Court to the questions that had to be solved. Anyone in doubt about these propositions can read the Federal Court's reasons143. Only one unarguable principle emerges from the earlier decisions, reflected in the Federal Court's analysis. It is the self-evident one that any duty of a public authority at common law must be compatible with the legislative powers conferred, and duties imposed, on that authority144. It must conform to the apparent purpose of the legislature relating to the authority carrying out its duties according to statute145. As Lindgren J said in the Federal Court, the search for what the law expects must commence "with a close examination of the relevant legislation"146. As Kiefel J expressed it, "the principal focus must be upon the statutes which confer power on those entities"147. In deciding whether a breach of a statutory duty gives rise to a civil remedy for damages at the suit of an individual, Hayne J has pointed out, correctly in my view, that a court "is not assisted by references to the 'intention' 140 (1999) 198 CLR 180. 141 Witting, "The Three-stage Test Abandoned in Australia – or Not?", (2002) 118 Law Quarterly Review 214 at 214. 142 Ryan v Great Lakes Council (1999) 102 LGERA 123. 143 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 312-321 [6]-[20] per Lee J, 370-391 [221]-[307] per Lindgren J, 453-455 [576]-[582] per Kiefel J. 144 cf Sullivan v Moody (2001) 75 ALJR 1570 at 1576 [36], 1577 [41]; 183 ALR 404 145 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 320-321 [18]-[21] per Lee J, 391 [307] per Lindgren J, 455 [582] per Kiefel J. 146 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 391 [307]. 147 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 455 [582]. Kirby of the legislature"148. Nor is a court entitled simply to give effect to its own ideas of what is desirable, attributing those ideas to the legislature's "intention"149. The same may be accepted as true in relation to the suggestion that a failure by a governmental authority to exercise its powers constituted negligence. However, once a decision-maker passes beyond these elementary principles of agreed doctrine, he or she enters a realm of great uncertainty in which there is no principle that currently commands universal assent, unless it be that such a principle is not presently discoverable150. The facts, legislation and earlier dispositions The facts are set out in the reasons of the other members of this Court151. In broad outline they are simple. Early in 1997, a number of consumers, including Mr Grant Ryan, were diagnosed as suffering from hepatitis A. This is a serious, and potentially fatal, viral infection. Its aetiology is commonly attributed to contact with human faeces. In the case of Mr Ryan and many other persons, the outbreak of this condition was traced to the consumption of oysters harvested from Wallis Lake in New South Wales. The finding about the source of the infection is not disputed; nor that the cause was the pollution of Wallis Lake by human faecal contamination. Mr Ryan, on his own behalf and on behalf of an expanded group of consumers in a like position whom he represented, commenced proceedings in the Federal Court claiming damages. He named three groups of defendants: the State of New South Wales ("the State"), the Great Lakes Council ("the Council"), a local government authority now deriving its existence and general powers from the Local Government Act 1993 (NSW) ("the LGA") and the two Graham Barclay companies responsible for the growing and harvesting of the oysters and for their distribution ("the Barclay companies"). Mr Ryan's proceedings were 148 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 633 [325]. 149 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 633-634 [325]-[326] referring to Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 458-459 and Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 405. 150 cf Perre v Apand Pty Ltd (1999) 198 CLR 180 at 210 [76]; Luntz, "Torts Turnaround Downunder", (2001) 1 Oxford University Commonwealth Law Journal 151 Reasons of Gummow and Hayne JJ at [116]-[127]; reasons of McHugh J at [69]- [77]; reasons of Callinan J at [272]-[277]. Kirby brought as a representative action152. Wallis Lake, where the Barclay companies operated, was within the area committed to the Council under the LGA. Mr Ryan brought a claim against the Barclay company responsible for farming and harvesting the oysters (Graham Barclay Oysters Pty Ltd) ("Barclay Oysters") under the Trade Practices Act 1974 (Cth) ("the TPA"). Although, in the Full Court, there were appeals and cross-appeals in relation to the claims under the TPA, the Full Court confirmed the primary judge's conclusions with respect to the TPA claims. What happened is explained in the joint reasons of Gummow and Hayne JJ ("the joint reasons")153. The judgment against Barclay Oysters under the TPA was reduced fractionally for an error found to have been made in its computation154. However, this is not a matter that has concerned this Court. Mr Ryan brought claims of common law negligence against all the parties. In his claims against the State, Mr Ryan relied on a number of State statutes and regulations affording powers to various officers or agencies of the State to take steps for the control of the production of oysters in State waters, such as Wallis Lake. The relevant provisions of these statutes appear in other reasons155. Likewise, powers specific to the protection of the environment, including the water environment such as Wallis Lake, were conferred by and under State legislation on local government authorities, such as the Council. These provisions too are set out in other reasons156. I will not repeat any of these details. The issue for decision is whether Mr Ryan (and upon proof of damage, the other persons included in his representative action) can recover under the common law of negligence against the State, the Council and the Barclay companies. The appeals to this Court proceeded on the footing that it was not necessary for us to consider separately the various cross-claims that had been brought at trial as between the several defendants. Presumably, these would sort themselves out following the determination of which, if any, of the parties was liable to Mr Ryan on his common law claim. 152 Federal Court of Australia Act 1976 (Cth), Pt IVA: cf Wong v Silkfield Pty Ltd (1999) 199 CLR 255. 153 Joint reasons at [131]. 154 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 330 [72], 452 155 Joint reasons at [166]-[173], [177]-[180]; reasons of Callinan J at [297]-[299]. 156 Joint reasons at [137]-[141]; reasons of Callinan J at [305]-[306]. Kirby The course of the proceedings at trial is described in other reasons157, as are the findings of the primary judge who upheld Mr Ryan's claim in negligence against each of the parties he had sued. There is an even more detailed analysis of the evidence at trial, and of the findings of the primary judge, in the lucid reasons of Lindgren J in the Full Court158. Because of the extended duration of the trial, the mass of complex evidence (including technical and scientific evidence) that the primary judge received and the time that was available to him to consider and absorb all this data, I acknowledge at the outset the caution that must be observed by an appellate court, including this Court, absent established error, before disturbing findings of fact and substituting opinions about the duty of care issue for those which the primary judge adopted159. Such hesitation rests not so much upon the advantages often attributed to trial judges concerning the evaluation of the credibility of witnesses. In this case that factor was of minimal, if any, importance. Instead, it rests upon the hesitation of one, sitting in an appellate court and taken to selective passages of transcript, who lacks the same opportunity that the primary judge had to absorb, reflect upon, digest, consider and evaluate the huge mass of evidentiary information that was adduced before him in what was clearly a major enterprise of litigation160. Given the uncertainties about the legal principle that differentiates the existence of a duty of care from its non-existence; the "multi-factorial" approach now favoured by this Court for determining the existence of a duty of care by reference to "salient features" of the facts161; and the possible return of legal doctrine to a more generally stated question to resolve contested cases of duty162, there are still further reasons for appellate restraint in disturbing the conclusion of the primary judge on the duty issue. Of all people, he or she will normally enjoy 157 Joint reasons at [124]-[126]. 158 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 334-370 [82]- 159 See CDJ v VAJ (1998) 197 CLR 172 at 230-231 [186.1]; cf Liftronic Pty Ltd v Unver (2001) 75 ALJR 867 at 879 [65.1]; 179 ALR 321 at 336. 160 cf State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In liq) (1999) 73 ALJR 306 at 330 [89]-[90]; 160 ALR 588 at 619. 161 cf Witting, "The Three-stage Test Abandoned in Australia – or Not?", (2002) 118 Law Quarterly Review 214 at 217 referring to Perre v Apand Pty Ltd (1999) 198 CLR 180 at 253 [198] per Gummow J. 162 cf Avenhouse v Hornsby Shire Council (1998) 44 NSWLR 1 at 8. Kirby the special advantage of having considered all of the evidence and seen it in its entirety and in context as relevant to that issue. The Full Court divided on the questions presented to it in the appeals. The differently constituted majorities in the Full Court are described in other reasons163. As a result of the majority that determined each matter, Mr Ryan held on to his judgments at common law against the State and the Barclay companies. He lost his claim in negligence against the Council. Now, by special leave, Mr Ryan appeals to this Court to have his judgment against the Council in negligence restored. The State, the Council and the Barclay companies, by their appeals, seek to resist liability in negligence. The issues Four issues arise, expressed in terms of the suggested errors of the Full Court: (1) Are the provisions of the TPA such as, in effect, to exclude the concurrent operation of the common law of negligence and therefore to confine Mr Ryan, as a matter of law, to his entitlements under the TPA against Barclay Oysters, which is uncontested in this Court? If not, in respect of common law negligence, did the State and/or the Council owe a duty of care to consumers such as Mr Ryan with respect to the contamination of the subject oysters (there was no contest that the Barclay companies owed him a duty of care)? If so (and in any event, in the case of the Barclay companies) did Mr Ryan establish a breach of the common law duty of care causing his damage so as to entitle him to recover damages against any or all of the State, the Council and the Barclay companies? In any case, did the primary judge err in law in including in his orders an order, in the form of order 2, declaring that Mr Ryan was entitled to succeed against the parties held to be liable to him? The TPA is not inconsistent with negligence In Crimmins v Stevedoring Industry Finance Committee164 I pointed out that the first question to be decided, in considering whether the provisions of 163 Joint reasons at [131]; reasons of Callinan J at [281]-[283], [285]-[287], [291]- 164 (1999) 200 CLR 1 at 76 [213]. Kirby legislation are compatible with the imposition by the common law of a duty of care on individuals, is the ascertainment of whether the two forms of legal liability can co-exist. This is a problem that can arise in any area of the law, including cases having nothing whatever to do with claims for damages in negligence165. If, for example, it is clear that a legislature, with full constitutional powers to do so, has, in effect, completely and exhaustively covered the applicable subject matter of legal regulation, it will not be competent for a court to add to the legislative design additional and inconsistent legal duties which the court attributes to general principles of the common law. In such a case, the statutory provisions will expel the common law's capacity to so prescribe. During argument of the appeal before this Court, a question was raised as to whether the express provision of the TPA with respect to liability to consumers for defective products (such as the subject oysters) constituted such a coverage of the subject field of law as to prevent development of the common law designed to impose other and different legal obligations on other and different parties, not the subject of such federal regulation. In the past, it has been accepted that, notwithstanding the enactment of provisions in the TPA, important aspects of common law doctrine remain applicable and effective. An example is the interaction of the TPA with the common law rule against the restraint of trade166. In other areas of the law involving the application of the TPA, questions have arisen as to whether the TPA has covered the relevant field of legal regulation, leaving no room for the application in that field of pre-existing rules of the common law or of equity167. The question whether the common law can exist side by side with provisions of the TPA is one that has been noted by this Court in earlier decisions. Analogous issues have also received attention in the context of anti-trust law in the United States of America168. Because the issue of statutory "pre-emption" was not expressly raised by any party as a fundamental ground of objection to Mr Ryan's claims based upon 165 eg The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285. 166 See eg Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 130-131 [1], 140- 141 [29]-[33]; Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 76 ALJR 246 at 263-264 [90]-[91]; 185 ALR 152 at 175-177. 167 cf I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd (2002) 76 ALJR 1461; 192 ALR 1; cf Henville v Walker (2001) 206 CLR 459 and Burke v LFOT Pty Ltd (2002) 76 ALJR 749 at 761 [66], 767-768 [98]-[99]; 187 ALR 612 at 629, 638 and see the joint reasons in this case at [129]-[130]. 168 Joint reasons at [129]. Kirby the common law, it is appropriate to proceed on the assumption that the claims can exist concurrently. I am content to do this. A claimant could not, of course, recover twice but would be obliged to elect before enforcing judgment169. Common law negligence and the duty of care Search for a methodology: Actions at common law for negligence probably still constitute the largest segment of civil litigation before Australian courts. It is therefore natural, and efficient if it be possible, for the law to afford a methodology or approach to such cases where liability is in dispute. Adopting a methodology encourages consistency and the avoidance of legal error. There are certain "standard questions"170 that dissect the composite notion of common law liability in negligence. Relevantly, those questions analyse the concept in terms of: (1) the duty of care; (2) the scope of the duty; (3) the breach; and (4) the causation of damage. Although these issues are commonly considered separately, it has been pointed out many times that "each element can be defined only in terms of the others"171 and, for example, that "the actual nature of the damage suffered is relevant to the existence and extent of any duty to avoid or prevent it"172. These words teach an important lesson. Excessive analysis and undue intellectual subdivision of what is basically a unitary concept can lead a decision-maker into over-sophisticated elaboration of a notion that is, at its heart, a reflection of practicality and common sense. Long ago and far away, Oliver Wendell Holmes Jr said, correctly, that "the general foundation of legal liability in blameworthiness, as determined by the existing average standards of the community, should always be kept in mind"173. Although that was said years before Lord Atkin wrote his speech in Donoghue v Stevenson174, it is reflected in what his Lordship said there175: "The liability for negligence … is no doubt based upon a general public sentiment of moral wrongdoing for which the offender must pay. But acts 169 cf United Australia, Ltd v Barclays Bank, Ltd [1941] AC 1 at 18, 29-30, 43. 170 Romeo v Conservation Commission (NT) (1998) 192 CLR 431 at 475 [115]. 171 John Pfeiffer Pty Ltd v Canny (1981) 148 CLR 218 at 241-242. 172 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 487. 173 Holmes, The Common Law, (1882) at 125. 175 [1932] AC 562 at 580. Kirby or omissions which any moral code would censure cannot in a practical world be treated so as to give a right to every person injured by them to demand relief. In this way rules of law arise which limit the range of complainants and the extent of their remedy." The Caparo three-stage test: Whilst Lord Atkin in Donoghue v Stevenson, building on earlier judicial attempts, propounded a unifying concept for liability in negligence at common law, and specifically for the circumstances giving rise to a legally enforceable duty of care, the defect in his analysis and in its acceptance in later cases as a "general unifying proposition"176 or "statement of principle"177 is the generality, even circularity, of the touchstone for defining the "neighbour" relationship178. The decision in Donoghue v Stevenson inevitably gave rise to attempted refinement, so as to retain the advantages of a unifying concept but to flesh out the detail concerning the manner of its application. A major attempt in that direction was made in England in Anns v Merton London Borough Council179. Subsequently, the two-stage test expressed in that case was expanded by the House of Lords in Caparo Industries Plc v Dickman180. That decision was interpreted as establishing a settled approach. In order to decide whether a legal duty of care existed, the decision-maker was obliged to ask three questions. These were: (1) whether it was reasonably foreseeable to the alleged tortfeasor that the particular conduct or omission would be likely to cause harm to a person such as the claimant; (2) whether between that tortfeasor and the claimant a relationship existed that could be characterised as one of "proximity" or "neighbourhood"; and (3) if so, whether it was fair, just and reasonable that the law should impose a duty of a given scope upon that tortfeasor for the benefit of that person. The Caparo test, sometimes worded in slightly different ways, continues to be applied in England. Variants of it are applied in other Commonwealth countries. As recently as 2001, in a unanimous decision, the Supreme Court of Canada in Cooper v Hobart181 affirmed its adherence to an approach adapted 176 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 541. 177 Dorset Yacht Co Ltd v Home Office [1970] AC 1004 at 1027. 178 Donoghue v Stevenson [1932] AC 562 at 580. 180 [1990] 2 AC 605 at 617-618 per Lord Bridge of Harwich. 181 (2001) 206 DLR (4th) 193. Kirby from Anns via earlier Canadian decisions182. Correctly in my opinion, informed observers have described the Canadian approach as looking "remarkably familiar to the 'classic' incremental approach re-adopted by the House of Lords in cases such as … Caparo"183. Competing Australian approaches: Whilst these developments were occurring in other common law countries, Australian courts, led by this Court, continued with their attempts to propound alternative and different tests for establishing the existence of a duty of care. It was obvious that "foreseeability" alone was insufficient to give rise to the potentially onerous obligations of a legal duty to act. Hence the experiments with other concepts such as "proximity"184 and "reliance" – including the fiction of "general reliance"185. One by one these attempts, by single or multiple verbal concepts, to encapsulate what was intended when the law imposed a duty of care, collapsed under the demonstration of the inadequacy of the propounded words to perform all of the functions expected of them. This was the point reached in this Court following its decision in Hill v Van Erp186. It was at that time that a series of cases came before the Court involving disputed claims of negligence concerning contested assertions of a duty of care and, specifically, claims against statutory authorities that included arguments that such authorities had been negligent in failing to perform their powers as they could (and, as it was asserted, should) have done. Possible resolution: During the past five years, after "foreseeability", "proximity" and "general reliance" were rejected by this Court as concepts sufficient to establish a duty of care, a contest emerged as to what would replace them. As I view the cases, at least two approaches or "methodologies" for discerning the existence of a duty of care emerged in this Court's decisions. They were locked in mortal combat, intellectually speaking. They were: 182 eg City of Kamloops v Nielsen [1984] 2 SCR 2. 183 Neyers, "Distilling Duty: The Supreme Court of Canada Amends Anns", (2002) 118 Law Quarterly Review 221 at 221. 184 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 495-498, 505-507; Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520; Bryan v Maloney (1995) 182 CLR 609. 185 cf Pyrenees Shire Council v Day (1998) 192 CLR 330 at 409 [226]-[227] where the authorities are reviewed. 186 (1997) 188 CLR 159. Kirby The adoption in this country of the three-stage test proposed in England in Caparo. This is the approach that I have consistently adopted, in Pyrenees Shire Council v Day187; Romeo v Conservation Commission (NT)188; Perre v Apand Pty Ltd189; Crimmins v Stevedoring Industry Finance Committee190; Brodie v Singleton Shire Council191, and other cases. The approach has attracted academic favour192; but alas, no judicial support where it mattered; and The adoption of a notion that a range of other factors, sometimes called "salient factors", must be considered in order to determine the existence of a duty of care in a particular case193. A cornucopia of verbal riches has been deployed to identify what, in given proceedings, these "salient features" will be. Some of them appear in the Court's decision in Perre v Apand Pty Ltd194. Many of them are helpfully collected by Callinan J in these appeals ("vulnerability, power, control, generality or particularity of the class, the resources of, and demands upon the authority", the "core, or … non-core" functions or relation to "a matter of policy or executive action" and so on)195. Choosing the new approach: In 2001 in Sullivan v Moody196 an appeal in which I did not participate, five members of this Court, in a unanimous joint opinion, rejected the three-stage test for a duty of care propounded in Caparo. Hints that this outcome was likely had been given in earlier decisions in which individual members of the Court had declined to embrace the Caparo 187 (1998) 192 CLR 330 at 420-427 [246]-[253]. 188 (1998) 192 CLR 431 at 476-477 [117]-[121], 484-485 [138]-[140]. 189 (1999) 198 CLR 180 at 286-291 [289]-[302]. 190 (1999) 200 CLR 1 at 80-86 [223]-[235]. 191 (2001) 206 CLR 512 at 604-605 [241]. 192 Katter, Duty of Care in Australia, (1999) at 173; Witting, "The Three-stage Test Abandoned in Australia – or Not?", (2002) 118 Law Quarterly Review 214. 193 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 253 [198]. 194 (1999) 198 CLR 180. 195 Reasons of Callinan J at [321]. 196 (2001) 75 ALJR 1570; 183 ALR 404. Kirby approach197. It was clear from these earlier decisions, and clearer still from Sullivan198, that the members of this Court were concerned that the frank acknowledgment, in the third stage of the Caparo approach, of the need to consider policy questions, could divert the courts (and decision-makers applying the law) from the clear application of discoverable legal norms into an evaluation of policy that is not properly the business of courts. This concern is a natural one and I understand it. Even in England it has led to the insistence by a number of the Law Lords upon the fact that they are concerned in this regard only with questions of legal principle or prescribed legal policy199. The flaw in the Caparo approach, discerned in the joint reasons in Sullivan, was that the question of liability might be "reduced to a discretionary judgment based upon a sense of what is fair, and just and reasonable as an outcome in the particular case"200. That, it was concluded, would introduce into judicial decision-making an unacceptable unpredictability based on an inappropriate methodology. In the face of this explicit disapproval of the Caparo approach, my duty is to conform to the opinion that the majority of this Court has stated. This is not an area of the law where the interpretation of the Constitution imposes special obligations upon individual Justices to give effect to their opinions about the requirements of the basic law. Nevertheless, I relinquish my adherence to the Caparo approach with reluctance. It is, after all, the methodology adopted in the major common law legal systems with which Australian judges are familiar201. It at least provides a methodology or approach for the determination of a complex question, which a search for the so-called "salient features" of a case does not. Sullivan has been criticised, correctly in my respectful opinion, as involving 197 eg Perre v Apand Pty Ltd (1999) 198 CLR 180 at 193-194 [9] per Gleeson CJ, 210- 212 [77]-[82] per McHugh J, 302 [332]-[334] per Hayne J. 198 (2001) 75 ALJR 1570 at 1578-1579 [49]; 183 ALR 404 at 414-415. 199 McFarlane v Tayside Health Board [2000] 2 AC 59 at 76 per Lord Slynn of Hadley, 95 per Lord Hope of Craighead, 108 per Lord Millett; cf at 100-101 per Lord Clyde. 200 (2001) 75 ALJR 1570 at 1579 [49]; 183 ALR 404 at 415. 201 Although this is disputed in Sullivan by reference to English practice, a glance at the English authorities suggests that it is what the English courts think they are doing: eg X (Minors) v Bedfordshire County Council [1995] 2 AC 633 at 749-751. It is also what scholars describe them as doing: Handford, "When the Telephone Rings: Restating Negligence Liability for Psychiatric Illness", (2001) 23 Sydney Law Review 597 at 618. Kirby "serious error"202. This Court has been taken to task for its repudiation of the idea that "policy" has a dominant role to play in the determination of duty issues. It has been castigated for embracing "a chimera"203. With the utmost respect, I agree with the comment made that in Sullivan this Court204: "has acted without due care in abandoning [the Caparo] test. It is difficult to conceive how duty issues can properly be analysed without resort to each of the three elements in the test. It is clear that courts must look for factors which indicate a minimum ability to avoid the causation of damage and for factors which identify particular persons as being appropriately placed to take care so as to avoid such damage. Foreseeability and proximity, respectively, serve these functions. But the decision whether or not to impose a duty will be, ultimately, a normative one – a question of legal policy, if you like. For this reason, Caparo … is likely to remain an irresistible force in the law of negligence." The resulting test: In somewhat different circumstances, Dixon J stated "for a mind that denies the correctness of reasoning" leading to a court's authority, it is "neither safe nor useful … to proceed to expound its meaning and implications"205. I share that feeling in this case. However, in order to provide some guidance in eliciting the test for establishing the existence of a duty of care, I must do my best in the situation that has now arisen. The development of an approach, hinted at by me in Pyrenees206, may provide an answer. The statements I made there acknowledged that the verbal attempts at identifying particular criteria for distinguishing cases where a duty of care existed (and where it did not) had failed; that candid policy evaluation was uncongenial to Australian judges or considered inappropriate; and that liability should therefore be imposed where it was judged that a reasonable person in the defendant's position could have avoided damage by exercising reasonable care and was in such a relationship to the plaintiff that he or she ought to have acted to 202 Witting, "The Three-stage Test Abandoned in Australia – or Not?", (2002) 118 Law Quarterly Review 214 at 215. 203 Witting, "The Three-stage Test Abandoned in Australia – or Not?", (2002) 118 Law Quarterly Review 214 at 215. 204 Witting, "The Three-stage Test Abandoned in Australia – or Not?", (2002) 118 Law Quarterly Review 214 at 220-221. 205 Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327 at 362-363. 206 (1998) 192 CLR 330 at 416-417 [241]. Kirby do so207. Despite its overt circularity, this formulation might at least offer a return to the substance of Lord Atkin's speech in Donoghue v Stevenson. It might afford a broad formula that poses a factual (or jury) question and avoids the chaos into which other attempted formulae have lately led the law. In similar terms, Priestley JA in Avenhouse v Hornsby Shire Council208 was moved to remark in the New South Wales Court of Appeal: "Courts … decide, in case after case, whether or not a duty of care exists in new situations. Consideration of all the cases of authority to date leads me to the view that the position in Australia … has returned to (or recognised the continuing applicability of) what it was immediately after the decision in Donoghue v Stevenson; that is, that the courts make decisions by first asking the question 'is the relationship between plaintiff and defendant in the instant case so close that a duty arose?' and then answering 'yes' or 'no' in light of the court's own experience-based judgment." The difficulty with this formulation is that the reference in it to the relationship of the parties as one "so close that a duty arose" could quite easily slip back into the discredited notion that "proximity", alone, is a sufficient criterion for the assignment of a legal duty. However, so long as the "closeness" of the relationship contemplated is not confined to physical closeness, I see no great difficulty now (and some advantage) in leaving the features of the "relationship" of "neighbourhood" undefined and simply asking whether, in all the circumstances, it is such as to make it "reasonable to impose upon the one a duty of care to the other"209. This is always the ultimate question that must be answered in all cases of a disputed duty of care in negligence. Somehow in the end accumulated facts must be turned into an "ought". In answering the "ultimate question", in a case involving the alleged neglect of a statutory authority to utilise the statutory powers that it undoubtedly enjoys, it will obviously be essential to analyse those powers carefully. It will be necessary to attempt to derive from the language and structure of the applicable legislation, viewed as a whole, a conclusion as to whether, in the particular case, 207 cf Jaensch v Coffey (1984) 155 CLR 549 at 607; McHugh, "Neighbourhood, Proximity and Reliance", in Finn (ed), Essays on Torts, (1989) 5 at 38; Corbett, "A Reformulation of the Right to Recover Compensation for Medically Related Injuries in the Tort of Negligence", (1997) 19 Sydney Law Review 141 at 148-149. 208 (1998) 44 NSWLR 1 at 8 noted by Gummow J in Perre v Apand Pty Ltd (1999) 198 CLR 180 at 253 [198]. 209 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 416 [241]. Kirby the power conferred on the authority had been converted to the obligations of a duty. The reference to the "particular case" will, in turn, invoke a consideration of the multitude of special features of the relationship between the parties that I take it the multi-factorial or "salient features" approach requires. There is an irony that I would not wish to see overlooked. The course of the legal history followed in Anns and Caparo was actually initiated a few years earlier by the remarks of Lord Denning MR in Dutton v Bognor Regis Urban District Council210. In that case, Lord Denning suggested that the basis of the Council's liability lay in "control". This was a notion said by his Lordship to lie somewhere between "power" and "duty". Although that explanation was rejected by Lord Wilberforce in Anns211, it is to be noticed how the concept of "control" on the part of a statutory authority is now re-emerging as crucial in this area of legal discourse212. Perhaps this is the ultimate lesson for legal theory in the attempted conceptualisation of the law of negligence and the expression of a universal formula for the existence, or absence, of a legal duty of care on the part of one person to another. The search for such a simple formula may indeed be a "will- o'-the wisp"213. It may send those who pursue it around in never-ending circles that ultimately bring the traveller back to the very point at which the journey began. Thus we seem to have returned to the fundamental test for imposing a duty of care, which arguably explains all the attempts made so far. That is, a duty of care will be imposed when it is reasonable in all the circumstances to do so. That is the test that Gummow J and I adopted in our joint reasons in the recent decision in Tame v New South Wales214, decided after Sullivan. Even if the approach of the other members of the Court in that case does not do so explicitly, it is obvious that the "touchstone"215 of reasonableness is fundamental to the way in which they determined the existence or otherwise of a duty of 210 [1972] 1 QB 373 at 391. 211 [1978] AC 728 at 753-754. 212 See, for example, the joint reasons at [152] and the reasons of McHugh J at [90], 213 Caparo Industries Plc v Dickman [1990] 2 AC 605 at 632-633 per Lord Oliver of Aylmerton; cf Perre v Apand Pty Ltd (1999) 198 CLR 180 at 194 [9]. 214 (2002) 76 ALJR 1348 at 1380 [185]; 191 ALR 449 at 493. 215 (2002) 76 ALJR 1348 at 1382 [195], see also at 1409 [331] per Callinan J; 191 ALR 449 at 496, 533. Kirby care216. So after 70 years the judicial wheel has, it seems, come full circle. In this way only is Ajax's prayer answered217. The duty of care: the State and the Council The duty of the State: In the already extended reasons in these appeals, I do not wish to repeat the features of the legislation and factual circumstances that are relevant to the determination of whether the State and the Council owed a duty of care to Mr Ryan. I have already acknowledged the important advantages that the primary judge enjoyed in considering all of the material. So far as the State is concerned, I am conscious of the fact that the primary judge, and the majority in the Full Court, concluded that a proper consideration of the applicable legislation, together with the factual evidence, imposed a duty of care on the State as the lessor of the oyster leases in Wallis Lake and the ultimate manager of fisheries (including oyster farming) in the State. However, alike with other members of this Court218 and for generally similar reasons, I have concluded that the State did not owe a duty of care to the ultimate consumers of oysters, such as Mr Ryan, to exercise its powers by and under legislation, in the ways propounded so as to prevent the contamination of the oysters that ultimately infected Mr Ryan and his co-plaintiffs. Once one approaches the matter in the way now suggested, it is difficult to draw from all of the circumstances a conclusion that the common law imposed legal liability on the State with respect to every person, such as Mr Ryan, for the failure of the State to implement the health and protective measures such as are contained in the applicable legislation. Subject to any relevant substantive exemptions219 or procedural protections220, I agree with the joint reasons that it is not necessary, in order to construct a claim of common law negligence against a governmental entity or public authority in reliance upon that authority's failure to exercise powers 216 Tame v New South Wales (2002) 76 ALJR 1348 at 1355 [35] per Gleeson CJ, 1367 [109] per McHugh J, 1398 [272] per Hayne J, 1409 [331] per Callinan J; 191 ALR 217 Above, these reasons at [211]. 218 Joint reasons at [162]-[186]; reasons of McHugh J at [90]-[95]; cf reasons of 219 As in Field v Nott (1939) 62 CLR 660 at 675; cf Bropho v Western Australia (1990) 171 CLR 1 at 14-15. 220 As in Australian National Airlines Commission v Cassidy (1964) 110 CLR 172. Kirby conferred upon it by statute, for the claimant to prove that the statute evinced a specific purpose that an action at common law was to be included as one of the means of enforcing the statutory purpose. No such rule has hitherto been required by the common law. Where created as a distinct legal entity, a governmental body or public authority, like any other legal or natural person, must comply with the law. This includes the common law of negligence where it remains applicable. When the two substantive claims against the State, into which the case of Mr Ryan ultimately evolved, are examined, namely failure to conduct sanitary surveys and failure to close the Wallis Lake fisheries at the relevant time, the problem of recognising the suggested duty of care on the part of the State is plain. The State Parliament had decided on a system of industry-funded self- regulation or co-regulation. In that context, and in the light of the level of the State's proved knowledge of the risks involved, the postulation of State intervention to conduct sanitary surveys in respect of Wallis Lake appears inconsistent with statute and unreasonable. In the same context, the suggestion that the State owed a duty, enforceable by the tort of negligence, to protect consumers such as Mr Ryan by closing down the Wallis Lake oyster industry for an unspecified time appears completely unreasonable and unrealistic. There was no actual knowledge of the State of a serious risk of infection. There had never been a previous case of infection traced to Wallis Lake oysters, although oysters had been farmed and harvested there for decades. The State and its agencies were not in control of the oysters or their manner of harvesting. In such circumstances, and in the context of the newly introduced form of industry self- regulation, such intervention by the agencies of the State before Mr Ryan became infected would, I believe, have been regarded, rightly, as an over-reaction and unnecessarily intrusive. I agree in this respect with the joint reasons221. Pyrenees is distinguishable because of the absence of notification of a precise risk to a public authority with immediate power and functions to act. Crimmins is distinguishable by the established evidence of long-term awareness in that case of the safety issues and elements of day-to-day control. Brodie is different because of the direct involvement and control of the authority over the relevant subjects of accident prevention. The claim against the State was therefore properly rejected by the Full Court. The duty of the Council: Mr Ryan's ultimate claim against the Council is described in other reasons222. I agree that the Council's powers were not specifically addressed to the protection of oyster consumers. Its measure of 221 Joint reasons at [177]-[186]. 222 Joint reasons at [142]. Kirby control for that purpose was even less relevant than that enjoyed by agencies of the State. The Council had no direct responsibility for the safety of the oysters grown in Wallis Lake or their consumers. For the Council to have exercised its general powers before the infection broke out in order to protect potential oyster consumers such as Mr Ryan, would have been regarded, correctly, as an excess of the Council's mandate and an undue, certainly premature, intrusion into the lawful responsibilities of others. Pyrenees is readily distinguished. There, the powers were specific to the prevention of the spread of fire. They were enlivened by express notice to the local authority, with applicable powers to act, of the risk that eventuated. The Full Court did not err in upholding the appeal by the Council. When the ultimate question is asked, the answer is that it was not reasonable in the circumstances (including when regard is had to the statutory powers that they respectively enjoyed) to conclude that the State and the Council owed a duty to exercise their respective powers for the protection of consumers like Mr Ryan. Neither the State nor the Council owed a duty of care enforceable by an action on the part of a consumer for negligence at common law. No action lay by statute. In the light of these conclusions, it is unnecessary to consider the alternative, and in my view equally powerful, case which the State and the Council presented. This was that, if either of them was held to owe a duty of care to exercise its respective statutory powers, such duty was not breached in the circumstances by the omission to act so as to ensure the safety of Wallis Lake oysters to the consuming public. Breach of the duty of care: the Barclay companies The Barclay companies did not contest that they owed a duty of care to Mr Ryan and his co-plaintiffs. They could hardly do so following Donoghue v Stevenson. However, those companies submitted that no breach of their duty of care had been proved. In judging the issue of breach, it is obviously necessary to relate it to the precise scope of the duty owed. Each of the Barclay companies was in a direct or indirect relationship with the ultimate consumers of the oysters. Those consumers were vulnerable, in the sense that they were dependent on the Barclay companies and would rarely, if ever, conduct tests of their own on the safety of oysters sold to them for consumption. Each Barclay company therefore had a specific duty, apart from statute, to ensure, so far as was reasonably practicable, the safety of the oysters offered to the market. It was not an absolute duty, as an insurer. But it was a high duty because of the serious (even potentially fatal) consequences of infection by needless exposure of the oysters to waterborne viruses, such as hepatitis A. Kirby The issue before this Court is whether error has been shown in the decision of the majority in the Full Court, in refusing to disturb the primary judge's conclusion that a breach of the conceded duty had been proved. Mr Barclay, who spoke for both companies, acknowledged in evidence that he was aware at the relevant time of the existence of potential sources of viral pollution in Wallis Lake. He knew that depuration was inadequate to ensure the removal of such viruses and that flesh testing would not necessarily detect them. The primary judge had accepted that absolute assurance that the oysters were free of the hepatitis A virus was neither possible nor reasonable to expect. It was in these circumstances that the primary judge correctly focussed his attention, for the most part, upon what "significant contribution to risk reduction"223 the Barclay companies could have instituted. With the majority judges in the Full Court224 and the joint reasons in this Court I would reject the hypothesis that the Barclay companies were negligent in failing to provide a warning to consumers of the risk that their oysters might have been contaminated. In particular cases, warnings can and do play an important part in the discharge of a duty of care225. However, the proposition that such a warning should have been provided with the subject oysters is unrealistic. Similarly, I regard it as unrealistic and unreasonable to propound the suggestion that the Barclay companies should have ceased growing and harvesting oysters in Wallis Lake because of the awareness of the possible risks of contamination. The absence of previous cases, over many decades, although not conclusive, suggests that such a response would have been an extreme and unreasonable one which the law of negligence would not require. It is as unrealistic as suggesting that the agencies of the State or the Council should have intervened before Mr Ryan was infected. Nevertheless, in the circumstances of the knowledge that must be attributed to the Barclay companies and the uncontested control which they enjoyed over the entire process of farming, harvesting and distributing the oysters, there remain a number of particular factors that sustain the conclusion of the primary judge that the Barclay companies breached the duty of care that they owed to consumers like Mr Ryan. Knowing of the risk and of the lack of 223 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 221 [352]. 224 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 330 [68] per Lee J; 461 [607]-[608] per Kiefel J; cf at 439 [502]-[503] per Lindgren J. 225 This was examined in Woods v Multi-Sport Holdings Pty Ltd (2002) 76 ALJR 483 at 488-489 [40]-[41], 495 [80]-[81], 504-505 [126]-[132]; 186 ALR 145 at 152- Kirby publicly conducted sanitary surveys in the catchment of Wallis Lake, the Barclay companies could have delayed the supply of oysters for sale after heavy rains had stopped until, in the words of Kiefel J, "a sufficient period had elapsed by which the risk of contamination could be regarded as acceptable or tests sufficiently indicated that to be the case"226. The expert evidence called at trial supported this view. Cessation of harvesting and distribution of oysters during and up to a few days after the heavy rainfall in November 1996 was insufficient. Likewise, 36 hours of depuration of the oysters after that period was insufficient. Of course, there cannot be certainty that a lengthier interruption in the marketing of the oysters would have prevented the viral outbreak that ensued, affecting Mr Ryan and his co-plaintiffs. But in the circumstances of Mr Barclay's knowledge that heavy rain would have increased the viral load in the lake's waters (because of the run-off from adjoining areas carrying pollution with septic tank effluent into the lake's catchment area227) the conclusion was open that insufficient was done by the Barclay companies to protect consumers in the face of specific awareness of a known and potentially serious risk and that, if more had been done, it could have reduced or eliminated that risk. There is no acceptable way to differentiate the common law liability of the respective Barclay companies. Both were therefore properly found liable in common law negligence. There are always pressures upon a commercial enterprise to maintain the production and supply of its product to the market. But where, as here, the product was known to be highly vulnerable, after heavy rains, to contamination with potentially serious consequences, the duty of care owed to consumers, as required by the common law, was a heavy one. I am unpersuaded that error has been shown in the concurrent findings of fact at trial, and in the Full Court, that the Barclay companies were in breach of their common law duty of care to consumers. Especially in the context of the known capacity of heavy rains to carry more effluent than usual into Wallis Lake and the consequent need for delay to permit natural cleansing of the water, the conclusion reached at trial and on appeal is an unsurprising one. Absolute certainty about safety could not be guaranteed. Nor was it required by the common law. But it was open to the primary judge and the Full Court to conclude that the two-day interruption in the harvesting of oysters after the rain stopped228 was insufficient and that it represented a breach of the duty of care that caused, or materially contributed to, the infection suffered by Mr Ryan and other consumers. 226 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 461 [608]. 227 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 323 [30]. 228 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 437 [491]. Kirby In the Full Court, Lindgren J, who dissented, recognised correctly that the issue of breach of a duty of care presented "a question of fact and depends on the circumstances"229. His Honour accepted that, in some cases, the discharge of such a duty "might require and demand that the product be withdrawn from the market so as to prevent it being used"230. The Barclay companies could not themselves carry out public sanitary surveys. They enjoyed no public power to do so. However, to some extent, the withdrawal of the public authorities, specifically the agencies of the State, and the implementation of a system of industry self-regulation or co-regulation, increased the requirement of care and vigilance on the part of oyster farmers and distributors, such as the Barclay companies. They could not look to, and blame, the public authorities for neglect of safety and infection prevention. They were obliged themselves to fill any gap to assure reasonable consumer safety in the consumption of their oysters. As the question of breach was an issue of fact and degree, it is one normally left to the judgment of the trial court. I am not persuaded that error has been shown in the finding of breach made at trial. The judgment in negligence at common law against the Barclay companies should not be disturbed by this Court, substituting itself for the fact finding of the courts below, with all the advantages that the trial court and the Full Court enjoyed. The declaration in respect of Mr Ryan A comment is made in the joint reasons that may be read as critical of the action of the primary judge in providing an order in the form of a declaration of legal right that Mr Ryan was entitled to succeed against named parties "in respect of that portion of his representative claim that alleges negligence, but only on behalf of those group members who proved damage has been suffered by them"231. No objection appears to have been raised by any party at trial, or in the Full Court, to the making, or form, of that order. For all that this Court knows, the order may have followed the preparation of draft minutes of orders submitted by the parties, as is the usual course and the course contemplated by this Court's own orders in disposing of these appeals. 229 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 437 [493]. 230 Graham Barclay Oysters Pty Ltd v Ryan (2000) 102 FCR 307 at 437 [493] quoting Thompson v Johnson and Johnson Pty Ltd [1991] 2 VR 449 at 491. 231 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 231. Kirby The making of the order is not a question raised by the appeals to this Court. I see no reason why this Court should initiate an objection of its own. Because it was not an issue, the point was not the subject of detailed written or oral submissions. At most, the question could have arisen in certain contingencies in settling any final orders of this Court. However, it would not arise in the disposition favoured by the joint reasons in the course of which the criticism is mentioned. I am far from convinced that it was beyond power, or "inappropriate"232, for the primary judge to provide by his order as he did. Under the Federal Court of Australia Act 1976 (Cth), that Court is constituted as a superior court of record and a court of law and equity233. It has national jurisdiction in a large number of matters, some of them with novel public interest features. As this case illustrates, the Federal Court enjoys specific and additional statutory powers to decide representative proceedings234. By s 33Z(1), which relates to the powers of the Federal Court to give judgment in representative proceedings, it is provided that (with emphasis added): "The Court may, in determining a matter in a representative proceeding, do any one or more of the following: determine an issue of law; determine an issue of fact; (c) make a declaration of liability; grant any equitable relief; (e) make an award of damages for group members, sub-group members or individual group members … award damages in an aggregate amount without specifying amounts awarded in respect of individual group members; (g) make such other order as the Court thinks fit." From these provisions, it is clear that the Parliament intended to arm the Federal Court with a wide and flexible armoury of powers, capable of being adapted to the particular needs and novel circumstances of representative proceedings and any matter in such proceedings. Representative proceedings are 232 Joint reasons at [128]. 234 Pt IVA. Kirby not traditional litigation; nor should they be subjected to all of the requirements of such litigation. To confine the grant of such a statutory power is incompatible with the oft-repeated statements in this Court concerning the construction of grants of such powers to superior courts235. In particular, it is inappropriate to impose upon such grants of power strictures derived from earlier times and traditional powers in litigation between individual parties. Where the Federal Court is engaged, as it was here, in novel proceedings, this Court, in my view, should refrain from imposing limitations that are uncalled for236. The only authority cited to support the criticism of the primary judge's order relates to proceedings that have nothing to do with representative proceedings. For my own part, I can see no good reason why, in disposing efficiently of potentially complex representative proceedings, declarations of legal right as to a particular "matter" in the proceedings might not be appropriate at an interlocutory stage in order to clear away a part of the proceedings that has been finally decided237. But whether that is right or wrong, there is no reason why this Court should volunteer its opinion on the subject which, until properly challenged in this Court and necessary for decision, belongs to the procedural powers of the Federal Court as conferred by special statutory provision. Orders In relation to Mr Ryan's appeal (No S259/2001) and the State's appeal (No S261/2001), I agree in the orders proposed by Gummow and Hayne JJ, including the provision of time in which the parties may file draft minutes of consequential orders. The appeal of the Barclay companies (No S258/2001) should be dismissed with costs. 235 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 205 per Gaudron J; Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 at 201 [41.3]; Gerlach v Clifton Bricks Pty Ltd (2002) 76 ALJR 828 at 831 [14], 842-843 [75]-[76]; 188 ALR 353 236 cf Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 367-371 [80]-[89]; cf 237 cf Yuill v Corporate Affairs Commission (NSW) (1990) 20 NSWLR 386 at 389- Callinan CALLINAN J. The principal question which these appeals raise is whether the conferral of various statutory powers to regulate uses of land and waters, creates duties of care, in respect of the non-exercise or breach of which, affected persons may sue: in short, in what circumstances are statutory powers and functions to be regarded as duties? Facts Oysters are cultivated and thrive in Wallis Lake, which lies north of the Hunter River in New South Wales. There, holders of permits cultivate and harvest oysters from aquaculture leases granted by the State of New South Wales ("the State"). When heavy rain falls in the catchment of the lake run-off increases, and with it does the potential for pollution of waters and marine life growing in them, including oysters. These crustaceans, which daily ordinarily ingest and expel large quantities of water are particularly susceptible to contamination by faecal matter which may be carried by run-off into lakes and streams. This is so because changing conditions of temperature and salinity may reduce the creature's capacity to excrete contaminated water. Accordingly, harvesting is customarily suspended during, or for a relatively short period after rain. A question arises in this case as to the appropriate duration of the suspension of harvesting. One consequence of the contamination of oysters is that they may become a source of Hepatitis A which is a highly infectious disease. It can survive for long periods in marine sediments. There is no practicable test to detect its presence in waters, or in the flesh of an oyster. In the catchment, for which the Great Lakes Council ("the Council") was responsible and to its knowledge, there were defective septic tanks and other sources of faecal contamination. Before May 1996 the Council's policy was merely to respond to complaints about inadequate treatment of waste. After that month, the Council discontinued even that policy. This discontinuation was not motivated by an insufficiency of resources. In November 1996, heavy rain fell on the catchment area of the Wallis Lake. Oysters were thereafter harvested from it. In the first three months of 1997 there was a surge in the number of reported Hepatitis A cases in New South Wales. The source of this infection was fairly clearly shown to be oysters taken from Wallis Lake after November 1996. This was the first recorded event of the high incidence of an infection originating in the lake. There had however been a similar occurrence in the Tweed River in New South Wales in 1989 to 1990. A class action was brought in the Federal Court on behalf of Mr Ryan and 184 other people who became ill from Hepatitis A as a result of the consumption of contaminated oysters. They claimed in negligence and for breach of the Trade Practices Act 1974 (Cth) ("the Act"). The action was brought against growers (leaseholders) and suppliers of the oysters, the Council and the State of New South Wales ("the State"). No distinction was drawn in these proceedings Callinan between the growing company and the related distributing company so far as negligence is concerned, and it is therefore convenient to treat them as one on that issue. At first instance the Federal Court (Wilcox J) gave judgment in favour of Mr Ryan, apportioned liability equally among the defendants and made the following orders238: Judgment be entered in favour of the first applicant, Grant Ryan, in respect of his personal claim, in the sum of $30,000 against each of the following respondents: Great Lakes Council; State of New South Wales; Graham Barclay Oysters Pty Ltd; and Graham Barclay Distributors Pty Ltd. It be declared that the first applicant is entitled to succeed against each of the said respondents, in respect of so much of his representative claim as alleges negligence, but only on behalf of those group members who prove damage has been suffered by them. The first applicant's representative claim of breaches by Graham Barclay Oysters Pty Ltd of ss 74B and 74D of the Trade Practices Act 1974 (Cth) be reserved. Otherwise the first applicant's representative claim of breaches of the Trade Practices Act be dismissed. The said respondents pay to the first applicant his costs of the action incurred to date, whether in relation to his personal or representative claim. The burden of orders (1), (2) and (5) be apportioned between the said respondents as follows: (a) Great Lakes Council – one third; State of New South Wales – one third; 238 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 125. Callinan (c) Graham Barclay Oysters Pty Ltd and Graham Barclay Distributors Pty Ltd – together one third; and judgment be entered on the cross-claims accordingly. The matter be listed for further directions at 9.30am on Friday 9 April 1997 or such other time as my Associate may notify the parties." Appeals and cross-appeals were heard by the Full Court of the Federal Court constituted by Lee, Lindgren and Kiefel JJ. In the result, the State, as to one half of the damages, the Council as to one quarter, and Barclay, also as to one quarter, were held to be liable for the loss and damage caused to Mr Ryan by the consumption of the contaminated oysters. The liability of the State Wilcox J summarized the case against the State in this way239: "There are four elements to the applicant's case against the State. First, what counsel describe as their client's 'essential case' is that the State failed to prepare or implement any proper oyster management plan for the lake. This has a number of aspects. Secondly, the applicant claims [the NSW Environment Protection Authority] failed properly: to carry out its functions in relation to land, buildings thereon and discharge therefrom so as to ensure they were not sources of pollution; or appropriately to monitor the water quality of the lake. Thirdly, the applicant says the Health Department failed to properly monitor and regulate the depuration facilities of oyster farmers; 22 out of the 32 facilities being found defective after the HAV outbreak. Fourthly, it is said the Heath Department failed to ensure that appropriate water was used for depuration. The suggestion is that Barclay Oysters' depuration intake pipe was too close to the lake floor, so the depuration water was likely to contain virus-bearing sediment." 239 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 213 [316]-[319]. Callinan It is unnecessary to deal with the third and fourth of the bases because his Honour summarily dismissed them and no complaint is made about that. He dealt in greater detail with the first two elements in this way240: "In developing the first point, counsel for the applicant note that cl 12B of the Fisheries Management (Aquaculture) Regulation 'required' the Minister to 'determine ... a program to assure the quality of shellfish taken from estuarine waters for sale for human consumption'. This was to be the New South Wales shellfish quality assurance program. There was also to be a local program for each estuary. Counsel observe this Regulation took effect on 1 May 1995; but when the Wallis Lake 'rainfall event' occurred 18 months later, there was not yet either a New South Wales program or a Wallis Lake local program; and this notwithstanding the years of work that preceded the making of the Regulation and the development of a Tweed River quality assurance program following the Norwalk virus epidemic in that estuary in September 1996. Counsel point out that State officers had always known depuration was an inadequate protection against viruses. The fact that a Wallis Lake quality assurance program was approved by the Minister on 19 March 1997, only five weeks after the cause of the HAV outbreak was established, demonstrates the delay was not due to policy or budgetary considerations or the need for extensive consultation. Indeed, they say, the relevant policy had been formulated before the Regulation was promulgated: the program had to 'assure' quality. Given the known limitations of depuration, this meant a quality assurance program would need more than depuration; in practical terms, a sanitary survey and water monitoring. As we have seen, the program approved in March 1997 included both these features. Counsel argue this program could, and should, have been approved earlier. Had it been approved and implemented before November 1996, they suggest, the HAV outbreak would not have occurred. In relation to the EPA, counsel say that authority failed properly to regulate pollution from the caravan parks; if it be accepted that pollution from that source significantly contributed to the contamination of Wallis Lake and the HAV outbreak, the State is responsible for EPA's neglect. (ii) Council's and growers' submissions The council, the Barclay companies, Sciacca and Tadeven all support the applicant's claim against the State. Counsel for the council say this is not a case of a government being involved in an undertaking only to the extent of determining general 240 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 213-214 [322]-[325]. Callinan policy and making legislation; through the Department of Fisheries, the State was actively involved in the day to day management of the fishery. The State leased the oyster leases to the growers, stipulated the terms of the aquaculture permits under which they operated and received and retained the rentals they paid. Through the Department of Fisheries, it was represented on the Wallis Lake oyster quality assurance committee which, on 22 February 1993, laid down what the Committee Chairman, Mr Moran, called 'stringent guidelines ... regarding the harvesting of oysters in Wallis Lake'. Officers of the Department of Health supervised the depuration process and, for that purpose, required growers to maintain oyster purification log books. They approved and inspected growers' depuration facilities. However, importantly in counsel's submission, those officers were aware of the limitations of the depuration process; in particular its limited effectiveness against viruses. In his publication 'Purification Technology for New South Wales Oysters', Mr Bird had pointed out purification 'is not a perfect system and will not guarantee the absolute public health safety of raw oysters'; depuration was justified as the 'only alternative' on 'a cost risk basis'. Mr Bird had referred to the need to warn consumers about the risks associated with the consumption of raw seafood: '[e]ducation of consumers [about those risks] should be on-going and effective'. Yet there is no evidence of any warning to oyster consumers, whether generally or in relation to Wallis Lake oysters, still less on-going 'education'; and this despite the fact that the Department knew there was no oyster management plan or water testing program for Wallis Lake." His Honour stated his reasons for holding the State liable as follows241: "The substance of the only case against the State that seems open to the applicant is not unlike that which I have upheld against the council: that the State failed to exercise its management powers in such a way as to minimise the risk of HAV infection of oyster consumers. I accept the submission that neither the Fisheries Management Act [1994 (NSW)] nor the Fisheries Management imposed an obligation on the Minister to approve a quality assurance program within any particular period of time. In any event, I would not be prepared to say a delay of about 18 months, between the making of the Regulation and the Wallis Lake 'rainfall event', was so excessive as to constitute a breach of the Minister's obligation, under cl 12B of the Regulation, to approve a quality assurance program. Section 143 of the Act requires consultation with the industry and the public prior to the making of a 'development plan' – a term that seems to include a local quality assurance program. (Aquaculture) Regulation 241 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 216 [331]. Callinan While the evidence does not suggest frenetic activity in relation to the preparation of the New South Wales program or any local program, I cannot say the pace was unreasonably slow." His Honour continued242: "This is not a case where the alleged negligence of a government lies in failing to enact appropriate legislation. It is not a case, like McMullin v ICI Australia Operations Pty Ltd243, where the claim made against government depended on policy, rather than operational, factors244. What ought to be the content of a New South Wales shellfish quality assurance program was, no doubt, a matter of policy; to be determined at a political level by the responsible Minister. The same comment may be made about any decision by the Minister to approve or not approve a local quality assurance program. Decisions of that nature fall within Gummow J's description 'quasi-legislative activity of public authorities'245. They are not cognisable by the law of negligence. Consequently, it would have been immaterial, if it were the fact, that a New South Wales or local program had been made that did not include a requirement of a sanitary survey. However, it does not follow that the absence of a sanitary survey is irrelevant to the case against the State. Although the State cannot be made liable for failing to make a general prescription for sanitary surveys, it may be made liable for ignoring the necessity of a sanitary survey in relation to its management of a particular oyster growing area. In the present case, the State did more than lay down rules and leave the industry to manage itself. Through various agencies, the State actively involved itself in the management of the Wallis Lake oyster industry. This is understandable. The State had a direct financial interest in the industry, as a lessor of oyster leases, as well as indirect financial interests and (presumably) social and political concerns. The determination by the Fisheries Department of the areas to be leased to oyster growers, and the supervision of their use, were activities within the operational area; as were the depuration activities of the Health Department and any decisions by the Minister as to the closure or non-closure of the fishery. The EPA was involved in inspections and directions in relation to premises in the 242 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 216-218 [333]-[337]. 243 (1997) 72 FCR 1. 244 (1997) 72 FCR 1 at 93-98. 245 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 394 [182]. Callinan Wallis Lake catchment area. Decisions by EPA regarding the necessity to inspect premises for the purpose of determining whether they were sources of water pollution were decisions in the operational area. In sum total, through various agencies, the New South Wales government exercised substantial managerial control over the Wallis Lake oyster industry. It exercised that control by day-to-day operational decisions. It is interesting to note that State functionaries themselves recognised the State's managerial role in relation to oyster fisheries. The advisory committee that prepared the 1992 New South Wales oyster quality assurance program included Mr Bird and an officer of the Department of Fisheries. In discussing the concept of quality assurance, the Committee referred 'powers of enforcement, investigation and if necessary, prosecution' …. In his Second Reading Speech [for the Fisheries Management Act], the Minister for Fisheries spoke about aquaculture permits becoming 'the tool by which the industry is managed' …. Aquaculture permits were to be issued by his Department, managing on behalf of the State. the Health Department's It seems to me the State's involvement in the management of the Wallis Lake oyster fishery was so extensive and significant as to warrant the conclusion that it gave rise to a duty of care to oyster consumers. As with the council, the State was not obliged to undertake a quality assurance role or guarantee the safety of the oysters harvested in the lake. But it was under a duty to take those steps that were reasonably open to it to minimise the risk of consumers contracting a viral infection from the oysters. If the State was under a duty of care, that duty was clearly breached. In the extract from their submission … counsel for the State describe 'the requirements for sanitary surveys' as being 'notorious in the industry'. This description accords with the evidence in this case. There is overwhelming evidence as to the desirability of investigation of possible sources of pollution of a shellfish growing area. Although the Americans and Europeans adopt different methods of monitoring water quality, they agree on the need for regular sanitary surveys. As the witnesses made clear, there ought to be a sanitary survey before an area is used for commercial shellfish production. The stated reason is compelling. Depuration cannot be relied on to remove viruses from shellfish. The only way of safeguarding consumers is to prevent the shellfish becoming contaminated in the first place; that means preventing human faecal contamination of growing area waters. Although it may rarely be possible to eliminate the possibility of water contamination, a thorough initial shoreline survey will go a long way towards this, provided it is supplemented by regular subsequent surveys." Callinan In the Full Court of the Federal Court, Lee J, after summarizing the relevant legislation, expressed his conclusion in the following paragraphs246: "The State was aware that oyster growers may harvest oysters during or after heavy rain and that no controls had been implemented by the State to prevent such action. In 1981 the State had imposed the depuration system on growers after oysters contaminated by the Norwalk virus had harmed the health of approximately 2,000 people in 1978. The State was aware that depuration alone was not a sufficient safeguard against harm resulting from oysters taken from polluted waters. In 1989/1990 1,200 people suffered harm to health after consuming oysters contaminated by Norwalk or Parvo viruses taken from the waters of the Tweed River. The State understood that pollution of the waters of the Tweed River from which the oysters were taken was caused by human sewage originating either from sewerage systems and septic tanks adjacent to the waters or from vessels navigating the waters. The State closed the Tweed River for a period of not less than two months after the outbreak. The foregoing amply supports conclusions that the risk of harm being caused to consumers of oysters taken from the Lake was foreseeable; that the State had knowledge of or ought to have known facts that defined the magnitude of that risk; and that in the absence of action by the State to reduce that risk of harm by steps available to it and reasonable in the circumstances, consumers would be exposed to a greater risk of harm than they would either expect or be able to ascertain. No question of 'core policy' was involved in the foregoing nor any decision by the State not to legislate in respect of the matter. Accordingly, it was open to his Honour to conclude, as he did, that the State was under a duty of care to ensure that powers it had created were exercised to reduce the risk of harm being caused to consumers of oysters and further, to find that the State had breached that duty of care by reason of its failure to manage the waters of the Lake by taking steps to have sanitary surveys of oyster-growing waters undertaken and sources of pollution, or potential pollution, identified and rectified and to implement controls on the harvesting of oysters in conditions known to increase the risk of oyster contamination and, in particular, in failing to close the Lake fishery when those conditions occurred in 1996 and keep the fishery closed until circumstances existed that made it safe for the harvesting of oysters for sale to the public to resume. 246 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 328-329 [60]-[63]. Callinan Further, it was open to his Honour to conclude that on the balance of probabilities it was the failure of the State to act as described and meet the duty of care imposed upon it, that caused Mr Ryan to suffer injury." Kiefel J, who was of the same opinion as Lee J, in affirming the finding of negligence by the primary judge, summarized her opinion in this way247: "The rainfall in the catchment in November 1996 created a known and significant risk of faecal contamination of oysters, carrying with it a risk of viral infection including HAV. The purpose of the powers given to the Minister to prohibit the harvesting of oysters from an area for a specified period clearly had, as its purpose, the protection of members of the public who might be consumers of oysters, where the Minister had reason to be concerned about the fitness of the oysters for human consumption, as he must have had here if properly informed. In my view, the State thereby came under a duty to exercise its powers and prohibit harvesting until the Minister could be assured of the likelihood of the oysters' fitness for consumption. It was reasonably able to do so, as the letter from the NSW Shellfish Quality Assurance Programme affecting a ban, after reports of the diagnosis of HAV in persons, shows. In submissions the State complained that, in some respects, his Honour's findings towards a conclusion of negligence went beyond the case as pleaded by its opponents. The power of the State to effect a closure was, however, squarely raised. There was, in any event, little by way of evidence which could have been addressed to it." Lindgren J was of a different opinion248: "My conclusion that the State was not shown to be liable is, I think, supported by various approaches to the issue. First, I do not think that the array of statutory powers referred to, including the power given by s 189(1) of the Fisheries Management Act to close an oyster fishery where the Minister was satisfied that, relevantly, oysters were, or were likely to be, unfit for human consumption, gave rise to the duty. A duty to exercise that power would, in my view, in accordance with Pyrenees249 and Lutz250, not arise unless, at least, the State knew that the oysters to be harvested 247 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 460 [603]-[604]. 248 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 431-434 [463]-[479]. 249 (1998) 192 CLR 330. 250 Parramatta City Council v Lutz (1988) 12 NSWLR 293. Callinan would be, or would be likely to be, unfit for human consumption. But there had not previously been an outbreak of hepatitis A arising from the consumption of oysters harvested from the Lake. The Lake's growers' practices of depuration and suspension of harvesting for a sufficient period following a 'fresh' had apparently worked in the past. Of course, the possibility of the irresponsible grower was always of general concern, but this did not rise to the required level to impose a duty to exercise statutory powers. Similarly, although, no doubt, instances of faecal contamination over time can be pointed to, the evidence did not establish that the standard of purity of the Lake's water was known to the State to be dangerous by being, for example, significantly lower than that of the water in which oysters were satisfactorily grown and harvested elsewhere in the State or overseas. But let it be assumed that the standard throughout the State was lower than the standard insisted upon in Europe and the United States of America. It may be said that the State government failed in its duty to the public in this respect. That is, it may be said that in the interests of public health the State should have adopted a different régime from that which it did adopt. In particular, it may be said that the State should have adopted a system involving sanitary surveys of the estuaries or flesh testing or both. I do not think, however, that a failure of that kind, which I would characterise as a failure of policy, necessarily indicates breach of an actionable duty of care to those members of the public who consume oysters. A further point in relation to 'fishing closures' under s 189 of the Fisheries Management Act is that the duty proposed would have to be understood as one requiring the Minister to consider the question whether he should be satisfied that the Lake's oysters were or were to be likely to be unfit for human consumption. To my mind this highlights, at least in relation to that particular power, the fact that what is involved is a question of priorities and allocation of resources. I accept the State's submission that, rightly or wrongly, the government of the day took a policy decision in 1994-1995 to the effect that the State would distance itself from the day to day management of the oyster industry in favour of a system of industry-based control to be implemented through two bodies representative of the industry: a State QAP Committee and local estuary-based QAP committees. I do not mean to suggest that by merely recording a policy of 'non-involvement', a public authority can necessarily avoid incurring legal liability. It is hard to accept that the formal adoption of a policy of non-intervention would have saved the Shire in Pyrenees or the Council in Lutz. The nature of their legislative powers and the facts and circumstances of their knowledge of the particular danger and the steps taken in relation to it would have Callinan prevailed to render them liable nonetheless. But in the present case the State did act consistently with its policy. It did not, for example, embark upon testing the growing waters of the Lake's oyster fishery or the flesh of oysters taken from it. There is no scope for saying that partial action gave rise to 'a common law duty to take care which is to be discharged by the continuation or additional exercise of [partially exercised] powers'251. The State's policy is to be contrasted with the learned primary judge's finding that the State 'managed' the oyster fishery in the Lake. A question arises as to the meaning of the notion of 'management' in the present context. The State had ultimate control but this is not management of a kind that would generate a duty of care. Moreover, I do not think the State's roles of licensing and inspecting depuration facilities, inspecting premises from an environmental viewpoint through the EPA, granting oyster leases, issuing aquaculture permits, participating in the Lake's Oyster Quality Assurance Committee as from 14 December 1992, or providing the State's employee, Dr Kerry Jackson, to coordinate the State QAP as from 2 September 1996, constituted 'management' of the day to day oyster and harvesting activity of a kind that would give rise to a duty of care. I do not accept Mr Ryan's submission that his Honour should have found that the State owed him a duty to ensure that the local QAP was in place by November 1996. His Honour felt unable to reach that conclusion on the evidence and I do not think it is shown that this was a finding of fact at which he was not entitled to arrive. Mr Ryan submits that control of the fishery was 'ceded' to the State. But in one sense, so is virtually every aspect of the control of the production of food. The individual consumer cannot protect himself or herself and so is 'vulnerable' and hopes that someone will have taken steps to minimise the risk to his or her health. But is it to be said that in every case of 'food poisoning', the State must be liable for having failed to exercise its statutory powers? It seems to me that as a matter of policy the law refrains from imposing the kind of duty on which Mr Ryan is obliged to rely. I would not conclude, so far as it may remain relevant, that Mr Ryan 'specifically relied on' the State to protect him. There was no dealing between the State and Mr Ryan before he consumed the oysters. As noted earlier, the doctrine of 'general reliance' no longer enjoys support 251 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 391-392 [177] per Callinan in the High Court as a touchstone of the existence of a duty of care of a public authority to exercise statutory powers. In my view, on the evidence the State did not 'manage' the shellfish industry in the Lake in any way that might have given rise to a duty of care in favour of Mr Ryan. Breach of duty If I had thought that the State owed a duty of care to Mr Ryan, I would have held that the State was not shown to have breached it. The case would have called for consideration of what steps the State, acting reasonably, would have taken. This would have immediately raised considerations of the kind referred to by Mason J in Wyong Shire Council v Shirt252 … as discussed in the context of breach in relation to the Council's appeal. I have referred to some of these considerations as relevant to the State in the context of my treatment of the duty issue above. In the case of the State, questions of the magnitude of the risk, the fact that the Lake's oysters had not previously caused a problem and the cost to the State of taking (and maintaining) the course of action described by his Honour in all of the State's oyster-growing estuaries would have arisen. Causation For the reasons I gave for allowing the Council's appeal, it is not shown that the course of action that his Honour decided was required (the taking of the steps that were reasonably open to minimise faecal contamination of the Lake) would have prevented Mr Ryan from A suggested alternative ground of the State's liability Because I have held that the State did not owe Mr Ryan a duty of care at all, I need not consider whether it was required to exercise its power to close the fishery (exercise of that power would have prevented Mr Ryan from contracting hepatitis A). But I would not have been prepared to find on the hearing of this appeal that it was required to do so. The issue is one that would call for the making of findings by the primary judge, particularly as to the reasonableness of the State's being required to monitor pollution at the shoreline of all its oyster-growing estuaries and closing oyster-growing businesses from time to time, in the light of the magnitude of the risk in question. 252 (1980) 146 CLR 40 at 47-48. Callinan Mr Ryan's notice of contention This leaves to be dealt with Mr Ryan's notice of contention insofar as it relates to the State's appeal. I gave reasons for not accepting Mr Ryan's contention relating to causation based upon a duty to minimise faecal contamination of the Lake when dealing with the Council's appeal. Another contention relating to the State is that his Honour should have found the State owed to Mr Ryan a duty of care to implement a specific local QAP which required: a comprehensive and competent sanitary survey of the Lake's oyster fishery 'and surrounding area'; and in the absence of such a survey, a closure of the fishery, particularly after a heavy rainfall episode, until such a survey was carried out and it was then safe to re-open the fishery. I would not accept the contention. For the reasons given above, it was not incumbent upon the State to exercise its powers at all, in my view. The remaining contention relating to the State is that his Honour should have found that the State, through the EPA, breached a pleaded duty to ensure that, relevantly, 'the relevant caravan parks' did not pollute the Lake. His Honour rejected the submission by reference to Bendix253, that is, because although the escape of sewage effluent from caravan parks increased the risk, this was not enough: it would have to be shown that it materially contributed to the actual suffering of the illness by Mr Ryan. With respect, I agree with his Honour." The liability of the supplier Wilcox J held the associated Barclay companies as grower and supplier to be liable. He said254: "Notwithstanding the attention given to the matter at the hearing, I am not persuaded there was a causal connection between the HAV the harvesting undertaken by Barclay Oysters on epidemic and 253 Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307. 254 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 220-222 [349]-[355]. Callinan 23 November 1996 or on 27 November and the immediately succeeding days. The cause of the epidemic was the widespread HAV contamination of the lake. I see no reason to believe the date of harvesting was a critical factor in relation to any particular consumer contracting the disease. I accept Mr Barclay's evidence that, at all times, he endeavoured to implement the requirements set out in Mr Bird's publication. There is no evidence of any deficiency in Barclay Oysters' depuration plant, in design, construction or maintenance, or in relation to its manner of operation. However, this does not mean the Barclay companies must be exonerated of negligence. The existence of a duty of care is conceded; the only issues relate to breach of duty and damage. As to breach, it seems to me the applicant is able to establish his case out of matters conceded by Mr Barclay himself. Mr Barclay agreed he was at all times aware: of the existence of potential sources of viral pollution of the lake; that depuration was not adequate to remove viruses; and that E-coli oyster meat testing would not necessarily show viruses. In this situation, it seems to me apparent that a prudent oyster grower needed to do more than depurate and rely on E-coli flesh tests; ex hypothesi those steps would be an insufficient protection against the known danger. I do not agree with the State's submission that Barclay Oysters' omission lay in its failures further to defer harvesting after the November rain and to carry out PCR flesh testing and faecal coliform water testing. Useful though these measures might have been, they would not necessarily have protected consumers of the oysters. As already explained, viruses could have remained in the water, or in unharvested oysters, for many weeks after cessation of the rain, and after faecal coliform levels had dropped back to normal limits; and their existence would not necessarily have been revealed by PCR testing. The only real protection to consumers was to prevent viral contamination in the first place. As is the case with the council and the State, Barclay Oysters was not obliged to ensure the absence of viruses, but it was obliged to take the steps reasonably open to it to obtain a virus-free growing environment and, if this was impossible, to refrain from selling oysters for human consumption, except perhaps with a warning about the risk in eating them. Counsel for the Barclay companies cross-examined the witnesses who urged the need for a sanitary survey by obtaining their agreement that they would not ordinarily expect this to be undertaken by a single Callinan producer. Counsel seemed to assume that this agreement absolved their clients from any responsibility for the absence of a sanitary survey. I do not see the matter that way. The Barclay companies could have made a significant contribution to risk reduction by having a few men walk that part of the foreshores of the lake, rivers and islands that is publicly accessible – and that is most of it – and list all items of apparent concern. However, a satisfactory sanitary survey required access to all premises and possession of enforcement powers. Governmental or local governmental involvement was essential. This does not let the Barclay companies off the hook; neither they nor any of the committees with which they were associated attempted to procure governmental or local governmental involvement. The evidence does not reveal any approach to the council or a State agency for the making of a sanitary survey, with or without support (manpower or financial) from the local industry. The Barclay companies (and, apparently, the other local oyster producers) were as oblivious to the need for a sanitary survey as was the State. Given that they actually produced the product that put consumers at risk, they cannot escape some responsibility for the lack of a sanitary survey. If the oyster producers had endeavoured, and failed, to persuade the council or the State to undertake a proper sanitary survey, they would have needed to consider other options. One option – presumably expensive – might have been to relay the oysters in other waters for a period before sale. There may have been other possibilities. It is not necessary to go into them. It is enough to say it was not sufficient for the Barclay companies (or any other producer) to shrug off their knowledge of the possible pollution of the lake by saying this was someone else's responsibility. In my opinion, in selling without warning oysters grown in waters known to be subject to possible undetectable viral contamination, both Barclay companies breached their duty of care to ultimate consumers of the oysters. Because it is apparent that the viral infection sustained by Mr Ryan, and the group members who became ill after consuming Barclay oysters, stemmed from the contamination of the lake, there is a clear causal connection between the breach and the damage. It does not follow that all distributors of Wallis Lake oysters are liable in negligence to HAV infected consumers of their oysters. Barclay Distributors is in the unusual position of being controlled by a person (Mr Graham Barclay) who is also the controller of a grower company. Barclay Distributors is therefore fixed with an unusual degree of knowledge about the circumstances of production of the oysters it distributes. Its knowledge may exceed that of distributors based elsewhere; and, even more so, people (perhaps including restaurateurs) who purchase oysters Callinan for commercial purposes without knowledge of the circumstances, even location, of their production." Lee J and Kiefel J in the Full Court agreed with the conclusion of the primary judge that the Barclay companies were negligent. Lindgren J was of a different opinion. Kiefel J, with whom Lee J generally agreed on the issue of Barclay's negligence said this255: "His Honour the primary judge referred to the evidence of Mr Barclay, that he was aware of the existence of potential sources of viral pollution of the lake; that depuration was not adequate to remove viruses; and that flesh testing would not necessarily detect viruses. His Honour referred to what the Barclays companies should have done and focussed, principally, upon the 'significant contribution to risk reduction' it could have made. For the reasons I have given with respect to steps which his Honour found might have been undertaken by others, but which were not likely to amount to prevention or detection, I am respectfully unable to agree that this was the proper measure of the duty owed by the Barclays companies. His Honour however also identified, as an alternative to attempts to prevent contamination, and in the event that it proved impossible to obtain a virus-free growing environment, the requirement that the Barclays companies refrain from selling oysters for human consumption, except perhaps with a warning about the risk in eating them. Ultimately, it was the absence of warning when selling which his Honour held to constitute negligence. It follows from the view I have expressed above concerning the State's duty, and the basis for it, that even if the harvesting of oysters had not been prohibited in the circumstances prevailing, as it should have been, the Barclays companies should not have supplied oysters for sale until a sufficient period had elapsed by which the risk of contamination could be regarded as acceptable or tests sufficiently indicated that to be the case. That was the effect of the expert evidence. A cessation of harvesting and supply during and up to a few days after the rainfall could never suffice; nor could 36 hours of depuration thereafter. His Honour determined liability, ultimately, on the basis that a warning was not given of the danger which remained in consuming oysters from the area. The requirement of a warning would of course render nugatory the supply of oysters for sale." 255 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 461 [607]-[608]. Callinan Lindgren J summarized his dissenting opinion in this way256: "It seems to me that on the evidence of the lack of any previous outbreak of health problems arising from the consumption of oysters grown in the Lake and the lack of knowledge otherwise of Mr Barclay of the existence of an actual problem as distinct from potential sources of faecal contamination of the Lake, the Barclay companies' duty of care did not reasonably require them either to take the course that his Honour outlined or to suffer a closure of their business until somehow they could be completely assured that they were putting into the market a product that was free of defects." Liability of the Council In dealing with the position of the Council, the local authority in whose jurisdiction the Lake lay, Wilcox J first summarized its powers and duties. Not surprisingly, these included extensive powers to supervise and manage the treatment of effluent, and to insist upon the abatement of sources of it. Next, his Honour referred to the Council's awareness of problems of seepage from septic tanks and the need to take steps to deal with them. His Honour's reasons for holding the Council liable in negligence are to be found in the following passage257: "The applicant need not prove the particular source or sources of the HAV contamination. The HAV oyster contamination came from human faecal pollution of the lake. The expert evidence establishes the probability that this pollution came from multiple points, predominantly land-based. All of those points were subject to council control. The pollution occurred because the council did not exercise its powers in a responsible manner; although it knew there was a problem, the council allowed the continuation of pollution from those points. It does not matter that it is impossible to say which of those pollution points introduced the HAV contaminated faeces into the lake. It is not necessary to determine whether the council owed a duty of care to the oyster growers. It was certainly not obliged to undertake general quality control of the oysters harvested from the lake. However, if the content of the supposed duty of care is defined merely as being an obligation to exercise the Council's statutory powers in such a manner as to minimise pollution of the lake, I see no reason for rejecting such a duty; 256 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 439 [503]. 257 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 209-210 [297]-[301]. Callinan like Mr and Mrs Day in Pyrenees258, the growers were entitled to expect the council to exercise its powers in such a manner as to avoid a nuisance their property (the oysters) and cause them that would damage consequential loss. If there was a duty of care to oyster consumers, as I hold, there can be little doubt it was breached. Prior to the HAV epidemic, the council took no steps to identify point pollution sources. Although the 1989-1993 water tests showed high faecal coliform levels after rain, including in stormwater drains, council took no steps to ascertain – for example by E-coli tests of that water – whether human sewage effluent contributed to those high levels. Given that the drains served the towns of Forster and Tuncurry, this was at least a distinct possibility. If tests had revealed significant E-coli levels, this would have indicated a problem of discharge from sewerage pumping stations or septic tanks. Armed with that information, the council could have taken samples from various locations along the stormwater drains to trace the source of the pollution and then taken whatever steps were necessary to ensure the problem was fixed. All this would have been no more than good housekeeping for a local government authority that took its responsibilities seriously. It is the Shoalhaven Council approach, according to Mr Papworth. However, it is not necessary for the applicant to depend upon council's failure to trace effluent emissions. The evidence establishes council was aware of serious sewage effluent problems in the villages (Nabiac and Cooloongolook) draining to the lake's tributaries. Anybody who gave the matter thought would have realised there was a possibility that viruses in that effluent might reach the lake and contaminate the oysters. That suspicion would have been heightened (at least in relation to Nabiac) if the person read the Laxton report, a copy of which was in council's possession. Closer to home, numerous sites were contributors, or potential contributors, to estuarine pollution; for example, the two caravan parks, the Little Street public toilet, the toilet pits on the islands and the houseboats on the lake. If council did not know about these problems, that was because it chose not to look. Until May 1996, council's policy was merely to respond to complaints; and this despite the fact that council's officers knew the complaints they received represented only the tip of the iceberg, that pollution from septic tanks was a widespread problem. The responsible reaction to such knowledge would have been to institute a sanitary survey, especially of premises that drained to estuarine waters. Astonishingly, in May 1996 council's officers took the opposite 258 (1998) 192 CLR 330. Callinan course, determining not even to respond to complaints. It may not be coincidence that the HAV outbreak occurred shortly after the first heavy rain of the next oyster season." Later, his Honour said this259: "Counsel for the Council submit the establishment in 1993 of the Wallis Lake oyster farmers quality assurance committee brought to an end any responsibility council might have had for ensuring the estuarine water quality was satisfactory for the growing of oysters; the oyster farmers took over responsibility for water quality, in conjunction with relevant State officers. One difficulty about this submission is that council was a major participant in the committee; Mr Chadban and Mr Powell were members and Mr Chadban acted as Secretary. The membership of the committee reflected the fact that the oyster growers, the council and various State agencies all saw themselves as having an interest in the safety of Wallis Lake oysters. The committee's deliberations show its members recognised this involved attention to water quality." His Honour continued260: "I find the council breached its duty of care to the applicant and group members. As it is clear the breach occasioned damage to the applicant, he is entitled to recover against the council in respect of his personal claim. He is also entitled to recover against the council in relation to his representative claim, subject to proof of the damage suffered by group members." The Full Court upheld the Council's appeal. Kiefel J said this261: "It is clear from his Honour's reasons that it was considered that there was much that the Council could have done. So much can, I think be accepted. That does not however, in my respectful view, answer the question whether it came under a duty to take action." Her Honour continued262: 259 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 211 [308]-[309]. 260 Ryan v Great Lakes Council (1999) 102 LGERA 123 at 212-213 [315]. 261 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 457 [590]. 262 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 457-458 [593]. Callinan "A conclusion that the Council was under an obligation to use the powers it had to protect oyster consumers from injury cannot, in my view, be reached without ascertaining the nature of those statutory powers and what they were directed to. It will be recalled that in Pyrenees263 there was coincidence between the action which was necessary to prevent the fire, the powers given to the Council and the purpose for which they were given. In my view the provisions here referable to water pollution and public health, whilst no doubt sufficient to authorise the undertaking of surveys or water testing, were not such as to place the Council in a position where it was obliged to prevent the risk of injury, assuming for present purposes that it could have done so effectively. His Honour set out the relevant statutory provisions. The Local Government Act 1993 (NSW), pursuant to which the Council obtained its wider powers, had amongst its stated purposes the provision of the legal framework for an effective and environmentally responsible local government. More specifically, the Council had the power to approve the carrying out of 'sewerage work', which was defined to include works relating to septic tanks or effluent systems and Council sewers. In that connexion, it was to have regard to 'the protection and promotion of public health'. It had power to require compliance to 'relevant standards' relating to sewerage systems and to require that owners or occupiers of premises (a term widely defined) do or refrain from doing, specified things 'to prevent environmental damage' or to cease an activity which was a threat to public health. It had the power to abate a nuisance, or to require that it be abated. It had powers of entry into premises in aid of its other powers. It had a general power to remove, disperse, destroy or mitigate the pollution of water, at the direction of the Environmental Protection Authority. There was, however, no statutory provision which had as its apparent purpose the prevention of contamination of oysters, the water in which they were grown, or the protection of consumers, and which required the Council to use one or more of its powers in a given circumstance to achieve those ends. The powers given to the Council, referred to above, which allowed it to undertake some action and which might have had some effect upon the risk in question may be contrasted with those in Pyrenees, by which the Council could be said to have been obliged to act so as to ensure the defective fireplace was remedied or not used. It may also be observed that the Council's argument, concerning the lack of definition of the content of any alleged duty, reflects the lack of an obligation directed to a specific end." 263 (1998) 192 CLR 330. Then her Honour said264: Callinan "Had the Council undertaken the management strategies referred to by his Honour it would follow from the evidence that the best outcome would have been a reduction of the risk. A finding that it would actually 'minimise' is not, with respect, apparent and in any event the Council could not have acted such as to prevent the viral contamination and the injury in question. In order to involve liability, action or inaction must be sufficiently important and closely connected with the incident in question so as to make it reasonable, on a broad commonsense view, to regard its author as responsible for it in law: Fitzgerald v Penn265. As to the possibility that any inaction on the Council's part could be said to have materially increased the risk of injury, the Council referred to the decision of Mason P in Bendix266, where his Honour held that the law did not equate that situation with one where it could be said the defendant materially contributed to it (as to which see March v E & MH Stramare Pty Ltd267). It does not seem to me that the Council's position is to be determined by such considerations, for in my view any general omission on its part could only be said to have left oyster consumers exposed to the same risk. The only relevant increase in risk arose not from its conduct, but from the effect of heavy rainfall. Tested another way, one could not say, on balance, that the performance of the duty identified would have averted the harm"268. After discussing the cases, Lindgren J stated his conclusion in this way269: "In my respectful opinion, it would be not an incremental development but a major change of direction in the law if we were to hold that the Council owed an actionable duty of care to the oyster consuming public in the circumstances of this case. 264 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 458-459 [595]-[596]. 265 (1954) 91 CLR 268 at 275-276. 266 Bendix Mintex Pty Ltd v Barnes (1997) 42 NSWLR 307. 267 (1991) 171 CLR 506 at 532. 268 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 467 per Mason J. 269 Graham Barclay Oysters v Ryan (2000) 102 FCR 307 at 414 [376]-[377]. Callinan The Council would be under a duty to exercise each of its powers where injury to members of the public was foreseeable if it did not do so, even if, as here, the exercise of the power could do no more than reduce the risk of the injury. The Council would have to take all steps reasonably available to it in respect of all of the powers or be subject to the risk of indeterminate and potentially huge liabilities, the extent of which was beyond its control." Lee J agreed with the primary judge. His Honour was of the opinion that the proper application of the reasoning of this Court in Crimmins v Stevedoring Industry Finance Committee270 dictated that result. The State's powers and functions Because the primary judge's finding of negligence against the State was made on the basis that the State was "the ultimate manager of the fishery"271, it is necessary to consider the statutory powers and functions of the agencies of the State to which the parties referred. In the Fisheries Management Act the statutory definition of "fish" includes "oysters" (s 5). Commercial oyster growers were required to hold an aquaculture permit (s 144). The responsibility for the grant of oyster leases and the issue of aquaculture permits was the Minister's (s 146). He or she had power to determine commercial aquaculture industry development plans (ss 58 and 143) as well as a general power to close any fishery, and a specific power to prohibit harvesting if satisfied that fish (including oysters) were, or were likely to be, unfit for human consumption (s 189). On 1 May 1995 the Fisheries Management (Aquaculture) Regulation (NSW) came into force. It required the Minister to determine a commercial aquaculture industry development plan to assure the quality of shellfish taken for human consumption (reg 12B). It also required the Minister to appoint State and local Shellfish Quality Assurance Committees (reg 12C), the latter having responsibility for the establishment and administration of local shellfish quality assurance programs in designated growing areas (reg 12E). By November 1996, the State Committee had been appointed but the New South Wales Shellfish Quality Assurance program had not been developed. In 270 (1999) 200 CLR 1. 271 (1999) 102 LGERA 123 at 219 [340]. Callinan December 1992 however, local oyster growers established a voluntary local shellfish quality assurance committee. The State's submissions The principal submission of the State was that changes to the legislation and the regulations in 1994 and 1995 indicated considered rejection of any idea that the State would assume responsibility for quality control management in any local oyster growing area: that this was not only a policy decision, it was also a disavowal of any active day-to-day role in any local growing area. The introduction of these regulations, the State submits, brought to fruition a long discussed regime for quality assurance to be funded and administered by the industry itself. It follows, the State submits, that the regulatory changes, because they rejected any requirement for classification of oyster growing areas, and because they did not require mandatory sanitary surveys, must be taken to have recognized the existence of foreseeable risks in every oyster growing area. Moreover, they must be taken to have recognised the likely continuation of those risks, at least until the establishment of a quality assurance program. Those matters, the State contended, are incompatible with the existence of a duty of care to consumers of oysters. The State's regulatory powers were not therefore powers of day-to-day control. They were regulatory powers, the exercise of which depended on the evaluation of competing economic and community interests inconsistent with the existence of a common law duty of care requiring their exercise272. The Council's powers and functions Mr Ryan drew attention to several of the provisions of the Local Government Act 1993 (NSW) ("the Local Act") as manifesting in sum a statutory obligation on the part of the Council to take steps for the prevention of contamination of the lake in default of which an infected consumer such as he might sue. First, reference was made to stated purposes of the Act: "to provide the legal framework for an effective, efficient, environmentally responsible … system of local government in New South Wales" (s 7(a)); "to give councils … a role in the management … of the resources of their areas" (s 7(d)); and, "to require councils … to have regard to the principles of ecologically sustainable development in carrying out their responsibilities" (s 7(e)). Mr Ryan also pointed 272 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 441 per Gibbs CJ, 457, 459, 469 per Mason J. Callinan out that s 68 of the Local Act provided that certain activities, including the disposal and management of waste within the area of the local authority, could only be undertaken with the prior approval of the Council. Reference was also made to s 125 which empowered the Council to abate a nuisance, and s 191 which authorized the Council, by its employees or others, to enter premises in order to carry out a function, which would include the abatement of an effluent nuisance. Similarly, s 192 made provision for inspections and investigations by the Council and the recovery of the cost thereof pursuant to s 197. Other sections and regulations of the Act, such as s 678 and s 697, and reg 45, were also the subject of submissions because they enlarged the powers of the Council to take steps for the abatement of nuisances, and the protection of public health. Mr Ryan also drew the attention of the Court to the Clean Waters Act 1970 (NSW). Section 27 of that Act conferred upon the Council power to do such things, and to take such action as might be necessary to remove, disperse, destroy, or mitigate pollution, and to enter and inspect places and premises at the expense of a person responsible at that person's expense. Mr Ryan's submission Mr Ryan's submission is that there is no doubt that the Council did have statutory power to protect him and other consumers of oysters: the fact that the Council's powers are not expressed to be duties should not be fatal to his claim. As to the nature and purpose of the powers of the Council, he draws attention to s 7 of the Local Act, from which the true legislative purposes may be inferred. These, together with the powers granted by the interconnected provisions of that Act and other legislation, amount not only to a formidable array of power, but also a duty to exercise that power. So to hold would not, it is argued, be to produce an incompatibility with other functions and powers of the Council: nor would recognition of a duty of care in these circumstances distort the law or impinge upon the exercise of other statutory powers. Mr Ryan further argues that the class to which he belongs is not an indeterminate one, that its members can be clearly identified, and that it is a class for whose benefit it should be accepted the Council would, and should exercise its powers. The exercise of the relevant powers would not involve the taking of legislative, or quasi-legislative steps, and would not relate to a "core-policy"273 function. Mr Ryan made the further point that the injury that he suffered was physical injury, and not pure economic loss, towards the former of which the law has more consistently been tender than the latter. The Council had a large measure of control over the situation, that is to say the state of sanitary containment in the area of the 273 See Mason J in Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 469. See also McHugh J in Pyrenees Shire Council v Day (1998) 192 CLR 330 at 393 Callinan Council. Consumers were particularly vulnerable and had little or no means of self-protection against contaminated oysters. Mr Ryan's submission which I have summarized adopts much of the language and some of the tests which have been formulated by various justices of this Court in other cases. However, as will also appear, the tests have not commanded unanimous support, and the situations in which their application has been considered may all be distinguished from one another. The tests for liability of statutory authorities As long ago as 1880 Earl Cairns LC said this:274 "[t]here may be something in the nature of the thing empowered to be done, something in the object for which it is to be done, something in the conditions under which it is to be done, something in the title of the person or persons for whose benefit the power is to be exercised, which may couple the power with a duty, and make it the duty of the person in whom the power is reposed, to exercise that power when called upon to do It may, with respect, be doubted whether it is possible to make a more accurate or better statement in relation to the powers and obligations of a statutory authority. Another way of expressing his Lordship's view is to say that there has to be something either unique (as it was in Crimmins275 case) or special about the role, or involvement of the authority, or the relationship between it and the affected person, or special about the non-exercise of the power such as marked irrationality in abstention from employing it276, before liability may be sheeted home to the former277. It is of course understandable that courts should strive to find and state a principle capable of universal application, but so far such a principle has remained just as elusive as has any alternative formula to "beyond 274 Julius v Lord Bishop of Oxford (1880) 5 App Cas 214 at 222-223. 275 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1. 276 See Lord Hoffmann in Stovin v Wise [1996] AC 923 at 954. 277 Compare the need to find a special relationship discussed in Annetts v Australian Stations Pty Ltd (2002) 76 ALJR 1348 at 1407 [324]; 191 ALR 449 at 531 per Callinan J citing Barwick CJ in Mutual Life & Citizens' Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 569-570 and Jaensch v Coffey (1984) 155 CLR 549 at 583 Callinan reasonable doubt" in criminal cases, although from time to time various opinions have held sway. The test propounded by Mason J in Sutherland Shire Council v Heyman278, of general reliance which I would read to be little different from that stated by Deane J in that case, enjoyed a considerable amount of support. It was adopted and applied by McHugh JA in the Court of Appeal in New South Wales in Lutz,279 and restated by his Honour in the High Court in Pyrenees280 albeit with some qualifications. But Pyrenees also sounded its demise on its express disapproval by three of the Justices, Brennan CJ281, Gummow282 and Kirby JJ283. The Chief Justice in that case was influenced by the speech of Lord Hoffmann (with whom Lord Goff of Chieveley and Lord Jauncey of Tullichettle agreed) in Stovin v Wise284, which had been decided shortly before the Court was called upon to reconsider what had been said by Mason J in Sutherland. Lord Hoffmann said285: "In the case of a mere statutory power, there is the further point that the legislature has chosen to confer a discretion rather than create a duty. Of course there may be cases in which Parliament has chosen to confer a power because the subject matter did not permit a duty to be stated with sufficient precision. It may nevertheless have contemplated that in circumstances in which it would be irrational not to exercise the power, a person who suffered loss because it had not been exercised, or not properly exercised, would be entitled to compensation. I therefore do not say that a statutory 'may' can never give rise to a common law duty of care. I prefer to leave open the question of whether the Anns case286 was 278 (1985) 157 CLR 424 at 461-464. 279 Parramatta City Council v Lutz (1988) 12 NSWLR 293 at 328-331. 280 Pyrenees Shire Council v Day (1998) 192 CLR 330 at 369-371 [103]-[110]. 281 (1998) 192 CLR 330 at 344 [20]. 282 Gummow J compared it with the test of legitimate expectation but criticised it as a legal fiction, anachronistic on that account, and therefore discordant with a modern preference for substance. So far, however, "legitimate expectation" appears to have survived as a test: see Sanders v Snell (1998) 196 CLR 329 at 347-348 [45]. 283 (1998) 192 CLR 330 at 411 [231]. 285 Stovin v Wise [1996] AC 923 at 953, cited in Pyrenees Shire Council v Day (1998) 192 CLR 330 at 345 [21] per Brennan CJ. 286 Anns v Merton London Borough Council [1978] AC 728. Callinan wrong to create any exception to Lord Romer's statement of principle in the East Suffolk case287 and I shall go on to consider the circumstances (such as 'general reliance') in which it has been suggested that such a duty might arise. But the fact that Parliament has conferred a discretion must be some indication that the policy of the act conferring the power was not to create a right to compensation. The need to have regard to the policy of the statute therefore means that exceptions will be rare. In summary, therefore, I think that the minimum preconditions for basing a duty of care upon the existence of a statutory power, if it can be done at all, are, first, that it would in the circumstances have been irrational not to have exercised the power, so that there was in effect a public law duty to act, and secondly, that there are exceptional grounds for holding that the policy of the statute requires compensation to be paid to persons who suffer loss because the power was not exercised." Another test altogether, and indeed a potentially far-reaching one, was stated by Gibbs CJ in Sutherland. His Honour said288: "Once it is accepted, as it must be, that the ordinary principles of the law of negligence apply to public authorities, it follows that they are liable for damage caused by a negligent failure to act when they are under a duty to act, or for a negligent failure to consider whether to exercise a power conferred on them with the intention that it should be exercised if and when the public interest requires it." Only Wilson J agreed with the Chief Justice in Sutherland, and the statement that I have just quoted has not been adopted or applied in this Court since Sutherland. In Pyrenees, Kirby J was attracted to a third test which involved three stages and which had been expressed and applied by the House of Lords in Caparo Industries Plc v Dickman289. It involves the asking of three questions, as to foreseeability, relationship, and what should be regarded as fair, just and reasonable in the circumstances. His Honour was the only Justice to embrace that test in Pyrenees, and it has been expressly rejected in this country subsequently in Perre v Apand Pty Ltd290. 287 East Suffolk Rivers Catchment Board v Kent [1941] AC 74. 288 Sutherland Shire Council v Heyman (1985) 157 CLR 424 at 445. 290 (1999) 198 CLR 180 at 193-194 [9] per Gleeson CJ, 210-212 [77]-[82] per Callinan I will put to one side for the time being the decision of this Court in Crimmins291 and go to the more recent case of Brodie v Singleton Shire Council292 in which this Court effectively abolished the distinction between nonfeasance and misfeasance on the part of road authorities upon which the "highway rule" was based. There, Gaudron, McHugh and Gummow JJ in adopting a test of control, said this293: "The decisions of this Court in Sutherland Shire Council v Heyman294, Pyrenees Shire Council v Day295, Romeo v Conservation Commission (NT)296 and Crimmins v Stevedoring Industry Finance Committee297 are important for this litigation. Whatever may be the general significance today in tort law of the distinction between misfeasance and non-feasance, it has become more clearly understood that, on occasions, the powers vested by statute in a public authority may give it such a significant and special measure of control over the safety of the person or property of citizens as to impose upon the authority a duty of care. This may oblige the particular authority to exercise those powers to avert a danger to safety or to bring the danger to the knowledge of citizens otherwise at hazard from the danger. In this regard, the factor of control is of fundamental importance298. It is often the case that statutory bodies which are alleged to have been negligent because they failed to exercise statutory powers have no control over the source of the risk of harm to those who suffer injury. Authorities having the control of highways are in a different position. They have physical control over the object or structure which is the source 291 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1. 292 (2001) 206 CLR 512. 293 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 558-559 [102]-[103]. 294 (1985) 157 CLR 424. See also Northern Territory v Mengel (1995) 185 CLR 307 295 (1998) 192 CLR 330. 296 (1998) 192 CLR 431. 297 (1999) 200 CLR 1. 298 Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 551-552. Callinan of the risk of harm. This places highway authorities in a category apart from other recipients of statutory powers." Their Honours did not see the possibility that courts might be called upon to examine the allocation of resources by a highway authority as reason to maintain the highway rule299. The formulation which their Honours adopted is set out in the following paragraph300: "The duty which arises under the common law of Australia may now be considered. Authorities having statutory powers of the nature of those conferred by the LG Act upon the present respondents to design or construct roads, or carry out works or repairs upon them, are obliged to take reasonable care that their exercise of or failure to exercise those powers does not create a foreseeable risk of harm to a class of persons (road users) which includes the plaintiff. Where the state of a roadway, whether from design, construction, works or non-repair, poses a risk to that class of persons, then, to discharge its duty of care, an authority with power to remedy the risk is obliged to take reasonable steps by the exercise of its powers within a reasonable time to address the risk. If the risk be unknown to the authority or latent and only discoverable by inspection, then to discharge its duty of care an authority having power to inspect is obliged to take reasonable steps to ascertain the existence of latent dangers which might reasonably be suspected to exist." Although Hayne J was also in favour of the abolition of the highway rule, his Honour's formulation of the duty of care to replace it was somewhat different from the formulation in the joint judgment. In a passage which resonates with the statement of Earl Cairns LC and the speech of Lord Hoffmann that I earlier quoted, his Honour said this301: "Rather, reference must be made302 to 'the nature, scope and terms of the statute, including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation' (emphasis added). Ordinarily, the more general the statutory duty and the wider the class of persons in the community 299 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 560 [105]-[106] and especially at 580-581 [162]. 300 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 577 [150]. 301 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 633-634 [326]. 302 Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 405. Callinan who it may be expected will derive benefit from its performance, the less likely is it that the statute can be construed as conferring an individual right of action for damages for its non-performance. In particular, a statutory provision giving care, control and management of some piece of infrastructure basic to modern society, like roads, is an unpromising start for a contention that, properly understood, the statute is to be construed as providing for a private right of action." Crimmins does, I think, stand apart from the other cases to which I have referred. Whilst it was a case in which the Court effectively treated powers and functions as giving rise to duties of care, the factual and statutory contexts were both very special. What distinguished the powers and functions there was that if they were not in fact exercised, then the industry which was a uniquely organized one, would hardly have been able to function at all, or with any degree of efficiency303. The most recent case which has some bearing upon this one is Modbury Triangle Shopping Centre Pty Ltd v Anzil304. Its relevance lies in the Court's reluctance, and ultimate refusal there, to impose upon an occupier, a duty to take reasonable care to prevent harm inflicted by the criminal behaviour of a third party. It is not without significance in these appeals, that almost certainly those persons within the area of the Council who failed to prevent the run-off of faecal effluent were guilty of offences against regulations or enactments, as indeed may the Council itself have been in respect of areas which it occupied. However, as to these, a caravan park and other public areas it cannot be established that they alone, or at all, were the source of the faecal matter which caused the contamination and illness. In my opinion, the authorities to which I have referred do not stand for one clear test which is applicable to this case. Even though the Council here did have some measure of control of the land, and the management of waste on it in its area, it was not in the same position as a highway authority. The reasoning of the three Justices responsible for the joint judgment in Brodie305 depends in part at least upon the fact that highway authorities stand in a different position from other authorities in that they have actual physical control and occupation of the dedicated road area the source of the risk of harm. In that sense they are in a 303 Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 at 113-114 [343]-[345], 115 [351] and in particular 115 [353]. 304 (2000) 205 CLR 254. 305 Brodie v Singleton Shire Council (2001) 206 CLR 512 at 559 [103] per Gaudron, Callinan similar position to occupiers and in a category apart from other recipients of statutory power. Statement of the principle I return to where I started in this section of my reasons, to the statement of Earl Cairns LC which requires that there be something in all of the circumstances, including of course the terms of the conferral of the powers, which requires that the power be coupled with a duty; or, as Hayne J put it in Brodie, "[something in] the whole range of circumstances relevant upon a question of statutory interpretation"306; or as Lord Hoffmann put it in Stovin v Wise, irrationality in an abstention from exercising the power307 or some other exceptional matter, or indicator of an intention to permit a person to sue. Unless these conditions are satisfied, in my opinion no relevant duty of care will arise. True it may be, that vulnerability, power, control, generality or particularity of the class, the resources of, and demands upon the authority, may each be, in a given case, a relevant circumstance, but none should, I think, of itself be decisive. Nor do I think it convenient or satisfactory to pose a test whether a particular function of an authority involves a core, or a non-core function, or relates to a matter of policy or executive action308. Not the only problem about such a test is the inevitable difficulty of distinguishing functions, and the need for statutory authorities to make a political assessment of priorities. In my opinion, no better test can be stated than that of Earl Cairns LC modified to take account of Lord Hoffmann's opinion as to irrationality of abstention from exercise, or other exceptional circumstance, and which in form only, but not in substance I would regard as being similar to that of Hayne J in Brodie. It was, it may also be observed, a test which quite clearly appealed to Brennan J in Sutherland as appears from his Honour's citation of it in that case. The liability of the State Applying the test to which I have just referred, I would conclude that the State is not liable. There had been no previous serious outbreak of Hepatitis A as a result of faecal contamination of the waters of the lake. There was a management council in place which had been supported by both the Council and 306 (2001) 206 CLR 512 at 633 [326]. 307 [1996] AC 923 at 954. 308 Gummow J rejected such a distinction in Pyrenees Shire Council v Day (1998) 192 CLR 330 at 393-394 [180]-[182]. Callinan State which, not unreasonably, could be expected to ensure that the industry regulated itself in a way that not only would protect the public as oyster consumers, but also would, in the interests of oyster growers and suppliers themselves, take steps to maintain control of quality and purity. There seems to be no suggestion that the rainfall in November 1996 was unprecedented. What I have just said also bears upon the submission that the State should have exercised its power under s 189 of the Fisheries Management Act to close the oyster fishery in the lake for a longer period than the growers themselves did. The absence of previous outbreaks, and the apparently satisfactory nature of what had been done in the past provides an answer to this. I do not think that in the circumstances, that elsewhere, and on other occasions, for instance the infectious contamination had occurred in the Tweed River in 1989 to 1990, meant that the State should have adopted further measures and caused the fishery to be closed for longer than it was. That might mean that an outbreak in the lake was foreseeable, but foreseeability alone is not enough to establish liability. It is an overstatement in my opinion to say, as the primary judge did, that the involvement of the State in the management of the fishery was so extensive that it gave rise to a duty of care to oyster consumers. His Honour the primary judge dwelt at some length on the need for regular sanitary surveys. No doubt these were highly desirable. But with all due respect, they were not the answer, although they might have been the first step in providing it. Their particular utility would lie only when effect was given to them by the taking of all necessary steps to abate the potential sources of contamination which they revealed. Such a process, however desirable it might be, would require time, money, labour, other resources, and possibly the deferral of other highly desirable measures. The State, furthermore, was not in the position of a highway authority having actual physical control of the land from which the effluent was released. It follows that I do not think that there is any particular circumstance in this case which gives rise to a duty of care, a breach of which by the State would entitle an infected oyster consumer such as Mr Ryan to sue it. I do not overlook such important features as that the State did have and exercised a measure of control over the industry, that a matter of public health was involved, and that an oyster consumer is vulnerable and without any personal means whatsoever of guarding against a contaminated oyster. These are all relevant considerations. But they are not unique ones. Daily, agencies of the State and local authorities are concerned with issues of public health. In practical terms it would be impossible for any authority to police all potential sources of dangerous food just as it would be for such an agency to identify and eradicate all potential sources of danger of any kind. What distinguished the source of danger in Pyrenees is not present here: its precise identification by the Council and inadequate attempts by it to remove it. The massive obligation of the State to which a contrary view would give rise is a relevant and important circumstance to which I should have regard, and which, although not decisive, weighs in the balance. In abstaining from doing more than it did the State was not, in my opinion, acting irrationally. Callinan In truth, Mr Ryan did not belong to a particular class of persons in the sense in which that expression has from time to time been used in the cases. All members of the community (as well, perhaps, as people overseas) except perhaps infants and those who either do not like or are allergic to oysters, are potential consumers of them. Nor can I find anything special in the conditions under which contamination of oysters may be prevented which would require the imposition of a relevant duty upon the State. I am unable therefore to couple even the extensive powers of the State here, of control over the oyster industry, with a duty to do any particular act in this case which would have prevented Mr Ryan from contracting Hepatitis A from the contaminated oysters. It follows that I would disallow Mr Ryan's appeal so far as it affects the liability of the State and I would uphold the appeal of the latter. The liability of the Council For the purposes of this case I am unable to distinguish in any significant way between the State and the Council. In form only, rather than in substance (with three exceptions only) their powers were much the same. The first two exceptions are that the State could have been a great deal more interventionist in the management of the oyster fishery had it wished, and it did have the power of closure. However, had the Council brought to the attention of both the participants in the industry and the public, facts which it knew as well as the State, as to the sources of potential contamination, and the risks to which they gave rise, the practical consequence would probably have been the same, that oysters from the lake would not have been consumed by members of the public until their quality could be reasonably assured. It is correct, as Kiefel J put it in the Full Court there was no doubt much that the Council could have done. The third exception is that unlike however in the case of the State, there was no statutory provision which had as its particular purpose the possible management of the industry or the prevention of contamination of oysters. There was no direct and active involvement by the Council in the control of the industry in anything like the same way as the Council involved itself in the attempt to eradicate the potential source of a fire in Pyrenees. Asking the same questions and applying the same test as I have in relation to the State, I conclude that the Council is not liable. The disposition of the appeals involving the Council should result in its not being held liable to Mr Ryan. The liability of Barclay The law so far as the liability of Barclay is concerned is well settled. It was obliged to take reasonable care for the safety of persons who consumed its oysters. So much was conceded by Barclay. Bearing upon that matter are these facts: of most importance that Barclay was carrying on a commercial activity in the cultivation and sale of oysters, that Barclay was not only obliged to have, but Callinan also had a great deal of knowledge about the cultivation and harvesting of oysters, and in particular of the potential for infection after heavy rain; that oysters were susceptible to faecal contamination; and that there were numerous potential sources of such contamination in the catchment of the lake. Useful measures were available and had been adopted by Barclay but they could provide no complete defence against Hepatitis A infection. The trial judge made a finding that Barclay could have made a significant contribution to the reduction of risk by causing an inspection to be made of the foreshores of the lake. Barclay was armed with the knowledge of outbreaks of Hepatitis A on other occasions in other places. Hepatitis A is a particularly unpleasant and dangerous illness. By a combination of inspections (as held by the primary judge) and a suspension of harvesting for longer than a few days, the risk might have significantly been reduced. As grower and supplier for profit, Barclay could and should be expected to provide safe oysters. These matters led the trial judge to make what was essentially a finding of fact, that in failing to adopt those measures Barclay was in breach of its duty of care to Mr Ryan. I might not perhaps have reached the same conclusion myself. As Starke J pointed out in Australian Knitting Mills v Grant309 untoward results or accidents cannot with the greatest of care be wholly eliminated in any industrial process, an observation which could be made with at least equal force to a process of production of natural products. There were however facts upon which his Honour was entitled to reach the conclusion as to the liability of Barclay that he did. There are now concurrent findings of fact to a similar effect by two judges of the Full Court. Notwithstanding therefore the evidence of an absence of any previous outbreak by reason of contaminated oysters from Wallis Lake, and Barclay's incapacity itself to remove the sources of contamination, relevant factors which Lindgren J in dissent thought decisive, I am not prepared to depart from the holding of negligence against Barclay by the primary judge and the majority in the Full Court. The consequence of my decision is that both Barclay companies should be solely liable for Mr Ryan's loss and damage in negligence and with respect to costs. Barclay Oysters Pty Ltd has also been held to be liable, an unchallenged holding, to Mr Ryan for breaches of ss 74B and 74D of the Trade Practices Act in respect of those and the claim in negligence he will in due course be obliged to elect. 309 (1933) 50 CLR 387 at 410. Callinan Disposition of the appeals The judgment and orders of the Full Court of the Federal Court should be quashed and judgment and orders as follows substituted: 1. Judgment be entered in favour of Mr Ryan in the sum of $25,000 with interest of $2,000 against Graham Barclay Oysters Pty Ltd and Graham Barclay Distributors Pty Ltd ("Barclays"); 2. Order that Barclays pay Mr Ryan's costs of the trial, and the appeals to the Full Court of the Federal Court and this Court confined to the litigation of the issues between them; 3. Order that Mr Ryan pay the costs of the State of New South Wales and the Great Lakes Council, of the trial, the appeals to the Full Court of the Federal Court and this Court; 4. Order that Barclays pay to Mr Ryan a sum equal to the additional costs incurred by him by reason of the litigation of issues arising solely between Barclays and the State and the Council or any of them inter se, at and of the trial, the appeal to the Full Court of the Federal Court and this Court; and 5. Order that the matter be remitted to the primary judge for the trial of any outstanding issues and disposition of the action.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Achurch v The Queen [2014] HCA 10 2 April 2014 ORDER Appeal dismissed. On appeal from the Supreme Court of New South Wales Representation T A Game SC with G A Bashir for the appellant (instructed by Catherine L A Babb SC with S C Dowling SC for the respondent (instructed by Solicitor for Public Prosecutions (NSW)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Achurch v The Queen Criminal law – Sentence – Appellant convicted of drug crimes and sentenced – Crown successfully appealed against sentences – Court of Criminal Appeal applied reasoning held to be erroneous in Muldrock v The Queen (2011) 244 CLR 120 in re-sentencing appellant – Appellant applied under s 43 of Crimes (Sentencing Procedure) Act 1999 (NSW) for re-sentencing proceedings to be re- opened – Court of Criminal Appeal dismissed application – Where sentences imposed by re-sentencing court open at law – Whether sentences imposed "contrary to law". Words and phrases – "contrary to law", "principle of finality". Crimes (Sentencing Procedure) Act 1999 (NSW), ss 43(1), 43(2). FRENCH CJ, CRENNAN, KIEFEL AND BELL JJ. Introduction On 24 June 2008 the appellant was convicted after trial by a judge and jury in the District Court of New South Wales of three counts of supplying prohibited drugs contrary to s 25 of the Drug Misuse and Trafficking Act 1985 (NSW) ("the Drug Act"). The counts on which he was convicted1 alleged respectively methylenedioxymethylamphetamine ("MDMA")2 (count 1), that he supplied an amount not less than the commercial quantity3 of MDMA (count 2) and that he large commercial quantity4 of supplied an amount not methylamphetamine (count 4). prohibited supplied drug, than that less the The appellant was sentenced to a total of 14 years imprisonment, backdated to 16 August 2006, with a non-parole period of six years expiring on 15 August 2012. A Crown appeal to the New South Wales Court of Criminal Appeal against the inadequacy of the sentences, individually and collectively, was allowed on 16 August 20115. The Court of Criminal Appeal re-sentenced the appellant. The offences alleged in counts 2 and 4 were offences for which standard non-parole periods were prescribed in the Table to Div 1A of Pt 4 of the Crimes (Sentencing Procedure) Act 1999 (NSW) ("the Sentencing Act"). In re-sentencing the appellant and fixing non-parole periods, the Court applied an approach developed in its earlier decisions which was subsequently held by this Court in Muldrock v The Queen6 to have been incorrect. It is not in dispute that, in the light of Muldrock, the Court erred by focusing upon the objective seriousness of the offence and then considering factors justifying a departure from the standard non-parole period. 1 The appellant was acquitted on count 3 on the indictment. 2 The amount supplied was 108.7 grams. 3 The amount supplied was 270 grams. A commercial quantity is defined under s 3(1) of the Drug Act read with Sched 1 col 4 as 125 grams. 4 The amount supplied was 2.6 kilograms. A large commercial quantity is defined under s 33(4) of the Drug Act read with Sched 1 col 5 as 1 kilogram. 5 R v Achurch (2011) 216 A Crim R 152. (2011) 244 CLR 120; [2011] HCA 39. Crennan Bell This Court's judgment in Muldrock was delivered on 5 October 2011, seven weeks after the decision of the Court of Criminal Appeal. The appellant applied to the Court of Criminal Appeal on 22 March 2012 to re-open the proceedings on the Crown appeal. He invoked ss 43(1)(a) and 43(2) of the Sentencing Act, whereby a court may re-open criminal proceedings, including proceedings on appeal, in which the court has "imposed a penalty that is contrary to law". The Court of Criminal Appeal, sitting a bench of five, dismissed the application on 22 May 20137 on the basis that s 43 did not apply to errors of reasoning of the kind relied upon by the appellant when the penalty was one which could have been imposed in the proper exercise of the Court's discretion. The appellant has appealed against that decision to this Court pursuant to a grant of special leave made on 8 November 20138. For the reasons that follow, we are of the opinion that s 43 of the Sentencing Act does not authorise the re-opening of proceedings in which a sentence open at law was reached by a process of reasoning involving an error of law. The statutory framework The decisions taken by the sentencing judge and the Court of Criminal Appeal must be understood in the light of the statutory framework governing the penalties for the offences of which the appellant was convicted. Count 1 on the indictment alleged the offence of supply of a prohibited drug contrary to s 25(1) of the Drug Act. The penalty for such an offence is a fine or imprisonment for a term of 15 years, or both9. If the supply is of not less than the commercial quantity of a prohibited drug contrary to s 25(2) of the Drug Act, as alleged in count 2, the penalty under the Drug Act is a fine or 20 years imprisonment, or both10. The penalty for supply of the large commercial quantity of a prohibited drug contrary to s 25(2) of the Drug Act, alleged in count 4, is a fine or imprisonment for life, or both11. 7 Achurch v The Queen (No 2) [2013] NSWCCA 117. [2013] HCATrans 278 (French CJ and Hayne J). 9 Drug Act, s 32(1)(c) and (g). 10 Drug Act, s 33(1)(a) and (2)(a). 11 Drug Act, s 33(1)(a) and (3)(a). Crennan Bell Part 4 of the Sentencing Act deals with sentencing procedures for imprisonment. A court sentencing an offender to imprisonment for an offence is first required, by s 44(1), to set a non-parole period for the sentence, being the minimum term for which the offender must be kept in detention in relation to the offence. Division 1A of Pt 4 provides for standard non-parole periods for certain offences. It is unnecessary to repeat the analysis of its provisions set out in Muldrock12. The standard non-parole periods specified for the offences in counts 2 and 4 of supplying a commercial quantity of a prohibited drug and supplying a large commercial quantity of a prohibited drug were 10 years and 15 years respectively13. In Muldrock, this Court identified as the correct approach to sentencing for offences for which standard non-parole periods are specified in Div 1A14 that enunciated for sentencing generally by McHugh J in Markarian v The Queen15: "[T]he judge identifies all the factors that are relevant to the sentence, discusses their significance and then makes a value judgment as to what is the appropriate sentence given all the factors of the case." In sentencing for offences specified under Div 1A, the sentencing court is required to have regard to two legislative guideposts — the maximum penalty and the standard non-parole period16. This Court eschewed a two-stage approach which had been apparent in decisions of the Court of Criminal Appeal after R v Way17, observing that nothing in Div 1A18: "requires or permits the court to engage in a two-stage approach to the sentencing of offenders for Div 1A offences, commencing with an assessment of whether the offence falls within the middle range of 12 (2011) 244 CLR 120 at 126–133 [12]–[32]. 13 Sentencing Act, Table to Div 1A of Pt 4, items 18 and 19. 14 (2011) 244 CLR 120 at 131–132 [26]. 15 (2005) 228 CLR 357 at 378 [51]; [2005] HCA 25. 16 (2011) 244 CLR 120 at 132 [27]. 17 (2004) 60 NSWLR 168. 18 (2011) 244 CLR 120 at 132 [28]. Crennan Bell objective seriousness by comparison with an hypothesised offence answering that description and, in the event that it does, by inquiring if there are matters justifying a longer or shorter period." The reasoning of the Court of Criminal Appeal in re-sentencing the appellant in the present case was inconsistent with Muldrock. The reasoning is briefly summarised below. It is necessary first to set out the sentences imposed by the sentencing judge in respect of each of the three counts and by the Court of Criminal Appeal. Sentencing at first instance The appellant was first sentenced on 6 August 2010. The delay between conviction and sentence resulted from defence applications to allow evidence to be obtained concerning the appellant's medical conditions and their management in custody19. The total sentence imposed upon him by the sentencing judge, Woods DCJ, was 14 years imprisonment commencing 16 August 2006, with a non-parole period of six years expiring 15 August 2012. The individual sentences for each count were as follows: Count 1 Count 2 Count 4 A term of imprisonment of two years and three months was to expire on imposed 15 November 2008. A non-parole period was not fixed because the sentence had already been served. to date from 16 August 2006 and A term of imprisonment of four years was imposed to date from 16 August 2006 and to expire on 15 August 2010. A non-parole period of four years was set but no balance term was specified. The sentencing judge held that the "offence [was] significantly less substantial in terms of culpability than a mid-range offence for such an offence." A non-parole period of five years was fixed commencing on 16 August 2007 and expiring on 15 August 2012, with a balance term of eight years to commence upon expiration of the non-parole period and expire on 15 August 2020. The total sentence of imprisonment on count 4 was, therefore, 13 years comprising the non-parole period and the balance of the sentence. The sentencing judge did not treat the offence as in the middle range of objective seriousness "because the offence was 'nipped in the bud' and 19 (2011) 216 A Crim R 152 at 157 [23]. Crennan Bell nothing in effect came of it." The drugs had been found in a police search of a premises previously occupied by the appellant. Re-sentencing on appeal On 16 August 2011, the Court of Criminal Appeal (Macfarlan JA, Johnson and Garling JJ) allowed the Crown appeal. The sentences imposed on the appellant were quashed. In their place the following sentences were imposed: Count 1 Count 2 Count 4 Imprisonment for two years and three months, commencing on 16 August 2006 and expiring on 15 November 2008. A non-parole period of six years, commencing on 16 August 2007 and expiring on 15 August 2013, with a balance term of two years, commencing on 16 August 2013 and expiring on 15 August 2015. A sentence of imprisonment by way of a non-parole period of 11 years, commencing on 16 August 2008 and expiring on 15 August 2019, with a balance term of five years, commencing on 16 August 2019 and expiring on 15 August 2024. The Court also ordered that the appellant would be eligible for release on parole on 16 August 2019. The re-sentencing reasons The principal judgment of the Court of Criminal Appeal on the Crown appeal was written by Johnson J, with whom Macfarlan JA and Garling J agreed. Garling J wrote a separate judgment adding some observations in relation to count 4. The Court held that although the sentencing judge had been in error in failing to address the objective gravity of the offence under count 1, the sentence imposed on that count was not manifestly inadequate20. With respect to counts 2 and 4, the Court held that the sentencing judge had erred in various ways, including a failure to resolve the question whether the offence under count 4 fell below the mid-range of objective seriousness21. The sentences imposed on counts 2 and 4 were held to be manifestly inadequate22. 20 (2011) 216 A Crim R 152 at 162–163 [59], 174 [154]. 21 (2011) 216 A Crim R 152 at 165 [84]. 22 (2011) 216 A Crim R 152 at 174 [155], 175 [157]. Crennan Bell Johnson J observed that as the appellant had been convicted after trial, the standard non-parole periods of 10 and 15 years with respect to counts 2 and 4 respectively had direct application by force of statute and not merely as a guidepost on sentence following a plea of guilty23. His Honour referred to Way. "When sentencing for offences for which Parliament has provided a standard non-parole period, it is necessary for Judges to specify where the offences lie on the range of objective seriousness for those crimes." (citations omitted) The sentencing judge, it was said, had imposed non-parole periods for counts 2 and 4 which were very significantly below the standard non-parole period for each offence25. As was acknowledged by the Court of Criminal Appeal on the application to re-open the Crown appeal, the Court in re-sentencing had applied an approach which was disapproved in Muldrock26. The new sentences imposed on the appellant by the Court of Criminal Appeal in allowing the Crown appeal were explained in two succinct paragraphs in the judgment of Johnson J27: "165. In my view, having regard to the objective seriousness of the second offence and after taking into account the [appellant's] subjective circumstances, a non-parole period of six years ought be imposed for this offence. As the [appellant's] medical condition has been taken into account in the determination of sentence, it is not appropriate to double count that factor in his favour by way of a finding of 'special circumstances' under s 44(2) Crimes (Sentencing Procedure) Act: R v Way at [185]. Accordingly, for this offence, the appropriate sentence is one of a non-parole period of six years with a balance of term of two years. 23 (2011) 216 A Crim R 152 at 164 [76]. 24 (2011) 216 A Crim R 152 at 165 [77]. His Honour cited R v Sellars [2010] NSWCCA 133 at [12] and R v McEvoy [2010] NSWCCA 110 at [87]. 25 (2011) 216 A Crim R 152 at 165 [78]. 26 [2013] NSWCCA 117 at [70]. 27 (2011) 216 A Crim R 152 at 176 [165]–[166]. Crennan Bell In my view, the fourth count may be properly characterised as lying in the middle of the range of objective seriousness. The [appellant] is entitled to have his subjective factors, principally his medical condition, taken into account to mitigate penalty. In my view, a non-parole period of 12 years is appropriate for this offence. Once again, the [appellant] is not entitled to have his medical condition double counted in his favour by way of a finding of 'special circumstances'. For this offence, I would impose a non-parole period of 12 years with a balance of term of four years." His Honour went on to find "special circumstances" on count 4 arising from a process of accumulation and the application of the totality principle28. The non- parole period on that count was therefore fixed at 11 years, with a balance term of five years. The total effective non-parole period would be 13 years, with an effective balance term of five years29. Statutory framework — re-opening proceedings Section 43 of the Sentencing Act, the construction of which is in issue in this appeal, appears in Div 5 of Pt 3 of the Act. Division 5 is entitled "Correction and adjustment of sentences". Section 43 relevantly provides: "(1) This section applies to criminal proceedings (including proceedings on appeal) in which a court has: imposed a penalty that is contrary to law, or failed to impose a penalty that is required to be imposed by law, and so applies whether or not a person has been convicted of an offence in those proceedings. The court may reopen the proceedings (either on its own initiative or on the application of a party to the proceedings) and, after giving the parties an opportunity to be heard: (a) may impose a penalty that is in accordance with the law, and 28 (2011) 216 A Crim R 152 at 176–177 [170]. 29 (2011) 216 A Crim R 152 at 177 [171]. Crennan Bell if necessary, may amend any relevant conviction or order. Subject to subsection (5), nothing in this section affects any right of appeal. For the purposes of an appeal under any Act against a penalty imposed in the exercise of a power conferred by this section, the time within which such an appeal must be made commences on the date on which the penalty is so imposed." Absent specific statutory authority, the power of courts to re-open their proceedings and to vary their orders is constrained by the principle of finality. That principle was stated succinctly in D'Orta-Ekenaike v Victoria Legal Aid30 and re-stated by the plurality in Burrell v The Queen31: "A central and pervading tenet of the judicial system is that controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances." As was said in Burrell, the principal qualification to the general tenet of finality is the appellate system32. Relevant to the position of the Court of Criminal Appeal of New South Wales, their Honours said33: "But in courts other than the court of final resort, the tenet also finds reflection in the restrictions upon reopening of final orders after they have been formally recorded." The principle protects parties to litigation from attempts to re-agitate what has been decided and serves as "the sharpest spur to all participants in the judicial process, judges, parties and lawyers alike, to get it right the first time."34 30 (2005) 223 CLR 1 at 17 [34]; [2005] HCA 12. 31 (2008) 238 CLR 218 at 223 [15]; [2008] HCA 34. 32 (2008) 238 CLR 218 at 223 [15]. 33 (2008) 238 CLR 218 at 223 [15]. 34 (2008) 238 CLR 218 at 223 [16]. Crennan Bell The principle of finality forms part of the common law background against which any statutory provision conferring power upon a court to re-open concluded proceedings is to be considered. It is a principle which may inform the construction of the provision. In the present case, it is a principle which informs the limit of the purpose for which s 43 and its precursors were enacted, that limit being that the section was not to provide a substitute for the appellate system. Insofar as s 43 applies to courts of first instance exercising original jurisdiction, the limit also maintains the well-established distinction between appellate and original jurisdiction. A statute conferring original jurisdiction is not lightly to be construed as undermining that distinction35. Consistently with the principle of finality, courts may correct their errors before their orders are formally recorded. As was said in the joint judgment in Smith v New South Wales Bar Association36: "It has long been the common law that a court may review, correct or alter its judgment at any time until its order has been perfected ... The power is discretionary and, although it exists up until the entry of judgment, it is one that is exercised having regard to the public interest in maintaining the finality of litigation." (footnotes omitted) The power is inherent in superior courts. Similar powers may be implied in statutory courts, including inferior courts, and may be reflected or extended by express statutory provisions or rules of court37. Subject to express provision to the contrary, the power subsists up to but not beyond the point at which judgment is entered. As Barwick CJ observed in Bailey v Marinoff38: 35 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 594 [51]; [2011] HCA 10. 36 (1992) 176 CLR 256 at 265 per Brennan, Dawson, Toohey and Gaudron JJ; [1992] HCA 36. 37 Generally as to implied powers see Grassby v The Queen (1989) 168 CLR 1 at 15– 17 per Dawson J; [1989] HCA 45; Pelechowski v Registrar, Court of Appeal (NSW) (1999) 198 CLR 435 at 450–452 [47]–[54] per Gaudron, Gummow and Callinan JJ; [1999] HCA 19; DJL v Central Authority (2000) 201 CLR 226 at 240– 241 [25] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; [2000] HCA 17. 38 (1971) 125 CLR 529 at 530; [1971] HCA 49. Crennan Bell "Once an order disposing of a proceeding has been perfected by being drawn up as the record of a court, that proceeding apart from any specific and relevant statutory provision is at an end in that court and is in its substance … beyond recall by that court." The rationale for the limiting requirement, that the order to be corrected has not been perfected, is that it provides "a readily ascertainable and easily applied criterion."39 It also "marks the end of the litigation in that court, and provides conclusive certainty about what was the end result in that court."40 The slip rule as an aspect of the inherent or implied powers41 allows for limited correction of an order after its final entry, as was explained in Burrell42: "The power to correct the record so that it truly does represent what the court pronounced or intended to pronounce as its order provides no substantial qualification to that rule. The power to correct an error arising from accidental slip or omission, whether under a specific rule of court or otherwise, directs attention to what the court whose record is to be corrected did or intended to do. It does not permit reconsideration, let alone alteration, of the substance of the result that was reached and recorded." (footnote omitted) The power conferred under the slip rule "is one to be exercised sparingly, lest it encourage carelessness by a party's legal representatives and expose to risk the public interest in finality of litigation."43 Section 43 and its precursors provided a conditional statutory power to correct penalties beyond the limits of the inherent and implied powers of courts and of the slip rule. 39 Burrell v The Queen (2008) 238 CLR 218 at 224 [20]. 40 Burrell v The Queen (2008) 238 CLR 218 at 224 [20]. 41 Express provision may be made by statute or rule in relation to the correction of errors of the kind covered by the slip rule. 42 (2008) 238 CLR 218 at 224–225 [21]. 43 Gould v Vaggelas (1985) 157 CLR 215 at 275; [1985] HCA 75. Crennan Bell The earliest precursor of s 43 in New South Wales was s 100HA of the Justices Act 1902 (NSW), enacted with effect from 1 January 1987. It conferred on magistrates the power to re-open the hearing of a criminal matter following the imposition of a penalty contrary to law. It was described in the Attorney- General's Second Reading Speech in the Legislative Assembly as similar to provisions then existing in Tasmania, Western Australia and Queensland44. The provision could not be used to revise a sentence45: "It will only allow the magistrate to correct a sentence which is patently in error." It was necessary "because on occasions magistrates [were] handing down sentences which they [did] not have the power to impose."46 The Minister representing the Attorney-General in the Legislative Council said of the proposed s 100HA47: "I emphasize again that the power given by this bill cannot be used as a general power of review or as an appeal process. The power to reopen exists only where there has been a patent error of law in the sentence imposed." The power thereby conferred on magistrates was applied to all courts by the enactment of s 19 of the Criminal Procedure Act 1986 (NSW)48, later renumbered as s 24 of that Act49. The power was in substantially the same terms 44 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3591. 45 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3591. 46 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3591. 47 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 18 November 1986 at 6514. 48 Criminal Procedure (Amendment) Act 1988 (NSW), s 3. 49 Statute Law (Miscellaneous Provisions) Act 1989 (NSW), Sched 2. Crennan Bell as that subsequently conferred by s 4350. In the Second Reading Speech introducing s 19, the Attorney-General again distinguished the mechanism thus created from that of appeal, emphasising that it could only be used "where there has been a technical error in the sentence imposed."51 The need for the power was said to be highlighted by the enactment of the Probation and Parole Act 1983 (NSW)52: "The complexity of this and other legislation that judicial officers have to grapple with in the courts on a daily basis has invariably led to technical errors being made. It is vital that judicial officers have a simple procedure available to them to correct such errors." Section 43 and its precursor provisions were held by the Court of Criminal Appeal in a number of unreported and reported decisions to require a broad construction. Much emphasis was placed in those decisions upon the remedial purpose of the provisions. The remedial purpose of s 24 of the Criminal Procedure Act was invoked in Ho v Director of Public Prosecutions53 to justify giving the section "the widest possible operation", extending to the correction of a sentence imposed as a result of "an error of law in the exercise of the sentencing discretion."54 Section 43 was said in Erceg v District Court (NSW)55, not to limit a court to the formal record of the sentence, but to allow it to "have regard to all the circumstances relevant to the imposition of the penalty."56 In R v Finnie (No 2)57, Howie J, with whom Spigelman CJ and Dunford J agreed, held 50 Unlike s 43, s 24(1) provided expressly that the court "whether or not differently constituted" might re-open the proceedings. 51 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 21 September 1988 at 1673. 52 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 21 September 1988 at 1674. 53 (1995) 37 NSWLR 393. 54 (1995) 37 NSWLR 393 at 403. 55 (2003) 143 A Crim R 455. 56 (2003) 143 A Crim R 455 at 476 [109]. 57 [2004] NSWCCA 150. Crennan Bell that s 43 could be engaged where there had been an error of fact or an omission to find, or to take into account, a relevant fact58: "Where a relevant error is established, the section is engaged and, at least in so far as the jurisdiction of the court to reopen the sentencing proceedings is concerned, it is unnecessary for the court to determine how the erroneous sentence came about." That approach was followed more recently in Meakin v Director of Public Prosecutions (NSW)59. There has been a variety of approaches to similar legislation in other Australian jurisdictions. Those approaches do not indicate a cross-jurisdictional consensus about the way in which re-opening powers in relation to sentencing are to be applied. In Boyd v Sandercock; Ex parte Sandercock60, the Full Court of the Supreme Court of Queensland held that a penalty was not "contrary to law" for the purposes of s 147A(1) of the Justices Act 1886 (Q) "merely because the prosecution has failed to prove a fact [the existence of a prior conviction] which would have led to a higher range of penalty becoming applicable, or a higher sentence being imposed."61 In R v Thorpy62, the Court of Appeal of Queensland applied a restrictive construction to s 188(2)(a) of the Penalties and Sentences Act 1992 (Q), which conditioned the power to re-open sentencing proceedings on a sentence having been imposed that was "not in accordance with the law". The Court held that the provision was "limited to the correction of error or possibly also clarification of an order made; but not as allowing the admission of fresh evidence."63 A restrictive approach to s 188, in its application to factual error, 58 [2004] NSWCCA 150 at [32]. 59 (2011) 216 A Crim R 128 at 135–136 [28]–[30] per Beazley JA, Allsop P agreeing at 131 [2], see also at 149 [109]–[111] per Basten JA. 60 [1990] 2 Qd R 26. 61 [1990] 2 Qd R 26 at 29. 62 [1996] 2 Qd R 77. 63 [1996] 2 Qd R 77 at 79 and authorities there cited. Crennan Bell was maintained in R v Cassar; Ex parte Attorney-General64. The Court of Appeal said65: "Sentences are reviewed through the appeal process, not by means of this provision, which is in the nature of a 'slip rule', to be used in the exceptional, limited circumstances to which in precise terms it refers." In contradistinction to the approach in Queensland, the Supreme Court of Western Australia endorsed a broad approach to s 37 of the Sentencing Act 1995 (WA), which empowered a court to re-open proceedings when it had sentenced an offender in a manner that was not in accordance with that Act or the written law under which the offence was committed. In Traegar v Pires de Albuquerque66, which was a case similar in its facts to Boyd v Sandercock, the power was held to extend to a case in which a magistrate had failed to impose a minimum mandatory sentence because he had not been informed of prior convictions of the defendant which attracted that mandatory minimum67. In a more recent decision, The State of Western Australia v Wallam68, the Court of Appeal held that the statutory power to re-open arises in the case in which the sentence imposed was not one which could lawfully be imposed under the Sentencing Act 1995 (WA) or the written law under which the offence was committed69. Different approaches were also reflected in judgments of the Court of Criminal Appeal of the Northern Territory in relation to s 112 of the Sentencing 64 [2002] 1 Qd R 386. The case concerned s 188(1)(c), which empowered re-opening of proceedings if a court had imposed a sentence "decided on a clear factual error of substance". 65 [2002] 1 Qd R 386 at 390 [16]. 66 (1997) 18 WAR 432. The Full Court followed Shortland v Heath [1977] WAR 61, concerning the re-opening power under s 166B of the Justices Act 1902 (WA), a decision which was not followed by the Full Court of the Supreme Court of Queensland in Boyd v Sandercock. 67 (1997) 18 WAR 432 at 447. 68 [2008] WASCA 117 (S) — a case in which the sentencing judge had not taken account of the abolition of remissions. 69 [2008] WASCA 117 (S) at [58]–[59]. Crennan Bell Act (NT). That section provides for the re-opening of proceedings when a court has "imposed a sentence that is not in accordance with the law". Martin CJ in Staats v The Queen70 saw s 112 as "limited in its application to errors of law in relation to the imposition of the sentence" and not extending to "the correction of reasons or review of the exercise of a discretionary judgment."71 Angel J expressed the view that the section at least included errors of law and "may well include judicial oversight of a fact obviously material for sentencing purposes"72. In R v Melville73, the Court of Criminal Appeal held, in a case with some similarities to the case before this Court, that s 112 enabled74: "the correction of an error of law in sentencing when, in the course of a binding decision in the appellate hierarchy in another case, it is stated that the sentence in the instant case was not imposed in accordance with the law which governs the proper exercise of the sentencing discretion." A re-opening provision of long standing in New Zealand has attracted a narrow construction. Section 372 of the Crimes Act 1961 (NZ) provided that if a sentence was one "that could not by law be passed" or if a judge had not passed a sentence required by law to be passed, he could pass such sentence as ought to have been passed. Like s 43(5), s 372(5) provided that in such a case, the time to appeal against sentence would run from the date of the new sentence. Section 372 was held by the New Zealand Court of Appeal in R v Shepherd75 to confer "a closely limited jurisdiction on the sentencing Judge ... to pass a new sentence."76 In so holding, that Court relied upon s 372(5) to distinguish correction from appeal77: 70 (1998) 123 NTR 16. 71 (1998) 123 NTR 16 at 24. 72 (1998) 123 NTR 16 at 26. 73 (1999) 9 NTLR 29. 74 (1999) 9 NTLR 29 at 43 [27]. 75 [1990] 3 NZLR 39. 76 [1990] 3 NZLR 39 at 40. 77 [1990] 3 NZLR 39 at 41. Crennan Bell "It necessarily refers to the end product of the sentencing process, not to conclusions reached in the course of arriving at the sentence which is ultimately imposed. Such conclusions whether as to legal principle or factual matters, are reviewable by way of appeal against that sentence." The decision in Shepherd was not questioned or elaborated on in later cases78. A similarly constrained view of a corrective provision was expressed by the Supreme Court of the United States in Hill v United States79. Examples from jurisdictions outside Australia must, of course, be treated with caution. The New Zealand and United States examples, however, reinforce the important functional distinction between re-opening proceedings to correct an error which has led to a sentence not authorised by law and correction of error by a sentencing court on appeal. The attribution of a narrower purpose and application to s 43 is consistent with the maintenance of that distinction. The approach by the Court of Criminal Appeal to s 43 Bathurst CJ and Garling J, in a joint judgment with which Johnson and Bellew JJ agreed, correctly focused upon the text of s 43. Their Honours observed that on one view the term "contrary to law" referred to a sentence "which could not be lawfully imposed as distinct from one arrived at by an erroneous process of reasoning."80 Their Honours acknowledged that the section had consistently been given a broad construction in New South Wales. The decisions which had enunciated that broad construction had not been challenged81. 78 Section 372 of the Crimes Act 1961 (NZ), and the similar provision, s 77 of the Summary Proceedings Act 1957 (NZ), were repealed, and were replaced by ss 180– 182 of the Criminal Procedure Act 2011 (NZ). 79 368 US 424 at 430 (1962). 80 [2013] NSWCCA 117 at [22]. 81 [2013] NSWCCA 117 at [23]. Crennan Bell After reviewing a number of those decisions and the two decisions of the Court of Criminal Appeal of the Northern Territory mentioned above82, their Honours held in relation to s 43: In an appeal against sentence under s 5(1) or s 5D of the Criminal Appeal Act 1912 (NSW), the jurisdiction to impose a different sentence is enlivened upon error being demonstrated. Section 43(1) focuses on outcome. Error must be identified and it must be shown that the error led to a penalty which it was not otherwise open to the court to impose83. Section 43 is a discretionary provision designed principally to correct manifest error. Generally speaking, the only circumstance in which the power to re-open should be exercised is where error is apparent from the sentence itself, not from an analysis of the legal reasoning which underpins the sentence84. Section 43 should not be used as a vehicle to review what might colloquially be described as Muldrock appeals, save possibly for the case in which it is alleged that the Court of Criminal Appeal erroneously sentenced on the basis of Way85. The reasoning of the Court of Criminal Appeal on the Crown appeal demonstrated error86. However, the sentence imposed by the Court of Criminal Appeal would only be "contrary to law" if the application of correct principle had led to the conclusion that the Crown appeal should have been dismissed87. 82 [2013] NSWCCA 117 at [24]–[42]. Their Honours also quoted a passage from the judgment of Kearney J in R v Melville (1999) 9 NTLR 29 at 43 [27], referring to decisions in Queensland and Western Australia. 83 [2013] NSWCCA 117 at [63]. 84 [2013] NSWCCA 117 at [66]. 85 [2013] NSWCCA 117 at [67]. 86 [2013] NSWCCA 117 at [70]–[71]. 87 [2013] NSWCCA 117 at [73]. Crennan Bell The sentences which were imposed by the Court of Criminal Appeal were within its reasonable discretion and could, in accordance with correct principle, have been lawfully imposed88. The penalty imposed by the Court of Criminal Appeal was appropriate and thus not contrary to law within the meaning of s 43(1)(a)89. As appears from the preceding, Bathurst CJ and Garling J disposed of the application on the basis that the condition for the exercise of the power conferred by s 43 had not been satisfied. The penalty imposed was not "contrary to law". Therefore the section did not apply. McClellan JA on the other hand held that, on the strength of previous decisions of the Court of Criminal Appeal, the correctness of which were not under challenge, the Court was bound to interpret s 43 as applicable to errors in reasoning of the kind identified in Muldrock90. His Honour, however, concluded that the Court should decline, in its discretion, to exercise the power conferred by s 4391. McClellan JA was correct to discern a construction of s 43 in the reasoning of Bathurst CJ and Garling J which was narrower than that adopted in decisions of the Court of Criminal Appeal of New South Wales discussed earlier in these reasons. The appellant's submission was to like effect. Indeed, a strong thread in the appellant's argument was that the Court of Criminal Appeal had departed from its own previous decisions, which were not in question before it. The task of this Court, however, is to construe s 43, at least to the extent necessary to decide the appeal. Invocation of the previous approach taken by the Court of Criminal Appeal and of the approaches taken by other intermediate appeal courts to similar but not identical provisions is of limited assistance. In relation to the decisions of intermediate appeal courts outside New South Wales, it is also necessary to bear in mind what was said in DJL v Central Authority92 and quoted in Burrell93: 88 [2013] NSWCCA 117 at [98]. 89 [2013] NSWCCA 117 at [99]. 90 [2013] NSWCCA 117 at [106]–[107]. 91 [2013] NSWCCA 117 at [109]–[110]. 92 (2000) 201 CLR 226 at 247 [43]. 93 (2008) 238 CLR 218 at 223 [14]. Crennan Bell "In the case of each such court, State or federal, attention must be given to the text of the governing statutes and any express or implied powers to be seen therein." There are significant textual differences between the relevant statutory provisions of the States and Territories. The broad approach of the earlier decisions of the Court of Criminal Appeal was underpinned by emphasis upon a remedial purpose, the breadth of which was not supported by the text of s 43 nor by the purpose of the re-opening jurisdiction as stated to the Parliament of New South Wales when s 19 of the Criminal Procedure Act was enacted. The task of construction begins with the text of the provision. The purpose of the provision is an aid to its construction, as mandated by s 33 of the Interpretation Act 1987 (NSW). The construction and application of s 43 Section 43 confers upon courts exercising jurisdiction in criminal proceedings a power to re-open those proceedings and to impose a penalty that is in accordance with law94. The section only applies to criminal proceedings in which one of two conditions is fulfilled. The condition directly relevant to this appeal is that "a court has … imposed a penalty that is contrary to law". On the ordinary meaning of that collocation, what must be contrary to law is the "penalty". That condition is not satisfied merely by demonstrating that the court has erred in law or fact. Notwithstanding such error, the penalty imposed may not be contrary to law. It may fall within the range of penalties permitted or required by the relevant statutory provisions and may also be consistent with the reasonable exercise of a discretion applicable to the particular offence and offender. Examples of circumstances in which a penalty may be said to be contrary to law include: A penalty which exceeds the maximum penalty prescribed for the offence. A penalty which it is beyond the power of the court to impose because some precondition for its imposition is not satisfied — eg the existence of an aggravating factor or the existence of prior convictions for the same kind of offence. 94 It is not necessary for present purposes to consider whether the section extends the jurisdiction of the courts. Crennan Bell A penalty which lies outside the range of penalties that could have been imposed in a reasonable exercise of discretion is not, thereby, contrary to law in the sense required by s 43, not least because reconsideration of such would involve an evaluative exercise which must be dealt with by way of appeal. The appellant relied upon the approach to s 43 reflected in the line of decisions of the Court of Criminal Appeal mentioned earlier in these reasons. Much of the appellant's argument was by way of complaint about the Court of Criminal Appeal's departure from those decisions, the limited classes of cases to which it held s 43 to apply, and the consequential reduction in the utility of the provision in a way that was said to be inconsistent with its remedial purpose. The respondent submitted that the finding by the Court of Criminal Appeal that the sentence imposed on the Crown appeal was within its reasonable discretion95 was another way of expressing a finding that the error did not result in a higher sentence than was warranted. Correction of legal and factual errors in sentencing may be effected in more than one way. There are no doubt classes of sentencing error which would not fall within the scope of s 43 as construed by the Court of Criminal Appeal, but would fall within the scope of inherent power or the slip rule or statutory extensions thereof96. Such corrective powers do not require, as a condition of their application, that the penalty imposed be "contrary to law". Correction of legal and factual errors is principally available by way of appeal. If an error is obvious and conceded, the appeal may be disposed of by consent order. The respondent also referred in written submissions to the availability of a judicial inquiry or a referral to the Court of Criminal Appeal in relation to a sentence pursuant to Pt 7 of the Crimes (Appeal and Review) Act 2001 (NSW). Part 7 was considered in Sinkovich v Attorney General of New South Wales97, which held that Muldrock errors could found an application under it for a judicial inquiry or referral98. Of course, the availability of more than one means of redressing sentencing error, which may be contracted or expanded or added to from time to 95 [2013] NSWCCA 117 at [98]. 96 Eg, r 50C(3) of the Criminal Appeal Rules (NSW), whereby the Court of Criminal Appeal may, of its own motion, within 14 days after an order is entered "set aside or vary the order as if the order had not been entered." 97 [2013] NSWCA 383. 98 [2013] NSWCA 383 at [79]. Crennan Bell time, is not determinative of the constructional question in relation to s 43. Their existence demonstrates that corrective powers may be conferred on courts to deal with a variety of cases and subject to a variety of conditions. Such powers, however, do not subsume the appeal process, which remains the principal qualification on the tenet of finality of ligitation. The text of s 43 is clear enough. The relevant power is conditioned upon the penalty being "contrary to law". A construction encompassing error in the imposition of a lawful penalty would allow the power to be applied to any penalty, however appropriate, that is imposed under the influence of an error of law or fact. That construction does not fit with the text. Nor does it accord with the limited purpose of the section. The principle of finality should not be taken to have been qualified except by clear statutory language and only to the extent that the language clearly permits. The construction for which the appellant contended, and which is reflected in some earlier decisions of the Court of Criminal Appeal, can only be supported by attributing to the provision a purpose which, whatever its practical benefits, leaves the boundaries between correction and appeal porous and protected only by the exercise of the sentencing court's discretion. The importance of the distinction between original and appellate jurisdiction in the application of s 43 to courts of first instance militates against such a result. The appellant's construction should not be accepted. A penalty is not "contrary to law" only because it is reached by a process of erroneous reasoning or factual error. Conclusion For the preceding reasons the Court of Criminal Appeal did not err in its approach to the application of s 43 of the Sentencing Act. The sentences imposed were not "contrary to law". The appeal should be dismissed. The Crimes (Sentencing Procedure) Act 1999 (NSW) ("the Act") confers a discretion on a court to reopen criminal proceedings to "impose a penalty that is in accordance with the law" and, "if necessary", to "amend any relevant conviction or order"99. The criminal proceedings in which that discretion applies are confined to those in which a court has "imposed a penalty that is contrary to law" or "failed to impose a penalty that is required to be imposed by law"100. Any right of appeal is unaffected101, save as to the time for commencing an appeal against a reimposed penalty102. This appeal concerns when one of threshold conditions for consideration of the exercise of that statutory discretion to reopen criminal proceedings is met. When has a court imposed a "penalty that is contrary to law"? the The appellant argues that it is enough that the court has made an error of law in exercising its discretion to impose the penalty. A majority of the Court of Criminal Appeal rejected that argument. They held that such an error of law can result in a penalty that is contrary to law, but only if the error has resulted in the court imposing a penalty which is outside the range which the court could have imposed in the lawful exercise of its discretion. They said that the relevant question is whether or not the court "sentencing in accordance with the correct principles could have imposed the penalty which was in fact imposed"103. I would also reject the appellant's argument. Taking a narrower view than the Court of Criminal Appeal, I would hold that a penalty is only contrary to law, in the sense required to meet the threshold condition for consideration of the exercise of the discretion to reopen, if the order imposing the penalty is in its terms an order that the court could not have made in the criminal proceedings. A provision conferring power on courts is not to be read down by making an implication or imposing a limitation which is not found in its express words104. Yet a "central and pervading tenet of the judicial system is that 99 Section 43(2). 100 Section 43(1). 101 Section 43(4). 102 Section 43(5). 103 Achurch v The Queen (No 2) [2013] NSWCCA 117 at [73]. See also at [63], [98], 104 Owners of "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 181 CLR 404 at 421; [1994] HCA 54. controversies, once resolved, are not to be reopened except in a few, narrowly defined, circumstances"105. Words conferring a power to reopen ought not to be read widely. The words "contrary to law" are by no means incapable of describing a penalty imposed in breach of an express or implied condition of discretion such as would warrant appellate intervention106. Here, however, that reading of those words is too wide. Legislative history reveals the legislative purpose of conferring the power to reopen to be quite narrow. The current provision derives in relevant part from the re-enactment in 1999 of a provision introduced in 1988107 giving to all courts the same power to reopen which had first been given to magistrates in 1986108. The power as first given to magistrates in 1986 was explained at the time of its enactment "only [to] allow the magistrate to correct a sentence which is patently in error" and to be "necessary because on occasions magistrates are handing down sentences which they do not have the power to impose"109. The errors being made were "often only discovered after the time for an appeal [had] expired", leaving "only one avenue of relief, namely, an application to the Supreme Court of New South Wales to quash the order and refer the matter back to the magistrate"110. Two specific areas of sentencing were identified as highlighting the problem: the imposition of a period of disqualification less than the minimum period prescribed for a motor traffic offence; and the sentencing of 105 Burrell v The Queen (2008) 238 CLR 218 at 223 [15]; [2008] HCA 34, quoting D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 17 [34]; [2005] HCA 106 Cf Barbaro v The Queen (2014) 88 ALJR 372 at 382 [61]; 305 ALR 323 at 335- 336; [2014] HCA 2. 107 Section 19 (renumbered s 24) of the Criminal Procedure Act 1986 (NSW), introduced by the Criminal Procedure (Amendment) Act 1988 (NSW). 108 Section 100HA of the Justices Act 1902 (NSW), introduced by the Justices (Amendment) Act 1986 (NSW). 109 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3591. 110 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3591-3592. an ineligible person to periodic detention111. It was noted that provisions giving magistrates similar powers to reopen then existed in Tasmania, Western Australia and Queensland112. The extension of the power to other courts in 1988 was explained at that time as making the same procedure available to all judicial officers, thereby saving costs and relieving appellate courts of unnecessary work. It was emphasised that the discretion "can only be used where there has been a technical error in the sentence imposed" (the example was again given of the imposition of a disqualification period less than that required for a motor traffic offence) and "cannot be used to review a penalty by way of appeal"113. Legislative history to that point therefore reveals that the purpose of the power to reopen was to enable a court to ensure that an order that the court had made in the resolution of criminal proceedings was an order which operated, in its terms, to impose a penalty that the court was empowered to impose in those proceedings, as well as to impose a penalty that the court was required to impose in those proceedings. The importance of having such a power to reopen reposed in the court itself was to avoid the need for an appeal, or for an application in the original supervisory jurisdiction of the Supreme Court, merely to correct an error or omission apparent from the terms of the earlier order considered in the context of the criminal proceedings. Whether the purpose extended to the correction of an error or omission apparent only from information not placed before the court in the criminal proceedings is unclear, and goes to an issue which does not now need to be resolved114. What is clear is that the legislative purpose was emphatically not to empower a court to reopen criminal proceedings so as to reconsider its reasons for making that earlier order either generally or by way of asking, as if on appeal, whether its exercise of any discretion in those reasons was in accordance with law. Between 1988 and 1999, the Court of Criminal Appeal considered the provision then conferring the discretion in four cases. The first two were appeals 111 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3592. 112 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 1 May 1986 at 3591. The provisions were s 76A of the Justices Act 1959 (Tas); s 166B of the Justices Act 1902 (WA); s 147A of the Justices Act 1886 (Q). 113 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 21 September 1988 at 1673. 114 Compare Shortland v Heath [1977] WAR 61; Traegar v Pires de Albuquerque (1997) 18 WAR 432; Boyd v Sandercock; Ex parte Sandercock [1990] 2 Qd R 26. against reimposed penalties. In both of those cases, the threshold condition of the original penalty having been contrary to law was conceded and the only question was as to the exercise of discretion115. The third case, in 1994, was an appeal against an original sentence brought in circumstances where the court which had imposed the sentence had held that it lacked power to reopen116. The appeal was allowed on the ground that the sentence was manifestly inadequate. Hunt CJ at CL went on to express the view that the court which had imposed the original sentence had been "clearly right" in considering that it lacked power to reopen "to carry out the exercise which this Court has now carried out" in that the discretion to reopen did not permit "a rehearing on the merits"117. The other two members of the Court (Smart and Badgery-Parker JJ) specifically refrained from endorsing that view118. The fourth case, in 1996, was again an appeal against a reimposed penalty. The original penalty was a sentence required by statute to commence on or before the date of imposition, but in fact specified by the court to commence on a later date119. The sentence was held to be a penalty that was contrary to law. Badgery-Parker J (with whom Gleeson CJ and Hidden J agreed) remarked: "Whatever else [the provision] was intended to do, it was intended to enable the correction of errors in the sentencing process (which is a highly technical process, not in the determination of the appropriate level of sentence, which is very much an intuitive process, but in the formal expression of the results of that determination), a process in which error is apt to occur." In the meantime, the provision had been touched on in the Court of Appeal in 1995 in the course of determining an application in the original jurisdiction of the Supreme Court for judicial review of a penalty imposed by the District Court120. Having decided that the application was to be dismissed on its 115 R v Petrou unreported, Court of Criminal Appeal of the Supreme Court of New South Wales, 13 February 1990; R v Denning unreported, Court of Criminal Appeal of the Supreme Court of New South Wales, 15 May 1992. 116 Tolmie (1994) 72 A Crim R 416. 117 Tolmie (1994) 72 A Crim R 416 at 420. 118 Tolmie (1994) 72 A Crim R 416 at 421. 119 R v Tangen unreported, Court of Criminal Appeal of the Supreme Court of New South Wales, 21 June 1996. 120 Ho v Director of Public Prosecutions (1995) 37 NSWLR 393. merits, Kirby P (with whom Gleeson CJ and Sheller JA agreed) went on to accept a submission that it would in any event have been open to the applicant to have applied to the District Court to reopen121. Kirby P said that "[f]or the correction of arguable mistakes in sentencing", the provision "should be given the widest possible operation", and that an error of law in the exercise of sentencing discretion meant that the "resulting penalty is then one 'contrary to law'"122. Had the view so expressed by Kirby P in 1995 come to represent a settled judicial interpretation, re-enactment of the provision in the same terms in 1999 might have been susceptible of characterisation as its legislative adoption123. The view, however, was not necessary to the decision of the Court of Appeal in 1995, was contrary to the view earlier expressed by Hunt CJ at CL, and had not by 1999 been the subject of further appellate consideration in New South Wales. Nothing in the extrinsic material accompanying re-enactment of the provision in 1999 suggests legislative advertence to it. Against it is the legislative purpose revealed by the earlier legislative history, to which I have already referred. Following re-enactment of the provision in 1999 and before the present case, the Court of Criminal Appeal considered the provision in three cases: refusing in two of them to find that its own resentencing on an appeal against sentence had resulted in a penalty that was contrary to law124, and accepting in the third that the District Court had imposed a penalty that was contrary to law when it made an impermissible direction as to the date of commencement of a sentence125. The Court of Appeal also considered the re-enacted provision in two cases: in the first holding that an internally inconsistent order imposed a penalty that was contrary to law126, and in the second finding no jurisdictional error in a decision of a court refusing to reopen127. While some of the reasoning in each of those cases proceeded on an acceptance of a view as to the scope of the threshold 121 Ho v Director of Public Prosecutions (1995) 37 NSWLR 393 at 401-403. 122 Ho v Director of Public Prosecutions (1995) 37 NSWLR 393 at 403. 123 Zickar v MGH Plastic Industries Pty Ltd (1996) 187 CLR 310 at 329; [1996] HCA 31. 124 R v Finnie (No 2) [2004] NSWCCA 150 at [31]; R v Chalmers (No 2) (2007) 179 A Crim R 188 at 192 [23]. 125 Thompson-Davis v The Queen [2013] NSWCCA 75 at [35], [47]. 126 Erceg v District Court (NSW) (2003) 143 A Crim R 455 at 481-482 [152]. 127 Meakin v Director of Public Prosecutions (NSW) (2011) 216 A Crim R 128 at 131 condition which is wider than I have stated it, I see no reason to doubt the outcome of any of them. The appeal should be dismissed.
HIGH COURT OF AUSTRALIA Matter No S142/2014 HUNTER AND NEW ENGLAND LOCAL HEALTH DISTRICT APPELLANT AND RESPONDENT Matter No S143/2014 HUNTER AND NEW ENGLAND LOCAL HEALTH DISTRICT APPELLANT AND SHEILA MARY SIMON & ANOR RESPONDENTS Hunter and New England Local Health District v McKenna Hunter and New England Local Health District v Simon [2014] HCA 44 12 November 2014 S142/2014 & S143/2014 ORDER Matter No S142/2014 Appeal allowed. Set aside paragraphs 2, 3 and 4 of the order of the Court of Appeal of the Supreme Court of New South Wales made on 23 December 2013 and, in their place, order that the appeal to that Court be dismissed. The appellant pay the respondent's costs of the appeal to this Court. Matter No S143/2014 Appeal allowed. Set aside paragraphs 2, 3 and 4 of the order of the Court of Appeal of the Supreme Court of New South Wales made on 23 December 2013 and, in their place, order that the appeal to that Court be dismissed. The appellant pay the respondents' costs of the appeal to this Court. On appeal from the Supreme Court of New South Wales Representation R J Cheney SC with N E Chen for the appellant (instructed by TressCox Lawyers) B M Toomey QC with G R Graham for the respondents (instructed by T D Kelly & Co) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Hunter and New England Local Health District v McKenna Hunter and New England Local Health District v Simon Negligence – Duty of care – Statutory duties – Mental Health Act 1990 (NSW) provided for admission and detention of mentally ill persons in hospital – Act prohibited detention or continuation of detention of mentally ill person in hospital unless medical superintendent formed opinion that no other care of less restrictive kind appropriate and reasonably available – Alleged negligence of hospital and medical staff in discharging mentally ill person – Whether hospital and medical staff owed common law duty of care to protect other persons against harm caused by mentally ill person upon discharge – Whether duties under Act inconsistent with common law duty of care. Words and phrases – "duty of care", "inconsistent duties", "mentally ill person". Mental Health Act 1990 (NSW), Ch 4, Pt 2, Div 1. FRENCH CJ, HAYNE, BELL, GAGELER AND KEANE JJ. Phillip Pettigrove was from Echuca, Victoria. He had a long history of chronic paranoid schizophrenia and was being treated for his illness at Echuca. In July 2004, while in New South Wales with a friend, Mr Stephen Rose, Mr Pettigrove was involuntarily admitted to, and detained in, the Manning Base Hospital at Taree ("the Hospital") under Div 1 of Pt 2 of Ch 4 of the Mental Health Act 1990 (NSW). Dr Warwick Coombes, a psychiatrist who saw Mr Pettigrove at the Hospital, recorded that he was of the opinion that Mr Pettigrove was a "mentally ill person"1. The medical superintendent of the Hospital, Dr Kay Wu, certified2 that she was of the opinion that Mr Pettigrove was a "mentally ill person". On the day Mr Pettigrove was admitted to the Hospital, the Hospital obtained, and Dr Coombes read, Mr Pettigrove's medical records from the Echuca Community Mental Health Service. Mr Pettigrove, Mr Pettigrove's mother and Mr Rose. that Mr Pettigrove would be kept in the Hospital overnight and that Mr Rose would then drive with Mr Pettigrove to his mother's home in Echuca, where he would receive continuing medical treatment. All agreed As proposed, Mr Pettigrove was discharged from the Hospital on the following day. Mr Rose picked him up at the Hospital and they set off to travel by car to Echuca. In the course of that journey, Mr Pettigrove killed Mr Rose. He told police that he had acted on impulse, believing that Mr Rose had killed him in a past life. Mr Pettigrove later took his own life. There was no dispute that the appellant ("the Health Authority") is responsible for the conduct of the Hospital and its medical staff. Did either or both of the Hospital and Dr Coombes owe Mr Rose, or his relatives, a duty of care that was breached by discharging Mr Pettigrove into the company of Mr Rose? The course of proceedings Two proceedings were brought in the District Court of New South Wales for damages for psychiatric injury allegedly suffered by relatives of Mr Rose as a result of his death: one proceeding brought by a sister of Mr Rose and a separate proceeding brought by the mother and another sister of Mr Rose. The claims 1 Mental Health Act 1990 (NSW), s 9. Hayne Bell made in the proceedings were not materially different and the two proceedings were tried together. Although there are separate appeals to this Court in each matter, it is convenient to deal with them together and to refer to the plaintiffs, together, as "the relatives". In the District Court, the relatives alleged that Dr Coombes and the Hospital did not exercise reasonable professional care and skill in deciding that Mr Pettigrove could leave the Hospital with Mr Rose for the purpose of Mr Rose taking Mr Pettigrove back to the place in Victoria where he could be treated by his usual treating doctors. The trial judge, Elkaim DCJ, recorded that the relatives put their case on the basis that the discharging of Mr Pettigrove from the Hospital, of itself, was not negligent. Rather, their case was that placing Mr Pettigrove into Mr Rose's care for the road trip was the act of negligence. And the trial judge recorded that the real dispute between the parties was whether there was a breach of duty. The trial judge found that there had been no breach of duty and entered judgment in both proceedings for the Health Authority. The trial judge based his conclusions about breach of duty on the application of the Civil Liability Act 2002 (NSW) ("the CLA"). His Honour held that s 5B(1)3 of the CLA was engaged because it was not shown that "a reasonable person in Dr Coombes' position would have concluded that there was a not insignificant risk of Mr Pettigrove behaving as he did". His Honour further found that s 5O4 of that "A person is not negligent in failing to take precautions against a risk of harm unless: the risk was foreseeable (that is, it is a risk of which the person knew or ought to have known), and the risk was not insignificant, and in the circumstances, a reasonable person in the person's position would have taken those precautions." A person practising a profession (a professional) does not incur a liability in negligence arising from the provision of a professional service if it is established that the professional acted in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice. (Footnote continues on next page) Hayne Bell Act also applied and that Dr Coombes had acted "in a manner that (at the time the service was provided) was widely accepted in Australia by peer professional opinion as competent professional practice"5. The relatives appealed to the Court of Appeal of the Supreme Court of New South Wales. The Court of Appeal (Beazley P and Macfarlan JA, Garling J dissenting) allowed6 the relatives' appeals and ordered that there be judgments for the relatives. Beazley P held7 that the Health Authority owed Mr Rose "a duty of care not to release [Mr Pettigrove], who was a mentally ill person, into Mr Rose's care, or at least his sole care, for the purposes of conveying him to Victoria where it was intended or, at least, expected that he would undergo further psychiatric treatment". Macfarlan JA held8 that "[t]he Hospital owed Mr Rose a common law duty to take reasonable care to prevent Mr Pettigrove causing physical harm to Mr Rose"; that Dr Coombes was negligent "in discharging Mr Pettigrove from the Hospital" when he did; that the Health Authority "is not entitled to the protection of s 5O" of the CLA9; and that Dr Coombes' negligence However, peer professional opinion cannot be relied on for the purposes of this section if the court considers that the opinion is irrational. The fact that there are differing peer professional opinions widely accepted in Australia concerning a matter does not prevent any one or more (or all) of those opinions being relied on for the purposes of this section. Peer professional opinion does not have to be universally accepted to be considered widely accepted." s 5O(1). 6 McKenna v Hunter and New England Local Health District (2013) Aust Torts Reports ¶82-158. (2013) Aust Torts Reports ¶82-158 at 67,001 [2]. (2013) Aust Torts Reports ¶82-158 at 67,002 [10]. 9 Macfarlan JA also rejected arguments that two other provisions of the CLA (ss 43 and 43A), concerning the exercise of statutory powers by public or other authorities, were engaged: (2013) Aust Torts Reports ¶82-158 at 67,002 [10]. Hayne Bell was a cause of the injuries which Mr Rose, and therefore his mother and sisters, suffered. By special leave, the Health Authority appeals to this Court in each matter. Each appeal should be allowed. Consistent with the terms on which special leave was granted, the Health Authority should pay the costs of each appeal and the costs orders made by the Court of Appeal should not be disturbed. Orders 2, 3 and 4 made by the Court of Appeal in each matter should be set aside and in their place there should be orders that each appeal to the Court of Appeal is dismissed. Argument of the appeal In this Court, the Health Authority alleged many grounds of appeal. It alleged that the Court of Appeal was wrong to hold that it (or, more accurately, the Hospital or Dr Coombes) owed a duty of care to Mr Rose and his relatives. It raised issues about the application of s 5B of the CLA and breach of duty, s 5O of the CLA and "competent professional practice", s 43 of the CLA and liability for breach of a statutory duty, and s 43A of the CLA and the "exercise of special statutory powers". The parties filed written submissions directed to all of these issues. At the hearing of the appeals, the Court required the parties to make oral submissions about only the question of duty of care. The other issues raised by the Health Authority do not fall for consideration if, as these reasons will show, the Hospital and Dr Coombes did not owe the relatives a duty of care. Consideration of those other issues, about ss 5B, 5O, 43 and 43A of the CLA, should await a case in which it is necessary to examine them. Duty to whom? In the Court of Appeal, the Health Authority contended that judgment was properly entered in its favour in each proceeding because the Hospital and Dr Coombes owed no relevant duty of care. (It will be recalled that the trial judge decided the cases on the basis that there was no breach of duty.) The Health Authority argued that it owed no relevant duty of care to the relatives because the Hospital and Dr Coombes did not owe Mr Rose a duty to take reasonable care to avoid Mr Pettigrove inflicting physical injury on Mr Rose. In his reasons for judgment, Macfarlan JA recorded10 that the Health Authority did 10 (2013) Aust Torts Reports ¶82-158 at 67,022 [85]. Hayne Bell not argue "that even if the Hospital owed a relevant duty of care to Mr Rose, it nevertheless did not owe such a duty to the [relatives], who were members of his family". Argument having taken this course in the Court of Appeal, there was no exploration in argument, in either that Court11 or this, of how a finding that the Hospital or Dr Coombes owed a duty of care to Mr Rose bears upon whether it or he owed a duty of care to the relatives. The hypothesised duties are owed to different persons and are duties to take reasonable care to prevent a third party doing something that would cause different kinds of injury: in the case of Mr Rose, physical injury; in the case of the relatives, psychiatric injury. It is not necessary, however, to decide whether the two different duties are related12 in the manner assumed in argument in the Court of Appeal. That is, it is not necessary to decide whether the Court of Appeal was right to conclude that, because the Hospital and Dr Coombes owed Mr Rose a duty to take reasonable care to prevent Mr Pettigrove inflicting physical harm on him, they also owed the relatives a duty to take reasonable care to prevent psychiatric injury sustained on learning that Mr Pettigrove had killed Mr Rose. Nothing in these reasons should be understood as deciding that point. It is also not necessary to consider the extent and potential indeterminacy of the liability which imposing the alleged duty of care would entail. If, as the relatives submitted, the Hospital and Dr Coombes owed Mr Rose and his relatives a duty of care, it is not easy to see why that duty did not extend to any and every person with whom Mr Pettigrove would come in contact after his release from the Hospital. The range of persons who might foreseeably suffer harm if Mr Pettigrove acted violently was extensive13. Difficulties in determining the existence of a duty In Sullivan v Moody14 this Court pointed out why determining the existence and nature and scope of a duty of care may be difficult. Four examples 11 cf (2013) Aust Torts Reports ¶82-158 at 67,040 [206] per Garling J. 12 cf Tame v New South Wales (2002) 211 CLR 317 at 399-400 [243]-[246]; [2002] HCA 35. 13 cf Sullivan v Moody (2001) 207 CLR 562 at 582 [61]; [2001] HCA 59. 14 (2001) 207 CLR 562. Hayne Bell were given of classes of case in which particular difficulty may arise. The Court said15: "Sometimes the problems may be bound up with the harm suffered by the plaintiff, as, for example, where its direct cause is the criminal conduct of some third party. Sometimes they may arise because the defendant is the repository of a statutory power or discretion. Sometimes they may reflect the difficulty of confining the class of persons to whom a duty may be owed within reasonable limits. Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships. The relevant problem will then become the focus of attention in a judicial evaluation of the factors which tend for or against a conclusion, to be arrived at as a matter of principle." (footnotes omitted) The examples given in Sullivan were all based on particular decisions of this Court. It is useful to amplify the references given in Sullivan in the way Gummow J did in Vairy v Wyong Shire Council16. In Sullivan, the Court referred to Modbury Triangle Shopping Centre Pty Ltd v Anzil17 as an example of the first problem (nature of harm). It referred to Crimmins v Stevedoring Industry Finance Committee18 and Brodie v Singleton Shire Council19 (to which may be added Graham Barclay Oysters Pty Ltd v Ryan20) as examples of the second problem (statutory power). It referred to Perre v Apand Pty Ltd21 (to which may be added Woolcock Street Investments Pty Ltd v CDG Pty Ltd22) as an example of 15 (2001) 207 CLR 562 at 579-580 [50]. 16 (2005) 223 CLR 422 at 448 [78]; [2005] HCA 62. 17 (2000) 205 CLR 254; [2000] HCA 61. 18 (1999) 200 CLR 1; [1999] HCA 59. 19 (2001) 206 CLR 512; [2001] HCA 29. 20 (2002) 211 CLR 540; [2002] HCA 54. 21 (1999) 198 CLR 180; [1999] HCA 36. 22 (2004) 216 CLR 515; [2004] HCA 16. Hayne Bell the third problem (indeterminacy of class). It referred to Hill v Van Erp23 (to which may be added Koehler v Cerebos (Australia) Ltd24) as an example of the fourth problem (coherence). Each of those decisions demonstrates that questions of duty of care may present difficult issues. Every one of the four examples given in Sullivan was relevant in this matter. The relatives' claims presented issues about the nature of harm, about the exercise of statutory powers and discretions, about indeterminacy of class and about coherence. These reasons will show that the second of those considerations, statutory power, is determinative. But that conclusion should not be understood as suggesting that the other three considerations which have been mentioned (nature of harm, indeterminacy and coherence) are not relevant considerations bearing upon whether the Hospital or Dr Coombes owed the relatives a relevant duty of care. Proper determination of whether there was a relevant duty of care and, if there was, of the nature and scope of that duty is not assisted by directing attention only to why the relatives suffered the injuries they did. The relatives sustained psychiatric injury on learning of Mr Rose's death at the hand of Mr Pettigrove. Their complaint was that Mr Pettigrove should not have been allowed to leave the Hospital, or at least not in the company of Mr Rose because there was a risk that Mr Pettigrove would do (physical) injury to Mr Rose. And they alleged that Dr Coombes and the Hospital did not act with reasonable care and skill when deciding whether Mr Pettigrove could leave the Hospital to travel to Echuca with Mr Rose. As will be recalled, the relatives submitted at trial that the relevant act of negligence was placing Mr Pettigrove into the care of Mr Rose. The relatives sought to distinguish that conduct from what was described as the decision to discharge Mr Pettigrove. It is greatly to be doubted that any distinction of the kind described can be made in this case. But whether or not that is so, specification of the respect or respects in which the relatives said that the Hospital or Dr Coombes did not act with reasonable care should not distract attention from the need to identify the duty which it is alleged was owed to the relatives: a duty to take reasonable care when deciding that the powers given by 23 (1997) 188 CLR 159 at 231; [1997] HCA 9. 24 (2005) 222 CLR 44; [2005] HCA 15. Hayne Bell the Mental Health Act, which had been used to detain Mr Pettigrove, should no longer be used to prevent him leaving the Hospital. Identifying whether there was such a duty (and if there was, its nature and scope) requires consideration of the Mental Health Act. Would a duty of care to the relatives be consistent with the provisions of the Mental Health Act? Consideration of this question must begin with an examination of the relevant provisions of the Mental Health Act. Mental Health Act Section 4(2)(b) of the Mental Health Act provided that "[i]t is the intention of Parliament" that the Act be interpreted, and "every function, discretion and jurisdiction conferred or imposed" by the Act be, as far as practicable, performed or exercised, so that (among other things) "any restriction on the liberty of patients and other persons who are mentally ill or mentally disordered and any interference with their rights, dignity and self-respect are kept to the minimum necessary in the circumstances". Consistent with this general principle, the provisions of Div 1 of Pt 2 of Ch 4 of the Act (ss 20-37A) limited the powers to detain a person in hospital. Section 20 provided that: "A person must not be admitted to, or detained in or continue to be detained in, a hospital under this Part unless the medical superintendent is of the opinion that no other care of a less restrictive kind is appropriate and reasonably available to the person." (emphasis added) That is, the Mental Health Act prohibited detention, or the continuation of detention, unless the medical superintendent of the hospital formed the opinion that no other less restrictive care was appropriate and reasonably available. This prohibition was reinforced by other provisions of the Mental Health Act including, among others, ss 28, 29 and 35. Section 29 required prompt examination by the medical superintendent of a person detained in a hospital. Section 28 obliged the medical superintendent to refuse to detain a person unless the superintendent was of the opinion that the person was a mentally ill person or a mentally disordered person. Section 35(3) required that a person not be further detained in a hospital if the medical superintendent was of the opinion either that the person was not a mentally ill person or a mentally disordered person or that "other care of a less restrictive kind is appropriate and reasonably available to the person". Hayne Bell These features of the Act presented a medical superintendent of a hospital deciding whether a person should be, or should continue to be, involuntarily admitted and detained with two questions. First, is the person a mentally ill person or a mentally disordered person? Second, if yes, is there no other care of a less restrictive kind which is appropriate and reasonably available to the person? No doubt, each question required clinical assessment and judgment, and each had to be answered either yes or no. But if the person was judged to be a mentally ill person, the Act required not only that "any restriction on the liberty [of that person] and any interference with their rights, dignity and self-respect [be] kept to the minimum necessary in the circumstances"25, but also that, unless the medical superintendent was of the opinion that no other care of a less restrictive kind was appropriate and reasonably available, the person not be detained or further detained. Hence, determining that a person was a "mentally ill person" did not entail that the person must be, or must continue to be, involuntarily admitted to and detained in a hospital. Inconsistent duties The core of the relatives' complaint in this matter is that each was injured because a decision was made not to continue to detain a mentally ill person. But, as in Sullivan26, those who made that decision had other duties. Particularly relevant was the obligation imposed by s 20 not to detain or continue to detain a person unless the medical superintendent was of the opinion that no other care of a less restrictive kind was appropriate and reasonably available to the person. Performance of that obligation would not be consistent with a common law duty of care requiring regard to be had to the interests of those, or some of those, with whom the mentally ill person may come in contact when not detained. And, as explained27 in Sullivan, "if a suggested duty of care would give rise to inconsistent obligations, that would ordinarily be a reason for denying that the duty exists". If a hospital or doctor were to owe to those with whom a mentally ill person may later come in contact a duty to take reasonable care to protect those 25 s 4(2)(b). 26 (2001) 207 CLR 562 at 581 [55]-[56]. 27 (2001) 207 CLR 562 at 582 [60]. Hayne Bell others from risk of physical harm (or psychiatric injury caused by learning of physical harm) done by the mentally ill person, the hospital or doctor would be required to ask whether that risk is foreseeable and not insignificant and then take whatever steps a reasonable person would take in response to that risk. Foreseeable risks are those that are not far-fetched or fanciful28. If a person is a mentally ill person, the risk of that person acting irrationally will often not be insignificant, far-fetched or fanciful. And, in such cases, there will often be a risk29 that the irrational action will have adverse consequences. In some cases, there will be a risk that the mentally ill person will engage in conduct that may have adverse physical consequences for others, whether because the conduct is directed at another or because it otherwise causes adverse physical consequences. In some cases, perhaps many, the reasonable person in the position of the hospital or doctor would respond to those risks by continuing to detain the patient for so long as he or she remains a mentally ill person, thus avoiding the possibility that the risk of harm to others will eventuate. But that is not what the Mental Health Act required. It required the minimum interference with the liberty of a mentally ill person. It required30 that the person be released from detention unless the medical superintendent of the hospital formed the opinion that no other care of a less restrictive kind was appropriate and reasonably available to that person. Because s 20 of the Mental Health Act required that Mr Pettigrove be released from detention unless the medical superintendent formed the opinion that no other care of a less restrictive kind was appropriate and reasonably available to Mr Pettigrove, it is not to the point to decide whether, as the relatives alleged, the medical superintendent did not positively authorise his release from the Hospital (whether under s 35 of the Mental Health Act or otherwise). The powers, duties and responsibilities of doctors and hospitals respecting the involuntary admission and detention of mentally ill persons were prescribed 28 Wyong Shire Council v Shirt (1980) 146 CLR 40 at 48 per Mason J; [1980] HCA 12. 29 Section 9 of the Mental Health Act defined a "mentally ill person" in terms that required (among other things) "reasonable grounds for believing that care, treatment or control of the person [was] necessary ... for the person's own protection from serious harm, or ... for the protection of others from serious harm". Hayne Bell by the Mental Health Act. It is the provisions of that Act which identified the matters to which doctors and hospitals must have regard in exercising or not exercising those powers. Those provisions are inconsistent with finding the common law duty of care alleged by the relatives. Conclusion This being so, it is not necessary to consider the extent and potential indeterminacy of the liability which imposing a duty of care would entail. Nor is it necessary to consider the difficulties presented in this case by the immediate cause of the harm suffered by the relatives being occasioned by the unlawful act of Mr Pettigrove. And, as already explained, the issues about the application of ss 5B, 5O, 43 and 43A of the CLA are not reached. The Hospital and Dr Coombes did not owe the relatives a relevant duty of care. The appeals must be allowed and consequential orders made.
HIGH COURT OF AUSTRALIA APPELLANT AND TRANSPORT ACCIDENT COMMISSION RESPONDENT Sweedman v Transport Accident Commission [2006] HCA 8 9 March 2006 ORDER Appeal dismissed with costs. On appeal from the Supreme Court of Victoria Representation: B W Walker SC with J K Kirk for the appellant (instructed by Henry Davis York) D F Jackson QC with P H Solomon for the respondent (instructed by Transport Accident Commission) Interveners: D M J Bennett QC, Solicitor-General of the Commonwealth with G A Hill intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) M G Sexton SC, Solicitor-General for the State of New South Wales with M J Leeming intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor for New South Wales) C J Kourakis QC, Solicitor-General for the State of South Australia with M J Wait intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor's Office (SA)) C J Kourakis QC, Solicitor-General for the State of South Australia with M J Wait intervening on behalf of the Attorney-General for the State of Western Australia (instructed by Crown Solicitor for the State of Western Australia) P M Tate SC, Solicitor-General for the State of Victoria with M K Moshinsky intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Sweedman v Transport Accident Commission Private international law – Motor accident – Applicable law – Accident occurred in New South Wales between a car registered in Victoria and driven by a Victorian resident and a car registered in New South Wales and driven by a New South Wales resident – Accident assumed to have been caused by negligence of New South Wales driver – Victorian driver and passenger obtained compensation payments from the Transport Accident Commission pursuant to Transport Accident Act 1986 (Vic) – The Commission sued the New South Wales driver in the County Court of Victoria, exercising federal jurisdiction, for indemnity pursuant to Transport Accident Act, s 104 – Alternative avenue of redress was available to the Victorian residents under the Motor Accidents Act 1988 (NSW) – Whether the regime established by the Motor Accidents Act supplanted that of the Transport Accident Act – Whether identification of the law of Victoria as the applicable law by virtue of common law choice of law rules and the operation of Judiciary Act 1903 (Cth), s 80 would be inconsistent with the operation of the Constitution. Private international law – Choice of law – Applicable choice of law rule – Action brought on a statutory obligation of the appellant to indemnify the respondent – Statute provided no particular method of enforcing the obligation – Where appropriate action for enforcing the right of indemnity is an action in the nature of a quantum meruit – Where action brought in federal jurisdiction – Whether applicable law is the law of the State with which the obligation of the appellant to indemnify the Commission has the closest connection. Statutes – Construction – Motor accident – Where statutes of different States said to be capable of being invoked in relation to the same circumstances – Transport Accident Act invoked in proceedings in County Court of Victoria for an indemnity claim – Whether the provisions of the Motor Accidents Act spoke to, or in opposition to, those proceedings. Constitutional law – Inconsistency between laws of States – Where statutes of different States said to be capable of being invoked in relation to the same circumstances – Transport Accident Act invoked in proceedings in County Court of Victoria for an indemnity claim – New South Wales funds depleted in Victorian proceedings – Whether any inconsistency or clash between Victorian and New South Wales statutes – Whether State of New South Wales had the the compelled financial greater governmental consequences of a motor vehicle accident occurring in New South Wales – Whether any such inconsistency denied the operation of the Judiciary Act, s 80. in providing for interest Constitutional law (Cth) – Discrimination between residents – Resident of New South Wales subject to claim to indemnity under Victorian statute – Transport Accident Act, s 104(1) provided that that provision did not apply to a person entitled to be indemnified by the Commission under s 94 of that Act – Section 94 obliged the Commission to indemnify persons who have paid the transport accident charge levied upon owners of registered motor vehicles under Transport Accident Act, s 109(1) for the relevant period – New South Wales driver would not have been subject to claim to indemnity had she been resident in Victoria – Where New South Wales driver bound to hold third-party insurance pursuant to Motor Accidents Act, ss 8 and 11 – Whether Transport Accident Act, s 104(1) subjected New South Wales driver to any disability or discrimination which would not be equally applicable to her if she were resident in Victoria. Words and phrases – "inconsistency". Constitution, ss 75(iv), 92, 109, 117. Judiciary Act 1903 (Cth), ss 30, 39, 80. Motor Accidents Act 1988 (NSW), ss 2, 8, 11, 40-82A. Transport Accident Act 1986 (Vic), ss 1, 8, 27, 35, 94, 104, 109. GLEESON CJ, GUMMOW, KIRBY AND HAYNE JJ. The event giving rise to this litigation was an accident between two motor vehicles on 20 July 1996. The accident occurred on a public road in the State of New South Wales. One car was registered in the State of Victoria and was driven by a Victorian resident, Mr Sutton, with Mrs Sutton as passenger. The other car was driven by the appellant, Mrs Sweedman, a New South Wales resident. This car was registered in New South Wales and owned by Mrs Sweedman's son. Mr and Mrs Sutton were injured and, for the purposes only of the present litigation, it is assumed that this accident was caused by the negligent driving of Mrs Sweedman. The mobility of the Australian population is assisted by motor vehicles and their passage between the States is protected by the Constitution itself. It is to be expected that when State legislatures deal with the legal and social consequences of motor accidents they do not restrict their attention to the use of cars within particular State territorial limits. At the date of the accident both New South Wales and Victoria had legislative regimes which bore upon the legal responsibility of Mrs Sweedman to Mr and Mrs Sutton. The legislative regimes of New South Wales and Victoria differed in significant respects. They implemented distinct governmental policies concerning the legal consequences of motor vehicle accidents. This litigation is occasioned by the interaction and alleged disharmony between the legislation of Victoria and New South Wales. The Attorneys-General for both States intervened in this Court, together with their Commonwealth, South Australian and Western Australian counterparts. The Attorney-General for New South Wales supported the decision below and opposed the submissions of the appellant. The legislation of the two States The Motor Accidents Act 1988 (NSW) ("the NSW Act") repealed (by s 5) the Transport Accidents Compensation Act 1987 (NSW) and thereby abolished the scheme it had established for the compensation of the victims of transport accidents; the common law was reinstated (by s 6) in respect of transport accidents occurring on or after 1 July 1987. However, Pt 5 (ss 40-67) and Pt 6 (ss 68-82A) placed various restrictions and limitations upon the pursuit of the common law rights of Mr and Mrs Sutton against Mrs Sweedman and the measure of damages recoverable. This reflected one of the stated objects of the statute, the reduction of the cost of the former common law based scheme (s 2A(1)(c)(i)). The NSW Act had more than one focus and was not concerned purely with personal injury litigation. In particular, it provided in Pt 3 (ss 8-34) for a Kirby Hayne system of compulsory third-party insurance. Section 8 made it an offence to use or cause or permit another person to use on a public street a motor vehicle to which a third-party policy complying with s 9 was not in force. Section 11 forbad the registration of a motor vehicle unless the registration authority was satisfied that there existed a third-party policy in relation to that vehicle. The car driven by Mrs Sweedman was registered in New South Wales and it may be inferred that there was compliance with the third-party insurance requirements of ss 8 and 11 of the NSW Act. Mr and Mrs Sutton did not sue Mrs Sweedman in tort pursuant to the NSW Act. They took the other avenue under the law of Victoria. The Transport Accident Act 1986 (Vic) ("the Victorian Act") established a scheme of compensation in respect of those injured or killed as a result of transport accidents (s 1). One of the stated objects of the statute was "[t]o reduce the cost to the Victorian community of compensation for transport accidents" (s 8(a)). Section 35 conferred an entitlement to compensation under the Victorian Act on a person injured as a result of a transport accident which occurred in Victoria or, in certain circumstances, elsewhere in Australia. In particular, the accident in New South Wales in which Mr and Mrs Sutton were involved qualified under s 35(1)(b) because the car was a registered motor vehicle under the Road Safety Act 1986 (Vic) and they were residents of Victoria and respectively the driver and passenger. Section 27 of the Victorian Act required the respondent, the Transport Accident Commission ("the Commission"), to establish and maintain the Transport Accident Fund ("the Fund"). Owners of a registered motor vehicle such as that driven by Mr Sutton were obliged by s 109 to pay a transport accident charge to be credited by the Commission to the Fund (s 27(2)). Payments of compensation were to be made out of the Fund (s 27(3)). The Commission made payments of compensation to Mr and Mrs Sutton which it contended totalled $35,310.29 on 9 April 2002, the date of the institution of the action giving rise to this appeal. The litigation between the Commission and Mrs Sweedman The subject of the litigation is not the rights of Mr and Mrs Sutton to compensation payments by the Commission, nor their rights in tort against By statement of claim filed in the County Court of Victoria at Melbourne on 9 April 2002, the Commission sued Mrs Sweedman for indemnity for that proportion of the amount of its liability to make payments under the Victorian Kirby Hayne Act in respect of the injuries to Mr and Mrs Sutton which was appropriate to the degree the negligence of injuries were attributable to which the Counsel for the Commission stressed that the ambit of the insurance provided to Mrs Sweedman by the compulsory third-party insurance under the NSW Act was not confined to her liability in tort to Mr and Mrs Sutton; it extended to "liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle"1. The phrase "liability in respect of" is sufficiently broad to provide Mrs Sweedman with recourse to the third-party insurer for the indemnity sought by the Commission. The essence of the submission for Mrs Sweedman is that the occasion for such recourse cannot arise. This is said to be because the source of the claim by the Commission to indemnity is in the Victorian Act and, in the circumstances, that legislation is inoperative or inapplicable for constitutional reasons. As already remarked, Mrs Sweedman is a resident of New South Wales. The Commission is established by Pt 2 (ss 10-33) of the Victorian Act with characteristics which bring it within the constitutional description of the State of Victoria for the purposes of s 75(iv) of the Constitution2. That has not been disputed. It also is accepted that, by operation of ss 75(iv) and 77(iii) of the Constitution and s 39(2) of the Judiciary Act 1903 (Cth) ("the Judiciary Act"), the County Court was invested with federal jurisdiction in a matter between the State of Victoria and a resident of the State of New South Wales. (It is unnecessary to enter upon the question whether there was a matter relating to the same subject-matter claimed under the laws of different States, within the meaning of s 76(iv) of the Constitution.) The claim for indemnity made by the Commission was expressed by reference to s 104(1) of the Victorian Act. This confers upon the Commission in certain circumstances an entitlement to indemnity where the Commission has made compensation payments under the Victorian Act. Section 104(2) imposes what in argument was identified as a "cap"; the liability of Mrs Sweedman under s 104(2) is not to exceed the amount of damages which, but for the Victorian Act, she would be liable to pay Mr and Mrs Sutton in respect of their injuries. There are various issues of construction of s 104 which were not pressed by the parties 1 NSW Act, s 9; Sched 1, Item 1. 2 See Deputy Commissioner of Taxation v State Bank (NSW) (1992) 174 CLR 219 at Kirby Hayne as decisive of this case, and upon which it is unnecessary for this Court to enter. However, as noted above, Mrs Sweedman did contend that s 104(1) does not apply to her situation. On 18 July 2003 the County Court (Judge Duggan) reserved questions for the Court of Appeal in the form of a special case. The Court of Appeal (Winneke P, Callaway and Nettle JJA) amended the applicable form of the text of s 104(1) as stated in the questions reserved. The Court of Appeal went on to give answers which favoured the Commission3. It is against that order that the appeal is brought by special leave. Section 104(1) reads: "If an injury arising out of a transport accident in respect of which the Commission has made payments under this Act arose under circumstances which, regardless of section 93, would have created a legal liability in a person (other than a person who is entitled to be indemnified under section 94) to pay damages in respect of pecuniary loss suffered by reason of the injury, the Commission is entitled to be indemnified by the first- mentioned person for such proportion of the amount of the liability of the Commission to make payments under this Act in respect of the injury as is appropriate to the degree to which the injury was attributable to the act, default or negligence of the first-mentioned person." Section 93 denies recovery by an action for damages but makes special provision for some recovery in cases of "serious injury" and in wrongful death actions. Section 94 imposes in some circumstances a liability upon the Commission itself to provide indemnity. It will be necessary later in these reasons to make further reference to s 94. For the reasons that follow the appeal should be dismissed. The scope of the two laws It is convenient first to give further consideration to the scope of the two statutes, the NSW Act and the Victorian Act. The accident in which Mr and Mrs Sutton were injured took place in New South Wales but they received compensation payments from the Commission set up by the Victorian Act. In turn, the Commission (the respondent) in the County Court action in Victoria 3 Transport Accident Commission v Sweedman (2004) 10 VR 31. Kirby Hayne asserts against a New South Wales resident, Mrs Sweedman (the appellant), its entitlement under s 104(1) of the Victorian Act to indemnity. There is nothing necessarily antithetical to the system of federation established and maintained under the Constitution in the legislation of one State having legal consequences for persons or conduct in another State4. There are three relevant corollaries to that general proposition. First, it is sufficient for the validity of a law such as s 104(1) that it has any real connection between its subject-matter and the State of Victoria5. Plainly, s 104(1) meets that criterion. The appellant does not assert lack of State power to legislate with extra-territorial operation. Secondly, as to adjudication of the legal consequences referred to above, the choice of law rules have the important function, in the absence of an effective statutory overriding requirement, of selecting the law to be applied to determine the consequences of acts or omissions which occurred in a State (or Territory) other than that where action is brought6. This means that questions of alleged "inconsistency" between laws of several States must be considered not at large, but first with allowance for the operation of applicable choice of law rules. This may remove the necessity in a given case to answer those questions of inconsistency. However, as will appear, the appellant enlists what are said to be constitutional imperatives which dictate an outcome in the litigation at odds with the operation of choice of law rules, rather than consistent with those rules. Thirdly, reference is appropriate to the point clearly made in the joint reasons in John Pfeiffer Pty Ltd v Rogerson7 that, subject to what followed in that passage: 4 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 26 [16], 58 [122]; APLA Ltd v Legal Services Commissioner (NSW) (2005) 79 ALJR 1620 at 1653 [158]; 219 ALR 403 at 445. 5 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 22-23 [9], 34 [48], 58- 6 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 36 [57]. (2000) 203 CLR 503 at 518 [15]. Kirby Hayne "because there is a single common law of Australia8, there will be no difference in the parties' rights or obligations on that account, no matter where in Australia those rights or obligations are litigated". Their Honours went on to refer to statutory modifications to the common law and to other considerations, including those applying in federal jurisdiction, which may dictate different outcomes according to the seat of the litigation. Further, it is well settled that (putting to one side consideration of specific provisions such as ss 51(ii), 51(iii), 92, 99 and 117) there is no general requirement in the Constitution that a federal law such as s 80 of the Judiciary Act have a uniform operation throughout the Commonwealth9. In addition, s 118 of the Constitution does not require certainty and uniformity of legal outcomes in federal jurisdiction or otherwise10. New South Wales and Victoria submitted that in any event no question of differential outcome could arise here because, if the Commission had sued in a New South Wales court, the Judiciary Act would have mandated the same outcome as in the County Court. That submission may be accepted as correct. It appears that the limitation period under the Limitation of Actions Act 1958 (Vic)11 would be the general period of six years. On the other hand, the NSW Act (s 52) imposes a limitation period of three years and the Commission sued more than five years after the accident. But counsel for the Commission correctly emphasised that in its terms s 52 addresses "legal proceedings for damages under [the NSW Act]" and the claim by the Commission for indemnity did not answer that description. Hence the postulated identity of outcome. What has been said so far as to it being not uncommon for one State to legislate with consequences for persons or conduct in another State must be read 8 Mabo v Queensland [No 2] (1992) 175 CLR 1 at 15; Environment Protection Authority v Caltex Refining Co Pty Ltd (1993) 178 CLR 477 at 556; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 562-563, 566; Lipohar v The Queen (1999) 200 CLR 485 at 505, 509, 551-552. 9 Leeth v The Commonwealth (1992) 174 CLR 455 at 467; Kruger v The Commonwealth (1997) 190 CLR 1 at 63, 153-154; R v Gee (2003) 212 CLR 230 at 10 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at 532-534 [59]-[65], 11 Section 5(1)(d). Kirby Hayne with a caveat. This is that in a federal system one does not expect to find one government legislating for another12. But that is not an absolute proposition, as the outcome in State Authorities Superannuation Board v Commissioner of State Taxation (WA)13 indicates. No party or intervener questioned the correctness of this decision. There, a body identified with the State of New South Wales was validly assessed to stamp duty on its agreement to acquire a real estate interest in Perth. Section 4 of the NSW Act states: "This Act binds the Crown, not only in right of New South Wales but also, so far as the legislative power of Parliament permits, the Crown in all its other capacities." If the NSW Act had gone on to stipulate that no claim to indemnity or exoneration might be brought in any court by any party against a tortfeasor in respect of a motor accident occurring in New South Wales, other than as permitted by the NSW Act, and if s 4 be read in terms as applicable to the Commission, there may have been questions both as to constitutional power14 and inconsistency. But that situation has not arisen. Moreover, an examination of the NSW Act discloses that it is not directed to blocking or restricting claims, whether made in New South Wales or elsewhere, to enforce liabilities of the nature of that created by s 104(1) of the Victorian Act. Indeed, as earlier mentioned, the compulsory third-party policy would cover the appellant for the claim by the Commission to indemnity under s 104(1). Nor is the NSW Act (or the Victorian Act) concerned to displace the operation in respect of such claims of the choice of law rules15. These are critical considerations for what follows in these reasons. 12 cf In re Foreman & Sons Pty Ltd; Uther v Federal Commissioner of Taxation (1947) 74 CLR 508 at 529. 13 (1996) 189 CLR 253. 14 See BHP Billiton Ltd v Schultz (2004) 79 ALJR 348 at 364-365 [89]-[94], 374-375 [142]-[144], 380 [178]-[179], 382-383 [191]-[201]; 211 ALR 523 at 544-545, 557- 15 cf Akai Pty Ltd v People's Insurance Co Ltd (1996) 188 CLR 418. Kirby Hayne Choice of law Against this background, two essential steps are to be taken for the resolution of the appeal. The first step concerns the character in law of the claim made for indemnity under s 104(1) and the identification of the choice of law rule applicable to that claim. In Pfeiffer16 it was explained, with reference to Koop v Bebb17, that the term "tort" used for the purposes of choice of law rules may encompass civil actions for acts or omissions made wrongful by statute. The same reasoning applies to quasi-contractual or restitutionary claims arising from statute. The second step concerns the operation upon the indemnity claim of the federal jurisdiction which, given the character and identity of the parties, has been engaged with respect to that controversy. When these steps have been taken some of the substratum upon which the appellant's submissions rest will cease to be of dispositive significance for the present case. First, as to the choice of law rule, the following is to be said. It was accepted on both sides and by the interveners that, consistently with Victorian WorkCover Authority v Esso Australia Ltd18, the obligation of the appellant to indemnify was distinct from any underlying claim in tort19. The choice of law rule in tort had no direct role to play. But what was the applicable choice of law rule? Section 104(1) of the Victorian Act states that the Commission "is entitled to be indemnified" but leaves it to the general law to spell out the character and incidents of that entitlement. Section 138 of the Accident Compensation Act 1985 (Vic) conferred in similar terms an entitlement to indemnity upon the Victorian WorkCover Authority. This provision was considered in Esso20. The older authorities referred to in that case indicate that, where the amount of the statutory entitlement was liquidated, the action of debt was appropriate 16 (2000) 203 CLR 503 at 519-520 [21]; see also at 548 [116]. 17 (1951) 84 CLR 629. 18 (2001) 207 CLR 520. 19 cf Dicey and Morris, The Conflict of Laws, 13th ed (2000), vol 2, §35-042. 20 (2001) 207 CLR 520 at 526-530 [12]-[20], 555-559 [96]-[105]. Kirby Hayne notwithstanding that the statute gave no particular method of enforcing the obligation21. The requirement to fix the appropriate degree of attribution to the negligence of the tortfeasor before quantification of the amount recoverable by the Commission on the indemnity, suggests a characterisation more akin to indebitatus assumpsit than to the old action of debt22. In that vein, in the present case, Nettle JA described the right of indemnity as "enforceable as a quasi- contractual cause of action in the nature of a quantum meruit"23. That view of the matter was consistent with the view of Bray CJ on analogous provisions in other legislation24. On that classification, and as explained by Bray CJ in the authorities just cited, for the purposes of the choice of law rules, the law applicable to the action, the lex causae, will be the law of the State with which the obligation of the appellant to indemnify the Commission has the closest connection. There was, however, a dispute as to the selection of New South Wales or Victoria as the place of closest connection. The appellant stressed that the accident occurred in New South Wales and that the appellant resided there. However, the better view favours Victoria. The obligation to indemnify is sourced in s 104(1) of the Victorian Act, the moneys recovered will go to augment the Fund (s 27(2)(a), (g)), and the obligation only arose after payments required by the Victorian Act had been made out of the Fund (s 27(3)(a)) to Mr and Mrs Sutton, Victorian residents. There is no authority in this Court settling the selection of the governing choice of law rule in a case such as the present. Victoria proposed an answer which fixed upon the characterisation of the compensation payments to Mr and Mrs Sutton as made by the Commission from the Fund under compulsion of 21 (2001) 207 CLR 520 at 528 [15]; cf at 558 [105]. 22 cf Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221 at 250-251; Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 at 532-535 [26]- 23 (2004) 10 VR 31 at 41. 24 Nominal Defendant v Bagot's Executor and Trustee Company Ltd [1971] SASR 346 at 365-366; Hodge v Club Motor Insurance Agency Pty Ltd (1974) 7 SASR 86 at 91. Bray CJ's dissenting judgment in the first of these cases was upheld by this Court: (1971) 125 CLR 179 at 183. Kirby Hayne Victorian law and upon the liability of Mrs Sweedman to the Commission as restitutionary in nature25. Victoria submitted that the outcome of a search for the "closest connection", posited by Bray CJ, may be difficult to predict with certainty. Rather, the governing law was that which was the source of the legal compulsion to make the compensation payments26. However, it is unnecessary to determine here which of the above classifications is correct as the first step in identifying the applicable choice of law rule. This is because, as noted above, the identification of the law of Victoria as the source of the compulsion upon the Commission to make the payments to the injured parties (two Victorian residents), and thus of a restitutionary obligation, is a significant pointer to the selection of the law of Victoria as the law with the closest connection to the indemnity entitlement of the Fund against the tortfeasor. Whichever competing thesis be adopted, the road so chosen leads to the law of Victoria rather than to that of New South Wales. Federal jurisdiction However, the County Court was exercising federal jurisdiction. This is national in nature. In those circumstances, there was presented no direct choice between laws of competing States. Rather, federal law controlled and required the ascertainment under the Judiciary Act of the applicable law27. Section 80 of the Judiciary Act was engaged28. Federal jurisdiction was to be exercised by the 25 Goff and Jones, The Law of Restitution, 6th ed (2002) at 20-22 [1-019]-[1-020]; Jackman, The Varieties of Restitution, (1998) at 97-100; Grantham and Rickett, Enrichment and Restitution in New Zealand, (2000) at 207-210. 26 Adopting the position taken in Panagopoulos, Restitution in Private International Law, (2000) at 175; cf Gutteridge and Lipstein, "Conflicts of Law in Matters of Unjustifiable Enrichment", (1939) 7 Cambridge Law Journal 80 at 92-93, favouring "the law of the place in which the payment of money or the vesting of property occurs which constitutes the enrichment". 27 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at 530 [53], 562 [156]; Agtrack (NT) Pty Ltd v Hatfield (2005) 79 ALJR 1389 at 1392 [8]; 218 ALR 677 at 28 Section 80 states: "So far as the laws of the Commonwealth are not applicable or so far as their provisions are insufficient to carry them into effect, or to provide adequate remedies or punishment, the common law in Australia as modified by the (Footnote continues on next page) Kirby Hayne County Court in respect of a matter, being the controversy as to the enforcement of an obligation the governing law of which under the common law choice of law rules was that of Victoria. The County Court was exercising jurisdiction in Victoria. No Victorian statute was identified as modifying that common law choice of law rule29. There was no applicable provision in a law of the Commonwealth. The upshot was that s 80 required the County Court to apply that common law choice of law rule in determining the law to govern the action30. However, s 80 by its terms is denied any operation which is inconsistent with the operation of the Constitution. The appellant then submits that to apply, by the medium of s 80, the statute law of Victoria as the law which governs the action for indemnity, and operates to the exclusion of the NSW Act, would offend the Constitution in several respects. One respect is the operation of s 117 of the Constitution upon the Victorian Act. Consideration of s 117 may be deferred. The other respect concerns principles for resolving inconsistency between State laws, which are said to be derived from the text and structure of the Constitution31. This argument will be treated first. The case for the appellant on inconsistency There are threshold difficulties with the appellant's case which should be identified immediately. Upon its proper construction did the NSW Act speak at all, or in opposition, to the County Court action by the Commission against the Constitution and by the statute law in force in the State or Territory in which the Court in which the jurisdiction is exercised is held shall, so far as it is applicable and not inconsistent with the Constitution and the laws of the Commonwealth, govern all Courts exercising federal jurisdiction in the exercise of their jurisdiction in civil and criminal matters." 29 Section 80 speaks of "the statute law in force" in that State; the text and structure of s 80 indicate that laws of other States are not "in force" there. Submissions by South Australia and Western Australia to the contrary were correctly controverted by the appellant. 30 Blunden v The Commonwealth (2003) 218 CLR 330 at 338-339 [16]-[18], 359-361 31 McGinty v Western Australia (1996) 186 CLR 140 at 168-169; APLA Ltd v Legal Services Commissioner (NSW) (2005) 79 ALJR 1620 at 1665 [240]; 219 ALR 403 Kirby Hayne appellant? The provisions of Pt 5 (ss 40-67) and Pt 6 (ss 68-82A) of the NSW Act, headed respectively "CLAIMS AND COURT PROCEEDINGS TO ENFORCE CLAIMS" and "AWARDING OF DAMAGES", were not engaged. The statements of the objects of those parts made in ss 40A and 68A indicate that the legislation is concerned with claims for damages, not an indemnity claim of the nature asserted by the Commission. That claim had its source in Victorian statute law, but it is not suggested that New South Wales should refuse to recognise s 104(1) on the grounds of its public policy. Section 118 of the Constitution would appear to foreclose any such reliance upon public policy32. Within the Commonwealth, considerations of the kind considered in Attorney- General (UK) v Heinemann Publishers Australia Pty Ltd33 would not arise34. Where then is the operation of the NSW Act, against which it is said that s 80 of the Judiciary Act cannot operate to enlist the common law choice of law rule which selects the Victorian Act? An affirmative answer appears to require the adoption into inter-State relations of the "covering the field" doctrine developed by this Court in giving effect to the paramountcy of Commonwealth law. But as between States there is no paramountcy. Where then lies the necessity or sufficiency of reasoning to displace the selection of the rule of decision in the County Court litigation which is obtained through Ch III of the Constitution and the Judiciary Act? The appellant's submissions took three steps, each depending upon what preceded it. The first postulated an "inconsistency" or, the preferred term, a "clash" which the Constitution addressed. The second was to identify the constitutional mechanism which resolved the clash. The third was to subject the operation of the Judiciary Act in this case to that constitutional mechanism. These steps are now considered in turn. The appellant submitted that there was a "clash" between the operation of the two statutes. This was demonstrated by considering an outcome in favour of the claim to indemnity made by the Commission in this case. What was said to be "New South Wales funds", apparently the resources of the third-party insurer of the appellant, would be depleted by reference to an amount which, under the scheme of the NSW Act, should be paid out only pursuant to an action for 32 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at 533-534 [64]. 33 (1988) 165 CLR 30. 34 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503 at 549-551 [119]-[124]. Kirby Hayne damages by Mr and Mrs Sutton litigated in accordance with the stipulations (including the limitation provision in s 52) of the NSW Act. The Constitution required that "clash" to be resolved by a means other than the common law choice of law rules. The path dictated by the Constitution required the court of the forum to identify which of New South Wales and Victoria had "the greater governmental interest" in providing for the compelled financial consequences (not necessarily all those consequences) of a motor vehicle accident occurring in New South Wales. The greater governmental interest was that of New South Wales. Why this was so, and why the greater governmental interest here was not that of the State with which the indemnity claim had the closest connection (the choice of law rule in quasi-contract and for a restitutionary claim), was not succinctly articulated. Rather, various considerations were prayed in aid. These appear to be as follows. The appellant contended that her preferred outcome was referable to, or consistent with, the "constitutionally conformed" but not mandated choice of law rule in tort as settled by Pfeiffer. It also was said that New South Wales had "the closer nexus to the subject matter of the intersection" between the two laws. That "intersection" appeared to be "how [much] money can be paid out for accidents [occurring in New South Wales]". Another consideration was that the entitlement to indemnity only arose under s 104(1) because of the liability of the appellant under the combination of the NSW Act and the common law of tort and it was the law of New South Wales which was availed of in fixing the "cap" under s 104(2). The outcome of this application of the constitutionally mandated criterion of greater governmental interest was that the primacy of the NSW Act could not accommodate the operation of s 104(1) against the appellant. This meant that nothing in the provisions of the Judiciary Act could operate in a way which denied that result. Conclusions respecting inconsistency The acceptance, now recognised in s 2(1) of the Australia Act 1986 (Cth), of the proposition that State Parliaments may make laws with extra-territorial operation, allows for the possibility that individuals and corporations are subjected to conflicting commands. Legislation most often enlists the criminal Kirby Hayne law and creates offences to encourage observance of its requirements. Questions of "double jeopardy" may arise35. The Constitution itself, in s 74, contemplates the exercise of federal jurisdiction in resolving questions "as to the limits inter se of the Constitutional powers of any two or more States"36. Other provisions of the Constitution (in particular, ss 52, 90) require a distinction between exclusive and concurrent legislative power. The body of authority concerning s 109 of the Constitution is concerned with inconsistent laws made in exercise of concurrent federal and State powers. There was some consideration of inconsistency between State laws in Port MacDonnell Professional Fishermen's Association Inc v South Australia37 but no "real" inconsistency arose on the facts of that case. Any question of "inconsistency" in the present case requires as a first step asking whether the NSW Act as well as the Victorian Act spoke at all to the indemnity action brought by the Commission. That is not answered by contemplation at the higher realms of abstraction upon which the submissions for the appellant concentrated. What is called for is a consideration of the particular claim made by the Commission, rather than, as the appellant would have it, looking in the broadest sense to a character attributed to the NSW Act as implementing a policy controlling the total financial outcomes of accidents occurring in that State. References by the appellant to an outcome consistent with the choice of law rule in tort were inapposite. When attention is given to the nature of the claim made by the Commission, it is apparent, and in accord with what has been said earlier in these reasons, that the NSW Act does not speak in any way which impairs or detracts from the pursuit of that claim. Indeed, as also pointed out, the coverage of a claim by the appellant under the third-party policy to answer the demand for indemnity by the Commission would supplement the operation of the Victorian Act. Claims of such a kind are only likely to be a small proportion of claims under the two legislative schemes and then only because of the interstate movement of motorists within Australia in accordance with the freedom that the Constitution itself envisages in s 92. 35 Pearce v The Queen (1998) 194 CLR 610 at 630 [71], 644-645 [107]. 36 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 52-53 [109]-[110]. 37 (1989) 168 CLR 340 at 374. See also Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 34 [48], 52-53 [110], 61 [131]. Kirby Hayne The appellant's case fails at the first step. But something more should be said respecting the criterion of inconsistency the appellant propounded. Constitutional discourse has been informed by principles of varying width and precision which identify and resolve the disharmony between laws of more than one legislature. One principle adopts from Imperial law the term "repugnancy"; another the term "incompatibility" considered recently in Fardon v Attorney-General (Qld)38. The broadest principle is the "covering the field" test which was developed in cases applying s 109 of the Constitution, as remarked above. Authorities such as Collins v Charles Marshall Pty Ltd39 and Ansett Transport Industries (Operations) Pty Ltd v Wardley40 which upheld State laws against "covering the field" claims by federal law suggest that the NSW Act would not prevail over s 104(1) if this were the determinative constitutional norm. But principles derived from Imperial law and later from s 109 assume a hierarchy of legislative competence, whether its peak be at Westminster or at the seat of government established under s 125 of the Constitution. The "covering the field" test was devised to uphold conceptions of federalism expressed in the paramountcy provision of s 10941. Whatever principle may be settled upon to meet cases of inconsistency between laws of several States in exercise of concurrent powers held as polities of equal authority, it will not be one that relies upon a "covering the field" test. Perhaps with an awareness of these difficulties, the appellant in her submissions eschewed reliance upon the s 109 case law. (And, in light of Pfeiffer42, reliance upon s 118 of the Constitution as itself a circuit breaker also was discounted in oral submissions.) 38 (2004) 78 ALJR 1519; 210 ALR 50. 39 (1955) 92 CLR 529. 40 (1980) 142 CLR 237. 41 APLA Ltd v Legal Services Commissioner (NSW) (2005) 79 ALJR 1620 at 1658 [192]; 219 ALR 403 at 452. 42 (2000) 203 CLR 503 at 533-534 [62]-[65], 555-558 [137]-[143]; see also Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491 at 536-537 [127]. Kirby Hayne Instead, the appellant appealed to the constitutional criteria of a "clash" at an "intersection" which was resolved by ascertainment of the "greater governmental interest". The latter may take its inspiration from United States conflict of laws jurisprudence which, along with the "proper law of the tort", was not accepted for Australia in Pfeiffer43 and is now in disfavour in the United States Supreme Court44. New South Wales has an undoubted interest in legislating with respect to motor accidents in its territory; Victoria also has an undoubted interest in recoupment from out-of-State tortfeasors of payments Victoria has made to injured residents of Victoria. Which interest is the greater? The interests are not easily measurable or even comparable within the means available in the processes of adjudication. It is undoubtedly the case that the many criteria of constitutional adjudication do not involve bright lines. That is no encouragement to further indeterminacy. In the end, three things are to be said on this branch of the case. First, no adequate constitutional criterion is asserted by the appellant which would resolve inconsistency between the laws of two or more States. That criterion awaits formulation on another occasion where the circumstances of the propounded incompatibility of the State laws suggest a criterion by which that incompatibility is to be recognised and resolved. Secondly, and in any event, the NSW Act has not in this case been shown to speak at odds with the claim to indemnity made against the appellant in the County Court. Thirdly, the operation of the Judiciary Act is not displaced in the County Court action and the law of Victoria is the lex There remains for consideration the submissions respecting s 117 of the Constitution. Section 117 of the Constitution The appellant submits that if she had resided in Victoria rather than New South Wales she would not have been subjected to the claim to indemnity under s 104(1). This sub-section in its terms does not apply to "a person who is entitled to be indemnified [by the Commission] under section 94" and, it is said, the 43 (2000) 203 CLR 503 at 537-538 [76]-[80], 562-563 [157]-[158]. 44 See Franchise Tax Board of California v Hyatt 538 US 488 (2003). Kirby Hayne practical effect of this is that, had the appellant resided in Victoria, the exception would have operated and s 104(1) would not have been engaged. Section 117 states: "A subject of the Queen, resident in any State, shall not be subject in any other State to any disability or discrimination which would not be equally applicable to him if he were a subject of the Queen resident in such other State." The appellant is a subject of the Queen resident in New South Wales and contends that she is exposed in Victoria to a disability or discrimination, amenability to a s 104(1) claim by the Commission, which would not be equally applicable to her were she a resident of Victoria. The mandatory terms of s 117 of the Constitution require that the appellant not be amenable to the s 104(1) claim, with the result that there is no content to the "matter" propounded under s 75(iv) of the Constitution. This last step was not advanced in these terms but was implicit in the appellant's case. That submission may be compared with the outcome in Goryl v Greyhound Australia Pty Ltd45. The plaintiff, as a resident of New South Wales, was, by the terms of s 20 of the Motor Vehicles Insurance Act 1936 (Q), limited in her action in the Queensland District Court to the damages she could have recovered under New South Wales law for her motor vehicle accident in New South Wales; these were less than the damages she would otherwise have received under Queensland law had she been a Queensland resident. Section 20 was rendered inapplicable by s 117 of the Constitution to limit recovery of damages. However, for several reasons Goryl does not support the reliance placed upon s 117 by the present appellant. The appellant urged consideration of the reality of the situation as that to which s 117 is directed. That emphasis upon substance and practical operation of laws impugned for contravention of a constitutional limitation or restriction on power may be accepted46. But to approach the present case in that way does not assist the appellant. She was required by the NSW Act to have third-party 45 (1994) 179 CLR 463. 46 Ha v New South Wales (1997) 189 CLR 465 at 498. Kirby Hayne insurance and it was not asserted that she had any direct personal financial interest in the outcome of the case. The insurer no doubt has an interest, but the NSW Act (s 101) stipulates that applications to become a licensed insurer may be made only by corporations licensed under the Insurance Act 1973 (Cth) or by the Government Insurance Office of New South Wales or its affiliates. It is not suggested that a corporation may be a subject of the Queen within the meaning of Secondly, unlike the Queensland statute considered in Goryl, the operation of s 94 of the Victorian Act is not conditioned by residence. Rather, it is conditioned by payment for the relevant period of the "transport accident charge" for the registered motor vehicle in question. Section 94 would have obliged the Commission to indemnify Mr Sutton as driver of a motor vehicle registered in Victoria in respect of any liability in respect of an injury to or death of a person arising out of its use in Victoria or in another State or Territory, but not in respect of any period where the transport accident charge had not been paid. Payment of that charge to the Commission is required by s 109 and receipts are paid by the Commission into the Fund established under s 27. The obligation of payment of the charge is imposed upon the owner of a "registered motor vehicle" (s 109(1)). That expression has a detailed definition in s 3 which refers to the Road Safety Act 1986 (Vic) and the regulations made thereunder. The upshot is that a vehicle may be registered in Victoria even though its owner or user or both ordinarily reside outside that State47, and a person must not use a vehicle on a highway in Victoria unless registered under that statute or exempted under the regulations48. On the other hand, the effect of s 111 of the Victorian Act is that the owner of the car driven by the appellant, being insured under the third-party system in New South Wales, would not have been required, while in Victoria, to have paid the transport accident charge. The words in brackets in s 104(1), namely "other than a person who is entitled to be indemnified under section 94", reflect the circumstance that the entitlement against the Commission under s 94 is, in a practical if not also legal sense, the consideration for payment of the transport accident charge. Without the exception to s 104(1), the benefit under s 94 conferred by payment of the transport accident charge required by s 109 would have been rendered nugatory. 47 Road Safety (Vehicles) Regulations 1988, reg 203. 48 Road Safety Act 1986 (Vic), s 7. Kirby Hayne The appellant is exposed to the claim by the Commission to indemnity under s 104(1). She is not exempted. But that is because she was not required to have paid the charge levied under the Victorian scheme. There is no differential treatment in s 94 attributable to residence so as to attract s 117 of the Constitution. A non-Victorian resident who owned or drove a registered motor vehicle in respect of which the s 109 charge had been paid would have the benefit of the exception to s 104(1); a Victorian resident who had failed to pay the charge would not have the benefit of the exception. By its terms, s 117 of the Constitution is addressed to protecting a "subject of the Queen" from disability or discrimination in the form of laws and governmental actions or policies. It is therefore necessary in each case where s 117 is invoked to examine the operation of the impugned law, action or policy, to decide whether the discrimen it chooses concerns the State residence of the person who invokes its provisions. It is unnecessary to consider, on the footing that there was a disability or discrimination attributable to residence, whether this was appropriate and adapted (sometimes described as "proportional"49) to the attainment of a proper objective50. Orders The appellant seeks orders displacing the answers given by the Court of Appeal. In particular she seeks answers that s 104(1) of the Victorian Act would be invalid and inapplicable against the appellant in the County Court proceeding. That answer should not be given. The appeal should be dismissed with costs. 49 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567, referring to Cunliffe v The Commonwealth (1994) 182 CLR 272 at 377, 396. 50 Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict) (2004) 220 CLR 388 at 423-424 [88]-[89]. Callinan CALLINAN J. This appeal raises federal constitutional questions, and questions about the integrity of the Constitutions of the States, and their hegemony over events and people within them, and of choice of law. Facts and previous proceedings On 20 July 1996, a car driven by the appellant ("the New South Wales car") collided with a car driven by Mr John Sutton ("the Victorian car") on a road in New South Wales. Mrs Helen Sutton was a passenger in the Victorian car. Mr and Mrs Sutton were residents of Victoria at the time of the collision. Both suffered injuries as a result of it. The Victorian car was registered in Victoria. The New South Wales car was owned by the appellant's son. It was registered in New South Wales. When it was not in use it was kept at a garage at the appellant's residence at Gravesend in New South Wales51. The respondent, which is a body corporate established by the Transport Accident Act 1986 (Vic) ("the TA Act"), has paid compensation to Mr and Mrs Sutton ("the casualties") in satisfaction of a claim made by them under that Act. How their entitlement in that regard arises will be explained later. The respondent commenced proceedings against the appellant in the County Court of Victoria on 9 April 2002 to recover from the appellant the sum of the payments made to Mr and Mrs Sutton under the TA Act. It contended that s 104 of that Act gave it a statutory right of indemnity against the appellant recoverable in the Victorian courts. On 18 July 2003, at the request of the parties, the County Court ordered that three questions be reserved for the consideration of the Court of Appeal of Victoria, in the form of a special case, pursuant to s 76(1) of the County Court Act 1958 (Vic). The Court of Appeal of Victoria The questions stated for the Court of Appeal (Winneke P, Callaway and Nettle JJA) and the answers given by that Court appear below52: "A. Whether, given the agreed facts set out in paragraphs 1-9 of the Special Case, s 104(1) of the Transport Accident Act 1986 (Vic) is capable as a matter of construction of applying to the [appellant] 51 The lex loci stabuli, a term used, as Dicey and Morris point out, in jest with respect to the garaging of cars: Dicey and Morris on the Conflict of Laws, 13th ed (2000), vol 1 at 30 [1-075]. 52 The decision of the Court of Appeal is reported as Transport Accident Commission v Sweedman (2004) 10 VR 31. Callinan so as to give the [respondent] a right of indemnity against the [appellant]. [Yes.] B. Whether, given the agreed facts set out in paragraphs 1-9 of the Special Case, this proceeding is a matter within federal jurisdiction and, if so, whether s 104(1) of the Act is capable of applying as against the [appellant] in light of ss 79 and 80 of the Judiciary Act 1903 (Cth). [Yes.] C. Whether, given the agreed facts set out in paragraphs 1-9 of the Special Case, in its potential application to the [appellant] in this proceeding s 104(1) of the Act is invalid or inapplicable as being: contrary to Chapter III and s 118 of the Commonwealth of Australia Constitution Act ('the Constitution'); or contrary to s 117 of the Constitution; or inconsistent with the operation of the provisions of the Motor Accidents Act 1988 (NSW), as it applied at the time of the Accident. In the Court of Appeal, the appellant's principal argument was that s 104 of the TA Act did not apply to her, as a matter of construction. She submitted that this was so because the intended reach of the TA Act was to the borders of Victoria only: otherwise the section would have the potential to expose tortfeasors to double liability, or double jeopardy in respect of torts occurring outside the State. That, and her other arguments were rejected by the Court of Appeal. The appellant did not press the argument principally relied on there in this Court. The Victorian Parliament has, in any event, amended s 104 of the TA Act to apply it explicitly to legal liability for events arising outside Victoria53. 53 See s 31(a) of the Transport Accident (Amendment) Act 2004 (Vic), which commenced operation on 8 December 2004. Callinan Nettle JA, with whom Winneke P agreed, rejected the appellant's further submission, and the one that figured more prominently in this Court, that because the proceeding was within federal jurisdiction, that is, as a matter between a State and a resident of another State within the meaning of s 75(iv), and also a matter arising under the Constitution or involving its interpretation, the law to be picked up and applied by ss 79 and 80 of the Judiciary Act 1903 (Cth) should be the common law choice of law rule applicable to all Australian torts. The laws to be applied were therefore the laws in force in New South Wales, the lex loci delicti. Nettle JA rejected the submission on the basis that the claim under s 104 of the TA Act was in the nature of a statutory "quasi-contractual cause of action in the nature of a quantum meruit"54, rather than a claim in tort, even though, in order to succeed the respondent would have to prove that the appellant had committed a tort55. Nettle JA also rejected another of the appellant's submissions, and again one that in a slightly different form, assumed much more prominence in this Court, that s 104(1) trespassed, unconstitutionally, upon a preserve of the New South Wales legislature, and that it was beyond the constitutional competence of the Victorian Parliament to provide for the civil liability of an interstate resident in respect of a collision between motor vehicles occurring in another State. Nettle JA said this of it56: "It is within the competence of a State to make things in or connected with the State the occasion for the imposition of liability, and evidently the occasion for imposition of liability under s 104(1) is that the tort in question involves a Victorian resident or a Victorian registered motor car. Arguably it is also sufficient to sustain the section that it applies to acts or omissions outside Victoria that have had consequences within the State and it should not be regarded as a problem that the section is productive of consequences for persons or conduct in another State or Territory." His Honour went on to say57: "[I]t is tolerably clear that Victoria has power to impose civil liability upon the driver of a Victorian registered vehicle in respect of his or her 54 (2004) 10 VR 31 at 41 [28], citing Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 at 527 and Hodge v Club Motor Insurance Agency Pty Ltd (1974) 7 SASR 86 at 102. 55 See s 104 of the TA Act. 56 (2004) 10 VR 31 at 54 [71]. 57 (2004) 10 VR 31 at 55 [74]. Callinan driving of the vehicle wherever in Australia, and to impose upon a Victorian resident civil liability in respect of a traffic accident wherever occurring in Australia, and to impose civil liability upon a resident of another State in respect of a traffic accident occurring in Victoria. Therefore it is difficult to see why Victoria would not also have power sufficient to sustain the imposition of liability under s 104 upon a resident of another State in respect of a motor accident occurring in that other State where it results in injury to a victim ordinarily resident in Victoria (or to others to whom the commission may be liable to pay compensation)." Nettle JA also rejected the appellant's next submission, that s 104 of the TA Act and the Victorian statutory scheme generally subjected her to a disability or discrimination to which she would not be subject if she were resident in Victoria. That disability or discrimination was said to arise out of the fact that the respondent had no entitlement to recover from an owner or driver of a "Victorian registered motor vehicle": s 94 precludes that. It was then argued that a vehicle could not be registered in Victoria unless it was ordinarily kept there, and that the section had therefore the practical effect of favouring Victorian residents and discriminating against residents elsewhere. Nettle JA formulated the question whether s 104 created discrimination against non-Victorian residents in contravention of s 117 of the Constitution as, in essence, a question whether s 117 proscribes discrimination by Victoria in the provision of compulsory third party insurance benefits to owners and drivers of vehicles registered in Victoria exclusively, that is without also providing the same or similar benefits to owners and drivers of vehicles registered in other States and Territories. After discussing the reasons of each of the Justices in Street v Queensland Bar Association58, Nettle JA concluded that s 117 does not operate to do so here. The appeal to this Court The appellant's arguments The appellant submitted in this Court that in consequence of an inconsistency, as she put it, a "clash", between s 104 particularly, and some other provisions generally, of the TA Act on the one hand, and the provisions of the Motor Accidents Act 1988 (NSW) ("the MA Act") on the other, the former was rendered "inoperative": it accordingly could not be relied upon by the respondent to recover money from the appellant. Counsel for the appellant described the "clash", in language customarily used in discourse about s 109 of the Constitution, as one of "operational inconsistency", adding, that "[i]n operation this Victorian law [the TA Act] has an effect which is sufficiently inimical to the intended effect of the New South Wales law [the MA Act]" to produce that 58 (1989) 168 CLR 461. Callinan result. It was next submitted that because the New South Wales legislature had a "closer nexus" with the subject matter of the clash between the two enactments, the New South Wales enactment prevailed over the Victorian one. The appellant emphasized the fact that the operation of s 104 of the TA Act depended upon the creation, and therefore, the existence of an underlying liability of a tortfeasor under the MA Act. This, it was contended, supported the appellant's argument that the TA Act "force[d] an intersection" with the MA Act in a manner that "altered, detracted [from] or impaired" its intended operation. The appellant again also argued that s 104 of the TA Act had the practical effect of discriminating against her contrary to s 117 of the Constitution. The appellant submitted that had she been a resident of Victoria, then in all likelihood, the car which she had been driving at the time of the collision would have been registered there with the result that she would have been immune from a suit under s 104. To hold, by implication, as the judgment of the Court of Appeal did, that the appellant was free to place herself in the same advantageous position as a Victorian owner or driver, by paying the same fee as the latter to the respondent, even though she was not even on a transitory visit to Victoria, and was subject to statutory obligations already under the law of New South Wales, was discriminatory. The Transport Accident Act 1986 (Vic) It is necessary to examine the TA Act in some detail to make sense of the statutory language, to ascertain its objects, and the means adopted to achieve them. The same exercise will need to be undertaken in relation to the MA Act. In Victoria, an owner of a motor vehicle must effect insurance against claims for damages for personal injuries caused by the use of the vehicle under the TA Act. The right to indemnity extends to the owner and driver of a registered motor vehicle (s 94). Stated objects of the Act are, to reduce the cost to the Victorian community of compensation for transport accidents, to provide just compensation economically, and to determine claims speedily (s 8). By s 12, the respondent, which is established under the TA Act, is given the function of administering the Transport Accident Fund which is comprised, together with other amounts paid into it, of charges paid by owners of vehicles for the insurance of them in respect of a transport accident, which is defined as an incident directly caused by the driving of a motor car or motor vehicle, a railway train or a tram. Section 35 of the TA Act confers an entitlement to compensation, out of the Fund, for victims of transport accidents occurring in Victoria, or elsewhere in Australia if the victim is a resident of Victoria, or the driver of, or a passenger in a registered motor vehicle, a term defined by the Act to include a vehicle registered under the relevant Victorian enactment, or an unregistered vehicle Callinan usually kept in Victoria, but not a vehicle registered or kept elsewhere in Australia. The scheme which the TA Act establishes is essentially, but as will appear, not exclusively a "no fault" scheme. The respondent may be taken, for present purposes, as one and the same as the State of Victoria59. By s 35 of the TA Act, a person who is injured, and the dependants of a person who dies, as a result of a transport accident may claim compensation under the TA Act. Section 104 of the TA Act is concerned, among other things, but ultimately principally with fault, or tort, delict, to use the term conventionally used in private international law. At the time of the accident, s 104 provided: "Indemnity by third party If an injury arising out of a transport accident in respect of which the Commission has made payments under this Act arose under circumstances which, regardless of section 93, would have created a legal liability in a person (other than a person who is entitled to be indemnified under section 94) to pay damages in respect of pecuniary loss suffered by reason of the injury, the Commission is entitled to be indemnified by the first-mentioned person for such proportion of the amount of the liability of the Commission to make payments under this Act in respect of the injury as is appropriate to the degree to which the injury was attributable to the act, default or negligence of the first-mentioned person. The liability of a person under sub-section (1) shall not exceed the amount of damages referred to in sub-section (1) which, but for this Act, the person would be liable to pay to the injured person in respect of the injury. Judgment against or settlement by a third party in an action in respect of an injury or death referred to in sub-section (1) does not eliminate or diminish the right of indemnity given by this section, except to the extent provided in this section." (emphasis added) 59 Deputy Commissioner of Taxation v State Bank (NSW) (1992) 174 CLR 219 at Callinan Some of the differences between the scheme established by the TA Act for the payment of claims for compensation under it, and the scheme established by the MA Act are very substantial ones. As the joint judgment states, they implemented distinct governmental policies legal consequences of motor vehicle accidents. It may also be added that the financial consequences for those affected by them are also quite different. to produce different The TA Act confers these entitlements: sums in respect of loss of earnings for the first 18 months after injury (ss 44 and 45); lesser amounts for "loss of earning capacity" thereafter, and only so long as the loss continues (ss 49, 50 and 51); medical, hospital, rehabilitation, domestic services and burial expenses (s 60); "impairment benefit[s]" (ss 47 and 48); compensation in the nature of damages for pain and suffering (s 93(7)(b), in accordance with ss 53(2)(b) and 93(11)(b)); and a lump sum under s 57 for spouses of victims, and periodical payments under s 58 for not fewer than five years, until the spouse reaches pensionable age, or the children are no longer dependent (if later), and, absent a dependent spouse, similar provision for dependent children (s 59). Some payments are capped, and other limits may apply if the impairment of a casualty is less than 50 per cent. The Commission is not liable after three years from the first manifestation of an injury, and is not liable for an amount in excess of a specified total amount (s 53(3)), although s 61 provides for indexation of monetary limits. Under s 93, a victim may sue for "damages"60 in respect of injuries suffered in a transport accident if the injury is a "serious injury" as defined, but subject again to limits or caps upon compensation for pecuniary loss, and pain61. The TA Act imposes no restriction upon an action by a Victorian resident who is injured in a motor vehicle accident occurring outside Victoria. The degree of fault, if any, on the part of a driver or owner is irrelevant to the right to compensation, and the quantum recoverable, as is any contributory fault on the part of the claimant or plaintiff. Under s 107(1) of the TA Act, the respondent may take over the conduct of proceedings against a person, a tortfeasor, liable to the victim, if other than a person the respondent is itself obliged to indemnify under s 94, and may itself initiate proceedings. 60 "Damages" is a misnomer in the sense that the defendant is the Transport Accident Commission and not the tortfeasor. 61 In the Court of Appeal, Nettle JA held that s 93 applies only to traffic accidents occurring in Victoria: (2004) 10 VR 31 at 42 [33]. Callinan Sections 93(10), (11) and (11A) provide that amounts already paid by the respondent to claimants under the TA Act, must be deducted from the damages, except in cases of actions brought outside Victoria. Accordingly, if s 93 applies, s 104 is designed to ensure that the respondent has a right to recover from the tortfeasor the payments that it has made to the claimant. Should a casualty pursue an action at law, the liability of the respondent to the casualty will be reduced. The respondent may also be liable to make payments in relation to a period after a settlement, or an award of damages within the meaning of s 93, that is, in respect of damage suffered in or caused by a Victorian accident. To dependants, the respondent's liability will cease upon settlement, or the making of an award of damages (ss 57(5), 58(7) and 59(1)). The respondent may not claw back the amounts it has already so paid because they are deductible from a casualty's damages under s 93. If a claim is made "under the law of a place outside Victoria", the casualty will not be entitled to compensation from the respondent if he or she has recovered an amount in an action, or by settlement, or if a claim is pending (s 42(2)). Under s 42(3) of the TA Act, the respondent may recover the compensation paid under the Act. Provision in that regard is required because the limits prescribed by s 93 do not apply to such claims. The Motor Accidents Act 1988 (NSW) I turn now to the MA Act, the stated objects of which include the reduction of costs, and the limitation of claims and amounts payable for them to persons injured in motor vehicle accidents. A few of the objects are, in some respects, not dissimilar to those of the TA Act (ss 2A, 40A, 43 and 52 of the MA Act), but discernible in them are very different purposes, for example: the re- enactment of common law rights and remedies, and the introduction of a unique regime for the investigation, and the making, assessment and settlement of claims. Unlike the TA Act, the MA Act does not establish a statutory corporation as effectively the sole insurer of vehicles registered in the State. As had been the position in some of the States for many years, insurance may be effected in New South Wales with insurers licensed under the MA Act. This is an important difference. It means that proprietary rights and interests of persons other than the State, or one of its emanations, insured persons who pay premiums, injured persons and insurers of motor vehicles in New South Wales, are liable to be affected by claims of the kind in issue here. I emphasize this because New South Wales intervened to support the respondent. What may be acceptable, expedient or even advantageous, or seem to be so to an executive government, may not always be of advantage to the residents and others bound by the law, as it is submitted to be on behalf of the executive. Constitutions are not the property of governments of the day. Callinan There is no evidence of the identity of the appellant's insurer here but there is no reason to assume that her vehicle was not duly insured in New South Wales. That does not mean however that the appellant, or any person in her situation is unaffected by, or has no interest, financial or otherwise in the litigation. Simply to be named as a defendant in legal proceedings is unfortunately capable of giving rise to adverse inferences. To have a judgment entered against her is capable of producing even more unfavourable inferences. As recent notorious failures of insurance corporations show, sometimes an insured person may have no recourse against her insurer. A litigant such as the appellant, as a resident of New South Wales, also faces the prospect of being obliged to travel to Victoria to give evidence there with all of the inconvenience and distraction thereby entailed. There is also this. The "indemnity" for which the MA Act provides appears to be incomplete. The appellant may have no assurance of a full financial indemnity even if her insurer is solvent. Under s 23 of the MA Act which provides as follows, the appellant could be required to pay $500 of the respondent's claim. "Recovery of an excess in certain cases If an insured person incurs a liability against which he or she is insured under a third-party policy and the liability arises out of a motor accident which was to the extent of more than 25 per cent the fault of the insured person, the licensed insurer may recover from the insured person as a debt in a court of competent jurisdiction: (a) where the money paid and costs incurred by the licensed insurer in respect of the liability do not exceed $500 – the amount of the money paid and costs incurred, and (b) where the money paid and costs incurred by the insurer exceed $500 – $500. The licensed insurer is not entitled to recover an amount under this section if the licensed insurer exercises any other right of recovery against the insured person under section 22." For all of these reasons, I am unable to accept, as the joint judgment holds, that the appellant's compulsory third party policy would cover the appellant for the claim by the Commission to indemnity under s 104(1) of the TA Act62. In her submissions, the appellant emphasizes these further differences as important ones, between the TA Act and the MA Act. A judgment in favour of 62 Joint reasons at [11] and [24]. Callinan an injured person under the MA Act is a final judgment. It may not be reopened on the recurrence, or the worsening of the effects of an injury63. This is so even though, under s 81 of the MA Act structured settlements are possible. Section 104 of the TA Act may be productive of quite different consequences. Under that section, a further and separate right to obtain indemnity may accrue each time that a payment is made with the result that liability may exist for an extended period. Indeed, in this case the respondent actually seeks in its statement of claim a "declaration of liability in respect of payments to be made after the date of trial". It is right, as the appellant submits, that if she were liable in this unpredictable and uncertain way, the capacity of her, and other insurers in similar circumstances, to make accurate and sufficient provision for, or to finalize claims may be jeopardized. To put an insurer in New South Wales in such a state of uncertainty is inconsistent with the objects of the MA Act, particularly those stated in s 2A of it, the introduction of a stricter procedure for the making and assessment of claims for damages, and the encouragement of the speedy provision of benefits. A further tension arises between the state of uncertainty to which I have referred, and the statutory direction in s 2A(2) of the MA Act, that in its application, it be acknowledged that insurers are obliged to charge premiums that will fully fund their anticipated liabilities, and that there be a large measure of stability and predictability regarding future claims under policies sold. I have already referred to some of the differences in methods of calculation of entitlements to compensation and damages. There are others which need noting only, including s 73 of the MA Act, by contrast with s 104 of the TA Act, and s 79A of the MA Act with ss 47 and 48 of the TA Act. An even more important, and highly significant practical difference follows from the prescription by the MA Act of a limitation period of three years from the date of an accident unless time be extended. Extensions may only be granted if various conditions, not present here, and which need not therefore be further considered, are satisfied. The limitation period for an action under s 104 of the TA Act is six years. The importance for present purposes of the different periods is that the action with which the Court is concerned in this appeal was brought by the respondent long after Mr and Mrs Sutton could have sued for damages in New South Wales, five years and eight months after the accident, and for an amount in respect of which no extension of time could be granted under the MA Act. The correctness of the respondent's arguments that this is a matter of no present relevance because its claim is for an indemnity, and not in tort, and accordingly is not one subject to a limitation period of three years under the MA Act will need careful consideration but may be deferred until some other matters are dealt with. 63 cf BHP Billiton Ltd v Schultz (2004) 79 ALJR 348; 211 ALR 523. Callinan In her written submissions the appellant provided a convenient table of inconsistencies in the processes prescribed by the respective enactments for the making of claims. The table is accurate and should be reproduced: MA Act TA Act Under s 39(1) and (1A) of the Victorian Act a failure to report to the police can be excused by TAC, and no time limit is set. There is no duty on TAC to report the accident to the police. Under the Victorian Act, the driver has a duty to notify TAC within 28 days of an accident (s 64), but there is no duty on the claimant to do so, and nor is there any duty on TAC to notify any other relevant CTP insurer. A claim against TAC can be made within 1 year of accident / death, but TAC may accept a claim up to 3 years after such Claimant to report the accident to police within 28 days (s 42). If duty not complied with, a satisfactory "full explanation" s 40(2)) must be given, and otherwise a court proceeding may not be allowed to continue. (as defined and A claim must be made to the tortfeasor and insurer within 6 months of the accident or death (s 43), on an approved form satisfied In cases of late claims for which due objection has been taken (s 43A), a court must dismiss proceedings the claimant does not have a full and satisfactory explanation for the delay, and, if the claim was made more than 12 months after the accident / death, must be dismissed if the total damages likely to be awarded are less than 10% of the maximum for non- amount awardable economic loss (ie for this claim, $23,500 un-indexed). Callinan No equivalent duty on TAC as against potential defendants to s 104 actions, or their CTP insurers. No equivalent duty on TAC. is obliged information The claimant cooperate with the tortfeasor / insurer for the purpose of giving sufficient to be satisfied as to validity of the early claim, assessment, and to make an informed offer of settlement to make is obliged The claimant provide the CTP insurer (if any) with "full details" of injuries, disabilities impairments, prognoses, and any economic losses and other losses claimed as damages, sufficient to enable the insurer to make a proper assessment of the claimant's full entitlement to damages: s 50A. Failure to comply can lead to the claim being struck out in whole or part. If the respondent is not bound, in making its claim for indemnity, to comply with any of the obligations imposed by the MA Act upon claimants for damages for personal injury, it is true, as again the appellant submits, and the table unmistakably demonstrates, that the objects of the MA Act of enabling the early investigation, assessment, and settlement of claims may be frustrated. Co-existence of the States Before considering the parties' principal arguments it is as well to state some basic propositions which bear upon them. Of course it may be accepted that in a federation, and particularly so, where, as in Australia, most of the States are not separated by water, and modern communications facilitate mobility, physical, commercial and electronic, the legislation of one of them may have legal consequences for persons and corporations in others. That cannot deny however that the polity of a State will have the primary responsibility for, and hegemony over the people, institutions, lands and activities within its boundaries. If it were otherwise, then the borders of the States and statehood would be meaningless. The Constitution expressly, and in many places by clearest of necessary implications, recognizes the continuing existence of the States. Callinan Equally it recognizes not only their co-existence with the Commonwealth, but also their co-existence with one another. And while it may further be accepted that a real connexion between the subject matter of legislation, and a State may be enough to support the extra-territorial legislation of that State, that proposition cannot be an absolute one. It must be read subject to the matters I have just stated, and in particular, the primary responsibility of a State for what happens within it. If one State were able to legislate extra-territorially to the point of intrusion upon the primary and predominant responsibilities of another State, then the co-existence of the States and the integrity of their Constitutions, and the federal Constitution itself would be threatened. Long-arm jurisdiction and legislation I regard this case as another example of a recent disturbing trend on the part of courts and tribunals, and legislatures, towards jurisdictional over-reach, the former by insisting on hearing cases that could more efficiently, proximately and appropriately be heard by courts of other jurisdictions, and the latter, by seeking to confer excessive long-arm jurisdiction on their courts64. I adhere to what I said in Mobil Oil Australia Pty Ltd v Victoria65 in a passage which is unaffected by the fact of my dissent there66: "The Australian Constitution and the federal structure for which it provides, must of necessity contemplate and ensure the unfettered exercise of jurisdiction of the courts of each of the States according to accepted notions of territoriality. All of the State Constitutions contain similar provisions to s 85 of the Victorian Constitution. The plaintiff accepts that the language used in s 85 of the Victorian Constitution and like provisions in other States should not be read in any narrow fashion. However, a consistent, expansive reading and application of all State Constitutions has the capacity to cause, and will inevitably do so, conflicts of jurisdiction, and forum poaching: it is only when the jurisdiction of one State is under consideration, that there may be no immediately apparent problem. The Victorian legislature, by the Victorian Act, has attempted to make the Supreme Court of Victoria a national court for the conduct of class actions: this is so because it has the potential, if the Supreme Court Act is 64 Agar v Hyde (2000) 201 CLR 552; John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503; Regie Nationale des Usines Renault SA v Zhang (2002) 210 CLR 491; Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1; BHP Billiton Ltd v Schultz (2004) 79 ALJR 348; 211 ALR 523. 65 (2002) 211 CLR 1. 66 (2002) 211 CLR 1 at 75 [177]. Callinan valid, to draw residents of other places into proceedings in Victoria as plaintiffs in circumstances in which their claims have no necessary connection with Victoria, they have not invoked the jurisdiction of that Court and they might wish, for perfectly valid reasons, to bring proceedings in jurisdictions other than Victoria." I add this. The excessive exercise of long-arm jurisdiction will appear much less attractive when other jurisdictions, particularly off-shore ones, are provoked, as inevitably they will be, to repay the compliment. It has these undesirable side effects as well, of causing unproductive, expensive, and complicated litigation, and unseemly contests between courts and legislatures, of different jurisdictions. Choice of law The Commonwealth Parliament has no constitutional power to legislate for the resolution of conflicts between the States. Nor does the Constitution contain any provision, such as an adaptation of s 109, which would enable the legislation of one State to prevail over that of another. The High Court, and only the High Court may ultimately resolve conflicts between States (ss 74 and 75(iv) of the Constitution). To the extent that any Commonwealth legislation may appear, or purport to do so, it would be invalid. The fact that the conflict emerges in federal jurisdiction may mean that federal legislation, the Judiciary Act has a legitimate role to play, but to the extent that federal legislation, including the Judiciary Act, may be thought to have a purpose of resolving constitutional conflicts between the States, it is incapable by reason of an absence of Commonwealth constitutional power, of achieving it. Although ss 74 and 75(iv) of the Constitution contemplate that the High Court may and should resolve disputes between States, neither those sections nor any other provide an indication as to how the disputes should be resolved. It seems to me that consistently with the propositions that I have earlier stated this can only be done by treating the legislation of one State which is in conflict with the extra-territorial operation within it of the legislation of some other State, as prevailing over that extra-territorial operation. It seems to me that the only qualifications in relation to that are those that may flow from ss 117 and 118 of the Constitution to which I will refer later. What I have said does not mean that the choice of law rules will not have a role to play in appropriate cases. The choice of law rules however, whether rules of common law, or adapted or altered by legislation, must be applied, subject to the Constitution. They may operate on occasions in such a way as to answer or resolve questions of apparent inconsistency, but they cannot be used to deny a real or substantial conflict, or, as the appellant not inaccurately put it, a clash of laws between States when it truly exists, as it does in this case. Callinan Both New South Wales and Victoria submitted that it would have made no difference to the outcome if the respondent had sued in a New South Wales court: the Judiciary Act would have compelled the same outcome as in Victoria. For reasons which will appear I very much doubt the correctness of that submission. It assumes the desired outcome, that a New South Wales court would be bound to choose and accept the law of Victoria, the TA Act, as the law governing the events with which the action is concerned. It is with respect, right, for the reasons stated in the joint judgment, that the action of the respondent is in federal jurisdiction, and that, absent effective legislation to the contrary, the forum, the Victorian court would be bound, pursuant to s 79 of the Judiciary Act, to apply its common law choice of law rules, which, as has recently been settled, are common to the whole of Australia67, or if those rules have been altered by constitutionally competent Victorian legislation, the altered rules. That raises the first issue in the appeal, but one which is not decisive of it: what choice of law rule governs the respondent's action? The answer that Nettle JA gave to that question was in two parts: that the applicable choice of law rule is a rule of common law; and that the common law requires that the law of the jurisdiction in which a statutory cause of action or right is created be chosen68: "But the cause of action for which s 104(1) provides is not a cause of action in tort and the right of indemnity which the section creates is not a right to damages. As has already been noticed, s 104(1) creates a statutory right and cause of action and, according to the common law choice of law rules applicable to statutory rights and causes of action, those created by s 104(1) are governed by the laws of Victoria69 as the law of the obligation thereby created. There is no conflict between s 104(1) and the common law choice of law rules which apply within Australia70." In other passages in his Honour's judgment and the case cited by Nettle JA71 as authority for it, weight is placed upon the nature of the cause of action, as a claim analogous to a claim for an indemnity, rather than other factors. 67 John Pfeiffer Pty Ltd v Rogerson (2000) 203 CLR 503. 68 Transport Accident Commission v Sweedman (2004) 10 VR 31 at 47-48 [51]. 69 Hodge v Club Motor Insurance Agency Pty Ltd (1974) 7 SASR 86. 70 cf Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 601; Barcelo v Electrolytic Zinc Co of Australasia Ltd (1932) 48 CLR 391 at 424. 71 Hodge v Club Motor Insurance Agency Pty Ltd (1974) 7 SASR 86. Callinan Subject to a reservation which I will explain later, if the law to be applied to the action is Victorian law, that would not be because a common law rule requires it. It would be so, because, in creating the right or cause of action, the TA Act, necessarily also enacts by necessary implication, a choice of law rule to govern the action. How could it be otherwise? One State cannot legislate for another72. In enacting a novel statutory cause of action, a parliament of a State could hardly be intending that the law of some other State apply to the litigation of it. In enacting s 104 of the TA Act, the legislation of Victoria also necessarily sought to enact the choice of law rule to apply to it, of Victoria. There can be no doubt about the statutory intendment of a legislature which creates and enacts a statutory cause of action. On this analysis it is unnecessary to look for and compare similar non-statutory causes of action, and to seek to apply the choice of law rules governing them to the statutory cause of action under s 104 of the TA Act. Lex causae73 means the law of the cause of action but is on occasions used less rigidly. "Cause of action" itself does not have a fixed meaning. As I said in Air Link Pty Ltd v Paterson74: "It is true that lawyers usually tend to think of a cause of action as the label to be given to the category of claims within which the claim in question on the facts alleged in the case falls. But 'cause of action' does not have that meaning exclusively. The phrase is often used in relation to the facts giving rise to a right of action. As Parke B said in Hernaman v Smith75: 'The term "cause of action" means all those things necessary to give a right of action, whether they are to be done by the plaintiff or a third person.' 72 Re Wakim; Ex parte McNally (1999) 198 CLR 511. 73 Lex causae is defined as "the law of the cause of action" in Butterworths Australian Legal Dictionary, (1997) and as "the law of the issue" in CCH Macquarie Dictionary of Law, rev ed (1996). Cassell's New Latin Dictionary, 4th ed (1966) does not include a translation of lex causae, but lists "lex" as meaning "law generally, ordinance, rule, precept" and "causa" as meaning "a case at law, a law- suit". 74 (2005) 79 ALJR 1407 at 1429 [145]; 218 ALR 700 at 730. 75 (1855) 10 Exch 659 at 666 [156 ER 603 at 606]. Callinan Another statement to a similar effect is as follows76: '"Cause of action" has been held from the earliest time to mean every fact which is material to be proved to entitle the plaintiff to succeed – every fact which the defendant would have a right to traverse.' Wilson J said this in Do Carmo v Ford Excavations Pty Ltd77: 'The concept of a "cause of action" would seem to be clear. It is simply the fact or combination of facts which gives rise to a right to sue. In an action for negligence, it consists of the wrongful act or omission and the consequent damage78. Knowledge of the legal implications of the known facts is not an additional fact which forms part of a cause of action. Indeed, a person may be well appraised of all of the facts which need to be proved to establish a cause of action but for want of taking legal advice may not know that those facts give rise to a right to relief.'" Dicey and Morris point out, that different Latin expressions are used from time to time to embrace the notion of lex causae79: "The lex causae is a convenient shorthand expression denoting the law (usually but not necessarily foreign) which governs the question. It is used in contradistinction to the lex fori, which always means the domestic law of the forum, ie (if the forum is English) English law. The lex causae may be more specifically denoted by a variety of expressions, usually in Latin, such as the lex domicilii (law of the domicile), lex patriae (law of the nationality), lex loci contractus (law of the country where a contract is made), lex loci solutionis (law of the country where a contract is to be performed or where a debt is to be paid), lex loci delicti (law of the country where a tort is committed), lex situs (law of the country where a thing is situated), lex loci celebrationis (law of the country where a marriage is celebrated), lex loci actus (law of the country where a legal act 76 Cooke v Gill (1873) LR 8 CP 107 at 116 per Brett J. 77 (1984) 154 CLR 234 at 245. 78 cf Cooke v Gill (1873) LR 8 CP 107 at 116; Read v Brown (1888) 22 QBD 128 at 131; Trower and Sons Ltd v Ripstein [1944] AC 254 at 263; Board of Trade v Cayzer, Irvine & Co Ltd [1927] AC 610 at 617; Shtitz v CNR [1927] 1 DLR 951 at 953; Williams v Milotin (1957) 97 CLR 465 at 474. 79 Dicey and Morris on the Conflict of Laws, 13th ed (2000), vol 1 at 29-30 [1-075]. Callinan takes place), lex monetae (law of the country in whose currency a debt or other legal obligation is expressed). The terms of lex loci disgraziae (law of the place where a bill of exchange is dishonoured) and lex loci stabuli (law of the place where a motor car is garaged) are used only in jest." Nygh and Davies discuss the steps involved in selecting the lex causae80: "The confusion has arisen because traditionally the process involved in the selection of the lex causae has been represented as a series of steps that follow logically the one after the other. The first step in this series is classification in order to determine whether the facts before the court raise an issue which falls within a category for which a choice of law rule exists, such as tort, contract, succession and the like. This process leads to the discovery of the relevant choice of law rule, which, of course, contains the connecting factor. The next logical step is the determination of the connecting factor and this in turn will lead the court to the lex And Cheshire and North describe the necessary steps in much the same manner81: "[T]he 'classification of the cause of action' means the allocation of the question raised by the factual situation before the court to its correct legal category. Its object is to reveal the relevant rule for the choice of law." (emphasis added) To ascertain the cause of action, it is therefore necessary first to ascertain the relevant facts causing the harm or loss. The second step, the application of the relevant label to them, of the cause of action, for example, of tort, or a claim for an indemnity, or breach of statutory duty, as the case may be, is a legal and not a factual exercise. The third step, again a legal exercise, is the selection of the law to apply to the cause of action to which the facts give rise. The relevance for present purposes of the matters to which I have referred is that the facts, or the factual situation, determine what the correct cause of action is, and ultimately therefore the law to be chosen. What is strongly arguable is that the facts here, as opposed to matters of law or legal consequence, do not give rise simply to a claim for, or in the nature of an indemnity, statutory or otherwise: that the facts constituting or giving rise to the cause of action are those pleaded in paragraphs 3 and 4 of the respondent's 80 Nygh and Davies, Conflict of Laws in Australia, 7th ed (2002) at 273. 81 Cheshire and North's Private International Law, 13th ed (1999) at 36. Callinan statement of claim, of a collision, negligence on the part of the appellant causing it, and the suffering of injuries by the casualties as a result of it, in short, of a tort; and that the other matters pleaded are not facts but matters of law, or of legal consequence, of payments to the casualties pursuant to the TA Act, and that the respondent is entitled to sue to recover them under that Act. The argument then proceeds, that the factual situation in substance, and as pleaded, requires the characterization of the respondent's action as one in tort, or at least one which, again as the statement of claim discloses, requires for its success, proof of a tort: the principal or substantial issue is of tort; all other relevant matters are legal ones, and in any event are beyond dispute. John Pfeiffer Pty Ltd v Rogerson82 holds the lex causae for torts in Australia is the place of the commission of the tort, here the place where the respondent's right against the appellant arose, Victoria. The argument would also invoke the proposition that modern courts eschew form, and prefer substance wherever possible. There is authority, with which I would respectfully agree, which holds that substance rather than form may be determinative of a question of choice of law, that the true, real, or substantial issues in dispute, of law and fact, govern the choice, and not the nomenclature of the cause of action. In Macmillan Inc v Bishopsgate Investment Trust Plc (No 3)83 the principal issue was whether the defendants were purchasers of shares for value in good faith without notice. The competing laws were the law of England and the law of New York. The primary judge, Millett J, selected New York. The Court of Appeal (Staughton, Auld and Aldous LJJ) affirmed that selection. In doing so, Auld LJ went behind the mere formulation of the cause of action84: "Subject to what I shall say in a moment, characterisation or classification is governed by the lex fori. But characterisation or classification of what? It follows from what I have said that the proper approach is to look beyond the formulation of the claim and to identify according to the lex fori the true issue or issues thrown up by the claim and defence. This requires a parallel exercise in classification of the relevant rule of law. However, classification of an issue and rule of law for this purpose, the underlying principle of which is to strive for comity between competing legal systems, should not be constrained by particular notions or distinctions of the domestic law of the lex fori, or that of the 82 (2000) 203 CLR 503. 83 [1996] 1 WLR 387; [1996] 1 All ER 585. 84 [1996] 1 WLR 387 at 407; [1996] 1 All ER 585 at 604. Callinan competing system of law, which may have no counterpart in the other's system. Nor should the issue be defined too narrowly so that it attracts a particular domestic rule under the lex fori which may not be applicable under the other system85." (emphasis added) Aldous LJ adopted a similar approach86: "I agree with the [primary] judge when he said87: 'In order to ascertain the applicable law under English conflict of laws, it is not sufficient to characterise the nature of the claim: it is necessary to identify the question at issue.' Any claim, whether it be a claim that can be characterised as restitutionary or otherwise, may involve a number of issues which may have to be decided according to different systems of law. Thus it is necessary for the court to look at each issue and to decide the appropriate law to apply to the resolution of that dispute. The judge concluded88: 'In my judgment the defendants have correctly characterised the issue as one of priority.' I agree, but believe it right to add what is implicit in that statement, namely that the issue is one of priority of title to shares in Berlitz. Those shares are in the nature of choses in action. They give to the registered holder the rights and liabilities provided by the company's documents of incorporation as governed by New York law. The issue between the parties concerns the right to be registered as the holder of the shares and therefore entitled to the rights and liabilities stemming from registration or the right to registration." The arguments to which I have referred, are consistent with the approach of four judges in the United Kingdom. In substance I would prefer them. It also strikes me as both unfair, and somewhat eccentric that the appellant and her insurer, who may perhaps be presumed to know the law of New South Wales, but hardly the choice of law rules of Victoria and the statutory law creating the claim against them, are now to be confronted with a claim in a Victorian court in respect of events occurring in New South Wales, made long after any action in respect of them in New South Wales could successfully be pursued. That this is so provides further reason for the discouragement and rejection of the excessively long-arm reach of s 104 of the TA Act which Victoria wishes to extend here. 85 See Cheshire and North's Private International Law, 12th ed (1992) at 45-46, and Dicey and Morris on the Conflict of Laws, 12th ed (1993), vol 1 at 38-43, 45-48. 86 [1996] 1 WLR 387 at 418; [1996] 1 All ER 585 at 614. 87 [1995] 1 WLR 978 at 988; [1995] 3 All ER 747 at 757 (Millett J's emphasis). 88 [1995] 1 WLR 978 at 990; [1995] 3 All ER 747 at 759. Callinan The respondent would no doubt seek to answer those arguments by contending that in pleading as it did, paragraphs 2, 3 and 4 of its statement of claim, it was not simply pleading a factual situation giving rise to a tort, it was pleading, as it was required to do, in order to succeed under s 104 of the TA Act, the criteria which that section prescribes for the success of an action under it. But that argument has these three defects. It makes nomenclature of the cause of action decisive; it ignores the substance of, and the true issues; and it requires for its maintenance too narrow a meaning of "cause of action". It is unnecessary for me to decide the case on the basis just discussed, or reach a firm conclusion on the respondent's ensuing argument, that there was no relevant conflict with respect to limitation periods, because its claim was for an indemnity, and that was a matter as to which s 52 of the MA Act, which imposes a limitation period of three years for actions for damages for personal injuries, did not speak at all because I would uphold the appeal on constitutional grounds. But before leaving this aspect of the case, I would add this. It may be that in any event, even if the respondent's action is properly to be regarded as an action for an indemnity, its nexus with New South Wales is closer than its nexus with Victoria, and would still call for the application of the law of New South Wales as the lex causae. This is so because the underlying events, the ones that gave rise to the injuries sustained by the casualties, occurred in New South Wales, they were allegedly caused by a person domiciled and resident in New South Wales, and the indemnity to the extent that it is available, and if the case could be made out, would be provided by satisfaction of the judgment in New South Wales, by an insurer in that State, bound by and acting pursuant to its laws, and basing its premiums, no doubt, upon actuarial calculations of the likely damages assessable under the law of New South Wales. The connexion with Victoria depends almost entirely upon the fact of the TA Act. If the test of closer connexion, the test for an "indemnity claim" is to be applied, New South Wales and its law may better satisfy it. On that basis, the respondent would not be entitled to an indemnity under ordinary principles of subrogation and New South Wales law, because an entitlement to it could not be made out, unless first a liability in tort for the casualties' damages had been established in an action brought, by or in the name of the casualties, as this one was not, within three years of the accident. The constitutional argument I would hold as I have said, for the appellant on constitutional grounds. What does s 104 of the TA Act really seek to do? The answer is to confer upon a Victorian statutory authority, not only the right to make a unique statutory claim in respect of relevant events wherever occurring in Australia, but also to do so, regardless of any local legal impediments or obstacles to an action for the recovery of the amount sought reflecting New South Wales legislative policy and Callinan the law on the topic of damages for personal injuries caused by the negligent use of a motor vehicle in that State. One obvious impediment here is s 52 of the MA Act, which bars an action for damages for personal injuries after the expiration of three years from their occurrence. But that of course is not the only one. None of the elaborate steps which must be taken before an action could be brought against the appellant in New South Wales, have been taken. In Port MacDonnell Professional Fishermen's Association Inc v South Australia89, the Court foresaw that a conflict between States could arise, and suggested that when it did, it should be resolved by a test of the closer or stronger the connexion of a State with the facts: in that case, the facts of geography. As was said in that case90: "A problem of greater difficulty would have arisen if the fishery defined by the arrangement had a real connexion with two States, each of which enacted a law for the management of the fishery. The Constitution contains no express paramountcy provision similar to s 109 by reference to which conflicts between competing laws of different States are to be resolved. If the second arrangement had been construed as extending to waters on the Victorian side of the line of equidistance, there would obviously have been grounds for arguing that the Victorian nexus with activities in these waters was as strong as or stronger than the South Australian nexus." If the test propounded in Port MacDonnell were a, or the exclusive, test of prevalence, then for the reasons which I have already given, I would hold that New South Wales, and New South Wales law only, should govern the action. The adoption of the State law having the closer or stronger connexion with the facts in issue has several attractions, including that it is suggested in prior authority of this Court. One such benefit is that the application of the closer or stronger connexion test ensures consistency of result, regardless of the forum. Another is that it recognises the primary responsibility or, to use the phrase of the majority in John Pfeiffer Pty Ltd v Rogerson, the "predominant concern"91 that each State has over its own geographical area92. Even though, as I pointed out in Mobil Oil, more than one State can have a legitimate connexion with the same 89 (1989) 168 CLR 340. 90 (1989) 168 CLR 340 at 374. 91 (2000) 203 CLR 503 at 536-537 [75] per Gleeson CJ, Gaudron, McHugh, 92 See at [101] above. Callinan facts93, it is clear that the Constitution intended each State to have primary legislative responsibility, subject to the Commonwealth's enumerated powers, for occurrences within its borders. Similar issues have arisen in the United States. In general, the approach to their resolution is much the same as the one that I adopt. In Franchise Tax Board of California v Hyatt94, the Supreme Court discussed the various tests arguably applicable to the selection of the appropriate legal regime, in a case in which the Franchise Tax Board of California, which had been sued in another State in tort, sought to rely upon the immunity from suit to which it would have been entitled if similar proceedings had been brought in California. The Supreme Court disallowed the defence. In doing so, it emphasized a number of matters. One was that a State is not compelled to substitute the statutes of other States for its own statutes dealing with a subject matter concerning which it is competent to legislate95. Another was that the injury that the plaintiff claimed to have suffered was suffered within the borders of the State in which the action was brought, and that he was one of the citizens of the State96. The Court also looked to the degree of significant contact or significant aggregation of contacts creating State interests, pointing out that they were manifest in the case, being in particular, the suffering of injury in the State in which the action was brought, and the fact that at least some of the conduct causing the injury occurred in the State. On the basis of any of those considerations, any conflict between the laws of the State of Victoria and those of New South Wales here should be resolved in favour of the latter. The Supreme Court also discussed a test of "core sovereignty": or to put it another way, which sovereign interest should be deemed more weighty. These were tests which the Court concluded were unworkable in practice. Assistance can be derived from some other United States authority also. In Brown-Forman Distillers Corp v New York State Liquor Authority97, the majority of the Supreme Court (Burger CJ, Marshall, Powell and O'Connor JJ) spoke of the projection of the legislation of one State into another, and the interference by the law of one State with the ability of another State to exercise 93 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 80 [186]. 95 538 US 488 at 494, 496 (2003). 96 538 US 488 at 494-495 (2003). Callinan the latter's constitutional authority98. A similar question for consideration arose in Healy v The Beer Institute99. In that case, the Court referred to "unconstitutional extraterritorial effects"100. The reasoning of the Court there made it clear that one State should not be permitted to legislate extra-territorially to regulate events in another State101. In his Siamese Essays, Professor Regan said of extra-territorial legislation in the United States102: "[T]he extraterritoriality principle is not to be located in any particular clause. It is one of those foundational principles of our federalism which we infer from the structure of the Constitution as a whole." In World-Wide Volkswagen Corp v Woodson, the United States Supreme Court said this103: "The concept of minimum contacts, in turn, can be seen to perform two related, but distinguishable, functions. It protects the defendant against the burdens of litigating in a distant or inconvenient forum. And it acts to ensure that the States, through their courts, do not reach out beyond the limits imposed on them by their status as coequal sovereigns in a federal system. Nevertheless, we have never accepted the proposition that state lines are irrelevant for jurisdictional purposes, nor could we, and remain faithful to the principles of interstate federalism embodied in the Constitution. The economic interdependence of the States was foreseen and desired by the Framers. In the Commerce Clause, they provided that the Nation was to be a common market, a 'free trade unit' in which the 98 476 US 573 at 583-584, 585 (1986). 100 491 US 324 at 342 (1989). 101 491 US 324 at 342-343 (1989). 102 Regan, "Siamese Essays: (I) CTS Corp v Dynamics Corp of America and Dormant Commerce Clause Doctrine; (II) Extraterritorial State Legislation", (1987) 85 Michigan Law Review 1865 at 1885. 103 444 US 286 at 291-293 (1980). Callinan States are debarred from acting as separable economic entities104. But the Framers also intended that the States retain many essential attributes of sovereignty, including, in particular, the sovereign power to try causes in their courts. The sovereignty of each State, in turn, implied a limitation on the sovereignty of all of its sister States – a limitation express or implicit in both the original scheme of the Constitution and the Fourteenth Amendment." And in State Farm Mutual Automobile Insurance Co v Campbell, the Supreme Court said this105: "A basic principle of federalism is that each State may make its own reasoned judgment about what conduct is permitted or proscribed within its borders, and each State alone can determine what measure of punishment, if any, to impose on a defendant who acts within its jurisdiction." There can be discerned in those cases an appropriate and well-adapted wariness about the application of the laws of one State, to persons and events in other States, and the activities of those other States. They recognize the need of a State to have the predominant, and if it is so minded, exclusive domain over affairs within it. They also look to, and prefer substance over form, in identifying the people and the events to which the competing laws may apply. The approach focuses first and foremost upon the location of the people and events concerned. I return to the authority of this Court. There must be some territorial limitations upon the legislative powers of the States106. In State Authorities Superannuation Board v Commissioner of State Taxation (WA)107, the Court held that the Constitution imposed no impediment upon the imposition by one State, of a tax upon another with respect to property of the latter, situated within the territory of the former, or with respect to dealings by that latter State within the territory of the former. I would not regard that as a case in which one government, the Western Australian government, legislated for another, New South Wales. More accurately, the situation was one in which one State, by an 104 H P Hood & Sons Inc v Du Mond 336 US 525 at 538 (1949). 105 538 US 408 at 422 (2003). 106 Union Steamship Co of Australia Pty Ltd v King (1988) 166 CLR 1 at 14; State Authorities Superannuation Board v Commissioner of State Taxation (WA) (1996) 189 CLR 253 at 271. 107 (1996) 189 CLR 253. Callinan emanation of it, chose to acquire property and do business in another State. It would be remarkable if New South Wales could be permitted to do that without adherence to the relevant laws of Western Australia. By parity of reasoning, if the respondent here, and those whom it "insured" (the casualties) choose to come into New South Wales or seek to recover money in respect of events occurring there, then they should be bound by the law of New South Wales. It is not as if the casualties could not have sued in that State, and recovered there, had they done so in a timely way, what the respondent now seeks to recover from the appellant. I would accordingly allow the appeal on the basis that s 104 of the TA Act in its application to this case is unconstitutional: it represents an unconstitutional interference with, projection into, or intrusion upon the State of New South Wales, and the natural and predominant hegemony that that State has over claims for personal injuries arising out of negligently caused motor vehicle accidents occurring within it, involving one of its residents, and her insurer licensed to insure her under the law of New South Wales; and upon the further basis that the scheme for which the TA Act provides is in conflict as the table and other provisions discussed show, with the scheme mandated by the MA Act. My conclusion does not depend upon the presence or absence of a provision in the MA Act that no claim to indemnity may be brought in any court, by any party, against a tortfeasor causing a motor accident in New South Wales other than as permitted by the MA Act. The conflict or clash appears clearly from the very marked differences in the statutory schemes, and does not need the express language of such a provision to make it manifest. This conclusion is unaffected by s 118 of the Constitution. It is impossible to give full faith and credit to both sets of laws because they are in conflict with each other. To give full faith and credit to one would be to give no faith or credit to the other. The conflict exists in spite of the common law rules of private international law, because the federal guarantees in the Constitution are paramount108. The conflict means that if full faith and credit were to be given to one set of laws, no faith or credit could be given to the other. The United States Supreme Court has countenanced State public policy as a reason for not giving full faith and credit to another State law. The Court said in Griffin v McCoach109: 108 See Pryles and Hanks, Federal Conflict of Laws, (1974) at 67-68. 109 313 US 498 at 507 (1941). Callinan "Where this Court has required the state of the forum to apply the foreign law under the full faith and credit clause or under the Fourteenth Amendment, it has recognized that a state is not required to enforce a law obnoxious to its public policy." In the present case I do not need to go so far as to advocate a public policy exception to giving full faith and credit to laws such as s 104 of the TA Act; the TA Act's unconstitutional intrusion upon the State of New South Wales is sufficient to dispose of the case. To adapt a statement that has been made in relation to the United States full faith and credit clause: to apply the conflicting laws of two States is impossible; to require each State to apply the law of the other is absurd; and to let each State apply its own law ignores the intended operation of s 118110. It follows that where there is an irreconcilable and direct conflict between two State statutes only one can prevail. The last matter to which reference should be made is the appellant's argument that s 117 of the Constitution required that the appeal be allowed. I have already pointed out that the appellant is not in fact "covered" by insurance in all relevant respects, but in view of the opinion I have formed with respect to the unconstitutionality of s 104 of the TA Act, it is unnecessary for me to decide whether that, or any matter arising under the TA Act subjects the appellant to a disability or discrimination under s 117. I would answer the questions stated for the Court of Appeal differently from the way that Court answered them, and as follows. A. Whether, given the agreed facts set out in paragraphs 1-9 of the special case, s 104(1) of the Transport Accident Act 1986 (Vic) is capable as a matter of construction of applying to the appellant so as to give the respondent a right of indemnity against the appellant. Unnecessary to answer. 110 Laycock, "Equal Citizens of Equal and Territorial States: The Constitutional Foundations of Choice of Law", (1992) 92 Columbia Law Review 249 at 297. Callinan B. Whether, given the agreed facts set out in paragraphs 1-9 of the special case, this proceeding is a matter within federal jurisdiction and, if so, whether s 104(1) of the Act is capable of applying as against the appellant in the light of ss 79 and 80 of the Judiciary Act 1903 (Cth). The proceeding is a matter within federal jurisdiction. Section 104(1) of the Act is unconstitutional in its purported application to the appellant whether in light of ss 79 and 80 of the Judiciary Act 1903 (Cth) or otherwise. C. Whether, given the agreed facts set out in paragraphs 1-9 of the special case, in its potential application to the appellant in this proceeding s 104(1) of the Act is invalid or inapplicable as being: contrary to Ch III and s 118 of the Constitution; or Section 104(1) of the Act is invalid and inapplicable to the appellant by reason of its unconstitutional interference with, projection into, and intrusion upon the constitutional hegemony of New South Wales over the events with which the Act purports to deal. It is otherwise unnecessary to answer this question. contrary to s 117 of the Constitution; or Unnecessary to answer. inconsistent with the operation of the provisions of the Motor Accidents Act 1988 (NSW), as it applied at the time of the accident. Yes. The orders that I would make following upon those answers are that the respondent's action be dismissed, and that the respondent pay the appellant's costs of it, and of the proceedings in the Court of Appeal and in this Court. 139 HEYDON J. The background circumstances and the questions posed in the special case for the Court of Appeal of Victoria are set out in Callinan J's reasons for judgment. However, the range of argument in this Court was less extensive than those questions might suggest. The appellant agreed that the correct answers to question A and the first part of question B were those which that Court gave. The appellant contended that the correct answer to the second part of question B was that s 104(1) of the Transport Accident Act 1986 (Vic) did not apply against the appellant for reasons centring on its invalidity. The key controversies in this appeal are thus those raised by question C, which turn on validity. Question C raises as essential issues whether s 104(1) is invalid as being (a) contrary to Ch III and s 118 of the Constitution; or (b) contrary to s 117 of the Constitution; or (c) inconsistent with the Motor Accidents Act 1988 (NSW). It is convenient to examine these questions in reverse order. At the heart of the appellant's case was her submission that pursuit of the Commission's s 104(1) action against her would undermine, alter, impair and detract from the Motor Accidents Act, and that there was in substance a direct operational inconsistency or "clash" between pursuit of the s 104(1) action and the Motor Accidents Act. It was submitted that the Transport Accident Act was "inimical to the intended effect of the New South Wales law". The appellant also submitted: "the issue is to identify inconsistency as a matter of substance and operation, reflecting the principle that a subject of Australian law cannot be required simultaneously to comply with two inconsistent legal requirements." The appellant submitted that inconsistency arose essentially in five respects. Inconsistency of s 104(1) of the Transport Accident Act with the Motor Accidents Act Before examining the respects in which the appellant submitted that s 104(1) of the Transport Accident Act was inconsistent with the Motor Accidents Act, it is desirable to point to certain features of each Act. Section 35 of the Transport Accident Act creates an entitlement in a person to compensation in accordance with the Act where the transport accident occurred in Victoria, or where it occurred in another State or Territory and involved a "registered motor vehicle" and, at the time of the accident, the person was a resident of Victoria, or the driver of, or a passenger in, the registered motor vehicle. The compensation is paid by the Transport Accident Commission. Section 104(1) gives the Commission a right of indemnity against the person responsible for the accident. The Motor Accidents Act has several functions111. One relates to insurance. The Act creates a requirement that motor vehicles used on public streets in New South Wales be insured by a "third-party policy" in the terms of Sched 1: ss 3(1), 8, 9 and 11. The third-party policy insures the owner and driver of all but excepted motor vehicles against "liability in respect of the death of or injury to a person caused by the fault of the owner or driver of the vehicle … in the use or operation of the vehicle in any part of the Commonwealth …". Thus the liability of the insurer is not limited to liabilities arising in New South Wales. Nor is the liability limited to damages payable to an injured person. The liability includes a liability like that arising under s 104 – a statutory liability to indemnity which is not a claim for damages. Thus the third-party policy extends to the circumstances of a case like the present, where the victims did not sue the owner or driver in New South Wales, but were compensated by the Commission in Victoria, and the Commission sought indemnity from the driver. Section 104(1) thus does not prevent the insurance scheme contemplated by the Motor Accidents Act from operating in an integrated fashion so as to indemnify both the driver and those whom she injured. And it does not take away from the defendant an advantage which that defendant would have had if the victim had not sought compensation from the Commission but had instead sued in New South Wales. Another function of the Motor Accidents Act is to regulate the enforcement of common law rights of action for damages in respect of the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle (ss 40(1) and 41). One way in which that function is fulfilled is through Pt 5. The principal role of Pt 5 is to create procedural requirements regulating the manner in which plaintiffs enforce their claims for "damages" in respect of death or injury so caused. A claim under s 104(1) is not a claim of that kind. Part 5 relates to the claims of injured persons, not to claims for indemnity from those who have met claims by injured persons. This illustrates the fact that the Motor Accidents Act does not exhaustively define the remedies which may exist in respect of the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle. Yet another function of the Motor Accidents Act is seen in Pt 6. It limits the amounts to be arrived at as integers in an award of damages which relates to the death of or injury to a person caused by the fault of the owner or driver of a 111 The Motor Accidents Compensation Act 1999 (NSW) repealed some parts but not other parts of the Motor Accidents Act. It is convenient to speak of the Motor Accidents Act using the present tense, whether or not the provisions discussed remain in force now. motor vehicle in the use or operation of the vehicle. Although Pt 6 is exhaustive in the sense that damages are not to be awarded to a person in respect of a motor accident contrary to Pt 6, it does not deal with claims for indemnity by those who have met claims relating to death or injury, but only with the damages payable under those claims. In short, the relevant sections of the Motor Accidents Act, in terms of what they provide and what they do not provide, do not seek to deal with and regulate claims of the kind which arise under s 104(1). But they do permit persons against whom indemnity is obtained under s 104(1) to recover from their insurers. There is thus no collision between the Motor Accidents Act and s 104(1) in that respect. Similarly, s 104(1) does not purport to reduce the ambit of the Motor Accidents Act. Section 104(2) provides that the liability of the defendant under s 104(1) shall not exceed the amount of damages payable to the injured person: that is, under s 104(1) neither the tortfeasor nor the insurer incurs greater liability than that tortfeasor or insurer would have incurred had the victim proceeded against the tortfeasor under the common law as modified by the Motor Accidents Act. Against this background it is convenient to examine the five groups of inconsistencies between s 104(1) and the Motor Accidents Act which the appellant contended for. They centre on a much smaller range of the provisions than those referred to in argument. The first of the five was that there were differences between the Motor Accidents Act and the Transport Accident Act as to the permissible recovery of particular heads of loss. Section 104(2) of the Transport Accident Act prevents these differences from having significance. Even if in relation to some heads of loss Victoria is more generous than New South Wales and in relation to others New South Wales is more generous than Victoria, whatever a victim recovers under the Transport Accident Act, the amount recoverable under s 104(1) by the Commission cannot exceed the amount recoverable by the victim under the Motor Accidents Act. For this reason it is necessary to reject the appellant's submission that recoveries by the Commission under s 104(1) "undermine the NSW Parliament's attempts to restrict what is compensable". The second alleged inconsistency was that judgment under the Motor Accidents Act in favour of a victim would crystallise the liability of the insurer into a once-and-for-all amount, while potential liabilities under s 104(1) could go on for an extended period. It was said that this impaired the ability of insurers "to provision for, or close off, claims", inconsistently with the objects of the Motor Accidents Act. It is convenient to consider this "inconsistency" with the third inconsistency, which was said to lie in the fact that the Motor Accidents Act, s 52, subjected a claim under the Motor Accidents Act by a victim to a three year limitation period, while a claim by the Commission under s 104(1) was subjected by s 5(1)(d) of the Limitation of Actions Act 1958 (Vic) to a six year limitation period. The appellant pointed out that in this very case the s 104(1) claim was instituted more than three years after the accident. This comparison of the provisions does not indicate "inconsistency". To compare the limitation period applicable to a claim for damages against the owner/driver at fault with the limitation period applicable to a claim by the Commission for indemnity is not to compare like with like. A more appropriate comparison is a comparison between the three year limitation period binding the claimant under the Motor Accidents Act and s 68 of the Transport Accident Act. Section 68(1) gives to a person making a claim on the Commission as the result of a transport accident one year after the accident or a death caused by the accident in which to make the claim, or one year after the injury first manifested itself. Section 68(2) provides for claims to be made within three years if the Commission considers there are reasonable grounds for the delay. The limitation regime created by the Victorian legislation in relation to claims by injured persons against the Commission, far from being more lenient than that imposed by the New South Wales legislation on claims by injured persons against tortfeasors, is less lenient. The fact that a claimant hampered by the Victorian limitation regime can sue in New South Wales does not reveal an "inconsistency" which is "inimical" to the Motor Accidents Act. Even if it be assumed that while only one claim can be made under the Motor Accidents Act, several may be made under s 104(1), none of the latter can be made after six years, and all must relate to payments by the Commission in response to claims by victims made within three years at the latest. No doubt there is a risk, as this case reveals, that from time to time an insurer may have to indemnify an owner or driver sued by the Commission under s 104(1) up to six years after the accident. Since the third-party policy insures against "liability in respect of" vehicles used or operated in any part of the Commonwealth, the legislative language contemplates the policy meeting liabilities other than those which sound in damages and which are subject to the specific limitation and other restrictions of Pts 5 and 6 of the Motor Accidents Act. The fact that the Motor Accidents Act contemplates those other liabilities arising indicates that legislation in other States generating them is not inconsistent with the Motor Accidents Act. In particular, provision will have to be made for those other liabilities, or they will have to be closed off, as insurers see fit in the light of claims under the legislation of other States which are subject to limitation periods which may be longer than that provided by the Motor Accidents Act. Those are decisions for insurers to make in the light of their experience of those claims being made, and their perception of the likelihood of them being made in future. That circumstance does not create an inconsistency with the objects of the Motor Accidents Act in view of the terms of s 9(a)(i) and Sched 1, for the objects must give way to those clear words: the role of the statutory objects is only to assist in resolving a competition between competing constructions (see s 2B(1)). The fourth inconsistency was said to lie in the differences between the procedures which are to be followed by victims making claims under each Act. So far as these differences rest on a relevant comparison, they tend to lack materiality, partly because some of them are trivial, partly because the absence in the Transport Accident Act of requirements equivalent to those in the Motor Accidents Act will be overcome by the fact that in practice claimants under the Transport Accident Act will tend to behave in a manner functionally similar to the way required under the Motor Accidents Act, and partly because s 104(2) prevents recovery under the Transport Accident Act greater than that achievable under the Motor Accidents Act. But the fundamental reason why the fourth alleged inconsistency is not a true inconsistency is that the Motor Accidents Act contemplates that persons driving in New South Wales will be insured against liabilities other than those relating to the payment of damages; that is, statutory indemnities of the type illustrated by s 104(1). A difference between what a claimant for damages must do under the Motor Accidents Act and what a claimant for payments under the Transport Accident Act must do does not reveal an inconsistency between the Motor Accidents Act and s 104(1). Recovery by a claimant for damages under the Motor Accidents Act is a form of recovery distinct from recovery under s 104(1). The fact that the latter kind of recovery is one which the language of the Motor Accidents Act and the third-party policy contemplates as available precludes a conclusion of inconsistency. The fifth inconsistency relied on turned on "the possibility of double recovery by [the Commission] and the victim", which was said to undermine the goals of the Motor Accidents Act – controlling claim payments and insurance premiums (s 2A(2) and s 68A). This appears to postulate a claim in Victoria against the Commission and an earlier, concurrent or subsequent claim in New South Wales against the tortfeasor. In this Court the argument was put very briefly, perhaps because Callaway JA and Nettle JA in the Court of Appeal gave compelling reasons for the conclusion that s 42112 and s 104 of the Transport 112 Sub-sections (1), (2), (3) and (5) of s 42 provide: "(1) This section applies where a person is injured or dies as a result of a transport accident if – the person, a dependant of the person or the surviving spouse of the person is entitled to compensation in respect of the accident in accordance with this Act; and (b) a person has a right to claim compensation or a right of action in respect of the accident under the law of a place outside Victoria. (2) The person, or a dependant or a surviving spouse of the person, is not entitled to compensation in accordance with this Act if, under the law of a place outside Victoria – (Footnote continues on next page) the person, dependant or surviving spouse has been paid or has recovered an amount of compensation or damages; or (b) an award of compensation or judgment for damages has been made, given or entered; or any payment into court has been accepted; or there has been a compromise or settlement of a claim; or a claim for compensation or action for damages is pending. If the person, a dependant or a surviving spouse of the person – receives compensation under this Act in respect of a transport accident; and (b) under the law of a place outside Victoria – receives compensation or damages; or (ii) obtains an award of compensation or judgment for damages; or (iii) payment into court has been accepted; or there has been a settlement or compromise of a claim – in respect of the accident – the Commission may recover from that person, dependant or surviving spouse as a debt due to the Commission the amount of compensation paid under this Act or the amount to which paragraph (b) refers, whichever is the lesser. If a person who claims or is entitled to claim compensation under this Act in respect of a transport accident claims compensation or commences proceedings outside Victoria for the recovery of damages in respect of that accident, the person must give notice in writing to the Commission." Accident Act in combination prevent any double recovery by victims and also any double recovery by the Commission113. For those reasons, which it is unnecessary to repeat, the argument must be rejected. The appellant's arguments that material inconsistencies exist must fail. The Transport Accident Act and the Motor Accidents Act have differences, but they are not what the appellant accepted had to be found – inconsistencies in substance. They satisfy no possible test for inconsistency, and the correctness of various tests for inconsistency debated at the bar table need not be considered. Accordingly, the answer given by the Court of Appeal of Victoria to question C(c) is correct. Thus the question of how inconsistencies between the legislation of different States are to be resolved does not arise. I would prefer to say nothing about the references made in the reasons of the majority and in the reasons of Callinan J to United States authorities. Very little reference was made in argument to United States law. The respondent made no reference to it. Three interveners, and the appellant in reply, referred to it only briefly. Section 117 of the Constitution Turning to question C(b), I agree with the reasons given by the majority for concluding that s 104(1) is not contrary to s 117 of the Constitution114. In consequence, the answer given by the Court of Appeal of Victoria to question C(b) is correct. Chapter III and s 118 of the Constitution The notice which the appellant served pursuant to s 78B of the Judiciary Act 1903 (Cth) maintained that s 104 is unconstitutional on the ground that the effect of its application to the facts of this case would be "to facilitate inconsistent and indeterminate legal results for matters arising within Australia, … contrary to the rule of law, the implied requirements of Ch III of the Constitution in relation to the creation and maintenance of one unified system of law, and the requirements of s 118 of the Constitution". However, the appellant did not advance any specific or distinct submission to this Court in support of that proposition beyond contending that to give effect to s 104(1) was to fail to give full faith and credit to the Motor Accidents Act and was to undermine the 113 Transport Accident Commission v Sweedman (2004) 10 VR 31 at 36-38 [9]-[17], 43-44 [38] and 45-46 [42]-[44]. "unified and integrated legal structure established under, and envisaged and protected by, Chapter III of the Constitution". These contentions rest on the proposition that the Motor Accidents Act is impaired by the claim under s 104(1). That in turn rested on the argument that there were inconsistencies between s 104(1) and the Motor Accidents Act. It follows from the rejection of that argument that there is accordingly no reason to doubt the correctness of the answer which the Court of Appeal of Victoria gave to question C(a). It also follows that that Court's answer to the second part of question B is also correct. Orders I agree with the majority that the appeal should be dismissed with costs.
HIGH COURT OF AUSTRALIA Matter No A30/2012 APPELLANT RESPONDENT APPLICANT RESPONDENT APPLICANT RESPONDENT AND THE QUEEN Matter No A31/2012 AND THE QUEEN Matter No A32/2012 AND THE QUEEN Sem v The Queen [2013] HCA 6 13 March 2013 A30/2012, A31/2012 & A32/2012 ORDER Matter No A30/2012 Appeal dismissed. Matter No A31/2012 Special leave to appeal granted. Appeal treated as instituted and heard instanter and dismissed. Matter No A32/2012 Special leave to appeal granted. Appeal treated as instituted and heard instanter and dismissed. On appeal from the Supreme Court of South Australia Representation M E Shaw QC with S J Doyle SC for the appellant in A30/2012 (instructed by Caldicott and Co) J D Edwardson QC with J P Noblet for the applicant in A31/2012 (instructed by Noblet & Co) M L Abbott QC for the applicant in A32/2012 (instructed by Patsouris & Associates) A P Kimber SC with E M Wildman and T J Costi for the respondent in all matters (instructed by Director of Public Prosecutions (SA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Sem v The Queen Criminal law – Directions to jury – Joint enterprise liability – Participation in joint criminal enterprise – Where participation in enterprise not live issue at trial – Whether necessary for trial judge to direct jury on elements of liability not in issue at trial. Criminal law – Summing-up – Joint trial – Where almost all evidence at trial admissible against each accused – Where trial judge identified criticisms of evidence and significance of criticisms to each accused's case – Whether trial judge obliged to deal separately with each accused's case when summing-up in joint trial. FRENCH CJ, CRENNAN, KIEFEL, BELL AND GAGELER JJ. Tuan Kiet David Huynh ("Huynh"), Chansyna Duong ("Duong") and Rotha Sem ("Sem") were each convicted of the murder of Thea Kheav at a joint trial in the Supreme Court of South Australia (Kourakis J and a jury). Each is serving a term of life imprisonment subject to a non-parole period of 20 years consequent upon that conviction. Appeals against their convictions were dismissed by the Full Court of the South Australian Supreme Court (Doyle CJ, Vanstone and Peek JJ)1. On 7 September 2012, Huynh was granted special leave to appeal on two overlapping grounds. Following the grant of that leave, Duong and Sem applied for special leave to appeal on the same two grounds. Their applications were referred to a Full Court on the basis that they would be argued as on appeal at the same time as the hearing of Huynh's appeal. For the reasons to be given, Duong and Sem should be given special leave to appeal but all three appeals should be dismissed. In the balance of these reasons, Duong and Sem will be referred to as appellants. At the time of his death, Thea Kheav was attending an 18th birthday party held at a family home in suburban Adelaide ("the Vartue Street premises"). He died as the result of a stab wound that was inflicted in the course of an assault carried out by a number of persons. His assailants were part of a larger group that had arrived at the Vartue Street premises following an hostile incident at the party involving Sem. There was some evidence that Duong stabbed the deceased. However, the prosecution did not limit its case to proof that Duong was the principal offender. The prosecution case against each appellant was put alternatively in ways that did not depend upon proving the identity of the principal offender. One of these ways required the prosecution to prove that the appellant was a party to an agreement with others, including the principal offender, to kill or to inflict really serious bodily injury on a person or persons at the Vartue Street premises, and that while that agreement was on foot the principal offender stabbed the deceased intending thereby to kill or to do really serious bodily harm to him. Liability on this case depended on the doctrine variously described as "common purpose", "concert" or "joint criminal enterprise". Another way in which the case was put engaged the doctrine described as "extended common purpose" or "extended joint enterprise". Liability on this basis would be established, notwithstanding that the agreement was to do no 1 R v Duong (2011) 110 SASR 296. Crennan Bell more than to assault a person or persons at the Vartue Street premises, provided that the prosecution proved that the appellant contemplated that, in carrying out the agreement, a party to it might use a knife or similar weapon intending thereby to kill or to inflict really serious bodily harm. Liability on either basis (collectively "joint enterprise liability") required proof that the appellant participated in some way in furtherance of the enterprise. None of the appellants gave evidence at the trial. None disputed that he had been among the persons who had gone to the Vartue Street premises following the earlier incident. The case of each appellant was that he had not been a party to an agreement to kill or to inflict really serious bodily harm and that the stabbing of the deceased was the unforeseen act of another. The directions given to the jury respecting liability for a joint enterprise to commit murder were favourable to the appellants in that they required the prosecution to prove that the agreement to kill or to inflict really serious bodily harm involved the use of "a knife or similar bladed weapon". However, the directions did not specify proof that the appellant participated in the enterprise as a discrete element of liability. The significance of that omission is the first issue raised by the appeals. Its resolution requires consideration of the real issues in the trial and of the sufficiency of the directions to guide the jury to their decision on those issues. That consideration requires analysis of the separate case of each appellant. The sufficiency of the summing-up to identify fairly each appellant's case is the second issue raised by the appeals. The determination of each issue requires some further reference to the evidence and to the conduct of each case at the trial. The evidence A detailed summary of the evidence is contained in the reasons of the Full Court2. What follows is substantially taken from that account. The deceased, his three brothers and Sem all attended the birthday party as invited guests. Duong, Huynh and a number of their associates also attended the party. After a short time they left and went to Duong's house. Sem remained at the party. The deceased and his brothers appear to have entertained some ill-feeling towards Sem and the others. The deceased asked his hosts why they had been invited to the party. The inquiry led to a confrontation between Sem and the Kheav 2 R v Duong (2011) 110 SASR 296 at 298-301 [3]-[23]. Crennan Bell brothers. At some point in the course of the confrontation Sem said words to the effect of "watch your back". Following the confrontation, Sem left the party and drove to Duong's house, where he gave an account of the incident. The evidence of what took place at Duong's house came from Kathleen Francis and Sophie Russo. Kathleen Francis said that Sem might have said "let's go get them". The group left Duong's house and travelled in several cars to the Vartue Street premises. As the group was leaving the house, Kathleen Francis heard someone say "get a knife". The evidence did not establish that Duong or Huynh were present when Sem related his account of the incident at the party, nor did it establish that any of the appellants heard the words "get a knife". Kathleen Francis believed that Sem had already walked out of the house at the time she heard these words. Evidence concerning the events that followed the arrival of the group at the Vartue Street premises came from the hosts, guests and neighbours. There were inconsistencies in the various accounts. Estimates of the number of persons who arrived at the Vartue Street premises varied between 10 and 40. The men in the group were described as having been "armed with bottles, pieces of wood, sticks, blue metal poles, baseball bats, machetes and a fishing knife". The evidence did not establish that Duong or Huynh arrived at the scene armed with any form of weapon. A witness gave an account that Sem had been armed with two bottles when he got out of his car. Relevantly, the appearance of the group was evidently aggressive. In summing-up, the trial judge commented that it was open to find that the group, as it proceeded down Vartue Street, presented "a combined show of force". As the group approached the Vartue Street premises, many of the guests retreated into the garage and closed the roller door. At this point the deceased and a female friend were standing in the driveway at the front of the premises. The assault on the deceased commenced in the driveway near the road. He was hit on the head with a bottle. He fell to the ground and was kicked and punched by several persons as he lay on the road. After this initial assault the deceased was helped to his feet and he made his way to a set of gates, which gave access to the rear of the premises. His face was bleeding. He attempted to climb over the gates but was pulled from the gate by some of his assailants, who renewed their assault on him. In this second phase of the assault, the deceased was kicked and hit by a number of persons and struck with pieces of wood. Rithy Kheav, the deceased's older brother, gave evidence that he had seen Duong stab the deceased. Crennan Bell The deceased suffered multiple injuries, some occasioned by a blunt object and others by glass or a sharp object. The fatal injury, a stab wound, penetrated 16cm into the abdomen, cutting a vertebra. It was the only stab wound. The weapon was not recovered. Rithy Kheav's evidence, that he had seen Duong stab the deceased, was open to criticism. Among grounds for that criticism was evidence that shortly before the trial Rithy Kheav had claimed for the first time that Huynh had also stabbed the deceased. Rithy Kheav adhered to this account at the trial. The prosecution disavowed reliance on this part of Rithy Kheav's evidence in its case In Sem's case, the prosecution tendered a statement made by him to the police on the day after the killing. It contained material that was both inculpatory and exculpatory. In summary, Sem said he had attended the party as an invited guest. He had asked his friend, Duong, to leave because Duong was not an invited guest. Duong and his companions had done so. Later that evening he had been subjected to an unprovoked assault by 15 or so of the guests. He had left the party and gone to Duong's house where he had told Duong of the assault and had asked him to "come back with me to sort it out". Duong and two others had travelled with Sem to the Vartue Street premises. Duong had intended to "have a word to them". On arrival they had walked up the driveway and had been confronted by persons throwing bottles and pieces of timber at them. They had been attacked by these persons. Sem had "punch[ed] back" but there were too many of them and he and his associates had run back to his car and driven away. There was evidence that each appellant had taken part in the assaults upon the deceased and that each had struck the deceased either with a piece of wood or a bottle. This evidence was challenged on grounds including inconsistency with other evidence and in some instances with the witness' prior statements. Doyle CJ, writing the leading judgment in the Full Court, acknowledged that some of the evidence was subject to "legitimate criticisms"3. Later, dealing with a ground which asserted that the verdicts were not supported by the evidence, Doyle CJ characterised the evidence respecting the involvement of each appellant in the attack on persons at the Vartue Street premises as "powerful"4. A 3 R v Duong (2011) 110 SASR 296 at 301 [24]. 4 R v Duong (2011) 110 SASR 296 at 331 [190]. Crennan Bell summary of the evidence as it relates to each appellant is contained in the reasons of the Full Court5. It is unnecessary to repeat that summary in these reasons. The prosecution case on joint enterprise liability Fundamental to the prosecution case in joint enterprise liability was the contention that it was not reasonably possible that any of the appellants was unaware that others in the group were in possession of weapons. That awareness was the basis for the inference in each case that the appellant had come to an understanding with other members of the group that a knife would be used to kill or to inflict really serious bodily harm on one or more persons at the Vartue Street premises or, at least, that he contemplated that a knife might be used intentionally to inflict injury of that kind. Critical questions for the jury's determination concerned the appearance and conduct of the group. Were any of its members armed on arrival at the scene? If so, with what weapons? Did any of the group produce a machete, fishing knife or other bladed weapon at the scene? Were the bottles, pieces of wood, and poles, with which some members of the group were armed, brandished aggressively in a show of force, or were they objects that had been thrown at the group by the occupants of the Vartue Street premises? The answer to these questions bore on the capacity of the evidence in each case to establish to the criminal standard that the appellant had come to the understanding or arrangement on which the case on joint enterprise liability depended. The determination of what, if anything, the appellant whose case was under consideration did at the scene was relevant to the same issue. The appellants' cases on joint enterprise liability At this point some reference should be made to the way each appellant answered the joint enterprise case at the trial. Duong relied on evidence that he had been reluctant to go with the group; that he had travelled to the Vartue Street premises with Kathleen Francis and Sophie Russo; and that he was unarmed on arrival. He acknowledged that he had picked up a piece of wood at the scene but he pointed to the evidence that he had backed off when the person he was confronting had demonstrated that he was unarmed. In combination, these features of the evidence were said to raise a doubt that Duong had come to an agreement to do really serious bodily harm to any person. 5 R v Duong (2011) 110 SASR 296 at 300-301 [20]-[23]. Crennan Bell Sem relied on the account in his statement as raising the reasonable possibility that he had returned to the Vartue Street premises with no understanding other than to "talk or to posture" and that he had done nothing more than defend himself from an attack at the front of the house. It was his case that some of the group had picked up sticks at the scene and that thereafter "things very much spiralled out of control". The stabbing of the deceased in an incident by the gates was suggested to have been the unexpected act of an individual who was "completely out of control". Huynh's case relied on the absence of evidence from which an inference might be drawn that he had knowledge that any of the group had a knife. Huynh's counsel put it this way: "It's all well and good, it's one thing members of the jury to go to a fight, maybe chuck a bottle or two, swing a lump of wood, chuck a lump of wood, one thing to do things like that, it's another question altogether to go to a fight knowing that a knife or some kind of a bladed weapon is there and realising, considering actually applying your mind to the possibility that it might be used by some lunatic to go over the top". The summing-up The directions of law in the summing-up were complex and lengthy. The complexity and length were occasioned in part by the need to address liability in the event the jury found that Duong was the principal offender and in the event that the principal offender was not identified. On either case it was necessary to direct on liability with respect to the alternative verdict of manslaughter. The complexity and length were also occasioned by the perceived need to direct on accessorial liability as an alternative to joint enterprise liability. The accessorial case, in the way it was left, required the jury to determine as a preliminary matter whether the stabbing took place on the road or near the gates. Accessorial liability in each case depended upon proof that the appellant knew of the knife and of the principal offender's murderous intention, and that with that knowledge he had intentionally assisted or encouraged the commission of the offence. Joint enterprise liability depended upon proof that the appellant was a party with others, including the principal offender, to an agreement to use a knife or similar bladed weapon to kill or do really serious bodily harm, and that pursuant to the agreement he participated in some way in the enterprise. The evidence that supported the inference of knowledge of the knife on the accessorial case was the same evidence that supported the inference of agreement that a knife would be used (or that its use by a party possessed of the murderous Crennan Bell intention was contemplated) in the joint enterprise case. In neither of the ways the prosecution case was put was it necessary to prove that the appellant had engaged in any conduct other than being present at the Vartue Street premises as one of the group. On the accessorial case, presence in the circumstances supported the inference that the appellant whose case was under consideration was intentionally encouraging the commission of the offence. On the joint enterprise case, presence in the circumstances supported the inference that the appellant whose case was under consideration was a party to an agreement either to murder or to assault. The trial judge directed the jury respecting presence at the scene on the joint enterprise case as follows: "[T]he mere presence of the person at or near the scene of a crime being committed by another whatever may be that person's knowledge of or attitude towards the commission of the crime does not without more make him guilty under this principle. To implicate that person his presence must be by agreement with the other for the purpose of furthering and achieving the commission of the crime." (emphasis added) Shortly after retiring, the jury sent a note asking if they could be supplied with a "written description explaining the components of murder, joint enterprise and aiding abetting and manslaughter". The response to that request involved the production of a 17-page typewritten document setting out the elements of murder and manslaughter and explaining how liability might be established for each offence as principal in the first degree, accessory at the fact, aiding and abetting, party to a joint enterprise to commit murder and party to a joint enterprise to assault. The directions also included instruction in the law of self defence. A draft of the directions was circulated to counsel. A number of amendments were made to the draft to take into account counsel's submissions. In the form in which they were distributed, the written directions were approved by all counsel. The impugned direction The criticism now made of the directions is with respect to those dealing with joint enterprise liability. The same criticism is made in each case. It is sufficient to set out the direction on joint enterprise to commit murder: Crennan Bell "JOINT ENTERPRISE TO COMMIT MURDER The general principle is that if two persons come to an agreement or make an arrangement that together they will commit a crime and then, while that agreement or arrangement is still on foot and has not been called off, in accordance with that agreement or arrangement one of them does, or they do between them, all the things that are necessary to commit the crime they are both guilty of that crime regardless of what part each played in its commission. In order to prove that the accused or any one or more of them is guilty of murder by reason of involvement in a joint enterprise to murder, the prosecution must prove each of the following elements beyond reasonable doubt: That the accused came to an agreement or made an arrangement with others (the participants) to use a knife or similar bladed weapon to kill or cause really serious bodily harm to a person or persons at [the Vartue Street premises]. That pursuant to that agreement or arrangement a participant killed [the deceased] by stabbing him. That the participant who stabbed [the deceased] did so with the intention to kill [the deceased] or to cause him really serious bodily harm. That the killing of [the deceased] was unlawful, not in self defence." The Court reconvened and the written directions were distributed to the jury. The trial judge read through the directions in the jury's presence. His Honour omitted the opening sentence of the direction on joint enterprise to murder, observing that he would "go straight to the steps related to in this case". He proceeded to direct the jury that in order to prove an accused's guilt of murder by reason of his involvement in a joint criminal enterprise to commit murder the prosecution must prove each of the elements in pars (1) to (4) of the written direction. The Full Court – the first issue The appellants' consolidated grounds of appeal in the Full Court were prepared by new counsel. They included a ground that the trial judge had erred Crennan Bell "in directing the jury that an accused could be found guilty of murder without any act of participation in the joint enterprise on that accused's part". It does not appear to have been contended on the hearing before the Full Court that the trial judge had given any such direction. Doyle CJ treated this ground as contending error by the omission of a requirement that the prosecution prove as a separate element of liability that the accused participated in the joint enterprise6. His Honour observed that the written direction closely followed the decision in McAuliffe v The Queen7. However, he accepted that participation had not been identified as a discrete element requiring proof8. His Honour commented that in the circumstances of this case there was "no risk at all that the jury found any one of the [appellants] guilty without finding that that [appellant] participated in the joint enterprise"9. That observation is to be understood in the context of his Honour's identification of the real issue in the trial, which he put this way: "what the jury made of the conduct of the accused, and whether that conduct established the relevant agreement or arrangement. If it did, it did it by establishing conduct that amounted to participation."10 In dealing with other of the appellants' grounds of appeal, Doyle CJ rejected the submission that the directions were wrong in law11. Error of law? The appellants contend that the acknowledged omission of a direction respecting an element of joint enterprise liability constituted legal error and required the Full Court to set aside their convictions12. The Full Court's assessment that the error had not given rise to the risk of wrong conviction was a 6 R v Duong (2011) 110 SASR 296 at 311 [92]. (1995) 183 CLR 108; [1995] HCA 37. 8 R v Duong (2011) 110 SASR 296 at 312 [97]. 9 R v Duong (2011) 110 SASR 296 at 312 [98]. 10 R v Duong (2011) 110 SASR 296 at 313-314 [102]. 11 R v Duong (2011) 110 SASR 296 at 324 [158], 328 [168]. 12 Criminal Law Consolidation Act 1935 (SA), s 353(1). Crennan Bell consideration going to the application of the proviso13, but there had been no invitation to apply the proviso and the Full Court had not purported to do so. The contention that it is an error of law for a trial judge to omit to instruct a jury on all of the elements of liability for an offence cannot stand with the many decisions of this Court affirming the statement of the responsibility of the trial judge in Alford v Magee14. The duty is to decide what the real issues in the case are and to direct the jury on only so much of the law as they need to know to guide them to a decision on those issues. The application of the principle was illustrated in Alford v Magee by reference to the trial of an accused for larceny at which the sole issue is proof of the taking away of the thing stolen. In such a case it is neither necessary nor desirable to instruct the jury on the elements of the offence of larceny. Commonly liability does not reduce to a single factual question at the trial and the trial judge's responsibility will not be as readily discharged as in the celebrated illustration of Sir Leo Cussen's "great guiding rule"15. Discharge of that responsibility will usually involve instruction respecting the elements of the offence16 and, where appropriate, the principles governing accessorial or joint enterprise liability. This is not to say that the omission to specify an element of liability that is not in issue in the trial is legal error. Whether the omission to specify the requirement of proof of participation in the directions on joint enterprise liability was an error depends upon whether the Full Court was right to conclude that proof of that fact was not an issue at the trial. Before turning to the Full Court's analysis, it is appropriate to make an observation about the length and complexity of the written and oral directions. 13 Criminal Law Consolidation Act 1935 (SA), s 353(1). 14 (1952) 85 CLR 437 at 466 per Dixon, Williams, Webb, Fullagar and Kitto JJ; [1952] HCA 3; and see R v Getachew (2012) 86 ALJR 397 at 404 [29] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; 286 ALR 196 at 204; [2012] HCA 10 and the cases set out therein at footnote 30. 15 Alford v Magee (1952) 85 CLR 437 at 466 per Dixon, Williams, Webb, Fullagar 16 RPS v The Queen (2000) 199 CLR 620 at 637 [41] per Gaudron ACJ, Gummow, Kirby and Hayne JJ; [2000] HCA 3. Crennan Bell Clayton v The Queen17 contains discussion on the approach to summing- up at the trial of multiple accused jointly charged with murder. The majority questioned the need to frame the directions of law according to a pattern determined only by the legal principles upon which the prosecution relied18. The point being made was the need to isolate the factual issues for determination and to direct only on the law as it applies to the determination of whether guilt has been proved by reference to those issues19. As a matter of legal analysis, there were differing paths to fixing the appellants with liability for the act of the principal offender. Liability might be as an accessory at the fact aiding and abetting or as parties to a joint enterprise. In the way joint enterprise to murder was left, each path depended upon proof of knowledge of the knife or similar bladed weapon (or contemplation of the possible use of such a weapon by a person possessed of a murderous intention). The critical question in either of the ways that liability was left turned on the capacity of the evidence in each case to prove that knowledge. There was evidence from which an inference of concert was open. If the jury were not persuaded in each case that the appellant had come to an understanding respecting the intentional infliction of really serious bodily harm with the use of a knife or similar bladed weapon (or, in the case of an understanding that a person or persons would be assaulted, that he contemplated the use of such a weapon by a party having the requisite intention) it is not apparent how, acting reasonably, the jury might have been affirmatively persuaded that the appellant possessed the knowledge necessary for accessorial liability. One way of reducing the length and complexity of the directions on the law would have been to raise with the prosecutor the utility of leaving the accessorial case before the commencement of the addresses. The Full Court identified the real issue in each case as whether the jury were satisfied that the prosecution had proved the agreement specified in par (1) 17 (2006) 81 ALJR 439; 231 ALR 500; [2006] HCA 58. 18 Clayton v The Queen (2006) 81 ALJR 439 at 444 [23] per Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ; 231 ALR 500 at 506. 19 Clayton v The Queen (2006) 81 ALJR 439 at 444 [24] per Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ; 231 ALR 500 at 506. Crennan Bell of the direction20. Proof of such an agreement relied on drawing an inference from the appellant's conduct. If the conduct proved the agreement, it necessarily proved the appellant's participation in that agreement21. Provided that the Full Court's analysis of the real issue at the trial was correct, it was right to reject the challenge to the correctness of the directions on joint enterprise liability. Participation in a joint criminal enterprise The appellants submitted that proof of their participation in any joint criminal enterprise had been an issue at the trial. Their submissions were apt to suggest that it had been incumbent on the prosecution to prove an act of "participation" beyond presence at the scene pursuant to the agreement. The submissions in this respect require consideration of proof of participation in a joint criminal enterprise of the kind alleged here. So, too, does one submission made by the respondent. The respondent's written submissions acknowledged that joint enterprise liability requires proof of the agreement and of the accused's participation in the enterprise. However, on the hearing of the appeals the respondent resiled from that submission in favour of the contention that "one plays a part at its most simple by joining into the agreement". That contention conflated the making of the agreement (whether tacit or express) with participation in its execution and confused liability for conspiracy with liability for the offence that is the subject of the conspiracy. Under the common law the agreement of two or more persons to commit a crime is, without more, a conspiracy22. Parties to a conspiracy are liable to conviction for that offence regardless of whether the crime that is the subject of their agreement is committed. The doctrine of joint criminal enterprise provides the means of attaching liability for the agreed crime on all the parties to the agreement regardless of the part played by each in its execution23. Of course there will usually be no occasion to have recourse to the doctrine in the case of a 20 R v Duong (2011) 110 SASR 296 at 313-314 [102]. 21 R v Duong (2011) 110 SASR 296 at 313-314 [102]. 22 Gerakiteys v The Queen (1984) 153 CLR 317 at 327, 330 per Brennan J, 334 per Deane J; [1984] HCA 8; Truong v The Queen (2004) 223 CLR 122 at 143-144 [35] per Gleeson CJ, McHugh and Heydon JJ; [2004] HCA 10. 23 McAuliffe v The Queen (1995) 183 CLR 108 at 114; Gillard v The Queen (2003) 219 CLR 1 at 35-36 [110] per Hayne J; [2003] HCA 64. Crennan Bell party who does some or all of the acts constituting the actus reus. The work done by the doctrine is in making other parties liable for those acts. The principles are as explained by McHugh J in Osland v The Queen24. Liability attaches to all the parties to the agreement who participate in some way in furthering its execution. A person participates in a joint criminal enterprise by being present when the crime is committed pursuant to the agreement25. The unchallenged evidence was that each appellant was one of a larger number of persons who had travelled from Duong's house to the Vartue Street premises. No nice question arises in these appeals of the sufficiency of the evidence to prove participation in the enterprise. If, at any time prior to the stabbing, the appellant whose case was under consideration was found to have come to an understanding or arrangement with others, including the principal offender, that a knife or similar bladed weapon would be used to kill or to inflict really serious bodily harm on a person or persons at the Vartue Street premises, his presence as one of the hostile group amounted to participation in furtherance of the agreement. Proof that the appellant whose case was under consideration assaulted a person or persons at the Vartue Street premises was material to the determination of the existence and nature of any agreement to which he was a party. However, proof that an appellant was a party to the agreement specified in par (1) of the direction (or to an agreement to assault a person or persons having the requisite foresight) did not depend upon proof that he had engaged in any particular conduct at the scene. Participation an issue at the trial? The appellants submitted that the Full Court was wrong to reason that the existence of the agreement was an inference from participation because the prosecution case "encompassed scenarios in which agreement might be inferred from evidence separate from, and earlier in time than, any participation of the accused in the brawls". It was open to the jury to infer in each case that the appellant had come to the agreement at Duong's house. Such a conclusion was 24 (1998) 197 CLR 316 at 342-350 [72]-[94]; [1998] HCA 75. See also Simester, "The Mental Element in Complicity", (2006) 122 Law Quarterly Review 578 at 25 Osland v The Queen (1998) 197 CLR 316 at 329 [27] per Gaudron and Gummow JJ, 343 [73] per McHugh J citing R v Tangye (1997) 92 A Crim R 545 at 556-557; Hui Chi-Ming v The Queen [1992] 1 AC 34 at 45, 53. Crennan Bell an inference from the events at Duong's house and from each appellant's conduct in accompanying others from Duong's house to the Vartue Street premises. In any event, whether the agreement was made at Duong's house or at a later time was irrelevant to liability in each case. None of the appellants put in issue his presence as one of the persons who travelled from Duong's house to the Vartue Street premises. Counsel's addresses at the trial are eloquent of a forensic decision in each case to fight the trial on the capacity of the evidence to prove the agreement. Lengthy consideration was given by trial counsel to the sufficiency of the written directions. No counsel requested that the jury be directed on participation in the joint enterprise as a discrete element of liability. This was not neglect on their part. It reflects the reality of the trial, at which proof of the agreement and not participation in it was the issue. The point is readily tested. Assume the written direction included as par (1A) a requirement for the prosecution to prove "that the accused participated in the joint enterprise to murder". Also assume that the jury asked the trial judge what was required to prove participation in the enterprise. A correct answer to the question would have been "presence at the Vartue Street premises pursuant to the agreement in par (1)". Sem's case differed from those of Duong and Huynh in that Sem's account of the relevant events formed part of the evidence in his case. Sem submitted that the oral evidence that identified him as present during the second phase of the assault (when it was probable that the fatal wound was inflicted) was of doubtful reliability. In the circumstances, Sem contended that it had been necessary to direct the jury of the necessity to find that he had been participating in the enterprise at the time of the stabbing. Sem's "continuing participation" was said to have been the main issue at the trial. The account in Sem's statement was capable of raising a doubt that Sem was a party to any agreement to kill or to inflict really serious bodily harm with the use of a knife at the Vartue Street premises (or that he contemplated the use of a knife by those who accompanied him to those premises). Sem's submission overlooks that the jury could not have reasoned to his guilt as a party to a joint enterprise without being satisfied beyond reasonable doubt that he had come to the agreement or arrangement specified in par (1) (or that he was a party to an agreement to assault a person or persons and that he contemplated that one of his confederates might use a knife thereby intending to kill or to do grievous bodily harm). In the event that the jury were satisfied that Sem had come to such an agreement, his presence at the Vartue Street premises pursuant to the agreement amounted to participation in furtherance of it. It was not necessary to prove that he was present near the gates at the time of the stabbing. Sem would still be guilty of murder if the jury were satisfied of each of the matters in pars (1), (2) and (3) of the direction on joint Crennan Bell enterprise to murder. (The requirement stated in par (4) was otiose – there was no suggestion that the killing of the deceased was done in self defence or that it was not unlawful.) In the event that the jury were satisfied of the matters in pars (1), (2) and (3), Sem would only absolve himself from liability for the act of the stabber if the jury considered it reasonably possible that Sem had withdrawn from the enterprise before the stabbing. The trial judge directed the jury that Sem's presence in the vicinity of the gates at the time of the stabbing was not essential for proof of his guilt as a party to a joint criminal enterprise. In addressing the possibility that Sem had abandoned the enterprise at the time of the stabbing his Honour reminded the jury that there was no evidence that Sem had attempted to call off the attackers, or tell the others that he was "out of it"26. Sem's appeal does not provide the occasion to consider what may be required to withdraw from an enterprise involving group violence27. Sem's case, like those of Duong and Huynh, was that the evidence did not establish that he had come to an agreement of the kind specified in par (1) or that he contemplated the use of a knife by a confederate who intended thereby to kill or to inflict really serious bodily harm. The Full Court was right to dismiss the appellants' challenge to the direction on joint enterprise liability. The second issue – the summing-up of the appellants' cases The second issue raised by the appellants' overlapping grounds of appeal concerns the structure of the summing-up. The trial judge instructed the jury on the law governing proof of liability in each of the ways the prosecution case was advanced. He then discussed the application of the principles of accessorial liability in the context of a narrative review of the evidence. He then discussed the application of the principles of joint enterprise liability in the same way. In the course of the narrative review of the evidence, his Honour drew attention to the criticisms made by each appellant of those parts of the evidence that were relevant to the case against him. What his Honour did not do was to deal separately with the case of each appellant, instructing on how liability might arise in each of the ways the case was put and reminding the jury of the evidence as it applied to each appellant's case. At the completion of the narrative review of the evidence, his Honour reminded the jury of the submissions of counsel. 26 R v Duong (2011) 110 SASR 296 at 317 [119]. 27 White v Ridley (1978) 140 CLR 342 at 348-351 per Gibbs J; [1978] HCA 38. Crennan Bell The reasons of the Full Court contain a detailed analysis of the summing- up28. There is no need to repeat that analysis in these reasons. Doyle CJ said that the trial judge's approach to summing-up the case in this respect was not "the usual approach"29 but that despite that circumstance it was adequate30. In this Court, the appellants submit that the Full Court erred in so concluding. The failure to sum up the cases separately was said to be contrary to a requirement of the fair trial of multiple accused. The authority on which the appellants relied for this proposition was R v Towle31. Street CJ, giving the judgment of the New South Wales Court of Criminal Appeal, said that, save for unusual cases, where two or more persons are being tried together32: "it is the clear duty of the trial judge to separate for the jury's consideration the evidence properly relevant and material in the case of each, and to present the case made against each of the accused separately." That statement was made in the context of a trial at which the evidence against each accused differed. This was not such a trial. With the exception of Sem's statement, all of the evidence at the trial was admissible against each appellant. There is no template for summing-up a case involving multiple accused any more than for a trial of a single accused. Doyle CJ was right to reject the submission that it was an error for the trial judge to depart from structuring his summing-up in "the usual way"33. Doyle CJ considered that to have summed up the case for each appellant separately on each of the alternative bases of liability would have added considerably to the length and complexity of the charge34. Huynh was critical of this aspect of his Honour's reasons. He submitted that the task of separately 28 R v Duong (2011) 110 SASR 296 at 325-328 [162]-[167]. 29 R v Duong (2011) 110 SASR 296 at 328 [170]. 30 R v Duong (2011) 110 SASR 296 at 328 [171]-[172]. 31 (1954) 72 WN (NSW) 338. 32 R v Towle (1954) 72 WN (NSW) 338 at 340. 33 R v Duong (2011) 110 SASR 296 at 328 [174]. 34 R v Duong (2011) 110 SASR 296 at 328-329 [174]. Crennan Bell distilling the evidence against him would have added little time. The submission wrongly assumed that the evidence relevant to consideration of whether Huynh's liability had been established (whether as an aider and abettor, a party to a joint enterprise to murder or a party to an agreement to assault with the necessary foresight) was that of the witnesses who gave an account of the things Huynh did at the scene. The whole of the evidence (save for Sem's statement) was relevant to the consideration of Huynh's liability in each of the ways the case was left. It was the responsibility of the trial judge to structure the summing-up in a way that he assessed would most effectively distil the issues for determination in each case and, to the extent that it was necessary to do so, to remind the jury of the evidence bearing on the determination of those issues. Given that the whole of the oral evidence was common to the three cases, and that many of the factual issues were common to liability in each case, the approach that his Honour adopted was one which avoided a deal of needless repetition. Critical to the appellants' separate cases were the suggested weaknesses in the evidence that implicated each as engaged in the assault on the deceased and in other acts of violence at the scene. The trial judge drew attention to these criticisms of the evidence and to their significance to the case against each appellant in the course of reviewing the evidence. On the hearing of the appeals in this Court, the only matter raised on behalf of any of the appellants as material to his case and which was not addressed in the summing-up concerned Duong. This was the failure to refer to the evidence of Kathleen Francis and Sophie Russo of the short interval during which Duong was absent from the car following their arrival in Vartue Street. His Honour reminded the jury of other aspects of the evidence of these two witnesses which were favourable to Duong's case including Kathleen Francis' account that Duong had initially been reluctant to leave his house, that neither had seen any weapons, and that neither had seen any blood on Duong. Trial counsel made no complaint that his client's case had not been fairly put and none invited his Honour to supplement the summing-up by further reminder of any matter touching his client's case. The challenge to the sufficiency of the summing-up to fairly put the case of each appellant cannot be sustained. Crennan Bell Orders Orders should be made as follows: Tuan Kiet David Huynh v The Queen No A30 of 2012 Dismiss the appeal. Chansyna Duong v The Queen No A31 of 2012 Special leave to appeal granted, the appeal be treated as instituted and heard instanter and dismissed. Rotha Sem v The Queen No A32 of 2012 Special leave to appeal granted, the appeal be treated as instituted and heard instanter and dismissed.
HIGH COURT OF AUSTRALIA ALLIANZ AUSTRALIA INSURANCE LIMITED APPELLANT AND GSF AUSTRALIA PTY LIMITED & ANOR RESPONDENTS Allianz Australia Insurance Limited v GSF Australia Pty Limited [2005] HCA 26 19 May 2005 ORDER Appeal allowed. The first respondent (GSF Australia Pty Ltd - "GSF") pay the costs of the appellant (Allianz Australia Insurance Ltd - "Allianz"). Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 1 July 2003 and in their place order: the appeal to the Court of Appeal is allowed; (b) GSF pay the costs of Allianz of the appeal to the Court of Appeal; (c) Orders 1, 4 and 5 of the orders of the District Court of New South Wales made on 14 June 2002 are set aside and in their place order: judgment for the plaintiff against GSF in the sum of judgment for Allianz against GSF; (iii) GSF pay the costs of Allianz in the District Court. On appeal from the Supreme Court of New South Wales Representation: K P Rewell SC with P S L Dooley for the appellant (instructed by TL Lawyers) L King SC with J W Catsanos for the respondent (instructed by Blake Dawson Waldron) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Allianz Australia Insurance Limited v GSF Australia Pty Ltd Insurance – Motor vehicles – Third party liability insurance – Truck and trailer provided by first respondent to convey packed containers of food to airport – Appellant insurer of vehicle – Second respondent an employee of first respondent – Second respondent suffered back injury while assisting in unloading containers after vehicle's lifting mechanism became inoperative – Whether second respondent's injury an "injury" within the meaning of the Motor Accidents Act 1988 (NSW). Insurance – Motor vehicles – Third party liability insurance – Causation – Whether second respondent's injury a result of and caused during use or operation of the vehicle by a defect in the vehicle – Utility of "common sense" tests for causation and notions of proximate cause. Statutes – Construction – Purposive construction – Where object of the Motor Accidents Act 1988 (NSW), as amended, to contain overall costs of compulsory third party insurance scheme within reasonable bounds – Whether consistent with an expansive notion of causation of injury. Words and phrases: "a result of", "caused". Motor Accidents Act 1988 (NSW), ss 3(1), 69(1). McHUGH J. The central issue in this appeal is whether an injury sustained by an employee while unloading containers from a vehicle whose unloading mechanism was defective was an "injury" as defined by s 3(1) of the Motor Accidents Act 1988 (NSW) ("the Act") (as amended by the Motor Accidents Amendment Act 1995 (NSW)). In my opinion, the injury that the employee suffered was not an injury for the purpose of the Act. That is because in an unloading case there is no "injury" within the meaning of the Act unless the injury was the result of and caused by a defect in the vehicle. Whether or not a defect causes an injury for the purpose of the Act has to be evaluated in the light of the objects of the Act. Those objects demonstrate that the defective unloading mechanism did not cause the injury because the defect was merely a condition and not a cause of the injury. It was the unsafe system of the employer – not the defect in the vehicle – that caused the employee's injury. Statement of the case Garry Oliver sued GSF Australia Pty Ltd ("GSF"), his employer, for damages in the District Court of New South Wales. The action was settled. GSF conceded that it was negligent in requiring Mr Oliver to work under an unsafe system of work. However, a dispute arose as to which of two insurers should indemnify GSF: the compulsory third party insurer of the vehicle, Allianz Australia Insurance Ltd ("Allianz") or the workers' compensation insurer, QBE. As a result, Mr Oliver and GSF made two agreements concerning the damages that Mr Oliver was to receive. If QBE was liable to indemnify GSF, Mr Oliver was to receive $450,000, based upon a notional assessment of damages under the Workers Compensation Act 1987 (NSW) ("the Workers Compensation Act"). If Allianz was liable, Mr Oliver was to receive $460,000, based on a notional assessment of damages under the Act. Allianz applied to be, and was, joined as a party to the District Court proceedings between Mr Oliver and GSF. The District Court (Delaney DCJ) held that Mr Oliver's injury gave rise to an indemnity by Allianz because the injury occurred in circumstances that made it an "injury" as defined by s 3(1) of the Act. The injury was therefore covered by the motor vehicle policy issued by Allianz. His Honour entered judgment in favour of Mr Oliver for $460,000 and ordered that Allianz pay GSF "by way of indemnification" the sum of $230,000 on the basis that it was a case of "dual insurance". Allianz appealed to the Court of Appeal on the ground that the injury was not an "injury" within the meaning of that term as defined in s 3(1) of the Act. By majority (Mason P and Davies AJA, Santow JA dissenting), the Court of Appeal dismissed Allianz's appeal. McHugh The material facts GSF employed Mr Oliver as a maintenance technician. On 12 February 1998, it directed him to assist in unloading airline containers from the back of a truck owned by GSF. The truck had been specifically modified to facilitate the unloading of airline containers. Rollers had been installed on the floor of the trailer and a T-bar mechanism, which was an electric/pneumatic device, was used to push the airline containers to the rear of the truck, where they could be removed by a forklift truck. The T-bar mechanism was driven by a motor and a gearbox and was activated by pushing a button on a panel at the rear of the truck. The effect of the T-bar and roller system was that no manual effort was required to move the containers to the rear of the truck. On 11 February 1998, the gearbox broke and the T-bar unloading mechanism became inoperative. GSF knew that the unloading mechanism had become inoperative but did not repair it. Instead, it directed Mr Oliver and another employee to perform the task of unloading the truck manually. GSF gave Mr Oliver no instructions as to how to unload the truck. Mr Oliver and his colleague used pinch-bars or crowbars to manoeuvre the containers along the rollers to the rear of the truck, where the containers would be lifted off by forklift. The containers weighed approximately one tonne each. It was not disputed that this was an unsafe system of work. In the course of this work, Mr Oliver suffered an injury to his lower back. The legislation The difficulty of the case arises from the failure of the Act to state expressly or inferentially that that Act does not apply if the Workers Compensation Act or, indeed, any other statutory public liability scheme, applies to the facts of the case. Part 6 of the Act governs the award of damages for injuries sustained in incidents involving motor vehicles. That Part is "concerned with controlling the amount of recoverable damage under the legislation to ensure that the scheme under the legislation is affordable."1 Section 69(1) provides that the Part "applies to and in respect of an award of damages which relates to the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle." Section 69(1) is the principal operative provision governing the award of damages under the Act2. 1 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2003) 57 NSWLR 321 at 329 [32] per Santow JA. 2 Part 6 provides for the awarding of damages and deals with matters such as the determination of economic and non-economic loss, including the claimant's prospects of future economic loss, applicable discount rates, payment of interest, (Footnote continues on next page) McHugh For the purposes of this appeal the key term in s 69(1) is "injury", which is defined in s 3(1) of the Act as follows: "injury: (a) means personal or bodily injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during: the driving of the vehicle, or a collision, or action taken to avoid a collision, with the vehicle, or (iii) the vehicle's running out of control, or such use or operation by a defect in the vehicle, and includes: pre-natal injury, and psychological or psychiatric injury, and (iii) damage to artificial members, eyes or teeth, crutches or other aids or spectacle glasses." This definition of injury was inserted by the Motor Accidents Amendment Act 1995 (NSW)3 ("the 1995 Act"). The appeal concerns the application of par (a)(iv) of the definition of "injury" in s 3(1) of that Act. It gives rise to the issue whether Mr Oliver's injury was "caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during … such use or operation by a defect in the vehicle". The definition of "injury" mirrors the terms of s 69(1). The words of s 69(1) emphasise two basic requirements for the Act to apply4: the injury must be caused "by the fault of the owner" of the vehicle and the injury must be caused by the fault of the owner "in the use or operation of the vehicle". the effect of defences such as contributory negligence and voluntary assumption of risk, the non-applicability of exemplary or punitive damages and the apportionment of damages. 3 Schedule 1, Item 4. 4 Allianz (2003) 57 NSWLR 321 at 329 [34]. McHugh The rest of the definition of injury in s 3(1)(a) is then incorporated into s 69(1) by reference5. For sub-par (iv) to apply, the injury must be "a result of and is caused during … such use or operation by a defect in the vehicle". Significance of definition sections Except in rare cases, definitions are not intended to enact substantive rules of law. Their function is to aid the construction of those substantive enactments that contain the defined term or terms. Moreover, the meaning of the definition depends on the context and object of the substantive enactment. As I pointed out in Kelly v The Queen6: "[T]he function of a definition is not to enact substantive law. It is to provide aid in construing the statute. Nothing is more likely to defeat the intention of the legislature than to give a definition a narrow, literal meaning and then use that meaning to negate the evident policy or purpose of a substantive enactment. … [O]nce … the definition applies, … the only proper … course is to read the words of the definition into the substantive enactment and then construe the substantive enactment – in its extended or confined sense – in its context and bearing in mind its purpose and the mischief that it was designed to overcome. To construe the definition before its text has been inserted into the fabric of the substantive enactment invites error as to the meaning of the substantive enactment. … [T]he true purpose of an interpretation or definition clause [is that it] shortens, but is part of, the text of the substantive enactment to which it applies." In this case, therefore, the definition of "injury" is to be read into and applied in respect of s 69(1) of the Act. When that is done, the sub-section, with that term defined, must be construed in the context in which it appears and in light of the objects of that Part and the Act as a whole. Parties' submissions before this Court Allianz submitted that Mr Oliver's injury was not "a result of", in any legally causal sense, the use or operation of the vehicle. It contended that Mr Oliver's injury was caused by his participation in the unsafe system of work. Such use or operation of the vehicle as occurred was merely incidental. Allianz 5 Allianz (2003) 57 NSWLR 321 at 329 [34]. (2004) 78 ALJR 538 at 559-560 [103]; 205 ALR 274 at 302. McHugh submitted that the definition emphasises that the defect must be truly causative of the injury, and not merely incidental to it. GSF conceded that sub-pars (i)-(iv) of the definition of injury in s 3(1)(a) limits the class of injuries more generally described in the introductory words of the definition. It conceded that, in construing the definition, one commences with the introductory words and then decides whether any of the four conditions is satisfied. GSF contended that the defective unloading mechanism was a cause of Mr Oliver's injury and occurred in the course of the vehicle's use or operation for unloading. Consequently, the requirements that the injury be "a result of" the defect and "caused during … such use or operation by a defect" were satisfied. Construction of the term "injury" in s 3(1) For the Act to apply in the present case, several requirements of the definition must be satisfied: there must be "fault of the owner … of the vehicle". That is, the owner was negligent or had committed another tort (as "fault" is defined in s 3); the fault of the owner must be "in the use or operation" of the vehicle; the injury must be caused "by" the fault of the owner or driver in the use or operation of the vehicle; the injury must be caused "during" such use or operation of the vehicle; the injury must be a result of such use or operation; the injury must be a result of a defect in the vehicle; and the injury must be caused by a defect in the vehicle. The definition of "injury" emphasises the element of "cause" as the key factor that governs the entitlement to compensation. So far as sub-par (iv) is concerned, the definition has a dual aspect of causation. The first aspect appears in the introductory words of the definition and considers causation from the point of view of a human actor (the owner or driver): "caused by the fault of the owner … of a motor vehicle in the use or operation of the vehicle". The second aspect requires the injury to be the result of something inanimate, namely, a defect in the vehicle. The second aspect also contains a temporal requirement, namely, that the injury must be "caused during" the relevant timeframe. The definition requires the injury to be caused by something inanimate only where there is a defect in the vehicle ("the injury is a result of and is caused McHugh during ... such use or operation by a defect in the vehicle"). The other conditions in sub-pars (i)-(iii) require that the injury: be a result of the driving of the vehicle or a collision (or action taken to avoid a collision) or the vehicle running out of control, be caused during the driving, the collision (or action taken to avoid a collision) or the vehicle running out of control (the temporal requirement). The first aspect of causation: "caused by the fault of the owner … in the use or operation of the vehicle" This part of the definition considers causation from the point of view of a human actor. The injury must be "caused by the fault of the owner … in the use or operation of the vehicle". This part of the definition can be broken down into its constituent elements: there must be "fault" of the owner, that fault must be "in" the use or operation of the vehicle and the injury must be "caused by" the fault of the owner in that use or operation. In this case, the fault (negligence) of the defendant employer and the causal impact of that negligence was conceded before the Court of Appeal7. The direction given by the employer resulted in an unsafe system of work. There was no dispute that GSF was negligent in using an unsafe system of work that required Mr Oliver to carry out the task of manually manoeuvring the containers to the rear of the truck. GSF also conceded before the Court of Appeal that the fault of the owner occurred "in" the use or operation of the vehicle as that expression appears in the introductory words of s 3(1)(a) of the Act8. Santow JA took the view that the word "in", in the expression "in the use or operation of the vehicle", simply meant "in relation to" or "in the course of"9. This construction is correct because the words focus on the fault of the owner in its capacity as owner. Failure by the owner to fix the defective unloading mechanism satisfies this requirement, as would a direction to use an unsafe system of work to unload the vehicle. 7 Allianz (2003) 57 NSWLR 321 at 335 [62] per Davies AJA. 8 Allianz (2003) 57 NSWLR 321 at 335-336 [63] per Davies AJA. 9 Allianz (2003) 57 NSWLR 321 at 330 [38]. McHugh In the Court of Appeal, GSF also conceded that the injury was caused by the fault of the owner of the vehicle in the use or operation of the vehicle. As Davies AJA observed10: "The vehicle ought not to have been used to transport the employer's goods whilst its unloading mechanism, the T-bar, was inoperable. The employer's goods were too heavy to be moved manually without a risk of injury of the type which Mr Oliver suffered." The second aspect of causation: preliminary matters The second aspect of causation relates to the four conditions that limit the general class of injuries to which the Act applies. Where there is a defect in the vehicle, the injury must be "a result of and is caused during ... such use or operation by a defect in the vehicle". The expression "caused during such use or operation" imposes a temporal causal requirement. Where there is a defect in the vehicle, the defect must be operative when the injury is sustained and the vehicle must be in "such use or operation" to which the fault of the owner attaches when the injury is sustained. Allianz conceded that Mr Oliver's injury occurred during the use or operation of the vehicle11. Further, the expression "such use or operation" in s 3(1)(a)(iv) refers to the "use or operation" of the vehicle in the opening words of the definition. In Zurich Australian Insurance Ltd v CSR Ltd, the New South Wales Court of Appeal held correctly that "such" generally refers to use and operation in the introductory paragraph, not to sub-pars (i), (ii) and (iii) in the definition12. Allianz contended that the effect of the word "such" in sub-par (iv) is to confine the operation of the defect provisions to the use or operation of the vehicle in the senses referred to in s 3(1)(a)(i)-(iii). It contended that this construction is consistent with the legislative purpose of the section as evidenced by the Second Reading speech13. This construction must be rejected for three reasons. First, the construction would make sub-pars (i), (ii) and (iii) redundant. 10 Allianz (2003) 57 NSWLR 321 at 335-336 [63]. 11 Allianz (2003) 57 NSWLR 321 at 336 [64] per Davies AJA. 12 (2001) 52 NSWLR 193 at 201 [32] per Spigelman CJ, Mason P and Handley JA agreeing. 13 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 16 November 1995 at 3322. McHugh Secondly, this conclusion is not consistent with the use of the disjunctive "or" between each sub-section. Thirdly, the construction is also inconsistent with s 3(6), which provides that a reference to the use or operation of a motor vehicle includes a reference to the maintenance or parking of the vehicle14. An "injury" within the meaning of the Act may therefore occur while a person is performing maintenance on the vehicle, which generally occurs when the vehicle is not in motion. The question then arises whether the unloading of the trailer constitutes "such use or operation" of the vehicle for the purposes of the Act. Davies AJA held that "[t]he loading or unloading of a vehicle, ... which was designed to transport goods, may be a part of the use or operation of a vehicle"15, and "[t]he loading and unloading of the employer's vehicle were essential parts of the operation for which the vehicle was used ... [which was] the transport of the loaded containers from the employer's premises to the airport."16 This conclusion accords with the statement of Windeyer J in Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd17 where his Honour said: "Any use that is not utterly foreign to its character as a motor vehicle is, I consider, covered by the words ['use of a motor vehicle']. … The loading of a vehicle designed to be used, and ordinarily used, for the carriage of goods is a necessary element in its ordinary use. Loading it is incidental to the use of it in the normal way." In R J Green & Lloyd, this Court accepted that the word "use" has a wide meaning and covers loading and unloading. In NRMA Insurance Ltd v NSW Grain Corporation18 – which was decided before the commencement of the 1995 Act – the Court of Appeal held that the Act applied to injuries sustained during loading and unloading operations. The Act did so where an injury was caused by the fault of the owner in the use or 14 Section 3(6) has always been in these terms. 15 Allianz (2003) 57 NSWLR 321 at 336 [64], citing NRMA Insurance Ltd v NSW Grain Corporation (1995) 22 MVR 317; Zurich Australian Insurance Ltd v CSR Ltd (2001) 52 NSWLR 193. 16 Allianz (2003) 57 NSWLR 321 at 336 [64]. 17 (1966) 114 CLR 437 at 446-447. 18 (1995) 22 MVR 317. Cases which turned on the definition of "use or operation of the vehicle" include Mercantile Mutual Insurance (Australia) Ltd v Moulding (1995) 22 MVR 325 and Prospect County Council v Foster (2001) 33 MVR 228. McHugh operation of the vehicle. The Court held that an unsafe system of work that involved loading or unloading operations could constitute "fault of the owner … in the use or operation of the vehicle" within the meaning of the Act. The amendments effected by the 1995 Act do not result in the Act automatically excluding acts of loading and unloading a vehicle from the concept of "use or operation" of the vehicle. The Act restricts the circumstances in which the Act governs an injury sustained during loading and unloading operations (the injury must be "a result of and is caused during … such use or operation by a defect in the vehicle"). However, the Act neither expressly nor inferentially excludes all loading and unloading activities from the expression "use or operation" of the vehicle. Its application is governed by the cause of the injury, but not by the activity in which the person injured was engaged when the injury was sustained. The third aspect of causation: "a result of and is caused … by a defect in the vehicle" There was a defect in the vehicle within the meaning of the definition. In its ordinary usage, a defect means "a lack or absence of something necessary or essential for completeness; a shortcoming or deficiency [which] may be either major or minor."19 It may be a defect in the design or the original construction of the vehicle or may arise because the vehicle is not kept in proper condition20. One of the important functions of the vehicle was the use of a T-bar mechanism to push containers to the rear of the truck where they could be unloaded. This function was incapable of being performed because the mechanism was defective. As Mason P pointed out21 "[t]here was a defect in the vehicle because one of the important things it was designed to do was not functioning, that is, was defective." Santow JA22 and Davies AJA23 agreed. 19 Topfelt Pty Ltd v State Bank of New South Wales Ltd (1993) 47 FCR 226 at 237 per 20 See the discussion of Spigelman CJ in Zurich (2001) 52 NSWLR 193 at 202-207 21 Allianz (2003) 57 NSWLR 321 at 323 [3]. 22 Allianz (2003) 57 NSWLR 321 at 326 [23], 333-334 [51]. 23 Davies AJA held that "[o]nce the gearbox to the T-bar had failed and the T-bar was inoperable, the vehicle was unsuitable for the function it was designed to perform, the transport of the employer’s goods." Allianz (2003) 57 NSWLR 321 at 336 [66], citing Zurich (2001) 52 NSWLR 193 at 202-207 [42]-[71]. McHugh In Zurich24, Spigelman CJ drew a distinction between a "defect" and a "negligent user" for the purposes of the Act, although he acknowledged that the distinction "may not always prove helpful": "The defect must be 'in' the vehicle. A vehicle is not 'defective' only because its operation in a particular manner may lead to injury. However, the manner in which it is intended to operate may determine whether there is a 'defect' 'in' the vehicle." His Honour also thought that an appropriate perspective from which to approach the question of a "defect in the vehicle" for the purposes of the Act is the fitness of the vehicle for its intended use25. Allianz contended, however, that, because there was a negligent use of the vehicle – the inability to use the out-of-repair lifting mechanism and the requirement to lift manually – there was no "defect" in the context of its "intended use". Nor was there a "defect" in the sense of an inherent defect. Santow JA correctly rejected this contention saying26 that "a lifting mechanism that is out of repair, taking into account its intended use as a lifting mechanism, clearly represents a defect in the vehicle." "[A] result of and … caused … by a defect in the vehicle" In considering the construction of the requirement that the injury be "a result of and ... caused … by a defect in the vehicle", two matters must be noted. First, the second aspect of causation in the definition requires the injury to be caused by something inanimate (a defect in the vehicle). Secondly, the approach to the question of causation must be considered in the context of the Act. One difficulty with the definition of injury is that it imposes a causal requirement in respect of something inanimate – a defect in the vehicle – as if the defect itself could "cause" the injury. As I pointed out in Insurance Commission of Western Australia v Container Handlers Pty Ltd, leaving aside natural catastrophes such as volcanoes, earthquakes and tidal waves, inanimate objects 24 (2001) 52 NSWLR 193 at 206-207 [68] (emphasis in original). 25 Zurich (2001) 52 NSWLR 193 at 206 [67]. 26 Allianz (2003) 57 NSWLR 321 at 334 [53]. McHugh do not cause anything. Inanimate objects (even defective ones) are not the cause of the harm that people suffer by coming into contact with them. I stated27: "Both scientific and modern common law doctrines of causation as well as common sense … deny that inert objects such as vehicles cause anything. Whilst the use of inert objects may have effects, this is because they are the instruments by which living creatures bring about those effects. … [T]he notion that a vehicle may cause death or bodily injury without human intervention is not easy to understand." This reasoning applies to defects in inanimate objects. The expressions "a result of … such use or operation by a defect in the vehicle" and "caused … by a defect in the vehicle" look to the defect in the vehicle as the harm-causing instrument and require a connection between the vehicle as the harm-causing instrument and the injury. Although the expression "a result of … [the] defect" requires a causal connection between the defect and the injury, that connection does not have to be a "direct" connection or the only connection. The section speaks of the injury being "a" result of, not "the" result of, the defect. Mason P thought that, because the injury must be "a result of" and not "the result of" the defect, the injury need not be the "direct" or "effective" or "efficient" result of the defect28. The use of the indefinite article "a" instead of the definite article "the" suggests that the defect in the vehicle does not have to be the sole or even the predominant cause of the injury. Nevertheless, there must be a connection between the defect and the injury. The defect must be one of the elements in the chain of events that leads to the injury. The causal inquiry as to whether the injury is "a result of … [the] defect" requires a less direct connection than the inquiry as to whether the injury is "caused … by [the] defect". The expression "a result of" emphasises the result or effect of the defect, rather than the defect causing the result. The term "result" emphasises effect and is less concerned with the proximity of cause and effect. In contrast to sub-pars (i)-(iii) of the definition, the expression "a result of" appears to have little work to do in relation to sub-par (iv). Sub-paragraphs (i)-(iii) impose a temporal requirement – that the injury be caused during the driving of the vehicle, a collision (or action taken to avoid a collision) or the vehicle's running out of control – and a causal requirement – that the injury be a result of those activities. But sub-par (iv) imposes the temporal requirement that 27 (2004) 78 ALJR 821 at 826-827 [18]; 206 ALR 335 at 342. 28 Allianz (2003) 57 NSWLR 321 at 324-325 [15] per Mason P. McHugh the injury be caused during the use or operation of the vehicle and the causal requirement that the injury be caused by the defect. One construction of the definition that gives "a result of" some work to do in sub-par (iv) is to hold that the expression requires the injury to be "a result of" the use or operation of the vehicle. In other words, there must be a temporal causal connection between the use or operation of the vehicle, the defect and the injury sustained. The defect must somehow operate during the use or operation of the vehicle as a factor that brings about the injury. The mere fact that there is a defect in the vehicle is not sufficient to satisfy the requirement that the injury be "a result of" the defect. The causal inquiry in s 3(1)(a)(iv) In the end, the outcome of this appeal turns on the construction of the words "caused … by a defect in the vehicle". The language of the Act reflects the concept of causation at common law. This suggests that the inquiry into the question of causation under the Act does not differ materially from the "common sense" test for causation at common law. However, because the task before the Court is one of statutory construction, the question of causation must be determined in light of the subject, scope and objects of the Act. The common law concept of causation is concerned with determining whether some breach of a legal norm was so significant that, as a matter of common sense, it should be regarded as a cause of damage29. In the present case, however, common law conceptions of causation must be applied having regard to the terms or objects of the Act. Those terms and objects of the Act operate to modify the common law's practical or common sense concept of causation. The inquiry into the question of causality is therefore not based simply on notions of "common sense". In NRMA Insurance Ltd v NSW Grain Corporation30, Clarke JA said that the Act compels a "common sense" approach to the question of causality of the injury (as prevails in relation to the common law): "[The Act] propounds an inquiry on causation identical with that undertaken in determining whether the negligence of the person claiming indemnity 'caused' the damage and thus was liable for it. That test has now been firmly based on common sense. … It would not be reasonable, in my opinion, to attribute to the legislature an intention that the expression 'caused by' in the statutory policy should enliven a test of causation different from the test by which the party claiming indemnity had been found liable." 29 Henville v Walker (2001) 206 CLR 459 at 490 [97] per McHugh J. 30 (1995) 22 MVR 317 at 320. McHugh However, the purpose of the inquiry must be ascertained before the application of any notion of "common sense". The purpose of the causal inquiry is critical because it conditions the result. Once the purpose of the inquiry is ascertained, the question of causality must be determined in light of the subject, scope and objects of the Act. Both Mason P31 and Santow JA32 acknowledged the importance of considering the purpose of the causal inquiry because the purpose "conditions the outcome of any application of common sense to its answer"33. Although the Act establishes a compulsory third party insurance scheme for motor vehicle injuries, the Act does not and was never intended to provide a universal, comprehensive scheme to award damages to every person who sustains an injury that was in some way connected to a motor vehicle. The Attorney-General made a statement to this effect when he gave the Second Reading speech for the 1995 Bill34: "The CTP policy and the motor accidents scheme simply are not, and were never intended to be, a comprehensive accident compensation scheme providing substantial damages in all cases of injuries connected in some way to the use of a motor vehicle." To the extent that Gunter v State Transit Authority of NSW35 suggests that the purpose of the Act is to provide a universal coverage scheme for all motor vehicle accidents, it should not be followed. The objects of the Act The 1995 Act inserted ss 2A, 68A and 2B into the Act. Section 2A sets out the objects of the Act, which include the following: 31 Allianz (2003) 57 NSWLR 321 at 323 [7], citing Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 at 29-30 per Lord Hoffmann. 32 Allianz (2003) 57 NSWLR 321 at 330 [40], citing Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd [1999] 2 AC 22 at 29 per Lord Hoffmann. 33 Allianz (2003) 57 NSWLR 321 at 330 [40]. 34 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 16 November 1995 at 3322. 35 [2004] NSWCA 330 at [16] per Young CJ in Eq, Tobias JA and Wood CJ at CL agreeing. McHugh It must be acknowledged in the application and administration of this Act: that participants in the scheme under this Act have shared and integrated roles with the overall aim of benefiting all members of the motoring public by keeping the overall costs of the scheme within reasonable bounds so as to keep premiums affordable, and that: (iii) the premium pool from which each insurer pays claims consists at any given time of a finite amount of money, and insurers are obliged under this Act to charge premiums that will fully fund their anticipated liability, and the preparation of fully funded premiums requires a large measure of stability and predictability regarding the likely future number and cost of claims arising under policies sold once the premium is in place, and the stability and predictability referred to in subparagraph (iii) require consistent and stable application of the law." Section 68A provides that the objects of Pt 6 are: to control the amount of damages that may be awarded to a claimant for the purpose of ensuring that the scheme under this Act is affordable, and to achieve this control by the deliberate strategy of placing the burden of ensuring affordability on those who suffer relatively minor injuries so that sufficient funds are available to more fully compensate those who suffer more severe injuries." Section 2B provides that in interpreting the Act, a construction that would promote the object of the Act is to be preferred to a construction that would not promote that object. The above objects indicate that insurers are obliged to charge premiums that will fully fund their anticipated liability and that the premium pool from which claims are paid is finite. They also indicate a need to keep the overall costs of the scheme within reasonable bounds so as to keep premiums affordable. The amendments disclose a cost-saving objective. McHugh The Second Reading speech also suggests that the Legislature intended to amend the relevant sections of the Act so as to limit the scope of the motor accidents scheme in New South Wales by keeping premiums under control, perhaps even reducing them. The critical part of the second reading speech for the 1995 Bill is the following statement by the Attorney-General36: "Common sense and community expectations generally demand that the CTP policy provide coverage in respect of injuries which arise from crashes and collisions on the roads or from vehicles running out of control. Over the years the courts have interpreted the CTP policy as providing for a wide range of injuries often unrelated to motor accidents. For example, the CTP policy has been held to cover injuries sustained during the loading and unloading of vehicles, and injuries sustained while standing on the back of a stationary trailer, and injuries involved in the use of a firearm in a vehicle. It is therefore proposed to amend the definition of 'injury' to adopt an approach similar to that taken in Queensland, South Australia and Western Australia, where 'injury' is qualified in terms of its cause." Santow JA held, correctly in my opinion, that, consistent with the Minister's Second Reading speech, the Act announces its own purposes in s 2A, and that cost-saving is the predominant consideration37. His Honour held that in light of the cost-saving purposes of the Act, the breadth of its application is a relevant consideration. He found that "[i]f motor accident liability encompasses what is really employer liability, that purpose is clearly not served."38 Given also that s 2B directs a construction of the Act that promotes its object over one that does not, "[a]ny narrowing of its coverage readily supports the cost-saving objects of the … legislation. Any extension does the opposite. … The 1995 amendments were introduced to narrow the definition of injury and thus its reach."39 In pursuit of the Act's objects, Parliament has limited the scope of the Act by means of the concept of causation. The amendment requires a close causal connection between the use of the vehicle and the injury. Mere connection "in some way to the use of a motor vehicle" is not enough to bring an injury within 36 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 16 November 1995 at 3322. 37 Allianz (2003) 57 NSWLR 321 at 332 [44]. 38 Allianz (2003) 57 NSWLR 321 at 332 [44]. 39 Allianz (2003) 57 NSWLR 321 at 332 [44]. McHugh the scope of the Act. The general class of injury described in the introductory expression of the definition of injury in s 3(1) still includes injuries sustained during loading and unloading operations. However, the four conditions in sub- pars (a)(i)-(iv) limit the class more generally described in the introductory expression. The history of the legislation shows how unloading and similar cases were removed from the scope of the Act. The Act effectively replaced the Motor Vehicles (Third Party Insurance) Act 1942 (NSW) ("the 1942 Act") as the compulsory third party insurance scheme for motor vehicle injuries after 1 July 1989. Since the introduction of the Act and the subsequent amendments to that Act, the circumstances in which an injury is governed by the Act have been qualified by a tighter definition of cause. Under the 1942 Act, the third party insurance policy was required to provide cover in respect of any injury that was "caused by or arising out of the use of the motor vehicle"40. Under that Act, most loading and unloading injuries fell within the "arising out of" limb, particularly where the only connection with the vehicle was that goods were being loaded into or unloaded from the vehicle41. The expression "arising out of" does not and never has appeared in the Act. Thus, the Act has a narrower scope than the 1942 Act. The words "caused by" are narrower than the words "arising out of" and require a closer causal connection between the event or activity and the injury than the latter phrase implies. However, the removal of the words "arising out of" from the operative provision of the Act does not operate to exclude all loading and unloading cases. Although "arising out of" permitted the 1942 Act to respond in circumstances of "attenuated causation", the Act still applies to injuries sustained during unloading activities, but only "if, and only if" the injury is "caused … by" a defect in the vehicle. As enacted, the Act effectively restricted claims in loading and unloading cases to circumstances in which the injury was "caused by the fault of the owner … in the use or operation of the vehicle." The Act no longer covered loading and unloading cases where the injury simply arose out of the use of the vehicle. Despite the change in focus of the causal inquiry, as I have indicated the New South Wales Court of Appeal has held that the Act continues to apply to injuries sustained during loading and unloading operations. It applies where the injury 40 1942 Act, s 10(1)(b). 41 See, eg Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd (1966) 114 CLR 437. McHugh was caused by the fault of the owner in the use or operation of the vehicle42. However, the amendments bring about the result that the Act does not apply to injuries sustained during loading and unloading operations where there is no defect in the vehicle. The above examination of the subject, scope and purpose of the Act suggests three matters that are relevant in the construction of Pt 6 of the Act. First, the Act does not provide a universal compensation scheme for all injuries sustained in connection with a motor vehicle. Second, cost-saving and the need to keep the scheme affordable are significant objects of the Act. Third, the Act has tightened the definition of injury by reference to its cause. These three matters indicate that, in the inquiry into the question of causality, an approach that limits the scope of the Act is preferable to one that would extend its application. This in turn suggests that a close causal connection is required for the injury to satisfy the requirement the injury be "caused … by a defect in the vehicle". In addressing the question of causality, metaphysical concepts such as "proximate cause" or "immediate cause" should be avoided, because they provide little, if any, assistance in resolving questions of causation under this Act. The task is to identify the factors that contributed to the injury and determine whether, for the purposes of obtaining damages under the Act, the injury was caused by a defect in the vehicle and not by some other factor. To paraphrase Lord Hoffmann in Environment Agency (formerly National Rivers Authority) v Empress Car Co (Abertillery) Ltd43, causality is determined in light of the subject, scope and objects of the Act. At common law, injury may be "caused ... by a defect" even if the act or event in question did no more than materially contribute to the injury44. The courts have given an expansive meaning to the 42 See, eg, NRMA Insurance Ltd v NSW Grain Corporation (1995) 22 MVR 317 at 318-319, where the Court applied the following three-stage test: 1. Does the evidence establish that there was "fault of the owner or driver … of the vehicle", that is, that the owner was negligent or had committed another tort (as "fault" is defined in s 3)? 2. If yes, did the fault of the owner or driver cause the injury to the claimant? 3. If yes, was the fault of the owner or driver in the use or operation of the vehicle? 43 [1999] 2 AC 22 at 31. 44 See Henville v Walker (2001) 206 CLR 459 at 469 [14] per Gleeson CJ, 480 [60]-[61] per Gaudron J, 493 [106] per McHugh J. McHugh word "cause". For example, material contribution may constitute a "cause" for the purpose of determining culpability and a contributory cause may constitute a "cause" for the purposes of tort law45. Under the Act, however, there must be a finding that, of the entire set of circumstances that contributed to the injury, it was "a defect in the vehicle" that caused the injury. As I pointed out in Henville v Walker46, in some situations, the applicable legal framework requires a finding that no causal connection exists for legal purposes even though a physical connection exists between the thing complained of and the damage. In other situations, the legal framework may require a finding that a causal connection exists even though no such physical connection exists. Given the objects of the Act, if the fault of the owner merely provides the reason why the injured person acted, it will not be sufficient to establish a causal connection unless the purpose of the Act is to prevent persons suffering detriment in circumstances of the kind that occurred. Where several factors operate to bring about the injury to a plaintiff, selection of the relevant antecedent (contributing) factor as legally causative requires the making of a value judgment and, often enough, consideration of policy considerations47. This is because the determination of a causal question always involves a normative decision. Application of the definition As I earlier pointed out, the definition of "injury" in s 3(1) of the Act contains a triple causation requirement. All requirements must be satisfied for the Act to apply. The first aspect (whether the injury was caused by the fault of the owner in the use or operation of the vehicle) is satisfied in the present case. It is satisfied because GSF failed to maintain the vehicle and negligently instructed its employees to unload the vehicle despite the vehicle's unloading mechanism being out of operation. In my opinion, however, the second and third requirements of the causal inquiry (whether the injury was "a result of and … caused during ... such use … by a defect in the vehicle") was not satisfied. Mr Oliver's injury was no doubt a result of the defect. But it does not follow that, for the purposes of the Act, the injury was caused by the defect in the vehicle. Where the injury is sustained as a consequence of a defect in the vehicle and does not fall within sub-pars (i), (ii) or 45 See, eg, Chappel v Hart (1998) 195 CLR 232 at 239-240 [11]-[12] per Gaudron J, 243-245 [26]-[28] per McHugh J. 46 (2001) 206 CLR 459 at 491-492 [100]-[101], [103]. 47 Allianz (2003) 57 NSWLR 321 at 331 [42] per Santow JA, citing Chappel v Hart (1998) 195 CLR 232 at 255 [62] per Gummow J. McHugh (iii), it will not be "caused ... by" the defect unless the connection between the defect and the injury is more than "a result of" the defect. When the case falls within sub-par (iv), the definition applies only where "the injury is a result of and is caused ... by a defect". In the present case, two matters contributed to bring about Mr Oliver's injury: the unremedied defect in the unloading mechanism, which rendered the mechanism inoperative; and the employer's negligent direction to Mr Oliver to unload the containers manually. Of these two elements, it was the second that proved decisive. The unremedied defect, like Mr Oliver's employment and the containers on the vehicle, was merely one of a myriad of background facts that had to exist for the injury to occur. Even if the common law test of causation had to be applied without regard to the context and objects of the Act, I would conclude that, for the purpose of legal responsibility, the passive condition of the defective mechanism was not a cause of Mr Oliver's injury. It was the employer's direction that was significant. Where a person directs another person to take a step that places a person in proximity to a passive condition of danger, it is often the case that it is the direction rather than the condition that causes any subsequent harm. That will generally be the case where the danger consists in some natural phenomenon, such as a cliff or deep water. Leaving aside earthquakes, volcanoes, tidal waves and similar conditions, inanimate objects do not cause harm without human intervention. Where the passive condition has been created by the agency of a third party or the plaintiff, however, the direction may simply be one of two or more causes: creating the danger and directing the injured person to do something near or in relation to the danger. In some circumstances, the omission to repair the danger as well as the direction, may also constitute joint causes of the injury. In a different context, GSF's failure to repair the unloading mechanism could "cause" the injury suffered by a person when using or operating the vehicle. In the present case, however, Mr Oliver's injury was not a consequence of contact with or use of the unloading mechanism. Even on a common law approach to causation, uncontrolled by the objects of the Act, the defect in the vehicle did not cause Mr Oliver's injury because it had no physical connection with the injury. There was no direction to use the defective loading mechanism. On the contrary, there was a direction to work without it. But even if at common law, the defect in the vehicle caused the injury, the objects of the Act show that it did not cause it for the purpose of the Act. Given that the objects of Pt 6 and the Act as a whole emphasise cost-saving McHugh considerations, an expansive interpretation of the definition of injury would not promote the objects of the Act or Pt 6. Given this consideration and the Legislature's intention to restrict the application of the Act in unloading cases, the best construction of the definition is that, in its application to such cases, there must be a close physical connection between the defect and the injury. And that physical connection must exist in circumstances that would make it consistent with the subject, scope and purpose of the Act for the Act to apply to the injury. Here there was no physical connection. Moreover, the scope and purpose of the Act indicate that, far from the Act being intended generally to cover unloading cases, it was intended to apply to them only in special circumstances. GSF contended that there was a physical connection between the defect and the injury because there was human involvement with the defect. This contention has no substance. According to this contention, the defect operated in the causal sense because what was done was an attempt to cope with or accommodate the defect. GSF submitted that the gearbox had broken, rendering the T-bar mechanism inoperable, and this meant that the whole unloading apparatus was defective, including the T-bar, the motor and the rollers. It contended that the rollers were part of the defect because they were not working as they were intended to work and were "out of action". It contended that the defect was part of the use of the vehicle because the vehicle was not taken out of operation or immediately repaired. Instead, Mr Oliver and another employee had to "work with it, accommodate it, cope with it". GSF submitted that the requirements of the Act are satisfied where the defect is "one of a number of things necessary to complete the occurrence of the injury and which is operative at all times". That proposition, so it claimed, was satisfied in this case because Mr Oliver and his colleague were "coping" with the defect and "trying to accommodate it – they [were] actually using the damaged or the non-working thing at the time". However, none of these submissions establish a physical connection between the defective unloading mechanism and the injury. At their highest, they do no more than explain the reasons why Mr Oliver and his colleague were doing what they did. In support of its submission, GSF also relied on the Court of Appeal's decision in Zurich. There the Court held that the employee's injury was "caused … by a defect in the vehicle" in circumstances where the employee injured his back while lifting a loading ramp that formed part of a custom built trailer attached to a truck. The trailer had no aids to assist in the lowering and lifting of the ramps and the worker had no assistance from any colleague. Lifting the ramp manually was the intended use of the vehicle. The Court of Appeal found that the absence of any hydraulic or mechanical lifting mechanism to assist in lifting the ramps was a defect in the design of the vehicle, because it required a worker to behave in a way that was unsafe. This defect was the direct cause of the worker's injury. The employer's negligent instruction was merely to use the vehicle for the purpose and in the manner for which it was intended. This instruction did not operate to take the injury outside the scope of the Act. McHugh In both Zurich and the present case, the worker was instructed to do something which led to the worker being injured. In Zurich, however, the instruction was to use the vehicle for the purpose and in the manner for which it was intended. In the present case, Mr Oliver was instructed to use the vehicle in a manner other than its intended use. And he was instructed to use the vehicle in a way that did not involve the use of the defective part, which was the T-bar mechanism. Zurich does not assist GSF's contentions. In my opinion, therefore, the majority of the Court of Appeal erred in finding that, although the negligent direction of the employer was the major reason for Mr Oliver's injury, the involvement of the defect in the vehicle was sufficient to satisfy the definition of the term "injury" in the Act. Mason P erred by conflating the separate concepts of "cause" and "result" in the definition, giving the expression "caused … by" no independent work to do. His Honour used the words "a cause" interchangeably with the words "a result of". He considered only the words "a result of" and failed to consider the words "caused … by". In so doing, he failed both to give the expressions different meanings as required by the Act and to give them cumulative effect. Davies AJA erred because he appeared to hold that the causation requirements of the Act were satisfied if the defect was a link in the causal chain and an element without which the injury would not have occurred48. Order The appeal must be allowed. 48 Allianz (2003) 57 NSWLR 321 at 337 [70]. GUMMOW, HAYNE AND HEYDON JJ. The facts The first respondent ("GSF") conducted a business in which food was packed for conveyance by airlines in containers which were too heavy for manual handling. GSF provided a truck with a trailer attached for the conveyance of packed containers from its premises to an airport. The trailer, which for relevant purposes has been considered as a part of the vehicle, had six rows of rollers. At the premises of GSF, containers were placed on the rollers and pushed inside the trailer by use of a forklift. At the front end of the trailer there was a T-bar and underneath the trailer a motor and gearbox to drive the T-bar. At the airport, the containers were unloaded from the trailer by means of the motorised T-bar which pushed the containers back along the rollers until they were discharged. On the day in question, 12 February 1998, the gearbox had broken down and the T-bar was inoperable. The second respondent (Mr Oliver) was employed by GSF as a maintenance fitter. He was not usually involved in loading and unloading operations. On 12 February 1998, he was instructed to go to the airport with another employee to assist in unloading containers. Mr Oliver and his fellow employee were given crowbars and directed to insert these between the rollers and lever the containers to the rear of the trailer. In the course of performing this work, Mr Oliver sustained a back injury. The insurer of GSF under the workers compensation legislation was QBE Workers Compensation (NSW) Ltd ("QBE"). The appellant ("Allianz") was the insurer of the vehicle under the compulsory third party ("CTP") insurance scheme. The litigation The action instituted by Mr Oliver against GSF in the District Court of New South Wales was referred to arbitration and, on 21 November 2001, an award was made in favour of Mr Oliver. Thereafter, GSF applied to the District Court for a limited rehearing, pursuant to s 18 of the Arbitration (Civil Actions) Act 1983 (NSW). At this stage, the active dispute turned upon a particular aspect of the case. Did the facts and circumstances leading to Mr Oliver's injury give rise to an indemnity under either or both of the Workers Compensation Act 1987 (NSW) ("the Compensation Act") and the Motor Accidents Act 1988 (NSW) ("the Motor Accidents Act")? It was agreed that, if damages were assessed only pursuant to Pt V of the Compensation Act, there should be a verdict for $450,000 in Mr Oliver's favour; if they were assessed pursuant to the Motor Accidents Act, then the sum should be $460,000. Section 47A of the Motor Accidents Act states: "An insurer may apply to the court to be joined as a party to legal proceedings brought against a defendant who is insured under a third- party policy with the insurer in order to argue that in the circumstances of the case it has no obligation under the policy to indemnify the defendant." An order under s 47A was made in the District Court joining Allianz as a party to the proceedings. The other insurer, QBE, has not become a party, but in substance the dispute has been between the two insurers. The District Court held that the provisions of the Motor Accidents Act were attracted and that there should be judgment in favour of Mr Oliver against GSF in the larger sum of $460,000. It entered judgment accordingly. In addition to entering judgment in favour of Mr Oliver against GSF in the sum of $460,000, the District Court ordered that Allianz pay GSF "by way of indemnification" the sum of $230,000. This order was made on the concession that, because it had been established that Mr Oliver's claim fell within both legislative regimes, the case was one of "dual insurance". Allianz appealed to the New South Wales Court of Appeal seeking to set aside the judgment against it obtained by GSF and an order that there be judgment in favour of Mr Oliver against GSF in the sum of $450,000, that is to say, on the footing that only the Compensation Act applied. The Court of Appeal (Mason P and Davies AJA; Santow JA dissenting) dismissed the appeal49. In this Court, Allianz seeks orders to the effect of those it unsuccessfully sought in the Court of Appeal. GSF is the first respondent and Mr Oliver the second respondent. Mr Oliver played no active part in the appeal and his position has been protected by arrangement between the other parties after the grant of special leave. It also should be noted that motor vehicle accidents occurring after 5 October 1999 are governed by the Motor Accidents Compensation Act 1999 (NSW) ("the 1999 Act") and not the Motor Accidents Act (s 2AA), but nothing for this appeal turns on that50. Other aspects of the 49 Allianz Aust Insurance Ltd v GSF Aust Pty Ltd (2003) 57 NSWLR 321. 50 In particular, the definition of "injury" in s 3 of the 1999 Act does not differ from that on which this case turns. scheme established by the Motor Accidents Act were considered by this Court in Russo v Aiello51. The legislation The critical question on the appeal is the contention, which the majority in the Court of Appeal accepted, that the facts and circumstances gave rise to "injury" within the definition in s 3(1) of the Motor Accidents Act. The submission by Allianz that the Court of Appeal erred should be accepted and the appeal allowed. Part 6 of the Motor Accidents Act (ss 68-82A) is headed "Awarding of damages". Section 69(1) states: "This Part applies to and in respect of an award of damages which relates to the death of or injury to a person caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle." (emphasis added) The term "injury" is then defined in s 3(1) as follows: "injury: (a) means personal or bodily injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during: the driving of the vehicle, or a collision, or action taken to avoid a collision, with the vehicle, or (iii) the vehicle's running out of control, or such use or operation by a defect in the vehicle, and includes: pre-natal injury, and psychological or psychiatric injury, and 51 (2003) 215 CLR 643. (iii) damage to artificial members, eyes or teeth, crutches or other aids or spectacle glasses." (emphasis added) It will be apparent that the opening words in the definition "caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle" mirror those in the substantive provision in s 69(1). Section 69(1) was in the same form when the Motor Accidents Act was enacted in 1988. The present definition of "injury" was inserted by the Motor Accidents Amendment Act 1995 (NSW) ("the 1995 Act")52. The original definition it replaced did not mirror s 69(1); rather, it stated that "'injury' means personal injury" and that "injury" included what now appears as par (b) of the present definition. The 1995 Act also included (as s 2A and s 2B) provisions dealing with the object and interpretation of the legislation. Further reference will be made to s 2A and s 2B later in these reasons. The evident purpose of the 1995 Act, which is confirmed by the Second Reading Speech in the Legislative Council on the Bill for the 1995 Act53, was to limit the definition of injury by its cause and to narrow what the legislature considered the overbroad reading in the case law of the expression in s 69(1) "caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle". In the Second Reading Speech the Attorney-General said54: "The CTP policy and the motor accidents scheme simply are not, and were never intended to be, a comprehensive accident compensation scheme providing substantial damages in all cases of injuries connected in some way to the use of a motor vehicle. Common sense and community expectations generally demand that the CTP policy provide coverage in respect of injuries which arise from crashes and collisions on the roads or from vehicles running out of control. Over the years the courts have interpreted the CTP policy as providing for a wide range of injuries often unrelated to motor accidents. For example, the CTP policy has been held to cover injuries sustained during the loading and unloading of vehicles, 52 Sched 1, Item 4. 53 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 16 November 1995 at 3320-3324. 54 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 16 November 1995 at 3322. and injuries sustained while standing on the back of a stationary trailer, and injuries involved in the use of a firearm in a vehicle. It is therefore proposed to amend the definition of 'injury' to adopt an approach similar to that taken in Queensland, South Australia and Western Australia, where 'injury' is qualified in terms of its cause." The Western Australian legislation of which the Attorney-General spoke was considered by this Court in Insurance Commission (WA) v Container Handlers Pty Ltd55. In the present case, Mason P said that the definition of "injury" was "the gateway that controls access to an award of damages under Pt 6 of the [Motor Accidents Act] (see also s 69 thereof)"56. His Honour held that "[t]here was a defect in the vehicle because one of the important things it was designed to do was not functioning, that is, was defective"57. He added that the definition uses the term "a result of" not "the result of" and that "the defect was a cause of the compensable injury. Or, to use the language of the definition, the injury was 'a result of' the defective vehicle provided to Mr Oliver in circumstances rendering its owner at fault."58 The immediate difficulty with this reasoning is that it gives insufficient attention to the phrase as a whole as it appears in the definition, namely "if, and only if, the injury is a result of and is caused ...". The other member of the majority, Davies AJA, held that the defect in the vehicle formed "part of the chain of events which led to the injury" and was "one of the factors constituting the fault of [GSF]"59. It will be apparent that this reasoning construes the definition as if it contained words such as "arising out of" which require no direct or proximate causal link, and gives insufficient attention to the words "if, and only if" in the definition. 55 (2004) 78 ALJR 821; 206 ALR 335. 56 (2003) 57 NSWLR 321 at 323. 57 (2003) 57 NSWLR 321 at 323. 58 (2003) 57 NSWLR 321 at 324-325. 59 (2003) 57 NSWLR 321 at 337. Previous interpretation Before turning to the disposition of the present appeal, something more should be said of the New South Wales legislative history. The third party policy first required by s 10 of the Motor Vehicles (Third Party Insurance) Act 1942 (NSW) ("the 1942 Act") was to provide for insurance "against all liability incurred by [the] owner ... in respect of the death of or bodily injury to any person caused by or arising out of the use of the motor vehicle"60. The phrase "arising out of" was construed as extending to a result that was less immediate than the "direct" or "proximate" relationship of cause and effect indicated by the phrase "caused by". For example, in Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd61 and Fawcett v BHP By-Products Pty Ltd62, claims for injuries in the course of loading operations were upheld in this Court as within the scope of the 1942 Act. These and other authorities were considered in Container Handlers63 as indicative of the change in direction made by the later legislation in Western Australia. The words "arising out of" were banished from the legislation. They did not appear in the form of third party policy required by s 9 of the Motor Accidents Act. Rather, in its initial form64, s 9 substantially replicated the terms of s 69(1), which after the 1995 Act appeared in the opening words of the definition of injury in s 3(1). It might have been thought that the new expression, "in the use or operation", narrowed the scope of the legislation. However, in NRMA Insurance Ltd v NSW Grain Corporation65, the New South Wales Court of Appeal held that an injury sustained in 1990 during the course of unloading a 60 The 1942 Act continues to govern the death of or bodily injury to a person arising out of the use, before 1 July 1987, of a motor vehicle (s 3(d) of the 1942 Act). 61 (1966) 114 CLR 437. 62 (1960) 104 CLR 80. 63 (2004) 78 ALJR 821 at 829-830 [33]-[34], 837 [77]-[79], 841 [101], 845 [131], 851 [154]; 206 ALR 335 at 346-347, 356-357, 362, 368, 376. 64 Section 9 was omitted and a new section including the same relevant phrase was inserted by the 1995 Act, Sched 1, Item 6. The new section in turn was repealed by the 1999 Act, Sched 3, Item 6. 65 (1995) 22 MVR 317. grain elevator from a truck was caused by the fault of the owner or driver "in the use or operation" of the vehicle. NRMA was decided before the commencement of the 1995 Act and under the Motor Accidents Act in its preceding form. But the outcome in that case is illustrative of the situations to which the legislature gave further attention in the 1995 Act. Construction of the definition of "injury" Nevertheless, in the present case, it was conceded that Mr Oliver's injury occurred "in the use or operation of the vehicle", as first mentioned in par (a) of the definition of "injury". The appeal was fought in the Court of Appeal and in this Court upon the question whether the second branch of par (a), in particular sub-par (iv), applied. This speaks of an injury which is caused by the use or operation (in the conceded sense) of the vehicle and which is a result of and is caused during such use or operation by a defect in the vehicle. The history of the legislation indicates that the second branch of par (a) of the definition of "injury" was introduced to curtail what otherwise was the scope of the preceding matter in par (a). In Zurich Australian Insurance Ltd v CSR Ltd66, the New South Wales Court of Appeal held that the word "such" in sub-par (iv) refers not to the driving, collision, running out of control and other matters referred to in sub-pars (i), (ii) and (iii), but to the words "use or operation" in the opening words of the definition; the phrase was repeated to fix a time dimension for sub-par (iv). The parties to the appeal did not challenge Zurich. The repetition of the same phrase "use or operation" is important in construing the definition. The adverb "during" appears before sub-pars (i)-(iv) and has a ready association with the events set out in sub-pars (i), (ii) and (iii). However, the text "during ... by a defect in the vehicle" would have no sensible meaning were not the words "such use or operation" added to identify that activity during which the injury is sustained. That activity is identified not by referring to sub-pars (i), (ii) and (iii) but by picking up the phrase "use or operation" appearing earlier in the definition. We would not be prepared to differ from the decision in Zurich. However, what is clear from the course of the legislative history since the introduction of the 1942 Act is that the New South Wales Court of Appeal misconstrued that history in Gunter v State Transit Authority of NSW67. Young CJ in Eq, with whom Tobias JA and Wood CJ at CL agreed, there said: 66 (2001) 52 NSWLR 193 at 201. 67 [2004] NSWCA 330 at [16]. "When one looks at the history of the legislation the fact that [the 1999 Act] has the main objects of providing a universal scheme to provide compensation for compensable injuries sustained in motor accidents to achieve optimum recovery for persons injured in motor accidents becomes abundantly clear." Whatever may have been the policy manifested in the 1942 Act, there had been a pronounced shift against such "optimum recovery" by the time of the enactment of the 1995 Act. The concession to which reference has been made forecloses any issue whether the injury suffered by Mr Oliver was caused by the fault of GSF in the use or operation of the vehicle. However, the case only falls within the definition "if, and only if" the injury was a result of and was caused during that use or operation by a defect in the vehicle. In argument, some suggestion was conveyed that the terms "result" and "cause" have different meanings and, in particular, that "cause" narrows "result". That is not so. The drafting in this second part of par (a) of the definition seeks to accommodate two cumulative criteria and does so by telescoping them into a grammatical contortion. One criterion is that the injury be sustained during certain events, including the driving of the vehicle or a collision with the vehicle or its running out of control. The other criterion is that the injury be sustained as a consequence of those events. The phrase "a result of" is linked to the first or temporal criterion; the phrase "is caused" is linked to the second criterion. For sub-par (iv), the temporal criterion is that the injury be a result of the use or operation of the vehicle because it was sustained during that activity. The other criterion is that the injury be caused by a defect in the vehicle. Conclusions The facts do not sustain a contention that Mr Oliver's injury was caused by a defect in the vehicle. Had the vehicle been functioning in the ordinary way, there would have been no occasion for GSF to send Mr Oliver and his co-worker to the airport and to arm them with crowbars. However, that could be said of a range of circumstances but for the occurrence of which Mr Oliver would not have sustained his back injury. The question, as Santow JA correctly said in his dissenting judgment, was whether the state or condition of the vehicle is to be treated as causative in the relevant legal sense required by the Motor Accidents Act68. Santow JA also emphasised that this question of causality was not at large or to be answered by "common sense" alone; rather, the starting point is to identify the purpose to which the question is directed69. Those propositions should be accepted. The following may be added. First, in March v Stramare (E & M H) Pty Ltd70, McHugh J doubted whether there is any consistent "commonsense notion of what constitutes a 'cause'", and added71: "Indeed, I suspect that what commonsense would not see as a cause in a non-litigious context will frequently be seen as a cause, according to commonsense notions, in a litigious context. This is particularly so in many cases where expert evidence is called to explain a connexion between an act or omission and the occurrence of damage. In these cases, the educative effect of the expert evidence makes an appeal to commonsense notions of causation largely meaningless or produces findings concerning causation which would often not be made by an ordinary person uninstructed by the expert evidence." Secondly, the significance at general law of the identification of purpose is illustrated by decisions influenced by the changing state of the principles of contributory negligence. In March72, and more recently in Andar Transport Pty Ltd v Brambles Ltd73, reference was made to the operation of a defence of contributory negligence as a complete answer to an action in negligence and to its significance for reliance upon notions of "sole" or "effective cause". Further, speaking of that defence in its unreformed operation, McHugh J said in March74: 68 (2003) 57 NSWLR 321 at 331. 69 (2003) 57 NSWLR 321 at 330. See also at 323 per Mason P. 70 (1991) 171 CLR 506 at 532. 71 (1991) 171 CLR 506 at 533. 72 (1991) 171 CLR 506 at 511, 532-533. 73 (2004) 78 ALJR 907 at 916-917 [38]-[39]; 206 ALR 387 at 399-400. 74 (1991) 171 CLR 506 at 533. "It is understandable that, in the days when any contributory negligence on the part of a plaintiff was sufficient to deprive him or her of a verdict, judges should sanction tests for determining causation which in practice allowed juries to avoid the consequences of a strict application of the doctrine of contributory negligence. In that context, instructions to determine whether a particular act or omission was a cause of damage according to commonsense notions were appeals to extra-legal values to determine 'hard cases'." Thirdly, the case law construing s 82 of the Trade Practices Act 1974 (Cth) ("the TP Act") illustrates and emphasises that notions of "cause" as involved in a particular statutory regime are to be understood by reference to the statutory subject, scope and purpose. Section 2 of the TP Act states: "The object of this Act is to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection." Section 82 entitles a person to recover the amount of the loss or damage suffered by conduct done in contravention of a large number and range of provisions designed to further the stated object in s 2. In I & L Securities Pty Ltd v HTW Valuers (Brisbane) Pty Ltd75, Gleeson CJ said of the construction of s 82: "When a court assesses an amount of loss or damage for the purpose of making an order under s 82, it is not merely engaged in the factual, or historical, exercise of explaining, and calculating financial consequences of, a sequence of events, of which the contravention forms part. It is attributing legal responsibility; blame. This is not done in a conceptual vacuum. It is done in order to give effect to a statute with a discernible purpose; and that purpose provides a guide as to the requirements of justice and equity in the case. Those requirements are not determined by a visceral response on the part of the judge assessing damages, but by the judge's concept of principle and of the statutory purpose." the 75 (2002) 210 CLR 109 at 119 [26]. The upshot in I & L Securities was the holding stated by Gaudron, Gummow and Hayne JJ76: "[T]he question presented by s 82 of [the TP Act] is not what was the (sole) cause of the loss or damage which has allegedly been sustained. It is enough to demonstrate that contravention of a relevant provision of [that] Act was a cause of the loss or damage sustained." (original emphasis) On the other hand, the subject, scope and purpose of the 1995 Act, and the changes it made to the Motor Accidents Act, point in the other direction. The text of the new definition of "injury" manifests that legislative policy of restricting previous overbroad interpretations of the CTP insurance legislation. A stated object of the changes made by the 1995 Act was (s 2A(1)(b)) the reinstatement of a common law based scheme but (s 2A(2)(a)) to keep premiums "affordable" by containing "the overall costs of the scheme within reasonable bounds". A construction which promotes that object is to be preferred (s 2B(1)). The use in the definition of the emphatic and intensive phrase "if, and only if" directs attention to notions of predominance and immediacy rather than to more removed circumstances. The definition of "injury" looks, for the CTP insurance system, to notions of proximate cause found in insurance law77. That construction is consistent with the subject, scope and purpose of the 1995 Act. It was the system of work adopted by GSF to deal with the problem of unloading presented by the failure in operation of the motorised T-bar and, in particular, the direction to use the crowbar to lever the containers which had a predominant quality for, and an immediacy to, Mr Oliver's injury. The defect in the T-bar was not a defect by which the accident was caused in the necessary statutory sense. Orders The appeal should be allowed with the costs of Allianz to be paid by GSF. The orders of the Court of Appeal should be set aside. In place thereof, the appeal to that Court should be allowed, GSF should bear the costs of Allianz of 76 (2002) 210 CLR 109 at 128 [57] (footnotes omitted). See also at 121-122 [33] per Gleeson CJ, 132 [69] per McHugh J. 77 See Australian Casualty Co Ltd v Federico (1986) 160 CLR 513 at 534-535; March v Stramare (E & M H) Pty Ltd (1991) 171 CLR 506 at 511. that appeal, orders 1, 4 and 5 of the orders of the District Court dated 14 June 2002 should be set aside and orders made that (a) judgment be entered in favour of the plaintiff against GSF in the sum of $450,000, (b) judgment be entered in favour of Allianz against GSF, and (c) GSF pay the costs of Allianz in the District Court. Callinan CALLINAN J. As well as a question of causation this appeal raises a question whether courts may bring to the construction and application of amending legislation an inclination to read it as intended to produce a result that the legislature has fairly and clearly eschewed, and with a view to effecting a form of justice according to a judge's, or judges' particular perceptions of moral responsibilities or to who happens to be the longer-pocketed defendant. It is understandable that legislators become exasperated with courts that fail to give effect to the manifest intention of legislation, especially legislation enacted to arrest judicial trends that have become entrenched over the years. In my opinion this is a case in which they would be justified in doing so, because both of the courts below not only misconstrued what I consider to be the tolerably clear meaning of such legislation, but also disregarded the plain language of a second reading speech to which resort could and should have been had if the language were thought to be ambiguous. The legislation in question is the Motor Accidents Act 1988 (NSW) ("the Act"), in particular the definition of "injury" in s 3(1) which was introduced in 1995 by the Motor Accidents Amendment Act 1995 (NSW) ("the Amendment Act") and which is ultimately relevantly concerned with the allocation of financial responsibility for personal injury between users and owners of motor vehicles on the one hand, and employers and others utilising them for various purposes on the other. Facts The business of the first respondent was the packing of food in airline containers for transport by aeroplanes. The containers were carried on the ground in a truck. The truck was fitted with a set of rollers on its floor and a motorised T-bar to enable the containers to be more easily loaded and unloaded from it. The T-bar on the vehicle with which this appeal is concerned became inoperative to the knowledge of the first respondent on the day before the second respondent suffered injury. The second respondent was a technician employed by the first respondent. He was not usually required to load and unload containers. On 12 February 1998 he was however instructed by the first respondent to assist another employee to unload containers at the airport in Sydney. The second respondent and the other employee were given crowbars which they were instructed to insert between the rollers on the floor of the trailer so as to lever the containers along the rollers. It could not seriously be disputed that this method of moving the containers was an unsafe one. In the result, in implementing it, the second respondent suffered injury. The proceedings in the District Court The second respondent sued the first respondent for damages for personal injury in negligence in the District Court of New South Wales. By its defence Callinan the first respondent contended that the second respondent's claim was one to which, if it were liable, the Workers Compensation Act 1987 (NSW) ("the Compensation Act") applied, rather than the Act. If this contention were correct the practical effect would be that the second respondent's entitlement to damages would be less than he might otherwise recover, and in particular less than what he might recover if the Act applied, although in the circumstances the difference would not be a large one. Whether the Compensation Act or the Act should apply was therefore a matter of much greater concern to the respective insurers under those Acts, between which the real contest in the District Court would be fought. The appellant as the insurer of the truck under the Act accordingly applied to, and was granted leave by the District Court to be joined as a party to the proceedings in order to argue that in the circumstances it had no obligation under the policy to indemnify the first respondent. In the first instance the action proceeded to arbitration pursuant to s 63A of the District Court Act 1973 (NSW). An award was made on 21 November 2001. On 17 December 2001 the first respondent applied to the Court for a re- hearing of the arbitrated action pursuant to s 18 of the Arbitration (Civil Actions) Act 1983 (NSW)78. By the time that the matter came on for the re-hearing before Delaney DCJ leave had been granted to the second respondent to add particulars of negligence to his statement of claim directed to the negligence of the first respondent as an employer, the better and more clearly to define what were the true issues, and in particular, to raise more clearly the question whether the second respondent's claim was governed by the Act or the Compensation Act. It was agreed for the purposes of the re-hearing that the first respondent had been negligent, and that the second respondent's damages should be $450,000. The trial judge identified the principal question before him as being whether the circumstances leading to the injury suffered by the second respondent were to be the subject of indemnity pursuant to the Act or the Compensation Act. As to that his Honour held that the injury suffered by the second respondent arose in the use or operation of the vehicle which had been set up in a specific way for a specific purpose. He regarded himself as bound by two Section 18 provides: "Application for rehearing (1) A person aggrieved by an award of an arbitrator may apply for a rehearing of the action concerned. (2) The applicant may (but need not) in the application request that the rehearing be a full or a limited rehearing." Callinan other cases, Mayne Nickless Ltd v Symen79 and Zurich Australian Insurance Ltd v CSR Ltd80 to reach his conclusion. He expressly rejected two other related submissions made by the appellant: that it was the system of work which led to the injury; and that the defective T-bar was not materially or at all causative of it. Accordingly, judgment was entered in favour of the second respondent against the appellant. The appeal to the Court of Appeal The appellant unsuccessfully appealed to the Court of Appeal of New South Wales (Mason P, Santow JA (diss) and Davies AJA)81. All members of the Court of Appeal accepted that the outcome of the case depended upon the meaning to be attributed to "injury" which was defined by s 3(1) of the Act as follows: "(a) means personal or bodily injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is a result of and is caused during: the driving of the vehicle, or a collision, or action taken to avoid a collision, with the vehicle, or (iii) the vehicle's running out of control, or such use or operation by a defect in the vehicle." All members rejected the appellant's submission that there was no defect in the vehicle. The appellant conceded that the first respondent's fault occurred during the use or operation of the vehicle but not that the injury suffered by the second respondent was an injury within the meaning of the definition. The majority were also of the view that the defect was causative of the second respondent's injury. Santow JA was of a different mind on that issue. Mason P referred in his reasons for judgment to the legislative history and the second reading speech for the Amendment Act which inserted the definition of injury in s 3, but was unwilling to infer anything from those except that the 79 (2001) 34 MVR 18. 80 (2001) 52 NSWLR 193. 81 Allianz Australia Insurance Ltd v GSF Australia Pty Ltd (2003) 57 NSWLR 321. Callinan definition of injury was intended to be narrower than its predecessor. His Honour also said that he was unable to derive any assistance in construing the definition "by recognising that cost-saving considerations (so far as vehicle owners are concerned) informed the amendment82." His Honour then said this83: "One could throw into the opposite scales the fact that compulsory insurance of motor vehicles continues as a beneficial reform enacted to ensure that victims of motor vehicle accidents have a deep-pocketed defendant to sue. The narrower the scope given to 'injury' under the amendment, the narrower will be the ultimate umbrella of protection for victims, not all of whom can fall back on claiming against a defendant who is insured under the Workers Compensation Act 1987." Later in his judgment his Honour turned to his own notions of moral responsibility "[underlying] causation issues arising in tort law ... the context [requiring] that the interests of potential victims (not all of whom are employees) [have] access to an insured defendant ... ."84 After expressing his disagreement with the reasoning of the dissenting judge, his Honour emphasised that the definition spoke of the injury being "a result of" and not "the result of" relevant events. It followed, his Honour thought, that for the injury to be an injury within the definition it was not necessary that it be the "direct" or "effective" or "efficient" result of the defect. He added that "[t]he presence of 'if, and only if' [did] not undercut this, because those words have their own work to do"85. His Honour did not say what that work is. He concluded that the injury was "'a result of' the defective vehicle provided to [the second respondent] in circumstances rendering its owner at fault. It does not matter that it was also a result of negligence in the [first respondent's] instructions to [the second respondent]."86 Davies AJA, who reached the same conclusion as the President, read the words in the definition "by a defect in the vehicle" as relating to, and qualifying both words "result" and "cause". 82 (2003) 57 NSWLR 321 at 323 [4]. 83 (2003) 57 NSWLR 321 at 323 [4]. 84 (2003) 57 NSWLR 321 at 323 [8]. 85 (2003) 57 NSWLR 321 at 325 [15]. 86 (2003) 57 NSWLR 321 at 325 [16]. Callinan Davies AJA dealt with the submissions of the appellant in this way87: "The final and crucial submission made by [Counsel for the appellant] was that [the second respondent's] injury was caused not by the defect in the vehicle but by the [first respondent's] negligence in directing that the defective vehicle be used and that the goods be moved manually during the unloading process. In my opinion, [Counsel's] submission that the injury was caused by the use of the defective vehicle but not by the defect itself has a subtlety about it that does not meld well with the common law's robust, commonsense approach to issues of causation. A similar and equally subtle argument was rejected by Clarke JA, with whom Priestley JA and Powell JA agreed, in NRMA Insurance Ltd v NSW Grain Corporation. His Honour rejected the proposition that, because the employer had failed to employ a safe system of work, that meant that the employer's negligence was not negligence 'in the use of the vehicle'88. Clarke JA rejected the contention that the issue of causation should be considered under the rubric of 'efficient cause', 'real cause' or 'effective cause' holding89 that issues of causation should be determined upon a practical commonsense basis as laid down in March v Stramare90, Halvorsen Boats Pty Ltd v Robinson91 and Fitzgerald v Penn92. I agree with the approach taken by Clarke JA. There is nothing in the content of the definition to require the term 'caused' to carry a meaning more limited than the term ordinarily bears in the law of negligence. The words in the definition, 'if, and only if,' do not narrow the meaning of the subsequent words 'caused ... by a defect in the vehicle'. Indeed, the context of the definition is such as to attract the ordinary meaning of the term as it is used in negligence cases. I do not accept [Counsel's] submission that the definition requires one to look for 'a direct cause' or 'the proximate cause' of the injury. Such an approach has long since been rejected. The definition requires one to determine whether, as a matter of fact, the injury 87 (2003) 57 NSWLR 321 at 336-337 [67]-[70]. 88 (1995) 22 MVR 317 at 319. 89 (1995) 22 MVR 317 at 320. 90 March v E & MH Stramare Pty Ltd (1991) 171 CLR 506. 91 (1993) 31 NSWLR 1. 92 (1954) 91 CLR 268. Callinan resulted from and was caused by the defect in the vehicle. The approach enunciated in March v Stramare should be adopted. It would be inconsistent with the terms of the definition if the employer's fault in the use or operation of the vehicle, which lay in its decision to use the vehicle for the transport of its goods when the vehicle was not fit for that use, was regarded as leading to the conclusion that the employee's injury, which was occasioned by and during such use and operation, did not result from and was not caused by the defect. The definition of 'injury' contemplates that there will be both elements, injury caused by the negligence of the owner in the use and operation of the vehicle and injury resulting from and caused by a defect in the vehicle during the course of that use and operation. The definition contemplates that the relevant facts may satisfy all of these elements." His Honour expressed his conclusions as follows93: "The definition operates in the context of claims for negligence. It defines those injuries to which the Act applies, the claims in respect of which are limited as the Act specifies. It follows that the concept of fault flows through all elements of the definition. The element 'injury which is caused by the fault of the owner or driver' encompasses the element which follows, 'injury caused ... by a defect in the vehicle'. In a case where sub- par (iv) of the definition applies, the defect will form part of the chain of events which led to the injury and will be one of the factors constituting the fault of the owner or driver. Adopting a commonsense approach, the learned trial judge concluded that [the second respondent's] injury was a result of and was caused by the defect in the vehicle. I see no error in that conclusion." In dissent Santow JA identified the issues involved in the resolution of the appeal as being whether the second respondent's injury was the result of, and caused by the defective mechanism, or, as a result of, and caused by the first respondent's negligent direction, or as Davies AJA would have it, both: and whether the bodily injury was caused "in the use or operation of the vehicle" and "during ... such use or operation". As to the first of these, Santow JA concluded that it was the first respondent's negligent direction and not the antecedent defect that was the legal cause of the injury, but even if both were causal then the injury was a result of the defect coupled with the negligent direction, both being essential conditions for that result, with the first respondent's negligence being far more significant. 93 (2003) 57 NSWLR 321 at 337 [71]-[72]. Callinan Commonsense compelled this conclusion because the injury could not be regarded as the result of the defect alone but required the active and negligent intervention of the first respondent for its occurrence. The appeal to this Court The appellant argues that the cause of the second respondent's injury was the negligent direction of the first respondent, and not any defect in the vehicle, and that on its proper construction, the definition of injury did not extend to an injury such as this one, sustained whilst the vehicle was not in motion. Before I deal specifically with those arguments I make these observations. Motor vehicles in modern times are indispensable not only for social intercourse but also for industry and commerce. Almost every employer in industry or commerce uses one or more of them, often adapted to the particular activities of that employer. Both the workplace and the roads can be hazardous places. For the better security of those in and on them, legislatures in Australia long ago enacted legislation to compel employers and owners of motor vehicles to effect insurance to ensure that those negligently injured by these hazards have recourse to a sufficient fund to compensate them. It is not surprising therefore that there have often been, as here, contests between the insurers responsible under the respective enactments. The insurer of the motor vehicle has been a rare victor in those contests, even though the injury in question has frequently borne the appearance of an industrial, rather than a motor vehicle misadventure. This was a result, in part at least, of an almost universal judicial tendency to read as expansively as possible94, whether this was the legislative intention or not, such statutory expressions as "by through or in connexion with a motor vehicle", "arising out of the use of a motor vehicle", and like phrases and clauses. An extreme example of this judicial trend, as I pointed out in Insurance Commission of Western Australia v Container Handlers Pty Ltd95, with which this case can be compared, is Dickinson v Motor Vehicle Insurance Trust96. That case was specifically referred to in the Parliament of Western Australia as the catalyst for changes to Western Australian legislation similar to the Amendment Act here. Whether these expansive readings were intended or not by legislatures I cannot say, but I am inclined to question whether they were. The consequence of them has been the exoneration of industry and commerce from the liability of higher premiums at the expense of the general body of owners of motor vehicles. 94 For example see Gunter v State Transit Authority of New South Wales [2004] NSWCA 330 at [16]-[18]. 95 (2004) 78 ALJR 821; 206 ALR 335. 96 (1987) 163 CLR 500. Callinan Involved in, or associated with this trend has been a tendency to import into the exercise of construing such legislation, attenuated meanings given to "cause" and like words by the common law. True it is that expressions used in legislation will frequently and rightly be taken to bear the meaning given to them by the common law, but sometimes as here, it will be apparent that something different and stricter was intended97. It is against that background that a number of state legislatures have moved to ensure that the burden of claims made in circumstances in which the use of a motor vehicle was peripheral, or contributory only, to an injury negligently inflicted, be borne by those responsible or substantially responsible for it, industry, or, in appropriate cases, persons able to effect public risk insurance98. So much was in terms said by the Attorney-General in his second reading speech for the Amendment Act99: "The CTP policy and the motor accidents scheme simply are not, and were never intended to be, a comprehensive accident compensation scheme providing substantial damages in all cases of injuries connected in some way to the use of a motor vehicle. Common sense and community expectations generally demand that the CTP policy provide coverage in respect of injuries which arise from crashes and collisions on the roads or from vehicles running out of control. Over the years the courts have interpreted the CTP policy as providing for a wide range of injuries often unrelated to motor accidents. For example, the CTP policy has been held to cover injuries sustained during the loading and unloading of vehicles, and injuries sustained while standing on the back of a stationary trailer, and injuries involved in the use of a firearm in a vehicle. It is therefore proposed to amend the definition of 'injury' to adopt an approach similar to that taken in Queensland, South Australia and Western Australia, where 'injury' is qualified in terms of its cause. 97 McCann v Switzerland Insurance (2000) 203 CLR 579 at 637-640 [190]-[193]. See also Shipping Corporation of India Ltd v Gamlen Chemical Co (A/Asia) Pty Ltd (1980) 147 CLR 142 at 164 per Mason and Wilson JJ; Great China Metal v Malaysian Shipping (1998) 196 CLR 161 at 244 [230]. 98 See Motor Accident Insurance Act 1994 (Q); Motor Vehicle (Third Party Insurance) Act 1943 (WA); and Motor Vehicles Act 1959 (SA). 99 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 16 November 1995 at 3322. Callinan Similarly, the expression 'motor vehicle' is widely defined in the Act and covers go-karts and other vehicles, such as forklifts, not normally associated with use on the dedicated public road network. Accidents involving such vehicles have given rise to claims against the Nominal Defendant under the Motor Accidents Act. Under the Construction Safety Act the WorkCover Authority licenses go-kart facilities and public liability insurance is compulsory. It is considered that claims for injury arising from the use of such vehicles should properly be made under such public liability policies and not against the Nominal Defendant." Before I turn to the construction of the definition of injury I should deal with the appellant's submission that, if the failure of the T-bar was a defect in the vehicle, it did not cause the injury, or, to put it the other way that the definition does, the injury was not a result of the defect. I would accept this submission. The T-bar was inoperable. The first respondent well knew this. Nonetheless it chose to use the vehicle to carry containers and to give a negligent and dangerous direction as to the movement of the containers. Because the T-bar was inoperable it could not and did not play any part in the events leading up to the second respondent's injury. That was a result of the negligently devised system of work and instructions that the first respondent elected to adopt. Any imperative to use the vehicle with its inoperable T-bar could only have been a self-imposed commercial one. There must come a time in relation to the occurrence of a known malfunction, when its capacity to cause a result should be regarded as spent. This, in light of the fact that the stoppage happened on the previous day, was what occurred in this case. In any event, even if the injury could be regarded as a result of a defect it could not, for the reasons I have given, be said to have been caused by it. Realistically and rationally this was an industrial accident in which, because it was not operable or operating at all, the T-bar played no part. I am however of the view that the injury here otherwise falls outside the definition. This is a conclusion that I would reach without recourse to the second reading speech. Any part of a definition, as indeed any section of an enactment, is to be read as a whole with the rest. On a first reading of the whole of the definition, the reader should be immediately struck by the emphasis which is placed upon the notion of movement, of the driving of the vehicle, or its operation to avoid a collision whilst moving, or of its running out of control. It equally strikes me as an unlikely proposition that it was intended that, for a relevant injury to have occurred, the vehicle must always have been in motion, except in the case of an injury resulting from a defect in it100. 100 cf Insurance Commission of Western Australia v Container Handlers Pty Ltd (2004) 78 ALJR 821 at 829 [32]; 206 ALR 335 at 345-346. Callinan It is significant that after the words "is a result of" no expression such as "or is contributed to by" is used. The indefinite article "a" does not imply in my opinion that one of multiple causes may suffice101, even if "cause" and "result" were taken as synonyms in the definition. Each of the separate expressions "is a result of" and "is caused during" has to be given its full and presumably different meaning. They have a cumulative reinforcing effect. Each has its own separate and important work to do. The words "if, and only if," refer both to result and the event or, to put it another way, what is happening in relation to the vehicle when the injury is caused. It follows that sub-par (iv) of the definition should be read in this way: "'injury': (a) means personal ... injury caused by the fault of the owner or driver of a motor vehicle in the use or operation of the vehicle if, and only if, the injury is caused during such use or operation of the vehicle of the kind referred, or by a defect in it". "Such" is the key word. It means "[o]f the character, degree, or extent described, referred to, or implied in what has been said102." Furthermore, the expression "use or operation" as used in the introductory words of the definition have separate and sufficient work to do. That work is to identify the event in the course of which there is fault, the "fault" earlier referred to. The use or operation of the vehicle earlier described and referred to in sub-par (iv) is the use or operation of the vehicle in the manner most recently and proximately referred to in the definition, that is, in motion, as set out in sub-pars (i), (ii) and (iii). In Zurich Australian Insurance Ltd v CSR Ltd Spigelman CJ rejected a submission that "such" should be read as having the application that I would give it. His Honour said103: "The second submission was that the word 'such' in (a)(iv) did not refer to the words 'use or operation' in the opening words of par (a), but referred to the 'use or operation' comprised in (i), (ii) and (iii), that is, 'driving', 'collision' and 'running out of control'. This construction would deprive (iv) of all content. Paragraph (a)(i) applies to any injury 'caused during ... driving'. That encompasses every injury 'caused during ... driving ... by a defect in the vehicle'. The same is true of par (ii) and par (iii). The construction advanced by the appellant would leave (iv) with no work to do. The word 'such' in (iv) is, in my opinion, a reference to the preceding use of the precise words which immediately follow it, that is, 'use and operation'. The repetition of this phrase in (iv) was necessitated 101 cf Great China Metal v Malaysian Shipping (1998) 196 CLR 161 at 244 [230]. 102 Oxford English Dictionary, 2nd ed (1989), vol 17 at 101. 103 (2001) 52 NSWLR 193 at 201 [31]-[32]. Callinan by the fact that the sub-paragraphs are all qualified by the word 'during'. It makes sense to speak of something occurring 'during' driving, a collision or running out of control. It makes no sense to speak of something occurring 'during' a defect. The words are repeated to identify a time dimension for (iv)." I am unable to agree. The expression "use or operation" is explained, qualified and further refined by sub-pars (i), (ii) and (iii). The word "such" is a reference to that expression as so refined or qualified. Sub-paragraph (iv) does have work to do. It is important to note that the introductory words of the definition speak of the fault of the owner or driver of a motor vehicle. An owner who is not driving the vehicle would not ordinarily be at fault and responsible for an injury within sub-pars (i) and (ii). An owner although he or she could conceivably be at fault when the vehicle ran out of control as contemplated by sub-par (iii), would generally be unlikely to be so. More probably such an event would result from a failure of the last driver to secure the vehicle properly after driving it, or to control it properly when driving it. A running out of control could also be of course a result of a failure by the owner to rectify a defect such as a malfunctioning brake or gearbox. On the other hand the "fault" of an owner would be more likely to be the failure say, of that owner to service the vehicle regularly in order to discover some defect in it, or to rectify a defect in it of which he or she should be aware. In other words the purpose of sub-par (iv) is to sheet home liability for an injury caused by the fault of the owner, if the injury is a result of a defect causing it, during such use or operation, that is, whilst it is being driven as contemplated by sub-pars (i) and (ii) or running out of control as contemplated by sub-par (iii) in circumstances in which the driver has not been at fault. There is this further point which supports the construction that I prefer. It is that from 1942 until 1988, the relevant definition and policy used the words "arising out of" before the expression "use of a motor vehicle". That language has now been significantly altered by the deletion of the words "arising out of". Those words, as pointed out by Windeyer J in Government Insurance Office of NSW v R J Green & Lloyd Pty Ltd104, are words of very considerable generality. Their removal provides a further indication of a legislative intention to treat a relevant injury as one caused by fault in the use of a motor vehicle in the course of a use for which it is primarily intended, as a means of movement. If there were any doubt about any of these matters the doubt could have been resolved by reference to the second reading speech. It is difficult to imagine how the speech could have made it plainer. Take for example these words " ... the CTP policy has been held to cover injuries sustained during the 104 (1966) 114 CLR 437 at 447. Callinan loading and unloading of vehicles ... ". Take also the reference to the qualification of injury "in terms of its cause". But the clearest indications of all in the second reading speech are the statements that the motor accident scheme was never intended to be a comprehensive motor insurance scheme providing substantial damages in all cases of injuries connected in some way with the use of a motor vehicle, because, "[c]ommon sense and community expectations generally demand that the CTP policy provide coverage in respect of injuries which arise from crashes and collisions on the roads or from vehicles running out of control". That is to say far more than what the President in the Court of Appeal derived from it, that the speech conveyed only that the definition of injury was intended to be narrower than its predecessor. The majority in the Court of Appeal did not consider the definition to be clear. That being so they were, by s 34 of the Interpretation Act 1987 (NSW) required to have regard, among other things, to the second reading speech. This in my opinion, they did not do. The Court of Appeal erred in this regard. They also erred in adhering to an approach to the construction of the definition which had been adopted in the past to different legislation by the courts, and which was the subject of explicit criticism in the second reading speech. The President of the Court of Appeal chose to substitute his own perception of moral responsibility for the statutory imposition of the burden of damages, and elected to decide the case according to his perception of who, in other factual situations might be better able to satisfy the judgment. Absent a clear statement to that effect in legislation, or relevant extrinsic materials in case of doubt, such a consideration cannot be relevant to the construction of legislation, and certainly not in a case such as this one where the legislature has done everything that it reasonably can to put its intention beyond doubt. It is not for any court to decide cases and construe enactments on the basis of who may have the longer pocket. The President acknowledged that the contest here was not between an impecunious defendant and a long-pocketed one because the contest was a contest by legislative mandate between two long pockets, each an insurer under a statutory scheme. But his Honour allowed the possibility that there might be a contest in another case between an impecunious defendant and an insurer of a motor vehicle, a long-pocketed party, to infect his approach to the proper construction of the definition, and that too was erroneous. The other member of the majority, Davies AJA, also approached the construction of the definition erroneously. His Honour said first, and to this extent, correctly, that the approach of the common law to issues of causation has been robust, some might say, on occasions far too robust. Statutes should not however be construed upon the basis of any predisposition towards robustness, particularly where, as here, the legislature sought to correct undue judicial robustness in the past. The appeal should be allowed with costs. I would make the following orders: Appeal allowed. Callinan The first respondent (GSF Australia Pty Ltd - "GSF") pay the costs of the appellant (Allianz Australia Insurance Ltd - "Allianz"). Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 1 July 2003 and in their place order: the appeal to the Court of Appeal is allowed; (b) GSF pay the costs of Allianz of the appeal to the Court of Appeal; (c) Orders 1, 4 and 5 of the orders of the District Court of New South Wales made on 14 June 2002 are set aside and in their place order: judgment for the plaintiff against GSF in the sum of judgment for Allianz against GSF; (iii) GSF pay the costs of Allianz in the District Court.
HIGH COURT OF AUSTRALIA SST CONSULTING SERVICES PTY LIMITED APPELLANT AND STEPHEN CHARLES RIESON & ANOR RESPONDENTS SST Consulting Services Pty Limited v Rieson [2006] HCA 31 15 June 2006 ORDER Appeal allowed with costs. Set aside the orders of the Full Court of the Federal Court of Australia made on 15 February 2005 and, in their place, order that the appeal to that Court be dismissed with costs. On appeal from the Federal Court of Australia Representation: C J Birch SC with K W Dawson for the appellant (instructed by Henderson R I M Lilley with P R Franco for the respondents (instructed by Synkronos Legal) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS SST Consulting Services Pty Limited v Rieson Trade Practices – Restrictive trade practices – Exclusive dealing – Trade Practices Act 1974 (Cth) ("TPA"), s 47(1) – Loan agreement obliged borrower to acquire services of a particular kind from third persons specified by the lender – Lender thereby engaged in "exclusive dealing" in breach of s 47(1) of the TPA – Guarantors of loan sought to avoid enforcement of guarantee on basis that contract was void and unenforceable for illegality – Whether contract void or unenforceable for illegality – Relevance of other forms of relief available under ss 87 and 87A – Whether severance an exceptional form of relief – Whether TPA, s 4L permitted or required severance of the prohibited provision. Statutes – Interpretation – Structure and meaning of s 4L – Whether s 4L engaged common law "rules" of severance – Whether identifiable "rules" of severance existed at common law – Relevance of rules of severance devised and applied in other contexts. Statutes – Interpretation – Statutory context of s 4L – Objects and purpose of the TPA – Relevance of legislative history of s 4L – Relevance of report of committee (Swanson Committee) appointed to review legislation prior to introduction of s 4L. Words and phrases – "exclusive dealing", "illegality", "in so far as", "making of a contract", "severance", "subject to", "third line forcing". Trade Practices Act 1974 (Cth), ss 4L, 47(1), 47(6), 87. GLEESON CJ, GUMMOW, HAYNE, HEYDON AND CRENNAN JJ. This case turns on the construction and application of a provision of the Trade Practices Act 1974 (Cth), s 4L, which deals with severability. Section 4L provides: "If the making of a contract after the commencement of this section contravenes this Act by reason of the inclusion of a particular provision in the contract, then, subject to any order made under section 87 or 87A, nothing in this Act affects the validity or enforceability of the contract otherwise than in relation to that provision in so far as that provision is severable." The relevant facts can be summarised as follows. The appellant lent money to AFS Freight Management (USA) Inc ("AFS USA"), a company of which the respondents were directors. The respondents guaranteed repayment of the loan. The loan agreement obliged AFS USA to direct all work of packing and unpacking shipping containers at certain ports "to the corporations that the lender shall direct". The appellant, by lending or agreeing to lend money on that condition, engaged in the practice of exclusive dealing, contrary to s 47(1) of the Trade Practices Act. AFS USA repaid some but not all of the money lent. Was the appellant's claim under the guarantee, for the balance of the loan and for interest, properly met by the answer that the principal debtor, AFS USA, was not indebted to the appellant because the contract of loan was illegal and unenforceable? Or did s 4L of the Trade Practices Act require severance of provisions of the loan agreement so that the principal debtor's obligations to repay the loan and to pay interest remained enforceable? The loan agreement and the guarantee It is desirable to say something about how the agreements now in question came about, and to set out some of the principal provisions of the loan agreement and the guarantee. At the relevant times, the directors of the appellant were Messrs Peter Sweeney, Paul Sweeney and Denys Truman. Before late 1998 or early 1999 (the exact date does not matter) these three men had carried on business through various companies referred to collectively as the Port Botany Group. The business included packing and unpacking shipping containers. The Port Botany Group dealt with Australian Freight Services Ltd ("AFS"), a company which, until the late 1990s, acted as a local agent for a United States freight forwarder called Brennans. When Brennans was taken over by a competitor of AFS, AFS Crennan decided to set up its own American operation and AFS USA was formed to carry on that activity. In January 1999, the assets of the Port Botany Group were acquired by the Mayne Nickless group of companies. A company associated with Messrs Sweeney, Sweeney and Truman (it matters not which company) had a management agreement with Mayne Nickless. In June 1999, the first respondent asked Mr Peter Sweeney to provide about $1 million, by instalments, to be used as additional working capital for AFS USA and he offered what he described as "certainty in relation to the work". Mr Sweeney's contemporaneous notes recorded, as the first proposition agreed, that all packing and unpacking work and "LCL" (consignments less than a full container load) transport in Sydney, Melbourne and Brisbane, and Sydney air freight, would be directed to "Port Botany/MPG/Pitkin facilities during the life of loan". The second note he made was that "[i]f any work directed away from the above facilities, the loan becomes due and payable". It seems that the "Port Botany/MPG/Pitkin facilities" were in some way associated with Mayne Nickless and it may be that directing this work to those facilities was of advantage to the appellant or its associated interests. Nothing turns on the accuracy of either of these propositions. During June and July 1999, the parties agreed upon the terms of the loan to AFS USA and the guarantee to be given by the respondents. The loan was to be made by instalments between July 1999 and June 2000 and to be repaid by payments in August 2000, 2001 and 2002 with the balance, together with compounded interest at the rate of 20 per cent, in September 2003. The terms of the proposed loan agreement were recorded in a document headed "Special Terms for Inclusion in Agreement". One of the terms thus recorded was "[i]f any work is directed away from those facilities [ie the 'Port Botany/MPG/Pitkin facilities'], this is a default event". Another matter recorded in the document was the proposal that if AFS, or any subsidiary of AFS, was sold or otherwise disposed of, subject to some exceptions whose content was to be agreed later, the lender could require repayment of the loan and interest. In the event of non-compliance with any condition of the loan or a default event, the whole amount of the loan became due and payable "together with interest that would otherwise have been payable at the end of year four". This record of the terms of the loan agreement was signed by the first respondent and by Mr Truman on 7 July 1999. Crennan On 10 September 1999, solicitors for the appellant wrote to the directors of AFS USA setting out the terms of the loan agreement. A copy of the letter was signed on behalf of AFS USA and it is this letter that was later treated in argument as constituting the loan agreement. The letter contained a provision about AFS USA directing work which was expressed differently from the way that provision was set out in the earlier documents, but nothing was said to turn on the differences. The letter provided that: "AFS Freight Management (USA) Inc will direct all work of pack and unpack LCL nature in Sydney, Melbourne and Brisbane, together with Sydney air freight to the corporations that the lender shall direct. Such work shall include transport." Reference was made in the letter to the respondents selling their shares in AFS USA. The letter provided the "vendor" (presumably this was intended to read the "lender") "holds no objection provided all principal and interest on the basis of interest is paid up to date of settlement". The letter recorded that the respondents would guarantee the repayment of all principal and interest of the loan. The respondents subsequently made a deed of guarantee dated 23 December 1999. That deed recited that the appellant had advanced funds, at the request of the respondents, to AFS USA. It provided that: "In the event of the Borrower defaulting under any of its obligations, as set out in the 10th of September document both as to payment of interest and principal as well as positive acts to be done, the Guarantors will pay on demand to the Lender the principal amounts advanced with interest at the rate reserved in the payment schedule up to the time of payment under the Guarantee. This Guarantee is a continuing guarantee and takes into account future advances in accordance with the Schedule attached or variations therefrom to the document of the 10th of September 1999." (The "10th of September document" was the solicitor's letter mentioned earlier.) The guarantee contained no provision making the sureties liable as principals and so preserving the guarantors' liability in circumstances where the Crennan guarantors otherwise would be discharged1. It provided that "[t]his Deed will not be prejudiced or discharged or in any way affected by ... any part of this Deed being unenforceable, void or voidable" but it contained no provision dealing with the possibility that the loan agreement might be wholly or partly unenforceable, or wholly or partly void or voidable. Third line forcing Section 47(1) of the Trade Practices Act provides that "[s]ubject to this section, a corporation shall not, in trade or commerce, engage in the practice of exclusive dealing". One kind of exclusive dealing (third line forcing) is identified in s 47(6). That sub-section, so far as now relevant, provides: "A corporation also engages in the practice of exclusive dealing if the corporation: supplies, or offers to supply, goods or services; on the condition that the person to whom the corporation supplies or offers or proposes to supply the goods or services or, if that person is a body corporate, a body corporate related to that body corporate will acquire goods or services of a particular kind or description directly or indirectly from another person." Several of the words and expressions used in this provision are defined or given extended meanings in other provisions of the Act. For present purposes, it is necessary to note only that "services" is defined in s 4(1) as including: "any rights (including rights in relation to, and interests in, real or personal property), benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce, and without limiting the generality of the foregoing, includes the rights, benefits, privileges or facilities that are, or are to be, provided, granted or conferred under: any contract for or in relation to the lending of moneys; 1 O'Donovan and Phillips, Modern Contract of Guarantee, [1.1240]. Crennan but does not include rights or benefits being the supply of goods or the performance of work under a contract of service." It follows that the appellant's granting or conferring upon AFS USA the right to borrow money from the appellant was a supply of "services" to AFS USA. That supply was on the express condition that AFS USA would acquire services of a particular kind or description (namely, "all work of pack and unpack LCL nature" at the specified ports, including transport) from another person (namely, corporations nominated by the appellant). It follows that, by making the loan agreement and by providing the loan, the appellant engaged in the practice of exclusive dealing2. Procedural history The appellant commenced an action in the Supreme Court of New South Wales against the respondents claiming payment of the balance of the loan and interest. By an amended defence the respondents pleaded that the loan agreement was "[a]n agreement to effect the illegal purpose of exclusive dealing" as defined in s 47(6) of the Trade Practices Act and accordingly was "void and unenforceable". The respondents further alleged that, if they had entered into a guarantee in favour of the appellant, that guarantee was "void and unenforceable having been given to effect and maintain the illegal purpose of third line forcing". The respondents sought leave to deliver a cross-claim seeking a "declaration pursuant to s 87 of the [Trade Practices Act] that the guarantee is On the appellant's application to a single judge (Sully J), the cross-claim and those parts of the respondents' amended defence relying on the Trade Practices Act and alleging illegality were struck out3. They were struck out on 2 The loan was to be made in instalments between July 1999 and June 2000. The trial judge found that two instalments totalling $350,000 were advanced in July and August 1999 – before the right to the loan was formally created in the 10 September 1999 letter. The analysis set out above applies in relation to the instalments of the loan to be advanced after 10 September 1999. A similar analysis operates for the first two instalments, for they were evidently advanced on the terms of the "Special Terms for Inclusion in Agreement" document signed on 7 July 1999, which contained a similar s 47(6) condition. 3 SST Consulting Services Pty Ltd v Riesen [2001] NSWSC 804 at [26]. Crennan the basis that, because the unlawful provision of the loan agreement could be severed, the matters alleged in the defence and cross-claim were unarguably bad, provided no arguable answer to the appellant's claim, and pleaded no arguable cross-claim. The respondents' application for orders transferring the proceedings to the Federal Court pursuant to s 6(1) of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) was dismissed4. The respondents sought leave to appeal to the Court of Appeal of New South Wales. Leave was granted, the appeal allowed, and the orders made at first instance set aside5. The Court of Appeal held that the points sought to be raised by the impugned pleadings were not unarguable. The Court ordered that the proceedings be transferred to the Federal Court. In the Federal Court, amended pleadings were filed. The respondents alleged that the loan was made "pursuant to an overall agreement to provide for a loan to ... [AFS USA] and related Australian performance arrangements". They further alleged that this "overall agreement" and the guarantee (whose making was no longer put in issue): [w]ere [a]greements to effect the illegal purpose of exclusive dealing as defined in s 47(6) of the [Trade Practices Act] proscribed by s 47(1) of the [Trade Practices Act;] [a]re void and unenforceable as illegal for the reason that they are proscribed by s 47(1) of the [Trade Practices Act]." The respondents also filed a cross-claim in which they alleged that, by reason of the contravention of s 47, they: "were and are likely to suffer damage if the guarantee is enforced against them in that they are likely not to be able to pursue rights of contribution against [AFS] or to seek to recover or prove for any amount paid to [the appellant] pursuant to the guarantee for the reason that they are persons involved in the contravention". They claimed a declaration pursuant to s 87 of the Act that the guarantee "is void and/or unenforceable". [2001] NSWSC 804 at [26]. 5 Riesen v SST Consulting Services Pty Ltd [2002] NSWCA 163. Crennan At first instance6, Emmett J entered judgment for the amount claimed (which, by then, amounted to $1,514,890) and dismissed the cross-claim. To the extent that there was an unlawful provision in the overall agreement the appellant was held7 "entitled to treat that provision as severed from the arrangement, so as to permit the enforcement, as against [AFS USA], of its obligations in respect of the advances". It was held8 that it followed that the obligations in respect of the advances that were guaranteed by the respondents were valid and enforceable obligations. It does not appear that any argument was advanced at trial (and no point was pleaded) to the effect that severance of a provision of the loan agreement presented separate questions about the enforceability of the guarantee. In particular, there was no argument advanced at trial (or subsequently on appeal to the Full Court of the Federal Court or in this Court) based on considerations of the kind discussed in Ankar Pty Ltd v National Westminster Finance (Australia) Ltd9, Chan v Cresdon Pty Ltd10 or Andar Transport Pty Ltd v Brambles Ltd11. Those considerations may be noted but put aside from further consideration as not put in issue in the courts below or in the appeal to this Court. On appeal to the Full Court of the Federal Court (Wilcox, Sackville and Finn JJ), the appeal was allowed, the orders of the trial judge set aside and the appellant's application dismissed12. The Full Court held that it was not possible to sever the offending provision which obliged AFS USA to direct work to corporations nominated by the appellant from the balance of the loan agreement and that, accordingly, the agreement as a whole was illegal and void. This was 6 SST Consulting Services Pty Ltd v Rieson (2004) ATPR ¶42-016. (2004) ATPR ¶42-016 at 48,957 [49]. (2004) ATPR ¶42-016 at 48,957 [49]. (1987) 162 CLR 549. 10 (1989) 168 CLR 242. 11 (2004) 217 CLR 424. 12 Rieson v SST Consulting Services Pty Ltd (2005) 142 FCR 482. Crennan said13 to follow from the conclusion that the parties had structured their contractual arrangements in such a way as to evince a mutual understanding that the obligations assumed by the parties under the contracts constituted an indivisible whole such the offending provision would fundamentally alter the character and nature of the agreement they had made. that severing The central focus of the reasons of the Full Court was upon the application of what were understood to be the common law rules governing the consequences of illegality14. There was, therefore, a deal of reference to the decisions of this Court in Brooks v Burns Philp Trustee Co Ltd15, Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd16 and Humphries v Proprietors "Surfers Palms North" Group Titles Plan 195517 as well as to McFarlane v Daniell18 and Brew v Whitlock [No 2]19. But as these reasons will later demonstrate, whether the principles stated in those cases find application in the present matter depends upon first construing the relevant provisions of the Act. The Full Court concluded that to excise the obligation to direct "all work of pack and unpack LCL nature" to the corporations nominated by the appellant "would be to alter the nature of the contract notwithstanding that what remained of the arrangement would embody a loan obligation"20. The validity of that conclusion need not be examined. Nor is it necessary to consider what significance should be attached to the course of negotiations between the parties in deciding questions of the kind that lie behind that conclusion. 13 (2005) 142 FCR 482 at 497-498 [61]-[67] per Wilcox and Finn JJ, 504-505 [94] 14 (2005) 142 FCR 482 at 496-497 [59] per Wilcox and Finn JJ, 501-502 [81] per 15 (1969) 121 CLR 432. 16 (1978) 139 CLR 410. 17 (1994) 179 CLR 597. 18 (1938) 38 SR (NSW) 337. 20 (2005) 142 FCR 482 at 498 [63] per Wilcox and Finn JJ. See also at 504-505 Crennan The construction of s 4L Both at trial21, and on appeal to the Full Court22, the construction of s 4L acted on by the Full Court of the Federal Court in News Ltd v Australian Rugby Football League Ltd23 was adopted and applied. In News Ltd, the effect of s 4L was understood24 to be that "the invalidity of an exclusionary provision of a contract, if severable, does not affect the validity or enforceability of the balance of the provisions" (emphasis added). The Full Court in the present case rejected the construction of s 4L preferred by Emmett J, but not applied by his Honour in deference to the decision in News Ltd. What Emmett J said25 was that the effect of s 4L was that "even if the making of a contract involves a contravention of the Act, the contract would be valid and enforceable except to the extent that the provision of the contract that renders the contract a contravention can be severed" (emphasis added). For the reasons that follow, s 4L does not bear the meaning or effect given to it in News Ltd. Emmett J was right to construe s 4L as providing that where the section is engaged the contract in question is valid and enforceable except to the extent that the offending provision is severed. It is, however, not right to say that the section is engaged where the making of a contract involves a contravention. The condition for engagement of s 4L is more precisely stated. Further, the operation of s 4L is to require severance of the offending condition of the contract. Severance of the offending provision is not predicated upon the separate application of common law rules governing severance. It is, therefore, not right to speak of the contract being valid and enforceable except to the extent that the offending provision can be severed. In order to make good those propositions it is necessary to begin by considering the statutory context in which s 4L takes its place. 21 (2004) ATPR ¶42-016 at 48,955 [34]. 22 (2005) 142 FCR 482 at 484 [3] per Wilcox and Finn JJ, 499 [71] per Sackville J. 23 (1996) 64 FCR 410. 24 (1996) 64 FCR 410 at 582. 25 (2004) ATPR ¶42-016 at 48,954 [33]. Crennan The Trade Practices Act proscribes certain forms of conduct. Those proscriptions take several different forms. Some26 hinge upon the making of a "contract, arrangement or understanding". Some27 hinge upon requiring the giving of, or giving, a "covenant" which is defined28 as "a covenant (including a promise not under seal) annexed to or running with an estate or interest in land (whether at law or in equity and whether or not for the benefit of other land)". Others, like the exclusive dealing provisions now in issue, focus upon the supply or acquisition of, or the refusal to supply or acquire, goods or services, and the conditions of supply or acquisition or the reason for refusal. Making a contract may, as here, constitute a contravention of the exclusive dealing provisions, but those provisions encompass many other kinds of conduct. Because the exclusive dealing provisions encompass the making of certain kinds of contract, the Act provides in s 45(6) for the way in which the otherwise overlapping provisions of s 45 and s 47 are to operate29. The construction of s 45(6) was considered by this Court in Visy Paper Pty Ltd v Australian Competition and Consumer Commission30. Issues of that kind do not arise here. Still other provisions of the Act31 prohibit the acquisition of shares in or assets of a corporation, if the acquisition would or would be likely to have a particular effect. Provisions found in Pt IVA prohibit unconscionable conduct; 26 cf s 45(2). 27 For example, s 45B(2). 29 So far as relevant, s 45(6) provides: "The making of a contract ... does not constitute a contravention of this section by reason that the contract ... contains a provision the giving effect to which would, or would but for the operation of subsection 47(10) ... constitute a contravention of section 47 and this section does not apply to or in relation to the giving effect to a provision of a contract ... by way of: engaging in conduct that contravenes, or would but for the operation of subsection 47(10) ... contravene, section 47". 30 (2003) 216 CLR 1. Crennan the provisions of Pt V prohibit various other forms of conduct including, of course, misleading or deceptive conduct. Some of the conduct otherwise proscribed by the Act may be authorised under Pt VII. Further, conduct, and in particular conduct constituting the practice of exclusive dealing, may be notified to the Australian Competition and Consumer Commission. If exclusive dealing conduct is notified, engaging in the conduct will not, in the circumstances identified in the Act, constitute a contravention. The Act does much more than proscribe (with the elaborations mentioned) certain forms of conduct. It contains detailed provisions, in Pt VI, dealing with the enforcement of the Act and providing remedies for past or proposed contraventions of the Act. In addition, particular provision is made for the extent to which certain contractual provisions are enforceable. Thus, s 45(1) provides: "If a provision of a contract made before the commencement of the Trade Practices Amendment Act 1977: is an exclusionary provision; or has the purpose, or has or is likely to have the effect, of substantially lessening competition; that provision is unenforceable in so far as it confers rights or benefits or imposes duties or obligations on a corporation." Section 4L takes its place in this statutory framework: a framework of legislation that makes elaborate provision not only for the creation of norms of conduct but also for the consequences that are to follow from the contravention of those norms32. It is not readily to be supposed that the consequences of contravention are to be determined by resort to principles hinging upon inferences about legislative intention or the imputed intentions of contracting parties. Section 4L was inserted in the Act following the Swanson Committee Report33 and both sides in this appeal sought to turn the legislative history of the 32 cf Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 520-521 [75]-[76]. 33 Australia, Trade Practices Act Review Committee, Report to The Minister for Business and Consumer Affairs, August 1976. Crennan provision to their advantage. It will be necessary to say something about that history and those arguments but it is necessary to begin by considering the text of the provision. Section 4L is engaged only "[i]f the making of a contract after the commencement of this section contravenes this Act by reason of the inclusion of a particular provision in the contract". It is, therefore, engaged (a) only if there is a contract (as distinct from an arrangement or understanding), (b) only if the making of that contract contravenes the Act, and (c) only if the making of the contract contravenes the Act by reason of the inclusion of a particular provision in the contract. It follows that s 4L cannot be engaged in respect of a number of kinds of contravention of the Act because it cannot be said that they turn on the making of a contract which contravened the Act by reason of the inclusion of a particular provision. As explained earlier in these reasons, the making of the loan contract in this case contravened the Act by reason of the inclusion of the provision in the loan contract requiring AFS USA to direct certain work to the corporations that the lender directed. Making the contract with that condition constituted engaging in the practice of exclusive dealing. It was the inclusion of the condition obliging AFS USA to direct its work in that way that brought the lender's supply of services within s 47(6). It is that condition with which s 4L deals in the second part of its provisions, namely: "subject to any order made under section 87 or 87A, nothing in this Act affects the validity or enforceability of the contract otherwise than in relation to that provision in so far as that provision is severable" (emphasis added). It is important to recognise the way in which this second part of s 4L is constructed. It sets out what may be identified as its central proposition – "nothing in this Act affects the validity or enforceability of the contract". That central proposition is qualified in two respects. First, it is "subject to any order made under section 87 or 87A"; secondly, different consequences are to follow in relation to the offending provision "in so far as that provision is severable". But it is to be noted that, subject to those qualifications, what we have called the "central proposition" is that the contract, the making of which contravened the Act, is valid and enforceable. That central proposition is the direct opposite of the ordinary rule that a contract whose making is illegal will not be enforced. As was said in Yango Pastoral34: 34 (1978) 139 CLR 410 at 430 per Jacobs J. Crennan "When a statute expressly prohibits the making of a particular contract, a contract made in breach of the prohibition will be illegal, void and unenforceable, unless the statute otherwise provides either expressly or by implication from its language." The second qualification to the central proposition hinges about the words "in so far as". The offending provision is not valid and is not enforceable "in so far as" that provision is severable. The words "in so far as" describe the extent35 of invalidity and unenforceability that is to follow from the contravention that engages the section. Much of the argument in this Court and in the courts below (informed as it was by what was said in News Ltd) treated the words "in so far as that provision is severable" as stating a condition for the engagement of s 4L. In particular, the assumption which lay behind the consideration, by the Full Court in the present matter, of cases concerning what were understood to be the common law rules governing the consequences of illegality was that if, according to those rules, the offending provision could not be severed, s 4L had no work to do. Thus, because the Full Court concluded that the offending provisions in this case could not be severed, it was held that the contract of guarantee was wholly unenforceable. It is important to recognise that this is a conclusion that stands sharply at odds with the recognition that the central provision of s 4L is that (subject to certain qualifications) nothing in the Act affects the validity or enforceability of the contract. The conclusion that the loan contract was wholly unenforceable was seen as following from the second of the two qualifications to the central provision of s 4L. But as noted earlier, that qualification is that different consequences follow in relation to the offending provision. That the construction which underpinned the Full Court's decision is not the proper construction of s 4L is revealed by substituting "if" or "if, and to the extent that," for the words "in so far as". That is the sense given to the concluding words of s 4L both in News Ltd and by the Full Court in this case. What that substitution reveals is that to treat the reference in s 4L to severance of the offending provision as a condition for the section's engagement leads to an unresolvable contradiction. On the one hand, the central provision says that "nothing in this Act affects the validity or enforceability of the contract"; on the 35 The Oxford English Dictionary, 2nd ed (1989), vol 7 at 763, "in" meaning 39; Burchfield (ed), Fowler's Modern English Usage, 3rd ed (rev) (1998) at 401. Crennan other, if a condition for engaging that central provision is that the offending provision is severable, the general rule is said to be that the contract is not valid and not enforceable. There is no such contradiction if "in so far as" is given its ordinary meaning as an expression of extent. As noted earlier, both sides sought to draw some advantage from reference to the legislative history of s 4L. Little can be gleaned, however, from the very short references made to severance in the Swanson Report36. The essence of the recommendation made by the Committee is sufficiently captured by what was said in par 4.32 of the Report: "The Committee agrees that there is, at least, a problem of uncertainty felt by the community at the present time, namely whether the common law rules of severance will be applied to contracts containing clauses made unlawful by section 45. We feel that it is too harsh a penalty for contracts to be made totally unenforceable in circumstances where the restraint of trade is merely ancillary to, and not the core of, the contract. Accordingly, we recommend that the Act should clearly provide an express power in the courts to apply the common law rules of severance in relation to such offensive clauses." The Committee did not offer a draft provision to give effect to this recommendation. It is clear, of course, that s 4L was enacted in response to the Committee's recognition and acceptance of the proposition that the Act should prescribe what consequences would follow from finding that making a contract contravened the Act. But beyond that, the Report provides no guidance about how the particular legislative solution that was in fact adopted should be construed. The Report suggested giving a power to the courts; s 4L is cast as a rule to which the courts must give effect. Nor is there any guidance to be had on that question from the Second Reading Speech for either the Trade Practices Amendment Bill 1977 (which proposed the insertion of a provision in like form to s 4L, but lapsed) or the subsequent Bill of the same name which inserted s 4L in the Act. Much more often than not the definition of the extent of severance will be revealed by the way in which the condition for engagement of s 4L operates. 36 Australia, Trade Practices Act Review Committee, Report to The Minister for Business and Consumer Affairs, August 1976 at 18-19, pars 4.31-4.33. Crennan That condition requires the identification of a provision whose inclusion in the contract brings about the result that making the contract contravened the Act. It is that provision which is unenforceable and void and it is that provision which is to be severed from the other provisions of the contract. Subject to any order made under s 87 or s 87A, nothing in the Act affects the validity or enforceability of those other provisions. Are some common law "rules" relating to severance nonetheless engaged by the reference made in s 4L to the extent of severance of the offending provision? Posed in this way the question assumes that there is a single set of readily identified and stable rules that would be engaged. But, as Kitto J said in Brooks37: "Questions of severability are often difficult, and tests that have been formulated as useful in particular classes of cases are not always satisfactory for cases of other kinds". In Carney v Herbert, Lord Brightman, speaking for the Privy Council and with reference to the statement by Kitto J, added38: "There are not set rules which will decide all cases." Not least is that so because questions of "severance" arise in different circumstances. In public law, what have been called common law rules of severance were devised to preserve valid portions of subordinate legislation after textual surgery to remove the invalid portions39. The term "severance" is also used to describe what is done when a contractual term is ignored as being too uncertain to admit of enforcement but other promises in the contract are 37 (1969) 121 CLR 432 at 438. 38 [1985] AC 301 at 309. 39 Harrington v Lowe (1996) 190 CLR 311 at 326-328; Director of Public Prosecutions v Hutchinson [1990] 2 AC 783 at 811; Commissioner of Police v Davis [1994] 1 AC 283 at 298-299. Crennan enforced40. Further, "severance" is a term employed in considering the enforceability of provisions of contracts other than provisions whose making or enforcement is illegal41 or contrary to one of the heads of public policy42. Different considerations arise in these various cases. The origin of what came to be known as the "blue pencil" test43 lay in the treatment by the common law of illegal conditions in bonds and other instruments under seal. This was a field where matters of form were paramount and the concern was with whether what remained was a valid instrument rather than with the implication of a promise to take effect if part of the bargain was illegal44. The "blue pencil" test was imported into the treatment of covenants in restraint of trade even though in that field, at least following the general adoption of the approach of courts of equity to such restraints45, the emphasis has been upon questions of substance and of public policy46. 40 Life Insurance Co of Australia Ltd v Phillips (1925) 36 CLR 60 at 72; Fitzgerald v Masters (1956) 95 CLR 420 at 427 per Dixon CJ and Fullagar J, 438 per McTiernan, Webb and Taylor JJ. 41 Thomas Brown and Sons Ltd v Fazal Deen (1962) 108 CLR 391 at 411. 42 A v Hayden (1984) 156 CLR 532 at 557-559 per Mason J. 43 Namely that the "severance can be effected when the part severed can be removed by running a blue pencil through it", a figurative expression of the principle applicable where two parts of the covenant are expressed in such a way as to amount to a clear severance by the parties themselves and so as to be substantially equivalent to two separate covenants: Attwood v Lamont [1920] 3 KB 571 at 578 per Lord Sterndale MR. 44 Marsh, "The Severance of Illegality in Contract", (1948) 64 Law Quarterly Review 230 at 233-234; 347 at 351-352. 45 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535 at 562-565 per Lord Macnaghten. 46 Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 134-136 [14]-[19]. Crennan The modern law respecting severance in relation to covenants in unreasonable restraint of trade may be seen as turning on three questions. The first question is whether the covenantee can enforce the restraining covenant to the extent to which it would have been valid had it been narrowly drafted. The answer is that the covenantee can do so if the parts which are too wide can be removed without altering the nature of the contract and without having to add to, or modify, the wording in any way other than by excision. The second question is whether the covenantor can enforce the promise in consideration of which the restraining covenant was given. The answer is that the covenantor can enforce the promise if the main consideration provided for it is not illegal. The third question is whether, if a contract is unenforceable because it contains a covenant in restraint of trade, transactions connected or associated with it are also unenforceable. The answer is that the unenforceability of the contract may affect the enforceability of other transactions with which it is closely connected. Thomas Brown and Sons Ltd v Fazal Deen47 concerned not a covenant in restraint of trade but a contract of bailment for certain gold bars and a parcel of gems. Performance of the contract, so far as concerned the gold bars, contravened a law of the Commonwealth and was illegal; but this Court held that an action lay to recover the value of the gems because the terms of the bailment relating to the gold were severable. Kitto, Windeyer and Owen JJ held48 that the test of severability was that stated by Jordan CJ in McFarlane49, a restraint of trade case. In McFarlane, Jordan CJ stated the applicable rule as being50: "If the elimination of the invalid promises changes the extent only but not the kind of the contract, the valid promises are severable." But different circumstances may arise in cases of illegality from those that fall for consideration when the enforcement of certain provisions is contrary to public policy. That is why it is necessary to distinguish between cases in which a promise made by a party to a contract is void or unenforceable, but not illegal, 47 (1962) 108 CLR 391. 48 (1962) 108 CLR 391 at 411. 49 (1938) 38 SR (NSW) 337. 50 (1938) 38 SR (NSW) 337 at 345. Crennan and cases in which the contract or the performance of a promise would be illegal51. And as Jordan CJ rightly observed52, there is particular difficulty in identifying the limits of a doctrine that permits enforcement of a legal promise associated with, but said to be severable from, an illegal promise53: "It is difficult to see how, in principle, a legal promise associated with an illegal promise can ever be enforceable unless it is supported solely by a separate consideration so exclusively attributable to it that there are in substance two independent contracts and not one composite contract." References which postulate particular contractual intentions of the parties if the restraint of trade doctrine strikes at part of their contract are inapposite when construing s 4L. The severance it requires does not hinge upon any assumption about the intention of the parties, but turns upon the effect to be given to statutory purposes. Further, in the circumstances in which s 4L is engaged (making the contract is a contravention of the Act) there is a more deep-seated problem. It is that the making of the contract is contrary to law54. As was noted55 by Sackville J in the present case, Trade Practices Commission v Milreis Pty Ltd56 demonstrates that "the ordinary rule is that if Parliament prohibits the making of a contract, the contract does not give rise to an enforceable right or obligation". What then would be the basis upon which more general rules, intended to give effect to what is inferred to be "the legislative intention regarding the extent and the effect of the prohibition which the statute contains"57, are to be regarded as relevant to, 51 McFarlane v Daniell (1938) 38 SR (NSW) 337 at 345 per Jordan CJ. 52 (1938) 38 SR (NSW) 337 at 345-346. 53 (1938) 38 SR (NSW) 337 at 346. 54 George v Greater Adelaide Land Development Co Ltd (1929) 43 CLR 91; cf Braham v Walker (1961) 104 CLR 366. 55 (2005) 142 FCR 482 at 502 [81]. 56 (1977) 14 ALR 623 at 637 per Brennan J. 57 Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410 at 423 per Mason J. Crennan and delineating the field of operation of, a statutory provision expressly dealing with that very subject? That is reason enough to reject a construction of s 4L that would require resort to common law rules of severance. Even putting these difficulties to one side, there are at least two further reasons for concluding that common law "rules" relating to severance are not engaged by the reference made in s 4L to the extent of severance of the offending provision. First, while s 4L identifies the relevant contravention of the Act as resulting from the inclusion of a particular condition in the contract whose making contravenes the Act, and singles that condition out for different legal consequences from those attaching to the contract otherwise, the cases in which the offending condition did not constitute consideration for the promise that it is sought to enforce, or was not to be understood as an important and inseparable element in the contract, would be rare indeed. There would, in that event, be very few cases in which common law "rules" about severance would permit the severance of the offending condition. Section 4L would thus have little effective work to do. The cases in which provisions of a contract, apart from the offending condition, could be enforced would be few and far between. The second, and a determinative, consideration which requires the rejection of a construction of the section requiring resort to such a body of rules is that, upon analysis, it is apparent that marking out the bounds of severance by reference to some set of common law "rules" as to severance would treat severability as the condition for the operation of s 4L. It would treat severability as the condition for the operation of s 4L because, if the offending condition is not severable, the consequence is said to be that the contract as a whole is unenforceable. For the reasons given earlier, that construction of the section should be rejected. What follows is that s 4L, on its proper construction, requires rather than permits the severance of offending conditions. The phrase "in so far as" marks the limit of the severance that must be undertaken. In many cases that would be achieved by a "blue pencil" approach to severance. But that may not always be the case. If it is not, the phrase marks the limit of invalidity and unenforceability of the offending condition. The working out of those limits in each case will depend upon the particular contractual provisions that are to be considered. In the present case, no such difficulty arises. So much of the provisions of the loan agreement as required repayment of the loan with interest are valid and enforceable. It follows that the answer which the respondents sought to make to the claim against them on the guarantee they had given was not made out. Crennan This outcome is wholly consistent with the purpose, text and structure of the Act. It is an outcome that recognises that the consequences of contravention are prescribed by the Act, not by resort to a general and all-embracing principle whose application in this case would favour one group of parties knowingly concerned in the contravention over another party in like contravention of the Act. AFS USA and the respondents were all knowingly concerned in the appellant's contravention of the Act. It was the first respondent who, on behalf of AFS USA, offered "certainty in relation to the work". Yet on the respondents' arguments, the debt which AFS USA owed would be irrecoverable. That result would not advance any purpose of the Act. Nor, for the reasons given earlier, is it a result that is consistent with either the Act's text or its structure. No separate issue was raised (whether by notice of contention or otherwise) about the respondents' cross-claim for a declaration under s 87 of the Act that the guarantee "is void and/or unenforceable". It is, therefore, not necessary to examine whether or what relief would be available under s 87 to a party who was knowingly concerned in the contravention which founds the claim, under that section, as a party likely to suffer damage by the conduct of the other in contravention of Pt IV. Restraint of trade In this Court, by notice of contention, the respondents took the point that the loan agreement was unenforceable as containing an unreasonable restraint of trade at common law. This had not been pleaded and was raised for the first time in this Court. The appellant contended that evidence could have been given at the trial which might possibly have prevented the point succeeding, and hence it was not open to the respondents to take the point in this Court. That contention is correct, and it is not necessary to discuss any of the other answers which the appellant advanced. Orders The appeal should be allowed with costs. The consequential orders sought by the appellant should be made. The orders of the Full Court of the Federal Court of Australia made on 15 February 2005 should be set aside and, in their place, there should be orders that the appeal to that Court is dismissed with costs. Kirby KIRBY J. The reasons of Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ ("the joint reasons") conclude that this appeal58 should be allowed. I disagree. My disagreement reflects considerations that I have identified in earlier decisions of this Court involving the meaning and operation of the Trade Practices Act 1974 (Cth) ("the TPA")59. Having correctly insisted that the resolution of this appeal is to be found, not in common law doctrines of severability, as such, but in the applicable statutory provisions, the majority has then faltered. It has failed to apply one of the most important rules for the ascertainment of statutory meaning. I refer to the rule that obliges meaning to be assigned by reference to the purpose of the Parliament in enacting the provision. It is not enough to subject the words to "metaphysical analysis"60. When giving meaning to the TPA, decision-makers with the responsibility of interpretation should do so by reference to the Act's purposes, ascertained with the assistance of available tools. These might include the background to, and history of, its enactment; the entire context and structure of the legislation; the course of relevant amendments to the text; and the content of sources that throw light on the issues, such as law reform and like reports, admissible parliamentary speeches and applicable supplementary materials. This appeal is ultimately concerned with giving effect to the command of the Parliament, expressed in the TPA. When that command is clarified, it sustains the unanimous conclusion of the Full Court of the Federal Court of Australia, now before us. The section of the TPA providing for severability of a provision must be given effect, but in a way that conforms to the large, national objectives of the Act. When this extra element is added to the reasoning of the other members of the Court, and the severability provisions are viewed in that 58 From the Full Court of the Federal Court of Australia: Rieson v SST Consulting Services Pty Ltd (2005) 142 FCR 482. As explained in the joint reasons, the proceedings were first heard in the Supreme Court of New South Wales, both at first instance in SST Consulting Services Pty Ltd v Riesen [2001] NSWSC 804 and by the Court of Appeal in Riesen v SST Consulting Services Pty Ltd [2002] NSWCA 163. The proceedings were transferred to the Federal Court of Australia by order of the Court of Appeal, that Court having found the respondents' arguments to be deserving of a grant of leave to appeal. 59 See, for example, Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 at 35-39 [90]-[98]. 60 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (1999) 90 FCR 128 at 137 [34]. Kirby context, the result is the opposite to that reached without due regard to it. It requires an order that the appeal be dismissed. That is the order which I favour. The context: the large purposes of the TPA Reading provisions in context: The section whose meaning and application is critical to the outcome of this appeal, s 4L of the TPA, is not, nor was it intended to be, entirely free-standing. It is a provision the meaning of which is to be ascertained in the context of the entire Act, so far as other provisions are relevant. In short, the requirements of the TPA, attracted by "a particular provision in [a] contract"61 that causes the making of a contract to contravene the TPA and to be illegal or unenforceable, may be viewed as one of a number of general sanctions included in the TPA as a means of upholding the Act's purposes. To such general sanctions, an exception has been provided by s 4L "in so far as" the offending "provision is severable" from the impugned "contract". The facility of severance, "in so far as" severability applies, only takes its meaning from the context. The context involves a particular provision in a contract, the inclusion of which contravenes the TPA. If this insight is lost, the correct operation of the primary provision, and of the exception, is at risk of being misunderstood. That is a serious risk because it threatens the proper operation of the TPA. I have made the same or similar points over many years in other cases involving the TPA62. It should not require repetition. In many other statutory contexts, this Court has accepted the purposive and contextual interpretation of statutory language as essential to the proper fulfilment of the task of judicial interpretation63. 61 TPA, s 4L. 62 See, for example, Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 481-482 [323]; Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 at 79 [65]; News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563 at 602-603 [120]; Visy Paper Pty Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 1 at 20 [56]. 63 See, for example, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382 [69]-[71]. Kirby The purpose of the TPA: In the context of the TPA, however, it is especially important to adopt this approach. In Melway Publishing Pty Ltd v Robert Hicks Pty Ltd64 I explained why: "The object of the Act is 'to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection'65. The Act incorporates a number of important departures from the previous law. It should be approached as a 'fundamental piece of remedial and protectionist legislation [that is to] be construed broadly'66. This approach to the meaning and purpose of the Act is not only to be taken to Pt V, which concerns consumer protection, but also to Pt IV, designed to outlaw 'Restrictive trade practices'67. This approach is warranted, indeed necessary, because of the important policy objectives that the legislation evidences, the large economic purposes it sets out to attain and the atypical mode of drafting that was adopted to express the Parliament's objectives68." It follows that, in ascertaining the meaning and application of provisions of the TPA (both primary provisions as to a breach and exceptional provisions for severance of contractual terms that manifest such a breach), it is a serious mistake to ignore the design and structure of the Act. To interpret its provisions as if one were construing a charterparty or deed of trust, is to fall into error. In this case, the Court's obligation is to uphold the significant national purposes of the TPA, and the public interests that those purposes defend, save only "in so far as" exceptions (such as statutory severance) apply; and not to provide "loopholes for escape"69 that frustrate the achievement of the Act's objectives. Sanctioning exclusive dealing: Section 4L of the TPA is not a general code for the common law of severance. Still less is it a statutory consolidation of 64 (2001) 205 CLR 1 at 35-36 [90]. 65 TPA, s 2. 66 Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 41. 67 The heading of Pt IV of the Act. See Accounting Systems 2000 (Developments) Pty Ltd v CCH Australia Ltd (1993) 42 FCR 470 at 503 per Lockhart and Gummow JJ, approved and applied in Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 41; Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43 at 60. 68 Australia, Senate, Parliamentary Debates (Hansard), 30 July 1974 at 542 (Senator 69 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 at 37 [91]. Kirby the rules of severance, applicable in a multitude of contexts. It is a particular provision, applicable only to particular contracts, having legal consequences in the context (relevantly) of restrictive trade practices. One form of restrictive practice, prohibited by s 47 of the TPA, is the practice of exclusive dealing. A fundamental purpose of the TPA is to discourage and impose sanctions on that practice. The facts A conjoined arrangement: The background facts are summarised in the joint reasons70. However, at the outset it is essential to understand the full context of the dispute. SST Consulting Services Pty Limited (the appellant) sued Messrs Stephen Rieson and Scott Bell (the respondents) as guarantors of a loan made by the appellant to AFS Freight Management (USA) Inc ("AFS USA"). The respondents' guarantee was not disjoined from the exclusive arrangement under the TPA in issue in this appeal. The appellant is not a banker, a finance house or some other disinterested financial intermediary, now concerned with the recoupment of a loan made to AFS USA. The uncontested facts show that all of the parties were, in their different ways, involved, directly or indirectly, individually or by the acts of their directors, in trading and carrying on business involved in the packing and unpacking of shipping containers at ports, in Australia and elsewhere. The directors of the appellant (Messrs Sweeney and Truman), through corporations trading as the Port Botany Group, formerly acted as agents for a United States freight forwarder whose activities AFS USA was created to secure. For this purpose, in 1999, AFS USA needed to raise capital. The parties then formulated the "deal" by which the appellant would lend approximately $1 million to AFS USA. In return for this loan, Mr Rieson, for the respondents, not only guaranteed the discharge by AFS USA of the loan. He also guaranteed "certainty in relation to the work". This was affirmed by Mr Rieson in a conversation with Mr Peter Sweeney. The primary judge in the Federal Court, Emmett J, found that the conversation included the promise: "If you provide the funds you can have certainty in relation to the work"71. The "work" envisaged was the flow of work to the company that had succeeded the Port Botany Group. Messrs Sweeney and Truman were interested in that company. Some of the judges below made heavy weather of the interests of the respective parties in the "deal" that led to the contract challenged under the TPA. However, as I approach the case, that interest was really quite simple. The 70 Joint reasons at [2]-[13]. 71 SST Consulting Services Pty Ltd v Rieson (2004) ATPR ¶42-016 at 48,949 [11]. Kirby lender (the appellant), the borrower (AFS USA) and the guarantors (the respondents) all shared a common interest in the arrangement to which they severally agreed. The appellant lent a fund of capital at a "somewhat usurious"72 rate of interest to AFS USA, the borrower. The borrower's directors Messrs Rieson and Bell (who had an interest in the commercial success of the borrower) became guarantors of the repayment of the loan by the borrower. They offered (and the appellant accepted) not only the promise of the agreed interest but also the tied arrangements constituting an exclusive dealing prohibited by s 47 of the TPA. The clear consequence of the exclusive dealing was that members of the Australian public were deprived of the operation of the market forces of competition that would tend to drive down the costs of the packing and unpacking of containers, and improve the quality of the services that AFS USA would perform. The appellant secured high interest, a closed market with the borrower and the prospect of both repayment and a steady flow of work. The respondents secured the loan and the prospect that AFS USA would prosper. Had things not gone sour before the loan was repaid, the parties would have furthered their respective economic interests. But the Australian public, dealing with AFS USA, would have borne the disadvantages that flowed from the exclusive dealing. A loan and mutual interests: The agreement that led to the impugned "contract" was effected as contemplated. Mr Sweeney made notes during his conversation with Mr Rieson. Those notes were subsequently reflected in the formal documents prepared by the solicitors. Thus, the notes included: "(1) All pack, unpack, LCL transport in SM & B and Sydney airfreight to be directed to Port Botany/MPG/Pitkin facilities during the life of loan. If any work directed away from the above facilities, the loan becomes due and payable." The "facilities" nominated, and the venues for transport named73, were those in which companies associated with the Sweeney and Truman interests were involved. To demonstrate even more clearly the attractiveness of the tied dealing, in a further conversation involving Messrs Sweeney, Truman and Rieson, Mr Rieson explicitly affirmed the mutual advantages proposed. They arose because of the then recent alteration in the position of the United States freight forwarder which AFS USA was hoping to replace. Because of this 72 Rieson (2005) 142 FCR 482 at 495 [56]; cf at 504-505 [94]. 73 SST Consulting (2004) ATPR ¶42-016 at 48,949 [12]. Kirby prospect, Mr Rieson pointed out that "your Port Botany container depot will suffer a short term loss of FAK containers ex the States"74. All in all, the replacement of the United States freight forwarder during the shortfall with the new Australian company, tied to interests with which the appellant was associated, would be a very attractive one all round. The only deficiency was that the contemplated contract of loan, entered into on such conditions, would breach s 47 of the TPA. The purpose of the loan was to maintain and assure the exclusive dealing, because, in the event that the borrower ceased to acquire packing and unpacking services from the third party, default would occur, entitling the appellant immediately to recover the loan principal. Nonetheless, the parties pressed on. The loan agreement and the deed of guarantee were finalised and executed. Apparently oblivious to the requirements of the TPA, the parties took steps to formalise the "deal". "Special Terms" were prepared by solicitors and sent to the appellant. These referred to "default events" that would apply during the life of the loan "[i]f any work is directed away from [the specified] facilities"75. The parallel deed of guarantee was executed in December 1999. It contained the identical provision obliging the borrower (AFS USA) to conform to the exchange of letters representing the loan agreement. Thus, in terms, the borrower agreed that, if it defaulted on the payments of interest and principal, or the "positive acts to be done", the respondents, as guarantors, would "pay on demand to the lender the principal amounts advanced with interest … up to the time of payment under the Guarantee"76. The "positive acts" and "default events" referred to in the exchange of letters were clear. Relevantly, the "default events" included the failure to direct all pack and unpack in Sydney, Melbourne and Brisbane and Sydney air freight to the specified venues, as agreed. The sixth clause contained the express promise of the borrower, AFS USA, to "direct all work", which was to include transport, in the same language as the expression used for the relevant "default event"77. The breach of s 47 of the TPA could not have been more brazen. To strengthen the assurance still further, an additional exchange of letters was procured. It contemplated a further guarantee of the loan obligations of AFS USA by its holding company, Australian Freight Services Limited ("AFS"). This letter specifically contemplated that AFS would itself also enter into a deed 74 SST Consulting (2004) ATPR ¶42-016 at 48,949 [13]. 75 SST Consulting (2004) ATPR ¶42-016 at 48,950 [15]. 76 SST Consulting (2004) ATPR ¶42-016 at 48,951 [19]. 77 SST Consulting (2004) ATPR ¶42-016 at 48,952 [22]. Kirby "whereby they will cause all their pack and unpack LCL transport in Sydney, Melbourne and Brisbane and Sydney air freight to be directed to [the specified facilities in which the appellant was interested]"78. Before this could occur, default by AFS USA in the payment of interest took place. That default occasioned demand on the respondents upon their guarantee. It also gave rise to these proceedings. Unenforceability of the loan: I have included this detail of the oral and written exchanges that were formalised in the impugned loan "contract" for a reason. It adds to the bare bones contained in the joint reasons. It shows how the several parties (the appellant, the respondents and AFS USA) were, and had been for some time, associated. Those parties were all interested in the exclusive dealing upon which they mutually agreed. Imprudently as it transpired – but candidly, reflecting their agreements – each had a reason to want the terms for the exclusive dealing to be contained both in the loan agreement and in the deed of guarantee. The terms did not slip into these documents by accident or oversight. As I have shown, from the beginning, they were essential conditions of each "contract". They were a direct affront to s 47. The language containing these terms survived through several drafts. It remained essentially the same from the moment of its first formulation in the telephone conversation between Mr Rieson and Mr Peter Sweeney, noted down by the latter and acknowledged by the primary judge79. There was no relevant disparity between the reproduction in the letters which were treated as constituting the loan agreement, and the terms of the deed of guarantee. By law, to enforce the deed of guarantee, the appellant was obliged to establish default by the borrower on a legally valid and enforceable loan. The ultimate question was therefore whether, given the language and purpose of s 47 of the TPA, read with the provision as to severability in s 4L, the appellant was entitled to take this course. The legislation Sections 47 and 4L of the TPA: The provisions of s 47 of the TPA, prohibiting the practice of exclusive dealing80, and the way in which it applies to 78 SST Consulting (2004) ATPR ¶42-016 at 48,952 [23]. 79 SST Consulting (2004) ATPR ¶42-016 at 48,949 [11]. 80 TPA, s 47(1). Kirby corporations that supply or offer to supply "services"81, are set out in the joint Also contained there are the terms of s 4L of the TPA, concerning "[s]everability"83. To understand the operation of these two provisions and how they relate to one another, it is necessary to take the following steps: Read the section of the TPA (s 47) that renders the inclusion of a specific provision in a contract a contravention of the TPA; Consider the section of the TPA providing for severability (s 4L) in so far as it applies to the impugned provision of the contract; and Consider both sections of the TPA in the context of the Act as a whole, with its large public purposes84. Section 87 of the TPA: Two other sections of the TPA are expressly referred to in s 4L. They are ss 87 and 87A. Nothing in s 87A of the TPA would appear to be relevant. Section 87 is a provision that empowers the court, when dealing with a contravention of the TPA, to85: "… make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (2) of this section) if the Court considers that the order or orders concerned will compensate [a person who has suffered or is likely to suffer loss or damage] in whole or in part for the loss or damage …". The orders contemplated by s 87(1) of the TPA are stated in extremely broad terms. They include the power to make orders: Declaring the whole or any part of a relevant contract "to be void and, if the Court thinks fit, to have been void ab initio or at all times on or after such date … as is specified in the order"86; 81 TPA, s 47(6). See also the definition of "services" in TPA, s 4(1). 82 Joint reasons at [13]. 83 Joint reasons at [1]. 84 See these reasons at [61]-[66]. 85 TPA, s 87(1). 86 TPA, s 87(2)(a). Kirby "[V]arying such a contract … in such manner as is specified in the order and, if the Court thinks fit, declaring the contract … to have had effect as so varied on and after such date … as is so specified"87; "[R]efusing to enforce any or all of the provision of such a contract"88; "[D]irecting the person who engaged in the [prohibited] conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage"89; and "[D]irecting the person who engaged in the [prohibited] conduct or a person who was involved in the contravention … to supply specified services to the person who suffered, or is likely to suffer, the loss or damage"90. The flexibility of the orders that might be made under s 87 indicates that the Parliament contemplated that, in some cases where a contract breaches the TPA, invalidation of the contract will not be the only remedy available under the Act. In a proper case, the response of a court might include an order under s 87. Alternatively, it might include the severance of offending provisions under s 4L of the Act. The latter remedy is available "in so far as" the relevant provision ought to be severed. But it is not the only available remedy. The battery of orders afforded by s 87 permits, in some cases, a much more nuanced adjustment of the rights of the parties than the "blue pencil"91 solution that severance allows. The existence of additional remedies, and the provision for multiple orders which the court might make, reduces the need to deploy the technique of severance under s 4L when an order under s 87 has been made. It also withdraws the need to impose on s 4L an artificial or "metaphysical"92 construction that 87 TPA, s 87(2)(b). 88 TPA, s 87(2)(ba). 89 TPA, s 87(2)(c). 90 TPA, s 87(2)(f). 91 cf joint reasons at [44]. 92 Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (1999) 90 FCR 128 at 137 [34]. Kirby would undermine the achievement of the fundamental purposes of the Act, including those expressed in s 47, which are protective of competitive and fair trading practices and defensive of large social and economic objectives for the nation. There is much common ground between the approach that I favour in this appeal and that expressed in the joint reasons. It is as well to set this out before turning to the points of difference. The common ground The loan agreement breached s 47: I agree in the analysis in the joint reasons, indicating that the appellant's grant to, or conferral upon, AFS USA of the right to borrow money from the appellant was a supply of "services" to AFS USA on "the condition that [AFS USA] will acquire … services of a particular kind or description"93, namely the specified "pack and unpack LCL" work in designated ports, "includ[ing] transport"94. For the reasons there given, I agree that the appellant, by entering into the loan agreement and providing the loan, thereby engaged in the practice of "exclusive dealing" within s 47(6) of the TPA, a course prohibited by s 47(1)95. The initial instalments are included: I also agree with the joint reasons96 that the initial two instalments advanced by the appellant to AFS USA, before the right to the loan was formally created, should be treated as having been paid in anticipation of the loan agreement and pursuant to the Special Terms to which I have referred97. Those instalments do not cast doubt on the existence, and provisions, of the loan agreement ultimately entered into. In any case, as I have shown, the Special Terms included, in the provision for "default events", express reference to the tied arrangements. The loan and the guarantee: The case has been approached on the footing that no additional questions arise in respect of severance of a provision of the loan agreement, separate from the enforceability of the deed of guarantee. I agree that such questions can be disregarded by this Court98. 93 TPA, s 47(6). 94 Joint reasons at [10]. 95 Joint reasons at [13]. 96 Joint reasons at [13], fn 2. 97 See these reasons above at [73]. 98 Joint reasons at [19]. Kirby The primacy of statutory severability: I also agree that the obligation of the courts below was to address any question of severability presented by the circumstances, by giving effect to the requirements of s 4L of the TPA. At most, the earlier doctrines of severability at common law were available by analogy to assist in the application of s 4L. To the extent that the judges of the Supreme Court of New South Wales and of the Federal Court, who considered this case, thought it appropriate to apply the common law rules as such, they were mistaken. Their duty was to apply the statutory provisions and to give effect to the requirements of the TPA, including any requirement imported by s 4L, providing a statutory remedy of severance. In the past, severability has arisen in many different contexts. Some of those contexts99 have involved the operation of statutory provisions. Such cases might afford useful analogies for s 4L. But as this Court has had occasion to say repeatedly in other contexts, where statutory provisions are engaged, attention must primarily be addressed to those provisions and to their terms, and not to earlier judicial elaborations of the common law or of other statutory provisions100. Applying the language of s 4L: The language of s 4L makes it clear that the provision is only engaged in respect of a "contract", the "making" of which contravenes the Act, by reason of the inclusion of a particular "provision". This confines severability to cases of the specified kind101. The loan agreement was such a case. Ultimately, this was undisputed. The importance of context and objectives: To the extent that the reasoning of courts in the past, concerning severance of contractual provisions that would otherwise render a contract invalid or unenforceable at law, may be useful by analogy to the task presented by s 4L of the TPA, it must be recognised that there are no universal "set rules which will decide all cases"102. Whether severability is applicable depends on the considerations expressed or implied in the statutory 99 See, for example, Thomas Brown and Sons Ltd v Fazal Deen (1962) 108 CLR 391; Carney v Herbert [1985] AC 301 at 313 (PC). 100 See, for example, Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 89 [46]; Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520 at 545 [63]; The Commonwealth v Yarmirr (2001) 208 CLR 1 at 111-112 [249]; Visy Paper Pty Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 1 at 10 [24]. 101 Joint reasons at [32]. 102 Carney v Herbert [1985] AC 301 at 309 (PC). See joint reasons at [42]. Kirby provision; the terms of the contract; the extent and seriousness of the breach of the TPA; the policy evident in the legislation; and the judgment of the decision- maker. The lastmentioned consideration necessitates recognition of the part that values play in such decisions, and the importance of harnessing such considerations to the context in which they are invoked. Here, that context is the TPA as a whole, with its significant social and economic objectives. The language of s 4L should not be construed in isolation from that context. Common law restraint of trade: I am content, as the joint reasons hold103, to treat as inadmissible the respondents' belated attempt to raise an alternative complaint that the appellant had engaged in unreasonable restraint of trade at common law, providing a different basis for unenforceability of the loan agreement. Whilst I have some doubts that any procedural unfairness to the appellant would flow from this Court's deciding that issue, raised by a notice of contention, I can put it aside. The proper application of the TPA's exclusive dealing provisions will be sufficient to bring me to the orders that I favour. The issues The foregoing analysis presents a high measure of common ground. When this common ground is taken into account, only three issues remain for decision in this appeal: The approach to s 4L: How is the decision-maker to approach the task of applying s 4L of the TPA, given the context in which that provision is found in the Act? The meaning of s 4L: Noting the existence of different approaches to the interpretation of s 4L, and having regard to its language and the somewhat complex structure in the closing phrases, what is the meaning to be given to that section? The application of s 4L: Having regard to the resolution of the two preceding issues, how is s 4L to be applied in the present case? Does the correct application indicate error in the orders of the Full Court or of the primary judge? The proper approach to s 4L The contravention of the TPA: The appellant accepted104 that "in entering into the agreement [containing] the pack and unpack provision [the parties made 103 Joint reasons at [55]. 104 See appellant's written submissions at [38]. Kirby a contract that] directly contravened section 47(1)" of the TPA. It was a contract committing the parties to exclusive dealings which were antithetical to market competition and fair trade practices. The provision of the loan by the appellant was conditional on the promise that AFS USA gave (confirmed by the respondents) that the appellant would obtain "certainty in relation to the work". The combination was not accidental, ephemeral, mistaken or incidental to some other contract. The offending promise lay at the very heart of the integrated loan agreement and the associated deed of guarantee. The prima facie rule: In these circumstances, the primary rule was that the inclusion of certain provisions in the contract, specifically the loan agreement, contravened s 47 of the TPA. The contract was therefore rendered illegal and unenforceable in accordance with that section. The proper approach to the application of the TPA in these circumstances is therefore that which I have described above. It requires one to start with the invalidating provisions of general application. Only then does one turn to the special, saving provision (here, s 4L (severability) or s 87 (remedies to an innocent party)). Clarifying the existence and scope of the relevant invalidity in the making of the contract is the necessary precondition to the consideration of any relief available in the circumstances. In Trade Practices Commission v Milreis Pty Ltd105 Brennan J explained this approach in the following way: "The general rule is that if the Legislature prohibits the making of a contract, the making of the contract does not give rise to an enforceable right or obligation … The Legislature may, however, provide that the general rule should not apply, and that contractual relationships should be enforced or accorded effect although the contract be made in breach of the prohibition (O'Neill v O'Connell106; Batu Pahat Bank Ltd v Official Assignee107; Bassin v Standen108). There must be 'a special context in the statute demonstrating an intention to exclude the general rule' (Menaka v 105 (1977) 14 ALR 623 at 637. 106 (1946) 72 CLR 101 at 132. 108 (1945) 46 SR (NSW) 16 at 18. 109 [1977] 1 WLR 267 at 274. Kirby In the lastmentioned case, Menaka110, the Privy Council cited Parke B as stating the general rule in his reasons in Cope v Rowlands111: "It is perfectly settled, that where the contract which the plaintiff seeks to enforce … is expressly or by implication forbidden by the common or statute law, no court will lend its assistance to give it effect. It is equally clear that a contract is void if prohibited by a statute, though the statute inflicts a penalty only, because such a penalty implies a prohibition." In Menaka, the Privy Council went on to elaborate the correct approach by reference to earlier decisions in which, as here, a statute rendered the contract invalid or unenforceable. Their Lordships cited Cornelius v Phillips112, a case involving the application of the Money-lenders Act 1900 (UK), as stating that the application of the general rule (voidness and unenforceability) might be modified "if there had been a special context in the statute demonstrating an intention to exclude the general rule [and there is no] doubt that such a context could be provided either by express words or by necessary implication"113. In the past, courts have struggled with what appear to be the disproportionate and unjust consequences of denying any effect to a contract merely because it contains provisions that are prohibited by statute. It was to afford relief against this outcome that the common law doctrine of severance arose. In the present case, there is no need, as such, to resort to the common law doctrine because the Parliament has provided specifically for severability in the context of the TPA by s 4L. However, it should not be assumed that the earlier judicial rationalisations are completely irrelevant, so long as they are compatible with the language and purposes of s 4L; and so far as considering them does not detract attention from the primary duty to apply the statute. It is essential for a court, considering severance in this context, to apply s 4L of the TPA. But the fact that that section uses the word "severable" suggests that the statutory remedy is not entirely divorced from the common law that preceded it. For more than a century prior to the enactment of the TPA, judges explored the concept of severability. They developed a range of considerations that could be taken into account when 110 [1977] 1 WLR 267 at 274. 111 (1836) 2 M & W 149 at 157 [150 ER 707 at 710]. 113 Menaka v Lum Kum Chum [1977] 1 WLR 267 at 274, referring to Cornelius v Phillips [1918] AC 199 at 211. Kirby applying the concept. These considerations are not irrelevant to the application of what is now a statutory remedy. It follows that where "trading practices provisions"114 prohibit certain kinds of conduct, "the effect upon contractual relationships is consequential upon the prohibition". The approach of Brennan J in Milreis was approved by this Court in Carlton & United Breweries Ltd v Castlemaine Tooheys Ltd115. The approach is applicable to the present appeal. Here, a provision for exclusive dealing was included in the subject contract. As a result, the making of the contract contravened the TPA. In the circumstances, the contract was, at the least, rendered unenforceable. This was so because s 47 is not simply addressed to inter partes interests. It is designed for the protection of the public116. The public interest in invalidating the practice of exclusive dealing (and deterring others from engaging in such practices) demanded a sanction. Sanctions and hard cases: If this result is thought to produce "harsh" consequences in the particular case117, the TPA affords several justifications. First, the social and economic purposes of provisions such as s 47 are concerned, on a macroeconomic level, with the protection of the public generally. Because such agreements are usually entered into secretly, detection of exclusive dealing arrangements is very difficult. When they are discovered, the available sanctions must reflect this fact. Section 87 of the TPA provides remedies to an innocent party who suffers loss as a result of a contract being found void or unenforceable, for example, where it contains provisions for exclusive dealing. Further, in cases to which it applies, a party might seek severance of the offending provisions under s 4L. But the starting point for analysis is an appreciation of the importance of the policy expressed in s 47. Where that section applies, it has serious consequences for the validity and enforceability of the affected contract. So much is the clearly expressed command of the Parliament. It applies to the loan agreement in the present case. 114 Trade Practices Commission v Milreis (1977) 14 ALR 623 at 637 per Brennan J. 115 (1986) 161 CLR 543 at 554-555. 116 cf Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 117 Rieson (2005) 142 FCR 482 at 505 [96]. Kirby The preferable meaning of s 4L The competing meanings: I accept that there is a degree of ambiguity in the meaning of s 4L of the TPA. It arises from the fact that, in the closing phrases, there are three ideas at play. The question for decision is how those ideas are intended to relate to one another. The three relevant provisions are identified by dividing the closing (operative) provisions of s 4L as follows: "nothing in this Act affects the validity or enforceability of the contract"; "otherwise than in relation to that provision [the provision that contravenes the TPA]"; "in so far as that provision is severable". The phrase "that provision" is a reference back to the statement, earlier in s 4L, identifying "the inclusion of a particular provision in the contract" which renders the making of the contract a contravention of the TPA. In the present case "that provision" is the provision by which the parties to the loan agreement agreed to an exclusive dealing, and to the inclusion of that provision as a term of the contract. It was the inclusion of the provision that resulted in the appellant's breach of the TPA. The joint reasons: The majority in this Court, rejecting past authority in the Full Court of the Federal Court118, reads s 4L as a provision that "requires rather than permits the severance of offending conditions"119. That interpretation could only be adopted by overlooking the context in which s 4L appears in the statute. It is a context designed to provide exceptional relief from the provisions of the TPA dealing with invalidity and unenforceability. The approach of the majority also involves disregarding the overall purpose of the statute (relevantly, to redress anti-competitive and unfair trading practices). Whilst apparently approving what was said by Brennan J in Milreis120, the majority fails to apply the approach established by that case for the application of s 4L. Contrary textual arguments: It would be remarkable if, in the language of s 4L, the exceptional cases of severability were given such predominance as to undermine the important work of the exclusive dealing provisions in protecting 118 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 582-583. See Rieson (2005) 142 FCR 482 at 484 [1]-[3]. 119 Joint reasons at [52]. 120 Joint reasons at [49]. Kirby competition and fair trade practices. Self-defeating provisions may arise in legislation. But one would expect such a deep flaw to have been discovered a long time before this case; and the language of the TPA, said to justify that conclusion, to have been much clearer. That severance was intended as an exceptional solution is evident from the language of s 4L, which provides for severability, but only "subject to any order made under section 87 or 87A"121. The explicit mention of those provisions makes it clear that s 4L operates on a micro level, by reference to the particular provisions of the contract. This particularity is reinforced by the reference in the preconditions for the attachment of s 4L to the "inclusion of a particular provision in the contract"122. The particularity of s 4L is not consistent with the construction favoured in the joint reasons, which requires (rather than exceptionally permitting) the severance of offending conditions. By the majority's construction, the more an agreement is tainted by illegality (due to non-compliance with the TPA) the more likely it is that the agreement will be rescued by s 4L. This is a counterintuitive result which the Parliament could not have intended. Inconsistent legislative history: To confirm that this is so, one has only to look at the history that lay behind the enactment of s 4L. The provision arose out of recommendations of the Review Committee appointed by the Minister for Business and Consumer Affairs ("the Swanson Committee"), which reported in August 1976123. That Committee was established to consider problems that had arisen in the early operation of the TPA. It produced a report containing recommendations for the Act's amendment. Although the report did not include a draft of proposed legislative amendments, it expressed clearly the objectives that the Committee set out to attain. On the subject of severance, the Swanson Committee noted a number of submissions that had requested amendment of the Act to deal with "the problem known as 'severance'". It described that problem as relating to "the enforceability of a contract which contains, as only a part of the contract, an unlawful term or condition, such as a term or condition that is prohibited by section … 47 … of 121 Emphasis added. 122 Emphasis added. 123 Commonwealth of Australia, Trade Practices Act Review Committee, Report to the Minister for Business and Consumer Affairs, August 1976 ("the Swanson Committee report"). Kirby the Act"124. It described the issue for decision as being "whether, assuming that the part of the contract that is in restraint of trade can be isolated from the rest of the contract, the rest of the contract is still legally enforceable". It described the common law rule (which would apply in default of express legislative provisions) as permitting such severance "provided that it does not alter entirely the scope and intention of the contract". It addressed the question of whether the TPA permitted the operation of the common law doctrine of severance. It acknowledged the uncertainty "felt by the community"125 as to whether this was It was against this background that the Swanson Committee concluded that it was126: "too harsh a penalty for contracts to be made totally unenforceable in circumstances where the restraint of trade is merely ancillary to, and not the core of, the contract. Accordingly, we recommend that the Act should clearly provide an express power in the courts to apply the common law rules of severance in relation to such offensive clauses." When the stated purpose of the Swanson Committee is taken into account, it contradicts the construction now adopted by the joint reasons in this Court. It makes it clear that s 4L of the TPA was intended as an exceptional, ameliorative provision designed to save individual contracts in special cases from total unenforceability. In fact, it was intended to operate much in the way that the common law rules of severance had done but, of course, according to the statutory formula enacted by the Parliament. This Court should not adopt an unnatural interpretation of that formula that would significantly alter the character of s 4L and the remedial work that the 124 The Swanson Committee report at 18 [4.31]. The Second Reading Speech and Explanatory Memorandum make it clear that the Bill that introduced s 4L into the TPA was designed "to implement such of the recommendations of [the Swanson] Committee as can be adopted immediately": Explanatory Memorandum at [1]. The Explanatory Memorandum at [8] indicates that what became s 4L of the TPA was intended to continue in operation the common law principles relating to the severance of restrictive provisions from contracts, subject only to their being displaced by the particular remedies in the TPA (hence the cross-reference to ss 87 and now also to 87A); cf Rieson (2005) 142 FCR 482 at 486-487 [16]. 125 The Swanson Committee report at 19 [4.32]. 126 The Swanson Committee report at 19 [4.32] (emphasis added). The Swanson Committee report at 19 [4.33] also concluded that the statutory amendment should apply retrospectively to contracts entered into on or after 1 February 1975. Kirby section was enacted to perform. That work was to save particular contracts from the consequences of invalidity and unenforceability occasioned by a "particular provision". It was to do so only "in so far as" that provision was "merely ancillary to, and not the core of, the contract". It follows that there is no occasion to press s 4L into a much larger, proactive and obligatory function beyond that which the words of the section would ordinarily bear. Especially is this so where the purposes of the TPA, the internal textual features of s 4L, the revealed object of enacting s 4L, and the harmonious operation of s 4L in the context of the entire Act, suggest the contrary. Conclusion on approach and meaning: I accept the conclusion of the joint reasons that the proper approach to deciding issues of severability is to apply s 4L and not the common law rules that preceded the enactment of that section. Nonetheless, some of the old common law principles may still be helpful to an understanding of the work that s 4L was adopted to perform127. Once this is acknowledged, and the provisions of s 4L are read in the context of the TPA as a whole, it becomes clear that the proper way to read s 4L is in the manner urged by the respondents. This means that the operative provision of s 4L should be read, effectively, by placing certain words in parentheses: Thus: "Nothing in this Act affects the validity or enforceability of the contract (otherwise than in relation to that provision) in so far as that provision is severable." This approach maintains the intended focus on the severability of the offending provision; and it requires severability to be determined in the context of the TPA, an Act concerned with large social and economic objectives. The application of s 4L to this case Reasons for non-severance: When the foregoing approach is adopted, it becomes apparent that the Full Court was correct to conclude that the "particular provision" in the impugned contract, namely, the exclusive dealing provisions in the loan agreement, should not be severed from that agreement pursuant to s 4L of the TPA. The reasons for this conclusion include: 127 Changing social and legal conditions may make it necessary to reconsider some of the "tests" earlier propounded by judges for common law severability. See Rieson (2005) 142 FCR 482 at 499 [73], noting Marsh, "The Severance of Illegality in Contract", (1948) 64 Law Quarterly Review 230 at 233. Kirby The tying arrangements gave rise to an unlawful exclusive dealing that was manifestly contrary to s 47 of the TPA. So much is not now contested. It involved a serious breach of the TPA. Redress under the Act would be far from surprising. A total lack of redress in such a brazen case would be astonishing; The arrangements were not incidental, accidental, fortuitous, the product of oversight or merely ancillary to the terms of the contract. The primary judge accepted that the offending arrangements were "regarded as being of significance so far as [the appellant] was concerned"128. It could not be concluded that they "were insignificant or that they were not important to [the appellant]"129. The primary judge also found that "the tying arrangement … ensured that the advances would be made"130. Nor were the arrangements for the exclusive benefit of one party131. All of the participants, the appellant, the respondents and the borrower, had a mutual interest. The offending provisions of the contract brought them together in the anti-competitive terms on which they agreed; The parties' common interest was achieved at the cost of the public interest which the TPA, and specifically s 47, is designed to protect. The severance for which s 4L of the TPA provides is to be performed having regard to the ordinary requirement to secure the achievement of the overall purposes of the TPA, including s 47. Those purposes protect large policy objectives in which innocent members of the public have an interest for which the courts are the guardians; This case must be distinguished from earlier cases in which an unlawful provision has been severed. Those cases are very different from the present. In particular, they concern much more limited ("ancillary") provisions in the contract and less serious breaches of the TPA than those disclosed in the contract in this case132; and 128 SST Consulting (2004) ATPR ¶42-016 at 48,956 [45]. 129 SST Consulting (2004) ATPR ¶42-016 at 48,956 [46]. 130 SST Consulting (2004) ATPR ¶42-016 at 48,956 [47]. 131 cf Carney v Herbert [1985] AC 301 at 317. 132 See, for example, Thomas Brown and Sons Ltd v Fazal Deen (1962) 108 CLR 391 at 411; Humphries v Proprietors "Surfers Palms North" Group Titles Plan 1955 (1994) 179 CLR 597 at 605, 606, 609; Rose, "Reconsidering Illegality", (1996) 10 Journal of Contract Law 271 at 273. Kirby Severance is not available because the exclusive dealing provisions lay at the core of the loan agreement (and of the deed of guarantee which contained an explicit cross-reference to the terms of the loan agreement). Conclusion on the application of s 4L: When the foregoing considerations are given their proper weight, it becomes plain that this was not an occasion for the severance of the offending provisions of the loan agreement. In my respectful view, it is only by ignoring the context in which severance occurs under s 4L that the contrary conclusion could be reached in the present case. The Full Court was correct to decide as it did. Any suggestion that the appellant was an innocent abroad, a disinterested financier uncontaminated by the breach of the TPA or unaware of the circumstances that constituted the breach of the Act, is completely unconvincing. To the complaint that the appellant's culpability in the breach of the TPA was less serious than that of the respondents, who proposed the exclusive dealing and secured the benefit of the loan, the answer is plain. This does not justify the use of severance to affirm the remainder of the contract, with its inherent affront to the TPA. At most, it may be a reason to enliven the more nuanced forms of relief for which s 87 of the Act provides. Orders The appeal should be dismissed with costs.
HIGH COURT OF AUSTRALIA PLAINTIFFS AND ELECTORAL COMMISSIONER & ANOR DEFENDANTS [2016] HCA 36 Date of Order: 12 May 2016 Date of Publication of Reasons: 5 September 2016 ORDER The questions stated by the parties in the amended special case dated 1 April 2016, as amended by the addendum to the amended special case dated 11 May 2016, and referred for consideration by the Full Court be answered as follows: Question 1 Do one or both of the first plaintiff and the second plaintiff have standing to seek the relief sought in paragraphs 1, 2, 3 and/or 4 of the Further Amended Application for an Order to Show Cause? Answer The second plaintiff has standing and it is otherwise unnecessary to answer the question with respect to the first plaintiff. Question 2 Are any or all of sections 94A(4), 95(4), 96(4), 102(4), 103A(5), 103B(5) and 118(5) of the Commonwealth Electoral Act 1918 (Cth) contrary to ss 7 and 24 of the Constitution and therefore invalid? Answer Question 3 If the answer to Question 2 in relation to a section is yes, do sections 152(1)(a) and 155 of the Act have the same or substantially the same operation or effect as the impugned provisions or any of them and, if so, are sections 152(1)(a) and 155 invalid and of no effect? Answer The question does not arise. Question 4 If the answer to Question 2 or Question 3 in relation to a section is yes, is that section, or are those sections, severable from the rest of the Act? Answer The question does not arise. Question 5 What if any relief should be granted? Answer None. Question 6 Who should pay the costs of the special case? Answer The first plaintiff. Representation R Merkel QC, B K Lim and C J Tran for the plaintiffs (instructed by King & Wood Mallesons) Submitting appearance for the first defendant J T Gleeson SC, Solicitor-General of the Commonwealth and N J Owens with K E Foley for the second defendant (instructed by Australian Government Solicitor) Intervener C D Bleby SC with D F O'Leary for the Attorney-General for the State of South Australia, intervening (instructed by Crown Solicitor (SA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS to enrol Constitutional law (Cth) – Legislative power – Franchise – Power of Parliament to regulate exercise of entitlement to vote – Provisions of Commonwealth Electoral Act 1918 (Cth) precluding consideration of claims for enrolment or transfer of enrolment and amendment of Electoral Rolls during "suspension period" from 8pm on day of closing of Electoral Rolls until close of polling for election – Whether burden on constitutional mandate that Parliament be "directly chosen by the people" – Whether burden justified by substantial reason – Relevance of Roach v Electoral Commissioner (2007) 233 CLR 162; [2007] HCA 43 and Rowe v Electoral Commissioner (2010) 243 CLR 1; [2010] HCA 46. Words and phrases – "adequacy in its balance", "burden", "constitutional mandate of popular choice", "directly chosen by the people", "franchise", "necessity", "obvious and compelling alternative", "reasonably appropriate and adapted", "structured proportionality", "substantial reason", "suitability". Constitution, ss 7, 10, 24, 30, 51(xxxvi). Commonwealth Electoral Act 1918 (Cth), ss 94A(4), 95(4), 96(4), 101, 102(4), 103A(5), 103B(5), 118(5). FRENCH CJ AND BELL J. Introduction The plaintiffs in this special case, which was referred to the Full Court by Nettle J on 1 April 2016, sought relief including a declaration that a number of provisions of the Commonwealth Electoral Act 1918 (Cth) ("the Act") are invalid. The impugned provisions prevent the Electoral Commissioner from placing the name of a person on an Electoral Roll for a Division until after the close of the poll for an election for the Division, where the person's claim for enrolment or for transfer to the Roll from the Roll of another Division has been received after 8 pm on the day of the closing of the Rolls. The period from the closing of the Rolls to the close of the poll for an election is referred to in these reasons as the "suspension period". The impugned provisions also prevent the Electoral Commissioner, during the suspension period, from exercising statutory powers, without claim or notice, to update or transfer enrolments where there has been a change of address and to enrol unenrolled persons. They preclude removal, during that period, of an elector's name from a Divisional Roll where there has been an objection to that person's enrolment under Pt IX of the Act. At the time of the hearing, the first plaintiff was enrolled on the Electoral Roll for the Division of Wills in the State of Victoria. Initially, his standing was challenged by the second defendant, the Commonwealth. The second plaintiff, who was on the Electoral Roll for the Division of Newcastle, intended to nominate herself as a candidate for election to the House of Representatives in that Division. She was an independent candidate for election to the House of Representatives in the Division in 2013. She was joined as a party, with the consent of the Commonwealth, at the hearing of the special case. She had not been endorsed by a registered political party. In order that she could contest the election, her nomination had to be signed by 100 persons who were entitled to vote at the election in the Division of Newcastle1. Her standing was not disputed and, on that basis, the challenge to the standing of the first plaintiff was not pursued. The plaintiffs said that the suspension of the processing of claims, transfers, objections and amendments to the Roll initiated by the Electoral Commissioner precluded people otherwise eligible to enrol and vote at a particular federal election from doing so and produced an inaccurate and distorted Electoral Roll. The provisions were said, on that account, to have an effect adverse to the constitutional requirement for election of members of the Parliament by the choice of the people. That effect being brought about for no 1 Act, s 166. Bell substantial reason and being disproportionate to any legitimate end served by the impugned provisions, they were said to be invalid. In addition to declaratory relief, the plaintiffs sought a writ of prohibition pursuant to s 75(v) of the Constitution prohibiting the Electoral Commissioner from "giving effect to, or taking any steps in reliance upon" the impugned provisions. That claim involved a remedial double negative. It required the Electoral Commissioner to act as though the statutory obligations imposed on him, otherwise limited by the impugned provisions, were extended up to and including polling day. The plaintiffs' case did not involve a challenge, as in Roach v Electoral Commissioner2, to a disqualifying provision targeting a particular class of persons such as sentenced prisoners. Nor was it, as in Rowe v Electoral Commissioner3, a challenge to a law removing an existing opportunity to enrol up to seven days after the issue of the writs for an election. In this case the plaintiffs said, in effect, that Parliament had not gone far enough when it left in place long-standing time limits, essentially dating back to the 1930s, on the processing of new and transferred enrolments, objections and amendments to the Rolls. The questions in the special case are set out at the end of these reasons. At the conclusion of the hearing the Court answered those questions adversely to the plaintiffs, holding that none of the impugned provisions were invalid and that the first plaintiff should pay the costs of the special case. Our reasons for joining in those orders follow. It is necessary first to outline the legislative framework in which the impugned provisions appear. The general legislative framework The Act establishes the Australian Electoral Commission4 and the office of the Electoral Commissioner as its Chief Executive Officer and one of its members5. Part IV of the Act provides that each State and Territory shall be distributed into Electoral Divisions6 and that one Member of the House of (2007) 233 CLR 162; [2007] HCA 43. (2010) 243 CLR 1; [2010] HCA 46. 4 Act, s 6. 5 Act, ss 6 and 18. 6 Act, s 56. Under s 55A, Pt IV applies to the Northern Territory as if it was a State if the Electoral Commissioner determines that the number of Members of the (Footnote continues on next page) Bell Representatives shall be chosen for each Electoral Division7. Part VI provides for a Roll of electors for each State and Territory8. Each such Roll is made up of Rolls for the Electoral Divisions within the State or Territory which are to contain the names, addresses and prescribed particulars of each elector for the Division9. Part VII of the Act sets out the qualifications and disqualifications for enrolment and for voting. Section 93 sets out the conditions upon which persons "shall be entitled to enrolment." Australian citizens who have attained 18 years of age are so entitled10. Section 100 allows, but does not require, a person who has turned 16 but is under 18 to make a claim for enrolment. The term "Elector" is defined in the Act as "any person whose name appears on a Roll as an elector."11 An elector whose name is on the Roll for a Division is "entitled to vote at elections of Members of the Senate for the State that includes that Division and at elections of Members of the House of Representatives for that Division."12 Part VIII of the Act deals with mechanisms for enrolment. The principal means by which a qualified person can be included on the Roll for a Division is by making a claim for enrolment13. The claim is to be processed by the Electoral House of Representatives to be chosen in the Northern Territory at a general election is 2 or greater. On 13 November 2014, the Acting Electoral Commissioner determined that 2 Members of the House of Representatives were to be chosen in the Northern Territory at a general election. 7 Act, s 57. There is provision for subdivisions of Divisions in the Act which are mentioned in a number of the sections summarised in these reasons. No Division is currently divided into subdivisions, and hence s 4(4) of the Act has the effect that references to subdivisions should be read as references to Divisions. 8 Act, s 81. 9 Act, ss 82(4) and 83(1). The addresses of eligible overseas electors and itinerant electors are not required: s 83(2). 10 Act, s 93(1)(a) and (b)(i). Non-citizens who would have been British subjects within the meaning of the relevant citizenship law had it continued in force and whose names were, immediately before 26 January 1984, on a Roll are also entitled: Act, s 93(1)(b)(ii). 11 Act, s 4(1). 12 Act, s 93(2). 13 Act, ss 98, 99 and 101. Bell Commissioner as provided by the Act14. Electors can apply to transfer from the Roll of one Division to the Roll of another15. Section 101 provides for compulsory enrolment for persons entitled to be enrolled for a Division other than by virtue of ss 94, 94A, 95, 96 or 100. Each person entitled to be enrolled for any Division whether by way of enrolment or transfer of enrolment, except residents of Norfolk Island, is required to "forthwith fill in and sign a claim and send or deliver the claim to the Electoral Commissioner." The Electoral Commissioner can enrol or transfer the enrolment of persons who have not made a claim for enrolment or transfer16. The Electoral Commissioner can also correct any Roll17. Alterations to the Roll to correct mistakes and to remove the names of deceased electors may be made at any time18. The removal of the name of a person from a Roll who is not entitled to enrol and had made a claim for enrolment containing a false statement may be effected at any time between the date of issue of the writ for an election for the relevant Division and before the close of polling for that election19. The Electoral Commissioner may enter the name of an elector who is not enrolled, and who has made a declaration vote, on the Roll for the Division in which the elector was living at the time of voting at a preliminary scrutiny of declaration votes20 if the vote is in order and the omission of the elector's name from the Roll for the Division was due to an error made by an officer or to a mistake of fact21. Part XIII provides for writs to be issued by the Governor-General for elections to the House of Representatives, pursuant to s 32 of the Constitution, and for the election of Senators for the Territories22. The State Governors issue 14 Act, s 102. 15 Act, s 99(2). 16 Act, ss 103A and 103B. 17 Act, s 105. 18 Act, s 105(3). 19 Act, s 106. 20 Preliminary scrutinies of declaration votes are continuously held from the last Monday before the close of the poll for the election until a time not earlier than 13 days after the close of the poll: Act, s 266. 21 Act, s 105(4) and Sched 3. 22 Act, ss 151, 152 and 154. Bell the writs for the election of Senators for each State, pursuant to s 12 of the Constitution23. The date fixed for the close of the Rolls is the seventh day after the date of the relevant writ24. The date fixed for the nomination of candidates must be not less than 10 days nor more than 27 days after the date of the relevant writ25. Polling day must be not less than 23 days nor more than 31 days after the date of nomination26. Part XVI of the Act, entitled "The polling", concerns arrangements to be made for the polling day. Section 208(1) requires the Electoral Commissioner to prepare a list of voters for each Division and to certify the list. A paper copy of the certified list for a Division is to be delivered to the presiding officer at each polling place before the start of voting27. A copy must also be delivered to each place at which pre-poll ordinary voting is available for voters enrolled for that Division28. The list is created from data extracted from the Australian Electoral Commission's IT system, known as "RMANS", in which each elector's details are stored. The Australian Electoral Commission's practice is to process all enrolment applications received prior to the close of the Rolls within 40 hours of their close. It aims to conclude production of the certified list approximately 48 hours after the close of the Rolls. The delivery of certified lists from printers occurs over a 10 day period with priority delivery to early voting centres. The certified list once prepared is not updated. Any error or omission may be remedied by proclamation specifying the matter dealt with and providing for the course to be followed29. There is an electronic version of the Electoral Rolls known as a "Notebook Roll" maintained by the Australian Electoral Commission to manage 23 Act, ss 152 and 153. By convention, each Governor adopts the suggestion of the Governor-General, upon the advice of the Prime Minister, that the writ proclaim the same deadlines to apply as those in the writs issued for elections to the House of Representatives and for elections of Senators for the Territories: Odgers' Australian Senate Practice, 12th ed (2008) at 94-95. 24 Act, s 155. 25 Act, s 156. 26 Act, s 157. 27 Act, s 208(3). 28 Act, s 208(4). 29 Act, s 285(1). Bell any additional applications for enrolment or changes received before the suspension period, but not processed before the printing of the certified lists, including the addition of names from claims under s 101. Other changes may include the removal of names of deceased electors, the reinstatement of eligible electors previously removed by mistake and changes as a result of the detection of enrolments pursuant to claims including a false statement30. The Notebook Roll operates as an administrative mechanism to assist in processing updates to the Roll in order, ultimately, to facilitate the scrutiny of declaration votes. In addition, under s 208A of the Act, inserted in 201031, the Electoral Commissioner may arrange for the preparation of an "approved list of voters for a Division". This is a list in electronic form which contains the same information as the certified list for the Division most recently prepared32. The certified and approved lists for each Division are used to determine the entitlement of a person to cast an ordinary vote on polling day. The impugned provisions Three of the impugned provisions, ss 94A(4), 95(4) and 96(4), are found in Pt VII of the Act. Sections 94A, 95 and 96 respectively provide for applications for enrolment by persons residing outside Australia, by their spouses, de facto partners or children living outside Australia and by itinerant electors. In each case, the impugned subsection provides that if an application under the section to which it relates is received by the Electoral Commissioner after 8 pm on the day of the close of the Rolls for an election to be held in a Division, and the application relates to that Division, the person must not be added to the Roll for that Division until after the close of the poll for that election. Section 102 sets out the actions to be taken by the Electoral Commissioner on receipt of a claim pursuant to s 101 for enrolment or transfer of enrolment. Section 102(4) provides that if such a claim is received by the Electoral Commissioner during the "suspension period" then "the claim must not be considered until after the end of the suspension period." The suspension period is defined as the period commencing at 8 pm on the day of the close of the Rolls for an election to be held in a Division and ending on the close of the poll for that election. As noted earlier, although the term "suspension period" is only defined 30 Act, ss 105 and 106. 31 Electoral and Referendum Amendment (Modernisation and Other Measures) Act 2010 (Cth), Sched 4 item 8. 32 Act, s 4(1) definition of "approved list". Bell in the Act for the purposes of s 102 it is used in these reasons to refer to the same period in which each of the impugned provisions operates. Section 103A(5) also prevents the Electoral Commissioner from taking action of his or her own motion to update or transfer a person's enrolment during the suspension period. Section 103B(5) imposes the same prohibition with respect to the power of the Electoral Commissioner under s 103B to enrol an unenrolled person without claim or notice from that person. Section 118 appears in Pt IX of the Act, which deals with objections to the enrolment of a person in a Division. By s 118(5) the Electoral Commissioner must not, during the suspension period, remove an elector's name from the Roll of the Division under the powers conferred on him or her by s 118(3) and (4A). History of the suspension period The legislative scheme for enrolment and for a cut-off date for enrolment for a particular election is to be understood by reference to the history and purposes of the Electoral Roll. Some of that history was set out in Rowe33. The registration and listing of qualified electors on an Electoral Roll as a condition of the exercise of the right to vote dates back to the enactment of the Representation of the People Act 183234. The purpose of registration was practical and originally directed to dealing with the complicated and diverse qualifications required for a person to become an elector35. The electoral laws of the Australian colonies in the late 19th century replicated key features of the British system, including its requirements for listing, enrolment and registration. At the time of Federation those colonial laws conditioned the right to vote in an election upon enrolment on the relevant Electoral Roll36. They also provided for closure of the Electoral Rolls to new 33 (2010) 243 CLR 1 at 14-18 [10]-[17] per French CJ. 34 2 & 3 Will IV c 45, s 26. 35 (2010) 243 CLR 1 at 15 [12]. 36 Parliamentary Electorates and Elections Act 1893 (NSW), s 80; Constitution Act Amendment Act 1890 (Vic), s 241; Electoral Code 1896 (SA), ss 36, 116 and 126; Elections Act 1885 (Q), s 40; Electoral Act 1899 (WA), ss 21, 87 and 104; Electoral Act 1896 (Tas), s 57. Bell enrolments or transfers before polling day, albeit there were variations in the cut-off dates37. Enrolment and voting for federal elections from 1902 were regulated by the Commonwealth Electoral Act 1902 (Cth) and the Commonwealth Franchise Act 1902 (Cth). Section 3(1) of the present Act provided that these Acts and several amending Acts were to be repealed on dates fixed by proclamation, a process which concluded in 1934. Between 1902 and 1983 the Rolls closed on the day the writs for an election were issued. From at least the 1930s an executive practice developed of announcing the election a few days before the Governor-General was asked to dissolve Parliament and issue writs for the election of the Members of the House of Representatives. This administrative practice provided a grace period enabling persons wishing to enrol or transfer enrolment to do so before the issue of the writs. In 1983 the statutory cut-off point for consideration of claims for enrolment or transfer of enrolments was extended beyond the date of the issue of the writs to the date of close of the Rolls, which was fixed as seven days after the issue of the writs38. The objective was "to make it easier for electors to get on the rolls and stay on the rolls"39. The Act was further amended in 2006 so that a claim for enrolment received between 8 pm on the date of the issue of the writs for an election and the close of polling for that election could not be considered until after the close of polling for the election. Transfer claims could be considered if they were received before 8 pm on the day of the close of the Rolls, which was fixed as the third working day after the issue of the writs40. However, following the decision in Rowe in which those amendments were held to be invalid, the text of the Act was amended to restore the seven day grace period41. 37 Parliamentary Electorates and Elections Act 1893 (NSW), ss 47-51; Constitution Act Amendment Act 1890 (Vic), ss 97 and 186; Electoral Code 1896 (SA), ss 51, 52 and 57; Elections Act 1885 (Q), s 40; Electoral Act 1899 (WA), ss 37 and 44; Electoral Act 1896 (Tas), s 57. 38 Commonwealth Electoral Legislation Amendment Act 1983 (Cth). 39 Australia, House of Representatives, Parliamentary Debates (Hansard), 2 November 1983 at 2216. 40 Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth), Sched 1 items 41 and 52. 41 Electoral and Referendum Amendment (Enrolment and Prisoner Voting) Act 2011 (Cth), Sched 1 items 2-8. Bell Practical operation of the impugned provisions To provide an indication of the practical impact of the suspension period, the special case included a table of the numbers of claims for new and updated enrolments received during that period for the 2004, 2007, 2010 and 2013 federal elections. They were as follows: Inter-State transfer Intra- Division transfer Intra-State transfer New enrolment Enrolment update (no change of address) Total There were no unresolved objections at the beginning of the suspension periods in 2004 and 2007, but there were 22,579 in 2010. That figure was high because the Australian Electoral Commission did not anticipate the calling of the election. The figure at the 2013 election was 2,975. The figures set out in the special case were said by the plaintiffs to demonstrate the magnitude of the practical "burden" that the impugned provisions imposed upon the constitutional mandate of popular choice. They were said to represent the lower limits of the number of persons effectively disenfranchised by the suspension period for each of the elections to which they related. There were potentially, it was suggested, additional persons who did not make claims because they knew of the suspension period, advice about it having been provided on the Australian Electoral Commission website. In the end, the significance of these figures depended upon the resolution of a fundamental difficulty with the plaintiffs' case arising out of the character of the impugned provisions as long-standing time limits for settlement of the Rolls prior to an election. The plaintiffs' reliance upon Roach and Rowe The plaintiffs submitted that: A law which has the practical operation of effecting a legislative disqualification from what otherwise is the popular choice mandated by the Constitution is invalid unless the disqualification is for a substantial reason. Such a law will be for a substantial reason only if it is reasonably appropriate and adapted to serve an end which is consistent or compatible with the constitutionally mandated system of representative government. Bell Those submissions were based upon the decisions of this Court in Roach and Rowe. The impugned provisions were said to be invalid in light of them. In Roach, the Court was concerned with the validity of amendments to the Act, enacted in 2004 and 2006, disqualifying sentenced prisoners from voting at federal elections. The 2004 amendment disqualified persons serving sentences of three years or more. The 2006 amendment disqualified any person serving a sentence of imprisonment regardless of duration. The Court held the former disqualification to be valid and the latter disqualification to be invalid. Roach involved a law directly affecting the qualification of a person to be enrolled and to vote. Further, the law which was held invalid in that case had imposed a disqualification upon a class of persons not previously disqualified from voting. In Rowe, the Court was concerned with the validity of the amendments to the Act, made in 2006, which had the effect of precluding consideration of a claim for enrolment or transfer of enrolment where the claim for enrolment was lodged after the issue of the writs and where the claim for transfer of enrolment was lodged after the close of the Rolls. The amendments removed the pre-existing seven day grace period allowing enrolment after issue of the writs and significantly abridged the opportunities for electors to transfer their enrolments42. The impugned laws in this case were similar to the impugned laws in Rowe only to the extent that they both provided for suspension periods during which claims for enrolment, transfers of enrolment, objections and corrections to the Roll could not be considered. The significant difference was that, unlike the present case, Rowe concerned laws which reduced existing opportunities for enrolment or transfer of enrolment prior to an election. The plaintiffs' case depended upon a generalisation of Roach and Rowe and a characterisation of the impugned provisions as imposing a burden upon the realisation of the constitutional mandate of choice by the people. Some general propositions There are three key propositions derived from the text of the Constitution which lie at the threshold of the special case: Sections 7 and 24 of the Constitution provide that the members of the Senate and the House of Representatives shall be directly chosen, "by the people of the State" in the case of the Senate and "by the people of the Commonwealth" in the case of the House of Representatives. 42 (2010) 243 CLR 1 at 12 [3] per French CJ. Bell Sections 8 and 30 of the Constitution, read with s 51(xxxvi), empower the Parliament to make laws providing for the qualification of voters43. It was the exercise of that power which was in issue in Roach. Sections 10 and 31 of the Constitution, read with s 51(xxxvi), confer upon the Parliament power to make laws relating to the election of Senators and Members of the House of Representatives44. It was the exercise of that power which was in issue in Rowe and is in issue in this case. While the limits of the legislative powers considered in Roach and Rowe were variously expressed by the majority Justices in those cases, they reflected an essentially common approach to the criterion of validity. In Roach, Gleeson CJ held that the contemporary understanding of the constitutional term "chosen by the people" required nothing less than universal adult suffrage45. Parliament's power to define exceptions to that requirement was limited by the negative criterion that46: "disenfranchisement of any group of adult citizens on a basis that does not constitute a substantial reason for exclusion from such participation would not be consistent with choice by the people." (footnote omitted) Gleeson CJ's use of the term "substantial reason" was a borrowing from Brennan CJ in McGinty v Western Australia47. Brennan CJ observed that, unaffected by context, "chosen by the people" admitted of different meanings including "some requirement of a franchise that is held generally by all adults or all adult citizens unless there be substantial reasons for excluding them."48 The word "substantial" appears in the common law and in statutes in areas law, intellectual property, contract, criminal as diverse as defamation, 43 (2007) 233 CLR 162 at 173 [6] per Gleeson CJ. 44 (2010) 243 CLR 1 at 14 [8] per French CJ. 45 (2007) 233 CLR 162 at 174 [7]. 46 (2007) 233 CLR 162 at 174 [7]. 47 (1996) 186 CLR 140 at 170; [1996] HCA 48. A criterion foreshadowed, as Gageler J points out in his reasons at [84], in Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 36, 69; [1975] HCA 53. 48 (1996) 186 CLR 140 at 170. Bell competition law and wills. It directs its readers' attention from form to substance. It generally indicates a narrowing qualification in some otherwise broadly expressed legal criterion and, according to context, may be a cautionary direction about the limits of the judicial power. Plainly, neither Brennan CJ in McGinty nor Gleeson CJ in Roach meant the term "substantial reason" to be at large. Gleeson CJ said49: "There would need to be some rationale for the exception; the definition of the excluded class or group would need to have a rational connection with the identification of community membership or with the capacity to exercise free choice." A rational connection between exclusion from the right to vote and community membership might be found in conduct manifesting such a rejection of civic responsibility as to warrant temporary withdrawal of a civic right50. Within that general framework, Gleeson CJ held the indiscriminate exclusion of all sentenced prisoners from the right to vote to be invalid. The notion of rational connection thus explained is embedded in the requirement for a "reason" in the term "substantial reason". It precludes arbitrary exclusions or exclusions not founded in any relevant normative or practical objective. The requirement of substantiality means that disqualifying legislation cannot be justified solely on the basis that the exclusions it creates have a formal, logical connection with the purpose it purports to serve. The other members of the majority in Roach, Gummow, Kirby and Crennan JJ, like Gleeson CJ, quoted Brennan CJ's reference in McGinty to "substantial reasons" for excluding adults or adult citizens from the franchise51. They said that a reason would be "substantial" if it was, in language familiar in Australian public law, "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government."52 It did not require a justification of the exclusion as "essential" or "unavoidable". Rather, the 49 (2007) 233 CLR 162 at 174 [8]. 50 (2007) 233 CLR 162 at 175 [8]. 51 (2007) 233 CLR 162 at 198 [83]. 52 (2007) 233 CLR 162 at 199 [85]. Bell criterion of a "substantial reason" imported a notion of proportionality in the "[w]hat upon close scrutiny is disproportionate or arbitrary may not answer to the description reasonably appropriate and adapted for an end consistent or compatible with observance of the relevant constitutional restraint upon legislative power." The terminology "reasonably appropriate and adapted" in this context marks the limits of legislative power and the borderlands of the judicial power. As Gleeson CJ observed in Mulholland v Australian Electoral Commission54: "For a court to describe a law as reasonably appropriate and adapted to a legitimate end is to use a formula which is intended, among other things, to express the limits between legitimate judicial scrutiny, and illegitimate judicial encroachment upon an area of legislative power." Gleeson CJ referred to the long Australian history of judicial application of the term "reasonably appropriate and adapted" originally derived from the judgment of Marshall CJ in McCulloch v Maryland55. Four Justices of this Court said in McCloy v New South Wales56 that, as used in Australian law, it describes a class of criteria developed over many years to determine whether legislative or administrative acts are within the constitutional or legislative grant of power under which they purport to have been done57. Such criteria have been applied to test the validity of the exercise of purposive powers58, incidental powers, which 53 (2007) 233 CLR 162 at 199 [85]. 54 (2004) 220 CLR 181 at 197 [33]; [2004] HCA 41. 55 (2004) 220 CLR 181 at 199-200 [39] citing 4 Wheat 316 at 421 (1819). 56 (2015) 89 ALJR 857; 325 ALR 15; [2015] HCA 34 (French CJ, Kiefel, Bell and 57 (2015) 89 ALJR 857 at 863 [3] per French CJ, Kiefel, Bell and Keane JJ; 325 ALR 58 The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 130, 138-139 per Mason J, 172 per Murphy J, 232 per Brennan J, 259-260 per Deane J; [1983] HCA 21; Richardson v Forestry Commission (1988) 164 CLR 261 at 295-296 per Mason CJ and Brennan J, 303 per Wilson J, 311-312 per Deane J, 336 per Toohey J, 344-346 per Gaudron J; [1988] HCA 10; Attorney-General (SA) v Adelaide City Corporation (2013) 249 CLR 1 at 37-40 [55]-[60] per French CJ; [2013] HCA 3. Bell must serve the purposes of the substantive powers to which they are incidental59, and powers whose exercise may limit or restrict the enjoyment of a constitutional guarantee, immunity or freedom, including the implied freedom of political communication60. An extensive discussion of the history and application of the criterion appears in the judgment of Kiefel J in Rowe61. A law which excludes a class of adult citizens from an existing right of participation in a federal election and thus reduces the extent to which the election represents a choice of representatives "by the people" might be thought to fall into a category analogous with laws limiting or restricting the enjoyment of a constitutional guarantee, immunity or freedom. Such a law may be tested for validity under the general criterion — is it reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government? The particular aspect of the system of representative government in play in such a case is the mandate of choice by the people. It is true that the criterion does not set out "precise metes and bounds" which chart the generality of that mandate and which Parliament in the exercise of its powers to determine exceptions to or disqualifications from the franchise must respect62. Nevertheless it is a criterion of a kind long used in Australian courts in a variety of settings. In Rowe, the impugned law diminished the opportunities for enrolment and transfer of enrolment which existed prior to its enactment63. French CJ characterised it as thereby effecting a "significant detriment in terms of the constitutional mandate", which would have to be weighed "against the legitimate 59 Davis v The Commonwealth (1988) 166 CLR 79 at 98-100 per Mason CJ, Deane and Gaudron JJ, 101 per Wilson and Dawson JJ agreeing, 117 per Toohey J agreeing; [1988] HCA 63; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 30-31 per Mason CJ, 78 per Deane and Toohey JJ, 101 per McHugh J, 95 per Gaudron J agreeing with Mason CJ and McHugh J; [1992] HCA 46. 60 Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 472 per Mason CJ, Brennan, Deane, Dawson and Toohey JJ; [1990] HCA 1; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567-568; [1997] HCA 25; Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 476-477 [101]-[103] per Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ; [2008] HCA 11. 61 (2010) 243 CLR 1 at 133-139 [431]-[455]. 62 (2007) 233 CLR 162 at 206 [113] per Hayne J. 63 (2010) 243 CLR 1 at 38 [78]. Bell purposes of the Parliament" which it was said to serve64. The detriment was "disproportionate to the benefits of a smoother and more efficient electoral system to which the amendments were directed."65 That approach did not set up a sui generis test of validity. It provided an answer to the question whether the impugned law, notwithstanding its legal effect, was reasonably appropriate and adapted to serve a legitimate purpose of the Parliament consistent with the prescribed system of representative government. It was adopted in the context of an acceptance of the approach of the majority in Roach, including the proposition that a "substantial reason" for an exception to the franchise is needed in order to satisfy the general proportionality criterion66. The proportionality criterion was expressly applied by Gummow and Bell JJ. As their Honours pointed out, the Commonwealth in that case accepted that if the legal or judicial operation of a law was to disqualify adult citizens from enrolling and thus from exercising their franchise, the consistency of that law with ss 7 and 24 of the Constitution was to be determined in accordance with the reasoning in Roach67. Thus the consideration upon which the Commonwealth relied had to supply "a substantial reason in the sense used in the reasons of the two majority judgments in Roach."68 Their Honours said that once it was shown that the 2006 amendments in issue in Rowe had the practical operation of effecting a legislative disqualification from participation in the popular choice mandated by the Constitution, the relevant question was that propounded by Gleeson CJ in Roach: "whether ... there has been broken the rational connection necessary to reconcile the disqualification with the constitutional imperative"69. Their Honours equated that question, via the term "substantial reason" used by Gleeson CJ, with the question formulated by Gummow, Kirby and Crennan JJ in Roach and expressed in terms of the general proportionality criterion70. Crennan J, the other member of the majority in Rowe, read ss 7 and 24 of the Constitution as mandating a franchise which would result in a democratic representative government, a concept the content of which had evolved to require 64 (2010) 243 CLR 1 at 38 [78]. 65 (2010) 243 CLR 1 at 39 [78]. 66 (2010) 243 CLR 1 at 20-21 [23]-[25]. 67 (2010) 243 CLR 1 at 56-57 [151]. 68 (2010) 243 CLR 1 at 58 [157]. 69 (2010) 243 CLR 1 at 59 [161] citing (2007) 233 CLR 162 at 182 [24]. 70 (2010) 243 CLR 1 at 59 [161]. Bell "a fully inclusive franchise — that is, a franchise free of arbitrary exclusions based on class, gender or race."71 The impugned provisions in Rowe were not shown to be necessary or appropriate for the protection of the integrity of the Rolls, the purpose advanced in that case by the Commonwealth72. Her Honour there used the word "necessary" as not limited to what was essential or unavoidable but encompassing what was "'reasonably appropriate and adapted' to serve a legitimate end."73 As appears from the above, in their various ways the reasons of the majority in Rowe fell within the same general rubric of proportionality long applied in Australian public law. The Commonwealth in this case also accepted the applicability of that general rubric, and did not take issue with the result in Rowe. A structured approach to the application of the general proportionality criterion to a law said to burden the implied freedom of political communication was recently set out in the joint judgment in McCloy. It was invoked by the plaintiffs in support of their case. That approach, foreshadowed in the judgment of Kiefel J in Rowe74, involved an unpacking of the question whether a law found to burden the implied freedom, and to do so for a legitimate purpose, was "reasonably appropriate and adapted to advance that legitimate object"75. The analysis used to answer the proportionality question was undertaken by reference to three considerations drawn from the approach of European and, in particular, Suitability — whether the law had a rational connection to the purpose of the provision — a criterion which reflects that adopted by Gleeson CJ in Roach. Necessity — whether there was an obvious and compelling alternative, reasonably practicable means of achieving the same purpose with a less restrictive effect on the freedom. 71 (2010) 243 CLR 1 at 117 [367]. 72 (2010) 243 CLR 1 at 120 [384]. 73 (2010) 243 CLR 1 at 118 [374]. 74 (2010) 243 CLR 1 at 140-142 [460]-[466]. 75 (2015) 89 ALJR 857 at 862-863 [2]; 325 ALR 15 at 19. 76 (2010) 243 CLR 1 at 140 [460] per Kiefel J. Bell Adequacy in its balance — whether the extent of the restriction imposed by the impugned law was outweighed by the importance of the purpose it served. The adoption of that approach in McCloy did not reflect the birth of some exotic jurisprudential pest destructive of the delicate ecology of Australian public law. It is a mode of analysis applicable to some cases involving the general proportionality criterion, but not necessarily all. For example, as Kiefel J observed in Rowe77: "A test of reasonable necessity, by reference to alternative measures, may not always be available or appropriate having regard to the nature and effect of the legislative measures in question." In Davis v The Commonwealth78, Nationwide News Pty Ltd v Wills79 and Australian Capital Television Pty Ltd v The Commonwealth80, as her Honour observed, want of proportionality was assessed by reference to a range of factors. The three considerations relevant to proportionality set out in McCloy are capable of application to laws burdening or infringing a constitutional guarantee, immunity or freedom. In the case of the constitutional mandate of choice by the people, they may be relevant depending upon the character of the law said to diminish the extent of the realisation of that mandate. Apart from the suitability requirement, they do not have universal application in determining whether a law, a delegated legislative instrument or an administrative act is a valid exercise of the relevant grant of power, being reasonably appropriate and adapted to serve the purpose of the grant. The plaintiffs in the present case were concerned with provisions reflecting long-standing limits on the times at which a qualified person could be registered on the Roll. Theirs was not a case about a law reducing the extent of the realisation of the constitutional mandate. It was ultimately a complaint that the legislation did not go far enough in the provision of opportunities for enrolment. The difficulty confronting their case was demonstrated by their attempt to apply the necessity consideration in McCloy by reference to what were said to be obvious and compelling legislative alternatives. One was enrolment up 77 (2010) 243 CLR 1 at 136 [445]. 78 (1988) 166 CLR 79. 79 (1992) 177 CLR 1 at 31. 80 (1992) 177 CLR 106; [1992] HCA 45. Bell to and including polling day, said to be demonstrated by the electoral systems of three Australian States. Another was a reduction of the suspension period by making it a fixed number of days counted back from polling day. These arguments invited the Court to undertake an hypothetical exercise of improved legislative design by showing how such alternatives could work. In so doing, they invited the Court to depart from the borderlands of the judicial power and enter into the realm of the legislature. The McCloy analysis was inapposite in this case. Conclusions The plaintiffs submitted that: "Any effective burden on the constitutional mandate of popular choice (such as a requirement to enrol in a particular manner or at a particular time, or even to vote in a particular manner or at a particular time) is constitutionally suspect and will be invalid unless justified by reference to a permissible substantial reason. The extent of the burden will inform the extent of justification required, but there should be no narrow approach to what constitutes an effective burden." (footnote omitted) And further: "Many burdens may be justifiable, but they must ultimately serve 'the end of making elections as expressive of the popular choice as practical considerations properly permit'." (footnote omitted) The notion of a "burden", which was central to the plaintiffs' argument, was indicative of the difficulty they had in seeking to generalise from the case of a change to the law adverse to the exercise of the franchise, to the omission of the legislature to maximise opportunities for the exercise of the franchise. long time and for legitimate reasons. As was submitted for The suspension period is a design feature of the Act, which has existed for the Commonwealth, by making participation in the electoral process dependent upon membership of the single class of persons defined as "electors" by reference to the content of the Rolls on the date upon which they are closed, the orderly and efficient conduct of elections is advanced. The legislative scheme establishes the Rolls as the means of defining the class of eligible participants in the choice by the "people" to which ss 7 and 24 of the Constitution refer. It defines not only those who can vote on polling day but those who can nominate or be nominated81 or have their details provided to candidates so that campaign material may be 81 Act, s 163. Bell provided82. It defines those who can cast a postal vote and a pre-poll vote83 and have a provisional vote admitted to scrutiny84. It may be that in the light of modern technology, with appropriate electronic infrastructure and human and financial resources, a system could be devised which would allow enrolments to occur and alterations to be made to the Rolls up to and including polling day. Proposals for change have been made by the Australian Electoral Commission85 and by the Joint Standing Committee on Electoral Matters86, which were referred to in the special case, as were the legislative schemes in New South Wales, Victoria and Queensland. The plaintiffs also invoked the scheme in Queensland in support of a further "alternative" whereby the commencement of the suspension period would be determined by counting a fixed number of days backwards from the date of an election, rather than by counting forwards from the date of issue of the writs. The existence of such possibilities does not support a characterisation of the design limits of the existing Act as a "burden" upon the realisation of the constitutional mandate of popular choice. The impugned provisions do not become invalid because it is possible to identify alternative measures that may extend opportunities for enrolment. That would allow a court to pull the constitutional rug from under a valid legislative scheme upon the court's judgment of the feasibility of alternative arrangements. The plaintiffs' premise that the suspension period reflects a burden on the constitutional mandate of popular choice was not made out. The failure of that premise was fatal to the plaintiffs' attempts to generalise Roach and Rowe in support of their argument. Answers to questions The answers to the questions in the special case in which we joined were as follows: 82 Act, s 90B. 83 Act, ss 183 and 200A, Sched 2. 84 Act, s 235. 85 Australia, Australian Electoral Commission, "Submission to the Joint Standing Committee on Electoral Matters on the Conduct of the 2010 Federal Election", (21 February 2011) at 61-63. 86 Australia, The Parliament, Joint Standing Committee on Electoral Matters, The 2010 Federal Election: Report on the Conduct of the Election and Related Matters, (June 2011) at 37. Bell Question 1: Do one or both of the first plaintiff and the second plaintiff have standing to seek the relief sought in paragraphs 1, 2, 3 and/or 4 of the Further Amended Application for an Order to Show Cause? Answer: The second plaintiff has standing and it is otherwise unnecessary to answer the question with respect to the first plaintiff. Question 2: Are any or all of sections 94A(4), 95(4), 96(4), 102(4), 103A(5), 103B(5) and 118(5) of the Commonwealth Electoral Act 1918 (Cth) contrary to ss 7 and 24 of the Constitution and therefore invalid? Answer: Question 3: If the answer to Question 2 in relation to a section is yes, do sections 152(1)(a) and 155 of the Act have the same or substantially the same operation or effect as the impugned provisions or any of them and, if so, are sections 152(1)(a) and 155 invalid and of no effect? Answer: The question does not arise. Question 4: If the answer to Question 2 or Question 3 in relation to a section is yes, is that section, or are those sections, severable from the rest of the Act? Answer: The question does not arise. Question 5: What if any relief should be granted? Bell Answer: None. Question 6: Who should pay the costs of the special case? Answer: The first plaintiff. KIEFEL J. The plaintiffs challenged the validity of certain provisions of the Commonwealth Electoral Act 1918 (Cth) ("the Electoral Act"). They contended that these provisions are contrary to ss 7 and 24 of the Constitution. At the conclusion of the hearing of this matter the Court answered the questions which had been stated for it, the effect of which was that the provisions were held not to be invalid. I joined in the answers given by the Court. These are my reasons for doing so. The provisions in question The provisions sought to be impugned by the plaintiffs fell into two main categories. Sections 94A(4), 95(4), 96(4), 102(4) and 103B(5) provide that a person's name must not be added to the Electoral Roll for a Division during the period between 8:00pm on the day of the close of the Electoral Rolls and the close of the poll for the election ("the suspension period"). Sections 102(4) and 103A(5) provide that a claim for a transfer of enrolment must not be considered until after the end of the suspension period. The commencement of the suspension period is marked out by ss 152(1) and 155. Section 155 provides that the date fixed for the close of the Rolls is the seventh day after the date of the writ for the election, which is provided for in s 152(1). The practical effect of these provisions is that when a writ for a federal election issues, a person who is not enrolled has seven days within which to do so or they will not be on the Roll and as a consequence not able to vote; and a person who wishes to transfer their enrolment to another Division has seven days within which to do so, otherwise they will not be able to vote in the Division in which they live. The other provision which the plaintiffs challenged was s 118(5), which provides that a person's name must not be removed from the Electoral Roll during the suspension period. The plaintiffs sought to use this provision in aid of a submission concerning the distortion of the Rolls as a result of the suspension period. It is not directly relevant to questions of validity of the other impugned provisions. A period of seven days has been provided for by statute for new enrolments, or transfers of enrolment, after the issue of the writs for the election ("the grace period") continuously since 1983, with one exception. The Electoral Act was amended in 2006 so as to remove the grace period for new enrolments and to limit the grace period to only three days for transfers of enrolment. The provisions effecting those changes were held to be invalid by a majority of the Court in Rowe v Electoral Commissioner87 and the changes were subsequently removed. The position now is that which was maintained prior to Rowe. Standing The first plaintiff was in fact enrolled to vote at a federal election. The Commonwealth challenged his standing to maintain these proceedings on the basis that he did not seek to have his rights or interests clarified by the orders he sought88. The second plaintiff was subsequently joined to the proceedings. She intended to nominate as a candidate for election to the House of Representatives. Section 166 of the Electoral Act requires a candidate in her position to be nominated by 100 persons whose names appear on the Electoral Rolls and are entitled to vote at the election for which the candidate is nominated. This provided the second plaintiff with a sufficient interest in the matter before the Court for standing, as the Commonwealth conceded. It is not necessary therefore to address the position of the first plaintiff. The plaintiffs' argument The plaintiffs relied upon what they described as a principle established in Roach v Electoral Commissioner89 and Rowe, that a law which disqualifies a person from exercising the choice mandated by the Constitution is invalid unless the disqualification is for a substantial reason. It will be for a substantial reason only if it is "reasonably appropriate and adapted" to secure an end which is consistent and compatible with the maintenance of the constitutionally prescribed system of representative government. The plaintiffs sought to incorporate into this test of proportionality those tests stated in McCloy v New South Wales90 as tools of analysis used in that case with respect to legislation which burdens the implied freedom of political communication. The larger part of the plaintiffs' submissions in this matter were concerned with testing for proportionality. Their principal submission in this regard was that there are reasonably practicable alternative means available which would provide for a longer period of enrolment. In the first place, they contended that there is no reason why a person should not be permitted to enrol up to and including polling day. This could be achieved given advances in technology and without the requirement of substantial further resources. The second alternative 87 (2010) 243 CLR 1; [2010] HCA 46. 88 See Croome v Tasmania (1997) 191 CLR 119 at 127; [1997] HCA 5. 89 (2007) 233 CLR 162; [2007] HCA 43. 90 (2015) 89 ALJR 857; 325 ALR 15; [2015] HCA 34. was to calculate a suspension period back from polling day, rather than forward from the date of the issue of the writs. New South Wales and Victoria permit enrolment up to and including polling day; and in Queensland a person can enrol up to the night before polling day. It is to be inferred that the essential premise of the plaintiffs' argument is that legislation will not be valid unless it ensures that the maximum number of people are able to vote at elections. Roach and Rowe The concentration of the plaintiffs' submissions on proportionality testing reflects their assumption that this case is not materially different from the circumstances in Roach and Rowe. That assumption is not correct. Roach was concerned with legislation which disqualified prisoners from voting at federal elections. This case has a closer affinity to Rowe, but only by degree and without the particular aspect of the legislation there in question. As mentioned earlier, the legislative provisions in Rowe removed or substantially limited the grace period which had been in place since 1983, and the basis for its removal was contentious. It must, however, be acknowledged that Roach and Rowe effected something of a turning in the law. Sections 7 and 24, in their reference to "chosen by the people", had been understood to refer to direct and popular choice. It had been accepted that the Constitution left it to the Parliament to legislate with respect to our system of representative government. The ability of Parliament to legislate necessarily extends to questions such as who is qualified to be elected, who may be the electors and a system for conducting elections. These matters are reflected in the provisions of the Electoral Act. The majority judgments in Roach, upon which the majority judgments in Rowe were largely founded, recognised a limitation on legislative power with respect to the eligibility of persons to vote. The limitation was founded upon perceptions about the franchise, as being held generally by all adults and, implicitly, entrenched as such in conceptions of representative government91. The arguments of the parties in Rowe applied the joint judgment in Roach and addressed two questions. The first was whether the provisions in question disentitle, exclude or disqualify any citizen otherwise entitled to vote from voting. The second was whether any such disqualification was for a substantial 91 Roach v Electoral Commissioner (2007) 233 CLR 162 at 173-174 [6]-[7] per Gleeson CJ, 198 [80], [83], 199-200 [86], 202 [95] per Gummow, Kirby and reason or is disproportionate92. It was to those two topics that my reasons, in dissent, in Rowe were directed. In Rowe, no disqualification or disenfranchisement such as that dealt with in Roach was in issue. However, the majority in Rowe proceeded upon the basis that a law which permits little time after the writs for the election have issued to enrol or transfer enrolment is also subject to the requirement that it be justified. Such a law was considered effectively to disentitle93, disqualify94 or exclude95 persons otherwise qualified to be enrolled as electors from voting. In Rowe the justification for the changes to the Electoral Act was said by the Commonwealth to be found largely in a report of the Joint Standing Committee on Electoral Matters with respect to the 2004 federal election96. However, the majority in Rowe did not consider that the laws were proportionate. French CJ97 said that if a law's adverse legal or practical effect upon the exercise of the entitlement to vote is disproportionate to its advancement of the constitutional mandate, it may be invalid. His Honour did not accept some of the practical reasons put forward in the report as to why the earlier cut off had to be made, such as dealing with electoral fraud or encouraging electors to enrol or apply in time98, and considered that the "heavy price" imposed by the amendments was disproportionate to the benefits of a smoother and more efficient electoral system which the amendments sought to achieve99. Gummow and Bell JJ also did not accept that the purpose of preventing systemic fraud, put forward as justification for the legislation, supplied a substantial reason for disqualifying a large number of electors and held that this disqualification went 92 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 4-8. 93 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 12 [3] per French CJ, 119 [381], 121 [384] per Crennan J. 94 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 58 [160], 61 [167] per 95 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 119 [381] per Crennan J. 96 Australia, The Parliament, Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005). 97 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 12 [2]. 98 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 38 [75]. 99 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 38-39 [78]. beyond any advantage to be gained to the integrity of the electoral process100. Crennan J did not consider the provisions to be either necessary or appropriate for the protection of the integrity of the Rolls101. There was no substantial reason for the amendments, in her Honour's view. A further observation may also be made about Roach and Rowe, as relevant to the plaintiffs' argument. Neither of those decisions is authority for the proposition that it is a constitutional imperative that the maximum number of persons entitled to be enrolled and vote have the opportunity to be enrolled and vote. Applying Roach and Rowe The Commonwealth did not submit in these proceedings that Roach and Rowe were wrongly decided. This Court was asked to proceed upon the basis that they are to be applied. The Commonwealth submitted that the first requirement of these decisions was not met. There was no disqualification because persons eligible to enrol were entitled to enrol before and during the grace period; they had a duty to do so; and they had been reminded by the announcement of the election to do so. Whilst I am attracted to such a submission – it reflects the view I took in Rowe102 – it seems to me to repeat an argument which was implicitly rejected by the majority in Rowe, which considered that any detriment to, or burdening of, the ability to vote had to be justified. This is the topic to which I should now turn. Justification? The joint reasons in Roach required that there be a substantial reason for provisions which effect a disqualification from the entitlement to vote and that that requirement would be satisfied the means adopted were not disproportionate to the legitimate end which they sought to achieve103. That is to say, a "substantial reason" implies something more than the means being for a legitimate purpose. Even so, to state that there is a substantial reason for a statutory provision, without more, is to state a conclusion in which there inheres a value judgment in respect of which no reasoning is exposed. 100 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 61 [167]. 101 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 120-121 [384]. 102 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 128 [411]. 103 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85]. Since the decisions in Roach and Rowe, this Court has confirmed the usefulness of traditional proportionality tests as tools of analysis in determining the limits of legislative power where legislation has the effect of restricting the implied freedom of political communication104. Amongst the reasons given for the adoption of that approach were that the question of justification should not turn on a matter of impression and that it should not be stated as a mere conclusion of proportionality, absent reasons105. The Commonwealth and South Australia, intervening to support the Commonwealth, made the obvious point that this case does not involve legislation affecting the implied freedom. On the other hand, the effect of the reasoning in Roach is that legislative power which burdens the franchise is to be justified. The reasoning applied in the joint judgment in Roach was based upon notions of representative democracy derived from ss 7 and 24 of the Constitution which had been employed in Lange v Australian Broadcasting Corporation106. The requirement of "proportionality", which was considered in Roach107 to inhere in the question whether the disqualification of electors was for a "substantial reason", was said to have an "affinity" to what is called the second question in Lange108. And of course it was by reference to the questions posed by Lange that proportionality testing came to be applied, to an extent in Unions NSW v New South Wales109, and then more fully in McCloy. The alternative to utilising the tests stated in McCloy in order to conclude whether the provisions here were made for a "substantial reason" would be to ask whether they are "reasonably appropriate and adapted" to their legitimate end. This is a test more commonly utilised with respect to determining whether legislation is within a purposive head of power, but it has also been described and used as a kind of proportionality test for laws which affect constitutionally guaranteed freedoms. However, it does not identify any method by which one is to reason to a conclusion that a law is "reasonably appropriate and adapted". It must necessarily involve value judgments, as any form of proportionality testing 104 McCloy v New South Wales (2015) 89 ALJR 857; 325 ALR 15. 105 McCloy v New South Wales (2015) 89 ALJR 857 at 875 [75], [77]; 325 ALR 15 at 106 (1997) 189 CLR 520; [1997] HCA 25. 107 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85]. 108 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [86]. 109 (2013) 252 CLR 530; [2013] HCA 58. must do, but, absent a method, such judgments and the method of reasoning are not required to be exposed by this test. The aim of any testing for proportionality is to ascertain the rationality and reasonableness of a legislative restriction110 in a circumstance where it is recognised that there are limits to legislative power. Proportionality analysis does not involve determining policy or fiscal choices, which are the province of the Parliament. Thus the test of whether there are alternative, less restrictive means available for achieving a statutory object, which assumes some importance in this case, requires that the alternative measure be otherwise identical in its effects to the legislative measures which have been chosen. It will not be equal in every respect if it requires not insignificant government funding111. The Roll is at the centre of the Commonwealth electoral system. Electors are defined as those persons whose names appear on the Roll112. Enrolment is the single qualification for voting on polling day, or by pre-polling or postal vote. Claims to enrolment are required to be made within a short time of a person becoming eligible for enrolment, on pain of penalty113. Claims for enrolment are investigated and determined114 and objections to enrolment dealt with115. The Electoral Commissioner is obliged to prepare a certified list of persons who are entitled to vote for each Division and to deliver it to the presiding officer at each polling place before the commencement of voting116. The Commissioner may also provide an "approved list", which is a list in electronic form containing the same information as the most recent certified list117. A "Notebook Roll" is also maintained by the Australian Electoral Commission. It is not required by the Electoral Act. It is used in practice to deal 110 McCloy v New South Wales (2015) 89 ALJR 857 at 873 [68]; 325 ALR 15 at 33. 111 Barak, Proportionality: Constitutional Rights and their Limitations, (2012) at 324- 112 Commonwealth Electoral Act 1918 (Cth), s 4(1). 113 Commonwealth Electoral Act 1918 (Cth), s 101. 114 Commonwealth Electoral Act 1918 (Cth), s 102. 115 Commonwealth Electoral Act 1918 (Cth), ss 113-118. 116 Commonwealth Electoral Act 1918 (Cth), s 208. 117 Commonwealth Electoral Act 1918 (Cth), s 208A. with applications for enrolment or changes to the Roll received before the suspension period but which have not been processed before the certified lists have been printed. It facilitates the scrutiny of provisional votes, which can be made where a person's name or address does not appear on the certified lists but the person declares that they are enrolled118. It is in this scheme that the closure of the Roll is to be considered. The Roll is closed seven days after the writs for election issue and shortly before the first step in the electoral process (nomination) occurs119. In the scheme established by the Electoral Act it is evident that there are practical reasons why the Roll is closed to further enrolment or transfer. It enables a number of steps to be undertaken to facilitate the efficient conduct of an election. The closure of the Roll prior to the commencement of the election process ensures there will be few delays in declaring election results, which would occur if persons were entitled to enrol at a point close to, or on, polling day. It achieves accuracy and certainty in the lists which are able to be produced when polling does take place. The provisions for the closure of the Roll bear a rational connection to their purposes120. It is appropriate to consider alternative statutory schemes in order to determine whether there are alternative, equally practicable means of achieving these purposes without closing the Rolls or closing them at the point presently provided for. This was the approach taken by the Court in Betfair Pty Ltd v Western Australia121, where Tasmanian legislation on the same topic as the impugned Western Australian legislation showed that the legislative purpose could be achieved without restricting the freedom of interstate trade and commerce guaranteed by s 92 of the Constitution. Until relatively recently, all of the States and Territories followed the Commonwealth model, allowing for the closure of the Rolls some days after the issue of the writs for the election, and this closure had the effect of suspending the processing of claims for new enrolments and transfer of enrolments. Legislation in Queensland and Victoria continues to provide that the Rolls close a specified number of days after the writs are issued122. However, in Queensland, 118 Commonwealth Electoral Act 1918 (Cth), s 235. 119 Commonwealth Electoral Act 1918 (Cth), ss 155, 156. 120 Unions NSW v New South Wales (2013) 252 CLR 530. 121 (2008) 234 CLR 418; [2008] HCA 11. 122 Electoral Act 2002 (Vic), s 63(3); Electoral Act 1992 (Q), s 84(1)(b). a person who is not enrolled may enrol or transfer their enrolment up to 6.00pm on the day before polling day if they are entitled to be, but are not, enrolled. Such persons must make a declaration vote at the polling booth123. In Victoria a person who is not enrolled on polling day, but claims to be entitled to be enrolled, may make a provisional vote despite the fact that the Rolls are "closed"124. The New South Wales legislation goes further: under it, the Roll does not close and the entitlement to vote does not depend upon enrolment125. In each of these States, the Roll is not in any final form at the conclusion of polling and claims to enrolment made in connection with a declaration or provisional vote must be determined after polling day and before the election result is announced. Reference to these other statutory schemes shows that there is more than one electoral system to choose from. It does not show that these systems are capable of achieving the same objectives that the Electoral Act does. They reflect policy choices of those States' legislatures, which no doubt balance the delays and costs, which must inevitably be associated with keeping the Roll open, against other objectives. It cannot be concluded that the systems chosen elsewhere would be as efficient as that which operates under the Electoral Act, with the level of certainty which is achieved by the closure of the Rolls and the suspension period. Nor can it be concluded on the facts available that adopting such a system would not require additional resources – for example, by way of staff and computer equipment – and therefore further funding by government. The alternative systems cannot therefore be said to be equally practicable. Finally, it may be observed that the effect of the suspension period in closing the Rolls for enrolments and transfers is balanced by the certainty and efficiencies which are achieved. In this regard it is appropriate to take into account that many, if not most, of the persons who will be unable to enrol are already in breach of their obligation to do so and that persons who have transferred to, but are not yet enrolled in, another Division retain the ability to vote in their former Division126. 123 Electoral Act 1992 (Q), ss 106(1)(d), 115(d). 124 Electoral Act 2002 (Vic), s 108; Electoral Regulations 2012 (Vic), reg 41. 125 Parliamentary Electorates and Elections Act 1912 (NSW), s 106(2A). 126 Commonwealth Electoral Act 1918 (Cth), ss 229, 231, 235. Professor Albert Venn Dicey saw the Australian Constitution as rigid, but noted that its rigidity is tempered in three ways. One is the "very wide legislative authority" with which the Commonwealth Parliament is endowed. Another is that the Constitution provides the means for its own alteration. The other is that a large number of provisions of the Constitution remain in force only "until the Parliament otherwise provides": "they can therefore be changed like any other law by an Act of Parliament passed in the ordinary manner; in other words, the constitution is as to many of its provisions flexible"127. The flexibility to which Professor Dicey drew attention is not unbounded. It is expressly constrained by the terms in which s 51(xxxvi) of the Constitution confers authority on the Parliament to make laws with respect to "matters in respect of which this Constitution makes provision until the Parliament otherwise provides". Like other conferrals of legislative authority, that authority is conferred "subject to this Constitution". This special case was concerned with three matters falling within the scope of the authority conferred by s 51(xxxvi). One matter, in respect of which provision is made in s 30, is the qualification of electors of members of the House of Representatives. Provision in respect of that matter has a consequential effect through s 8, which makes the qualification of electors of senators the same as the qualification of electors of members of the House of Representatives. The other matters are the method of election of senators, for which provision is made in s 9, and the method of election of members of the House of Representatives, for which provision is made in s 31. Those other matters overlap in practice with the first; they always have. Legislation enacted by the Parliament under s 51(xxxvi) has always provided that, in order to vote at an election for the Senate or the House of Representatives, a person must be enrolled on the Electoral Roll for an Electoral Division. That was so under the Commonwealth Electoral Act 1902 (Cth) and remained so under the Commonwealth Electoral Act 1918 (Cth) ("the Act"). Enrolment on the Electoral Roll for an Electoral Division under the Act involves the taking of administrative action to enter a person's name on that Roll128. Taking that administrative action ordinarily depends on that person making a claim for enrolment or for transfer of enrolment129. The person is 127 Dicey, Introduction to the Study of the Law of the Constitution, 6th ed (1902) at 481-482. See now Allison (ed), The Law of the Constitution by A V Dicey, (2013) 128 Section 102. 129 Sections 98(1), 99(1) and (2). obliged to make such a claim forthwith on becoming entitled to do so as a consequence of meeting pre-requisites as to age, Australian citizenship, and residence in (or other relevant connection to) a Subdivision of the Electoral Division130. Only a person whose name appears on a Roll meets the statutory definition of an "elector"131 and only a person who is an elector has an entitlement to vote at an election132. The result is that "[e]nrolment is not merely evidence of an elector's qualification to vote; enrolment is itself a qualification to vote"133. The scheme of the Act is to make the close of the Rolls on a fixed date a step in the conduct of an election for the Senate or the House of Representatives. Together with dates for nomination, polling and return, a date for the close of the Rolls must be fixed by the writ for an election134. The date fixed by the writ for the close of the Rolls must be the seventh day after the issue of the writ135. Only persons whose names appear on the Rolls as electors at the close of the Rolls can vote in the election whether on polling136 or by pre-poll137 or postal vote138. In the conduct of the polling, the Rolls are conclusive evidence of the right of each person enrolled as an elector to be admitted to vote139. The Court of Disputed Returns, if required to adjudicate a dispute about the election following the return of the writ, must assume the Roll to be correct and is prevented from inquiring into its correctness140: the Court cannot "go behind the Electoral Roll and 130 Sections 93 and 101(1). 131 Section 4(1). 132 Section 93(2). 133 Muldowney v Australian Electoral Commission (1993) 178 CLR 34 at 40; [1993] HCA 32. 134 Section 152(1). 135 Section 155. 136 Part XVI. 137 Part XVA. 138 Part XV. 139 Section 221. 140 Section 361. determine whether a person who is not on the roll is none the less entitled to be on the roll"141. The issue for substantive determination in the special case concerned the validity of the currently legislated time for cutting off enrolment before an election. That time is 8.00pm on the date fixed for the close of the Rolls. The cut-off is implemented by provisions having the effect of suspending all administrative action directed to enrolment from that time until the close of the poll for the election142 with the result that claims for enrolment or transfer made during that period are not to be processed until after the election. Those provisions, which the plaintiffs impugned, were inserted into the Act in 2011 and Stripped of distractions of detail and ignoring some vagueness of temporal focus, the plaintiffs' essential argument was that cutting off enrolment before an election at 8.00pm on the date fixed for the close of the Rolls was not within the authority conferred on the Parliament by s 51(xxxvi). That timing of the cut-off was said to be repugnant to the requirements of ss 7 and 24 of the Constitution that senators and members of the House of Representatives be "directly chosen by the people". The repugnance was argued to lie in the cut-off of enrolment at that time resulting in the practical exclusion from voting of some people entitled to enrolment without substantial justification. Unable to accept that argument, I joined in formally answering the substantive questions posed in the special case to the effect that the provisions imposing the cut-off are not repugnant to ss 7 and 24 of the Constitution. My reasons are as follows. The major premise of the plaintiffs' argument must be accepted; acceptance is compelled by unchallenged authority. The view that the constitutional phrase "directly chosen by the people" might import "some requirement of a franchise that is held generally by all adults or all adult citizens unless there be substantial reasons for excluding them" was canvassed by 141 Snowdon v Dondas (1996) 188 CLR 48 at 75; [1996] HCA 27, quoting Re Brennan; Ex parte Muldowney (1993) 67 ALJR 837 at 840; 116 ALR 619 at 623; [1993] HCA 53. 142 Sections 94A(4), 95(4), 96(4), 102(4), 103A(5), 103B(5) and 118(5). 143 Electoral and Referendum Amendment (Enrolment and Prisoner Voting) Act 2011 (Cth); Electoral and Referendum Amendment (Maintaining Address) Act 2012 (Cth); Electoral and Referendum Amendment (Protecting Elector Participation) Act 2012 (Cth). Brennan CJ in McGinty v Western Australia144. The view had been foreshadowed by three members of the Court in Attorney-General (Cth); Ex rel McKinlay v The Commonwealth145. The view was subsequently taken up and acted upon by differently constituted majorities of four members of the Court in Roach v Electoral Commissioner146 and in Rowe v Electoral Commissioner147, in each case holding provisions of the Act repugnant to the requirements of ss 7 and 24 and therefore beyond the authority conferred on the Parliament by s 51(xxxvi) of the Constitution. A substantial reason, equating to a substantial justification, for an exclusion from the franchise was seen by the majority in each of Roach and Rowe to require the provisions effecting the exclusion to be judged "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government"148. That standard was acknowledged to be one bearing "affinity"149 to the second limb of the test articulated in Lange v Australian Broadcasting Corporation150 as reformulated in Coleman v Power151 for determining restriction of political compatibility of a provision which effects a communication with freedom of political implied constitutional the communication. The exclusion from the franchise held to lack substantial justification in Roach was a legal disqualification from voting of persons answering a given description: persons serving a sentence of imprisonment for an offence against a 144 (1996) 186 CLR 140 at 170; [1996] HCA 48. 145 (1975) 135 CLR 1 at 36, 69; [1975] HCA 53. 146 (2007) 233 CLR 162 at 174 [7], 182 [23], 198-199 [83], 199-200 [85]-[86]; [2007] HCA 43. 147 (2010) 243 CLR 1 at 19-21 [23]-[26], 56-62 [150]-[168], 118-121 [372]-[385]; [2010] HCA 46. 148 Roach (2007) 233 CLR 162 at 182 [24], 199 [85]; Rowe (2010) 243 CLR 1 at 20- 149 Roach (2007) 233 CLR 162 at 199 [86]. 150 (1997) 189 CLR 520 at 567; [1997] HCA 25. 151 (2004) 220 CLR 1 at 51 [95], 77-78 [196], 90-91 [236]; [2004] HCA 39. See Roach (2007) 233 CLR 162 at 199 [86]. law of the Commonwealth or of a State or Territory152. The exclusion from the franchise held to lack substantial justification in Rowe was a practical impediment to voting created by provisions which at that time set the cut-off for enrolment at 8.00pm on the day of the issue of the writ153, and the cut-off for transfer of enrolment three working days later154. The provisions held invalid in each of those cases had been newly inserted into the Act in 2006155. Why the requirements of ss 7 and 24 of the Constitution that senators and members be directly chosen by the people should invalidate legislative provisions which operate without substantial justification to impose legal or practical exclusions from the franchise is not difficult to explain. The explanation can be no different from that given for why those same requirements invalidate legislative provisions which operate without substantial justification to impose legal or practical restrictions on communication pertaining to the exercise of the franchise. "The great underlying principle" of the Constitution "that the rights of individuals are sufficiently secured by ensuring, as far as possible, to each a share, and an equal share, in political power"156 must inform the core operation of ss 7 and 24 in guaranteeing participation in the political process to no lesser extent than the same principle informs the penumbral operation of those sections in guaranteeing freedom of political communication. Hence the affinity of the test of substantial justification adopted in Roach and Rowe to the second limb of the test for compatibility with the implied freedom of political communication articulated in Lange. "Three great principles, representative democracy (by which I mean that the legislators are chosen by the people), direct popular election, and the national character of the lower House, may each be discerned in the opening words of s 24." The force of that observation, made by Stephen J in McKinlay157, applies equally to the opening words of s 7, addressed to the composition of the Senate. His Honour continued: 152 Section 93(8AA) of the Act as it appeared in Roach. 153 Section 102(4) as it appeared in Rowe. 154 Sections 102(4AA) and 155(1) as they appeared in Rowe. 155 Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth). 156 Harrison Moore, The Constitution of the Commonwealth of Australia, (1902) at 329, referred to in McCloy v New South Wales (2015) 89 ALJR 857 at 867 [27]- [28], 880 [110], 899 [219]; 325 ALR 15 at 24, 43, 67; [2015] HCA 34. 157 (1975) 135 CLR 1 at 56. "The principle of representative democracy does indeed predicate the enfranchisement of electors, the existence of an electoral system capable of giving effect to their selection of representatives and the bestowal of legislative functions upon the representatives thus selected. However the particular quality and character of the content of each one of these three ingredients of representative democracy, and there may well be others, is not fixed and precise." Imprecision is a characteristic of the conception of representative democracy captured by that observation. That characteristic must be embraced for the conception to be understood and applied. The "high purpose" of the requirements of ss 7 and 24 of the Constitution that senators and members of the House of Representatives be directly chosen by the people, to adopt language once used by McHugh J, is "to ensure representative government by insisting that the Parliament be truly chosen in a democratic election by that vague but emotionally powerful abstraction known as 'the people', a term whose content will change from time to time"158. The Constitution commits to the judiciary, in the last instance, the function of ensuring fidelity to a very large constitutional idea. To attempt to pin it down more tightly would be to fail to grasp its meaning; it defies being diced or squashed to fit within a judicially constructed box. The very nature of the conception enshrined in the language of ss 7 and 24 means that the point at which a choice by electors, for which provision is made in a law enacted by the Parliament under s 51(xxxvi), ceases to be describable as a choice by the people cannot be determined "in the abstract", must be a "question of degree" and must be a question which "depends in part upon the common understanding of the time"159. The understanding of the time, however, is not a concern of the moment or a hope for the future. What informs the content of the constitutional conception from time to time is the relatively stable and enduring understanding of the nature of our system of representative government, to be discerned by reference to the course of our national development up until that time. What is therefore of critical importance is that judicial discernment of the content of the requirements of ss 7 and 24 that senators and members be directly chosen by the people have regard to stable and enduring developments that have occurred within our system of representative government. 158 Langer v The Commonwealth (1996) 186 CLR 302 at 342; [1996] HCA 43. 159 McKinlay (1975) 135 CLR 1 at 36. Of equal importance is that judicial enforcement of those requirements be sensitive to the inherent strengths and weaknesses of institutional structures. The legislative authority conferred on the Parliament by s 51(xxxvi), it must always be borne in mind, falls to be exercised by the Senate and the House of Representatives as constituted at the time of that exercise, either each voting separately by majority160 or voting together in a joint sitting by absolute majority161. Responding in 1988 to terms of reference which required it to inquire into and report on the potential for revision of the Constitution to "adequately reflect Australia's status as ... a Federal Parliamentary democracy", the Constitutional Commission (chaired by Sir Maurice Byers QC and including Professor Enid Campbell, the Hon Sir Rupert Hamer, the Hon Edward Gough Whitlam QC and Professor Leslie Zines) stated in its Final Report162: "Democracy, like other forms of government, has to do with power relationships – the power which different people, in different capacities, have over one another. What distinguishes a democracy from other forms of government is that the people who are to be governed have an opportunity to decide, freely and at regular intervals, who is to have authority to govern them and according to what policies. The people express their choices by voting at periodic elections of candidates for legislative office, and sometimes other governmental offices as well. The franchise – entitlement to vote – in a democratic system is broadly based and each elector has only one vote." The Constitutional Commission went on to state that "[a] democratic system of government is commonly thought to require a good deal more than the basic elements" described by Stephen J in McKinlay. "The electoral system", they stated, "has to ensure that electors are able to vote freely so that 'neither the incumbent government nor any other group can determine the electoral result by means other than indications of how they will act if returned to power.'"163 Underlying the requirements of ss 7 and 24 that senators and members be directly chosen by the the relationship between judicial enforcement of 160 Sections 23 and 40 of the Constitution. 161 Section 57 of the Constitution. 162 Australia, Final Report of the Constitutional Commission, (1988), vol 1 at 127 163 Australia, Final Report of the Constitutional Commission, (1988), vol 1 at 127 people, on the one hand, and legislative exercise of the wide and flexible authority conferred by s 51(xxxvi) in respect of the qualification of electors and the conduct of elections, on the other hand, is the inherent potential for that legislative authority to be exercised to exclude from the political process persons whose participation is unwanted by, or inconvenient to, those who currently form majorities in the Senate and the House of Representatives. That point was made by Gummow and Hayne JJ when they observed that an appreciation of the interests involved is assisted by reference to the United States experience captured in the observation of Professor Laurence Tribe that "[f]ew prospects are so antithetical to the notion of rule by the people as that of a temporary majority entrenching itself by cleverly manipulating the system through which the voters, in theory, can register their dissatisfaction by choosing new leadership"164. Roach and Rowe illustrate the judiciary's role in safeguarding against the introduction by a current Parliament of restrictions on the franchise which would unjustifiably compromise the representative nature of a future Parliament. Those cases do not point to some broader judicial mandate. Cutting off enrolment at 8.00pm on the day of the close of the Rolls has the practical effect of excluding, from voting in a particular election, persons who are entitled to enrol yet who through ignorance or inertia do not claim to enrol before that cut-off. The imposition of the cut-off having been challenged by the plaintiffs as incompatible with the core operation of ss 7 and 24, the substantive question raised for judicial determination was therefore whether that exclusion was for a substantial reason. The problem for the plaintiffs was at the next level of the analysis. The problem was exacerbated by the plaintiffs' treatment of the question of whether there was a substantial justification for the exclusion as one which needed to be answered through the application of standardised "proportionality testing". That approach led the plaintiffs to advance stylised propositions, acceptance of any one of which, they argued, was enough to show that the cut-off fell foul of the constitutional requirement for choice by the people. The propositions were advanced in cascading form. There was, the plaintiffs put as their first proposition, "no rational connection" between the legislated cut-off for enrolment and what they accepted to be the legitimate legislative goal of ensuring enrolment before voting; the administrative processes required to be undertaken in order to ensure the conduct of an orderly election had not been shown to need so much time between 164 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 237-238 [157]; [2004] HCA 41. enrolment and voting. There were, the plaintiffs next put, "less restrictive means" of achieving the legitimate legislative goal of ensuring enrolment before voting which would give more time for enrolment; a viable alternative, variations of which have recently been adopted in electoral laws in some States, would be to permit enrolment up to or including on the day of polling. Finally, said the plaintiffs, the legislated cut-off was "not adequate in its balance"; such benefit as the cut-off might produce in terms of orderly electoral administration was outweighed by the detriment it caused in terms of the numbers of persons who are entitled to enrol yet do not claim enrolment before the cut-off. My reservations about the appropriateness of importing such a structured and prescriptive, and ultimately open-ended, form of proportionality testing into our constitutional setting have been expressed elsewhere165. The plaintiffs' attempt to shoehorn their argument within it highlights the inappropriateness of attempting to apply such a form of proportionality testing here. What is at best an ill-fitted analytical tool has become the master, and has taken on a life of its own. I can accept that each of the inquiries into which the plaintiffs invited the Court to enter is within the Court's institutional competence. What I cannot accept is that entering into any of those inquiries, other than what might perhaps be regarded as a variation of the first of them, is warranted by performance of the Court's constitutional role in the circumstances of this case. Left out of the plaintiffs' analysis, or at least pushed to the bottom (to bob up if at all only at the final stage of balancing), is the important consideration that closure of the Rolls is and has always been a step in the conduct of an election under our national electoral law. From 1902 to 1983 the Rolls closed on the day of issue of the writ, albeit that an executive practice of announcing an election some days before the issue of the writ resulted in a "period of grace" in which to claim enrolment from at least the 1930s. Closure of the Rolls on the seventh day after the issuing of a writ was introduced in 1983166, extending the statutory period for enrolment that had existed until then. The effect of the decision in Rowe, declaring relevant 2006 amendments to the Act to be invalid, was to continue the position introduced in 1983 until formally replaced by the challenged provisions in 2011 and 2012. Nothing of substance has changed. The impugned provisions do no more than give contemporary expression to a standard incident of the traditional legislative scheme for the orderly conduct of national elections. That is the reason for them, and that reason is substantial. 165 McCloy v New South Wales (2015) 89 ALJR 857 at 885-888 [141]-[152]; 325 ALR 166 Commonwealth Electoral Legislation Amendment Act 1983 (Cth). Whether or not cutting off enrolment at a fixed time seven days after the issue of a writ might be regarded as outmoded, that cut-off is not so unfit for the purpose for which it was long ago designed that it can no longer be said to be reasonably appropriate and adapted to serve that purpose. Stricter scrutiny is not warranted, and greater justification is not required. Unlike Roach and Rowe, this is not a case in which provisions impugned have expanded an exclusion from the franchise. for an offence could be Recall that the provisions held invalid in each of Roach and Rowe were novel when introduced into the Act in 2006. Extrinsic material in Roach showed that the new disqualification from voting of all persons serving any sentence of imprisonment the disenfranchisement from time to time of perhaps up to 10,000 persons, many of them indigenous, who were serving short terms of imprisonment yet otherwise entitled to vote. The agreed facts in Rowe demonstrated that the new contraction of the cut-off for enrolment to the date of the issue of the writs resulted at the 2010 general election in disenfranchising about 100,000 persons who had then made claims for enrolment after the issue of the writs and before the close of the Rolls. The agreed facts also allowed for the inference to be drawn that the burden of that disenfranchisement was shouldered by persons newly qualified for enrolment in the age bracket of 18 to 25. foreseen result The point of recalling those circumstances is not to dwell on the absolute numbers of those disenfranchised but rather to indicate the tendency of the disenfranchisement in each of Roach and Rowe to freeze out of the political process discrete minority interests. That tendency engaged to a significant degree the central concern underlying the constitutional tempering of the Parliament's wide and flexible authority to determine the qualification of electors and the method of election through insistence on a judicially enforceable core requirement that senators and members of the House of Representatives remain directly chosen by the people. The circumstances of those cases are a long way from the circumstances of this case. The most that could be said in this case was that the agreed facts supported an inference that significantly more persons could have been expected to enrol in time to vote at the 2013 and 2016 general elections if the time of the cut-off for enrolment, reimposed in 2011, had not been that introduced in 1983 but some other time closer to or including the time of polling. There was an agenda that should be acknowledged. Under the guise of inviting the Court to assess the rationality of the timing of the cut-off, to examine the availability of less restrictive alternative means of achieving its purpose, and to weigh the adequacy of its balance, the plaintiffs would have had the Court engage in a process of electoral reform. Through the application of an abstracted top-down analysis, they would have had the Court compel the Parliament to maximise the franchise by redesigning the legislative scheme to adopt what the plaintiffs put forward currently to be best electoral practice. To seek to compel such a result by those means might be all well and good in a constitutional system in which a function of the judiciary is understood to be the enhancement of political outcomes in order to achieve some notion of Pareto-optimality167. That is not our system. The plaintiffs' efforts to expand the franchise would be better directed to the Parliament than to the Court. 167 Eg Alexy, A Theory of Constitutional Rights, Proportionality: Constitutional Rights and their Limitations, (2012) at 364-365. 111 KEANE J. The plaintiffs challenged the validity of certain sections of the Commonwealth Electoral Act 1918 (Cth) ("the Act"). Their contention was that the sections of the Act that suspend the enrolment of persons who seek to enrol to vote in federal elections, and the transfer of enrolment of persons already enrolled, during the period from 8 pm on the day of the close of the rolls for the election until the completion of polling ("the suspension period") are contrary to ss 7 and 24 of the Constitution. Enrolment has been a condition of the right to vote since Federation168. Enrolment was voluntary until the obligation on adult citizens to enrol was introduced in 1911169. Voting was voluntary until the obligation to vote was introduced in 1924170. The roll has been used to identify those persons who are obliged to vote since the introduction of compulsory voting. The roll has been, and is, used to determine whether a person has the support of a sufficient number of electors to be nominated as a candidate for election171. The roll must be available for public inspection to allow for objections to be made to the enrolment of a person172. The roll also serves to identify persons entitled to cast a vote before polling day173. Since Federation, the rolls for federal elections have always closed before polling day. Between 1902 and 1983, rolls for federal elections closed on the day the writs for a general election were issued. In 1983, the Commonwealth Electoral Legislation Amendment Act 1983 (Cth) ("the 1983 Amendment Act") introduced a period of time between the issue of the writs and the close of the rolls ("the grace period") during which claims for enrolment or transfer of enrolment could be accepted. This was a period of seven days after the issue of the writs. The grace period was removed for new enrolments and "significantly abridged for transfers of enrolment"174 by the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) ("the 2006 168 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 17 [16]; [2010] HCA 46. 169 Commonwealth Electoral Act 1911 (Cth), s 8. 170 Commonwealth Electoral Act 1924 (Cth), s 2. 171 Commonwealth Electoral Act 1918 (Cth), s 166(1)(b). 172 Commonwealth Electoral Act 1918 (Cth), ss 90A, 114-118. 173 Commonwealth Electoral Act 1918 (Cth), ss 200A, 200BA, 200C, 200D. 174 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 12 [3]. Amendment Act"). In Rowe v Electoral Commissioner175, two citizens challenged certain provisions of the 2006 Amendment Act: one had turned 18 shortly before the 2010 election had been announced and had not been enrolled when the writs for that election had issued; and the other had moved from one electoral division to another and his claim to transfer his enrolment had been lodged after the rolls had closed under the 2006 Amendment Act. This Court upheld their challenge to the validity of those provisions. Subsequently, the Act was amended to restore the grace period176. The proceedings The plaintiffs contended that, notwithstanding the legislative restoration of the grace period, the suspension period impedes enrolment, which in turn reduces the opportunity for citizens to vote. The plaintiffs did not challenge the requirement of enrolment as a qualification to vote, but contended that the failure of the Act to provide for enrolment on polling day is contrary to the Constitution, and renders the suspension period invalid. Thus, the plaintiffs argued that the suspension period, moderated by the grace period, which has been part of our electoral law since 1983 (save for the life of the challenged provisions of the 2006 Amendment Act), must now be seen to operate as a burden on the choice by the people required by the Constitution. This argument depends on two propositions: first, that an electoral law which does not maximise the opportunity of every potential voter to enrol to vote is inconsistent with choice by the people as contemplated by ss 7 and 24 of the Constitution; and secondly, that this inconsistency has emerged over time to invalidate laws (which may previously have been valid) by reason of changes in the technological resources available to maximise voting opportunities. Neither of these propositions should be accepted. This Court's decision in Rowe does not require a different conclusion. Pursuant to r 27.08 of the High Court Rules 2004 (Cth), the plaintiffs and the second defendant ("the Commonwealth") agreed to state questions of law for the opinion of the Court in a special case. At the conclusion of the hearing of this matter, the Court answered the questions posed by the parties as follows: Question 1: Do one or both of the first plaintiff and the second plaintiff have standing to seek the relief sought in paragraphs 1, 2, 3 and/or 4 of the Further Amended Application for an Order to Show Cause? 175 (2010) 243 CLR 1. 176 By the Electoral and Referendum Amendment (Enrolment and Prisoner Voting) Act 2011 (Cth). Answer: Question 2: The second plaintiff has standing and it is otherwise unnecessary to answer the question with respect to the first plaintiff. Are any or all of sections 94A(4), 95(4), 96(4), 102(4), 103A(5), 103B(5) and 118(5) of the Commonwealth Electoral Act 1918 (Cth) contrary to ss 7 and 24 of the Constitution and therefore invalid? Answer: Question 3: If the answer to Question 2 in relation to a section is yes, do sections 152(1)(a) and 155 of the Act have the same or substantially the same operation or effect as the impugned provisions or any of them and, if so, are sections 152(1)(a) and 155 invalid and of no effect? Answer: The question does not arise. Question 4: If the answer to Question 2 or Question 3 in relation to a section is yes, is that section, or are those sections, severable from the rest of the Act? Answer: The question does not arise. Question 5: What if any relief should be granted? Answer: None. Question 6: Who should pay the costs of the special case? Answer: The first plaintiff. The following are my reasons for joining in the answers given by the Court. It is necessary to begin by summarising the impugned provisions of the Act in the context of the Act as a whole. The Act and the impugned provisions Overview The Act establishes the structure by which the choice by the people is to be made. By way of overview, it may be noted that the Act provides for the entitlement to vote, the creation of the electoral roll and the enrolment of voters, objections to enrolment, voting, counting and scrutiny of votes, the number of members of the House of Representatives, the creation of electoral divisions ("Divisions") for the House of Representatives, the registration of political parties and the nomination of candidates. All these matters are germane to the choice by the people contemplated by ss 7 and 24 of the Constitution. Section 4(1) defines terms used in the Act. Relevantly, an "Elector" is "any person whose name appears on a Roll as an elector." The "Roll" is "an Electoral Roll under this Act." A "declaration vote" is a "postal vote", a "pre-poll declaration vote", an "absent vote", or a "provisional vote". Part II of the Act provides for the administrative functions of the Australian Electoral Commission ("the AEC"), the Electoral Commissioner ("the Commissioner") and staff of the AEC. Part III provides for the representation of the States and Territories in the Senate and the House of Representatives. Part IV provides for the distribution of each State and Territory into Divisions. There is currently no Division that is divided into Subdivisions. Accordingly, references in the Act to a Subdivision should be read as references to the relevant Division. Sections 81 and 82 provide that there shall be a roll of the electors for each State and for each Territory and a roll for each Division. Section 83 provides for the form of the rolls. Section 111 permits the Commissioner to record or store particulars of a roll on a mechanical or electrical device. Section 93 provides that persons who have attained 18 years of age and who are Australian citizens are entitled to be added to a roll for a Division. Section 98 provides that names may be added to a roll pursuant to claims for enrolment or transfer of enrolment. Sections 99B and 100 allow persons who are due to be granted citizenship between the issue of the writs and polling day, or who are due to attain the age of 18 years in that period, to enrol to vote at the election. Section 101(1) provides that, subject to exceptions not presently relevant, any person who is entitled to be enrolled for any Division "whether by way of enrolment or transfer of enrolment, and whose name is not on the Roll, shall forthwith fill in and sign a claim and send or deliver the claim to the ... Commissioner." Section 101(4) provides that, subject to an exception which is presently immaterial, every person "who is entitled to have his or her name placed on the Roll" whose name is not on the roll at the expiration of 21 days from the date on which the person became so entitled commits an offence. Section 102 provides that the Commissioner must, upon receipt of a claim for enrolment or transfer, enter the claimant's name on the roll or notify the claimant that the claim is not in order and has been rejected. The Commissioner may also make any inquiries that he or she thinks necessary before dealing with a claim. Section 114 provides for objections to enrolment. Electors may make objections to the enrolment of another person. The Commissioner shall object to the enrolment of a person if there are reasonable grounds for believing that the person is not entitled to be enrolled. The determination of objections to enrolment is dealt with by the process set out in ss 116 and 118. Pursuant to ss 12, 32 and 33 of the Constitution, an election commences upon the issue of writs for elections. Section 152(1) of the Act provides that the writs for the election of senators for States, senators for Territories or members of the House of Representatives shall fix the date for: the close of the rolls; the nomination; the polling; and the return of the writs. Section 155 of the Act fixes the date for the close of the rolls as seven days after the date on which the writs are issued. Section 208(1) provides that the Commissioner must arrange for a certified list of voters for each Division. Section 208(2) provides that the list must include the name of each person who is on the roll for the Division, will be at least 18 years old on polling day and is not excluded from voting because the person is serving a sentence of imprisonment of three years or longer. Section 208(3) provides that the Commissioner must deliver to the presiding officer at each polling place, before the start of voting, a copy of the certified list for the Division. An "approved list" is defined in s 4(1) to mean a list in electronic form that contains the same information as the most recent certified list of voters for a Division and is approved by the Commissioner for use in connection with voting under the Act. Section 208A provides that the Commissioner may arrange for the preparation of approved lists and make such lists available for use by an officer in connection with voting under the Act. Outside of the scheme of the Act, the AEC also maintains a version of the rolls known as the "Notebook Roll". The Notebook Roll is used to manage applications for enrolment or changes to the roll, including the removal of electors and reinstatement of eligible voters, received before the suspension period but not processed before the printing of the lists. The Notebook Roll is electronic and can be printed for use by AEC officials. The purpose of maintaining the Notebook Roll is to assist in processing updates to the roll in order to facilitate the scrutiny of declaration votes. Declaration votes include provisional votes under s 235, which applies to a person claiming to vote if the person's name cannot be found on the certified or approved lists for the Division in which the person claims to vote, or because of some other procedural irregularity in the person's details on the lists, or due to the person's responses to certain questions about the person's details on the lists, or if the person is provisionally enrolled. Section 235(2) provides that a person to whom s 235 applies may cast a provisional vote if the person signs a declaration in the approved form directed to the Divisional Returning Officer ("DRO") for the Division in which the person claims to be enrolled. Part XXII of the Act deals with disputed elections and returns. It provides, by s 354, for a Court of Disputed Returns, the jurisdiction of which is enlivened by a petition under s 355. By virtue of s 361(1), the jurisdiction of the Court of Disputed Returns does not extend to an inquiry "into the correctness of any Roll." The impugned provisions Section 102(1) provides that, where the Commissioner receives a valid claim for enrolment or transfer of enrolment pursuant to s 101, the Commissioner must enter the name of the claimant on the roll for the Division in respect of which the claim was made. Subject to an exception for delays caused by postal service malfunction, s 102(4) provides that a claim under s 101 will not be considered if it is received during the suspension period. Section 94A provides for the application for enrolment of persons outside Australia who intend to resume residing in Australia. Section 95 provides for the application for enrolment of the spouse, de facto partner or child of an eligible overseas elector. Section 96 provides for the application for enrolment of itinerant electors. Sub-section (4) of each of ss 94A, 95 and 96 provides that the Commissioner must not add to the roll the name of any person who makes an application for enrolment under those sections that is received by the Commissioner during the suspension period. Section 103A(5) provides that where a person lives at an address other than the person's address entered on a roll, the Commissioner must not take action to enter the person's name on a new roll within the suspension period. Section 103B(5) provides that where a person is entitled to enrolment and has lived at an address in a Division for at least one month and is not enrolled, the Commissioner must not take action to enter the person's name on the roll for the relevant Division within the suspension period. Section 118(5) provides that where an objection is made pursuant to s 114 to the enrolment of a person for a Division, the Commissioner must not remove a person's name from the roll for a Division within the suspension period. The Constitution It is necessary now to refer to ss 7 and 24 of the Constitution and to the context in which they appear. Section 7 of the Constitution provides, relevantly: "The Senate shall be composed of senators for each State, directly chosen by the people of the State, voting, until the Parliament otherwise provides, as one electorate." It may be noted that the language in which s 7 is cast treats the direct choice by the people of each State as something different from the activity of voting. Significantly, given that the plaintiffs' argument proceeded upon the view that choice by the people is synonymous with voting, the activity of voting is spoken of in s 7 as an aspect, indeed an essential aspect, but not the totality, of the choice by the people. Section 41 of the Constitution confirms that the choice by the people contemplated by ss 7 and 24 is not co-extensive with voting, at least in so far as the right to vote is conferred by federal law. It provides relevantly that: "No adult person who has or acquires a right to vote at elections for the more numerous House of the Parliament of a State shall … be prevented by any law of the Commonwealth from voting at elections for either House of the Parliament of the Commonwealth." Section 24 of the Constitution provides, relevantly: "The House of Representatives shall be composed of members directly chosen by the people of the Commonwealth, and the number of such members shall be, as nearly as practicable, twice the number of the senators." It may be noted here that the references in ss 7 and 24 to direct choice by the people were included to ensure that modes of indirect representation, such as selection by State legislatures or by an electoral college, not be adopted by the Parliament177. 177 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 21, 44, 56, 61; [1975] HCA 53; McGinty v Western Australia (1996) 186 CLR 140 at 279; [1996] HCA 48. Section 8 of the Constitution provides: "The qualification of electors of senators shall be in each State that which is prescribed by this Constitution, or by the Parliament, as the qualification for electors of members of the House of Representatives; but in the choosing of senators each elector shall vote only once." This provision (together with ss 9, 27, 29 and 30) is a vital part of the context in which ss 7 and 24 appear in the Constitution. The terms of s 8 make it clear that the electors for the Senate were not required by the Constitution to be all the people of the Commonwealth. Section 9 of the Constitution provides, relevantly: "The Parliament of the Commonwealth may make laws prescribing the method of choosing senators, but so that the method shall be uniform for all the States." Section 27 of the Constitution provides: "Subject to this Constitution, the Parliament may make laws for increasing or diminishing the House of Representatives." the members of the number of Section 29 of the Constitution provides, relevantly: "Until the Parliament of the Commonwealth otherwise provides, the Parliament of any State may make laws for determining the divisions in each State for which members of the House of Representatives may be chosen, and the number of members to be chosen for each division." Section 30 of the Constitution provides: "Until the Parliament otherwise provides, the qualification of electors of members of the House of Representatives shall be in each State that which is prescribed by the law of the State as the qualification of electors of the more numerous House of Parliament of the State; but in the choosing of members each elector shall vote only once." It was left by the Constitution to the Parliament to determine, subject to s 41 of the Constitution, the qualifications, for example, of age and gender, of the electors through whom the choice by the people would be made. As Gummow J said in McGinty v Western Australia178: 178 (1996) 186 CLR 140 at 279. "the selection of those from among the population who were to be empowered to make the electoral choice was left by s 24 to s 30 of the Constitution." And so, at Federation, although infants and women were indisputably people of the Commonwealth, they were not qualified as electors179. Nor was it thought that choice by the people of the Commonwealth required compulsory voting by all of the people who might be qualified to vote180. The provision for Parliament to "otherwise provide" in ss 29 and 30 reflects a deliberate decision to allow the Parliament to choose the form of representative government and the electoral system by which it would be established181. In this regard, s 51(xxxvi) of the Constitution provides that the Commonwealth Parliament may make laws with respect to matters in respect of which the Constitution "makes provision until the Parliament otherwise provides". Sections 12, 32 and 33 of the Constitution provide for writs to be issued for elections of senators for each State, general elections of the House of Representatives and vacancies in the House of Representatives. A writ commands the Commissioner to hold an election and states the dates for the close of the rolls, the close of nominations, the polling day and the date for the return of the writ. Under s 12, the State Governors issue the writs for the States' Senate elections, which by convention follows a request by the Governor-General, and s 32 provides that writs issued by the Governor-General in Council for general elections of members of the House of Representatives "shall be issued within ten days from the expiry of a House of Representatives or from the proclamation of a dissolution thereof." These provisions contemplate a process which commences with the issue of the writs for the elections. It was left to the Parliament to address the issues which arise in relation to the organisation of the structure and operation of the process whereby the choice 179 Roach v Electoral Commissioner (2007) 233 CLR 162 at 173-174 [5]-[6]; [2007] HCA 43. 180 Judd v McKeon (1926) 38 CLR 380 at 383, 385, 390-391; [1926] HCA 33. 181 McGinty v Western Australia (1996) 186 CLR 140 at 184, 269, 280-282; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 188 [6], 207 [64], 236-237 [154]; [2004] HCA 41; Rowe v Electoral Commissioner (2010) 243 CLR 1 at 22 [29], 49-50 [125], 121 [386]. by the people was to be made. As was said by French CJ, Kiefel, Bell and Keane JJ in McCloy v New South Wales182: "Sections 7 and 24 contemplate legislative action to implement the enfranchisement of electors, to establish an electoral system for the ascertainment of the electors' choice of representatives183 and to regulate the conduct of elections 'to secure freedom of choice to the electors'.184" The plaintiffs' submissions As noted earlier, the plaintiffs took no issue with enrolment as a necessary condition of the entitlement to vote; they argued that, because enrolment on polling day is now technologically possible, the constitutional mandate to maximise voting opportunity now requires nothing less than the adoption of polling day enrolment. Citing the reasons of Gummow and Bell JJ in Rowe185, the plaintiffs argued that a burden on voting is justifiable in terms of ss 7 and 24 only if it serves "the end of making elections as expressive of the popular choice as practical considerations properly permit." They argued that the practical effect of the impugned provisions is the same as the provisions struck down in Rowe in that they prevent enrolment to vote by persons who would otherwise be entitled to vote. The plaintiffs argued that the suspension of enrolment prior to polling day, even moderated by the grace period, can now be seen, by reason of the practical possibility of maximising the number of voters, to be a burden on the choice by the people of a State or a Division. The plaintiffs then argued that the validity of the burden on the constitutional mandate should be determined by a test which bears an affinity to the second limb of the test articulated in Lange v Australian Broadcasting Corporation186 and applied by this Court in McCloy. Applying that analysis, the plaintiffs submitted that there are two obvious and compelling alternatives to the suspension period which could be adopted to 182 (2015) 89 ALJR 857 at 869 [42]; 325 ALR 15 at 27; [2015] HCA 34. 183 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 56; McGinty v Western Australia (1996) 186 CLR 140 at 182. 184 Smith v Oldham (1912) 15 CLR 355 at 358; [1912] HCA 61. 185 (2010) 243 CLR 1 at 57 [154]. 186 (1997) 189 CLR 520 at 567; [1997] HCA 25. achieve the same end without impeding the constitutional mandate to maximise the opportunity of citizens to vote187. The first would be to permit enrolment up to and including polling day, as may now occur under the electoral laws of the States of New South Wales and Victoria. The second alternative would be to provide a suspension period calculated back from the date of the election rather than forwards from the date of the writs. This would permit people to enrol or update their enrolments for a longer period than under the impugned provisions. An example of this alternative was said to be afforded by the law in Queensland, where people can enrol for State elections until 6 pm on the day before the election. The Commonwealth's submissions In the Commonwealth's submission, it is not possible to view the function of the impugned provisions as something separate from the function of the roll itself. The use of the roll facilitates the production of certified and approved lists for use on polling day, thus creating certainty as to the persons entitled to vote, thereby avoiding delays and uncertainty at the polling booth, and facilitating the prompt and efficient scrutiny of votes after the completion of the poll. The "closure" that is inherent in the concept of a roll was said to facilitate these aspects of the electoral process. The Commonwealth submitted that the roll represents a choice by Parliament as to the nature of the electoral system in which a citizen's qualification as an elector is determined by the criterion of enrolment. It is therefore wrong to speak of a person who is not enrolled when the rolls close as "otherwise entitled to vote". As Brennan ACJ said in Muldowney v Australian Electoral Commission188, "[e]nrolment is not merely evidence of an elector's qualification to vote; enrolment is itself a qualification to vote." The Commonwealth argued that the roll and its closure before polling is central to the electoral system devised by the Parliament, and in particular the necessity to ensure that the roll is accurate as a statement of the entitlement to vote before the poll takes place. The centrality of the roll was said to be confirmed by s 361 of the Act, which "assum[es] the Roll to be correct" for the purposes of an inquiry by the Court of Disputed Returns into whether votes were improperly admitted or rejected, and does not permit that Court to "inquire into the correctness of any Roll." 187 McCloy v New South Wales (2015) 89 ALJR 857 at 876 [81]; 325 ALR 15 at 36. 188 (1993) 178 CLR 34 at 40 (footnote omitted); [1993] HCA 32; cf Rowe v Electoral Commissioner (2010) 243 CLR 1 at 16 [13], 18 [17], 52 [133]. The Commonwealth argued that the suspension period, as moderated by the grace period, does not operate to disqualify citizens from the franchise; rather, it suspends any changes being made to the roll for a short period to allow for the orderly conduct of the election. Any person who is unenrolled at the time of the issue of the writs will not be prevented from voting by virtue of the suspension period because every such person has the opportunity to enrol during the grace period. The Commonwealth submitted that Rowe did not support the contention that any provision that operates to prevent a person from enrolling at any time disqualifies that person from the franchise189. It was said that the challenge which succeeded in Rowe was to a law which would allow the executive government to abrogate an opportunity for enrolment to vote which citizens had enjoyed for many years by reason of the grace period. It was said that nothing in Rowe cast doubt on the validity of the arrangements which included the grace period. The Commonwealth disputed the plaintiffs' contention that the validity of the impugned provisions should be determined by "proportionality analysis" of the kind discussed in Lange and McCloy. In the Commonwealth's submission, the existence of an alternative measure by which the popular choice might be determined does not demonstrate the incompatibility of the existing measure with choice by the people. In addition, it was said that a Lange-style analysis should not be applied because it is inconsistent with the broad conferral of power by the Constitution upon the Parliament in relation to the creation of the electoral system to apply a prescriptive proportionality test to the validity of the provisions made by the Parliament. The Commonwealth also noted that it is not an agreed fact, and there is no evidence before the Court, that the AEC currently has the capability to process enrolment claims on polling day at polling stations. The Attorney-General for South Australia The Attorney-General for South Australia intervened in support of the involve a Commonwealth, arguing "disqualification" of any would-be voter, and against testing the validity of the suspension provisions by recourse to a proportionality analysis. the present case does not that Standing The first question posed by the special case was as to the plaintiffs' standing to make their challenge. The first plaintiff was enrolled to vote for the 189 (2010) 243 CLR 1 at 38-39 [78], 58-59 [160], 119 [381]. Division of Wills in the State of Victoria. He intended to vote in that Division for his representative and senators at the then forthcoming federal election. On this basis, the Commonwealth objected that he "has no more interest than anyone else in clarifying what the law is"190, in that he did not seek to have his "rights and position clarified" by the orders he sought by way of relief191. In order to avoid that difficulty, the first plaintiff applied for, and the Commonwealth consented to, the joinder of Ms Scurry as the second plaintiff in the action. Ms Scurry intended to become an independent candidate for the Division of Newcastle, for which she had previously stood as an independent candidate. The Commonwealth conceded that Ms Scurry had standing to make the arguments advanced by the plaintiffs and that the question as to standing posed by the parties in the special case should be answered accordingly. The Commonwealth's concession was rightly made. On the footing that Ms Scurry would, in fact, be a candidate for election, she had an interest in the validity of laws which would have affected her candidacy. She had an interest beyond that of the general public in the entitlement of electors to vote. In this regard, she was required to obtain the signatures of "not less than 100 electors entitled to vote at the election" to support her nomination as a candidate192. In addition, a candidate at an election who fails to obtain a certain number of votes forfeits the deposit193 which is required to accompany the candidate's nomination form194. Further, subject to achieving a certain minimum number of eligible votes polled in the election195, a candidate is entitled to be paid $1.50 for each first preference vote cast in his or her favour196. Further, a candidate is entitled to dispute the outcome of the election in his or her Division197. 190 Kuczborski v Queensland (2014) 254 CLR 51 at 106 [176]; [2014] HCA 46. 191 Pharmaceutical Society of Great Britain v Dickson [1970] AC 403 at 433, cited with approval in Croome v Tasmania (1997) 191 CLR 119 at 127; [1997] HCA 5. 192 Commonwealth Electoral Act 1918 (Cth), s 166(1)(b)(i). 193 Commonwealth Electoral Act 1918 (Cth), s 173(1). 194 Commonwealth Electoral Act 1918 (Cth), s 170(2)(b). 195 Commonwealth Electoral Act 1918 (Cth), s 297. 196 Commonwealth Electoral Act 1918 (Cth), s 294. 197 Commonwealth Electoral Act 1918 (Cth), s 355(c). Accordingly, it was not necessary to determine whether the first plaintiff had standing to bring these proceedings in order to answer the question posed as to standing in the affirmative. Maximising the opportunity to vote Constitutional bedrock and the Parliament Sections 7 and 24 of the Constitution were described in Roach v Electoral Commissioner198 as "constitutional bedrock". On this foundation, the political sovereignty of the people of the Commonwealth through their elected representatives is established199. It is not to go beyond the ordinary and natural reading of the constitutional text to understand ss 8, 9, 27, 29 and 30 of the Constitution as authorising only laws which are compatible with the choice by the people contemplated in ss 7 and 24. The question is whether the impugned provisions are not compatible with that choice. While it is not to be supposed that the Parliament may impede the making of the choice by the people contemplated by ss 7 and 24 of the Constitution, to say this is not to postulate a theoretical ideal200 of representative democracy by which the measures enacted by Parliament are to be judged. It is not permissible to deduce from one's "own prepossessions"201 of representative democracy a set of irreducible standards against which the validity of Parliament's work may be tested. As Brennan CJ said in McGinty202: "It is logically impermissible to treat 'representative democracy' as though it were contained in the Constitution, to attribute to the term a meaning or content derived from sources extrinsic to the Constitution and then to invalidate a law for inconsistency with the meaning or content so attributed." 198 (2007) 233 CLR 162 at 198 [82]. 199 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 560; Unions NSW v New South Wales (2013) 252 CLR 530 at 548 [17], 578 [135]; [2013] HCA 200 McGinty v Western Australia (1996) 186 CLR 140 at 169, 244-245. 201 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 202 (1996) 186 CLR 140 at 169. Parliament's broad powers to make laws to establish and regulate the process by which the choice by the people is to be made are not constrained by some judicially enforceable standard of representative democracy. If they were, this Court's decisions rejecting the argument that the Constitution required that electoral laws provide, as near as reasonably possible, for each vote to have the same value in electing candidates to the House of Representatives might well have been decided differently203. In the context in which ss 7 and 24 appear, the choice by the people which those sections contemplate is required by the Constitution to be effected pursuant to an electoral system to be established by the Parliament; but while a broad discretion is reposed in the Parliament, it is not beyond judicial review204. In Attorney-General (Cth); Ex rel McKinlay v The Commonwealth205, McTiernan and Jacobs JJ said that the electoral arrangements made by the Parliament might be such that "choice by electors could cease to be able to be described as a choice by the people of the Commonwealth." In Langer v The Commonwealth206, Toohey and Gaudron JJ explained that the phrase "chosen by the people", understood in its context, "prohibits any feature [of legislation] that prevents it being said that the Senate or the House of Representatives is … composed of persons 'chosen by the people'." These observations do not, however, support the notion that a failure to maximise voting opportunity has the prohibited effect. Only in the reasons of Gummow and Bell JJ in Rowe is there arguable support for the view that the constitutional role of the Parliament in relation to the electoral system is constrained by a mandatory requirement of maximum participation in voting207. And, as will be said, to ascribe that view to their Honours' observations is to misstate their effect. 203 See Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 17, 44, 55-57, 61-62; McGinty v Western Australia (1996) 186 CLR 140 204 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7]. 205 (1975) 135 CLR 1 at 36. 206 (1996) 186 CLR 302 at 333; [1996] HCA 43. See also Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7], 197-198 [78]-[79]. 207 (2010) 243 CLR 1 at 50-52 [126]-[133], see also at 20-21 [24]-[25], 38-39 [78], A burden on the mandate? The first step in the plaintiffs' argument was that the choice contemplated by ss 7 and 24 of the Constitution can only be achieved by electoral arrangements which maximise the opportunity for citizens to vote on polling day. If it were indeed the case that the constitutional requirement of choice by the people were synonymous with the activity of voting on polling day, the plaintiffs' argument would gain a foothold in the jurisprudence which prohibits legislation that prevents choice by the people208. But the plaintiffs erred in fixing their focus narrowly upon the act of voting as if it exhausted the content of the concept of choice by the people. They thereby removed from view the broader aspects of the electoral system which are necessary to facilitate that choice and against which the desirability of maximising voting opportunities must be balanced. They did not attempt to demonstrate that the overall balance achieved by the Act prevents it being said that the Senate or House of Representatives is composed of persons chosen by the people. In short, they failed to identify a burden on the constitutional mandate of choice by the people; rather, their case was no more than a complaint that better arrangements might be made to fulfil the mandate. In McGinty209, Gummow J noted, with approval, the statement by Reid and Forrest210 that the Constitution left it to the Parliament to specify: "a whole range of matters including: the method of voting to elect the members of the respective houses; the question of whether members of the House of Representatives would be elected by single-member or multi-member divisions; … who would be authorised to vote; the question of voluntary or compulsory registration of voters and of voting itself; the control of electoral rolls; the conduct of the ballot; … the location of responsibility for the administration of the electoral law". To view ss 7 and 24 of the Constitution as concerned solely with voting on polling day is to fail to appreciate that an election is not a single-day event but a process commenced by the issuing of the writs and concluded by their return, and that the Parliament is required by the Constitution to address all the steps involved in between, to ensure that the sovereign citizenry are able to make a free, informed, peaceful, efficient and prompt choice of their legislators. 208 Langer v The Commonwealth (1996) 186 CLR 302 at 333; Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7], 197-198 [78]-[79]. 209 (1996) 186 CLR 140 at 283-284. 210 Reid and Forrest, Australia's Commonwealth Parliament: 1901-1988, (1989) at The Constitution looks to the Parliament, via ss 8, 9, 27, 29 and 30, for the establishment of an electoral system in which the competing considerations relevant to the making of a free, informed, peaceful, efficient and prompt choice by the people are balanced by the Parliament. It cannot be disputed that provisions apt to ensure peace and good order at places where the franchise is to be exercised can readily be seen to facilitate, rather than to impede, the choice by the people required by the Constitution. The constitutional mandate to Parliament to organise an electoral system encompasses the nomination of candidates, the qualification of electors, the logistics of the poll, voting by electors, the scrutiny of votes and the declaration of the poll. And the discharge of this mandate requires attention to the importance of an informed electorate, orderly and peaceful polling, efficient scrutiny of votes, as well as promptitude, certainty and finality in the declaration of the poll. The closure of the rolls before polling day can readily be seen as addressed to issues relating to the certainty of the class of electors by whom candidates are nominated and to whom they may wish to direct their candidacy. In addition, enrolment as the qualification for voting, and the requirement of the closure of the rolls before polling day, can rationally be seen as integral to the facilitation of an orderly and peaceful poll, efficient scrutiny of votes and a prompt and certain declaration of the poll, all of which is compatible with choice by the people. As noted above, the plaintiffs placed substantial reliance upon observations of Gummow and Bell JJ in Rowe211. The decision in Rowe will be discussed more fully in due course, but it is convenient to emphasise here that their Honours were not endorsing the view that ss 7 and 24 contemplate a "sans-culottes" frenzy of the spontaneous manifestation of the popular will. In the passage of their Honours' reasons on which the plaintiffs relied, their Honours were speaking specifically of the legislative removal of the grace period. It was on this basis that their Honours said that: "the legislation fails as a means to what should be the end of making elections as expressive of the popular choice as practical considerations properly permit." These remarks cannot fairly be understood as directed to the overall balance of the Act while it included the grace period: they were specifically directed to the legislative alteration of the balance; and it was that alteration which was seen as the burden on the franchise. That this is the fair reading of their Honours' observations is apparent from the express recognition that 211 (2010) 243 CLR 1 at 57 [154]. practical considerations of the kind referred to above may properly permit compromise on the achievement of maximum voting opportunity. Parliament and the Court To require the assessment of qualification to enrol at the polling booth can also be expected to require the provision of resources in addition to those currently necessary if delays to voting and consequent inconvenience to those already enrolled and waiting to vote are to be avoided. While this Court's power and responsibility to declare what the law is requires this Court to declare the invalidity of laws which exceed the legislative power of the Parliament212, it is not a recognised part of the role of the judiciary within our system of separated powers to require the executive government or the legislature to raise and spend public funds in order to effect what might be thought to be desirable improvements in the public life of the community213. Alexander Hamilton, in his celebrated essay No 78 of The Federalist Papers (1788), described "the judiciary, from the nature of its functions", as the "least dangerous" branch of government because it "has no influence over either the sword or the purse". It is the executive which "holds the sword of the community" and the legislature which "not only commands the purse, but prescribes the rules by which the duties and rights of every citizen are to be regulated." The plaintiffs sought to meet this difficulty by suggesting that no extra resources would be required to implement a program of polling day enrolment because the same resources would be expended before or after polling on processing and verification of the entitlement to vote. This suggestion cannot be accepted. It proceeds upon the naïve assumption, unsupported by any agreed fact in the special case, that the concentration of resources to accelerate the performance of the same work in a shorter time will not carry with it additional expense. It is also to be noted that the plaintiffs sought to invalidate the suspension of the process of objection to enrolment as part of their claim for polling day enrolment. The possibility that objections to enrolment might be made and determined at the polling booth on election day can be expected to require the availability of further resources if delays to voting and the disruption of voting are to be avoided. In addition, the resolution of objections to enrolment at the polling booth, in an environment fraught with the emotions of political conflict, may disrupt the efficient and peaceful conduct of voting. 212 Marbury v Madison 5 US 137 at 177 (1803); New South Wales v Kable (2013) 252 CLR 118 at 138 [51]; [2013] HCA 26. 213 Dietrich v The Queen (1992) 177 CLR 292 at 323; [1992] HCA 57. Creeping unconstitutionality The facts agreed in the special case establish that some would-be voters may not be enrolled at the end of the grace period, and that some would-be voters who have transferred their residence from one Division to another may not be able to enrol to vote in the Division of their now current residence. The plaintiffs argued that this state of affairs is unacceptable in terms of ss 7 and 24 because advances in technology mean that practical arrangements are now available to avoid it. Thus, the plaintiffs argued that laws which have the effect of excluding from voting a person who is entitled to enrol to vote can now be seen to be invalid due to a change in the factual context in which they operate. It was said that the impugned provisions may well have previously been valid, but that they have become invalid by reason of their current operation given the availability of technology which might be deployed to facilitate maximum voting by the adoption of polling day enrolment. It may be accepted that, as a practical matter, some would-be electors will be denied the opportunity to vote, even with the benefit of the grace period, and that some of these would-be electors will not be enrolled for reasons which do not involve a failure on their part to heed the requirements of s 101 of the Act. That being said, there was no suggestion that the number of persons so affected is greater, either in absolute or relative terms, than has always been the case previously in numerous elections the validity of which was not impugned. The plaintiffs eschewed the suggestion that their argument implied that the provisions of the Act challenged in this case were invalid at the time of previous elections. But it is not apparent that technological advances which would facilitate polling day enrolment were not available at federal elections held when the suspension period was moderated by the grace period; and so it is difficult to see why the plaintiffs' argument does not point to that unattractive conclusion. The plaintiffs, no doubt appreciating that the destabilising implications of their argument are not attractive, maintained a pious agnosticism when pressed as to whether the logic of their argument implies, as it seems to, that those elections were held under laws which had, surreptitiously it seems, become invalid. There are two difficulties with the plaintiffs' argument that the impugned laws, though valid when made, became invalid because changes in the milieu in which the Act operates produced a change in the practical operation of the law. The first difficulty with this argument is that the practical operation of the Act, in its present terms, has not changed since 1983; its practical operation is the same as it was, save for the period when the challenged provisions of the 2006 Amendment Act were in force. What has changed was said to be the availability of technologies which, if adopted, might improve the practical operation of the legislation. Secondly, the plaintiffs' contention was that the Parliament was obliged by the Constitution to appreciate and act upon the new facts and update the electoral laws in order to achieve the postulated improvements. That argument could be accepted only if maximising the opportunity to vote were a critical determinant of whether an electoral system is compatible with choice by the people. For the reasons already given, this is not the case. It would also blur the separation of powers under the Constitution by opening the way for the judiciary to instruct the Parliament in the exercise of the power of the purse. While it is not necessary to go further here, it may also be said that, if one looks at the matter more broadly, the dearth of authority supporting the plaintiffs' contention that a law valid when made may become invalid by changes in the milieu in which it operates suggests that the plaintiffs' argument is unorthodox at a fundamental level. The plaintiffs relied on a statement by Dixon J in Andrews v Howell214 for the proposition that the ambit of a constitutional power to legislate may vary with changes of the facts. But Dixon J was, of course, referring to the power to make laws for the defence of the Commonwealth conferred by s 51(vi) of the Constitution. Speaking of the defence power, his Honour observed that215: "though its meaning does not change, yet unlike some other powers its application depends upon facts, and as those facts change so may its actual operation as a power enabling the legislature to make a particular law." Dixon J was making the point that the operation of a power to make laws for the defence of the Commonwealth may expand or contract depending upon the exigencies of the nation's defence. The plaintiffs also relied upon observations of Williams J in Armstrong v The State of Victoria [No 2]216 in which his Honour gave three examples of an Act which is valid when passed becoming invalid by reason of a change in circumstances. One example was a Commonwealth Act passed in wartime which could only be justified by the defence power as extended in wartime; such an Act would become invalid in peacetime "when that power had contracted … to such an extent that it is no longer wide enough to support it". The second example was of a State Act which is rendered invalid under s 109 of the Constitution as a result of the enactment of an inconsistent Commonwealth law. The third example was that s 92 of the Constitution might render invalid an 214 (1941) 65 CLR 255 at 278; [1941] HCA 20. 215 (1941) 65 CLR 255 at 278. 216 (1957) 99 CLR 28 at 73-74; [1957] HCA 55. impost valid at its inception as a reasonable regulation of inter-State trade217 which ceased to be reasonable because of changes in the circumstances of inter-State trade. Each of the examples given in Armstrong is a far cry from the present case. No question arises as to the operation of s 109 of the Constitution; and the operation of the freedom of trade, commerce and intercourse guaranteed by s 92 of the Constitution may depend upon the exigencies of trade, commerce and intercourse. More relevantly for present purposes, there is no analogy between the defence power and the powers conferred on the Parliament by ss 8, 9, 27, 29, 30 and 51(xxxvi) of the Constitution. It is the function of Parliament to make laws in order to change the world. To assert that changes in the world may unmake laws made by Parliament is to assert the existence of an exception to this understanding of the role of Parliament. In this regard, the defence power in s 51(vi) of the Constitution is indeed exceptional. It is well settled that the subject matter of the power to make laws for the defence of the Commonwealth differs in an important respect from most of the others mentioned in s 51, namely that the defence of the Commonwealth "is not a class of transaction or activity, or a class of public service, undertaking or operation, or a recognized category of legislation, but is a purpose."218 In determining whether a given legislative measure is within the defence power, the capacity of the measure to assist that purpose must be "discernible by the Court"219 by reference to the state of the world. It is, to say the least, arguable that the subject matter of legislative power conferred by ss 8, 9, 27, 29, 30 and 51(xxxvi) of the Constitution is, in contrast to the defence power, activities and undertakings of a public nature, rather than a purpose. Further, ss 7 and 24 may be said to describe a standard characteristic of the Houses of Parliament220. It is not necessary to resolve this broader question, which may be left for another day. One further point raised by the plaintiffs may conveniently be addressed here. It was suggested on behalf of the plaintiffs that those transferring to a new Division might not be allowed to vote at all; but that suggestion did not take 217 In accordance with the then accepted test of validity under s 92 of the Constitution: Hughes and Vale Pty Ltd v The State of New South Wales [No 2] (1955) 93 CLR 127 at 174-177, 192-194, 210, 214-215; [1955] HCA 28. 218 Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 273, see also at 192-193, 253-256; [1951] HCA 5. See also Stenhouse v Coleman (1944) 69 CLR 457 at 471; [1944] HCA 36. 219 Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 273. 220 See Roach v Electoral Commissioner (2007) 233 CLR 162 at 218-220 [156]-[162]. account of ss 93(2), 229 and 231 of the Act, which allow such a person to vote in the electorate in which he or she was enrolled. Further, the possibility of a small number of such voters voting for the Division in which they were until recently resident hardly justifies the plaintiffs' description of that outcome as a "distortion" of choice by the people. If maximising voting opportunities is not a sine qua non of an electoral system to facilitate choice by the people, neither is the maximising of the geographical appropriateness of the franchise. The Lange test The plaintiffs argued that the effect of the suspension period, even moderated by the grace period, was disproportionate to any legitimate end it might be said to serve. The plaintiffs invoked by analogy the Lange test for the validity of laws which burden political communication, as recently applied by this Court in McCloy221. The analogy is not helpful in this case. As noted above, the plaintiffs' unduly narrow focus on maximising voting means that they failed to identify a burden on the constitutional mandate to which a Lange-style analysis might be applied. It was the perceived need to ensure that ss 7 and 24 of the Constitution the freedom of political laws which affected were not frustrated by communication indispensable to their effective operation that led to the formulation of what is now called the Lange test222. Relevantly, the second limb of the Lange test determines whether a burden on political communication is justifiable by asking whether the burden223: "is reasonably appropriate and adapted to serve a legitimate end in a manner that is compatible with the maintenance of the constitutionally prescribed system of government and freedom of political communication which is its indispensable incident." the When the provisions impugned in this case are considered, as they must be, as integral and unremarkable elements of an electoral system authorised by ss 8, 9, 27, 29, 30 and 51(xxxvi), there is no discernible "burden" on the requirements of ss 7 and 24 which calls for justification by a Lange-style analysis224. 221 (2015) 89 ALJR 857 at 866 [24]; 325 ALR 15 at 23-24. 222 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567. 223 Monis v The Queen (2013) 249 CLR 92 at 161 [175]; [2013] HCA 4. 224 cf Roach v Electoral Commissioner (2007) 233 CLR 162 at 199-200 [85]-[86]. The considerations which gave rise to the formulation of the Lange test are not engaged here. No question of the scope of an implication from the Constitution arises: we are concerned with the effect of express provisions of the Constitution. No question arises as to whether the pursuit of some legitimate end or purpose not expressly addressed by the Constitution is reconcilable with those express provisions. That being so, there is no occasion to apply the abstract locutions of the second limb of the Lange test. The only question is whether the impugned laws can be seen to be compatible with the requirements of ss 7 and 24 of the Constitution, bearing in mind Parliament's powers under ss 8, 9, 27, 29, 30 and 51(xxxvi). It may be noted here that in Rowe225 the Court was invited by the Commonwealth to uphold the validity of the challenged provisions of the 2006 Amendment Act using an approach akin to the Lange test. The Commonwealth took a different course in this case. It is not entirely clear that the majority in Rowe accepted the Commonwealth's invitation to apply the second limb of the Lange test as determinative of the question before the Court, as opposed to using that analysis as a means of testing the conclusion that a perceived burden on the franchise was not compatible with choice by the people. In this regard, French CJ applied226 the approach of Gleeson CJ in Roach227, who did not apply a Lange-style analysis. Gleeson CJ said228: "Because the franchise is critical to representative government, and lies at the centre of our concept of participation in the life of the community, and of citizenship, disenfranchisement of any group of adult citizens on a basis that does not constitute a substantial reason for exclusion from such participation would not be consistent with choice by the people." the challenged provisions of the 2006 Amendment Act as an impediment to the exercise of choice by the people, and looked for a substantial reason for the impediment consistent with the constitutionally mandated choice; and his Honour could see none. When his Honour described those provisions as creating a detriment upon the mandate of choice by the people which was disproportionate to the benefit to the fulfilment of the mandate, his Honour was explaining his conclusion that the law 225 (2010) 243 CLR 1 at 7-8. 226 (2010) 243 CLR 1 at 19-20 [23]. 227 (2007) 233 CLR 162 at 178-180 [17]-[19]. 228 (2007) 233 CLR 162 at 174 [7] (footnote omitted). could not rationally be seen to be supported by a substantial reason "for the detriment it inflicts upon the exercise of the franchise."229 Gummow and Bell JJ seemed to accept the Commonwealth's invitation to apply a Lange-style analysis230, but apparently did so as a checking exercise231 as to whether the challenged provisions were invalid on the ground that they lacked "a substantial reason" for what their Honours described as a "disqualification" from the franchise232. It should also be noted that when their Honours concluded that those provisions had "broken the rational connection necessary to reconcile the disqualification with the constitutional imperative"233, their Honours were focused upon the only justification advanced as the legitimate end of the abrogation of the grace period, which was the prevention of fraudulent enrolment234. In contrast, in the present case, the Commonwealth advanced a broader explanation for the suspension period coupled with the grace period to show that it was not a burden on the operation of ss 7 and 24 of the Constitution, but rather an integral aspect of the system adopted for its attainment. Crennan J, the other member of the majority, held that the challenged provisions were invalid because there was no235: "substantial reason, that is, a reason of real significance, for disentitling a significant number of electors from exercising their right to vote for parliamentary representatives in the State and Subdivision in which they reside." Her Honour's position thus appears substantially to accord with the approach of French CJ. In the present case, the absence of an opportunity to maximise voting does not mean that there has been a departure from the constitutional mandate which must be justified by a substantial reason. The 229 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 20-21 [25], see also at 38-39 230 (2010) 243 CLR 1 at 59-61 [161]-[167]. 231 (2010) 243 CLR 1 at 60 [163]. 232 (2010) 243 CLR 1 at 61 [166]-[167]. 233 (2010) 243 CLR 1 at 59 [161]. 234 (2010) 243 CLR 1 at 60-61 [164]-[167]. 235 (2010) 243 CLR 1 at 121 [384]. impugned provisions are not a burden on the mandate, but rather an integral part of the system adopted for its fulfilment. In any event, even if a Lange-style analysis were to be applied here, the alternatives to the suspension and grace periods advanced by the plaintiffs are not shown to be the kind of compelling and obvious alternatives to achieve the same outcome as is achieved by the Act. Even if it were accepted that those measures might be adapted without any increase in the public funds required to resource them, it cannot be said that they would achieve a balance in terms of voter participation, orderliness of voting, efficiency of scrutiny, and promptitude and finality in the conclusion of the electoral process "equal" to or "better" than that achieved by the Act. It should be noted in this regard that the State laws to which the plaintiffs referred take a different view of the appropriate time at which the right to vote must be established. Under the Parliamentary Electorates and Elections Act 1912 (NSW) ("the NSW Act"), the electoral roll does not close; but the right to vote does not depend exclusively on enrolment. Thus, under s 106(2A) of the NSW Act, a person who is not enrolled, but who claims to be entitled to be enrolled, may make a provisional vote. In such a case, the question whether the person was, in truth, entitled to vote is to be determined after polling day. The same position obtains under the Electoral Act 2002 (Vic) and Electoral Regulations 2012 (Vic) ("the Victorian law") by virtue of s 108 and reg 41. Under the Victorian law, however, the electoral roll closes seven days after the issue of the writs for the election. Under the Electoral Act 1992 (Q) ("the Queensland Act"), the electoral roll closes between five and seven days after the issue of the writs. A person who is not enrolled may make a declaration vote under s 115(d) of the Queensland Act if he or she is "entitled to be enrolled". Under s 106(1)(d), such a person has, after the close of the rolls, but before 6 pm on the day before polling day, to make a claim for enrolment. A declaration vote under s 115(d) is admitted to scrutiny if the person's entitlement to vote is established. Again, the decision as to whether the person is entitled to vote is to be made after the election. Whether postponing the determination of whether a would-be voter is qualified to enrol to vote until after the poll has been taken is "better" than resolving the issue before the poll is taken is a question in relation to which reasonable minds may differ. Measures which seem good to State Parliaments do not provide yardsticks against which the constitutionality of Commonwealth laws can be measured. State Parliaments may be expected to have different priorities in relation to optimising the balance of considerations which bear upon their choice of electoral system. Considerations of promptitude and finality in scrutiny and the declaration of the poll which are accorded relatively high importance by the Commonwealth may not exert the same strong claim on State Parliaments; but that does not mean that either is right or wrong. The various polities of the federation exist in different environments which can be expected to give rise to different priorities. Members of State Parliaments are able to form executive governments within the relatively benign environment guaranteed by membership of the federation. In that environment, the prompt conclusion of the electoral process to enable the formation of an executive government may not be regarded as a matter of particular urgency. In such an environment a leisurely approach to the resolution of disputes as to the right to vote may be acceptable. In contrast, because of the responsibility of the Commonwealth for Australia's external affairs and the security of the nation, the Parliament of the Commonwealth can be expected to accord a higher priority to the prompt conclusion of the electoral process in order to expedite the formation of a responsible executive government in a world of uncertain and rapidly changing situations. Finally under this heading, it must be said that it is not correct to say, as the plaintiffs did, that the irrationality of the suspension period as a bar to polling day enrolment by unenrolled citizens is demonstrated by the availability of provisional voting under s 235 of the Act. These provisions require that a person whose name cannot be found on an approved list, or whose address does not appear on a certified list compiled from the roll, sign a declaration in the approved form directed to the DRO for the Division that he or she claims to be enrolled in. The efficacy of the provisional vote depends on the truth of that claim. In other words, the Act's provisions for provisional voting are themselves predicated upon the provisional voter actually being enrolled. Rowe v Electoral Commissioner In Rowe236, this Court was concerned with the validity of certain provisions of the 2006 Amendment Act. The amendment had the effect of removing the grace period so that any citizen who lodged a claim for enrolment or for the transfer of enrolment after the issue of writs for a general election could not vote at the election or in the Division to which he or she had moved. If the writs were issued by the executive government at the same time as a general election was announced, citizens who were then unenrolled would be excluded from participation in the election as voters. The possibility that such an outcome might be achieved by the executive government to the detriment of the citizenry was adverted to when the 1983 Amendment Act was introduced. In the second 236 (2010) 243 CLR 1. reading speech for the Bill introducing the 1983 Amendment Act, the Minister said237: "the Bill provides that there must be a sufficient time between the announcement of an election and the close of rolls for that election. ... [W]ithout this sort of provision the cynical exercise of the strict terms of the law could effectively stop many thousands of people enrolling and voting." In Rowe, this Court held, by majority, that the challenged provisions of the 2006 Amendment Act were invalid. It was argued by the plaintiffs here that the decision in Rowe is determinative of the present case in their favour. That suggestion cannot be sustained. Nothing in Rowe casts doubt upon the validity of the suspension period moderated by the grace period. In argument in Rowe238, Senior Counsel for the plaintiffs in that case, who is, as it happens, Senior Counsel for the plaintiffs in the present case, accepted that "[t]here was no recognisable defect with the seven day period" which had been abolished by the 2006 Amendment Act. The majority accepted the argument that the vice of the challenged provisions lay in the legislative removal of the grace period. Without the grace period, the suspension period was apt to remove the then existing opportunity of citizens to enrol to vote after the writs for the election issued. In the present case, it was contended that, even though the grace period has been restored, so that the Act is now materially in the same terms as it was before the 2006 Amendment Act, the impugned provisions of the Act were invalid. Whether the issue presented in Rowe was analysed by the majority as one of legislative disqualification of some citizens from the franchise239, and whether that analysis is correct, are questions which it is not necessary to resolve now: no party sought to argue that Rowe was wrongly decided. What is clear is that the provisions of the Act impugned by the plaintiffs in the present case are not apt to allow the executive government to disqualify any citizen from exercising the franchise. While it is true to say that they may operate to prevent some citizens who are unqualified to vote when the roll closes becoming qualified to do so, that is not an impediment to enrolment, much less to the choice by the people 237 Australia, House of Representatives, Parliamentary Debates (Hansard), 2 November 1983 at 2216. 238 (2010) 243 CLR 1 at 5. 239 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 58-59 [157]-[160]. contemplated by the Constitution, just as it was not an impediment to that choice at elections held before the 2006 Amendment Act and after the challenged provisions of that Act were held to be invalid. In this regard, it is worth recalling that in Roach240, what was at stake was "legislative disqualification of some citizens from exercise of the franchise." In the joint reasons of Gummow, Kirby and Crennan JJ, their Honours adopted241 the proposition stated by Brennan CJ in McGinty242 that "the phrase 'chosen by the people' … [requires] a franchise that is held generally by all adults or all adult citizens unless there be substantial reasons for excluding them." The legislation challenged in this case does not effect a disqualification of citizens as electors of the kind considered in Roach. In Roach, the majority were speaking of a legislative disqualification from voting of citizens even if they were enrolled to vote. The legislation challenged by the plaintiffs in the present case affords citizens not enrolled at the issue of the writs the very opportunity to enrol which was abrogated by the legislation struck down in Rowe. While it may be that reasonable minds may differ as to whether the challenged provisions of the 2006 Amendment Act were apt to permit a disqualification of citizens from enrolment or voting (as the division within the Court in Rowe attests), it is simply an abuse of language to say that those citizens who do not avail themselves of the opportunity to enrol afforded by the grace period have been disqualified from enrolment or from voting. Conclusion It is important to bear in mind that whether voting should be compulsory or voluntary has long been held to be within the discretion of the Parliament243. If it is open to the Parliament to authorise voluntary, rather than compulsory, voting as an aspect of the choice by the people, it is not to be supposed that it is beyond the discretion of the Parliament to permit some leakage from the compulsory franchise on the part of those who are less than astute to discharge 240 (2007) 233 CLR 162 at 198 [82], see also at 198-199 [81], [83]-[84]. 241 (2007) 233 CLR 162 at 198 [83]. 242 (1996) 186 CLR 140 at 170. 243 Judd v McKeon (1926) 38 CLR 380 at 383, 385, 390-391. their civic duty to enrol. To conclude otherwise would truly be to "strain at a gnat, and swallow a camel."244 The plaintiffs' argument that nothing less than polling day enrolment can satisfy the requirements of ss 7 and 24 of the Constitution draws no support from the Constitution. The proposition that only one judgment about the appropriate period of time between the issue of the writs for an election and the closing of the rolls is available to the Parliament is distinctly inconsistent with the broad conferral of power on the Parliament by ss 8, 9, 27, 29, 30 and 51(xxxvi) of the Constitution to create the system whereby the choice by the people is to be made. Indeed, to accept the argument that the requirements of ss 7 and 24 can only be satisfied by electoral laws which maximise the opportunity for voting above all other considerations germane to that choice is to make a nonsense of the absence of an express statement to that effect in these sections themselves. 244 Matthew 23:24. See Gleeson, "The Shape of Representative Democracy", (2001) 27 Monash University Law Review 1 at 7. Nettle 228 NETTLE J. In this matter, the plaintiffs contended that provisions of the Commonwealth Electoral Act 1918 (Cth) ("the Act"), which suspend the processing of claims for enrolment and transfer of enrolment during the period that starts seven days after the issue of writs and ends at the completion of polling ("the suspension period"), are inconsistent with ss 7 and 24 of the Constitution and therefore invalid. On 12 May 2016, I joined with the other members of the Court in rejecting that contention. What follows are my reasons. Standing The second plaintiff intended to nominate as a candidate for election to the House of Representatives for the seat of Newcastle at the then forthcoming federal election. Under the Act, a candidate in the second plaintiff's position must be nominated by 100 persons, all of whom must appear on the Electoral Roll ("the Roll") and be entitled to vote at the election for which the candidate is nominated245. Once nominated, a candidate may engage in competition for votes at the election246. There are also financial implications for a candidate depending on the number of first-preference votes he or she obtains247. Consequently, the second plaintiff had a special interest in the size, composition and validity of the pool of electors from which she may have sought nomination and votes, and thus had a sufficient interest in the validity of the Act to challenge it in this Court. On that basis, it became unnecessary to consider the question of the first plaintiff's standing248. The alleged inconsistency Section 7 of the Constitution relevantly provides for the election of senators as follows: "The Senate shall be composed of senators for each State, directly chosen by the people of the State, voting, until the Parliament otherwise provides, as one electorate." 245 Commonwealth Electoral Act 1918 (Cth), s 4(1) definition of "Elector", ss 93, 166. 246 Commonwealth Electoral Act, s 162. 247 Commonwealth Electoral Act, ss 170, 173, 294, 297. 248 Williams v The Commonwealth (2012) 248 CLR 156 at 223-224 [112] per Gummow and Bell JJ (French CJ agreeing at 181 [9], Hayne J agreeing at 240 [168], Crennan J agreeing at 341 [475], Kiefel J agreeing at 361 [557]); [2012] HCA 23. Nettle Section 24 of the Constitution relevantly provides for the election of members of the House of Representatives as follows: "The House of Representatives shall be composed of members directly chosen by the people of the Commonwealth, and the number of such members shall be, as nearly as practicable, twice the number of the senators." The plaintiffs contended that ss 94A(4), 95(4), 96(4), 102(4), 103A(5), 103B(5) and 118(5) of the Act were inconsistent with the requirement, in ss 7 and 24 of the Constitution, that senators and members be "directly chosen by the people". Those provisions of the Act provide that any claim249 for compulsory enrolment or transfer of enrolment250; any claim for enrolment by an overseas person251, an overseas person's family member252 or an itinerant person253; and any objections to enrolments254, received by the Electoral Commissioner ("the Commissioner") after 8 pm on the day seven days after the issue of writs for an election are not to be processed until after the election. The plaintiffs' argument was said to be based on the decision of this Court in Rowe v Electoral Commissioner255: that amendments to the Act which purported to bring forward the commencement of the suspension period, from 8 pm on the day seven days after the issue of writs to 8 pm on the day of the issue of writs (and, for claims for transfer of enrolment, 8 pm on the day three days later), were invalid because they were not reasonably appropriate and adapted to serve a legitimate end consistent with the maintenance of the constitutionally prescribed system of representative government. The plaintiffs submitted that it was implicit in Rowe or logically followed from it that a legislative provision which, as from seven days after the issue of writs, suspends the processing of claims for enrolment and transfers of enrolment 249 Otherwise than by virtue of ss 94, 94A, 95, 96 or 100: Commonwealth Electoral Act, s 101(1). 250 Commonwealth Electoral Act, ss 102(4), 103A(5), 103B(5). 251 Commonwealth Electoral Act, s 94A(4). 252 Commonwealth Electoral Act, s 95(4). 253 Commonwealth Electoral Act, s 96(4). 254 Commonwealth Electoral Act, s 118(5). 255 (2010) 243 CLR 1; [2010] HCA 46. Nettle of persons otherwise eligible to vote disentitles a person otherwise eligible to vote and is inconsistent with the maintenance of the constitutionally prescribed system of representative government mandated by the text and structure of the Constitution (in particular Ch I and ss 7, 24 and 128). The decision in Rowe Rowe was decided following this Court's decision in Roach v Electoral Commissioner256. In Roach, it was held that legislation that disqualified persons serving a sentence of imprisonment on the day of a federal election from voting at the election was invalid as it was contrary to ss 7 and 24 of the Constitution. As noted, in Rowe it was held that amendments to the Act that changed the commencement point of the suspension period, from seven days after the issue of writs to the day of issue of writs (and, for claims for transfer of enrolment, three days later), were invalid because they were not reasonably appropriate and adapted to serve a legitimate end consistent with the maintenance of the constitutionally prescribed system of representative government. Rowe, however, is a complex decision. It was decided by a bare majority of four to three (French CJ, Gummow and Bell JJ and Crennan J, Hayne, Heydon and Kiefel JJ dissenting) and the judges who comprised the majority differed in their reasoning. French CJ held that the amendments were invalid because they removed a legally sanctioned opportunity for enrolment, which caused detriment in legal effect or practical operation to the normative framework of a representative democracy based on direct choice by the people, and because the measure of the detriment was disproportionate to any benefit of the amendments in terms of the fulfilment of the constitutional mandate257. Gummow and Bell JJ (in a joint judgment) held that the amendments were invalid because the Act as amended failed as a means to the end of making elections as expressive of popular choice as practical considerations properly permit – in particular, the amendments effected a disqualification from the entitlement to vote in the sense considered in Roach – and the supposed legislative purpose of the amendments, preventing the electoral fraud, was not a sufficient, substantial reason disqualification258. Crennan J held that, although the amendments differed from the disqualification considered in Roach, and although maintaining the integrity of the Roll (by preventing electoral fraud) was a purpose that was compatible with ss 7 and 24 of the Constitution, the amendments operated to disentitle or justify 256 (2007) 233 CLR 162; [2007] HCA 43. 257 Rowe (2010) 243 CLR 1 at 38-39 [78]. 258 Rowe (2010) 243 CLR 1 at 57 [154], 61 [167]. Nettle exclude persons who were otherwise legally eligible to vote from the franchise embedded in the constitutional imperative of choice by the people and, thus, the amendments were not necessary and appropriate for the integrity of the electoral system259. The judges who comprised the minority also differed in their reasoning. Hayne J held that the amendments did not constitute a disqualification of the kind considered in Roach260. In his Honour's view, there was no constitutional imperative to make elections as expressive of popular choice as practical considerations properly permit and neither s 7 nor s 24, alone or in combination, provided for a system of representative government in which there can be no closing of the Roll at or very soon after the issue of writs261. Heydon J stressed that, at the time of the inclusion of the words "chosen by the people" in the Constitution, the conception of being chosen by the people was undoubtedly consistent with legislative provisions preventing persons who were not on the Roll at the time of the issue of writs from voting in an election, and that the so- called "'higher' standards", established by later legislation and the operation of executive discretion, did not alter the requirements of constitutional validity262. Kiefel J held that, although the amendments were not directed to voting and did not disqualify any group from voting in the sense that was contemplated in Roach, and although the Parliament's power to legislate with respect to elections should not be seen as fixed by reference to a requirement that the greatest number of people possible should vote, the amendments affected the entitlement to enrol and thereby raised questions about proportionality263. In the result, however, her Honour held that, having regard to the integrity of the Roll, the object of encouraging compliance with the statutory obligation to enrol and the short duration of the effect of the amendments on the opportunity to enrol, and since there was nothing to suggest that a shorter period of disentitlement would be equally effective in encouraging compliance, the amendments did not intrude too far into the present system of voting, with the result that any burden imposed by 259 Rowe (2010) 243 CLR 1 at 119 [381], 120-121 [384]. 260 Rowe (2010) 243 CLR 1 at 66 [187]. 261 Rowe (2010) 243 CLR 1 at 76 [223]. 262 Rowe (2010) 243 CLR 1 at 97 [293], 102 [311]. 263 Rowe (2010) 243 CLR 1 at 128 [411], 130-131 [422]-[424], 147 [487]. 264 Rowe (2010) 243 CLR 1 at 145-147 [479]-[489]. Nettle In summary, each of French CJ and Crennan J held that legislative amendments which reduced the time available to enrol to vote by seven days were prima facie detrimental to and, to that extent, inconsistent with the imperative of choice by the people mandated by ss 7 and 24 of the Constitution; and that such a detriment could only be justified if it were proportionate to the benefit to the integrity and efficiency of the electoral system achieved by the amendments (or, in the case of Crennan J, if the amendments were necessary and appropriate for the integrity of the electoral system). To similar but not identical effect, Gummow and Bell JJ held that legislative amendments which reduced the time available to enrol to vote by seven days could only be saved if there were a sufficient, substantial reason to justify that effect. Kiefel J held that although the provisions did not disqualify any group of persons from voting, they raised questions of proportionality because they affected a person's ability to enrol and thus vote at a particular election. In contrast, Hayne and Heydon JJ both held that legislative amendments which had the effect of closing the Roll from a point shortly after the issue of writs, and which did no more than reduce the time to enrol so as to conclude at 8 pm on the day of the issue of writs, were not inconsistent with ss 7 and 24 of the Constitution and so were not invalid. According to orthodox conceptions, "[e]very decision has its ratio"265. In view of the differences in reasoning just identified, however, the ratio of Rowe appears to go no further than that, where a provision of an amending Act reduces the time between the issue of writs and the closing of the Roll, and thereby reduces the period in which claims for enrolment and transfer of enrolment may be processed before an election, the amending Act is liable to be held invalid unless it is seen to be based on a substantial reason, such as to produce benefits in the integrity and efficiency of the electoral system, sufficient to warrant the perceived detrimental effect of the reduction upon the constitutional imperative of choice by the people. Rowe is not authority for the proposition that a reduction in the time available in which to enrol amounts to a disqualification from voting in the sense conceived in Roach, and it is not authority for the proposition that "chosen by the people" in ss 7 and 24 of the Constitution mandates making elections as expressive of the popular choice as practical considerations properly permit. Neither proposition commanded the assent of all members of the majority or the assent of any members of the minority. 265 Mason, "The Use and Abuse of Precedent", (1988) 4 Australian Bar Review 93 at Nettle The plaintiffs' argument This is not a case of reduction in the time for enrolment. The statutory grace period ending seven days after the issue of writs has existed for more than 30 years since it was introduced by the Commonwealth Electoral Legislation Amendment Act 1983 (Cth). Hence, Rowe is not controlling. Counsel for the plaintiffs submitted that the plaintiffs' case nevertheless built on Rowe in a manner that accords with the imperative of choice by the people mandated by ss 7 and 24 of the Constitution and thus with what counsel contended should now be recognised as the resultant necessity for maximum opportunity for participation in elections. In counsel's submission, those propositions derived support from obiter dictum observations of French CJ and of Gummow and Bell JJ in Rowe concerning the possibility that improvements in technology might mean that it is practicable to keep the Roll open until polling day. Counsel referred in particular to French CJ's statement that266: "This is not to suggest that particular legislative procedures for the acquisition and exercise of to vote can become constitutionally entrenched with the passage of time. Rather, it requires legislators to attend to the mandate of 'choice by the people' to which all electoral laws must respond"; the entitlement and to Gummow and Bell JJ's statement that267: "Two things are to be said respecting this legislative history. The first is that the plaintiffs make no challenge to the seven day period. It may be that developments in technology and availability of resources will support the closure of the rolls at a date closer to election day. But this is a matter of speculation and inappropriate for further consideration here." As finally propounded, the plaintiffs' argument thus became that the constitutional imperative of choice by the people renders invalid any provision that closes the Roll on or before polling day unless it is demonstrated that the provision is necessary to ensure the integrity of the electoral process. Reference was made to the electoral systems now operating in New South Wales and Victoria as evidence that it has become reasonably practicable to provide for enrolment up to and even on polling day. The existence of those systems was said to show that it is no longer necessary to close the Roll before polling day to ensure the integrity of the process. On that basis, it was contended that, whether or not the impugned provisions were valid at the time of their enactment, they had since become invalid. 266 Rowe (2010) 243 CLR 1 at 19 [22]. 267 Rowe (2010) 243 CLR 1 at 53 [140]. Chosen by the people Nettle in Rowe268, Unencumbered by more recent authority, one might not have hesitated to reject the the plaintiffs' argument. constitutional prescription of the form of representative government is so spare that the Parliament is, to a large extent, left free to determine the way in which the notion of representative government is to be given effect at the federal level. Certainly, that freedom is limited by the overarching requirements of ss 7 and 24 that the Houses be "directly chosen by the people". But, as Hayne J observed269, quoting from Mulholland v Australian Electoral Commission270, "care is called for in elevating a 'direct choice' principle to a broad restraint upon legislative development of the federal system of representative government". Why, then, should it be thought that the very minor discipline of closing the Roll seven days after the issue of writs offends the constitutional imperative of "chosen by the people"? As against that, however, authority now establishes that "chosen by the people" bespeaks universal adult suffrage and thus an "entitlement to vote"271. To restrict the time in which persons may enrol to vote can have a substantive effect on the entitlement to vote, which, in turn, affects the franchise272. To justify such a restriction, there must be a "substantial reason" for it. And the establishment of a substantial reason sufficient to justify the restriction requires that the restriction be seen as "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government"273. Accordingly, this case fell to be decided in accordance with those requirements. 268 (2010) 243 CLR 1 at 70 [200]; see also at 130 [420] per Kiefel J. 269 Rowe (2010) 243 CLR 1 at 70 [200]. 270 (2004) 220 CLR 181 at 237 [156] per Gummow and Hayne JJ; [2004] HCA 41. 271 Rowe (2010) 243 CLR 1 at 18-19 [18]-[22] per French CJ, 51-52 [132]-[133], 57 [154], 58 [157] per Gummow and Bell JJ, 116-117 [366]-[368] per Crennan J. See also Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 36 per McTiernan and Jacobs JJ; [1975] HCA 53; Roach (2007) 233 CLR 162 at 174 [7] per Gleeson CJ. 272 Rowe (2010) 243 CLR 1 at 38-39 [78] per French CJ, 57 [154] per Gummow and Bell JJ, 119 [381] per Crennan J. 273 Roach (2007) 233 CLR 162 at 199 [85] per Gummow, Kirby and Crennan JJ; see also Rowe (2010) 243 CLR 1 at 59 [161] per Gummow and Bell JJ, 77 [225] per Hayne J (in dissent in the result), 119 [381], 120-121 [384] per Crennan J. Nettle A substantial reason Even so, as French CJ observed in Rowe274, it is necessary to keep in mind in applying those requirements that the Constitution gives the Parliament considerable discretion in selecting the means to regulate elections and so to require persons otherwise qualified to vote to enrol to vote. Hence, as his Honour emphasised, the validity of the means chosen by the Parliament does not depend on some finely calibrated weighing of detriment and benefit. The means chosen are not to be adjudged invalid merely because the Court may think that there is another and apparently superior way of achieving the same objective. The criterion of validity is whether the means chosen are appropriate and adapted, and in that sense proportionate275, to the achievement of the objective. In effect, that provides the Parliament with a fair amount of room in which to move. Here, as the Commonwealth emphasised, the means chosen in the Act accord primacy to the integrity and reliability of the Roll. Thus, s 4(1) of the Act defines an elector as any person whose name appears on a Roll as an elector. Part VI of the Act provides that there shall be a Roll of the electors for each State and Territory and for Division Rolls and Subdivision Rolls, which together comprise the Roll for the State or Territory. Part VII provides for the qualifications and disqualifications for enrolment. Section 93(2) provides that an elector whose name is on the Roll for a Division is entitled to vote at elections of members of the Senate for the State that includes that Division and at elections of members of the House of Representatives for that Division. Part VIII regulates the procedure for enrolments. Section 101 makes it compulsory to enrol within 21 days of becoming entitled to do so and renders it an offence to fail to comply. Section 102 provides for the steps to be taken by the Commissioner on receipt of a claim for enrolment. Part IX provides for objection to enrolments. Part X provides for the review of the Commissioner's decisions pertaining to enrolments. The central importance of the Roll is then reflected in the procedure for the commencement of an election and in each of the steps leading from commencement to completion of the election. Part XIII of the Act provides for the issue of writs for the commencement of elections in accordance with ss 12, 32 and 33 of the Constitution and requires that a writ for an election shall fix the dates for the close of the Roll, nomination, polling and return of the writ. The dates for those events are set by ss 155 to 159: with the close of Rolls seven days 274 (2010) 243 CLR 1 at 22 [29]. 275 Roach (2007) 233 CLR 162 at 199 [85] per Gummow, Kirby and Crennan JJ. Nettle after the issue of writs276; nominations following not less than 10 days and not more than 27 days after the date of the writs277; the date of polling being not less than 23 days nor more than 31 days after the date of nominations278; the day of polling being a Saturday279; and the date fixed for the return of writs being not more than 100 days after the issue of writs280. Part XIV provides for nominations of candidates. For example, certain nominations must be signed by not less than 100 electors entitled to vote at the election for which the candidate is nominated. Part XVI provides for polling. Section 208 provides for the Commissioner to prepare certified lists of the names of each person whose name is on the Roll, who will be 18 years old on polling day and who is not serving a term of imprisonment of more than three years. Section 203 requires the provision of "all necessary certified lists of voters and approved lists of voters" for polling day. Section 208A allows for approved (electronic) lists of voters to be prepared from the certified lists, which, in turn, are prepared from the Roll. Taken together those provisions comprise a system of enrolment, objection, review, nomination and polling in which the several steps and stages appear as separated by periods of time directed to achieving an acceptable degree of order and certainty within the constraints of finite resources. The Roll is also an essential reference point for processes in the electoral cycle that depend on the number and distribution of electors likely to vote at the next election, including: the proportionate distribution of States and Territories into Divisions ahead of the issue of writs281; the assessment of whether a political party has sufficient support to be registered282; 276 Commonwealth Electoral Act, s 155. 277 Commonwealth Electoral Act, s 156. 278 Commonwealth Electoral Act, s 157. 279 Commonwealth Electoral Act, s 158. 280 Commonwealth Electoral Act, s 159. 281 Commonwealth Electoral Act, ss 56-78. 282 Commonwealth Electoral Act, s 123(1) definitions of "eligible political party" and "Parliamentary party", s 126. Nettle (iii) the assessment of whether a candidate has sufficient support to be nominated for election as a senator or a member of the House of Representatives283; the provision of accurate information to interested members of the public, any of whom can attend the office of a Divisional Returning Officer and view the Roll for that Division284; the preparation of a certified list of voters for each Division, and distribution of it to each polling place before the start of voting285 and to candidates, political parties, senators, members of the House of Representatives and State and Territory electoral authorities286; and the making and resolution of objections to voter enrolment287. It is necessary for the integrity of the system so established that the Roll be maintained as accurately as possible on a day-to-day basis as well as on polling day. Evidently, the impugned provisions and the legislative offence provisions regarding late and inaccurate enrolment288 are directed to the achievement of the requisite degree of accuracy. By requiring potential electors to enrol within a defined time, penalising potential electors who fail to comply with their enrolment obligations, and preventing the processing of claims for enrolment and transfer of enrolment within the suspension period, the impugned provisions and the legislative offence provisions are calculated to persuade electors to comply with their obligations to enrol, to make the Roll as accurate as possible on a day- to-day basis and to allow sufficient time to ensure the accuracy of the Roll in advance of an election. Taken as a whole, the means chosen in the Act to regulate elections, and require persons otherwise qualified to vote to enrol to vote, may thus be seen as directed to the achievement of a degree of order and certainty which enhances the democratic process consistently with the system of representative government prescribed by the Constitution. 283 Commonwealth Electoral Act, s 166. 284 Commonwealth Electoral Act, s 90A(1). 285 Commonwealth Electoral Act, ss 208, 208A. 286 Commonwealth Electoral Act, s 90B. 287 Commonwealth Electoral Act, ss 113-118. 288 Commonwealth Electoral Act, s 101. Nettle Alternative means So to conclude is not to overlook the availability of alternative means, which might be regarded as a relevant consideration in the determination of whether the suspension period is reasonably appropriate and adapted to serve the identified ends289. As the plaintiffs contended, there are other systems which take less time between steps and thereby enable the Roll to be kept open until closer to an election. Some of the facts stated in the special case show that it is now possible for potential electors in State elections in New South Wales and Victoria to enrol up to and on polling day in one form or another. But nothing in the special case establishes or provides a basis to infer that the systems in New South Wales and Victoria are capable of achieving the same level of order and certainty as the system prescribed by the Act. To the contrary, it appears that the New South Wales and Victorian systems have the potential to lead to more disputes about who is entitled to vote, more consequent disputes about the outcome of elections, those disputes remaining unresolved for longer and consequent greater uncertainty for longer about the outcome of elections. There are indications, too, that, even in the short time for which the present system in Victoria has been in operation, the ability for voters to enrol up to and on polling day has led to an increased level of voter insouciance to the consequences of failing to enrol within the prescribed time and a consequent increased and increasing level of enrolment delinquency. It may also be, as the plaintiffs contended, that it would be possible to shorten the time between steps within the system prescribed by the Act by the allocation of additional personnel and other resources to the tasks involved. Presumably, the more personnel and other resources applied to those tasks, the faster they might be completed. But who is to say what further resources should be applied to the administration of the electoral system and at what costs to other, competing priorities? To a large extent those are questions of policy in which this Court has no role to play. 289 See Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 568; [1997] HCA 25; Monis v The Queen (2013) 249 CLR 92 at 214 [347] per Crennan, Kiefel and Bell JJ; [2013] HCA 4; Unions NSW v New South Wales (2013) 252 CLR 530 at 556 [44] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; [2013] HCA 58; Tajjour v New South Wales (2014) 254 CLR 508 at 550 [36] per French CJ, 565-566 [90] per Hayne J, 581 [152] per Gageler J; [2014] HCA 35; McCloy v New South Wales (2015) 89 ALJR 857 at 884-885 [135] per Gageler J, 899 [222] per Nettle J, 915-916 [328] per Gordon J; 325 ALR 15 at 48, 68, 89; [2015] HCA 34. Nettle Ultimately, within the relatively broad discretion conferred on the Parliament to select means to regulate elections, it is open for the Parliament to prefer the relative order and certainty of the Act's system to the relative disorder and uncertainty of the New South Wales or Victorian real time enrolment/voting paradigm and to apply no more resources to the task than have already been allocated. Suspension period not invalid Rowe suggests that, if the time available for enrolment were to be further restricted, there might come a point at which the detriment of the increased restriction on therefore vote would appear disproportionate to any benefit to the fulfilment of the constitutional mandate. But, as matters stand, the burden imposed on the entitlement to vote by the existing requirement that the Roll be closed seven days after the issue of writs has not been shown to answer that description. to enrol and the ability Conclusion Bearing in mind the objectives of order and certainty which the Act appears designed to achieve, the requirement that the Roll be closed seven days after the issue of writs has not been shown to be invalid. On the basis of the facts disclosed in the special case, the restriction presents as appropriate and adapted to the achievement of an end, namely, an acceptable degree of order and certainty within the constraints of finite resources, which is consistent or compatible with the system of representative government mandated by the Constitution. It is for these reasons that I joined in the orders that were made on 12 May 258 GORDON J. At the time this matter was heard, the first plaintiff was enrolled to vote under the Commonwealth Electoral Act 1918 (Cth) ("the Act") in the Division of Wills in Victoria. The second plaintiff was enrolled to vote in the Division of Newcastle in New South Wales and intended to seek nomination as a candidate for election to the House of Representatives for the seat of Newcastle at the 2016 federal election. The plaintiffs contended that specific provisions of the Act, which suspend certain additions and amendments to the Electoral Rolls from seven days after the issue of the writs for elections ("the suspension period"), prevented persons otherwise entitled to do so from enrolling and voting up to and including on polling day and were therefore invalid. These are my reasons for rejecting that contention and for joining in answering the questions of law stated for the opinion of the Full Court under r 27.08.1 of the High Court Rules 2004 (Cth) in the way they were answered following oral argument. The constitutional framework for The Constitution "advancement of representative the government"290. The term "representative government" is not defined and does not appear in the text of the Constitution. Nevertheless, the institution of "representative government"291 has been said to be "written into"292 the Constitution. The institution of "representative government", like the closely related institution of "responsible government", is part of the "fabric on which the written words of the Constitution are superimposed"293. The text of the Constitution, and its structure, define how and the extent to which the 290 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 557; [1997] HCA 25 citing Federal Commissioner of Taxation v Munro (1926) 38 CLR 153 at 178; [1926] HCA 58. 291 See Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 70-71; [1992] HCA 46; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 137-138, 149, 168, 228-230; [1992] HCA 45; Lange (1997) 189 CLR 520 at 557-559; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 188 [6], 205-207 [61]-[65], 236 [154]; [2004] HCA 41; Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7], 186-187 [44]-[45]; [2007] HCA 43. 292 See ACTV (1992) 177 CLR 106 at 184. 293 ACTV (1992) 177 CLR 106 at 135 citing The Commonwealth v Kreglinger & Fernau Ltd and Bardsley (1926) 37 CLR 393 at 413; [1926] HCA 8. See also Lange (1997) 189 CLR 520 at 557-558. Constitution gives effect to the institution of representative government294. As the Court explained in Lange v Australian Broadcasting Corporation, "the Constitution provides for that form of representative government which is to be found in the relevant sections"295. The relevant question then is: "What do the terms and structure of the Constitution prohibit, authorise or require?"296 The starting point is s 1, contained in Pt I of Ch I of the Constitution, which vests the legislative power of the Commonwealth in the Parliament. Parts II, III and IV of Ch I establish that there are two Houses of the Parliament – the Senate and the House of Representatives – composed of senators and members respectively. Sections 7 and 24 of the Constitution, read in context, require those senators and members "to be directly chosen at periodic elections by the people of the States and of the Commonwealth respectively"297. The Constitution then empowers the Parliament to make laws regulating those elections298, and the qualification of electors299. Indeed, since the Parliament first exercised those powers by enacting the Commonwealth Electoral Act 1902 (Cth) ("the 1902 Electoral Act") and the Commonwealth Franchise Act 1902 (Cth) ("the 1902 Franchise Act"), the Constitution, in effect, has required the Parliament to maintain laws of that kind300. The Commonwealth also has power to make laws that determine the Electoral Divisions in each State301. Although that legislative power is effectively a "plenary power over federal elections"302, it is subject to express and implied limitations contained in 294 Lange (1997) 189 CLR 520 at 566-567 citing McGinty v Western Australia (1996) 186 CLR 140 at 168, 182-183, 231, 284-285; [1996] HCA 48. 295 (1997) 189 CLR 520 at 567. 296 Lange (1997) 189 CLR 520 at 567. 297 Lange (1997) 189 CLR 520 at 557. 298 ss 9, 10, 31 and 51(xxxvi) of the Constitution. 299 ss 8, 30 and 51(xxxvi) of the Constitution. 300 That is the consequence of the phrase "[u]ntil the Parliament otherwise provides" in ss 10, 30 and 31 of the Constitution. Those powers are exclusive to the Commonwealth: Smith v Oldham (1912) 15 CLR 355 at 358, 360; [1912] HCA 61. 301 ss 29 and 51(xxxvi) of the Constitution. 302 cf Smith (1912) 15 CLR 355 at 363. the people" operates as one such the Constitution303. The mandate in ss 7 and 24 that senators and members be limitation304. "directly chosen by The Parliament may not establish an electoral system that does not comply with that requirement. On occasion, this Court has held laws invalid on that basis305. Accepting that "directly chosen by the people" is a "broad expression to identify the requirement of a popular vote"306, "care is called for in elevating a 'direct choice' principle to a broad restraint upon legislative development of the federal system of representative government"307. There are other limitations on the relevant power308. But outside those limitations, the Constitution does not prescribe the features of any particular electoral system. That design was deliberate309. The result is that, subject to limitations deriving the Constitution, the Parliament is left with a broad choice as to the features of the electoral system310. text and structure of from the Those features are not limited to minor matters; they include fundamental features about how elections are carried out. As Gleeson CJ observed in Roach v Electoral Commissioner, "[i]mportant features of our system of representative democracy, such as compulsory voting, election of members of the House of 303 Rowe v Electoral Commissioner (2010) 243 CLR 1 at 14 [8]; [2010] HCA 46. 304 Mulholland (2004) 220 CLR 181 at 206 [61]-[62]. 305 See, eg, Roach (2007) 233 CLR 162; Rowe (2010) 243 CLR 1. 306 McGinty (1996) 186 CLR 140 at 279; see also at 285. 307 Mulholland (2004) 220 CLR 181 at 237 [156]; Roach (2007) 233 CLR 162 at 197 [77]; Day v Australian Electoral Officer (SA) (2016) 90 ALJR 639 at 645 [19]; 331 ALR 386 at 393; [2016] HCA 20. 308 See, eg, ss 8, 9, 29 and 30 of the Constitution. See also the discussion of s 9 in Day (2016) 90 ALJR 639 at 649-650 [39]-[44]; 331 ALR 386 at 399-400. 309 See, eg, Official Report of the National Australasian Convention Debates, (Adelaide), 15 April 1897 at 672-675; Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 16 March 1898 at 2445-2446. See also McGinty (1996) 186 CLR 140 at 279-280. 310 McGinty (1996) 186 CLR 140 at 184; Langer v The Commonwealth (1996) 186 CLR 302 at 343; [1996] HCA 43; Mulholland (2004) 220 CLR 181 at 207 [64], 236-237 [154]; Rowe (2010) 243 CLR 1 at 22 [29], 49-50 [125], 106 [325], Representatives by preferential voting, and proportional representation in the Senate", as well as suffrage for women and indigenous persons, "are the consequence of legislation, not constitutional provision"311. In addition, since 1902, the electoral system prescribed by Parliament has extended to laws relating to the franchise more broadly, the requirement to enrol to vote, the process for electing senators and members and the exercise of the right of an elector to vote. The scope of those subject matters demonstrates the breadth of the legislative power granted to the Parliament by the Constitution. Enrolment as a condition of the right to vote A distinction between persons being qualified to vote and persons being enrolled or registered and listed as qualified electors on an Electoral Roll, as a condition of the exercise of the right to vote, existed in Australian colonial laws before Federation312. Those laws included provisions to close the Electoral Rolls to new enrolments or transfers of enrolment prior to polling day313. From 1902, enrolment for and voting in federal elections were regulated under the 1902 Electoral Act and the 1902 Franchise Act. Under the 1902 Electoral Act, all persons qualified to vote at an election for the Senate or House of Representatives were qualified and entitled to have their names placed upon the Electoral Roll for the Division in which they lived314. Under the 1902 Franchise Act, subject to certain exceptions and qualifications, the persons whose names were on the Electoral Roll for any Division were then entitled to vote at the election of senators and members of the House of Representatives315. Enrolment was voluntary until 1911316. 311 (2007) 233 CLR 162 at 173 [5]. See also Mulholland (2004) 220 CLR 181 at 312 Rowe (2010) 243 CLR 1 at 17 [15]-[16]. For the position in England and Wales before Federation, see Representation of the People Act 1832 (2 & 3 Will IV c 45). 313 Rowe (2010) 243 CLR 1 at 17 [16]. 314 s 31 of the 1902 Electoral Act. 315 s 3 of the 1902 Franchise Act. 316 The obligation on qualified persons to enrol was introduced by s 8 of the Commonwealth Electoral Act 1911 (Cth). The Commonwealth Electoral Roll has been available for use in State and Commonwealth elections under joint Roll arrangements since 1905317, and has been used to determine who had an obligation to vote since the introduction of compulsory voting in 1924318. Between 1902 and 1983, the Rolls closed on the day the writs for an election were issued. From at least the 1930s, however, there was an executive practice of announcing the election some days before the Governor-General was asked to dissolve Parliament and issue writs for the election of the members of the House of Representatives319. This provided a grace period, the length of which was a matter of discretion of the Executive, for persons wishing to enrol or transfer enrolment to do so prior to the issue of the writs. In 1983, the cut-off point for consideration of claims for enrolment or transfer of enrolment was extended beyond the date of the issue of the writs to the date of close of the Rolls, which was fixed as seven days after the issue of the writs320. In 2006321, the Act was amended to provide that a claim for enrolment received between 8 pm on the day the writs issued and ending at the close of polling for that election could not be considered until after the close of polling. Claims for transfer of enrolment could be made within three working days of the issue of the writs. A majority of the Court in Rowe v Electoral Commissioner322 found those amendments to be invalid, and the Parliament subsequently amended the text of the Act to reflect the effect of the orders made in Rowe, restoring the seven day grace period323. It is the "suspension period" that follows the seven 317 See s 18 of the Commonwealth Electoral Act 1905 (Cth), which inserted s 30 into the 1902 Electoral Act. 318 Compulsory voting was introduced by s 2 of the Commonwealth Electoral Act 1924 (Cth) and found to be valid in Judd v McKeon (1926) 38 CLR 380; [1926] HCA 33. 319 Rowe (2010) 243 CLR 1 at 31 [59]. 320 See ss 29 and 45 of the Commonwealth Electoral Legislation Amendment Act 1983 (Cth). 321 Items 20, 24, 28, 41-45 and 52 of Sched 1 to the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth). 322 (2010) 243 CLR 1. 323 Items 2-8 of Sched 1 to the Electoral and Referendum Amendment (Enrolment and Prisoner Voting) Act 2011 (Cth). day grace period that the plaintiffs contended is invalid. The validity of the suspension period was not challenged by the plaintiffs in Rowe324. The Act The electoral system provided by the Parliament is that senators and members are "directly chosen by the people"325 by a process defined and regulated by the Act. It is a system that provides for the creation of Electoral Divisions; identifies the franchise; includes a requirement to enrol to vote; sets out the process for an election of senators and members, commenced by the issue of a writ for an election and ended by its return, and the nominations of candidates; prescribes the qualifications to be entitled to vote; regulates the exercise of the right of an elector to vote; and provides for the declaration of a poll after voting. It is necessary to examine some aspects of that system and the relationship between them. Entitled to be enrolled The franchise is addressed in s 93 of the Act. In general terms, all citizens aged 18 and over are entitled to enrol to vote. Any person qualified to enrol, who lives at an address in a Division, and has lived at that address for the last month, is entitled to have their name "placed on" the relevant Roll for that Division326. If such a person was previously enrolled at an address in a different Division, the person is entitled to have their name "transferred" to the relevant Roll for the Division in which they now live327. Every person entitled to enrol, by way of either enrolment or transfer of enrolment, and whose name is not on the relevant Roll, is obliged to make a claim for enrolment or transfer of enrolment under the Act328. A person whose name is not on the relevant Roll within 21 days from the date of entitlement is guilty of an offence329. 324 (2010) 243 CLR 1 at 53 [140]. 325 ss 7 and 24 of the Constitution. 326 s 99(1) of the Act. 327 s 99(2) of the Act. 328 s 101(1) of the Act. This does not apply to persons who are entitled to be enrolled by virtue of ss 94, 94A, 95, 96 or 100. Some of these provisions will be addressed below. 329 s 101(4) and (6) of the Act. The Roll An "Elector" is "any person whose name appears on a Roll as an elector"330. Entitlement to vote as an elector depends on a person being entitled to be enrolled331, and enrolled332, on the Roll. The "Roll" is an "Electoral Roll under this Act"333. Part VI of the Act deals with Electoral Rolls. There is a Roll of electors for each State and for each Territory334 and a Roll for each Division335. All the Division Rolls for a State or Territory form the Roll for that State or Territory336. The Rolls must set out the surname, given names and place of living of each elector and other particulars as are prescribed337. Names may be added to Rolls pursuant to claims for enrolment or transfer of enrolment or claims for "age 16 enrolment"338. There is no prescribed form for the Rolls. A computerised record of a Roll is permitted339. There are specific mechanisms for three particular classes of persons (persons outside Australia340, persons having an entitlement to be placed on the Roll because of a relationship with an eligible overseas elector341 and itinerant electors342) to apply to the Electoral Commissioner for enrolment. In respect of those categories of persons, the plaintiffs challenged the validity of ss 94A(4), 95(4) and 96(4), which each provide that if a person's application to be enrolled 330 s 4(1) of the Act. 331 See ss 93(1), 94, 94A, 95, 96 and 99(1)-(2) of the Act. 332 ss 93(2)-(8AA) and 221 of the Act. 333 s 4(1) of the Act. 334 s 81(1) of the Act. 335 s 82(1) of the Act. 336 s 82(4) of the Act. 337 s 83(1) of the Act, subject to two exceptions presently not relevant. 338 s 98(1) of the Act. 339 s 111 of the Act. 340 s 94A of the Act. 341 s 95 of the Act. 342 s 96 of the Act. is received during the suspension period, the Electoral Commissioner must not add the applicant's name to the relevant Roll until after the close of the poll. As seen, qualification as an "elector" being dependent on enrolment is a mechanism adopted by the legislature to assist in the orderly and efficient conduct of elections. There are other aspects of that mechanism directed to the same end, some of which were also challenged by the plaintiffs. As noted earlier, a claim to be entitled to participate (whether by enrolment or transfer of enrolment) is required to be made under s 101343. Each claim may be the Electoral investigated before being determined by Commissioner344. The plaintiffs also challenged the validity of s 102(4), which provides that if a person's claim under s 101 is received during the suspension period, the claim must not be considered until after the end of the suspension period. The Act permits the Electoral Commissioner to update the Roll in two ways without a claim having been made. First, s 103A(2) of the Act permits the Electoral Commissioner to give 28 days' notice to a person that the Electoral Commissioner is satisfied that the person lives at another address and therefore the Electoral Commissioner proposes to update or transfer that person's enrolment. Second, under s 103B(2) of the Act, if the Electoral Commissioner is satisfied that a person is entitled to enrolment, has lived at an address for at least one month and is not enrolled, the Electoral Commissioner may give 28 days' notice to that person that the Electoral Commissioner proposes to enter the person's name and other particulars on the relevant Roll. In both situations, the Electoral Commissioner may take action before the end of 28 days if the person indicates that they do live at the proposed address and, in the case of s 103B, are entitled to enrolment345. The plaintiffs challenged the validity of ss 103A(5) and 103B(5), which provide that the Electoral Commissioner must not take the proposed action within the suspension period. 343 As noted above, s 101(1) does not apply where a person is entitled to be enrolled by virtue of ss 94, 94A, 95, 96 or 100. 344 s 102 of the Act. 345 ss 103A(4) and 103B(4) of the Act. The enrolment of a person may be objected to on certain grounds346. The Act prescribes how to object347 and the objection process348. The plaintiffs the Electoral challenged Commissioner must not remove an elector's name from the relevant Roll within the suspension period. the validity of s 118(5), which provides that Elections An election commences with the issue of election writs349. By s 152 of the Act, writs issued for the election of senators or members of the House of Representatives fix the date for the close of the Rolls, the nomination of candidates, the polling and the return of the writ. Section 155 prescribes that the date fixed for the close of the Rolls is the seventh day after the date of the writ. The suspension period is from 8 pm on the day of the close of the Rolls until the close of polling. The plaintiffs did not directly challenge the validity of ss 152 and 155 but contended that to the extent that they prevented enrolments or transfers after the close of the Rolls, they should be read down to prevent that operation. Part XIV of the Act provides for nomination of candidates for the Senate or the House of Representatives. A person cannot be nominated unless the person is, or is qualified to become, an elector entitled to vote at a House of Representatives election350. If a candidate is not endorsed by a registered political party351 or is not an independent senator or member immediately prior to Parliament's dissolution352, the nomination must be signed by not less than 100 electors entitled to vote at the election for which the candidate is nominated353. The date fixed for the nomination of candidates is not less than 10 days and not 346 s 114 of the Act. 347 s 115 of the Act. 348 ss 116 and 118 of the Act. 349 See ss 12, 32 and 33 of the Constitution and Pt XIII of the Act. 350 s 163 of the Act. 351 s 166(1)(b)(ii) of the Act. 352 s 166(1C) of the Act. 353 s 166(1)(b)(i) of the Act. more than 27 days after the date of the writ354. The date fixed for polling is between 23 and 31 days after the nominations355. An elector whose name is on the Roll for a Division is entitled to vote at elections of senators for the State or Territory that includes that Division and elections of members of the House of Representatives for that Division356. As seen earlier, entitlement to vote is dependent on an elector's name being on the Roll. Polling is dealt with in Pt XVI of the Act. It is the duty of every elector to vote at each election357. The Electoral Commissioner provides a certified list of voters for each Division, which includes the name, sex and date of birth for each person on the Roll for the Division, who will be at least 18 years old on polling day and who is not subject to a term of imprisonment of three years or longer358. In conducting the poll, subject to two exceptions359, the Electoral Rolls in force at the time of the election are "conclusive evidence" of the right of each person on the Rolls to vote as an elector360, unless the person answers the questions put to them prior to voting361 in a way which demonstrates they are not entitled to vote. Postal voting is permitted under Pt XV of the Act. Pre-poll voting by electors is provided for under Pt XVA of the Act. An elector may apply for a postal vote or a pre-poll vote on the grounds set out in Sched 2 to the Act362. Part XIX of the Act provides for the return of the writs. The date fixed for the return of a writ must be within 100 days of the issue363. The names of 354 s 156 of the Act. 355 s 157 of the Act. 356 ss 93, 97 and 221(1)-(2) of the Act. 357 s 245(1) of the Act. 358 ss 203(1)(b) and 208 of the Act. 359 The exceptions are a person who has been placed on a Roll because of a claim made under s 100 and who will be under 18 on polling day and a person subject to a term of imprisonment of three years or longer. 360 s 221(3) of the Act. 361 ss 200DI and 229 of the Act. 362 ss 183 and 200A(1) of the Act. 363 s 159 of the Act. candidates elected are declared and certified, the writs are returned364 and there is a transition to the formation of a new government. Other uses of the Rolls The Rolls are central the maintenance of the institution of representative government in other ways. First, the Rolls ensure that Electoral Divisions reflect election of senators and members of the House of Representatives "directly chosen by the people". As seen earlier, an elector's name is on the Roll for a Division. Each State and Territory is distributed into Electoral Divisions365, with one member of the House of Representatives chosen for each Division366. The Act provides a complex procedure for redistribution of the Divisions in a State or Territory367. A trigger for a redistribution may be an assessment (which is conducted monthly) of the extent to which the number of electors enrolled in each Division differs from the average divisional enrolment368. The Rolls contain the data from which that assessment is made. Second, the Rolls are available to be used by others. A copy of a Roll for a Division or each State and Territory is available for public inspection369. Information in relation to the Rolls and certified lists of voters also must be provided by the Electoral Commission to particular persons and organisations370. In particular, "as soon as practicable after the close of the Rolls", candidates in elections for the House of Representatives must receive a copy of the certified list of voters for the Division for which they are seeking election371. 364 ss 283 and 284 of the Act. 365 s 56 of the Act. See also s 55A regarding the Northern Territory. 366 s 57 of the Act. 367 See ss 59-68 of the Act. 368 ss 58 and 59(2)(b) and (10) of the Act. 369 s 90A of the Act. 370 s 90B of the Act. 371 Item 1 in the table in s 90B(1) of the Act. The system As the above discussion demonstrates, the electoral system chosen by the Parliament has a detailed, coherent structure. That system includes practical and logical steps directed to the orderly and efficient conduct of elections, which result in senators and members of the House of Representatives being "directly chosen by the people" as required by ss 7 and 24 of the Constitution, leading to the formation of a government. It is against that background that the plaintiffs' complaints are to be considered. The plaintiffs' complaints The plaintiffs complained about the suspension period effected by ss 94A(4), 95(4), 96(4), 102(4), 103A(5), 103B(5) and 118(5) of the Act ("the impugned provisions"). The plaintiffs contended that the text and structure of the Constitution prohibit the suspension period372 because the impugned provisions prevent persons otherwise entitled to do so from enrolling (or transferring their enrolment) and voting on polling day, thereby effecting a legislative disenfranchisement, disqualification or exclusion of persons otherwise entitled to vote. The plaintiffs also contended that the impugned provisions distort the popular choice mandated by the Constitution. Limit on Commonwealth legislative power Whatever choice is made by the legislature about the qualification to enrol, the entitlement to vote and the method of voting, universal adult suffrage may only be subject to a limitation for a substantial reason373. In Roach, the Court dealt with a case where the Parliament, in exercise of its legislative power to determine the qualification of electors374, had enacted provisions that had a legal effect on the franchise by prohibiting persons serving a term of imprisonment from voting. In Rowe, although the provisions challenged were not directed towards the qualification of electors, they had a substantial practical effect on who participated in the "choice". The provisions challenged in both cases were held invalid. The basis for that invalidity was that 372 Lange (1997) 189 CLR 520 at 567. 373 Roach (2007) 233 CLR 162 at 174 [7], 198-199 [83]; cf McGinty (1996) 186 CLR 140 at 170 as discussed in Twomey, "Rowe v Electoral Commissioner – Evolution or Creationism?", (2012) 31 University of Queensland Law Journal 181 at 186. 374 ss 8, 30 and 51(xxxvi) of the Constitution. the provisions, in the context of the electoral system as a whole, had the effect that the electoral system established by the Act did not provide for senators and members of the House of Representatives to be "directly chosen by the people" as required by ss 7 and 24 of the Constitution375. In Roach, Gummow, Kirby and Crennan JJ identified that there will be a "substantial" reason for a restriction on the franchise if the reason is "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government"376. Their Honours noted that "[t]he affinity to what is called the second question in Lange will be apparent"377. The questions in Lange were directed to whether a law will be invalid for infringing the implied freedom of political communication. More recently, in McCloy v New South Wales378, a majority of the Court altered the traditional formulation of that test and adopted a framework of "structured" proportionality. Here, the plaintiffs proceeded on the basis that, because of the "affinity" between the test outlined in Roach and the second question in Lange, the validity of the impugned provisions fell to be determined in accordance with the "structured" proportionality approach of the joint judgment in McCloy. The Commonwealth, while accepting that some form of proportionality testing was appropriate, rejected the suggestion that it should take the form adopted by the joint judgment in McCloy. The Attorney-General for South Australia, who intervened to make submissions only on the issue of the relevant test, supported the Commonwealth's approach. The concept of proportionality is applied in a variety of areas in Australian jurisprudence379. It should not be assumed that, because a particular test for proportionality has been adopted in one particular constitutional context, it can 375 See Roach (2007) 233 CLR 162 at 173 [6], 182 [24], 187-188 [46]-[49], 199-200 [85]-[86], 202 [95]; Rowe (2010) 243 CLR 1 at 19 [22], 38-39 [78], 56-57 376 (2007) 233 CLR 162 at 199 [85]. 377 (2007) 233 CLR 162 at 199 [86] (footnote omitted). 378 (2015) 89 ALJR 857; 325 ALR 15; [2015] HCA 34. 379 See McCloy (2015) 89 ALJR 857 at 863 [3]; 325 ALR 15 at 19. be uncritically transferred into another context, constitutional or otherwise380, even within the same jurisdiction. The "structured" proportionality approach adopted by the joint judgment in McCloy is inappropriate in the constitutional context in this case. That can be demonstrated by considering the "necessity" stage of the McCloy test. The "necessity" stage of the McCloy test would require a court to inquire as to whether there exists an "obvious and compelling alternative, reasonably practicable means of achieving the same purpose which has a less restrictive effect"381 on the franchise. If that inquiry is answered positively, then a law will (not may) be invalid382. There are questions about whether such a rigid inquiry (which alone may result in the invalidity of legislation) is appropriate at all in the Australian constitutional context, where the judicial branch of government cannot exercise legislative or executive power. However, for present purposes, it is enough to consider the immediate constitutional context. There is a critical difference between the implied freedom of political communication considered in McCloy and the issues in this case. The Parliament is required to enact laws which provide for an electoral system383. The consequence of the constitutional framework is that the Parliament is effectively under an obligation to maintain laws of that kind. The legislature must design and maintain a comprehensive system that meets the constitutional mandate. In designing that system, the legislature will be faced with a multitude of options for how the system is to operate and, in doing so, will be required to balance a wide range of matters and values. Those options will be presented at a number of different points as the Parliament addresses many different stages of the electoral process. Each of those different stages must ultimately interact to create a coherent whole. It is not a matter of devising and 380 See McCloy (2015) 89 ALJR 857 at 874 [72]; 325 ALR 15 at 34. See also Mulholland (2004) 220 CLR 181 at 200 [39]; Roach (2007) 233 CLR 162 at 178-179 [17]; McCloy (2015) 89 ALJR 857 at 885 [139], 917 [339]; 325 ALR 15 381 McCloy (2015) 89 ALJR 857 at 863 [2]; 325 ALR 15 at 19. 382 cf McCloy (2015) 89 ALJR 857 at 885 [135], 899 [222], 915-916 [328]; 325 ALR 383 See [261]-[264] above. cf Barak, Proportionality: Constitutional Rights and their Limitations, (2012) at 400. drafting a single provision or division of an Act. There are countless variations of such a system. That positive role given to Parliament, together with the broad scope of the legislative power with respect to elections, distinctly marks out the present constitutional context from any inquiry about the implied freedom of political communication. And that is also why, in any case, it is not appropriate to apply the "necessity" stage of the McCloy test as rigidly as McCloy would suggest. To do so would create too great a risk of the judicial branch intruding on the legislative function conferred on the Parliament by the Constitution384. And at a practical level, the judiciary is not equipped to make definitive judgments about whether there are obvious, compelling and practical alternatives to particular provisions that are part of an entire legislative scheme that the Parliament is required to enact to comply with ss 7 and 24 of the Constitution. That flows from the distinctions that are "to be maintained between powers described as legislative, executive and judicial" by reference to "distinctions generally accepted at the time when the Constitution was framed between classes of powers requiring different 'skills and professional habits' in the authorities entrusted with their exercise"385. The difficulties in assessing an integrated legislative scheme were demonstrated in this case when considering the electoral systems in New South Wales, Queensland and Victoria. While they demonstrate that alternative schemes do exist, upon close examination the difficulties in making effective comparisons become apparent. Those difficulties would only be heightened by considering hypothetical alternatives. Those observations are not to endorse particular labels such as "deference", "margin of appreciation" or "zone of proportionality". Rather, they are observations grounded in, and derived from, fundamental constitutional principle in this country. None of that denies that comparisons with alternative laws may be instructive386. But they are not determinative. That accords with the earlier warning that "care is called for in elevating a 'direct choice' principle to a broad 384 See Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 473; [1990] HCA 1; Unions NSW v New South Wales (2013) 252 CLR 530 at 576-577 [130]-[132]; [2013] HCA 58. 385 R v Davison (1954) 90 CLR 353 at 381-382; [1954] HCA 46. 386 See Lange (1997) 189 CLR 520 at 568; Unions NSW (2013) 252 CLR 530 at restraint upon legislative development of the federal system of representative government"387. Impugned provisions are valid Turning to the present case, is part of the universal adult suffrage excluded or the franchise restricted by the impugned provisions, which form part of the electoral system prescribed by the Act? If so, is there a "substantial reason" for that exclusion or restriction? such Terms "exclusion", "detriment", "disentitlement", "disenfranchisement" and "disqualification" were used in the different reasons for judgment in Roach and Rowe. Some of these terms are unhelpful. Most are not defined or not defined consistently. To take "disqualification" as an example, it may mask a distinction between legal disqualification in the Roach sense and cases such as the present where persons who are qualified to vote are unable to vote for some other reason388. Here, the plaintiffs contended that there was a restriction on, exclusion from, or distortion of the franchise. No restriction on, or exclusion from, the franchise Is there a relevant restriction on, or exclusion from, the franchise in this case? The answer is "No". First, there was no legislative diminution of an existing opportunity to enrol, transfer or vote. That is not to endorse the legislative diminution of opportunities to enrol, transfer or vote as being a legitimate criterion to determine the constitutional validity of legislation affecting the franchise. As a matter of constitutional interpretation, treating legislative diminution as a criterion raises complicated issues389. It is enough to note that when the grace period was restored by the decision in Rowe and reflected in the enactment of the impugned provisions by Parliament in 2011, that amounted to a restoration of the opportunity to enrol, transfer or vote to the position that first existed in 1983. The plaintiffs' reliance on Rowe to contend that there was a restriction on the franchise in the present case was misplaced. The outcome in Rowe does not 387 Mulholland (2004) 220 CLR 181 at 237 [156]; Roach (2007) 233 CLR 162 at 197 [77]; Day (2016) 90 ALJR 639 at 645 [19]; 331 ALR 386 at 393. 388 See Rowe (2010) 243 CLR 1 at 66 [187]. 389 See Rowe (2010) 243 CLR 1 at 102 [310]-[311]. See also Twomey, "Rowe v Electoral Commissioner – Evolution or Creationism?", (2012) 31 University of Queensland Law Journal 181 at 183-195. dictate the answer to the present case. There was no consensus between the majority in Rowe on this issue. For example, French CJ placed significance on the fact that the impugned provisions in Rowe operated to diminish opportunities to enrol and transfer that had previously existed under the Act390. That fact was not determinative for the other members of the majority. In numerical terms, the question of whether there is a relevant restriction on, or exclusion from, the franchise might be said to be answered by the facts agreed in the special case. For each of the four federal elections prior to the 2016 election, there has been an increase in the number of provisional votes cast. Such a vote may be cast in certain circumstances where a person claims to vote, but there is a specific reason why their entitlement to vote cannot be verified at the time391. In the 2004 election, 180,865 provisional votes were cast, with 112,560 counted for the Senate and 90,512 counted for the House of Representatives. In the 2013 election, 202,246 provisional votes were cast, with 95,619 counted for the Senate and 48,299 counted for the House of Representatives. The principal explanation for the difference between the votes in fact counted for the Senate and the House of Representatives in each election is that the Senate vote was accepted and counted, whereas the House of Representatives vote was rejected, when an enrolment was valid for the State but not for the Division. In addition, in each of the four federal elections prior to the 2016 election, people lodged claims for enrolment or updates of enrolment during the suspension period392. In 2004, 164,037 people lodged claims: 60,584 were new enrolments and 103,453 were to update enrolment. At the close of the Rolls, approximately 1.2 million people were eligible to be enrolled but were not enrolled. In 2013, 228,585 people lodged claims: 52,692 were new enrolments and 175,893 were to update enrolment. At the close of the Rolls, 1,212,616 people were eligible to be enrolled but were not enrolled. It can be inferred that, in each of these cases, a number of people who were probably qualified to vote, but not enrolled to vote, were ineligible to cast a vote or their vote was not counted for one or both of the Senate and the House of Representatives. None of these facts taken singularly or collectively provides an answer to the relevant constitutional question. To treat them as doing so would overlook both the nature of the limitation imposed by ss 7 and 24 of the Constitution, and fundamental components of the electoral system provided for by the Act. 390 (2010) 243 CLR 1 at 38-39 [78]. 391 s 235 of the Act. 392 It can be noted that "update" in this context includes any changes to a person's enrolment details, and is not limited to a change of the person's address. The electoral system provided for by the Parliament must result in senators and members of the House of Representatives being "directly chosen by the people". Numbers alone cannot establish that senators or members have not been chosen in accordance with that constitutional mandate. That proposition may be tested in this way. Many people who are qualified to enrol fail to do so. Those numbers are not insignificant. Others are enrolled, but do not vote393. No one suggests that even if a large proportion of the enrolled population decided not to vote at a particular election the result of that election would not "yield" Houses of Parliament constituted by senators and members directly chosen by the "people"394. These observations expose a fundamental flaw in the plaintiffs' argument. The plaintiffs assumed that the Constitution requires the Parliament to enact legislation to provide for "elections as expressive of the popular choice as practical considerations properly permit"395. That assumption cannot be sustained. It finds no support or foundation in the text or structure of the Constitution, or elsewhere396. Further, the plaintiffs' numerical argument proceeded on the basis that polling day has constitutional significance. According to the plaintiffs, polling day is when the people "choose". That proposition does not emerge from the text or structure of the Constitution. Moreover, the contention is inconsistent with the interpretation of the phrase "shall be incapable of being chosen" in s 44 of the Constitution, which has been held to refer to "the process of being chosen"397. Section 44 concerns the disqualification of persons from being "chosen" as senators or members. In that way, it is directly linked to ss 7 and 24. There is no reason to think the word "chosen" has a different meaning in the different sections. Accordingly, the numbers are not an answer because whether senators and members are "directly chosen by the people" necessarily requires consideration of the electoral system provided for by the Act, which extends to and includes the franchise, qualification to enrol to vote, entitlement to vote, the process for 393 Rowe (2010) 243 CLR 1 at 96 [288]. 394 Rowe (2010) 243 CLR 1 at 64 [182]. 395 Rowe (2010) 243 CLR 1 at 57 [154]. 396 Rowe (2010) 243 CLR 1 at 73 [210], 75-76 [220]. 397 Sykes v Cleary (1992) 176 CLR 77 at 99-100; [1992] HCA 60. See also Langer (1996) 186 CLR 302 at 332-333. cf Rowe (2010) 243 CLR 1 at 58-59 [160]. electing senators and members and the exercise of the right of an elector to vote, ultimately leading to the formation of a government. Moreover, the choice made by the electors is not one made only on the day of the poll. Every person qualified to enrol for a Division, either by way of enrolment or transfer, and whose name is not on the Roll, is obliged to make a claim for enrolment or transfer of enrolment under the Act398. A person whose name is not on the Roll within 21 days from the date of entitlement is guilty of an offence399. That obligation is not tied to polling day. Moreover, electors can and do vote prior to polling day. Polling day is simply the last possible time a qualified elector can vote. Finally, the suspension period does not prevent any group of electors from voting. In contrast to Roach, the impugned provisions are not directed to the qualification of electors. Generally, a person who cannot vote on polling day because of the suspension period could have voted if they had complied with their statutory obligations400. It is simply not possible or appropriate to isolate one aspect of the system (the suspension period) and contend that, considered in isolation from the rest of the system, it results in the exclusion of part of universal adult suffrage or restriction on the franchise and, instead, the system must enable persons to enrol and vote on polling day. There is no relevant restriction on, or exclusion from, the franchise. The elected senators and members can still be said to be directly chosen by the "people". No distortion The plaintiffs also contended that because of the requirement that senators are to be chosen "for each State" by the "people of the State" and that members are to be chosen by the "people of the Commonwealth", the impugned provisions effected a distortion of the popular choice. The distortion was said to arise because the franchise must be geographically perfect in the sense that a person can only vote in the Division and State in which they are resident. That argument wrongly assumed that the Constitution dictates that a person can only be considered to be a person of a State or of the Commonwealth if they have a particular geographic connection. There is no basis for that assumption in the text or structure of the Constitution. Indeed, if the plaintiffs' 398 s 101(1) of the Act. 399 s 101(4) and (6) of the Act. 400 Subject to those whose eligibility to vote only arises during the suspension period. argument was correct (and it is not), it would render unconstitutional those provisions which permit persons to vote who no longer reside in Australia. Substantial reason In any event, even if there was an exclusion from, or restriction on, the franchise (and neither of those was established in this case), the features of the electoral system chosen by the legislature (which have been set out earlier) demonstrate that there is a substantial reason for the impugned provisions. The suspension period reflected in the impugned provisions must be considered in the context of the coherent electoral system chosen by the legislature, which extends to and includes qualification to enrol to vote, entitlement to vote, the process for electing senators and members and the exercise of the right of an elector to vote, ultimately leading to the formation of a government. As stated earlier, the system is coherent and structured. That structure is rational, logical, efficient and prompt, and provides for an orderly process for senators and members of the House of Representatives to be "directly chosen by the people" as required by ss 7 and 24 of the Constitution, and the subsequent formation of a government. The formation of a representative government is the purpose for which the system exists. The impugned provisions form a part of that system and are directed to achieving that end. Not only is the end consistent and compatible with the maintenance of the constitutionally prescribed system of representative government, the end is for the maintenance of that system. Consideration of whether the impugned provisions are reasonably appropriate and adapted to achieving the identified end cannot be done by the electoral system. isolating one aspect (the suspension period) of The electoral system, which the legislature must design and maintain, has a coherent structure. Isolation of the impugned provisions is artificial and, in this case, distracts attention from consideration of the whole structure. The Rolls are a central component of that system401. Indeed, ss 152(1)(a) and 155 specifically acknowledge the inevitability of the Rolls "closing", and provide for the date on which that is to occur. Each of the impugned provisions simply recognises the logical corollary of the closing of the Rolls – namely, the suspension of changes to the Rolls while they are "closed". 401 See [271]-[287] above. The Rolls close (and the suspension period commences) only three days before the earliest date upon which the first step of the process by which senators and members are chosen takes place (the close of nominations under s 156 of the Act), where some candidates require the signatures of 100 "electors" entitled to vote at the election for which the candidate is nominated402. And, on the closure of the Rolls, the nominated candidates for the House of Representatives are provided with a list of the electors in their Division – who will directly decide whether they should be elected. Moreover, as noted earlier, any consideration of alternative measures in this case was of limited utility. The alternatives put forward by the plaintiffs demonstrated that an electoral scheme or system may be designed in a variety of ways. However, none of them could be considered a "compelling" alternative when its implementation would require substantive consequential amendment to the broader legislative scheme and raise questions about the allocation of financial resources. The preceding analysis explains why, even if there was an exclusion from, or restriction on, the franchise, or a distortion of the popular choice, the impugned provisions are reasonably appropriate and adapted to serve an end. That end was and remains an orderly process for senators and members of the House of Representatives to be "directly chosen by the people" as required by ss 7 and 24 of the Constitution. Conclusion The impugned provisions form part of a system. They do not relevantly exclude part of universal adult suffrage, restrict the franchise, or produce a distortion of the popular choice. To the extent that the impugned provisions may be considered to effect such an exclusion, restriction or distortion, there is a substantial reason for them doing so. The impugned provisions are not invalid. Standing The question of standing can be dealt with shortly. At the time of the hearing, the second plaintiff was enrolled to vote but intended to seek nomination as a candidate for election to the House of Representatives. She had a sufficient interest to raise the issues based on the requirement that she would have needed the signatures of 100 "electors" to seek nomination as a candidate. It is unnecessary to address the standing of the first plaintiff. 402 s 166(1)(b)(i) of the Act. Result For these reasons, I joined in the answers given to the questions reserved.
HIGH COURT OF AUSTRALIA McHUGH ACJ, HILLPALM PTY LIMITED APPELLANT AND HEAVEN'S DOOR PTY LIMITED RESPONDENT Hillpalm Pty Ltd v Heaven's Door Pty Ltd [2004] HCA 59 1 December 2004 ORDER Appeal allowed with costs. Orders of the New South Wales Court of Appeal made on 3 October 2002 set aside and in their place order: Appeal allowed with costs. Paragraphs 1 to 5 of the orders of the New South Wales Land and Environment Court made on 7 June 2001 set aside and in their place order that the application is dismissed with costs. On appeal from the Supreme Court of New South Wales Representation: D F Jackson QC with P R McGuire for the appellant (instructed by Bolster & T F Robertson SC with L M Byrne for the respondent (instructed by Woolf Associates) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Hillpalm Pty Ltd v Heaven's Door Pty Ltd Real Property – Easements – Subdivision of land – Adjoining lots on a subdivision – Proposed plan of subdivision depicted "proposed right of way 10 wide" across one lot – Council approved subdivision – Whether creation of easement was a condition of the grant of approval of the subdivision – Easement not registered under the Real Property Act 1900 (NSW) – Whether appellant required to grant registered easement of right of way. Real Property – Land titles under the Torrens system – Exceptions to indefeasibility of registered title – Whether Council's consent to the subdivision created a right in rem that could be relied upon by the respondent to require the appellant to grant a registered easement of way – Whether such a right consistent with s 42(1) of the Real Property Act 1900 (NSW). Local Government – Town planning – Whether the creation of a right of way was a "condition" of a "development consent" under s 76A(1) of the Environmental Planning and Assessment Act 1979 (NSW) ("EPAA") – Whether purchase and occupation of land was to "carry out development" of the subdivision and therefore a breach of s 76A(1) of the EPAA – Whether s 123 of the EPAA empowers the making of orders to remedy or restrain a breach of the EPAA to a person who had not committed any breach of the EPAA. Courts – Land and Environment Court – Powers of Court – Orders to remedy or restrain breaches of the EPAA. Words and Phrases – "carry out development", "condition", "development consent". Conveyancing Act 1919 (NSW), s 88B. Conveyancing Act Regulations (NSW), reg 52A. Environmental Planning and Assessment Act 1979 (NSW), ss 4, 76A(1), 123. Local Government Act 1919 (NSW), Div 7 Pt XIIA, Div 7 Pt XII, ss 327(2), Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW). Real Property Act 1900 (NSW), ss 42(1), 96D. McHUGH ACJ, HAYNE AND HEYDON JJ. The appellant is the registered proprietor of an estate in fee simple in the land described as Lot 529 in Deposited Plan 1003396 ("the appellant's land"). Its title is subject to some exceptions, encumbrances, interests and entries recorded in the Second Schedule to the Computer Folio Certificate issued under s 96D of the Real Property Act 1900 (NSW). The respondent is the registered proprietor of an estate in fee simple in land ("the respondent's land") which adjoins the appellant's land. The respondent's land is described as Lot 1 in Deposited Plan 601049. The issue The respondent now has no registered easement of way over the appellant's land. None is recorded as an exception, encumbrance or interest on the title to the appellant's land. Can the respondent compel the appellant to grant it such an easement and compel the appellant to construct a track along that easement? The respondent contends that there was a condition of the grant of approval of the subdivision recorded in Deposited Plan 601049 which it can now have the appellant fulfil by granting it a registered easement of way and constructing a track. That contention should be rejected. How the issue arises In 1977, Winchcombe Carson Trustee Co (Canberra) Ltd ("Winchcombe Carson") owned the land of which both the appellant's land and the respondent's land formed part. The land owned by Winchcombe Carson was used for banana growing. Now it seems that the appellant's land, and the respondent's land, would be much more valuable if used for tourist developments. In November 1977, a firm of surveyors, John P Marendy & Associates ("the surveyors"), applied to the local Shire Council (the Tweed Shire Council) for permission to subdivide the land owned by Winchcombe Carson, the purpose of the subdivision being said to be "Rural (Bananas)". It is convenient to refer to this subdivision as the "subdivision of the Winchcombe Carson land". That permission was given by the Council. The resulting plan of subdivision was lodged with, and registered by, the Registrar-General in 1979. That plan (Deposited Plan 601049 – "the 1979 Plan") bore on it a diagram which showed what was described as "proposed right of way 10 wide" from the northernmost point of Lot 1 (the respondent's land) across that part of Lot 2 which includes the appellant's land to join a road called Clothiers Creek Road. (No unit of measurement was given after the figure "10".) McHugh ACJ Hayne Between 1979 and the time of the litigation which gives rise to the present appeal, Lot 2 in the 1979 Plan was further subdivided. It was subdivided in 1981. Each of those plans of subdivision bore a diagram with the same notations as appeared on the 1979 Plan, namely, a diagram showing the same "proposed right of way 10 wide". In January 1998 (nearly 20 years after the Council gave its consent to the subdivision and the plan of subdivision was registered), the respondent purchased Lot 1 in the 1979 Plan. The appellant purchased its land (that part of Lot 2 which is now Lot 529 in Deposited Plan 1003396) in December 1998. The respondent contended in the Land and Environment Court of New South Wales, and maintains its contention in this Court, that it is entitled to a declaration that the appellant is in breach of a condition of the development consent given to the surveyors for the subdivision of the Winchcombe Carson land, and to orders requiring the appellant not only to create a 10 metre right of carriageway on its land by registering that easement on the appellant's title, but also to construct a track within that right of carriageway at least 2.5 metres wide. The Land and Environment Court made a declaration and orders substantially in the form sought by the respondent1. The Court of Appeal of New South Wales dismissed an appeal by Hillpalm Pty Ltd (the appellant in this Court)2. By special leave, that company now appeals to this Court. It was common ground in this Court that the appellant's registered title to its land is not subject to any estate or interest of the respondent, whether in the "proposed easement" or otherwise. In oral argument the respondent accepted that it now has no easement over, or other interest in, the appellant's land. (In particular, it was accepted that the "exceptions, encumbrances" and so on recorded in the Second Schedule to the Computer Folio Certificate in respect of the appellant's land do not include the "proposed right of way".) The respondent contends, nonetheless, that it is entitled to compel the appellant now to perform what it says was a condition imposed, many years before, by the Shire Council, when a predecessor in title of both the appellant and the respondent subdivided the land of which their land now forms a part. These reasons will seek to demonstrate that the respondent was not entitled to any of the orders it sought in the Land and Environment Court and that its application to that Court should have been dismissed. 1 Heavens Door Pty Ltd v Hillpalm Pty Ltd (2001) 116 LGERA 138. 2 Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2002) 55 NSWLR 446. McHugh ACJ Hayne To understand the basis of the respondent's contentions, it will be necessary to notice not only the relevant provisions of legislation dealing with subdivision of land in the Tweed Shire in 1977 to 1979, but also some provisions of subsequent legislation relied on as preserving what was said to be the effect of a condition imposed by the Shire at the time of the 1979 subdivision of the It is against the background of the legislation that existed at the time of the subdivision of the Winchcombe Carson land that it will be convenient to trace the particular course of events recorded in correspondence between the Council and the surveyors about the subdivision of the Winchcombe Carson land. It will then be necessary to examine the legislation in force at the time the respondent commenced its proceedings in the Land and Environment Court and some of the transitional provisions said to link the legislation with the legislation in force at the time of the subdivision of the Winchcombe Carson land. The legislative scheme in 1977-1979 Between 1977 and 1979, two separate parts of the Local Government Act 1919 (NSW) regulated the subdivision of land. Division 7 of Pt XIIA of that Act (ss 342S-342Z) permitted3 the making of an interim development order forbidding the interim development of land (an expression which included, but was not limited to, subdivision of land4) except as permitted by or under the authority of the interim development order and "subject to such conditions and restrictions as may be imposed by or under the interim development order and to such provisions as may apply by virtue of the interim development order"5. Division 2 of Pt XII of the Local Government Act (ss 323-340F) provided6, among other things, that land should not be subdivided except in accordance with the provisions of the Local Government Act. In particular, s 327(2) provided that, "[i]n a case where a subdivision does not provide for the opening of a public road", land was not to be subdivided until certain conditions were met. The subdivision of the Winchcombe Carson land was a subdivision which did not provide for the opening of a public road. The conditions applicable to such a 3 Local Government Act 1919 (NSW), s 342U. s 342T(1). s 342U(4). McHugh ACJ Hayne subdivision included7 that "the town or shire clerk has certified to the applicant that the requirements of this Act other than the requirement for the registration of plans have been complied with". Section 327(2)(c) further provided that, where a subdivision did not provide for the opening of a public road, a plan of the subdivision was to be registered in the office of the Registrar-General. In 1966, the Minister for Local Government rescinded the then Interim Development Order No 1 – Shire of Tweed and made a new interim development order – the Interim Development Order No 2 – Shire of Tweed. That order was amended from time to time. By 1977, it forbade subdivision of the land the subject of the Winchcombe Carson subdivision unless some conditions (about the size of allotments, the ratios of depth to frontage of allotments, and the size of the frontage of each allotment) were satisfied. The Council could dispense with these conditions in certain circumstances. In addition, however, s 342V(1A) of the Local Government Act permitted the Council to grant an application for subdivision (or other development) of land which was subject to an interim development order "unconditionally or subject to such conditions as it may think proper to impose". The respondent submitted that this power to impose conditions was exercised when the Shire Council gave permission for the subdivision of the Winchcombe Carson land. It is convenient to deal at this point with that subdivision. For that purpose, it will be necessary to examine the course of correspondence between the surveyor and the Council. Conditions of permission to subdivide? Not all of the documents submitted to the Shire Council in connection with the proposal to subdivide the Winchcombe Carson land were in evidence at the trial of proceedings in the Land and Environment Court. Some documents, notably the proposed plan of subdivision lodged with the Council, could not be found. In the end, however, nothing turns on that fact. The dispute between the parties to this appeal must be decided according to what is revealed by the evidence about the course of events concerning the subdivision of the When the application for that subdivision was first submitted to the Council, in November 1977, the surveyor, in an accompanying letter, spoke of physical access from Clothiers Creek Road to what was then described as Lot 2 (but appears to be a reference to what became Lot 1 – the respondent's land8) as s 327(2)(b). (2001) 116 LGERA 138 at 144 [25]. McHugh ACJ Hayne being "given by an easement over the proposed new road in stage 3 of the overall development". Because the plan accompanying this letter was not in evidence there might be some debate about what was meant by "the proposed new road in stage 3 of the overall development". Again, however, nothing turns on that. On 22 December 1977, the Shire Clerk wrote to the surveyor saying that the application to subdivide the Winchcombe Carson land "to create a 45 hectare rural lot with right of way access to Clothiers Creek Road" had been approved by Council (emphasis added). The "45 hectare rural lot" that was to be created was the land that became the respondent's land. The letter said that the Council's approval was: "subject to compliance with the following conditions:- Provision of a constructed right of carriageway from Clothiers Creek Road. The track shall be at least 2.5 metres wide and constructed with 150mm consolidated thickness of gravel. Submission of final plans and payment of fees." It is the first of these conditions ("the December 1977 conditions") which the respondent contended in the courts below, and in this Court, was a condition which bound the appellant. In April 1978, the surveyor wrote again to the Council about the proposed subdivision and in particular "[w]ith respect to the provision of a constructed right of carriageway from Clothiers Creek Road to the proposed 45 hectare rural allotment". The surveyor said: "It was originally envisaged that the right of carriageway was to follow the proposed route of a new road of which part is to be constructed in Stage 1 and part in Stage 3 of the overall development. Physical access to the proposed new Lot can at present be gained by an existing track which follows the intended route of the road in Stage 3 but traverses the proposed allotments in Stage 1 as shown on the accompanying plan. It would be logical if the right of carriageway was to follow the existing track, however not wishing to involve ourselves in any possible legal entanglements at the time of development of Stage 1 the right of carriageway should follow the route of the proposed new road. This further poses the problem of the difficulty in construction of the carriageway over the section of road in Stage 1 because of the nature of the terrain. McHugh ACJ Hayne Would Council advise if consideration would be given to physical access being attained over the existing track but the actual right of carriageway being granted over the route of the intended new road. I am advised that the road in Stage 1 of the project will begin as of the 1st July Two aspects of that letter should be noted. First, the letter sought to vary the December 1977 conditions. Secondly, the variation sought was not limited to doing away with the requirement to provide a constructed right of carriageway. What was suggested was that physical access to what was to become the respondent's land should be "attained over the existing track" but that "the actual right of carriageway [be] granted over the route of the intended new road" (presumably before the subdivision was approved and effected). What was described as "the intended new road" appears to have followed the route subsequently depicted on Deposited Plan 601049 as the "proposed right of way 10 wide". Council replied to this proposal on 22 May 1978. The Shire Clerk confirmed "that the arrangement for right of carriageway provisions as access to the proposed lot as described in [the surveyor's April letter] are acceptable to Council". The letter went on to say: "This acceptance is conditional upon the rural/residential estate development proceeding. Consequently your client company shall be required to declare by statutory document as a condition of subdivision that a right of carriageway over the existing track shall be created in favour of the proposed rural lot if the new roads are not dedicated within two years of the date of this letter." Again, two features of this letter are to be noted. First, Council accepted the surveyor's proposal made in the April 1978 letter. But, secondly, that acceptance was conditional. The exact content of the condition is obscure. In particular, it is not clear what was meant by saying that Winchcombe Carson "shall be required to declare by statutory document as a condition of subdivision that a right of carriageway over the existing track shall be created". What is clear, however, is that this obligation ("to declare by statutory document") was to operate "if the new roads are not dedicated within two years" of the date of Council's letter, 22 May 1978. In September 1978, the surveyor sent the plan of subdivision to Council for sealing. On 6 November 1978, the Shire Clerk wrote to the surveyor saying that: McHugh ACJ Hayne "Council is prepared to grant final approval to the above subdivision even though all the conditions of Council's letters dated 22 December, 1977, and 22 May, 1978, have not been complied with. However, you are hereby advised that Council will not take any responsibility for the fact that the existing track is outside the right of carriageway; nor will Council be involved in any dispute that may arise because the existing track is outside the right of carriageway." The plan certified by the Shire Clerk bore on it the diagram showing "proposed right of way 10 wide". The Shire Clerk certified that the requirements of the Local Government Act (other than the requirements for the registration of plans) had been complied with by the applicant in relation to the proposed subdivision. The plan was registered in the Office of the Registrar-General and became Deposited Plan 601049. "Proposed right of way" The expression "proposed right of way" when used on the plan of subdivision that became Deposited Plan 601049 was (and is) a term of art. Since 1964, s 88B of the Conveyancing Act 1919 (NSW) has provided for the creation (and later the release) of easements, and restrictions on use of land by the lodging of plans showing the creation or release of those interests. In particular, it has provided, and now provides, that9 a plan shall not be lodged in the Office of the Registrar-General for registration unless it indicates in the manner prescribed in respect of the plan by regulations made under the Conveyancing Act (or now under that Act or the Real Property Act) what easements, if any, are intended to be created appurtenant to or burdening land comprised in the plan. It further provided10 that on registration of a plan upon which an easement is indicated, then, subject to some qualifications which need not be noticed, easements indicated as intended to be created shall be created11, whether or not the land benefited and the land burdened are in the same ownership at the time when the plan is registered. Regulations were made under the Conveyancing Act prescribing the manner in which easements intended to be created by registration of a plan are to be indicated. At the times relevant to this matter, the Conveyancing Act s 88B. 10 s 88B(3). 11 s 88B(3)(c)(i). McHugh ACJ Hayne Regulations (NSW) provided12 that, in any deposited plan lodged for registration in the Office of the Registrar-General, no notation was to be entered referring to an intention to create an easement which was not intended to be created pursuant to s 88B of the Conveyancing Act. An exception was made, however, to allow illustration of the site of an easement which it was intended should later be created by an instrument of a grant or reservation rather than by the plan itself. Thus, reg 52A provided that: "(2) Notwithstanding the provisions of clause (1) of this Regulation, the diagram in such a plan may illustrate the site of an easement intended to be created by an instrument of grant or reservation, provided the designation of such site includes the word 'proposed' or an abbreviation thereof and provided no written statement of such intention is entered elsewhere on the plan. The illustration and designation of the site of an easement in accordance with clause (2) of this Regulation shall not be taken for the purposes of the said section 88B to indicate in the prescribed manner an intention to create an easement." It follows that registration of the plan of subdivision of the Winchcombe Carson land as Deposited Plan 601049 did not create an easement over the "proposed right of way 10 wide". That plan, by describing the right of way as a "proposed right of way 10 wide", did no more than "illustrate the site of an easement intended to be created by an instrument of grant or reservation". In these circumstances, what was the effect of the correspondence which passed between the surveyor and Council? In particular, was there any condition of the Council's approval of the subdivision which was a condition relating to the "proposed right of way 10 wide"? Was there a condition of the subdivision? The appellant submitted that, even if there was a condition attached to the Council's approval of the subdivision, the Shire Clerk had certified on the plan that was lodged with the Registrar-General that it had been met. The plan lodged with the Registrar-General bore the Shire Clerk's certificate that the requirements of the Local Government Act had been met. That certificate was given under s 327(2)(b) of that Act. As noted earlier, that 12 reg 52A. McHugh ACJ Hayne provision was found in Pt XII of the Act. The better view may well be that, as the appellant submitted, s 327(2)(b) required the Shire Clerk to consider not only whether requirements which flowed from or were imposed pursuant to Pt XII of the Act had been satisfied but also to consider whether any other requirements of the Act, including any requirements imposed under Pt XIIA and, in particular, s 342U(4) had been satisfied. But even if the Shire Clerk's certificate is to be read in this way, it could certify only that those conditions which had to be met before the subdivision was certified had been satisfied. The certificate did not, and could not, say anything about whether conditions to be fulfilled at some time after the subdivision had been certified, let alone after it had been effected, were conditions that had been satisfied. Because the respondent's argument assumes that the relevant condition of approval of the subdivision was not one that had to be satisfied before certification by the Shire Clerk or the effecting of the subdivision, the certificate of the Shire Clerk may be put aside from further consideration. The December 1977 conditions had required provision of a constructed right of carriageway before the plan of subdivision would be sealed. Because this presented "the problem of the difficulty in construction of the carriageway" over part of that road, a difficulty to which the surveyor referred in his April 1978 letter, the surveyor sought and obtained a variation of that condition. The variation first proposed by Council (in its May 1978 letter) was the requirement "to declare by statutory document as a condition of subdivision that a right of carriageway over the existing track" should be created "if the new roads are not dedicated" before 22 May 1980. In November 1978, there was no "statutory document" created or "declare[d]" by Winchcombe Carson or its surveyor and none was thereafter sought by the Council. Its letter of November 1978 recognised that the condition had not been met and that letter did not seek to pursue its enforcement. Instead, the Council sealed the plan and its Shire Clerk gave his certificate with no condition other than any that could be identified from the plan itself. In particular, contrary to the respondent's submission, in November 1978, the Council did not impose as a condition of its sealing the plan, and thus approving the subdivision, any condition in the form or to the effect of the first of the December 1977 conditions, namely, that a constructed right of carriageway from Clothiers Creek Road be provided, on which the track should be at least 2.5 metres wide and constructed with 150 mm consolidated thickness of gravel. What significance, then, is to be attached to the depiction, on the plan that was sealed and registered, of the "proposed right of way 10 wide"? McHugh ACJ Hayne The effect of the plan On its face, the depiction on the plan of the "proposed right of way 10 wide" did no more than indicate that those who had prepared the plan intended, at some unspecified time in the future, to create an easement of way by an instrument of grant or reservation. All the land in the plan then being owned by Winchcombe Carson, the plan may be taken as indicating that company's intention. That statement of intention was not devoid of significance. Indeed, it may well have taken on some real commercial significance in dealings between Winchcombe Carson and any person who bought only one of the lots in the subdivision. The statement of intention having been made, it would have been open to a would be purchaser of the proposed dominant tenement to press for the creation of the relevant easement (and to a would be purchaser of the proposed servient tenement to press for a reduction in the price otherwise payable). Whatever may have been the commercial significance of the statement of Winchcombe Carson's intention on the plan, nothing in the Local Government Act obliged Winchcombe Carson to give effect to its stated intention. If the depiction of the "proposed right of way 10 wide" on the plan can be understood as a condition of the grant of Council's approval to the subdivision (and we doubt that it can), that condition was not one requiring the creation of a right of carriageway; it was, at most, a condition that the intention to do so be stated. And that was done. But the intention was not bounded by any time for its being put into effect. In this Court, the respondent suggested that the statement of an intention to create a right of way constituted a condition of the subdivision that was to be carried into effect within a reasonable time. So far as the reasons of the Land and Environment Court and the Court of Appeal reveal, this contention was not one made in the courts below. But whether or not advanced for the first time in this Court, the contention is not made good. Once it is recognised, as in our view it must, that the Council, by its November 1978 letter, abandoned any insistence on any of the earlier formulations of conditions for the subdivision, it follows that, if there was any relevant condition for the subdivision, it could be found only in what appears on the plan. The evidence led in the Land and Environment Court provides no basis for deciding what time would be a reasonable time within which effect should be given to the stated intention. That is reason enough to reject the respondent's contention. But even if that difficulty could be surmounted, there is a more fundamental difficulty. These reasons later demonstrate that there is no basis for concluding that the obligation to give effect to the statement of intention was an obligation binding the appellant – a person other than the party whose intention McHugh ACJ Hayne Legislation in force at the time of the subdivision of the Winchcombe Carson land which was relevant to that subdivision underwent considerable alteration before the appellant or the respondent bought their land. It is necessary to identify the statutory provisions upon which the respondent relied in support of the claim it made in the Land and Environment Court. The basis of the claims in the Land and Environment Court As noted earlier, the respondent sought, in the Land and Environment Court, a declaration that the present appellant was in breach of condition (a) of the December 1977 conditions. This was said to constitute a breach of a condition of a development consent. The reference to a "condition" of a "development consent" was to be understood by reference to the Environmental Planning and Assessment Act 1979 (NSW) ("the EPAA"). Section 4 of the EPAA defined "development consent", so far as now relevant, as a "consent under Part 4 to carry out development". The word "development" was in turn defined by s 4 of that Act as meaning: the use of land, and the subdivision of land, and the erection of a building, and the carrying out of a work, and the demolition of a building or work, and any other act, matter or thing referred to in section 26 that is controlled by an environmental planning instrument, but does not include any development of a class or description prescribed by the regulations for the purposes of this definition." Section 76A(1) of the EPAA provided that: that specified "If an environmental planning development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless: instrument provides such a consent has been obtained and is in force, and McHugh ACJ Hayne the development is carried out in accordance with the consent and the instrument." Thus, if by "an environmental planning instrument" permission was given to subdivide land, that subdivision (the "specified development") might not be carried out on the land otherwise than "in accordance with the consent and the instrument". An "environmental planning instrument" included what the EPAA referred to13 as a "deemed environmental planning instrument". A "deemed environmental planning instrument" meant "a former planning instrument referred to in clause 2 of Schedule 3 to the Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 and include[d] an instrument referred to in clause 3(2) of that Schedule". The respondent asserted, and the appellant did not dispute, that the Interim Development Order No 2 – Shire of Tweed was a "deemed environmental planning instrument" for the purposes of the EPAA. The appellant did submit that the particular transitional provisions made by the Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW) (as later amplified by the Environmental Planning Legislation Amendment Act 1995 (NSW)) would not have served to preserve any condition which the Council had imposed in respect of the subdivision of the Winchcombe Carson land beyond a limited time. But it is unnecessary to consider the validity of that submission. The more fundamental point made by the appellant was that, even if the correspondence which passed between the surveyor and the Council, or the depiction of the "proposed right of way 10 wide" on the plan of subdivision did constitute a condition on which the Council approved the subdivision, that condition was not enforceable against the appellant. That contention should be accepted. For the reasons given earlier, we do not accept that either the correspondence to which we have referred, or the depiction on the plan of the "proposed right of way 10 wide" constituted or evidenced a condition on which the Council approved subdivision, or at least any condition that went beyond Winchcombe Carson being required to state that it intended to create at an unspecified future time such a right of carriageway. In order to explain why, even if that conclusion is not right, we accept the appellant's submission that any condition that was imposed was not enforceable against it, it is necessary to return to examine the nature of the proceedings instituted by the respondent in the Land and Environment Court and then to notice some particular aspects of McHugh ACJ Hayne the reasoning of the Court of Appeal which led that Court to conclude that the respondent had been entitled to the relief which it had sought and obtained in the Land and Environment Court. Section 123 of the Environmental Planning and Assessment Act As noted previously, the respondent sought two forms of order in the Land and Environment Court – a declaration and an order in the nature of a mandatory injunction. The latter form of order was sought pursuant to s 123 of the EPAA. Sub-section (1) of that section provided that: "Any person may bring proceedings in the Court for an order to remedy or restrain a breach of this Act, whether or not any right of that person has been or may be infringed by or as a consequence of that breach." Pressed, in oral argument, to identify the breach of the EPAA which it was sought to remedy or restrain by the mandatory order to create an easement and construct a carriageway, the respondent pointed to that part of s 76A of the EPAA which provided that a person must not carry the development out on land to which the provision of an environmental planning instrument applies unless "the development is carried out in accordance with the consent and the instrument". No doubt, as counsel for the respondent pointed out, "development", as used in the EPAA, could refer to the subdivision of land, the use of land or to both subdivision and use. It by no means follows, however, that a person occupying a lot in a plan of subdivision carries a development out on the land by simply occupying the land. Where, as here, the subdivision of the land was the relevant development, the subsequent purchaser of a subdivided lot does not "carry that development out" by occupying, and thus using, one of the lots in the subdivision. It follows that, even if there was a relevant condition of the subdivision concerning the creation of a right of way, the appellant did not contravene s 76A of the EPAA by using the land without creating that right of way. It did not breach s 76A because it did not carry the development of subdivision out on the land. In the courts below, two points emerged in response to this apparent difficulty in applying s 123 of the EPAA to the facts of the present matter. It will be convenient to refer to those points as the "objective contravention" point and the "rights in rem" point, and to deal with them separately, even though, on examination, they are revealed to be closely connected. McHugh ACJ Hayne The "objective contravention" point In the Court of Appeal, Meagher JA gave the principal judgment. Handley and Hodgson JJA agreed with the reasons of Meagher JA but Hodgson JA added some additional reasons for concluding that the appeal to that Court by the owner of the appellant's land should be dismissed. Hodgson JA said14 that, if the development in question in the proceedings had been a use of the land, then any person who made that use of the land pursuant to a development consent, without complying with a condition of that consent, would "be in breach of the [EPAA] and [could] plainly be ordered to rectify that breach". His Honour went on to say15 that: "If the development in question is a subdivision, then a later owner of the subdivided land or of a subdivided part of it may not be guilty of any breach of the [EPAA], but nevertheless, so long as the land remains subdivided in accordance with a development consent without a condition of that consent being fulfilled, there is objectively speaking a continuing contravention of the condition; and s 123 of the [EPAA] then gives power to the Land and Environment Court to order the rectification of that contravention by such person as is able to do so, again irrespective of what appears on the title of the land." (emphasis added) The reference to there being "objectively speaking" a continuing contravention of the condition obscures an important question about the proper construction of s 123. In particular, it assumes that s 123 empowers the making of orders to remedy or restrain a breach of the EPAA even if the person to whom the order is directed has not committed any breach of the Act and would not commit a breach of the Act. There is no doubt that s 123, as a provision conferring powers on a court, should be read giving the words of the provision full amplitude. As was said in the judgment of the Court in Owners of "Shin Kobe Maru" v Empire Shipping Co Inc16: 14 (2002) 55 NSWLR 446 at 449 [19]. 15 (2002) 55 NSWLR 446 at 449 [19]. 16 (1994) 181 CLR 404 at 421. See also FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 283-284 per Wilson J, 290 per Gaudron J; David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 275-276 per Gummow J; PMT Partners Pty Ltd (In Liq) v Australian (Footnote continues on next page) McHugh ACJ Hayne "It is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words." Nonetheless, s 123 of the EPAA is not to be read as conferring power on the Land and Environment Court to make orders to remedy or restrain breaches of the Act against persons who are not themselves in breach of the Act or who, unless restrained, would be in breach of the Act. So much follows from the description of the kind of order which may be made under s 123, namely, "an order to remedy or restrain a breach of this Act". An order directed to a person who is not actually in breach of the Act, and not threatening to act in breach, would neither remedy nor restrain any breach. To read s 123 in this way does not lead to any artificial, let alone absurd, result; it does not strip s 123 of utility. In the common case where the relevant development of the land is a particular permitted use of the land, any person who uses the land in some other way carries out a development of the land (by using it in that other way) contrary to the consent that was given. It matters not whether the user of the land was the applicant for consent. Section 76A of the EPAA forbids the user of the land from carrying out the development constituted by that use otherwise than in accordance with the consent given. Accordingly, orders may be made against those who use land in a manner not permitted by development consent. A person using the land in that way is in breach of s 76A of the EPAA. But in the present case the relevant development was not the use of the land; the relevant development was the subdivision. The operation of the EPAA to forbid any person using land otherwise than in accordance with the use permitted by a development consent has sometimes been described by drawing analogies with principles of the law of real property. References may be found in the decided cases to planning restrictions "enur[ing] for the benefit of all future owners or occupiers"17 or giving rise to rights "in National Parks and Wildlife Service (1995) 184 CLR 301 at 313 per Brennan CJ, Gaudron and McHugh JJ; Oshlack v Richmond River Council (1998) 193 CLR 72 at 81 [21] per Gaudron and Gummow JJ; Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at 279 [17] per Gleeson CJ, McHugh, Gummow, Hayne and 17 Auburn Municipal Council v Szabo (1971) 67 LGRA 427 at 433-434. McHugh ACJ Hayne rem"18. Drawing analogies of that kind may, in the particular facts of an individual case, provide a familiar or convenient summary of the result of applying the relevant statutory provisions. Such analogies, however, provide no satisfactory basis for the consideration of any novel case. It is the applicable statutory provisions, and those alone, which must be examined in order to determine the rights of the parties. In particular, to say as Meagher JA did in the Court of Appeal19 that "the council's consent to the subdivision operates to create a right in rem, so that it may be relied on (inter alia) by all later transferees of any lot" is to express a conclusion which, if valid, must find its justification in the relevant statutes. Right in rem? If the Council's consent to the subdivision operated to create a right in rem that may be relied on by any later transferee of any lot in the subdivision, that would present a fundamental question about how the creation of such a right would be consistent with the effective operation of a system of Torrens Title. In particular, the existence of such a right would be inconsistent with s 42(1) of the Real Property Act. That provides that, subject only to the four kinds of exception specified in the succeeding paragraphs of s 42(1), and the further exception "in case of fraud": "Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded". (emphasis added) (None of the exceptions specified in s 42(1) was said to be engaged in the present matter.) As Barwick CJ said in Breskvar v Wall20: 18 Winn v Director General of National Parks and Wildlife [2001] NSWCA 17 at [199] per Stein JA. 19 (2002) 55 NSWLR 446 at 449 [13] (emphasis added). 20 (1971) 126 CLR 376 at 385-386. McHugh ACJ Hayne "The Torrens system of registered title ... is not a system of registration of title but a system of title by registration. That which the certificate of title describes is not the title which the registered proprietor formerly had, or which but for registration would have had. The title it certifies is not historical or derivative. It is the title which registration itself has vested in the proprietor." (emphasis added) It follows that, when the appellant became registered as proprietor of an estate in fee simple in the appellant's land, it obtained the title described in the certificate of title. That title was free from any encumbrance or interest of the kind which the respondent contends it is now entitled to have created. If the consent to the subdivision did create a right in rem, that would be a right or interest in the land not shown on the Computer Folio Certificate. There would then be a real and lively question about how the two statutory schemes (the scheme under the EPAA and the Torrens system for which the Real Property Act provides) were to be reconciled, and questions of implied repeal or amendment might arise. But those questions are not raised by this matter. That is because it was common ground that the appellant's title was not and is not now subject to any interest of the kind which the respondent asserted it was entitled to have the appellant create in its favour. If the respondent has any such right, it is a right to have an interest in land created and that is said to be a right enforceable by personal action against the appellant, not by any action or application to rectify the Register maintained under the Real Property Act. That right, if it exists, is not a right in rem. The availability of rights in personam is entirely consistent with the Torrens system of title. The immediate indefeasibility of a title to land under the Torrens system does not deny "the right of a plaintiff to bring against a registered proprietor a claim in personam, founded in law or in equity, for such relief as a court acting in personam may grant"21 and those proceedings "may have as their terminal point orders binding the registered proprietor to divest himself wholly or partly of the estate or interest vested in him by registration"22. If the respondent has a right against the appellant, it is a personal right, not a right in rem, and that personal right must be found, if at all, in the relevant statutory provisions. For the reasons given earlier, however, the respondent has no such right. Section 123 of the EPAA does not provide that right to the respondent in this 21 Frazer v Walker [1967] 1 AC 569 at 585. 22 Breskvar v Wall (1971) 126 CLR 376 at 385 per Barwick CJ. McHugh ACJ Hayne case, the appellant not being in actual or threatened breach of that Act. No other provision of that Act was identified as founding the right asserted. That being so, the respondent's claim to orders obliging the appellant to create an easement and construct a right of way must fail. Conclusions and Orders The appeal to this Court should be allowed with costs. The orders of the Court of Appeal made on 3 October 2002 should be set aside and in their place should be orders as follows: (a) Appeal allowed with costs. Set aside pars 1 to 5 of the orders of the Land and Environment Court of New South Wales made on 7 June 2001 and, in their place, order that the application is dismissed with costs. Kirby KIRBY J. This appeal23 "presents an interesting question of real property law" argued closely on "both sides with reference both to principle and to decided cases"24. As I approach the ultimate question in the appeal, it concerns the right of a specialised superior court of record, under deliberately wide statutory powers, to order Hillpalm Pty Ltd ("the appellant"), at the suit of Heaven's Door Pty Ltd ("the respondent"), to create "the 10 metre right of carriageway, shown on DP 601049, by registration thereof on the title to [Hillpalm's] land"25. The respondent (which succeeded before the primary judge26 and unanimously in the New South Wales Court of Appeal27) suggests that, ultimately, what is at stake is the application of the very broad powers afforded to the Land and Environment Court by the Environmental Planning and Assessment Act 1979 (NSW)28 ("the EPAA") in circumstances where the merits were, and were found to be29, in the respondent's favour. This, it was said, sustained the making of orders rendering them unassailable in this Court. This Court has said many times that the High Court will not normally disturb collateral findings of fact30. It will only do so when the findings are shown to be "clearly erroneous"31. Still less will it readily interfere with discretionary orders of a court, so long as those orders are made within power and without legal error. 23 From the New South Wales Court of Appeal: Hillpalm Pty Ltd v Heaven's Door Pty Ltd (2002) 55 NSWLR 446. 24 Pratten v Warringah Shire Council (1969) 90 WN (Pt 1) (NSW) 134 at 139 per 25 Terms of the order of the Land and Environment Court, entered 7 June 2001, par 2. See Heavens Door Pty Ltd v Hillpalm Pty Ltd (2001) 116 LGERA 138 at 157 26 Hillpalm (2001) 116 LGERA 138 per Sheahan J. 27 Hillpalm (2002) 55 NSWLR 446 per Meagher JA (Handley JA concurring; Hodgson JA agreeing with further reasons). 28 In particular, see ss 122, 123 and 124. 29 Hillpalm (2001) 116 LGERA 138 at 156 [102]-[104]. 30 eg Graham Barclay Oysters Pty Ltd v Ryan (2002) 211 CLR 540 at 568-569 [51]- 31 Barclay Oysters (2002) 211 CLR 540 at 568 [53]. Kirby For the appellant, however, the issue at stake concerns a fundamental aspect of the system of land title by registration, regulated in this case by the Real Property Act 1900 (NSW) ("the RPA"). The appellant argued that the courts below had erred in failing to hold that, when it became the registered proprietor of the land, supposedly subject to an unfulfilled condition of development and subdivision consent for a right of carriageway in favour of the respondent, the appellant took its interest in the land free of an easement necessary for the right of carriageway to be effective, and free of any obligation to recognise or create such an easement. At the time the appellant acquired title to the subject land, the appellant's Certificate of Title to the land did not disclose the existence of any easement, actual or proposed. Reference to the proposed right of carriageway existed only in a deposited plan. It was not on the registered title. For the appellant, then, the appeal concerned the suggested precedence which the RPA took, both as a matter of legal principle, and in the factual circumstances of the case. The facts, legislation and issues The background facts: The way the dispute arose between the parties is stated in the reasons of McHugh ACJ, Hayne and Heydon JJ ("the joint reasons")32. The relevant circumstances include those giving rise to the subdivision of the once unified parcel of land owned by Winchcombe Carson Trustee Co (Canberra) Ltd ("Winchcombe Carson") near Tweed Heads in New South Wales; the condition of a constructed right of carriageway imposed on Winchcombe Carson by the Tweed Heads Shire Council ("the Council") as a requirement for subdivision consent; and the survival of that condition despite intervening changes to planning law33. All of these are explained in the joint reasons34. The applicable legislation: It is perhaps as well to spell out, in a little more detail, the two different statutory regimes of planning law that successively applied to the development and use of the subject land. When Winchcombe Carson initially proposed the subdivision of the then unified allotment, development approval belonged to the Council under Pt XIIA of the Local Government Act 1919 (NSW) ("LGA"). For the proposed separation of the land 32 Joint reasons at [4]-[13]. See also reasons of Callinan J at [111]-[124]. 33 Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 (NSW), Sched 3, 34 Joint reasons at [14]-[24], [36]-[39]. Kirby into two lots, subdivision approval was required under Pt XII of the LGA, specifically applicable in the late 1970s whenever a subdivision was proposed35. The applicable request for development consent to create a 45 hectare rural lot (Lot 1) specified a right of way access from the lot to Clothiers Creek Road. Approval was sought pursuant to the Interim Development Order No 2 − Shire of Tweed ("the IDO"), cl 11(1). The Council had no power to grant development consent to the application unless it provided for access from the proposed lot to a main road. Clause 11(1)(c) of the IDO imposed a development standard requiring frontage to a main road of not less than 400 metres36, although that requirement was capable of waiver in cases involving "minor" departures from the specified standard37. However, not only was the provision of the right of way a legal requirement for the exercise of the Council's powers to grant development consent. It was essential from the point of view of the purchaser of the proposed rural lot, otherwise effectively cut off from access to the nearest road. It was necessary to protect the interests of the public (including service utilities), having legitimate purposes to gain access to Lot 1 of the proposed subdivision. Long before the times in question here, experience in planning control law taught that, unless the requirements for access from a proposed new lot to a main road were incorporated in development consent, subsequent contests over the creation of an easement38 would take time, involve cost, inconvenience landowners and the public, burden public utilities and consume the energies of the courts sorting out the consequences. All of these considerations explain the imperative planning and land management interest in attaching clear conditions concerning a right of way to a public road when development consent to a subdivision was invoked. So it was that the Council granted development consent to the proposed subdivision with right of way access to Clothiers Creek Road, subject to conditions requiring provision of a constructed right of carriageway of a specified width and road thickness from Clothiers Creek Road together with the submission of final plans and payment of the requisite fees to the Council. 35 The equivalent provisions to Pt XIIA LGA are now found in Pt 4 EPAA. Those in Pt XII LGA are now found in Pt 4A EPAA. 36 IDO, cl 11(1)(c): "... land shall not be sub-divided ... unless ... the frontage of any such allotment to a main road is not less than 400 metres". 37 IDO, cl 35. 38 Under the Conveyancing Act 1919 (NSW), s 88B. Kirby What ensued was approval by the Council of the subdivision under Pt XII LGA. That approval was part of the separate regulatory scheme then in force in the State of New South Wales for the control of subdivisions. So much was confirmed by the expert evidence given at trial; by the separate (subdivision) number given to the approval; and by the release of a linen plan of survey impressed with the certificate of the Shire Clerk to the Council which was the final step in implementing the Council's subdivision approval before registration of the plan as a deposited plan under the Conveyancing Act 1919 (NSW). Once this plan was registered, a subdivision of the land was effected. It yielded two lots. Such a subdivision was also a step in implementing the applicable development consent under Pt XIIA LGA. Each of the deposited plans for subdivision of the subject land (including the title diagram incorporated by reference in the appellant's Certificate of Title) referred to "Title diagram: DP 1003396". That deposited plan clearly showed the proposed right of way, a fact proved in evidence at the trial and clear in any case on the face of that document. Transitional legislation and its effect: Because it would have been unlawful for the Council to approve the subdivision without imposing a condition with respect to the access road, the development consent granted by the Council is to be read as incorporating that condition. The applicable development consent was granted under Pt XIIA LGA. When the EPAA commenced on 1 September 1980, the applicable Parts of the LGA were repealed. However, the New South Wales Parliament took great care to preserve consents given under the LGA and any conditions attaching thereto. Thus the Miscellaneous Acts (Planning) Repeal and Amendment Act 1979 ("Miscellaneous (NSW) "Any consent, approval or permission granted in respect of an application made under a former planning instrument, and in force immediately before the appointed day, shall, subject to subclause (2), continue in full force and effect subject to − the operation of any provision of that instrument or any term or condition of that consent, approval or permission governing or relating to the currency, duration or continuing legal effect of that consent, approval or permission; and the operation of any condition (other than that referred to in paragraph (a)), restriction or limitation, subject to which that consent, approval or permission was granted." 39 See Sched 3, cl 7(1). Kirby This provision of the transitional legislation indicates that an objective of the New South Wales Parliament was (amongst other things) to ensure that unperformed conditions attaching to planning consents did not abate on the coming into force of the new planning legislation. They were not treated as inherently fragile or such as could be taken as abandoned or extinguished before or under the new statutory regime. On the contrary, cl 7(1) was clearly enacted on the assumption that the conditions attached to subdivision and development consents granted under the LGA were intended to survive into the new planning law created by the EPAA. Indeed, a development consent under the LGA was to be taken to have been made under the EPAA. This position was further reinforced by cl 9 of the Miscellaneous Acts (Planning) Savings and Transitional Provisions Regulation (NSW) ("the Miscellaneous Transitional Regulation"): "For the purposes of Division 3 of Part 6 of the [EPAA] − a consent, approval or permission referred to in − clause 7(1) of Schedule 3 to the Act; … shall be deemed to be a consent referred to in section 122(b)(ii) of the [EPAA]; and a term or condition of a consent, approval or permission referred to in paragraph (a) shall be deemed to be a condition referred to in section 122(b)(iii) of the [EPAA]". This provision is important because, by force of s 122(b)(iii) of the EPAA, a breach of a condition of consent is a breach of the Act, that is, of the EPAA. A breach of that Act attracts remedies under the EPAA, and in particular ss 123 and 124 of that Act. It was under those sections that the respondent sought, and obtained, relief in the Land and Environment Court in this case. The joint reasons conclude that the condition imposed by the Council pursuant to the IDO was not enforceable against the appellant40. Additionally, they decide that, even if that conclusion is not correct, any condition that was imposed was not a subject of an order by the Land and Environment Court under the EPAA, s 12341. I disagree with each of these conclusions. The former involves an artificially narrow view of the condition imposed by the Council (for good, lawful and practical reasons), long thereafter maintained on the register of 40 Joint reasons at [40]. 41 Joint reasons at [41]-[44]. Kirby title42 and known to the appellant. The latter arises from an unacceptably confined reading of the powers of the Land and Environment Court, contrary to the plain language of the EPAA and to established judicial authority. The Council's condition is enforceable against the appellant The nature and purpose of land use law: In order to understand the operation of planning law − both under the LGA and, when it came into force, the EPAA, it is necessary to appreciate that it is concerned with fundamentally more important objectives than the rights of those with various interests in land inter se. Of their nature, such laws, governing consent to development generally, and to subdivisions in particular, are concerned with the orderly management of land in society so as to protect at once the interests of individuals, the community and the environment. This point was well made by Street CJ in F Hannon Pty Ltd v Electricity Commission of NSW [No 3]43. His Honour's analysis is generally accepted as the classic exposition of the nature and scope of the jurisdiction and powers of the Land and Environment Court to grant remedies for breaches of the EPAA pursuant to the provisions whose scope is in issue in this appeal44. However, much of what Street CJ says in that connection (whilst especially pertinent here) is also applicable to the purpose and effect of conditions imposed under the former planning law in the LGA. I shall return to his Honour's analysis later. For the moment it is enough to notice the essential point he made45: "[T]he task of the Court is to administer social justice in the enforcement of the legislative scheme of the Act. It is a task that travels far beyond administering justice inter partes." The reason for the breadth of this principle lies in the central purpose of planning law for land management and use. That purpose is to ensure, relevantly, that the basic purposes necessary to that task are observed and conditions essential to a modern interdependent society observed. Apart from the considerations already mentioned, one has only to think of societies that do not protect their environment and land-based infrastructure, but permit developments to occur without observance of overall planning control and environmental 42 See reasons of Callinan J at [111]. 43 (1985) 66 LGRA 306 at 310-313. 44 EPAA, ss 122, 123 and 124. See Mandalong Progress Association Inc v Minister for Planning (2003) 126 LGERA 408 at 418-419 [30]-[32]. 45 Hannon (1985) 66 LGRA 306 at 313. Kirby protection. It is because of the chaos that can ensue in such circumstances that the ultimate focus of planning regulation law is the land itself. It is not, as such, merely the ephemeral ownership or possession of the land. Were it otherwise, planning law could easily be circumvented by changes of ownership and possession immediately following the imposition of conditions upon proposed development of the land. This is a reason why it is a fundamental mistake to read the LGA, the EPAA or associated laws strictly, so as to confine their application to those who owned or possessed the subject land at the time applicable conditions were imposed. Yet that is what the majority do in this appeal. Preservation of the applicable condition: To give effect to the purpose of planning conditions, a different approach to the construction of laws providing for such conditions is required. That approach is confirmed and reinforced by the care taken in the Miscellaneous Transitional Act and Miscellaneous Transitional Regulation to preserve a "consent, approval or permission" granted under a "former planning instrument" so that it would continue "in full force and effect" and be deemed to be a consent or condition, as referred to in s 122(b)(iii) of the EPAA. The parties to the present appeal did not contest that the IDO, under which the Council had imposed the conditions on the development by way of subdivision "that a right of carriageway over the existing track shall be created in favour of the proposed rural lot" was a "deemed environmental planning instrument" for the purposes of the EPAA46. Clearly, the conditions attached to that development by way of subdivision were not complied with. On the face of things, this meant that there was a breach of the development consent initially given which continued as a breach of the "development consent" deemed to be given under the EPAA. The appellant also conceded (rightly in my view) that the Miscellaneous Transitional Act preserved any condition which the Council had imposed in respect of the subdivision and would have bound Winchcombe Carson had it remained the owner of the land. It simply asserted that the condition was not enforceable against it. However, once it is conceded that the condition travels with the land and survives, despite breach of its terms, the passage of years and the commencement of the EPAA, the attempt of the appellant to exempt itself from the consequences of the breach (or to deny the Land and Environment Court the power to afford a remedy designed to enforce the condition) is unpersuasive in this case both as a matter of law and fact. 46 See joint reasons at [38]. Kirby Nor does the course of correspondence between the Shire Clerk, for the Council, and the surveyor for Winchcombe Carson alter the essential terms of the condition on the development and subdivision, namely the "provision of a … right of carriageway from Clothiers Creek Road" of specified dimensions. It is unsurprising that this is so, given that the LGA47 contemplated and the IDO required, that such a condition be imposed as a planning necessity. Immaterial evidentiary imperfections: There are unsatisfactory features of the evidence at the trial of this case. The initial proposed plan of subdivision, lodged with the Council, was lost. There was misdescription of the lots affected by the proposed right of carriageway48. The width of the carriageway was described in successive diagrams by a digit (10) but without an express indication that it referred (as it clearly did) to "10 metres". There was inconclusive correspondence49 concerning a suggested variation of the exact trajectory of the proposed right of carriageway. By 1990, the Certificate of Title, as such, did not disclose on its face the existence of any easement, actual or proposed, relating to the intended carriageway. Despite these evidentiary imperfections, through all of the deposited plans relating to the subject land, notwithstanding later subdivisions, the title diagram in the deposited plan clearly showed the access road as a "proposed right of carriageway" or "proposed right of way 10 wide". To a skilled conveyancer, this bore a plain meaning that it was intended at a later time to create an easement in the location shown in the diagram as a condition of the subdivision. The Council did not necessarily wish to be forced into involvement in a dispute between the owners of the adjoining lots in respect of the exact position of the proposed easement and right of carriageway. Sensibly, this was something the Council was content to leave to them. But at no stage did the Council withdraw or rescind the condition it had imposed for the development and subdivision of the land. The existence of that subdivision condition continued to be evidenced in the title diagrams appearing in the successive deposited plans relating to the subject lots. The unfulfilled condition was enforceable: I would therefore reject the appellant's contention that, of its nature, the condition imposed by the Council upon the development and subdivision that ultimately produced the allotments of 47 s 327(2). See joint reasons at [14]. 48 See joint reasons at [17]. 49 See joint reasons at [19]-[22]. Kirby land owned by the appellant and respondent respectively was not enforceable in its own terms. I agree with the remark of Hodgson JA in the Court of Appeal50: "[The EPAA] is concerned with land as a topographical entity, indifferently is a continuing contravention of a condition of a development consent for so long as the development continues and the condition is unfulfilled. its proprietorship; and … there If the development in question is a use of land, then any person who makes that use of the land pursuant to the consent without complying with the condition will be in breach of the Act". It follows that, on the face of things, the legal rights of the appellant as the successor to Winchcombe Carson in respect of Lot 2 were subject to the condition imposed by the Council upon the development and subdivision concerning the land. The breach of the condition imposed by the Council continued. The real issue in the case is thus reached. It concerns whether the Land and Environment Court had the power under the EPAA in these circumstances to order the appellant, belatedly, to comply with the condition. The resolution of that issue, both as a matter of law and of discretion, depends on the argument of the appellant that no such order could or should be made having regard to its "clean" Certificate of Title (bearing no notification of a proposed easement with respect to the right of carriageway) taking into account the provisions and purposes of the RPA, read together with the EPAA. The Land and Environment Court's power was engaged Wide interpretation of court powers: The Land and Environment Court "is both a superior court of record and a court of limited jurisdiction"51. It follows from the fact that it is a superior court of record that "within its defined jurisdiction, amply construed, it will be entitled to do the large range of things that superior courts of record traditionally do"52. The definition of the jurisdiction and powers of the Land and Environment Court is found in its Act53, the EPAA and in implications inherent in the express 50 Hillpalm (2002) 55 NSWLR 446 at 449 [18]-[19]. 51 National Parks and Wildlife Service v Stables Perisher Pty Ltd (1990) 20 NSWLR 52 Stables Perisher (1990) 20 NSWLR 573 at 585. 53 Land and Environment Court Act 1979 (NSW). Kirby grants of power54. The peculiarity of the functions of the Court, to uphold the public interest in planning law, to protect the public interest beyond the interests of the parties and also to protect the environment are most clearly indicated by a provision in s 123(1) of the EPAA. This permits "any person" to bring proceedings in the Court "for an order to remedy or restrain a breach of this Act". That power, which transcends traditional notions of standing under the general law55, reinforces in this context the principle stated in the general rule that the jurisdiction and powers conferred by statute on a superior court of record must be construed amply, in the confidence that such a repository will need to be in a position to deal with the great variety of circumstances coming before it and that it will not misuse such powers56. In terms of the EPAA, the broad entitlement of any person to commence proceedings "for an order to remedy or restrain a breach" is given still further emphasis by the acknowledgment in that Act that the person bringing such proceedings may do so "whether or not any right of that person has been or may be infringed by or as a consequence of that breach"57. Such provisions scarcely suggest a strict or narrow reading of the powers of the Land and Environment Court when invoked to remedy or restrain an established breach of the EPAA. Breach includes failure to comply: By the EPAA, a "breach of this Act" includes "a contravention of or failure to comply with" a "condition subject to which a consent is granted"58. Pursuant to the Miscellaneous Transitional Act, the "condition" imposed on the subdivision and development of the subject land is a deemed "environmental planning instrument" for the purposes of the EPAA. It is thus referred to in s 122 of the EPAA. Even if it might be argued that the appellant did not "contravene" the condition (eg at the time of the creation of the subdivision itself) the same is not true of the phrase "failure to comply with" the condition. There are, with respect, dangers in posing the question solely as to whether a party is "in breach of the Act"59. This is not an accurate paraphrase of 54 See Cardile v LED Builders Pty Ltd (1999) 198 CLR 380 at 422-423 [108]. 55 See Sydney City Council v Building Owners and Managers Association of Australia Ltd (1985) 2 NSWLR 383 at 386-387. 56 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 204; Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 at 581-582; Logwon Pty Ltd v Warringah Shire Council (1993) 33 NSWLR 13 at 28-30. 57 EPAA, s 123(1). 58 EPAA, s 122 (emphasis added). 59 Joint reasons at [47]. Kirby the EPAA when the extended definition of "breach" is taken into account. Here the "breach" was a "failure to comply". The condition never having been rescinded (and on the contrary maintained and carried into force under the EPAA by the transitional legislation and regulation) it remains applicable to the land in the resulting subdivision. It has not been complied with either by Winchcombe Carson or the appellant as the owner and occupier of the land. The "condition subject to which a consent is granted" remains unfulfilled. The "failure to comply with" it therefore enlivens the jurisdiction and powers of the Land and Environment Court under the EPAA. It is the extended definition of "breach" of the EPAA that affords the textual foundation in that Act for the appellant's liability under s 76A(1) of the Act to relief in favour of the respondent directed at the previous carrying out of the specified development and subdivision otherwise than "in accordance with the consent and the [environmental planning] instrument"60. Relevantly, this is the deemed environmental planning instrument61 (in this case the Shire of Tweed IDO made under the LGA). Established authority on Court powers: This approach, and the notion that conditions governing subdivision and development consent relate to the land and survive intermediate changes in the ownership and possession of the land, is well established in New South Wales law62. It has roots in earlier English cases63. It helps to explain the care taken in the Miscellaneous Transitional Act to preserve conditions, restrictions and limitations on consents made under a "former planning instrument". In Winn v Director General of National Parks and Wildlife64, Spigelman CJ correctly described the position hitherto accepted as settled law in New South Wales: 60 EPAA, s 76A(1)(b). 61 EPAA, s 4 (definition of "environmental planning instrument"). 62 Ryde Municipal Council v The Royal Ryde Homes (1970) 19 LGRA 321 at 324; Parramatta City Council v Shell Co of Australia Ltd [1972] 2 NSWLR 632 at 637 per Hope JA (Jacobs P and Manning JA concurring); Friends of Stradbroke Island Association Inc v Sandunes Pty Ltd (1998) 101 LGERA 161 at 169; House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498 at 504 [23], 507 63 Miller-Mead v Minister of Housing and Local Government [1963] 2 QB 196 at 215 per Lord Denning MR ("A grant of permission runs with the land and may come into the hands of people who have never seen the application at all"); see also at 223 per Upjohn LJ. 64 [2001] NSWCA 17 at [4]. Kirby "A public document, such as a development consent, constitutes a unilateral act on the part of the consent authority expressed in a formal manner, required and intended to operate in accordance with its own terms. It has … an inherent quality that it will be used to the benefit of subsequent owners and occupiers. It is also a document intended to be relied upon by many persons dealing with the original grantee, or assignees of the grantee, in such contexts as the provision of security. In some respects it is equivalent to a document of title. It must be construed in accordance with its enduring functions." This Court could only now overturn this settled authority by adopting an exceedingly narrow approach to the meaning and operation of the EPAA which, contrary to its language, history and object, confined it effectively to an inter partes operation. That is not an approach that I would take. The unlikelihood that Parliament would have contemplated the need for fresh Council consideration (and the imposition of new development and subdivision conditions) upon each new purchaser or assignee of a party itself subject to current conditions has only to be stated to be understood. The disruption that would ensue for the orderly operation of planning law, and compliance with conditional consents under that law, should not be embraced lightly. Court powers and the public interest: I would therefore reject the appellant's submission that the "condition" imposed by the Council on the subdivision and development of its land did not apply to the appellant and that it was not in "breach" of the EPAA (as defined) so as to attract the jurisdiction and powers of the Land and Environment Court under s 123 of the EPAA. I agree with what Street CJ said in Hannon to which I return65: "The width of the powers and jurisdiction of the Land and Environment Court is apparent from the legislative provisions … Likewise it is apparent that the court enjoys a wide discretionary range within which to consider the formulation of orders or to remedy or restrain breaches of the planning legislation. … It is the duty of that Court, in formulating 'such order as it thinks fit', to have regard at all times to the pursuit of the objects of the [EPAA] as set out in s 5. This involves, in appropriate cases, the evaluation of matters extending beyond the mere determination of the rights and matters in dispute between the immediate parties. It involves due weight being given to the public interest and the interests of other affected persons in the overall context of the pursuit of the objects broadly set out in s 5." 65 (1985) 66 LGRA 306 at 312-313. Kirby Similar observations have been made in many later cases66. I do not believe that the established line of authority on this point in the Court of Appeal is wrong. The Act, its exceptional language and large purposes all support the correctness of the broad view hitherto taken. It has not been shown to be erroneous. In my view, it is fully sustained by the wide language of the EPAA, its history and purposes. This Court errs in adopting a different view. Indefeasibility under the RPA and unfulfilled conditions Indefeasibility: a legal innovation: The argument that the appellant pressed most strongly on this Court, to support the construction that it urged of the EPAA, including in relation to the jurisdiction and powers of the Land and Environment Court, was based on the view it urged of the language and purposes of the RPA. There is no doubt that the RPA represents the implementation in New South Wales of one of the most important legal innovations adopted in Australia67. I refer to the implementation of the Torrens system of land title by registration68. Virtually from the start, the Torrens system succeeded in Australia because of its great advantages for all those concerned with interests in land. Its success has encouraged the adoption of similar laws in many other countries, modelled to some extent on the Australian precedent69. Although the initial model in South Australia was probably influenced by the system of land registration operating for many years in the Hanseatic towns of Northern Germany, such as Hamburg70, this providence does not detract from the 66 See eg Sydney County Council (1985) 2 NSWLR 383 at 386-387; Mandalong Progress Association Inc (2003) 126 LGERA 408 at 418-419 [30]-[33]. 67 See Fox, "The Story behind the Torrens System", (1950) 23 Australian Law Journal 489. 68 The applicable provisions of the RPA appear in the reasons of Callinan J at [117]- [120]. See also Whalan, "Immediate Success of Registration of Title to Land in Australasia and Early Failures in England", (1967) 2 New Zealand Universities Law Review 416 at 424. 69 Cooper, "Equity and Unregistered Land Rights in Commonwealth Registration Systems", (2003) 3 Oxford University Commonwealth Law Journal 201; Agbosu, "Land Registration in Ghana: Past, Present and Future", (1990) 34 Journal of African Law 104. 70 Raff, Private Property and Environmental Responsibility: A Comparative Study of German Real Property Law, (2004); Esposito, "A Comparison of the Australian ('Torrens') System of Land Registration of 1858 and the Law of Hamburg in the 1850s", (2003) 7 Australian Journal of Legal History 193. Kirby enormous influence of the Torrens reform in Australia and beyond. That influence continues to this day71. I would not lightly reach a conclusion on a contested legal point that diminished the effective operation of the RPA. One of the important benefits of the RPA, from the start, has been observance of the principle that it is the register, created by that Act, that expresses the title to land brought under the Act. The register is not merely evidence of a title to land existing otherwise. It is the "title which registration itself has vested in the proprietor"72. The RPA and statutory burdens: Concern has been expressed in some writing that has followed the decisions in the courts below that their holding undermines one of the central purposes of the RPA. Thus, it has been suggested that the decision of the Court of Appeal effectively necessitates the undertaking by conveyancers of "a historical search of the property of a type akin to the searches that need to be undertaken in relation to old system title land". This, it is said, is an undesirable consequence "in that the Torrens system of registered title was designed to avoid the need to make such historical searches of a vendor's title"73. Clearly, there are advantages of certainty, efficiency and speed in settlements for purchasers, vendors and others interested in dealings in land being able to rely on the face of the register to discover applicable interests in the land where the land has been brought under the Torrens system. Formulating requisitions and conducting inquiries addressed to local government consent authorities74 add to cost and delays in transactions affecting land to the extent that it is necessary to go beyond the register. These are legitimate concerns. Any erosion or diminution of a principal objective of the RPA is not something to be accepted lightly. However, this is not a new problem for this Court. In South-Eastern Drainage Board (SA) v Savings Bank of South Australia75 the question arose 71 Simpson, Land Law and Registration, (1976) at Ch 21. 72 Breskvar v Wall (1971) 126 CLR 376 at 386. The passage is quoted in the joint reasons at [52]. 73 Radan, "Indefeasibility and Overriding Statutes", (2003) 41(6) Law Society Journal 74 Which in New South Wales must maintain a register of development consents that is open to public inspection. See EPAA, s 100; Environmental Planning and Assessment Regulation (NSW), Pt 16. 75 (1939) 62 CLR 603. Kirby whether charges on land, purportedly created by various South-Eastern Drainage Acts76, took priority over a mortgage affecting the same land registered under the Real Property Act 1886 (SA), a counterpart to the RPA. This Court upheld the priority of the statutory charge against the registered charge. In explaining the interaction of the two statutes, Dixon J said77: "[T]he question upon which our decision must turn is whether in the enactments creating the statutory charges such a clear intention is expressed to include land under the Real Property Act and to give to the charges an absolute and indefeasible priority over all other interests that, notwithstanding s 6 of that Act, no course is open but to allow the intention so expressed in the later enactments to be paramount over the earlier Real Property Act. In my opinion this question ought to be answered that such an intention so plainly appears that no other course is open." There have been similar decisions of the Privy Council78 and of State Supreme Courts in Australia79. Some of these decisions have been criticised by commentators understandably anxious about the prospect of the loss, or diminution, of one of the most important objectives of the Torrens principle of title by registration80. However, for a number of reasons (which the foregoing line of decisional authority supports) I cannot accept the appellant's submission that the fact that its title to land under the RPA was "clean" (bearing no note of any easement in favour of the respondent's land to permit the proposed right of carriageway over it) operates somehow to extinguish the legal effect of the "condition" imposed on the subdivision and development of that land under planning law or on the jurisdiction and power of the Land and Environment Court to provide remedial orders under s 123 of the EPAA designed to oblige 76 South-Eastern Drainage Board (1939) 62 CLR 603 at 615-616. 77 (1939) 62 CLR 603 at 627-628. See also at 621-622 per Starke J. 78 Miller v Minister of Mines [1963] AC 484 at 498. 79 See eg Vickery v Municipality of Strathfield (1911) 11 SR (NSW) 354 at 361-364 per Rich AJ; Trieste Investments Pty Ltd v Watson (1963) 64 SR (NSW) 98 at 103; Pratten (1969) 90 WN (Pt 1) (NSW) 134 at 140-142 per Street J; Quach v Marrickville Municipal Council [Nos 1 & 2] (1990) 22 NSWLR 55 at 70 per 80 As stated in Breskvar (1971) 126 CLR 376 at 385-386. See eg O'Connor, "Public Rights and Overriding Statutes as Exceptions to Indefeasibility of Title", (1994) 19 Melbourne University Law Review 649. Kirby compliance with such a condition where the facts of the case warranted such an order. Primary operation of statutory requirements: It is elementary under our system of law, that if a written law is valid, clear and applicable, it must be given effect according to its terms81. Where there is conflict between the commands of written laws enacted by the same legislature, courts endeavour to reconcile the texts. If they cannot do so in other ways in terms of their language, they have resort to established canons of construction. Here, these canons include obedience to the law made later in time82; priority to the law on a subject classified as more specific over one regarded as more general83; and precedence to public over purely private rights84. The last principle affords little guidance in the present case. There is a public interest in the observance of planning laws and consent decisions and protection of the environment. However, there is also a public interest in upholding the indefeasibility principle of the RPA which transcends the private rights of parties expressed in Certificates of Title issued under that Act. However that may be, each of the stated canons of construction favour the respondent's argument. The EPAA is later in time than the RPA. The EPAA is more specific and particular than the RPA. To any necessary extent, its provisions would take priority over those of the RPA so far as there is any conflict. Court powers to create new rights: When properly analysed, the order of the Land and Environment Court that the appellant challenges creates new rights which arise from the making of the order. They are superimposed upon the rights of the parties, by force of the EPAA. This is so notwithstanding any rights that the parties to that time may have enjoyed under the RPA. In this sense, there is no irreconcilable conflict between the two Acts. There is no ultimate need to 81 Trust Co of Australia Ltd v Commissioner of State Revenue (2003) 77 ALJR 1019 at 1029 [68]-[69]; 197 ALR 297 at 310-311. 82 Goodwin v Phillips (1908) 7 CLR 1 at 7; Travinto Nominees Pty Ltd v Vlattas (1973) 129 CLR 1 at 33-34 per Gibbs J. 83 See Minister for Immigration and Multicultural and Indigenous Affairs v B (2004) 78 ALJR 737 at 769 [176]; 206 ALR 130 at 174, citing Phillips v Lynch (1907) 5 CLR 12 at 28-29. See also Goodwin (1908) 7 CLR 1 at 7; Butler v Attorney- General (Vict) (1961) 106 CLR 268 at 276, 280, 290-291; Saraswati v The Queen (1991) 172 CLR 1 at 17-18, 23. 84 P E Bakers Pty Ltd v Yehuda (1988) 66 LGRA 403 at 410; Hillpalm (2002) 55 NSWLR 446 at 449 [14]. Kirby treat the EPAA as repealing or amending the RPA pro tanto. The Acts simply operate sequentially. Until the order is made by the Land and Environment Court, the appellant's title was indeed "clear", although in this case the appellant was on notice of the respondent's claim for relief once made and, possibly (as I shall show) much earlier. Clean title and judicial discretion: The consideration of a "clean" Certificate of Title of a purchaser or assignee of land, ignorant of the breach of planning law that gives rise to the claim for relief from the Land and Environment Court, would indeed be a matter highly relevant to the decision of that Court about whether to exercise its jurisdiction and powers at all, and if so, upon what conditions. I agree with the opinion of Hodgson JA that, in such a case85: "[P]articularly if there is no hint of this condition [of a subdivision] on the title documents … the Court may decline as a matter of discretion to order compliance with it, or may order compliance only subject to conditions, including conditions requiring payment of money by the person seeking the order if that person's acts or omissions have contributed to the problem." As Hodgson JA pointed out, long before this case was decided, it had been customary for purchasers to inquire about compliance of buildings with relevant planning consents of local government consent authorities. It may not have been usual to make similar inquiries with respect to consents to subdivisions86. The modification of requisitions and initiation of investigation, although new obligations, are not so substantial a burden as to cast doubt on the wide ambit in which the discretionary power of the Land and Environment Court is expressed in the EPAA. Conclusion: the relief was lawful and justified The discretionary order was justified: Once the jurisdiction and power of the Land and Environment Court is established, the exercise of its discretionary power in the present case in favour of the respondent cannot be criticised. Contrary to submissions made for the appellant at trial87, the primary judge found that the appellant did have notice of the Council's conditional consent to the subdivision affecting its land88. He found that, having regard to the way the 85 Hillpalm (2002) 55 NSWLR 446 at 450 [22]. 86 Hillpalm (2002) 55 NSWLR 446 at 449-450 [21]. 87 Hillpalm (2001) 116 LGERA 138 at 143 [18]. 88 Hillpalm (2001) 116 LGERA 138 at 156 [102]-[103]. Kirby consortium was formed to purchase the property and the corporate vehicle (Hillpalm) that was created for that purpose, the appellant company itself was on notice of the proposed right of carriageway through examination of the series of deposited plans and otherwise89. He concluded that notice to the company had not been lost when the "guiding mind" of the company changed90. The primary judge reached the foregoing conclusions more comfortably91 on the footing that, although it had been foreshadowed that the appellant's predecessor in title (who had formed the consortium and created the appellant as a corporate vehicle for the appellant's purposes) would be called to give oral evidence at the trial, in the event he was not92. The evidentiary findings of the primary judge in this respect were not challenged before the Court of Appeal. Still less were they disturbed. They cannot be altered by this Court. The case illustrates utility of the power: Once jurisdiction and power in the Land and Environment Court is established, the foregoing factual findings reinforce the conclusions available from the course of the successive deposited plans themselves. However, they go further. They illustrate the utility and justice of providing the discretionary power to the Land and Environment Court to provide the relief which it did against the appellant in respect of the subject land, although the appellant's Certificate of Title was "clear" and although it was a purchaser of the land nearly 20 years after the original subdivision was registered upon conditions that still remained unfulfilled. In other factual circumstances, the passage of time could well give rise to other arguments for a party like the appellant acquiring the subject land much later (eg of waiver) in respect of a belated demand to conform with unfulfilled conditions imposed on a subdivision or other development of land. However, the discretion of the Land and Environment Court, and its broad powers to shape its orders to suit the particular case93 afford ample protection against unreasonable demands or demands that should not be met without the imposition of countervailing terms. All of these points were well made in the Court of Appeal by Hodgson JA. I agree with him. 89 Hillpalm (2001) 116 LGERA 138 at 156 [103]. 90 Hillpalm (2001) 116 LGERA 138 at 156 [104]. 91 On the basis of the principle stated in Jones v Dunkel (1959) 101 CLR 298 at 320- 92 Hillpalm (2001) 116 LGERA 138 at 156 [105]. 93 EPAA, s 124(1). Kirby Order The appellant's criticism of the reasons of the Court of Appeal and the orders of the Land and Environment Court fails. The appeal should be dismissed with costs. Callinan CALLINAN J. It is true, as the respondent in this appeal submits, that planning and real property legislation should be enacted and administered so as to enable each to be read and applied as complementing the other. And if those responsible for the drafting and administration of legislation of these kinds keep this elementary truth firmly in mind, little difficulty in giving full effect to them should arise. In this case however, it appears that this truth has not been kept in mind. I say this by reason not only of the facts stated by McHugh ACJ, Hayne and Heydon JJ and Kirby J, with the conclusion of the latter of whom I agree, but also by reason of other facts and statutory provisions which require particular consideration. The first of the facts is that until 1990 a search of the folio for the certificate of title of the proposed servient tenement would have disclosed the existence and location of the proposed right of way, albeit of an unstated unit of measurement of "10". It is difficult to understand how and precisely why this important information ceased to appear on the relevant folio of the Register of Titles. Perhaps it was because of the introduction of an electronic Register. Whether that is so or not, the fact remains that a highly relevant piece of information concerning the title was replaced by a cryptic reference to a deposited plan by number which did contain that information. The second of the facts relates to the language in which an amendment to condition (a)94 as originally imposed, was made by the Council as the planning authority. It is necessary to understand how the amendment came to be made. This appears, first, from the letter of the applicant's95 surveyor of 4 April 1978 to the Council: "It was originally envisaged that the right of carriageway was to follow the proposed route of a new road of which part is to be constructed in Stage 1 and part in Stage 3 of the overall development. Physical access to the proposed new Lot can at present be gained by an existing track which follows the intended route of the road in Stage 3 but traverses the proposed allotments in Stage 1 as shown on the accompanying plan. It would be logical if the right of carriageway was to follow the existing track, however not wishing to involve ourselves in any possible legal entanglements at the time of development of Stage 1 the right of 94 See the reasons of McHugh ACJ, Hayne and Heydon JJ at [18]. 95 The applicant for the initial subdivision was Winchcombe Carson Trustee Co (Canberra) Ltd ("Winchcombe Carson"), which owned the land of which the appellant's land and the respondent's land formed a part. See the reasons of McHugh ACJ, Hayne and Heydon JJ at [4], [5] and [19]. Callinan carriageway should follow the route of the proposed new road. This further poses the problem of the difficulty in construction of the carriageway over the section of road in Stage 1 because of the nature of the terrain. Would Council advise if consideration would be given to physical access being attained over the existing track but the actual right of carriageway being granted over the route of the intended new road. I am advised that the road in Stage 1 of the project will begin as of the 1st July It is clear from the letter that the applicant accepted that it was bound to provide a "right of carriageway" over its land: secondly, that as a temporary expedient only, actual physical access would be provided by way of an existing track; and, thirdly, that there was to be constructed a "right of carriageway [to] follow the route of the proposed new road." The Council, as appears from its letter of response of 22 May 1978, acceded in part to the applicant's request. The form of the condition that then emerged was as follows: is conditional upon "This acceptance rural/residential estate development proceeding. Consequently your client company shall be required to declare by statutory document as a condition of subdivision that a right of carriageway over the existing track shall be created in favour of the proposed rural lot if the new roads are not dedicated within two years of the date of this letter." the It is true that the expression "statutory document" is not a precise one. In the circumstances however I do not doubt that what the writer of the letter had in mind, and the applicant would have understood him to mean, was a document given legal effect by, or under a relevant enactment, to the applicant's obligation to create and construct a right of carriageway if new roads were not dedicated within two years. What may appear ambiguous now was no doubt clear to the Council and the applicant at the time of the correspondence between them. It may also be safely assumed that any ambiguity to anyone was dispelled, not only by the deposit of the plan in the office of the Registrar-General of Titles, but also by the diagram drawn to scale on it, indicating both the location and the intended width of the proposed right of way. Callinan A map or a plan (of subdivision) is by definition an instrument under the Real Property Act 1900 (NSW) (the "RPA")96. Section 31B(2) of the RPA defines the "Register" as follows: "(2) The Register shall be comprised of: folios, dealings registered therein under this or any other Act, the record required to be kept pursuant to section 32(7), instruments of a prescribed class, and records required by the regulations to be kept as part of the Register." Section 32(7) of the RPA provides as follows: "(7) The Registrar-General shall maintain a record of all dealings recorded in, or action taken in respect of, a computer folio and such other information, if any, relating to the folio as the Registrar- General thinks fit." (emphasis added) Here the deposited plan filed in the office of the Registrar-General and given its own number, was consistently also expressly referred to on the folio containing the title deed to the lot for the appellant's land. It follows that the deposited plan was an instrument under the RPA and formed part of the Register. That this is so is reinforced by s 13K(1)(d) which provides as follows: "13K Conversions, purchases, extensions of term, subdivisions etc (1) Where a holding comprising land to which this Part applies is subject to the provisions of this Act and the following action is taken in regard to the holding: it is subdivided, 96 Section 3(1)(a) defines instrument in this way: "Any grant, certificate of title, conveyance, assurance, deed, map, plan, will, probate, or exemplification of will, or any other document in writing relating to the disposition, devolution or acquisition of land or evidencing title thereto." Callinan the Registrar-General may create such folios of, and make such recordings in, the Register as, in the Registrar- General's opinion, are appropriate to give effect to that action." Next, the actual language of the indefeasibility provision set out in s 42 of the RPA should be noticed: "42 Estate of registered proprietor paramount (1) Notwithstanding the existence in any other person of any estate or interest which but for this Act might be held to be paramount or to have priority, the registered proprietor for the time being of any estate or interest in land recorded in a folio of the Register shall, except in case of fraud, hold the same, subject to such other estates and interests and such entries, if any, as are recorded in that folio, but absolutely free from all other estates and interests that are not so recorded ..." The emphasis in the section is upon the "folio". Here, as we now know, no proposed right of way was in terms recorded on the current folio in respect of the appellant's land although the existence of another instrument "relating to [that] folio", forming part of the Register, and indicating clearly the existence of a proposed right of way was. Were it not for the emphasis upon the folio in s 42 it could hardly be argued to afford very much support for the appellant's case. The evidence established that the appellant by its advisers did know of the deposited plan before completing the acquisition of the land. Neither that fact, nor the fact that the appellant asserted that it thought that all of the "proposed" interests shown on the Register, had, in effect lapsed, on the abandonment of the scheme for the development of all of the land in the 1970s, whatever bearing either might have on the apparent merits of the case, can of itself be of no necessary significance to the disposition of the appeal in light of s 43 of the RPA which provides as follows: "43 Purchaser from registered proprietor not to be affected by notice Except in the case of fraud no person contracting or dealing with or taking or proposing to take a transfer from the registered proprietor of any registered estate or interest shall be required or in any manner concerned to inquire or ascertain the circumstances in or the consideration for which such registered owner or any previous registered owner of the estate or interest in question is or was registered, or to see to the application of the purchase money or any part Callinan thereof, or shall be affected by notice direct or constructive of any trust or unregistered interest, any rule of law or equity to the contrary notwithstanding, and the knowledge that any such trust or unregistered interest is in existence shall not of itself be imputed as fraud. Subsection (1) does not operate to defeat any claim based on a subsisting interest, within the meaning of Part 4A, affecting land comprised in a qualified folio of the Register." (emphasis added) It is a curiosity, that although the Registrar-General was prepared to accept and include as part of the Register, a plan showing a "proposed right of way", neither the term "proposed right of way" nor "proposed right of carriageway" appears in the RPA. Section 47 is concerned with the creation of "easements", and it is common ground here that no easement has as yet been created. Schedule 8 Pts 1 and 2 of the Conveyancing Act 1919 (NSW) (the "CA") set out the basic elements of a right of carriageway and right of footway as follows: "Schedule 8 Construction of certain expressions Part 1 Right of carriage way Full and free right for every person who is at any time entitled to an estate or interest in possession in the land herein indicated as the dominant tenement or any part thereof with which the right shall be capable of enjoyment, and every person authorised by that person, to go, pass and repass at all times and for all purposes with or without animals or vehicles or both to and from the said dominant tenement or any such part thereof. Part 2 Right of foot way Full and free right for every person who is at any time entitled to an estate or interest in possession in the land herein indicated as the dominant tenement or any part thereof with which the right shall be capable of enjoyment, and every person authorised by that person, to go, pass and repass on foot at all times and for all purposes, without animals or vehicles to and from the said dominant tenement or any such part thereof." Section 88 of the CA draws a distinction between an easement and a restriction on use of land. Relevantly it provides as follows: Callinan "88 Requirements for easements and restrictions on use of land ... a restriction arising under covenant or otherwise as to the user of any land, the benefit of which is intended to be annexed to other land, contained in an instrument coming into operation after such commencement, shall not be enforceable ... unless the instrument clearly indicates: the land to which the benefit of the easement or restriction is appurtenant, the land which is subject to the burden of the easement or restriction: Provided that it shall not be necessary to indicate the sites of easements intended to be created in respect of existing tunnels, pipes, conduits, wires, or other similar objects which are underground or which are within or beneath an existing building otherwise than by indicating on a plan of the land traversed by the easement the approximate position of such easement, the persons (if any) having the right to release, vary, or modify the restriction, other than the persons having, in the absence of agreement to the contrary, the right by law to release, vary, or modify the restriction, and the persons (if any) whose consent to a release, variation, or modification of the easement or restriction is stipulated for. (1A) Land (including the site of an easement) is clearly indicated for the purposes of this section if it is shown: in the manner prescribed by regulations made under this Act or the Real Property Act 1900, or in any other manner satisfactory to the Registrar- General in the particular case or class of cases concerned. This subsection does not limit other ways in which land may be clearly indicated." The restriction intended by s 88 of the CA may well have been a restrictive covenant, but in terms it seems to me to be so generally stated as to be capable of embracing a proposed right of way. The inclusion of the proposed right of way Callinan was apparently sufficiently and satisfactorily shown for the purposes of the Registrar-General for he gave the deposited plan indicating it a number, and expressly referred to that on the folio. It is necessary to go now to 52(A) of the Regulations made under the CA. At all material times it provided as follows: "Indication of site of easement created by instrument of grant or reservation In any deposited plan lodged for registration in the office of the Registrar-General no notation shall be entered referring to an intention to create easements, restrictions on the use of land or positive covenants which are not intended to be created pursuant to section 88B of the Act. (2) Notwithstanding the provisions of clause (1) of this Regulation, the diagram in such a plan may illustrate the site of an easement intended to be created by an instrument of grant or reservation, provided the designation of such site includes the word 'proposed' or an abbreviation thereof and provided no written statement of such intention is entered elsewhere on the plan. The illustration and designation of the site of an easement in accordance with clause (2) of this Regulation shall not be taken for the purposes of the said section 88B to indicate in the prescribed manner an intention to create an easement." One effect of the regulation was to ensure that only easements intended to be duly created according to law, could be designated as "proposed" on a relevant plan of subdivision. Any person responsible for the preparation and deposit of a plan of subdivision (as was the applicant) must therefore be taken to have intended, and to be clearly and expressly signalling an intention to create an easement in accordance with its location and dimensions as shown on a proposed right of way on the deposited plan. Another effect of the regulation was to make it clear that the deposited plan could not, and did not of itself create an easement. There can be no doubt in my opinion that the applicant was obliged to give effect to its stated intention. The condition with respect to the proposed right of way was a condition of the development. Section 76A(1) of the Environmental Planning and Assessment Act 1979 (NSW) (the "EPAA") provides as follows: Callinan "76A Development that needs consent (1) General If an environmental planning instrument provides that specified development may not be carried out except with development consent, a person must not carry the development out on land to which the provision applies unless: such a consent has been obtained and is in force, and the development is carried out in accordance with the consent and the instrument." The fact that a development, in this case a subdivision, was carried out without satisfaction of a condition, cannot relieve an applicant of its obligation to satisfy it. But there is a further reason why the applicant was obliged to give effect to the condition. Winchcombe Carson got the benefit of the approval which relieved it, temporarily only, of an obligation that it was, in due course, obliged to meet. The principle laid down in Coke on Littleton is relevant: that "a man who takes the benefit of a deed is bound by a condition contained in it though he does not execute it"97. The deposited plan may not have been a deed98, but it contains what I would take to be a solemn promise, to create, initially, a proposed right of way, and subsequently, an easement. That was the burden that Winchcombe Carson assumed. By way of benefit it got the subdivisional approval and the postponement of the obligation to create the easement. Although not in terms a deed, the deposited plan was adopted and sealed by Winchcombe Carson as well as the Council, the latter of which was essential for its registration. The preceding correspondence between Winchcombe Carson's surveyors and the Council is to a similar effect. The question remains however, whether the appellant as a successor in title, should now be saddled with the obligation of satisfying the condition, for that it should do so was the effect of the decision of the court at first instance and the Court of Appeal of New South Wales. Arguably the appellant did take and have a relevant benefit, the land in its subdivided state, thereby placing itself 97 At 230 b; see also Rufa Pty Ltd v Cross [1981] Qd R 365 at 371 per Kneipp J. 98 Contrast s 176 of the Land Title Act 1994 (Q) which relevantly provides: "176 Registered instrument operates as a deed A registered instrument operates as a deed." Callinan under an obligation to grant and construct the easement, but I do not find it necessary to determine the appeal on that basis. It is important to notice the language of s 123(1) of the EPAA99, upon which, in the end, I think the case turns. It is its unqualified language which is decisive. It allows any person (without reference to the passage of time) to seek to have the Court make an order "to remedy ... a breach of [the] Act", and s 122(b)(iii) defines a breach of the Act to include a failure to comply with a condition subject to which a consent is granted. Section 123 does not, expressly or by implication, confine the remedy to a remedy against the person originally responsible for the breach. No doubt in deciding whether to grant relief, being relief of an equitable kind, and in the nature of a mandatory injunction, a court would take into account such matters as the financial and other capacities of a successor in title, his or her knowledge of the circumstances, the conduct of the applicant, the indications which did appear on the folio and the plan, hardship, the period of time that has passed since the breach first occurred, any windfall or otherwise to the parties, and other relevant matters. There is no reason to doubt that the primary judge did have regard to such of these as were relevant in deciding to grant the relief that he did to the respondent. The view that I have formed makes it unnecessary therefore for me to decide whether the reference on the folio of the certificate of title incorporates by reference, the deposited plan and what is shown clearly on it, the dimensions and location of the proposed right of way. As a matter of construction therefore of the instruments, and the regulation to which I have referred, s 42 of the RPA although at first sight, an apparently formidable barrier to a grant of relief to the respondent, simply has nothing conclusive to say about the remedying of a breach of the kind that has occurred here of the EPAA. The fact that an order made under it might cause an owner of land under the RPA to assume a burden or restriction on his or her land that could have been, but was not clearly shown on the folio in the Register as an encumbrance of any kind, although a matter relevant to a decision whether to grant or withhold relief, does not mean that s 42 of the RPA provides a watertight defence to a claim of the kind made by the respondent here. 99 Section 123(1) provides: "123 Restraint etc of breaches of this Act (1) Any person may bring proceedings in the Court for an order to remedy or restrain a breach of this Act, whether or not any right of that person has been or may be infringed by or as a consequence of that breach." Callinan I cannot leave this appeal without making these observations. This litigation should never have occurred and possibly never would have, had the Council been diligent in enforcing its conditions, and perhaps if the Registrar- General had not, so far as the evidence goes, inexplicably allowed the explicit and detailed reference to the proposed right of way formerly appearing there, to drop off the folio in the Register for the appellant's land. It may not even have happened had there been no such creature as a proposed right of way under the CA, a somewhat anomalous interest, serving no necessary purpose, at best barely compatible with the intent of the RPA, and seemingly unique to New South Wales. I would dismiss the appeal with costs.
HIGH COURT OF AUSTRALIA GUMMOW ACJ, MICHAEL PELDAN (AS TRUSTEE OF THE BANKRUPT ESTATE OF RAYMOND APPELLANTS AND BERNADETTE ANDERSON (AS EXECUTOR OF THE ESTATE OF THE LATE DOROTHY RUTH PINNA) & ANOR RESPONDENTS Peldan v Anderson [2006] HCA 48 4 October 2006 ORDER Grant leave for the amended notice of contention dated 23 June 2006 to be filed out of time. Allow the appeal to the extent necessary to vary order 2 made by Kiefel J on 25 August 2005 so that it reads: "The orders of Jarrett FM made on 22 February 2005 be set aside, and in their place order that the application to the Federal Magistrates Court filed 20 August 2004 be dismissed." Appeal otherwise dismissed with costs. On appeal from the Federal Court of Australia Representation D R Cooper SC with M D Martin for the appellants (instructed by Quinn & Scattini) A J H Morris QC with L A Jurth for the respondents (instructed by Bennett Carroll) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Bankruptcy − Transfers to defeat creditors − s 121(1)(a) of the Bankruptcy Act 1966 (Cth) ("the Act") − Transfers of property void against the trustee in bankruptcy if the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred − Where pursuant to s 121(9)(b) of the Act property that did not previously exist is taken to have been transferred for the purposes of s 121 of the Act − Where the bankrupt unilaterally severed a joint tenancy in Torrens title land held between himself and his wife who later died prior to his bankruptcy − Whether s 121(9)(b) of the Act operated so as to take the bankrupt to have transferred property to his wife − Whether that property would probably have become part of the transferor's estate in bankruptcy if the property had not been transferred. Real property − Joint tenancy − Severance − Torrens system land − Unilateral severance of joint tenancy pursuant to s 59 of the Land Title Act 1994 (Q) − Effect of severance upon property of the bankrupt. Statute − Statutory construction − Construction of pars (1)(a) and (9)(b) of s 121 of the Act where drafting reflects inconsistent assumptions − Whether possible to render those sub-sections capable of concomitant operation so as to give effect to the text and policy of the Act. Bankruptcy Act 1966 (Cth), s 121. Land Title Act 1994 (Q), ss 57, 59, 60. GUMMOW ACJ, KIRBY, HAYNE, CALLINAN AND CRENNAN JJ. This is an appeal from a decision of the Federal Court of Australia1 (Kiefel J) exercising its appellate jurisdiction in respect of a decision of the Federal Magistrates Court of Australia (Jarrett FM). Kiefel J allowed an appeal by the executors of the estate of Mrs D R Pinna against orders made upon an application under the Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act") by the trustees of the bankrupt estate of Mr R K Pinna, the husband of Mrs Pinna. The trustees are the appellants in this Court and the executors are the respondents. The trustees seek orders with the effect of reinstating their success at first instance. However, for the reasons which follow, the appeal should be dismissed. The fund in contention between the parties is the remaining one-half of the proceeds of sale of a property at Carindale in Brisbane ("the Carindale property") after the distribution of the other half to the trustees. The property was sold for $600,000 after a sequestration order was made against the estate of Mr Pinna on 21 April 2004. Mr and Mrs Pinna had purchased the Carindale property, which is land under the provisions of the Land Title Act 1994 (Q) ("the Land Title Act"), in 1995 and they were registered proprietors as joint tenants. Mrs Pinna died on 12 January 2004. Other things being equal, the result would have been that, at the date of the sequestration order, some three months later, Mr Pinna enjoyed the entirety of the Carindale property as surviving joint tenant, and his full interest passed to the trustees. However, the respondents rely upon steps taken in 2003 whereby Mr Pinna unilaterally severed the joint tenancy. They say that, at the time of her death, Mrs Pinna was entitled to a one-half share in the Carindale property as tenant in common with her husband, and that this passed to her deceased estate and was not part of the bankrupt estate of Mr Pinna, so that the trustees are entitled to no more than one-half of the proceeds of sale. In response, the trustees contend that the unilateral severance of the joint tenancy was a transaction by Mr Pinna which is void against them by operation of s 121 of the Bankruptcy Act. Kiefel J rejected that submission and the effect of her orders is that the respondents are entitled against the trustees to that one-half of the proceeds of sale which is held in trust pending the outcome of the litigation. Whilst the reasons for doing so depart from those of Kiefel J, the dismissal of the appeal by the trustees to this Court will preserve that outcome. 1 Anderson v Peldan (2005) 146 FCR 361. Gummow ACJ Kirby Hayne Callinan Crennan Before turning to the issues respecting s 121 of the Bankruptcy Act, something should be said respecting the unilateral severance. This was effected on 5 November 2003 by registration of a form of transfer executed by Mr Pinna pursuant to s 59(1) of the Land Title Act. In the absence of such a specific provision, the law as to unilateral severance by transfer to oneself of a joint interest had been unsettled2. Section 59(1) states: "A registered owner of a lot subject to a joint tenancy may unilaterally sever the joint tenancy by registration of a transfer executed by the registered owner." The issues The trustees' case is that the unilateral severance transaction constituted a "transfer of property" for the purposes of s 121(1) of the Bankruptcy Act within the extended sense provided for by s 121(9)(b). To understand this submission, it is necessary to set out s 121(1) together with s 121(9): "(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and the transferor's main purpose in making the transfer was: to prevent the transferred property from becoming divisible among the transferor's creditors; or to hinder or delay the process of making property available transferor's creditors. for division among the 2 See the Note by Professor Butt, (1992) 66 Australian Law Journal 286; New South Wales Law Reform Commission, Unilateral Severance of a Joint Tenancy, Report No 73, (1994), Ch 4. Gummow ACJ Kirby Hayne Callinan Crennan For the purposes of this section: transfer of property includes a payment of money; and a person who does something that results in another person becoming the owner of property that did not previously exist is taken to have transferred the property to the other person; and the market value of property transferred is its market value at the time of the transfer." The trustees submit that the extinguishment of the rights of Mr Pinna and his wife as joint tenants and the simultaneous creation of new rights in them as tenants in common in equal shares, here by reason of the registration of the transfer under s 59(1) of the Land Title Act, answered the description required by par (b) of s 121(9). To succeed, it is necessary also for the trustees to show that the two conditions in pars (a) and (b) of s 121(1) have been satisfied. There was no issue that Mr Pinna's main purpose could be taken to be that described in par (b). Section 121(2) provides that "if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent", then the main purpose of the transferor in making the transfer is to be taken to be that described in par (b) of s 121(1). The controversy turns on whether par (a) of s 121(1) was satisfied. Kiefel J held that it was not3. The trustees' submission on their appeal to this Court can be reduced to the proposition that, in the events that happened (Mr Pinna's co-tenant predeceased him prior to his bankruptcy), it can be said that Mrs Pinna's interest in the property "would probably have" accrued to him by right of survivorship so as to render the entirety available to his creditors. If this submission is well founded, it will be necessary to consider the amended notice of contention the respondents seek leave to file out of time. This claims that Kiefel J ought to have found that, if the transaction was void, the trustees were obliged by s 121(5) of the Bankruptcy Act to refund to the respondents the consideration given in respect of the transfer. That consideration (2005) 146 FCR 361 at 366-367. Gummow ACJ Kirby Hayne Callinan Crennan is said to have had the same value as that of the interest as tenant in common which was created upon the severance4. Before considering the merits of these various submissions, it is convenient to say something more of the facts. The facts It is a curiosity of the facts of this case that, had the unilateral severance under s 59(1) been effected by Mrs Pinna, rather than Mr Pinna, on no basis could that have attracted s 121 so as to render the severance void against the trustees upon the bankruptcy of Mr Pinna. There would have been no transfer of property by the bankrupt as required by s 121. The Carindale property was the matrimonial home of Mr and Mrs Pinna. The memorandum of transfer pursuant to s 59(1) of the Land Title Act was executed on 11 September 2003 and, as indicated above, was registered on 5 November 2003. In the form in which it was ultimately lodged (following amendments to which it is not necessary to refer), the memorandum recorded the "[i]nterest being transferred" as a "ONE-HALF INTEREST IN FEE SIMPLE". Mr Pinna was described as both "transferor" and "transferee", and the consideration was expressed to be the unilateral severance of a joint tenancy pursuant to s 59(1) of the Land Title Act. The transfer form was prepared by Mr Peter Klar of Klar & Klar, solicitors. He gave evidence that the issue of severance arose in the course of his taking instructions to prepare a will for Mr Pinna. This was to leave all his property to his wife in the first instance with a gift over. Mr Pinna was born in 1923 and Mrs Pinna in 1925. Neither of them could be described as being in perfect health. Such little evidence as existed suggested that Mr Pinna had undergone open-heart surgery earlier in 2003, and that Mrs Pinna had been living with one kidney for about 40 years (although no evidence was led as to any underlying condition which caused this), and was 4 Section 121(5) states: "The trustee must pay to the transferee an amount equal to the value of any consideration that the transferee gave for a transfer that is void against the trustee." Gummow ACJ Kirby Hayne Callinan Crennan admitted to hospital for rehabilitation in November or December of 2003. Mr Klar gave evidence suggesting that the concern when he had been consulted on 11 September 2003 had been with the health of Mr Pinna. Mr Klar said that "the concern was that Mr Pinna would be the first to die, not Mrs Pinna". The sequestration order was made on the petition of the Deputy Commissioner of Taxation. The financial affairs of Mr Pinna and those of his company, Pinnacle Engineering Pty Ltd, had been in a parlous condition for some time. Mr Pinna was personally liable to the Deputy Commissioner in respect of the default by the company of a payment agreement entered into on 16 April 2003 with respect to outstanding taxation debts, and also in respect of certain Director Penalty Notices issued against him. He was also liable upon substantial personal guarantees in respect of the company's debts. The trustees allege (and it appears not to have been disputed) that, at 11 September 2003, Mr Pinna's total liabilities amounted to $1,474,291.35. The only asset of any value was his interest in the Carindale property; the interest was valued at that date at $300,000. The trustees commenced proceedings in the Federal Magistrates Court on 20 August 2004 seeking declarations that the severance was void against them. The proceedings were conducted rather informally and without the benefit of pleadings, so contributing to the somewhat disorganised and incomplete state of the evidence. Cummins5 Something should be said here respecting the relationship of this case to the issues examined by this Court in Trustees of the Property of Cummins (A Bankrupt) v Cummins. There, the relevant transaction was a disposition by the bankrupt in favour of his wife of his joint beneficial interest in Torrens title property in New South Wales. In contrast to this case, the bankrupt was then left with no registered interest6. Cummins thus was not a case involving the unilateral severance of a joint tenancy under the New South Wales equivalent to s 59(1) of the Land Title Act7. In addition, in Cummins there was no issue as to 5 Trustees of the Property of Cummins (A Bankrupt) v Cummins (2006) 80 ALJR 589; 224 ALR 280. 6 See Prentice v Cummins (2003) 134 FCR 449 at 459-460. 7 See Real Property Act 1900 (NSW), s 97. Gummow ACJ Kirby Hayne Callinan Crennan whether s 121(1)(a) of the Bankruptcy Act was satisfied; the controversy concerned the "main purpose" of Mr Cummins within the meaning of s 121(1)(b). In particular, as this Court noted, there was no issue as to whether or how the transaction could answer the description of a "transfer of property"8. The unilateral severance of the joint tenancy As previously indicated, the present litigation proceeded upon the premise that, if the unilateral severance of the jointure was a "transfer of property", this could only be by reason of par (b) of s 121(9) of the Bankruptcy Act. The result of the severance had been extinguishment of the interest of Mr Pinna and Mrs Pinna as joint tenants (including the incident of survivorship), and the creation of interests as tenants in common in the Carindale property. That view of the matter accords with historical understandings of the nature of a jointure at common law. Joint tenants were generally regarded as together composing one single owner, each being seised per my et per tout and consequently having nothing to convey to the other9. However, in Wright v Gibbons10, Dixon J doubted that this proposition could be regarded as an unqualified truth, because "the aliquot share of each [joint tenant] existed in contemplation of law as a distinct and ascertained proprietary interest" for the purposes of alienation, including alienation to a co-owner. Be that as it may, the Carindale property was land the title to which was provided by the Queensland Torrens title legislation, the Land Title Act. In such a case, the interests as joint tenants were extinguished by registration of a new instrument which created an indefeasible title as tenants in common. This is because, notwithstanding that the Land Title Act (like cognate statutes in other States) uses the language of "transfer", title is comprised by the record contained in the register. A lot or an interest in a lot "passes" by registration of an instrument (s 60)11. The title of the registered proprietor comes from the fact of (2006) 80 ALJR 589 at 595 [24], fn 19; 224 ALR 280 at 286. 9 See Wright v Gibbons (1949) 78 CLR 313 at 323, 331; Williams on Real Property, 21st ed (1910) at 140. 10 (1949) 78 CLR 313 at 333. 11 Breskvar v Wall (1971) 126 CLR 376 at 385-387, 400. Gummow ACJ Kirby Hayne Callinan Crennan registration, and it is this which is the source of the title rather than what Windeyer J contrasted as "a retrospective approbation of ... a derivative right"12. In the ordinary case, registration under the Land Title Act involves all the rights, powers, privileges and liabilities of the transferor in relation to the lot vesting in the transferee, upon registration of an instrument of transfer of a lot or an interest in a lot (s 62(1)). However, s 59(1) operates in a different situation. Section 59(1) confers upon a registered owner of a lot subject to joint tenancy the right unilaterally to sever the jointure upon registration of an appropriately executed instrument of transfer. Here, the instrument accepted for registration was a transfer from Mr Pinna to himself. Nevertheless, upon registration, the particulars of the lot in the freehold land register are altered and a new and different indefeasible title for the lot is created (see ss 37, 38). Each tenant in common is entitled to request the Registrar to create a "separate indefeasible title for the interest of each owner by including a separate set of particulars in the freehold land register for the interest of each owner" (s 57). Section 59(1) of the Land Title Act was relied upon to effect the severance, and registration occurred. Accordingly, it is unnecessary and inappropriate to consider a broader question. This concerns the extent to which unregistered dealings by way of whole or partial alienation to a co-owner of an aliquot share in the jointure (in the manner discussed in detail by Dixon J in Wright v Gibbons13 and by Deane J in Corin v Patton14) by one joint owner who later becomes bankrupt may constitute a "transfer of property" for the purposes of s 121 of the Bankruptcy Act. That question may be left for another day. Section 121(9)(b) of the Bankruptcy Act In its present form, s 121 was enacted by the Bankruptcy Legislation Amendment Act 1996 (Cth) ("the 1996 Act"). The relationship of s 121 to its forebears was considered in Cummins15. The section impugns transactions which 12 Breskvar v Wall (1971) 126 CLR 376 at 400. See also the observations of Rich J in Wright v Gibbons (1949) 78 CLR 313 at 326. 13 (1949) 78 CLR 313 at 330-333. 14 (1990) 169 CLR 540 at 572-577. 15 (2006) 80 ALJR 589 at 594 [21]-[22]; 224 ALR 280 at 285. See also P T Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 521-522. Gummow ACJ Kirby Hayne Callinan Crennan answer the description of a "transfer of property". This expression will bear its ordinary meaning, save to the extent that this is expanded by s 121(9)16. The term "transfer of property" also appears in s 120 ("Undervalued transactions") and s 122 ("Avoidance of preferences"). Further, these sections contain definitional provisions which were introduced by the 1996 Act and are in identical terms to s 121(9)17. Paragraph (b) of s 121(9) provides that A "is taken" to have transferred to B property that "did not previously exist" if A "does something" which results in B becoming the owner of the property. Thus, par (b) expands the concepts at the heart of s 121 beyond their natural meaning. It is expressed in similar terms to the former s 160M(6) of the Income Tax Assessment Act 1936 (Cth)18, which was the subject of the litigation in Hepples v Federal Commissioner of Taxation19. Section 160M(6) consistently attracted the description "obscure"20. That same adjective also appropriately describes par (b) of s 121(9) of the Bankruptcy Act. It is important to recall that "property" for the purposes of the Bankruptcy Act must be understood as including "any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to" real or personal property of any description (s 5(1)). As noted above, par (b) of s 121(9) operates to treat person A, who did something which resulted in person B becoming the owner of property that did not "previously" exist, as having transferred "the property" to B. In its natural sense, the word "previously" indicates that the property did not exist prior to the act of A which results in B 16 Australia, House of Representatives, Bankruptcy Legislation Amendment Bill 1996 (Cth), Explanatory Memorandum at [84.8]. 17 See s 120(7) and s 122(8) respectively. 18 Section 160M(6) relevantly provided: "A disposal of an asset that did not exist (either by itself or as part of another asset) before the disposal, but is created by the disposal, constitutes a disposal of the asset for the purposes of this Part ..." 19 (1992) 173 CLR 492. 20 See Commissioner of Taxation v Cooling (1990) 22 FCR 42 at 61; Hepples v Commissioner of Taxation (1990) 22 FCR 1 at 11; (1992) 173 CLR 492 at 505, Gummow ACJ Kirby Hayne Callinan Crennan becoming the owner of it. The act of A which produces the result that B becomes the owner of that property is to be regarded as the "transfer of property". Upon an ordinary reading, the corollary of this is that the property that did not previously exist is taken to be the "transferred property". As remarked earlier in these reasons, provisions in the terms of s 121(9) appeared at the same time as s 120(7) and s 122(8) of the Bankruptcy Act. It is to be expected that the sub-section has the same meaning in each provision. In the Explanatory Memorandum to the House of Representatives upon the Bill for the 1996 Act, it was said at [84.10] of the inclusion of the provision in the undervalued transactions provision (s 120) that: "where a person creates an interest in property, for example by allowing a mortgage or charge to be created over it, the person will be taken to have transferred property, for the purposes of the section". Other examples were given, including the conferral of a trademark or patent licence. Further instances would include the grant of a lease over freehold property and a declaration of a trust over property vested in the "transferor". In all of these cases, the same act both creates the property in question and vests it in the other person. In other cases to which the sub-section would apply, the creation of property will occur at a later time. Instances of this relate primarily to the diversion of future property (necessarily constituting property that did not previously exist) from coming into the hands of the person who later becomes bankrupt. This may occur by the assignment, whether absolutely or by way of charge, of property such as future income21, royalties yet to be earned22, and damages which may be recovered in pending litigation23. (Consideration is required for the assignment to be effective24, but that issue is dealt with by s 121(4) of the Bankruptcy Act.) In such cases, the assignment operates 21 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9. 22 Shepherd v Federal Commissioner of Taxation (1965) 113 CLR 385. 23 Glegg v Bromley [1912] 3 KB 474. 24 Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 24-25. Gummow ACJ Kirby Hayne Callinan Crennan immediately upon acquisition by the assignor and vests the property in the assignee25. However, in all these cases (and it is not suggested that the examples are exhaustive), the property that did not previously exist is "carved out" of "property" which is held, or which comes to be held, by the person who later becomes bankrupt. It is here that the first issue on the appeal arises. The interest of Mrs Pinna as tenant in common of the Carindale property cannot be said to have been "carved out" of any property of her husband. If anything, it represented the transmogrification of her prior interest as joint tenant. What was "carved out", in a loose sense, from both Mr Pinna's and Mrs Pinna's prior interest as joint tenants was the right of survivorship. However, upon registration of the transfer executed by Mr Pinna pursuant to s 59(1) of the Land Title Act, Mrs Pinna became "the owner of property that did not previously exist". She acquired an interest as tenant in common in the Carindale property whereas previously she had held an interest as joint tenant in the Carindale property (which included the right of survivorship). That interest as joint tenant was transformed into, or extinguished and replaced by, the interest as tenant in common. Accordingly, the terms of par (b) of s 121(9) were met because, by Mr Pinna registering the transfer unilaterally severing the joint tenancy, he did something by dint of which he was taken to have transferred the interest as tenant in common to Mrs Pinna. The respondents denied that Mrs Pinna's interest was "property that did not previously exist". In written submissions relying upon remarks of Dixon J in Wright v Gibbons26, they submitted that Mrs Pinna's interest did previously exist as a potential aliquot share and that that interest merely "crystallized upon severance". However, for the reasons given previously, that submission pays insufficient regard to the effect of the Land Title Act and to what Rich J described as the "innovation effected by the new or Torrens system"27. 25 Palette Shoes Pty Ltd v Krohn (1937) 58 CLR 1 at 27 per Dixon J citing In re Lind; Industrials Finance Syndicate Ltd v Lind [1915] 2 Ch 345. 26 (1949) 78 CLR 313 at 330-331. 27 Wright v Gibbons (1949) 78 CLR 313 at 326. Gummow ACJ Kirby Hayne Callinan Crennan Reading s 121(1)(a) and s 121(9)(b) together Having established that events falling within par (b) of s 121(9) have occurred, the next issue on this appeal is presented. This concerns the reading of that provision with par (a) of s 121(1). The step treated by par (b) of s 121(9) as having taken place assumes that character "[f]or the purposes of this section". Paragraph (a) of s 121(1) asks whether "the property", had it not "been transferred", would probably have either become part of the bankrupt's estate or been available to creditors. A difficulty then arises in the following way: (i) s 121(9)(b) takes "property that did not previously exist" to be the transferred property; further, the provision applies to situations (such as the present case) where the bankrupt "does something" which results in the creation of that property; (ii) when par (a) of s 121(1) speaks of "the property", the natural reading requires this to be construed as referring to the property which has been transferred under the transfer which is void against the trustee in bankruptcy; and (iii) the use of the subjunctive in par (a) ("if the property had not been transferred") indicates a supposition that the described occurrence is contrary to fact; it presupposes that there was no transfer, and asks what in that situation would have happened to "the property". These factors taken together produce an apparent conundrum in applying par (b) of s 121(9) for the purposes of par (a) of s 121(1). This is that, if the act which is taken to have transferred the property did not occur, the "property that did not previously exist" ex hypothesi would never have come into existence, and so could never "probably have become" part of the bankrupt's estate. A similar problem is posed by par (b) of s 121(1), where the phrase "the transferred property" appears in terms. In that paragraph, if the expression "the transferred property" is construed as referring to the property taken to have been transferred, which did not come into existence until the occurrence of the act which is taken to have transferred it, how could the transferor's main purpose be to prevent that property from becoming divisible among the creditors? Paragraphs (a) and (b) of s 121(1) both assume that the transferred property was, prior to the transfer, capable as a matter of fact of becoming part of the bankrupt estate. Section 121(1)(a) therefore involves the assumption that the transferred property had an antecedent existence to the transfer, or would have come into existence had the transfer not been made. On the other hand, s 121(9)(b), as discussed earlier in these reasons, assumes that the property which "did not previously exist" would not have come into existence if the act which is Gummow ACJ Kirby Hayne Callinan Crennan taken to have transferred it had not occurred. In this way the two paragraphs are in conceptual and linguistic contrariety. These textual and conceptual difficulties manifest a failure in the drafting of s 121(9)(b) adequately to grapple with the conceptual nature of the elements in pars (a) and (b) of s 121(1) and their interaction. This problem does not arise with s 120 or s 122, even though definitional sub-sections identical to s 121(9)(b) are used. This is because, in dealing with undervalued transactions and preferences, those sections do not employ language which requires identification of the "transferred property" in the way that s 121(1)(a) does when dealing with transfers to defeat creditors. In the examples given of the operation of par (b) of s 121(9) where the "property that did not previously exist" may be "carved out" of the transferor's property, it is impossible discretely to identify the "transferred property" in the hands of the transferor prior to it being vested in the other person. Where the transferor grants a long lease to an associate, the leasehold interest cannot be identified as part of the transferor's freehold estate prior to the grant. Nor can the interest of a beneficiary under a trust be identified prior to the trust being declared; where the whole legal and beneficial interest in property is united in one owner, there is no separate beneficial interest in existence28. It may be observed that the difficulty under discussion here appears not to arise where a person directs a creditor or trustee to make payment of future rents, profits or distributions to a third party, and this mandate falls short of an assignment to that third party29. Such items would be "property" for the purposes of s 121 of the Bankruptcy Act within the sense of "profit ... arising out of or incident to" property owned by the person who later becomes bankrupt (s 5(1)). Here, the act of the person who later becomes bankrupt does not create "the property" which comes to be transferred to the third party; that property, and this is the critical distinction, comes into existence by reason of other circumstances. In such a case, the "transferred property" can be identified prior to the third party becoming the owner of it (although not prior to the act of the transferor in giving the mandate). However, it is unlikely that par (b) of s 121(9) was designed to have such a special and limited operation. 28 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 463; Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 606 [30]. 29 See Comptroller of Stamps (Vict) v Howard-Smith (1936) 54 CLR 614 at 623-624. Gummow ACJ Kirby Hayne Callinan Crennan By a process of construction, is it possible properly to resolve the contrariety identified above and render sub-ss (1) and (9) of s 121 capable of sensible concomitant operation in those other cases referred to previously, namely, where there is a direct "carve-out" of property? May the words "the property" in the opening words of par (a) of s 121(1) be construed as referring to something other than "the property that did not previously exist"? We now turn to examine whether this construction is properly open. In Project Blue Sky Inc v Australian Broadcasting Authority30, McHugh, Gummow, Kirby and Hayne JJ emphasised that apparent conflict must be alleviated as far as possible by an adjustment in the meaning of the two provisions to give best effect to their purpose and text. That exhortation applies the more forcefully where the two provisions are found in the same section and the second provision is said in terms to operate "for the purposes of" the first. The trustees' construction of s 121(1) In submissions in reply, counsel for the trustees submitted that the words "the property" in par (a) of s 121(1) should be understood as referring to the property in the hands of the transferee prior to the deemed transfer, here the prior interest of Mrs Pinna as joint tenant in the Carindale property. This would result in s 121(1)(a) being read as follows: "(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: the property [in the hands of the transferee prior to the act taken to be the transfer] would probably have become part of the transferor's estate or would probably have been available to creditors if the property [in the hands of the transferee after the act taken to be the transfer] had not been [taken to have been] transferred ..." (bracketed words inserted). This construction assumes both that the transferee's interest would probably have come to the transferor, and that an act of the transferor resulted in a 30 (1998) 194 CLR 355 at 381-382 [70]-[71]. Gummow ACJ Kirby Hayne Callinan Crennan transformation of that interest. There is unlikely to be any circumstance in which this could come to pass, apart from the severance of a jointure. With respect to the severance of jointures, the outcome would be capricious, depending upon the identity of the party effecting the severance and the temporal sequence of death and survivorship and the intervention of bankruptcy. Further, such a reading of the statute could not apply to the "carve-out" examples discussed in the Explanatory Memorandum and earlier in these reasons. The reading of s 121(1)(a) proffered by the trustees is bespoken for this particular case, but should not be accepted. The construction adopted in the Federal Court Kiefel J recognised the difficulties referred to above, and propounded a criterion said to give effect to the meaning of par (a) of s 121(1). This was in the "[B]ut for the acts undertaken by the bankrupt, would the property held by the bankrupt before the acts were undertaken probably have remained available to creditors?" Kiefel J regarded the words "the property", not as the "transferred property", but as the property held by Mr Pinna before the relevant acts. However, this formulation departs substantially from both the structure and the terms of par (a). It should not be accepted. Counsel for the respondents described this construction (which he did not embrace) as looking not to the interest in Blackacre which was created, but to the extent to which the value of Blackacre was diminished by the transaction. Kiefel J may have been attracted by the concept of "subtraction of assets" referred to by Brennan CJ and McHugh J in Cannane v J Cannane Pty Ltd (In liq)32. This is a distraction. What was under consideration in Cannane was whether it was appropriate to draw an inference that a debtor had intent to defraud creditors within the meaning of the earlier form of s 121. It was in that context that their Honours referred to the dictum of Lord Hatherley LC in 31 (2005) 146 FCR 361 at 366. 32 (1998) 192 CLR 557 at 566 [12]. Gummow ACJ Kirby Hayne Callinan Crennan Freeman v Pope33 regarding the notion of the "proper fund" out of which debts to creditors are to be discharged. Although in broad terms that notion of a "proper fund" finds expression in s 121(1)(a), it is the words of that section rather than a loose concept of "subtraction of assets" which must be applied. This is especially the case where, because new property has been created, such a subtraction could only refer to the value of property, not the property itself. Value is the concern of s 121(4), not s 121(1). Acceptable construction Where s 121(9)(b) is relied upon, the phrase "the property" in the opening words of s 121(1)(a) should be construed as signifying "the property in the hands of the transferor prior to the act which is taken to be the transfer". This removes from the operation of s 121(1)(a) the assumption that it is existing property which is being transferred. It involves treating the words "the property" in s 121(1)(a) in a special sense to give to s 121(1) an extended operation as required by s 121(9)(b). The acceptable construction is best illustrated by setting out the paragraph as if it read in this manner: "(1) A transfer of property by a person who later becomes a bankrupt (the transferor) to another person (the transferee) is void against the trustee in the transferor's bankruptcy if: the property [in the hands of the transferor prior to the act taken to be the transfer] would probably have become part of the transferor's estate or would probably have been available to creditors if the property [in the hands of the transferee after the act taken to be the transfer] had not been [taken to have been] transferred ..." (bracketed words inserted). The italicised words are appropriate because it would be at odds with s 121(9)(b) for the subjunctive clause to read "if the property in the hands of the transferor prior to the deemed transfer had not been deemed to be transferred". 33 (1870) 5 Ch App 538 at 541, where the forebear of s 121, Statute 13 Eliz c 5, was under consideration. Gummow ACJ Kirby Hayne Callinan Crennan Section 121(9)(b) expressly states that the property which is deemed to have been transferred is the "property that did not previously exist". The effect of the acceptable construction is to shift the emphasis of the inquiry in s 121(1)(a), and to focus not upon whether the "transferred property" would have become part of the transferor's estate in bankruptcy, but upon whether that result would have obtained in respect of the transferor's "property" (as defined in s 5(1)) out of which the newly created property has been "carved". Consistently with Project Blue Sky, the above construction gives s 121(1)(a) a degree of sensible operation in cases of the kind where it evidently was designed to operate, namely, where the property that did not previously exist is "carved out" of property of the person who later becomes bankrupt. Such an outcome is consistent with the indications of legislative purpose seen in the Explanatory Memorandum to which reference has been made. Analysis of the trustees' case The above construction does not assist the trustees in this appeal. It requires attention to what would probably have happened to Mr Pinna's undivided interest as joint tenant in the Carindale property. It must be shown that that interest "would probably have become part of the transferor's estate or would probably have been available to creditors", if property had not been taken by s 121(9)(b) to have been transferred. However, that interest could never have become part of his bankrupt estate. As was accepted by this Court in Cummins34, it is established that the onset of bankruptcy works a severance of a joint tenancy35. Upon sequestration, unity of title is destroyed. On this basis, all that fell into the bankrupt's estate was an interest as tenant in common in the Carindale property. The trustees would have no claim to the whole of the proceeds of sale of the Carindale property as they seek in this litigation. Conclusion and orders The trustees have not established that upon its construction s 121 of the Bankruptcy Act could apply in the circumstances of this case. The appeal must 34 (2006) 80 ALJR 589 at 593 [14]; 224 ALR 280 at 283-284. 35 See the authorities and texts discussed in Re Francis; Ex parte Official Trustee (1988) 19 FCR 149. Gummow ACJ Kirby Hayne Callinan Crennan fail and it is unnecessary to consider further issues debated in argument, in particular, those arising on the foreshadowed amendment to the notice of contention filed by the respondents. Leave nevertheless should be given for this amended notice of contention to be filed out of time. The orders of Kiefel J should be varied by adding to order 2 an order that the application to the Federal Magistrates Court be dismissed and by correcting the misstatement in order 2 as to the date when the orders of the Federal Magistrates Court were made. Otherwise, the appeal to this Court should be dismissed with costs.
HIGH COURT OF AUSTRALIA CGU INSURANCE LIMITED APPELLANT AND RESPONDENT CGU Insurance Limited v Porthouse [2008] HCA 30 30 July 2008 ORDER 1. Appeal allowed. Set aside the order of the Court of Appeal of the Supreme Court of New South Wales made on 11 April 2007 and, in its place, order that: the appeal to that Court be allowed; (b) orders 3 and 8 made by Judge Balla in the District Court of New South Wales on 23 March 2006 be set aside and in their place order that judgment be entered for the appellant on the respondent's cross- claim; and the respondent pay the appellant's costs at trial and in the Court of Appeal of the Supreme Court of New South Wales. The appellant pay the respondent's costs of the appeal to this Court. On appeal from the Supreme Court of New South Wales Representation M A Pembroke SC with G Lucarelli for the appellant (instructed by Kennedys) A J Meagher SC with A J Payne and D F C Thomas for the respondent (instructed by Langes Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS CGU Insurance Limited v Porthouse Insurance – Professional indemnity – Barrister's liability policy conforming with Legal Profession Act 1987 (NSW) – "Known Circumstance" exclusion – "Known Circumstance" defined to include any fact, situation or circumstance which a reasonable person in the insured's professional position would have thought, before the policy began, might result in someone making an allegation against an insured in respect of a liability that might be covered by the policy – Denial of liability by insurer – Meaning of exclusion clause – Relevance of what insured actually thought – Whether exclusion clause operated by reference to an objective standard. Legal practitioners – Barristers – Barrister's liability policy conforming to Legal Profession Act 1987 (NSW) – "Known Circumstance" exclusion – Meaning of exclusion clause – Whether operated by reference to objective standard – Whether a reasonable person in the insured barrister's professional position would have thought a fact, situation or circumstance known to him might result in someone making an allegation in respect of a liability that might be covered by the policy – Relevance of insured's state of mind – Proper approach to construction of the exclusion clause – Whether error on the part of primary judge demonstrated. Words and phrases – "a reasonable person in the insured's professional position", "would have thought might result in". Insurance Contracts Act 1984 (Cth), ss 21, 40(3). Legal Profession Act 1987 (NSW), s 38R. GUMMOW, KIRBY, HEYDON, CRENNAN AND KIEFEL JJ. This appeal concerns the interpretation and application of an exclusion provision in a policy of professional indemnity insurance. CGU Insurance Limited ("the appellant"), the insurer under the policy, denied liability to indemnify Mr Anthony Porthouse ("the respondent"), a barrister, for losses arising from a successful claim made against him. The insurer alleged that an exclusion from insurance cover (the "Known Circumstances" exclusion) applied. The policy The policy conformed with requirements set by the Legal Profession Act 1987 (NSW) which provided that the Bar Council in New South Wales may not issue a practising certificate to an insurable barrister unless it is satisfied that there is, or will be, in force a professional indemnity insurance policy of a type approved by the Attorney-General1. The appellant's obligation, as insurer, was to indemnify the insured from 30 June 2004 (the "inception" date) until 30 June 2005, up to the policy limit "for any Claims [made and notified] for Civil Liability to any third party which is incurred by the Insured in the conduct of the Insured Professional Business Practice" (Section 3.1)2. Cover in respect of specified types of claims for civil liability included claims in respect of a "breach of duty" (Section 3.2(a)), claim investigation costs (Section 3.3) and the legal costs and expenses of disciplinary proceedings or enquiries (Section 3.4). The policy defined "Civil Liability", "Claim", "Covered Claim" and "Proposal". The information given by the insured in the proposal was included in the policy (Section 11.13(d)) and was part of the insurance contract (Section 2.2). Section 6 of the policy contained an exclusion from cover in the following terms: 1 Sections 38R(1) and 38R(2)(b). Section 403 of the Legal Profession Act 2004 (NSW), now in force, is to the same effect and came into operation on 1 October 2 The use of "Section" follows the policy document. Kirby Crennan "What is not covered We do not cover any of the following Claims (or losses): 6.1 Known Claims and Known Circumstances Claims (or losses) arising from a Known Circumstance, or Claims (or losses) directly or indirectly based upon, attributable to, or in consequence of any such Known Circumstance or known Claims (or losses) …" "Known Circumstance" is defined in Section 11 ("Words with special meanings") as follows: "11.12 Known Circumstance Any fact, situation or circumstance which: an Insured knew before this Policy began; or a reasonable person in the Insured's professional position would have thought, before this Policy began, might result in someone making an allegation against an Insured in respect of a liability, that might be covered by this Policy." Section 2.2 of the policy stated that the insurer relied on the information provided by the insured in the proposal "to decide whether to enter into this contract and on what terms". The facts The events which give rise to the respondent's claim for indemnity occurred in 2001 and the basic facts are not in dispute. On 17 April 1999 Mr James Bahmad sustained an injury while performing work pursuant to a community service order under the supervision of the Probation and Parole Service. While raking grass on a steep embankment he slipped and fell, injuring his right shoulder. On 16 December 1999 he consulted Cameron Gillingham Boyd, solicitors, concerning his rights to compensation for that injury. In May or June 2001 the respondent was briefed to advise whether Kirby Crennan Mr Bahmad had a claim under the Workers Compensation Act 1987 (NSW) ("the Workers Compensation Act") or a claim in respect of negligence against the Department of Corrective Services. In a memorandum of advice dated 12 June 2001 the respondent advised wrongly that the Workers Compensation Act did not apply to Mr Bahmad's claim as there had been "no employment for wages". The advice did not refer to the Crimes (Administration of Sentences) Act 1999 (NSW) which governed Mr Bahmad's potential action and set limits on common law damages for injuries to offenders undertaking community service3. As part of a comprehensive programme of tort reform, from about June or July 2001, the New South Wales government foreshadowed proposed restrictions on common law claims for injuries governed by the Workers Compensation Act. The proposed amendments included transitional provisions having the effect that proceedings brought before the commencement date of the legislation would not be affected by the restrictions. It was not contested that it became well known in New South Wales that the commencement date of amendments to the Workers Compensation Act was to be 27 November 2001. On 26 November 2001 the respondent was instructed to draft a statement of claim on behalf of Mr Bahmad. Immediately before 27 November 2001, s 151H of the Workers Compensation Act prohibited damages for economic loss from being awarded unless the injured worker had suffered a serious injury. It is not contested that Mr Bahmad had suffered a serious injury within the meaning of s 151H(2A) as it stood before 27 November 2001. Section 151H was amended4 to prohibit the awarding of damages unless the injury suffered resulted in a degree of permanent impairment of the injured 3 Section 122, which commenced on 3 April 2000 and has since been repealed, provided that Divs 1 and 3 of Pt 5 of the Workers Compensation Act applied to any award of damages in respect of personal injuries, incurred while involved in community service work, in the same way as they applied to an award of damages referred to in those Divisions. Item 7 of Sched 1.1 to the Workers Compensation Legislation Further Amendment Act 2001 (NSW). Kirby Crennan worker that was at least 15% ("the 2001 amendment"). The amendment took retrospective effect on the day the Bill for the 2001 Act5 was introduced into State Parliament which was 27 November 2001. On 6 December 2001 the respondent provided a draft statement of claim, which was filed on 11 December 2001, naming the State of New South Wales ("the State") as the defendant. On 30 October 2002 the Crown Solicitor's Office wrote to Mr Bahmad's solicitor and for the first time raised the point that the Workers Compensation Act was applicable to Mr Bahmad's claim and that as his injury did not reach the 15% threshold required by the 2001 amendment to that Act, he was not entitled to an award of damages6. On 4 November 2002 Mr Bahmad obtained an award at arbitration for the sum of $120,687.15 plus costs. Following an application by the State, the matter was listed for a re-hearing in the District Court on 15 May 2003. On that day, the respondent became aware that the State intended to argue that the 2001 amendment to the Workers Compensation Act applied to bar Mr Bahmad's claim. On an application by the respondent, an adjournment of the hearing was granted. On 19 May 2003 Mr Bahmad's solicitor advised him that by reason of the proceedings not having been commenced prior to 27 November 2001 "[i]t may be that the operation of the law shuts you out of any entitlements to claim under any legislation". In the Court of Appeal, Hodgson JA found that in late May and early June 2003 the respondent researched the point raised by the State and satisfied himself that if it were correct Mr Bahmad would lose the case. The case proceeded on 29 August 2003. It was common ground between the parties that if the 2001 amendment to the Workers Compensation Act applied to the circumstances of Mr Bahmad he would be unable to recover any damages. Graham DCJ delivered judgment in favour of Mr Bahmad on the basis that his claim was covered by the provisions of the Workers Compensation Act as it 5 Section 2(2) of the Workers Compensation Legislation Further Amendment Act 2001 (NSW). 6 The letter incorrectly referred to the Community Service Orders Act 1979 (NSW), s 26O, rather than the Crimes (Administration of Sentences) Act 1999 (NSW), Kirby Crennan stood prior to the 2001 amendment. Graham DCJ ordered an unconditional stay of the proceedings pending an appeal by the State. In opposing the State's request for a stay, the respondent conceded that the State had an arguable appeal point. The State appealed to the Court of Appeal from the judgment of Shortly before 2 April 2004, senior counsel retained to appear for Mr Bahmad in the forthcoming appeal from the decision of Graham DCJ conferred with the respondent and indicated that there were reasonable prospects of success in the Court of Appeal. On 20 May 2004 the respondent completed a "Barcover Professional Indemnity Proposal Form" ("the Proposal") for the period 30 June 2004 to 30 June 2005. Question 4 of the Proposal, relevantly to Section 11.12 of the policy, asked: "Are you aware of any circumstances, which could result in any Claim or Disciplinary Proceedings being made against you?" The respondent answered "No". The Proposal contained a statement that the policy did not provide cover in relation to "facts or circumstances [of] which you first became aware prior to the period of cover, and which [you] knew or ought reasonably to have known had the potential to give rise to a claim under this policy". That reference to "the potential" of facts and circumstances to give rise to a claim makes it clear that what is enquired about is the possibility, not the certainty, of a claim being made. Answering that enquiry does not call for the proponent to make any judgment, or draw any conclusion, about the prospects of success of a possible claim or the strength of possible defences to it. It should be noted that it is only the insured's knowledge of these events prior to the commencement of the policy, which needs to be considered when determining whether the exclusion from cover applied. However, for the sake of completeness, it can be noted that on 19 July 2004 the State's appeal was heard and Mr Bahmad then raised with the respondent the question of the negligence of his solicitors. The following day the respondent wrote to his instructing solicitors noting that: "The plaintiff has already raised the issue of whether his former solicitors were negligent in failing to file the Statement of Claim prior to 27 November 2001. As I was briefed at that time, and in fact drafted the Statement of Claim, I am obviously in no position to advise on this issue due to a conflict of interest. The plaintiff will need to seek independent advice on this issue." Kirby Crennan On 27 August 2004 the Court of Appeal allowed the State's appeal and set aside the verdict in favour of Mr Bahmad7. On 3 March 2005 Mr Bahmad commenced proceedings in the District Court of New South Wales against his former solicitors and the respondent (as second defendant), alleging negligence. The case advanced on behalf of Mr Bahmad was that had his legal representatives acted with reasonable diligence and filed a statement of claim earlier, his claim would not have been caught by the 2001 amendment to the Workers Compensation Act, which commenced on 27 November 2001 and reduced his entitlement to damages to nil. A claim for civil liability arising from the conduct of the respondent's professional practice was thus made and it was duly notified. The insurer, who had declined the respondent's claim for an indemnity, was joined in the proceedings by the respondent (then, the cross-claimant) as a cross-defendant. The decision of the primary judge The primary judge in the District Court in these proceedings was Balla DCJ. She made numerous findings of fact8 and held that both the solicitors and the present respondent, the barrister, had been negligent. Her Honour found that the respondent breached his duty of care to Mr Bahmad. Her Honour gave judgment against the respondent and his instructing solicitors for $170,000 plus costs. She apportioned responsibility equally between the solicitors and the barrister, considering that it was just and equitable for them to share In relation to the respondent's cross-claim against his insurer, her Honour found that the exclusion in Section 6.1 of the policy, relied upon by the insurer, did not apply. Evidence of the respondent's state of mind as at 20 May 2004, when he completed the Proposal, was elicited during his cross-examination before the primary judge. The cross-examiner asked whether it was the respondent's view, as at 20 May 2004, that whatever happened in the Court of Appeal the plaintiff was never going to make an allegation against him. He responded "I didn't 7 State of New South Wales v Bahmad (2004) 2 AWR 2313. 8 Bahmad v Gillingham unreported, District Court of New South Wales, 17 March Kirby Crennan believe I'd done anything wrong and I had no belief at that time that a claim would be made against me no matter what happened in the Court of Appeal." When asked whether he had turned his mind on 20 May 2004 to the question of whether the plaintiff was going to make a claim against him, the respondent answered "[t]here was no cause for me to turn my mind to something which didn't exist, which was the notion that I'd done something wrong in the conduct of this case." These answers show the respondent's concentration upon blameworthiness, rather than upon the possibility of a claim arising. In relation to the first limb of the definition of "Known Circumstance" in Section 11.12(a) of the policy, the primary judge found that: "the [respondent] did not know, before the policy commenced, that [Mr Bahmad] might make an allegation of negligence that might be covered by the policy. Accordingly, the first limb of the definition relating to the exclusion does not apply." No appeal was brought from this finding on the respondent's state of mind and, accordingly, the subsequent appeal to the Court of Appeal of the Supreme Court of New South Wales was only concerned with the construction and application of the second limb of the definition in Section 11.12(b). As to the second limb of the definition of "Known Circumstance", her Honour accepted the submission put by counsel for the respondent that it "does not necessarily impose an entirely objective test since it involves a consideration of whether the [respondent's] actual state of mind was unreasonable". In a somewhat elliptical statement, her Honour referred to her findings about the respondent's state of mind at the relevant time and then concluded that "a reasonable person in [the respondent's] position would not have thought otherwise". Her Honour ordered that the insurer indemnify the respondent. The insurer appealed to the Court of Appeal against the order requiring indemnity. The appeal to the Court of Appeal The Court of Appeal by a majority (Hodgson JA and Young CJ in Eq; Hunt AJA dissenting) dismissed the appeal by the insurer9. The essential issue, as framed by the insurer before the Court of Appeal, was whether the primary judge erred by considering the subjective state of mind of the respondent when construing and applying Section 11.12(b) of the policy. 9 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727. Kirby Crennan A second issue arose in relation to the proper construction of the conditional expressions in the formulation in Section 11.12: "[a]ny fact, situation or circumstance which … a reasonable person in the Insured's professional position would have thought, before this Policy began, might result in someone making an allegation …" (emphasis added). The members of the Court of Appeal considered that the formulation containing the conditional expressions referred to a possibility which was "realistic" (Hodgson JA), "reasonable" (Young CJ in Eq), or "real" (Hunt AJA)10. Each of those epithets served to distinguish correctly a real possibility from a possibility which is fanciful or remote, or a certainty. Hodgson JA considered that the primary judge had not fallen into error by assessing whether the respondent's actual state of mind was unreasonable11. He considered that the question of what a reasonable person in the insured's professional position would have thought before the policy began could be approached by considering what the actual insured did think and asking if this was unreasonable so long as that approach did not distract attention from the ultimate question posed in Section 11.12(b), namely whether that reasonable person would have thought there was a realistic possibility of a claim being made12. Young CJ in Eq rejected the approach taken by the primary judge but took the view that while the Section 11.12(b) test was objective, "how people in the relevant industry are accustomed to act and even how the actors in the drama before the court behaved forms part of the material to be considered by the tribunal of fact in making the objective assessment"13. His Honour concluded that even if the primary judge had fallen into error, any such error did not affect 10 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 75,956 [30] per Hodgson JA, 75,958 [46] per Young CJ in Eq and 75,965 [91] per Hunt AJA. 11 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 12 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 13 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at Kirby Crennan the result14. If required to make his own finding of fact (if the primary judge had erred) his Honour would not have found, on the facts found by the primary judge, that a reasonable person in the respondent's professional position would have had the thought identified in Section 11.12(b)15. Hunt AJA, in dissent, considered that the test posed by the second limb of the exclusion provision was "solely an objective one"16 and that the primary judge had erred in her interpretation of the exclusion clause. He said17: "This clause requires the insurer to establish that a reasonable person in the insured's professional position would have contemplated the real possibility that an allegation of negligence that might be covered by the policy might be made against him." In determining the position for himself, Hunt AJA concluded18: "In my opinion, the reasonable person in the respondent's professional position would, upon the reflection required by his insurance policy which was at that stage about to commence, have contemplated the real possibility that the plaintiff would, at the very least, make an allegation of negligence against his barrister." The appeal to this Court There were two main issues of construction before this Court. The first was whether, upon a proper interpretation of the phrase "a reasonable person in 14 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 15 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 16 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 17 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at 18 CGU Insurance Ltd v Porthouse (2007) 14 ANZ Insurance Cases ¶61-727 at Kirby Crennan the Insured's professional position", one was confined to taking into account the insured's experience and knowledge and was not permitted to take into account the insured's state of mind, as to whether "[a]ny fact, situation or circumstance" known to the insured might give rise to an allegation against the insured. The second main issue of construction concerned the correct interpretation to be given to the conditional expressions italicised below, when determining whether the hypothetical reasonable person "would have thought [any fact, situation or circumstance known to the insured] might result in" someone making an allegation against the insured. The third issue in the appeal concerned the correct application of Section 11.12(b) and whether evidence of what the insured actually thought could be taken into account when determining what the hypothetical reasonable person "would have thought". It is convenient to deal with the main construction issues first. Applicable principles There was no disagreement about the principles to be applied to the task of interpretation. Gleeson CJ in McCann v Switzerland Insurance Australia Ltd said19: "A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation. Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure." (footnotes omitted) As mentioned, professional indemnity insurance policies, which are compulsory for barristers, are regulated and must be of a type approved by the Attorney-General under legal practice legislation governing the legal profession. An important object of the compulsory scheme is to provide a fund to cover the claims of successful claimants against barristers. Another important object of the 19 (2000) 203 CLR 579 at 589 [22], see also at 600-603 [74] per Kirby J; [2000] HCA 65; Wilkie v Gordian Runoff Ltd (2005) 221 CLR 522 at 528-529 [15] per Gleeson CJ, McHugh, Gummow and Kirby JJ; [2005] HCA 17. Kirby Crennan scheme is to cover the costs to barristers of defending claims, including unsuccessful claims, to the extent to which insured barristers would otherwise be out of pocket. A third important object of the scheme is to cover the costs to barristers of defending disciplinary proceedings. Both the respondent and a reasonable person in the same professional position as the respondent would know the nature, scope and objects of the policy under consideration. "a reasonable person in the Insured's professional position" The language of Section 11.12 is disjunctive, not cumulative. Both sides agreed that the second limb (Section 11.12(b)) provides the objective standard of "a reasonable person". Where the parties differed was on the meaning to be given to the additional words describing "a reasonable person". The appellant submitted that the additional words describing "a reasonable person" as one "in the Insured's professional position" meant that the hypothetical reasonable person would have the same experience as the insured and the same knowledge of any facts and circumstances as the insured had, and the same opportunity to react to such facts or circumstances. The respondent contended that the additional words introduced a subjective element with the effect that the hypothetical reasonable person "stood in the shoes" of the insured20. In developing the submission that the reasonable person stood in the shoes of the insured, the respondent urged that this meant that the reasonable person had the insured's knowledge of material facts, matters and circumstances, together with the insured's professional qualifications and experience, and that the reasonable person had, in addition, a capacity to draw conclusions which were plain and obvious. Support for this interpretation was based, in part, on s 40(3) of the Insurance Contracts Act 1984 (Cth) ("the Insurance Contracts Act"), which refers to the insured's knowledge in providing that an insured under successive "claims made" policies should not be precluded from claiming under both of them. It was submitted that if the appellant's interpretation of Section 11.12(b) were correct, there could be a gap in what was intended to be continuous cover. 20 Mount Isa Mines Ltd v Pusey (1970) 125 CLR 383 at 397 per Windeyer J; [1970] HCA 60. Windeyer J was considering the construct of "the reasonable man" as relevant to the tort of negligence. Kirby Crennan An insurance contract is a contract requiring the utmost good faith (uberrimae fidei) of both parties21 and it was the law for centuries that a person seeking insurance had a duty to make full disclosure of all material circumstances22. The Marine Insurance Act 1906 (UK), which codified the common law concerning marine insurance, provided that a circumstance was material if it would influence the judgement of a prudent insurer in fixing the insurance premium, or determining whether the insurer would take the risk23. In 1980, in the context of an EEC Directive concerning harmonisation of insurance contract law in the European Community, and manifold criticisms of the English law of disclosure, particularly the "prudent insurer" test of materiality, as applied to all classes of insurance24, the English Law Commission suggested replacing that test. The Commission proposed a test which obliged a person seeking insurance to disclose a fact "if it would have been ascertainable by reasonable enquiry and if a reasonable man applying for the insurance in question would have ascertained it"25. The Australian Law Reform Commission gave similar consideration to reforming the law of disclosure in insurance contracts in a Report which preceded the Insurance Contracts Act26. That Act replaced the common law test of "materiality", assessed by reference to the common law construct of the "prudent insurer". 21 CGU Insurance Ltd v AMP Financial Planning Pty Ltd (2007) 81 ALJR 1551 at 1556 [15] per Gleeson CJ and Crennan J; 237 ALR 420 at 425; [2007] HCA 36. 22 Rozanes v Bowen (1928) 32 Ll L Rep 98 at 102 per Scrutton LJ. 23 Marine Insurance Act 1906 (UK), s 18(2). 24 Exemplified in Lambert v Co-operative Insurance Society Ltd [1975] 2 Lloyd's Rep 25 Law Commission, Insurance Law: Non-disclosure and Breach of Warranty, Law Com No 104, (1980) Cmnd 8064 at [4.50]. 26 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982). See also Sutton, Insurance Law in Australia, 3rd ed (1999), Ch 3 esp at [3.65]- Kirby Crennan The statutory test for disclosure now to be found in s 21 of the Insurance Contracts Act focuses on the "reasonable insured", not the "prudent insurer", and operates, first, by reference to the actual knowledge of the insured (s 21(1)(a)), and secondly, by reference to what "a reasonable person in the circumstances could be expected to know" (s 21(1)(b)). That latter statutory phrase has been interpreted as meaning that one should take into account only factors which are "extrinsic" to the insured, such as the circumstances in which the policy was entered into, rather than "intrinsic" factors such as the individual idiosyncrasies of the insured27. Whilst it is possible to take into account the circumstances of the insured, the ultimate question under s 21(1)(b) turns on consideration of a reasonable person's state of mind, not the insured's state of mind28. A test of disclosure, which operates by reference to both the insured's actual knowledge and the knowledge of a reasonable person in the same circumstances, is calculated to balance the insured's duty to disclose and the insurer's right to information. The insurer is protected against claims where the is unreasonable, insured's disclosure idiosyncratic or obtuse and the insured is protected from exclusion from cover, provided he or she does not fall below the standard of a reasonable person in the same position. inadequate because insured the Whilst Section 11.12 of the policy issued to the respondent by the appellant does not replicate s 21 of the Insurance Contracts Act, it employs a technique for identifying a "Known Circumstance" made familiar by s 21 in that it contains a subjective test in the first limb (Section 11.12(a)) and an objective standard in the second limb (Section 11.12(b)). The objective standard moderates a purely subjective test, and the difficulties of proof to which a wholly subjective test might give rise. It does so by reference to a standard of disclosure of "a reasonable person in the Insured's professional position". The intention of the second limb is to prevent insured persons from avoiding the exclusion provision (Section 6.1) by saying that they did not disclose facts and circumstances because they did not know that the facts and circumstances might 27 Twenty-First Maylux Pty Ltd v Mercantile Mutual Insurance (Australia) Ltd [1990] VR 919 at 925 per Brooking J. This decision was followed in Dew v Suncorp Life and Superannuation Ltd [2001] QSC 252 at [21] per Jones J. On appeal this point was not dealt with: Dew v Suncorp Life and Superannuation Ltd [2001] QCA 459. 28 GIO General Ltd v Wallace (2001) 11 ANZ Insurance Cases ¶61-506 at 75,866 [23] per Heydon JA. Kirby Crennan give rise to an allegation against the insured in respect of a liability which might be covered by the policy, even though a reasonable person in the same professional position would have thought the same facts and circumstances might give rise to such an allegation. The respondent's submission that the second limb was intended to guard the insurer against an obtuse proponent is correct, in the sense that the second limb is directed, not to the state of mind of the insured, but to the state of mind of the reasonable person in the same professional position as the insured. It is that hypothetical person's conclusion as to the possibility of an allegation being made at the relevant time which needs to be ascertained under Section 11.12(b). For this purpose the advantages of hindsight need to be put to one side. To give effect to Section 11.12(b), the conclusion of the hypothetical person needs to be ascertained independently of the subjective test in Section 11.12(a). The error of the primary judge, which was not corrected by the majority in the Court of Appeal, was that she gave no consideration to the Section 11.12(b) standard, which was independent of the respondent's subjective appreciation of the facts and circumstances known to him. The phrase "a reasonable person in the Insured's professional position" in Section 11.12(b) posits an objective standard, with a modification relating to professional, not personal, matters. The phrase describes a hypothetical reasonable person with the experience and knowledge of the insured coupled with the capacity of such a reasonable person to draw a conclusion (whether it is plain and obvious or not) as to the possibility of someone making an allegation against the insured. There is nothing in the context or language of the policy to suggest that there is to be imputed to the hypothetical person the insured's personal idiosyncrasies or the insured's state of mind, which may reflect an unreasonable assessment of "[a]ny fact, situation or circumstance" known to the insured or an unreasonable conclusion about the possibility of an allegation being made. There is also nothing in the language to support reading down a reasonable person's capacity to draw conclusions as limited to conclusions which are plain and obvious. A reasonable person's conclusions may involve matters of judgement. For such conclusions to be reasonable, in the relevant sense, they may need to command a consensus, among those in the same professional position as the insured, that they are reasonable conclusions. The general knowledge and experience of barristers in relation to policies The of professional indemnity insurance has already been mentioned. Kirby Crennan respondent's specific knowledge of the facts and circumstances at the relevant time included the following facts: the State did not rely on the argument based on the 2001 amendment until 15 May 2003; the State failed before Graham DCJ; senior counsel briefed on the appeal told the respondent that there were reasonable prospects of succeeding on the appeal; and as at 30 June 2004 Mr Bahmad had not made any allegation against the respondent. These matters were relied upon by the respondent to support an argument that the possibility of an allegation being made against the respondent was not "plain and obvious". The respondent also had knowledge, at the relevant time, of the potential effect of the 2001 amendment to the Workers Compensation Act on his client's case, the pending appeal in Mr Bahmad's case and his own role in creating the problem which gave rise to the State's appeal. The appellant relied principally on those matters to support its position. All of these facts and circumstances known to the respondent are to be imputed to "a reasonable person in the Insured's professional position". "would have thought … might result in" Once the hypothetical "reasonable person in the Insured's professional position" is established as above, it is then necessary to determine whether the hypothetical person "would have thought [any fact, situation or circumstance known to the insured] might result in" someone making an allegation against the insured. Three preliminary matters can be noted. First, the reference in Section 11.12(b) to "allegations", not claims, emphasises that the expression "Known Circumstance" is not confined to claims likely to be successful. Having regard to the policy as a whole, "allegations" means allegations in respect of claims (successful or not) or in respect of disciplinary proceedings. Secondly, the phrase "before this Policy began" in Section 11.12(b) is a temporal expression meaning earlier in time, no matter how much earlier in time. There is no justification for reading down that expression as suggested by the respondent to mean that the insurer was only intending to exclude cover in respect of what was known immediately before the policy was entered. Thirdly, the reference to "[a]ny fact, matter or circumstance" in Section 11.12 is plainly a reference to objective matters and is not a reference to a state of mind or belief. In the context of the policy, the conditional expression "would have thought" is a reference to a supposed conclusion reached by the hypothetical Kirby Crennan "reasonable person". Once that person satisfies the condition of being "in the Insured's professional position" and once knowledge of "[a]ny fact, situation or circumstance" known to the insured is imputed to that person, the phrase "would have thought" coupled with the expression to which we give emphasis "might result in" requires a conclusion by the hypothetical person that there was a real (not a fanciful or remote) possibility (not a certainty) of an allegation being made. Application of Section 11.12(b) It was contended by the appellant that the respondent's "thought processes" were not relevant to any application of the objective standard. The respondent took a different tack and submitted that the question what "a reasonable person in the Insured's professional position would have thought" was capable of yielding different answers. Therefore it was contended that the effect of the second limb of the definition of "Known Circumstance" was that the insurer must prove that no reasonable person in the insured's professional position could have thought otherwise than he did. As both Hodgson JA and Young CJ in Eq remarked, correctly, it is not necessarily an error for a primary judge to take into account evidence of what an insured actually thought in seeking to determine what a reasonable person in the insured's professional position "would have thought". That is a consideration entirely separate from the issue of whether the insured's state of mind in respect of "[a]ny fact, situation or circumstance" known to the insured is to be imputed to the hypothetical person. The evidence of what the insured thought, without more, could hardly suffice as evidence of what a reasonable barrister in the insured's professional position would have thought in circumstances where Section 11.12, read as a whole, includes two separate reference points: the insured's actual knowledge and the standard of "a reasonable person in the Insured's professional position" which moderates the subjective test. While each of the insured and the insurer called expert evidence from senior counsel, their evidence did not go beyond the issue of negligence. A third senior counsel called by the respondent gave evidence limited to issues relevant to Section 11.12(a), namely the respondent's actual knowledge at the relevant time. The primary judge rejected an attempt to tender opinion evidence on the question of what a reasonable person in the insured's professional position "would have thought", partly because of late service. Kirby Crennan By reference to Warren v Coombes29 the appellant submitted that this Court was in as good a position as the primary judge to make a finding of fact as to what a reasonable person in the respondent's professional position, imputed with knowledge of the facts and circumstances known to the respondent, "would have thought". In supplementary written submissions the respondent, correctly, accepted that the governing principles entitle this Court to draw its own inferences from facts which are relevantly undisputed. The respondent submitted that it was open to the primary judge (and the majority in the Court of Appeal) to conclude that a reasonable person in the insured's professional position would not have reached the conclusion required by Section 11.12(b). It was contended that the appellant had not established otherwise, that the conclusion was not plain and obvious and that the evidence of the insured alone did not provide a basis on which Section 11.12(b) could be applied. There is no doubt that where a claim falling within the policy has been made and notified the evidentiary onus or burden of proof or persuasion is on an insurer that wishes to rely on an exclusion clause30. Whether the burden of proof is sustained here, given the state of the evidence, turns on whether there could possibly be any doubt as to what a reasonable person in the insured's professional position would have thought. Evidence of a particular practice or standard of conduct, whether laid down by a professional body or sanctioned by common usage, may be relevant to establishing a standard of care in a case of professional negligence31, although expressions of personal opinion about what an individual would have 29 (1979) 142 CLR 531 at 551 per Gibbs ACJ, Jacobs and Murphy JJ; [1979] HCA 9; see also Fox v Percy (2003) 214 CLR 118 at 126-127 [25] per Gleeson CJ, Gummow and Kirby JJ, 145-146 [87] per McHugh J and 159-160 [134] per Callinan J; [2003] HCA 22. 30 See, for example, Alex Kay Pty Ltd v General Motors Acceptance Corp [1963] VR 458 at 461 per Sholl J. 31 Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209 at 219 [47]-[48] per Gleeson CJ, 229 [99] per Gaudron J and 230 [110] per Gummow J; 167 ALR 575 at 588, 601, 603; [1999] HCA 64; Rosenberg v Percival (2001) 205 CLR 434 at 439 [6]-[7] per Gleeson CJ; [2001] HCA 18. Kirby Crennan hypothetically done, if in the same position as a defendant in a negligence action, might be thought to be of little assistance32. While the legal criterion here is not the standard of care for professional conduct, similar considerations might arise. It is not inconceivable that an occasion, or set of facts, could arise where it is necessary for an insurer to prove common practices or attitudes in order to prove what a hypothetical reasonable person "would have thought" so as to establish that it is not liable to indemnify the insured. However, the inferences to be drawn from the undisputed facts and circumstances known by the insured in this case are so obvious that the Court is able to evaluate for itself the correct application of the objective standard in the second limb of Section 11.12 of the policy. Given the nature and objects of this particular policy, there can be no real doubt that a reasonable barrister (unable to practise without a policy of professional indemnity insurance), who knew of the potential effect on his client's case of the 2001 amendment to the Workers Compensation Act, and who knew of the pending appeal and of his role in creating his client's problem, would have thought that there was a real possibility that an allegation might be made in respect of a liability which might be covered by the policy. Accordingly, evidence on that issue was not essential and may well have been superfluous. The error of the primary judge, which was not corrected by the majority in the Court of Appeal, was that she gave no independent consideration to the alternative, additional and objective standard stated in Section 11.12(b) of the policy, namely what a "reasonable person … would have thought". In particular, there was no clear foundation for the primary judge's finding that the respondent's knowledge coincided with what a reasonable person in the insured's professional position would have thought and concluded, in respect of the undisputed facts and circumstances known to the insured. Yet the reference in the policy to that consideration afforded an essential criterion that had to be applied. Moreover, it was an important practical protection for insurers. It protected the insurer from a genuine but unreasonable or unrealistic estimate or 32 Hawkins v Clayton (1988) 164 CLR 539 at 573 per Deane J; [1988] HCA 15. See also Cross on Evidence, 7th Aust ed (2004) at [29105]-[29125]. Distinctions between the differing uses which might be made of expert evidence, and the differing approaches to the admissibility of such evidence in cases concerning negligence by members of the legal profession, are usefully summarised by Young J in Permanent Trustee Australia Ltd v Boulton (1994) 33 NSWLR 735 at Kirby Crennan understanding of the insured. It introduced a necessary element of objectivity into the final conclusion to be reached. It had to be given proper application in the present case. This, with respect, is where the primary judge and the majority in the Court of Appeal erred. Conclusions Section 11.12(b) sets an objective standard, with the modification that the insured's professional experience and the insured's knowledge of facts and circumstances are imputed to "a reasonable person in the Insured's professional position". An enquiry about what a reasonable person "would have thought" enquires about real (not remote or fanciful) possibilities; it does not enquire about certainties. When applying Section 11.12 it is not wrong to take into account what an insured thought, as a piece of possibly relevant evidence, but the standard described in Section 11.12(b) is an objective standard, and a question of fact to be determined independently of the insured's state of mind. Orders The appeal should be allowed. The order of the Court of Appeal of the Supreme Court of New South Wales of 11 April 2007 should be set aside and in lieu thereof it should be ordered that: the appeal to the Court of Appeal be allowed; orders 3 and 8 made by Judge Balla in the District Court of New South Wales on 23 March 2006 be set aside and in their place order that judgment be entered for the appellant on the respondent's cross-claim; and the respondent pay the appellant's costs at trial and in the Court of Appeal. In accordance with an undertaking given by the appellant on the application for a grant of special leave to appeal, the appellant should pay the respondent's costs of the appeal to this Court.
HIGH COURT OF AUSTRALIA Matter No S215/2006 AND THE QUEEN  RESPONDENT Matters No S281/2006 & S282/2006 THE QUEEN  APPELLANT AND Cornwell v The Queen [2007] HCA 12 22 March 2007 S215/2006, S281/2006 & S282/2006 ORDER In Appeal No S281 of 2006 and Application No S215 of 2006: Appeal allowed. Application for special leave to cross-appeal granted and cross-appeal allowed. Matter remitted to the Court of Criminal Appeal for consideration of grounds 2, 3, 4 and 6, and reconsideration of ground 5, in the appellant's notice of appeal to that Court. In Appeal No S282 of 2006: Appeal dismissed. On appeal from the Supreme Court of New South Wales Representation P Roberts SC for the respondent in Matter No S215/206 and for the appellant in S281/2006 and S282/2006 (instructed by Commonwealth Director of Public Prosecutions) T A Game SC with S J Buchen for the applicant in matter No S215/2006 and for the respondent in S281/2006 and S282/2006 (instructed by Ford Criminal Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Cornwell v The Queen Evidence – Competence and compellability of accused persons – Accused convicted following retrial of conspiracy to import cocaine – Accused gave evidence after indications that a certificate under s 128(6) would be granted – At retrial, Crown sought to tender cross-examination evidence from first trial – Evidence held to be admissible at retrial – Construction of s 128(8) – Whether s 128(8) precluded accused from relying on the certificate – Privilege against self-incrimination – Meaning of "fact in issue" under s 128(8) – Distinction between "facts in issue" and "facts relevant to facts in issue" – Whether evidence went to a "fact in issue" at the retrial – Whether retrial was a "proceeding" to which s 128(7) applied. Evidence – Criminal Procedure – Competency of Crown challenge to grant and issue of certificate – Significance of certificate granted under s 128 – Whether trial judge conducting retrial bound by evidentiary rulings in the first trial. Evidence – Criminal Procedure – Whether evidence should have been excluded on discretionary grounds – Whether retrial was unfair – Whether accused prejudiced by evidence tendered at retrial. Evidence – Criminal Procedure – Whether accused objected to giving evidence – Meaning of "objects" in s 128(1) – Whether s 128 applies where witness sets out to adduce evidence revealing offences other than the one charged. Criminal Law and Procedure – Appeal – Appeal against conviction – Verdict of acquittal – Appeal ground alleges that conviction unreasonable and contrary to evidence – Obligation of Court of Criminal Appeal to consider and decide ground of appeal – Necessity of independent assessment – Whether reasons sufficiently demonstrate such assessment. Words and phrases – "proceeding", "fact in issue", "fact relevant to a fact in issue" "objects", "interests of justice". Criminal Appeal Act 1912 (NSW), s 5F. Evidence Act 1995 (NSW), s 128(1), (6), (7), (8). GLEESON CJ, GUMMOW, HEYDON AND CRENNAN JJ. This case involves two appeals and an application for special leave. They arise out of two trials of Richard Bruce Cornwell ("the accused") on a drug conspiracy charge. The charge was laid under federal law and prosecuted in the name of the Crown by the Commonwealth Director of Public Prosecutions ("the DPP")1. The first trial was conducted in the Supreme Court of New South Wales before Howie J and a jury. At that trial the jury failed to agree on the charge against the accused. The second trial was conducted in the District Court of New South Wales before Blackmore DCJ and a jury. At the second trial the accused was convicted. The first appeal is brought by the Crown against orders of the Court of Criminal Appeal of New South Wales (McClellan CJ at CL, Hulme and Adams JJ) upholding an appeal by the accused against his conviction at the second trial and ordering a new trial. The second appeal is also brought by the Crown. It is an appeal against the Court of Criminal Appeal's failure to allow a Crown appeal against Howie J's grant of a certificate under s 128 of the Evidence Act 1995 (NSW) ("the NSW Act"). The application for special leave is an application by the accused for special leave to cross-appeal against the orders of the Court of Criminal Appeal. As presented, it criticises that Court's handling of a ground of appeal rejected by that Court, ground 5. Its ultimate goal is to obtain the entry of a verdict of acquittal, in place of the order for a new trial. The background to these matters is complex and unusual. It led to considerable division of opinion in the courts below. Background The charge. On 17 February 2003 the DPP charged the accused on an indictment that he conspired (with eight other defendants, three other named persons "and divers others") to "import into Australia prohibited imports to which section 233B of the Customs Act 1901 [(Cth)] applied, namely, narcotic goods consisting of a quantity of cocaine being not less than the commercial quantity applicable to cocaine". The period alleged was the period between about 1 January 2001 and about 6 August 2001. The provision allegedly 1 See Director of Public Prosecutions Act 1983 (Cth), s 9(1). Crennan contravened was s 233B(1)(cb)2. The quantity of cocaine allegedly involved was approximately 120 kilograms. The commercial quantity applicable to cocaine was two kilograms. The maximum sentence was a fine not exceeding $825,000 and/or imprisonment for life. The accused was sentenced to 24 years imprisonment, with a non-parole period of 14 years and six months. Howie J admits recorded conversations. The first trial began on 4 February 2003. On 20 February 2003, Howie J decided to admit into evidence certain listening device recordings of conversations between the accused and one of the defendants, Mr Diez, and between the accused and another of the defendants, Mr Lawrence ("the Diez-Lawrence conversations"). Howie J did so on the basis that the Diez-Lawrence conversations revealed that the three persons were involved in the business of supplying drugs to buyers in Australia, and that this was "highly probative evidence" of their participation in the alleged conspiracy to import drugs into Australia3. Howie J said4: "A person involved in the drug trade has to obtain his supplies from somewhere. When that trade is as substantial as appears to be that in which the accused was involved, it is well open to the jury to find that the accused would be a participant in a conspiracy to obtain a substantial amount of drug for the purpose of carrying out the trade in which he was involved." Howie J rejected various contentions advanced on behalf of the accused which are not now pressed, for example, that the evidence was tendency evidence which was not admissible under s 97 of the NSW Act, that the evidence was so unfairly prejudicial that the Court should exercise its discretion under s 137 of the NSW 2 Section 233B(1)(cb) provided: "(1) Any person who: conspires with another person or other persons to import ... into Australia any prohibited imports to which this section applies ... shall be guilty of an offence." 3 R v Cornwell (2003) 57 NSWLR 82 at 94 [40]. 4 R v Cornwell (2003) 57 NSWLR 82 at 95 [46]. Crennan Act to exclude it, and that it was inadmissible because it did not comply with s 138 of the NSW Act. The accused foreshadows an application for a s 128 certificate. On 30 April 2003 counsel for the accused5 said that he expected his client would give evidence, but that he would wish to object to testifying about the Diez- Lawrence conversations. Counsel said that he would be seeking a certificate under s 128 of the NSW Act in relation to the accused's testimony on that subject. He said that Howie J would need to consider what procedure should be adopted. Section 128. Section 128 of the NSW Act provides: "(1) This section applies if a witness objects to giving particular evidence on the ground that the evidence may tend to prove that the witness: has committed an offence against or arising under an Australian law or a law of a foreign country, or is liable to a civil penalty. Subject to subsection (5), if the court finds that there are reasonable grounds for the objection, the court is not to require the witness to give that particular evidence, and is to inform the witness: that he or she need not give the evidence, and that, if he or she gives the evidence, the court will give a certificate under this section, and of the effect of such a certificate. If the witness gives the evidence, the court is to cause the witness to be given a certificate under this section in respect of the evidence. The court is also to cause a witness to be given a certificate under this section if: 5 Who appeared at both trials, but not at the hearing of the appeals to the Court of Criminal Appeal or in this Court. Crennan the objection has been overruled, and after the evidence has been given, the court finds that there were reasonable grounds for the objection. If the court is satisfied that: the evidence concerned may tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, an Australian law, and the evidence does not tend to prove that the witness has committed an offence against or arising under, or is liable to a civil penalty under, a law of a foreign country, and the interests of justice require that the witness give the evidence, the court may require the witness to give the evidence. If the court so requires, it is to cause the witness to be given a certificate under this section in respect of the evidence. In any proceeding in a NSW court: evidence given by a person in respect of which a certificate under this section has been given, and evidence of any information, document or thing obtained as a direct or indirect consequence of the person having given evidence, cannot be used against the person. However, this does not apply to a criminal proceeding in respect of the falsity of the evidence. In a criminal proceeding, this section does not apply in relation to the giving of evidence by a defendant, being evidence that the defendant: did an act the doing of which is a fact in issue, or had a state of mind the existence of which is a fact in issue. (9) A reference in this section to doing an act includes a reference to failing to act." Submissions of the parties. On 30 April 2003, on 1 May 2003, and on the next sitting day, 5 May 2003, some argument took place about the meaning of Crennan s 128(8). The DPP argued that the expression "fact in issue" included the supply of drugs within Australia revealed by the Diez-Lawrence conversations. His position was in effect that "fact in issue" meant a fact relevant to the proceedings which was in contest between the parties. Howie J advanced the contrary view. He suggested that "fact in issue" referred only to elements of the offence charged (here, importation into Australia); and that the supply of drugs within Australia was only a fact relevant to a fact in issue, rather than a fact in issue strictly so called. Counsel for the accused supported and sought to reinforce that construction. Below this will be referred to as "the accused's construction" of s 128(8). The competing view, which is to be preferred for reasons given below6, is that even if "fact in issue" does not include the supply of drugs within Australia, the giving of evidence by the accused about that supply was "evidence that the [accused] ... did an act [conspiring to import drugs] the doing of which is a fact in issue". Counsel for the accused pressed his request for guidance about the procedure to be adopted. He said that it could affect the terms of his opening address. He said that if the grant of a certificate were unlikely, that might lead to a reconsideration of whether or not the accused should give evidence. However, Howie J made it plain several times that he would not give any guidance about the relevant procedure, and would not decide whether or not he would grant a certificate, until the accused was asked a specific question and took an objection to it. After counsel for the accused conferred with his client during a short adjournment, he said: "Just so that your Honour understands where things are likely to proceed from here on [in]: I will open to the jury. I will call [the accused]. In the very early stages of his evidence-in-chief I will ask him a question. He will decline to answer that on the grounds it might tend to incriminate him. Then I expect that your Honour would wish to hear either argument or perhaps further evidence in the absence of the jury before determining whether or not to issue a certificate under s 128." Howie J indicated agreement to this course and said: "Let's proceed and see what happens." 6 Below at [30]-[85]. Crennan The accused's "objection". What happened was that after the accused entered the witness box a little later he answered 33 questions put by his counsel. He was then asked two questions which he answered as follows: "Q. ... Some time after you re-established contact with Mr Diez, did he raise with you the possibility of involvement in some form of illegal activity? A. In February. Q. You may wish to preserve your legal rights here in answer to this question, Mr Cornwell. What did he say to you about the possibility of your involvement in some illegal activity? A. Well, I don't want to answer that on the grounds of it may incriminate Howie J's judgment of 5 May 2003. After Howie J heard submissions from counsel (including counsel appearing for other defendants) he delivered a detailed judgment. First, he rejected the DPP's argument that testimony about what the Diez-Lawrence conversations revealed of the accused's involvement in selling drugs in Australia was evidence of a "fact in issue" within the meaning of s 128(8), that hence s 128 did not apply and that no certificate could be granted7. Secondly, Howie J indicated that he would require the accused, under s 128(5), to answer questions about selling drugs in Australia, and would grant him a certificate under s 128(6)8. He required the legal representatives of the accused to present a draft certificate within three weeks9, but this was not done. He did not give, or cause to be given, any certificate to the accused in the course of the first trial. The outcome of the first trial. On 23 June 2003 the jury convicted some of the defendants and acquitted others. However, the jury members were unable to agree on the charge against the accused and the charges against some of the other defendants. 7 R v Cornwell [2003] NSWSC 660 at [5]-[17]. 8 R v Cornwell [2003] NSWSC 660 at [18]-[27]. 9 R v Cornwell [2004] NSWSC 45 at [4]. Crennan The start of the second trial. On 27 January 2004 a second trial began; the jury was empanelled on 16 February 2004. The charge against the accused was similar to the charge against him in the first trial in the sense that it related to the same part of s 233B and the same drugs. Apart from the accused, there were four other defendants. Additional unindicted co-conspirators were named. In that trial the DPP contended that statements made by the accused in evidence at the first trial were admissible in the second despite Howie J's judgment of 5 May 2003. On 6 February 2004 Blackmore DCJ ruled that any s 128 certificate issued by the Supreme Court would apply to the proceedings before him, on the basis that the trial before him was a "proceeding" within the meaning of s 128(7) which was different from the proceeding involved in the first trial before Howie J. Howie J grants the s 128 certificate. The difficulty that no certificate had actually been issued by the Supreme Court was then met by counsel for the accused making an application to Howie J for a certificate. On 11 February 2004 it was granted. Howie J did indicate a strong view about s 128(7) to the contrary of that expressed by Blackmore DCJ, but did not see that as a reason for refusing the certificate10. The certificate provided: "This Court certifies under section 128 of the Evidence Act 1995 of New South Wales that evidence in these proceedings by Richard Bruce Cornwell on 5 May 2003, 6 May 2003, 7 May 2003, 8 May 2003, 9 May 2003 and 12 May 2003 in relation to Richard Bruce Cornwell's involvement with Juan Guillermo Diez-Orozco, John Lawrence, and any other person in the supply or trafficking in narcotic goods between the 1st January and 10th August 2001 is evidence to which section 128 (7) of that Act applies." The Evidence Regulation 2000 (NSW), cl 7(1), provided that a certificate under s 128 might be in accordance with Form 1, and Form 1 provided for a transcript, or other record of the evidence, to be attached to the certificate. None was. However, counsel for the accused marked a copy of the transcript to indicate which portions were in his contention covered by the certificate. 10 R v Cornwell [2004] NSWSC 45 at [11]-[13]. Crennan Blackmore DCJ receives the accused's testimony about the Diez-Lawrence conversations. The DPP had previously indicated to Blackmore DCJ that he wished to tender the whole of the accused's evidence in cross-examination from the first trial. On 12 February 2004 Blackmore DCJ made the crucial ruling of which the accused complains. He ruled that the Diez-Lawrence conversations "went to a fact in issue" in the trial before him and that s 128(8) precluded the accused from relying on the certificate to prevent the tender of evidence about those conversations. That is, he apparently declined to accept Howie J's ruling that s 128(8) did not apply to the accused's oral evidence about the Diez- Lawrence conversations and appeared to reach the conclusion that since s 128(8) was satisfied, s 128 as a whole did not apply11. If that were his reasoning, it would follow that the inhibition which Blackmore DCJ considered was otherwise created by s 128(7) on the use of the evidence against the accused did not exist. Blackmore DCJ rejected an argument that there was sufficient unfairness in the tender to outweigh the significant probative value of the evidence. The accused then requested that the Crown tender the whole of the accused's evidence at the first trial and not just the cross-examination. The Crown agreed to this course, and it was adopted. The accused did not give evidence at the second trial. On 8 June 2004 he was convicted. On 18 November 2004 he was sentenced. The appeals to the Court of Criminal Appeal. In the meantime, on 24 February 2004 the DPP appealed to the Court of Criminal Appeal against Howie J's grant of the certificate. That appeal was eventually heard on 2 and 3 February 2006 at the same time as the accused's appeal against conviction. The grounds of appeal relied on by the accused were: The learned trial judge erred by admitting against the [accused] evidence which was the subject of a certificate issued pursuant to section 128 of the Evidence Act. The learned trial judge erred by referring to the [accused's] former evidence as (a) an admission tendered against the interests of the accused and (b) 'a possible version of the facts'. learned The that conversations involving the [accused] could be used against him if judge erred by directing jury trial the 11 That was the Court of Criminal Appeal's view of what Blackmore DCJ did: Cornwell v The Queen (2006) 160 A Crim R 243 at 260 [84] and 261 [91]. Crennan the jury was satisfied on the balance of probabilities that the conversations related to the conspiracy. The learned trial judge failed to adequately sum up the defence case. The verdict is unreasonable and cannot be supported by the evidence. The learned trial judge erred in refusing to grant the [accused] access to the information on oath deposed by Federal Agent ... on 27 February 2001."12 The Court of Criminal Appeal upheld ground 1, briefly rejected ground 5, discussed ground 4 but did not decide it, and did not decide grounds 2, 3 and 6. The Court declined to apply the proviso to s 6(1) of the Criminal Appeal Act 1912 (NSW). The Court ordered a new trial. The Court dismissed the Crown appeal in relation to the issue of the certificate. The issues Five issues emerged in the argument. The first and fundamental issue is whether the accused's construction of s 128(8) of the NSW Act was correct. The second issue is whether Blackmore DCJ was correct to treat the second trial as falling within s 128(7). The third issue is whether it is competent for the DPP now to challenge the certificate granted by Howie J on 11 February 2004 and the ruling underlying that grant made on 5 May 2003. The fourth issue is whether Blackmore DCJ erred in failing to exclude the evidence given by the accused before Howie J in his discretion on grounds of unfairness. 12 A list of revised grounds stated by the Court of Criminal Appeal comprised only the first five grounds: Cornwell v The Queen (2006) 160 A Crim R 243 at 245 [1]. But on this appeal the DPP said without contradiction by counsel for the accused that ground 6 was a ground of appeal as well. Crennan The fifth issue is whether the accused's application for special leave to cross-appeal should be granted and the cross-appeal allowed. This issue turns on the Court of Criminal Appeal's treatment of ground 5. First issue: did s 128(8) apply to the accused's testimony at the first trial? Before s 128 could operate, a key question posed by s 128(8) had to be answered. Was the accused's testimony at the first trial about the drug dealing in Australia "evidence" that he "did an act the doing of which is a fact in issue" or that he "had a state of mind the existence of which is a fact in issue"? On the accused's construction of s 128(8), the answer is "No" and the balance of s 128 was capable of applying. If the answer is "Yes", s 128 could not have applied, there would have been no power to "require" the accused to give the evidence pursuant to s 128(5), and there would have been no justification for causing the accused to be given a certificate under s 128(6). It would have been a matter for the accused and his counsel what questions were asked in chief, and the accused would have been obliged to answer any otherwise permissible questions in cross- examination. The right answer to the question just posed is "Yes", because the accused's construction of s 128(8) is not correct. Section 128(8), in New South Wales and other jurisdictions in which it or identical provisions apply13, is the successor to s 1(e) of the Criminal Evidence Act 1898 (UK) ("the 1898 Act") and its Australian equivalents. The affirmative answer to the question flows from the language of s 128(8) considered in the light of that earlier legislation and the Australian Law Reform Commission Reports which led to the enactment of Section 1(e) of the 1898 Act and its Australian equivalents. At common law parties to legal proceedings were generally not competent witnesses: they could not testify, on their own behalf or otherwise, even if they wanted to. The nineteenth century justification for this rule was that the credibility of their evidence was tainted by their interest in the outcome, although other explanations for its earlier development have been suggested14. The legislature rejected this justification in relation to non-party witnesses in 1843, when s 1 of the Law of 13 Evidence Act 1995 (Cth), s 128(8) (Federal Courts and Australian Capital Territory); Evidence Act 2001 (Tas), s 128(8); Evidence Act 2004 (Norfolk Island), 14 Allen, The Law of Evidence in Victorian England, (1997) at 96-97. Crennan Evidence Act (UK) (Lord Denman's Act) abolished their incompetence on the grounds of interest. When the county courts were established in 1846, the parties were rendered competent: County Courts Act 1846 (UK), s 83. For civil cases generally the Law of Evidence Amendment Act 1851 (UK) abolished the common law rule of party incompetency and non-compellability (except as between husband and wife). That exception was greatly narrowed by the Evidence Amendment Act 1853 (UK), rendering spouses competent and compellable except in proceedings instituted in consequence of adultery. The last exception in turn was abolished by the Evidence Further Amendment Act 1869 (UK). So much for party-witnesses in civil proceedings. What of the accused in criminal proceedings? It is well-known that in Rationale of Judicial Evidence, first published in 1827, Bentham opposed the rule rendering accused persons incompetent in their own defence. His preferred position – administration of compulsory questioning, coupled with a power in the court to infer guilt from failure to respond – has not prevailed in Australia. But his criticism of the common law rule of incompetence had some influence during the debate which led to its abolition. Speaking of the late nineteenth century, Windeyer J said15: "Proposals that accused persons should be permitted to give evidence on oath, and considerations of the qualifications that should be entailed upon the conferring of such a right, had been the subject of vigorous controversy in England ...". That controversy had been going on from at least the mid-nineteenth century16. It was a debate in which the participants included leading statesmen with a legal background (for example, Robert Lowe and Sir William Harcourt); prominent former or future judges (for example, Lord Brougham, Lord Chief Baron Kelly, Sir James Fitzjames Stephen and Sir Richard Webster); lawyers of all kinds; and influential lay writers (for example, Charles Dickens). A key institutional participant was the Law Amendment Society: it was created by Lord Brougham in 1844, it produced a quarterly journal called The Law Review, 15 Bridge v The Queen (1964) 118 CLR 600 at 613. 16 See Allen, The Law of Evidence in Victorian England, (1997) at 10-11 and 123- 180. See also Bodansky, "The Abolition of the Party-Witness Disqualification: An Historical Survey", (1982) 70 Kentucky Law Journal 91 at 105-129; Parker, "The Prisoner in the Box – The Making of the Criminal Evidence Act, 1898" in Guy and Beale (eds), Law and Social Change in British History, (1984) at 156-175. Crennan and it engaged in activities like conducting a survey of the County Court judges to obtain their views on the effects of the County Courts Act 1846 (UK) and conducting a survey of judges and Attorneys-General in the American States and Canadian provinces about the rendering of the accused competent17. Another leading participant in the debate was Pitt Taylor, who in 1848 published the first of the eight editions of his Treatise on the Law of Evidence to appear in his lifetime, who had drawn up a Bill, introduced unsuccessfully in 1845 by Lord Brougham, to enable parties and their spouses to give evidence in civil cases, who had drawn up the Report of the Common Law Committee of the Law Amendment Society which recommended the reform embodied in the Law of Evidence Amendment Act 1851 (UK), and who had prepared the first draft of that Act. Another influence on the debate came from John Appleton, a Justice of the Supreme Court of Maine from 1852 to 1862, and the Chief Justice from 1862 to 1883. From 1829 he wrote articles strongly affected by Bentham, not only in thought18. He advocated the grant of competency to parties in civil suits (which was achieved in Maine in 1856). From 1835, he also advocated the grant to defendants in criminal trials of the right to testify on their own behalf19, and this campaign led to Maine becoming the first common law jurisdiction to enact permanent20 legislation to this effect, first in relation to certain lesser offences in 1859 and then generally in 186421. Other States and Territories followed suit22. 17 Goodeve, "The Examination of Accused Persons", (1876) 1 Law Magazine and Review (4th Series) 630. See also Cairns, Advocacy and the Making of the Adversarial Criminal Trial 1800-1865, (1998) at 166-167. 18 They were collected in The Rules of Evidence Stated and Discussed, (1860), a work in the style of Bentham. 19 The Rules of Evidence Stated and Discussed, (1860), ch vii, first published as "Rules of Evidence. No. 6. Of the Admission of Parties as Witnesses in Criminal Procedure", (1835) 13 American Jurist and Law Magazine 46. 20 Connecticut had preceded Maine in 1848, but the common law position was restored in 1849. Opinions differ on whether the provision in 1848 was enacted inadvertently (Gold, The Shaping of Nineteenth-Century Law: John Appleton and Responsible Individualism, (1990) at 61 and 187 n 15), or whether it was enacted deliberately but was then thought to work badly (Fisher, "The Jury's Rise as Lie Detector", (1997) 107 Yale Law Journal 575 at 665 n 425. 21 Gold, The Shaping of Nineteenth-Century Law: John Appleton and Responsible Individualism, (1990) at 61. Crennan A letter from Appleton CJ to the Massachusetts Committee on the Judiciary advocating that the accused be made competent was published in England in Those in the United Kingdom who were opposed to the accused's testimonial incompetence faced considerable difficulties. Those difficulties are illustrated by the fact that although in the four decades preceding its general abolition by the 1898 Act there were numerous Private Member's Bills seeking to achieve that result, and that in the two decades before 1898 both Liberal and Conservative administrations introduced numerous Bills seeking to achieve it, these Bills persistently failed. And they failed even though in many self- governing Colonies in the Empire equivalent Bills were enacted without fuss. The difficulties did not lie merely in the task of persuading adherents to the status quo to change their minds. They also arose from the fact that any legislative decision to make accused persons competent but not compellable raised other questions. Should the accused's evidence be given on oath or not? What could be said to the jury about, or inferred from, the accused's decision not to testify? To what extent could the accused be cross-examined on matters of credit? And, most relevantly for present purposes, to what extent could the accused be cross-examined on matters relevant to the charge apart from credit?24 Once the 1898 Act was enacted, Australian legislation was introduced to adopt, or altered to conform to, the model of that enactment. The model stood in the United Kingdom for over 100 years and in four Australian jurisdictions for nearly 100 years. Indeed in five of them it still stands. The accused's construction of s 128(8) rests on the conclusion that that model, particularly in relation to cross-examination of the accused on issues bearing on guilt other than credit and character, has been abandoned. That is not a conclusion lightly to be reached. 22 By the end of the nineteenth century every State but Georgia had done so: see Ferguson v Georgia 365 US 570 at 577 n 6 (1961). 23 Anon, "Testimony of Parties in Criminal Cases", (1866) 21 Law Magazine and Law Review 339 at 342-347. 24 This is the issue underlying s 128(8) and its precursors. The terms of s 1(e) of the 1898 Act are set out at [54]. Some of the provisions of Bills unsuccessfully introduced before 1898 which correspond with s 1(e) are set out below at fn 40 and Crennan Developments in the United Kingdom may be surveyed chronologically as follows. A partial breach in the common law rule rendering accused persons incompetent in criminal cases was effected by the Summary Jurisdiction Act 1848 (UK): s 14 permitted the defendant to give evidence on the hearing of an information or complaint under that Act. With a view to achieving the general abolition of the common law rule, Lord Brougham introduced Bills into the House of Lords in 1858, 1859 and 1860, but without success. In 1861, Pitt Taylor read a paper to the Law Amendment Society advocating abandonment of the common law incapacity of the accused to testify, which was thereafter published25. In 1865, Vincent Scully26 introduced a Bill for abolition, as did Sir Fitzroy Kelly27, both again without success. Although these and later attempts at general abolition did not succeed in England until 1898, more piecemeal changes began to be made from 1867. The legislature frequently followed the practice, when it created a new criminal offence, of also providing that persons charged with that offence were competent witnesses in relation to it28. This approach solved particular difficulties, but also 25 "On the Expediency of passing an Act to permit Defendants in Criminal Courts, and their Wives or Husbands, to testify on Oath", (1861) 5 The Solicitors' Journal and Reporter 363 at 363-364, 383-385. 26 A Queen's Counsel who was the Liberal Member for Cork. 27 The former Attorney-General and Solicitor-General, a Conservative, shortly to be appointed Lord Chief Baron. 28 The following are examples. The Master and Servant Act 1867 (UK), s 16, rendered parties to a contract of service and their spouses competent witnesses on the hearing of an information or complaint brought under it. Section 51(4) of the Licensing Act 1872 (UK) provided that in summary proceedings for offences under the Act the defendant and his wife were competent to give evidence. Section 11 of the Conspiracy, and Protection of Property Act 1875 (UK) provided that on the hearing of any indictment or information for the offences relating to breaches of contract created by ss 4-6 the parties to the contract and their spouses were competent to give evidence. The Explosives Act 1875 (UK), s 87, in certain circumstances made defendants to charges brought under the Act competent witnesses. The Merchant Shipping Act 1876 (UK), s 4, made a defendant charged with knowingly taking, sending, or attempting to send an unseaworthy ship to sea a competent witness. The Evidence Act 1877 (UK), s 1, made defendants to indictments relating to certain public nuisances and related crimes competent where (Footnote continues on next page) Crennan necessarily "created numberless anomalies"29, as the Earl of Halsbury LC, moving the second reading of the Criminal Evidence Bill 1898 in the House of Lords, was able to point out with considerable effect30. In 1876, 1877 and 1878, Evelyn Ashley31 introduced Bills seeking general abolition of incompetence. During the debate on the second reading of the 1878 Bill, Sir John Holker, Conservative Attorney-General, announced that the Law Officers intended to introduce draft legislation including a code of criminal the proceedings were instituted for the purpose of trying a civil right. The Corrupt and Illegal Practices Prevention Act 1883 (UK) made the accused competent in any prosecution for any offence under the Act. The Criminal Law Amendment Act 1885 (UK), s 20, made defendants and their spouses competent witnesses in relation to offences under the Act and other sexual offences. The Merchandise Marks Act 1887 (UK), s 10, made defendants and their spouses competent in relation to any offence under the Act. The Coal Mines Regulation Act 1887 (UK), s 62(ii), provided that any person charged with an offence under the Act was competent. The Prevention of Cruelty to, and Protection of, Children Act 1889 (UK), s 7, rendered defendants and their spouses competent witnesses. The Betting and Loans (Infants) Act 1892 (UK), s 6, made defendants charged with any offence under the Act and their spouses competent. Similar legislation existed in relation to various summary offences: see Stephen, A Digest of the Law of Evidence, (1893) at 125. Sir Richard Webster, when as Attorney-General he moved the second reading of the Criminal Evidence Bill in the House of Commons, estimated that 26 of those Acts had been passed since 1873: United Kingdom, House of Commons, Parliamentary Debates, 4th series, vol 56 at 978 (25 April 1898). 29 Glanville Williams, The Proof of Guilt: A Study of the English Criminal Trial, 3rd ed (1963) at 46. 30 United Kingdom, House of Lords, Parliamentary Debates, 4th series, vol 54 at 1171-1172 (10 March 1898). See also Lord Herschell at 1176-1178 and the Attorney-General, Sir Richard Webster, moving the second reading of the Bill in the House of Commons: United Kingdom, House of Commons, Parliamentary Debates, 4th series, vol 56 at 977 (25 April 1898). 31 A barrister and Liberal; a son of the great Shaftesbury; private secretary to and biographer of Palmerston. By a curious coincidence the political career of this prominent Parliamentary advocate of competence for the accused was terminated in 1885 by his defeat in the Isle of Wight at the hands of his main successor in that role, Sir Richard Webster, particularly as Attorney-General in Salisbury's first three administrations. Crennan procedure for indictable offences which would have a similar effect to Ashley's proposals. What Sir John Holker had in mind was cl 368 of a code drafted by Sir James Fitzjames Stephen. That provided for the accused to make an unsworn statement at the end of a prosecution case or to be examined in chief without being sworn. Cross-examination was to be confined to "the matter in issue and matters relevant thereto, and shall not be directed to matters affecting the defendant's credit or character"32. A Royal Commission (of which the members were, apart from Stephen, Lord Blackburn, Lord Justice Lush and Mr Justice Barry) revised Stephen's code, and cl 523 of the draft code annexed to their Report corresponded with cl 36833. Clause 523 provided: "Every one accused of any indictable offence shall be a competent witness for himself or herself upon his or her trial for such offence, and the wife or husband as the case may be of every such accused person shall be a competent witness for him or her upon such trial: Provided that no such person shall be liable to be called as a witness by the prosecutor, but every such witness called and giving evidence on behalf of the accused shall be liable to be cross-examined like any other witness on any matter though not arising out of his examination-in-chief: Provided that so far as the cross-examination relates to the credit of the accused, the court may limit such cross-examination to such extent as it thinks proper, although the proposed cross-examination might be permissible in the case of any other witness." (emphasis added) The Report34 said of cl 523: "As regards the policy of a change in the law so important, we are divided in opinion. The considerations in favour of and against the change have been frequently discussed and are well known. On the whole we are of opinion that, if the accused is to be admitted to give evidence on his own 32 See Criminal Code (Indictable Offences) Bill 1878 (Bill 178) in House of Commons Parliamentary Papers, (1878), vol 2 at 5 (emphasis added). 33 United Kingdom, Report of the Royal Commission Appointed to Consider the Law Relating to Indictable Offences, (1879) [C 2345]. 34 United Kingdom, Report of the Royal Commission Appointed to Consider the Law Relating to Indictable Offences, (1879) [C 2345] at 37. Crennan behalf, he should do so on the same conditions as other witnesses, subject to some special protection in regard to cross-examination." The Bill proposed by the Commission was discussed in the House of Commons in 1879, but the government decided it was not possible to proceed with it in that session. Another Bill35, containing in cl 471 a provision equivalent to cl 523, was read a second time in 1880, but was not proceeded with36. In the same year, 1880, a Private Member's Bill for a criminal code – the Criminal Code (No 2) Bill – was introduced into the House of Commons. If that Bill had been enacted, accused persons would have become competent (cl 337) to give unsworn evidence (cl 341) and be questioned about it in the same way as ordinary witnesses, save that accused persons were not to be asked "any question with a view to impeaching [their] credit generally", and the questions which were asked were to be "such only as are reasonably calculated to elicit the whole knowledge of the accused in relation to the particular offence then being tried" In 1882 a further Private Member's Bill – the Criminal Law Amendment Bill – contained cl 106, which was identical with cl 523 of the 1879 Bill38. The Liberal Attorney-General, Sir Henry James, while favouring the Bill, argued that the responsibility for so great a change in the law had to rest with the government. The Bill was dropped. But, faithful to what Sir Henry had said, in 1883 the government introduced the Criminal Code (Indictable Offences Procedure) Bill, cl 100 of which corresponded with cl 106 of the 1882 Bill39. Eventually the 1883 Bill was dropped in committee: this was apparently the result of its size, complexity and importance, and the employment of delaying tactics by Irish Nationalist members. Indeed the 1898 Act itself might never have been enacted if it had not been limited to the narrow issues of rendering accused and their spouses competent and if it had not contained s 7(1), which provided that it did not extend to Ireland. 35 Criminal Code Bill (Bill 2) in House of Commons Parliamentary Papers, (1880), vol 2 at 1. 36 For the reasons, see Darkan v The Queen (2006) 80 ALJR 1250 at 1259 [36] per Gleeson CJ, Gummow, Heydon and Crennan JJ; 228 ALR 334 at 343. 37 Bill 47 in House of Commons Parliamentary Papers, (1880), vol 2 at 223. 38 Bill 15 in House of Commons Parliamentary Papers, (1882), vol 2 at 1. 39 Bill 8 in House of Commons Parliamentary Papers, (1883), vol 2 at 249. Crennan In 1884 Lord Bramwell presented a very short Bill to render the accused competent40. It passed the House of Lords, but not the House of Commons. In 1885 a very short government Bill of the same kind was introduced into the House of Commons without success41. Further Bills were introduced in 1886 and 1887. In 1888 the government introduced another Bill which was similar in some respects to Lord Bramwell's in 188442. It failed by reason of delays caused by the opposition of Irish members. Yet further Bills were introduced without success in 1889 and 1891. In 1892, 1893 and 1894 more Bills passed the House of Lords but the session ended before they could be considered by the House of Commons. In the next three years yet more Bills were introduced without success. Then, against an immediate background of public controversy on the issue in the newspapers, in other journals and in pamphlets, the 1898 Act was enacted. In the House of Lords debate on the motion that the Bill be read a second time, aggressively moved by the Earl of Halsbury LC, his political opponent, Lord Herschell, delivered a passionate speech supporting the Lord Chancellor's remarks. The tone of these two speeches can be understood in the light of a remark by the First Lord of the Treasury, A J Balfour, in his most weary style, after more than eight hours' debate in the House of Commons on the motion of the Attorney-General, Sir Richard Webster, that the Bill be read a second time43: 40 Bill 9 in House of Lords Sessional Papers, (1884), vol 4 at 39. Section 4 provided that an accused who testified had no right "to refuse to answer any question on the ground that it would tend to criminate him or her as to the offence charged, unless the court ... shall think fit." 41 Bill 65 in House of Commons Parliamentary Papers, (1884-1885), vol 2 at 363. Proviso (c) to cl 2 was in these terms: "A person called as a witness in pursuance of this Act shall not be asked, and, if asked, shall not be required to answer, any questions tending to show that any defendant has committed or been convicted of any offence other than that wherewith he is then charged, unless the proof that the defendant has committed such other offence is admissible evidence to show, that such defendant is guilty of the offence wherewith he is then charged, or unless such defendant has given evidence of good character." 42 Bill 132 in House of Commons Parliamentary Papers, (1888), (132), vol 2 at 407. 43 United Kingdom, House of Commons, Parliamentary Debates, 4th series, vol 56 (25 April 1898) at 1075-1076. Crennan "I beg to make an appeal to the House to bring this interesting and important Debate to a conclusion. I would remind the House that the principle of the Bill, which, after all, is the one thing we are discussing tonight, has been decided eight times in the House of Lords, in which even those most opposed to that House will admit that legal talent is very strongly represented, and four times in the House of Commons. A Bill which has passed a Second Reading four times in the House of Commons in different Houses, with different majorities predominating, and under varying circumstances, is surely one which we may to-night pass after the full and important discussion which has taken place." Although there was no substantial opposition in the House of Lords and no division, there was much opposition in the House of Commons; however, 233 members voted for a second reading and only 80 against. Many leading lawyers apart from the Attorney-General were present. A future Lord Chancellor (Sir Robert Reid) spoke, as did Sir Edward Clarke, Edward Carson, the future Mr Justice Bucknill and the future Mr Justice Evans. Among those who did not speak but voted were the future Lord Atkinson, a future Master of the Rolls (H H Cozens-Hardy), two future Lord Chancellors (Sir Robert Finlay and R B Haldane), and one who was offered the Lord Chancellorship but declined it (H H Asquith). For present purposes, the principal interest of the House of Commons speeches lies in three aspects. The first is the demonstration by opponents of the Bill that there were distinguished lawyers who preferred other solutions to the problems with which it dealt. The second is the references made to the success which the grant of testimonial competence to accused persons had enjoyed in "practically all the States of America ... all our self-governing Colonies, and ... a great many of our Crown Colonies ..."44. The American States were dealt with above45. Among the 44 United Kingdom, House of Commons, Parliamentary Debates, 4th series, vol 56 at 978 (25 April 1898) (Sir Richard Webster) and 1006 (Sir Robert Reid). See also United Kingdom, House of Commons, Parliamentary Debates, 4th series, vol 54 at 1176 (10 March 1898) (Earl of Halsbury LC). Cf United Kingdom, House of Commons, Parliamentary Debates, 4th series, vol 56 at 1016-1017 (25 April 1898) (A Lyttelton) and 1017 (T M Healy). Crennan Australian Colonies, competence was granted in South Australia in 188246, New South Wales in 189147, Victoria in 189148 and Queensland in 189249. In Tasmania competence was conferred in summary proceedings in 188850. In New Zealand the accused was made competent in 188951. In the Cape Colony testimonial competence was granted in 188652. In Canada it was granted in 45 Above at [34]. 46 Accused Persons Evidence Act 1882 (SA), ss 1 and 5. "[N]o presumption of guilt" was to "be made from" the accused's election not to give evidence (s 1). Section 5 provided: "Any person so giving evidence shall be liable to be cross-examined as in the case of any other witness, and shall not be excused from answering any question on the ground that the answer may tend to criminate himself ...". 47 Criminal Law Evidence Amendment Act 1891 (NSW) (in relation to indictable offences). Section 6 provided that an accused person giving evidence was not "to be questioned on cross-examination without the leave of the Judge as to his or her previous character or antecedents". It was replaced by s 7 of the Evidence Act 1898 (NSW). 48 Crimes Act 1891 (Vic). Section 34(3) provided: "A person called as a witness in pursuance of this section shall not be asked, and if asked shall not be required to answer, either on examination cross-examination or re-examination any question not relevant to the particular offence with which he is charged unless such person has given evidence of good character." 49 Criminal Law Amendment Act 1892 (Qld). Section 3 provided in part: " ... Nothing in this section shall render any person compellable to answer any question tending to criminate himself or herself with respect to any matter other than the offence for which he or she is being tried, and on the trial of which he or she tenders himself or herself as a witness." 50 An Act to further amend the Law of Evidence 1888 (Tas), s 1. 51 Criminal Evidence Act 1889 (NZ). 52 Administration of Justice Act 1886: see Hoffmann, The South African Law of Evidence, 2nd ed (1970) at 58. 53 Canada Evidence Act 1893: see Noble, "The Struggle to Make the Accused Competent in England and in Canada", (1970) 8 Osgoode Hall Law Journal 249. Crennan The third point of interest in the Second Reading speeches lies in their rehearsal of the many arguments put against the grant of competence to the accused in the course of the previous half century. These arguments divided the legal profession, they divided each major political party, and individual lawyers changed their minds on the issues from time to time as particular arguments were pressed. They will now briefly be noted – not with a view to debating their force, but merely to underline the seriousness and significance of the resolution arrived at in the 1898 Act. The principal arguments for conferring general competence on accused persons were as follows. First, it would reduce the risk of a miscarriage of justice by creating a new avenue by which innocent accused persons could negate guilt, particularly if they were unrepresented. Secondly, the goal of the trial was to discover the truth, and to grant competence removed one obstacle to the achievement of that goal: it increased the chance not only of acquitting the innocent but of convicting the guilty. Thirdly, the creation of limited grants of competence for particular offences in the last third of the nineteenth century had resulted in many anomalies. It was also anomalous in principle that the legislative decision to render admissible the evidence of the parties in civil cases, despite their interest in the outcome, had not been matched by the same change in criminal cases. Hence it was argued that to render accused persons competent was merely to extend a natural and existing trend in the law. Finally, the grant of competence in the United States and many parts of the Empire had not caused any difficulty; nor had the grant of competence in relation to particular newly created statutory offences. The principal arguments against conferring general competence on accused persons were as follows. First, the difficulties in which many accused persons found themselves meant that they would be presented with an irresistible temptation to commit perjury. The grant of competence would enable oppression by skilful counsel of ignorant accused persons. Since it would be difficult to prevent the jury from drawing adverse inferences from silence, the change would have the effect of compelling accused persons to testify and would create, in practice, an alteration in the standard and burden of proof. It would generate the conviction of the innocent. It would assimilate English legal procedure to French, which was thought to operate unfairly to the accused, and would lead to unseemly wrangling between judge and accused. It would prejudice the impartiality both of prosecution counsel and the judge. The Bill's attempt to control the introduction of the accused's record was inadequate. These were arguments about what were seen as fundamentally important issues. The competing arguments were put with varying degrees of emphasis and Crennan detail in different combinations. Equally complex attempts were made to refute or qualify them. The point is that the legislature reacted to these arguments, after many years in which numerous possibilities had been put forward in Bills presented but not enacted, by enacting a particular compromise or accommodation which was thought correct. Few legislative changes have been more closely examined, or by more experienced observers. Apart from its conferral of testimonial competence on accused persons and their spouses, the key relevant parts of the 1898 Act, s 1, for present purposes are as follows: "(e) A person charged and being a witness in pursuance of this Act may be asked any question in cross-examination notwithstanding that it would tend to criminate him as to the offence charged: A person charged and called as a witness in pursuance of this Act shall not be asked, and if asked shall not be required to answer, any question tending to show that he has committed or been convicted of or been charged with any offence other than that wherewith he is then charged, or is of bad character, unless – the proof that he has committed or been convicted of such other offence is admissible evidence to show that he is guilty of the offence wherewith he is then charged; or he has personally or by his advocate asked questions of the witnesses for the prosecution with a view to establish his own good character, or has given evidence of his good character, or the nature or conduct of the defence is such as to involve imputations on the character of the prosecutor or the witnesses for the prosecution; or (iii) he has given evidence against any other person charged with the same offence ...". After the 1898 Act had been enacted, the Australian position came to assume very similar form in legislation rendering accused persons competent to testify in their own defence. First, through provisions similar to s 1(e) of the 1898 Act, accused persons could be asked any question in cross-examination notwithstanding that it would tend to criminate them of the offence charged54. 54 For Victoria, see Crimes Act 1891, s 34(3); Crimes Act 1915, s 432(3); Crimes Act 1928, s 432(d); Crimes Act 1957, s 399(d); Crimes Act 1958, s 399(4). For (Footnote continues on next page) Crennan Secondly, in jurisdictions other than New South Wales (and, before 1971, the Australian Capital Territory) a regime generally similar to s 1(f) of the 1898 Act was expressly adopted55. Only in New South Wales before 1974 (and the Australian Capital Territory before 1971) was the position less clear. Section 407 of the Crimes Act 1900 (NSW) (also in force in the Australian Capital Queensland, see Criminal Law Amendment Act 1892, s 3, replaced in 1961 by s 618A of the Criminal Code, (inserted by the Criminal Code and Other Acts Amendment Act 1961, s 31), and continued by s 15(1) of the Evidence Act 1977. For South Australia, see Accused Persons Evidence Act 1882, s 5, replaced by Evidence Amendment Act 1925, s 12(d) and Evidence Act 1929, s 18(v). For Tasmania, see Evidence Act 1910, s 85(1)(iv). For Western Australia, see Criminal Evidence Act 1899, s 3(e), and Evidence Act 1906, s 8(1)(d). For the Australian Capital Territory, between 1971 and the enactment of the Evidence Act 1995 (Cth), see Evidence Ordinance 1971, s 69; Evidence Act 1971, s 69. In New South Wales, the same position held by implication until enactment of the NSW Act in 1995: Crimes Act 1900 (NSW), s 407(1)(b). Thus Gobbo (ed), Cross on Evidence, 1st Aust ed (1970) at 291 n 38 said that the loss of the privilege against self- incrimination was "implicit" in s 407(1)(b). It has held in the Northern Territory since 1939: Evidence Ordinances 1939, s 9(7); Evidence Act, s 9(7). While the legislation in New South Wales, Queensland, the Australian Capital Territory and the Northern Territory did not use the actual word "cross-examination", the Queensland and Australian Capital Territory legislation is to be construed as if it did, and the same outcome must be "implicit" in the New South Wales and Northern Territory legislation. 55 Adoption took place in the following order. In Western Australia it took place in 1899 by the Criminal Evidence Act, s 3(f), and continued in the Evidence Act 1906, s 8(1)(e). In Tasmania adoption took place by the Evidence Act 1910, s 85(1)(v): see now Evidence Act 2001, s 104. For Victoria, see Crimes Act 1915 (No 2), introducing s 432(5) of the Crimes Act 1915, and continued as Crimes Act 1928, s 432(e), Crimes Act 1957, s 399(e) and Crimes Act 1958, s 399(5). In South Australia adoption took place in 1925 in s 12 of the Evidence Amendment Act, and has continued under the Evidence Act 1929, s 18. In the Northern Territory adoption took place in the Evidence Ordinances 1939, s 9(7), and continued in the Evidence Act, s 9(7). In Queensland adoption took place in 1961 with the insertion of s 618A into the Criminal Code by the Criminal Code and Other Acts Amendment Act 1961, s 31, and continued in substance in s 15(2) of the Evidence Act 1977. Adoption existed in the Australian Capital Territory between 1971 and 1995: Evidence Ordinance 1971, s 70; Evidence Act 1971, s 70. Crennan Territory until 1971)56 provided that although accused persons were rendered competent, no person charged with an indictable offence was liable "to be questioned on cross-examination as to his previous character or antecedents, without the leave of the Judge". Before the enactment of ss 413A and 413B of the Crimes Act in 1974, which introduced a modification of the 1898 Act model, the New South Wales Court of Criminal Appeal held that the same principles were to be applied in New South Wales as had been enacted in the United Kingdom and Victorian legislation57. Thus the Australian jurisdictions which had conferred competence on the accused before 1898 tended to alter their legislation so as substantially to mirror the 1898 Act. The Australian jurisdictions which had not conferred competence on the accused by 1898 thereafter adopted the approach of the 1898 Act when they did so. The language of the equivalents to s 1(e) of the 1898 Act did not support the view that their application turned on any distinction between "facts in issue" and "facts relevant to facts in issue". Nor did any decision on that language. In discussing the general law of evidence that distinction is sometimes drawn. It is the distinction between the facts in issue, which are to be identified by reference to the substantive law and anything which defines the issues, like pleadings or a plea of "not guilty", and matters of fact from which inferences going to the existence or non-existence of facts in issue may be drawn. Facts relevant to facts in issue are often called "circumstantial evidence". The distinction between facts in issue and facts relevant to facts in issue is not material to any specific rule of the law of evidence at common law, save for such exceptional instances as the standard of proof of circumstantial evidence in criminal cases58, and, in some cases, jury directions on circumstantial evidence. It can be seen, then, that the problems raised by granting to the defendant the right to testify in criminal cases were serious and controversial; that the grant 56 Section 407 of the Crimes Act 1900 (NSW) was one of the laws in force in the Australian Capital Territory immediately before 1 January 1911, and therefore continued in force pursuant to the Seat of Government Acceptance Act 1909 (Cth), s 6. Section 407 ceased to apply in the Territory from 1971: Crimes Ordinance, 1971 (ACT), s 8. 57 R v Woods (1955) 56 SR (NSW) 142 at 145. 58 Shepherd v The Queen (1990) 170 CLR 573. Crennan had been opposed for a long time on many grounds; and that even experienced lawyers who favoured the grant of competence came up with radically different solutions to the problems which conferral created. Notwithstanding these disagreements, the Australian legislatures achieved unanimity on the proposition that the defendant's privilege against self-incrimination was abolished so far as matters of fact tending to criminate the accused as to the crime charged were concerned. In these circumstances it is highly unlikely that the enactment of s 128(8) of the NSW Act in 1995, and the corresponding Commonwealth legislation, the Evidence Act 1995 (Cth) ("the Commonwealth Act"), would have had the effect of changing the law by the introduction of a distinction, not specifically referred to in the statutory language, between self-incrimination as to facts in issue and self-incrimination as to facts relevant to facts in issue, unless clear language were employed. There is no suggestion in reports prepared by the Australian Law Reform Commission or the New South Wales Law Reform Commission that any such change was intended. There is no such suggestion in the Second Reading Speeches. And the indications in the legislation itself relied on by Howie J and by the accused's submissions are insufficient to suggest that it effected so radical a change in the law as that which is involved in the accused's construction of s 128(8). The Australian Law Reform Commission. The Australian Law Reform Commission published two reports on evidence – an Interim Report ("ALRC 26") in 1985 and a Report ("ALRC 38") in 1987. The latter took account of comments made by the public on the former. Both were tabled in the Parliament of the Commonwealth – the former on 21 August 1985 and the latter on 5 June 1987. In consequence, by reason of s 3(3) of the NSW Act, they may be used in the interpretation of s 128(8). In ALRC 26 the Commission perceived difficulties in what is known as the second limb of s 1(f)(ii) of the Australian equivalents to the 1898 Act – the rule permitting the character of an accused person to be attacked in cross- examination where that accused person has attacked prosecution witnesses59. Its proposal for changes in the law in relation to this particular rule has resulted in s 104(4)(b) of the NSW Act. The equivalent in the NSW Act to the first limb of s 1(f)(ii) is s 104(4)(a). Corresponding to s 1(f)(i) are ss 97, 98 and 112. The equivalent to s 1(f)(iii) is s 104(6). 59 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at [411]. Crennan In oral argument counsel for the accused correctly conceded that the only provision in the NSW Act corresponding to the equivalents to s 1(e) of the 1898 Act is s 128(8). ALRC 26 did not discuss any difficulties arising out of the equivalents to s 1(e) of the 1898 Act. The origins of s 128(8) lay in the Commission's treatment of the privilege against self-incrimination. The Commission thought that anachronistic aspects of the privilege should be removed, such as the common law rule that the privilege could be claimed where there is a risk of forfeiture60. The result of that approach is seen in s 128(1) of the NSW Act. The Commission also considered that although the privilege against self-incrimination served useful purposes, it was capable of injuring the interests of the State in that it was capable of restricting unduly the body of evidence available to the trier of fact61. It found an alternative solution in what it called "a modified version of the ACT certification approach"62. That was a reference to s 57 of the Evidence Ordinance 1971 (ACT), now repealed, which provided in part: "(2) Where, in a proceeding, a person called as a witness or required to answer an interrogatory declines to answer a question or interrogatory under the last preceding sub-section, the court may, if it is satisfied that, in the interests of justice, the person should be compelled to answer the question or interrogatory, inform the person – that, if he answers the question or interrogatory and all other questions or interrogatories that may be put to him, the court will give him a certificate under this section; and of the effect of such a certificate. (3) Where, in relation to a proceeding, a person has been informed by the court of the matters referred to in paragraphs (a) and (b) of the last preceding sub-section, that person is not thereafter entitled to refuse to answer a question or interrogatory put to him in that proceeding. 60 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at [464], [852]-[862]. 61 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at [853]-[854]. 62 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at [861]. Crennan (4) Where, after being informed by the court of the matters referred to in paragraphs (a) and (b) of sub-section (2) of this section, a person answers all questions and interrogatories put to him in the proceeding, the court shall give to the person a certificate that his evidence in the proceeding was given under this section. (5) Where a person is given a certificate under this section, a statement made by the person in answer to a question or interrogatory put to him in the proceeding in which that certificate was given to him is not admissible in evidence against the person in criminal proceedings other than proceedings for an offence arising out of falsity of the statement." Similar but not identical provisions were introduced in Western Australia in 190663, Tasmania in 191064 and Queensland in 199765. The element of "modification" to which the Commission referred was a conferral on the witness of an option whether or not to accept the certificate. It was thought that that would increase the amount of evidence admitted without destroying the advantages conferred on witnesses by the privilege against self- incrimination. That view was adopted in cl 104 of the draft Bill annexed to ALRC 26 and cl 110 of the draft Bill annexed to ALRC 38. The present form of s 128, under which the witness has an option not to give the evidence under s 128(2) but a duty to give it under s 128(5), developed after 1987. 63 Evidence Act 1906 (WA), ss 11-13 and 24. 64 Evidence Act 1910 (Tas), ss 87-89. 65 Criminal Code (Qld), s 644A, inserted by the Criminal Law Amendment Act 1997 (Qld), s 117. In a rather different field, namely, the compelling of witnesses before commissions or boards of examiners not deciding adversarial litigation, a similar idea was introduced into the Royal Commissions Act 1902 (Cth) when in 1912 it was amended by inserting s 6DD: to him by a Royal Commission or any of "A statement or disclosure made by any witness in answer to any question put the Commissioners shall not (except in proceedings for an offence against this Act) be admissible in evidence against him in any civil or criminal proceedings in any Commonwealth or State Court or any Court of any Territory of the Commonwealth". Crennan In neither ALRC 26 nor ALRC 38 does the discussion by the Commission give any support to the accused's construction of s 128(8)66. The only two references to the equivalents to s 1(e) of the 1898 Act in ALRC 26 expressed no dissatisfaction with them. The only aspect which is discussed in the first reference67 is the relationship of each of them with the corresponding equivalent to s 1(f). The other reference68 merely summarises what the equivalents say, using the words "would tend to incriminate him as to the crime charged". There is no reference in ALRC 38 to the equivalents to s 1(e). Counsel for the accused's the accused, however, submitted construction was supported by one part of ALRC 38 (although Howie J did not rely on it). The part in question was the last four sentences of a passage directed to cl 104(5) of the draft Bill annexed to ALRC 26, which was in the following terms69: that "The preceding provisions of this section do not apply in relation to evidence given by a party that tends to prove that the party did an act the doing of which is a fact in issue in the proceeding." The passage containing the sentences on which counsel for the accused relied is as follows70: Like techniques are common: Evidence Act 1958 (Vic), s 30; Trade Practices Act 1974 (Cth), ss 155(7) and 159; Corporations Act 2001 (Cth), s 597(12) and (12A). 66 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at [852]-[862]; Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2 at App C, [207]-[229]; Australian Law Reform Commission, Evidence, Report No 38, (1987), at [214]-[217]. 67 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2 at App C, [187]. 68 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2 at App C, [209]. 69 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2 at App A, 52. 70 Australian Law Reform Commission, Evidence, Report No 38, (1987) at [217(a)]; (two footnotes are omitted and two added). Crennan "Privilege claimed by a party. The interim proposals [ie cl 104(5)] provided that the privilege was not available in relation to evidence given by a party that tended to prove that the party did an act the doing of which is a fact in issue in the proceedings. This reflects the law for criminal trials in most jurisdictions where a provision applies to the effect that a person charged and being a witness may be asked any question in cross- examination notwithstanding that it would tend to incriminate that person as to the offence charged.[71] The proposal, in its application to civil trials, went further than existing law. In civil trials, it appears that a party who gives evidence as a witness can claim the privilege in relation to questions directed to the facts in issue. The interim proposal treated all party witnesses in the same way, whether the accused in a criminal trial or a plaintiff/defendant in a civil trial, on the basis that, where a party chooses to give evidence, he or she should have to give complete evidence about matters directly in issue. The accused and civil parties are not, however, in the same position. If the accused has to answer questions about facts relevant to the charges, the answers will not generally expose the accused to the risk of further criminal proceedings. The contrary applies to parties giving evidence in civil proceedings – their answers could be used in subsequent criminal proceedings. The clause[72] should be limited to the accused." The submission of counsel for the accused in relation to the last four sentences of that passage, which he put orally but not in writing, was: "[I]f you take the converse of that, what it means is that the rationale is that you do not need to protect the accused in relation to facts in issue because they are protected by the charge, but if there are uncharged acts, they are not protected by the charge. That is an explanation for the 71 This refers to the Australian equivalents to s 1(e) of the 1898 Act. 72 That is, cl 104(5) of the Bill annexed to ALRC 26. This proposal was reflected in cl 110(5) of the Bill annexed to ALRC 38, which provided: "In a criminal proceeding, the preceding provisions of this section do not apply in relation to evidence that a defendant – did an act the doing of which is a fact in issue; or had a state of mind the existence of which is a fact in issue." Crennan narrowness of the provision and that is the only passage I can find that really speaks in any way to that subject." The submission suffers the following vices. First, it seeks to advocate a particular answer to the question: "What is the meaning of the words 'evidence that a defendant ... did an act the doing of which is a fact in issue'?" It seeks to derive that answer from a passage which did not pose the question and did not seek to answer it. The passage was directed to a different question – "Whatever the legal regime which flows from the words 'evidence that a defendant ... did an act the doing of which is a fact in issue' on their true construction, should that legal regime apply only to defendants in criminal cases, or to the parties in civil cases as well?" Secondly, the passage quoted suggests that the Commission was trying to bring its proposal into conformity with the equivalents to s 1(e) of the 1898 Act, rather than to depart from them. The second sentence, after saying that cl 104(5) "reflects the law for criminal trials", accurately summarised that law as established in the equivalents to s 1(e). The balance of the passage argues against extending that law to civil cases. It does not seek to alter the law in criminal cases. It does not offer any explanation for why the Commission would seek to alter the law in criminal cases. Unlike some parts of s 1(f) and its equivalents, s 1(e) and its equivalents generated very little reported authority, appear to have caused no problems, were not the subject of any criticism by the Commission in ALRC 26 or ALRC 38, and were not the subject of any recorded complaint to the Commission. Thirdly, not only is it impossible to extract from the language employed in ALRC 26 and ALRC 38 any desire to alter the regime established for criminal cases by the equivalents to s 1(e), but that language points against the existence of any such desire in the following ways. The expression employed in cl 104(5) of the Bill annexed to ALRC 2673, "tends to prove", and the first sentence of the long passage quoted above which summarised cl 104(5), is close to the expression "tend to criminate him as to the offence charged" that is used in s 1(e) and its equivalents. The Commission in ALRC 26 had earlier employed a similar expression 73 Quoted above at [64]. Crennan in summarising, accurately, the effect of the equivalents to s 1(e) of the 1898 Act74. The Commission evidently regarded "tends to prove" as meaning the same as "tends to show". Clause 104(1) of the Bill annexed to ALRC 26 commenced: "Where a witness objects to giving evidence on the ground that the evidence may tend to prove that the witness ...". The Commission's summary of cl 104(1) in ALRC 38 was75: "It was proposed that a witness should be able to object to answering a question on the ground that the answer may tend to show that the witness has committed an offence or is liable to a civil penalty." The draft Bill annexed to ALRC 26 used the expression "may tend to prove" in cl 104(1) (corresponding with s 128(1)) and "tends to prove" in cl 104(5) (corresponding with s 128(8)). The draft Bill annexed to ALRC 38 used the expression "may tend to prove" in cl 110(1) (corresponding with s 128(1)), but used the expression "evidence that a defendant ... did an act the doing of which is a fact in issue" in cl 110(5)76 (corresponding with s 128(8)). However, the Commission did not appear to intend any change by its use of different words in cl 110(5) from those used in cl 104(5). That is because in its notes on the clauses of the draft Bill annexed to ALRC 38, the Commission said of cl 110(5)77: "Subclause (5) provides that the privilege against self-incrimination is not available in a criminal trial for questions that tend to show that the accused committed the offence for which he or she is being prosecuted." Of course, it is not the questions which tend to show anything, only the answers. But it is clear that what the Commission meant was that the expression 74 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2 at App C [209]. 75 Australian Law Reform Commission, Evidence, Report No 38, (1987) at [214]. 76 Set out above at fn 72. 77 Australian Law Reform Commission, Evidence, Report No 38, (1987) at App A Crennan "evidence that a defendant ... did an act the doing of which is a fact in issue" in cl 110(5) means evidence that "[tends] to show that the accused committed the offence" charged. These passages confirm that the Commission did not intend cl 110(5) to have a different meaning from the equivalents to s 1(e) of the 1898 Act. Counsel for the accused conceded that evidence of conversations about retailing cocaine in New South Wales "tends to prove" that the speakers were conspiring to import it into New South Wales. If so, the evidence obviously "tends to show" a conspiracy to import as well. Counsel for the accused also accepted that if the accused's construction of s 128(8) were sound, a revolutionary change in the law contained in the equivalents to s 1(e) of the 1898 Act had been effected by s 128(8), and that the Commission had given no explanation for this change. Counsel for the accused simply submitted that, in fact, the Commission, in the Bill annexed to ALRC 38, and the legislature had been "very explicit in using different words". One problem is that the Commission did not see the different words as having a different meaning. Another problem is that the Commission was normally careful to indicate when it thought that its proposals would change the law significantly and, when it did so, it habitually strove to give very full justifications for making changes of that kind. The likelihood of this practice being followed would have been extremely high in relation to any intention to change the long established and widespread statutory regime to be found in the equivalents to s 1(e) of the 1898 Act, which itself had a long and controversial background of which the Commission is likely to have been aware. If the accused's construction of s 128(8) were sound, its substitution for any provision equivalent to s 1(e) would have changed the law significantly. The absence of any justificatory material of this kind in the ALRC Reports – or in the Report of the New South Wales Law Reform Commission in 198878, or in the Second Reading Speeches – tells powerfully against the accused's construction. Howie J's reasoning. Howie J gave three reasons79 for adopting the construction he did. They were supported by the accused in this Court. 78 New South Wales Law Reform Commission, Evidence, Report No 56, (1988) at [2.38] ("NSWLRC 56"). It concurred with cl 110 of the draft Bill annexed to ALRC 38, but for an addition which is immaterial for present purposes. 79 Apart from his plain opinion that the outcome of his construction was just: "The accused should be able to put forward his defence to that [importation conspiracy] (Footnote continues on next page) Crennan The first was that ALRC 26 said80: "The expression 'fact in issue' should be interpreted as referring to the issues in the proceedings defined by substantive law and pleadings and thus would extend to facts to be proved in undefended or ex parte proceedings."81 Howie J's second reason was related to s 94 of the NSW Act. Section 94 is the first section in Pt 3.6, which deals with tendency and coincidence evidence. In particular, s 94(3) provides: "This Part does not apply to evidence of: the character, reputation or conduct of a person, or a tendency that a person has or had, if that character, reputation, conduct or tendency is a fact in issue." It is a precondition to the admission of both tendency evidence (s 97(1)(a)) and coincidence evidence (s 98(1)(a)) that the parties intending to adduce the evidence have given reasonable notice in writing to the other parties of that "In order to determine whether Part 3.6 applies, and whether the tendency rule and the coincidence rule have any application, it is necessary to know whether the character, reputation, conduct or tendency of a person is a fact in issue in the proceedings. Because it is necessary for the party wishing to tender evidence falling within the tendency or coincidence rules to give reasonable notice of its intention to do so, there must be some understanding of what will be a fact in issue in advance of the charge without putting himself at risk of being prosecuted for other serious criminal activity" (R v Cornwell [2003] NSWSC 660 at [17] (emphasis added)). 80 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 1 at [641], n 3. 81 R v Cornwell [2003] NSWSC 660 at [7]. 82 R v Cornwell [2003] NSWSC 660 at [11]. Crennan proceedings. The question whether the Part applies and, therefore, the rules operate to exclude otherwise relevant evidence cannot depend upon the manner in which the proceedings are conducted by the parties." The third reason given by Howie J centred on a passage in Smith v The Queen in the following terms83: "In determining relevance, it is fundamentally important to identify what are the issues at the trial. On a criminal trial the ultimate issues will be expressed in terms of the elements of the offence with which the accused stands charged. They will, therefore, be issues about the facts which constitute those elements. Behind those ultimate issues there will often be many issues about facts relevant to facts in issue. In proceedings in which [the NSW Act] applies, as it did here, the question of relevance must be answered by applying Pt 3.1 of the Act and s 55 in particular. Thus, the question is whether the evidence, if it were accepted, could rationally affect (directly or indirectly) the assessment by the tribunal of fact, here the jury, of the probability of the existence of a fact in issue in the proceeding." Howie J then said that the reference to the "ultimate issues" was a "reference to the facts in issue for the purposes of" the NSW Act84. These three reasons are directed to the meaning of "fact in issue" in s 128(8). Neither the Commission in the passage in ALRC 26, nor this Court in Smith v The Queen, was dealing with the meaning of "fact in issue" in s 128(8), and what was said in those passages was said in a context very remote from s 128(8). The field of operation of s 94(3) is also remote from that of s 128(8). Subject to those difficulties, even if Howie J's reasons are thought to support the proposition that "fact in issue" in s 128(8) does not mean "fact relevant to a fact in issue", they do not support his construction of s 128(8) as a whole. In particular, none of them negate the proposition that the expression "giving of evidence by a defendant, being evidence that the defendant ... did an act the doing of which is a fact in issue" includes giving evidence of facts (including facts relevant to facts in issue) which tend to prove that the defendant did an act the doing of which is a fact in issue. 83 (2001) 206 CLR 650 at 654 [7] per Gleeson CJ, Gaudron, Gummow and Hayne JJ (footnote omitted). 84 R v Cornwell [2003] NSWSC 660 at [13]. Crennan The accused's construction appears to read "evidence" in s 128(8) as meaning "direct evidence" and excluding circumstantial evidence. When, on 20 February 2003, Howie J gave reasons for his decision to admit the Diez- Lawrence conversations, he stated that they were "of such probative value as circumstantial evidence tending to prove ... participation in the conspiracy, that [they] ought to be admitted notwithstanding [their] prejudicial effect"85. However, on 5 May 2003, he concluded that those conversations were not evidence of a "fact in issue". In consequence the accused's construction compelled Howie J to conclude that the conversations about drug supply in Australia, which he had held on 20 February 2003 to be "highly probative evidence" of the conspiracy to import into Australia, fell outside s 128(8). This outcome raises a serious question about the reasoning which led to it. Assume that a man's body is found in a locked room. The cause of death is a single bullet fired into his head. One "fact in issue" on a defendant's trial for murder is whether the defendant shot the deceased. Evidence that the defendant was outside the room just before the time of death in possession of a fully loaded revolver is, on the accused's construction, not evidence of a "fact in issue". Nor is evidence that the defendant was outside the room just after the time of death in possession of a revolver fully loaded save that one shot had been fired. Nor is evidence that the defendant was the only person possessing a key to the room. Nor is evidence that the defendant had a motive for killing the deceased. All of these matters of fact other than the actual shooting are matters of fact relevant to the material "fact in issue", being the shooting by the defendant, but are not themselves "facts in issue". They are items of circumstantial evidence tending to establish that the defendant had the opportunity, the means and the motive to shoot the deceased. Counsel for the accused conceded that on the accused's construction, if the defendant entered the witness box, he could not claim any privilege against answering questions about the shooting inside the room, but he could claim privilege against answering questions about where he was just before and just after the shooting, about possessing the revolver or the key, and about his motive. If s 128(2) was satisfied, the accused would not be required to answer the questions, and if he did so, he would be entitled to a s 128(3) certificate; if s 128(5) was satisfied, he would be required to answer the questions and he would be entitled to a s 128(6) certificate. This would give the defendant a much greater potential immunity from questioning, and from later use of the answers to any questions which were asked, than existed – and in Victoria, Queensland, South Australia, Western Australia and the Northern Territory still 85 R v Cornwell (2003) 57 NSWLR 82 at 95 [44]. Crennan exists – under the equivalents to s 1(e) of the 1898 Act. That outcome would be extremely unlikely. There are two bases on which that outcome could be avoided. One, advanced by the DPP to Howie J, is that the expression "fact in issue" in s 128(8) includes "facts relevant to facts in issue". It is not necessary now to decide whether or not that approach is sound. The second basis assumes that "fact in issue" does not include "facts relevant to facts in issue", but directs attention to the statutory expression of which "fact in issue" forms part. That was the submission of the DPP in this Court. That approach is sound. Even if the expression "fact in issue" in s 128(8) is limited to the shooting by the defendant of the deceased, no doubt evidence by the defendant that he shot the deceased is "evidence that the defendant ... did an act the doing of which is a fact in issue". But evidence by the defendant that he had the opportunity, the means and the motive to shoot the deceased is also "evidence that the defendant ... did an act the doing of which is a fact in issue". That is because from the circumstantial evidence of opportunity, means and motive can be inferred the doing of the act which is the fact in issue. That construction is supported by a consideration of s 128(8)(b) in its application to the example being discussed. One fact in issue might be whether the defendant intended to kill the deceased. What is the meaning of "evidence that the defendant ... had a state of mind the existence of which is a fact in issue"? A defendant's state of mind can be proved by the defendant's testimony in the witness box; or by proof of an out-of-court admission by the defendant; or by proof of circumstances from which the existence of that state of mind can be inferred. An out-of-court admission by the defendant as to his state of mind can be established by the defendant's own testimony. And circumstances from which the existence of a defendant's state of mind can be inferred can be proved by that defendant's testimony. If the accused's construction were correct, the defendant could not object to answering questions about whether, as he pulled the trigger, he intended to kill the deceased; but he could object to answering questions, and seek to obtain the advantages of s 128(2) and s 128(5), about having later admitted an intention to kill, or about motives and other circumstances – including circumstances also relevant to whether the defendant shot the deceased – such as buying the revolver and the bullets, loading the revolver and procuring the key, from which an intention to kill could be inferred. That outcome too is extremely unlikely. Evidence of admissions of having had an intention to kill or of circumstances from which that intention can be inferred are as much "evidence that the defendant ... had a state of mind the existence of which is a fact in issue" as the accused's direct testimony about it. Crennan There is a further consideration. In its most common application, and in the application to which the attention of the Commission was principally directed, s 128(8) arises in the context of cross-examination. A defendant in a criminal proceeding, having elected to give evidence, will have denied guilt. The evidence in chief may take the form of a blanket denial of any knowledge of or participation in the relevant events, or it may take the form of detailed refutation, or explanation, of particular aspects of the prosecution case. Counsel for the prosecution, by cross-examination, may seek to test and challenge that evidence and may open up other matters that have not been addressed in chief. A cross- examiner is unlikely to confine questioning so as to distinguish between questions about the elements of the offence and questions about facts relevant to the elements of the offence. As the language of s 128(1) reveals, the section is concerned with the probative tendency of evidence. A line of cross-examination, aimed at advancing the prosecution case or cutting down the defence case, might lead directly or indirectly to a point that, in one way or another, tends to prove guilt, but cross-examination will rarely conform to the neat separation required by the argument for the accused in this case. That is another factor pointing to the extreme unlikelihood of the accused's construction. In short, on the correct construction of s 128(8) the words: "... the giving of evidence by a defendant, being evidence that the defendant: did an act the doing of which is an act in issue, or had a state of mind the existence of which is a fact in issue" are not limited to direct evidence that the defendant did the act or had the state of mind; they extend also to the giving of evidence by the defendant of facts from which the doing of the act or the having of the state of mind can be inferred. Conclusion on s 128(8). In these circumstances, where the accused's construction leads to results which would be both revolutionary and extremely unlikely, where it is not supported by the ALRC Reports (and indeed is, to a degree, contradicted by them) and where it is not justified by the reasons he advanced, it should not be accepted. Crennan Second issue: was the second trial a "proceeding" to which s 128(7) applied? Blackmore DCJ and the Court of Criminal Appeal86 considered that the second trial was a "proceeding" to which s 128(7) applied so as to prevent the reception of the accused's evidence at the first trial about the Diez-Lawrence conversations. Even if that view were correct, the evidence was still rightly admitted. That is because it was concluded above that the accused's construction of s 128(8) was erroneous. It follows that s 128 could not apply to the accused's testimony about the Diez-Lawrence conversations. Since s 128 could not apply, the prohibition contained in s 128(7) on use of the evidence against the accused could not apply. But even apart from that point, the second trial was not a "proceeding" to which s 128(7) applied. The reason given by Blackmore DCJ for his opinion was: "[T]he natural meaning of the words 'any proceeding' would include the circumstances of this trial even though it is a retrial. The trial is taking place in a different court, in a different jurisdiction, before a different tribunal of fact and the only similarities are the fact that the accused is charged with the same offence." On the other hand, Howie J disagreed with Blackmore DCJ on the following grounds87: "I find it difficult to see any justifiable policy which would permit an accused to give evidence in a trial on the basis that some or all of it could not be used against him in any subsequent proceeding for the same offence. There are many situations in which a retrial can occur other than because of a jury disagreement. It is, to my mind at least and generally speaking, an affront to the administration of criminal justice that the evidence given by an accused at a trial of a serious criminal offence could not be used by the Crown at a subsequent trial of the same offence either as evidence in the Crown case or by way of cross-examination of the accused if he or she gave evidence on that occasion. Yet that would be the result of the issuing of the certificate issued by me if the further trial is 86 Cornwell v The Queen (2006) 160 A Crim R 243 at 261 [89]. 87 R v Cornwell [2004] NSWSC 45 at [11]. Crennan caught by s 128(7). I do not believe that could have been the intention of the Law Reform Commission or the legislature in giving effect to the Commission's recommendations." Howie J's opinion is correct for the following reasons. The first and second trials were each part of one "proceeding" – the prosecution of the accused on the charge of conspiring to important 120 kilograms of cocaine. As Blackmore DCJ accepted, at both trials the accused was "charged with the same offence" arising out of the same facts, even though the jurors were different, the trial judges were different, the courts were different, and the form of the indictments differed in relation to the parties. That prosecution was not brought to an end by reason of the jury at the first trial failing to agree on whether the accused should be acquitted or convicted. Rather, that failure simply left the prosecution uncompleted. As Howie J said, a retrial may occur for many reasons other than a jury disagreement. The jury may be discharged, for example, because of illness among the jurors, because of what is said in the addresses of counsel, because the jury hears inadmissible information in a manner not capable of being cured by direction, or because of judicial self-disqualification on grounds of actual or apprehended bias. The first trial may proceed to a conviction, but a second trial may be necessary because an appeal is allowed on some ground not resulting in a verdict of acquittal. The construction on which Blackmore DCJ's conclusion depends produces results so unlikely as to compel its rejection. Among other difficulties, it would mean that an accused person who had obtained a ruling under s 128(2) or s 128(5) but who considered that the evidence given to which the ruling related had turned out unsatisfactorily could, by misconduct sufficient to cause the first trial to miscarry, obtain a second trial free of the risk of that evidence being used. To conduct a retrial is to conduct the trial which ought to have taken place in the first place. A retrial returns the parties to the position they were in at the start of the first trial. The parties are at liberty to re-tender the evidence already tendered. They are also at liberty to tender other evidence. Among that other evidence which traditionally the parties have been at liberty to tender is evidence of admissions made at the first trial. To construe a statutory provision as negating that traditional possibility would require the identification of clear words to that effect. There are no clear words to that effect in s 128(7). There is nothing in ALRC 26, ALRC 38 or NSWLRC 56 which would support Blackmore DCJ's construction of s 128(7). In short, the function of s 128 is to ensure that evidence given at a trial in relation to one charge is not used later in relation to another. Section 128 does not ensure that Crennan the evidence received at a trial in relation to the first charge cannot be used at a Third issue: competency of Crown challenge to certificate This issue raises the question: even if Howie J erred in granting the certificate, and even if s 128(7) did not prevent the tender of the evidence at the second trial, can the prosecution succeed in this appeal unless the certificate is set aside? The accused submitted that the grant of the certificate was an act of a Supreme Court judge which should not have been ignored by Blackmore DCJ and could not be negated by collateral attack. The Court of Criminal Appeal held that it could not accede to the Crown's request made in the Crown appeal to that Court to set aside the certificate. It gave three reasons. The first was that the provision relied on, s 5F of the Criminal Appeal Act 1912 (NSW), granted only a Crown right of appeal against interlocutory orders up to the time when the first trial concluded. The appeal was filed much later. The second was that although s 5A of the Criminal Appeal Act entitled the Crown to submit a question of law to the Court of Criminal Appeal for determination, that entitlement was confined to circumstances where there had been an acquittal. There had been no acquittal. The third was that even if the Crown amended the proceeding so as to seek an order to quash the certificate, and even if the Court had power to grant that order, there were "overwhelming discretionary reasons" for not making the order. McClellan CJ at CL said89: "The [accused] only gave evidence after Howie J had determined that a certificate would be granted. If that certificate could now be quashed, not only could the evidence be tendered at a retrial of the original charge but also would be available to the Crown to tender against him at a separate trial on the 'domestic' charges. This could result in significant injustice." It is unnecessary to decide whether the Court of Criminal Appeal erred in not granting any relief in relation to the certificate. The arguments on that 88 In Uniform Evidence Law (ALRC Report 102, NSWLRC Report 112, VLRC Final Report) (2005) at 534, the Australian, New South Wales and Victorian Law Reform Commissions recommended that s 128(7) be "amended to clarify that a 'proceeding' under that section does not include a retrial for the same offence or an offence arising out of the same circumstances". 89 Cornwell v The Queen (2006) 160 A Crim R 243 at 262 [100]. Crennan subject in this Court attributed excessive significance to the certificate granted on 11 February 2004, as distinct from the reasoning which had led to the ruling – the "requirement" – on 5 May 2003 that the accused give the evidence. The certificate had no intrinsic importance. It was not a document constitutive of rights. It was not like a title deed or a certificate of title or a bearer security. The role of a properly drafted certificate granted under s 128(6) (or s 128(3)) is simply to record a factual matter – what particular evidence was required to be given under s 128(5) (or was given after the accused chose to give it under s 128(2)). A s 128 certificate is only a convenient mechanism for use by a witness who later claims the protection given by s 128 and for aiding a court having the duty of determining that claim. It would be absurd if a witness were to fail to obtain the protection conferred by s 128(7) merely because a court which had decided that the conditions stipulated in s 128(1) and (5) (or s 128(1) and (2)) had been satisfied had failed to cause the witness to be given a certificate, whether because it had overlooked s 128(6) (or s 128(4)), or because, as here, a legal representative of the witness had failed to carry out a direction in relation to the certificate, or because of some lapse within the registry of the court. It would be equally absurd if a witness were to fail to obtain the protection conferred by s 128(7) merely because the witness and the court registry lost all copies of the certificate. If the certificate had had any intrinsic importance beyond being a convenient mechanical record, it is hard to see how Howie J could have issued it when he did: the first trial had ended months earlier, and he was functus officio. Accordingly, the vital question is not whether the Court of Criminal Appeal erred in failing to set aside or quash the certificate, but rather whether Howie J's ruling of 5 May 2003 was a barrier to Blackmore DCJ's reception of the evidence at the second trial. The Court of Criminal Appeal, which construed Blackmore DCJ's reasons as amounting to a ruling that the certificate had been issued contrary to the section, held that it was not open to him to have done this90. In this regard, with respect, it erred. Counsel for the accused supported the Court of Criminal Appeal's view by contending that s 128(8) did not relate to the giving of evidence before Blackmore DCJ. Rather, it restricted the tender of evidence from the first trial. Counsel submitted that all Blackmore DCJ had to do was construe the s 128(6) certificate and apply it. He had erred in going behind it. 90 Cornwell v The Queen (2006) 160 A Crim R 243 at 261 [91]-[93]. Crennan This criticism is incorrect. It would only be valid if there were some legislative provision compelling Blackmore DCJ to follow Howie J's ruling. The only legislative provision to which the accused could point was s 128(7), and it was concluded above that it did not apply91. In the absence of any legislative provision to the contrary, Blackmore DCJ was not bound either by Howie J's ruling under s 128(5), or by the certificate, any more than he was bound by any other evidential ruling made by Howie J. Blackmore DCJ took a far wider view than Howie J of the relevance of the Diez-Lawrence conversations, for example: no complaint was made about this, and it could not be said that this course was not open to him. If trial judges conducting second trials are not in general92 able to approach the task of making evidential rulings afresh for themselves, free of any constraints created by the rulings in the first trial, the prosecution would be placed in an impossible position. Those responsible for the conduct of a prosecution at one trial would have to seek protection against the risk of an order for a new trial later being made. But by what means? To launch interlocutory appeals under s 5F of the Criminal Appeal Act against all rulings which they were dissatisfied with would run foul of the strong repugnance appellate courts have towards interrupting trials by interlocutory appeals. To apply to quash those rulings after the jury disagreed would mean having to face the difficulty that the Court of Criminal Appeal seemed to express considerable doubt, in the passage quoted above, as to whether there exists any method by which to actually do so. Blackmore DCJ was not bound by the accused's construction of s 128(8), and was entitled to depart from it. If the accused's construction were wrong, as it has been held to be93, Blackmore DCJ was therefore entitled to depart from Howie J's s 128(5) ruling since no part of s 128 applied. Whether or not Blackmore DCJ actually relied on this reasoning, it is sound, and it supports his conclusion that the accused's testimony at the first trial was admissible at the second. That conclusion stands whether or not the certificate is set aside. 91 Above at [86]-[88]. 92 In an exceptional case far removed from the present context, Rogers v The Queen (1994) 181 CLR 251, this Court held that where admissions had been rejected as involuntary at a trial on four counts of armed robbery, on two of which the accused was acquitted and on two of which he was convicted, it was an abuse of process for the Crown to tender some of the admissions on further and distinct charges of armed robbery. The question whether that principle applies to a case like the present, where the jury failed to agree at the first trial of a particular charge, so as to prevent the Crown from re-tendering at a second trial on that charge an admission rejected as involuntary at the first, does not arise. 93 Above at [85]. Crennan Fourth issue: discretionary grounds? should Blackmore DCJ have excluded the evidence on Counsel for the accused submitted that once Howie J had given a ruling pursuant to s 128(5) requiring the accused to give evidence, and the accused had acted on the faith of it by giving evidence about the Diez-Lawrence conversations on the assumption that he would have the protection given by s 128(7), Blackmore DCJ was wrong to admit that evidence where the consequence of his having done so was to prevent the accused from testifying in the second trial. Blackmore DCJ appears to have considered whether the evidence should be excluded under s 137 of the NSW Act94, but declined to do so because he considered that the evidence had significant probative value which "easily" outweighed the danger of unfair prejudice. Counsel for the accused did not before this Court in terms rely on s 137. Instead it was submitted that the accused had not had a fair trial according to law. In developing that submission, to some degree counsel for the accused criticised the conduct of the DPP, but in essential respects it is difficult to see how the DPP could have behaved differently. Before Howie J made his s 128(5) ruling, the DPP contended that s 128(8) prevented s 128 from applying. Howie J was against that contention, but the DPP has succeeded in this Court on that point. An attempt to seek leave to appeal against Howie J's s 128(5) ruling would almost certainly have met with failure in view of the months the trial had been running and the undesirability of disrupting it. It would have been a highly unusual course, even if it were legally possible, to have challenged Howie J's ruling after the jury at the first trial disagreed and before the second trial started. One factual element of the accused's submission must be refined. It is not necessarily the case that the accused would not have given evidence if his counsel had not sought and obtained the s 128(5) ruling. The Diez-Lawrence conversations were already in evidence before the accused's case opened; unless explained by testimony from the accused, they would have been very damaging to the accused's position. The s 128(5) ruling was obtained only after the accused entered the witness box. Howie J steadfastly refused to make a ruling before 94 Section 137 provides: "In a criminal proceeding, the court must refuse to admit evidence adduced by the prosecutor if its probative value is outweighed by the danger of unfair prejudice to the defendant." Crennan then. It is true that perhaps even before the accused entered the witness box the ruling eventually made could have been predicted because the accused's construction of s 128(8) was advanced in argument and embraced by counsel for the accused. But it was not certain that the ruling would have been made. Once the accused had entered the box, he was running the risk that the ruling might not be made. It follows that it is an exaggeration to say that the accused acted on the faith of the s 128(5) ruling in giving evidence about the Diez-Lawrence conversations. Once Howie J had decided to admit evidence of those conversations, there would have been strong pressure on the accused to enter the box to explain them. Once he entered the box it was virtually inevitable that he would be questioned about them: the only issue was whether he would be questioned first in chief (and, if so, with s 128(5) protection) or in cross- examination. Another factual element in the accused's argument must be questioned. It has not been demonstrated how it is that Blackmore DCJ's reception of the evidence prevented the accused from testifying at the second trial. Indeed he gained one potential advantage from the course adopted. His case, as explained over the several days in which he gave evidence in chief and was cross-examined at the first trial, was put before the jury without the risk of damage from further cross-examination. There is a third factual aspect raised by the accused's argument to be clarified. While evidence given by the accused after Howie J "required" him to do so under s 128(5) was no doubt given with s 128(7) in mind, there is nothing to suggest either that it was given with a second trial on the same charge in mind, or that it was given in the belief that s 128(7) would provide protection against the use of the evidence at a second trial on the same charge. It is hard to see how the accused suffered "prejudice", or how the second trial could be called unfair, by reason of the tender of evidence at the second trial which was given at the first trial in the belief that s 128(7) would apply to it, in circumstances where s 128 did not in truth apply. The accused claimed privilege under s 128(1), obtained a ruling under s 128(5), and was issued with a certificate under s 128(6). In law he had in truth no privilege, he should not have obtained the ruling, and he should not have been issued with the certificate. Nor was he entitled to any s 128(7) protection at the second trial. To have excluded the evidence would have conferred by an indirect route benefits to which he was not entitled directly95. 95 The position in which the accused finds himself is the result of a difference of opinion between Howie J and this Court as to the correct construction of s 128(8). (Footnote continues on next page) Crennan Fifth issue: the application for special leave to cross-appeal The draft notice of cross-appeal (composed and filed by the accused, not his counsel) sought an order that a verdict of acquittal be entered. The only submission specifically directed to this outcome was a submission made very briefly, and only in writing, that it was not reasonably open to a properly instructed jury to have been satisfied beyond reasonable doubt of the accused's guilt. This Court would ordinarily not undertake the task of assessing such a submission unless that task had first been undertaken by the Court of Criminal Appeal. Counsel for the accused advanced with much more vigour an argument that although the Court of Criminal Appeal had rejected the relevant ground of appeal, ground 5, directed to the unreasonableness of the verdict, it had done so only very briefly, without properly addressing the question, and the matter should be remitted to it to be addressed properly. Counsel for the accused advanced two groups of arguments to the Court of Criminal Appeal. According to the first, the evidence revealed that the accused was "frozen out" of the conspiracy in the sense that even if he engaged in acts preparatory to it, he fell out with the conspirators before he became party to the conspiracy. According to the second, the enterprise discussed in the Diez- Lawrence conversations was not the conspiracy charged, but another conspiracy, a "parallel importation". These submissions were supported by copious references to the evidence. Counsel for the accused submitted that while the Court of Criminal Appeal's discussion of ground 4 (which in the end it did not decide) referred to the parallel importation issue, its very brief discussion of ground 5 did not deal adequately with either group of arguments96. The application for special leave to cross-appeal is sufficiently dealt with by saying that the criticisms made by counsel for the accused of the Court of Criminal Appeal's reasoning in relation to ground 5 are sound. The Court's conclusion may be correct, but its reasoning – or at least the Court's statement of It is the result of a failure by his counsel correctly to predict what the true construction of s 128, considered as a matter of first impression, would ultimately be held to be, and in that sense it was the result of what was essentially an innocent "mistake" by his counsel. Whether in these particular circumstances the evidence which the accused gave could or should be excluded at a trial on domestic drug dealing charges is an entirely separate question which need not be discussed here. 96 See Cornwell v The Queen (2006) 160 A Crim R 243 at 262-263 [102]-[107]. Crennan it – did not come to grips with the points of detail which an assessment of the arguments advanced by counsel for the accused called for. Ground 5 should be remitted to the Court of Criminal Appeal for reconsideration. Intermediate appellate courts in criminal appeals must deal with grounds of appeal which, if made out, could result in a verdict of acquittal notwithstanding that a ground justifying an order for a new trial has been made out97. That principle does not apply here, for apart from ground 5, none of the grounds of appeal, if made out, were likely to result in a verdict of acquittal as distinct from an order for a new trial. This case presents a different and more difficult problem. Intermediate courts of appeal in this country are very busy, and it is understandable that they should not wish to deal with matters which it is not necessary for them to deal with. However, while no universal rule can be enunciated, intermediate courts of appeal should bear in mind the factors making it desirable for them to deal with all grounds of appeal, rather than to deal with what is seen as a decisive ground in a way which apparently renders it unnecessary to deal with other grounds98. That is because of the trouble caused if this Court, as here, disagrees with the intermediate court of appeal on one ground it did deal with fully, considers that its treatment of the other ground it dealt with was incomplete, and has returned the matter to the intermediate court for the four grounds not dealt with and the one ground not completely dealt with to be considered again. The trouble comes in the form of cost, delay and the need for reargument. This is particularly so in criminal appeals, where adding to delays can result in accused persons who are ultimately acquitted at a second trial having to remain imprisoned for longer than necessary, and longer than in justice they should be. Did the accused "object" to giving particular evidence? Finally, one other aspect of s 128 may be referred to. The opening words of s 128(1) provide that s 128 only applies if "a witness objects to giving particular evidence". A fair characterisation of the exchanges between counsel 97 Jones v The Queen (1989) 166 CLR 409 at 411 per Mason CJ, Brennan, Dawson 98 The issue has been discussed in this Court in other contexts: Kimberly-Clark Australia Pty Ltd v Arico Trading International Pty Ltd (2001) 207 CLR 1 at 19-20 [34]-[35]; Lockwood Security Products Pty Ltd v Doric Products Pty Ltd (2004) 217 CLR 274 at 312 [105]. Crennan for the accused and Howie J set out earlier99 is that while in one sense the accused "objected" to the 35th question he was asked in chief when he claimed privilege, in another sense he did not object at all. He evidently wanted to give some evidence about the Diez-Lawrence conversations. He could only be sure of giving it in the way he would have liked if he gave it in chief; if he took the risk of leaving its reception to the chance of particular questions in cross- examination, he ran the risk of not being able to give it, or not in the way perceived to be most favourable to his interests. Hence his claim of privilege was arguably not a means by which he "objected", but was an attempt to ensure that s 128 protected him from some potentially adverse consequences of evidence which he did not "object" to giving, but strongly wanted to give. The accuracy of that characterisation is supported by the following factors. First, counsel for the accused carefully spent time in the days preceding 5 May 2003 seeking to prepare the ground for a favourable ruling on the evidence. He had hopes of a favourable ruling before the accused's case opened. While Howie J was resistant to blandishments seeking a favourable ruling, the course being charted for the accused was plainly driven by the desire of the accused to give evidence in chief about the Diez-Lawrence conversations. Secondly, the 34th question was leading and the 35th question explicitly triggered the claim to privilege which the accused made: what was happening was no surprise to the accused. Thirdly, if the accused had objected to counsel's question in the sense of not wanting to answer it, or not wanting it to be asked, the issue probably would have been sorted out before the accused entered the witness box, or the accused could have reacted in such a way as to cause counsel to withdraw the question. The fact that the thirty-fifth question, and all the later questions in chief about the Diez-Lawrence conversations, were asked supports the conclusion that the accused wanted to give evidence about them and instructed counsel to structure events so that he could do so with a measure of impunity. This characterisation raises a question whether s 128(1), and hence s 128 as a whole, applies where a witness sets out to adduce in chief evidence revealing the commission of criminal offences other than the one charged. A criminal defendant might wish to present an alibi, the full details of which would reveal 99 Above at [11]-[12]. Crennan the commission of another crime. A civil defendant might wish to prove the extent of past earnings, being earnings derived from criminal conduct. This raises a question whether witnesses who are eager to reveal some criminal conduct in chief, because it is thought the sting will be removed under sympathetic handling from their own counsel or for some other reason, are to be treated in the same way as witnesses who, after objection based on genuine reluctance, give evidence in cross-examination about some crime connected with the facts about which evidence is given in chief. The view that the accused's claim of privilege in all the circumstances answered the requirements of s 128(1) has difficulties. It strains the word "objects" in s 128(1). It also strains the word "require" in s 128(5) – for how can it be said that a defendant-witness is being "required" to give some evidence when his counsel has laid the ground for manoeuvres to ensure that the defendant-witness's desire to give the evidence is fulfilled? And it does not fit well with the history of s 128(8). For one thing, s 1(e) of the 1898 Act and its Australian equivalents provided that an accused person called pursuant to the legislation could be "asked any question in cross-examination notwithstanding that it would tend to criminate him as to the offence charged"100, which implies that the protection of the accused's position in chief or in re-examination was a matter between the witness's counsel and the witness. For another thing, the Australian Law Reform Commission, in summarising the pre-s 128(8) law, assumed that s 1(e) and its Australian equivalents were to be construed as applying to questions in cross-examination only101. The present point was not raised by the DPP either in the courts below or in this Court. It was raised by this Court in the course of oral argument, but was not embraced by counsel for the DPP. "Sometimes this Court will decide a question which has not been referred to or discussed by an intermediate court of appeal but that is not the course which should ordinarily be followed."102 The 100 Emphasis added. The actual word "cross-examination" was used in five of the nine relevant statutes, two others are to be construed similarly, and the same construction is implicit in the remaining two: note [46] above. 101 Australian Law Reform Commission, Evidence, Interim Report No 26, (1985), vol 2 at App C [181] and [209]; Australian Law Reform Commission, Evidence, Report No 38, (1987), at [217(a)]. 102 Jones v The Queen (1989) 166 CLR 409 at 414 per Mason CJ, Brennan, Dawson Crennan present question could be of considerable importance in the day-to-day conduct of trials, since counsel for the accused submitted that in practice s 128 was often employed by prosecutors to elicit evidence in chief. It is not necessary finally to decide this issue, since the appeal is to be allowed on other grounds. And it is not desirable to do so in view of the absence of dispute between the parties on the question and the importance of the question. Orders The consequence is that the first Crown appeal (No S281 of 2006) should be allowed in relation to s 128(8), and, as counsel for the DPP agreed, there is therefore no need to deal with the second Crown appeal (No S282 of 2006) other than by dismissing it. If the s 128(8) issue had been the only controversy, it would have been appropriate to reinstate the accused's conviction. But four of the accused's grounds of appeal to the Court of Criminal Appeal (2, 3, 4 and 6) have not been dealt with, and ground 5 must be remitted for reconsideration by that Court. The following orders should be made. In Appeal S281 of 2006 and Application No S215 of 2006 Appeal allowed. Application for special leave to cross-appeal granted and cross-appeal allowed. 3. Matter remitted to the Court of Criminal Appeal for consideration of grounds 2, 3, 4 and 6, and reconsideration of ground 5, in the appellant's notice of appeal to that Court. In Appeal No S282 of 2006 Appeal dismissed. Kirby 116 KIRBY J. These proceedings arise out of orders of the Court of Criminal Appeal of New South Wales103. By those orders, that Court upheld an appeal by Mr Richard Cornwell ("the accused"). It set aside his conviction of an offence against the Customs Act 1901 (Cth) ("Customs Act") of conspiring to import into Australia a commercial quantity of cocaine, a prohibited import104. It ordered his retrial on that charge. The first prosecution appeal to this Court concerns those orders. The second prosecution appeal relates to orders of the Court of Criminal Appeal dismissing a prosecution appeal against a decision by the trial judge at the accused's first trial in the Supreme Court of New South Wales (Howie J) to grant the accused a certificate under s 128 of the Evidence Act 1995 (NSW) ("the NSW Act"). Also before this Court is an application by the accused for special leave to cross-appeal against part of the Court of Criminal Appeal's disposition. The accused comes before this Court substantially supporting the reasoning of the Court of Criminal Appeal in relation to the meaning of the contested provisions of the NSW Act. However, he complains that that Court omitted to address properly grounds in his appeal before it, most notably a ground challenging the safety of the jury's verdict of guilty of the offence charged. That verdict was returned at the accused's second trial in the District Court of New South Wales (before Blackmore DCJ and a jury). The first trial before Howie J and a jury had ended with the jury being unable to agree on a verdict in relation to the accused. That is why a new trial was ordered105. Before this Court, the accused sought to support his fifth ground of appeal to the court below, namely that the verdict at the second trial was "unreasonable and cannot be supported by the evidence". The Court of Criminal Appeal dealt with that ground in a very brief way. It dismissed it on the basis that the evidentiary submissions made by the accused were "matters for the jury and it could not be said that there was no evidence to support the conviction"106. If he had been successful on that ground of appeal, the accused would have been entitled to the entry of a verdict of acquittal by the Court of Criminal Appeal and hence to discharge from imprisonment and further liability107. 103 Cornwell v The Queen (2006) 160 A Crim R 243. 104 Customs Act, s 233B(1)(cb). This sub-section was repealed by the Law and Justice Legislation Amendment (Application of Criminal Code) Act 2001 (Cth), Sched 21, s 108. That repeal has no consequence for this appeal. 105 (2006) 160 A Crim R 243 at 245 [3]. 106 (2006) 160 A Crim R 243 at 263 [107]. 107 Under the Criminal Appeal Act 1912 (NSW), s 6(1), (2). Kirby Nevertheless, the Court of Criminal Appeal upheld only the first ground of appeal relied on by the accused. It accepted the accused's complaint that the trial judge at the second trial had erred in admitting against him evidence that was the subject of the certificate granted in the first trial by Howie J. That error, in the opinion of McClellan CJ at CL (with whom Hulme and Adams JJ concurred), involved both legal error and injustice to the accused. In the opinion of McClellan CJ, it resulted in108: "… very significant portions of the transcript [being] tendered at the second trial contrary to the certificate. Containing as it did admissions that the appellant was engaged in domestic drug trafficking on a significant scale it could have significantly influenced the jury's approach to the guilt or innocence of the appellant in respect of the matter charged. The Crown tendered the evidence 'to use' it against the appellant at the retrial and in my opinion it was admitted contrary to s 128(7) [of the NSW Act]." The Court of Criminal Appeal dismissed the belated prosecution attempt to challenge the validity of the certificate granted to the accused by Howie J in his first trial. It rejected an attempt to bring a cross-appeal against the grant of that certificate109. It did so for a mixture of procedural and substantive reasons110. Most importantly, it concluded that there were "overwhelming discretionary reasons" why such relief would be denied111: "The appellant only gave evidence after Howie J had determined that a certificate would be granted. If that certificate could now be quashed, not only could the evidence be tendered at a retrial of the original charge but also would be available to the Crown to tender against him at a separate trial on the 'domestic' charges [of conspiring to be, or being involved in, illegal drug activities within Australia]. This could result in significant injustice." Having dismissed the prosecution's cross-appeal and upheld the accused's complaint about the conduct of his second trial, in the light of the certificate given under the NSW Act in the first trial, the Court of Criminal Appeal declined 108 (2006) 160 A Crim R 243 at 261-262 [94]. 109 Purportedly pursuant to the Criminal Appeal Act 1912 (NSW), s 5F(2) and in light of the powers granted to the Court of Criminal Appeal under s 5F(5). 110 (2006) 160 A Crim R 243 at 262 [95]-[101]. 111 (2006) 160 A Crim R 243 at 262 [100]. Kirby to apply "the proviso"112. In so doing, it applied the principles explained by this Court in Weiss v The Queen113. Contrary to the conclusion reached by the majority of this Court, it is my view that (save in one respect) the approach adopted by the Court of Criminal Appeal was substantially correct. That Court did not err in its construction and application of the NSW Act. Its explanation of the meaning of that Act, and its evaluation of the requirements of justice in the circumstances, were sound. Both appeals brought by the prosecution to the orders below should be rejected. However, the accused should have leave to cross-appeal. His cross-appeal should be allowed and the proceedings remitted to the Court of Criminal Appeal to permit that Court to consider in appropriate detail, and according to the operative principles114, whether the accused was entitled, in the circumstances, to an acquittal on the basis that his conviction at the second trial was "unsafe and unsatisfactory"115 in the legal sense. Mine is a minority view. However, to a large extent, I am able to explain it by reference to the reasons of the Court of Criminal Appeal and the facts, issues and applicable law set out in the reasons of Gleeson CJ, Gummow, Heydon and Crennan JJ ("joint reasons") in this Court. The facts The background facts: The factual circumstances that gave rise to the prosecution of the accused for the offence of being party to a conspiracy to import prohibited drugs into Australia are set out in the joint reasons116. However, those reasons, whilst referring to the "Diez-Lawrence conversations"117 112 Criminal Appeal Act 1912 (NSW), s 6(1). 113 (2005) 224 CLR 300. 114 M v The Queen (1994) 181 CLR 487 at 492-493, 525. See also Jones v The Queen (1997) 191 CLR 439 at 446, 453. 115 The "unsafe and unsatisfactory" ground does not represent the way in which the ground is expressed in the Criminal Appeal Act 1912 (NSW), s 6(1), (2), or other such Australian statutes. See Gipp v The Queen (1998) 194 CLR 106 at 147-150 [120]-[127]. The language of each statute must be applied. 116 Joint reasons at [6]. 117 Joint reasons at [7]-[14]. Kirby do not fully explain (as the reasons of the Court of Criminal Appeal did118) the prosecution case against the accused and the way in which he contended at the first trial that the Diez-Lawrence conversations, recorded on a listening device, "should be understood as relating exclusively to domestic drug deals and were not related to any proposed importation of cocaine in respect of which the appellant denied he was a party"119. This was a threshold point which the accused made clear at both his first and second trials. It was not an after-thought120. At all times it was the way the defence case was conducted. As the Court of Criminal Appeal noted121: "[T]he evidence which he gave admits to involvement in illegal drug activities but the appellant says this was confined entirely to domestic dealings". Such an assertion was, of course, perilous for the accused. Conversations which concede trafficking in illegal drugs within Australia might, depending on the circumstances, be relevant to proof of involvement in a conspiracy to import such drugs into Australia. At least where the prohibited drug was cocaine, insusceptible to local production in commercial quantities such as the drugs in issue here (120 kilograms)122, the necessity of a source external to Australia might, depending on the conversations, also suggest arrangements designed to assure a source and hence the involvement of the participants both in a conspiracy to import the drugs and in arrangements to trafficking them thereafter within Australia123. On the other hand, the only offence with which the accused was charged was that of conspiracy to import. It is not unknown for dealings in prohibited drugs to reflect a hierarchy of criminal involvement, so that some offenders are involved in conduct incidental to the importation and others in the subsequent 118 (2006) 160 A Crim R 243 at 248-251 [21]-[39]. 119 (2006) 160 A Crim R 243 at 252 [40]. 120 A similar defence, propounded in Nudd v The Queen (2006) 80 ALJR 614 at 636 [103]; 225 ALR 161 at 188 was held to be an after-thought prompted by a jury question. 121 (2006) 160 A Crim R 243 at 252 [40]. 122 (2006) 160 A Crim R 243 at 245 [1]. 123 cf Leff (1996) 86 A Crim R 212 at 213-214 per Gleeson CJ; Nudd v The Queen (2006) 80 ALJR 614 at 643 [153]; 225 ALR 161 at 198. Kirby domestic dealings. For constitutional reasons124 the federal offences relating to criminal importations are not open-ended125. At a certain point, different State or Territory offences may also arise for consideration. Such offences will typically involve different legal ingredients; different punishments upon conviction; and (sometimes) different prosecuting authorities and decision-makers. To the extent that, at his first trial and thereafter, the accused propounded an explanation of the intercepted conversations that involved him in "domestic dealings" in illegal drugs, he necessarily exposed himself to the risk of prosecution for such offences, unless he might give evidence to contradict his guilt of the federal offence with which he was charged, without running the risk that such evidence could later be used against him in a proceeding for other federal or State offences. This was the issue presented by the accused's request for, and Howie J's grant of, a certificate under s 128 of the NSW Act. In the system of criminal procedure followed in Australia, high particularity is observed in the statement and proof of criminal accusations126. It is not enough that the prosecution establishes that an accused person has committed unspecified criminal offences or other wrongs. Still less is it enough that the prosecution establishes that the accused person is of bad character, disreputable or an unsavoury person, accustomed to criminality. An important protection for the liberty of the individual in Australia lies in the fact that, in the accusatorial system of criminal justice127, the prosecution ordinarily assumes the responsibility of proving, to the requisite standard, the precise accusation alleged in the proceedings (stated in this case in the indictment). The accused's case: Whatever perils and consequences might flow for the accused from his concessions of involvement in "domestic dealings", if that were all that was ultimately proved against him beyond reasonable doubt in his trial, the prosecution for the federal offence of conspiring to import into Australia a commercial quantity of cocaine would fail. This, therefore, was the accused's defence to the charge. He was entitled to have that defence lawfully and fairly considered in his trial. This was the approach that the Court of Criminal Appeal took throughout its reasons. In my opinion it was the proper and lawful 124 Constitution, s 90; cf s 95. See also s 51(xxix). 125 R v Tannous (1987) 10 NSWLR 303 at 306-307; cf Nudd v The Queen (2006) 80 ALJR 614 at 637 [111]; 225 ALR 161 at 190. 126 MacKenzie v The Queen (1996) 190 CLR 348 at 366-368. 127 RPS v The Queen (2000) 199 CLR 620 at 630 [22]. Kirby approach. It was required both by a correct application of the NSW Act and by basic legal principles. I will not set out at length the evidence successively adduced by the prosecution against the accused at his two trials. That evidence is described in the reasons of the Court of Criminal Appeal128 as is the evidence relevant to the accused's defence given by him at his first trial129. The essence of the accused's case, based on the intercepted conversations, was as follows130: "The appellant admitted that from March 2001 he was engaged in distributing cocaine with Lawrence and that his role included the collection of the money for the distributed cocaine and payments to Diez for the supply. The appellant agreed that the conversations on the tapes concerned the distribution and importation of cocaine. He also agreed that he was in regular contact with Diez after 24 March (the date of the last recorded conversation between Diez and the appellant) but that these meetings did not occur in the appellant's flat. The appellant claimed that although he discussed the possible importation of cocaine with Diez and Lawrence these discussions were merely preliminary and tentative discussions and that eventually he never agreed to be part of an importation venture." Some of the evidence taken from the recorded conversations is difficult to reconcile with the accused's contention that his involvement in the illegal drug activities was "confined entirely to domestic dealings"131. However, whether ultimately this was so or not was the question presented for the jury's verdict. As already noted, the jury at the first trial did not agree on their verdict in respect of the accused, although they were agreed that other named defendants, Messrs Diez and Lawrence, should be found guilty and convicted132. Had the jury at the first trial reached a verdict in respect of the accused, whether of guilty or not guilty, it is unlikely that this Court would have been troubled with any of the fine points now raised. Those points only really present themselves because of the necessity for a retrial and because Blackmore DCJ, presiding in that retrial, took a different view about the availability of a certificate 128 (2006) 160 A Crim R 243 at 248-251 [21]-[39]. 129 (2006) 160 A Crim R 243 at 252-258 [40]-[72]. 130 (2006) 160 A Crim R 243 at 248 [23]. 131 (2006) 160 A Crim R 243 at 252 [40]. See also at 251 [33]. 132 (2006) 160 A Crim R 243 at 245 [3]. Kirby under s 128 of the NSW Act from that earlier taken by Howie J. Blackmore DCJ also disagreed with the consequence that flowed from the fact that Howie J had granted such a certificate and made the ruling he did on s 128 and thereafter "required" the accused to give evidence notwithstanding that it "may tend to prove that the witness has committed an offence against or arising under … an Australian law"133. The legislation The terms and history of s 128: The joint reasons set out the terms of s 128 of the NSW Act, which controls the outcome of the main issues in the prosecution's appeals from the orders of the Court of Criminal Appeal134. By reference to the legislative predecessors to that section, the joint reasons explain the course of legislation in England135 and, more immediately, the provision for certificates in the evidence law of a number of Australian jurisdictions that provided the precedents adapted by the Australian Law Reform Commission ("ALRC") in recommending provisions of the kind now found in s 128 of the NSW Act136. It is unnecessary for me to repeat any of these provisions except, where necessary, to give emphasis to particular features. The history of the nineteenth century debates in the United Kingdom, leading to the final enactment of the Criminal Evidence Act 1898 (UK) ("the 1898 Act"), recorded in the joint reasons137, is of much intrinsic interest. So is the history of the evidence statutes in Australia that followed the 1898 Act, which copied and later varied its provisions138. I accept that it may be important to appreciate the previous state of the law in Australia governing the evidence of persons accused of a crime when, in their trial for that crime, they claim a privilege against self-incrimination in respect of another and different crime. Primacy of the text: Nevertheless, the NSW Act is the counterpart, in one Australian State, of a major enterprise to secure a new law on evidence139 that 133 NSW Act, ss 128(1)(a), 128(5). 134 Joint reasons at [9]. 135 Esp Criminal Evidence Act 1898 (UK). See joint reasons at [30]-[54]. 136 See joint reasons at [55]-[56], [59]-[62]. 137 Joint reasons at [32]-[54]. 138 Joint reasons at [55]-[56], [61]. 139 Enacted as the Evidence Act 1995 (Cth). Kirby could be used (as it has been) as a template for a uniform evidence law for Australia140. In such a major and novel undertaking, the light that may be shed on the meaning of the provisions of the Australian uniform evidence law by debates, controversies and understandings that existed in the United Kingdom Parliament in the late nineteenth century is strictly limited. Old controversies may sometimes help to identify the contemporary mischief to which the new uniform Australian evidence statutes are addressed. But beyond that, it would risk distorting the operation of the new Australian legislation, enacted by Australian Parliaments with their lawmaking authority derived from the Australian Constitution, to chain the meaning of the modern Australian text to controversies that occurred in the United Kingdom more than a century ago. In my respectful opinion, expressions of the law of Australia, and interpretations of Australian legislation, have now moved beyond that imperial approach. Essentially, they have done so for a reason derived from the constitutional independence of this country and its laws. The duty of Australian courts, in giving meaning to the NSW Act, is therefore to ascertain that meaning from the legislative text. True, the text is read in context – including its historical context and its context as part of a national move towards a reformed and uniform evidence law for Australian courts. But statutory interpretation is always a text-based activity141. To the extent that we depart from the meaning ascertained from the Australian legislative text, we risk giving effect to judicial, rather than parliamentary, will142. The issues A constitutional question: The trial of the accused for an offence against the Customs Act involved the New South Wales courts in an exercise of federal 140 Discussed in New South Wales Law Reform Commission, Evidence, Report No 56, (1988); Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) ("Uniform Evidence Law"). 141 Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518; Trust Company of Australia Ltd v Commissioner of State Revenue (2003) 77 ALJR 1019 at 1029 [68]; 197 ALR 297 at 310. 142 Coventry v Charter Pacific Corporation Ltd (2005) 80 ALJR 132 at 148 [76]-[77]; 222 ALR 202 at 220-221; Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 80 ALJR 1509 at 1527-1528 [77]-[84]; 229 ALR 1 at 21-23; Sons of Gwalia Ltd v Margaretic (2007) 81 ALJR 525 at 552 [104]; 232 ALR 232 at 261. Kirby jurisdiction. The provisions of evidence law contained in the NSW Act were picked up and applied to the trial pursuant to the provisions of the Judiciary Act 1903 (Cth)143. The trial being on indictment and the offence being one against a law of the Commonwealth, a jury was required for the trial by s 80 of the Constitution. Such a trial also had to conform to all requirements implicit in Ch III of the Constitution. No arguments were advanced, relevant to the resolution of the issues presented by these proceedings, based upon the procedures inherent in a federal jury trial, or more generally, upon the basis of any due process implications to be found in Ch III of the Constitution144. The extent of any such requirements, or implications, was reserved by this Court in Weiss v The Queen145. It was mentioned by me, but not explored, in Nudd v The Queen146. As in that case, because the parties were well represented before this Court, I am content to proceed on the basis that no constitutional issue arises. But I do not decide that point. Issues in the proceedings: The joint reasons147 outline the issues as they were argued before this Court. They include (1) the interpretation of s 128; (2) the application of s 128 to the retrial; (3) the prosecutor's belated challenge to Howie J's certificate; (4) the procedural unfairness complained of; and (5) the cross-appeal. I shall, likewise, deal with these issues separately. It is convenient first to deal with the issue raised by the accused's application for leave to cross-appeal for, upon it, the conclusions and orders set out in the joint reasons are conformable with this Court's authority148. I support them. The cross-appeal issue: The joint reasons explain the imperfections of the treatment by the Court of Criminal Appeal of the accused's complaint to that 143 s 79. See also s 68(2): Solomons v District Court of New South Wales (2002) 211 CLR 119 at 134 [23], 145 [57], 160-162 [111]-[118]. 144 cf Re Tracey; Ex parte Ryan (1989) 166 CLR 518 at 580; Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 606-614, 703-706; Leeth v The Commonwealth (1992) 174 CLR 455 at 483-488, 501-503. 145 (2005) 224 CLR 300 at 317-318 [46]. 146 (2006) 80 ALJR 614 at 637 [112]; 225 ALR 161 at 190. 147 Joint reasons at [24]-[29]. 148 Joint reasons at [102]-[105], [114]-[115]. Kirby Court that the evidence demonstrated that he had been "frozen out" of the conspiracy for which he was charged in the indictment. In this Court, detailed written submissions on the point, with ample references to the evidence, were provided. It is not normally the function of this Court to perform, effectively for the first time, the detailed examination of such submissions. To do so would potentially deprive a party, discontented with the outcome, of the opportunity, if so desired, to suggest to this Court either a basic error of approach or of result, sufficient to attract a grant of special leave from the intermediate court. The accused's complaint, if made good, would entitle him to a verdict of acquittal. It had therefore to be dealt with additionally, and separately from, new trial points and in sufficient detail to make it clear that the Court of Criminal Appeal had properly discharged its appellate function in this respect. I therefore agree with the orders proposed in the joint reasons on the cross-appeal. I also agree with the way in which those reasons reaffirm the general principle requiring intermediate courts to deal with potentially decisive grounds of appeal149. Needless regurgitation of arguments and evidence is not required. Of course, I am very mindful of, and have not forgotten, the burden that is cast upon the intermediate courts. But there must be sufficient detail to demonstrate that the court has turned its mind adequately to the separate submission. In default of this, there is no alternative but to grant the accused special leave to cross-appeal; to allow the appeal to that extent; and to remit the proceedings to the Court of Criminal Appeal to deal with the "unsafe and unsatisfactory" ground. In my opinion, this is the full extent to which error has been shown on the part of the Court of Criminal Appeal. To demonstrate that this is so, I must deal with the four remaining issues on which I disagree with the approach taken in the joint reasons. The interpretation of s 128 of the NSW Act The issue stated: The first such issue concerns the meaning and application of s 128(8) of the NSW Act. It presents the question whether Howie J was correct in construing the sub-section150 and whether the Court of Criminal Appeal erred in confirming his interpretation and his consequently issuing a documentary certificate to the accused pursuant to s 128151. In my view, the interpretation adopted by the first trial judge, and by the Court of 149 Jones v The Queen (1989) 166 CLR 409 at 411. 150 R v Bruce Cornwell [2003] NSWSC 660. 151 Cornwell (2006) 160 A Crim R 243 at 260-262 [87]-[94]. Kirby Criminal Appeal, represents interpretation. It should be affirmed by this Court. the preferable, and therefore the correct, Several considerations bring me to this conclusion. They include (1) a textual analysis of s 128; (2) an historical examination of the predecessors to the section; (3) a contextual analysis addressed to other provisions of the NSW Act; (4) a reflection on applicable principles of fundamental human rights that help to resolve any ambiguity that may exist in the section; and (5) a consideration of the constitutional primacy of the parliamentary text. I shall deal with these arguments in turn. Textual analysis of s 128: The starting point is the language of s 128 itself. Its application is not confined to a criminal proceeding152. But it does extend to such a proceeding. Its general object is to strike a proper balance between upholding an objection by a witness to the giving of particular evidence, on the ground that such evidence may tend (relevantly) to prove that the witness has committed an offence against Australian law and, in some cases, to require the witness to give the evidence but in circumstances where the court gives the witness a certificate in respect of the evidence. Such a certificate prevents such evidence, so certified, as given by the witness, from later being used against that person in any proceeding in a NSW court (save for an immaterial exception). If the proceeding in which the question arises is a criminal one, s 128 does not apply in relation to the giving of evidence by a defendant where such evidence is evidence that the defendant did an act, the doing of which "is a fact in issue" in the subject trial153. In the present proceedings, which were a criminal proceeding, the accused at his first trial objected to giving particular evidence, relevantly, on the ground that such evidence might tend to prove that he had committed an offence against or arising under an Australian law. The objection was foreshadowed. The accused, who was competently represented, sought preliminary or prospective rulings which, properly, Howie J declined to give. However, ultimately, when the accused, as a witness, formally objected he did so in plain terms154: 152 It also extends to evidence that may tend to prove the witness is liable for a civil penalty, or has committed an offence against or arising under the law of a foreign country: see NSW Act, ss 128(1)(a), 128(1)(b). 153 NSW Act, s 128(8)(a). 154 (2006) 160 A Crim R 243 at 252 [41]. Kirby "Q. … Some time after you re-established contact with Mr Diez, did he raise with you the possibility of involvement in some form of illegal activity? In February. You may wish to reserve your legal rights here in answer to this question, Mr Cornwell: what did he say to you about the possibility of your involvement in some illegal activity? A. Well, I don't want to answer that on the grounds of it may incriminate me." As the Court of Criminal Appeal indicated, the matter that had previously been signalled "was now squarely raised"155. A ruling was required so as to permit the accused's evidence to continue, one way or the other. Howie J had earlier indicated that the accused might be entitled to a certificate under s 128156. What was obviously of concern to Howie J (properly in my view) was the need to address competing considerations of a highly practical kind, to which he would give expression in his ruling on the point: That the accused had exposed himself to general cross-examination by electing to enter the witness box and to give evidence; That, by the NSW Act, he nonetheless had a right to object to giving particular evidence where this might tend to prove that he had "committed an offence against … an Australian law"; foreshadowed his wish to conduct his defence, That he had acknowledging involvement in other offence(s) against Australian law, namely domestic trafficking in drugs, but asserting that he had not entered the conspiracy to import the prohibited drugs, with which he was charged; That, to some extent, evidence concerning domestic trafficking might be evidence of a fact that the jury might regard as relevant to the facts in issue, concerning the alleged offence of conspiracy to import; That if the accused were to give evidence, along the lines foreshadowed, such evidence might be highly damaging to the co-accused, especially Messrs Diez and Lawrence, and thus valuable to the prosecution in 155 (2006) 160 A Crim R 243 at 252 [42]. 156 (2006) 160 A Crim R 243 at 252-253 [43]-[49]. Kirby proving the involvement of those other persons in the importation of the drugs; and That a ruling, requiring the accused to give the evidence after causing him to be given a certificate under s 128 of the NSW Act, would obviate seriatim objections to individual questions; permit the accused's evidence to proceed without interruption; and afford him the chance to present his case fairly, such as it was, for the verdict of the jury without exposing him to the risk of future convictions for the serious offences of domestic drug dealing which were not before this jury on the count of the indictment by which the accused had been charged. In his ruling on the certificate application, Howie J weighed these and other considerations157. He did so by reference to the language of s 128 of the NSW Act. He explained why, in all the circumstances, he concluded that "the interests of justice" required that the accused give the evidence proposed158 and why he therefore intended to require the accused to give such evidence. With all respect to those of a different conclusion, I agree with the assessment of the Court of Criminal Appeal that the reasoning given by Howie J for the course that he took was both legally accurate and factually compelling. The contest concerning the application of s 128 to the circumstances therefore turns on the meaning of the phrase "fact in issue" in s 128(8). The prosecution contended that the phrase extended to include a "fact relevant to a fact in issue" For many reasons, this is not the preferable construction: It is not what s 128(8)(a) actually says; The distinction between a "fact in issue" and a "fact relevant to a fact in issue" is well established in the law of evidence159. The latter is a category often described as "circumstantial evidence". This is evidence which, although not directly proving a fact in issue in the trial, may tend towards or contribute to, the reasoning by which the decision-maker infers that a fact in issue is established; . What is "in issue" is determined in criminal, as much as in civil, proceedings, by the pleadings by which the ultimate issues are defined. It was therefore determined, in this case, by the single count of the 157 R v Bruce Cornwell [2003] NSWSC 660 at [18]-[27]. 158 NSW Act, s 128(5). 159 See eg Smith v The Queen (2001) 206 CLR 650 at 663 [41]. Kirby indictment alleging against the accused his guilt of the offence of conspiracy to import illegal drugs. The "facts in issue" are thus the elements, or necessary ingredients, of the offence so stated. Unless a fact is of such a character, it is not "in issue", however much it may be relevant or useful, in terms of evidence, to deriving a conclusion about the establishment of the facts required by the legal issues for trial; . All of this is to say no more than was said by Gleeson CJ, Gaudron, Gummow and Hayne JJ in Smith v The Queen160, which Howie J cited161 and which the Court of Criminal Appeal likewise applied162; and The interpretation adopted was the one that helps s 128 to operate in accordance with its apparent purpose. It upholds the differential entitlement of the accused to refuse to answer questions tending to prove that he had committed offences of trafficking drugs within Australia (with which he was not charged); but it does so under the protection of a certificate that required him to give his evidence in that regard because that was what "the interests of justice" required in the proceedings for the larger reasons of justice identified by Howie J. Even if I disagreed with the assessment of "the interests of justice" (which I do not), that disagreement would not justify a conclusion that the Court of Criminal Appeal had erred. In decisions made concerning the balance of individual and public interests, contemplated by s 128 of the NSW Act, a high measure of respect must be paid by appellate courts to the assessments and judgment of the trial judge as envisaged by the section. Limited use of history: The NSW Act is part of a major effort of national and uniform legislation of Australian evidence law163. The assistance that can be derived from the meaning of s 128 of the Act (in some respects novel in its terms) from poking amongst the embers of legal history in the United Kingdom is strictly limited. History may help us to understand the mischief to which s 128 was addressed. But parliamentarians, citizens, most lawyers and not a few judges have little inclination, or time, to delay over distant controversies about 160 (2001) 206 CLR 650 at 654 [7]. See also at 663-664 [41]. 161 [2003] NSWSC 660 at [12]-[13]. 162 (2006) 160 A Crim R 243 at 255-256 [61]-[62]. 163 Other counterpart laws are Evidence Act 1995 (Cth) (applicable to federal courts and the Australian Capital Territory); Evidence Act 2001 (Tas); Evidence Act 2004 (Norfolk Island). The enactment of such a law in Victoria has been recommended by the Victorian Law Reform Commission: see Uniform Evidence Law at 11-12, Kirby legal history, when the task in hand is essentially one of interpreting and applying the text of an Australian statute. Nevertheless, when one reads the history that lay behind the enactment by the United Kingdom Parliament of the 1898 Act164, it is far from casting doubt on the construction of s 128 of the NSW Act favoured by Howie J and the Court of Criminal Appeal. This should not surprise us because the considerations that troubled Howie J in the conduct of the accused's first trial were bound to arise, in the conduct of criminal trials generally, once provision was made for an accused to give evidence in his or her defence. The immediate problem is then presented as to how an accused, who by implication has become a witness and is thus exposed to questioning, might nonetheless be protected in respect of questions that tended to prove the commission of an offence against the criminal law, other than the offence of which the accused is charged, upon which questioning would necessarily have to be expected, given the "fact in issue", as defined by the pleadings? How could the trial, in such circumstances, be stopped from becoming an open-ended inquisition into all or any of an accused's other criminal offences? How could it be kept within the bounds of the charge actually before the jury? How could it be prevented from becoming a general examination of the alleged bad character and past criminal convictions which would be contrary to basic principle, highly prejudicial and divert the decision-makers from the particularity of the charge in issue, which is the object of the accusatorial form of a criminal trial? It is not as if those who drafted the 1898 Act overlooked, or ignored, these problems. To the contrary, as the joint reasons suggest, the successive Bills introduced into the United Kingdom Parliament struggled to resolve the appropriate adjustment of the competing interests at stake so as to address the most obvious concerns165. Much attention was directed to limiting questions to matters that were relevant to the trial. Significantly for the meaning of the critical phrase "fact in issue", a proposed 1878 provision extended the right of cross-examination to "the matter in issue and matters relevant thereto"166. Similarly, limitations were placed on cross-examination directed to "the defendant's credit or character"167. 164 Joint reasons at [32]-[54]. 165 Joint reasons at [38]-[46]. 166 Criminal Code (Indictable Offences) Bill 1878 (UK). See joint reasons at [41] 167 Joint reasons at [41]. Kirby As the joint reasons show, the particular problem of protecting a criminal accused from being exposed to unlimited questions that might tend to incriminate him or her in the commission of some other offence(s), different from those charged, was dealt with in the Bill, introduced in 1884, to render the accused competent to give evidence168. Although that Bill passed the House of Lords, it did not pass the House of Commons. Proviso (c) to cl 2 of an identical Bill, introduced in 1885 to the House of Commons, stated169 (with emphasis added): "A person called as a witness … shall not be asked, and, if asked, shall not be required to answer, any questions tending to show that any defendant has committed or been convicted of any offence other than that wherewith he is then charged, unless the proof that the defendant has committed such other offence is admissible evidence to show, that such defendant is guilty of the offence wherewith he is then charged, or unless such defendant has given evidence of good character." In short, although an accused was competent to give evidence, and was thereby laid open to cross-examination "like any other witness on any matter though not arising out of his examination-in-chief"170, a large exception was carved out, protective of the immunity from self-incrimination for uncharged crimes, save in circumstances where such questioning pursued evidence admissible in respect of the precise offence charged or was opened up by the criminal defendant's assertion of his own good character. This series of checks and balances is evident in the language of the 1898 Act, as ultimately enacted by the United Kingdom Parliament171. The critical paragraph provides (with emphasis added): "(f) A person charged and called as a witness … shall not be asked, and if asked shall not be required to answer, any question tending to show that he has committed or been convicted of or been charged with any offence other than that wherewith he is then charged, or is of bad character, unless – 168 Joint reasons at [45]. 169 Joint reasons at [45] fn 41. 170 United Kingdom, Draft Code to the Report of the Royal Commission Appointed to Consider the Law Relating to Indictable Offences, (1879) [C2345], cl 523; cf United Kingdom, Report of the Royal Commission Appointed to Consider the Law Relating to Indictable Offences, (1879) [C2345] at 37; joint reasons at [41]. 171 Section 1 of the 1898 Act is set out in the joint reasons at [54]. Kirby the proof that he has committed or been convicted of such other offence is admissible evidence to show that he is guilty of the offence wherewith he is then charged; or he [opens up good character]; or (iii) he has given evidence against any other person charged with the same offence ...". This provision, which became the foundation for legislation on the same subject in the several Australian jurisdictions172, did not ride rough-shod over an accused's general protection from self-incrimination. To the contrary, it introduced a carefully calibrated provision. It abolished the general protection from self-incrimination; but potentially only with respect to the offence charged. As to other offences, strict limitations were imposed defensive of the immunity from self-incrimination of offences other than those charged, save in the specified circumstances. When s 128 of the NSW Act is read against this historical background, and properly understood, it is clear that the drafters proposing the reformed Australian provision (and the Parliaments enacting it) have attempted to preserve a similar, although not identical, calibration. What is new is the procedure designed to permit over-riding an accused's remaining protection against self-incrimination as to uncharged offences by reference to an evaluation of the requirements of "the interests of justice", as decided by the trial judge and as given effect in a certificate. Such a certificate would permit the judge's insistence upon the giving of such evidence but under conditions protecting the witness from the consequences of condemning himself or herself by such evidence173. To the suggestion, set out in the joint reasons174, that this would be inconsistent with a wide-ranging cross-examination desired by a prosecutor, the answer is plain. That cross-examination is restricted by the procedures envisaged by s 128 and by the terms of any certificate granted under that section. The joint reasons essentially reduce the certificate procedure to a rather pointless and impotent exercise. And that is clearly not what the reformers of the section contemplated. 172 Joint reasons at [55]-[58]. 173 The model for the ALRC certification procedure appears to have been the Evidence Ordinance 1971 (ACT) (since repealed), s 57. See Australian Law Reform Commission, Evidence, Interim Report No 26, vol 1, (1985) at [853]-[854]; joint reasons at [61]. 174 Joint reasons at [60]-[62]. Kirby Through this innovative procedure175, the ALRC, in discharging its task of overhauling Australia's evidence laws, obviously sought to continue, and improve on, some of the provisions of the law that had preceded the reports of the Commission176. With the exception of affording the judicial power to overrule the protection from self-incrimination and to "require" evidence to be given by an accused (although there were "reasonable grounds" for objecting to do so) where "the interests of justice" required that course and by providing the procedure for certification protective of later use of such evidence in other "proceedings", the ALRC maintained the chief ingredients of the statutory compromise struck in the United Kingdom Parliament and evident in the 1898 Act. The ruling of Howie J also respected those contours. It was obedient to the language and apparent purpose of the ALRC and of the NSW Parliament in enacting s 128 of the NSW Act. Once Howie J concluded that the questioning of the accused as a witness tended to prove that the accused had committed an offence against Australian law other than that with which he was charged, the accused's entitlement on reasonable grounds to maintain his objection to the questioning was preserved by s 128. By law, he did not have to give such evidence. He could not be required to do so, save under conditions that involved the provision to him of the certificate which Howie J determined in the circumstances should be given in "the interests of justice". Far from undermining the construction of s 128 of the NSW Act which Howie J adopted, the history of the predecessors to the new reformed legislation tends to confirm the view that he, and the Court of Criminal Appeal, took of the balances provided within the section. Contextual support for the interpretation: In addition to the foregoing, considerations of context also support Howie J's approach. They include, as his Honour pointed out, several passages in the reports of the ALRC to which reference may be had in construing the legislation that resulted from such reports177. 175 As noted in the joint reasons at [61]-[62]. Similar provisions had earlier been enacted in Western Australia (1906) and Tasmania (1910) and were introduced in Queensland later (1997). 176 Australian Law Reform Commission, Evidence, Interim Report No 26, vol 1, (1985) at [853]-[854]. See also Australian Law Reform Commission, Evidence, Report No 38, (1987) at [214]-[217]. 177 (2006) 160 A Crim R 243 at 255 [59] citing Howie J's reasons. Kirby The conclusion by Howie J as to the meaning of the expression "fact in issue"178 was essential to an interpretation of s 128(8) that recognised the differences that could arise in criminal trials between the offence "wherewith [the witness] is then charged"179 and other offences or general matters of bad character in respect of which, as a general rule, the privilege against self-incrimination remained in place. Only by adhering to the approach adopted by Howie J could the longstanding principle of the criminal law be maintained, based as it is, ultimately, on the particularity of the elements of a crime charged. That this was the way the ALRC itself approached the matter is made clear in the passages of its report on evidence law to which Howie J referred180. The Commission said: "The expression 'fact in issue' should be interpreted as referring to the issues in the proceedings defined by substantive law and pleadings and thus would extend to facts to be proved in undefended or ex parte proceedings." Moreover, as Howie J pointed out, although the phrase "fact in issue" is not defined in the Dictionary to the NSW Act, or elsewhere, the term, which is clear enough on its face, appears in a number of sections of that Act, not least s 55, the section which deals with the relevance of evidence181. Howie J then made a point, derived from his considerable experience in the conduct of criminal trials. With respect, it appears to have been overlooked in the construction adopted in the joint reasons in this Court. In a criminal trial a "fact in issue" must, in the nature of the tasks assigned to the judge by the NSW Act, be capable of determination, at least generally speaking, in advance of the unfolding of much, if not all, of the testimony and even "without understanding the nature of the Crown case or the defence to it"182. Trial judges do not have the luxury, as this Court does, of pouring over the completed record of the entire proceedings. Rulings of the kind that Howie J had 178 [2003] NSWSC 660 at [7]-[17]. 179 See above at [158], [160]; joint reasons at [45] fn 41, [54]. See also [2003] NSWSC 660 at [10]-[11]. 180 Australian Law Reform Commission, Evidence, Interim Report No 26, vol 1, (1985) at [641] esp fn 3. 181 [2003] NSWSC 660 at [6]. 182 [2003] NSWSC 660 at [9]. Kirby to make are necessarily made prospectively, on the run. Of its nature, at the time such a ruling is typically made, neither the jury, nor the judge, will know every fact in dispute in the proceedings, the proof of which might assist the jury in determining whether the accused committed the particular offence charged. This is why it should be inferred from the context that "fact in issue" is an expression used with legal precision. It is concerned not with how probative or significant an evidentiary fact might be to the prosecution case or to the accused's defence of the charge. It is a reference to the "ultimate issues" as defined by the pleading. Only this interpretation is consistent with the hypothesis that s 128 contains, namely that in certain limited circumstances an accused person may be required to give evidence, although the giving of it may tend to prove that the person has committed an offence against an Australian law that requires, in "the interests of justice", imposing the obligation to give the evidence but under the condition of the grant of a certificate protecting the person from the use of the evidence to prove different offences. That is what occurred here. With respect, the interpretation adopted in the joint reasons does not reflect the particular purpose for which the certificate provisions in s 128 are provided by the NSW Act. Nor does it accommodate convincingly the other provisions of the NSW Act containing the phrase "a fact in issue", such as s 94 dealing with the related questions of evidence as to credibility, character, reputation or conduct of a person. This, it will be remembered, was a subject which the 1898 Act dealt with in the same provision that generally protected a witness's entitlement to immunity from self-incrimination, save for the offence "wherewith he is then charged"183. The scheme of the legislation, the reports of the ALRC, and the practical necessities of knowing immediately and in advance of all the evidence the "fact[s] in issue", within provisions such as s 128 of the NSW Act, so that immediate and accurate rulings might be made, all support the approach of Howie J and the Court of Criminal Appeal. As Howie J observed, it is also the approach adopted on this subject by knowledgeable text-writers184. These considerations confirm the endorsement of that approach by the Court of Criminal Appeal. Protecting basic rights: There is an additional consideration. In so far as the meaning of s 128(8) of the NSW Act is ambiguous and susceptible to the loose interpretation of "fact in issue" adopted in the joint reasons, that 183 See joint reasons at [54]. See also [2003] NSWSC 660 at [10]-[11]. 184 Odgers, Uniform Evidence Law, 5th ed (2002) at [1.3.80]; cf [2003] NSWSC 660 Kirby interpretation should be rejected in favour of the meaning preferred below because it is only that meaning that provides an appropriate measure of protection for the fundamental principle of human rights defensive of the entitlement of all persons ordinarily to be free of a legal obligation of self-incrimination. That principle is expressed in most international statements of fundamental human rights185. These include the International Covenant on Civil and Political Rights186 ("ICCPR") which provides, in Art 14.3(g) that: "In the determination of any criminal charge against him, everyone shall be entitled to the following minimum guarantees, in full equality: (g) Not to be compelled to testify against himself or to confess guilt." Australia is a party to the ICCPR187 and to the First Optional Protocol, which affords persons a right to communicate to the United Nations Human Rights Committee complaints of derogations of Australian law from the requirements of the Covenant188. The ICCPR is not, as such, part of Australian domestic law. This Court has accepted that where domestic law is clear, it must be given effect (so long as it is constitutionally valid) notwithstanding any disconformity with the ICCPR or other international law189. But at least where there is ambiguity, or suggested uncertainty, in the meaning of an Australian statute, a court today will read the statute in a way that resolves the ambiguity or 185 See eg European Convention on Human Rights, Art 6(1), (2); cf R v Hertfordshire County Council; Ex parte Green Environmental Industries Ltd [2000] 2 AC 412 at 416, 422 per Lord Hoffmann; R v Kearns [2002] 1 WLR 2815 at 2823, 2829-2830; Lester and Pannick (eds), Human Rights Law and Practice, 2nd ed (2004) at 227- 186 See Joseph, Schultz and Castan (eds), The International Covenant on Civil and Political Rights: Cases, Materials, and Commentary, 2nd ed (2005). 187 The ICCPR (except for Art 41) came into force on 23 March 1976 and into force for Australia on 13 November 1980: [1980] ATS 23. Article 41 came into force generally on 28 March 1979 and for Australia on 28 January 1993. 188 The First Optional Protocol to the ICCPR came into force on 23 March 1976. In respect of Australia it commenced 25 December 1991: [1991] ATS 39. 189 Polites v The Commonwealth (1945) 70 CLR 60 at 69, 77-78, 79; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 38; Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 287-288; Minister for Immigration and Multicultural and Indigenous Affairs v B (2004) 219 CLR 365 at 414 [136]. Kirby uncertainty in favour of conformity with a binding obligation of international law190. the ICCPR as conferring a The United Nations Human Rights Committee has interpreted Art 14.3(g) from compulsory large self-incrimination. Such self-incrimination has been treated in the jurisprudence as objectionable, not only because the methods used to extract it are commonly unacceptable but because the practice is ordinarily incompatible with the presumption of innocence. This presumption normally obliges proof of criminal wrong-doing from the evidence of others, not from the mouth of the person accused, given otherwise than by his or her own free will191. immunity Values, similar to those expressed in the ICCPR are also part of the Australian common law. They have been stated by this Court on several occasions192. It would be entirely conformable with the ordinary way in which this Court construes legislation affecting fundamental rights for us to protect that principle in these proceedings193. This Court should therefore construe a provision such as s 128 of the NSW Act consistently with the ICCPR (and basic common law principle) so as to give its provisions, protective of the immunity from self-incrimination, a liberal construction, designed to uphold the immunity. Applying this principle, I agree with the submission for the accused that s 128(7) of the NSW Act should be interpreted liberally while s 128(8) should be construed strictly. This approach to the interpretation of the contested provision 190 Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309 at 363; Zachariassen v The Commonwealth (1917) 24 CLR 166 at 181; Mabo v Queensland [No 2] (1992) 175 CLR 1 at 42; Vasiljkovic v Commonwealth (2006) 80 ALJR 1399 at 1430 [159]; 228 ALR 447 at 486. 191 Joseph, Schultz and Castan (eds), The International Covenant on Civil and Political Rights: Cases, Materials, and Commentary, 2nd ed (2005) at 449 192 See eg Hamilton v Oades (1989) 166 CLR 486 at 495, 500-501, 508-509; cf Hartmann v Commissioner of Police (1997) 91 A Crim R 141 at 146-147 per Cole JA citing Sorby v The Commonwealth (1983) 152 CLR 281 at 309 and Police Service Board v Morris (1985) 156 CLR 397 at 403. 193 See eg Potter v Minahan (1908) 7 CLR 277 at 304; Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 523; Bropho v Western Australia (1990) 171 CLR 1 at 18; Coco v The Queen (1994) 179 CLR 427 at 437; Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476 at 492 [30]; Coleman v Power (2004) 220 CLR 1 at 96-97 [250]. Kirby supports the conclusion as to the meaning and operation of s 128 adopted by Howie J and by the Court of Criminal Appeal. The approach adopted in the joint reasons is neglectful of the true construction of the provision enacted by the NSW Parliament to afford a facility by which, under appropriate judicial certification for reasons of "the interests of justice", potentially inculpating evidence of a defendant in criminal proceedings might be required but on condition that it could not be used against that person in later proceedings in a NSW court, contrary to the terms of the certificate. The federal counterpart to the NSW Act, the Evidence Act 1995 (Cth), ss 118 and 119, was read in Esso Australia Resources Ltd v Commissioner of Taxation (Cth)194 in such a way as to preserve, and apply, the principles of the common law protective of an ample understanding of the rights of the large corporation there claiming legal professional privilege, so as to preserve challenged documents of the corporation from discovery and inspection. Why should a large immunity be upheld in such a case but denied in the present, where what is at stake is the fundamental privilege of an individual against self-incrimination and the meaning of a statute enacted to protect that privilege under specified conditions and with novel and special procedures? It may sometimes be easier for courts to empathise with an immunity for evidence covered by legal professional privilege of a corporation than with the immunity against compulsory self-incrimination of a criminal defendant such as the accused. But the latter's privilege is no less important. It is expressed in fundamental human rights principles, and statements of the general law, to which this Court should give effect. Constitutional considerations: There is a final consideration that derives from the obligations of this Court in construing legislation, such as the NSW Act. As I observed in Central Bayside General Practice Association Ltd v Commissioner of State Revenue195: fundamental assumption of the Commonwealth is maintenance of the rule of law196. Inherent in that obligation is the notion that courts, disposing of matters within the Judicature, will give effect to the commands of the several legislatures of the States and the Commonwealth, as expressed in the statutes which they the Constitution of 194 (1999) 201 CLR 49. 195 (2006) 80 ALJR 1509 at 1527 [77]-[78], 1530 [96]; 229 ALR 1 at 21, 26. 196 Australian Communist Party v Commonwealth (1951) 83 CLR 1 at 193; Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476 at 513 [103]. Kirby enact, or in the subordinate laws which they thereby authorise. The Act in question in this case is such a statute. Its validity has not been questioned. On its face, it is valid and applicable. This Court must therefore give effect to it. It must do so according to its terms. This Court has no authority to ignore or neglect a meaning of legislation which the Parliament intended. For judges, no longer subject to the authority of Imperial or English courts, to maintain obedience to conceptions of [the language in legislation] expressed in … different times, seems, on the face of things, an irrational surrender to the pull of history over contemporary understandings of language used in a modern Australian statute." The primacy of statutory requirements, derived from the language enacted by Parliament, obliges primary attention, in proceedings such as the present, to the legislative text. This is the invariable starting point for deriving the applicable legal rule. In Brodie v Singleton Shire Council197, I said: "[T]he duty of a court is to the law. If a valid statute is enacted with relevant effect, that duty extends to giving effect to the statute, not ignoring it. No principle of the common law can retain its authority in the face of a legislative prescription that enters its orbit with relevant effect. The proper starting point for the ascertainment of the legal duties … is the statute." Although in recent years in countless cases this Court has insisted on this approach, it is not the approach which, in my respectful opinion, the joint reasons have taken on this occasion. Instead, they have diverted themselves into an exposition of legal history to reach a conclusion different from that suggested by the statutory text, contrary to that envisaged by the ALRC and inconsistent with that derived from an intuitive reading of the provisions of the Act in the way that such legislation can be expected to be read. Above all, the Act in question is a statute intended for application by judges on the run, often in urgent and fraught circumstances, in the midst of large and complex trials, such as that of the accused in this case. There is no time, nor is it the proper approach, to gloss the statute with implications derived from a very detailed, and contestable, examination of the legislative history of another 197 (2001) 206 CLR 512 at 602 [231]. See also Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 80 ALJR 1509 at 1527-1528 [82]-[84], 1530 [96]; 229 ALR 1 at 22-23, 26. Kirby country, itself long since repealed. This is the same mistaken approach as was evident in Central Bayside198. I did not agree with it there; and I do not agree with it here. Where a law is enacted by an Australian legislature, and is designed to reform, re-express, collect and unify Australian law on the subject, it is especially important to derive the governing law from within the four walls of the statute enacted by the authority of Australian legislators. In a sense, such a major enterprise of statutory reform demands a new legal beginning. If the statutory language is encrusted with legal barnacles imported from earlier times, part of the object of the reforming measure will inevitably be lost. The dead hand of lawmakers from other places and earlier times will reach into the present age in a way that is difficult to reconcile with the postulate of democratic lawmaking by Australian Parliaments as envisaged by the Australian Constitution199. Conclusion: no error: For all of the foregoing reasons, the interpretation of s 128(7) and (8), adopted by Howie J, and confirmed by the Court of Criminal Appeal, should be upheld by this Court. The central plank in the prosecution's appeals to this Court therefore fails. The application of s 128(7) to the retrial The issue stated: The next issue is whether the accused's second trial was a "proceeding in a NSW court" so as to attract s 128(7) of the NSW Act and to prevent the use of that evidence "against the person" who gave it in such proceedings. As the joint reasons point out, Blackmore DCJ, in the second trial, concluded that it was such a "proceeding"200. However, this was an immaterial conclusion for his Honour because he also concluded that the prosecution could tender such evidence in the second trial provided it was evidence intended to prove the matters outlined, relevantly in s 128(8)(a). Because he took the view that a "fact in issue" was that now adopted by a majority of this Court, sub-s (8) of s 128 did not apply in relation to the giving of the relevant evidence by the accused. The evidence was thus available for tender in later "proceedings" without inhibition, notwithstanding the "certificate" granted by Howie J201. 198 (2006) 80 ALJR 1509 at 1527-1528 [83]-[84]; 229 ALR 1 at 22-23. 199 Coventry v Charter Pacific Corporation Ltd (2005) 80 ALJR 132 at 153-154 [108]-[114]; 222 ALR 202 at 227-228. 200 (2006) 160 A Crim R 243 at 259 [79]. 201 (2006) 160 A Crim R 243 at 259-260 [80]-[86]. Kirby from On Blackmore DCJ's approach, the ruling on the evidence, and the grant of the certificate by Howie J, were legally misconceived. The accused was wholly unprotected As a consequence of self-incrimination. Blackmore DCJ's indication of this approach, the accused unsurprisingly gave no evidence in his second trial. All of his testimony in the first trial (including by inference that protected by Howie J's "certificate") was placed before the second jury. Howie J's "certificate" proved illusory. The self-incriminatory evidence was received before the second jury without protection. Equally unsurprisingly, the accused was then convicted on the count charged, of conspiracy to import illegal drugs. By inference, on the approach now favoured by this Court, he is liable, in addition, to prosecution, conviction and punishment for the separate offences that he admitted in the evidence that Howie J required him to give of "domestic dealings"202 in illegal drugs. The joint reasons conclude that the second trial was "not a 'proceeding' to which s 128(7) applied"203. The Court of Criminal Appeal had rejected that contention204. In my opinion, it was correct to do so. A second "proceeding": My reasons for reaching this conclusion are similar to those expressed by the Court of Criminal Appeal. They follow from the approach to the interpretation of the NSW Act explained above. The joint reasons proffer various grounds of policy why the re-tender of the evidence already tendered in a first trial should be available without hindrance in a second trial of the same charge205. It is true that there are arguments why the law should be so expressed. A recent review of the NSW Act (and its other Australian counterparts) has led to a proposal that s 128(7) of the Act should be amended to make it plain that a "proceeding" under the sub-section does not include a retrial for the same offence or an offence arising out of the same circumstances206. This conclusion of the three law reform bodies that studied the problem was expressed before the decision of the Court of Criminal Appeal was given in these proceedings. Necessarily, it was based on the opinion that the Act, as here applicable, did not so provide or, at least, did not appear to do so. 202 (2006) 160 A Crim R 243 at 252 [40]. 203 Joint reasons at [87]. 204 (2006) 160 A Crim R 243 at 261 [89]-[90]. 205 Joint reasons at [87]-[88]. 206 Uniform Evidence Law, at 534. Kirby That was a legally correct opinion. The interpretation of s 128(7) of the NSW Act now adopted by the joint reasons is inconsistent with the language in which s 128(7) of the NSW Act is expressed and with its purpose: The language of s 128(7) applies the prohibition on the use of the subject evidence given by a person who is the recipient of a certificate in "any proceeding". The use of the word "any" as an adjective connotes an application of the provision to a number of instances, no matter how many or how much. This is the natural meaning of the word "any" in the context. It imports a universal and unlimited application to the subject described; The subject of s 128(7) is a "proceeding in a NSW court". It defies the ordinary meaning of that expression to suggest that the second trial of the accused was not such a "proceeding". It had all of the appearances of a "proceeding". It was certainly a trial "in a NSW court". It was one of "any" such "proceeding" because retrials are not at all unknown. Obviously, a new trial is a species of legal "proceeding". The interpretation suggested in the joint reasons requires glossing the language of the NSW Act, in effect to add a qualification such as "in any proceeding other than a retrial or the proceeding in which a certificate was given". There is no reason to read such a rider into the NSW Act because Parliament did not put it there; Section 128(7) contains in its concluding sentence a qualification expressly limiting its application to a defined criminal proceeding. Had a further such qualification for retrials been intended it would, by inference, also have been expressly so stated; . Moreover, the general object of s 128(7) is protective of the person who has given the evidence in question. It is designed to defend that person from the adverse use of evidence that he or she had been earlier "required" to give by direction of the court; . Although the joint reasons are dismissive of the significance of the "certificate"207 granted under s 128, their approach overlooks the serious step involved in the judicial requirement to give evidence (but under conditions of protection signified by the certificate). Having regard to these features of s 128, the extension of the protection afforded in a criminal proceeding to a defendant who has received such a certificate is 207 Joint reasons at [91]-[92]. Kirby far from surprising. On the contrary, the formality of certification obliges the judge concerned to express any such certificate and to address carefully whether to "require" the witness to give the evidence and, if so, in what terms; and The interpretation urged by the accused, adopted on this point by Blackmore DCJ and affirmed by the Court of Criminal Appeal, tends to ensure the continuing availability to the defendant in any later criminal proceedings (even where a retrial is had) of evidence extracted by judicial requirement despite reasonable grounds for an objection based on self-incrimination but it does so under conditions fair to an accused. Conclusion: no error: The foregoing are reasons why the language of s 128(7) is intractable. As the Court of Criminal Appeal concluded, that language demonstrates the universal application of a certificate to all other and later proceedings (including a retrial). If a narrower application is desired, the amendment suggested by the three law reform bodies that reviewed the current statutory language would first have to be enacted. In the performance of its judicial function, this Court is not entitled to ignore, or re-express, the statutory text adopted by Parliament. The belated challenge to certification The issue stated: The third contested issue is whether, although it brought no interlocutory appeal against Howie J's grant of a certificate to the accused, it was open to the prosecution, in the retrial, to challenge the certificate granted by The conclusion expressed by Howie J, in terms of s 128 of the NSW Act, given on 5 May 2003, read as follows208: "[I]t is my present opinion that, if Cornwell refuses to answer questions about his involvement in the ongoing supply of drugs on the grounds that it might incriminate him, he is entitled to take that stance, but in the interests of justice I would require him to answer the questions and grant him a certificate in accordance with the section." In the outcome, no documentary certificate was physically issued during the first trial, a fact discovered only after the second trial had commenced209. It was then that Howie J, over the objection of the prosecution, issued a form of 208 [2003] NSWSC 660 at [27]. 209 (2006) 160 A Crim R 243 at 258 [73]. Kirby documentary certificate that fulfilled, and evidenced, the course contemplated by his earlier reasons210: "This Court certifies under section 128 of the Evidence Act 1995 of New South Wales that evidence in these proceedings by Richard Bruce Cornwall [sic] on 5 May 2003, 6 May 2003, 7 May 2003, 8 May 2003, 9 May 2003 and 12 May 2003 in relation to Richard Bruce Cornwall's [sic] involvement with Juan [Diez], John Lawrence and other person in the supply or trafficking in narcotic goods between the 1st January and 10th August 2001 is evidence to which section 128(7) of that Act applies." Despite reservations about the relevance of the "certificate" to the second trial, expressed by Howie J211, his Honour did not refuse the documentary certificate on that, or on any other, ground (such as delay in seeking it or that the original grant had been misconceived). On the contrary, Howie J concluded that the earlier failure of the accused's representatives to procure the documentary certificate in a timely fashion did not operate as a reason for refusing to issue a form of certificate nunc pro tunc212: "I cannot see how I could refuse to give a certificate to an accused by reason of events that have occurred after the accused was told that he must answer the questions asked but that a certificate would be issued in respect of those answers. Where a witness, including an accused, has been required to answer a question notwithstanding that a valid objection has been taken on the grounds of privilege against self-incrimination, the witness is entitled to have the certificate given to him. Section 128 is mandatory in that if the witness gives evidence under s 128(2) or is required to give evidence under s 128(5) the court 'is to cause the witness to be given a certificate under the section in respect of the evidence'. The issuing of the certificate is a purely administrative step and the court has no discretion in respect of the matter." This was a correct description of the evidentiary step that Howie J was belatedly asked to take. What was important was the ruling that his Honour had made during the course of the accused's first trial. Effectively, and in law, the statutory "certificate" was granted by him at that time, because it had to be. The provision of documentary evidence of the certificate did no more than formalise and evidence the administrative step that had already been taken. It expressed the ambit of the protection afforded to the accused in the precise terms that had 210 (2006) 160 A Crim R 243 at 258 [73]. See also at [74]-[78]. 211 (2006) 160 A Crim R 243 at 258-259 [75]-[78]. See joint reasons at [87]-[88]. 212 (2006) 160 A Crim R 243 at 259 [77]. Kirby been foreshadowed in Howie J's published reasons for granting the certificate in the first place. There is no invalidity in such formalisation; nor is there any disharmony between the documentary "certificate" published by Howie J and the statutory certificate granted in his earlier ruling. Like the joint reasons, I can pass by the technical question as to whether any appeal was open to the prosecution against the "certificate" at the time it was announced during the accused's first trial or later when it was formalised by Howie J following the commencement of the second trial213. Although I do not share the view that the "certificate had no intrinsic importance"214 (because of my opinion that the statutory formality required indicates a significant alteration in the legal rights of the parties), what was ultimately important was the ruling that Howie J made when he initially granted the certificate and the course that was then taken by the accused, and the first trial, on the faith of that step. The second trial was bound: Blackmore DCJ decided that he was not bound by Howie J's ruling under s 128(5) of the NSW Act, nor by the certificate granted by Howie J under s 128(7). The joint reasons support Blackmore DCJ in these conclusions. Their support derives from the view that his Honour adopted concerning the ambit of s 128(8)215. For several reasons, it is my opinion that Blackmore DCJ erred in the course that he adopted and in the conclusion that he expressed: The ruling made by Howie J in the accused's first trial was one lawfully made in the conduct of a trial, the circumstances of which had not relevantly changed when the second trial began before Blackmore DCJ. With respect, one would ordinarily expect that a single judge of equal or inferior rank in the judicial hierarchy would follow that ruling in any retrial, if only out of comity, leaving it to a court of criminal appeal to correct it later if it were challenged, either in an interlocutory appeal by the prosecution or in any final appeal following completion of the trial; this so, given the preliminary conclusion Especially that Blackmore DCJ had reached (correctly in my view) that the "proceeding" before him and the new jury, involving a fresh indictment with different named parties (some of the original defendants having been convicted by the first jury), was a different "proceeding" within s 128(7), thereby attracting legal consequences for the "certificate" granted in the first trial 213 Joint reasons at [91]-[92]; cf (2006) 160 A Crim R 243 at 262 [95]-[101]. 214 Joint reasons at [91]. 215 Joint reasons at [93]-[94]. Kirby by Howie J and formalised by that judge whilst the second trial was proceeding; . Most importantly, it was only after the grant of the certificate by Howie J in the first trial, and his Honour's signification that he "required" the accused to give evidence of his "domestic dealings" in illegal drugs, that the accused embarked on his detailed evidence concerning his drug dealings with Mr Diez and Mr Lawrence, evidence which (save for the protection of the certificate) heavily inculpated the accused in serious but local domestic offences of drug trafficking; and The course therefore adopted by Blackmore DCJ treated Howie J's "certificate" as immaterial, despite the fact that it was only after Howie J had determined that a certificate would be granted that the accused gave such evidence and although that certificate then, and to this time, had never been quashed or set aside. As the Court of Criminal Appeal observed216: "If that certificate could now be quashed, not only could the evidence be tendered at a retrial of the original charge but also would be available to the Crown to tender against him at a separate trial on the 'domestic' charges. This could result in significant injustice." These were strong reasons of legal principle and elementary justice that should have restrained Blackmore DCJ from giving effect to any different opinion that he might have felt concerning the construction of s 128(7) and (8) of the NSW Act. They provide "overwhelming discretionary reasons" to decline the prosecution's attempt, after the course that unfolded during the second trial, retrospectively to reopen the correctness of Howie J's ruling and effectively to "quash" the "certificate" that he had granted although doing so in a lower court without the requisite authority to make an order to that effect217. Conclusion: no error: No error has been shown in the conclusion of the Court of Criminal Appeal on this issue. With respect, the error lay in the decision of Blackmore DCJ. For the reasons earlier stated, his Honour misconstrued s 128(7) and (8) of the NSW Act. And even if his opinion as to the meaning of those sub-sections had been correct, he ought not to have given effect to it whilst Howie J's certificate remained in force. Specifically, he ought not to have treated the ruling and certificate by Howie J as if they had never occurred, were immaterial and could effectively be ignored by him in the retrial. 216 (2006) 160 A Crim R 243 at 262 [100]. 217 (2006) 160 A Crim R 243 at 262 [100]. Kirby The procedural unfairness of the course adopted The issue stated: The final issue in contest is whether, even if Blackmore DCJ's interpretation of s 128(7) and (8) were legally correct, the earlier provision by Howie J of his ruling and the grant of a certificate under s 128 of the NSW Act rendered the second trial unfair, in the use that was then permitted of the evidence that had been given subject to the ruling and certificate that Howie J had announced. The proceedings were unfair: It follows from what I have said that the premise for this last issue does not arise in the construction of s 128 that I favour. Alike with the Court of Criminal Appeal, I would conclude that the original approach of Howie J, his ruling and grant of the certificate under s 128 in the first trial, were entirely correct. Blackmore DCJ erred in law in reaching, and giving effect to, the opposite conclusion. Nevertheless, assuming for the moment that I am wrong in the view I have taken of s 128(7) and (8), the position reached was clearly seriously unjust to the accused. It resulted in an unfair trial. A judge of a superior and constitutional court (the Supreme Court of a State of the Commonwealth) had made a ruling which was announced in open court with the reasons for it duly published. The ruling was made in response to prior discussion between the judge and the parties and the submissions of the parties. The judge had granted a certificate provided by statute carrying important legal consequences. The prosecutor initially declined to assist Howie J, contenting himself by asking that a certificate not be given at all at the stage at which it was sought. Following submissions from the accused and in response to further questions from Howie J concerning s 128(5) and (6) of the Act, the prosecutor again declined to accept the procedure. However, he ultimately appeared to concede that, if the accused was asked whether he did "go ahead and start distributing and to whom, a question along those lines" [ie a question about his involvement in domestic drug dealings], then "he would be entitled to a certificate". It was only then that Howie J granted the accused the certificate in the terms later formalised. The prosecutor did not take up Howie J's invitation to make submissions on the "width" of the certificate. In both trials, the prosecutor relied on the accused's evidence in the prosecution case against Mr Diez and Mr Lawrence. Those defendants were convicted in the first trial. It is open to inference that the accused's evidence, the subject of the certificate, contributed to that outcome which was relevantly in "the public interest". Against this background, and in the light of the certificate granted by Howie J, to subject the accused to a second trial in which his evidence in the first was treated as available without restriction (whether from Howie J's ruling, his certificate or otherwise) was basically unfair. Effectively, it involved a pretence that a ruling made, and certificate granted, by a Supreme Court judge had been a Kirby legal nullity although never set aside or doubted by a higher court. Moreover, it ignored the careful steps taken by the accused to give evidence pursuant to judicial direction and on the explicit understanding that such evidence could not be used "against him" in breach of the certificate concerning his involvement with Messrs Diez and Lawrence and any other person in the supply or trafficking in illegal drugs within Australia during the times indicated. Conclusion: an unfair course: No doubt, justice is a disputable virtue. The requirement that a trial conducted in federal jurisdiction (such as this one) be conducted fairly may be constitutionally guaranteed. But whether this is so or not, a fair trial is protected by basic common law principles and by the provisions of the Criminal Appeal Act 1912 (NSW) defending convicted prisoners from miscarriages of justice. The accused, by his own admission, was involved in serious "domestic dealings" in prohibited drugs. It would be open to a jury to conclude that his dealings, as recorded in telephonic intercepts, were facts relevant to the facts in issue in his trial on the charge of participating in a conspiracy to import drugs. But the proof of his guilt of the only charge that he faced in these proceedings had to comply with the law. It also had to comply with basic fairness in the manner in which the evidence was procured from the accused himself. In the result of the proceeding before Blackmore DCJ, evidence earlier given upon a ruling (and thus an assumption) as to its limited availability, as defined in the ruling made and certificate granted by Howie J, was then treated as available without limitation or restriction. It was used without any protection for the accused from the self-incrimination inherent in much of that evidence. The course adopted in the successive trials of the accused necessarily exposed him to an unfair trial. The trial miscarried because Blackmore DCJ, unlike Howie J, misunderstood and misapplied s 128(7) and (8) of the NSW Act. But even if this had not been so, the trial miscarried because evidence, given on the faith of the ruling and certificate of a Supreme Court judge, was then used contrary to that ruling and certificate. This was fundamentally unfair as the Court of Criminal Appeal correctly concluded218. Remaining immaterial issues: Whatever view this Court might take of s 128 of the NSW Act, it should not inflict such an unfairness on the accused. The arguments belatedly raised by this Court itself (concerning whether the accused "objected" to giving particular evidence219 or did so only because he was 218 (2006) 160 A Crim R 243 at 260-262 [87]-[94], [100], 264 [113]. 219 Joint reasons at [106]. Kirby "required" to do so by the ruling of Howie J) were never argued below. They were not grounds of appeal to this Court. They raise factual considerations that have not been explored. They could not be passed upon without added procedural unfairness to the accused220. The objection and requirement referred to in s 128 are legal steps in a trial. The hypothesis of high emotion or intense objection on the part of an accused, implicit in the joint reasons221, is not part of the statutory scheme. No argument was advanced before this Court that the "proviso"222 should be applied if the foregoing conclusions were reached. The Court of Criminal Appeal was correct to conclude that it should not223. To order a third trial is a misfortune. Impatience with the arguments of the accused is understandable, given that his defence concedes serious domestic dealings in prohibited drugs. However, that course is required by the high value placed by our law on legal accuracy in criminal trials. Moreover, the contrary conclusion distorts the meaning of a most important statute which is gradually gaining acceptance as a reformed national, uniform law of evidence. Conclusions and orders Save in respect of the complaint raised by the accused's application to cross-appeal, I would therefore confirm all of the conclusions of law, fact and discretion reached by the Court of Criminal Appeal. Substantially, I would confirm the approach taken by Howie J in the first trial as to the meaning and application of s 128 of the NSW Act. The prosecution's appeals in matters S281 of 2006 and S282 of 2006 should be dismissed224. For the reasons also discussed, the accused's application for special leave to cross-appeal should be granted and the cross-appeal allowed. The orders of the Court of Criminal Appeal of the Supreme Court of New South Wales should be set aside so as to permit that Court to hear and determine the accused's fifth ground of appeal in the revised grounds of appeal to that Court225. 220 Coulton v Holcombe (1986) 162 CLR 1 at 7-8. 221 Joint reasons at [106]-[113]. 222 Criminal Appeal Act 1912 (NSW) s 6(1). 223 (2006) 160 A Crim R 243 at 265 [115]. 224 As pointed out in the joint reasons at [114] the DPP agreed that the disposition of the prosecution appeal in matter S 281/2006 determined the outcome of its appeal in matter S 282/2006. 225 See (2006) 160 A Crim R 243 at 245 [1].
HIGH COURT OF AUSTRALIA SERGE ANIKIN AND APPELLANT ALFONSO SIERRA & ANOR RESPONDENTS [2004] HCA 64 9 December 2004 ORDER 1. Appeal allowed with costs. 2. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 7 February 2003 and, in their place, order that the appeal to that Court be dismissed with costs. On appeal from the Supreme Court of New South Wales Representation: B M Toomey QC with I S McLachlan for the appellant (instructed by Warren & K P Rewell SC with A R Beardow for the respondents (instructed by Keddies Litigation Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Negligence – Duty of care – Motor vehicle accident – Pedestrian struck by motor omnibus – No eyewitnesses – Pedestrian visible to driver of motor omnibus well before collision – No other vehicles on road impeding driver's capacity to avoid impact – Driver's failure to brake or swerve to avoid pedestrian – Whether open to primary judge to find driver negligent upon the evidence. Negligence – Contributory negligence – Pedestrian walking on road at night in dark clothing – No footpath visible to pedestrian – Driver's superior capacity to control outcome – Whether pedestrian contributorily negligent – Apportionment of liability. Appeal – Appellate review of fact-finding at trial before judge alone – Reversal by appellate court of findings of fact at trial – Limitations on appellate review of findings at trial. Judiciary Act 1903 (Cth), s 37. Supreme Court Act 1970 (NSW), s 75A. GLEESON CJ, GUMMOW, KIRBY AND HAYNE JJ. This is an appeal from the Court of Appeal of the Supreme Court of New South Wales1. That Court was divided on the issues in the appeal. Its orders followed the conclusions of the majority (Beazley JA with whom Heydon JA agreed). The dissenting judge (Santow JA) favoured dismissing the appeal on the issue of negligence, although he would have substantially increased the provision for contributory negligence2. In this Court, the party successful at trial sought restoration of the judgment in his favour on the ground that the majority of the Court of Appeal had erred in disturbing that judgment. The parties disputed the issue of contributory negligence. In our view, the appeal succeeds. The analysis of the dissenting judge on the issue of negligence is to be preferred. The judgment at trial, including on the issue of contributory negligence, should be restored. The uncontested facts Mr Serge Anikin, the appellant, is a young man who was seriously injured on 29 March 1997 on the Epping Road near Epping, a suburb of Sydney. His injuries were the result of being struck by a motor omnibus whilst he was a pedestrian. The bus was owned and operated by the State Transit Authority of New South Wales, the second respondent. At the relevant time, it was driven by Mr Alfonso Sierra, the first respondent ("the bus driver"). Most of the background facts relevant to the happening of the accident, and many of the inferences to be drawn from those facts, are uncontested. The appellant was walking on the outside lane of the road when the respondents' bus hit him. The bus struck him head-on on the front corner of its left-hand side, catapulting him back against the doorwell on the side of the bus where blood stains were found3. From there the appellant was thrown against a nearby rockface sustaining such serious injuries to his left shoulder and arm that he later required amputation of the arm. The appellant was unconscious for nine days following the impact4. He had no recollection of the events immediately 1 Sierra v Anikin [2003] NSWCA 11. 2 Sierra [2003] NSWCA 11 at [106]-[108]. 3 Anikin v Sierra unreported, District Court of New South Wales, 22 March 2002 per Sidis DCJ ("Reasons of the primary judge") at [5.3]. 4 Sierra [2003] NSWCA 11 at [19], [29]. Kirby Hayne preceding it5, and thus could give no evidence to elucidate how the accident had occurred. The appellant sued the respondents for negligence. His action was heard in the District Court of New South Wales by Sidis DCJ, sitting without a jury. The quantification of damages was agreed between the parties at $1 million. Sidis DCJ entered judgment for the appellant. However, she reduced that judgment by 25 per cent for contributory negligence by the appellant, producing an adjusted judgment in the sum of $750,000. It was this judgment that was set aside by the Court of Appeal. At trial, it was common ground that there were no eye witnesses to the way in which the accident had occurred, except the appellant, who could remember nothing, and the bus driver. In material respects, however, the bus driver's evidence was revealed at the trial to be inconsistent and unreliable. The primary judge regarded the inconsistencies as significant. To the extent that there was a difference between the evidence of the bus driver and that of a witness proceeding as a passenger in a vehicle travelling on the other side of the road towards the bus (Mr Fatches), the primary judge preferred the evidence of that witness6. It was common ground that, on the day of the accident, the appellant, with friends who included his then girlfriend, attended a rock concert held on the grounds of Macquarie University7. The appellant drove his friends to that place in his vehicle. However, he was unfamiliar with that area of Sydney and had to be directed to the University8. He parked his car in the University grounds; attended the concert; and drank a cup or two of beer with his friends. There was no suggestion in the trial that the appellant was affected by alcohol or other drugs9. Some time prior to 8.00 pm, the appellant quarrelled with his girlfriend. He left the concert; and moved the position of his car in the University grounds, 5 Sierra [2003] NSWCA 11 at [4], [19]. 6 Reasons of the primary judge at [7.3]. 7 Sierra [2003] NSWCA 11 at [26]. 8 Sierra [2003] NSWCA 11 at [27]. 9 Sierra [2003] NSWCA 11 at [4], [18]. Kirby Hayne locking it after doing so. The friends subsequently looked for him but, on not finding him or his car, left the University by taxi for Epping Railway Station. At 8.00 pm the appellant telephoned his father stating that he was lost. The father instructed the appellant to return to the University offices to wait there until he could arrive10. When the father arrived at about 8.30 pm he could not find the appellant. The appellant had set out on foot along Epping Road. Why the appellant had not driven his car to a point of familiarity or waited for his father is unexplained. The appellant proceeded on foot along the northern side of Epping Road, which is a major arterial road serving that part of suburban Sydney11. He was proceeding in a westerly direction in the direction of the Epping Railway Station12. There was evidence from a witness at the accident scene suggesting that the appellant was wearing a dark coloured shirt and light coloured trousers. However, it was common ground in the briefs to the experts later retained for the litigation that the clothing was dark in colour, save for a one-inch white stripe on the appellant's shoes which were tied with white shoelaces. There were no bus stops in the vicinity of the accident scene. Although there were street lights on each side of Epping Road, near the point of impact, neither was functioning on the evening of the accident13. It was a clear night14. There was no rain15. It was a Saturday evening towards the end of the period of daylight saving. At 9.00 pm, the approximate time of the accident, it was dark. However, the police witness who was quickly on the scene resisted the suggestion that it was "very dark indeed". When the police officer first drove through the area it was "twilight to dark". He was there for four to five hours. Neither in driving there nor when on the spot did he "observe any strong deficiencies in lighting"16. 10 Sierra [2003] NSWCA 11 at [35]. 11 Sierra [2003] NSWCA 11 at [39]. 12 Sierra [2003] NSWCA 11 at [38]. 13 Sierra [2003] NSWCA 11 at [18], [41]. 14 Sierra [2003] NSWCA 11 at [18]. 15 Sierra [2003] NSWCA 11 at [43]. 16 Sierra [2003] NSWCA 11 at [42], reproducing the evidence of Acting Sergeant Guff. Kirby Hayne The bus driver had completed a shift of about nine hours. He was driving the bus with no passengers on board, and with the internal lights off, in the direction of the depot. He was travelling at between 70 and 80 kilometres per hour17. The speed limit on this portion of the Epping Road was 80 kilometres per hour. Immediately before the impact, the bus was proceeding down a seven degree gradient and it may have picked up a little speed. The appellant was proceeding on foot in a direction facing oncoming traffic, such as the bus. It was agreed that the bus would have been visible to a pedestrian such as the appellant over about 108 metres18. The bus had its front lights illuminated on low beam. Such lights threw a range of illumination downwards and to the left of the bus19. That is, the lights of the bus were cast in the direction of the road ahead and towards the edge of the road to the left of the bus driver. The maximum range of illumination of such lights, according to an expert witness called for the respondents (Mr Joy), was approximately 50 to 60 metres. However, what the actual illumination of people and objects would be depended on the range of colours they presented and any contrast with the background that was also illuminated20. Just prior to the place of impact between the bus and the appellant, the footpath which ran along the side of Epping Road ran out. Steps led upwards over an interval of rockface. Inferentially, the rock had been carved out when Epping Road was built or widened. There was no sign indicating continuing pedestrian access by way of the steps and by resumption of a safe footpath21. On the opposite side of the road there was bushland and no footpath. In front of the appellant on the northern side of the road lay the rockface and a narrow shoulder of between one and two metres wide, without a footpath. Given the circumstances of darkness, and the absence of a sign, the respondents did not suggest that it was unreasonable for the appellant to press on beside the rockface, without ascending the steps. The conditions on the verge of the road near the rockface were also largely undisputed. They are illustrated in photographs that were taken 17 Sierra [2003] NSWCA 11 at [3], [6]. 18 Sierra [2003] NSWCA 11 at [21]. 19 Sierra [2003] NSWCA 11 at [51]. 20 Sierra [2003] NSWCA 11 at [53]. 21 Sierra [2003] NSWCA 11 at [39]. Kirby Hayne immediately after the accident and received into evidence. These show a quantity of rubbish, involving plastic bags, newspapers and other debris scattered over the shoulder near the rockface together with a section of broken asphalt. A "fogline" marked the northern extremity of the lane in which the bus was proceeding on the side of the road on which the appellant was walking. It was an unbroken white line designated to illuminate the extreme edge of the trafficable surface of the road. It was at this place in the road, adjoining the rockface, that the impact between the front left side of the bus and the appellant occurred. Before the primary judge, the appellant argued successfully that the circumstances demonstrated negligence in the sense of lack of due care and attention on the part of the bus driver in causing the impact, in failing to keep a proper lookout, in failing to sound the bus horn and in failing to stop the bus or to cause it to deviate slightly so as to avoid the impact. The contested facts The appellant's alleged gestures: At this point in the narrative it is necessary to mention certain conflicts and uncertainties in the evidence that it fell to the primary judge, in the first instance, to resolve. The first conflict concerned the bus driver's allegation that the impact had occurred because, suddenly and without warning, the appellant had jumped, in effect, in front of the bus, apparently seeking to flag it down. It must be accepted that there were some elements in the evidence that might have combined to persuade the trial judge that something like this had happened. Clearly, the appellant was unfamiliar with the district. He had told his father earlier that he was lost. There was also more than a suggestion in the evidence that he was upset because of the argument with his girlfriend. Leaving his car at the University and setting out on foot was unexplained. However, the primary judge, for reasons that she gave, rejected the bus driver's version of events in this regard. She did so, in part, by a comparison of that version with other statements that the bus driver had made; in part, by reference to the injuries suffered by the appellant and the damage to the bus and other objective indications; and, in part, by reference to the evidence of Mr Fatches, whom she accepted. Kirby Hayne As to the other statements, a police officer who arrived at the scene immediately following the accident found the bus driver "shocked and upset"22. The bus driver told the police officer that "[the appellant] just stumbled out, I tried to swerve"23, or words to that effect. In fairness to the bus driver, the primary judge noted that another witness, Mr Marco Denev, a motorist who had stopped after the accident, was told by the bus driver that "there was a gentleman who flagged me down but was proceeding to get on the bus, and that is when I hit him"24. The primary judge quoted the evidence of the bus driver to the effect that the appellant was "approximately two metres from the kerb, so it was very near not exactly in the middle but very close" [to the centre of the bus's lane]25. He was described as "jumping with both hands up, there is nothing I could have avoided him" [sic]26. However, as the primary judge was to point out in her reasons, this description of the position of the appellant in relation to the bus was inconsistent with the objective evidence of minor damage only to the near-side edge of the bus. It was also inconsistent with the nature of the injuries received Against the suggestion that the purported position of the appellant, effectively in the centre of the lane in which the bus was travelling, could be reconciled with the injuries suffered by the appellant on the footing that the bus had indeed swerved to avoid hitting the appellant, the primary judge relied on the evidence of Mr Fatches. He had watched the bus travel east along Epping Road, proceeding towards the vehicle in which he was travelling. He said that there were no vehicles ahead of, beside or behind the bus. He gave evidence that the bus did not swerve and that it travelled at a steady speed within its lane28. He observed the bus from a distance of approximately 20 to 30 metres. Although he 22 Reasons of the primary judge at [5.3]. 23 Reasons of the primary judge at [5.3]. 24 Reasons of the primary judge at [4.10]. 25 Reasons of the primary judge at [3.3]. 26 Reasons of the primary judge at [3.3]. 27 Reasons of the primary judge at [7.2]. 28 Reasons of the primary judge at [7.3]. Kirby Hayne did not see the impact of the bus with the appellant, he saw a spray of glass come from around the back and under the back of the bus. After the bus passed, he saw a person lying in the gutter29. Apart from the conventional advantages that her Honour enjoyed in observing both the bus driver and Mr Fatches give evidence in the trial30, there were also objective facts, notably the site and extent of damage to the bus, injuries to the appellant and scuff marks on the road "left by the band of white around the shoes the [appellant] was wearing at the time of the accident"31 all of which the primary judge called in aid in reaching her conclusion. It was a conclusion unamenable to appellate correction32. The bus driver's length of vision: The bus driver's case was essentially that the appellant had suddenly and unexpectedly moved, effectively into the centre of the lane in which the bus was travelling. That lane was shown by the evidence to be about 3.2 metres wide33. On this basis, the bus driver asserted that he had only 10 metres within which to stop or avoid the appellant34. Later, when reminded of two similar but not identical statements that he had made to police, fixing the distance at 15 metres ahead of him, the bus driver adjusted his oral evidence to agree in cross-examination with the distance of 15 metres35. Significantly, in one of the police statements the driver had said that the pedestrian "was walking about two metres from the kerb in lane 1."36 Obviously, if the appellant had suddenly moved into the centre of the roadway of lane 1, there would be no negligence on the part of the bus driver for failing to avoid collision with the appellant. 29 Reasons of the primary judge at [4.1]-[4.3]. 30 Jones v Hyde (1989) 63 ALJR 349; 85 ALR 23; Abalos v Australian Postal Commission (1990) 171 CLR 167; Devries v Australian National Railways Commission (1993) 177 CLR 472. 31 Sierra [2003] NSWCA 11 at [54]. 32 Fox v Percy (2003) 214 CLR 118. 33 Sierra [2003] NSWCA 11 at [80]. 34 Sierra [2003] NSWCA 11 at [57]. 35 Sierra [2003] NSWCA 11 at [57], [58]. 36 Sierra [2003] NSWCA 11 at [60]. Kirby Hayne Once again, the primary judge rejected these assertions. Again, her decision in this respect relied in part upon her assessment of the credibility of the bus driver. That fact would likewise make it immune from appellate correction. However, the rejection of the bus driver's evidence was confirmed by evidence to which the primary judge pointed. This included the lack of any evidence of braking marks on the road surface; the site of the relevant damage and injuries previously described; and the virtually uncontested evidence of expert witnesses called by both sides concerning the projection of illumination from the bus lights on low beam. It was common ground that this afforded illumination of 50 to 60 metres of the road ahead with a bias to the left side that would pick up "visual cues" appearing on the left. The white stripe on the appellant's shoes constituted such "visual cues" for a professional bus driver paying due attention. judge, unsurprisingly, thought it unlikely that the appellant would have deliberately moved directly in front of a large bus travelling at 70 to 80 kilometres per hour which he had well in his vision. Whilst accepting that it was "unlikely" from the bus driver's point of view that a pedestrian would have been walking on that part of Epping Road at 9.00 pm on a Saturday evening37, the primary judge was equally unwilling to conclude that the appellant "would have leaned forward or walked into the path of a large bus"38. The primary The objective facts, together with the natural concern of the bus driver with the possibility of a police prosecution (with the relevance of any such action for his employment) were further factors that led the primary judge to reject the bus driver's evidence to the effect that the appellant had only entered the carriageway 10 or 15 metres ahead of the bus. If it were true that the bus driver only saw the appellant 10 or 15 metres before impact, the inference drawn by the primary judge was that this was because the bus driver had failed to keep the proper lookout that would have taken full advantage of the illumination cast over 50 to 60 metres by the bus's headlights and caused him to notice the appellant. The course of careful action: The primary judge then had to consider whether evasive action on the part of the bus driver would have avoided the accident, having regard to the point of impact. Because there was no brake mark visible on the road, and having rejected the evidence of the bus driver which 37 Reasons of the primary judge at [7.1]. 38 Reasons of the primary judge at [7.5]. Kirby Hayne placed the appellant towards the centre of his lane, the primary judge had to resolve the point of impact by reference to other evidence. In this regard, her Honour accepted the evidence concerning the damage to the bus and the injuries to the appellant. She also accepted the evidence of Mr Fatches relating to the spray of glass that he described and the positions where blood was noted and photographed after the appellant came to rest. Relying on these indications and the "scuff marks" previously described, the primary judge found the point of impact to be at least 0.7 metres south of the fog line39, that is, just inside the trafficable surface of the lane in which the bus was proceeding. On this basis, the primary judge concluded that "a minor deviation in the path of travel of the bus driven by the [bus driver] would have avoided the impact with the [appellant]."40 Obviously, this conclusion built on her Honour's rejection of the evidence of the bus driver that his capacity to deviate to the right was limited by surrounding traffic, an assertion rejected on the basis of Mr Fatches' evidence. Different minds might respond in different ways to the evidence given at the trial. Much time was consumed there by the evidence of experts. Sometimes such evidence may be helpful in describing technical developments of motor vehicle design (such as the evolution and capacity of modern motor vehicle headlamps) or in applying to uncontested facts commonly accepted tables governing the distance travelled by motor vehicles at different speeds and stopping time allowing for differing driver reaction times. Not all judges are mechanically minded or interested. Expert evidence, grounded in the proved testimony, can therefore occasionally be useful. But in the end, such evidence has weight only in respect of matters within the relevant field of expertise and is only as helpful as the evidence and assumptions on which it is based. Such evidence may not usurp the ultimate decisions which remain for the trial judge. In the present case, the expert reports had (and were treated as having) relatively little significance. In the end, the evaluation of the case depended substantially on the acceptance or rejection of the evidence of the bus driver and Mr Fatches and the application to the facts, as then found, of largely undisputed evidence concerning the illumination in front of the bus and the likelihood that it would have revealed the presence of the appellant in time to permit the avoidance of impact41. 39 Reasons of the primary judge at [7.2]. 40 Reasons of the primary judge at [7.2]. 41 Reasons of the primary judge at [7.1]-[7.4]. Kirby Hayne The decision of the Court of Appeal The majority reasons: The Court of Appeal reversed the judgment entered by the primary judge. The reasons for the majority in that Court were given by Beazley JA. Her Honour acknowledged the limitations imposed on appellate review by the primary judge's rejection of the bus driver's evidence to the effect that there were vehicles beside and behind him that made it dangerous for the bus to swerve to the right to avoid collision with the appellant42. This notwithstanding, Beazley JA upheld the submission that there was no evidence to support the finding of negligence. The first step towards this conclusion was a statement that there was "nothing in [the primary judge's] reasons to suggest that the [bus driver] should have seen the [appellant] when he was on the side of the road."43 Secondly, Beazley JA proceeded to apply to the facts the uncontested tables concerning distance covered at given speeds with adjustment for the differing reaction times of different motorists. This analysis lay at the heart of the reasons that found favour in the Court of Appeal. They were again pressed on this Court. Beazley JA said44: "If the [bus driver] was travelling at 70 kilometres per hour and based upon a reaction time of 1 second (given that the [bus driver] was a professional driver) he would have travelled 19 metres before 'reacting' to the presence of someone or something on the roadway. It would have taken him another 22 metres to bring his vehicle to a complete stop – a total of 41 metres. At 80 kilometres per hour, the relevant distances are 22 metres 'reaction distance' and 30 metres 'stopping distance' – a total of 52 metres. Had the [appellant] stepped onto the roadway at a time when the bus was 40 metres away, then the [bus driver] would not have seen him, reacted and been able to take action to avoid the accident in sufficient time 42 Sierra [2003] NSWCA 11 at [8]. 43 Sierra [2003] NSWCA 11 at [10]. 44 Sierra [2003] NSWCA 11 at [10]-[11]. Kirby Hayne to avoid the accident, even if he was only travelling at 70 kilometres per hour. The difference between impact and no impact would have only been about 1 metre, but there would have been an impact which the [bus driver] could not have avoided. … If the speed was closer to 80 kilometres per hour, the [bus driver] would not have been able to stop his bus until approximately 10 metres after the point of impact. Had the [appellant] stepped onto the roadway when the bus was 30 or 35 metres away his position would have been correspondingly more perilous." Because Beazley JA considered that it was equally uncertain as to when the appellant had stepped onto the road surface, the possibilities favouring, or not favouring, his claim were equally valid. Thus the claim was bound to fail45. The dissenting reasons: In his dissenting reasons, Santow JA responded to this analysis by repeating and elaborating the manner in which the primary judge had come to her conclusions. However, his Honour also tackled the basis on which the majority of the Court of Appeal had concluded that the primary judge had erred. First, Santow JA pointed out that it had not been in dispute at the trial that the bus headlights would have illuminated the left-hand shoulder of the road sufficiently to throw some light on a pedestrian proceeding there for 50 metres as found by the trial judge. As Santow JA pointed out, the respondents' own expert, Mr Joy, had concluded his evidence, as described by the primary judge, thus46: "[T]he [bus driver] had understated the distance from which he saw the [appellant] and proposed that, in order to carry out the actions of braking, swerving and straightening the bus, he probably initially perceived the risk of collision with the [appellant] from 34.5 to 43.5 metres." The reference to "50 metres" was clearly a reference to the evidence given at trial concerning the illumination cast by the front headlights of the bus over 50 to 60 metres. The fact that that illumination was cast with a bias to the left-hand side of the road is highly relevant to the likelihood that it would have picked up "visual cues" in the footwear of the appellant walking in a direction facing the bus. 45 Sierra [2003] NSWCA 11 at [12], applying Luxton v Vines (1952) 85 CLR 352. 46 Sierra [2003] NSWCA 11 at [88]. Kirby Hayne Secondly, and more importantly, Santow JA pointed out that the majority reasoning proceeded on the basis that braking was the only relevant evasive action that the bus driver could have taken47. Self-evidently, from the conclusions of the primary judge, this was not (as Santow JA demonstrated) the way the primary judge had reasoned. Conclusions on negligence It is necessary to accept the large functions belonging to an appellate court, such as the Court of Appeal, in reviewing findings of fact of a judge sitting without a jury48. Those functions, which derive from the provisions of the legislation governing the Court of Appeal in such proceedings49, require that Court to conduct its own independent review of the facts, giving effect to its own conclusions about them. It must do this save to the extent, if any, that the primary judge enjoys advantages that cannot be fully recaptured by the appellate court. In these last respects, the appellate court should defer to the findings of the primary judge except for the very limited circumstances where it is authorised to substitute its own, differing conclusions50. No occasion arises in this appeal to repeat the principles governing the appellate revision of fact-finding at trials conducted by judges sitting alone. The principles, with particular reference to s 75A of the Supreme Court Act 1970 (NSW), were stated by Gleeson CJ, Gummow and Kirby JJ in a passage in Fox v Percy51 recently adopted by Callinan and Heydon JJ in Pledge v Roads and Traffic Authority52. In the exercise of its own appellate jurisdiction, this Court is 47 Sierra [2003] NSWCA 11 at [94]. 48 State Rail Authority of NSW v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 320-321 [58]-[64], 330-332 [89]-[93], 340 [146]; 160 ALR 588 at 49 Supreme Court Act 1970 (NSW), s 75A. 50 Fox (2003) 214 CLR 118. 51 (2003) 214 CLR 118 at 125-128 [21]-[25], [27]. 52 (2004) 78 ALJR 572 at 581-582 [43]; 205 ALR 56 at 67-69. See also Shorey v PT Ltd (2003) 77 ALJR 1104; 197 ALR 410; Joslyn v Berryman (2003) 214 CLR 552; Whisprun Pty Ltd v Dixon (2003) 77 ALJR 1598; 200 ALR 447; Hoyts Pty Ltd v Burns (2003) 77 ALJR 1934; 201 ALR 470. Kirby Hayne not concerned, as such, to review the facts for yet a further time. It will not do so unless error is shown on the part of the intermediate court in the manner in which it has discharged its own functions53. But if such error is shown, this Court is authorised, and may be required, to correct the error. With respect to the majority in the Court of Appeal, we have concluded that their Honours erred in disturbing the primary judge's conclusion on the issue of negligence. Santow JA was correct in his analysis in the closing part of his reasons and, specifically, in his riposte to the reasons of the majority. The starting point for the Court of Appeal's analysis was the conclusion of the primary judge concerning the credibility of the evidence of the bus driver. Had the primary judge accepted the bus driver's evidence, concerning the position that the appellant took up towards the middle of the lane in which the bus was travelling, and the suggestion that he assumed that position only 10 or 15 metres in front of the bus in order to flag it down, the conclusion of the Court of Appeal that there was no evidence of negligence would have been irresistible. However, once the primary judge rejected that evidence, the foundation for an opinion that there was "no evidence" of negligence on the part of the bus driver was undermined. It then became necessary for the primary judge to draw inferences, as she sought to do, concerning where the appellant was when he was struck, how long before impact he had been on the road surface, what he was doing and how far he would have been visible to the bus driver, exercising reasonable care and keeping a proper lookout in driving the bus. The conclusions of the primary judge, having reached her view about the evidence of the bus driver, were anchored in the testimony of Mr Fatches, which she accepted. According to that evidence, the bus had no relevant vehicles in front, beside or behind it. The bus simply continued steadily in its own lane. It did not deviate to the right, as it might have done safely on these premises. The position of the appellant, walking to the side of the road, was explained adequately by the apparent absence of a footpath there and reasonable conduct on his part of avoiding a ditch, broken asphalt and refuse in that section of the road shoulder near the rockface that the appellant had reached on foot. To traverse that section, whilst avoiding these obstacles, the appellant entered upon the road surface. However, he did so only to a small degree, estimated by the primary judge at 0.7 metres. Whilst retrospect suggests that he might have waited or kept more closely to the shoulder and the rockface ignoring the obstacles (and whilst later knowledge suggests that he could have climbed the steps to take him to a 53 Liftronic Pty Ltd v Unver (2001) 75 ALJR 867 at 879 [65]; 179 ALR 321 at 336. Kirby Hayne continuation of the footpath), the course that he adopted put him potentially within the illumination of the bus headlights with their bias to the left-hand side and projection over about 50 metres. Far from the objective evidence giving any basis for the Court of Appeal to set aside the findings of the primary judge concerning the evidence of the bus driver, that evidence (as Santow JA points out) supported the conclusion so reached. The fact that there were no skid or brake marks and that the bus did not reach a stop after the point of impact for some 110 metres suggests that the bus driver did not see the appellant at all, save possibly at the very last moment. This, in turn, supports the primary judge's conclusion that there was a lack of due attention on the part of the bus driver. However, the most decisive criticism in the reasons of Santow JA relates to the reasoning of the majority in the Court of Appeal that there was insufficient time for the bus driver to bring the bus to a stop before impact with the appellant. Even if that were so (depending on the combination of factors such as the speed of the bus, the bus driver's reaction time, the precise movements of the appellant and the moment of reasonable perception in the available illumination) this does not answer the essential way in which the primary judge reasoned to her conclusion of negligence. The route that the primary judge took was founded in the acceptance of the testimony of Mr Fatches, which was a course certainly open to the primary judge. Moreover, that evidence was reinforced to some extent by objective facts. The bus did not swerve or brake. It did not sound its horn. Yet, according to Mr Fatches, there was no impediment to its moving to the right. Having regard to the damage to the bus and the injuries to the appellant's left upper extremities, the degree of movement required was but slight. The bus driver's capacity to move safely was established in a manner invulnerable to appellate disturbance. The only excuse that would save the bus driver from a finding of negligence in these circumstances was his suggestion that the appellant moved suddenly out into the centre of the road waving his arms or stumbling into the path of the bus. As that version of events was rejected in terms that were not ultimately challenged in this Court, the finding of "no negligence" cannot stand. The majority of the Court of Appeal erred in reaching, and giving effect to, that conclusion. Kirby Hayne This was not, therefore, a case like Luxton v Vines54 where the possibilities were equally open and neither could be said to be more likely. Nor was it a case like Derrick v Cheung55 where the defendant came upon the infant victim, emerging from two parked vehicles onto the road in the path of the defendant's vehicle driving within the prescribed speed limit. Here, there was a range of visibility available to the bus driver, a professional motorist, if he were keeping a proper lookout. Most importantly, there was an unimpeded capacity to move the vehicle to the right. Had that been done even at a late stage the serious injury to the appellant would have been avoided. True, the appellant was obliged to keep a proper lookout for his own safety. However, the bus driver, who was in charge of a powerful vehicle had obligations to exercise care for pedestrians in the Having regard to findings made by the primary judge which are impregnable against appellate correction, it was incorrect of the Court of Appeal to conclude that there was "no evidence" of negligence. It was equally incorrect to treat the case as one where the only precaution that might have been taken by the bus driver was that of stopping the bus. This was neither what the appellant asserted nor what the primary judge found. The judgment at trial in favour of the appellant should not have been disturbed. Conclusions on contributory negligence One of the grounds of appeal urged upon the Court of Appeal by the present respondents was that the primary judge had erred in assessing the contributory negligence of the appellant at 25 per cent. Santow JA agreed and would have increased the proportionate liability of the appellant to 60 per cent. It was unnecessary for the majority to deal with the question, but their Honours indicated that they would have been in favour of an increase to 60 per cent if not more. In this Court, there was no cross-appeal by the respondents, who had achieved complete success in the Court of Appeal. The circumstances may not 54 (1952) 85 CLR 352. See also Nominal Defendant v Owens (1978) 22 ALR 128 at 132; Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 at 141, cited in Sierra [2003] NSWCA 11 at [12]. 55 (2001) 181 ALR 301. 56 Pennington v Norris (1956) 96 CLR 10 at 16-17. Kirby Hayne have supported a notice of contention under O 70 r 6(5) of the High Court Rules because the respondents do not contend that any matter of fact or law had been erroneously decided against them. Section 37 of the Judiciary Act 1903 (Cth) empowers this Court to give such judgment as the Court of Appeal ought to have given. Rather than remit any issues which remain outstanding in the respondents' appeal to the Court of Appeal, the parties urged this Court to deal with the matter so as finally to dispose of the litigation. Counsel presented submissions supporting respectively the stances taken by the trial judge and Santow JA. It is accepted that the decision of the trial judge is "not lightly reviewed".57 Santow JA referred to the authorities for that proposition but did intervene with the result indicated above. However, his Honour did not refer to the decision of this Court in Pennington v Norris58 where it was stressed that what was to be considered was the respective degrees of departure from the standard of care of the reasonable person. On the facts of Pennington it was said that to drive a car at high speed involved negligence of a far greater culpability than the failure of the plaintiff to keep a proper lookout when crossing the road. This Court in Pennington fixed the proportions at 20:80, rather than the 50:50 which had been fixed by the trial judge. Consistently with that reasoning, Sidis DCJ emphasised that the first respondent had, as the bus driver, far greater capacity to cause damage, and was the major cause of the accident. Her Honour distinguished the instant case from accidents on crowded city streets where plaintiffs had stepped onto roads without looking and defendants had had minimal opportunity to avoid impact. There was evidence that in daylight hours pedestrians including school children, walked on that part of Epping Road where the accident happened. Her Honour rejected the submission that in darkness and without signage it would have been more reasonable for the appellant to have taken the footpath traversing the top of the rock wall. The primary judge accepted that the appellant had the capacity to see the approaching bus. To that, it may be added that this capacity may have been 57 Podrebersek v Australian Iron & Steel Pty Ltd (1985) 59 ALJR 492 at 494; 59 ALR 529 at 532-533; Liftronic (2001) 75 ALJR 867 at 868 [2]; 179 ALR 321 at 322; Berryman (2003) 214 CLR 552 at 578-579 [84], 601-602 [157]. 58 (1956) 96 CLR 10 at 16-17. Kirby Hayne greater than that of the bus driver who was approaching, at greater speed, an object which was both unexpected and less readily visible. Her Honour went on to accept that the appellant "should have stepped away from the trafficable portion of lane 1," and that had he done so "the accident would have been avoided." In the latter respect, she may have overstated the matter. It is by no means clear that if the appellant had walked on the fog line and not strayed from it the accident would not have happened. Lane 1 was 3.2 metres wide and the bus was 2.5 metres wide and it was found that the bus was wholly within lane 1 and had not deviated. If the bus were in the middle of the lane when it struck the appellant, it would have been 0.35 metres from the fog line; if the feet of the appellant were astride the fog line, his upper body would have overhung that 0.35 metres. The appellant is able to point to these matters to support the conclusion that Sidis DCJ did not err in the outcome she reached on apportionment. Any misapprehension of fact could only further support the appellant on that issue. The interference which Santow JA would have made in the apportionment was based upon a view of the comparative seriousness of the failure of the appellant to "remove himself from the road" once the bus had become visible59. That, however, would not open the door to appellate review on the ground of the manifest error spoken of in the authorities60. The view of Beazley JA on the matter must be understood in light of what has been shown to be an incomplete appreciation of the evidence and what followed from it. We would not disturb the apportionment for contributory negligence made by the primary judge because the gateway to appellate intervention should not be opened. 59 Sierra [2003] NSWCA 11 at [104]. 60 Phillis v Daly (1988) 15 NSWLR 65 at 78 per McHugh JA. Kirby Hayne Orders The appeal should be allowed with costs. The orders of the Court of Appeal of the Supreme Court of New South Wales should be set aside. In place thereof, the appeal to that Court should be dismissed with costs. Callinan CALLINAN J. The question in this case is whether an intermediate court of appeal was right to regard the decision of the trial judge as being based upon conjecture and speculation, rather than inferences legitimately drawn from established facts. The facts In March 1997, in an area not frequented by pedestrians, and in which the closest street lights were not functioning, at about 9:00 pm, in darkness, and dressed in dark clothing the appellant was walking beside the carriageway of Epping Road in Sydney. That road is a major arterial of four lanes. A white fog line was painted on the carriageway towards the left extremity of it. A broken yellow line was also painted on its edge to designate the shoulder there as a "No Stopping" zone. The appellant was heading in a westerly direction and was on the northern side of the roadway. There was a formed footpath near the roadway where the appellant was walking. At this point however it ascended up a cliff face about five metres high. Its presence would not have been readily apparent to a stranger to the area. There were a few houses on one side of the road and dense scrub on the other. The sealed shoulder of the road on the northern side was 1.2 to 2 metres wide. The precise circumstances which led to the appellant's presence on the roadway are not known. He had earlier attended a concert at Macquarie University which he had left prematurely after an argument with his girlfriend, leaving his car behind him. Later, he had telephoned his father to tell him that he was lost. His father told him to go to the University where he would collect him. Why he had chosen to leave his car behind him, and what he had done, and where he had been after he parted from his friends at the University, are all unknown and unexplained. At the same time as the appellant was walking beside the roadway, the first respondent was driving his employer's, the second respondent's, bus in an easterly direction in the left of the two lanes in accordance with his direction of travel, at a speed approaching 80 kilometres per hour and within the speed limit for that section of the road. The bus was empty. Both its headlights and a large sign on the front of it for the display of its destination or a number, were illuminated. A motor car was also travelling towards the appellant in a westerly direction. The first respondent gave this account in evidence of what occurred: "Q. When you went into the area to where the accident finally happened, did you see something? A. Suddenly a man was stopping my bus sir. Callinan Q. What was the first you saw of him? A. He was jumping to stop my bus sir. Q. Where was he with regard to the fog line on the left hand side of the roadway when you first saw him? A. He was approximately two metres from the kerb, so it was very near not exactly in the middle but very close. Q. In your lane? A. In my lane. Q. How far ahead of you was he when you saw him? A. Approximately 10 metres. Q. What did you do? A. I tried to brake, there is nothing in the world I could have [sic] avoided the accident sir, it was there. Q. Was he [the appellant] doing anything? A. He was jumping with both hands up, there is nothing I could have [sic] avoided him." He added that on seeing the appellant he had braked, and tried to swerve to his right, but that the bus struck the appellant when he straightened it. The first respondent rejected a suggestion that there were no cars closer than 70 to 80 metres to the bus. He said there were cars in the lane beside the bus. He had wanted to swerve further to his right but had been deterred by the horns sounded by the drivers of those cars. The first respondent said that if he had swerved too far in that direction he would have collided with motor vehicles travelling in the opposite direction. He insisted that there had been sufficient time to brake, swerve and straighten the bus although he had first seen the appellant from a distance of only 10 metres. A police officer who came to the scene of the accident and interviewed the first respondent described him as shocked and upset. After asking about the appellant's condition the first respondent said: "He just stumbled out, I tried to swerve", or words to that effect. He also told the police officer that he had not seen the appellant until he was 15 metres away from him. Callinan The appellant suffered injuries in the accident which, among other things, have deprived him of any capacity to recall the accident and the events leading up to it. The appellant sued the respondents in negligence in the District Court of New South Wales. The respondents denied that the first respondent had been negligent and alleged contributory negligence. The trial in the District Court The case came on for trial before Sidis DCJ. On the issue of liability, in addition to giving evidence themselves, each side relied on a "traffic expert". Other witnesses included occupants of cars travelling on Epping Road at the time of the accident, and investigating police officers. One of the occupants of a car travelling in a westerly direction, Mr Fatches said he saw the bus when it was 20 or 30 metres away. He did not notice any deviation in its line of travel. Both of the experts purported to reconstruct the events leading up to, and the accident itself. No objection was taken to these reconstructions, or to the qualifications of the experts to state the opinions that they did on a variety of matters, including psychological and physiological matters. Absence of objection cannot however correct what is plainly speculative, or informed by no relevant field of expertise, into evidence of probative value. The experts agreed that if the first respondent had been travelling at 70 kilometres per hour and had seen the appellant from a distance of 15 metres (as claimed in his statement to the police officer at the scene), or 10 metres (as stated to the Court), he would not have had time to brake and swerve to avoid the appellant. The respondents' expert purported to conclude that the first respondent had understated the distance from which he saw the appellant, and contended that, in order to have been able to brake, swerve and straighten the bus, he probably initially had perceived the risk of collision from a distance of 34.5 to 43.5 metres. He added that the first respondent could have slowed the bus to a speed of 48 kilometres per hour over a distance of 19.5 metres if he had braked and swerved simultaneously. The appellant's expert purported to know, and stated, that the first respondent had not been paying proper attention, and accordingly did not have the time or opportunity of avoiding the appellant. It is necessary to examine in greater detail what Mr Woodward, the expert for the appellant, stated in his written report which was in evidence, and upon which the trial judge substantially relied for her decision. Section 3 of the report bears the ambitious title "crash aetiology" as a synonym for the cause of the accident. It then records a quantity of unsubstantiated information (not all of which is uncontroversial) of which Mr Woodward could have had no personal knowledge. The next section of the Callinan report, "crash situation" describes apparently fresh scuff marks seen on the roadway, and line marks about 108 metres in length from which Mr Woodward concluded that the bus travelled 122.5 metres after impact. After noting that the first respondent was 60 years old at the date of the collision, he referred to some statistics relating to "perception times" of male drivers, in daylight, aged 25 to 40 years. Mr Woodward then embarked upon an allocation of culpability for the accident. He stated his conclusions as follows: This report concerns a collision at night between a bus and a pedestrian who was walking towards it. A poorly lit, non standard walkway had been provided and was separated from the vehicle carriageway simply by a painted edgeline and reflective raised pavement markers. The other edge of the walkway consisted of a stone cliff. It is possible that the pedestrian, in the darkened conditions, was compelled to walk on the vehicle carriageway due to the rubbish, detritus and undergrowth which had accumulated on the walkway …. This means that the bus driver should have taken extra care whilst travelling along this pedestrian-unfriendly part of Epping Road. The bus driver stated he was 'very familiar with the road where the collision occurred', and should have been aware of the potential danger. As can be seen in photo 6 in this report, there was a substantial amount of rubbish and weeds growing on the walkway. Whether this had any adverse effect towards the collision is a matter of speculation. The driver stated the pedestrian was 15 metres ahead of him. He said that the pedestrian appeared to be signalling him. Requirements of the Motor Traffic Regulations were that the headlights of the bus should have 'an effective range of 50 metres.' In paragraphs 5 and 6 of the bus driver's statement, summarized in paragraphs 5.03 to 5.05 of this report, the driver has provided an extensive and detailed account of the 'perception-response' phase of this collision. Onto this would have to be added the physical distance required to bring the vehicle to a halt from the stated 70 km/h it was initially travelling. From the conservative figures I computed in para 6.04 above, it is difficult to reach any conclusion other Callinan than the bus driver was not keeping a proper lookout, otherwise he would have observed the pedestrian sooner, and be able to set his 'perception-response' in train earlier. The regulations required at least an effective range of the headlights of 50 metres. Whilst it is impossible to say that he may have avoided the pedestrian, certainly the latter's injuries would have been substantially mitigated. The point of impact occurred approximately half way between two illuminated mercury-vapour streetlights which were 120 metres apart. There should have been another street light midpoint between the two operating lights, but at the time of the collision, it was not lit. The streetlights were placed on the opposite or southern side of Epping Road. They provided light for guidance of pedestrians on the southern side of the road. There is little doubt the bus was being driven at a speed that was excessive in the circumstances by this driver who was completing his shift." (emphasis added) After the respondents provided their expert's report Mr Woodward made a report in response to it. I need not refer in detail to it except to note that it is argumentative and even more egregious in the conjectural conclusions which its author claims to be able to assert61. Not the least of its defects is its criticisms of the respondents' expert for doing what he himself had done, for example, expressed opinions about what a person in the first respondent's position could and would have seen on the night, the use to which photographs were put, estimations of the degree and quality of the available light, and the application of statistics relating to physiological matters, "eye test results". I need only add in relation to the written report that it was not only unedifying and overtly partisan, but also unconvincing for its author to make a charge in it of predesignation against the respondents' expert. A similar examination of the transcript of Mr Woodward's oral evidence at the trial reinforces the impression of partisanism. For example, on a number of occasions when confronted with matters which he had either overlooked or ignored, in one instance the presence of fresh blood on the roadway, he refused to acknowledge that it could have had any relevance to his theory about the point of impact. Some of the same criticisms could no doubt be made of the report and evidence of the respondents' 61 cf Clark v Ryan (1960) 103 CLR 486 at 490-492 per Dixon CJ, a case in which objection had been taken. Callinan expert but as neither the trial judge nor the Court of Appeal relied in any way upon these, reference to them is unnecessary in this Court. The trial judge largely rejected the evidence of the first respondent. She summarized her findings in this way: "(1) The [first respondent] had the capacity to see the [appellant] from a distance of at least 50 metres. (2) The [first respondent] could have stopped the bus which he was driving, sounded the horn on the bus, or taken effective evasive action if he had seen the [appellant] from a distance of 30 metres. The [first respondent] did not take the appropriate evasive action. The fact that the [first respondent] did not see the [appellant] at a distance at which he could take effective action leads to the finding that he was not paying adequate attention at the time of the accident. The point of impact was in the vicinity of point A on the sketch plan, indicating that the [appellant] was positioned somewhere between 1.3 to 0.7 metres south of the fog line. A minor deviation in the path of travel of the bus would have avoided the accident." Her Honour relied, for her conclusions, among other things, upon inferences as to the point of impact and the conduct of the first respondent, which she sought to draw from the minor damage caused to the bus and the nature and extent of the appellant's injuries. The greater capacity of the first respondent as the driver of a heavy vehicle, to inflict injury than the appellant was another of the factors which led her Honour to apportion liability as she did62. Her Honour apportioned liability against the respondents 75 per cent to 25 per cent. She said that it was inherently improbable that the appellant would have leaned forward, or walked into the path of a large bus travelling at a speed of between 70 to 80 kph. She held the appellant liable in negligence because he could, and should have seen the approaching bus when it was 108 metres away. 62 Podrebersek v Australian Iron and Steel Pty Ltd (1985) 59 ALJR 492; 59 ALR Callinan In the result the trial judge gave judgment for the appellant in the sum of $750,000 being three quarters of the damages upon which the parties came to agree was the appropriate measure. The appeal Both sides appealed to the Court of Appeal of New South Wales (Beazley, Heydon and Santow JJA). Beazley JA (with whom Heydon JA agreed), in upholding the respondents' appeal said this: "There was no evidence however as to when the [appellant] first stepped onto the carriageway. He may have done so from the commencement of the unpaved portion of the roadway. He could equally have done so at any point thereafter up until some metres prior to the collision. Nor was there any evidence to indicate when it was more probable that he stepped onto the road. All that is known is that the [appellant] was on the road at some point. The existence of a number of equally available possibilities is not sufficient to found an inference that the [appellant] was on the roadway at a point where the [first respondent] could have seen him, reacted and taken action to avoid the accident ... It follows that there was no evidence to support the basis upon which her Honour found that the [first respondent] was negligent." (footnotes omitted) Santow JA was of a different view. His Honour said this: "The Trial Judge sums the position up as she saw it ... '[A]ccording to the [first respondent] the [appellant] was moving towards the bus intent on boarding it. The [appellant] cannot say what he was doing. There is no evidence that he was intoxicated at the time of impact or that he was experiencing any other condition which would cause him to behave carelessly.' She therefore found it inherently improbable that he would have leant forward or walked into the path of such a large bus travelling as it was at a speed of between 70 to 80 kph. That finding is necessarily an inference, but based on the evidence, including the advantage she had from witnesses particularly the [first responent]. For my part, I would not disturb that finding. I am satisfied that it was properly open to be made, though being an inference it is not immune from appellate intervention." His Honour then effectively adopted one of the conclusions of the expert called by the appellant: "The [appellant's] expert, Mr Woodward, makes a telling point when he says: Callinan 'With the absence of heavy braking marks being detected, assuming the crash investigation unit that attended had the special skills referred to above, I am of the opinion that the driver's attention was focused elsewhere. In his statement to the police "I saw a man about 15 metres ahead of me" when read with his references to cars beside and behind him, confirms that he was not keeping a proper look-out ahead of him. If he was travelling properly in lane 1, there is no reason why he should be concerned with traffic elsewhere. (If he had been looking for obstacles ahead he would have seen the [appellant] much earlier.)'" Santow JA expressed his conclusion in this way: "I am therefore satisfied that the findings of the Trial Judge do not disclose appealable error in concluding that the [first respondent], in failing to take such evasive action was liable in negligence. This was not a situation such as that described in Derrick v Cheung63 where the defendant came upon the victim of the accident with insufficient warning to avoid an accident." Notwithstanding that Santow JA adopted the trial judge's findings and inferences from them, he nonetheless was of the opinion that he should disturb her Honour's apportionment by holding the appellant to be responsible for 60 per cent of his damages and the respondents 40 per cent. The basis for this adjustment was stated in the following passages: "But accepting that the [appellant] was walking, not on the adjacent shoulder of the road, but on the laneway itself, with its added danger, is then the [appellant] of greater culpability, or his acts of greater causal potency, in the accident that befell him? While it is true that the [appellant] may have thought that he would be safer, perhaps because more visible or less likely to be crushed against the rock wall, walking on the first lane of the roadway than walking on a rubbish filled shoulder with a dish drain, it was undoubtedly a significant failure on the [appellant's] part to care for his own safety. Moreover the failure to remove himself from the road once the bus was visible when he still had 108 metres to do so, was a very serious act of carelessness as regards his own safety." 63 (2001) 181 ALR 301. Callinan The appeal to this Court There are two grounds of appeal to this Court: The majority in the Court of Appeal erred in finding that there was no evidence before the trial judge of negligence by the first respondent. The appeal miscarried by reason of the failure of the majority to review adequately the material before the trial judge upon which she was entitled to make her decision. In this Court the appellant submitted that the trial judge's finding that the first respondent had the capacity to see the appellant from a distance of at least 50 metres, was justified by the evidence of the experts, in particular the appellant's expert Mr Woodward who said: "Present-day motor vehicle headlamps are the product of a long, evolutionary process. Low-beam headlamps in particular are asked to provide adequate illumination for safe vehicle operation at all legal speeds, allowing the driver to safely detect objects on the road and detect and read signs that can be placed on either side of the road, as well as overhead. In addition, the system should provide adequate illumination on hills and curves as well as straight flat sections. The system is biased away from approaching traffic, that is, to the left side of the road. In terms of the revealing power of the system, it clearly favours objects to the left. This would favour illumination of the [appellant]." I need not repeat in detail what I said of expert evidence in cases of this kind in Fox v Percy64. It is sufficient to say that the so-called expert evidence here suffered in a number of respects from the same sorts of defects as there: argumentativeness, conjecture, wide departure from any conceivable area of expertise, partisanism, and a determination to express dogmatic conclusions about fault and liability. Assuming however that the evidence of the experts here with respect to the range of the headlights of the bus was reliable and useful, it could provide no sound basis for a conclusion that the first respondent could, and should have seen the appellant when he was 50 metres away and that he accordingly had sufficient time to take effective evasive action. That conclusion has no, or no sufficient regard to these factors: the need for the first respondent to be attentive to other traffic, including approaching traffic, the absence of pedestrians in the area, the presence of a shoulder of sufficient width to accommodate an unlikely pedestrian, the appellant's dark clothing, and the 64 (2003) 214 CLR 118 at 166-167 [149]. Callinan absence of any evidence at all as to where, in relation to the paved surface, the appellant was walking at any proximate stage as the bus approached. It assumes that because the likely range of the headlights of the bus was 50 metres or so, they would necessarily have illuminated the darkly clad appellant at that point, that the first respondent's attention could and should have immediately focused upon him, and that the first respondent should have anticipated that the appellant would leave the shoulder of the roadway and place himself directly in the path of the bus, which, it is common ground, at all times stayed within its lane on the carriageway. It also involved the implicit acceptance of a perception time relating to the average of persons 25 to 40 years old rather than that of a person of the first respondent's age of 60 years during darkness. The trial judge in this regard appears to have overlooked a rare, but significant concession by Mr Woodward that even had the first respondent immediately seen the appellant and reacted to that sighting the bus would still have travelled more than 80 metres before he could stop it. So too, it was quite unsafe to reconstruct what had happened by reference to the nature of the damage caused to, and the injuries suffered by the bus and the appellant respectively. The former was likely to cause serious injuries to the appellant in any collision in which the bus was travelling, as it was here, at some speed. Nothing of relevance therefore can be deduced from this. The appellant's next submission was to a similar effect, that contrary to the holding of Beazley JA in the Court of Appeal there was material before the trial judge sufficient to found an inference that the appellant was on the roadway at a point where the first respondent could have seen him, reacted in time and taken action sufficient to avoid the accident. The submission is met with the same response as the first. The appellant made an heroic effort, in submissions, to reconstruct a scenario which would locate the appellant on the carriageway itself, rather than on the shoulder of the road when the first respondent saw him, by reference to photographs, and assumptions about how far, and in which direction the appellant would have been catapulted by the impact, the presence of blood on the rock face at a certain point, the position of a light coloured bag on the road, and the presence of some debris in a particular position. Reliance on photographs can and did present its own problems here as appears from the different inferences which the respective experts claimed to be able to draw from them65. The further difficulty for the appellant is that he asked the Court to make conjectures about them, as to what happened before the static positions which they showed, and as to the extent to which a viewer's perception of them now coincided with what the parties could, and would have seen before the collision occurred. The invitation to adopt the appellant's scenario was an invitation to speculate, and that, the trial judge did but Courts may not do. The second submission should be rejected. 65 See Pledge v Roads and Traffic Authority (2004) 78 ALJR 572 at 583 [49] per Callinan and Heydon JJ; 205 ALR 56 at 70. Callinan The appellant's final submission although made in less specific terms was that had the first respondent been keeping a proper look out, he could and should have avoided the collision. It is right, as the appellant submits, that the trial judge found, and was entitled to find that there was sufficient room on the roadway for the first respondent to swerve to avoid the appellant had he seen him in sufficient time to react to the sighting and assuming that he was bound to anticipate that the appellant would, if he were on the shoulder, move on to the carriageway, or, if on the edge of the carriageway, would stay there. For the reasons that I have already given this submission also cannot be sustained. In my opinion the majority of the Court of Appeal duly performed its statutory appellate duty pursuant s 75(A) of the Supreme Court Act 1970 (NSW) ("the Act")66. Its entitlement, indeed its obligation, to intervene, was enlarged by the fact that the trial judge's conclusion depended, to put the matter at the best for the appellant, upon inference, although more accurately, upon speculation in part at least. Nesterczuk v Mortimore67 is of some relevance to this case. There the trial judge found himself unable to decide between two conflicting accounts. Here the trial judge rejected most of the first respondent's evidence. Her Honour had however no relevant evidence from the appellant himself. The rejection of the first respondent's evidence could not establish the case sought to be made by the appellant68. In Nesterczuk Windeyer J made this observation69: "This case is not one in which nothing is known beyond the fact that the accident happened on a roadway ... The learned trial judge was not persuaded that either account was more probable than the other. I can see no reason why his Honour, feeling unable to choose between them, was bound to conclude that both were false and find the drivers equally to blame on an hypothesis that neither had suggested, namely that both had been driving too close to the centre of the roadway. His Honour was not conducting an inquest to determine the cause of the accident. He was trying a case in which the plaintiff was asserting that the accident was caused by the defendant's negligence ..." 66 See Fox v Percy (2003) 214 CLR 118 at 163-165 [145]-[147]. 67 (1965) 115 CLR 140. 68 cf Hobbs v Tinling (CT) and Co Ltd [1929] 2 KB 1 at 19 per Scrutton LJ. 69 (1965) 115 CLR 140 at 153. Callinan Some additional remarks of Kitto J are also relevant70: "The tribunal may of course reason from the material before it, drawing all logical inferences while refraining from speculation. In particular, by comparing that which is proved to have occurred with that which according to general experience is to be expected when a particular condition has been fulfilled, it may conclude that the condition was not fulfilled in the case before it – res ipsa loquitur. By this process of reasoning many a case is decided in which the fact sought to be proved is that in a particular situation a person did not conduct himself with reasonable care and skill; but the utility of the process in the present case has been exhausted when the conclusion has been reached that there was a lack of reasonable care on the part of one or other or both of the drivers. Because of the meagreness of the evidence, general experience provides no basis for a belief enabling a choice to be made between the three possibilities by a tribunal acting judicially." Another quotation, this time from Luxton v Vines is equally apposite71: "It may be possible to say that with proper headlights a motor driver ought prima facie to have been able to see the plaintiff in time to avoid him, in spite of his dark clothes and of the dark wet night. But that supposes that he was standing or walking on the road in the line of light ... It is quite impossible to reconstruct from any materials the manner in which he and the supposed car or vehicle came into contact. It can be done only by conjecture. But a number of conjectures is open, equally plausible." This is a case in which the real circumstances of the accident are not, and probably will never be known. On any view the appellant's behaviour was unconventional. What is known however would tend to suggest that the appellant was capable, on the evening, of acting erratically. Just as there is no explanation for his presence on the carriageway at the time, there is no explanation why he did not, within the 108 metres available to him to see the bus with its headlights illuminated, take one step further to the side of the roadway. For myself, having regard to this critical factor, and the appellant's unlikely presence at the place and time, in dark clothing, I would have thought a verdict in favour of the respondents inevitable. It is not however necessary to go as far as that to hold that the appeal must be dismissed with costs. 70 (1965) 115 CLR 140 at 149-150. 71 Luxton v Vines (1952) 85 CLR 353 at 359 per Dixon, Fullagar and Kitto JJ.
HIGH COURT OF AUSTRALIA YOUYANG PTY LIMITED as Trustee of the APPELLANT AND The persons listed in Schedule 1 trading as and later as Minter Ellison RESPONDENT Youyang Pty Limited v Minter Ellison Morris Fletcher [2003] HCA 15 3 April 2003 1. Appeal allowed with costs. ORDER 2. Orders 1, 2, 3, 4, 5, 7 and 8 made by the New South Wales Court of Appeal on 8 October 2001 are set aside and, in their place, order that: a) the appeal to that Court is allowed with costs and the cross-appeal is dismissed with costs, b) Orders 3, 4, 5 and 6 made by Brownie AJ on 16 August 2000 are set aside, the respondent pay the costs of the appellant at first instance, and d) Order 1 made by Brownie AJ on 16 August 2000 is varied so as to replace the amount of $414,009 with $500,000, together with interest thereon pursuant to s 94, Supreme Court Act 1970 (NSW) from 24 September 1993 to the date of these orders. 3. The parties have 28 days within which to file a proposed consent order to supplement order 2(d), by fixing the actual sum for interest under s 94, Supreme Court Act 1970 (NSW). In the absence of such a proposed consent order, each party is at liberty to restore the matter to a single Justice of this Court for further directions. On appeal from the Supreme Court of New South Wales Representation: D F Jackson QC with A S Martin SC for the appellant (instructed by Carneys Lawyers) T F Bathurst QC with I M Jackman SC for the respondent (instructed by Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Youyang Pty Limited v Minter Ellison Morris Fletcher Trusts – Express trust – Money received by firm of solicitors to be held for a specific purpose and in accordance with specific conditions – Misapplication of funds by firm – Breach of express trust – Liability of firm as trustee – When breaches of trust occurred – Remedies – Restoration of trust fund – Causation – Whether appellant suffered a recoverable loss in consequence of firm's breaches of trust – Whether appellant would not have suffered loss but for breach of trust – When loss is to be assessed. Supreme Court Act 1970 (NSW), s 94. GLEESON CJ, McHUGH, GUMMOW, KIRBY AND HAYNE JJ. The appellant company ("Youyang") was trustee of a discretionary trust formed in 1974 and styled "the Bill Hayward Discretionary Trust". Mr William Hayward and his wife, Mrs Alison Hayward, were the directors of Youyang. The secretary of Youyang was Mr Peter Fowler, the Hayward family accountant and investment adviser. Mr Hayward acted on behalf of Youyang in the events giving rise to this litigation. The ECCCL proposal Mr Hayward was born in 1930. He held a degree from the University of Cambridge. In 1986 he had retired after serving as a school master for approximately 30 years. From 1974 until his retirement, Mr Hayward was head master of the Anglican Church Grammar School in Brisbane. Mr Hayward was a person of means. With his wife, he controlled, through various companies and trusts, funds of about $25 million. Before making investment decisions, it was Mr Hayward's practice to consult Mr Fowler. In about July 1993, Mr Hayward received from Mr Fowler two documents issued by EC Consolidated Capital Limited ("ECCCL"). The first, dated 31 March 1993, was styled "Investment Summary" and the second, dated 14 May 1993, was headed "Information Memorandum". The documents related to a proposed preference share issue by ECCCL. The Information Memorandum contained the statement: "This opportunity to subscribe for shares to be issued by [ECCCL] is subject to the express condition that each person wishing to invest is to subscribe at least $500,000.00 and that [ECCCL] will under no circumstances accept any subscription from any person for any amount that is less than $500,000.00." At that time, the Corporations Law, which was adopted and applied in the States and Territories, contained in Div 2 (ss 1017-1034) of Pt 7.12 detailed prospectus provisions. However, s 1017 stated that the Division did not apply, among other things, in relation to excluded offers or invitations in relation to securities. Section 66(3) provided that an offer or invitation in relation to securities was an excluded offer or excluded invitation if, together with other criteria, it was an offer for subscription of or invitation to subscribe at least $500,000 by each person to whom the offer was made or the invitation issued. Hence the significance of the stipulation in the ECCCL documents of the $500,000 minimum subscription. McHugh Kirby Hayne the Information Memorandum, under the heading "HOW TO INVEST", there appeared the statement: "The Investor, upon signing the Subscription Agreement is to provide an unendorsed bank cheque made payable to Minter Ellison Morris Fletcher's Trust Account for an amount equal to the Subscription Moneys to be held in trust by Minter Ellison Morris Fletcher pending satisfaction of the Completion provisions detailed in the Subscription Agreement. The Investor will be entitled to be refunded in full without deduction an amount (in cash or bearer securities) equal to the Subscription Moneys if at the date agreed for Completion of the share purchase the Investor does not among other things receive the benefit of the Deposit Certificate. The deposit Certificate issued by the Prime Bank will be held by National Registries Pty Ltd as Paying Agent for the benefit of the Investor." In the same document, under the heading "DISCLAIMER", was the statement that the preference shares were to be subscribed for "on the basis of the information and representations contained in this Memorandum" and certain other documents defined as "the Approved Documentation" and that investors "must only rely on statements made in the Approved Documentation". The role of Minters Minter Ellison Morris Fletcher ("Minters") was a firm of solicitors with offices in Sydney, Melbourne, Brisbane and elsewhere. Mr Hayward regarded Minters as a leading national law firm. Since at least July 1991 Minters had been acting for the promoters of ECCCL, who included Mr Tony Senese. ECCCL was incorporated on 23 March 1992. Mr Ian Lewis was the responsible partner of Minters under whose supervision and control there was performed all work in connection with the drafting of the documents relating to the subscription for preference shares in ECCCL. The preparation of those documents took place over many months and they included the Information Memorandum and the Subscription Agreement to which reference will be made hereunder. Mr Lewis also was the responsible partner under whose supervision and control the funds held by Minters were disbursed. He had been a partner of Minters since 1985. Youyang invests $500,000 Mr Hayward decided to proceed with an investment of $500,000 by Youyang in ECCCL after a meeting with Mr Senese, the Managing Director of McHugh Kirby Hayne ECCCL. The general scheme of the investment was that Youyang subscribe for 5,000 shares in ECCCL, each with a par value of 1 cent but with a premium of $99.99. ECCCL was to use a proportion of the subscription moneys to purchase a bearer deposit certificate issued by a prime bank which undertook to pay to the bearer $500,000 10 years after its issue. In that way, the investor would obtain security for the $500,000 subscription moneys. The deposit certificate was to be held by National Registries Pty Ltd ("Registries") as "paying agent" on behalf of Youyang and presented for payment by the prime bank on its maturity. The other principal component of the subscription moneys was to be used by ECCCL in dealing on international money markets. This was a speculative venture, but Youyang was assured, if all went to plan, of the return 10 years later of the face value of its investment. The prime bank which was selected was Dresdner International Financial Markets (Australia) Limited ("DAL"), a wholly owned subsidiary of Dresdner Bank AG. The evidence was that a bearer certificate of deposit is far more than a letter to a depositor evidencing a term deposit transaction. The bearer deposit certificate bears the word "negotiable", which allows it to be traded on the money market. Youyang completed a document headed "Subscription Agreement" and the four schedules to it. The Subscription Agreement, without the schedules, comprised some 17 pages. Minters' name and Melbourne address appeared at the bottom of the title page of the Subscription Agreement. Schedule 4 was a document addressed to Minters by Youyang and headed "AUTHORISATION FOR PAYMENT". It stated: "In accordance with ('Subscription Agreement') dated 24th Sept 1993 I irrevocably and unconditionally authorise you to disburse the moneys held to my account in accordance with clause 2 of the Subscription Agreement." the Subscription Agreement Mr Hayward, on behalf of Youyang, also completed a document dated 17 September 1993 headed "PURCHASE OF PREFERENCE SHARES IN [ECCCL]". It stated that Youyang "hereby confirms that [Minters], Solicitors of 40 Market Street Melbourne Victoria are to act as its agents at Completion for Subscription Moneys of $500,000.00". Youyang contended at trial that this agency was part of a contractual arrangement between Minters and Youyang which contained an implied term that Minters would exercise due care and skill in attending to the completion. However, that case failed at trial and in this Court McHugh Kirby Hayne the relationship between Youyang and Minters was approached by both sides as purely one of beneficiary and trustee on the terms to which we now turn. Clause 2 of the Subscription Agreement was headed "SUBSCRIPTION FOR SHARES". Clause 2.1 is of critical importance. It stated: "The Investor on signing this Agreement will provide an unendorsed non negotiable bank cheque made payable to [ECCCL's] Solicitors trust account for the aggregate of the Subscription Moneys (subject to the 'Important Notice' on page 27 of this Agreement) to be held in trust by [ECCCL's] Solicitors this Agreement." in accordance with the provisions of The "IMPORTANT NOTICE" stated that the signing and delivery by the investor of the Subscription Agreement, with a bank cheque for the subscription moneys, constituted an offer by the investor to enter into that agreement. Clause 2.3 obliged ECCCL to use the subscription moneys in a particular fashion. It stated: "[ECCCL] subject to the terms of this Agreement will use the Subscription Moneys in the following manner: procuring the provision of the Deposit Certificate as detailed in clause 3; paying expenses and commissions incurred by [ECCCL] relating to the subscription by the Investor under this Agreement details of which are set out in Schedule 2; and funds lenders concerning the balance to be applied to the working capital requirements of [ECCCL] to be used among other matters, for example, providing margin [ECCCL's] proposed borrowing of foreign currencies (physical or synthetic), funding purchases and investments in securities (such as bonds, bills of exchange etc) in International Money Markets (physical or synthetic), for the paying of option fees concerning [ECCCL's] proposed dealing in paper and non paper currencies such as precious metals and for working capital reserves, overhead costs and operating needs generally." Clause 3 provided for ECCCL, before completion, to procure the delivery of the deposit certificate from the funds provided by Youyang to Minters, and McHugh Kirby Hayne authorised Minters to release the funds for that purpose up to the "Deposit Certificate Purchase Limit". Clause 4 dealt with the steps to be taken on completion. The investor was obliged (cl 4.2) to provide a written authority to Minters to pay to ECCCL "the aggregate of the Subscription Moneys after the purchase of the Deposit Certificate under clause 3". Clause 4.3 stated that at completion Minters "from the funds held pursuant to clause 2.1 will pay to [ECCCL] the aggregate of the Subscription Moneys remaining after the provision of the Deposit Certificate". Clause 4.4 obliged ECCCL at completion, among other matters, to procure that the deposit certificate be delivered to Registries. Finally, cl 4.5 stated: "The Investor will not be obliged to complete the subscription for the shares under this Agreement and will be entitled to be refunded in full without deduction the moneys paid by the Investor under this Agreement if at Completion the matters set out in clauses 4.3 and 4.4 do not occur provided that the Investor has first complied with its obligations under clause 4.2." Clause 6 of the Subscription Agreement provided for the redemption of the preference shares from the funds held by Registries and yielded at the maturity of the bearer deposit certificate. In the meantime, after the expiry of 12 months from the date of issue of the preference shares, ECCCL was obliged (cl 7.3) to redeem them within 30 days of receipt of a written request by the holder. On 22 September 1993, Mr Fowler, on behalf of Youyang, arranged for the issue of a bank cheque made payable to Minters in the sum of $500,000. This was in performance of the obligation imposed by cl 2.1 of the Subscription Agreement. Minters received the funds on 24 September. It was admitted on the pleadings that there was thus constituted a trust of which Minters was the trustee. No consideration was given in submissions to the Court respecting any Victorian legislation which dealt with the administration of the trust accounts of solicitors1. However, any additional statutory controls apart, the nature of the trust was clear and in most respects was of a not unusual type. Minters was obliged to hold the $500,000 proceeds of the bank cheque upon trust for, or, as the documentation also put it, to the account of, Youyang, with the power (and duty) to disburse it in accordance with the Subscription Agreement but not cf Maguire v Makaronis (1997) 188 CLR 449 at 465-466. McHugh Kirby Hayne otherwise2. Any disbursement by Minters otherwise than as authorised by Youyang would be a dealing with Youyang's property which was in breach of trust. However, as explained above, Minters' client in the ordinary sense of the term was ECCCL, not Youyang. That state of affairs placed Minters in the position of owing (at least) contractual and fiduciary duties to ECCCL and its trust obligations to Youyang. The case has not been presented as one arising from the clash of conflicting fiduciary duties; certainly Minters was not in a position whereby it could not fulfil its obligations to the one party without failing in its obligations to the other3. Rather, Youyang relies upon alleged breach of trust in the most direct sense. But in what follows the broader circumstances are to be kept in mind. The breaches of trust by Minters The terms of the trust which bound Minters were admitted on the pleadings to include the following terms: the Subscription Moneys would be disbursed only in accordance with the provisions of the Subscription Agreement (cl 2.1); if requested by ECCCL, Minters would release to ECCCL prior to the completion of the Subscription Agreement an amount up to but not exceeding the amount defined in the Subscription Agreement as the Deposit Certificate Purchase Limit (cl 3.3); (c) Minters would only release the Deposit Certificate Purchase Limit amount for the purpose of ECCCL purchasing a Deposit Certificate if on completion a Deposit Certificate purchased by ECCCL with the moneys released by Minters pursuant to the terms alleged in pars (b) and (c) was delivered to Registries in accordance with cl 4.4 of the Subscription Agreement, then Minters would pay from the funds held in trust the balance of the Subscription Moneys cf Twinsectra Ltd v Yardley [2002] 2 AC 164 at 188 per Lord Millett. cf Bristol and West Building Society v Mothew [1998] Ch 1 at 19. McHugh Kirby Hayne remaining after the provision of the Deposit Certificate to ECCCL Further, cl 4.5 indicated that if on completion the deposit certificate as required by the Subscription Agreement was not delivered to Registries, then Minters was obliged to hold for Youyang or as it directed the whole of the balance of the subscription moneys. The Subscription Agreement dated 24 September 1993 and supporting documents were executed and payments made on that day. The disbursement authority signed on that day by ECCCL and addressed to Minters stated: "In accordance with the Subscription Agreement dated 24 September 1993 between [ECCCL] and [Youyang] we authorise you to disburse the moneys ($500,000.00) held by you under the Subscription Agreement as follows:- $256,800.00 to [DAL] (by way of bank cheque); $21,641.44 to [Minters] (made up of $21,041.44 being outstanding legal fees and $600.00 being settlement fee); $221,558.56 to [ECCCL]." With the payment of $256,800 from Minters' trust account there was procured from DAL a letter dated 24 September and addressed to ECCCL. This read: "We confirm your deposit with us value 24 September 1993. Our Ref Dealt date Principal Term Maturity 24 September 1993 AUD 256,800 (banked into our account number with BNZ Melbourne 10 years 24 September 2003 At maturity we confirm repayment of AUD 500,000 representing principal of AUD 256,800 and interest of AUD 243,200." McHugh Kirby Hayne This, as Minters admitted on the pleadings, was not a bearer certificate of deposit. It was an acknowledgment of indebtedness by DAL to ECCCL and provided Youyang with no security whatever against any insolvency of ECCCL. In a statement dated 14 October 1998 and prepared for other litigation, but in evidence in this case, Mr Lewis said that he had had no previous dealings with such certificates and thought that all that was required by the Subscription Agreement was "a document from the bank certifying that it held the monies on deposit and stating the terms on which the monies were held". However, in the cross-examination of Mr Lewis upon that statement, a different picture emerged. First, Mr Lewis agreed that by September 1992, well before Youyang had become involved, the proposal included the use of bearer certificates of deposit, which Mr Lewis understood to be a certificate of deposit negotiable by delivery. Secondly, on 31 May 1993, again before the involvement of Youyang, Minters had written to Mr Senese with respect to the form of certificates of deposit to be provided with respect to investments with ECCCL by Perpetual Trustees WA Limited ("Perpetual WA"): "Earlier we expressed our concern in relation to the form of the certificate of deposit. In particular the provisions relating to the terms of issue of the preference shares have been ignored ... for the last two completions." Minters continued: "Therefore the certificate of deposit must be in bearer form and be delivered to [Registries] at completion. We again query why the current form of the certificate of deposit is in favour of [ECCCL]. In our opinion, unless the certificate of deposit is issued in bearer form this will constitute a breach of the Subscription Agreement", and concluded: "Finally new certificates of deposit concerning the first two completions should be obtained in bearer form and all further certificates of deposit should be issued in bearer form." The result is that well before the wrongful disbursement of Youyang's funds at the completion on 24 September 1993 Minters understood both the importance of the obtaining of a deposit certificate in the requisite form to McHugh Kirby Hayne provide security for the investors and that ECCCL had a history of procuring certificates which were not in proper form. A provisional liquidator was appointed to ECCCL on 28 May 1997 and its winding up was ordered on 15 July 1997. This was after certain events to which further reference will be made later in these reasons. There was no money to pay anything to unsecured creditors such as Youyang. The upshot was that Youyang recouped none of the $500,000 investment. The Supreme Court proceedings Youyang instituted proceedings in the Equity Division of the Supreme Court of New South Wales seeking restoration of the trust fund. Minters defended the claim on the footing that Youyang had suffered no recoverable loss in consequence of the breach of trust. With respect to the $256,800 applied by ECCCL to the deposit with DAL, Brownie AJ entered judgment on 23 August 2000 for Youyang in the sum of $414,009 on the basis that this amount would yield $500,000 on 24 September 2003. This was the tenth anniversary of the completion on 24 September 1993, and the stipulated "Redemption Date" in respect of the preference shares. His Honour held that, even if there had been no breaches of trust by Minters, the balance of the investment ($221,558.56) would have been lost as "speculative". Each party appealed. The Court of Appeal, by majority (Handley JA, Young CJ in Eq), reversed the orders of Brownie AJ. Youyang appeals to this Court against that result, whilst still seeking to vary the orders at trial. Their Honours held that the acceptance of the defective deposit certificate was a breach of trust which nevertheless did not cause any loss of Youyang's funds. The third member of the Court of Appeal (Hodgson JA) would have limited the recovery by Youyang to $221,558 being the moneys disbursed at settlement by Minters to ECCCL itself. The reasons for these conclusions are discussed hereafter. In this Court, Youyang seeks the restoration and variation of the relief given at trial, so as to replace the sum of $414,009 stipulated by Brownie AJ with $500,000, together with interest pursuant to s 94 of the Supreme Court Act 1970 (NSW) ("the Supreme Court Act") from 24 September 1993 to the date of the order of this Court. Section 94 empowers an award of interest in proceedings in the Supreme Court for the recovery of any money, including any debt or damages or the value of any goods, but does not authorise the giving of interest upon interest. In some McHugh Kirby Hayne circumstances, a court of equity may require a delinquent trustee or other fiduciary to bear compound interest4. However, Youyang relies upon the statute alone and it will not be necessary to consider whether this could have been a case for compound interest. The liability of the trustee Perhaps the most important duty of a trustee is to obey the terms of the trust. On 24 September 1993 there were several breaches by Minters of the trust obligations it had undertaken to Youyang. First, Minters released the trust moneys as to $256,800 for the purchase from DAL of what was not the requisite certificate of deposit. Secondly, the balance of $221,558.56 remaining after an appropriation by Minters of $21,641.44 was paid out of Minters' trust account to ECCCL in breach of the obligation of Minters not do to so unless the payment to DAL had procured the requisite certificate of deposit. The payment to Minters appears to have been in discharge of indebtedness to the firm by ECCCL. It stands in no better light than the larger sum which ECCCL received. The result is that the whole of the $500,000 was dealt with by Minters in breach of its duties as trustee. The rigour of the rule, as Augustine Birrell QC5 put it, that it is the duty of a trustee "to adhere to the terms of his trust in all things great and small, important, and seemingly unimportant" was alleviated in England by s 3 of the Judicial Trustees Act 1896 (UK), shortly after Birrell gave his lectures6. In Victoria, s 67 of the Trustee Act 1958 (Vic) empowered the Supreme Court to relieve from personal liability trustees who had acted in breach of trust but who had done so "honestly and reasonably" and who "ought fairly to be excused for the breach"7. Minters did not attempt to place any reliance upon s 67 or comparable provisions in legislation of any other State. The facts discouraged any such attempt. 4 Hungerfords v Walker (1989) 171 CLR 125 at 148; The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 at 316 [74]. 5 The Duties and Liabilities of Trustees, (1896) at 22. Birrell was Quain Professor of Law at University College, London, 1896-1899. 6 Maguire v Makaronis (1997) 188 CLR 449 at 473-474; cf at 495-496. 7 Partridge v Equity Trustees Executors and Agency Co Ltd (1947) 75 CLR 149 at McHugh Kirby Hayne The submissions for Minters which were accepted in the Court of Appeal appear to have proceeded on the footing that the relevant breaches of trust occurred at some later time when Youyang's investment with ECCCL was lost. But the critical date (both for the operation of s 94 of the Supreme Court Act and more generally) was 24 September 1993. At that date, the trust was to be performed by the discharge by Minters of its duties with respect to payment from its trust account. Thereafter, there would be no active obligations for Minters to perform. Whilst the rights of Youyang against Minters crystallised on 24 September 1993, decisions such as that by Street J in Re Dawson (deceased); Union Fidelity Trustee Co Ltd v Perpetual Trustee Co Ltd8 indicate that the appropriate remedy, and, in particular, the quantum of pecuniary remedy, falls for determination at a later stage. In Target Holdings Ltd v Redferns9, Lord Browne-Wilkinson, with reference to Re Dawson and the judgment of McLachlin J in Canson Enterprises Ltd v Boughton & Co10, said: "A trustee who wrongly pays away trust money, like a trustee who makes an unauthorised investment, commits a breach of trust and comes under an immediate duty to remedy such breach. If immediate proceedings are brought, the court will make an immediate order requiring restoration to the trust fund of the assets wrongly distributed or, in the case of an unauthorised investment, will order the sale of the unauthorised investment and the payment of compensation for any loss suffered. But the fact that there is an accrued cause of action as soon as the breach is committed does not in my judgment mean that the quantum of the compensation payable is ultimately fixed as at the date when the breach occurred." In Canson, McLachlin J, after putting to one side considerations that arise in tort and contract law, said that in equity "the losses are to be assessed as at the time of trial, using the full benefit of hindsight"11. [1966] 2 NSWR 211. See also the judgment of Kearney J in Hagan v Waterhouse (1991) 34 NSWLR 308 at 345-346. [1996] AC 421 at 437. 10 [1991] 3 SCR 534. 11 [1991] 3 SCR 534 at 555. McHugh Kirby Hayne Equity provides a range of remedies for breach of express, resulting, implied and constructive trust and apprehended and repeated breach. This appeal concerns the provision of a money remedy for breach of an express trust. The nature of that remedy may vary to reflect the terms of the trust, and the breach of which complaint is made. Generalisations may mislead. This is not a case of providing a remedy to restore or replenish funds thereafter to be held on trusts yet to be fully performed12. Here, Minters did not hold the moneys for indeterminate or contingent beneficial interests. The result is that the right of Youyang after 24 September 1993 was not to have duly administered a restored trust fund by an order of the nature exemplified in Partridge v Equity Trustees Executors and Agency Co Ltd13. There, in a suit brought by the residuary beneficiaries of a testamentary trust, an order was made that the trustee pay a specified sum to the estate of the testator "to be invested and held on the trusts of the will". As already indicated, this was a case of breach of duty by a trustee; the complaint was not one merely of the imprudent exercise of a power, for example of a power of investment, by failure to employ the care and diligence which equity requires14. Where the complaint is of maladministration of this kind, then it has been said in the English Court of Appeal in Bristol and West Building "Equitable compensation for breach of the duty of skill and care resembles common law damages in that it is awarded by way of compensation to the plaintiff for his loss. There is no reason in principle why the common law rules of causation, remoteness of damage and measure of damages should not be applied by analogy in such a case. It should not be confused with equitable compensation for breach of fiduciary duty, which may be awarded in lieu of rescission or specific restitution." 12 Maguire v Makaronis (1997) 188 CLR 449 at 473. 13 (1947) 75 CLR 149 at 167-168. 14 Fouche v The Superannuation Fund Board (1952) 88 CLR 609 at 641. 15 [1998] Ch 1 at 17. See, further, Elliott, "Remoteness Criteria in Equity", (2002) 65 Modern Law Review 588 at 591-593. McHugh Kirby Hayne This view of the matter has been approved by the New Zealand Court of Appeal in Bank of New Zealand v New Zealand Guardian Trust Co Ltd16, on the footing that the stricter view of liability for breaches of trust causing loss to the trust estate and for breaches of the fiduciary duties of loyalty and fidelity is not required where the complaint concerns failure to exercise the necessary degree of care and diligence. Given the nature of the present case, those questions do not arise on this appeal. However, there must be a real question whether the unique foundation and goals of equity, which has the institution of the trust at its heart, warrant any assimilation even in this limited way with the measure of compensatory damages in tort and contract. It may be thought strange to decide that the precept that trustees are to be kept by courts of equity up to their duty has an application limited to the observance by trustees of some only of their duties to beneficiaries in dealing with trust funds. The point appears from the statement by McLachlin J in Canson17: "The basis of the fiduciary obligation and the rationale for equitable compensation are distinct from the tort of negligence and contract. In negligence and contract the parties are taken to be independent and equal actors, concerned primarily with their own self-interest. Consequently the law seeks a balance between enforcing obligations by awarding compensation and preserving optimum freedom for those involved in the relationship in question, communal or otherwise. The essence of a fiduciary relationship, by contrast, is that one party pledges itself to act in the best interest of the other. The fiduciary relationship has trust, not self-interest, at its core, and when breach occurs, the balance favours the person wronged." Whatever the qualification to these principles which might flow in some cases from acceptance in Australia of the reasoning in Bristol and Bank of New Zealand, they applied to the present case with undiminished cogency. 16 [1999] 1 NZLR 664 at 681. 17 [1991] 3 SCR 534 at 543. See also McLachlin J's further remarks in Norberg v Wynrib [1992] 2 SCR 226 at 272, quoted by McHugh, Gummow, Hayne and Callinan JJ in Pilmer v Duke Group Ltd (In liq) (2001) 207 CLR 165 at 196-197 McHugh Kirby Hayne However, a little more should be said of the case put by Youyang. It does not put a case of breach by the trustee of the proscriptive fiduciary obligations not to obtain an unauthorised benefit from the relationship and not to be in a position of conflict. These are identified and explained in Breen v Williams18 and Pilmer v Duke Group Ltd (In liq)19. In particular, the present is not an instance, of which the decisions of the House of Lords and Privy Council respectively in Nocton v Lord Ashburton20 and Brickenden v London Loan and Savings Co21 are the most celebrated examples, of a solicitor who has had financial transactions with a client, getting the client to prefer the personal interests of the solicitor. Thus, in Nocton, one transaction involved the solicitor getting the client to release from his mortgage a property over which, by that release, the solicitor obtained further security for a mortgage of his own. In these cases, as Viscount Haldane put it22, a court of equity may order the solicitor to replace the property improperly acquired from a client or to make compensation if that property has been lost. The essence of Youyang's complaint is shortly identified. It is the misapplication of the moneys held on trust on terms that, in the events that happened, obliged Minters to hold the moneys absolutely for Youyang and at its direction. To adapt what was said by Fry LJ in Webb v Stenton23, Minters has made itself "personally liable to pay money to [Youyang] by reason of some breach of trust or default in the performance of [its] duties as trustee". (emphasis added) This appeal turns upon the significance for the facts of the causal requirement expressed by Fry LJ in the phrase "by reason of". That serves to 18 (1996) 186 CLR 71 at 113, 137. 19 (2001) 207 CLR 165 at 197-199 [74]-[78]; cf at 216-220 [134]-[136]. 21 [1934] 3 DLR 465. 22 [1914] AC 932 at 956-957. 23 (1883) 11 QBD 518 at 530. See also the further authorities referred to by Handley and Cripps JJA in Wickstead v Browne (1992) 30 NSWLR 1 at 14-15. McHugh Kirby Hayne remind, as Mummery LJ recently put it, that "[t]here is no equitable by-pass of the need to establish causation" and that "[i]n questions of causation it is important to focus on the relevant equitable duty"24. This raises considerations having an affinity to those which determined the outcome in Target Holdings. Target Holdings Target Holdings concerned the misapplication by the solicitors for a finance company of moneys held by the solicitors on a bare trust for their client. The solicitors had received moneys from their client to be held on trust, subject to any contrary instructions of the client, to pay to or to the order of the proposed mortgagor and borrower from the client; payment out was to occur only when the property in question had been conveyed to the mortgagor and the mortgagor had executed charges in favour of the client. The solicitors acted in breach of trust in paying out the moneys prematurely and before the conditions had been satisfied, and were liable to account. However, ultimately, the property was conveyed to the mortgagor and the charges were duly executed. That was an important circumstance and one that differs from the present case. The House of Lords held in Target Holdings that the client had suffered no loss for which the solicitors were accountable in an action for breach of trust for the premature payment out of the funds. Writing extrajudicially of Target Holdings, Lord Millett has said25: "The plaintiff could not object to the acquisition of the mortgage or the disbursement by which it was obtained; it was an authorised application of what must be treated as trust money notionally restored to the trust estate on the taking of the account." The litigation in Target Holdings arose when it transpired the mortgaged property, on subsequent exercise by the client of its power of sale, was worth far less than the moneys disbursed by the solicitors. The client brought an action claiming restitution of the entire moneys held by the solicitors (£1.525 million). In the Court of Appeal, the client recovered final judgment for that amount less 24 Swindle v Harrison [1997] 4 All ER 705 at 733, 734. 25 Millett, "Equity's Place in the Law of Commerce", (1998) 114 Law Quarterly Review 214 at 227. See also Underhill and Hayton, Law Relating to Trusts and Trustees, 16th ed (2003) at 857. McHugh Kirby Hayne the sum realised on the subsequent sale of the property26. The House of Lords rejected the reasoning of the Court of Appeal, which had accepted that in cases of "immediate loss" by wrongful payment out of trust moneys, the loss was treated as established at that moment and subsequent events were to be disregarded. Their Lordships emphasised that the depositing of the moneys with the solicitor had been but one aspect of the arrangements for the financing transactions and until "the underlying commercial transaction" had been completed, the solicitors could be required to restore to their client account the moneys wrongly paid away27. Lord Browne-Wilkinson said that he did not doubt that moneys held by solicitors on client account were trust moneys or that the basic equitable principles applied to any breach of trust. However, his Lordship continued28: "[T]he basic equitable principle applicable to breach of trust is that the beneficiary is entitled to be compensated for any loss he would not have suffered but for the breach." He added: "I have no doubt that, until the underlying commercial transaction has been completed, the solicitor can be required to restore to client account moneys wrongly paid away. But to import into such trust an obligation to restore the trust fund once the transaction has been completed would be entirely artificial. ... To impose such an obligation in order to enable the beneficiary solely entitled (ie the client) to recover from the solicitor more than the client has in fact lost flies in the face of common sense and is in direct conflict with the basic principles of equitable compensation. In my judgment, once a conveyancing transaction has been completed the client has no right to have the solicitor's client account reconstituted as a 'trust fund.'" The breach of trust committed by the solicitors in Target Holdings left the client in exactly the same position as if there had been no breach; if the instructions had been obeyed, the transaction still would have gone ahead and the client suffered a loss represented by the difference between the amount advanced 26 [1994] 1 WLR 1089; [1994] 2 All ER 337. 27 [1996] AC 421 at 436. 28 [1996] AC 421 at 436. McHugh Kirby Hayne on security and the amount realised from the security. That loss would have been caused by the fraud of third parties. The present case is distinguishable from Target Holdings in at least two respects. First, Youyang was not the client of Minters, although Minters was trustee of the moneys for it. Secondly, the proposed commercial transaction, involving the provision of security to Youyang, was not after delay, as in Target Holdings, completed; the security was never provided and Minters should not have disbursed Youyang's moneys. Nevertheless, the creation of the trust in favour of Youyang was not an end in itself; the terms of the trust which bound Minters were concerned with the application of the trust moneys in completion of a larger commercial transaction with Youyang and Minters' client, ECCCL, as the principal actors. To acknowledge that situation is not necessarily to embrace any theory of reductionism whereby, notwithstanding the rigour of the rule requiring observance of the terms of the trust, in certain events "commercial" trusts do not provide for their beneficiaries the full panoply of personal and proprietary rights and remedies designed by equity29. Rather, it emphasises that, in the administration of the pecuniary remedy Youyang seeks for misapplication of its funds by Minters, regard should be had to the scope and purpose of the trust which bound Minters. These considerations in turn lend force to the application here of the proposition expressed as follows by Lord Browne-Wilkinson in Target "[T]he fact that there is an accrued cause of action as soon as the breach is committed does not in my judgment mean that the quantum of the compensation payable is ultimately fixed as at the date when the breach occurred. The quantum is fixed at the date of judgment at which date, according to the circumstances then pertaining, the compensation is assessed at the figure then necessary to put the trust estate or the beneficiary back into the position it would have been in had there been no breach. I can see no justification for 'stopping the clock' immediately in 29 cf Austin, "Moulding the Content of Fiduciary Duties", in Oakley (ed), Trends in Contemporary Trust Law, (1996) 153 at 167-168. 30 [1996] AC 421 at 437. McHugh Kirby Hayne some cases but not in others: to do so may, as in this case, lead to compensating the trust estate or the beneficiary for a loss which, on the facts known at trial, it has never suffered." Subsequent events Minters relies upon events subsequent to the completion date of 24 September 1993 as showing that Youyang seeks to render it accountable for a loss which is attributable to other circumstances. Youyang submits that it would not have suffered the loss of $500,000 but for the breaches of trust by Minters. Youyang's submissions should be accepted. In reaching that conclusion it is necessary to consider certain events subsequent to the disbursement of moneys on 24 September 1993. ECCCL wished to withdraw the deposits with DAL before the expiry of their terms, a step requiring the co-operation of DAL. The position taken by DAL was that it wanted to make sure that the investors were informed of the changes to the documentation and that DAL would no longer be holding any deposits. On 23 August 1994, Mr Senese on behalf of ECCCL wrote to Mr Lewis at Minters advising that ECCCL was: "in the process of completing and obtaining the necessary approvals from the preference shareholders for the purpose of withdrawing the deposit funds from [DAL] and depositing those funds with an overseas prime rated bank. Under this basis no interest withholding tax liability would accrue. The notifications and approvals process with respect to the preference shareholders is being conducted formally by way of a Deed Poll." Mr Lewis responded to Mr Senese by letter dated 1 September 1994 stating that Minters expressed no opinions on the tax implications of the proposed change and presumed that ECCCL had sought advice from its tax advisers. The letter added: "[W]e presume that the Deed Poll referred to in your letter is to be signed by the individual investors who have subscribed for the preference shares. We feel you will obviously require their consent to the proposal." Youyang executed the Deed Poll on 2 September 1994. Earlier, by letter dated 26 August 1994, ECCCL had asked for the prompt attention of Youyang to McHugh Kirby Hayne the execution of the Deed Poll and indicated that any questions should be directed to Mr Senese. This communication was accompanied by a notice to preference shareholders bearing the date 26 August 1994. This stated: "On advice from our taxation advisors, all the DAL deposits should be transferred directly to an overseas Investment Grade Bank to ensure that the deposits could not attract withholding tax liability." The notice commenced with the statements, both incorrect, that in accordance with the terms and conditions of the Subscription Agreement, ECCCL had procured the provision of deposit certificates for the benefit of the preference shareholders and that the deposit certificates issued by DAL were held by Registries to be applied for the benefit of the preference shareholders in accordance with the agreement with Registries. There was no statement that Youyang had not been provided with the requisite security afforded by the issue of a bearer certificate of deposit. Clause 6 of the Deed Poll provided that Youyang agreed with ECCCL that ECCCL: "may substitute a Deposit Certificate issued by a Prime Bank, which as to maturity date and maturity sum is identical to the DAL certificate of deposit for which it is substituted, and that such substitution shall constitute a variation of the Subscription Agreement and that it otherwise confirms the Subscription Agreement". (emphasis added) On 20 September 1994, ECCCL withdrew the moneys on deposit with DAL and thereafter lent them to a related company, Consolidated Capital Acceptances Ltd. On 30 January 1995, ECCCL entered into an agreement with Westpac Banking Corporation ("Westpac") for Westpac to sell to ECCCL a certificate of deposit with a face value of $502,213.61 at the maturity date of 24 September 2003. Again, this document was not a bearer certificate of deposit and was issued in favour of ECCCL. On 23 February 1995, ECCCL lodged with Registries the Westpac instrument which was substituted for the DAL certificate. In all, eleven instruments were substituted in this way: five of them in respect of investments by Perpetual WA, four by Perpetual Trustee Co Ltd, one by Youyang and the other by Letcher & Jeffery Nominees Pty Ltd. Mr Hayward Brownie AJ was not satisfied that if Mr Hayward had learned that the deposit certificate procured from DAL had not corresponded with the McHugh Kirby Hayne requirements of the Subscription Agreement, Youyang would have sought to redeem its preference shares. In any evaluation of the significance of that finding it must be remembered that, when the Deed Poll was executed, there was nothing to suggest to Mr Hayward that Registries was not holding a bearer certificate of deposit as required by the Subscription Agreement. Right up to the time when he heard of the liquidation of ECCCL, Mr Hayward had thought that his investment was performing satisfactorily. In any event, Brownie AJ did not find, as Handley JA later assumed he had found, that if Mr Hayward had been told about the form of the certificate he would not have been concerned and would have proceeded with the investment. The matter was accurately put in the following passage from the judgment of Hodgson JA: "There is in my opinion a world of difference between, on the one hand, an investor seeking to reverse an investment that has already been made because of a matter of the form of a certificate considered in isolation and, on the other hand, a proposed investor instructing a trustee to go ahead and make an investment notwithstanding that the party to whom the money is to be entrusted is deliberately breaching its contract by not proffering the security for the investment which it undertook to provide. In my opinion, the primary judge's finding concerning the former matter says nothing about the latter." His Honour added: "In my opinion, if a trustee wishes to assert that a breach of trust caused no damage for the reason that the beneficiary would, if asked, have authorised the very action which constituted the breach of trust, then there is at least an evidentiary onus on the trustee to make good that proposition." The significance attached in the Court of Appeal to the supervening event, being the execution of the Deed Poll, appears to have proceeded upon a misunderstanding. For example, Handley JA reasoned: "The funds remained intact and safe until [Youyang's] [D]eed [P]oll of 2 September 1994 was delivered to [DAL]." The fate of the investment in ECCCL appears to have been treated as synonymous with the trustee relationship between Youyang and Minters. McHugh Kirby Hayne However, the moneys which ECCCL had held on deposit with DAL never provided the security for the investment made by Youyang. The security was to be provided by a bearer certificate of deposit in the proper form lodged with Registries. The subsequent release of the moneys held by ECCCL on investment with DAL had no effect upon the deficiency in Youyang's position. The "non-bearer" instrument had been lodged with Registries, leaving Youyang's investment unsecured. After the events of 1994 and the execution of the Deed Poll, that position did not change. Youyang's investment was still unsecured. Clause 6 of the Deed Poll had authorised ECCCL to substitute a deposit certificate but only on the same terms as those required by the Subscription Agreement. The execution of the Deed Poll and the implementation of these steps thereunder could be of significance on questions of causation if what had been brought about was the release of an existing bearer certificate of deposit and its replacement by a "non-bearer" instrument. But that was not the order of events that transpired. Youyang was not provided at any stage with the security for which it had bargained. It is not to the point that, in addition to the breaches of trust by Minters, there may also have been dishonest and discreditable subsequent acts by third parties which led to the loss of the funds31. To present the case by fixing upon those subsequent acts, to adopt the remarks of Bowen LJ in Magnus v Queensland National Bank32, would be "an ocular illusion", because the loss of the trust funds occurred as soon as the trustee wrongly disbursed them, at the completion on 24 September 1993. The reasoning of the Court of Appeal Handley JA reasoned that the breach of trust in making the payment to ECCCL "was consequential on the earlier breach and was not an independent breach in its own right" and did "not enlarge [Youyang's] rights against [Minters]". Young CJ in Eq held that the second breach was "consequential" in the sense that "[t]he act of paying over the balance of the fund to ECCCL caused no further loss" to the loss of $500,000 which "occurred when the bearer certificate was not obtained". 31 McCann v Switzerland Insurance (2000) 203 CLR 579 at 588 [18], 621-622 [135]; Magnus v Queensland National Bank (1888) 37 Ch D 466 at 471-472, 477, 32 (1888) 37 Ch D 466 at 480. McHugh Kirby Hayne These statements were made on the footing that there was to be no recovery in respect of the first breach, by reason of the subsequent events concerning the Deed Poll. But, as indicated above, that reasoning is to be rejected. That being so, there is no ground to dismiss from consideration the breach respecting the balance of the $500,000. Each component of the $500,000 was paid away in breach of trust and not one cent of the moneys was recouped by Youyang from the "investment" with ECCCL. Young CJ in Eq also spoke of Youyang as having, apparently by the Deed Poll, "release[d]" its right to compensation in respect of the first breach. It should be noted that in this Court Minters correctly did not seek to maintain a proposition that Youyang at any stage had released any claims it might have against Minters. Hodgson JA also held that Brownie AJ had erred in finding that a loss had resulted from the first breach of trust. But in respect of the payment to ECCCL his Honour held that, as between Youyang and Minters and as a matter of common sense and experience, the subsequent failure of the investment made with the payment was caused by that breach of trust by Minters. Something more should be said respecting Hodgson JA's holding as to the first breach. This was that (i) DAL had refused to pay over the money evidenced by the ECCCL certificate without the consent of Youyang, so that, until the Deed Poll was executed and DAL left the scene, Youyang had suffered "no compensable loss from the first breach of trust"; (ii) "the loss of money due to the [D]eed [P]oll" could not be seen as caused by Minters' breach, "unless the entry into the [D]eed [P]oll can itself be regarded as a consequence" of that breach; (iii) it was for Youyang to plead and demonstrate (ii), but it had not done so. There are several difficulties with step (i) in this reasoning and thus with (ii) and (iii), even if the burden placed upon Youyang by (iii) could otherwise be supported. First, the reference to "no compensable loss" was misleading in this context. The trust moneys were lost when paid out in breach of trust. That is the injuria with which equity is concerned, not the failure of the investment transaction33. By analogy with common law terms, the damage was then suffered; subsequent events went to quantification. Secondly, at no time did 33 cf Crofter Hand Woven Harris Tweed Co v Veitch [1942] AC 435 at 442; Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 526 [93]. McHugh Kirby Hayne Youyang have the benefit of the security against the possible insolvency of ECCCL which was to have been provided by the bearer certificate. Thirdly, the stance taken by DAL may have reflected caution lest it be embroiled as a third party accountable to Youyang for breach of trust or duty by, it would appear, ECCCL; but the fact remained that the deposit held by DAL had been made by ECCCL to whom DAL was indebted. The reasoning of the Court of Appeal cannot stand as an answer to the case put by Youyang. Orders The appeal to this Court should be allowed with costs. Orders 1, 2, 3, 4, 5, 7 and 8 made by the Court of Appeal on 8 October 2001 should be set aside, and in place thereof two orders should be made. They are that (i) the appeal to that Court by Youyang be allowed and the cross-appeal by Minters be dismissed, in each case with costs to be paid by Minters, and (ii) Orders 3, 4, 5 and 6 made by Brownie AJ on 16 August 2000 be set aside, Minters be ordered to pay the costs of Youyang of the proceedings at first instance, and Order 1 be varied so as to replace the amount of $414,009 with $500,000, together with interest thereon pursuant to s 94 of the Supreme Court Act from 24 September 1993 to the date of these orders by the High Court. The orders of this Court will leave standing the order of Brownie AJ (Order 2) entering judgment for Youyang on the Amended Cross-Claim by Minters for contribution and Order 6 made by the Court of Appeal dismissing Minters' cross-appeal. The reference in proposed order (ii) above does not fix a sum for the interest under s 94. The parties should have 28 days within which to file a proposed consent order to vary order (ii) by adding therein a reference to that sum. In the absence of such a proposed consent order, each party should have liberty to restore the matter to a single Justice of this Court for further directions.
HIGH COURT OF AUSTRALIA Matter No S513/2004 THE WATERWAYS AUTHORITY APPELLANT AND DANIEL GERARD FITZGIBBON & ORS RESPONDENTS Matter No S98/2005 MOSMAN MUNICIPAL COUNCIL APPLICANT AND DANIEL GERARD FITZGIBBON &ORS RESPONDENTS Matter No S131/2005 MIDDLE HARBOUR YACHT CLUB APPLICANT AND DANIEL GERARD FITZGIBBON & ORS RESPONDENTS The Waterways Authority v Fitzgibbon Mosman Municipal Council v Fitzgibbon Middle Harbour Yacht Club v Fitzgibbon [2005] HCA 57 5 October 2005 S513/2004, S98/2005 & S131/2005 ORDER The time within which the second and third respondents may apply for special leave to appeal is extended, special leave to appeal is granted, the applications are to be treated as appeals and heard with the appellant's appeal. Each appeal is allowed with costs. Set aside orders 3 and 4 of the Court of Appeal of the Supreme Court of New South Wales made on 3 December 2003 and: In place of order 3, order that there be a new trial generally; In place of order 4, order that the respondents in the Court of Appeal pay the costs of the appeal of the appellant in that Court and that the costs of the trial be costs in the new trial. On appeal from the Supreme Court of New South Wales Representation: Matter No S513/2004 J L Glissan QC with J S Whyte for the appellant (instructed by McCabe Terrill) D F Jackson QC with D A Wheelahan QC and E G Romaniuk for the first respondent (instructed by Paul A. Curtis & Co) B W Walker SC with R J Cheney for the second respondent (instructed by M T McCulloch SC with S P W Glascott for the third respondent (instructed by Phillips Fox) Matter No S98/2005 M T McCulloch SC with S P W Glascott for the applicant (instructed by D F Jackson QC with D A Wheelahan QC and E G Romaniuk for the first respondent (instructed by Paul A. Curtis & Co) J L Glissan QC with J S Whyte for the second respondent (instructed by McCabe Terrill) B W Walker SC with R J Cheney for the third respondent (instructed by Matter No S131/2005 B W Walker SC with R J Cheney for the applicant (instructed by Riley Gray- Spencer) D F Jackson QC with D A Wheelahan QC and E G Romaniuk for the first respondent (instructed by Paul A. Cutis & Co) J L Glissan QC with J S Whyte for the second respondent (instructed by McCabe Terrill) M T McCulloch SC with S P W Glascott for the third respondent (instructed by Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS The Waterways Authority v Fitzgibbon Mosman Municipal Council v Fitzgibbon Middle Harbour Yacht Club v Fitzgibbon Appeal and new trial – Practice and Procedure – New South Wales – Powers of court – Sufficiency of trial judge's reasons – Miscarriage of fact-finding process – Exercise of power to order new trial – New trial ordered by Court of Appeal on a limited factual basis – Substituted factual finding decisive on issue of causation – Whether Court of Appeal was right to order a new trial on this limited basis. Torts – Negligence – Causation – Person suffered injury when entering water from jetty – Absence of a handrail – Public authorities and yacht club responsible for design or approval of jetty – Whether person entered the water deliberately – Contributory negligence. Supreme Court Act 1970 (NSW), s 75A. Supreme Court Rules 1970 (NSW), Pt 51 r 23. GLEESON CJ. The facts of the case appear from the reasons of Callinan J. Three issues were argued before this Court. First, was the Court of Appeal in error in reversing the decision of the trial judge to dismiss the first respondent's action on a factual basis that went to the issue of causation? Secondly, if the answer to the first question is in the negative, did the Court of Appeal err in the exercise of its power to send the matter back for a new trial on a certain, limited, basis? Thirdly, did the Court of Appeal err in its order as to costs? It was the second issue that was the principal focus of attention in this Court. Nevertheless, it is necessary to begin by addressing the first issue, because that sets the context in which the form of order for a new trial was made. The first respondent and a number of other young people, while attending a social function at the Middle Harbour Yacht Club, engaged in some horseplay on the jetty outside the club. One of their number, Nathan Wilmot, was thrown from the jetty into the harbour. A witness, Luke Molloy, said the first respondent was "in the middle" of the group that escorted Nathan Wilmot out of the club onto the jetty, to be thrown in. There was a dispute about that. Soon afterwards, the first respondent, to use a neutral expression, entered the water himself. At the point from which he left the jetty, it was about one and a half metres above water level, and the water was about eight inches deep. He hit his face on the sand and suffered catastrophic injury. The first respondent sued the appellant, and the second and third respondents, for damages for negligence. The jetty (at which boats would tie up, and onto which people would step from boats) had no handrail. The appellant and the other two respondents were, in one way or another, said to be responsible for the design, or the approval, of the jetty and, in particular, the absence of a handrail. The first respondent's case was that he was jostled or pushed by some of the other people on the jetty, lost his balance, and fell into the water. The absence of any handrail was said to be a cause of his injuries. (There was also a complaint about a toe-board that may have contributed to his instability.) There were issues as to whether the absence of a handrail involved negligence, and as to contributory negligence and damages. As will appear, none of those issues were decided at trial. There was a dispute about how the first respondent came to enter the water. On one possible view of the facts, the design of the jetty, and the absence of the handrail, had nothing to do with what occurred. It was part of the defence case at trial that the first respondent had deliberately dived or plunged into the water, not because he overbalanced, but because he thought Nathan Wilmot was in trouble and he intended to go to his assistance. This view of the facts was based on the evidence of Dr Trevithick, who was the emergency registrar at the hospital to which the first respondent was taken by ambulance. The doctor said he recalled that the first respondent, who was lucid, told him that he dived into the water because he thought his friend was at risk of drowning, and that, when he dived, he hit his face on the bottom. Dr Trevithick's evidence was supported by the notes he made in the hospital records. The notes said: "Visiting Sydney with friends for sailing regatta. Had several alcoholic drinks with friends. One friend was thrown into the water at the Spit and pretended to drown so Daniel dived 1.5m into shallow water, striking his mouth on the bottom - he was paralysed immediately." A number of the first respondent's companions, including Luke Molloy, gave evidence about the occurrence. As would be expected, some of them did not profess to be able to give a clear account of how the first respondent came to enter the water, and their evidence was in some respects inconsistent and contradictory. Dr Trevithick's note. The first respondent, who could not recall what he told Dr Trevithick, denied that anything of the kind recorded by Dr Trevithick happened. He said he was jostled or pushed, and lost his balance. the account of events recorded It did not support The proposition that the first respondent "dived" into the water was not necessarily inconsistent with the evidence that he and his companions gave at trial. For example, one of his companions, Matthew von Bibra, made a statement in which he said: "I was looking in Dan's direction and I saw him fall forward towards the water as if he had for some reason lost his balance. At this time I could see that there were people either side and behind him. As he fell forward I could see his arms outstretched trying to regain his balance. But at the 'point of no return' Dan put his arms in front of him like a person diving and then he hit the water." What was, however, completely inconsistent with the first respondent's case, and, if accepted, destructive of his case on causation, was the proposition that he entered the water deliberately. Again, the explanation recorded by Dr Trevithick, which was that he wanted to help Nathan Wilmot, and the proposition that the first respondent entered the water voluntarily, did not necessarily stand or fall together, although as a practical matter no other reason was given as to why the first respondent would have jumped or dived in. The trial judge, Newman AJ, accepted the evidence of Dr Trevithick. That evidence was supported, not only by Dr Trevithick's note, set out above, but also to some extent, although less cogently, by an ambulance record and by records made by other members of the hospital staff. The trial judge said: "[The defendants] all alleged that the plaintiff did not enter the water as a result of falling because he had been either jostled or pushed but rather as a result of him deliberately entering the water by diving from the jetty's edge. In other words, the defendants contended that the plaintiff's entry into the water was the result of his own deliberate act and that the presence or absence of a handrail on the jetty's edge was irrelevant to his mode of entry." Having recorded in that form a question of fact relevant to one of the issues in the case (causation), Newman AJ went on to resolve that issue in favour of the defendants on the basis of his acceptance of the evidence of Dr Trevithick and his preference for that evidence over the evidence of the first respondent and his companions. The first respondent appealed to the Court of Appeal. The grounds of appeal included complaints that Newman AJ had failed to give adequate reasons, and had failed adequately to consider the whole of the evidence. The notice of appeal sought either a resolution of the issue of liability in favour of the plaintiff and a new trial on damages or, alternatively, a new trial on all issues. In the course of argument in the Court of Appeal, brief, although rather dismissive, reference was made to an intermediate possibility. It was "in play", but very little argument was devoted to it. In the Court of Appeal, Foster AJA, with whom Meagher JA and Santow JA agreed, undertook a close examination of all the evidence. He concluded that Newman AJ had failed to give adequate reasons for his decision. In particular, he concluded that Newman AJ had failed to examine with sufficient care the evidence of the first respondent's witnesses, or to explain why important parts of that evidence were apparently rejected. As to Dr Trevithick, he said his evidence was largely dependent on his notes, that the notes were made for purposes of medical management, that Dr Trevithick's record of the purpose of the first respondent's entry into the water was not supported by any other evidence, and that, having regard to the rest of the evidence as to what happened, the supposed account of an attempted rescue was "nonsensical". He accepted Newman AJ's finding that Dr Trevithick was an honest witness, but concluded that his notes were unreliable. The finding that the first respondent deliberately entered the water was "glaringly improbable". What has been said so far explains how the first issue in the appeal to this Court arises. On that issue, as the judgment of Foster AJA demonstrated, the reasoning of the trial judge failed to deal adequately with important aspects of the evidence called on behalf of the first respondent at trial. Indeed, much of that evidence was neither referred to nor analysed. Foster AJA concluded that "the body of such evidence ... could not and should not have been rejected on the basis of the evidence given by Dr Trevithick and the material in the notes." It was one thing for the Court of Appeal to conclude that the trial judge had not done justice to the first respondent's case, and that there should be a new trial. The further conclusion, that the evidence of the first respondent's witnesses should have been accepted, and that a finding based on Dr Trevithick's evidence and notes was "glaringly improbable", is another matter. A puzzling feature of the case is that, on the evidence called by the first respondent, there appears to be no rational explanation of how Dr Trevithick could have conceived the idea, which he recorded in his notes, that the first respondent thought his friend in the water was in trouble and went in to assist him. Neither the first respondent nor any of the people who took him to the hospital acknowledged telling Dr Trevithick that. It may be that the doctor misinterpreted or misunderstood something that was said to him by the first respondent. The first respondent did not claim to know the depth of the water where he entered it. The "glaring improbability" of the conclusion that he entered the water deliberately was thought to arise mainly from the fact that, on the evidence of the first respondent and his witnesses, there was nothing about the behaviour of Nathan Wilmot to indicate that he had any need for assistance. As to the second issue, it was obvious that, unless the Court of Appeal was going to uphold the decision of Newman AJ, there would have to be a new trial. On any view, there were unresolved issues concerning liability, contributory negligence, and damages. All the evidence relating to those issues was called before Newman AJ. As to liability, for example, there was a lively dispute about whether there should have been a handrail on the jetty. As to contributory negligence, the dynamics of the situation in which the first respondent was involved, and the nature and extent of his participation, were the subject of conflicting evidence. The Court of Appeal decided that the matter should go back for a new trial, but with a positive finding in favour of the first respondent on the question of fact identified by the trial judge. The Court of Appeal ordered: "That there be a new trial of the action conducted on the basis that it is established in favour of the appellant that, through being jostled or pushed, he lost his balance and fell from the jetty into the water." The Court of Appeal had wide power under s 75A of the Supreme Court Act 1970 (NSW) and the Supreme Court Rules Pt 51 r 23. It could, for example, direct admissions to be made by any party for the purpose of a new trial. The question is not the width of the power, but the appropriateness of the manner of its exercise in the circumstances. There are two closely related considerations. Should the Court of Appeal have substituted for the finding of Newman AJ a positive finding as to how the first respondent came to enter the water? Should it then have ordered a new trial "on the basis of" that finding? There was some argument in this Court about the precise effect of the order made by the Court of Appeal. There is little doubt about what was intended. The Court of Appeal took Newman AJ's formulation of a question of fact that arose from the way the case was argued at trial. It was a fact relevant to a fact in issue, that is to say, causation. If the first respondent deliberately leapt into the water, then the absence of a handrail, even if one was required by a duty of care owed to the first respondent by one or more of the defendants, had no causal connection with the damage. The Court of Appeal considered that it should both reverse the trial judge's finding of fact, and preserve for the first respondent the benefit of that reversal at the new trial. Conducting a new trial on the basis of a certain view of the primary facts is not impossible. Expressing the order in terms of the Act and the Rules, it is as though the defendants were required to make an admission of fact. However, the trial judge's finding of fact was based upon consideration of the credibility of the first respondent, and the witnesses called in his case, as well as Dr Trevithick. Furthermore, it may have implications, unexplored by Newman AJ or the Court of Appeal, with respect to the credibility of those witnesses which touch upon other unresolved issues in the case. The evidence about the circumstances in which the first respondent entered the water was contradictory and confused. The dispute as to whether the first respondent deliberately entered the water to assist Mr Wilmot was not the only area of disagreement or uncertainty. The witness Luke Molloy gave evidence that was significantly different from that of the first respondent in some respects, although on the question of seeking to assist Nathan Wilmot it supported the first respondent. Luke Molloy said the first respondent was in the middle of a group of 10 people who took Nathan Wilmot out of the Club to throw him in the water. If, as Luke Molloy's evidence might suggest, and contrary to the first respondent's evidence, the first respondent was an active participant in the dunking of Nathan Wilmot (a matter about which the Court of Appeal made no finding), and a small crowd of young people, including the first respondent, had been milling around on the jetty, then the problem for a trial judge was not so simple or clear-cut as asking: did he jump or was he pushed? The situation could have been more complex, and issues both of causation and contributory negligence could be affected by a decision, at a new trial, as to exactly what went on. It is apparent that the Court of Appeal made the focus of its attention the trial judge's finding on a specific factual question. However, the facts relevant to the issues that arose on the pleadings were wider and more complex. In ordering a new trial on both liability (including contributory negligence) and damages, and yet at the same time seeking to preserve its own finding on a particular factual question, the Court of Appeal did not in its own reasons examine the implications for the practical conduct of the new trial. The fact which the Court of Appeal found (that the first respondent, through being jostled or pushed lost his balance and fell into the water), and then by its order made the basis on which the new trial was to be conducted, is only one of a number of facts relevant to facts in issue in the case, and it is not a fact that can be isolated from all other facts that remain in controversy. Newman AJ isolated it because, if decided one way, it meant that the first respondent's case must fail on the issue of causation, and no other issues arose for decision. The converse, however, does not hold. There remain for decision a number of unresolved questions which will depend upon the reliability of the evidence of other witnesses, including that of the first respondent. At a new trial, the trial judge will have to hear evidence, and make findings about, the circumstances of the accident. The evidence will not necessarily be the same as the evidence at the first trial. It could be significantly different. It is in the interests of justice that the judge hearing the second trial should be in a position to make a fresh appreciation of the whole of the relevant evidence, unconstrained by an artificially isolated assumption that reflects the first respondent's forensic success in the Court of Appeal. The appellant should succeed on the second issue. The third issue concerns costs. The Court of Appeal, despite ordering a new trial, ordered the other parties to pay the first respondent's costs of the first trial, notwithstanding that all the other issues in the case were litigated before the judge. This unusual costs order is consistent with, and reflects, the Court of Appeal's approach to the second issue. In a sense, it makes plain what the Court of Appeal was seeking to achieve. It was regarded as the logical corollary of what was done in relation to the order constraining the basis on which the new trial was to be conducted. It can only be justified on the basis that the first trial is to be treated as a trial of a separate issue, being the factual question formulated by Newman AJ. Having reversed Newman AJ on that question, and substituted its own finding, which was to become the basis for the continuation of the litigation, the Court of Appeal ordered the defendants to pay the costs of the first trial. That, however, simply exposes the problem in another form. The question formulated by Newman AJ could never properly have been identified as an issue for a separate trial. It is not a separate issue. It is one of a number of interconnected questions of fact relevant to facts in issue. If resolved in one way, it was decisive on the issue of causation, but if resolved differently it was not decisive of any issue, and the manner of its resolution could affect, and could be affected by, the approach taken to other questions. I respectfully disagree with the Court of Appeal's decision on the third issue for the same reason as I disagree with its decision on the second issue, but in my view they are really only two sides of the one coin. I would make the following orders. The second and third respondents, who seek special leave to appeal out of time (the appellant having previously been granted such special leave), should have extensions of time to apply for special leave to appeal, such special leave to appeal should be granted, and the applications should be treated as appeals and heard with the appellant's appeal. The appeals should be allowed with costs. Orders 3 and 4 of the Court of Appeal should be set aside. In place of order 3 it should be ordered that there be a new trial of the action generally. In place of order 4 it should be ordered that the respondents in the Court of Appeal pay the costs of the appeal of the appellant in that Court, and that the costs of the trial be costs in the new trial. McHugh 25 McHUGH J. I agree with the orders proposed by the Chief Justice in this matter. I agree with his Honour's reasons and also with the additional reasons of GUMMOW J. Orders should be made as proposed by the Chief Justice. I agree with the reasons of the Chief Justice and of Hayne J. Kirby KIRBY AND HEYDON JJ. At Christmas time in 1996 Mr Nathan Wilmot won a national championship yachting race in Hobart. It was a tradition in yachting circles to throw winners of such races into the water, but it proved impossible to comply with this tradition at that time in Hobart. On the evening of 29 March 1997, a yachting party at the Middle Harbour Yacht Club took place in connection with a regatta held in Sydney. Mr Wilmot attended. The plaintiff, a successful and promising yachtsman, also attended. He had never been there before, and he arrived after dark. Some guests decided to throw Mr Wilmot into the water in belated compliance with the tradition not observed in Hobart. This they did. The plaintiff saw him in the water. The plaintiff then himself entered the water from a jetty headfirst. He was rendered quadriplegic. The plaintiff described his injury as having happened because he was accidentally nudged from behind by other watchers. He lost his balance. He could not recover it because his feet were "butted up against" a toe-board about 200 millimetres high on the edge of the jetty. He began to fall. There being no handrail to restrain his fall, he tried to counteract it by swinging his arms. However, he hit the shallow bottom of the harbour. According to the defendants, on the other hand, the plaintiff's injury happened because he deliberately dived into the water. The defendants' case was not supported by any eyewitnesses. Its prime support came from an alleged admission recorded by Dr Trevithick, who treated the plaintiff on his arrival at hospital, to the effect that he had dived because he thought Mr Wilmot was drowning. The plaintiff's case was supported by several eyewitnesses, both to the fact that he did not enter the water voluntarily, and to the fact that Mr Wilmot, far from drowning, was standing up in shallow water. The plaintiff's case was also supported by a complaint of being pushed which he made immediately after the injury. The trial judge found for the defendants in reliance on Dr Trevithick's evidence. The Court of Appeal, while accepting Dr Trevithick's honesty and in large measure his reliability, found the trial judge's finding that the plaintiff had intentionally entered the water to be glaringly improbable. It reversed the trial judge's finding, and ordered that a new trial be conducted on the limited basis that it was established in favour of the plaintiff that, through being jostled or pushed, he lost his balance and fell from the jetty into the water. The consequences of the trial judge's approach The trial in this matter took place over 10 days – a working fortnight. But it was not heard in a fortnight. For reasons which may have been good but are not clear, it was heard over more than two months – on 5-6, 9-10, 12-13, 16 and 19 September, 17 October and 15 November 2002. Thus, although it took 10 days, it proceeded in a staggered manner. This was likely to have disrupted continuity. It was also likely to have inflated costs. The first defendant was an agency of the Government of the State of New South Wales. It owned the land, and was the authority having the responsibility of approving the structures on it. The second was the yacht club; it was lessee and occupier of the land, and had organised the party. The third was the local council. As between the plaintiff and the defendants, the defendants put in issue duty, breach, causation, contributory negligence and quantum. However, the case between the plaintiff and the defendants, although turning on detailed evidence, some of it difficult to reconcile, was relatively simple. As between the defendants, each of the defendants' cross-claims contended that if the plaintiff succeeded on the basis that there should have been a handrail, the legal responsibility for failure to provide it lay with some other defendant. The issues between the defendants were of considerable legal complexity. The trial judge was an Acting Justice of the Supreme Court of New South Wales. He delivered a reserved judgment on 20 December 2002. That judgment dealt with only one of the questions in the case. It was not a question isolated by the pleadings. The trial judge described it several times as the "prime factual issue" or "prime factual case". Indeed it was, in the sense that if the trial judge found against the plaintiff on that issue, and the plaintiff enjoyed no success on appeal, it was inevitable that the plaintiff would have to lose. It was an issue which went to an aspect of causation, and to an aspect of the defendants' contributory negligence case. But the trial judge dealt with no other issues. All the members of this Court are of opinion that there must be a new trial at least on those other issues. Ordering a new trial is "[i]n all cases ... a most deplorable result … ."1 In this case it is a scandalous result. In our view the Court of Appeal so regarded it and properly turned its attention to how, within the large powers that Parliament has conferred on that Court, such a scandalous outcome might properly be palliated. The trial judge had power to order a question to be tried separately from other questions pursuant to the Rules of the Supreme Court of New South Wales, Pt 31 r 2, which was then in force. He did not exercise it. It is notorious that the course of ordering that a preliminary separate question be tried, and deciding the case on that question, rather than deciding the case on all issues, is a course which can create graver difficulties than those which it is intended to solve. This case illustrates that even graver difficulties can flow from deciding a case on a single issue isolated by the trial judge without instigation by or consent from the parties. 1 Dakhyl v Labouchere [1908] 2 KB 325 (n) at 327 per Lord Loreburn LC. Kirby The course adopted by the trial judge preserved to the plaintiff an appeal to the Court of Appeal as of right, since an appeal from a decision on a question decided separately pursuant to a Pt 31 r 2 order would have required leave: Supreme Court Act 1970 (NSW), s 103. But in other respects the course adopted has had calamitous effects, and not only for the plaintiff. The point of a Pt 31 r 2 order is that usually it relates to some critical preliminary question which, if decided one way, will terminate the proceedings and save the parties the costs of litigating other questions. Yet here the parties litigated all the issues at the trial, they have not been saved any costs, and as a result of the trial judge's failure to decide the other questions in the case the parties are now exposed to the costs and other pains of a second trial which a different course on his part may have rendered unnecessary. That is because had the trial judge decided all the issues in the case, treating each conclusion adverse to the plaintiff as a separate ground of decision, it might be that in the Court of Appeal or this Court it would have become apparent that the plaintiff could not succeed in a second trial whatever errors the trial judge made in deciding the "prime factual issue". Instead the plaintiff, and each of the three defendants, are now to be exposed to a new trial on all issues (on the view adopted by Gleeson CJ, McHugh J, Gummow J and Hayne J) or on all issues but the "prime factual issue" (on the view adopted by the Court of Appeal and proposed by Callinan J). Whatever form it takes, the second trial could well last almost as long as the first. It may last longer if the defendants adopt different tactics at the second trial from those adopted at the first, as from time to time in their submissions in this Court they suggested they would. The proceedings caused, and continue to cause, each defendant to be exposed to the risk of a multi-million dollar verdict. The Court knows nothing of whether any of the defendants can rely, in whole or in part, on the benefit of a contract of insurance. Nor does the Court know whether the other party to that contract is, or will remain, solvent. Even if the matter is approached in non-monetary terms – that is, whether or not there are solvent insurers in place, and whether or not each defendant can face their absence, if they are absent, with equanimity – there will be individuals within the camps of the three defendants to whom the first trial caused distress, and to whom a second trial will cause additional distress. That distress will take the form of "strain" and "anxiety" – for they, like the plaintiff, must, before the trial started, have had a "legitimate expectation that the trial [would] determine the issues one way or the other."2 If, 2 Ketteman v Hansel Properties Ltd [1987] AC 189 at 220 per Lord Griffiths, approved in State Pollution Control Commission v Australian Iron & Steel Pty Ltd (1992) 29 NSWLR 487 at 494 per Gleeson CJ. on the other hand, the matter is approached at the crude level of the defendants' financial self-interest, although the Court of Appeal's order that they pay the costs of the first trial will not stand, they will be much worse off. They will suffer financial costs and lost opportunity costs not capable of being repaired by a costs order even if they win the second trial. They will have doubled their exposure to that part of their costs not covered by a costs order in their favour. And an order that the plaintiff pay the costs of both trials will not be much comfort. The Court knows nothing of the plaintiff's financial position, but ordinarily the chances of a man rendered quadriplegic at the age of 20 being able to meet an order to pay the defendants' costs of one trial, let alone two, nearly a decade later are extremely remote. In turn, the plaintiff is in an even worse position than the defendants. For him the strain and anxiety of a second trial will be very great. The legitimacy of his expectation that the trial of his action would determine all the issues was very high. Quite apart from the ordinary emotions he would have experienced on losing the case, his disappointment about the obstruction of that expectation must have been very painful. He did not ask the trial judge to decide the "prime" issue in isolation. Indeed, the "prime factual issue" did not emerge over the years between the accident in 1997 and the start of the proceedings in 1999. Thus each of the defendants pleaded that the damage suffered by the plaintiff had been contributed to by his negligence, but none of the particulars relied on alleged that he had intentionally entered the water. Nor did the "prime factual issue" emerge over the years between the start of the proceedings in 1999 and the trial in 2002. Thus it did not appear in differential case management documents filed by the defendants before the trial. Rather, in those documents the first and third defendants did not deny or seek to qualify the plaintiff's contention in his differential case management document that he simply "fell … and struck his head on the sandy bottom" in circumstances where there was no hand railing or warning as to the depth of the water. The second defendant went further, admitting the correctness of the evidence which the plaintiff eventually gave: "[T]he Plaintiff was pushed from the jetty area and struck his head on the sandy bottom." It is not clear whether that significant admission was ever withdrawn. The "prime factual issue" only emerged for the first time, as an issue between the parties, during the cross-examination of the plaintiff, and over the unavailing protest of counsel for the plaintiff. The contribution which the defendants made to what the trial judge did was to urge the contention that the plaintiff had to fail if the "prime factual issue" were decided in their favour. At trial, the plaintiff pointed to the absence of a handrail, while, as the trial judge recorded, "the defendants contended that the plaintiff's entry into the water was the result of his own deliberate act and that the presence or absence of a handrail on the jetty's edge was irrelevant to his mode of entry." The plaintiff, like the defendants, has been left with the consequences of the "prime factual issue" being decided against him by the trial judge in a manner which, in the opinion of Kirby the Court of Appeal and of this Court, is so erroneous that there must be a new trial. The quality of, and the gaps in, the trial judge's reasoning, as Foster AJA said while delivering the leading judgment of the Court of Appeal, "could not … have failed to leave the [plaintiff] with a significant sense of grievance. He would be not only disappointed in the result but disturbed by it."3 Counsel for the plaintiff took up these terrible words in the following submission to this Court: "[T]he judge was dealing with someone who had suffered, very suddenly, injuries which changed him from being a prominent young Australian athlete to someone who is massively crippled. The case did not, with respect, merit being dealt with by, in effect, seizing on a basis which would involve the necessity to resolve the fewest issues or a basis which would obviate the need to determine more complicated questions. Your Honours, one is left, and I say so with respect, with the distinct and somewhat disturbing impression that the primary judge's approach was tailored … to arrive at a situation which had the result that the more complex issues did not have to be dealt with. That may well account for the underlying tone of a degree of distress which one sees, we would submit, in the reasons of the Court of Appeal and a distress which reflects a perception that the Supreme Court had not really performed its function and that the approach to the resolution of the case at first instance had been one which was expeditious rather than that which was proper. In our submission, the Court of Appeal adopted the correct approach in deciding the issue itself." In our view, this was entirely correct. It would, incidentally, have been equally correct if the plaintiff had not been a prominent athlete, or not young, or not Australian, or less than massively crippled. Unless there are very good reasons to the contrary, personal injuries cases at least merit treatment of the kind advocated by counsel for the plaintiff. The result of that treatment not being given to the plaintiff in this case is completely unsatisfactory. The approach of confining the decision to the "prime factual issue" overlooked, or betrayed an indifference to, the extreme and well-known difficulties which injured plaintiffs 3 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [106], adapting the words of Chilwell J in Connell v Auckland City Council [1977] 1 NZLR 630 at 634, as they had been by Kirby P in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 259. without assets have in mounting complex litigation against defendants who, without impropriety, are seeking to take every step the law affords them to preserve their positions. They may have to marshal lay witnesses not necessarily sympathetic to them. They may have to seek documents from the defendants, or from third parties who may not be amenable to that course. They may have to find expert witnesses and persuade solicitors to pay them. They may have to appeal to the charity of legal advisers prepared to fund litigation without any certainty that either the just fees of the unpaid advisers will ever be paid, or the other expenditures which have been made by those advisers will ever be reimbursed. The need for a second trial necessarily involves complete or partial repetition of each of these steps. The willingness of witnesses and others to assist is likely to decline. The capacity of witnesses to remember events nearly a decade ago will be reduced. Litigants in Australian courts in this position – indeed any litigants in those courts – deserve better treatment than the parties in this case received. There are, at least potentially, five issues. Did the defendants obtain natural justice in the Court of Appeal? The first issue is whether the defendants were denied natural justice in the Court of Appeal on the question of whether a new trial limited to only some issues should be ordered. There is no utility in examining the point, since the parties have had a full opportunity in this Court to debate what order, if any, should be made about a new trial. The defendants kept trying to link this issue to other issues, but in truth it had no relevance to those other issues. Should a new trial of any kind have been ordered? Errors of the primary judge. The second issue is whether the Court of Appeal erred in concluding that a new trial of any kind should be ordered. It did not err for two reasons. First, the trial judge made numerous errors in the reasoning he did set out. Secondly, he failed fully to set out the reasoning which might have supported the conclusions he reached. No party contended that the Court of Appeal should have decided the issues which the trial judge had not decided. The only possibility left was a new trial. The evidence of Mr Treharne. The first reason centres on errors of the trial judge in not dealing with some key evidence; and, while recording other evidence, in not analysing the totality of it and explaining how, so far as it was apparently contradictory, parts of it could be reconciled or rejected. A good example concerns one important witness whom the trial judge did not mention, Mr Treharne. In his evidence he denied that the plaintiff dived in and said that he saw the plaintiff enter the water "with his arms waving to try and stop himself" before extending his arms to the front. Counsel for the second defendant Kirby conceded in this Court that the evidence could not be dismissed as "trivial". That evidence was strongly contradictory of the conclusion favoured by the trial judge that the plaintiff had "deliberately [entered] the water by diving". Mr Treharne was not cross-examined to suggest that the plaintiff's arms were not waving in the manner described, nor that his denial of diving was false, nor that the plaintiff intentionally entered the water. Counsel for the first defendant contended that it was wrong for the Court of Appeal to rely on Mr Treharne's evidence to reverse the trial judge. Counsel cited the following passage4: "[W]here a trial judge has made a finding of fact contrary to the evidence of a witness but has made no reference to that evidence, an appellate court cannot act on that evidence to reverse the finding unless it is satisfied 'that any advantage enjoyed by the trial judge by reason of having seen and heard the witnesses, could not be sufficient to explain or justify the trial judge's conclusion'." However, the Court of Appeal was satisfied of this in view of the trial judge's other omissions and errors, and rightly so. from other events observers Analysis of eyewitness evidence. The plaintiff called evidence of the relevant eyewitness Miss Roberts-Thompson, Mr Roberts-Thompson, Mr Molloy and Mr von Bibra). Their evidence suggested that the plaintiff's entry into the water was not deliberate. The trial judge failed to explain how this eyewitness evidence could be reconciled with his conclusion. Nor, if he thought the eyewitness evidence could not be reconciled with his conclusion, did he explain why the eyewitness evidence was to be rejected. In fact, the trial judge cannot have rejected this oral evidence sub silentio. It would have been extremely difficult to do so in view of the way in which the witnesses were cross-examined. As the Court of Appeal pointed out of these witnesses5: "No attack was made on their honesty in cross-examination. No suggestion was put to them that their evidence was fabricated in order to assist the [plaintiff]. Nor was it suggested, in cross-examination, that they were grossly mistaken in their observations of the events of the evening or 4 Abalos v Australian Postal Commission (1990) 171 CLR 167 at 178 per McHugh J, quoting Watt or Thomas v Thomas [1947] AC 484 at 488 per Lord Thankerton. 5 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [69]. in their recall of them. … [T]here were no questions in cross-examination to the eye-witnesses, to the effect that what they had observed was, throughout, a deliberate dive. ... [T]he question most likely was not put because the [tenor] of the testimony of each witness was such that it was obvious that such a proposition would have been unequivocally denied. There is, after all, an obvious difference in appearance between an unintended fall and a deliberate dive; this is so, even where one who has accidentally fallen towards water is seen attempting to recover his situation by endeavouring to convert his uncontrolled fall into a dive, before entering the water." this, and taken no the matter was These conclusions of the Court of Appeal are correct. Thus while it was suggested to Mr James that his vision of the plaintiff's entry into the water was obscured, he denied further. Miss Roberts-Thompson was not cross-examined on her observations, in particular on her impression that the plaintiff did not appear to be diving. Mr Roberts-Thompson was only cross-examined to show that he saw only part of the plaintiff's entry into the water. Mr Molloy was cross-examined to suggest that he could not see the plaintiff's entry into the water clearly, but without avail. Mr von Bibra agreed that he had not mentioned the account he gave in evidence in chief when interviewed by lawyers on 5 March 2002, but said that he had since refreshed his memory from an earlier statement he had made on 17 April 2000, of which he did not have a copy on 5 March 2002. Mr von Bibra, who gave evidence pursuant to a subpoena, denied fabricating his evidence, and the 17 April 2000 statement confirmed it. The trial judge did not reject the evidence of either Mr von Bibra or any of the others. The second defendant, the Middle Harbour Yacht Club Ltd, being the organiser of the evening, was the best positioned of the defendants to call any evidence from the 50-150 people present of how the plaintiff entered the water if it were truly contended that the consistent evidence of the eyewitnesses was to be rejected. It called one person present to prove that those attending the function were well behaved, but that witness did not observe the plaintiff's entry into the water. The trial judge did not refer to the failure of the second defendant, or the other defendants, to call evidence contradicting the eyewitness evidence called by the plaintiff, or to the significance of this failure. Indeed, the trial judge appears to have accepted the honesty and reliability of the eyewitness evidence called by the plaintiff (apart from that relating to one aspect of Mr Molloy's) by saying that he would have found for the plaintiff on the "prime factual issue" but for Dr Trevithick's evidence and the medical notes. The trial judge certainly did not criticise the demeanour of any of these witnesses, or point to any significant unreliability or improbability in their evidence. Kirby The first defendant described this eyewitness evidence as being "internally inconsistent". Whether or not Mr Molloy was not wholly consistent with other witnesses on the subject of the plaintiff's involvement with Mr Wilmot's entry into the water, there were no inconsistencies in his account of the plaintiff's entry into the water. Indeed, counsel for the second defendant was right to concede that so far as there were differences between the eyewitnesses in their accounts of the plaintiff's entry into the water, those differences tell in favour of their testimonial reliability: they are what one would expect of honest witnesses doing their best without having put their heads together. the water, The first defendant referred to this evidence as "utterly incomplete" and as "snippets". While it may be that the perception of some witnesses was incomplete in the sense that each saw particular aspects of the plaintiff's entry into incomplete, and these perceptions were not "utterly" Mr von Bibra's were not incomplete at all. The first defendant also said that most of this evidence stemmed from statements made about a year after the event. Nothing was made of this in cross-examination, and it was not suggested that the oral evidence did not reflect actual recollections of what had been observed. Failure to deal with Mr Moon's evidence. The trial judge referred to Mr Moon's evidence that when he approached the plaintiff and assisted him immediately after he had been dragged to the shoreline, the plaintiff asked "Who pushed me in?". But the only discussion of it related to the question whether the evidence should have been given in the plaintiff's case in chief or in reply. That is surprising, in view of the fact that the debate during the trial about the admissibility of what Mr Moon said did not turn on the difference between a case in chief or a case in reply, but on whether s 108 of the Evidence Act 1995 (NSW) applied, or whether s 64 applied, and, if it did, whether reception of the evidence was barred by the failure of the plaintiff's legal advisers to comply with the requirements of prior notice imposed by s 67. Nothing was made of any admissibility point in this Court, save for reminders that Mr Moon's evidence was hearsay. Since the plaintiff (the person who "made the representation" reported by Mr Moon) gave evidence, Mr Moon's evidence was in fact plainly admissible under s 64(3), to which s 67 does not apply6. At least for that reason, the trial judge's rulings that the evidence was 6 Section 64(3) provides: "(3) If the person who made the representation has been or is to be called to give evidence, the hearsay rule does not apply to evidence of the representation that is given by: (a) that person; or (Footnote continues on next page) admissible was correct. In view of the time at which and the circumstances in which the plaintiff spoke, Mr Moon's evidence in chief about the plaintiff's question was powerful evidence. It was repeated in cross-examination. Although in cross-examination counsel for the first defendant suggested reasons to Mr Moon as to why his powers of perception and recollection might have been affected by the events of the evening, there was no direct challenge to the relevant evidence. Counsel for the second defendant did not cross-examine Mr Moon on that topic, and counsel for the third defendant did not cross-examine In these circumstances it would have been difficult for the trial judge to reject Mr Moon's evidence. Indeed he did not say that he rejected it. Nor did he attempt the impossible task of reconciling it with his conclusion that the plaintiff deliberately entered the water. The failure to deal with the evidence of Mr Wilmot. The trial judge mentioned Nathan Wilmot early in his reasons. He said that he would "return to the evidence relating to Wilmot later". He did not do so. Mr Wilmot's evidence was hearsay – a statement signed on 20 February 1998. The key elements of it were received without objection, because Mr Wilmot was in Sardinia. Despite the inability of the defendants to cross-examine Mr Wilmot, his evidence had considerable power. He was in the water when the plaintiff entered it, he was the first person to assist the plaintiff, and he dragged the plaintiff ashore. His evidence was inconsistent with any idea that after he had been thrown into the water he was in any distress or was feigning it, and there is no other firsthand evidence that supports that idea. The plaintiff's evidence in chief was to the effect that Mr Wilmot was standing no more than knee deep in the water. This was repeated in cross-examination. He denied that Mr Wilmot was lying in the water as if pretending to drown, or that the plaintiff had ever told anyone that. Counsel did not cross-examine on that denial, which was repeated in re-examination. The (b) a person who saw, heard or otherwise perceived the representation being made; if, when the representation was made, the occurrence of the asserted fact was fresh in the memory of the person who made the representation." Section 67(1) provides: "(1) Subsections 63(2), 64(2) and 65(2), (3) and (8) do not apply to evidence adduced by a party unless that party has given reasonable notice in writing to each other party of the party's intention to adduce the evidence." Kirby plaintiff's evidence that Mr Wilmot was standing in water which was no more than knee deep without conveying or feigning distress was corroborated by Mr James, Miss Roberts-Thompson, Mr Roberts-Thompson, Mr Molloy, Mr von Bibra, Mr Treharne and Mr Moon. There were factors pointing strongly to the reliability of Mr Treharne, in particular, on this issue: as he was Mr Wilmot's cousin, he was likely to have observed Mr Wilmot in the water closely, so as to ensure that he was safe. There was either no cross-examination of these witnesses on the point or, in the case of Mr Molloy, no effective cross-examination. Even in Mr Wilmot's case, it was not suggested that his behaviour was indicative of some form of distress, whether actual or feigned. Of Mr Molloy's evidence the trial judge said: "Molloy's evidence is clearly contradictory of the plaintiff's evidence relating to his part in the manner in which Wilmot entered the water. Molloy has the plaintiff as an active participant in the dunking of Wilmot whereas, of course, the plaintiff maintains his part was no more than a spectator. Not only that, Molloy deposes that Wilmot's actions in the water involved him carrying out a range of activities which were much more extensive than him merely standing up as all other witnesses called by the plaintiff deposed to. The contradictory nature of Molloy's evidence is of some importance when the evidence called by the first defendant in the matter is taken into account." This passage is hard to understand. Mr Molloy did say that Mr Wilmot was "floundering" in the water; but it is obvious that all he meant by that was that he was walking around in it. He denied Mr Wilmot gave the appearance of being in difficulties. The Court of Appeal rightly pointed out that Mr Molloy's evidence stopped "fairly short of asserting that the plaintiff was 'an active participant in the dunking'". Mr Molloy said only that the plaintiff was "with the 10 people involved in escorting him out". The Court of Appeal also rightly pointed out that Mr Molloy did not assert a "much more extensive" range of activities than those deposed to by other witnesses. The Court of Appeal was also correct to say that the trial judge did not explain the extent to which Mr Molloy's evidence contradicted other evidence, and what that other evidence was. Nor did the trial judge find who, if anyone, was wrong, and, if so, why. Further, the trial judge did not explain what importance Mr Molloy's evidence had in relation to that called by the first defendant – that is, the evidence of Dr Trevithick. Mr Wilmot's unsworn evidence, confirmed by much sworn evidence of other witnesses, was inconsistent with any possibility that the plaintiff deliberately dived into the water because he thought Mr Wilmot was at risk of drowning, and was, in turn, inconsistent with passages in Dr Trevithick's notes and testimony to the effect that the plaintiff had deliberately dived for that reason. With respect, the trial judge's failure to refer to Mr Wilmot's evidence reflected his failure to refer to any of the other evidence which corroborated it, apart from that of Mr Molloy. Medical notes unsupported by testimony. For the reasons given by the Court of Appeal7, no significance attaches to the statements in the ambulance officers' report that the plaintiff "dived" 1.5 metres. Nor, for the reasons it gave8, does any significance attach to the nurses' notes recording the plaintiff as "jumping [crossed out and replaced by "diving"] into water off Spit Bridge": the trial judge was right to say that the Spit Bridge "is not far from the Middle Harbour Yacht Club", but the fact remains that it is a totally different place. Nor, for the reasons which the Court of Appeal gave9, does any significance attach to a note made by Dr Liston the morning after the admission of the plaintiff to hospital to the effect that the plaintiff's injury was "secondary to diving into shallow water". The trial judge found that these three statements – to the ambulance officers, the nurses and Dr Liston – were made by the plaintiff. There was no testimony to this effect, since the plaintiff had no recollection of this and the makers of the statements did not give evidence. It is certainly very difficult to conclude from the notes that the plaintiff admitted to the makers of the documents that he deliberately entered the water. That is also true of another note, made by Dr Sew Hoy one and a half hours after the plaintiff was admitted to the hospital ("No recollection of having fallen? dived into the water.") This note was described by the trial judge as equivocal, but, as the Court of Appeal explained, if anything it supported the plaintiff's testimony that he had no recollection of speaking to anyone at the hospital. And it supported the conclusion that whatever was said about the plaintiff's mode of entry into the water to those at the hospital was vague. 7 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [72]. 8 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [73]. 9 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [75]. Kirby Aspects of Dr Trevithick's unreliability. The trial judge said that Dr Trevithick was "a most impressive witness". That expression evidently encompassed both his honesty as a witness and his reliability as a witness. The defendants' arguments blurred the distinction between his honesty as a witness and his reliability as a witness. Whatever inhibitions exist against the New South Wales Court of Appeal overturning the findings of trial judges based on honest testimony, they cannot extend to findings based on non-credit based reliability: for to reason that some common law rule precludes the latter findings from being reviewed would not be giving full effect to the statutory mandate to that Court to conduct a rehearing. And that is clearly inconsistent with the authority of this Court in Warren v Coombes10, Fox v Percy11 and many other cases. The Court of Appeal analysed Dr Trevithick's evidence much more closely than the trial judge had. It accepted the trial judge's "finding, based on demeanour," that he was truthful. But it noted that that did not necessarily make him reliable in his understanding and recollection of the information coming to him in the hour and a half between first seeing the plaintiff and making his notes. The Court of Appeal demonstrated four elements of unreliability in his testimony. First, initially Dr Trevithick suggested that the history was recorded solely as a result of interviewing the plaintiff. Later he said it was secured after speaking to four of the plaintiff's friends. He said thereafter that in addition the history was based on what the ambulance officers told him. Secondly, initially he said that when, an hour and a half after first seeing the plaintiff, he made his notes about the history he took from the plaintiff, it was very unlikely that he looked at the nurses' notes. He later contended that he may have looked at the front sheet of those notes as a means of obtaining the telephone numbers of the plaintiff's relatives. It is likely that he did, because although his oral evidence, given without recourse to the notes he had made, placed the plaintiff's accident at the Middle Harbour Yacht Club, his notes placed it at "the Spit". The front sheet of the nurses' notes contain, among other items of information including telephone numbers, a note referring to "jumping [crossed out and replaced by "diving"] into water off Spit Bridge". That suggests two possibilities for the source in Dr Trevithick's notes of the reference to Spit Bridge: either the nurses' notes, or some mistaken informant on whom both he and the nurses were relying. On Dr Trevithick's evidence the only other 10 (1979) 142 CLR 531. 11 (2003) 214 CLR 118. possible sources of the information were the plaintiff's friends and the ambulance officers, and none of them could have been mistaken about the scene of the accident. That excludes the second possibility and leaves only the first. Thirdly, after Dr Trevithick gave evidence that he had obtained the telephone number of the plaintiff's mother from the plaintiff, he conceded the possibility that he obtained it from the plaintiff's older brother. Fourthly, in relation to the absence from his notes of the fact, noticed by Mr Moon, that after the accident the plaintiff was going into and out of consciousness at the scene of it, Dr Trevithick initially said that while he remembered it, it was not recorded because the notes were only a summary, but later said he could not remember what was said on that subject. In view of these four elements, it is not entirely clear what the trial judge was referring to when he said that Dr Trevithick's "answers in cross-examination confirmed his evidence in chief." The ambiguity of Dr Trevithick's evidence. Putting aside the above instances of the unreliability of Dr Trevithick's evidence, even if the trial judge was correct in concluding not only that Dr Trevithick was a truthful witness, but also that he was a reliable one, the trial judge failed to consider whether anything the plaintiff said to Dr Trevithick was in truth not an admission of deliberate entry into the water, but only of entry into it. The trial judge paid no attention to the ambiguity of the evidence given by Dr Trevithick and found in various hospital and ambulance records to the effect that the plaintiff "dived" into the water. To "dive" into water is to "descend or plunge" into it, usually headfirst12; but the word does not by itself indicate whether the descent or plunge is deliberate or not. Nor do the reasons for judgment record whether consideration was given to whether the authors of the word "dived" other than Dr Trevithick were influenced by the unhappy experience of medical professionals that those who sustain spinal injuries in water often do so because of a deliberate plunge into it. Nor did the trial judge consider the limited significance to be attributed to the word "dived" when used, if it was used, by a man who, according to all the other relevant firsthand evidence in the case, had lost his balance, had attempted to regain it, and had then entered the water headfirst while attempting to place his arms and hands in front of him in the manner which a person intentionally diving into water might. In 12 Oxford English Dictionary, 2nd ed (1989), meaning I.1.a. The Macquarie Dictionary (Federation Edition), (2001) vol 1, gives as meaning 1: "to plunge, especially head first, as into water". Kirby short, the trial judge did not consider and deal with the possibility that if the plaintiff told Dr Trevithick that he had "dived" into the water, that was not inconsistent with what the primary witnesses had observed the plaintiff doing. Counsel for the second defendant contended that Dr Trevithick's notes and testimony recorded an admission of deliberate entry into the water for the following reasons. The note which Dr Trevithick made about an hour and a half after first speaking to the plaintiff was: "One friend was thrown into the water at the Spit and pretended to drown so Daniel dived 1.5 m into shallow water." (italics added) Dr Trevithick's evidence in chief about what the plaintiff told him was: "I don't think I can actually use his exact words after this length of time … he dived into the water because ... he thought his friend was at risk of drowning." (italics added) Counsel for the second defendant submitted that the words "so" and "because" indicated that the plaintiff was saying he intentionally entered the water. That linguistic point has no substantive force. As the Court of Appeal said, "the suggested attempt at rescue" of Mr Wilmot recorded in Dr Trevithick's notes and repeated in his testimony was "nonsensical". That was not a description challenged by any defendant in this appeal. The only explanation offered for it was that offered by counsel for the plaintiff: that Dr Trevithick had got matters the wrong way around, since in truth Mr Wilmot had, being the first person to aid the plaintiff, in a sense tried to rescue him. It would have been highly improbable, even if the plaintiff had thought Mr Wilmot was in difficulty, and even if he had not seen him standing in the water, that the plaintiff would have deliberately dived in. He could have entered the water as speedily without diving, he had never been to the yacht club before and was unaware of the depth of the water and the nature of the surface beneath it, and an experienced sailor would have appreciated the foolhardiness of diving in such obviously dangerous circumstances. There was simply no evidentiary basis whatever for the existence of any pretended or actual danger to Mr Wilmot. Indeed it was contradicted by the evidence of primary witnesses whom the trial judge also apparently found to be truthful and reliable. It was also contradicted by the evidence of the same primary witnesses that the plaintiff did not intentionally enter the water. For the above reasons the Court of Appeal was right to order a new trial. Lack of reasons. The Court of Appeal recorded a submission by the plaintiff that there should be a new trial because of the failure of the trial judge to give adequate reasons. It analysed the authorities and concluded that the trial judge had failed to comply with the duty to give adequate reasons. It therefore concluded that a new trial would have to be ordered unless the Court of Appeal were in a position to decide the matter for itself. This conclusion was a free-standing reason for ordering a new trial; it was not merely a passing dictum. It was belatedly invoked by the plaintiff in this Court. And it is not a reason which was attacked in the defendants' grounds of appeal to this Court. Any attack on it must fail. With respect, the Court of Appeal was right to hold that the trial judge had not complied with the duty to give adequate reasons. While it is not necessary for trial judges to set out and analyse the totality of the evidence, in a case like the present, in which the trial judge rightly or wrongly identified certain inconsistencies which he saw as crucial, it was necessary to explain why they were inconsistencies and why one body of evidence was to be preferred to another. That ground too supports the Court of Appeal's order for a new trial. Did the Court of Appeal have power to order a new trial on a restricted basis? The third issue is whether the Court of Appeal had power to make the qualified new trial order it made. Counsel for the plaintiff devoted considerable energy to demonstrating the amplitude of its powers. However, the defendants did not deny that the Court of Appeal had the necessary power, and for that reason there is no utility in debating the issue. As Callinan J has demonstrated13 the power was to be found in the Supreme Court Act 1970 (NSW), s 75A and the Rules of the Supreme Court of New South Wales, Pt 51 r 23. There is no need to repeat that demonstration. It is agreed in by all other members of this Court14. The power of the Court of Appeal to act as it did is clearly established. Did the Court of Appeal exercise its discretion to limit the new trial soundly? The fourth issue was whether or not the Court of Appeal was right to limit the new trial in the way it did. This is the point upon which this Court is divided. Upon this point, we agree in the conclusion reached by Callinan J. The nature of the arguments. The second defendant advanced three groups of arguments against the limitation which the Court of Appeal order placed on the second trial. The first was that there were unresolved credibility disputes. The second turned on the proposition that the Court of Appeal had pre-empted a finding of the trial judge turning on his observation of the demeanour of witnesses whom the Court of Appeal had not had the opportunity 13 Reasons of Callinan J at [175]-[179]. 14 Reasons of Gleeson CJ at [15], McHugh J and Gummow J agreeing; reasons of Kirby of observing. The third was that the conduct of the new trial would be unsatisfactorily hampered by the order. Unresolved credibility disputes. Counsel for the second defendant submitted in relation to the question of whether the information appearing in Dr Trevithick's notes was derived from the "four" friends who came to the hospital that three of them – Messrs Wilmot, Moon and Roberts-Thompson – "all rejected the possibility that they were the source". He also submitted that this meant "there remains a lively, unresolved dispute of credibility … that should have been left to be determined by a proper trial" (ie a second trial without conditions). This submission is ill-based both factually and in logic. There is, in fact, evidence that there were five friends at the hospital – Simon Hartigan (who Mr von Bibra remembers as being there), Mr von Bibra, Mr Moon, Mr Roberts-Thompson and Mr Wilmot. Of them, there was no evidence of any kind from one – Mr Hartigan. Although Mr Moon stated that he saw Mr Wilmot at the hospital, Mr Wilmot's statement did not deal with any hospital visit he made, and indeed it suggests that there was none. Hence the constant reference by the parties to "four" friends may in fact be correct. Only three of the friends testified: Mr von Bibra, Mr Roberts-Thompson and Mr Moon. Of these, only Mr von Bibra and Mr Roberts-Thompson observed the plaintiff's entry into the water. Mr von Bibra was asked no questions about what he or others said to medical staff at the hospital. It would be surprising if there really were a lively unresolved dispute of credibility about what happened at the hospital, since in Mr von Bibra's statement of 10 April 2000, in which he gave an account of the plaintiff's entry into the water which was strongly confirmatory of the plaintiff's evidence, and said that Mr Wilmot did not appear to be feigning drowning or actually drowning, he said that he and other friends had conversations with some of the medical staff. He continued: "There was no discussion by any of us to any medical staff as to what had actually happened at the Club to [the plaintiff] which caused his injury. Certainly there was no mention to the medical staff by any of us to the effect that [the plaintiff] had dived into the water to save a drowning mate." It is plain that if Mr von Bibra had been asked by the medical staff what the cause of the plaintiff's accident was, he would have been unlikely to say what Mr Roberts-Thompson and Mr Moon did not reject the possibility that they were the source of the information in Dr Trevithick's notes: they merely said that they could not remember being the source. If there were any dispute about the credibility of those answers, the time for it to be dealt with was in cross-examination of the witnesses at the first trial. In fact there has never been any suggestion either that there was a dispute about their credibility or, if there was, that it is unresolved. The absence of demeanour-based findings against the plaintiff. Whether or not an order for a new trial on a restricted basis should be reserved for exceptional cases – and the enactments giving power to do this say nothing about exceptional cases – this was certainly an exceptional case. The factor ultimately turning the trial judge against the plaintiff's case was the admission which the plaintiff supposedly made to Dr Trevithick. That called for an assessment of whether the admission was made, and, if so, what its reliability was; and it called for that assessment to be made against a background of a mass of evidence not turning on demeanour. The assessment of whether the plaintiff made the admission, and what its significance was in the light of the other evidence, depended on taking into account the following matters. Dr Trevithick was not asked to recall the events of the night he treated the plaintiff until some weeks prior to the trial, over five and a half years later. He had not prepared a statement at any stage. He relied on the notes he prepared about an hour and a half after the plaintiff was brought to the hospital. He experienced an extremely busy evening, having to deal with five patients with catastrophic injuries. He composed his notes after speaking not only to the plaintiff but also to his friends (only two of whom observed the plaintiff's entry into the water) and the ambulance officers; and he referred to the nursing notes. He did not record, and could not remember, which pieces of information came from which source. The plaintiff was in a distressed condition, and had been moving into and out of consciousness. The supposed admission depended on a conclusion that an ambiguous statement by the plaintiff was intended to be taken in one particular way. Even if Dr Trevithick is assumed to have been both honest and reliable (subject to the qualifications in the latter respect demonstrated by the Court of Appeal), the supposed admission, when considered against all the other evidence, the honesty of which was not challenged and the reliability of which was either not challenged or scarcely questioned, cannot negate the plaintiff's case that he did not enter the water voluntarily, but did so as a result of losing his balance after a nudge from behind. Either the plaintiff deliberately entered the water or he did not. If he did not, in the particular circumstances of this case as it was run, he can only have entered it by being jostled or pushed. The Court of Appeal's analysis concluded that, allowing for and accepting the trial judge's findings as to Dr Trevithick's truthfulness, the plaintiff did not deliberately enter the water. The only other possibility open is that he was jostled or pushed. Kirby In the particular circumstances of this unusual case the Court of Appeal was right to substitute that conclusion for the trial judge's conclusion. One of those particular circumstances is the way in which the defendants conducted it. For example, while in this Court the defendants sought to make something of a contrast between Dr Trevithick's positive recollection of what the plaintiff said to him, and the plaintiff's professed inability to remember speaking to any doctor on the night of the accident, at the trial the plaintiff was not cross-examined to suggest that that professed inability was merely convenient self-serving and that he did in truth remember saying what it was suggested he said. The defendants did not cross-examine the plaintiff to suggest he was fabricating his story. So far as the defendants cross-examined the eyewitnesses to the accident about their evidence in chief on that subject, they only did so to suggest a want of reliability because of poor opportunities for observation. These tactics flow from an understandable forensic choice. The cross-examiners did not call evidence to contradict the eyewitnesses, and evidently lacked any material from which to cross-examine them to suggest that their evidence was false. It would certainly have been wrong to have cross-examined them to suggest fabrication without proper supporting material. In any event, undue aggression towards either a quadriplegic plaintiff or his witnesses can be counterproductive. But understandable though the tactics were, the consequence of their adoption was to narrow very greatly the opportunity for the trial judge to base his reasoning on his observations of witness demeanour. His reasoning had to turn very largely on inferences from primary evidence which, the defendants by their conduct of the case accepted, might be unreliable but was given sincerely. Similarly, since the criticism by the Court of Appeal of Dr Trevithick's evidence turned on factors going to reliability rather than credibility, it was open to that Court to reason as it did. That conclusion is not undermined by the following famous words of "[N]ot to have seen the witnesses puts appellate judges in a permanent position of disadvantage as against the trial judge, and, unless it can be shown that he has failed to use or has palpably misused his advantage, the higher Court ought not to take the responsibility of reversing conclusions so arrived at, merely on the result of their own comparisons and criticisms of the witnesses and of their own view of the probabilities of the case. The course of the trial and the whole substance of the judgment must be 15 SS Hontestroom v SS Sagaporack [1927] AC 37 at 47. looked at, and the matter does not depend on the question whether a witness has been cross-examined to credit or has been pronounced by the judge in terms to be unworthy of it." The Court of Appeal rightly thought that the trial judge in part failed to use and in part palpably misused his position. Not only were the eyewitnesses not cross-examined as to credit, they were not cross-examined as to the issue. The judge did not pronounce them unworthy of credit, but his acceptance of the truth of what Dr Trevithick wrote down and testified to about how the accident occurred could only have been arrived at if he had explained how the eyewitnesses could be ignored. This he did not do, and the cross-examinations gave him no material with which to do it. The first defendant submitted that appellate courts are not "entitled to dismiss [a trial judge's] findings where they are supported by exposed reasoning". The findings of this trial judge were not. In short, the Court of Appeal, having been invited to overturn the trial judge's findings of fact, had a duty to examine the trial judge's reasoning and the evidence to see whether it should. In that examination it employed the following unimpeachable methods. First, it concluded that the trial judge's reasoning was unsatisfactory – and the defendants devoted very little effort to defending it either in the Court of Appeal or in this Court. Secondly, the Court of Appeal, as it was entitled to: looked at all the probabilities; took into account the trial judge's findings so far as they were favourable to the plaintiff and not open to rational criticism; refrained from reaching conclusions adverse to the plaintiff based on propositions in medical records which were made by persons who were not called as witnesses, which derived from unknown persons, and which were contradicted by all the eyewitness testimony in the case; (d) while giving full weight to Dr Trevithick's notes and testimony, and to the trial judge's conclusions from them so far as they were demeanour-based: departed from his evidence where, although honest, it was not reliable; alternatively, accepted Dr Trevithick as having accurately recorded and recollected what he was told, but rejected the reliability of what he was told. None of these steps involved the Court of Appeal reversing demeanour-based findings of the trial judge. Kirby Obstructing the second trial. The third group of arguments against restricting the retrial advanced by the defendants turned on various disadvantages and inconveniences which, it was said, the restriction would create. Counsel for the plaintiff, on the other hand, submitted that, in view of the unrestricted and complete way the original trial had been conducted, it was incumbent on the defendants to point in a realistic way to the parts of the evidence called at the trial which might be affected by the Court of Appeal's order. This they did not do. The second defendant argued that to conduct the second trial on the basis that the plaintiff was "jostled or pushed" was unsatisfactory: "Jostled or pushed by whom? Someone whose propensity to be doing just that should have been within [the plaintiff's] cognizance for the purposes of contributory negligence or somebody that he did not need to be taking into account? Is this going to be an inadvertence or misjudgment answer to contributory negligence by the plaintiff or not? Jostled or pushed is quite a spectrum." Similarly, the second defendant argued that the Court of Appeal's order amounted to a "partial determination" which "prevents or substantially hinders" a second trial on "questions of fact intimately associated with how the plaintiff came to be standing on the jetty, how he came to enter the water and the circumstances surrounding those matters." It is true that the Court of Appeal's order prevents inquiry into the limited issue of how the plaintiff came to enter the water. These submissions did not explain why the Court of Appeal's order made it impossible for the defendants to investigate the scene on the wharf in order to advance the balance of their contributory negligence case, whether by inquiring into how the plaintiff came to be standing on the jetty, into who jostled or pushed him, or into any other circumstances surrounding that matter. The second defendant also submitted that it was impossible to separate out the issue which the trial judge had decided one way and the Court of Appeal another, because it turned on questions of credibility, and those questions might affect other areas of the case as well. An illustration was given: the credibility of the plaintiff on damages could be affected by a conclusion as to his credibility in describing his entry into the water. Another illustration was given: the credibility of the eyewitnesses on the plaintiff's contributory negligence could be affected by a conclusion as to his credibility in describing his entry into the water. So far as damages are concerned, at the start of the trial, the issues on damages were identified as turning on the plaintiff's life expectancy, the amount to be awarded as general damages, the future accommodation to be provided to the plaintiff, and the appropriate level of computer facilities for him. With all respect, none of these matters seemed likely to raise a credibility question. Certainly this Court was taken to no part of the plaintiff's cross-examination on damages which revealed any challenge to his credibility – or any other challenge. The first and third defendants did not cross-examine on damages. The second defendant's cross-examination on damages consisted of a calm process of eliciting various uncontroversial facts about the plaintiff's then position and future prospects. No doubt these facts were seen as being useful in the second defendant's case, but nothing in the cross-examination suggested any challenge to credibility. There are no signs of acrimony or disagreement between counsel and witness. So far as contributory negligence is concerned, it was said that the credibility of the eyewitnesses as to the plaintiff's entry into the water "is going to be critical". Perhaps the defendants would like it to be so at the second trial, but they did not make it so at the first trial. They should not be afforded a second chance that reopens a factual question which, on proper analysis of the evidence in the first trial, conducted by the Court of Appeal as its duty required and its powers permitted, was resolved in favour of the version presented by the plaintiff's case. It was said that the Court of Appeal's order that the second trial be conducted on the basis that the plaintiff, through being jostled or pushed, lost his balance would raise difficulties in relation to dealing with the contradiction between Mr Molloy and other witnesses on whether the plaintiff had helped to throw Mr Wilmot into the water. That was a particular of contributory negligence, but the submission did not say how that contradiction bore on the basis for the new trial, which assigned a particular mode by which the plaintiff entered the water. The defence tactics in cross-examination at the first trial, too, did not support any inference that the contradiction was related to the plaintiff's mode of entry into the water. There were signs that these submissions had an armchair character. They gestured at tactics which the defendants might have used at the first trial, but did not. They suggested that the defendants would wish to conduct a second trial differently if the question of how the plaintiff entered the water was still in issue. This was a suggestion the more easily made in view of the fact that none of the counsel who led for the defendants in this Court led at the trial; in appellate litigation the absent are often wrong. Thus the first defendant contended that, at the second trial, it might be a question whether the eyewitness evidence had been contaminated by the fact that the statements on which it may have been based were prepared a year later, after the witnesses had congregated at the Middle Harbour Yacht Club for counselling, and whether they were not impartial witnesses. The first defendant also referred to the fact that at the first trial the quantity of alcohol drunk by the plaintiff had "not [been] very much explored with him in cross-examination". Kirby But the first trial was not a rehearsal, warm-up or dummy run. It must have been conducted against the possibility of all available factual findings being made. To suggest that the defendants will be hampered at a second trial in relation to the employment of tactics they did not employ in the first trial is unconvincing. There is another respect in which the defendants are attempting to alter the consequences of their conduct of the first trial. Accepting that they did not instigate or agree to the trial judge deciding the case on the "prime factual issue" and not all other issues, the terms of his reasons for judgment suggest that they did point out that if the plaintiff's case failed on that point, the whole case would fail. It does not lie well in their mouths now to protest that the Court of Appeal's order that a new trial be conducted on the basis that the issue had been decided the other way makes a second trial unworkable. Their perceptions of that issue as being the "prime factual issue" did not make their conduct of the first trial unworkable. What they effectively tendered as an issue for separate resolution to their own advantage, they should now be required to accept as having been properly concluded against them, with the forensic consequence that follows for the second trial. Otherwise, the value and outcome of the thorough review of, and conclusion on, the facts, recorded in the reasons of the Court of Appeal, are thrown away. The third defendant contended that the Court of Appeal's order was unsatisfactory in foreclosing questions of causation and contributory negligence; made it difficult for the parties to prepare for and conduct the second trial; and would make it difficult to deal with any objection by the plaintiff to evidence of the circumstances surrounding the accident. These are speculative contentions. All otherwise admissible evidence will be receivable unless it goes to the one issue foreclosed. The judge conducting the second trial may have to rule on objections, but the difficulties were not shown to be insuperable. As counsel for the plaintiff said in this Court, it is not necessary now to give advisory opinions on what questions counsel for the defendants could or could not ask at the second trial, nor is it necessary to consider whether the judge hearing the second trial might make some mistake in ruling on objections to those questions. The third defendant said that the difficulties were probably incapable of articulation until after the second trial had been conducted. Certainly they were not articulated convincingly in argument in this Court. When this category of the defendants' arguments is examined, it can be seen that it was not unfair of counsel for the plaintiff to describe them as no more than "a great deal of huffing and puffing". Conclusion. In these circumstances the Court of Appeal was correct to conclude that there should be no re-litigation – perhaps employing different methods – of an issue which the defendants had already had a full opportunity of litigating. In Pateman v Higgin16 Kitto J, discussing the Common Law Procedure Act 1899 (NSW), s 160, a precursor to Pt 51 r 23, said: "it remains … a sound general proposition from which to start in the consideration of each particular case according to its own circumstances that if there is to be a new trial it ought to be of the case as a whole unless the Court thinks that 'they shall do more injustice by setting the matter at large again'." To have ordered a new trial on all issues would have produced more injustice than the order the Court of Appeal made. It would have called for a re-litigation of an issue fully litigated at the first trial. It was an issue on which the correct outcome, given the conduct of the first trial by the defendants, was plainly that at which the Court of Appeal arrived. The trial judge's expressed conclusion in the first trial prevented the attainment of finality on all issues. It was right of the Court of Appeal to seek to achieve finality on the one issue he did deal with, however unsatisfactorily. Upholding the special order. We have taken the trouble, at greater length than is usual in this Court, to explain the facts and to recount the evidence given at the trial. We have done so for several reasons. We accept that, when a trial has miscarried, the usual order for the appellate court to make is for a new trial generally, upon all issues. That is what a majority of this Court favours in this appeal. It is the course that will now follow. However, it is important to demonstrate that this was not a usual case. Moreover, the Court of Appeal is not open to criticism for making the order effecting the retrial in the terms that it did. Only by appreciating the detailed evidence, and the error of the first trial, can the order of the Court of Appeal be understood. It is now accepted that the order made was within the powers of the Court of Appeal. The terms of that order involved a discretionary judgment that an appellate court, like this, should be slow to disturb. It is only when the deplorable result that will now follow is fully appreciated that the justification for the Court of Appeal's order is made clear. At the first trial, the defendants tendered an issue on the "primary factual question". At trial they succeeded, but on appeal they failed on that issue. They were willing to take its fruits. Properly, the Court of Appeal, reversing the trial judge, required them to wear its burdens. In our view this Court errs in disturbing the Court of Appeal's orders in this respect, which we would affirm. 16 (1957) 97 CLR 521 at 527, quoting Hutchinson v Piper (1812) 4 Taunt 555 at 556 [128 ER 447 at 448] per Gibbs J. Kirby Did the Court of Appeal err in ordering the defendants to pay the costs of the first trial? The fifth issue arises from the Court of Appeal's order that the defendants pay the costs of the first trial in any event – that is, even if they succeed against the plaintiff in a second trial on some point not decided in the first trial. The Court of Appeal was asked to change that order, but declined, without giving reasons, to do so. The absence of reasons makes it difficult to identify the justification for the order. Counsel for the plaintiff sought to justify it by saying that the defendants, having not taken the point on which they succeeded before the cross-examination of the plaintiff, and having urged on the trial judge the proposition that if they succeeded on that point that was the end of the matter, were responsible for the wasting of all the costs incurred in the first trial. The materials before this Court do not demonstrate that the responsibility of the defendants for the course which the trial judge took was so great that they should be left with a liability to pay the costs of the first trial in any event. Indeed, counsel for the plaintiff, in a note circulated after oral argument, made it plain that the idea of deciding one issue to the exclusion of all others was not urged by any party. Accordingly, the costs order should be set aside, and the costs of the first trial should abide the decision of the judge who hears the second trial. However, it is undesirable to make any order that the defendants have their costs on this issue in this Court, and indeed they did not in terms seek it. The matter is de minimis because it occupied so small a part of the argument in this Court. There is a real risk that the expense of working out what fraction of the overall costs went to this issue would exceed the value and justification of attempting to do so. Orders We agree with the orders proposed by Callinan J. Hayne 128 HAYNE J. I agree with Gleeson CJ. Reference was made in argument to the "sufficiency" of the primary judge's reasons. When it is said that a judge did not give "sufficient" reasons for a decision there may be some doubt about what principles are engaged. Reference may be being made to the duty of a judicial officer "to make, or cause to be made, a note of everything necessary to enable the case to be laid properly and sufficiently before the appellate Court if there should be an appeal [including] not only the evidence, and the decision arrived at, but also the reasons for arriving at the decision"17. To fail to make or cause to be made such a note may invoke principles of procedural fairness and constitute a failure to exercise the relevant jurisdiction18. In the present case, however, reference to the "sufficiency" of the primary judge's reasons is not to be understood as seeking to invoke only those principles. Rather, because the primary judge was bound to state the reasons for arriving at the decision reached, the reasons actually stated are to be understood as recording the steps that were in fact taken in arriving at that result. Understanding the reasons given at first instance in that way, the error identified in this case is revealed as an error in the process of fact finding. In particular, it is revealed as a failure to examine all of the material relevant to the particular issue. The primary judge's reasons stated his conclusion that the evidence of Dr Trevithick was to be accepted and preferred to that of other evidence but disclosed no reasoning supporting that conclusion. No analysis was made of the competing evidence and no explanation proffered for rejecting it. The most that might be inferred from what was said was that some special significance was attached to the existence of the written record upon which Dr Trevithick founded his oral evidence. But what significance was to be attached to the existence of that record might well be thought to have turned critically upon the source or sources of the information recorded in it. That was not a matter examined in the reasons. The absence of explanation for, and reasoning in support of, the conclusion expressed in the primary judge's reasons reveals that the process of fact finding miscarried. It miscarried because, so far as the reasons reveal, no examination was made of why Dr Trevithick's evidence was to be preferred to that of other witnesses. When it is understood that the primary judge made this error it becomes apparent that there must be a new trial of this issue as well as all other issues in 17 Carlson v King (1947) 64 WN (NSW) 65 at 66 per Jordan CJ cited in Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257 per Kirby P. 18 Pettitt v Dunkley [1971] 1 NSWLR 376 at 382 per Asprey JA. Hayne the matter. The task of the Court of Appeal is prescribed by statute19 and the applicable rules of court20. The nature of that task was recently considered in Fox v Percy21 and its importance emphasised. The Court of Appeal is bound to rehear the case and the Court, in doing that, may draw inferences and make findings of fact. But it was as much an error for the Court of Appeal to make the finding of fact which it sought to specify in its order as it was for the primary judge to make the erroneous finding he made. As Fox v Percy recognises22, the Court of Appeal "must, of necessity, observe the 'natural limitations' that exist in the case of any appellate court proceeding wholly or substantially on the record". The defect in the primary judge's fact finding lay in the failure to evaluate all of the evidence bearing upon the relevant issue of fact. The Court of Appeal could not substitute its finding when that too was based on only part of the material which ought properly to have been considered by the primary judge. Yet that is what the Court of Appeal did. The Court of Appeal made a finding of fact that was necessarily founded upon only part of the material that had been available to the primary judge: the transcript of what the witnesses had said and the documentary evidence that was received. The witnesses called to give evidence at the trial had given divergent accounts of what had happened. The Court of Appeal could make no evaluation of the credibility of those witnesses23. Without itself seeing and hearing the witnesses, and without any relevant finding by the primary judge about the probable accuracy and reliability of the testimony given by the witnesses other than Dr Trevithick, the Court of Appeal could not decide whether the manner in which any of those other witnesses gave their evidence bore upon the finding to be made. It may be that the manner in which those witnesses gave their evidence would be of no assistance in deciding what finding should be made. For present purposes, however, the critical thing is that the Court of Appeal had no basis upon which it could treat it as irrelevant. It may readily be accepted that retrial is a remedy that inflicts great hardship on parties and witnesses. But the Court of Appeal rightly concluded 19 Supreme Court Act 1970 (NSW). 20 Supreme Court Rules 1970 (NSW), Pt 51. 21 (2003) 214 CLR 118. 22 (2003) 214 CLR 118 at 125-126 [23] per Gleeson CJ, Gummow and Kirby JJ. 23 Fox v Percy (2003) 214 CLR 118 at 125-126 [23] per Gleeson CJ, Gummow and Hayne that there had to be a new trial in the present matter. The Court of Appeal erred, however, in deciding that the new trial should be confined in the manner described. The orders proposed by Gleeson CJ should be made. Callinan CALLINAN J. The first respondent suffered serious injuries when he was either pushed, jostled or jumped from a jetty under the control of, or constructed or approved by, one or more of the appellant, the Middle Harbour Yacht Club (the second respondent) and the Mosman Municipal Council (the third respondent). He sued the appellant and the second and third respondents in the Supreme Court of New South Wales. Each of the defendants at the trial cross-claimed against the others and alleged contributory negligence on the part of the first respondent. The action was dismissed by the trial judge (Newman AJ). Because of that it was unnecessary for his Honour to determine the issues between the appellant and the other respondents. The first respondent appealed to the Court of Appeal. That Court ordered a retrial upon a restricted basis. Who, if any, of the appellant and the second and third respondents should be liable to the first respondent remains undetermined. The principal question in the appeal to this Court is whether the New South Wales Court of Appeal erred in the exercise of its powers under s 75A of the Supreme Court Act 1970 (NSW) ("the Act") by ordering, that although there should be a new trial of the action, it be conducted on the basis that it was established in favour of the first respondent that, through being jostled or pushed, he lost his balance and fell from the jetty into the water. Facts The first respondent on 29 March 1997, was 20 years old and a successful recreational sailor. He lived in Queensland but was in Sydney on that date to compete in sailing races at Rose Bay. On the evening of that day he was present at a ball conducted at the Middle Harbour Yacht Club. The clubhouse is constructed on the foreshore of the Harbour. On each side, and directly in front of it is a jetty. A white "toe-board" approximately 200 mm in height, but no railing, was constructed on the seaward side of the jetty. It presented no barrier to entry into the water. The evidence as to the number of people in attendance at the ball was imprecise. It is clear however that it was not a small function. Alcoholic drinks were served, but not consumed in excessive quantities. Although the first respondent had partaken of them his judgment was not impaired: it was his intention to compete in an important sailing race the next day. Mr Nathan Wilmot who had won the National titles in Hobart during the previous year for the class of boats in which the first respondent sailed was present at the ball. Sailors, or at least this group of them, had the practice at the conclusion of a regatta of "dunking" the winner in the waters in which the race was conducted. Mr Wilmot had not been dunked in Hobart the preceding year. Some of those present at the ball resolved to dunk him during the ball. They took Callinan hold of him in the club, carried him to the jetty and dunked him in shallow water off the beach. Some further description of the jetty is required. Two other jetties ("the mooring jetties") jut out at right angles from the club. Boats are moored from time to time in the water to the sides of the mooring jetties and close to the jetty from which the first respondent entered the water. The depth varied with the tide. The tide was in on the evening of the ball. The sand immediately below the jetty was covered by shallow water at the time. The distance between its surface and the jetty was about one and a half metres. Its depth in the vicinity of the jetty was only about one fifth of a metre. The jetty was lit but the lighting did not illuminate the seafloor. There was no impediment to access from the clubhouse to the jetty. Access to the mooring jetties could only be gained by passing through lockable gates. The trial A suggestion that the first respondent participated in the dunking of Mr Wilmot was not made out. He did however say that he watched it from the jetty on the fringe of a group of people. His feet were then resting, he said, against the toe-board on its edge. It was from there that he entered the water. When he did his head struck the sandy bottom. He was rendered, in consequence, a quadriplegic. The appellant was the owner of the land on which the clubhouse and jetties were built. The second respondent was the occupier of the premises, and the third respondent was the local government authority in whose municipality the clubhouse and the jetties were situated. The first respondent's case included that while he was standing on the jetty he was jostled or bumped into the shallow water. The second and third respondents, neither of which had direct knowledge of the events, made generalised allegations of contributory negligence on the part of the first respondent. However, the second respondent's allegations were more specific: "(a) Failing to keep a proper lookout; Failing to take due care in all the circumstances; Failing to take adequate precaution for his own safety; Failing to observe the environment in which he was walking; Failing to take care whilst on the wharf/jetty; Callinan Standing too close to the edge of the wharf/jetty; Failing to observe that he was in a position of peril; Exposing himself to a risk that he could be forced off the edge of the wharf/jetty; Failing to move back from the edge of the wharf/jetty; Rushing towards the edge of the wharf/jetty without due care; Failing to have regard to the depth of the water beneath the wharf/jetty; Participating in activities with other people which exposed himself to a risk of injury; (m) Engaging or participating in activities which led Nathan Wilmot to be thrown into the water; Failing to prevent Nathan Wilmot from falling into the water". There was no allegation by any of the appellant and the second and third respondents in their pleadings that the first respondent had deliberately dived into the water. Notwithstanding this, whether he did became a central issue at trial. The trial judge having found that the first respondent had deliberately dived into the water dismissed the action. In evidence-in-chief at the trial, the first respondent said this in answer to these questions: ... what [did] you experience? A. Well, it was a nudge from behind as I was on the edge which put me off balance and it – and I couldn't recover because my feet were butted up against this raised timber edging, I couldn't put my feet out to stop my momentum so I just fell forward. Q. Do you recall anything about the way in which you fell? A. With regard – sorry? You have told his Honour that there was this nudge from behind? Yes. You lost your balance, you went forward? Callinan Yep. Do you recall what inclination you adopted as you went down? ... I tried to counteract it by putting – by swinging my arms back. Did that do any good? No, no, I just toppled there. Q. What did you strike? The bottom, the sandy bottom it was. Q. With what? Q. What did you notice about yourself? I didn't notice anything at the time. I did black out. The next thing I remember, I – it was quite a bit of commotion and water and – and looked up and there was Nathan Wilmot looking down at me and I noticed I couldn't control – like I couldn't stand up or couldn't control what was happening." Later the first respondent gave the following evidence about being pulled out of the water by Mr Wilmot: ... once I was on the beach, they just kept me there, just comforting me and I said I couldn't move or anything and just – at the edge – at the edge of the water and, yeah, I just waited. They said they called an ambulance and we just waited for it. Did you realise at that stage what was the problem with you? I just wanted to get to the hospital. I knew I just couldn't – I couldn't move, and, yep. It was serious." In cross-examination, the first respondent made these responses: … do you have any recollection of Nathan lying in the water as if he was pretending to drown? Callinan Have you ever told anyone about that? About Nathan? Have you ever told anyone that Nathan was pretending to drown? You never have? The basis for this cross-examination was a statement attributed to the first respondent by the doctor who treated him at Royal North Shore Hospital on his arrival there soon after he was injured. The cross-examination continued: "Q. Can I suggest to you that you told at least one and perhaps two of the ambulance officers that you dived approximately 1.5 metres, landing face first in shallow water. Did you tell anyone that? I don't remember. Did you tell any of the ambulance officers that you'd been drinking rum and Coke and beer? I didn't drink any beer. So it may be you told the ambulance officers you'd been drinking rum and Coke? I don't remember saying that, no. Do you have a recollection now of being taken or actually being admitted to Royal North Shore Hospital? A. When I first got there? Yes? I don't remember. It's very hazy. Do you remember whether anyone from the yachtsman's ball either went to hospital with you or was at the hospital after you were admitted? Do remember Ben Moon being in the ambulance with me." In re-examination the first respondent persisted in his denial that his entry into the water was voluntary: Callinan "Q. Did you have any intention of entering that water that night? None at all. Did you know how high the deck was from the water? I had not been to the yacht club before so I wasn't aware of the heights of anything. Did you know how deep the water was above the sandy beach? Yeah, I had no idea of the surroundings. Did you know what the nature of the bottom was? No. I'd never been to the yacht club before. Did you know what the nature of the bottom was off that point of the timber deck? Did you know if it was sand? Or rock? I didn't know of anything. Did you see Mr Wilmot at any time face down in the water? Q. What was the deepest into the water that you saw him at any stage? At ankle deep. In what position was he when you saw him at that depth? He was standing in the water. Did he convey to you the appearance of any difficulty in the water? Q. Were you affected by liquor at the time you entered the water? Callinan Do you recall any conversation in the ambulance? No. I was – I'd just broken my neck. I had no sense." (Emphasis added) I turn to the evidence given by the witnesses called in support of the first respondent's case. Mr James gave the following account in evidence-in-chief: "Q. What became of Mr Fitzgibbon? I saw Mr Fitzgibbon standing there looking in towards Nathan, and then I was talking back to my friends, turned around and I saw him overbalanced. How would you describe the method or plane in which he entered? I would say he entered, he was falling over headfirst, and he entered the water in a forward motion. The picture that you saw was one of him attempting to regain his balance? Yes, sir. Did he achieve that outcome? No, sir." Another witness, Ms Roberts-Thompson, said that she saw the first respondent falling into the water: "Q. Where was he in relation to the edge? I couldn't tell you in relation to the edge. I could tell you – I only saw him when he was falling into the water. Q. Well, what did you see then? I saw him falling into the water and as he got closer, right to the end – as he was falling I saw his arms go forward but he landed in the water before any of that, before he could finish anything. Callinan Before his arms moved in the way that you have described how would you describe their position with regard to his body generally before he put them out as you've described it? Just, it would be like a falling forward motion. Did he appear to you to be diving? No. Not at all. How did he enter the water? A. Well, as I said before, he was trying to get his hands out but he hit the water. It was basically headfirst." Her brother, Mr Roberts-Thompson, was also a witness. He said this: "… Daniel I identified was falling, pushed, but certainly was making his way into the water and it certainly didn't look as though it was something he was meaning to do on purpose … … It wasn't that he was purposefully diving … he was … caught off balance, or fell, or basically that it was not his intention to be heading towards the water." Evidence was given by a friend of the first respondent, Mr Molloy. He said that he saw the first respondent overbalancing with his arms raised beside him and falling. While his evidence in this respect was consistent with the first respondent's and other witnesses', contrary to the first respondent's assertion, Mr Molloy said that he had a clear recollection that the first respondent was personally involved in the "dunking" of Mr Wilmot. The trial judge made no reference in his reasons to the evidence of another witness, Mr Treharne, which the Court of Appeal thought to be of "considerable importance". In chief Mr Treharne said that he was standing "shoulder to shoulder" with the first respondent on the jetty at the time of the Wilmot dunking. He did not see Mr Wilmot enter the water but saw him standing in it about "knee deep". Later Mr Treharne gave this evidence: "Q. Whilst you were standing there with him in that position, did you notice something happen to him? Yes, I did. Q. What did you observe? Callinan I noticed the top half of Dan's body propel forward. Then I noticed his feet get tangled up on a thin white painted piece of timber around the edge of the wharf, and then with his arms waving to try and stop himself, and then proceeded forward towards the water, and then had his arms out in front of him before he hit the water. How did he strike the water? Head first. Other than you being shoulder to shoulder with Mr Fitzgibbon at the point that you have indicated, and at the time that you have indicated, were you aware of the presence of other people around you? Yes. Q. Where were those other persons located apropos Mr Fitzgibbon? Congregated out at the end of the wharf and obviously behind us, because we were out on the edge of the wharf. Did you see anyone push him? Did you see a hand applied to him? Or a shoulder, or any other propelling force? Did he dive in? Mr Treharne also said that the point at which the first respondent entered the water was very near to where Mr Wilmot was. The water there would therefore have been about knee deep. In cross-examination Mr Treharne was not asked about the entanglement of the first respondent's feet in the toe-board. He said that as soon as the first respondent's upper body moved forward, his immediate reaction was to try to Callinan regain his balance. No attack was made by the cross-examiner upon Mr Treharne's emphatic denial that the first respondent had dived into the water. Mr Moon, another friend of the first respondent, gave evidence that he had participated in the "dunking" of Mr Wilmot. He saw Mr Wilmot standing in the water. Next he heard a clamor behind him, turned around and noticed somebody else in the water. He saw Mr Wilmot wade out to that person, the first respondent, and pull him into the shallows. He heard the first respondent say: "Who pushed me in?" The last of the witnesses on liability called by the first respondent was Mr von Bibra. He too was a competitor in the sailing competition. His evidence was that he saw a group of people escorting Mr Wilmot on to the jetty. He said: "I noticed [the first respondent] – [he] caught my attention when he lost balance on the end of the boardwalk ... He was right on the edge of the boardwalk so his feet would have been next to [the toe-board]". He added that the first respondent had gone forward and put his arms out futilely to try to stop himself, and that he could not regain his balance and fell into the water. He entered the water with his arms stretched out but below his shoulders. He saw Nathan Wilmot move to help him. In doing so he had to move a little bit further out, a distance of a metre and a half to two metres. While they waited for the ambulance he noted that the first respondent "was going in and out of consciousness", despite that he and the others were trying to keep him awake. Mr von Bibra was cross-examined on a statement that was tendered and which he had given to the lawyers for the club. He had relevantly said this in it: "18. Nathan was still being half carried half walking to a point on the wharf where the water was on the sand ... I moved along the wharf to the point ... standing near a post. It appeared to me Nathan was half pushed half thrown into the water from about waist high. From memory there were two at Nathan's feet and two at his shoulders. It was like one gentle movement into the water. I can't remember seeing Nathan standing in the water, but it never run [sic] 'through my head' Nathan was drowning either authentically or in 'horse play'. At this stage Nathan was the only one in the water. 21. At this stage I was standing on the wharf at the point ... I saw Dan Fitzgibbon standing on the wharf at the point ... Dan was surrounded by about 8 to 10 people. I noticed that Dan's feet were hard up against the white painted timber on the edge of the wharf. Callinan I was looking in Dan's direction and I saw him fall forward towards the water as if he had for some reason lost his balance. At this time I could see that there were people either side and behind him. 23. As he fell forward I could see his arms out-stretched trying to regain his balance. But at the 'point of no return' Dan put his arms in front of him like a person diving and then he hit the water." The witness in the case whose evidence the trial judge came to regard as decisive was Dr Trevithick, the emergency registrar at the Royal North Shore Hospital on duty on the night of the first respondent's accident. He said that he well recalled many of the events of the night. It was Easter Sunday. It was memorable for the need to attend to five major trauma cases. It was the busiest night of any that he had encountered until then in any emergency department in which he had worked. Dr Trevithick was the doctor "specifically responsible" for the first respondent's care in the emergency department that night. The first respondent was, the doctor said, capable of conversing upon arrival at the hospital. He smelled of alcohol but did not appear to be affected to such a degree as to cause concern in his management. The conversation that the first respondent and the doctor had was described by him in this way: "[The first respondent] said to me that he had been on a wharf at Middle Harbour Yacht Club and when one of his friends was pushed into the water during – I don't think I can actually use his exact words after this length of time, but some skylarking perhaps, or high jinks – it's a bit hard to describe what I am trying to say – some episodes of hilarity on the wharf and enjoyment following winning a sailing regatta – when one of his friends was pushed into the water, he dived into the water because he was – he thought his friend was at risk of drowning and he dived in to the water from a height of about 1.5 metres, hitting his face on the bottom of the – on the ground – when I say – on the bottom of the water because the water depth was quite shallow at the time and he was – then felt completely numb in his limbs and had to be rescued by onlookers." The doctor's contemporaneous note was more brief but was to a similar effect: "Visiting Sydney with friends for sailing regatta. Had several alcoholic drinks with friends. One friend was thrown into the water at the Spit and pretended to drown so Daniel dived 1.5m into shallow water, striking his mouth on the bottom – he was paralysed immediately, rescued by onlookers – Ambulance attended and placed cervical collar." Callinan There was other evidence capable, albeit slightly, of supporting the doctor's evidence. One such piece of evidence was a note made by a nurse at the hospital (who was not called to give evidence). It read: "Patient BIBA [brought-in-by-ambulance] after diving [the word 'jumping' was crossed out] into water off Spit Bridge 1.5 metres head first into H20 ... Patient alert & orientated." Three other documents admitted into evidence were also said to lend support to Dr Trevithick's evidence. The first was a note made by a Dr Sew Hoy who examined the first respondent at 12:45 am on 30 March 1997. It read: "no recollection of having fallen? dived into the water". Another was a note made by a Dr Liston who also saw the first respondent in the intensive care ward after his accident. It relevantly said: "20-year-old male; previously well; acute spinal injury secondary to diving into shallow water under the influence of ETOH". The final document was a "patient report" prepared by the New South Wales Ambulance Service which read: "? Spinal injury. 20-year-old male dived approximately 1.5 metres landing face first in shallow water". Neither Dr Sew Hoy nor Dr Liston was called to give evidence. Of all this evidence for the defence the trial judge said the following24: "None of the arguments advanced on behalf of the [first respondent] in any way reduces the view I have formed as to the credibility and reliability of Dr Trevithick's evidence. I am of the view that Dr Trevithick was not only a truthful witness but also a reliable one. I accept fully that he had a clear recollection of what he was told that evening by the [first respondent]. As I have already indicated his evidence does not stand alone, it is supported by notations made by others who had the care of the [first respondent] on that evening. In my view it overcomes the probative value of the evidence given by the [first respondent] and those called in his case. I should add that even if those other notations did not exist, my view as to the probative value of Dr Trevithick's evidence would be unchanged." 24 Fitzgibbon v The Waterways Authority [2002] NSWSC 1230 at [40]. Callinan Some of the other findings of the trial judge should be noted25: the "Molloy's evidence is clearly contradictory of [first respondent's] evidence relating to his part in the manner in which Wilmot entered the water. Molloy has the [first respondent] as an active participant in the dunking of Wilmot whereas, of course, the [first respondent] maintains his part was no more than a spectator. Not only that, Molloy deposes that Wilmot's actions in the water involved him carrying out a range of activities which were much more extensive than him merely standing up as all other witnesses called by the [first respondent] deposed to. The contradictory nature of Molloy's evidence is of some importance when the evidence called by the [appellant] in the matter is taken into account. The evidence called by the [first respondent] as to the events surrounding him entering the water is of such nature that in the absence of any evidence called on behalf of the [appellant] I would have come to the conclusion that the [first respondent] had established his case that he had either tripped on the raised board at the eastern edge of the jetty or was pushed or jostled by those surrounding him or indeed a combination of both factors and thus he would be entitled to have the matter determined on that factual finding. While it is true that certain of the evidence given by witnesses called on his behalf when viewed alongside his evidence has contradictory elements in it, those contradictory elements would not be sufficient in my view to displace my base view that the [first respondent] had established his case on a balance of probabilities. However, the matter does not end there. Why it does not is because of oral evidence given by a Dr Trevithick, the emergency registrar at Royal North Shore Hospital on the evening in question. Furthermore, that oral evidence was supported not only by Dr Trevithick's notes on the evening but also by notes made by other personnel at Royal North Shore Hospital and by ambulance officers of statements made to them by the [first respondent] when he was being transported to Royal North Shore Hospital and after his arrival at that institution. It is true that when the [first respondent] was seen at 12.45am on the morning of 30 March 1997 by a Dr Sew Hoy at North Shore the note he took of the history given to him by the [first respondent] was equivocal. That note was 'no recollection of having fallen? dived into the water'. 25 Fitzgibbon v The Waterways Authority [2002] NSWSC 1230 at [26]-[27], [34]-[35] and [41]. Callinan However, when he was seen in intensive care later on that morning a Dr Liston recorded the following history: '20-year-old male; previously well; acute spinal injury secondary to diving into shallow water under the influence of ETOH.' Putting aside any considerations of onus of proof, looking at all the evidence dispassionately I conclude on a balance of probabilities that the [first respondent] entered the water because he dived from the jetty. In terms of onus of proof this in turn means that I am not satisfied that the [first respondent] has established his prime factual case on a balance of Not only did the trial judge fail to make reference to probabilities." Mr Treharne's evidence but he also omitted to deal with the significant piece of evidence given by Mr Moon that the first respondent had asked, immediately after he was rescued: "Who pushed me in?". It is also relevant that the second respondent called no eye-witnesses or persons present at the ball, and that the trial judge failed to deal with a submission by the first respondent about that based on Jones v Dunkel26. The Court of Appeal The first respondent appealed to the Court of Appeal (Meagher and Santow JJA and Foster AJA). He argued there that the trial judge attributed too much weight to the evidence of Dr Trevithick and gave insufficient weight to the substantial body of evidence led on his behalf. In that regard particular attention was drawn to the fact that the trial judge failed to advert to, or consider in any way, the evidence of Mr Treharne. The argument in this respect was that the reasons of the trial judge were appealably deficient. Their Honours conducted their own thorough review of the evidence. It was the opinion of Foster AJA, with whom Meagher JA and Santow JA agreed, that the trial judge failed to provide adequate reasons for the rejection of the large body of evidence that the first respondent did not dive into, or enter the water voluntarily and that it was inevitable that the first respondent would not only be "disappointed" but "disturbed" as well by this omission27. 26 (1959) 101 CLR 298. 27 Connell v Auckland City Council [1977] 1 NZLR 630 at 634. Callinan Dealing first with the notes from the hospital nurse and the ambulance officer, Foster AJA said this28: "[Newman AJ], in his reasons for judgment, has made a finding, without discussion, that both these descriptions [of the first respondent diving] were statements made by the [first respondent] to the relevant ambulance and hospital personnel. With respect, I am unable to agree. In my opinion, the evidence falls short of establishing that these entries recorded admissions made by the [first respondent] to the effect that he deliberately dived into the water." Turning then to the notes of Drs Liston and Sew Hoy his Honour said29: "I am of the same view in relation to the notes made after the [first respondent] passed from the care of Dr Trevithick. Dr Liston was not called, nor was Dr Sew Hoy. Consequently, there is no direct evidence that the material recorded in their notes was in fact supplied by the [first respondent] rather than from the hospital documents which would have accompanied him. In the absence of any expert evidence on the topic, the question whether the [first respondent] dived or simply fell head first into the shallow water, striking his head on the bottom, would appear to be of no medical significance. The fact that Dr Sew Hoy, the orthopaedic registrar, who saw the [first respondent] approximately one and a half hours after his admission to the hospital, recorded that the [first respondent] had 'no recollection of having fallen? dived into the water' cannot, in my view, be treated as merely 'equivocal'. It is consistent with the [first respondent's] sworn testimony that he had no recollection of speaking to any doctors at the hospital. It also suggests that, at this very early stage, there was at least uncertainty as to whether he had dived or fallen. The note, clearly enough, indicates that, in a short space of time after being seen by Dr Trevithink [sic], the [first respondent] was unable to provide information as to the happening of the accident." Foster AJA next turned his mind to the evidence of Dr Trevithick which the trial judge had held to be conclusive. One passage in particular in his Honour's analysis of the doctor's evidence is worth noting30: "The [first respondent's] alleged statement that he had dived into the water because he thought his friend was at risk of drowning is simply out of step 28 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [74]. 29 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [75]. 30 Fitzgibbon v The Waterways Authority [2003] NSWCA 294 at [99]. Callinan with all the other evidence in the case. This purpose for the dangerous dive is not referred to in any other of the notes in the hospital and ambulance records. It appears only in Dr Trevithick's note. The evidence, including Dr Trevithick's, cannot support a suggestion that the [first respondent] was so affected by alcohol as to form a mistaken view that Mr Wilmot was in danger of drowning or to have acted on some inebriated impulse. This being so, the whole of the evidence renders nonsensical the suggested attempt at rescue. Mr Wilmot was never in any danger, nor did he appear to be so. According to the sworn testimony of the [first respondent] and the eye-witnesses, he was standing in shallow water, or even making his way out of it, at the time when the [first respondent] entered the water. There was no rational basis upon which, in these circumstances, the [first respondent] could have made the statement recorded in the doctor's notes. Nor, having regard to the evidence, was there any basis for anyone else making such a suggestion. In this regard, no evidence was called by the [appellant and the second and third respondents] from any persons also present at the scene to support the proposition that the [first respondent] was diving to attempt the rescue of Mr Wilmot. The absence of such evidence strongly suggests that none was available." Having found that the trial judge placed too much weight on the evidence of Dr Trevithick, the question was then as to the orders that should be made for the disposition of the appeal. The first respondent had contended principally for either one of two results in the Court of Appeal, a retrial on all of the issues, or that the Court of Appeal could and should re-determine the matter finally, and give judgment for him. The first respondent did not however confine himself to those contentions. His submissions in reply sought relief in the alternative: "It is submitted his Honour's finding should be set aside and in lieu thereof the Court should find the [first respondent] sustained injury as a result of falling from the deck because he had been either jostled or pushed and remit the matter to the Court below for the determination of the issues left undetermined by the trial judge ... It is noted that the [second and third respondents] in their written submission have adduced no substantive arguments in support of the judgment entered by the trial judge." Counsel for the first respondent contemplated the possibility of an order of the kind that the Court of Appeal decided to make as appears from this exchange: "Foster AJA: I take it the only result if you are successful in this appeal would be a new trial in those circumstances. [Counsel for the first respondent]: There'd have to be a new trial. The only question might be if this Court was persuaded that on the facts his Honour's factual finding as to how the event occurred should be reversed Callinan and the [first respondent's] version should be accepted, but apart from that the matter would have to go back for a new trial, and it may be the Court would not be disposed to determine the factual issue but would send that back as well, assuming the appeal was successful." It is true that at a later stage of the hearing of the appeal the presiding judge indicated that if there were to be a retrial it should be on all issues but not only did the first respondent never depart from the position stated in his submissions in reply, but also he orally submitted that the essential issue was whether he had dived or otherwise entered the water voluntarily. In allowing the appeal, the Court ordered that: "there be a new trial of the action conducted on the basis that it is established in favour of the [first respondent] that, through being jostled or pushed, he lost his balance and fell from the jetty into the water". The Court also ordered that the appellant and the second and third respondents pay the first respondent's costs, not only of the appeal but also of the trial. The appeal to this Court The appellant appeals on a number of bases, including that the Court of Appeal was wrong in its assessment of the evidence, and that its decisions and orders should be overturned in their entirety. The second and third respondents support the appellant's appeal and adopt its arguments as well as advance some of their own. The appellant's second ground is that the order made by the Court of Appeal which I have set out above was one that could not and should not have been made. The appellant mounted a third argument that the intimation by the trial judge, and the appellant's reliance on it, amounted to a denial of natural justice. In addition to being a respondent to the appellant Authority's appeal, the Council sought special leave to appeal against the order for costs made against it by the Court of Appeal. The first respondent also seeks to rely upon a notice of contention filed out of time the sole ground of which was: "Order 3 of the Court of Appeal's orders entered on 22 March 2004 was the order which should in any event have been made in the proper exercise of that Court's power pursuant to s 75A of the Supreme Court Act 1970 (NSW) and/or Part 51 Rule 23 of the Supreme Court Rules." The first respondent should be allowed to rely upon that notice. On any view, the power, statutory or otherwise of the Court of Appeal to make the order that it did, was always going to be a central issue in this Court. Section 75A of Callinan the Act confers many extensive powers upon the Court of Appeal. Pursuant to that section appeals are to be conducted by way of rehearing31. The Court of Appeal has powers, inter alia, to draw inferences and make findings of fact32, assess damages33, receive further evidence34, although only on "special grounds"35, and to make any finding or assessment, and, give any judgment or make any order or direction which ought have been given or made36 or the nature of the case requires, pursuant to sub-ss (10) which is as follows: "The Court may make any finding or assessment, give any judgment, make any order or give any direction which ought to have been given or made or which the nature of the case requires." In Fox v Percy I said this of the powers conferred by s 75A37: "Section 75A of the Act imposes positive duties upon the State appellate court, the performance of which is in no way conditioned by judge-made rules stated in very different language, and to a substantially different effect from the plain meaning of the section which, by sub-ss (6) and (10) imposes affirmative duties on the Court of Appeal, including to do what the nature of the case requires ... By the Act, the Court of Appeal was armed with all of the ample powers and duties of an appellate court under the Equity Act 1901 (NSW) (ss 81- 89), and in particular the duty to rehear the case pursuant to s 82 which might even, for example, permit the Court to undertake a review in In the joint judgment of Gleeson CJ, Gummow and Kirby JJ their Honours said39: 31 s 75A(5). 32 s 75A(6)(b). 33 s 75A(6)(c). 34 s 75A(7). 35 s 75A(8). 36 s 75A(10). 37 Fox v Percy (2003) 214 CLR 118 at 164-165 [146]-[147]. 38 Attorney-General (NSW) v Wheeler (1944) 45 SR(NSW) 321. 39 Fox v Percy (2003) 214 CLR 118 at 125-127 [21]-[25]. Callinan "The character and features of [an] appeal are governed by the Supreme Court Act 1970 (NSW) ... The nature of the 'rehearing' provided in these and like provisions has been described in many cases. To some extent, its character is indicated by the provisions of the sub-sections quoted. The 'rehearing' does not involve a completely fresh hearing by the appellate court of all the evidence. That court proceeds on the basis of the record and any fresh evidence that, exceptionally, it admits ... the record41. The foregoing procedure shapes the requirements, and limitations, of such an appeal. On the one hand, the appellate court is obliged to 'give the judgment which in its opinion ought to have been given in the first instance'40. On the other, it must, of necessity, observe the 'natural limitations' that exist in the case of any appellate court proceeding wholly or substantially on the disadvantage that the appellate court has when compared with the trial judge in respect of the evaluation of witnesses' credibility and of the 'feeling' of a case which an appellate court, reading the transcript, cannot always fully share42. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole43. limitations These include 40 Dearman v Dearman (1908) 7 CLR 549 at 561. The Court there was concerned with s 82 of the Matrimonial Causes Act 1899 (NSW) which provided that "on appeal every decree or order may be reversed or varied as the Full Court thinks proper": see Dearman v Dearman (1908) 7 CLR 549 at 558. 41 Dearman v Dearman (1908) 7 CLR 549 at 561. See also Scott v Pauly (1917) 24 CLR 274 at 278-281. 42 Maynard v West Midlands Regional Health Authority [1984] 1 WLR 634 at 637; [1985] 1 All ER 635 at 637 per Lord Scarman, with reference to Joyce v Yeomans [1981] 1 WLR 549 at 556; [1981] 2 All ER 21 at 26. See also Chambers v Jobling (1986) 7 NSWLR 1 at 25. 43 State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 330 [89]-[91]; 160 ALR 588 at 619-620, citing Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 209-210; Jones v The Queen (1997) 191 CLR 439 at 466-467. Callinan Nevertheless, mistakes, including serious mistakes, can occur at trial in the comprehension, recollection and evaluation of evidence. In part, it was to prevent and cure the miscarriages of justice that can arise from such mistakes that, in the nineteenth century, the general facility of appeal was introduced in England, and later in its colonies44. Some time after this development came the gradual reduction in the number, and even the elimination, of civil trials by jury and the increase in trials by judge alone at the end of which the judge, who is subject to appeal, is obliged to give reasons for the decision45. Such reasons are, at once, necessitated by the right of appeal and enhance its utility. Care must be exercised in applying to appellate review of the reasoned decisions of judges, sitting without juries, all of the judicial remarks made concerning the proper approach of appellate courts to appeals against judgments giving effect to jury verdicts46. A jury gives no reasons and this necessitates assumptions that are not appropriate to, and need modification for, appellate review of a judge's detailed reasons. Within the constraints marked out by the nature of the appellate process, the appellate court is obliged to conduct a real review of the trial and, in cases where the trial was conducted before a judge sitting alone, of that judge's reasons. Appellate courts are not excused from the task of 'weighing conflicting evidence and drawing [their] own inferences and conclusions, though [they] should always bear in mind that [they have] neither seen nor heard the witnesses, and should make due allowance in this respect'"47. It is the duty of courts of appeal therefore to ensure that appeals are fully and carefully considered, and that their consideration not be confined to the identification of errors of law. The great preponderance of cases turn on their 44 Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 619-620; State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 322-325 [72]-[80]; 160 ALR 588 at 609-613. 45 Public Service Board of NSW v Osmond (1986) 159 CLR 656 at 666-667 citing Housing Commission (NSW) v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257-258, 46 eg, Hocking v Bell (1945) 71 CLR 430; Hocking v Bell (1947) 75 CLR 125 at 131- 132; cf Naxakis v Western General Hospital (1999) 197 CLR 269 at 271-272 [2], 47 Dearman v Dearman (1908) 7 CLR 549 at 564, citing The Glannibanta (1876) 1 PD 283 at 287. Callinan facts. Judges at first instance, armed with all of the advantages, sometimes exaggerated, which appellate courts have from time to time attributed to them, of seeing and hearing the witnesses, are not infallible. In this case, in my opinion, the Court of Appeal undertook precisely the sort of review of the facts that was entrusted to it by the legislature. In consequence, it decided to allow the appeal and to order a retrial upon the basis that one issue of fact be foreclosed by, what in substance was a finding that it was prepared to, and did make. As unusual as such a course may be, it was a course open to it, and specifically contemplated by s 75A(10) of the Act. I am unable to say therefore that the Court of Appeal should not have done that, either for the reasons advanced in argument by the appellant which I will shortly examine, or otherwise. But first reference should be made to Pt 51, r 23 of the Supreme Court Rules (NSW) which provides a further source of power and is as follows: "51.23 New trial (1) The Court of Appeal shall not order a new trial: on the ground of misdirection, non-direction or other error of law, on the ground of the improper admission or rejection of evidence, (c) where there has been a trial before a jury, on the ground that the verdict of the jury was not taken upon a question which the trial judge was not asked to leave to the jury, or on any other ground, unless it appears to the Court of Appeal that some substantial wrong or miscarriage has been thereby occasioned. (2) The Court of Appeal may order a new trial on any question without interfering with the decision on any other question. (3) Where it appears to the Court of Appeal that some ground for a new trial affects part only of the matter in controversy, or one or some only of the parties, the Court of Appeal may order a new trial as to that part only, or as to that party or those parties only. (4) Where the Court of Appeal makes an order under subrule (2) or subrule (3), the Court of Appeal may give such judgment or make Callinan such order as the nature of the case requires for the disposal of the remainder of the appeal. (5) Where the Court of Appeal orders a new trial, the Court of Appeal may: impose conditions on any party for the purposes of the new trial, direct admissions to be made by any party for the purpose of the new trial, order that the testimony of any witness examined at the former trial may be read from the notes of the testimony, instead of the witness being again examined, and for the purposes of subparagraphs (a) to (c) from time to time make such orders as the Court of Appeal thinks fit." If there were any question about the amplitude and sufficiency of the powers of the Court of Appeal under s 75A of the Act to do what the Court of Appeal did here, which in my opinion there is not, there is no doubt that the rules which I have just quoted, especially sub-r 3, singly and collectively would resolve that question. In terms those sub-rules permit the Court of Appeal to do exactly what it did: effectively to order a new trial as to "part[s] only of the matter[s] in controversy", the former being every issue except as to the involuntariness of the first respondent's entry into the water. I turn now to the arguments of the appellant and the second and third respondents. The first submission of the appellant was that the circumstances of the trial and the facts generally were not so exceptional as to justify the highly unusual course which was adopted by the Court of Appeal, even though what was done may have literally been within the power conferred by s 75A of the Act. The appellant developed this submission by contending that the order of the Court of Appeal presented a severe handicap to the appellant and the second and third respondents in mounting their case of causative and contributory negligence against the first respondent at the retrial. It is right, as the appellant submits, that orders for retrials on a restricted basis are rare, and should be reserved for exceptional cases. Indeed, as I have said on other occasions48, the perceived advantages of splitting trials are often illusory, and can create more problems than they resolve. The problems are 48 for example, Perre v Apand Pty Ltd (1999) 198 CLR 180 at 332 [436]. Callinan likely to be greater and more numerous however in jury cases as the ones cited The appellant made the submission that it had been denied natural justice. That submission was based upon the matters to which I have referred, namely the intimation given at one stage of the appeal by the presiding judge that if there were to be a retrial it should be on all issues. The balance of the appellant's submissions were directed to the intervention of the Court of Appeal on questions of fact generally, and the absence of any sufficient basis for their Honours to do so at all in this case. For the second respondent it was submitted that the order made by the Court of Appeal would inhibit the appellant and the second and third respondents on a retrial in contesting the quantum of damages: that the division between that issue and the issue of liability can be misleading. Reference was also made to difficulties which would arise in establishing causation, or absence of causation, as well as contributory negligence. The second respondent also sought to make the point that it would be denied the opportunity of attacking the credibility of the witnesses called on liability by the first respondent if (and to the extent that) they were witnesses on quantum as well. In advancing these submissions the second respondent put matters in rather extravagant language, that the retrial would be "crippled" or "a travesty of a trial". A number of further submissions were made concerning the first respondent's witnesses on liability. Those differences appear to me to be only minor and semantic, particularly having regard to the ambiguities latent in the word "dive". A further criticism was made of the Court of Appeal: that it gave weight, indeed undue weight to a piece of hearsay evidence, the statement by Mr Moon that he heard the first respondent say: "Who pushed me in?". in expression between the differences The principal submission of the third respondent was also that the inhibitions upon the conduct of the retrial were so great as to make it, in effect, practically impossible to be conducted fairly. The difficulties were identified as being, as to the objections which might be taken to evidence; the need for the parties to reflect on the meaning of the order of the Court of Appeal in advance of the retrial; and the need for the parties to make decisions as to the witnesses to be called, and the questions to be put to them. It is convenient to deal with the third respondent's submission first. In my view, on examination there is very little substance in it, as, ultimately, the third respondent was bound to concede in argument. With respect to the asserted problem, as to how an objection could properly be made if a question were asked that was relevant to the pleading of contributory negligence that did not raise any 49 Pateman v Higgin (1957) 97 CLR 521; Balenzuela v De Gail (1959) 101 CLR 226. Callinan issue of the voluntariness of the first respondent's entry into the water, the only response that counsel was able to make, was, that although no objection could legitimately be sustained, enterprising counsel might still attempt to persuade a trial judge that the question could not be asked. With respect to the issue of causation, the third respondent initially adopted the stance that on the approach of the Court of Appeal, it would be unable to argue that the first respondent's entry into the water was caused or contributed to by anything that he had done. Subsequently however, the third respondent accepted that it would still be open for it to argue that the first respondent stood too close to the edge of the jetty, or put himself in a position to be jostled, thereby causing or contributing to his injuries. Similarly, the third respondent was unable to draw any real distinction between jostling or pushing in the circumstances of the case. And again, without being able to demonstrate why this would be so, the third respondent contended that a discrete admission under Pt 51 r 23 that it might have been required to make, would not have caused the same difficulties as the finding and order of the Court of Appeal. The last matter to which the appellant and the second and third respondents referred was the order of the Court of Appeal that the first respondent should have his costs not only of the appeal but also of the trial, an argument which will require separate attention. Even though the course adopted by the Court of Appeal was unusual, indeed perhaps even highly unusual, it was as I have said, open to it. In my opinion, the perceived difficulties to which the appellant and the second and third respondents have referred are largely illusory, as in substance the third respondent was bound to concede. A retrial will not be crippled and certainly will not be a travesty. The issue of causation remains open. It is not inconceivable that the first respondent could fail entirely on the issue of negligence even though there can no longer be any question about the voluntariness of his descent into the water. That the jetty lacked a railing was something that all could see. Similarly, there was no reason for anyone including the first respondent to make any assumptions about the depth of the water beside the jetty. The width of the jetty was a matter of ordinary observation, and that it could accommodate only a limited number of people in a huddle at any one time must have been obvious. It would be open for the appellant and the second and third respondents on any retrial to make use of these matters as they see fit, and to contend, if they are so minded, that nothing that they did or omitted to do in conducting the ball, in choosing that location for it, and in approving the structure of the jetty and the form that it took, involved negligence on the part of any of them. In litigious times, it is sometimes overlooked that accidents, even accidents with catastrophic consequences, can occur without fault on the part of anyone. So too, there are cases in which a plaintiff will fail simply because he or she is unable to establish on the balance of probabilities that anyone was negligent. Callinan I turn now to the submission that the Court of Appeal should not have intervened in the case, whether by making the orders that it did, or at all. I would reject this submission. In my view the challenge must fail. The omission to refer to Mr Treharne's evidence was a serious one. That the first respondent would voluntarily dive into the water is improbable. And whilst no doubt Dr Trevithick was impartial, allowance should have been made for the fact that whether the first respondent entered the water voluntarily or involuntarily was completely irrelevant to the matter with which the doctor was concerned, the assessment and treatment of the first respondent which were being undertaken on an exceedingly busy night. As to the criticism, as hearsay, of the evidence of the first respondent's question "Who pushed me in?", it is sufficient to say that it was in evidence, and provided a basis at least for a contention that the doctor may have misunderstood, or not accurately recorded what a highly distressed person was saying very soon after suffering the massive injury that he did. The question mark which appears in written versions of the first respondent's account, associated as they were, with the word "dived" add nothing, except perhaps to highlight the ambiguity inherent in the use of the word "dived" in the circumstances of this case. Having regard to the matters to which I have discussed intervention by the Court of Appeal was not only open, but almost inevitable. I do not think that the appellant and the second and third respondents have been denied natural justice. It was at first instance in Stead v State Government Insurance Commission50 that the judge intimated that a party need not address on a particular issue. In this case, there was some argument in the Court of Appeal on the issue which has loomed largest in this Court, the form of the Court of Appeal's order. And now the issue has been fully argued here. Everything that could be said on behalf of the parties has been said. Furthermore, a retrial on the restricted basis should be less costly than a trial on all issues. The restriction is plainly stated. The parties will be, following the full argument in this Court, well aware of what they will need to do in preparing and conducting their cases. The Court of Appeal should not however have made the order that it did in respect of the costs of the trial in favour of the first respondent. There was no proper basis for such an order. It may turn out, if the first respondent's case were ultimately to fail, that the appellant and the second and third respondents should never have incurred any costs of a trial at all. The proper order is that the costs of the trial should abide the result of the retrial. 50 (1986) 161 CLR 141. Callinan The orders that I would make are that that the applications for special leave to appeal to this Court should be granted, but that the appeals should be dismissed except the appeals with respect to the costs of the trial. I would therefore make the following orders: The time for filing the appellant's notice of contention filed on 13 May 2005 be extended as necessary. The appellant's appeal be dismissed with costs subject to the following orders. That the appellant and the second and third respondents pay the first respondent's costs of the appeal. Order 4 of the Court of Appeal made on 3 December 2003 be set aside and in lieu thereof order that the respondents pay the appellant's costs of the appeal to that Court. That the time for filing the applications for special leave in S98/2005 and S131/2005 be extended as necessary. That the applications for special leave be granted. That the applications be treated as appeals and heard instanter. That the appeals be allowed with respect to order 4 made by the Court of Appeal on 3 December 2003 insofar as it relates to the costs of the first trial. That the appeals otherwise be dismissed. That the costs of the first trial abide the result of the retrial.
HIGH COURT OF AUSTRALIA THE QUEEN AND APPELLANT RESPONDENT The Queen v Dickman [2017] HCA 24 21 June 2017 ORDER Appeal allowed. Set aside orders 2, 3 and 4 of the Court of Appeal of the Supreme Court of Victoria made on 23 November 2015 and in their place order that the appeal against conviction to that Court be dismissed. Remit the proceeding to the Court of Appeal of the Supreme Court of Victoria to determine the respondent's pending application for leave to appeal against sentence. On appeal from the Supreme Court of Victoria Representation G J C Silbert QC with B L Sonnet for the appellant (instructed by Solicitor for Public Prosecutions (Vic)) M E Shaw QC with B J Doyle for the respondent (instructed by Barbaro Thilthorpe Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS The Queen v Dickman Criminal law – Appeal against conviction – Identification evidence – Where victim's identification of accused on photoboard admitted at trial – Where police conveyed to victim that photograph of suspect would be on photoboard – Where victim had made erroneous previous identification – Whether probative value of identification evidence outweighed by unfair prejudice to accused – Whether evidence should have been excluded under s 137 of Evidence Act 2008 (Vic) – Whether admission of identification evidence occasioned substantial miscarriage of justice. Words and phrases – "identification evidence", "probative value", "substantial miscarriage of justice", "unfair prejudice". Evidence Act 2008 (Vic), s 137. KIEFEL CJ, BELL, KEANE, NETTLE AND EDELMAN JJ. The respondent was convicted following his trial in the County Court of Victoria (Judge Coish and jury) of (i) intentionally causing serious injury1; and (ii) making a threat to kill2, for which offences he was sentenced to an effective sentence of eight years' imprisonment with a non-parole period of five years and six months. The Court of Appeal of the Supreme Court of Victoria (Priest JA and Croucher AJA; Whelan JA dissenting) allowed the respondent's appeal against his convictions3. The majority concluded that the trial judge had erred by failing to exclude certain identification evidence ("the August 2011 identification") under s 137 of the Evidence Act 2008 (Vic) ("the Evidence Act"), and that this error had occasioned a substantial miscarriage of justice. The convictions were set aside and a new trial ordered. On 18 November 2016 French CJ, Kiefel and Gordon JJ granted the prosecution special leave to appeal on grounds which challenge the conclusion that it was an error to admit the evidence and, in the alternative, the conclusion that its admission occasioned a substantial miscarriage of justice. One plank of the challenge relating to the admission of the evidence anticipated the decision in IMM v The Queen4, and contends that the Court of Appeal majority erred by assessing its probative value by reference to their Honours' view that the complainant was an unreliable witness of identification. As will appear, this aspect of the appellant's challenge is not determinative. The real issue is the correctness of the Court of Appeal majority's conclusion that such probative value as the August 2011 identification possessed was outweighed by the danger of unfair prejudice to the respondent. As will also appear, it is strictly unnecessary to address the question said to be raised by the appellant's alternative ground, which is whether, if the admission of the evidence was wrongful, it resulted in a substantial miscarriage of justice given that it was deployed to the advantage of the defence. The August 2011 identification remained a strand in the prosecution's circumstantial case regardless of the forensic use made of it by the defence. The issue presented by 1 Crimes Act 1958 (Vic), s 16. 2 Crimes Act 1958 (Vic), s 20. 3 Dickman v The Queen [2015] VSCA 311. (2016) 257 CLR 300; [2016] HCA 14. Bell Nettle Edelman the alternative ground is whether, assuming the admission of the August 2011 identification involved legal error, the respondent's conviction on the admissible For the reasons to be given, analysis of the evidence and the conduct of the trial supports the trial judge's conclusion that the risk that the August 2011 identification would unfairly prejudice the defence was minimal. The analysis also supports the conclusion that if the August 2011 identification is put to one side, the respondent's conviction was nonetheless inevitable. The appeal must be allowed and the respondent's convictions restored. The evidence Faisal Aakbari, an 18 year old German youth, was holidaying in Melbourne. In the early hours of 27 September 2009, he went into the city, where he attempted to gain entry to several nightclubs. These included the Dallas Showgirls nightclub ("the Dallas club") in King Street, Melbourne. A number of men associated with the Hells Angels Motorcycle Club ("the Hells Angels") were standing outside the Dallas club. Aakbari falsely claimed to one of them, Ali Chaouk, that he was a member of the Hells Angels in order to gain entry. Once inside the club, Aakbari was taken upstairs by the manager, a man named Smith. There, he met a person whom he described as the "old man", and a short, balding man named Daly, and a short, balding man who looked Italian ("the Italian"). The "old man" had a long beard and a ponytail and was wearing an "army" style of jacket. He looked like a "rocker" or "biker". His long beard gave him this appearance. No one else in the Dallas club looked like a "rocker" or "biker". After a time Aakbari was told that the group was going to visit another club. Aakbari did not want to go with them but he was given to understand that he had no choice. He left the Dallas club with Chaouk, Daly and a man who had a bullring in his nose ("Bullring"). Daly and Bullring got into Aakbari's car with him and directed him to the Hells Angels' Thomastown clubroom ("the Thomastown clubroom"). Aakbari described the Thomastown clubroom, on arrival, as "very empty". He saw the "old man", Chaouk and the Italian inside the clubroom. There was a 5 Baini v The Queen (2012) 246 CLR 469 at 481 [33] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; [2012] HCA 59. Bell Nettle Edelman bar in the clubroom and on one of the walls there were photographs of members of the Hells Angels from chapters around the world. The "old man" showed Aakbari photographs of members of the German chapter and asked him if he knew any of them. When Aakbari said he did not, the "old man" became very angry and aggressive. At a point, he disappeared and returned with a baseball bat with which he savagely beat Aakbari about the head and body. When he ran out of breath, the "old man" passed the baseball bat to Chaouk, who continued the assault. The "old man" disappeared again and on this occasion he reappeared with a large "Ninja" knife, which he held next to Aakbari's neck as he told him "don't go to the police, otherwise I will kill you and your family". The only persons whom Aakbari described as present in the clubroom at the time of the assault were the "old man", Chaouk and the Italian, who, on the prosecution case, was a man named Michael Gerrie. Aakbari described Daly and Bullring as walking in and out. After the "old man" threatened Aakbari with the knife, a man whom Aakbari had not seen at the Dallas club intervened, saying "let him go". Daly and Chaouk helped Aakbari to his car. Aakbari was driven to an unknown location, where he was left. Aakbari suffered multiple injuries in the course of the assault. These included: an extradural haematoma; a tear in the dura (the lining of the brain); bleeding on the surface of the brain; a broken fibula; lacerations to the head; abrasions to the arms and legs; a loose tooth; and a black eye. He was taken to hospital, where he underwent a craniotomy to drain the blood clot and repair the On 28 September 2009, while he was in hospital, Aakbari spoke to the police about the attack. The process of obtaining a statement from Aakbari took several days. On 29 September 2009, he was shown an array of photographs of 12 men (a "photoboard") from which he selected a photograph of Chaouk. Later that day, he assisted the police in compiling a "FACEview" image of the "old man". On 30 September 2009, Aakbari was shown another photoboard, from which he wrongly selected photographs of persons who he said might be Daly and Bullring. On 2 October 2009, Aakbari was shown closed-circuit television (CCTV) footage of the interior stairs and exterior of the Dallas club recorded on the morning of his visit. He identified Chaouk, the "old man", Daly and the Italian. The person whom Aakbari identified as the "old man" appears to be a stocky, middle-aged, bearded male with a long ponytail, wearing a camouflage-style jacket. Bell Nettle Edelman Aakbari gave the police a description of the "old man" after he had assisted in the compilation of the FACEview image and after he had seen the CCTV footage. The "old man" was aged in his 50s or 60s, he was 170 to 180 cm in height, he was white with tanned skin, he had a long beard, his hair was worn in a long ponytail, and he was wearing a green, grey and white "army" style of jacket. Detective Senior Constable Blezard, who was one of the police officers investigating the assault, thought that he recognised the person whom Aakbari identified in the CCTV footage as the "old man" as a man named Michael Cooper. On 5 October 2009, Aakbari was shown a photoboard containing photographs of 12 men, including a photograph of Cooper. The respondent's photograph was not included in the array. Aakbari selected the photograph of Cooper as the "old man". Cooper was charged with the assault on Aakbari. Further investigation, however, established that Cooper had a "rock solid" alibi and the charge was withdrawn. Aakbari returned to Germany in December 2009. On 16 February 2010 the police executed a search warrant at the respondent's home in Gawler, South Australia. They located a number of items in the course of the search which suggested that the respondent is known as "Boris". It is accepted that the police told Aakbari that his identification of Cooper was mistaken. In an email dated 18 February 2010, Detective Sergeant Condon said that he had spoken to two people whom he believed to be responsible for the assault on Aakbari and that he intended to make contact with police in Germany with a view to having Aakbari shown photographs. In the event, Detective Sergeant Condon was unable to make arrangements for Aakbari to participate in any identification procedures in Germany. In August 2011, Aakbari returned to Australia to give evidence at Chaouk's trial. During his stay in Melbourne he was shown a number of photoboards prepared by a police analyst. One photoboard included a photograph of the respondent. Aakbari was asked if he could identify the "old man" in this photoboard and he selected the photograph of the respondent. This is the August 2011 identification. In cross-examination, Aakbari agreed that the police had given him to understand that the photoboard would contain a photograph of the person whom they suspected of being the "old man". Aakbari also agreed that he had selected the photograph of the respondent because his photograph bore the closest resemblance to his recollection of the "old man". On the same day Aakbari wrongly identified photographs of persons as the Italian, Daly and Bullring and failed to identify a photograph of Michael Gerrie. Bell Nettle Edelman Gerrie, a "prospect" for membership of the Hells Angels, gave evidence in the prosecution case. Gerrie had driven from Adelaide to Melbourne on 26 September 2009 with a member of the Hells Angels whom he knew as Boris. It was not in issue at the trial that the respondent is Boris. Gerrie and Boris were at the Dallas club on the morning of Sunday 27 September 2009. He, Boris and Chaouk left the Dallas club together and travelled by car to the Thomastown clubroom. Gerrie was shown the CCTV footage taken at the Dallas club and he identified the stocky figure with the long beard and ponytail wearing the camouflage-style jacket as Boris. He identified himself, Boris and Chaouk walking from the Dallas club towards a car. Gerrie claimed to have fallen asleep behind the bar at the Thomastown clubroom following their arrival and not to have witnessed any assault. Records of text communications and calls made to and from mobile telephone services associated with Gerrie and the respondent were in evidence. These showed that a text message had been sent from the respondent's mobile telephone to Gerrie's mobile telephone at 7.55 am on Saturday 26 September 2009. Thereafter, calls made to, and from, these mobile telephones were relayed through various telephone towers consistently with Gerrie's account that they had driven from Adelaide to Melbourne that day. The telephone records were consistent with Gerrie's account that on arrival he and Boris had driven to the Thomastown clubroom and that in the early hours of Sunday 27 September they had gone to the Dallas club. The CCTV footage recorded Aakbari's arrival at the Dallas club at 3.42 am on Sunday 27 September 2009. Chaouk's mobile telephone was being intercepted in connection with another police investigation. At 3.52 am, in an intercepted call between Chaouk and a person called Diva, there was reference to a member from Germany. In the same call Chaouk stated "no, no I'm still here. I've got to take Boris there and Mick". Commencing at 4.12 am, calls were made from the respondent's mobile telephone and Gerrie's mobile telephone to the mobile telephone associated with a man named Bernard Salstufor, who it would seem was believed to have knowledge of the German chapter of the Hells Angels. At 4.30 am Aakbari left the Dallas club. Shortly after 4.40 am the CCTV footage records the man in the camouflage-style jacket, Chaouk and Gerrie walking towards the car. At 4.48 am, while the three men were in the car, a call was recorded between Chaouk and one Peter Green. During the course of this conversation, the telephone records recorded a call from Gerrie's mobile telephone to Salstufor's mobile telephone. Fragments of what was suggested to have been being said to Salstufor (or the person using Salstufor's telephone) were Bell Nettle Edelman audible in the background of the recording of Chaouk's call. One fragment was the words "reckons he's from Frankford". It was the prosecution case that the bona fides of Aakbari's claim to membership of the German chapter of the Hells Angels was being investigated as the respondent, Gerrie and Chaouk travelled to the Thomastown clubroom. An intercepted call was recorded at the time of the assault and in the background Aakbari can be heard screaming "oh my God, what's happening?" and another voice can be heard saying "lying cunt" and "I mean, are you a Hells Angel?" The jury was invited to compare the respondent's voice on a recording made during the execution of a search warrant at his home with the voice speaking during the assault and conclude that the latter was the respondent. The sole issue at the trial was proof that the respondent was the "old man". The respondent did not give or call evidence at the trial. The trial judge's ruling The photoboard shown to Aakbari on 23 August 2011 contained photographs of 11 men6, including a photograph of the respondent. As earlier noted, the photoboard was prepared by a police analyst. It appears that the photograph of the respondent had been taken by the police on 16 February 2010. The respondent objected to the August 2011 identification and a voir dire hearing was conducted to determine its admissibility. The respondent argued that the preconditions for the admission of "visual identification evidence" under s 114 of the Evidence Act were not satisfied. Section 114 governs the admission of identification evidence based wholly or partly on what a person saw but does not include "picture identification evidence"7. Picture identification evidence relates to an identification made wholly or partly from the examination of pictures that are kept for the use of police officers8. The admission of picture identification evidence is governed by s 115 of the Evidence Act. 6 The photoboard contained 12 photographs; two were of the same man. 7 Evidence Act 2008 (Vic), s 114(1). 8 Evidence Act 2008 (Vic), s 115(1). Bell Nettle Edelman Consistently with the way the matter had been argued, the trial judge found that there was no evidence that the pictures included in the photoboard were kept for the use of police officers. His Honour considered that the admissibility of the August 2011 identification was governed by s 114 of the Evidence Act. It followed that the evidence would not be admissible unless the respondent had refused to take part in an identification parade or it would not have been reasonable to hold an identification parade, and the identification was made in circumstances in which Aakbari had not been intentionally influenced to The August 2011 identification was conducted by Detective Sergeant Condon and recorded on videotape. The trial judge was satisfied that Aakbari had not been intentionally influenced to identify the respondent's photograph. His Honour found that the respondent had refused to take part in an identification parade and, in any event, it would not have been reasonable to hold such a parade. His Honour was satisfied that the preconditions for the admission of the August 2011 identification were established. The respondent argued the August 2011 identification should be excluded under s 137 of the Evidence Act because its probative value was outweighed by the danger of unfair prejudice to his case. the alternative that The prosecutor submitted that the probative value of photographic identification evidence was generally in the "moderate to low" range and that the probative value of this identification was further reduced because it had taken place almost two years after the assault and after Aakbari's misidentification of Cooper. She contended that the evidence was nonetheless relevant and that its admission would not result in any unfair prejudice to the respondent. The trial judge found that notwithstanding its limitations, the August 2011 low, probative value". identification possessed "some, albeit relatively His Honour said that the unfair prejudice with which s 137 is concerned is the risk that the jury might misuse the evidence in some unfair way. In the circumstances, his Honour assessed that risk as minimal because the limitations of the evidence were readily apparent and would be the subject of directions as to the special need for caution before accepting it. 9 Evidence Act 2008 (Vic), s 114(2). Bell Nettle Edelman The August 2011 identification was adduced in the prosecution case together with the evidence of Aakbari's initial identification of Cooper and each of his other photoboard identifications and misidentifications. The issues at trial The prosecution case, which was essentially a circumstantial one, placed significant reliance on Aakbari's identification of the "old man" from the CCTV footage taken in conjunction with Gerrie's evidence that the bearded man with the ponytail wearing the camouflage-style jacket in that footage was Boris. In closing address, the prosecutor made this submission with respect to the August 2011 identification: "It's also relevant that when he was shown a photo board with the accused man, he picked the accused as the old man. It's relevant information for you to take into account but it's not something either way that could either lead you or to conclude he's guilty nor can it give rise to what we call a reasonable doubt. You've got it before you. It's in the mix so to speak but it is not the evidence upon which I rely to prove my case." The defence case relied on claimed inconsistencies between Aakbari's description of the "old man" and the respondent's appearance. Aakbari described the "old man" as fat whereas the video-recording of the execution of the search warrant at the respondent's home shows the respondent, who was then aged 46 years, as a person of moderately athletic appearance. Aakbari described the "old man's" hair and beard as white with grey tips. The respondent's hair and beard were described as ginger with some lighter colour. In addition to these physical differences, the respondent relied on Aakbari's belief that the "old man" was the boss of the Thomastown clubroom whereas the respondent was an interstate visitor. Prominent in defence counsel's closing address was the fact of Aakbari's initial identification of Cooper as the "old man" and the contention that Aakbari's assailant was a person who looked like Cooper. The Court of Appeal The respondent appealed against his convictions on multiple grounds, two of which challenged the admission of the August 2011 identification. The first contended that the evidence did not comply with the preconditions for admission under s 114 of the Evidence Act. Argument in the Court of Appeal in support of this ground proceeded upon acceptance that the August 2011 identification was not "picture identification evidence" under s 115. The correctness of that analysis is not an issue in the appeal in this Court. Bell Nettle Edelman The sole ground on which the respondent's appeal succeeded in the Court of Appeal was the trial judge's refusal to exclude the August 2011 identification under s 137 of the Evidence Act10. The Court of Appeal majority concluded that any probative value that the August 2011 identification had was so low as to be outweighed by the risk of unfair prejudice11. Their Honours gave five reasons for this conclusion. First, Aakbari's reliability was "significantly compromised"12 in that he had wrongly identified Cooper as the "old man", wrongly identified persons as Daly, Bullring and the Italian, and failed to identify Gerrie. Secondly, the delay of almost two years between the assault and the August 2011 identification exacerbated doubts about his reliability. Thirdly, his memory may have been contaminated by his earlier identification of Cooper and the possible "displacement effect" of viewing the CCTV footage. Fourthly, he had been told that his earlier identification was mistaken and he had been given to understand that a photo of his assailant would be included in the photoboard. Fifthly, he would have been striving to find the photograph that best resembled his memory Their Honours rejected any suggestion that directions could address any prejudice occasioned by admitting the evidence14. Their Honours went on to say15: "Had the evidence [of the August 2011 identification] been excluded – as the defence had sought – in our view it is highly unlikely that defence counsel would then have run the risk of having it admitted by undisciplined to his misidentification of Mr Cooper. Very experienced senior counsel would well have appreciated that – in circumstances where the evidence had cross-examination of [Aakbari] directed 10 Section 137 of the Evidence Act 2008 (Vic) provides: "In a criminal proceeding, the court must refuse to admit evidence adduced by the prosecutor if its probative value is outweighed by the danger of unfair prejudice to the accused." 11 Dickman v The Queen [2015] VSCA 311 at [102]. 12 Dickman v The Queen [2015] VSCA 311 at [104]. 13 Dickman v The Queen [2015] VSCA 311 at [105]-[108]. 14 Dickman v The Queen [2015] VSCA 311 at [111]. 15 Dickman v The Queen [2015] VSCA 311 at [112]. Bell Nettle Edelman been excluded – it would be inevitable that the evidence would be made admissible by any cross-examination on the misidentification of Mr Cooper (if only to rehabilitate [Aakbari's] credit). It is unthinkable that astute defence counsel would be so unwise." Having found that s 137 of the Evidence Act required the exclusion of the August 2011 identification, their Honours concluded that its admission had occasioned a substantial miscarriage of justice without further examination. Whelan JA, in dissent, agreed with the trial judge that the probative value of the August 2011 identification was low and that the danger of its misuse was minimal16. Whelan JA took into account that the trial judge proposed to, and did, give warnings concerning identification evidence in careful and detailed terms. His Honour considered that the problems to which the warnings were directed were plainly exposed in the evidence and that the trial judge was right to conclude that there was no danger that the jury would give the evidence disproportionate weight17. Whelan JA considered that it was highly unlikely that the respondent's case would have been conducted without reliance on Aakbari's initial identification of Cooper. His Honour framed the issue not as the possibility of a lack of discipline in cross-examining Aakbari, but rather whether defence counsel would be prepared to forgo the very substantial benefits to the defence of adducing evidence of the Cooper identification18. His Honour pointed to defence counsel's final position in closing address19: "[T]he Crown really want to put it to one side, don't they, this photo ID business. They really want to put it to one side because it is completely contrary to my client being the old man." As Whelan JA noted, in her closing address the prosecutor acknowledged that Aakbari had made numerous mistakes in the photoboard identification of other persons and that there were "real problems with that type of evidence". 16 Dickman v The Queen [2015] VSCA 311 at [3]. 17 Dickman v The Queen [2015] VSCA 311 at [5]-[9]. 18 Dickman v The Queen [2015] VSCA 311 at [27]. 19 Dickman v The Queen [2015] VSCA 311 at [16]. Bell Nettle Edelman The prosecutor disavowed that the August 2011 identification could be relied upon "alone" and conceded that Aakbari's earlier identification of Cooper was "obviously relevant"20. In the way the trial was conducted, far from the identification being prejudicial to the respondent, Whelan JA reasoned it had been used as a principal component of the defence case. In Whelan JA's view no substantial miscarriage of justice had been occasioned by the admission of the August 2011 identification21. The probative value of the August 2011 identification The majority and minority analyses in the Court of Appeal proceeded upon acceptance of the prosecutor's stance at the trial, which was that evidence of Aakbari's initial identification of Cooper would only be adduced in the prosecution case if the August 2011 identification was also admitted. In the event the latter identification was rejected, the prosecutor flagged the likelihood that cross-examination would make it admissible "in rebuttal". In this Court, the respondent contests this analysis, submitting that the prosecutor was obliged to lead evidence of Aakbari's identification of Cooper. In circumstances in which Aakbari had not resiled from the Cooper identification, he submits that its admission did not require identification, made subsequently, also be received. the August 2011 that In this Court, the appellant accepts that discharge of its duty of fairness required that it adduce evidence that within days of the assault Aakbari identified Cooper as his assailant, and that the admission of this evidence did not necessitate that the August 2011 identification also be admitted. While cross- examination of Aakbari may have enabled the prosecution to adduce the August 2011 identification, the appellant's concession should be accepted. The determination of whether s 137 required the exclusion of the August 2011 identification, as the trial judge appreciated, did not turn on whether Aakbari's identification of Cooper was, or was likely, to be received in evidence. In written submissions, the appellant complains that the Court of Appeal majority wrongly took into account their Honours' assessment that Aakbari was an unreliable witness of identification. As the appellant acknowledged on the hearing of the appeal, the complaint is not to the point in circumstances in which there is no dispute that the probative value of the evidence was rightly assessed 20 Dickman v The Queen [2015] VSCA 311 at [17]. 21 Dickman v The Queen [2015] VSCA 311 at [23]-[24]. Bell Nettle Edelman by the trial judge as low. This was an estimate that did not depend upon his Honour's assessment of Aakbari's truthfulness or reliability as a witness22. Assuming that the jury would accept the August 2011 identification at its highest, it was identification with limited capacity to rationally affect the assessment of the probability that the respondent was the "old man". This is to recognise not only the limitations of photographic identification, but also that the August 2011 identification was evidence of Aakbari's opinion that of the 11 men whose photographs were included in the array, the respondent's photograph bore the closest resemblance to his recollection of the appearance of the man who had assaulted him two years earlier23. Aakbari's opinion that the photograph of the respondent resembled his assailant was nonetheless a relevant circumstance. The fact that standing alone its probative value was low did not require its exclusion unless that value was outweighed by the danger of unfair prejudice24. Yet each of the reasons that the Court of Appeal majority gave for the conclusion that the evidence required exclusion was concerned with its low probative value. The only unfair prejudice to which the Court of Appeal majority referred was the "seductive quality" of identification evidence, which, their Honours said with reference to a passage in the joint reasons in Domican v The Queen, is difficult to ameliorate by directions25. 22 The Dictionary to the Evidence Act 2008 (Vic) defines "credibility of a witness" to mean the credibility of any part or all of the evidence of the witness, and to include the witness's ability to observe and remember facts and events about which the witness has given, is giving or is to give evidence. 23 The Dictionary to the Evidence Act 2008 (Vic) defines "identification evidence" to include evidence of an assertion that the accused resembles a person who was present at the place where the offence was committed. 24 Festa v The Queen (2001) 208 CLR 593 at 598-599 [10]-[11], [13]-[14] per Gleeson CJ, 614-615 [66]-[67] per McHugh J, 644 [171] per Kirby J (dissenting, but agreeing as to the admissibility of the Hill identification evidence), 658 [216] per Hayne J; [2001] HCA 72. 25 Dickman v The Queen [2015] VSCA 311 at [111] citing (1992) 173 CLR 555 at 561-562 per Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ; [1992] HCA 13. Bell Nettle Edelman Recognition of the seductive effect of identification evidence led their Honours in Domican to state a requirement of the common law of evidence that where evidence of identification represents a significant part of the prosecution case, the judge must warn the jury of the dangers of convicting on it in a case in which its reliability is disputed26. Their Honours did not suggest that the seductive effect of identification evidence cannot be addressed by judicial direction. The point made in Domican was the need for cogent and effective directions tailored to the circumstances of the case27. Section 116 of the Evidence Act, as at the date of trial, reflected the concerns voiced in Domican respecting identification evidence28. It required the judge to warn the jury of the special need for caution before accepting identification evidence and of the reasons for that need for caution both generally and in the circumstances of the case. Aakbari's evidence of the August 2011 identification was unlikely to have the seductive effect of an identifying witness who is adamant that the accused is the offender29. The Court of Appeal majority did not explain the error in the trial judge's conclusion that directions drawing attention to the readily apparent limitations of the August 2011 identification would minimise any risk that the jury might give the evidence disproportionate weight. Unfair prejudice may be occasioned because evidence has some quality which is thought to give it more weight in the jury's assessment than it warrants or because it is apt to invite the jury to draw an inference about some matter which would ordinarily be excluded from evidence30. The "rogues' gallery" effect of picture identification evidence creates a risk of the latter kind because 26 Domican v The Queen (1992) 173 CLR 555 at 561 per Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ. 27 Domican v The Queen (1992) 173 CLR 555 at 561-562 per Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ. 28 Section 116 of the Evidence Act 2008 (Vic) has since been repealed: Jury Directions Act 2015 (Vic), s 73(1). Division 4 of Pt 4 of the Jury Directions Act contains provisions relating to identification evidence in criminal trials. 29 Cf Festa v The Queen (2001) 208 CLR 593 at 614 [64] per McHugh J. 30 Festa v The Queen (2001) 208 CLR 593 at 602-603 [22] per Gleeson CJ. Bell Nettle Edelman the appearance of some photographs kept by the police may invite the jury to infer that the accused has a criminal record31. On the appeal in this Court, the respondent's argument concentrates on the danger of unfair prejudice of this latter kind, which is said to arise from unsatisfactory features of the August 2011 identification. The respondent points out that Aakbari did not volunteer that he had any doubts concerning his identification of Cooper. The police told Aakbari that he was mistaken and that they had identified the persons who were in fact responsible for the assault on him. This was the context in which Aakbari was told that arrangements would be made for him to look at further photographs. This background made it necessary for defence counsel to cross-examine Aakbari to elicit his agreement that he understood at the time of the August 2011 identification that the array would contain a photograph of the man whom the police suspected of being the "old man". The cross-examination was necessary in order to expose a weakness in the identification but it inevitably served to highlight that the police suspected the respondent of being the offender. Before addressing this aspect of the prejudice on which the respondent's argument relies, the question of the propriety of the police advising Aakbari that his identification of Cooper was mistaken should be addressed. It would have been wrong to tell Aakbari that his identification was a mistake if the police did not have cogent evidence that Cooper was not the "old man". On the hearing of the appeal in this Court, it was not clear that the respondent accepted that the police had correctly excluded the possibility that Cooper was the "old man". Senior counsel for the respondent submitted: "[T]here was a circumstantial case against Mr Cooper. That circumstantial case included that he was from Melbourne, he was in fact at the club rooms on the Monday when the police came, that he looked like Mr – the person – or he was identified by Mr Aakbari as the offender. Those matters were put to raise a reasonable doubt about the reliability of the CCTV and of course the [August 2011 identification], which the defence were endeavouring to meet." 31 See Alexander v The Queen (1981) 145 CLR 395 at 409-414 per Stephen J; [1981] HCA 17. Bell Nettle Edelman Contrary to the tenor of the submission, the trial was not conducted on the basis that the prosecution had failed to exclude the reasonable possibility that Cooper was the offender. That question first arose in the course of the voir dire. The prosecutor asked Detective Sergeant Condon a question about the inquiries that had been made concerning Cooper's alibi. Defence counsel interrupted, submitting that she could "short-circuit" this aspect of the hearing. In the exchange that followed, the prosecutor indicated that she wished to clarify whether it was to be suggested that Cooper should still have been a suspect. The trial judge inquired whether that was the suggestion, to which defence counsel replied "no, your Honour, obviously not". The prosecutor did not press questions on the topic of Cooper's alibi. In a later exchange during the trial, the prosecutor again raised the question of whether the defence proposed to suggest that Cooper was, or could have been, the offender. The prosecutor stated that if that suggestion were to be made she was in a position to lead evidence to rebut it. Defence counsel stated, somewhat enigmatically, "Your Honour, I've made my position plain all the way along. I agreed to my learned friend she could open in that general way". This led the trial judge to ask "correct me if I'm wrong, but I've never understood the defence to be suggesting that it could have been Cooper … Unless I'm missing something … that's how I'm interpreting [defence counsel's] comments. I haven't got it wrong, have I, [defence counsel]?" To the last query, defence counsel replied "No. I've been saying to my learned friend - I said in my opening my client wasn't there". In the absence of a clear indication that the defence was not proposing to suggest that Cooper may have been the "old man", it would perhaps have been prudent to lead evidence of the Cooper alibi. In the event it would seem that the issue was dealt with by evidence being led from Detective Sergeant Condon that following receipt and investigation of further information the charges against Cooper had been withdrawn. Consistently with the way the case had been conducted, before closing addresses defence counsel stated "I won't be putting to the jury it is Mr Cooper. I'll be submitting that it's a person who clearly Mr Aakbari believes is Mr Cooper and therefore looks like Mr Cooper". There was nothing to prevent the respondent from exploring the strength of Cooper's alibi. A forensic decision was made not to do so. The admissibility of the August 2011 identification is to be determined upon acceptance that the police were in possession of evidence that excluded Cooper as the offender. In these circumstances it was not improper for the police to tell Aakbari that he appeared to have been mistaken and to ask him to participate in a further attempt to identify his assailant. Bell Nettle Edelman It was wrong, however, to convey to Aakbari that the suspect's photograph would be included in the photoboard presentation. It appears that the photoboards that were shown to Aakbari in August 2011 contained a printed "preamble", stating that the viewer should not assume that the presentation included a photograph of any person suspected of being the offender. The value of this instruction was effectively undermined by Detective Sergeant Condon's earlier advice to Aakbari that the police had spoken to the men whom the police believed to be responsible for the assault and that they would arrange for him to be shown further photographs. Nonetheless, criticism of the police for the conduct of the identification should not have resulted in the exclusion of relevant evidence unless such probative value as it possessed was outweighed by the danger of unfair prejudice32. The unfair prejudice occasioned by the disclosure of Detective Sergeant Condon's suspicion that the respondent was the offender was the risk that the jury would infer that his suspicion was based on matters about the respondent known to Detective Sergeant Condon which were not in evidence. That risk, however, does not appear to have been a real one in the context of this trial. The evidence shows that police attended the Thomastown clubroom at about 6.40 am on Sunday 27 September 2009 and took details of the registration numbers of four cars parked outside it. One of these was a car bearing a South Australian plate which was associated with Gerrie. The text message transmitted from the respondent's mobile telephone to Gerrie's mobile telephone on the morning of 26 September 2009 linked the respondent to Gerrie. Telephone records placed the respondent in the vicinity of the Thomastown clubroom around the time of the assault. The reasons that the investigation came to focus on the respondent were explained in the evidence. Whether the evidence proved the respondent's guilt was the issue for the jury but there is no reason to conclude that the suspicion that the police entertained as to his guilt was based on information apart from the material that was before the jury. The appellant is right to contend that the jury was not required to grapple with "abstract notions as to the dangers of identification evidence", as the limitations of the August 2011 identification were apparent. The trial judge's conclusion that the danger of unfair prejudice was minimal and could be adequately addressed by direction was justified. It follows that the admission of the August 2011 identification did not involve error. 32 Alexander v The Queen (1981) 145 CLR 395 at 430 per Mason J. Bell Nettle Edelman Substantial miscarriage of justice Even if there had been an error in admitting the evidence it did not follow, as the Court of Appeal majority appear to have concluded, that the error necessarily occasioned a substantial miscarriage of justice33. The appellant rightly complains that the Court of Appeal majority proceeded to the conclusion that there had been a substantial miscarriage of justice34 without reference to the evidence or the conduct of the trial. Such an analysis, it is suggested, would have demonstrated that, without the August 2011 identification, the respondent's conviction was inevitable. The force of the appellant's submission is illustrated by consideration of unchallenged aspects of the evidence. Aakbari met the "old man" in the Dallas club and the "old man" looked like a "rocker" or a "biker". Whatever Aakbari intended to signify by that description, he was unchallenged in his account that there was only one person in the Dallas club who answered it. Aakbari was not challenged on his identification that the bearded man with the ponytail wearing the camouflage-style jacket seen in the CCTV footage was the "old man". It was not in issue that the respondent is the person Gerrie knew as Boris. Gerrie's account of his trip with the respondent from Adelaide to Melbourne and their visit to the Dallas club in the early hours of Sunday 27 September 2009 was not in issue. Nor was it in issue that Gerrie, Chaouk and the respondent left the Dallas club together and travelled by car to the Thomastown clubroom together. 33 The determination of the appeal was governed by s 276(1) of the Criminal Procedure Act 2009 (Vic), which provides: "On an appeal under section 274, the Court of Appeal must allow the appeal against conviction if the appellant satisfies the court that – the verdict of the jury is unreasonable or cannot be supported having regard to the evidence; or as the result of an error or an irregularity in, or in relation to, the trial there has been a substantial miscarriage of justice; or for any other reason there has been a substantial miscarriage of justice." 34 Dickman v The Queen [2015] VSCA 311 at [113]-[114]. Bell Nettle Edelman It was not suggested that the bearded man with the ponytail wearing the camouflage-style jacket identified by Aakbari in the CCTV footage is not the same man identified by Gerrie as Boris. The quality of the CCTV images may be grainy and the lighting may have differed between images taken by the cameras inside and outside the club. Nonetheless the bearded man with the ponytail wearing the camouflage-style jacket is clearly visible. The persons Aakbari nominated as being present at the Thomastown clubroom were the "old man", Chaouk, the Italian, Daly and Bullring (and the man who later intervened on Aakbari's behalf and whom he had not seen earlier at the Dallas club). The submission that without the August 2011 identification the prosecution had not excluded that another bearded man with a ponytail, who answered Aakbari's description of being "fat" with grey and white hair, might have been his assailant fails to address the unchallenged evidence that Aakbari first encountered the "old man" at the Dallas club. The submission that the bearded man with the ponytail wearing the camouflage-style jacket appears to be stockier than the respondent is hardly to the point given that it was not put to Gerrie that the apparently stocky bearded man with the ponytail wearing the camouflage-style jacket who can be seen walking with him and Chaouk to the car was not Boris. Gerrie's evidence in material respects concerning his and the respondent's movements at critical times was supported by the telecommunications records. In light of the evidence and the issues that were live at the trial, the appellant's submission that the prosecution case was overwhelming should be accepted. The possibility that a person other than the respondent was the "old man" was excluded beyond reasonable doubt. The respondent's conviction was inevitable35. Orders For these reasons there should be the following orders. Appeal allowed. 35 Baini v The Queen (2012) 246 CLR 469 at 481 [33] per French CJ, Hayne, Crennan, Kiefel and Bell JJ. Bell Nettle Edelman Set aside orders 2, 3 and 4 of the Court of Appeal of the Supreme Court of Victoria made on 23 November 2015 and in their place order that the appeal against conviction to that Court be dismissed. Remit the proceeding to the Court of Appeal of the Supreme Court of Victoria to determine the respondent's pending application for leave to appeal against sentence.
HIGH COURT OF AUSTRALIA Matter No C17/2013 THE AUSTRALIAN ELECTORAL COMMISSION PETITIONER AND RESPONDENTS Matter No P55/2013 AND PETITIONER RESPONDENTS Matter No P56/2013 SIMON MEAD AND PETITIONER RESPONDENTS Australian Electoral Commission v Johnston Wang v Johnston [2014] HCA 5 18 February 2014 C17/2013, P55/2013 & P56/2013 ORDER The questions of law which, on 13 December 2013, were ordered to be tried separately be answered as follows: Did the loss of the 1,370 ballot papers between the fresh scrutiny and the re-count mean that the 1,370 electors who submitted those ballot papers in the poll were "prevented from voting" in the Election for the purposes of s 365 of the Commonwealth Electoral Act 1918 (Cth) ("Act")? Answer: Yes. Is the Court of Disputed Returns precluded by s 365 or otherwise from admitting the records of the fresh scrutiny, or original scrutiny, that bear on the 1,370 missing ballot papers as evidence of the way in which each of those voters intended to vote, or voted, in the Election for the purposes of each of the petitions filed in the matter, including in so far as those petitions seek relief under ss 360 and 362? Answer: The Court of Disputed Returns is precluded by s 365 from admitting the records of the fresh scrutiny and the original scrutiny that bear on the 1,370 missing ballot papers for the purpose identified in the proviso to s 365, namely, determining whether the loss of the ballot papers did or did not affect the result of the election. Further, the records of the original scrutiny and the fresh scrutiny that bear on those missing ballot papers are not admissible for the purpose of the Court determining that it should declare any candidate duly elected who was not returned as elected. On a proper construction of the Act, including the re-count provisions, is any further inquiry regarding the manner in which the Australian Electoral Officer for Western Australia dealt with the ballot papers reserved for decision pursuant to permitted under any, and if so which, provision of the Act; relevant to the disposition of any, and if so which, petitions before the Court of Disputed Returns; necessary to the disposition of any, and if so which, petitions before the Court of Disputed Returns? Answer: Yes, s 281(3). (b) No. Costs of the trial of separate questions reserved. Stand over further hearing of petitions to Thursday, 20 February 2014 at 12 noon in Melbourne. Representation J T Gleeson SC, Solicitor-General of the Commonwealth and A S Bell SC with P Kulevski for the petitioner in C17/2013, for the eighth respondent in P55/2013 and for the ninth respondent in P56/2013 (instructed by Australian Government Solicitor) S P Donaghue SC with D W Bennett for the first, third and fourth respondents in each matter (instructed by Colquhoun Murphy) A D Lang with E M Heenan for the second and eighth respondents in C17/2013, for the second and seventh respondents in P55/2013 and for the petitioner and the second and eighth respondents in P56/2013 (instructed by Slater & Gordon Lawyers) J A Thomson SC with D B Shaw for the fifth respondent in each matter (instructed by DLA Piper) R Merkel QC with F I Gordon for the sixth respondent in each matter (instructed by MDC Legal) K A Barlow QC with T O Prince for the petitioner in P55/2013 and for the seventh respondent in C17/2013 and P56/2013 (instructed by Hopgood Ganim Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Australian Electoral Commission v Johnston Wang v Johnston Parliamentary elections (Cth) – Senate – Court of Disputed Returns – Petitions disputing election – Election of six senators for State of Western Australia – Election for fifth and sixth Senate places very close – Re-count of ballot papers directed – 1,370 ballot papers lost before re-count – Re-count of available ballot papers led to different candidates being elected to fifth and sixth Senate places from those determined upon "fresh scrutiny" under s 273 of Commonwealth Electoral Act 1918 (Cth) ("Act") – Whether result of election likely affected by loss of ballot papers – Whether electors who cast lost ballot papers "prevented from voting" in election – Whether Court precluded by s 365 of Act from admitting evidence of records made at earlier counts about lost ballot papers in determining whether result of election affected – Whether Court could declare candidate duly elected by combining records made in earlier counts about lost ballot papers with results of re-count. Words and phrases – "duly elected", "prevented from voting", "result of the election was likely to be affected". Commonwealth Electoral Act 1918 (Cth), ss 263, 273, 281(3), 360(1)(v)-(vii), The issues An election of six senators for the State of Western Australia to serve in the Senate of the Parliament of the Commonwealth was held on 7 September 2013. The election for the fifth and sixth places was very close. A re-count was directed, but not all of the ballot papers to be re-counted could be found: 1,370 of them had been lost. On the re-count, the candidates who won the fifth and sixth places differed from those ascertained by earlier counts. Was the result of the election likely to be affected by the loss of the ballot papers? Can this Court now decide who should have been elected? Can it do so by looking at records of earlier counts of the lost ballot papers? And need it now examine ballot papers whose formality is disputed? Or must it instead declare the election absolutely void? The resolution of these questions depends on the proper construction of the Act under which the election was held and under which the result of the election is now challenged: the Commonwealth Electoral Act 1918 (Cth) ("the Act"). This decision resolves three questions of law about the construction of that Act. It is the answers to these questions that determine the answers to the questions above. Outline Section 7 of the Constitution requires that "[t]he Senate shall be composed of senators for each State, directly chosen by the people of the State". The Act provides the mechanisms and procedures by which senators are chosen by the people. In particular, the Act provides for the issue of writs for elections (Pt XIII), the nomination of candidates (Pt XIV), postal voting (Pt XV), pre-poll voting (Pt XVA) and the polling (Pt XVI). Section 263 of the Act provides that the result of the polling shall be ascertained by scrutiny. Section 283(1)(a) of the Act requires the Australian Electoral Officer for the relevant State or Territory to declare the result of the election and the names of the candidates elected as soon as is convenient after the result of the election has been ascertained. Three election petitions have been issued disputing1 the election of six senators for Western Australia that was held on 7 September 2013. Following the conduct of an original scrutiny and a fresh scrutiny of the ballot papers cast at the election, the Electoral Commissioner directed a re-count of a category of Hayne ballot papers. That category related to about 96 per cent of the votes that had been cast at the election. During the course of the re-count, it emerged that 1,370 ballot papers considered in both the original and fresh scrutinies had been lost and could not be included in the re-count. By its petition, the Australian Electoral Commission ("the AEC") alleges that the result of the election was affected by the loss of the ballot papers and seeks an order declaring the election absolutely void. Mr Zhenya Wang (a candidate at the election) petitions for orders declaring that the fifth and sixth persons returned as elected (Mr Wayne Dropulich and Senator Scott Ludlam) were not duly elected and declaring that Mr Wang and Senator Louise Pratt were. In the alternative, Mr Wang petitions for an order declaring the election absolutely void. Mr Simon Mead (a person qualified to vote at the election) petitions for the same orders as those sought by Mr Wang. Mr Wang and Mr Mead both rely on the loss of the 1,370 ballot papers but allege further contraventions of the Act constituted by what they allege were wrong decisions about ballot papers reserved during the course of the re-count for the decision of the Australian Electoral Officer for Western Australia. In deciding whether to declare that persons returned as elected were not duly elected, or to declare the election void, the Court must be satisfied2 that the loss of the ballot papers was likely to have affected the result of the election that was declared. To make either form of declaration, the Court must also be satisfied3 that it is just to do so. And if any elector was prevented from voting in the election on account of an error of, or omission by, an officer, the Court may not admit4, for the purpose of determining whether the error or omission did or did not affect the result of the election, any evidence of the way in which the elector intended to vote in the election. These reasons will show that the electors who submitted the lost ballot papers were prevented from voting. The Court may not admit evidence of records about the lost ballot papers made following the original scrutiny or the fresh scrutiny in deciding whether the result of the election was affected by the loss of the ballot papers. The number of ballot papers lost far exceeded the margin between relevant candidates at a point in the count determinative of who were the Hayne successful candidates for the fifth and sixth Senate places5. That margin was assessed on the fresh scrutiny to be 14 votes in favour of one candidate and, on the re-count of available ballot papers, 12 votes in favour of the other. Without evidence of the voting intentions recorded in the lost ballot papers, the conclusion that the result which was declared was likely affected by the loss of the ballot papers is inevitable. It may be noted, however, that, if the Court could admit such records, three of the respondents to the petitions assert (and no other party denies) that the records would demonstrate that the result of the election was likely affected. Combining what was recorded about the lost ballot papers with what was ascertained in the re-count would have led to a different result. The result of the election being likely affected by the loss of ballot papers, what orders should the Court make? Mr Wang and Mr Mead (with the support of several other parties) submitted that the Court should use the records which were made about the lost ballot papers in the original and fresh scrutinies to decide that Mr Wang and Senator Pratt should now be declared to have been duly elected. These claims depend upon the petitioners demonstrating not only that Mr Dropulich and Senator Ludlam were not duly elected but also that the Court can and should decide who would have been elected if the re-count had been conducted in accordance with the Act. The choice of senators must be made and ascertained in accordance with law6. For present purposes, that means in accordance with the Act. The Act requires that the result of the election be ascertained by scrutiny of the ballot papers. Once a re-count was directed, the process of scrutinising the ballot papers which were to be re-counted had to begin afresh7. There was not in the re-count, and there cannot now be, scrutiny of all of the relevant ballot papers to ascertain the result of the election. There was not then, and cannot now be, any opportunity for any of the lost ballot papers to be reserved for decision (in accordance with s 281) or for this Court to consider (in accordance with s 281(3)) any of the ballot papers which were reserved. 5 Chanter v Blackwood (No 2) (1904) 1 CLR 121 at 131 per Griffith CJ; [1904] HCA 48; cf Kean v Kerby (1920) 27 CLR 449 at 457-458 per Isaacs J; [1920] HCA 35. 6 Chanter v Blackwood (1904) 1 CLR 39 at 75 per O'Connor J; [1904] HCA 2. 7 Re Lack; Ex parte McManus (1965) 112 CLR 1 at 10; [1965] HCA 7. Hayne Mr Wang and Mr Mead (and those who supported this aspect of their arguments) ask the Court to construct a result of the polling from a combination of scrutiny of votes on the re-count, consideration of some of the votes reserved in the course of that re-count and consideration of records made in the course of the original and fresh scrutinies about the lost ballot papers which should have been, but were not, included in the re-count. The Act does not permit8 the construction of a result in that way. It is not now possible for the Court to combine the result of so much of the re-count as was undertaken (whether revised to correct what are said to be errors made with respect to some ballot papers, or not) with records made in the original and fresh scrutinies about the lost ballot papers. The results of the original and fresh scrutinies must be disregarded9 and the result of the election ascertained in accordance with a re-count conducted according to law. Ballot papers having been lost through official error, it is not possible to ascertain "the valid choice of the electors"10 by a re-count. The loss of the ballot papers (which constituted and occasioned contraventions of the Act) cannot be dismissed as immaterial. The fifth and sixth candidates returned as elected (Mr Dropulich and Senator Ludlam) were not duly elected. It is not possible to determine who was duly elected because ballot papers have been lost. All parties rightly11 accepted that, if the Court declares that Mr Dropulich and Senator Ludlam were not duly elected, and cannot declare who was duly elected, the only relief appropriate is for the election to be declared void. Directions for trial together and trial of separate questions On 13 December 2013, I ordered that the three petitions were to be heard and determined together, with the evidence, findings of fact and decisions in one petition also being evidence, findings of fact and decisions in the others. On the same day, I ordered that three questions of law be set down for trial separately from other issues raised by the petitions. Those questions are: "1. Did the loss of the 1,370 ballot papers between the fresh scrutiny and the re-count mean that the 1,370 electors who submitted those ballot papers in the poll were 'prevented from voting' in the In re Wood (1988) 167 CLR 145 at 166; [1988] HCA 22. 9 Re Lack (1965) 112 CLR 1 at 10. 10 In re Wood (1988) 167 CLR 145 at 166. 11 In re Wood (1988) 167 CLR 145 at 166. Hayne Election for the purposes of s 365 of the Commonwealth Electoral Act 1918 (Cth) ('Act')? Is the Court of Disputed Returns precluded by s 365 or otherwise from admitting the records of the fresh scrutiny, or original scrutiny, that bear on the 1,370 missing ballot papers as evidence of the way in which each of those voters intended to vote, or voted, in the Election for the purposes of each of the petitions filed in the matter, including in so far as those petitions seek relief under ss 360 and 362? On a proper construction of the Act, including the re-count provisions, is any further inquiry regarding the manner in which the [Australian Electoral Officer for Western Australia] dealt with the ballot papers reserved for decision pursuant to s 281: permitted under any, and if so which, provision of the Act; relevant to the disposition of any, and if so which, petitions before the Court of Disputed Returns; necessary to the disposition of any, and if so which, petitions before the Court of Disputed Returns?" Those questions should be answered as follows: Yes. The Court of Disputed Returns is precluded by s 365 from admitting the records of the fresh scrutiny and the original scrutiny that bear on the 1,370 missing ballot papers for the purpose identified in the proviso to s 365, namely, determining whether the loss of the ballot papers did or did not affect the result of the election. Further, the records of the original scrutiny and the fresh scrutiny that bear on those missing ballot papers are not admissible for the purpose of the Court determining that it should declare any candidate duly elected who was not returned as elected. (a) Yes, s 281(3). (b) No. (c) No. In order to understand the questions and the answers which are given, it is necessary to say something further about the relevant provisions of the Act and Hayne about the facts and circumstances which have been agreed or assumed for the purposes of the determination of the questions. Writs for elections Part XIII of the Act (ss 151-161) provides for the issue of writs for the election of senators12 and members of the House of Representatives13. The writ fixes14 the dates for the close of the rolls, the nomination of candidates, the polling and the return of the writ. The dates which may be fixed for those steps are prescribed by ss 155-159. The polling Part XVI of the Act (ss 202A-245) provides for the conduct of the polling. Provision is made for the form15 and printing16 of Senate ballot papers and for group voting tickets17 and individual voting tickets18, which are steps necessary to permit electors to vote "above the line" in a Senate election. An elector claiming to vote in an election (and who does not take advantage of the provisions for postal or pre-poll voting) must attend a polling place and, upon answering certain questions19, has the right to receive a ballot paper20. Subject to some exceptions which are not material, the voter, upon receipt of the ballot paper, marks "his or her vote on the ballot paper"21, folds the 12 ss 151 and 153. 18 s 211A. 21 s 233(1)(a). Hayne ballot paper and either deposits22 the paper in the ballot-box or, if voting as an absent voter, returns23 it to the presiding officer. Senate voting The effect of the detailed provisions made by s 273 is to provide for a single transferable vote system of proportional representation by which a candidate, at a half-Senate election, must obtain a quota of one-seventh of the available formal votes cast in the State, plus one, in order to be elected. If all available vacancies are not filled on a count of the first preferences, or on the transfer of the surplus votes of elected candidates beyond their quotas to the candidates next in the preferences indicated by the ballot paper, there is progressive exclusion24 of candidates with the fewest votes and the distribution of those candidates' preferences until six candidates have the required quota of votes. Electors may express25 their preferences, "below the line", by writing the number "1" in the square opposite the name of the candidate for whom the person votes as his or her first preference and successive numbers in the squares opposite the names of all remaining candidates so as to indicate the order of the person's preferences. Electors may express26 their preferences by voting "above the line", thus adopting a group or individual voting ticket lodged with the Australian Electoral Officer for the relevant State or Territory in accordance with s 211 or s 211A. The order of the electors' preferences is then determined in accordance with the relevant ticket. The scrutiny Section 263 of the Act provides that "[t]he result of the polling shall be ascertained by scrutiny". Section 273 provides for the manual scrutiny of votes in Senate elections and s 273A provides for the computerised scrutiny of votes in Senate elections. 22 s 233(1)(b)(i). 23 s 233(1)(b)(ii). Hayne Section 273B permits a scrutiny of votes for a Senate election to be conducted partly under s 273 and partly under s 273A. Section 273(2) requires Assistant Returning Officers to conduct an original scrutiny of votes. Each Assistant Returning Officer, in the presence of a polling official and of such authorised scrutineers as may attend, must reject27 all informal ballot papers "and arrange the unrejected ballot papers under the names of the respective candidates by placing in a separate parcel all those on which a first preference is indicated for the same candidate". Each Assistant Returning Officer must seal up28 the parcels of ballot papers and transmit29 the parcels to the Divisional Returning Officer with the least possible delay. Upon receiving the sealed parcels of ballot papers from Assistant Returning Officers, the Divisional Returning Officer is required30 to make a fresh scrutiny of the ballot papers contained in the parcels, "and for this purpose the officer shall have the same powers as if the fresh scrutiny were the original scrutiny, and may reverse any decision given by an Assistant Returning Officer in relation to the original scrutiny". The procedures which must then be followed are similar to those for the original scrutiny. The Divisional Returning Officer, having completed the fresh scrutiny, must place31 all informal ballot papers in a separate parcel and bundle32 the unrejected ballot papers under the names of the respective candidates. The officer must place in separate parcels all the ballot papers on which a first preference is indicated above the line for a candidate and all the ballot papers on which a first preference is marked below the line for that candidate. The Divisional Returning Officer must count33 the first preference votes given for each candidate and transmit information, this time to the Australian Electoral Officer for the relevant State or Territory, about the number of first preference votes given for each candidate (distinguishing between those votes cast above the line and those cast below the line) and the total number of ballot papers rejected as informal. 27 s 273(2)(b). 28 s 273(2)(g). 29 s 273(2)(h). 30 s 273(5)(a). 31 s 273(5)(b). 32 s 273(5)(c). 33 s 273(5)(d). Hayne Re-count At any time before the declaration of the result of a Senate election the Australian Electoral Officer for the relevant State or Territory may, on the written request of any candidate "setting forth the reasons for the request", or of the officer's own motion, direct or conduct34 a re-count of the ballot papers contained in any parcel or in any other category determined by the Australian Electoral Officer. If the Australian Electoral Officer refuses the request of a candidate for a re-count, the candidate may, in writing, appeal35 to the Electoral Commissioner to direct a re-count. The Electoral Commissioner has a discretion either to direct a re-count of the ballot papers or to refuse to direct a re-count. Section 279B regulates the conduct of a re-count. It requires36 the opening of the sealed parcels of ballot papers which are to be re-counted and the counting of the votes in the parcels. Section 280 provides that: "The officer conducting a re-count shall have the same powers as if the re-count were the scrutiny, and may reverse any decision in relation to the scrutiny as to the allowance and admission or disallowance and rejection of any ballot paper." Section 281 provides, in part, that: "(1) The officer conducting a re-count may, and at the request of any scrutineer shall, reserve any ballot paper for the decision of the Australian Electoral Officer. The Australian Electoral Officer shall decide whether any ballot paper so reserved is to be allowed and admitted or disallowed and rejected." Section 279B(7) requires the Australian Electoral Officer to scrutinise the ballot papers which are reserved for decision and mark each as "admitted" or "rejected" according to his or her decision. The 7 September 2013 election and original scrutiny On 5 August 2013, the Governor-General in Council issued writs for the election of members of the House of Representatives for the States and 36 s 279B(1). Hayne Territories and for the election of senators for the Australian Capital Territory and the Northern Territory. On the same day, pursuant to the Election of Senators Act 1903 (WA), the Governor of Western Australia issued a writ for the election of six senators for Western Australia. The writ fixed dates for the close of the rolls, nominations, polling and return of the writ. The date fixed for the return of the writ was on or before 13 November 2013. There were 62 candidates for election as a senator for Western Australia. The candidates were divided into 27 groups or political parties, with one "ungrouped" candidate. Each group or political party registered a group voting ticket pursuant to s 211 of the Act. Under their respective registered group voting tickets, preferences from Group G (Shooters and Fishers), Group K (Australian Independents) and Group V (Australian Fishing and Lifestyle Party) flowed to Mr Murray Bow of the Shooters and Fishers. Under their respective registered group voting tickets, preferences from Group C (Australian Christians) and Group O (No Carbon Tax Climate Sceptics) flowed to Mr Jamie van Burgel of the Australian Christians. On 7 September 2013, after the close of the poll, Assistant Returning Officers at each of the appointed polling places conducted, in accordance with s 273(2) of the Act, an original scrutiny of the ballot papers cast at the election except for declaration votes. The fresh scrutiny The fresh scrutiny required by s 273(5) of the Act began on about 9 September 2013. On 2 October 2013, the Australian Electoral Officer for Western Australia ("the AEO") announced that, for the purposes of s 273A(5) of the Act, he had ascertained that the successful candidates at the election, in order of their election, were Senator David Johnston, Mr Joe Bullock, Senator Michaelia Cash, Ms Linda Reynolds, Mr Wang and Senator Pratt. The 50th exclusion point All parties accept that the 50th exclusion point in the process required by s 273 of the Act was critical to the determination of who were the last two successful candidates at the election. At the 50th exclusion point, either Mr van Burgel (representing the Australian Christians) or Mr Bow (representing the Shooters and Fishers) was to be excluded according to who then had the lower number of votes. The Wang petition and the Mead petition allege that who had the lower number of votes was affected, in the case of Mr Bow, by votes validly cast for Mr Daryl Higgins (Australian Independents) and Mr Jay Edwards (Australian Hayne Fishing and Lifestyle Party) and, in the case of Mr van Burgel, by votes wrongly accepted as cast for Mr Adrian Byass (No Carbon Tax Climate Sceptics). According to the fresh scrutiny, at the 50th exclusion point Mr Bow had 23,515 votes and Mr van Burgel had 23,501 (a difference of 14 votes in favour of Mr Bow). All parties accept that if, at the 50th exclusion point, Mr van Burgel had more votes than Mr Bow (with the consequence that Mr Bow was excluded and his votes transferred in accordance with s 273), Mr Dropulich and Senator Ludlam (not Mr Wang and Senator Pratt) would have been the fifth and sixth candidates elected as senators for Western Australia. Requests for a re-count Mr Dropulich and Senator Ludlam each requested a re-count. The AEO refused those requests. Senator Ludlam – and, later, Mr Dropulich – appealed to the Electoral Commissioner against the decision to refuse the requests for a re-count. On 10 October 2013, the Electoral Commissioner directed the AEO to conduct a re-count of a category of ballot papers submitted by voters in the election of senators for Western Australia. The category of ballot papers which was to be re-counted was described as: "All the Senate ballot papers marked above the line together with those informal ballot papers that have been determined as obviously informal by Divisional Returning Officers in accordance with section 273A(3) of the Electoral Act." The re-count related to about 96 per cent of the votes that had been cast at the election. The Electoral Commissioner gave as his reasons for ordering a re-count that "the criticality of the particular Senate candidate exclusion together with the small margin leads me to conclude that it is prudent to confirm the result in the interests of the electorate's confidence in the outcome". Ballot papers reserved for the decision of the AEO During the re-count, 949 ballot papers were reserved for the decision of the AEO in accordance with s 281(1). Both Mr Wang and Mr Mead seek, by their petitions, to dispute some of the decisions which were made by the AEO in respect of reserved ballot papers. In his petition, Mr Mead alleges that the AEO wrongly rejected at least 87 ballot papers and wrongly accepted at least 90 ballot papers, which affected whether Mr Bow or Mr van Burgel was excluded at the 50th exclusion point. In his petition, Mr Wang alleges that the AEO wrongly rejected at least 56 ballot papers and wrongly accepted at least 18 ballot papers, which affected the 50th exclusion point. Hayne It is likely that there is at least some, perhaps very substantial, overlap between the allegations made in the Wang and Mead petitions about wrongful rejection and wrongful acceptance of votes. It is not necessary, however, to decide whether or to what extent this is so. Argument proceeded on the assumption that, together, Mr Wang and Mr Mead seek to demonstrate error in the treatment of at least 250 ballot papers reserved for the decision of the AEO. Lost ballot papers During the course of the re-count, it emerged that 1,370 ballot papers for votes which had been cast in either the Division of Forrest or the Division of Pearce (said, in the records of the fresh scrutiny, to be 120 informal votes and 1,250 unrejected above the line votes) could not be located and brought within the re-count. Those ballot papers have not since been found and it is accepted that it is unlikely that they will be found. Because these ballot papers were lost, the re-count directed by the Electoral Commissioner could not, and did not, take place in accordance with the Act. But those of the ballot papers which were to be re-counted and were available were scrutinised. The result of the scrutiny of ballot papers available for re-count Before the re-count, the AEO ascertained that a total of 1,349,635 ballot papers were submitted at the election of senators for Western Australia, of which 1,311,440 were unrejected votes and 38,195 were informal votes. Re-counting those votes which were the subject of the Electoral Commissioner's direction and were available for re-count revealed that, at the 50th exclusion point, Mr van Burgel had 23,526 votes and Mr Bow had 23,514 (a difference of 12 votes in favour of Mr van Burgel). (As noted earlier, the fresh scrutiny had found Mr van Burgel to have 23,501 votes and Mr Bow 23,515.) The fresh scrutiny and the re-count arrived at different tallies of votes. The parties accept that 532 ballot papers were counted on the re-count which had not been counted in the fresh scrutiny. The parties further accept that the numbers of ballot papers (both in parcels of above the line votes and in parcels of informal votes) counted at the re-count differed from the numbers counted at the fresh scrutiny. Some of these differences in counting were due to miscounts of the number of ballot papers in some parcels at the fresh scrutiny; some were due to counting about 80 blank ballot papers as informal votes on the re-count. And some were due to movement of ballot papers between parcels at the re-count (for example, from one registered group voting ticket to another). Each transfer of ballot papers between parcels was counted as two movements (one addition and one subtraction). There were 7,826 movements of ballot papers. That is, on the re-count, 3,913 ballot papers were assigned to parcels different from the parcels to which they had been assigned at the fresh scrutiny. Hayne If it were proper to take account of the information about the number of first preference votes given for each candidate and the total number of ballot papers rejected as informal which, following the fresh scrutiny, the relevant Divisional Returning Officers transmitted to the AEO in accordance with s 273(5)(d), and treat that information as accurately recording the effect properly to be given to those ballot papers which should have been, but were not, scrutinised in the re-count, the AEC calculates that Mr Bow would have been one vote ahead of Mr van Burgel at the 50th exclusion point. (Mr van Burgel would have had 23,531 votes and Mr Bow 23,532.) Declaration and return of the writ On 4 November 2013, the AEO declared, under s 283(1)(a) of the Act, that the first to sixth respondents to the AEC petition were elected in that order. The declaration reflected the results revealed by the re-count, which had been conducted without the 1,370 lost ballot papers. That is, the result which was declared depended upon excluding Mr Bow at the 50th exclusion point. On 6 November 2013, the AEO returned the writ for the election of senators for Western Australia to the Governor of Western Australia. Powers of the Court of Disputed Returns Section 360 of the Act gives the Court of Disputed Returns power to declare37 that any person who was returned as elected was not duly elected and to declare38 any election absolutely void. These powers may be exercised39 "on the ground that illegal practices were committed in connexion with the election". "Illegal practice" is defined40 to include "a contravention of [the] Act". That expression means41 a failure to comply with a provision of the Act. The Court also has the power to declare42 any candidate duly elected who was not returned as elected. But it could not exercise that power in this case without first declaring that someone returned as elected was not duly elected. 37 s 360(1)(v). 38 s 360(1)(vii). 41 Sue v Hill (1999) 199 CLR 462 at 512 [124] per Gaudron J; [1999] HCA 30. 42 s 360(1)(vi). Hayne Section 362(3) of the Act places two conditions on the exercise of the Court's power to declare an election void, and the Court's power to declare that a person returned as elected was not duly elected, on the ground of certain illegal practices. The Court must be satisfied43, first, "that the result of the election was likely to be affected" (scil by one or more of the illegal practices alleged) and, second, "that it is just that the candidate should be declared not to be duly elected or that the election should be declared void". The "result of the election" means the result as it was declared. And "result" in the Act means44 the return of a particular candidate, not the number of the candidate's majority. Section 365 of the Act places limits on the evidence the Court may admit to determine whether the result of an election was affected by certain illegal practices. If any elector was prevented from voting in an election on account of an error of, or omission by, an officer, the section prohibits the Court from admitting, for the purpose of determining whether the error or omission affected the result of the election, any evidence of the way in which the elector intended to vote in that election. Illegal practices and ss 362(3) and 365 All three petitioners seek relief under s 360(1) and (3) on the ground that illegal practices were committed in connection with the election. All three petitioners allege that the loss of the ballot papers and the consequent failure to conduct the re-count in accordance with the Act were illegal practices. It is not necessary to identify more precisely which provisions of the Act were contravened. It is sufficient to proceed on the footing adopted in argument that the loss of the ballot papers both constituted and occasioned one or more contraventions of the Act. It is to be noted, however, that because ballot papers were lost, there was not the scrutiny required by ss 279B and 280 of all the ballot papers which were to be re-counted. There was not the opportunity for the officer conducting the re-count to allow and admit, or disallow and reject, any of the lost ballot papers. There was not the opportunity for a scrutineer to require45 reservation for the decision of the AEO of any of the lost ballot papers which were disputed. So much was accepted by all parties to the petitions. Each petitioner and each respondent accepted, correctly, that the loss of ballot papers and the failure to have available at the re-count all of the parcels of ballot papers which were to 44 Kean v Kerby (1920) 27 CLR 449 at 458 per Isaacs J. Hayne be the subject of the re-count constituted contraventions of the Act and thus illegal practices in connection with the election. Those illegal practices are of the kind to which s 362(3) applies. That is, they were (as all parties accepted) "committed by [a] person other than the candidate and without the knowledge or authority of the candidate"46 and were not "bribery or corruption or attempted bribery or corruption"47. It follows that, although s 362(3) applies only to the Court's powers to declare an election void and to declare that a person returned as elected was not duly elected, none of the orders sought by any petitioner can be made unless the Court is satisfied, first, that the result of the election was likely to be affected by one or more of the illegal practices and, second, that it is just that the candidates who were returned as elected should be declared not to be duly elected or that the election should be declared void. That is because no order could be made declaring that Mr Wang and Senator Pratt were duly elected (being an order outside the scope of s 362(3)) without first declaring that Mr Dropulich and Senator Ludlam were not duly elected. Those illegal practices are also of the kind dealt with by s 365, thus engaging the proviso to that section. That is, the illegal practices constituted and occasioned by the loss of ballot papers were (as all parties implicitly or explicitly accepted) occasioned by the "omission [of an] officer". What evidence the Court can admit to determine whether the result of the election was affected by those illegal practices (at least in respect of claims for the avoidance of the election) therefore depends on whether the electors whose ballot papers were lost were "prevented from voting" within the meaning of s 365. Three particular questions must then be considered. First, must the Court deal first with the allegations made by Mr Wang and Mr Mead that there were wrong decisions made about reserved votes? Or, without dealing with those allegations, can the Court decide whether the loss of ballot papers was likely to have affected the result of the election? Second, were electors whose ballot papers were lost on account of the error of, or omission by, an officer "prevented from voting" in the election? If those electors were prevented from voting, the Court cannot admit evidence of the way in which they "intended to vote" in determining whether the illegal practices affected the result of the election. And if the Court is prohibited from 46 s 362(3)(a). 47 s 362(3)(b). Hayne admitting such evidence, it must determine whether records about earlier scrutinies of the lost ballot papers amount to such evidence. Third, if the likely effect on the result of the election must be determined without regard to those records, the Court must decide whether the records could and should be considered for some other purpose and, if they can be so considered, whether it is necessary to do so for the purposes of determining any of these petitions. Deal first with allegations of wrong decisions? Mr Wang and Mr Mead both submitted that the Court must first deal with their allegations of wrong decisions about reserved votes. They submitted that once it was shown that wrong decisions were made, the difference between the relevant candidates at the 50th exclusion point would be so large (in favour of Mr Bow) that it would be obvious that the result of the election would have been different and that the lost ballot papers could not or would not have altered the result that the candidates who should have been declared elected were Mr Wang and Senator Pratt. Necessarily implicit in the submission was the proposition that altering the decisions which the petitioners challenged in respect of about 250 ballot papers would swamp the effect of losing 1,370 ballot papers. That implicit proposition could be established only by making some assumption about what voting intentions were validly recorded on the lost ballot papers (or by relying on records of those intentions). Both Mr Wang and Mr Mead went so far as to submit that, if the Court first determined the challenges to decisions about reserved ballot papers, the illegal practices constituted and occasioned by the loss of ballot papers would be shown not to have affected the result of the election. The "result" of the election referred to in these submissions appears to have been the result which Mr Wang and Mr Mead submitted should have been reached rather than the result which was declared. As already explained, s 362(3) requires that no order be made declaring a person who was returned as elected not to have been duly elected, or declaring an election void, unless the Court is satisfied that the result which was declared was likely to be affected. And the whole point of both Mr Wang's petition and Mr Mead's petition was to challenge the result which was declared, and obtain either a declaration that Mr Dropulich and Senator Ludlam were not duly elected (coupled with a further declaration that Mr Wang and Senator Pratt were) or a declaration that the election was absolutely void. To the extent to which Mr Wang and Mr Mead allege that the loss of ballot papers constituted and occasioned illegal practices entitling them to any of the relief they claim, they must demonstrate that those illegal practices were likely to have affected the result of the election. Neither Mr Wang nor Mr Mead abandoned reliance upon the loss of ballot papers as constituting and occasioning illegal practices. Hayne If, as the AEC submitted, the loss of ballot papers was likely to have affected the result of the election, it is not necessary to decide whether other illegal practices were committed which were likely to affect that result. The only relevant significance which other illegal practices could have would be in relation to what orders the Court should make. Was the result of the election which was declared likely to have been affected by the loss of the ballot papers? In deciding whether the loss of ballot papers did or did not affect the result of the election, may the Court admit evidence of the records made about the lost ballot papers in the original and fresh scrutinies? That is, is the proviso to s 365 engaged? Prevented from voting The ballot papers which were lost were omitted from processes which the Act required to be followed to determine the result of the election. Although included in both the original and the fresh scrutinies, those lost ballot papers were not available at the re-count. The lost ballot papers were, therefore, excluded from the processes which, in the events that had happened, the Act required be undertaken to determine who should be returned as duly elected. As is apparent from the description which has been given of the Act's provisions about Senate elections, the Act provides for several distinct steps being taken before the result of the poll is ascertained and declared. In this case, after the original and fresh scrutinies, a re-count was directed. As the AEC rightly emphasised, when a re-count is directed, the result of that re-count is to be determined by scrutiny and it is this scrutiny (not any of the earlier scrutinies) which determines48 the result of the poll. Were the electors who had submitted the lost ballot papers prevented from voting in the election? Although it is the proviso to s 365 which is directly relevant to this question, it is necessary to set out the whole of the provision: "No election shall be avoided on account of any delay in the declaration of nominations, the provision of certified lists of voters to candidates, the polling, or the return of the writ, or on account of the absence or error of or omission by any officer which did not affect the result of the election: Provided that where any elector was, on account of the absence or error of, or omission by, any officer, prevented from voting in any election, the Court shall not, for the purpose of determining whether the absence or error of, or omission by, the officer did or did not affect the result of the 48 Re Lack (1965) 112 CLR 1 at 10. Hayne election, admit any evidence of the way in which the elector intended to vote in the election." Mr Wang and Mr Mead, and the respondents to the AEC petition other than Senator Ludlam, all submitted that the electors who had submitted the lost ballot papers were not prevented from voting; the AEC and Senator Ludlam submitted that they were. The central difference upon which the submissions hinged was whether "voting" should be understood as complete at the point an elector put his or her ballot paper into the ballot-box or should instead be understood as extending to the point where the ballot paper was considered in the scrutiny conducted to ascertain the result of the polling. It may readily be accepted that an elector would, "on account of the ... error of, or omission by, any officer", be "prevented from voting in [the] election" if an officer prevented the elector receiving49 a ballot paper to which the elector was entitled, or prevented the elector depositing50 the ballot paper in the ballot-box. But does the notion of "prevented from voting" stop at the point where an elector has done all that he or she can do to submit a ballot paper for consideration in the poll? The preferable construction of the Act is that the reference in the proviso to s 365 to an elector being prevented by error or omission of an officer from voting in any election includes a case such as this where 1,370 electors were prevented, through official error, from having their ballot papers be the subject of the determinative scrutiny (in this case the re-count). There are several reasons to prefer this construction. First, this construction of the provision follows as a matter of ordinary language. As the first, third and fourth respondents to each of the petitions rightly pointed out, to "vote" means to express or signify a choice. But contrary to the submissions of those parties (and others who adopted their submissions), "voting", when used in the collocation "prevented from voting", extends to taking account of the expression or signification of choice. That is, ask whether an elector has voted and the answer will direct attention to whether that person has done those acts which, as far as the elector can, express or signify the elector's choice to those who will decide the outcome of the poll. Hence, as the first, third and fourth respondents rightly pointed out, many of the provisions of the Act use the word "voting" or cognate expressions in a way which directs attention only to the conduct of an elector. So, for example, when s 220(c) forbids admission of persons to a polling booth after six o'clock "for the purpose of voting", the provision is directed only to what the elector would do, if admitted. But ask 50 s 233(1)(b)(i). Hayne whether an elector has been prevented by the error or omission of an officer from voting and the answer must look not only to what the elector has or has not done but also to what the officer has done. And what the officer has done is to be judged according to whether the expression or signification of choice has become available for consideration in determining the outcome of the poll. Second, the preferred construction of the provision better reflects the constitutional purposes pursued by the Act than the competing construction would. As noted earlier, s 7 of the Constitution provides that "[t]he Senate shall be composed of senators for each State, directly chosen by the people of the State". Direct choice by the people is effected only by taking account of the choices expressed by "the people". If some of the choices expressed by the people are not taken into account in the determinative scrutiny, there is at least the possibility that the result determined does not give effect to the choice which the people sought to make. "Choice" bears51 two faces. It refers to an elector's act of choosing. (And it is here that those parties who denied that electors had been prevented from voting would end the analysis.) But it also refers to those who are chosen. Direct choice by the people requires that the lawful expression of every voter's choice is taken into account in determining who has been chosen. Reading the expression "prevented from voting" in the proviso to s 365 as encompassing cases such as the present reflects this understanding of the constitutional notion of direct choice. It does so by requiring the Court to determine whether official error affected the result of the election without regard to evidence of the voting intentions of relevant electors. More particularly, it requires the Court to decide whether the errors or omissions of an officer preventing consideration of the choices made by certain electors (regardless of what those choices were) were sufficiently numerous in the poll as a whole to have affected the outcome. By contrast, reading the proviso to s 365 as speaking only to cases where electors were prevented from depositing a ballot paper in the ballot-box would confine attention to only some of the cases in which, on account of official error, choices expressed by the people are not considered. And once the step has been taken (as it is in s 365) to require determination of the effect of official error on the result of an election without evidence about how electors intended to vote, its operation should not be confined to some cases where persons are denied the effective expression of their choice. 51 cf The Oxford English Dictionary, 2nd ed (1989), vol III at 151-152, "choice", meanings 1a and 5a. Hayne Third, the preferred construction of the provision is consistent with its legislative history and what was, at the time of its enactment, its established meaning. The provisions which now appear as s 365 of the Act were brought into their present form by amendments made by s 25 of the Commonwealth Electoral Act 1922 (Cth). Section 26 of the 1922 Act inserted what is now s 367, precluding admission of evidence of a witness that he or she was not permitted to vote unless the witness satisfies the Court (in effect) that he or she had claimed to vote and had complied with the requirements of the Act and the regulations relating to voting as far as permitted to do so. These amendments to the Act were made after (and in consequence of) the decision of Isaacs J in Kean v Kerby52. In that case, Isaacs J had admitted evidence from electors who through official error had not been permitted to submit a ballot paper that each had intended to vote for a particular candidate. But Isaacs J had admitted this evidence because the Act then provided53 that no election should be avoided on account of the error of any officer "which shall not be proved to have affected the result of the election". Isaacs J observed54 that in this respect the Act (as it then stood) differed from equivalent English electoral legislation which had been held55 to provide, in effect, that an election could be declared invalid if official error may have affected the result. Isaacs J concluded56 that, in order to prove that official error had affected the result, "[t]he error of refusing a vote to a qualified elector, if it is to have any weight at all, must be accompanied with proof as to how the elector intended to vote". The 1922 Act amended the Act in the respects which have been described for the stated purpose57 of bringing the law into line with English law. The 52 (1920) 27 CLR 449. 53 s 194 of the Act as it then stood. Section 194, as amended, was later renumbered 54 (1920) 27 CLR 449 at 458. 55 Woodward v Sarsons (1875) LR 10 CP 733 at 751; Eastern Division of Clare Case (1892) 4 O'M & H 162; cf Hackney Case (1874) 2 O'M & H 77. See also Rogers on Elections, 19th ed (1918), vol 2 at 68-69. 56 (1920) 27 CLR 449 at 458. 57 Australia, Senate, Parliamentary Debates (Hansard), 26 July 1922 at 752; (Hansard), Australia, House of Representatives, Parliamentary Debates 14 September 1922 at 2268-2269, 20 September 1922 at 2467. Hayne amendments which were made to what has now become s 365 hinged about the expression "prevented from voting". In 1875, Lord Coleridge CJ had spoken58 of circumstances in which "an election is to be declared void by the common law applicable to parliamentary elections" as including cases where there was "no real electing at all" (original emphasis). His Lordship gave59 examples of there being "no real electing at all" where "a majority of the electors were proved to have been prevented from recording their votes effectively according to their own preference" by any of several specified causes. Those causes included60 cases of "fraudulent counting of votes or false declaration of numbers by a returning officer". And, of course, those cases are examples which depended upon the relevant electors having submitted their votes. That is, they are examples of cases in which, despite electors having submitted their votes, "a majority of the electors were proved to have been prevented from recording their votes effectively"61 (emphasis added). They were cases where (a majority of) electors were prevented from voting effectively by official error because the votes they submitted were not considered in determining the result of the election. The first, third and fourth respondents to each of the petitions submitted that the reasons of Lord Coleridge CJ should be understood as distinguishing between "prevented from voting" and "prevented from voting effectively". Those respondents submitted that the former expression was used to refer only to cases in which an elector was not permitted to vote and that this, and this alone, was the meaning of the expression "prevented from voting" established by the decision. There are two answers to these arguments. First, I greatly doubt that the reading of the reasons of Lord Coleridge CJ proffered by the first, third and fourth respondents is the preferable reading of what was written. Second, and more significantly, it is not how those reasons were understood in subsequent decisions of this Court. Those decisions, particularly Chanter v Blackwood62 and Bridge v Bowen63, treated Woodward v Sarsons as establishing that an elector is 58 Woodward v Sarsons (1875) LR 10 CP 733 at 743. 59 (1875) LR 10 CP 733 at 743. 60 (1875) LR 10 CP 733 at 744. 61 (1875) LR 10 CP 733 at 743. 62 (1904) 1 CLR 39 at 58-59 per Griffith CJ. 63 (1916) 21 CLR 582 at 605-607 per Barton J, 616-618 per Isaacs J (Gavan Duffy and Rich JJ agreeing); [1916] HCA 38. Hayne prevented from voting if the elector is prevented from voting with effect. In particular, Isaacs J explained64 in Bridge v Bowen that an elector is prevented from voting if, through official error, the vote which an elector submitted could not be counted. (Isaacs J distinguished between errors in performance of provisions of enactments requiring strict performance and other kinds of error but this distinction, if relevant to the Act as it then stood, need not be drawn for the purposes of the provisions at issue in these petitions.) This being the state of the law as determined by this Court at the time of the 1922 amendments, there is no reason to conclude that "prevented from voting" was used in those amendments with some narrower meaning. No party submitted that any later decision of this Court casts any doubt on this understanding of "prevented from voting". The parties did examine a number of decisions of State Courts of Disputed Returns65 which may be read as permitting, even depending upon, the adoption of a narrower construction of "prevented from voting" which would confine its application to cases where an elector was prevented by official error from submitting a vote. The course of decisions in this Court, before the enactment of the 1922 amendments, provides a sounder foundation for construing s 365 than the later decisions of State Courts of Disputed Returns. Apart from the decision of Sugerman J in Campbell v Easter66, it is not clear that all of those later decisions were made in the light of arguments which fully canvassed the relevant decisions of this Court (and the cases upon which those decisions were based) or referred to all of the decisions of other State Courts which had considered the question of construction. Further, in at least some of the State cases, it would appear that the issue agitated in the course of argument focused more upon preservation of the secrecy of the ballot than upon the more fundamental question of statutory construction and what is meant by "prevented from voting". Finally, the preferred construction of the expression "prevented from voting" is consistent with what is now s 367 (also inserted in the Act by the 1922 Act), which regulates when the Court may admit evidence of any witness 64 (1916) 21 CLR 582 at 618. 65 Including Dunbier v Mallam [1971] 2 NSWLR 169; Fell v Vale (No 2) [1974] VR 134; Freeman v Cleary unreported, Court of Disputed Returns (NSW), 31 October 1974; Fenlon v Radke [1996] 2 Qd R 157. See also Australian Electoral Commission v Towney (1994) 51 FCR 250. 66 Unreported, Court of Disputed Returns (NSW), 12 June 1959, followed in Varty v Ives [1986] VR 1; McBride v Graham unreported, Court of Disputed Returns (NSW), 11 December 1991. Hayne that the witness was not permitted to vote. It is notable that s 367 uses the phrase "not permitted to vote" rather than "prevented from voting". It follows, and no party submitted to the contrary, that cases where an elector is not permitted to vote must be understood to be a subset of cases where electors are prevented from voting. The question then becomes how widely the set (of which s 367 is a subset) should be drawn. Mr Wang allowed cases where an elector is given the wrong ballot paper as a case of prevention from voting but drew no convincing distinction between such a case and other cases where an elector, through official error, submits a ballot paper which is not the subject of the determinative scrutiny. In this case, where a re-count of some ballot papers was ordered, and the lost ballot papers should have been included within that re-count, the electors who submitted those ballot papers did not have their ballot papers included in the determinative scrutiny. For these several reasons, the 1,370 electors who submitted ballot papers which were lost between the fresh scrutiny and the re-count were prevented from voting. The first separate question should be answered accordingly. It follows from the proviso to s 365 that, in these petitions, where all the petitioners allege that the lost ballot papers were not included in the re-count "on account of the ... error of, or omission by", an officer, "the Court shall not, for the purpose of determining whether the ... error of, or omission by, the officer did or did not affect the result of the election, admit any evidence of the way in which the [electors whose ballot papers were lost] intended to vote in the election". Would admission in evidence of the records about the lost ballot papers be evidence of the way in which electors who were prevented from voting "intended to vote in the election"? Intended to vote Contrary to the submissions of Mr Wang, Mr Mead and a number of the respondents, admitting evidence of the records made at the original and fresh scrutinies about what voting intentions were validly expressed in the lost ballot papers would be evidence of the way in which those electors intended to vote at the election. It would not be evidence which would reveal how any identified or identifiable elector intended to vote and it therefore would not be evidence which broke the secrecy of the ballot. But once it is accepted that the prevention from voting with which s 365 deals extends to cases of the present kind, it follows that "evidence of the way in which the elector intended to vote" includes evidence revealing how electors whose ballot papers were not the subject of the determinative scrutiny intended (by their ballot papers) to vote. Hayne The submissions that this reading of s 365 would lead to incongruent (perhaps even absurd) results should not be accepted. In particular, this reading of s 365 does not exclude any evidence in respect of any ballot paper which was the subject of the determinative scrutiny. It is not a reading of the provision which restricts in any way the Court's consideration of ballot papers which were included in the determinative scrutiny, regardless of whether, on that scrutiny, the vote recorded in the ballot paper was rejected or accepted. If ballot papers were rejected in that determinative scrutiny as informal, the electors concerned would not have been prevented, by official error, from having their papers considered in the determinative scrutiny. The proviso to s 365 would not be engaged and, because it would not be engaged, there can be no resulting incongruous or absurd application. For these reasons, evidence of the records made at the original and fresh scrutinies about the voting intentions recorded in the lost ballot papers may not be admitted for the purpose referred to in the proviso to s 365. Whether the official errors relied on by the petitioners did or did not affect the result of the election must be decided without regard to that evidence. Likely to affect the result? Some attention was given in argument to whether anything turns on the use in s 362(3) of the expression "the result of the election was likely to be affected" but the use in s 365 of the expression "did or did not affect the result of the election". Nothing turns on the use of these different expressions in the two provisions. Section 362(3) provides the relevant limitation on the Court's exercise of two of the powers given by s 360(1) and it is the text of s 362(3) which provides the content of that limitation. The Court must be satisfied that the result of the election was likely to be affected before making (and also satisfied that it is just to make) either of the specified kinds of declaration. By contrast, the proviso to s 365 regulates the evidence which may be admitted for the purpose of the Court deciding whether it is satisfied that the result was likely to be affected. Some attention was also given to what is meant by "likely" in the expression "likely to be affected". Does it mean "more probable than not"? Does it include "substantial possibility less than probability"? Perhaps other expressions could be used to capture the various meanings referred to in argument but, for present purposes, the two meanings given capture the substance of the debate. As already noted, without regard to the voting intentions recorded in the 1,370 lost ballot papers, the conclusion that the loss of those ballot papers probably affected the result of the election is inevitable. The conclusion follows Hayne from matters which I identified earlier in these reasons. The result declared was based on a scrutiny from which 1,370 ballot papers were excluded. The result depended upon who was excluded at the 50th exclusion point. The margin at that point was determined in the original and fresh scrutinies to be 14 votes one way but then (excluding scrutiny of the lost ballot papers) determined on the re-count to be 12 votes the other way. And the re-count yielded different tallies of votes and different decisions about rejection or acceptance of ballot papers from those reached in the original and fresh scrutinies, in numbers which cannot be dismissed as irrelevant or trivial. Those are reasons enough to conclude that it is more probable than not that the loss of ballot papers affected the result of the election which was declared. If, as Mr Wang and Mr Mead allege, there were wrong decisions made in relation to reserved votes, the particular errors they allege could only reinforce the conclusion otherwise reached that the result declared was likely to be affected by illegal practices. It is not necessary, in this case, to resolve any dispute about the meaning to be given to the word "likely" in the expression "likely to be affected" in s 362(3). It is, however, desirable to deal specifically with one submission made by Mr Dropulich. It was submitted, in effect, that if the Court could not take account of the records made in the original and fresh scrutinies about the lost ballot papers, the Court could not be satisfied that the result of the election was likely to be affected by the loss of the ballot papers. The Court could not be satisfied, the argument ran, because the Court could form no judgment at all. The Court could form no judgment because both outcomes (the result declared and the opposite result) were equally probable67. This argument must be rejected. Wrongly, the argument treated the question of effect on the result of the election as requiring a petitioner to prove what the result would have been if the ballot papers had not been lost. The argument did not take account of all of the relevant facts that are known, including the closeness of the outcome, and the differences shown to exist between the original and fresh scrutinies and the re-count as to both tallies and rejection and acceptance of votes. It is more probable than not that the loss of the ballot papers affected the result of the election which was declared. Using the records about the lost ballot papers for other purposes Subject to one possible caveat, those who submitted that the Court can and should have regard to the records which were made about the lost ballot papers all did so in aid of arguments that the Court should decide who would have been declared elected if the re-count had been conducted according to law. It is 67 cf Jones v Dunkel (1959) 101 CLR 298 at 304-305 per Dixon CJ; [1959] HCA 8. Hayne convenient to deal at once with the possible caveat and notice a strand of argument which might be understood as seeking to support the admission of evidence about the records of the original and fresh scrutinies on a basis other than demonstrating entitlement to a declaration that Mr Wang and Senator Pratt were duly elected. Some of the arguments about the admissibility of the records were expressed in terms which appeared to be directed to the application of the last clause of s 362(3), and its requirement that the Court not declare that a person returned as elected was not duly elected and not declare any election void unless the Court is satisfied that "it is just that the candidate should be declared not to be duly elected or that the election should be declared void". To the extent to which parties sought to support the admission of the evidence about the records of the original and fresh scrutinies on this basis, the argument should be rejected. Without regard to the evidence of the records about the lost ballot papers, the Court can and should be satisfied, not only that the result of the election was likely to be affected by the loss of the ballot papers, but also that it is just that one or other of the forms of declaration dealt with by s 362(3) should be made: either that Mr Dropulich and Senator Ludlam were not duly elected or that the election should be declared void. As has already been noted, admission of evidence about the records of the original and fresh scrutinies would only reinforce these conclusions, for the evidence would show (if admissible and accepted) that the wrong result was declared in respect of the fifth and sixth places. That being so, to the extent to which admission of the evidence was sought to be supported by reference to s 362(3), its admission in this case is unnecessary. Though variously expressed, the chief arguments advanced in support of admission of the evidence of the records of the original and fresh scrutinies asserted that, by adding what was recorded about the lost ballot papers in the original and fresh scrutinies to the results of the re-count (revised or unrevised in accordance with the allegations of Mr Wang and Mr Mead), it would be shown that Mr Wang and Senator Pratt should have filled the fifth and sixth places and should now be declared to have been duly elected. No provision of the Act expressly provides for making such a patchwork of results. Rather, the relevant provisions of the Act provide that the result of the poll will be determined by scrutiny of all of the relevant ballot papers accompanied by whatever additional steps (such as reservation of ballot papers on a re-count for the decision of the Australian Electoral Officer for the relevant State or Territory) the Act permits or requires. Scrutiny of the ballot papers is much more than a mechanical task. Judgments must be made about particular ballot papers. Both the Wang and Mead petitions depend, in very large part, upon this being so. And the differences between decisions made in the original and fresh scrutinies and those Hayne made in the re-count about rejection or acceptance of ballot papers emphasise the importance of the scrutiny. Even the apparently mechanical task of tallying yielded different results between the original and fresh scrutinies and the re-count. As already noted, the Act provides the procedures and mechanisms by which senators are to be directly chosen by the people. Those procedures and mechanisms are the means by which senators are "duly elected". More particularly, senators are duly elected following a poll conducted in accordance with the Act and ascertainment of the result of the polling by scrutiny of the ballot papers. Those who now seek to have the Court declare that Mr Wang and Senator Pratt were "duly elected", though not returned as elected, necessarily ask the Court to do so by reference to a "result" of the election constructed in a manner not provided for by the Act. The departures from those requirements which Mr Wang and Mr Mead invite the Court to make cannot be dismissed as immaterial (as might have been the case if at no point in the successive exclusion of candidates had the margin between candidates been less than the number of lost ballot papers). In In re Wood68, the Full Court determined questions respecting a possible vacancy in the Senate referred to the Court pursuant to s 377 of the Act. A senator returned as elected was not, at the time of his election, an Australian citizen and, therefore, was not entitled69 to be nominated for election as a senator. The whole Court held that the vacancy should be filled by the further counting of the ballot papers cast at the election, treating expressions of preference in favour of the unqualified candidate as ineffective: "a nullity"70. The central premise for the Court's conclusions was that a valid result of the polling could be ascertained by scrutiny of the ballot papers. By construing Pt XVIII of the Act (the provisions regulating the scrutiny) in this way, the whole Court concluded71 that "the true result of the polling – that is to say, the true legal intent of the voters so far as it is consistent with the Constitution and the Act – can be ascertained" (emphasis added). As the Court said72, there was, in that 68 (1988) 167 CLR 145. 69 Constitution, ss 16 and 34 and the Act, s 163(1)(b) and (2). (The Court expressly refrained from deciding whether s 44(i) of the Constitution was engaged. See now Sue v Hill (1999) 199 CLR 462.) 70 (1988) 167 CLR 145 at 166. 71 (1988) 167 CLR 145 at 166. 72 (1988) 167 CLR 145 at 166. Hayne case, "no blemish affecting the taking of the poll and the ballot papers [were] available to be recounted" (emphasis added). As "the valid choice of the electors [could] lawfully be ascertained by recounting", it was unnecessary to take a further poll. That is, no further poll was necessary because "[t]he full number of qualified senators required [could] be returned in accordance with the Act after a recount of the ballot papers"73 (emphasis added). the questions referred for The Full Court having answered its consideration pursuant to s 377 of the Act, the matter came on for further hearing before Mason CJ. His Honour gave directions for the further counting and re-counting of ballot papers and did so74 as an incident of and for the purpose of facilitating the exercise of the power given to the Court of Disputed Returns by s 360(1)(vi) to declare any candidate duly elected who was not returned as elected. It must be acknowledged that, as the first, third and fourth respondents to each of the petitions pointed out, the directions given by Mason CJ moulded the procedures required by the Act to the circumstance that one of the candidates named on the ballot paper was ineligible for election. But the directions given did not provide for any departure from, or addition to, the requirements of the Act regulating the scrutiny beyond recognition of the candidate's ineligibility to be chosen as a senator. By contrast, what Mr Wang and Mr Mead invite the Court to do in this case is to adopt a method of ascertaining the result of the polling which is a method for which the Act does not provide. That step cannot be taken. Because that is so, the evidence of the records of the original and fresh scrutinies which bear on the lost ballot papers is not admissible for the purpose of the Court determining that it should declare any candidate duly elected who was not returned as elected. The second separate question should therefore be given an answer in two parts. First, the Court is precluded by s 365 from admitting, for the purpose described in the proviso to that section, evidence of the records made at the original and fresh scrutinies that bear on the missing ballot papers. Second, those records are not admissible for the purpose of the Court determining that it should declare any candidate duly elected who was not returned as elected. Third separate question The conclusions just expressed make it unnecessary to deal at any length with the third separate question, which asks, in effect, whether an inquiry 73 (1988) 167 CLR 145 at 166. 74 (1988) 167 CLR 145 at 172. Hayne regarding the manner in which the AEO dealt with reserved ballot papers is permitted, relevant or necessary. No party submitted that inquiry regarding the manner of dealing with reserved ballot papers was not permitted and, in terms, s 281(3) provides that if the validity of an election is disputed the Court may consider any ballot papers which were reserved for the decision of the Australian Electoral Officer for the relevant State or Territory. Whether ss 353(1) and 360(1) are additional sources of power need not be decided. Question 3(a) should be answered "Yes, s 281(3)". Having regard, however, to the rejection of the submissions made by Mr Wang, Mr Mead and others that the Court can determine who should have been elected by constructing a result from a combination of the records made at the original and fresh scrutinies about the lost ballot papers with the results of the re-count of available ballot papers and the results of the scrutiny of those ballot papers which were not within the re-count, it is neither relevant nor necessary to the disposition of any of the three petitions to consider the reserved ballot papers. It is neither relevant nor necessary to undertake that consideration because the Court must find that Mr Dropulich and Senator Ludlam were not duly elected, but cannot declare who was duly elected. The only relief appropriate is for the election to be declared void. Conclusion and orders For these reasons, the separate questions should be answered in the manner set out earlier in these reasons. The costs of the trial of separate questions should be reserved. The petitions should be stood over for argument about any remaining issue (including what order, if any, should be made for the costs of the trial of separate questions) on Thursday, 20 February 2014 at 12 noon in Melbourne.
HIGH COURT OF AUSTRALIA APPLICANT AND THE QUEEN RESPONDENT Gassy v The Queen [2008] HCA 18 14 May 2008 ORDER Application for special leave to appeal granted. Appeal treated as instituted, heard instanter and allowed. Set aside the orders of the Full Court of the Supreme Court of South Australia made on 22 December 2005 and in their place order that: the appeal to that Court be allowed; the appellant's conviction and sentence be quashed; and there be a new trial. On appeal from the Supreme Court of South Australia Representation J E Gassy appeared in person C J Kourakis QC Solicitor-General for the State of South Australia with P R Brebner QC and E F Telfer for the respondent (instructed by Director of Public Prosecutions (South Australia)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Practice and procedure – Directions to the jury – Deliberations continued, without success, for more than ten hours – The trial judge suggested that, if invited by the jury, she could suggest ways for the jury to "move forward" – Jury requested assistance – Further direction suggesting how the jury could approach its deliberations –The jury returned its guilty verdict about half an hour after the further direction – Balance of further direction – Whether the further direction constituted a miscarriage of justice. Criminal law – Appeals – Application of the proviso – Whether no substantial miscarriage of justice actually occurred – Whether on the record of the trial an appellate court could conclude, beyond reasonable doubt, that the applicant was guilty – Relevance to the proviso of a separate consideration as to whether the trial was unfair – Relevance to the proviso of a consideration as to whether there has been such a departure from the essential requirements of the law that it goes to the root of the proceedings. Criminal law – Practice and procedure – Legal representation of an accused – At the applicant's trial for murder, counsel sought to appear for the applicant in relation only to a voir dire hearing concerning the admissibility of certain evidence – Statement by the trial judge that counsel could not appear on the voir dire if counsel did not then represent the applicant for the entire trial – Counsel withdrew and applicant conducted voir dire himself – Error of law – Whether error constituted a miscarriage of justice. Criminal Law Consolidation Act 1935 (SA), ss 288, 353. Criminal Law (Legal Representation) Act 2001 (SA), s 11. GUMMOW AND HAYNE JJ. Dr Margaret Tobin was Director of Mental Health for South Australia. On 14 October 2002, after lunch, Dr Tobin was returning to her office on the eighth floor of an Adelaide city building. She got into a lift with two men and another woman. One of the men, and the other woman, got out of the lift at the seventh floor. Dr Tobin got out of the lift on the eighth floor and, as she was walking away from the lift, she was shot four times. She died of her wounds soon after the shooting. At the applicant's trial for murder in the Supreme Court of South Australia, the prosecution alleged that he had been the fourth passenger in the lift and that he had shot Dr Tobin. The prosecution case at the trial was that the applicant had been motivated by resentment and anger stemming from Dr Tobin's part in setting in train a sequence of events during the 1990s that had led to the applicant, then a legally qualified medical practitioner practising as a psychiatrist, being deregistered as a medical practitioner and disqualified from practising medicine and psychiatry. Neither of the lift passengers who got out of the lift on the floor below the floor at which Dr Tobin got out recognised the other man in the lift. Neither positively identified the applicant from a selection of photographs shown to each. There was, therefore, no witness at his trial who said that it was the applicant who had been left alone in the lift with Dr Tobin, or that it was the applicant who had fired the fatal shots. The applicant was convicted. He appealed to the Full Court of the Supreme Court of South Australia against his conviction. His appeal to that Court (Bleby and White JJ; Debelle J dissenting) was dismissed1 and he applied for special leave to appeal to this Court. Two issues raised by the application for special leave were referred for consideration by a Full Court of this Court, to be argued as on an appeal; the balance of the application was dismissed2. The prosecution case at trial In the Summary of Prosecution Case at Trial, filed in the Full Court of the Supreme Court, the prosecution's case at trial was described as having twelve elements. It is convenient to set out that description but adding paragraph numbers to identify the separate elements of the case. 1 R v Gassy (No 3) (2005) 93 SASR 454. 2 Gassy v The Queen [2007] HCATrans 426. "(1) Dr Gassy developed feelings of resentment and anger towards a number of other people who were involved in different ways in the sequence of events which led to his deregistration, that these feelings of resentment and anger endured into 2002 and it follows that he would have held similar feelings of resentment and anger towards Dr Tobin which would similarly have endured up until the time of her death. In April 2002 or about six months before the killing he booked into a motel in Brisbane under a false name and then the following day he was seen acting suspiciously at a convention centre where Dr Tobin was attending a conference and that the evidence suggests that he must have been carrying a pistol at the time. (3) About five months later and over the weekend before the killing he travelled to Adelaide under a false name and then booked into a motel in Adelaide under a false name. (4) A few hours before the killing he was seen in a lift in the Citi Centre Building. Traces of firearms residue were found in the hire car in which he drove to Adelaide. The elemental composition of the residue found was the same as the [S]peer brand ammunition which had been used to shoot Dr Tobin. (6) He was an experienced pistol shooter. (7) He owned pistols which were of the same brand of manufacture as was used to shoot Dr Tobin. (8) He possessed ammunition of the same kind as that with which (9) He had accessed an internet site carrying information about firearms identification in the detection of crime some time before the killing. (10) Dr Gassy's appearance at the time of the killing is not so inconsistent with the description of the killer, that it couldn't have been him. (11) Both the killer and Dr Gassy had a beard at the time of the killing and that Dr Gassy had his beard shaved off shortly after the killing. (12) Dr Gassy accessed internet sites carrying information about Dr Tobin's death on a number of occasions after the killing." The prosecution sought to prove each of the second and the third elements (that the applicant was in Brisbane in April 2002 and in Adelaide over the weekend before the killing) by a mosaic of evidence. The applicant lived in Sydney. The evidence relied on as putting the applicant in Brisbane in April 2002 included evidence that he had rented a motorcar over the relevant period and that that car had travelled a distance sufficient to go to and from Brisbane. In addition, evidence was led of a man ordering a part for a Glock 26 pistol at a Brisbane gunshop and giving the name Gassy or Gass, the number of the applicant's firearms licence, and his sister's mobile telephone number as a contact number. A receipt for this transaction was later found at the applicant's flat and the salesman chose the applicant's photograph from the selection of photos he was shown by police as a photograph of the man who had come to the shop and ordered the gun part. While this evidence, if accepted, placed the applicant in Brisbane on 27 April 2002, the prosecution's purpose in seeking to establish that fact was to show not just that the applicant had gone to Brisbane but that he was in Brisbane when Dr Tobin was conducting a workshop at the Brisbane Convention Centre as part of the annual conference of the Royal Australian College of Psychiatrists. In this regard the prosecution adduced evidence which, if accepted, was said to demonstrate that a man seen at the Brisbane Convention Centre on the day Dr Tobin was to conduct her workshop (27 April 2002) was the applicant, that that man was "behaving furtively", and that he "must have been carrying a pistol concealed under his clothing at the time". No witness positively identified the applicant as the man who was seen at the Brisbane Convention Centre. No witness saw any firearm being carried by the man in question. The conclusions urged by the prosecution, that the man observed by the witnesses was the applicant, and that he was armed, were open on the evidence led at trial but they were not conclusions that the evidence compelled. The mosaic of evidence said to show that the applicant was in Adelaide over the weekend before Dr Tobin was killed had some similarities to the Brisbane evidence. Again the mosaic was made up of various pieces of evidence, not all of which it is necessary to refer to now. The prosecution alleged, however, that the evidence showed that on each occasion the applicant had hired a small car, had travelled under a false name, and had been seen at or near where Dr Tobin might reasonably be expected to be. The prosecution further alleged that on each occasion there was at least a suggestion that the applicant had a firearm with him. The prosecution submitted that "[t]he only conclusions that were reasonably and rationally open from this simple but significant combination of similarities" were that (a) the applicant "must have gone" to Brisbane and to Adelaide for the same reason; (b) because the applicant had gone to Brisbane "for a non-innocent purpose relating to Dr Tobin" he must have gone to Adelaide for the same reason; and (c) after he arrived in Adelaide, he succeeded in doing what he had failed to do in Brisbane. Again, these conclusions were open on the evidence but they were not conclusions that the evidence compelled. Issues argued in this Court Two issues raised by the application for special leave to appeal to this Court were referred for argument as on appeal: an issue about representation of the applicant by counsel during argument on a voir dire, and an issue about a direction the trial judge (Vanstone J) gave to the jury, after the jury had indicated that they did not believe that they would be able to reach a verdict in the matter. In this Court, the applicant refused the offer of senior counsel to appear pro bono on his behalf and argued his own case. Representation Section 288 of the Criminal Law Consolidation Act 1935 (SA) provides that a person charged with an offence may be represented by counsel. At the trial, counsel sought to appear on behalf of the applicant in relation only to a voir dire hearing concerning the admissibility of certain evidence which the prosecution sought to adduce. The trial judge expressed the view that, if counsel were to be retained, it should be for the entire trial and further indicated that she may not give counsel leave to withdraw if counsel appeared on the voir dire argument. As a result, the applicant told the trial judge that he would conduct the voir dire himself. In this Court, the respondent accepted that the trial judge erred in ruling that the applicant was not entitled to counsel for the purposes of only the voir dire hearing. The respondent further accepted that s 11 of the Criminal Law (Legal Representation) Act 2001 (SA) ("the Legal Representation Act") does not preclude an appeal on the grounds that counsel engaged by the applicant and available to appear for him was not heard3. These concessions departed from the 3 Section 11 of the Criminal Law (Legal Representation) Act 2001 (SA) provided: "The fairness of a trial (or a prospective trial) cannot be challenged (and a trial or prospective trial cannot be stayed) on the ground of lack of legal representation unless— (a) the Commission has, contrary to this Act, refused or failed to provide legal assistance for the defendant; or (b) the Commission has withdrawn legal assistance for the defendant on the the to reach agreement with it has been unable ground Attorney-General on a case management plan." that stance taken by the respondent on the applicant's appeal against conviction to the Full Court of the Supreme Court. In that Court, the respondent had submitted that the trial judge had made no error and that, if there was error below, s 11 of the Legal Representation Act precluded subsequent complaint about the error. All members of the Full Court of the Supreme Court held4, however, that the trial judge had erred in ruling (in effect) that the applicant was not entitled to counsel for the purposes of only the voir dire hearing and that s 11 of the Legal Representation Act did not have the effect the respondent asserted it had. The Full Court below divided in opinion5 about whether the error occasioned a substantial miscarriage of justice. The majority in that Court identified6 the "only relevant question" presented by the wrongful refusal to allow legal representation of the applicant for the purposes of only the voir dire hearing as being "whether the trial [of the applicant] was unfair and a chance of acquittal was denied to [him] by the failure to allow the legal representation". Their Honours concluded7 that there was "no miscarriage of justice" because it was "not possible to find that [the applicant] lost a chance fairly open to him of being acquitted by virtue of his failure to be represented by counsel at the relevant time". The third member of the Court, Debelle J, was of the opinion8 that "the refusal to permit [the applicant] to be represented at [an] important stage of the voir dire hearing dealing with evidence [of identification] capable of having a critical bearing on the trial was so grave that the trial was fundamentally flawed". The question identified by the majority as the only question relevant to whether there had been a substantial miscarriage of justice had two elements – whether the trial was unfair, and whether a chance of acquittal was denied to the applicant by the failure to allow him the legal representation he desired. The answer given by the majority to the question they had identified hinged about its second element (loss of chance of an acquittal) and no separate examination was made of the fairness of the trial. That is, the second element of the question appears to have been treated as including or governing the answer to the first element. (2005) 93 SASR 454 at 471 [23] per Debelle J, 501 [158] and 506 [183] per Bleby (2005) 93 SASR 454 at 471 [23] per Debelle J, 511 [206] per Bleby and White JJ. (2005) 93 SASR 454 at 507 [188]. (2005) 93 SASR 454 at 511 [206]. (2005) 93 SASR 454 at 472 [28]. Approaching the matter in that way is evidently awkward. It appears to treat an assessment of the fairness of the trial as governed by the safety or sufficiency of the verdict returned at the trial. On their face those are radically different considerations. But the difficulty in the approach is more deep-seated than that. It is a difficulty that stems from treating judicial expositions of the application of common form statutory provisions to particular facts and circumstances9 not only as capable of application even when divorced from the context in which they were made, but also as sufficient substitutes for the relevant statutory provisions, here s 353(1) and (2) of the Criminal Law Consolidation Act. Those sub-sections provided: "(1) The Full Court on any such appeal against conviction shall allow the appeal if it thinks that the verdict of the jury should be set aside on the ground that it is unreasonable or cannot be supported having regard to the evidence, or that the judgment of the court before which the appellant was convicted should be set aside on the ground of a wrong decision on any question of law, or that on any ground there was a miscarriage of justice, and in any other case shall dismiss the appeal; but the Full Court may, notwithstanding that it is of the opinion that the point raised in the appeal might be decided in favour of the appellant, dismiss the appeal if it considers that no substantial miscarriage of justice has actually occurred. Subject to the special provisions of this Act, the Full Court shall, if it allows an appeal against conviction, quash the conviction and either direct a judgment and verdict of acquittal to be entered or direct a new trial." As this Court pointed out in Weiss v The Queen10, judicial expressions describing the task presented by the proviso to the common form criminal appeal statute must not be taken as substitutes for the statutory language. It is the relevant language of the applicable criminal appeal provision that must be considered and applied. 9 Mraz v The Queen (1955) 93 CLR 493 at 514 per Fullagar J; [1955] HCA 59: "the appellant may thereby have lost a chance which was fairly open to him of being acquitted". 10 (2005) 224 CLR 300 at 313 [33]; [2005] HCA 81. The Court also pointed out in Weiss11 that the use of the word "substantial" in the proviso to the common form appeal provision ("no substantial miscarriage of justice") was more than mere ornamentation. The expression "substantial miscarriage" was adopted to make plain that the common form appeal provision did away with the old Exchequer rule by which any departure from trial according to law, regardless of its nature or importance, entitled the accused to a new trial. But whether there has been a "substantial miscarriage" at any trial will depend, as was also pointed out in Weiss12, upon the particular facts and circumstances and "[n]o single universally applicable description of what constitutes 'no substantial miscarriage of justice' can be given". But as was said13 in Weiss, one important negative proposition may be identified: "[i]t cannot be said that no substantial miscarriage of justice has actually occurred unless the appellate court is persuaded that the evidence properly admitted at trial proved, beyond reasonable doubt, the accused's guilt of the offence on which the jury returned its verdict of guilty". In undertaking that task the appellate court must make its own independent assessment of the evidence and make due allowance for the natural limitations that exist where an appellate court must proceed wholly or substantially on the written record. The negative proposition identified in Weiss states when the proviso may not be engaged but, as the reasons in Weiss make plain, it is not a statement that may be treated as a complete and sufficient paraphrase of the statute. To approach the application of the proviso as if its operation is sufficiently described by describing when it is not engaged would commit the very same error the decision in Weiss sought to identify. The respondent making the concessions it did in this Court it follows that it was not disputed in this Court that at the trial of the applicant there was, within the meaning of s 353(1) of the Criminal Law Consolidation Act, either a wrong decision on a question of law or a miscarriage of justice. It follows that the Full Court of the Supreme Court, on the applicant's appeal against his conviction, was bound by s 353(1) of the Criminal Law Consolidation Act to allow the appeal (the Court shall allow the appeal) unless it considered that no substantial miscarriage of justice had actually occurred (in which event it may dismiss the appeal). 11 (2005) 224 CLR 300 at 308 [18]. 12 (2005) 224 CLR 300 at 317 [44]. 13 (2005) 224 CLR 300 at 317 [44]. In the present case, the respondent submitted that the admitted failure of process at the applicant's trial (by which he was denied the legal representation he sought) did not lead to the wrongful admission of any evidence. Therefore, so the argument proceeded, the jury's verdict of guilty should stand. The respondent submitted that the jury's verdict should stand, not because the Full Court of the Supreme Court (or this Court) could or should be persuaded beyond reasonable doubt of the accused's guilt, but because it was not shown that the jury's decision might have been affected by the admitted want of proper process. In particular, the respondent submitted that even if counsel had appeared for the applicant at the voir dire, no different rulings about admissibility of evidence would have been made. But the respondent's submission about the application of the proviso in connection with the acknowledged error about the applicant's legal representation need not be further examined. That is so because these reasons will show that the second issue argued in this Court by the applicant must be resolved in his favour. The impugned direction To explain the second of the issues which the applicant raised it is necessary to describe the course of the jury's deliberations. After a trial that had occupied many weeks, the jury were asked to retire to consider their verdict at 5.43 pm on 21 September 2004. The jury deliberated until about 8.30 pm on that day. On the following day the jury continued their deliberations between about 9.15 am and about 4.15 pm. During that time the jury sought and were given some further directions. At about 4.15 pm on that day the jury sent a note to the trial judge indicating that the foreman did not believe that they would be able to reach a verdict. The trial judge then gave the jury a Black direction14 and the jury continued deliberating until about 7.45 pm when they indicated a wish to retire for the night. On the following morning, the trial judge, of her own motion, had the jury brought into court at about 9.30 am and told them that she could suggest an approach to take in an attempt "to move [their] discussions along", but that she would not do that uninvited. At about 11.15 am the jury asked the trial judge to give to them her "suggestions as to how they might move forward". It is the instructions then given to the jury of which the applicant complains as constituting a miscarriage of justice. 14 Black v The Queen (1993) 179 CLR 44; [1993] HCA 71. It is necessary to set out the whole of those instructions and it is convenient to do so adding numbers to the paragraphs. Sometimes, when one reaches a difficult position and cannot move on, of course, it is good to go back to the beginning. I am not suggesting that you would start the whole process again, of course. I am not suggesting days of work. But rather, why not take stock right back from the beginning and then, from that point, see if you can move forward in a different way. A good thing to do along the way is to sort out the common ground. And once you have got that common ground, ask yourselves how that helps you. What does it tell you? Now, you will remember in my summing up I spoke to you about a number of different topics which I suggested made up the prosecution case. That is only my way of labelling them. You might have done it differently but, since it is the way I used, I am going to go back to that. But I do suggest that you look at them in a new order, not the order which I gave you previously. Perhaps first look at the evidence that I discussed under the heading of 'Equipment'. That is a fairly straightforward topic, I would have thought, and I know you know what the evidence is under that topic. No doubt you have discussed it already. With that in mind, ask yourselves 'Are we at one about that? Can we call that evidence, and our view of that evidence, common ground?' And if you can, then move on. The next topic you could go to, perhaps, is what I called 'Motive'. That, of course, was the deregistration sequence, and it included that number of statements which various witnesses attributed to the accused about Dr Tobin. Well, once you have looked at that, again in overview, ask yourselves 'Are we at one about that?' Then I suggest you could go to 'Brisbane'. You will remember that I gave you quite extensive directions about Brisbane because, obviously, it is a very important part of the prosecution case and, in a sense, it is a difficult part of the case. So the question is, as I told you, 'Are you satisfied beyond reasonable doubt that the accused was the man at the Convention Centre, that he was there for a purpose related to Dr Tobin and that his motive was a sinister one?' And remember I gave you in my summing up – and I will not repeat it now unless you wish me to – a number of areas of evidence that bore on those questions. Now you need to make a decision about Brisbane, as it seems to me. It is a very significant part of the prosecution case. If you have reached that conclusion about Brisbane, then I suggest, look again at the evidence I discussed under the topic of 'Opportunity'. Remember I said to you that it perhaps was not the best word to describe that topic. The topic is probably bigger than mere opportunity, but I mentioned a number of topics under that heading. Then, ask yourselves the question 'Are we satisfied beyond reasonable doubt that the accused was in Adelaide when Dr Tobin was killed?' If that is a point of difficulty, then I suggest you go through all the evidence that bears on that question. If you cannot recall the detail of all that evidence, then, by all means, ask me a question about it and I will go through it systematically. But if that is where the difficulty is, you need to be able to call to mind all the evidence that bears on that topic and you need to be able to call to mind the arguments that the prosecutor and Dr Gassy put to you about that. Then, finally, you could look at the scene. I spent little time on that because it seems to me that it does not help you all that much. But that is a question for you. You know from the scene the type of killing it was and, possibly, that the fourth man in the lift was the killer. But then there are competing arguments about that. So does that help you? Of course, I do not know where your difficulty is but, if you get through that process, then you could ask yourselves 'Are we in agreement to this point?' And I say again, if you are not, then you need to isolate the exact point where your views diverge and you need to focus on that point and you need to go through that process: 'What is the evidence on this point? Do we have adequate recall of all that evidence? Do we need to hear some of it read? Do we need a summary of it? Do we need to know again what anyone said about it?' Make a list, I suggest, of that evidence and then make a list of the arguments on both sides relating to that point and then analyse those arguments. 10. Now, let me assume, for the purpose of this exercise, that you are in agreement to that point. The next question, of course, would be: 'Now we have decided the accused was in Adelaide when Dr Tobin was killed, what was his purpose for being here? Did he kill her?' So then you ask 'What evidence helps us on that point?' Here you will remember I gave you a direction about the use of the Brisbane evidence. It is a difficult direction in a way and I wonder whether it might help you if I gave it to you again. FOREPERSON: Yes. 12. HER HONOUR: I will put it into context. I had just gone through all the evidence I said you could take into account on this question of whether the accused was the man in Brisbane, and I will not go through that at the moment; I have really moved past that point for this purpose. Then I said to you: 'Now, having considered and evaluated all that evidence, if you are satisfied beyond reasonable doubt that it was the accused acting suspiciously at the Convention Centre on 27 April 2002, and that he was there for a purpose related to Dr Tobin, and that it was a sinister purpose, then you are entitled to use all that material and the conclusion when you come to consider the other evidence which bears on the identity of Dr Tobin's killer. You could use that conclusion in this way. First, you could use it as bearing on the identity of the man David Paes at the Shamrock and the Lindy Lodge Motels, and on the Renmark video. And, further, if you conclude that the accused and David Paes are one and the same, and that he used the vehicle with the registration number RSX-366 to drive to Adelaide, then you could use the Brisbane evidence to throw light on the reason for the accused's presence in Adelaide. Because once you know that Dr Tobin was killed in what might be called execution style in Adelaide in October, then any incident concerning her, or possibly concerning her, in the year or two leading up to that event, would potentially take on a new significance. If it turns out that there was such an incident in Brisbane earlier in the year, and if you conclude that the accused was the person at the centre of that incident, and then, if you find a number of similarities between the circumstances of the Brisbane and Adelaide incidents, including that, on each occasion, if you find it so, this man with what you might find was a profound resentment towards Dr Tobin, a man who possessed the type of weaponry that killed her, had made a long, clandestine and otherwise unexplained journey to the place where Dr Tobin was at that time; a planned journey, using a hired car, notwithstanding the availability to him of his own and his parents' cars, a journey each time coinciding with his parents' absence from the home they shared, then your conclusion that the accused was that man in Brisbane could take on a decisive character in relation to your deliberations about the identity of Dr Tobin's killer in Adelaide. It is for you to say whether such a line of reasoning is helpful in this case. The potential relevance of the Brisbane evidence is then its tendency to prove the accused's presence in Adelaide and as to his purpose for being here. That is the proper use of the Brisbane evidence.' 16. And so you would have, on this question of the accused's purpose, the Brisbane evidence, the timing of the trip, the hiring of the car, the return of the car, the suggestion of the trip being clandestine, the false names used in the motels, the fact, if you find it so, of the dumping of rubbish at Renmark, potentially linking the two trips, the timing I think I said of the departure from Adelaide, if you find it so, and the very type of killing it was. 17. Well, again I say to you, if that is the point of difficulty, make a list of the evidence that bears on those matters, discuss what can be drawn from that evidence, recall the arguments as to each of those matters, decide whether you adequately recall all the evidence and all the arguments as to it and, if you do not, then please ask for help. And that, as I said, could be reading from some passages of a particular witness's evidence (and you could direct me to the very points that you wanted read out) or it might mean reading a part of my summing up again or asking me for a summary of something that you thought important. And I could compile something like that and let you have it. So, that is the series of suggestions that I make to you. Perhaps I can ask you to retire again. Hopefully it has been of assistance." As Debelle J rightly said in the present matter15: "There will be occasions when it is appropriate for a trial judge to make suggestions as to what might be a convenient way for the jury to approach their deliberations16. However, any suggestion of that kind must maintain a proper balance between both the prosecution case and the defence case. The suggested approach must be expressed in neutral terms so that the jury is aware both that it is free to deliberate without any pressure to reach a verdict and that it may give the issues that free deliberation to which both the accused and the Crown are entitled17." 15 (2005) 93 SASR 454 at 467 [14]. 16 Stanton v The Queen (2003) 77 ALJR 1151 at 1157-1158 [38]; 198 ALR 41 at 50; [2003] HCA 29. 17 Black v The Queen (1993) 179 CLR 44 at 51. The impugned instructions contained only one reference (in par 7) to the applicant's case. Otherwise the instructions restated the essential elements of the circumstantial case upon which the prosecution relied in proof of guilt. The "way forward" which the judge suggested was along a single path leading only to a verdict of guilty. Immediately after the trial judge gave these instructions, trial counsel for the prosecution asked her Honour to supplement the impugned instructions by spelling out and "emphasis[ing] a little more" the fact that what the judge had said were "suggestions for [the jury's] assistance and they are free to accept or reject the suggestions as they see fit". The trial judge recalled the jury and said that: "[T]here was a concern that I have not made it clear enough that what I have said to you are merely suggestions for your consideration." The jury returned a guilty verdict about half an hour later. Did the impugned directions constitute a miscarriage of justice? In particular, were those impugned directions so "lacking in judicial balance and so partaking of partiality as to render this trial a miscarriage of justice"18? That depends upon the impression which the impugned directions, when taken as a whole, would have conveyed to the jury. There are two telling indications of the impression conveyed by the impugned instructions. First there was the response of trial counsel for the prosecution. It is evident from that reaction that trial counsel for the prosecution considered that what had been said did not sufficiently inform the jury that the trial judge was offering no more than suggestions. While it is true that the trial judge then told the jury that what she had said were "merely suggestions for [their] consideration", the fact is that nowhere in the impugned instructions was anything said about the nature or content of any of the arguments the applicant had sought to advance at the trial. It is the lack of any but the most passing reference to competing arguments and evidence that constitutes the central deficiency in the impugned instructions. And the second telling indication of the impression conveyed by the impugned instructions is the speed with which the jury thereafter completed deliberations and returned the verdict of guilty. The jury were out for only about half an hour more. Because the impugned instructions contained no substantial reference to the competing arguments and considerations relevant to the applicant's case the 18 Green v The Queen (1971) 126 CLR 28 at 34; [1971] HCA 55. instructions "render[ed] justice"19. impugned this Section 353(1) of the Criminal Law Consolidation Act required that the appeal against conviction be allowed unless the proviso was engaged. trial a miscarriage of Both in the Full Court and in the written submissions that have been filed in this Court, attention focused upon whether giving the impugned instruction was an error of a kind which precluded engaging the proviso. Identifying a priori some kinds of error as precluding application of the proviso presents difficulties of the same kind as are presented by using judicial statements about the application of the proviso as some substitute for the relevant statutory test. That is, it is neither possible nor useful to seek to apply the proviso according to a taxonomy of errors at trial which describes some as "fundamental" and others as not. And what was said in Wilde v The Queen20 about "such a departure from the essential requirements of the law that it goes to the root of the proceedings" is not to be understood as prescribing or defining a class of cases to which the proviso cannot be applied. Rather, what was said in the passage quoted from Wilde is a description, in words other than the statutory words, of one kind of case in which an appellate court could not conclude that there had been no substantial miscarriage of justice. For the reasons given in Weiss, a negative proposition of this kind cannot be taken as a substitute for the statutory language. Whether the error constituted by giving the impugned instructions is properly described as "fundamental" or as an error going "to the root of the proceedings" would depend upon the content that is given to the expressions used. The statutory question is whether the Full Court considers that "no substantial miscarriage of justice has actually occurred"21. In answering that question it is necessary to consider the nature of the error and in doing that it will be important to consider the possible effect that the error may have had on the outcome of the trial. In assessing the possible effect of the giving of the impugned instructions, it is necessary to recall that the jury deliberated for more than a day and a half and initially reported to the trial judge that they did not consider that they could reach a verdict. The difficulties the jury experienced suggest a need for caution on the part of an appellate court before concluding that the charged offence was 19 Green (1971) 126 CLR 28 at 34. 20 (1988) 164 CLR 365 at 373 per Brennan, Dawson and Toohey JJ; [1988] HCA 6. 21 Criminal Law Consolidation Act 1935 (SA), s 353(1). proved beyond reasonable doubt. But ultimately it is the nature of the case that the prosecution sought to make against the applicant which shows that the proviso was not engaged here. An appellate court, making its own independent assessment of the evidence, and making due allowance for the natural limitations that exist in the case of an appellate court proceeding wholly or substantially on the record22, could not conclude beyond reasonable doubt that the applicant was guilty of Dr Tobin's murder. The case against the applicant depended, in critically important respects, upon what the jury made of each of two separate mosaics of evidence adduced by the prosecution in proof of what was alleged concerning the applicant's presence and actions in Brisbane and in Adelaide. Important elements of each of those mosaics were provided by evidence given by persons who did not know the applicant but identified him as the man whom they had seen. The conclusions which the prosecution urged the jury to reach at the applicant's trial depended upon an assessment of the accuracy and reliability of this evidence. The conclusions for which the prosecution argued cannot safely be reached by an appellate court when it can refer only to the written record of the evidence. Further, in important respects the prosecution case depended upon drawing inferences from what was said to have happened in Brisbane, particularly at the Brisbane Convention Centre. As noted earlier in these reasons, the prosecution argued that the man seen at the Brisbane Convention Centre "must have been carrying a pistol concealed under his clothing" (emphasis added). The prosecution further argued that the applicant went to Brisbane "for a non-innocent purpose relating to Dr Tobin" and that he "must have gone" to Adelaide for the same reason (emphasis added). The evidence which was led at trial permitted the jury to draw these conclusions, but the evidence did not compel them. It follows that on the record of trial the Full Court could not have been persuaded beyond reasonable doubt of the applicant's guilt. It also follows that the application for special leave to appeal should be granted, the appeal treated as instituted and heard instanter and allowed. The orders of the Full Court of the Supreme Court of South Australia made on 22 December 2005 should be set aside and in their place there should be orders that the appellant's appeal to that Court is allowed, his conviction and sentence are quashed, and there be a direction that a new trial be had. 22 Weiss v The Queen (2005) 224 CLR 300 at 316 [41]. Kirby KIRBY J. Dr Jean Gassy ("the applicant") was tried in the Supreme Court of South Australia on an information that charged him with the murder of Dr Margaret Tobin. Dr Tobin was shot dead in Adelaide, South Australia on 14 October 2002. Nearly two years later the applicant's trial was conducted before Vanstone J and a jury. This trial followed fourteen pre-trial direction hearings, a voir dire and other applications, conducted before Vanstone J and other judges. The trial itself involved more than forty sitting days over an eleven week period. The trial and appeal During the trial, 163 witnesses were called. The evidence against the applicant was substantially circumstantial. The jury returned a verdict of guilty after more than a day and a half of deliberations, following circumstances that it will be necessary to describe. The trial judge convicted the applicant and sentenced him to life imprisonment. The applicant sought leave to appeal against his conviction to the Full Court of the Supreme Court of South Australia, sitting as the Court of Criminal Appeal ("the Court of Criminal Appeal"). Leave was granted on eight grounds by Duggan J23. By further leave, additional grounds were later added24. By majority (Bleby and White JJ; Debelle J dissenting), the Court of Criminal Appeal ordered that the applicant's appeal against his conviction be dismissed on all grounds upon which leave had been granted25. In his minority opinion, Debelle J concluded that the applicant's appeal should be allowed on two grounds. The first concerned the ruling by the trial judge rejecting the applicant's request to have legal representation during the voir dire hearing only, without the necessity of the same or other legal representation at the trial26. The second ground concerned the "supplementary direction" given by the trial judge to the jury during their deliberations after the jury disclosed that they were experiencing difficulties in reaching a unanimous verdict27. On both 23 R v Gassy [2005] SASC 68 at [221]. 24 R v Gassy (No 2) [2005] SASC 491 at [4]. 25 R v Gassy (No 3) (2005) 93 SASR 454. 26 (2005) 93 SASR 454 at 471-472 [22]-[29]. 27 (2005) 93 SASR 454 at 462-471 [2]-[21]. Kirby grounds, Debelle J favoured allowing the appeal. By inference he would have ordered a retrial28. The application to this Court was confined by the special leave panel to the two grounds upon which Debelle J had dissented. The application was referred to the Court to be heard as an appeal. The applicant represented himself. Self-evidently, it is a large misfortune when a major enterprise, such as a prolonged trial that involves much circumstantial evidence, fails and has to be repeated. This is especially the case when one ground (representation in the voir dire proceeding) involves an interlocutory ruling made before the substantive hearing of the trial began. Such a ruling may subsequently assume limited importance in the context of the questions presented by the trial itself. It is particularly unfortunate when a complaint about a supplementary direction concerns an attempt by the trial judge, upon the jury's request, to assist the jury in overcoming an impasse in their deliberations. The retrial of the applicant (which would follow the orders of this Court if the appeal were allowed) would significantly inconvenience the many witnesses who would have to be recalled. It would present considerable expense to the community. It would cause distress and anxiety for the family and friends of Dr Tobin otherwise entitled to closure. And it would risk new errors to which any human system of justice is subject. On the other hand, the applicant has been found guilty of a heinous crime for which he protests his innocence and has been sentenced to the most severe punishment available within our legal system. His case turns significantly on the identification of him as the person who killed Dr Tobin. The risk of a miscarriage of justice in such a case is notorious and a proper matter for judicial vigilance29. The central obligation of a judge presiding in a criminal trial is to "ensure that the trial is conducted fairly and in accordance with law"30. This requires a very high standard of legal accuracy in the conduct of criminal trials, particularly where the offence is so grave and the punishment is so severe. 28 His Honour did not indicate the detailed orders he would have made save for allowing the appeal: (2005) 93 SASR 454 at 472 [30]. 29 cf Domican v The Queen (1992) 173 CLR 555 at 565; [1992] HCA 13; Domican (No 3) (1990) 46 A Crim R 428 at 445; Australian Law Reform Commission, Criminal Investigation, Report No 2 (Interim), (1975) at 52 [117]. 30 MacPherson v The Queen (1981) 147 CLR 512 at 523; [1981] HCA 46. Kirby An error of law and miscarriage of justice For the reasons given by Gummow and Hayne JJ, I agree that there was an error of law in the interlocutory ruling concerning the applicant's entitlement to counsel for the purposes of the voir dire held before the trial31. Indeed, the conclusion that an error had arisen from the interpretation of s 11 of the Criminal Law (Legal Representation) Act 2001 (SA) was basically common ground in the Court of Criminal Appeal32. The contrary was not argued before this Court. Like the intermediate court, this Court is thus obliged to consider whether, notwithstanding an error arising in the trial which to some degree affected the conduct of the trial, the "proviso" should be applied to maintain the conviction, as envisaged by s 353 of the Criminal Law Consolidation Act 1935 (SA)33. I also agree with Gummow and Hayne JJ that there was a miscarriage of justice in the circumstances of the trial resulting from the supplementary jury direction given after the request for assistance from the jury. Occasioning a "miscarriage of justice" by giving jury directions that appear to lack balance and impartiality would have been the furthest thing from the mind of the learned trial judge. There are many indications during the trial of her Honour's care to protect the rights of the applicant. He elected to appear without counsel although the provision of skilled legal representation was effectively his legal right34. By electing to represent himself, the applicant placed considerable additional burdens on the trial judge in a trial that was already large and complex. The prosecutor at the trial endeavoured to preserve the legal correctness of the impugned directions by suggesting a limited redirection (which was given). However, legal representation of the applicant at the trial would almost certainly have substantially enlarged the application for further redirection and possibly its provision. The trial judge had to do her best without the assistance of defence counsel. She was properly concerned to do what could be done to assist the jury to reach a unanimous verdict if that was possible35. The applicant himself 31 Reasons of Gummow and Hayne JJ at [19]. 32 (2005) 93 SASR 454 at 471 [23] per Debelle J, 501 [158] and 506 [183] per Bleby 33 The text of s 353(1) and (2) is set out in the reasons of Gummow and Hayne JJ at 34 Dietrich v The Queen (1992) 177 CLR 292; [1992] HCA 57. See (2005) 93 SASR 35 As provided by Black v The Queen (1993) 179 CLR 44 at 51-52; [1993] HCA 71. Kirby accepts that the direction given by the trial judge in accordance with the decision of this Court in Black v The Queen36 was "a model … direction". The attention of the judge in giving the further supplementary direction was doubtless, as she said, concentrated on creating a pathway through the evidence. As is usual in an accusatorial trial, as in this trial, that evidence was substantially the evidence for the prosecution. Even so, I reach the same conclusion as Debelle J did in the Court of Criminal Appeal37 and as Gummow and Hayne JJ do in this Court38. Taken as a whole and in context, the supplementary "way forward" provided by the trial judge to the jury led only to the unanimous guilty verdict that followed shortly thereafter. The trial judge no doubt assumed that the jury would keep in mind the counter-balancing directions given earlier regarding the applicant's case, his protestations of innocence and his criticisms of the prosecution evidence. However, contemporaneous reminders of countervailing considerations were needed and should have been given as part of the supplementary direction. As they were not given, these judicial directions fell short of the legal standard of neutrality and impartiality required by the authority of this Court39. Consequently, the applicant has established on each of the residual complaints about his trial either a "wrong decision on any question of law" or "that on any ground there was a miscarriage of justice". According to the general provision of the Criminal Law Consolidation Act for the determination of criminal appeals in ordinary cases, it was therefore the prima facie duty of the Court of Criminal Appeal to allow the appeal against conviction40. When legislation was first enacted in the United Kingdom to create a Court of Criminal Appeal and to provide for appeals against criminal convictions41, a practical qualification was introduced to permit specified convictions to be upheld despite the demonstration of an error of law or some miscarriage of justice. In the original English formulation, the qualification was 36 (1993) 179 CLR 44. 37 (2005) 93 SASR 454 at 470-471 [21]. 38 Reasons of Gummow and Hayne JJ at [29]-[30]. 39 Green v The Queen (1971) 126 CLR 28 at 34; [1971] HCA 55. 40 s 353(1) ("shall allow"). 41 Criminal Appeal Act 1907 (UK). Kirby expressed in the language of a proviso to the primary provisions of the statute42. When this legislation was copied throughout the British Empire, some Australian jurisdictions followed the formulation of a proviso43 and others did not44. In South Australia, Parliament followed the language of the 1907 English template except it substituted the word "but" for "provided that". In substance, the statutory formula is the same and no-one has suggested otherwise. Since 1907, the legislation in the United Kingdom has been amended on several occasions45. Amendments have also been made to the equivalent legislation in Australia, but without enacting significant changes46. Through all these changes, the South Australian provision has remained substantially unaltered. After a century, one would expect that, given the imitation of the template throughout Australia and within other Commonwealth countries, all controversies about the proviso would have been settled. Yet, controversies over interpretation remain. One difficulty involves the requirement in the preconditions to the operation of the section of a "wrong decision on any question of law". The issue is whether this necessitates a "decision" in the sense of a specific ruling that the trial judge has been asked to make on an issue that is contested, enlivening a "decision" of such a kind. Opinions to support that interpretation exist, mainly involving rulings on the admissibility of evidence47. In this Court, opinions to 42 Criminal Appeal Act 1907 (UK), s 4(1): "Provided that the court may, notwithstanding that they are of opinion that the point raised in the appeal might be decided in favour of the appellant, dismiss the appeal if they consider that no substantial miscarriage of justice has actually occurred." See discussion, Spencer, "Quashing Convictions for Procedural Irregularities", (2007) Criminal Law Review 43 eg Criminal Appeal Act 1912 (NSW), s 6(1); Crimes Act 1958 (Vic), s 568(1). 44 eg Criminal Code (Q), s 668E(1). See now Criminal Appeals Act 2004 (WA), s 30(4); Criminal Code (Q), s 668E(1A); and Washer v Western Australia (2007) 82 ALJR 33 at 54 [101]; 239 ALR 610 at 637; [2007] HCA 48. 45 Criminal Appeal Act 1968 (UK), s 2(1); Criminal Appeal Act 1995 (UK), s 2(1). Further reforms have been proposed. See Spencer, "Quashing Convictions for Procedural Irregularities", (2007) Criminal Law Review 835 at 835. 46 See eg Criminal Appeals Act 2004 (WA), s 30(4). See Washer (2007) 82 ALJR 33 at 55 [105]; 239 ALR 610 at 638. 47 See eg Gardiner v The Queen (2006) 162 A Crim R 233 at 260 [127]; R v Tofilau (No 2) (2006) 13 VR 28 at 35-36 [15]; R v Huynh (2006) 165 A Crim R 586 at 588 Kirby this effect have been expressed48. However, the issue has not been conclusively resolved. The meaning of "decision" has attracted differing views, and the present case is an illustration of the need to avoid an unduly narrow meaning. The applicant did not himself object to the balance of the trial judge's supplementary direction to the jury and so could not request a ruling on an objection. He is not legally trained and was representing himself. The prosecutor suggested a need for only a limited redirection. In most important directions to a jury, a judge is bound to conform to many legal requirements. Normally, the judge will have planned at least the outline of the directions to be given. Thus it seems highly artificial to classify providing directions as not involving a "decision" by the judge. In my view, the supplementary direction given to the jury was a judicial "decision" on a "question of law" for the purposes of the statute. However, this point does not need to be decided in this case given the alternative provision of the statute postulating a "miscarriage of justice". It follows that the applicant has, at the very least, made out a ground of a "wrong decision on any question of law" in respect of the unchallenged legal error on the explicit ruling about legal representation on the voir dire, and also "that on any ground there was a miscarriage of justice" in the lack of balance and neutrality in the supplementary jury direction. The preconditions to s 353(1) of the Criminal Law Consolidation Act therefore require that the Court of Criminal Appeal "shall" allow the appeal when the Court "thinks that the verdict of the jury should be set aside", relevantly, with a ground of a wrong decision on any question of law or a miscarriage of justice. The Court of Criminal Appeal would only then not set aside the verdict of the jury if it were to consider "that no substantial miscarriage of justice has actually occurred"49. The decision in Weiss The history and purpose of statutory provisions of the kind found in the proviso were explained in this Court's reasons in Weiss v The Queen50. In English criminal procedure, an important purpose of the new procedure provided by the 1907 Act in the United Kingdom was to overcome the rigidities of the so- 48 Papakosmas v The Queen (1999) 196 CLR 297 at 319 [72] per McHugh J; [1999] HCA 37; Dhanhoa v The Queen (2003) 217 CLR 1 at 12-13 [37]-[38], 15 [49] per McHugh and Gummow JJ; [2003] HCA 40. 49 s 353(1) (emphasis added). 50 (2005) 224 CLR 300; [2005] HCA 81. Kirby called "Exchequer rule"51. The proviso to the new statutory procedure replacing Crown Cases Reserved aimed to substitute a more nuanced judicial decision, designed to produce outcomes in criminal appeals that reflected more than purely technical considerations. It drew attention to the actuality and substance of demonstrated defects in the trial. Since 1907, courts of criminal appeal have thus been preoccupied by attempts to strike the correct balance, envisaged by the statute, between: The maintenance of a very high measure of legal accuracy, fairness and impartiality in the conduct of a criminal trial; . The proper observance of procedural and other rules that protect the fair . The adherence to the rule of law whilst preventing seemingly meritless, immaterial and insubstantial errors from controlling outcomes. trial of the accused; and The important instruction for Australian decision-making on such issues contained in this Court's decision in Weiss was: The reminder to the appellate court to conform closely to the statutory language in which the duty of judges participating in criminal appeals is expressed by Parliament52; The affirmation of the need to avoid substituting for the statutory language various "absolute rules or singular tests" that have developed in a century of judicial decision-making explaining and applying the statutory provisions53; The instruction to avoid, in particular, judicial formulations that involved the legal fiction of speculating on or predicting what the original or a future hypothesised "jury of reasonable men, properly instructed and on 51 Weiss (2005) 224 CLR 300 at 306-307 [13] referring to Crease v Barrett (1835) 1 Cr M & R 919 at 933 [149 ER 1353 at 1359]. 52 Weiss (2005) 224 CLR 300 at 316 [41]-[42]. This is a recurring theme in recent decisions of this Court. Recent cases are collected in Weiss (2005) 224 CLR 300 at 53 Weiss (2005) 224 CLR 300 at 316 [42]. Kirby such of the material as should properly be before them"54 did, would do, or would have done without the legal error or miscarriage demonstrated; and The insistence upon the obligation of the appellate court to "make its own independent assessment of the evidence"55 in deciding whether "no substantial miscarriage of justice has actually occurred". In this, the appellate court must make due allowance for the "natural limitations" that exist56: it is obliged to act on the record, but ordinarily does not hear or see witnesses, and typically decides appeals based substantially on selected extracts of the record emphasised by the parties or their representatives. Neither of the two discrete issues reserved in Weiss57 needs to be considered in this case. The first of these involves whether, in some cases, very serious breaches of the presuppositions of a criminal trial (occasionally called "fundamental") may undermine the intended operation of such a provision. Thus, provisions such as s 353 of the Criminal Law Consolidation Act are intended to apply to normal cases where a "verdict of the jury" has been reached in a process that answers to the description of a "trial". The second is whether, in the trial of indictable federal offences, considerations inherent or implied in s 80 of the Constitution may demand relief. Each of these considerations can be set aside or ignored in these proceedings. The language of indeterminate The Court of Criminal Appeal proceeded in the way mandated by Weiss. The majority and minority judges in that Court nonetheless reached opposing conclusions. the statute ("substantial miscarriage" and "actually occurred") readily invites differing opinions. Because an appeal to this Court is not a fresh rehearing but a strict appeal58, to succeed the applicant is required to demonstrate error on the part of the majority. The error propounded was that the conclusion reached by Debelle J was clearly right; that the applicant had demonstrated that there was a "wrong decision" on a question of law and also that a serious "miscarriage of justice" had occurred as a result of the trial judge's supplementary direction. 54 R v Storey (1978) 140 CLR 364 at 376 per Barwick CJ; [1978] HCA 39. See Weiss (2005) 224 CLR 300 at 313 [34]. 55 Weiss (2005) 224 CLR 300 at 316 [41]. 56 Weiss (2005) 224 CLR 300 at 316 [41]. 57 Weiss (2005) 224 CLR 300 at 317-318 [46]. 58 Eastman v The Queen (2000) 203 CLR 1 at 13 [18], 24 [69], 35 [111], 60 [184], 97 [290]; [2000] HCA 29 applying Mickelberg v The Queen (1989) 167 CLR 259 at 267; [1989] HCA 35. Kirby The application of the proviso starts from this point. As Gummow and Hayne JJ explained in AK v Western Australia59: "In every case it will be necessary to consider the application of the proviso … taking proper account of the ground or grounds of appeal that have been made out and which, but for the engagement of the proviso, would require the appellate court to allow the appeal." In the present application it is thus necessary to consider the proviso in light of both of the established grounds: the lack of legal representation at the voir dire and the defects of the supplementary direction. Alike with Gummow and Hayne JJ60, I am prepared to put to one side the conceded "wrong decision on any question of law" in the ruling that the applicant could not have the benefit of legal representation only at the voir dire. There were strong arguments, in the circumstances of the trial, to support the conclusion reached by the majority in the Court of Criminal Appeal that this error, whilst attracting the application of s 353(1), did not justify allowing the appeal as "no substantial miscarriage of justice has actually occurred" as a consequence. Although the majority did not recite the actual language of the Act61, the factual considerations for withholding relief on this ground are substantial. In the large canvas of the applicant's trial, I am not convinced that this error alone would justify relief. Nor, in terms of its consequences, would it attract an argument based on the suggested category of "fundamental" departures from the hypothesis of a fair trial. This conclusion leaves the undoubtedly substantial argument advanced to this Court, challenging the majority's conclusion in the Court of Criminal Appeal62 that the judge's supplementary direction to the jury did not qualify as a "substantial miscarriage of justice [that] has actually occurred". In this Court the prosecution cannot, in my view, sustain the approach adopted by the majority in the Court of Criminal Appeal in terms of the reasons given. There, Bleby and White JJ rejected the submission that the supplementary direction was unbalanced63. Their Honours dismissed the applicant's submission 59 (2008) 243 ALR 409 at 422 [55]; [2008] HCA 8. 60 Reasons of Gummow and Hayne JJ at [21]. 61 (2005) 93 SASR 454 at 511 [206]. 62 (2005) 93 SASR 454 at 530 [294]-[295]. 63 (2005) 93 SASR 454 at 528-530 [286]-[295]. Kirby that the trial judge had failed to put "many important aspects of [his] case based on the evidence of what took place at the scene"64. They concluded that her Honour had only suggested "the questions that would then arise if [the jury] had got to" the point presented by her "way forward"65. They interpreted the supplementary direction as involving nothing more than a series of logical steps based on acceptance of the prosecution evidence. They regarded the prompt return of the jury after the supplementary direction as immaterial and explicable66. They rejected the contention that the supplementary direction suggested a conclusion that "should be reached"67. They insisted that the supplementary direction had to be read against the background of the earlier detailed charge given to the jury. They concluded68: "It was implicit in the suggestions made that all the evidence and arguments which the jury had heard were to be taken into account on each of the topics in question. In respect of some of the topics the judge actually reminded the jury of their duty to do that. The direction was not unbalanced but was neutral. It did not imply that any issue should be decided adversely to the [applicant]." Upon this reasoning, it did not fall to the majority to consider the application of the closing words of s 353(1) of the Criminal Law Consolidation Act. However, with respect to their Honours, it is my view that their reasoning was erroneous. Whether or not a "wrong decision on any question of law" occurred (as I am inclined to think it did), in my view the supplementary direction certainly resulted in a "miscarriage of justice". It therefore invited consideration of the substantiality and actuality criteria expressed in the closing words of s 353(1). Because an error has been shown in the reasoning of the majority, the applicant is prima facie entitled to have his appeal allowed by this Court. But it is then for this Court either to remit the proviso decision to the court below or to decide the matter for itself69. Because this Court has the advantage of the opinion 64 (2005) 93 SASR 454 at 528-529 [287]. 65 (2005) 93 SASR 454 at 529 [288]. 66 (2005) 93 SASR 454 at 529-530 [291]-[293]. 67 (2005) 93 SASR 454 at 530 [294]. 68 (2005) 93 SASR 454 at 530 [295]. 69 Judiciary Act 1903 (Cth), s 37; cf Mahmood v Western Australia (2008) 82 ALJR 372 at 379 [31]-[32]; 241 ALR 606 at 614; [2008] HCA 1. Kirby of Debelle J on this point; has the full record of the trial; and has heard extensive argument on the issue, it is appropriate for us to decide the point. As the division in this Court demonstrates, there are strong arguments both ways. "No substantial miscarriage … actually occurred"? A strong prosecution case: In most crimes, perpetrators endeavour to remove or avoid identifiers that will result in their apprehension. Often the only way a guilty person can be brought to justice is by the painstaking presentation of circumstantial evidence. This was the course taken by the prosecution in the trial of the applicant. In deciding the proviso question I accept that the prosecution built a very strong case. That case included: Evidence supporting the conclusion that the applicant was in South Australia at the time that Dr Tobin was shot; Evidence of identification and of opportunity; Evidence showing that the applicant owned pistols of the same brand and manufacture as the pistol proved to have been used to shoot Dr Tobin, and ammunition of the particular kind used in that shooting; Evidence of earlier activities of the applicant in Brisbane that suggested that the applicant harboured a sinister animus towards Dr Tobin; and Evidence of motive for the applicant to effect the killing. Evidence of travel to Adelaide: Dr Tobin was shot four times as she left an elevator on the eighth floor of the Citi Centre building in Adelaide. The Citi Centre building contained her professional office. When attended by a colleague immediately after the shooting and before she lost consciousness, Dr Tobin said that she had been shot. She did not identify the applicant as having been in the elevator or as her killer. Dr Tobin did not then regain consciousness before she died. At the relevant time, the applicant resided with his parents in Oyster Bay, New South Wales. His parents were overseas and thus could not provide an alibi for the applicant. There was no safe eye-witness identification of the applicant as the person who entered the same elevator as Dr Tobin and remained there after the other passengers had left. Thus the question presented by the prosecution is whether it had been proved to the requisite standard that the applicant had travelled from Sydney to Adelaide at the relevant time. Kirby On 11 October 2002, three days before the killing, the applicant had certainly rented a motor vehicle at Hurstville in Sydney, using his credit card. The employee who processed the hiring transaction gave evidence accordingly. The applicant returned the rented vehicle on 17 October 2002 and paid the charges in cash. The speedometer showed that the vehicle had travelled 3,110 kilometres. The prosecution called evidence to prove that this distance was consistent with the return road journey from Sydney to Adelaide. The applicant agreed that he had hired the vehicle, but said that he had done so to practise surveillance. He claimed that following his earlier deregistration as a medical practitioner specialising in psychiatry, he was retraining for employment as a private investigator. The prosecution called evidence to suggest that the applicant had stayed at the Shamrock Motel, Balranald and the Lindy Lodge Motel, Woodville Park at times consistent with the alleged travel to Adelaide and the shooting. Balranald is a town on the main highway between Sydney and Adelaide. The manager of the motel there gave evidence that, on the evening of 12 October 2002, a man had arrived at the motel seeking a room. This guest completed a registration form and the motel retained the carbon copy. The original form, allegedly retained by the applicant, was later found after investigations on 20 November 2002 in a white plastic bag at the Renmark rubbish dump. The name given was not that of the applicant. The nominated address of the guest was proved as fictitious. The proprietor of the motel in Woodville Park, Adelaide, also gave evidence. He said that during the mid to late afternoon of 13 October 2002, a man had arrived at that motel without a prior reservation. He completed a registration form and paid cash in advance. The form bore the same false name and address as had been used at the motel at Balranald. It also contained a mobile telephone number which, apart from one digit, coincided with the number of a mobile telephone that had been in the name of the applicant since January Evidence was presented by a secretary who had performed typing and secretarial work for the applicant at the St George Hospital in Sydney about ten years before the trial. She claimed familiarity with his handwriting and gave evidence that some of the handwriting on the copies of the two motel forms was that of the applicant. A handwriting expert also gave evidence that there were indications that the handwriting on both receipts was that of the applicant. Each person who had dealt with the guest at the two motels selected the applicant's photograph from an array of photographs. Each also identified the applicant in court. However, another employee at the Balranald motel who saw the guest was unable to select a photograph of the applicant. Properly, the trial judge warned the jury about the dangers of such identification evidence. Kirby On 15 October 2002, the day after Dr Tobin was killed, a video surveillance camera captured images of a person purchasing fuel and bottled water at a service station in Renmark, about three hours driving distance from Adelaide. This film revealed a person depositing a white object in a rubbish bin at the service station. The subsequent search of the Renmark rubbish dump with assistance from the service station proprietor led to the discovery of a white plastic bag. That bag contained the receipt and tax invoice from the Shamrock Motel and also a tax invoice for earlier accommodation at the Edmondstone Motel in Brisbane, the relevance of which will be explained shortly. There was additional, but weak, identification evidence from a hairdresser at the Arndale Shopping Centre. The applicant had allegedly received a beard trim or shave from this hairdresser on 14 October 2002, consequently altering his appearance somewhat after the killing. Firearms discharge residue was found in the motor vehicle which the applicant had rented in Sydney and allegedly driven to Adelaide. This residue had the same elemental profile as the cartridges used in the killing of Dr Tobin. The applicant admitted that he had placed his shooting bag in the boot of the hired vehicle. He said that he had done this in case he had an opportunity to visit a shooting range. However, he said that he did not have such an opportunity. He did not deny his interest in, and possession of, registered firearms. Again, he suggested that he needed to practise the use of firearms for his new intended occupation. None of Dr Tobin's colleagues in Adelaide identified the applicant and seemingly no surveillance camera images were obtained there. After the shooting, some bystanders were identified. They later selected the applicant from a photographic array as a man who had been seen in the vicinity of, and took the elevator in, the Citi Centre building shortly before the shooting. Properly, the trial judge also cautioned the jury about the dangers of reliance on this evidence. Evidence of opportunity: The prosecution led evidence at the trial to suggest that the applicant was absent from his home in Sydney during the period of the alleged trip to Adelaide. This included specialist police evidence that addressed a suggested gap in the activity of the applicant's home computer during the relevant interval. Although there were fourteen computer operations during the period of the alleged absence, the evidence suggested that these were computer-initiated rather than operator-initiated. Telephone usage records during the alleged interval of travel to Adelaide were also admitted in evidence in respect of the applicant's residence. The prosecution proved that a number of telephone calls to that address went unanswered. On the other hand, an eighteen second telephone call was made from the residence to an identified telephone number on the day of the shooting at 7.33 p.m. The applicant claimed that he had been away from home most of Kirby that day practising surveillance. He claimed that that telephone call on 14 October 2002 was his mis-dialled attempt to telephone a cousin. However, the dialled telephone number and that of the cousin were quite distinct. The applicant deposed that he rarely answered telephone calls at his home as most of them were for his parents. This was supported by evidence from family members. Evidence of ownership of firearms: The evidence showed that the applicant possessed a number of firearms at the time of the killing, including Glock pistols of the same make and calibre as that used to kill Dr Tobin. He also had two spare slides. The breech faces of both slides had been polished, thus destroying any chance of identifying inculpating impressions on an ammunition cartridge fired before the polishing. The applicant also possessed ammunition of the identical type used in the killing, stamped by the same bunters. However, the applicant pointed out that his boxes of ammunition cartridges were full, with no cartridges apparently missing, at least from that particular batch. Evidence of presence in Brisbane: An important element in the prosecution case was evidence presented to show that a person (allegedly the applicant) had travelled to Brisbane before the alleged trip to Adelaide. The Brisbane trip coincided with a convention of the Royal Australian College of Psychiatrists during which Dr Tobin was advertised to present a talk. The prosecution suggested that the applicant had originally planned to kill Dr Tobin on this occasion. Dr Tobin was co-convenor of a workshop at the Brisbane convention on 27 April 2002. The prosecution proved that, on 25 April 2002, the applicant had hired a vehicle in Kings Cross, Sydney. That vehicle was returned on 29 April having travelled 2,067 kilometres. The applicant admitted to hiring the vehicle but stated that he had only driven it to Lakes Entrance, Victoria. The prosecution case was that he had driven the vehicle to Brisbane and stayed at the Edmondstone Motel, South Brisbane, approximately two blocks from the convention centre where Dr Tobin was listed to speak. The guest at that motel, allegedly the applicant, filled out a motel registration form and paid in cash. The nominated vehicle licence plate number (GCO-183) closely resembled that of the vehicle shown to have been hired by the applicant (183-GEO). The original tax invoice for the Edmondstone Motel was one of those later found in the white plastic bag at the Renmark dump. Staff at the Brisbane Convention Centre, including two security guards, gave evidence that their attention at one point had been attracted to a man thought to have been possibly carrying a weapon under his clothing. Two such staff selected the applicant's photograph from an array of police photographs as this suspect. There were some discrepancies in the attributed colour of the vehicle associated with the suspicious man. However, the registration number of the vehicle was noted down as "183-GEO" or "183-GEQ". This objective record Kirby linking the applicant to suspicious conduct in Brisbane, possibly with a concealed weapon, and to a presence in Adelaide at the time of the killing was the centrepiece of the prosecution case. The applicant simply denied that he had driven to Brisbane or Adelaide. The sales manager of a gun shop in Brisbane testified that on 27 April 2002 (the day of Dr Tobin's workshop) he served a man who placed an order for a bare slide for a Glock 26 pistol. Seven months later, the salesman selected a photograph of the applicant from an array of photographs. The applicant gave evidence to the effect that he had placed an order for such a slide, but by telephone from Sydney, and he had sent a postal order and a copy of his firearms licence by mail. A search of the records of the applicant's home telephone in Sydney contained no record of any telephone call to Brisbane made during the period of the alleged visit and thus at the time when the order was placed. Evidence of motive: Motive alone does not demonstrate guilt of an offence, including murder70. The prosecution, however, proved a series of events in the mid-1990s as relevant to motive. Whilst working in Sydney at that time as a medical practitioner, conduct of the applicant led to his deregistration both as a medical practitioner and registered psychiatrist. The evidence on this issue included testimony that showed an association at that time between the applicant and Dr Tobin, who was then in practice in Sydney. Although the applicant denied it, this testimony provided evidence suggesting a belief of the applicant that Dr Tobin was "out to get him" and had played a vital role in the procedures leading to his professional deregistration. Specifically, the prosecution relied on this evidence to demonstrate that the applicant had delusional beliefs and a profound resentment of Dr Tobin for her alleged role in the loss of his right to practise medicine. In his evidence, the applicant stated that his attitude towards Dr Tobin was benign. Conclusion: powerful evidence of guilt: A consideration of the entirety of the case against the applicant leads to an opinion that the prosecution case was a strong one. Patiently, piece by piece, the prosecution had assembled what Gummow and Hayne JJ correctly call a "mosaic of evidence"71. Individually, the elements in the mosaic might be questioned or doubted. However, when placed together and in relation to each other, the resulting case was in my view powerful. 70 See De Gruchy v The Queen (2002) 211 CLR 85 at 99 [53]-[54]; [2002] HCA 33. 71 Reasons of Gummow and Hayne JJ at [8]. Kirby I have elaborated the prosecution case at trial to explain the difficulty that decisions on the proviso sometimes present, in particular in respect of these proceedings. Having conducted my own independent examination of the record, as the appellate court with responsibility is bound to do, I am brought to the conclusion that the present case is a borderline one in respect of the proviso72. Definitely, it is at the cusp. A new trial should be ordered Impact of the supplementary direction: As has been explained, the invocation of the proviso, for me, is focused on the trial judge's supplementary direction to the jury73. It is therefore vital to note very closely the temporal context. The trial of the applicant was long and involved many witnesses. The trial judge commenced her charge to the jury at 2.36 p.m. on 21 September 2004. She concluded her directions at 5.50 p.m. that same day. At 2.49 p.m. on 22 September 2004 the jury requested redirection on the meaning of the expression "beyond reasonable doubt". The trial judge made certain statements that are not in issue. The jury then resumed their deliberations. Later that day a note was sent to the judge by the foreman of the jury indicating that he did not believe that the jury would be able to reach a verdict. Properly, this information led the trial judge to give a Black direction, informing the jury that they should take additional time to deliberate and endeavour to reach a verdict. At 11.17 a.m. on 23 September 2004 the jury sent the judge a further note. This note asked for the judge's suggestions as to how they might move forward. The impugned direction was then given and concluded at 11.41 a.m. The jury returned with their verdict of guilty at 12.15 p.m. Contrary to the opinion of the majority in the court below, the inference is inescapable that the supplementary direction had the almost immediate effect of removing whatever obstacles had, until then, existed to agreement upon a verdict. Essentiality of judicial balance: The trial had reached a critical point and the judge was perfectly correct to attempt to save it. However, that endeavour could not be at the cost of manifest impartiality and neutrality and a fair presentation to the jury of the applicant's case. 72 Nudd v The Queen (2006) 80 ALJR 614 at 637 [109]; 225 ALR 161 at 189; [2006] HCA 9; Washer (2007) 82 ALJR 33 at 54-55 [102]; 239 ALR 610 at 637-638. 73 The elements of the supplementary direction are set out in the reasons of Gummow and Hayne JJ at [24]. Kirby In Pemble v The Queen, this Court held that, whatever course counsel for the accused may take, the trial judge "must be astute to secure for the accused a fair trial according to law" and to that end must "put to the jury with adequate assistance any matters on which the jury, upon the evidence, could find for the accused"74. For the judge to give the jury a clear and firm reminder of the prosecution case, at that critical point, without equally reminding the jury of the applicant's main arguments, placed the applicant at a very great disadvantage. Not least was this important because, from the duration and announced difficulties of the jury's deliberations, it is apparent that the applicant had succeeded with some or all of them in at least some of his criticisms of the prosecution case. Such criticisms had arguably left the jury unconvinced or, at least, confused up to the time that the supplementary direction was given. The reasons for manifest judicial impartiality and neutrality derive from the very nature of the judicial function and the purposes of a public criminal trial. They are reflected in fundamental principles of human rights as expressed in international law75. They have been repeatedly stated in the reasons of this and other courts76. They were well explained by Debelle J in the court below77. Imperfections of appellate trial: Sometimes it is possible for the appellate court, faced with an issue such as the present, to be satisfied that it can apply the proviso even though it has not seen or heard the witnesses78. Thus, there may exist compelling, objective evidence that points ineluctably to the prisoner's guilt of the offence charged. The appellate court may be able to conclude 74 (1971) 124 CLR 107 at 117-118 per Barwick CJ; [1971] HCA 20 (emphasis added). 75 International Covenant on Civil and Political Rights, Art 14(1). For consideration of the position at international law, in particular, by the Human Rights Committee of the United Nations and the European Court of Human Rights, see Antoun v The Queen (2006) 80 ALJR 497 at 505-506 [37]-[40] per Kirby J; 224 ALR 51 at 60- 62; [2006] HCA 2. 76 Pemble (1971) 124 CLR 107 at 117-118 per Barwick CJ; Green (1971) 126 CLR 28 at 34; Courtney-Smith (No 2) (1990) 48 A Crim R 49 at 55-56; B v The Queen (1992) 175 CLR 599 at 605 per Brennan J; [1992] HCA 68; Antoun (2006) 80 ALJR 497 at 506 [41] per Kirby J; 224 ALR 51 at 62. 77 (2005) 93 SASR 454 at 467 [14]. 78 See eg Festa v The Queen (2001) 208 CLR 593 at 604 [28], 633 [127], 655 [205], 669 [255]; [2001] HCA 72; Nudd (2006) 80 ALJR 614 at 622 [20], 636-637 [107]- [109], 645 [162]; 225 ALR 161 at 169, 189, 200-201; and Washer (2007) 82 ALJR 33 at 55 [105]; 239 ALR 610 at 638. Kirby affirmatively that no substantial miscarriage of justice has actually occurred as a result of demonstrated error or miscarriage. The present is not such a case. Although she knew the applicant well, Dr Tobin did not identify him in her dying words. Perhaps her back was turned to him in the elevator. There was some evidence that he had altered his appearance. No DNA or other objective evidence, such as video film, incontestably linked the applicant to the crime. The composite circumstantial evidence is powerful (most specifically the evidence of the contents of the white bag retrieved from the Renmark dump). Yet that evidence still requires a number of judgments to be made to prove the links in the chain to produce the conclusion of guilt beyond reasonable doubt. Apart from their role in resolving resulting contested issues of credibility raised during the trial, the jury in this trial had one significant advantage over an appellate court. The jury sat for weeks listening to and watching the prosecution construct its case. Absorbing the entirety of the evidence is a very important function of the decision-maker, especially in a very long trial79. Whilst this Court can certainly comprehend the gist and substance of the case, there are distinct risks in pretending that the appellate court can accurately and fairly comprehend the entirety of the evidence. Something obviously caused serious hesitation for the jury. This was only dispelled either by the content of the supplementary direction or by the jury concluding that the trial judge had made up her own mind and that they should follow her on the "way forward" that she provided. Effectively, that way forward led only to a guilty verdict. The applicant was entitled to have that "way forward" modified with a contemporaneous reminder of the essence of the applicant's case whose "way forward" urged acquittal. With respect, this was not provided. It was not suggested that any of the evidence called at the trial would not be available on a retrial. The expense and inconvenience of such a retrial are significant indeed. However, so is the sentence of life imprisonment which the applicant is serving. The minority reasons: It is true, as Crennan and Kiefel JJ point out in their reasons, that in the supplementary direction the trial judge was not "undertaking a summation of the case"80. However, whilst a complete recapitulation of all of the evidence was not required, it is the absence of any adequate or appropriate reference to the evidence favourable to the applicant that created the problem that I see in the balance of the supplementary direction. 79 cf State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In liq) (1999) 73 ALJR 306 at 330 [89]-[91]; 160 ALR 588 at 619-620; [1999] HCA 3; Fox v Percy (2003) 214 CLR 118 at 126 [23]; [2003] HCA 22. 80 Reasons of Crennan and Kiefel JJ at [133]. Kirby It is also true that the supplementary direction "cannot be considered in isolation"81. However, it is important to emphasise that the authority of R v Glover82, which Crennan and Kiefel JJ cite, includes the insistence by King CJ that any points about the evidence should be made "fairly"83. It is the failure to make counterbalancing reference to evidence that favoured the applicant that deprived the supplementary direction of the fairness of which Glover speaks. It is true, as well, that earlier directions were given by the trial judge that had emphasised the jury's primacy in fact-finding and the way they should undertake their task84. However, the time sequence of what then occurred is strongly against an inference that the "way forward" in the supplementary direction was no more than a helpful addition to the earlier directions. As events demonstrated, the supplement was quickly to prove decisive. At such a critical moment in the trial, the need for special care to uphold the judicial role of strict impartiality and neutrality was vitally important. The reference by the trial judge to the fact that her supplementary direction comprised "merely suggestions for your consideration"85, whilst entirely proper, was not adequate to afford the balance that was essential at that point. Crennan and Kiefel JJ conclude that there was no resulting miscarriage of justice so they do not need to consider the proviso86. I accept that whether or not there is a "miscarriage" is, in part, a question of impression addressed to the suggested error in the context of the entire trial. No doubt the resulting conclusion is influenced by values and perceptions of justice that are to some extent individual and can only be explained so far. It is enough for me to say that I place the highest value on the principle of manifest judicial impartiality and neutrality. Those qualities were of cardinal importance given the impasse that the applicant's trial had reached. In the end, this case stands for the principle that, particularly in circumstances of jury disagreement after a long trial, the trial judge must balance "ways forward" that lead to conviction with a reminder of those that lead to the opposite outcome. 81 Reasons of Crennan and Kiefel JJ at [134]. 82 (1987) 46 SASR 310. 83 Glover (1987) 46 SASR 310 at 314. 84 Reasons of Crennan and Kiefel JJ at [136]. 85 Reasons of Crennan and Kiefel JJ at [130]. 86 Reasons of Crennan and Kiefel JJ at [145]. Kirby Conclusion: a retrial is necessary: In Weiss87, this Court said: "[T]here may be cases where it would be proper to allow the appeal and order a new trial, even though the appellate court was persuaded to the requisite degree of the appellant's guilt. Cases where there has been a significant denial of procedural fairness at trial may provide examples of cases of that kind." There have been many cases where judges of this Court have made similar points88. AK v Western Australia involved a trial by judge alone but the principles are relevantly the same. There Gleeson CJ and Kiefel J, although in dissent as to the disposition, said89: "[S]ome errors are so fundamental or involve such a departure from the essential requirements of a fair trial that they exclude the operation of the proviso, irrespective of the strength of the prosecution case, or the appellate court's view as to the guilt of the accused." To similar effect Gummow and Hayne JJ, in the majority, said90: "[P]ersuasion of the appellate court of the accused's guilt does not in every case conclude the enquiry about the proviso's application in appellate review of a jury trial". And Heydon J, also in the majority, citing the foregoing passage from Weiss, "there may be cases where it would be proper to allow an appeal and order a new trial without applying the proviso … includ[ing] cases 'where there has been a significant denial of procedural fairness at trial'". 87 (2005) 224 CLR 300 at 317 [45]. See also Libke v The Queen (2007) 81 ALJR 1309 at 1321 [43]; 235 ALR 517 at 531; [2007] HCA 30. 88 See eg Mraz v The Queen (1955) 93 CLR 493 at 514 per Fullagar J; [1955] HCA 59; cf Nudd (2006) 80 ALJR 614 at 645 [162]; 225 ALR 161 at 200-201; Libke (2007) 81 ALJR 1309 at 1322 [53]; 235 ALR 517 at 533. 89 (2008) 243 ALR 409 at 415 [23]. 90 (2008) 243 ALR 409 at 423 [59]. 91 (2008) 243 ALR 409 at 433 [87]. Kirby Before the verdict was given in the present case, the trial judge did not adequately repair the injustice to the applicant of her late supplementary direction. The applicant thereby lost the chance of a trial that was conducted fairly, impartially and in accordance with law. This Court is not in a position to conclude that no substantial miscarriage of justice has actually occurred. It follows that the primary principle of the statute should be given effect. The appeal must be allowed and a new trial ordered. Orders I agree in the orders proposed by Gummow and Hayne JJ. CRENNAN AND KIEFEL JJ. The applicant was convicted of the murder of Dr Margaret Tobin in Adelaide, which occurred on 14 October 2002. His application for special leave to appeal from the dismissal by the Court of Criminal Appeal of the Supreme Court of South Australia of his appeal against conviction is limited to two aspects of the proceedings leading to his conviction: his lack of legal representation on preliminary hearings, concerning the admissibility of certain evidence; and the further direction given by the trial judge, as to the evidence in the prosecution case, at a point when the jury were having difficulty in their deliberations. The applicant says that her Honour's further direction was unbalanced and unfair to him. Dr Tobin was a psychiatrist and the Director of Mental Health for South Australia at the time of her death. She was shot as she left a lift in the building in which she worked. The killer was not identified by her whilst she remained conscious, nor by any other person at the scene. She died shortly thereafter. The applicant was a psychiatrist whose name had been removed from the Register of Medical Practitioners by the Medical Tribunal of New South Wales in 1997. Investigations into his fitness to practise had been initiated by Dr Tobin. The prosecution's case was that Dr Tobin's involvement gave rise to feelings of resentment and anger on the part of the applicant towards her. The case against the applicant was based almost entirely on circumstantial evidence. The prosecution sought to prove that the applicant had travelled to Adelaide in a car he hired in Sydney on 11 October 2002 and that he had taken advantage of his parents' absence from their home, where he resided, to do so. There was evidence which might identify the applicant as the person who stayed at motels on the highway leading into Adelaide and in Adelaide in the days before the killing. The prosecution relied upon evidence concerning the pistol used to kill Dr Tobin. The applicant owned a pair of pistols of the same type and he was an experienced shooter. It was sought to prove that he had tampered with components of the pistols which are useful to identify used cartridges. Gunshot residue from ammunition of the type used in the killing was present in the hired vehicle, which the applicant returned on 17 October 2002. The prosecution adduced evidence that the applicant had hired a car some six months earlier, in April 2002. It was alleged that he drove to Brisbane, where Dr Tobin was attending a medical conference. Evidence was produced which might identify the applicant as the person seen at the conference venue and who stayed at a motel nearby, and identify the vehicle hired by him. The prosecution pointed to evidence which linked the Brisbane and Adelaide trips. The applicant represented himself upon his trial and gave evidence. He denied any feeling of ill-will towards Dr Tobin. He denied being in Brisbane at the time of the conference and in Adelaide at the time of the murder. He said that he had had an interest in handguns for some time, was licensed to possess the pistols and used them for target shooting. He gave an explanation for having spare slide components for the pistols and he denied tampering with the breech faces. He said that he had hired the vehicle in October 2002 to undertake surveillance exercises, as he was contemplating work as a private investigator. He admitted hiring the vehicle in April 2002 but said it was used for a trip to Lakes Entrance. He relied upon a call made from his parents' house, on the day of the shooting, as alibi evidence. In his address to the jury the applicant attacked the prosecution case, so far as it concerned the firearms evidence and the documentary examination of his signature on motel records. He said that the majority of the witnesses who identified him were mistaken. He pointed out that his fingerprints were not found in the building, or near the lift, where the killing took place. The applicant relied upon the fact that Dr Tobin did not identify him as the killer following the shooting. He said that the spread of shot suggested a shooter who did not have his level of training or expertise. The further direction The trial before the jury took place over eleven weeks. The prosecutor and the applicant addressed the jury at length. The applicant's address took some five hours. Her Honour's summing-up followed. Her Honour dealt with what she described as the main "limbs" of the prosecution case under the headings: "opportunity", "Brisbane", "equipment", "motive" and "the scene". understanding of what the further direction conveyed to the jury requires consideration of what was discussed by her Honour in summing up. Her Honour commenced by referring to "opportunity", a description she would later concede to be unhelpful. At this point her Honour described this body of evidence as "what the Crown would say was a carefully planned, clandestine, quick and rather expensive trip to Adelaide for which there was, on the face of it, no reason, apart from to kill the victim." The applicant's parents were overseas at the time, her Honour reminded the jury. Her Honour discussed the evidence concerning the journey of the fictitious person who registered at the motels on the highway to Adelaide (the Shamrock Motel at Balranald) and in Adelaide (the Lindy Lodge Motel) and the evidence identifying that person as the applicant, including that as to his handwriting on the motel records. It was in connection with this evidence that her Honour reminded the jury of the evidence of receipts from the motel in Brisbane and from the Shamrock Motel having been found amongst rubbish from a service station located on the highway between Adelaide and Sydney. The prosecution had produced a video recording of a man, the service station on which 15 October 2002. Her Honour alerted the jury to the significance of that evidence to the prosecution case. Her Honour reminded the jury of the evidence that, save for one call, no telephone calls were made or answered at the applicant's parents' house in the period before and after the killing. The it alleged was the applicant, taken at exception was a call recorded as having been made on 14 October 2002. Her Honour explained to the jury how the applicant sought to rely upon this evidence. The jury were then informed by her Honour that she proposed to turn to the "events in Brisbane" in April 2002. She told them that the prosecution: "points to this evidence as throwing light on the identity of Margaret Tobin's killer [and] says that something of a pattern emerges when one examines what it alleges are the accused's activities in Brisbane in late April 2002, as against what it says are his activities in the days Her Honour identified, as relevant to that pattern: the hiring of the vehicles; the extensive mileages recorded; the motels hired by a person with a false name; and the lack of telephone activity at the applicant's parents' house in the two periods. Her Honour then detailed the evidence from the time of the hiring of the vehicle in Sydney. She referred to the evidence of some seven witnesses who had been impressed by the strange behaviour of a man at the conference venue in Brisbane. Two security officers entered in the security log a description of the person and that he was reported as carrying "something which resembled a possible weapon underneath his clothing." The colour and registration number of the man's vehicle were recorded. The registration was the same as that of the vehicle hired by the applicant, save for the last letter, about which there was some uncertainty. Her Honour later discussed the identification of the applicant by the witnesses. Her Honour then turned to the evidence from the sales manager at a gun exchange in Brisbane who, on 27 April 2002, had served a man who placed an order for a slide for a Glock pistol of the kind owned by the applicant. The sales manager wrote out the order after having sighted a New South Wales licence. He identified the applicant as the customer from photographs. At the conclusion of her discussion about the "Brisbane evidence" her Honour said that, if the jury concluded that it was the applicant at the conference venue in Brisbane on that day, it would be necessary to consider what his motive was for being there and whether it showed a morbid or sinister interest in Dr Tobin, which was part of the prosecution case. She said that she would further discuss the use to be made of this evidence. Her Honour discussed the topics of "equipment" and "motive". In relation to the former she reminded the jury that the applicant had an interest in firearms. She said there was no suggestion about his possession and use of them, in the way he described, being other than lawful and that they should not draw any inference from the fact of gun ownership adverse to him. The question of motive involved evidence of the correspondence leading up to his deregistration and of his being diagnosed as having a mental illness, which, from the applicant's perspective, was contentious. In any event the jury were directed not to reason that there was any correlation between it and the commission of the crime. The question was whether the applicant had feelings which gave rise to a wish to kill Dr Tobin and which engendered the resentment and malice necessary to carry this desire out. The prosecution pointed to the list, maintained by the applicant, of doctors who had been involved in his investigation, diagnosis and deregistration, as relevant to his continuing state of mind. Although having commenced the summing-up with a reference to "the scene", her Honour mentioned only the bare facts of the shooting and the lack of eye witness identification of a fourth, unknown, person in the lift, before she concluded her discussion on what she referred to as "the limbs comprising the prosecution case". She then discussed a number of other matters, including evidence concerning fingerprints. She said that nothing of significance to the prosecution case was found, including in the area of the lift in the building in Adelaide. She reminded the jury of the applicant's reliance upon this gap in the prosecution case. Her Honour gave directions and discussed the identification evidence at some length. Her Honour returned to the topic of the Brisbane evidence. She told the jury that it was obvious that "proof of this incident and the circumstances surrounding it is of some importance to the prosecution case" and "[d]epending on the view you take of it, it could amount to very significant evidence going to the issue of the identity of Dr Tobin's killer." Her Honour, however, drew the jury's attention to a threshold test which had to be met before they could make use of that evidence. She directed the jury that the test involved being satisfied beyond reasonable doubt of three matters: that it was the applicant who was in Brisbane; that his purpose in being there related to Dr Tobin; and that that purpose was opposed to her interests. Only then was the jury entitled to use the applicant's presence there in considering whether it was proved that he was Dr Tobin's killer, she directed. After identifying the evidence relevant to the conclusion urged by the prosecution, that the applicant was the man in Brisbane, her Honour said that if the jury were satisfied of the three matters she had listed "then you are entitled to use all that material and the conclusion itself when you come to consider the other evidence which bears on the identity of Dr Tobin's killer." Her Honour went on: "You could use that conclusion in this way. First you could use it as bearing on the identity of the man David Pais at the Shamrock and Lindy Lodge Motels and on the identity of the man shown on the Renmark video. And further, if you conclude that the accused and David Pais are one and the same and that he used the vehicle with the registration number RSX-366 to drive to Adelaide, then you could use the Brisbane evidence to throw light on the purpose for the accused's presence in Adelaide. Because once you know that Dr Tobin was killed in what could be called 'execution style' in Adelaide in October, then any incident concerning her or possibly concerning her in the year or two leading up to that event would potentially take on new significance. If it turns out that there was such an incident in Brisbane earlier in the year, and if you conclude that the accused was the person at the centre of that incident; and then if you find a number of similarities between the circumstances of the Brisbane and Adelaide incidents, including that on each occasion – if you find it so – this man, with what you might find was a profound resentment towards Dr Tobin, a man who possessed the type of weaponry which killed her, had made a long, clandestine and otherwise unexplained journey to the place where Dr Tobin was at that time; a planned journey using a hired car notwithstanding the availability to him of his own and his parents' cars; a journey each time coinciding with his parents' absence from the home they shared, then your conclusion that the accused was the man in Brisbane could take on a decisive character in relation to your deliberations about the identity of Dr Tobin's killer. It is for you to say whether such a line of reasoning is helpful in this case. The potential relevance of the Brisbane evidence is, then, its tendency to prove the accused's presence in Adelaide and his purpose for being here. That is the proper use of the Brisbane evidence." Her Honour then summarised the defence case. Her Honour reminded the jury of the applicant's evidence and the points made in his address. Included in the summary of issues dealt with by her Honour was the applicant's reliance upon the fact that Dr Tobin did not identify him as the killer, as indicating that he was not the killer. The jury retired to consider their verdict on the evening of the summing- up. The following afternoon the trial judge received a note from the foreperson, to the effect that he did not believe that the jury would be able to reach a verdict. Her Honour gave the jury a direction to further consider the evidence in an attempt to reach agreement92. Some few hours later her Honour suggested that the jury might consider whether hearing any part of the summing-up might assist. She asked the jury to turn their minds to it and send a note if the reading of it, or some evidence, or the framing of a question, might assist. 92 See Black v The Queen (1993) 179 CLR 44; [1993] HCA 71. It would appear from the remarks made by her Honour the following morning that she had expected to hear from the jury. She said that she could suggest some kind of approach the jury might take ("to move your discussions along") but that she would not do so unless asked for that assistance. Later that morning her Honour received a note from the foreperson asking for "suggestions as to how they might move forward." Her Honour commenced her response to that inquiry by suggesting that the jury commence afresh and identify where there was common ground. She suggested that the jury review the evidence under the topics she had previously identified, but in a different order. She reminded the jury of the topics "equipment" and "motive". She suggested that members of the jury ask, with respect to each of them, whether they could come to a common view. If they could, they should move on. In relation to the "Brisbane" evidence her Honour repeated what she had said in her summing-up – that it was a very important part of the prosecution case and that the jury needed to make a decision about it. Any conclusion, that the applicant was the man at the conference venue, and as to his purpose in relation to Dr Tobin, could only be reached if the jury were satisfied, beyond reasonable doubt, of the three matters she had identified. If the jury were so satisfied, her Honour suggested consideration, again, of the evidence she had discussed under the heading of "opportunity", a word which she now accepted was not a good description of the evidence intended to fall under it. Clearly enough, as the summing-up had indicated, it was intended to cover evidence relevant to the journey to Adelaide and the timing of it. Her Honour went on: "Then, ask yourselves the question 'Are we satisfied beyond reasonable doubt that the accused was in Adelaide when Dr Tobin was killed?' If that is a point of difficulty, then I suggest you go through all the evidence that bears on that question. If you cannot recall the detail of all that evidence, then, by all means, ask me a question about it and I will go through it systematically. But if that is where the difficulty is, you need to be able to call to mind all the evidence that bears on that topic and you need to be able to call to mind the arguments that the prosecutor and Dr Gassy put to you about that. Then, finally, you could look at the scene. I spent little time on that because it seems to me that it does not help you all that much. But that is a question for you. You know from the scene the type of killing it was and, possibly, that the fourth man in the lift was the killer. But then there are competing arguments about that. So does that help you? Of course, I do not know where your difficulty is but, if you get through that process, then you could ask yourselves 'Are we in agreement to this point?' And I say again, if you are not, then you need to isolate the exact point where your views diverge and you need to focus on that point and you need to go through that process: 'What is the evidence on this point? Do we have adequate recall of all that evidence? Do we need to hear some of it read? Do we need a summary of it? Do we need to know again what anyone said about it?' Make a list, I suggest, of that evidence and then make a list of the arguments on both sides relating to that point and then analyse those arguments. Now, let me assume, for the purpose of this exercise, that you are in agreement to that point. The next question, of course, would be: 'Now we have decided the accused was in Adelaide when Dr Tobin was killed, what was his purpose for being here? Did he kill her?' So then you ask 'What evidence helps us on that point?' Here you will remember I gave you a direction about the use of the Brisbane evidence. It is a difficult direction in a way and I wonder whether it might help you if I gave it to you again." To this inquiry the foreperson answered "yes" and her Honour said that she would put it into context. Her Honour was referring to its place in the summing-up. She said: "I had just gone through all the evidence I said you could take into account on this question of whether the accused was the man in Brisbane, and I will not go through that at the moment; I have really moved past that point for this purpose. Then I said to you: 'Now, having considered and evaluated all that evidence, if you are satisfied beyond reasonable doubt that it was the accused acting suspiciously at the Convention Centre on 27 April 2002, and that he was there for a purpose related to Dr Tobin, and that it was a sinister purpose, then you are entitled to use all that material and the conclusion when you come to consider the other evidence which bears on the identity of Dr Tobin's killer. You could use that conclusion in this way. …'" Her Honour then repeated that part of her summing-up which is set out earlier in these reasons93. Her Honour concluded by saying: "And so you would have, on this question of the accused's purpose, the Brisbane evidence, the timing of the trip, the hiring of the car, the return of the car, the suggestion of the trip being clandestine, the false names used in the motels, the fact, if you find it so, of the dumping of rubbish at Renmark, potentially linking the two trips, the timing I think I said of the departure from Adelaide, if you find it so, and the very type of killing it was. Well, again I say to you, if that is the point of difficulty, make a list of the evidence that bears on those matters, discuss what can be drawn from that evidence, recall the arguments as to each of those matters, decide whether you adequately recall all the evidence and all the arguments as to it and, if you do not, then please ask for help. And that, as I said, could be reading from some passages of a particular witness's evidence (and you could direct me to the very points that you wanted read out) or it might mean reading a part of my summing up again or asking me for a summary of something that you thought important. And I could compile something like that and let you have it. So, that is the series of suggestions that I make to you. Perhaps I can ask you to retire again. Hopefully it has been of assistance." Following a discussion with the prosecutor the trial judge brought the jury back to mention a few matters briefly. She explained that the matters she had referred to "are merely suggestions for your consideration", in case she had not made that clear enough. She said that she should have added that motive would be relevant, if the jury found the applicant was in Adelaide at the time of the killing, and that she had failed to mention that gunshot residue in the vehicle might be significant. The applicant submits that the direction was not balanced, presented only the prosecution case and strongly implied that he was in Adelaide on the day of the shooting. He points to the jury returning a verdict of guilty shortly after the direction, as indicating the force of what had been put to the jury by her Honour. He said that her further direction ignored his argument about factors concerning "the scene" of the homicide, which he said excluded him as the killer. He submitted that the significance of the Brisbane evidence was emphasised too strongly by her Honour and as potentially decisive on the question of guilt. He said that it was tantamount to an instruction to the jury to find him guilty if it were concluded that he was the man involved in the Brisbane incident. A number of the aspects of the evidence identified by her Honour implied this. In the applicant's submission her Honour did not point out the course the jury should take if they were not satisfied about aspects of the prosecution case which he had sought to show were problematic, such as deficiencies in the evidence about the firearms and about events at the scene of the killing, but had only moved in one direction, towards the prospect of conviction. The majority in the Court of Criminal Appeal, Bleby and White JJ, considered that the applicant's complaints proceeded from a misconception about what the trial judge was undertaking – namely, the suggestion of a process by which the jury could consider the evidence, rather than that they should find a particular fact94. Their Honours did not accept that the time taken by the jury to then reach their verdict supported the applicant's argument. In their view it might be that the process suggested by the trial judge resolved a difficulty in the path of their decision95. Debelle J, however, considered that her Honour departed from a discussion as to a process of decision-making to be undertaken by the jury96. In his Honour's view, the further direction became a recapitulation of the prosecution case, albeit qualified, at points, by reminders to the jury about their function as triers of the facts. His Honour considered that the prejudicial effect this had was heightened by the trial judge's failure to remind the jury of any aspect of the defence case, save – in a general way – that they should recall what the applicant had said about the evidence concerning his being in Adelaide97. In our view, there were two aspects to her Honour's further direction to the jury. The earlier part of the further direction comprised her Honour's suggestions that the jury go back over the evidence and make findings on particular subjects. They were clearly directed to the jury's method in decision-making. Later her Honour came to discuss a separate topic, concerning the relevance of a finding, that the applicant was the man in Brisbane. This was directed to the jury's understanding of the use of this finding, what it might convey and the evidence to which it might be connected. In neither case was her Honour undertaking a summation of the case. Moreover, the latter part of the direction was by way of an answer to an inquiry from the jury. The terms of the further direction cannot be considered in isolation. A consideration of the influence, if any, which her Honour's discussion may have had upon the jury requires an understanding of what had already been conveyed, about the evidence and about the jury's role in making findings upon it. Questions about the need to balance what was then said about the prosecution case should also be seen in context. They may depend upon the extent to which her Honour was revisiting the evidence on particular topics. Whether a reminder was necessary with respect to the defence case needs to be considered in light of the inquiry from the jury that her Honour came to address. It is important to bear in mind that no questions concerning the balance and fairness of the summing-up arise on the application. The summing-up was as fair as the evidence permitted. Her Honour's summation of the prosecution 94 R v Gassy (No 3) (2005) 93 SASR 454 at 527 [274]. 95 R v Gassy (No 3) (2005) 93 SASR 454 at 529 [292]. 96 R v Gassy (No 3) (2005) 93 SASR 454 at 465 [4]. 97 R v Gassy (No 3) (2005) 93 SASR 454 at 466 [6]. case took much longer than that of the defence, but this is hardly uncommon98, especially in cases based almost entirely upon circumstantial evidence. Her Honour made forthright observations, in her summing-up, about the importance of some of the evidence to the prosecution case, but it has long been held that a judge is entitled to comment upon the evidence to the jury99 and may do so in strong terms. In R v Glover100 King CJ said that it is not a criticism of a summing-up that a judge refers to points which tend in the direction of conviction, if those points may fairly be made upon the evidence and if it is made clear to the jury that the facts are within their province101. In RPS v The Queen102 Gaudron ACJ, Gummow, Kirby and Hayne JJ reiterated that the division of functions between judge and jury should never be obscured103. It is important that the jury be told that they are not bound by any view, expressed or to be implied, in what the trial judge says, and that they are not relieved from the responsibility of forming their own opinion104. At the outset of the summing-up her Honour directed the members of the jury, in clear and unequivocal terms, that their interpretation of the facts was all that mattered and that they should act upon their own view, regardless of anything that she said. In relation to inferences which the prosecution suggested might be drawn, her Honour advised the jury that she was making no suggestion herself as to whether that should be done. On retiring to consider their verdict, the members of the jury would have understood their role and that of the judge. It cannot be assumed that, when her Honour came to the further direction, the jury had forgotten what her Honour had conveyed about their task, because it had been continually reinforced throughout the summing-up. The jury were reminded of this, in the direction, by the suggestions made by her Honour about the process of fact-finding which should be undertaken. That it was the jury's task to work through the topics suggested and to make the critical decisions about whether the 98 Courtney-Smith (No 2) (1990) 48 A Crim R 49 at 55. 99 Broadhurst v The Queen [1964] AC 441 at 464; Courtney-Smith (No 2) (1990) 48 A Crim R 49 at 55; B v The Queen (1992) 175 CLR 599 at 605; [1992] HCA 68; RPS v The Queen (2000) 199 CLR 620 at 637 [42]; [2000] HCA 3. 100 (1987) 46 SASR 310. 101 R v Glover (1987) 46 SASR 310 at 314. 102 (2000) 199 CLR 620. 103 RPS v The Queen (2000) 199 CLR 620 at 637 [42]. 104 Broadhurst v The Queen [1964] AC 441 at 464. applicant had been present in Brisbane and in Adelaide on the dates in question could hardly have been made clearer by the trial judge. Her Honour reminded the jury of the topics "equipment", "motive", "Brisbane", "opportunity" and "scene", clearly referring back to her summing-up, but without going over that evidence again. Her Honour largely left it to the jury to request assistance in particular areas, once they had undertaken the process suggested and identified areas where jury members were not in agreement. Her Honour had said that the evidence about the weapons was fairly straight-forward and assumed the jury knew what it was. She did not restate the prosecution's evidence. In these circumstances it was not necessary, for balance, for her Honour to remind the jury of aspects of the defence case or of the applicant's arguments. Her Honour did not need to go over the applicant's contentions about evidence from the scene. Her Honour explained that she had not spent much time on that evidence in the summing-up because she did not consider it to be of much assistance. Her Honour was entitled to state that view, but she clearly left the determination of the evidence's importance as a matter for the jury. The point had been made on a number of occasions about Dr Tobin not identifying the applicant as the killer. Her Honour, in the further direction, did not elevate the prosecution case in this regard and it was not necessary to revisit the issue in the way for which the applicant contends. Contrary to the contention of the applicant, her Honour did not suggest that the jury should find that he was in Adelaide. Before turning to the use to which the Brisbane evidence could be put, her Honour made a statement which assumed that the jury had reasoned that he was in Adelaide, but it is plain that this was premised upon the jury having come to such a conclusion upon that matter. It was at no point suggested that that was the only course open to the jury or one which should be taken. One aspect of the Brisbane evidence, which her Honour discussed, was that it might make it more likely that the applicant was the person in Adelaide at the time of the killing. This followed from the nature of the evidence, not from her Honour's direction as to its application. The focus of the further direction came to be the use to which the Brisbane evidence could be put. The discussion about that use was also premised upon a finding, by the jury, that the applicant was the man in Brisbane. The trial judge did not revisit the evidence upon that point and no view on the subject, on the part of her Honour, can be seen to intrude into the jury's consideration of it. Her Honour offered to repeat to the jury what she had said about the areas of evidence which were relevant to that question, but received no such request. At this point in the further direction her Honour advised the jury that it was necessary to make a decision about Brisbane, for it was a "very significant" part of the prosecution case. Her Honour had described it as a "very important" but also "difficult" aspect of the case shortly before. Clearly enough her Honour was referring to the multiple uses to which the evidence could be put, which might not be obvious to a jury dealing with a circumstantial evidence case, although she had attempted to outline them in her summing-up. It is unremarkable that her Honour described the potential effect of the evidence in the way that she did. It had been identified as important to the prosecution case from the outset and its significance had been reinforced throughout the trial. What her Honour said on the occasion of the further direction was no more than she had already said. The reference to the effect of the evidence taking on a "decisive" character in relation to the identity of Dr Tobin's killer, about which the applicant complains, was contained in the passage from the summing-up which her Honour read. It would have been understood by the jury to repeat what had earlier been said, not to convey that the evidence was now given additional significance by the trial judge. So far as her Honour's statements revealed a view about the importance of the evidence, in the context of the prosecution case, it was one which was plainly objective. The further direction did not contain a suggestion, let alone an instruction, that they should find that the applicant was present in Brisbane. The trial judge's direction was a reminder to the jury as to the use to which a finding, that the applicant was the man in Brisbane, could be put. That fact, if found, could weigh heavily in the reasoning of the jury, if the jury understood how it could be relevant. Her Honour's direction in the summing-up had identified its relevance, to explain features of the evidence which pointed to the applicant's presence in Adelaide and to the applicant's motive. That state of mind was, in turn, relevant to proof of a number of other facts. Importantly, the restatement of the earlier direction, in relation to the use of the evidence, was sought by the jury, making it unlikely to be seen as conveying an instruction by the judge that the evidence should be used in this way. The applicant's submissions imply that her Honour had in some way imposed the direction upon the jury, and that they would therefore infer that her Honour held a view about the appropriateness of reasoning to guilt by reference to this evidence. The transcript does not support the applicant's contentions. To the contrary, the transcript suggests that her Honour had come to a question about the evidence which she identified as of concern to the jury. This appears to be borne out by the alacrity with which the foreperson accepted her Honour's offer to repeat the direction about the Brisbane evidence, when no offer to do so with respect to other evidence had been taken up. In dealing with the jury's request, her Honour repeated what she had earlier said on the subject in the summing-up. The additional remarks in conclusion were reiterations of a few points, but were unlikely to have altered the purport or effect of what was said by her Honour. The repetition of the summing-up could not now convey what it had not conveyed before, namely that her Honour thought that the jury should reason from this evidence to guilt. The content of the direction did not misstate or overstate the use to which the evidence could be put, accepting that it can be difficult to explain multiple uses of evidence of this kind. The jury may have been assisted in their further deliberations once the relevance of the evidence was apparent to them. This may go some way towards explaining how the jury came to return their verdict expeditiously, but it is not wise to speculate about these matters. It could not be said to be unfair to an accused that a jury be reminded of the use to which a finding may be put, when the jury request that assistance. Of course a trial judge must be conscious of the need to correct any perception, that she or he is putting forward only the prosecution case and that it is credible. But not every further direction requires a judge to remind the jury of points made by the defence. Much depends upon the subject-matter. The fact that it concerns an aspect of the prosecution case does not of itself mean that it requires balance. The fact that the further direction concerned the use to which a finding of the presence of the applicant in Brisbane in April 2002 could be put and the context in which the request for that direction was made did not make it necessary for her Honour to reiterate points made by the applicant in defence. They were not connected to the relevance of the evidence in question. The direction could not be of importance to the jury unless the jury made the critical finding about the applicant's presence in Brisbane. In that regard her Honour had repeated warnings to the jury about the standard of proof of the prosecution case and had not offered any view upon the matter. The applicant had not produced any evidence, independent of the prosecution case, which might have weighed against it. He had argued that the jury should not accept the evidence which identified him and the vehicle as accurate. These matters were all dealt with in the summing-up. The jury would have understood the need to address these matters when considering the evidence and applying the standard of proof that they had been directed to apply. The jury were reminded of that requirement in the further direction. The further direction also contained a reminder to the jury of the need to address questions of fact. It did not instruct them to make particular findings. The jury were not invited to reason to the applicant's presence in Brisbane in April 2002, by reference to the uses to which that evidence could be put. The jury were clearly and repeatedly told that the evidence could not be used unless they were satisfied, beyond reasonable doubt, that the applicant was in Brisbane at that time. The significance of that finding had been impressed upon the jury before. Its importance, in the questions it raised generally about the applicant's feelings towards Dr Tobin, would have been obvious to the jury. Its application to other facts from that point may not have been. That was the inquiry which the trial judge was addressing in the further direction. There was no unfairness in repeating the earlier direction. There was undoubtedly force in what was conveyed about the use to which the evidence could be put, but it followed from the nature of the finding. There was no miscarriage of justice by reason of the further direction. The applicant's representation on the voir dire At the first directions hearing of the trial, counsel appearing for the applicant informed the trial judge that he was instructed to appear only on preliminary hearings concerning any further directions or the exclusion of evidence, but that the applicant intended to appear for himself at trial. This reflected the applicant's choice. So much appeared from an assurance that the applicant had signed some months before, that he did not wish to be legally represented at trial. Her Honour the trial judge did not, however, accept that counsel could appear only for these limited purposes. Her Honour expressed the firm view that it was to be expected that counsel retained for argument on a voir dire would continue to represent the accused at trial. At the third directions hearing the applicant appeared unrepresented and advised her Honour that he had elected to conduct the voir dire himself, given what her Honour had said. In the period of eleven days during which the applicant was not represented during the voir dire, his counsel was present in court for eight of them and arrangements were made to allow the applicant to seek his advice from time to time during the course of the hearing. Transcripts were made available for the purpose. Counsel was unaccountably absent from court for the last few days of that period. He returned with instructions to appear for the applicant, including appearing at the trial. He continued to appear for the applicant for a time until he advised the Court that his instructions had been terminated. The applicant appeared for himself on the further preliminary applications until a jury was empanelled on 8 July 2004. Thereafter the applicant conducted his own defence. The trial judge's preference, that the applicant be represented at trial, is understandable. It was not, however, correct to suggest that there was some legal or ethical impediment to the course proposed by the applicant. On the special leave application the respondent conceded that her Honour was in error in the stance she took. At an earlier point in the argument it was unclear whether it was also conceded that a ground of appeal was thereby made out under s 353(1) of the Criminal Law Consolidation Act 1935 (SA), leaving only the application of the proviso for consideration. In what followed it became apparent that the respondent was not conceding this to be the case. It was submitted that there was an anterior question necessary to be determined; one as to the effect, if any, of the lack of representation. There was some debate, in the early directions hearings before her Honour, as to whether her Honour had ruled that the applicant's counsel was not entitled to appear on the preliminary hearings. That does not appear to have occurred, but her Honour's view was strongly stated and no doubt contributed to the election made by the applicant. This does not suggest as appropriate for consideration the ground that the conviction should be set aside on the basis of a wrong decision on a question of law. In the circumstances the relevant ground of appeal is whether there has been a miscarriage of justice. Dietrich v The Queen105 does not hold that an accused's lack of representation itself amounts to a miscarriage of justice106. Mason CJ and McHugh J acknowledged that a lack of representation may mean that an accused is unable to receive a fair trial, but that such a finding depended upon the circumstances of the particular case107. The notion of a fair trial requires the observance of conditions essential to a satisfactory trial108. It involves consideration of the process undertaken109. In the present case the focus is upon what occurred during that part of the pre-trial procedures when the applicant was unrepresented. The majority in the Court of Criminal Appeal considered it to be significant that the trial judge did not rule upon the exclusion of any contentious evidence in this period. The exclusion of identification evidence was argued in this period, by reference to video recordings and statements. The admissibility of other evidence – such as the list of doctors kept by the applicant, the deregistration proceedings and his firearm training and pistol club attendance110 – which was also then argued, did not assume importance in submissions on the application. One witness as to identification was called on the voir dire and cross-examined by the applicant. That evidence was excluded by the trial judge111. Rulings upon the exclusion of other evidence were postponed until well after the applicant's counsel was again participating fully in the process. The 105 (1992) 177 CLR 292; [1992] HCA 77. 106 Dietrich v The Queen (1992) 177 CLR 292 at 311 per Mason CJ and McHugh J, 325 per Brennan J, 343 per Dawson J. 107 Dietrich v The Queen (1992) 177 CLR 292 at 311. 108 Nudd v The Queen (2006) 80 ALJR 614 at 617 [5] per Gleeson CJ; 225 ALR 161 at 162; [2006] HCA 9. 109 Nudd v The Queen (2006) 80 ALJR 614 at 618 [7] per Gleeson CJ; 225 ALR 161 at 110 R v Gassy (No 3) (2005) 93 SASR 454 at 508 [194]. 111 R v Gassy (No 3) (2005) 93 SASR 454 at 508 [193]. point made by Bleby and White JJ in the Court of Criminal Appeal was that the rejection of evidence was not foreclosed in the period in question. Not only had the applicant's counsel been present for the majority of the arguments, he was in a position to put further submissions and to seek to call evidence, if necessary, when he was again instructed in the matter112. The applicant's argument on this ground relied principally upon the later admission of the evidence of some of the witnesses as to identification and in particular the evidence of the witness Ms Durrington. She worked in the building where Dr Tobin was shot and had identified the applicant, from photographs, as a person who had been present in the building some hours before the shooting. The applicant's argument reflects the views of Debelle J in the Court of Criminal Appeal. His Honour observed that the evidence of this witness was so unsatisfactory as to require the trial judge to give a strong warning about its use and mentioned that, had the evidence of identification witnesses been excluded, the prosecution case would have been weakened113. His Honour concluded that the denial of legal representation meant that the trial was fundamentally flawed114. It may be accepted that the prosecution case may not have been so strong if some of the identification evidence had been excluded. But there is nothing to suggest that the evidence was other than legally admissible. On the application to add grounds of appeal, Debelle J rejected the applicant's proposed ground – concerning the admissibility of the evidence of seven of the witnesses as to identification – on the basis that it raised questions going only to the weight. In his Honour's view, it was not reasonably arguable that that evidence should have been excluded115. The applicant declined the opportunity to examine Ms Durrington on the voir dire. His contention was that her evidence was weak and tainted by a conversation with a police officer. Evidence is not, however, inadmissible on account only of its weakness116. It cannot be concluded that the evidence should have been excluded in the exercise of the trial judge's discretion. It is not 112 R v Gassy (No 3) (2005) 93 SASR 454 at 509 [196]-[197]. 113 R v Gassy (No 3) (2005) 93 SASR 454 at 471 [25]. 114 R v Gassy (No 3) (2005) 93 SASR 454 at 472 [28]. 115 R v Gassy (No 2) [2005] SASC 491 at [37]. 116 Festa v The Queen (2001) 208 CLR 593 at 599-600 [14]-[15] per Gleeson CJ, 609 [51] per McHugh J; [2001] HCA 72. sufficient for the applicant to assert that his counsel did not have an opportunity to persuade the trial judge to the contrary. In any event, if the grounds for its exclusion had been obvious, the applicant's counsel may have been expected to have raised the question before its admission was ruled upon. No unfairness has been shown to have resulted by reason of the applicant not being represented for part of the voir dire of the trial. Orders The application for special leave should be granted but the appeal should be dismissed.
HIGH COURT OF AUSTRALIA NAGV and NAGW of 2002 APPELLANTS AND MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS & ANOR RESPONDENTS NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2005] HCA 6 2 March 2005 ORDER Appeal allowed. First respondent pay the appellants' costs. Set aside the orders of the Full Court of the Federal Court of Australia made on 27 June 2003 and in their place order: the appeal to that Court is allowed; first respondent pay the appellants' costs; set aside the order of Stone J made on 27 November 2002 and in its place order: order absolute for a writ of certiorari directed to the second respondent, quashing the decision of the second respondent dated 1 March 2002 in matter N99/29907; order absolute for a writ of mandamus directed to the second respondent, requiring the second respondent to determine according to law the application for review of the decision of the delegate of the first respondent dated 3 September 1999; (iii) first respondent pay the appellants' costs of their application under s 39B of the Judiciary Act 1903 (Cth). On appeal from the Federal Court of Australia Representation: J Basten QC with J A Gibson and I Ryan for the appellants (instructed by N J Williams SC with S B Lloyd for the first respondent (instructed by Clayton Utz) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs Immigration – Refugees – Refugee Review Tribunal – Decision – Judicial review – Tribunal found that appellants had genuine fear of persecution if returned to Russia – Tribunal concluded that Israel was a third country where appellants would have effective protection – Protection visa refused – Whether the Tribunal failed to observe the requirements in ss 36 and 65 of the Migration Act 1958 (Cth) – Whether each appellant was a non-citizen in Australia to whom Australia has protection obligations under the Convention Relating to the Status of Refugees as amended by the Protocol Relating to the Status of Refugees – Whether this means anything other than "refugee" within the meaning of Art 1 of the Convention Relating to the Status of Refugees as amended by the Protocol Relating to the Status of Refugees. Immigration – Refugees – International law – Construction of the Convention Relating to the Status of Refugees as amended by Protocol Relating to the Status of Refugees – Whether a non-refoulement obligation precludes removal to a safe third country. Words and phrases – "protection obligations", "to whom Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol". Migration Act 1958 (Cth), ss 36 and 65. Convention Relating to the Status of Refugees as amended by Protocol Relating to the Status of Refugees, Arts 1, 32 and 33. GLEESON CJ, McHUGH, GUMMOW, HAYNE, CALLINAN AND HEYDON JJ. The appellants entered Australia on 17 June 1999. They are citizens of the Russian Federation, and respectively are father and son, born in what was then the USSR in 1962 and 1982. The father qualified as a medical practitioner in the USSR in 1985. The other child of his marriage, a daughter, was with her mother in Lithuania at the time of the hearing before the second respondent, the Refugee Review Tribunal ("the RRT")1. The RRT found that the appellants have a genuine fear that if they returned to Russia they would be persecuted because they are Jews and because of the first appellant's political activities and opinions. Thiyagarajah However, on 1 March 2002 the RRT affirmed the decision of a delegate of the first respondent ("the Minister") to refuse to grant to the appellants protection visas under the Migration Act 1958 (Cth) ("the Act"). The RRT did so with reference to the decision of the Full Court of the Federal Court in Minister for Immigration and Multicultural Affairs v Thiyagarajah2. That decision was reversed on appeal to this Court, but on grounds not immediately material3. In this case, the RRT proceeded on the footing that: "[g]enerally speaking, Australia will not have protection obligations under [the Convention Relating to the Status of Refugees done at Geneva on 28 July 1951 and the Protocol Relating to the Status of Refugees done at New York on 31 January 1967 (together 'the Convention')] where an applicant for refugee status has 'effective protection' in a country other than that person's country of nationality, that is a third country". The ground of decision by the Full Court in Thiyagarajah which was applied by the RRT in this passage is that stated by von Doussa J4: 1 The RRT was added as second respondent by order made at the hearing of this appeal. (1997) 80 FCR 543. 3 Minister for Immigration and Multicultural Affairs v Thiyagarajah (2000) 199 CLR 343. (1997) 80 FCR 543 at 565. "As a matter of domestic and international law, Australia does not owe protection obligations to the respondent as he is a person who has effective protection in France which has accorded him refugee status. Moreover, when his application for a protection visa was determined by the RRT, he had been a resident in France for a long period, he had the right to apply for citizenship in France, and he held travel documents that entitled him to return to France. These added matters are not essential to the finding that Australia did not owe him protection obligations, but serve to illustrate that the respondent's claim for protection is far removed from the object and purpose of [the Convention]." His Honour had remarked earlier in his reasons that, provided France was able to provide effective protection, "it was not inconsistent with the obligations owed by Australia as a Contracting State to effect [the respondent's] deportation from Australia without considering the substantive merits of a claim to refugee status"5. But the starting point of this reasoning had been the proposition that, in enacting s 36(2) of the Act, the Parliament had introduced as a criterion for the grant of a protection visa the existence of "protection obligations" owed by Australia under the Convention, in particular under Art 336. It is this reasoning and the construction of the Act upon which it depends that the appellants challenge in this Court. The RRT decision The RRT concluded that Israel was a third country in which the appellants would have effective protection. The RRT was satisfied that if the appellants had travelled to Israel they most probably would have been allowed to enter and reside there, that there was no evidence that there would be a risk of the appellants being returned from Israel to Russia, and that there was no evidence supporting a conclusion that they had a well-founded fear of persecution in Israel. Further, it was probable that the appellants would still have access to the effective protection of Israel if they now were to travel there. (1997) 80 FCR 543 at 563. (1997) 80 FCR 543 at 556. The first appellant's wife is not Jewish and the family had rejected the option of moving to Israel. This was partly because of an apprehension that families of mixed marriages were subject to discrimination and because compulsory military service in Israel would conflict with the pacifist upbringing of the children of the marriage. However, the RRT was not satisfied that those reasons were relevant to the consideration of whether the appellants would have effective protection in Israel. The Federal Court By application instituted in the Federal Court on 24 April 2002, the appellants sought relief under s 39B of the Judiciary Act 1903 (Cth) ("the Judiciary Act"). The relief sought included certiorari to quash the decision of the RRT, prohibition restraining the Minister from acting upon that decision and mandamus requiring the RRT to reconsider the application for review. The application was dismissed by Stone J and an appeal to the Full Court (Finn and Conti JJ; Emmett J dissenting) was dismissed7. The Full Court accepted that, if the appellants' case otherwise were made out, there had been a failure to observe the requirements in ss 36 and 65 of the Act with respect to the issue of protection visas and thus jurisdictional error to which the privative clause provisions of the Act did not apply8. Further, all members of the Full Court agreed that the previous Full Court decision in Thiyagarajah was wrongly decided9. Detailed reasons for that conclusion were given by Emmett J. However, Finn and Conti JJ concluded, with Emmett J dissenting, that it would be inappropriate for the Full Court now to depart from what hitherto and in many decisions after Thiyagarajah had been regarded as settled law10. Hence the grant of special leave to appeal to this Court. 7 NAGV v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 130 FCR 46. (2003) 130 FCR 46 at 67, 68. (2003) 130 FCR 46 at 48, 64, 68. 10 (2003) 130 FCR 46 at 48-49 per Finn J, 68 per Conti J. The form of the legislation It is necessary to begin with the provisions of the Act referred to above, namely ss 36 and 65. In doing so, it should be noted that the relevant form of the Act predates the changes made to s 36 with respect to "protection obligations" by Pt 6 of Sched 1 to the Border Protection Legislation Amendment Act 1999 (Cth) ("the 1999 Act")11. Part 6 (Items 65-70) is headed "Amendments to prevent forum shopping". The amendments made by the 1999 Act do not apply to applications for a visa made before 16 December 199912. The application made by the appellants for protection visas was lodged on 16 July 1999. In its relevant form, s 36 stated: "(1) There is a class of visas to be known as protection visas. (2) A criterion for a protection visa is that the applicant for the visa is a to whom Australia has protection non-citizen obligations under [the Convention]." in Australia Section 65(1) obliges the Minister to grant the visa if satisfied that the criterion described by s 36(2) is met, along with other criteria identified in s 65(1). It has not been suggested that the appellants failed in the other criteria; the decision of the RRT turned upon its construction of s 36(2). For the reasons later set out, the RRT erred in its construction of s 36(2). As a result, the appellants should have the orders for certiorari and mandamus directed to the RRT which they seek in their Amended Notice of Appeal. No order now is sought for prohibition against the Minister. The Act and international law Something first should be said respecting the means by which consideration of the Convention has been drawn into Australian municipal law. 11 Sched 1, Item 65. See Minister for Immigration and Multicultural and Indigenous Affairs v Al Khafaji (2004) 78 ALJR 1156 at 1159 [9]-[10], 1160-1161 [18]-[19]; 208 ALR 201 at 204, 206. 12 Item 70. First, customary international law deals with the right of asylum as a right of states not of individuals; individuals, including those seeking asylum, may not assert a right under customary international law to enter the territory of a state of which that individual is not a national13. Secondly, the Convention is an example of a treaty which qualifies what under classical international law theory was the freedom of states in the treatment of their nationals14; but the Convention does not have the effect of conferring upon the refugees to which it applies international legal personality with capacity to act outside municipal legal systems15. Thirdly, the Convention was negotiated and agreed between the relevant Contracting States and obligations are owed between those states16, not to refugees, so that it is at a state level that the Convention has to be understood17. Fourthly, the Convention has been construed by the House of Lords18 and the 13 T v Home Secretary [1996] AC 742 at 754; Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 272-275; Minister for Immigration and Multicultural Affairs v Haji Ibrahim (2000) 204 CLR 1 at 4 [1], 45 [137], 72 [203]. 14 Menon, "The International Personality of Individuals in International Law: A Broadening of the Traditional Doctrine", (1992) 1 Journal of Transnational Law and Policy 151 at 154-156; Orakhelashvili, "The Position of the Individual in International Law", (2001) 31 California Western International Law Journal 241 at 15 See Orakhelashvili, "The Position of the Individual in International Law", (2001) 31 California Western International Law Journal 241 at 253-256. 16 Article 38 provides for any dispute between parties to the Convention, which relates to its interpretation or application and cannot be settled by other means, to be referred to the International Court of Justice at the request of any one of the parties to the dispute. 17 Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 at 294; Horvath v Secretary of State for the Home Department [2001] 1 AC 489 at 508; Minister for Immigration and Multicultural Affairs v Haji Ibrahim (2000) 204 CLR 18 T v Home Secretary [1996] AC 742 at 753-754. Supreme Court of the United States19 as not detracting from the right of a Contracting State to determine who should be allowed to enter its territory. Fifthly, the text of the Convention speaks, as Brennan J pointed out in Minister for Immigration and Ethnic Affairs v Mayer20, indifferently of a person who is "considered a refugee" and of one to whom the "status of refugee [is] accorded" for the purposes of the Convention. Sixthly, Gibbs CJ and Brennan J in Mayer21 and Stephen J in Simsek v Macphee22 pointed out that the determination of the status of refugee is a function left by the Convention to the competent authorities of the Contracting States which may select such procedures as they see fit for that purpose; as will appear, the procedures adopted by Australia have varied from time to time. Other Contracting States in their migration laws have adopted in different ways criteria drawn from the Convention. The legislative methods adopted in New Zealand, Canada, the United Kingdom and the United States, which differ each from the others and from that of Australia, may be seen respectively from the reports of Attorney-General v Refugee Council of New Zealand Inc23, Pushpanathan v Canada (Minister of Citizenship and Immigration)24, T v Home Secretary25 and Sale v Haitian Centers Council, Inc26. It appears that in at least some of these countries the legislation has been amended since the decisions in the above cases by specific provision respecting "safe third countries"27. 19 Sale v Haitian Centers Council, Inc 509 US 155 at 179-183 (1993). 20 (1985) 157 CLR 290 at 305. 21 (1985) 157 CLR 290 at 294, 305. 22 (1982) 148 CLR 636 at 643. 23 [2003] 2 NZLR 577 at 601-602. 24 [1998] 1 SCR 982 at 997-1000. 25 [1996] AC 742 at 759-760. 26 509 US 155 at 170-171 (1993). 27 United States Code Annotated, Title 8, Aliens and Nationality, §1158(a)(2)(A); Asylum and Immigration (Treatment of Claimants, etc) Act 2004 (UK), s 33. Seventhly, as the title to the Convention suggests28, the Convention details the status and civil rights to be afforded within Contracting States to those accorded the status of refugee. These matters are to be seen from the detail in Ch 2 (Arts 12-16, headed "Juridical Status"), Ch 3 (Arts 17-19, headed "Gainful Employment"), Ch 4 (Arts 20-24, headed "Welfare") and Ch 5 (Arts 25-34, headed "Administrative Measures"). Chapter 5 deals with such matters as the issue of identity papers (Art 27) and travel documents (Art 28). However, the Contracting States accept significant obligations under Art 32 (headed "Expulsion") and Art 33 (headed "Prohibition of Expulsion or Return ('Refoulement')"). Article 32(1) states29: "The Contracting States shall not expel a refugee lawfully in their territory save on grounds of national security or public order." Article 33(1) states: "No Contracting State shall expel or return ('refouler') a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion." 28 Convention Relating to the Status of Refugees. 29 Articles 32(2) and 32(3) qualify and explain the procedures for that expulsion as follows: "(2) The expulsion of such a refugee shall be only in pursuance of a decision reached in accordance with due process of law. Except where compelling reasons of national security otherwise require, the refugee shall be allowed to submit evidence to clear himself, and to appeal to and be represented for the purpose before competent authority or a person or persons specially designated by the competent authority. (3) The Contracting States shall allow such a refugee a reasonable period within which to seek legal admission into another country. The Contracting States reserve the right to apply during that period such internal measures as they may deem necessary." In Sale30, the Supreme Court of the United States construed Art 33(1) by reading "expulsion" as referring to a refugee already admitted into a Contracting State and "return" as referring to a refugee already within the territory of a Contracting State but not yet resident there. On the other hand, Professor Shearer has emphasised the distinction between the two articles, writing31: "These Articles are of a distinctly different character. The first assumes the prior admission of the refugee to a status of lawful residence, and refers to expulsion per se, and not to the institutionalised procedure of extradition. The second, however, not only applies to refugees whether lawfully or unlawfully within the host territory, but also embraces all measures of return, including extradition, to a country where their lives or freedom would be threatened." The Minister's submissions It is unnecessary for this appeal to determine all these matters of construction of the Convention. The Minister accepts that Australia has an international obligation under Art 33(1) not to expel or return the appellants in any manner whatsoever to the frontiers of the Russian Federation, being their country of nationality, or to the frontiers of any other territory where their life or freedom would be threatened in the sense spoken of in that Article. Counsel for the Minister also accepts that there is implicit in that negative proposition drawn from Art 33(1) a positive obligation to permit the appellants to remain in Australia. The Minister thus adopts the proposition stated by a commentator32: "[I]f a State is bound by a non-refoulement obligation with respect to a given individual, and there is no place to which that individual can be removed without the obligation being breached, the State in question has 30 509 US 155 at 182 (1993). 31 "Extradition and Asylum", in Ryan (ed), International Law in Australia, 2nd ed 32 Taylor, "Australia's 'Safe Third Country' Provisions: Their Impact on Australia's Fulfillment of Its Non-Refoulement Obligations", (1996) 15 University of Tasmania Law Review 196 at 200-201. no choice but to tolerate that individual's presence within its territory. In these circumstances, fulfillment of the non-refoulement obligation through time is functionally equivalent to a grant of asylum." However, the Minister submits that this positive obligation to grant asylum is qualified in a fashion fatal to the appellants' case under the Act. The asserted qualification is that, if Australia assesses a third state, here Israel, as being one which will accept the appellants, allow them to enter and to remain, and not "refoule" them to a country of persecution, then there is no international obligation to permit the appellants to remain in Australia, even though they answer the definition of the term "refugee" in Art 1 of the Convention. The Minister claims support from an opinion in which Sir Elihu "Article 33(1) cannot, however, be read as precluding removal to a 'safe' third country, ie one in which there is no danger [that he or she might be sent from there to a territory where he or she would be at risk]. The prohibition on refoulement applies only in respect of territories where the refugee or asylum seeker would be at risk, not more generally. It does, however, require that a State proposing to remove a refugee or asylum seeker undertake a proper assessment as to whether the third country concerned is indeed safe." It is accepted that the appellants answer the definition in Art 1. The issue on this appeal does not turn immediately upon the content of Australia's international obligations respecting the appellants under Art 33(1) of the Convention. The Convention is of determinative importance for this appeal only insofar as it or its particular provisions are drawn into municipal law by adoption as a criterion of operation of s 36(2) of the Act. 33 Lauterpacht and Bethlehem, "The scope and content of the principle of non- refoulement: Opinion", in Feller, Türk and Nicholson (eds), Refugee Protection in International Law: UNHCR's Global Consultations on International Protection, Section 36(2) of the Act Section 36(2) is awkwardly drawn. Australia owes obligations under the Convention to the other Contracting States, as indicated earlier in these reasons. Section 36(2) assumes more than the Convention provides by assuming that obligations are owed thereunder by Contracting States to individuals. Beginning with that false but legislatively required step, the appeal turns upon the meaning of the adjectival phrase "to whom Australia has protection obligations under [the Convention]". Counsel for the Minister submits that the Minister has no "protection obligation" in the nature of providing asylum to the appellants because the implication of that positive obligation does not flow from Art 33(1); there is the availability of Israel as a safe and permanent destination in the sense discussed. This conclusion as to the operation of the Convention is then translated into the terms of s 36(2) by saying that Australia has no "protection obligations" to the appellants because it would not be a breach of Australia's international obligations under the Convention to send the appellants to Israel. Consideration of the use in s 36(2) of the plural "protection obligations" discloses a non sequitur in the reasoning for which the Minister contends. Australia owed an obligation in respect of the appellants not to return them to the Russian Federation or to the frontiers of any other territories where their life or freedom would be threatened in the manner identified in Art 33(1). That is not disputed. From the circumstance that Australia might not breach its international obligation under Art 33(1) by sending the appellants to Israel, it does not follow that Australia had no protection obligations under the Convention. Acceptance of the Minister's submissions respecting the significance of the access of the appellants to Israel would have significant and curious consequences for the operation of the Convention, given the events in Europe which preceded its adoption. In NAEN v Minister for Immigration and Multicultural and Indigenous Affairs34, Sackville J referred to the enactment by Israel of the Law of Return in 1950, before the adoption of the Convention in 1951; his Honour said it would be "an exquisite irony" if from the very commencement of the Convention it had not obliged Contracting States to afford protection to Jewish refugees because they might have gone to Israel instead. 34 [2003] FCA 216 at [74]. Further, as Emmett J correctly emphasised in the Full Court35, a perusal of the Convention shows that, Art 33 apart, there is a range of requirements imposed upon Contracting States with respect to refugees some of which can fairly be characterised as "protection obligations". Free access to courts of law (Art 16(1)), temporary admission to refugee seamen (Art 11), and the measure of religious freedom provided by Art 4 are examples. However, there is a more immediate answer to the Minister's case. Section 36(2) does not use the term "refugee". But the "protection obligations under [the Convention]" of which it does speak are best understood as a general expression of the precept to which the Convention gives effect. The Convention provides for Contracting States to offer "surrogate protection"36 in the place of that of the country of nationality of which, in terms of Art 1A(2), the applicant is unwilling to avail himself37. That directs attention to Art 1 and to the definition of the term "refugee". Such a construction of s 36(2) is consistent with the legislative history of the Act. This indicates that the terms in which s 36 is expressed were adopted to do no more than present a criterion that the applicant for the protection visa had the status of a refugee because that person answered the definition of "refugee" spelled out in Art 1 of the Convention. 35 (2003) 130 FCR 46 at 60. 36 See Minister for Immigration and Multicultural Affairs v Respondents S152/2003 (2004) 78 ALJR 678 at 683 [20]; 205 ALR 487 at 492. 37 Section A(2) states: "owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence, is unable or, owing to such fear, is unwilling to return to it". (emphasis added) The Convention and Australian statute law Australia was the sixth state to ratify or accede to the Convention Relating to the Status of Refugees, doing so on 22 January 1954 with effect from 22 April 195438. It acceded to the Protocol Relating to the Status of Refugees on 13 December 1973, with effect from that date39. Reservations by Australia to Art 28(1) and Art 32 were withdrawn in 1971 and 1967 respectively40. However, in Simsek41, Stephen J applied the accepted general proposition42 that in the absence of legislation the Convention had no legal effect in Australian municipal law upon the rights and duties of individuals and of the Commonwealth43. Before the addition to the Act of s 6A by the Migration Amendment Act (No 2) 1980 (Cth)44, the determination of whether a person had the status of a refugee was a matter within the discretion of the Executive; by administrative arrangements responsibility had been allotted to the Minister for Immigration and Ethnic Affairs assisted by an Interdepartmental Committee45. 38 Australian Treaty Series, (1954), No 5. 39 Australian Treaty Series, (1973), No 37. 40 NAGV v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 130 FCR 46 at 69. 41 (1982) 148 CLR 636 at 641-643. 42 See, for qualifications to the common law doctrine, Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1 at 43 By way of contrast, the State Parties to the (First) Optional Protocol to the International Covenant on Civil and Political Rights, which entered into force for Australia on 25 December 1991 (Australian Treaty Series, (1991), No 39), recognise the competence in certain circumstances of the Human Rights Committee, set up under the Covenant, to receive and consider claims by individuals. 45 Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 at Section 6A(1) provided that an entry permit was not to be granted to a non-citizen after entry into Australia unless one or more of the conditions then set out was fulfilled. One of those conditions, contained in par (c), was that the non-citizen "is the holder of a temporary entry permit which is in force and the Minister has determined, by instrument in writing, that he has the status of refugee within the meaning of [the Convention]". Mayer determined that s 6A impliedly conferred on the Minister the function of determining whether an applicant had the status of "refugee", with the result that the determination was made "under an enactment" as required by s 13(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth). Section 6A was repealed by the Migration Legislation Amendment Act 1989 (Cth)46, but the new provision47 was drawn in similar terms to s 6A(1)(c). Legislation in a form with no material differences to that of s 36 as it falls for consideration in this litigation was first introduced (as s 26B) by the Migration Reform Act 1992 (Cth) ("the Reform Act")48. The Act as it stood immediately before the commencement of the relevant provisions of the Reform Act was considered in Applicant A v Minister for Immigration and Ethnic Affairs49. The Act at that stage still involved the two steps seen in the old s 6A considered in Mayer. These were the determination of status and the grant of a visa or permit. Thus, immediately before the commencement of the relevant provisions of the Reform Act, Div 1AA of Pt 2 (ss 22AA-22AD)50 was headed "Refugees" and s 22AA read: 47 Paragraph (d) of s 11ZD(1), renumbered s 47 by the Migration Legislation Amendment Act 1989 (Cth), s 35. 48 s 10, which commenced on 1 September 1994. 49 (1997) 190 CLR 225 at 238, 250, 271. 50 Inserted by the Migration Amendment Act (No 2) 1992 (Cth), which commenced on 30 June 1992; s 26B did not commence until 1 September 1994 after the lodgment of the applications considered in Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225. "If the Minister is satisfied that a person is a refugee, the Minister may determine, in writing, that the person is a refugee." The term "refugee" was defined in s 4 as having "the same meaning as it has in Article 1 of [the Convention]". Regulations made under the Act operated by treating applications for determination of refugee status as also being applications for the grant of the necessary visa51. This administrative system was changed by the Reform Act with the introduction of s 26B and s 26ZF, the predecessors of s 36 and s 65 respectively. The Reform Act also omitted52 the definition of "refugee" and repealed53 Div 1AA of Pt 2, which had contained s 22AA. The Explanatory Memorandum circulated to the House of Representatives with the introduction of the Bill for the Reform Act stated: "The Reform Bill makes a technical change in the way applications for protection as a refugee are dealt with. In future claimants will not apply separately for recognition as a refugee and permission to stay in Australia. Both processes will be combined in an application for a protection visa." (emphasis added) The Explanatory Memorandum stated that a protection visa was "intended to be the mechanism by which Australia offers protection to persons who fall under [the Convention]", and continued: the protection of the future persons seeking the Australian Government on the basis that they are refugees will not apply initially, as now, for recognition as a refugee, but directly for the protection visa. This change is consistent with the general principle contained in the Reform Act that the visa should be the basis of a non-citizen's right to remain in Australia lawfully. The change will end the present duplication of processing whereby separate applications are required for recognition of 51 Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 52 By s 4(b). 53 By s 9. refugee status and grant of formal authority to remain (presently an entry permit)." (emphasis added) This reference to enhanced administrative efficiency by the combination of previously separate processes merited the description in the Explanatory Memorandum that what was being made was a "technical change". It contained no support for a construction of the new legislation which would supplement and qualify the determination that a person is a refugee, with that term bearing by force of the Act the same meaning as it had in Art 1 of the Convention. Conclusions Having regard to the subject, scope and purpose of the Reform Act, the adjectival phrase in s 26B(2) (repeated in s 36(2)) "to whom Australia has protection obligations under [the Convention]" describes no more than a person who is a refugee within the meaning of Art 1 of the Convention. That being so and the appellants answering that criterion, there was no superadded derogation from that criterion by reference to what was said to be the operation upon Australia's international obligations of Art 33(1) of the Convention. The previous statutory definition of "refugee" that it had the same meaning as in Art 1 may have involved an ambiguity. If so, it is that ambiguity which was removed by the Reform Act. The possible ambiguity may have been that while s A of Art 1 identifies those to whom the term "refugee" applies, containing in sub-s (2) the well-known "Convention definition", it is the whole of Art 1 which is headed "Definition of the Term 'Refugee'". The reach of s A is qualified by what follows. In particular, s C states that the Convention in certain circumstances "shall cease to apply to any person falling under the terms of section A". Sections D, E and F each state that the Convention or its provisions "shall not apply" to certain persons. In particular, Art 1F states: "The provisions of this Convention shall not apply to any person with respect to whom there are serious reasons for considering that: he has committed a crime against peace, a war crime, or a the crime against humanity, as defined international instruments drawn up to make provision in respect of such crimes; he has committed a serious non-political crime outside the country of refuge prior to his admission to that country as a refugee; he has been guilty of acts contrary to the purposes and principles of the United Nations." The possible ambiguity present in the previous statutory definition of "refugee" is apparent from this Court's decision in Chan v Minister for Immigration and Ethnic Affairs54. A question which arose in Chan was whether Art 1 requires refugee status to be determined as at the time when the test laid down by the Convention is first satisfied, so that it ceases only in accordance with the Article of the Convention providing for cessation, or whether refugee status is to be determined at the time when it arises for determination55. These distinct conclusions could only be understood to produce different results if s 6A(1)(c) of the Act required regard to be had to only s A of Art 1 of the Convention, and not the cessation provisions in s C. If this was not so, then the distinction held no meaning because an applicant who once fell within the terms of Art 1 would cease to do so by operation of s C of that Article and thus not be entitled to an entry permit under s 6A(1). By contrast, in Minister for Immigration and Multicultural Affairs v Singh56, the Court, in considering s 36(2) of the Act, proceeded on the footing that a decision-maker does not err in law in considering as a preliminary issue whether the applicant for a protection visa falls within an exception in Art 1F. The adoption of the expression "to whom Australia has protection obligations under [the Convention]" removes any ambiguity that it is to s A only that regard is to be had in determining whether a person is a refugee, without going on to consider, or perhaps first considering, whether the Convention does not apply or ceases to apply by reason of one or more of the circumstances described in the other sections in Art 1. 54 (1989) 169 CLR 379. 55 (1989) 169 CLR 379 at 398. 56 (2002) 209 CLR 533. Something also should be said concerning Art 1E, which provides: "This Convention shall not apply to a person who is recognized by the competent authorities of the country in which he has taken residence as having the rights and obligations which are attached to the possession of the nationality of that country." In Thiyagarajah57, the Minister contended to the Full Court that Art 1E on its proper construction excluded from the definition of "refugee" a person having most, if not all, of the rights and obligations attached to the nationality of the host country, there France; the submission was that such an interpretation would be in accordance with the objects and purpose of the Convention, which did not extend to bestowing on a refugee the right to move from country to country, "asylum shopping". Acceptance of that construction would support the actual conclusion of the Full Court in Thiyagarajah that the RRT correctly had affirmed the refusal of protection visas to the respondent and his family. The Full Court decided the appeal in Thiyagarajah in favour of the Minister but on other grounds. Nevertheless, whilst stating that it was "strictly unnecessary to decide"58, the Full Court endorsed the interpretation given to Art 1E by Hill J in Barzideh v Minister for Immigration and Ethnic Affairs59, with the qualification that "some disability suffered by an alien might be so slight as to be negligible"60. Hill J in Barzideh had construed Art 1E as follows61: "I do not think that the Article is rendered inapplicable merely because the person who has de facto national status does not have the political rights of a national. That is to say, the mere fact that the person claiming to be a refugee is not entitled to vote, does not mean that the person does not have 57 (1997) 80 FCR 543 at 565-566. 58 (1997) 80 FCR 543 at 568. 59 (1996) 69 FCR 417. 60 (1997) 80 FCR 543 at 568. 61 (1996) 69 FCR 417 at 429. de facto nationality. But short of matters of a political kind, it seems to me that the rights and obligations of which the Article speaks must mean all of those rights and obligations and not merely some of them." (emphasis added) The Full Court in Thiyagarajah added that this interpretation was in accordance with the literal meaning of the text62. However, the reference to "de facto nationality" as sufficient suggests the contrary. If an issue respecting the construction of Art 1E hereafter arises before the Federal Court, it should not regard further consideration as limited by what was said respecting Art 1E in Thiyagarajah and Barzideh. Subsequent legislation The Migration Legislation Amendment Act (No 4) 1994 (Cth) added63 subdiv AI (ss 91A-91F) which was originally headed "Certain non-citizens unable to apply for certain visas"64. One of the reasons stated in s 91A for the enactment of this subdivision was the legislative determination that certain non-citizens in relation to whom there was an agreement between Australia and countries including "a safe third country"65 should not be allowed to apply in Australia for a protection visa. This legislation is an example of a specific response to "asylum shopping"66. Its later presence in the Act does not support the Minister's interpretation of the changes earlier made by the Reform Act. Reference must also be made to other changes to the Act. 62 (1997) 80 FCR 543 at 566. 63 To Div 3 of Pt 2 of the Act. 64 The heading of subdiv AI (which now comprises ss 91A-91G) has since been changed to "Safe third countries". 65 A term defined in s 91D. 66 Further provision of this nature was made (after the appellants had lodged their applications on 16 July 1999) by the 1999 Act. This introduced subdiv AK of Div 3 of Pt 2 (ss 91M-91Q), headed "Non-citizens with access to protection from third countries". As a result of changes to the Act initiated by the Migration (Offences and Undesirable Persons) Amendment Act 1992 (Cth)67 and the Migration Legislation Amendment (Strengthening of Provisions relating to Character and Conduct) Act 1998 (Cth)68, and post-dating the passage of the Reform Act69, at the material time for this litigation the Act contained provisions relating to the refusal or cancellation of protection visas "relying on one or more of the following Articles of [the Convention], namely, Article 1F, 32 or 33(2)"70. The text of Arts 1F and 32 has been set out earlier in these reasons. Article 33(2) states: "The benefit of the present provision may not, however, be claimed by a refugee whom there are reasonable grounds for regarding as a danger to the security of the country in which he is, or who, having been convicted by a final judgment of a particularly serious crime, constitutes a danger to the community of that country." The special provisions made in Art 32 and in Art 33(2) with respect to expulsion "on grounds of national security or public order" (Art 32) and to those who are a danger to security (Art 33(2)) attract comparison with the terms used in Art 1F to identify those to whom the Convention "shall not apply". The reference to Arts 32 and 33(2) may have been included by the legislation identified above for more abundant caution or as epexegetical of Art 1F in its adoption by the Act, with operation both at the time of grant and later cancellation of protection visas. However that may be, the legislation did not go on expressly to adopt Art 33(1). It is upon a particular construction of Art 33(1), with the implied obligation to afford asylum and its qualification with respect to safe third states, that the Minister relies. Accordingly, while the attention of the Full Court in this case was not drawn to the presence in the Act 68 Sched 1, Item 20. 69 However, s 4(1) of the Migration (Offences and Undesirable Persons) Amendment Act 1992 (Cth) commenced on 24 December 1992 while the relevant provisions of the Reform Act commenced on 1 September 1994. 70 ss 500(1)(c), 500(4)(c), 502(1)(a)(iii), 503(1)(c). of the references to Arts 32 and 33(2), nothing turns upon it. The presence of these references elsewhere in the Act does not detract from the construction of s 36(2) adopted in these reasons. It would have been open to the Parliament to deal with the question of "asylum shopping" by explicit provisions qualifying what otherwise was the operation for statutory purposes of the Convention definition in Art 1. As indicated earlier in these reasons, such a step may have been taken with the changes to s 36 made by the 1999 Act. The primary change is indicated by sub-s (3): "Australia is taken not to have protection obligations to a non-citizen who has not taken all possible steps to avail himself or herself of a right to enter and reside in, whether temporarily or permanently and however that right arose or is expressed, any country apart from Australia, including countries of which the non-citizen is a national." There are qualifications expressed in sub-ss (4) and (5). However, the changes made by the 1999 Act were not achieved years earlier by the quite differently expressed alterations made by the Reform Act. The grant of a protection visa to an otherwise unlawful non-citizen removes liability to further detention (s 191) and to removal from Australia (s 198). The adoption by the Act of the definition spelled out in Art 1 of the Convention may have given this benefit to refugees to whom in particular circumstances Australia may not, as a matter of international obligation under the Convention, and upon the proper construction of the Convention, have owed non-refoulement obligations under Art 33. But, at any rate before the changes made to s 36 by the 1999 Act, the extending of that benefit had not been foreclosed by the Parliament. The interpretation of the revised s 36 does not arise on this appeal. Nor, as has been mentioned, is it necessary to decide whether the Minister ought to have succeeded in Thiyagarajah, not on the ground assigned by the Full Court, but by application of s E of Art 1 of the Convention, as picked up by s 36(2) of the Act. Orders The appeal be allowed with costs against the Minister. The order of the Full Court be set aside. In place thereof, the appeal to the Full Court be allowed with costs, the order of Stone J set aside and orders made for certiorari and mandamus to the RRT and for the payment by the Minister of the costs of the appellants of their application under s 39B of the Judiciary Act. The order for certiorari should quash the decision of the RRT in Matter N99/29907 dated 1 March 2002. That for mandamus should require the RRT to determine according to law the application for review of the decision of the delegate of the Minister given on 3 September 199971. 71 Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 579; Minister for Immigration and Multicultural Affairs v Wang (2003) 215 CLR 518 at 526 [20], 542 [77]. See also Minister for Immigration and Multicultural Affairs v Thiyagarajah (2000) 199 CLR 343 at 367-368 [67]-[70]; Samad v District Court of New South Wales (2002) 209 CLR 140 at 163-164 [77]. Kirby KIRBY J. I agree in the orders proposed by Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ ("the joint reasons"). In essentials, my reasons are similar. However, I prefer to found my concurrence on a narrower footing because some of the wider issues mentioned in the joint reasons may, in future cases, return to this Court. That will be the occasion to consider the larger questions and, in particular, the significance (if any) for Australian law of decisions of other countries based on their own distinctive, and constantly The joint reasons acknowledge that it is unnecessary for this appeal to determine all of the matters of construction of the Convention relating to the Status of Refugees, as amended by the Protocol relating to the Status of Refugees73 (together "the Convention") that their Honours mention74. There are now so many cases in this Court and elsewhere concerning the Convention that it seems prudent to limit the elaboration of the Convention and the relevant provisions of the Migration Act 1958 (Cth) ("the Act") in this case to the issues that have to be decided to arrive at orders, and to those matters alone. The facts, legislation and Convention provisions The facts and the decisional history are explained in the joint reasons75. There too are set out the critical provisions of the Act as it stood at the time the appellants, father and son, made their applications for a protection visa under s 36(2) of the Act76. The language of that sub-section is central to the outcome of this appeal. It provided: "A criterion for a protection visa is that the applicant for the visa is a non- citizen in Australia to whom Australia has protection obligations under [the Convention]." 72 See joint reasons at [13]-[21]. 73 Convention relating to the Status of Refugees, done at Geneva on 28 July 1951, [1954] Australian Treaty Series No 5; Protocol relating to the Status of Refugees, done at New York on 31 January 1967, [1973] Australian Treaty Series No 37. 74 Joint reasons at [22]. 75 Joint reasons at [1]-[6]. 76 Joint reasons at [11]. Kirby It is true, as stated in the joint reasons, that the Convention, like all other treaties77, represents a binding obligation as between international the Contracting States. Australia is one such party. In terms of the Convention, Australia owes obligations to the other States that ratified, or acceded to, the Convention. Individual human beings are not, as such, parties to the Convention. However, one of the most significant developments of international law in the past 50 years has been the growth of the recognition of the individual as a subject of international law78. The provisions of the Convention (and of other humanitarian and human rights treaties) help to explain the changes in the role of the individual in international law. The terms of the Convention, indeed its very subject matter, make it potentially misleading to deny the existence of protection obligations under the Convention owed to individuals79. They are not parties to the Convention; but they are certainly the subjects of the Convention provisions80. For my own part, therefore, I do not accept that the Parliament was mistaken (or that it took a "false" step) in describing the subjects of the Convention as "a non-citizen … to whom Australia has protection obligations". Obligations may be owed, in international as in Australian law81, otherwise than by and to the parties to a binding agreement. However that may be, it is a side issue in this appeal. This is because s 36(2) of the Act is a valid law made by the Parliament under available heads of constitutional power82. The provision is not dependent for its constitutional 77 See Vienna Convention on the Law of Treaties, Art 26. 78 See Brownlie, Principles of Public International Law, 6th ed (2003) at 529-557; Weeramantry, Universalising International Law, (2004) at 171-172, 178-179. See also Sohn, "The New International Law: Protection of the Rights of Individuals Rather than States", (1982) 32 American University Law Review 1; Menon, "The International Personality of Individuals in International Law: A Broadening of the Traditional Doctrine", (1992) 1 Journal of Transnational Law and Policy 151; Orakhelashvili, "The Position of the Individual in International Law", (2001) 31 California Western International Law Journal 241. 79 cf joint reasons at [27]. 80 See, for example, the Convention, Art 2: "Every refugee has duties to the country in which he finds himself". See also Art 3: "The Contracting States shall apply the provisions of this Convention to refugees" (emphasis added). 81 See, for example, Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107. 82 Constitution, s 51(xix) ("naturalization and aliens"); (xxvii) ("immigration and emigration"); and (xxxix) ("incidental powers"). Kirby validity solely upon the extent to which it implements the obligations of the Convention. This Court must therefore accept s 36(2) and give effect to it so as to achieve, so far as its language permits, the purposes the Parliament had in enacting it83. Clearly, to provide those purposes legally enforceable included entitlements to non-citizens in Australia falling within the class mentioned. The Parliament clearly intended the entitlements of members of that class to be taken seriously and to have meaning and local consequence. The class of persons concerned is those "to whom Australia has protection obligations under [the Convention]". Expressed in that way, it is plain that the Parliament recognised the legitimate entitlements of such persons to "protection". This is a word that is used in the Convention itself84. Relevantly, a reference to "protection obligations" under the Convention engages at least the obligations accepted by the Contracting Parties under the Convention that would normally be the primary responsibility of the country of nationality in relation to its own citizens. In respect of a person falling within the Convention definition of "refugee" in Art 1A (and not otherwise excluded), therefore, such protection obligations become "surrogate obligations" of the receiving State so long as, like Australia, that State is a party to the Convention85. The obligation imposed by the Parliament on the respondent Minister to grant a protection visa to a person, if satisfied that the criterion described in s 36(2) of the Act is established, confirms that, by Australian law, the Act affords rights to protection to individuals meeting that criterion. In this sense, within Australia, the Convention is given effect and operation in respect of applicants for protection visas up to, and beyond, the mutual obligations of Australia agreed with other Contracting States participating in the Convention. To suggest that "protection obligations" are not owed under the Convention, as such, to people such as the appellants is erroneous both as a matter of Australian and international law. We do not need to say this; and we should not do so. 83 Bropho v Western Australia (1990) 171 CLR 1 at 20; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382 [69]-[71]; Al- Kateb v Godwin (2004) 78 ALJR 1099 at 1131 [167]; 208 ALR 124 at 167. 84 The Convention, Preamble, Arts 1A(2), 1C(1), 1C(3), 1C(5), 1D, 14. 85 Minister for Immigration and Multicultural Affairs v Khawar (2002) 210 CLR 1 at 9-10 [17]-[20], 10-11 [22]. See also Minister for Immigration and Multicultural Affairs v Respondents S152/2003 (2004) 78 ALJR 678 at 682-683 [19]-[20], 700 [109]-[110]; 205 ALR 487 at 492-493, 517. Kirby The supposed ground defeating "protection obligations" The appellants have been accepted by the Refugee Review Tribunal ("the Tribunal") as having satisfied every criterion for the issue of a protection visa, as provided by the Act, except for the suggestion that, in terms of s 36(2), Australia had no "protection obligations" under the Convention towards them86. The sole ground why this was said to be the case is that, because the first appellant identifies as (and is considered by others to be) Jewish, he was entitled to travel to Israel and, with members of his family, to take advantage of the Law of Return 1950 of the State of Israel87. This is a law affording a right for every Jew to go to Israel as an "oleh", being a Jew immigrating to Israel88. The immigration of Jews is referred to as "aliyah". The right of "aliyah" is created by Israeli legislation. Obviously, there is no reference to this right in the Convention, nor to the general phenomenon of a right of return of persons of a given ethnicity or religion or other class of persons to States so providing in their municipal legislation. On these matters the Convention contains no express provisions. Any supposed consequence of such municipal laws for the operation of the Convention, and the protections which it provides, is left to implication, if to anything, or to the legislation of States participating in the Convention not inconsistent with the Convention. According to the unchallenged finding of the Tribunal in the present case89: "[A] Jew who has come to Israel and subsequent to his arrival has expressed his desire to settle in Israel may, while in Israel, receive an oleh's certificate. According to paragraph 4A(a) the rights of a Jew under this Law and the rights of an oleh under the Nationality Law, as well as the rights of an oleh under any other enactment are also vested in a child and a grandchild of a Jew and the spouse of a grandchild of a Jew, except for a person who has been a Jew and voluntarily changed his religion. Paragraph 4B. For the purposes of this Law 'Jew' means a person who was born of a Jewish mother or has become converted to Judaism and who is not of another religion. The Israeli authorities issue these emigrants 86 Joint reasons at [11]. 87 The Law of Return bears the year 5710 in the Jewish calendar. 88 Law of Return, s 1. 89 Decision of the Tribunal, 27 March 2002, Reference N99/29907 at 12 ("the Tribunal decision"). Kirby actual Israeli citizenship, not merely the right to acquire it. See: US State Department Report 1997. The Tribunal also noted that information from the Israeli Embassy and also from [the Immigration and Absorption Board of Israel] internet site indicate that a Jew is able to travel to Israel and obtain aliya [sic] on arrival in Israel. … According to the Israeli Immigration and Absorption Board ... '... Essentially, all Jews everywhere are Israeli citizens by right.'" There is no single answer to the question: "Who is a Jew?"90 There are different views as to whether matrilineal descent is necessary, or what form any conversion must take91. However, since the Law of Return was amended in 1970 to define "Jew", in response to the controversial judgment in Shalit v Minister of the Interior92, it is clear that the Law of Return requires a person to be born of a Jewish mother, or to convert to Judaism, to be considered a "Jew" for the purposes of returning to Israel as an "oleh" and obtaining Israeli citizenship93. The first appellant's wife is not a Jew by that description. Therefore, for the purposes of the Law of Return, neither are his children (including the second appellant). Nonetheless, being a "child of a Jew", the second appellant falls within the Law of Return, as found by the Tribunal. The appellants thus, together and separately, have a prima facie entitlement to claim nationality status in the State of Israel. This has been so at all relevant times, including since their arrival in Australia. 90 In Shalit v Minister of the Interior (1968) Selected Judgments of the Supreme Court of Israel (Special Volume, 1962-1969) 35 at 91, Landau J said: "[F]or [a] section of the population ... being a Jew depends solely upon ... birth to a Jewish mother ... Another camp exists ... that rejects this test utterly." In the same case (at 71-72), Sussman J said that "it is now accepted that the expression 'Jew' has no single definite and continuing meaning". 91 See Baker, "Who Is a Jew? The Dilemma of Israel", (1970) 12 Journal of Church and State 189; Akzin, "Who Is a Jew? A Hard Case", (1970) 5 Israel Law Review 259. See also Savir, "The Definition of a Jew Under Israel's Law of Return", (1963) 17 Southwestern Law Journal 123. 92 (1968) Selected Judgments of the Supreme Court of Israel (Special Volume, 1962- 93 Law of Return, s 4B. This was inserted by the Law of Return (Amendment No 2) Kirby Neither of the appellants wishes to immigrate to Israel for a number of reasons, including that they have never been to Israel, they do not speak Hebrew, they have an apprehension of discrimination against non-Jews (and that this would negatively affect the first appellant's wife, and the second appellant) and the existence of a strong desire to continue their pacifist beliefs and avoid compulsory military service. But to the Minister, this disinclination on the part of the appellants is legally irrelevant. The Convention is an imposition of obligations upon Contracting States. Such obligations extend only so far as the Convention provides. A Contracting State may not "expel or return ('refouler') a refugee in any manner whatsoever to the frontiers of territories where his life or freedom would be threatened on account of his race, religion, nationality, membership of a particular social group or political opinion"94. But in this case, there is no intention to return the appellants to Russia, the country of their nationality, either on the part of Australia or of the State of Israel, which the Tribunal found had received more than 800,000 Jews from Russia and the other former Soviet republics since the late 1980s95. Because of the apparent availability of this right of return to Israel, the Minister contends that, in terms of s 36(2) of the Act, Australia has no "protection obligations" towards the appellants under the Convention. The Minister's construction of the Act, read in the light of the Convention, and with regard to the purposes of both the Act and the Convention, is a strained one. I would reject it. Essentially there are four reasons. Reasons for rejecting the Minister's construction Plain language of the Act: All that is required to enliven the entitlement to a "protection visa" is, relevantly, the three preconditions stated in s 36(2) of the Act. The applicant must be a "non-citizen" of Australia. He or she must be in Australia. And Australia must have "protection obligations" under the Convention towards the applicant. Here, the appellants clearly satisfied the first and second preconditions. The Tribunal found that because, in Russia, the appellants were both regarded as Jewish and because of the first appellant's political activities and opinions, they had a genuine fear that they would be persecuted were they returned to Russia. Therefore, the "protection obligations" under the Convention are enlivened. There is nothing expressly stated in the Convention that puts the appellants outside the protections for which it provides. It is the Minister who must seek to import into the Convention, or into the terms of the Act, in a case such as the 94 The Convention, Art 33(1). 95 Tribunal Decision at 11. Kirby present, an exception to Australia's "protection obligations" that is not expressly spelt out. Most specifically, there is imposed on Australia under the Convention the obligation not to expel a "refugee" lawfully in Australian territory, save on grounds not here relevant96. And not to expel or return a "refugee" in "any matter whatsoever to the frontiers of territories where his life or freedom would be threatened"97. It follows that, on the findings made by the Tribunal, both of these "protection obligations" have descended on Australia in respect of each of the appellants. There are many other duties imposed on Australia that answer to the description of "protection obligations", the formula chosen by s 36(2) of the Act. I agree, for the reasons stated by the other members of the Court, that it is impossible to read the plural expression "protection obligations" so as to exclude the appellants from the ambit of the various Convention protections98. The mere fact that sending the appellants to Israel might not of itself breach Australia's obligations under Art 33(1) of the Convention does not relieve Australia of the many other "protection obligations" that remain to be fulfilled in respect of the appellants whilst they are in Australia, and whilst s 36(2) is engaged in their case. The legislative history: The foregoing conclusions, which derive from nothing more than the language of s 36(2) of the Act and the terms of the Convention – and particularly the "protection obligations" stated in that sub-section – are reinforced by the legislative history that preceded the enactment of s 36(2). Such history is commonly taken into account by courts in seeking to elicit the purpose of Parliament in enacting provisions such as it did. the plural description of It is important to note that the description of the criterion for a protection visa, in terms of the "protection obligations" owed by Australia to the specified individuals, is a deliberate choice made by the Parliament. Originally, as the joint reasons explain99, the statutory provisions for the grant of refugee status, replacing previous administrative arrangements, were expressed by reference to a determination by the applicable Minister of whether the applicant was, or was not, a "refugee" within the terms of the Convention100. This approach to 96 National security or public order: the Convention, Art 32(1). 97 The Convention, Art 33(1). 98 Joint reasons at [27]-[31]. 99 Joint reasons at [35]-[38]. 100 See the Act, s 6A(1)(c), introduced by the Migration Amendment Act (No 2) 1980 (Cth), s 6. Set out in joint reasons at [36]. Kirby enlivening the criterion for the grant of a visa to permit an applicant claiming to be a "refugee" to stay in Australia, by reference to status as a "refugee" in terms of the Convention, was continued through subsequent amendments of the Act. Only when the Act was changed by s 10 of the Migration Reform Act 1992 (Cth) were the predecessors to ss 36 and 65 of the Act as now appearing introduced101. Only then was the statutory definition of "refugee" in s 4 repealed. This course of legislation makes it clear that the Parliament deliberately embarked on the adoption of a new criterion for refugee applicants seeking to remain in Australia. The three-fold test, now applicable in s 36(2) of the Act, was introduced. It was sufficient that the non-national in Australia should be a person who fitted into the class of someone to whom Australia owed "protection obligations". This is a very wide expression. Whatever negative implications might be added, as a gloss, to the definition of "refugee" in the Convention, none could cut back the wide class so defined. The existence of "protection obligations" was sufficient. And by the Convention, they are expressed in large and multiple forms. They applied to the appellants. They were not disapplied by the fact that other countries might or might not, under their several laws, be willing, or even bound, to receive them. The focus of the Act was shifted to Australia's "protection obligations". In this case, those obligations were enlivened. Subsequent amendment of the foregoing construction of s 36(2) of the Act, by reference to its history, regard may also be had to amendments to s 36 that have been added to the Act to spell out a specific withdrawal of "protection obligations" on the part of Australia in the case of certain non-citizens able to secure protection in "safe third countries"102. To reinforce the Act: The idea expressly to withdraw "protection obligations" in such a case was first manifested with effect from 15 November 1994, with the insertion of subdiv AI in Pt 2, Div 3 of the Act103. This amendment introduced s 91E into the Act, preventing specified non-citizens, to whom the subdivision applied, from applying for a protection visa. The specific target of the amendments was persons covered by the Comprehensive Plan of Action approved by an international conference on Indo-Chinese refugees104. The amendments 101 The Act, ss 26B(2) and 26ZF (since renumbered). 102 See Hunter Resources Ltd v Melville (1988) 164 CLR 234 at 254-255 per Dawson J (and authorities cited therein). 103 Migration Legislation Amendment Act (No 4) 1994 (Cth). 104 The Act, s 91B(1). Kirby envisaged agreements relating to persons seeking asylum between Australia and another country or countries that fall in the category of a "safe third country". With effect from 16 December 1999, s 36 of the Act was further amended by the addition of sub-ss (3)-(7)105. The added sub-sections have no application to the appellants. This is so because the amendments apply only to applications for visas made on or after their commencement. They do not affect the appellants' applications which were made on 16 July 1999. Nevertheless, it is worth noting the terms of the following sub-sections: "Protection obligations (3) Australia is taken not to have protection obligations to a non-citizen who has not taken all possible steps to avail himself or herself of a right to enter and reside in, whether temporarily or permanently and however that right arose or is expressed, any country apart from Australia, including countries of which the non-citizen is a national. (4) However, if the non-citizen has a well-founded fear of being persecuted in a country for reasons of race, religion, nationality, membership of a particular social group or political opinion, subsection (3) does not apply in relation to that country. (5) Also, if the non-citizen has a well-founded fear that: a country will return the non-citizen to another country; and the non-citizen will be persecuted in that other country for reasons of race, religion, nationality, membership of a particular social group or political opinion; subsection (3) does not apply in relation to the first-mentioned country." Although the foregoing and other later amendments106 to the Act do not control the interpretation of s 36(2) in the present case, they do demonstrate that legislative techniques are available which might have been used by the Parliament to limit the scope of the "protection obligations" owed by Australia. 105 Border Protection Legislation Amendment Act 1999 (Cth), Sched 1, Pt 6, Item 65. 106 See Migration Legislation Amendment Act (No 6) 2001 (Cth), Sched 1, Pt 1, Item 2 (commenced 1 October 2001); Migration Legislation Amendment (Judicial Review) Act 2001 (Cth), Sched 1, Pt 1, Item 5 (commenced 2 October 2001). Kirby They had not been used, and were not in force, in relation to the appellants at the time of their applications. This Court should not strain itself to import such limitations or restrictions on Australia's "protection obligations" with respect to the appellants when the Parliament, with the power to do so, has not enacted them expressly. Approach to construction: The foregoing considerations of statutory interpretation are reinforced by a final one. The Convention constitutes an important means of protection for the human rights and fundamental freedoms of refugees who claim such protection as non-citizens in Australia. The Parliament, by the terms of ss 36(2) and 65(1) of the Act, has given effect, in domestic law, to Australia's accession to the Convention. Ordinarily, this Court would give a meaning to such a provision so as to ensure that Australia's international obligations were thereby carried into full effect107. As I stated in Coleman v Power108, "where words of a statute are susceptible to an interpretation that is consistent with international law, that construction should prevail over one that is not". That, in my opinion, is how s 36(2) is to be construed. Because there is nothing in the Convention, either expressly or by implication, to remove from Australia its protection obligations with respect to the appellants, as accepted there, in circumstances where, although the Convention is engaged in the State to which the applicant has had recourse, the applicant might have obtained protection elsewhere, such obligations continue to exist. But should a negative implication be read into the Convention in a case such as the present? I think not. The notion can be tested this way. It would suggest that no Contracting State ever has "protection obligations" to a refugee who may (on whatever basis) be entitled by law to protection by another State. For example, the constitutions of numerous countries create rights to seek and obtain asylum109. Specifically, 107 Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476 at 492 [29] per Gleeson CJ; Coleman v Power (2004) 78 ALJR 1166 at 1171-1173 [17]-[24] per Gleeson CJ, 1209-1212 [240]-[249] of my own reasons; 209 ALR 182 at 189-191, 108 (2004) 78 ALJR 1166 at 1209 [240]; 209 ALR 182 at 241. See also authorities cited in fn 230. 109 See, for example, Constitution of the Republic of Albania, Art 40; Constitution of the Republic of Bulgaria, Art 27(2); Constitution of Georgia, Art 47; Constitution of the Republic of Hungary, Art 65; Constitution of the Italian Republic, Art 10; Constitution of the Republic of Namibia, Art 97; Constitution of the Slovak Republic, Art 53. See also Constitution of Finland, s 9. See Flanz (ed), Constitutions of the Countries of the World. Kirby until 1993, the Grundgesetz (The Basic Law for the Federal Republic of Germany) provided that "[p]olitically persecuted individuals enjoy the right of asylum"110. This was an "absolute right"111 and included the rights of entry and non-refoulement112. The Minister argued that the issue in this appeal was whether s 36 of the Act "conferred an entitlement to a protection visa upon persons who have a well-founded fear of being persecuted for a Convention reason in their country of nationality but who have the right to enter, and settle in, a third country in which they do not have a well-founded fear of persecution or of expulsion". If the Minister's argument were accepted, and if the Minister's argument with respect to the Law of Return were applied to the German Constitution as it stood before 1993, it would seem to follow that Australia would never have owed protection obligations to any person. All such persons would have had a right to asylum in Germany. It would be an absurd result if the generosity of other States' refugee laws meant that Australia was thereby relieved of international obligations that it voluntarily accepted with other nations. Such a result should not be reached by implication. It could not have been what was intended by Parliament when it enacted s 36(2). I agree with the submission for the appellants that such a principle would render the Convention self-destructive. It would deprive the Convention of the practical effect that it was intended to have in the case of vulnerable persons such as the appellants who can establish that the Convention criteria apply in their case in the State where they have arrived and in which they claim the benefit of such protections. The notion of an implied exclusion of "protection obligations" is one that would, if given effect as part of the Convention scheme, potentially send applicants for refugee status shuttling between multiple countries. Their entitlements under the Convention would be hostage to arrangements purportedly 110 The Basic Law for the Federal Republic of Germany, Art 16. 111 Hailbronner, "Asylum Law Reform in the German Constitution", (1994) 9 American University Journal of International Law and Policy 159 at 159. Hailbronner notes that the amendments to Art 16 "maintain the individual right of asylum" but restrict "unfounded asylum applications and asylum seekers entering from safe third countries": at 160. Hailbronner further clarifies that "for German authorities to reject an asylum application under the safe third state clause, an asylum seeker must have had actual contact with the territory of the safe third country and must have had the opportunity to apply for asylum in that country": at 112 See "Review of Foreign Laws", (1982) 3 Michigan Yearbook of International Legal Studies 553 at 567. Kirby made affecting their nationality by countries with which they may have no real connection. It would shift obligations clearly imposed by international law to contingencies that, in some cases, may be imponderable. It would introduce a serious the instability and uncertainty of "protection obligations" Convention's requirements. Without clear language in the Convention to support such a course, I would not introduce such relief from Convention "protection obligations" by a process of implication inimical to the Convention's objectives, terms and practical operation. into I leave aside a case where a refugee applicant has a clearly established entitlement to protection which has been exercised and engaged before resort to Australia, as in a case of transit. Such were the factual circumstances in Minister for Immigration and Multicultural Affairs v Thiyagarajah113. Those facts are quite different from the present case. Neither of the appellants in this case has ever been to Israel. Neither has any personal connection with that country. Neither has ever claimed or exercised a "right of return" as provided by Israeli law. The notion that such a municipal law (which is not unique to Israel) could cut a swathe through the international obligations assumed under the Convention is not one that is easily reconciled either with the Convention's language or its purpose. Least of all is it an attractive notion in the case of a refugee who is a Jew, claiming protection under the Convention including on the basis of his status as a Jew. Historically, the Convention was, in part, a response of the international community to the affront to the international conscience caused by the mass migrations that occurred in Europe before, during and immediately after the Second World War114. In discussing key influences on the Convention, Professor Walker states that by "1938, as the position of the Jews in Germany became worse, the Evian Conference was convened to try to provide a solution. The Conference was largely a failure, though it did produce the [Inter-Governmental Committee on Refugees (IGCR)] ... The IGCR was the first organization to have a definition of refugee that expressly referred to threats to life or liberty on the basis of race, religion or political opinion. This was subsequently picked up in the definition used in the [International Refugee Organization] Constitution after 113 (1997) 80 FCR 543. 114 Steinbock, "Interpreting the Refugee Definition", (1998) 45 UCLA Law Review 733 at 766; Walker, "Defending the 1951 Convention Definition of Refugee", (2003) 17 Georgetown Immigration Law Journal 583; Musalo, "Claims for Protection Based on Religion or Belief", (2004) 16 International Journal of Refugee Law 165 at 166; Deng, "International Response to Internal Displacement: A Revolution in the Making", (2004) 11(3) Human Rights Brief 24. Kirby the War, and then again in [the Convention]."115 At least four Jewish organisations were involved in the drafting of the Convention116. In part, the Convention sought to repair, and prevent recurrences of, the injustices suffered by Jewish refugees during that time. Notoriously, many of them were shipped from pillar to post, searching often fruitlessly for a place of refuge117. The Law of Return in Israel is, itself, also in part a response to that historical period118. It would be astonishing if the Law of Return could now be used to force a person to migrate to Israel. Article 2(b) of the Law of Return states that an "oleh's visa shall be granted to every Jew who has expressed his desire to settle in Israel" (emphasis added). Given that the Law of Return aimed to facilitate the provision of a place for Jews to "finally have a place to be free from persecution"119, it would be surprising if it now had the effect that all Jews fleeing persecution anywhere were obliged to go there, even if doing so was contrary to their "desire"120. It would also be astonishing if the enactment by the State of Israel of the Law of Return, without more, meant that the Convention's "protection 115 Walker, "Defending the 1951 Convention Definition of Refugee", (2003) 17 Georgetown Immigration Law Journal 583 at 590 (footnote omitted). 116 See Takkenberg and Tahbaz, The Collected Travaux Préparatoires of the 1951 Geneva Convention relating to the Status of Refugees, (1990). The groups included the Co-ordinating Board of Jewish Organizations, the Agudas Israel World Organization, the Consultative Council of Jewish Organizations and the World Jewish Congress. 117 A well-known instance involved the vessel St Louis, "when the United States rebuffed fleeing Jewish refugees who had arrived at New York and Miami harbors, forcing many back to die in Nazi gas chambers": see Koh, "Reflections on Refoulement and Haitian Centers Council", (1994) 35 Harvard International Law Journal 1 at 7, citing Thomas and Morgan-Witts, Voyage of the Damned, (1974). 118 Altschul, "Israel's Law of Return and the Debate of Altering, Repealing, or Maintaining its Present Language", (2002) 5 University of Illinois Law Review 119 Altschul, "Israel's Law of Return and the Debate of Altering, Repealing, or Maintaining its Present Language", (2002) 5 University of Illinois Law Review 120 On the relationship between a "desire" to return, and the Law of Return, see Katkova v Canada (Minister of Citizenship and Immigration) (1997) 130 FTR 192 Kirby obligations", accepted by other countries, were thereby withdrawn throughout the world, by implication and not express terms, from application to all persons who were, or might be, classified as Jewish. This is especially so, given the role of Jewish organisations in drafting the Convention, and given that the definition of "refugee" was directly influenced by the Nazi persecution of Jews. It would require the clearest language of the Convention to have such a discriminatory operation. Far from being clear, the Convention, in its terms, does not withdraw its protection from applicants, otherwise "refugees", who happen to be of Jewish religion or ethnicity or any other religion or ethnicity that might somewhere fall within some other country's unilateral enactment of return rights. Jews, however defined, are protected by the Convention like everyone else. The enactment of the Law of Return by the State of Israel does not deprive them of that protection which derives from the international law expressed in the Convention. As far as I am concerned, any ambiguity that might exist in the Convention (or the Act) must be construed to prevent such an unjust operation. Conclusion: clear protection obligations It may be that issues will arise in the future under exclusion provisions of Australian statutes, which will present questions of ambiguity. But so far as s 36(2) of the Act is concerned, as operating at the time of the appellants' application, there was no such ambiguity. It is clear. Australia had undoubted "protection obligations" to the appellants. By the findings of the Tribunal in their case, the appellants were therefore entitled to protection visas. The supposed ground of implied disqualification was erroneous. I do not criticise the Tribunal, which properly followed what it took to be a general principle stated by the Federal Court in Thiyagarajah121 and followed in many other Federal Court decisions referred to by the Tribunal122. However, at the very least, that principle was stated too broadly in the reasons in that case. In this case, it requires correction and refinement by this Court. Orders I therefore agree in the orders proposed in the joint reasons. 121 (1997) 80 FCR 543. 122 Tribunal decision at 14.
HIGH COURT OF AUSTRALIA WET052 AND APPELLANT THE REPUBLIC OF NAURU RESPONDENT WET052 v The Republic of Nauru [2018] HCA 47 17 October 2018 ORDER Leave to amend the notice of appeal is refused. Appeal dismissed with costs. On appeal from the Supreme Court of Nauru Representation S A Beckett with M L L Albert for the appellant (instructed by Banki N M Wood for the respondent (instructed by Republic of Nauru) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS WET052 v The Republic of Nauru Nauru – Appeal as of right from Supreme Court of Nauru – Refugees – Where Secretary of Department of Justice and Border Control determined appellant not refugee and not owed complementary protection – Where Refugee Status Review Tribunal affirmed Secretary's determination – Where Tribunal made adverse finding as to credibility of appellant – Where Supreme Court of Nauru affirmed Tribunal's decision – Whether Tribunal's adverse finding made without logical foundation – Whether Tribunal failed to properly consider appellant's claims relating to treatment in Iran as a returned asylum seeker. Words and phrases – "adverse credibility finding", "country information", "failed asylum seeker", "political profile", "well-founded fear of persecution". Refugees Convention Act 2012 (Nr), ss 3, 5, 6, 31. GAGELER, KEANE AND EDELMAN JJ. The appellant was born in Tehran, Iran, in 1990. His ethnicity is Turkmen and his religion Shi'a Islam. After graduating from high school and gaining a certificate in industrial electricity, he was employed in various jobs in Iran. He arrived on Christmas Island in September 2013. He was transferred to the Republic of Nauru in February 2014. On 21 February 2014, the appellant participated in a transfer interview. In the course of that interview, he stated as follows: He left Iran because his father was an alcoholic who physically abused him. For instance, his father had burned his hands with cigarettes and cut him with a knife. He had run away from home three times but each time his father found him and brought him home. His father had forced him to go to work and bring money home, when the appellant wanted to study at university. On one occasion, his father had taken a knife, intending to stab the appellant. His brothers and mother intervened, but his father then threw an ashtray, which struck the appellant on the head. He was not feeling safe at home. His mother had urged him to flee Iran, and, with money she gave him, he was able to leave. He feared that if he were returned to Iran he would be subjected to further physical abuse by his father, and might be killed by him. The appellant's application for refugee status On 26 May 2014, the appellant applied to the Secretary of the Department of Justice and Border Control ("the Secretary") for recognition as a refugee under the Refugees Convention Act 2012 (Nr) ("the Refugees Act"). As at the date of the Secretary's decision, the Refugees Act relevantly provided: Interpretation In this Act, unless the contrary intention appears: Edelman 'complementary protection' means protection for people who are not refugees as defined in this Act, but who also cannot be returned or expelled to the frontiers of territories where this would breach Nauru's international obligations; 'refugee' means a person who is a refugee under the Refugees Convention as modified by the Refugees Protocol; Application for refugee status (1) A person may apply to the Secretary to be recognised as a refugee. Determination of refugee status Subject to this Part, the Secretary must determine whether an asylum seeker is recognised as a refugee or is owed complementary protection." The Refugees Convention, as modified by the Refugees Protocol, provides that a refugee is a person who1: "owing to well-founded fear of being persecuted for reasons of race, religion, nationality, membership of a particular social group or political opinion, is outside the country of his nationality and is unable or, owing to such fear, is unwilling to avail himself of the protection of that country; or who, not having a nationality and being outside the country of his former habitual residence, is unable or, owing to such fear, is unwilling to return to it." The appellant claimed to be a refugee because he feared that if he returned to Iran, he would be persecuted by the Iranian authorities by reason of: 1 Convention relating to the Status of Refugees (1951) as amended by the Protocol relating to the Status of Refugees (1967), Art 1A. Edelman his imputed political opinion against the Iranian regime, for reason of his association with his father, an alcoholic, drug addict and drug supplier, who was engaged in acts directly contravening Sharia law; his actual or perceived contravention of Sharia law by assisting his father to supply drugs, by being associated with a drug dealer and by consuming drugs while young; his membership of the particular social group consisting of his family "because I could be placed at peril for reason of being my father's son given his serious anti-Islamic activities"; and his membership of the particular social group of failed asylum seekers returning to Iran from the West. In support of the appellant's application for refugee status, he participated in a refugee status determination interview. The Refugee Status Review Tribunal ("the Tribunal") records the claims made by the appellant in his application and interview as follows: His father is an alcoholic and a drug addict who forced him to supply drugs to those he worked with. As the appellant grew older and started to refuse his father's demands, his father physically abused him. His father has friends in the Sepah, the Basij and the police who, the appellant believes, helped his father to find him each time he ran away. He was afraid that his father would use his connections with the authorities to accuse him of drug trafficking and have him put in jail. The family's neighbours had filed complaints against his father in the past but he has been protected by his connections with the authorities. He cannot find safety by relocating elsewhere in Iran because of his father's connections. He feared that his father would continue to take all his money and prevent him limiting his employment opportunities and denying him his basic human rights. further education, from pursuing He feared being severely punished for assisting his father to deliver drugs in the past and consuming drugs as a young person. These offences carry penalties ranging from long-term imprisonment to execution. He feared being tortured and subject to inhumane prison conditions. Edelman The decision of the Secretary On 28 September 2015, the Secretary determined that the appellant was not a refugee, and was not owed complementary protection. The Secretary accepted that the appellant was a citizen of Iran, that his identity was as he claimed it to be, that his father was an alcoholic and drug addict, and that his cousin was jailed for dealing drugs. On the other hand, the Secretary did not accept that the appellant's father was involved in drug trafficking, that the appellant had been compelled to engage in drug trafficking on his father's behalf, that on each occasion he had attempted to flee home the appellant had been forced to return home, or that his father has close personal connections with the Iranian authorities which he could use to threaten the appellant's safety. The decision of the Tribunal On 2 October 2015, the appellant applied to the Tribunal for review of the Secretary's determination. In that regard, at relevant times s 31 of the Refugees Act relevantly provided: "Application for merits review by Tribunal (1) A person may apply to the Tribunal for merits review of any of the following: a determination that the person is not recognised as a refugee; a determination that the person is not owed complementary protection." In a supplementary statement signed on 20 November 2015, the appellant made further statements detailing his father's drug addiction and its impact upon him and his family. The appellant also said that he had converted to Christianity in Nauru in about April 2015, and that he had been regularly attending church and Bible classes after being baptised. He said that a number of friends who had learnt of his conversion through friends in Nauru and Australia sent him congratulatory messages over the Internet. The appellant claimed to fear return to Iran, where apostasy is punishable by death, and to believe that he would, at least, be sent to jail. Edelman On 1 February 2016, the Tribunal affirmed the Secretary's decision. The Tribunal accepted, "in the absence of any evidence to the contrary", the appellant's claims concerning his citizenship and identity. On the other hand, the Tribunal did not accept that the appellant would be at risk of persecution in Iran on grounds of an adverse political opinion imputed to him through association with his father, or that he would be at risk of persecutory harm because he distributed illicit drugs for his father. The Tribunal expressed concern as to the credibility of several aspects of the appellant's account: First, in his transfer interview the appellant had made no reference to his father's involvement with the use and supply of illicit drugs when explaining why he left Iran. The Tribunal did not accept that the appellant had satisfactorily explained that omission. Secondly, the Tribunal found implausible the appellant's claim to fear that his father would deliberately implicate him in drug dealing by setting him up with planted drugs, particularly the notion that his father would thereby accept the related danger of disgrace and severe punishment to himself. Thirdly, the Tribunal found it difficult to accept that the appellant's father could have forced him to distribute illicit drugs on an almost full-time basis over a period of three or four years. The Tribunal concluded in relation to the aspect of the appellant's claim based on his involvement with his father's alleged illegal activities: "On the information before it, the Tribunal is not satisfied as to the credibility of the [appellant's] claim that his father is a drug addict or drug dealer, or that he forced the [appellant] to use drugs and transport drugs to his friends and others. ... The Tribunal finds that these claims have been fabricated by the [appellant] to strengthen his case for protection. As these are not minor or marginal aspects of the [appellant's] account, but instead lie at the heart of his claim to fear harm in Iran, the Tribunal considers that these findings cast strong doubt over the credibility of his claims in general. Given these findings the Tribunal does not accept that the [appellant] would be at risk of persecution in Iran on ... Convention ground[s]." In addition, the Tribunal dismissed the appellant's claim to fear persecution as a returned asylum seeker, finding that, on the evidence provided, Edelman including relevant country information, there was "nothing … to indicate that the act of applying for asylum in itself attracts harm". The Tribunal also dismissed the appellant's remaining claims, concerning his purported conversion to Christianity, and his claim for complementary protection. These claims are not material to the issues pursued in this Court. The decision of the Supreme Court of Nauru On 6 May 2016, the appellant filed a notice of appeal in the Supreme Court of Nauru, raising eight grounds of appeal on questions of law from the decision of the Tribunal. On 6 November 2017, the Supreme Court dismissed the appeal, rejecting all these grounds2. The appeal to this Court In the appeal to this Court, which is brought as of right3, the appellant submitted that: the Tribunal's adverse credibility finding, in respect of the appellant's claims for protection arising out of his alleged involvement in his father's drug trafficking, was both without logical foundation and wrongly treated as determinative against his claim for refugee status; and the Tribunal erred by failing properly to consider his claims to protection that: he had a political profile which would lead him to be at particular risk of persecution on his return to Iran as a failed asylum seeker from the West; and he was at risk of persecution on his return to Iran as a failed asylum seeker per se. Leave was necessary to enable the appellant to raise the contention in (b). At the hearing of the appeal, this Court reserved the question of leave and allowed argument to proceed upon the merits of that ground. Leave to amend 2 WET052 v The Republic [2017] NRSC 96. 3 Appeals Act 1972 (Nr), s 44; Nauru (High Court Appeals) Act 1976 (Cth), s 5. See also BRF038 v Republic of Nauru (2017) 91 ALJR 1197 at 1203-1204 [35]-[41]; 349 ALR 67 at 73-74; [2017] HCA 44. Edelman should be refused on the basis that the proposed ground is entirely without merit. The reasons for that view will be explained in due course; but first it is necessary to consider the appellant's argument in relation to the Tribunal's adverse credibility finding. The Tribunal's adverse credibility finding The appellant's argument under this heading focused on the reference in the Tribunal's reasons to the circumstance that the appellant made "no reference to drugs" in his transfer interview when explaining why he left Iran. The Tribunal did not accept that the appellant satisfactorily explained "why so important an area of [his] claims would not have been mentioned by him at the first opportunity he was given to do so". The appellant submitted that the Tribunal's adverse credibility finding was not logical or supported by probative evidence. In particular, he argued that: The transfer interview was a general interview on transfer from Australia to Nauru and was not part of his application for refugee status, that application being made later. The appellant was not asked to provide the basis for his claim for refugee status at the transfer interview. Those questions were left until his refugee status determination interview. The Tribunal could not reasonably reject the appellant's credibility on the basis that he had not stated his claims fully when he had not been asked to state his claims to refugee status. The appellant was not assisted by a legal representative or a claims assistant at the transfer interview as he was later. The appellant's claims relating to his father's drug trafficking were detailed in his statement as part of his refugee status determination interview, and were not inconsistent with his answers in the transfer interview. The appellant told the Tribunal he was confused and stressed at the time of the transfer interview. Caution was required on the part of the Tribunal in comparing the statements at the transfer interview with statements made later. The Tribunal's task should have been approached with a degree of solemnity, and it should not effectively dismiss his primary claim on the basis of an omission at his first interview. Edelman The appellant's submissions cannot be accepted. They proceed upon a distinctly unreasonable misunderstanding of the Tribunal's reasons and an artificially rigid view of the constraints upon the fact-finding function of the Tribunal. The Tribunal did not find that the appellant's claims as to his father's drug use and trafficking were untrue because they had not been mentioned at the transfer interview; rather, the Tribunal said that the appellant's failure to refer to these claims at the first opportunity "casts strong doubt" on their truth. The Tribunal's ultimate conclusion that it was not satisfied as to the credibility of his claims was based on the accumulated concerns summarised above. There was nothing illogical or irrational about that conclusion. The Tribunal was entitled to consider that it was inherently unlikely that the appellant's father would risk bringing the attention of the authorities to his own unlawful activities by accusing the appellant. It was also open to the Tribunal to regard the appellant's assertion that his father was able to force him to distribute illicit drugs on an almost full-time basis for a period of three or four years as testing credulity too far. The concern expressed by the Tribunal in relation to the appellant's failure to mention his involvement in his father's illicit drug activities in Iran is one familiar to any tribunal of fact, namely, that the failure to mention a matter of obvious significance when one is afforded the opportunity to do so is a reason for scepticism when the matter is asserted at a later time. It may be that any scepticism is readily dispelled by the balance of the evidence. But whether or not it should be dispelled depends on the cogency of the explanation in the circumstances of the case as well as the significance of the evidence to the claim. It was open to the Tribunal to regard the appellant's failure to refer to these aspects of his claim at the first opportunity as reason to be sceptical of the truth of his claims. And the Tribunal had the opportunity to weigh the appellant's explanations for the differences in his accounts. At the hearing, the Tribunal raised its concern that the appellant had not made the claims concerning his father's involvement with illicit drugs at the transfer interview. The appellant offered a variety of explanations for why he didn't mention these things. Whether those explanations were cogent or not was a matter for the Tribunal. The extent to which considerations of the kinds urged on behalf of the appellant should be taken into account by a tribunal of fact necessarily varies with the circumstances of the particular case. And there is nothing in the circumstances of the present case to suggest that the Tribunal did not take into account the language difficulties facing the appellant, or his lack of representation at the transfer interview. Edelman The appellant's argument seeks to minimise the differences between the appellant's account of the reasons for leaving Iran given in his transfer interview and that given in his refugee status determination interview by suggesting that the only significant difference was his failure at the transfer interview to mention that his father was a "drug addict". On any fair reading of the record of the two interviews, the differences are much more substantial and significant. The written record of the transfer interview, which was before the Tribunal, contained a section, "Part A", which advised the interviewee that "[t]he purpose of this interview is to gather information about you and your circumstances for the Government of Nauru". It also stated that "the information that you give will … be read and used by the people who will be assessing your claim for refugee status. It may be compared against the information you give in your refugee application." "Part C" includes Question 1 – "Why did you leave your country of nationality (country of residence)?" In this case, the completed box under Question 1 recorded a reasonably detailed answer given by the appellant, and further questions from the interviewer including "What do you think would happen to you if you were to return to Iran?" It can be seen that the appellant's answer not only described abuse by his father, but gave an explanation as to why he had been abused. The appellant explained that his father was an "alcoholic", and that his father "forced [the appellant] to go and work, bring money home". In his refugee status determination interview, the appellant made different claims concerning his father's drug use and trafficking; thereafter, such claims assumed central significance in his claim to be a refugee. It was open to the Tribunal to be concerned that, while the appellant volunteered details of the domestic violence that he suffered at his father's hands in his transfer interview when the issue of why he left Iran was squarely raised, it did not occur to him to mention that this domestic violence took place in the context of the appellant's being embroiled in his father's illegal drug trafficking. Finally under this heading, it is simply not to the point to argue that the transfer interview was not part of the refugee status determination process. No-one suggested that it was – certainly not the Tribunal. While it may be that the appellant did not turn his mind consciously to the pursuit of his claim for refugee status at the time of the transfer interview, the Tribunal was entitled to note, and weigh the significance of, his failure to volunteer that his father had embroiled him in the distribution of illicit drugs in Iran. The Tribunal's consideration of the appellant's claims In this Court the appellant submitted that he had a political profile that meant that he would face a real possibility of harm on return to Iran as a failed asylum seeker from the West. His argument in support of this claim, referred to as "the particular claim", was focused upon the statement in his transfer interview Edelman that he had been involved in the 2009 demonstrations against the outcome of the Iranian election. As to "the general claim" that he faced a real risk of harm as a failed asylum seeker per se, there was country information before the Secretary and the Tribunal which indicated that persons returning to Iran were persecuted by Iranian officials because they were failed asylum seekers per se. The appellant argued that neither of these matters was properly considered by the Tribunal, and that the Tribunal erred by failing to consider these integers of his claim for protection. The respondent submitted that the appellant did not make the particular claim, and that the Tribunal considered and determined the general claim. The respondent's submissions must be accepted. The particular claim At the transfer interview the appellant stated that "[i]n 2009 I was involved in demonstrations, mainly in the evening – about the election". This was evidently a reference to the controversial election in Iran in 2009, and the popular demonstrations that ensued. The appellant's involvement in the 2009 demonstrations was not mentioned specifically by the Secretary in his reasons or at all in the Tribunal's reasons. The Secretary found that "the likelihood of a returned asylum seeker coming to harm on return to Iran is proportionate to the political profile that they have". The Secretary observed further that: "in all examples [of failed asylum seekers facing 'difficulties' on return] it related to people who had partaking [sic] in activities either in Iran or outside Iran that were clear illustrations of anti-government sentiment such as well covered demonstrations. A person such as the [appellant], who was not politically active or had a profile [sic], will not be a person of particular interest to the authorities in Iran." The answer given in his transfer interview, that he was involved in the 2009 demonstrations against the election, is the foundation for the appellant's contention that he advanced the particular claim. However, at no stage did the appellant suggest, whether in his transfer interview, his application for refugee status, his refugee status determination interview, or any of his later statements, that he had an actual fear of being harmed by Iranian authorities as a result of a political profile associated with his participation in the 2009 demonstrations. It might be said that it is hardly surprising that he made no such suggestion, given that the demonstrations had occurred four years before he left Iran and he had apparently suffered no retaliation by the authorities. It would also strain too far to suggest that such a fear, if actually entertained, was well-founded. Edelman The appellant did not offer further information about his participation in Iranian politics at the transfer interview. In his application for refugee status, he advanced only the general claim to fear harm as a failed asylum seeker; the only "imputed political opinion against the Iranian regime" was said to arise from his association with his father. Moreover, the appellant's submissions to the Tribunal, to the extent that they were critical of the Secretary's decision, said nothing concerning the Secretary's failure to consider the 2009 demonstrations, notwithstanding the identification of several bases for why the appellant feared harm from Iranian authorities for his "actual/imputed political opinion" and as a failed asylum seeker, nor was the point raised by the appellant during the Tribunal hearing or in the further submissions to the Tribunal filed after the hearing. In truth, the appellant did not advance a claim to fear persecution in Iran as a result of a political profile generated by his involvement in the 2009 demonstrations. There was no such claim for the Tribunal to consider. As Gleeson CJ said in Appellant S395/2002 v Minister for Immigration and Multicultural Affairs4: "on judicial review, a decision … must be considered in the light of the basis upon which the application was made, not upon an entirely different basis which may occur to an applicant, or an applicant's lawyers, at some later stage in the process". The general claim The Tribunal, having said that it considered "the country information cited in the Secretary's decision" and "the submissions together with more recent DFAT reporting", rejected the appellant's claim that asylum seekers per se faced discrimination on return to Iran. The appellant put country information to the contrary effect before the Tribunal. In this Court, he submitted that he had raised an issue which the Tribunal was duty-bound to resolve, and that it had failed to do so. The country information provided on behalf of the appellant to the Tribunal included an Amnesty International report of 2012, quoting an Iranian judge who said that "[a]sylum seekers are interrogated on return, whether or not they have been political activists in Iran or abroad". The appellant also provided detailed examples of asylum seekers who were arrested, detained for extended periods and beaten, without an apparent history of political involvement. (2003) 216 CLR 473 at 479 [1]; [2003] HCA 71. Edelman The Tribunal found that persons possessing certain profiles, including "student activists, Arab political activists, criminals and asylum seekers who have received Western media attention", may be subject to harm on return to Iran; but that there was "nothing in the information to indicate that the act of applying for asylum in itself attracts harm or that those who [are] without these identified profiles are at risk of harm". In its reasons, the Tribunal accepted that some failed asylum seekers may be subject to harm on their return to Iran, but was not satisfied that the act of applying for asylum itself would attract harm, without a pre-existing political profile. The Tribunal found there was "no other evidence before [it] to indicate that [the appellant had] come to the adverse attention of the authorities or that he would do so following his return". It is to be noted that the lawyers representing the appellant in the hearing before the Tribunal stated in written submissions to the Tribunal: "The Tribunal referred to country information to indicate that [the appellant] did not have a sufficient profile to attract adverse attention of Iranian authorities should he be returned. We agree that failed asylum seekers per se may not face harm solely on the basis of seeking protection; however, case law indicates that the Tribunal should not look at the client's circumstances in isolation." The country information as to the likelihood that failed asylum seekers, without a political profile, would suffer persecution was not all one way. It was necessary for the Tribunal to come to a conclusion on the issue. And it did. In that regard, the Tribunal was justified in acting upon the appellant's lawyers' written submission as an acknowledgment that the Tribunal was not bound to regard the mere fact that he would return to Iran as a failed asylum seeker as a basis for a well-founded fear of persecution. Accordingly, it was open to the Tribunal to reject the general claim. Orders The application for leave to amend the notice of appeal should be refused. The appeal should be dismissed with costs.
HIGH COURT OF AUSTRALIA APPELLANTS AND BADENOCH INTEGRATED LOGGING PTY LTD RESPONDENT Bryant v Badenoch Integrated Logging Pty Ltd [2023] HCA 2 Date of Hearing: 18 October 2022 Date of Judgment: 8 February 2023 ORDER The appeal be dismissed. Special leave be granted to the respondent to cross-appeal to this Court from part of the judgment and order of the Full Court of the Federal Court of Australia given and made on 24 June 2021. The cross-appeal be dismissed. The appellants pay the respondent's costs of the appeal and the respondent pay the appellants' costs of the cross-appeal, such costs to be set off against each other. On appeal from the Federal Court of Australia Representation B W Walker SC with B M Gibson for the appellants (instructed by Johnson Winter & Slattery) M G R Gronow KC with R G Morison for the respondent (instructed by Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Bryant v Badenoch Integrated Logging Pty Ltd Corporations – Winding up – Insolvency – Voidable transactions – Unfair preferences – Construction of s 588FA(3) of Corporations Act 2001 (Cth) – Where appellants liquidators of debtor company – Where respondent entered into agreement to supply services to debtor company for harvesting and hauling timber – Where respondent continued to provide services to debtor company despite debtor company's increasing indebtedness – Where liquidators applied to have series of payments made by debtor company to respondent within six-month period ending on relation-back day set aside as unfair preferences – Where liquidators contended that, if "continuing business relationship" existed so as to engage s 588FA(3), liquidators entitled by "peak indebtedness rule" to choose starting date of "single transaction" within relation-back period to prove existence of unfair preference – Whether "peak indebtedness rule" part of or excluded by s 588FA(3) – Proper approach to construction of element of s 588FA(3)(a) that "transaction is, for commercial purposes, an integral part of a continuing business relationship" – Whether payments engaged s 588FA(3)(a). Words and phrases – "business character of the transaction", "continuing business relationship", "peak indebtedness rule", "running account principle", "unfair preference", "voidable transactions", "winding up". Corporations Act 2001 (Cth), Pt 5.7B, ss 588FA, 588FC, 588FE, 588FF, 588FG. KIEFEL CJ. I agree with Jagot J. I agree with Jagot J. GORDON J. I agree with Jagot J. Edelman EDELMAN J. I agree with Jagot J. STEWARD J. I agree with Jagot J. Steward Gleeson GLEESON J. I agree with Jagot J. Jagot JAGOT J. Section 588FA(3) of the Corporations Act 2001 (Cth) is a statutory embodiment of the "running account principle" which has long been a part of insolvency law in Australia1. The effect of s 588FA(3) is that if "a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account)" between a company as debtor and a creditor, then all transactions forming part of that relationship are to be treated as if they together constituted a single transaction in determining if the transaction is an unfair preference given by the company to the creditor, voidable on application by a liquidator2. These proceedings raise three questions about the operation of s 588FA(3). The first question is one of statutory construction. The question is whether the so-called "peak indebtedness rule" is part of or is excluded by s 588FA(3) of the Corporations Act. The "peak indebtedness rule" permits a liquidator to choose the starting date within the relevantly prescribed statutory period (in this case, the relation-back period of six months prescribed by s 588FE(2)) to prove the existence of an unfair preference given by the company to a creditor3. The second question is one of characterisation. What is the proper approach to determining whether a "transaction is, for commercial purposes, an integral part of a continuing business relationship" as referred to in s 588FA(3)(a) of the Corporations Act? The third question is one of evaluation of facts. Were certain payments in this case from the debtor (identified below as "Gunns") to the creditor (identified below as "Badenoch"), for commercial purposes, an integral part of a "continuing business relationship" between them within the meaning of s 588FA(3) of the Corporations Act? There is also a subsidiary question about the date on which the "continuing business relationship" between Gunns and Badenoch ended. The answer to each question depends on the proper construction of the relevant provisions of Pt 5.7B of the Corporations Act and the application of those provisions to the facts of the present case. Summary of conclusions First, Pt 5.7B of the Corporations Act does not incorporate the "peak indebtedness rule". Rather, the first transaction that can form part of the continuing 1 Airservices Australia v Ferrier (1996) 185 CLR 483 at 501-510. 2 This is referred to as the "doctrine of ultimate effect", eg, Airservices Australia v Ferrier (1996) 185 CLR 483 at 502, 504, 505, 507, 509. 3 Rees v Bank of New South Wales (1964) 111 CLR 210 at 220-221. Jagot business relationship contemplated by s 588FA(3) is either the first transaction after the beginning of the prescribed period or after the date of insolvency, or (if the relationship started after the beginning of the prescribed period or the date of insolvency) the first transaction after the beginning of the continuing business relationship, whichever is the later. Second, answering the statutory question under s 588FA(3)(a) whether a "transaction is, for commercial purposes, an integral part of a continuing business relationship" involves an objective factual inquiry. What one or both of the parties to the transaction intended (if ascertainable) may be relevant to, but is not determinative of, the statutory question. The task is one of characterisation of the facts, involving an objective ascertainment of the "business character"4 of the relevant transaction. It is therefore necessary to consider the whole of the evidence of the "actual business" relationship between the parties5. Third, the Full Court did not err in concluding that certain payments were transactions forming an integral part of the continuing business relationship between Gunns and Badenoch (defined in these reasons below as payments 1 and 2)6. Nor did it err in concluding that other (later) payments were not transactions forming part of the continuing business relationship between Gunns and Badenoch (defined in these reasons below as payments 5 to 11)7. It also did not err in concluding that the continuing business relationship did not cease until 10 July 2012 and that, applying s 588FA(1) to the deemed single transaction created by s 588FA(3)(c) and as required by s 588FA(3)(d), there could be no unfair preference given by Gunns to Badenoch8. Accordingly, the appeal should be dismissed, the respondent should be granted special leave to cross-appeal, and the cross-appeal should also be dismissed. 4 Richardson v The Commercial Banking Co of Sydney Ltd (1952) 85 CLR 110 at 132 ("Richardson"), quoted in Airservices Australia v Ferrier (1996) 185 CLR 483 at 5 Richardson (1952) 85 CLR 110 at 132; Airservices Australia v Ferrier (1996) 185 CLR 483 at 502; see also Queensland Bacon Pty Ltd v Rees (1966) 115 CLR 266 at 286 ("Queensland Bacon"). 6 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 608 [72]. 7 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 609 [79]. 8 Badenoch Integrated Logging Pty Ltd v Bryant, in the matter of Gunns Ltd (in liq) (receivers and managers appointed) [No 2] [2021] FCAFC 111 at [9], [21] ("Badenoch Integrated Logging Pty Ltd v Bryant [No 2]"). Jagot The statutory provisions Division 2 of Pt 5.7B of the Corporations Act concerns voidable transactions. Section 9 defines a "transaction" in Pt 5.7B as meaning a transaction to which, relevantly, a body corporate is a party, "for example (but without limitation): ... (d) a payment made by the body". Section 588FF(1) provides that: "Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders: The orders which may be made include, for example, an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction9, and an order directing a person to transfer to the company property that the company has transferred under the transaction10. Section 588FE(1) provides that, if a company is being wound up, a transaction of the company may be voidable because of any one or more of sub-ss (2) to (6B) of s 588FE. Relevantly for the present case, s 588FE(2) provides that: "The transaction is voidable if: it is an insolvent transaction of the company; and it was entered into, or an act was done for the purpose of giving effect to it: during the 6 months ending on the relation-back day; or after that day but on or before the day when the winding up began." Section 588FF(1)(a) of the Corporations Act. 10 Section 588FF(1)(b) of the Corporations Act. Jagot Sub-sections (2A) to (6B) of s 588FE specify other circumstances in which a transaction is voidable. Those circumstances include other prescribed periods from 12 months to 10 years ending on the relation-back day. Section 588FC provides relevantly that a "transaction of a company is an insolvent transaction of the company if, and only if, it is an unfair preference given by the company, or an uncommercial transaction of the company" and the transaction is entered into or given effect while the company is insolvent or the company becomes insolvent because of, or because of matters including, entering into or giving effect to the transaction. Section 588FA deals with unfair preferences. Section 588FB deals with uncommercial transactions. Section 588FA provides that: "(1) A transaction is an unfair preference given by a company to a creditor of the company if, and only if: the company and the creditor are parties to the transaction (even if someone else is also a party); and the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company; even if the transaction is entered into, is given effect to, or is required to be given effect to, because of an order of an Australian court or a direction by an agency. For the purposes of subsection (1), a secured debt is taken to be unsecured to the extent of so much of it (if any) as is not reflected in the value of the security. (3) Where: a transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company (including such a relationship to which other persons are parties); and in the course of the relationship, the level of the company's net indebtedness to the creditor is increased and reduced from Jagot time to time as the result of a series of transactions forming part of the relationship; then: subsection (1) applies in relation to all the transactions forming part of the relationship as if they together constituted a single transaction; and the transaction referred to in paragraph (a) may only be taken to be an unfair preference given by the company to the creditor if, because of subsection (1) as applying because of paragraph (c) of this subsection, the single transaction referred to in the last-mentioned paragraph is taken to be such an unfair preference." It is also relevant that s 588FG(2) provides that a court is not to make an order under s 588FF materially prejudicing a right or interest of a person if the transaction is not an unfair loan to the company, or an unreasonable director- related transaction of the company, and it is proved that: the person became a party to the transaction in good faith; and at the time when the person became such a party: the person had no reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as mentioned in paragraph 588FC(b); and a reasonable person in the person's circumstances would have had no such grounds for so suspecting; and the person has provided valuable consideration under the transaction or has changed his, her or its position in reliance on the transaction." Section 588FG(2) is relevant because it means that an unfair preference under s 588FA concerns transactions entered into or given effect to at a time when either the party to the transaction (that is, the creditor) had reasonable grounds for suspecting that the company was insolvent at that time or would become insolvent as a result of the transaction, or a reasonable person in the creditor's circumstances would have had such grounds for so suspecting. The facts The appellants are the liquidators of Gunns Limited (in liquidation) (receivers and managers appointed) and its wholly owned subsidiary Auspine Limited (in liquidation) (receivers and managers appointed) (together, "Gunns"). Jagot The respondent, Badenoch Integrated Logging Pty Ltd ("Badenoch"), is a creditor of and former supplier of services to Gunns for harvesting and hauling timber to be processed by Gunns. Gunns and Badenoch entered into an agreement in 2003 for Badenoch to supply Gunns with timber. Under the agreement, Badenoch provided timber in a specified quantity per annum. Badenoch was to provide an invoice at the end of each calendar month and payment was due from Gunns on the last working day of the following month. They renewed their agreement in 2008 for the period from 1 January 2008 to June 2013. Gunns suffered significant declines in revenue from 2010. By late 2011, Gunns' parlous financial position was the subject of significant media coverage. On 9 March 2012, Gunns announced a halt in trading of its shares pending the release of an announcement to the market. Despite repeated efforts, Gunns was unable to raise sufficient further capital as required. Badenoch continued to provide services to Gunns during this time, despite Gunns frequently being late in making payments or only making partial payments. Badenoch took steps to protect its position from Gunns' increasing indebtedness and uncertain financial position in various ways, including threatening to cease supply and ceasing supply for short periods, issuing letters of demand, negotiating a payment plan, and seeking a bank guarantee. Ultimately, in August 2012, Badenoch agreed with Gunns to terminate the agreement on the basis that it would continue to supply some services for a further short period to enable "another contractor [to get] up to speed"11. On 25 September 2012, and while Badenoch was continuing to supply some services to Gunns, Gunns appointed the liquidators as joint and several administrators. This is the "relation-back day" for the operation of s 588FE, the voidable transactions provision, of the Corporations Act12. By an application under s 588FF(1) of the Corporations Act, the liquidators applied to have a series of payments made by Gunns to Badenoch during the period from 26 March to 25 September 2012 declared to be voidable transactions. This is the period of "the 6 months ending on the relation-back day" prescribed under s 588FE(2)(b) of the Corporations Act13 (the "relation-back period"), on which the 11 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 609 [78]. 12 See s 91 of the Corporations Act. 13 By s 588FE(2) of the Corporations Act, a transaction is voidable if it is an insolvent transaction of the company and was entered into or given effect, relevantly, during the six months ending on the relation-back day. Jagot liquidators relied to impugn the transactions during that period as voidable transactions. The transactions between Gunns and Badenoch during this period are identified in the following table14: Date Invoice Payment Balance 26 March 2012 28 March 2012 30 March 2012 ("payment 1") 31 March 2012 13 (or 16) April 2012 ("payment 2") 30 April 2012 30 April 2012 1 (or 2) May 2012 ("payment 3") 31 May 2012 7 (or 8) June 2012 ("payment 4") 30 June 2012 31 July 2012 6 (or 8) August 2012 ("payment 5") 14 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 592-593 [5]. Jagot Date Invoice Payment Balance 17 August 2012 24 (or 27) August 2012 ("payment 6") ("payment 7") 31 August 2012 31 August (or 3 September) ("payment 8") 1 September 2012 7 (or 10) September 2012 14 (or 17) September 2012 21 (or 24) September 2012 ("payment 9") ("payment 10") ("payment 11") 25 September 2012 As has been seen, to be a voidable transaction under s 588FE(2) of the Corporations Act, the transaction must be both an insolvent transaction of the company and entered into or given effect, relevantly, during the relation-back period. Accordingly, only a transaction entered into or given effect by a company after the date of insolvency of the company may be a voidable transaction under s 588FE(2). After a separate, contested hearing, the primary judge (Davies J) determined the insolvency date of Gunns to be 30 March 201215. The liquidators 15 Under s 95A(1) of the Corporations Act a "person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable". Under s 95A(2), a person who is not solvent is insolvent. The date of insolvency of Gunns was determined in Bryant (Liquidator) v LV Dohnt & Co Pty Jagot therefore contended that all payments made by Gunns to Badenoch during the period from 30 March to 25 September 2012 were voidable transactions16. The payments made on 26 and 28 March 2012 could not be voidable transactions under s 588FE(2) because, when they were made, Gunns was not insolvent. The liquidators also contended that, if there was a "continuing business relationship" between Gunns and Badenoch so as to engage s 588FA(3) of the Corporations Act, they were entitled by the "peak indebtedness rule" to choose the starting date within the relation-back period to prove the existence of an unfair preference given by Gunns to Badenoch (it being common ground that the necessary end date would be the end of the "continuing business relationship"). On the basis that the "continuing business relationship" ended by 30 June 2012, the liquidators chose the date of 31 May 2012 as the starting point of the "single transaction" for the application of the unfair preference provision in s 588FA(1)17. It can be seen from the table above that, in the period before 30 June 2012, 31 May 2012 is the date on which Gunns' indebtedness to Badenoch peaked at $1,416,563.31 (due to Badenoch rendering an invoice to Gunns on that date of $737,633.68). On this basis, Gunns' indebtedness to Badenoch decreased from $1,416,563.31 (on 31 May 2012) to $1,365,321.02 (on 30 June 2012), with the difference between the two said by the liquidators to represent the amount of the unfair preference paid by Gunns to Badenoch on the application of s 588FA(1) of the Corporations Act. The primary judge The primary judge held that the "peak indebtedness rule" continued to apply under s 588FA(3), so that the liquidators were entitled to determine the date of the first transaction in the relevant "relationship" for the purpose of the comparison or netting process required by s 588FA(1)(b) of the Corporations Act to determine if the transaction was an unfair preference18 (ie, if "the transaction results in the creditor receiving from the company, in respect of an unsecured debt that the company owes to the creditor, more than the creditor would receive from the Ltd, in the Matter of Gunns Ltd (in liq) (receivers and managers appointed) [2018] FCA 238. 16 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 592-593 [4]- 17 Bryant (in their capacities as joint and several liquidators of Gunns Ltd) (in liq) (receivers and managers appointed) v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 447 [109] ("Bryant v Badenoch Integrated Logging Pty Ltd"). 18 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 447 [109]. Jagot company in respect of the debt if the transaction were set aside and the creditor were to prove for the debt in a winding up of the company"). The primary judge also held that only payments 3 and 4, made in May and June 2012, were subject to s 588FA(3) of the Corporations Act in that they were each an integral part of a continuing business relationship involving a running account between Gunns and Badenoch in respect of the supply, and payments for the supply, of timber by Badenoch to Gunns19. According to the primary judge, in contrast to payments 3 and 4, payments 1 and 2 and 5 to 11 were made in circumstances where Gunns and Badenoch were "looking backwards rather than forwards; looking to the partial payment of the old debt rather than the provision of continuing services"20, so that these transactions were not made as part of a continuing business relationship between Gunns and Badenoch. The Full Court In response to an appeal and cross-appeal by Badenoch and the liquidators respectively, the Full Court of the Federal Court of Australia (Middleton, Charlesworth and Jackson JJ) held that the "peak indebtedness rule" is inconsistent with the reasoning in Airservices Australia v Ferrier21 concerning the "running account principle" (and the associated "doctrine of ultimate effect") embodied by s 588FA(3) of the Corporations Act22. The "doctrine of ultimate effect" is that23: "If a payment is part of a wider transaction or a 'running account' between the debtor and the creditor, the purpose for which the payment was made and received will usually determine whether the payment has the effect of giving the creditor a preference, priority or advantage over other creditors. If the sole purpose of the payment is to discharge an existing debt, the effect of the payment is to give the creditor a preference over other creditors unless the debtor is able to pay all of his or her debts as they fall due. But if the purpose of the payment is to induce the creditor to provide further goods or services as well as to discharge an existing indebtedness, 19 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 443 [99]. 20 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 443 [99], citing Airservices Australia v Ferrier (1996) 185 CLR 483 at 510. (1996) 185 CLR 483. 22 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 617 [118], 23 Airservices Australia v Ferrier (1996) 185 CLR 483 at 501-502 (footnotes omitted). Jagot the payment will not be a preference unless the payment exceeds the value of the goods or services acquired. In such a case a court ... looks to the ultimate effect of the transaction. Whether the payment is or is not a preference has to be 'decided not by considering its immediate effect only but by considering what effect it ultimately produced in fact'." The Full Court also held that, if the purpose of a payment is to induce the creditor to provide further goods or services as well as to discharge an existing indebtedness, the payment will not be a preference unless the payment exceeds the value of the goods or services acquired24. As such, the Full Court said that the principle from Sutherland (as liquidator of Sydney Appliances Pty Ltd (in liq)) v Eurolinx Pty Ltd25, that a mutual purpose or assumption of a continuation of payment and reciprocal supply "must not come to be subordinated to a predominant purpose of recovering past indebtedness" for a "continuing business relationship" to continue, "should be treated with some caution"26. On this basis, the Full Court concluded that, contrary to the conclusion of the primary judge, payments 1 and 2 were made as an integral part of a "continuing business relationship" as provided for in s 588FA(3)27. The Full Court agreed with the primary judge, however, that payments 5 to 11 were not part of a "continuing business relationship" between Gunns and Badenoch as, before payment 5 was made, any mutual assumption of such a relationship continuing had ceased28. In a subsequent judgment, the Full Court held that the continuing business relationship ended on 10 July 2012 when Badenoch ceased supplying Gunns for the second time29. As a result, the Full Court considered that, on the facts, the start date of the relevant relationship did not need to be decided as, whether that date be 26 March 2012 (the start of the period of six months ending on the relation-back day as prescribed by s 588FE(2)(b)(i)) or 30 March 2012 (the date of insolvency), the indebtedness of Gunns to Badenoch increased over the period of the continuing 24 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 602 [48(c)], applying Airservices Australia v Ferrier (1996) 185 CLR 483 at 501-502. (2001) 37 ACSR 477 at 504 [148] ("Sutherland v Eurolinx Pty Ltd"). 26 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 604-605 27 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 608 [72]. 28 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 609 [78]- 29 Badenoch Integrated Logging Pty Ltd v Bryant [No 2] [2021] FCAFC 111 at [9]. Jagot business relationship until 10 July 2012 so that the single transaction deemed by s 588FA(3) could not involve any unfair preference under s 588FA(1)(b)30. The peak indebtedness rule The context of the statutory provisions discloses that it cannot be assumed or inferred that, in incorporating the "running account principle" in s 588FA(3) of the Corporations Act, the legislature also intended to incorporate the "peak indebtedness rule". The predecessor to the Corporations Act, the Corporations Act 1989 (Cth), was amended by the Corporate Law Reform Act 1992 (Cth). The Explanatory Memorandum to the Corporate Law Reform Bill 1992 (Cth) said that the "Bill implements a number of recommendations of the Harmer Report in relation to claims"31 in insolvency. The Explanatory Memorandum, after referring to proposed ss 588FA, 588FB, 588FC, 588FD, 588FE, 588FF and 588FG, continued: "Proposed section 588FA - Unfair preferences 1039. Proposed section 588FA defines an 'unfair preference' to be a transaction to which a company and the creditors are parties and which results in the creditor receiving in respect of the debt that the company owes to the creditor more than the creditor would receive in respect of that debt if the transaction had been set aside and the creditor had to prove for the debt in the winding up of the company. 1042. Subsection 588FA(2) provides that where a transaction is, for a commercial purpose, an integral part of a continuing business relationship such as a running account between a creditor and the company (including such a relationship to which other persons are parties), it should not be attacked as a preference, but rather the effect of all the transactions which form the relationship between that creditor and the company should be taken into account as though they constituted a single transaction. This provision is aimed at embodying in legislation the principles reflected in the cases of Queensland Bacon Pty Ltd v Rees (1967) 115 CLR 266 and Petagna Nominees Pty Ltd & Anor v A E Ledger 1 ACSR 547. The effect of these principles is that it is implicit in the circumstances in which payments are made to reduce the outstanding balance in a running account 30 Badenoch Integrated Logging Pty Ltd v Bryant [No 2] [2021] FCAFC 111 at [21]. 31 Australia, House of Representatives, Corporate Law Reform Bill 1992, Explanatory Memorandum at [32]. Jagot between purchaser and supplier that there is a mutual assumption that the relationship of purchaser and supplier would continue as would the relationship of debtor and creditor. The net effect, therefore, is such that payments 'in' are so integrally connected with payments 'out' that the ultimate effect of the course of dealings should be considered to determine whether the payments are preferences." The reference in the Explanatory Memorandum to s 588FA(2) should be read as a reference to the current s 588FA(3). These parts of the Explanatory Memorandum reflect the recommendation in the Law Reform Commission's 1988 General Insolvency Inquiry ("the Harmer Report")32 that there "should be a statutory provision which allows the court to have regard to the relationship between the parties and, if appropriate, the history of transactions between them to determine if there has been a preferential transaction or transactions"33. The Harmer Report, as explained in Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher34, recommended the continuation of the policy that "transactions by which an insolvent individual or company disposed of property within a relevant period prior to the actual commencement of the formal insolvency in circumstances that are unfair to the general body of unsecured creditors" be voided35. Queensland Bacon Pty Ltd v Rees36, referred to in the Explanatory Memorandum, concerned, in part, the determination of a preference to a creditor where there is a "running account" between the debtor and creditor with "an expectation that further debits and credits will be recorded" and where, "[o]rdinarily, a payment, although often matching an earlier debit, is credited against the balance owing in the account"37. In Richardson v The Commercial Banking Co of Sydney Ltd, it was held that "where the payment forms an integral, an inseparable, part of an entire transaction its effect as a preference involves a consideration of the whole 32 Law Reform Commission, General Insolvency Inquiry, Report No 45 (1988). 33 Harmer Report, Summary of Report at 43 [131]. (2015) 254 CLR 489 at 500 [11]. 35 Harmer Report, vol 1 at 266 [629]. (1966) 115 CLR 266. 37 Airservices Australia v Ferrier (1996) 185 CLR 483 at 504-505. Jagot transaction"38. By reference to this principle, Barwick CJ in Queensland Bacon concluded that39: "it is enough if, on the facts of any case, the court can feel confident that implicit in the circumstances in which the payment is made is a mutual assumption by the parties that there will be a continuance of the relationship of buyer and seller with resultant continuance of the relation of debtor and creditor in the running account, so that, to use the expressions employed in Richardson's Case, 'it is impossible' – I interpolate, in a business sense – 'to pause at any payment into the account and treat it as having produced an immediate effect to be considered independently of what followed ...'." In Petagna Nominees Pty Ltd v A E Ledger Liquidator of Linun Pty Ltd (in liq)40, also referred to in the Explanatory Memorandum, Wallace and Franklyn JJ each referred41 to the statement in The Law of Company Liquidation42 that: "Genuine payments made by the company to reduce a general debit as it stands from day to day and in order to maintain a genuine business relationship that promises advantages to both the company and its creditor are not preferences. This is because there is a mutual assumption by the parties that the business relationship of buyer and seller will continue with the result that the relationship of debtor and creditor will continue in the running account between the parties. There is no attempt to terminate this relationship but rather to ensure its continuance to the mutual benefit of the parties. In these circumstances payments made by the company to its supplier should not be viewed in isolation and attacked as preferences." (1952) 85 CLR 110 at 129. (1966) 115 CLR 266 at 286 (footnote omitted). (1989) 1 ACSR 547 ("Petagna Nominees"). (1989) 1 ACSR 547 at 552-553 per Wallace J, 563 per Franklyn J (Malcolm CJ agreeing at 549). 42 McPherson, The Law of Company Liquidation, 3rd ed (1987) at 319 (footnotes omitted). Jagot Franklyn J also reproduced43 a summary of principles developed by Wootten J in M & R Jones Shopfitting Co Pty Ltd (in liq) v The National Bank of Australasia Ltd, including the proposition that44: "The mere fact that a payment is made on a running account does not protect it from scrutiny and if a point comes where payments are made with a view to terminating the running account, or greatly reducing the level of credit granted on the account, the effect of these payments may be a preference. It follows that the liquidator can choose any point during the statutory period in his endeavour to show that from that point on there was a preferential payment. However, this does not mean that the connection between such a payment and dealings prior to the chosen date is to be ignored." Other than in respect of the first sentence, this summary is not straightforward. It does not follow from the "running account principle" that a liquidator may choose the point during the prescribed period from which to identify a preference. Further, if the liquidator can do so, then the connection between that payment and earlier payments would be ignored, at least for the application of the "running account principle". The relevant point to be drawn from this discussion is that the focus of the two cases referred to in the Explanatory Memorandum, Queensland Bacon and Petagna Nominees, is the "running account principle", not the "peak indebtedness rule". The original source of the "peak indebtedness rule", the judgment of Barwick CJ in Rees v Bank of New South Wales45, was a case in which the liquidator had chosen a date representing the point at which the bank overdraft was at its highest as the start of the notional single transaction required to be assumed by the "running account principle". The bank claimed the defence of good faith (that it had no reason to suspect insolvency), that the date the liquidator selected was arbitrary, and that to determine whether there had been any preference it was necessary to consider the ultimate effect of all transactions within the entire prescribed six-month period ending on the relation-back day46. The High Court rejected the good faith defence. In response to the argument about the date selected by the liquidator, having said that it was "sufficient in the circumstances of this 43 Petagna Nominees (1989) 1 ACSR 547 at 564. (1983) 68 FLR 282 at 290. (1964) 111 CLR 210. 46 Rees v Bank of New South Wales (1964) 111 CLR 210 at 214-216. Jagot case to take the overall effect of the deposits and the withdrawals in the period"47, "It was also said in argument for the bank that it was not permissible for the liquidator to choose a date within the period of six months and to make a comparison of the state of the overdrawn account at that date and its state at the date of the commencement of the winding up. It was submitted that the proper comparison was between the debit in the account at the commencement of the statutory period of six months and the debit at the commencement of the liquidation – a comparison which in this case would result in a materially lesser figure than that reached by taking the liquidator's comparison. In my opinion the liquidator can choose any point during the statutory period in his endeavour to show that from that point on there was a preferential payment and I see no reason why he should not choose, as he did here, the point of the peak indebtedness of the account during the six months period." It should be inferred from their reasons that Kitto and Taylor JJ accepted this obiter dictum, albeit without analysis49. It may be accepted that, as the liquidators stressed in this Court, in Queensland Bacon Barwick CJ referred to related transactions "from the date of the first impugned payment" and "the first payment which is impugned"50. It may also be assumed that his Honour had in mind in this regard his statement in Rees v Bank of New South Wales51 which is the source of the "peak indebtedness rule". The rule, if it may be called such, merely reflects that a liquidator discharging their functions and powers under ss 477 and 478 of the Corporations Act to collect the assets of a company in liquidation would seek to identify any unfair preference in the prescribed period ending on the relation-back day in the context of a running account by comparing the position at the end of that period with the position at the point of peak indebtedness; the effect of so doing will be to maximise both the 47 Rees v Bank of New South Wales (1964) 111 CLR 210 at 220. 48 Rees v Bank of New South Wales (1964) 111 CLR 210 at 220-221. 49 See Rees v Bank of New South Wales (1964) 111 CLR 210 at 221-222 per Kitto J; see also at 229 per Taylor J ("... at the material time, which I take to be on and after 1st December 1960 ...", 1 December 1960 being the date of the first payment selected by the liquidator). (1966) 115 CLR 266 at 282. (1964) 111 CLR 210 at 220-221. Jagot likelihood of ascertaining an unfair preference and the amount of any unfair preference. What is more difficult to accept is that, in referring to Queensland Bacon and Petagna Nominees, the Explanatory Memorandum contemplated that the "peak indebtedness rule" formed part of the "running account principle". The context of the relevant discussion in the Explanatory Memorandum is the inclusion of the "running account principle" in the Corporate Law Reform Bill 1992. The Explanatory Memorandum explains (in part) the rationale underlying the "running account principle". No rationale is to be found in the Explanatory Memorandum for the "peak indebtedness rule". The rule also remains unexplained in the decisions which embody it, other than that it is obvious that if the relevant "relationship" between debtor and creditor is taken to start at the first transaction between them, there could never be an unfair preference because the account will stand at zero at that time. It may be inferred that it is for this reason that, in Rees v Bank of New South Wales, Barwick CJ conceived of the possible starting points for the relevant "relationship" to be either the date on which the prescribed period ending on the relation-back day commenced or the date selected by the liquidator52. This context to the inclusion of s 588FA(3) (as s 588FA(2)) in the Corporations Act 1989 is relevant because it indicates that approaching Pt 5.7B on the assumption that the legislature intended to give effect to the "peak indebtedness rule" as a part of the existing law is fraught. This is not a case in which Parliament has repeated in a statute words the meaning of which has been judicially determined53. It is a case in which Parliament has given effect to the "running account principle". As other cases have also made clear, s 588FA(3) of the Corporations Act is to be read as embodying the "running account principle" and its associated requirement to determine the question of an unfair preference by reference to the ultimate effect of the transactions during the relevant prescribed period in the running account as a whole54. As noted, sub-ss (2) to (6B) of s 588FE identify the circumstances in which a transaction is voidable. The circumstances require an "insolvent transaction" (s 588FE(2)), an "uncommercial transaction", an "unfair preference", an "unfair loan", or an "unreasonable director-related transaction" (s 588FE(2A) to (2D)), or (1964) 111 CLR 210 at 221. 53 Re Alcan Australia Ltd; Ex parte Federation of Industrial, Manufacturing and Engineering Employees (1994) 181 CLR 96 at 106. 54 See, eg, Airservices Australia v Ferrier (1996) 185 CLR 483; V R Dye & Co v Peninsula Hotels Pty Ltd (in liq) [1999] 3 VR 201. Jagot a combination of such or other prescribed circumstances (s 588FE(3) to (6B)). In each case, the time of the entry into or of the giving of effect to the transaction is a part of the identified circumstances. The time must be within the period prescribed for each relevant kind of transaction. That period is identified as starting from or ending at the relation-back day or after that day but on or before the day the winding-up began. It follows that s 588FC, concerning insolvent transactions (which, on the terms of that section, requires the transaction to be an unfair preference or an uncommercial transaction), is capable of operating only in respect of transactions within the relevantly prescribed period in sub-ss (2) to (6B) of s 588FE. This context frames the operation of s 588FA. Section 588FA pre-supposes the existence of s 588FE and, in particular, the prescribed period within which, if a transaction has been entered into or given effect, the transaction may be determined by a court to be a voidable transaction. Section 588FA also pre-supposes the existence of s 588FC, which, critically, only applies relevantly where a transaction is entered into when a company is insolvent or the transaction has the effect of causing the company to become insolvent. This context cannot be ignored in giving meaning to s 588FA(3). Paragraphs (a) and (b) of s 588FA(3) are the gateway provisions to the operative provision in s 588FA(3)(c). Paragraphs (a) and (b) identify both the required kind of transaction (a transaction which is, for commercial purposes, an integral part of a specified kind of relationship) and the required kind of relationship (a continuing business relationship such as a running account) in which the level of the company's net indebtedness to the creditor is increased and reduced as a result of a series of transactions forming part of the relationship. the "continuing business relationship" referred "[A] continuing business relationship" in s 588FA(3)(a) may start either before or during the prescribed period. "[T]he relationship" twice appearing in s 588FA(3)(b) s 588FA(3)(a). But neither provision is concerned with "a continuing business relationship" at any time. Both provisions are functionally tethered to s 588FA(3)(c) and (d). Paragraphs (c) and (d) of s 588FA(3) provide how s 588FA(1), concerning unfair preferences – which are necessarily transactions in a period prescribed by s 588FE(2) to (6B) and which are entered into when a company is insolvent or have the effect of causing the company to become insolvent – applies to transactions of the kind made as an integral part of a continuing business relationship of the kind identified in s 588FA(3)(a) and (b). Section 588FA(3)(c), in providing that s 588FA(1) applies "in relation to all the transactions forming part of the relationship as if they together constituted a single transaction", cannot mean all the transactions forming part of the relationship from the first transaction which started the relationship, if the relationship started before the prescribed period. It cannot mean this because the function of s 588FA(3)(c) is to dictate how s 588FA(1) applies and the operation of that provision is confined to the relevant period prescribed by s 588FE(2) to (6B) and to the premise of Jagot insolvency under s 588FC. That is, where the relationship started before the prescribed period, the relevant transactions forming part of the relationship for the purpose of s 588FA(3)(c) must be transactions within the prescribed period and which are entered into when a company is insolvent or have the effect of causing the company to become insolvent. The natural and ordinary meaning of s 588FA(3)(c) of the Corporations Act is that "all the transactions forming part of the relationship" means "all the transactions forming part of the relationship" which are within the relevant period prescribed by s 588FE(2) to (6B) and which were entered into when the company was insolvent or the effect of which was to cause the company to become insolvent. Such transactions, as a result, might be an unfair preference on the application of s 588FA(1) (and assuming the other relevant requirements of s 588FE, as applicable, are satisfied). This does not involve reading any additional words into s 588FA(3)(c). Rather, it gives the language of s 588FA(3)(c) its ordinary and natural meaning in its full context. Section 588FA(3)(d) then operates by reference to that deemed "single transaction". The power of a court under s 588FF(1) of the Corporations Act to make orders if it is satisfied that a transaction of a company is voidable is engaged "on the application of a company's liquidator". This reflects the liquidator's functions and powers under ss 477 and 478 of the Corporations Act. It also reflects that it is for the liquidator (at least in the first instance) to decide what the liquidator's statutory and fiduciary duties to the company require in the circumstances55. This underlies the fact that a court's power under s 588FF is conditioned on an application by a liquidator and, in this sense, depends on a choice or election of a liquidator to impugn the transaction56. The effect of the liquidators' arguments is that, in deciding if it is satisfied that a transaction is voidable because of s 588FE, a court is bound by the decision of the liquidator as to the first transaction forming part of the "relationship" for the purpose of the deemed "single transaction" in s 588FA(3)(c). This would be the effect of the "peak indebtedness rule" if embodied in s 588FA(3)(c) read with s 588FF(1). But, as discussed, while there can be no doubt that s 588FA(3) is a statutory embodiment of the "running account principle", the same conclusion cannot be drawn from the statutory context in respect of the "peak indebtedness rule". 55 eg, Pace v Antlers Pty Ltd (in liq) (1998) 80 FCR 485 at 497. 56 eg, Williams v Lloyd (1934) 50 CLR 341 at 373-374; Brady v Stapleton (1952) 88 CLR 322 at 333; N A Kratzmann Pty Ltd (in liq) v Tucker [No 1] (1966) 123 CLR Jagot The fact that the liquidator determines which transaction is to be the subject of an application under s 588FF(1) does not enable the liquidator to determine the first transaction forming part of "the relationship" for the purpose of the deemed "single transaction" in s 588FA(3)(c). That date is dictated by the operation of s 588FA(3)(c). This is consistent with the fact that it is for the court, not the liquidator, to determine if it is satisfied that a transaction is voidable "because of" s 588FE, which, insofar as an "insolvent transaction" is concerned, relevantly requires the transaction to be an unfair preference as provided for in ss 588FC and 588FA. In the context of a transaction which is an integral part of a continuing business relationship as provided for in s 588FA(3)(a) and (b), an insolvent transaction is only voidable as an unfair preference "because of" s 588FE if that is so by application of s 588FA(1) to all the transactions forming part of the relationship within the period prescribed by s 588FE. This construction gives the language of the provisions its natural and ordinary meaning, without reading in words, and accords with the policy choice underlying the statutory embodiment of the "running account principle" in s 588FA(3) of the Corporations Act. That principle, as embodied in s 588FA(3) of the Corporations Act, unavoidably qualifies the object of Pt 5.7B to ensure "equality of distribution amongst creditors of the same class"57. Contrary to the arguments for the liquidators, their proposed construction giving effect to the "peak indebtedness rule" is not open on the language of s 588FA. Nor, for the reasons given, can it be said that s 588FA was intended to embody the "peak indebtedness rule". It may be accepted that the statutory choice of confining the relevant transactions forming part of the relationship to the period prescribed by s 588FE(2) to (6B) and on the premise of insolvency is arbitrary, but that results from the legislative choice made. The arbitrariness that would result from the liquidators' proposed construction arises from the choice made by a liquidator. It is also not the case that the liquidators' construction serves the purpose of the "running account principle", whereas the construction determined to be correct above defeats that purpose. The purpose of the "running account principle" is not to maximise the potential for the claw-back of money and assets from a creditor, but that is the effect of the "peak indebtedness rule". The "running account principle" recognises that a creditor who continues to supply a company on a running account in circumstances of suspected or potential insolvency enables the company to continue to trade to the likely benefit of all creditors. The prescription of periods within which all transactions in a continuing business relationship are deemed to be a "single transaction" and, accordingly, may be netted off against each other to determine any unfair preference serves this purpose. 57 G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662 at 675 [30]. Jagot The reasoning in Airservices Australia v Ferrier also does not support the liquidators' arguments. Dawson, Gaudron and McHugh JJ there explained that58: "If at the end of a series of dealings, the creditor has supplied goods to a greater value than the payments made to it during that period, the general body of creditors are not disadvantaged by the transaction – they may even be better off. The supplying creditor, therefore, has received no preference. Consequently, a debtor does not prefer a creditor merely because it makes irregular payments under an express or tacit arrangement with the creditor that, while the debtor makes payments, the creditor will continue to supply goods. In such a situation, the court does not regard the individual payments as preferences even though they were unrelated to any specific delivery of goods or services and may ultimately have had the effect of reducing the amount of indebtedness of the debtor at the beginning of the six-month period. If the effect of the payments is to reduce the initial indebtedness, only the amount of the reduction will be regarded as a preferential payment." The reference to "the beginning of the six-month period" in this statement should not go unnoticed. The facts in Airservices Australia v Ferrier did not require consideration of the "peak indebtedness rule" as the liquidators had applied to recover nine payments within the prescribed period of six months ending on the relation-back day. Construing s 588FA(3) to exclude the operation of the "peak indebtedness rule" also does not suffer from "two fundamental difficulties" the liquidators identified. The first proposed difficulty, that a company may become insolvent after the relation-back day (so that, in theory, a transaction that is not an "insolvent transaction" under s 588FC might be an integral part of a "continuing business relationship" and therefore part of the deemed "single transaction" under s 588FA(3)), is no difficulty at all. The statutory provisions work together. To be a voidable transaction, all requirements specified in one or more of s 588FE(2) to (6B) must be satisfied. Where there is a requirement that the transaction be an "insolvent transaction" (s 588FE(2), (3), (4), and (5)), that requirement must also be satisfied. By s 588FC, a transaction is only an insolvent transaction if it is, amongst other things, an unfair preference in accordance with s 588FA. It follows from the same reasoning as set out above concerning the purpose of s 588FA (to identify voidable transactions) that "all the transactions forming part of the relationship" for the purpose of the deemed "single transaction" in s 588FA(3)(c) must mean "the relationship" starting at the beginning of the prescribed period, or the date of insolvency, or (if the relationship started after the beginning of the (1996) 185 CLR 483 at 503-504 (footnotes omitted). Jagot prescribed period or the date of insolvency) the beginning of the continuing business relationship, whichever is the later. These objective facts determine the operation of the provisions, not the choice made by a liquidator in the application under s 588FF. Again, this is not to read words into s 588FA(3), but to give meaning to the provision in its overall context as part of an integrated scheme directed at the identification of voidable transactions. The second proposed difficulty, that fixing the start of the deemed single transaction as the start of the applicable relation-back period would lead to the perverse result that the "running account" defence would operate more favourably to parties intending to defraud creditors, and to related party recipients of a preference, than to innocent, unrelated third parties, also does not arise. The longer prescribed periods in sub-ss (4) and (5) of s 588FE, for example, do not operate in isolation. They also require that the transaction be an insolvent transaction with a related entity (s 588FE(4)(b)) or an insolvent transaction for, amongst other things, the purpose of defeating creditors (s 588FE(5)(b)). The overall interaction of these longer prescribed periods with the operation of s 588FA(3) in the event of transactions forming an integral part of a continuing business relationship will be fact dependent. Accordingly, the cases which concluded that the "peak indebtedness rule" is to be read into s 588FA(3) of the Corporations Act wrongly assumed that the "running account principle" included the "peak indebtedness rule"59, did not involve full argument on or reasoning about the issue60, or must now be considered to be wrong in that respect61. It is also not the case that the "peak indebtedness rule" is irreconcilable with the "running account principle" and the associated need to consider the ultimate effect of the transactions forming part of the relevant continuing business 59 eg, Rothmans Exports Pty Ltd v Mistmorn Pty Ltd (in liq) (1994) 125 ALR 442 at 453; CSR Ltd v Starkey (1994) 13 ACSR 321 at 325. See also, to the contrary, Timberworld Ltd v Levin [2015] 3 NZLR 365 at 382 [52], 384 [61], 386 [69], [71], 388 [80]-[81] (especially at 388 [80] fn 72), 390-391 [86]-[90], 391 [93]-[94], in which the New Zealand Court of Appeal, in considering the provision in the Companies Act 1993 (NZ) modelled on s 588FA of the Corporations Act, concluded that the "peak indebtedness rule" is not part of the law in New Zealand. 60 Sutherland v Eurolinx Pty Ltd (2001) 37 ACSR 477 at 503 [140]; Sutherland v Lofthouse (2007) 214 FLR 157 at 171 [50], 172 [53], [54]; Clifton (as liquidator of Adelaide Fibrous Plasterboard Linings Pty Ltd (in liq)) v CSR Building Products Pty Ltd [2011] SASC 103 at [13]. 61 Olifent v Australian Wine Industries Pty Ltd (1996) 130 FLR 195. Jagot relationship62. Once it is accepted that the first transaction in the continuing business relationship cannot be the first transaction between the creditor and debtor if that occurred before the prescribed period, but must be a later transaction, then (leaving aside a case in which the continuing business relationship itself starts during the prescribed period and after the date of insolvency) there was (and is) a policy choice available between two starting points. Barwick CJ recognised that this was the choice in Rees v Bank of New South Wales and saw no reason why the choice should not be that of the liquidator63. The first choice, selecting the time of peak indebtedness within the prescribed period when a transaction may be voidable, maximises the potential for there to be an unfair preference and the amount of any unfair preference. The second choice, by not selecting the time of peak indebtedness, permits the facts as they exist to dictate if there is an unfair preference and the amount of any unfair preference. Both choices are reconcilable with the "running account principle", but in enacting Div 2 of Pt 5.7B of the Corporations Act Parliament's language fixed upon the first transaction in the relationship capable of being a voidable transaction and, accordingly, made the second choice. For these reasons, the date of the first transaction in the relevant relationship between Gunns and Badenoch in accordance with s 588FA(3) of the Corporations Act is 30 March 2012, being the later of the date of the start of the prescribed period under s 588FE(2)(b) (26 March 2012, the relation-back day being 25 September 2012 when the liquidators were appointed as administrators of Gunns) and the date of insolvency (30 March 2012), the continuing business relationship having started years before the prescribed period. Continuing business relationship The second question arising in this appeal concerns the proper approach to determining whether a "transaction is, for commercial purposes, an integral part of a continuing business relationship (for example, a running account) between a company and a creditor of the company". This is the statutory question mandated by s 588FA(3)(a). It is a question of objectively ascertained fact. This factual question is not to be decided by applying one or more of the ways in which judges have explained their decision about that question in other cases concerned with different facts. To do so would be to substitute words of judicial explanation for the language of the statute. Argument was directed to issues about the assumptions or purposes of the debtor and creditor and whether the "sole" or "dominant" assumption or purpose 62 cf Timberworld Ltd v Levin [2015] 3 NZLR 365 at 388 [80]-[81]; Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 617 [118]. (1964) 111 CLR 210 at 220-221. Jagot of one or both of the parties in making and receiving an impugned payment was to continue the business relationship between them. This debate reflects a misunderstanding, and misapplication, of what was said in Richardson64, Queensland Bacon65, and Airservices Australia v Ferrier66 as to the relevance of parties' purposes and assumptions when determining if a continuing business relationship has continued or ceased. Those cases speak of a search for a "business purpose common to both parties"67, a "mutual assumption"68, or a consideration of the "business purpose and context of the payment"69. Those statements should be understood to mean no more than that the task is one of characterisation of the facts, involving an objective ascertainment of the "business character"70 of the relevant transaction – whether "a transaction is, for commercial purposes, an integral part of a continuing business relationship". The concept of the "mutual assumption" or common business "purpose" of the parties in relation to the transaction may be useful, but only to the extent that it serves as a description of the objective ascertainment of the "business character" of the transaction which is required to answer the statutory question. To parse the terms "mutual assumption" or common business "purpose", searching for their metes and bounds as if they were the language of a statute, is impermissibly to divert attention from that statutory question. What one or both of the parties intended (if ascertainable) may be relevant to, but is not determinative of, the statutory question. There must be a continuing business relationship and the transaction must, for commercial purposes, be an integral part of that continuing business relationship. In objectively characterising those matters – whether, on all the facts, there is a continuing business relationship (and the transaction is, for commercial purposes, an integral part of that continuing business relationship), there is no longer such a relationship, or that relationship has ended and been (1952) 85 CLR 110 at 133. (1966) 115 CLR 266 at 286. (1996) 185 CLR 483 at 502-506. 67 Richardson (1952) 85 CLR 110 at 133. 68 Queensland Bacon (1966) 115 CLR 266 at 286. 69 Airservices Australia v Ferrier (1996) 185 CLR 483 at 502. 70 Richardson (1952) 85 CLR 110 at 132, quoted in Airservices Australia v Ferrier (1996) 185 CLR 483 at 502. Jagot replaced by another (as occurred in this case) – it is necessary to consider the whole of the evidence of the "actual business" relationship between the parties71. For example, in Airservices Australia v Ferrier, only the last of several payments was held to constitute an unfair preference. The decisive conclusion for the other payments was that they formed part of the continuing business relationship, "which contemplated further debits and credits", so that the payments "were intended to continue and not determine that relationship". As such, those payments were "so connected with the continuing provision of services, that it is the ultimate and not the immediate effect of each payment on the relationship ... that is relevant"72. Further, Dawson, Gaudron and McHugh JJ said that the "appropriation of a payment to a past debt will generally have no bearing on the issue of preference", as73: "Where the relationship appears to be a continuing one, the fact that the parties agree to appropriate the payment to the oldest debt is neither unusual nor surprising. In that context, it can seldom, if ever, provide any ground for concluding that the payment was not connected with the future supply of goods or services." To adopt their Honours' words74: "the whole point of the doctrine emanating from Richardson, Queensland Bacon and Rees ... is designed to ensure that the effect of a payment that induces the further supply of goods and services is evaluated by the ultimate effect that it has on the financial relationship of the parties." The different conclusion in respect of the last payment in Airservices Australia v Ferrier resulted from the fact that, although the creditor believed it would continue to supply services to the debtor and in fact did so after the last payment, that payment was made "looking backwards rather than forwards; looking to the partial payment of the old debt rather than the provision of continuing services"75. In so concluding, Dawson, Gaudron and McHugh JJ were not suggesting that a subjective intention of a creditor to reduce past indebtedness meant that the continuing business relationship would cease (clearly not, given the 71 Richardson (1952) 85 CLR 110 at 132; Airservices Australia v Ferrier (1996) 185 CLR 483 at 502; see also Queensland Bacon (1966) 115 CLR 266 at 286. 72 Airservices Australia v Ferrier (1996) 185 CLR 483 at 507-508. 73 Airservices Australia v Ferrier (1996) 185 CLR 483 at 508. 74 Airservices Australia v Ferrier (1996) 185 CLR 483 at 509. (1996) 185 CLR 483 at 510. Jagot treatment of the earlier eight payments). They were saying that, on the whole of the evidence, the objectively inferred character of the payment was to reduce past indebtedness, and not to induce the continuation of supply. On this basis, the whole of the last payment was to be characterised as an unfair preference. It follows that it is not the case that a continuing business relationship necessarily continues unless and until it can be inferred that the sole mutual assumption or purpose of the creditor and debtor in respect of the transaction is the reduction of indebtedness. That is not what was being said in Airservices Australia v Ferrier76. The statutory task remains one of characterisation of the facts involving an objective ascertainment, on the whole of the evidence, of the business character (for commercial purposes) of the transaction in issue. Payments 1 and 2 and 5 to 11 The dispute about payments 1 and 2 and 5 to 11 exposes the operation of the discussion above. For this reason, Badenoch's proposed cross-appeal in respect of payments 5 to 11 should be the subject of a grant of special leave to appeal to this Court. There is no dispute that Badenoch and Gunns were in a continuing business relationship from 2003. As noted, from 2010 onwards, Gunns was regularly late in making payments and often made payments that were only in partial satisfaction of invoiced amounts such that, by the end of February 2012, Gunns owed Badenoch approximately $1.64 million77. Payments 1 and 2 Before payments 1 and 2 were made on 30 March and 13 (or 1678) April 2012 respectively, Badenoch had issued a letter of demand in respect of Gunns' indebtedness, ceased supplying Gunns with timber for 10 days despite Gunns being Badenoch's sole customer, and demanded a bank guarantee of $1 million to secure supply. Gunns proposed a progressive payment plan in response79. Badenoch accepted this proposal on the basis that if Gunns' indebtedness exceeded (1996) 185 CLR 483 at 501-502. 77 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 606 [58]. 78 There was some uncertainty about the actual dates of the impugned payments: see Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 593 [7]. 79 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 434 [48]. Jagot $1 million Badenoch would immediately cease supply80. Badenoch also reserved the right to enforce its contract immediately81. Gunns made payments 1 and 2 to Badenoch to "get deliveries back on track" and Badenoch continued to supply timber82. The necessary focus is on the "actual business" relationship83, "in a business sense"84. The issue is whether it is possible to treat payments 1 and 2, "for commercial purposes", as an integral part of the "continuing business relationship" or as so unconnected from the subsequent debits to the account to enable treating them "as having produced an immediate effect to be considered independently of what followed"85. What followed in the present case was payments 3 and 4 on 1 (or 2) May 2012 and 7 (or 8) June 2012 respectively, and supplies of timber. The actual business relationship, evaluated in its commercial context, is critical. In the present case, Gunns had often made only partial payments of Badenoch's invoices since 2010, but the agreement and the business relationship continued. The controlling minds of Badenoch believed that Gunns would ultimately be in a position to pay all of Badenoch's outstanding invoices86. The temporary cessation of supply and negotiation of additional credit terms in March 2012 did not cause Gunns or Badenoch to consider that their business relationship was coming to an end. To the contrary, they were working towards their business relationship continuing and believed it would do so (and, indeed, it did do so)87. The mere change in credit terms between Gunns and Badenoch in March 2012 did not operate to bring their continuing business relationship to an end. Nor is the fact 80 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 81 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 435 [49]. 82 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 606-607 [65]; Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 434 83 Richardson (1952) 85 CLR 110 at 132; Airservices Australia v Ferrier (1996) 185 CLR 483 at 502; see also Queensland Bacon (1966) 115 CLR 266 at 286. 84 Queensland Bacon (1966) 115 CLR 266 at 286. 85 Richardson (1952) 85 CLR 110 at 133. 86 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 606 [59], 87 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 606 [65], Jagot that Badenoch and Gunns also wanted to reduce Gunns' past indebtedness determinative88. The mutual assumption or purpose as between Gunns and Badenoch that should be inferred as a matter of objective fact from all of the circumstances in the present case is that payments 1 and 2 were made to induce further supply. Their mutual intention that the payments would also reduce Gunns' past indebtedness, in the context of the actual business relationship as a whole, was not such as to characterise the payments as having been made to reduce past indebtedness, rather than89 to induce the continuation of supply. To conclude otherwise would be to "ignore the practical relationship between the payments and the subsequent supply of services and the ultimate effect of the dealings between the parties [and] would not advance the purpose for which"90 s 588FA(3) of the Corporations Act was enacted. The Full Court's conclusion to the same effect91 is correct. Payments 5 to 11 Payments 5 to 11 were made between 6 (or 8) August and 21 (or 24) September 201292. By early July 2012 Badenoch had again decided to cease supplying Gunns due to its inability to obtain payment93. Badenoch's lawyers wrote to Gunns on 3 July 2012 demanding payment, threatening to commence legal proceedings to recover a debt of $737,633.68, and saying that once Badenoch had "finalised those services which have been agreed to between it and your Regional Management", Badenoch would cease to provide any further services to Gunns until non-payment was rectified94. On 10 July 2012, Badenoch ceased to provide services to Gunns95. On 11 July 2012, Gunns proposed a payment plan in response to the letter from Badenoch's lawyers. On 31 July 2012, Badenoch wrote to Gunns 88 Airservices Australia v Ferrier (1996) 185 CLR 483 at 502. 89 Airservices Australia v Ferrier (1996) 185 CLR 483 at 510. 90 Airservices Australia v Ferrier (1996) 185 CLR 483 at 509. 91 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 608 [72]. 92 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 592-593 [5]. 93 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 435-436 94 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 436 [63]. 95 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 437 [64]. Jagot saying that Badenoch was owed $1.36 million and the non-payment was a breach of a fundamental term of the contract, amounting to a repudiation of the agreement. "Before we accept Auspines [sic] repudiation, we propose to investigate the opportunity for a transition to a mutually acceptable termination of the agreement at the end of three or four months. We understand that you would regard it as helpful if we were to supply logs. Subject to the following arrangements, we are willing to meet this need in the short term with a gradual tapering off while another contractor gets up to speed." Badenoch proposed termination of the agreement for supply between it and Gunns "on the basis of a payment plan comprising an immediate payment of $300,000 and weekly instalments of $150,000 until all outstanding debt was paid. In the meantime, Badenoch would not take action in respect of the current debt whilst instalments were paid and would cooperate with Gunns to meet timber supply requirements in the course of a structured handover to another contractor."97 Gunns accepted this proposal on 2 August 201298. Payment 5 was the first payment under and in accordance with the new agreement reached on 2 August 2012. In these circumstances, Badenoch's submission that the Full Court erred in finding that the change in the business relationship between Gunns and Badenoch meant that payments 5 to 11 were not made as part of that relationship99 must be rejected. Badenoch's argument is that the agreement reached on 2 August 2012 was that the business relationship would cease once another contractor had been appointed100. According to Badenoch, this did not mean that the business relationship between Badenoch and Gunns ceased by 2 August 2012, given that Badenoch continued to supply to Gunns until September 2012101. Badenoch submitted that it could readily be inferred that payments 5 to 11 were made to induce the provision of future services, with the expectation by both parties that 96 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 439 [77]. 97 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 439 [77]. 98 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 439 [79]. 99 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 609 [79]. 100 See the letter referred to in [93] above: "... we are willing to meet this need in the short term with a gradual tapering off while another contractor gets up to speed". 101 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 440 [93]. Jagot future credits and debits would be recorded, albeit also with the intention that at some point in the future that relationship would come to an end. These submissions are disconnected from the actual business relationship between Gunns and Badenoch, at least by 2 August 2012. By that time, in a practical "business sense"102, the pre-existing business relationship between Gunns and Badenoch had ceased. They had agreed that their agreement would cease and also agreed a transition plan towards the cessation of supply. Badenoch was intent on supplying for the purpose of maximising the reduction of Gunns' debt to it before the handover to another contractor103. Gunns knew from Badenoch's letter of 31 July 2012 it would need to find another contractor104. As a result, the fact that some supply continued after the 2 August 2012 agreement is immaterial. That supply was not provided pursuant to the pre-existing business relationship. It was provided pursuant to the agreed transition plan to another contractor. The continuing business relationship between Gunns and Badenoch had ceased by no later than 2 August 2012, before payment 5 was made. For these reasons, the Full Court's conclusion to the same effect105 is correct. The end of the continuing business relationship The liquidators submitted that the Full Court correctly concluded in its first judgment that the continuing business relationship ceased by the end of June 2012, but then found in its second judgment that the continuing business relationship did not cease until 10 July 2012. The Full Court did not find that the continuing business relationship ceased by or on 30 June 2012 in its first judgment. It considered that the primary judge had so found and concluded that it "is clear that the continuing business relationship continued throughout this period up to the end of June 2012, and that payments 3 and 4 (which were referable to the March and April invoices) formed an integral part of that relationship"106. In so concluding, the Full Court was not embracing the primary judge's finding about the cessation of the continuing business relationship by or on 30 June 2012. Their Honours were agreeing with the primary judge that payments 3 and 4 were part of that continuing business relationship. As those payments were made on or before 8 June 2012, the 30 June 102 Queensland Bacon (1966) 115 CLR 266 at 286. 103 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 439 [77]. 104 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 439 [77]. 105 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 609 [79]. 106 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 608 [75]. Jagot 2012 date had no significance for the Full Court in its first judgment. This also follows from the fact that in its first judgment the Full Court said that payments 5 to 11, "being payments made after 31 July 2012, were not a part of a continuing business relationship"107. By the second judgment, it was apparent that the start and end date of the continuing business relationship in accordance with s 588FA(3) mattered because of the changing state of Gunns' indebtedness108. As determined above, the date of the first transaction in the relationship in accordance with s 588FA(3) is 30 March 2012. At that time, Gunns' debt to Badenoch was $410,965.07109. On 31 July 2012, Badenoch rendered an invoice in the sum of $194,273.06110. This is after the date on which the primary judge had found the continuing business relationship ceased111. In its second judgment the Full Court concluded that the continuing business relationship ceased on 10 July 2012, being the date on which Badenoch ceased supply for the second time112. While the invoice of 31 July 2012 was rendered after this date, it related to supply by Badenoch before this date. The Full Court, accordingly, concluded that the 31 July 2012 invoice was a transaction forming part of the continuing business The rendering of the 31 July 2012 invoice gave rise to an obligation on the part of Gunns to pay as and when required. The rendering of the invoice, accordingly, is a "transaction" within the meaning of s 9 of the Corporations Act. The (undisputed) fact that the invoice related to work before 10 July 2012 means that the obligation to pay which arose on 31 July 2012 would be an integral part of the continuing business relationship if the relationship continued until 10 July 2012. The Full Court did not err in so concluding. On 3 July 2012, Gunns and Badenoch were still contemplating supply being continued under the agreement as modified in March if the non-payment was rectified. Further, at that time, 107 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 609 [79]. 108 Badenoch Integrated Logging Pty Ltd v Bryant [No 2] [2021] FCAFC 111 at [3]- 109 Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 592 [5]. 110 Badenoch Integrated Logging Pty Ltd v Bryant [No 2] [2021] FCAFC 111 at [3]; Badenoch Integrated Logging Pty Ltd v Bryant (2021) 284 FCR 590 at 592 [5]. 111 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 447 [109]. 112 Badenoch Integrated Logging Pty Ltd v Bryant [No 2] [2021] FCAFC 111 at [9]. 113 Badenoch Integrated Logging Pty Ltd v Bryant [No 2] [2021] FCAFC 111 at [9]. Jagot Badenoch was merely contemplating termination of the agreement if Gunns did not rectify the non-payment114. This is sufficient to conclude that the continuing business relationship did not cease before 10 July 2012 when Badenoch ceased supply. The Full Court's conclusion that, as the net indebtedness of Gunns to Badenoch increased from 30 March 2012 ($410,965.07) to 31 July 2012 (relating back to supply provided before 10 July 2012) ($1,559,594.08), there could be no unfair preference relating to the single transaction deemed by s 588FA(3), and its application of s 588FA(1) to that deemed single transaction as required by s 588FA(3)(c) and (d), are correct. Orders The orders which should be made are: The appeal be dismissed. Special leave be granted to the respondent to cross-appeal to this Court from part of the judgment and order of the Full Court of the Federal Court of Australia given and made on 24 June 2021. The cross-appeal be dismissed. The appellants pay the respondent's costs of the appeal and the respondent pay the appellants' costs of the cross-appeal, such costs to be set off against each other. 114 Bryant v Badenoch Integrated Logging Pty Ltd (2020) 144 ACSR 423 at 436 [63].
HIGH COURT OF AUSTRALIA PLAINTIFF M150 OF 2013 BY HIS LITIGATION PLAINTIFF AND MINISTER FOR IMMIGRATION AND BORDER PROTECTION & ANOR DEFENDANTS Plaintiff M150 of 2013 v Minister for Immigration and Border Protection [2014] HCA 25 20 June 2014 ORDER The questions asked by the parties in the special case dated 16 April 2014 and referred for consideration by the Full Court be answered as follows: Question 1 Is the Minister's determination made on 4 March 2014 pursuant to s 85 of the Migration Act invalid? Answer Yes. Question 2 What, if any, relief should be granted to the plaintiff? Answer A writ of mandamus directing the first defendant to consider and determine the plaintiff's application for a Protection (Class XA) visa according to law. Question 3 Who should pay the costs of the special case? Answer The defendants. Representation R M Niall SC with C L Lenehan and S M Keating for the plaintiff (instructed by Allens Lawyers) S P Donaghue QC with P D Herzfeld for the defendants (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Plaintiff M150 of 2013 v Minister for Immigration and Border Protection Migration – Refugees – Protection visas – Power of Minister under s 85 of Migration Act 1958 (Cth) to determine maximum number of visas of specified class granted in specified financial year, in circumstances where s 65A imposed time limit in which protection visa applications must be decided – Minister signed instrument limiting number of protection visas granted in current financial year – Plaintiff's protection visa application not determined by Minister pursuant to that determination – Whether power under s 85 extended to protection visas – Whether instrument valid. Words and phrases – "harmonious construction", "implied repeal", "leading provision", "legislative instrument", "subordinate provision". Legislative Instruments Act 2003 (Cth), s 56. Migration Act 1958 (Cth), ss 36, 39, 65, 65A, 84, subdiv AH. Introduction This proceeding, referred by way of special case to the Full Court, raises the question whether the power, conferred on the Minister for Immigration and Border Protection ("the Minister") by s 85 of the Migration Act 1958 (Cth) ("the Migration Act"), to determine the maximum number of visas of a specified class that may be granted in a specified financial year, applies to protection visas. The Minister made a determination on 4 March 2014 limiting the number of Protection (Class XA) visas that could be granted in the financial year ending 30 June 2014. The plaintiff is an applicant for a protection visa who, by reason of the determination, if it be valid, cannot be granted a visa on or before 30 June Some classes of visa are created by the Migration Act and some by regulation made pursuant to s 31(1) of that Act. The protection visa is a class of visa created by the enactment of s 36(1) of the Migration Act, which came into effect on 1 September 19941. Criteria for the grant of visas of a specified class may be prescribed by regulation2. Some criteria are set out in the Act. Uniquely among the classes of visa for which the Act itself provides, a criterion for the grant of a protection visa is expressed in terms of Australia's international obligations. That criterion, set out in s 36(2)(a), requires the applicant for a protection visa to be: "a non-citizen in Australia in respect of whom the Minister is satisfied Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol"3. The coverage of s 36 was extended, by amendments made in 20114, to non- citizens in respect of whom the Minister is satisfied Australia has protection 1 Migration Reform Act 1992 (Cth), s 10, inserting s 26B into the Migration Act (renumbered as s 36 of the Act by the Migration Legislation Amendment Act 1994 (Cth)). 2 Migration Act, s 31(3). The power to make regulations prescribing criteria extends to the classes of visa set out in ss 32, 36, 37, 37A and 38B of the Act. 3 The "Refugees Convention" means the Convention relating to the Status of Refugees done at Geneva on 28 July 1951; the "Refugees Protocol" means the Protocol relating to the Status of Refugees done at New York on 31 January 1967 — Migration Act, s 5(1). 4 Migration Amendment (Complementary Protection) Act 2011 (Cth), Sched 1, item 12, inserting s 36(2)(aa) into the Migration Act. obligations under other international conventions5. Importantly, validly made applications for a protection visa under s 46 of the Migration Act are subject to a decisional time limit of 90 days from the making of the application. That time limit is imposed by s 65A, which was enacted in 20056. The Explanatory Memorandum to the Bill for the Migration Reform Act 1992 (Cth), which introduced protection visas into the Migration Act, stated that7: "A protection visa is intended to be the mechanism by which Australia offers protection to persons who fall under the 1951 Convention and the 1967 Protocol relating to the Status of Refugees." The purpose of the provisions of the Migration Act relating to protection visas informs the construction of those provisions and the Act as a whole. As this Court said in Plaintiff M61/2010E v The Commonwealth8: "the Migration Act proceeds, in important respects, from the assumption that Australia has protection obligations to individuals. Consistent with that assumption, the text and structure of the Act proceed on the footing that the Act provides power to respond to Australia's international obligations by granting a protection visa in an appropriate case and by not returning that person, directly or indirectly, to a country where he or she has a well-founded fear of persecution for a Convention reason." The plaintiff contends that, having regard to its history, context and purpose, and the special position of protection visas under the Migration Act, s 85 does not apply to that class of visa. He points in particular to the decisional 5 The purpose of s 36(2)(aa) is to provide for a criterion for a protection visa on the basis of a non-refoulement obligation contained or implied in the International Covenant on Civil and Political Rights or the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment, if the Minister is not already satisfied that the non-citizen is owed protection obligations under the Refugees Convention as amended by the Refugees Protocol — Australia, House of Representatives, Migration Amendment (Complementary Protection) Bill 2011, Explanatory Memorandum at 10 [65]. 6 Migration and Ombudsman Legislation Amendment Act 2005 (Cth), Sched 1, item 1. 7 Australia, House of Representatives, Migration Reform Bill 1992, Explanatory Memorandum at 18 [26]. (2010) 243 CLR 319 at 339 [27]; [2010] HCA 41. time limit imposed by s 65A(1). The defendants point to the generality of the language of s 85, which they contend cannot support implied words of exception which would be necessary for the plaintiff's construction. They also rely upon statutory context. Contrary to the defendants' submissions, the purposes of the relevant provisions of the Act lead to the conclusion that, properly construed, s 85 does not apply to protection visas. The questions on the special case should be answered as set out at the end of these reasons. Factual background The facts necessary to the disposition of the special case were agreed and may be summarised briefly. The plaintiff is a national of Ethiopia who entered Australia at the Port of Gladstone on 29 March 2013. He entered without a visa, having been a stowaway aboard a vessel. Being an "unlawful non-citizen" within the meaning of ss 5(1) and 14 of the Migration Act, he was taken into immigration detention pursuant to s 189. He remained in immigration detention from 29 March 2013 to 10 February 2014. Between 27 June 2013 and 10 February 2014, he was held in community detention pursuant to a residence determination made under s 197AB(1) of the Migration Act. On 19 April 2013, the plaintiff made a valid application for a protection visa. That application was refused on 3 July 2013. On 16 July 2013, the plaintiff applied to the Refugee Review Tribunal ("the RRT") for a review of the decision to refuse his protection visa application. On 3 October 2013, the RRT remitted his application to the Minister with a direction that the plaintiff satisfied the criterion under s 36(2)(a) of the Migration Act for the grant of a protection visa. On 10 February 2014, a delegate of the Minister refused to grant the plaintiff a protection visa on the basis that the plaintiff did not satisfy the criteria prescribed by cl 866.222 of Sched 2 to the Migration Regulations 1994 (Cth) ("the Regulations"). Those criteria, which were introduced by the Migration Amendment (Unauthorised Maritime Arrival) Regulation 2013 (Cth), required, inter alia, that at the time of decision in relation to an application for a protection visa, the applicant held a visa that was in effect on his or her last entry to Australia and was immigration cleared on that last entry. The plaintiff did not meet those requirements. On the same day as his application was again refused by the Minister's delegate, the Assistant Minister for Immigration and Border Protection exercised her power under s 195A of the Migration Act and granted the plaintiff a Temporary Safe Haven (Class UJ subclass 449) visa and a Temporary (Humanitarian Concern) (Class UO) visa. By reason of the grant of those visas, the plaintiff became a lawful non-citizen and was released from immigration detention. The plaintiff applied again to the RRT on 14 February 2014 for a review of the Minister's decision to refuse to grant him a protection visa. He this Court on commenced proceedings 19 December 2013. On 22 April 2014, by order of this Court made by consent, certiorari issued to quash the decision made by the delegate on 10 February 2014 to refuse to grant the plaintiff's application for a protection visa. The plaintiff's application for a protection visa remains undetermined. jurisdiction of the original The plaintiff's application remains undetermined because, on 4 March 2014, the Minister made a determination under s 85 that the maximum number of protection visas that could be granted in the year ending 30 June 2014 was 2,773. The effect of that determination, if valid, was that no more protection visas could be granted between 24 March 2014, when the maximum number of protection visas was reached, and 30 June 2014. Its effect, if valid, is that the plaintiff cannot be granted a protection visa in the current financial year. The questions in the special case The questions referred to the Court in the special case, based on the proceedings as they now stand, are: Is the Minister's determination made on 4 March 2014 pursuant to s 85 of the Migration Act invalid? 2. What, if any, relief should be granted to the plaintiff? 3. Who should pay the costs of the special case? Sections 85 and 86 of the Migration Act and their companion provisions Sections 85 and 86 of the Migration Act, which must be read together, appear in subdiv AH of Div 3 of Pt 2, entitled "Limit on visas". Both sections commenced on 16 December 1992 as ss 28A and 28B of the Migration Act, contained in what was then a new subdiv AA of Div 2 of Pt 29. Section 85 provides, in language unchanged since its enactment: "The Minister may, by notice in the Gazette, determine the maximum number of: the visas of a specified class; or the visas of specified classes; 9 Migration Laws Amendment Act 1992 (Cth), s 7. that may be granted in a specified financial year." Section 86 attaches a legal consequence to a determination under s 85. It provides: there is a determination of the maximum number of visas of a class or classes that may be granted in a financial year; and the number of visas of the class or classes granted in the year reaches that maximum number; no more visas of the class or classes may be granted in the year." The two sections were described in the relevant Second Reading Speech as a mechanism for managing "the migration program"10. The Minister, it was said, could "target the grant of visas in accordance with the priorities of the migration program."11 In the Explanatory Memorandum, the new subdiv AA was described as establishing "a capping scheme to assist in the delivery of the annual migration program."12 Given their purpose of program management, it is not surprising that ss 85 and 86 do not apply to all classes of visa, for not all classes of visa can be related to what could be called migration programs. Subdivision AH is expressly excluded from application to five classes of visa discussed in the next section of these reasons13. Even without those exclusions, s 85 could not logically apply to them. There is another class of visa, the bridging visa, not the subject of an express exclusion, to which s 85 is of doubtful application. Consideration of the purpose of ss 85 and 86 against the purpose of protection visas, supported in part 10 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 August 11 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 August 12 Australia, Senate, Migration Laws Amendment Bill 1992, Explanatory Memorandum at [7]. 13 Those classes are special purpose visas (s 33), absorbed person visas (s 34), ex- citizen visas (s 35), criminal justice visas (s 44) and enforcement visas (s 44). by the decisional time limit mandated by s 65A(1), leads to the conclusion that ss 85 and 86, which predated that class of visa, do not apply to them14. Subdivision AH provides the immediate statutory context for ss 85 and 86. It comprises ss 85 to 91 inclusive. Section 87 qualifies s 86 so as not to prevent the grant of a visa to a person who applied for it on the ground that he or she is the spouse, de facto partner or dependent child of an Australian citizen, of the holder of a permanent visa or of a person usually resident in Australia whose continued presence in Australia is not subject to a time limit imposed by law. In the cognate proceeding, Plaintiff S297/2013 v Minister for Immigration and Border Protection15, the plaintiff submitted that s 87 is in tension with s 36. The family members protected by s 87 comprise a narrower class of persons than the "member[s] of the same family unit" as a protection visa holder who may, on account of that membership, satisfy the criterion for the grant of a protection visa set out in s 36(2)(b). The definition of the class "member of the same family unit", which derives from the definition of the class "member of the family unit", is left by s 5(1) of the Act to the Regulations. That class presently includes, as well as those family members mentioned in s 87, grandchildren, stepchildren and other relatives16. the defendants correctly submitted, no constructional conclusion can be drawn from the definition in the Regulations as they stand from time to time17. However, as Section 88 allows visa processing to continue even though a limit under s 85 may be in place. It provides that the prevention of a grant of a visa by s 86 "does not prevent any other action related to the application for it." It is also consistent with the continuance of the obligation on the part of the Minister, pursuant to s 65(1)(b), discussed later in these reasons, to refuse to grant a visa if not satisfied of the matters set out in s 65(1)(a). Section 89 provides: "The fact that the Minister has neither granted nor refused to grant a visa of a class or classes to which a determination under section 85 applies does not mean, for any purpose, that the Minister has failed to make a decision to grant or refuse to grant the visa." 14 See footnote 1. 15 [2014] HCA 24. 16 reg 1.03 ("relative") with reg 1.12. 17 A further exemption from the limit imposed under s 85, not material for present purposes, is set out in s 87A for persons unable to meet health or character requirements before the limit becomes applicable. The defendants submitted that s 89 militates against the contrariety, for which the plaintiff contended, between the decisional time limit imposed by s 65A(1) and the prohibition imposed by s 86 on the grant of visas exceeding a ministerial cap imposed under s 85. However, s 65A is directed to decisions on the merits of applications for protection visas. Section 89 was directed to ensuring that a failure to make a decision by reason of s 86 could not constitute the ground for judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) that the Minister had failed to exercise a power or perform a duty18, later available under Pt 8 of the Migration Act19. Section 89 does not assist the defendants' argument that s 85 is applicable to protection visas. Section 90 has a similar function to s 8920. It provides that the failure to consider or dispose of a visa application to which a determination under s 85 applies does not mean that the application is "unreasonably delayed". That is so, even though an application for another visa of the class or classes that was made later has been considered or disposed of. Section 91 appears to have the effect that visas which could have been granted in a given financial year, but for a limit imposed under s 85, have no priority when the limit ceases to operate, ie, at the end of the relevant financial year. It provides: "If a determination under section 85 applies, or has applied, to visas of a class or classes, the Minister may consider or, subject to section 86, dispose of outstanding and further applications for such visas in such order as he or she considers appropriate." The discretion thus conferred on the Minister is in tension with the decisional time limit imposed with respect to protection visas by s 65A and, to that extent, is another indicator that s 85 does not apply to protection visas. A feature of the wider statutory context of s 85, upon which the defendants relied, is the existence of express provisions of the Migration Act disapplying subdiv AH, and thereby ss 85 and 86, to particular classes of visa. There is no such express disapplication in relation to protection visas. Those provisions are considered in the next section of these reasons. 18 See s 7(1) of the Administrative Decisions (Judicial Review) Act: Australia, Senate, Migration Laws Amendment Bill 1992, Explanatory Memorandum at [13]. 19 See s 477(1) of the Migration Act. Part 8 of the Act, which commenced on 1 September 1994, was introduced as Pt 4B by s 33 of the Migration Reform Act and renumbered by the Migration Legislation Amendment Act 1994. 20 See s 7(1) of the Administrative Decisions (Judicial Review) Act. Visas to which s 85 does not apply Legislation enacted between 1992 and 1994 replaced the pre-existing dual visa and entry permit system with a visa system21. The term "visa" now means a permission granted to a non-citizen by the Minister to travel to and enter Australia and/or remain in Australia22. A non-citizen in the "migration zone", who holds a visa that is in effect, is a lawful non-citizen23. A non-citizen in the migration zone who is not a lawful non-citizen is an "unlawful non-citizen"24. The latter category of person, of which the plaintiff is a member, attracts the provisions of the Migration Act relating to mandatory detention25 and removal from Australia26. Section 31(1) provides for "prescribed classes of visas", that is to say, visas prescribed by the regulations27. In addition to the prescribed classes, there are classes provided for in the Migration Act itself. All of them post-dated the enactment of ss 85 and 86. They are special category visas (s 32), special purpose visas (s 33), absorbed person visas (s 34), ex-citizen visas (s 35), protection visas (s 36), bridging visas (s 37), temporary safe haven visas (s 37A), criminal justice visas (s 38), enforcement visas (s 38A) and maritime crew visas (s 38B). They were introduced into the Migration Act at different times from and after 1994. Special purpose, absorbed person and ex-citizen visas were 21 The legislative history of those changes was set out in Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom (2006) 228 CLR 566 at 574– 576 [10]–[17] per Gummow and Hayne JJ; [2006] HCA 50. 22 Migration Act, s 29(1). Section 30 provides that a visa may be permanent, authorising its holder to remain in Australia indefinitely, or may be temporary, authorising a stay for a specified period or until a specified event happens or while the holder has a particular status. 23 Migration Act, s 13(1). "Migration zone" is defined in s 5(1) to mean "the area consisting of the States, the Territories, Australian resource installations and Australian sea installations". 24 Migration Act, s 14(1). 25 Migration Act, ss 189 and 196. 26 Migration Act, s 198. 27 See the definition of "prescribed" in s 5(1) of the Migration Act. introduced by the Migration Legislation Amendment Act 1994 (Cth)28, which commenced on 1 September 1994, as did the Migration Reform Act, which introduced protection visas and criminal justice visas29. Enforcement visas were created by the Border Protection Legislation Amendment Act 1999 (Cth)30, which relevantly commenced on 16 December 1999. Maritime crew visas were created in 2007 by the Migration Amendment (Maritime Crew) Act 2007 (Cth)31, which commenced on 1 July 2007. When the special purpose, absorbed person, ex-citizen, criminal justice and enforcement visas were created, express provision was made disapplying to them the provisions of subdiv AH of Div 3 of Pt 2 of the Migration Act and thus disapplying ss 85 and 8632. It is a common feature of those classes of visa that their grant does not depend upon application and they are not of a kind, nor do they serve purposes, to which annual numerical limits or targets, elements of migration programs, would be relevant33. The special purpose, absorbed person and ex-citizen visas are each "taken to have been granted" upon the satisfaction of certain conditions which it is not necessary to set out here34. Criminal justice visas are granted in aid of the administration of criminal justice35. Enforcement visas are granted in aid of law enforcement activities involving non-citizens in relation to fisheries and environmental 28 Migration Legislation Amendment Act 1994, s 8. The provisions creating these classes were respectively numbered ss 26AA, 26AB and 26AC and were renumbered as ss 33, 34 and 35 by the same amending Act. 29 Migration Reform Act, s 10. The provisions creating these classes were respectively numbered ss 26B and 26D and were renumbered by the Migration Legislation Amendment Act 1994 as ss 36 and 38. 30 Border Protection Legislation Amendment Act, Sched 1, Pt 3, item 19. 31 Migration Amendment (Maritime Crew) Act, Sched 1, Pt 1, item 5. 32 The disapplication provisions are s 33(10) for special purpose visas, s 34(3) for absorbed person visas, s 35(4) for ex-citizen visas, s 44(1) for criminal justice visas and s 44(2) for enforcement visas. 33 For example, see the discussion of the rationale for absorbed person visas in Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom (2006) 228 CLR 566 at 576–577 [18]–[20] per Gummow and Hayne JJ. 34 Migration Act, ss 33(2), 34(2) and 35(2). 35 Migration Act, s 141. The grant of such a visa is conditioned upon the issue of a criminal justice certificate by the Commonwealth Attorney-General or a State authorised official, or a criminal justice stay warrant issued by a court — Migration Act, s 159(1) read with ss 147, 148 and 151. protection legislation36. Neither requires a prior application as a condition of its grant. The inapplicability of s 85 to those classes of visa is apparent. No modification or repeal, express or implied, of s 85 was necessary to support the conclusion that the power it confers could not extend to them. Indeed, the express exclusions, so far as they relate to s 85, may be seen as declaratory in the sense that they are statements of the obvious. There is no express exclusion from s 85 for bridging visas created by the Migration Act37. Nevertheless, it is difficult to see how the power conferred by that section would serve any purpose applicable to them. They are temporary visas, ancillary to the provisions of the Migration Act relating to the application for, and grant or refusal of, a substantive visa. A bridging visa may be granted by the Minister to a non-citizen who, inter alia, has made a valid application for a protection visa and who is determined by the Minister, in the public interest, to be an eligible non-citizen38. When an eligible non-citizen in immigration detention makes an application for a bridging visa of a prescribed class and the Minister does not, within the prescribed period, make a decision to refuse or grant the visa, "the non-citizen is taken to have been granted a bridging visa of the prescribed class … at the end of that period."39 The deemed grant resembles that effected with respect to classes of visa expressly exempted from the application of s 85 and discussed above. Classes of visa have been created by the Migration Act to which s 85 is inapplicable. That inapplicability derives from the functional incompatibility between the purposes served by those classes of visa and the purpose served by s 85. The latter purpose may be discerned more clearly by reference to the place of s 85 in the Migration Act as one of a group of provisions designed to provide mechanisms for controlling the volume of applications considered and grants of particular classes of visa made in any given financial year. The place of s 85 among those provisions, and, in particular, its relationship to s 39, is considered in the next section of these reasons. 36 Migration Act, ss 164A–164BA. 37 Bridging visas were introduced as s 26C of the Migration Act by s 10 of the Migration Reform Act, commencing on 1 September 1994. Section 26C was renumbered as s 37 by the Migration Legislation Amendment Act 1994. 38 Migration Act, ss 72 and 73. 39 Migration Act, s 75(1). The visa capping power — ss 39 and 85 Mechanisms for regulating the number of visas of specific classes being processed and granted are to be found in three sections of the Migration Act, which, in chronological order of their first appearances in the legislation, are ss 84, 39 and 85. Section 84 entered the Migration Act before s 39 and its precursors, and before s 85 and its precursor. It empowers the Minister, by notice in the Gazette, to "determine that dealing with applications for visas of a specified class is to stop until a day specified in the notice". Its first precursors were ss 11J and 11W, introduced into the Migration Act by the Migration Legislation Amendment Act 1989 (Cth)40. They were renumbered as ss 28 and 40 by the same Act and further renumbered as s 84 by the Migration Legislation Amendment Act 1994. When the precursors to ss 85 and 86 were enacted the Minister, in the Second Reading Speech, observed that the suspension power had not been exercised and said that while it was "a powerful administrative tool in ensuring that program levels are not exceeded", it was also "a very blunt one."41 There was a mechanism in place for the capping of visa numbers before the enactment of ss 85 and 86. That was s 39. Its legislative precursors predated ss 85 and 86 and their precursors. Section 39 authorises the imposition by regulation of a criterion limiting, to a maximum fixed by the Minister, the number of visas of a class that may be granted in a particular financial year. It provides: In spite of section 14 of the Legislative Instruments Act 2003, a prescribed criterion for visas of a class, other than protection visas, may be the criterion that the grant of the visa would not cause the number of visas of that class granted in a particular financial year to exceed whatever number is fixed by the Minister, by legislative instrument, as the maximum number of such visas that may be granted in that year (however the criterion is expressed). For the purposes of this Act, when a criterion allowed by subsection (1) prevents the grant in a financial year of any more visas of a particular class, any outstanding applications for the grant in that year of visas of that class are taken not to have been made."42 (emphasis added) 40 Migration Legislation Amendment Act 1989, s 6. 41 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 August 42 The displacement of s 14 of the Legislative Instruments Act 2003 (Cth) overcomes the restriction in s 14(2) on a legislative instrument, in this case the regulations (Footnote continues on next page) The precursors of s 39(1) and (2) were s 23(3A) and (3B), enacted by the Migration Amendment Act (No 2) 1991 (Cth), which commenced on 15 January 199243. Those sub-sections, as enacted, did not exclude protection visas because, as already explained, that class did not exist until the Migration Reform Act came into effect on 1 September 1994. The sub-sections were described in the Explanatory Memorandum as allowing the regulations "to authorise the Minister to fix a numerical limit on the number of visas or permits or [sic] a particular class which may be granted in a particular financial year." 44 In the Second Reading Speech, the Minister for Immigration, Local Government and Ethnic "These application capping powers will only apply to those classes where use of the power is specifically permitted under the regulations. The powers are, in effect, an extension of the capping powers already found in sections 28 and 40 of the Act." As noted earlier, ss 28 and 40 of the Act as it then stood were the precursors of s 84. They did not and it does not confer a "capping power", but rather a power to suspend the processing of applications until a specified date. Sub- sections (3A) and (3B) of s 23 were repealed and reintroduced as s 26E by the Migration Reform Act46 and, with the introduction of the exclusion for protection visas, came into force on 1 September 1994, the same date as protection visas were created47. A question whether s 39 confers a capping power on the Minister or simply attaches particular consequences to the exercise of the power conferred by authorised by s 39, "applying, adopting or incorporating any matter contained in an instrument or other writing as in force or existing from time to time", in this case the legislative instrument referred to in s 39(1) by which the Minister fixes a maximum number of visas. In the precursors to s 39, the corresponding displacement was of s 49A of the Acts Interpretation Act 1901 (Cth). 43 Migration Amendment Act (No 2) 1991, s 4. 44 Australia, Senate, Migration Amendment Bill (No 2) 1991, Explanatory Memorandum at [4]. 45 Australia, House of Representatives, Parliamentary Debates (Hansard), 15 October 46 Migration Reform Act, s 10. 47 Section 26E was renumbered as s 39 by the Migration Legislation Amendment Act s 85 was debated at the hearing of the special case. The precursors of s 39, expressed in materially similar language to s 39, save for the exclusion of protection visas, clearly provided for a determination to be made by the Minister. There was no other provision for the Minister to fix a maximum number of visas to be granted in a given financial year. Neither s 85 nor its precursors had been enacted when the precursors of s 39 were enacted. In the event, the debate seems to be about a distinction without a difference. If the Minister makes a determination of a maximum number of visas that may be granted in a specified financial year and does so by legislative instrument, which may include a notice in the Gazette48, the making of the determination is the common factum which attracts the legal consequences for which ss 39(2) and 86 respectively provide. The one determination may have legal consequences by operation of either s 39(2) or s 86. Sections 39, 85 and 86 may therefore be considered as part of the one statutory scheme now in existence for controlling the volume of grants of particular classes of visa made in a given financial year. If the Minister's determination, fixing a maximum number of grants for a given year, relates to a class of visa for which a criterion has been prescribed pursuant to s 39(1) then, when the maximum is reached, all outstanding applications for the grant in that year of that class of visa are taken not to have been made. Section 86 would not be engaged. If the determination relates to a class of visa for which no criterion is prescribed under s 39(1), then applications for that class of visa remain on foot. As explained earlier in these reasons, by virtue of s 88, processing of the applications can continue but, by operation of s 86, no grant may be made in that financial year. A decision to refuse an application could and would have to be made if the conditions requiring such a decision, identified in s 65, which is discussed later in these reasons, were met. The defendants also sought to support their preferred construction of s 85 by reference to the different consequences attaching, by ss 39(2) and 86 respectively, to a ministerial determination of a maximum number of visas to be granted in a given financial year. Under s 39(2), when the cap determined by the Minister has been reached for a class of visa, outstanding applications for visas of that class are taken not to have been made. The defendants submitted that there was a rationale, based upon that consequence, for the exclusion of protection visas from the application of s 39. They argued that had s 39 been applicable to protection visas, the consequential extinguishment of outstanding applications for such visas would have engaged the conditional obligations imposed by s 198 of the Migration Act to remove from Australia unlawful non- citizens who have not made a valid application for a substantive visa that could be granted when the applicant is in the migration zone49. That consequence was 48 Legislative Instruments Act, s 56(1). 49 Migration Act, s 198(2)(c)(i). contrasted with the consequence imposed by s 86 on a determination under s 85, which would leave in place a pending application for a protection visa and thus not engage the removal process. The defendants' argument should not be accepted. For an unlawful non-citizen in detention awaiting determination of a valid application for a protection visa, the application of ss 85 and 86, read with s 91, would have the consequence that the date of decision could be indefinitely deferred by the imposition of successive caps, thus prolonging the period that that applicant would remain in detention absent a request for removal or, as in the present case, the exercise of a non-compellable ministerial discretion to grant a visa pursuant to s 195A(2) of the Migration Act. That consequence, extending as it necessarily would to persons who, like the plaintiff, have satisfied the criterion in s 36(2)(a) that they are persons in respect of whom Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol, is at odds with the purpose of the Act relating to Australia's obligations under the Convention and the purpose of protection visas as a mechanism for meeting those international obligations. The defendants also submitted that the express exclusion of protection visas from the application of s 39 militated against their implied exclusion from the application of ss 85 and 86. That submission deploys a familiar interpretative argument. However, it must be considered in the wider context of the scheme of the Migration Act relating to protection visas and the purposes which they serve. Specific provisions relating to protection visas Section 39 is one of a number of provisions of the Migration Act which, for a variety of purposes, refer expressly to protection visas. Section 40 authorises regulations which provide that visas of "a specified class" may only be granted in specified circumstances50. Applicants for protection visas enjoy a limited express exemption with regard to "circumstances" requiring the provision of certain kinds of personal identifier to an officer51. A limited exemption also exists in relation to s 41, which authorises regulations providing that a visa or visas of a specified class may be subject to specified "conditions"52. No condition can be imposed to prevent a visa holder from applying for a protection visa53. A bar on repeat applications for protection visas is imposed by s 48A(1), 50 Migration Act, s 40(1). 51 Migration Act, s 40(3A). 52 Migration Act, s 41(1). 53 Migration Act, s 41(2)(a). which is subject to a ministerial dispensing discretion under s 48B, albeit, pursuant to s 50(c), the Minister is not required to base consideration of the repeat application on information provided in support of the earlier application. Section 65A, which has already been mentioned, imposes a decisional time limit in relation to applications for protection visas that are validly made or remitted to the Minister for reconsideration. Subdivision AF of Div 3 of Pt 2 of the Migration Act (ss 72–76) provides for the grant of a bridging visa to an unlawful non-citizen who has made a valid application for a protection visa after arriving in Australia and is determined by the Minister to be an eligible non-citizen. The holder of a criminal justice entry visa, or the former holder of such a visa which has been cancelled, cannot apply for a visa "other than a protection visa"54. Similar provision is made in relation to the holder of an enforcement visa55. Unlawful non-citizens held in immigration detention are subject to time limits in relation to visa applications, other than applications for bridging visas or protection visas56. Those provisions were all referred to by the defendants in their submissions. They contended that when Parliament wishes to exclude protection visas from the operation of particular provisions, it does so expressly. Those exclusions, the express exclusion in s 39, and the absence of any such exclusion in s 85, were said to support the application of s 85 to protection visas. What those exclusions indicate, however, is the particular purpose of protection visas in the statutory scheme. More generally, protection visas were not created for purposes relevant to a migration program of the kind amenable to management by the powers conferred by ss 84, 85 and 39. Protection visas are a mechanism, albeit not the only mechanism, by which Australia can discharge its international obligations not to send back to their countries of origin persons falling under the protection of the Refugees Convention and the other international conventions underpinning s 36(2)(aa). That "non-refoulement" obligation may also be met by removal of a person claiming to be a refugee to a safe third country57. The existence of that alternative is provided for in subdiv AI of Div 3 of Pt 2 of the Migration Act, entitled "Safe third countries". Its existence, however, is not relevant to the 54 Migration Act, s 161(5) and (6). 55 Migration Act, s 164D. 56 Migration Act, s 195(2). 57 See Plaintiff M70/2011 v Minister for Immigration and Citizenship (2011) 244 CLR 144 at 175 [45] per French CJ, 198 [122] per Gummow, Hayne, Crennan and Bell JJ; [2011] HCA 32. constructional question raised in this proceeding. Nor are the recently enacted provisions of the Migration Act relating to removal of unauthorised maritime arrivals to regional processing countries58. The express provisions of the Migration Act relating to protection visas reflect their special purpose. They point away from the interpretative submission advanced by the defendants based upon the difference in language between ss 39 and 85. General provisions of the Act should not be construed in a way that is inconsistent with international involving obligations, unless their text plainly requires such a construction. That approach is mandated by s 15AA of the Acts Interpretation Act 1901 (Cth), which provides: the discharge of that purpose, "In interpreting a provision of an Act, the interpretation that would best achieve the purpose or object of the Act (whether or not that purpose or object is expressly stated in the Act) is to be preferred to each other interpretation." A construction of s 85 which would permit the deferral of a decision about an application for a protection visa by a person in respect of whom Australia has been found to owe protection obligations, and which would expose such a person to the prolongation of immigration detention, would be at odds with the purposes of the statutory scheme of which protection visas are a central part. That construction is not to be preferred. For that reason, together with the textual and contextual considerations thrown up by s 65A of the Migration Act, which are considered in the next section of these reasons, s 85 should not be construed as authorising a determination by the Minister of the maximum number of protection visas that may be granted in a specified financial year. Consideration and determination of visa applications — ss 65 and 65A A non-citizen who wants a visa must apply for a visa of a particular class59. That requirement is expressed to be subject to the Migration Act and the regulations. Mention has already been made of classes of visa which may be granted without application. Section 46(1) provides, as a general rule, that an application for a visa is valid if, and only if, it is for a visa of a class specified in the application and it satisfies the criteria and requirements prescribed under 58 Migration Act, subdiv B of Div 8 of Pt 2 (ss 198AA–198AJ). 59 Migration Act, s 45(1). 60 This case does not require consideration of the effects of statutory bars to valid applications in relation to unauthorised maritime arrivals found in s 46A and (Footnote continues on next page) The Minister is required by s 47 to consider a valid application for any class of visa61. The Minister also has a discretion, conferred by s 51, to consider and dispose of applications for visas in such order as he or she considers appropriate62. Section 63 provides that, subject to s 39, the Minister may grant, or refuse to grant, a visa at any time after the application has been made63. That discretion is subject to the express time limits for decision-making in relation to protection visas imposed by s 65A. Subdivision AC of Div 3 of Pt 2 of the Migration Act deals specifically with the grant of visas. Sections 65 and 65A appear in that subdivision. Section 65(1) requires one of two outcomes from the consideration of an application for any class of visa: "After considering a valid application for a visa, the Minister: if satisfied that: the health criteria for it (if any) have been satisfied; and the other criteria for it prescribed by this Act or the regulations have been satisfied; and (iii) the grant of the visa is not prevented by section 40 (circumstances when granted), 500A (refusal or cancellation of temporary safe haven visas), 501 (special power to refuse or cancel) or any other provision of this Act or of any other law of the Commonwealth; and any amount of visa application charge payable in relation to the application has been paid; is to grant the visa; or if not so satisfied, is to refuse to grant the visa." related provisions of the Act and discussed in Plaintiff S10/2011 v Minister for Immigration and Citizenship (2012) 246 CLR 636 at 647–649 [26]–[31] per French CJ and Kiefel J, 661–664 [77]–[87] per Gummow, Hayne, Crennan and Bell JJ; [2012] HCA 31. 61 Migration Act, s 47(1). 62 Migration Act, s 51(1). 63 Migration Act, s 63(1). Section 65(2) is not material for present purposes. Section 65 was introduced by the Migration Reform Act as s 26ZF64. It was renumbered by the Migration Legislation Amendment Act 1994, on the same date, as s 65. As the plurality observed in Chen Shi Hai v Minister for Immigration and Multicultural Affairs65: "s 65(1) imposes an obligation to grant a visa, as distinct from conferring a power involving the exercise of a discretion. The satisfaction that is required is a component of the condition precedent to the discharge of that obligation." (footnote omitted) Section 65 must be read with ss 85 and 86. The defendants submitted that where a determination under s 85 applies then, even if the Minister has considered a valid application for a visa and is satisfied of the matters in s 65(1), the duty to grant the visa gives way, pro tem, to the prohibition imposed by s 86. That may be accepted, subject to two qualifications. The first qualification is that neither s 65 nor s 86 is engaged if the Minister's determination of a maximum number of visas to be granted in a particular financial year applies to a class of visa which attracts the application of a criterion under a regulation made pursuant to s 39. As explained earlier in these reasons, any application outstanding after the determined maximum has been reached is taken never to have been made. The second qualification arises from the obligation imposed by s 65A, which is not susceptible of displacement by the prohibition in s 86. Section 65A, which relates only to protection visas, imposes a specific temporal limit on the decision-making required by s 65 and indirectly affects the order of consideration and disposition of applications which may be adopted by the Minister pursuant to s 51. Section 65A post-dates ss 51 and 65, having been introduced into the Migration Act in 2005 with effect from 12 December 200566. It provides: If an application for a protection visa: (a) was validly made under section 46; or (b) was remitted by any court or tribunal to the Minister for reconsideration; 64 Migration Reform Act, s 10. 65 (2000) 201 CLR 293 at 306 [41] per Gleeson CJ, Gaudron, Gummow and Hayne JJ; [2000] HCA 19. 66 Migration and Ombudsman Legislation Amendment Act, Sched 1, item 1. then the Minister must make a decision under section 65 within 90 days starting on: the day on which the application for the protection visa was made or remitted; or in the circumstances prescribed by the regulations—the day prescribed by the regulations. Failure to comply with this section does not affect the validity of a decision made under section 65 on an application for a protection visa." The Explanatory Memorandum relevant to s 65A stated67: "The purpose of this new section is to reflect the Government's policy that decisions on protection visa applications should be made in a timely and efficient manner so as to provide greater transparency and certainty for protection visa applicants. Timeliness in the decision-making process will be enhanced by these provisions as the Minister will be required to make all decisions within a set time frame." It is plain that s 65A is incompatible with the application of ss 85 and 86 to protection visas. Those sections, if applied to such visas, would leave applications and their processing on foot but, once a maximum determined under s 85 was reached, would prevent a grant in the financial year to which the determination applied. The defendants submitted that the obligation created by s 65A is dependent upon the existence of the duty imposed by s 65 and is, therefore, susceptible to displacement, pro tem in respect of grant decisions, by the prohibition imposed by s 86. The premise that s 65A is parasitic upon s 65 is inconsistent with the evident purpose of s 65A and should be rejected. The preferred construction, consistent with its statutory purpose, is that s 65A incorporates by reference, in relation to protection visas, the obligation created by s 65, and attaches a time limit to its discharge. The obligation to decide and to decide within a certain time is imposed by s 65A as a special provision in relation to protection visas. It is not displaced in respect of grant decisions by the application of the general provisions of ss 85 and 86. No question arises of s 65A effecting an implied repeal of ss 85 and 86 in their application to protection visas. The enactment of s 65A confirms the anterior conclusion that the nature and purposes of protection visas and the statutory scheme of which protection visas are a part are inconsistent with the application to that class of 67 Australia, Senate, Migration and Ombudsman Legislation Amendment Bill 2005, Explanatory Memorandum, Sched 1 [3]. visa of the general capping provision under s 85, which was enacted before they came into existence. Conclusion The conclusion that ss 85 and 86 are not applicable to protection visas means that the first question in the special case must be answered in the affirmative. The question of further relief should be remitted to a single Justice to determine. The defendants should pay the plaintiff's costs of the special case. The costs of the proceedings otherwise should be remitted to a single Justice. The issue The plaintiff, now aged 15 years, is an Ethiopian national. In March 2013, he arrived in Gladstone Port, Queensland, as a stowaway on a cargo ship. He had no visa permitting him to enter or remain in Australia and was, therefore, an unlawful non-citizen within the meaning of the Migration Act 1958 (Cth) ("the Act"). The plaintiff has made a valid application for a protection visa (a visa of the class provided for by s 36 of the Act). It has been determined that he is a refugee within the meaning of the Refugees Convention68. The plaintiff has been neither granted nor refused a protection visa. The Minister has determined that the maximum number of protection visas that may be granted in the financial year ending on 30 June 2014 is 2,773. Granting the plaintiff a protection visa in this financial year would exceed that limit. The plaintiff alleges, and the Minister and the Commonwealth deny, that the determination limiting the number of protection visas which may be granted is invalid and that the Minister is bound to consider and determine the plaintiff's application and grant him a protection visa. The plaintiff's submissions should be accepted. The questions of law stated by the parties in the form of a special case should be answered accordingly. A question of statutory construction Resolution of the central issue presented by the case depends upon the proper construction of the relevant provisions of the Act, in particular the provisions of subdiv AC of Div 3 of Pt 2 (ss 65-69), dealing with "Grant of visas", and the provisions of subdiv AH of Div 3 of Pt 2 (ss 85-91), dealing with "Limit on visas". As with any legislation, the Act, and these provisions in particular, "must be construed on the prima facie basis that [the] provisions are intended to give effect to harmonious goals"69. Section 65 obliges the Minister, after considering a valid application for a visa, either to grant or to refuse to grant the visa. Section 65A fixes a time limit 68 Convention relating to the Status of Refugees (1951) as amended by the Protocol relating to the Status of Refugees (1967). 69 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382 [70] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28, citing Ross v The Queen (1979) 141 CLR 432 at 440 per Gibbs J; [1979] HCA 29. within which the Minister must make decisions on protection visas. Section 91Y requires the Secretary of the Minister's Department to give to the Minister a report for tabling in the Parliament if that time limit is not met. The central question in the case is whether the power given by s 85 to limit the number of visas of a specified class that may be granted in a financial year permits the Minister to limit the number of protection visas that may be granted. The Minister and the Commonwealth submitted that if the Minister may limit the number, the consequence is that, once that number has been granted, the Minister may not grant any other protection visas during the financial year, but also may not refuse to grant a visa on the ground that its grant would exceed the permitted number of visas. Consideration of the text of the relevant provisions, their history, and the consequences of adopting the construction of the Act asserted by the Minister and the Commonwealth, requires the conclusion that s 65 (governing the grant or refusal of visas) is the leading provision of the Act, in the sense that s 85 (and the associated provisions of subdiv AH) is subsidiary to s 65. The provisions of s 65A (obliging the Minister to determine applications for protection visas within a limited time) reinforce this conclusion. The relevant provisions Section 65 obliges the Minister, after considering a valid application for a visa, to grant or refuse to grant the visa according to whether the Minister is satisfied that certain conditions are met. Two conditions are relevant to this proceeding. First, the Minister must be satisfied70 that the criteria for the grant of the visa "prescribed by [the] Act or the regulations" have been met. Second, the Minister must be satisfied71 that the grant of the visa "is not prevented" by certain identified provisions of the Act72 or by any "other provision of [the] Act or of any other law of the Commonwealth". Section 85 provides the Commonwealth of Australia Gazette, determine the maximum number of visas of a specified class that may be granted in a specified financial year. the Minister may, by notice that Section 86 provides for the effect of the Minister limiting the number of visas of a specified class which may be granted. It provides: 70 s 65(1)(a)(ii). 71 s 65(1)(a)(iii). 72 None of which is relevant to this case. there is a determination of the maximum number of visas of a class or classes that may be granted in a financial year; and the number of visas of the class or classes granted in the year reaches that maximum number; no more visas of the class or classes may be granted in the year." Section 88 provides that "[s]ection 86's prevention of the grant of a visa does not prevent any other action related to the application for it". Section 89 provides that the Minister's having neither granted nor refused to grant a visa of a class to which a determination under s 85 applies "does not mean, for any purpose, that the Minister has failed to make a decision to grant or refuse to grant the visa". And s 90, in effect, provides that, where a determination under s 85 applies, the Minister's disposing of an application for a visa which was lodged after another application "does not mean, for any purpose, that the consideration or disposal of the earlier application is unreasonably delayed". There is, then, an evident tension between s 65 and the provisions of subdiv AH. Section 65 requires a decision to grant or refuse to grant a visa; subdiv AH requires that visas of a specified class not be granted but does not require that they be refused. The tension is emphasised by s 65A requiring the Minister to determine applications for protection visas (by granting or refusing to grant the visa sought) within a limited time. As will later be explained, the tension is resolved by s 39 of the Act, which gives the Minister power to make compliance with a limit a criterion for the grant of a visa. It provides: In spite of section 14 of the Legislative Instruments Act 2003, a prescribed criterion for visas of a class, other than protection visas, may be the criterion that the grant of the visa would not cause the number of visas of that class granted in a particular financial year to exceed whatever number is fixed by the Minister, by legislative instrument, as the maximum number of such visas that may be granted in that year (however the criterion is expressed). For the purposes of this Act, when a criterion allowed by subsection (1) prevents the grant in a financial year of any more visas of a particular class, any outstanding applications for the grant in that year of visas of that class are taken not to have been made." (emphasis added) It is important to notice that s 39(1) expressly excludes protection visas. Competing considerations The Minister and the Commonwealth submitted that any tension between s 65 and subdiv AH was to be resolved by treating subdiv AH as providing comprehensively for the consequences of the Minister making a determination under s 85. They submitted that s 86 provides the chief consequence of a determination: that visas not be granted in excess of the limit fixed. They submitted that s 86 "prohibits the Minister from making the decision otherwise required by s 65(1)" (original emphasis). The duty in s 65 to grant or refuse to grant a visa was thus said to "give way to the prohibition in s 86". They further submitted that this construction of the Act was supported by reference to ss 88, 89 and 90. But the arguments advanced by the Minister and the Commonwealth did not demonstrate that this was a construction which would yield a harmonious construction of either the Act as a whole or the relevant provisions. All of the submissions of the Minister and the Commonwealth proceeded from the premise that ss 39 and 85 give two separate powers for the Minister to limit the number of visas of a particular class which may be granted in any financial year. That is, the submissions proceeded on the footing that, if the Minister exercised the power given by s 85 to fix a limit, effect was to be given to that limit in accordance with s 86 regardless of whether the power under s 39 to make compliance with a limit a criterion for the grant of a visa could be, or had been, exercised. This premise should not be accepted. If s 85 did not appear in the Act, the phrase used in s 39(1) – "whatever number is fixed by the Minister, by legislative instrument" – might have been construed as giving the Minister the power to fix the maximum number of visas of a particular class that may be granted in a financial year. But that construction of s 39(1) should not be adopted. Sections 39 and 85 should be construed as working together, not separately. Section 85 provides the Minister with the power to limit the number of visas of a particular class which may be granted in a financial year. There is no reason to read the Act as providing two separate powers to limit the number of visas of a particular class. The words "whatever number is fixed by the Minister, by legislative instrument" are better read in s 39(1) as a reference to the exercise of the power conferred by s 85 to fix a limit rather than as granting any additional or different power to fix a limit. That is, the determination made under s 85 is the legislative instrument of which s 39(1) speaks. Rejection of the separate powers premise for the arguments advanced by the Minister and the Commonwealth permits dealing with their reliance on ss 88, 89 and 90 briefly. The Minister and the Commonwealth submitted that the provisions of s 88 (that s 86's prevention of the grant of a visa does not prevent any other action related to the application) point towards subdiv AH operating independently of s 39. Were that not so, they submitted, effect could not, or at least would not, be given to both s 39(2) (deeming the application not to have been made) and s 88 (permitting continued processing of applications). The submission should not be accepted. Section 39 has a particular operation with respect to s 65. Section 88 goes no further than saying that other action related to an application is not prevented by s 86. It may readily be supposed that, in some cases, processing of an application for a particular class of visa may continue during a financial year in which the grant of that visa would exceed the limit with a view to its speedy grant in the next financial year. The Minister and the Commonwealth made a similar submission based on the provisions of s 89 (that the Minister's having neither granted nor refused to grant a visa of a class to which a determination under s 85 applies "does not mean, for any purpose, that the Minister has failed to make a decision to grant or refuse to grant the visa") and s 90 (that not considering or disposing of an application for such a visa does not demonstrate unreasonable delay). They submitted that ss 89 and 90 not only point towards subdiv AH operating independently of s 39 but also, in the case of protection visas, provide statutory authority for the Minister neither granting nor refusing to grant a valid application for a protection visa. Neither branch of the argument should be accepted. Sections 89 and 90 were evidently directed73 to the availability of judicial review of decisions made, or not made, in respect of visa applications. Their retention in the Act is readily explained as abundant caution against arguments that, despite the deeming worked by s 39(2), the failure to decide to grant or refuse to grant a visa of a class to which s 39 applied would attract an order for mandamus. It takes little imagination to devise an argument to that effect (whatever may be its merit) being founded on the repeal of either or both of ss 89 and 90. It is necessary to return to the question of the tension between s 65 and subdiv AH. 73 cf Australia, Senate, Migration Laws Amendment Bill 1992, Explanatory Memorandum at [13]-[14]. Resolving the tension As was pointed out in Project Blue Sky Inc v Australian Broadcasting Authority74, "[w]here conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions". And reconciling conflicting provisions "will often require the court 'to determine which is the leading provision and which the subordinate provision, and which must give way to the other'"75. That is why, as was also said76 in Project Blue Sky, in many cases it is only by determining the hierarchy of the provisions that each provision can be given "the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme". In this case, that hierarchy can be determined only by first resolving some associated issues about how s 39 of the Act intersects with subdiv AH and, in particular, ss 85 and 86. Section 39 If regard is had only to the text of the Act as it now stands, the better, and more obvious, construction of ss 39, 85 and 86 can be described in three related propositions. First, s 85 prescribes how the Minister may fix a limit on the number of visas of a particular class which may be granted in a financial year. Second, s 39(1) prescribes how effect is given to that determination (by making not exceeding the limit a criterion for the grant of a visa of the relevant class). Third, s 39 resolves the tension between s 65 and the fixing of a limit on the number of visas. It is necessary to explain how s 39 resolves the tension. It does so in two steps. If an application relates to a visa of a specified class, ss 39(1) and 65(1)(a)(ii) prevent the grant of the visa. Without more, s 65(1)(b) would compel the Minister to refuse to grant the visa. But that consequence would be at odds with subdiv AH going no further than saying (in s 86) that the visa not be granted, yet saying (in s 88) that the limit on numbers does not affect processing 74 (1998) 194 CLR 355 at 382 [70] per McHugh, Gummow, Kirby and Hayne JJ (footnote omitted). 75 (1998) 194 CLR 355 at 382 [70] per McHugh, Gummow, Kirby and Hayne JJ (footnote omitted). 76 (1998) 194 CLR 355 at 382 [70] per McHugh, Gummow, Kirby and Hayne JJ. of applications. Hence, s 39(2) takes a second step to resolve the tension, by deeming outstanding applications not to have been made. Deeming the visa application not to have been made disengages the duty that s 65(1)(b) in particular (and hence s 65 in general) would otherwise impose on the Minister. It disengages that duty in a manner which is consistent with subdiv AH. Section 39 speaks to all cases where there is a valid application for a visa; s 86 speaks to all other circumstances in which, with or without a valid application77, the Minister may grant a visa. And disengaging the duty to determine a valid application would not be inconsistent with s 88 permitting "any other action related to the application" to proceed. The kind of "other action" embraced by the section would readily include action founded in the consent of the visa applicant, such as submission to medical examination. What then of protection visas? Section 39 expressly excepts visas of that class from its reach. Given that the Act provides a mechanism for resolving any tension with respect to any other kind of visa, the more natural construction of the Act is to treat s 65 as the leading provision and ss 85 and 86 as subordinate to it. The effect of reading the Act in this way is that the duty imposed by s 65, after considering a valid application for a visa, either to grant or to refuse to grant the visa, can be disengaged only by the operation of s 39. And if that is so, two conclusions follow. First, neither s 85 nor s 86 directly intersects with the duty imposed by s 65. Second, the power to limit the number of visas of a particular class given by s 85 does not extend to protection visas. Reading the Act in this way gives each of its provisions "the meaning which best gives effect to its purpose and language while maintaining the unity of the statutory scheme"78. It achieves a harmonious construction. Consideration of the history of the provisions reinforces these conclusions. 77 See, for example, s 195A, permitting the Minister to grant a visa to a person who is in detention under s 189 whether or not that person has made a valid application for a visa. 78 Project Blue Sky (1998) 194 CLR 355 at 382 [70] per McHugh, Gummow, Kirby The history of the provisions Describing the history of the relevant provisions is made more difficult by the renumbering of provisions effected by s 83 of the Migration Legislation Amendment Act 1994 (Cth). For the most part it will be convenient to refer to the provisions in the text of these reasons by their present numbers, and identify their original numbers by footnote. It is necessary to trace the history of s 39, s 65 and the provisions of subdiv AH and to observe how those sections intersected with provisions dealing with persons making claims that they were owed protection obligations under the Refugees Convention. Central to an understanding of the history is recognition of the important changes which were made to the Act by the Migration Reform Act 1992 (Cth) ("the 1992 Reform Act"). Many of the provisions of the 1992 Reform Act did not come into operation until 1994 and there were amendments made to some of its provisions before it came into operation. Nothing turns on either the delay in commencement or the details of the intervening amendments. The 1992 Reform Act made three changes to the Act of most immediate significance. First, it introduced the binary classification of non-citizens as either "lawful non-citizens" or "unlawful non-citizens". Second, it provided for the mandatory detention of unlawful non-citizens. Third, it provided for a new class of visa: "protection visas". Until the 1992 Reform Act came into operation, a person making claims to protection under the Refugees Convention was granted an entry permit, not a visa, after the Minister had determined that the person was a refugee. The 1992 Reform Act did away with the system which distinguished between visas and entry permits and treated all forms of permission to travel to, enter, or remain in Australia as visas. Subdivision AH, permitting the specification of limits on the number of visas of a particular class that may be granted in a financial year, was inserted79 in the Act before the enactment of the 1992 Reform Act. At the time of the insertion of subdiv AH, the Act also contained provisions permitting the Minister to fix limits on the number of entry permits of a particular class that might be granted in a financial year. Those provisions about limiting the number of entry 79 Migration Laws Amendment Act 1992 (Cth), s 7, inserting, as subdiv AA of Div 2 of Pt 2 (ss 28A-28G), what now appear as ss 85-87 and 88-91. permits had been inserted80 in 1991 and were in a form generally similar to what is now s 39. In their then form, the provisions made no reference to entry permits relating to persons claiming protection under the Refugees Convention. The provisions were repealed by s 11 of the 1992 Reform Act and what is now s 39 was inserted81 by s 10 of the same Act. As inserted, the new s 39 expressly excepted protection visas from its operation. The express exception of protection visas from the 1992 Reform Act scheme for prescribing limits on the number of visas which may be granted is readily explained. First, the Act, as amended by the 1992 Reform Act, when read as a whole, contained what the whole Court has previously described82 as "an elaborated and interconnected set of statutory provisions directed to the purpose of responding to the international obligations which Australia has undertaken in the Refugees Convention and the Refugees Protocol". This being so, it would be surprising if the Act permitted limiting the number of protection visas which may be granted in a financial year to those who, having landed in Australia, had made a valid application for a protection visa. Second, the assumption which underpinned the 1992 Reform Act was that all unlawful non-citizens would be detained until granted a visa or removed. Excepting protection visas from the power to limit the number of visas of a particular class that may be granted in a financial year is consistent with the speedy determination of whether an unlawful non-citizen claiming protection is to be granted a visa, and released from detention, or removed from detention under the Act by being removed from Australia. By contrast, reading the Act as permitting the Minister, by a discretionary decision limiting the number of protection visas that may be granted, to suspend the statutory duty to decide to grant or refuse to grant such a visa would prolong the detention of the visa applicant. The period of detention would depend upon the exercise of the Minister's discretion to limit the number of visas granted. As the whole Court has also said83, "[i]t is not readily to be supposed that a statutory power to detain a person permits continuation of that detention at the unconstrained discretion of the Executive". 80 Migration Amendment Act (No 2) 1991 (Cth), s 5, amending s 33 by inserting new sub-ss (3A) and (3B). 81 As s 26E. 82 Plaintiff M61/2010E v The Commonwealth (Offshore Processing Case) (2010) 243 CLR 319 at 339 [27]; [2010] HCA 41. 83 Offshore Processing Case (2010) 243 CLR 319 at 348 [64]. That the duty imposed by s 65 (to grant or refuse to grant the visa sought) was not to be affected by a decision to limit the number of visas of a class that may be granted in a financial year except through the application of s 39 is a conclusion reinforced by the legislative history of s 65. It is necessary to recall84 that, from the enactment of the Migration Amendment Act (No 2) 1980 (Cth)85 until the 1992 Reform Act, an entry permit was not to be granted to a non-citizen after entry to Australia unless certain conditions were fulfilled. One of the conditions permitting the grant of an entry permit was that the non-citizen was the holder of a temporary permit and that the Minister had determined that the person was a refugee within the meaning of the Refugees Convention. If the conditions for the grant of an entry permit were satisfied, the Minister was obliged86 to grant it. By contrast, as the Act stood before the 1992 Reform Act came into operation, what was then s 24 governed the grant or refusal of visas. That section provided expressly87 that the Minister's obligation to grant a visa (if satisfied of the requirements for a grant) was subject to what were then ss 28 and 28B and are now ss 84 and 86. That is, the Minister's obligation to grant a visa was expressly made subject first, to the provision permitting general suspension of visa processing (then s 28, now s 84) and second, to the provision (then s 28B, now s 86) prohibiting grant of visas in excess of a limit determined in accordance with what was then s 28A and is now s 85. In the form enacted by the 1992 Reform Act, s 6588 makes no reference to the provision for general suspension of processing of visas of a particular class and makes no reference to the provisions permitting the specification of limits on the number of visas that may be granted. The omission from s 65 of any reference to these provisions (ss 84 and 86) is telling. 84 The relevant history of the provisions is more fully described in NAGV and NAGW of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 222 CLR 161 at 174-176 [34]-[41] per Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ; [2005] HCA 6. 85 s 6, inserting s 6A into the Act. 86 See s 34(3)(b), as in force immediately before the 1992 Reform Act came into operation. 87 s 24(3)(b). 88 Inserted as s 26ZF. The preferred construction As has been observed, the tension between s 65 and subdiv AH is to be resolved by treating s 65 as the leading provision, and the provisions of subdiv AH as subordinate to it. That is the preferable construction of the text of the Act. The history of the provisions which are now found in ss 39 and 65 and subdiv AH reinforces that conclusion. The consequences for the detention of unlawful non-citizens who have made a valid application for a protection visa which would follow from adopting the contrary construction of the Act have been identified and those consequences provide a further and compelling reason for adopting the preferred construction. The prescription of time limits by s 65A for determination of applications for protection visas is a still further and compelling reason for adopting it. Conclusion and orders For these reasons, the Minister's determination of the maximum number of protection visas which may be granted during the financial year ending on 30 June 2014 was not authorised by s 85 of the Act. Having been made beyond power, the determination is invalid. It is not necessary to consider the plaintiff's submissions about the construction of s 85. The questions stated for the consideration of the Full Court in the form of a special case should be answered as follows. Question 1, which asks whether the Minister's determination fixing the maximum number of protection visas which may be granted in the financial year ending on 30 June 2014 is invalid, should be answered: "Yes". Question 2 asks what relief should be granted to the plaintiff. The exact form of relief which the plaintiff should have will be a matter for the single Justice making orders finally disposing of the proceeding and the question should be answered accordingly. As the matter presently stands, it would seem probable that the plaintiff would be entitled to a declaration that the Minister's determination is invalid, an order for mandamus directed to the Minister requiring the Minister to determine according to law the plaintiff's application for a protection visa and an order that the defendants pay the plaintiff's costs. But those are matters which should finally be determined by a single Justice. Question 3, which asks who should pay the costs of the special case, should be answered: "The defendants". Crennan Bell CRENNAN, BELL, GAGELER AND KEANE JJ. This special case has been heard concurrently with the special case in Plaintiff S297/2013 v Minister for Immigration and Border Protection89. For the reasons we have given in that case, which will need to be read in conjunction with these reasons, the instrument signed by the Minister on 4 March 2014 was beyond the substantive scope of the power conferred by s 85 of the Act. The plaintiff in this proceeding made a valid application for a protection visa on 19 April 2013. A delegate of the Minister refused to grant him a protection visa on 10 February 2014. That decision was quashed by a writ of certiorari on 22 April 2014. Although the 90 day period set by s 65A for compliance with the duty imposed by s 65 of the Act has not yet expired, it is an agreed fact that the plaintiff has done all things necessary for the purpose of having his protection visa determined by the Minister and the Minister has pointed to no reason why he has not yet made a decision to grant or refuse to grant the protection visa other than the existence of the instrument. Absent any discretionary reason for withholding that relief, there is no reason why the plaintiff should not now have a writ of mandamus directing the Minister to consider and determine his application according to law. The questions reserved should be answered as follows: Question 1: Is the Minister's determination made on 4 March 2014 pursuant to s 85 of the Migration Act invalid? Answer: Yes. Question 2: What, if any, relief should be granted to the plaintiff? Answer: A writ of mandamus directing the first defendant to consider and determine the plaintiff's application for a Protection (Class XA) visa according to law. Question 3: Who should pay the costs of the special case? Answer: The defendants. 89 [2014] HCA 24.
HIGH COURT OF AUSTRALIA ATTORNEY-GENERAL OF THE COMMONWEALTH OF AUSTRALIA APPELLANT AND ALINTA LIMITED & ORS RESPONDENTS Attorney-General (Cth) v Alinta Limited [2008] HCA 2 Date of order: 13 December 2007 Date of publication of reasons: 31 January 2008 ORDER Appeal allowed. Set aside so much of paragraph 2 of the orders of the Full Court of the Federal Court of Australia made on 30 April 2007 as ordered that there be a declaration that s 657A(2)(b) of the Corporations Act 2001 (Cth) is invalid and, in its place, order that there be a declaration that s 657A(2)(b) of the Corporations Act 2001 (Cth) is not invalid on the ground that it purports to confer the judicial power of the Commonwealth on the Takeovers Panel. On appeal from the Federal Court of Australia Representation D M J Bennett QC, Solicitor-General of the Commonwealth with M A Perry QC and E A Collins for the appellant (instructed by Australian Government Solicitor) J R J Lockhart for the first and second respondents (instructed by Blake Dawson Waldron) D M J Bennett QC, Solicitor-General of the Commonwealth for the third respondent (instructed by Australian Government Solicitor) Submitting appearance for the fourth and fifth respondents P J Hanks QC with S P Donaghue and F I Gordon appearing as amici curiae Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Attorney-General (Cth) v Alinta Limited Constitutional law (Cth) – Judicial power – Meaning of judicial power – Takeovers Panel – Section 657A(2)(b) of the Corporations Act 2001 (Cth) allows the Takeovers Panel to make a declaration of unacceptable circumstances in connection with a finding of contravention of the takeovers provisions of the Act – Whether s 657A(2)(b) is invalid as involving the exercise of the judicial power of the Commonwealth by the Takeovers Panel. Constitutional law (Cth) – Judicial power – Meaning of judicial power – Whether function of Takeovers Panel was to resolve disputes about existing rights and obligations or to create new rights and obligations. Constitutional law (Cth) – Judicial power – Meaning of judicial power – Relevance of scope of Takeover Panel's power to make remedial orders – Relevance of inability to enforce Takeover Panel's orders without independent exercise of judicial power. Constitutional law (Cth) – Judicial power – Meaning of judicial power – Relevance of requirement that the Takeovers Panel consider public interest and policy considerations in deciding whether to make a declaration – Extent to which inclusion of policy considerations is indicative of non-judicial power. Practice and procedure – Parties – Interveners and amici curiae – The appellant intervened below as of right – After special leave was granted, the commercial controversy between the original parties was resolved and an order revoking special leave sought – Whether the appellant was a party to the proceedings – Whether the appellant had an interest in the appeal to this Court – Whether leave should be granted to amici curiae to appear to contradict the appellant's submissions. Constitution, Ch III. Corporations Act 2001 (Cth), s 657A. GLEESON CJ. I joined in the order allowing the appeal in this matter. My reasons were substantially the same as those that have been given by Hayne J, and Crennan and Kiefel JJ. My reasons for joining in the order concerning the limiting of the grant of special leave, the amendment of the notice of appeal, and leave to counsel to appear as amici curiae were substantially the same as those stated by Hayne J. I would add the following comments on the principal issue before the Court. There are two features of the statutory scheme which, in combination, strongly support a conclusion that the Takeovers Panel ("the Panel") does not exercise judicial power. The first is that, in deciding whether to make a declaration of unacceptable circumstances, and remedial orders, the Panel is required to take account of considerations and interests to which the judicial process is ill-adapted. The second is that a decision of the Panel creates new rights and obligations, and provision is made for their enforcement by a court in the independent exercise of judicial power. In Precision Data Holdings Ltd v Wills1, this Court said: "In some situations, the fact that the object of the determination is to bring into existence by that determination a new set of rights and obligations is not an answer to the claim that the function is one which entails the exercise of judicial power … However, where, as here, the function of making orders creating new rights and obligations is reposed in a tribunal which is not a court and considerations of policy have an important part to play in the determination to be made by the tribunal, there is no acceptable foundation for the contention that the tribunal, in this case the Panel, is entrusted with the exercise of judicial power." In decisions of this Court, there is a long history of treating power as non- judicial where an exercise of the power was, to use the words of Kitto J, "intended [by the Parliament] to be made upon considerations of general policy and expediency alien to the judicial method."2 The breadth of the concept of policy sometimes creates difficulty in its use as a criterion for distinguishing between legitimate judicial action on the one hand and legislative or executive action on the other. For the purpose of such a distinction, it may be necessary to be more specific as to the nature of the policy involved. It also may be necessary to relate the considerations of wisdom or expediency involved in the formulation of a certain kind of policy to the constraints inherent in the judicial method, (1991) 173 CLR 167 at 190-191. 2 R v Spicer; Ex parte Australian Builders' Labourers' Federation (1957) 100 CLR including the way in which issues are defined, and the rules of procedure and evidence according to which a court receives the information upon which it is to base its decision. When Kitto J spoke of "considerations of general policy and expediency alien to the judicial method", he was not suggesting that judging involves no more than the mechanical application of inflexible rules, without regard to questions of wisdom or expediency. The common law is judge-made, and its development and rationalisation necessarily involve attention to such questions. Furthermore, many of its settled principles, in their application to changing circumstances and social conditions, require judgment about what is wise and expedient. Statutes commonly confer upon judges discretionary powers which raise such matters for decision. Yet there are features of the judicial process, fundamental to its nature, that make it ill-suited to the application of certain kinds of policy and the exercise of certain kinds of power. Judges are appointed on the basis of their legal knowledge and experience. Individual judges may have other talents or interests, but what these might be is usually unknown, and is not the subject of any process of assessment, formal or informal. The material on which they base their decisions is provided, and tested, in accordance with rules of procedure and evidence. The decisions of the parties and their lawyers, made in an adversarial setting, impose limitations upon the information according to which a court legitimately may proceed. The parties to litigation, acting within the limits set by the law, define the issues to be resolved and the courses open to be followed by way of judicial order. These constraints, although not absolute or inflexible, influence the nature of the judicial process, and affect the suitability of that process for the exercise of certain forms of governmental power. It is to be expected that the Parliament, in deciding whether a certain kind of authority should be exercised judicially, or otherwise, would take account of the characteristics, and of the strengths, and the limitations, of the judicial method. Chapter 6 of the Corporations Act 2001 (Cth), in regulating takeovers, seeks to preserve an efficient, competitive and informed capital market, and to protect the legitimate interests of investors in that market. The purposes of the Chapter are declared in s 602, in terms that define the nature of the considerations at work in reaching a conclusion that circumstances in relation to the affairs of a company are unacceptable and that the public interest requires a certain form of regulatory intervention in the market. The matters to which the Panel may have regard in deciding whether, and in what way, it should exercise its powers, and the information and judgment it brings to bear upon the likely consequences of intervention, understood in the light of the purposes stated in s 602, are aspects of a decision-making process of an order quite different from that which may be involved where a litigant seeks from a court an injunction to restrain a contravention of the Act, or where a court is asked to penalise a contravention. The constitution of the Panel, the way in which it is intended to go about its business, the way in which it informs itself about matters that arise for its consideration, and the nature of the considerations according to which it acts or declines to act, all point against a conclusion that this is a judicial process. Various parts of the regulatory regime established by Ch 6 involve the exercise of judicial power, and the application of the judicial method to the determination of legal rights and liabilities. Judicial power is employed to enforce the rights and obligations which the Act attaches to actions of the Panel. On the other hand, the Panel's supervisory and regulatory function, having regard to the constitution of the body itself, the nature of the legislative purposes it pursues, and the consequences of what it does, is not an exercise of judicial power. GUMMOW J. The facts and circumstances giving rise to the litigation in the Federal Court and to the conduct of the appeal in this Court by the Commonwealth Attorney-General are explained in the reasons of Hayne J and those of Crennan and Kiefel JJ. I agreed that the appeal should be allowed and that declaratory relief should be given to the effect that s 657A(2)(b) of the Corporations Act 2001 (Cth) ("the Corporations Act") is not invalid as purporting to confer the judicial power of the Commonwealth upon the Takeovers Panel. I agree generally with what is said by Hayne J and by Crennan and Kiefel JJ in support of that outcome. In particular, I agree with what appears in the reasons of Hayne J under the heading "Judicial power?". I would add only the following. First, as in the recent decision of Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board3, the case for invalidity does not proceed on the footing that the statute confers on the regulatory body a power of a chameleon-like nature which takes its colour from the character of that body. Where it applies, the "chameleon" analogy supports a case for validity and not the opposite. Rather, here the case for invalidity depends upon demonstration that the authority conferred on the Panel by the provision in question (par (b) of s 657A(2)) is essentially and exclusively judicial in character. Secondly, in support of an argument of invalidity, reliance cannot effectively be placed upon the "historical approach" most recently discussed in White v Director of Military Prosecutions4. The legislation of which s 657A is a component has no readily apparent analogue in the common law or in pre-1900 legislation. Thirdly, the outcome thus depends upon the application of theories or descriptions of the judicial power of the Commonwealth which in the decisions of this Court are expressed in analytical but general and ahistorical terms. In that regard, and as Hayne J emphasises, the reasoning in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd5 is particularly significant in determining the outcome in the present case. Further, with respect to the significance of Tasmanian Breweries several points may be made. One point concerns the interrelation between a regulatory (2007) 81 ALJR 1155 at 1163-1164 [36]; 234 ALR 618 at 627. (2007) 81 ALJR 1259 at 1272-1273 [45]-[49]; 235 ALR 455 at 468-469. (1970) 123 CLR 361. regime such as one dealing with restrictive trade practices (as in Tasmanian Breweries) or corporate activity respecting takeovers (this case): without the superimposition of federal regulation these activities might readily give rise to contractual rights and obligations (and perhaps tortious claims), but, contrary to what was considered to be so by the majority in the Full Court6, the partial displacement of those rights and obligations by the regulatory regime does not necessarily stamp the functions exercised under that regime with the character of judicial power. The withdrawal of jurisdiction from the State courts in this way may give rise to other constitutional questions7, but these are not for consideration here. The remaining point concerns the need for caution against placing determinative significance in this case solely upon considerations of "policy". It needs to be emphasised that matters of policy may enter permissibly (and necessarily) into the exercise of judicial power in various ways, as was indicated by Gummow and Crennan JJ in Thomas v Mowbray8. The legislative mandating of consideration by the Panel of matters of policy thus is not necessarily a sufficient indicator of conferral of non-judicial power. Rather, a significant pointer against invalidity of the legislation under consideration here, as with that upheld in Precision Data Holdings Ltd v Wills9, is the entrusting to the Panel of authority to alter (subject to collateral attack and challenge under s 75(v) of the Constitution) the law otherwise applying in the particular case, to create new rights and obligations, and to do so with regard to considerations of policy which are identified only by reference to the subject, scope and purpose of the legislation. (2007) 159 FCR 301 at 386-387. 7 See Truong v The Queen (2004) 223 CLR 122 at 160 [93]-[94]. (2007) 81 ALJR 1414 at 1438-1439 [80]-[82]; 237 ALR 194 at 222-223. (1991) 173 CLR 167 at 191. Kirby KIRBY J. This appeal arises from a divided decision of the Full Court of the Federal Court of Australia10. That Court declared that s 657A(2)(b) of the Corporations Act 2001 (Cth) ("the Act") was invalid on the ground that it purported to confer on the Takeovers Panel ("the Panel") powers that Ch III of the Constitution reserves to the courts. The facts, legislation and issues The facts and circumstances, and the relevant provisions of the Act, are set out in other reasons11. Some 16 years ago, an earlier manifestation of the Panel survived a challenge in this Court for reasons explained in Precision Data Holdings Ltd v Wills12. The primary question which divided the Full Court in the present case was whether subsequent alterations to the Panel's powers meant that the holding in Precision Data continued to sustain the operations of the Panel as constitutionally valid. The majority in the Full Court cited four principal intervening changes to the legislation as critical to the negative conclusion that they reached on this question: the empowerment of the Panel to make a declaration of "unacceptable circumstances" based upon a relevant contravention of the Act13; the introduction of an entitlement on the part of any interested person to apply to the Panel for relief14; the imposition of limitations on the powers of the courts to afford judicial remedies during the takeover bid period and, in particular, removal of their power to grant orders to remedy a breach of the law other than orders for the payment of money15; and 10 Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301 (Gyles and Lander JJ; Finkelstein J dissenting) reversing Australian Pipeline Ltd v Alinta Ltd (2006) 237 ALR 158 (Emmett J). 11 See reasons of Hayne J at [51]-[62]; reasons of Crennan and Kiefel JJ at [106]- 12 (1991) 173 CLR 167. See reasons of Hayne J at [69]-[71]. 13 (2007) 159 FCR 301 at 385 [399(1)] referring to s 657A(1) of the Act. 14 (2007) 159 FCR 301 at 385 [399(2)] referring to s 657C(2) of the Act. 15 (2007) 159 FCR 301 at 386 [399(3)] referring to Div 3 of Pt 6.10 of the Act. Kirby the enlargement of the remedial orders which the Panel could make, rendering its orders similar to those that a court might make pursuant to Pt 9.5 of the Act and under the general law16. Vigilance over filling a "judicial vacuum" The reason given for the enhancement of the powers of the new Takeovers Panel was to facilitate the diversion of disputes about company takeovers from the courts to the speedier and more commercially sensitive decision-making of an administrative body17. However, the majority in the Full Court were concerned that the enlargement of the Panel's function was designed to fill what they described as the "judicial vacuum"18 created by the limitations placed by the legislation on access to the courts. They said19: "It is one thing to remove the courts from the enforcement of prohibitions created by statute. It is quite another to transfer that function to a body which is not a court. It is also another thing to preclude courts from exercising jurisdiction under the general law as is provided expressly in s 659B(4) and impliedly in s 659C of the [Act]. … The orders made in this case are a good illustration of the identity of Panel orders with orders that might have been made by a court. ... The effect of s 659B is that, leaving aside any possible operation of s 75 of the Constitution, the Panel is the sole forum for resolving the defined disputes during the bid period between private parties, notwithstanding that such disputes might otherwise be within the jurisdiction of Federal, State and Territory courts. … [T]he powers of courts having jurisdiction over a dispute to grant remedies for a contravention of the Act are significantly curtailed. As already noted, in particular, there is no power to make positive or negative injunctions. … [Section] 659C authorises 16 (2007) 159 FCR 301 at 386 [399(4)] referring to s 657D(2) of the Act. 17 Takeovers – Corporate Control: A Better Environment for Productive Investment, Corporate Law Economic Reform Program – Proposals for Reform: Paper No 4, (1997) at 36-37. See also Explanatory Memorandum, Corporate Law Economic Reform Program Bill 1998 (Cth) at 38 [7.16]; cf Armson, "Attorney-General (Commonwealth) v Alinta Limited: the Takeovers Panel Survive Constitutional Challenge?", (2007) 29 Sydney Law Review 495 at 497. Will 18 (2007) 159 FCR 301 at 387 [403]. 19 (2007) 159 FCR 301 at 386-387 [401]-[402]. Kirby exercise of the powers of the Court only where the Panel refuses to make a declaration of unacceptable circumstances". The majority in the Full Court also noted20 that s 657G of the Act gave power to a court to make orders securing compliance with the Panel's orders and that s 657F made contravention of an order of the Panel an offence of strict liability. They therefore considered that the Act established "stronger methods of enforcement" than were present in Precision Data or Brandy v Human Rights and Equal Opportunity Commission21. The majority were right to exhibit vigilance against any erosion by the legislature or the Executive of access by what they described as "private parties" to the independent courts, as envisaged by the Constitution22. Protection of the right of access to courts, and thus to judicial officers independent from the other branches of government, is an essential policy which the constitutional separation of powers is designed to safeguard23. However irksome it may sometimes be to the other branches to be obliged to have disputes over legal rights resolved through external and impartial determination by the courts, that is an essential role of the courts required under the Constitution. On the other hand, there might be legitimate reasons for a legislature to prefer administrative over judicial decision-making in some situations, including in the often urgent circumstances of attempts to effect (or repel) company takeovers. The essential substantive issue in these proceedings is whether the legislative choice made by the Parliament, and the means chosen to give it effect, fall on the permissible side of the constitutional line. Reconstitution of the proceedings in this Court By the time the matter came before this Court for hearing, a preliminary issue had arisen. It concerned whether special leave should be revoked in light of 20 (2007) 159 FCR 301 at 388-389 [408]. 21 (1995) 183 CLR 245. 22 Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 607 per Deane J; Visnic v Australian Securities and Investments Commission (2007) 81 ALJR 1175 at 1183-1184 [45]; 234 ALR 413 at 423; Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board (2007) 81 ALJR 1155 at 1166-1168 [59]-[68]; 234 ALR 618 at 631-633. 23 cf White v Director of Military Prosecutions (2007) 81 ALJR 1259 at 1301 [202]; 235 ALR 455 at 507. Kirby the settlement of the commercial dispute between the litigants in the Federal Court24. By the time of the hearing in this Court, those parties had neither the interest nor the desire to maintain their earlier constitutional arguments. Thus, the Alinta parties properly notified that they had arrived at a settlement of their dispute with Australian Pipeline Ltd. They filed a summons seeking revocation of the grant of special leave to the Attorney-General of the Commonwealth. In support of this, they filed written submissions pointing out that, in effect, the controversy which they had originally brought to be quelled by this Court had (so far as they were concerned) disappeared. On the other hand, revocation of the grant of special leave and the discontinuance of Alinta's application would leave standing the orders favoured by the majority of the Full Court, including the judicial declaration that s 657A(2)(b) of the Act was invalid under the Constitution25. It would also leave undisturbed the reasons of the Full Court upholding those orders. Until altered by other and later proceedings in the Federal Court or in this Court or by valid legislative amendments, this outcome would cast a shadow over the validity of the activities of the Panel in the important work committed to it by the Act. Potentially, the result of such an outcome might be to expose the Panel and its members to liability for purporting to act under powers which the Full Federal Court had held to be constitutionally invalid. It would cause uncertainty and inconvenience to "private parties" involved in takeovers disputes. Without doubt, it would be an unsatisfactory outcome. If this Court were to revoke special leave earlier granted to the Attorney-General, litigants would inferentially enjoy access to the courts upon the hypothesis of the invalidity of s 657A(2)(b) of the Act until some other challenge was "fast-tracked" to bring the issue back to the Full Court or to this Court for fresh determination. The inconvenience of this outcome is manifest, and so is its potential importance. Nevertheless, convenience and public importance do not control the application of basic constitutional principles. Into the breach, the Attorney-General of the Commonwealth entered to offer relief. He pointed out that, in the Federal Court, he had intervened in the Alinta proceedings in order to support the validity of the contested provision of the Act. He therefore asserted a statutory status as a "party", in consequence of his intervention in that Court26. He submitted that this continued to sustain his 24 cf reasons of Hayne J at [63]-[68]; reasons of Crennan and Kiefel JJ at [148]-[150]. 25 (2007) 159 FCR 301 at 396 [433]. 26 Judiciary Act 1903 (Cth), s 78A(3). See reasons of Hayne J at [65]. Kirby appeal challenging the Full Court's declaration of invalidity. He emphasised that the issue that the appeal sought to raise remained one of general public importance. Endeavouring to cure the problem presented by the departure of the original parties, the Attorney-General made arrangements for counsel to appear to seek leave to be heard as amici curiae to provide arguments contesting his own submissions and supporting the reasons and declaration of the Full Court majority. In effect, therefore, the Attorney-General was at once presenting his appellate attack on the Full Court's declaration and supporting advocacy by independent counsel to sustain its correctness. To say the least, this is an unusual position for a "party" to real litigation in this country to find itself in. Curiosities in the adopted course and orders At the end of argument on the preliminary issue, orders were made by this Court amending the earlier grant of special leave to appeal so as to limit it strictly to the attempt to set aside the declaration made by the Full Court. However, the Federal Court had made its orders and declarations as between identified parties who were no longer to be present in this Court. Moreover, those original parties had no continuing interest of their own to defend or contest the outcome. Following argument, this Court gave leave to counsel to appear as amici curiae to sustain the continuing "context". It reserved its reasons. I have long accepted that the power of this Court to permit interveners and amici curiae to be heard is a wide one27. However, normally the question of hearing from such persons has arisen in circumstances quite different from those of the present case. It has presented where such persons have sought to be heard in matters being litigated as between parties having a real, live and continuing interest in the relevant proceedings. In several cases, I have supported applications by interveners and amici which have either been rejected or 27 Levy v Victoria (1997) 189 CLR 579 at 650-652; cf at 600-605. See also North Ganalanja Aboriginal Corporation v Queensland (1996) 185 CLR 595 at 665-668; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 at 646-647 [144]-[148]. 28 See Attorney-General (Cth) v Breckler (1999) 197 CLR 83 at 134-137 [102]-[109]; Federal Commissioner of Taxation v Scully (2000) 201 CLR 148 at 185-187 [75]- [80]; Re McBain; Ex parte Australian Catholic Bishops Conference (2002) 209 CLR 372 at 434-435 [158]; Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 81 ALJR 304 at 322-323 [77]-[81]; 231 ALR 340 at 361-362; cf Kenny, "Interveners and Amici Curiae in the High Court", (1998) 20 Adelaide Law Review 159; Neville, "Abortion Before the High Court – (Footnote continues on next page) Kirby The Attorney-General's effective application to continue the appeal with a single party (himself) presents curiosities that take the Court, in these proceedings, to the extremities of its past doctrine. That doctrine insists that the Court will not afford the Executive Government advisory opinions. As Gleeson CJ pointed out extracurially in his Boyer Lectures29: "[Judges] deal with issues that litigants bring to them for decision. … Australian courts do not give advisory opinions. They resolve concrete issues raised by disputing litigants. Further, the procedures by which they deal with those disputes mean that they are not well placed to form an opinion on issues outside those in contest between the parties. It is the litigants and their lawyers who decide the information that will be put before a court, and the arguments that will be presented." It is no criticism of counsel appearing as amici curiae, funded by the Attorney- General, to say that for them the presentation of argument involved a theoretical exercise. None of them, nor any client of theirs, had any personal, financial or other interest in the issues or the outcome. By inference, none of them would have appeared if the Attorney-General had not initiated, arranged and funded their appearance. The most analogous precursor to the procedure adopted in this appeal appears to be Mellifont v Attorney-General (Q)30. However, that was a case upholding the validity of a special and detailed procedure under State legislation. Here there is no detailed legislation, but rather an assertion on the part of the Attorney-General of the Commonwealth of an entitlement to prosecute an appeal concerning federal law where the foundational controversy to which he had earlier become a party has arguably evaporated. The course adopted will stand as a precedent for a more expansive exercise of the power to permit amici curiae to be heard in this Court, wherever convenience and practical importance suggest the desirability of that course. It cannot, in my view, be sustained simply because by statute the Attorney-General intervened to become a "party" to earlier proceedings in another court. In this respect, the statute cannot override the constitutional requirement of a live What Next? Caveat Interventus: A Note on Superclinics Australia Pty Ltd v CES", (1998) 20 Adelaide Law Review 183. 29 Gleeson, The Rule of Law and the Constitution, (2000) at 99. 30 (1991) 173 CLR 289. Kirby controversy constituting a "matter"31. Because of their settlement, the parties to that controversy have packed their bags and announced their intention to depart from the courts. Because, in the circumstances, no party was left to contest the arrangement initiated by the Attorney-General, I will not disagree with the Court's orders on this point. It is enough that I draw attention to the unusual features of the circumstances giving rise to those orders and to the apparent expansion of the notion of a constitutional "matter" which the appeal, thus presented to the Court, implies32. Essential and inessential features of judicial power The foregoing explanation of events brings me back to the substantive issue in the appeal as it is now reconstituted. In a number of cases33, some of which were decided after the Full Court's orders in these proceedings34, this Court has explained the approach to be taken to questions of invalidity in matters such as the present. I adhere to what I said in Albarran v Members of the Companies Auditors and Liquidators Disciplinary Board35: "Evaluating the criteria for the presence of 'the judicial power of the Commonwealth' cannot be undertaken in a vacuum, divorced from considerations of constitutional principle and policy. It is necessary to have some conception of the 'functions' of courts which particular criteria may suggest to be exclusive, or non-exclusive, to such bodies." 31 The State of South Australia v The State of Victoria (1911) 12 CLR 667 at 674-675, 715; In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 264-267. 32 As to the ongoing relevance of this question, see South, "The campaign for a national Bill of Rights: would 'declarations of incompatibility' be compatible with the Constitution?", (2007) 10 Constitutional Law and Policy Review 2; Evans and Evans, "Legal redress under the Victorian Charter of Human Rights and Responsibilities", (2006) 17 Public Law Review 264 at 271; Lindell, "The statutory protection of rights and parliamentary sovereignty: Guidance from the United Kingdom?", (2006) 17 Public Law Review 188 at 204-207. 33 cf Luton v Lessels (2002) 210 CLR 333 at 373-376 [123]-[133]. 34 Visnic (2007) 81 ALJR 1175; 234 ALR 413 and Albarran (2007) 81 ALJR 1155; 234 ALR 618. 35 (2007) 81 ALJR 1155 at 1169 [76]; 234 ALR 618 at 635. Kirby As in the other recent decisions, it is appropriate, in this case, to take into account historical considerations; practical features that help to explain the assignment of the present controversies to an administrative body rather than to courts; and whether what is attempted in the impugned legislation offends basic features traditionally associated with the postulate of an independent judiciary36. Necessarily, what is required is a judgment or evaluation of the legislation, ultimately by this Court. The Court's function cannot be reduced to the mechanical application of bright-line rules or to the simple task of working This approach, which is borne out by long authority in this Court, has understandably attracted a measure of criticism38. A number of considerations are insufficient to establish an administrative intrusion upon the exercise of the judicial power of the Commonwealth. The fact that adjudication is required can be as true of decision-making in certain administrative bodies as of the courts39. The fact that policy considerations are taken into account cannot, of itself, render a decision non-judicial40. Nor is the ascertainment and enforcement of the law an exclusively judicial function. Nor can the mere fact that the Parliament has elected to assign a decision to a judicial or administrative body be conclusive of the constitutional character of the decision41. The so-called "chameleon doctrine" does not go so far. 36 cf R v Quinn; Ex parte Consolidated Foods Corporation (1977) 138 CLR 1 at 11 per Jacobs J. See Albarran (2007) 81 ALJR 1155 at 1173 [98]; 234 ALR 618 at 37 See Precision Data (1991) 173 CLR 167 at 188-189. See also reasons of Gummow J at [12]; reasons of Hayne J at [93]; reasons of Crennan and Kiefel JJ at 38 Ratnapala, Australian Constitutional Law: Foundations and Theory, 2nd ed (2007) at 124-129; Williams, "Commentary", in Stone and Williams (eds), The High Court at the Crossroads, (2000) 178 at 179; cf Perry, "Chapter III and the Powers of Non- Judicial Tribunals: Breckler and Beyond", in Stone and Williams (eds), The High Court at the Crossroads, (2000) 148 at 177. 39 Reasons of Crennan and Kiefel JJ at [161]. 40 Reasons of Gummow J at [14]; reasons of Crennan and Kiefel JJ at [168]. 41 Albarran (2007) 81 ALJR 1155 at 1168 [70]; 234 ALR 618 at 634. Kirby Likewise, the fact that relief is available under s 75(v) of the Constitution is not determinative42. Where administrative bodies are established by federal legislation their members will necessarily be answerable to the constitutional writs. Limited accountability to the courts is universal to such cases. According to long-standing authority, the constitutional writs provided for in s 75(v) apply to office-holders in federal courts43. This cannot therefore provide a criterion to differentiate essential judicial functions, so as to set them apart and bar them from discharge by non-judicial bodies. If, therefore, I acknowledge the validity of the Full Court majority's concern over the "judicial deficit" presented by the legislation in this case (as I do), what are the considerations that ultimately result in a conclusion that the impugned provision of the Act falls on the right side of the constitutional line? In effect, for me, they are various considerations referred to in the reasons of my colleagues (and in the dissenting reasons of Finkelstein J in the Full Court44). I will mention those that are most important to my conclusion. The indicia of non-judicial power First, whilst policy choices are inevitably involved in many decisions made in the courts, the broad policy criteria that the Act requires the Panel to address in discharging its functions are such as to be more appropriate to, and characteristic of, an administrative decision than a judicial decision45. Thus, the criteria are stated in wide and substantially open-ended terms. Those terms go beyond the language in which judicial decision-making functions are typically conferred. This is not a conclusive point46. But it is the right place to start in appreciating the essential character of the governmental functions involved in this case. They are not inherently judicial. 42 Reasons of Hayne J at [100]. 43 The Tramways Case [No 1] (1914) 18 CLR 54 at 68, 83, 86; Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 276, 323, 368; R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 44 (2007) 159 FCR 301 at 322-326 [78]-[97]. 45 Reasons of Gleeson CJ at [6]; see also reasons of Hayne J at [81]-[83] referring in particular to ss 602 and 657A(2), (3); see Breckler (1999) 197 CLR 83 at 130 [90]. 46 Reasons of Gleeson CJ at [5]; reasons of Gummow J at [14]; reasons of Crennan and Kiefel JJ at [168]. Kirby Secondly, the limitation on the commencement of court proceedings, which weighed so heavily for the majority in the Full Court, is temporary, not permanent47. It is neither absolute nor unrestricted48. This is a partial answer to the understandable concern of the majority over the attempted exclusion of the courts from availability to resolve authoritatively disputes over the legal rights of parties caught up in a takeover dispute finally and conclusively. It is not decisive. But it tends to neutralise a significant feature supporting the majority's conclusion. Thirdly, the width of the Panel's powers makes it clear that it is expected that the Panel, by its decisions, will create new rights and obligations and not simply determine conclusively (as a court might do) controversies over past suggested contraventions of the Act49. Fourthly, contrary to the conclusion of the majority in the Full Court50, the determination by the Panel of the rights and obligations of the contesting parties under s 657A(2)(b) of the Act remains no more than a "basis for determining what rights and obligations should be created in the future". The Attorney- General of the Commonwealth correctly submitted that the decision by the Panel was a "criterion or factum" by reference to which legal norms are imposed and remedies provided for their enforcement51. In every case it remains for the Panel to conclude whether or not the circumstances are "unacceptable". For that conclusion to be reached, more is required than proof of a contravention of the Act, although in particular cases such proof may, in practice, be sufficient to result, without much more, in a conclusion of unacceptability52. Fifthly, care has been taken in drafting the provisions of the Act to avoid any suggestion that the Panel enforces its own orders53. It is left to the courts to 47 Reasons of Hayne J at [87]. See also Breckler (1999) 197 CLR 83 at 130-132 [92]- 48 Reasons of Hayne J at [100] (referring to s 75(v) of the Constitution). 49 Reasons of Hayne J at [88]-[90]. 50 (2007) 159 FCR 301 at 391-392 [418]. 51 Noted in the reasons of Hayne J at [77]. 52 cf reasons of Hayne J at [81]-[82]. 53 The Act, s 657D. See reasons of Crennan and Kiefel JJ at [173]-[174]. This aspect of the legislative scheme was not relevantly altered from the previous legislation. See Breckler (1999) 197 CLR 83 at 132-134 [97]-[101]. Kirby make orders to ensure compliance with the Panel's determinations54. Necessarily, this involves the court concerned in a judicial decision, not a mere formality55. From the earliest days of this Court, it has been recognised that it is a special feature of the exercise of the judicial power of the Commonwealth to carry a decision into effect as between the parties who bring the case before the relevant tribunal for decision. In many decisions, this feature of the legislative design has been regarded as an important consideration marking off the judicial power from other governmental powers56. The dissenting judge in the Full Court was right to conclude that s 657F of the Act was insufficient to amount to an "enforcement mechanism"57. This is a feature of the legislation supporting the conclusion that it is administrative and not judicial power that has been invoked. In the end, by reference to the proper construction of the Act and its intended operation, an evaluation must be reached as to the character of the governmental powers exercised in this case, viewed in their entirety. Certainly, it was open to the Federal Parliament to conclude that the nature of takeovers disputes was such that they required, ordinarily, prompt resolution by decision- makers who enjoyed substantial commercial experience and could look not only at the letter of the Act but also at its spirit, and reach outcomes according to considerations of practicality, policy, economic impact, commercial and market factors and the public interest. By virtue of their composition and provisions for appeal, and procedures and the scope for collateral challenges, courts have disadvantages and defects in operating effectively in the resolution of such disputes58, although carefully drawn legislation can, and does, submit all such questions to courts for judicial determination. The statutory provisions establishing the earlier panel had not succeeded in diverting more than a tiny handful of cases to administrative decision-making. It was open to the Federal Parliament to conclude that new measures were needed to divert such contests to the Panel, in the interests of corporations, their shareholders, officers and employees and the public interest more generally. 54 See ss 58AA and 657G of the Act. 55 Reasons of Hayne J at [97]. 56 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 451 citing extrajudicial observations of Miller J of the Supreme Court of the United States. See also Brandy (1995) 183 CLR 245 at 258, 269. 57 (2007) 159 FCR 301 at 326 [97]. 58 cf reasons of Gleeson CJ at [5]. Kirby Whilst it is true that the legal rights and economic interests of "private parties" commonly arise in the course of such contests, the way the legislation has been drafted pays appropriate attention to the considerations that this Court has identified as relevant to compliance with the constitutional requirements. Thus, it cannot be said that traditional or historical rights of parties have been disturbed59. Specifically, the regulation of corporations and the adjustment of competing claims and entitlements in the context of company takeovers is substantially provided for in company legislation of relatively recent origin. Care needs to be taken in suggesting that identifying exclusively judicial functions involves substantially an historical inquiry60. History can be a useful guide in this respect; but it is not a straitjacket. Clearly, the Constitution created an integrated Judicature that was intended to endure and adapt over time, as the governmental needs of the Commonwealth required. A conclusion that a particular activity is not a classical or traditional or historical function of the courts (as for example criminal trials have long been) might militate against acceptance of the argument that an invasion of the judicial power of the Commonwealth has occurred. But it is not determinative of that conclusion. Of its nature, a constitutional doctrine is not ossified by history. Conclusion and orders In all of the circumstances, the better view of the arguments is that s 657A(2)(b) of the Act does not confer the judicial power of the Commonwealth on the Panel. It is not, therefore, invalid as offensive to Ch III of the Constitution. The majority in the Full Court were correct in identifying a real question to be decided between the parties in this dispute. However, they erred in deciding, and declaring, constitutional invalidity. Given the orders of the Court reconstituting the "parties" to the appeal, this Court should now correct the orders of the Full Court in the exercise of its own appellate powers in the matter. For these reasons, I agree in the orders proposed by Hayne J. 59 cf reasons of Gummow J at [11]. 60 Reasons of Gummow J at [11] by reference to White (2007) 81 ALJR 1259 at 1272-1273 [45]-[49]; 235 ALR 455 at 468-469. Hayne HAYNE J. Chapter 6 of the Corporations Act 2001 (Cth) ("the Corporations Act") regulates takeovers. It applies to the acquisition of relevant interests in listed companies, unlisted companies with more than 50 members61, some listed bodies that are not companies62 and listed managed investment schemes63. Chapter 6 of the Corporations Act gives certain powers and functions to the Takeovers Panel ("the Panel")64. The only issue in this appeal concerns the validity of one of the provisions of Ch 6 which deals with the Panel's powers: s 657A(2)(b). At the times relevant to this matter, s 657A(1), (2) and (3) provided: Declaration of unacceptable circumstances The Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. Without limiting this, the Panel may declare circumstances to be unacceptable circumstances whether or not the circumstances constitute a contravention of a provision of this Act. Note: Sections 659B and 659C deal with court proceedings during and after a takeover bid. The Panel may only declare circumstances to be unacceptable circumstances if it appears to the Panel that the circumstances: are unacceptable having regard to the effect of the circumstances on: the control, or potential control, of company or another company; or the 61 Corporations Act 2001 (Cth) ("the Corporations Act"), s 602(a)(i). 64 A body established, as the Corporations and Securities Panel, by s 171 of the Australian Securities Commission Act 1989 (Cth), continued in existence by s 261 of the Australian Securities and Investments Commission Act 2001 (Cth) and renamed by the Financial Services Reform Act 2001 (Cth), Sched 3. Hayne the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company; or are unacceptable because they constitute, or give rise to, a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C. The Panel may only make a declaration under this subsection, or only decline to make a declaration under this subsection, if it considers that doing so is not against the public into account any policy considerations that the Panel considers relevant. interest after taking In exercising its powers under this section, the Panel: (a) must have regard to: the purposes of this Chapter set out in section 602; and the other provisions of this Chapter; and (iii) the rules made under section 658C; and the matters specified in regulations made for the purposes of paragraph 195(3)(c) of the [Australian Investments Commission Act 2001 (Cth)]; and Securities and (b) may have regard to any other matters it considers relevant. In having regard to the purpose set out in paragraph 602(c) in relation to an acquisition, or proposed acquisition, of a substantial interest in a company, body or scheme, the Panel must take into account the actions of the directors of the company or body or the responsible entity for a scheme (including actions that caused the acquisition or proposed it not acquisition not proceeding)." to proceed or contributed The focus of this appeal is the provision, in s 657A(2)(b), that the Panel may declare circumstances to be unacceptable circumstances, if it appears to the Panel that the circumstances are unacceptable because they constitute a contravention of a provision of Chs 6, 6A, 6B or 6C. The Full Court of the Hayne Federal Court of Australia (Gyles and Lander JJ, Finkelstein J dissenting) held65 that s 657A(2)(b) is invalid because it purports to confer on the Panel the judicial power of the Commonwealth. These reasons will show that the impugned provision does not purport to confer on the Panel the judicial power of the Commonwealth. The appeal should be allowed. The facts In April 2006, Alinta Limited ("Alinta" – the first respondent in this appeal) and The Australian Gas Light Company ("AGL") agreed to merge their infrastructure assets. Those assets included units held by AGL in the Australian Pipeline Trust ("the APT"), a listed managed investment scheme. AGL held 30 per cent of the issued units in the APT. A wholly-owned subsidiary of Alinta (the second respondent, Trewas Pty Limited – "Trewas") later acquired on-market a further 10.25 per cent of the issued units in the APT. Section 604 of the Corporations Act provides that Ch 6 applies to the acquisition of relevant interests in the interests in a listed managed investment scheme as if the scheme were a listed company and interests in the scheme were shares in the company. Section 606, which is the fulcrum about which the takeover provisions of the Corporations Act turn, prohibits the acquisition of relevant interests in shares or securities of a body corporate except in accordance with the Act. If, as was asserted in the proceedings in the courts below, the agreement between Alinta and AGL gave Alinta a relevant interest in AGL's units in the APT, Alinta's later purchases of units in the APT contravened s 606 of the Corporations Act. The assertion in the courts below was that Alinta's on-market acquisitions contravened s 606 because, as a result of the on-market acquisitions, Alinta's relevant interests in units in the APT would increase from a starting point above 20 per cent and below 90 per cent, and the acquisition of those further interests was not within one of the exceptions to the prohibitions in s 606 provided in Pt 6.2 of Ch 6 of the Corporations Act (ss 611-615). Whether the agreement between Alinta and AGL did give Alinta a relevant interest in AGL's units in the APT is a dispute the resolution of which depended upon the effect of a declaration that had been made by the Australian Securities and Investments Commission ("ASIC") after Alinta and AGL made their agreement in April 2006. That declaration (made under s 655A(1) of the Corporations Act66) had modified s 609(7) of the Act. In deciding this appeal, 65 Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301. 66 "ASIC may: (a) exempt a person from a provision of this Chapter; or (Footnote continues on next page) Hayne however, it is neither necessary nor appropriate to resolve this dispute, whether by examining the effect of ASIC's declaration, or considering whether the agreement did give Alinta a relevant interest in AGL's units. The fifth respondent to the appeal, Australian Pipeline Limited, which was the responsible entity of the APT, applied to the Panel for a declaration of unacceptable circumstances under s 657A of the Corporations Act. The Panel decided to make that declaration and to make orders, under s 657D of the Corporations Act, vesting in ASIC the units in the APT that Alinta had acquired on-market. Alinta sought internal review by the Panel67 of those decisions but the Panel made the declaration and the vesting orders. Pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth), Alinta then applied to the Federal Court of Australia for judicial review of the Panel's decision to make a declaration of unacceptable circumstances and its decision to make the vesting orders. Alinta alleged (among other things) that the Panel's decisions were invalid because each of ss 657A and 657D "is unconstitutional because and to the extent to which they involve [the Panel] exercising the judicial power of the Commonwealth" or because the Panel's decisions "involved the exercise of the judicial power of the Commonwealth by a body other than a Ch III Court". Australian Pipeline Limited also brought proceedings claiming declarations that Alinta's acquisitions of units contravened s 606. That proceeding was heard by the same judge (Emmett J) and immediately before Alinta's proceedings. Both proceedings were dismissed68. Alinta and Trewas, and Australian Pipeline Limited, each appealed to the Full Court of the Federal Court of Australia against the orders dismissing its proceedings. Pursuant to s 78A of the Judiciary Act 1903 (Cth), the Attorney-General of the Commonwealth intervened in the proceedings. That Court ordered69 that Alinta's appeal be allowed. The Court made a declaration that s 657A(2)(b) of the Corporations Act is invalid. It further ordered that the Panel's declaration of unacceptable circumstances be quashed, and the vesting (b) declare that this Chapter applies to a person as if specified provisions were omitted, modified or varied as specified in the declaration." 67 Corporations Act, s 657EA. 68 Australian Pipeline Ltd v Alinta Ltd (2006) 237 ALR 158. 69 Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301. Hayne orders set aside. The Court also ordered that the appeal of Australian Pipeline Limited be allowed and made consequential orders, including a declaration that Alinta's acquisitions of units in the APT contravened s 606. The Attorney-General of the Commonwealth sought and was granted special leave to appeal to this Court against the orders made by the Full Court of the Federal Court in Alinta's appeal. Australian Pipeline Limited also sought and obtained special leave to appeal seeking (among other things) an order declaring that s 657A is valid. A separate application for special leave brought by Alinta and Trewas (its wholly-owned subsidiary) against the orders of the Full Court of the Federal Court allowing the appeal by Australian Pipeline Limited and declaring the on-market acquisitions to be in contravention of s 606 was referred for argument before a Full Court of this Court. The proceedings in this Court After this Court had made the orders granting special leave to appeal, and referring the application by the Alinta parties for further argument before a Full Court, the underlying commercial controversy was resolved. Australian Pipeline Limited did not file a notice of appeal pursuant to the grant of special leave. The Alinta parties discontinued their application for special leave and applied for orders revoking the special leave granted to the Attorney-General, or revoking that leave in part so that the scope of the appeal was limited to whether the The declaration of Attorney-General responded by seeking leave to amend the notice of appeal to confine the issues raised in his appeal to the validity of s 657A(2)(b). Further, the Attorney-General arranged for counsel not hitherto engaged in the matter to be briefed to apply for leave to appear in this Court as amici curiae and submit arguments supporting the declaration of invalidity made by the Full Court of the Federal Court. The Alinta parties did not thereafter press for complete revocation of leave, but neither the Alinta parties nor Australian Pipeline Limited sought to present arguments in the appeal, whether about the validity of s 657A(2)(b) or otherwise. invalidity of s 657A(2)(b) should be set aside. After hearing argument in relation to these applications, the Court ordered that the special leave granted to the Attorney-General be limited to the issue the subject of the Attorney-General's proposed amended notice of appeal, gave leave to the Attorney-General to amend the notice of appeal in the manner proposed, and gave leave to counsel to appear as amici. I supported the making of those orders and now state my reasons for doing so. The Attorney-General intervened in Alinta's appeal to the Full Court of the Federal Court as of right. The matter was one arising under the Constitution or involving its interpretation. Having thus intervened in those proceedings the Attorney-General was "for the purposes of the institution and prosecution of an appeal from a judgment given in the proceedings ... taken to be a party to the Hayne proceedings"70. The controversy underpinning the matter in which the Attorney-General intervened included (but was not limited to) the question of validity of the impugned provisions of the Corporations Act, and s 657A(2)(b) in particular. And by his intervening, the Attorney-General became party to the controversy about the validity of the impugned provision. (It may well be that the controversy about validity is better seen, at least after the Attorney-General's intervention, as a matter distinct from the underlying commercial controversy but it is not necessary to decide whether that is so.) The Full Court of the Federal Court having made the declaration it did, the interest of the Attorney-General in setting aside the declaration is evident. It is an interest of the same kind as that which, before the enactment of s 78A of the Judiciary Act, underpinned the appeal by the Attorney-General of the Commonwealth to the Privy Council in Attorney-General of the Commonwealth of Australia v The Queen ("the Boilermakers' Case")71. Although other parties to the litigation in which the present constitutional controversy has arisen no longer have any commercial reason to oppose the Attorney-General's appeal, the matter is neither merely hypothetical72 nor moot. It is not necessary to consider questions of the kind examined in Mellifont v Attorney-General (Q)73 and other cases74 in relation to the availability of an appeal to this Court against answers given to a stated case. In the present case, the declaration that was made was about the validity of a particular provision of the Corporations Act regulating the rights and obligations of the parties to the litigation in which the declaration was made. The Attorney-General was a party to the proceedings in which the declaration that s 657A(2)(b) is invalid was made. It is that controversy about validity which the Attorney-General of the Commonwealth seeks to pursue further by appeal to this Court. The appointment of amici curiae provided a contradictor to the Attorney-General's arguments where none otherwise would have appeared. That 70 Judiciary Act 1903 (Cth), s 78A(3). 71 (1957) 95 CLR 529; [1957] AC 288. 72 In re Judiciary and Navigation Acts (1921) 29 CLR 257. 73 (1991) 173 CLR 289. 74 See, for example, Fisher v Fisher (1986) 161 CLR 438; Swiss Aluminium Australia Ltd v Federal Commissioner of Taxation (1987) 163 CLR 421; O'Toole v Charles David Pty Ltd (1990) 171 CLR 232. Hayne was an entirely sufficient reason (and in the present case a compelling reason) to grant the amici leave to appear75. Precision Data Holdings Ltd v Wills Much of the argument about the validity of s 657A(2)(b), both in this Court and in the courts below, proceeded by reference to this Court's decision in Precision Data Holdings Ltd v Wills76. Both in this Court, and in the courts below, argument was directed to whether Precision Data was to be distinguished. Neither the decision in that case nor the principles that were applied in it were challenged. In Precision Data, this Court held that the powers given by ss 733 and 734 of the Corporations Law of Victoria77, to the Corporations and Securities Panel established by s 171 of the Australian Securities Commission Act 1989 (Cth), were not part of the judicial power of the Commonwealth. Section 733 of the Corporations Law gave that body power to declare an acquisition of shares in a company to be an unacceptable acquisition, or to declare conduct in relation to shares in or the affairs of a company to be unacceptable conduct. Where an acquisition or conduct was declared unacceptable, the Corporations and Securities Panel, on application by the Australian Securities Commission, had power under s 734 to make "any order that it thinks necessary or desirable to protect the rights or interests of any person affected by the acquisition or conduct" or to ensure, as far as possible, that a takeover or proposed takeover "proceeds in the manner in which it would have proceeded if that acquisition had not taken place or that conduct had not been engaged in". This Court held78, in Precision Data, that the decision to be made under s 733 was "not an adjudication of a dispute about existing rights and obligations". The object of the inquiry and determination for which the law provided was "to create a new set of rights and obligations, that is, rights and obligations arising from such orders as the [Corporations and Securities] Panel may make in a 75 Victoria v Australian Building Construction Employees' and Builders Labourers' Federation [No 2] (1982) 152 CLR 179. See also Levy v Victoria (1997) 189 CLR 76 (1991) 173 CLR 167. 77 Aspects of the origins and the operation of the scheme of national corporate regulation that preceded the enactment of the Corporations Act and was constituted by the Corporations Act 1989 (Cth) and separate State Corporations Laws were examined by this Court in R v Hughes (2000) 202 CLR 535. 78 (1991) 173 CLR 167 at 190. Hayne particular case, being rights and obligations which did not exist antecedently and independently of the making of the orders". The Court further held79 that: "The fact that the [Corporations and Securities] Panel is given a power to make orders conditionally upon its having declared the acquisition to have been an unacceptable acquisition or the conduct to have been unacceptable conduct does not indicate that the Panel is exercising judicial power in making the declaration or subsequently in making orders. As the making of a declaration necessarily proceeds in part, at least, from an assessment of considerations of commercial policy, not solely from an application of the law to the facts as found, neither the making of a declaration nor the making of orders is binding in the same sense that a judicial determination would be binding." The Full Court of the Federal Court In the present matter, the majority in the Full Court (Gyles and Lander JJ) identified80 a number of differences between the present legislative provisions and those considered in Precision Data. Chief emphasis was given to two features of the provisions of Ch 6 of the Corporations Act which were not found in the legislation considered in Precision Data. First, the majority said81 that "an interested party can now apply to the Panel for a declaration of unacceptable circumstances based upon a contravention of the Act – in particular, a contravention of Ch 6, Ch 6A, Ch 6B or Ch 6C". Secondly, reference was made82 to the limitations provided by Div 3 of Pt 6.10 of Ch 6 (ss 659A-659C) on "court proceedings in relation to a takeover bid or proposed takeover bid"83. 79 (1991) 173 CLR 167 at 191. 80 (2007) 159 FCR 301 at 385-386 [399]. 81 (2007) 159 FCR 301 at 386 [400]. 82 (2007) 159 FCR 301 at 386-387 [402]. 83 An expression defined in s 659B(4), for the purposes of that section, as: "(a) mean[ing] any proceedings before a court in relation to: (i) an action taken or to be taken as part of, or for the purposes of, the bid or the target's response to the bid; or (ii) a document prepared or to be prepared, or a notice given or to be given, under this Chapter; and includ[ing]: (Footnote continues on next page) Hayne Section 659B(1) limits those who may commence such proceedings, before the end of the bid period, to ASIC, a Minister of the Commonwealth or of a State or Territory, or the holder of an office established by a law of the Commonwealth or a State or Territory or a body corporate incorporated for a public purpose by such a law, to the extent to which it is exercising a power conferred by such a law. Section 659AA states that the object of s 659B (and of s 659C regulating certain court proceedings after the end of the bid period) "is to make the Panel the main forum for resolving disputes about a takeover bid until the bid period has ended". The majority in the Full Court of the Federal Court said84 that the effect of the provisions of Ch 6 (including, in particular, those just mentioned) was "to transfer the power to make orders to enforce a statute from the courts to another body otherwise than in conformity with Ch III of the Constitution". The effect of s 659B, their Honours said85, was that "leaving aside any possible operation of s 75 of the Constitution[86], the Panel is the sole forum for resolving the defined disputes during the bid period between private parties, notwithstanding that such disputes might otherwise be within the jurisdiction of Federal, State and Territory courts". The majority in the Full Court noted87 that considerable emphasis was placed, by those supporting the validity of ss 657A and 657D, "upon the lack of (i) proceedings to enforce an obligation imposed by this Chapter; or (ii) proceedings for the review of a decision, or the exercise of a power or discretion, under this Chapter; or (iii) proceedings for the review of a decision, or the exercise of a power or discretion, under Chapter 6C in relation to securities of the target of a takeover bid during the bid period; and (iv) proceedings under Part 2F.1A for leave to bring, or to intervene paragraph (a) proceedings referred subparagraph (b)(i), (ii) or (iii). This is not limited to proceedings brought under this Chapter or this Act but includes proceedings under other Commonwealth and State or Territory laws (including the general law)." 84 (2007) 159 FCR 301 at 386 [401]. 85 (2007) 159 FCR 301 at 386-387 [402]. 86 The operation of which is expressly preserved by s 659B(5). 87 (2007) 159 FCR 301 at 387 [404]. Hayne ability on the part of the Panel to enforce its own orders and the related point that the decisions of the Panel are subject to collateral challenge at the point of enforcement". These, their Honours said88, were "difficult arguments to sustain" in the light of this Court's decision in Brandy v Human Rights and Equal Opportunity Commission89. And their Honours contrasted90 the provisions of the Racial Discrimination Act 1975 (Cth), considered in Brandy, with those of the Corporations Act. Whereas the Racial Discrimination Act had provided that a determination of the Commission was not binding or conclusive between any of the parties to the determination, s 657F made contravention of an order made by the Panel an offence of strict liability, and s 657G gave power to a court to make orders securing compliance with the Panel's orders. These provisions of the Corporations Act were said91 to "provide stronger methods of enforcement than were present in Brandy". It was on these bases that the majority in the Full Court decided92 that the decision in Precision Data did not govern the present case, and that "[i]t cannot be concluded that a declaration by the Panel pursuant to s 657A(2)(b) ... is only a basis for determining what rights and obligations should be created in the future and that an order pursuant to s 657D ... creates those rights and obligations". Rather, their Honours concluded93 that: "[T]he Panel, as an essential part of the process of declaration, decides between contending parties whether there has been a contravention of the [Corporations Act], with reference to past events and conduct and with the application of law to those events and conduct ... Where, as here, a finding of contravention is the basis or a basis for the declaration then the remedy granted by the Panel is typical of remedies now available to courts, both in the general equitable jurisdiction pursuant to Pt 9.5 of the [Corporations Act] and under a range of other statutes ... where discretionary considerations of a similar kind are relevant to the grant of relief and where similar remedial orders may be made." 88 (2007) 159 FCR 301 at 387 [404]. 89 (1995) 183 CLR 245. 90 (2007) 159 FCR 301 at 387-389 [404]-[409]. 91 (2007) 159 FCR 301 at 389 [408]. 92 (2007) 159 FCR 301 at 391-392 [418]. 93 (2007) 159 FCR 301 at 389-390 [412]. Hayne third member of The dissenting opinion of the Full Court the (Finkelstein J) proceeded94 from the premise that "the Panel does not decide whether a person has contravened a provision of the [Corporations Act] and in consequence impose punishment for that contravention". Two conclusions were said95 to follow: that the Panel is not concerned with the ascertainment or enforcement of existing rights, and that when the Panel makes an order under s 657D it is creating rights that operate for the future. Arguments in this Court The Attorney-General submitted that there are two central features of the statutory scheme which demonstrate that the Panel is not vested with powers of an exclusively judicial character. The first was said to be "the broad ranging considerations of policy and public interest which the Panel is required and able to take into account in determining whether to make a declaration and remedial orders". The second was said to be "the fact that the legislative scheme takes the existence of a decision by the Panel as a criterion or factum by reference to which legal norms are imposed and remedies provided for their enforcement by a court in the independent exercise of judicial power". that, on By contrast, the amici contended true construction, s 657A(2)(b), when read with s 657D, "purports to empower the Panel to determine whether a person or company has contravened Chapters 6, 6A, 6B or 6C ... and, if so, to grant relief for the purpose of quelling a controversy between parties". The amici sought to draw support for their view of the operation of the relevant provisions from the stated legislative object of making "the Panel the main forum for resolving disputes about a takeover bid until the bid period has ended"96. its Features of the relevant provisions The competing submissions proceeded from premises that depended upon the proper construction of the relevant provisions. In particular, the arguments in favour of validity sought to identify the Panel's task as essentially the making of a policy decision about what new rights and duties should be created, whereas those against validity sought to portray the Panel's task as quelling a controversy about whether there had been a contravention of the Corporations Act and 94 (2007) 159 FCR 301 at 325 [93]. 95 (2007) 159 FCR 301 at 325 [93]. 96 s 659AA. Hayne granting consequential relief to remedy that breach. It is essential, then, to begin by considering the relevant provisions of the Corporations Act. In doing that, it is important in this appeal to recognise that the Full Court of the Federal Court held to be invalid only one aspect of the Panel's power to make a declaration of unacceptable conduct. Only s 657A(2)(b) was declared invalid. That is, only the Panel's power to declare circumstances unacceptable on the ground that they are unacceptable because they constitute or give rise to a contravention of specified provisions of the Corporations Act was held invalid. There may well be cases in which only that ground for making a declaration of unacceptable circumstances is engaged – whether because the person seeking the declaration makes no other argument or because the Panel acts on only that basis. But accepting that s 657A(2)(b) provides a distinct and separate ground upon which the Panel may act, it is nonetheless important to place the particular provision in its proper statutory context. Three matters should be observed. First, s 657A(2) permits the Panel to make a declaration only if it appears to the Panel "that the circumstances ... are unacceptable". Contravention of a provision of one of the specified Chapters of the Corporations Act may provide the footing for that conclusion but it must appear to the Panel that the circumstances merit the description "unacceptable". Secondly, the power to make a declaration must, in every case, be exercised or be not exercised upon the Panel's consideration of whether making or refusing to make a declaration "is not against the public interest after taking into account any policy considerations that the Panel considers relevant"97. Thirdly, in exercising its powers under s 657A, the Panel must have regard to the matters identified in s 657A(3)(a). The matters to which the Panel must have regard include the purposes of Ch 6 set out in 97 s 657A(2). Hayne s 60298 and the other provisions of Ch 6. The Panel may have regard "to any other matters it considers relevant"99. 98 Section 602 provides: "The purposes of this Chapter are to ensure that: (a) the acquisition of control over: the voting shares in a listed company, or an unlisted company with more than 50 members; or the voting shares in a listed body; or (iii) the voting interests in a listed managed investment scheme; takes place in an efficient, competitive and informed market; and (b) the holders of the shares or interests, and the directors of the company or body or the responsible entity for the scheme: know the identity of any person who proposes to acquire a substantial interest in the company, body or scheme; and (ii) have a reasonable time to consider the proposal; and (iii) are given enough information to enable them to assess the merits of the proposal; and (c) as far as practicable, the holders of the relevant class of voting shares or interests all have a reasonable and equal opportunity to participate in any benefits accruing to the holders through any proposal under which a person would acquire a substantial interest in the company, body or scheme; and (d) an appropriate procedure is followed as a preliminary to compulsory acquisition of voting shares or interests or any other kind of securities under Part 6A.1. Note 1: To achieve the objectives referred to in paragraphs (a), (b) and (c), the prohibition in section 606 and the exceptions to it refer to interests in 'voting shares'. To achieve the objective in paragraph (d), the provisions that deal with the takeover procedure refer more broadly to interests in 'securities'. Note 2: Subsection 92(3) defines securities for the purposes of this Chapter." 99 s 657A(3)(b). Hayne It may be accepted that the word "unacceptable" may readily be applied to most, perhaps all, contraventions of provisions of the kind found in Chs 6, 6A, 6B and 6C of the Corporations Act. The first observation, that the Panel must conclude that the word "unacceptable" can properly be attached to a contravention, may therefore be of little moment. But even if that is so, the second and third observations reveal that the Panel's task is not completed by deciding that there has been a contravention of one of the relevant provisions. The Panel must make a declaration or decline to do so if it considers that doing that is not against the public interest after taking into account any policy considerations that the Panel considers relevant (s 657A(2)), and in exercising its powers under s 657A the Panel may have regard to any matters (in addition to those specified in s 657A(3)(a)) that it considers relevant. If the Panel finds that there has been no contravention, then assuming that there is no other basis for a declaration, the Panel's task is at an end. But if a contravention is demonstrated, the considerations which have been identified as emerging from the second and third contextual observations provide a distinct and additional layer of matters to which the Panel must give attention before making a declaration. And without a declaration of unacceptable circumstances, there can be no orders made by the Panel. Section 657D(1) empowers the Panel to make orders under s 657D(2) only if it has declared circumstances to be unacceptable and it follows that, if the Panel were to find that there had been a contravention of a relevant provision, but that no declaration should be made, the Panel could make no orders of any kind. Section 657D(2) empowers the Panel to make any order that it thinks appropriate to: protect the rights or interests of any person affected by the circumstances; or ensure that a takeover bid or proposed takeover bid in relation to securities proceeds (as far as possible) in a way that it would have proceeded if the circumstances had not occurred; or specify in greater detail the requirements of an order made under this subsection; or determine who is to bear the costs of the parties to the proceedings before the Panel". The orders the Panel may make are expressly stated in s 657D(2) to include a "remedial order" but to exclude "an order directing a person to comply with a requirement of Chapter 6, 6A, 6B or 6C". Hayne The expression "remedial order" is defined in s 9 of the Corporations Act in very elaborate terms that encompass many forms of order100. They include 100 Section 9 defines "remedial order" as an order that: restrains a person from exercising any voting or other rights attached to securities; or directs a body corporate not to make or to defer payment of an amount due from the body corporate in respect of securities; or restrains a person from acquiring securities or an interest in securities; or directs a person to dispose of, or not to dispose of, securities or interests in securities; or directs the disposal referred to in paragraph (d): to be made within a specified time; or to be made subject to specified conditions; or (iii) not to be made to a specified person or persons or to a specified class or classes of persons; directs a specified person to pay to the body corporate an amount equal to any profit or benefit that the person obtains because of the disposal referred to in paragraph (d); or vests securities, or an interest in securities, in ASIC; or directs a body corporate not to register the transfer or transmission of securities; or cancels securities issued as consideration for offers under a takeover bid; or declares that an exercise of the voting or other rights attached to securities be disregarded; or cancels or declares voidable: an agreement or offer relating to a takeover bid, or a proposed takeover bid; or (Footnote continues on next page) Hayne orders that restrain persons in various ways (for example, from exercising voting rights or acquiring securities), orders that direct persons to do or refrain from doing various acts (such as disposing of securities or not disposing of securities), and orders vesting securities or an interest in securities in ASIC. Although the definition of remedial order includes an order that directs a person to comply with a requirement of Chs 6, 6A, 6B or 6C, it is to be recalled that the Panel's powers to make orders expressly exclude this form of order. As noted earlier, emphasis was given by the majority in the Full Court to the effect of the statutory limitation upon the bringing of "court proceedings in relation to a takeover bid or proposed takeover bid"101. The limitation was an important step in the argument to their Honours' conclusion102 that there had been a "transfer [of] the power to make orders to enforce a statute from the courts to another body otherwise than in conformity with Ch III of the Constitution". The statutory limitation upon the bringing of "court proceedings in relation to a takeover bid or proposed takeover bid" must be understood in the light of the Panel's powers to make a declaration of unacceptable circumstances. The limitation on the taking of such proceedings may prevent a person from instituting proceedings alleging that there has been a contravention of a provision of Chs 6, 6A, 6B or 6C. The limitation is, however, temporary, not permanent. (ii) any other agreement or offer in connection with the acquisition of securities or relevant interests in securities; directs a person to give specified information to the holders of securities of a body corporate; or directs a body corporate not to issue securities to a person; or if an order of a kind referred to in paragraphs (a) to (m) is in force in respect of securities – directs the registered holder of the securities to give written notice of the order to any person whom the holder knows to be entitled to exercise a right to vote attached to those securities; directs a body corporate to repeal or modify its existing constitution or adopt a particular constitution; or if a person has failed to comply with a requirement of Chapter 6, 6A, 6B or 6C – directs that person to comply with that requirement." 101 s 659B(4). 102 (2007) 159 FCR 301 at 386 [401]. Hayne Section 659B(1) prevents the bringing of such proceedings "before the end of the bid period". Further, the limitation does not extend to the various public office holders, such as a Minister of the Commonwealth or of a State or Territory, or others specified in s 659B(1). In particular, s 659B(1) does not prevent the regulator, ASIC, taking whatever step it thinks fit to obtain enforcement of the law or seek punishment for its contravention. The Panel's task Delaying the institution or prosecution of proceedings in which a private party affected by an actual or proposed takeover bid alleges that there has been a contravention of a provision of one of the specified Chapters of the Corporations Act is at least consistent with the Panel's task under s 657A being the task of creating new rights and obligations as between those affected by the bid. And as explained earlier, the requirement that the Panel take into account any policy considerations that it considers relevant103, in deciding whether to make or not make a declaration, coupled with the obligation to have regard to the matters identified in s 657A(3)(a) and the power to have regard to any other matters it considers relevant104 reinforce the view that the Panel's task is better described as the creating of new rights and obligations rather than the quelling of a controversy about contravention of the Corporations Act. Further, the question before the Panel is not confined to any question of contravention. The Panel may make a declaration under s 657A, a final order under s 657D, or an interim order under s 657E, only on an application under s 657C105. The persons who may apply for a declaration or an order are limited106 to the bidder, the target, ASIC or "any other person whose interests are affected by the relevant circumstances". Leaving aside ASIC (which is not affected by the limitations on bringing court proceedings relating to a takeover bid before the end of the bid period), those who may make application to the Panel all have commercial interests underpinning their application. Those of the bidder and the target are self-evident; the interests of a person "whose interests are affected by the relevant circumstances" are necessarily larger than and different from a bare interest in enforcement of compliance with the relevant provisions of the Corporations Act. And the Panel may not make an order directing a person to comply with the requirement of the provision that has been contravened107. 103 s 657A(2). 104 s 657A(3)(b). 105 s 657C(1). 106 s 657C(2). 107 s 657D(2). Hayne In these circumstances, it is not right to describe the proceedings before the Panel as encompassing only a controversy about contravention. The issues which arise in an application to the Panel by a party other than ASIC are necessarily wider and extend to the commercial questions that emerge from that party's interests in the bid in question. It follows that to describe the Panel as quelling a controversy about contravention is inaccurate. Even if it were right to describe the Panel's task as quelling a controversy, the controversy or dispute with which the Panel deals, when s 657A(2)(b) is engaged, is wider than a controversy or dispute about contravention of the Corporations Act. Enforcement of the Panel's orders It was not disputed, whether in this Court or in the courts below, that the Panel's orders under s 657D are not enforceable by the Panel. Rather, contravention of an order of the Panel is made an offence under s 657F. And "the Court", which is to say one of the several courts identified in s 58AA of the Corporations Act108, may make orders to secure compliance with an order made by the Panel109. Whether, as the majority in the Full Court held110, these provisions provide "stronger methods of enforcement than were present in Brandy" depends upon what is meant by "stronger". If, as seems most likely, the "strength" of the enforcement methods is no more than a reference to the nature of the consequences that may follow disobedience, the observation is not to the point in deciding whether the Panel exercises the judicial power of the Commonwealth. Judicial power? As Brandy demonstrated, and has been recognised since the very earliest decisions of this Court about Ch III111, no single combination of necessary or sufficient factors identifies what is judicial power. So much is made plain by the 108 The Federal Court, the Supreme Court of a State or Territory, the Family Court of Australia and "a court to which section 41 of the Family Law Act 1975 [(Cth)] applies because of a Proclamation made under subsection 41(2) of that Act". 109 s 657G. 110 (2007) 159 FCR 301 at 388-389 [408]. 111 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 357; Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434; R v Davison (1954) 90 CLR 353 at 368-369; Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 188-189. Hayne so-called chameleon doctrine112 and the cases in which that doctrine has been engaged. In R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd113, in a passage often since applied in this Court114, Kitto J said: "[A] judicial power involves, as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons. In other words, the process to be followed must generally be an inquiry concerning the law as it is and the facts as they are, followed by an application of the law as determined to the facts as determined; and the end to be reached must be an act which, so long as it stands, entitles and obliges the persons between whom it intervenes, to observance of the rights and obligations that the application of law to facts has shown to exist." In Tasmanian Breweries, the legislation in issue (the Trade Practices Act 1965 (Cth)) did not require the relevant tribunal to adjudicate upon any claim of right115 but did render unenforceable the restriction or practice found to be contrary to the public interest. But as Kitto J went on to say116: "The determination [by the tribunal] itself has no operative effect: it constitutes the factum by reference to which the Act operates to alter the law in relation to the particular case. And an order under s 52 (or an interim restraining order under s 54) is in like case. It presents a direct contrast with an injunction granted by a court as a means of enforcing obligations that have been established by adjudication. The order restrains future conduct, not as being in breach of ascertained obligations, but as 112 R v Quinn; Ex parte Consolidated Food Corporation (1977) 138 CLR 1 at 8. 113 (1970) 123 CLR 361 at 374. 114 See, for example, R v Ludeke; Ex parte Australian Building Construction Employees' and Builders Labourers' Federation (1985) 159 CLR 636 at 655; Babaniaris v Lutony Fashions Pty Ltd (1987) 163 CLR 1 at 12; Love v Attorney-General (NSW) (1990) 169 CLR 307 at 320; Polyukhovich v The Commonwealth (War Crimes Act Case) (1991) 172 CLR 501 at 532, 685; Attorney-General (Cth) v Breckler (1999) 197 CLR 83 at 109-110 [41]. 115 (1970) 123 CLR 361 at 377. 116 (1970) 123 CLR 361 at 378. Hayne being in conformity with ascertained obligations or practices – not in order to ensure observance of them but to prevent observance of them, because it is considered that their observance would be against the public interest. The Act, particularly s 52(7), operates upon the order to give its provisions the force of law, and thus to alter the law for the future in relation to the particular case." The features of the legislation in issue in Tasmanian Breweries which were identified in that case are also to be observed in the relevant provisions of the Corporations Act. The Panel is required to conclude whether a declaration of unacceptable circumstances should be made. If s 657A(2)(b) is engaged, the Panel must decide, along the way, whether there has been a contravention of a relevant provision of the Corporations Act. But if it does decide that there has been a contravention, the conclusion to which the Panel must ultimately come is whether identified circumstances should be declared unacceptable. In making a declaration, or orders consequent upon a declaration, the Panel does not create a charter for the observance of the rights and obligations that attach to the contravention. The Panel's powers to make orders expressly exclude117 the power to make "an order directing a person to comply with a requirement of Chapter 6, 6A, 6B or 6C". The charter that is established by the Panel's order is for the observance of the rights and obligations that are created in consequence of a declaration being made. For, if a declaration is made, an order is framed to prevent the consequences of what have been found to be unacceptable circumstances. The order is framed to prevent those consequences by the "protect[ing] circumstances"118 or by "ensur[ing] that a takeover bid or proposed takeover bid ... proceeds (as far as possible) in a way that it would have proceeded if the circumstances had not occurred"119. The order constitutes the new charter of rights and obligations of the parties. And the Corporations Act "operates upon the order to give its provisions the force of law, and thus to alter the law for the future in relation to the particular case"120. interests of any person affected by rights or the It is then for the courts in the exercise of judicial power to enforce the law as it has been framed by the Panel's orders. There is what was identified in 117 s 657D(2). 118 s 657D(2)(a). 119 s 657D(2)(b). 120 R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 378. Hayne Brandy121 as "an independent exercise of judicial power" to give effect to the Panel's orders. The orders of the Panel stand in sharp contrast with the determinations of the Human Rights and Equal Opportunity Commission considered in Brandy. By the provisions of the Racial Discrimination Act 1975 (Cth) in issue in Brandy, the Commission's determination, when registered as it had to be, was binding upon the parties and enforceable as an order of the Federal Court. But the determination remained the determination of the Commission and in no sense became the determination of the Federal Court122. Under the relevant provisions of the Corporations Act, the binding effect of the orders of the Panel is determined by the Court which is called upon to decide whether orders should be made under s 657G to secure compliance with them or to decide whether there has been an offence committed under s 657F by a person contravening a valid order of the Panel. This analysis of the effect of the relevant provisions requires the conclusion that the Panel does not exercise the judicial power of the Commonwealth. It is important, however, to notice one further consideration which strengthens the case for validity of the impugned provisions. Although the Corporations Act gives an order of the Panel the force of law and makes contravention of the Panel's order an offence, an order of the Panel is open to challenge. It is open to direct challenge by proceedings under s 75(v) of the Constitution or proceedings seeking relief under s 39B of the Judiciary Act. No less importantly, an order of the Panel is open to collateral challenge123 in other judicial proceedings in which its valid making is an element in issue. That an order of the Panel may be challenged in these ways points away from a conclusion that the Panel exercises judicial power. Conclusions and orders For these reasons, the Full Court erred in holding that s 657A(2)(b) was invalid as purporting to confer the judicial power of the Commonwealth on the Panel. 121 (1995) 183 CLR 245 at 261. 122 (1995) 183 CLR 245 at 270. 123 Breckler (1999) 197 CLR 83 at 111-112 [46]. Hayne The appeal to this Court should be allowed. So much of par 2 of the orders of the Full Court of the Federal Court of Australia as ordered that there be a declaration that s 657A(2)(b) of the Corporations Act is invalid should be set aside. In its place there should be a declaration that s 657A(2)(b) of the Corporations Act is not invalid on the ground that it purports to confer the judicial power of the Commonwealth on the Takeovers Panel. 103 HEYDON J. I agreed with the orders relating to the conduct of this appeal by the Attorney-General of the Commonwealth of Australia on the following grounds. The Commonwealth had an interest in defending the validity of the relevant Commonwealth legislation. It therefore had an interest in seeking to reverse, in this appeal, its failure in its attempt to defend validity in the Full Court of the Federal Court of Australia. It retained that interest, even though those who in the Full Court of the Federal Court of Australia were concerned to attack its validity no longer had the contrary interest in this Court because they had ceased to care about whether their victory there should be maintained here. I agreed with the order granting leave to counsel to appear as amici curiae on the ground that that was the only possible means in the present highly unusual circumstances to ensure that the controversy in which the Commonwealth wished to engage in this Court was suitably sharpened and to prevent this Court from being hampered in quelling it satisfactorily. I agree that there should be a declaration that s 657A(2)(b) of the Corporations Act 2001 (Cth) is not invalid on the ground that it purports to confer the judicial power of the Commonwealth on the Takeovers Panel for the primary reasons given by Finkelstein J in the Full Court of the Federal Court of Australia124. 124 Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301 at 322-326 [78]-[95]. CRENNAN AND KIEFEL JJ. Section 657A(1), which appears in Ch 6 of the Corporations Act 2001 (Cth), provides that the Takeovers Panel may make a declaration that circumstances relating to the affairs of a company are "unacceptable circumstances". Pursuant to s 657A(2)(b), the provision with which this appeal is concerned, the Panel may consider circumstances to be unacceptable because they constitute, or give rise to, a contravention of Chs 6, 6A, 6B or 6C. A declaration may only be made by the Panel if it considers that it is not against the public interest, taking into account any policy considerations it considers relevant. If the Panel makes such a declaration it may make orders provided for by s 657D. On the application of Australian Pipeline Limited the Panel made a declaration of unacceptable circumstances in relation to acquisitions by a wholly owned subsidiary of Alinta Limited between 16 August 2006 and 22 August 2006 of units in the Australian Pipeline Trust, representing 10.25 per cent of the voting power in the Trust. Prior to those acquisitions, the Panel held, Alinta had a relevant interest in units representing 30 per cent of the voting power. Section 606 of the Act prohibits acquisitions which increase a person's voting power to more than 20 per cent and prohibits any increase if the starting point is above 20 per cent and below 90 per cent. The stated bases for the declaration were that the acquisitions constituted, or gave rise to, a contravention of the section and the effect they had on the control, or potential control, of the Trust. The latter is a circumstance referred to in s 657A(2)(a). In the declaration the Panel said that it considered that it would not be against the public interest to make a declaration of unacceptable circumstances and that it had taken into account other statutory purposes. The Panel made orders under s 657D, vesting the additional units acquired by Alinta in the Australian Securities and Investments Commission ("ASIC") on trust for sale, with the proceeds to be remitted to Alinta as registered holder. Further orders were made restricting Alinta's disposal of the acquired units or further acquisition of any interest in the Trust or exercise of any voting rights attaching to any units to be sold125. The orders were said to be necessary in order to protect the interests of unitholders in the Trust, which interests had been adversely affected by the acquisitions. In its application to the Federal Court, for review of the Panel's decision, Alinta contended that the declaration and the orders made by the Panel were invalid because in making them the Panel exercised the judicial power of the 125 In the matter of Australian Pipeline Trust O1R [2006] ATP 29. Commonwealth. The Panel is not a court within the meaning of Ch III of the Constitution. Emmett J rejected the contention126. The reasons of Emmett J reflect, in part, the conclusion reached in Precision Data Holdings Ltd v Wills127 with respect to powers exercised by the Takeovers Panel128, under earlier legislation129, to make a declaration that unacceptable circumstances had occurred in relation to the acquisition of shares in a company, and following orders. The majority in the Full Court (Gyles and Lander JJ, Finkelstein J dissenting) distinguished the decision in Precision Data on account of the significant changes to the Panel's functions and powers which had been effected by the Corporate Law Economic Reform Program Act 1999 (Cth)130 and carried into the Corporations Act 2001131. The Court declared s 657A(2)(b) invalid. It held that s 657A(2)(a) did not provide an alternative basis for the Panel's declaration, ordered that it be quashed, and set aside the Panel's orders. The 1989 legislation Under legislation which preceded the Corporations Act 1989 (Cth)132, the National Companies and Securities Commission could make a declaration that "unacceptable conduct" had been engaged in, in relation to the shares in, or the affairs of, a company133. The Commission also had an investigatory role. A declaration made by it had the effect of deeming a contravention of the statute to have occurred. The Court could make orders following upon a declaration, if it 126 Australian Pipeline Ltd v Alinta Ltd (2006) 237 ALR 158 at 193 [164]. 127 (1991) 173 CLR 167. 128 Known at the time as the Corporations and Securities Panel. Subsequently renamed by the Financial Services Reform Act 2001 (Cth), Sched 3. 129 Corporations Law of Victoria, Ch 6; Corporations Act 1989 (Cth). 130 The "CLERP" Act. 131 Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301 at 386 [401]. 132 Companies (Acquisition of Shares) Act 1980 (Cth). determined not to displace it134. The Court could, in any event, make orders with respect to a contravention of the section restricting the acquisition of shares135. The Corporations Act 1989 formed the basis for a national scheme for the regulation of corporations. That legislation was applied as the Corporations Law of Victoria136. It was that Law, and in particular Ch 6 of it, with which the Court was concerned in Precision Data. The Australian Securities Commission Act 1989 (Cth) established the Australian Securities Commission (now ASIC) and the Takeovers Panel137. Qualification for appointment as a Panel member required knowledge of, or experience in, one or more of the fields of business, the administration of companies, the financial markets, law, economics and accounting138. Under the Corporations Law declarations were made on the application of the Commission to the Panel. The Panel had the power to make orders when it had made a declaration. The Court139 could make orders securing compliance with the Panel's orders and it had power to make other orders with respect to contraventions of the Law. Section 733(3) of the Corporations Law provided: "Where, on an application under subsection (1), the Panel is satisfied: that unacceptable circumstances have occurred: in relation to an acquisition of shares in the company; or as a result of conduct engaged in by a person in relation to shares in, or the affairs of, the company; and 136 By Corporations (Victoria) Act 1990 (Vic), s 7. 137 ss 7 and 171. 139 Defined under s 58AA to refer to the Federal Court, the Supreme Court, the Family Court and a court the subject of proclamation under s 41 of the Family Law Act 1975 (Cth). having regard to the matters referred to in section 731 and any other matters the Panel considers relevant, that it is in the public interest to do so; the Panel may by writing declare the acquisition to have been an unacceptable acquisition, or the conduct to have been unacceptable conduct, as the case may be." Section 732 of the Law limited the occurrence of unacceptable circumstances to situations where the shareholders and directors did not know the identity of the proposed acquirer, did not have a reasonable time in which to consider the proposal, or were not supplied with sufficient information to assess the proposal; or where all shareholders did not have the opportunity to participate in benefits which might accrue under the proposal. These circumstances all involved a breach of the "Eggleston principles", which had been the subject of a report preceding the 1980 legislation140. A further circumstance was added in 1995141: where the company proposes a buy-back which is unreasonable. Finally, two circumstances were added in 1998142: where a company unreasonably reduced its share capital or itself acquired shares having an effect upon the control of it or another company. Section 731, to which the Panel was required to have regard in considering whether to make a declaration, in addition to reiterating the Eggleston principles, obliged the Panel to "take account of the desirability of ensuring that the acquisition of shares in companies takes place in an efficient, competitive and informed market". When the Panel had declared an acquisition of, or conduct in relation to, shares to be unacceptable s 734(2)(a) provided, in general terms, that it could make: "any order that it thinks necessary or desirable to protect the rights or interests of any person affected by the acquisition or conduct or to ensure, as far as possible, that a takeover scheme or takeover announcement, or a proposed takeover scheme or proposed takeover announcement, in relation to shares in the company proceeds in the manner in which it 140 Victoria, Company Law Advisory Committee, Report to the Standing Committee of Attorneys-General on Disclosure of Substantial Shareholdings and Takeovers, (February 1969). 141 First Corporate Law Simplification Act 1995 (Cth), Sched 2, item 14. 142 Company Law Review Act 1998 (Cth), Sched 2, item 226. would have proceeded if that acquisition had not taken place or that conduct had not been engaged in". Paragraph (b) more specifically provided for orders directing a person to supply information to shareholders; prohibiting the exercise of voting rights; directing a company not to make payment of amounts due with respect to shares; prohibiting the acquisition of or directing the disposal of an interest in specified shares; directing a company not to register a transfer; directing that an exercise of voting rights be disregarded; directing a company not to issue shares; cancelling or declaring void an agreement or offer relating to a takeover scheme; and directing a person registered as a shareholder to give notice to a person entitled to exercise the right to vote attached to those shares. Paragraph (c) permitted the Panel to make an order directing a person to do, or refrain from doing, a specified act for the purpose of securing compliance with any of its orders made under the preceding paragraphs. Where a declaration or order was to be made, procedural fairness was to be applied143. The Panel could not make an order under s 734(2) if it was satisfied that it would unfairly prejudice any person144. Section 734(5) provided that a person was not to contravene an order made by the Panel under sub-s (2). In the event of contravention the Court, on the application of the Commission, might make such order or orders as it considered necessary for the purpose of securing compliance with the Panel's order including, but not limited to, a "remedial order"145 and an order directing a person to do, or to refrain from doing, a specified act. Many of the orders which could be made by the Panel under s 734(2) came within the definition of a remedial order146. The Court could also make an order vesting shares, or an interest in shares, in the Commission. The Court had power, under Pt 6.10, to make remedial and other orders, in the nature of injunctions, in order to secure compliance where there had been a contravention of provisions relating to prohibited acquisitions, procedures or other matters connected with takeovers. A contravention also constituted an offence under the Law147. 143 ss 733(5) and 734(6). 146 Defined in s 613. The decision in Precision Data Holdings Ltd v Wills In Precision Data the Court accepted that s 733(3)(a) involved the Panel in making findings of fact148. It observed that whilst the finding of facts, the making of value judgments and the formation of an opinion as to the legal rights and obligations of parties are common ingredients in the exercise of judicial power, they may also be elements in the exercise of administrative and legislative power. Functions may be classified as either judicial or administrative according to the way in which they are to be exercised149. The making of binding declarations of right, "by way of adjudication of disputes about rights and obligations arising from the operation of the law upon past events or conduct", was considered to be a "classical instance of the exercise of judicial power"150. But the declarations for which s 733 provided were held not to be binding declarations of right in this sense. The object of the adjudication before the Panel was to determine what legal rights and interests should be created, not to resolve a dispute about what rights and obligations existed151. Their Honours referred, in this regard, to Re Ranger Uranium Mines Pty Ltd; Ex parte Federated Miscellaneous Workers' Union of Australia152 where it was said by the Court: "The power of inquiry and determination is a power which properly takes its legal character from the purpose for which it is undertaken. Thus inquiry into and determination of matters in issue is a judicial function if its object is the ascertainment of legal rights and obligations. But if its object is to ascertain what rights and obligations should exist, it is properly characterized as an arbitral function when performed by a body charged with the resolution of disputes by arbitration." Although those remarks were made by reference to the function of the Conciliation and Arbitration Commission, they were considered to apply with 148 (1991) 173 CLR 167 at 187. 149 (1991) 173 CLR 167 at 189. 150 (1991) 173 CLR 167 at 188, referring to Re Cram; Ex parte Newcastle Wallsend Coal Co Pty Ltd (1987) 163 CLR 140 at 148-149 per Mason CJ, Brennan, Deane, 151 (1991) 173 CLR 167 at 188-189. 152 (1987) 163 CLR 656 at 666. equal force to determinations for administrative, executive or legislative purposes153. The Court accepted that the function entrusted to the Panel was one to make a declaration concerning past events or conduct. And it accepted that courts are sometimes vested with jurisdiction by the legislature to create rights or impose liabilities154. Nevertheless in doing so a court exercises judicial power, which requires the application of legal principle or a standard which is prescribed, not considerations of policy. In the conclusion to its reasons the Court said155: "The fact that the Panel is given a power to make orders conditionally upon its having declared the acquisition to have been an unacceptable acquisition or the conduct to have been unacceptable conduct does not indicate that the Panel is exercising judicial power in making the declaration or subsequently in making orders. As the making of a declaration necessarily proceeds in part, at least, from an assessment of considerations of commercial policy, not solely from an application of the law to the facts as found, neither the making of a declaration nor the making of orders is binding in the same sense that a judicial determination would be binding." In the view of the Court156, the position of the Panel was analogous to that of the Trade Practices Tribunal considered in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd157. In that case the trade practices legislation provided that if the Tribunal was satisfied that an "examinable agreement or practice exists it shall make a determination whether the agreement or practice is contrary to the public interest". A number of matters were to be taken into account by the Tribunal in making its determination, the basis for which was expressed to be the principle that the preservation and encouragement of competition are desirable. The statutory effect of a determination made by the Tribunal was that the agreement or practice became unenforceable. The Tribunal could make orders restraining 153 (1991) 173 CLR 167 at 189-190. 154 (1991) 173 CLR 167 at 190, 191. 155 (1991) 173 CLR 167 at 191. 156 (1991) 173 CLR 167 at 191-192. 157 (1970) 123 CLR 361. future conduct which fell within certain descriptions. The Court there held that the making of a restraining order by the Tribunal did not involve the exercise of judicial power. The Corporations Act 2001 The Corporate Law Economic Reform Program Act 1999 repealed Ch 6 of the Corporations Law and certain other provisions. A new Ch 6, together with Chs 6A, 6B and 6C, were amongst the replacement provisions158. These provisions continued in the same form with the enactment of the Corporations Act 2001. The provisions of Ch 6 of the Corporations Act 2001 extend to listed managed investment schemes and listed bodies. Section 606 contains the prohibitions upon acquisitions earlier referred to, which are subject to certain exceptions and exemptions. A contravention of the section results in the commission of an offence, one of absolute liability159. The balance of Ch 6 deals with procedures to be undertaken in connection with takeovers, such as the formation of the takeover offer, the content of the bidder's statement, variations of offers and acceptance and other activities during the bid period. Chapter 6A contains requirements with respect to a compulsory acquisition and buy-out, which may follow upon a takeover bid. Chapter 6B contains provisions prohibiting misstatements in, or omissions from, takeover, compulsory acquisition and buy-out documents. Chapter 6C requires disclosure of substantial holdings and provides for the tracing of the beneficial ownership of shares. In each Chapter an offence is created for contravention of some provisions, and in the case of Chs 6A and 6C, the offences are of strict liability. Chapter 6C also provides for a liability for compensation in the event of contravention. Chapter 6B creates an offence, if a statement or omission is materially adverse, and a liability for compensation. The Court160 has both general and specific powers to make orders with respect to contraventions of Chs 6, 6A, 6B and 6C161. Its general powers include 158 Taking effect 13 March 2000. 159 s 606(4A). 160 Defined by ss 9 and 58AA, as before, to refer to the Federal Court, the Supreme Court, the Family Court and a court the subject of proclamation under s 41 of the Family Law Act. 161 ss 1325A, 1325B and 1325C. the making of remedial orders and excusing contraventions of any of the Chapters162. The remedial orders listed in the definition section163 are the same as those provided for in the 1989 legislation, with some additions. Amongst them is par (p), which provides for the making of an order which directs a person to comply with a requirement of Chs 6, 6A, 6B or 6C. The Takeovers Panel and ASIC are continued in existence under s 261 of the Australian Securities and Investments Commission Act 2001 (Cth). Part 10 contains the provisions relating to the Takeovers Panel. The qualification for membership of the Panel is substantially the same as that required by the Australian Securities Commission Act 1989. As the majority in the Full Court observed164, the current provisions relating to Panel proceedings are broadly the same as those earlier provided for. The Panel is obliged to afford procedural fairness165 and provide written reasons for the making of a declaration or consequential orders166. The Corporations Act 2001 provides that a finding of fact recorded in an order by the Panel, or a written statement of the reasons for an order, is proof of the fact, in the absence of evidence to the contrary167. The Panel may dismiss an application as frivolous or vexatious168. The Panel's powers to make a "[d]eclaration of unacceptable circumstances" are contained in s 657A. An application for a declaration may be made by ASIC, the bidder, the target and any other person whose interests are affected by the relevant circumstances169. Sub-sections (1), (2) and (3), in relevant part, of s 657A provide: 162 ss 1325A, 1325D. 164 Australian Pipeline Ltd v Alinta Ltd (2007) 159 FCR 301 at 380 [385]. 165 Corporations Act 2001, ss 657A(4), 657D(1). 166 ss 657A(6), 657D(4). 167 s 658B. 168 s 658A. 169 s 657C. "(1) The Panel may declare circumstances in relation to the affairs of a company to be unacceptable circumstances. Without limiting this, the Panel may declare circumstances to be unacceptable circumstances whether or not the circumstances constitute a contravention of a provision of this Act. The Panel may only declare circumstances to be unacceptable circumstances if it appears to the Panel that the circumstances: are unacceptable having regard to the effect of the circumstances on: the control, or potential control, of the company or another company; or the acquisition, or proposed acquisition, by a person of a substantial interest in the company or another company; or are unacceptable because they constitute, or give rise to, a contravention of a provision of this Chapter or of Chapter 6A, 6B or 6C. The Panel may only make a declaration under this subsection, or only decline to make a declaration under this subsection, if it considers that doing so is not against the public interest after taking into account any policy considerations that the Panel considers relevant. In exercising its powers under this section, the Panel: (a) must have regard to: the purposes of this Chapter set out in section 602; and the other provisions of this Chapter; and (iii) the rules made under section 658C; and the matters specified in regulations made for the purposes of paragraph 195(3)(c) of the ASIC Act; and (b) may have regard to any other matters it considers relevant. The purposes stated in s 602 are those stated in the 1989 legislation, namely the desirability of ensuring share acquisitions take place in an efficient, competitive and informed market and the four Eggleston principles. Section 657D provides for the orders that the Panel may make if it has declared circumstances to be unacceptable under s 657A. It must not make an order if it is satisfied that it would unfairly prejudice any person170. The Panel is permitted, by s 657D(2), to make orders of the kind referred to in the former s 734(2)(a), those necessary to protect the rights or interests of a person and to ensure that a takeover proceeds in the manner it should have, but for the circumstances which have occurred. Provision is now made for the Panel to order costs171. The power given by s 657D(2) extends to the making of remedial orders with a notable exception. The power previously given in par (c) of the former s 734(2), to direct compliance with orders made, is absent. The sub- section expressly excludes from orders the subject of the Panel's powers an order directing compliance with a requirement of Chs 6, 6A, 6B or 6C172. Similar provision to that contained in the 1989 legislation is made for the Court to make orders with respect to compliance with the Panel's orders. The provision is couched in terms of a discretion, but it is limited to orders the Court considers "appropriate to secure compliance" with the Panel's orders, as was the equivalent provision in the 1989 legislation. Application may be made for such an order by ASIC, the President of the Panel, a person to whom the Panel's order relates or a person who was a party to the proceedings before the Panel173. A contravention of an order made by the Panel is an offence, one of strict liability174. Although the Court has extensive powers in relation to contraventions of, or non-compliance with, the Act in the context of takeovers, a feature of the Corporations Act 2001 is that access to the courts during the bid period is limited. Section 659B(1) provides that only ASIC, and other nominated office holders or public bodies having jurisdiction in the area, may bring "court proceedings in relation to a takeover bid, or proposed takeover bid". The phrase 170 s 657D(1). 171 s 657D(2)(d). 172 par (p) of the definition of "remedial order" in s 9. 173 s 657G. 174 s 657F. Such an offence is therefore one which does not contain the element of fault: Criminal Code (Cth), s 6.1. refers to any proceedings before a court175 in relation to action taken in connection with a bid or a target's response to it, or a document to be prepared, or a notice to be given under Ch 6. It includes any proceeding for the review of a decision or the exercise of a discretion under the Chapter and "proceedings to enforce an obligation imposed by this Chapter". It extends to proceedings under the general law176. The powers of the Court, in proceedings after the end of the bid period, are also limited so far as concerns the remedies it may provide where it finds that the Act was in fact contravened, although the Panel refused to make a declaration of unacceptable circumstances177. The object of ss 659B and 659C, stated shortly in s 659AA, is "to make the Panel the main forum for resolving disputes about a takeover bid until the bid period has ended". The reasons of the Full Court Gyles and Lander JJ noted178 that there were at least four significant differences between the present legislative provisions and those considered in Precision Data: the express power now given to the Panel to make a declaration of unacceptable circumstances based upon a contravention of the Chapters; the extension of those entitled to apply for a declaration or order; the restriction of the role of the courts; and the similarity between the orders which the Panel can now make and those made by a court. Reference was made by their Honours179 to statements in the Explanatory Memorandum to the Bill which introduced the changes180: "7.14 Takeover disputes are currently principally determined by the courts, with the jurisdiction of the Corporations and Securities Panel (Panel) depending upon referrals from ASIC. There have been only three matters brought before the Panel since it was established in 1991. 175 Defined by ss 9 and 58AA to mean any court. 176 s 659B(4). 177 s 659C. 178 (2007) 159 FCR 301 at 385-386 [399]. 179 (2007) 159 FCR 301 at 385 [398]. 180 Corporate Law Economic Reform Program Bill 1998 (Cth). 7.15 Target companies often resort to litigation in hostile takeover bids, sometimes for tactical reasons. This can result in bids being delayed and, where a final hearing cannot be held within the bid period, the courts having to decide between disrupting the bid by granting an injunction without the benefit of full evidence and allowing the bid to proceed even though it may later be found to be defective. 7.16 To meet these concerns, a reconstituted Panel will take the place of the courts as the principal forum for resolving takeover disputes under the Corporations Law, with the exception of civil claims after a takeover has occurred and criminal prosecutions. This will allow takeover disputes to be resolved as quickly and efficiently as possible by a specialist body largely comprised of takeover experts, so that the outcome of the bid can be resolved by the target shareholders on the basis of its commercial merits. Other benefits of an effective panel for dispute resolution include the minimisation of tactical litigation and the freeing up of court resources to attend to other priorities." (Emphasis was added by their Honours.) It is apparent from their Honours' reasons that they took the view that the function of the courts had been impermissibly transferred from the courts to the Panel181. In their Honours' view the exclusion, effected by s 657D(2), of the Panel making orders directing compliance with requirements of the Chapters, did not avoid the conclusion that positive and negative orders, which could be made, have the effect of orders made by the courts. The courts, on the other hand, could no longer grant injunctions in the bid period. Their Honours said182 that as a "deliberate legislative policy" the Panel is now concerned with the "adjudication of disputes" about "existing obligations" to a degree not seen in Precision Data. In their Honours' view183 the scheme was radically different from that considered in Precision Data. In argument before their Honours some weight was placed upon the lack of ability of the Panel to enforce its orders, as indicating that it did not have judicial power. Their Honours pointed out184 that this had not been considered an essential feature of judicial power, and that this was confirmed in Brandy v Human Rights and Equal Opportunity Commission185. Under the Corporations 181 (2007) 159 FCR 301 at 386 [401]. 182 (2007) 159 FCR 301 at 386 [400]. 183 (2007) 159 FCR 301 at 386 [401]. 184 (2007) 159 FCR 301 at 387 [404]. 185 (1995) 183 CLR 245. Act 2001 the Court was obliged to secure compliance with the Panel's orders and contravention of them was now an offence of strict liability. In their Honours' view, these were stronger methods of enforcement than had been present in that case186. Before the Full Court, in argument for the validity of s 657A(2)(b), reliance was placed upon the reasoning of Emmett J, that the effect of the Panel's inquiry was to create a new set of rights. Their Honours in the majority considered that the fact that the Panel had the power to determine whether a breach of the law had been committed and the power to make an appropriate remedial order was sufficient to indicate that more is involved than the creation of new rights187. An essential part of the Panel's powers, in making a declaration, is to decide between contesting parties whether there has been a contravention of the Act, by reference to past events and conduct and with the application of law to those events and conduct188. It is not to the point that the decision to declare or not to declare may involve other factors involving the public interest and "policy", in their Honours' view. The mere existence of such a discretion should not be regarded as determinative of power being non-judicial. It was of some importance, Finkelstein J observed in his reasons for dissent, that in order to arrive at a decision the Panel is required to consider the matters in s 657A(3), including any other matter it considers relevant. This showed that deciding that the facts gave rise to a contravention is only one step along the path of deciding whether a declaration was justified. It may be an important step, but it was not one that itself leads to the conclusion that the Panel is exercising judicial power189. The Panel does not decide whether a person has contravened and in consequence impose punishment. It follows that it is not concerned with the ascertainment or enforcement of existing rights. A declaration does not resolve any dispute about legal rights. The corollary of that is that when the Panel makes an order under s 657D it is creating rights that operate for the future190. In his Honour's view the point which was fatal to an argument that the Panel exercises judicial power is that its orders require an independent exercise 186 (2007) 159 FCR 301 at 388-389 [408]. 187 (2007) 159 FCR 301 at 390 [413]. 188 (2007) 159 FCR 301 at 389-390 [412]. 189 (2007) 159 FCR 301 at 325 [92]. 190 (2007) 159 FCR 301 at 325 [93]. of judicial power to give effect to them191. The Court could refuse to do so, albeit by reference to limited discretionary factors. The offence provision was not a mechanism for putting into effect the Panel's orders. Amici curiae and the question on the appeal Since the bringing of this appeal the shares the subject of the Panel's orders have been disposed of, following a settlement reached between the corporate parties to the proceedings. The orders made by the Panel can have no operation. Alinta and its subsidiary have no interest in responding to the appeal. A declaration of invalidity of a statutory provision is a matter of A decision holding s 657A(2)(b) to be invalid may have importance. consequences for the operation of the scheme of the Act so far as it concerns takeovers. Paragraph (b) of sub-s (2) was replaced by the Corporations Amendment (Takeovers) Act 2007 (Cth). Sub-section (1) still refers to the occurrence of a contravention or possible contravention. In these circumstances, and in the absence of a contradictor to the arguments to be raised, the Attorney- General made arrangements for counsel, having no prior connection to the proceedings, to appear as amici curiae, in the event that the Court granted leave. That leave was granted at the commencement of the hearing. The declaration sought by the Attorney-General was in wide terms: that s 657A of the Act is valid. The declaration of invalidity made by the Full Court is limited to s 657A(2)(b). And the invalidity in question is confined to contravention of Ch III of the Constitution, by investing judicial power in the Panel. This was accepted as the correct position on the hearing of the appeal. The question on the appeal is to be understood as so confined. The appeal No issue is taken with the approach taken by the Court in Precision Data to the question whether an exercise of judicial power is involved in a function such as the Panel's. The starting point is the identification of those features of the judicial function that are essential to it. Their presence characterises the power exercised as judicial. In Precision Data the Court referred to the difficulty, if not the impossibility, of framing an exclusive and exhaustive definition of judicial power. It arose from the many positive features essential to the exercise of the power but which were not conclusive of it192. 191 (2007) 159 FCR 301 at 326 [95]. 192 (1991) 173 CLR 167 at 188-189; and see Labour Relations Board of Saskatchewan v John East Iron Works Ltd [1949] AC 134 (PC). The purpose of the judicial function identified by their Honours is not controversial. An adjudication is undertaken in order to resolve a dispute about the existing rights and obligations of the parties by determining what they are, not in order to determine what rights and obligations should be created193. Holmes J, delivering the opinion of the Court in Prentis v Atlantic Coast Line Company194, said that a judicial inquiry "investigates, declares and enforces liabilities as they stand on present or past facts and under laws supposed already to exist. That is its purpose and end." It is both logical and necessary that the right or obligation in question exist independent of, and prior to, the exercise of judicial power195. The controversy about its existence is the hallmark of a matter before the courts196. The ascertainment of its existence is exclusively a judicial function197. In doing so the courts apply the law, not considerations foreign to it, such as policy198, which is to say policy which is not of the law. The conclusion of the judicial process was described by Kitto J in Tasmanian Breweries199: "[T]he end to be reached must be an act which, so long as it stands, entitles and obliges the persons between whom it intervenes, to observance of the rights and obligations that the application of law to facts has shown to exist." 193 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 463 per Isaacs and Rich JJ; Tasmanian Breweries (1970) 123 CLR 361 at 396 per Windeyer J; Re Ranger Uranium Mines (1987) 163 CLR 656 at 665. 194 211 US 210 at 226 (1908). 195 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 442-443 per Griffith CJ. 196 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 357 per 197 R v Davison (1954) 90 CLR 353 at 369 per Dixon CJ and McTiernan J. 198 Labour Relations Board of Saskatchewan v John East Iron Works Ltd [1949] AC 134 at 149 per Lord Simonds delivering the opinion of the Privy Council; approved R v Davison (1954) 90 CLR 353 at 366-367 per Dixon CJ and McTiernan J. 199 (1970) 123 CLR 361 at 374 per Kitto J. In his Honour's view a power that does not involve a process which applies the law to the facts as determined and lead to such an end needs special qualities to make it judicial200. Neither a legislative, an executive nor an arbitral function has as its purposes the ascertainment and recognition of existing rights or obligations. It follows that the result reached cannot be the same as that of the judicial function. Holmes J described the legislative function as looking to the future and having as its purpose the creation of a new rule to be applied201. In Prentis the legislative act was the fixing of railway passenger rates. In Precision Data the Court gave as an example of a non-judicial function, the arbitration of an industrial dispute202. Viewed in general terms, arbitration is a claim by one party that relations should be altered, with the other party not conceding that claim203. In the case to which the Court there referred, Re Ranger Uranium Mines, it was pointed out that an industrial dispute concerning the dismissal of an employee is properly to be viewed as a claim for the creation of an obligation, on the part of the employer, to reinstate204. In that example the employee does not have a legal entitlement to reinstatement arising from the contract of employment. If the employee did have such a right the courts, but not an arbitral body, could recognise and give effect to it. The local coal authority in Re Cram; Ex parte Newcastle Wallsend Coal Co Pty Ltd205 could settle claims as a matter of what was right and fair as between the parties, but not a claim for the payment of wages, which was a matter of legal entitlement. The majority the acknowledgment in Precision Data206, that the Parliament sometimes confers upon courts authority to make orders which create rights and liabilities. However, the Court made plain that what is exercised is nevertheless judicial the Full Court placed some weight upon 200 (1970) 123 CLR 361 at 374-375. 201 Prentis 211 US 210 at 226 (1908). 202 (1991) 173 CLR 167 at 189. 203 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 463 per Isaacs and Rich JJ. 204 (1987) 163 CLR 656 at 664. 205 (1987) 163 CLR 140. 206 (1991) 173 CLR 167 at 191. power, which requires the application of legal principle and objective standards, not reference to policy considerations and other matters not specified by the legislature. Considerations of that kind had an important part to play in the determination to be made by the Panel. That did not provide a proper foundation for the contention that it was entrusted with judicial power, the Court held. The result of the exercise of judicial power, of which Kitto J spoke in Tasmanian Breweries, assumes some importance in connection with the declaration and the orders made by the Panel in this case. Palles CB in R (Wexford County Council) v Local Government Board for Ireland207 and Griffith CJ in Huddart, Parker & Co Pty Ltd v Moorehead208 identified as an essential element in the judicial process that it resulted in a binding and authoritative determination209. It is the judicial determination which pronounces the existence of the right or duty and obliges the parties to that recognition. It is not an exercise of judicial power if effect is not given to a controversial matter of legal right210. A non-judicial determination does not itself have force and effect. It is the statute which stamps an arbitrator's opinion with legal rights or obligations, so that when it is declared those are the mutual rights and obligations211. In Tasmanian Breweries the statute operated upon the determination to render the agreement or practice unenforceable. As Kitto J pointed out212, the findings made by the Tribunal did not bind the parties in the sense referred to by Palles CB. The Tribunal did not conclude any question between them and its determination had no operative effect. The provision in s 657A(2)(b), which permits the Panel to consider whether a contravention has occurred in connection with the making of a declaration, is a point of departure from the legislation considered in Precision 207 [1902] 2 IR 349 at 373-374. 208 (1909) 8 CLR 330 at 357. 209 And see Brandy (1995) 183 CLR 245 at 258 per Mason CJ, Brennan and 210 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 443 per Griffith CJ, 451 per Barton J. 211 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 463 per Isaacs and Rich JJ. 212 (1970) 123 CLR 361 at 376-378. Data. It may be inferred that in Tasmanian Breweries the absence of any inquiry into the validity or legality of the practice or agreement in question was taken to indicate that a judicial function was not involved213. The finding of, and conviction for, an offence together with the imposition of penalties are matters regarded as exclusively pertaining to judicial power214. So too is the grant of an injunction on the finding of a contravention of a statute215. On the other hand, it is not uncommon for a tribunal to find it necessary to form an opinion as to the existence of the legal rights of the parties as a step in arriving at its ultimate decision216. Another feature of the current legislation, pointed to by the majority in the Full Court, is that the applicant for a declaration is no longer limited to ASIC. The bringing of an application by persons whose interests might be affected, by the circumstances arising in connection with a takeover, may suggest a dispute about rights as more likely. The majority thought so, and that the Panel's function involved adjudication between the parties217. The adjudication of a dispute is itself, however, neither conclusive, nor even a strong indicator, of a judicial function. It is commonplace in administrative law218. A non-judicial function, such as arbitration, does not cease to be so because the decision-maker forms an opinion as to existing legal rights and obligations219. A controversy of the kind dealt with by the courts requires more than an adjudication of some dispute. A controversy has as its subject-matter the existence of a legal right or obligation. The majority clearly considered that the contravention referred to in s 657A(2)(b) provided that subject-matter220. It may be inferred that their 213 (1970) 123 CLR 361 at 375 per Kitto J. 214 Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 444 per Griffith CJ. 215 Mikasa (NSW) Pty Ltd v Festival Stores (1972) 127 CLR 617. 216 Re Cram (1987) 163 CLR 140 at 149 per Mason CJ, Brennan, Deane, Dawson and 217 (2007) 159 FCR 301 at 386 [400]. 218 Tasmanian Breweries (1970) 123 CLR 361 at 371 per McTiernan J; Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 463 per Isaacs and Rich JJ. 219 Re Ranger Uranium Mines (1987) 163 CLR 656 at 665. 220 (2007) 159 FCR 301 at 389-390 [412]. Honours considered that the Panel's determination under the sub-section was declaratory of it. Sub-section (1) of s 657A provides a power, expressed in non-obligatory terms ("may declare"), to make a declaration that the affairs of a company are unacceptable. The purpose of sub-s (2) is to provide for the occurrences which may constitute unacceptable circumstances. Paragraph (a) requires an opinion, on the part of the Panel, about the effect of the circumstances on the company. Paragraph (b) requires only that the Panel be satisfied that there has been a contravention. The paragraph treats a contravention as synonymous with unacceptable circumstances. The circumstances are unacceptable "because" they constitute or give rise to a contravention of the Chapters. The Panel may make something in the nature of a finding in relation to the contravention. There may be a dispute about whether it has occurred, for example if the acquisition in question is denied, where a subsidiary company or third party has purchased the shares. Some such question arose in the present proceedings. The Panel's finding may have some evidentiary effect in later proceedings221, but it is not suggested that it is itself binding upon the parties or that it is determinative of any legal question. If a declaration was made at this point it may more readily be inferred that the contravention was its sole subject-matter. The making of a declaration upon the basis of a finding of contravention is not, however, possible at this point. Sub-section (3) and the concluding words of sub-s (2) direct attention to other considerations. It is necessary to have regard to those considerations to determine whether the finding of "unacceptable circumstances", of which sub- s (2) speaks, is a conclusion reached by the Panel by reference to matters other than the contravention. Section 657A(3) requires that, in exercising any power under the section, the Panel must have regard to the purposes of Ch 6 and in particular those referred to in s 602. It will be recalled that the section states the principles of maintaining a well-informed, efficient and competitive market, that shareholders and directors be well-informed and have an opportunity to properly consider any offer of acquisition and that shareholders be able to participate in any benefits the takeover proposal offers. The other matters which the Panel is permitted to take into account would be consistent with these purposes. These considerations could not inform a discretion to make or refuse a declaration in a situation where there has been a contravention of a provision of the Chapters. The matters to which sub-s (3) refers concern the principles upon which those provisions are 221 s 658B. based. A reference to them could add nothing to the conclusion that the circumstances are unacceptable. The concluding words of sub-s (2), however, import considerations of the public interest, and policy considerations relevant to it, in connection with the Panel's decision to make or to decline to make a declaration. The question which arises, when a contravention has occurred, is whether those considerations have a part to play in a decision whether to make or refuse to make a declaration. Where a contravention is found to have occurred it may be thought that the making of a declaration is the only course consistent with the public interest. The public interest ordinarily requires the maintenance of standards set by statutes. It was pointed out in argument, however, that some contraventions may have less serious consequences than others. Even when that is not the case, considerations of interests other than those directly affected by the share acquisitions may lead the Panel to conclude that no action should be taken and that the takeover proposal should be permitted to proceed. In either case the point is that the public interest is to be taken into account in making the decision. This implies a process where the Panel weighs the contravention and its effects with other considerations in order to determine what is required. Policy considerations are more often regarded as applying to a non- judicial process of decision-making. This is not to say that statutes do not sometimes require the courts to have regard to the public interest. Whether it is possible for a court to do so, consistent with its function, may depend upon what guide is given by the statutory context and stated criteria. Where policy considerations relevant to the public interest are ill-defined and subjective, their application may be regarded as inappropriate to the judicial method222 and more consonant with a non-judicial process of decision-making. The policy considerations here reserved to the Panel are potentially of wide range, even with statements of statutory purpose. They may involve matters relevant to the market, corporate behaviour and the interests of stakeholders beyond those directly affected by the proposal. In this regard Panel members may be taken to be qualified to make an assessment by their knowledge and experience. The considerations relevant to the Panel's decision point to a non-judicial function being undertaken. But such a conclusion is not reached by reference to the nature of the considerations alone. When identifying whether administrative power is being exercised, considerations of policy will not necessarily be 222 Tasmanian Breweries (1970) 123 CLR 361 at 399-400 per Windeyer J. decisive223. The taking into account of policy considerations is part of a statutory scheme in which the declaration is preliminary to action taken by the Panel. The declaration is a statement of the Panel's conclusion that, having regard to the circumstances created by the contravention and to the public interest, it considers something needs to be done about those circumstances. They are "unacceptable" in the sense that they cannot remain as they are and that they require consideration to be given to the orders that may be made under s 657D. It follows that a declaration of unacceptable circumstances made under s 657A(2)(b) is not operative and determinative of any question of legal obligation. In Tasmanian Breweries the determination by the Tribunal, that the agreement or practice was contrary to the public interest, was held to have no binding or operative effect. It was described as the factum upon which the section rendering it unenforceable depended224. This approach was relied upon by the Attorney-General in argument on this appeal. There is a difference, however, in the operation of the Corporations Act 2001. The provisions of Ch 6 do not work upon a declaration made under s 657A(2)(b). The making of a declaration enables the Panel to exercise the powers given by s 657D to make orders of the kind there referred to. Where a body is given power, conditionally upon being satisfied as to a state of facts, a determination that it is satisfied rarely has the binding effect spoken of. The determination may be described as one as to jurisdictional facts225. In the present case the Panel's opinion, expressed in the declaration of unacceptable circumstances, provides the basis for the exercise of its powers to make orders. Windeyer J, in Tasmanian Breweries, observed that deciding whether or not facts exist, upon which jurisdiction depends, is not an exercise of judicial power unless the jurisdiction dependent upon the decision is itself part of the judicial power226. The focus of the inquiry then shifts to the orders made 223 Thomas v Mowbray (2007) 81 ALJR 1414 at 1438-1440 [80]-[91] per Gummow and Crennan JJ; 237 ALR 194 at 222-225. 224 (1970) 123 CLR 361 at 371 per McTiernan J, 378 per Kitto J; and see Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 464 per Isaacs and Rich JJ; Federal Commissioner of Taxation v Munro ("BIO No 2") (1926) 38 CLR 153 at 176 per Isaacs J; Luton v Lessels (2002) 210 CLR 333 at 357-358 [67] per Gaudron and Hayne JJ. 225 Rola Co (Australia) Pty Ltd v The Commonwealth (1944) 69 CLR 185 at 197 per 226 (1970) 123 CLR 361 at 399. under s 657D. The nature of the final act may be determinative of the nature of the inquiry leading to it227. The orders which can be made by the Panel are in substantially the same terms as those which could be made by the Panel under the 1989 legislation. The orders that that Panel could make were, in most respects, the same as those which could be made by the Court, although the Court's orders were called remedial orders. The Corporations Act 2001 refers the power to make those orders to both the Panel and the Court. No issue arises on the appeal concerning the ability of the Panel to make particular orders listed in the definition of remedial orders in s 9. It is not suggested that the further express power in the Panel to order costs is a distinctly judicial one. The fact that both the Court and the Panel can make orders in the same terms does not mean that they involve the exercise of judicial power. The orders which the Panel may make include those which may direct a person to do or not to do an act. Many non-judicial bodies make orders of this kind, in order to regulate the future rights of the parties. In Tasmanian Breweries the Tribunal was given power to make restraining orders. They were regarded as laying down rules for the future228, consistent with the exercise of a non-judicial power. A similar power may be seen to be exercised by the Panel. Its orders address the circumstances as have occurred in connection with the takeover. Its role is to protect the interests of persons affected by the share acquisition and to realign the takeover process. In doing so it is to take account of the extent of burden or prejudice to a party in what it seeks to do. This suggests a power akin to one to do what is right and fair as between the respective interests229. Its orders, whilst remedial in effect, do not require a party to make good a legal obligation or correct a contravention of the Chapters. The Panel is expressly denied the power to do so. By contrast, and in addition to the remedial orders it may make in the circumstances arising from a contravention, the Court may make any order, by way of injunction or otherwise, that it considers appropriate where a 227 Prentis 211 US 210 at 227 (1908) applied Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 382 per Isaacs J; and see Tasmanian Breweries (1970) 123 CLR 361 at 376-377 per Kitto J. 228 (1970) 123 CLR 361 at 408 per Owen J. 229 Re Cram (1987) 163 CLR 140 at 154 per Mason CJ, Brennan, Deane, Dawson and contravention has occurred230. The specified orders it may make include one requiring a bidder to make an offer231 and orders declaring unconscionable agreements to be void232. It may make orders securing compliance with any of its orders so made233. It may excuse a contravention and declare that an act is not invalid because of a contravention and has at all times had legal effect234. The absence of a power in the Panel to compel compliance with its orders says much about the nature and effect of its orders. In Brandy it was held that it is not essential to the exercise of judicial power that a body have the ability to enforce its own decision235. The other members of the Court accepted that, whilst not an exclusive test, the fact that the Human Rights and Equal Opportunity Commission could not enforce its own determinations was a strong factor weighing against the characterisation of its powers as judicial236. In the present case an order of the Court is necessary for enforcement of compliance with the Panel's orders. This aspect of the legislative scheme has not altered. That an offence of strict liability is now created, on non-compliance with the statute, does not render the Panel's orders enforceable in their own right. Conclusion The consideration which the Takeovers Panel may now give to the fact that a contravention of the provisions of Chs 6, 6A, 6B and 6C has occurred does not render its function a judicial one. The making of a declaration of unacceptable circumstances does not involve the resolution of a controversy about an existing legal obligation. It represents a conclusion reached by the Panel that the circumstances are such as to require orders and directions to be made by it. It reaches that conclusion by reference to the circumstances arising from the contravention and wider considerations, referable to the public interest. The orders it makes reflect the Panel's view about the process which should be undertaken with respect to the takeover and what the rights of the parties should 230 s 1325A. 231 s 1325B. 232 s 1325C. 233 s 1325E. 234 s 1325D. 235 (1995) 183 CLR 245 at 269 per Deane, Dawson, Gaudron and McHugh JJ. 236 (1995) 183 CLR 245 at 257 per Mason CJ, Brennan and Toohey JJ. be. So understood, the function of the Panel under s 657A(2)(b) does not involve the exercise of judicial power. The majority in the Full Court were clearly concerned about the restriction placed upon the use of the courts in the bid period. Although there was no question raised in the proceedings concerning that aspect of Ch 6, their Honours were alert to the prospect that the courts' functions might be undertaken by the Panel. It is apparent from the provisions of that and following Chapters, that some care has been taken to ensure that the Panel's functions do not impermissibly involve the exercise of judicial power. The appeal should be allowed. The only orders necessary to be made are that the declaration made by the Full Court as to the invalidity of s 657A(2)(b) be set aside; and in lieu it be declared that s 657A(2)(b) is not invalid as involving an exercise of the judicial power of the Commonwealth.
HIGH COURT OF AUSTRALIA CROWN MELBOURNE LIMITED APPELLANT AND COSMOPOLITAN HOTEL (VIC) PTY LTD & ANOR RESPONDENTS Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd [2016] HCA 26 20 July 2016 ORDER Appeal allowed with costs. Set aside orders 2 to 6 of the Court of Appeal of the Supreme Court of Victoria made on 8 April 2015, and in their place order that the appeal to that Court be dismissed with costs. Special leave to cross-appeal granted, limited to ground 4 of the Notice of Cross-Appeal dated 24 December 2015. Cross-appeal dismissed with costs. On appeal from the Supreme Court of Victoria Representation B W Walker SC with N D Hopkins QC for the appellant (instructed by Minter Ellison Lawyers) M R Pearce SC with R S Hay QC for the respondents (instructed by Mills Oakley Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Crown Melbourne Limited v Cosmopolitan Hotel (Vic) Pty Ltd Contract – Collateral contract – Where tenants held five year leases under which they operated two restaurants – Where clause of leases required landlord to give notice that leases were to be renewed or continued or the premises were to be vacated – Where in course of negotiations for further leases landlord made statement to tenants that they would be "looked after at renewal time" – Where landlord required tenants to vacate premises on expiration of leases – Whether statement gave rise to collateral contract – Whether statement promissory in nature – Whether obligation uncertain. Estoppel – Whether statement to tenants that they would be "looked after at renewal time" could give rise to estoppel – Whether statement capable of conveying to reasonable person that tenants would be offered further lease – Whether expectation acted upon by tenants. Appeals – Procedure – Where question whether statement amounted to binding contractual promise – Whether question of fact or question of law. Words and phrases – "certainty", "collateral contract", "oral contract", "promissory estoppel", "proprietary estoppel", "question of fact", "question of law", "reasonable correspondence", "remittal". Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 148. FRENCH CJ, KIEFEL AND BELL JJ. In proceedings brought by the respondents ("the tenants"), the Victorian Civil and Administrative Tribunal ("the VCAT")1 found that the appellant ("Crown") made a statement to the tenants in the course of negotiations for their leases, to the effect that the tenants would be "looked after at renewal time". The VCAT determined that the statement gave rise to a collateral contract which obliged Crown to offer a renewal of the leases for five years on terms to be decided by Crown. The VCAT further determined that should that conclusion be wrong, it would have also accepted the tenants' submission that Crown was estopped from denying the existence of the collateral contract. It ordered that Crown pay the first respondent2 $467,505.00 and the second respondent3 $1,143,167.00 in damages for breach of that agreement. The primary judge4 and the Court of Appeal of the Supreme Court of Victoria5 held that the VCAT was in error and that the statement did not give rise to an enforceable obligation pursuant to a collateral contract. The primary judge also held that no estoppel arose. However, the Court of Appeal ordered that the matter be remitted to the VCAT for further determination on the issue of what relief could be given, on the basis that the statement founded a promissory estoppel. For the reasons which follow, the Court of Appeal was correct to conclude that there was no collateral contract but it was in error in remitting the issue of estoppel. The tenants could not succeed on that issue. Background Crown is the owner of the Melbourne Casino and Entertainment Complex. The tenants held leases of two areas in the Complex in which, after 1 September 2005, they operated two restaurants. Before 1 September 2005, other companies controlled by Mr Zampelis (director of the tenants) had operated those restaurants under leases from Crown which expired at the end of May. In early 2005 negotiations commenced between the tenants and Crown for new 1 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225. 2 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106. 3 Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105. 4 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614. 5 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771. Bell leases. It may reasonably be inferred from the discussions which followed that the representatives of both parties were experienced in negotiations of this kind. The new leases which were offered by Crown were limited to a term of five years and did not contain an option for renewal. Clause 2.3 of each lease provided only that Crown was to give at least six months notice to the tenants prior to the expiration of the lease stating whether: the Landlord will renew this Lease, and on what terms (this may include a requirement to refurbish the Premises or to move to different premises …); the Landlord will allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or the Landlord will require the Tenant to vacate the Premises by the It was a condition of the leases that a major refurbishment of the premises be undertaken by the tenants. Mr Zampelis, the tenants' representative in the negotiations, was concerned about the cost of the refurbishment and sought to obtain a commitment from Crown to enable the tenants to continue to trade for a further five years. Crown, for its part, was unwilling to offer any further term on the lease. Leases in the terms offered by Crown, and limited to a term of five years, were signed by the tenants in November 2005 but were not delivered to Crown until March 2006 when Crown demanded them ("the 2005 leases"). In October 2008 Crown invited tenders for new leases of the premises and the tenants put in tenders in March 2009. In December 2009 Crown gave notice, pursuant to cl 2.3(c), requiring them to vacate the premises on the expiration of the 2005 leases, 31 August 2010. In July 2010 the tenants brought proceedings in the VCAT in which they alleged that a series of representations had been made by representatives of Crown to Mr Zampelis, to the effect that the tenants would be given a further term of five years following the expiration of the 2005 leases. These representations were said to amount to a promise that Crown would exercise its power under cl 2.3(a) of the 2005 leases and offer a renewal for a further five year term. The tenants claimed to have been induced by the representations to execute the leases and to carry out the refurbishments. Two, alternative, legal consequences were said to follow from the promise: a collateral contract, by which Crown was obliged to offer the tenants further five year leases, came into existence, or an estoppel arose which prevented Crown from denying that Bell obligation. Importantly, the terms of the further leases were said to be the same (or the same, mutatis mutandis) as for the 2005 leases. The VCAT did not find6 that Crown's representatives had made representations in the terms claimed, but it did find7 that the statement referred to at the outset of these reasons gave rise to a collateral contract. The compensation which it ordered that Crown pay for breach of its obligation, to offer a renewal of the leases for a further term of five years, was assessed8 by reference to the profits the tenants would have made under hypothetical renewed leases. The decision of the VCAT was set aside on appeal to the Supreme Court of Victoria9. The Court of Appeal10 granted the tenants leave to appeal but dismissed the appeal save with respect to the estoppel issue, which it remitted to the VCAT for determination of "what equitable relief, if any, should be granted", in accordance with the Court of Appeal's reasons. The evidence and the VCAT's findings Mr Zampelis gave evidence before the VCAT that in meetings with Mr John Williams and in a chance encounter with Mr Lloyd Williams, both representatives of Crown, Mr Zampelis had been assured that the 2005 leases would be renewed after their five year term. Mr Zampelis said that in a further meeting between himself and another Crown representative, Mr Boesley, in December 2005, at which others including Mr Zampelis' bank manager were in attendance, Mr Boesley gave him the same assurance. He said that Mr Boesley repeated this assurance in a telephone conversation following the meeting and in another conversation in February 2006, shortly prior to the executed leases being handed over to Crown. 6 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 7 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 8 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 9 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [98]. 10 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at Bell The VCAT did not accept Mr Zampelis' evidence of having received assurances in these terms. It considered11 that Mr Zampelis was prone to embellishment and exaggeration about Crown's statements. It gave12 detailed reasons for its finding that it was improbable that Crown made the alleged promise to grant a renewal for the further term. It did accept13 that Mr Zampelis sought assurances from Crown about a longer lease term, because he believed that a longer trading period was necessary to recoup the substantial costs of refurbishment. And it accepted that a meeting took place in December 2005. The VCAT preferred14 to rely upon evidence of a hand-written note, which had been made by Mr Zampelis' bank manager, of the conversations which had taken place at the December meeting. It accorded, to an extent, with aspects of Mr Zampelis' version of what had been said. On the basis of this evidence, the VCAT found15 that on or about 6 December 2005 Mr Boesley made a statement to the effect that: "if Mr Zampelis spent the money that, under Crown's leases, the tenants were required to spend to achieve a major refurbishment to a high standard, he would be 'looked after at renewal time', and that the leases had been limited to a five year term only because they would thereby be aligned with other tenants' leases." The VCAT made16 a specific finding that Crown had not expressly stated that it would renew the 2005 leases, but that Mr Boesley had said only that Mr Zampelis (and therefore the tenants) would be looked after at renewal time. 11 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 12 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 13 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 14 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 15 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 16 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at Bell The VCAT's reasoning It is the process of reasoning which the VCAT then undertook which is in issue. It first determined17 that the statement that Mr Zampelis would be "looked after at renewal time" was promissory in nature. Whilst it accepted18 that the words "looked after", viewed in isolation, were vague, it considered that in context and objectively, a reasonable person would consider that the statement amounted to a promise that Crown would give a notice under cl 2.3(a) that it would renew each of the 2005 leases. This was held to be sufficient to give rise to a legal obligation. Because the promise to renew was of an existing five year lease, the VCAT considered19 it to be necessarily implied that the renewal would be for the same period. This was the only term which the VCAT identified as present in the offer which Crown was obliged to make; Crown was otherwise able to stipulate the terms. It rejected20 the tenants' claim that the promise meant that the leases were to be renewed on the same terms and conditions as the 2005 leases, or on the same terms and conditions as the 2005 leases with necessary changes (mutatis mutandis). In the VCAT's view, the promise Crown made did not require Crown to offer any particular terms to the tenants, other than the five year term. The terms which Crown was to offer were at its discretion. The VCAT did not suggest that there was any criterion by which the discretion was to be exercised. The VCAT did not accept21 Crown's argument that any such obligation on Crown's part was too uncertain to be enforceable. It considered that the terms and conditions could be ascertained with certainty when Crown provided them in 17 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 18 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 19 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 20 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 21 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at Bell the notice for renewal pursuant to cl 2.3(a). That is to say, it did not matter that the terms were whatever Crown decided them to be, it was sufficient for an enforceable agreement that they would be ascertainable at that point. The VCAT appears to have been of the opinion that commercial realities would produce acceptable terms. It accepted that the terms of the promise left Crown with the right to impose terms and conditions which were so onerous that the tenants could not accept them. However, it went on to say22: "No doubt that is an unrealistic scenario, because the stipulation of unreasonably onerous terms in notices of renewal would jeopardise Crown's tenancies generally. One would expect a notice of renewal to stipulate terms and conditions that had reasonable correspondence with terms and conditions that had appeared in the lease that Crown was proposing to renew." The VCAT did not identify the basis for this view. No evidence was identified to support it. The VCAT assessed the damages to which the tenants were entitled by reason of Crown's failure to renew the lease for a further five years on the basis of the profits the tenants would have made in that period. That was the measure of damages which the tenants had claimed, but of course on the basis of the collateral contract for which they contended. For reasons which are not entirely clear, the VCAT did not make orders for damages at the conclusion of its reasons. It had a further hearing23 where it "ruled" on Crown's submission that its findings permitted an award of only nominal damages. It rejected that submission and, at a later hearing, awarded damages as it had previously assessed, which is to say for loss of profits in the sums referred to above24. The VCAT dealt with the issue of whether the statement could also be said to found a promissory estoppel as an alternative to the conclusion it reached concerning a defence raised by Crown that the collateral contract was 22 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 23 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 1407 at 24 See [1] above. Bell unenforceable by reason of s 126(1) of the Instruments Act 1958 (Vic). That provision required that a disposition of an interest in land be in writing. The VCAT held25 that s 126 did not apply to the collateral contract because the collateral contract was not one for an interest in land, but for a notice that Crown would renew a lease. Alternatively, an estoppel26 of the kind referred to in Waltons Stores (Interstate) Ltd v Maher27 was made out, because the promise made created an expectation upon which the tenants relied in entering into the leases and they suffered a detriment when that expectation was not fulfilled. A collateral contract? In Hospital Products Ltd v United States Surgical Corporation Gibbs CJ explained28 that a representation made in the course of negotiations may result in an agreement collateral to the main agreement if it can be concluded that the parties intended that the representation be contractually binding. It may be so concluded if the representation has the quality of a contractual promise, as distinct from a mere representation. The question of intention is adjudged by reference to the words and conduct of the parties, but it is an objective test – of what a reasonable person in the position of the parties would necessarily have understood to have been intended. In the Supreme Court of Victoria, Hargrave J considered29 that a reasonable person in the parties' situation could not have understood the statement that the tenants would be "looked after at renewal time" to amount to a binding contractual promise to renew the 2005 leases for a further five years. 25 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 26 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 27 (1988) 164 CLR 387; [1988] HCA 7. 28 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 61-62; [1984] HCA 64. 29 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [38]- Bell The statement was no more than "vaguely encouraging". The Court of Appeal agreed with his Honour's assessment30. That assessment is plainly correct. On the appeal before Hargrave J the tenants conceded that the question to which Gibbs CJ referred in Hospital Products was one of mixed fact and law. That is clearly correct. Whilst regard is had to the facts – what was said and done – questions as to what a representation objectively may be taken to convey, and whether it has the qualities which the law requires for it to amount to a binding contractual promise, are questions of law. In a passage in his speech in Heilbut, Symons & Co v Buckleton, Lord Atkinson said31 that the existence or non-existence of the intention in the mind of the party who warrants the truth of a fact is a question for the jury. The question of fact to which his Lordship referred was one as to the subjective intention of a party, which is relevant in making out a fraudulent misrepresentation. Viscount Haldane LC32, with whom Lord Atkinson concurred33, and Lord Moulton34 were clearly of the opinion that the question whether there was an intention to create a collateral contract was a question of law. The tenants applied to this Court for special leave to cross-appeal on the ground that no question of law was involved in the question whether there was a collateral contract (or an estoppel) and therefore no appeal to the Supreme Court lay under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). That application was heard with argument on the appeal and was refused. In the course of argument the tenants contended that any question respecting the construction of an oral contract is a question of fact and therefore questions as to the promissory nature of the statement made by Crown were only questions of fact for the VCAT. The tenants' submissions in this regard proceeded upon a misapprehension of what the authorities they relied upon actually say. It is certainly the case that 30 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 786 [59]-[60] per Warren CJ, 808 [179] per Whelan JA, 814 [206] per Santamaria JA. 31 Heilbut, Symons & Co v Buckleton [1913] AC 30 at 43. 32 Heilbut, Symons & Co v Buckleton [1913] AC 30 at 36-37. 33 Heilbut, Symons & Co v Buckleton [1913] AC 30 at 39. 34 Heilbut, Symons & Co v Buckleton [1913] AC 30 at 50-51. Bell the question as to what was actually agreed between the parties, which is to say the terms of the consensus reached, is a question of fact35. That is what is meant by the reference in those cases to the "construction" of the contract. Questions as to the terms of any offer and any consensus reached, including the subject matter of any agreement36, are questions of fact. But questions whether a statement has a quality which the law requires and whether, objectively, it could be said to be intended to be contractually binding are questions of law. The statement found to have been made by Crown's representative, that the tenants would be "looked after at renewal time", could not possibly have been understood to bind Crown to offer a further five year lease. It did not have the quality of a contractual promise of any kind. It is possible that the statement could be understood as addressed to the tenants' concerns about whether they would not recoup the costs of the refurbishment that the 2005 leases, which they were about to enter into, required. Crown was aware of these concerns. But this was not the case the tenants pursued. Their case depended on a promise by Crown that it would do much more than ensure that the tenants were not out of pocket. Hargrave J also held37 that even if Crown came under the obligation which the VCAT identified as arising from the statement, the obligation was illusory and unenforceable, because it contained no criteria by which Crown was to exercise its discretion or by which the terms could be ascertained. It was no answer to say, as the VCAT did, that it would have been commercially unrealistic to stipulate onerous terms. A further issue with which his Honour also dealt38, whether the obligation to offer to renew under cl 2.3(a) was 35 Deane v The City Bank of Sydney (1904) 2 CLR 198 at 209; [1904] HCA 44; Carmichael v National Power Plc [1999] 1 WLR 2042 at 2049-2050; [1999] 4 All ER 897 at 904. See also Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532; Thorner v Major [2009] 1 WLR 776 at 794-795 [58]; [2009] 3 All ER 945 at 965. 36 Handbury v Nolan (1977) 13 ALR 339 at 341. 37 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [72]- 38 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [76]- Bell inconsistent with the choices given to Crown in cl 2.3 of the 2005 leases39, may be put to one side. It is not necessary for the determination of this appeal. The problem regarding the enforceability of the obligation which the VCAT considered arose from the statement is not so much one concerning the uncertainty of its terms as the lack of them40. On basic principles, there can be no enforceable agreement to renew a lease, breach of which sounds in damages, unless at least the essential terms of such a lease have been agreed upon41. In their submissions on this appeal, the tenants sought to rely upon that part of the VCAT's reasons42 which suggested that Crown was likely to stipulate terms that had a "reasonable correspondence" with the terms and conditions of the 2005 leases. The tenants further submitted that there was no real difference between what the VCAT found that Crown was able to do pursuant to cl 2.3 – dictate the terms of the renewed lease as it saw fit – and the argument the tenants had put to the VCAT – that the existing terms would apply mutatis mutandis. The difficulty with this latter submission is that the VCAT expressly rejected43 this argument. The collateral contract which it identified clearly reserved the terms to be offered to Crown's discretion. The views that the VCAT expressed about the terms of the renewed leases bearing a "reasonable correspondence" with the 2005 leases were mere conjecture, made in passing. As Whelan JA observed44, they were not findings as to Crown's future conduct. Although the VCAT subsequently sought to 39 See Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133; [1919] HCA 64. 40 See Whitlock v Brew (1968) 118 CLR 445 at 454; [1968] HCA 71. 41 Thorby v Goldberg (1964) 112 CLR 597 at 607; [1964] HCA 41; Beattie v Fine [1925] VLR 363, referred to in Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 360; [1969] HCA 29. 42 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 43 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 44 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at Bell explain45 its assessment of damages by reference to these statements as "findings" relating to expectation damages, that is clearly incorrect. As the VCAT itself acknowledged, the tenants had not advanced a case for damages based upon an agreement of this kind. In any event the views were expressed by the VCAT in the context of its discussion of the agreement reached between the parties, not its assessment of damages. Finally, as a matter of law46, there was no evidence to support a finding about what Crown might do. It remains to add that the tenants' claim was not based upon an agreement whereby Crown would make an offer on terms at its discretion. No such agreement is identified in the VCAT's reasons. During argument on this appeal the tenants acknowledged that the agreement identified by the VCAT was not one in the nature of an agreement to make an offer, such as a right of pre- emption. The damages it awarded are not referable to such an agreement, as such damages could only have been nominal. It assessed damages for loss of profits on the basis of an enforceable agreement for the renewal of the leases for a further term of five years. Estoppel? It has long been recognised that for a representation to found an estoppel it must be clear47. In Low v Bouverie, it was said48 that the language used must be precise and unambiguous. This does not mean that the words used may not be open to different constructions, but rather that they must be able to be understood in a particular sense by the person to whom the words are addressed. The sense in which they may be understood provides the basis for the assumption or expectation upon which the person to whom they are addressed acts. The words must be capable of misleading a reasonable person in the way that the person relying on the estoppel claims he or she has been misled49. The statement that the tenants would be "looked after at renewal time" is not capable of conveying to a reasonable person that the tenants would be offered a further lease. 45 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 1407 at 46 Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390 at 418 [90]-[91]; [2010] HCA 32. 47 Legione v Hateley (1983) 152 CLR 406 at 435; [1983] HCA 11. 48 Low v Bouverie [1891] 3 Ch 82 at 106. 49 Low v Bouverie [1891] 3 Ch 82 at 113. Bell In submissions on this appeal the tenants for the first time sought to characterise the estoppel for which they contended as a proprietary estoppel. The tenants may have been encouraged to do so by the reasons of Warren CJ50, where reference was made to cases where a party was held to be estopped from resiling from their promise to grant a proprietary interest notwithstanding the lack of precise detail in the promise51. This is not a case of that kind. It appears that the tenants sought to characterise the estoppel as proprietary because they considered that a less stringent view is taken for the test for certainty of the representation in cases dealing with promises with respect to interests in land than is the case with respect to other interests. The tenants conceded that a consideration of the requirements of proprietary and promissory estoppels might require the resolution of a question, as yet unresolved, as to whether there is a single, unified doctrine of estoppel52. They did not explain how that resolution is to be achieved. This is not the case to consider these questions. Whether the estoppel claimed is proprietary in nature has never been an issue in these proceedings and has not been the subject of any substantial argument. It has never been the tenants' case that the estoppel in question was proprietary rather than promissory. It is to be inferred from the VCAT's decision53 concerning s 126(1) of the Instruments Act that it was the tenants' submission that the subject matter of the promise in question was not an interest in land. In any event, the tenants' case fails at another level. Not only must the representation be such as to be able to create the assumption or expectation in question, it must be shown that that assumption was in fact acted upon54. This derives from the basal purpose of the doctrine of estoppel, which is to avoid a detriment by compelling the party who has created an assumption, or 50 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 51 See, eg, Giumelli v Giumelli (1999) 196 CLR 101; [1999] HCA 10; Wright v Hamilton Island Enterprises Ltd (2003) Q ConvR ¶54-588. 52 See Giumelli v Giumelli (1999) 196 CLR 101 at 112-113 [7]. 53 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 54 Low v Bouverie [1891] 3 Ch 82 at 111. Bell expectation, on which the innocent party has acted, to adhere to it55. Attention is then directed to the expectation said to have been created by Crown and whether Mr Zampelis acted upon it. The expectation the VCAT said Crown engendered in the tenants was that they would be offered further five year leases at renewal time on terms to be decided by Crown. But that is not what the tenants submitted that Mr Zampelis was led to believe. They submitted56 that he said that he assumed that there would be a renewal of the leases, or an offer of renewal, on the same terms and conditions as the 2005 leases. That is what the tenants argued induced him to hand over the executed leases. It was not his evidence, and it was no part of the tenants' case, that he had acted on the basis of an expectation in the terms identified by the VCAT. Remittal? Whelan JA57 was cognisant of this problem for the tenants' case. However, his Honour did not proceed simply to dismiss their appeal but instead remitted the issue of estoppel to the VCAT for further determination. The basis for doing so was said to be that the parties had not had the opportunity to make submissions on the basis of the VCAT's findings. This was undoubtedly correct, but the point is that submissions were not made because it was not part of the tenants' case that a more limited promise was made by Crown to Mr Zampelis. His Honour did not suggest that either of the parties had been denied procedural fairness; rather his Honour seemed to think that the tenants' case could be regarded as encompassing Crown being estopped from resiling from whatever representation it was found to have made58. Such an approach encourages the prolongation of litigation, litigation which is intended largely to be concluded in the VCAT. 55 Thompson v Palmer (1933) 49 CLR 507 at 547; [1933] HCA 61; Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-675; [1937] HCA 58; Legione v Hateley (1983) 152 CLR 406 at 437. 56 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 57 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 58 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at Bell His Honour considered59 that the only matter to be dealt with by the VCAT on remittal was what relief, if any, should be granted with respect to the promise it found. His Honour said that the representation has been found and Crown has resiled from it. That left only the issue of relief. This reasoning overlooks the requirement, essential to a conclusion that a party is estopped from denying a promise made, that the expectation it engendered was in fact acted upon by the person to whom it was made. Mr Zampelis did not have an expectation of the kind to which the VCAT's findings refer. The tenants could never make out an estoppel unless they were given the opportunity to alter Mr Zampelis' evidence. There was no utility in the order for remittal. It should not have been made. Conclusion and orders The appeal from the Court of Appeal should be allowed. We agree with the orders proposed by Keane J. 59 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at GAGELER J. Substantially for the reasons given by Gordon J, I would grant special leave to cross-appeal on the ground that there was a binding and enforceable collateral contract between Crown and each Tenant as found by VCAT, allow the cross-appeal on that ground, and make consequential orders reinstating the decision of VCAT. That disposition of the cross-appeal operating to remove the substratum of the appeal, I would dismiss the appeal accordingly. The collateral contract found by VCAT comprised a promise made by Crown to each Tenant in consideration of the Tenant entering into that Tenant's lease with Crown for a term of five years. Crown's promise was that, at least six but no more than 12 months before the expiry date of the lease, Crown would give the Tenant a notice under cl 2.3(a) of the lease. The notice would state that Crown would renew the lease, which in the context of a notice under cl 2.3(a) would mean that Crown would renew for a further term of five years. The notice would go on to state the terms on which Crown would renew the lease. The choice of the terms to be included in the promised notice was to be left to Crown60. Like any other notice under cl 2.3(a) of the lease, the promised notice was to constitute an offer to renew the lease which the Tenant could in turn choose to accept within 60 days by giving notice to Crown under cl 3.1 of the lease. Crown's promise under the collateral contract was therefore a promise to make an offer on terms which, if accepted by the Tenant, would result in a new agreement for lease for a further term of five years. Crown's argument that the collateral contract was inconsistent with the lease was accepted by the primary judge61 and by the Court of Appeal62. The argument is met in this Court by the reasoning of Nettle J63 and of Gordon J64. Their reasoning, with which I agree, makes redundant the Tenants' invitation to 60 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 61 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [80]. 62 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 63 Reasons of Nettle J at [203]-[205]. 64 Reasons of Gordon J at [264]. reopen and overrule Hoyt's Pty Ltd v Spencer65 and Maybury v Atlantic Union Oil Co Ltd66. The critical point of distinction between the present case and each of those cases is that cl 2.3 of the lease did not operate to confer a contractual discretion which is circumscribed by the collateral contract. The clause operated instead to impose a contractual obligation on Crown to give notice of a decision to be made by Crown outside the terms of the lease. Crown's obligation to give notice under the collateral contract did not conflict with its obligation to give notice under the lease. To the contrary, the two obligations operated in harmony: performance of the obligation to give notice under the lease was necessary to constitute performance of the obligation to give notice under the collateral contract; giving one notice would satisfy both obligations. Crown's separate and logically anterior argument denies the existence of the collateral contract. Crown's grounds of appeal from VCAT to the Supreme Court articulated the argument in terms that "the 'promise' [found by VCAT to have been made by Crown] was uncertain and/or incomplete and/or illusory". That argument too was accepted by the primary judge67 and by the Court of Appeal68. Although now also accepted by other members of this Court, I consider it to be answered by the reasoning of Gordon J69. I write separately to expose my understanding of the principles which inform my support for the answer given by her Honour. Blurred from the outset, the various strands of Crown's argument denying the existence of the collateral contract are related, but conceptually distinct70. One strand asserts want of contractual certainty. Another asserts want of contractual completeness. The last involves the assertion of "the illusion of a 65 (1919) 27 CLR 133; [1919] HCA 64. 66 (1953) 89 CLR 507; [1953] HCA 89. 67 [2013] VSC 614 at [73]. 68 (2014) 45 VR 771 at 786-787 [62]-[64], 809 [185]. 69 Reasons of Gordon J at [265]-[266]. 70 See generally Powell v Jones [1968] SASR 394 at 397-403 (referred to with approval in Godecke v Kirwan (1973) 129 CLR 629 at 641-642; [1973] HCA 38); Carter, Carter on Contract, vol 1 (at December 2015, Service 43) at [04-090], contract where there is none"71. I will consider those strands separately in that order. Crown's assertion of want of contractual certainty is in substance an assertion that what was said by Mr Boesley, as agent for Crown, to Mr Zampelis, as agent for the Tenants, was so obscure or imprecise as to be incapable of supporting attribution to Crown and to the Tenants of any particular contractual intention72. The contractual intention required to provide contractual certainty, of course, is not the subjective intention of either or both of the parties but such mutual contractual intention as the words and conduct attributed to the parties might convey to a reasonable person having the background knowledge reasonably available to both of them. What the words of Mr Boesley and the conduct of Mr Zampelis would have conveyed to a reasonable person who had the background knowledge reasonably available to Crown and to the Tenants is a question of fact73. That is precisely the question of fact which VCAT considered and answered in concluding that the words of Mr Boesley that Mr Zampelis would be "looked after" when the time came for Crown to consider renewing the leases, and the conduct of Mr Zampelis in subsequently returning the executed leases, gave rise to the collateral contract under which Crown promised to give a notice under cl 2.3(a) in consideration of each Tenant entering into the lease. Whatever view might be taken were VCAT's conclusion of fact to be the subject of a hypothetical appeal by way of rehearing, I do not consider VCAT's conclusion to have been flawed in any way which would make that conclusion susceptible to being overturned on an appeal to the Supreme Court on a question of law under s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). That the finding was open on the evidence before VCAT is demonstrated by the reasoning of Gordon J74. The careful and detailed analysis of the evidence before VCAT undertaken by the primary judge, as endorsed by the Court of Appeal and explained by Nettle J75, does not in my opinion support the drawing 71 Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 369; [1969] HCA 29. 72 Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 437; [1968] HCA 8. 73 Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532 (citing Maskelyne v Stollery (1899) 16 TLR 97 and Heilbut, Symons & Co v Buckleton [1913] AC 30). 74 Reasons of Gordon J at [252]-[253]. 75 Reasons of Nettle J at [192]-[193]. of an inference that VCAT either failed to take any part of that evidence into account or failed to consider that evidence in its totality. Before recording its findings of primary fact, in particular its findings as to exactly what Mr Boesley said and exactly what Mr Zampelis subsequently did, VCAT acknowledged that there were features of the evidence which would support a view that it was "improbable" that Crown promised to renew the leases76. There could be no suggestion that VCAT did not take those features of the evidence into account in making the findings it did as to what was said and done. Equally, however, nothing in the structure or content of the balance of VCAT's reasons provides any basis for inferring that VCAT either forgot or ignored those same features of the evidence, or any other feature of the evidence, in going on to make findings about contractual intention which VCAT recorded in terms of what a reasonable person with knowledge of the facts and circumstances would have concluded from the words and conduct earlier found77. That deals with Crown's assertion about contractual certainty. Crown's conceptually distinct assertion of want of contractual completeness is an assertion which necessarily attempts to build on the incontestable understanding that a contract can arise only if parties have reached a present agreement "upon all the terms which they regarded or the law requires as essential for the formation of legally binding relations"78, it being "implicit in the very notion of consensus that the minds of the parties should have met in praesenti and not merely that it is hoped or expected that they will meet in futuro"79. Consistently with that understanding80: "It is established by authority, both ancient and modern, that the courts will not lend their aid to the enforcement of an incomplete 76 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 77 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 78 RTS Flexible Systems Ltd v Molkerei Alois Müller GmbH & Co KG (UK Production) [2010] 1 WLR 753 at 771 [45]; [2010] 3 All ER 1 at 18. 79 Powell v Jones [1968] SASR 394 at 398. See also Whitlock v Brew (1968) 118 CLR 445 at 456, 460; [1968] HCA 71. 80 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 604; [1982] HCA 53. agreement, being no more than an agreement of the parties to agree at some time in the future. Consequently, if [a] lease provided for a renewal 'at a rental to be agreed' there would clearly be no enforceable agreement." Crown's assertion of want of contractual completeness seems to be that, if the law will not recognise an agreement to agree, the law will not recognise an agreement to make an offer. I cannot accept that to be so. There is a material difference between an agreement to agree and an agreement to offer. To agree to agree is to defer the whole or some part of an agreement to the future. To agree to offer is to enter into a present agreement to propose terms capable of resulting in a further future agreement if accepted. The agreement to make an offer is an agreement that is complete in itself. So much has been recognised in numerous cases in which a right of first refusal or pre-emption has been recognised as enforceable81. That leaves just one of the three conceptually distinct strands of Crown's argument remaining to be considered: the assertion that the collateral contract found by VCAT is illusory because it leaves the choice of the terms on which Crown will renew the lease to Crown. It is important to be clear about the root principle sought to be invoked. The principle, as classically stated, is as follows82: "wherever words which by themselves constituted a promise were accompanied by words which showed that the promisor was to have a discretion or option as to whether he would carry out that which purported to be the promise, the result was that there was no contract on which an action could be brought at all. The doctrine was an old one. In Leake on Contracts, 3rd ed, p 3, it was expressed thus:—'Promissory expressions reserving an option as to the performance do not create a contract.'" The principle is thus one which has application where parties have reached a present agreement but where their present agreement has "left to the option of one party not only the mode of performance but whether there shall be any performance at all"83. But while "[i]t is an objection to a contract if one party 81 See generally Chitty on Contracts, 32nd ed (2015), vol 1 at 279-280 [2-134]. 82 Loftus v Roberts (1902) 18 TLR 532 at 534; applied in Beattie v Fine [1925] VLR 363 at 369 and Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 356, 359-361, 369-370; and distinguished in Thorby v Goldberg (1964) 112 CLR 597 at 605; [1964] HCA 41 and Meehan v Jones (1982) 149 CLR 571 at 581; [1982] HCA 52. 83 Powell v Jones [1968] SASR 394 at 397. is left to choose whether he will perform it", "it is an entirely different matter if there is an obligation to do a specified thing of a general description but it is left to the party who is to perform it to choose the particular thing that he will do in performance of it"84. A hypothetical illustration of that critical distinction is that "[a]n arrangement with an artist that he should for a specified fee paint a portrait of a particular person if the artist, upon seeing the proposed sitter, should decide to do so would be no contract to paint a portrait whereas an arrangement that the artist would for a specified fee paint a portrait of such person as he, the artist, should choose would be a contract"85. What the illustration demonstrates is that, in order to determine whether or not an agreement has left a party with a choice as to whether or not to perform a promise, it is first necessary to be quite clear about the content of the promise in question. Where, as here, the promise is no more and no less than a promise to make an offer, the promisor cannot be said to be left with a choice as to whether or not to perform the promise merely because the terms of the offer to be made are left to the promisor. The orthodoxy of that ultimate proposition can in turn be given concrete illustration by reference to the facts and outcome of a first instance English decision noted by Gordon J86. There a provision in a written contract for the conveyance of land was interpreted as imposing an obligation on the vendor, "should she wish to sell ... to make an offer to the purchaser at the price and at no more than the price at which she is, as a matter of fact, willing to sell". The obligation was held to be binding and enforceable. In explaining the operation of the contractual obligation, it was said in that case that "[i]f that offer is accepted by the [purchaser], then there will be a purchase at a figure which has been agreed upon"; "[i]f the offer is rejected, then cadit quaestio"87. Crown's obligation under the collateral contract found by VCAT was to give each Tenant a notice amounting to an offer which the Tenant would be able to accept. That was the long and the short of it. The fact that the choice of the terms on which Crown would make that offer was left to Crown did not render the obligation to make an offer illusory: that Crown could choose the terms did not contradict its obligation to make an offer. 84 Thorby v Goldberg (1964) 112 CLR 597 at 613. 85 Thorby v Goldberg (1964) 112 CLR 597 at 613. 86 Smith v Morgan [1971] 1 WLR 803; [1971] 2 All ER 1500. 87 Smith v Morgan [1971] 1 WLR 803 at 808; [1971] 2 All ER 1500 at 1504. Finally, it is necessary to note two potentially important issues which were not raised in the appeal or the cross-appeal to this Court and to which no argument has been directed. One issue concerns whether Crown might have been constrained by an implied obligation to act honestly or honestly and reasonably in choosing the terms on which it would offer to renew the leases88. The other issue concerns the measure of the Tenants' damages for Crown's breach of its obligation to make an offer. Neither is without difficulty, and the two are interrelated. I say nothing about either. 88 Cf Meehan v Jones (1982) 149 CLR 571 at 581, 590-591. KEANE J. Two issues are presented for determination by the Court. The issue on which special leave was granted to appeal to this Court from the Court of Appeal of the Supreme Court of Victoria is whether an assurance given by the appellant landlord ("Crown") that the respondent tenants ("the tenants") would be "looked after at renewal time" could lead to further leases by way of estoppel. The second issue, which arises only on the tenants' cross-appeal, but which is logically anterior to the issue raised on appeal, is whether an enforceable collateral contract came into force between Crown and the tenants whereby Crown was obliged, on the expiration of the leases, to grant the tenants a new lease on terms having a reasonable correspondence with the terms of the original leases. This issue was resolved in favour of the tenants by the Victorian Civil and Administrative Tribunal ("the Tribunal"), but against the tenants by the primary judge in the Supreme Court of Victoria and then by the Court of Appeal. The tenants require a grant of special leave to raise this issue89. The second issue is so closely related to the first that it would be distinctly unjust to determine the first issue without also determining the second90. Accordingly, special leave should be granted to allow that part of the cross-appeal to proceed. The tenants also sought to cross-appeal to argue that the appeal by Crown to the Supreme Court from the decision of the Tribunal was not "on a question of law" as required by s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic) ("the VCAT Act"). This argument had not been raised before the primary judge; it was raised for the first time in the Court of Appeal and resolved against the tenants unanimously in that Court91. The conclusion of the Court of Appeal in this regard is consistent with that of the Full Court of the Federal Court of Australia in Haritos v Federal Commissioner of Taxation92. This Court refused an application for special leave to appeal against the decision in Haritos93. In these circumstances, the interests of justice do not warrant the grant 89 High Court Rules 2004 (Cth), r 42.08.4. 90 cf Director of Public Prosecutions v United Telecasters Sydney Ltd (1990) 168 CLR 594 at 602; [1990] HCA 5. 91 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 92 (2015) 233 FCR 315. 93 [2015] HCATrans 337. of special leave. Accordingly, the Court refused special leave to raise this issue on the tenants' cross-appeal94. The proceedings The tenants commenced proceedings in the Tribunal95, claiming that Crown assured them that, if they entered leases in respect of certain restaurant premises for a five year term, Crown would offer to renew the leases for a further five year term. That assurance was said to amount to a collateral contract between Crown and the tenants. It was also claimed that Crown was estopped from denying that it had promised to offer the tenants a further term of five years. These claims were based on statements, to which reference will be made later in these reasons, allegedly made by representatives of Crown to Mr Nicholas Zampelis, as representative of the tenants, in the course of negotiations for the leases. The tenants claimed that, acting in reliance on the assurance that Crown would grant them further five year leases on the same terms as the original leases, they undertook a major refurbishment of the premises in the expectation that they would thus be able to recoup the cost of the refurbishment96. Crown denied that the alleged statements were made. The tenants also claimed that Crown had engaged in misleading or deceptive conduct or unconscionable conduct in contravention of the Retail Leases Act 2003 (Vic) or the Fair Trading Act 1999 (Vic) ("the statutory claims"). It is common ground that the statutory claims were not the subject of separate consideration in the Tribunal, in the Supreme Court or in the Court of Appeal. They were not agitated in this Court. The tenants sought to recover the loss of profit that they would have made during the term of the further leases which they contended Crown was obliged to grant them. The tenants did not pursue any claim based on their inability to recoup expenditure made on refurbishments under the original leases, and in this Court expressly disavowed such a claim. The relief they sought was that sum of 94 [2016] HCATrans 103. 95 Pursuant to s 89 of the Retail Leases Act 2003 (Vic), the Tribunal has exclusive jurisdiction to hear and determine a "retail tenancy dispute". 96 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at money necessary to put them in the position they would have been in had Crown kept what was advanced as a promise having contractual force97. The Tribunal upheld the tenants' claim based on collateral contract98, and ordered that Crown pay damages of $1.6 million plus interest calculated from the commencement of the proceedings99. Crown appealed to the Supreme Court. The primary judge (Hargrave J) granted leave to appeal and overturned the decision of the Tribunal100. The tenants appealed to the Court of Appeal. The Court of Appeal (Warren CJ, Whelan and Santamaria JJA) allowed the appeal and ordered that the proceeding be remitted to the Tribunal for further determination101. Crown appealed to this Court pursuant to special leave to appeal granted by Keane and Nettle JJ on 11 December 2015. The Tribunal upheld the tenants' claim on the basis of lost profits, finding an enforceable collateral contract between the parties that Crown would offer further leases to the tenants, and then assessing their loss on the basis that the offers would have led to leases on the terms assumed by the Tribunal. For the reasons which follow, the primary judge and the Court of Appeal were correct to conclude that the Tribunal erred in law in failing to appreciate that the contract by reference to which it assessed damages was illusory. The cross-appeal should be dismissed. As to the estoppel issue raised on the appeal to this Court, the parties were at odds as to whether the tenants had invoked promissory estoppel or proprietary estoppel as the alternative basis for their claim. Their dispute was driven by the apprehension that the requirement of certainty of the promise relied upon by the representee is less stringent in the case of proprietary estoppel than in the case of promissory estoppel. The dispute as to taxonomy need not be resolved in order to determine the estoppel issue in this case. 97 Tabcorp Holdings Ltd v Bowen Investments Pty Ltd (2009) 236 CLR 272 at 286 [13]; [2009] HCA 8; Clark v Macourt (2013) 253 CLR 1 at 7 [10]-[11], 11 [26]-[27], 18-19 [59]-[61], 30 [106]; [2013] HCA 56. 98 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225. 99 Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106. 100 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614. 101 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771. On the findings of fact made by the Tribunal, the tenants' refurbishment of the premises was not, in fact, induced by an expectation of the grant of further five year leases on terms corresponding to the original leases. The statement found to have been made by Crown was not that which Mr Zampelis said he relied upon; and the statement which was found to have been made could not reasonably have engendered the expectation on which he claimed to have acted. Accordingly, the claim made by the tenants is not made out. They did not seek to establish any lesser claim, and so the Court of Appeal erred in remitting for further consideration by the Tribunal a claim that had not been advanced or litigated by the tenants. Crown's appeal should be allowed. In order to explain these conclusions more fully, it will be necessary to examine in some detail the reasons of the Tribunal, the primary judge and the Court of Appeal. Before turning to consider those reasons, it is desirable to set out the relevant background. Background Crown owns the Melbourne Casino and Entertainment Complex. From 1 September 2005 to 31 August 2010, the tenants each operated a restaurant at the Complex. Mr Zampelis was a director of each of the tenants. Prior to 1 September 2005, other companies controlled by Mr Zampelis operated the two restaurants as the lessees of the restaurant premises. The leases in respect of the restaurant premises were due to expire in May 2005, and so negotiations began at the start of 2005 in respect of new leases between Crown and the tenants. The tenants each entered into a deed of lease, expressed to operate from 1 September 2005. Each lease provided for an expiry date of 31 August 2010. Clause 2.3 of each lease provided: "At least 6 months, but no more than 12 months before the Expiry Date, the Landlord must give notice to the Tenant stating whether: the Landlord will renew this Lease, and on what terms (this may include a requirement to refurbish the Premises or to move to different premises ...); the Landlord will allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or the Landlord will require the Tenant to vacate the Premises by the Clause 3.1 of each lease provided that: "If the Landlord gives the Tenant a notice under clause 2.3(a) and the Tenant wishes to renew this Lease, the Tenant must, within 60 days of that notice, give notice to the Landlord that the Tenant agrees to renew this Lease and accepts the Landlord's terms." Part N of each lease concerned the tenants' obligations to undertake work, repairs, maintenance and refurbishment of the restaurant premises. Clause 85 of each lease, titled "Major Refurbishment", provided: The Tenant must complete a Major Refurbishment of the Premises, at it's [sic] own cost and to the full satisfaction of the Landlord, before 1st December 2005 The Major Refurbishment must be undertaken in full compliance with Part N of this Lease including all necessary approvals by the Landlord." "Major Refurbishment" was defined in cl 1 of each lease to mean a comprehensive renovation of the restaurant premises in accordance with the tenants' design concept. The refurbishment of the restaurant premises was intended to be completed before the Commonwealth Games were held in Melbourne in March 2006. The works were carried out by the tenants and completed shortly after the commencement of the Commonwealth Games at a cost of approximately $4.65 million. During the negotiations for the leases, the tenants proposed that the leases should be for a term of 10 years or, alternatively, that they should contain an option in their favour to renew for a further five year period. The incorporation of one of those options was said by Mr Zampelis, who conducted the negotiations on behalf of the tenants, to be necessary to ensure that the tenants would have sufficient the refurbishment of the restaurant premises. What was said in these negotiations was controversial, and will be discussed in relation to the decision of the Tribunal. the capital expenditure on to recover time The leases were signed by the tenants in November 2005. The tenants did not deliver the signed leases to Crown until March 2006. It is to be noted that a period of four months elapsed between the signing of the leases by the tenants and the delivery of the leases to Crown. This period was occupied by the tenants' continuing attempts to obtain Crown's agreement to a lease term that extended beyond the expiry date or an option to renew. Crown declined to amend or include a provision in the leases to reflect the tenants' concerns, and in March 2006, at Crown's insistence, the tenants returned the signed leases, unaltered, to Crown. In October 2008, Crown commenced a tender process for new leases of the restaurant premises. The tenants submitted a tender. In December 2009, Crown informed the tenants that their tender was unsuccessful and provided the tenants with notice, in accordance with cl 2.3(c) of the leases, requiring them to vacate the restaurant premises at the expiration of the leases. The decision of the Tribunal Before the Tribunal, the tenants' case was that representatives of Crown made statements to Mr Zampelis which amounted to a promise that Crown would offer new leases to the tenants for a further term of five years by giving notice under cl 2.3(a) that it would renew the leases102. Mr Zampelis' evidence was that in the course of negotiations between the tenants and Crown in December 2005, Mr Boesley, a representative of Crown, said that if the tenants spent money on refurbishment that resulted in a high quality finish to the two restaurants, there would be leases for a further term and the tenants would be looked after at renewal time103. Mr Boesley denied making such a statement104. The Tribunal did not accept Mr Zampelis' evidence in its entirety, observing that "Mr Zampelis was prone to embellish and exaggerate when giving evidence about statements or conduct of Crown."105 The Tribunal resolved the conflict of testimony by reference to a note written on a page of a copy of one of the leases in the margin adjacent to the "Expiry Date" by Mr Craig, an employee of the tenants' bank. The Tribunal accepted Mr Craig's evidence that he had written the note within one or two weeks of a meeting with Mr Boesley106. The note said, relevantly: 102 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 103 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 104 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 105 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 106 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at "whilst this is a 5 yr term this is standard for Crown and aligns with other venues. Have however been with [Mr Zampelis] at several meetings when discussions have confirmed that further terms will be provided as they have in the past. [Mr Boesley] (Crown) was talking to [Mr Zampelis] one time and intimated that fit out should be high quality as this would reflect well and not to worry as he would be looked after at renewal time. So he should complete fit-out with this in mind and not scrimp on finishing to save a few dollars just because of the lease term." The Tribunal concluded that, given Mr Craig's role as the tenants' banker and the context in which the note was made, the note was likely to be a "careful and reasonably accurate record of the substance of what Mr Boesley said to Mr Zampelis"107. The Tribunal did not accept Mr Zampelis' evidence that Mr Boesley gave the tenants an assurance of a further lease term. The Tribunal found that the statement that Mr Boesley actually made to Mr Zampelis was to the effect that108: "if Mr Zampelis spent the money that, under Crown's leases, the tenants were required to spend to achieve a major refurbishment to a high standard, he would be 'looked after at renewal time', and that the leases had been limited to a five year term only because they would thereby be aligned with other tenants' leases." The Tribunal concluded that the statement found to have been made by Crown through Mr Boesley was "promissory in character"109. Mr Zampelis' evidence of the expectation upon which the tenants acted did not reflect the statement found to have been made on behalf of Crown. That evidence was that the tenants acted upon the expectation that Crown would renew each lease on the same terms and conditions as the original lease. The Tribunal noted that at the hearing the tenants' case as to the assurance given by Crown moved from that starting position to the position that the promise was to renew each lease on the same terms and conditions as the original lease, mutatis 107 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 108 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 109 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at mutandis110. The Tribunal rejected both of the tenants' positions, concluding that Crown could stipulate whatever terms it saw fit, including terms "so onerous that the tenant[s] would be compelled not to accept them."111 The Tribunal did not regard the promise as lacking sufficient certainty to give rise to an enforceable collateral contract112, stating that: "the way in which terms and conditions of a renewed lease could be ascertained with certainty was by Crown stipulating in its notice given under clause 2.3 what they were to be." The Tribunal held113 that, although the phrase "looked after" was "vague"114, in the context in which the statement was made: "[a] reasonable person would have concluded that the promise ... carried with it the consequence that the terms and conditions of the renewed lease would be those specified in the notice, whatever they were." The Tribunal held that the collateral contract was not inconsistent115 with the written terms of the main contract, being the leases. The Tribunal reached that conclusion on the basis that cl 2.3 did not confer any new right on Crown that it did not already enjoy as lessor at the expiration of the leases116. In the upshot, the Tribunal held that the representation gave rise to a collateral contract obliging Crown to give a notice to the tenants that it would 110 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 111 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 112 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 113 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 114 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 115 See Maybury v Atlantic Union Oil Co Ltd (1953) 89 CLR 507; [1953] HCA 89. 116 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at renew each of the leases117, and that the tenants entered into the leases in reliance upon that promise118. It is to be noted that the Tribunal regarded the terms of any offer of renewal as a matter for Crown. In particular, it is to be noted that, at this stage of the Tribunal's reasons, there was no suggestion that Crown's liberty to stipulate the terms on which it would be willing to grant a further lease was constrained by considerations of reasonableness or by what might be acceptable to the tenants. Consistently with the terms of cl 3 of each lease, Crown was entitled to set the terms of the new leases, and the tenants could take or leave them. The Tribunal then proceeded to assess the damages recoverable by the tenants on the basis that Crown "probably would have offered terms and conditions that had reasonable correspondence with those that had been in the expired lease."119 On this basis, the tenants were held to be entitled to damages for breach of contract which reflected the profit that they would have made from the further term120. It is apparent that the assumption on which damages were assessed involved a substantial departure from the Tribunal's earlier conclusion that "the terms and conditions of the renewed lease would be those specified in the notice, whatever they were." The Tribunal's earlier conclusion recognised that Crown was fully entitled to stipulate the terms of the renewed leases having regard to its own commercial interests; but the assessment of damages assumed the contrary for reasons which cannot satisfactorily be explained as a finding of fact on the evidence before the Tribunal. Nor is the assessment of damages for the loss of expected profit satisfactorily explained on the basis that Crown is bound by the conduct of its case to accept that the tenants were entitled to recover damages measured by reference to their expectations. While Crown contested the quantification of the tenants' damages by reference to their expectation loss, Crown's primary case was always that the tenants should not recover anything by way of damages, assessed by reference to the tenants' expectations or otherwise. 117 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 118 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 119 Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105 at [53]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106 120 Fish and Company (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 105 at [3]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2013] VCAT 106 at The Tribunal's view as to the terms of renewal that Crown would probably have stipulated was not a finding of fact based on evidence of Crown's likely attitude. Moreover, the assumption on which the Tribunal proceeded was inconsistent with cl 3 of each lease, which entitled Crown to act in its own interests in setting the terms of the new leases. In light of the circumstance that Crown did not wish to renew the tenants' leases, it is likely that it would have stipulated onerous terms as the price of surrendering its commercial preference to terminate its relationship with the tenants. The tenants might well have found such terms unacceptable. Be that as it may, given that Crown was not obliged to be "reasonable" in stipulating the terms of the further leases, it is, at best for the tenants, entirely speculative whether the terms of the offer would have been acceptable to, and accepted by, the tenants. On no view of the Tribunal's findings of fact was there a sufficient basis in law for the assessment of damages which the Tribunal proceeded to make. The Tribunal seems to have imposed upon the parties a "reasonable" solution to their unresolved differences in order to measure the damages to which the tenants were entitled. In proceeding in this way, the Tribunal was not engaged in an exercise in fact-finding. The solution which the Tribunal imposed did not reflect the Tribunal's finding of fact as to the assurance that was actually given by Crown to the tenants. An assurance that Crown would offer each tenant a lease on terms acceptable to Crown which might be so onerous that the tenants would not accept them, even if contractually binding, would hardly be of any value at all. In any event, perhaps not surprisingly, the tenants did not seek damages measured on this basis. It was simply no part of the tenants' case that they were entitled to damages representing the value of the opportunity to consider an offer of further leases. It is also to be noted that the award of damages was not calculated by reference to any suggestion that the tenants were worse off because they entered the leases with Crown and carried out the refurbishments than if they had walked away from the negotiation. No comparison was made between the tenants' financial position at the expiration of the leases and their position had they not obtained the leases and traded under them. The tenants did not seek to show, for example, the value of expenditure on refurbishment the cost of which had not been recouped during the term of the leases. The Tribunal also noted that if its conclusion as to the existence of a collateral contract were wrong, it would accept the tenants' alternative submission based on estoppel. The Tribunal said that it would hold that Crown was "estopped in equity from denying the existence of the collateral contract."121 121 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at Relevant to an aspect of Crown's argument in this Court is the Tribunal's rejection of a submission by Crown that the tenants could not succeed in the proceedings because the collateral contract was not in writing. Such a requirement is imposed on contracts for the sale or other disposition of an interest in land by s 126(1) of the Instruments Act 1958 (Vic) ("the Instruments Act"). The Tribunal held that the collateral contract was not for the disposition of an interest in land, but rather for an option to renew122. The appeal to the primary judge As the Tribunal was not constituted by its President or a Vice President, it was uncontroversial that Crown could appeal from the orders of the Tribunal to the Trial Division of the Supreme Court with leave of the Trial Division pursuant to s 148(1)(b) of the VCAT Act. Collateral contract The primary judge held that the Tribunal's conclusion in favour of the existence of a collateral contract advanced by the tenants did not accommodate its factual findings relating to the negotiations between the parties123. The primary judge concluded that a reasonable person in the position of the tenants would not have understood the representation found by the Tribunal as a promise by Crown to take any particular action124. The representation was125: "too vague to found any objectively reasonable understanding to the effect found, and Mr Zampelis did not give evidence that he understood the statements in that sense." The primary judge concluded that the putative collateral contract that obliged Crown to make an offer to the tenants to renew the leases was not sufficiently certain to be enforceable126. His Honour also held that if he were 122 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 123 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at 124 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [39]. 125 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [42]. 126 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [73]. wrong on the certainty point the collateral contract was unenforceable by virtue of its inconsistency with the leases127. Estoppel On the estoppel issue, the primary judge addressed128 the requirements for an estoppel summarised by Brennan J in Waltons Stores (Interstate) Ltd v Maher129. The primary judge concluded that130: "the meaning which the Tribunal attributed to the statements was not that which a reasonable person in the position of the parties in the relevant surrounding circumstances would have understood the statements to mean". His Honour said that131: "In determining whether a representation is sufficiently precise to support an estoppel, the Court examines the sense in which the representee understood the representation and relied upon it, and then determines whether, in the context of the facts of the particular case, it was reasonable for the representee to understand and rely upon the representation in that sense." On the issue of the tenants' understanding of the representation, the primary judge observed that132: "An analysis of the Tribunal's findings the evidence and demonstrates that there was a disconformity between Mr Zampelis's evidence of his understanding of the statements and the meaning which the Tribunal gave to those statements." 127 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [80]. 128 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [87]. 129 (1988) 164 CLR 387 at 428-429; [1988] HCA 7. 130 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [88]. 131 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [89]. 132 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [93]. The primary judge held that this "disconformity" meant that the sense in which Mr Zampelis said he understood the statement was "wholly unreasonable ... [s]o the estoppel case falls at the first hurdle."133 The decision of the Court of Appeal The Court of Appeal granted leave to appeal from the decision of the primary judge, and allowed the appeal. Collateral contract Warren CJ accepted that the primary judge was right to hold that the collateral contract was illusory and unenforceable for want of certainty as to the terms of the renewed leases134. Her Honour also agreed with the primary judge that the terms of the alleged collateral contract were inconsistent with the leases135. Whelan JA, with whom Santamaria JA agreed, held that the Tribunal failed to conduct an objective assessment of the parties' intentions from the totality of the evidence, and so incorrectly applied the legal principles relevant to a determination of what the parties' intentions were136. His Honour further held that "[t]he statement which [the Tribunal] found was made is not capable of bearing the meaning [the Tribunal] attribute[d] to it."137 This was said to be because the phrase "looked after" could have many meanings. Whelan JA agreed with Warren CJ that the legal obligation imposed by the collateral contract as 133 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [94]. 134 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 135 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 136 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 137 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at defined by the Tribunal was illusory138. His Honour also agreed with the primary judge and Warren CJ on the inconsistency issue139. Estoppel As to whether Crown was estopped from denying the existence of a collateral contract, Warren CJ held that the primary judge was correct to hold that the Tribunal did not analyse the claim on the basis of the meaning attributed to the statement by the tenants, but on the basis of the meaning that the Tribunal attributed to the statement140. Her Honour held that the Tribunal should have considered the sense in which the tenants understood the representation and whether it was reasonable for them to rely upon it141. Warren CJ went on, however, to hold that the primary judge was wrong to hold that the requirement for certainty to found a promissory estoppel was not satisfied142. In this regard, Warren CJ referred to observations by Hodgson JA in Sullivan v Sullivan143 to the effect that a promise or representation may support an estoppel even though it is not sufficiently certain to operate as a contract. "there is a lower standard of certainty for estoppel than in contract law and therefore the fact that the representation was not sufficiently certain to establish a collateral contract does not mean that it is not sufficiently certain for estoppel." 138 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 139 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 140 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 141 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 142 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 143 (2006) 13 BPR 24,755 at 24,768 [84]. 144 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at Her Honour concluded that, while the promise was open to different interpretations, it was sufficiently certain to give rise to an estoppel145. Her Honour held that the tenants "would be entitled to the minimum equity", and to that end "they would need to establish what was the lower limit of the representation made to them and then, what they are entitled to in order to achieve equity."146 On that footing, her Honour would have allowed the appeal and remitted the matter to the Tribunal. It may be said immediately that there is a twofold difficulty with applying her Honour's approach in this case: first, there is the disconformity between the finding of fact as to what was actually said to Mr Zampelis and the expectation which he claimed was engendered by Crown; and secondly, there is no identification of any basis for a lesser entitlement than that which the tenants claimed. On this issue, Whelan JA took a somewhat different approach from that taken by Warren CJ. Whelan JA held that the primary judge's analysis of the Tribunal's approach to estoppel was correct in that the disconformity between the promise that the Tribunal found and the understanding of the promise on which the tenants claimed to have relied was "irreconcilable"147. Whelan JA went on to conclude, however, that the estoppel issue needed to be addressed "more widely"148. His Honour held that the Tribunal and the primary judge had failed to analyse the tenants' claim by reference to the "lower limit" of what was meant by "looked after". On the basis that neither party had made submissions "by reference to the 'lower limit' of what was meant by 'looking after' the tenants at renewal", his Honour held that the matter should be remitted to the Tribunal for 145 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 146 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 147 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 148 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at further consideration of "the claim formulated in that way"149. His Honour said that150: "The issue of what the representation was has been determined. Crown has resiled. The issue to be determined on remittal is what equitable relief, if any, should be granted." On the face of these observations, it might be said, and Senior Counsel for Crown did say, that the order for remittal to the Tribunal proceeded upon the unorthodox basis that the mere resiling from a representation is enough to establish an estoppel of some kind. It is apparent, however, that Whelan JA recognised the need for the tenants to establish detrimental reliance. In this regard, Whelan JA went on to say151: "to require Crown to provide a renewed lease would be to do more than is necessary to avoid the detriment. … [The] enquiry would involve an analysis of what Crown should do to relieve [the tenants] from the its detriment representation. … It would not involve some surrogate for such a renewed lease such as the profits that might have been earned under a renewed lease." they have suffered because Crown resiled from The difficulty with this approach is that the only detriment ever identified by the tenants was the loss of the profit that would have been earned under the renewed leases; there was no attempt to show that the tenants were prevented from recovering expenditure on refurbishment which they would not have incurred but for the statement Crown was found to have made. The only case made by the tenants failed, and so the litigation was concluded, there being no contention which might be the subject of further litigation. It is significant in this regard that while Whelan JA explained what the further enquiry would not involve, his Honour did not positively identify the basis on which Crown "should do" something to relieve the tenants from "the detriment they have suffered". Nor is there an identification of that detriment, save that it is something other than "the profits that might have been earned under a renewed lease." 149 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 150 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 151 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at As already noted, the primary judge and the Court of Appeal also rejected the tenants' collateral contract case on the ground that the collateral contract contended for would be inconsistent with the terms of the leases, and, in particular, cl 2.3152. Their Honours referred to this Court's decision in Hoyt's Pty Ltd v Spencer153. The tenants argued that cl 2.3 of the leases did not add to Crown's rights at the conclusion of the leases but merely regulated the manner of their exercise; and so the putative collateral contract was not inconsistent with the leases. While that may be so, and it may therefore be said that the collateral contract found by the Tribunal was not inconsistent with cl 2.3 of the leases, it is at the stage of the Tribunal's assessment of damages by reference to the terms of the leases which would be granted that the assumption on which that assessment proceeded can be seen to be inconsistent with cl 3 of each lease. However that may be, it is unnecessary to resolve the issue. It is convenient now to deal with the issue as to collateral contract raised by the tenants' cross-appeal. The collateral contract The tenants submitted that the focus of the courts below on Crown's freedom to stipulate whatever terms it chose in the renewal notices paid insufficient regard to the promise to "look after" the tenants at renewal time. It was said that the courts below incorrectly discerned a dichotomy between Crown's freedom and the promise to "look after" the tenants, concluding on that basis that the promise was not capable of bearing the meaning attributed to it by the Tribunal154. The tenants' contention should be rejected. Both the primary judge and the Court of Appeal were right to conclude that, on the findings of fact made by the Tribunal, the parties had not made an enforceable agreement for the offer or grant of further five year leases. The formulation of the tenants' case in their pleadings is instructive. There, it was asserted that the collateral contract obliged Crown to make an offer of a lease. But to say that the collateral contract was to make an offer of a lease, and no more, is distinctly not to identify a basis for the approach to the assessment of damages adopted by the Tribunal. No objective standard by which 152 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [76]-[80]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 153 (1919) 27 CLR 133; [1919] HCA 64. 154 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [42]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at the terms of such an offer might be fixed was alleged or proved. That deficit in the tenants' case could not be made good by the legally unorthodox approach adopted by the Tribunal, which gave the tenants the benefit of a contract that was never made between the parties. The Tribunal had no authority to force upon Crown such terms as might seem to the Tribunal to be reasonable. The Tribunal erred in law in its appreciation of the legal effect of the facts as to what actually passed between Mr Boesley and Mr Zampelis. On one view, it might be said that the terms of the putative renewed leases were left to further agreement so that there is no binding agreement at all as to the renewal155. The issue of rent could be expected to have loomed large; and no basis for resolving that issue had been agreed or was identifiable. Nor was there any basis for concluding that differences between the parties on the terms of the renewed leases were likely to have been resolved upon terms acceptable to the tenants, much less that Crown was obliged to reach agreement on that basis. And the tenants did not seek, or advance any basis for the recovery of, damages for the loss of the opportunity to receive an offer from Crown. On another view, it might be said that the indication of a willingness to "look after" Mr Zampelis at the end of the leases could reasonably be understood as an indication of an intention to reimburse the tenants for any enduring disadvantage enuring to the tenants as a result of the refurbishment. What that might involve could range from some form of monetary recompense to favourable consideration in relation to new opportunities. In the case advanced by the tenants, none of these possibilities was litigated. To say either of these things, however, is merely to emphasise that because Crown was left legally free to act in its own interests in negotiating the terms of any further lease, and indeed free to stipulate for rent and other terms which might be unacceptable to the tenants, no agreement had been concluded. On either view of what might be involved in Crown's "looking after" the tenants at renewal time, the terms on which an agreement might be made could never be more than unresolvable speculation. Accordingly, even if the assurance that the tenants would be "looked after" by Crown at the expiration of the leases had actually been incorporated as a term of the leases signed by the tenants, it would not have been sufficiently certain to be enforceable as a promise of the grant of further leases. It has been noted that the Tribunal's error was not an error of fact. Where the terms of an oral representation have been established as a fact, its 155 Loftus v Roberts (1902) 18 TLR 532; cf Thorby v Goldberg (1964) 112 CLR 597 at 601, 605, 607, 616; [1964] HCA 41. construction is a question of law156. Similarly, the question whether the communications which have taken place between the parties to an alleged contract are so vague or incomplete that the alleged contract is illusory is a question of law. By way of example, in Horton v Jones157, the plaintiff in an action heard by judge and jury was non-suited, notwithstanding her evidence of a promise by the deceased to make a will and leave his "fortune" to her in return for her promise to make a home and to give up everything to look after him for the rest of his life. It was held that, while the content of what passed between the plaintiff and the deceased was a matter of fact, the question whether it was "too vague or uncertain to afford a consideration for" the deceased's promise was a question, not of fact for the jury, but of law for the judge158. For these reasons, the primary judge and the Court of Appeal were right to conclude that the collateral contract for which the tenants contended was illusory. Estoppel Contract and equity The tenants submitted that they have always contended that their claim that Crown is estopped from denying the existence of the collateral contract was founded upon proprietary estoppel because performance of the collateral contract would have secured further five year leasehold interests for the tenants. They argued that it was only in the reasoning of the Court of Appeal that their claim was categorised as one of promissory estoppel. It was said that this occurred only because the Court of Appeal attributed an artificially narrow meaning to the statement made by Crown. It may also be noted here that the tenants' argument proceeded on the assumption that promissory and proprietary estoppel are distinct doctrines. The argument between the parties proceeded upon this assumption, which was not challenged by any suggestion that proprietary estoppel is a doctrine which is, or ought to be, subsumed within promissory estoppel159. Crown submitted that it was not open to the tenants to assert that they have always grounded their claim in proprietary estoppel. In this regard, Crown 156 Heilbut, Symons & Co v Buckleton [1913] AC 30 at 36. See also Handley, Estoppel by Conduct and Election, 2nd ed (2016) at 79-80 [4-001]. 157 (1935) 53 CLR 475; [1935] HCA 7. 158 (1935) 53 CLR 475 at 477, 484-485, 488-489, 490-492. 159 Difficulties with such a suggestion are noted in Handley, Estoppel by Conduct and Election, 2nd ed (2016) at 29-30 [1-034]. argued that the tenants denied that s 126 of the Instruments Act applied to the contract, and the Tribunal expressly accepted that the collateral contract was not a contract for the disposition of an interest in land. On that basis, it was said that it cannot now be said that the estoppel for which the tenants contend is a proprietary rather than a promissory estoppel. There is force in this contention. There is also force in Crown's contention that the tenants' case was litigated as a matter of promissory estoppel, as is evident from the Tribunal's conclusion that Crown was estopped "from denying the existence of the collateral contract." Further, the Tribunal's conclusion echoes this Court's conclusion in Waltons Stores, a case identified by Mason CJ and Wilson J as an example of promissory estoppel160. It is important here to observe the differences between Waltons Stores and the present case. The most important difference for present purposes is that in Waltons Stores there was no question as to the certainty of terms of the agreement between the parties; the dispute was as to whether the parties were bound to those terms. In Waltons Stores, the parties had been negotiating the terms of a lease from the Mahers to Waltons. The Mahers proposed to demolish existing buildings on the land to be leased and to construct a new building to suit Waltons' purposes. Waltons' solicitor assured the Mahers' solicitor that the terms of the proposed lease were agreed and the Mahers executed the final form of the lease, sent it to Waltons and began the construction work. Waltons did not sign the lease but said nothing to the Mahers about its reluctance to do so even though it knew that the demolition work had begun. Waltons did not inform the Mahers that it did not want to complete the transaction until the new building was 40 per cent complete. At trial, and in the Court of Appeal of the Supreme Court of New South Wales, it was held that Waltons was estopped from denying that there was a contract of lease between the parties. In this Court, a majority held that Waltons had not represented that it had, in fact, executed the lease, but was nevertheless estopped from resiling from its promise to execute the lease161. The estoppel precluded the putative lessee from denying that the terms of the lease had been162, or would be163, agreed. If the putative lessee were not so precluded, the lessors would be left having wasted their outlays on the construction of premises for the lessee. 160 (1988) 164 CLR 387 at 404. 161 (1988) 164 CLR 387 at 399-401, 420, 423, 426, 428-429. 162 (1988) 164 CLR 387 at 443, 464. 163 (1988) 164 CLR 387 at 399-401, 428-429. In addition, in the present case, in contrast with Waltons Stores, the issue whether the tenants would have been left worse off at the end of the leases depends on findings of fact that were not made by the Tribunal and which it was not invited to make. Most importantly, the tenants did not seek to litigate the contention that the original leases were not long enough to enable them to recoup, with or without profit, their outlays on refurbishment or, more precisely, the outlays they would not have made but for the statement Crown was found to have made to Mr Zampelis. It is difficult to see that the case of estoppel advanced by the tenants in the Tribunal and the courts below could fairly be said to be other than a case of promissory estoppel given that it was advanced as an alternative to the collateral contract case, that it was concerned to bind Crown to a promise to make an offer, and that the tenants argued that they were not seeking to establish an interest in land. That having been said, however, it is not necessary to resolve the taxonomical dispute between the parties. In Giumelli v Giumelli164, this Court observed that difference of views in the decided cases as to whether there is a single unified or unifying doctrine of estoppel has yet to be resolved. This case is not the occasion to resolve that difference. Broadly speaking, however, the categories of promissory and proprietary estoppel serve a common purpose of protecting a party from a detriment which "would flow from a party's change of position if the assumption (or expectation) that led to it were deserted."165 Giving effect to this purpose may require different approaches in different contexts, but the purpose which underpins both iterations of the doctrine of estoppel was explained in Grundt v Great Boulder Pty Gold Mines Ltd166. There, Dixon J said that: "The principle upon which estoppel in pais is founded is that the law should not permit an unjust departure by a party from an assumption of fact which he has caused another party to adopt or accept for the purpose of their legal relations."167 164 (1999) 196 CLR 101 at 112-113 [7]; [1999] HCA 10. See also Handley, Estoppel by Conduct and Election, 2nd ed (2016) at 29-30 [1-034]. 165 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 419; see also Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-675; [1937] HCA 58; Legione v Hateley (1983) 152 CLR 406 at 437; [1983] HCA 11; Giumelli v Giumelli (1999) 196 CLR 101 at 124 [44]. 166 (1937) 59 CLR 641 at 674. 167 Since Waltons Stores, the assumption in question need no longer be as to a matter of fact. Dixon J described the "basal purpose of the doctrine" as being168: "to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting." It is because the "opposite party" is responsible for creating the assumption on which the party asserting the estoppel acted that the estoppel comes into play to prevent that party suffering a detriment. For the purposes of the present case, it may be accepted that the separate categories of promissory and proprietary estoppel allow for different approaches to the determination of whether the "opposite party" is responsible for creating that assumption in different contexts169. Promises and property interests Crown relied upon the proposition affirmed by Mason and Deane JJ in Legione v Hateley170 that a representation must be "clear", "unequivocal" and "unambiguous" before it can found a promissory estoppel. Nothing in the subsequent decisions of this Court has detracted from that requirement, which addresses the concern that a doctrine which is apt to preclude a party to a contract from relying upon its terms should not be so broad in its operation as to deny the party the benefit of its bargain by dint of representations which are so equivocal171 or ambiguous172 that they could not be given effect as terms of a contract. This concern was acknowledged in Legione173 by Mason and Deane JJ, who cited with approval the speech of Lord Hailsham of St Marylebone LC in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd174: 168 (1937) 59 CLR 641 at 674. 169 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 404. 170 (1983) 152 CLR 406 at 435-437. 171 Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd [1971] 2 QB 23 at 60. 172 Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355 at 375; [1924] HCA 58. 173 (1983) 152 CLR 406 at 436. 174 [1972] AC 741 at 757; see also at 768. "it would really be an astonishing thing if, in the case of a genuine misunderstanding as to the meaning of an offer, the offeree could obtain by means of the doctrine of promissory estoppel something that he must fail to obtain under the conventional law of contract. I share the feeling of incredulity expressed by Lord Denning MR in the course of his judgment in the instant case when he said175: 'If the judge be right, it leads to this extraordinary consequence: A letter which is not sufficient to vary a contract is, nevertheless, sufficient to work an estoppel – which will have the same effect as a variation.'" It would tend to reduce the law to incoherence if a representation, too uncertain or ambiguous to give rise to a contract or a variation of contractual rights and liabilities, were held to be sufficient to found a promissory estoppel. Practical considerations such as the need of commerce for certainty, both as to the terms to which parties have agreed to be bound, and as to whether their bargaining process has concluded, also provide strong support for this approach. The decision in Waltons Stores was coherent with the law of contract. Indeed, the result which was reached in Waltons Stores by the application of equitable principles fully accords with the result which might have been reached by a contractual analysis, so far as the making of a binding contract is concerned where no question of uncertainty of terms arises176. In this regard, as long ago as Brogden v Metropolitan Railway Co177, it was held that where terms of agreement were drawn up by the plaintiff in the action and presented to the defendant in the action, who filled in some parts left blank, wrote "approved" on the document, and returned it to the agent of the plaintiff, who put the document in his desk, and the parties later traded on the terms of the document, the circumstance that it had not been formally executed by either party was no obstacle to the conclusion that the parties had indicated by their conduct that they had bound themselves to a contract in the terms of the document178. It is pertinent to observe that Brogden was a decision to which very great chancery judges in Lords Cairns, Hatherley and Selborne were party, along with Lord Blackburn, the greatest common law judge of his time. 175 [1971] 2 QB 23 at 59-60. 176 (1988) 164 CLR 387, but note that there was no signed memorandum of agreement nor part performance to satisfy the requirements of the Statute of Frauds. These circumstances necessitated the invocation of equitable doctrines. 177 (1877) 2 App Cas 666. 178 (1877) 2 App Cas 666 at 680, 686, 690, 693. The principal practical difference between promissory and proprietary estoppel arises from the circumstances in which each is deployed: the former operates in relation to contracts, whereas the latter is concerned with the recognition of interests in property by way of relief against unconscionable conduct179. Proprietary estoppel affords relief against unconscionable conduct where departure from an assurance means that the representor's conduct is to be regarded as contrary to good conscience. In proprietary estoppel, it is necessary to consider both the subjective reliance of the representee and the extent to which the representor can, in good conscience, be held to be responsible for the representee's actions. The representor is not acting contrary to good conscience in refusing to conform its conduct to the predicament produced by the representee's unreasonable misunderstanding of a representation made to it. Certainty and conscience Where a contractual right or liability is to be altered, coherence in the law requires that the representation which is said to bring about that alteration should be no less certain in its terms than would be required for an effective contractual variation. Accordingly, Warren CJ erred in holding that "there is a lower standard of certainty for estoppel than in contract law" in so far as her Honour was dealing with a claim of promissory estoppel. Her Honour erred in treating what was said by Hodgson JA in Sullivan as applicable to such a case. In "Generally, a promise or representation will be sufficiently certain to support an estoppel if it was reasonable for the representee to interpret the representation or promise in a particular way and to act in reliance on that interpretation, thereby suffering detriment if the representor departs from what was represented or promised. Generally, if there is a grey area in what is represented or promised, but it was reasonable for the representee to interpret it as extending at least to the lower limit of the grey area and to act in reliance on it as so understood, I see no reason why the court should not regard the representation or promise as sufficiently certain up to this lower limit." Hodgson JA made these observations in relation to a claim for proprietary estoppel where, although the representee's understanding that she was being promised accommodation for life was an unreasonable understanding of the representation made to her, it was reasonable of her to understand that she would 179 Handley, Estoppel by Conduct and Election, 2nd ed (2016) at 29-30 [1-034]. 180 (2006) 13 BPR 24,755 at 24,768 [85]. be no worse off by altering the circumstances of her accommodation. It is apparent that Hodgson JA proceeded on the basis that the terms on which the representee was to occupy the house offered by the representors were to be no less favourable to her than the representee's current arrangements, which she gave up in reliance on the representation made to her. His Honour concluded that the representee's action "was what the [representors] intended she should do, and it was reasonable for her to do it."181 The concern that estoppel should not operate incoherently with the law of contract does not arise where proprietary estoppel is invoked precisely because there is no charter of contractually based rights and obligations governing the parties' relationship. Even in such cases, however, as Hodgson JA held, the assurance or representation on which the party claiming the benefit of the estoppel relies must be sufficiently clear that the expectation which that party asserts was both actually, and reasonably, engendered by the assurance or representation. In Giumelli182, this Court explained the doctrinal basis of relief by way of proprietary estoppel as involving the recognition of a constructive trust of property whereby the legal title of the owner of property is subjected by order of the court to limitations necessary to meet the requirements of good conscience. Where the expectation of the party asserting the estoppel which led to detrimental reliance was not reasonably attributable to the conduct of the "opposite party", then the conscience of the opposite party is not fixed with an obligation not to resile from the expectation. In Low v Bouverie183, Bowen LJ said: "an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed." In Woodhouse184, Lord Hailsham LC explained that these observations by Bowen LJ excluded: 181 Sullivan v Sullivan (2006) 13 BPR 24,755 at 24,769 [86]. 182 (1999) 196 CLR 101 at 111-114 [2]-[10]. See also Sidhu v Van Dyke (2014) 251 CLR 505 at 511 [2]; [2014] HCA 19. 183 [1891] 3 Ch 82 at 106. 184 [1972] AC 741 at 756. "far-fetched or strained, but still possible, interpretations, whilst … insisting on a sufficient precision and freedom from ambiguity to ensure that the representation will (not may) be reasonably understood in the particular sense required." Observance of this limit on the operation of estoppel in equity ensures that it is not allowed to operate to underwrite unrealistic expectations or wishful thinking. Such an operation would be especially pernicious in a commercial context; but even in a non-commercial context estoppel should not be allowed to operate as an instrument of injustice. The tenants, in their argument invoking proprietary estoppel, submitted that the Tribunal found as a matter of fact that Crown's statement meant that an interest in land would be granted. The tenants emphasise that the Tribunal found that they "expected that there would be an offer of a renewed lease, at renewal time, that they would be free to accept."185 In the tenants' submission, the Court of Appeal was wrong to depart from that finding, and to attribute a narrower meaning to the representation. In truth, this finding of the Tribunal highlights the flaw in the tenants' case. That is that the expectation found by the Tribunal was not of a grant of an interest in land but of an offer on terms which they would be "free" to accept. The obvious problem is that such an offer might well come to nothing because Crown was entitled to give full effect to its own self-interest in setting the terms of the offer. And any interest in land to be granted to the tenants necessarily depended on reaching an agreement upon the terms of an enforceable agreement for a lease186. The difficulties with this aspect of the tenants' argument are not avoided by categorising the tenants' case as one of proprietary, rather than promissory, estoppel. Mr Zampelis' evidence was that he was assured of the grant of further five year leases and that it was this assurance that he acted upon. This evidence was not accepted. The tenants' case, based on Mr Zampelis' evidence, was that they were induced to act by the assurance of five year leases on the same terms as the original leases. That case was rejected as a matter of fact by the Tribunal; as was the tenants' alternative case, adopted late in the day, that the assurance was of five year leases on the same terms mutatis mutandis. In addition, no one in 185 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 186 Progressive Mailing House Pty Ltd v Tabali Pty Ltd (1985) 157 CLR 17 at 29, 51; [1985] HCA 14; Willmott Growers Group Inc v Willmott Forests Ltd (Receivers and Managers Appointed) (In liq) (2013) 251 CLR 592 at 604 [39]-[40], 610-611 [61]-[62], 634-635 [151]-[152]; [2013] HCA 51. Mr Zampelis' position could reasonably have understood the statement found to have been made to him as an assurance of such an outcome. One thing that was unequivocally clear from the course of negotiations as found by the Tribunal was that Crown was refusing to bind itself to such an outcome. No other basis was suggested as the basis for holding that Crown was conscience-bound to hold its title subject to an interest in favour of the tenants. As to the Court of Appeal's reliance on Sullivan187, Senior Counsel for Crown said of the observations by Warren CJ and Whelan JA that their Honours did not identify what the "grey area" or "lower limit" was, or, indeed, that the tenants had any expectation within the "grey area" or the "lower limit". No case had been advanced by the tenants of a "grey area" or a "lower limit" of what was meant by "looked after". These submissions should be accepted. In none of its manifestations does estoppel operate by imputing to the party asserting the estoppel an expectation or reliance which might be thought to be a proportionate or fair response to the statement of the opposite party188. In Sidhu v Van Dyke189, French CJ, Kiefel, Bell and Keane JJ said: "Reliance is a fact to be found; it is not to be imputed on the basis of evidence which falls short of proof of the fact. It is actual reliance by the promisee, and the state of affairs so created, which answers the concern that equitable estoppel not be allowed to outflank Jorden v Money190 by dispensing with the need for consideration if a promise is to be enforceable as a contract191. It is not the breach of promise, but the promisor's responsibility for the detrimental reliance by the promisee, which makes it unconscionable for the promisor to resile from his or her promise. In Giumelli v Giumelli192, Gleeson CJ, McHugh, Gummow and Callinan JJ approved the statement of McPherson J in Riches v Hogben193 that: 187 (2006) 13 BPR 24,755. 188 Maynard v Moseley (1676) 3 Swans 651 at 655 [36 ER 1009 at 1011]; Stern v McArthur (1988) 165 CLR 489 at 514; [1988] HCA 51. 189 (2014) 251 CLR 505 at 522-523 [58]. 190 (1854) 5 HL Cas 185 at 210, 212-213 [10 ER 868 at 880-881]. 191 The Commonwealth v Verwayen (1990) 170 CLR 394 at 410, 416; [1990] HCA 39. 192 (1999) 196 CLR 101 at 121 [35]. 193 [1985] 2 Qd R 292 at 301. 'It is not the existence of an unperformed promise that invites the intervention of equity but the conduct of the plaintiff in acting upon the expectation to which it gives rise.'" The tenants placed substantial reliance upon the decision of the Victorian Court of Appeal in Flinn v Flinn194. In truth, that decision does not assist them. The putative collateral contract asserted in that case was held to be too uncertain to be enforceable: it was held that a promise to leave property by will on condition that the donee pay a reasonable sum to a third person could not give rise to an enforceable contract because there was no criterion by which to determine what was reasonable195. is "no general standard of reasonableness"196 to which appeal might be made to solve the problem. In Flinn the expectation that was held to ground the estoppel that the Court of Appeal enforced was informed by explicit descriptions of the property to be granted under the will and articulation of the conditions on which the grant would be There Conclusion In summary, in the course of the negotiations, a promise of a renewal of the leases had been explicitly rejected. It was clear beyond reasonable misunderstanding that Crown refused to bind itself to renew the leases on terms acceptable to the tenants, or, indeed, at all198. On the findings made by the Tribunal as to the expectation engendered by Crown's statement to Mr Zampelis, he did not act upon an expectation that the tenants would be granted renewed leases on terms acceptable to them. In addition, no one in his position could reasonably have expected a renewal of the leases for five years on the same terms and conditions as had been agreed in the leases or on terms reasonably corresponding to those terms. That being so, any claim based on estoppel was bound to fail. And the tenants had advanced no other basis for such a case. 195 [1999] 3 VR 712 at 733-734 [65]. 196 Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 357, 360-361; [1969] HCA 29. See also Hall v Busst (1960) 104 CLR 206 at 216-217, 222-223, 234-235; [1960] HCA 84. 197 [1999] 3 VR 712 at 743-744 [94]-[95]. 198 cf Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 352-353; [1982] HCA 24. Orders Special leave should be granted in respect of ground 4 of the Notice of Cross-Appeal dated 24 December 2015; otherwise, special leave should be refused. The cross-appeal should be dismissed. The tenants should pay Crown's costs of the cross-appeal. Crown's appeal should be allowed. Paragraphs 2 to 6 of the orders of the Court of Appeal should be set aside, and in their place the tenants' appeal to the Court of Appeal should be dismissed. The tenants should pay Crown's costs of the appeal and of the appeal to the Court of Appeal. Nettle 163 NETTLE J. This is an appeal from a judgment of the Court of Appeal of the Supreme Court of Victoria199. It concerns two leases of restaurant premises in the Melbourne Casino and Entertainment Complex in Southbank, Melbourne. Each lease was for a term of five years with no right of renewal and together the leases required the respondents ("the tenants") to spend in the order of $5 million refurbishing the premises to bring them to what was described as "world class" standard. Before they entered into the leases, the tenants were apprehensive of being unable to recover the costs of the refurbishments within the term of five years. Accordingly, they attempted to persuade the appellant ("Crown"), the lessor, to include in the leases a right of renewal for a further term of five years. Crown refused to do so. Nevertheless, after the tenants had executed the leases but before they delivered the executed leases to Crown, and shortly before they began to outlay funds on the refurbishments, Crown represented to the tenants that, if they spent the money, they would be "looked after at renewal time". Acting in reliance on that representation – in the belief it meant that, when renewal time came, Crown would offer to renew the leases for a further term of five years on the same terms and conditions as the existing leases – the tenants delivered the executed leases to Crown and carried out the refurbishment works at a total cost of some $5 million. When it came to renewal time, however, Crown did not offer to renew the leases for five years or at all and the tenants were not otherwise looked after. The tenants immediately became insolvent due to write-downs of more than $2 million in the value of the refurbishments. The principal question in this appeal is whether the Court of Appeal were correct to remit the matter to the Victorian Civil and Administrative Tribunal ("VCAT") on the basis that Crown was estopped from departing from the tenants' assumption or expectation that Crown would offer to renew the leases for a further term of five years. Due to the way in which the tenants put and conducted their case before VCAT, that question should be answered, no. There is also an application for special leave to cross-appeal. The principal question in that application is whether the Court of Appeal should have found that Crown's assurance constituted an enforceable collateral contract to renew the leases for a further term of five years. That question should also be answered, no. The facts Crown owns the Melbourne Casino and Entertainment Complex. Between 1997 and 2005, two companies associated with Mr Nicholas Zampelis 199 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771. Nettle leased and operated two restaurants in the complex, called respectively "Cafe Greco" and "Waterfront". Each lease was due to expire on 7 May 2005. Early in 2005, Mr Zampelis began negotiations on behalf of the tenants with Crown for the grant of new leases of the restaurants. Crown signalled that it was prepared to grant a new lease of each restaurant but only for a term of five years with no option for renewal, and only on condition that the tenants undertake major refurbishment works on each restaurant premises. In May 2005, Crown sent Mr Zampelis comprehensive summaries of the terms and conditions of the proposed new leases. On 29 June 2005, Crown gave in principle approval to the tenants' refurbishment concept plans for the restaurants and stated that the new leases would start on 1 September 2005, and that the refurbishments would have to be completed and trading would need to commence by 1 December 2005. On 22 July 2005, Mr Zampelis replied by email to Crown confirming "our acceptance of your offer unconditionally". On 2 September 2005, Crown sent unexecuted leases to the tenants which accurately reflected the summary documents ("the Leases"). In November 2005, each tenant executed its Lease, and informed Crown that it had done so, but the tenants did not then deliver the executed Leases to Crown. Clause 2.3 of each Lease required Crown to give notice to the tenant at least six months, but not more than 12 months, before the expiry of the Lease, stating whether Crown would: renew the Lease, and if so on what terms (cl 2.3(a)); allow the tenant to occupy the premises on a monthly tenancy after require the tenant to vacate the premises on expiry (cl 2.3(c)). Being concerned that the tenants might not recover the refurbishment costs within the term of five years, Mr Zampelis made a further attempt to persuade Crown to extend the term of the Leases to 10 years or to include in each Lease an option to renew for a further term of five years. Once again, however, he met with resolute resistance. Crown was keen to have the executed Leases and for the refurbishments to be completed ahead of the approaching Commonwealth Games in Melbourne, and it put considerable pressure on Mr Zampelis to deliver the Leases and to get on with the refurbishment works. But Crown also made clear that the only basis on which it would deal was on the basis of the executed Leases. The only concession was that at a meeting on 6 December 2005, Mr Boesley of Crown said to Mr Zampelis that the Leases had been limited to a term of five years so that they would align with other Crown leases and that, if Mr Zampelis spent the money required to refurbish the Nettle restaurants to a high standard, he would be "looked after at renewal time" ("the assurance"). The tenants began the refurbishment works just over a month later, and the refurbishments were completed two months after that in March 2006. At much the same time, Mr Boesley gave Mr Zampelis an ultimatum that, if he did not deliver the executed Leases to Crown, he would not be allowed to trade. On 7 March 2006, the tenants delivered the executed Leases to Crown. In October 2008, Crown put out a tender for the grant of leases of the restaurants following the expiration of the Leases and sent the tenants a "request for proposal". The tenants each submitted a proposal but were unsuccessful. In December 2009, Crown gave notices pursuant to cl 2.3(c) of the Leases requiring the tenants to vacate the leased premises upon the expiration of the Leases. The proceedings in VCAT On 30 July 2010, the tenants commenced a proceeding in VCAT seeking, inter alia, interlocutory relief to restrain Crown from re-entering the premises. Crown re-entered the premises on 31 August 2010, before the application for an interlocutory injunction was heard. The proceeding continued, however, to a final hearing and, on 24 February 2012, VCAT found that the assurance constituted a collateral contract that, as consideration for the tenants entering into the Leases and carrying out the refurbishment works, Crown would offer to renew the Leases for a further term of five years on such terms and conditions as Crown might choose pursuant to cl 2.3(a) of the Leases200. VCAT also held that, by reason of the tenants having acted in reliance upon the collateral contract to their detriment, Crown was estopped from denying the existence of the collateral contract and thus that the collateral contract was enforceable notwithstanding that it was not evidenced in writing as was thought might otherwise have been required by s 126(1) of the Instruments Act 1958 (Vic). VCAT found that by failing to offer a further term of five years in accordance with the collateral contract, Crown caused the tenants loss and damage by way of the loss of profits which it was anticipated would have been generated during the further term of five years. VCAT quantified those losses of profits, in the case of the first respondent, in the amount of $467,505 plus interest and, in the case of the second respondent, in the amount of $1,143,167 plus interest. 200 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at Nettle The appeal at first instance From that decision, Crown appealed successfully to the Supreme Court of Victoria201. The primary judge (Hargrave J) held that VCAT erred in finding that the assurance was sufficiently promissory to constitute a collateral contract and in any event that, because the supposed collateral contract provided for Crown to offer to renew the Leases for a term of five years on such terms and conditions as Crown might choose, it was illusory and unenforceable. His Honour further held that, because a reasonable person in the position of the tenants would not have understood the assurance as meaning that Crown would offer a further term at renewal time on the same terms and conditions as the existing Leases, the tenants' estoppel case failed in limine. The appeal to the Court of Appeal The Court of Appeal upheld the primary judge's finding that there was no collateral contract but allowed the appeal in relation to the estoppel claim. Warren CJ agreed with the primary judge that the supposed collateral contract was so uncertain as to be illusory and unenforceable. Her Honour took a different view, however, concerning estoppel. She referred to authorities supporting the view that a lower standard of certainty is required to establish an equitable estoppel than is necessary to establish the existence of a contract202 and, on that basis, reasoned that the fact that the assurance was not sufficiently certain to establish a collateral contract did not mean that it was incapable of founding an equitable estoppel. As VCAT had found, the tenants had taken the assurance to mean that they would be offered a further term. By giving the assurance, Crown had induced the tenants to adopt that assumption or expectation. It was not unreasonable for the tenants to adopt that assumption or expectation. On that basis, her Honour held that it would be unconscientious for Crown to be permitted to resile from that assumption or expectation and hence that Crown was estopped. But, her Honour said, it did not follow that the tenants were entitled to relief calculated by reference to the position in which they would have been if they had been granted further leases of five years' duration. The tenants 201 Pursuant to Victorian Civil and Administrative Tribunal Act 1998 (Vic), s 148; Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614. and Callinan JJ; 202 Giumelli v Giumelli (1999) 196 CLR 101 at 121-122 [35] per Gleeson CJ, McHugh, Gummow v Flinn [1999] 3 VR 712 at 743 [95] per Brooking JA (Charles JA agreeing at 754 [134], Batt JA agreeing at 754 [135]); Sullivan v Sullivan (2006) 13 BPR 24,755 at 24,768 [84]-[85] per Hodgson JA (McColl JA agreeing at 24,771 [101]); Evans v Evans [2011] NSWCA 92 at [121] per Campbell JA (Giles JA agreeing at [1], Sackville AJA agreeing at [151]). [1999] HCA 10; Flinn Nettle were only entitled to the minimum relief sufficient to satisfy their equity. Her Honour held therefore that the matter should be remitted to VCAT to enable the tenants to establish "what was the lower limit of the representation made to them and then, what they are entitled to in order to achieve equity"203. Whelan JA, with whom Santamaria JA agreed, concurred with the primary judge that the supposed collateral contract was so uncertain as to be illusory and unenforceable. Whelan JA was also at one with the primary judge in observing that there was an "irreconcilable disconformity" between the representation which Crown had been found in fact to have made – "to make a renewal offer under cl 2.3(a) on whatever terms Crown chose"204 – and Mr Zampelis' subjective understanding that the effect of the representation was that Crown would offer to renew the Leases for a further term of five years on the same terms and conditions as the existing Leases. But Whelan JA considered that that was not the end of the matter. In his Honour's view, it was "necessary to address the estoppel issue more widely than the narrow terms of VCAT's conclusion on estoppel"205, because the tenants had pleaded their case in VCAT in estoppel in wider terms than that; VCAT's findings were expressed in wider terms than that; and ground 8 of the Notice of Appeal was in wider terms than that. It was necessary to consider estoppel on the basis of VCAT's findings "by reference to the 'lower limit' of what was meant by 'looking after' the tenants at renewal"206. As Whelan JA noted, however, although a claim couched in those terms may have been within the case as pleaded and, in that sense, as put at VCAT, it had not been adjudicated upon by VCAT. Thus, in his Honour's view, it was necessary for the matter to be remitted to VCAT "for this aspect of the tenants' case to be ruled upon and determined"207. It remained for VCAT to decide what, 203 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 204 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 205 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 206 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 207 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at Nettle if any, equitable relief should be granted to the tenants, consistently with the "lower limit"208 of what was meant by the assurance. The appellant's contentions Before this Court, Crown contended that all members of the Court of Appeal erred in holding that the assurance was capable of founding a promissory estoppel. Crown submitted that it was established by the judgment of Mason and Deane JJ in Legione v Hateley209 that, for a representation to found a promissory estoppel, the representation must be clear and the representation must have been such as to cause a reasonable person in the position of the representee to have relied upon it as the representee is alleged to have done. In Crown's submission, those principles have been followed in numerous cases since Legione and should continue to be adhered to, especially given that the tenants did not challenge VCAT's finding that the assurance was objectively ambiguous and did not seek to re-open Legione. Crown further contended that the Court of Appeal erred in treating the arguably lower level of certainty required to found a proprietary estoppel as if it were applicable to promissory estoppel. In Crown's submission, the Court of Appeal were in error in following what Crown characterised as the relatively small number of recent decisions in New South Wales and Victorian courts which have treated the lower standard of certainty applicable to proprietary estoppel as if it were applicable to promissory estoppel. In any event, in Crown's submission, the notion of some "lower limit" of the "grey area"210 was misconceived and, on the facts of this case, devoid of application. Since the only case advanced by the tenants was that they assumed the assurance meant they would be offered new leases of five years' duration on the same terms and conditions as the existing Leases, it did not matter if the assurance might reasonably be considered to have had some other meaning less favourable to the tenants. In Crown's submission, since the heart of promissory estoppel is the subjective state of mind of the promisee and the part which the promisor has played in bringing that about, it is not to the point to suppose what a reasonable promisee might reasonably have understood a promise to mean and then to pretend that the actual promisee acted on the basis of that supposed understanding. According to Crown, given that the Court of Appeal found that 208 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 209 (1983) 152 CLR 406 at 436-437; [1983] HCA 11. 210 Sullivan (2006) 13 BPR 24,755 at 24,768 [84]-[85] per Hodgson JA (McColl JA agreeing at 24,771 [101]). Nettle the assurance was ambiguous, and therefore had no decisive reasonable meaning, it followed ineluctably that the appeal to the Court of Appeal should have been dismissed. The respondents' contentions By way of their application for special leave to cross-appeal, the tenants contended that the primary judge and the Court of Appeal were in error in failing to uphold VCAT's decision that there was a binding collateral contract that Crown would offer a further term of five years on the same terms and conditions as the existing Leases, and that the tenants were entitled to damages for breach of the collateral contract equal to the profits which it was said they had forgone. The tenants further contended that VCAT was correct in holding that Crown was estopped from denying that it promised to offer further leases of five years' duration, and right to award equitable compensation equivalent to the profits which it said were forgone as the result of Crown's refusal to grant a further term of five years to each tenant. According to the tenants, Crown's reliance on the difference between the degrees of certainty required for promissory estoppel and proprietary estoppel was also misplaced. Crown had not invoked any such distinction when before VCAT or the primary judge or the Court of Appeal, and, in any event, it was submitted, in the circumstances of this case, there was no relevant difference. Properly characterised, the estoppel for which the tenants contended was a proprietary estoppel. The tenants embraced Warren CJ's conclusion that VCAT was correct in finding that the tenants took the assurance to mean that they would be offered new leases of five years' duration on the same terms and conditions as the existing Leases, and her Honour's finding that the tenants acted in reliance on that assumption to their detriment. But, contrary to Warren CJ's reasoning, the tenants contended that it followed that Crown was estopped from denying that it had agreed to grant new leases of five years' duration on the same terms and conditions as the existing Leases. On that basis, it was submitted, the tenants were entitled to equitable compensation equal to the profits forgone and there was no occasion to consider whether any lesser measure of relief was appropriate or, therefore, to remit the matter to VCAT. Alternatively, the tenants contended, if the meaning that Crown would offer new leases of five years' duration on the same terms and conditions as the existing Leases or on the same terms and conditions mutatis mutandis was not a meaning that could reasonably be attributed to the assurance, the fact remained that that was the way in which the tenants had construed the assurance and the basis on which they had acted to their detriment, and thus, as Whelan and Santamaria JJA had held, the matter should be remitted to VCAT for Nettle determination of the relief to be accorded to the tenants having regard to the meaning which a reasonable person in the position of the tenants would have attributed to the assurance. The collateral contract It is a remarkable feature of this matter that, although the tenants' claim before VCAT was essentially one for damages for breach of collateral contract, the claim ultimately upheld in the Court of Appeal was a claim in equitable estoppel for relief not previously sought. It is no less remarkable that, in this Court, the tenants demonstrated very little interest in supporting the Court of Appeal's reasoning or conclusion regarding estoppel and instead devoted the bulk of their submissions to an attempt to establish that the primary judge and the Court of Appeal were wrong to reject their claim for damages for breach of collateral contract, or alternatively in holding that the tenants were not entitled to equitable compensation in the same amount. No binding promise As has been noticed, VCAT decided the collateral contract claim on the basis of what it perceived to be the objective or reasonable meaning of the assurance that, if Mr Zampelis spent the money required to refurbish the premises to a high standard, he would be "looked after at renewal time". VCAT found that a reasonable person in Mr Zampelis' position would have understood that to be a promise that, if the tenants delivered the executed Leases and paid the costs of the fit out works, Crown would make an offer to grant a further term of five years on such terms and conditions as Crown might choose in its discretion. VCAT also held that the assurance was a sufficiently certain promise that, once accepted by the delivery of the executed Leases and payment of the fit out costs, it gave rise to a binding and enforceable collateral contract. The primary judge took the opposite view. His Honour held that VCAT had erred in law in reaching its conclusion by failing to take the following relevant considerations into account: In October and November 2004, before the expiry of the previous leases, Mr Boesley wrote to Mr Zampelis to enquire about his intentions to enter new leases, and specifying terms on which Crown would allow a holding-over. (2) When, by email in reply dated 8 November 2004, Mr Zampelis' personal assistant suggested that Crown had represented to Mr Zampelis that there would be a further term under the previous leases, Mr Boesley expressly denied any such representation by email dated 10 November 2004. Nettle (3) On 11 May 2005, when the time came to negotiate the terms of the Leases, Mr Boesley sent "comprehensive summaries of the terms and conditions of proposed new leases"211 to the tenants, including the five year term and major refurbishment clause. (4) On 29 June 2005, Mr Boesley informed Mr Zampelis by email that his concept proposals for refurbishment of the restaurants had been approved "in principle"212, and sought confirmation from Mr Zampelis that he would accept the proposed terms under the Leases. the (5) Mr Zampelis replied by email to Mr Boesley on 22 July 2005, confirming offer unconditionally"213. That offer was for two five year leases, with no right of renewal, each commencing on 1 September 2005, under which major refurbishments were to be completed and trading was to commence by 1 December 2005. "acceptance tenants' your (6) By email dated 3 November 2005, Mr Zampelis' personal assistant advised Mr Boesley that the Leases had been signed. (7) On 23 November 2005, Mr Boesley sent an email to the tenants demanding that the executed Leases be returned to Crown and threatening to lease the restaurants to other restaurateurs if this was not done. The primary judge reasoned, and the Court of Appeal agreed, that those and other matters revealed a background of commercial negotiations between parties experienced in commercial leasing, in which important matters were documented, against which a reasonable person in Mr Zampelis' position would have understood the assurance as being no more than "some vaguely encouraging words from Mr Boesley about the strength of the parties' relationship and Crown's willingness to see the restaurants prosper beyond the end of the five year 211 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at 212 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at 213 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at 214 Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [39]. Nettle Before this Court, the tenants attacked the primary judge's reasoning at a number of levels but principally on the basis that it was not correct that VCAT failed to have regard to the listed matters. It followed, it was said, that the judge was wrong in holding that VCAT erred in law and thus wrong in substituting his own view of the facts for VCAT's findings. That argument should be rejected. VCAT did not have regard to at least some of the listed factors and did not give adequate consideration to any of them. Whether VCAT had regard to factors (1) and (2) is perhaps debatable. They are described in VCAT's reasons as "features of these cases that would support a view that it is improbable that Crown made the alleged promise to renew for a further term"215. But there is no analysis anywhere in the reasons of what, if anything, VCAT perceived to so much outweigh those factors that the assurance could objectively be discerned as a binding promise by Crown to offer a further term of five years. The position is even clearer in relation to factors (3), (4), (5), (6) and (7). None of them is described in the reasons as "features of these cases that would support a view that it is improbable that Crown made the alleged promise to renew for a further term"216. Factor (3) is mentioned later in VCAT's reasons217, but only as an historical introduction to statements which Crown was alleged to have made and were found not to have been made. Factors (4) and (5) are also mentioned218 but only as part of the historical narrative. Factor (7), and implicitly factor (6), are mentioned219, but without any consideration of their implication that Crown was not prepared to deal on a basis other than the terms of the executed Leases. When proper regard is had to each of those factors, it is apparent that the primary judge and the Court of Appeal were correct in holding that a reasonable person in the position of Mr Zampelis could not have construed the assurance as a binding promise to offer a further term of five years. To adopt and adapt the words of Lord Wright in Scammell (G) and Nephew Ltd v Ouston (H C and J G), 215 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 216 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 217 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 218 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at 219 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at Nettle the parties did not "in intention nor even in appearance"220 make or accept any promise about a renewal. Such, if any, understanding as they may have come to on the point was inchoate. They might have considered that there should be some form of renewal. But they never went on to make an agreement regarding renewal, by settling between them on what terms the renewal was to be. The furthest point they reached was an understanding that they would agree upon terms of renewal. The words which they used were not "the language of obligation or contract"221. VCAT's contrary finding was untenable. That is sufficient to dispose of the proposed cross-appeal on the collateral contract claim. But, given the way in which the matter was argued, it is appropriate also to mention something of the primary judge's and the Court of Appeal's further reasoning that, in the event that the assurance could objectively be regarded as a promise to offer a further term of five years, the promise was not made in sufficiently certain terms to be contractually binding. Illusory promise As has been seen, the primary judge concluded, and the Court of Appeal affirmed, that, assuming the assurance were a promise, it was illusory and unenforceable because, apart from the term of five years, it left the selection of the terms and conditions of the renewed leases entirely to Crown's discretion. That conclusion was correct. Although a lease which leaves the determination of the rent to a nominated third party, or provides for a reasonable rent, may be sufficiently certain to be enforceable222, an agreement to lease at a rent to be determined in the discretion of the lessor is not enforceable223. And, 220 [1941] AC 251 at 269. 221 Horton v Jones (1935) 53 CLR 475 at 489 per Starke J; [1935] HCA 7; see also Whitlock v Brew (1968) 118 CLR 445 at 456 per Kitto J; [1968] HCA 71. 222 Booker Industries Pty Ltd v Wilson Parking (Qld) Pty Ltd (1982) 149 CLR 600 at 606 per Gibbs CJ, Murphy and Wilson JJ; [1982] HCA 53. 223 Beattie v Fine [1925] VLR 363 at 368-369; Trustees Executors and Agency Co Ltd v Peters (1960) 102 CLR 537 at 555-556 per Menzies J (McTiernan J agreeing at [1960] HCA 16; Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 356 per Kitto J, 359-360 per Taylor and Owen JJ, 371-372 per Windeyer J; [1969] HCA 29; Godecke v Kirwan (1973) 129 CLR 629 at 640 per Walsh J (Mason J agreeing at 648), 646-647 per Gibbs J; [1973] HCA 38; Booker Industries (1982) 149 CLR 600 at 604-605 per Gibbs CJ, Murphy and Nettle since a contract to lease on such terms is unenforceable, a promise to make an offer to lease on such terms is illusory. In this case, the assurance did not provide for the rent to be determined by a third party. Nor was it a case of a right of first refusal in which the requisite certainty is said to be provided by the terms on which the promisor is prepared to deal with a third party224. As the primary judge held and the Court of Appeal affirmed, it was not open to construe the assurance as importing reasonable terms and conditions. Nor did it assist that, when VCAT set about assessing damages for breach of the supposed collateral contract, VCAT conjectured by way of what it described as a matter of probability that, if Crown had appreciated it was bound to offer a further term, it would have stipulated terms and conditions that "had reasonable correspondence with those that had appeared in the existing lease"225. That was not the effect of the assurance. To the extent that the assurance presaged anything about the terms and conditions of the further term, it was implicit that it would be on such terms and conditions as Crown could choose in its discretion. The primary judge appears to have accepted a submission by the tenants that, because the supposed promise was to offer to "renew" the Leases, it could be inferred that the offer would be to renew the Leases for a term of five years. That was thought to follow from the decision in Lewis v Stephenson226, which was later approved by this Court in Trade Practices Commission v Tooth & Co Ltd227, that, where a lease of land contains an option to renew which is silent as to the term of the renewal, it is to be inferred that the parties intended the renewal to be for the same term as the lease. That, however, was not correct. Although it makes no difference to the outcome of this matter, it is to be observed that the principle which informs Lewis v Stephenson and Tooth & Co applies to written contracts. Consistently with the precept that courts should endeavour to construe a formal legal document in order to avoid frustrating the parties' intentions, and therefore should be loath to hold that a written condition is bad for uncertainty, it can often be inferred that parties intended that a 224 Cf Smith v Morgan [1971] 1 WLR 803 at 808; [1971] 2 All ER 1500 at 1504; Goldmaster Homes Pty Ltd v Johnson (2004) 12 BPR 23,167 at 23,175-23,176 [36]-[38] per Bryson JA (Mason P agreeing at 23,167 [1], Stein AJA agreeing at 225 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 1407 at 226 (1898) 67 LJQB 296 at 299-300 per Bruce J. 227 (1979) 142 CLR 397 at 419-420 per Stephen J, 441 per Aickin J; [1979] HCA 47. Nettle provision for "renewal" of a lease on unspecified terms and conditions is a provision for renewal on the same terms and conditions as the existing lease. But that principle has little if any application to the objective interpretation of oral assurances. The latter depends on the words of the assurance and the circumstances in which the assurance is given. If the assurance had been given in terms that Crown would grant a renewal, it might have been inferred that what was intended was a renewal for the same term as the Leases. But, since the assurance was no more specific than that the tenants would be looked after at renewal time, it was not open to infer that it meant a further term of no less than the existing term. No inconsistency The primary judge also held that, if the assurance could reasonably be construed as a promise to grant a further term of five years, the promise would be inconsistent with cl 2.3 of the Leases, and therefore unenforceable because of the rule in Hoyt's Pty Ltd v Spencer228 and the decision in Maybury v Atlantic Union Oil Co Ltd229. The Court of Appeal affirmed that view of the matter. But that was not correct either. Although it makes no difference to the outcome in this matter, it is apparent that there would not have been an inconsistency. Certainly, as was earlier noticed, cl 2.3 of the Leases provided for Crown to give notices at a set period before the expiration of the Leases in one of three possible forms: in the form of an offer to renew; in the form of an offer to allow the tenant to remain in possession as a tenant from month to month; and in the form of a notice to quit. But Crown's rights to offer to renew the Leases or to permit occupation on a monthly tenancy or to require the tenant to vacate the demised premises, and Crown's discretion to choose between courses, were not created by the Leases. Those rights arose by operation of law as rights in reversion upon the expiration of the Leases230. The only effect of cl 2.3 was to require Crown to give notice of 228 (1919) 27 CLR 133; [1919] HCA 64. 229 (1953) 89 CLR 507; [1953] HCA 89. 230 Woodfall's Law of Landlord and Tenant, (Release 103), vol 1, pars 17.001, 17.002, 17.023-17.031; Attorney-General of Ontario v Mercer (1883) 8 App Cas 767 at Nettle its choice. Absent cl 2.3, a collateral promise by Crown to choose among its common law rights as reversioner231 would not be in any sense inconsistent with the terms of the Leases. Equally, since the only effect of cl 2.3 was to require Crown to give notice of its choice between its common law rights as reversioner, such a collateral promise would not be inconsistent with cl 2.3. Estoppel When this matter was before VCAT, the tenants put their claim in estoppel as an alternative to their claim in collateral contract. So put, it was that because Mr Boesley gave the assurance and the tenants acted in reliance upon it to their detriment, Crown was estopped from denying that it was bound to offer to renew the existing Leases for a term of five years on the same terms and conditions as the existing Leases, or at least on the same terms and conditions mutatis mutandis as the existing Leases. By contrast, VCAT's conclusion on estoppel was that Crown was not so estopped but estopped only from denying that it was bound to offer to renew the Leases for a further term of five years on such terms and conditions as it might choose in its discretion. As will be recalled, the primary judge held that the claim of estoppel failed because, on the facts as found by VCAT, the assumption or expectation which a reasonable person in Mr Zampelis' position would have formed on the basis of the assurance was that Crown would offer to renew the Leases on such terms and conditions as Crown might choose in its discretion, as opposed to the same terms and conditions as the existing Leases, and because there was no evidence or determination by VCAT of whether Mr Zampelis would have been induced to act as he did if he had understood that the assurance meant no more than that Crown would offer to renew the Leases on such terms and conditions as Crown might choose in its discretion. Each member of the Court of Appeal held that that was not correct, although for different reasons. Warren CJ reasoned that the primary judge was in error in approaching the matter on the basis of what the assurance would have meant to a reasonable person in Mr Zampelis' position. Her Honour considered that the claim was to be determined by a process of four steps. The first was to ascertain what Mr Zampelis took the assurance to mean. The second was to ascertain whether it was reasonable for Mr Zampelis to have interpreted the assurance in that fashion. The third was to determine whether the tenants had acted in reliance on the assurance to their detriment. The fourth was to determine 231 See, eg, Messenger v Armstrong (1785) 1 Term Rep 53 [99 ER 968]; Cobb v Stokes (1807) 8 East 358 [103 ER 380]; Tayleur v Wildin (1868) LR 3 Ex 303 at 305 per Kelly CB (Martin and Bramwell BB agreeing at 305); Arnold v Mann (1957) 99 CLR 462 at 475 per Dixon CJ; [1957] HCA 64. Nettle the minimum equity. Her Honour accepted that Mr Zampelis took the assurance to mean that Crown would offer to renew the Leases for a term of five years on the same terms and conditions as the existing Leases. Her Honour also found that, although the assurance was capable of a range of meanings, it was not unreasonable for Mr Zampelis to construe it as he did. Her Honour further found that the tenants had acted in reliance on the assurance and suffered detriment by incurring expenditure on the fit out works. On that basis, Warren CJ held that the matter should be remitted to VCAT for determination of the measure of relief to be accorded to the tenants, which her Honour posited should be at the "lower limit of the representation"232; meaning, presumably, in accordance with the least onerous to Crown of the several possible meanings which could reasonably have been drawn from the assurance. Whelan and Santamaria JJA considered that the primary judge was correct in holding that VCAT made an error in failing to "analyse or consider what [VCAT] had found as to what had been said to Mr Zampelis and as to what that meant"233. But their Honours were also of the view that VCAT and the primary judge were at fault in that "[n]either VCAT nor the [primary] judge have addressed estoppel on the basis of the factual findings which VCAT made but by reference to the 'lower limit' of what was meant by 'looking after' the tenants at renewal"234. Like Warren CJ, therefore, although for a different reason, Whelan and Santamaria JJA concluded that the matter should be remitted to VCAT to determine "what equitable relief, if any, should be granted"235. Their Honours said that the "enquiry [should] involve an analysis of what Crown should do to relieve [the tenants] from the detriment they have suffered because Crown resiled from its representation"236, but that it should not extend to the grant of new leases or anything in the nature of expectation loss. 232 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 233 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 234 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 235 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at 236 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR 771 at Nettle Certainty of the representation Crown attacked the Court of Appeal's reasoning at a number of levels. Its starting point was to contend that the tenants had put their estoppel claim in VCAT as a claim of promissory estoppel and that, because the assurance lacked contractual certainty, the claim was bound to fail. Counsel for Crown called in aid Mason and Deane JJ's statement in Legione that "[t]he requirement that a representation must be clear before it can found an estoppel is ... applicable to any doctrine of promissory estoppel"237, and their Honours' reference with apparent approval to the statement of Lord Denning MR in Woodhouse AC Israel Cocoa Ltd SA v Nigerian Produce Marketing Co Ltd238 that a higher standard of clarity is required to found a promissory estoppel than is required to found an agreed variation of contract. In Woodhouse AC, Lord Denning stated that was so because it was clear from Low v Bouverie239 and Canada and Dominion Sugar Co Ltd v Canadian National (West Indies) Steamships Ltd240 that a representation must be clear and unequivocal in order to work an estoppel. Crown's contention should not be accepted. The notion that it takes a representation of contractual certainty to found a promissory estoppel is misplaced. As Warren CJ observed, what is determinative in cases of promissory estoppel is whether the party sought to be estopped has played such a part in creating an assumption or expectation in the mind of a claimant, in reliance on which the claimant has acted to the claimant's detriment, that it would be unconscionable for the estopped party to depart from the assumption or expectation before allowing the claimant reasonable time in which to revert to the status quo ante or, in some cases, at all241. Mason and Deane JJ's statement in Legione that the requirement that a representation must be clear before it can found an estoppel is to be understood in that sense. So are Lord Denning's references in Woodhouse AC to Low v Bouverie and Canada and Dominion Sugar Co. Neither of the latter cases supports the proposition that a statement must be objectively unambiguous in 237 (1983) 152 CLR 406 at 436. 238 [1971] 2 QB 23 at 60. 241 The Commonwealth v Verwayen (1990) 170 CLR 394 at 411 per Mason CJ, 428 per Brennan J, 444 per Deane J; [1990] HCA 39. Nettle order to found a promissory estoppel, still less that it must be more certain in terms than is required to found an agreed variation of contract242. Low v Bouverie243 was decided in the immediate aftermath of Derry v Peek244. The beneficiary of a trust sought a loan from a client of a firm of solicitors on the security of the beneficiary's life interest in the trust and the solicitors sought advice from the trustee as to whether the trustee held any mortgage or knew of any other encumbrance over the beneficiary's interest in the trust. The trustee replied that he held a mortgage from the beneficiary for the charge of interest on money advanced to the beneficiary and two policies of life insurance on the beneficiary's life as security for the moneys advanced to him, both of which were mortgaged, but, in effect, that the trustee was not aware of any other security. Acting in reliance on the trustee's reply, the solicitors went ahead and made the loan to the beneficiary. When the beneficiary later defaulted in repayment of the loan, the solicitors discovered that the beneficiary's interest in the trust was in fact subject to six prior mortgages and that, although the trustee had notice of the prior mortgages, at least in the sense that they were receipted in the deed by which he was appointed as trustee some three years before, the trustee had forgotten of their existence when responding to the solicitors' enquiry. The client sued the trustee for breach of warranty and also for equitable relief on the basis that the trustee was estopped from denying that the only encumbrances on the beneficiary's interest in the trust were those which the trustee had mentioned. It was held that the claim for breach of warranty failed because there was no intention to enter into contractual relations, and that the claim of estoppel failed because the meaning which the solicitors sought to attribute to the trustee's reply went beyond the meaning that it could reasonably bear in the circumstances. Bowen LJ encapsulated the latter point as follows245: "[I]n order to entitle the Plaintiff to relief, we must find here such an estoppel as would justify a claim for relief based upon the hypothesis that the Defendant is precluded from denying the truth of the fact which he is supposed to have asserted. Now, an estoppel, that is to say, the language upon which the estoppel is founded, must be precise and unambiguous. 242 See also Australian Crime Commission v Gray [2003] NSWCA 318 at [183]-[207] per Ipp JA (Mason P agreeing at [3], Tobias JA agreeing with Mason P at [313]); Workplace Safety Australia Pty Ltd v Simple OHS Solutions Pty Ltd (2015) 89 NSWLR 594 at 623 [144] per Bathurst CJ (Basten JA agreeing at 244 (1889) 14 App Cas 337. 245 [1891] 3 Ch 82 at 106. Nettle That does not necessarily mean that the language must be such that it cannot possibly be open to different constructions, but that it must be such as will be reasonably understood in a particular sense by the person to whom it is addressed. ... I have come to the conclusion that the Defendant did not make any clear statement of the character which the Plaintiff alleges. I think that his language would be reasonably understood as conveying an intimation of the state of his belief, without an assertion that the fact was so apart from the limitation of his own knowledge; and therefore that no relief here can be granted." (emphasis added) Canada and Dominion Sugar Co246 was to a similar effect albeit in a different context. It concerned a "received for shipment" bill of lading in respect of a quantity of sugar shipped on the respondent's steamship which stated that the sugar was received "in apparent good order and condition" but contained on the margin a stamped endorsement "[s]igned under guarantee to produce ship's clean receipt". In fact, the sugar had suffered damage before shipment and the ship's receipt stated "[m]any bags stained, torn and resewn". The appellant, which was the indorsee of the bill of lading, sued the respondent, alleging that it was estopped by the bill of lading from denying that the sugar was shipped in good condition. The claim in estoppel failed, although once again not because of any lack of contractual certainty. To the contrary, as the Privy Council observed with reference to the passage of the judgment of Bowen LJ in Low v Bouverie247 which is set out above: "[a] question ... of estoppel must be decided on ordinary common law principles of construction and of what is reasonable, without fine distinctions or technicalities"248. The claim of estoppel failed because "the language of the bill of lading, read fairly, and as a whole"249 did not bear the meaning which the indorsee sought to attribute to it. As the Privy Council observed250, if the statement "[r]eceived in apparent good order and condition" at the head of the bill of lading had stood alone, the bill of lading would have been a "clean" bill of lading and in the relevant context that would have meant that there was no clause or notation modifying or qualifying the statement as to the condition of the goods. But, because the bill bore on its face the qualifying words "[s]igned under guarantee to produce ship's clean receipt", it would reasonably have conveyed to a businessman that the statement as to good order and condition could not be taken to be unqualified. 248 Canada and Dominion Sugar Co [1947] AC 46 at 55. 249 Canada and Dominion Sugar Co [1947] AC 46 at 55. 250 Canada and Dominion Sugar Co [1947] AC 46 at 54. Nettle Additionally, whatever degree of certainty might be necessary to found a promissory estoppel of the kind considered in Legione – and it is to be observed that, although the representation in that case was not certain, it was held by a majority to be sufficient to estop the vendor from rescinding – proprietary estoppels of the kinds exemplified in Dillwyn v Llewelyn251 and Ramsden v Dyson252 do not require any particular degree of objective certainty253; and proprietary estoppels of those kinds are a form of promissory estoppel254. As Lord Scott of Foscote (with whom Lord Hoffmann, Lord Brown of Eaton-under-Heywood and Lord Mance agreed) observed in Cobbe v Yeoman's Row Management Ltd, proprietary estoppel is a sub-species of promissory estoppel255: "The estoppel becomes a 'proprietary' estoppel – a sub-species of a 'promissory' estoppel – if the right claimed is a proprietary right, usually a right to or over land but, in principle, equally available in relation to chattels or choses in action." Arguably, the present was a case of proprietary estoppel, because what was alleged was in effect that the tenants had acted to their detriment in carrying out the refurbishment works to a high standard on the faith of an assurance that, if they did so, they would be granted a further term. But, in any event, as Brennan J observed in Waltons Stores (Interstate) Ltd v Maher256, unless cases of proprietary estoppel are to be attributed to a different equity from that which explains non-proprietary promissory estoppel, "[i]t does not accord with principle to hold that equity, in seeking to avoid detriment occasioned by unconscionable conduct, can give relief in some cases but not in others"257. And, although his 251 (1862) 4 De G F & J 517 [45 ER 1285]. 252 (1866) LR 1 HL 129. 253 See Plimmer v Mayor of Wellington (1884) 9 App Cas 699; Austotel Pty Ltd v Franklins Selfserve Pty Ltd (1989) 16 NSWLR 582 at 604 per Priestley JA; Giumelli (1999) 196 CLR 101 at 121-122 [35] per Gleeson CJ, McHugh, Gummow and Callinan JJ; Flinn [1999] 3 VR 712 at 738-744 [80]-[95] per Brooking JA (Charles JA agreeing at 754 [134], Batt JA agreeing at 754 [135]). 254 Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387 at 424 per Brennan J; [1988] HCA 7. 255 [2008] 1 WLR 1752 at 1761 [14]; [2008] 4 All ER 713 at 724. 256 (1988) 164 CLR 387. 257 (1988) 164 CLR 387 at 426. Nettle Honour was there speaking of whether promissory estoppel can apply in cases in which there is no pre-existing legal relationship between the parties, the logic of the proposition applies equally to the degree of certainty required in each case. The foundational principle on which equitable estoppel in all its forms is grounded is that equity will not permit an unjust or unconscionable departure by a party from an assumption or expectation of fact or law, present or future, which that party has caused another party to adopt for the purpose of their legal relations258. Consequently, the notion that there is or should be some a priori distinction between the degree of objective certainty required to found a promissory estoppel compared to a proprietary estoppel runs counter to principle. The idea of "one overarching doctrine of estoppel rather than a series of independent rules"259 may not yet have "won general acceptance"260. But, in as much as the recognised categories of equitable estoppel are instances of the operation of the more general foundational principle, the determination of 258 Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674 per Dixon J (McTiernan J agreeing at 682); [1937] HCA 58; Moorgate Mercantile Co Ltd v Twitchings [1976] QB 225 at 241-242 per Lord Denning MR; Verwayen (1990) 170 CLR 394 at 438, 445 per Deane J. 259 Verwayen (1990) 170 CLR 394 at 410-411 per Mason CJ; see also at 443-446 per 260 First National Bank Plc v Thompson [1996] Ch 231 at 236 per Millett LJ. See, eg, Giumelli (1999) 196 CLR 101 at 112-113 [7] per Gleeson CJ, McHugh, Gummow and Callinan JJ; Gillett v Holt [2001] Ch 210 at 225-226 per Robert Walker LJ (Waller and Beldam LJJ agreeing at 238); Johnson v Gore Wood & Co [2002] 2 AC 1 at 40-41 per Lord Goff of Chieveley; Baird Textiles Holdings Ltd v Marks & Spencer plc [2002] 1 All ER (Comm) 737 at 751-752 [38]-[39] per Sir Andrew Morritt V-C, 754-755 [53]-[56] per Judge LJ, 765-766 [95]-[99] per Mance LJ; Cobbe [2008] 1 WLR 1752 at 1788 [92] per Lord Walker of Gestingthorpe (Lord Brown of Eaton-under-Heywood agreeing at 1789 [94]); cf at 1761 [14], 1762 [16] per Lord Scott of Foscote (Lord Hoffmann agreeing at 1754 [1], Lord Brown agreeing at 1789 [94], Lord Mance agreeing at 1789 [95]); [2008] 4 All ER 713 at 718, 724, 725, 750, 751; Thorner v Major [2009] 1 WLR 776 [67] per Lord Walker of Gestingthorpe; [2009] 3 All ER 945 at 967; Fisher v Brooker [2009] 1 WLR 1764 at 1780 [63] per Lord Neuberger of Abbotsbury (Lord Hope of Craighead agreeing at 1766 [1], Lord Walker of Gestingthorpe agreeing at 1769 [10], Baroness Hale of Richmond agreeing at 1771 [20], Lord Mance agreeing at 1773 [28]); [2009] 4 All ER 789 at 792, 794, 796, 798, 805; DHJPM Pty Ltd v Blackthorn Resources Ltd (2011) 83 NSWLR 728 at 739 [44] per Meagher JA (Macfarlan JA agreeing at Nettle whether it is unconscionable for the charged party to depart from an assumption or expectation created in the mind of the claimant must always depend on the particular facts and circumstances of the case. The recognised applications of established categories of promissory estoppel are not necessarily exhaustive of the cases in which equity will intervene261 and, even if they were, it would not follow that because it has been found in the context of one relationship that a designated level of certainty was required, the same degree of certainty would be necessary in the context of a different relationship or in different circumstances. Finally on this aspect of the matter, as Warren CJ emphasised, since the object of equitable estoppel in all its forms is to prevent the detriment which a representee would suffer if the representor were unjustly or unconscionably to depart from the assumption or expectation created in the mind of the representee, relief should be accorded only to the extent of the minimum content of the assumed state of affairs from which it would be unjust or unconscionable for the representor to depart262. Frequently, that may not extend to compelling the representor to fulfil the assumption or expectation as opposed to compensating the representee for the detriment suffered263. Hence, although an equivocal or objectively ambiguous representation would be incapable of forming a binding contract, it may yet found a promissory estoppel. The equivocal or objectively ambiguous nature of the representation is but one, albeit important, consideration in the determination of whether and to what extent the assumption or expectation is fairly and reasonably to be attributed to the representation and thus the measure of relief which is to be accorded264. Correspondence of the assumption or expectation with the representation Crown next contended that the claim in estoppel was bound to fail because of the disconformity between what VCAT found to be the objective meaning of the assurance and Mr Zampelis' subjective understanding of the meaning of the assurance. 261 Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982] QB 133 at 145-155; Amalgamated Investment & Property Co Ltd v Texas Commerce International Bank Ltd [1982] QB 84 at 103-104 per Robert Goff J, 122 per Lord Denning MR; Waltons Stores (1988) 164 CLR 387 at 420 per Brennan J; Verwayen (1990) 170 CLR 394 at 445 per Deane J; cf Baird Textiles [2002] 1 All ER (Comm) 737 at 751-752 [38]-[39] per Sir Andrew Morritt V-C, 754-755 [53]-[56] per Judge LJ, 765-766 [95]-[99] per Mance LJ. 262 Verwayen (1990) 170 CLR 394 at 439 per Deane J. 263 Verwayen (1990) 170 CLR 394 at 439. 264 Gillett [2001] Ch 210 at 225-226 per Robert Walker LJ. Nettle That contention cannot be accepted in the broad terms in which it was stated. It follows from what has already been said about contractual certainty that it was not necessarily inimical to the tenants' claim in estoppel that VCAT found that Crown's representation could not reasonably have been taken to mean more than that Crown would offer the tenants a further term of five years on such terms and conditions as Crown might choose in its discretion in accordance with cl 2.3 of the Leases. Certainly, as has been explained, before a party charged can be estopped by representation, the party charged must have played such a part in the adoption of the assumption or expectation on which the other party has acted to the latter's detriment that it would be unconscionable for the party charged to be left free to ignore that assumption or understanding265. But it does not follow that, because the claimant has made an assumption or reached an understanding of the meaning of the representation that goes beyond the meaning that could reasonably be attributed to it, the party charged is altogether free to ignore it266. Depending on the facts and circumstances of a given case, it may still appear that it would be unconscionable if the party charged were free to depart from the meaning that may reasonably be attributed to the representation. In cases of proprietary estoppel, the approach which has been taken is that, where the court is satisfied that the level of a claimant's assumption or expectation is genuinely derived from the subject representation but goes beyond what could reasonably be attributed to it, and it appears that it would be unjust or unconscionable if the party charged were free to depart from some lower level of assumption or expectation that may fairly and objectively be derived from the representation, relief may be limited accordingly267. As Robert Walker LJ observed in Jennings v Rice268, if a claimant's expectations are uncertain or extravagant or out of all proportion to the detriment suffered, the court can and should recognise that the claimant's equity is to be satisfied in another, generally 265 Grundt (1937) 59 CLR 641 at 674-675 per Dixon J (McTiernan J agreeing at 682); Legione (1983) 152 CLR 406 at 437 per Mason and Deane JJ. 266 See, eg, Fontana NV v Mautner (1979) 254 EG 199 at 203 per Balcombe J cited in Feltham, Hochberg and Leech, Spencer Bower: The Law Relating to Estoppel by Representation, 4th ed (2004) at 454. 267 Gillett [2001] Ch 210 at 225-226 per Robert Walker LJ; Jennings v Rice [2003] 1 P & CR 8 at 113 [47], 114 [50] per Robert Walker LJ (Aldous LJ agreeing at 112 [39], Mantell LJ agreeing at 112 [40]); Sullivan (2006) 13 BPR 24,755 at 24,757 [16] per Handley JA, 24,768 [85] per Hodgson JA (McColl JA agreeing at 268 [2003] 1 P & CR 8 at 114 [50]. Nettle more limited, way. For the reasons already expressed, the common principle which informs all species of equitable estoppel, including non-proprietary promissory estoppel, implies that the same approach should be taken in relation to cases of non-proprietary promissory estoppel. On that basis, Crown would be chargeable with such assumptions or expectations as might reasonably be attributed to the assurance in the circumstances which obtained. Whether it would be unjust or unconscionable for Crown to depart from that level of assumption or expectation would then depend on whether, if Mr Zampelis had taken the assurance to mean no more than that Crown would offer new leases on such terms and conditions as Crown might choose under cl 2.3, the tenants would have been induced by that more limited assumption or understanding the refurbishment works. the Leases and undertake to deliver If it were thus established that the tenants would have been induced by that more limited assumption or understanding to act as they did, and acting as they did caused them detriment, it might fairly be said that Crown had played such a part in the tenants' change of position to their detriment that it would be unconscionable for Crown to depart from the lesser assumption or expectation. By contrast, however, if the facts were that the tenants would not have been induced by that more limited assumption or expectation to act as they did, there would be nothing apparently unconscionable about Crown departing from that more limited assumption or expectation. The conduct of the case before VCAT As Crown contended, the tenants' case before VCAT was an all or nothing claim of collateral contract or, in the alternative, estoppel preventing the denial of the existence of a collateral contract, with damages for breach of the collateral contract calculated by reference to the profits which it was supposed would have been generated during the renewed term of the Leases. The tenants did not plead or contend or attempt to prove that, if they were not entitled to be put in the position in which they would have been if a further term of five years had been granted, they were entitled to some lesser scale of relief to be moulded according to what might reasonably be regarded as the meaning of the assurance. It follows, Crown submitted, that the tenants cannot now succeed to some lesser measure of relief computed on that basis. That contention should be accepted, and it is determinative of this appeal. Due to the way in which the tenants put and conducted their case before VCAT, VCAT did not make any findings as to whether the tenants would have been induced by a more limited reasonable assumption or understanding to act as they did. Nor did VCAT make any finding of detriment as such. It found that the tenants were induced by their assumption or expectation of the meaning of the assurance to deliver the Leases and to expend the funds necessary to complete Nettle the refurbishments. But there was no evidence or determination of how much of the costs of the refurbishments were not recovered out of profits generated during the five year terms of the Leases. As has been seen, there was evidence that, upon the expiration of the Leases and Crown's refusal to grant a further term, the value of the refurbishments in the tenants' books of account was written down immediately to nil, generating an accounting loss of close to $2 million. But there was no evidence of how much of that would have been recovered if a further term of five years had been granted. Perhaps it could have been contended that it was probable that depreciation during the second five year term would continue at the same rate as during the initial term. But that was not suggested or considered. Nor was it appropriate for the Court of Appeal to order that the matter be remitted to VCAT for further hearing in order to make up those deficiencies. The tenants chose not to advance a lesser case for relief when the matter was before VCAT, even as an alternative to the claim as it was put, and there is nothing in the way in which Crown conducted its defence which warrants that the tenants should now be given a second opportunity. There should be an end to litigation269. Having successfully resisted the tenants' claim in the way in which it was put, Crown should not now be vexed with what, in effect, would be a second proceeding. That would be wrong in principle270 and it would be unfair. Conclusion In the result, the appeal should be allowed with costs. Orders 2-6 of the Court of Appeal should be set aside. In lieu, it should be ordered that the appeal to the Court of Appeal be dismissed with costs. Special leave to cross-appeal should be granted but the cross-appeal should also be dismissed with costs. 269 Interest reipublicae ut sit finis litium: CDJ v VAJ (1998) 197 CLR 172 at 232 [186(4)] per Kirby J; [1998] HCA 67. See also Young v Keighly (1809) 16 Ves 348 at 351 [33 ER 1015 at 1016]. 270 Nemo debet bis vexari pro una et eadem causa: Jackson v Goldsmith (1950) 81 CLR 446 at 466 per Fullagar J; [1950] HCA 22. 229 GORDON J. The appellant ("Crown") provided draft leases with terms of five years to the respondents ("the Tenants") as prospective tenants. Clause 2.3 of the leases provided that "[a]t least 6 months, but no more than 12 months before the Expiry Date, [Crown] must give notice to the Tenant stating" whether – (a) Crown would renew the lease and on what terms, (b) Crown would allow the Tenant to occupy the premises on a monthly tenancy after the Expiry Date, or (c) Crown would require the Tenant to vacate the Premises by the Expiry Date. The Victorian Civil and Administrative Tribunal ("VCAT") found that Mr Zampelis, the controller of the Tenants, believed that the Tenants needed a term longer than five years to recover the costs of refurbishments required by the leases and to make a profit. Crown acknowledged internally that the refurbishments would require considerable capital expenditure and was aware that Mr Zampelis would "push for very long leases". VCAT found that, on a date that was probably 6 December 2005, a representative of Crown made a statement to Mr Zampelis to the following effect271: the leases that Crown required [the Tenants] to execute were expressed to be for five years because Crown wanted them to be aligned with other tenants' leases; (b) Mr Zampelis should spend money on refurbishment that would result in a high quality finish for the two restaurants; if Mr Zampelis did so he would be looked after when the time came for Crown to consider renewing the leases." (emphasis added) VCAT found that a reasonable person in the position of Mr Zampelis would have concluded that the statement that he would be looked after at renewal time was a promise that Crown "would fulfil its obligation under clause 2.3 to give a notice, within the time specified in clause 2.3, stating that it would renew the lease for a further five year term", on the terms specified in the notice272. The issue raised on appeal, and by an application for special leave to cross-appeal, was whether the statement made by Crown constituted a contract collateral to the leases, a representation that founded an estoppel, or neither. For the reasons that follow, the dealings between Crown and the Tenants created a contract collateral to the leases, and that collateral contract was breached. The estoppel issue is not reached. The appeal should be dismissed. 271 Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd [2012] VCAT 225 at [118]; see also at [84]. 272 Cosmopolitan [2012] VCAT 225 at [176]; see also at [135], [139]-[141]. Special leave to cross-appeal in relation to the existence of the collateral contract should be granted and the cross-appeal should be allowed. However, the Tenants should be ordered to pay Crown's costs of the appeal and the cross-appeal. As these reasons will explain, although there was a collateral contract which was breached, VCAT was asked to assess damages on an incorrect basis, and did so. It is not appropriate to remit the matter to allow the Tenants to make a wholly different damages case. Facts Crown owns the Melbourne Casino and Entertainment Complex. The complex includes several restaurants. Companies of which Mr Zampelis was a director operated two riverfront restaurants at the complex, each under a five-year lease from Crown. The leases expired in May 2005, with the companies holding over until September 2005. Negotiations for new leases started in late 2004. The two restaurants were to be operated by the Tenants. Mr Zampelis was provided with a draft lease for each Tenant. The starting date for each was 1 September 2005. The "Expiry Date" was 31 August 2010. Neither lease contained an option to renew but both contained a cl 2.3 that provided: "At least 6 months, but no more than 12 months before the Expiry Date, [Crown] must give notice to the Tenant stating whether: [Crown] will renew this Lease, and on what terms (this may include a requirement to refurbish the Premises or to move to different premises - see clauses 44 and 54); [Crown] will allow the Tenant to occupy the Premises on a monthly tenancy after the Expiry Date; or [Crown] will require the Tenant to vacate the Premises by the Clause 3.1 of each lease provided that "[i]f [Crown] gives the Tenant a notice under clause 2.3(a) and the Tenant wishes to renew this Lease, the Tenant must, within 60 days of that notice, give notice to [Crown] that the Tenant agrees to renew this Lease and accepts [Crown's] terms". Clause 85 of each lease, entitled "Major Refurbishment", provided that "[t]he Tenant must complete a Major Refurbishment of the Premises, at it's [sic] own cost and to the full satisfaction of [Crown], before 1st December 2005". "Major Refurbishment" was defined in each lease to mean "a complete removal of all existing fitout, fixtures, fittings, furnishings, plant and equipment from the Premises by the Tenant and replacement with a completely new fitout, inclusive of new fixtures, fittings, furnishings, plant and equipment, graphics and signage in accordance with the Tenant's refurbishment and redecoration concept for the Premises". In December 2009, Crown gave notice to the Tenants that it would not renew the leases. Collateral contract Applicable principles There may be a contract ("the collateral contract") for which the consideration is the making of some other contract ("the main contract")273. Each contract is complete. Each contract has an independent existence and legal effect. Like all contracts, the collateral contract alters the contractual relations of the parties, but it does not, cannot, and is not intended to, alter the terms of the main contract. The parties "shall have and be subject to all (not some only) of the respective benefits and burdens of the main contract"274. As Knox CJ explained in Hoyt's Pty Ltd v Spencer, a "distinct collateral agreement, whether oral or in writing, and whether prior to or contemporaneous with the main agreement, is valid and enforceable even though the main agreement be in writing, provided the two may consistently stand together so that the provisions of the main agreement remain in full force and effect notwithstanding the collateral agreement"275 (emphasis added). To similar effect, in a passage later quoted in Maybury v Atlantic Union Oil Co Ltd276, Isaacs J said in Hoyt's277: "The truth is that a collateral contract, which may be either antecedent or contemporaneous … being supplementary only to the main contract, cannot impinge on it, or alter its provisions or the rights created by it". (emphasis in bold added) 273 See Hoyt's Pty Ltd v Spencer (1919) 27 CLR 133 at 145-148; [1919] HCA 64. 274 Hoyt's (1919) 27 CLR 133 at 146 (emphasis in original). 275 (1919) 27 CLR 133 at 139. 276 (1953) 89 CLR 507 at 518; [1953] HCA 89. 277 (1919) 27 CLR 133 at 147. Some discontent has been expressed with what is often referred to as "the rule in Hoyt's v Spencer"278. The Tenants submitted that, if necessary, Hoyt's and Maybury should be reconsidered. However, as will become apparent, that question need not be addressed in this matter. For a statement to form the basis of a collateral contract, the statement must be "promissory and not merely representational"279. A statement will be promissory if it was "reasonably considered" by the person to whom it was made as "intended" to be a contractual promise280. It must also be shown that the person to whom the statement was made "intended" to accept the statement as a contractual promise281. The relevant "intention" of the parties is to be judged objectively, that is, "deduced from the totality of the evidence"282, by reference to what a reasonable person in the position of the parties would have understood283. And as with any contractual promise, the statement must be sufficiently certain284. As seen earlier, the consideration for the collateral contract may be the making of the main contract. Whether the making of the main contract was consideration for the collateral contract can be determined by considering whether the promisee relied upon the promissory statement in entering into the main contract285. 278 See, eg, Seddon, "A Plea for the Reform of the Rule in Hoyt's Pty Ltd v Spencer", (1978) 52 Australian Law Journal 372. 279 J J Savage & Sons Pty Ltd v Blakney (1970) 119 CLR 435 at 442; [1970] HCA 6; Ross v Allis-Chalmers Australia Pty Ltd (1980) 55 ALJR 8 at 10-11; 32 ALR 561 280 Hospital Products Ltd v United States Surgical Corporation (1984) 156 CLR 41 at 61; [1984] HCA 64. 281 Hospital Products (1984) 156 CLR 41 at 61. 282 Hospital Products (1984) 156 CLR 41 at 61 citing Heilbut, Symons & Co v Buckleton [1913] AC 30 at 51. 283 Hospital Products (1984) 156 CLR 41 at 61-62. 284 See, eg, Thorby v Goldberg (1964) 112 CLR 597 at 607; [1964] HCA 41; Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 at 436-437, 441; [1968] HCA 8. 285 See, eg, Savage (1970) 119 CLR 435 at 442; Ross (1980) 55 ALJR 8 at 11; 32 ALR 561 at 567. Importantly for this matter, as is clear from the explanation by Knox CJ in Hoyt's, a collateral contract may be oral or in writing. This case concerns the former possibility. Whether the parties have the requisite "intention" to create an oral contract286, and, if so, the terms of that oral contract287 and the interpretation of that oral contract288, are questions of fact. Of course, if there is only one construction open, a judge is bound to treat the construction as a matter of law289. Those propositions have a historical basis – juries were often illiterate and could not interpret written contracts, but could interpret oral contracts – as well as a practical basis because of the different evidence admissible in relation to oral and written contracts290. The matters of primary fact or inferences from primary fact may include what was said, how that was understood, what was intended by the maker of the statements and how the statements should reasonably have been understood291. That is not to say that there are not questions of law involved in this matter. The Hoyt's issue – whether the collateral contract may consistently stand together with the main contract – is one. The questions of whether the terms as interpreted are legally incomplete, in the sense that essential or critical terms are yet to be determined, or whether the terms as interpreted are illusory, are two others. 286 See Heilbut [1913] AC 30 at 43, 50-51; Couchman v Hill [1947] KB 554 at 558; cf Oscar Chess Ltd v Williams [1957] 1 WLR 370 at 375, 378; [1957] 1 All ER 287 Handbury v Nolan (1977) 13 ALR 339 at 341; Gardiner v Grigg (1938) 38 SR (NSW) 524 at 532, 537. 288 Deane v The City Bank of Sydney (1904) 2 CLR 198 at 209-210; [1904] HCA 44; Handbury (1977) 13 ALR 339 at 346, 348-349; Gardiner (1938) 38 SR (NSW) 524 at 537; Thorner v Major [2009] 1 WLR 776 at 794-795 [58], 800-801 [80]-[83]; [2009] 3 All ER 945 at 965, 970-971 citing Carmichael v National Power Plc [1999] 1 WLR 2042 at 2048-2051; [1999] 4 All ER 897 at 902-905. 289 See, eg, Deane (1904) 2 CLR 198 at 209; Handbury (1977) 13 ALR 339 at 346; Gardiner (1938) 38 SR (NSW) 524 at 537; Heilbut [1913] AC 30 at 36; Oscar Chess [1957] 1 WLR 370 at 375; [1957] 1 All ER 325 at 328. That was not the position in this case: see, eg, Cosmopolitan [2012] VCAT 225 at [71]-[85]. 290 Carmichael [1999] 1 WLR 2042 at 2048-2049; [1999] 4 All ER 897 at 902-903; Thorner [2009] 1 WLR 776 at 800-801 [83]; [2009] 3 All ER 945 at 971. 291 Thorner [2009] 1 WLR 776 at 800-801 [81]-[83]; [2009] 3 All ER 945 at 970-971. Issue and approach In light of the above principles, whether a collateral contract was formed may be addressed by asking four questions: (1) Was the statement promissory and sufficiently certain?; (2) Did Mr Zampelis rely upon the statement?; (3) Was the alleged collateral contract consistent with leases?; and the (4) Was the alleged collateral contract not illusory, but complete? The answer to each question is "Yes". The Tenants and Crown made a collateral contract, which Crown breached. Promissory and sufficiently certain? The statement made by Crown's representative to Mr Zampelis was promissory and sufficiently certain292. To explain why, it is first necessary to consider cl 2.3 of each lease. Clause 2.3 is directed primarily to when Crown was required to give notice of how it proposed to deal with its reversionary interest, as lessor, under the leases. A reversionary interest arises when the holder of an interest in land grants a lesser interest to a third party without disposing of his or her entire interest in the property293. The creation of Crown's reversionary interest as lessor was an essential part of the grant of each lease294. Those interests arose by operation of law, not express grant. As each lease had no option for the Tenant to renew, one aspect of Crown's reversionary interest was the right to offer and grant to the Tenant (or some third party) a lease that would commence after the determination of that Tenant's existing lease on such terms as Crown saw fit. Crown had that right throughout the term of each Tenant's lease, not only after the lease determined295. Clause 2.3 addressed the existence of Crown's reversionary interest, not by dealing directly with it, but by imposing a time period in which Crown was obliged to tell each Tenant how it proposed to exercise its rights about what would happen at the end of the lease. Crown had no greater rights under the 292 See [230] above. 293 See, eg, Wik Peoples v Queensland (1996) 187 CLR 1 at 91; [1996] HCA 40; Western Australia v Ward (2002) 213 CLR 1 at 216-217 [482]-[483], 222 [501]; [2002] HCA 28. 294 Commissioner of Taxes (Q) v Camphin (1937) 57 CLR 127 at 133; [1937] HCA 30. 295 See, eg, Fuller's Theatre and Vaudeville Co v Rofe [1923] AC 435 at 438; Green v Bowes-Lyon [1963] AC 420. leases than it had as a result of its reversionary interest by the operation of law. The requirements imposed by cl 2.3 had no legal effect except to fix a time period within which Crown was required to tell the Tenant how it proposed to exercise its rights. What, then, was the promise? As seen earlier, VCAT found that the statement made by Crown's representative was, in substance, a promise that Crown "would fulfil its obligation under clause 2.3 to give a notice, within the time specified in clause 2.3, stating that it would renew the lease for a further five year term", on the terms specified in the notice296. As that interpretation (including how the statement should reasonably have been understood) was a question of fact297, it was not open to challenge on appeal to the Supreme Court of Victoria, unless the finding was not open on the evidence298. That finding was open on the evidence. It was a promise to give to the Tenants, within the stipulated time period, notice of the terms on which Crown would "renew" the leases for five years. Consistent with the lease terms and Crown's reversionary interest, Crown could have required a move to different premises or stipulated that further refurbishment was required. The promise was not a promise to agree. It was not a promise to enter into a new lease. More particularly, it was not a promise to enter into a new lease on substantially similar terms. It was not an offer of a right of pre-emption. It was not a right of first refusal. It did not purport to impose future contracts on the parties. The promise was, in its terms and effect, a promise to make an offer "to renew" the leases for five years on terms of Crown's choosing299. Nothing more, nothing less. That was the finding of VCAT300. A provision to like effect was to be included in cl 2.3(a) of the leases. Such a promise does not become uncertain simply because it forms part of an oral collateral contract. And it does not become uncertain because, at the time 296 Cosmopolitan [2012] VCAT 225 at [176]; see also at [135], [139]-[141]. 297 See [245] above. 298 cf s 148 of the Victorian Civil and Administrative Tribunal Act 1998 (Vic). See also Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 79-80 [15]; [2001] HCA 49; Osland v Secretary to Department of Justice [No 2] (2010) 241 CLR 320 at 331-333 [18]-[20]; [2010] HCA 24. 299 cf Smith v Morgan [1971] 1 WLR 803 at 807; [1971] 2 All ER 1500 at 1503; Brown v Gould [1972] Ch 53 at 58-59. 300 Cosmopolitan [2012] VCAT 225 at [135], [139]-[141], [176]. that the promise is made, it is not known whether the offer, when it is made, will be acceptable to the Tenants when it is served on them. VCAT found that the statement by Crown's representative was a promise; a statement about what Crown would do in the future301. That VCAT found that the statement was a promise is unsurprising. That finding was supported by independent evidence from Mr Craig, formerly of the National Australia Bank, which VCAT accepted. Mr Craig's evidence was that, within one or two weeks of the 6 December 2005 meeting, he made a handwritten note of the meeting on a copy of the lease for one of the Tenants. The handwritten note stated302: "[W]hilst this is a 5 year term this is standard for Crown and aligns with other venues. Have however been with [Mr Zampelis] at several meetings when discussions have confirmed that further terms will be provided as they have in the past. David Boesley (Crown) was talking to [Mr Zampelis] one time and intimated that fit out should be high quality as this would reflect well and not to worry as he would be looked after at renewal time. So he should complete fit-out with this in mind and not scrimp on finishing to save a few dollars just because of the lease term. [Mr Zampelis] has also advised that he has had such conversation with Nick Williams and others so this should give bank comfort for longer term." (emphasis added) VCAT found that the roughly contemporaneous note was likely to be a more reliable account of the conversation than evidence given by one or more of the meeting participants some six years later. Indeed, Crown's representative, Mr Boesley, gave evidence before VCAT in which he acknowledged that the meeting probably occurred and that parts of the evidence given by Mr Craig (and another witness) were probably correct. What, then, of the complaint that the phrase "looked after at renewal time"303 was too vague? That complaint should be rejected. As VCAT found, the statement could not be looked at in isolation. It had to be considered in context – by looking at the statement as a whole, the history of the negotiations and the terms of the leases including, in particular, cl 2.3. The question for VCAT was how a reasonable person in the position of the parties with knowledge of those facts and matters would understand the statement. As seen earlier, VCAT found that a reasonable person would conclude that the promise meant that Crown "would fulfil its obligation under clause 2.3 to give a notice, 301 Cosmopolitan [2012] VCAT 225 at [133]. 302 Cosmopolitan [2012] VCAT 225 at [74]. 303 See [230] read with [255] above. within the time specified in clause 2.3, stating that it would renew the lease for a further five year term", on the terms specified in the notice304. That finding was well open on the evidence and is anything but surprising. Before the expiration of each lease, Crown would have three options305. Under cl 2.3 of each lease, only one of those options – cl 2.3(a) – could align with "looked after when the time came for Crown to consider renewing the leases". And the one option which could align – cl 2.3(a) – was, in substance, consistent with Mr Craig's handwritten note of what Mr Zampelis had been told by Crown. VCAT's analysis of the promissory nature and certainty of the statement was correct. Reliance The next question is whether Mr Zampelis relied upon the promise in entering into the leases. That required consideration of two issues: first, when the Tenants delivered the leases; and second, whether the Tenants delivered the leases in reliance on the promise. The timing of the delivery was important because it was common ground that the Tenants had executed the leases before the promise was made by Crown's representative to Mr Zampelis. However, that fact was not conclusive. The question was whether the leases had been delivered before the promise was made306. Whether there had been delivery, with the intention of being bound, was a question of fact307. VCAT found that the leases had not been delivered prior to the promise being made and that the Tenants evinced an intention to be bound by 304 Cosmopolitan [2012] VCAT 225 at [176]; see also at [135], [139]-[141]. 305 See [235] above. 306 See Xenos v Wickham (1867) LR 2 HL 296 at 312; Vincent v Premo Enterprises (Voucher Sales) Ltd [1969] 2 QB 609 at 619-620; Ansett Transport Industries (Operations) Pty Ltd v Comptroller of Stamps [1985] VR 70 at 77-78; Scook v Premier Building Solutions Pty Ltd (2003) 28 WAR 124 at 133 [25]; Segboer v A J Richardson Properties Pty Ltd (2012) 16 BPR 31,235 at 31,242-31,243 307 See Xenos (1867) LR 2 HL 296 at 309, 311; Ansett [1985] VR 70 at 78; Segboer (2012) 16 BPR 31,235 at 31,243 [59]. the leases when, but only when, the executed leases were handed over or "delivered" in March 2006308. So, did the Tenants deliver the leases in reliance on the promise? That was also a question of fact. VCAT found that the delivery was made to Crown in reliance on the promise309. VCAT recognised that different interpretations of the evidence were open and explained why the finding made was preferable. All of the above findings of fact were open on the evidence. The criticisms by the primary judge and the Court of Appeal of VCAT's approach to, and resolution of, the collateral contract question should not be accepted – they do not account for the factual nature of the relevant inquiries. Consistent with the leases The collateral contract was not inconsistent with, and did not impinge upon or alter, the rights under the leases. The collateral contract did not seek to impinge on, alter, or impair, the timing of the notice under cl 2.3. The collateral contract and each lease could "stand together"310. The collateral contract was additional to and stood outside the parties' rights and obligations under the leases. It was an agreement that the notice given, within the timing prescribed by cl 2.3, would be a notice which was directed to one of Crown's rights as a result of its reversionary interest, which existed independently of the leases, to offer to "renew" the leases for five years on the terms that Crown specified in the notice. In the context of these leases, that was an agreement which included the possibilities that under the offer the premises would alter or there would be a requirement to refurbish the premises. Not illusory but complete Contrary to the conclusions reached by the primary judge and the Court of Appeal, the collateral contract found by VCAT was not illusory311. As has been seen, it was an agreement to make an offer. Crown could fix the terms on which it would offer the new leases for five years. But Crown was under an obligation 308 Cosmopolitan [2012] VCAT 225 at [167]. 309 Cosmopolitan [2012] VCAT 225 at [168]. 310 Hoyt's (1919) 27 CLR 133 at 139. 311 See Crown Melbourne Ltd v Cosmopolitan Hotel (Vic) Pty Ltd [2013] VSC 614 at [72]-[73]; Cosmopolitan Hotel (Vic) Pty Ltd v Crown Melbourne Ltd (2014) 45 VR to make an offer of the kind promised. It could not refuse to make an offer at all312. Nor were the terms of the collateral contract incomplete. Essential or critical terms of the agreement were not "left to be settled by future agreement of the parties"313. The collateral contract would have been concluded had Crown made the offer it was obliged to make. That offer must contain all the essential terms necessary for it to be complete upon acceptance314. But that does not mean, if there is a contract to make an offer, that those terms must be settled in advance of the offer being made. By its nature, an offer only reflects the will of one of the parties. Had the offer been accepted by the Tenants, a new and independent contract – a lease – would have come into existence at that point. That is not the same as the essential terms of the collateral contract being settled by further agreement between the parties at a later point. Finally, the collateral contract – an agreement to make an offer, not a contract for the disposition of an interest in land – was not required to be evidenced in writing by s 126 of the Instruments Act 1958 (Vic). Other matters For the above reasons, VCAT correctly found that there was a collateral contract and correctly concluded that Crown breached that collateral contract when it failed, within the time specified in cl 2.3, to give the Tenants notice that it offered to "renew" the lease for a further five year term on the terms specified in the notice. The Tenants lost the benefit of such an offer. It was a loss of an opportunity315. The value (if any) of that offer was the proper basis for assessment of damages. That was not the approach adopted by VCAT. VCAT was asked to adopt, and adopted, what was described as an "agreed approach to assessment of damages" for breach of the collateral contract316. The damages were calculated by reference to the profits that would have been 312 See Thorby (1964) 112 CLR 597 at 613; cf Placer Development Ltd v The Commonwealth (1969) 121 CLR 353 at 357; [1969] HCA 29. 313 Thorby (1964) 112 CLR 597 at 607. 314 See Smith v Morgan [1971] 1 WLR 803 at 807; [1971] 2 All ER 1500 at 1503. 315 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332 at 349; [1994] HCA 4 citing The Commonwealth v Amann Aviation Pty Ltd (1991) 174 CLR 64 at 92, 102-104, 118-119; [1991] HCA 54. 316 Cosmopolitan [2012] VCAT 225 at [21]-[24]. generated during the term of renewed leases. The Tenants did not contend, or prove, that they were entitled to damages, even nominal damages, for loss of an opportunity or detriment317. Indeed, because of the agreed approach to the assessment of damages, VCAT did not make any findings relevant to assessing the value, if any, of the loss of an opportunity or make any finding of detriment. Further, the subsequent assessment of damages by VCAT was the subject of appeal before the primary judge but the relevant appeal grounds were not addressed by his Honour. VCAT's assessment of damages was not relevantly the subject of challenge in the Court of Appeal or in this Court. Having regard to the course taken in VCAT in relation to damages, it is not appropriate to remit the matter to VCAT to allow the Tenants to make a wholly different damages case. Nor is it necessary or appropriate to remit the matter to a single judge of the Supreme Court of Victoria to consider so much of the Tenants' application for leave to appeal to that Court as related to the damages issue. Estoppel Given the views formed in relation to the collateral contract claim, the estoppel claim does not arise for determination. Result and orders For those reasons, the appeal should be dismissed. The Tenants should be granted special leave to cross-appeal on the collateral contract issue, and the cross-appeal should be allowed. The Tenants should be ordered to pay Crown's costs of the appeal and the cross-appeal. Paragraphs 2, 3, 4, 5 and 6 of the Order of the Court of Appeal of the Supreme Court of Victoria of 8 April 2015 should be set aside and, in their place, order that the appeal be dismissed with costs. 317 cf Amann Aviation (1991) 174 CLR 64 at 119.
HIGH COURT OF AUSTRALIA THE STATE OF SOUTH AUSTRALIA APPELLANT AND SANDRO PETER TOTANI & ANOR RESPONDENTS South Australia v Totani [2010] HCA 39 11 November 2010 ORDER Grant of special leave expanded to include, within the orders appealed from, the order of Bleby J made on 28 September 2009. Proposed further amended notice of appeal treated as filed in the appeal. Appeal dismissed with costs. On appeal from the Supreme Court of South Australia Representation M G Hinton QC, Solicitor-General for the State of South Australia with G J Parker for the appellant (instructed by Crown Solicitor (South Australia)) B W Walker SC with S J Doyle for the respondents (instructed by Caldicott and Co Barristers and Solicitors) Interveners S J Gageler SC, Solicitor-General of the Commonwealth with A M Dinelli intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) R J Meadows QC, Solicitor-General for the State of Western Australia and R M Mitchell SC intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor (WA)) M G Sexton SC, Solicitor-General for the State of New South Wales with J G Renwick intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor (NSW)) at the hearing on 20 and 21 April 2010 J G Renwick intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor (NSW)) at the hearing on 17 June P M Tate SC, Solicitor-General for the State of Victoria with K L Walker intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor) the State of Queensland with W Sofronoff QC, Solicitor-General of G J D del Villar and A D Keyes intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Solicitor (Qld)) at the hearing on 20 and 21 April 2010 P J Davis SC with G J D del Villar and A D Keyes intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Solicitor (Qld)) at the hearing on 17 June 2010 M P Grant QC, Solicitor-General for the Northern Territory with S L Brownhill intervening on behalf of the Attorney-General for the Northern Territory (instructed by Solicitor for the Northern Territory) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS South Australia v Totani Constitutional law (Cth) – Judicial power of Commonwealth – Constitution, Ch III – Vesting of federal jurisdiction in State courts – Serious and Organised Crime (Control) Act 2008 (SA) ("Act") – Section 10(1) of Act permits Attorney- General to make declaration in respect of organisation, if satisfied members associate for purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, and organisation represents risk to public safety and order – Section 14(1) of Act provides Magistrates Court of South Australia ("Court") must, on application by Commissioner of Police, make control order (contravention of which is a crime) imposing restrictions on freedom of association of defendant if satisfied defendant is member of declared organisation under s 10(1) – Section 35(1) of Act creates offence of associating with member of declared organisation or person the subject of control order on not less than six occasions during 12 month period – Whether making control order requires determination by Court of what defendant has done or may do, or any determination of criminal guilt – Effect of Attorney-General's declaration on adjudicative process – Whether Court enlisted to implement legislative and executive policy – Whether task given to Court repugnant to, or incompatible with, institutional integrity. Words and phrases – "control order", "institutional integrity", "judicial power", "member of declared organisation", "serious criminal activity". Constitution, Ch III. Serious and Organised Crime (Control) Act 2008 (SA), ss 10(1), 14(1), 17, 19, Introduction Courts and independently of judges decide cases the executive government. That is part of Australia's common law heritage, which is antecedent to the Constitution and supplies principles for its interpretation and operation1. Judicial independence is an assumption which underlies Ch III of the Constitution, concerning the Commonwealth. It is an assumption which long predates Federation. Sir Francis Forbes, the first Chief Justice of New South Wales, stated the principle in uncompromising terms in 1827 in a letter to the Under-Secretary of State for War judicial power of the exercise of the "His Majesty may remove the judges here, and so may the two Houses of Parliament at home; but the judicial office itself stands uncontrolled and independent, and bowing to no power but the supremacy of the law." It is a requirement of the Constitution that judicial independence be maintained in reality and appearance for the courts created by the Commonwealth and for the courts of the States and Territories3. Observance of that requirement is never more important than when decisions affecting personal liberty and liability to criminal penalties are to be made. Its application is in issue in this appeal, which concerns the validity of a provision of the Serious and Organised Crime (Control) Act 2008 (SA) ("the SOCC Act"). The objects of the SOCC Act include the disruption and restriction of the activities of organisations involved in serious crime and of the activities of their members and associates and the protection of the public from violence associated with such organisations4. The Attorney-General for the State of South Australia is given power by s 10 of the SOCC Act to make a declaration in respect of an organisation on the 1 Dixon, "Marshall and the Australian Constitution", (1955) 29 Australian Law Journal 420 at 424-425. 2 Bennett (ed), Some Papers of Sir Francis Forbes, (1998) 134 at 143. 3 North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 at 163 [29] per McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ; [2004] HCA 31; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 552-553 [10] per Gummow, Hayne, Heydon and Kiefel JJ; [2008] HCA 4; Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 363 [81] per Gaudron J; [2000] HCA 63. 4 SOCC Act, s 4(1), the text of which appears in the judgment of Hayne J at [160]. basis that its members are involved in "serious criminal activity"5 and that it represents a risk to public safety and order in South Australia. Such a declaration is administrative in character. It has no text or content but does have legal consequences. One of the legal consequences of a declaration is to be found in s 14(1) of the SOCC Act, which imposes on the Magistrates Court of South Australia an obligation, on application by the Commissioner of Police ("the Commissioner"), to make a control order against a member of a declared organisation. Such an order places, and results in, restrictions upon the freedom of association and communication of the person to whom it applies and others who might wish to associate or communicate with him or her. The Full Court of the Supreme Court of South Australia, by majority, held the sub-section, and a control order made under it, to be invalid6. The decision of the Full Court was correct. Section 14(1) requires the Magistrates Court to make a decision largely pre-ordained by an executive declaration for which no reasons need be given, the merits of which cannot be questioned in that Court and which is based on executive determinations of criminal conduct committed by persons who may not be before the Court. The SOCC Act thereby requires the Magistrates Court to carry out a function which is inconsistent with fundamental assumptions, upon which Ch III of the Constitution is based, about the rule of law and the independence of courts and judges. In that sense it distorts that institutional integrity which is guaranteed for all State courts by Ch III of the Constitution so that they may take their place in the integrated national judicial system of which they are part. This appeal, by the State of South Australia against the decision of the Full Court, should be dismissed with costs. Procedural history On 14 May 2009, the Attorney-General for South Australia published in the South Australian Government Gazette ("the Gazette") a declaration pursuant to s 10 of the SOCC Act. The declaration was "about the Finks Motorcycle Club operating in South Australia (including but not limited to: the Finks MC, Finks M.C. Incorporated, Finks M.C. INC and the Finks)" ("the Club"). On 25 May and 4 June 2009, the Commissioner applied to the Magistrates Court (Civil Division) in Adelaide under s 14 of the SOCC Act for control orders 5 A defined term: see n 10 below. 6 Totani v South Australia (2009) 105 SASR 244. against Donald Brian Hudson and Sandro Totani, alleging each was a member of a declared organisation, namely the Club. On 25 May 2009, the Magistrates Court made a control order against Mr Hudson prohibiting him, inter alia, from "[a]ssociating with other persons who are members of declared organisations" and from "[p]ossessing a dangerous article or a prohibited weapon (within the meaning of section 15 of the Summary Offences Act 1953)". The prohibition was subject to an exception relating to political party meetings which is not material for present purposes. The order contained a statement that the ground upon which it had been issued was that: "The defendant is a member of a declared organisation, namely the Finks Motorcycle Club operating in South Australia (including but not limited to: the Finks MC, Finks M.C. Incorporated, Finks M.C. INC and the Finks)."7 No control order has yet been made against Mr Totani. On 26 May 2009, Messrs Hudson and Totani commenced their proceedings in the Supreme Court of South Australia. On 3 June 2009, Mr Hudson filed, in the Magistrates Court, a notice of objection under s 17 of the SOCC Act seeking an order, inter alia, that the control order be revoked as unconstitutional. On 3 July 2009, Bleby J in the Supreme Court proceedings reserved four questions for consideration by the Full Court. The questions and the answers, delivered by majority judgment of the Full Court (Bleby and Kelly JJ, White J dissenting) on 25 September 2009, are set out in the judgment of Hayne J8. The effect of the answers was that the Full Court found s 14(1) not to be a valid law of the State of South Australia and the control order in respect of Mr Hudson to be "void and of no effect". The Full Court ordered that the costs of the reference be costs in the cause. On the same day that the Full Court delivered its judgment, the Magistrates Court, in light of the judgment, made an order revoking the control order it had made against Mr Hudson. This rather anticipated the finalisation of the Supreme Court proceedings by Bleby J. On 28 September 2009, Bleby J made declarations as to the invalidity of s 14(1) and of the control order against Mr Hudson and ordered that the State pay his and Mr Totani's costs of the action. 7 This statement was said to exclude information classified by the Commissioner as criminal intelligence. Judgment of Hayne J at [155]. On 12 February 2010, special leave was granted to the State of South Australia to appeal to this Court from the whole of the judgment and order of the Full Court given and made on 25 September 2009. SOCC Act The Commissioner may apply to the Attorney-General, under s 8 of the SOCC Act, for a declaration under Pt 2 in relation to an organisation9. Section 10(1) empowers the Attorney-General, on the application of the Commissioner, to make such a declaration if the Attorney-General is satisfied that: "(a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity[10]; and the organisation represents a risk to public safety and order in this State". It is sufficient for the purposes of s 10(1) that the Attorney-General be satisfied that the members of an organisation who are associating for purposes related to serious criminal activity constitute a significant group within the organisation numerically or in terms of their influence11. Such purposes need not be the only purposes for which members of the organisation associate12. 9 An "organisation" is defined in s 3 as "any incorporated body or unincorporated group (however structured), whether or not the body or group is based outside South Australia, consists of persons who are not ordinarily resident in South Australia or is part of a larger organisation". 10 The term "serious criminal activity" is defined in s 3 as "the commission of serious criminal offences". Such offences are defined in s 3 as "indictable offences (other than indictable offences of a kind prescribed by regulation)" or "summary offences of a kind prescribed by regulation". Regulation 4 of the Serious and Organised Crime (Control) Regulations 2008 (SA) prescribes offences under the Controlled Substances Act 1984 (SA); the Criminal Law Consolidation Act 1935 (SA); the Explosives Act 1936 (SA); the Firearms Act 1977 (SA); the Lottery and Gaming Act 1936 (SA); the Summary Offences Act 1953 (SA); the Explosives Regulations 1996 (SA); and the Explosives (Fireworks) Regulations 2001 (SA). 11 SOCC Act, s 10(4)(a). 12 SOCC Act, s 10(4)(c). Matters to which the Attorney-General may have regard in considering whether or not to make a declaration include information suggesting that a link exists between the organisation and serious criminal activity. He may also have regard to the criminal convictions of its current or former members and of persons who associate or have associated with its members13. Submissions received from members of the public14 and any other matter the Attorney-General considers relevant may be taken into account15. If the Attorney-General is provided with information classified by the Commissioner as "criminal intelligence", it may not be disclosed to any person except to a person conducting a review of the operation of the Act under Pt 6 or a person to whom the Commissioner authorises its disclosure16. In answer to questions from this Court, the State of South Australia accepted that, before making a declaration, the Attorney-General would have to be satisfied that a significant group of members of the organisation had committed or conspired to commit one or more indictable offences or prescribed summary offences or committed accessorial offences. In the alternative, it acknowledged the practical reality that almost invariably the Attorney-General would have to be satisfied that a member or members of the organisation had committed one or more identified crimes. The Attorney-General is not required to provide any grounds or reasons for making a declaration other than to a person conducting a review under Pt 6 if A declaration has an immediate legal effect upon members of the public and members of the declared organisation. Section 35 makes it an offence for a person to associate, on not less than six occasions during a period of 12 months, with a person who is a member of a declared organisation18. A maximum penalty of imprisonment for five years is imposed for the offence19. The verb "associate" 13 SOCC Act, s 10(3)(a) and (b). 14 The Attorney-General is required by s 9(b) to invite submissions from members of the public in relation to the application. 15 SOCC Act, s 10(3)(e) and (f). 16 SOCC Act, s 13(2). 17 SOCC Act, s 13(1). 18 SOCC Act, s 35(1)(a). 19 SOCC Act, s 35(1). is widely defined in s 35(11)(a) to include "communicating … by letter, telephone or facsimile or by email or other electronic means". Importantly, the offence provision also applies in relation to association with a person the subject of a control order20. The generality of the provision means that it also applies to association between members of a declared organisation. Certain classes of association are to be disregarded for the purposes of s 35 unless the prosecution proves that the association was not reasonable in the circumstances21. These include associations between close family members22. Part 3 of the Act provides for control orders to be made by the Magistrates Court of South Australia23. The critical provision of Pt 3 is s 14, which provides in sub-s (1): "The Court must, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that the defendant is a member of a declared organisation." The grounds of an application under s 14(1) must be verified by affidavit24. In such an application the affidavit need not establish more than the existence of a declaration about an organisation and the defendant's membership of that organisation. As appears below, the statutory concept of membership is very broad. Section 14(2) provides for discretionary control orders to be made in circumstances other than those covered by s 14(1)25. Section 14(5)(b) defines the minimum content of a control order against a member of a declared organisation. It requires that, except as specified in the control order, the Court must prohibit him or her from associating with other persons who are members of declared organisations and from possessing a 20 SOCC Act, s 35(1)(b). 21 SOCC Act, s 35(6). 22 SOCC Act, s 35(6)(a) and (11)(b). A "close family member" is defined to include a spouse or a former spouse, a person who is or has been in a "close personal relationship" (as defined in s 11 of the Family Relationships Act 1975 (SA)), a parent or a grandparent, a brother or a sister and a guardian or a carer. 23 The relevant provisions of Pt 3 refer to "the Court", which is defined in s 3 as the Magistrates Court of South Australia. 24 SOCC Act, s 14(4). 25 The text of s 14(2) appears in the judgment of Crennan and Bell JJ at [404]. dangerous article or a prohibited weapon26. In addition, pursuant to s 14(5)(a), the control order may prohibit the defendant from associating or communicating with specified persons or persons of a specified class or from entering or being in the vicinity of specified premises or premises of a specified class. I agree with Hayne J27 that the Court's power to make exceptions to the minimum content of a control order required by s 14(5)(b) could not be used to make a control order without content. I agree also with Kiefel J that the discretion conferred on the Court does not significantly enlarge its function under s 14(1) and s 14(5)(b)28. The making of a control order enlivens the prohibition in s 35 against others associating with the defendant29. That prohibition is congruent with the prohibition which applies because the defendant is a member of a declared organisation30. Under s 22, it is also an offence, punishable by a term of imprisonment not exceeding five years, to contravene or fail to comply with a control order. In s 6 of the Act it is said to be "the intention of the Parliament that this Act apply within the State and outside the State to the full extent of the extra- territorial legislative capacity of the Parliament". While the effect of this provision was not explored on the hearing of the appeal, it indicates a legislative intention that the offence provisions, including s 35, should apply to persons anywhere in Australia communicating or associating with a member of a declared organisation or with a person the subject of a control order31. 26 Within the meaning of s 15 of the Summary Offences Act 1953 (SA). The text of s 14(5)(b) appears in the judgment of Hayne J at [171]. 27 Judgment of Hayne J at [172]. 28 Judgment of Kiefel J at [459]. 29 SOCC Act, s 35(1)(b). 30 SOCC Act, s 35(1)(a). 31 As to extraterritorial legislative competence of State Parliaments see APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 354 [40] per Gleeson CJ and Heydon J, 388-389 [154]-[159] per Gummow J (Hayne J agreeing at 449 [375]), 482-483 [465]-[466] per Callinan J; [2005] HCA 44; Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 22-26 [7]-[16] per Gleeson CJ; [2002] HCA 27; and see generally Carney, The Constitutional Systems of the Australian States and Territories, (2006), Ch 7; Twomey, The Constitution of New South Wales, (2004) at 53-56. A control order may be issued on an application made without notice to any person32. The State of South Australia correctly disclaimed any suggestion that the Magistrates Court was obliged to hear such an application without notice to the affected party. In the making and application of a control order the concept of membership of an organisation has particular significance. The definition of "member" in s 3 of the SOCC Act is non-exhaustive33. It includes "an associate member or prospective member"34, "a person who identifies himself or herself, in some way, as belonging to the organisation"35 and "a person who is treated by the organisation or persons who belong to the organisation, in some way, as if he or she belongs to the organisation"36. The obligation imposed upon the Magistrates Court to make a control order is not conditional upon proof of any involvement by the defendant in any criminal conduct. Nor is the Court's obligation conditional upon proof of any past or prospective association between the defendant and any person who has engaged in criminal conduct. It is not necessary that the defendant regards himself or herself as a member of the declared organisation so long as the organisation treats him or her as a member. Section 14(6) specifies matters to which the Court must have regard in considering the prohibitions that may be included in a control order under s 14(1)37. Section 14(7) confers power to make consequential or ancillary orders. The verb "associate" is defined non-exhaustively in s 14(8): "For the purposes of this section, a person may associate with another person by any means including communicating with that person by letter, telephone or facsimile or by email or other electronic means." 32 SOCC Act, s 14(3). 33 The full definition appears in the judgment of Hayne J at [161]. 34 SOCC Act, s 3 (definition of "member", par (b)(i)). 35 SOCC Act, s 3 (definition of "member", par (b)(ii)). 36 SOCC Act, s 3 (definition of "member", par (b)(iii)). 37 The full text of s 14(6) appears in the judgment of Kiefel J at [455]. A person served with a control order38 may lodge a notice of objection with the Magistrates Court39. The Magistrates Court must consider whether, in the light of the evidence presented by both the Commissioner and the objector, "sufficient grounds existed for the making of the control order"40. It may confirm, vary or revoke the control order41. It may specify, subject to such conditions as it thinks fit, that the defendant is not prohibited from associating with a particular member or members of a declared organisation42. In their application to a control order against a member of a declared organisation, the words "sufficient grounds" suggest a wider basis for objection than actually exists. In such a case the debate at the objection hearing is likely to be confined to those aspects of the control order which are in the discretion of the Court under s 14. The Commissioner or an objector may appeal to the Supreme Court against a decision of the Magistrates Court on a notice of objection43. Such an appeal lies as of right on a question of law and with permission on a question of fact44. There is a wide-ranging privative provision, s 41. Section 41(1) precludes proceedings for judicial review, declaratory or injunctive relief, writs, orders or other remedies in respect of various things done under, or purportedly done under, the SOCC Act including decisions and declarations. As the State of South Australia accepted, the application of s 41(1) to decisions or declarations "purportedly" under the Act must be read in light of what was said in Kirk v Industrial Court (NSW)45. State legislative power does not extend to depriving a State Supreme Court of its supervisory jurisdiction in respect of jurisdictional error by the executive government of the State, its Ministers or authorities46. It may be accepted, therefore, that s 41(1) would not prevent review for jurisdictional error of the Attorney-General's decision to declare an organisation. 38 The control order is not binding until served in one of the ways specified in s 16: see s 16(4). 39 SOCC Act, s 17. 40 SOCC Act, s 18(1). 41 SOCC Act, s 18(2). 42 SOCC Act, s 18(3). 43 SOCC Act, s 19(1). 44 SOCC Act, s 19(2). 45 (2010) 239 CLR 531; [2010] HCA 1. 46 Kirk (2010) 239 CLR 531 at 581 [99]-[100]. Section 41(2) precludes a challenge in any proceedings to the "validity and legality of a declaration under Part 2". The State of South Australia submitted that this sub-section would not preclude collateral challenge, in proceedings for a control order, to the declaration upon which the application for the control order was based. A challenge to the validity of the declaration would lie, it was said, because an invalid declaration would not have been made "under Part 2". Accepting that self-serving concession, the practical scope of challenge to the declaration would be limited. It would be limited because the Commissioner, in applying for a control order, has to do no more to prove the declaration than to produce the relevant entry in the Gazette. The Attorney- General in making the declaration is under no obligation to give reasons, although in this case he chose to do so. Short of what might be characterised as a "fishing" subpoena, the materials on which the declaration was based would not be before the Magistrates Court. To the extent that they included information classified by the Commissioner as "criminal intelligence", access to them would be constrained by the provisions of s 21 of the SOCC Act47. I agree also with the observations of Gummow and Hayne JJ in relation to the availability of judicial review of declarations made under s 1048. The limited and difficult avenues for challenge to the making of the declaration do not materially alter the nature of the conditions which enliven the obligation to make a control order imposed on the Magistrates Court by s 14(1). The dominance of the executive declaration in the outcome of a control order application is what was intended by the proponents of the SOCC Act and is what, subject to its validity, it achieved. Historical and contemporary analogues The Attorney-General in his Second Reading Speech stated the general effect of the SOCC Act when he said49: "This legislation grants unprecedented powers to the police and the Attorney-General to combat serious and organised crime." 47 The text of s 21 appears in the judgment of Hayne J at n 288. 48 Judgments of Gummow J at [128] and Hayne J at [193]-[195]. 49 South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1806. The SOCC Act, in effect, empowers the executive government to restrict the exercise of the common law freedoms of expression and assembly50 by members of declared organisations, persons the subject of control orders and members of the public who might wish to communicate or meet with them. It authorises the imposition of restrictions regardless of whether the persons affected by them have ever engaged in, or are ever likely to engage in, criminal conduct of any kind or have actively associated with, or are likely to associate with, persons who have engaged or might at some time in the future engage in criminal conduct51. The effect of the SOCC Act on personal freedoms was a matter for consideration by the South Australian Parliament which enacted it. Its merit as a legislative measure is not a matter for this Court to judge52. Applying the "principle of legality", courts will, of course, construe statutes, where constructional choices are open, so as to minimise their impact upon common law rights and freedoms53. That principle, well known to the drafters of legislation, seeks to give effect to the presumed intention of the enacting Parliament not to interfere with such rights and freedoms except by clear and 50 See R (Laporte) v Chief Constable of Gloucestershire Constabulary [2007] 2 AC 105 at 126-127 [34] per Lord Bingham of Cornhill; Evans v New South Wales (2008) 168 FCR 576 at 594-596 [72]-[77]; Fellman, The Constitutional Right of Association, (1963) at 87-101; Keith, Constitutional Law, 7th ed (1939) at 454- 456; Jarrett and Mund, "The Right of Assembly", (1931) 9 New York University Law Quarterly Review 1 at 2-10; Jennings, "Current Comment – The Right of Assembly in England", (1931) 9 New York University Law Quarterly Review 217 at 51 Such matters may be relevant and taken into account by the Commissioner in the exercise of the discretion to seek a control order and in the exercise by the Court of its discretion to specify exceptions to the minimum conditions of the order pursuant to s 14(5)(b). 52 A restraint applicable to this Court and to all courts: Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 126 per Rich J; [1925] HCA 53, citing Vacher & Sons Ltd v London Society of Compositors [1913] AC 107 at 118 per Lord Macnaghten. 53 Bropho v Western Australia (1990) 171 CLR 1 at 17-18 per Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ; [1990] HCA 24; Coco v The Queen (1994) 179 CLR 427 at 436-437 per Mason CJ, Brennan, Gaudron and McHugh JJ; [1994] HCA 15; Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309 at 329 [21] per Gleeson CJ; [2004] HCA 40; K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 520 [47] per French CJ; [2009] HCA 4. unequivocal language for which the Parliament may be accountable to the electorate. Save to the extent that it imposes something approaching a formal requirement of clear statutory language, the principle of legality does not constrain legislative power. Whether, beyond that imposition, State legislative power is constrained by rights deeply rooted in the democratic system of government and the common law54 was a question referred to but not explored in Union Steamship Co of Australia Pty Ltd v King55. Whatever the answer to the unexplored question, it is self-evidently beyond the power of the courts to maintain unimpaired common the Commonwealth Parliament or a State Parliament, acting within its constitutional powers, has, by clear statutory language, abrogated, restricted or qualified56. That having been said, a constitutionally supported freedom of association has been suggested in dicta in this Court as an incident of the implied freedom of political communication57. That suggestion may draw some support from the historical connection between freedom of association and the right to petition Parliament law freedoms which 54 See the cautionary discussion in Zines, The High Court and the Constitution, 5th ed (2008) at 592-595 and dicta in Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 687 per Toohey J; [1991] HCA 32; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 69 per Deane and Toohey JJ; [1992] HCA 46. 55 (1988) 166 CLR 1 at 10; [1988] HCA 55. Without resolving the unexplored question, this Court held just-terms compensation for the acquisition of property by a State not to constitute such a right in Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399 at 410 [14] per Gaudron, McHugh, Gummow and Hayne JJ; [2001] HCA 7. 56 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 71-76 per Dawson J; [1996] HCA 24; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 590 [14] per Gleeson CJ; [2004] HCA 46. The rejection of common law constraints upon parliamentary supremacy in Pickin v British Railways Board [1974] AC 765 does not resolve the question for Australia whether there are fundamental common law rights and freedoms which inform constitutional constraints. 57 Kruger v The Commonwealth (1997) 190 CLR 1 at 91 per Toohey J, 116 per Gaudron J, 142 per McHugh J; [1997] HCA 27; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 234 [148] per Gummow and Hayne JJ; [2004] HCA 41; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 212 per Gaudron J, 231-232 per McHugh J; [1992] HCA 45; and see Gray, "Due process, natural justice, Kable and organisational control legislation", (2009) 20 Public Law Review 290 at 303-305. As to an implied freedom of association and the Kable doctrine, see Lindell, "The Australian Constitution: Growth, Adaptation and Conflict – Reflections About Some Major Cases and Events", (1999) 25 Monash University Law Review 257 at 278. under s 5 of the Bill of Rights58. No issue arose in this appeal concerning any implied constitutional freedom of association. Nor did any issue arise in relation to the interaction between s 92 of the Constitution and the restrictions on communication imposed by reason of the extended definition of "associate"59. On the other hand, the extent of the intrusions upon personal freedom effected by a control order is relevant to the characterisation of the duty imposed upon the Magistrates Court under s 14(1) of the Act and to whether, contrary to assumptions reflected in Ch III of the Constitution, s 14(1) removes or impairs that independence from the executive that is a defining characteristic of courts of law in Australia. The SOCC Act is not without historical analogues. It takes its place in a long history of laws concerned to prevent or impede criminal conduct by imposing restrictions on certain classes or groups of persons and on their freedom of association. Some such laws have been described generically as vagrancy and consorting laws. Vagrancy laws, which can be traced back to the 14th century in England, were concerned to identify inchoate criminality and prevent criminal conduct by the regulation of persons defined by such terms as "rogues", "vagabonds" and "sturdy beggars"60. A 19th-century consolidating statute, the Vagrancy Act 1824 (UK)61, was the model for vagrancy laws in Australia and New Zealand. 58 1 Wm & Mar Sess 2 c 2; see Handley, "Public Order, Petitioning and Freedom of Assembly", (1986) 7 Journal of Legal History 123 at 138-141. 59 SOCC Act, ss 14(8) and 35(11). See, eg, in relation to a State law restricting the influx of criminals, R v Smithers; Ex parte Benson (1912) 16 CLR 99; [1912] HCA 96. See also Gratwick v Johnson (1945) 70 CLR 1 at 12-15 per Latham CJ, 17 per Starke J, 19-20 per Dixon J; [1945] HCA 7; Buck v Bavone (1976) 135 CLR 110 at 136-137 per Murphy J; [1976] HCA 24; Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556 at 580-581 per Murphy J; [1986] HCA 60; Cole v Whitfield (1988) 165 CLR 360 at 393; [1988] HCA 18; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 81-83 per Deane and Toohey JJ; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 192-195 per Dawson J; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 307-308 per Mason CJ; [1994] HCA 44; AMS v AIF (1999) 199 CLR 160 at 179 [45] per Gleeson CJ, McHugh and Gummow JJ, 211-217 [152]-[165] per Kirby J, 248-249 [276]-[277] per Callinan J; [1999] HCA 26. 60 39 Eliz c 4 (1597); 13 Geo II c 24 (1740); 17 Geo II c 5 (1744). See Holdsworth, A History of English Law, 3rd ed (1945), vol 4 at 392-401. An abbreviated history of English vagrancy laws is provided by Scott LJ in Ledwith v Roberts [1937] 1 KB 61 5 Geo IV c 83. There have also been examples in the history of English law of statutes restricting freedom of association of persons or members of organisations deemed socially undesirable or thought to pose a threat to social order62. However, direct inspiration for consorting laws in the Australian States came from the Police Offences Amendment Act 1901 (NZ), which created the offence of habitually consorting with reputed thieves, prostitutes or persons without visible means of support63. The offence was described by Mason J in Johanson v Dixon64 as "an Australasian contribution to the criminal law". South Australia, in 1928, was the first Australian jurisdiction to introduce an habitual consorting offence that depended upon the idea of guilt by association65. The other States for the most part followed suit over the next decade66. In each of the States, when consorting laws were enacted they were justified as a mechanism for the reduction of crime and for dealing with criminal gangs67. Concerns that they 62 An early example was Statute 5 Eliz c 20 (1562), which punished those found in the company of gypsies. The Public Order Act 1936 (UK) prohibited the wearing of political uniforms and the formation of quasi-military organisations. It was directed at Sir Oswald Mosley and the British Union of Fascists: see "Public Order and the Right of Assembly in England and the United States: A Comparative Study", (1938) 47 Yale Law Journal 404 at 404-406. See also the examples given by Hayne J at [235]. 63 Elements of vagrancy laws in the United Kingdom and the Australian colonies and States foreshadowed consorting laws by prohibiting keepers of public houses from allowing common prostitutes and reputed thieves to assemble at their premises: 13 & 14 Vict c 33 (1850), s 103; General Police and Improvement (Scotland) Act 1862 (25 & 26 Vict c 101), s 337; Habitual Criminals Act 1869 (Imp) (32 & 33 Vict c 99), s 10; Prevention of Crimes Act 1871 (Imp) (34 & 35 Vict c 112), s 10; Vagrancy Act 1835 (NSW), s 2; Police Act 1863 (SA), s 56(7); Police Offences Statute 1865 (Vic), s 35(iv); Police Act 1892 (WA), s 65(7). 64 (1979) 143 CLR 376 at 382-383; [1979] HCA 23. 65 Police Act Amendment Act 1928 (SA), s 5. 66 Vagrancy (Amendment) Act 1929 (NSW), s 2(b); Police Offences (Consorting) Act 1931 (Vic), s 2; Vagrants, Gaming, and Other Offences Act 1931 (Q), s 4(1)(v); Police Offences Act 1935 (Tas), s 6; Police Act Amendment Act 1955 (WA), s 2. 67 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 22 October 1929 at 682; Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 10 November 1931 at 4092; Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 20 October 1931 at 1418; Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 25 August 1955 at 328. might impinge on innocent members of the community were expressed in opposition to such laws68. Consorting did extend to innocent association with proscribed classes of persons such as reputed thieves or known prostitutes or persons who had been convicted of having no visible lawful means of support69. However, unlike the provisions of the SOCC Act providing for ministerial declarations and judicial control orders, the vagrancy and consorting laws created offences, based upon norms of conduct, which did not depend upon the prior existence of an executive or judicial order. A conceptual ancestor of the modern control order, referred to by Gleeson CJ in Thomas v Mowbray under the general rubric of Blackstone's "preventive justice", was the "ancient power of justices and judges to bind persons over to keep the peace"70. Gummow and Crennan JJ pointed out that the jurisdiction to bind over could be exercised in respect of a risk or threat of criminal conduct against the public at large and was not dependent upon a conviction71. As their Honours said72: "The matters of legal history … do support a notion of protection of public peace by preventative measures imposed by court order, but falling short of detention in the custody of the State." The State of South Australia relied upon the analogy between the control order and orders binding persons by recognisance to keep the peace. It referred to the Summary Procedure Act 1921 (SA), which confers power upon courts to is "a reasonable make restraining orders against persons where apprehension" that the person may behave in an intimidating or offensive manner or cause personal injury or damage to property73. An important feature of such orders, which distinguishes them from the control order under the SOCC Act, is that they depend upon judgments to be made by the court about the conduct and apprehended conduct of the defendant. No such judgment conditions the there 68 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 22 October 1929 at 683; Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 10 November 1931 at 4097. 69 Johanson (1979) 143 CLR 376. 70 (2007) 233 CLR 307 at 329 [16]; [2007] HCA 33. See Devine v The Queen (1967) 119 CLR 506 at 513-514 per Windeyer J; [1967] HCA 35. 71 (2007) 233 CLR 307 at 357 [120]. 72 (2007) 233 CLR 307 at 357 [121]. 73 Summary Procedure Act 1921 (SA), s 99; see also s 99AA. obligation to make a control order under s 14(1) of the SOCC Act even though it may have a part to play in relation to the conditions which are imposed. On this matter I agree also with the observations of Kiefel J74. Commonwealth legislation directed at certain classes of organisation regarded as seditious, subversive or revolutionary has included the Unlawful Associations Act 1916 (Cth)75, provisions of the Immigration Act 1901 (Cth) relating to the deportation of members of revolutionary organisations76 and Pt IIA of the Crimes Act 1914 (Cth). The provisions of Pt IIA declare associations which advocate or encourage the overthrow, by revolution, sabotage, force or violence, of the Commonwealth or a State to be unlawful associations77. Part IIA also provides for the Attorney-General to make an application to the Federal Court for a declaration that a body is an unlawful association78. These provisions have been little used79. the established government of the Constitution or In recent years a range of statutory mechanisms have been adopted in Australia and in other countries to meet the wider challenge of organised crime, which sometimes operates at a national and international level. Two such mechanisms are civil and criminal assets forfeiture. Civil assets forfeiture was considered in International Finance Trust Co Ltd v New South Wales Crime Commission80. The mechanism under consideration in this case is intended to be preventative. It strikes at the freedom of association of members of criminal organisations and at participation in the activities of such organisations. A longstanding example of legislation directed at participation in organised 74 Judgment of Kiefel J at [473]-[474]. 75 Considered in Pankhurst v Kiernan (1917) 24 CLR 120; [1917] HCA 63. 76 Immigration Act 1901 (Cth), s 8AA (inserted by the Immigration Act 1925 (Cth)); as to the validity of this provision see Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36. 77 Crimes Act 1914 (Cth), s 30A(1)(a). 78 Crimes Act 1914 (Cth), s 30AA. 79 Douglas, "Keeping the Revolution at Bay: The Unlawful Associations Provisions of the Commonwealth Crimes Act", (2001) 22 Adelaide Law Review 259; Australian Law Reform Commission, Fighting Words: A Review of Sedition Laws in Australia, Report No 104, (2006) at 86-100. See also R v Hush; Ex parte Devanny (1932) 48 CLR 487; [1932] HCA 64. 80 (2009) 240 CLR 319 at 344-345 [25]-[29] per French CJ; [2009] HCA 49. criminal activity in the United States is Ch 96 of Title 18 of the United States Code, entitled "Racketeer Influenced and Corrupt Organizations"81. International support for domestic laws directed at criminal organisations is reflected in Art 5 of the United Nations Convention against Transnational Organized Crime (2000)82, which provides for the criminalisation of active participation in an "organized criminal group". Examples of legislation directed to participation and membership are to be found, inter alia, in the United Kingdom83, Canada84 and A number of Australian States and Territories have enacted legislation specifically directed against participation in criminal organisations86. A meeting of the Standing Committee of Attorneys-General in April 2009 agreed that States and Territories should consider introducing legislative measures including "consorting or similar provisions that prevent a person associating with another person who is involved in organised criminal activity as an individual or through an organisation"87. In 2010, the Parliament of the Commonwealth enacted Pt 9.9 of the Criminal Code (Cth) ("the Code"), which creates offences relating to association in respect of serious criminal activity and support for "criminal organisations"88. There is no provision for declarations and control orders in 81 18 USC §§1961-1968 (2006), replicated in many States of the USA; see generally Mecone, Shapiro and Martin, "Racketeer Influenced and Corrupt Organizations", (2006) 43 American Criminal Law Review 869. 82 2225 UNTS 209 (opened for signature 12 December 2000, entered into force 29 September 2003). Australia signed the Convention on 13 December 2000 and became a party to it on 27 May 2004. 83 Serious Crime Act 2007 (UK), Pt 1. In s 5, provision is made for serious crime prevention orders restricting, inter alia, the means by which a person communicates or associates with others. 84 Criminal Code RSC 1985, c C-46, s 467.11 (which creates the offence of participating in or contributing to any activity of a criminal association). 85 Crimes Act 1961 (NZ), s 98A. 86 Crimes (Criminal Organisations Control) Act 2009 (NSW); Serious Crime Control Act 2009 (NT); Criminal Organisation Act 2009 (Q). 87 Australia, Standing Committee of Attorneys-General, Communiqué, 16-17 April 88 Introduced into the Code by the Crimes Legislation Amendment (Serious and Organised Crime) Act (No 2) 2010 (Cth). The Code makes provision for the executive listing of "terrorist organisations" by regulation and for the making, by courts, of control orders against participants in such organisations or for the prevention of terrorist acts89. The nature of the power conferred upon the Federal Magistrates Court to make such orders was considered in Thomas v Mowbray. The regime created by the Code is significantly different from that created by s 14(1) of the SOCC Act90. Importantly, the Code does not purport to impose any obligation upon a court to make a control order upon the basis of an executive determination or otherwise. Whether a control order is made or not is in the discretion of the court91. The court cannot make such an order unless it is satisfied, on the balance of probabilities, that to do so would substantially assist in preventing a terrorist act or that the person in question has provided training to, or received training from, a listed terrorist organisation. The issues in Thomas v Mowbray were not the issues before this Court in this appeal. They were whether the power conferred on a court by Div 104 of the Code was judicial power, whether the Code authorised its exercise in a manner contrary to Ch III and whether there was a head of legislative power to support it. There are differences between the provisions of the SOCC Act relating to declarations and control orders and analogous provisions in other State and Territory jurisdictions. In New South Wales and the Northern Territory declarations of organisations are made on the application of the Commissioner of Police by a judge declared by the Attorney-General, with the judge's consent, to be an "eligible Judge"92. Beyond drawing attention to these provisions, it is not necessary for present purposes to express any view on whether eligible judges act as personae designatae or discharge an administrative rather than judicial function in making such declarations93. The Commissioner of Police may also 89 Code, Divs 102 and 104. 90 The submission of the Solicitor-General for New South Wales, that it was difficult to tell the difference between the two regimes, must be rejected. 91 Code, s 104.4. 92 Crimes (Criminal Organisations Control) Act 2009 (NSW), ss 5, 6 and 9; Serious Crime Control Act 2009 (NT), ss 12, 13 and 14. 93 As to the use of federal judges as personae designatae to exercise non-judicial functions compatible with their judicial role, see Hilton v Wells (1985) 157 CLR 57; [1985] HCA 16; Grollo v Palmer (1995) 184 CLR 348; [1995] HCA 26. The application of compatibility requirements to State judges acting persona designata was raised by McHugh J in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 117-118 and variously discussed in Campbell, "Constitutional Protection of State Courts and Judges", (1997) 23 Monash University Law Review (Footnote continues on next page) apply to the Supreme Court in both of those jurisdictions for interim control orders or control orders which that Court has a discretion to grant or refuse94. The Criminal Organisation Act 2009 (Q) provides for the Supreme Court, on the application of the Commissioner of Police and in its discretion, to declare organisations and to make control orders95. As appears from the preceding, the SOCC Act does not introduce novel or unique concepts into the law in so far as it is directed to the prevention of criminal conduct by providing for restrictions on the freedom of association of persons connected with organisations which are or have been engaged in serious criminal activity. The area of constitutional scrutiny in this appeal is the interaction between the Attorney-General's executive declaration of an organisation and the conditional obligation imposed upon the Magistrates Court to make a control order on the application of the Commissioner. It was the constitutional propriety of that interaction which concerned the Full Court of the Supreme Court of South Australia. The decision of the Full Court In the Full Court, Bleby J, with whom Kelly J agreed96, summed up his opinion of the operation of s 14(1) of the SOCC Act as follows97: "Thus it can be seen that the process of depriving a person of their right to and freedom of association on pain of imprisonment for up to five years, although formally performed by a State court which exercises federal jurisdiction, is in fact performed to a large extent by a member of the Executive Government in a manner which gives the appearance of being done by the court. But the process is devoid of the fundamental protections which the law affords in the making of such an order, namely, the right to have significant and possibly disputed factual issues 397 at 413-415; Carney, "Wilson & Kable: The Doctrine of Incompatibility – An Alternative to Separation of Powers?", (1997) 13 Queensland University of Technology Law Journal 175 at 191; Johnston and Hardcastle, "State Courts: The Limits of Kable", (1998) 20 Sydney Law Review 216 at 229-230. 94 Crimes (Criminal Organisations Control) Act 2009 (NSW), ss 14, 19 and 21; Serious Crime Control Act 2009 (NT), s 25. 95 Criminal Organisation Act 2009 (Q), ss 10 and 18. 96 (2009) 105 SASR 244 at 305 [277]. 97 (2009) 105 SASR 244 at 283 [166]. determined by an independent and impartial judicial officer and the right to be informed of and to answer the case put against the person." His Honour characterised s 14(1) of the SOCC Act as requiring the Magistrates Court to "act without question on a declaration which represents the finding of the Attorney-General on matters critical to the making of the control order, and without the right to a fair hearing"98. He held that the "unacceptable grafting of non-judicial powers onto the judicial process in such a way that the outcome is controlled, to a significant and unacceptable extent, by an arm of the Executive Government … destroys the court's integrity as a repository of federal jurisdiction"99. Bleby J attached weight to the requirement of the SOCC Act that the most complex factual matters to be established before a control order could be made were to be determined by the Attorney-General100. I agree with Hayne J that the question whether the Magistrates Court is required by s 14(1), in appearance or reality, to act as an instrument of the executive is not determined by a comparison of the respective size or complexity of the tasks undertaken by the executive and the judicial branches of government. Rather it depends upon the nature of the relationship that the SOCC Act establishes between those two branches101. The proposition embodied in the second ground of appeal raised by the State of South Australia and set out below is correct but does not lead to a determination of the appeal in favour of the State. Bleby J also placed reliance on the fact that the Attorney-General, in making a declaration, could act upon information classified by the Commissioner as "criminal intelligence", which information could not be disclosed to anyone, including a defendant to a s 14(1) application, without the authority of the Commissioner102. His Honour drew a distinction between these matters and the criminal intelligence provisions considered in K-Generation Pty Ltd v Liquor Licensing Court103, holding that the protections which preserved the legislation in that case were absent from the SOCC Act104. I agree, however, with Gummow J 98 (2009) 105 SASR 244 at 283 [167]. 99 (2009) 105 SASR 244 at 281 [157]. 100 (2009) 105 SASR 244 at 280 [154]-[155]. 101 Judgment of Hayne J at [199]-[200]. 102 (2009) 105 SASR 244 at 282 [164]. 103 (2009) 237 CLR 501. 104 (2009) 105 SASR 244 at 282 [163]. that the distinction drawn by Bleby J between s 21(2) of the SOCC Act and the like provisions in question in K-Generation Pty Ltd should be rejected105. In dissent, White J held that the jurisdiction of the Magistrates Court was not so subordinated to the decision-making power of the executive, and its manner of exercise not so directed, that the Court's independence and capacity to act impartially was impaired106. His Honour had regard to the matters upon which the Magistrates Court had to adjudicate in an application under s 14(1), including the fact of the defendant's membership of the organisation107, the content of the control order108 and the matters listed in s 14(6)109. His Honour also had regard to the need for the Magistrates Court to take into account the freedoms protected in s 4(2) relating to advocacy, protest, dissent and industrial action110. His Honour concluded that it could not reasonably be said that s 14(1) directed the Magistrates Court in an impermissible way as to the manner and outcome of the exercise of its jurisdiction. The obligation to make a control order with a specified minimum outcome was not in context sufficient to warrant that conclusion111. Grounds of appeal In its proposed further amended notice of appeal the State of South Australia asserted that the Full Court misapplied the principle recognised in Kable v Director of Public Prosecutions (NSW)112 and erred by: having regard to the process by which the legislature chose to select a particular fact (the declaration of the Club), proof of which, to the satisfaction of the Magistrates Court to the required standard, along with legislatively prescribed other facts, served as consequence; trigger for a the 105 Judgment of Gummow J at [121]-[125]. 106 (2009) 105 SASR 244 at 305 [273]. 107 (2009) 105 SASR 244 at 287 [190]. 108 (2009) 105 SASR 244 at 288 [192]-[193]. 109 (2009) 105 SASR 244 at 288-289 [195]. 110 (2009) 105 SASR 244 at 289 [196]. 111 (2009) 105 SASR 244 at 291 [207]. 112 (1996) 189 CLR 51. drawing a comparison between the significance and complexity of the functions conferred by the SOCC Act on the Magistrates Court and those conferred by the Act on the Attorney-General; and having regard to whether the functions conferred by the Act on the Attorney-General, as opposed to those conferred on the Magistrates Court, might offend the Kable doctrine. It is useful, before turning to the merits of the appeal, to review the way in which Ch III of the Constitution rests upon assumptions about the continuing existence and essential characteristics of State courts as part of a national judicial system and the implications that this Court has drawn from those assumptions. The assumptions are historical realities and not the product of judicial implication. State courts exercising federal jurisdiction – an economical proposal Early drafts of the Australian Constitution prepared by Andrew Inglis Clark and Charles Kingston proposed distinct State and federal judicatures. In that respect, they followed the United States model subject to Inglis Clark's "innovation", which provided that the Federal Supreme Court should hear appeals from all final judgments of the Supreme Courts of the States113. The proposal that the Parliament should be able to invest State courts with federal jurisdiction did not emerge until the 1897 session of the Australasian Federal Convention in Adelaide. It appears to have been inspired by concerns raised in the Judiciary Committee of the Convention about the cost of establishing federal courts. A telegram exchange ensued between Josiah Symon, the chairman of the Committee, James Walker, a member of the Committee, and Sir Samuel Griffith, who was in Brisbane in April 1897 when the proposal was raised. Griffith gave it his blessing by telegram114. In his written critique of the 1897 draft Constitution, Griffith described the proposed power to invest State courts with federal jurisdiction as "[a]n important and valuable alteration in substance", one which would "obviate the immediate necessity of establishing Federal Circuit Courts"115. An emphasis on economy 113 Williams, The Australian Constitution: A Documentary History, (2005) at 69. 114 Joyce, Samuel Walker Griffith, (1984) at 204-205; La Nauze, The Making of the Australian Constitution, (1972) at 130-131. 115 Williams, The Australian Constitution: A Documentary History, (2005) at 622. was apparent from Symon's explanation, to the 1898 session of the Convention at Melbourne, of the rationale for using State courts116: "The method adopted in the United States of having circuit courts, and so on, all over the country has been wiped out here, so that the Federal Parliament may save that expense, and the Parliament has been given power to vest the judicial control of matters not to be dealt with by the High Court in the state courts." "Thus was born, out of practical considerations rather than high constitutional theory, what a famous Chief Justice of the High Court of Australia was to describe in characteristic language as the 'autochthonous expedient of conferring federal jurisdiction on State courts'." One does not look first to overarching principles of constitutionalism as a source of the limitations on State legislative power which have been expounded under the general rubric of the "Kable doctrine". Rather, it is necessary to focus upon the text and structure of Ch III and the underlying historically based assumptions about the courts, federal and State, upon which the judicial power of the Commonwealth can be conferred. It is in the need for consistency with those assumptions that the implied limitations find their source. The linkage between assumptions about courts at the time of Federation and the national character of the Australian judiciary was foreshadowed in the commentary offered by Quick and Garran on s 77 in 1901118: 116 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 31 January 1898 at 298. 117 La Nauze, The Making of the Australian Constitution, (1972) at 131. The "characteristic language" of Sir Owen Dixon appeared in the joint judgment in R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 at 268 per Dixon CJ, McTiernan, Fullagar and Kitto JJ; [1956] HCA 10; see also Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 110 per McHugh J, 139-140 per Gummow J, and the references to the economic imperative of the autochthonous expedient in Zines, Cowen and Zines's Federal Jurisdiction in Australia, 3rd ed (2002) at 195, citing The Commonwealth v Limerick Steamship Co Ltd (1924) 35 CLR 69 at 90 per Isaacs and Rich JJ; [1924] HCA 50 and Bailey, "The Federal Jurisdiction of State Courts", (1940) 2 Res Judicatae 109. 118 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, "It is noteworthy that in this section, as elsewhere in the Constitution, the judicial department of the Commonwealth is more national, and less distinctively federal, in character, than either the legislative or the executive departments. The High Court, as has already been pointed out …, is not only a federal, but a national court of appeal; it has appellate jurisdiction in matters of the most purely provincial character as well as in matters of federal concern. Confidence in the integrity and impartiality of the Bench prevents any jealousy or distrust of this wide federal jurisdiction; and the same confidence makes it possible to contemplate without misgiving the exercise of federal jurisdiction by State courts – subject, of course, to the controlling power of the Federal Parliament." (emphasis added) It is appropriate in this context to refer to the status of the Magistrates Court of South Australia as a court of the State. The Magistrates Court of South Australia At the time of the Convention Debates in 1891 and 1897-1898 each of the Australian colonies had a two- or three-tiered judicial system with a Supreme Court at its apex. Each of the colonies had an active magistracy as part of that system. After 1850 the paid magistracy began to be regarded in most jurisdictions as made up of "officials who were basically judicial-style functionaries"119. Nevertheless persons could be appointed as magistrates who were not qualified lawyers and not all magistrates were independent of administrative control by heads of department of the executive government. As Gummow, Hayne and Crennan JJ pointed out in Forge v Australian Securities and Investments Commission, Justices of the Peace and stipendiary magistrates formed part of the colonial and State public services and were subject to disciplinary and like procedures applicable to public servants generally120. This was perhaps an example of the general proposition that their Honours advanced that121: "History reveals that judicial independence and impartiality may be ensured by a number of different mechanisms, not all of which are seen, or need to be seen, to be applied to every kind of court … The independence and impartiality of inferior courts, particularly the courts of summary jurisdiction, was for many years sought to be achieved and enforced chiefly by the availability and application of the Supreme Court's 119 Castles, An Australian Legal History, (1982) at 327. 120 (2006) 228 CLR 45 at 82 [82]; [2006] HCA 44. 121 (2006) 228 CLR 45 at 82-83 [84]. supervisory and appellate jurisdictions and the application of the apprehension of bias principle in particular cases." From 1985 all appointments of magistrates were made from the ranks of qualified practitioners122. Justice Thomas accurately characterised the Australian magistracy when he wrote in 1991123: "Clearly the Magistrates' Courts are simply the courts of first instance in the judicial structure throughout Australia." As a general proposition magistrates courts are courts of the States for the purpose of receiving federal jurisdiction124. This is true of the Magistrates Court of South Australia. The history of the magistracy in South Australia dates back to 1837125. In 1982, King CJ said of the magistracy126: "Every consideration which renders a judiciary independent of the government, essential to the proper functioning of society under the rule of law, is as valid in relation to the magistracy as to the other two tiers of the judiciary." 122 Thomas, "The Ethics of Magistrates", (1991) 65 Australian Law Journal 387 at 123 Thomas, "The Ethics of Magistrates", (1991) 65 Australian Law Journal 387 at 124 As to the characterisation of members of the Federal Magistrates Court as Justices of a court created by the Parliament under s 72 of the Constitution, see Re Bryant; Ex parte Guarino (2001) 75 ALJR 478 at 480 [13] per Hayne J; 178 ALR 57 at 60; [2001] HCA 5. 125 The history of the magistracy beginning in 1837 with the creation of Courts of General or Quarter and Petty Sessions was set out at length in R v Moss; Ex parte Mancini (1982) 29 SASR 385 at 397-421 per Wells J. See also Lowndes, "The Australian Magistracy: From Justices of the Peace to Judges and Beyond", 74 Australian Law Journal 509 (Part I); 592 (Part II). 126 R v Moss; Ex parte Mancini (1982) 29 SASR 385 at 389. The Magistrates Court of South Australia was established by the Magistrates Court Act 1991 (SA)127. It is a court of record128, divided into criminal and petty sessions divisions and three civil divisions129. The three civil divisions are "General Claims", "Consumer and Business" and "Minor Claims". The Court has defined civil, criminal and petty sessions jurisdictions130 and "any jurisdiction conferred on it by statute"131. The rules of the Court may assign particular statutory jurisdictions conferred by or under another Act either to the Civil (General Claims) Division or to the Criminal Division of the Court132. There is provision for appeals from the Court to the Supreme Court of South Australia133 and for reservation of questions of law arising in a civil action (except a minor civil action) for determination by the Supreme Court134. The Magistrates Court participates in the State Courts Administration Council pursuant to the Courts Administration Act 1993 (SA). The members of the Court are not members of the Public Service135. White J said in Frederick v South Australia136: "The effect of the regime arising from the Magistrates Act, the Magistrates Court Act, and the [Courts Administration Act] is that magistrates are judicial officers who, as one would expect, exercise their judicial functions independently of the Executive." 127 Magistrates Court Act 1991 (SA), s 4. 128 Magistrates Court Act, s 5. See Waterside Workers' Federation of Australia v J W Alexander Ltd (1918) 25 CLR 434 at 454-456 per Barton J; [1918] HCA 56. 129 Magistrates Court Act, s 7(1). 130 Magistrates Court Act, ss 8, 9 and 9A. 131 Magistrates Court Act, s 10(1). 132 Magistrates Court Act, s 10(2). Rules of the Court are made by the Chief Magistrate, the Deputy Chief Magistrate and any two or more other magistrates: 133 Magistrates Court Act, s 40. 134 Magistrates Court Act, s 41. 135 See Public Sector Act 2009 (SA), s 24. 136 (2006) 94 SASR 545 at 597 [222]. The Magistrates Act referred to was the Magistrates Act 1983 (SA). His Honour's remarks and the legislative framework which he considered are to be understood against an historical background in which magistrates in South Australia, like magistrates in the other States of Australia, had been members of the Public Service and often subject, in administrative matters, to the same heads of department as prosecuting counsel appearing before them137. There is no doubt, and it was not contended otherwise, that the Magistrates Court of South Australia is a court in which the Parliament of the Commonwealth can invest federal jurisdiction under s 71 of the Constitution. Nor is there any doubt, and it was not contended otherwise, that a member of the Magistrates Court is a judge for the purposes of s 79 of the Constitution, which provides that "[t]he federal jurisdiction of any court may be exercised by such number of judges as the Parliament prescribes"138. In 2008 there were no fewer than 72 Commonwealth statutes which conferred jurisdiction on the Magistrates Court of South Australia139. Established as a court by the State, the Magistrates Court cannot be deprived by the State "of those minimum characteristics of the institutional independence and impartiality identified in the decisions of this Court"140. For, as appears below, the continuing existence of those characteristics is an assumption which underlies Ch III of the Constitution. Constitutional assumptions about courts The essentials of the British justice system travelled to and settled in the Australian colonies long before the Federation movement began. The courts of Britain's colonies, including the Australian colonies141: "in exercising their power to hear and determine, … did so in the manner of their judicial counterparts in the place of the law's origin". 137 (2006) 94 SASR 545 at 597 [223]. 138 See Clark v Federal Commissioner of Taxation (2008) 171 FCR 1 at 9 [35] per 139 Clark v Federal Commissioner of Taxation (2008) 171 FCR 1 at 3 [8] per Branson 140 K-Generation Pty Ltd (2009) 237 CLR 501 at 544 [153] per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. 141 McPherson, The Reception of English Law Abroad, (2007) at 405. As Windeyer J said in Kotsis v Kotsis142: "The nature of a court and the functions of court officers were matters that were well known in England long before the Australian colonies began. The meaning of the word 'court' has thus come to us through a long history; and it is by the light of that that it is to be understood in ss 71, 72 and 73 of the Constitution." The 19th-century understanding of a "court of justice", extant at the time of the drafting of the Constitution, was explained in part in the frequently cited judgment of Fry LJ in Royal Aquarium and Summer and Winter Garden Society Ltd v Parkinson143. His Lordship spoke of "the fairness and impartiality which characterize proceedings in Courts of justice, and are proper to the functions of a judge"144. He described courts as "for the most part, controlled and presided over by some person selected as specially qualified for the purpose" and said "they have generally a fixed and dignified course of procedure, which tends to minimise the risks that might flow from [their] absolute immunity"145. The application of that concept to courts contemplated as repositories of the judicial power of the Commonwealth was accepted by Isaacs and Rich JJ in Waterside Workers' Federation of Australia v J W Alexander Ltd, citing Fry LJ in connection with the proposition that146: "the Federal Constitution is specific that judicial power shall be vested in Courts, that is, Courts of law in the strict sense". The understanding of what constitutes "Courts of law" may be expressed in terms of assumptions underlying ss 71 and 77(iii) in relation to the courts of the States. There are three overlapping assumptions which, as a matter of history and as a matter of inference from the text and structure of Ch III, underlie the adoption of the mechanism reflected in s 77(iii) of the Constitution. The first is the universal application throughout the Commonwealth of the rule of law, an assumption "upon which the Constitution depends for its efficacy"147. The 142 (1970) 122 CLR 69 at 91; [1970] HCA 61. 144 [1892] 1 QB 431 at 447. 145 [1892] 1 QB 431 at 447. 146 (1918) 25 CLR 434 at 467. 147 Thomas v Mowbray (2007) 233 CLR 307 at 342 [61] per Gummow and Crennan JJ; APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 (Footnote continues on next page) second is that the courts of the States are fit, in the sense of competent, to be entrusted with the exercise of federal jurisdiction. As Professor Sawer observed148: "The State Supreme Courts were of a very high and uniform calibre – a situation in marked contrast with that which obtained in the United States shortly after its establishment – and there was no substantial ground for fearing that they would be biased or parochial in their approach to federal questions." The generality of the wording of ss 71 and 77(iii) indicates that the assumption of competence extends to all courts of the States, albeit the supervisory role of the Supreme Courts, as was submitted by the Commonwealth, reinforces the independence and impartiality of inferior State courts and contributes to the fulfilment of the constitutional imperative recognised in Kable149. the Solicitor-General of The third assumption is that the courts of the States continue to bear the defining characteristics of courts and, in particular, the characteristics of independence, impartiality, fairness and adherence to the open-court principle. This formulation is deliberately non-exhaustive. In considering the attributes of courts contemplated by Ch III of the Constitution it is necessary to bear in mind the cautionary observation of Gummow, Hayne and Crennan JJ in Forge that150: "It is neither possible nor profitable to attempt to make some single all-embracing statement of the defining characteristics of a court." at 351 [30] per Gleeson CJ and Heydon J; [2005] HCA 44; Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 193 per Dixon J; [1951] HCA 5. 148 Sawer, Australian Federalism in the Courts, (1967) at 20-21. And see The Federalist, No 81 (attributed to Hamilton), in The Federalist, (1788), vol 2, 310 at 149 For example, Fingleton v Christian Ivanoff Pty Ltd (1976) 14 SASR 530, in which the Full Court of the Supreme Court of South Australia held a special magistrate disqualified from hearing a complaint because, after a departmental rearrangement, the magistrate and the solicitor appearing on the complaint were both in the same department of the Public Service with the same departmental head. 150 (2006) 228 CLR 45 at 76 [64]. Nevertheless, as their Honours added151: "An important element, however, in the institutional characteristics of courts in Australia is their capacity to administer the common law system of adversarial trial. Essential to that system is the conduct of trial by an independent and impartial tribunal." At the heart of judicial independence, although not exhaustive of the concept, is decisional independence from influences external to proceedings in the court, including, but not limited to, the influence of the executive government and its authorities152. Decisional independence is a necessary condition of impartiality. Procedural fairness effected by impartiality and the natural justice hearing rule lies at the heart of the judicial process153. The open-court principle, which provides, among other things, a visible assurance of independence and impartiality, is also an "essential aspect" of the characteristics of all courts, including the courts of the States154. The Convention Debates reveal implicit reflection on the principle of separation of powers in the context of a provision, later omitted, which would have barred any person holding judicial office from being appointed to or holding any executive office155. The limited record of consideration of judicial independence by delegates to the Convention otherwise centred around debate about the mechanism for the removal of federal judges. A leading contributor in this respect was the South Australian Charles Kingston. He spoke of his desire "to preserve intact the absolute independence of the judges, both in relation to the Federal Executive and the Federal Parliament; that they may have nothing to hope for, and nothing to fear either; and that in doing their duty they may feel 151 (2006) 228 CLR 45 at 76 [64] (footnote omitted). 152 As to the multiple location of judicial decisional independence in separation-of- powers protections providing for "judicial independence" and within the rubric of "due process" and "the rule of law", see Gerangelos, The Separation of Powers and Legislative Interference in Judicial Process, (2009) at 8. 153 For a recent discussion of the natural justice hearing rule in this context, see International Finance Trust Co Ltd (2009) 240 CLR 319 at 379-384 [139]-[150] 154 Russell v Russell (1976) 134 CLR 495 at 520 per Gibbs J; see also at 505 per Barwick CJ, 532 per Stephen J; [1976] HCA 23. 155 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 1 February 1898 at 356, 358-359, 361, 363, 368, 371, 372. secure in their office"156. The absence of any recorded debate about the principle of independence enunciated by Kingston indicates that it was uncontroversial. The historical record does not indicate that the members of the Convention expressly adverted to the broader concept of the separation of judicial power in their debates157. However, that does not detract from the conclusion that the Constitution was framed on the basis of common assumptions, at least among lawyers of the day, about the nature of courts and their independence in the discharge of judicial functions. The assumption of the continuity of the defining characteristics of the courts of the States as courts of law is supported by ss 106 and 108 of the Constitution, which, by continuing the constitutions and laws of the former colonies subject to the Constitution of the Commonwealth, continued, inter alia, the courts of the colonies and their various jurisdictions. That continuity could accommodate the extension, diminution or modification of the organisation and jurisdiction of courts existing at Federation, the creation of new courts and the abolition of existing courts (other than the Supreme Courts). Those powers in State legislatures are derived from the constitutions of the States. Until 1986, they were also derived from s 5 of the Colonial Laws Validity Act 1865 (Imp)158. Since 1986, they can be derived from s 2(2) of the Australia Acts159. The assumption that all Australian courts would retain the defining characteristics of courts of law after Federation is also implicit in covering cl 5 of the Constitution160, which provides that "[t]his Act, and all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on the courts, the Commonwealth". Those words represent what Quick and Garran called "a judges, and people of every State and of every part of 156 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 20 April 1897 at 947; see also at 949 (Isaacs); Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 1 February 1898 at 361 (Downer). 157 Wheeler, "Original Intent and the Doctrine of the Separation of Powers in Australia", (1996) 7 Public Law Review 96 at 99-103; Gerangelos, The Separation of Powers and Legislative Interference in Judicial Process, (2009) at 59. 158 28 & 29 Vict c 63. 159 Australia Act 1986 (Cth); Australia Act 1986 (UK); and the Australia Acts (Request) Act 1985 of each of the States. 160 Section 5 of the Commonwealth of Australia Constitution Act 1900 (Imp) (63 & 64 Vict c 12). distinctly national feature of the Constitution"161. Within their jurisdictions the courts of the States had, by operation of covering cl 5, "jurisdiction to declare and apply the laws of the Commonwealth in all cases in which the judicial power of the Commonwealth is not necessarily exclusive of the judicial power of the States"162. Whether covering cl 5 also provides a source of authority for judicial review of the validity of legislation need not be explored here163. There was at Federation no doctrine of separation of powers entrenched in the constitutions of the States. Unsuccessful attempts to persuade courts of the existence of such a doctrine164 were made in New South Wales165, Western Australia166 and South Australia167 in the 1960s and 1970s, and Victoria168 in 1993, relying, inter alia, upon the decision of the Privy Council in Liyanage v The Queen169. The absence of an entrenched doctrine of separation of powers 161 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, 162 MZXOT v Minister for Immigration and Citizenship (2008) 233 CLR 601 at 620 [26] per Gleeson CJ, Gummow and Hayne JJ; [2008] HCA 28, quoting Inglis Clark, Studies in Australian Constitutional Law, (1901) at 177. 163 Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087 at 1125; [1907] HCA 76; Kingston v Gadd (1901) 27 VLR 417 at 426 per Williams J, 428 per Holroyd J; Commissioner of Taxes v Parks [1933] St R Qd 306; and see Dixon, "Marshall and the Australian Constitution", (1955) 29 Australian Law Journal 420 at 425; Sawer, Australian Federalism in the Courts, (1967) at 76; cf Lindell, "Duty to Exercise Judicial Review", in Zines (ed), Commentaries on the Australian Constitution, (1977) 150 at 185-186; Thomson, "Constitutional Authority for Judicial Review: A Contribution from the Framers of the Australian Constitution", in Craven (ed), The Convention Debates 1891-1898: Commentaries, Indices and Guide, (1986) 173 at 188-192. 164 See, generally, Carney, The Constitutional Systems of the Australian States and Territories, (2006) at 344-349, discussing the five cases next footnoted. 165 Clyne v East (1967) 68 SR (NSW) 385; Building Construction Employees and Builders' Labourers Federation of New South Wales v Minister for Industrial Relations (1986) 7 NSWLR 372. 166 Nicholas v Western Australia [1972] WAR 168. 167 Gilbertson v South Australia (1976) 15 SASR 66. 168 Collingwood v Victoria [No 2] [1994] 1 VR 652. under the constitutions of the States at Federation and thereafter does not detract from the acceptance at Federation and the continuation today of independence, impartiality, fairness and openness as essential characteristics of the courts of the States. Nor does the undoubted power of State Parliaments to determine the constitution and organisation of State courts detract from the continuation of those essential characteristics. It is possible to have organisational diversity across the Federation without compromising the fundamental requirements of a judicial system. The diversity of State courts in Federated Sawmill, Timberyard and General Woodworkers' Employes' Association (Adelaide Branch) v Alexander ("the Sawmillers' Case") that "when the Federal Parliament confers a new jurisdiction upon an existing State Court it takes the Court as it finds it, with all its limitations as to jurisdiction, unless otherwise expressly declared"170. The proposition in the Sawmillers' Case, as developed in later decisions of this Court including Le Mesurier v Connor171, recognised that the Parliaments of the States retain the legislative power to determine the constitution of their courts and the organisational arrangements through which they will exercise their jurisdiction and powers172. As Gummow, Hayne and Crennan JJ said in Forge173: "The provisions of Ch III do not give power to the federal Parliament to affect or alter the constitution or organisation of State courts." The statement made by Griffith CJ in the Sawmillers' Case should not be over-generalised. As Gaudron J explained in Kable, it was "a vastly different statement from the unqualified proposition that the Commonwealth must take a State court as it finds it"174. The Parliament of a State does not have authority to enact a law which deprives a court of the State of one of its defining characteristics as a court, or impairs one or more of those characteristics. The 170 (1912) 15 CLR 308 at 313; [1912] HCA 42. 171 (1929) 42 CLR 481; [1929] HCA 41. 172 Le Mesurier (1929) 42 CLR 481 at 495-496 per Knox CJ, Rich and Dixon JJ; Adams v Chas S Watson Pty Ltd (1938) 60 CLR 545 at 554-555 per Latham CJ; [1938] HCA 37; Peacock v Newtown Marrickville and General Co-operative Building Society No 4 Ltd (1943) 67 CLR 25 at 37 per Latham CJ, McTiernan J agreeing; [1943] HCA 13. 173 (2006) 228 CLR 45 at 75 [61] (footnote omitted). 174 (1996) 189 CLR 51 at 102. statement in The Commonwealth v Hospital Contribution Fund about the unrestricted legislative competency of the States in relation to the composition, structure and organisation of their courts "as appropriate vehicles for the exercise of invested federal jurisdiction"175 must be read in the light of Kable and those decisions which further explain the principles which it enunciated. The point was made by Gummow J in Kable176, commenting on the decision in Le Mesurier: "But this decision did not determine that a State legislature has power to impose upon the Supreme Court of that State functions which are incompatible with the discharge of obligations to exercise federal jurisdiction, pursuant to an investment by the Parliament of the Commonwealth under s 77(iii) of the Constitution." That limitation on State legislative power nevertheless makes ample allowance for diversity in the constitution and organisation of courts. Application of the principles The text and structure of Ch III of the Constitution postulate an integrated Australian court system for the exercise of the judicial power of the Commonwealth with this Court at its apex177. There is no distinction, so far as concerns the judicial power of the Commonwealth, between State courts and federal courts created by the Parliament178. The consequences of the constitutional placement of State courts in the integrated system include the following: A State legislature cannot confer upon a court of a State a function which substantially impairs its institutional integrity and which is therefore incompatible with its role as a repository of federal jurisdiction179. 175 (1982) 150 CLR 49 at 61 per Mason J; [1982] HCA 13. 176 (1996) 189 CLR 51 at 137. 177 Kable (1996) 189 CLR 51 at 101 per Gaudron J, 114 per McHugh J, 138-143 per 178 Kable (1996) 189 CLR 51 at 101 per Gaudron J, 115 per McHugh J, 143 per 179 Kable (1996) 189 CLR 51 at 96 per Toohey J, 103 per Gaudron J, 116-119 per McHugh J, 127-128 per Gummow J; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 591 [15] per Gleeson CJ. State legislation impairs the institutional integrity of a court if it confers upon it a function which is repugnant to or incompatible with the exercise of the judicial power of the Commonwealth180. The institutional integrity of a court requires both the reality and appearance of independence and impartiality181. The principles underlying the majority judgments in Kable and further expounded in the decisions of this Court which have followed after Kable do not constitute a codification of the limits of State legislative power with respect to State courts. Each case in which the Kable doctrine is invoked will require consideration of the impugned legislation because182: "the critical notions of repugnancy and incompatibility are insusceptible of further definition in terms which necessarily dictate future outcomes". For legislators this may require a prudential approach to the enactment of laws directing courts on how judicial power is to be exercised, particularly in areas central to the judicial function such as the provision of procedural fairness183 and the conduct of proceedings in open court. It may also require a prudential approach to the enactment of laws authorising the executive government or its authorities effectively to dictate the process or outcome of judicial proceedings. The risk of a finding that a law is inconsistent with the limitations imposed by Ch III, protective of the institutional integrity of the courts, is particularly significant where the law impairs the reality or appearance of the decisional independence of the court. The validity of s 14(1) of the SOCC Act falls for consideration against that background. 180 Kable (1996) 189 CLR 51 at 103 per Gaudron J, 134 per Gummow J; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617 [101] per Gummow J, 628 181 Forge (2006) 228 CLR 45 at 77 [66] per Gummow, Hayne and Crennan JJ, citing Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 345 [7]-[8] per Gleeson CJ, McHugh, Gummow and Hayne JJ. 182 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 618 [104] per 183 International Finance Trust Co Ltd (2009) 240 CLR 319. The Solicitor-General for South Australia submitted that the true question in determining whether legislation "impairs" or "detracts from" the institutional integrity of a State court is whether that court no longer satisfies the constitutional description "court of a State". He reformulated the question as: "[D]oes a State Court exercising the impugned function nevertheless bear sufficient relation to a court of a state within the meaning of the Constitution?"184 However, the true question is not whether a court of a State, subject to impugned legislation, can still be called a court of a State nor whether it bears a sufficient relation to a court of a State. The question indicated by the use of the term "integrity" is whether the court is required or empowered by the impugned legislation to do something which is substantially inconsistent or incompatible with the continuing subsistence, in every aspect of its judicial role, of its defining characteristics as a court. So much is implicit in the constitutional mandate of continuing institutional integrity. By way of example, a law which requires that a court give effect to a decision of an executive authority, as if it were a judicial decision of the court, would be inconsistent with the subsistence of judicial decisional independence185. It has been accepted by this Court that the Parliament of the Commonwealth may pass a law which requires a court exercising federal jurisdiction to make specified orders if some conditions are met even if satisfaction of such conditions depends upon a decision or decisions of the executive government or one of its authorities186. The Parliament of a State may enact a law of a similar kind in relation to the exercise of jurisdiction under State law. It is also the case that "in general, a legislature can select whatever factum it wishes as the 'trigger' of a particular legislative consequence"187. But these 184 Adopting the language in R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 at 278 per Dixon CJ, McTiernan, Fullagar and Kitto JJ. 185 Re Macks; Ex parte Saint (2000) 204 CLR 158 at 232-233 [208] per Gummow J; [2000] HCA 62. In relation to a federal court, such a law would also offend constitutional separation-of-powers principles applicable to courts created by the Commonwealth: see Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 at 264 per Mason CJ, Brennan and Toohey JJ, 270-271 per Deane, Dawson, Gaudron and McHugh JJ; [1995] HCA 10. 186 Palling v Corfield (1970) 123 CLR 52 at 58-59 per Barwick CJ, 62-63 per McTiernan J, 64-65 per Menzies J, 65 per Windeyer J, 66-67 per Owen J, 68-70 per Walsh J, 70 per Gibbs J; [1970] HCA 53; International Finance Trust Co Ltd (2009) 240 CLR 319 at 352 [49] per French CJ. 187 Baker v The Queen (2004) 223 CLR 513 at 532 [43] per McHugh, Gummow, Hayne and Heydon JJ; [2004] HCA 45. powers in both the Commonwealth and the State spheres are subject to the qualification that they will not authorise a law which subjects a court in reality or appearance to direction from the executive as to the content of judicial decisions. In International Finance Trust Co Ltd this Court held invalid a law of the State of New South Wales which imposed upon the Supreme Court of New South Wales a process which, at the option of the executive, in substance required188: "the mandatory ex parte sequestration of property upon suspicion of wrong doing, for an indeterminate period, with no effective curial enforcement of the duty of full disclosure on ex parte applications". It follows from what has already been said in these reasons, and is reflected in the decisions of this Court, that one of the characteristics required of all courts capable of exercising the judicial power of the Commonwealth (including the courts of the Territories) is that they be, and appear to be, independent and impartial tribunals189. Forms of external control of courts "appropriate to the exercise of authority by public officials and administrators" are inconsistent with that requirement190. The requirement is not a judicially generated imposition. It derives from historically based assumptions about courts which were extant at the time of Federation. It is not necessary, in this case or any other, to mediate the constitutional assumption of actual and apparent independence and impartiality through its effect upon "public confidence" in the courts. That is a criterion which is hard to define, let alone apply by reference to any useful methodology. It may be the case from time to time that a law which trespasses upon the independence and impartiality of a court will have substantial popular support. That is not the measure of its compliance with the requirements of the Constitution. Were it otherwise, the strength of the protections for which the Constitution provides could fluctuate according to public opinion polls. The rule of law, upon which the Constitution is based, does not vary in its application to any individual or group according to the measure of public or official condemnation, however justified, of that individual or that group. The requirements of judicial independence and impartiality are no less rigorous in the case of the criminal or 188 (2009) 240 CLR 319 at 366 [97] per Gummow and Bell JJ, French CJ agreeing at 356 [58]; see also at 386 [159]-[160] per Heydon J. 189 North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 at 163 [29] per McHugh, Gummow, Kirby, Hayne, Callinan and Heydon JJ; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 552- 553 [10] per Gummow, Hayne, Heydon and Kiefel JJ. 190 Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 553 [10] per Gummow, Hayne, Heydon and Kiefel JJ. anti-social defendant than they are in the case of the law-abiding person of impeccable character. In any event, as has been pointed out, the effect of the control order under challenge in this case reaches beyond Mr Hudson. It potentially touches members of the public at large and well beyond the boundaries of South Australia. The question in the present case is whether s 14(1) of the SOCC Act requires the Magistrates Court of South Australia to do something which is not consistent with the assumption of independence and impartiality of courts underlying Ch III of the Constitution. As Gummow J observes in his reasons, the question directs attention to the practical operation of s 14(1) and the significance for that practical operation of the Attorney-General's declaration under s 10(1)191. Section 14(1) of the SOCC Act confers upon the Magistrates Court the obligation, upon application by the Commissioner, to make a control order in respect of a person by reason of that person's membership of an organisation declared by the Attorney-General. The declaration rests upon a number of findings including, in every case, a determination by the Attorney-General that members of the organisation, who need not be specified, have committed criminal offences, for which they may never have been charged or convicted. The findings, of which the Magistrates Court may be for the most part unaware and which in any event it cannot effectively or readily question, enliven, through the declaration which they support, the duty of the Court to make control orders against any member of the organisation in respect of whom the Commissioner makes an application. That is so whether or not that member has committed or is ever likely to commit a criminal offence. Membership of a declared organisation is not made an offence by the SOCC Act. The control order involves a serious imposition upon the personal liberty of the individual who is the subject of the control order and subjects him or her to criminal penalties for breach of the order. It enlivens restrictions upon members of the public limiting their capacity to communicate with the person the subject of the control order. Breaches of those restrictions are criminal offences. A person exposed to such a restriction and to criminal liability for its breach may be an entirely law-abiding citizen unlikely, on any view, to engage in contravention of the law. The control order is an order of the kind which, in its effect upon personal liberty, is ordinarily within the domain of judicial power. I should add that I agree with the reasons of Gummow J for rejecting the submission by the State of Western Australia that the validity of s 14(1) is supported by the proposition that the State of South Australia could have vested the power to make a control order in the Attorney-General himself192. 191 Judgment of Gummow J at [138]. 192 Judgment of Gummow J at [146]-[148]. Submissions made by the State of South Australia identified findings which the Magistrates Court would have to make before issuing a control order under s 14(1). Those submissions sought to effect a kind of forensic inflation of the function of the Court under s 14(1) in aid of the characterisation of that function as "a genuine adjudicative process". The following points were made: Section 14(1) of the SOCC Act directs the Magistrates Court to make a control order only when satisfied of specified matters, namely, that there has been a declaration with respect to the organisation in question pursuant to s 10(1) and that the defendant is a member of that organisation. The defendant may collaterally challenge declaration. the Attorney-General's The Court is required to satisfy itself that the person is a member of a declared organisation. It must consider affidavit material presented by the Commissioner and choose whether or not to act on the basis of that evidence, applying the civil standard of proof. That material is testable and the defendant may adduce evidence to the contrary. To the extent that the Commissioner relies upon criminal intelligence to prove membership, the Court and the defendant are entitled to insist upon strict proof that the material has been properly so classified. The admission of such material and the weight to be given to it is a matter for the Court. The Court has discretion to compose the content of a control order and make ancillary or consequential orders pursuant to s 14(5). It was submitted, having regard to the above matters, that the Court, exercising its power under s 14(1), undertakes a genuine adjudicative process free from any interference from the executive. Reliance was also placed upon the availability of the objection procedure and the Court's discretion in framing a control order in that context. The fact that the impugned legislation provides for an adjudicative process does not determine the question whether it impairs the institutional integrity of the Magistrates Court by impairing the reality or appearance of judicial decisional independence. The laws held invalid in Kable and International Finance Trust Co Ltd both allowed for an adjudicative process by the court to which they applied. The submission of the State of South Australia rightly identified the question of membership of a declared organisation as "[t]he central issue raised by an application for a control order". Although it was acknowledged that membership may be easy to prove with the practical result that the making of a control order would be inevitable, it was said not to follow that this would always be the case. It could not be said, so the argument went, that the outcome of the Commissioner's application would be directed. In submissions made on behalf of Messrs Totani and Hudson, emphasis was placed on the standard of proof in an application for a control order, which, by virtue of s 5 of the SOCC Act, is the balance of probabilities. But that is not determinative or even more than marginally relevant to any consideration of the relationship between the executive declaration and the making of a control order, which is under scrutiny in the present case. The submissions made on behalf of the State of South Australia did not, with respect, diminish the dominance of the executive act of declaration of an organisation and the findings of fact behind it in determining for all practical purposes the outcome of the control order application. While it is true that membership can be contested, the breadth of the definition of "member" is such that, given any evidential basis for the contention that the defendant is a member, the practical burden of disproof is likely to fall upon the defendant. Section 14(1) represents a substantial recruitment of the judicial function of the Magistrates Court to an essentially executive process. It gives the neutral colour of a judicial decision to what will be, for the most part in most cases, the result of executive action. That executive action involves findings about a number of factual matters including the commission of criminal offences. None of those matters is required by the SOCC Act to be disclosed to the Court, nor is the evidence upon which such findings were based. In some cases the evidence, if properly classified as "criminal intelligence", would not be disclosable. Section 14(1) impairs the decisional independence of the Magistrates Court from the executive in substance and in appearance in areas going to personal liberty and the liability to criminal sanctions which lie at the heart of the judicial function. I agree with the conclusion of Gummow J193, Crennan and Bell JJ194 and Kiefel J195 that s 14(1) authorises the executive to enlist the Magistrates Court to implement decisions of the executive in a manner incompatible with that Court's institutional integrity. I agree also with the conclusion reached by Hayne J about the operation of s 14(1) in permitting the executive to enlist the Magistrates Court for the purpose of applying special restraints to particular individuals identified by the executive as meriting application for a control 193 Judgment of Gummow J at [149]. 194 Judgment of Crennan and Bell JJ at [436]. 195 Judgment of Kiefel J at [481]. order196 and the repugnancy of that function to the institutional integrity of the Court. In the exercise of the function conferred on it by s 14(1), the Magistrates Court loses one of its essential characteristics as a court, namely, the appearance of independence and impartiality. In my opinion, s 14(1) is invalid. Conclusion The grant of special leave should be expanded to include the order of Bleby J made on 28 September 2009. The appeal should be dismissed with costs. 196 Judgment of Hayne J at [236]. GUMMOW J. The objects of the Serious and Organised Crime (Control) Act 2008 (SA) ("the Act") as stated in s 4 are as follows: "(1) The objects of this Act are – to disrupt and restrict the activities of – organisations involved in serious crime; and the members and associates of such organisations; and to protect members of the public from violence associated with such criminal organisations. (2) Without derogating from subsection (1), it is not the intention of the Parliament that the powers in this Act be used in a manner that would diminish the freedom of persons in this State to participate in advocacy, protest, dissent or industrial action." The Act will expire on 4 September 2013 (s 39). It is the intention of the Parliament that the Act apply within South Australia and beyond it to the full extent of the extra-territorial legislative capacity of the Parliament (s 6). The legislative power of the Parliament extends to the making of laws that have extra-territorial operation: Australia Act 1986 (Cth), s 2(1). Both respondents appear to be residents of South Australia and not to be residents of any other State. But it should be noted that were they residents of another State, any proceeding between them and South Australia in the courts of that State would, if the proceeding answered the constitutional criterion of a "matter", have engaged federal jurisdiction pursuant to s 75(iv) and s 77(iii) of the Constitution and s 39 of the Judiciary Act 1903 (Cth). The course of the litigation There is before this Court an appeal by the State of South Australia ("the State") from a decision of the Full Court of the Supreme Court of South Australia delivered on 25 September 2009197. By majority (Bleby and Kelly JJ; White J dissenting) the Full Court answered in the negative the reserved question "Is s 14(1) of the Act a valid law of the State of South Australia?" The reasons of the majority were given by Bleby J. 197 Totani v South Australia (2009) 105 SASR 244. The Full Court answered in the affirmative the further reserved question whether the "control order" purportedly made by the Magistrates Court of South Australia ("the Magistrates Court" or "the Court") under s 14(1) of the Act on 25 May 2009 in respect of the second respondent (Mr Hudson) was void and of no effect. The Magistrates Court has since revoked that control order in light of the Full Court's decision. However, the second respondent takes no point that the appeal by the State to this Court in the Supreme Court proceeding is moot198. An application to the Magistrates Court for a control order in respect of the first respondent (Mr Totani) had been made on 4 June 2009 but was adjourned by reason of the Supreme Court proceeding and has not been dealt with by the Magistrates Court. The proceedings in the Magistrates Court, as noted above, did not involve the exercise of federal jurisdiction. But the separate proceeding in the Supreme Court which challenged the validity of s 14(1) was a matter arising under the Constitution or involving its interpretation199. On 28 September 2009, Bleby J made final orders which disposed of the proceeding in the Supreme Court in accordance with the answers which had been given to the questions of law reserved for consideration by the Full Court. The State should have special leave to appeal also (upon the same grounds of appeal) against the orders of Bleby J made on 28 September 2009. The initial grant of special leave should be expanded accordingly. It will be apparent from the statement of objects in s 4 that the legislature took the view that the disruption and restriction of freedom of association between members and associates of bodies involved in serious crime was in the public interest. There is some, but not general200, support in this Court for the proposition that the Constitution necessarily implies freedom from laws which prevent association between persons for the purposes of communication with respect to government and political matters201. However, even if the Act did operate to burden such freedom, the question would arise whether its provisions were reasonably appropriate and adapted to serve the legitimate legislative end of 198 Cf Croome v Tasmania (1997) 191 CLR 119 at 125-128, 136-138; [1997] HCA 5. 199 Constitution, s 76(i); Judiciary Act 1903 (Cth), s 39. 200 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 234 [148] per Gummow and Hayne JJ, 306 [364] per Heydon J; [2004] HCA 41. 201 Statements in earlier authorities were collected by McHugh J in Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 225 [114]; see also at 278 protecting members of organisations202. the public from violence associated with such The successful attack on validity was put on another and quite distinct basis which has a surer footing in the decisions of this Court. The majority of the Full Court held that the jurisdiction conferred on the Magistrates Court by s 14(1) of the Act required that Court to act in a fashion incompatible with the proper discharge of its judicial responsibilities and its institutional integrity203. The foundation of the dissenting reasons of White J was that the area of decision making entrusted by s 14(1) was not so subordinate to that of the executive and the manner of its exercise was not so directed that there was impairment of the independence of the Magistrates Court and its capacity to act impartially204. The case put in this Court by the State for validity of s 14(1) of the Act was supported by interventions by the Attorneys-General of New South Wales, Victoria, Queensland, Western Australia and the Northern Territory and by a limited intervention by the Attorney-General of the Commonwealth. For the reasons which follow, which are not co-extensive with those of the Full Court, the appeal should be dismissed. Control orders Part 3 (ss 14-22) of the Act is headed "Control orders". The central provisions are found in s 14. It is important for what follows in these reasons to compare and contrast s 14(1) and s 14(2). Both provisions confer jurisdiction on "the Court" (defined as "the Magistrates Court" in s 3) to make orders on application by the Commissioner of Police ("the Commissioner"). However, the nature of the jurisdiction conferred by s 14(1) differs in several significant respects from that conferred by s 14(2). First, on a s 14(1) application the Court "must" make an order if satisfied of one matter, namely, that the defendant is a member of an organisation which has been declared by the Attorney-General under s 10(1). On the other hand, not only does s 14(2) require satisfaction of more complex criteria, it uses the term "may" to confer a 202 See Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 201 203 (2009) 105 SASR 244 at 283 [167]. 204 (2009) 105 SASR 244 at 305 [273]. discretion rather than a power with a duty to exercise it if the requisite satisfaction is attained by the Court205. Secondly, the factum upon which the sub-sections operate, the Court's satisfaction, differs significantly between s 14(1) and s 14(2). The satisfaction required for the operation of s 14(2)(b) is that the defendant "engages, or has engaged, in serious criminal activity" and regularly associates with other such persons. Section 14(2)(a)(ii) stipulates satisfaction of engagement in serious criminal activity and regular association with members of a declared organisation. That requirement of past or present engagement by the defendant (Section 14(2)(a)(i) differs from the balance of s 14(2) by fixing upon membership of a declared organisation and is closer to s 14(1), although it also requires regular association with members.) There is no challenge to the validity of s 14(2). serious criminal activity repeated is not In what follows in these reasons, much turns upon the imperative direction to the Court by use of the term "must" coupled with the absence in s 14(1) of a requirement respecting criminal activity by the defendant and the focus of s 14(1) merely upon membership by the defendant of a body which the Attorney-General has classified as a "declared organisation". The respondents submit that it is the anterior classification by the Attorney-General, which drives the curial process under s 14(1). the executive branch, represented by It is the validity only of s 14(1) which is in contention. Section 14(1) states: "The Court must, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that the defendant is a member of a declared organisation." A member may be an "associate member" or "prospective member", or a person who identifies himself or herself, in some way, as belonging to the organisation in question, or a person who is treated by the organisation or its members, in some way, as if belonging to the organisation (s 3). Of this membership the Court must be satisfied to engage s 14(1). But it attains such satisfaction upon the prior determination by the Attorney-General that the organisation is a declared organisation. 205 Cf John Fairfax Publications Pty Ltd v Gacic (2007) 230 CLR 291 at 302 [28]; [2007] HCA 28. The Commissioner may apply for a control order, and a control order may be issued, without notice to any person (s 14(3)). Any question of fact arising in a s 14(1) proceeding is to be decided on the balance of probabilities (s 5). A control order is not binding on the defendant until served on the defendant in accordance with s 16 of the Act (s 16(4)). Section 14(5)(b) requires that if the defendant is a member of a declared organisation, the control order must prohibit the defendant, except as may be specified in the order, from "associating with other persons who are members of declared organisations" and from possessing a dangerous article or a prohibited weapon within the meaning of s 15 of the Summary Offences Act 1953 (SA). A control order may prohibit the defendant from associating or communicating with specified persons or persons of a specified class, from entering or being in the vicinity of specified premises or premises of a specified class, or from possessing specified articles or articles of a specified class (s 14(5)(a)). In considering the imposition of these prohibitions the Court must have regard to, inter alia, whether the defendant's behaviour or history of behaviour suggests a risk of engagement in serious criminal activity, and the assistance the order might give in preventing such engagement by the defendant (s 14(6)(a), (b)). For the purposes of s 14, the defendant may "associate" by any means, including any electronic means (s 14(8)). A person who contravenes or fails to comply with a control order is guilty of an offence, the maximum penalty for which is imprisonment for five years (s 22(1)). It also is an offence for a person, on not less than six occasions during a period of 12 months, to associate with a person who is the subject of a control order (s 35(1)(b)), if the first person knew or was reckless as to the fact that the second person was so subject (s 35(2)). Some forms of association, including those between "close family members", are to be disregarded unless the prosecution proves that the association was not reasonable in the circumstances Declared organisations Several points should be noted here. First, the Act does not make membership of a declared organisation an offence. Secondly, the existence of the declared organisation itself is not proscribed by the Act as, for example, was sought to be achieved by ss 4, 6 and 7 of the Communist Party Dissolution Act 1950 (Cth)206. Thirdly, a control order must be made under s 14(1) against a member regardless of whether that person engages or has engaged in serious 206 See Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 3-5; [1951] HCA 5. criminal activity or is likely to do so. Fourthly, as Crennan and Bell JJ emphasise in their reasons, the requirement that the Court have regard to the matters listed in pars (a)-(e) of s 14(6) is attached to s 14(1) only in a limited sense; the requirement does not qualify the obligation to make a control order and operates at the next stage when the Court is considering the particular prohibitions to be included in that order. As already remarked, the organisation, of which membership by the defendant is found by the Court under s 14(1), must be a declared organisation, and the Court is required to act upon a declaration made by the Attorney-General under Pt 2 (ss 8-13) of the Act. An organisation may be an incorporated body or an unincorporated group and may be part of a larger organisation; it may be based outside the State or consist of persons not ordinarily resident in the State Part 2 of the Act is headed "Declared organisations". Section 10(1) is an important provision. It empowers the Attorney-General to make a declaration as follows: "If, on the making of an application by the Commissioner under this Part in relation to an organisation, the Attorney-General is satisfied that – (a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; and the organisation represents a risk to public safety and order in this State, the Attorney-General may make a declaration under this section in respect of the organisation." The phrase "serious criminal activity" means "the commission of serious criminal offences", which may, however, include summary offences prescribed by regulation (s 3)207. The satisfaction of the Attorney-General requires the formation of an opinion formed reasonably upon the material before the Attorney-General208. However, the State accepts that it would be enough for the Attorney-General to 207 See Serious and Organised Crime (Control) Regulations 2008 (SA), reg 4. 208 Enfield City Corporation v Development Assessment Commission (2000) 199 CLR 135 at 150 [34]; [2000] HCA 5; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 558 [33]; [2008] HCA 4. be satisfied that a member or members of the organisation, but not necessarily the member against whom the Commissioner later seeks a control order under s 14(1), has or have committed a criminal offence. The result is that in such a case s 14(1) then would oblige the Court to impose significant restraints upon the defendant, under pain of criminal sanction, and upon criteria which do not require past or threatened contraventions by the defendant of any anterior legal norm. It may be noted that, as Bleby J recognised in his reasons209, had the Act been a federal law then the making of a declaration by the Attorney-General under s 10(1), taken together with the requirement that the Magistrates Court make a control order under s 14(1) if satisfied of the defendant's membership of a declared organisation, may have involved the exercise of judicial power by the Attorney-General. The presence of s 14(1), like the presence of the provisions in Brandy v Human Rights and Equal Opportunity Commission210 providing for the registration and enforcement of the Human Rights and Equal Opportunity Commission's determinations the Attorney-General's declaration the necessary binding and enforceable effect so as to involve the exercise of judicial power by the Attorney-General. If the Attorney-General's task had involved the exercise of the judicial power of the Commonwealth questions would have arisen of the validity of any federal law to the effect of s 10(1) and s 14(1) of the Act. But the Act is a State law. the Federal Court, would give The issues on this appeal, as refined in argument emphasising the driving force for the curial process in s 14(1) as the anterior classification by the Attorney-General, do, however, bear some relationship to those in Brandy. The registration and review procedures by the Federal Court, for which Pt III of the Racial Discrimination Act 1975 (Cth) provided, were said by the defendants to require an independent exercise of judicial power for effect to be given to determinations by the Human Rights and Equal Opportunity Commission. But it was held in Brandy that the presence of the review provisions did not save the legislative scheme from invalidity211. Before returning to consider the respondents' submissions something first should be said respecting the facts, the provisions made by the Act for objections and appeals, and the reasons of the majority in the Full Court. 209 (2009) 105 SASR 244 at 280-281 [157]. 210 (1995) 183 CLR 245 at 259-260, 269; [1995] HCA 10. 211 (1995) 183 CLR 245 at 261-264, 270-271. The Finks Motorcycle Club On 14 May 2009 the then Attorney-General of the State, acting upon application made by the Commissioner, made a declaration under s 10(1) of the Act with respect to the Finks Motorcycle Club. The Act imposes upon the Attorney-General no requirement to give reasons but the declaration was preceded by detailed reasons contained in 204 paragraphs. They included reference to "criminal intelligence" provided by the Commissioner and upon which the Attorney-General relied. The control order subsequently made in respect of Mr Hudson declared the satisfaction of the Magistrates Court that he was a member of a declared organisation, namely the Finks Motorcycle Club. The order went on to impose upon Mr Hudson prohibitions expressed as follows: "1. Associating with other persons who are members of declared organisations; UNLESS the association occurs between members of a registered political party (within the meaning of the Electoral Act 1985 or the Commonwealth Electoral Act 1918 of the Commonwealth (as the case requires)) at an official meeting of the party, or a branch of the party, and you have provided the Officer in Charge of the State Intelligence Branch of the South Australia Police with notice in writing of the time, date and place of the association, to be received at 60 Wakefield Street Adelaide, SA, 5000 no less than 48 hours before such association. AND Possessing a dangerous article or a prohibited weapon (within the meaning of section 15 of the Summary Offences Act 1953)." Objections and appeals Section 17 of the Act confers a right of objection upon a person upon whom a control order was served. Within 14 days of service of the order or such longer period as the Magistrates Court allows, a notice of objection may be lodged with that Court and it is then to be served upon the Commissioner. Section 18(1) states: "The [Magistrates] Court must, when determining a notice of objection, consider whether, in the light of the evidence presented by both the Commissioner and the objector, sufficient grounds existed for the making of the control order." On hearing the objection the Magistrates Court is empowered by s 18(2) to confirm, vary or revoke the control order and to make any other orders of a kind which could have been made by it when making the control order. Section 19 provides for an appeal to the Supreme Court against a decision of the Magistrates Court on a notice of objection. An appeal might be brought as of right by the Commissioner or the objector on a question of law, but only with the permission of the Supreme Court on a question of fact (s 19(2)). On appeal the Supreme Court is empowered by s 19(5) to confirm, vary or reverse the decision under appeal and to make any consequential or ancillary order. On application by the Commissioner or the defendant, the Magistrates Court may vary or revoke a control order (s 20(1)). However, an application by the defendant requires the permission of the Court; this is to be granted only if the Court is satisfied that there has been a substantial change in the relevant circumstances since the order was made or last varied (s 20(2)). Further, an application by the defendant must be supported by oral evidence given on oath Part 6 (ss 37-39) provides in s 37 for an annual review by a retired judicial officer appointed by the Attorney-General, to determine whether powers under the Act have been exercised "in an appropriate manner, having regard to the objects of [the Act]". The reasoning of the majority of the Full Court Bleby J (with whom Kelly J agreed) identified four matters or elements to be established before an order might be made by the Magistrates Court under s 14(1)212. These were: first, that members of the organisation, of which the defendant is alleged to be a member, associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; secondly, that this organisation represents a risk to public safety and order in the State; thirdly, the making of a declaration by the Attorney-General; and fourthly, membership by the defendant of the organisation the subject of that declaration. The first two matters were relatively more significant and factually complex, but they needed only to be established to the satisfaction of the Attorney-General for a declaration to have been made under s 10(1). The Magistrates Court was required to address the last two matters for itself, but as to the first two matters was obliged to act upon what had been the satisfaction of the Attorney-General. 212 (2009) 105 SASR 244 at 279-280 [150]-[152]. Bleby and Kelly JJ based their decision respecting the invalidity of s 14(1) upon three considerations. These were that213: (i) the most significant and essential findings of fact to be established to obtain a control order against a particular individual were made not by a judicial officer but by the Attorney-General; (ii) the findings of the Attorney-General about these matters were not reviewable; and (iii) it was open to the Attorney-General to have regard to "criminal intelligence" without the protections which saved from invalidity the legislation considered in Gypsy Jokers Motorcycle Club Inc v Commissioner of Police214 and K-Generation Pty Ltd v Liquor Licensing Court215. Proposition (i) may be accepted and requires further consideration. The State challenges propositions (ii) and (iii). I begin with proposition (iii). This fixes attention upon s 21(2) of the Act. Section 21(2) is directed to the courts determining the proceedings it describes. It reads: "In any proceedings relating to the making, variation or revocation of a control order, the court determining the proceedings – (a) must, on the application of the Commissioner, take steps to maintain the confidentiality of information properly classified by the Commissioner as criminal intelligence, including steps to receive evidence and hear argument about the information in private in the absence of the parties to the proceedings and their representatives; and (b) may take evidence consisting of, or relating to, information that is so classified by the Commissioner by way of affidavit of a police officer of or above the rank of superintendent." Section 21(2) is drawn in terms which resemble s 28A(5) of the Liquor Licensing Act 1997 (SA), a provision construed in K-Generation. The reasoning which in that case led to the conclusion that s 28A(5) did not operate to deny to the Licensing Court the constitutional character of an independent and impartial tribunal216 applies to s 21(2). It does so with the added force supplied by the use 213 (2009) 105 SASR 244 at 280-281 [155]-[157], 282-283 [164]-[165]. 214 (2008) 234 CLR 532. 215 (2009) 237 CLR 501; [2009] HCA 4. 216 (2009) 237 CLR 501 at 529-532 [87]-[99], 539-543 [135]-[149], 576-580 in s 21(2) of the phrase "properly classified", not found in the earlier legislation considered in K-Generation. I conclude that proposition (iii) in the reasoning of the Full Court, with respect to "criminal intelligence", should not be accepted. I turn then to consider proposition (ii), respecting the absence of judicial review. Reference first should be made to s 41(2). This is directed specifically to s 10(1) declarations, stating: "The validity and legality of a declaration under Part 2 cannot be challenged or questioned in any proceedings." The State submitted that on an application to the Magistrates Court under s 14(1) for a control order, the tender of a s 10(1) declaration could be challenged by analogy to the challenge to the validity of a warrant. But the authorities establish that validity of a warrant depends on the regularity of its issue, not the sufficiency of the material which supported the application for its issue217. Further, counsel for the respondents submitted that s 41(2) prevents the Magistrates Court on a s 14(1) application from canvassing in any way the validity of a s 10(1) declaration. Counsel contended that to read the phrase "a declaration under Part 2" as excluding "a purported declaration" would render the sub-section otiose and self-defeating. That submission should be accepted. But there remains scope for judicial review by the Supreme Court. Section 41(1) is a broadly drawn privative clause which would apply to a declaration by the Attorney-General under s 10(1) and a control order made by the Magistrates Court under s 14(1). However, in its application to a s 10(1) declaration, it is now clear that s 41(1) is ineffective to deny the supervisory jurisdiction of the Supreme Court in respect of jurisdictional error by the Attorney-General218. Further, as was emphasised in Kirk v Industrial Court (NSW)219, in the present state of authority in this Court it is not possible to attempt to mark the metes and bounds of jurisdictional error. The statement by the Full Court majority of proposition (ii) thus is too wide. Further, with respect to control orders, s 41(1) is subject to the express provision for review and appeal made by ss 17 and 19 of the Act, to which reference has been made above. 217 McArthur v Williams (1936) 55 CLR 324 at 365-366; [1936] HCA 10; Ousley v The Queen (1997) 192 CLR 69 at 80, 87, 103, 126; [1997] HCA 49. 218 Kirk v Industrial Court (NSW) (2010) 239 CLR 531 at 581 [99], 585 [113]; [2010] HCA 1. 219 (2010) 239 CLR 531 at 573-574 [71]-[73]. In addition, the respondents emphasise their submission that s 14(1) is invalid whatever the measure of review of control orders; their primary submission is that a control order regularly made in accordance with the Act lacks legal efficacy because s 14(1) is invalid and confers no authority whatsoever. Indeed the respondents' case is that it is precisely the operation of s 14(1) according to its terms which crosses the line of legislative validity. The involvement of the Attorney-General It is convenient now to return to proposition (i) in the reasoning of the Full Court majority. This fixes upon the fact finding and determination of the Attorney-General as providing the significant integer for the decision the Court must make if satisfied as to the membership of the defendant. In Thomas v Mowbray220 Gummow and Crennan JJ said of Ch III of the Constitution that it gives practical effect to the assumption of the rule of law in the development of a free and confident society, an assumption upon which the Constitution depends for its efficacy. Also in Thomas v Mowbray221 in a passage repeated by French CJ in International Finance Trust Co Ltd v New South Wales Crime Commission222, Gummow and Crennan JJ accepted that legislation which requires a court exercising federal jurisdiction to depart in a significant degree from the methods and standards which have characterised the exercise of judicial power in the past may be repugnant to Ch III. The unique and essential function of the judicial power is the quelling of controversies between individuals, between government and individuals, and between governments, and whether relating to life, liberty or property, "by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion"223. Further, in Gypsy Jokers224, Gummow, Hayne, Heydon and Kiefel JJ accepted as a general proposition that legislation which purports to direct the 220 (2007) 233 CLR 307 at 342 [61]; [2007] HCA 33. See also the remarks of Gleeson CJ and Heydon J in APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 351-352 [30]; [2005] HCA 44. 221 (2007) 233 CLR 307 at 355 [111]. 222 (2009) 240 CLR 319 at 353 [52]; [2009] HCA 49. 223 Fencott v Muller (1983) 152 CLR 570 at 608 per Mason, Murphy, Brennan and Deane JJ; [1983] HCA 12. 224 (2008) 234 CLR 532 at 560 [39]. See also Bodruddaza v Minister for Immigration and Multicultural Affairs (2007) 228 CLR 651 at 669 [47]; [2007] HCA 14. courts as to the manner and outcome of the exercise of their jurisdiction is apt impermissibly to impair the character of the courts as independent and impartial tribunals. This reasoning was applied in International Finance Trust Co Ltd225. There is, however, a distinction between a legislative grant of jurisdiction and a legislative direction to the courts as to the manner and outcome of the exercise of the jurisdiction. This point was made by Brennan, Deane and Dawson JJ, with the concurrence of Gaudron J, in Chu Kheng Lim v Minister for Immigration226. It is true also that a law such as s 14(1) of the Act, which confers upon a court a power with a duty to exercise it if the court decides that the conditions attached to the power are met, on that ground alone is not to be classified as a legislative attempt to direct the outcome of the exercise of jurisdiction227. However, questions of this nature, to adapt the words of Windeyer J in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd228, inevitably attract consideration of predominant characteristics together with comparison with the historic functions and processes of courts of law. Consideration of the predominant characteristics of a law involves attention not only to its form but also to its practical operation and, as it has been said229, to its "pith and substance". Hence, perhaps, the later statement by Mason J that the notion of the usurpation of judicial power is not susceptible of precise and comprehensive definition230. Mason J also indicated that the mere circumstance that a statute affects rights in issue in pending litigation does not involve any invasion of the judicial power231. The dispute in the present appeal concerning s 14(1) does not concern 225 (2009) 240 CLR 319 at 360 [77]. 226 (1992) 176 CLR 1 at 36-37, 53; [1992] HCA 64. 227 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 360 [77]. 228 (1970) 123 CLR 361 at 394; [1970] HCA 8. 229 Liyanage v The Queen [1967] 1 AC 259 at 290. 230 R v Humby; Ex parte Rooney (1973) 129 CLR 231 at 249-250; [1973] HCA 63. 231 R v Humby; Ex parte Rooney (1973) 129 CLR 231 at 250. See also Australian Building Construction Employees' and Builders Labourers' Federation v The Commonwealth (1986) 161 CLR 88 at 96; [1986] HCA 47; H A Bachrach Pty Ltd v Queensland (1998) 195 CLR 547 at 562-564 [17]-[20]; [1998] HCA 54. the operation of legislation upon pre-existing rights and liabilities to be enforced in pending litigation. Nor does s 14(1) itself merely alter what otherwise would be the rules of evidence by which the facts in issue are to be determined. The validity of a law of that description was upheld in Nicholas v The Queen232. Under various laws of the Commonwealth there arise "matters" within the meaning of s 76(ii) of the Constitution in which the significant element is some anterior decision or determination not made in the exercise of the federal judicial power. Examples are the enforcement in the State and Territory courts of foreign arbitral awards233, the registration in the Federal Court and State and Territory Supreme Courts of foreign judgments234, and the curial effect given to determinations of the Superannuation Complaints Tribunal established by the legislation upheld in Attorney-General (Cth) v Breckler235. The State legislation, the validity of which was upheld in Re Macks; Ex parte Saint236, created new rights and liabilities by reference to earlier ineffective judgments of federal courts, but did not change the character of those judgments and did not impermissibly interfere with the anterior judicial process. The factum, upon which turned the operation of the State legislation upheld in Fardon v Attorney-General (Qld)237, was the status of the respondent to the Attorney-General's application as a prisoner presently detained upon conviction for an offence of a certain nature. But I noted that validity may well have been imperilled by the legislative choice of a factum of some other character238. Moreover, in Nicholas239 I left for subsequent consideration the validity of a law deeming to exist any ultimate fact (including a state of affairs or vital circumstance) which is an element of the offence charged. This invites closer attention to the practical operation of s 14(1) of the Act and the significance of the Attorney-General's anterior determination under s 10(1). 232 (1998) 193 CLR 173; [1998] HCA 9. 233 International Arbitration Act 1974 (Cth), s 8. 234 Foreign Judgments Act 1991 (Cth), s 6. 235 (1999) 197 CLR 83 at 110-111 [42]-[45]; [1999] HCA 28. 236 (2000) 204 CLR 158; [2000] HCA 62. 237 (2004) 223 CLR 575; [2004] HCA 46. 238 (2004) 223 CLR 575 at 619 [108]. 239 (1998) 193 CLR 173 at 236 [155]-[156]. Section 14(1) is invalid The making of a control order under s 14(1) against a defendant is not an adjudication of the criminal guilt of that person. But the order is made in aid of the important legislative objective spelled out in s 4(1) of protecting members of the public from violence associated with organisations involved in "serious crime", and the order creates a norm of conduct breach of which is attended by the criminal sanction in s 22. Further, it is the executive branch which not only initiates the process of the Magistrates Court, by the Commissioner making the application, but also has by its own processes under Pt 2 already achieved the result that there exists a vital circumstance, the existence of a declaration by the Attorney-General, upon which the Court now must act. The Court must be satisfied of the membership of the defendant, but, as already explained in these reasons, the defendant need not have engaged or be likely to engage in criminal activity. The operation of s 14(1) may be contrasted with that of the legislation the validity of which was upheld in Thomas v Mowbray. Section 104.4 of the Criminal Code (Cth) required, among other matters, that the court be satisfied on the balance of probabilities that the making of the interim control order "would substantially assist in preventing a terrorist act" or that the person in question had "provided training to, or received training from, a listed terrorist organisation", these being offences under ss 101.1 and 102.5 of the Criminal Code. There was no anterior determination by the executive branch which was an essential element in the curial decision. The same is true of s 18 of the Criminal Organisation Act 2009 (Q), to which the Solicitor-General of that State referred. It conditions the power of the court upon its satisfaction that the respondent engages in, or has engaged in, serious criminal activity. The respondents submit that s 14(1) presents a case for invalidity stronger than that which succeeded in Kable v Director of Public Prosecutions (NSW)240. In Kable241 McHugh J said of the jurisdiction conferred on the Supreme Court of New South Wales by the Community Protection Act 1994 (NSW) that it was: "hardly distinguishable from those powers and functions, concerning the liberty of the subject, that the traditions of the common law countries have placed in Ministers of the Crown so that they can be answerable to Parliament for their decisions". 240 (1996) 189 CLR 51; [1996] HCA 24. 241 (1996) 189 CLR 51 at 122. His Honour added that the Supreme Court was not called upon to determine any contest as to whether the defendant had breached any law or other legal obligation; that being "the benchmark of an exercise of judicial power"242. The place of s 14(1) in the scheme of the Act is that it supplements the exercise by the Attorney-General of the politically accountable function conferred by Pt 2 with respect to the declaration of organisations. But that supplementation involves the conscription of the Magistrates Court to effectuate that political function. This is achieved by obliging the Magistrates Court to act upon the declaration by the executive, by making a control order in respect of the defendant selected by the Commissioner, subject only to the satisfaction of the Magistrates Court that the defendant is a member of the declared organisation. It is the declaration by the executive which provides the vital circumstance and essential foundation for the making by the Magistrates Court of the control order. The Solicitor-General for South Australia relied upon the range of matters to which the Magistrates Court was to have regard in considering the scope of the prohibitions imposed in each particular case by the control order (s 14(6)). But the primary requirement is that there must be a prohibition upon association with other members, except as may be specified in the order (s 14(5)). For these reasons, which develop proposition (i) upon which the Full Court majority founded their decision, s 14(1) of the Act requires the Magistrates Court to depart in a significant degree from the methods and standards which characterise the exercise of judicial power. A federal law in these terms would be repugnant to Ch III of the Constitution. But the Act is State legislation. As Callinan and Heydon JJ explained in Fardon243: "Although the test, whether, if the State enactment were a federal enactment, it would infringe Ch III of the Constitution, is a useful one, it is not the exclusive test of validity. It is possible that a State legislative conferral of power which, if it were federal legislation, would infringe Ch III of the Constitution, may nonetheless be valid. Not everything by way of decision-making denied to a federal judge is denied to a judge of a State. So long as the State court, in applying legislation, is not called upon to act and decide, effectively as the alter ego of the legislature or the executive, so long as it is to undertake a genuine adjudicative process and so long as its integrity and independence as a court are not compromised, 242 (1996) 189 CLR 51 at 122. 243 (2004) 223 CLR 575 at 655-656 [219]. then the Constitution." legislation in question will not infringe Ch III of the Counsel for Western Australia submitted that the respondents could have had no complaint if the Act had vested in the executive of South Australia both the function of declaring organisations under Pt 2 and that of making control orders under Pt 3. This was said to follow from the proposition that it is open to a State legislature to authorise a body other than a court to exercise judicial power. A corollary was said to be that a State law may authorise a body other than a court to punish criminal guilt by ordering the detention of the person244. These are large propositions for an intervener to advance and appear to go outside the contest between the immediate parties245. It is sufficient here to make two observations. As a general proposition, State legislatures may confer judicial powers on a body that is not a "court of a State" within the meaning of s 77(iii) of the Constitution246. But that does not involve acceptance of the corollary respecting enforcement of the criminal law. The submissions by Western Australia appeared to be directed to support an argument that because South Australia could have legislated in terms which did not seek to conscript any court of that State, but had not done so, there was a diminished case for the application of what was called the Kable doctrine. With some cogency, the respondents countered that consideration of what may or may not be the greater liberty of legislative action at the State rather than federal level serves to strengthen, not weaken, the constitutional rationale for the Kable doctrine. This Court should accept the submission by the respondents that the practical operation of s 14(1) of the Act is to enlist a court of a State, within the meaning of s 77(iii) of the Constitution, in the implementation of the legislative policy stated in s 4 by an adjudicative process in which the Magistrates Court is called upon effectively to act at the behest of the Attorney-General to an impermissible degree, and thereby to act in a fashion incompatible with the proper discharge of its federal judicial responsibilities and with its institutional integrity. Section 14(1) is invalid. 244 Cf Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 600 [40]. 245 See K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 544 246 K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 544 [153]. Orders There should be an expanded grant of special leave to include within the orders appealed from the orders of Bleby J made on 28 September 2009. The entire appeal should be dismissed with costs. Hayne 151 HAYNE J. Section 10(1) of the Serious and Organised Crime (Control) Act 2008 (SA) ("SOCCA") provides that: "If, on the making of an application by the Commissioner [of Police for South Australia] under [Pt 2 of SOCCA] in relation to an organisation, the Attorney-General is satisfied that— (a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; and the organisation represents a risk to public safety and order in this State, the Attorney-General may make a declaration under this section in respect of the organisation." Section 14(1) of SOCCA provides that: "The [Magistrates Court of South Australia] must, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that the defendant is a member of a declared organisation." On 14 May 2009, the Attorney-General for South Australia made a declaration about "the Finks Motorcycle Club operating in South Australia (including but not limited to: the Finks MC, Finks M.C. Incorporated, Finks M.C. INC and the Finks)" under Pt 2 of SOCCA. The Attorney-General published reasons for making the declaration. Those reasons described the application made by the Commissioner and the steps that the Attorney-General had taken after the application was received. Those steps included sending letters, by registered post, to the individuals who were thought to be members of the organisation. The letters stated that the application had been made, and invited the recipients to instruct a solicitor to look at the application and so much of the supporting statutory declaration as was not classified as criminal intelligence or would not ground a claim for public interest immunity. Not every letter that was sent reached the intended recipient. After the declaration was made, the Commissioner of Police applied to the Magistrates Court for a control order under s 14(1) of SOCCA directed to the second respondent in this appeal, Mr Hudson. The application was not served on Mr Hudson. The magistrate, being satisfied, on the balance of probabilities247, 247 Section 5 of the Serious and Organised Crime (Control) Act 2008 (SA) ("SOCCA") provides that: (Footnote continues on next page) Hayne that Mr Hudson was a member of a declared organisation (the Finks Motorcycle Club operating in South Australia), made a control order. By that order (made on 25 May 2009), Mr Hudson was prohibited from associating with other persons who are members of declared organisations (unless, in effect, the association occurred between members of a registered political party and not less than 48 hours prior notice was given to police). The order also prohibited Mr Hudson from possessing a dangerous article or a prohibited weapon within the meaning of s 15 of the Summary Offences Act 1953 (SA). Shortly after being served with the order, Mr Hudson gave notice of objection. A control order was also sought against the first respondent, Mr Totani, but the application for that control order was stayed pending the determination of these proceedings. Following the determination of the proceedings in the Supreme Court, to which reference will next be made, the Magistrates Court revoked the control order against Mr Hudson and Mr Totani instituted a proceeding in the Supreme Court of South Australia claiming a declaration that Pts 2 and 3 of SOCCA are, or in the alternative, s 14(1) of that Act is, "invalid and inoperative". In their statement of claim, each of Mr Hudson and Mr Totani described himself as "a member of the Finks Motorcycle Club Incorporated operating in South Australia". Pursuant to s 49 of the Supreme Court Act 1935 (SA) and r 294 of the Supreme Court Civil Rules 2006 (SA), Bleby J reserved for consideration of the Full Court four questions: Is section 10(1) of [SOCCA] a valid law of the State of South Australia? Is the declaration by the Attorney-General referred to in paragraph 6 of the Statement of Claim void and of no effect? Is section 14(1) of [SOCCA] a valid law of the State of South Australia? Is the control order in respect of Hudson made on 25 May 2009 void and of no effect?" "(1) Any question of fact to be decided by a court in proceedings under this Act is to be decided on the balance of probabilities. This section does not apply in relation to proceedings for an offence against this Act." Hayne By majority (Bleby and Kelly JJ, White J dissenting), the Full Court determined248 that it was not necessary to answer either question (1) (about the validity of s 10(1)) or question (2) (about the validity of the declaration made by the Attorney-General), but answered the other two questions. Question (3) (Is section 14(1) of the Act a valid law of the State of South Australia?) was answered "No". Question (4) (Is the control order in respect of Hudson made on 25 May 2009 void and of no effect?) was answered "Yes". The Full Court having answered in this way the questions reserved, Bleby J made final orders disposing of the proceedings instituted by Mr Totani and Mr Hudson by declaring that s 14(1) of SOCCA is invalid and inoperative, and that the control order against Mr Hudson made on 25 May 2009 is invalid and of no effect. The State was ordered to pay the plaintiffs' costs of the action. By special leave, the State appeals to this Court against the orders of the Full Court answering the questions reserved. Attention being drawn in argument to the fact that Bleby J had made orders finally disposing of the action, the State sought special leave to appeal against those orders. That leave should be granted, and the initial grant of special leave enlarged accordingly. The control order against Mr Hudson having been revoked, the only relief which the State seeks in this Court concerns the answer given by the Full Court to question (3), about the validity of s 14(1) of SOCCA, and the declaration made by Bleby J in consequence of that answer. The determinative issue in the appeal is whether s 14(1) of SOCCA is beyond the legislative power of the State of South Australia, on the ground that it infringes the limitation on State legislative power identified in Kable v Director of Public Prosecutions (NSW)249. That issue should be determined in favour of the respondents. Section 14(1) of SOCCA is invalid. To identify the particular issues that arise in this matter, it is necessary to say something more about the provisions of SOCCA. Relevant provisions of SOCCA Although ss 10(1) and 14(1) of SOCCA were the central focus of argument in the proceedings in the Supreme Court and in the appeal to this Court, account must be taken of a number of other provisions of the Act. First, s 4 provides the objects of the Act. It provides that: 248 Totani v South Australia (2009) 105 SASR 244. 249 (1996) 189 CLR 51; [1996] HCA 24. Hayne "(1) The objects of this Act are— to disrupt and restrict the activities of— organisations involved in serious crime; and the members and associates of such organisations; and to protect members of the public from violence associated with such criminal organisations. (2) Without derogating from subsection (1), it is not the intention of the Parliament that the powers in this Act be used in a manner that would diminish the freedom of persons in this State to participate in advocacy, protest, dissent or industrial action." the Both to an organisation) are given extended meanings by s 3 of the Act. "[O]rganisation" is defined as: terms "organisation" and "member" (in relation "any incorporated body or unincorporated group (however structured), whether or not the body or group is based outside South Australia, consists of persons who are not ordinarily resident in South Australia or is part of a larger organisation". Section 3 provides that "member", in relation to an organisation: "includes— in the case of an organisation that is a body corporate—a director or an officer of the body corporate; and in any case— (iii) an associate member or prospective member (however described) of the organisation; and a person who identifies himself or herself, in some way, as belonging to the organisation; and a person who is treated by the organisation or persons who belong to the organisation, in some way, as if he or she belongs to the organisation". It will be observed that the definition of "organisation" extends to bodies or groups "based outside South Australia", and to bodies or groups consisting of persons who are not ordinarily resident in South Australia. Section 6 of SOCCA Hayne reinforces what may otherwise follow from these extraterritorial features of the definition of "organisation" by providing that it "is the intention of the Parliament that this Act apply within the State and outside the State to the full extent of the extra-territorial legislative capacity of the Parliament". Part 2 of SOCCA (ss 8 - 13) deals with "declared organisations". Section 3 defines a "declared organisation" as "an organisation subject to a declaration by the Attorney-General under section 10". Section 8(1) permits the Commissioner of Police to apply to the Attorney-General for a declaration in respect of an organisation. Section 8(2) specifies the form and content of such an application. The application must be in writing250, identify the organisation in respect of which the declaration is sought251, set out the grounds on which the declaration is sought252, set out the information supporting the grounds on which the declaration is sought253, set out details of any previous application for a declaration in respect of the organisation and the outcome of that application254, and be supported by a statutory declaration from the Commissioner, or statutory declarations from other senior police officers255, verifying the contents of the application256. If the Commissioner makes an application for a declaration, the Attorney-General must publish a notice in the Gazette and in a newspaper circulating throughout the State, specifying that an application has been made, and inviting members of the public to make submissions to the Attorney-General in relation to the application within 28 days of the date of publication of the notice257. Section 10(2) forbids the making of a declaration before the period for making submissions in relation to it has expired. Section 10(3) identifies a number of different matters to which the Attorney-General may have regard in considering whether or not to make a declaration. 250 s 8(2)(a). 251 s 8(2)(b). 252 s 8(2)(c). 253 s 8(2)(d). 254 s 8(2)(e). 255 Defined in s 3 as police officers of or above the rank of inspector. 256 s 8(2)(f). Hayne It will be recalled that s 10(1) permits the Attorney-General to make a declaration under s 10 if satisfied of two matters. The matters of which the Attorney-General is to be satisfied are first, that "members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity" and second, that "the organisation represents a risk to public safety and order in this State". Further content is given to the first matter by s 10(4). That provides, in effect, that the Attorney-General may be satisfied of the first matter, whether or not all of the organisation's members associate for that purpose; whether or not members associate for the purpose of organising, planning, facilitating, supporting or engaging in the same serious criminal activities; and whether or not the members also associate for other purposes. If the Attorney-General is not satisfied that all members associate for the purpose identified in s 10(1), the Attorney must be satisfied that those members who do associate for that purpose "constitute a significant group within the organisation, either in terms of their numbers or in terms of their capacity to influence the organisation or its members"258. If the Attorney-General makes a declaration under s 10, s 13(1) provides that the Attorney is not required to provide any grounds or reasons for the declaration other than on the request of a person conducting a review in accordance with the provisions of Pt 6. (That Part provides for annual review and report as to the exercise of powers under the Act259, for a review of the operation and effectiveness of the Act as soon as practicable after the fourth anniversary of its commencement260 and for the Act to expire five years after the date of its commencement261.) The Attorney-General was not bound to give any reasons for declaring the Finks to be a declared organisation, let alone the comprehensive reasons that were in fact given. Two consequences follow from declaring an organisation to be a declared organisation. First, the provisions of Pt 3 of SOCCA, concerning control orders, may be engaged, and the Commissioner of Police may apply for a control order against a member of the organisation. Secondly, provisions of Pt 5 of SOCCA, dealing with offences, will also be engaged. But making a declaration has no consequence for the organisation itself. If incorporated, the organisation continues in existence. If it owns or uses property, the use and ownership of that property is unaffected. 258 s 10(4)(a). Hayne It is necessary to say something more about both the provisions relating to control orders and the provisions creating offences under SOCCA. Control orders As is apparent from what has already been said in these reasons, if the Magistrates Court is satisfied that a person against whom the Commissioner of Police seeks a control order is a member of a declared organisation, s 14(1) of SOCCA requires that the Court make a control order against that person. Section 14(2) provides that a control order may also be made in certain other circumstances. Those include262 where the defendant has been a member of a declared organisation, or engages, or has engaged, in serious criminal activity, and (in either case) "regularly associates with members of a declared organisation" or263 where the defendant engages, or has engaged, in serious criminal activity and regularly associates with other persons who engage, or have engaged, in serious criminal activity. It will not be necessary to explore in any detail all of the circumstances in which a control order may be made. It is enough to focus principal attention upon those which applied in the case of Mr Hudson: the Magistrates Court being satisfied that he is a member of a declared organisation. The only challenge to validity that is presently under consideration is to the validity of s 14(1). Section 14(3) provides that a control order may be issued on an application made without notice to any person. As noted earlier, the order made against Mr Hudson was obtained without notice to him. The grounds of an application for a control order must be verified by affidavit264. Section 14(5) deals with what may, and what must, be the content of a control order. In the case of a defendant who is a member of a declared organisation, s 14(5)(b) provides that a control order: "must prohibit the defendant from— associating with other persons who are members of declared organisations; and possessing— a dangerous article; or 262 s 14(2)(a). 263 s 14(2)(b). a prohibited weapon, Hayne (within the meaning of section 15 of the Summary Offences Act except as may be specified in the order". The operation of the exception provided by the last eight words of s 14(5)(b) was discussed in the course of argument. It was rightly accepted by the Solicitor-General for South Australia that the exception could not be engaged so as to negate the command of s 14(5)(b) by giving it an operation that would permit the Magistrates Court to make a control order without content. There must be, so the Solicitor-General for South Australia submitted, a minimum content in a control order. But that minimum content was not identified. In the end, argument proceeded on the footing that s 14(5)(b) required the Magistrates Court to frame a control order against a person found to be a member of a declared organisation in a way that prohibited the defendant from associating with any person who is a member of any declared organisation unless the person was specifically identified in the control order as excepted from its operation. Section 14(8) identifies what is meant by a person "associating" with another. It provides that: "For the purposes of this section, a person may associate with another person by any means including communicating with that person by letter, telephone or facsimile or by email or other electronic means." Section 16(1) provides that, subject to some limited exceptions, a control order must be served on the defendant personally. Section 16(4) provides that: "A control order is not binding on the defendant until it has been served on the defendant in accordance with this section." A person on whom a control order has been served may, within a limited time, lodge a notice of objection with the Magistrates Court265. Section 18 regulates the determination of an objection. The central task of the Court is identified by s 18(1) as being to "consider whether, in the light of the evidence presented by both the Commissioner and the objector, sufficient grounds existed for the making of the control order". In the case of a control order made under s 14(1), the focus of attention in an objection hearing would be whether the Magistrates Court had sufficient grounds to conclude that "the defendant is a member of a declared organisation". As will later be explained, the Solicitor-General for South Australia accepted that, in objection proceedings, a Hayne defendant could mount a collateral challenge the Attorney-General's declaration of the organisation as well as challenge the finding of membership. the validity of The objection procedure constitutes the gateway to an appeal to the Supreme Court. Section 19(1) provides that the Commissioner or an objector may appeal to the Supreme Court against a decision of the Magistrates Court on a notice of objection. An appeal lies as of right on a question of law, and with permission on a question of fact266. Offences Contravention of, or failure to comply with, a control order is an offence punishable by imprisonment for up to five years267. What amounts to contravention or failure is to be determined in accordance with s 22(2), which provides that: "A person does not commit an offence against this section in respect of an act or omission unless the person knew that the act or omission constituted a contravention of, or failure to comply with, the order or was reckless as to that fact." Part 5 of SOCCA (ss 35 - 36) deals with offences. Section 35 creates offences of a kind identified by the heading to the section as "[c]riminal associations". A person who associates, on not less than six occasions during a period of 12 months, with a person who is either a member of a declared organisation, or the subject of a control order, is guilty of an offence punishable by imprisonment for up to five years268. A person does not commit that offence unless269: "on each occasion on which it is alleged that the person associated with another, the person knew that the other was— a member of a declared organisation; or a person the subject of a control order, Hayne or was reckless as to that fact". Section 35(6) identifies a number of forms of association that are to be disregarded for the purposes of s 35, unless the prosecution proves that the association was not reasonable in the circumstances. The associations to be disregarded include associations between close family members, and associations occurring in the course of a lawful occupation, business or profession. In addition, a court hearing a charge of an offence against s 35 may determine that an association is to be disregarded if the defendant proves that he or she had a reasonable excuse for the association270. But the provision permitting courts to take this step does not apply to an association if, at the time of the association, the defendant was a member of a declared organisation, was subject to a control order, or had a criminal conviction (whether against the law of South Australia or of another jurisdiction) of a kind prescribed for the purposes of s 35(3). There are several observations to make about these offence provisions. First, it is important to recognise that the control order itself imposes a number of disadvantages upon the person who is subject to it. Describing the disadvantages imposed by a control order as "penal" or "punitive" may distract attention from what it is that the order does, by obliging debate about the definition of terms like "penal" or "punitive". That debate need not be explored. What matters for present purposes is that a control order affects a defendant by limiting that defendant's freedom. The offence which is created by s 22, of contravening or failing to comply with a control order, is an offence which, upon proof, will lead to punishment of the offender. But the punishment thus imposed by a court is for failure to comply with the curially determined and imposed restrictions on freedom that are set out in the control order. Secondly, it is important to recognise that the operation of ss 22 and 35 overlaps. Both sections operate to proscribe association with members of a declared organisation. Both could apply to the conduct of a person who is a member of a declared organisation. Section 14(5)(b)(i) requires the Magistrates Court to prohibit a defendant who is a member of a declared organisation from associating with other persons who are members of declared organisations. It follows that s 22, in effect, makes it an offence for a member of a declared organisation who is the subject of a control order to associate with any member of any declared organisation. An offence is committed under s 22 every time a person subject to a control order associates with a member of a declared organisation. Hayne Section 35 is directed more generally. Sub-sections (1) and (2) deal with association with a person who is a member of a declared organisation and association with a person who is the subject of a control order. Those sub-sections provide, in effect, that it is an offence for any person to associate with a member of a declared organisation, or a person who is the subject of a control order, on not less than six occasions during a period of 12 months, if that person knew, on each occasion, that the other was a member of a declared organisation or the subject of a control order, or was reckless as to that fact. Section 35 can thus be seen to create an offence that is very like consorting offences of the kind considered in Johanson v Dixon271. Section 35 makes repeated association with members of a declared organisation a crime. By contrast, s 22 makes any association in breach of a control order a crime, but applies only to a person in respect of whom the Magistrates Court has made a control order. The third feature to notice about the offence provisions of SOCCA is that s 35 makes a very wide range of conduct criminal. Section 35(6) provides that some forms of association will be disregarded for the purposes of the section, "unless the prosecution proves that the association was not reasonable in the circumstances". Those forms of association include associations between close family members, and associations "occurring in the course of a lawful occupation, business or profession". But noticeably absent from the exceptions is any that would cover everyday forms of association that would be constituted by communications between friends outside immediate family and work. The fourth, and final, point to make about the offence provisions is that, because the only provision which is challenged in these proceedings is s 14(1), the only aspects of the offence provisions which are brought into question are those which are engaged by the making of a control order under s 14(1). Thus, to take only one example, the operation of s 35(1)(a) (prohibiting association with a member of a declared organisation on not less than six occasions) is not challenged in, or affected by the outcome of, this litigation. Before further identifying the issues that arise in the appeal, it is convenient to deal with the Full Court's decision. The Full Court's decision A critical step in the reasoning of Bleby J, with whose reasons Kelly J agreed272, depended upon comparing the nature and extent of the roles performed 271 (1979) 143 CLR 376; [1979] HCA 23. 272 (2009) 105 SASR 244 at 305 [277]. Hayne first by the Attorney-General, and then by the Magistrates Court, that would culminate in the making of a control order. Bleby J concluded273 that four elements had to be established to obtain a control order: (a) members of the organisation of which the defendant to the application for a control order is alleged to be a member associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; the organisation in question represents a risk to public safety and order in South Australia; the making of the declaration; and (d) membership by the defendant of the organisation the subject of the declaration. As Bleby J pointed out274, the third and fourth elements must be established to the satisfaction of the Court, but the first two elements are to be established275 to the satisfaction of the Attorney-General. Bleby J described276 the first two elements as "the most factually complex matters that have to be established". Thus, his Honour continued277: "[t]he relatively much more significant and complex factual inquiry is removed from the court to the Attorney-General. The Attorney-General is not subject to or bound by the rules of evidence or any standard of proof. He can act on whatever information he pleases and give it whatever weight he pleases." The second important element in the reasoning of Bleby J was, as he put it278: "[t]he Attorney-General's findings are unreviewable279. They are, in effect, 273 (2009) 105 SASR 244 at 280 [152]. 274 (2009) 105 SASR 244 at 280 [153]. 275 (2009) 105 SASR 244 at 280 [154]. 276 (2009) 105 SASR 244 at 280 [154]. 277 (2009) 105 SASR 244 at 280 [155]. 278 (2009) 105 SASR 244 at 280 [155]. 279 SOCCA, s 41. Hayne binding on the court." What Bleby J characterised280 as the requirement of SOCCA for the Magistrates Court "to act on what is, in effect, the certificate of the Attorney-General that elements 1 and 2 are proved, with no ability to go behind that certificate" was281 "sufficient to undermine the institutional integrity of the court, as the most significant and essential findings of fact are made not by a judicial officer but by a Minister of the Crown". The Act required, in his Honour's opinion282, "the integration of the administrative function with the judicial function to an unacceptable degree which compromises the institutional integrity of the court" with the result that the outcome of the judicial process "is controlled, to a significant and unacceptable extent, by an arm of the Executive Government which destroys the court's integrity as a repository of federal jurisdiction". Two elements of the reasoning of Bleby J require separate consideration: first, the conclusion that the decision of the Attorney-General, to make a declaration under s 10, is not reviewable, and secondly, that a comparison of the "size" or "complexity" of the task of the Attorney-General under s 10 and the task of the Magistrates Court under s 14(1) is useful. Declaration reviewable? The conclusion that the decision of the Attorney-General to declare an organisation to be a "declared organisation" is unreviewable should not be accepted. To explain why that is so, it is necessary to consider the meaning and operation of s 41 of SOCCA. That section provides: "(1) Except as otherwise provided in this Act, no proceeding for judicial review or for a declaration, injunction, writ, order or other remedy may be brought to challenge or question— a decision, determination, declaration or order under this Act or purportedly under this Act; or proceedings or procedures under this Act or purportedly under this Act; or an act or omission made in the exercise, or purported exercise, of powers or functions under this Act; or 280 (2009) 105 SASR 244 at 280 [155]. 281 (2009) 105 SASR 244 at 280 [156]. 282 (2009) 105 SASR 244 at 280-281 [157]. Hayne an act, omission, matter or thing incidental or relating to the operation of this Act. The validity and legality of a declaration under Part 2 cannot be challenged or questioned in any proceedings. The validity and legality of a control order or a public safety order cannot be challenged or questioned in proceedings for an offence against this Act." In this Court, the Solicitor-General for South Australia submitted283 that a defendant to an application for a control order may collaterally challenge the Attorney-General's declaration. He also accepted that the Supreme Court of South Australia had jurisdiction to grant relief in the nature of certiorari to quash any declaration purportedly made under s 10 which was made in excess of jurisdiction. The first of these submissions, about collateral challenge, treated s 41(2) of SOCCA as controlling any challenge to the validity or legality of a declaration made under Pt 2. Although not expressed in these terms, the submission appeared to proceed from the premise that the specific provisions of s 41(2), dealing with the validity and legality of a declaration under Pt 2, should be treated as applicable even if the more generally expressed prohibitions in s 41(1) might otherwise be capable of application284. It is not necessary, however, to examine whether that construction of s 41 should be adopted. It is sufficient, for present purposes, to observe that, whether or not the Attorney-General's declaration can be the subject of collateral challenge in objection proceedings in the Magistrates Court, judicial review of the Attorney-General's decision will be available in the Supreme Court285. Because the power given to the Attorney-General by s 10 of SOCCA depends upon the Attorney-General being satisfied of certain matters, judicial 283 Referring in this connection to Ousley v The Queen (1997) 192 CLR 69; [1997] HCA 49. 284 cf Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom (2006) 228 CLR 566 at 583-590 [43]-[61]; [2006] HCA 50; Downey v Trans Waste Pty Ltd (1991) 172 CLR 167; [1991] HCA 11; Leon Fink Holdings Pty Ltd v Australian Film Commission (1979) 141 CLR 672; [1979] HCA 26; R v Wallis ("the Wool Stores Case") (1949) 78 CLR 529; [1949] HCA 30; Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7; [1932] HCA 9. 285 Kirk v Industrial Court (NSW) (2010) 239 CLR 531; [2010] HCA 1. Hayne review of the Attorney-General's decision, on grounds other than want of procedural fairness, would be governed by the principles described by Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation286. As Dixon J said in Avon Downs, with particular reference to a question depending upon the satisfaction of the Commissioner of Taxation287: "If he does not address himself to the question which the sub-section formulates, if his conclusion is affected by some mistake of law, if he takes some extraneous reason into consideration or excludes from consideration some factor which should affect his determination, on any of these grounds his conclusion is liable to review. Moreover, the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision. The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some such misconception. If the result appears to be unreasonable on the supposition that he addressed himself to the right question, correctly applied the rules of law and took into account all irrelevant considerations, then it may be a proper inference that it is a false supposition. It is not necessary that you should be sure of the precise particular in which he has gone wrong. It is enough that you can see that in some way he must have failed in the discharge of his exact function according to law." relevant considerations and no the The forensic difficulties of mounting such a challenge to the decision of the Attorney-General to make a declaration under s 10 of SOCCA would be very large. Those difficulties would be compounded if, as may well be the case, not all of the information before the Attorney-General could be inspected by the party seeking judicial review. To the extent to which the Attorney-General acted upon criminal intelligence, s 21288 of SOCCA would appear, on its face, to 286 (1949) 78 CLR 353; [1949] HCA 26. 287 (1949) 78 CLR 353 at 360. 288 Section 21 provides: "(1) No information provided by the Commissioner to a court for the purposes of proceedings relating to the making, variation or revocation of a control order may be disclosed to any person (except to the Attorney-General, a person conducting a review under Part 6, a court or a person to whom the Commissioner authorises its disclosure) the the Commissioner as criminal intelligence. is properly classified by information (Footnote continues on next page) Hayne preclude a court from making that material available to the applicant for judicial review. In addition, the Attorney-General may act upon information in respect of which it would be proper for the Attorney to claim public interest immunity from production. In such circumstances, for an applicant for judicial review to show that the Attorney-General's decision was affected by some mistake of law, or that the Attorney-General took some extraneous reason into consideration, or excluded from consideration a factor which should affect the determination, would be very difficult. But the decision is not unexaminable for jurisdictional error. And, as the Solicitor-General for South Australia also accepted, it could be challenged for want of procedural fairness. These conclusions, about the availability of judicial review of the validity of a declaration made under s 10, do not decide the inquiry about the validity of s 14(1). One reason that the availability of judicial review does not conclude the inquiry is exposed by considering the relationship between the two steps of making a declaration under s 10 and making an order under s 14(1). The first step, of making a declaration under s 10, directs attention to the activities of individuals. It then requires a conclusion about the organisation of which those individuals are members. The second step, of making an order under s 14(1), directs attention to membership of a declared organisation. It does not direct any attention to any past or future activity of any person, be it a person whose activities were examined when considering whether to make a declaration under s 10, or any other person. The second step, of making an order under s 14(1), does not direct attention to any feature of the organisation other than its being a declared organisation. The subject of inquiry at the second step, of making an order under s 14(1), can thus be seen to be different, and disconnected, from the subject of inquiry at the earlier step of making an order under s 10. The only link between the two steps (under s 10 and s 14(1)) is provided by the identification of the defendant to an application for a control order as a member of a declared organisation. That the declaration relied on as founding the application has been properly made does not bear upon the issue of membership which the Magistrates Court is required to determine. In any proceedings relating to the making, variation or revocation of a control order, the court determining the proceedings— (a) must, on the application of the Commissioner, take steps to maintain the confidentiality of information properly classified by the Commissioner as criminal intelligence, including steps to receive evidence and hear argument about the information in private in the absence of the parties to the proceedings and their representatives ...". Hayne In these circumstances, the validity of s 14(1) is best examined on the assumption that the relevant declaration of an organisation has been properly made. Comparison of the "size" or "complexity" of the tasks One other matter, taken up in the reasons of Bleby J, may also be put aside from consideration. It may be right, in the present case, to say that the task which the Attorney-General undertook in determining whether to declare the Finks to be a declared organisation was much more factually complex than the inquiry which the Magistrates Court had to undertake in determining whether Mr Hudson was a member of that organisation. It may very well be that a similar comparison could be made in most, if not all, cases in which there has been, first, a decision by the Attorney-General to declare an organisation, and secondly, a decision by the Magistrates Court whether a person is a member of a declared organisation. It is greatly to be doubted, however, that comparison of the size or complexity of the respective tasks is useful in determining whether the relevant provisions of SOCCA are valid. The conclusion reached by Bleby J289 that "[i]n a very real sense the court is required to '[act] as an instrument of the Executive'290" depends, for its force, not upon comparison of the respective size or complexity of the tasks undertaken by the executive and the judicial branches of government, but upon the nature of the relationship that the legislation establishes between the two branches of government. The principle in Kable Section 106 of the Constitution provides that "[t]he Constitution of each State of the Commonwealth shall, subject to this Constitution, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be, until altered in accordance with the Constitution of the State" (emphasis added). The reference in s 106 to "subject to this Constitution" is important. Kable dealt with one respect in which the Constitutions of the States are affected by the federal Constitution: the legislative powers of the States are not unlimited. The relevant limitation is not one which follows from any separation of judicial and legislative functions under 289 (2009) 105 SASR 244 at 280 [156]. 290 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 76 [63]; [2006] HCA 44. Hayne the Constitutions of the States291. Rather, it is a consequence that follows from Ch III establishing, in Australia, "an integrated Australian legal system, with, at the this Court of its apex, Commonwealth"292. judicial power of the exercise by the the exercise of incompatible with judicial power"294. The immediate focus in Kable was upon State legislation which sought to impose, on a State court, powers or functions repugnant to, or incompatible with, the exercise by State courts of the judicial power of the Commonwealth293. The jurisdiction to be exercised under the Act in question in Kable was, by its "very nature The incompatibility with, or repugnancy to, judicial process lay in the procedures laid down by the legislation for the further incarceration of Mr Kable. Those procedures were incompatible with, or repugnant to, the exercise of judicial power because, apart from certain well-recognised exceptions295, "the involuntary detention of a citizen in custody by the State is penal or punitive in character and, under our system of government, exists only as an incident of the exclusively judicial function of adjudging and punishing criminal guilt"296. In Kable, the Act in question drew in "the Supreme Court of a State as an essential and determinative integer of a scheme whereby, by its order, an individual is incarcerated … otherwise than for breach of the criminal law"297. It thereby "sapped to an impermissible degree" the Supreme Court's appearance of institutional impartiality298. In Fardon v Attorney-General (Qld)299, the Court considered the application of these principles to State legislation providing more generally for a 291 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 95 per 292 (1996) 189 CLR 51 at 143 per Gummow J. 293 (1996) 189 CLR 51 at 104 per Gaudron J. 294 (1996) 189 CLR 51 at 95 per Toohey J. 295 Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 27-29; [1992] HCA 64. 296 (1992) 176 CLR 1 at 27 per Brennan, Deane and Dawson JJ. 297 (1996) 189 CLR 51 at 133 per Gummow J. 298 (1996) 189 CLR 51 at 133-134 per Gummow J. 299 (2004) 223 CLR 575; [2004] HCA 46. Hayne system of preventive detention: the Dangerous Prisoners (Sexual Offenders) Act 2003 (Q). The Court distinguished Kable and held the Act to be valid. In Fardon, Gummow J made300 a number of points about the principle for which Kable is authority. They serve to identify a number of issues that fall for consideration in this matter. First, it was a particular combination of features of the New South Wales Act in issue in Kable that led to its invalidity: "[t]hese included the apparent legislative plan to conscript the Supreme Court of New South Wales to procure the imprisonment of the appellant by a process which departed in serious respects from the usual judicial process"301. Secondly, the essential notion about which the principle in Kable hinges "is that of repugnancy to or incompatibility with that institutional integrity of the State courts which bespeaks their constitutionally mandated position in the Australian legal system"302. Thirdly, an important indication that a particular law is repugnant to, or incompatible with, that institutional integrity is "that the exercise of the power or function in question is calculated, in the sense of apt or likely, to undermine public confidence in the courts exercising that power or function"303. But perception as to the undermining of public confidence "is an indicator, but not the touchstone, of invalidity; the touchstone concerns institutional integrity"304. Finally, as is the case in other areas of constitutional doctrine305, "the critical notions of repugnancy and incompatibility are insusceptible of further definition in terms which necessarily dictate future outcomes"306. 300 (2004) 223 CLR 575 at 617-619 [100]-[105]. 301 (2004) 223 CLR 575 at 617 [100]. 302 (2004) 223 CLR 575 at 617 [101]. 303 (2004) 223 CLR 575 at 617 [102]. 304 (2004) 223 CLR 575 at 618 [102]. 305 (2004) 223 CLR 575 at 618 [103]. 306 (2004) 223 CLR 575 at 618 [104]. Hayne As Gummow J also pointed out in Fardon307, the proposition stated by Brennan, Deane and Dawson JJ in Chu Kheng Lim v Minister for Immigration308, that "the involuntary detention of a citizen in custody by the State is penal or punitive in character and, under our system of government, exists only as an incident of the exclusively judicial function of adjudging and punishing criminal guilt", was applied as a step in the reasoning in Kable of Toohey J309 and Gummow J310, and was reflected in the reasoning of Gaudron J311 and McHugh J312. But as Gummow J also pointed out in Fardon313, the expression of a constitutional principle in this form has a number of indeterminacies. First, there is the difficulty of identifying the beneficiary of the principle as "a citizen". Secondly, there are difficulties associated with the phrase "criminal guilt". As was pointed out in Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd314, the litigious world cannot be neatly divided into only two parts: one civil, the other criminal. Having regard to these matters, Gummow J proffered315, as a formulation of the relevant principle derived from Ch III, "that, the 'exceptional cases' aside, the involuntary detention of a citizen in custody by the State is permissible only as a consequential step in the adjudication of criminal guilt of that citizen for past acts". The reference, in this formulation of principle, to adjudication of criminal guilt "for past acts" takes account of what was held in Polyukhovich v The Commonwealth (War Crimes Act Case)316. It is a formulation which omits 307 (2004) 223 CLR 575 at 611 [77]. 308 (1992) 176 CLR 1 at 27. 309 (1996) 189 CLR 51 at 97-98. 310 (1996) 189 CLR 51 at 131-132. 311 (1996) 189 CLR 51 at 106-107. 312 (1996) 189 CLR 51 at 121-122. 313 (2004) 223 CLR 575 at 611-613 [78]-[84]. 314 (2003) 216 CLR 161 at 198-199 [114]; see also at 172-173 [29]; [2003] HCA 49. 315 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 612 [80]. 316 (1991) 172 CLR 501; [1991] HCA 32. Hayne reference to detention being "penal or punitive in character"317. Instead, by describing the relevant principle by reference to involuntary detention, attention is directed to what has happened, rather than to any attempted characterisation of the effect of, or the purpose that may lie behind, the detention. It is to be observed, however, that all of the circumstances considered in Chu Kheng Lim and Fardon, in which there can be the involuntary detention of a citizen, whether within or without the class of "exceptional cases", depend for their engagement upon one or more factors specific to the person who is to be detained. Section 14(1) of SOCCA does not provide for involuntary detention of any person. It provides for other restrictions on the freedom of the person who is the subject of a control order. But, as the decision in International Finance Trust Co Ltd v New South Wales Crime Commission318 demonstrates, the limitation on State legislative power that was identified in Kable is not confined to legislation imposing or resulting in involuntary detention. It is a limitation whose roots lie deeper than particular issues presented by questions of involuntary detention. Those roots lie in the Constitution's establishment of an integrated legal system. And the principle which is supported by those roots directs attention to repugnancy to, or incompatibility with, the constitutional integrity of State courts. Questions of repugnancy or incompatibility are not necessarily confined to cases where there is involuntary detention. And in the end, no party or intervener in this appeal submitted to the contrary. largely dismissed from further consideration: Section 14(1) of SOCCA requires the Magistrates Court, if it is satisfied that the defendant is a member of a declared organisation, to order other, lesser restrictions of the defendant's freedom than involuntary detention. One of those restrictions may be the requirement that a control order prohibit the defendant from possessing articles of a kind whose possession, without lawful excuse, is an offence under s 15 of the Summary Offences Act 1953. That aspect of the control order does no more than require the defendant to obey the law. Rather, in considering the validity of s 14(1), attention must focus upon the requirement that a control order limit the defendant's freedom of association by prohibiting the defendant from associating with any member of any declared organisation, apart, perhaps, from a person specifically excepted from the reach of the order by exercise of the power under s 14(5)(b). The possibility of exercise of the power to make an exception under s 14(5)(b) may be put aside from further consideration. The validity of the legislation is to be determined by reference to its intended legal and practical 317 Fardon (2004) 223 CLR 575 at 612 [81]. 318 (2009) 240 CLR 319; [2009] HCA 49. Hayne operation. And although the focus of attention will necessarily fall upon the limitations that a control order imposes on the freedom of the person who is subject to the order, the nature and effect of those limitations must be understood in the light of the offence provisions of s 35. More particularly, it is important to recall that it is a crime for anyone who knows of a control order to associate with the subject of that order six or more times in 12 months, unless their association falls within one of the specified exceptions mentioned in s 35(6). As the statement of objects of SOCCA, set out in s 4, makes plain, one of the principal objects of the Act is "to disrupt and restrict" the activities of organisations involved in serious crime. Section 14(1) evidently seeks to contribute to that object by restricting the freedom of association of members of declared organisations. It does that, however, by requiring the Magistrates Court to make an order that prohibits a defendant associating with any member of any declared organisation. Several aspects of the prohibition contemplated by s 14(1) are important. First, and foremost, the prohibition is to be imposed by reason of membership of a declared organisation, regardless of whether the Attorney-General has found that the defendant is one of those members of the organisation who associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity. And, of course, that question is not asked in the proceedings in the Magistrates Court. It follows that the freedom of association of a defendant may be restricted where neither the executive nor the judicial branch has made any determination about what he or she has done, intends to do, or is likely to do in connection with "serious criminal activity". That is, the disadvantages imposed by an order are imposed regardless of what the person disadvantaged has done, intends to do, or may do. Secondly, the restriction on association that is to be imposed under s 14(1) is a restriction on association, not only with other members of the organisation of which the defendant is a member, but also with the members of any other declared organisation. When regard is had to the fact that "member" includes not only those who see themselves as members of a particular organisation, but also those whom the organisation treats as members, the reach of the prohibition effected by a control order made under s 14(1) can be seen to extend well beyond any disruption or prevention of anticipated conduct by the defendant which would fall within the criterion which authorised the Attorney-General to make a declaration under s 10. Next, it is important to notice that the prohibition on association, which is effected by a control order, prohibits association between members of an organisation whose continued existence is not made unlawful, whether by SOCCA or by any other law. And a control order prohibits association between a person who is a member of a declared organisation and any member of any Hayne other declared organisation although the continued existence of those other organisations is not made unlawful. Although s 14(1) of SOCCA requires the Magistrates Court to determine any controversy about whether the defendant is a member of a declared organisation, it does not require the Court to ascertain, declare or enforce the rights or liabilities of the parties to the application for a control order as those rights and liabilities exist at the time the proceedings are instituted319. Rather, s 14(1) obliges the Magistrates Court to make an order which for the most part creates new obligations. (The qualification, "for the most part", is made necessary by the requirement for the control order to prohibit possession of offensive weapons.) It is the new obligations created by the order (including the obligation to refrain from associating with certain persons) with which s 22 engages to make the breach of the obligations a crime. The fact that a relevant obligation finds its immediate origin in a court order is an unremarkable consequence of the exercise of many forms of judicial power. But the creation and imposition of that obligation depends, in every case, upon the court's ascertainment of rights or liabilities, or upon its determination that the order will conduce to future conformity with rights and liabilities. When a court awards judgment for damages, or other forms of final relief, it does so as a remedy for a breach of rights. When a court punishes a person convicted of crime, it does so in consequence of adjudication of guilt for past acts. When a court orders an injunction, it does so to prevent future contravention of existing rights. And, as will later be further explained, when a court makes an order to prevent future wrongdoing, it does so on its assessment of the connection between the order proposed and past or future conduct of the person to be restrained, or on its assessment of the connection between the order and a combination of past and possible future acts. Section 14(1) of SOCCA does not operate in any of these ways. It is well-established that, in considering the judicial power of the Commonwealth, the "concept [of judicial power] seems … to defy, perhaps it were better to say transcend, purely abstract conceptual analysis"320. And although this Court has identified factors to be taken into account in assessing what is judicial power, "no single combination of necessary or sufficient factors 319 R v Kirby; Ex parte Boilermakers' Society of Australia ("the Boilermakers' Case") (1956) 94 CLR 254 at 281; [1956] HCA 10. 320 R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 394 per Windeyer J; [1970] HCA 8. Hayne identifies what is judicial power"321. A distinction, often offered322 in connection with the discussion of the judicial power of the Commonwealth, seeks to differentiate between the determination of rights and liabilities and the creation of rights and liabilities, the former being identified as typical of judicial power and the latter as indicating that the power engaged is non-judicial. But as decisions like R v Davison323 show, the absence of any dispute about existing rights and liabilities does not, of itself, entail the conclusion that there is no exercise of the judicial power of the Commonwealth. And as one writer has recently suggested324, "[t]he guiding principle of rights-determination versus rights-creation has proved to be imprecise and malleable". It is, none the less, both right and important to observe that the determination of rights and liabilities lies at the heart of the judicial function, and that the creation of rights and liabilities lies at the heart of the legislative function. Of course, it is also important to recognise that there can be no direct translation of what has been said about issues that arise directly under Ch III to the present case. This case is concerned with a limitation on State legislative power that does not follow from any separation of judicial and legislative functions under the Constitutions of the States; the limitation follows from Ch III establishing an integrated legal system with, at its apex, this Court exercising the judicial power of the Commonwealth. Section 14(1) of SOCCA exhibits three, connected, features that are critical to consideration of its validity. First, the court that makes an order under s 14(1) does not ascertain, declare or enforce any right or liability that exists at the time the proceedings are instituted. Secondly, the court's order creates new and particular restrictions on association. The restrictions are particular in two respects. They are particular in that they are directed only to the defendant in question. They are also particular in that they do not reflect, let alone give effect to, any more general legislative proscription of any and every act of association between or with members of a declared organisation. Thirdly, the court must make the order against the particular defendant, without the court making any inquiry for itself about what the subject of the order has done, or may do in the 321 Attorney-General (Cth) v Alinta Ltd (2008) 233 CLR 542 at 577 [93]; [2008] HCA 2. 322 Australian Boot Trade Employés Federation v Whybrow & Co (1910) 10 CLR 266; [1910] HCA 8; Boilermakers' Case (1956) 94 CLR 254 at 281. 323 (1954) 90 CLR 353; [1954] HCA 46. 324 Stellios, The Federal Judicature: Chapter III of the Constitution (2010) at 207 Hayne future, or any inquiry about what the executive may have concluded that the subject of the order has done, or may do in the future. Section 14(1) of SOCCA thus stands in sharp contrast with the provisions of the Criminal Code (Cth) that were in issue in Thomas v Mowbray325. Provisions of Div 104 of Pt 5.3 of the Criminal Code permitted the making of control orders in relation to a person in certain circumstances. Those circumstances included the issuing court being satisfied that "making the order would substantially assist in preventing a terrorist act" or that the person against whom the order was to be made was a person who "has provided training to, or received training from, a listed terrorist organisation"326. Moreover, s 104.4(1)(d) of the Criminal Code provided that an issuing court may make a control order of the kind in issue in Thomas v Mowbray "only if ... satisfied ... that each of the obligations, prohibitions and restrictions to be imposed on the person by the order is reasonably necessary, and reasonably appropriate and adapted, for the purpose of protecting the public from a terrorist act" (emphasis added). Unlike s 14(1) of SOCCA, the provisions of the Criminal Code in issue in Thomas v Mowbray thus required the issuing court to be satisfied either that the person against whom the order was to be made had engaged in particular past conduct, or that the order would have an identified consequence. The past conduct in issue under the Criminal Code provisions was conduct which the Criminal Code made unlawful. The relevant consequence (of protecting the public from a terrorist act) had to be related directly to the defendant (as did the fact of past conduct), because a control order could be made only if each particular aspect of the proposed order (as it operated against the defendant) was both reasonably necessary and reasonably appropriate and adapted for the purpose of protecting the public from a terrorist act. And, as explained in Thomas v Mowbray327, other forms of preventive order, like apprehended violence orders, depend upon inquiries no different in substance from those that were required under the provisions in issue in that case. In summary, then, s 14(1) requires the Magistrates Court to perform functions that have the following characteristics: upon application by the Executive, the Magistrates Court must make a control order against a person who is shown to be a member of a declared organisation; 325 (2007) 233 CLR 307; [2007] HCA 33. 326 s 104.4(1)(c). 327 (2007) 233 CLR 307 at 328-329 [16], 347-348 [79]. Hayne a control order imposes significant restrictions on the defendant's freedom of association, over and above the restrictions that are generally applicable to others dealing with members of declared organisations; a control order must be imposed without any judicial determination (and without the need for any executive determination) that the defendant has engaged, or will or may engage, in criminal conduct; a control order will preclude the defendant's association with others in respect of whom there has been no judicial determination (and without the need for any executive determination) that those others have engaged, or will or may engage, in criminal conduct; a control order creates new norms of conduct, contravention of which is a crime; (f) making a control order neither depends upon, nor has the consequence of, ascertaining, declaring or enforcing any existing right or liability, whether of the defendant, any other member of the subject organisation, the subject organisation itself, or any other organisation (declared or not). All of these features of the task that is given to the Magistrates Court are important to the conclusion that performance of that task is repugnant to, or incompatible with, the institutional integrity of the Court. The task is repugnant to, or incompatible with, the institutional integrity of the Court because the Court is enlisted, by the Executive, to make it a crime, for particular persons upon whom the Executive fixes, to associate together when, but for the Court's order, the act of association (as distinct from repeated and persistent associations of the kind with which s 35 deals) would not be a crime. Those whom the Executive chooses, for the compulsory imposition of a special regime by order of the Magistrates Court, must be drawn from a group determined by the Executive to be an organisation that "represents a risk to public safety and order in [the] State"328. But it is no part of the function of the Magistrates Court under SOCCA to determine what the particular defendant has done, or may do in the future. The Court is required to act on the assumption that "membership" of a declared organisation requires imposition of limitations on the freedom of the defendant which are not otherwise imposed, when the legislation does not make either the fact of membership of the organisation, or the continued existence of the organisation, unlawful. That is, upon the motion of the Executive, the Court is required to create new norms of conduct, that apply to a particular member of a class of persons who is chosen by the Executive, on the footing that the 328 s 10(1)(b). Hayne Executive has decided that some among the class (who may or may not include the defendant) associate for particular kinds of criminal purposes. It is not the business of the courts, acting at the behest of the executive, to create such norms of conduct without inquiring about what the subject of that norm has done, or may do in the future. To be required to do so is repugnant to the institutional integrity of the courts. It is desirable to amplify a number of aspects of these points. In considering the nature of the task that s 14(1) requires the Magistrates Court to perform, it is important to recall that, as Kitto J said in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd329: "[A] judicial power involves, as a general rule, a decision settling for the future, as between defined persons or classes of persons, a question as to the existence of a right or obligation, so that an exercise of the power creates a new charter by reference to which that question is in future to be decided as between those persons or classes of persons. In other words, the process to be followed must generally be an inquiry concerning the law as it is and the facts as they are, followed by an application of the law as determined to the facts as determined; and the end to be reached must be an act which, so long as it stands, entitles and obliges the persons between whom it intervenes, to observance of the rights and obligations that the application of law to facts has shown to exist. It is right, I think, to conclude from the cases on the subject that a power which does not involve such a process and lead to such an end needs to possess some special compelling feature if its inclusion in the category of judicial power is to be justified." (emphasis added) Section 14(1) of SOCCA does not permit or require the Magistrates Court to determine the existence of any right or obligation. The Court is required to make a control order without enquiring how, if at all, that order will contribute to the legislative object of disrupting the criminal activities of identified groups, or the criminal activities of any individual. The obligations which are created by the Court's order are not imposed on account of what the person against whom the order is directed has done, will do, or may do. It is next important to recognise that the Court must act at the behest of the Executive. It is the Executive which chooses whether to apply for an order, and the Executive which chooses the members of a declared organisation that are to be made subject to a control order. So long as the person named as a defendant falls within the definition of "member", the Court cannot refuse the Executive's application; the Court must make a control order. That the Court must decide 329 (1970) 123 CLR 361 at 374-375. Hayne whether the defendant falls within the definition of "member" does not detract from the conclusion that the Court is acting at the behest of the Executive. In that regard, it is to be recalled that, under the legislation considered in Kable, and held to be beyond the legislative power of the State, the Supreme Court of New South Wales had to be satisfied330 that Mr Kable was "more likely than not to commit a serious act of violence", and that it was "appropriate, for the protection of a particular person or persons or the community generally" that he be held in custody. Yet the conclusion was reached331 that, under the legislation in issue in Kable, "[t]he judiciary is apt to be seen as but an arm of the executive which implements the will of the legislature". The same observation is to be made about s 14(1) of SOCCA. The courts are not to be used as an arm of the Executive to make unlawful the association between individuals when their associating together is not otherwise a crime, where such prohibition is to be imposed without any determination that the association of the particular individuals has been, will be, or even may be, for criminal purposes. The significance of "membership" Membership of an organisation, affiliation with that organisation, or association with one or more of its members does not in every case demonstrate support for all of the aims or purposes of the group, or all of the methods that it uses to achieve its aims or purposes. It may, perhaps it often does, at least if membership of the group is sought out and maintained. But the conclusion is not inevitable, and is all the harder to draw as the premise for it varies from active membership, through affiliation, to mere association with members. And it is to be recalled that the definition of "member" in s 3 of SOCCA is so wide that it would readily embrace many cases beyond those in which a person actively seeks out and maintains formal membership of the relevant organisation. It is not to be assumed that the organisations that are intended to be the subject of declarations under SOCCA will be ordered according to the standards applicable to a listed public company, or that membership of the relevant body can be determined with the certainty that might be possible under corporations legislation. The extended definition of "member" given in SOCCA reflects that fact. But by doing so, it brings persons within the reach of s 14(1) in respect of whom a finding of membership will do no more than show that the defendant has associated with persons who, in turn, associate with persons who the Attorney-General has concluded associate with each other for criminal purposes. 330 Community Protection Act 1994 (NSW), s 5(1). 331 (1996) 189 CLR 51 at 134. Hayne A central and informing principle of criminal liability in Australia, as elsewhere332, is that guilt is personal and individual. The debates about the ambit of doctrines of complicity and joint enterprise333 demonstrate the continued vitality and importance of the principle by seeking to chart one boundary to it. That guilt is personal and individual is intrinsic in the notion of the rule of law. As Dixon J said in Australian Communist Party v The Commonwealth334, one of the assumptions in accordance with which the Constitution is framed is the rule of law. It was on that footing ("[i]n such a system") that he concluded335 that: "it would be impossible to say of a law of the character [then in issue], which depends for its supposed connection with the power upon the conclusion of the legislature concerning the doings and the designs of the bodies or person to be affected and affords no objective test of the applicability of the power, that it is a law upon a matter incidental to the execution and maintenance of the Constitution and the laws of the Commonwealth". That is, the legislative determination, recorded in the recitals to the Communist Party Dissolution Act 1950 (Cth), that the Communist Party "also engages in activities or operations designed to bring about the overthrow or dislocation of the established system of government of Australia", did not conclude the issue about engagement of the defence power. As has later been observed, by reference to this aspect of the decision of Dixon J in the Communist Party Case, "Ch III gives practical effect to the assumption of the rule of law upon which the Constitution depends for its efficacy"336. And the implication which was drawn from Ch III in Kable, about the legislative power of the States, is also to be seen as giving practical effect to the same assumption. But that then invites attention to what the rule of law requires. 332 Sayre, "Criminal Responsibility for the Acts of Another", (1930) 43 Harvard Law Review 689 at 717; Schneiderman v United States 320 US 118 at 136 (1943); Knauer v United States 328 US 654 at 669 (1946); Kotteakos v United States 328 US 750 at 772 (1946). 333 McAuliffe v The Queen (1995) 183 CLR 108; [1995] HCA 37; Gillard v The Queen (2003) 219 CLR 1; [2003] HCA 64. 334 (1951) 83 CLR 1 at 193; [1951] HCA 5. 335 (1951) 83 CLR 1 at 193. 336 Thomas v Mowbray (2007) 233 CLR 307 at 342 [61]; see also APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 351-352 [30]; [2005] HCA Hayne The legislature has not chosen to make the fact of membership of a declared organisation a crime. It has not made that kind of legislative judgment, spoken of in decisions of the Supreme Court of the United States concerning legislation directed against the Communist Party or its members337, that seeks to bridge the gap that may exist between membership of an organisation and personal possession of particular purposes or characteristics. And although the legislature may be said to have acted on the footing that the gap between identifying the purposes and conduct of some members of a group, and attributing those purposes to all the group's members, should be ignored, it has not attributed, and could not attribute, guilt of specific crime (past or future) to any, let alone all, members of an organisation that is declared under s 10. As was said in one of the United States cases338, dealing with the activities of those identified as Communists, "[t]he designation of Communists as those persons likely to cause political strikes is not the substitution of a semantically equivalent phrase". So too here, the identification of an organisation as including, even being constituted by, persons who "associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity"339 does not entail that every individual who falls within the extended definition of "member" in relation to that organisation necessarily has those purposes or characteristics. And it does not entail that every individual who falls within the definition of "member" has committed, or will commit, any crime. Yet the Magistrates Court impose disadvantageous consequences upon any person who falls within that extended definition of "member", regardless of what the person has or has not done, and regardless of what purposes that person has had, or may now or later harbour, for having a connection with the organisation. is required, by s 14(1), History, including recent history, provides many examples of legislative attempts to suppress associations thought, at the time, to pose some danger to the common good. In the late 18th century, 39 Geo III c 79 was enacted, as its long title said, "for the more effectual Suppression of Societies established for Seditious and Treasonable Purposes; and for better preventing Treasonable and Seditious Practices". Less than 20 years later, 57 Geo III c 19 was enacted "for the more effectually preventing Seditious Meetings and Assemblies" and to suppress and prohibit "certain Societies or Clubs calling themselves Spenceans or 337 For example, American Communications Association v Douds 339 US 382 at 391 (1950); United States v Brown 381 US 437 at 455 (1965). 338 United States v Brown 381 US 437 at 455 (1965). 339 s 10(1)(a). Hayne Spencean Philanthropists"340. A century and a half later, in Australia and elsewhere, legislation was enacted, and existing legislation administered, to bring an end to the existence of the Communist Party, and to disadvantage those who were identified as its supporters341. The legislation now in issue does not go down the path of seeking to outlaw particular organisations, or kinds of organisation. SOCCA does not make membership of any organisation (declared or not) a crime. It does not dissolve any organisation, or seek to forfeit or deal with any property that an organisation may own, use or occupy. What s 14(1) does is permit the Executive to enlist the Magistrates Court to create new norms of behaviour for those particular members who are identified by the Executive as meriting application for a control order. They are to be subjected to special restraint, over and above the limitations that the Act imposes on the public at large, not for what they have done or may do, and not for what any identified person with whom they would associate has done or may do, but because the Executive has chosen them. That function is repugnant to the institutional integrity of the Court that is required to perform it. Section 14(1) is invalid. The appeal should be dismissed with costs. 341 Communist Party Dissolution Act 1950 (Cth); Australian Communist Party v The Commonwealth (1951) 83 CLR 1; Bridges v Wixon 326 US 135 (1945); United States v Lovett 328 US 303 (1946). 238 HEYDON J. I dissent. The mischief and its solution In 2007, at least according to the then Attorney-General for the State of South Australia342: "outlaw motorcycle gangs remain prominent within the criminal class of South Australia and continue to expand. [Police] intelligence indicates that outlaw motorcycle gang members are involved in many and continuing criminal activities including murder; drug manufacture, importation and distribution; fraud; vice; blackmail; intimidation of witnesses; serious assaults; the organised theft and re-identification of motor vehicles and motorcycles; public disorder offences; firearms offences; and money laundering." it was not But Attorney-General. He went on343: just the seriousness of the crimes that troubled the and "Although comprising a small proportion of the state's population, outlaw motorcycle gang members disproportionate number of serious crimes. Outlaw motorcycle gang crime affects all levels of society. It is varied in scope, expertise, sophistication and influence. Incidents in which outlaw motorcycle gang members and their associates are suspected of involvement … pose a risk to public safety. Outlaw motorcycle gangs are increasingly infiltrating legitimate industries and using professionals to insulate their criminal activity from law enforcement." associates commit On 14 May 2009 the Attorney-General laid before the House of Assembly a document giving his reasons for making a s 10 declaration in relation to the motorcycle club of which the respondents allegedly are members. In it he stressed the club's capacity to instil fear into the public and to induce the withdrawal of criminal allegations against its members344. 342 South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1805. 343 South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1805. 344 "Serious and Organised Crime (Control) Act 2008: Application for Declaration Regarding the Finks M.C. – Reasons of the Honourable M J Atkinson MP, Attorney-General", 14 May 2009 at [195]-[198]. The role of s 10 declarations in the legislative scheme is discussed below at [249]. South Australia aspires to government by the rule of law. A government seeking to foster the rule of law has a primary duty to preserve the safety of persons within the Queen's peace, and to preserve the government itself, from criminal violence and other criminal activities. It is a legitimate expectation of the governed that their government will fulfil that duty. The legislation under challenge in this case is the Serious and Organised Crime (Control) Act 2008 (SA) ("the impugned Act"). The impugned Act was enacted on the initiative of an executive which believed that it was not enough merely to respond to crime after it had occurred, by seeking to attribute fault and dispense punishment or order reparation. That executive thought that measures were necessary to forestall what it saw as very serious and socially damaging crimes. It thought that failure to implement those measures would be an abdication from duty. Like Coke, it thought that "preventing justice excelleth punishing justice."345 It sought to combine established techniques to meet modern problems. The measures employed in the impugned Act had the object of protecting the public from violence at the hands of organisations involved in serious crime by disrupting and restricting the activities of those organisations (s 4(1))346. That object was to be accomplished by rendering it difficult for the members to associate with other members or certain non-members. McHugh J has said that "there is no reason to doubt the authority of [a] State to make general laws for preventive detention when those laws operate in accordance with the ordinary judicial processes of the State courts."347 The preventive techniques of the impugned Act are much milder than preventive detention. The question of their constitutional validity is a very significant one. 345 The Second Part of the Institutes of the Laws of England, (1797) at 299. 346 Section 4(1) provides: "The objects of this Act are – (a) to disrupt and restrict the activities of – organisations involved in serious crime; and the members and associates of such organisations; and (b) to protect members of the public from violence associated with such criminal organisations." 347 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 121; [1996] HCA 24. The significance of the case Most crime in Australia is, so far as it can be, investigated, prosecuted and punished by the States. Many of their officials are responsible for preserving public order. Some of them pursue that responsibility by keeping legislation relating to crime under constant review. Of course in a federal system it is the unhappy fate of legislatures, federal or State, and the electors who elected them, sometimes to have their desires thwarted when it becomes necessary for a court to hold that legislation reflecting those desires is constitutionally invalid. But if officials and legislators see it as their duty to procure legislation to prevent crime, to obstruct those endeavours by invalidating it is a serious step. It is a serious step partly because there are very limited respects in which legislation. the Constitution explicitly prohibits a State from enacting Section 107 of the Constitution preserves "[e]very power of the Parliament of a Colony" which has become a State, unless that power is exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State by the Constitution. Thus s 52(i) gives the Commonwealth exclusive power to legislate with respect to the seat of government of the Commonwealth, and all places acquired by the Commonwealth for public purposes. Section 52(ii) gives the Commonwealth exclusive power to legislate with respect to public service departments, the control of which was transferred to the Executive Government of the Commonwealth pursuant to s 69. Section 52(iii) gives the Commonwealth exclusive power to legislate with respect to other matters declared by the Constitution to be within the exclusive power of the Parliament. Of these other matters there are well-known examples. Section 90 deprives the States of power to impose duties of customs and excise, and to grant bounties on the production or export of goods. Section 92 prevents the States from making laws protective of their trade. Section 111 provides that if a State surrenders part of its territory to the Commonwealth, upon acceptance by the Commonwealth, that part becomes subject to the exclusive jurisdiction of the Commonwealth. Section 114 prevents the States from raising or maintaining naval or military forces or imposing any tax on Commonwealth property without the consent of the Commonwealth. Section 115 prevents the States from coining money and from making anything but gold or silver coin legal tender in payment of debts. Section 117 prevents a State from discriminating against residents of other States. Section 109 does not prevent a State from enacting legislation, but it renders State legislation inoperative to the extent of its inconsistency with valid Commonwealth legislation for so long as the inconsistency continues. To that list of express limitations on State legislative power must be added various limitations arising out of constitutional implications, some rather recently perceived. One of these concerns the freedom of political communication – for 90 years unrecognised, then the subject of wide claims348, now much reduced in scope349. Another concerns "due process", which at one stage showed a little vigour350 but is apparently dormant, at least under that name, though perhaps only for a time. Another is the "Kable doctrine"351, invoked in this case. Lawyers commonly think that the Kable doctrine has had a beneficial effect on some legislation. But it is a doctrine which intermediate appellate courts have found difficult to understand352. Many constitutional scholars have welcomed it. But not all353. No counsel has ever sought leave to argue that Kable's case be overruled. Hence it must be faithfully applied, whatever its meaning. That meaning remains controversial. Some aspects of its reasoning are now given less significance than formerly, others more. For example, the decision itself turned on the legislative requirement of detention without proof of criminal guilt. That requirement is not sufficient for invalidity354. There are statements in Kable's case indicating that the jurisdiction conferred on State 348 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106; [1992] HCA 45. 349 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520; [1997] HCA 350 Wheeler, "The Doctrine of Separation of Powers and Constitutionally Entrenched Due Process in Australia", (1997) 23 Monash University Law Review 248. 351 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51. 352 R v Moffatt [1998] 2 VR 229 at 237 and 249; John Fairfax Publications Pty Ltd v Attorney-General (NSW) (2000) 181 ALR 694 at 724 [169]. 353 Twomey, The Constitution of New South Wales, (2004) at 187 and 194; Winterton, "Justice Kirby's Coda in Durham", (2002) 13 Public Law Review 165 at 167-168; Winterton, "Australian States: Cinderellas No Longer?", in Winterton (ed), State Constitutional Landmarks, (2006) 1 at 5 and 14-17. 354 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 657 [225]; [2004] HCA 46; Thomas v Mowbray (2007) 233 CLR 307 at 331 [19]; [2007] HCA 33. courts must not damage "public confidence" in them355. But that damage is not now seen as a criterion of invalidity, merely an indication of it356. Speaking very generally, the meaning of the Kable doctrine and other constitutional implications affecting the States must in part be limited by the lack of restrictions on State legislative power to be found in the express terms of the Constitution. The Constitution must be read as a whole. It would be surprising if the quite wide field left for State legislatures by the relatively precise express prohibitions were to be radically constricted by somewhat general implications. It would also be surprising if the role of the States as jurisdictions in which experiment may be conducted and variety may be observed were to be significantly reduced by doctrines resting on opinions – which are very likely to be divergent – about the fitness of a State court to exercise federal jurisdiction. Government seeks to achieve its goals by many non-coercive techniques. But if they fail, in the end, at least in many fields, government depends on the exercise of coercive power. The States have routinely adopted the practice of resting their coercive power in important matters on the procurement of court orders. An implication like the Kable doctrine, which centres on the structure and functions of State courts, is therefore capable of being peculiarly damaging to the States. That is one reason why this is an extremely important appeal. Another is that its dismissal is likely to tempt the States into legislating to exert their coercive power through means other than their courts357. If legislation of 355 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 98, 107-108, 117-119, 121 and 133. See also Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 363 [81]; [2000] HCA 63; North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 at 162 [27]; [2004] HCA 31. 356 Nicholas v The Queen (1998) 193 CLR 173 at 197 [37] and 275-276 [242]; [1998] HCA 9; Silbert v Director of Public Prosecutions (WA) (2004) 217 CLR 181 at 191 [26]; [2004] HCA 9; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617-618 [102] (see also at 593 [23] and 629-630 [144] (3)); Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 122 [194] and 149 [274]; [2006] HCA 44. See also Handsley, "Public Confidence in the Judiciary: A Red Herring for the Separation of Judicial Power", (1998) 20 Sydney Law Review 183. The concept of "public confidence" is much talked of in legal circles, and not only in relation to the present field, but its merits may be doubted. The great confidence which sections of the German public had in some of their courts in the last decade of the Third Reich was not creditable to either the public or the courts. 357 See Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 121; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 586 [2] and 600 [40]; Thomas v Mowbray (2007) 233 CLR 307 at 329 [17]. that kind is valid, the outcomes it generates are less likely to be congenial to civil liberties than legislation employing the courts358. If legislation of that kind is not valid, the capacity of the States to fulfil their obligations to protect their residents is severely impaired. Either way the rule of law is significantly diminished. It is understandable that the respondents, and indeed many other people, find the policy of the impugned Act unsatisfactory. But it is trite to say that neither the unsatisfactoriness nor the unpopularity of legislative policy is a ground of legislative invalidity. If it were, "the judiciary's collective reputation for impartiality would quickly disappear."359 In Fardon v Attorney-General "That which judges regard as repugnant to the judicial process may be no more than a reflection of their personal dislike of legislation that they think unjustifiably affects long recognised rights, freedoms and judicial procedures. State legislation that requires State courts to act in ways inconsistent with the traditional judicial process will be invalid only when it leads to the conclusion that reasonable persons might think that the legislation compromises the capacity of State courts to administer invested federal jurisdiction impartially according to federal law. That conclusion is likely to be reached only when other provisions of the legislation or the surrounding circumstances as well as the departure from the traditional judicial process indicate that the State court might not be an impartial tribunal that is independent of the legislative and the executive arms of government." In this case that conclusion should not be reached. The respondents' argument in a nutshell The respondents' argument centred on the Magistrates Court of South Australia ("the Magistrates Court"). The argument was that the independence of the Magistrates Court from the Executive, and its impartiality towards the Executive, had been used by the legislature to cloak the fact that the real decision underlying the making of a control order by the Magistrates Court under s 14(1)361 of the impugned Act was the decision of the Executive to make a 358 Thomas v Mowbray (2007) 233 CLR 307 at 329 [17]. 359 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 593 [23] per Gleeson CJ. 360 (2004) 223 CLR 575 at 601 [42] (emphasis in original). 361 Section 14(1) provides: (Footnote continues on next page) declaration in respect of the organisation under s 10(1)362. The respondents contrasted the role of the Magistrates Court, which "issues the control order with the draconian consequences that follow from it", with the traditional role of a criminal court, which "adjudges guilt and punishes." The respondents submitted that while the Magistrates Court makes an order, and breach of that order is rendered a crime by s 22, it does not adjudge guilt. The respondents then said that the issuing of the control order stemmed from nothing which the Magistrates Court did beyond finding membership and dealing with the supposedly minor matters involved in s 14(5)(b) and (6)363. The respondents said that the "real bulk "The Court must, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that the defendant is a member of a declared organisation." 362 Section 10(1) provides: "If, on the making of an application by the Commissioner under this Part in relation to an organisation, the Attorney-General is satisfied that – (a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; and (b) the organisation represents a risk to public safety and order in this State, the Attorney-General may make a declaration under this section in respect of the organisation." 363 Section 14(5) provides: "A control order – (b) if the defendant is a member of a declared organisation, must prohibit the defendant from – associating with other persons who are members of declared organisations; and possessing – a dangerous article; or a prohibited weapon, (Footnote continues on next page) of the reason why somebody should be the subject of a control order is supplied entirely by the Executive determination [under s 10] in which nothing that passes muster as real procedural fairness contributes, [and] in which nothing which passes as practicable or worthwhile judicial review is available". Each proposition in those submissions is flawed. In part the flaws in the respondents' arguments stemmed from the respondents' contention that the application of the Kable doctrine was a matter of fine degree calling for a minute search of the legislation for the slightest deviation from a pure model of curial process. In this and other respects, the respondents appealed to the rule of law, and would have shunned Lenin's system of government, described by that statesman as "the government of force, unrestrained by any laws". It was thus paradoxical that they acted on another of Lenin's pronouncements: "the worse things are, the better the circumstances". They concentrated on a remorseless attempt to demonstrate the frightfulness of the legislation by construing it favourably to ease of conviction and adversely to constitutional validity. In this attempt they persistently ignored the contrary (within the meaning of section 15 of the Summary Offences Act except as may be specified in the order." Section 14(6) provides: "In … considering the prohibitions that may be included in a control order under subsection (1) … the Court must have regard to the following: (a) whether the defendant's behaviour, or history of behaviour, suggests that there is a risk that the defendant will engage in serious criminal activity; (b) the extent to which the order might assist in preventing the defendant from engaging in serious criminal activity; (c) the prior criminal record (if any) of the defendant and any persons specified in the application as persons with whom the defendant regularly associates; (d) any legitimate reason the defendant may have for associating with any person specified in the application; (e) any other matter that, in the circumstances of the case, the Court considers relevant." principles of statutory construction364. They invited the hearer again and again to shrink in civilised disgust and loathing from each supposed disregard for orthodox judicial procedures. The problem is that there was very little departure from those procedures. In part the flaws in the respondents' arguments lay in improbable assumptions about the Kable doctrine which would invalidate not just the impugned Act, but a large quantity of legislation which has never before been questioned. That would be a surprising outcome. In part the flaws in the respondents' arguments arose because they exaggerated freedom of association. That is a very important freedom. It is reflected in, for example, the existence of institutions and practices which are fundamental to the day-to-day control of excessive state and private power. A list of examples would include political parties; ad hoc groups of people concerned about particular problems; deputations to legislatures, government officials and business executives; trade unions; business and professional associations; churches; ex-soldiers' organisations; lodges; associations of former pupils; clubs and societies of all kinds; meetings (public and private); parades; demonstrations; and indeed families. The list is not usually thought to include institutions like the price-fixing associations of cartelists, or associations between trade union officials for the purpose of committing torts, or criminal gangs. As "To outlaw fraudulent or deceitful practices is but to secure freedom of trade and commerce as that freedom is understood in organized and civilized societies. To prevent cornering, restriction of competition in a society based on free competition in trade, or monopolization, particularly where disproportionate strength or advantage is the source of the power or ability to corner, restrict or monopolize, again … is compatible with freedom of trade in such a society and laws providing means of such prevention can be regarded as regulatory in nature, and dependent on the length of their reach and the nature of their provisions, may well be regarded as compatible with the guaranteed freedom." 364 For the principles in relation to ease of conviction, see Krakouer v The Queen (1998) 194 CLR 202 at 223 [63]; [1998] HCA 43. For the principles in relation to constitutional validity, see New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 161-162 [355]; [2006] HCA 52. 365 Samuels v Readers' Digest Association Pty Ltd (1969) 120 CLR 1 at 19-20; [1969] HCA 6. In the same way, prevention of criminal association secures freedom of association. But however important freedom of association is, as Gummow and Hayne JJ pointed out in Mulholland v Australian Electoral Commission366, while "freedom of association to some degree may be a corollary of the freedom of communication formulated in Lange v Australian Broadcasting Corporation367", there "is no such 'free-standing' right to be implied from the Constitution." At times the respondents' submissions seemed to assume that there is. The majority of the court below (Bleby and Kelly JJ), whose reasoning the appellant challenges in this appeal, will be referred to as "the Full Court". The key strands in the reasoning of the Full Court and the corresponding submissions of the respondents were numerous. They were detailed. In many respects they were subtle. It therefore takes time to explain why, with unfeigned respect, it is necessary to disagree with them. As is customary in analysing the application of the Kable doctrine to a particular piece of legislation, the strands were combined and rearranged to form a variety of patterns. Those strands can be divided into six groups, several of which seek to demonstrate in detail a considerable departure in the Magistrates Court from what McHugh J called "the traditional judicial process"368. Before examining other aspects of them, it is desirable to consider generally how far the impugned Act departed from that traditional process. Procedure in the Magistrates Court The legislative conferral of jurisdiction on an established court brings with it the usual incidents of that court's exercise of jurisdiction, in the absence of contrary language369. The impugned Act contains no contrary language of any significance in relation to the Magistrates Court. The Magistrates Court is established by s 4 of the Magistrates Court Act 1991 (SA) ("the Magistrates Court Act"). By s 5 of that Act, it is a court of record. By s 10(1) of that Act, the Magistrates Court has any jurisdiction conferred on it by statute. Section 14(1) of the impugned Act confers on the 366 (2004) 220 CLR 181 at 234 [148]; [2004] HCA 41. 367 (1997) 189 CLR 520. 368 See above at [248]. 369 Electric Light and Power Supply Corporation Ltd v Electricity Commission of NSW (1956) 94 CLR 554 at 560; [1956] HCA 22; Mansfield v Director of Public Prosecutions (WA) (2006) 226 CLR 486 at 491 [7]; [2006] HCA 38; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 555 [19]; [2008] HCA 4. Magistrates Court jurisdiction to hear and determine an application for a control order. Subject to contrary legislation, s 49(1) of the Magistrates Court Act provides for the making of rules, inter alia, regulating the practice and procedure of the Court (s 49(1)(c)), imposing on the parties mutual obligations of pre-trial disclosure of evidence (s 49(1)(ca)) and regulating the form in which evidence is taken or received by the Court (s 49(1)(d)). Pursuant to s 49(1), both the Magistrates Court of South Australia Rules 1992 (SA) ("the Criminal Rules") and the Magistrates Court (Civil) Rules 1992 (SA) ("the Civil Rules") have been made. By s 10(2) of the Magistrates Court Act, the rules may assign a particular statutory jurisdiction to the Civil (General Claims) Division of the Court. The s 14 jurisdiction has been so assigned by r 4.06 of the Criminal Rules. Section 11(2) of the Magistrates Court Act makes the Chief Magistrate responsible for the administration of the Court. Hence it makes the Chief Magistrate responsible for determining which magistrates sit in the Civil (General Claims) Division, and which of these are to hear applications under the impugned Act. Applications under s 14 of the impugned Act are made in accordance with the Civil Rules. Section 14(4) adopts a conventional procedure – verification of the grounds of an application for a control order by affidavit. Rule 37A(1) provides for an application to be filed using Form 38. It must contain the grounds on which the application is made. By r 37A(2), the affidavit accompanying the application must, if the applicant seeks leave to have it heard ex parte, set out the reasons for that course. Section 14(1) is conventional in placing the legal burden of proof on the Commissioner of Police ("the Commissioner"). There is nothing in the legislation to suggest that that burden shifts in any sense at all. Applications under s 14 are civil proceedings. The legislation adopts a conventional standard of proof for civil proceedings – satisfaction on the balance of probabilities (s 5(1)). As the Full Court rightly held370, the protective principles discussed in Briginshaw v Briginshaw371 apply. The respondents suggested that the filing of an affidavit verifying the grounds, as distinct from simply filing an affidavit, was sinister. There is no reason to suppose that it is. It is permissible for the Commissioner to file whatever other affidavits are necessary to prove membership and other relevant matters, and for the defendant to file affidavits to the contrary. Both parties can call oral evidence. In International Finance Trust Co Ltd v New South Wales Crime Commission372, legislation was struck down because it compelled a court to 370 Totani v South Australia (2009) 105 SASR 244 at 252-253 [23]. 371 (1938) 60 CLR 336; [1938] HCA 34. 372 (2009) 240 CLR 319; [2009] HCA 49. proceed ex parte and provided no practical means by which an ex parte order could be dissolved. That is a state of affairs which is completely antithetical to the nature of a court. Section 14 of the impugned Act does not compel the Magistrates Court to proceed ex parte. Although it gives it power to do so (s 14(3)), two factors suggest that ex parte hearings will be relatively exceptional, and, as is usual in courts, will take place only in special circumstances such as urgency. One factor is the requirement for reasons to be stated in an affidavit to support a request for leave to have a s 14 application heard ex parte. The other is the serious indirect consequences of a control order both for the defendant (s 22) and for those who wish to associate with the defendant (s 35). In any case, the power to proceed ex parte is a traditional judicial power, and the grant of it by s 14(3) is not antithetical to the exercise of judicial power373. Section 14 does not relieve the Commissioner from the duty to make full disclosure to the Magistrates Court if an ex parte application is made. There is power for a defendant to secure a further hearing by lodging a notice of objection within 14 days of service of the control order or such longer period as the Magistrates Court may allow (s 17). At that hearing, the objector may call further evidence (s 18). The same standard procedural and evidentiary provisions apply as apply in relation to s 14 hearings. Proceedings after a notice of objection must be inter partes (ss 17-18). An independent assessment of the evidence and the issues is to take place. The assessment is not confined to matters within the discretion of the Magistrates Court, ie those relating to the form of the order (under s 14(5)(b) and (6)), and of consequential or ancillary orders (under s 14(7)): it extends to the non-discretionary question whether the order should have been made at all – that is, whether the defendant was a member of the declared organisation. It is likely that a notice of objection will be employed where the Magistrates Court proceeds ex parte, or in a fashion so highly expedited as to cause the objector to believe that fuller evidence could be filed at the objection hearing. It is also likely that in those circumstances the Magistrates Court will follow the practice of courts generally, namely to hear and decide the objection hearing expeditiously, for a control order, even though it stands for only a short period, may operate adversely to the interests of a defendant and possible associates by reason of ss 22 and 35. From the decision on a notice of objection an appeal to the Supreme Court lies as of right on a question of law, and by leave on a question of fact (s 19). It is likely that that too will be heard expeditiously. A control order may also be varied or revoked if there has been a substantial change in the relevant 373 Thomas v Mowbray (2007) 233 CLR 307 at 355 [112]; International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 348 [39], 364 [89] and 385 [154]. circumstances (s 20(2)). If made by the defendant, the application for variation or revocation must be supported by oral evidence on oath (s 20(4)). Questions of how evidence is to be adduced in proceedings under ss 14, 18 and 20 are left to the Magistrates Court. It may be adduced by both the Commissioner and the defendant. It may be tested in cross-examination. The general rules of evidence are applicable in the Magistrates Court, and in s 14 proceedings in particular: Evidence Act 1929 (SA), s 5. Rule 19 of the Civil Rules establishes a conventional regime for the reception of affidavit evidence. Subject to contrary order, r 19(5) establishes as a general rule that a deponent must speak from personal knowledge. One entirely standard exception to this is contained in r 19(4): in interlocutory proceedings statements on information and belief may be received. The weight of evidence received is for the Magistrates Court to assess. Like all courts, it will conduct that assessment aided by the rules of evidence and its own institutional experience. The parties before the Magistrates Court are entitled legal representation. The Magistrates Court is bound by the rules of natural justice. Hence, unless the proceedings are ex parte, it is obliged to hear what the parties or their representatives wish to submit about anything relevant to the making of a decision about whether a control order should be made, and, subject to the question of "criminal intelligence"374, it is obliged not to decide the proceedings on a point adverse to one party without notice to that party. Do ss 14-18 and 20-21 prevent the Magistrates Court from answering the description of a "court" within the meaning of Ch III of the Constitution on the ground that it departs too far from ordinary judicial processes? Sections 14-18 and 20-21 do not require the Magistrates Court to depart from the methods which have characterised judicial activities in the past375. Subject to particular points made by the Full Court and by the respondents yet to be considered, it must be concluded that the Magistrates Court as such – in its composition, structure and standard methods of operation applicable to proceedings under s 14 – possesses the defining characteristics of a court376. It will be seen that those particular points do not disturb that conclusion. It is a conclusion which poses difficulties for the respondents. For in the case of a body like the Magistrates Court, which otherwise has the defining 374 See below at [297]. 375 Thomas v Mowbray (2007) 233 CLR 307 at 355 [111]. 376 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at characteristics of a court, it is wrong lightly to reach the conclusion that it lacks the "minimum requirements of independence and impartiality."377 The legislative conferment on a court of a particular function is not invalid unless that function "substantially impairs [the court's] institutional integrity"378. The legislation struck down in Kable's case was "extraordinary"379 and "almost unique"380. So was the legislation in the only other case in this Court in which the Kable doctrine was successfully invoked381. The Kable doctrine is attracted "only in very limited circumstances"382 and in "rare situations"383. It is "of very limited application."384 "State legislation must have a quite exceptional character" to contravene it385. The legislation must generate "repugnancy to or incompatibility with that institutional integrity of the State courts which bespeaks their constitutionally mandated position in the Australian legal system."386 It must be "repugnant to the judicial process in a fundamental degree."387 Just as State legislation compelling a departure to a significant degree from traditional methods and standards in carrying out judicial functions may be invalid, the 377 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 67 [41] per Gleeson CJ; see also at 76 [64]. 378 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 591 [15] per Gleeson CJ (emphasis added). 379 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 98 per Toohey J; see also at 134 per Gummow J. 380 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 601 [43] per McHugh J. 381 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319. 382 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 598 [37] per McHugh J. 383 Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 560 [63] per McHugh J; [1999] HCA 27. 384 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 601 [43] per McHugh J. 385 R v Whyte (2002) 55 NSWLR 252 at 272 [133] per Spigelman CJ. 386 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617 [101] per 387 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 132 per Gummow J. See also International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 367 [98]. absence of significant departure from those methods and standards points to validity. The respondents submitted requirements of that independence and impartiality are not met if the court's power of decision is so subordinate, directed and circumscribed that it cannot be said to be acting impartially; and that s 14(1) so compromised the Magistrates Court's appearance of independence from the Executive as to render it unsuitable for the exercise of federal judicial power. the minimum What, then, were the strands of reasoning which led the respondents to submit and the Full Court to conclude that these unusual circumstances were established? First strand: section 10 findings unreviewable The Full Court's first strand. The first strand in the Full Court's reasoning ran along the following lines. The "Attorney-General's findings [in making a declaration under s 10] are unreviewable." There is "no ability to go behind [the Attorney-General's] certificate."388 It is "in effect … binding on the [Magistrates Court]."389 The interaction between s 10 and s 14 was seen as analogous to the referral by a court of the task of making findings to a non-judicial officer whose decision "would be final, not reviewable and binding on the court."390 The "[Magistrates Court] must act [on the declaration] without question"391. The Full Court rested these propositions on s 41 of the impugned Act392. Their correctness depends on what is meant by "unreviewable". 388 Totani v South Australia (2009) 105 SASR 244 at 280 [155]. 389 Totani v South Australia (2009) 105 SASR 244 at 280 [155]. 390 Totani v South Australia (2009) 105 SASR 244 at 280 [156]. 391 Totani v South Australia (2009) 105 SASR 244 at 283 [167]. 392 Totani v South Australia (2009) 105 SASR 244 at 280 [155] n 74. Section 41 is set out above in the reasons of Hayne J at [191]. The Attorney-General's Second Reading Speech said of it: "A privative clause will try to protect the Attorney-General's decision from the full rigour of judicial review. I do not hold out much hope of this preventing all judges substituting their own decisions on declared organisations for those of the elected Government." (South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1807.) (Footnote continues on next page) Reviewable for jurisdictional error? It is likely that by "unreviewable" the Full Court meant "unreviewable for jurisdictional error". If so, those propositions are incorrect for the reasons explained in Kirk v Industrial Court (NSW)393. Section 41 does not remove the supervisory jurisdiction of the Supreme Court for jurisdictional error including breaches of the obligation to give procedural fairness. In this Court the respondents treated the Full Court's error about judicial review as being without significance. That contrasts with the approach successfully urged on the Full Court, which saw the supposed lack of judicial review as fatal. It is true that invoking judicial review is not made easy: the Attorney-General is not required to give reasons for the declaration (s 13(1)), criminal intelligence394 supplied by the Commissioner to the Attorney-General cannot be made available to the claimant for review (s 13(2)), and public interest immunity may be claimable by the Attorney-General for other material. The absence of a duty on the Attorney-General to give reasons scarcely deprives the Magistrates Court of institutional integrity: in this respect s 13(1) of the impugned Act simply follows the common law395. The duty of the Attorney-General to preserve criminal intelligence may create difficulties in relation to a subpoena seeking material capable of being tendered in evidence to demonstrate a lack of jurisdiction in the Attorney-General. But the rule restricting access to criminal intelligence overlaps with similar common law rules of public interest immunity396. The general problem exists in many fields in One can sympathise with the Attorney-General for having this thought, if not with the decision to express it and the form in which it was expressed. Think of it always. Speak of it never. 393 (2010) 239 CLR 531 at 580-581 [98]-[100] and 585 [113]; [2010] HCA 1. The Full Court's error in this respect is of the most excusable kind; its decision was delivered more than four months before Kirk's case was decided. 394 The expression "criminal intelligence" is defined in s 3 as meaning: "information relating to actual or suspected criminal activity (whether in this State or elsewhere) the disclosure of which could reasonably be expected to prejudice criminal investigations, to enable the discovery of the existence or identity of a confidential source of information relevant to law enforcement or to endanger a person's life or physical safety". 395 Public Service Board of New South Wales v Osmond (1986) 159 CLR 656; [1986] HCA 7. 396 Marks v Beyfus (1890) 25 QBD 494. relation to documents for which public interest immunity may be claimed without depriving the court of capacity to entertain administrative law challenges397. Section 13(2), like s 21(1) and (2)(a), considered below398, is simply an illustration of the difficulty created by the existence of immunities or privileges from production. The form which these immunities or privileges take represents the result of legislative or judicial choices between conflicting interests or principles. This Court itself has gone so far as to strike the balance between the public interest in clients being able to have confidential consultations with lawyers and the interests of accused persons in seeking to raise a reasonable doubt about their guilt by holding that there is no common law right in an accused person to the production of, or access to, documents protected by legal professional privilege399. In some other jurisdictions, legislation came into force around that time which took a different course (Evidence Act 1995 (Cth), s 123 and Evidence Act 1995 (NSW), s 123). If the choice this Court made is open to a court administering the common law, it is hard to see why the legislative choice reflected in ss 13(2) and 21 is a ground of constitutional invalidity. In any event, a subpoena seeking production of documents which were before the Attorney-General when consideration was being given to the making of the declaration would not be set aside if it had a legitimate forensic purpose. While the party issuing the subpoena could not look at criminal intelligence, the court could examine the relevant material to see whether it was in fact criminal intelligence, for s 13(2) prohibits disclosure of it to "any person", but not to a court400. The respondents submitted that seeking review for jurisdictional error would be a very difficult and unproductive enterprise. The enterprise is difficult, but not necessarily unproductive. It may be that strait is the gate, and narrow is the way, and few there be that find it. That is a common feature of attempts to obtain judicial review of administrative action. But a person bringing a claim that the Attorney-General has acted beyond the power conferred by s 10 can do so without hindrance from s 41. The Full Court's excessive discounting of possible judicial review is revealed by its description of the Attorney-General's 397 Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 550-551 [5], 556 [24] and 595 [179]-[180]. 399 Carter v Northmore Hale Davy & Leake (1995) 183 CLR 121, particularly at 132- 142 per Deane J; [1995] HCA 33. 400 Canadian Pacific Tobacco Co Ltd v Stapleton (1952) 86 CLR 1 at 6; [1952] HCA 32. See also [280]-[283] below. declaration as a "certificate". There is no statutory warrant for this dismissive expression. Its use reveals an erroneous assumption that the Magistrates Court proceedings are no more than a mere formality. Is an application for prerogative relief to the Supreme Court the only route to a successful claim that the Attorney-General has acted beyond power? Or is it also possible to launch what was perhaps unhappily called a "collateral" challenge in the s 14 proceedings in the Magistrates Court? It is not necessary to answer the second question. Even if the only route to a challenge is via the Supreme Court, the first strand in the Full Court's reasoning is unsustainable. Merits review? If by "unreviewable" the Full Court meant "incapable of examination on the merits", it is true that a s 10 declaration is unreviewable. But that cannot affect constitutional validity. Until quite recently the examination of administrative action on the merits was extremely rare, and even now it is a creature of statute401. Second strand: Attorney-General's freedom from the rules of evidence that, unlike the Magistrates Court under s 14(1), The Full Court's second strand. The second strand in the Full Court's the reasoning was Attorney-General under s 10 "is not subject to or bound by the rules of evidence or any standard of proof. He can act on whatever information he pleases and give it whatever weight he pleases."402 To this the respondents added submissions resting on the vagueness of s 10(3), turning on links with, involvement in, or association with, serious criminal activity, as distinct from particular criminal acts403. They pointed to the inherent unreliability of the 401 See, eg, the Administrative Appeals Tribunal Act 1975 (Cth). 402 Totani v South Australia (2009) 105 SASR 244 at 280 [155]; see also at 282 [164]. 403 Section 10(3) provides: "In considering whether or not to make a declaration under this section, the Attorney-General may have regard to any of the following: (a) any information suggesting that a link exists between the organisation and serious criminal activity; (b) any criminal convictions recorded in relation to – current or former members of the organisation; or persons who associate, or have associated, with members of the organisation; (Footnote continues on next page) material on which the Attorney-General might rely – for it might be untested material received from informants, in circumstances where there was no-one to act as contradictor. They noted that s 10(3)(f) permits the Attorney-General to have regard to any other matter which the Attorney-General considers relevant. Errors in the second strand. This reasoning is incorrect in several respects. First, there is a legislative requirement that the Attorney-General be "satisfied". That legislative requirement puts limits on the information to which the Attorney-General can have regard. It also prevents the Attorney-General from whimsically attaching weight, or lack of weight, to particular items of information. It calls for actual persuasion of the existence of the state of affairs described in s 10(1), arrived at reasonably on the material before the Attorney-General404. Secondly, if the implications of the duty to be satisfied are left aside, and if it is assumed (but not decided) that s 10 confers on the Attorney-General the capacity to act on "any standard of proof" without being bound by the "rules of evidence", then the Attorney-General could place the burden of demonstrating that the conditions referred to in s 10(1) do not exist on those against whom the (c) any information suggesting that – current or former members of the organisation; or persons who associate, or have associated, with members of the organisation, have been, or are, involved in serious criminal activity (whether directly or indirectly and whether or not such involvement has resulted in any criminal convictions); (d) any information suggesting that members of an interstate or overseas chapter or branch of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; (e) any submissions received from members of the public in relation to the application in accordance with section 9; (f) any other matter the Attorney-General considers relevant." 404 Enfield City Corporation v Development Assessment Commission (2000) 199 CLR 135 at 150 [34]; [2000] HCA 5. allegations are made. A legislative provision of that kind binding a court is not constitutionally invalid405. A provision of that kind in legislation applying not to a court, but to a member of the executive, cannot on that ground alone be invalid either. Section 10 does not create any conclusive presumption406. It does not deem an element of the offence to be proved407. It does not require findings on the basis of a legislative conclusion which is unexaminable judicially408. The impugned Act makes it an offence to associate on not less than six occasions during a period of twelve months with a person who is a member of a declared organisation (s 35(1)(a)) or the subject of a control order (s 35(1)(b)). But the existence of a declared organisation – a necessary precondition for guilt – is not something which is deemed. The question whether the organisation was validly declared is not unexaminable judicially409. The existence of a declared organisation, and the facts on which the jurisdiction to declare an organisation depends, are not facts invented by the legislature410. Thirdly, it is commonplace for legislation to give a court the power or the duty to make an order on proof of a conclusion which flows from findings by the court and a decision by the executive or the legislature411. In those instances, it is also commonplace for the decision of the executive or the legislature to be 405 R and Attorney-General (Commonwealth) v Associated Northern Collieries (1911) 14 CLR 387 at 404; [1911] HCA 73; The Commonwealth v Melbourne Harbour Trust Commissioners (1922) 31 CLR 1 at 12; [1922] HCA 31; Williamson v Ah On (1926) 39 CLR 95; [1926] HCA 46; Orient Steam Navigation Co Ltd v Gleeson (1931) 44 CLR 254 at 259-260, 262-263 and 264; [1931] HCA 2; Milicevic v Campbell (1975) 132 CLR 307 at 316, 318-319 and 320-321; [1975] HCA 20; Nicholas v The Queen (1998) 193 CLR 173 at 189-190 [24] and 235-236 [153]- [156]; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 600-601 [41]; Thomas v Mowbray (2007) 233 CLR 307 at 356 [113]. 406 See Williamson v Ah On (1926) 39 CLR 95 at 108 and 117; Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 704; [1991] HCA 32; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 at 185; [1995] HCA 23. 407 Nicholas v The Queen (1998) 193 CLR 173 at 236 [156] and 238 [162]. 408 Actors and Announcers Equity Association of Australia v Fontana Films Pty Ltd (1982) 150 CLR 169 at 214; [1982] HCA 23. 409 See above at [267]-[272]. 410 Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 704. 411 See below at [326]-[339]. arrived at without being subject to the rules of evidence and by reference to very general criteria on material possessing variable standards of reliability. Fourthly, the Attorney-General to take into account any relevant matter. It would be more surprising if that officer could not do so. is no criticism of s 10(3)(f) it permits that Third strand: lack of access to "criminal intelligence" The Full Court's third strand. The third strand in the Full Court's reasoning is that the Attorney-General "may act on information classified by the Commissioner of Police as 'criminal intelligence' which information may not, in effect, be disclosed to anyone, least of all to the defendant to a s 14(1) application, without the authority of the Commissioner."412 That is true because of s 13(2). But the Full Court and the respondents went on to say that whether information deemed by the Commissioner to be "criminal intelligence" is actually something which "properly amounts to criminal intelligence cannot be determined by a court."413 The Full Court considered that the protections which preserved the legislation under consideration in Gypsy Jokers Motorcycle Club Inc v Commissioner of Police414 and K-Generation Pty Ltd v Liquor Licensing Court415 were "notably absent."416 Difficulties in the third strand. This third strand in the Full Court's reasoning, too, has difficulties. The definition of "criminal intelligence" in s 3 of the impugned Act is in substance identical to the definition in s 4 of the Liquor Licensing Act 1997 (SA), which was under consideration in the K-Generation case417. The duty imposed by s 21(2)(a) of the impugned Act on courts in proceedings relating to the making, variation or revocation of control orders is to maintain the Commissioner as criminal intelligence."418 The duty imposed by s 28A(5) of the information "properly classified by the confidentiality of 412 Totani v South Australia (2009) 105 SASR 244 at 282 [164]. 413 Totani v South Australia (2009) 105 SASR 244 at 282-283 [165]. 414 (2008) 234 CLR 532. 415 (2009) 237 CLR 501; [2009] HCA 4. 416 Totani v South Australia (2009) 105 SASR 244 at 283 [165]. 417 The definition in s 3 of the impugned Act (see above at [269] n 394) added to the end of the definition considered in the K-Generation case the words "or to endanger a person's life or physical safety". 418 Section 21(1) provides: (Footnote continues on next page) legislation under consideration in the K-Generation case was identical, except that the word "properly" was absent. Despite that absence, this Court held that the definition of "criminal intelligence" meant that it was necessary for the relevant court, in the face of a challenge as to whether material answered the definition, to be "satisfied that facts existed sufficient to found the expectation of the prejudicial consequences spelt out in the definition; or, that the classification was 'objectively correct'."419 The Court therefore held that the relevant court would not have been obliged to accept that the information classified by the Commissioner as criminal intelligence in fact answered that description. The insertion into s 21(2)(a) of the impugned Act of the word "properly" means, a fortiori, that the Magistrates Court would not have been obliged to accept that the information classified by the Commissioner as "criminal intelligence" in fact answered that description. Section 13(2) of the impugned Act, like s 28A(5) of the legislation in the K-Generation case, does not contain the word "properly". But by parity with this Court's reasoning on s 28A(5), whether the Commissioner's decision to classify material as criminal intelligence was affected by jurisdictional error could be tested in a court despite s 41420. It was therefore not correct for the Full Court to have said that whether information described as "criminal intelligence" in truth "properly amounts to criminal intelligence cannot be determined by a court." "No information provided by the Commissioner to a court for the purposes of proceedings relating to the making, variation or revocation of a control order may be disclosed to any person (except to the Attorney-General, a person conducting a review under Part 6, a court or a person to whom the Commissioner authorises its disclosure) if the information is properly classified by the Commissioner as criminal intelligence." Section 21(2) provides: "In any proceedings relating to the making, variation or revocation of a control order, the court determining the proceedings – (a) must, on the application of the Commissioner, take steps to maintain the confidentiality of information properly classified by the Commissioner as criminal intelligence, including steps to receive evidence and hear argument about the information in private in the absence of the parties to the proceedings and their representatives". 419 K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 542 [143] per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. See also at 523-524 [58]- [63] per French CJ and 576 [257] per Kirby J. 420 See above at [267]-[272]. Nor was it correct to say that the protections which preserved the legislation in the K-Generation case are "notably absent". In the Gypsy Jokers case the relevant provision was s 76(2) of the Corruption and Crime Commission Act 2003 (WA). It prevented disclosure of information identified by the Commissioner of Police as confidential "if its disclosure might prejudice the operations of the Commissioner". The majority of the Court construed s 76(2) as meaning that it was for the Supreme Court to determine upon evidence provided to it whether the disclosure of the information might have the prejudicial effect spoken of421. Again, as the Magistrates Court here can determine whether information classified as "criminal intelligence" meets that description, it is not correct to say that the protections which preserved the legislation in the Gypsy Jokers case are "notably absent" either. Fourth strand: no procedural fairness The Full Court's fourth strand. The fourth strand in the Full Court's reasoning rested on the contention that the process by which a s 14 control order was made was "devoid of … fundamental protections". These protections were422: "the right to have significant and possibly disputed factual issues determined by an independent and impartial judicial officer and the right to be informed of and to answer the case put against the person." In short, it was said, there was no "right to a fair hearing"423. The exclusion of the right rendered the Magistrates Court incapable of acting in a manner compatible with the proper discharge of judicial responsibility, and severely impaired its institutional integrity424. "The stuff of nightmares". The Full Court relied on the proposition that "a denunciation on grounds that are not disclosed is the stuff of nightmares."425 It quoted those words as used by Lord Hope of Craighead in Secretary of State for 421 Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 422 Totani v South Australia (2009) 105 SASR 244 at 283 [166]. 423 Totani v South Australia (2009) 105 SASR 244 at 283 [167]. 424 Totani v South Australia (2009) 105 SASR 244 at 282 [162]. 425 Totani v South Australia (2009) 105 SASR 244 at 281 [160]. the Home Department v AF (No 3)426. He attributed them to Lord Scott of Foscote in A v Secretary of State for the Home Department427. Lord Scott said: "Indefinite imprisonment in consequence of a denunciation on grounds that are not disclosed and made by a person whose identity cannot be disclosed is the stuff of nightmares, associated whether accurately or inaccurately with France before and during the Revolution, with Soviet Russia in the Stalinist era and now associated … with the United Kingdom." (emphasis added) Lord Scott's proposition, notable for its cautious unwillingness to prejudge the French and Soviet dictators, was much more specific than Lord Hope's. It is important to preserve a sense of proportion. Perhaps the present state of affairs in South Australia has its dolorous aspects. But life in the Athens of the South now is very different from life in the Athens of the North when delations were common while Tiberius ruled the Roman Empire. And it is very different from life in the Union of Soviet Socialist Republics in the days when "the wonderful Georgian" was responsible for administering the bill of rights provisions contained in the 1936 Constitution, and Harold Laski was "lecturing about the beauties of the Russian system"428. Procedural fairness in relation to the Attorney-General: before the declaration. One idea underlying the Full Court's reasoning was that even if in the s 14 control order proceedings there was a right to a fair hearing on the issue of whether the defendant was a member of a declared organisation (either when the order was made or after objection pursuant to ss 17-18), in the process by which the Attorney-General decided to make a s 10 declaration there was not. The respondents submitted that there was no right in an organisation or a member to be heard at all. They submitted that there was no requirement on the Commissioner to rely only on admissible evidence. They also submitted that there was no provision requiring that the persons likely to be affected by the declaration should have any useful material served on them. This was so despite the fact that s 35(1)(a) caused serious consequences to flow even without control orders being made. The Solicitor-General for the State of South Australia correctly contended that the rules of procedural fairness applied in relation to the making of a 426 [2009] 3 WLR 74 at 105 [83]; [2009] 3 All ER 643 at 673. 427 [2005] 2 AC 68 at 148-149 [155]. 428 Kresge and Wenar (eds), Hayek on Hayek: An Autobiographical Dialogue, (1994) declaration; that the Attorney-General was obliged to provide to the organisation the adverse material on which the Commissioner was inviting reliance (apart from criminal intelligence); and that if the application relied on the activity of particular individuals, they had a right to be notified of that fact and a right to answer material adverse to them. Because the making of a declaration under s 10 has the potential to affect the interests of relevant organisations and their members, there is a duty of procedural fairness to the organisation and its members unless the legislation excludes it429. The legislation does not exclude it. Section 8 provides that an application by the Commissioner to the Attorney-General for a declaration under s 10 must, inter alia, identify the organisation against which the declaration is sought (s 8(2)(b)), the grounds on which it is sought (s 8(2)(c)), and the information supporting those grounds (s 8(2)(d)). Section 9 provides that the Attorney-General must then publish a notice in the Gazette and in a newspaper circulating throughout the State specifying that the application had been made (s 9(a)) and inviting the public to make submissions to the Attorney-General within 28 days of the publication of the notice (s 9(b)). While it may be that not all organisations in relation to which the Commissioner seeks a declaration have members who associate for the purpose of engaging in serious criminal activity, it is likely that some do. It is also likely that the Commissioner will believe in the existence of reasonable grounds for suspecting that all do: for a Commissioner who seeks a declaration without having that belief would be committing a grave abuse of office, which cannot be presumed. It is not easy to effect formal service on organisations of those kinds, let alone on all their members. Section 9(a) offers a reasonably realistic practical alternative, for it gives those who wish to know an opportunity to find out what is going on. Section 10(3)(e) provides that in considering whether to make a declaration, the Attorney-General "may" have regard to any submissions received from members of the public in relation to the s 9 notice. The respondents stressed the word "may". But in context that word does not negate a duty. It follows from the right under s 9(b) to make submissions before the declaration is made, and the duty under s 10(2) not to make a declaration before the period for making submissions provided in s 9(b) has expired, that there is a duty to take them into account. Otherwise the grant of the s 9(b) right and the imposition of the s 10(2) duty would be pointless. The respondents also stressed the absence of a requirement for the s 9(a) notice to specify the s 8(2)(c) grounds and the s 8(2)(d) information. But there is 429 Annetts v McCann (1990) 170 CLR 596 at 598; [1990] HCA 57. nothing to stop that material being requested. The right to make submissions entails a right to make properly informed submissions. A duty to supply the material, if requested, may be inferred from the fact that its refusal would deprive members of the public of their s 9(b) right to make properly informed submissions. There is also a duty on the Attorney-General to inform, so far as possible, both the organisation and persons named adversely in the material relied on by the Commissioner (unless it constitutes criminal intelligence)430. The interests of those persons would be affected if their conduct caused the Attorney-General to make a declaration in relation to the organisation of which they were members. The respondents submitted that there were no obligations of procedural fairness in relation to s 10 because if they existed the process would be unworkable: many people would have the capacity to have declarations set aside as beyond jurisdiction if they were not consulted. This is a curious and mercurial submission. For the purposes of the first strand in the Full Court's reasoning, the respondents said powers of administrative challenge were very narrow; for the present purpose they said they were broad. On the one hand they said s 10 excluded procedural fairness; on the other hand they said if procedural fairness were given, its operation was impractical. The respondents' submission was that the absence of procedural fairness – either because it is excluded or because practical opportunities were not given – was fatal to constitutional validity. In assessing the submission it would have been of interest to hear the respondents' contention on what scheme could have overcome this flaw. There was no contention of this kind. Procedural fairness in relation to the Attorney-General: after the declaration. The respondents criticised s 11. Although it requires the Attorney- General to publish notice of any declaration under s 10 in the Gazette and in a newspaper circulating throughout the State, there was no obligation to notify the organisation or any of its members about the declaration. In reality, the organisation is likely to find out quickly. Its capacity to notify its own members is much greater than that of the Attorney-General. Procedural fairness in relation to the Attorney-General: an alternative answer. Contrary to what has just been said, even if the Attorney-General has no duty to tell the organisation or affected members what is put against it or them when the declaration is applied for, even if it has no right to answer, and even if it has no right for any answer it gives to be considered, s 14 would not be invalid. If the Full Court's reasoning were sound, it would affect the validity of a great deal of legislation which lacks any of the safeguards to be found in ss 8-13. That 430 Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88 at 95-96 [15]-[17]; [2005] HCA 72. is because, as White J said431, it is not uncommon for statutes to permit the executive to decide one ingredient in prohibited conduct, leaving it to the courts to decide others. The effect is to narrow the area of decision-making otherwise open to the courts by withdrawing that ingredient from their consideration and to deprive affected persons of the right to consideration by an independent and impartial judicial officer of that ingredient. Yet these statutes are not usually thought to be constitutionally invalid432. Procedural fairness in the Magistrates Court: access to materials before the Attorney-General. So far as procedural fairness in the Magistrates Court is concerned, the Full Court said that when the Commissioner makes an application for a control order under s 14(1), there is no duty on the Commissioner to provide to the defendant the materials which were before the Attorney-General when the Attorney-General made the declaration. The Solicitor-General for the State of South Australia did not dispute that. As discussed above433, it would, however, be open to the defendant to obtain the relevant materials (apart from criminal intelligence) in the ordinary way by subpoena in the course of a challenge on the grounds of jurisdictional error, and in the course of an endeavour to negate membership of the declared organisation. In an ex parte application under s 14 the Commissioner would be obliged to reveal materials relevant to membership to the Magistrates Court, and this would result in them becoming available to the defendant at the notice of objection hearing. Procedural fairness in the Magistrates Court: access to "criminal intelligence". In the Magistrates Court, criminal intelligence might be relevant to the question whether a person is a member of a declared organisation. The effect of s 21(1) and (2)(a) is that criminal intelligence might be employed without the defendant or the defendant's representatives being made aware of what it is. There are three answers to this difficulty. First, as noted earlier434, in the K-Generation case435 this Court upheld the validity of s 28A(1) and (5)(a) of the relevant South Australian legislation, which were in the same terms as s 21(1) and (2)(a), save that "properly" appears before "classified" in each of the latter provisions. The Court pointed to the possibility of a challenge to the Police Commissioner's classification of material as "criminal intelligence", to the absence of legislative direction of a particular outcome and to the capacity of 431 Totani v South Australia (2009) 105 SASR 244 at 303-304 [268]-[270]. 432 See below at [326]-[339]. 433 See [269]. 434 See above at [280]-[283]. 435 (2009) 237 CLR 501 at 542-543 [144]-[149]. parties other than the Commissioner to put submissions. Each of those considerations applies here. Secondly, to modify something said in the K-Generation case436, the potential that the s 21(2) procedure has for serious effects is reduced by the fact that a decision by the Commissioner to make a s 21(2)(a) application itself may greatly reduce the chance of "criminal intelligence" being decisive, because, in at least some cases, the Magistrates Court may feel disinclined to place weight on material which the Commissioner's application has prevented the defendant being able to test, or even see. Thirdly, as noted above in relation to s 13(2), the difficulty created by s 21 is inherent in any regime, common law or statutory, for striking a balance between interests in confidentiality and other interests437. General fairness of the respondents' arguments. It is convenient to deal with some submissions of the respondents about the general fairness of proceedings in the Magistrates Court and the Supreme Court. initial Magistrates Court proceedings: First, the respondents complained that, as with all other questions of fact to be decided by the Magistrates Court under the impugned Act, s 14 questions are to be decided on the civil standard (the balance of probabilities), not the criminal standard (beyond reasonable doubt). This is not significant. It was a factor against validity in Kable's case, but it may be doubted very strongly whether the outcome would have been different if the criminal standard had applied there. As McHugh J said later438: "State legislation may alter the burden of proof and the rules of evidence and procedure in civil and criminal courts in ways that are repugnant to the traditional judicial process without compromising the institutional integrity of the courts that must administer that legislation." And changes to the conventional burden and standard of proof do not usually affect constitutional validity439. The respondents submitted that applications for a control order will perhaps often proceed ex parte. That means that offences against s 35 could be committed before service of the control order and that a defendant against whom the control order was made could commit a criminal offence under s 22 after 436 (2009) 237 CLR 501 at 543 [148]. 437 See above at [269]. 438 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 601 [41]. 439 See above at [277]. service and before being able to have a notice of objection under ss 17-18 heard. The submission exaggerates the likely frequency of ex parte applications for control orders440. The submission that offences against s 35 could be committed even before the control order was served does not take into account s 35(2), requiring the prosecution to establish that the accused had knowledge that the person associated with was the subject of a control order. And it does not take account of the fact that s 16(4) provides that a control order is "not binding" on the defendant until served, and that it is not until then that the defendant is "a person … the subject of a control order" under s 35(1). The submission that offences under s 22 could be committed from the moment of service and before ss 17-18 proceedings could be constituted and heard is only sound in relation to defendants who contravene or fail to comply with the control order knowing that their act or omission constitutes a contravention of, or a failure to comply with, it or reckless as to that fact (s 22(2)). Yet there is no injustice in contempt proceedings against persons for breach of an ex parte injunction which took place before there was time to have the injunction dissolved, and those persons cannot avail themselves of anything as beneficent as s 22(2). The respondents submitted that there is no requirement that the defendant be provided with a copy of the s 14(4) affidavit verifying the grounds of an application for a control order. But the legislation takes the Magistrates Court as it finds it. Rule 37A(3) of the Civil Rules provides: "On the filing of an application to commence an action under the [impugned Act], the Registrar must list it for a directions hearing at the earliest possible time." Rule 37A(4) provides: "The Court may give directions as to service and as to any other matter." There is no reason to suppose that, except in ex parte applications or where criminal intelligence is concerned, any affidavit intended to be relied on will not ordinarily be served in advance, whether pursuant to directions or not. Any other notion is antithetical to the idea of inter partes proceedings. The respondents complained that s 21(2)(b) compelled the Magistrates Court to receive inadmissible evidence in the form of "criminal intelligence"441. This is not so. If criminal intelligence does not contain inadmissible hearsay, and it is otherwise admissible, it may be received. If it does contain inadmissible hearsay, or material inadmissible by reason of other rules of the law of evidence, that part of the material is not to be received. In the court below, the respondents relied on s 21(2)(b) for a contrary conclusion, and both the Full Court and White J agreed442. As the respondents pointed out, the appellant did not 440 See above at [258]. 441 For the definition of "criminal intelligence" see [269] n 394 above. 442 Totani v South Australia (2009) 105 SASR 244 at, respectively, 286 [183], 271 [98] and 301 [256]. challenge that conclusion. Despite that concession, the conclusion does not follow from s 21(2)(b). That provision is permissive in allowing proof of criminal intelligence by affidavit rather than oral evidence. But it does not create an exception to the rule against hearsay not known to the general law. The respondents relied on the possibility, unresolved in the court below and not the subject of full argument either there or in this Court, that s 14 proceedings are interlocutory, thus permitting affidavit evidence based on information and belief. Even if they are, the Magistrates Court is less likely to place weight on evidence given on information and belief where better was available443. General fairness of Magistrates Court proceedings under ss 17-20: the respondents' arguments. The respondents then turned to ss 17-18 (providing a defendant with the means of objecting to control orders already made), s 19 (giving powers of appeal to the Supreme Court against a decision of the Magistrates Court on a notice of objection), and s 20 (giving the Magistrates Court power to vary or revoke a control order on proof of a substantial change in the relevant circumstances). The respondents put four submissions about these provisions. The first submission was that they were no substitute for an opportunity to be heard by and to place material before the Attorney-General before a declaration was made. But there is an opportunity for affected persons to be heard by and to place material before the Attorney-General before a declaration is made. There is also a duty on that officer to consider what is put444. The second submission was that these provisions were no substitute for an opportunity to be heard by and to place material before the Magistrates Court before a control order was made. That opportunity exists as well, except in what is likely to be the relatively rare cases of ex parte applications. The third submission was that ss 17-18 did not alter the unsatisfactory nature of s 14(1) proceedings because the objection procedure under ss 17-18 placed the legal burden of proving a basis for varying or revoking the control order on the objector, and that an order could only be revoked if one of the matters required to be established under s 14(1) is disproved. But ss 17-18 do not place the burden of proof on the objector. Section 14(1) makes it plain that the burden of proving that the defendant is a member of a declared organisation rests on the Commissioner. And s 18(1) provides: 443 See above at [297]. 444 See above at [286]-[293]. "The Court must, when determining a notice of objection, consider whether, in the light of the evidence presented by both the Commissioner and the objector, sufficient grounds existed for the making of the control order." As has been held in relation to similar legislation, that does not relieve the Commissioner of the burden of showing that sufficient grounds did exist for the making of the control order445. It is true that s 18(3)(b) imposes on the defendant a burden of satisfying the Magistrates Court that there is good reason why he or she should be allowed to associate with a particular member or members of a declared organisation. But that only goes to the question of what form the order should take, not to the question whether it should have been made at all. The fourth submission was that appeals and applications to vary or revoke the control order were defective because there could be no full examination and no "full judicial review" of whether the s 10 declaration should have been made. There is much legislation analogous to s 10 of which that is true without its affecting validity446. Fifth strand: significant, complex, major role for the Attorney-General but not the Court The Full Court's fifth strand. The fifth strand in the Full Court's reasoning and the corresponding submissions of the respondents contrasted the complexity of the Attorney-General's role in deciding whether to declare an organisation under s 10(1) with the role of the Magistrates Court in deciding whether a person was a member of a declared organisation under s 14(1). The Full Court said that the Attorney-General, not the Magistrates Court, conducts the "relatively much more significant and complex factual inquiry"447. The "most significant and 445 Osenkowski v Magistrates Court of South Australia (2006) 96 SASR 456 at 467 [30] and 472 [55], construing s 74BF(2) of the Summary Offences Act 1953 (SA): there is close correspondence between s 74BF(2)-(3) and s 18(1)-(2). The respondents drew attention to the word "existed" in s 18(1), in contrast to "exist" in s 74BF(2). The difference is insignificant. 446 See below at [327]-[338]. 447 Totani v South Australia (2009) 105 SASR 244 at 280 [155]. See also at 280 essential findings of fact are made not by a judicial officer but by a Minister of the Crown."448 They were "the major elements"449. This meant that the: "process of depriving a person of their [sic] right to and freedom of association on pain of imprisonment for up to five years [under ss 22 and 35], although formally performed by a State court which exercises federal jurisdiction, is in fact performed to a large extent by a member of the Executive Government in a manner which gives the appearance of being done by the court."450 The effect of s 14(1) was "that the court must act without question on a declaration which represents the finding of the Attorney-General on matters critical to the making of the control order"451. The respondents submitted that the Magistrates Court's task is "relatively limited or formal", and "peripheral or incidental". They submitted that control orders "will generally flow almost as a matter of course". They submitted that the Magistrates Court had to do little more than satisfy itself of the defendant's membership of the declared organisation, that this led "readily to the appearance, if not the reality, of the Court's role being confined to the implementation of the Attorney-General's decision rather than any independent decision of its own", and that it gave "rise to an appearance of the Court acting as an instrument of the political arm of government (and in particular, the Executive determination manifest in the [s] 10(1) declaration)." These submissions must be rejected. Declaration and membership are equally important. These passages wrongly suggest that it is only the declaration which is important. This is not so. The declaration is no more important or essential in the making of the control order than the finding of membership. The distinction between the question whether the declaration should be made and the question whether a person is a member is not analogous to the distinction between the major premise and the minor premise in a syllogism. Even if it were, like the major and the minor premise, both the fact of the declaration and the existence of membership are necessary to the conclusion to which they lead. Neither is sufficient. Neither has predominating significance. It is true, as the Full Court said, that the matters 448 Totani v South Australia (2009) 105 SASR 244 at 280 [156]. 449 Totani v South Australia (2009) 105 SASR 244 at 280 [156]. 450 Totani v South Australia (2009) 105 SASR 244 at 283 [166]. 451 Totani v South Australia (2009) 105 SASR 244 at 283 [167]. underlying the declaration are "critical to the making of the control order"452. But so are the matters underlying proof of membership of the declared organisation. Membership may not be a simple issue. The fifth strand exaggerates the Attorney-General's role in another way. The Full Court saw four elements as necessary for a control order: first, satisfaction of the criterion in s 10(1)(a); secondly, satisfaction of the criterion in s 10(1)(b); thirdly, proof of the making of the declaration about the organisation; fourthly, proof of membership of the declared organisation. The Full Court saw the first two elements as being complex and significant. It saw the third as generally formal. That leaves only the fourth for the Magistrates Court. This oversimplifies the matter in several respects. For one thing, the Full Court's last question – membership – is not necessarily simple or brief. It is true that the matters relevant to the making of a declaration may often be more complex than the matters relevant to finding membership. The legislative scheme may contemplate that this potential for complexity makes the Attorney-General a more rational person to select as decision-maker on s 10(1) issues than the members of the Magistrates Court. That is because the Attorney-General provides a single answer to the threshold question posed by s 10, rather than a series of potentially conflicting decisions by individual magistrates; is perhaps more capable of assessing risks to "public safety and order in the State"; and is perhaps more capable of handling criminal intelligence. But whether or not the circumstances make the Attorney-General a more rational person to select as a decision-maker on s 10(1) issues, it does not follow that resolution of those issues is invariably more important, essential, significant, complex or major than s 14 issues. This is partly because membership may be a very informal matter in relation to some organisations. It is partly because of the extreme and ill-defined width of the definition of "member" in s 3 to include an "associate" member, a "prospective" member, a person who "identifies himself or herself, in some way, as belonging to the organisation" and "a person who is treated by the organisation or persons who belong to the organisation, in some way, as if he or she belongs to the organisation"453. There is considerable room for debate on the application of the 452 Totani v South Australia (2009) 105 SASR 244 at 283 [167]. 453 Section 3 provides that "member" includes: in the case of an organisation that is a body corporate – a director or an officer of the body corporate; and in any case – (i) an associate member or prospective member (however described) of the organisation; and (Footnote continues on next page) statutory definition. There is also room for extensive factual inquiry. Often membership will be incapable of proof by simple means like tendering a membership roll or a document evidencing payment of a subscription. The structure of serious criminal gangs may exhibit considerable variety. Membership may be both fluid and clandestine. Proof of membership is thus a task which may be neither easy nor simple. Complicating effect of the discretions and orders. For another thing, although under s 14 the Magistrates Court has a duty, not a discretion, to make the control order, and although under s 14(5)(b) the control order must prohibit the defendant from associating with other persons who are members of declared organisations and from possessing a dangerous article or a prohibited weapon, there is a discretion to omit or modify those prohibitions by reason of the tailpiece to the paragraph – "except as may be specified in the order"454. In exercising the discretion under s 14(5)(b), the Magistrates Court must take into account four specific matters under s 14(6)(a)-(d), as well as any other relevant matter (s 14(6)(e))455. The Magistrates Court also has a discretion in relation to the making of consequential or ancillary orders (s 14(7)). These discretions add to the potential complexity of its task. And the precise form of the orders is of considerable significance to each particular defendant. Finally, s 15 requires the Magistrates Court to specify the grounds on which the control order has been made (s 15(1)(d)) without including criminal intelligence (s 15(2)). Section 15 thus creates another source of complexity in the Magistrates Court's task. To treat most of the work involved in deciding whether to grant a control order as being done by the Attorney-General, with the Magistrates Court having only a formal and subsidiary role, is completely unrealistic. The discretionary decisions which the Magistrates Court must make under s 14(5)(b), (6) and (7), and its duty under s 15(1)(d), call for the specific attention of the Magistrates Court and no-one else. Not one of the various possible outcomes will have been dictated by the Executive. (ii) a person who identifies himself or herself, in some way, as belonging to the organisation; and (iii) a person who is treated by the organisation or persons who belong to the organisation, in some way, as if he or she belongs to the organisation". 454 See below at [362]-[365]. 455 See above at [249] n 363. In relation to the s 14(5)(b) discretion, by reason of the factors to which the Magistrates Court is required by s 14(6) to have regard, it is relevant for the Magistrates Court to consider the many circumstances in the personal life of the defendant and in the personal lives of those in the defendant's circle – the educational needs of the defendant or the defendant's family, the need to obtain health services, the defendant's employment position, the defendant's habits in relation to communicating with family members and friends, the defendant's practices in relation to social, religious, political and recreational affairs – all the many ways in which and the purposes for which human beings associate so far as they may relate to the defendant. It is also relevant under s 14(5)(b) to consider the extent to which the members of the declared organisation associate for the purpose of organising, planning, facilitating or engaging in serious criminal activity, and the extent to which it represents a risk to public safety and order in South Australia. The Magistrates Court is bound to act on a valid declaration in the sense that if membership is proved the control order must be made, but it is not bound to accept the Attorney-General's estimate of the preconditions which led to the declaration being made. The reasons for the s 10 declaration may relate to a condition of affairs which significantly predates the time when the s 14(1) application for a control order is made to the Magistrates Court, and they will not necessarily be focused on the particular position of the defendant (s 14(6)(a)-(b)) and the defendant's associates, whether regular (s 14(6)(c)) or potential (s 14(6)(d)). As White J said, the Attorney-General's declaration is not the equivalent of a court order. It founds no res judicata. It creates no issue estoppel. While the Magistrates Court cannot disagree with an intra vires decision of the Attorney-General to make a s 10(1) declaration, it can, for s 14(5)(b) purposes, reach a different assessment of the strength and nature of the factors referred to in s 10(1)456. The s 10(1) declaration can be made even though organising, planning, facilitating, supporting or engaging in serious criminal activity is not the organisation's sole purpose. The declaration can be made even though many of the members may not be involved in serious criminal activity. It can be made even though many members present no risk to public safety or order at all. The Magistrates Court has to assess the extent of the risk that the particular defendant will engage in serious criminal activity and the risk that the particular persons who are regular associates of the defendant will do so. These are tasks which are in no way foreclosed by the Attorney-General's conclusion that other persons have behaved or threatened to behave in a fashion which justified the Attorney-General's finding that the s 10(1) conditions were satisfied. The Attorney-General's declaration is a necessary but not sufficient condition for the grant of a control order. Apart from s 35(1)(a), it is the control 456 Totani v South Australia (2009) 105 SASR 244 at 289-290 [198]-[199]. orders which will effectuate the statutory object of disrupting the activities of declared organisations, their members and associates, and in effectuating that object the precise form of each order will be vitally important. Some defendants may be small fry, and narrow control orders will suffice for them. The circumstances of others may call for much more extensive control orders. And the interests in free association of both defendants and the many people with whom they may associate have to be taken into account. An inter partes hearing under s 14 or s 18 is likely to involve controversy in relation to both evidence and argument. The serious consequences of a control order both for the defendant (s 22) and for those who wish to associate with the defendant (s 35) would suggest that the Magistrates Court is obliged to search for cogent evidence about all aspects of the order sought, to undertake a genuinely evaluative and adjudicative exercise, and not to act nonchalantly, lightly or without careful consideration of the significance of what is being done457. Those conclusions also flow from the difficulties that lie in the path of a defendant who wishes to apply for a variation or revocation of a control order. That application cannot be made without the Magistrates Court's leave, and leave is only to be granted if the Magistrates Court is "satisfied there has been a substantial change in the relevant circumstances since the order was made or last varied" (s 20(2)). In short, the Court does not operate as a rubber stamp for the Attorney-General's opinion. It is engaged in a sensitive, difficult and potentially complex task of great importance for civil liberty. That is a task at the heart of the judicial function, not at or beyond its periphery. Lack of authority. There is a further matter which casts doubt on the fifth strand of the Full Court's reasoning. Even if, in the process which leads to a control order, the Executive is given a larger or more complicated job to perform than the Magistrates Court, neither the Full Court nor the respondents pointed to any part of the Kable line of authorities which saw that circumstance as bringing State legislation within the Kable doctrine. Sixth strand: grafting of administrative functions onto judicial functions The Full Court's sixth strand. The sixth strand in the Full Court's reasoning characterised the Attorney-General's role in deciding to make a declaration as administrative, and the Magistrates Court's role in deciding to make a control order as judicial. "It is the integration of the administrative function with the judicial function to an unacceptable degree which compromises the institutional integrity of the [Magistrates Court]. … It is the unacceptable grafting of 457 Totani v South Australia (2009) 105 SASR 244 at 290 [201] per White J. non-judicial powers onto the judicial process in such a way that the outcome is controlled, to a significant and unacceptable extent, by an arm of the Executive Government which destroys the [Magistrates Court's] integrity as a repository of federal jurisdiction."458 The Full Court said that the making of the control order by the Magistrates Court was a process "in fact performed to a large extent by a member of the Executive Government in a manner which gives the appearance of being done by the [Magistrates Court]."459 The Full Court said that: "the judicial function actually performed by the Magistrates Court is significantly impaired in a manner which is incompatible with its institutional integrity. The difficulty is not removed by providing a right of appeal to this Court. The Attorney-General's certificate is equally binding on this Court which has its own institutional integrity impaired in the same way."460 Questions about the Full Court's reasoning. Why does s 10 "significantly" impair the judicial function of the courts, and why does it do so to the point of being "incompatible" with their "institutional integrity"? Because, according to the Full Court, s 10 entails an "unacceptable grafting" of non- judicial powers onto the judicial process. Why is that unacceptable? Because it controls the outcome to a "significant and unacceptable extent". To say that the control exists to an "unacceptable extent" or to an "unacceptable degree" implies that control to a less significant extent or a less extreme degree would be acceptable. What is the test for dividing one "extent" or "degree" from another? And how is the court's integrity as a repository of federal (as distinct from non-federal) jurisdiction affected? Another series of questions arises from the fact that within quite broad limits legislatures can validly determine whether a particular power is to be exercised by the legislature, the executive or the judiciary. In Thomas v Mowbray, Gleeson CJ gave examples of how allocations of power made at one time and one place have been made differently at later times or other places461. Why then is it not possible for judicial powers affecting a particular problem to be exercisable after a process divided between the judiciary and one of the other organs of government? In particular, why is that not possible in relation to State 458 Totani v South Australia (2009) 105 SASR 244 at 280-281 [157] (emphasis added). 459 Totani v South Australia (2009) 105 SASR 244 at 283 [166]. 460 Totani v South Australia (2009) 105 SASR 244 at 283 [167] (emphasis added). 461 (2007) 233 CLR 307 at 326-327 [12]. institutions, which are not subject to the strict federal separation of powers doctrine? No false appearances. The Full Court said that the making of the control order by the Magistrates Court was a process "in fact performed to a large extent by a member of the Executive Government in a manner which gives the appearance of being done by the [Magistrates Court]"462. This pays no attention to the clear division of function between what the Attorney-General does and what the Magistrates Court does. Attention to that division negates any misleading appearance that the Magistrates Court makes the s 10 declaration. The impugned Act is not a "legislative decree" by which the Attorney-General's acts are "passed off" as a judgment of the Magistrates Court463. The impugned Act does not "deem" the Attorney-General's s 10 declaration to have been made by the Magistrates Court and it does not "confer validity" on it464. Duty of court to act on finding by executive coupled with finding of its own. A circumstance relevant not only to the sixth strand in the Full Court's reasoning, but to some others465, is as follows. There are many examples of statutes, Commonwealth and State, which resemble the impugned Act. They are statutes which provide for a non-curial decision made by the executive which, when taken with other matters found by a court in proceedings initiated by the executive, obliges the court to make orders. The maker of the non-curial decision might be the executive when it makes regulations under a statute, or when it acts under some power conferred by statute or regulation. This type of legislation confers on the executive the power to assign a particular legal status or character to persons, substances, places or other things and it confers on the court a duty to make a decision, after arriving at additional factual conclusions, as to the commission, for example, of a crime. Controlled Substances Act. White J gave an illustration: the Controlled Substances Act 1984 (SA) ("the Controlled Substances Act"). Section 32 creates offences concerning trafficking in a "controlled drug". That expression is not defined by reference to specified characteristics, the evidence of which in relation to a particular substance is considered by the court from case to case. Instead, it is defined in s 4 to mean "a drug of dependence" or any other "substance declared 462 Totani v South Australia (2009) 105 SASR 244 at 283 [166]. 463 The quoted words are those of Hayne and Callinan JJ in Re Macks; Ex parte Saint (2000) 204 CLR 158 at 285 [366]; [2000] HCA 62. 464 The quoted words are those of Stephen J in R v Humby; Ex parte Rooney (1973) 129 CLR 231 at 243; [1973] HCA 63. 465 See above at [278] and [295] and below at [340]-[345]. by the regulations to be a controlled drug for the purposes of" that Act. And "drug of dependence" is defined to be "a poison declared by the regulations to be a drug of dependence"466. Environment Act. The Solicitor-General of the State of Queensland gave an example depending not on regulations, but on Ministerial instruments. Section 178(1) of the Environment Protection and Biodiversity Conservation Act 1999 (Cth) ("the Environment Act") imposes on the Minister a duty, by instrument published in the Gazette, to establish a list of threatened species divided into six categories: extinct, extinct in the wild, critically endangered, endangered, vulnerable and conservation dependent. Those categories are defined in s 179. Thus a "native species" may be listed as "vulnerable" only if it is not "critically endangered" or "endangered" and is "facing a high risk of extinction in the wild in the medium-term future, as determined in accordance with the prescribed criteria": s 179(5). Regulation 7.01 of the Environment Protection and Biodiversity Conservation Regulations 2000 prescribes five criteria, satisfaction of any of which would justify listing. The first is that the native species has undergone, is suspected to have undergone, or is likely to undergo in the immediate future, a substantial reduction in numbers. The second is that its geographic distribution is precarious for the survival of the species and is limited. The third is that the estimated total number of mature individuals is limited and either evidence suggests that the number will continue to decline at a substantial rate, or the number is likely to continue to decline and its geographic distribution is precarious for its survival. The fourth is that the estimated total number of mature individuals is low. The fifth is that the probability of its extinction in the wild is at least 10 percent in the medium-term future. Assessment of whether any of the criteria are satisfied would obviously require expert analysis and receipt by the Minister of expert advice. The Environment Act envisages a complicated listing process, involving the formal obtaining of scientific advice from a Threatened Species Scientific Committee established under s 502 of the Environment Act before a native species can be listed as a "threatened species" because it is "vulnerable": Pt 13, Div 1, subdiv AA. Section 196(1) provides that a person is guilty of an offence if the person "takes an action" and the action results in the death of a "member" of a listed threatened species. In relation to whether the dead thing is a member of a listed threatened species, the offence is one of strict liability: s 196(2). The Solicitor-General of the State of Queensland submitted that this legislation divided the relevant tasks between the Minister and the criminal court. He submitted that the task of deciding whether something should be listed as a threatened native species is, to borrow the language of the Full Court, "removed 466 Totani v South Australia (2009) 105 SASR 244 at 303-304 [269]. from the court to the [Minister]"467. All that the criminal court has to determine is whether an "action" of the accused resulted in the death of something which was on the list in a Commonwealth area: s 196(1). Once the criminal court makes positive findings on these topics, it is obliged to find the accused guilty of the offence. Yet it could not be suggested that for that reason the imposition of the s 196 duty on the court involves "the unacceptable grafting of non-judicial powers onto the judicial process in such a way that the outcome is controlled … which destroys the court's integrity as a repository of federal jurisdiction."468 Nor could it be suggested that "the legislation provided for the required elements to be proved on application to the court, but that the court was to refer the findings on the major elements to a non-judicial officer, acting without any judicial safeguards"469. Customs Act. The Solicitor-General of the State of Queensland gave another example of an executive decision which furnished the basis for a criminal conviction. Section 233(1)(b) of the Customs Act 1901 (Cth) ("the Customs Act") renders it an offence to import "prohibited imports". The offence is one of strict liability: s 233(1AB). The Customs Act itself does not describe what goods are "prohibited imports". That is a matter left to the Executive acting by regulation pursuant to s 50 of the Customs Act. The sole role of the court is to determine whether the accused has imported the goods. Yet it could not be said, the Solicitor-General of the State of Queensland rightly submitted, that a law requiring a finding of guilt if a court makes a finding of importation of prohibited goods is invalid because the task of deciding which goods will be prohibited from being imported is left to the executive. Drugs Misuse Act. Yet another example given by the Solicitor-General of the State of Queensland was the Drugs Misuse Act 1986 (Q) ("the Drugs Misuse Act"). Section 5 provides that a person who carries on the business of unlawfully trafficking in a dangerous drug is guilty of a crime. Section 6(1) provides that a person who unlawfully supplies a dangerous drug to another, whether or not such other person is in Queensland, is guilty of a crime. Section 8 provides that a person who unlawfully produces a dangerous drug is guilty of a crime. Section 9 provides that a person who unlawfully has possession of a dangerous drug is guilty of a crime. In each case "unlawfully" means without authorisation, justification or excuse by law (s 4). Section 4 defines "dangerous drug" as, inter alia, a thing specified in the Drugs Misuse Regulation 1987 or something derived from or similar to it. 467 Totani v South Australia (2009) 105 SASR 244 at 280 [155]. 468 Totani v South Australia (2009) 105 SASR 244 at 281 [157]. 469 Totani v South Australia (2009) 105 SASR 244 at 280 [156]. The Full Court's distinction between s 14 and the Controlled Substances Act. The Full Court dealt with White J's example by stating that a s 10 declaration was not equivalent to the prescription by regulation of a particular drug as a "controlled drug" for the purpose of s 32 of the Controlled Substances Act. The Full Court said: "That involves the prescription by regulation of certain identified substances and quantities for the purpose of that section. The Attorney-General's role under s 10 … involves the assessment of and making a judgment about human behaviour and its effects."470 By those words the Full Court probably had in mind s 10(1)(b), which refers to an organisation representing "a risk to public safety and order". The Full Court may also have been referring to s 10(1)(a), which refers to assessing both an action and a purpose – the action of associating for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity. The Solicitor-General of the State of Queensland correctly submitted that it is not possible to discern differences between the Controlled Substances Act and the impugned Act. Under one Act a drug is proscribed by regulation because of an executive judgment about the actions of a drug and the predicted effect of those actions upon people. Under the other Act an organisation is declared by the Attorney-General because of an executive judgment about the actions of the members of that organisation, which can only act through or by its members, and the predicted effect of their actions upon people. Each decision may involve elaborate technical inquiries of experts. Each may require the detailed examination of complicated facts and the need to draw inferences from them. Each may involve reliance on information that would not be admissible as evidence. Each is ultimately concerned with the safety of human beings. In any event, as the Solicitor-General for the Northern Territory submitted, "assessments of and judgment about human behaviour and its effects" are not within the exclusive province of the judiciary. An executive or legislative determination that a particular crime should attract a particular maximum penalty involves assessing and making a judgment about human behaviour and its effects as much as a decision by a sentencing judge in a particular case. The respondents' distinction between s 14 and other legislation. How did the respondents deal with the examples posed by the Solicitor-General of the State of Queensland? They submitted that: 470 Totani v South Australia (2009) 105 SASR 244 at 281 [158]. "there is a greater risk of impairment of the requisite appearance of institutional separation and independence between the Executive and the Court where the Court's role is essentially one of determining whether a person fits within a class of persons which the Executive has determined meets the statutory criteria (and is thus worthy of the consequences that follow), than there is where the Court's role is to determine whether a particular person has engaged in proscribed conduct (even if the Executive has a role in determining what that proscribed conduct is)." This reasoning rests on a false distinction. It wrongly assumes that proof of membership is merely proof of a particular status and involves no conduct. It is true that a person can be a member of an organisation without doing anything. Many clubs have passive members who do nothing but pay the subscriptions (if any) and leave their name on the books (if any). But the organisations with which s 10 is concerned are likely to have many members whose membership is evidenced by their engaging in a great deal of conduct. Paragraph (b) of the definition of "member" contemplates identify themselves as belonging to an organisation they engage in conduct. And treatment of persons by the organisation or its members as if they belong to the organisation involves conduct. The role of the Magistrates Court under s 14 thus involves determination of whether a particular person has engaged in conduct. this471, for when persons The respondents submitted that s 196 of the Environment Act and s 233 of the Customs Act were distinguishable from the impugned Act. The former two items of legislation left it to the court to decide whether persons had engaged in conduct deserving of consequences (taking an action resulting in the death of a species determined by the Executive, or importing goods determined by the Executive). This, according to the respondents, meant that the legislation was less apt to be perceived as requiring the relevant court merely to give effect to an executive determination in respect of a particular person or classes of person, and hence less likely to give rise to an appearance of impaired independence. Why? As the respondents would frame it, the issue is whether there is an appearance of impaired independence. If that appearance exists, does it matter whether the court's independence appears to be impaired in relation to one issue rather than another? The respondents' submission seizes on an apparent difference between the subject to which s 10 is directed and the subjects to which the other legislation is directed, and erects that difference into a touchstone of constitutional validity. If legislation is to be invalidated because, in allocating decisions about some elements in a crime to the executive and some to the courts, it appears to impair judicial independence, why does it matter which elements are committed to the executive? The alleged appearance of impaired judicial independence remains. 471 For the text see above at [313] n 453. If the Full Court's reasoning were sound, the South Australian, Commonwealth and Queensland legislation just discussed would be invalid. Now it is not true that everything is for the best in the best of all possible worlds. And the mere existence of legislation does not automatically make it valid. But if a legal doctrine supposedly invalidates such common types of legislation as those just described, widely thought to be within the range of legitimate legislative choice, a significant question mark arises over the reasoning by which it was applied. The doctrine in question here is the Full Court's suggestion that there is something novel and impermissible about legislation like s 14, which provides, if the Magistrates Court makes particular findings of fact in combination with earlier conclusions by the Executive, for orders to be made that can lead to the commission of criminal offences against s 22 and s 35. But ss 10, 22 and 35(1)(b) are analogous to the provisions in the South Australian, Commonwealth and Queensland legislation described above so far as they create crimes. In each instance, as with s 14, a court was given a duty – not a discretion – to make an order if a non-curial decision has been made and the court finds that a particular fact exists. The relevant provisions in those pieces of legislation are not invalid. Nor is s 14. The Kable doctrine is not infringed by legislation requiring the court to make an order if certain conditions are met472. Nor is it infringed if among those conditions is a particular decision by the executive. As the Solicitor-General for the State of New South Wales pointed out, this Court has held that a Commonwealth legislative requirement that a Ch III court act on the basis of a state of affairs determined by a person who is not a court, for example a member of the executive, does not offend Ch III473. A fortiori, a State legislative 472 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 352 [49], 360 [77], 372-373 [120]-[121] and 386 [157]. 473 Palling v Corfield (1970) 123 CLR 52 at 58-59, 62, 64-65, 67 and 69-70; [1970] HCA 53. The decision was not challenged by counsel for the appellant in Kable's case nor overruled by the majority, though it was cited by Dawson J (dissenting): (1996) 189 CLR 51 at 88, n 151. See also Ex parte Coorey (1944) 45 SR (NSW) 287 at 298 per Jordan CJ: "[The Commonwealth] Parliament may provide that the prior determination by [an administrative person] of a matter of fact shall be an essential ingredient of the coming into existence of a new right or liability." This, too, was not overruled in Kable's case. See also Thomas v Mowbray (2007) 233 CLR 307, discussed below at [356]-[357]. requirement that a State court act on the basis of a state of affairs determined by the executive cannot offend the Kable doctrine, which rests on Ch III474. Impact of the legislative examples on other strands Complex executive decision/simple curial decision. Thus these legislative examples have demonstrated fallacy in the sixth strand of the Full Court's reasoning. They also demonstrate fallacies in elements of other strands as well. One element in the fifth strand concentrated on the supposed contrast between the "relatively much more … complex factual inquiry"475 under s 10, involving "possibly disputed factual issues"476, on the one hand, and the simpler task under s 14477. Similar contrasts can exist between the role of the Executive in making regulations under the Controlled Substances Act and the role of a criminal court under s 32. They can exist between the role of the Ministerial instrument made under s 178(1) of the Environment Act and the role of a criminal court under s 196. They can exist between the role of the Executive in making regulations under s 50 of the Customs Act to identify prohibited imports and the role of the criminal court under s 233. They can exist between the role of the Executive in making regulations for the purpose of the definition of "dangerous drug" in s 4 of the Drugs Misuse Act and the role of the criminal court under ss 5, 6, 8 and 9. Significant executive decision/insignificant curial decision. Another element in the fifth strand also concerned the balance between the Attorney- General's decision under s 10 and the Magistrates Court's decision under s 14478. The Full Court saw the s 10 inquiry as a "relatively much more significant … factual inquiry"479, as one which caused the s 14 outcome to be "controlled … to a significant … extent"480, and as one which caused the Magistrates Court's function under s 14 to be "in fact performed to a large extent by a member of the 474 H A Bachrach Pty Ltd v Queensland (1998) 195 CLR 547 at 561-562 [13]-[14]; [1998] HCA 54; Baker v The Queen (2004) 223 CLR 513 at 526 [22]-[23]; [2004] HCA 45. 475 South Australia v Totani (2009) 105 SASR 244 at 280 [155]. 476 South Australia v Totani (2009) 105 SASR 244 at 283 [166]. 477 Above at [249] n 361. 478 Above at [249] n 362. 479 Totani v South Australia (2009) 105 SASR 244 at 280 [155]. 480 Totani v South Australia (2009) 105 SASR 244 at 281 [157]. Executive Government"481. Depending on the circumstances of a particular case, these characterisations can be true. And depending on the circumstances of a particular case, they can be true of the other items of legislation just identified. That does not make any of the legislation unconstitutional. Appearance of the court being the executive. An element of the sixth strand was that the s 14 function was one which gave only "the appearance of being done by the court."482 Again, if that is true in any sense, it could be said to exist in relation to the other pieces of legislation. But they are not invalid, and it is not true. Assuming that a central vice to which the Kable doctrine is directed is conscripting or recruiting the court so as to give the appearance that the judicial process is merely an extension of the executive's function, it is not a vice to be found in s 14. The Magistrates Court does not sanction the merits of the Attorney-General's decision to make a declaration, any more than the courts that apply drug legislation sanction the merits of the decision by the executive or the legislature that a particular drug is dangerous – a topic on which opinions can differ widely. The courts must act on the relevant decision unless it is set aside as being beyond jurisdiction, but that does not mean they give the decision their imprimatur. Procedural fairness. The fourth strand was the Full Court's contention that both s 10 and s 14 are inconsistent with duties of procedural fairness. But a person charged with trafficking in a controlled drug contrary to s 32 of the Controlled Substances Act is not able to challenge the conclusions of fact which underlay the decision of the Executive to make a regulation declaring a particular substance to be a controlled drug, to have those issues heard before an independent and impartial judicial officer, to be informed of the "case" and to answer the "case". The same is true of a person charged with taking an action resulting in the death of a member of a listed threatened species contrary to s 196(1) of the Environment Act in relation to the question of whether the species should have been listed. It is true of a person charged with importing a prohibited import contrary to s 233 of the Customs Act on the question whether the import should have been prohibited. It is true of a person charged with criminal offences against the Drugs Misuse Act in relation to dangerous drugs on the question whether the drugs should have been declared dangerous. Section 10 of the impugned Act is actually much less inimical to procedural fairness than the other legislation described. While defendants to s 14 proceedings for a control order cannot challenge the declaration (save for jurisdictional error), they can, if they keep their eyes open, learn that the 481 Totani v South Australia (2009) 105 SASR 244 at 283 [166]. 482 Totani v South Australia (2009) 105 SASR 244 at 283 [166]. Attorney-General is considering a declaration, seek the material before the Attorney-General, make submissions to the Attorney-General before the declaration is made, and expect the Attorney-General to take their submissions into account. None of the other Acts described have these beneficial characteristics. This invalidates the respondents' submission that s 14 obliged the Magistrates Court to enforce as if it were its own judgment an executive determination under s 10 which was at odds with the fundamentals of the judicial process. It is true that the s 10 process is not a judicial process. But it is far from wholly lacking in the safeguards which characterise the judicial process. More importantly, the Magistrates Court was not compelled to enforce the s 10 declaration: it was compelled to make a control order, but only if it made a finding of membership, and the form of the control order rested on various discretionary considerations483. Unreviewability. The second strand was the Full Court's reliance on the unreviewability of the Attorney-General's decision to declare an organisation. It can be "reviewed" in a strict sense of that word for jurisdictional error484. But in a looser sense it cannot be "reviewed" by appeal or "merits review". The same is true of the executive decisions in the legislation which has been analysed above. They can be challenged if they are beyond the power conferred by the legislation under which they are made. But appeals and merits review are not available. Most executive decisions are "unreviewable" in that sense, unless they fall within relatively recent Commonwealth or State legislation of the type exemplified by the Administrative Appeals Tribunal Act 1975 (Cth). That circumstance does not make the legislation invalid under the Kable line of cases. Is this appeal on all fours with Kable's case? It is now necessary to deal with certain arguments of the respondents which extend beyond the Full Court's six strands. The Kable reasoning. The respondents submitted that the impugned Act was analogous to the legislation in Kable's case, particularly as analysed by McHugh J485. His Honour held that that legislation compromised the institutional impartiality of the Supreme Court of New South Wales for the following reasons. It was ad hominem legislation: it had the object of keeping Gregory Wayne Kable in gaol, not because of the manslaughter for which he had been convicted but because of another serious act of violence which the Executive Government 483 See above at [314]-[320] and [362]-[366]. 484 See above at [267]-[272]. 485 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 119-124. and the legislature feared he might carry out in the future (see ss 3 and 5). It sought: "to ensure, so far as legislation can do it, that the appellant will be imprisoned by the Supreme Court when his [current sentence] expires. It makes the Supreme Court the instrument of a legislative plan, initiated by the executive government, to imprison the appellant by a process that is far removed from the judicial process that is ordinarily invoked when a court is asked to imprison a person."486 The devisers of the plan must have seen as minimal the risk of the plan failing. Section 5 of the relevant Act gave the Supreme Court "power" to detain Gregory Wayne Kable if satisfied on reasonable grounds that he was more likely than not to commit a serious act of violence and that it was appropriate, for the protection of a particular person or persons or the community generally, that he be held in custody. In substantial respects the Supreme Court was compelled to receive material whether it complied with the rules of evidence or not (s 17). Section 7 gave the Supreme Court power to make interim detention orders for a period not exceeding three months pending the making of a s 5 order of detention for six months – without the need to satisfy the s 5 criteria and without granting any capacity to appeal. The relevant Act declared the proceedings to be civil proceedings even though the Supreme Court was not asked to determine the existing rights and liabilities of any party or parties. Proceedings under the relevant Act bore very little resemblance to the ordinary processes and proceedings of the Supreme Court. The jurisdiction of the Supreme Court was purely executive in nature. The relevant Act asked the Supreme Court to "speculate whether, on the balance of probabilities, it is more likely than not [that Gregory Wayne Kable] will commit a serious act of violence."487 In view of the notorious difficulty in predicting dangerousness, the Supreme Court could make only "an informed guess"488. McHugh J quoted the observation of a commentator on similar Victorian legislation: "It would take a brave Supreme Court judge to find that the case for placing [the defendant] in preventive detention had not been made out." It brought the process and the courts which administered it into public disrepute because it gave the impression that the judiciary was ratifying a political decision that one man should be incarcerated without findings of criminal conduct, and this created the impression in the public mind that the 486 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 122 per McHugh J; see also at 99 per Toohey J, 106-108 per Gaudron J and 131-134 per 487 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 122-123 per 488 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 123. judiciary was simply an arm or an instrument of the Executive implementing the will of the legislature489. The writer whom McHugh J quoted seemed to doubt the existence of any brave Supreme Court judges in Victoria. Experience does not support that doubt. In any event it was unfortunate and inconvenient for this reasoning that after the initial s 5 order was made against Gregory Wayne Kable, and after an appeal to the Court of Appeal failed, "a brave Supreme Court judge" in the person of Grove J declined to make another s 5 order490. Thus the risk of the Supreme Court thwarting the intention of the officials and legislators to keep Gregory Wayne Kable locked up turned out to be much greater than minimal. The Kable reasoning distinguished. But putting these considerations on one side, how does the Kable reasoning apply to the impugned Act? The impugned Act is not ad hominem, and that was a crucial factor for all the majority Justices in Kable's case491. A law of general application which provided for restrictions on liberty for preventive purposes and which, unlike the legislation in Kable's case, did not dictate the outcome in particular cases, could not have had an impact on the actual or perceived impartiality or independence of the Supreme Court of New South Wales. Section 14 is a law of general application which provides for restrictions on association for preventive purposes and does not dictate the outcome in particular cases. Unlike the Kable legislation, s 14 is "a carefully calculated legislative response to a general social problem"; it was the absence of that feature in the Kable legislation that highlighted its ad hominem nature492. The respondents submitted that the 489 R v Moffatt [1998] 2 VR 229 at 237 per Winneke P, explaining the reasoning in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 134. See also Forge v Australian Securities and Investments Commission (2006) 228 CLR 490 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 109. McHugh J also specifically endorsed the independence and impartiality with which Levine J and the Court of Appeal conducted the proceedings which led to the High Court appeal: at 123. 491 (1996) 189 CLR 51 at 98-99 per Toohey J, 108 per Gaudron J, 121-122 per McHugh J and 125 per Gummow J. That the ad hominem character of the legislation was central to its invalidity was stressed by all members of the majority in Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 591 [16], 595-596 [33], 601-602 [43], 617 [100], 647 [196] and 658 [233]. 492 The quoted words are those of Sir Maurice Byers QC, counsel for the appellant in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 62: see Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 614-615 [91]. impugned Act did have an "ad hominem … flavour" because the s 10 declaration narrowed the class of persons to be subjected to s 14(1) orders: but the potential number and width of the classes was great – as great as the number and width of the organisations capable of answering the description in s 10(1). Although the Kable doctrine has not been limited to incarceration493, the present legislation is not concerned with total restraints on liberty of that kind, but with a control order restraining freedom of association. As Gummow and Crennan JJ said in Thomas v Mowbray494: "Detention in the custody of the State differs significantly in degree and quality from what may be entailed by observance of an interim control order." The control order in that case contained restrictions on communicating or associating with specified individuals495, and s 14(5)(a)(i) of the impugned Act contemplates the same types of restriction. The respondents submitted that there was an analogy with Kable's case in that imprisonment was a possible, though non-immediate, consequence of the control order. In the case of s 22 violations, however, the outcome of imprisonment is a matter within the defendant's control, and in the case of s 35(1)(b) violations it is within the control of the defendant and the associate. The outcome of imprisonment was not within the control of Gregory Wayne Kable. Although the civil standard of proof applies under both regimes, in contrast to Kable's case the conventional rules of evidence apply to s 14 proceedings in every other respect. Unlike the proceedings before the Supreme Court under the Kable legislation, proceedings under the impugned Act are almost identical to the ordinary processes and proceedings of the Magistrates Court496. Although s 5 of the Kable legislation called for predictions about the future in relation to dangerousness, s 10 of the impugned Act deals largely with present and past facts: it asks "for what purpose do members associate?" and "does the organisation represent a risk to the public?" And s 14 deals with present facts – "is the defendant a member?" It is true that in considering the 493 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319. 494 (2007) 233 CLR 307 at 356 [116]. 495 Thomas v Mowbray (2007) 233 CLR 307 at 339 [49]. For the relevant provision, s 104.5(3)(e) of the Criminal Code (Cth), see at 501 [574], n 778, and for the relevant part of the actual order see at 493-494 [554]. 496 See above at [255]-[263]. form of the control order, the Magistrates Court must consider at least two future matters pursuant to s 14(6)(a) and (b). But it could not fairly be said that the Magistrates Court is asked merely to speculate, or to act only on an "informed guess". It is a common function of courts to reach a predictive conclusion about risk – for example, in relation to the protection of children497, the assessment of damages for personal injury498 and the assessment of damages for loss of a chance in commercial cases499. The processes of assessing risk and predicting how far something will prevent a future outcome have not invalidated legislation in cases subsequent to Kable's case500. In Kable's case reference was made to the fact that the process did not involve adjudication of guilt for a criminal offence501, but this is not a sufficient condition of invalidity, because the process in Fardon v Attorney-General (Qld)502 did not involve the adjudication of guilt for a criminal offence either. The commonplace stipulation as one condition for the Magistrates Court's s 14(1) order of the making of a declaration about a state of affairs by the Executive does not mean that the Magistrates Court is doing the Executive's bidding503. The impugned Act does not reflect a legislative or executive plan to secure a pre-determined result, because the Magistrates Court exercises an independent function in determining whether the criteria for a control order are made out, and exercises discretions in determining the content of a control order. The Executive has no control over it in those crucial respects. The respondents submitted that s 14(1) of the impugned Act is a stronger candidate for invalidity than s 5 of the Kable legislation in two respects. The first is that while s 14 is mandatory once the conditions for a control order are satisfied, s 5 "required the Court to exercise its judgment" – it "bestowed a discretion upon the court by evaluation of matters that had to do with prediction of future criminal conduct." That distinction is questionable: this Court's view 497 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 657 [225]. 498 Malec v J C Hutton Pty Ltd (1990) 169 CLR 638; [1990] HCA 20. 499 Sellars v Adelaide Petroleum NL (1994) 179 CLR 332; [1994] HCA 4. 500 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 657 [225]; Thomas v Mowbray (2007) 233 CLR 307 at 331 [19]. 501 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 97, 106-107, 120 and 132. 502 (2004) 223 CLR 575. 503 See [326]-[339]. that the legislative scheme reflected a plan to ensure that Gregory Wayne Kable remained imprisoned must rest on the construction of the words "may order" in s 5(1) as "must order". The second reason submitted by the respondents was that s 14 did not require any past criminal conduct on the part of the defendant, while in Kable's case s 5 "was predicated only upon the past and future conduct of the defendant." That is not significant, because the purpose of the impugned Act is to disrupt and restrict the activities of organisations involved in serious crimes, as well as their members and associates, and this depends on breaking up connections between potentially wide classes of members and associates who might be involved in criminal activity in future – whether or not they have been in the past. On the other hand, the Kable legislation was of an entirely different kind, having the narrow purpose of stopping one man committing crimes. Section 14, far from being indistinguishable from the State legislation struck down in Kable's case, is very close to the Commonwealth legislation upheld in Thomas v Mowbray504. Section 104.4(1)(c) of the Criminal Code (Cth) permitted an interim control order to be obtained against a person ex parte if, among other things, the court was satisfied on the balance of probabilities that (i) making the order would substantially assist in preventing a terrorist act (a future state of affairs) or (ii) the person had provided training to or received training from a listed terrorist organisation (a past event). The legislation also required the court to be satisfied that the order was reasonably necessary, adapted and appropriate for the purpose of protecting the public from a terrorist act (s 104.4(1)(d)). A list of terrorist organisations was set out in the Criminal Code Regulations 2002 (Cth) made under the Criminal Code. The identification of terrorist organisations was thus a decision made by the Governor-General on the advice of the Executive – with many fewer safeguards than those which exist in ss 8-13 of the impugned Act. As is the case with s 21 of the impugned Act in relation to criminal intelligence, information provided in support of the application for an interim control order could be withheld from the person against whom the order was made in the interests of national security (s 104.5(2A)). If an interim control order were made, a hearing could subsequently take place at which the court could confirm, vary or revoke the order (s 104.14). The majority held that this regime did not offend Ch III. In both that case and this, an anterior determination by the Executive is part of the scheme (s 10(1)/reg 4A). In both cases past events are involved (becoming a member and the matters listed in s 14(6)(a) and (c)/providing or receiving training pursuant to s 104.4(1)(c)(ii)). In both cases an assessment of future conduct is involved (s 14(6)(a) and (b)/s 104.4(1)(c)(i)). In both cases the order is to be adapted to the particular circumstances (s 14(5)(b) and (6)/s 104.4(1)(d)). In both cases the process involves no adjudication of criminal 504 (2007) 233 CLR 307. guilt. It may be said that the primary difference between s 14(1) and s 104.4 is that s 14(1) creates a duty on the Magistrates Court to make a control order if satisfied of proof of the elements referred to in s 14(1), while s 104.4(1) (commencing: "The … court may") creates only a discretion; the s 104.4(1)(d) factors go to the question of whether an order should be made at all, while the s 14(6) factors go only to the form of the order. However, this alone is not repugnant to Ch III505. Why, then, is s 104.4 valid but not s 14(1)? The supposed distinction between mandatory s 14(1) orders and discretionary s 104.4 orders is insubstantial. First, as noted earlier506, though s 14(1) is mandatory, the operation of s 14(6) can make particular orders quite narrow. Secondly, there is only a limited sense in which interim control orders can be called discretionary. They cannot be refused on a whim. Provided the conditions referred to in s 104.4(1) are satisfied and the considerations referred to in s 104.4(2) and (3) are taken into account, an interim control order should flow as of course unless some special reason to the contrary exists. Thus it is not true to say that the court always has a discretion to grant the order, because in certain circumstances it will have a duty to do so. When that duty arises, the court will be required to act on an anterior determination by the Executive. It is true that the arguments advanced by the respondents in the present case were not advanced in Thomas v Mowbray. Yet if the court's function in relation to an anterior determination of the Executive is fatal to validity on the ground that it removes one of the essential characteristics of a Ch III court, it is surprising that this striking phenomenon was not observed by any of the 15 barristers involved in Thomas v Mowbray or their instructing solicitors. The respondents' remaining submissions The argument. Finally, the respondents pointed out that the focus of s 10 is on the organisation – the purposes of the organisation (which need not be the dominant purposes) and the risks it presented to public safety and order – not the wrongdoing of individuals. But the effect of the impugned Act is to curtail significantly the freedom of association enjoyed by individuals. It does so only by reference to future harm, not to whether or not a particular member or associate had engaged in any criminal conduct before the making of the control order. The respondents then submitted that it was repugnant to the institutional integrity of the Magistrates Court for it to grant a control order forbidding a defendant who is a member of a declared organisation from associating with a member of that or another declared organisation, when that conduct was not in breach of an antecedently existing legal norm, when membership of the declared 505 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 352 [49], 360 [77], 372-373 [120]-[121] and 386 [157]. 506 At [314]-[320]. See also below at [361]-[365]. organisation or organisations was not of itself unlawful, when there was no existing controversy or dispute requiring resolution, and when the Magistrates Court made no inquiry into what the defendant had done in the past or might do in the future, with the result that the association between individuals is made criminal where it would not otherwise be a crime. The argument must be rejected for the reasons advanced by the Solicitor-General of the State of Queensland. Those reasons were substantially to the following effect. Past criminal conduct of members before s 10 declaration. The respondents submitted that it was possible for a control order to be made without any particular member of the declared organisation or associate of a member having engaged in any criminal conduct. That submission is incorrect. It is extremely unlikely that an organisation could be declared unless the Attorney- General was satisfied that at least one member of the organisation had committed a crime. In view of the definition of "serious criminal activity" (which means the commission of serious criminal offences) and "criminal intelligence" (which means information relating to "actual or suspected criminal activity"), it would be difficult to conclude that the "purpose" and the "risk" referred to in s 10(1) existed without reaching that state of satisfaction. If members associate for the purpose of organising, planning or engaging in serious criminal activity, it is not hard to infer that they are guilty of conspiracy to commit offences. If members associate for the purpose of facilitating or supporting serious criminal activity, it is not hard to infer that they are guilty of aiding, abetting, counselling or procuring the commission of offences. Even if for some reason in isolated instances this is not so, the Attorney-General's satisfaction could only be achieved if inferences could be drawn from the commission of crimes by a member or members. In each case the members in the above categories must be sufficiently numerous or otherwise significant to make the organisation a risk to public safety and order. And since "serious criminal activity" is defined in s 3 as "the commission of serious criminal offences", in the plural, it is not enough that there be a single conspiracy or act of secondary participation. The Attorney-General is entitled to take into account that best evidence of past criminal activity – convictions of current or former members of the organisations and convictions of persons who associate, or have associated, with members (s 10(3)(b)). Of course the satisfaction of criminality may be based upon the Attorney-General's own view of the facts: it does not depend upon there having been any conviction by a court. Magistrates Court's duty to restrict defendant's freedom of association without any duty to inquire into defendant's past conduct? The next flaw in the respondents' submission is the contention that the Magistrates Court is required to issue the control order without inquiring into what the defendant has done. The contention takes no account of the fact that the Magistrates Court is obliged to inquire into one thing the defendant has done – become a member of a declared organisation. A declared organisation is, to put it shortly, a criminal gang. Although it is possible to be a member of a declared organisation without having committed any crimes, it is not, depending on what the member knew, creditable to be a member of such an organisation. There is a further flaw. It is true that the Magistrates Court is under a duty to make a control order against a member even if the member has not committed any crimes. The form of that order is another matter. Although s 14(5)(b)(i) provides that where the defendant is a member of a declared organisation, the control order "must prohibit" the defendant from "associating with other persons who are members of declared organisations", that duty is subject to the concluding words of s 14(5)(b) – "except as may be specified in the order." The discretionary judicial power conferred on the Magistrates Court by s 14(5) is to be construed without making implications or imposing limitations not found in the express words507. And Parliament is not to be taken by s 14(5)(b)(i) to have deprived persons of fundamental rights without using clear, unmistakable and unambiguous language508. There is no such language, and the last eight words are the opposite of that language. The Magistrates Court's power to leave out the terms described in s 14(5)(b)(i) negates any duty to impose them. Various matters of fact in s 14(6) are relevant to whether there should be a specification in the order to the contrary of s 14(5)(b)(i). It is not the case, contrary to the respondents' submission, that the Magistrates Court is forbidden to inquire into these various matters of fact. On the contrary, it is required to do so. Section 14(6)(a) obliges the Magistrates Court, in considering the prohibitions "that may be included" in a control order, to have regard to whether the defendant's behaviour, or history of behaviour, suggests that there is a risk that the defendant will engage in serious criminal activity. Section 14(6)(b) obliges the Magistrates Court to have regard to the extent to which the order might assist in preventing the defendant from engaging in serious criminal activity. And s 14(6)(c) obliges the Magistrates Court to have regard to the prior criminal record (if any) of the defendant and any persons specified in the application as persons with whom the defendant regularly associates509. In view of these provisions, it is open to the Magistrates Court to conclude that no prohibition on a defendant's freedom of association, whether of the 507 Owners of the Ship "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 181 CLR 404 at 421; [1994] HCA 54; CDJ v VAJ (1998) 197 CLR 172 at 185-186 [53] and 201 [110]; [1998] HCA 67. 508 Bropho v Western Australia (1990) 171 CLR 1 at 17-18; [1990] HCA 24; Coco v The Queen (1994) 179 CLR 427 at 437-438; [1994] HCA 15. 509 See above at [249] n 363. s 14(5)(b)(i) kind or any other kind, is warranted given the negligible risk that the defendant will engage in serious criminal activity by reason of the past record of the defendant and the defendant's regular associates. One object of the impugned Act is to protect members of the public from violence associated with criminal organisations. It would not advance that object to make a prohibition under s 14(5)(b)(i) if any association between the defendant and others carries no risk of violence to the public. It follows that the Magistrates Court is not required to grant a control order without inquiry into what the defendant has done or may do. The opposite is the case: the Magistrates Court cannot grant a control order without making that inquiry. The respondents submitted that it was not possible to frame a control order which had no prohibition on association without draining the notion of "control order" of content in defiance of the duty to make one created by s 14(1). The Solicitor-General for the State of South Australia accepted that it would not be possible to make a "control order" having no content; but the respondents' submission goes too far. The principles of construction referred to above510 mean that if there is a choice between a construction protecting liberty and a construction by which it was obligatory for a control order to prohibit association, the former construction must be preferred so long as the control order has some content. This difficulty in the impugned Act can be palliated by limiting the control order to the matters in s 14(5)(b)(ii) (thus creating no problems in relation to association under s 22). The respondents otherwise offered no answer to the submissions of the Solicitor-General of the State of Queensland, save to rely on s 35. The respondents submitted that even if the terms of the control order were: "significantly confined under s 14(5)(b), other persons would be subject to criminal sanctions if they were to associate with the defendant contrary to the terms of s 35 … even if the defendant's control order had exceptions in respect of certain other members of the declared organisation". This answer goes beyond the submission under consideration, which concentrated on the criminalisation of the defendant's conduct, not that of other people. There is an imperfect meshing between s 14 and s 35. But the worst that can be said of the s 35 problem is that, like the problem of whether or not a control order can have very limited content, it is the kind of legislative disharmony which will very often be thrown up by an appeal like the present in which eight teams of sharp-witted lawyers spend many days analysing legislation in their preparation and presentation of argument. Perhaps there was an oversight. Perhaps there was a blunder. It is difficult to imagine that the 510 At [251] n 364 and [362] n 508. Executive will prosecute a person for contravention of s 35(1)(b) by association with a person subject to a control order, being a control order which does not prevent the latter person from associating with the former. A prosecution of that kind would be vulnerable to dismissal as an abuse of process. Difficulties of this kind, like the problem concerning whether a control order can have very limited content, cannot support a conclusion of constitutional invalidity. Magistrates Court's duty to restrict defendant's right of association without any duty to inquire into the defendant's future conduct? Contrary to the relevant submission, at least pars (a) and (b) of s 14(6) create a duty on the Magistrates Court to inquire into the defendant's future conduct. The requirement in the legislation under consideration in Fardon v Attorney-General (Qld)511 that possibilities in relation to future conduct be considered before the preventive detention could be terminated did not invalidate it. No breach of an existing norm and no existing controversy. If it were essential to validity that the conduct forbidden by the control order be conduct in breach of an existing norm, and that the order be made in an existing controversy, much legislation would be invalid. It is true that the absence of any controversy or dispute requiring resolution was pointed to in Kable's case to demonstrate how little resemblance the proceedings contemplated by the legislation there under consideration bore to the ordinary processes and proceedings of the Supreme Court of New South Wales512. That conclusion will not hold for the s 14(1) proceedings in this case, which are closely similar to the ordinary processes and proceedings of the Magistrates Court513. In general, "a legislature can select whatever factum it wishes as the 'trigger' of a particular legislative consequence"514. That is so even when the trigger is a finding by the executive that a state of affairs exists which does not involve any actual or threatened contravention by the defendant of a legal norm of conduct. And it is so even when the trigger is an order in legal proceedings not involving any actual or threatened contravention by the defendant of a legal norm of conduct. The respondents attempted to create a universal proposition out of what was said in Kable's case. That universal proposition would render unconstitutional legislation permitting or compelling orders to be made even though this was not necessary to resolve a controversy or dispute. The attempt encounters the difficulties discussed by Dixon CJ and McTiernan J in R v 511 (2004) 223 CLR 575. 512 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 122. 513 See above at [255]-[263]. 514 Baker v The Queen (2004) 223 CLR 513 at 532 [43]. Davison515. They were dealing with a contention that "judicial power" depended on certain elements which included the existence of a controversy between subjects or between the Crown and a subject, and on the determination of existing rights as distinct from the creation of new ones. They said: "It may be said of each of these various elements that it is entirely lacking from many proceedings falling within the jurisdiction of various courts of justice in English law. In the administration of assets or of trusts the Court of Chancery made many orders involving no lis inter partes, no adjudication of rights and sometimes self-executing. Orders relating to the maintenance and guardianship of infants, the exercise of a power of sale by way of family arrangement and the consent to the marriage of a ward of court are all conceived as forming part of the exercise of judicial power as understood in the tradition of English law. Recently courts have been called upon to administer enemy property. In England declarations of legitimacy may be made. To wind up companies may involve many orders that have none of the elements upon which these definitions insist. Yet all these things have long fallen to the courts of justice. To grant probate of a will or letters of administration is a judicial function and could not be excluded from the judicial power of a country governed by English law." After Kable's case, McHugh J wrote to the same effect in Fardon v Attorney-General (Qld)516. He said that even if legislation does not require the court to determine: "an actual or potential controversy as to existing rights or obligations[517] … that does not mean that the Court is not exercising judicial power. The exercise of judicial power often involves the making of orders upon determining that a particular fact or status exists. It does so, for example, in the cases of matrimonial causes, bankruptcy, probate and the winding up of companies." In those instances the courts change the legal rights of individuals: they do not merely declare those rights. 515 (1954) 90 CLR 353 at 368; [1954] HCA 46. 516 (2004) 223 CLR 575 at 596-597 [34]. Cf Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 106, 122 and 142. 517 R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 375 per Kitto J; [1970] HCA 8. Far from being alien to traditional curial functions, the form of preventive justice found in a control order under s 14 has close analogies with some traditional forms of preventive justice which apply even where there is no adjudication of past criminal guilt, no breach of an existing norm, and no controversy about those questions. It is convenient to list some examples, particularly examples affecting freedom of association. One example is an order by justices binding over a citizen to keep the peace even though that citizen has not yet committed any crime518. In Coke's words, it is "for prevention of … offences before they be done"519. The defendant can be bound over to keep the peace where the risk of violence apprehended is not violence by the defendant, but violence directed against the defendant520. That is, it is not only that the defendant need not have committed a crime in the past; it is not even necessary that there be apprehension that the defendant will commit a crime in future. These forms of preventive detention were well known at the time of Federation, both as part of English law and as part of the law of the colonies521. They were adopted in the Judiciary Act 1903 (Cth), s 81. Another example is a condition restricting a person to whom bail is granted from associating with others, for example, witnesses. Thus the Bail Act 1982 (WA) provides that the discretion to grant or refuse bail depends, inter alia, on whether an accused who is not kept in custody may commit an offence, endanger the safety, welfare or property of any person, interfere with witnesses or obstruct the course of justice (Sched 1 Pt C cl 1(a)(ii)-(iv)). It also grants power to impose conditions to ensure that those things do not happen (Sched 1 518 Thomas v Mowbray (2007) 233 CLR 307 at 347-348 [79] and 356-357 [116]-[121]. See also R v Sandbach; Ex parte Williams [1935] 2 KB 192 at 196 (quoting Blackstone: "This preventive justice consists in obliging those persons, whom there is probable ground to suspect of future misbehaviour, to stipulate with and to give full assurance to the public, that such offence as is apprehended shall not happen; by finding pledges or securities for keeping the peace, or for their good behaviour"); R v County of London Quarter Sessions Appeals Committee; Ex parte Metropolitan Police Commissioner [1948] 1 KB 670 at 673-676; Devine v The Queen (1967) 119 CLR 506 at 513-514; [1967] HCA 35. 519 Cited in R v County of London Quarter Sessions Appeals Committee; Ex parte Metropolitan Police Commissioner [1948] 1 KB 670 at 677. 520 Percy v Director of Public Prosecutions [1995] 1 WLR 1382 at 1391-1392; [1995] 3 All ER 124 at 130-131. 521 See, for example, The Justices Procedure Amendment Act 1883-4 (SA), ss 16 and Pt D cl 2(2)(b)-(d)). That is, it has the character of ensuring not only that the accused is available to face trial and does not interfere with that trial, but also that the accused is prevented from committing various crimes, whether or not that accused committed any crime in the past. There are numerous examples of legislation permitting the grant of injunctions in the nature of an apprehended violence order which may significantly restrict a person's freedom of association with others and which do not necessarily require prior criminal conduct as a condition of their grant522. The Family Law Act 1975 (Cth), s 68B, permits a court to grant injunctions for the welfare of a child, the child's parents and other specified people, including injunctions restraining the defendant from entering or remaining in a place of residence, employment or education of the child. Section 114 contains similar powers in relation to certain proceedings between the parties to a marriage. The Summary Procedure Act 1921 (SA), s 99, gives the Magistrates Court power to make an order restraining the defendant as the Magistrates Court considers necessary or desirable in order to prevent the defendant from causing personal injury or damage to property or behaving in an intimidating or offensive manner. Section 99AA of that Act gives the Magistrates Court power to make an order restraining certain classes of defendant from loitering near children, using the internet or owning, possessing or using a device capable of being used to gain access to the internet. Sections 4 and 5(2)(a)-(e) of the Domestic Violence Act 1994 (SA) give the Magistrates Court power to make a domestic violence restraining order prohibiting the defendant from being in particular premises and locations, from approaching a family member and from contacting a family member or any other person at a place where a family member resides or works. Section 16 of the Crimes (Domestic and Personal Violence) Act 2007 (NSW) gives power to make an apprehended domestic violence order and s 18 gives power to make an apprehended personal violence order. Section 35(2)(a)-(c) gives power to impose in each order prohibitions or restrictions on the defendant's ability to approach the protected person and on access by the defendant to particular places. The Domestic and Family Violence Act (NT) gives power to grant domestic violence orders (s 18), which can include orders requiring the defendant not to reside in or enter premises occupied by a protected person (s 22). Sections 11A and 11B of the Restraining Orders Act 1997 (WA) give a court power to make a violence restraining order in relation to acts of family and domestic violence. Section 13(2)(a)-(d) gives power to include in a violence restraining order restraints on approaching certain premises or persons, or communicating with certain persons. Section 36(1) gives the court power to make a misconduct restraining order against intimidatory or offensive behaviour. Section 36(2)(a)-(d) gives power to include in a misconduct restraining order restraints of the same kind as are referred to in s 13(2)(a)-(d). Sections 4, 4A and 522 Thomas v Mowbray (2007) 233 CLR 307 at 328-329 [16]-[17] and 347-348 [79]. 5(1)(a)-(d) of the Crimes (Family Violence) Act 1987 (Vic) give power to make an intervention order restricting access by the defendant to the aggrieved family member or to particular locations. Another category consists of enactments criminalising association with persons who may not have committed crimes. They have been quite common. Their enforcement has not been seen as compromising courts in any way, let alone in ways relevant to the Kable doctrine. Although sometimes the legislation turned on consorting with convicted persons, it often made or makes it an offence habitually to consort with reputed thieves or criminals or known prostitutes523. A person can be a reputed thief or a reputed criminal without actually being a thief or a criminal, and a person can be a known prostitute without having committed a criminal offence. In Johanson v Dixon524 Mason J said that the gist of the offence in the Victorian legislation under consideration was "habitual association with persons who fall into the designated classes, whether the association is for unlawful purposes or not." Two of the three designated classes were reputed thieves or known prostitutes. The offence did not require any prior convictions or misconduct on the part of the defendant. Mason J went on to say that the policy of the legislation "was designed to inhibit a person from habitually associating with persons of the three designated classes, because the association might expose that individual to temptation or lead to his involvement in criminal activity"525 – even if the individual had never succumbed to temptation in the past, or been involved in criminal activity in the past. Section 35 of the impugned Act replaced a provision of this kind – s 13 of the Summary Offences Act 1953 (SA), which rendered it an offence habitually to consort with reputed thieves, prostitutes or persons having no lawful visible means of support. It is a novel suggestion that legislation which attempts to forestall and prevent crime before it is committed by persons who might be likely to do so if they associate together (whether or not those persons have committed crimes in the past) is constitutionally invalid. Then there are examples of preventive justice where, although the conduct to be prevented is in breach of an antecedently existing legal norm and there is controversy about whether it will take place, there is no need to prove any past breach of that norm. They include the following. The Trade Practices Act 1974 (Cth) provides for the grant of an injunction if the court is satisfied that a person 523 See Vagrants, Gaming and Other Offences Act 1931 (Q), s 4(1)(b) and (e) (repealed); Police Offences Act 1935 (Tas), s 6; Summary Offences Act (NT), s 56(1)(i). 524 (1979) 143 CLR 376 at 384; [1979] HCA 23. 525 (1979) 143 CLR 376 at 385. is proposing to engage in conduct that would constitute a contravention of various provisions of that Act, whether or not the person has previously engaged in conduct of that kind: s 80(1) and (4)(b). Sections 475(1) and 479(1)(b) of the Environment Act give a similar power in relation to persons who propose to engage in conduct consisting of an act or omission that contravenes that Act or the regulations made under it. In s 1324(1) and (6)(b) of the Corporations Act 2001 (Cth) there is a similar power in relation to contraventions of that Act. A further category comprises rules of law which provide for the grant of warrants to arrest debtors to prevent them leaving a State526 or which restrain them from removing property situated in the State527, whether or not any crime or civil wrong has been proven. A related example is s 1323(1)(j) and (k) of the Corporations Act 2001 (Cth). Those provisions empower certain courts to make orders requiring a person to surrender his or her passport and prohibiting that person from leaving the jurisdiction while an investigation is carried out in relation to a possible (but not proven) contravention of that Act by the person. Finally, asset preservation orders in the nature of Mareva injunctions may be granted against persons who are not alleged to have committed, or to be about to commit, any crime or civil wrong, like banks complying with the lawful directions of customers. So far as these orders are based on statutes, the constitutional validity of these statutes has never been doubted. So far as these orders rest on judge-made doctrines, those doctrines have never been criticised along the lines of the respondents' arguments. The Solicitor-General for the State of South Australia was accordingly correct to submit that Australian courts have exercised powers restricting freedom of association otherwise than as an incident of a finding of criminal guilt and even though there is no adjudication of existing rights and liabilities between parties. They have done so in many circumstances, and for a long time. In Thomas v Mowbray528 Gleeson CJ said that restraints on liberty can be imposed, whether or not they involve detention in custody, independently of adjudging and punishing criminal guilt. He pointed out that Fardon v Attorney-General (Qld)529 was an example of State legislation validly providing for preventive detention in custody pursuant to judicial order. The submission of the plaintiff in Thomas v Mowbray that legislation protecting the public peace by preventive measures falling short of detention in the custody of the State but imposed by court order 526 Restraint of Debtors Act 1984 (WA), ss 5 and 6. 527 Restraint of Debtors Act 1984 (WA), ss 17 and 19. 528 (2007) 233 CLR 307 at 330 [18]. 529 (2004) 223 CLR 575. was repugnant to Ch III was rejected530. The like submission by the respondents in the present appeal must be rejected too. Unless the Constitution renders all preventive (as distinct from punitive) measures invalid, which is not a proposition for which any argument or authority could be or was advanced, it is not an objection that a particular defendant to control order proceedings has not committed any crime. This possibility is inherent in the notion of preventive justice. The making of a declaration under s 10 does not immediately result in any person committing an offence. It does create the possibility of a control order being made against members, breach of which is criminal under s 22. They can avoid that outcome by ceasing to be members. It also means that people who associate with members of a declared organisation in the manner described in s 35(1)(a) may commit a crime. They can avoid that outcome by not doing so, or availing themselves of the exceptions set out in s 35(6). Interference with freedom of association is not a light matter, but it is inevitable in legislation the purpose of which is to disrupt and restrict the activities of organisations involved in serious crime, their members and their associates. Is controlling freedom of association exclusively judicial in character? Perhaps underlying the arguments of the respondents under consideration are the dicta of Brennan, Deane and Dawson JJ in Chu Kheng Lim v Minister for Immigration531. They said: "There are some functions which, by reason of their nature or because of historical considerations, have become established as essentially and exclusively judicial in character. The most important of them is the adjudgment and punishment of criminal guilt under a law of the Commonwealth. … [Chapter] III of the Constitution precludes the enactment … of any law purporting to vest any part of that function in the Commonwealth Executive. … It would, for example, be beyond the legislative power of the Parliament to invest the Executive with an arbitrary power to detain citizens in custody notwithstanding that the power was conferred in terms which sought to divorce such detention in custody from both punishment and criminal guilt. The reason why that is so is that, putting to one side the exceptional cases to which reference is made below, the involuntary detention of a citizen in custody by the State is penal or punitive in 530 (2007) 233 CLR 307 at 357 [121]. 531 (1992) 176 CLR 1 at 27; [1992] HCA 64. character and, under our system of government, exists only as an incident of the exclusively judicial function of adjudging and punishing criminal guilt." The exceptions referred to were the gaoling of accused persons pending trial, detaining those suffering from mental or infectious illnesses, punishment for contempt of Parliament, punishment for breach of military discipline, and detention of aliens in relation to the determination of their immigration status, pending possible removal. To this list may be added the detention of persons against whom extradition proceedings are pending without any prima facie finding that the extradition offence alleged against that person had been committed532. These dicta in relation to involuntary detention in custody validly existing only as an incident of judging and punishing criminal guilt do not apply in terms to restrictions on freedom of association falling short of detention. No extension of the dicta was made to anti-terrorist control orders533. Nor was it made to the process of depriving professional persons of liberty to carry on a profession without proof of any offence – a deprivation which can be more damaging than a restraint on association534. The extension should not be made here, particularly in view of the unresolved questions to which the dicta have given rise535. Conclusion Taken individually, the arguments of the respondents are inadequate to sustain the orders made in the court below. Sometimes when arguments, each of which in isolation is inadequate to achieve a goal, are taken together, the goal is achieved. That is not so in this appeal. 532 Vasiljkovic v The Commonwealth (2006) 227 CLR 614; [2006] HCA 40. 533 Thomas v Mowbray (2007) 233 CLR 307. 534 Albarran v Companies Auditors and Liquidators Disciplinary Board (2007) 231 CLR 350 at 358-360 [17]-[21] and 378-379 [96]-[97]; [2007] HCA 23. 535 For example, Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 55; Kruger v The Commonwealth (1997) 190 CLR 1 at 110; [1997] HCA 27; Al-Kateb v Godwin (2004) 219 CLR 562 at 648-649 [258]; [2004] HCA 37; Re Woolley; Ex parte Applicants M276/2003 (2004) 225 CLR 1 at 25 [59]; [2004] HCA 49. Cf Al- Kateb v Godwin (2004) 219 CLR 562 at 612-614 [137]-[140]; Fardon v Attorney- General (Qld) (2004) 223 CLR 575 at 608-614 [68]-[88]. Orders Question 3 of the questions reserved to the Supreme Court of South Australia should be answered "Yes". The grant of special leave to appeal should be extended. The appeal should be allowed. The respondents should pay the appellant's costs in this Court and in the Supreme Court of South Australia. CRENNAN AND BELL JJ. The Serious and Organised Crime (Control) Act 2008 (SA) ("the Act") provides for a control order to be made against a person by a Magistrates Court536 if the court is satisfied, on the balance of probabilities, that the defendant is a member of a declared organisation. A declared organisation is an organisation which is the subject of a declaration by the Attorney-General. In this case, the Attorney-General made a declaration in relation to the organisation known variously as the Finks Motorcycle Club, the Finks MC, Finks M.C. Incorporated, Finks M.C. INC and the Finks ("the Finks"). On 25 May 2009 the Magistrates Court of South Australia made a control order on an ex parte application by the Commissioner of Police in respect of the second respondent, Donald Brian Hudson. The control order was made under s 14(1) of the Act. The application for a control order was supported by 14 affidavits of police officers, some of whom deposed to both direct observations of and contact with Mr Hudson, and others of whom deposed to the rules, structure, modus operandi and membership of the Finks and the identification of members of the Finks. The control order prohibited Mr Hudson from associating with other persons who were members of the declared organisation, the Finks (unless the association occurred between members of a registered political party at an official meeting of the party, or a branch of the party, and no less than 48 hours notice had been given to the police). Mr Hudson was also prohibited from "[p]ossessing a dangerous article or a prohibited weapon (within the meaning of section 15 of the Summary Offences Act 1953)." On 26 May 2009 the control order was served on Mr Hudson in accordance with s 16(1) of the Act. On 26 May 2009, the respondents to the appeal filed a summons and statement of claim commencing proceedings in the Supreme Court of South Australia contending that s 14(1) of the Act "impairs the institutional integrity of the Magistrates Court of South Australia, contrary to the requirements of Chapter III of the Constitution." Mr Hudson filed a notice of objection under s 17 of the Act on 3 June 2009. On 3 July 2009, pursuant to s 49 of the Supreme Court Act 1935 (SA) and r 294 of the Supreme Court Civil Rules 2006, Bleby J reserved four questions, set out in the reasons of Hayne J537, for the consideration of the Full Court of the Supreme Court of South Australia ("the Full Court") on the facts stated. 536 Section 3 of the Act states: "Court means the Magistrates Court". 537 Reasons of Hayne J at [155]. At the time of the reservation of the four questions for the consideration of the Full Court, Mr Hudson's objection had not been heard in the Magistrates Court. Immediately after the determination of the reserved questions by the Full Court, the Magistrates Court revoked the control order against Mr Hudson. On 4 June 2009, the Commissioner of Police applied to the Magistrates Court for a control order in respect of the first respondent, Sandro Peter Totani. The hearing of that application was adjourned on Mr Totani's motion. At the time when the abovementioned questions were reserved the Commissioner's application had not been dealt with. It is uncontested that both respondents are and have at all material times been members of the Finks. The course of the proceedings before the Full Court, the Full Court's answers to reserved questions numbered (3) and (4), and the orders made, have been described in the reasons of others538. The State of South Australia ("the State") appeals to this Court from the decision of the Full Court made on 25 September 2009539. On 28 September 2009 Bleby J made final orders in the proceedings in the Supreme Court in accordance with the orders made in the Full Court. We agree with French CJ, Gummow, Hayne and Kiefel JJ that the State should have special leave to appeal against the orders of Bleby J of 28 September The only question before this Court is whether s 14(1) of the Act is valid. The State contends that s 14(1) is within the legislative power of the State, whereas the respondents contend that s 14(1) exceeds the legislative power of the State by reference to the principles identified in Kable v Director of Public Prosecutions (NSW)540. For the reasons which follow we agree with the conclusions of French CJ, Gummow, Hayne and Kiefel JJ that s 14(1) of the Act is invalid and that the appeal should be dismissed. Legislative scheme in respect of control orders In the relevant Second Reading Speech, the Minister, the Hon Mr Atkinson, stated that "outlaw motorcycle gang members are involved in many 538 Reasons of French CJ at [9]; reasons of Gummow J at [88]-[89]; reasons of 539 Totani v South Australia (2009) 105 SASR 244. 540 (1996) 189 CLR 51; [1996] HCA 24. and continuing criminal activities including murder; drug manufacture, importation and distribution; fraud; vice; blackmail; intimidation of witnesses; serious assaults; the organised theft and re-identification of motor vehicles and motorcycles; public disorder offences; firearms offences; and money laundering"541 (emphasis added). It is important to note in relation to control orders that being a member of a motorcycle gang is not "outlawed" – membership is not made a criminal offence. Further, motorcycle gangs which are "declared organisations"542 under the Act (a process referred to below) are not "outlawed" under the legislative scheme – no civil or criminal sanctions are applied to them. The objects of the Act are set out in s 4(1): to disrupt and restrict the activities of – organisations involved in serious crime; and the members and associates of such organisations; and to protect members of the public from violence associated with such criminal organisations." It is not necessary to set out all the details of the legislative scheme designed to achieve those objects because this task has been undertaken in the reasons of others. The aspects of the legislation which we would wish to emphasise for the purposes of these reasons include the following. Section 10(1) (to be found in Pt 2 of to make a declaration under the Attorney-General the Attorney-General is satisfied that "members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity" (s 10(1)(a)) and that "the organisation represents a risk to public safety and order in this State" (s 10(1)(b)). the Act) permits that section In considering whether or not to make a declaration under s 10(1) the Attorney-General may have regard to a number of matters set out in s 10(3)(a) to (f). Those matters include any information suggesting that a link exists between the organisation and serious criminal activity; any criminal convictions recorded 541 South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1805. 542 Defined in s 3 of the Act. in relation to current or former members of the organisation, or persons who associate, or have associated, with members of the organisation; or any information suggesting that current or former members of the organisation, or persons who associate, or have associated, with members of the organisation, have been, or are, involved in serious criminal activity (whether directly or indirectly and whether or not such involvement has resulted in any criminal convictions) (s 10(3)(a), (b) and (c)). Section 10(4)(a) provides that the Attorney-General may be satisfied that members of an organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, whether or not all the members associate for such purpose, provided that the Attorney-General is satisfied that such members as do associate for such purpose are a "significant group" within the organisation, "either in terms of their numbers or in terms of their capacity The Attorney-General is also entitled to take into account any information suggesting that members of an interstate or overseas chapter or branch of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity (s 10(3)(d)). The number and range of matters which the Attorney-General may take into account shows the extent of fact-finding undertaken by the Attorney-General for the purposes of the legislative scheme. The making of a declaration does not affect the continuation, or the activities, of a declared organisation. the organisation or its members". influence Section 14(1), the key provision, provides: "The Court must, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that the defendant is a member of a declared organisation." Section 14(2) also provides for the making of a control order: "The Court may, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that – the defendant – has been a member of an organisation which, at the time of the application, is a declared organisation; or engages, or has engaged, in serious criminal activity, and regularly associates with members of a declared organisation; the defendant engages, or has engaged, in serious criminal activity and regularly associates with other persons who engage, or have engaged, in serious criminal activity, and that the making of the order is appropriate in the circumstances." It will be noted that a control order "must" be made under s 14(1) if the court is satisfied that the defendant is a member of a declared organisation, whereas the court has a discretion under s 14(2). Secondly, the adjudicative process under s 14(1) is confined to determining that the defendant is a member of a declared organisation, whereas the adjudicative process under s 14(2) may involve considerations of whether the defendant engages in or has engaged in serious criminal activity. Thirdly, the considerations to which the court must have regard in respect of making a control order under s 14(2) can only be taken into account under s 14(1) when the court is considering the prohibitions to be included in a control order (s 14(6)). Section 14(5)(b) sets the minimum conditions of a control order under "(5) A control order – if the defendant is a member of a declared organisation, must prohibit the defendant from – associating with other persons who are members of declared organisations; and possessing – a dangerous article; or a prohibited weapon, (within the meaning of section 15 of the Summary Offences Act 1953), except as may be specified in the order." Section 14(6) provides: "In considering whether or not to make a control order under subsection (2) or in considering the prohibitions that may be included in a control order under subsection (1) or (2), the Court must have regard to the following: (a) whether the defendant's behaviour, or history of behaviour, suggests that there is a risk that the defendant will engage in serious criminal activity; the extent to which the order might assist in preventing the defendant from engaging in serious criminal activity; the prior criminal record (if any) of the defendant and any persons specified in the application as persons with whom the defendant regularly associates; In relation to the requirement of s 14(1) that the court be satisfied that the defendant is a member of a declared organisation, s 3 defines member widely: "member, in relation to an organisation, includes – in the case of an organisation that is a body corporate – a director or an officer of the body corporate; and in any case – (iii) an associate member or prospective member (however described) of the organisation; and a person who identifies himself or herself, in some way, as belonging to the organisation; and a person who is treated by the organisation or persons who belong to the organisation, in some way, as if he or she belongs to the organisation". Legal obligations flow from the making of a control order under s 14(1). Contravention of, or a failure to comply with, a control order is an offence attracting a maximum penalty of five years imprisonment (s 22). Section 35 deals with "Criminal associations" and, subject to limited exceptions in s 35(6), provides for offences analogous to what were once known as consorting offences543, also punishable by up to five years imprisonment. Section 41 contains a privative clause. 543 Formerly in s 13 of the Summary Offences Act 1953 (SA). The Full Court Bleby J (with whom Kelly J agreed544) concluded that the jurisdiction conferred on the Magistrates Court by s 14(1) of the Act required the court to act in a manner incompatible with its institutional integrity545. Specifically, the court was required to act on findings made by the Executive on matters which were critical to the making of a control order. This constrained the capacity of the court to act judicially with the result that the court did not satisfy the constitutional requirements of independence and impartiality. In considering the jurisdiction conferred on the court under s 14(1), Bleby J said that four elements must be established in order to obtain a control order under s 14(1)546: (1) Members of the organisation of which the defendant to a s 14(1) application is alleged to be a member associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity. The organisation of which the defendant to a s 14(1) application is alleged to be a member represents a risk to public safety and order in the State. The making of a declaration under s 10(1). (4) Membership by the defendant of the same organisation as is the subject of the s 10(1) declaration. "The effect of [the Act] is therefore that the Magistrates Court is required by the Act to act on what is, in effect, the certificate of the Attorney-General that elements 1 and 2 are proved, with no ability to go behind that certificate. The relatively much more significant and complex factual inquiry is removed from the court to the Attorney-General. The Attorney-General is not subject to or bound by the rules of evidence or 544 (2009) 105 SASR 244 at 305 [277]. 545 (2009) 105 SASR 244 at 280-281 [155]-[157], 283 [166]-[167]. 546 (2009) 105 SASR 244 at 279 [150], 280 [152]. 547 (2009) 105 SASR 244 at 280 [155]-[156]. any standard of proof. He can act on whatever information he pleases and give it whatever weight he pleases. … In a very real sense the court is required to '[act] as an instrument of the Executive'." White J, in dissent, found that the decision making entrusted to the court was not so subordinate to that of the Executive, nor was its manner of exercise so directed, that the court's independence and capacity to act impartially is impaired548. The reasoning of the majority on this aspect of the case is to be preferred. The majority's conclusion was also based on the proposition that "[t]he Attorney-General's findings are unreviewable"549 under s 41 of the Act. It has been demonstrated by each of Gummow and Hayne JJ that such a proposition is too widely stated, especially in the light of this Court's decision in Kirk v Industrial Court (NSW)550. We agree with their Honours and have nothing to add. The majority also identified a third basis in support of their conclusion that s 14(1) was invalid. This was that the provisions of the Act concerning "criminal intelligence" operated so as to impermissibly impair the court's independence and impartiality551. We agree with Gummow J's reasons for rejecting that proposition and have nothing to add. The Finks as a "declared organisation" It was not contended by the parties that the Attorney-General had failed to comply with any necessary procedural requirement under the Act. Indeed, as recognised by the Full Court, the Attorney-General went further than was required by the Act, by publishing and tabling on 14 May 2009 in the House of Assembly some 53 pages of reasons for making the declaration. Those reasons referred to criminal intelligence, redacted pursuant to s 13(2), upon which the Attorney-General had relied in making the declaration. 548 (2009) 105 SASR 244 at 305 [273]. 549 (2009) 105 SASR 244 at 280 [155]. 550 (2010) 239 CLR 531; [2010] HCA 1. 551 (2009) 105 SASR 244 at 282-283 [164]-[165]. The reasons of the Attorney-General detailed the process of investigation and public consultation which had been undertaken prior to him making an assessment as to whether the requirements of s 10 were satisfied. The Attorney-General was satisfied on the balance of probabilities that the Finks was an organisation, that the members of the organisation associated for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, and that the organisation represented a risk to public safety and order in the State. The Attorney-General recorded that the effect of s 10(3), described above in these reasons, was that the rules of evidence did not apply to the tasks he was required to undertake for the purposes of making the declaration, and that members of South Australia Police were entitled to rely upon hearsay, and second- and third-hand hearsay, in respect of the evidence put before him. Submissions The respondents submitted that in conferring judicial power to make a control order, s 14(1) of the Act required the power to be exercised in a manner which is incompatible with the exercise of federal judicial power and the institutional integrity of the court. The respondents submitted that the control orders authorised by s 14(1) are imposed after a process which requires the court to act merely to implement executive policy decisions, contrary to the authority of Kable552, and that a control order so imposed operates to significantly interfere with a person's ordinary right or freedom of association. It was accepted that a State court may be required to act on the basis of a factum determined by the Executive and that that, without more, does not impermissibly impair the institutional integrity of the court553. A factum determined by the Executive may support the institutional integrity of the court. However, Kable might apply if the court's adjudicative powers are confined so as to merely implement an executive or legislative determination554. It should also be noted that an exercise of judicial power may involve the making of orders upon determining that a particular status exists, as occurs in proceedings in 552 (1996) 189 CLR 51. 553 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 352 [49] per French CJ; [2009] HCA 49. 554 Re Macks; Ex parte Saint (2000) 204 CLR 158 at 233 [208] per Gummow J; [2000] HCA 62. matrimonial causes, bankruptcy or probate, or concerning the winding up of companies555. In answer to the respondents' submission that s 14(1) required the court to act merely to implement executive policy decisions, the appellant contended that the legislation did not offend against the principles established in Kable. Section 14(1) was characterised as part of a preventative legislative scheme, as identified in the objects set out in s 4 of the Act, similar, it was said, to that which was upheld by this Court in Thomas v Mowbray556. The appellant submitted that s 14(1) was a provision of a familiar kind and that it is permissible for a State legislature to confer a power with a duty to exercise it if the court decides that the conditions attached to the power are satisfied557. The appellant also contended that the adjudicative role under s 14(1) was genuine and not merely formal. Rights to object to a control order (s 17), a right of appeal (s 19) and a right to apply to vary or revoke a control order (s 20) were also relied on. It was accepted by the respondents that before making a control order, the court was not only required to determine whether the defendant is a member of a declared organisation, but was also required to determine the validity of the application before it, and the sufficiency of the grounds. The appellant's case, that s 14(1) of the Act was valid, was supported by interventions by the Attorneys-General of New South Wales, Victoria, Queensland, Western Australia and the Northern Territory, and by a limited intervention by the Attorney-General of the Commonwealth. The exercise of judicial power The Constitution does not contain express guarantees of personal liberty which would have placed limitations on State legislatures558. Rather, the protection of personal liberty was left to the rule of law559, described by Dixon J 555 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 597 [34] per McHugh J; [2004] HCA 46. 556 (2007) 233 CLR 307; [2007] HCA 33. 557 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 360 [77] per Gummow and Bell JJ, 372-373 [120]-[121] per Hayne, Crennan and Kiefel JJ. 558 Kruger v The Commonwealth (1997) 190 CLR 1 at 61 per Dawson J; [1997] HCA 559 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 8 February 1898 at 664-691. in Australian Communist Party v The Commonwealth as an assumption, in accordance with which the Constitution is framed560. In Al-Kateb v Godwin, which concerned a federal provision for administrative detention of unlawful non-citizens, Gleeson CJ said "personal liberty is the most basic" human right or freedom561. Whilst interference with the freedom to associate with others is distinguishable from detention in custody, it nevertheless operates as a significant restriction on personal liberty. In the context of the judicial power of the Commonwealth, the separation of judicial functions from other functions of government has been said to advance "two constitutional objectives: the guarantee of liberty and, to that end, the independence of Ch III judges."562 As explained by Gummow and Crennan JJ in Thomas v Mowbray563: "[Chapter] III gives practical effect to the assumption of the rule of law upon which the Constitution depends for its efficacy." In harmony with the Constitution, conclusions about whether legislation conflicts with constitutional requirements, which turn on the nature of judicial power, or its usurpation564, or which are directed to the effect of legislation on the 560 (1951) 83 CLR 1 at 193; [1951] HCA 5; see also Dixon, "The Common Law as an Ultimate Constitutional Foundation", in Jesting Pilate, (1965) 203. See, subsequently, Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476 at 492 [31] per Gleeson CJ, 513 [103] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ; [2003] HCA 2. 561 (2004) 219 CLR 562 at 577 [19]; [2004] HCA 37. 562 Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1 at 11 per Brennan CJ, Dawson, Toohey, McHugh and Gummow JJ; [1996] HCA 18; see also R v Davison (1954) 90 CLR 353 at 380-381 per Kitto J; [1954] HCA 46; R v Quinn; Ex parte Consolidated Food Corporation (1977) 138 CLR 1 at 11 per Jacobs J; [1977] HCA 62; Attorney-General (Cth) v Breckler (1999) 197 CLR 83 at 109 [40] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ; [1999] HCA 28; Al-Kateb v Godwin (2004) 219 CLR 562 at 612 [137] 563 (2007) 233 CLR 307 at 342 [61]. 564 Polyukhovich v The Commonwealth (War Crimes Act Case) (1991) 172 CLR 501; [1991] HCA 32; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1; [1992] HCA 64; Thomas v Mowbray (2007) 233 CLR 307. institutional integrity of a court565, commonly subsume consideration of the effect of the legislation on personal liberty. In Kable566 limitations on the powers of State legislatures were identified by reference to the establishment by the Constitution of an integrated Australian court system, which contemplates the exercise of federal jurisdiction by State courts and has, at its apex, this Court exercising the judicial power of the Commonwealth567. There is a limit on State legislatures, derived from Ch III of the Constitution, which concerns the conferral on State courts of powers or functions repugnant to the exercise of the judicial power of the Commonwealth. Kable concerned a power conferred on a State court by the legislature of New South Wales568 to order preventative detention of a specified person in circumstances where no breach of the law was alleged against the person and there was no determination of guilt. In finding that the legislation was incompatible with the institutional integrity of the court, because of the nature of the task which the legislature required the court to perform, it was said that powers conferred by State legislatures on State courts must be compatible with the exercise of the judicial power of the Commonwealth569. Such powers should not lead to a conclusion that a State court was not independent of the Executive Government of the State570 and should not jeopardise the integrity of a court or sap the appearance of a court's institutional impartiality571. State courts depend for their integrity on acting in accordance with the judicial process572. These various statements underpin a conclusion that powers and functions conferred on State courts must be compatible with a State court's constitutional position as a potential repository of federal judicial power. Of particular importance to this case is the recognition in Kable of the interests of litigants in having issues 565 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51; Fardon v Attorney-General (Qld) (2004) 223 CLR 575. 566 (1996) 189 CLR 51. 567 (1996) 189 CLR 51 at 101-103 per Gaudron J, 111, 114 per McHugh J, 138, 143 568 Community Protection Act 1994 (NSW), ss 3, 5. 569 (1996) 189 CLR 51 at 98 per Toohey J, 103 per Gaudron J. 570 (1996) 189 CLR 51 at 117, 121, 124 per McHugh J, 134 per Gummow J. 571 (1996) 189 CLR 51 at 133-134 per Gummow J. 572 (1996) 189 CLR 51 at 107 per Gaudron J. determined by judges independent of the legislature and the Executive573 and in accordance with "ordinary judicial processes"574. Since Kable, it has been said often that to answer the constitutional description of "courts", in terms of Ch III, a court must satisfy minimum requirements of independence and impartiality575. It has also been accepted that "legislation which requires a court exercising federal jurisdiction to depart to a significant degree from the methods and standards which have characterised judicial activities in the past may be repugnant to Ch III."576 Legislation which draws a court into the implementation of government policy, by confining the court's adjudicative process so that the court is directed or required to implement legislative or executive determinations without following ordinary the judicial processes, will deprive characteristics of an independent and impartial tribunal – "those defining characteristics which mark a court apart from other decision-making bodies"577. Such legislation would render that court an unsuitable repository of federal jurisdiction. that court of 573 (1996) 189 CLR 51 at 98 per Toohey J. 574 (1996) 189 CLR 51 at 121 per McHugh J; see also Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 362 [80] per Gaudron J; [2000] HCA 63; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 655 [219] per Callinan 575 North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 at 163 [29]; [2004] HCA 31; Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 67-68 [41] per Gleeson CJ; [2006] HCA 44; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 552 [10] per Gummow, Hayne, Heydon and Kiefel JJ; [2008] HCA 4. 576 Thomas v Mowbray (2007) 233 CLR 307 at 355 [111] per Gummow and Crennan JJ, repeated in International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 353 [52] per French CJ. See also Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 607 per Deane J. 577 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 76 [63], 78 [68] per Gummow, Hayne and Crennan JJ. See also Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 560 [39] per Gummow, Hayne, Heydon and Kiefel JJ. In seeking to resolve the question of the validity of s 14(1) of the Act, it is instructive to consider Fardon v Attorney-General (Qld)578 and Thomas v Mowbray579 in a little detail. Fardon concerned a law of general application which empowered a court to order continuing detention of a prisoner, in the interests of community protection, after the expiry of the prisoner's sentence580. The power to make the order was conditioned on the court determining whether a prisoner was a serious danger to the community in that there was an unacceptable risk that the prisoner would commit a serious sexual offence if released from custody. As noted by McHugh J581: "the Court [was required] to adjudicate on the claim by the Executive that a prisoner is 'a serious danger to the community' in accordance with the rules of evidence and 'to a high degree of probability'." The court had a substantial discretion as to whether or not to make the order, or an alternative supervision order. The legislative requirements, imposing ordinary judicial processes on the court, supported the conclusion that in exercising the power the court was not acting as a mere instrument of government policy582. The legislation was held to be compatible with the institutional integrity of the court and its constitutional position as a potential repository of federal judicial power. Thomas v Mowbray583 concerned a power to make an interim control order for the prevention of a terrorist act584. Under the Criminal Code (Cth), membership of a terrorist organisation is an offence punishable by a term of imprisonment of 10 years585, and training or receiving training from a terrorist 578 (2004) 223 CLR 575. 579 (2007) 233 CLR 307. 580 Dangerous Prisoners (Sexual Offenders) Act 2003 (Q), ss 5, 8, 13. 581 (2004) 223 CLR 575 at 602 [44]. 582 (2004) 223 CLR 575 at 592 [19] per Gleeson CJ, 602 [44] per McHugh J, 614-617 [90], [93]-[99], 621 [116] per Gummow J, 655 [219], 657 [225] per Callinan and 583 (2007) 233 CLR 307. 584 Criminal Code (Cth), Ch 5, Pt 5.3, Div 100, Div 104 subdiv B, ss 101.1, 101.4. 585 Defined in s 102.1(1); offence set out in s 102.3(1). organisation is an offence punishable by a term of imprisonment of 25 years586. The court's power to make the control order was conditioned on it being satisfied, on the balance of probabilities, that the making of the order would substantially assist in preventing a terrorist act, or that the person against whom the order was sought has provided training to, or received training from, a listed terrorist organisation587. In addition, the court was required to be satisfied, on the balance of probabilities, "that each of the obligations, prohibitions and restrictions to be imposed on the person by the order is reasonably necessary, and reasonably appropriate and adapted, for the purpose of protecting the public from a terrorist act."588 There was a burden of proof on the applicant for a control order in respect of these conditions. The court had a discretion whether to revoke or vary or confirm the interim order. The power to make an interim control order involved following ordinary judicial processes, which countered any suggestion that the court making the order was to act as a mere instrument of government policy589. The legislation was held not to be repugnant to Ch III. The powers to make preventative orders in each of Fardon and Thomas v Mowbray were conferred on the respective courts in a manner which was compatible with an exercise of federal judicial power. Preventative orders were made in each of those cases following ordinary judicial processes, which gave the persons to whom such orders were directed the protections inherent in those processes. Section 14(1) The Magistrates Court of South Australia590 is a court of a State within the meaning of s 77(iii) of the Constitution. A control order made under the Act has as its purposes disrupting and restricting the activities of members of organisations involved in serious crime and protecting members of the public from the violence associated with such organisations. The Executive, through the Commissioner of Police, is the 586 Defined in s 102.1(1); offence set out in s 102.5(1) and (2). 587 Section 104.4(1)(c). 588 Section 104.4(1)(d). 589 (2007) 233 CLR 307 at 335 [30] per Gleeson CJ, 355-356 [112]-[113] per 590 Established by the Magistrates Court Act 1991 (SA), s 4. applicant for a control order591. The court's power to grant a control order under s 14(1) is conditioned upon two matters, the existence of a declaration by another member of the Executive, the Attorney-General, that the declared organisation is a serious criminal organisation, and the court's determination of the defendant's status as a member of the declared organisation. Making the control order does not involve any finding of criminal guilt. The power to make a control order is not conditioned on any assessment by the court of whether, by reason of the defendant's status or by reason of past or threatened conduct of the defendant (whether criminal or in breach of the peace), the defendant poses a risk to public safety and order. The power to make592 a control order is also not conditioned on any satisfaction of the court as to whether the defendant engages in or has engaged in serious criminal activity593 or whether the defendant's past or threatened conduct poses a risk that the defendant will engage in serious criminal activity or whether, and to what extent, the making of a control order may substantially assist in preventing the defendant from engaging in serious criminal activity. In these respects the power to make a control order can be distinguished from the power to make a control order of the type considered in Thomas v Mowbray. By reference to the past activities of members of the declared organisation (which do not necessarily include the defendant), it is the Attorney-General's declaration which provides the essential foundation for the making of the control order. The substantive considerations relevant to whether the making of a control order was reasonably necessary for, or reasonably adapted to, achieving the objects of the Act are matters set out in s 10(1)(a) and (b) of the Act, which have been determined by the Attorney-General before the Commissioner of Police makes an application to the court for a control order. No discretion is given to the court594. In this context, the appellant relied on the court's discretion to vary or revoke the order (s 20). However, a defendant may only apply to vary or revoke the order with the permission of the court, which is conditional on the court's satisfaction that there has been a "substantial change in the relevant circumstances since the order was made". Upon the Attorney-General's declaration and a determination by the court of the defendant's status as a member of a declared organisation, the court must impose a control order which 591 The application for the order in respect of Mr Hudson was made ex parte. 592 As distinguished from the power to impose conditions under s 14(5) of the Act. 593 Cf s 14(2). 594 Cf Fardon v Attorney-General (Qld) (2004) 223 CLR 575 and Thomas v Mowbray (2007) 233 CLR 307. must, as a minimum, prohibit association with other members of declared organisations, except as specified in the order595. The power to prohibit association with other members of declared organisations is not conditioned on any satisfaction of the court that such other members of declared organisations engage in, or have engaged in, serious criminal activity. These considerations show that, in conferring a power on the court to make control orders under s 14(1), the State requires the court to exercise judicial power to make a control order after undertaking an adjudicative process that is so confined, and so dependent on the Executive's determination in the declaration, that it departs impermissibly from the ordinary judicial processes of an independent and impartial tribunal. Specifically, s 14(1) operates to draw the court into the implementation of the legislative policy expressed in the objects of the Act. The conditions upon which the court must make a control order require the court to give effect to the determination of the Executive in the declaration (which implements the legislative policy), without undertaking any independent curial determination, or adjudication, of the claim or premise of an application for a control order by the Commissioner of Police, that a particular defendant poses risks in terms of the objects of the Act. This has the effect of rendering the court an instrument of the Executive, which undermines its independence. Section 14(1) requires the Magistrates Court of South Australia to act in a way which is incompatible with its constitutional position and the proper discharge of federal judicial responsibilities, and with its institutional integrity. Conclusion Section 14(1) is invalid. We agree with the orders proposed by 595 Section 14(5)(b). Note that such an order must also prohibit possession of a dangerous article or a prohibited weapon, except as specified in the order. 438 KIEFEL J. In our society it is assumed that, subject only to limitations which may be imposed by the law, each person is free to associate with another. The Serious and Organised Crime (Control) Act 2008 (SA) ("the Act") contains provisions which have as their purpose the restriction of the ability of certain persons, identified by the Attorney-General, to associate with others. The question raised in these proceedings concerns the participation required, by s 14(1) of the Act, of the Magistrates Court of South Australia ("the Court") in achieving that objective. The question is whether the role and function given to the Court by that provision is incompatible with its role as a court which may, from time to time, exercise federal jurisdiction within the integrated Australian court system provided for by the Constitution596. It would be so incompatible if it compromises the institutional integrity of the Court, as explained in Kable v Director of Public Prosecutions (NSW)597. A majority of a Full Court of the Supreme Court of South Australia (Bleby and Kelly JJ, White J dissenting) gave answers to questions reserved to the effect that s 14(1) of the Act was not valid and a control order made with respect to the second respondent was void and of no effect598. Bleby J subsequently made final orders, in the nature of declarations, in the proceedings. The control order was later revoked by the Magistrates Court. The issue on the appeal therefore concerns the validity of s 14(1). The State of South Australia appeals, by special leave, from the orders containing the answers and seeks special leave to appeal from the final orders made. In my view, that leave should be granted and the initial grant expanded. The appeal should be dismissed with costs, for the reasons which follow. The facts It was not in dispute in the proceedings before the Full Court of the Supreme Court of South Australia, by way of questions reserved, that the respondents were members of the Finks Motorcycle Club. The Club had been made the subject of a declaration by the Attorney-General for South Australia, on the application of the Commissioner of Police, and was therefore a "declared organisation" for the purpose of the Act. The declaration was made under s 10(1) 596 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 102-103 per Gaudron J, 138, 143 per Gummow J; [1996] HCA 24. 597 (1996) 189 CLR 51. 598 Totani v South Australia (2009) 105 SASR 244. of the Act. The Commissioner subsequently applied for and obtained a control order against the second respondent from the Court599. The control order was made under s 14(1) of the Act, which requires that: "The Court must, on application by the Commissioner, make a control order against a person (the defendant) if the Court is satisfied that the defendant is a member of a declared organisation." The order prohibited the second respondent from associating with other persons who are members of declared organisations. Such a prohibition is required by s 14(5)(b)(i) of the Act. The order contained one exception to that prohibition, namely an association occurring between members of a registered political party in particular circumstances and subject to certain conditions as to notification. The making of the order had the further consequence, by reason of s 35(1)(b) of the Act, that it would be an offence for any other person to associate with the second respondent on six or more occasions in a 12 month period, subject to the exceptions listed in s 35(6). A court's institutional integrity In Forge v Australian Securities and Investments Commission600, Gummow, Hayne and Crennan JJ explained that a court may be said to lack institutional integrity when it no longer exhibits, in some relevant respect, those defining characteristics which set courts apart from other decision-making bodies. Their Honours acknowledged that it is not possible to make some all- encompassing statement of the minimum defining characteristics of a court601. Nevertheless, consideration might be given, in the first place, to what is usually involved in a judicial process. Although it is equally difficult to state all the respects in which the institutional integrity of a court may be seen to be compromised, perceptions of a court as independent and impartial must be taken as essential to its integrity602. 599 The application for an order against the first respondent was adjourned. 600 (2006) 228 CLR 45 at 76 [63]; [2006] HCA 44. 601 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 76 [64]; see also North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 at 163 [30]; [2004] HCA 31; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 552-553 [10] per Gummow, Hayne, Heydon and Kiefel JJ; [2008] HCA 4. 602 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 67-68 [41] per Gleeson CJ, 76 [64] per Gummow, Hayne and Crennan JJ; Gypsy (Footnote continues on next page) In general terms, courts are understood to have an adjudicative role, the essential function of judicial power being the quelling of controversies603 and the ascertainment and determination of rights and liabilities604. Controversies to be resolved may involve questions or issues arising under statutes. The process involved, in the exercise of judicial power, is as stated in the often-quoted passage by Kitto J in R v Trade Practices Tribunal; Ex parte Tasmanian "the process to be followed must generally be an inquiry concerning the law as it is and the facts as they are, followed by an application of the law as determined to the facts as determined; and the end to be reached must be an act which, so long as it stands, entitles and obliges the persons between whom it intervenes, to observance of the rights and obligations that the application of law to facts has shown to exist." The process usually undertaken by courts raises questions about the role given to the Court by the Act. Its determination, of the fact of membership only, stands in contrast with that of the Attorney-General. The Attorney-General considers the activities of members of an organisation and whether those activities warrant the making of a declaration concerning the organisation, thus exposing its members to a control order and other restrictions imposed by the Act. The Court's limited determination does not explain the need for a control order, yet it was clearly considered to be important that the Court be seen to participate in the process of attaching adverse consequences to the fact of membership. The making of the order raises a further question, about the law that the Court is applying. It is a feature of this legislation that it does not proscribe any organisation and does not make membership of any organisation declared by the Attorney-General unlawful. It is in this context that the Court's control order assumes some importance, in achieving the restriction of association of those to whom the declaration is directed. Consideration of these matters leads to the more fundamental question about the role assigned to the Court and its relationship with legislative and executive aims. Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 552-553 [10] per Gummow, Hayne, Heydon and Kiefel JJ. 603 Fencott v Muller (1983) 152 CLR 570 at 608; [1983] HCA 12. 604 R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 at 281; [1956] HCA 10. 605 (1970) 123 CLR 361 at 374; [1970] HCA 8. The statutory scheme Objects The objects of the Act, as declared by s 4(1), are: to disrupt and restrict the activities of – organisations involved in serious crime; and the members and associates of such organisations; and to protect members of the public from violence associated with such criminal organisations." It may be observed that par (b) contains the more general object. It assumes some importance in the submissions for South Australia, which seek to explain the control order made by the Court by reference to this object. Paragraph (a) refers to the means to be adopted in achieving the object in par (b). A control order may be said to effect restrictions on the activities of members of such organisations, and therefore to disrupt the organisation's criminal activities, assuming of course that the organisation is involved in criminal activities and, more particularly, assuming that the person the subject of the control order is involved in such activities. It was explained in the second reading speech606 that the targets of the legislation are motorcycle gangs and their associates, because these groups were considered to commit a disproportionate number of serious crimes. But the legislation is not expressed to refer to such groups. The only limitation with respect to its application is the expressed intention that the Act not be used "in a manner that would diminish the freedom of persons in this State to participate in advocacy, protest, dissent or industrial action."607 Otherwise the Act may extend to any organisation identified by the Attorney-General as a declared organisation, upon application by the Commissioner of Police and upon the information provided by the Commissioner. An organisation is defined to include both incorporated bodies and unincorporated groups608. 606 South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1805. 607 Serious and Organised Crime (Control) Act 2008 (SA), s 4(2). 608 Serious and Organised Crime (Control) Act 2008, s 3, definition of "organisation". As will be explained, the only determination of fact concerning the possible involvement of members of an organisation in criminal activities is made by the Attorney-General and it may have nothing to say about the defendant to an application for a control order. The Court is given no role to determine whether that person has any connection with criminal activities before it makes a control order. The declaration The first step towards restricting association between the members of an organisation and other persons is the declaration made by the Attorney-General. The Attorney-General may make a declaration with respect to an organisation if the Attorney is satisfied, in terms of s 10(1), that: "(a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; and the organisation represents a risk to public safety and order in this State". In considering whether to make a declaration the Attorney-General is entitled to have regard to information suggesting a link between the organisation, or its members, and serious criminal activity609. Such information may extend to submissions from the public610. The Attorney-General may be satisfied that members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, whether or not only some of the members do so and whether or not the members also associate for other purposes611. A declaration may therefore be made where the information provided by the Commissioner of Police suggests that only some members are associated with criminal activity. By itself, the Attorney-General's declaration carries no legal consequences for either the organisation or its members. As earlier mentioned, the Act does not proscribe an organisation the subject of a declaration, nor is membership of such an organisation made an offence. The declaration serves the purpose of identifying persons to whom other provisions of the Act will apply. It identifies persons who may be the subject of an application for a control order under 609 Serious and Organised Crime (Control) Act 2008, s 10(3). 610 In response to a public invitation under Serious and Organised Crime (Control) Act 611 Serious and Organised Crime (Control) Act 2008, s 10(4). s 14(1), on the basis of their membership of an organisation. A "member" is widely defined. It includes an associate member or prospective member; a person who identifies himself or herself, in some way, as belonging to the organisation; and a person who is treated by the organisation as if he or she belongs to it612. The declaration also serves to identify persons with whom others may not associate, on account of their membership of a declared organisation, if membership is proved. Section 35(1)(a) (as set out later in these reasons) makes it an offence to associate with them. But it is the purpose of identifying persons as possible subjects for a control order which is directly relevant in these proceedings. The s 14(1) control order It is no part of the Court's function under s 14(1) to inquire into the participation of the defendant to an application for a control order in any criminal activities. It is obliged to make a control order without any determination other than whether that person's membership of a declared organisation has been proved. The role of the Court under s 14(1) is to be distinguished from, and contrasted with, that given to the Court by s 14(2). Pursuant to s 14(2) the Court is not obliged to make a control order. It may do so when a person has been a member of a declared organisation, or engages or has engaged in serious criminal activity, and regularly associates with members of a declared organisation. It may also do so where it is shown that the person engages or has engaged in serious criminal activity and regularly associates with other persons who engage or have engaged in such activity. Moreover, the Court is entitled, under s 14(2), to consider the appropriateness of a control order in the circumstances pertaining to the person. Section 14(6) requires the Court, when considering whether to issue a control order under s 14(2) or the prohibitions to be included in an order, to have regard to the following matters: "(a) whether the defendant's behaviour, or history of behaviour, suggests that there is a risk that the defendant will engage in serious criminal activity; the extent to which the order might assist in preventing the defendant from engaging in serious criminal activity; 612 Serious and Organised Crime (Control) Act 2008, s 3, definition of "member". the prior criminal record (if any) of the defendant and any persons specified in the application as persons with whom the defendant regularly associates; any legitimate reason the defendant may have for associating with any person specified in the application; any other matter that, in the circumstances of the case, the Court considers relevant." Section 14(6) is also expressed to apply to the prohibitions which may be included in a control order under s 14(1). However, as will be explained, because of the provisions of s 14(1) and (5)(b), s 14(6) only provides the Court with a basis for adding further prohibitions to those which automatically follow upon the making of a control order under s 14(1). Section 14(6) does not permit the Court to consider the above factors in connection with whether to make a control order, nor does it permit the Court to limit the order to prohibitions that are necessary in the circumstances of the case. The only matter which is the subject of a determination by the Court before a control order is made under s 14(1), apart from the existence of the declaration, is whether the defendant is a member of the organisation the Attorney-General has identified in the declaration. Where the Court finds that the defendant is a member, as defined, s 14(5)(b) requires that a control order must prohibit the defendant from associating with other persons who are members of declared organisations613 "except as may be specified in the order." The Solicitor-General for South Australia submitted that the exception provided by s 14(5)(b) allows the Court to reach a conclusion as to the content of a control order made under s 14(1), based upon what is reasonably required, appropriate and adapted to achieve the object of the legislation. A provision such as that described by the Solicitor-General, which incorporates aspects of the principle of proportionality, was a feature of the legislation in Thomas v Mowbray614, but no such provision appears in this Act. Moreover, the Act does not allow the Court to undertake such a process. Section 14(5)(b) forecloses the prospect of excepting any member of a declared organisation from the operation of a control order made under s 14(1). These persons must be made the subject of the prohibitions outlined in s 14(5)(b). A possible use of the exception, one which would not negate the 613 And from possessing a dangerous article or a prohibited weapon: Serious and Organised Crime (Control) Act 2008, s 14(5)(b)(ii). 614 (2007) 233 CLR 307; [2007] HCA 33; Criminal Code (Cth), s 104.4(1)(d). prohibition in s 14(5)(b), may be to except some type of association. The order made in the present case provides an example. It excepts associations for political purposes. However, the exceptions which might be made cannot significantly enlarge the function of the Court under s 14(1) and (5)(b). These provisions do not permit the Court to consider the case at hand or the involvement of the particular defendant in criminal activities. The Solicitor-General for South Australia submitted that s 14(6) could be used so that, when a control order is made under s 14(1), the order could "be tailored to meet the circumstances of the individual and the part they play within the organisation that is declared", thereby indicating a greater role for the Court in its determinations. It is difficult to see how this can be so, given that s 14(5)(b) provides the minimum content for an order under s 14(1), regardless of the matters listed under s 14(6). Clearly, the matters referred to in s 14(6) may be considered and applied in the way described by the Solicitor-General when an order is made under s 14(2). But it does not seem possible that such considerations could be applied to alter, or negate, the prohibition required by s 14(5)(b). In the context of an order made under s 14(1), it would seem that s 14(6) could only apply to any further prohibitions sought by the Commissioner of Police615. The making of a control order under s 14(1) exposes the person subject to it to punishment for any disobedience of its terms, either by way of contempt or by reason of s 22(1), which renders it an offence to contravene or fail to comply with such an order. This offence carries a maximum penalty of five years imprisonment616. However, a control order is productive of serious disadvantage for the person subject to it from the moment it is made. The making of a control order, without more, prevents that person from associating with anyone who falls within the definition of a "member" of a declared organisation. It has the further effect of preventing others from associating with that person, by reason of s 35(1)(b). Section 35(1) provides: "A person who associates, on not less than 6 occasions during a period of 12 months, with a person who is – a member of a declared organisation; or 615 Which may be made under Serious and Organised Crime (Control) Act 2008, s 14(5)(a). 616 So long as the person knew that the act or omission constituted a contravention of, or failure to comply with, the order, or was reckless as to that fact: Serious and Organised Crime (Control) Act 2008, s 22(2). the subject of a control order, is guilty of an offence." (emphasis added) This offence also carries a maximum penalty of imprisonment for five years. A person may be taken to "associate" with another person by any means of communication617. Only certain associations, such as those between "close family members"618, and for professional, business, educational, rehabilitation and some other purposes, are exempt from the operation of s 35619. those Summary The scheme of the Act may be summarised as follows. On the application of the Commissioner of Police, the Attorney-General, if satisfied of a link between some persons connected with an organisation and crime, may make a declaration affecting the organisation as a whole. By that means, each person coming within the wide definition of a "member" of that organisation is liable, upon proof of their membership by the Commissioner of Police, to have a control order made against them, prohibiting their association with other members of the organisation and severely curtailing the ability of other persons to associate with them. The Court, although having determined nothing about the activities of members of the organisation and nothing about whether the defendant to the application has had any connection with criminal activities, is obliged by the Act to make an order, containing the prohibition referred to, the making of which has the effect of further restricting that person's association with others. The Court is obliged to do so although membership of the organisation, declared or otherwise, is not made unlawful by the Act. As was acknowledged in the second reading speech, the legislation "grants unprecedented powers to the police and the Attorney-General", yet itself imposes "no direct punishment on an organisation or its members."620 It is the Court that might be seen to provide for some such effect upon the members. 617 Serious and Organised Crime (Control) Act 2008, s 35(11)(a). 618 Defined by Serious and Organised Crime (Control) Act 2008, s 35(11)(b). 619 Serious and Organised Crime (Control) Act 2008, s 35(6). 620 South Australia, House of Assembly, Parliamentary Debates (Hansard), 21 November 2007 at 1806, 1807. The role of the Court It has already been observed that the determination made by the Court under s 14(1) is very limited – to a factual finding about a defendant's membership of an organisation identified by the Attorney-General as a declared organisation. The Solicitor-General of Queensland, which intervened in the proceedings, pointed out that it is not uncommon for legislation to involve antecedent decision-making by the Executive, to which a court gives effect in later proceedings. In such cases the Executive's determination may be of a more detailed and complex nature than that of a court. An example provided of such legislation was the Customs Act 1901 (Cth), under which it is an offence to import "prohibited imports"621. The offence is one of strict liability622. All goods which are the subject of the prohibition are identified by executive determination623. The court's role is to determine whether such goods have been imported. Such a determination may not always be a simple matter. Nevertheless, the point is made. It may be accepted that a quantitative comparative assessment of a court's role against another's may not be particularly useful in resolving questions about whether the court's institutional integrity is compromised. A court may have regard to facts established by others, and its role may be more limited, yet that role may still be readily identifiable as involving an independent judicial function, as is the case in the example given. But the example also invites a comparison with the role given to the Court by s 14(1), a comparison which highlights important features of that role. The Court, acting under s 14(1), is not involved in a determination as to whether an offence has been committed. There is no offence to which its processes are directed; yet it is obliged to make an order, the nature of which suggests that some such process has been undertaken. Far from explaining the role of the Court under s 14(1), this comparison raises questions about it. Other examples may be given of legislation whereunder courts may give effect to anterior decision-making not involving a judicial function624, but they are not apposite to the role assigned to the Court by s 14(1). The Act does not go so far as to require the recognition of, or that effect be given to, the Attorney- General's declaration by the Court. More relevant is the discrete task the Court is 621 Customs Act 1901 (Cth), s 233. 622 Customs Act 1901, s 233(1AB). 623 By regulation, under Customs Act 1901, s 50. 624 See reasons of Gummow J at [136]. given, one which may be seen to involve something of a traditional judicial function, because it involves a determination of something about a person prior to an order being made. An order of a court may be understood as the end of the court's process, as was explained by Kitto J in the Tasmanian Breweries Case, in which the law is applied to the facts as found. But the limited process which precedes the making of an order under s 14(1) does not disclose the basis for an order of a kind which restricts a person's ability to associate. It is not obvious what legal criterion the Court can be said to be applying when making an order under s 14(1). There is no offence to which it is directed, no "law" by which a rule of conduct or the existence of a duty is stated625. Absent any illegality attaching to membership of an organisation declared by the Attorney-General, it is difficult to see how a control order can be explained as resulting from the Court's processes. Prior to the making of the order under s 14(1), there was no restriction upon the second respondent's ability to associate with others to which the Court could give effect. It was the Court's order which created the restriction, but not in response to a breach, by the second respondent, of any law. The Court effects the restriction at the direction of the legislature and with respect to a person who is identified by reference to the Attorney-General's declaration. The Court's order can only be accounted for by reference to the obligation cast upon it by s 14(1). The fulfilment of that obligation fills the legislative gap which exists because there is no offence. It gives effect to the outcome sought with respect to each member of the organisation the subject of the Attorney-General's declaration. Preventive orders The Solicitor-General for South Australia submitted that it is not necessary that a court deal with an offence when it makes an order restricting freedom of association. It was pointed out that, historically, courts have made orders in the nature of involuntary detention, without the person subject to the order having committed any offence. In Chu Kheng Lim v Minister for Immigration626 it was said that the involuntary detention of a citizen is penal or punitive and can occur only as an incident of the exclusively judicial function of adjudicating and punishing criminal guilt627. The statements in Lim were made subject to certain exceptions, 625 The Commonwealth v Grunseit (1943) 67 CLR 58 at 82; [1943] HCA 47. 626 (1992) 176 CLR 1; [1992] HCA 64. 627 (1992) 176 CLR 1 at 27. namely, where a citizen is detained, involuntarily, in custody pending trial and in cases involving mental illness or infectious disease, but it may be that they require the further qualifications suggested by Gummow J in Fardon v Attorney-General (Qld)628. In particular, some difficulty may attend questions about whether an order effects a punishment, but it is not necessary to consider such questions in this case. It may be accepted that the courts have exercised powers to restrict the liberty of persons, in certain circumstances, without an offence having been committed and without having made a determination about the person's past conduct. Orders by which a person is bound over to keep the peace provide an example. They are of long standing and may be considered the origin of modern apprehended violence orders ("AVOs")629. Binding over orders were described by Blackstone as expressions of "preventive justice"630 that look to the possible future conduct of a person. In Chu Shao Hung v The Queen631 Kitto J explained that this ancient power of magistrates required for its exercise some conduct which, although not actually contrary to law, was contra bonos mores. It was a power to oblige those persons, of whom there was probable ground to suspect future misbehaviour, "to give full assurance to the public" that such offence as was apprehended would not happen632. It may be observed that such orders differ from the orders made under s 14(1) in at least two respects: the former orders were directed to an obligation, at common law, to keep the peace in the interests of and for the protection of society; and they were the result of a process which might clearly be described as a judicial function. As was observed by Gummow and Crennan JJ in Thomas v Mowbray633, it was necessary, in asking the Federal Magistrates Court to exercise that preventive jurisdiction, to place before it material which enabled it to 628 (2004) 223 CLR 575 at 611-612 [78]-[80]; [2004] HCA 46. 629 As Gleeson CJ observed in Thomas v Mowbray (2007) 233 CLR 307 at 328-329 630 Blackstone, Commentaries on the Laws of England, 15th ed (1809), bk 4, c 18 at 631 (1953) 87 CLR 575 at 589-590; [1953] HCA 33, referring to Blackstone, Commentaries on the Laws of England, 15th ed (1809), bk 4, c 18 at 256 and R v Sandbach; Ex parte Williams [1935] 2 KB 192 at 197 per Humphreys J. 632 Blackstone, Commentaries on the Laws of England, 15th ed (1809), bk 4, c 18 at 633 (2007) 233 CLR 307 at 357 [120]. conclude that, in the absence of an order, there would be a breach of the peace. The Act here in question contains no antecedent obligation to which the order may be directed and allows no consideration by the Court of the need for an order. Binding over orders are therefore an imperfect analogy with control orders under s 14(1). The legislation in Fardon v Attorney-General (Qld) furnishes another example of a preventive order made by a court, for the protection of the public, in accordance with its statutory objective. The question raised by the statute in that case was whether there was "an unacceptable risk that the prisoner will commit a serious sexual offence" if he was released into the community634 and it was a question to be answered by the Supreme Court of Queensland. The Supreme Court could make an order only on the basis of acceptable, cogent evidence which satisfied it to a high degree of probability635. Its role clearly involved a judicial process and its resulting order was explicable on that basis. There was nothing to suggest that the Supreme Court was to act "as a mere instrument of government policy"636 or "that the jurisdiction conferred is a disguised substitute for an ordinary legislative or executive function."637 The institutional integrity of the Supreme Court could not be said to have been compromised by the legislation. The legislation with which the Federal Magistrates Court was concerned in Thomas v Mowbray involved the making of orders directed to the protection of society. It may also be contrasted with the legislation here in question. The legislation in Thomas v Mowbray permitted the making of an interim control order by a court if it was satisfied of certain matters, including that the making of the order would substantially assist in preventing a terrorist act or that the person to be subjected to the order had provided training to, or received training from, a listed terrorist organisation638. Under the Criminal Code (Cth) it was an offence to be a member of a terrorist organisation639 or to train or receive training from such an organisation640. The Federal Magistrates Court determined matters 634 Dangerous Prisoners (Sexual Offenders) Act 2003 (Q), s 13(2). 635 Dangerous Prisoners (Sexual Offenders) Act 2003, s 13(3). 636 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 592 [19] per Gleeson CJ. 637 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 597 [34] per McHugh J. 638 Criminal Code, s 104.4(1)(c). 639 Criminal Code, s 102.3(1). 640 Criminal Code, s 102.5(1) and (2). necessary to these offences. It was not obliged to make an interim control order but, if it did so, it was required to ensure that the restrictions, prohibitions and obligations to be imposed upon the person by the order were proportionate to the purpose of protecting the public from a terrorist attack, as earlier mentioned641. These are matters proper and usual to a judicial process. They may be contrasted with the role assigned to the Court by s 14(1). The submissions for South Australia sought to align the order made under s 14(1) and the process in which the Court is involved, by reference to the objects section of the Act and its stated purpose of the protection of the public from violence associated with criminal organisations642. It is possible that a control order made against a member of a declared organisation might assist in the achievement of this purpose, but this does not mean that it is correct to characterise the Court's role and the processes it undertakes by reference to that purpose. The Court's determinations under s 14(1) have nothing to say about whether the purpose might be achieved in a particular case. No regard may be had by the Court to a defendant's history or the prospect that he or she may have been, or might in the future be, involved in criminal activities. Its order is not explicable on this basis. It can only be understood to proceed upon some unstated assumption concerning all persons who are identified by the Attorney-General's declaration and by reference to the obligation cast upon the Court to make an order with respect to a person so identified. Conclusion In Fardon v Attorney-General (Qld)643, Gummow J referred to a statement in Mistretta v United States644 as relevant to the principle in Kable. It is apposite to this case. It is that the reputation of the judicial branch may not be borrowed by the legislative and executive branches "to cloak their work in the neutral colors of judicial action." It is to be inferred from the Act that it is the aim of the Executive that all persons identified by the declaration made by the Attorney-General are to have their liberty to associate restricted. This is the end which the declaration serves but to which it cannot give effect. The Court is directed to bring this result 641 Criminal Code, s 104.4(1)(d). 642 Serious and Organised Crime (Control) Act 2008, s 4(1)(b). 643 (2004) 223 CLR 575 at 615 [91]. 644 488 US 361 at 407 (1989). about. Its action, in making the order, gives the appearance of its participation in the pursuit of the objects of the Act. Properly understood, however, the making of the order serves to disguise an unstated premise and the lack of any illegality attaching to membership of a declared organisation. It follows that s 14(1) involves the enlistment of the Court to give effect to legislative and executive policy. It impinges upon the independence of the Court and thereby undermines its institutional integrity. Section 14(1) is invalid.
HIGH COURT OF AUSTRALIA Matter No S592/2005 STATE OF NEW SOUTH WALES PLAINTIFF AND COMMONWEALTH OF AUSTRALIA DEFENDANT Matter No P66/2005 STATE OF WESTERN AUSTRALIA PLAINTIFF AND COMMONWEALTH OF AUSTRALIA DEFENDANT Matter No A3/2006 STATE OF SOUTH AUSTRALIA PLAINTIFF AND COMMONWEALTH OF AUSTRALIA DEFENDANT Matter No B5/2006 STATE OF QUEENSLAND PLAINTIFF AND COMMONWEALTH OF AUSTRALIA DEFENDANT Matter No B6/2006 AUSTRALIAN WORKERS' UNION & ANOR PLAINTIFFS AND COMMONWEALTH OF AUSTRALIA DEFENDANT Matter No S50/2006 UNIONS NSW & ORS AND PLAINTIFFS COMMONWEALTH OF AUSTRALIA DEFENDANT Matter No M21/2006 STATE OF VICTORIA AND PLAINTIFF COMMONWEALTH OF AUSTRALIA DEFENDANT New South Wales v Commonwealth of Australia Western Australia v Commonwealth of Australia South Australia v Commonwealth of Australia Queensland v Commonwealth of Australia Australian Workers' Union v Commonwealth of Australia Unions NSW v Commonwealth of Australia Victoria v Commonwealth of Australia [2006] HCA 52 14 November2006 S592/2005, P66/2005, A3/2006, B5/2006, B6/2006, S50/2006 & M21/2006 ORDER In each matter: The defendant's demurrer to the statement of claim is allowed. Judgment for the defendant with costs. Representation M G Sexton SC, Solicitor-General for the State of New South Wales and B W Walker SC with J K Kirk and I Taylor for the plaintiff in Matter No S592/2005 (instructed by Crown Solicitor for New South Wales) R J Meadows QC, Solicitor-General for the State of Western Australia with R M Mitchell and D J Matthews for the plaintiff in Matter No P66/2005 (instructed by State Solicitor for Western Australia) C J Kourakis QC, Solicitor-General for the State of South Australia with G J Parker and S A McDonald for the plaintiff in Matter No A3/2006 (instructed by Crown Solicitor for South Australia) W Sofronoff QC, Solicitor-General of the State of Queensland with G C Martin SC, R W Campbell, S E Brown and J M Horton for the plaintiff in Matter No B5/2006 (instructed by Crown Solicitor for the State of Queensland) D F Jackson QC with A K Herbert and N J Owens for the plaintiffs in Matter No B6/2006 (instructed by Sciacca's Lawyers and Consultants) N C Hutley SC with N Perram and B L Jones for the plaintiffs in Matter No S50/2006 (instructed by Jones Staff & Co) P M Tate SC, Solicitor-General for the State of Victoria with M Bromberg SC, G R Kennett, M K Moshinsky, S J Moore and D I Star for the plaintiff in Matter No M21/2006 (instructed by Victorian Government Solicitor) D M J Bennett QC, Solicitor-General of the Commonwealth and R R S Tracey QC and H C Burmester QC with J L Bourke, S B Lloyd and S P Donaghue for the defendant in all matters (instructed by Australian Government Solicitor) Interveners W C R Bale QC, Solicitor-General of the State of Tasmania with S K Kay intervening on behalf of the Attorney-General of the State of Tasmania in all matters (instructed by Solicitor-General of Tasmania) T I Pauling QC, Solicitor-General for the Northern Territory with S L Brownhill intervening on behalf of the Attorney-General for the Northern Territory in all matters (instructed by Solicitor for the Northern Territory) P M Tate SC, Solicitor-General for the State of Victoria with M Bromberg SC, G R Kennett, M K Moshinsky, S J Moore and D I Star intervening on behalf of the Attorney-General of the State of Victoria in Matter Nos S592/2005, P66/2005, A3/2006 and B5/2006 (instructed by Victorian Government Solicitor) S J Gageler SC with G C McCarthy intervening on behalf of the Australian Capital Territory Attorney-General in all matters (instructed by Australian Capital Territory Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS New South Wales v Commonwealth of Australia Western Australia v Commonwealth of Australia South Australia v Commonwealth of Australia Queensland v Commonwealth of Australia Australian Workers' Union v Commonwealth of Australia Unions NSW v Commonwealth of Australia Victoria v Commonwealth of Australia Constitutional Law (Cth) – Powers of federal Parliament – Workplace Relations Amendment (Work Choices) Act 2005 (Cth) amended Workplace Relations Act 1996 (Cth) – Amending Act altered primary constitutional basis of Workplace Relations Act 1996 (Cth) so as to place reliance on s 51(xx) instead of s 51(xxxv) of the Constitution – Constitutional validity of Workplace Relations Amendment (Work Choices) Act 2005 (Cth) – Whether s 51(xx) of the Constitution confers power upon the federal Parliament to regulate the employment relationship between "foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth" and their employees. Constitutional Law (Cth) – Powers of federal Parliament – Section 51(xx) – Whether, to be supported by s 51(xx), the fact that a corporation is a foreign, trading or financial corporation must be significant in the way in which the law relates to it – Whether sufficient for law to be characterised as law with respect to constitutional corporations that it singles out constitutional corporations as the object of statutory command. Constitutional Law (Cth) – Powers of federal Parliament – Relationship between s 51(xx) and s 51(xxxv) – Whether s 51(xx) confined in its operation by reference to terms of s 51(xxxv) – Whether s 51(xxxv) represents the totality of the federal Parliament's power to make laws with respect to industrial relations, except in relation to employees of the Commonwealth and other limited categories of employees – Whether s 51(xxxv) contains a "positive prohibition or restriction" to which s 51(xx) is subject – Whether s 51(xxxv) contains a "safeguard, restriction or qualification" to which s 51(xx) is subject. Constitutional Law (Cth) – Powers of federal Parliament – Section 51(xxxv) – Constitutional validity of Sched 6 of Workplace Relations Act 1996 (Cth) as amended by Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("Amended Act") – Whether Sched 6 supported by s 51(xxxv) of the Constitution. Constitutional Law (Cth) – Powers of federal Parliament – Section 122 – Amended Act applied to any body corporate incorporated in a Territory and any person or entity that carried on an activity in a Territory so far as the person or entity employed an individual in connection with the activity – Whether supported by s 122 of the Constitution. Constitutional Law (Cth) – Powers of federal Parliament – Exclusion of State and Territory laws – Section 16 of Amended Act excluded certain State and Territory laws – Whether s 16 a law with respect to any head of power in s 51 of the Constitution – Whether s 16 amounted to a bare attempt to limit or exclude State legislative power – Whether s 16 impermissibly curtailed the capacity of the States to function as governments. Constitutional Law (Cth) – Powers of federal Parliament – Section 117 of Amended Act empowered the Australian Industrial Relations Commission to restrain a State industrial authority from dealing with certain matters – Whether s 117 contrary to s 106 of the Constitution – Whether s 117 impermissibly impaired capacity of States to function as governments – Whether s 117 supported by s 51(xx). Constitutional Law (Cth) – Powers of federal Parliament – Regulation-making powers – Sections 356 and 846(1) of Amended Act together empowered the Governor-General to make regulations specifying matters to be "prohibited content" in relation to workplace agreements made under the Act, without expressly stipulating any relevant criteria – Whether regulation-making power amounted to a "law" – Whether regulation-making power a law with respect to any identifiable head of Commonwealth legislative power. Constitutional Law (Cth) – Constitutional interpretation – Applicable principles of interpretation – Relevance of failure of proposals to alter Constitution by referendum. Constitution, ss 51(xx), 51(xxxv), 122. Workplace Relations Amendment (Work Choices) Act 2005 (Cth). Workplace Relations Act 1996 (Cth). GLEESON CJ, GUMMOW, HAYNE, HEYDON AND CRENNAN JJ. Introduction In December 2005, the Parliament enacted the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("the Amending Act"). The Amending Act made extensive amendments to the Workplace Relations Act 1996 (Cth) ("the Act"). The Act in its form before those amendments will be referred to as "the previous Act"; the Act in its form after those amendments will be referred to as "the new Act". The most notable change effected by the Amending Act was an alteration of the constitutional basis of the Act. Although certain provisions of the previous Act had been enacted in reliance on the power conferred by s 51(xx) of the Constitution (the corporations power), its general framework was based upon the power conferred by s 51(xxxv) (the conciliation and arbitration power). Although certain provisions of the new Act are still based on the conciliation and arbitration power, and although the Amending Act invoked other heads of Commonwealth legislative power, the new Act is now, in large part, an exercise of the corporations power. The Parliament's capacity to rely upon that power to sustain the legislation is the principal question in issue in these proceedings. The principal amendments to the Act commenced on 27 March 2006. On that day the Workplace Relations Regulations 2006 ("the Regulations") also commenced. These reasons are organised as follows: PART I – THE LITIGATION AND THE LEGISLATION The litigation [4]-[6] The legislation [7]-[44] The principal issue: Constitution, s 51(xx) [45]-[55] Other issues [56] PART II – SECTION 51(xx) The plaintiffs' principal arguments [57]-[60] The Commonwealth's principal arguments [61]-[63] A distinction between "external" and "internal" relationships Relevant nineteenth century developments [96]-[124] Failed referendums [125]-[135] The course of authority after Huddart Parker [136]-[178] The Banking Case [147]-[152] The Concrete Pipes Case [153]-[156] Crennan The Tasmanian Dam Case [166]-[172] Re Dingjan [173]-[178] Distinctive character and discriminatory operation [179]-[182] A need to limit s 51(xx)? [183]-[196] General conclusions [197]-[198] PART III – THE RELATIONSHIP BETWEEN s 51(xxxv) AND s 51(xx) The parties' submissions [199]-[208] Text, structure and authority [209]-[222] The course of authority [223]-[229] The provenance of s 51(xxxv) [230]-[238] PART IV – PARTICULAR CONCLUSIONS Particular provisions and s 51(xx) [239]-[294] Part 7 [245]-[246] Parts 8 and 10, Divs 1 and 2 of Pt 12 and Pt 23 [247]-[252] Part 9 [253]-[262] Item 4 of Sched 4 to the Amending Act and Sched 8 to the new Act [263]-[268] Part VIAAA [269]-[271] Sections 365 and 366 [272]-[275] Sections 637 and 643 [276]-[278] (h) Division 5 of Pt 15 [279]-[287] Part 16 [288]-[294] Particular provisions and s 51(xxxv) [295]-[327] Parts 8, 9 and 13 [296]-[298] Schedule 6 [299]-[308] Schedule 1 [309]-[327] PART V – CONSTITUTION, s 122 – TERRITORIES Structure of the challenges [330]-[333] Paragraph (e) of the definition of "employer" [334]-[337] Paragraph (f) of the definition of "employer" [338]-[344] PART VI – OTHER PARTICULAR CHALLENGES Section 16 – Exclusion of State and Territory laws [346]-[377] Section 117 – Restraining State industrial authorities [378]-[394] Regulation-making powers [395]-[421] PART VII – CONCLUSIONS AND ORDERS Crennan PART I – THE LITIGATION AND THE LEGISLATION The litigation Seven actions were commenced in this Court seeking declarations of invalidity of the whole Amending Act, or, alternatively, of specified provisions. Five of the actions were commenced by the States of New South Wales, Victoria, Queensland, South Australia and Western Australia. The other two actions were commenced by trade union organisations. The statements of claim followed a substantially similar form, reciting the impugned legislation, and its legal effect, and asserting its constitutional invalidity. To each statement of claim the Commonwealth demurred, the ground of demurrer being that none of the impugned provisions was invalid. Those demurrers are now before this Court for decision. Although there were some, relatively minor, disagreements between the parties upon various points of construction of the legislation, there are no matters of disputed fact that are claimed to affect the questions of validity that have been argued. That being so, the demurrer is an appropriate procedure for the resolution of the issues of validity that arise. This procedure has been adopted on many past occasions1, and no question of an advisory opinion or of a hypothetical case arises. After oral argument was concluded the parties agreed upon a joint document setting out the provisions that were challenged, which parties made the particular challenges, and the bases upon which those challenges were made. These reasons have been prepared on the footing that the document contained an exhaustive list of the live issues in the litigation and thus reflected some narrowing of the controversies presented by the pleadings and earlier written submissions. The Attorneys-General of Tasmania, the Northern Territory and the Australian Capital Territory intervened in support of the plaintiffs. The Attorney-General for Victoria intervened in certain of the proceedings. The position of the State of Victoria is affected by the Commonwealth Powers (Industrial Relations) Act 1996 (Vic) ("the Referral Act") by which the 1 Examples include Melbourne Corporation v The Commonwealth (1947) 74 CLR 31; The State of Victoria v The Commonwealth ("the Second Uniform Tax Case") (1957) 99 CLR 575; Attorney-General (Vict) v The Commonwealth ("the Marriage Act Case") (1962) 107 CLR 529; Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353; Victoria v The Commonwealth and Hayden ("the Australian Assistance Plan Case") (1975) 134 CLR 338. Crennan Parliament of Victoria referred powers to the Commonwealth Parliament to make laws with respect to conciliation and arbitration for the prevention and settlement of industrial disputes within the limits of the State; agreements about matters pertaining to the relationship between an employer or employers in the State and an employee or employees in the State; and minimum terms and conditions of employment for employees of the State. The Referral Act was subject to a number of exceptions. The legislation The principal object of the new Act is stated in s 3 as follows: "The principal object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity and welfare of the people of Australia by: encouraging the pursuit of high employment, improved living standards, low inflation and international competitiveness through higher productivity and a flexible and fair labour market; and establishing and maintaining a simplified national system of workplace relations; and providing an economically sustainable safety net of minimum wages and conditions for those whose employment is regulated by this Act; and ensuring that, as far as possible, the primary responsibility for determining matters affecting the employment relationship rests with the employer and employees at the workplace or enterprise level; and enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances; and industrial ensuring compliance with minimum instruments and bargaining processes by providing effective means for the investigation and enforcement of: standards, employee entitlements; and the rights and obligations of employers and employees, and their organisations; and Crennan ensuring that awards provide minimum safety net entitlements for award-reliant employees which are consistent with Australian Fair Pay Commission decisions and which avoid creating disincentives to bargain at the workplace level; and supporting harmonious and productive workplace relations by providing flexible mechanisms for the voluntary settlement of disputes; and balancing the right to take industrial action for the purposes of collective bargaining at the workplace level with the need to protect the public interest and appropriately deal with illegitimate and unprotected industrial action; and ensuring freedom of association, including the rights of employees and employers to join an organisation or association of their choice, or not to join an organisation or association; and protecting the competitive position of young people in the labour market, promoting youth employment, youth skills and community standards and assisting in reducing youth unemployment; and assisting employees family responsibilities effectively through the development of mutually beneficial work practices with employers; and their work and to balance respecting and valuing the diversity of the work force by helping to prevent and eliminate discrimination on the basis of race, colour, sex, sexual preference, age, physical or mental disability, marital status, religion, political opinion, national extraction or social origin; and responsibilities, pregnancy, family assisting in giving effect to Australia's international obligations in relation to labour standards." The constitutional basis upon which the "framework for cooperative workplace relations" is constructed is revealed by the definitions of "employee" and "employer" in ss 5 and 6 of the new Act. Those definitions are central to the operation of much of the new Act. The definition of "employee" in s 5(1) is an individual so far as he or she is employed, or usually employed, as described in the definition of "employer" in s 6(1), by an employer. Section 6(1) provides the "basic definition" of "employer" which applies unless the contrary intention appears (as it does in certain provisions). The definition is: Crennan In this Act, unless the contrary intention appears: employer means: a constitutional corporation, so far as it employs, or usually employs, an individual; or the Commonwealth, so far as it employs, or usually employs, an individual; or a Commonwealth authority, so far as it employs, or usually employs, an individual; or a person or entity (which may be an unincorporated club) so far as the person or entity, in connection with constitutional trade or commerce, employs, or usually employs, an individual as: a flight crew officer; or a maritime employee; or (iii) a waterside worker; or a body corporate incorporated in a Territory, so far as the body employs, or usually employs, an individual; or a person or entity (which may be an unincorporated club) that carries on an activity (whether of a commercial, governmental or other nature) in a Territory in Australia, so far as the person or entity employs, or usually employs, an individual in connection with the activity carried on in the Territory." The term "constitutional corporation" is defined in s 4 to mean a corporation to which s 51(xx) of the Constitution applies. That paragraph refers to foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth. No doubt there may be room for dispute, in relation to some corporations, about whether they are constitutional corporations within the meaning of the new Act. However, in the application of par (a) of the basic definition of employer, and the corresponding definition of employee, to a given corporation, the hypothesis is that it is a constitutional corporation. Crennan The definitions of employee and employer invoke other heads of power as well as the corporations power. Even so, in its practical application the new Act depends in large measure upon the assumption that the corporations power is capable of sustaining the legislative framework. Accordingly, the validity of that assumption was the matter to which the primary submissions of a number of the parties were directed. The system introduced by the Amending Act is intended to cover all employers and employees as defined in s 6(1) and s 5(1), including those formerly bound by State based industrial instruments. It includes transitional provisions designed to cover certain employers and employees bound by federal awards who are not within the ss 6 and 5 definitions. It also contains provisions which preserve for a time the terms and conditions of employment of employees within the s 5(1) definition who would have been bound by, or whose employment would have been subject to, a State industrial instrument. The States and the Commonwealth, for the purposes of the presentation of their arguments, agreed upon a description of the operation of the relevant provisions of the new Act. That agreed description is substantially as follows. The language of the agreement of the parties will be adopted, without supporting references to the specific legislative provisions. It is not intended to foreclose any issues of construction. Part VI of the previous Act dealt with the prevention and settlement of interstate industrial disputes by the processes of conciliation and arbitration engaged in by the Australian Industrial Relations Commission ("the AIRC"). Part VI has been repealed. Parts 7 and 10 of the new Act deal with some matters of a kind formerly dealt with by procedures for prevention and settlement of interstate industrial disputes. Part 7 is headed "The Australian Fair Pay and Conditions Standard". The purpose of the Part is to set out "key minimum entitlements of employment" relating to basic rates of pay and casual loadings, maximum ordinary hours of work, annual leave, personal leave, and parental leave and related entitlements. The provisions of Pt 7 together constitute the Australian Fair Pay and Conditions Standard ("the Pay and Conditions Standard"). Central to the operation of Pt 7 is the Australian Fair Pay Commission ("the AFPC"), a body established by s 20 of the new Act. It is unnecessary for present purposes to go into the detail of the constitution of the AFPC save to say that Commissioners are appointed by the Governor-General (s 38) and their terms and conditions of employment are governed by Div 2 of Pt 2 of the Act. Crennan The AFPC has what is described as a wage-setting function, which involves conducting wage reviews and exercising its wage-setting powers as necessary depending on the outcomes of wage reviews. The objective of the AFPC in performing this function is to promote the economic prosperity of the people of Australia having regard to specified "wage-setting parameters". Those include providing a safety net for the low paid and providing minimum wages for certain kinds of employee. The AFPC has power to determine the timing, frequency and scope of wage reviews. Division 2 of Pt 7 provides that if the employment of an employee is covered by an Australian Pay and Classification Scale ("APCS") the employee must be paid a specified basic periodic rate of pay. The AFPC adjusts, revokes and determines new APCSs. If the employment is not covered by an APCS, the employee must be paid a rate that is at least equal to the standard Federal Minimum Wage. This is described as a "guarantee of basic rates of pay". Various other "guarantees" as to wages are contained in Div 2 of Pt 7. Similarly, Div 3 of Pt 7 provides what is described as a "guarantee of maximum ordinary hours of work". In brief, an employee must not be required or requested by an employer to work more than 38 hours per week and reasonable additional hours. Factors to be taken into account in determining what is reasonable are specified. Division 4 of Pt 7 deals with annual leave, and contains what is described as a "guarantee of annual leave". Details of the entitlements are set out in s 232. Division 5 of Pt 7 prescribes certain entitlements to various kinds of "personal leave". Division 6 of Pt 7 does the same in relation to parental leave. The details of the various entitlements prescribed by Pt 7 are not material to the principal issues in these proceedings. It suffices to say that the provisions of Pt 7 are much more detailed than appears from the above brief synopsis. Having regard to the scheme of Pt 7, it may be said that one of the principal issues in the case may be stated by asking whether a law that provides that a corporation of a kind referred to in s 51(xx) of the Constitution must pay its employees certain minimum wages, and must provide them with certain leave entitlements, and must not require them to work more than a certain number of hours, is a law with respect to such corporations. On the commencement of Pt 7, employees (as defined in s 5) who were covered by a "pre-reform wage instrument", such as a federal award under the previous Act, or a State award or State law, or Territory law, which contained rates of pay, continued to have a minimum entitlement to those rates of pay as the pay rates, classification, casual loading and coverage provisions of the previous instrument were converted to a "preserved APCS". Crennan Part 8 of the new Act is headed "Workplace agreements". It also applies only to s 6(1) employers and their employees. It provides for the making, variation and termination of particular kinds of agreement, called workplace agreements. In the Second Reading Speech it was said that a "central objective of [the Amending Act] is to encourage the further spread of workplace agreements"2. The previous Act, in Pt VID, provided for Australian workplace agreements ("AWAs"). The relevant Part applied where the employer was a constitutional corporation, or the Commonwealth, or where the employee's primary workplace was in a Territory and in certain other circumstances. It was an example of part of the previous legislation that was based, not on the power given by s 51(xxxv), but on the powers relied upon to support the Amending Act. Part 8 of the new Act provides for certain forms of agreement that may be made between employers, employees and unions which are registered organisations. A workplace agreement may be an AWA, an employee collective agreement (an agreement between an employer and persons employed in a single business or part of a single business), a union collective agreement (an agreement between an employer and one or more organisations of employees), a union greenfields agreement (a collective agreement between an employer and one or more organisations of employees where the agreement relates to a new business), an employer greenfields agreement, or a multiple-business agreement. Workplace agreements become operative when lodged with the Office of the Employment Advocate. As was the case under the previous Act, there is no requirement for certification or approval by the AIRC. In general, workplace agreements are to include dispute settlement procedures chosen by the parties, in the absence of which a model dispute resolution process in Pt 13 will be taken to be included in the agreement. Where applicable, certain protected award conditions are taken to be included in a workplace agreement to the extent that the agreement does not expressly exclude or modify them. Workplace agreements must not contain "prohibited content". This is a topic the subject of a separate issue that will be considered below. What matters are prohibited content is the subject of the Regulations which have prescribed, for example, terms relating to the deduction from wages of union 2 Second Reading Speech of the Minister for Employment and Workplace Relations and Minister Assisting the Prime Minister for the Public Service, Australia, House of Representatives, Parliamentary Debates (Hansard), 2 November 2005 at 17. Crennan membership dues, terms which confer a right or remedy in relation to termination of employment for a reason that is harsh, unjust or unreasonable, and terms that deal with matters that do not pertain to the employment relationship. Inclusion of prohibited content results in exposure to civil penalties. Under Pt 8 of the new Act, a party may terminate an agreement that has passed its nominal expiry date by giving 90 days written notice. Under the previous Act, a party could apply to the AIRC to terminate an agreement after the nominal expiry date. The AIRC was required to terminate the agreement unless such an order would be contrary to the public interest. From the date on which a workplace agreement that operated in relation to an employee is terminated until another workplace agreement comes into operation in relation to that employee, neither the terminated agreement nor an award has effect in relation to that employee. Upon termination of a workplace agreement, the minimum terms and conditions of employment are governed by the Pay and Conditions Standard and applicable "protected award conditions". A pre-reform AWA will cease to apply when replaced by a post-reform AWA. The Pay and Conditions Standard prevails over a workplace agreement that operates in relation to an employee to the extent that the Standard provides a more favourable outcome for the employee in a particular respect. Part 9 of the new Act is headed "Industrial action". It applies only to s 6(1) employers and their employees. Division 8 of Pt VIB of the previous Act dealt with negotiations for the making of certified agreements and included a right for a party wishing to make a certified agreement to initiate a bargaining period during which a party could engage in industrial action in relation to which a limited immunity was conferred. The industrial action was described as "protected action". The AIRC had a role in suspending or terminating a bargaining period, and exercising functions of conciliation and arbitration to make an award where agreement could not be reached. Most of Pt 9 of the new Act deals with the taking of lawful industrial action ("protected action") in limited circumstances and for the specific purpose of bargaining for a collective agreement. Part 9 also prohibits industrial action not permitted by the Act and prohibits the making and acceptance of certain payments relating to periods of industrial action. It extends the circumstances in which bargaining for a collective agreement may be terminated by the AIRC. In the event of such termination the AIRC may make a "workplace determination" that provides for the matter in issue. The new Act establishes additional requirements in order for industrial action to be "protected action". The action must be preceded by a "protected action ballot" in which the proposed industrial action is approved by a majority of employees, voting at a secret ballot. The new Crennan Act also confers a power on the Minister to terminate a bargaining period if satisfied of certain matters, including that the industrial action is threatening, or would threaten, to endanger the life, the personal safety, or the health or welfare, of the population or part of it, or to cause significant damage to the Australian economy or an important part of it. The new Act requires the AIRC to make an order that industrial action stop, not occur and not be organised if it appears to the AIRC that industrial action by an employee, employees or an employer is not, or would not be, protected action. The new Act imposes a similar obligation on the AIRC in relation to industrial action taken by employees and employers within the ordinary meaning of those terms who do not fall within s 5(1) and s 6(1) where the industrial action will, or would, be likely to have the effect of causing substantial loss or damage to the business of a constitutional corporation. the AIRC Part 10 of the new Act is headed "Awards". It applies only to s 6(1) employers and their employees. By definition, an award may be either an award made by the AIRC under s 539 or a pre-reform award. Schedule 4 to the Amending Act dealt with the operation of awards in force before the reform commencement. It provided for the creation of a "pre-reform award", that is, an instrument to take effect from the reform commencement in the same terms as an the reform in force original award of commencement binding relevantly only employees and employers within the meaning of s 5(1) and s 6(1) respectively and each organisation that was bound by the original award immediately before the reform commencement. Awards may be made by the AIRC to give effect to the outcome of an "award rationalisation process" following a request by the Minister. The AIRC can make an award only to give effect to the outcome of an award rationalisation process and not otherwise. Awards, whether pre-reform awards or rationalised awards, as under the previous Act, may only include terms about "allowable award matters", but the number of such matters has been reduced from 20 to 15. The conditions provided for by the Pay and Conditions Standard (including rates of pay) and other prescribed matters cannot be included in awards. immediately before Part 12 of the new Act is headed "Minimum entitlements of employees". It supplements the minimum conditions of employment established by the Pay and Conditions Standard provided for by Pt 7. Some of the additional minimum entitlements established by Pt 12 apply to employers and employees as defined in s 6(1) and s 5(1), and the balance apply to all employers and employees. Division 4 of Pt 12 deals with termination of employment. Subdivision B of Div 4 provides that employees as defined in s 5(1), to the extent that they are not otherwise excluded, have a right to make application to the AIRC for relief in respect of the termination of their employment on the ground that the termination was harsh, unjust or unreasonable ("unfair dismissal"). State unfair dismissal Crennan jurisdictions are intended to be excluded by the Act in so far as they apply to s 6(1) employers and their employees. Subdivision C prohibits an employer from terminating an employee's employment for any one of a range of specified reasons ("unlawful dismissal"). Subdivision D enables the AIRC to make orders against an employer where the employer had decided to terminate the employment of 15 or more employees for reasons of an economic, technological, structural or similar nature and yet failed to consult each relevant trade union before terminating. Part 13 of the new Act is headed "Dispute resolution processes". Its objects are to encourage employers and employees who are parties to a dispute to resolve it at the workplace level, and to allow the parties to determine the best forum in which to resolve disputes. It includes a model dispute resolution process. Division 5 of Pt 15 is headed "Entry for OHS purposes". In Pt 15 the terms "employer" and "employee" have their ordinary meaning. Division 5 prohibits the exercise by an official of a registered organisation of the right to enter premises conferred by an "OHS law" (that is, an occupational health and safety law of a State or Territory prescribed as such by the Regulations) unless the official holds a permit under Pt 15 of the new Act and exercises the right during working hours. Contravention results in exposure to a civil penalty. The issue of a permit by an Industrial Registrar or Deputy Industrial Registrar depends upon the Registrar's satisfaction that the official is a fit and proper person having regard to certain matters. Division 5 applies, inter alia, to premises that are occupied or otherwise controlled by constitutional corporations or in circumstances where the right of entry under the law of the State or Territory relates to requirements to be met by a constitutional corporation, conduct to be engaged in, or activity undertaken or controlled, by a constitutional corporation, or by an employee of a constitutional corporation, or by a contractor providing services for a constitutional corporation or the Commonwealth, or the exercise of the right will have a direct effect on any such persons. Part 16 of the new Act is headed "Freedom of association". In this Part, the terms "employer" and "employee" have their ordinary meaning. It seeks, among other things, to provide relief to employers and employees and independent contractors who are prevented or inhibited from exercising their rights to freedom of association. Divisions 3 to 8 prohibit a range of conduct by persons in relation to forming, or being or not being a member of, industrial associations, or participating or not participating in industrial action. For example, s 789 prohibits persons from organising or taking (or threatening to organise or take) any action against another person with intent to coerce that Crennan person or a third person to become or not become (or remain or cease to be) an officer or member of an "industrial association". The prohibitions extend to conduct by or against a constitutional corporation; or conduct that adversely affects a constitutional corporation; or conduct carried out with intent to adversely affect a constitutional corporation; or conduct that directly affects (or is carried out with the intent to directly affect) a person in the capacity of an employee, or prospective employee, a contractor, or prospective contractor of a constitutional corporation; or conduct that consists of advising, encouraging or inciting a constitutional corporation to take or not to take (or threaten to take, or not to take) particular action in relation to another person. Part 23 of the new Act is headed "School-based apprentices and trainees". It applies only to s 6(1) employers and their employees. It provides, subject to certain qualifications, for persons who are employed as "school-based apprentices" or "school-based trainees" to be entitled to any additional conditions to which a full-time apprentice or employee doing the same kind of work, in the same location and for the same employer would be entitled, calculated by reference to the proportion of hours worked on the job by the employee. The following provisions of the new Act were also the subject of argument. Section 16 expresses the intention that the new Act is to apply to the exclusion of a range of State and Territory laws that would otherwise apply in relation to an employer and employee. The excluded laws include a "State or Territory industrial law" of a kind specified, together with an Act of a State or Territory "that applies to employment generally" and has a main purpose of either regulating workplace relations; providing for the determination of the terms and conditions of employment; providing for the making and enforcement of agreements determining the terms and conditions of employment; providing for rights and remedies connected with termination of employment or prohibiting conduct that relates to whether a person is a member of an industrial association. It will be necessary to make further reference to the provisions excluding State and Territory laws when dealing with the arguments on that topic. Section 117 provides that a Full Bench of the AIRC has the power to make an order restraining a State industrial authority from dealing with a matter which is the subject of a proceeding before the AIRC. If such an order is made, the new Act provides that the State industrial authority must cease dealing with the matter and any order the State industrial authority makes in contravention of the restraint is invalid to the extent of the contravention. Crennan Between 14 December 2005 and 27 March 2006, the new Act included Pt VIAAA, which sought to render of no effect an obligation contained in any State law, State award, State authority order or Territory law requiring a "relevant employer" with fewer than 15 employees to pay redundancy pay. In the case of a State law or award or authority order "relevant employer" meant a constitutional corporation. In the case of a Territory law, it meant any employer. Although the provision was repealed on 27 March 2006, it could have affected persons before its repeal, and its validity was challenged. It is necessary now to refer to certain Schedules. That which was the subject of most argument is Sched 1, headed "Registration and Accountability of Organisations". Much of the substantive content of this Schedule was in the previous Act, but under the previous Act the constitutional basis for the regulation of organisations of employers and employees was s 51(xxxv)3. The basis has now changed, even though the scheme of regulation remains, in large part, substantially the same. Schedule 1 provides for the registration and regulation of organisations of employees and employers. It is unnecessary for present purposes to go into the detail of the regulation. The provisions relating to registration are central to the scheme. The associations which may apply for registration under the new Act are those which are "federally registrable". An association of employers is federally registrable either if it is a constitutional corporation or if the majority of its members are "federal system employers". Federal system employers include constitutional corporations, employers in relation to "public sector employment", employers in Victoria, or employers in relation to an enterprise that operates principally from or within a Territory, or is engaged principally in interstate trade or commerce. Federally registrable employee associations are those which are constitutional corporations or which have as a majority of their members "federal system employees". Federal system employees are persons employed by constitutional corporations, or employed in public sector employment, or employed in Victoria, or in certain kinds of enterprise including those which operate principally from or within a Territory or are engaged principally in interstate trade and commerce. Federally include constitutional corporations and associations the majority of whose members are federal system registrable enterprise associations Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309. Crennan employees. An association may apply to the AIRC for registration. If the application is successful, the association becomes an "organisation", which is deemed to be a body corporate. Item 4 of Sched 4 to the Amending Act was included among the transitional provisions, and dealt with the operation of pre-reform awards. Schedule 6 to the new Act provides transitional arrangements for certain employers and employees bound by federal awards. It is based upon the power given by s 51(xxxv). It provides in effect that employers who do not fall within s 6(1), and their employees, will continue to be bound by a federal award which applied to them before the reform commencement for a transitional period of up to five years, as a transitional award. During that period the AIRC can vary transitional awards but is prohibited from making new awards. There are limits on the content of transitional awards. Schedule 8 preserves for a time the terms and conditions of employment of those employees within the meaning of s 5(1) who, but for the commencement of the reforms, would have been bound by, or whose employment would have been subject to, a State employment agreement, a State award or a State or Territory industrial law. Its object also is to encourage the making of workplace agreements under the new Act during that time. It creates a new federal instrument called a "notional agreement preserving State awards" containing the terms of the original State award or State or Territory industrial law. The pay rates, casual loading provisions, classification and coverage provisions in pre-reform wage instruments are converted to a preserved APCS pursuant to Div 2 of Pt 7. The notional agreement ceases to operate three years from the date of the reform commencement, or otherwise ceases to operate in relation to an employee if a workplace agreement comes into operation in relation to the employee, or if the employee becomes bound by an award. A term of a notional agreement that deals with a matter for which provision is made by the Pay and Conditions Standard is not enforceable. State employment agreements are converted into Preserved State agreements taken to have come into operation on the reform commencement. The new Act provides that industrial action must not be taken until after the date on which the agreement would have expired, or the end of three years, whichever is the sooner. The Pay and Conditions Standard does not apply to those covered by a Preserved State agreement. State industrial authorities are prohibited from exercising any function in respect of the converted instruments. Crennan There are general, and specific, regulation-making powers, the terms of which will be mentioned when considering challenges to those powers and to regulations. The State of Victoria joined in most of the challenges made by the other States. In one important respect, however, the application of the new Act to Victoria is different, and is covered by Pt 21. Reference has already been made to the Referral Act, and the exceptions to which it was subject. Part 21 establishes a regime particular to Victoria. In its amended statement of claim, and its written submissions in chief, Victoria challenged s 898 of the new Act, which is in Div 13 of Pt 21, and deals with the exclusion of Victorian laws, on the ground that it purported to express an intention to exclude Victorian laws on matters which were excluded from the referral of powers under the Referral Act, and also on the ground that it purported to exclude Victorian laws which pertain The Commonwealth, in its written submissions, advanced certain arguments relating to the construction of the Acts and stated certain intentions as to the making of regulations. In its written submissions in reply, Victoria stated that, in the light of those "submissions and concessions", Victoria did not persist with its challenge to s 898. the essential functions of government. The principal issue: Constitution, s 51(xx) the Explanatory Memorandum circulated when the Workplace Relations Amendment (Work Choices) Bill 2005 was introduced, the first of the major changes to be implemented by the Bill was said to be to "simplify the complexity inherent in the existence of six workplace relation jurisdictions in Australia by creating a national workplace relations system based on the corporations power that will apply to a majority of Australia's employers and employees". The Explanatory Memorandum, citing a report of the Australian Bureau of Statistics4, said that "[u]se of the corporations power, together with other heads of power such as the Territories power and powers referred by Victoria, to expand the federal system would mean that up to 85 per cent of Australian employees would be covered by the federal system". Large and medium sized businesses in Australia are almost invariably incorporated. The figure of 85 per cent was accompanied by an assertion that 49 per cent of small businesses employing staff are currently incorporated. 4 Australian Bureau of Statistics, Employee Earnings and Hours, May 2004 (Cat No 6306.0). Crennan In its submissions, the Commonwealth was concerned to make the point that reliance on the corporations power to support legislation relating to industrial relations matters and terms and conditions of employment in 2005 was not novel. At least since 1993, the Parliament has included provisions enacted in reliance on s 51(xx) in its industrial relations legislation. In Victoria v The Commonwealth (Industrial Relations Act Case)5, Victoria, Western Australia and South Australia challenged a substantial number of the provisions of the previous Act, but they conceded that s 51(xx) empowered the Parliament to make laws governing the industrial rights and obligations of constitutional corporations. They conceded that s 51(xx) supported Div 4 of Pt VIB of the previous Act. Part VIB was substantially similar to Pt 8 of the new Act, which is now said to be invalid. New South Wales, which intervened in the case, adopted the submissions of the Commonwealth. These concessions do not preclude the States from advancing the arguments made in the present case, but they draw attention to the fact that reliance on the corporations power to sustain parts of the new Act is not unprecedented. It is the extent of the reliance that is new, but if the argument for the States in this case is correct, then it applied also to that earlier legislation. In the Industrial Relations Act Case, Brennan CJ, Toohey, Gaudron, McHugh and "It is not in issue that the Parliament may validly legislate as to the industrial rights and obligations of persons employed by constitutional corporations as defined in s 4(1) of the Act. Clearly, the constitutional powers which authorise laws in that regard also authorise laws defining those rights and obligations by reference to a specified happening or event. And they authorise laws specifying that they are exclusive of other rights and liabilities, whether that specification is express or implied." (footnotes omitted) Electrolux Home Products Pty Ltd v Australian Workers' Union7 concerned Pt VIB of the previous Act and, in particular, Divs 2 and 8 of that Part. The relevant provisions concerned "certified agreements" made between employers who were constitutional corporations and unions or made directly between such employers and their employees. The constitutional underpinning (1996) 187 CLR 416. (1996) 187 CLR 416 at 540. (2004) 221 CLR 309. Crennan of the legislation was noted, but not questioned8. McHugh J said9 that "[t]he corporations power provides a broader basis upon which s 170LI may operate". The validity of Pt VIB of the previous Act was upheld in 2001, by the Full Court of the Federal Court, in Quickenden v O'Connor10. In 1909, in Huddart, Parker & Co Pty Ltd v Moorehead11, this Court dealt with a challenge to the validity of certain provisions of the Australian Industries Preservation Act 1906 (Cth), which prohibited corporations of the kind referred to in s 51(xx) from engaging in certain forms of anti-competitive behaviour. In substance the power which the Parliament then exercised, or purported to exercise, was no different from the power that sustains much of the Trade Practices Act 1974 (Cth). The Court was divided in opinion. The majority, strongly influenced by the now discredited doctrine of reserved State powers, held that s 51(xx) was to be read down because of the provisions of s 51(i), which empowers the Parliament to make laws with respect to trade and commerce with other countries, and among the States. The impugned legislation covered anti-competitive activity (by constitutional corporations) in intra-State trade. Plainly, it was a law with respect to trade and commerce, but not only with respect to trade and commerce of the kind described in s 51(i). The question was whether it also was a law with respect to corporations of the kind described in s 51(xx). Griffith CJ, who was in the majority, said12: "It is common ground that [the relevant sections of the Australian Industries Preservation Act], as framed, extend to matters relating to domestic trade within a State, and the question is whether the power to make laws with respect to 'foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth' extends to the governance and control of such corporations when lawfully engaged in domestic trade within the State. If it does, no limit can be assigned to the exercise of the power. The Commonwealth Parliament can make any laws (2004) 221 CLR 309 at 344 [75] per McHugh J, 361 [133] per Gummow, Hayne and Heydon JJ, 387 [216] per Kirby J. (2004) 221 CLR 309 at 344 [75]. 10 (2001) 109 FCR 243. 11 (1909) 8 CLR 330. 12 (1909) 8 CLR 330 at 348. Crennan it thinks fit with regard to the operation of the corporation, for example, may prescribe what officers and servants it shall employ, what shall be the hours and conditions of labour, what remuneration shall be paid to them, and may thus, in the case of such corporations, exercise complete control of the domestic trade carried on by them." By "domestic trade", Griffith CJ meant "domestic trade within the State", that is, trade other than trade of the kind referred to in s 51(i). He treated, as part of such trade, contracts made between constitutional corporations and their employees. He read down s 51(xx) by reference to the limitations inherent in s 51(i). The foundation of the reasoning of the majority in Huddart Parker was undermined by Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers' Case")13 in 1920, but the decision was not formally overruled until 1971, when Strickland v Rocla Concrete Pipes Ltd ("the Concrete Pipes Case")14 held that Huddart Parker was wrongly decided. Since then, the corporations power has provided the constitutional basis for legislation prohibiting anti-competitive conduct by constitutional corporations, including conduct in what Griffith CJ called "domestic trade", notwithstanding the limitations upon the power of the Parliament to pass laws with respect to such trade contained within s 51(i). No party to these proceedings questioned the authority of the Engineers' Case, or the Concrete Pipes Case, or the validity of the Trade Practices Act in its application to the domestic (intra-State) trade of constitutional corporations. Necessarily, however, the plaintiffs experienced difficulty in accommodating their submissions to those developments. If s 51(xx) is not affected by the limitations inherent in s 51(i), why is it affected by the limitations inherent in s 51(xxxv)? If, in the exercise of its powers under s 51(xx), the Commonwealth Parliament can regulate the terms and conditions on which constitutional corporations may deal with their customers, or their suppliers of goods or services, why can it not, in the exercise of the same powers, regulate the terms and conditions on which constitutional corporations may deal with employees, or with prospective employees? If, as Griffith CJ recognised, a corporation's dealings with its employees are part of its trading activities, how can it be that the Parliament has power to prohibit constitutional corporations from engaging in some forms of business activities (such as anti-competitive behaviour) but not 13 (1920) 28 CLR 129. 14 (1971) 124 CLR 468. Crennan others (such as engaging in certain industrial practices)? Why is not use of the corporations power to regulate aspects of intra-State trade just as much an incursion into State legislative power as use of the corporations power to regulate aspects of industrial relations? The answers to these questions must be found in the accepted principles of constitutional interpretation established in the previous decisions of this Court. Close and detailed attention must be given to the previous decisions of the Court in which s 51(xx) has been considered. Moreover, effect must be given to some basic principles of constitutional interpretation that were not challenged in this litigation. In particular, it is necessary to give effect to the well-established proposition that a law may be characterised as a law with respect to more than one of the subject-matters set out in s 51. To describe a law as "really", "truly" or "properly" characterised as a law with respect to one subject-matter, rather than another, bespeaks fundamental constitutional error. That error is compounded if the conclusion which is reached about the one "real" or "true" or "proper" character of a law proceeds from a premise which assumes, rather than demonstrates, a particular division of governmental or legislative power, or if it proceeds from the mischaracterisation of the subject-matter of s 51(xxxv) as "industrial relations". Resort to undefined concepts of "industrial affairs", "industrial relations", and "industrial matters" (all of which have somewhat different meanings) should not be permitted to obscure the fact that s 51(xxxv) uses none of those expressions; it speaks of "industrial disputes". To say, as appears accepted on all hands in this litigation, that the Constitution is to be read as a whole and as the one coherent document does not necessarily advance the argument on either side of the record. It merely occasions further inquiry with respect to the particular issue to be determined. Early in the history of the Court, Griffith CJ stressed that the foundation of the Commonwealth of Australia involved much more than "the establishment of a sort of municipal union" resembling "the union of parishes for the administration of the Poor Laws, say in the Isle of Wight"; it involved a federation of national character exercising the most ample power15. 15 Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR (Pt 2) 1087 at 1108. Crennan The arguments of the plaintiffs16 included a submission that the power conferred by s 51(xx) was restricted to a power to regulate the dealings of constitutional corporations with persons external to the corporation, but not with employees (or, apparently, prospective employees). It was also submitted that s 51(xx) should be read down, or restricted in its operation, by reference to the presence in s 51 of par (xxxv). That paragraph confers on the Parliament the power to make laws with respect to "conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State". Just as Griffith CJ in Huddart Parker read down s 51(xx) by reference to the terms of s 51(i), so the plaintiffs invited the Court to read down the general scope of s 51(xx) by reference to the terms of s 51(xxxv). Alternatively, it was argued that, even if the presence of s 51(xxxv) did not affect the general ambit of s 51(xx), at least it operated to restrict the capacity of the Parliament to enact a law that can be characterised as a law with respect to the prevention and settlement of industrial disputes. It will be necessary to amplify these and other challenges to the Commonwealth's reliance on the corporations power in due course. Underlying all these arguments there was a theme, much discussed in the authorities on the corporations power, that there is a need to confine its operation because of its potential effect upon the (concurrent) legislative authority of the States. The Constitution distinguishes in s 107 and s 109 between legislative powers exclusively vested in the Parliament of the Commonwealth and inconsistency between federal and State laws made in exercise of concurrent powers. Section 107 does not vest exclusive powers in the State legislatures. It will be necessary also to return to that topic17. It is immediately useful to bear in mind what Windeyer J said in Victoria v The Commonwealth ("the Payroll Tax Case")18: "The Colonies which in 1901 became States in the new Commonwealth were not before then sovereign bodies in any strict legal sense; and They were certainly the Constitution did not make them so. 16 For some purposes it is not necessary to distinguish between the plaintiffs or to deal separately with the interveners' submissions; it suffices to speak generally of "the plaintiffs". 17 Particularly at [192]. 18 (1971) 122 CLR 353 at 395-396. Crennan self-governing colonies which, when the Commonwealth came into existence as a new Dominion of the Crown, lost some of their former powers and gained no new powers. They became components of a federation, the Commonwealth of Australia. It became a nation. Its nationhood was in the course of time to be consolidated in war, by economic and commercial integration, by the unifying influence of federal law, by the decline of dependence upon British naval and military power and by a recognition and acceptance of external interests and obligations. With these developments the position of the Commonwealth, the federal government, has waxed; and that of the States has waned. In law that is a result of the paramount position of the Commonwealth Parliament in matters of concurrent power. And this legal supremacy has been reinforced in fact by financial dominance. That the Commonwealth would, as time went on, enter progressively, directly or indirectly, into fields that had formerly been occupied by the States, was from an early date seen as likely to occur. This was greatly aided after the decision in the Engineers' Case, which diverted the flow of constitutional law into new channels." (footnote omitted) These were the observations of a distinguished legal historian. References to the "federal balance" carry a misleading implication of static equilibrium, an equilibrium that is disturbed by changes in constitutional doctrine such as occurred in the Engineers' Case, and changes in circumstances as a result of the First World War. The error in implications of that kind has long been recognised. So much is evident from Alfred Deakin's Second Reading Speech on the Judiciary Bill in 190219 and his comparison between the difficulty of amending the Constitution by referendum, and this Court's differing but continuing role in determining the meaning and operation of the Constitution. The challenge to the validity of the legislation enacted in reliance on the corporations power does not put in issue directly the characteristics of corporations covered by s 51(xx). It does not call directly for an examination of what is a trading or financial corporation formed within the limits of the Commonwealth20. (Plainly, a foreign corporation is a corporation formed outside the limits of the Commonwealth.) No party or intervener called in question what 19 Australia, House of Representatives, Parliamentary Debates (Hansard), 18 March 20 See [58] and [185]. Crennan was said about trading and financial corporations in R v Federal Court of Australia; Ex parte WA National Football League21, Actors and Announcers Equity Association v Fontana Films Pty Ltd22, State Superannuation Board v Trade Practices Commission23 or Fencott v Muller24. Other issues The other principal issues between the parties may be identified as follows. Section 6(1) of the new Act, in pars (e) and (f), invokes the power conferred by s 122 of the Constitution (the territories power). There is a question whether the territories power supports the operation given to the new Act in connection with Territories by the definitions of employee and employer. As has been noted above, Sched 6 of the new Act continues reliance on the conciliation and arbitration power. There is a question whether that power enables the Commonwealth to maintain in force a limited conciliation and arbitration system, or to legislate with respect to the dismantling of the previous industrial relations system. There is a question whether s 16(1) and s 16(4) of the new Act validly exclude State and Territory laws in so far as they apply to employees and employers as defined in ss 5 and 6. There is a question whether s 117 of the new Act validly empowers the AIRC to make orders which restrict the actions of State industrial authorities. As was noted above, there are questions as to the validity of various provisions empowering the making of regulations. PART II – SECTION 51(xx) The plaintiffs' principal arguments The plaintiffs' submissions about s 51(xx) were directed principally to identifying what were said to be relevant limits to the power. There were three principal strands to the submissions. First, it was submitted that s 51(xx) permits the making of a law with respect to only the external relationships of constitutional corporations, not their internal relationships, and that the relationship between a constitutional corporation and its employees should be classified as "internal". Secondly, both in amplification of and as an alternative 21 (1979) 143 CLR 190. 22 (1982) 150 CLR 169. 23 (1982) 150 CLR 282. 24 (1983) 152 CLR 570. Crennan to the first submission, it was submitted that it is insufficient for a law to be characterised as a law with respect to constitutional corporations that the law confers rights or imposes obligations upon them. If a positive test is to be adopted, the preferred test was said to be a distinctive character test – that the nature of the corporation is significant as an element in the nature or character of the laws. Thirdly, as indicated earlier, it was submitted that s 51(xx) is to be read down, or confined in its operation, by reference to s 51(xxxv), with the consequence that the Parliament has no power to legislate with respect to the relationship between a constitutional corporation and its employees except pursuant to s 51(xxxv). All of the plaintiffs' submissions about the validity of the Amending Act took as their premise that there are constitutional corporations (whether foreign corporations, or trading or financial corporations formed within the limits of the Commonwealth) which would be the subject of, or affected by, the various norms of behaviour for which the Amending Act provides. There was, therefore, no occasion to debate in argument, and there is no occasion now to consider, what kinds of corporation fall within the constitutional expression "trading or financial corporations formed within the limits of the Commonwealth". Any debate about those questions must await a case in which they properly arise. Constitutional corporations are juristic persons recognised by the law as separate from their corporators. Such juristic persons are able to act only through human actors. The Amending Act deals with the relationship between those juristic persons which are constitutional corporations and one particular class of actors through whom those corporations may act – the corporation's employees. The Amending Act also deals with the relationship between certain other kinds of employer (including the Commonwealth, certain Territory employers, and certain persons engaged in interstate or international trade or commerce) and their employees. But it is the provisions which regulate the relationships between constitutional corporations and their employees to which attention must be given in considering the plaintiffs' challenges to the sufficiency of s 51(xx) as support for the Amending Act. Once it is recognised that the Amending Act prescribes norms which regulate or affect the relationship between constitutional corporations and a class of those through whom those corporations may act, it may be seen that the plaintiffs' submissions require consideration of what is meant by a law "with respect to" the subject-matter of constitutional corporations, rather than identification of the metes and bounds of the subject-matter of the relevant head of power. That is, when it is said by the plaintiffs that s 51(xx) permits the making of a law with respect to only the external relationships of constitutional Crennan corporations, the contention is one that seeks to identify what is meant by a law "with respect to" the specified kinds of corporation, and seeks to limit such laws to laws with respect to external relationships. And the alternative submissions about what is not, and what is, sufficient to characterise a law as a law with respect to constitutional corporations have the same focus. The Commonwealth's principal arguments The Commonwealth submitted that a law "directed specifically to constitutional corporations", in the sense that the law creates, alters or impairs the rights, powers, liabilities, duties or privileges of such a corporation, is supported by s 51(xx). This the Commonwealth described as "a 'direct' connection". The Commonwealth further submitted that previous decisions of this Court showed that other, less direct, forms of connection between a law and constitutional corporations are not so "insubstantial, tenuous or distant"25 as to deny its characterisation as a law with respect to that subject-matter. Four forms of connection were said to be supported by authority: a law relating to the conduct (in the relevant capacity) of those who control, work for, or hold shares or office in constitutional corporations26; a law relating to the business functions, activities or relationships of constitutional corporations27; a law protecting a constitutional corporation from conduct that is carried out with intent to, and the likely effect of which would be to, cause loss or 25 Melbourne Corporation (1947) 74 CLR 31 at 79; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 369 per McHugh J; Leask v The Commonwealth (1996) 187 CLR 579 at 601-602 per Dawson J, 621 per Gummow J. 26 Re Dingjan (1995) 183 CLR 323 at 369 per McHugh J. 27 Re Dingjan (1995) 183 CLR 323 at 364 per Gaudron J (with whose reasons Mason CJ and Deane J agreed), 369-370 per McHugh J. See also Quickenden v O'Connor (2001) 109 FCR 243 at 257-258 [38]-[40] per Black CJ and French J, 274-275 [115] per Carr J. Crennan damage to the business of28, or interfere with the trading activities of29, a constitutional corporation; and a law which otherwise, in its practical operation, "materially affect[s]" or has "some beneficial or detrimental effect on" a constitutional corporation30. In addition to these connections, said to be taken from the decided cases and said not to set the boundaries to what would be a sufficient connection, the Commonwealth submitted that there was a sufficient connection between certain provisions of the Amending Act and s 51(xx) on any of three further bases. First, provisions relating to conduct carried out or proposed to be carried out with intent to cause loss or damage to a constitutional corporation; secondly, provisions relating to conduct where there is a real, not merely remote, prospect that the conduct will have a material effect on a constitutional corporation; and, thirdly, provisions relating to conduct that is carried out or proposed to be carried out with intent to benefit a constitutional corporation, were all said to be within power. In its submissions, the Commonwealth used shorthand descriptions (such as "the 'intention to damage' connection") for each of the forms of connection it identified. The adoption of such descriptions was a convenient means of presenting both written and oral argument. It is not proposed, however, to use them in these reasons, lest their use distract attention in this case, or subsequently, from the questions that must be decided by inviting consideration of the adequacy or applicability of the shorthand. The Commonwealth submitted that many of the impugned provisions of the Amending Act were directed specifically to constitutional corporations (in the sense identified in the Commonwealth's submissions) and for that reason 28 Actors and Announcers Equity Association v Fontana Films Pty Ltd (1982) 150 CLR 169 at 183 per Gibbs CJ, 195 per Stephen J, 208 per Mason J, 212 per Murphy J, 219 per Brennan J. 29 Victoria v The Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416 at 557 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ. 30 Re Dingjan (1995) 183 CLR 323 at 340 per Brennan J, 365 per Gaudron J, 370 per Crennan were laws with respect to that subject-matter. The Commonwealth further submitted that other impugned provisions were to be supported in one or more of the ways identified as providing a sufficient connection between a law and s 51(xx). A distinction between "external" and "internal" relationships the difficulties and dangers The first of the three principal submissions made by the plaintiffs about s 51(xx) (seeking to distinguish between "external" relationships and "other" or "internal" relationships) was put in a number of different ways. The plaintiffs, rightly, recognised to state comprehensively the scope of the power. Nonetheless, they submitted that the "essential scope and focus of the corporations power" could be gathered from the Convention Debates, the early text writers, what has been said in the cases, including, in particular, New South Wales v The Commonwealth (The Incorporation Case)31, and general principles of constitutional construction. It was said that the mischief to which the power was addressed was: in attempting "a concern about enabling proper regulation of artificial corporate entities of particular types, especially insofar as they operated in jurisdictions other than the ones in which they have been created, along with a concern about the need to regulate their interaction with the public in the conduct of their business activities, particularly in light of the economic strength and usual limited liability characteristic of such bodies corporate." (emphasis added) These relevant ideas, it was said, could be encapsulated in different ways, but to much the same effect, and the plaintiffs pointed to a number of statements made in the cases which it was said did that. They submitted: "Following Isaacs J it can be said that the power is directed to regulating 'the conduct of the corporations in their transactions with or as affecting the public', that is, 'the conduct of the corporations in relation to outside persons'.32 Alternatively, it may be said that the power is directed to authorise the regulation of matters peculiar to constitutional corporations, 31 (1990) 169 CLR 482. 32 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 395, 396 (original emphasis). Crennan namely matters going to peculiarly corporate characteristics along with the engagement of foreign, trading and financial corporations in trading or financial (broadly business) activities. That is essentially a way of saying that 'the nature of the corporation to which the laws relate must be significant as an element in the nature or character of the laws',33 or 'the fact that a law binds constitutional corporations does not make it law upon the subject of constitutional corporations unless the personality of the persons bound is a significant element of the law itself',34 or that the law must discriminate by reference the corporations in question.35" the relevant character of In dealing with these submissions it will be convenient first to say something more about this Court's decision in Huddart Parker, next to look at some matters of nineteenth century history, including the Convention Debates and some aspects of the drafting history of s 51(xx), then to deal with an argument based on some failed referendum proposals, and finally to consider the course of this Court's decisions, about s 51(xx), after Huddart Parker. The examination of those matters will reveal that a distinction of the kind relied on by the plaintiffs, between the external relationships of a constitutional corporation and its internal relationships, does not assist the resolution of the issues presented in these matters. It is a distinction rooted in choice of law rules which cannot, and should not, be transposed into the radically different area of determining the ambit of a constitutional head of legislative power. It is a distinction which finds no support in the Convention Debates or drafting history of s 51(xx). It is a distinction of doubtful stability but, if it were to be adopted, there seems every reason to treat relationships with employees as a matter external to the corporation. In so far as the distinction between external and internal relationships is proffered as a means of limiting what the plaintiffs assert would otherwise be too broad a reach for s 51(xx), it is necessary to consider whether the assertion assumes the answer to the question presented. And in any event it is necessary to examine carefully the context in which such assertions have been made. In that regard, it is essential to recognise the fundamental and far-reaching legal, social, 33 Fontana Films (1982) 150 CLR 169 at 182 per Gibbs CJ. 34 Re Dingjan (1995) 183 CLR 323 at 349 per Dawson J. 35 Re Dingjan (1995) 183 CLR 323 at 337 per Brennan J. Crennan and economic changes in the place now occupied by the corporation, compared with the place it occupied when the Constitution was drafted and adopted, and when s 51(xx) was first considered in Huddart Parker. Huddart Parker There are at least two reasons why it is important to examine what was said about s 51(xx) in Huddart Parker. First, the decision is important for what it reveals concerning assertions made about what the framers of the Constitution intended. Secondly, as noted earlier, the dissenting reasons of Isaacs J were the acknowledged source of one of the principal strands of the plaintiffs' arguments about the construction and effect of s 51(xx). Huddart Parker was argued in October 1908 and March 1909, little more than five years after the Court first sat in October 1903. The membership of the Court had been increased in 1906, with the appointments of Isaacs and Higgins JJ, but all five members of the Court had been leading participants in the Constitutional Conventions. All are properly seen as among the framers of the Constitution although, of course, each played a different part in that work. Huddart Parker concerned the validity of three provisions of the Australian Industries Preservation Act 1906 (Cth) – ss 5, 8 and 15B. Sections 5 and 8 were held to be invalid; s 15B was held to be valid. Sections 5 and 8 created offences. Section 5 prohibited "[a]ny foreign corporation, or trading or financial corporation formed within the Commonwealth" from making any contract or engaging in any combination: "(a) with intent restrain Commonwealth to the detriment of the public, or trade or commerce within the (b) with intent to destroy or injure by means of unfair competition any Australian industry the preservation of which is advantageous to the Commonwealth". Section 8 was directed to the same persons, and prohibited such corporations monopolizing, or attempting to monopolize, or combining or conspiring to monopolize, any part of the trade or commerce within the Commonwealth, with intent to control the supply or price of any goods or services. Section 15B36 gave 36 Introduced into the principal Act by the Australian Industries Preservation Act 1907 (Cth), s 4. Crennan power to the Comptroller-General of Customs to require persons believed to be capable of giving information in relation to an alleged offence against Pt II of the Australian Industries Preservation Act to answer questions and produce documents in relation to the alleged offence. All members of the Court agreed that s 15B was valid. Four Justices (Griffith CJ, Barton, O'Connor and Higgins JJ) held ss 5 and 8 to be invalid; Isaacs J disagreed. The five members of the Court gave separate reasons for judgment. The headnote writer for the Commonwealth Law Reports rightly records37 that four separate views of s 51(xx) are to be identified in the reasons. All members of the Court concluded that s 51(xx) does not give power to the Parliament to make a law providing for the creation of trading or financial corporations38. This was an important first step in the reasons of all members of the Court and its taking was prompted by the way in which argument had been presented. As O'Connor J noted39, counsel for the respondent, supporting the validity of the impugned provisions, had initially submitted40 that s 51(xx) gave the Parliament "authority to create corporations and to make laws with respect to everything which has relation to the powers and scope of corporations". The real question, so the argument proceeded41, was whether the impugned provisions "are in fact legislation dealing with corporations or legislation dealing with some other subject and applying it to corporations". Section 51(xx) was said to extend "to regulating the internal management and restraining the external affairs of corporations [and] to enabling Parliament to forbid corporations doing certain things"42. The respondent in Huddart Parker also advanced an alternative, less expansive, contention, that assumed that the power of creating all of the kinds of 37 (1909) 8 CLR 330 at 331-332. 38 (1909) 8 CLR 330 at 348-349 per Griffith CJ, 362 per Barton J, 369 per O'Connor J, 394 per Isaacs J, 412 per Higgins J. 39 (1909) 8 CLR 330 at 368-369. 40 (1909) 8 CLR 330 at 339. 41 (1909) 8 CLR 330 at 339. 42 (1909) 8 CLR 330 at 339. Crennan corporation with which s 51(xx) deals rested either in the States (in the case of trading or financial corporations formed within the limits of the Commonwealth) or in a foreign jurisdiction (in the case of foreign corporations). But the respondent's broader contention, that the Parliament has power to regulate what constitutional corporations can or cannot do within the Commonwealth, because it has power to create trading or financial corporations, informed much of what was said by the Justices in their reasons in Huddart Parker. In particular, it seems plain that it was this argument that prompted consideration, by some members of the Court43, of what Westlake had written in 190544, on the subjects of the law which regulated an artificial person, like a corporation, in matters "concerning only itself or the relations of its members, if any, to it and to one another" as distinct from the law which governed its entry into relations, in another country, with "outside parties". Significance was attached by Griffith CJ45, by O'Connor J46 and by Isaacs J47, to a distinction of the kind drawn by Westlake, as assisting the task of characterising the laws in question in Huddart Parker. Of course it is important to recognise that the opinions of Griffith CJ and Barton and O'Connor JJ, three of the four Justices who held ss 5 and 8 of the Australian Industries Preservation Act invalid, were much influenced by the then accepted doctrine of the Court that legislative powers not given to the Parliament were reserved to the States. In particular, as O'Connor J said48, the construction of s 51(xx) was approached on the basis that the grant of power to the Parliament must be "so construed as to be consistent as far as possible with the exclusive control over its internal trade and commerce vested in the State". Nonetheless, observing the importance of the reserved powers doctrine to the reasoning of these members of the majority in Huddart Parker does not explain all aspects of the differences in opinion 43 (1909) 8 CLR 330 at 353 per Griffith CJ, 370-371 per O'Connor J, 395 per Isaacs J. 44 A Treatise on Private International Law, 4th ed (1905) at 358-359. See also Dicey, A Digest of the Law of England with reference to The Conflict of Laws, (1896) at 45 (1909) 8 CLR 330 at 353. 46 (1909) 8 CLR 330 at 370-371. 47 (1909) 8 CLR 330 at 394-395. 48 (1909) 8 CLR 330 at 370. Crennan expressed in that case about the ambit of s 51(xx). In particular, it does not explain the place taken by the distinction drawn by Westlake between the law regulating a corporation or the relations of its members to it and to one another, and the law governing the corporation's entry into relations with outside parties. Griffith CJ pointed out49 that there is a distinction between "acts which are ultra vires of a corporation and acts which, though otherwise within the powers of a corporation, are prohibited by positive law". Griffith CJ accepted that a law denying capacity to a corporation to enter into certain kinds of contract may fall within Commonwealth legislative power. "But the conditions governing the validity of a contract relating to any subject matter rests with the legislature having control of that subject matter, which, in the case of domestic trade, is the State legislature."50 It was on this basis that Griffith CJ concluded51 that: "I think that they [the words of s 51(xx)] ought not to be construed as authorizing the Commonwealth to invade the field of State law as to domestic trade, the carrying on of which is within the capacity of trading and financial corporations formed under the laws of the State. In other words, I think that pl. xx. empowers the Commonwealth to prohibit a trading or financial corporation formed within the Commonwealth from entering into any field of operation, but does not empower the Commonwealth to control the operations of a corporation which lawfully enters upon a field of operation, the control of which is exclusively reserved to the States." That analysis may be compared with that undertaken by O'Connor J. In the course of argument he had said52 that "[t]he idea of sec. 51 (xx.) ... is that what is generally known as the law as to companies should be put on a general footing all over Australia". But in his reasons O'Connor J expressed a narrower view. 49 (1909) 8 CLR 330 at 353. 50 (1909) 8 CLR 330 at 353. 51 (1909) 8 CLR 330 at 354. 52 (1909) 8 CLR 330 at 334. Crennan Like the other members of the Court, O'Connor J took53 as a premise the proposition that s 51(xx) was restricted to making laws with respect to corporations actually in being. From this it followed54, in the view of O'Connor J, that the field of legislative power marked out for the Parliament extended "no further than the regulation of the conditions on which corporations of the class described shall be recognized, and permitted to carry on business throughout the Commonwealth". That power was not to be seen as unlimited lest it "encroach on the power of the State over its own internal trade"55. The limitation on the power was seen56, by O'Connor J, as identifiable from the necessity, in the interests of Australian trade and commerce, for there to be federal power to grant the right to a foreign corporation, or a corporation which owed its existence to the laws of any Australian State, to carry on business in every part of Australia. Thus, it followed, in the opinion of O'Connor J57, that: "In the light of the circumstances it may fairly be taken that the framers of the Constitution intended by the sub-section under consideration to confer on the Parliament of the Commonwealth just that power which was wanting in the legislative bodies then existing in Australia – the power of making a uniform law for regulating the conditions under which foreign corporations, and trading or financial corporations created under the laws of any State, would be recognized as legal entities throughout Australia. As part of that power there would be necessarily implied the authority to impose on those corporations all such conditions on admission to recognition as would be appropriate or plainly adapted to the object of the sub-section and not forbidden by the Constitution." The general nature of the power to make laws imposing conditions upon recognition of those corporations was described58 by O'Connor J as being "those laws and the conditions embodied in them [that] have relation only to the 53 (1909) 8 CLR 330 at 371. 54 (1909) 8 CLR 330 at 371. 55 (1909) 8 CLR 330 at 372. 56 (1909) 8 CLR 330 at 372. 57 (1909) 8 CLR 330 at 373. 58 (1909) 8 CLR 330 at 373. Crennan circumstances under which the corporation will be granted recognition as a legal entity in Australia". The central focus of the power was seen by O'Connor J as falling upon the status of the corporation. This distinction between matters of status or internal regulation on the one hand, and relations with outsiders on the other, underpinned much of the dissenting opinion of Isaacs J. But whereas Griffith CJ and O'Connor J had identified s 51(xx) as confined (in the case of Griffith CJ) to controlling the capacity of a corporation to enter a field of operations, as distinct from controlling the corporation's operations in that field, or (in the case of O'Connor J) the recognition of constitutional corporations throughout Australia, Isaacs J saw the distinction as requiring the opposite allocation of powers between federal and State legislatures. Isaacs J concluded59 that questions of status and corporate powers were beyond federal legislative power and "left to the States". Rather60: to regulating "The power [given by s 51(xx)] does not look behind the charter, or concern itself with purely internal management, or mere personal preparation to act; it views the beings upon which it is to operate in their relations to outsiders, or, in other words, in the actual exercise of their corporate powers, and entrusts to the Commonwealth Parliament the regulation of the conduct of the corporations in their transactions with or as affecting the public." (emphasis in original) These views of Isaacs J, upon which the plaintiffs in the present matters placed such store, and to which it will be necessary to return in some detail, may be contrasted with those of Barton J and of Higgins J. Barton J said61 that he did not dissent from the reasons of Griffith CJ, but Barton J rested his opinion upon the doctrine of reserved powers. He said62 that the relevant question was: 59 (1909) 8 CLR 330 at 395. 60 (1909) 8 CLR 330 at 395. 61 (1909) 8 CLR 330 at 366. 62 (1909) 8 CLR 330 at 363. Crennan "Taking then sub-sec. (xx.) to authorize the dealing with both classes of corporations on the same footing – that is, the footing that neither class is a creature of federal legislation – does the sub-section, so read, constitute an exception to the otherwise exclusive reservation to the States of the power to deal by legislation with matters within the field of their internal or domestic trade?" Barton J concluded63 that there being no express exception to be found in s 51(xx), from the reservation to the States of power over internal trade and commerce, ss 5 and 8, in so far as they dealt with the domestic trade of the States, were64 "in no wise incidental or ancillary to the execution of sec. 51 (xx.) of the Constitution, and that the invasion of that sphere is prohibited by the Constitution". Higgins J held65 that the federal Parliament "can regulate corporations as to status, capacity, and the conditions on which business is permitted. But it is for the State Parliament to regulate what contracts or combinations a corporation may make in the course of the permitted business." Thus, just as a distinction was to be drawn between legislation determining the status of a person (for example, as alien or subject) and legislation determining the rights and liabilities attached to the status thus ascertained66, the power in s 51(xx) was understood by Higgins J67 "as a power to legislate with respect to corporations as corporations". But this understanding of s 51(xx) did not confine that power to legislating with respect to matters of status or questions of corporate powers. Higgins J considered68 that it extended to "the conditions under which they [constitutional corporations] shall be permitted to carry on business" including, for example69, matters of capital requirements, filing of returns, auditing, and deposit of 63 (1909) 8 CLR 330 at 363-364. 64 (1909) 8 CLR 330 at 366. 65 (1909) 8 CLR 330 at 414 (emphasis added). 66 (1909) 8 CLR 330 at 414. 67 (1909) 8 CLR 330 at 416. 68 (1909) 8 CLR 330 at 412. 69 (1909) 8 CLR 330 at 412-413. Crennan securities. But while Higgins J concluded70 that the federal Parliament could "regulate the terms of admission into a field and of remaining therein, ... it cannot make a law imposing a penalty for picking a turnip" in the field. This, as Higgins J acknowledged71, was a fine distinction. It was to be given effect by seeking out "the true nature and character of the legislation in the particular instance under discussion ... in order to ascertain the class of subject to which it really belongs"72. But the search was for a singular "nature and character"; it was assumed that a law can have no more than one character. (That a law can be one with respect to more than one head of power is now well established73.) This examination of Huddart Parker reveals several matters of present relevance. First, no one view of the meaning of s 51(xx) commanded the assent of even a majority of the Court. These differences of opinion deny that there was then any settled understanding, accepted by these framers of the Constitution, of what meaning or effect was to be given to s 51(xx). What was accepted, by at least the three founding members of the Court, were certain principles of constitutional construction, and in particular those principles which underpinned the reserved powers doctrine. Chief among those principles were first, the need to consider the Constitution "as a whole, and so as to give effect, as far as possible, to all its provisions"74 and second, the drawing of a negative implication from the grant of a positive power, like s 51(i) and its grant of power with respect to trade and commerce with other countries, and among the States75. (More than faint echoes of these propositions were to be heard in the present matters in the plaintiffs' submissions concerning the relationship between s 51(xx) and s 51(xxxv).) 70 (1909) 8 CLR 330 at 414. 71 (1909) 8 CLR 330 at 414. 72 (1909) 8 CLR 330 at 410, quoting Russell v The Queen (1882) 7 App Cas 829 at 73 See, for example, Fontana Films (1982) 150 CLR 169 at 192-194 per Stephen J. 74 R v Barger (1908) 6 CLR 41 at 72, quoted in Huddart Parker (1909) 8 CLR 330 at 75 Attorney-General for NSW v Brewery Employés Union of NSW ("the Union Label Case") (1908) 6 CLR 469 at 502-503, quoted in Huddart Parker (1909) 8 CLR 330 at 350-351 per Griffith CJ. Crennan These principles informed the reasoning of Griffith CJ, Barton and O'Connor JJ in Huddart Parker. And because these principles underpinned the then accepted doctrine of the Court, they find some reflection in the reasoning of both Isaacs J and Higgins J. But both Isaacs J and Higgins J had expressed their opposition to the reserved powers doctrine in R v Barger76 and in Attorney-General for NSW v Brewery Employés Union of NSW ("the Union Label Case")77. As Higgins J said in Huddart Parker78, it is a mistake to treat the internal trade of a State as forbidden to the federal Parliament "until the utmost limits of all the powers conferred on that Parliament by sec. 51 have been ascertained". And as Isaacs J pointed out79, s 107 of the Constitution, relied on as working the reservation of domestic trade and commerce to the States80, reserves to the parliaments of the States only those powers not exclusively vested in the federal Parliament or withdrawn from the parliaments of the States. The relevant question presented by s 107 thus is what legislative power the Constitution grants to the federal Parliament, not what the Constitution prohibits or reserves. To give effect to the reserved powers doctrine, any uncertainty or ambiguity in the federal power was resolved, as O'Connor J put it81, by giving "full operation to the power conferred" but not so as to make it "inconsistent with those portions of the Constitution which leave to the State exclusive power to regulate its own internal trade". And the alternative view of the ambit of the power given by s 51(xx) posited by Griffith CJ, that "no limit can be assigned to the exercise of the power"82, was rejected on that basis. The second matter of present relevance to notice about what was said in Huddart Parker is, as noted earlier, the use that was made of a distinction 76 (1908) 6 CLR 41 at 84 per Isaacs J, 113 per Higgins J. 77 (1908) 6 CLR 469 at 584-585 per Isaacs J, 601 per Higgins J. 78 (1909) 8 CLR 330 at 415. 79 (1909) 8 CLR 330 at 391. 80 For example, (1909) 8 CLR 330 at 361 per Barton J. 81 (1909) 8 CLR 330 at 372. 82 (1909) 8 CLR 330 at 348. Crennan between laws determining or affecting the status of an artificial person or its powers and laws affecting its activities. In particular, it is necessary to say more about the reasons of Isaacs J. Isaacs J identified two relevant limitations on the power conferred by s 51(xx). First, only some kinds of corporation fell within the power; secondly, the corporations that "come within the legislative reach of the Commonwealth must be corporations already existing"83. Although, as explained earlier, it is not necessary to consider what are "trading or financial corporations formed within the limits of the Commonwealth", it is interesting to observe that Isaacs J regarded "a purely manufacturing company"84 and "those domestic corporations, for instance, which are constituted for municipal, mining, manufacturing, religious, scholastic, charitable, scientific, and literary purposes, and possibly others more nearly approximating a character of trading"85 as falling outside the class of trading or financial corporations. The basis for excluding mining and manufacturing corporations from the class of trading or financial corporations was not explained. Because "[t]he creation of corporations and their consequent investiture with powers and capacities was left entirely to the States"86 it was, in the view of Isaacs J87, "absurd" to restrict s 51(xx) to power over internal company regulation. It was absurd because, if the States had the power of incorporation, that power, "effectively exercised, could go far to nullify"88 any power over internal company regulation. Rather, because the corporations the subject of the power were legal persons created according to the law of a State or a foreign country, they are89: 83 (1909) 8 CLR 330 at 393. 84 (1909) 8 CLR 330 at 393. 85 (1909) 8 CLR 330 at 393. 86 (1909) 8 CLR 330 at 394. 87 (1909) 8 CLR 330 at 394. 88 (1909) 8 CLR 330 at 394. 89 (1909) 8 CLR 330 at 395. Crennan "beings, which are found and remain in actual existence, possessing a fixed identity, a defined ambit of potentiality, having certain capacities and faculties unalterable by the Commonwealth, beings ready to act within their sphere of capabilities in relation to the people of the Commonwealth". It followed, so Isaacs J held90, that "[n]ecessarily you cannot legislate for such corporations except with respect to some extraneous circumstances or events, whether trade, or finance, or contracts, &c" (emphasis added). This distinction, between legislation affecting the status or powers of the corporation and legislation with respect to extraneous circumstances or events, is central to the opinion of Isaacs J. On its face, it is a distinction of the kind drawn by Westlake91 – between matters "concerning only itself or the relations of its members, if any, to it and to one another" and matters concerning its relations with outside parties. But Isaacs J drew the line between the two kinds of law at a different point. He classed92 as matters falling only within the competence of the legislature responsible for creation of a corporation all matters of "internal administration" necessary to produce "a corporation as a completely equipped body ready to exercise its faculties and capacities". Questions of employment terms and conditions and questions about qualifications of directors were93 "purely internal management and equipment". At once it can be seen that, by dealing thus with questions of employment, Isaacs J gave a very particular meaning to events and circumstances that were not external to a corporation. It was a meaning which would evidently present great difficulty in distinguishing between what is external or "extraneous" to a corporation and what is not. Especially would that be so if, as Isaacs J thought94 to have been "practically conceded" in Huddart Parker (and is now well 90 (1909) 8 CLR 330 at 395. 91 Westlake, A Treatise on Private International Law, 4th ed (1905) at 358-359. See, further, the discussion by Dixon J in Mills v Mills (1938) 60 CLR 150 at 181-182. 92 (1909) 8 CLR 330 at 396. 93 (1909) 8 CLR 330 at 396. 94 (1909) 8 CLR 330 at 402. Crennan established in respect of other powers95), s 51(xx) would support a law forbidding a foreign company doing any business whatever in Australia, or permitting entry to the field of trade only on conditions. In any event, there seems little reason to assign relationships between the corporation and its employees to the class of "internal" relationships. If, as Isaacs J suggested96, the touchstone is whether the corporation is "a completely equipped body ready to exercise its faculties and capacities", that seems to embrace the initial employment of employees but not any subsequent solicitation for, or engagement of, employees. Moreover, the inherent instability of the distinction can be illustrated further by considering three ways in which a corporation could raise capital – by borrowing from a bank or raising debt finance from the public, or by issuing shares (either by private placement or by public issue). There seems little reason to distinguish between the three. Yet it seems that borrowing from a bank would be an "external" matter and issuing shares to existing shareholders would be an "internal" matter. But where would an issue of unsecured notes to the public or a public offering of shares sit in this taxonomy? A distinction between "internal" and "external" matters relating to a corporation, whether made at the point chosen by Isaacs J or made at some other point, is a distinction that may have utility in the context of choice of law. That was its origin. Its utility in that context is that it may inform consideration of what law is to be chosen as the law governing particular questions relating to a particular form of juristic person. In particular, it may assist the formulation of choice of law rules to distinguish (as Anglo-Australian choice of law rules have, and still do97) between questions of status and power on the one hand, and questions concerning the regulation of particular aspects of the conduct of that juristic person on the other. 95 See, for example, Herald and Weekly Times Ltd v The Commonwealth (1966) 115 CLR 418; Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1. 96 (1909) 8 CLR 330 at 396. 97 Chaff and Hay Acquisition Committee v J A Hemphill and Sons Pty Ltd (1947) 74 CLR 375; Risdon Iron and Locomotive Works v Furness [1906] 1 KB 49; Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2) [1967] 1 AC 853 at 972; Hohfeld, "The Individual Liability of Stockholders and the Conflict of Laws", (1909) 9 Columbia Law Review 492. Crennan But using a distinction like the one just mentioned for the radically different task of identifying whether a particular law is within or outside a constitutional head of legislative power invites attention to some underlying assumptions that its use entails. The references made in Huddart Parker to the power of incorporating trading or financial corporations resting with the States, and the power of incorporating a foreign corporation resting with the relevant foreign country, were understood in that case as bringing with them all of the consequences that flow from a choice of law rule. In particular, the conclusion that s 51(xx) conferred no power to make laws providing for the incorporation of companies was seen as invoking principles of the kind discussed and applied in Bateman v Service98. In that case the Privy Council, on appeal from the Supreme Court of Western Australia, held that the Joint Stock Companies Ordinance 1858 (WA) did not apply to foreign companies or companies incorporated out of Western Australia (in that case Victoria) so as to require registration of the company under the Ordinance if the liability of the corporators for contracts made in Western Australia was to be limited. The Privy Council took the relevant principle to be a principle of comity, stated by Story99 as being that: "In the silence of any positive rule, affirming, or denying, or restraining the operation of foreign laws, courts of justice presume the tacit adoption of them by their own government, unless they are repugnant to its policy, or prejudicial to its interests." It followed, so the Privy Council held in Bateman v Service100, that "[i]t is not to be presumed that there was an intention [in the Western Australian Ordinance], contrary to the comity of nations, to prevent a foreign incorporated company carrying on business at all in the colony" (emphasis added). Accordingly, s 4 of the Western Australian Ordinance, providing that each partner was to be severally liable for the whole debts of the partnership, if more than 10 persons carried on in partnership any trade or business having gain for its object without being registered as a company under the Ordinance or otherwise incorporated, was construed as not embracing a corporation formed in Victoria. 98 (1881) 6 App Cas 386. 99 Commentaries on the Conflict of Laws, 2nd ed (1841), §38. 100 (1881) 6 App Cas 386 at 391. Crennan Notions of comity do not have any useful place in considering the questions about ambit of legislative power that arise in the present matters. Comity assumes the legislative competence of each of the jurisdictions concerned and would have one jurisdiction give effect to rules whose content is prescribed by the law of the other jurisdiction. But in a federation, the extent of the legislative power of the several integers of the federation is the very question that must be examined. It is not a question whose answer may be assumed, or resolved by appeal to notions of comity. Moreover, relying on notions of comity is apt to invoke presuppositions about allocation of legislative power between the integers of the federation that are not easily distinguished from a reserved powers doctrine. So, for example, the analysis made by Isaacs J of the consequences of s 51(xx) not authorising a law providing for incorporation depended, in important respects, upon his identifying the consequences for federal legislative power that were thought necessary to preserve the relevant State power. As Isaacs J said101: "Creation and continued existence of a corporation connote full and unalterable capacity; and that necessarily implies internal administration, which, besides, presents as a substantive subject every reason for retention in the same hands as being a subordinate power to that of creation, and none for transference alone to a national legislature". (emphasis added) To draw the line between what is internal and what is external, as Griffith CJ did102, between matters of formation and corporate powers and objects on the one hand, and the corporation's operations on the other, necessarily reflects a conclusion about the content of federal legislative power which stems not from the terms in which the power is granted, but from a priori assumptions about division of power. Adopting a distinction which is derived from choice of law rules and distinguishes between matters internal and external to a corporation approaches the question in a way that distracts attention from the issues that must be considered. Those issues focus upon the text of s 51(xx) and the ambit of the power it confers on the federal Parliament, not upon such matters as whether, for example, a corporation's dealings with persons the corporation hopes will become its unsecured note-holders are "internal" or "external" dealings. 101 (1909) 8 CLR 330 at 396. 102 (1909) 8 CLR 330 at 349, 353. Crennan Relevant nineteenth century developments The plaintiffs submitted that support for their contentions about s 51(xx) was provided by its drafting history and by what was said in the course of the Convention Debates. It will be necessary to examine both of these subjects. Before doing so, however, it is important to say something about the legal context within which those events occurred. It is necessary to notice only the bare outline of the many British enactments dealing with companies and corporations enacted between the repeal in 1825 by Statute 6 Geo 4 c 91 of the Bubble Act103, and the passing of The Companies Act 1862 (UK) ("the 1862 UK Act")104. (The word "company" was used in the nineteenth century to refer to a group of individuals associated together for a particular purpose or purposes. The word "corporation" was used to describe a juristic person distinct from its corporators. It is convenient to maintain this distinction when dealing with the nineteenth century legislation.) In 1826 the first British legislation was enacted105 by which a company could acquire any of the privileges of a corporation, or the power of suing and being sued by a public officer, without making special application to the Crown (for incorporation by Royal Charter) or to Parliament (for incorporation by private Act). The 1826 Act applied only to joint stock banking companies. The Trading Companies Act of 1834106 empowered the Crown to confer by letters patent all the privileges of incorporation, except limited liability, without granting a charter. In 1844 the Joint Stock Companies Act107 required all companies (with some exceptions) to obtain a certificate of incorporation. (In the 103 6 Geo 1 c 18. 104 The history is discussed more fully in Gower, The Principles of Modern Company Law, 2nd ed (1957) at 39-50. See also Buckley, The Law and Practice under the Companies Acts 1862 to 1890, 6th ed (1891) at 1-5; Lindley, A Treatise on the Law of Companies, 6th ed (1902), vol 1 at 2-7; Manson, The Law of Trading and Other Companies, (1892) at 1-7. 105 The Country Bankers Act 1826 (UK) (7 Geo 4 c 46). 106 4 & 5 Will 4 c 94. 107 7 & 8 Vict c 110. Crennan same year the legislature retraced108 its steps with respect to banking companies, repealed the 1826 Act, and required banking companies formed after May 1844 to apply to the Crown for incorporation.) In 1855 The Limited Liability Act 1855 (UK) enabled companies registered under the 1844 Act (other than insurance companies) to obtain a certificate of incorporation with limited liability. But neither the 1844 Act nor the 1855 Act provided for dissolution and winding-up of companies. These subjects were dealt with separately, in 1844109, in 1846 with respect to certain railway companies110, in 1848111, in 1849112 and in 1850, again with respect to certain railway companies113. In 1856 and 1857 attempts were made114 to consolidate the relevant legislation. These Acts were repealed by the 1862 UK Act. In the same year, 1862, legislation was passed relating to industrial and provident societies115 which placed those bodies on much the same footing as joint stock companies. The enactment of the 1862 UK Act marked a watershed in the development of modern corporations law. Section 4 of the 1862 UK Act provided that "[n]o Company, Association, or Partnership" consisting of more than a stated number of persons was to be formed, after the commencement of the Act, for certain purposes, unless it was 108 7 & 8 Vict c 113. 109 7 & 8 Vict c 111. 110 9 & 10 Vict c 28. 111 The Joint Stock Companies Winding-up Act 1848 (UK). 112 The Joint Stock Companies Winding-up Amendment Act 1849 (UK). 113 The Abandonment of Railways Act 1850 (UK). 114 The Joint Stock Companies Act 1856 (UK) and The Joint Stock Companies Act 115 The Industrial and Provident Societies Act 1862 (UK) subsequently repealed by The Industrial and Provident Societies Act 1876 (UK) which, in turn, was replaced by the Industrial and Provident Societies Act 1893 (UK). Crennan registered as a company under the Act, was a company formed in pursuance of another Act or of letters patent, or was a company engaged in working mines within and subject to the jurisdiction of the Stannaries. Two kinds of purpose were identified in s 4 of the 1862 UK Act – first, the purpose of carrying on the business of banking and, secondly, the purpose of carrying on any other business that had for its object the acquisition of gain by the company, association, or partnership, or by the individual members thereof. Ten persons might form a company, association or partnership for the purpose of carrying on the business of banking without being incorporated; twenty was the limit imposed in respect of companies of persons formed to carry on any other business having for its object the acquisition of gain by the company or its members. Some light was cast upon what was meant by a "Company ... formed ... for the Purpose of carrying on any other Business that has for its Object the Acquisition of Gain by the Company ... or by the individual Members thereof", by s 21 of the 1862 UK Act. That section, so far as now relevant, provided: "No Company formed for the Purpose of promoting Art, Science, Religion, Charity, or any other like Object, not involving the Acquisition of Gain by the Company or by the individual Members thereof, shall, without the Sanction of the Board of Trade, hold more than Two Acres of Land". As Jessel MR was later to point out116, the 1862 UK Act thus sought to distinguish between "commercial undertakings" and "what we may call literary or charitable associations". Some Australian colonies had passed legislation relating to companies before the 1862 UK Act was enacted117. But the 1862 UK Act was taken as the model for equivalent legislation in the colonies of Queensland in 1863118, 116 In re Arthur Average Association for British, Foreign, and Colonial Ships; Ex parte Hargrove & Co (1875) LR 10 Ch App 542 at 548. 117 See, for example, New South Wales legislation predating the separation of Victoria and Queensland, dealing with banking and other companies (6 Vict No 2), and joint stock companies (11 Vict No 19 and 11 Vict No 56), and Victorian legislation dealing with limited liability (17 Vict No 5 and 24 Vict No 109), and the Mining Association Act 1858 (Vic). 118 The Companies Act 1863 (Q). Crennan Victoria in 1864119 and South Australia in 1864120. Other colonies followed more slowly: Tasmania in 1869121, New South Wales in 1874122 and Western Australia in 1893123. The Queensland Act contained a provision equivalent to s 21 of the 1862 UK Act; the Victorian Act did not. Section 21 of the 1862 UK Act (and the equivalent provision in The Companies Act 1863 (Q)) was directed to companies, as distinct from corporations, formed for certain purposes not involving the acquisition of gain by the company or its members. Neither the 1862 UK Act, nor any of the Acts of the Australian colonies derived from that Act, prohibited the association of any number of persons for pursuit of non-profit purposes. The prohibitions contained in the 1862 UK Act and its derivatives, on which those Acts turned, were prohibitions directed against the pursuit of commercial ventures by associations of more than certain numbers of persons without incorporation. The 1862 UK Act and its derivatives provided for the incorporation of any group of seven or more persons "associated for any lawful Purpose"124 as a company limited by shares or by guarantee. Towards the end of the nineteenth century provision was made, in some Acts, for some non-profit associations to be incorporated as limited liability corporations but dispensed from the obligation to include the word "limited" in their name125. 119 The Companies Statute 1864 (Vic), the long title of which was "An Act for the Incorporation Regulation and Winding-up of Trading Companies and other Associations". 120 The Companies Act 1864 (SA). 121 The Companies Act 1869 (Tas). 122 Companies Act 1874 (NSW). 123 The Companies Act 1893 (WA). 124 1862 UK Act, s 6. 125 See, for example, Literary Associations Incorporation Act 1883 (Vic); Companies Act 1890 (Vic), s 181. Crennan legislation. Some non-profit ventures in the Australian colonies like universities126, museums127 or zoological societies128 were incorporated pursuant to statute. Otherwise, in most Australian colonies, and later in the States, incorporation of a non-profit association with limited liability was possible only under the relevant companies In South Australia, however, The Associations Incorporation Act 1858 (SA) provided a simple and cheap method for incorporation of an association established for what the preamble to that Act described as "the promotion of religion, education, and benevolent and useful objects". This innovative legislation was ultimately replicated in other Australian States and Territories but in most cases129 that was not done until the latter half of the twentieth century130. Between 1862 and the first of the Constitutional Conventions – the National Australasian Convention held in Sydney in 1891 – there were many statutory and other developments, in England, in the law of companies and corporations. There was a deal of litigation about what companies could or should be registered. That litigation canvassed what was meant by "business" 126 See, for example, An Act to incorporate and endow the University of Sydney (14 Vict No 31) and An Act to incorporate and endow the University of Melbourne (16 Vict No 34). 127 See, for example, An Act to incorporate and endow the Australian Museum (17 Vict No 2). 128 See, for example, The Zoological and Acclimatisation Society Incorporation Act 1884 (Vic). 129 But see The Religious Educational and Charitable Institutions Act 1861 (Q); Associations Incorporation Act 1895 (WA). 130 Associations Incorporation Ordinance 1953 (ACT); Associations Incorporation Ordinance 1963 (NT); Associations Incorporation Act 1964 (Tas); Associations Incorporation Act 1981 (Vic); Associations Incorporation Act 1981 (Q); Associations Incorporation Act 1984 (NSW). Crennan and "trade"131 and what was meant by "gain"132. Questions were agitated about the registration of investment trust companies133, land societies134, loan societies135 and foreign corporations136. And the legislature was no less active. The Parliament at Westminster enacted Companies Acts in 1867, 1877, 1879, 1880 and 1883. It enacted The Companies Seals Act 1864, the Companies (Colonial Registers) Act 1883, the Companies (Memorandum of Association) Act 1890, the Companies (Winding up) Act 1890, the Directors Liability Act 1890, The Joint Stock Companies Arrangement Act 1870, Life Assurance Companies Acts in 1870, 1871 and 1872 and the Preferential Payments in Bankruptcy Act But the corporation had not yet emerged as the chief means through which individuals conducted business ventures. That was a development that was to follow the decision, in November 1896, in Salomon v Salomon & Co137. In the Australian colonies there was both litigation and legislation about corporations. As noted earlier, some of the litigation138 focused upon whether a company incorporated in one colony was obliged to register in another colony in which it did business if it were to obtain the benefit of limited liability. Other 131 Smith v Anderson (1880) 15 Ch D 247 at 258-259 held that farming and banking are both businesses though neither is strictly a "trade". 132 In re Arthur Average Association for British, Foreign, and Colonial Ships; Ex parte Hargrove & Co (1875) LR 10 Ch App 542; In re Padstow Total Loss and Collision Assurance Association (1882) 20 Ch D 137. 133 Smith v Anderson (1880) 15 Ch D 247. 134 In re Siddall (a Person of Unsound Mind) (1885) 29 Ch D 1. 135 Shaw v Benson (1883) 11 QBD 563; In re Thomas; Ex parte Poppleton (1884) 14 QBD 379. 136 Bulkeley v Schutz (1871) LR 3 PC 764. 138 Bateman v Service (1881) 6 App Cas 386. Crennan litigation139 concerned the winding-up in a colony of a corporation incorporated elsewhere. Financial difficulties and scandals emerged in Australia, particularly in Victoria, in the late 1880s and continued into the 1890s. Not surprisingly, the difficulties thus revealed were later to provoke a deal of legislative response140. But for the moment, it is convenient to consider the position as things stood in 1891, when the first Constitutional Convention assembled. The Federal Council of Australasia Act 1885 (Imp) had provided in s 15 that the Federal Council should: "have legislative authority in respect to ... (i) [s]uch of the following matters as may be referred to the Council by the legislatures of any two or more colonies, that is to say, – ... status of corporations and joint stock companies in other colonies than that in which they have been constituted". That power was never exercised by the Federal Council. But the proposals put to the 1891 Convention included the proposal that the federal Parliament have power over "The Status in any State of Foreign Corporations, and Corporations formed in other States". The power with respect to banking adopted at the 1891 Convention was a power "To Regulate Banking, the Incorporation of Banks, and the Issue of Paper Money". Such little debate about the corporations power as there was at the 1891 Convention focused upon whether that power should be extended, like the banking power, to the registration or incorporation of companies. Sir Samuel Griffith's response141 was: "What is important ... is that there should be a uniform law for the recognition of corporations. Some states might require an elaborate form, the payment of heavy fees, and certain guarantees as to the stability of members, while another state might not think it worth its while to take so much trouble, having regard to its different circumstances. I think the states may be trusted to stipulate how they will incorporate companies, 139 For example, In re Oriental Bank Corporation (1884) 10 VLR(E) 154. 140 See, for example, Companies Act 1896 (Vic). 141 Official Record of the Debates of the Australasian Federal Convention, (Sydney), 3 April 1891 at 686. Crennan although we ought to have some general law in regard to their recognition." As this reveals, the concern then being addressed was very narrow. The suggestion that the power be extended was not agreed. As ultimately revised, the proposal made by the 1891 Convention was that the federal Parliament have power to make laws with respect to: "Establishing uniform laws throughout the Commonwealth concerning the following matters, that is to say:– The Status in the Commonwealth of Foreign Corporations, and of Corporations formed in any State of the Commonwealth". The proposal was one that reflected what then was seen as the problem requiring national attention – a problem about recognition of the status of artificial juristic entities created in a State or elsewhere. The issues about corporations and their regulation that had been in such legislative and litigious ferment in the immediately preceding decades of the century were not then seen as matters warranting the grant of national legislative power. To adapt what Sir Samuel Griffith said in 1891, these were, it seems, seen as matters about which the States "may be trusted". By the time the Convention met again, in 1897 in Sydney, the financial scandals of the Victorian land boom had been revealed for all to see. Building societies and banks had been formed, appeared to prosper for a time, but then had collapsed leaving investors and depositors with their claims, totalling many tens of thousands of pounds, substantially unsatisfied. Prominent citizens of the colonies who had been directors or officers of these failed entities had been prosecuted and imprisoned. The reputations of many others had been ruined. All of these events would have been well known to the delegates who attended the Convention sessions in Sydney and then Adelaide in 1897, and in Melbourne in In Adelaide in 1897 the reference that had been made in the 1891 drafts to the status of corporations was dropped. The corporations power was first put to debate in Adelaide in the form: "Foreign corporations and trading corporations Crennan formed in any State or part of the Commonwealth"142. Mr Barton said143 that the change had been made: "So that the Commonwealth may have the power to legislate, not merely with regard to the legal status of corporations acting within the Commonwealth, but it may have power as far as it can legislate upon the general subject of these corporations, over the general subject of foreign corporations, formed in any part of a State of the Commonwealth, for the purpose of uniform legislation." (emphasis added) Mr Higgins asked144 whether this would give power to exclude such corporations from trading in the Commonwealth and Mr Barton replied145: "Not, I think, to exclude them, but to regulate the mode in which they conduct their operations. It is for the purpose of uniformity." Delegates returned to the subject on 17 April 1897. On this occasion debate focused upon what kinds of corporation should be specified in the power. Particular reference was made146 to financial institutions. Mr Deakin, who had appeared as counsel in some of the notable prosecutions in Victoria that followed the corporate collapses of the early 1890s, pointed out147 that Victoria had passed legislation placing "a strict limitation on the meaning of the word 'banks', excluding from it particular kinds of financial companies which had hitherto been 142 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 12 April 1897 at 439. 143 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 12 April 1897 at 439. 144 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 12 April 1897 at 439. 145 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 12 April 1897 at 439. 146 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 17 April 1897 at 793. 147 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 17 April 1897 at 793. Crennan called banks, or treated as banks". He suggested148 the extension of the power with respect to corporations "to include all limited companies ... [e]specially land and finance companies which caused so much litigation in the past". An amendment inserting "or financial" after the word "trading" was at once proposed and agreed149, with next to no debate. Thereafter what was to become s 51(xx) received no separate consideration in the debates at the Constitutional Conventions. While there can be little doubt that, by 1897, the drafting committee, Mr Deakin, and others saw that national power was required over a wider field of law with respect to corporations than their status within the Commonwealth, the Convention Debates reveal very little about what those who framed the Constitution thought would fall within or outside the power. No doubt the reference made150 by Mr Barton to the Commonwealth being given power "as far as it can legislate upon the general subject" of corporations can be taken as suggesting some breadth to the power. But to fasten upon this one comment, made in debate, as fixing "the framers' intention" would be to place altogether too much weight upon it. Rather, the absence of any extended debate about this power does no more than show that, like so many of the legislative powers ultimately granted to the federal Parliament in s 51, the power with respect to corporations was not politically controversial at the time the Constitution was framed. But it also follows that it is impossible to distil any conclusion about what the framers intended should be the meaning or the ambit of operation of s 51(xx) from what was said in debate about the power, or from the drafting history of the provision. To pursue the identification of what is said to be the framers' intention, much more often than not, is to pursue a mirage. It is a mirage because the inquiry assumes that it is both possible and useful to attempt to work out a single 148 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 17 April 1897 at 793. 149 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 17 April 1897 at 794. 150 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 12 April 1897 at 439. Crennan collective view about what now is a disputed question of power, but then was not present to the minds of those who contributed to the debates. And even if a statement about the framers' intention can find some roots in what was said in the course of the Convention Debates, care must be taken lest, like the reserved powers doctrine, the assertion assumes the answer to the very question being investigated: is the law in issue within federal legislative power? For the answer to that question is not to be found in attempting to attribute some collective subjective intention to all or any of those who participated in the Convention Debates. And when it is said that a particular construction of the constitutional text does, or does not, accord with the framers' intention, the statement compares competing constructions of the Constitution, both of which must be based in its text, interpreted in accordance with accepted principles. In the case of s 51(xx) the statements made in the course of the Convention Debates were so few and equivocal as to provide no foundation for a conclusion about what those who spoke in debate thought would be the scope or meaning of s 51(xx). Moreover, in the case of s 51(xx), assertions about the framers' intention often leave out of account two subsequent developments of fundamental importance which cannot be assumed to have been foreseen by the framers. First, corporations law was still developing in the last decade of the nineteenth century. There can be no clearer demonstration of that than the decision in Salomon's Case. Only with that decision, in November 1896, did the courts fully grasp its consequences for the rights of creditors and others were still being debated, and dealt with, well into the twentieth century151. Secondly, the place of corporations in the economic life of Australia today is radically different from the place they occupied when the framers were considering what legislative powers should be given to the federal Parliament. implications of corporate personality. And the The Explanatory Memorandum for the Amending Act asserted152 that "[f]orty-nine per cent of small businesses employing staff are currently incorporated". There is no material before the Court in these matters which would show what would have been the equivalent proportion of incorporated small business employers in the 1890s. There is, however, every reason to think that it would have been very much smaller. For as Kahn-Freund pointed out, in 151 Kahn-Freund, "Some Reflections on Company Law Reform", (1944) 7 Modern Law Review 54. 152 Explanatory Memorandum at 9. Crennan 1944153, it was the decision in Salomon's Case that encouraged the sole trader (or small group of traders) to conduct business as a limited company even where the venture was not especially risky or where no outside capital was required. Relatively recently, legislation doing away with the doctrine of ultra vires in relation to companies154, permitting registration of single member companies155, and doing away with certain capital requirements156, may be seen as the continuation of development of the corporation as a vehicle for the sole trader's pursuit of commercial gain with minimum exposure to risk of personal liability. That development did not begin until Salomon's Case was decided. None of these events could be foreseen by the framers. It is not possible to attribute to them some intention about how this legislative power operates in respect of these or other subsequent legal, economic, and social developments, without making some assumption to the effect that the framers intended that the legislative power granted to the federal Parliament should be limited, not only to facts and circumstances of the kind that existed at federation, but also to whatever kinds of legislative solution had then been devised to address the problems then revealed. But the plaintiffs, correctly, made no such explicit contention. Rather, the plaintiffs confined their contentions about the framers' intention to the drawing of a conclusion from what was said in the Convention Debates, in Huddart Parker, and in early texts157, that s 51(xx) was not intended by the framers to have the reach that would be necessary to support the Amending Act. Those sources do not support the conclusion asserted by the plaintiffs, namely, that s 51(xx) would support only a law with respect to the relationships between a constitutional corporation and members of the public (excluding employees and potential employees of the corporation). 153 "Some Reflections on Company Law Reform", (1944) 7 Modern Law Review 54 at 54; cf at 57-58. 154 Companies and Securities Legislation (Miscellaneous Amendments) Act 1985 (Cth), ss 46-49. See now Corporations Act 2001 (Cth), s 124. 155 Corporations Act 2001, s 114. 156 Corporations Act 2001, s 254C. 157 Especially Harrison Moore's reference to the improbability of the Constitution contemplating "the revival of a medieval system of personal laws" – Harrison Moore, The Constitution of the Commonwealth of Australia, 2nd ed (1910) at 470. Crennan Failed referendums In its written submissions, Queensland submitted that "the people of Australia have repeatedly, at referendums, rejected attempts by governments of the Commonwealth to broaden the scope of the corporations power and to confer upon the Commonwealth Parliament a general industrial relations power". Queensland further submitted that "rejection by that sovereign force [the people of Australia] of proposals to add heads of power to section 51 of the Constitution is a powerful aid in construing the Constitution". Two reasons were proffered for that contention: first, that the need for alteration was predicated upon the power which it was sought to add being absent; and secondly, that the rejection "evidences the sovereign force's view that the power sought to be added both does not and ought not to exist and should not be found in the Constitution, at least at that point in time" (original emphasis). At once it should be said that the Amending Act does not depend for validity upon the federal Parliament having "a general industrial relations power". It is necessary always to bear steadily in mind that the Amending Act is directed to the relationships between constitutional corporations and their employees, not industrial relations generally. As the Explanatory Memorandum for the Amending Act says, there is an expectation (or at least the hope) that regulating the relationships between constitutional corporations and their employees will "deliver a unified national system [of workplace relations] for most employers"158 and that the changes will "move towards a national workplace relations system for the first time"159. But those consequences of the Amending Act (assuming that they are consequences that will come about) do not alter the need to focus upon the ambit of the corporations power. In 1910160, 1912161 and 1926162, proposals were put to referendum for amendment of both par (xx) and par (xxxv) of s 51. The amendments proposed 158 Explanatory Memorandum at 9. 159 Explanatory Memorandum at 10. 160 Constitution Alteration (Legislative Powers) Bill 1910. 161 Constitution Alteration (Corporations) Bill 1912 and Constitution Alteration (Industrial Matters) Bill 1912. 162 Constitution Alteration (Industry and Commerce) Bill 1926. Crennan to s 51(xx) would in each case have extended the power by authorising the Parliament to make laws with respect to the "creation, dissolution, regulation, and control" of corporations. The amendment proposed to s 51(xxxv) would have extended the federal Parliament's power, in 1910, to making laws with respect to (among other things) "[l]abour and employment, including ... [t]he wages and conditions of labour and employment in any trade industry or calling"; in 1912, to making laws with respect to "[l]abour, and employment, and unemployment"; and in 1926, by omitting from s 51(xxxv) the words "extending beyond the limits of any one State". The 1910 proposal about corporations was advanced by the then Acting Prime Minister and Attorney-General, Mr Hughes, in response to the decision in Huddart Parker. It was advanced on the basis that "[t]he National Parliament must have this power of dealing with corporations" – a power which "[w]e thought that paragraph xx. gave us"163. Corporations were said to be a national matter because "the distinguishing feature of modern production [was] the great and ever-increasing power, extent, and influence of combines"164. Although put forward in conjunction with a proposed alteration to legislative power with respect to industrial relations, the focus of the proposed alteration to the corporations power was upon what now would be called trade practices questions. The 1912 proposal about corporations was advanced (again by Mr Hughes as Attorney-General) on a generally similar basis165. By contrast, the 1926 proposal about the corporations power was not separated from the proposals about industrial matters and, at least so far as the parliamentary debates reveal, the central purpose of the amendments was to "cover industrial relations generally"166. In 1946167 the proposal again focused 163 Australia, House of Representatives, Parliamentary Debates (Hansard), 18 October 164 Australia, House of Representatives, Parliamentary Debates (Hansard), 18 October 165 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 November 1912 at 5625-5636. 166 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 May 167 Constitution Alteration (Industrial Employment) Bill 1946. Crennan upon industrial relations. It was proposed to add a new par (xxxivA) to s 51, giving the Parliament legislative power with respect to "[t]erms and conditions of employment in industry, but not so as to authorize any form of industrial conscription". All these proposals failed. There are insuperable difficulties in arguing from the failure of a proposal for constitutional amendment to any conclusion about the Constitution's meaning. First, there is a problem of equivalence. The argument must assume that the proposal which was defeated was as confined as is the question that now falls for determination. If the proposal was wider than the immediate question for decision, it is not open to conclude that a majority of those to whom the proposal was put (whether they are described as "the people of Australia", the "sovereign force" or, as in s 128, "the electors qualified to vote for the election of members of the House of Representatives") reached any view about the ambit of the (unamended) constitutional power, or that they reached any view about that part of the proposal that appears to deal with the immediate issue. None of the proposals relied on in this matter was so confined. And the fact that the early proposals (of 1910 and 1912) were prompted by the decision in Huddart Parker does not confine those proposals to the questions that now fall for decision in the present matters. that Secondly, despite Harrison Moore's optimistic view168 the constitutional alteration mechanism provided by s 128 was a "less cumbrous" way for avoiding the obstacle of disagreement between the Houses of Parliament than the deadlock provisions of s 57 of the Constitution, few referendums have succeeded. It is altogether too simple to treat each of those rejections as the informed choice of electors between clearly identified constitutional alternatives. The truth of the matter is much more complex than that. For example, party politics is of no little consequence to the outcome of any referendum proposal. And much may turn upon the way in which the proposal is put and considered in the course of public debate about it. Yet it is suggested that failure of the referendum casts light on the meaning of the Constitution. Finally, is the rejection of the proposal to be taken as confirming what is and always has been the meaning of the Constitution, or is it said that it works 168 Harrison Moore, The Constitution of the Commonwealth of Australia, 2nd ed Crennan some change of meaning? If it is the former, what exactly is the use that is being made of the failed proposal? If it is the latter, how is that done? The plaintiffs offered no answers to these questions. Constitutional construction is not so simple a process as the argument from failed referendums would have it. If, as is so often the case, a question about the meaning and operation of the Constitution is controversial, it is for this Court to determine the answer that is to be given. Chapter III, particularly s 76(i), indicates that the determination of matters arising under or involving the interpretation of the Constitution is committed to the judicial power of the Commonwealth. The phrase "or involving its [the Constitution's] interpretation" encompasses later curial disputation concerning earlier decisions respecting the Constitution169. Such decisions may also be followed by the passage of a proposed law for the alteration of the text of the Constitution pursuant to s 128. But the opening words of s 128, "[t]his Constitution shall not be altered except in the following manner ...", must be read with those of Ch III to which reference is made above. The constitutional text must be treated as the one instrument of federal government. The failure of successive referendums to alter s 51(xx) and s 51(xxxv) provides no assistance in the resolution of the present matters. The course of authority after Huddart Parker It will be recalled that in Huddart Parker all members of the Court concluded that s 51(xx) does not give the Parliament power to enact a law providing for the incorporation of trading and financial corporations. That conclusion was affirmed in The Incorporation Case170. The Court held171 that "[t]he word 'formed' is a past participle used adjectivally, and the participial phrase 'formed within the limits of the Commonwealth' is used to describe corporations which have been or shall have been created in Australia". It 169 See Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901), at 790. 170 (1990) 169 CLR 482. 171 (1990) 169 CLR 482 at 498 per Mason CJ, Brennan, Dawson, Toohey, Gaudron Crennan followed, so the joint reasons of six members of the Court continued172, that "[t]he subject of a valid law is restricted by that phrase to corporations which have undergone or shall have undergone the process of formation in the past, present or future". No party or intervener in the present matters sought to reopen The Incorporation Case and it was not in the interests of the plaintiffs to do so. It was not in the plaintiffs' interest to challenge The Incorporation Case because to do so would have challenged the premise for the reasoning of Isaacs J in Huddart Parker which the plaintiffs sought now to embrace. There is in these circumstances no occasion to consider further what was decided in The Incorporation Case. Consideration of the other principal decisions of this Court concerning s 51(xx), since Huddart Parker, can be confined to examining first, what those cases have said about the reach of s 51(xx) and secondly, some of the caveats that have been entered in those cases about the breadth of that reach. In undertaking that task it will be important to keep two matters at the forefront of consideration. First, there is no decision of the Court which has decided the specific issues raised in the present matters. Secondly, it follows that what is said in the cases since Huddart Parker is to be understood against the background of the issues that fell for decision in those cases – issues different from those that must now be decided. Apart from The Incorporation Case, it is necessary to say something about five other decisions – Bank of NSW v The Commonwealth ("the Banking 172 (1990) 169 CLR 482 at 498. Crennan Case")173, the Concrete Pipes Case174, Fontana Films175, The Commonwealth v Tasmania (The Tasmanian Dam Case)176 and Re Dingjan; Ex parte Wagner177. It is convenient to deal with them chronologically, and to do so recognising what the plaintiffs contended was to be derived from them. The plaintiffs submitted that in the cases decided after Huddart Parker there could be found views "as to the scope of s 51(xx), or the appropriate test for characterisation of a law with respect to foreign, financial and trading corporations". Two tests were said to be thus revealed – a "distinctive character test", and an "object of command test" – the former of which was to be preferred, and the latter to be regarded as having been rejected, or at least not endorsed, in the cases. The "distinctive character test" was said to be: "the fact that the corporation is a foreign, trading or financial corporation should be significant in the way in which the law relates to it"178 if the law is to be valid. The "object of command test" was said to be: that a constitutional corporation is "an 'object of command' [of a law], permitting or prohibiting a trading or financial corporation from engaging in conduct or forming relationships"179. It was not suggested that the distinction drawn between external and internal relationships by Isaacs J in Huddart Parker was taken up in the later cases. At once it should be said that the plaintiffs' argument against the object of command test and in favour of the distinctive character test has several difficulties. It seeks to build upon some statements made in judgments of the Court which, read in their context, constitute no more than an explicit limitation upon what was being decided in the particular case. In so far as it seeks to build 173 (1948) 76 CLR 1. 174 (1971) 124 CLR 468. 175 (1982) 150 CLR 169. 176 (1983) 158 CLR 1. 177 (1995) 183 CLR 323. 178 cf The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 316 per Dawson J. 179 cf Fontana Films (1982) 150 CLR 169 at 212 per Murphy J and Huddart Parker (1909) 8 CLR 330 at 348 per Griffith CJ. Crennan upon suggestions that s 51(xx) could be interpreted as having an unduly broad reach, such as would disturb a proper or intended "federal balance", it invites the closest attention to what assumptions underpin the suggestions. Finally, the assertion of a specific test for characterisation of a law as being a law with respect to constitutional corporations either runs serious risk of inverting the proper order of inquiry or posits a test that again invokes notions of federal balance. The general principles to be applied in determining whether a law is with respect to a head of legislative power are well settled. It is necessary, always, to construe the constitutional text and to do that "with all the generality which the words used admit"180. The character of the law must then be determined by reference to the rights, powers, liabilities, duties and privileges which it creates181. The practical as well as the legal operation of the law must be examined182. If a law fairly answers the description of being a law with respect to two subject-matters, one a subject-matter within s 51 and the other not, it is valid notwithstanding there is no independent connection between the two subject-matters183. Finally, as remarked in Grain Pool of Western Australia v The Commonwealth184, "if a sufficient connection with the head of power does exist, the justice and wisdom of the law, and the degree to which the means it adopts are necessary or desirable, are matters of legislative choice185". The argument that the object of command test has been, or should be, rejected is an argument that focuses upon what is said not to establish the 180 R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225-226; Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 492 [16]. 181 Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 352-353 [7], 372 [58]; Grain Pool (2000) 202 CLR 479 at 492 [16]. 182 Re Dingjan (1995) 183 CLR 323 at 369; Grain Pool (2000) 202 CLR 479 at 492 183 Re F; Ex parte F (1986) 161 CLR 376 at 388; Grain Pool (2000) 202 CLR 479 at 184 (2000) 202 CLR 479 at 492 [16]. 185 Leask (1996) 187 CLR 579 at 602. Crennan sufficiency of connection between a law and the relevant head of power. But it does that divorced from any consideration of the legal or practical operation of the law in question. That inverts the proper order of inquiry. What is described as the "distinctive character test" builds largely upon statements made in cases where the laws in question have concerned the trading activities of trading corporations. The argument that the distinctive character test has been, or should be, adopted takes what has been said about what is distinctive of a trading corporation and treats that as indicating that the adjectives "foreign", "trading", and "financial" are the considerations on which the power turns. "Trading" and "financial" are said to refer to a corporation's activities; "foreign" refers to a corporation's status or origin. Yet it is acknowledged that the power is to make laws with respect to particular juristic persons. It is what was described in argument as "a persons power" – it is not "a power with respect to a function of government, a field of activity or a class of relationships"186. to foreign corporations focus only upon Treating the character of the corporations mentioned in s 51(xx) (as foreign, trading or financial) as the consideration on which the power turns produces awkward results. Why should the federal Parliament's power with respect to Australian corporations focus upon their activities, but the power with respect More fundamentally, however, examination will reveal that the "distinctive character test" is put forward by the plaintiffs, not just as a convenient description of the result of considering the sufficiency of connection between a law and the relevant head of power, but as an additional filter through which it is said the law must pass if it is to be regarded as having a sufficient connection with s 51(xx). This is a contention that, again, necessarily invokes notions of federal balance. their status? It will be necessary to return to consideration of the plaintiffs' arguments after saying something about each of the five cases mentioned earlier. 7(a) The Banking Case It will be recalled, from what has been said earlier about the Convention Debates, that the banking power (s 51(xiii)) provides explicit power to make laws with respect to the incorporation of banks. But s 51(xiii) also limits the banking power by specifying the power as being with respect to "[b]anking, other than 186 New South Wales v The Commonwealth (The Incorporation Case) (1990) 169 CLR Crennan State banking; also State banking extending beyond the limits of the State concerned" (emphasis added). The laws in question in the Banking Case could be characterised, in at least their major aspects, as laws with respect to foreign corporations or financial corporations, as well as laws with respect to banking, and laws with respect to the acquisition of property. Latham CJ concluded187 that s 51(xx) should not be construed as giving "complete power to pass any law of any description in so far as it is made applicable to banking corporations". To do so would deny the qualification to the power to make laws with respect to banking provided by the words "other than State banking". The conclusion reached by Latham CJ was expressed in words of great generality. He said188 that s 51(xiii) is to be interpreted "as a special provision which provides for the whole legislative power of the Commonwealth Parliament so far as laws with respect to banking corporations and banking are concerned". Accordingly, Latham CJ continued189, s 51(xx) "should be regarded as not applying to corporations so far as they are engaged in banking". It is not necessary to decide whether these statements are cast in terms that are too absolute. Latham CJ recorded190 the Commonwealth's argument, in the Banking Case, that s 51(xx) "gave full power to make any law upon any subject so long as it was a law which applied to and controlled the conduct" of constitutional corporations. Although it is evident that Latham CJ did not favour this aspect of the Commonwealth's argument about s 51(xx), he treated the decisive point as being the relationship between s 51(xiii) and s 51(xx), and expressed no concluded view about the wider issue. It is to be noted, however, that Latham CJ considered191 that what had been said192 to be inconvenient consequences of construing s 51(xx) as the Commonwealth submitted it should be, were not conclusive of that wider issue. 187 (1948) 76 CLR 1 at 203. 188 (1948) 76 CLR 1 at 204. 189 (1948) 76 CLR 1 at 204. 190 (1948) 76 CLR 1 at 202. 191 (1948) 76 CLR 1 at 203. 192 Huddart Parker (1909) 8 CLR 330 at 409-410 per Higgins J. Crennan On the question of the relationship between s 51(xiii) and s 51(xx), Rich and Williams JJ agreed193 that "corporations which are banks [are to be] placed in the separate category expressly provided for by pl. (xiii.) and therefore as corporations outside the generality of the classes of corporations referred to in pl. (xx.)". But on the more general question of the proper meaning of s 51(xx), Rich and Williams JJ said194, of s 51(xx) and of Huddart Parker: "Very conflicting views of the meaning of this placitum were there expressed. But there was agreement that the placitum does not authorize the Commonwealth Parliament to create corporations but relates to legislation with respect to corporations as existing entities. For the purposes of private international law, each of the States of Australia is regarded as a foreign country in the courts of another State, so that bodies incorporated in one State are just as much foreign corporations in another State as bodies incorporated abroad. The language of the placitum indicates an intention to give the Commonwealth Parliament power to make laws from time to time with respect to the conditions, subject to the performance of which, corporations of all kinds created beyond Australia and trading and financial corporations incorporated in Australia should be entitled to carry on business throughout Australia or in any part thereof." Again it may be noted that, as in Huddart Parker, choice of law issues were introduced into the debate. For the reasons given earlier, those notions provide no relevant assistance to the examination of the ambit of the legislative power conferred by s 51(xx). By contrast, Starke J said195 of s 51(xx) that it would authorise the Commonwealth: "to govern and regulate the operation of these companies but would not authorize the suppression of all such corporations or the nationalization of their activities. Thus, the carrying on business in Australia by these corporations might be prohibited absolutely or except upon certain 193 (1948) 76 CLR 1 at 256. 194 (1948) 76 CLR 1 at 255. 195 (1948) 76 CLR 1 at 304. Crennan conditions and the exercise of their powers in Australia might be regulated and so forth." In the end, what was said in the Banking Case is of little direct assistance in the present matters. What was said there, about the consequences for construction of recognising that a particular law is a law with respect to banking and with respect to foreign corporations or financial corporations, would be of direct relevance in the present matters only if the Amending Act were to be characterised as a law with respect to constitutional corporations and a law with respect to conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State. But that is not said to be the character of the impugned provisions of the Amending Act. 7(b) The Concrete Pipes Case Like Huddart Parker, the Concrete Pipes Case concerned trade practices legislation. The central provision of the Act in question (s 35 of the Trade Practices Act 1965 (Cth)) required the registration of certain agreements – agreements under which restrictions of any of a number of kinds were accepted by one or more of the persons party to the agreement who were competitive with any of the parties to the agreement. Section 7 of the Act provided that the relevant restrictions included restrictions coming within the terms of s 35 and accepted under an agreement by a party to the agreement who is a foreign corporation, or a trading or financial corporation formed within the limits of the Commonwealth. Thus, at the risk of undue abbreviation, the impugned provisions could be described as taking the form "No person shall ..."; "This prohibition extends to constitutional corporations". The Court held in the Concrete Pipes Case that the law was not a law with respect to constitutional corporations. That the law applied to constitutional corporations did not suffice to bring it within s 51(xx). All members of the Court in the Concrete Pipes Case196 agreed that the provisions of ss 5 and 8 of the Australian Industries Preservation Act, held invalid in Huddart Parker, were laws with respect to corporations. And it was in the context of considering whether the Parliament had power to make a law "to govern and regulate the 196 (1971) 124 CLR 468 at 489 per Barwick CJ, 499 per McTiernan J, 511 per Menzies J, 512-513 per Windeyer J, 513 per Owen J, 515 per Walsh J, 525 per Crennan trading activities of corporations of the kind mentioned" in s 51(xx)197 that "it does not follow either as a logical proposition, or, if in this instance there be a difference, as a legal proposition, from the validity of those sections [of the Australian Industries Preservation Act], that any law which in the range of its command or prohibition includes foreign corporations or trading or financial corporations formed within the limits of the Commonwealth is necessarily a law with respect to the subject matter of s. 51 (xx.). Nor does it follow that any law which is addressed specifically to such corporations or some of them is such a law." The plaintiffs in the present matters attached a deal of significance to this statement, and on occasions in argument came close to submitting that Barwick CJ had decided that in no case could a law be a law with respect to constitutional corporations unless more was demonstrated than that the law was addressed specifically to such corporations. But Barwick CJ stated no such negative and absolute proposition. Rather, what was said was no more than the proper marking of a limit to what was being decided in a case where the law in question was addressed to all persons, not constitutional corporations in particular. And in any event, a negative proposition of the kind described would appear to assume that a court may take a piecemeal or sequential approach to characterisation of a law: by first considering whether one aspect of the law sufficed to make it a law with respect to a particular head of power before passing on to consider the whole of "the nature of the rights, duties, powers and privileges which [the law in question] changes, regulates or abolishes"199. That would not be a proper approach to the task. The plaintiffs also emphasised the statement by Menzies J200 that "[a] law is not to be described as with respect to the various persons or classes of persons 197 (1971) 124 CLR 468 at 525 per Gibbs J. 198 (1971) 124 CLR 468 at 489-490. 199 Fairfax v Federal Commissioner of Taxation (1965) 114 CLR 1 at 7 per Kitto J. See also Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union (2000) 203 CLR 346 at 386-387 [122], 411 [202], 416 [217], 200 (1971) 124 CLR 468 at 502. Crennan upon whom it casts obligations". They submitted that this was to be understood as rejection of the "object of command test". It is a statement that can be seen to have influenced the views expressed by Dawson J in The Tasmanian Dam Case and Re Dingjan. Further, the statement was made in the context of an argument that a law directed to all persons could be characterised as a law with respect to constitutional corporations. This was not because those bodies were the object of the law's command, but because those bodies were within the range of its command to all persons. By the time Fontana Films came to be decided, there had been controversy about what are "trading or financial corporations formed within the limits of the Commonwealth". In particular, in R v Trade Practices Tribunal; Ex parte St George County Council201, the Court had held that a county council, established under the Local Government Act 1919 (NSW) for "local government purposes", empowered to sell electricity and sell and install electrical fittings and appliances, and pursuing only those activities, was not a trading corporation. In his dissenting opinion, Barwick CJ had said202 that "a corporation whose predominant and characteristic activity is trading whether in goods or services" was a trading corporation. But this view did not then command the assent of a majority of the Court203. In R v Federal Court of Australia; Ex parte WA National Football League204, St George County Council was distinguished. Associations incorporated under associations incorporation legislation, whose principal objects were the promotion, control and management of Australian Rules football matches, were held to be trading corporations. Mason J said205: "'Trading corporation' is not and never has been a term of art or one having a special legal meaning. Nor, as the Chief Justice pointed out [in 201 (1974) 130 CLR 533. 202 (1974) 130 CLR 533 at 543. 203 cf Fencott v Muller (1983) 152 CLR 570 at 598-599. 204 (1979) 143 CLR 190. 205 (1979) 143 CLR 190 at 233. Crennan St George County Council], was there a generally accepted definition of the expression in the nineteenth century. Essentially it is a description or label given to a corporation when its trading activities form a sufficiently significant proportion of its overall activities as to merit its description as a trading corporation." As noted earlier, the correctness of this proposition is not in issue in these matters. Fontana Films concerned the validity of s 45D of the Trade Practices Act 1974 – a provision dealing with secondary boycotts. Taking account of what had been held in the Concrete Pipes Case, provisions of the Trade Practices Act 1974, other than s 45D, took a form which nowadays has become familiar. Whereas the Trade Practices Act 1965 considered in the Concrete Pipes Case took the form "No person shall ..."; "This prohibition extends to constitutional corporations", the 1974 Act generally took a form first considered and upheld in R v Australian Industrial Court; Ex parte CLM Holdings Pty Ltd206. Again, at the risk of undue abbreviation, the 1974 Act generally took the form of providing that, in the first instance, the Act is to have direct operation according to its terms, but also providing that, in addition to that operation, the Act should have further operation in accordance with provisions evidently intended to engage particular heads of power – interstate and international trade or commerce, foreign corporations, trading and financial corporations, territories, and so on. Section 45D of the Trade Practices Act 1974, however, took a different form. It prohibited any person, in concert with another, from engaging in conduct that hindered or prevented the supply or acquisition of goods or services by a third person to or from a fourth person (not being an employer of the first person) where the third person is a constitutional corporation and the conduct would have specified purposes or effects. Section 45D specified those purposes and effects differently according to whether the fourth person was or was not a corporation but those purposes and effects could be described generally as the inflicting of substantial loss on, or damage to, the third person's business. The command of s 45D was directed to any person; it imposed no obligation upon a corporation. The section was, however, designed to protect a 206 (1977) 136 CLR 235. Crennan corporation from certain conduct which was intended and likely to cause substantial loss or damage to its business. Section 45D in its application to trading corporations was held to be a valid law with respect to corporations. Certain other applications of the provisions were held invalid. Gibbs CJ pointed out207 that, like the aliens power (s 51(xix)), the corporations power is conferred "by reference to persons". He continued208: "However, having regard to the federal nature of the Constitution, it is difficult to suppose that the powers conferred by pars. (xix) and (xx) were intended to extend to the enactment of a complete code of laws, on all subjects, applicable to the persons named in those paragraphs. ... [I]n the s. 51(xx), extraordinary case of consequences would result if the Parliament had power to make any kind of law on any subject affecting such corporations. ... Other difficulties in relation to s. 51(xx) are caused by the need to construe the Constitution as a whole, and thus to reconcile par. (xx) with other parts of s. 51". the corporations described Although Gibbs CJ concluded209 that it was both unnecessary and undesirable to attempt to define the outer limits of s 51(xx), he did say210 that: "The words of par. (xx) suggest that the nature of the corporation to which the laws relate must be significant as an element in the nature or character of the laws, if they are to be valid ... In other words, in the case of trading and financial corporations, laws which relate to their trading and financial activities will be within the power." As to foreign corporations, he added211 that "the fact that the corporation is a foreign corporation should be significant in the way in which the law relates to 207 Fontana Films (1982) 150 CLR 169 at 181. 208 (1982) 150 CLR 169 at 181-182. 209 (1982) 150 CLR 169 at 182. 210 (1982) 150 CLR 169 at 182. 211 (1982) 150 CLR 169 at 183. Crennan In Fontana Films, the parties arguing against validity had sought to distinguish212 between a law which regulates or prohibits trading activities of a corporation (which was acknowledged to be a law with respect to the corporation) and a law which strikes at the activities of others because they interfere with the activities of such a corporation. They submitted that s 45D was of the latter character, and not a law with respect to corporations. Of this "When we speak of a law which regulates the trading activities of a trading corporation we mean a law which controls the subject matter by prohibiting the corporation from engaging in certain trading activities or permitting it so to do either absolutely or subject to condition. Such a law is within power because it necessarily operates directly on the subject of the power – it is a law about trading corporations. But when we speak of a law which protects the trading activities of a trading corporation our statement is not so specific. It may be understood as signifying a law which operates directly on the subject of the power. So understood the law is within power and valid. But it may be understood in a different sense so as to denote a law which, though it protects the trading activities of trading corporations, does so by a legal operation outside the subject matter of the power." Because this was an important focus of argument, the reasons stated by the Court in Fontana Films are to be understood accordingly. In particular, the statements made by Gibbs CJ about laws relating to the trading and financial activities of trading and financial corporations being within power are to be understood as responding to the arguments advanced in that case. They are not to be read as attempting an exhaustive statement of the ambit of the power. Gibbs CJ explicitly denied214 any intention of doing that. That said, it must be recognised that Gibbs CJ emphasised the importance of giving due weight to the words "foreign", "trading", and "financial" in considering the application of s 51(xx). 212 (1982) 150 CLR 169 at 172. 213 (1982) 150 CLR 169 at 205. 214 (1982) 150 CLR 169 at 182. Crennan 7(d) The Tasmanian Dam Case Section 10(2) of the World Heritage Properties Conservation Act 1983 (Cth) prohibited a body corporate that is a foreign corporation, is incorporated in a Territory or, not being incorporated in a Territory, is a trading corporation formed within the limits of the Commonwealth, from doing any of a number of specified acts in certain places. Section 10(3) prohibited such corporations from doing any act (not being unlawful by virtue of s 10(2)) that damaged or destroyed any property to which the section applied. Section 10(4) provided that it was unlawful for a trading corporation to do "for the purposes of its trading activities" any of the acts specified in s 10(2) in certain places. The Court held215 that s 10(4) was a law with respect to trading corporations. It is hardly surprising that the discussion in The Tasmanian Dam Case of the ambit of the corporations power was moulded by the terms of the legislation under consideration and the arguments advanced in the case. In particular, because s 10(4) focused upon the trading activities of a trading corporation, it is not surprising that much of what is said in the case about s 51(xx) looked to the connection between a law having both those features and the power to make laws with respect to trading corporations. In the present matters, the plaintiffs emphasised the conclusion216 of Dawson J (who dissented) that s 10 of the Act there in question was "bereft of any attribute which connects it with corporations other than the fact that the command which it contains is directed to trading and foreign corporations". And in the opinion of Dawson J, the fact that the law directed its command to the object of the power given by s 51(xx) did not suffice; more must be established to show that the law was a law with respect to constitutional corporations. Dawson J concluded that the reference, in s 10(4), to activities for the trading purposes of trading corporations did not suffice: the law was "not a law in which the character of a trading corporation has any significance"217. Because everything that a trading company does is "for trading purposes", the activities mentioned in the Act were not confined to "trading activities". 215 (1983) 158 CLR 1 at 119 per Gibbs CJ, 153 per Mason J, 179-180 per Murphy J, 241 per Brennan J, 271-272 per Deane J. 216 (1983) 158 CLR 1 at 317. 217 (1983) 158 CLR 1 at 317. Crennan The plaintiffs in the present matters submitted that the analysis made by Dawson J in The Tasmanian Dam Case, and subsequently amplified in Re Dingjan, embodied the distinctive character test and is the preferable approach to determining whether a law is supported by s 51(xx). It is an approach which would read the power as confined to making laws with respect to the trading activities of Australian trading corporations and the financial activities of Australian financial corporations. But that, of course, is not what s 51(xx) says. It is an approach that presents a particular difficulty with foreign corporations. The character of a foreign corporation is fixed by its status, not by its activities. The power to legislate with respect to foreign corporations would be very narrow if the law must focus upon the status of the corporation. There is no immediately evident reason for there to be such disconformity between the ambit of legislative power with respect to Australian corporations and the ambit of legislative power with respect to foreign corporations. South Australia sought to meet this difficulty by contending that the legislative power given with respect to foreign corporations was directed to the activities of such corporations, in Australia, that were "foreign activities" for those corporations. It was submitted that because most, if not all, of the activities undertaken in Australia by a foreign corporation would bear the character of foreign activities (when viewed from the standpoint of that corporation), a wider range of laws regulating the activities in Australia, or matters related to the activities in Australia, of foreign corporations, may be regarded as laws with respect to that subject-matter. The submission should be rejected. It depends upon assessing what is "foreign" from two, opposite, points of view: a foreign corporation is one formed outside Australia, and in that sense is foreign to Australia, but a foreign activity is one occurring within Australia but foreign to the corporation because it occurs here, not overseas. There is no textual, historical or other reason to adopt that approach. 7(e) Re Dingjan Section 127A(2) of the Industrial Relations Act 1988 (Cth) gave power to the AIRC to review a contract for services, binding on an independent contractor, on the grounds that the contract was unfair, harsh, or against the public interest. This provision applied in relation to a contract to which a constitutional corporation is a party, and to a contract relating to, or entered into for the Crennan purposes of, the business of a constitutional corporation. But the provision also applied to a contract relating to trade or commerce to which s 51(i) of the Constitution applied, a contract so far as it affects matters that take place in or are otherwise connected with a Territory, and a contract to which the Commonwealth or a Commonwealth authority is a party. Was this a law with respect to constitutional corporations? A majority of the Court held in Re Dingjan218 it was not. Each member of the majority expressed the reasons for concluding that the provision was invalid in different words. There are obvious difficulties, then, in proffering any single comprehensive statement of the reasoning. It is nonetheless right to say that the majority focused upon whether a law permitting review of a contract "relating to the business" of a constitutional corporation had a more than insubstantial, tenuous or distant connection219 with the relevant head of power. Holding that it did not, the majority concluded that it was not possible to read down or sever the provision and that, accordingly, it was wholly invalid. The explanations given for why the impugned law lacked the requisite connection with the relevant head of power contained a number of elements which should be identified. Dawson J, amplifying the approach reflected in his reasons in The Tasmanian Dam Case, said220 that "[i]t has long been recognised that a law is not a law with respect to foreign corporations or trading or financial corporations within the meaning of s 51(xx) of the Constitution merely because its provisions are addressed to constitutional corporations" (emphasis added). Because s 51(xx) is a power about persons, Dawson J said221 that "a different approach is required in determining whether a law falls within its terms" (emphasis added). Before a law may be said to be with respect to constitutional corporations "the way in which the law operates upon them must be such that they impart their character to the law ... [T]he fact that it is a trading or financial corporation should be significant in the way in which the law relates to it."222 218 (1995) 183 CLR 323 at 339 per Brennan J, 347 per Dawson J, 354 per Toohey J, 219 Melbourne Corporation (1947) 74 CLR 31 at 79 per Dixon J. 220 (1995) 183 CLR 323 at 344. 221 (1995) 183 CLR 323 at 345. 222 (1995) 183 CLR 323 at 346. Crennan Brennan J, though saying he saw no error in the approach taken by Gibbs CJ in Fontana Films223 and by Dawson J in The Tasmanian Dam Case224, sought to give that approach further content, at least for the case where a law "applies to constitutional corporations and to other persons indifferently"225, by postulating226 a "test of discriminatory operation" – "a law [is] with respect to constitutional corporations ... by reason of the differential effect on constitutional corporations which it produces". The dissenting members of the Court in Re Dingjan, Mason CJ, Deane and Gaudron JJ, took a view of the reach of s 51(xx) wider than that of the majority. Particular reference need now be made only to the reasons of Gaudron J (with which Deane J agreed). Her Honour's reasoning proceeded by the following steps227. First, the business activities of corporations formed within Australia signify whether they are trading or financial corporations, and the main purpose of the power to legislate with respect to foreign corporations must be directed to their business activities in Australia. Second, it follows that the power conferred by s 51(xx) extends "at the very least"228 to the business functions and activities of constitutional corporations and to their business relationships. Third, once the second step is accepted, it follows that the power "also extends to the persons by and through whom they carry out those functions and activities and with whom they enter into those relationships"229. This understanding of s 51(xx) was subsequently amplified by Gaudron J in her reasons in Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union230 where her Honour said: 223 (1982) 150 CLR 169 at 182. 224 (1983) 158 CLR 1 at 316. 225 (1995) 183 CLR 323 at 336. 226 (1995) 183 CLR 323 at 337. 227 (1995) 183 CLR 323 at 365. 228 (1995) 183 CLR 323 at 365. 229 (1995) 183 CLR 323 at 365. 230 (2000) 203 CLR 346 at 375 [83]. Crennan "I have no doubt that the power conferred by s 51(xx) of the Constitution extends to the regulation of the activities, functions, relationships and the business of a corporation described in that sub-section, the creation of rights, and privileges belonging to such a corporation, the imposition of obligations on it and, in respect of those matters, to the regulation of the conduct of those through whom it acts, its employees and shareholders and, also, the regulation of those whose conduct is or is capable of affecting its activities, functions, relationships or business."231 This understanding of the power should be adopted. It follows, as Gaudron J said232, that the legislative power conferred by s 51(xx) "extends to laws prescribing the industrial rights and obligations of corporations and their employees and the means by which they are to conduct their industrial relations". Distinctive character and discriminatory operation On its face, there seems no reason to consider that the test of discriminatory operation adopted by Brennan J in Re Dingjan would not be satisfied by any law which singled out constitutional corporations as the object of statutory command. That is, any law taking the form "a constitutional corporation shall ..." or "shall not ..." would have an effect on constitutional corporations but none on any other person; there would be a differential effect. Yet the plaintiffs in the present matters contended that this was not what Brennan J intended by the test. Rather, they sought to treat all that had been said by Gibbs CJ in Fontana Films and The Tasmanian Dam Case, by Dawson J in 231 The passage appears in reasons which are dissenting, but not on s 51(xx); since the majority, unlike her Honour, found the impugned legislation to be supported by s 51(xxxv), it was not necessary for them to consider s 51(xx) (see (2000) 203 CLR 346 at 360 [29] per Gleeson CJ, 422 [231] per Gummow and Hayne JJ, 449 [302] per Callinan J). Her Honour's treatment, immediately before the passage cited, of one particular aspect of the legislation in issue in the case does not qualify the principle stated. So much is made clear by her Honour's conclusion, in the next paragraph of her reasons ((2000) 203 CLR 346 at 375 [84]), that the legislation in question operated "neither to prescribe the industrial rights and obligations of corporations and their employees nor to regulate the means by which they are to conduct their industrial relations". 232 (2000) 203 CLR 346 at 375 [83]. Crennan The Tasmanian Dam Case and later in Re Dingjan, and by Brennan J in Re Dingjan as generally equivalent statements of a distinctive character test. Thus the plaintiffs contended that to ask whether the particular character of a corporation (as foreign, trading or financial) is "significant" in the way in which a law relates to it, and to search for "discriminatory operation", inserts a different, or an additional, filter in the process of deciding whether there is a sufficient connection between the relevant head of power and the law in question. The better view is that there is an important difference between the analysis made by Dawson J and that advanced by Brennan J in Re Dingjan. In particular, it may greatly be doubted that Brennan J intended, in Re Dingjan, to indicate that a law which imposes a duty or liability, or confers a right or privilege, on a constitutional corporation is not a law with respect to constitutional corporations unless more is shown. Rather, the better view is that his Honour's test of discriminatory operation was intended to apply chiefly, perhaps only, where the law applies to constitutional corporations and to other persons indifferently. But if such a test is to be applied in deciding whether a law applying to all persons indifferently is a law with respect to constitutional corporations, there is no evident basis upon which a law which imposes a duty or liability, or confers a right or privilege, only on a constitutional corporation should not be characterised as a law with respect to constitutional corporations. And, more particularly, there is no evident basis upon which laws of the kind described by Gaudron J in Re Dingjan233 and later in Re Pacific Coal234 should not be characterised as laws with respect to that subject-matter. That is, laws regulating "the activities, functions, relationships and the business" of a constitutional corporation, and laws creating "rights, and privileges belonging to such a corporation, [imposing] obligations on it and, in respect to those matters, [regulating] the conduct of those through whom it acts" including its employees, and regulating "those whose conduct is or is capable of affecting its activities, functions, relationships or business" would, on this test, be properly characterised as laws with respect to constitutional corporations. What the plaintiffs identify as an object of command test (which they contend should be rejected) is then seen to be indistinguishable from what is the 233 (1995) 183 CLR 323 at 363. 234 (2000) 203 CLR 346 at 375 [83]. Crennan logical extension of a discriminatory operation test of the kind described by Brennan J. But whether or not that is so, what is now important is that the plaintiffs in the present matters contended that a special rule should be adopted for considering whether a law is supported by s 51(xx) – a distinctive character test which was to be understood as substantially the same as a test of discriminatory operation. A need to limit s 51(xx)? An important element underpinning this argument, and indeed all of the plaintiffs' arguments about s 51(xx), was that it is necessary to limit the reach of the power. The step of taking "a different approach"235 to s 51(xx) was said by Dawson J to be required because s 51(xx) is a power with respect to persons. But what necessarily underpins the proposition that a different approach is required to the task of determining whether a law is supported by s 51(xx) is an implicit assertion about federal balance and, in particular, an implicit assertion that to give the ordinary scope to the legislative power with respect to the particular persons mentioned in s 51(xx) could or would distort that balance. So much was made explicit by Gibbs CJ in Fontana Films236 – "extraordinary consequences would result if the Parliament had power to make any kind of law on any subject affecting such corporations". And if there is no underlying assertion about federal balance, there could be no reason to adopt a different approach to determining the sufficiency of connection between an impugned law and the relevant head of power. The bare fact that s 51(xx) is a power to legislate with respect to particular persons rather than functions, activities or relationships, requires no such conclusion. Each of the arguments advanced by the plaintiffs proffered a form of limit on the reach of s 51(xx): only "external" relationships, "something more" than object of command, "distinctive character" or "discriminatory operation". As noted earlier, because the new Act prescribes norms which regulate or affect the relationship between constitutional corporations and their employees, the limits proffered by the plaintiffs must be seen as contentions about what is meant by a law being "with respect to" constitutional corporations. 235 Re Dingjan (1995) 183 CLR 323 at 345. 236 (1982) 150 CLR 169 at 182. Crennan Again, as noted earlier, it is well established that the heads of legislative power in s 51 are to be construed "with all the generality which the words used admit"237. But no question arises in these matters about what are constitutional corporations238. The existence of such bodies and the new Act's engagement with them are assumed. From time to time reference will be found in the cases to powers in s 51 being "plenary". To describe s 51(xx) as a "plenary" power is at best unhelpful in the present matters and, at worst, would be misleading. It is unhelpful because neither the identity nor the characteristics of the persons who are the subject of s 51(xx) is in issue. It would be misleading if it suggested that some new and wider test was to be applied in deciding whether a law is a law with respect to those persons. Reference has often been made in the cases239 to what are said to be the possible consequences of concluding that a law whose object of command is only constitutional corporations is a valid law. In Huddart Parker, Higgins J spoke240 of possibilities that he saw as distorting constitutional arrangements. Reference was made to the possibility of the federal Parliament framing a new system of libel laws applicable to newspapers owned by corporations, and to licensing Acts creating a new scheme of administration and of offences applicable only to hotels belonging to corporations. In part, reference to such consequences seeks to present possible social consequences that it is said could flow if further legislation is enacted, and which it is said are to be seen as absurd or inconvenient, as a reason to confine the reach of the legislative power. Section 51(xx), like other powers, should not be given a meaning narrowed by an apprehension of extreme examples and distorting 237 R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225-226. 238 See [55] and [58]. 239 Huddart Parker (1909) 8 CLR 330 at 409 per Higgins J; Bank of NSW v The Commonwealth ("the Banking Case") (1948) 76 CLR 1 at 202 per Latham CJ; Fontana Films (1982) 150 CLR 169 at 182 per Gibbs CJ; The Tasmanian Dam Case (1983) 158 CLR 1 at 315 per Dawson J. 240 (1909) 8 CLR 330 at 409. Crennan possibilities of its application to future laws241. While there may be room for debate about whether the particular examples proffered by Higgins J are properly to be characterised as extreme examples or distorting possibilities, what is plain is that, as Professor Zines has written242: "It is clear that any power of the Commonwealth, on the most restricted or the widest interpretation, might, if the federal Parliament were so inclined, produce results which, when viewed together with State laws, are inefficient, socially bad or downright ridiculous. ... That does not mean that the powers concerned should be construed restrictively so as to prevent those results. The object of the power, as an aid in its interpretation, is not to be seen as an accumulation of desirable laws." (emphasis added) The plaintiffs' arguments proffering limits to the reach of s 51(xx) were not confined, however, to arguments about the social or political utility of parallel systems of laws dealing in the one case with constitutional corporations and in the other with all other persons. Rather, the arguments about consequences went further than postulating absurd or inconvenient social consequences and explicitly or implicitly invoked notions of federal balance. No party sought to challenge the approach to constitutional construction that underpinned the decision in the Engineers' Case to reject the doctrine of implied immunities and the doctrine of reserved powers. But it is important not to overstate either the propositions about constitutional construction applied in and after the Engineers' Case or the consequences of their adoption. The doctrine of implied immunities, or as Sir Robert Garran described it243, "the reciprocal doctrine of non-interference", was founded in an implication. 241 XYZ v Commonwealth (2006) 80 ALJR 1036 at 1047-1048 [39]; 227 ALR 495 at 507; Singh v The Commonwealth (2004) 222 CLR 322 at 384 [155]; Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 43 [32]; Grain Pool (2000) 202 CLR 479 at 492 [16]; Egan v Willis (1998) 195 CLR 424 at 505 [160]; Kartinyeri (1998) 195 CLR 337 at 380-381 [87]-[88]. 242 Zines, "Characterisation of Commonwealth Laws", in Lee and Winterton (eds), Australian Constitutional Perspectives, (1992) 33 at 59. 243 Garran, "The Development of the Australian Constitution", (1924) 40 Law Quarterly Review 202 at 215. Crennan Whether that implication was to be drawn depended greatly upon how the constitutional structure was viewed. If, as the founding members of the Court (Griffith CJ, Barton and O'Connor JJ) saw it, the Constitution created a federation of separate, co-ordinate, governments, each substantially independent of the other, supreme in its own sphere but each of which had yielded some of their powers to a central government, the implication of a reciprocal doctrine of non-interference could be described244 as a necessary implication. But if the inquiry begins from a different starting point – the constitutional text, rather than a view of the place of the States that is formed independently of that text – a different conclusion is reached. There is then no necessity to imply a reciprocal doctrine of non-interference. So, too, the doctrine of reserved powers depended upon drawing negative implications from the positive grants of legislative power to the federal Parliament, and sought to draw support for that approach from s 107 of the Constitution. As Dixon J pointed out in Melbourne Corporation v The Commonwealth245, "the attempt to read s 107 as the equivalent of a specific grant or reservation of power lacked a foundation in logic". But no less fundamentally, the doctrine of reserved powers could be supported only if the Constitution was understood as preserving to the States some legislative power formerly held by the unfederated Colonies. Thus, like the doctrine of implied immunities, much depended upon what was taken as the starting point for the analysis. As Windeyer J rightly pointed out in the Payroll Tax Case246, the Engineers' Case is not to be seen "as the correction of antecedent errors or as the uprooting of heresy". There is no doubt that, as he continued247, "[t]o return today to the discarded theories would indeed be an error and the adoption of a heresy". But the Engineers' Case was both a consequence of developments outside the law courts (not least a sense of national identity emerging during and 244 The Federated Amalgamated Government Railway and Tramway Service Association v The New South Wales Railway Traffic Employés Association (1906) 4 CLR 488 at 505. 245 (1947) 74 CLR 31 at 83. 246 (1971) 122 CLR 353 at 396. 247 (1971) 122 CLR 353 at 396. Crennan after the First World War) and a cause of future developments. As Windeyer J went on to say248: "That is not surprising for the Constitution is not an ordinary statute: it is a fundamental law. In any country where the spirit of the common law holds sway the enunciation by courts of constitutional principles based on the interpretation of a written constitution may vary and develop in response to changing circumstances. This does not mean that courts have transgressed lawful boundaries: or that they may do so." What was discarded in the Engineers' Case was an approach to constitutional construction that started in a view of the place to be accorded to the States formed independently of the text of the Constitution. The Engineers' Case did not establish that no implications are to be drawn from the Constitution. So much is evident from Melbourne Corporation249 and from R v Kirby; Ex parte Boilermakers' Society of Australia ("the Boilermakers' Case")250. Nor did the Engineers' Case establish that no regard may be had to the general nature and structure of the constitutional framework which the Constitution erects. As was held in Melbourne Corporation251: "The foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities." And because the entities, whose continued existence is predicated by the Constitution, are polities, they are to continue as separate bodies politic each having legislative, executive and judicial functions. But this last observation does not identify the content of any of those functions. It does not say what those legislative functions are to be. 248 (1971) 122 CLR 353 at 396-397. 249 (1947) 74 CLR 31. 250 (1956) 94 CLR 254. 251 (1947) 74 CLR 31 at 82. See also Austin v The Commonwealth (2003) 215 CLR Crennan In the present matters, the appeals made to notions of federal balance, no matter whether the appeal was explicit or only implicit, were propositions about a "balance" of legislative power between the Commonwealth and the States. Two points must be made about those propositions. First, as Dixon J said252 in Melbourne Corporation: "The position of the federal government is necessarily stronger than that of the States. The Commonwealth is a government to which enumerated powers have been affirmatively granted. The grant carries all that is proper for its full effectuation. Then supremacy is given to the legislative powers of the Commonwealth." Secondly, again as Dixon J pointed out253 in Melbourne Corporation, the framers "appear ... to have conceived the States as bodies politic whose existence and nature are independent of the powers allocated to them" (emphasis added). Thus when it is said that there is a point at which the legislative powers of the federal Parliament and the legislative powers of the States are to be divided lest the federal balance be disturbed, how is that point to be identified? It cannot be identified from any of the considerations mentioned thus far in these reasons, and no other basis for its identification was advanced in argument. Whether a basis for choosing a point of balance is identified or not, the fundamental question which lies behind the plaintiffs' submissions is: what exactly is the content of the proposition that a particular construction of s 51(xx) would, or would not, impermissibly alter the federal balance? It is a proposition that stops well short of asserting that the favoured construction must be adopted lest the States could no longer operate as separate governments exercising independent functions. Instead it is advanced by proposing particular limitations to the connection which must be established to demonstrate that a law is a law with respect to constitutional corporations and is advanced in that form on the basis that the result is said to be evidently desirable, even necessary. It may be suggested that the proposition should be criticised as being more a political proposition than a legal proposition. But "[t]he Constitution is a political instrument. It deals with government and governmental powers."254 To state that the proposition is political rather than legal may, therefore, have a specious 252 (1947) 74 CLR 31 at 82-83. 253 (1947) 74 CLR 31 at 82. 254 Melbourne Corporation (1947) 74 CLR 31 at 82. Crennan plausibility but really be meaningless255 and the suggested criticism would be ill-founded. But to be valuable, the proposition, that a particular construction of s 51(xx) would or would not impermissibly alter the federal balance, must have content, and the plaintiffs made no attempt to define that content. General conclusions It is convenient to summarise at this point the conclusions that follow from the preceding discussion of the arguments about s 51(xx), before dealing with the arguments advanced by the parties concerning the relationship between s 51(xxxv) and s 51(xx). The distinction between external and internal relationships of corporations proffered by the plaintiffs as a limit to the legislative power conferred by s 51(xx) should be rejected as an inappropriate and unhelpful distinction. As explained earlier, transposing a distinction originating in choice of law rules into the present context is inappropriate. The distinction finds no reflection in the Convention Debates or the drafting history of s 51(xx) and, in any event, is unstable. Adopting it would distract attention from the tasks of construing the constitutional text, identifying the legal and practical operation of the impugned law, and then assessing the sufficiency of the connection between the impugned law and the head of power. In so far as the plaintiffs contended that a test of distinctive character or discriminatory operation is to be adopted it is enough to say that, as these reasons will explain, the impugned provisions of the Amending Act which depend upon s 51(xx) either single out constitutional corporations as the object of statutory command (and in that sense have a discriminatory operation) or, like the legislation considered in Fontana Films, are directed to protecting constitutional corporations from conduct intended and likely to cause loss or damage to the corporation. In so far as the plaintiffs' contentions required tests of distinctive character or discriminatory operation to be understood as inserting a new or different filter into the process of characterisation those contentions should be rejected. A law which prescribes norms regulating the relationship between constitutional corporations and their employees, or affecting constitutional corporations in the manner considered and upheld in Fontana Films or, as Gaudron J said in Re Pacific Coal256, "laws prescribing the industrial rights and obligations of [constitutional] corporations and their employees and the means by 255 cf Melbourne Corporation (1947) 74 CLR 31 at 82. 256 (2000) 203 CLR 346 at 375 [83]. Crennan which they are to conduct their industrial relations" are laws with respect to constitutional corporations. PART III – THE RELATIONSHIP BETWEEN s 51(xxxv) AND s 51(xx) The parties' submissions The submissions by which the various plaintiffs sought to elaborate the arguments respecting the relationship between s 51(xxxv) and s 51(xx) of the Constitution differed in emphasis and perhaps also in character. The Australian Workers' Union ("the AWU") identified the key provisions of the new Act as giving to the Act the character of a law with respect to industrial relations generally. The AWU (and New South Wales) relied upon s 51(xxxv) as providing a powerful reason, even without a substantive limitation being drawn from s 51(xxxv), favouring a narrow construction of s 51(xx) so as to deny its use to provide for industrial relations. In the course of oral argument, the AWU submitted that s 51(xxxv) indicated at least prima facie the extent of federal legislative power to deal with industrial regulation and industrial matters. The qualification was that the nature of other powers, specifically s 51(i) and s 51(vi), but not s 51(xx), might compel a different conclusion. Laws with respect to interstate and foreign commerce, and defence might encompass industrial matters. But, such instances apart, unless the nature of any one of the other powers in s 51 so suggested, the power should not be read as extending to "similar matters" to those dealt with in s 51(xxxv). The result was said to be that the selection in s 51(xxxv) of one method of preventing and settling industrial disputes and the limitation of that paragraph to disputes extending beyond the limits of any one State indicated that other powers, particularly s 51(xx), should not be construed so as to support laws without those limitations. The AWU submitted that there is nothing in s 51(xx) which suggests it should be treated as dealing with the subject of employment. (This submission by the AWU went beyond the consequences for Pts 7, 8, 9 and 13 of the new Act; it went also to the central definition of "employer" in s 6(1)(a), which speaks of "a constitutional corporation".) In the course of their treatment of the exhaustive operation of Ch III of the Constitution in the Boilermakers' Case257, Dixon CJ, McTiernan, Fullagar and 257 (1956) 94 CLR 254. 258 (1956) 94 CLR 254 at 270. Crennan "affirmative words appointing or limiting an order or form of things may have also a negative force and forbid the doing of the thing otherwise"259. The submissions by the AWU implicitly relied upon a negative implication of the kind identified in the Boilermakers' Case. However, it will always be necessary first to identify the particular "order or form of things" upon which the negative implication may then operate. It is here that several difficulties with the submissions of the AWU appear. First, the text of s 51(xxxv) (as the Commonwealth stressed and Victoria recognised) is concerned with a narrower subject-matter than industrial matters or relations and their regulation. Legislation may prescribe, independently of any mechanism for the resolution of disputes, a wide range of matters which may fairly be regarded as affecting the mutual relations of employers and employees who from time to time are engaged in an industry260. Part 7 of the Act, which prescribes what are identified in s 171 as "key minimum entitlements of employment", is a law of this description. Why should the heads of power, particularly s 51(xx), which are relied upon by the Commonwealth as supporting a law such as Pt 7, be construed as not doing so for the reason that s 51(xxxv) identifies particular means for the prevention and settlement of certain industrial disputes? The other heads of power should not be so construed. Secondly, it is contrary to established principle, in the case of a law which may bear several characters, one of which attracts a particular head of legislative power, to ask, as a requirement of validity, whether there is anything in that head of power which suggests it may be used to deal with those other matters. It will be convenient to return to this point later in these reasons. The third point arising from the AWU's submissions concerns reliance by the AWU upon the settled body of authority which construes what the AWU 259 See also Anthony Hordern & Sons Ltd v Amalgamated Clothing and Allied Trades Union of Australia (1932) 47 CLR 1 at 7; R v Wallis (1949) 78 CLR 529 at 550; Minister for Immigration and Multicultural and Indigenous Affairs v Nystrom [2006] HCA 50. 260 cf McKernan v Fraser (1931) 46 CLR 343 at 374. Crennan identified as the guarantee of just terms provided by s 51 of the Constitution. In Attorney-General (Cth) v Schmidt, Dixon CJ remarked261: "It is hardly necessary to say that when you have, as you do in par (xxxi), an express power, subject to a safeguard, restriction or qualification, to legislate on a particular subject or to a particular effect, it is in accordance with the soundest principles of interpretation to treat that as inconsistent with any construction of other powers conferred in the context which would mean that they included the same subject or produced the same effect and so authorized the same kind of legislation but without the safeguard, restriction or qualification." (emphasis added) These remarks were cited in the joint judgment of the whole Court in Bourke v State Bank of New South Wales262, a decision to which it will be necessary to return. The AWU referred in particular to the qualification, recently applied in Theophanous v Commonwealth263, that the requirement of just terms does not reach laws made under heads of power where "just terms" is an inconsistent or incongruous notion. It is sufficient, at this stage, to remark that there is nothing incongruous or inconsistent with a grant of power to legislate with respect to trading corporations formed within the limits of the Commonwealth for the power to be exercised to regulate the terms and conditions of the employment of persons by such corporations, with or without providing also for the means of resolving or preventing disputes on those subjects. Victoria took its preferred stand on the footing that, as a matter of substantive limitation, the Parliament of the Commonwealth lacks the power to enact a law with respect to trading corporations formed within the limits of the Commonwealth which also has the character of a law with respect to conciliation and arbitration for the prevention and settlement of industrial disputes within the limits of any one State. The substantive limitation upon the entry of federal law into the sphere of industrial relations is said to be that any industrial dispute so regulated must extend beyond the limits of any one State and the mechanism adopted must be conciliation and arbitration. 261 (1961) 105 CLR 361 at 371-372. 262 (1990) 170 CLR 276 at 285-286. 263 (2006) 80 ALJR 886; 226 ALR 602. Crennan None of the various submissions by the plaintiffs should be accepted. Their rejection is favoured by a consideration of the text and structure of the Constitution and by the course of authority in this Court since at least the demise of the reserved powers doctrine in 1920. That outcome is supported also by recourse to the provenance of s 51(xxxv) to identify the contemporary meaning in 1900 of the language used in that paragraph and the subject to which that language was directed264. The plaintiffs made no argument that their submissions were to be supported by the facts that the Conciliation and Arbitration Act 1904 (Cth) was cast in the terms it was, or that much litigation in this Court concerning the operation of the 1904 Act centred upon s 51(xxxv). Those considerations were rightly seen as wholly irrelevant to the task at hand. Text, structure and authority Perusal of the Convention Debates together with general historical knowledge of the period in which the Constitution took shape shows that in Australia, as elsewhere, there was concern with both the public disorder and the economic hardship which attended the strikes and lock-outs used by "capital" and "labour" in their disputes. This was the era of the London dock strike of 1889, the Homestead and Pullman strikes of 1892 and 1894 in the United States, the maritime strike of 1890 in Australia and New Zealand and the great shearers strike of 1891 in Australia. The Report of the Royal Commission on Strikes which was established following the maritime strike and reported to the New South Wales Governor in 1891 ("the NSW Royal Commission") described industrial strife as "the great social problem of the age"265. The Report also identified the employment of 264 See Cole v Whitfield (1988) 165 CLR 360 at 385; Re Federated Storemen and Packers Union of Australia; Ex parte Wooldumpers (Vic) Ltd (1989) 166 CLR 311 265 Paragraph III of the Report. The President of the Royal Commission was Dr Garran MLC, father of Sir Robert Garran: Garran, Prosper the Commonwealth, (1958) at 55-59. References to the considerable body of literature upon the subject were collected in Reeves, State Experiments in Australia and New Zealand, vol 2, (1902) at 69. Reeves was the Minister for Labour in New Zealand and leading proponent of reforms in that country; with Kingston, he shares the credit for the compulsory scheme of conciliation and arbitration: Mitchell, "State Systems of (Footnote continues on next page) Crennan non-unionists as "rapidly becoming the chief ground of contention between employers and employed"266. The existence of jurisdiction under the New Zealand legislation to direct in an award preferential engagement of union members was to be the issue in Taylor & Oakley v Mr Justice Edwards267. In the United Kingdom, the dispute giving rise to Quinn v Leathem268 arose from the engagement of non-union labour. There is a theme running through the evidence of the 55 witnesses (including Sir Samuel Griffith, Mr Barton and Mr Kingston) who gave evidence to the NSW Royal Commission that the cruelty and brutality they saw in accounts of industrial disputation in other countries should not become the norm in Australia. Something had to be done. In his evidence, Justice Windeyer emphasised that the consequences of industrial strife were so significant for the public as a whole as to create a right, and perhaps a duty, on the part of government to intervene, not only to enforce public safety by available legal means, but to devise means to prevent disputation "going to extremes"269. With that background in mind, it was to be expected that a new instrument of government such as the Constitution would encompass these matters, and do so at several levels. One arm of the defence power conferred by s 51(vi) is "the control of the forces to execute and maintain the laws of the Commonwealth"; on the application of the Executive Government of a State, the Commonwealth should protect the State "against domestic violence" (s 119)270. In their work271, Quick and Garran discussed the concept of "domestic violence" in s 119 with detailed reference to the decision of the Supreme Court of the United States in Conciliation and Arbitration: The Legal Origins of the Australasian Model", in Macintyre and Mitchell (eds), Foundations of Arbitration, (1989) 74 at 93-96. 266 Paragraph V. 267 (1900) 18 NZLR 876. 268 [1901] AC 495; cf McKernan v Fraser (1931) 46 CLR 343. 269 Royal Commission on Strikes – Précis of Evidence, (1891) at 157 (answer to question 6453). 270 See Re Aird; Ex parte Alpert (2004) 220 CLR 308 at 327-328 [61]. 271 The Annotated Constitution of the Australian Commonwealth, (1901) at 964-965. Crennan In re Debs272 which supported the intervention of the federal government in the Pullman Strike to break the strike by force. At another level, and in s 51(xxxv) in direct terms, the Constitution provided legislative means to achieve the second objective which Justice Windeyer had identified, namely, to prevent industrial disputation going to extremes. relations Industrial terms and conditions of intimately concerns employment and the state of the workplace. Changes therein might alleviate industrial disputation without the laws making these changes also being laws providing for the settlement of industrial disputes. As remarked earlier in these reasons, Pt 7 of the new Act, dealing with minimum conditions, is a law of this description. The powers conferred by s 51(i) and s 98 of the Constitution were relied on, for example, to support the enactment of the Seamen's Compensation Act 1911 (Cth)273. The same may be said of the posts and telegraphs power, as is illustrated by the federal compensation legislation considered in Telstra Corporation Ltd v Worthing274. Section 51(xxxv) speaks of the use of particular means to prevent and settle industrial disputes of a certain geographical character. Why, as Victoria particularly would have it, should the text of the Constitution be so read as to pre-empt the exercise of other heads of legislative power to deal with industrial disputations to which s 51(xxxv) could not apply? To answer that question it is necessary first to deal with some general and settled propositions respecting the scope of the various heads of legislative power and their interrelation. These propositions demonstrate that in the course of interpretation of the Constitution much has changed since 1908 when Higgins J identified "[t]he 272 158 US 564 at 582 (1895). 273 Australian Steamships Ltd v Malcolm (1914) 19 CLR 298; cf Owners of SS Kalibia v Wilson (1910) 11 CLR 689, respecting the invalidity of the Seamen's Compensation Act 1909 (Cth). 274 (1999) 197 CLR 61. Crennan doctrine of unconstitutionality in legislation [as] really a branch of the law as to powers" and referred to the text of Farwell on Powers275 on that subject276. First, as to motive. In Huddart Parker Ltd v The Commonwealth277, Dixon J emphasised that once legislative power over a subject-matter is established it is irrelevant to inquire into the motives for its exercise. In the same "Given the appropriate subject matter, the Commonwealth Parliament may prohibit as well as it may restrict; it may remove restrictions, alter restrictions or add restrictions; it may encourage or discourage; it may facilitate or obstruct. The phraseology is political, and question-begging terms necessarily abound." Isaacs J had spoken to the same effect in The State of New South Wales v The Commonwealth; The Commonwealth v The State of New South Wales ("the Wheat Case")279. There is a further general proposition that "a law with respect to a subject-matter within Commonwealth power does not cease to be valid because it affects a subject outside power or can be characterized as a law with respect to a subject-matter outside power"280. That proposition, however, does not apply when, as it was put in Bourke v State Bank of New South Wales281, "the second subject-matter with respect to which the law can be characterized is not only outside power but is the subject of a positive prohibition or restriction" (emphasis added). That positive prohibition or restriction may merely confine the ambit of the particular head of legislative power within which it is found, or it 275 Farwell and Sheldon, A Concise Treatise on Powers, 2nd ed (1893) at 298. 276 Jumbunna Coal Mine (1908) 6 CLR 309 at 316-317. 277 (1931) 44 CLR 492 at 515. See also Murphyores (1976) 136 CLR 1 at 6, 8, 9, 11, 278 (1931) 44 CLR 492 at 526. 279 (1915) 20 CLR 54 at 98. 280 Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 285. 281 (1990) 170 CLR 276 at 285. Crennan may be of general application. If the latter, then the other paragraphs in s 51 are to be construed as subject to the limitation. In Bourke itself, it was held that the phrase in s 51(xiii) "other than State banking" imposes a restriction upon federal legislative power generally, rather than a restriction only upon the ambit of s 51(xiii). Other examples of positive prohibitions or restrictions are found in the paragraphs of s 51 dealing with taxation (s 51(ii)) – "but so as not to discriminate between States or parts of States"; bounties (s 51(iii)) – "but so that such bounties shall be uniform throughout the Commonwealth"; insurance (s 51(xiv)) – "other than State insurance"; and medical and dental services (s 51(xxiiiA)) – "but not so as to authorize any form of civil conscription"282. Paragraph (xxxv) is to be read as a whole; it does not contain any element which answers the description in Bourke of a positive prohibition or restriction upon what otherwise would be the ambit of the power conferred by that paragraph. Accordingly, there does not arise the further question addressed in Bourke, namely, whether other paragraphs of s 51, in particular par (xx), are to be construed subject to a positive prohibition or restriction found elsewhere, and, in particular, in s 51(xxxv). The phrase "conciliation and arbitration" identifies a species of process or procedure embarked upon or engaged in with the objectives introduced by the word "for", namely, the prevention and settlement of certain industrial disputes, those "extending beyond the limits of any one State". The AWU submits that the latter words are "functionally equivalent" to the imposition of a direct limit on the powers of the Parliament of the Commonwealth "to deal with industrial matters". But the constitutional text (and, as will appear, its origins to be seen in the Convention Debates) treats the characteristic of interstate industrial disputation as the object of the application of processes and procedures of conciliation and arbitration. The text of par (xxxv), like that of par (i), expresses a compound conception; the paragraph contains within it, and not as an exception or reservation upon what otherwise would be its scope, the element of interstate disputation. 282 See, as to s 51(xxiiiA), British Medical Association v The Commonwealth (1949) 79 CLR 201. Crennan The course of authority The course of authority in this Court denies to par (xxxv) a negative implication of exclusivity which would deny the validity of laws with respect to other heads of power which also had the character of laws regulating industrial relations in a fashion other than as required by par (xxxv). In Re Maritime Union of Australia; Ex parte CSL Pacific Shipping Inc283, the Court upheld the validity of laws pertaining to the relationship between employers and maritime employees, so far as they were supported by s 51(i) of the Constitution. In this way, the prescience of Dr Quick in 1898 was further vindicated284. At the third session of the Convention at Melbourne and during the debate upon what became par (xxxv), he had said285: "Even in the Constitution as drawn there is a provision giving the Federal Parliament jurisdiction in the case of navigation and shipping, and this would apply to labour disputes in connexion with navigation and shipping." The immediate reference was to what became s 98 of the Constitution which states that the power of the Parliament to make laws with respect to trade and commerce (namely the power in s 51(i)286) extends to navigation and shipping. To the point made by Dr Quick may be added the consideration that s 101 of the Constitution provides for an Inter-State Commission, modelled, in part, on the body which had been established in the United States as the Interstate Commerce Commission. Speaking with no foreboding of the fate that in 1915 awaited the Australian body when the Wheat Case was decided287, Quick and Garran wrote288: 283 (2003) 214 CLR 397. 284 See, earlier, Huddart Parker Ltd v The Commonwealth (1931) 44 CLR 492. 285 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 27 January 1898 at 182. 286 Morgan v The Commonwealth (1947) 74 CLR 421 at 454-455. 287 (1915) 20 CLR 54. 288 The Annotated Constitution of the Australian Commonwealth, (1901) at 901. Crennan "The extent of the power of the Parliament to make laws with respect to trade and commerce has already been discussed (sec. 51-i.); and the Parliament itself is the sole judge of the extent to which it is necessary to vest in the Inter-State Commission the power of adjudicating upon and administering such laws. Practically the whole administration of the law upon this vast subject, and a great part of the judicial work in connection therewith, could be entrusted to the Commission." Victoria did not seek to reopen CSL but submitted that it was to be distinguished. This was said to be because (a) par (i) of s 51 contains, by reason of the phrase "among the States", essentially the same geographical limit as par (xxxv); and (b) this made it "unlikely" that there arose from par (xxxv) "essentially the same limit" when par (i) was relied on to support laws regulating "industrial relations" of those engaged in interstate or overseas trade or commerce. But the presence of a common geographical limit, if that be accepted, is beside the point. As already remarked, each head of power expresses a compound and distinct concept; that a law with respect to par (i) of s 51 also bears upon industrial relations does not deny to the law that character, whether or not it might fall outside par (xxxv). Reference also should be made to Pidoto v Victoria289. The decision in that case necessarily denied the proposition that the defence power is limited by par (xxxv). Whether all that was said on the subject by Latham CJ necessarily represents the views of the other members of the majority (Rich, McTiernan and Williams JJ) need not be pursued here. This is because the reasoning of Latham CJ is compelling and should be followed. Latham CJ rejected the submission (in substance, repeated in the present litigation) that par (xxxv) implies a negative. He understood that to mean290: "not only that the Commonwealth Parliament shall have power to legislate in relation to the industrial disputes there defined and in the manner there prescribed, but also that the Commonwealth Parliament shall not have power to deal with any other industrial matter or with any industrial dispute in any other manner". 289 (1943) 68 CLR 87. 290 (1943) 68 CLR 87 at 101. Crennan "Section 51 (xxxv.) is a positive provision conferring a specific power. The particular terms in which this power is conferred are not, in my opinion, so expressed as to be capable of being so construed as to impose a limitation upon other powers positively conferred. Further, if s. 51 (xxxv.) were construed so as to prevent the Parliament from dealing with industrial matters except under that specific provision, similar reasoning would lead to the conclusion that the Commonwealth Parliament could not (under any legislative power) provide for the use of conciliation and arbitration in relation to any other matter than inter-State industrial disputes. It must, I think, be conceded, for example, that the Commonwealth Parliament can, in legislating with respect to the public service of the Commonwealth (Constitution, s. 52 (ii.)), provide for conciliation and arbitration in relation to matters such as wages, conditions and hours, whether or not any dispute about those matters is industrial, and whether or not it extends beyond the limits of any one State." (original emphasis) The terms in which his Honour expressed his conclusion deny the reservation urged by the AWU that this turned upon the special nature of the defence power in war-time. More recently, in Re Pacific Coal292, Gleeson CJ approved what had been decided in Pidoto in a passage which now also should be accepted and followed. The Chief Justice said293: legislate directly "It has often been pointed out that s 51(xxxv) does not empower the Parliament regulate conditions of employment294. An attempt was made in argument to develop that proposition by adding to it what was described as '[t]he principle that Parliament cannot do indirectly what it cannot do directly'. Two points need to be made about that. First, it is one thing to say that the nature of the power is such that it deals with instituting and maintaining a system of 291 (1943) 68 CLR 87 at 101. 292 (2000) 203 CLR 346. 293 (2000) 203 CLR 346 at 359-360 [29]. 294 For example, Waterside Workers' Federation of Australia v Commonwealth Steamship Owners' Association (1920) 28 CLR 209 at 218 per Knox CJ. Crennan conciliation and arbitration, and that it is only through such a system that conditions of employment may be regulated under s 51(xxxv); it is another thing to find some negative implication amounting to a prohibition against the Parliament enacting any law which has the effect of altering conditions of employment. That there is no such negative implication, and no such prohibition, must follow from the acceptance that, where Parliament can rely upon some other power conferred by s 51, it can legislate in relation to conditions of employment. Such an implication was rejected, for example, in Pidoto v Victoria295. In the present case, an attempt was made to rely, if necessary, upon the power conferred by s 51(xx). It is unnecessary to deal with that attempt but if, in a given case, legislation were validly enacted pursuant to that power, then it would not be affected by any negative implication or prohibition of the kind mentioned. Secondly, there is no principle that Parliament can never do indirectly what it cannot do directly. Whether or not Parliament can do something indirectly, which it cannot do directly, may depend upon why it cannot do it directly. In law, as in life, there are many examples of things that can be done indirectly, although not directly. The true principle is that 'it is not permissible to do indirectly what is prohibited directly'296. If there were a constitutional prohibition of the kind earlier considered, then it could not be circumvented by an attempt to do indirectly that which is prohibited directly. There is, however, no such prohibition." What has been said in cases concerned with pars (i) and (vi) of s 51 of the Constitution is true of the broadcasting and telegraph power conferred by par (v). The Telecommunications Act 1975 (Cth) empowered the Conciliation and Arbitration Commission to prevent or settle "industrial disputes" in respect of the Australian Telecommunications Commission Service. But, given the head of legislative power engaged, the term "industrial disputes" was properly defined without reference to considerations which would have been required by 295 (1943) 68 CLR 87. 296 Caltex Oil (Aust) Pty Ltd v Best (1990) 170 CLR 516 at 522 per Mason CJ, 297 See R v Staples; Ex parte Australian Telecommunications Commission (1980) 143 CLR 614 at 627. Crennan The provenance of s 51(xxxv) Something more now should be said respecting the setting in which par (xxxv) was included in the draft of the Constitution and the significance as then understood of the terms in which it was expressed. This does not support any proposition to the effect that what was seen in the 1890s as an authority for legislative experimentation of a particular kind under the Constitution was to be the sole method open to the Parliament of the Commonwealth for legislating for industrial regulation. Those unsuccessfully opposing Mr Higgins stressed Section 51(xxxv) took its final form upon the motion of Mr Higgins presented in Committee at Melbourne on 25 January 1898 and passed on 27 January298. the indeterminacy of the requirement that the disputes extend beyond the limits of any one State. Nor was any particular method prescribed for the processes of conciliation and arbitration. It was said that voluntary systems used in some colonies had failed299. Mr Higgins declared300: "I do not ask the committee to say that arbitration shall be compulsory, or even that any steps shall be taken to secure the settlement of industrial disputes; I simply wish to give the Federal Parliament power to legislate on the subject. Whatever honorable members may think, the experience of New Zealand shows that this matter is at least within the pale of practical politics." 298 Official Record of the Debates of the Australasian Federal Convention, (Melbourne) at 180, 215 respectively. 299 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 27 January 1898 at 193-195, 200-201. The Trade Disputes Conciliation and Arbitration Act 1892 (NSW) was introduced after the Report of the NSW Royal Commission as a voluntary system and, after its repeal and eventual replacement by the Industrial Arbitration Act 1901 (NSW), was described by Mr Reeves as "an amiable and nicely-drafted measure", sponsored by Mr Barton, which was treated by employers with contempt, and had been "a not inexpensive piece of waste paper": Reeves, State Experiments in Australia and New Zealand, vol 2, (1902) at 99. 300 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 25 January 1898 at 180. Crennan The reference to New Zealand legislation was to The Industrial Conciliation and Arbitration Act 1894 (NZ) ("the NZ Act"). This had been sponsored by Mr Reeves and had introduced a compulsory system with features resembling those of a Bill which had been proposed unsuccessfully in South Australia by Mr Kingston in 1890301. The Kingston Bill had provided for the registration of unions and associations of unions, who would thereby have become bound by the Act, for the making and registration of industrial agreements, for Boards of Conciliation, in some instances for compulsory conciliation, and for the enforcement of awards and agreements. Part IX forbad strikes and lock-outs on account of any industrial dispute for the settlement of which the Bill provided. It was Mr Kingston who was to draft the Bill for the Conciliation and Arbitration Act 1904 (Cth) ("the 1904 Act") before his abrupt resignation from the Ministry302; and the influence of his efforts in 1890 upon the scheme of the 1904 Act is apparent. The importance of Mr Kingston as the prominent advocate of a compulsory system with the characteristics of the 1904 Act should not, in retrospect, obscure other contemporary considerations. The enactment of a law such as the 1904 Act had not been a given. Several of the delegates at Melbourne, particularly Mr O'Connor303, had stressed the "experimental" nature of legislation which would be supported by s 51(xxxv). Later, and with the benefit of hindsight, O'Connor J was to state in "[W]hen we have regard to the use of the word 'arbitration' in connection with the settlement of industrial disputes, it becomes still plainer that at the time when the Constitution was being framed by the Convention there was in Australia and New Zealand a well recognized use of the word as 301 Kingston's Bill is reproduced as Conciliation Appendix H(c) to the Report of the NSW Royal Commission. 302 La Nauze, Alfred Deakin, (1965), vol 1 at 296-301. 303 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 27 January 1898 at 199-200. 304 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Whybrow & Co (1910) 11 CLR 1 at 44. Crennan describing permanent public arbitral tribunals for settlement of industrial disputes, constituted not by choice of the parties, but by public authority." Matters had not been so simple as they later were to appear. The ordinary usage of the terms "conciliation" and "arbitration" at the time of the adoption of the Constitution appears from the title "Arbitration and Conciliation in Labour Disputes" in vol 25 of the Encyclopaedia Britannica published in 1902305. The terms were used to describe "a group of methods of settling disputes between employers and work-people or among two or more sets of work-people, of which the common feature is the intervention of some outside party not directly affected by the dispute"306 (emphasis added). The title continued: "If the parties agree beforehand to abide by the award of the third party, the mode of settlement is described as 'arbitration'. If there be no such agreement, but the offices of the mediator are used to promote an amicable arrangement between the parties themselves, the process is described as 'conciliation'. The third party may be one or more disinterested individuals, or a joint-board representative of the parties or of other bodies or persons." Labour arbitration was said to differ from commercial arbitration governed by the Arbitration Act 1889 (UK) in several respects. The former often related to the terms on which future contracts were to be made rather than purely to the rights and liabilities under existing contracts; the enforcement of awards by legal penalties was hampered by the unsettled questions respecting the legal personality of trade unions307 and the need to bind present and future members. Arbitration and conciliation as practised in the United Kingdom, whether by bodies established for particular trades or in particular areas which operated outside any statutory structure, or under the procedures of the Conciliation Act 305 Volume 25 was one of the New Volumes, constituting, with vols 1-24 of the Ninth Edition, the Tenth Edition. 307 Before Taff Vale Railway v Amalgamated Society of Railway Servants [1901] AC Crennan 1896 (UK)308, was voluntary, both as regards the initiation and conduct of negotiations and the performance of any agreement which resulted309. Classic nineteenth century liberalism did not favour the state participation which was an important part of the Kingston model310. Beside the voluntary system adopted in the United Kingdom there operated the law of torts which was used by the employer to obtain an award of damages in Quinn v Leathem311. That in turn led to the form of union immunity conferred by the Trade Disputes Act 1906 (UK). The divergence between the systems adopted in Australia and the United Kingdom for dealing with industrial relations was later described by Evatt J in McKernan v Fraser312. The point of present importance is that none of this was pre-ordained, or excluded, by the structure of government set up by the Constitution. The reference by Dr Quick in the Convention Debates to the settlement of maritime disputes has been noted earlier in these reasons. Mr Isaacs noted that the power in s 51(i) to regulate interstate trade and commerce would enable the Parliament "to prevent any obstruction of that inter-state trade and commerce"313. Indeed after the passage of the Interstate Commerce Act 1887 (US)314 and the Sherman Act 1890 (US)315, which were supported by the Commerce Clause316, the United States federal courts had intervened by injunction in labour 308 Repealed by the Employment Protection Act 1975 (UK). 309 See, generally, Kahn-Freund, Labour and the Law, (1972) at 97-101. 310 See Sinclair, Willliam Pember Reeves: New Zealand Fabian, (1965) at 110-111. 312 (1931) 46 CLR 343 at 373-390. 313 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 27 January 1898 at 189. 314 24 Stat 379. 315 26 Stat 209. 316 The Constitution of the United States of America, Art I, s 8, cl 3. Crennan disputes317. In re Debs, a cause célèbre of the mid-1890s318 which arose out of the Pullman Strike, had reached the Supreme Court as a contempt case319. It was against this background that in Re Pacific Coal Gummow and "The importance of arbitrated or conciliated awards in Australia has been at the expense of some features of other systems of industrial relations. Collective bargaining has a different place in Australia, and takes a very different form, from the bargaining that has taken place in the United States, the United Kingdom, or Germany321. The enforcement of arrangements struck between organisations of employees and employers or groups of employers has not depended solely on industrial action as it sometimes has in the United Kingdom322. Nor has there been the resort to enforcement in the ordinary courts of collectively negotiated contracts that has been seen in the United States323. More importantly, there has seldom been the need to focus, at least until recently, upon the terms and 317 See Frankfurter and Greene, "The Use of the Injunction in American Labor Controversies", (1928) 44 Law Quarterly Review 164 at 168-171. 318 See Fiss, "Troubled Beginnings of the Modern State, 1888-1910", History of the Supreme Court of the United States, vol 8 at 53-74. 320 (2000) 203 CLR 346 at 404-405 [183]. 321 Davies and Freedland, Kahn-Freund's Labour and the Law, 3rd ed (1983) at 322 Ford Motor Co Ltd v Amalgamated Union of Engineering and Foundry Workers [1969] 2 QB 303; Great Britain, Report of the Royal Commission on Trade Unions and Employers' Associations, (1968) Cmnd 3623. 323 For example, Schlesinger v Quinto 192 NYS 564 (1922); affd 194 NYS 401 (1922). See also Rice, "Collective Labor Agreements in American Law", (1931) 44 Harvard Law Review 572; Witmer, "Collective Labor Agreements in the Courts", (1938) 48 Yale Law Journal 195; Lenhoff, "The Present Status of Collective Contracts in the American Legal System", (1941) 39 Michigan Law Review 1109. Crennan conditions of an individual's contract of employment. Identifying the relevant award and its terms has been much more important324." PART IV – PARTICULAR CONCLUSIONS Particular provisions and s 51(xx) Much of the new Act turns (including many of the provisions whose validity the plaintiffs challenge) on the definition of employer set out in s 6 of the new Act. The employers identified in par (a) of the definition of employer in s 6(1) are constitutional corporations. The definition of employee in s 5(1) depends upon the identification of an employer (as defined). The plaintiffs (in some cases, some of the plaintiffs) challenged the validity of Pts 7, 8, 9 and 10, Divs 1 and 2 of Pt 12, Pt 23 and Sched 8 of the new Act and item 4 of Sched 4 to the Amending Act, in so far as those provisions apply to employers as defined in par (a) of the definition appearing in s 6(1), on the ground that those provisions are not supported by s 51(xx). Some plaintiffs made a separate point about the operation of Pt XVII325 between 14 December 2005 and 27 March 2006 in so far as that Part then applied to employers and employees as then defined in s 550. But as those plaintiffs noted, there is no material difference between the presently relevant aspects of the definitions in what was s 550 and the definitions in ss 6(1) and 5(1). It is therefore not necessary to deal separately with the validity of Pt XVII in its operation during the period from December 2005 to March 2006. Some of the plaintiffs challenged the validity of what was Pt VIAAA of the new Act (in so far as it purported to apply from 14 December 2005 to 27 March 2006 to employers who were constitutional corporations). The plaintiffs (or again in some cases, some of the plaintiffs) challenged the validity of ss 365 and 366, ss 637(1) and (4) and 643(1)(a), Div 5 of Pt 15 in so far as it purports to apply through a number of provisions of s 755 and Pt 16 in so far as it purports to apply through a number of provisions of ss 783 and 785, on the ground that those provisions are not supported by s 51(xx). 324 But see Byrne v Australian Airlines Ltd (1995) 185 CLR 410. 325 Part XVII became Pt 23 on 27 March 2006, when the principal amendments to the Act took effect. Crennan It is convenient to deal first with the challenges to Pts 7, 8, 9 and 10, Divs 1 and 2 of Pt 12, Pt 23 and Sched 8 of the new Act, item 4 of Sched 4 to the Amending Act, and what was Pt VIAAA of the new Act in so far as those provisions apply to constitutional corporations and their employees. 1(a) Part 7 Part 7 of the new Act provides for "key minimum entitlements of employment"326 – the Pay and Conditions Standard. Part 7 obliges an "employer" (and thus a constitutional corporation) to provide employees with not less than the specified entitlements of employment. That obligation is elaborated and qualified in certain respects (as, for example, by provisions327 that allow for determinations of issues about whether the "outcome" for an employee under a workplace agreement or a contract of employment is or is not more favourable than the prescribed minimum standard). Other provisions of the Part328 provide mechanisms by which the content of minimum standards is to be adjusted. But the central operation of Pt 7 can be summarised as being that an employer, as defined in s 6(1) (and thus a constitutional corporation), shall provide its employees with not less than the prescribed minimum entitlements: those provided by the Pay and Conditions Standard. In so far as the provisions of Pt 7, which give it that central operation, apply to employers as described in par (a) of the definition in s 6(1), they single out constitutional corporations as the object of the statutory command. In that sense they have a discriminatory operation. It is constitutional corporations that must provide their employees with not less than the prescribed minimum entitlements. These are laws with respect to constitutional corporations. Other provisions of Pt 7 elaborating or qualifying the obligations created elsewhere in the Part, or providing mechanisms for the alteration of the particular content of minimum standards, are incidental to that central operation and are also laws with respect to constitutional corporations. The challenge to the validity of Pt 7, 328 For example, Div 2 of Pt 7 (ss 176-222) which relates to the fixing of Federal Minimum Wages. Crennan in so far as it applies to employers as described in par (a) of the definition in s 6(1), fails. 1(b) Parts 8 and 10, Divs 1 and 2 of Pt 12 and Pt 23 The same analysis is to be made of Pts 8 and 10, Divs 1 and 2 of Pt 12, and Pt 23 of the Act. Each of these Parts relates to the terms and conditions of employment to be provided by constitutional corporations to their employees. Part 8 deals with workplace agreements, Pt 10 with awards, Pt 12 with minimum entitlements of employees and Pt 23 with school-based apprentices and trainees. Part 8 identifies various types of workplace agreements which will regulate terms and conditions of employment (ss 326-331), obliges an employer to lodge certain kinds of workplace agreement with the Employment Advocate (ss 342-346), prescribes what steps an employer must take before lodging such an agreement (ss 336-341), and prescribes when a workplace agreement comes into operation and ceases to be in operation (s 347) and who is bound by it (s 351). The Part prescribes what content workplace agreements must have (ss 352-355) and what content they must not have (ss 356-366). The Part prescribes how a workplace agreement may be varied (ss 367-380), how it may be terminated (ss 381-398) and the consequences of termination (s 399). As noted earlier, Pt 8 provides remedies (ss 403-414) for contravention of certain of its provisions. Part 8, in so far as it applies to employers as described in par (a) of the definition in s 6(1), like Pt 7, prescribes norms with which a constitutional corporation, making or proposing to make certain agreements with its present or its prospective employees, must comply. Those provisions of Pt 8 have a discriminatory operation; they are provisions that are directed at constitutional corporations. They are laws with respect to constitutional corporations. So too, those other provisions of Pt 8 which elaborate or qualify those obligations, or provide mechanisms for their implementation or enforcement, are incidental to the prescription of the norms with which constitutional corporations must comply in making workplace agreements with employees. Part 10 of the new Act deals with awards and a general description of its operation is set out in the introductory section of these reasons. It provides for the terms that may be included in awards (ss 513, 520-524), for terms that are taken to be included in each award (s 514), and for matters that are not to be included in awards (ss 515-519). Part 10 preserves certain pre-existing award entitlements (ss 527-533), provides for what it calls "Award rationalisation and award simplification" (ss 534-551), provides for variation and revocation of Crennan awards (ss 552-556), and provides for variation of the parties to an award (ss 557-566). Part 10 raises no different question about s 51(xx) from those presented by and answered in respect of Pts 7 and 8. Like Pt 7, Divs 1 and 2 of Pt 12 provide for certain minimum entitlements of employees, including in respect of meal breaks (Div 1 – ss 607-610) and public holidays (Div 2 – ss 611-619), and elaborate and qualify those entitlements. Part 23 obliges constitutional corporations (and other persons falling within the definition of an "employer" in s 6) to afford school-based apprentices and trainees any additional conditions to which a full-time apprentice or trainee, doing the same kind of work in the same location and for the same employer, would be entitled. The norms created by Divs 1 and 2 of Pt 12 and by Pt 23 (qualified as they are in certain respects) present no different question about s 51(xx) from those dealt with in relation to Pt 7. The plaintiffs' challenges to Pts 8 and 10, Divs 1 and 2 of Pt 12 and Pt 23, in so far as they apply to constitutional corporations, fail. 1(c) Part 9 Part 9 of the new Act deals with industrial action. The Part focuses primarily upon the conduct of employees, or organisations of employees, which is directed at an employer as defined in s 6(1). But the Part also includes some provisions which forbid employers (as defined), and thus constitutional corporations, from engaging in certain conduct329. "[I]ndustrial action" is defined in s 420 as any action of four kinds (which encompass bans, limitations, strikes and lock-outs) but does not include authorised or agreed action, or action by an employee based on a reasonable concern by the employee about the employee's health or safety. As Western Australia (and other plaintiffs) pleaded, "[t]he concept of industrial action is not defined for the purposes of the Act so as to require significant damage or detriment to the trading or financial activities, or to the interests, of constitutional corporations". As noted earlier, Pt 9 makes provision in s 435 (and related provisions) for what is "protected action". Section 496(1) obliges the AIRC to make an order 329 For example, s 448 forbids an employer dismissing an employee for engaging in what the Act defines, in s 435, as "protected action". Crennan that industrial action "stop, not occur and not be organised", "[i]f it appears to the Commission that industrial action by an employee or employees, or by an employer, that is not, or would not be, protected action ... is happening; or ... is threatened, impending or probable; or ... is being organised". The AIRC may make an order under s 496(1) on its own initiative or on the application of any person who is affected (whether directly or indirectly) or who is likely to be affected (again, whether directly or indirectly) by the industrial action, or of an organisation of which such a person is a member330. Section 496(1) deals only with industrial action by employers and employees as defined in s 6(1) with s 5(1) and, as noted earlier, it contains no reference (whether directly in s 496(1) or through the definition of industrial action) to any requirement that the industrial action be of a kind that would cause loss or damage to the business of a constitutional corporation. That may be contrasted with the provisions of s 496(2). That provides: If it appears to the Commission that industrial action by a non-federal system employee or non-federal system employees, or by a non-federal system employer; happening; or threatened, impending or probable; or (iii) being organised; and (b) will, or would, be likely to have the effect of causing substantial loss or damage to the business of a constitutional corporation; the Commission must make an order that the relevant industrial action stop, not occur and not be organised." A "non-federal system employee" and a "non-federal system employer" are persons not covered by the definitions in ss 5 and 6 respectively but who otherwise fall within the ordinary meaning of "employee" and "employer"331. Crennan The provisions of s 496(2) dealing with industrial action by non-federal system employees and non-federal system employers are of a kind not materially different from the provisions whose validity was considered and upheld in Fontana Films. The plaintiffs did not contend to the contrary and did not submit that s 496(2) was not a law with respect to constitutional corporations. Rather, the plaintiffs submitted that because the Part (in so far as it applies to employers and employees as defined in s 6(1)(a) with s 5(1)) does not confine the industrial action with which it deals to action which will, or would, be likely to have the effect of causing substantial loss or damage to the business of a constitutional corporation, it is not a law supported by s 51(xx). Both the fact that any person who is or is likely to be affected by the action may apply for an order under s 496(1), and the breadth of the concept of industrial action, were said to "militate against the view that s 496 is a law with respect to s 51(xx) corporations". To the extent to which Pt 9 prescribes norms governing what industrial action constitutional corporations may take against their employees, it is valid for the same reasons that other provisions of the new Act prescribing what a constitutional corporation may or may not do in relations with their employees are valid. And in so far as Pt 9 prescribes norms governing what industrial action the employees of constitutional corporations may take against their employer, it is properly characterised as a law with respect to constitutional corporations; the norms it creates give constitutional corporations rights or immunities. If, as was held in Fontana Films, and as the plaintiffs accept, a law forbidding any person from engaging in certain conduct, in trade or commerce, that will, or would, be likely to have substantially adverse effects on a constitutional corporation is a law with respect to constitutional corporations, then a law which regulates the relationship between constitutional corporations and their employees is no less of that character. It is only if what has earlier been referred to as "a new or different filter" is inserted into the process of characterisation that the need to demonstrate actual or likely damage to a constitutional corporation would take on significance. For the reasons given earlier, that contention should be rejected. The AWU made a discrete point about s 497 of the new Act, a provision concerned with what the Act calls "pattern bargaining" – a course of conduct involving the seeking of common wages or conditions of employment under two or more proposed collective agreements, where the course of conduct extends beyond a single business332. Section 497 permits the Federal Court or the Federal Crennan Magistrates Court333 to grant an injunction in respect of industrial action if that action is or would be for the purpose of supporting or advancing claims made by a negotiating party to a proposed collective agreement, and that party is engaged in pattern bargaining. The AWU submitted that the absence of any requirement that the proscribed conduct have any effect on a constitutional corporation was a significant consideration in deciding whether the provision was supported by s 51(xx). Fontana Films shows that a law which is predicated upon demonstrating that damage will or would be likely to be sustained by a constitutional corporation may be a to constitutional corporations. But it does not follow that a law is a law with respect to constitutional corporations only if it is to protect such corporations from damage. Section 497, in its operation with respect to constitutional corporations, is a law with respect to that subject-matter. law with respect The AWU further submitted that the provisions of Div 9 of Pt 9 (ss 507-509) concerning the payment of wages in relation to periods of industrial action were invalid. This submission should be rejected. These provisions of the new Act fix particular aspects of the rights and obligations of constitutional corporations concerning payments to their employees in relation to periods of industrial action. They are provisions of the same constitutional character as other provisions of the new Act regulating terms and conditions of employment. The plaintiffs' contentions that Pt 9 of the new Act is invalid, in so far as it applies to employers which are constitutional corporations, and their employees, should be rejected. Item 4 of Sched 4 to the Amending Act and Sched 8 to the new Act It is convenient to deal next with the challenges made to item 4 of Sched 4 to the Amending Act and Sched 8 to the new Act. These provisions deal with industrial instruments that were in operation when the new provisions introduced by the Amending Act came into force. Item 4 of Sched 4 to the Amending Act was one of the transitional, application and saving provisions made in the Amending Act. It dealt with the operation of awards, within the meaning of s 4(1) of the previous Act, which were awards in force at the time the Amending Act commenced operation. It provided that the original award was to be taken to Crennan be replaced by an instrument in the same terms and that the new instrument binds (among others) each employer and each employee bound by the original award. Schedule 8 to the new Act deals with a different transitional question – what the heading to the Schedule describes as "Transitional treatment of State employment agreements and State awards". But it follows a generally similar path to that followed by item 4 of Sched 4 to the Amending Act with respect to existing federal awards. As noted in the introductory section of these reasons, a new industrial instrument, called a "notional agreement preserving State awards", is created by the new Act. The central thrust of the argument against the validity of these provisions was334 that: "The invocation of the power of the Commonwealth under s 51(xx) as a support for [the] law is merely incidental and is not substantially or relevantly connected with any notable feature which attaches corporations, and which would allow for the characterisation of [the law] as being a law 'with respect to' corporations, as opposed to being a law with respect to the creation and maintenance of an industrial relations regulatory system, which happens to use corporations as one of the designated categories of employer to whom these laws are expressed to apply." the impugned provisions, The submission should not be accepted. First, in speaking of "opposing" characterisations of the submission might be understood as embracing the long-discarded view that a law may have only a single character. But secondly, and no less importantly, the submission proceeds from the premise that a law is not a law with respect to constitutional corporations unless it not only has a discriminatory operation (in the sense of singling out constitutional corporations as the object of command) but also is "substantially or relevantly connected with" some other "notable feature" which attaches to constitutional corporations. For the reasons given earlier, that seeks to insert a new and additional filter into the process of characterisation and that proposition should not be accepted. The essential operation of the provisions under immediate consideration is that the employment relationship between certain constitutional corporations and 334 Australian Workers' Union submissions, par 218. Crennan their employees shall be regulated according to certain terms and conditions whose content is to be found in identified forms of instrument and whose content may be adjusted in the ways prescribed by the new Act. That is a law with respect to constitutional corporations. The challenges to the provisions of item 4 of Sched 4 to the Amending Act, and to Sched 8 to the new Act, in so far as they apply to constitutional corporations, should be rejected. 1(e) Part VIAAA Part VIAAA was inserted into the Act by item 5 of Sched 3A to the Amending Act. It commenced on the day on which the Amending Act received the Royal Assent (14 December 2005)335. It was repealed by item 71 of Sched 1 to the Amending Act which commenced336 on its proclamation on 27 March 2006. Part VIAAA provided that certain small businesses (so far as now relevant, constitutional corporations employing fewer than 15 employees) were not to be bound by requirements deriving from a State law, a State award, or an order of a State industrial authority to pay redundancy pay. (The Part had further operation in respect of the Territories but that operation is considered separately at a later point in these reasons.) Although Pt VIAAA has been repealed, it was in operation for some months and the validity of that operation is not now shown to be moot. In its operation with respect to constitutional corporations, Pt VIAAA provided that such persons were not bound to make certain kinds of payment to their employees. For the reasons already given in relation to other impugned provisions of the new Act, Pt VIAAA was a law with respect to constitutional corporations. Consideration of the challenge to the remaining provisions alleged not to be supported by s 51(xx) (ss 365, 366, 637(1) and (4), 643(1)(a) and certain operations of Div 5 of Pt 15 and of Pt 16) requires more elaborate examination of the particular provisions in issue. 335 Amending Act, s 2. 336 Amending Act, s 2. Crennan 1(f) Sections 365 and 366 Sections 365 and 366 provide: "365 Seeking to include prohibited content in an agreement (1) A person contravenes this subsection if: the person seeks to include a term: in a workplace agreement in the course of negotiations for the agreement; or in a variation to a workplace agreement in the course of negotiations for the variation; and that term contains prohibited content; and the person is reckless as to whether the term contains prohibited content. Subsection (1) is a civil remedy provision. Note: See Division 11 for provisions on enforcement. 366 Misrepresentations about prohibited content (1) A person contravenes this subsection if: the person makes a misrepresentation in relation to a workplace agreement (or a variation to a workplace agreement) that a particular term does not contain prohibited content; and the person is reckless as to whether the term contains prohibited content. Subsection (1) is a civil remedy provision. Note: See Division 11 for provisions on enforcement." Crennan It was submitted that neither section required that the person to whom the prohibition was directed be a party or proposed party to a workplace agreement or a proposed agreement337. Moreover, the submission contended, the provisions of s 366(1) "are even more abstract", in as much as the conduct enjoined does not have to be in the course of, or in relation to, negotiations for a workplace agreement or a variation to it. It is critically important, however, to recognise that both provisions relate to existing or proposed workplace agreements. By definition a workplace agreement is an agreement to which an employer, as defined in s 6(1), is a party (or in the case of a multiple-business agreement, one or more such employers is a party338). For present purposes, then, ss 365 and 366 have operation in relation to existing or proposed workplace agreements with constitutional corporations. A law which forbids any person from making a misrepresentation in relation to an existing or proposed workplace agreement, that a particular term does not contain prohibited content, is connected with the subject-matter of s 51(xx) – constitutional corporations. It is connected in a way that is not "insubstantial, tenuous or distant"339. The connection is not insubstantial, tenuous or distant because the provisions now impugned form an integral part of a set of provisions directed to forbidding employers and employees from making or seeking to make workplace agreements with prohibited content. Section 365 prevents any person from seeking the inclusion of such a term; s 366 is evidently intended to prevent reckless misrepresentations about the effect of existing or proposed agreements. In their operation with respect to those employers which are constitutional corporations, both ss 365 and 366 are supported by s 51(xx). 1(g) Sections 637 and 643 Sections 637 and 643 are found in Div 4 of Pt 12 of the new Act – a division dealing with minimum entitlements of employees in relation to termination of employment. The principal object of the Division is said340 to be 337 s 324(a). 339 Melbourne Corporation (1947) 74 CLR 31 at 79. Crennan to establish procedures for conciliation, and subsequent procedures, remedies and sanctions, in connection with the termination or proposed termination of an employee's employment in certain circumstances. One aspect of that object341 is "to provide for remedies appropriate to a case where, on arbitration, a termination is found to be harsh, unjust or unreasonable". Subdivision B of Div 4 of Pt 12 (ss 643-658) is entitled "Application to Commission for relief in respect of termination of employment". Subdivision C (ss 659-667) concerns unlawful termination of employment by employers; subdiv D (ss 668-671) concerns Commission orders after an employer fails to consult relevant trade unions about termination. Section 637 is an application provision. The impugned sub-sections provide: "(1) Subdivision B applies, in so far as it relates to an application to the Commission for relief in relation to the termination of employment of an employee on the ground that that termination was harsh, unjust or unreasonable, if the employee concerned was, before the termination, an employee within the meaning of subsection 5(1). (4) Without prejudice to their effect apart from this subsection, Subdivisions C and D also apply in relation to the termination of the meaning of employment of subsection 5(1)." employee within Section 643 provides for the making of applications to the Commission to deal with terminations. Very little separate argument was advanced in connection with these provisions. For the most part they were treated as standing or falling with other provisions put in issue by the plaintiffs. It is, therefore, enough to say that, for the reasons already given, the plaintiffs' contentions about these provisions should be rejected. 1(h) Division 5 of Pt 15 Part 15 of the new Act deals with rights to enter premises. Division 5 (ss 755-759) is concerned with "Entry for OHS purposes". An "OHS law" is 341 s 635(1)(c). Crennan defined342 as "a law of a State or Territory prescribed by the regulations" for the purposes of the definition. The particular focus of the plaintiffs' submissions was upon ss 740-742 and 756. Section 756 provides that an official of an "organisation", that is, an organisation registered pursuant to Sched 1 to the new Act, who has a right under an OHS law, must not exercise that right unless the official holds a permit under Pt 15 and exercises the right during working hours. Sections 740-742 provide for the issue of permits. Regulation 15.1 of Ch 2 of the Regulations prescribes three laws for the purposes of the definition of an OHS law: Occupational Health and Safety Act 2000 (NSW), Occupational Health and Safety Act 2004 (Vic) and ss 49G and 49I-49O of the Industrial Relations Act 1979 (WA), to the extent that those provisions relate to a right of entry to investigate suspected breaches of certain Western Australian Acts. Section 755 of the new Act identifies "OHS entries" to which Div 5 of Pt 15 applies. That section provides: "(1) This Division has effect in relation to a right to enter premises under an OHS law if: the premises are occupied or otherwise controlled by: a constitutional corporation; or the Commonwealth; or the premises are located in a Territory; or the premises are, or are located in, a Commonwealth place; the right relates to requirements to be met by: a constitutional corporation or the Commonwealth in its capacity as an employer; or an employee of a constitutional corporation or the Commonwealth; or Crennan (iii) a contractor providing services for a constitutional corporation or the Commonwealth; or the right relates undertaken or controlled, by: to conduct engaged in, or activity a constitutional corporation or the Commonwealth in its capacity as an employer; or an employee of a constitutional corporation or the Commonwealth; or (iii) a contractor providing services for a constitutional corporation or the Commonwealth; or the exercise of the right will have a direct effect on: a constitutional corporation or the Commonwealth in its capacity as an employer; or an employee of a constitutional corporation or the Commonwealth; or (iii) a contractor providing services for a constitutional corporation or the Commonwealth. In this section: constitutional corporation includes: a Commonwealth authority; and a body corporate incorporated in a Territory." The plaintiffs made a number of separate points about Div 5 of Pt 15, one about the construction of the provisions, and others about validity. It is necessary to deal first with the construction issue. It was submitted that Div 5 of Pt 15 has no application to rights of entry under the New South Wales or Western Australian legislation prescribed by reg 15.1 of Ch 2 of the Regulations because those State Acts, unlike the Victorian Act, give rights of entry to certain officials of organisations registered under State law and those organisations are not and cannot be registered under Crennan Sched 1 to the Act. (The Victorian Act gives rights of entry to officials of federally registered organisations.) The submission should be rejected. For the purposes of dealing with the point, it is not necessary to consider whether it is right to say that an organisation registered under a State industrial system cannot be registered under Sched 1. It is enough to decide that, as the Commonwealth submitted, s 756 does not require that the right of entry under an OHS law be derived from the holding of office in an organisation registered under Sched 1. Section 756 forbids a person who is an official of such a federal organisation who has a right of entry, no matter what may be the criteria for granting that right under the relevant State law, from entering premises otherwise than in accordance with s 756. If a person is an official of a federal organisation, and has a right of entry under the New South Wales or Western Australian legislation (or for that matter a right of entry under the Victorian legislation), that official is bound by s 756. The plaintiffs' contentions about validity focused upon a number of the operations given to Div 5 of Pt 15 by s 755. The chief contention was that s 755(1)(a)(i) should be held to be invalid on the ground that, like the law considered in Re Dingjan, it "does no more than make the activity of a s 51(xx) corporation the condition for regulating the conduct of an outsider". To describe the operation of s 755(1)(a)(i) in this way gives insufficient significance to the fact that the particular operation of the new Act that is in question is the regulation of a right of entry to premises, and that the premises to which the right of entry is controlled are premises "occupied or otherwise controlled by" a constitutional corporation. This is a sufficient connection with s 51(xx), whether or not the entry that is thus regulated concerns a business being conducted on the premises by that corporation. The connection lies in the controlling of entry to a constitutional corporation's premises. The law controlling entry is a law with respect to constitutional corporations. Some plaintiffs further submitted that s 755(1)(d)(i), (e)(i) and (f)(i) were invalid. These provisions concern rights to enter relating to requirements to be met by a constitutional corporation as employer (s 755(1)(d)(i)), relating to conduct engaged in, or activity undertaken or controlled, by such a corporation in that capacity (s 755(1)(e)(i)), or having a direct effect on such a corporation in that capacity (s 755(1)(f)(i)). But as the Commonwealth rightly submitted, these paragraphs give the Division an operation in connection with the obligations or activities of constitutional corporations, or an operation having a direct effect on constitutional corporations as employers. The challenge to the validity of these provisions should be rejected. Crennan All plaintiffs submitted that s 755(1)(d)(iii), (e)(iii) and (f)(iii) were invalid. These provisions concern contractors providing services for constitutional corporations. The plaintiffs submitted that these provisions do not require that the right of entry be exercised in relation to an activity of a contractor engaged in for the purposes of providing services to the constitutional corporation. The Commonwealth accepted that on that construction the provisions would exceed power and therefore urged that the provisions be construed as limited in their application to requirements or activities in which a contractor is engaged in the course of providing services to a constitutional corporation. That construction of the provisions is to be preferred. So construed, the provisions are laws with respect to constitutional corporations. invalid Finally, Western Australia submitted that s 755(1)(d)(iii), (e)(iii) and (f)(iii) are in relation to contractors providing services to the Commonwealth. Those provisions in their operation with respect to the Commonwealth are to be construed in the same way as they are construed in their operation with respect to constitutional corporations. That is, they are to be construed as limited in their application to requirements or activities in which a contractor is engaged in the course of providing services to the Commonwealth. In that operation, these provisions are not supported by s 51(xx). If they are valid their support would be found in other legislative powers supporting the particular activities being undertaken by the Commonwealth. But those are not matters that were or could be explored in this litigation. No order should be made in these proceedings about this aspect of the legislation. 1(i) Part 16 The plaintiffs put their challenges to Pt 16 (ss 778-813 dealing with "Freedom of association") in different ways. Victoria sought a declaration that s 785(1) of the new Act is invalid. Western Australia, New South Wales, South Australia, Queensland, and the AWU sought narrower relief – that s 783 and s 785(1)(d), (e) and (f) are invalid. Victoria contended that Pt 16 could not be read down to apply only in respect of Victoria and supported by its referral of power. Section 783 provides that Pt 16 applies to conduct by an organisation registered under Sched 1, conduct by an officer of such an organisation acting in that capacity and "conduct carried out with a purpose or intent relating to a person's membership or non-membership" of an organisation registered under Sched 1. Section 785 provides: "(1) This Part applies to the following conduct: Crennan conduct by a constitutional corporation; conduct against a constitutional corporation; conduct that adversely affects a constitutional corporation; conduct carried out with intent to adversely affect a constitutional corporation; conduct that directly affects a person in the capacity of: an employee, or prospective employee, of a constitutional corporation; or a contractor, or prospective contractor, of a constitutional corporation; conduct carried out with intent to directly affect a person in the capacity of: an employee, or prospective employee, of a constitutional corporation; or a contractor, or prospective contractor, of a constitutional corporation; conduct that consists of advising, encouraging or inciting a constitutional corporation: to take, or not to take, particular action in relation to another person; or to threaten to take, or not to take, particular action in relation to another person. In this section: constitutional corporation includes a body corporate incorporated in a Territory." It is convenient to leave aside from consideration, for the moment, the extension to the meaning of "constitutional corporation" provided by s 785(2) and confine attention to the operation of the relevant provisions in relation to corporations of the kinds mentioned in s 51(xx). Crennan Part 16 proscribes a number of different kinds of conduct: certain conduct done with an intent to coerce (s 789), making certain kinds of false or misleading statements (s 790), organising, taking, or threatening to organise or take industrial action for particular reasons (s 791). More particular forms of conduct are dealt with by other provisions of the Part. For present purposes, it is convenient to focus upon s 785 and to recognise that it provides for the application of the Part to several kinds of conduct: conduct by a constitutional corporation (s 785(1)(a)), conduct against a constitutional corporation (s 785(1)(b)), conduct that does, or is intended to, adversely affect a constitutional corporation (s 785(1)(c) and (d)) or that does, or is intended to, adversely affect a present or prospective employee or contractor of a constitutional corporation (s 785(1)(e) and (f)), and conduct that consists of advising, encouraging or inciting a constitutional corporation to do, or not do, certain things (s 785(1)(g)). The first two forms of conduct (conduct by or against a constitutional corporation) raise no separate or different issue from those considered in connection with a number of other provisions of the Act, including Pts 7, 8, 10, Divs 1 and 2 of Pt 12 and Pt 23. For the reasons given in connection with those provisions, the challenge to the validity of s 785(1)(a) and (b) fails. The prohibition of forms of conduct whose ultimate purpose or effect is to cause harm to a constitutional corporation is to be supported as not materially different from legislation of the kind upheld in Fontana Films. And those provisions of s 785 which proscribe conduct done with the intent to cause harm to constitutional corporations are to be supported on the same basis. It is important to notice that the provisions about conduct directly affecting or done with intent to directly affect present or prospective employees or contractors of constitutional corporations (s 785(1)(e) and (f)) describe the relevant conduct as conduct affecting a person "in the capacity of" employee or contractor. The reference to capacity reveals that the conduct proscribed is conduct which affects the present or prospective relationship between an employee or contractor and a constitutional corporation. That being so, s 785(1)(e) and (f) are to be supported in the same way as s 785(1)(a) and (b), and are properly characterised as laws with respect to constitutional corporations. The prohibition in s 785(1)(g), against persons advising, encouraging or inciting a constitutional corporation, is to be supported on the same basis as the law creating the principal prohibition of conduct by the constitutional corporation the incitement of which is forbidden. Crennan The challenges to Pt 16 fail. It is, thus, not necessary to consider any question about the effect of Victoria's reference of power. Particular provisions and s 51(xxxv) Something should be said of the fate of the particular challenges to portions of the new Act which Victoria made in its submissions (which were adopted by some of the other States) as to the interrelation between pars (xxxv) and (xx) of s 51 of the Constitution. 2(a) Parts 8, 9 and 13 Victoria challenged Pt 8, much of Pt 9343 and Pt 13 of the new Act on this basis. The substance of those provisions is explained earlier in these reasons. Part 8 is headed "Workplace agreements" and, significantly for present purposes, requires (s 353) such agreements to include dispute settlement procedures and specifies that in the absence of such provision the agreement must be taken to include the model dispute resolution process laid out in Pt 13. Part 9 contains detailed provisions respecting what in s 420 is defined as "industrial action". All these Parts turn for their operation to a significant degree upon the definition of "employer" and thus upon the presence of an employer which is a "constitutional corporation" (s 6(1)(a)), being a corporation to which s 51(xx) applies (s 4(1)). Victoria characterised Pts 8, 9 and 13 as laws for the prevention and settlement of industrial disputes. But Victoria contended that these laws do not observe the "restrictions" in s 51(xxxv), namely, that the dispute extend beyond the limits of any one State and that the law adopt the process of conciliation and arbitration. Part 7 which provides for minimum entitlements of employment is not characterised by Victoria as a law for the prevention or settlement of industrial disputes. It is not attacked by Victoria on grounds relating to s 51(xxxv) and the "qualification" of s 51(xx) by s 51(xxxv). The validity of Pt 7 is attacked in particular by the AWU as a law with respect to industrial relations, a subject for which there is said to be no good reason to suggest that it be within the reach of a law otherwise supported by s 51(xx). The various grounds upon which Victoria sought to make good its "qualification" have been considered above. As there explained, the submissions 343 Divs 2, 3, 4, 5, 6, 7, 8, 9 (other than s 496(2), (3)) and s 497, in so far as it purports to apply to employers and employees as defined in s 6(1)(a) with s 5(1). Crennan in support of the "qualification" should not be accepted. The same is true of the arguments (particularly by the AWU) in the weaker form, that s 51(xxxv) invites or requires particular caution in construing s 51(xx). 2(b) Schedule 6 South Australia contended that Sched 6 is invalid for want of support by s 51(xxxv) of the Constitution (with particular reference to cll 1(2)(c), 8, 28(2) and 29). Section 8 of the new Act provides that Sched 6 has "effect". The Schedule operates during a "transitional period" of five years beginning with the commencement of the Schedule (cl 2(1)). It provides for what are described as transitional arrangements for certain employers bound by federal awards and their employees. During the transitional period those awards are to continue in operation as "transitional awards" and be maintained by the AIRC but within the limits specified in Sched 6. However, while the AIRC may vary a transitional award as permitted by cl 29 of the Schedule, it must not make any new awards (cl 7). A transitional award ceases to be in force at the end of the five year period if it has not earlier done so (cl 6(1)). The AIRC must (cl 8(1)) perform its functions in a way that furthers the objects set out in cl 1. One of those objects is the variation of awards so that wages and other monetary entitlements are not inconsistent with wage-setting decisions of the AFPC (cl 1(2)(c)). The AIRC must also "have regard to" wage-setting decisions of the AFPC and the desirability of consistency between its decisions and those of the AIRC (cl 8(4)). In preventing or settling an industrial dispute or maintaining the settlement of such a dispute, the power of the AIRC to vary a transitional award is limited in various respects by cl 29. Further, the AIRC must not vary a term about long service leave, notice of termination, jury service or superannuation (cll 22, One of the objects of Sched 6 is to ensure that during the transitional period those bound by a transitional award may in appropriate circumstances shift to an available State system (cl 1(2)(b)). Clauses 57-60 provide for such shifts. The decision in Re Pacific Coal344 emphasises the errors in treating s 51(xxxv) of the Constitution as concerned with the settlement of particular 344 (2000) 203 CLR 346. Crennan disputes by arbitration, rather than with the operation of a particular system of dispute resolution345, and in attaching to the outcome of a process of arbitration a constitutional as opposed to a legislative significance346. These errors are repeated in the submissions made by South Australia to the effect that Sched 6 requires the AIRC to vary transitional awards "in such a way that they no longer represent the outcome of a process" identified in s 51(xxxv). A complaint by South Australia respecting the significance to be attached by the AIRC to the wage-setting decisions of the AFPC turns, South Australia accepted in the oral submissions in reply of the Solicitor-General, upon the construction particularly of cl 8 of the Schedule. The submissions by the Commonwealth that to require the AIRC to have regard to particular matters in making a decision is not to mandate a particular outcome should be accepted. In any event, the validity of Sched 6 as a whole is to be assessed by identification of the rights, duties, powers and privileges which it changes, regulates or abolishes. The following statement by Gummow and Hayne JJ in Re Pacific Coal is applicable to Sched 6347: "Here the rights, duties, powers and privileges which are changed, regulated or abolished are some of those which were given by the Parliament in respect of the outcome of the process of conciliation and arbitration carried on under legislation enacted pursuant to s 51(xxxv). The effect of the changes may be very large, and may even be classified by some as unjust. But neither the size of that effect, nor any qualitative description of it, means that some other rights or duties are properly identified as having been the subject of the legislative change." The Parliament is not bound by s 51(xxxv) to maintain any particular system of regulation of industrial disputes. A legislative power to enter a particular field ordinarily, and as it does here, carries with it the power to 345 (2000) 203 CLR 346 at 360 [30]. 346 (2000) 203 CLR 346 at 418-419 [225], 421-422 [230], 449-450 [303], [305]. 347 (2000) 203 CLR 346 at 416 [217]. Crennan withdraw from that field348. That withdrawal may be staged in a manner such as that provided by Sched 6. Accordingly, it is not useful to ask whether transitional awards, after the operation of Sched 6, remain appropriate and adapted for the prevention of future disputes or remain sufficiently connected with a past dispute. To enter upon these questions is not to answer the question whether Sched 6 is a law supported by s 51(xxxv). Schedule 6 is such a law because it prescribes for a specified maximum period the extent to which legislatively created consequences are to continue to attach to pre-existing awards; it qualifies and takes away the legal effect otherwise given by the legislation to those awards. 2(c) Schedule 1 This is headed "Registration and Accountability of Organisations". One of the stated intentions of the Parliament in enacting Sched 1 was to enhance relations within workplaces of "federal system employers" and "federal system employees" and to reduce the adverse effects of industrial disputation by requiring associations of such persons to meet the standards set out in Sched 1 in order to gain the rights and privileges accorded to associations under the new Act and Sched 1 (s 5(1), (2)). The terms "federal system employer" and "federal system employee" are defined in s 18A(2) and s 18B(2) respectively in terms which, among other heads of legislative power, fix upon employment by "a constitutional corporation". Part 2 of Ch 2 of Sched 1 sets up a system of registration. Application may (not must) be made to the AIRC by bodies including "a federally registrable association of employers" and "a federally registrable association of employees" (s 18). If registration is obtained, it may be cancelled by the AIRC on its own motion if the organisation is not, or is no longer, a federally registrable association (s 30(1)(c)(v)). An employers association may apply for registration if it itself is a constitutional corporation, or the majority of its members are federal system employers (s 18A(1)). An association of employees may apply if it itself is a constitutional corporation, or the majority of its members are federal system 348 cf Kartinyeri (1998) 195 CLR 337 at 358 [19]; Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Ame (2005) 222 CLR 439 at 457 Crennan employees (s 18B(1)). These provisions are found in Div 1 of Pt 2, which is headed "Types of associations that may apply for registration". Division 2 of Pt 2 is headed "Registration criteria". Where an application is made by a federally registrable association of employers or employees which satisfies the requirements of Div 1 for the making of an application, the AIRC must grant it, but "if, and only if" the relevant further criteria in s 19 are met by the applicant. If the applicant be an association of employers, then throughout the six months before the application, those members who are employers – and the association will not have satisfied Div 1 unless it be a constitutional corporation or a majority of its members be federal system employers (s 18A(1)) – must have employed on a monthly average at least 50 employees (s 19(1)(c)). If the applicant be an association of employees, then the association – which must have satisfied the requirement in Div 1 (s 18B(1)) that it be a constitutional corporation or have federal system employees as a majority of its members – is required by Div 2 (s 19(1)(d)) to have at least 50 members who are employees. The terms "employer" and "employee", as used in s 19(1), are defined in s 6 of Sched 1 in terms which are not immediately attached to any head of federal legislative power. The new Act itself, in particular as appears in the definition of "employer" in s 6(1), is cast differently and does attract the heads of power invoked by pars (a)-(f) of that sub-section. Unions NSW, in particular, emphasised the distinction between the Act and Sched 1. There was said to be no rational basis for the differing discrimen chosen in the body of the Act and in Sched 1, where the registration system apparently is designed to assist the operation of the Act in various respects. It is undoubtedly the case that registration under Sched 1 confers a range of rights, privileges and obligations under the new Act. Some of these are as follows. With leave of the AIRC, an organisation may intervene in any matter before it (s 101); organisations may be parties to collective agreements (ss 328, 329) and are bound by them whilst they are in operation (s 351); they may be bound by awards (s 543); and may make applications for curial relief provided by the new Act (eg, ss 405, 448(7), 494(8), 495(7), 496(4)). But whatever the further restrictions imposed by s 19 of Sched 1 upon the obtaining of registration, an applicant must first pass the thresholds of s 18A and s 18B respectively. These are attached in the manner described to heads of Crennan legislative power. Paragraphs (c) and (d) of s 19(1) are designed to exclude from registration organisations which do not "at least" reach a certain size in membership. There is nothing irrational in doing so, if rationality to the beholder be a touchstone of validity349. Nor is it to the point that, for example, par (d) of the definition of "employer" in s 6(1) of the new Act makes a more limited use of the commerce power in s 51(i) than does s 18A(2)(b)(ii) in the definition for Sched 1 of "federal system employer", or that pars (e) and (f) of the definition make a more limited use of the Territories power than s 18A(2)(b)(i) of Sched 1. It may be, as counsel for the Commonwealth indicated, that Sched 1 was drafted with a view to it standing as a distinct statute. Whatever the situation in this respect may be, and contrary to the principal submission of those attacking its validity, Sched 1 is supported as an exercise of the power with respect to constitutional corporations. Two decisions of this Court, given at opposite ends of the twentieth century, illustrate the extent of the power to register persons and organisations, and to incorporate the latter, if there be the sufficient connection with one or more paragraphs in s 51 of the Constitution. Cunliffe v The Commonwealth350 upheld the validity of a system requiring registration of persons giving assistance and advice to aliens seeking entry permits, visas and determination of refugee status. It made no difference for its validity that the law operated upon those providing the services in question rather than upon those to whom they were provided; the law was concerned with the protection of aliens in relation to matters affecting their status. If it be accepted, as it should be for the argument on this branch of the plaintiffs' case, that it is within the corporations power for the Parliament to regulate employer-employee relationships and to set up a framework for this to be achieved, then it also is within power to authorise registered bodies to perform certain functions within that scheme of regulation. It also is within power to require, as a condition of registration, that these organisations meet requirements of efficient and democratic conduct of their affairs. 349 See [188]. 350 (1994) 182 CLR 272. Crennan The Commonwealth submitted that the heads of power in the terms relied upon in s 18A and s 18B of Sched 1, whatever the degree of overlap in a given case with s 6 of the new Act, supported the validity of the registration system provided by Sched 1. That submission should be accepted with respect to s 51(xx), the principal subject of debate, and also with respect to the other heads of power relied upon. It is unnecessary to consider a broader submission by the Commonwealth. This was that, for example, a federal law for the organisation of lighthouse employees would be valid whoever were their employer, and whether the parties were under a federal or State industrial relations system or no such system. Section 27 of Sched 1, the validity of which is challenged, provides for the incorporation of organisations registered under that Schedule. A provision to corresponding effect was found in s 58 of the 1904 Act. That invites attention to the earlier of the twentieth century cases mentioned above. This is Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association351. In that case, validity of the registration provisions in the 1904 Act, including s 58, was upheld. Isaacs J remarked that the point had not been strenuously contested352. In its various manifestations, the 1904 Act retained such a provision. Section 27 of Sched 1B to the Act prior to the commencement of the Amending Act, introduced in 2002353, was the most recent example. It was suggested in submissions that the outcome in Jumbunna had depended upon the grounding of the 1904 Act in the particular head of power in s 51(xxxv), and that the shift of the present legislation away from s 51(xxxv) was fatal to the validity of s 27 of Sched 1. However, for many years, the Parliament has taken a broader view of the power of incorporation implicit in various heads of power. The received doctrine was stated as follows by Latham CJ in Australian National Airways Pty Ltd v The Commonwealth ("the Airlines Case")354: 351 (1908) 6 CLR 309. 352 (1908) 6 CLR 309 at 375. 353 Schedule 1B was given effect by s 4A inserted by the Workplace Relations Amendment (Registration and Accountability of Organisations) Act 2002 (Cth). 354 (1945) 71 CLR 29 at 58-59. Crennan "It is true that the Commonwealth has no general power to create corporations, but when the Commonwealth Parliament exercises a legislative power it is for the Parliament, subject to any constitutional prohibition, to determine the means of securing an object which it is legitimate under the power for the Parliament to pursue. Thus the establishment of the Commonwealth Bank was a means of giving effect to an approved policy with respect to banking. In the well-known case of McCulloch v Maryland355 it was held that if Congress can exercise a power it can create a corporation to carry that power into effect: See Jumbunna Coal Mine No Liability v Victorian Coal Miners' Association356, relating to the creation of corporations for the purpose of giving effect to the industrial arbitration power." The establishment of the Commonwealth Bank was referable to the express power of incorporation of banks conferred by s 51(xiii)357. But the decision in the Airlines Case rested upon s 51(i) and s 122358. Long ago, Story wrote of the power of Congress that359: "a power to erect corporations may as well be implied, as any other thing, if it be an instrument or means of carrying into execution any specified 355 17 US 316 (1819). [The Supreme Court there upheld the incorporation in 1816 by the Congress of the Bank of the United States. By the time of the adoption of the Australian Constitution, the Supreme Court had upheld laws for the creation of corporations to construct railroads and bridges for the purpose of promoting interstate commerce: Luxton v North River Bridge Co 153 US 525 at 529-530 356 (1908) 6 CLR 309. 357 See Heiner v Scott (1914) 19 CLR 381 at 393, 395-396, 400, 402-403; Deputy Commissioner of Taxation v State Bank (NSW) (1992) 174 CLR 219 at 231-233. 358 See also The Commonwealth v Australian Commonwealth Shipping Board (1926) 39 CLR 1 at 9-10; Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd (1953) 89 CLR 78 at 87; Australian Coastal Shipping Commission v O'Reilly (1962) 107 CLR 46 at 54-55; Jones v The Commonwealth [No 2] (1965) 112 CLR 206 at 218, 225-226, 236-237, 245. 359 Commentaries on the Constitution of the United States, (1833), vol 3, §1257. Crennan power. The only question in any case must be, whether it be such an instrument or means, and have a natural relation to any of the acknowledged objects of government." In considering Sched 1, there remains a point concerning transitional provisions. The Amending Act makes special provision for the application of Sched 1 to the new Act to organisations registered before the commencement of the new system360. The power conferred by par (c)(v) of s 30(1) of Sched 1 upon the AIRC on its own motion to cancel the registration of an organisation if "the organisation is not, or is no longer, a federally registrable organisation" is qualified by the Amending Act. With respect to organisations registered under the old system, the power of cancellation does not apply for the period of three years after the commencement of the new system. The Commonwealth submits that this moratorium period for the phasing out of the old system is supported by s 51(xxxv) of the Constitution. That submission should be accepted, by application of the reasoning supporting the transitional arrangements made by Sched 6. PART V – CONSTITUTION, s 122 – TERRITORIES Section 122. Section 122 of the Constitution provides: "The Parliament may make laws for the government of any territory surrendered by any State to and accepted by the Commonwealth, or of any territory placed by the Queen under the authority of and accepted by the Commonwealth, or otherwise acquired by the Commonwealth ...". Relevant provisions of the new Act. It is convenient to set out again pars (e) and (f) of the definition of "employer" in s 6(1) of the new Act: a body corporate incorporated in a Territory, so far as the body employs, or usually employs, an individual; or a person or entity (which may be an unincorporated club) that carries on an activity (whether of a commercial, governmental or other nature) in a Territory in Australia, so far as the person or entity employs, or usually employs, an individual in connection with the activity carried on in the Territory." And s 5(1), subject to s 5(2), defines "employee" as meaning: 360 Item 24 of Sched 4 to the Amending Act. Crennan "an individual so far as he or she is employed, or usually employed, as described in the definition of employer in subsection 6(1), by an employer, except on a vocational placement". Structure of the challenges Victoria contended that s 122 did not support the following provisions so far as their validity rested on pars (e) and (f) of the definition of "employer" in s 6(1): Pts 7 and 8, Divs 2-5, 6 (other than s 496(2) and (3) and s 497) and 7-9 of Pt 9, Pt 10, Divs 1 and 2 of Pt 12, s 637(1) and Pt 23. New South Wales, Queensland, South Australia, Western Australia and the AWU contended that s 122 did not support the following provisions so far as their validity depended on par (f) of the definition of "employer" in s 6(1): Pts 7-10, Div 1 of Pt 12, s 637(1) and (4), s 643(1)(a), Pt 23, item 4 of Sched 4 to the Amending Act, and Sched 8 to the new Act. Western Australia, Queensland and the AWU contended that s 122 did not support Div 2 of Pt 12 so far as its validity depended on par (f) of the definition of "employer" in s 6(1). Finally, New South Wales, Queensland, South Australia, Western Australia and the AWU contended that s 122 did not support the validity of Pt XVII so far as it purported to apply from 14 December 2005 to 27 March 2006 and depended on a definition of "employer" identical to that in par (f) of the definition in s 6(1). Paragraph (e) of the definition of "employer" Initially New South Wales, Victoria, South Australia, Western Australia and the AWU adopted the following written submission of Queensland: "By virtue of s 6(1)(e) [scil par (e) of the definition of 'employer' in s 6(1)], the law operates by reference to the relation of employee and employer where the employer is a body whose sole connexion with a Territory is that it had been incorporated in a territory – irrespective of whether the employees or body have any other connexion with a territory whatsoever. This nexus between the subject matter of s 122 and the law, which is a law with elaborate provisions governing employer-employee relations, terms Crennan of employment and unions, is so distant and insignificant that s 122 can rightly be described as no more than a peg upon which the Act has been hung, by a slender loop." (emphasis added) The Commonwealth responded to this submission by pointing out that the words "had been" do not appear in par (e) and that par (e) could not be construed as if it contained them. The Commonwealth contended that par (e) referred only to a body corporate, the ongoing status of which as a body corporate depended on a Territory law or a Commonwealth law made under s 122. The Commonwealth contended that there is a sufficient nexus or connection between laws made under s 122 and bodies corporate incorporated in a Territory, because the law of the place of incorporation generally determines the powers of corporations established under that law. The Commonwealth contended further that s 122 supported the relevant provisions even though they affected employees of the body corporate incorporated in the Territory who were outside the Territory361. In its written submissions in reply, Queensland did not seek to refute either the construction advanced by the Commonwealth or the contentions advanced by the Commonwealth on the basis of that construction. All other written submissions in reply were silent on the matter, and so were the oral submissions. The parties have since indicated that only Victoria maintains the original challenge. That challenge must be rejected. The Commonwealth's construction of par (e) of the definition of "employer" is plainly correct. On that construction, its submissions as to the sufficiency of connection between s 122 and a law directed to bodies corporate incorporated in a Territory, which were not resisted by any other party, are also correct. Paragraph (f) of the definition of "employer" New South Wales, South Australia, Victoria, Western Australia and the AWU adopted the written argument of Queensland. In it two submissions were advanced. 361 Lamshed v Lake (1958) 99 CLR 132; Berwick Ltd v Gray (1976) 133 CLR 603 at 607 per Mason J, 611 per Jacobs J; AMS v AIF (1999) 199 CLR 160 at 171 [19] per Gleeson CJ, McHugh and Gummow JJ (Hayne J agreeing at 227 [201]) and at 182 [59] n 59 per Gaudron J. Crennan The first submission advanced by Queensland was that par (f) of the definition created no sufficient nexus with a Territory, because its effect was that the challenged provisions could apply to employees who conducted an activity in a Territory no matter how small a part of the employer's overall activities it was, no matter how insignificant it was, no matter whether the employer employed anyone in connection with the activity, no matter whether the employer or the employee had ever been present in the Territory, and no matter whether the employee might be engaged predominantly in activities unconnected in any way with the Territory. It was submitted that this state of affairs would produce an absurd outcome: an employee would be subject to the challenged legislation so far as an employee undertook Territory-connected activities, but subject to State laws so far as the employee's activities did not have that connection. The second submission advanced by Queensland rested on the fact that in Re Dingjan362 it was held that a law giving power "in relation to a contract relating to the business of a constitutional corporation" was not a law with respect to a constitutional corporation. It was said to follow that "a law with respect to the employment of employees in connexion with activities conducted by such persons in a territory" could not be a law for the government of the Territory. The first of Queensland's submissions turned on a particular construction of the legislation. The better construction is that for a person or entity to be an employer, two elements have to be found. First, the person or entity has to carry on an activity in a Territory. Secondly, the person or entity has to employ, or usually employ, an individual in connection with that activity. The word "usually" excludes unpredictable, infrequent or unusual acts carried out by the employee at the employer's request. It suggests the need for attention to what the employee normally does, and that in turn suggests that attention must be given to the employee's core or routine duties – considered as a whole, not separately. It is true, as the Commonwealth accepted, that in particular cases it might be difficult to assess whether the connection between the employee's duties and the employer's activities in a Territory existed. It is also true that changes in an individual's duties might cause that individual to cease to be an employee as defined in s 5(1), and later changes may cause that individual to become one again, with consequential changes in the application of the legislation to the employer. However, if a person or entity is an "employer" because an individual 362 (1995) 183 CLR 323. Crennan is employed in connection with an activity carried on by the person or entity in a Territory, the employee is subject to the new Act in respect of all that employee's duties. The supposed absurdity of an employee falling under one body of law as to one part of his or her duties, and a different body of law as to another, would not arise. On the better construction, the points made by Queensland can be seen to lack force. An employee engaged predominantly in activities unconnected in any way with a Territory would not be employed or usually employed in connection with the activity carried on by the employer in the Territory. If no employee were employed in connection with the activity, the employer would not be an employer in the sense defined in par (f). The fact that neither the employer nor the employee had ever been present in the Territory might point against the definition applying, but would not be fatal: an employer can carry on an activity in a Territory quite intensively through agents without ever going there, and an employee who directs the conduct of others in a Territory can be employed in connection with an employer's activity in that Territory without ever going there. The laws supported by s 122 are not limited to those applying to persons or activities in a Territory, but extend to laws applying to conduct taking place outside the Territory, for example, journeys that begin or end in a Territory363. Neither the insignificance of the activity carried on by the employer as compared to the employer's other activities, nor the insignificance of the activity considered by itself, are factors which can prevent the definition in par (f) from applying, and they are not factors revealing any remoteness of connection between the impugned provisions and the Territory. Nor is remoteness of connection demonstrated by the application of the challenged legislation to the employer in relation to only a small proportion of its employees rather than more of them. The second submission advanced by Queensland must also be rejected. Re Dingjan is distinguishable. It dealt with the power conferred by s 51(xx) to make laws for the peace, order and good government of the Commonwealth with respect to a particular class of persons, namely certain types of "corporations". It did not deal with s 122, which is not a power limited to persons, but which extends to making "laws for the government of any territory". The connection established by par (f) of the definition of "employer" between the impugned provisions and a Territory is in any event closer than the connection between the legislation held invalid in Re Dingjan and corporations. 363 Australian National Airways Pty Ltd v The Commonwealth (1945) 71 CLR 29 at 62-63 per Latham CJ, 71-72 per Rich J, 84 per Dixon J, 112 per Williams J. Crennan Conclusion. The challenges to validity so far as they are based on a lack of support from s 122 fail. PART VI – OTHER PARTICULAR CHALLENGES Section 16 – Exclusion of State and Territory laws The section. Section 16(1) provides: "(1) This Act is intended to apply to the exclusion of all the following laws of a State or Territory so far as they would otherwise apply in relation to an employee or employer: a State or Territory industrial law; a law that applies to employment generally and deals with leave other than long service leave; a law providing for a court or tribunal constituted by a law of the State or Territory to make an order in relation to equal remuneration for work of equal value (as defined in section 623); a law providing for the variation or setting aside of rights and obligations arising under a contract of employment, or another arrangement for employment, that a court or tribunal finds is unfair; a law that entitles a representative of a trade union to enter premises." The expression "State or Territory industrial law" is defined in s 4(1) to mean: various identified State Industrial Relations Acts; State or Territory Acts applying to employment generally and having one or more of five identified purposes as its main purpose or one or more of its main purposes; an instrument of a legislative character made under an Act described in par (a) or par (b); or Crennan a law of a State or Territory prescribed by regulations made under the new Act. Section 16(2) provides that s 16(1) does not apply to laws of a State or Territory falling within one of three categories. The third category comprises laws dealing with "non-excluded matters" which are described in s 16(3). Section 16(4) provides: "This Act is intended to apply to the exclusion of a law of a State or Territory that is prescribed by the regulations for the purposes of this subsection." And s 16(5) provides: "To avoid doubt, subsection (4) has effect even if the law is covered by subsection (2) (so that subsection (1) does not apply to the law). This subsection does not limit subsection (4)." It is convenient also to summarise ss 17 and 18, which played a role in the arguments advanced against the validity of s 16. Section 17 provides that, subject to exceptions, an award or workplace agreement prevails over a law of a State or Territory, and a State award or a State employment agreement, to the extent of any inconsistency. Section 18 provides that ss 16 and 17 are not a complete statement of the circumstances in which the new Act and instruments made under it are intended to apply to the exclusion of, or prevail over, laws of the States or Territories or instruments made under those laws. The structure and nature of the challenges. Western Australia advanced three challenges to s 16. First, it contended that s 16 was not supported by any head of power. Secondly, it contended that s 16 constituted "a bare attempt to limit or exclude State legislative power, including future State laws which may be excluded by regulations made under the [new] Act, rather than to comprehensively regulate a particular field of activity to the exclusion of any State law which also regulates that field of activity". Thirdly, it contended that s 16 impermissibly curtailed, or interfered with, the capacity of the States to function as governments. In these three challenges Western Australia was joined by Victoria, Queensland and the AWU. New South Wales put forward a version of the first challenge, but without advancing or adopting any argument in support of it. Crennan A further challenge, which is related to Western Australia's first challenge but was put independently, was that s 16(4) was an invalid attempt to delegate to the Executive the expression of Parliament's intentions about the extent to which the new Act should apply to the exclusion of State and Territory laws. That challenge was advanced by the AWU (in argument, but without any supporting pleading) and South Australia (in its pleading but without any supporting argument). Finally, Victoria advanced what was, in form, a further separate challenge: that s 16(1) and (4) are invalid because they are in their terms unrestricted as to the terms of the State laws which can be excluded in their operation. This was an element in the first challenge mounted by Western Australia, and the arguments of Western Australia were adopted by Victoria without elaboration. Preliminary question of construction: s 16(1). Western Australia contended, as a preliminary question of construction, that s 16(1) excluded any State or Territory law to which it applied in its entirety, irrespective of whether that law applied to persons other than employers and employees as defined in ss 6(1) and 5(1) of the new Act. The steps in that reasoning were: The definitions of employer and employee in ss 6(1) and 5(1) apply unless the contrary intention appears. (b) A contrary intention can be found in references in s 16 to State and Territory laws applying to a broader range of persons than employers and employees as defined in ss 6(1) and 5(1). In addition, it is plain (and the Commonwealth conceded) that by reason of s 5(2) and cl 2(1)(c) of Sched 2, the references to "employee" in s 16(3)(g) and "employees" in s 16(3)(m) are references to an "employee" or "employees" in the ordinary meaning of those words364. It is also plain 364 Section 16(3) relevantly provides: "(3) The non-excluded matters are as follows: the observance of a public holiday, except the rate of payment of an employee for the public holiday; (Footnote continues on next page) Crennan (and the Commonwealth conceded) that by reason of s 6(2) and cl 3(1)(c) of Sched 2, the references to "employers" in s 16(3)(m) are references to "employers" in the ordinary meaning of that word. This reveals a "contrary intention" excluding the definitions in ss 5(1) and 6(1). That contrary intention is revealed not only in relation to s 16(3)(g) and (m), but also in relation to s 16(1), because it is to be presumed that the same terms should be used in the same sense in all places in which they appear in one section. These submissions must be rejected for the following reasons. First, so far as different constructions of s 16 are available, a construction is to be selected which, so far as the language of s 16 permits, would avoid, rather than result in, a conclusion that the section is invalid as being outside Commonwealth legislative power365. In s 16(1) the words "so far as they would otherwise apply in relation to an employee or employer", if construed by recourse to the definitions of "employee" and "employer" in ss 5(1) and 6(1), would (subject to the validity of other challenges) result in s 16(1) being valid, while the adoption of the ordinary meaning of "employee" and "employer" would put it in peril of being invalid. That points against the view that s 16(1) reveals any intention to exclude the application of the ss 5(1) and 6(1) definitions of "employee" and "employer". Secondly, as Western Australia conceded, the Explanatory Memorandum to the Workplace Relations Amendment (Work Choices) Bill 2005 indicated that in s 16(1), the terms "employee" and "employer" were used in their defined regulation of any of the following: associations of employees; associations of employers; (iii) members of associations of employees or of associations of employers." 365 Attorney-General (Vict) v The Commonwealth (1945) 71 CLR 237 at 267 per Dixon J; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 14 per Mason CJ; Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476 at 504 [71] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ. Crennan senses. Thus the Explanatory Memorandum said of the provisions which now correspond with ss 16, 5(1) and 6(1)366: "70. Proposed section [16] would ensure that the [new Act] would operate to the exclusion of present and future State and Territory industrial regimes in their application to employers and employees who would fall within the general constitutional coverage of the [new Act] (that is, employers and employees within the meaning of proposed subsections [5(1)] and [6(1)]). This object would be achieved, first, by the exclusion by proposed paragraph [16(1)(a)] of a State or Territory industrial law in its application to constitutionally covered employers and employees." (italics in original) This indicates that s 16(1) was not seen, in its references to "employees" and "employers", as applying to "employees" and "employers" in the general meaning of those expressions. It also indicates that s 16(1) was seen as excluding a State or Territory law only to the extent that it applied to employees and employers in the senses defined in ss 5(1) and 6(1). Western Australia responded by saying that the Explanatory Memorandum was of limited utility, because it was contradicted by the Supplementary Explanatory Memorandum to the Workplace Relations Amendment (Work Choices) Bill 2005. The contradiction was said to lie in the fact that the Supplementary Explanatory Memorandum contemplated that State laws would be excluded in their entirety, not just in relation to employees and employers as defined in ss 5(1) and 6(1)367. However, properly construed, the Supplementary Explanatory Memorandum does not support that view, and there is thus no contradiction. Thirdly, it does not follow from the fact that "employee" and "employer", as used in s 16(3)(g) and (m), bear their ordinary meanings that those words as used in s 16(1) also bear their ordinary meanings. They bear their ordinary meanings in s 16(3)(g) and (m) because Parliament specifically listed those provisions in cll 2(1)(c) and 3(1)(c) of Sched 2. The fact that Parliament did not specifically list s 16(1) in either cl 2 or cl 3 negates any intention in s 16(1) to exclude the ss 5(1) and 6(1) definitions. The presumption of construction which 366 Explanatory Memorandum at 43 [70]-[71]. 367 Western Australia relied here on page 4 of the Supplementary Explanatory Memorandum. Crennan Western Australia relied on in par (d) of its argument on construction has no application in these circumstances. Fourthly, it is not possible to infer from s 16(1) an intention to exclude the ss 5(1) and 6(1) definitions of "employee" and "employer" by reason of the fact that the State and Territory laws described in s 16(1) might apply to a broader range of persons than employees and employers as defined. That is because the State and Territory laws excluded are only excluded to a limited extent, namely, "so far as they would otherwise apply in relation to an employee or employer". Hence s 16(1) on its true construction is limited to the exclusion of State and Territory laws so far as they would otherwise apply to an employee or employer, defined by reference to the heads of constitutional power referred to in pars (a)-(f) of the definition of "employer" in s 6(1). Preliminary question of construction: s 16(4). Western Australia also contended, as a preliminary question of construction, that even if (contrary to its arguments just rejected) s 16(1) were confined to excluding State and Territory laws so far as they would otherwise apply in relation to employees and employers as defined in ss 5(1) and 6(1), s 16(4) was not so confined. It submitted that s 16(4), on its true construction, enabled a State law to be excluded by regulation regardless of whether it was an industrial law, and regardless of whether it operated in relation to an employee and an employer as defined in ss 5(1) and 6(1). The construction advocated is unsound. First, so far as different constructions of s 16(4) are available, a construction is to be selected which would avoid, rather than result in, a conclusion that the sub-section was invalid as being outside Commonwealth legislative power. If s 16(4) bore the construction alleged by Western Australia, it might well be invalid. If it is construed harmoniously with s 16(1), then (subject to other arguments) it is not. Secondly, s 16(4) must be construed in context. The general context is that the new Act deals with the rights and obligations of "employees" and "employers" – generally, but not always, in the sense defined in ss 5(1) and 6(1). The particular context is that s 16(1) (subject to the matters listed in s 16(2) and (3)) applies the new Act to the exclusion of certain kinds of State and Territory laws so far as they would otherwise apply to employees and employers as defined in ss 5(1) and 6(1). In these contexts, s 16(4) is to be construed as supplementing s 16(1) and as operating in the same fashion. Section 16(4) permits the making of regulations excluding certain State or Territory laws which are described in pars (a)-(e) of s 16(1) and which relate to the dealings of employees and employers as defined, even though they would otherwise fall within the Crennan exceptions to s 16(1) set out in s 16(2). That flows from s 16(5), which makes it clear that a regulation made under s 16(4) can cause the new Act to apply to the exclusion of a State or Territory law otherwise caught by s 16(2). If s 16(4) were not to be construed harmoniously with s 16(1), it would have been pointless to have inserted into s 16(1) the limiting words "so far as they would otherwise apply in relation to an employee or employer". Is s 16 a law with respect to any head of power in s 51 of the Constitution? Since the constructions of s 16(1) and (4) advanced by Western Australia are rejected, ss 16(1) and 16(4) are to be characterised as laws with respect to the heads of constitutional power referred to in pars (a), (e) and (f) of the definition of "employer" in s 6(1). Subject to other arguments about to be considered, those sub-sections are supported by those heads of constitutional power as fully as the other parts of the new Act which, it has been held368, are valid on this ground. Western Australia did submit that even if "employee" and "employer" were used in s 16 with the meanings defined in ss 5(1) and 6(1), s 16 could not be characterised as a law with respect to corporations. The submission must be rejected. Western Australia's arguments on whether there was a bare attempt to limit or exclude State legislative power. It follows from the conclusion just reached that the Parliament had available to it the heads of power referred to in the definition of "employer" in s 6(1). But Western Australia submitted that in s 16 the Parliament had failed to use its power to deal with the subject-matter of the new Act. Section 16 was not a law dealing with a subject-matter assigned to the Parliament; it was a law merely aimed at preventing State legislative action. That was because it sought to exclude the operation of State laws on matters in relation to which the Commonwealth had not attempted to legislate. Western Australia accepted that it is open to the Parliament to identify a field to be "covered" by federal laws in the sense that federal laws are to operate exclusively of State laws, making those State laws inconsistent with the federal laws and invalid to that extent under s 109 of the Constitution369. But Western 368 See above at [57]-[198]. It will be recollected that no challenge was made to validity so far as the new Act rests on the heads of constitutional power referred to in pars (b)-(d) of the definition of "employer" in s 6(1). 369 Section 109 provides: (Footnote continues on next page) Crennan Australia contended that the Commonwealth had attempted, in a sense, to manufacture inconsistency for the purposes of s 109 of the Constitution in attempting to take the "covering the field" test beyond what s 109 permits. Western Australia submitted that in contrast to s 17, s 16 was not expressed in terms requiring there to be an inconsistency between the new Act and a State law. Both ss 17 and 18 would be unnecessary if s 16 were a genuine attempt to identify the extent to which the new Act was intended to operate exclusively, and they reveal that s 16 is concerned with the operation of State laws, not with preserving the operation of particular provisions of the new Act which might be inconsistent with State laws. Western Australia also contended that in numerous respects s 16 attempts to invalidate State laws despite having failed to enact any corresponding federal law. Western Australia said, for example, that s 16(1)(d) provides that the new Act is intended to apply to the exclusion of a State or Territory law providing for the variation or setting aside of rights and obligations arising under a contract of, or arrangement for, employment that a court or tribunal finds to be unfair. The only provisions in the new Act dealing with unfair contracts are ss 832-834, and they only deal with contracts binding on independent contractors, not employees. Hence s 16(1)(d) applies to the exclusion of Pt 9 of Ch 2 of the Industrial Relations Act 1996 (NSW), dealing with unfair contracts of employment. The State law is excluded, but no federal law applies. Western Australia contended that there were various other examples of this. One was said to relate to s 16(1)(e) which, read with s 16(3)(c), indicates an intention to apply the new Act to the exclusion of State laws dealing with the exercise of rights by a representative of any trade union to enter premises for any purpose other than occupational health and safety; yet the new Act only deals with the exercise of rights of entry pursuant to Divs 4, 5 and 6 of Pt 15 by officials of organisations registered under the new Act for certain purposes. Attention was drawn to the fact that "trade union" is defined in s 4(1) to include organisations of employees whether or not registered under the new Act. Another example related to State Acts of the kind referred to in par (b) of the definition of "State or Territory industrial law" in s 4(1), so far as they deal with matters for purposes other than one of the "main purposes" specified in that part of the definition. Western Australia submitted that those State Acts are excluded by s 16(1)(a) without any "When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid." Crennan substantive regulation of the subject in the new Act itself. Other examples, developed in considerable detail, related to the making of regulations under s 16(4) in relation to discrimination legislation, matters listed in s 16(3), redundancy provisions, and the enforcement of contractual entitlements. Thus Western Australia submitted that s 16, since it is aimed at preventing the exercise of State legislative power on various matters rather than preserving the operation of Commonwealth legislation on those matters, is not "a law of the Commonwealth" within the meaning of s 109, and cannot prevail over State legislation passed in exercise of its concurrent power370. It is true that on the construction of s 16(1) which was accepted above371, provisions like s 16(1)(d) and (e) only apply to circumstances involving employees and employers as defined in ss 5(1) and 6(1), and hence to circumstances where, subject to the present controversy, Commonwealth power exists. that construction, Western Australia contended that there was an area – relatively narrow, perhaps, but still an area – where the Commonwealth had refused to legislate positively and had used s 16 to prevent the States from doing so. That is, the Commonwealth had effectuated a bare exclusion of State law. But even on The Commonwealth's arguments. The Commonwealth specifically declined to contend that if a Commonwealth law simply sought to exclude State law in a field and made no provision whatever on the same subject-matter it was within power. The Commonwealth contended rather that it was open to the Commonwealth Parliament to indicate the relevant field it intended to cover to the exclusion of State law, that s 109 would then operate even though the Commonwealth had not made its own detailed provisions about every matter within that field which State law dealt with, and that it sufficed for the Commonwealth to have some provisions dealing with aspects of the field, leaving others unregulated. The Commonwealth submitted that the relevant field was to be identified, not by reference to the areas regulated by State law, but by reference to the terms of the Commonwealth law. It was concluded above that the Commonwealth has power to regulate the relationships between employees and employers as defined in ss 5(1) and 6(1) by reliance on the heads of power referred to in pars (a), (e) and (f) of the definition of "employer" in s 6(1). The 370 Western Australia relied on the language used in Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 628-629 [37] per Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ. Crennan Commonwealth submitted that it was open to the Parliament to identify the rights and obligations arising out of those relationships of employees and employers as a field, and to indicate an intention to cover that field (or, as here, part of it, because of the limitations to s 16(1) and the operation of s 16(2) and (3)). On the construction of s 16(1) accepted above372, the Commonwealth chose to exclude State law only in respect of the relations of employees and employers as defined in ss 5(1) and 6(1). No bare attempt to limit or exclude State legislative power. The Commonwealth's submissions are to be preferred. Western Australia pointed to nothing in s 109 itself or in the case law on s 109 suggesting that s 109 will not cause Commonwealth law to prevail over an inconsistent State law and render it invalid to the extent of the inconsistency unless the Commonwealth law provides some regime for regulating each particular aspect of the topics dealt with by the State law. Rather, as Dixon CJ put it in Lamshed v Lake373, the distinction is between a law which lays down a positive rule and a law "seeking rather to limit State power". Section 109 may operate where the Commonwealth chooses to enact a scheme involving a more detailed form of regulation than State law provides. Equally, s 109 may operate where the Commonwealth creates a scheme involving less detailed regulation than State law provides374. And s 109 may operate where the Parliament has done what it has in the new Act – to provide a more detailed scheme than State law in some respects and a less detailed scheme in other respects. The Commonwealth has legislated to provide a detailed set of rules for particular agreements; it has not dealt, for example, with unfair contracts except in relation to independent contractors, but that does not preclude it from defining a field of relationships between s 5(1) employees and s 6(1) employers, and occupying parts of that field, like unfair contracts, to the exclusion of State law. Section 16 of resembles s 24(2) of the new Act strongly Re-establishment and Employment Act 1945 (Cth)375. It relevantly provided: the 373 (1958) 99 CLR 132 at 147. 374 Western Australia v The Commonwealth (Native Title Act Case) (1995) 183 CLR 373 at 466 per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ. 375 See also the examples given by Dixon CJ in Lamshed v Lake (1958) 99 CLR 132 at 147-148; Australian Coastal Shipping Commission v O'Reilly (1962) 107 CLR 46 (Footnote continues on next page) Crennan "The provisions of this Division shall apply to the exclusion of any provisions, providing for preference in any matter relating to the employment of discharged members of the Forces, of any law of a State, or of any industrial award, order, determination or agreement made or filed under or in pursuance of any such law ..." Section 27(5)(a) provided that there was to be no preference in relation to promotion for discharged servicemen already employed by an employer. In Wenn v Attorney-General (Vict)376 the defendant advanced the argument which Western Australia has advanced in this case: 'covering the field' applies only where the "[T]he doctrine of Commonwealth Parliament has itself made some positive provision with respect to a particular subject with which provision any State law on that subject would be inconsistent. Section 27(5)(a) excludes the application of any preference in promotion by virtue of the Federal Act. It does not make any positive provision with respect to promotions. The defendant argues that therefore the field is free for the States, the Commonwealth Parliament not having provided any law with respect to promotions, so that s. 109 of the Commonwealth Constitution cannot apply so as to render any State law inoperative." The Court unanimously rejected that argument. Latham CJ (with whom "Section 24(2) is a provision prescribing the area within which Federal law, as enacted in the Act, is to apply to the exclusion of State law in respect of a subject as to which the Commonwealth Parliament has full legislative power. .... at 56-57 per Dixon CJ, 63-64 per Menzies J; Agtrack (NT) Pty Ltd v Hatfield (2005) 79 ALJR 1389 at 1400 [61] per Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ; 218 ALR 677 at 691. 376 (1948) 77 CLR 84 at 109 per Latham CJ. 377 (1948) 77 CLR 84 at 111-112. Crennan It is ... within Federal legislative power to prevent the operation of separate and possibly varying State enactments dealing with the same subject." Dixon J (with whom Rich J agreed) said378: "Section 24 and s. 27 ... justify the conclusion that, on the one hand, the Federal Parliament intended to define the extent to which the duty to give preference should go and to do it so as to exclude promotion, and, that on the other hand, it intended to provide in this and other respects what would be the only rule upon the subject and so would operate uniformly and without differentiation based on locality or other conditions. In this Court it is far too late to contend that s. 109 does not invalidate State law which in such a state of affairs carries the regulation of the same matter further than the Federal legislation has decided to go. This is a case where the Federal legislation undertakes a regulation or statutory determination of the very subject and then goes on to express an intention that it shall be an exhaustive declaration of the law on that particular subject." "To legislate upon a subject exhaustively to the intent that the areas of liberty designedly left should not be closed up is ... an exercise of legislative authority different in kind from a bare attempt to exclude State concurrent power from a subject the Federal legislature has not effectively dealt with by regulation, control or otherwise." He said there was "a debatable area where Federal laws may be found that seem to be aimed rather at preventing State legislative action than dealing with a subject matter assigned to the Commonwealth Parliament"380. But he concluded that the federal Act was "well within the line". The similarity of the statutory position in that case to that in the present case makes the reasoning directly applicable. Wenn has been cited with approval in many cases including Botany Municipal Council v Federal Airports 378 (1948) 77 CLR 84 at 119-120. 379 (1948) 77 CLR 84 at 120. 380 (1948) 77 CLR 84 at 120. Crennan Corporation381, Western Australia v The Commonwealth (Native Title Act Case)382 and the Industrial Relations Act Case383. Western Australia did not contend that any of these cases should be departed from. It follows that Western Australia's second challenge to the validity of s 16 must fail. Subsidiary arguments. The Commonwealth embarked upon a detailed refutation of some of the contentions advanced by Western Australia in relation to areas allegedly dealt with by State law but not by the new Act. It is unnecessary to decide on the merits of the competing submissions since, in view of the conclusion just reached, the controversies are irrelevant to validity. It is also undesirable to do so in the absence of factual circumstances raising a concrete dispute about them. Curtailment of, or interference with, the capacity of States to function. Western Australia pleaded its third challenge as being that s 16 was invalid because it impermissibly curtails, or interferes with, the capacity of the States to function as governments. The conclusion that s 16 does not represent a bare attempt to limit or exclude State legislative power would make any argument in support of this challenge very difficult to maintain. No argument was in fact advanced in support of the challenge. The inference that the challenge was abandoned is supported by its omission from an agreed statement prepared after the end of the hearing by the parties setting out the issues in dispute. Is s 16(4) an invalid attempt to delegate legislative power? The AWU submitted, and South Australia alleged in its pleading, that s 16(4) invalidly attempts to delegate the expression by Parliament of its intention as to the extent to which the new Act would apply to the exclusion of State and Territory laws. This point fails. It rested on the supposed absence of any legislative criteria by reference to which the regulation-making power was to be exercised. For the reasons given below384, there are sufficient criteria. 381 (1992) 175 CLR 453 at 464-465 per Mason CJ, Brennan, Deane, Dawson, Toohey, 382 (1995) 183 CLR 373 at 465-468 per Mason CJ, Brennan, Deane, Toohey, Gaudron 383 (1996) 187 CLR 416 at 540 per Brennan CJ, Toohey, Gaudron, McHugh and Crennan Lack of restriction in s 16 on the State laws which may be excluded? Victoria pleaded that s 16(1) and (4) are invalid because "they are in their terms unrestricted as to the laws of the States which can be excluded in their operation". The allegation was not elaborated. It must be rejected for the reasons given above385. Conclusion. All challenges to the validity of s 16 fail. Section 117 – Restraining State industrial authorities The terms of the section. Section 117 provides: If it appears to a Full Bench that a State industrial authority is dealing or is about to deal with a matter that is the subject of a proceeding before the the Commission under Registration and Accountability of Organisations Schedule, the Full Bench may make an order restraining the State industrial authority from dealing with the matter. this Act or The State industrial authority must, in accordance with the order, cease dealing or not deal, as the case may be, with the matter. (3) An order, award, decision or determination of a State industrial authority made in contravention of the order of a Full Bench under this section is, to the extent of the contravention, void." "Full Bench" means "Full Bench of the Commission", that is, the AIRC (s 4(1)). The expression "State industrial authority" is defined in s 4(1) to mean: a board or court of conciliation or arbitration, or tribunal, body or persons, having authority under a State Act to exercise any power of conciliation or arbitration in relation to industrial disputes within the limits of the State; or a special board constituted under a State Act relating to factories; Crennan any other State board, court, tribunal, body or official prescribed for the purposes of this definition." The Commonwealth's contention that no prescription has been made for the purposes of par (c) of that definition was not denied. Provisions similar to s 117 have appeared in federal industrial relations legislation since 1904386. The structure and nature of the challenge. South Australia contended that the power granted to the Full Bench by s 117 was invalid387. Similar contentions were made by New South Wales, Western Australia, Queensland and the AWU, each of which simply adopted the brief submissions advanced by South Australia on the issue. Those submissions may be grouped under three interlinked heads. South Australia's first contention: s 106 of the Constitution. Section 106 of the Constitution provides: "The Constitution of each State of the Commonwealth shall, subject to this Constitution, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be, until altered in accordance with the Constitution of the State." South Australia submitted that the "Constitution of each State" included arrangements for the exercise of the core functions of government of the State, including arrangements for the conclusive determination of controversies arising under the valid and operational laws of the State, and arrangements for the exercise of the executive power of the State to execute and maintain its valid and operational laws. 386 Conciliation and Arbitration Act 1904 (Cth), s 20. Section 20 was amended in 1928 and 1930. From 1947 the matter was dealt with by s 31, and from 1956 by s 66. (Section 66 was enacted as s 16BB by the Conciliation and Arbitration Act 1956 (Cth) but the same Act renumbered the provision as s 66; the section was amended in 1972.) From 1988 it was dealt with by the Industrial Relations Act 1988 (Cth), s 128. From 1996 until the enactment of s 117 it was dealt with by s 128 of the Workplace Relations Act 1996 (Cth). 387 A challenge based on the contention that judicial power had been impermissibly vested in the AIRC was initially put, but later abandoned by South Australia and all others who mounted it. Crennan South Australia contended that s 117 contravened s 106 in two ways. The first way in which s 117 was said to contravene s 106 was that an order of the Full Bench restraining a State industrial authority from proceeding was a command to the authority not to apply, enforce and uphold valid and operational State laws applicable to an industrial dispute. South Australia relied on the statement of Brennan and Toohey JJ in Re Tracey; Ex parte Ryan388 that provisions purporting to prohibit the exercise of the ordinary criminal jurisdiction vested in State courts by State law were invalid by reason of s 106. The second way in which s 117 was said to contravene s 106 related to the impact of an order of the Full Bench on "executive tribunals". That order, it was argued, was a direct prohibition on the performance by an organ of State government of its constitutional functions. South Australia's second contention: Melbourne Corporation. South Australia submitted that the conferral of power on the AIRC to make an order restraining a State industrial authority from dealing with a matter – that is, from administering the valid and operative laws of that State – affects the capacity of the State to "function as a government" and to "exercise constitutional functions" within Commonwealth389 in Melbourne Corporation390. those expressions as used the meaning of the principles in explaining stated South Australia's third contention: s 51(xx) is incapable of supporting a law having the consequences which s 117 has. In oral argument, South Australia for the first time advanced a third submission – that even if s 51(xx) was capable of supporting other parts of the new Act, it could not support s 117. The effect of s 117 was to permit the Full Bench to attack the administration of valid State laws by the executive of the State. South Australia conceded that the context or subject-matter of some of the powers conferred by s 51 of the Constitution would permit those powers to be exercised in such a way as to interfere with the functions of State executives, but said that s 51(xx) was not one of them. 388 (1989) 166 CLR 518 at 574-575. 389 (2003) 215 CLR 185 at 259 [146] per Gaudron, Gummow and Hayne JJ. 390 (1947) 74 CLR 31. Crennan Consideration of the contentions. There is one preliminary aspect of South Australia's submissions to be considered. It may not be a fatal obstacle but it is a difficulty. The difficulty relates to the first two arguments advanced, which, if sound, would be as good in relation to legislation not based on s 51(xx) as they are said to be in relation to legislation which is based on that paragraph. In several cases Justices of this Court have held391, assumed392 or said393 that the precursors of s 117 are valid, being supported by s 51(xxxv) and (xxxix) of the Constitution. It is true that these cases are not, strictly speaking, authorities against the first two arguments advanced by South Australia, for the arguments do not appear to have been advanced in those cases or at any other stage in the last 100 years. On the other hand, the novelty of the arguments may be seen as a badge of their lack of merit. And if the fact that no-one has ever thought it worthwhile to argue that the precursors of s 117, which were supported by s 51(xxxv) and (xxxix), were invalidated by s 106 or by the doctrine in Melbourne Corporation394 is an indication that the arguments to that effect lack merit, similar arguments employed against a provision to the effect of s 117, supported by s 51(xx), are likely to have no greater merit. Turning to the first argument advanced by South Australia, it is necessary to note three respects in which s 117 is of limited application. First, the power only exists where the State industrial authority is dealing or about to deal with a matter that is the subject of the proceeding before the AIRC – that is, the same matter, not some other matter remotely connected to the matter before the Commission. Secondly, contrary to the submissions of South Australia, it is not 391 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Engineers &c (State) Conciliation Committee (1926) 38 CLR 563. 392 Western Australian Timber Workers' Industrial Union of Workers (S W Land Division) v Western Australian Sawmillers' Association (1929) 43 CLR 185; Australian Timber Workers' Union v Sydney and Suburban Timber Merchants' Association (1935) 53 CLR 665 at 672 per Rich, Dixon, Evatt and McTiernan JJ. 393 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Whybrow & Co (1910) 11 CLR 1 at 52 per Isaacs J; R v Moore; Ex parte NSW Public Service Professional Officers' Association (1984) 154 CLR 1 at 15 per Deane J; at 7 Gibbs CJ said that he saw no reason to doubt validity but did not need to express any final opinion on the point; Dawson J reserved his position at 22. 394 (1947) 74 CLR 31. Crennan the case that in its standard operation s 117 will permit orders preventing a State from enforcing one of its own valid laws, because of s 16(1)(a): if the matter in the State industrial authority involves an industrial law of that State, and if s 16(2) and (3) do not apply, the law is invalid to the extent of its inconsistency with s 16(1)(a) by reason of s 109 of the Constitution. Thirdly, when s 117 is read with pars (a) and (b) of the definition of "State industrial authority", it can be seen that it does not give power to make orders directed against courts, for example State Supreme Courts, exercising their ordinary civil and criminal jurisdiction. It is true that par (c) of the definition of "State industrial authority" gives power to prescribe a "court" for the purposes of that definition, but no prescription has been made, and the question whether s 117 is valid in its grant of power to make orders against a State Supreme Court if a State Supreme Court were ever prescribed can be left to the day when it is. Hence, s 117 at present gives no power to make orders directed at the core of State judicial systems. It follows that the reasoning of Brennan and Toohey JJ in Re Tracey; Ex parte Ryan395 is not applicable to the present case, and that there is no occasion to consider the correctness of the Commonwealth's challenge to the decision. South Australia's first argument raises the question of whether the constitution and operation of a board or court of conciliation or arbitration, or a tribunal, body or person, having authority under a State Act to exercise any power of conciliation or arbitration in relation to industrial disputes within the limits of that State could be described as part of the "Constitution" of the State within the meaning of s 106. The content of that term used in s 106 is not finally settled in this Court396. Certainly, determination of the answer to that question would call for a close examination of the laws of that State with a view to deciding which are, and which are not, part of its Constitution. The same analysis would be called for in relation to any "special board constituted under a State Act relating to factories". South Australia essayed no examination along these lines, either for the Constitution of South Australia or for the Constitution of any other State. It is not for this Court to engage in that type of analysis of its own motion in a case in which no concrete industrial dispute between litigants is before the courts "and where, as a consequence, there is no factual situation against which the relevant limits of the constitutional power can be brought into 395 (1989) 166 CLR 518 at 574-575. The issue to which it relates was also identified in Truong v The Queen (2004) 223 CLR 122 at 163 [105]-[106] per Gummow and 396 McGinty v Western Australia (1996) 186 CLR 140 at 259 per Gummow J. Crennan focus"397. The Court ordinarily seeks to decide the issues before it in the light of detailed submissions advanced with notice to all parties, rather than by pursuing suggestions by one party for lines of research to be conducted by the Court independently after the hearing, without assistance from counsel and without notice to opponents of the party making the suggestion. It may be said, however, that normally the bodies dealing with industrial disputes or factories are specialist entities established for specific purposes and liable to change from time to time as the legislature sees fit. Even if it were to be accepted that the laws regulating State bodies of this kind may be part of the Constitution of the relevant State, it has not been demonstrated in these proceedings that that is the case in any State. The same difficulty prevents acceptance of South Australia's contention that, so far as a relevant State industrial authority is an "executive tribunal", a s 117 order by a Full Bench would be a direct prohibition on the performance by an organ of the State government of its constitutional functions. It has not been shown that the "constitutional" functions referred to in South Australia's submission are part of any State's "Constitution". South Australia's second argument, that based on Melbourne Corporation, must also be rejected. The interference which s 117 permits is relatively minor. The interest of a State in having a "State industrial authority" determine a matter in a way which is likely to lead to a conflict with the handling of that matter by a Full Bench of the AIRC is not so vital to the functioning of the State that it can be said, as South Australia asserted, that it affects the capacity of the State to "function as a government" or to "exercise constitutional functions". South Australia's third argument, too, must be rejected. The argument was that s 51(xx) could not support the consequences which would flow from s 117. However, if, as Knox CJ, Isaacs, Higgins, Gavan Duffy, Powers, Rich and Starke JJ held in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Engineers &c (State) Conciliation Committee398, the earlier provisions to the effect of s 117 are within the power conferred by s 51(xxxv) and (xxxix) of the Constitution, and if, as held elsewhere in this judgment, s 51(xx) supports the other provisions of the new Act, one could not conclude that s 51(xx) and (xxxix) do not support s 117 unless some relevant difference between s 51(xxxv) and 397 R v Moore; Ex parte NSW Public Service Professional Officers' Association (1984) 154 CLR 1 at 22 per Dawson J. 398 (1926) 38 CLR 563. Crennan s 51(xx) were identified. No relevant difference has been identified. Both the precursors to s 117, and s 117 itself, enable an otherwise valid federal system for the regulation of industrial relations to operate efficaciously without interference from a State body dealing with the same matter under State law. It was not explained why s 117 was not incidental to the exercise by the Parliament of its power under s 51(xx) to enact the rest of the new Act. To put the same point in a different way, the submission identified a desired conclusion, but advanced no reason why that conclusion should be drawn. Hence all the challenges to s 117 fail. Regulation-making powers The structure of the primary challenge. The AWU alleged that the provisions of subdiv B of Div 7 of Pt 8 and s 436 were invalid because they turned on the expression "prohibited content", and that expression was not defined in the new Act: its content was left for specification by regulation without stipulation of any relevant criteria. In consequence, the expression of Parliament's intention with respect to subdiv B of Div 7 of Pt 8 had been completely delegated to the Executive. Although the pleadings filed by Western Australia did not support this challenge, its written submissions were apparently intended to, without elaboration of what the AWU said. The legislation. The following provisions in subdiv B of Div 7 of Pt 8 employ the expression "prohibited content". Section 358 renders a term of a workplace agreement "void to the extent that it contains prohibited content". Section 357 prohibits an employer from recklessly lodging a workplace the agreement which contains prohibited content. Employment Advocate to vary a workplace agreement which contains prohibited content, and ss 359-362 and 364 deal with the procedures to be followed if that course is contemplated. Section 365 prohibits persons from recklessly seeking, in the course of negotiations, to include a term containing prohibited content in a workplace agreement, or in a variation to a workplace agreement. Section 366 prohibits persons from recklessly making misrepresentations that a particular term of a workplace agreement or a variation to a workplace agreement does not contain prohibited content399. Section 363 obliges 399 Sections 365 and 366 are set out at [272]. Crennan Further, s 436 provides that engaging in industrial action in relation to a proposed collective agreement is not "protected action" if it is to support or advance claims to include "prohibited content" in the agreement. Section 321 provides that "prohibited content" has "the meaning given by section 356". Section 356 provides: "The regulations may specify matters that are prohibited content for the purposes of this Act." Section 846(1) provides: "The Governor-General may make regulations, not inconsistent with this Act, prescribing all matters: required or permitted by this Act to be prescribed; or necessary or convenient to be prescribed for carrying out or giving effect to this Act." None of the particular items indicated in s 846(2) as potential subjects for regulations cast light on the power to make regulations specifying matters that are "prohibited content". Regulations of this kind have been made400. Their validity is not challenged, but this does not affect the question of whether s 356 itself is valid. It should be said that the technique employed in s 356 is an undesirable one which ought to be discouraged. For one thing it requires the lawyers (and the many non-lawyers) who have to work with the new Act to look outside it in order to apply it: identifying what regulations are in force is a task which many inquirers have found difficult. And it creates difficulty in assessing whether particular regulations made under the legislation are intra vires. However, to make these criticisms is one thing; to conclude that there is constitutional invalidity is another. The AWU's arguments. The AWU accepted that it was open to Parliament to authorise subordinate legislation "in wide and general terms ... under any of 400 Regs 8.5-8.7 of Ch 2. Crennan the heads of its legislative power"401. The AWU also accepted that by reason of s 846(1) any regulations to be made specifying matters that were prohibited content could not be inconsistent with the new Act. But the AWU submitted that no provision in the Act, not even s 3402, defining its principal object, indicated the permissible parameters of the regulations contemplated by s 356. The AWU submitted that to confer on the Governor-General a power to make regulations as broadly expressed as ss 356 and 846(1) without also stipulating matters stated in the new Act, or to be implied from it, as indicating the parameters within which those regulations could extend, was invalid for two distinct reasons. The first was that no "law" had been enacted, because, in the words of Latham CJ403, there had been no indication of "a rule of conduct", and no "declaration as to power, right or duty". The AWU went so far as to submit that the legislation said no more than that "[p]rohibited content is whatever the Executive Government says should not be contained in a workplace agreement". The second reason advanced by the AWU was that even if a "law" had been enacted, there was, in the words of Dixon J404, "such a width or such an uncertainty of the subject matter ... handed over" by the Parliament to the Executive that it was not a law with respect to any identifiable head of Commonwealth legislative power. Is there a "law"? The function of the expression "prohibited content" is to indicate matters which may not be included in workplace agreements entered into by employees to which the relevant employer is necessarily a party. Among the relevant classes of "employer" set out in the definition of "employer" in s 6(1) is the class of "constitutional corporations", that is, corporations to which s 51(xx) of the Constitution applies405. The facility to enter workplace agreements is granted by Pt 8. Sections 326 to 331 describe six types of workplace agreement. One is an AWA between an employer and a person whose employment will be 401 Plaintiff S157/2002 (2003) 211 CLR 476 at 512 [102] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ. 402 Section 3 is set out at [7]. 403 The Commonwealth v Grunseit (1943) 67 CLR 58 at 82, adopted in Plaintiff S157/2002 (2003) 211 CLR 476 at 512-513 [102] per Gaudron, McHugh, Gummow, Kirby and Hayne JJ. 404 Victorian Stevedoring and General Contracting Co Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at 101. 405 See par (a), set out at [8]. Crennan subject to the agreement (s 326). The second is an employee collective agreement between an employer and persons employed in a single business, or part of a single business, of the employer, whose employment will be subject to the agreement (s 327). The third is a union collective agreement between an employer and one or more organisations of employees which meets, or meet, two specified conditions (s 328). The fourth is a union greenfields agreement between an employer and one or more organisations of employees which meets, or meet, three specified conditions (s 329). The fifth is an employer greenfields agreement relating to any business which the employer proposes to establish, or is establishing, when the agreement is made, being an agreement made before the employment of the persons who will be necessary for the normal operation of the business and whose employment will be subject to the agreement (s 330). The sixth is a multiple-business agreement which would be a collective agreement of a type mentioned in ss 327, 328, 329 or 330 but for the fact that it relates to any combination or combinations of one or more single businesses, or one or more parts of single businesses, carried on by one or more employers (s 331). Sections 334 and 335 provide for employers who are constitutional corporations, and their employees, to appoint bargaining agents to act on their behalf in making, varying or terminating AWAs, making or varying employee collective agreements and varying employer greenfields agreements. Section 342 creates obligations on employers to lodge certain workplace agreements with the Employment Advocate. This is to be done, in the case of AWAs, only after approval by the parties, and, in the case of employee collective agreements and union collective agreements, only after all employees have been given by the employer a reasonable opportunity to decide whether they want to approve it and a majority of them has done so. Subdivision A of Div 7 of Pt 8, headed "Required content", stipulates various matters which workplace agreements must include. Subdivision B of Div 7 of Pt 8, headed "Prohibited content", stipulates, via the regulations contemplated by s 356, matters which workplace agreements must not include. While neither Pt 8 nor any other provision of the new Act mandates the making of workplace agreements, as has been seen406, according to the 406 See above at [19]. Crennan responsible Minister's Second Reading Speech, it is a "central objective of [the Amending Act] ... to encourage the further spread of workplace agreements"407. The advantages of various forms of workplace agreement from different points of view stem from certain consequences they have. Among those consequences are the following: Save for protected award conditions (s 354) or terms of certain awards incorporated by reference (s 355), an award has "no effect" in relation to an employee while a workplace agreement operates in relation to the employee (s 349). (b) While persons are prohibited from applying duress to an employer or employee in connection with an AWA (s 400(5)), a person is not prohibited by that provision from requiring another person to make an AWA as a condition of engagement (s 400(6)). (c) Only one workplace agreement can have effect at a particular time in relation to a particular employee (s 348(1)). Collective agreements (employee collective agreements, union collective agreements, union greenfields agreements, employer greenfields agreements and multiple-business agreements) have no effect in relation to an employee while an AWA operates in relation to the employee (s 348(2)). Some of the plaintiffs said, while the Commonwealth denied, that this had the effect of promoting individual bargaining over collective bargaining. (e) On the termination of a workplace agreement, the employee covered by it does not revert to any existing workplace agreement, or to an award, except to the extent that the award contains protected award conditions From the date when a collective agreement comes into operation until its nominal expiry date (s 352) has passed, industrial action, whether or not it relates to a matter dealt with in the agreement, must not be organised or 407 Second Reading Speech of the Minister for Employment and Workplace Relations and Minister Assisting the Prime Minister for the Public Service, House of Representatives, Parliamentary Debates (Hansard), 2 November 2005 at 17. Crennan engaged in by an employee bound by the agreement, an organisation of employees bound by the agreement, or an officer or employee of the organisation acting in that capacity (s 494(1) and (2)). Orders and injunctions may be obtained against industrial action which is not protected action and which is happening, or is threatening, impending or probable, or is being organised (s 496). From the date when a collective agreement comes into operation until its nominal expiry date has passed, industrial action, whether or not it relates to a matter dealt with in the agreement, must not be organised or engaged in by the employer against an employee (s 494(3)). From the date when an AWA comes into operation until its nominal expiry date, the employee must not engage in industrial action in relation to the employment to which the agreement relates (s 495(1)). From the date when an AWA comes into operation until its nominal expiry date, the employer must not engage in industrial action against the employee (s 495(2)). It is convenient first to deal with the AWU's submission that there was no stipulated ambit of the regulation-making power because the legislation said no more than that "[p]rohibited content is whatever the Executive Government says should not be contained in a workplace agreement". That submission must be rejected because in four respects it is erroneous. The first error is that it would not be open to the Executive to say that a workplace agreement should not contain any of the matters which are required content. That is because s 846(1) requires that the regulations not be inconsistent with the new Act; it might be so even without that provision. One of the matters included in required content is dispute settlement procedures, in the absence of which the agreement is taken to include the model dispute resolution process in Pt 13 (s 353). The model dispute resolution process requires the parties genuinely to attempt to resolve a dispute at the workplace level (s 695). It further provides for the alternative dispute resolution procedures of "conferencing", mediation, assisted negotiation, neutral evaluation, case appraisal, conciliation, arbitration or other determination of the rights and obligations of the parties in dispute, and other procedures or services specified in the regulations (ss 696(1) and (2) and 698). The alternative dispute resolution process is to be conducted by a person agreed between the parties, and if the parties cannot agree within a stipulated time, a party to the dispute may apply to Crennan the AIRC to have the alternative dispute resolution process conducted by the Commission (s 696(2) and (5)). The AIRC may also be employed if the parties have been unable to resolve the dispute at the workplace level (s 699(1)). Another matter which is required content is protected award conditions (s 354). Section 354(4) defines the expression "protected award conditions" to mean the terms of an award that are about, or otherwise related to, "protected allowable award matters". Section 354(4) defines that expression to mean: rest breaks; incentive-based payments and bonuses; annual leave loadings; observance of days declared by or under a law of a State or Territory to be observed generally within that State or Territory, or a region of that State or Territory, as public holidays by employees who work in that State, Territory or region, and entitlements of employees to payment in respect of those days; days to be substituted for, or a procedure for substituting, days referred to in paragraph (d); (f) monetary allowances for: expenses incurred in the course of employment; or (iii) responsibilities or skills that are not taken into account in rates of pay for employees; or disabilities associated with the performance of particular tasks or work in particular conditions or locations; loadings for working overtime or for shift work; penalty rates; outworker conditions; any other matter specified in the regulations." Crennan In short, if the Executive by regulation said that some aspect of the model dispute resolution process or a protected award condition were prohibited content, the regulation would be ultra vires. A second error in the AWU's argument is that the specification in a regulation of matters as prohibited which had the effect of excluding the Pay and Conditions Standard or any part of it would be ultra vires, because s 173 provides that a term of a workplace agreement purporting to have that exclusionary effect is of no effect. The Pay and Conditions Standard is to be found in Divs 2-6 of Pt 7 – that is, ss 176-316 – which set out a very detailed regime relating to five minimum entitlements in relation to wages, maximum ordinary hours of work, annual leave, personal leave and parental leave. A third error in the AWU's submission is that the key minimum entitlements (s 172(1)) provided by the Pay and Conditions Standard prevail over a workplace agreement to the extent to which, in a particular respect, they provide a more favourable outcome for the employee (s 172(2)). The specification in the regulation of matters as prohibited content in a manner which provided a less favourable outcome for the employee than the Pay and Conditions Standard would be ultra vires. A fourth error is that the specification in the regulation of matters as prohibited content which was so wide as to undermine the possibility of making a workplace agreement capable of practical operation would be ultra vires. These points are unanswerably fatal to the broad submission of the AWU as put. But even if the AWU had modified its submission to accommodate the points just made by conceding that some things were prohibited and contending that no ambit was defined beyond the limit of those prohibitions, the submission would fail. Section 356 provides that the regulations may specify matters that are prohibited content. Regulations of that kind would be regulations "prescribing ... matters ... permitted by this Act to be prescribed", and hence would fall within s 846(1)(a). In the absence of express language precisely defining the ambit of the permitted prescription beyond the four matters just mentioned, that ambit would be identical with the ambit of the prescription contemplated by s 846(1)(b), namely that the regulations prescribe all matters "necessary or convenient to be prescribed for carrying out or giving effect to this Act" (emphasis added). It would be absurd if regulations could be made under s 846(1)(b) by reference to wider criteria than those applying to s 846(1)(a). In a case considering a formula to the effect of s 846(1)(b), but in language relevant Crennan to s 846(1)(a), Dixon, McTiernan, Williams, Webb, Fullagar and Kitto JJ said408: "The ambit of the power must be ascertained by the character of the statute and the nature of the provisions it contains." Here the character of the statute is one which, inter alia, makes provision for workplace agreements in Pt 8 and attaches significant consequences to the existence of those agreements. Their Honours continued409: "An important consideration is the degree to which the legislature has disclosed an intention of dealing with the subject with which the statute is concerned. In an Act of Parliament which lays down only the main outlines of policy and indicates an intention of leaving it to the Governor-General to work out that policy by specific regulation, a power to make regulations may have a wide ambit. Its ambit may be very different in an Act of Parliament which deals specifically and in detail with the subject matter to which the statute is addressed." While the provisions about workplace agreements in Pt 8 are in many respects detailed, the main outlines of the policy it lays down as to what workplace agreements are to contain and are not to contain is not specific or detailed. It provides for some things workplace agreements must contain, but, apart from the matters already mentioned, it does not state what they may not contain save through the use of regulations made under s 356. The new Act has laid down the main outlines of policy in relation to workplace agreements but has indicated an intention of leaving it to the Executive to work out that policy in relation to what workplace agreements may not contain by specific regulation. Section 356 thus has a wide ambit. Its ambit must be construed conformably with the scope and purposes of the new Act as a whole, and with the provisions of Pt 8 in relation to workplace agreements in particular. The extent of the power is marked out by inquiring whether any particular regulation about the prohibited content of workplace agreements can be said to have a rational connection with the regime established by the new Act for workplace agreements. It follows that although the ambit of the regulation-making power so stated is imprecise, with the result that assessing whether particular regulations are ultra vires may not be easy, s 356, read with s 846(1), is a "law". 408 Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402 at 410. 409 Morton v Union Steamship Co of New Zealand Ltd (1951) 83 CLR 402 at 410. Crennan Is the "law" a law with respect to any identifiable head of power? In Victorian Stevedoring and General Contracting Co Pty Ltd and Meakes v Dignan410, Evatt J said that a provision in a statute conferring the power to make regulations "ordinarily ... will ... retain the character of a law with respect to the subject matter dealt with in the statute". The AWU pointed out that Evatt J's statement was predicated on the existence of "a scheme contained in the statute itself" which the regulations were to carry out. That is true, but the AWU's first challenge failed on the ground that there is a scheme here of the kind just discussed, and there is no reason not to conclude that the regulation-making power is a law with respect to the same heads of legislative power as supported the other provisions of the new Act, being those referred to in the definition of "employer" in s 6(1). Validity of other regulation-making provisions. The AWU submitted that certain other regulation-making provisions were invalid: par (d) of the definition of "State or Territory industrial law" in s 4(1), s 16(4), cl 5 of Sched 2 and cl 55 of Sched 8 to the new Act and item 2(1) of Sched 4 to the Amending Act. Queensland and Western Australia supported the challenge to all these provisions, and Victoria supported the challenge to all but cl 55 of Sched 8. The challenge was supported by brief arguments which were similar to those directed to s 356. The rejection of those arguments in relation to s 356 must mean that the challenge to the other regulation-making provisions is to be rejected, and for similar reasons. Conclusion. The challenge to ss 356 and 846(1), to subdiv B of Div 7 of Pt 8 and to the other regulation-making provisions referred to fails. PART VII – CONCLUSIONS AND ORDERS For these reasons, the plaintiffs' several challenges to the validity of the Amending Act all fail. The Commonwealth's demurrer to the statement of claim in each action should be allowed. In each action there should be judgment for the defendant with costs. 410 (1931) 46 CLR 73 at 121. Kirby 423 KIRBY J. These proceedings challenge the validity of comprehensive amendments to the Workplace Relations Act 1996 (Cth) ("the Act") effected by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("the Amending Act"). The central issue is whether the Amending Act, to the extent that it relies on the corporations power in s 51(xx) of the Constitution, is a valid law of the Commonwealth. The States of New South Wales, Victoria, Queensland, South Australia and Western Australia, substantially with one voice, contest the validity of the amendments. The State of Tasmania and the self-governing Territories intervened in their support. They, in turn, are supported in this challenge by a number of industrial organisations of employees ("the unions"), which mounted their own challenges to the legislation. No decision of this Court has determined conclusively the central question that now falls for decision. The parties did not submit otherwise. The issue concerning the ambit of the corporations power to sustain a comprehensive federal law on industrial (or workplace) relations has been debated (and a test case anticipated) since the previous federal Government, in 1993, used the corporations power to support federal laws establishing collective agreements, known as "Enterprise Flexibility Agreements", negotiated directly between employees and employers and not with industrial organisations411. Over the years, dicta of members of this Court have been offered that support the view that the corporations power is broad enough to sustain general federal legislation on workplace relations with respect to the employees of constitutionally defined corporations412. Conflicting obiter were offered in Re Dingjan; Ex parte Wagner413. In that case a majority of the Justices appeared to favour a view that a federal law, so framed, would be valid so long as it was "expressed to operate on or by reference to the business functions, activities or relationships"414 of a corporation (including workplace relations). However, 411 Industrial Relations Reform Act 1993 (Cth), s 31, inserting Pt VIB, Div 3 into the Industrial Relations Act 1988 (Cth). At the same time the Federal Parliament utilised the external affairs power to insert in the principal Act provisions to establish an unfair dismissal regime based on the ratification by Australia of the International Labour Organisation's Termination of Employment Convention. See Industrial Relations Act 1988 (Cth), Pt VIA, Div 3 (as then enacted). 412 See, eg, The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 147-153 per Mason J, 179 per Murphy J, 270 per Deane J. 413 (1995) 183 CLR 323. 414 (1995) 183 CLR 323 at 364 per Gaudron J, Deane J agreeing at 342. Kirby some of those who expressed that opinion were in dissent in respect of the orders made in that case. Thus, by orthodox principles, their views would be disregarded in deriving any binding rule from the decision415. In more recent decisions, the constitutional point concerning the ambit of the corporations power was either conceded (so that this Court was not obliged to decide it416) or was expressed in individual concurring opinions, so as to fall short of establishing a clear ruling by the Court417. In these proceedings, for the first time, the issue has been fully argued. It must be decided. Past decisions do not decide it. However, the past is clearly of great importance in reaching a conclusion based on the constitutional text. It must be read in the usual way, with the light that is cast by legal authority, legal principle and legal policy418. A constitutional oddity The 1904 Act: Before providing the answers that I would give to the questions that these proceedings present, it is worth noting what a radical change in constitutional doctrine the Commonwealth would achieve if its arguments as to the validity of the Amending Act were to succeed. For more than a century, since the passage of the Conciliation and Arbitration Act 1904 (Cth) ("the 1904 Act"), the substantial constitutional underpinning of the federal law on industrial disputes (later called in legislation "industrial relations"419, and later still "workplace relations"420) has been provided by s 51(xxxv) of the Constitution. That paragraph of s 51 affords power to the Federal Parliament to make laws with respect to: 415 Garcia v National Australia Bank Ltd (1998) 194 CLR 395 at 417-418 [56]. 416 Victoria v The Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 417 Such as Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union (2000) 203 CLR 346 at 359-360 [29] per Gleeson CJ, 374-375 [82]-[85] per Gaudron J; cf Stewart, "Federal Labour Law and New Uses for the Corporations Power", (2001) 14 Australian Journal of Labour Law 145; Williams and Simpson, "The Expanding Frontiers of Commonwealth Intervention in Industrial Relations", (1997) 10 Australian Journal of Labour Law 222. 418 cf Oceanic Sun Line Special Shipping Co Inc v Fay (1988) 165 CLR 197 at 252; Northern Territory v Mengel (1995) 185 CLR 307 at 347. 419 Industrial Relations Act 1988 (Cth). 420 Workplace Relations and Other Legislation Amendment Act 1996 (Cth). Kirby "conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State". Although s 51(xxxv) speaks of "industrial disputes"421, a narrow conception422 of that term has long been rejected. The words are "given their popular meaning – what they convey to the man in the street"423. Even in 1908, "industrial disputes" was said to be an expression "commonly used in Australia to cover every kind of dispute between master and workman in relation to any kind of labour"424. Today, this meaning is even further enlarged by new understandings of the constitutional concept of "prevention", which significantly expand the scope of the power, potentially to apply to circumstances still unexplored by this Court425. Necessarily, "industrial disputes", so defined, now encompass all manner of "industrial affairs", "industrial relations" and "industrial matters" in Australia. Whether s 51(xxxv) is labelled as the "labour power"426, "industrial relations power"427, "arbitration power"428 or, as I will refer to it, the "industrial disputes power", it must be understood in this light. This is not to say that the power is unfettered, or unlimited. However, the settled doctrine of this Court requires us to acknowledge the breadth of the federal power over industrial disputes that resides within s 51(xxxv)429. 421 Joint reasons at [51]. 422 See Federated State School Teachers' Association of Australia v State of Victoria (1929) 41 CLR 569. 423 R v Coldham; Ex parte Australian Social Welfare Union (1983) 153 CLR 297 at 312 per Gibbs CJ, Mason, Murphy, Wilson, Brennan, Deane and Dawson JJ. See also Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 at 236-237 per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ. 424 Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309 at 366 per O'Connor J. 425 See reasons of Callinan J at [833]. 426 McCallum, Pittard and Smith, Australian Labour Law: Cases and Materials, 2nd ed (1990) at 167. 427 Blackshield and Williams, Australian Constitutional Law and Theory, 4th ed 428 Lane, Lane's Commentary on the Australian Constitution, 2nd ed (1997) at 334. 429 See also reasons of Callinan J at [831]-[833]. Kirby By the language in which s 51(xxxv) is expressed, two essential safeguards, restrictions or qualifications are imposed on the enactment of federal laws with respect to this subject matter. They are: Interstateness: The necessity of the presence of an actual or potential dispute extending beyond the limits of one State; and Independent resolution: The inability of the Parliament itself to enact laws (at least in all but exceptional cases430) to deal generically and directly with issues in dispute, and the requirement, instead, to provide for an independent conciliator or arbitrator to resolve the dispute between the parties by the constitutionally mandated procedures. The majority considers the terms of the 1904 Act "wholly irrelevant" to the questions under consideration in these proceedings431. On the contrary, that Act, its history and the litigation which followed, provide the background to a constitutional context in which, for more than a century, legislators and courts in Australia assumed that any law enacted with respect to industrial disputes had to conform to the limitations imposed by s 51(xxxv)432. The background demonstrates how dramatically the joint reasons depart from the line of authority governing the reach of the corporations power in the constitutional field of industrial disputes. A century of decisions: For more than a century, in hundreds of cases, the Justices of this Court have pored over each and every word of s 51(xxxv) of the Constitution. They have weighed each concept, individually and in composite, so as to decide the meaning of the stated notions in order to define the limits of the powers of the Federal Parliament. Even before the 1904 Act commenced, this Court was concerned with the scope of "industrial disputes" in the enacted jurisdiction of a State industrial tribunal433. However, the trickle of cases on this 430 It will be necessary to consider the earlier decisions made in respect of the defence power (s 51(vi) of the Constitution); the external affairs power (s 51(xxix)); and the international and interstate trade and commerce power (s 51(i)). See below at 431 Joint reasons at [208]. 432 See also reasons of Callinan J at [894]. 433 The Colliery Employés Federation of the Northern District, New South Wales (Industrial Union of Employés) v Brown (1905) 3 CLR 255; cf The Master Retailers' Association of NSW v The Shop Assistants Union of NSW (1904) 2 CLR Kirby subject soon became a flood when the Commonwealth Court of Conciliation and Arbitration, established by the 1904 Act, arrived on the scene. In 1908, in Merchant Service Guild of Australasia v Archibald Currie & Co Pty Ltd434, this Court upheld a challenge to the jurisdiction of the Commonwealth Court of Conciliation and Arbitration to settle a dispute concerning employment conditions on a ship, owned by a joint stock company registered in Victoria and engaged in trade between Australia and Calcutta. The Court held that there was no jurisdiction to settle such a dispute. However, on the majority's new theory of the Constitution, there should have been no difficulty whatever in affording jurisdiction to the federal tribunal over such a dispute. Those who drew the 1904 Act, and those Justices who laboured so painstakingly over its terms, were blind to the simple truth that an easy solution existed that would permit direct federal regulation without the irksome necessity of establishing an actual or potential "dispute" or interstateness or (most irksome of all) prevention and settlement through the independent processes of conciliation and arbitration. A needless exercise? If s 51(xx) of the Constitution now provides a legitimate source for a comprehensive federal law with respect to industrial disputes, by inference it always did. All those hard-fought decisions of this Court and the earnest presentation of cases, the advocacy and the judicial analysis and elaboration within them concerning the ambit of s 51(xxxv) of the Constitution, were (virtually without exception) a complete waste of this Court's time and energies. I say "virtually without exception" because occasional instances may exist where neither of the parties to an industrial dispute was a "constitutional corporation". But if the cases in the law reports throughout the first century of the operation of the 1904 Act, and its 1988 successor435, are examined, it is almost impossible to find a case which does not either name a constitutional corporation as a party or a corporate industrial organisation of employees or employers as one of the litigants. Indeed, the latter type of actual or potential corporations were effectively implicit in the federal legal machinery established by the 1904 Act for the very purpose of facilitating the constitutional functions of conciliation and arbitration. Because under s 51(xxxv) the laws could not "be laws simply for the prevention and settlement of such industrial disputes; they must be laws for the prevention and settlement thereof by means of conciliation and arbitration"436, which was the 434 (1908) 5 CLR 737. 435 Industrial Relations Act 1988 (Cth). 436 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389 at 401. Kirby industrial relations system that the Federal Parliament established. From the earliest days of federation, compulsory conciliation and arbitration thus became a distinctive characteristic of the Australian industrial and workplace system. It was one in which "a system of arbitration … will begin to function … irrespective of the wishes of either party [disputant] … [There will be] a tribunal to which the parties … are compelled to submit"437. By conciliation, the system might produce an "amicable agreement". But if necessary, it would produce, by arbitration of the contested issues, a unilateral "binding award"438 that thereafter "operates with statutory force"439. From these features of federal law, derived from the constitutional text, it was recognised, and for most of the twentieth century unquestioned, that "[the Federal] Parliament can do nothing of itself to preserve the atmosphere of [industrial] peace, but can only create tribunals of pacifiers"440. The hypothesis of futility: Given all the labour that followed in this Court, in the successive federal industrial tribunals, in the business sector, in industrial organisations avid for the assertion of jurisdiction, in the legal profession, in academic life and in Australian society, it is passing strange, if s 51(xx) existed as a constitutional deus ex machina to cut a swathe through so many technicalities, that a chorus of voices was not raised from the earliest days of the Commonwealth to demand the attempt. Why did generations of Justices of this Court struggle in so many cases over the jurisprudence of s 51(xxxv) of the Constitution, doing so for decades, without, in their impatience, occasionally appealing to the legislature to be rid of the needless limitations of par (xxxv) of s 51 and urging the substitution of the fructuous source of par (xx)? Why were repeated attempts taken by well-advised federal governments, none of them successful, to amend the Constitution to enhance the federal legislative power with respect to terms and conditions of employment in industry, if, waiting in the wings for easy deployment, was the corporations paragraph, there to solve virtually all of the deficiencies of power and to fulfil all of the Commonwealth's law-making dreams of industrial regulation441? 437 R v Kirby; Ex parte Boilermakers' Society of Australia ("the Boilermakers Case") (1956) 94 CLR 254 at 342-343. 438 R v Bain; Ex parte Cadbury Schweppes Australia Ltd (1984) 159 CLR 163 at 176. 439 Monard v H M Leggo & Co Ltd (1923) 33 CLR 155 at 164. 440 Garran, Prosper the Commonwealth, (1958) at 175. 441 There were six relevant referendums: Constitution Alteration (Legislative Powers) 1910; Constitution Alteration (Industrial Matters) 1912; Constitution Alteration (Railway Disputes) 1912; Constitution Alteration (Legislative Powers) 1919; Constitution Alteration (Industry and Commerce) 1926; Constitution Alteration (Footnote continues on next page) Kirby The answer to these questions is not that the earlier Justices, or other lawyers of the Commonwealth and the well-resourced parties, lacked the intelligence, insight and imagination of those of the present generation. Their work on s 51(xxxv) is proof enough of legal imagination, demonstrated most clearly in the invention of "paper disputes" to give rise to the necessary interstateness, as Callinan J explains442. Nor can the answer be that the Justices focused their attention solely on the terms of the statute they had, rather than a much simpler statute that would make life easier for so many, including themselves. The reported decisions on the industrial disputes power in par (xxxv) are full of judicial suggestions, arising in the disposal of proceedings, for constructive ways in which the constitutional power might be utilised more constructively and simply. Thus, from the earliest days of the Commonwealth, Isaacs J was calling attention to the importance of the "preventive jurisdiction" of the industrial tribunal which, he pointed out, "was certainly intended to be a real and substantial power of preserving the peaceful course of industry, and in its operation might prove more beneficial than the settlement of disputes after they have broken out"443. Opposing views on this potential for new and different federal legislation were expressed in 1976 by Barwick CJ444 and Murphy J445 (Industrial Employment) 1946; cf Industrial Relations Act Case (1996) 198 CLR 442 Reasons of Callinan J at [823]-[834]; cf Burwood Cinema Ltd v Australian Theatrical and Amusement Employees' Association (1925) 35 CLR 528 at 540; Caledonian Collieries Ltd v Australasian Coal and Shale Employees' Federation [No 1] (1930) 42 CLR 527 at 552; R v Dunlop Rubber Australia Ltd; Ex parte Federated Miscellaneous Workers' Union of Australia (1957) 97 CLR 71 at 80-81; R v Commonwealth Conciliation and Arbitration Commission; Ex parte Printing Industry Employees' Union (1964) 109 CLR 544 at 551. 443 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Whybrow & Co (1910) 11 CLR 1 at 53. See also Australian Boot Trade Employés' Federation v Whybrow & Co (1910) 11 CLR 311 at 340 per Higgins J. See also reasons of 444 R v Heagney; Ex parte ACT Employers Federation (1976) 137 CLR 86 at 90. 445 R v Heagney; Ex parte ACT Employers Federation (1976) 137 CLR 86 at 105. See also R v Turbet; Ex parte Australian Building Construction Employees and Building Labourers' Federation (1980) 144 CLR 335 at 354-355. Kirby respectively, the latter subsequently supported by Mason CJ and Deane J446. Indeed, by 1989, Mason CJ was becoming quite insistent on this point447: "It may be that the constitutional power (s 51(xxxv)) enables the Parliament to legislate for the prevention by conciliation and arbitration of industrial disputes which fall short of being threatened, impending or probable disputes. This is not the occasion to discuss that question. However, it is appropriate to recall that members of this Court have suggested from time to time that the Act may not exercise to the full the constitutional power reposed in the Parliament". In the context, Mason CJ was making reference to the power for the "prevention" of industrial disputes. His suggestion was given legislative effect. Other attributes of the constitutional and statutory language derived from s 51(xxxv) were repeatedly worked over, elaborated, expanded and re-expressed in a century of this Court's decisional law. The unlikely hypothesis of oversight: The question now presented by these proceedings, and the Amending Act with which they are concerned, is whether all that effort, and the hundreds of decisions of the Justices, were really a futile waste of time, because of the ever-ready availability of s 51(xx) to come to the rescue of federal lawmakers and to provide a new, and much larger and more direct, source of constitutional power to enact a comprehensive federal law on what the Amending Act still calls "workplace relations". Of course, it is possible that even the experienced and insightful Justices who went before us, or most of them, were blind to the possibilities now presented in the legislation under scrutiny in these proceedings. It is part of the genius of our system of constitutional government that perceptions of the meaning of the Constitution change over time and that what seemed clear to earlier generations of judges sometimes appears differently to those who come 446 Re Federated Storemen and Packers Union of Australia; Ex parte Wooldumpers (Vic) Ltd (1989) 166 CLR 311 at 318-320, 327. 447 Re Federated Storemen and Packers Union of Australia; Ex parte Wooldumpers (Vic) Ltd (1989) 166 CLR 311 at 320-321. Following these observations, the Federal Parliament enacted the Industrial Relations Reform Act 1993 (Cth), which inserted a provision (s 170AH(4)) into the Industrial Relations Act 1988 (Cth) authorising the Australian Industrial Relations Commission to take "preventive action" to deal with a "situation that is likely to give rise to an interstate industrial dispute". This Court upheld the validity of that provision. See Industrial Relations Act Case (1996) 187 CLR 416 at 496-497. Kirby later448. Context necessarily impinges on constitutional interpretation449. Thus, in Victoria v The Commonwealth ("the Payroll Tax Case")450, Windeyer J this Court's constitutional impact upon correctly acknowledged interpretations of considerations of history, economics, commerce and emerging nationhood. Such considerations deny the attempts to confine the meaning of the constitutional text either to the expectations of the founders in the Constitutional Conventions451 or the reasoning of earlier Justices of this Court452. the The assumption of limited powers: However, the substantially uniform approach to the available federal power with respect to industrial disputes, as expressed in s 51(xxxv) of the Constitution, evident in so many authorities for over a century, suggests, at the least, a need to pause before nonchalantly consigning those efforts to judicial oblivion. It is obvious that most of our predecessors accepted, or assumed, that a severe limitation existed on the availability of federal legislative power to make laws directly in respect of industrial disputes otherwise than through the independent procedures expressly provided for in s 51(xxxv). The present proceedings thus afford both the opportunity, and the obligation, to consider whether the generally consistent authority of this Court, expressed for over a hundred years upon the basis of that assumption, express or implied, was mistaken. If it was, the Commonwealth is correct that the Federal Parliament enjoys (and always has enjoyed) a most substantial power under s 51(xx) to enact comprehensive national laws directly concerned with industrial disputes, without conforming to the two constitutional prerequisites contained in s 51(xxxv). 448 A good illustration is the adoption of the principle expressed in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers Case") (1920) 28 CLR 129 (affirmed (1921) 29 CLR 406). Another is the enlarged perception of the ambit of the external affairs power as explained in The Tasmanian Dam Case (1983) 158 CLR 1. 449 Al-Kateb v Godwin (2004) 219 CLR 562 at 624 [174]; cf at 589 [62]. 450 (1971) 122 CLR 353 at 395; cf Abebe v The Commonwealth (1999) 197 CLR 510 451 Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 599-600 [186]; Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 522-523 [111]. 452 Re Wakim (1999) 198 CLR 511; and Nolan v Minister for Immigration and Ethnic Affairs (1988) 165 CLR 178; Gould v Brown (1998) 193 CLR 346; Re Patterson; Ex parte Taylor (2001) 207 CLR 391; together with Singh v The Commonwealth (2004) 222 CLR 322. Kirby Because that conclusion would, in effect, render the industrial disputes power in par (xxxv) otiose, or at least optional for most purposes, effectively consigning it to the same insignificance as other provisions of the Constitution for which high hopes were once held453, the step that the Commonwealth now invites this Court to take is not one to be taken lightly. This is so for reasons expressed in the long line of authority to which I have referred. But it is also the case because of the considerations of legal principle and legal policy which I will mention. include laws on the part which Such considerations the requirement of interstateness454 has hitherto played in preserving features of the federal character of the Constitution in matters of industrial relations law. That element in Australia's constitutional arrangements, including in respect of State, federal and Territory to diversity and industrial disputes, has contributed experimentation in lawmaking, inter-governmental cooperation within the Commonwealth and the protection of individual rights455. Moreover, the feature of the independent determination of industrial disputes456 has the potential to encourage and promote collective agreements between parties and the protection of economic fairness to all those involved in industrial disputes, secured by the distinctive procedures of conciliation and arbitration. Such elements of fairness would not necessarily be assured by an unlimited focus of federal law on the activities of employers as constitutional corporations457. Under that power, attention is addressed to the corporation which is the employer, not, as such, the employment or the workplace relationship. The emerging issue: As will appear, the central issue for consideration in these proceedings is not whether, in the course of its elaboration, especially in the thirty-five years since the decision in Strickland v Rocla Concrete Pipes Ltd458 ("the Concrete Pipes Case"), understandings of the ambit of s 51(xx) of the 453 See, eg, ss 101, 102, 103 (Inter-State Commission); cf The State of New South Wales v The Commonwealth ("the Wheat Case") (1915) 20 CLR 54. 454 See above these reasons at [430]. 455 See below these reasons at [609]-[610]. 456 See above these reasons at [430]. 457 See below these reasons at [609]; cf McCallum, "The Australian Constitution and the Shaping of our Federal and State Labour Laws", (2005) 10 Deakin Law Review 458 (1971) 124 CLR 468. Kirby Constitution have expanded so as to enhance the federal legislative power in that respect. Of course they have. I have myself acknowledged such expansion and called attention to it459. The real question now directly presented is whether this expansion of the ambit of par (xx), however large it may otherwise grow, is subject to restrictions or limitations, including those expressed or implied in par (xxxv). The answer to that question is important for the outcome of these proceedings. It is important for the operation of the Constitution, read as a whole. It is important for the preservation of significant features of the resulting federal legislative power with respect to the prevention and settlement of industrial disputes that has hitherto prevailed in Australia. The facts, legislation and specific challenges The facts and litigation: The facts relevant to the disposition of these proceedings, the identification of the parties and the questions they ultimately present to this Court for decision are stated, sufficiently for my purposes, in the reasons of Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ ("the joint reasons"). There were no relevant disputed facts460. As appears from the joint reasons, the interests of the States in these proceedings were in their most significant respects similar, although there were different points of emphasis and argument. The position of the State of Victoria was somewhat different from that of the other States, in so far as its central constitutional argument was concerned. This was partly because of the referral, by the Parliament of Victoria to the Federal Parliament, of powers to make laws with respect to conciliation and arbitration for the prevention and settlement of industrial disputes within the limits of the State of Victoria and other related matters461. The Attorneys-General of Tasmania, the Northern Territory and the Australian Capital Territory intervened in support of the plaintiffs462. The result of the line-up of the parties before this Court was a governmental divide, not unique but not seen in this Court for some time, by which all of the States and Territories of the Commonwealth united, together 459 Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309 at 387 [216]; Blackadder v Ramsey Butchering Services Pty Ltd (2005) 221 CLR 539 at 548 [29] fn 37. In neither of those cases was the constitutional issue argued in these proceedings advanced by either party. 460 Joint reasons at [4]. 461 Commonwealth Powers (Industrial Relations) Act 1996 (Vic). See joint reasons at 462 Joint reasons at [6]. Kirby with the unions, against the Commonwealth, to challenge the validity of the amendments to the Act contained in the Amending Act. The inter-governmental unity amongst the States and self-governing Territories indicates a clear recognition of the very great significance of the outcome of the proceedings for the future of the governmental powers of those States (and possibly the Territories), if the Commonwealth's submissions on the ambit of s 51(xx) were to prevail. As I shall show, the plaintiffs and interveners were not mistaken in this assessment. If the Commonwealth's view of the corporations power is correct, and is upheld without inhibitions derived from other heads of federal power, notably in s 51(xxxv), this will have profound consequences for the residual legislative and governmental powers of the States in this country. Not least is this so because of the enormous expansion in Australia in the number, variety and activities of the foreign and trading corporations described in s 51(xx), including in the out-sourcing and privatisation in Australia today of the delivery of many governmental or formerly governmental services463. The legislation in issue: The relevant provisions of the legislation are also described adequately, for my purposes, in the joint reasons. I shall use the same descriptions of the Act and the Amending Act, the "previous Act" and the "new Act", and of the Workplace Relations Regulations 2006 (Cth), as appear in the joint reasons464. In those reasons can be found not only the general provisions of the new Act, and a description of the new and different objects465, constitutional foundations466, general structure467 and the continuing and new institutions468 for which the new Act provides, but also the more detailed scheme of the legislation offering the contents of Australian Workplace Agreements ("AWAs") (which are 463 cf Telstra Corporation Ltd v Worthing (1999) 197 CLR 61 at 71-72 [9]-[11]; NEAT Domestic Trading Pty Ltd v AWB Ltd (2003) 216 CLR 277 at 281-282 [1]-[4] per Gleeson CJ, 297 [49] per McHugh, Hayne and Callinan JJ; Griffith University v Tang (2005) 221 CLR 99. 464 Joint reasons at [1]-[2]. 465 Joint reasons at [7]. 466 Joint reasons at [8]-[9]. 467 Joint reasons at [10]-[12]. 468 Including the Australian Fair Pay Commission. See joint reasons at [13]-[16]. Kirby to be encouraged469 by the new Act) and the residuum of awards made by the Australian Industrial Relations Commission ("the AIRC") (which are to be "rationalised", confined in their content but not expanded in number) under the new Act470. In addition to these, and other general provisions of the new Act, the joint reasons set out, in terms, specific provisions of various sections, parts and schedules of the new Act, as amended471, together with a description of the regulation-making powers472. I will not repeat any of these provisions. I agree with the conclusion in the joint reasons that "[m]uch of the new Act turns (including many of the [specific] provisions whose validity the plaintiffs challenge) on the definition of employer set out in s 6 of the new Act"473. Most significantly, the "employers" identified in par (a) of the definition of "employer" in s 6(1) are constitutional corporations, as defined in s 4474. In turn, the definition of "employee" in s 5(1) depends on the identification of an "employer", as so defined475. To a very large extent, the particular provisions of the Act, complained of by the plaintiffs, represent nothing more than the drafter's attempt to carry out a thorough makeover of the Act so as to replace (but not entirely extinguish) the former comprehensive reliance in the previous Act on the constitutional head of power stated in s 51(xxxv), eventually substituting the constitutional power supposedly derived from s 51(xx). The clearest possible indication of the extremely wide conception of the corporations power which the joint reasons embrace emerges from the fact that not a single particular objection raised by the plaintiffs and interveners is upheld in those reasons. Not one of the complaints about the excessive width of the supposed ambit of the corporations power is found to have hit its constitutional mark. Not one sub-section, paragraph or regulation, challenged by the plaintiffs, is struck down. 469 Joint reasons at [19]-[23]. 470 Joint reasons at [26]-[40]. 471 Joint reasons at [239]-[294]. 472 Joint reasons at [395]-[418]. 473 Joint reasons at [239]. 474 Joint reasons at [9]. 475 Joint reasons at [8], [239]. Kirby Even in the significant challenge to the last substantial redrafting of the federal industrial relations law, Victoria v The Commonwealth (Industrial Relations Act Case) in 1996, which followed the 1993 amendments to the Industrial Relations Act 1988 (Cth), a majority of this Court found that a handful of provisions were invalid476 or needed to be read down or would not bind the States in the specified respects unless confined in their meaning477. Here, although some few of the specific provisions are read in a way that postpones a final conclusion478 or results in a narrow construction proffered by the Commonwealth to avoid a looming danger479, the plaintiffs are held not to have landed a single constitutional blow. Truly, this demonstrates the extraordinary zenith of the federal constitutional power, most especially under s 51(xx), which the majority now upholds. It manifests, in respect of the particular provisions challenged by the plaintiffs, as described in the joint reasons, the remarkable ambit of the corporations power which the majority of this Court now embraces. the federal corporations power This conclusion is plain despite the often tenuous, insubstantial and highly the contestable connections with Commonwealth advanced to sustain specific provisions as they came up for separate constitutional justification. It is the very amplitude of the power to make laws with respect to constitutional corporations, thus upheld, that obliges this Court to face squarely what I regard as the central issue in these proceedings. This is whether the corporations power is completely unchecked and plenary, and disjoined from other powers granted by the Constitution to the Federal Parliament. Or whether (as past history, experience and authority suggest) that power is subject to restrictions suggested by other paragraphs of s 51, notably par (xxxv). that The textual foundation for the importation of such restrictions is the structure of the Constitution and its federal character, inherent in its overall expression and design. But it can also be found in the clear statement in the opening words of s 51 that each grant of legislative power in that section is made "subject to this Constitution". That expression obviously includes the other provisions in s 51, including par (xxxv). It also includes the federal character of the Constitution that pervades its entire provisions. 476 ss 170DE(2), 170EDA(1)(b). See Industrial Relations Act Case (1996) 187 CLR 477 s 6 and ss 170AE, 170AH, 170BC, 170BI, 170DB, 170DC, 170DE(1), 170DF, 170KA, 170KB, 170KC, 170PM(3), 170PG. See also ss 150A(3) and 334A. 478 Joint reasons at [389]. 479 Joint reasons at [286]. Kirby Some legislative specificities: In order to clear the decks somewhat (and because mine is a minority opinion with proposed orders that will not affect the orders of the Court that follow from the joint reasons), it is appropriate for me to deal more briefly than I otherwise would with three of the matters upon which specific conclusions are voiced in the joint reasons. Upon each of these I wish to express a particular opinion. (1) Hybrid revised awards: The first concerns the specific challenge to the provisions of Sched 6 to the new Act, which is purportedly brought into operation by s 8. Schedule 6 is one of the comparatively few provisions of the new Act that continues to depend for its constitutional validity on s 51(xxxv) of the Constitution. It purports to impose obligations on the AIRC, during a "transitional period" of five years for which it provides, to disturb the provisions of already existing awards, earlier made by the AIRC by conciliation and arbitration in a way laid down by the earlier legislation480. For the reasons which I stated in Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union481, in my view, in circumstances such as this, the attempt by direct federal legislation to mandate particular alterations to such an award, which draws for its initial validity upon constitutional and statutory provisions founded ultimately in s 51(xxxv) of the Constitution, fails. Although my view in Pacific Coal was a dissenting one, in a closely divided Court, it is one that rests on the essential constitutional character of an award as an outcome arrived at by the independent processes of conciliation and arbitration contemplated in the constitutional grant of power in s 51(xxxv). Purportedly to alter and reconstitute the balances within such an award is not something that the Federal Parliament lawfully can do. At least, it cannot do so in reliance upon s 51(xxxv) of the Constitution. The outcome which results from such legislation is no longer a constitutionally valid award achieved by conciliation or arbitration. It is a kind of hybrid, imposed by legislation, that must find another constitutional source if its validity is to be sustained. I recognise that the view I expressed in this respect did not prevail in Pacific Coal. However, I adhere to it. Because it rests on my view of what the Constitution obliges, I would continue to give effect to it. Nevertheless, as this particular issue is caught up in the disposition of the general attack on the constitutional validity of the Amending Act, I need say no more than that, separately from my general conclusion, I consider Sched 6 to be invalid on this additional ground. 480 Joint reasons at [299]-[302]. 481 (2000) 203 CLR 346 at 442-446 [279]-[290]. Kirby Invoking the territories power: The joint reasons reject the challenge by the plaintiffs to the attempt made by the new Act to rely, in support of the new collection of federal legislative powers nominated to sustain validity, on s 122 of the Constitution482. That section affords power to the Federal Parliament to make laws for the government of the territories of the Commonwealth. The extent to which limitations upon the powers specifically granted to the Parliament by s 51 of the Constitution fetter the legislative power to make laws for the government of any territory, has been a matter of controversy upon which, in the past, this Court has divided483. In Newcrest Mining (WA) Ltd v The Commonwealth484, Gaudron and Gummow JJ and I concluded, contrary to some earlier authority, that the grant of power in s 122 was subject, in that case, to the restriction on the making of federal laws expressed in s 51(xxxi). I accept that the issue is not settled by Newcrest. Nor is this the case to settle it. Apart from anything else, there are differences between the restriction, relevant to laws for the federal acquisition of property contained in s 51(xxxi) of the Constitution, and the suggested restriction on federal laws with respect to industrial relations contained in s 51(xxxv). The reference in the latter to the consideration of interstateness suggests that, in this respect, the power of the Parliament to make laws for the government of any territory stands apart, is relevantly plenary and is not, in the case of the territories, subject to any express or implied restriction or limitation imported from the industrial disputes power contained in s 51(xxxv)485. Whilst, therefore, I am inclined to agree with the conclusion and reasoning of the majority concerning those provisions of the new Act that rely on the constitutional power to make laws by reference to the connection between the "employer" and "employee" and a territory486, it is unnecessary for me to reach a final opinion on the issue. As I shall show, the Act's stated objects and overall scheme are addressed to the relations between 482 Joint reasons at [345]. 483 Newcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR 513 at 568, 614, 661; cf Teori Tau v The Commonwealth (1969) 119 CLR 564. 484 (1997) 190 CLR 513. 485 Spratt v Hermes (1965) 114 CLR 226 at 242; Capital TV and Appliances Pty Ltd v Falconer (1971) 125 CLR 591 at 611; Svikart v Stewart (1994) 181 CLR 548 at 486 Joint reasons at [329], setting out ss 5(1) and 6(1) of the new Act. Kirby employers and employees. These features confirm the general character of the law as one with respect to the prevention and settlement of "industrial disputes" and the many associated aspects of "industrial relations". But could the law be read down so as to apply to the territories only? In my view, the new Act "was intended to operate fully and completely according to its terms, or not at all"487. Reading down the law in this way would have the result of producing a set of provisions "which the Parliament did not intend"488. To turn this Act into a law applying to territories only, when the Parliament clearly intended it to cover, comprehensively and generally, national industrial relations, would require this Court to "reconstruct out of the ruins of one invalid law of general application a number of valid laws of particular application"489, essentially, to "manufacture a new web"490. Legislative "plastic surgery" of this nature is the province of the Parliament. It would be preferable to dispose of the precise ambit of the territories power in relation to s 51(xxxv) in proceedings where the orders required an answer to that question. As I shall show, that is not the case here because the plaintiffs are entitled to succeed on other grounds and the Amending Act wholly fails. (3) Opaque regulation-making power: A third matter of particularity where I have specific reservations about the analysis of particular provisions of the challenged legislation in the joint reasons, relates to the treatment of the regulation-making powers provided by the new Act491. The joint reasons conclude that the challenge to s 356, to s 846(1) and to the other regulation-making powers, as mounted specifically by the Australian Workers' Union ("the AWU"), fails. The joint reasons reject the AWU's argument that those provisions are impermissibly vague and devoid of content. They conclude that the provisions confine the impugned regulations to matters adequately identified by the Parliament itself. The joint reasons content themselves with chastisement of the impugned legislation as instancing an "undesirable" technique of drafting "which 487 Pidoto v Victoria (1943) 68 CLR 87 at 108. 488 cf Sportodds Systems Pty Ltd v New South Wales (2003) 133 FCR 63 at 73 [19]. 489 Concrete Pipes Case (1971) 124 CLR 468 at 506. 490 Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 491 Joint reasons at [395]-[421]. Kirby ought to be discouraged"492. They point to the burden which the challenged provisions present to lawyers and non-lawyers forced to look outside the statute in order to find the criteria for lawmaking which the Parliament has approved. With all respect, this is an inadequate response. It is redolent of the judicial attitude that sustained the majority reasoning in Combet v Commonwealth493. Under the Constitution, it is the duty of this Court to uphold the law-making and supervisory powers of the Parliament. We should not sanction still further erosion of those powers and their effective transfer to the Executive Government, whether appearing in vague, indeterminate and open-ended appropriations (as upheld in Combet) or in vague, indeterminate and open-ended regulation-making powers (as purportedly provided in ss 356 and 846(1) of the new Act494). There comes a point when a regulation-making power becomes so vague and open-ended that the law which establishes it ceases to be a law with respect to a subject of federal law-making power, becoming instead a bare federal attempt to control and expel State laws. When that line is crossed, this Court has a duty to say so. Until this Court exhibits its disapproval in a judicial fashion, by invalidating such provisions, the lesson of history is that executive governments will present such provisions in increasing number to distracted or inattentive legislators. The legislators will be unlikely to notice them in the huge mass of legislative materials, such as those presented in the present case, and contest them. They will overlook the affront to proper parliamentary supervision, particularly in the context of regulation-making provisions that are typically found at the end of bills and ordinarily attract little parliamentary attention because they are assumed to be in the standard form. The relationship between the Parliament's function of lawmaking and the legitimate delegation to the Executive Government of promulgating regulations to carry a law into effect, is a point of great constitutional significance. Contemporary debates in the Parliament of the United 492 Joint reasons at [399]. 493 (2005) 80 ALJR 247 at 253 [6]-[7], 286 [158]-[161]; 221 ALR 621 at 623-624, 494 Joint reasons at [398]. Kirby this fact495. illustrate The plaintiffs' challenge legislation should be upheld both Kingdom the constitutional acceptability of the mode of delegation adopted in the the proper present constitutional role of the Federal Parliament and to discourage future similar measures. The impugned provisions border on an endeavour to enact an abdication of the Parliament's responsibilities. This Court should say so and forbid it. to defend Once again, however, because on other grounds the entirety of the Amending Act falls, the separate disposition of the particular issue concerning the regulation-making power is not essential in order to arrive at the orders that I favour. Nevertheless, this instance does illustrate, in a most vivid way, the indulgent approach of the majority, expressed in the joint reasons, to the entirety of the legislation. I find it impossible to believe that in earlier times this Court would have approved such an open-ended delegation by the Parliament to the Executive of the Parliament's proper law-making functions496. Centrality of the s 51(xx) issue: Apart from these specific matters, the remaining particular challenges to provisions of the Amending Act stand or fall with the plaintiffs' attack on the Commonwealth's reliance on s 51(xx) of the Constitution. It is that head of legislative power that is said to provide the constitutional underpinning for the new federal law on workplace relations. Therefore, it is to that central postulate of the new Act that I now turn. But first it is appropriate to notice the large measure of common ground and some general considerations of approach. Common ground and approach The basic case law: In these proceedings, no party challenged the approach to the interpretation of the heads of legislative power of the Federal Parliament expressed in the majority reasons in Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers Case")497. In so far as 495 See debate of the House of Lords on the Legislative and Regulatory Reform Bill 2006 (UK): United Kingdom, House of Lords, Parliamentary Debates (Hansard), 13 June 2006. 496 Contrast Shrimpton v The Commonwealth (1945) 69 CLR 613 at 620-621, 625, 629, 632; Kostrzewa v Southern Electric Authority of Queensland (1969) 120 CLR 653 at 656 and Dainford Ltd v Smith (1985) 155 CLR 342 at 357, 361-362 (citing Geraghty v Porter [1917] NZLR 554 at 556). 497 (1920) 28 CLR 129 (affd (1921) 29 CLR 406); cf Airlines of NSW Pty Ltd v New South Wales [No 2] ("the Second Airlines Case") (1965) 113 CLR 54 at 79; Grain Pool (2000) 202 CLR 479 at 524 [115]; cf joint reasons at [190]. Kirby they referred to considerations of federalism, neither the States, nor any of the unions, sought to revive the notion of reserved State powers that pre-existed the decision in the Engineers Case498. None of the States submitted that the propounded reliance by the Commonwealth on s 51(xx) of the Constitution should be rejected because, to uphold it, would "invade the field of State law"499. Specifically, the State and union submissions, urging their construction of the ambit of the corporations power by reference to the Constitution, did not posit a notion that a restriction or prohibition grew out of a pre-existing field of State law with respect to the operation of corporations "the control of which is exclusively reserved to the States"500. The plaintiffs all accepted that such an implied zone of restriction on the operation of federal law, including as it was validly founded on s 51(xx) of the Constitution, is forbidden by the settled approach to the ascertainment of the boundaries of such powers expressed in the Engineers Case. Likewise, no party sought to challenge the correctness of the fundamental step taken by this Court in its decision in the Concrete Pipes Case501, in expanding the ambit of the corporations power. Neither did any party seek to advance a re-argument of New South Wales v The Commonwealth (The Incorporation Case)502, although several of the plaintiffs pointed to the limited significance of the majority conclusion in that case (so far as it addressed the ambit of s 51(xx)), because the issue now for decision was conceded there and not argued before, or decided by, the Court. The parties did not stay, in these proceedings, to challenge what was said in the divided course of authority in recent years concerning the identity of a trading and financial corporation and the broad direction of this Court's recent authority upholding, with increasing majorities, the constitutional power provided by s 51(xx)503. These matters of approach identify the battle grounds 498 See generally R v Barger (1908) 6 CLR 41 at 84 per Isaacs J, 113 per Higgins J and Attorney-General for NSW v Brewery Employés Union of NSW ("the Union Label Case") (1908) 6 CLR 469. See also joint reasons at [82] et seq. 499 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 354. 500 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 354. See joint reasons at [74]. 501 (1971) 124 CLR 468. See joint reasons at [153]-[156]. 502 (1990) 169 CLR 482. See joint reasons at [137]. 503 Joint reasons at [46]-[47], [54]. Kirby that the plaintiffs were content to accept. In view of the state of this Court's authority, it is appropriate for this Court to act upon the foregoing concessions. Matters of history: Nor was there much real contest in argument over considerations of history, whether addressed to the development before federation of the corporation as a legal fiction504; the various debates and moves anterior to the adoption of s 51(xx) in the Constitution505; the record of failed referendums wherein fruitless attempts were made to persuade the Australian electors to amend the Constitution in ways designed to enhance the federal legislative power in regard to lawmaking with respect to industrial disputes506; and the course of relevant authority in this Court that followed federation507. Although I do not ultimately draw the same conclusions from these considerations of history, I adopt, as accurate and generally adequate for the purposes of these reasons, the broad outline of the history set out in the joint reasons. So far as the founders of the Commonwealth are concerned, some of whom were among the original Justices of this Court, the proof of the pudding may be seen in what they did and wrote and obviously assumed and believed when questions concerning the ambit of the corporations power came up for decision, and also when they turned to elucidate the conciliation and arbitration power provided in s 51(xxxv). The joint reasons acknowledge that the people of Australia have repeatedly declined to confer on the Federal Parliament, through referendum, a power to make laws with respect to "industrial relations generally" and the "terms and conditions of employment in industry"508. They suggest that the failure of these referendums casts no light on the power of the Federal Parliament to make laws with respect to industrial relations. Various reasons are offered in support of this view, including the "problem of equivalence"509 and the decisiveness of party politics510. However, the fact that it would be difficult to ascertain the intention of the people at referendum does not make that intention 504 Joint reasons at [96]-[124]. 505 Joint reasons at [111]-[124]. 506 Joint reasons at [125]-[135]. 507 Joint reasons at [136]-[182]. 508 Joint reasons at [129]. 509 Joint reasons at [131]. 510 Joint reasons at [132]. Kirby "irrelevant" to the questions at hand. In analogous cases, this Court is regularly called upon to determine the "intention" of the Parliament, expressed in legislation. It certainly cannot be denied that the law-making process is affected by factors like "party politics". In a pluralist democracy, the process of construing parliamentary intention is not a simple and direct one. Yet this Court performs its duty, and constantly construes those "intentions". It does so in light of authority, historical circumstances and many other available tools that may not be exactly "equivalent" to the circumstances prevailing in the instant case, but whose relevance cannot be ignored511. If we acknowledge that the ultimate foundation of the legitimacy of the Constitution is now derived from its acceptance by the Australian people512, the continued refusal of the Australian electors to approve the creation of a general power of industrial relations by constitutional amendment, while obviously not decisive of the outcome in these proceedings, remains a relevant factor to be considered when construing the contemporary meaning of the constitutional text and structure, including the interaction between ss 51(xx) and 51(xxxv)513. If amendments that are agreed to are relevant to the meaning of the Constitution514, those that have been repeatedly rejected should not be so lightly cast aside as irrelevant515. Coherent constitutional interpretation: Given that the proceedings involve constitutional validity, it is important to say that, on many of the matters of approach also, the parties were in agreement. Thus, they agreed that the Constitution must be read as a whole and as a coherent document516. 511 cf Cole v Whitfield (1988) 165 CLR 360 at 385. 512 Kirmani v Captain Cook Cruises Pty Ltd [No 1] (1985) 159 CLR 351 at 383 per Murphy J, 442 per Deane J; Leeth v The Commonwealth (1992) 174 CLR 455 at 486 per Deane and Toohey JJ; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 138 per Mason CJ, 216 per Gaudron J; Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104 at 171 per Deane J. See also McGinty v Western Australia (1996) 186 CLR 140 at 230 per McHugh J, 274-275 per Gummow J; Sue v Hill (1999) 199 CLR 462 at 490-493 [59]-[66], 503 [95]-[96] per Gleeson CJ, Gummow and Hayne JJ, 526-528 513 See also Cole v Whitfield (1988) 165 CLR 360 at 385. 514 Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 404-411 [137]-[152], 413 515 See also Durham Holdings Pty Ltd v New South Wales (2001) 205 CLR 399 at 428 [65]; reasons of Callinan J at [115]-[119]. 516 Joint reasons at [52]. Kirby The joint reasons express fear that this principle of interpretation, unless kept in check, might lead to the importation of a negative implication protective of State legislative rights, akin to the reserved powers doctrine517. However, this is not how I understood the plaintiffs' argument to be advanced. It was not for its impact on "preserving" State legislative "rights" that the coherency principle was invoked, but for the anterior question of ascertaining the content of federal legislative powers, such as those expressed in s 51 of the Constitution. In the interpretation of legal words, it is accepted today that serious errors can result from focusing on the words alone, in isolation, and omitting the context in which those words appear. Paying regard to context is now a settled requirement for the construction of statutes518. The same is true in ascertaining the meaning of a constitutional provision. the understanding of communication by the use of human language. This is nowhere more so than in deriving the meaning of a constitutional text, typically expressed (as in the Australian instance) in sparse language, designed to apply for an indefinite time and to address a vast range of predictable and unpredictable circumstances. is critical Context It follows that, to take the language of the corporations power in par (xx) of s 51 in isolation and to ignore the other paragraphs of that section, would involve a serious mistake. It is not a mistake that our predecessors in this Court made. They read pars (xx) and (xxxv) together as part of the one section of the Constitution containing a grant of many powers. Clearly, it was not intended that s 51(xxxv) should be otiose, irrelevant or entirely optional to the Commonwealth in its application. Nor was it intended that the important restrictions imposed on the federal exercise of legislative powers in par (xxxv), with respect to laws on industrial disputes, should be set at nought by invoking another head of power, such as that contained in par (xx). As I shall show, the principle of coherency in the interpretation of a legal text lies behind the reconciliation in several decisions of this Court of the restrictions appearing in the grants of legislative power in respect of banking (s 51(xiii)), insurance (s 51(xiv)) and acquisition of property (s 51(xxxi)). Of course, being a Constitution that contains grants of legislative power to a national legislature, it is appropriate to construe each of the heads of power expressed in s 51 "with all the generality which the words used admit"519. The words must 517 Joint reasons at [82]. 518 Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 397 citing R v Brown [1996] AC 543 at 561. 519 R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225; Grain Pool (2000) 202 CLR 479 at Kirby also be interpreted remembering their constitutional function520. They must reflect the fact that the Constitution is a "living instrument"521, intended to respond to the needs of changing times522. Merely because of the existence of one provision having a "more particular scope", one should not infer a limit on the deployment of other powers in ways that also affect the nominated subject523. Nevertheless, the abiding object of the task at hand is to secure an interpretation of the constitutional provisions that gives harmonious effect to the entire document. And this includes s 51. Necessity of characterisation: Because the constitutional validity of the impugned provisions is challenged, it is necessary for this Court to ask whether the provisions, taken separately and together, are laws "with respect to" the propounded head of power. Those words of connection "ought never be neglected". They "require … relevance to or connection with the subject assigned to the … Parliament"524. The well-known passage from the reasons of Kitto J in Fairfax v Federal Commissioner of Taxation525 was invoked. It was accepted by both sides to this contest. In accordance with those words, the central question thus became whether the several provisions of the Amending Act, read in context, according to their "true nature and character" and "real substance", constituted a "law upon, 'with respect to'", one or more of the enumerated subjects. Alternatively, were the provisions "so incidental as not in truth [such as] to affect its character"526? Any 520 cf Australian National Airways Pty Ltd v The Commonwealth (1945) 71 CLR 29 at 81; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 257 521 Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104 at 171 per 522 Victorian Stevedoring and General Contracting Co Pty Ltd and Meakes v Dignan (1931) 46 CLR 73 at 114-115. 523 Concrete Pipes Case (1971) 124 CLR 468 at 507. 524 Grannall v Marrickville Margarine Pty Ltd (1955) 93 CLR 55 at 77; Re Dingjan (1995) 183 CLR 323 at 352. 525 (1965) 114 CLR 1 at 7. Likewise the reference to the obligation to ascertain the really essential features of the head of power. See Union Label Case (1908) 6 CLR 469 at 616 per Higgins J. 526 The references to the "true" nature and character and the "real" substance of the law in question appear in the reasons of Kitto J in Fairfax (1965) 114 CLR 1 at 7 (emphasis added). Kirby decision-maker, approaching criteria expressed by reference to adjectival expressions such as "true", "real" or "in truth", will understand that he or she has reached the point where further verbal explanation is impossible. An opinion, in the nature of a judgment, must be provided. Legal analysis, expressed in words, can only go so far. To pretend otherwise is to succumb to the mesmerising effect of verbal formulae. It is to deny the inescapably personal judgment of the decision-maker in an illusory quest for an entirely scientific objectivity that does not exist in the task of legal characterisation. This conclusion does not make the task at hand extra legal in its basic character. But it does demand recognition of the opinionative assessment that is ultimately involved in constitutional characterisation. Such assessments are matters upon which, inevitably, reasonable minds can differ. Of their nature, there will often be more than a single available answer. We do not extinguish such difference today by the cry of heresy527. To have heresy alleged by those who participated in the joint reasons of this Court in Combet528 is an accusation to be borne with an easy heart. In making the assessment, each decision-maker will view the matter to be assessed through a lens affected by experience and constitutional values as much as by the verbal elaborations contained in the past authority of this Court in more or less analogous cases. This is why it is important to make the process of decision-making on such questions as transparent as possible and not to pretend that it involves only the application of past judicial dicta. Such dicta may light the path. But the ultimate destination is taken by the judicial traveller who cannot escape the obligation of choice. If, applying the foregoing approach, the impugned law may be characterised as one with respect to the nominated head of power, that is sufficient for the discharge of the judicial function. It is then no part of that function to deny constitutional validity because of a judge's doubts about the wisdom, justice or efficacy of the legislative choices529. Constitutional and legal values affect judicial choices; but, within the constitutional boundaries, political, economic and social choices in the text and design of legislation belong to the Parliament, which is answerable to the electors. 527 Joint reasons at [51]. 528 (2005) 80 ALJR 247; 221 ALR 621. 529 Leask v The Commonwealth (1996) 187 CLR 579 at 602; Grain Pool (2000) 202 CLR 479 at 492 [16], 522-525 [111]-[118]. Kirby Although the principal objects of an Act are not decisive of its character, in this case, they are telling. The objects530 make it clear that the law is addressed to the prevention and settlement of industrial "disputes", inherent in dealing comprehensively and generically with "workplace relations". The objects make no mention of "corporations", constitutional or otherwise. They are relevantly addressed to the relationship between employers and employees. So much is confirmed by the Act's key provisions, which are applied to "employers" and "employees"531. Those provisions directly impose terms and conditions on the employment relationship between affected "employers" and "employees"532; and modify the content of awards made by the AIRC regulating the terms and conditions of that relationship533. They regulate the payment of redundancy pay to affected employees534, the manner in which collective agreements may be negotiated and entered into535, and the content of those agreements536; and they substantially restrict the extent to which affected employees may engage in industrial action537. "The mere fact of mentioning corporations [in ss 5 and 6] does not necessarily make [the new Act] a law 'with respect to' – on the subject of – corporations."538 The only connection between the Act's key provisions and ss 51(xx) of the Constitution is that they may have some impact on the rights, duties and obligations of corporations and their employees. Taken separately and in sum, the "rights, duties, powers and privileges" which the Act "changes, regulates or abolishes"539 properly pertain to the prevention and settlement of 530 New Act, s 3. 531 Defined in ss 6 and 5. 532 Pts 7 and 12. 533 Pt 10 and Sched 8. 534 Pt 10, Div 2. 537 Pt 9; Sched 8, Pt 2, Div 7; s 400. 538 See Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 410 per Higgins J (emphasis in original). 539 Fairfax v Federal Commissioner of Taxation (1965) 114 CLR 1 at 7. Kirby industrial disputes inherent in the comprehensive regulation of industrial relations540. Such is the proper characterisation of the new Act. Nonetheless, the key operative provisions of the new Act are applied by reference to the employer as a constitutional corporation. The constitutional validity of the new Act depends on a sufficient connection with the corporations power. It must be established that the corporations power authorises any law directed to a corporation, regulating any interaction with it, or within it. In this respect, the intention of the Federal Parliament to circumvent the requirements of s 51(xxxv) by relying on a connection with s 51(xx) is irrelevant to the process of characterisation. However, if the new Act is to be characterised as a law with respect to s 51(xx), and not solely s 51(xxxv) as it appears to be in substance, the constitutional validity of that Act turns directly on the relationship between those two heads of power541. The corporations power: As the joint reasons demonstrate, this Court's explanation of the ambit of the corporations power, granted by s 51(xx), has changed, and effectively expanded, in the course of judicial authority decided over a century542. It would be contrary to my inclination, and in any case fruitless in these proceedings, to question such developments. I would accept the submission of Victoria, quoting from the Concrete Pipes Case543, that it is unnecessary in these proceedings to determine "the full ambit of the power conferred by s 51(xx) or to state definitive tests or criteria by which in every case the question may be determined whether a law is or is not a law with respect to the topic described in that paragraph". The intersection issue: What is, in my view, essential to the disposition of these proceedings is a decision on a narrower constitutional question. That question concerns the inter-relationship between s 51(xx) and s 51(xxxv). The issue posed by that inter-relationship may be stated in the alternative: Does the existence of par (xxxv) in s 51 limit the ambit and operation of par (xx), by restricting the availability of the latter to sustain a federal law? Or, is the content of par (xx) itself limited by any restriction upon laws with respect to industrial disputes inherent in giving true effect also to the provisions of par (xxxv)? In my 540 See further reasons of Callinan J at [789]-[799]. 541 See further reasons of Callinan J at [799], [821]-[822], [834]. 542 Joint reasons at [136]-[178]. 543 (1971) 124 CLR 468 at 515 per Walsh J agreeing with Barwick CJ at 490-491 on this point. See also Actors and Announcers Equity Association v Fontana Films Pty Ltd (1982) 150 CLR 169 at 182; The Tasmanian Dam Case (1983) 158 CLR 1 Kirby view, although the same result is achieved by either approach, the latter expresses the correct constitutional principle. It follows that the content of s 51(xx) takes on a reduced scope from what it otherwise might have had if par (xxxv) had not appeared in the Constitution at all, indeed in the very same section within which each paragraph is to be read together with the others. A law can be validly made with respect to more than one head of power544. The fact that it might be characterised as a law with respect to some other subject matter(s) is irrelevant if it properly answers to the description of a law with respect to another subject matter designated in s 51. This will be so even if there is no independent connection between the two constitutional subject matters545. What is forbidden is the making of a law in reliance upon a specified subject matter (such as s 51(xx)) when that law is properly characterised as one with respect to another head of power (such as s 51(xxxv)) in circumstances where the latter power is afforded to the Federal Parliament "subject to a safeguard, restriction or qualification"546. The resulting central question Stating the issue: It follows from the foregoing analysis that the central issue in these proceedings is not, as such, the reach of the corporations power, standing alone. For present purposes, it may be accepted, on the authority of this Court, that it is wide and comprehensive. Its exact contours and boundaries need not be defined in order to reach my orders in these proceedings. The issue, rather, is to what extent the ambit of the corporations power is qualified (if at all) by the existence of the power to make laws with respect to industrial disputes, which is expressed as subject to identified restrictions. This issue is not solved by resorting to generalities, such as by saying that the corporations power, like that with respect to aliens (s 51(xix)), is a power to make laws by reference to identified (legal) persons547. Nor does it really help to describe the corporations power as "plenary". It certainly is not uncontrolled. It is confined by the words in which it is expressed, most significantly the word "formed"548, and also by its appearance in the context of the grant of other 544 Fontana (1982) 150 CLR 169 at 192-194. See joint reasons at [51]. 545 Re F; Ex parte F (1986) 161 CLR 376 at 388; Grain Pool (2000) 202 CLR 479 at 546 Attorney-General (Cth) v Schmidt (1961) 105 CLR 361 at 371 per Dixon CJ (Fullagar, Kitto and Taylor JJ agreeing at 373; Windeyer J agreeing at 377). 547 Fontana (1982) 150 CLR 169 at 181. See joint reasons at [163]. 548 The Incorporation Case (1990) 169 CLR 482 at 497-498. Kirby powers, some of qualifications549. them subject to express safeguards, restrictions and The dicta in Pacific Coal: The joint reasons550 attach great significance to the remarks of Gaudron J in her reasons in Pacific Coal551. Her Honour is there quoted as expressing her belief as to the amplitude of the "power conferred by s 51(xx) of the Constitution", including with respect to the "regulation of the conduct of those through whom [the corporation] acts, its employees and shareholders". Three observations can be made on this passage, which the joint reasons say should be adopted by the Court as a correct "understanding of the First, in Pacific Coal, Gaudron J (along with McHugh J and myself) was in dissent. Her reasoning therefore forms no part of the ratio decidendi of that case. Secondly, the quotation from Gaudron J in the joint reasons omits the sentence that introduces the passage which the majority has now approved. That sentence makes it clear that Gaudron J was confining her remarks to the issue in hand, namely the constitutional validity under s 51(xx) of s 7A(1) of the Workplace Relations Act 1996 (Cth)553. In the omitted sentence, Gaudron J said554: "Even if s 7A(1) did apply in this case, item 50 in Pt 2 of Sch 5 could not, in my view, be characterised as a law with respect to constitutional corporations." The fact that the approved passage was not intended by Gaudron J to be as unqualified as the words quoted in isolation might suggest is confirmed by the conclusion which her Honour reached, based on the invocation by the employer in that case of s 51(xx) to sustain the validity of the contested provision. Gaudron J actually rejected the conclusion that the provision could rely for its validity on s 51(xx). Thus, her Honour went on to explain why the paragraph was not available555: 549 Such as s 51(xiii), (xiv), (xxxi), (xxxiii), (xxxiv). 550 Joint reasons at [178]. 551 (2000) 203 CLR 346 at 375 [83]. See joint reasons at [178]. 552 Joint reasons at [177]. 553 See Pacific Coal (2000) 203 CLR 346 at 354-355 [1]-[4], 374-375 [82]-[83]. 554 (2000) 203 CLR 346 at 375 [83]. 555 (2000) 203 CLR 346 at 375 [85]. Kirby "The only connection between item 50 in Pt 2 of Sch 5 to the [Workplace Relations and Other Legislation Amendment Act 1996 (Cth)] and s 51(xx) of the Constitution is that it may have some effect on the rights and obligations of corporations and their employees. That is not sufficient to give s 3 of [that] Act, to the extent that it purports to give effect to item 50, the character of a law with respect to corporations." This is therefore yet another instance of the oft-expressed danger of taking words (whether in a constitutional grant of power or in judicial elaborations of it) out of context556. Thirdly, no argument was addressed in Pacific Coal to the reconciliation of the powers granted by pars (xx) and (xxxv) of s 51 of the Constitution. In these proceedings, that argument is at the very centre of the matters for decision. Remarks made by a judge without regard to that argument are of limited utility in the present proceedings. They should not be inflated into a general principle to be endorsed by this Court. Powers subject to safeguards, restrictions or qualifications The emerging question: The resulting question can therefore now be stated. Is reading s 51(xx), so that it does not apply where the propounded law is truly one "with respect to" industrial disputes but without conforming to the safeguards, restrictions or qualifications contained in s 51(xxxv), inconsistent with the authority of this Court on the ambit of such powers? Would it, for example, cut across the principle of constitutional interpretation that each grant of power is to be construed with ample generality, despite the possibility of dual characterisation where another grant of power, on its own, might not sustain the validity of the challenged law557? Powers subject to restrictions: Whilst the ample approach to the elucidation of the meaning of the several heads of legislative power in ss 51 and 52 of the Constitution is well settled, it is subject to a qualification that derives from the requirement to construe the Constitution as one coherent instrument of 556 See also the treatment of s 51(xx) in my reasons: Pacific Coal (2000) 203 CLR 557 Herald and Weekly Times Ltd v The Commonwealth (1966) 115 CLR 418 at 434; Concrete Pipes Case (1971) 124 CLR 468 at 512; Russell v Russell (1976) 134 CLR 495 at 539; Fontana (1982) 150 CLR 169 at 191-194; Zines, "Characterisation of Commonwealth Laws", in Lee and Winterton (eds), Australian Constitutional Perspectives, (1992) 33. Kirby government558. Such an approach is really rudimentary. It derives not from implications external to the Constitution but from that document's text and structure. As Latham CJ explained in Bank of NSW v The Commonwealth ("the Bank Nationalisation Case")559: "[N]o single power should be construed in such a way as to give to the Commonwealth Parliament a universal power of legislation which would render absurd the assignment of particular carefully defined powers to that Parliament. Each provision of the Constitution should be regarded, not as operating independently, but as intended to be construed and applied in the light of other provisions of the Constitution. Thus an endeavour should be made to 'reconcile the respective powers … and give effect to all'". In the same decision, Rich and Williams JJ said, to like effect560: "[There is] no reason why a Constitution, like any other statute or document, should not be subject to the general rule that every clause should be construed with reference to the context of the other clauses of the Act, so as, so far as possible, to make a consistent enactment of the whole statute and to give a meaning if possible to every part thereof". In fact, this approach has been consistently applied in at least two particular categories of constitutional interpretation. These are outlined below. The issue is whether, in these proceedings, the same principle applies, by analogy, in the intersection between s 51(xx) and (xxxv). Express exclusions from power: The first category arises where the head of power in question contains an express exception from the subject matter that it states561. There are several paragraphs of s 51 that answer to this description. They include par (xxxii) with respect to the control of railways by the Commonwealth which is limited to "transport for … naval and military purposes"; and par (xxxiii) referring to the acquisition of any railways of a State but only "with the consent of [the] State" and "on terms arranged between the 558 Bank of NSW v The Commonwealth ("the Bank Nationalisation Case") (1948) 76 CLR 1 at 304; Lamshed v Lake (1958) 99 CLR 132 at 154. 559 (1948) 76 CLR 1 at 184-185. 560 (1948) 76 CLR 1 at 256-257. 561 Such a limitation need not be express; it may be "made manifest" by "necessary implication"; cf Nintendo Co Ltd v Centronics Systems Pty Ltd (1994) 181 CLR 134 at 160; Newcrest (1997) 190 CLR 513 at 577. Kirby Commonwealth and the State". Likewise, par (xxxiv) concerns railway construction and extension in any State but only "with the consent of that State". Obviously, the grant of power with respect to trading and financial corporations in par (xx) could not be given effect so as to ride roughshod over these restrictions. Two further express provisions in s 51 make the point even more clearly, being pars (xiii) and (xiv), which empower the Federal Parliament to make laws respectively with respect to banking and insurance. In each such head of power State banking or insurance, as the case may be, is excluded from the designated subject of federal lawmaking but may yet be the subject of federal laws where such excluded activities "extend[] beyond the limits of the State concerned". These provisions were the subject of close examination by this Court in the Bank Nationalisation Case562 and in several cases since. In Bourke v State Bank of New South Wales563, the relationship between the constitutional provision with respect to laws on "State banking" (s 51(xiii)) and the corporations power (s 51(xx)) received particular attention. The reasons of the entire Court, comprising Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, observed564: "In this context, some qualification must be made to the general principle that a law with respect to a subject-matter within Commonwealth power does not cease to be valid because it affects a subject outside power or can be characterized as a law with respect to a subject-matter outside power ... The principle cannot apply when the second subject-matter with respect to which the law can be characterized is not only outside power but is the subject of a positive prohibition or restriction. If a limitation is found to be of general application, then the fact that it is contained within one of the paragraphs of s 51 does not deny it a wider operation; the remaining paragraphs are then to be construed as being subject to the limitation". The result of this analysis was that, in Bourke, this Court unanimously, and in a single opinion, accepted that the words of limitation in s 51(xiii) restricted what would otherwise, read entirely on its own, involve such an ample scope for s 51(xx) as to render the prohibition or restriction in par (xiii) nugatory. 562 (1948) 76 CLR 1 at 203-204 per Latham CJ, 256 per Rich and Williams JJ, 304 per Starke J, 330 per Dixon J. 563 (1990) 170 CLR 276. 564 (1990) 170 CLR 276 at 285 (emphasis added). Kirby This Court held that the proper way to understand the limitation expressed in the latter paragraph was so that565: "the words of s 51(xiii) … require that, when the Commonwealth enacts a law which can be characterized as a law with respect to banking, that law does not touch or concern State banking, except to the extent that any interference with State banking is so incidental as not to affect the character of the law as one with respect to banking other than State banking". Section 51(xx) refers expressly to "financial corporations formed within the limits of the Commonwealth". It also refers expressly to "foreign corporations". Giving those phrases an "ample" meaning, they would obviously include many, if not most (perhaps all), banking corporations operating in Australia. Certainly, that is what such banking corporations typically were in 1900, were also in 1990, and still are. Clearly, if those words are to be given the full and unrestricted ("plenary") approach which the Commonwealth urges to the entirety of the language of s 51(xx) of the Constitution, this would render the limitation on federal laws with respect to banking (and insurance), expressed in s 51(xiii) and (xiv), worthless. Parliamentary counsel would simply express the law in question as one with respect to "foreign corporations" and "financial corporations" and the law would, on this hypothesis, walk straight out of the restrictions that the Constitution imposes on the grant of power to make laws with respect to banking and insurance. This would be so despite the language of s 51(xiii). Because that could not possibly be the way to construe the Constitution, read as a whole, coherently and consistently, this Court has denied that possibility566. By analogy, the plaintiffs invoke a similar approach to the available federal legislative powers in issue in the present proceedings, namely pars (xx) and (xxxv) of s 51. Powers subject to a guarantee: A second category where, to be made effective as obviously intended, a federal head of power has been read so as to diminish or confine what might otherwise seem to be the grant of plenary powers without restrictions, arises in the case where the constitutional text contains a specific provision with respect to a subject matter but limits the exercise of the power by reference to a constitutional guarantee, protective of the legal rights of those potentially affected by the federal law. One such obvious case arises where the Federal Parliament is empowered to make laws with respect to the "acquisition of property … from any State or 565 (1990) 170 CLR 276 at 288-289. 566 Bourke (1990) 170 CLR 276 at 290-292. Kirby person"567. In respect of this head of power, there is a restriction of the first type, already described. It limits the acquisition of property envisaged to acquisition of property "for any purpose in respect of which the Parliament has power to make laws". However, there is, as well, a second, express, restriction, stated by reference to a guarantee protective of the rights of persons who are subject to the exercise of the power. This is the guarantee that such acquisition must be "on just terms". This second safeguard, restriction or qualification has been described as a "guarantee" in countless cases, since The Commonwealth v Tasmania (The Tasmanian Dam Case)568 and even before569. In the face of such a "constitutional guarantee", this Court has been unwilling to permit federal legislation to avoid the obligation of providing "just terms" by the simple expedient of nominating some other head of legislative power, or subject matter, as the source of the law's constitutional validity. In Theophanous v Commonwealth, Gleeson CJ explained the relationship between s 51(xxxi) and the other heads of federal legislative power in s 51 on this footing570: "The qualification to the power [in s 51(xxxi)], contained in the reference to just terms, protects rights of private property. Whatever arguments 567 Constitution, s 51(xxxi). 568 (1983) 158 CLR 1 at 282. In The Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 at 48 [126] fn 149, the following authorities that also refer to s 51(xxxi) as a guarantee are cited by McHugh J: Clunies-Ross v The Commonwealth (1984) 155 CLR 193 at 201-202; Australian Tape Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 509; Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 168, 180, 184, 185; Health Insurance Commission v Peverill (1994) 179 CLR 226 at 241; Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 277, 283, 285; Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 303, 312, 320; Gambotto v Resolute Samantha Ltd (1995) 69 ALJR 752 at 754; 131 ALR 263 at 266-267; The Commonwealth v Mewett (1997) 191 CLR 471 at 534-535, 549-551, 551-552, 556-558; Newcrest (1997) 190 CLR 513 at 541-542, 605, 607, 610-611, 612-613, 613-614, 618-619, 652-653, 654-655. In WMC itself, see (1998) 194 CLR 1 at 15 [12], 27 [45], 34-35 [75]-[77], 69 [181], 73 [194], 90- 569 Minister of State for the Army v Dalziel (1944) 68 CLR 261 at 276, 284-285, cited in Clunies-Ross v The Commonwealth (1984) 155 CLR 193 at 201-202 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ. 570 (2006) 80 ALJR 886 at 888-889 [5]; 226 ALR 602 at 604 (emphasis added). Kirby there may be about the extent of that protection in various circumstances, the existence of the protection has been recognised as an 'implied guarantee', with significant consequences for an understanding of the relationship between par (xxxi) and the rest of s 51571. If par (xxxi) were intended to be no more than an express conferral of a power of acquisition that would otherwise be implicit in other paragraphs of s 51, then that would not explain the presence of the qualification. It is an important limitation on power." In a number of cases, particular members of this Court have questioned the use of the language of "guarantee"572. They have preferred to describe s 51(xxxi) as the grant of a "power hedged with a qualification"573. For my own part, I am content with the description of the requirement of "just terms" as a "constitutional guarantee". Effectively, that is what it certainly is. But whatever the label, it is now established that the legislative powers existing in many of the other paragraphs of s 51, to authorise federal acquisitions, are subject to the "just terms" requirement in s 51(xxxi). No other interpretation of the interacting powers of the Federal Parliament would uphold the purpose of the Constitution, viewed as an entire, inter-related and coherent instrument. It is no answer, in such a case, for the Commonwealth to incant, as it does here, that this is merely another instance of "dual characterisation". In Nintendo Co Ltd v Centronics Systems Pty Ltd574, six Justices of this Court explained575: "It is well settled that s 51(xxxi)'s indirect operation to reduce the content of other grants of legislative power is through the medium of a rule of construction, namely, that 'it is in accordance with the soundest principles of interpretation to treat' the conferral of 'an express power, subject to a safeguard, restriction or qualification, to legislate on a particular subject or to a particular effect' as inconsistent with 'any 571 Mutual Pools & Staff Pty Ltd v The Commonwealth (1994) 179 CLR 155 at 189. 572 The Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 at 48 [126], 56 [145], 57-58 [149] per McHugh J; cf Cheng v The Queen (2000) 203 CLR 248 at 276-277 [77]-[78] per Gaudron J. 573 The Commonwealth v WMC Resources Ltd (1998) 194 CLR 1 at 48 [126] per 574 (1994) 181 CLR 134. 575 (1994) 181 CLR 134 at 160 per Mason CJ, Brennan, Deane, Toohey, Gaudron and Kirby construction of other powers conferred in the context which would mean that they included the same subject or produced the same effect and so authorized the same kind of legislation but without the safeguard, restriction or qualification'". The principle of construction, cited in Nintendo, is taken directly from the reasons of Dixon CJ in Attorney-General (Cth) v Schmidt576. Three points must be noted about the oft-quoted passage in Schmidt. First, the principle stated is founded on a general rule of construction. It is not a consequence peculiar to constitutional interpretation, still less the language and purposes of s 51(xxxi). Secondly, the principle explained in Schmidt attracted the concurrence of four other Justices577. It has been repeatedly applied by this Court so that it is now to be regarded as "settled". Thirdly, as indicated, the principle is addressed not to a paragraph in s 51 expressed in terms of a "prohibition" but by reference to the existence in the paragraph of a "safeguard, restriction or qualification". That phrase connotes a provision that may not, as such, be expressed in prohibitive terms. In the joint reasons in these proceedings, the majority endorses578 a passage in the reasons of Gleeson CJ in Pacific Coal579. In those reasons, Gleeson CJ states that the constitutional limitation on doing indirectly what could not be done directly is confined to circumstances where the allegedly indirect activity is "prohibited directly". This criterion is then applied to s 51(xxxv) of the Constitution in its relation to s 51(xx). Because no express "prohibition" is found in s 51(xxxv), it is concluded that that paragraph affords no obstacle to an unbridled interpretation of the ambit of s 51(xx). The majority in these proceedings may re-express the law to adopt a principle of construction different from that which this Court has earlier adopted and treated as settled580. Their Honours may, as they please, adopt a test of "prohibition" in deriving their conclusion about the Constitution's meaning in this case. However, they should at least do so acknowledging that they are altering the expression of the criterion stated by Dixon CJ in Schmidt and applied many times since. That criterion asks not whether the competing head of power (here s 51(xxxv)) contains a prohibition upon a law based on s 51(xx). As applied to 576 (1961) 105 CLR 361 at 371-372. 577 (1961) 105 CLR 361 at 373 per Fullagar, Kitto and Taylor JJ, 377 per Windeyer J. 578 Joint reasons at [228]. 579 (2000) 203 CLR 346 at 359-360 [29]. 580 Joint reasons at [228]. Kirby the facts of this case, it asks whether, if a law were enacted, reliant on s 51(xx), it would involve legislation "without the safeguard, restriction or qualification" on the propounded subject matter that must be included in order to conform to the constitutional requirements of s 51(xxxv). If one asks a different constitutional question, one will often receive a different constitutional answer. I prefer to ask the constitutional question that is "well settled" in this Court581. I prefer not to substitute a new question, which has not hitherto been endorsed by the Court. Especially so where that question weakens the obligation to read the Constitution as a whole and carries the risk of enlarging federal power at the cost of safeguards, restrictions or qualifications contained in the constitutional text. The industrial disputes power: Applying the established authority, can it be said, by analogy with the foregoing settled principles, that s 51(xxxv) of the Constitution contains a "safeguard, restriction or qualification" that results in a conclusion, in accordance with Schmidt, that a correct understanding of the ambit of the corporations power in s 51(xx) renders the latter more confined than would be the case if s 51(xxxv) did not exist? If so, as so confined, does the corporations power sustain the Act in question in these proceedings, as altered by the Amending Act? There are further questions: Would such a conclusion be inconsistent with past decisions of this Court concerning the inter-relationship between s 51(xxxv) and other paragraphs contained in s 51? Does past authority support the proposition that s 51(xxxv) of the Constitution is not the only constitutional source for federal legislation that may be characterised as laws with respect to "industrial disputes", "industrial relations" or "workplace relations"? If so, can such other cases be explained and reconciled with the suggested consequences of the inter-relationship between s 51(xx) and (xxxv) argued in this case? Despite the apparently long-held assumptions, decisions and actions to the contrary, does the Amending Act afford this Court the opportunity to set the Federal Parliament free from the necessity to enact federal legislation on such topics, not by direct federal legislative prescription but only by the decisions of independent conciliators and arbitrators, acting in conjunction with the parties? Does s 51(xx) of the Constitution, even if surprisingly, sustain the legislation in question in these proceedings although it relies on such radically different constitutional underpinning from that hitherto accepted or assumed as necessary to support valid federal legislation with respect to such topics? Section 51(xxxv) is analogous: In my opinion, s 51(xxxv) is analogous to other provisions in s 51 of the Constitution so that it attracts the settled rule of 581 Nintendo (1994) 181 CLR 134 at 160. Kirby constitutional construction stated by this Court in Schmidt. The paragraph authorises federal legislation on industrial disputes but subject to the two "safeguards, restrictions or qualifications" already mentioned582. To be valid, such federal legislation must have the character of interstateness. It must also provide for the means of independent resolution, that is, resolving ultimate differences by the decision of an independent person or body in a process that answers to the description of "conciliation" or "arbitration". The Federal Parliament does not enjoy a more general power to make laws with respect to industrial disputes. It cannot do so by purporting to invoke another, less specific, head of power. There is no concluded authority of the Court upon the foregoing particular propositions. However, in these proceedings the arguments were advanced in various ways583. It is therefore necessary for the first time to decide the issue. It was not necessary earlier. General observations deployed in earlier decisions are therefore of limited assistance. For most of the last century, the invocation of s 51(xx) to support federal laws providing directly for what s 51(xxxv) requires to be done through conciliation and arbitration would have been treated as self-evidently erroneous. In this respect, the earlier conceptions as to the scope of s 51(xx) simply conform to the assumption inherent in the debates at the Constitutional Conventions that preceded the adoption of the Constitution. The assumption was that the particular heads of legislative power conferred on the Federal Parliament did not extend to, or include, a power to regulate the incidents and outcomes of industrial disputes (however expressed). In particular, for most of the last century it would have been regarded as inconceivable that the power to make federal laws with respect to corporations, contained in s 51(xx), extended to sustain such direct federal legislation with respect to industrial disputes. To be valid, such legislation was to be brought within the hard-fought, and narrowly adopted, constitutional power provided in the limited terms of s 51(xxxv). It was a power added to the draft Constitution at a late stage in its gestation. Sir Joseph Abbott would, in my view, have spoken for virtually all of the delegates at the Convention when he said584: 582 cf these reasons at [430]; joint reasons at [230]. 583 See especially the written submissions of Victoria at [62]-[100] and the AWU at [93]-[110]. See also the written submissions of New South Wales at [117]-[136] and South Australia at [45]-[48]. 584 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 27 January 1898 at 198; cf at 203-204. See also Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 646-647. Kirby "The Commonwealth may determine to leave the whole question to the states themselves to settle, but if this power is not given to the Commonwealth, in no instance can they [that is, the Commonwealth] interfere in a dispute, although they may be deeply interested in it." The desires and expectations of the founders of the Constitution, and the understandings of earlier Justices, do not limit the response which this Court may give to the central issue now presented585. New times may give rise to new insights. But the considerations of history, purpose, envisaged institutions and outcomes over more than a century, not to say the Herculean labours of our predecessors in this Court over s 51(xxxv) which were otherwise effectively unnecessary, suggest that any construction of s 51(xx) must accommodate itself to the co-equal inclusion of a particular, and restricted, grant of power to the Federal Parliament to make laws with respect to industrial disputes. If this is correct, it is no more permissible to rely on s 51(xx) to make laws with respect to the industrial disputes of corporations, than it is to acquire the assets of a constitutional corporation for the purposes of the Commonwealth and then to argue that the "just terms" requirements of s 51(xxxi) can be ignored because of the ample, generous, even "plenary", legislative powers otherwise conferred on the federal lawmakers, including by s 51(xx). It is not irrelevant that the legislative power conferred on the Federal Parliament by s 51(xxxv) appears amongst the powers granted towards the end of the list in s 51. Each of the immediately preceding legislative powers (s 51(xxxi), (xxxii), (xxxiii) and (xxxiv)) contains a grant of power subject to a "safeguard, restriction or qualification". As a matter of structure, therefore, it would not be surprising to view s 51(xxxv) in the same light. History, and the Convention debates, suggest the same conclusion. Strong reservations were expressed at the Conventions about the idea (initially propounded by Mr Charles Kingston586) that any legislative power should be given to the new Federal Parliament to make laws with respect to industrial disputes. In the end, only by restricting the grant of power in the two ways stated (compliance with the necessity of interstateness and indirect, independent, decision-making) did the provision squeak through to find its place in par (xxxv) of s 51. Clearly, had those two requirements not been included, s 51(xxxv) would not have become part of the Constitution. Having become 585 Grain Pool (2000) 202 CLR 479 at 522-523 [111]. 586 Official Record of the Debates of the Australasian Federal Convention, (Sydney), 6 April 1891 at 780; Kirby, "Industrial Conciliation and Arbitration in Australia – A Centenary Reflection", (2004) 17 Australian Journal of Labour Law 229 at 232. Kirby part, it is not historically or textually valid to treat the paragraph as no more than a grant of legislative power in respect of interstate disputes for which independent resolution by conciliation and arbitration is selected and provided in the law. That would be to turn the clearly intended restrictions on federal lawmaking into nothing more than an optional feature of a power of a confined kind that could be ignored by invoking other, unconfined, heads of power. transitional and Neither history, nor text, support such an optional meaning for par (xxxv). The reading which the Commonwealth now urges would effectively render the head of power irrelevant. Indeed, this is evident in the major reconstruction of the Act, attempted by the Amending Act. Substantially, save for a few particular provisions, the constitutional underpinning upon which the new Act relies is the corporations power. On this hypothesis, s 51(xx) has become a power to make laws with respect to the industrial disputes, industrial relations and workplace relations of constitutional corporations. Yet this is to ignore what s 51(xxxv) says. To confine s 51(xx) by reference to s 51(xxxv) involves no more than giving meaning to both paragraphs of the Constitution, paying due regard to the safeguards, restrictions or qualifications expressed in par (xxxv). residual circumstances, It is not an inappropriate choice of language to describe the preconditions for federal legislation with respect to "industrial disputes", contained in s 51(xxxv), as fitting within the tripartite expression described by Dixon CJ in Schmidt. Indeed, even if one were to confine the broad principle of constitutional construction stated in that decision to instances where the expressed elements of the grant of power constitute a constitutional "guarantee", the requirement that federal laws operate indirectly through independent resolution by way of conciliation and arbitration can, in my view, properly be described as a type of "guarantee". Both in its language, and in its history, this is how the power in par (xxxv) has been understood and has operated in Australia for more than a century. Section 51(xxxv) protects industrial fairness: If the Federal Parliament can directly enact provisions that generically fall within the description of laws with respect to the subject of industrial disputes, such issues are likely to be decided by unilateral determination according to political, sectional or exclusively economic factors focused on the propounded subject of the power, namely the corporation, that is, the employer in the posited industrial dispute. They would not need to be decided by collective bargaining between the parties most immediately affected by the outcomes, taking into consideration the interests of those parties, the public interest, the ideal of "a fair go", due process, Kirby transparent negotiations and, ultimately (where necessary), public disposition by an independent decision-maker, acting by conciliation or arbitration587. In the wake of the lessons learned from the widespread industrial strikes late in the nineteenth century, which evidenced how market forces, unaided, would resolve (or fail to resolve) "industrial disputes" over wages and conditions, the idea of compulsory conciliation and arbitration was born. It emerged as an institution and a process that would prove very important to the societal and industrial balances struck thereafter in the Australian Commonwealth. In fact, the procedure envisaged by s 51(xxxv) was aimed at "shap[ing] the political economy according to the national ethos of the fair go"588. Partly in consequence of the compromise reached on the grant to the Federal Parliament of such a restricted and qualified head of legislative power, the independent institutions of conciliation and arbitration became "the fulcrum constitutional acknowledgement of the conflicting interests of participants and their collective organisations"589. I agree with the Hon Paul Munro, a longtime presidential member of the AIRC, who has written590: industrial evolved societal system from and "The provision in the Constitution for the prevention and settlement of industrial disputes by conciliation and arbitration proceeds upon an egalitarian value and principle. Literally and by necessary implication, s 51(xxxv) of the Constitution connotes the existence and recognition of participants in disputes, including employers, employees and their 587 Munro, "Changes to the Australian Industrial Relations System: Reforms or Shattered Icons? An Insider's Assessment of the Probable Impact on Employers, Employees and Unions", (2006) 29 University of New South Wales Law Journal 588 Macintyre, "Arbitration", in Davison, Hirst and Macintyre (eds), The Oxford Companion to Australian History, rev ed (2001) 30 at 31. 589 Munro, "Changes to the Australian Industrial Relations System: Reforms or Shattered Icons? An Insider's Assessment of the Probable Impact on Employers, Employees and Unions", (2006) 29 University of New South Wales Law Journal 590 "Changes to the Australian Industrial Relations System: Reforms or Shattered Icons? An Insider's Assessment of the Probable Impact on Employers, Employees and Unions", (2006) 29 University of New South Wales Law Journal 128 at 135, citing Crisafulli, "Conciliation and Arbitration", in Blackshield, Coper and Williams (eds), The Oxford Companion to the High Court of Australia, (2001) 126 Kirby respective organisations within industries. By stipulating conciliation and arbitration, the Constitution ordained a relatively well-understood process and associated principles for dealing with the conflicting interests at stake. From that stipulation 'an industrial process that is uniquely Australian' has evolved." In effect, the constitutional preconditions for valid federal laws with respect to industrial standards enforce a "safeguard, restriction or qualification" that obliges the persons affected, usually through representative organisations, to take responsibility for negotiating, settling or resolving their own disputes in a collective way. This was a much more decentralised procedure than a federal legislative fiat would be. By the facility of conciliation and through the procedures of arbitration, workplace agreements have come, in recent years, to play an increasing role. They have done so without removing the protective machinery of conciliation and arbitration which the Constitution contemplates591. Before a quietus is administered by this Court to these longstanding, basic and beneficial features of Australia's constitutional arrangements, reflected in past federal legislation adopted and amended by successive Parliaments and a mass of case law, it is necessary to recall to mind the important guarantee of industrial fairness and reasonableness that has been secured by this Court's adherence to the requirements of s 51(xxxv) over more than a century592. The story can be traced back at least to the decision of Higgins J in Ex parte H V McKay ("the Harvester Case")593 which, with its successors, had a profound effect on the wages and conditions of life of Australian workers and their families. But it also extended to decisions concerning standard hours of 591 Crisafulli, "Conciliation and Arbitration", in Blackshield, Coper and Williams (eds), The Oxford Companion to the High Court of Australia, (2001) 126 at 129. 592 Kirby, "Industrial Conciliation and Arbitration in Australia – A Centenary Reflection", (2004) 17 Australian Journal of Labour Law 229, especially at 242- 593 (1907) 2 CAR 1. See also R v Commonwealth Conciliation and Arbitration Commission; Ex parte Amalgamated Engineering Union (Australian Section) (1967) 118 CLR 219 at 231-232 per Barwick CJ, 265 per Windeyer J. Eventually the use of a general hearing for the purpose of deciding the basic wage received the sanction of this Court in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd (1949) 78 CLR 389. See also R v Blackburn; Ex parte Transport Workers' Union of Australia (1952) 86 CLR 75; McGarvie, "Principle and Practice in Commonwealth Industrial Arbitration After Sixty Years", (1964) 1 Federal Law Review 47 at 72-74. Kirby work594; the development of the principle of equal pay for women workers595; fairness and training requirements in the conditions of juniors and apprentices596 and the removal of discriminatory employment conditions for Aboriginals597. The regulation of excessive overtime to compensate workers598 and to encourage employers to a better system of organising the work599; the introduction of bereavement or compassionate introduction of provisions for retrenchment for redundancy601; and reinstatement in cases of unfair termination602 are just some of the matters arising in industrial disputes in Australia decided by processes of federal conciliation and arbitration over the course of a century. Work value cases frequently ensured attention to the provision of fair wages and conditions to manual and other vulnerable workers leave entitlements600; the 594 Australian Timber Workers' Union v John Sharp and Sons Ltd (1920) 14 CAR 811, (1921) 15 CAR 836 and (1922) 16 CAR 649; cf Amalgamated Engineering Union v J Alderdice & Co Pty Ltd (1927) 24 CAR 755; Australian Railways Union v Victorian Railways Commissioners (1937) 37 CAR 937 at 938; R v Galvin; Ex parte Metal Trades Employers' Association (1949) 77 CLR 432 at 447-448. 595 National Wage Cases (1967) 118 CAR 655 at 660. See Equal Pay Cases (1969) 127 CAR 1142; National Wage and Equal Pay Cases (1972) 147 CAR 172. 596 Amalgamated Society of Engineers v Adelaide Steam-ship Co Ltd (1921) 15 CAR 297 at 325; Australian Telegraph and Telephone Construction and Maintenance Union v Public Service Commissioner and Postmaster-General (1916) 10 CAR 602 at 613-614 per Higgins J; Metal Trades Employers Association v Amalgamated Engineering Union (1935) 34 CAR 449 at 459-462. 597 Cattle Station Industry (Northern Territory) Award (1966) 113 CAR 651; Pastoral Industry Award (1967) 121 CAR 454 at 457-458. 598 Glass Workers Award (1953) 76 CAR 122. 599 Kennedy and Bird v Carpenters, Painters and Labourers employed by the Company (1962) 100 CAR 524; Metal Trades Award (1963) 105 CAR 1015. 600 Commonwealth Hostels Award (1962) 100 CAR 775. 601 Merchant Service Guild of Australia v Department of Main Roads, New South Wales (1971) 140 CAR 875. But see R v Hamilton Knight; Ex parte The Commonwealth Steamship Owners Association (1952) 86 CLR 283. 602 O'Donovan, "Reinstatement of Dismissed Employees by the Australian Conciliation and Arbitration Commission; Jurisdiction and Practice", (1976) 50 Australian Law Journal 636; cf Blackadder v Ramsey Butchering Services Pty Ltd (2005) 221 CLR 539 at 548 [28]-[29]. Kirby which market forces and corporate decisions alone would probably not have secured603. Attention to particular conditions of work, including arduous, distressing, disagreeable, dirty or offensive work, instilled in Australian work standards an egalitarian principle not always present in the pure operation of the market604 or the laws and practices of other countries. The effect of this history, clearly anticipated by the language of the grant of constitutional power in s 51(xxxv), profoundly affected the conditions of employment, and hence of ordinary life, of millions of Australians. It did so in the years following federation, and indeed until very recently. Inherent in the guaranteed procedures of "conciliation and arbitration" was a safeguard, restriction or qualification upon the deployment of federal governmental power that ultimately committed outcomes independent decision-makers who were obliged to take into account not only economic considerations but also considerations of fairness and reasonableness to all concerned and the consistent application of the principles of industrial relations in Australia. It is in this sense that the obligatory constitutional procedures involved in federal lawmaking with respect to industrial disputes imposed a "guarantee" for employer and employee alike: that their respective arguments would be considered and given due weight in a just and transparent process, decided in a public procedure that could be subjected to appeal and review, reasoned criticism and continuous evolution. to determinations by The different character of s 51(xx): Laws made solely by reference to the characteristics inherent in a constitutional corporation are not, of their nature, equally subject to the "safeguard, restriction or qualification" of a commitment to industrial fairness and reasonableness605. If the Commonwealth's submissions are correct, there is therefore no equal "guarantee" either inherent in the power provided by s 51(xx) or necessary to the operation upon the boundaries of that power of the more specific provisions contained in s 51(xxxv). Professor Ronald McCallum has argued that "laws based upon the corporations power [alone] will be centred around corporations to the detriment 603 See, eg, Metal Trades Award (re Work Value Inquiry) (1967) 121 CAR 587; Vehicle Industry Award (1968) 124 CAR 293 at 308. 604 Waterside Workers Federation v Commonwealth Steamship Owners Association (1915) 9 CAR 293 at 302-303; Amalgamated Society of Engineers v Broken Hill Proprietary Co Ltd (1920) 14 CAR 22. 605 McCallum, "The Australian Constitution and the Shaping of our Federal and State Labour Laws", (2005) 10 Deakin Law Review 460 at 469. Kirby of flesh and blood persons who interact with corporations"606. In the context of considering the Commonwealth's the outcome of submissions were to prevail, he observed607: these proceedings, "[G]eneral labour laws of broad application which would be required to found a national labour regime, which were enacted in reliance upon the corporations power could not for long maintain [the] balance between employers and employees. In the fullness of time, these labour laws will become little more than a sub-set of corporations law because inevitably they will fasten upon the economic needs of corporations and their employees will be viewed as but one aspect of the productive process in our globalized economy." If the Commonwealth's submissions are correct, and the relevantly uncontrolled federal law-making power exists in s 51(xx) of the Constitution, any such consequences must be left to the future. However, in deciding how the federal legislative powers, specifically s 51(xx) and (xxxv), operate in relation to each other, it is relevant for this Court to be aware of the constitutional values that are at stake in this decision. Those values, inherent in s 51(xxxv), have pervaded the outcomes of industrial disputes in Australia for more than a century. They have done so in respect of the majority of employees who, since 1901, have become subject to awards and agreements under federal law. This Court has contributed to, and generally upheld, the industrial fairness guarantee by its decisions on the ambit of the federal power with respect to industrial disputes. Its contribution grew out of the understandings expressed by the participants at the Constitutional Conventions, the language of the constitutional text and the long-held and often expressed assumption that the only way federal laws on industrial relations could be enacted was if they conformed to the dual requirements of interstateness and independent resolution by conciliation and arbitration. In my view, the long-held and shared assumptions, given effect by this Court, involved a correct view of the grant of legislative power in this respect to the Federal Parliament. The applicable grant of power imported a safeguard, restriction or qualification protective of all those involved in collective industrial 606 McCallum, "The Australian Constitution and the Shaping of our Federal and State Labour Laws", (2005) 10 Deakin Law Review 460 at 469. Professor McCallum is Dean of the Faculty of Law at the University of Sydney and a noted expert in the Australian law of industrial relations. 607 McCallum, "The Australian Constitution and the Shaping of our Federal and State Labour Laws", (2005) 10 Deakin Law Review 460 at 469. Kirby bargaining: employer and worker alike. It provided an ultimate constitutional guarantee of fairness and reasonableness in the operation of any federal law with respect to industrial disputes, including for the economically weak and vulnerable. It afforded machinery that was specific to the concerns of the parties, relatively decentralised in operation and focused on the public interest in a way that laws with respect to constitutional corporations made in the Federal Parliament need not be. These values profoundly influenced the nature and aspirations of Australian society, deriving as they did from a deep-seated constitutional prescription. They should not be swept aside lightly by this Court. Doing so would renounce an important part of the nation's institutional history and the egalitarian and idealistic values that such history has reinforced in the field of the constitutional prescription. industrial disputes and employment standards because of Conclusion: statutory invalidity: Subject to what follows, I therefore consider that this Court should adhere to the conclusion inherent in the hundreds of earlier cases over more than a century in which the Court has held or implied that, whatever the expanding content of the corporations power in s 51(xx) might otherwise permit, it does not sustain a law which, properly characterised, is one "with respect to" the subject matter of s 51(xxxv), that is, the prevention and settlement of interstate industrial disputes. This new Act is such a law. It does not comply comprehensively with the dual requirements laid down in s 51(xxxv) for laws with respect to that subject. That conclusion presents the issue of its constitutional invalidity608. The relevance of the Constitution's federal character The federal structure: An additional consideration supporting the foregoing approach should be mentioned. I refer to the federal structure and character of the Constitution and the support that this consideration provides to "subtracting" from the powers of the Federal Parliament to make a law with respect to corporations what is in truth a claim to an entitlement, under that guise, to enact a comprehensive law with respect to the prevention and settlement of industrial disputes but without observing the restrictions proper to that constitutional subject matter609. 608 See also reasons of Callinan J at [834]. 609 Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 283 per Deane and Gaudron JJ, who stated that "to the extent that s 51(xxxi) confers legislative power, it also abstracts power with respect to the acquisition of property from the other paragraphs of s 51". This formula was approved by this Court in Theophanous v Commonwealth (2006) 80 ALJR 886 at 896 [55]; 226 ALR 602 at Kirby The majority's reasons in these proceedings potentially cut a swathe through a very important feature of the constitutional design, expressed in s 51(xxxv), protective of diversity in the legal regulation of matters broadly answering to the description of industrial relations. From before the commencement of the Constitution and during the first century of its operation, federal regulation of industrial relations in Australia co-existed with various forms of State (and later Territory) laws. The resulting diversity of legal regulation has permitted a legal and administrative symbiosis. It has resulted in occasional diversity of approach, inventiveness in standards and entitlements and appropriate innovation. Such innovation, by which industrial standards determined in one jurisdiction of Australia are tested and sometimes copied in another, constitutes a good illustration of an important advantage of the federal form of government enshrined in the Constitution. When it comes to defending the rights of property owners from the purported deployment of other federal powers which would deprive them of the protections in s 51(xxxi) of the Constitution, this Court has been rightly protective610. Within the Constitution, it has been vigilant, even sometimes vigorous, in upholding the entitlement of State lawmakers to experiment and innovate611. Unfortunately, in recent times, this Court's willingness to do so has been missing in the field of laws on industrial disputes612. When it comes to defending employees from analogous legislative incursions into the protections provided to their rights by s 51(xxxv), the Court's vigilance wanes noticeably, as it has in this case. Both capital and labour deserve the even-handed protection that the Constitution provides in the language respectively of s 51(xxxi) and (xxxv). There should be no double standards in constitutional protection. Yet, once again, it is revealed that double standards exist. Avoiding offence to the Engineers Case: The joint reasons hint that the concerns of the States, expressed in these proceedings, about the federal 610 Schmidt (1961) 105 CLR 361 at 371-373; Re Director of Public Prosecutions; Ex parte Lawler (1994) 179 CLR 270 at 283. 611 See, eg, Fardon v Attorney-General (Qld) (2004) 78 ALJR 1519; 210 ALR 50; Baker v The Queen (2004) 78 ALJR 1483; 210 ALR 1; Forge v Australian Securities and Investments Commission (2006) 229 ALR 223. 612 See, eg, Fish v Solution 6 Holdings Ltd (2006) 80 ALJR 959; 227 ALR 241; Batterham v QSR Ltd (2006) 80 ALJR 995; 227 ALR 212; Old UGC Inc v Industrial Relations Commission of New South Wales in Court Session (2006) 80 ALJR 1018; 227 ALR 190. Kirby implications of the Commonwealth's submissions as to the ambit of s 51(xx), amount to an illicit attempt to undermine the doctrine of this Court as stated in the Engineers Case613. It is true that that decision has been criticised in recent years as inflicting a "debilitating blow to federalism"614. But none of the plaintiffs, whether States or unions, challenged the general approach stated in the Engineers Case. None of them asserted reserved powers for the States or an implied immunity of new pockets of State law from federal legislative incursion. Ambit of s 51(xx) and the States: Nevertheless, the plaintiffs did draw to notice the extremely large potential of the Commonwealth's submissions, if accepted, to exclude State law from operation in areas that for more than a century they have occupied in a hitherto creative interaction with federal law615. If, by the use of definition provisions, as in the Amending Act, comprehensive federal legislation that is really a law with respect to another subject matter (such as the prevention and settlement of industrial disputes and how they are to be resolved) may be dressed in the raiments of legislation with respect to constitutional corporations, a very significant risk is presented to the overall balance envisaged by the constitutional distribution of powers. That risk, in the field of resolving industrial disputes, is the almost total exclusion of State law from a significance it has enjoyed from the birth of the Commonwealth. Indeed, such exclusion is the announced intention of the Amending Act whose ambit, if valid, is proclaimed to extend immediately to an asserted 85% of Australian employees616. Moreover, if the Amending Act is valid, it affords non-corporate employers, at their option, an entitlement (by the relatively simple and inexpensive procedure of incorporation) unilaterally to alter the industrial disputes regime applying to themselves and all of their employees. 613 Joint reasons at [82]. 614 Meale, "The History of the Federal Idea in Australian Constitutional Jurisprudence: A Reappraisal", (1992) 8 Australian Journal of Law and Society 25 at 55. See also Gibbs, "Australia Day Messages, 2001-2005", in Samuel Griffith Society, Upholding the Australian Constitution, vol 17 (2005) 363 at 366, 386-387. 615 Munro, "Changes to the Australian Industrial Relations System: Reforms or Shattered Icons? An Insider's Assessment of the Probable Impact on Employers, Employees and Unions", (2006) 29 University of New South Wales Law Journal 616 Australian Parliament, Explanatory Memorandum circulated with the Workplace Relations Amendment (Work Choices) Bill 2005 (Cth) at 9-10. See joint reasons Kirby The States, correctly in my view, pointed to the potential of the Commonwealth's argument, if upheld, radically to reduce the application of State laws in many fields that, for more than a century, have been the subject of the States' principal governmental activities. Such fields include education, where universities, tertiary colleges and a lately expanding cohort of private schools and colleges are already, or may easily become, incorporated. Likewise, in healthcare, where hospitals (public and private), clinics, hospices, pathology providers and medical practices are, or may readily become, incorporated. Similarly, with the privatisation and out-sourcing of activities formerly conducted by State governments, departments or statutory authorities, through corporatised bodies now providing services in town planning, security and protective activities, local transport, energy, environmental protection, aged and disability services, land and water conservation, agricultural activities, corrective services, gaming and racing, sport and recreation services, fisheries and many Aboriginal activities. All of the foregoing fields of regulation might potentially be changed, in whole or in part, from their traditional place as subjects of State law and regulation, to federal legal regulation, through the propounded ambit of the corporations power. Upon the Commonwealth's theory of s 51(xx) of the Constitution, evident in the Amending Act in issue in these proceedings, such a shift of lawmaking in Australia could be achieved by the simple enactment by the Federal Parliament of a law dealing with any of the foregoing subjects but applied to corporations performing functions relevant in some way to such fields. The Amending Act provides the new federal template. This Court cannot complain that it was not warned by the States of the constitutional implications of these proceedings for a major shift in the balance of governmental power in Australia. Not all the foregoing fields of legislation are subject to a countervailing "safeguard, guarantee or qualification" appearing expressly in another head of constitutional power as a brake on such constitutional destabilisation. But where such a brake exists, there is good constitutional reason for engaging it. Testing propositions by outcomes: It is not appropriate, as the joint reasons suggest, to postpone all such questions to future cases. It is always valid to test a legal proposition by reference to the consequences that would flow from its acceptance. Such an approach applies as much in constitutional adjudication as to decision-making on anything else. It would not normally be assumed that such a potentially radical shift of governmental responsibilities from the States to the Commonwealth could be achieved by the expedient of utilising a federal head of power (s 51(xx)) which successive Federal Parliaments and governments have overlooked or misread these past hundred years. In the design of the Constitution, such a major shift would normally require the concurrence of Australian electors in accordance with s 128 of the Constitution – as successive governments have accepted or assumed. Kirby Therefore, when such a radical proposition, of such substantial constitutional potential, is advanced before this Court, this Court should test its correctness by its possible consequences. In my view, the use of s 51(xx) exhibited in the Amending Act carries with it, if valid, a very large risk of destabilising the federal character of the Australian Constitution. When such a conclusion is reached, only a formulaic approach to the law of the Constitution would lead this Court to ignore it617. In effect, the risk to which I refer is presented by a shift in constitutional realities from the present mixed federal arrangements to a kind of optional or "opportunistic" federalism in which the Federal Parliament may enact laws in almost every sphere of what has hitherto been a State field of lawmaking by the simple expedient (as in this case) of enacting a law on the chosen subject matter whilst applying it to corporations, their officers, agents, representatives, employees, consumers, contractors, providers and others having some postulated connection with the corporation. The present majority of this Court may uphold such a radical shift in the constitutional arrangements of the nation. But it should at least do so with eyes open to the results of its reasoning. Even those, like myself, who accept the need to which Windeyer J referred in the Payroll Tax Case618 for gradual accretions of some legislative powers to the Commonwealth to reflect "developments that had occurred outside the law courts"619, must baulk at the dysfunctional potential of the Commonwealth's central proposition in these proceedings. It is that potential that demands from this Court, which is the guardian of the Constitution620, a response protective of the text and structure of the document. If this Court does not fulfil its protective role under the Constitution, what other governmental institution will do so? What other institution has the power and the will to do so? Confining the federal issue: The larger issues involved in delimiting the scope of the corporations power (and in identifying the full range of laws that could be characterised as laws "with respect to" constitutional corporations) can indeed be postponed to future cases that will now surely follow the outcome of 617 Fontana (1982) 150 CLR 169 at 181-182; Austin v The Commonwealth (2003) 215 CLR 185; Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595; Craven, "Industrial Relations, the Constitution and Federalism: Facing the Avalanche", (2006) 29 University of New South Wales Law Journal 203 at 213. 618 (1971) 122 CLR 353 at 396-397. 619 (1971) 122 CLR 353 at 396. 620 Victoria v The Commonwealth and Connor (1975) 134 CLR 81 at 118 per Kirby these proceedings. Where, as here, the entire scheme of the law in question, including the "rights, duties, powers and privileges which it changes, regulates or abolishes"621, requires it to be characterised in such a way that it corresponds to s 51(xxxv), rather than s 51(xx), the precise ambit of the corporations power need not be determined. As explained, the Act is concerned with the relations between employers and employees, a fact which confirms its general character as a law with respect to the prevention and settlement of "industrial disputes" and the associated regulation of "industrial" or "workplace" relations. In the present proceedings it is sufficient to say that the content of the power afforded to the Federal Parliament under s 51(xx), with respect to the corporations defined in that paragraph, does not extend to a power to make laws that, in truth, relate to industrial disputes. As the majority suggests622, it is necessary to give effect to certain basic principles of constitutional interpretation, including the requirement that each provision of the Constitution, including the powers contained in s 51, be read in light of the remaining provisions, and any implications drawn from the document's overall structure and design. In short, the limitations suggested by the text of the two paragraphs in question, read together (pars (xx) and (xxxv)), are reinforced by the overall federal structure and design of the Australian Constitution, and by the offence to that structure and design that would be inflicted by a failure on the part of this Court to uphold the limitation imported into the legislative power afforded by par (xx) of s 51 by the power conferred in par (xxxv). Yet is this approach to the interaction of the two paragraphs, suggested by the language of the powers and the federal character of the Constitution, as claimed, an unacknowledged reversion to the constitutional notions that held sway before this Court's decision in the Engineers Case? The Commonwealth says so. I would reject that description. The rule of construction expressed in the Engineers Case is not an absolute one. It does not contemplate that the Federal Parliament could use its identified heads of legislative power to destroy the States and their express and implied role in the Constitution. It is impossible to ignore the place envisaged for the States in the Constitution. Reference is made to that role throughout the constitutional document. It is the people of the several States who "agreed to unite in one indissoluble Federal Commonwealth"623. Both in the covering clauses and in the text of the Constitution itself, the federal character of the polity thereby created is announced, and provided for, in great detail. 621 Fairfax v Federal Commissioner of Taxation (1965) 114 CLR 1 at 7 per Kitto J. 622 Joint reasons at [51]. 623 Preamble to the Commonwealth of Australia Constitution Act 1900 (Imp). Kirby Under the Constitution, the position of the federal government is necessarily stronger than that of the States for the reasons that Dixon J explained in Melbourne Corporation v The Commonwealth624. But it would be completely contrary to the text, structure and design of the Constitution for the States to be reduced, in effect, to service agencies of the Commonwealth, by a sleight of hand deployed in the interpretation by this Court of specified legislative powers of the Federal Parliament. Specifically, this could not be done by the deployment of a near universal power to regulate the "corporations" mentioned in s 51(xx). Such an outcome would be so alien to the place envisaged for the States by the Constitution that the rational mind will reject it as lying outside the true construction of the constitutional provisions, read as a whole, as they were intended to operate in harmony with one another and consistently with a basic law that creates a federal system of government for Australia. In applying the doctrine in the Engineers Case, this Court has repeatedly given effect to reasoning that has confined the ambit of express grants of federal legislative power so that they could not be used to control or hinder the States in the execution of their central governmental functions625. Once such an inhibition on the scope of federal legislative powers is acknowledged, derived from nothing more than the implied purpose of the Constitution that the States should continue to operate as effective governmental entities, similar reasoning sustains the inference that repels the expansion of a particular head of power (here, s 51(xx)) so that it would swamp a huge and undifferentiated field of State lawmaking, the continued existence of which is postulated by the constitutional language and structure. Why, for instance, bother to have State Parliaments626, with significant federal functions to perform627, if by dint of an interpretation of s 51(xx) of the Constitution the legislative powers of such Parliaments could effectively be reduced unilaterally by federal law to minor, or even trivial and continually disappearing functions, specifically in the laws governing industrial disputes? Relatively few important activities in contemporary Australia have no direct or indirect connection with a corporation, its employees, agents and those who trade with it. In other concerns, arguably less central to the expressed structure and design of the Constitution, this Court has found implications in the Constitution to inhibit the enactment of laws deemed inconsistent with its federal structure 624 (1947) 74 CLR 31 at 82-83, cited in joint reasons at [195]. 625 Melbourne Corporation (1947) 74 CLR 31. See also Austin (2003) 215 CLR 185. 626 eg Constitution, ss 9, 15, 25, 41, 107. 627 eg Constitution, ss 9, 41, 51(xxvii) and (xxxviii), 107, 108, 111, 123. Kirby and design. Thus, federal laws may not be enacted that are inconsistent with the separation of the judicial power provided by Ch III of the Constitution628. State laws cannot be validly enacted that would be incompatible with the capacity of State courts under s 77(iii) to be invested with federal jurisdiction629. Neither federal nor State laws may be enacted that are inconsistent with the implication, inherent in the creation of accountable democracy in the federal and State legislatures, of representative government necessitating open discussion of matters of political and governmental concern630. If, consistently with the decision in the Engineers Case, such inhibitions on lawmaking may be drawn from the design and structure of the Constitution, its provisions and purposes, so may the limitations on the ambit of s 51(xx), urged by the plaintiffs in these proceedings. The test for all such implications is necessity. Here, necessity is established because, if s 51(xx) is not construed and limited as the plaintiffs submit, the ambit and operation of that paragraph is potentially distorted and blown out of all proportion. Moreover, relevantly to these proceedings, the ambit and operation of s 51(xxxv), with the safeguards, restrictions and qualifications that it contains, would then be rendered nugatory or optional to the federal lawmaker. The Federal Parliament can choose whether or not to invoke par (xxxv) with its limiting dual requirements. But why should it ever have cause to do so if the majority's view in this case is correct? On the majority's approach, the Federal Parliament can always achieve the desired outcome by the simple expedient of presenting the law as one with respect to constitutional corporations. If it may thereby walk straight out of the tiresome necessities of interstateness and independent determination of disputes according to standards of fairness and reasonableness, why would it not always take that course? Division of governmental powers: The foregoing conclusion has been reached by reference to the text and structure of the Constitution. However, there is a still further, and connected, consideration. This is the overall design of the Constitution as an instrument of government intended to distribute and limit governmental powers in Australia in specified ways. By the Constitution, such powers are to be divided between the several polities in the Commonwealth (the federal, State and Territory jurisdictions). Moreover, within each jurisdiction, 628 Boilermakers Case (1956) 94 CLR 254. See also Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1. 629 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51. 630 Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520. Kirby most especially within the federal sphere of government, there is an express or implied division of powers, to a greater or lesser extent, between the legislatures, executive governments and courts of the nation. No doubt, viewed strictly from an economic perspective, such features of the Australian constitutional design may sometimes result in inefficiencies. Doubtless, they import certain costs, delays and occasional frustrations. Yet such divisions and limitations upon governmental powers have been deliberately chosen in the Commonwealth of Australia because of the common experience of humanity that the concentration of governmental (and other) power is often inimical to the attainment of human freedom and happiness631. Defending the checks and balances of governmental powers in the Constitution is thus a central duty of this Court. Because of the potential of modern government, corporate developments632, global forces and contemporary technology to concentrate power even more than was possible in earlier decades, the necessity to uphold the place of the States in the federation has become clearer in recent times. Just as the needs of earlier times in the history of the Commonwealth produced the Engineers Case, so the present age suggests a need to rediscover the essential federal character of the Australian Commonwealth633. In these proceedings, this consideration lends support and justification to the unanimous resistance of the States to the Commonwealth's interpretation of s 51(xx), particularly when read with s 51(xxxv). Conclusion: respecting federalism: The States' argument can be upheld without doubting the validity of the general approach to the interpretation of the Constitution adopted by this Court in the Engineers Case. As countless cases since the Engineers Case have shown, in giving content to the particular heads of federal power, it still remains for this Court to explain the content of the Engineers Case, paying due regard to all other relevant heads of federal power and to the overall structure and design of the Constitution. Thus, the language of s 51(xxxv) and the basic federal character of the Constitution lend support to the plaintiffs' central submission. This Court needs to give respect to the federal character of the Constitution, for it is a 631 cf XYZ v Commonwealth (2006) 80 ALJR 1036 at 1068 [147]; 227 ALR 495 at 632 McCallum, "The Australian Constitution and the Shaping of our Federal and State Labour Laws", (2005) 10 Deakin Law Review 460 at 467-469. 633 Forge (2006) 229 ALR 223 at 276 [184]-[185]. Kirby liberty-enhancing feature634. Federalism is a system of government of special value and relevance in contemporary circumstances. It is protective of the freedom of individuals in an age when the pressures of law, economics and technology tend to pull in the opposite direction. If, properly characterised, the Amending Act is one with respect to the prevention and settlement of industrial disputes necessary for the regulation of industrial relations, s 51(xx) will not sustain its constitutional validity. To be valid, the law must conform to the requirements of s 51(xxxv). And this the Amending Act fails to do. Is the conclusion consistent with past authority? A further issue: The Commonwealth nonetheless submitted that to read s 51(xx) as subject to the provisions of s 51(xxxv) would be inconsistent with a number of decisions of this Court in cases involving analogous questions arising under federal laws with respect to industrial relations, broadly so described. Specifically, the Commonwealth argued that it would be inconsistent with decisions sustaining such laws by reference to the federal legislative powers with respect to defence (s 51(vi)), external affairs (s 51(xxix)) and trade and commerce (s 51(i)). Even if it were shown that past authority in this Court presented difficulties for the plaintiffs' arguments based on the inter-relationship between pars (xx) and (xxxv) of s 51, this would not necessarily be fatal to the plaintiffs' constitutional proposition. This is the first occasion on which the intersection of these two paragraphs of the Constitution has been explored in detailed argument before this Court by parties specifically presenting that issue as determinative of the outcome of their contest. Where a new legal proposition is advanced, involving suggested new insights into the Constitution, it is not unusual for that course to require this Court to rethink earlier case law and to apply the new doctrine consistently635. In proceedings such as this, where the potential of s 51(xx) to tilt the constitutional balance in such a significant way is not only postulated as an idea but actually asserted by the Commonwealth and illustrated by the Amending Act itself, it would not be surprising if this Court were obliged to reconsider earlier decisions reached in the absence of argument that sharpened 634 XYZ (2006) 80 ALJR 1036 at 1061-1062 [110]-[112], [115], 1068 [147]; 227 ALR 635 As following the decisions in the Engineers Case (1920) 28 CLR 129; Boilermakers Case (1956) 94 CLR 254; Cole v Whitfield (1988) 165 CLR 360; Kable (1996) 189 CLR 51; Lange (1997) 189 CLR 520; and, temporarily, Re Patterson; Ex parte Taylor (2001) 207 CLR 391. Kirby the resolution of the issue. Indeed, it would be surprising if the contrary were the case. The defence power: In the joint reasons, reliance is placed upon this Court's wartime decision in Pidoto v Victoria636. Reference is made to the interpretation of that case by Gleeson CJ in Pacific Coal637. In that decision, his Honour stated that Pidoto denied an interpretation of s 51(xxxv) as importing a negative implication on the use of other heads of federal power to enact laws with respect to conditions of employment – in other words, laws generically answering to the description of laws with respect to industrial relations. The holding in Pidoto was that laws enacted under the defence power in time of war, dealing with industrial matters in ways that would not have been valid if enacted under s 51(xxxv), were nonetheless valid. The decision is one unique to the exceptional circumstances affecting the ambit of the defence power during hostilities that threaten the life of the nation. In his reasons in Pidoto638, Williams J referred to an earlier elaboration of the law in Victorian Chamber of Manufactures v The Commonwealth (Women's Employment Regulations)639. In that decision, his Honour had said of the defence power in this connection: "The paramount consideration is that the Commonwealth is undergoing the dangers of a world war, and that when a nation is in peril, applying the maxim salus populi suprema lex, the courts must concede to the Parliament and to the Executive which it controls a wide latitude to determine what legislation is required to protect the safety of the realm … Similar circumstances to those which in times of war enable the Parliament of Canada to encroach upon matters which in normal times are exclusively reserved to the States [sic] enlarge the operation of the defence power of the Commonwealth Parliament to enable it to legislate so as to affect rights which in normal times are within the domain reserved to the States". The reference in these passages to "reserved to the States" is not a reference to the pre-Engineers Case doctrine of reserved State powers. Williams J would have been fully aware of the decision in the Engineers Case. 636 (1943) 68 CLR 87. See joint reasons at [227]-[228]. 637 (2000) 203 CLR 346 at 359-360 [29]. 638 (1943) 68 CLR 87 at 127-128. 639 (1943) 67 CLR 347 at 400-401. Kirby His reference should therefore be understood as meaning that, in times of war, the defence power may permit the Federal Parliament to legislate on matters, and in ways, that are ordinarily forbidden as beyond federal legislative power640, and which would in fact be beyond the scope of the defence power during peacetime641. Whilst, in war, the defence power is not wholly unlimited or uncontrolled642 (being itself granted to the Federal Parliament "subject to this Constitution") it is necessarily very substantial. This is so because of the essential function and purpose of s 51(vi), derived both from its language and manifest object. So exceptional is the wartime defence power that the constitutional validity of a law made under it has been held capable of being "made to depend upon the opinion of the parliament, the government or any other person"643. In Pidoto, drawing on his earlier analysis, Williams J said644: "It follows from [Victorian Chamber of Manufactures] that the fact that there is an express power to legislate under placitum xxxv with respect to conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State does not deprive the Commonwealth Parliament of its power under placitum vi to legislate with 640 See Farey v Burvett (1916) 21 CLR 433 at 444, 456, 460, 468; South Australia v The Commonwealth (1942) 65 CLR 373 at 468. 641 Including cases where a court determines that the purported "emergency" is not grave enough to justify the expanded operation of the defence power, as in Australian Communist Party v The Commonwealth (1951) 83 CLR 1. 642 For example, legislation purportedly made under the defence power may still be subject to judicial review. "Even in wartime ... it must be for a court to determine the relevance of legislation to the object of defence": Zines, The High Court and the Constitution, 4th ed (1997) at 222, citing Reid v Sinderberry (1944) 68 CLR 504 at 511; Marcus Clark & Co Ltd v The Commonwealth (1952) 87 CLR 177 at 643 Zines, The High Court and the Constitution, 4th ed (1997) at 221, citing the Communist Party Case. This position is to be contrasted with that pertaining to all other constitutional powers, as Fullagar J explained in Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 258: "A power to make laws with respect to lighthouses does not authorize the making of a law with respect to anything which is, in the opinion of the law-maker, a lighthouse." 644 (1943) 68 CLR 87 at 127. Kirby respect to intra-State disputes where that legislation can be justified as legislation capable of aiding in the prosecution of the war."645 This conclusion is inherent in the longstanding doctrine of this Court that the defence power, provided to the Federal Parliament in s 51(vi) of the Constitution, expands and contracts in its content, having regard to the needs for its engagement646. In his reasons in Pidoto, invoked by the majority in these proceedings647 in support of an ambit of s 51(vi) uncontrolled by reference to s 51(xxxv), Latham CJ relied on the longstanding power of the Commonwealth to legislate with respect to the employment of its public service648. He put that instance forward as a supposed illustration of the inapplicability of par (xxxv) of s 51 to limit the meaning of par (vi) as a universal proposition. However, this argument was not sound. The power of the Federal Parliament to legislate with respect to the federal public service is one of the exclusive powers contained in s 52 of the Constitution, not a concurrent power expressed in s 51. No State Parliament would, accordingly, have any power to deal with industrial disputes concerning the federal public service. As well, the restriction and limitation in s 51(xxxv), appearing in another section of the Constitution, is not so obviously applicable to the ambit of a grant of power in, say, s 52(ii). In any case, the regulations challenged by Mr Pidoto and other members of the Public Works Department of Victoria in Pidoto are also clearly distinguishable from the Amending Act challenged in this case. Pidoto concerned the validity of the National Security (Industrial Peace) Regulations and of particular provisions of the National Security (Supplementary) Regulations. These regulations were intimately connected with the efficient prosecution of the Second World War. They did not purport to transfer to s 51(vi) the constitutional foundation for federal legislation relating to the prevention and settlement by conciliation and arbitration of particular industrial disputes. This was clearly understood by Latham CJ, who said649: 645 See also R v Commonwealth Court of Conciliation and Arbitration; Ex parte Victoria (1942) 66 CLR 488 at 509, where this Court refused to uphold the Federal Parliament's reliance on s 51(vi) to determine the wages and holiday entitlements of Victorian public servants for work unrelated to the prosecution of the war. 646 Andrews v Howell (1941) 65 CLR 255 at 278. 647 Joint reasons at [227]. 648 Constitution, s 52. 649 (1943) 68 CLR 87 at 100. Kirby "The Regulations, therefore, do not deal with industrial matters generally, but only with industrial matters which in the opinion of the Court or of the Minister or of a conciliation commissioner are actual or probable sources of industrial disturbance, or in the opinion of the Court should be dealt with in the interests of national security. The Regulations do not relate to industrial matters irrespective of the possibility of industrial disputes or of relation to national security. They are, therefore, in my opinion, distinguishable in this essential particular from the regulations the Victorian Chamber of Manufactures v The considered Commonwealth (Industrial Lighting Regulations)650. Those Regulations were not limited in any way by reference to possible industrial disturbance or to possible effect upon national security." The result is that neither the decision in Pidoto, nor the presence of par (vi) in s 51, causes serious difficulty for the plaintiffs' central argument. By its essential nature and purpose, the defence power is a very special one, particularly in the urgencies of actual wartime. Whilst subject to the other provisions of the Constitution, in time of hostilities the defence power is given a large and exceptional reading so that it can fulfil its objective purpose in the overall constitutional design. This is the correct explanation of Pidoto651. That decision casts no doubt on the availability of the plaintiffs' arguments based on the general interaction of s 51(xx) and (xxxv), as involved in these proceedings. The external affairs power: The Commonwealth also relied on the decision in the Industrial Relations Act Case652. That decision upheld the validity of certain provisions introduced into the Industrial Relations Act 1988 (Cth) by amendments enacted by the Parliament in 1993 and 1994 based on the external affairs power. That power is provided by the Constitution to the Executive Government (by s 61) and to the Parliament (by s 51(xxix))653. In particular, the Court, on the basis of various Conventions and Recommendations adopted by the General Conference of the International Labour Organisation, upheld amendments to the federal legislation dealing with the payment of equal remuneration for work of equal value; termination of employment; the provision of parental leave; prohibition of specified discrimination in employment; and protection of certain rights to engage in industrial action. 650 (1943) 67 CLR 413. 651 See also reasons of Callinan J at [797], [809]. 652 (1996) 187 CLR 416. 653 (1996) 187 CLR 416 at 476. Kirby Thus, it was suggested, if the grant of federal legislative power in s 51(xx) were controlled by the requirements of interstateness and procedures of independent decision-making by conciliation and arbitration as appearing in s 51(xxxv), so might be provisions relying on s 51(xxix) upon which these new sections of the Act were based. On this basis the Industrial Relations Act Case was cited as an authority inconsistent with the inter-relationship of other s 51 powers with s 51(xxxv) upon which the plaintiffs' central argument depended. Various issues may arise in respect of the Amending Act as it affects the remaining provisions of the legislation that were generally upheld in the Industrial Relations Act Case. It is not necessary to decide those issues in these proceedings. For the moment, it is appropriate to concentrate on the analogical argument suggested by reference to the external affairs power in s 51 of the Constitution and the submission that the decision in the Industrial Relations Act Case was inconsistent with a reading of other provisions in s 51, such as s 51(xx), as subject to s 51(xxxv). Because of the way the Industrial Relations Act Case was argued654, the question now posed by these proceedings was not debated, still less decided. But it must be decided now. In my view, it is unnecessary in these proceedings to overrule the conclusion reached in the Industrial Relations Act Case based on the external affairs power. Like the defence power, although appearing in the diverse list of federal legislative powers contained in s 51, the external affairs power is special and far-reaching of its very nature and purpose. The exact scope of the power is a question still undergoing evolution655. In contemporary international circumstances, matters occurring externally to Australia and matters of external concern (beyond international treaties) are now so numerous, varied and potentially significant for the several legislative bodies provided by or under the Australian Constitution, that further refinement of current doctrine will be required656. Otherwise, the external affairs power might be used by the Federal Parliament to destroy important features of the Constitution that are essential to its text and structure657. 654 See, eg, (1996) 187 CLR 416 at 459 (noting the Commonwealth's submissions). See also at 538-539. 655 XYZ (2006) 80 ALJR 1036 at 1062 [114]; 227 ALR 495 at 526. See also reasons of Callinan J at [797]. 656 XYZ (2006) 80 ALJR 1036 at 1062-1063 [117]-[118]; see also at 1087-1088 [224]-[226]; 227 ALR 495 at 527, 560-561. 657 XYZ (2006) 80 ALJR 1036 at 1062 [115]; 227 ALR 495 at 526. Kirby However that may be, it is not inconsistent with the plaintiffs' central argument, based on the operation of s 51(xxxv), that laws enacted in reliance on the external affairs power are not subject to the restrictions and limitations expressed in s 51(xxxv). By way of contrast, the legislative power granted to the Federal Parliament by s 51(xx) is quite different from that granted by s 51(xxix). The former is a power to make laws with respect to the nominated (legal) persons. The latter is a power of much greater amplitude and focus, addressed to a subject matter of general importance for the existence of the Commonwealth as an independent nation within the community of nations. Like every power in s 51, the power in par (xxix) is not unlimited. Its boundaries have been stated by this Court from time to time658. This Court will read the language of federal legislation down where it offends the provisions of the Constitution or where it offends implications necessary to the preservation of the structure and design of the Constitution659. What the Court did in this regard in the Industrial Relations Act Case is consistent with the essential proposition advanced by the plaintiffs in these proceedings. When a grant of federal legislative power may appear broad enough to sustain propounded federal legislation, it will not be valid where it does not conform to other provisions in the Constitution or In such circumstances, where it is possible, the Court will read down the contested federal law so as to avoid inconsistency. Where reading down is not possible, the Court will declare the offending provision to be invalid. The Industrial Relations Act Case contains responses to the parties' arguments reflecting each of these outcomes. implications necessary its operation. I am unconvinced that the decision in that case requires rejection of the plaintiffs' argument in these proceedings based on the terms of s 51(xxxv) and the way it is to be understood in its interaction with s 51(xx) of the Constitution. The trade and commerce power: The final line of authority propounded as an obstacle to the plaintiffs' invocation of the requirements of s 51(xxxv) is that relying on s 51(i) of the Constitution. That paragraph affords legislative power to the Federal Parliament to make laws with respect to "trade and commerce with other countries, and among the States". 658 Industrial Relations Act Case (1996) 187 CLR 416 at 517-518. 659 As in the reading down of provisions of the Industrial Relations Act 1988 (Cth) so that they did not apply to the "employment" of those employees at the higher levels of State government. See Industrial Relations Act Case (1996) 187 CLR 416 at Kirby Once again, the issue presented in the present proceedings was not advanced, still less considered and decided, in earlier cases concerned with the ambit of s 51(i). Specifically, it is unnecessary to overrule the recent decision of the Court concerned with that head of power, Re Maritime Union of Australia; Ex parte CSL Pacific Shipping Inc660. In that decision, the vessels were participating in interstate trade and commerce. The employees' conditions on the vessels formed the subject of the legal dispute. As appears from the record of the facts of the case, both vessels conformed to the requirements of interstateness. A contest arose when the industrial organisation of employees invoked the jurisdiction of the AIRC as established before the Amending Act661. On the face of things, in the circumstances of the particular case, there was no offence in the actual outcome of the case to the dual requirements of interstateness and procedural conformity to conciliation and arbitration provided by the head of power contained in s 51(xxxv). Nevertheless, it was argued that the decision in CSL Pacific, and some of the remarks of the Court in explaining that decision, suggested that s 51(i) may afford, on its own, a sufficient connection between a federal law dealing with "industrial issues" and the Constitution, without the need to invoke the propounded requirements in s 51(xxxv) of the Constitution662. In support of this proposition, reference was also made to earlier decisions of this Court upholding the validity of federal laws with respect to consumer protection and the prohibition of secondary boycotts663. Because the present argument concerning s 51(xx) was not advanced in any of the cases in which this Court has affirmed the validity of laws providing for industrial matters in the maritime industry664, there is no considered reasoning of this Court that rejects (or needed to reject) the inter-relationship argument now advanced by the plaintiffs. The precise way in which s 51(i) and (xxxv) potentially intersect and whether the former is subject to the restrictions and limitations of the latter, involve questions that should await proceedings in which the issue needs to be decided. 660 (2003) 214 CLR 397. 661 (2003) 214 CLR 397 at 405 [6]-[7]. 662 See also joint reasons at [223]-[226]. 663 Trade Practices Act 1974 (Ch), s 45D. See Fontana (1982) 150 CLR 169 at 185, 195, 222, but see at 187, 196, 211, 215. See also Australasian Meat Industry Employees' Union v Mudginberri Station Pty Ltd (1986) 161 CLR 98. 664 R v Wright; Ex parte Waterside Workers' Federation of Australia (1955) 93 CLR 528; R v Foster; Ex parte Eastern and Australian Steamship Co Ltd (1959) 103 CLR 256; CSL Pacific (2003) 214 CLR 397. Kirby It is notable, however, that the condition or requirement of interstateness, whilst not universal because of the reference to "trade and commerce with other countries", is specifically mentioned in s 51(i). Moreover, so far as industrial disputes related to such "trade and commerce" are concerned, there is nothing in s 51(i) that would be incompatible with a requirement that they be prevented and settled by the mandated procedures of conciliation or arbitration, as s 51(xxxv) provides. I accept the submission of Victoria that it is unnecessary to reopen and reconsider decisions on s 51(i) which can be explained, and justified, without reliance on s 51(xxxv). So far as CSL Pacific is concerned, the arguments advanced in this case do not convince me that any of the actual holdings of the Court there require reconsideration in these proceedings665. When an issue is not specifically presented to a court, it is unsurprising that the court may not deal with it. In the absence of a clear issue and specific argument it should not be concluded that this Court has decided against a proposition later advanced with full argument. Just as the case books are full of decisions (and reasoning) that rest on earlier narrow views about the ambit of s 51(xx), we should not be surprised that, as attempts are made to expand the operation of that power, the larger boundaries propounded will occasionally hit against other provisions of the Constitution (such as s 51(xxxv)). The resulting intersection will necessitate new decisions which the earlier authority of this Court overlooked or was able to avoid or postpone. Conclusion: no impediment: It follows from this reasoning that there is no impediment in the way of this Court's accepting the central submissions of the plaintiffs. In my view, the power afforded to the Federal Parliament by s 51(xx) of the Constitution must be read together with that afforded by s 51(xxxv). Where, properly analysed, the law under challenge is not a law with respect to corporations but is to be characterised as a law with respect to the prevention and settlement of industrial disputes, it must conform to the negative implication contained in the safeguard, restriction or qualification (or guarantee) stated for federal laws on that subject in par (xxxv). To the extent that the Amending Act is to be so qualified and does not conform to such requirements, it is constitutionally invalid. Invalidity and severance Invalidity of the Amending Act: The Amending Act explicitly seeks to alter the constitutional foundation for a great part of the federal legislation on industrial disputes. It aims to shift the constitutional underpinning of virtually 665 CSL Pacific (2003) 214 CLR 397 at 413-415 [32]-[40]. Kirby the entire federal law. It replaces the previous substantial reliance upon the power conferred on the Federal Parliament by s 51(xxxv) of the Constitution. It seeks to substitute a reliance on s 51(xx). Other heads of power are invoked in the new Act, most notably the territories power (s 122). Yet as I have explained, giving effect to the Act only in so far as it applies to the territories would require this Court to read down the law so dramatically as to give effect to a result that the Parliament, in enacting a national law regulating industrial relations, could not have intended. It is the shift from s 51(xxxv) to s 51(xx) that is crucial to what the Amending Act seeks to do. Moreover, the redesign of the federal law on this subject is not accidental, incidental or peripheral. It gives effect to a deliberate decision of the Executive Government of the Commonwealth, accepted by the Federal Parliament, to opt for reliance on the corporations power with the aim thereby to enlarge considerably federal legislative coverage of workplace relations, extending immediately to 85% of the Australian workforce. By inference, if the move contained in the legislation challenged in these proceedings succeeds, it would result in coercive consequences upon the rump of jurisdiction left with State industrial courts and tribunals. Such coercion is reinforced by particular provisions of the Amending Act666. It is worth observing that, for a purported law now based substantially on s 51(xx) of the Constitution, the new Act, following the Amending Act, is curiously presented. In its short title it is not described as a Corporations Act of any kind. Instead, with disarming candour, the new Act remains titled, as it was after 1996, the Workplace Relations Act. That title was accurate enough for the Act of 1996 which was the Industrial Relations Act 1988 (Cth), as substantially amended in that year (and earlier in 1993 and 1994). However, in a sense, the continuing short the constitutional game away. The aim of the Amending Act is, in effect, to retain the same ostensible character of the statute as before the amendments in 2005 whilst changing many of its provisions and altering the main constitutional foundation from par (xxxv) of s 51 to par (xx)667. the Act, doubtless unintentionally, gives title of Any doubt that this is so is laid to rest when the principal objects of the new Act are read, as re-expressed following the Amending Act668. There is no mention there of corporations, constitutional or otherwise. The stated objects 666 See, eg, ss 435, 496(1), 496(2) and 497; cf joint reasons at [253]-[262]. 667 New Act, s 3. 668 New Act, s 3. See joint reasons at [7]. Kirby are, relevantly, addressed to the relations of employers and employees. The statutory objects therefore confirm the general characterisation of the new Act as one with respect to the myriad concerns relevant to the prevention and settlement of "industrial disputes" inherent in dealing comprehensively and generically with industrial relations. In these circumstances, the immediate question arises as to whether it is feasible, or necessary, to dissect the particular provisions of the Act and to judge their validity following such an alteration to the constitutional underpinnings. Obviously, the new Act constitutes a major enterprise of legislative change. There are, it is true, many new provisions designed to advance the adoption of AWAs. That is a process which began with the amendments to the Industrial Relations Act 1988 (Cth) enacted in 1993 and 1996. In such circumstances a point is reached where the amendments incorporated by the Amending Act must be viewed as an integrated project. They are not merely the sum of their separate parts. In so far as the Executive Government put its amendments to the Federal Parliament as an integrated measure designed comprehensively to change the foundation and approach of the federal industrial relations law, it is appropriate for this Court to take the resulting legislative "package" at face value, and to treat it as an integrated endeavour, intended to stand or fall in its entirety. The joint reasons uphold the amending legislation in its entirety without finding a single provision invalid. In my view, the entire Amending Act fails. It does so for the absence of a valid constitutional foundation for its vital provisions. The parties' arguments: As the joint reasons point out669, Victoria, which was foremost amongst the States in its reliance on the argument concerning the inter-relationship of pars (xx) and (xxxv) of s 51 of the Constitution, submitted that acceptance of its argument in this respect would result in the necessary invalidation of Pt 8, much of Pt 9 and Pt 13 of the new Act. Part 8 ("Workplace agreements") contains requirements in s 353 that such agreements must include dispute settlement procedures as contained in Pt 13. As well, Pt 9 includes provisions defined (in s 420) as "industrial action". All of these provisions depend, substantially, on the new statutory definition of "employer". They thus rely on the presence of an "employer" that is a "constitutional corporation" (see s 6(1)(a)) employing "employees" (s 5(1)). The constitutional underpinning in the Act (s 4(1), in so far as it defines "constitutional corporation") is the corporations power in s 51(xx) of the Constitution, read in isolation. The dispute settlement procedures neither follow, nor conform to, the procedures mandated by s 51(xxxv). It is this defect that, in my view, invalidates the identified Parts of the new Act. 669 Joint reasons at [296]. Kirby Whilst there is force in the Victorian attack on the particular provisions of the new Act, I accept the proposition, advanced in reply for the Commonwealth, that the limited attack by Victoria on Pts 8 and 9 of the Act, extended during oral argument to Pt 13, suggests an overly narrow conception of the circumstances in which a federal law may be characterised as one for the "prevention" of industrial disputes. I agree with the Commonwealth's submission that other parts of the new Act, as amended by the Amending Act, including Pts 7, 10, 12, 15, 16 and 23, may properly fall within the classification of being laws for the "prevention" of industrial disputes. At least that is the arguable way in which such laws would be characterised when answering the question whether they constitute laws with respect to the subject matter of s 51(xxxv) of the Constitution, necessitating compliance with the requirements of that paragraph if they are to be valid. The law as to severance: Three bases might exist for approaching the challenged legislation on a piecemeal footing and invalidating only those provisions that clearly offend the constitutional requirement to read the ambit of s 51(xx) in the light of the requirements and limitations in s 51(xxxv). The three considerations include s 14 of the Act itself (which was formerly s 7A), which purports to require the reading down of invalid provisions where that is necessary to preserve others670. The terms of s 15A of the Acts Interpretation Act 1901 670 Section 14 of the new Act provides: "Act not to apply so as to exceed Commonwealth power Unless the contrary intention appears, if a provision of this Act: would, apart from this section, have an invalid application; but also has at least one valid application; it is the Parliament's intention that the provision is not to have the invalid application, but is to have every valid application. Despite subsection (1), the provision is not to have a particular valid application if: apart from this section, it is clear, taking into account the provision's context and the purpose or object underlying this Act, that the provision was intended to have that valid application only if every invalid application, or a particular invalid application, of the Commonwealth's legislative power; or the provision had also been within (Footnote continues on next page) Kirby (Cth) enjoining an approach of severance in the interpretation of federal legislation generally, save where a contrary intention is manifested, constitutes the second basis of severance. The third is the general principle of constitutional interpretation and the avoidance of the normal approach encouraging unnecessary invalidation671. Several of the parties (and interveners) submitted that s 14 of the Act was itself invalid, effectively on the basis that it represented an attempt by the Parliament to impose on the Court a rule of construction that is properly within the province of the courts in discharging their independent function. An issue as to the validity of such a provision was raised, but not decided, in Re Dingjan672. It is unnecessary to resolve the point here. For the reasons appearing below, s 14 of the new Act, even if valid, cannot rescue isolated parts of the residue of that Act after the invalidation of the provisions wholly reliant on s 51(xx) for their validity. So far as s 15A of the Acts Interpretation Act is concerned, there are limits upon the power of the Parliament to direct the courts, in effect, to make a new law or to choose what a remade law should be673. The limit is reached where, faced with a conclusion of apparent constitutional invalidity of particular provisions, a court "cannot separate the woof from the warp and manufacture a new web"674. From time to time, this Court has invoked other metaphors to the provision's operation in relation to that valid application would be different in a substantial respect from what would have been its operation in relation to that valid application if every invalid application of the provision had been within the Commonwealth's legislative power. Subsection (2) does not limit the cases where a contrary intention may be taken to appear for the purposes of subsection (1). 671 See, eg, Bank Nationalisation Case (1948) 76 CLR 1 at 186; R v Hughes (2000) 202 CLR 535 at 565-567 [66]; Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629 at 662 [81]. 672 (1995) 183 CLR 323 at 340-341, 348, 355, 366, 371-372. See also Industrial Relations Act Case (1996) 187 CLR 416 at 449-450, 503. 673 Western Australia v The Commonwealth (Native Title Act Case) (1995) 183 CLR 674 Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR Kirby explain when the Court has arrived at that limit. Thus, it has indicated a willingness to undertake amputation and excision, where necessary, but not to perform judicial "plastic surgery" upon the challenged law675. By inference, this is a reference to judicial excisions that would substantially alter the appearance of the law, presenting a law that looks quite different from that which was made by the Parliament. The reason why this Court will not undertake such a task is ultimately based on the proper function of the Judicature established by the Constitution and on the principle of the separation of the judicial from other governmental powers. Thus, in the guise of construing a challenged federal law, the Court cannot be required to perform a feat that is, in essence, legislative and not judicial676. As to s 15A of the Acts Interpretation Act, the provision can save the validity of a federal law generally where the law itself indicates a standard or test that may be applied for the purpose of limiting its operation and preserving the validity of the law thus limited, so long as the outcome has not been changed so as to make it something different from the law enacted by the Parliament677. If the Court concludes that the challenged law "was intended to operate fully and completely according to its terms, or not at all"678, the Court will not, under the guise of interpretation and severance, uphold what would effectively be a new and different law. If the invalidated portions are relatively few and specific, surgery involving particular invalidation and reading down will be available and appropriate, as it was in the Industrial Relations Act Case679. Where, however, the resulting invalidation is substantial and would strike down key provisions of a comprehensive and integrated legislative measure, the invocation of statutory or constitutional principles of severance will be inappropriate. They will be unavailing to save the parts of the new law that are not specifically struck down as invalid for constitutional reasons. 675 Bank Nationalisation Case (1948) 76 CLR 1 at 372 per Dixon J. 676 Pidoto (1943) 68 CLR 87 at 109 per Latham CJ; Bank Nationalisation Case (1948) 76 CLR 1 at 252; Concrete Pipes Case (1971) 124 CLR 468 at 498 per Barwick CJ, 506 per Menzies J, 513 per Windeyer J, 520-521 per Walsh J; Re Nolan; Ex parte Young (1991) 172 CLR 460 at 485. 677 Re Dingjan (1995) 183 CLR 323 at 339 per Brennan J; see R v Hughes (2000) 202 CLR 535 at 556-557 [43]. 678 Pidoto (1943) 68 CLR 87 at 108; Industrial Relations Act Case (1996) 187 CLR 679 (1996) 187 CLR 416 at 561-564. Kirby Conclusion: severance unavailing: When the foregoing well-established principles are applied to the present proceedings, they result in the invalidation of the entirety of the Amending Act. The provisions which I would hold invalid are too numerous. They affect core parts of the new Act which was clearly intended to operate as an integrated whole. In presenting the Amending Act to the Parliament, the Government stated that it would provide for a "national system of workplace relations"680. Apart from s 51(xx) and (xxxv) the remaining heads of federal legislative power, upon which reliance is placed in the definition of "employer" in s 6(1) of the new Act, are highly specific and not such as to achieve the stated object of a new "national system". The plain purpose of the legislation was to rely principally on s 51(xx) of the Constitution in the definition of "employer" in s 6(1) of the new Act. This appears on the face of that Act. It is the provision that supports the large edifice that is built upon that definition. That this is so is made completely clear by extrinsic material placed before this Court. That material discloses the object of those propounding the Amending Act to secure an immediate extension of federal coverage of workplace relations in Australia to 85% of Australian employees681. Moreover, the expressed object is also to persuade, or coerce, the States to refer their residual powers to make laws with respect to industrial relations to the Federal Parliament because the maintenance of separate State tribunals and laws would, in the circumstances, be too difficult and costly682. The attempt to create a "simplified national system"683 by the enactment of the Amending Act was one substantially dependent upon reliance on s 51(xx) of the Constitution, unaffected by any impact on the content of that power of implications to be derived from s 51(xxxv). That this is so is clear from the reliance upon the definition of "employer" to whom the new "simplified national system" would attach, as a constitutional corporation. So much is plain in Pt 7 of 680 Australian Parliament, Explanatory Memorandum circulated with the Workplace Relations Amendment (Work Choices) Bill 2005 (Cth) at 9. 681 Australia, House of Representatives, Parliamentary Debates (Hansard), 2 November 2005 at 16-18. 682 Australian Parliament, Explanatory Memorandum circulated with the Workplace Relations Amendment (Work Choices) Bill 2005 (Cth) at 9. 683 New Act, s 3(b). Kirby the new Act684; Pt 8685; Pt 9686; Pt 10687; Pt 12, Div 4688 and Sched 1, read with s 8689. The reliance on the definition, and hence on s 51(xx) of the Constitution, is the unifying element that permeates the whole legislative scheme. If any one of the foregoing important Parts of the new Act were to fail this would, in my view, result in a substantial alteration of the legislation. By force of the Constitution, the entire Amending Act would then fail. Where, as I would hold, all of the foregoing Parts of the new Act must fail, because of their ultimate dependence on the validity of the definition of "employer" adopted in that Act, the outcome is plain. It is not the function of this Court to save bits and pieces of the new law. The Commonwealth might, if it chose, proceed to submit for re-enactment its substantive amendments to federal law on industrial relations in relation to the territories where its powers, derived from s 122 of the Constitution, are extremely large and arguably unrestricted. However, were this Court to attempt to uphold those particular provisions of the new Act (and perhaps some other limited parts that could survive closer scrutiny) the outcome would be a law quite different from that propounded by the Government and enacted by the Federal Parliament. In accordance with the established principles that I have identified, in the conclusions that I have reached, severance is not available. Conclusion: the Amending Act is invalid Adhering to past decisions: Ultimately, these proceedings present the intersection of two accepted, and basic, rules of constitutional interpretation. The first, upheld by this Court since the Engineers Case in 1920, holds that grants of federal legislative power are given an ample content without implied restrictions based on notions of reserved State powers or an immunity of State institutions from the effect of federal laws. The second, established at least since Schmidt in 684 Minimum pay and conditions for employees of "employers". 685 The nature and enforcement of the agreements made by "employers" with such "employees". 686 The undertaking of industrial action by "employees" of such "employers". 687 The residual making of awards in respect of such "employees". 688 The termination of employment of "employees" of "employers". 689 Regulation of employer and employee organisations registered under the new Act. Kirby 1961, but given effect many times before and since, holds that particular grants of federal legislative power that are subject to expressed safeguards, restrictions or qualifications (or guarantees protecting identifiable persons or groups), require the modification of what would otherwise be "plenary" federal powers. In this way, such restrictions and guarantees are not neutered, but continue to enliven the constitutional text. To resolve the intersection of these rules, it is necessary to recognise that a national Constitution, like any legal document, must be read as a whole, not in bits and pieces. What this fundamental principle requires in the present case is the confinement of the large powers of the Federal Parliament to enact laws with respect to corporations. That confinement would preserve the constitutional prescription that federal laws with respect to the subject of industrial disputes (as provided by s 51(xxxv) of the Constitution) have to comply with the features deliberately imposed by the Constitution on the Federal Parliament for that aspect of its lawmaking. That is, such federal laws may not be enacted by direct federal legislative provisions. Rather, they must involve, by the processes of conciliation and arbitration, the intervention of independent decision-makers who hear both sides. To insist on this resolution of the intersecting principles fulfils this Court's role as the guardian of the Constitution. It preserves decisions of this Court, delivered over more than a century, that have either held, or impliedly accepted, that the corporations power has to be read as subject to the industrial disputes power. The view now endorsed by the majority of this Court effectively discards a century of constitutional doctrine. It ignores the express structure of the Constitution and the language of the two heads of constitutional power in question in this case, each of equal validity and effect. I refuse to accept that our predecessors in this Court were so blind to the true meaning of the Constitution that their decisions, in such number and detail over the past hundred years, were pointless exercises in constitutional futility. Yet that is the hypothesis inherent in the decision now reached by the majority. Preserving industrial fairness: As history has repeatedly shown, there are reasons of principle for preserving the approach of our predecessors. The requirement to decide industrial relations issues through the independent processes of conciliation and arbitration has made a profound contribution to progress and fairness in the Australian law on industrial disputes, particularly for the relatively powerless and vulnerable. To move the constitutional goalposts now and to commit such issues to be resolved directly by federal laws with respect to corporations inevitably alters the focus and subject matter of such Kirby laws. The imperative to ensure a "fair go all round"690, which lay at the heart of federal industrial law (and the State systems that grew up by analogy), is destroyed in a single stroke. This change has the potential to effect a significant alteration to some of the core values that have shaped the evolution of the distinctive features of the Australian Commonwealth, its economy and its society. In this respect, it is useful to recall what was said in 1909 by Higgins J in Huddart, Parker & Co Pty Ltd v Moorehead, when determining whether the Australian Industries Preservation Act 1906 (Cth)691 was a law "with respect to ... corporations". Despite his opposition to the doctrine of reserved powers692, as it then existed, Higgins J issued a serious warning about the consequences that could potentially flow from an uncontrolled interpretation of the corporations power693. Almost a century on, the concerns expressed by Higgins J on the potential scope of s 51(xx) are just as valid, if not more so. Respecting federalism: No one could contest the pervasive role of corporations in almost every activity of a modern society. However, the unnuanced interpretation of the corporations power now embraced by a majority of this Court, released from the previous check stated in the industrial disputes power (and other similar constitutional checks), has the potential greatly to alter the nation's federal balance. It risks a destabilising intrusion of direct federal lawmaking into areas of legislation which, since federation, have been the subjects of State laws. It does so unchecked by any express provisions in such powers or by any implied features of the Constitution derived from the federal system that lies at its very heart. This Court and the Australian Commonwealth need to rediscover the federal character of the Constitution. It is a feature that tends to protect liberty and to restrain the over-concentration of power which modern government, global forces, technology, and now the modern corporation, tend to encourage694. 690 Blackadder v Ramsey Butchering Services Pty Ltd (2005) 221 CLR 539 at 548-549 [30], citing In re Loty and Holloway and Australian Workers' Union [1971] AR (NSW) 95. 691 Described in the joint reasons at [70]. 692 R v Barger (1908) 6 CLR 41 at 113 per Higgins J. See joint reasons at [83]. 693 (1909) 8 CLR 330 at 409-410. 694 cf Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 599 [185]; R v Hughes (2000) 202 CLR 535 at 554-555 [38], 560-561 [53]; Sunstein, "Federalism in South Africa? Notes from the American Experience", (1993) 8 American University Journal of International Law and Policy 421; Kincaid, "The New Federalism (Footnote continues on next page) Kirby In this sense, the federal balance has the potential to be an important restraint on the deployment of power. In that respect, federalism is a concept of constitutional government especially important in the current age. By this decision, the majority deals another serious blow to the federal character of the Australian Constitution. We should not so lightly turn our backs on the repeatedly expressed will of the Australian electors and the wisdom of our predecessors concerning our governance. The United States Supreme Court has lately found innovative ways to uphold the role of the States within the federal system and to enforce limits on the powers of Congress without doing undue damage to the national demands of efficiency, prosperity and security695. Efforts like these balance the competing values that frame the American constitutional system. This Court should be no less attentive to the federal character of the Australian Constitution. Limiting the corporations power: The precise constitutional issue now presented has not previously been decided by this Court because, for most of the past century, its resolution was regarded as axiomatic. It was self-evident that the corporations power did not extend so far as the majority now holds it to do. It was for this reason that, through referendums, successive governments sought – without success – popular approval for the enlargement of federal power with respect to industrial disputes. The repeated negative voice of the Australian people, as electors, in votes on these referendums, is now effectively ignored or treated as irrelevant by the majority. I accept that the corporations power in the Constitution, when viewed as a functional document, expands and enlarges so as to permit federal laws on a wide range of activities of trading and financial corporations in keeping with their expanding role in the nation's affairs and economic life. But there are limits. Those limits are found in the express provisions and structure of the Constitution and in its implications. This Court's Context of the New Judicial Federalism", (1995) 26 Rutgers Law Journal 913; Guy, "Overcoming the Institutional and Constitutional Constraints of Australian Federalism: Developing a New Social Democratic Approach to the Federal Framework", (2006) 34 Federal Law Review 319 at 325. 695 National League of Cities v Usery 426 US 833 (1976); Hughes v Alexandria Scrap Corp 426 US 794 (1976); Reeves, Inc v Stake 447 US 429 (1980); White v Massachusetts Council of Construction Employers, Inc 460 US 204 (1983); United States v Lopez 514 US 549 (1995); United States v Morrison 529 US 598 (2000); Sanders, "The 'New Judicial Federalism' Before Its Time: A Comprehensive Review of Economic Substantive Due Process Under State Constitutional Law Since 1940 and the Reasons for Its Recent Decline", (2005) 55 American University Law Review 457. Kirby duty is to uphold the limits. Once a constitutional Rubicon such as this is crossed, there is rarely a going back. That is why this is such an important case for the content of constitutional power in Australia. The majority concludes that not a single one of the myriad constitutional arguments of the States succeeds. Truly, this reveals the apogee of federal constitutional power and a profound weakness in the legal checks and balances which the founders sought to provide to the Australian Commonwealth. In my view, particular provisions of the challenged legislation, which, if enacted separately, might be valid, fall with the overall design of the new law. Severance is not possible without imposing on this Court an impermissible function of making a new law with a different focus and purpose. The entire Amending Act is constitutionally invalid. This Court should so hold. Orders The Commonwealth's demurrer to the plaintiffs' statements of claim in each action should be overruled. There should be judgment in each action for the plaintiffs. This Court should declare the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) invalid in its entirety under the Constitution. The Commonwealth should pay the costs of the plaintiffs in each action. Callinan PART I. INTRODUCTION [618]-[621] PART II. INTENDED OPERATION AND REACH OF THE AMENDING ACT [622]-[680] PART III. HISTORY [681]-[735] RELEVANT CONSTITUTIONAL AND POLITICAL Div 1: Early industrial relations tribunals [691]-[706] Div 2: Failed attempts to gain power [707]-[735] The Constitution Alteration (Legislative Powers) Bill 1910 (Cth) for a referendum [709]-[715] The Constitution Alteration (Corporations) Bill 1912 (Cth) for a referendum and the Constitution Alteration (Industrial Matters Bill 1912 (Cth) for a referendum [716]-[723] The Constitution Alteration (Industry and Commerce) Bill 1926 (Cth) for a referendum [724]-[727] The Constitution Alteration (Industrial Employment) Bill 1946 (Cth) for a referendum [728]-[735] PART IV. CONSTITUTION [736]-[773] TECHNIQUES EMPLOYED IN CONSTRUING THE Div 1: Precedent [748]-[764] Div 2: The principle of generality of language [765]-[770] Div 3: Statement of the appropriate principles [771]-[773] BALANCE [774]-[797] CONSTITUTIONAL IMPERATIVE OF THE FEDERAL PART VI. THE NECESSITY TO CONSTRUE S 51 AS A WHOLE [798]- THE REACH AND IMPACT OF THE INDUSTRIAL PART VII. AFFAIRS POWER [821]-[834] Div 1: General [821]-[822] Div 2: Paper disputes [823]-[834] PART VIII. THE REACH AND IMPACT OF THE CORPORATIONS POWER [835]-[897] Div 1: General [835]-[837] Div 2: Convention Debates [838]-[843] Div 3: Texts [844]-[845] Div 4: The bankruptcy and insolvency power [846]-[854] Div 5: Previous cases [855]-[895] Div 6: A consequence of the "object of command" test [896]-[897] Callinan PART IX. THE DIFFERENT POSITION OF VICTORIA [898]-[909] PART X. THE DIFFERENT POSITION OF THE TERRITORIES [910]- PART XI. SUMMARY OF CONCLUSIONS [913]-[914] PART I. INTRODUCTION The substantial issue in this case is whether the amendments, effected by the Workplace Relations Amendment (Work Choices) Act 2005 (Cth) ("the Amending Act") to the Workplace Relations Act 1996 (Cth) ("the Act"), are a valid exercise of the corporations power conferred by s 51(xx) of the Constitution696. The question of the validity of some of the provisions of the Act697 has been at least latent since 1993 when the Industrial Relations Reform Act 1993 (Cth) was enacted, in purported reliance then upon the corporations power, but arises overtly and starkly as a result of the very extensive amendments enacted by the Amending Act. In these reasons the references to sections are to the sections in the Act in its amended, that is to say, its consolidated, current form. 696 Section 51(xx) provides: "The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth". 697 The relevant provisions introduced "enterprise agreements". The Minister for Industrial Relations, in moving that the Industrial Relations Reform Bill 1993 (Cth) be read a second time (Australia, House of Representatives, Parliamentary Debates (Hansard), 28 October 1993 at 2779), said: "Under our legislation, working conditions will increasingly be tailored to fit individual workplaces. Most importantly, the new enterprise flexibility agreements will do so without the prerequisite of a union or an interstate dispute." (emphasis added) Callinan This is one of the most important cases with respect to the relationship between the Commonwealth and the States to come before the Court in all of the years of its existence. If the legislation is to be upheld the consequences for the future integrity of the federation as a federation, and the existence and powers of the States will be far-reaching. The Act in its present form is well beyond, and in contradiction of what was intended and expressed in the Constitution by the founders. The Commonwealth concedes that there is no decision of this Court which of itself requires that the Act be held to be valid in its entirety, or even substantially so. These reasons will show there are neither persuasive dicta, sufficiently settled and consistent principles of constitutional construction, nor universally accepted constitutional theory which would compel, or even imply validity. Indeed the contrary is the case: the Act is, for the most part, beyond the power of the Commonwealth. I do not suggest that the Constitution can, or should be construed in a vacuum, that is, in disregard of statements of Justices of this Court in earlier cases, and, of course, history698. Although the relevant history here is important and instructive, the dicta from other cases are, with a few exceptions, not. The sum of the matters which should inform the proper construction are: the techniques employed from time to time by Justices of this Court in construing the Constitution; the constitutional imperative of the maintenance of the federal balance; the fundamental canon of construction, the need to construe the Constitution as a whole; the reach, impact and meaning of the industrial affairs power conferred by s 51(xxxv) of the Constitution699; the reach, impact and meaning of the corporations power; and, the relationship between the two powers. Indeed all of the topics are related, and the cases to which I refer in one section of these reasons may also be relevant to another. After I deal with each 698 Latham CJ said in In re Foreman & Sons Pty Ltd; Uther v Federal Commissioner of Taxation (1947) 74 CLR 508 at 521: "The Commonwealth of Australia was not born into a vacuum. It came into existence within a system of law already established." 699 Section 51(xxxv) provides: "The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: (xxxv) conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State". Callinan topic I will give some consideration to the submissions of Victoria which had, by agreement with the Commonwealth, already ceded some of its industrial power to the latter; to the different constitutional positions of the Territories; and, the question whether any of the Act may or should be saved. But before I turn to those matters it is necessary to set out, and make some comments about the key provisions of the Act. PART II. INTENDED OPERATION AND REACH OF THE AMENDING ACT The apparent purpose and effect of the legislation under challenge, if valid, would be to establish an essentially national, largely in substitution of a federal, system of industrial relations700 founded upon the corporations power. Incidental reliance is placed by the Commonwealth upon the territories power in s 122, the trade and commerce power in s 51(i) and the external affairs power in s 51(xxix). For reasons which will appear, and as it is effectively accepted by the Commonwealth, if the Amending Act is not within the corporations power, the incidental reliance on any other powers is not sufficient to validate it in its entirety. The whole structure of the Act as amended is now relevantly based largely upon the premise that the corporations power is a sufficient foundation for all of it. The Act, if valid, still cannot absolutely cover employment in Australia because it is expressly designed to apply, in most of its operation, to corporate employers, these being constitutional corporations so-called, and their employees. Except to the extent that ss 5(2), 6(2) and 7(2) may, as a matter of construction, incidentally do so, the Amending Act does not identify the head or heads of constitutional power upon which the Commonwealth relies for validity701. But the definition of a "constitutional corporation" in s 4 does provide a clear indication that the, or the principal head of power on which the defendant in enacting it relies, is the corporations power conferred by s 51(xx), despite that, in substance and in detail, the legislation is concerned with what has been, since the inception of the Commonwealth, understood to be industrial 700 See the principal object of the Act, set out in s 3. 701 Contrast, eg, s 6 of the Trade Practices Act 1974 (Cth), which confines the application of various sections to conduct in the course of or in relation to: (i) trade or commerce between Australia and places outside Australia; (ii) trade or commerce among the States; (iii) trade or commerce within a Territory, between a State and a Territory or between two Territories; or (iv) the supply of goods or services to the Commonwealth or an authority or instrumentality of the Commonwealth. These are express references to ss 51(i) and 122 of the Constitution. Callinan affairs. In this judgment I use the expressions "industrial affairs" and "industrial matters" interchangeably. Each is well understood in this country as the relationship between employers and employees, and disputes, pending, potential or actual, between them, matters which, if of an interstate character as developed in the cases702, fall within the purview of s 51(xxxv) of the Constitution, as to an aspect of which, industrial agreements, I said in Amcor Ltd v Construction, Forestry, Mining and Energy Union703: "An industrial agreement has a number of purposes, to settle disputes, to anticipate and make provision for the resolution of future disputes, to ensure fair and just treatment of both employer and employees, and generally to promote harmony in the workplace." Those remarks apply with equal force to the making of awards. The power to provide for each of these under s 51(xxxv) of the Constitution is a broad but not absolute one. In Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union704, Gleeson CJ said of it: "It is for Parliament to determine the structure and incidents of the system of dispute resolution (using that expression to cover prevention as well as settlement) which is appropriate to current circumstances, subject to the limitations imposed by the terms of s 51(xxxv): the available methods of dispute resolution are conciliation and arbitration; and the disputes must be of a certain kind. The Constitution confers the power to establish and maintain, and, where it is considered appropriate, alter, the system. The Parliament, in the exercise of the power, legislates to institute, vary, modify, or abrogate, the system. The nature of a particular legislative scheme set up in the exercise of the power is not to be confused with the scope of the power itself." Section 14 requires that the Act be given "every valid application", if it has any invalid application. The plaintiffs argue that this provision purports to command the Court to do far more than undertake an orthodox exercise of severance, or reading down, and goes well beyond the territory charted by 702 See Pt VII, Div 2 of these reasons. The Index to the Commonwealth Law Reports has used from its inception various titles capable of embracing issues arising under s 51(xxxv), for example: "industrial arbitration", "conciliation and arbitration", and "industrial law". 703 (2005) 222 CLR 241 at 283 [131]. 704 (2000) 203 CLR 346 at 354-355 [2]. Callinan decisions of this Court on s 15A of the Acts Interpretation Act 1901 (Cth)705 or otherwise: indeed that it purports to require the Court to do the impermissible, to legislate. As will appear, this submission has some force. The laws which the Amending Act is designed to abrogate, State and Territory industrial laws, are very comprehensively defined706: "State or Territory industrial law means: any of the following State Acts: the Industrial Relations Act 1996 of New South Wales; the Industrial Relations Act 1999 of Queensland; (iii) the Industrial Relations Act 1979 of Western Australia; the Fair Work Act 1994 of South Australia; the Industrial Relations Act 1984 of Tasmania; or an Act of a State or Territory that applies to employment generally and has one or more of the following as its main purpose or one or more of its main purposes: (iii) regulating workplace relations (including industrial matters, industrial disputes and industrial action, within the ordinary meaning of those expressions); providing for the determination of terms and conditions of employment; providing for the making and enforcement of agreements determining terms and conditions of employment; 705 Section 15A provides: "Every Act shall be read and construed subject to the Constitution, and so as not to exceed the legislative power of the Commonwealth, to the intent that where any enactment thereof would, but for this section, have been construed as being in excess of that power, it shall nevertheless be a valid enactment to the extent to which it is not in excess of that power." 706 The Act, s 4(1). Callinan providing for rights and remedies connected with the termination of employment; prohibiting conduct that relates to the fact that a person either is, or is not, a member of an industrial association (as defined in section 779); or an instrument made under an Act described in paragraph (a) or (b), so far as the instrument is of a legislative character; or a law that: is a law of a State or Territory; and is prescribed by regulations for the purposes of this paragraph." Generally, the effect and operation that the provisions under challenge would, if valid, have, are not controversial. Most of these are well summarized in the submissions of the first plaintiff in action No B6 of 2006, the Australian Workers' Union. I have been assisted by that summary. References by other members of the Court to other relevant provisions and the relationship, and differences between the unamended Act and the Act relieve me of the necessity to repeat the detail of these. Section 6(1) of the Act defines "employer" to mean a "constitutional corporation"707, the Commonwealth or a Commonwealth authority708, in each case so far as the corporation, the Commonwealth or Commonwealth authority employs or usually employs an individual. The definition in s 6(1) also includes a "person or entity" so far as the person or entity employs or usually employs, in connexion with "constitutional trade or commerce"709, an individual as a "flight crew officer", "maritime employee" or "waterside worker"710. The definition 707 Defined by s 4(1) to mean a corporation to which s 51(xx) of the Constitution applies. 708 "Commonwealth authority" is defined by s 4(1). As well as including bodies corporate established for public purposes by or under laws of the Commonwealth, it includes bodies corporate incorporated under laws of the Commonwealth, a State or a Territory, in which the Commonwealth has a controlling interest. 709 Defined by s 4(1) to mean trade or commerce between Australia and a place outside Australia, among the States, between a State and a Territory, between two Territories, or within a Territory. 710 These terms are defined by s 4(1) and cl 1 of Sched 2. Callinan includes bodies corporate incorporated in a Territory, so far as the body corporate employs, or usually employs, an individual, and persons or entities carrying on an activity in a Territory, so far as the person or entity employs, or usually employs, an individual in connexion with the activity carried on in that Territory. The definition of "constitutional corporation"711 effectively assumes that s 51(xx) is capable of embracing every aspect of a corporation apart from its incorporation. The Amending Act, as the joint judgment states712, in its practical application certainly depends in large measure upon the assumption that the corporations power is capable of sustaining the legislative framework in its entirety. The procedure adopted, of dealing with the matter on demurrer, is not without its problems. The Court does not have before it any relevant sets of facts in respect of which the reach and application of the Act may be tested. It is always an advantage for a court to be able to examine any impugned legislation in its practical application. The procedure adopted here, although not without precedent713, is, to some extent at least, in the nature of a solicitation from the Court of an advisory opinion of a kind which in other circumstances the Court has declined to give714. The disadvantage of the absence of relevant facts will become particularly apparent when the question arises whether any of the sections of the Act can or should be regarded as valid under placita other than placitum (xx) or otherwise. That legislation may be of high social, economic or political significance has never of itself sufficed to justify the Court's scrutiny of, and ruling upon it in hypothetical cases. During the course of argument, the Commonwealth, from time to time, suggested that some or all of the provisions in the Amending Act could be supported under heads of power other than the corporations power, but, the argument with respect to the territories power aside, the suggestions were incomplete as submissions and, for reasons which will appear, not such as to warrant any conclusive ruling upon them. In those circumstances my reasons will mainly therefore be confined to the questions whether the Act, and such sections of it, if any, as require or lend themselves to separate consideration, have been validly enacted under the corporations power. An "employee" is defined by s 5(1) to mean a person employed, or usually employed, by an employer as defined by s 6(1). 711 Section 4(1) of the Act provides that "constitutional corporation means a corporation to which paragraph 51(xx) of the Constitution applies". 713 A recent example is Victoria v The Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416. 714 Compare: In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 267 per Knox CJ, Gavan Duffy, Powers, Rich and Starke JJ. Callinan The Act is given an extended operation by s 6(2), which provides that "employer" has its ordinary meaning if the reference is as listed in cl 3 of Sched 2. The reference to "employer" in its ordinary meaning includes a person or "entity" which is usually an employer within that meaning715. The provisions in relation to employees which correspond to ss 6(2) and 6(3) are ss 5(2) and "Employment" is defined by s 7(1) to reflect the meanings attributed by ss 5 and 6 to employee and employer. Clauses 2, 3 and 4 of Sched 2 indicate when the ordinary meanings of employee, employer and employment are intended. Sections 16, 17 and 18 of the Act, because they seek, effectively, if not to obliterate, certainly very greatly to diminish, State industrial power over corporations and their employees, should be set out. Section 16 provides: "Act excludes some State and Territory laws This Act is intended to apply to the exclusion of all the following laws of a State or Territory so far as they would otherwise apply in relation to an employee or employer: a State or Territory industrial law; a law that applies to employment generally and deals with leave other than long service leave; a law providing for a court or tribunal constituted by a law of the State or Territory to make an order in relation to equal remuneration for work of equal value (as defined in section 623); a law providing for the variation or setting aside of rights and obligations arising under a contract of employment, or another arrangement for employment, that a court or tribunal finds is unfair; a law that entitles a representative of a trade union to enter premises. Note: Subsection 4(1) defines applies to employment generally. 715 Section 6(3). Callinan State and Territory laws that are not excluded (2) However, subsection (1) does not apply to a law of a State or Territory so far as: the law deals with the prevention of discrimination, the promotion of EEO or both, and is neither a State or Territory industrial law nor contained in such a law; or the law is prescribed by the regulations as a law to which subsection (1) does not apply; or the law deals with any of the matters (the non-excluded matters) described in subsection (3). The non-excluded matters are as follows: superannuation; (b) workers compensation; occupational health and safety (including entry of a representative of a trade union to premises for a purpose connected with occupational health and safety); (d) matters relating to outworkers (including entry of a representative of a trade union to premises for a purpose connected with outworkers); child labour; long service leave; the observance of a public holiday, except the rate of payment of an employee for the public holiday; the method of payment of wages or salaries; the frequency of payment of wages or salaries; deductions from wages or salaries; industrial action (within the ordinary meaning of the expression) affecting essential services; attendance for service on a jury; regulation of any of the following: Callinan associations of employees; associations of employers; (iii) members of associations of employees or of associations of employers. Note: Part 15 (Right of entry) sets prerequisites for a trade union representative to enter certain premises under a right given by a prescribed law of a State or Territory. The prerequisites apply even though the law deals with such entry for a purpose connected with occupational health and safety and paragraph (2)(c) says this Act is not to apply to the exclusion of a law dealing with that. This Act excludes prescribed State and Territory laws This Act is intended to apply to the exclusion of a law of a State or Territory that is prescribed by the regulations for the purposes of this subsection. To avoid doubt, subsection (4) has effect even if the law is covered by subsection (2) (so that subsection (1) does not apply to the law). This subsection does not limit subsection (4). Definition In this section: this Act Organisations Schedule and regulations made under it." the Registration and Accountability of includes As can be seen, by express provision, discrimination is excluded, but a reservation is made of a right to exclude other matters by regulation from time to time. Section 17 provides: "Awards, agreements and Commission orders prevail over State and Territory law etc. (1) An award or workplace agreement prevails over a law of a State or Territory, a State award or a State employment agreement, to the extent of any inconsistency. (2) However, a term of an award or workplace agreement dealing with any of the following matters has effect subject to a law of a State or Territory dealing with the matter, except a law that is prescribed by Callinan the regulations as a law to which awards and workplace agreements are not subject: occupational health and safety; (b) workers compensation; training arrangements; a matter prescribed by the regulations for the purposes of this paragraph. (3) An order of the Commission under Part 12 prevails over a law of a State or Territory, a State award or a State employment agreement, to the extent of any inconsistency. Note: Part 12 is about minimum entitlements of employees." Despite the breadth of ss 16 and 17, they alone do not mark out all of the intended domain of the Act: "18 Act may exclude State and Territory laws in other cases Sections 16 and 17 are not a complete statement of the circumstances in which this Act and instruments made under it are intended to apply to the exclusion of, or prevail over, laws of the States and Territories or instruments made under those laws. Note: Other provisions of this Act deal with its relationship with laws of the States and Territories. For example, see clause 87 of Schedule 6, which is about not excluding or limiting Victorian law that can operate concurrently with certain provisions of that Schedule. In this section: this Act Organisations Schedule and regulations made under it." the Registration and Accountability of includes Part 2 of the Act establishes an Australian Fair Pay Commission ("the AFPC"). The principal of its functions is "wage-setting" as referred to in ss 21(a) and 22(1). The AFPC's "wage-setting powers" are conferred and prescribed by Div 2 of Pt 7 (ss 176-222), in particular to adjust the standard Federal Minimum Wage ("FMW") provided for by s 195 and s 196(1); to determine and adjust special FMWs (ss 197 and 200); to determine new Australian Pay and Classification Scales ("APCSs") (s 214); and, to adjust or revoke APCSs (ss 216 and 217). Callinan Part 3 of the Act establishes an Australian Industrial Relations Commission ("the AIRC") (s 61(1)) to have the functions conferred on it by "this the Registration and Accountability of Organisations Schedule or Act, otherwise"716. The Registration and Accountability of Organisations Schedule is Sched 1 to the Act. Section 111, which I will set out, may be contrasted with s 38(h) of the original Commonwealth Conciliation and Arbitration Act 1904 (Cth)717 which empowered the Commonwealth Court of Conciliation and Arbitration: "to dismiss any matter or refrain from further hearing or from determining the dispute if it appears that the dispute is trivial, or that the dispute has been dealt with, or is being dealt with, or is proper to be dealt with, by a State Industrial Authority, or that further proceedings by the Court are not necessary or desirable in the public interest". (emphasis added) Section 111 provides: "Particular powers of Commission The Commission may do any of the following in relation to a proceeding under this Act or the Registration and Accountability of Organisations Schedule: inform itself in any manner that it thinks appropriate; take evidence on oath or affirmation; give directions orally or in writing in the course of, or for the purposes of, procedural matters relating the proceeding; vary or revoke an order, direction or decision of the Commission; 716 Section 62. 717 This section in only slightly varying forms remained the relevant Commonwealth Act from 1904 until 2005. See Commonwealth Conciliation and Arbitration Act 1904 (Cth), s 38(h) (1904-1947); Commonwealth Conciliation and Arbitration Act 1904 (Cth), s 40(d) (1947-1950); Conciliation and Arbitration Act 1904 (Cth), s 40(d) (1950-1956); Conciliation and Arbitration Act 1904 (Cth), s 41(d)(ii) (1956-1959); Conciliation and Arbitration Act 1904 (Cth), s 41(1)(d)(ii) (1959-1988); Industrial Relations Act 1988 (Cth), s 111(1)(g)(ii) (1988-1996); Workplace Relations Act 1996 (Cth), s 111(1)(g)(ii) (1996-2005). Callinan dismiss a matter or part of a matter on the ground: that the matter, or the part of the matter, is trivial; or that further proceedings in relation to the matter are not necessary or desirable in the public interest; determine the proceeding in the absence of a person who has been summoned or served with a notice to appear; sit at any place; conduct the proceeding, or any part of the proceeding, in private; adjourn the proceeding to any time and place; refer any matter to an expert and accept the expert's report as evidence; direct a member of the Commission to consider a particular matter that is before the Full Bench and prepare a report for the Full Bench on that matter; the amendment, on any allow thinks appropriate, of any application or other document relating to the proceeding; terms that correct, amend or waive any error, defect or irregularity whether in substance or form; summon before the Commission considers would assist in relation to the proceeding; it any persons whose presence compel the production before it of documents and other things for the purpose of reference to such entries or matters as relate to the proceeding; (p) make interim decisions; (q) make a final decision in respect of the matter to which the proceeding relates. The Commission may, in writing, authorise a person (including a member of the Commission) to take evidence on its behalf, with any limitations as the Commission directs, in relation to the Callinan proceeding, and the person has all the powers of the Commission to secure: the attendance of witnesses; and the production of documents and things; and the taking of evidence on oath or affirmation. The following provisions do not apply to the performance of a function under Part 9: paragraph (1)(e); paragraph (1)(j); paragraph (1)(k). The following provisions do not apply to the performance of a function under Division 3, 4 or 5 of Part 12: paragraph (1)(a); paragraph (1)(e); paragraph (1)(k); paragraph (1)(p); paragraph (1)(q); subsection (2). Paragraph (1)(j) does not apply to the performance of a function under Division 4 of Part 12. If a provision of this Act specifies a time or a period in respect of any matter or thing, the Commission must not extend the time or the period specified unless this Act expressly permits the Commission to do so. If a provision of the Registration and Accountability of Organisations Schedule specifies a time or a period in respect of any matter or thing, the Commission must not extend the time or the period specified unless the Registration and Accountability of Organisations Schedule expressly permits the Commission to do Callinan For the purposes of paragraph (1)(d), order does not include an award or an award-related order." Section 117 empowers a Full Bench of the AIRC to oust the jurisdiction of a State industrial authority. It provides: "State authorities may be restrained from dealing with matter that is before the Commission If it appears to a Full Bench that a State industrial authority is dealing or is about to deal with a matter that is the subject of a proceeding before the the Commission under Registration and Accountability of Organisations Schedule, the Full Bench may make an order restraining the State industrial authority from dealing with the matter. this Act or The State industrial authority must, in accordance with the order, cease dealing or not deal, as the case may be, with the matter. (3) An order, award, decision or determination of a State industrial authority made in contravention of the order of a Full Bench under this section is, to the extent of the contravention, void." The combined effect of ss 111 and 117 in operation will be to enable the Commonwealth and its creatures under the Act arbitrarily to deal a State out of the game in industrial affairs affecting corporations, even intrastate industrial affairs of the greatest importance to the well-being, stability, harmony and commerce of a State. It should not be overlooked that it has been accepted that State industrial tribunals have had very important roles to play in industrial affairs exclusively within, and of particular significance to, a State. Electrical Trades Union of Australia v Queensland Electricity Commission718 is an example of this. In 1986, electrical corporations were completely owned and controlled in Queensland by Queensland. The State of Queensland wished to effect reforms in the labour arrangements for the electrical industry. The history of industrial relations in that industry before 1986 had been a troubled one and is recorded in the reasons for decision of the Australian Conciliation and Arbitration Commission in that case719. Queensland enacted the Electricity Authorities Industrial Causes Act 1985 (Q) and the Electricity (Continuity of Supply) Act 1985 (Q), in order to establish a special industrial tribunal, the Electricity Authorities Industrial Causes Tribunal, and to facilitate the reform of labour 719 (1986) 16 IR 292 at 293-298. Callinan conditions. So as to create a classical paper dispute720, and to outflank the new State tribunal thereby to attract the jurisdiction of the Commonwealth Commission, the Electrical Trades Union of Australia delivered a log of claims seeking to reverse or obstruct the proposed reforms, and to have reinstated employees who were dismissed for striking, under an Order in Council, after those employees defied a direction to return to work by the State tribunal721. A member of the Commonwealth Commission, Brown C, found that an interstate industrial dispute did exist between the generating authorities and the Electrical Trades Union of Australia, even though the industrial strife in the industry did not in reality extend beyond the borders of Queensland. That holding, of an interstate industrial dispute, was affirmed on appeal by the Full Bench of the Commission. The electrical authorities then applied under s 41(1)(d) of the Conciliation and Arbitration Act 1904 (Cth) as amended, which was in substance the same as s 38(h) of the original Act which I have quoted, for dismissal of the union's application for an award as sought by its log of claims, on the grounds contemplated by By majority (Ludeke J and Brown C, O'Riordan DP dissenting) the Full Bench of the Australian Conciliation and Arbitration Commission granted the application, holding that, having regard to the character of the electricity industry and its essentiality to the well-being of the people and industry of Queensland, and to the state of affairs in the industry as shown by the evidence, further proceedings and pursuance of the union's log of claims were not necessary or desirable, or in the public interest722. In consequence, the regulation of industrial affairs in the Queensland electricity industry remained the prerogative of Queensland, and was left to the autochthonous Queensland tribunal. It is highly unlikely that in the future, as a practical matter, having regard to ss 111 and 117 of the Act, any State will be able to act to deal with local industrial matters affecting many local and essential State industries and the well-being of the people of the State, as was possible in the past, and of which this case in the Commission provides an example. that section. Part 4 deals with the Australian Industrial Registry, the functions of which may be seen in s 129. Part 5 makes provision for an Employment Advocate, whose functions are set out in s 151. Part 6 provides for the appointment of "workplace inspectors", whose powers are set out in s 169. 720 See Pt VII, Div 2 of these reasons. 721 (1986) 16 IR 292 at 293. 722 (1986) 16 IR 292 at 306. Callinan Part 7 states minimum entitlements in employment, described compendiously as the Australian Fair Pay and Conditions Standard (s 171(3)). Part 8 deals with workplace agreements as identified by ss 326-331. Provision is made by ss 334 and 335 for the appointment and recognition of "bargaining agents" in relation to Australian workplace agreements ("AWAs") (s 334) and some agreements (s 335). Workplace agreements come into force when they are lodged with the Employment Advocate (ss 344 and 347(1)), and cease to operate in the circumstances referred to in s 347(4)-(6) and (10). A workplace agreement binds the persons whose employment is subject to the agreement, and, if the agreement is a union collective agreement (s 328), or a union greenfields agreement (s 329), the organization of employees which made the agreement: s 351. the employer, The content of workplace agreements is dealt with by Div 7 (ss 352-366). Provision is made for their variation in Div 8 (ss 367-380) and termination in Div 9 (ss 381-399). Some types of conduct, relevantly "industrial action", in relation to agreements, are proscribed by Div 10 (ss 400-402). "Industrial action" is defined by s 420 of the Act to include at least all such matters as traditionally, if they could be given any interstate complexion at all, would be treated as industrial disputes fit for conciliation or arbitration by a federal Commission: "Meaning of industrial action For the purposes of this Act, industrial action means any action of the following kinds: the performance of work by an employee in a manner different from that in which it is customarily performed, or the adoption of a practice in relation to work by an employee, the result of which is a restriction or limitation on, or a delay in, the performance of the work; a ban, limitation or restriction on the performance of work by an employee or on the acceptance of or offering for work by an employee; a failure or refusal by employees to attend for work or a failure or refusal to perform any work at all by employees who attend for work; the lockout of employees from their employment by the employer of the employees; but does not include the following: Callinan action by employees that is authorised or agreed to by the employer of the employees; action by an employer that is authorised or agreed to by or on behalf of employees of the employer; action by an employee if: the action was based on a reasonable concern by the employee about an imminent risk to his or her health or safety; and the employee did not unreasonably fail to comply with a direction of his or her employer to perform other available work, whether at the same or another workplace, that was safe and appropriate for the employee to perform. Note 1: See also subsection (4), which deals with the burden of proof of the exception in subparagraph (g)(i) of this definition. Note 2: The issue of whether action that is not industrial in character is industrial action was considered by the Commission in Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union v The Age Company Ltd, PR946290. In that case, the Full Bench of the Commission drew a distinction between an employee who does not attend for work in support of a collective demand that the employer agree to alteration of the conditions of employment as being clearly engaged in industrial action and an employee who does not attend for work on account of illness. For the purposes of this Act: conduct is capable of constituting industrial action even if the conduct relates to part only of the duties that employees are required to perform in the course of their employment; and a reference to industrial action includes a reference to a course of conduct consisting of a series of industrial actions. Meaning of lockout For the purposes of this section, an employer locks out employees from their employment if the employer prevents the employees from performing work under their contracts of employment without terminating those contracts (except to the extent that this would be an expansion of the ordinary meaning of that expression). Callinan Burden of proof (4) Whenever a person seeks to rely on subparagraph (g)(i) of the definition of industrial action in subsection (1), that person has the burden of proving that subparagraph (g)(i) applies." As the joint judgment notes, the Act empowers the Minister to terminate a bargaining period, if he or she is satisfied of certain matters, including, that industrial action is threatening the health or welfare of the population, or part of it, or would cause significant damage to the Australian economy, or an important part of it723. These points should be made about this provision: true it is that the Minister's power is confined to the termination of a bargaining period, and that it is the AIRC which is given the jurisdiction to order that "industrial action" stop, but direct executive involvement of this kind in the affairs of non-governmental employers and employees would represent a significant departure, not only from current industrial practice, but also industrial law generally724, except perhaps in times of war, or otherwise in implementation of the defence power. Part 10 is concerned with the making and variation of awards. Part 11 deals with circumstances in which the obligations of an employer under industrial instruments are transferred to another employer when the whole, or a part, of an employer's business is transmitted to another legal personality. The Part sets out the circumstances in which the transmission of obligations operates pursuant to the Act725, and also empowers the AIRC to make orders to bind the new employers to, or exempt them from, an existing collective agreement upon transfer of a or the business726. Sections 595 and 596 further define the circumstances in which an existing award is, or is not to be binding upon employers and employees upon the transfer of a business from one legal personality to another. 723 Section 498. 724 From 1926 the Attorney-General of the Commonwealth could intervene in proceedings before the Court of Conciliation and Arbitration, but not in industrial affairs prior to the proceedings. See [701], below. 725 Sections 583-586. 726 Sections 590-592. Callinan Part 12 specifies some minimum entitlements of employees727. The Part prescribes entitlements in respect of: (a) meal breaks728; (b) public holidays729; (c) equal (d) termination of employment731, including provision for conciliation and arbitration, or judicial remedies for specified limited classes of employees for unlawful or unfair terminations; and (e) parental leave732. for work of equal value730; remuneration Part 13 prescribes a set of procedures called a "model dispute resolution process" for the resolution of disputes between employers and employees, and the procedures required to be followed in circumstances in which particular provisions of the Act require observance of them, or in circumstances in which an obligation to observe the particular process is set out in an award, a workplace agreement, or a workplace determination (s 694). The Part also prescribes a procedure by which a person may apply to the AIRC to have an alternative dispute resolution process conducted by the AIRC733. Part 14 is concerned with compliance, and contemplates the imposition of penalties and the awarding of damages. Part 15 sets out the terms and conditions upon which industrial organizations may enter and conduct activities on premises occupied by employers, and further provides for the issue of permits to officials of organizations734. Division 5 of Pt 15 imposes controls and modifications upon any right held by an official of an industrial organization to enter upon premises controlled by a constitutional corporation or the Commonwealth, if that right is conferred by a State occupational health and safety law. 727 As defined in s 5. 728 Division 1. 729 Division 2. 730 Division 3. 731 Division 4. 732 Division 6. 733 Sections 699-701, ss 704-706 and ss 709-711. 734 Section 740. Callinan Part 16 proscribes various types of conduct, relating to freedom of association735, which (a) is aimed at or against a constitutional corporation; (b) adversely affects the constitutional corporation; (c) is carried out with intent to affect adversely a constitutional corporation; (d) directly affects a person in the capacity of an employee or prospective employee of, or a contractor or prospective contractor to, a constitutional corporation, or conduct carried out with intent to do so; or (e) consists of advising, encouraging or inciting a constitutional corporation to take or not to take particular action in relation to another person or to threaten to take, or not to take, particular action in relation to another person. Section 793 of the Act defines a "prohibited reason" for various types of proscribed conduct. "Prohibited reasons Conduct referred to in subsection 792(1) or (5) is for a prohibited reason if it is carried out because the employee, independent contractor or other person concerned: is, has been, proposes to become or has at any time proposed to become an officer, delegate or member of an industrial association; or is not, does not propose to become or proposes to cease to be, a member of an industrial association; or in the case of a refusal to engage another person as an independent contractor – has one or more employees who are not, or do not propose to become, members of an industrial association; or has not paid, or does not propose to pay, a fee (however described) to an industrial association; or 735 The conduct includes: coercion (s 789); false or misleading statements about membership (s 790); industrial action for reasons relating to membership (s 791); conduct by employers directed against employees, such as dismissal or offering of inducements (ss 792-794); cessation of work by employees (s 795); various conduct by industrial associations, directed against employers, employees, members, discrimination by persons against employers relating to industrial instruments (s 804); and, false or misleading representations about bargaining services fees and obligations, such as whether an employee is obligated to join an industrial association (s 805). contractors, or persons generally independent Callinan has refused or failed to join in industrial action; or in the case of an employee – has refused or failed to agree or consent to, or vote in favour of, the making of an agreement to which an industrial association of which the employee is a member would be a party; or has made, proposes to make or has at any time proposed to make an application to an industrial body for an order under an industrial law for the holding of a secret ballot; or has participated in, proposes to participate in or has at any time proposed to participate in a secret ballot ordered by an industrial body under an industrial law; or is entitled to the benefit of an industrial instrument, an order of an industrial body or the Australian Fair Pay and Conditions Standard; or has made or proposes to make any inquiry or complaint to a person or body having the capacity under an industrial law to seek: compliance with that law; or the observance of a person's rights under an industrial instrument; or has participated in, proposes to participate in or has at any time proposed to participate in a proceeding under an industrial law; or has given or proposes to give evidence in a proceeding under an industrial law; or in the case of an employee, or an independent contractor, who is a member of an industrial association that is seeking better industrial conditions – is dissatisfied with his or her conditions; or in the case of an employee or an independent contractor – has absented himself or herself from work without leave if: the absence was for the purpose of carrying out duties or exercising rights as an officer of an industrial association; and Callinan the employee or independent contractor applied for leave before absenting himself or herself and leave was unreasonably refused or withheld; or as an officer or member of an industrial association, has done, or proposes to do, an act or thing for the purpose of furthering or protecting the industrial interests of the industrial association, being an act or thing that is: lawful; and (ii) within the limits of an authority expressly conferred on the employee, independent contractor or other person by the industrial association under its rules; or in the case of an employee or independent contractor – has not paid, has not agreed to pay, or does not propose to pay, a bargaining services fee. a threat is made to engage in conduct referred to in subsection 792(1) or (5); and one of the prohibited reasons in subsection (1) of this section refers to a person doing or proposing to do a particular act, or not doing or proposing not to do a particular act; and the threat is made with the intent of dissuading or preventing the person from doing the act, or coercing the person to do the act, as the case requires; the threat is taken to have been made for that prohibited reason." Part 17 creates a variety of offences in relation to: the AIRC, witnesses in Commission proceedings, non-compliance with requirements of inspectors, and misconduct with respect to ballots ordered to be conducted under the Act. Part 18 provides736 that an order cannot be made against a party to proceedings in a matter arising under the Act, to pay costs incurred by any other party to the proceedings, unless the first-mentioned party instituted the proceedings vexatiously or without reasonable cause, except in the case of a court proceedings if the court is satisfied that a party to the proceedings has, by 736 Section 824. Callinan an unreasonable act or omission, caused another party to the proceedings to incur costs. Part 19 is concerned with a variety of administrative matters. It gives an entitlement to a party to a contract for services that is binding on an independent contractor, to apply to the Federal Court to review the contract on the ground that the contract is unfair or that the contract is harsh737. The Court may make orders with respect to unfair contracts including setting aside the whole of the contract or varying it738. Part 20 is concerned with the jurisdiction of the Federal Court and the Federal Magistrates Court under the Act. The Federal Court or the Federal Magistrates Court is empowered to give an interpretation of an award739, or of a certified agreement740. The jurisdiction of those courts in relation to defined matters is exclusive of the jurisdiction of any other court created by the Parliament, or any court of a State or Territory741. This Part also prescribes the rights of representation of parties before the courts and the AIRC742, and rights of intervention in proceedings. Part 21 deals with matters which apply only to the State of Victoria, and extends the operation of certain provisions of the Act. This is necessitated by the earlier referral of industrial matters to the Parliament of the Commonwealth by the Commonwealth Powers (Industrial Relations) Act 1996 (Vic). Part 22 is concerned with contract outworkers in Victoria in the textile, clothing and footwear industry, and is confined in its operation to that State. Part 23 prescribes additional conditions of employment for "school-based apprentices" and trainees, in circumstances in which school-based apprentices are not covered by an award or a notional agreement preserving a State award which specifies additional conditions for school-based apprentices. There are Schedules to the Act. 737 Section 832. 738 Section 833. 739 Section 848. 740 Section 849. 741 Section 850. 742 Section 854. Callinan Schedule 1 sets out detailed regulations for the registration, control and accountability of industrial organizations. Schedule 2 contains definitions additional to those in ss 4, 5, 6 and 7. Clause 2 of Sched 2 prescribes the circumstances in which a reference to "employee" in the Act has its ordinary meaning, subject to sub-ss 5(3) and (4), as distinct from the meaning given by s 5. Similarly, cl 3 of Sched 2 sets out the circumstances in which a reference to "employer" in the Act has its ordinary meaning, as distinct from the meaning set out in s 6 of the Act. Schedule 4 repeats the words of the Termination of Employment Convention 1982, established at the General Conference of the International Labour Organisation, and Sched 5 the Workers with Family Responsibilities Convention 1981, established at the General Conference of the International Labour Organisation. Both of these, together with other international instruments to which the Commonwealth is a party are referred to and adopted in parts of the Act743. Schedule 6 makes provision for transitional arrangements for parties bound by federal awards, in order to deal with the position of certain employers who were bound by federal awards immediately before the Amending Act began. It preserves the effect of pre-existing awards744 for a maximum period of five years745 in cases in which those employers are employers (within the ordinary meaning of the term) who are not covered by the definition of "employer" in s 6(1)746. The Schedule also provides for the variation and revocation of awards preserved by operation of the Schedule, and the procedure for dealing with industrial disputes involving such employers. Schedule 7 contains the transitional arrangements for federal agreements (certified agreements and AWAs) which existed at the commencement of the principal provisions of the Amending Act on 27 March 2006. Pre-existing certified agreements are expressed to continue to be subject to certain of the pre- Amending Act provisions which were repealed or amended747, but are otherwise 743 See ss 4(1), 106, 222(1)(d), 620, 623(2), 624(2) and (3), 630(1), 635(1)(e), 637(5), 642(5), 659(1), 671(b) and 688 of the Act. 744 Clause 4. 745 Clause 6, together with cl 2, definition of "transitional period". 746 Clause 2, definition of "excluded employer". 747 Clause 2. Callinan subject to the provisions of the amended Act. Certified agreements made with excluded employers are also continued in operation subject to a number of (repealed) provisions standing in the Act prior to its amendment748. AWAs existing before the amendments too are continued in force and effect, subject to a number of provisions found in the Act before the Amending Act749, but are otherwise subject to the operation of the Act as amended. Awards made under s 170MX3 of the Act before its amendment are continued in force subject to a number of provisions found in the Act prior to amendment750 but are also otherwise subject to the Act as amended751. Further, the Schedule sets out what the relationship between pre-amendment agreements and an Australian Fair Pay and Conditions Standard is to be. the Schedule 8 transitional is concerned with treatment of State employment agreements and State awards. An employee and employer, as defined in ss 5 and 6, who are parties to an individual State agreement, or parties to, or bound by a collective State agreement, are deemed by the Schedule to be parties to, and bound by, a new federal instrument called a "preserved individual State agreement" or a "preserved collective State agreement"752. This Schedule prescribes the operative effect of each of those new federal instruments, and the terms of them, together with the means by which such agreements may be varied, enforced or terminated. The same Schedule provides for the creation of a new federal industrial instrument called a "notional agreement preserving State awards"753, which is taken to apply to all employees in a single business or part of a single business, and their employer (as defined in ss 5 and 6), in circumstances in which the terms and conditions of employment of one or more employees were not determined under a State employment agreement, and were determined in whole or in part under a State award, immediately before the commencement of the principal provisions of the Amending Act on 27 March 2006. The Schedule further provides for the parties bound by such a notional agreement, the terms, effect and operation thereof, and the manner of varying, enforcing and terminating such notional agreements. 748 Clause 13. 749 Clause 17. 750 Clause 23. 751 Clause 24. 752 Clauses 3 and 10. 753 Clause 31. Callinan Schedule 9 prescribes the rules for the transmission of the obligations of employers in cases in which a business has been transferred from one person to another in circumstances in which the employer's obligations arise from a transitional industrial instrument754. The operative effect of each kind of transitional industrial instrument, and the powers of the AIRC in relation to such transmissions, are prescribed by this Schedule. Schedule 10 provides for the transitional registration of an existing State- registered association755 under the Act, and prescribes certain of the rights and obligations of transitionally registered associations of employees. Transitional registration can be cancelled by the Federal Court756 or the AIRC757 or a Registrar758. Registration under the Schedule of a transitionally registered association ends when registration is cancelled, or when the association becomes an organization under the Act, or on the third anniversary of 27 March 2006. So far, I have referred only in passing to the objects of the Act, which deserved more attention than they received in argument. I now set them out759: "Principal object The principal object of this Act is to provide a framework for cooperative workplace relations which promotes the economic prosperity and welfare of the people of Australia by: encouraging the pursuit of high employment, improved living standards, low inflation and international competitiveness through higher productivity and a flexible and fair labour market; and establishing and maintaining a simplified national system of workplace relations; and 754 Clauses 2 and 3. 755 Clause 1 contains a definition of "State-registered association". 756 Clause 5(1). 757 Clause 5(5). 758 Clause 5(6). Section 4(1) defines "Registrar" as an Industrial Registrar or a Deputy Industrial Registrar. 759 Section 3. Callinan providing an economically sustainable safety net of minimum wages and conditions for those whose employment is regulated by this Act; and ensuring that, as far as possible, the primary responsibility for determining matters affecting the employment relationship rests with the employer and employees at the workplace or enterprise level; and enabling employers and employees to choose the most appropriate form of agreement for their particular circumstances; and ensuring compliance with minimum industrial instruments and bargaining processes by providing effective means for the investigation and enforcement of: standards, employee entitlements; and the rights and obligations of employers and employees, and their organisations; and ensuring that awards provide minimum safety net entitlements for award-reliant employees which are consistent with Australian Fair Pay Commission decisions and which avoid creating disincentives to bargain at the workplace level; and supporting harmonious and productive workplace relations by providing flexible mechanisms for the voluntary settlement of disputes; and balancing the right to take industrial action for the purposes of collective bargaining at the workplace level with the need to protect the public interest and appropriately deal with illegitimate and unprotected industrial action; and ensuring freedom of association, including the rights of employees and employers to join an organisation or association of their choice, or not to join an organisation or association; and protecting the competitive position of young people in the labour market, promoting youth employment, youth skills and community standards and assisting in reducing youth unemployment; and family assisting employees responsibilities effectively through the development of mutually beneficial work practices with employers; and their work and to balance Callinan respecting and valuing the diversity of the work force by helping to prevent and eliminate discrimination on the basis of race, colour, sex, sexual preference, age, physical or mental disability, marital status, religion, political opinion, national extraction or social origin; and responsibilities, pregnancy, family assisting in giving effect to Australia's international obligations in relation to labour standards." It can be seen from those objects that the whole purpose of the Amending Act is not just to affect, but is to govern completely, all aspects of the relationship between employers and employees, without any attempt to connect, even by the narrowest of threads, those objects with some implementation of the corporations power. The opening words are that the principal object is "to provide a framework for cooperative workplace relations" and thereafter there is not to be found any reference of any kind in the section to corporations or the corporations power. Stated objects of legislation are not to be put aside lightly. They may be relevant in two particular respects: in influencing, subject to other clear indications to the contrary in the legislation in question, the construction of all sections of it upon which they can bear; and, by providing a clear insight into the true, substantial, or actual nature and character of the legislation in question, and of the power to which the legislators are in reality looking, and need to look, in enacting it. In a passage unaffected by the fact of their dissent, Gleeson CJ and Kirby J said in the recent case of McKinnon v Secretary, Department of Treasury760 that judgments about the meaning and effect of legislation have to be made "not ... in a normative vacuum [but] in the context of, and for the purposes of, [the stated object of the Act]"761. Their Honours added that the objects clause there was the "premise" from which the construction of the legislation should begin762. It is of significance that the objects provision in this case is entirely bereft of any reference, not only to corporations but also to the financial or trading activities of corporations. This rather suggests that the drafters and the legislators may have found it difficult, in the objects provision, to make the connexion that the Commonwealth now seeks to make between the corporations power and the Amending Act. I do not overlook the definitions sections which are said to supply the necessary constitutional connexion. I simply observe that having regard to the fact that the Act cannot, on any view, constitutionally cover all aspects of the national economy, there is disconformity between the language of universality in the objects, and the constitutional reality of less than that. 760 (2006) 80 ALJR 1549; 229 ALR 187. 761 (2006) 80 ALJR 1549 at 1551 [5]; 229 ALR 187 at 189. 762 (2006) 80 ALJR 1549 at 1551-1552 [5]; 229 ALR 187 at 189. Callinan It has been said more than once that an enactment may be concerned with more than one subject763. So much can be readily accepted. It has also been said that the Commonwealth Parliament may attempt, but fail, to enact legislation under one head of power, yet still achieve constitutional validity in the courts under some other, apparently previously overlooked, power764: that in effect it may score a bullseye by aiming at a different target altogether (the "accidental bullseye" proposition). It has also been held765, indeed the joint judgment in this case so states766, that there is no constitutional proscription upon the achievement indirectly of what could not be done directly (the proposition of "indirect result")767. Claims however of accidental bullseyes and indirect results are not merely unconvincing. They have this further unsatisfactory aspect. When the Commonwealth comes to this Court, to contend validity on either of those bases, it asks the Court to do what the legislature was itself unwilling or unable to do: to strip-mine the Constitution to try to discover in it, or extend, for the Commonwealth some (any one will do) supportive head of power, express or 763 Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353 at 400; Seamen's Union of Australia v Utah Development Co (1978) 144 CLR 120 at 154; Actors and Announcers Equity Association v Fontana Films Pty Ltd (1982) 150 CLR 169 at 192-194; Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 261; Re F; Ex parte F (1986) 161 CLR 376 at 387; Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 656; Leask v The Commonwealth (1996) 187 CLR 579 at 764 See, eg, Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1; Northern Suburbs General Cemetery Reserve Trust v The Commonwealth (1993) 176 CLR 555. 765 Pidoto v Victoria (1943) 68 CLR 87 at 101 per Latham CJ; Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union (2000) 203 CLR 346 at 359-360 [29] per Gleeson CJ. The opposite was submitted by Sir Maurice Byers QC in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 53 (arguendo). 767 Contrast the early case of Bird v Holbrook (1828) 4 Bing 628 at 645 [130 ER 911 at 917] per Burrough J: "The Plaintiff was only a trespasser: if the Defendant had been present, he would not have been authorised even in taking him into custody, and no man can do indirectly that which he is forbidden to do directly." Callinan implied768. The absence of any reference in the objects provision to corporations, and the making of the connexion by distributive definition only, suggests that this is the process that the Commonwealth is inviting the Court to undertake here if all else were to fail. At the very least invocation of these propositions is a cause for pause, and provokes scepticism and close scrutiny, on grounds of improbability, uncertainty, or possible lack of candour on the part of the legislature. In my opinion the jurisprudence of this Court has not been enhanced by the application of the doctrine of indirect operation. Two examples, on dicta from both of which the Commonwealth relied, suffice to make the point. The first is Murphyores Incorporated Pty Ltd v The Commonwealth769. There, the Commonwealth wished to assert control of the environment of Fraser Island in Queensland. It initiated an inquiry under s 11(2) of the Environment Protection (Impact of Proposals) Act 1974 (Cth) and s 112 of the Customs Act 1901 (Cth) into the environmental aspects of a decision by the Minister for Minerals and Energy whether to approve the exploitation of concentrates of zircon and rutile to be extracted from the sands of the island. Before the companies that held the mineral rights lawfully granted by the State could export the concentrates, they needed the written consent of the Minister for Minerals and Energy. The Minister declined to grant a permit until the completion of the inquiry which he had initiated. The companies sought an injunction in this Court to restrain the Commissioners from proceeding with the inquiry. They argued that the relevant regulations were not concerned with the anterior operations of mining and processing, and that to take into account the incidents of these was to have regard to extraneous matters: that the question whether processed materials should be allowed to be exported did not have any environmental aspect. They further argued that the exercise of a power for purposes extraneous to it was bad, in substance, an argument that the Commonwealth was doing indirectly, seeking to control an it had no internal State environmental matter, over which constitutional power, by the device of reliance upon constitutional powers that it might have. The principal judgment refusing the injunction was given by Stephen J, with whom Barwick CJ, McTiernan J and Jacobs J agreed, Mason J writing an extensive judgment to a similar effect. All members of the Court were of the view that the legislation and the institution of the inquiry under it were a valid 768 In R v Burgess; Ex parte Henry (1936) 55 CLR 608 at 676-677, Evatt and McTiernan JJ said that s 15A of the Acts Interpretation Act 1901 (Cth), which provides that every Commonwealth Act is intended to be within power, "cannot be applied so as to perform [a] feat which is in essence legislative not judicial". 769 (1976) 136 CLR 1. Callinan exercise of the trade and commerce power. Stephen J accepted770 that the control of the plaintiffs' mining operations and of their effect upon the local environment was "essentially a matter for the State". Notwithstanding that undoubted truth, his Honour went on to hold that, because the power to control exports could be directed to ends such as trade embargoes or boycotts, and defence, it could also be used to protect local species of flora or fauna771. His Honour was of the opinion that the only limit upon the considerations to which the responsible Minister could have regard was an absence of bona fides in granting or refusing a permit to export, that is, in the sense of reliance upon, for example, corrupt, entirely personal or whimsical considerations772. His Honour held that because the power over exports was absolute, even the slightest of connexions with that end, of export, justified the interference that the Commonwealth's legislation and conduct involved. Giving the word "export" as much generality as one may, one still cannot rationally find somewhere in it the words or concept of a State or local "environment". On the reasoning of the Court, if a commodity of any kind, grown, mined, manufactured or processed anywhere in Australia is exported, the federal government would have large powers of control over the conditions of any aspect of its production. Even the Engineers' Case773 or the most extended application of it, and the "generality doctrine"774 cannot be authority for that. The other example, The Tasmanian Dam Case775, also involved the intrusion by the Commonwealth, by legislation and not acquisition on just terms, this time under the asserted head of the external affairs power, upon three, to adopt the language of Stephen J in Murphyores, "essential functions of a State", the supply of hydro-electric power to its residents, the environment of a local area of a State, and the use of State land as the State wished. This Court upheld the constitutional validity of that intrusion, thereby allowing the Commonwealth to achieve, by very indirect means, the use, I would say misuse, of the external affairs power, by reliance upon an international arrangement of a kind, and 770 See (1976) 136 CLR 1 at 9. 771 (1976) 136 CLR 1 at 13-14. 772 (1976) 136 CLR 1 at 12. 773 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 774 See Pt IV, Div 2 of these reasons. 775 The Commonwealth v Tasmania (1983) 158 CLR 1. Callinan having an impact which I do not believe the founders would have countenanced, and for which the Constitution, either textually or otherwise, does not provide776. The Act here requires for its validity at least in part the application of the doctrine of indirect operation777. For that reason, the capacity for intrusiveness upon essential State functions that its application has, the Act deserves sceptical and close scrutiny. PART III. HISTORY RELEVANT CONSTITUTIONAL AND POLITICAL I turn now to relevant history. No one in this case suggests that the Engineers' Case should be overruled, and indeed it must be accepted that the principles which it states, subject to some qualifications that I will only mention now, but refer to more extensively later, are still binding. The qualifications are those to be found in Melbourne Corporation v The Commonwealth778 and, very Commonwealth779. Both of those cases suggest a realization on the part of the Court that the Engineers' Case went too far in favour of the Commonwealth, and that any unqualified application of it had the capacity to reduce unacceptably the constitutional status and role of the States. The Engineers' Case is part of the relevant history, but, as an examination of it will show, stands for little to assist in this case. Judges now acknowledge that the history of the making of the Constitution, especially the most reliable account of it, the statements made in 776 In argument ([2006] HCATrans 215 at 1502-1514) it was suggested that perhaps too little time passed between argument and decisions in The Tasmanian Dam Case. In the Engineers' Case oral argument finished on 2 August 1920 and judgment was delivered four weeks later. 777 By contrast, s 96 of legitimately constitutionally enable the Commonwealth to achieve ends indirectly and without offence to other provisions and rights. It provides: for example, does the Constitution, "During a period of the Commonwealth and thereafter until the Parliament otherwise provides, the Parliament may grant financial assistance to any State on such terms and conditions as the Parliament thinks fit." the establishment of ten years after 778 (1947) 74 CLR 31. 779 (2003) 215 CLR 185. Callinan the Constitutional Convention Debates780, is highly relevant to an understanding of it. In Cole v Whitfield the Court said this781: "Reference to the history ... may be made, not for the purpose of substituting for the meaning of the words used the scope and effect – if such could be established – which the founding fathers subjectively intended the section to have, but for the purpose of identifying the contemporary meaning of language used, the subject to which that language was directed and the nature and objectives of the movement towards federation from which the compact of the Constitution finally emerged." It seems to me that the distinction which the makers of that statement sought to make, between subjective intention, and the meaning of the language used, the subject of it, and the nature and objective of the movement towards federation in constitutional discourse, is in truth a distinction without a difference. In particular, "the subject to which that language was directed" can only be the subject identified by the speakers about it, and unless they were being disingenuous, their stated subjective intentions and the subject of their language were one and the same. In his paper, "The Constitutional Commission or The Inescapable Politics of Constitutional Change"782, Professor Davis783 did not doubt that a knowledge of a history of a Constitution was essential for its understanding and interpretation784: "A constitution, it is often said, is what the judges say it is. In its proper context, this is unquestionably true. But it is equally true that it is 780 Being the record of the Constitutional Conference in Melbourne in 1890, the Constitutional Convention in Sydney in 1891, the Constitutional Convention in Adelaide in 1897, which had later sessions in Sydney in 1897, and the Constitutional Convention in Melbourne in 1898. 781 (1988) 165 CLR 360 at 385 per Mason CJ, Wilson, Brennan, Deane, Dawson, 782 Davis, The Constitutional Commission or The Inescapable Politics of Constitutional Change, (1987). 783 Professor Rufus Davis, then Emeritus Professor of Politics at Monash University and Barrister-at-Law at the Victorian Bar. 784 Davis, The Constitutional Commission or The Inescapable Politics of Constitutional Change, (1987) at 31-32. Callinan more than this. Like any institution, a constitution is first and foremost its history. It is the memories and the experience of all those who have ever lived by it, and of all those who continue to live by it. It is the written commentaries upon learned discussions, the controversies, the public inquiries, the parliamentary debates and the referenda polemics." judicial pronouncements, the the In XYZ v Commonwealth785, a case concerning the external affairs power, Heydon J and I said the following, which is unaffected by the fact that our decision was a dissenting one786: "These inquiries seem pointless unless, in general, the meaning of an expression in the Constitution like 'external affairs' comprises the meanings which skilled lawyers and other informed observers of the federation period would have attributed to it, and, where the expression was subject to 'dynamism'787, the meanings which those observers would reasonably have considered it might bear in future. What individual participants in the Convention debates said it was intended to mean, or meant, either during those debates or later, is no doubt immaterial, save to the extent that their linguistic usages are the primary sources from which a conclusion about the meaning of the words in question can be drawn. Further, no doubt the mere fact that a particular instance of the expression 'external affairs' was not foreseen, or could not have been foreseen, in 1900, does not conclusively indicate that the instance in question could not now fall within it788. But, subject to considerations of those kinds, it might be asked whether it is not legitimate to seek to measure the ambit of the power by reference to the meaning which, in 1900, that expression bore or might reasonably have been envisaged as bearing in the future." The two quoted passages from the cases state the bare minimum of the utility of the Convention Debates789. True it is that the Constitution does not contain any equivalent of s 15AA of the Acts Interpretation Act 1901 (Cth), 785 (2006) 80 ALJR 1036; 227 ALR 495. 786 (2006) 80 ALJR 1036 at 1070 [153]; 227 ALR 495 at 537. 787 Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 496 [23] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ. 788 Victoria v The Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416 at 482 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ. 789 See also Singh v The Commonwealth (2004) 222 CLR 322 at 424-425 [295] per Callinan which insists upon the preference for a purposive construction if it is available, or an equivalent of s 15AB of that Act which permits courts to refer to such extraneous materials as second reading speeches and explanatory memoranda, but there is reason why a similar approach should be adopted in construing the Constitution790, particularly when its history is so well and extensively laid out in the Debates, and in circumstances in which it can reasonably be inferred that what was said in debate was either clearly adopted or could be seen to reflect, not invariably but usually ultimately, a substantially consensual approach. Furthermore, the speeches and comments made in debate can be seen to have generally been made sincerely and constructively, and not upon the basis of politics and divisions. Although there were some differing views expressed by McHugh J and me in Woods v Multi-Sport Holdings Pty Ltd791, as to the use of extraneous materials, they related to some matters and facts only. Neither of us doubted that recourse could be had to relevant indisputable history792. The record of the proceedings of the Conventions is indisputable history as are the repeated relevant referenda and their failure, to which I will later refer. In Plaintiff S157/2002 v The Commonwealth793 I pointed out that Sir Robert Menzies, an experienced politician as well as a constitutional lawyer, said in his memoir Afternoon Light794 that constitutional law in a federal system is "a unique mixture of history, statutory interpretation, and some political philosophy". Part, indeed an essential, if not the most illuminating, aspect of the history of the Constitution is the language of the founders in the Convention Debates with respect to the provisions which they debated at great length, at 790 An analogy may be made with Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304-305 per Gibbs CJ, 310-311 per Stephen J, 320 per Mason and Wilson JJ, 334 per Aickin J (dissenting), in which a statute was construed purposively without any direction to that effect from the Acts Interpretation Act 1901 (Cth). 791 (2002) 208 CLR 460 at 478-481 [64]-[70] per McHugh J, 513-515 [168]-[169] per 792 See (2002) 208 CLR 460 at 480 [67] per McHugh J (citing Dixon J in Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 196), 511-512 [165] 793 (2003) 211 CLR 476 at 514-515 [108]; later cited in Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 37 [12] per Gleeson CJ, Gummow and Hayne JJ. 794 Menzies, Afternoon Light, (1967) at 320. Callinan much greater length it may be said, than the authors of the United States Constitution, but with the advantage of a sound knowledge of that Constitution and how it had operated and been construed for more than 100 years. And if two other things are clear from the Convention Debates they are that any federal power in relation to industrial affairs was to be confined to those of an interstate character, and that the former colonies were to retain power over internal industrial disputes. As appears from those sections of the Debates and the clear recollection of Mr Higgins as an enthusiastic participant in them, of their course and language, not long afterwards, to which I will refer, industrial matters and how power with respect to them was to be divided, were very much on the minds of the founders. Div 1: Early industrial relations tribunals Right from the beginning of the Debates and federation itself, industrial affairs were regarded as unique and quite separate affairs from others. Accordingly, the early federal parliaments were quick to exercise federal industrial power. And the power that they exercised was the power that they well understood was limited by the language and intent of the industrial affairs power to interstate disputes. Everything legislated thereafter until 1993 proceeded on that basis. The Commonwealth Court of Conciliation and Arbitration was established under the Commonwealth Conciliation and Arbitration Act 1904 (Cth), enacted pursuant to s 51(xxxv) of the Constitution. That Act conferred on the Conciliation and Arbitration Court both judicial and arbitral powers. In moving that the Conciliation and Arbitration Bill 1904 (Cth) be read a second time, the Minister for External Affairs, Mr Deakin, said this795: "The object of the measure has been stated to be, so far as its attainment may be possible, the establishment of industrial peace. The discussion upon the Bill ... has been concentrated upon the possibility or impossibility of achieving this task by legislative means." Later he said796: 795 Australia, House of Representatives, Parliamentary Debates (Hansard), 22 March 796 Australia, House of Representatives, Parliamentary Debates (Hansard), 22 March Callinan "What is sought to be done, therefore, is not, as is popularly supposed and currently stated, to endeavour to declare in an Act of Parliament what wages shall be paid or what conditions shall be observed in any particular trade. That is obviously and transparently impossible. What is sought to be done is to create a tribunal which, having the confidence of the public, and possessing all the knowledge that can be obtained in relation to any matter that may be brought before it, shall have authority to pronounce judgment between the disputants. It is not to pronounce judgment, be it observed, according to the bidding of the statute which creates it. On the contrary, the Court is to be launched upon its work with a larger and more general charter than that of any other Court in the world. ... The Court, when it comes to consider any propositions submitted to it, by way of complaint, either on the part of employer or employé, will look to no section of an Act which bids it fix such and such hours, wages, or conditions. What it will do will be to take evidence of the general conditions already obtaining in the trade in question. It will build upon facts as it finds them; it will take the experience which has wrought out the customs and conditions of employment. It will take these as existing, and endeavour to shape them in accordance with its own conceptions of equity and good conscience, based upon an examination of the facts." Mr Deakin spoke of a long-term goal797: "Our object is to see that, where other circumstances are equal, one and all shall pay the same and that a fair rate of wage for the same services; that competition, which is the life-blood of trade, shall not drain the life-blood of men, may not be pushed to that extreme, and that the advantage of the employer on the one side shall not be gained over the employer on the other, at the expense of the men, women, and children whom he employs. Equality of treatment in each business is the first end which is sought to be attained." Section 12(1) of the Commonwealth Conciliation and Arbitration Act 1904 (Cth), as a measure of the importance that the Parliament attached to maintenance of industrial peace, required the President of the Court to be a High Court Justice. The first President was O'Connor J (1905-1907). He was succeeded by Higgins J (1907-1920), and then Powers J (1921-1926). By 1926 there were two Deputy Presidents, Sir John Quick and Mr (Noel) Webb. In 1926 the Court's nexus with the High Court was broken, following legislative 797 Australia, House of Representatives, Parliamentary Debates (Hansard), 22 March Callinan reform798; a new Chief Judge was appointed to replace the President, and two additional judges were appointed. Interestingly, O'Connor J and Higgins J, as they were to become, had disagreed during the Convention Debates in Melbourne, 1898, about whether placitum (xxxv) should be included in the Australian Constitution at all. Mr O'Connor was opposed to its inclusion. Mr Higgins was in favour799: "Mr O'CONNOR: It must not ... be assumed that those of us who oppose the placing of this power in the Federal Constitution are any less sympathetic with those troubles and disasters, which affect not only the workers but the whole community. We base our opposition to the insertion of this clause in the Federal Constitution upon this ground only – that the matter is a matter not for federal control but for state control. Mr HIGGINS: How could you deal with a shearing strike or a shipping strike in that way? How could that be a matter for state control? Mr O'CONNOR: I would point out to the honorable member that, after all, when you come to deal with these cases so as to settle them, you must settle the dispute between the original parties. You don't get rid of the dispute between the original parties by settling the extension and the indirect effects of the dispute; you must settle the dispute itself. Now, the dispute occurs in one state, and the dispute generally depends on the terms of a contract or on the terms of employment, so that, however widespread the consequences of that one dispute may be, in order to arrive at a settlement of a strike you must settle the dispute. Therefore you have to deal with a matter arising in a particular state subject to local conditions, and referring to a contract made by parties living in that state. It is a matter, therefore, which really, except in regard to its consequences, the Federal Commonwealth has no concern with. ... If this power to legislate is given at all, the next step in legislation must be, if it is to be effective, to grant compulsory powers, and you have to regard this matter as if the power was to be exercised in that way. Honorable members cannot deny that it can be exercised in that way, and the probabilities are that it will be exercised in that way. 798 Commonwealth Conciliation and Arbitration Act 1926 (Cth), s 6. 799 Official Record of the Debates of the Australasian Federal Convention, (Melbourne), 27 January 1898 at 199-201. Callinan Mr HIGGINS: If the Federal Parliament is wise, will it not refuse to do an unwise thing? Mr BARTON: Are we not to assume, if we grant this power, that it will be fully exercised? Mr O'CONNOR: I would ask the honorable member (Mr Higgins) is he in favour of some form of compulsion? Mr HIGGINS: I am not in favour of anything at present but of leaving the thing to the Federal Parliament. Mr O'CONNOR: The honorable member, however, has given some attention to the subject, as he has to all subjects of a social character, and I would ask him what is his own opinion? If the honorable member is afraid to disclose his opinion to me – – Mr HIGGINS: I am not afraid of disclosing anything to you, but I want to make no false issue, but to leave the thing absolutely to the Federal Parliament. Mr O'CONNOR: The honorable member is mistaken in saying that this is a false issue. We must consider how the power is likely to be used. Mr HIGGINS: Will you trust the Federal Parliament? Mr O'CONNOR: I will trust the Federal Parliament when it gets a power of this kind to do what it considers to be effective, and the only way in which it can deal effectively with this matter is to make the power in some way compulsory. I will trust the Federal Parliament with any matter which is a matter of federal concern. The best way of proving that this is not a matter of federal concern is to inquire how it is likely to operate if the power is to be exercised in the way in which it is certainly likely to be exercised. Mr ISAACS: Surely that is not a correct principle to go upon? Before giving a man a vote would you inquire how he is likely to use it? Mr O'CONNOR: That is not an analogy. Mr ISAACS: It is very like one. Mr O'CONNOR: When you are dealing with a power of this kind, the very best way to discover whether it is a federal power is to consider how it may be exercised." Callinan Mr Higgins reiterated that he had favoured a broader power than s 51(xxxv) came to provide, as his later speech in the House of Representatives in 1903, as the Member for Northern Melbourne, reveals800: "My first proposal at Adelaide was to insert the words 'industrial disputes extending beyond the limits of any one State.' Those words read in conjunction with the words in the early part of the section would have amounted to a provision as follows:– 'The Parliament shall have power to make laws for the peace, order, and good government of the Commonwealth with respect to industrial disputes extending beyond the limits of any one State.' If those words had been adopted they would have permitted of any kind of legislation with regard to industrial disputes of a widespread character. ... Throughout the whole of the Convention debates, I felt that labour legislation should be exclusively vested in the Commonwealth Parliament. Unfortunately, members had come to the Convention with their minds prejudiced in favour of certain theories which they had derived from the antiquated Constitution of the United States. There was a general belief in the Convention that factory legislation should be left to the States['] Parliaments. It was utterly impossible to overcome that feeling." (emphasis added) I interpolate that it is not for an unelected institution such as a court, even this one, to cast aside as irrelevant the overwhelming sentiment which found explicit expression in the Constitution of a very strict division between federal and State industrial power, whether corporations were involved or not. Mr Higgins continued801: "Therefore, I had to see how the Commonwealth Parliament could, to some extent, obtain control over industrial disputes. Personally, I have always felt that Australia is ripe for a unity of a much higher character than it has obtained. I think that if members had not gone to the Convention with their judgments prejudiced in favor [sic] of the sanctity 800 Australia, House of Representatives, Parliamentary Debates (Hansard), 12 August 801 Australia, House of Representatives, Parliamentary Debates (Hansard), 12 August Callinan of the United States Constitution, we should have obtained a much better charter of government than that which we did. However, the fact remains that we have, in our Constitution, words the ambit of which I cannot foresee, and the power of which cannot at present be gauged." It was Higgins J, as President of the Court of Conciliation and Arbitration, who handed down the "Harvester judgment" in 1907 – Ex parte H V McKay802. In that case he used the expression, "minimum wage"803. His Honour's determination of the "minimum wage" there was not, however, enforced804, because a constitutional challenge to the Act in question, the Excise Tariff 1906 (Cth), was successful, by majority (Griffith CJ, Barton and O'Connor JJ, Isaacs and Higgins JJ dissenting)805. The former reasoned that specific constitutional powers could not be allowed to override others, or to undermine the Constitution generally, and specifically, that the taxation power could not be used for industrial purposes, that is, to achieve an indirect result. I do not think that the reasoning of Griffith CJ, speaking for the majority, depends wholly upon the doctrine of implied immunities or reserved or continued powers. To construe the Constitution as a whole, and with particular regard to the distinct powers conferred by each of the placita of s 51, as his Honour did, is not merely to do that. Griffith CJ said this806: "It follows from what has been said that the power of taxation is subject to some limits. On the other hand, so long as the prescribed limits are not transgressed, the Parliament may select the persons or the things in respect of which the exercise of the power is to operate. It is contended for the Commonwealth that this power of selection is only limited by the express words of placitum ii and sec 88, and that the discrimination or selection may be made to depend upon any other condition whatever, including conditions relating to personal conduct, or the regulation of domestic industrial conditions. The defendants contend, on the other hand, that the limitation of the power of selection is to be found, not only in the express words of sec 51, placitum ii, and sec 88, but also in other parts of the Constitution, so that the grant of the power of taxation, which, as already said, is an independent power, must be so construed as to be not 802 (1907) 2 CAR 1. 803 (1907) 2 CAR 1 at 4. 804 See Higgins, "A New Province for Law and Order: Industrial Peace through Minimum Wage and Arbitration", (1915) 29 Harvard Law Review 13 at 15. 805 R v Barger; The Commonwealth v McKay (1908) 6 CLR 41. 806 (1908) 6 CLR 41 at 71-72. Callinan inconsistent with the other provisions of that instrument. If this latter contention be rejected, it would follow that the power of taxation is an overriding power, which would enable the Parliament to invade any region of legislation, although it is impliedly forbidden to enter it, and this by the simple process of making liability to the taxation depend upon matters within those regions. In this connection I will read a passage from the judgment of this Court in Peterswald v Bartley807: – 'In construing a Constitution like this it is necessary to have regard to its general provisions as well as to particular sections, and to ascertain from its whole purview whether the power to deal with such matters was intended to be withdrawn from the States, and conferred upon the Commonwealth. The Constitution contains no provisions for enabling the Commonwealth Parliament to interfere with the private or internal affairs of the States, or to restrict the power of the States to regulate the carrying on of any businesses or trades within their boundaries, or even, if they think fit, to prohibit them altogether. That is a very important matter to be borne in mind in considering whether this particular provision ought to be construed so as to interfere with the States' powers in that respect. If the majority of the Supreme Court were right, the Constitution will have given to the Commonwealth, and withdrawn from the States, the power to regulate their internal affairs in connection with nearly all trades and businesses carried on in the States. Such a construction is altogether contrary to the spirit of the Constitution, and will not be accepted by this Court unless the plain words of its provisions compel us to do so." Griffith CJ then drew808 an analogy with an excess of power on the part of a local authority the powers of which were defined by statute809. Years later, Higgins J wrote about the Court of Conciliation and Arbitration in an article in the Harvard Law Review, "A New Province for Law and Order: Industrial Peace through Minimum Wage and Arbitration"810. The "new province" was "relations between employers and employees"811. He the Court of explained the constitutional and statutory background of 807 (1904) 1 CLR 497 at 507. 808 (1908) 6 CLR 41 at 75-76. 809 See Rossi v Edinburgh Corporation [1905] AC 21 at 25 per Earl of Halsbury LC. 810 (1915) 29 Harvard Law Review 13. 811 (1915) 29 Harvard Law Review 13 at 13. Callinan Conciliation and Arbitration, and referred to the exceptional nature of the limited power conferred upon the Commonwealth with respect to industrial affairs812: "Following the example of the United States Constitution, the [Australian] Constitution left all residuary powers of legislation to the States; and the theory generally held at the time of our constitutional convention was that each State should be left to deal with it own labour conditions as it thought best. But an exception was made, after several discussions, in favour of labour disputes which pass beyond State boundaries and cannot be effectually dealt with by the laws of any one or more States. Just as bushfires run through the artificial State lines, just as the rabbits ignore them in pursuit of food, so do, frequently, industrial disputes. In pursuance of this power, an Act was passed December 15, 1904, constituting a Court for Conciliation, and where conciliation is found impracticable, arbitration. The arbitration is compulsory in the sense that an award, if made, binds the parties. The Act makes a strike or a lockout an offence if the dispute is within the ambit of the Act – if the dispute is one that extends beyond the limits of one State. In other words, the process of conciliation, with arbitration in the background, is substituted for the rude and barbarous processes of strike and lockout. Reason is to displace force; the might of the State is to enforce peace between industrial combatants as well as between other combatants; and all in the interest of the public." Higgins J concluded with a summation of the matters which had exercised the minds of the founders in settling upon the language of s 51(xxxv) that they "It will be asked, however, what is the net result of the Court of Conciliation? Have strikes ceased in Australia? The answer must be that they have not. There have been numerous strikes in Australia, as elsewhere. But since the Act came into operation there has been no strike extending 'beyond the limits of any one State.' Those who are old enough to recall the terrible shearers' strike and seamen's strike of the 'nineties,' with their attendant losses and privations, turbulence and violence, will realize how much ground has been gained. The strikes which still occur are strikes within a single State, and disputes within a single State are outside the jurisdiction of the Court." 812 (1915) 29 Harvard Law Review 13 at 13-14. 813 (1915) 29 Harvard Law Review 13 at 37-38. Callinan An amending Act814 reconstituted the Court of Conciliation and Arbitration in 1926, and inserted a new s 18B, which provided for intervention, by the Commonwealth Attorney-General, "in the public interest in any proceeding before the Court in which the question of standard hours of work in any industry or of the basic wage is in dispute, in relation to either of those questions"815. Conciliation Commissioners were also provided for in the 1926 amending legislation816. The changes in 1926 were intended to be temporary only: the government had proposed in that year that there be a new placitum (xl), to enable the Commonwealth Parliament to legislate for and regarding "authorities with such powers as the Parliament confers on them with respect to the regulation and determination of terms and conditions of industrial employment and of rights and duties of employers and employees with respect to industrial matters and things". Speaking only a day after the Prime Minister, Mr Bruce, had moved that the Constitution Alteration (Industry and Commerce) Bill 1926 (Cth) be read a second time817, Mr Latham, subsequently Chief Justice of this Court, said in moving that the Conciliation and Arbitration Bill 1926 (Cth) be read a second time818: "It must be remembered that no single State is able to deal effectively with an interstate dispute, even when the dispute is made interstate merely by the service of a printed claim. If we wish to secure industrial peace through the medium of the law, there must be some means of dealing with these disputes on a federal basis. Therefore the Government is of opinion that it is necessary to continue the Commonwealth Arbitration Court, and to make certain improvements to it. ... I wish to make it perfectly plain at the outset that [the Bill] is designed to deal only with the period intervening between the 30th June and the time when the proposed constitutional amendments have been voted on by the people. The Government is of opinion that our present constitutional 814 Commonwealth Conciliation and Arbitration Act 1926 (Cth). 815 Section 18B(1). 816 Section 18C. 817 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 May 818 Australia, House of Representatives, Parliamentary Debates (Hansard), 21 May Callinan powers are not sufficient to enable it to deal satisfactorily with the industrial situation, and it does not propose to introduce an elaborate and carefully worked out scheme for the settlement of disputes upon the basis of our present limited powers. If our powers are extended it will become possible to introduce an improved scheme providing for a common rule, and for other means of settling industrial disputes than those provided under the Arbitration Act. I do not wish to be misunderstood on this point. If the proposed constitutional amendments are approved by the people it will not be necessary for parties to bring themselves to the stage of a formal dispute, for it will be possible to establish authorities which will have power industrial employment, irrespective of the existence of a dispute. It will also be possible to preserve the existing Arbitration Court, to extend and improve its powers, and to add other means of determining industrial conditions. This measure is not a full treatment of the subject, and it does not pretend to be such. In the circumstances, there would be no object in the Government seeking to walk delicately between the various decisions of the High Court in order to see how far it might go under its existing power. The proper thing to do is to face the whole problem, and to ask the people for whatever additional powers are necessary to enable it to deal effectively with industrial matters." (emphasis added) terms and conditions of to regulate Mr Latham explained that Justices of this Court, essentially for practical reasons, would no longer be Presidents or judges of the Conciliation and Arbitration Court819: "It is not proposed to appoint High Court judges to the Arbitration Court. That court will be entirely separate from the High Court. The provision that the President of the Arbitration Court must be a High Court judge will be repealed. There are various reasons which render it advisable to have the two jurisdictions entirely distinct from each other. Serious inconvenience of a practical nature now arises from time to time, because it is necessary to enlist the services of the President of the Arbitration Court to constitute a full bench of the High Court. Again, the President of the Arbitration Court, as a judge of the High Court, has on very many occasions to pronounce upon the validity of a procedure that he has adopted as President." Further changes were made to the Court, including in 1947 to enlarge the role of the Conciliation Commissioners. Then came the Boilermakers' Case820, 819 Australia, House of Representatives, Parliamentary Debates (Hansard), 21 May 820 R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254. Callinan in which the High Court declared the creation of the Conciliation and Arbitration Court to be unconstitutional, because it was empowered to exercise both arbitral and judicial functions. The Commonwealth Parliament accordingly created two separate bodies, the Commonwealth Conciliation and Arbitration Commission (later the Australian Conciliation and Arbitration Commission, and today the Australian Industrial Relations Commission), to exercise powers pursuant to s 51(xxxv) of the Constitution, and the Commonwealth Industrial Court (later the Industrial Division of the Federal Court and the Industrial Relations Court, today the Federal Court), to exercise federal judicial power. Enough appears to demonstrate that the founders never intended the Constitution to confer any intrastate industrial power upon the Commonwealth despite that some of the delegates might have wished it otherwise. The contrary Subsequent legislators well understood that sentiment was too strong. constitutionally too therefore they could not do so. I am not prepared to ignore that sentiment or the expression of it which s 51(xxxv) manifests. What also is apparent is that none of the lawyers, politicians and judges to whom I have referred even remotely contemplated intervention by the Commonwealth into industrial affairs, other than by enactments under s 51(xxxv). The whole tenor of the Convention Debates about industrial affairs was that they could be divided into two categories only, intrastate and interstate. No one suggested that the debate, so far as corporations were concerned, was an arid one, because the industrial affairs of these were already within the Commonwealth's grasp under the corporations power. Div 2: Failed attempts to gain power The point that I have just made is reinforced by the repeated failure of the referenda to enlarge industrial power. Part of the history, as I have shown, of s 51 that the Commonwealth has had to accept, and had generally accepted until 1993, is that it has no general industrial power, other than the power found in s 51(xxxv). It has long, from 1910821 at least, been understood by the Parliament that it could only exercise general, effectively almost exclusive, legislative powers, and with respect to corporations as well, for industrial affairs, if the Constitution were amended. To effect these amendments the Parliament sought changes on four occasions by referenda, in, respectively, 1911, 1913, 1926 and 1946. The speeches in Parliament regarding the Bills for these are more even than the polemics of referenda of which Professor Davis wrote, and to whose writings I earlier 821 See Australia, House of Representatives, Parliamentary Debates (Hansard), 18 October 1910 at 4703-4704, quoted below. Callinan referred822. They are revelatory of the understanding of lawyers and legislators of the limited reach and application of the Constitution in its unamended form, in pursuance of not only the industrial affairs power, but also the corporations power. (a) The Constitution Alteration (Legislative Powers) Bill 1910 (Cth) for a referendum This Bill was for a referendum for amendments to ss 51(xx) and (xxxv) of the Constitution, so that the Commonwealth Parliament could legislate with respect to: "(xx) Corporations, including – the creation, dissolution, corporations; regulation, and control of corporations formed under the law of a State (except any corporation formed solely for religious, charitable, scientific or artistic purposes, and not for the acquisition of gain by the corporation or its members), including their dissolution, regulation and control; and foreign corporations, including their regulation and control. (xxxv) Industrial matters, including employment and the wages and conditions of employment and also including the prevention and settlement of industrial disputes." The Acting Prime Minister and Attorney-General, Mr Hughes, adopting a narrow and simplistic textualist approach to the Constitution, in disregard of the founders' clearly expressed intentions, somewhat petulantly said this of the current s 51(xx) in the second reading speech for the Bill for the referendum823: "I come now to corporations. Here again we find our powers shorn by the High Court interpretations of the Constitution. We thought that we had power with regard to making laws regulating corporations, because 822 Davis, The Constitutional Commission or The Inescapable Politics of Constitutional Change, (1987) at 32. 823 Australia, House of Representatives, Parliamentary Debates (Hansard), 18 October 1910 at 4703-4704 (emphasis added). Callinan paragraph xx of section 51 of the Constitution says that we can make laws with respect to – 'Foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth.' Upon that assumption the Anti-Trust Act was passed, sections 5 and 8 of which were drafted with a view to dealing, in what was hoped would prove effective fashion, with monopolies, and to prevent the people of this country from being entirely at the mercy of persons who control the means whereby we live. It was found, however, in the Huddart-Parker case, that we had no such power, that paragraph xx did not mean what it said, and that practically the only power we have is the power to deal with Once they have corporations before they commence operations. commenced operations we can do nothing whatever with them. The absurdity of this position becomes clearer when we look more closely into the judgment. We have power to prohibit corporations from engaging in any business at all, but we have no power to direct their operations when once they are launched in any business. We can apparently say to any corporation about to start, 'You shall not do anything,' but directly it starts it may do anything it pleases for all that we can do to it. Practically, then, we have the shadow of a power; the reality is taken from us. We thought that paragraph xx gave us complete power, and we had reason for that opinion, for the power which that paragraph purports to give was novel, and did not exist in any other Federal Constitution. It was put into the Constitution to give us, as it was thought, an added power. But it gives us nothing, or nothing of value." Much of what Mr Hughes then said824 of the approach of this Court to s 51(xxxv) has now been falsified by subsequent decisions of this Court and the legal fiction of paper disputes825. Significantly however, he did not suggest that the industrial affairs of corporations could be regulated other than under the express industrial affairs power: "Now, what is our power with regard to industrial matters? The High Court has put a narrow and technical meaning on the term 'industrial disputes,' and has decided that our power does not extend to the making of laws respecting collective bargaining or industrial agreements. We cannot place the sanction of the law over that most excellent and effective means of promoting and maintaining industrial peace – the industrial agreement. 824 Australia, House of Representatives, Parliamentary Debates (Hansard), 18 October 825 See Pt VII, Div 2 of these reasons. Callinan Again, in the Woodworkers' case it was held that arbitration was of a judicial character, and the Commonwealth law must not be inconsistent with the State law; that is to say, that the decision of a Wages Board in New South Wales or Victoria could not be interfered with by us. That is the apotheosis of absurdity. In the Jumbunna case there was, as I have said, an indication by the Court that industrial agreements are, to a certain extent, ultra vires. In the Broken Hill case, industrial disputes were defined in a way indicating limitations on the Commonwealth power, and in the Boot Trade case it was held that the common-rule provisions of our Act were ultra vires. The net result is, as Mr Justice Higgins has pointed out, that the Arbitration Court is hampered at every turn, and can do little or nothing." Because of his prominent, the establishment of the federation, the words of Mr Deakin, who was by then the Leader of the Opposition are relevant826: indeed perhaps decisive role "The Attorney-General last night passed with a gay bound over all those gulfs surrounding the real question at issue, which is the distribution of powers between the Federal and local Governments. He relied upon the presentation of a number of subjects to honorable members as capable of being best dealt with by the National Parliament, and in an absolute manner. The honorable gentleman won the applause of his party by putting before the House the argument that in achieving this programme, and for this purpose, the short and direct route was to give this Parliament, of which we are members, the power to magnify its office and opportunities, so as to enable us to achieve the nationalization of monopolies, taxation, and other objects which he set out. The honourable gentleman put before us the objects to be attained, and, so far as absolute silence could, he diverted our attention from what we should be sacrificing in our Federal Constitution, now based upon a fairly natural and healthy balance of powers in order to achieve these immediate ends. ... The relation of Governments to Governments to the man in the street appears a much less practical matter than the ends sought to be achieved according to his immediate programme. The real question in this House is not whether this industrial legislation supported by our honorable friends opposite is necessary. It is not even a question whether there should be a greater control over trusts and monopolies. On many, if not all, of these questions, honorable members on this side are prepared to take a progressive view. But these are not the questions immediately at issue. 826 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 October 1910 at 4806-4807 (emphasis added). Callinan The question is whether we are going to endeavour to achieve these ends by a great alteration of the national machinery which will be permanent – unless the people alter it back again – an alteration in the national machinery and character of our Constitution which will continue to be operative long after the immediate and particular object of the change has been accomplished." (emphasis added) "The strongest criticism that I have to offer of these Bills is that, judged by the standard of the highest Federalism – the complete development of local governing bodies – they fail – they proceed much too far in an opposite direction. They unduly centralize, and unduly discourage local development." Another Member who spoke against the Bill was the Member for Bendigo, Sir John Quick. I refer to his speech because of his role in the Conventions828 and for his co-authorship of the magisterial Annotated Constitution of the Australian Commonwealth. He said829: "Speaking as a Federalist, I think I can say that if these amendments are carried, they will mark the beginning of the end of the Commonwealth of Australia as a union of States. They will mark the beginning of the destruction and the degradation of the Australian States as political units and partners in a scheme for the government of the Australian people. It is regrettable to witness so many honorable members who support these amendments either wholly or partially, marching recklessly and joyously to the dismemberment of the Commonwealth. That is what it means, in my opinion. Disguise it as we may, pretend as much as we may that these amendments are merely intended to meet a specific case – to provide for matters as to which the State Legislatures have either neglected their work or have imperfectly performed their duty – there can be no doubt that if 827 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 October 828 Quick was an early advocate of federation and was the second of 10 Victorian delegates to the Convention Debates. He was knighted on 1 January 1901 for his outstanding contribution to federation. In that year, Sir Robert Garran and he published The Annotated Constitution of the Australian Commonwealth, a "monumental tome". See Serle (ed), Australian Dictionary of Biography, vol 11 829 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 October Callinan they are engrafted upon the Constitution they will deal a staggering blow to the State Legislatures and Governments." Sir John was anxious to emphasize that the Commonwealth Parliament was neither the only parliament with legislative responsibilities, nor the only means of ensuring accountability to electors. He was equally anxious to emphasize the role of the people in a democracy in which there are several polities830: "At any rate, if it be true, as alleged by some here in Australia, and by some in America, that the State Legislatures have omitted to exercise their powers in certain matters, and have neglected to carry out great or important reforms, whose fault is it? Who is responsible for that neglect or remissness? It is the fault of the electors, the people of the State who have the management of their own affairs, the choice of their own representatives, and the control of their constitutional government. Surely they can control their own local constitutional development without resorting to an outside power such as the Federal Parliament to assist them in wresting liberal concessions within their domains? It is a reflection upon their intelligence as a Democracy to say that they want to appeal to the Federal Parliament to grant redress of local grievances." Sir John, in saying this of the proposed enlargement of the corporations power, indicated his understanding of the reach of the power as it was then, and in my opinion, is, and should now be regarded831: "By this [proposal] it is intended to confer on the Federal Parliament a general power to deal with corporations, including their creation, regulation, control, and dissolution. There is apparently no limit to the class of corporations which are to be dealt with, except corporations formed solely for religious, charitable, scientific, or artistic purposes, and not for the acquisition of gain. ... Under that power there might be a special code of the most penal, harassing, and destructive character, for the purpose, not merely of facilitating the existence of and regulating corporate bodies, but of gradually destroying them, and, if necessary for party purposes, crushing them out of existence. ... Why is it proposed to secure Federal power to deal with corporations that may be of a purely local or domestic character? Why is it necessary to extend the Federal power in this direction? How is labour or capital or any one to gain by 830 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 October 831 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 October Callinan this grant of power to the Federal Parliament to tinker and interfere with every form of corporate enterprise throughout the Commonwealth, with the exception of charitable or artistic corporations? This is a straining of Federal authority justified neither by any circumstances of Australian history, nor by any public requirement." (emphasis added) And Sir John had this to say of the proposed enlargement of s 51(xxxv)832: to settle "There was a time when the Labour party used to be strong advocates of the settlement of industrial disputes by arbitration. That, indeed, was a great popular battle cry, and was the foundation of the Arbitration Act of New South Wales as well as other arbitration measures. We succeeded in inserting that provision in the Federal Constitution, conferring upon the industrial disputes by Commonwealth Parliament power arbitration where those disputes extend beyond the limits of any one State. Those words of limitation were used for Federal reasons. At that time it was obvious that the various State Parliaments with one exception were moving in the direction of establishing State tribunals for the settlement of disputes by arbitration. ... [Section 51(xxxv)] was certainly limited by the words, 'extending beyond the limits of a State' in the same way and for the same reason that the commerce power was limited to commerce among the States. Those words of qualification were in accordance with the Federal principles of the Constitution. It was thought that if we went further, and invaded the State domain, we should excite resentment and opposition on the part of the State Governments and Parliaments, which were then important factors in the Federal movement. It was felt that, in such circumstances, they would have opposed the Constitution as being not of a purely Federal character, since it invaded the State domain in industrial matters; just as they would have opposed the Constitution had it invaded the State domain in commercial matters." The Bill was passed833 and the proposal for which it provided was put to the voters in a referendum on 26 April 1911. The proposal was rejected. Only 832 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 October 833 No amendments were made to the proposed s 51(xx), however the proposed s 51(xxxv) which was eventually put to the people was this: "Labour and employment, including – The wages and conditions of labour and employment in any trade industry or calling; and (Footnote continues on next page) Callinan Western Australia voted in favour, and overall the percentage of affirmative votes was 39.42 per cent. (b) The Constitution Alteration (Corporations) Bill 1912 (Cth) for a referendum and the Constitution Alteration (Industrial Matters) Bill 1912 (Cth) for a referendum These Bills proposed similar amendments to ss 51(xx) and (xxxv) of the Constitution to those proposed in 1911. The suggested amendment of placitum (xxxv), however, was even more prescriptive, that the Commonwealth Parliament be allowed to legislate with respect to: "Labour, employment, and unemployment, including – the terms and conditions of labour and employment in any trade, industry, or calling; the rights and obligations of employers and employees; the maintenance of industrial peace; and the settlement of industrial disputes." The Attorney-General, Mr Hughes now filling that office, in moving that the Constitution Alteration (Corporations) Bill 1912 (Cth) be read a second time, exhorted the Parliament and the people to affirm the proposals because they would provide a satisfactory vehicle for nationalization, and expressed his dislike of the States as polities and their parliaments834: "[I]s the Commonwealth to be denied a power which is now exercised in every civilized country, by every municipality in the municipalization of public utilities? The tendency of the age is towards nationalization where public welfare is involved. For example, it is suggested in Germany to nationalize the iron and coal mines. Supposing it was suggested that the Commonwealth should have power to make its own rails, or to nationalize any industry for its own purpose, is it to be suggested that this is a power which the National Government ought not to be trusted with – that nationalization is some new or revolutionary proposal? What are the facts? Every day there are suggestions that the State Parliament of the prevention and settlement of industrial disputes, including disputes in relation to employment on or about railways the property of any State." 834 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 November 1912 at 5634-5636. Callinan Victoria, or the State Parliament of New South Wales, should launch out in some new direction of State activity. Is the National Parliament not to have a power that is freely entrusted to all Parliaments? We are asking for these powers in order that the Parliament may protect the people. There is no one power that we ask for that the States have not got, and there is no one power that we are asking for that Canada has not got. ... There is no question here of unification. There is no question of State rights. 'State rights' indeed is a mere tribal cry. It has been used to bolster up every privilege and every wrong. It was the cause of civil war in America[835]. It is now the slogan of reactionaries and plutocrats. This is not a question of State rights at all. It is not even a question of Commonwealth rights. It is a question of whether the people or the trusts shall rule. It is a question of whether the Government of this country shall be in the hands of irresponsible coteries who decline to give information; who treat the duly appointed representatives of this country with contumely and contempt; who defy the Courts of this country. It is not a question of State rights; it is a question which goes to the very root of Democracy." (emphasis added) The Member for Angas, Mr Glynn836, said this in reply837: "[The Attorney-General] seeks by the corporation power to get special power over corporations, apart from the creation, dissolution, and winding up. In the High Court, Mr Justice Higgins pointed out that if such a power existed, it would enable us to make special differentiation in our laws in 835 This was rebutted in later debate. Sir John Quick said that the American Civil War "arose from no imperfections in the Federal system of government, but out of a domestic question, namely, the question of slavery": Australia, House of Representatives, Parliamentary Debates (Hansard), 20 November 1912 at 5723. 836 P M Glynn was a lawyer, having studied at the Middle Temple in London and been called to the Irish Bar in April 1879. He came to Australia in 1880. In 1883 he was admitted as a practitioner in the Supreme Court of South Australia. He was junior Member for Light in the South Australian House of Assembly, and later the Member for North Adelaide. He was elected as one of the 10 South Australian delegates to the Convention Debates, and was elected Member for Angas in 1901. See Nairn and Serle (eds), Australian Dictionary of Biography, vol 9 (1983) at 30- 837 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 November 1912 at 5643. Callinan case of companies – to pass special laws in relation to some matters not within our competence in relation to ordinary persons. For instance, if a millionaire on one side of the street carried on operations which were detrimental to the public, he could not be controlled to the same extent as could two men or twenty men carrying on similar operations on the other side of the street. What we ought to aim at in all our laws is to bring all within their scope, whether companies or persons. ... If this proposition is accepted by the people as proposed, we shall have not only power to frame a general companies law applying throughout Australia, placing companies in the same position as citizens, and enabling us to create a juristic person who can do throughout Australia what can be done by any individual, but we shall have power to pass exceptional laws in regard to corporations that we cannot pass with regard to their competitors who are private individuals." And the Member for Parramatta, Mr Joseph Cook838, pointed out that the Attorney-General doubtless had in mind to exercise the additional power sought, if granted, to the fullest839: "We cannot approve of a proposal to tear up the Constitution, and throw it into the cauldron, without knowing exactly how it is going to come out. As to many of these matters, we have all along expressed our intention to deal with them in some reasonable and business-like way. We say that we do not desire to make an ordinary, reasonable, beneficial corporation the football of party politics, as our honorable friends opposite desire to make it. The power they are asking for would enable them to deal with all sorts of innocent and beneficial combinations; it would enable them to deal with butter factories, than which I can conceive of no more reasonable form of combination from the point of view of the man on the land. The Government wish to be able to deal with all sorts of combinations, and to declare them monopolies whether the facts fit the 838 Later Sir Joseph Cook, Prime Minister of Australia from June 1913 to September 1914. Sir Joseph was a trade unionist and began his public life with the Labor Party. He was elected Member for Hartley in the Legislative Assembly of New South Wales, in June 1891. He served as postmaster-general, then secretary for mines and agriculture, in the Reid government. He was elected Member for Parramatta in 1901. In 1908 he became leader of the Free Trade Party, and in 1913 leader of the Liberal Party, following the resignation of Alfred Deakin. He was Prime Minister soon after. See Nairn and Serle (eds), Australian Dictionary of Biography, vol 8 (1981) at 96-99. 839 Australia, House of Representatives, Parliamentary Debates (Hansard), 3 December 1912 at 6290. Callinan case or not. We say that we cannot follow them in the rabid, unreasoning course which they insist upon taking. There are some further statements of the Attorney-General to which I should like to refer if time permitted of my doing so. There is a question which I wish to ask in this connexion: The Attorney-General told us the other day, as he did a number of times before, that he does not know the extent of the powers he is asking for, what they will include, or what they will not include. Moreover, he says – 'We come forward without a scheme or plan of any cut-and-dried character. There is no such plan.' The honorable gentleman has no plan defining the limitations of the power he seeks. He tells us very plainly that he does not propose to limit the power he desires to take. He will take the lot. He says, further, that he does not know what he is going to do with it when he gets it. He says, in another place, that he does not know whether he is proposing to take too much or enough power, and there is no plan in his mind in asking for these powers. He is asking the people of Australia to put these proposals into the melting-pot, and how they will come out, and what powers they will confer upon the Government, he says plainly that he does not know." Mr Hughes said in moving that the Constitution Alteration (Industrial Matters) Bill 1912 (Cth) be read a second time840: "[The proposal] gives the Commonwealth power to make laws in respect to labour, employment, and unemployment. It declares that included in that power, whatever it is, the Commonwealth has authority to make laws in respect to 'the terms and conditions of labour and employment in any trade, industry, or calling.' What those words precisely connote it is not easy to say. But I think that they include power to make laws in respect to the conditions of employment of all persons engaged in any manual trade; in any industry, such as, for instance, shop assistants and, say, persons engaged in clerical occupations. They do not enable the Commonwealth to make laws in respect to persons engaged in the learned professions; I think it clear they are excluded. Subject to this, the proposal empowers the Commonwealth to make laws in respect to the terms and conditions of labour and employment of all persons, whether engaged in any trade, industry, or calling. It gives power, further, to deal with the rights and obligations of employers and employés. That, for example, will enable this Parliament to pass a Workmen's Compensation Act to provide for 840 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 November 1912 at 5685. Callinan insurance against accidents, against injuries received in the course of employment; in short, to make such a Bill applicable to the whole country, as was lately passed here applicable to the Commonwealth Public Service. With regard to paragraph (c) [scil, (c) and (d)], 'the maintenance of industrial peace and the settlement of industrial disputes,' those powers will enable us to make such laws as will create a Conciliation and Arbitration Court clothed with power to deal with industrial disputes when they arise; and to take such action as may be necessary to prevent them from arising." Mr Hughes was prepared, however, to permit State industrial tribunals to continue to function, although his attitude to them was paternalistic841: "We are asking for power to deal with all disputes and all industrial conditions, for the preservation of industrial peace, but it by no means follows that we intend to supersede State tribunals when these are able and willing to deal with industrial matters within their jurisdiction. What we wish to do is not to supersede State tribunals. We wish to supplement them. Our object is to set up machinery which will insure fair industrial conditions for all citizens in Australia. If these are secured by State tribunals, good; if they are not, there ought to exist some tribunal by which these can be secured. It is for this purpose that we require greater powers." In reply, Mr Deakin said this842: "The proposals now before us cover all labour. What insignificant fraction of Australia is not labouring? There is no section of Australia that is not deeply and profoundly affected by labour, its conditions, and opportunities; but labour, employment, and even unemployment – another additional field which apparently is to be dealt with from a distinct point of view – are all covered by these proposals. In addition, power is proposed to be taken to legislate in regard to 'the terms and conditions of labour and employment in any trade, industry, or calling.' Nothing is omitted from these wide spheres. No one will be left outside the scope of this power, except, perhaps, a small professional 841 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 November 1912 at 5687. 842 Australia, House of Representatives, Parliamentary Debates (Hansard), 5 December 1912 at 6509-6510. Callinan section of the community. It is further proposed to take power to legislate in respect to 'the rights and obligations of employers and employés.' Who in this community is not either an employer or an employé? Indirectly, at all events, many are both. Absolute power to legislate in that regard also is sought to be conferred by this amendment. Then, again, the proposed amendment makes provision to legislate for 'the maintenance of industrial involves apparently as much bellicose peace,' which, nowadays, preparation – more or less legal – as does the preparation for war in civilized countries intent on maintaining that which they call 'peace' by an exhibition of armed power which it would be unsafe for any other country to challenge. Finally, we have the proposal to give power to legislate for the settlement of industrial disputes. That comes last on the list. It is treated as if it were the least. Yet, within that one provision, there is not only ample room, and verge enough for the whole of the powers we now possess under the existing Constitution, but room for very much more. That one simple sub-clause extends far beyond, and will have far greater effect than the whole of the endowment in this regard which the Commonwealth at present enjoys. ... I hope the whole community will appreciate the fact that this is not merely a proposed extension of our domain, not merely a substitution for the old power, but contains entirely new departures, the whole proposal covering effectively all the field that it is possible to cover by legislative power relating to labour and employment." Sir John Quick reiterated his insistence on the maintenance of the federation and the federal principle843: "I would insist upon the condition that in no case should any change be made in the Constitution unless it is in harmony with the Federal principle of that Constitution. I agree with the Attorney-General that the amending power contained in the constitutional instrument is an integral and vital power, and should be brought into use under proper conditions. I do not regard the Constitution as sacrosanct and beyond the reach of amendment when necessary. But our Constitution is not merely a legal document – it is an instrument of government which contains what I may describe as the very home and citadel of our national life." 843 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 November 1912 at 5723. 844 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 November 1912 at 5725. Callinan "What concern, for instance, has the State of New South Wales in the internal shopkeeping arrangements of the State of Victoria? There is no community of interest whatever. The State of Victoria has a perfect right to make its own shopkeeping arrangements relating to the hours of opening and closing, and the conditions of labour." The Bills were enacted845 and put to the Australian voters in a referendum on 31 May 1913. The proposals were rejected. They were accepted in Queensland, Western Australia and South Australia, and achieved a national vote of 49.33 per cent. (c) The Constitution Alteration (Industry and Commerce) Bill 1926 (Cth) for a referendum The next attempt to obtain the relevant power was the subject of a Bill for a referendum in 1926. This Bill included proposals that the Commonwealth be empowered to legislate with respect to: "(xx) Corporations, including – the creation, corporations; regulation, control and dissolution of the regulation, control and dissolution of corporations formed under the law of a State; and the regulation and control of foreign corporations; 845 The proposed s 51(xxxv) which was eventually put to the people included provision for strikes and lockouts. It was as follows: "Labour, and employment, and unemployment, including – the terms and conditions of labour and employment in any trade, industry, occupation, or calling; the rights and obligations of employers and employees; strikes and lockouts; the maintenance of industrial peace; and the settlement of industrial disputes." Callinan but not including municipal or governmental corporations, or any corporation formed solely for religious, charitable, scientific or artistic purposes, or any corporation not formed for the acquisition of gain by the corporation or its members. (xl) Establishing authorities with such powers as the Parliament confers on them with respect to the regulation and determination of terms and conditions of industrial employment and of rights and duties of employers and employees with respect to industrial matters and things." (emphasis added) The Prime Minister and Minister for External Affairs, Mr Bruce, said in moving that the Bill be read a second time846: "The bill relates to a proposed amendment of the Constitution, and deals with matters falling under the heading of industry and commerce. Those matters cover industrial relations generally, the regulation and determination of the terms and conditions of industrial employment, and the vesting of state authorities with powers for the regulation of trusts and combines in relation to trade unions and associations of employers and employees. In introducing this measure I appeal to honorable members to recognize that this is in no sense a party question, but one which fundamentally affects the present position of Australia, and the future happiness and prosperity of our people. ... We all recognize that in modern society, especially in a young country like this, unless industry and commerce progress, development is retarded, to the prejudice not only of the people of to-day, but also of generations to come. ... There is to-day no more vital need than to find some way by which our industry and commerce may progress smoothly, and better relations may be established between all sections of the community, so that we may have industrial peace, progressive development, and an enhanced degree of happiness among the people. This measure is designed to accomplish those ends." Mr Bruce said this of the proposed placitum (xl)847: 846 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 May 847 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 May Callinan "[It] will give power to the Commonwealth Parliament not to determine all questions relating to industrial employment, but to create the authorities to determine them. It will, subject to the explanation I have just given, be an absolute power, as wide as any one can desire. I wish to stress an aspect of the question on which there may be a divergence of opinion. There are sound reasons for proposing that Parliament shall have the power to create authorities, but not the power to decide industrial questions itself, and I wish to state those reasons frankly and fully. If full power to determine industrial questions were given to this Parliament it would have to deal with many complicated industrial problems in an atmosphere of political contention. It would be required to legislate with regard to hours of employment, the basic wage, and other vital industrial questions, and the determination of such questions by the contending parties in a political arena would be most undesirable. Furthermore, the Parliament would spend almost the whole of its time in dealing with industrial questions. It would have to pass factory acts applicable to the whole of Australia, and acts for the protection of the workers in dangerous industries, for the safeguarding of machinery in factories, for imposing conditions of apprenticeship, for fixing the closing hours of shops, and the like. All such ramifications of the industrial problem should be left to the State Parliaments, because this Parliament could deal with them only to the exclusion of all the great national tasks that it should undertake." There seems to have been little parliamentary opposition to these proposals on this occasion. The Leader of the Opposition, Mr Charlton, said that "[w]e all realize how necessary it is for the Commonwealth Parliament to have greater powers than it now possesses"848. After the Bill was enacted and the question put to the Australian voters, the proposed amendments were, on 4 September 1926, rejected. Only New South Wales and Queensland were in favour, and the national negative vote was 55 per cent or so. Contrary to the fears expressed by the Prime Minister for the future happiness and prosperity of Australia if the referendum were to fail, as it did, the nation has thrived, and who is to say whether its residents have been more or less happy in the 80 years that have elapsed since the failure. 848 Australia, House of Representatives, Parliamentary Debates (Hansard), 9 June Callinan (d) The Constitution Alteration (Industrial Employment) Bill 1946 (Cth) for a referendum Another attempt to enlarge the Commonwealth's powers was made in 1946. The Bill for the referendum this time, proposed a new s 51(xxxivA), which would empower the Commonwealth to legislate with respect to: "Terms and conditions of employment in industry, but not so as to authorize any form of industrial conscription". Dr Evatt, the Attorney-General and Minister for External Affairs, said this in moving that the Bill be read a second time849: "The object of this bill is to alter the Constitution so that this Parliament will be able, like the legislature of every State in Australia, to regulate, either directly or indirectly, the terms and conditions of employment in industry. ... During the war years, the industrialization of Australia has made unprecedented strides. Old industries expanded, new industries were set up. Australia became for the first time an exporter of secondary products. A major problem of the peace will be to maintain and even increase this high level of industrial production. Our hopes of providing full employment depend on it. So do our hopes of attracting and maintaining a larger population. What will be the position when the defence power has shrunk to its normal peace-time scope? Under the present constitutional powers of the Commonwealth in time of peace, this Parliament has no direct power to regulate terms and conditions of industrial employment in general. Under section 51(xxxv) it can maintain, and, of course, modify and improve, the existing machinery for conciliation and arbitration – but only in relation to disputes, and interstate disputes at that. It could perhaps directly regulate the terms and conditions of employment of those engaged in interstate commerce – that is, if they could effectively be isolated and defined as a distinct class. But that is all. It is not enough. The new power which the bill proposes to give to this Parliament will not in any way abrogate or curtail the existing industrial powers given by section 51(xxxv). The new power, however, will supplement the 849 Australia, House of Representatives, Parliamentary Debates (Hansard), 27 March Callinan present conciliation and arbitration power in two vital respects. First, as I have already said, the existing powers of industrial regulation are indirect. It is an extraordinary anomaly that although this Parliament has exclusive authority over such matters as customs and excise, it cannot take direct responsibility for regulating wages and hours and industrial conditions, which are in actual practice linked inseparably with tariff questions. The problem of ensuring that employees shall get their proper share of the benefits of a protective tariff system has always existed in Australia. The bill would enable this Parliament to deal with it effectively. ... Secondly, it is another extraordinary fact that only through processes originating in industrial disputes can there be any fixation under Commonwealth authority, in time of peace, of wages, hours and conditions of employment. The bill would enable Australia to lay aside the confused and technical system of regulating industrial relations in which the present Constitution has resulted." Despite the shadow that the recently ended Second World War still cast and to which the Attorney-General referred, the proposals were rejected, albeit narrowly, on 28 September 1946. New South Wales, Victoria and Western Australia were in favour as were 50.3 per cent of voters, but, by reason of a failure of an affirmative vote in a majority of the States as required by s 128, the proposals failed. The history of the referenda cannot be ignored850. Kirby J said this in Durham Holdings Pty Ltd v New South Wales851: "Nevertheless, the rejection by the electors of the Commonwealth (including those in New South Wales) of a proposed amendment to the federal Constitution, which would have prevented or invalidated legislation such as the amending legislation adopted by the New South Wales Parliament in 1990, suggests a reason for special caution when this Court is invited, but twelve years later, effectively to impose on the Constitution of the State a requirement which the electors, given the chance, declined to adopt." What happened in the referenda to which I have referred is particularly compelling because of the repetitiveness and ingenuity of the attempts made by the Commonwealth to gain the power which in this case it now says it has always 850 As Gleeson CJ, Gummow, Hayne and Heydon JJ said in Attorney-General (WA) v Marquet (2003) 217 CLR 545 at 570 [66]: "constitutional norms, whatever may be their historical origins, are now to be traced to Australian sources." 851 (2001) 205 CLR 399 at 428 [65]. Callinan had. The Court should not disregard that history. The people have too often rejected an extension of power to do what the Act seeks to do for that. To ignore the history would be, not only to treat s 128 of the Constitution as irrelevant, but also for the Court to subvert democratic federalism for which the structure and text of the Constitution provide. As I observed in Sweedman v Transport Accident Commission852, constitutions, State and federal are not the property of governments of the day. I confess that I would be greatly discomfited if I were compelled to ignore the referenda, and the will of the people as expressed in them, but I think that there are good legal reasons why I may not do so. The joint judgment would allow no weight, or indeed even relevance to the repeated failure of the referenda853. I cannot accept that there is any difference of substance between the powers sought and the powers now claimed to be possessed. It is no answer to say that the powers were not exercised because of a want of "political will"854. If the statute books for the Commonwealth show one thing, it is that there has, from the first session of the new Parliament, been a determination constantly to test the outer limits of federal power. The joint reasons attach too little weight to the intelligence and common sense of voters in a referendum. I am not prepared to regard the people as uninformed. To the extent that the joint reasons suggest the contrary, or that the failure of most referenda in some way justifies the taking by this Court of an activist expansive or different view of the meaning of the Constitution from that which prompted Parliament's attempt to change it, I am unable to agree with them. In summary I would regard the speeches for the referenda, the referenda and their results as relevant to the proper construction of the Constitution for these reasons. The speeches in Parliament for the Bills for them, having regard particularly to the experience, eminence, legal qualifications and knowledge of the speakers, throw much light on the founders' intentions and the understanding of the meaning of the Constitution of informed, legally qualified, politically astute, responsible people. The meaning of the words of the Constitution may not change following, and as a result of the failure of a referendum, but it is a distortion of reality to treat the failure as other than reinforcing the received meaning of the words which prompted the attempt to change or enlarge them. Equally, a successful referendum may provide relevant evidence of received 852 (2006) 80 ALJR 646 at 663 [94]; 224 ALR 625 at 645. 854 [2006] HCATrans 215 at 525. Callinan meaning immediately before the vote in it. But in addition, unlike in the failed referenda considered in this case, a successful referendum would also indicate the people's discontent with that received meaning. True it is that the construction of the Constitution is a matter ultimately for the Court, aided by qualified advocates presenting arguments to it, but even this Court should not be blind to the inescapable fact that the people do have, by virtue of s 128, a special and unique constitutional role to approve or veto a change. That, they can only do if they have an understanding of what is sought to be changed. For my own part I do not think it legally radical in the special constitutional setting of s 128, to attribute to the people the same understanding of meaning and of power as their elected representatives who legislated for the referenda to effect the changes, and as the failed referenda show, to be content with them. It is no answer as the Commonwealth submissions implied, that s 128 raises a high hurdle for constitutional change. So it does, and intentionally so. If Parliament cannot persuade the people to change, it is not for this Court to treat the people's will as irrelevant by making the change for them. Every one of the 36 proposals which have failed at a referendum has been accompanied by dire warnings of doom to the Commonwealth and the people, yet the nation prospers and grows. PART IV. CONSTITUTION TECHNIQUES EMPLOYED IN CONSTRUING THE In this part of my reasons I search for consistency of interpretation of the Constitution by the Justices of this Court but cannot find it because it does not exist. Accordingly I will state the principles that I think should govern it. The truth is that there has been little sustained unanimity on the part of the 46 Justices who have constituted this Court during its 103 years of existence as to how the Constitution should be interpreted: whether strictly textually855, by 855 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers' Case") (1920) 28 CLR 129 at 149-150 per Knox CJ, Isaacs, Rich and Starke JJ (rejection of doctrines of reserved State powers and implied intergovernmental immunities); Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 66 per Rich J (Constitution "expressly provides for the continued existence of the States"); Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353 at 372 per Barwick CJ (Melbourne Corporation principle not out of implication but because States are not mentioned in the "topics of legislation allotted to the Commonwealth"); Attorney-General (Commonwealth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 17 per Barwick CJ (look to text rather than "slogans", "political catch-cries" or "vague and imprecise expressions of political philosophy"). Callinan reference to history856, purposively857, as an exercise in "originalism"858, judge's perceptions of contemporary flexibly, according to a particular 856 Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087 at 1105-1109 per Griffith CJ, Barton and O'Connor JJ (reference "in detail to the historical facts which supply the answers to the inquiry"); Cole v Whitfield (1988) 165 CLR 360 at 385, 391 per Mason CJ, Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ (reference to history for "the subject to which that language was directed and the nature and objectives of the movement towards federation", clear objective of free trade area); Capital Duplicators Pty Ltd v Australian Capital Territory (1992) 177 CLR 248 at 274 per Brennan, Deane and Toohey JJ (an objective of federation was a free trade area); Sue v Hill (1999) 199 CLR 462 at 571-572 [290]-[291] per Callinan J (evolutionary theory of Australian sovereignty unsupported by history); Luton v Lessels (2002) 210 CLR 333 at 366-368 [98]-[103] per Kirby J (history of taxation laws); XYZ v Commonwealth (2006) 80 ALJR 1036 at 1069-1070 [153], 1071-1074 [157]-[173] per Callinan and Heydon JJ; 227 ALR 495 at 536-537, 538- 543 (history of external affairs and extradition); Forge v Australian Securities and Investments Commission (2006) 229 ALR 223 at 295-299 [256]-[267] per Heydon J (history of acting judges). 857 D'Emden v Pedder (1904) 1 CLR 91 at 109-111 per Griffith CJ, Barton and O'Connor JJ (Commonwealth and States intended as sovereign within own ambits of authority); The Municipal Council of Sydney v The Commonwealth ("the Municipal Rates Case") (1904) 1 CLR 208 at 239-240 per O'Connor J (reasoning from "the very nature of the Constitution, and the relation of States and Commonwealth"); Attorney-General of NSW v Collector of Customs for NSW ("the Steel Rails Case") (1908) 5 CLR 818 at 833 per Griffith CJ (rule of implied intergovernmental immunities "a rule of construction founded upon necessity"); West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 681-682 per Dixon J (implications may be made so as not to "defeat the intention of" the Constitution); South Australia v The Commonwealth (1942) 65 CLR 373 at 442 per Starke J (maintenance of the States an "object of the Constitution"); R v Commonwealth Court of Conciliation and Arbitration; Ex parte Victoria (1942) 66 CLR 488 at 515 per Starke J (maintenance of the the Constitution"); Australian Tape Commonwealth, as Manufacturers Association Ltd v The Commonwealth (1993) 176 CLR 480 at 503 per Mason CJ, Brennan, Deane and Gaudron JJ (looks to the "purpose of s 81"). the States, and of "object[s] of the framers 858 Deakin v Webb (1904) 1 CLR 585 at 616 per Griffith CJ, Barton and O'Connor JJ ("intended by like that interpretation"); Attorney-General (Vict); Ex rel Black v The Commonwealth ("the DOGS Case") (1981) 146 CLR 559 at 614-615 per Mason J ("a constitutional prohibition must be applied in accordance with the meaning which it had in 1900"); Singh v The Commonwealth (2004) 222 CLR 322 at 422-433 [288]-[317] per Callinan J (founders did not intend the aliens power to apply to people such as the (Footnote continues on next page) like provisions should receive Callinan conditions859, contextually860, by searching for implications emerging from the text and structure861, or, as a combination862 of one or more of these863. Each of plaintiff); Ruhani v Director of Police (2005) 222 CLR 489 at 571-572 [281], 573- 575 [286]-[289] per Callinan and Heydon JJ (founders did not intend to "transmogrify an appeal into an exercise of original jurisdiction"). 859 Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353 at 395-397 per Windeyer J (waxing of Commonwealth, waning of States); Nolan v Minister for Immigration and Ethnic Affairs (1988) 165 CLR 178 at 185-186 per Mason CJ, Wilson, Brennan, Deane, Dawson and Toohey JJ (emergence of Australia as an independent nation); Street v Queensland Bar Association (1989) 168 CLR 461 at 537-538 per Dawson J (connotation and denotation); Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 552-554 [43]-[49] per McHugh J (words so general "that the makers of the Constitution intended that they should apply to whatever facts and circumstances succeeding generations thought they covered"); Sue v Hill (1999) 199 CLR 462 at 496 [78] per Gleeson CJ, Gummow and Hayne JJ (the Constitution "speaks to the present and its interpretation takes account of and moves with these developments"); Eastman v The Queen (2000) 203 CLR 1 at 49-51 [154]-[156] per McHugh J (Constitution "to be infused with the current understanding of those concepts and purposes" (original emphasis)); Brownlee v The Queen (2001) 207 CLR 278 at 314 [105] per Kirby J ("text of the Constitution must be given meaning as its words are perceived by succeeding generations of Australians, reflected in this Court"); SGH Ltd v Federal Commissioner of Taxation (2002) 210 CLR 51 at 86-87 [77]-[78] per Kirby J ("serious mistake" to look to framers' intent); Singh v The Commonwealth (2004) 222 CLR 322 at 385 [160] per Gummow, Hayne and Heydon JJ ("constitutional expressions may have a different operation fifty or 100 years after Federation"). 860 Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309 at 367-368 per O'Connor J (broad interpretation "unless there is something in the context"); Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 415-416 per Higgins J ("forbidden" area of intrastate trade and commerce "narrowed" by other placita); Ffrost v Stevenson (1937) 58 CLR 528 at 566 per Dixon J (s 122 may "impl[y] that none of the other powers ... authorize[s] the government or control of territories"); Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 184 per Latham CJ (s 51(xx) limited by s 51(xiii)); Attorney- General (Cth) v Schmidt (1961) 105 CLR 361 at 371-372 per Dixon CJ, 373 per Fullagar J, 373 per Kitto J, 373 per Taylor J, 377 per Windeyer J (s 51 limited by s 51(xxxi)); Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 284- 286 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ (s 51 limited by s 51(xiii)); Capital Duplicators Pty Ltd v Australian Capital Territory (1992) 177 CLR 248 at 288 per Gaudron J (relationship between s 122 and other provisions "can only be determined by having regard to the Constitution as a whole"); Luton v Lessels (2002) 210 CLR 333 at 354-355 [56]-[58] per (Footnote continues on next page) Callinan the approaches has had its proponents at times but none has universally prevailed864. No doubt each judge has been convinced of his or her correctness of approach, even descending on occasions to unedifying accusations of "heresy"865 Gaudron and Hayne JJ (ss 53-55, 81-83 show that every tax is to go into the Consolidated Revenue Fund, but not every sum going in is a tax). 861 Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 60 per Latham CJ, 70 per Starke J, 78-79 per Dixon J, 99 per Williams J (Constitution does not empower the Commonwealth to control or hinder State governmental functions); R v Kirby; Ex parte Boilermakers' Society of Australia ("the Boilermakers' Case") (1956) 94 CLR 254 at 267-278 per Dixon CJ, McTiernan, Fullagar and Kitto JJ (separation of powers); Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 205-206 per Gibbs CJ, 217 per Mason J, 222 per Wilson J, 233 per Brennan J, 248 per Deane J (Commonwealth laws not to discriminate against the States); Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 50 per Brennan J, 72-73 per Deane and Toohey JJ, 94-95 per Gaudron J (freedom of political communication); Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 138-141 per Mason CJ, 149 per Brennan J, 168 per Deane and Toohey JJ, 215 per Gaudron J, 231-233 per McHugh J (freedom of political communication); Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 559-560 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ (freedom of political communication as a defence to defamation); Austin v The Commonwealth (2003) 215 CLR 185 at 217 [24] per Gleeson CJ, 249 [124] per Gaudron, Gummow and Hayne JJ, 281-282 [223]-[224] per McHugh J, 301 [281] per Kirby J (affirmation of Melbourne Corporation principle). 862 See, eg, New South Wales v The Commonwealth (The Incorporation Case) (1990) 169 CLR 482 at 498-503 per Mason CJ, Brennan, Dawson, Toohey, Gaudron and 863 It is difficult to know which interpretative technique Murphy J used when he spoke of the "implication of freedom in our Constitution" in R v Director-General of Social Welfare (Vict); Ex parte Henry (1975) 133 CLR 369 at 388. 864 Brownlee v The Queen (2001) 207 CLR 278 at 314-315 [107] per Kirby J. 865 See, eg, Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353 at 396 per Windeyer J; R v Lambert; Ex parte Plummer (1980) 146 CLR 447 at 470 per Murphy J; Meagher and Gummow, "Sir Owen Dixon's Heresy", (1980) 54 Australian Law Journal 25; Tasmania v The Commonwealth (The Tasmanian Dam Case) (1983) 158 CLR 1 at 147 per Mason J; Gould v Brown (1998) 193 CLR (Footnote continues on next page) Callinan on the part of predecessors or colleagues, no matter how learned and experienced they may have been. Sir Garfield Barwick in retirement even descended to saying, for publication, that the reasoning of the Court in Cole v Whitfield866 was "laughable" and "terrible tosh"867. Equally, Justices of this Court on occasions appear to have discouraged the adoption of settled universal principles of constitutional construction. Sir Garfield, for example, on the one hand spoke of the Engineers' Case as if it were an eleventh commandment868, but on the other, in R v Joske; Ex parte Australian Building Construction Employees & Builders' Labourers' Federation869 expressed a wish to overturn the Boilermakers' Case870. The truth is ultimately that if a judge have a subjective preference for a particular interpretative approach, somewhere a dictum to support it can usually be found. The reality is that no judge can claim to stride the high ground of exclusive interpretative orthodoxy. In SGH Ltd v Federal Commissioner of Taxation871, "Questions of construction of the Constitution are not to be answered by the adoption and application of any particular, all-embracing and revelatory theory or doctrine of interpretation. Nor are they answered by the resolution of a perceived conflict between rival theories, with the 346 at 427 [132] per McHugh J; Al-Kateb v Godwin (2004) 219 CLR 562 at 589 866 (1988) 165 CLR 360. 867 New South Wales Bar Association, "Bar News Interviews Sir Garfield Barwick GCMG", Bar News, (Summer 1989) 9 at 17. 868 See "Retirement of Chief Justice Sir Garfield Barwick", (1984) 148 CLR v at x: "I think all of us who work in constitutional work, whether it be at the Bar or on the Bench, or in academia, need to be very wary that the triumph of the Engineers' Case is never tarnished and that we maintain stoutly that motion, that the function of the Court is to give to the words their full and fair meaning and leave the Constitution which places the residue of the states to work itself out." and Exodus 20:3-17. 869 (1974) 130 CLR 87 at 90. 870 (1956) 94 CLR 254. 871 (2002) 210 CLR 51 at 75 [41]. Callinan placing of the victorious theory upon a high ground occupied by the modern, the enlightened and the elect." Statements about how the Constitution is not to be construed do not however promote ultimate goals of certainty and consistency. It must be accepted that the Constitution was intended to be an enduring instrument, but that does not mean that, without more, a judge may give it an operation that might appear to the judge to be convenient, or even better adapted, to his or her own perception of changing contemporary values872. To do that is to run two risks: of judicial misapprehension of contemporary values873; and, to write s 128 out of the Constitution874. What Mason J said of the common law in State Government Insurance Commission v Trigwell875 is of relevance to constitutional law also: "I do not doubt that there are some cases in which an ultimate court of appeal can and should vary or modify what has been thought to be a settled rule or principle of the common law on the ground that it is ill- adapted to modern circumstances. If it should emerge that a specific common law rule was based on the existence of particular conditions or circumstances, whether social or economic, and that they have undergone a radical change, then in a simple or clear case the court may be justified in moulding the rule to meet the new conditions and circumstances. But there are very powerful reasons why the court should be reluctant to engage in such an exercise. The court is neither a legislature nor a law reform agency. Its responsibility is to decide cases by applying the law to the facts as found. The court's facilities, techniques and procedures are adapted to that responsibility; they are not adapted to legislative functions or to law reform activities. The court does not, and cannot, carry out investigations or enquiries with a view to ascertaining whether particular common law rules are working well, whether they are adjusted to the needs of the community and whether they command popular assent. Nor can the court call for, and examine, submissions from groups and individuals who may be vitally interested in the making of changes to the law. In short, the court cannot, and does not, engage in the wide-ranging inquiries and assessments which are made by governments and law reform 872 cf Re Wakim; Ex parte McNally (1999) 198 CLR 511 at 552-554 [43]-[49] per 873 Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 298-299 [252] per Callinan J. 874 Al-Kateb v Godwin (2004) 219 CLR 562 at 592-593 [68]-[69] per McHugh J. 875 (1979) 142 CLR 617 at 633. Callinan agencies as a desirable, if not essential, preliminary to the enactment of legislation by an elected legislature." (emphasis added) Most judges of this Court over its century of existence would claim to have adhered faithfully to the doctrine of precedent, and to have abstained from usurpation of the legislature. Close examination will show that that claim cannot always be made out. The case which marked the most dramatic change in the interpretation of the Constitution in the first two decades of the Court, and cast aside as wrong its federalist doctrine of 15 or so years, is the Engineers' Case, upon which one of the Justices (Powers J) did not sit, and in which Gavan Duffy J dissented. The reasoning in it is less than satisfactory. The joint judgment of Knox CJ, Isaacs, Rich and Starke JJ was delivered by Isaacs J. It contains some less than detached language876. As Professor Sawer wrote of the latter877: "[He] was given to rhetoric and repetition, and here [in the Engineers' Case] he gave these habits full rein." The particular appeal that the Justices in the majority claimed to make there to justify their reasoning was to textualism878. In citing879 Lord Macnaghten in Vacher & Sons Ltd v London Society of Compositors880 they expressly rejected any regard to the policy of the Constitution, but they did accept that it should be construed in the same way as an Act of Parliament. To disregard entirely a, or perhaps the, fundamental "policy" of the Constitution, federalism, and the careful division of power that it involves, is to disregard, or is at least to attach little weight to, the object which, beyond all doubt, the framers intended, the people who voted in favour of federation adopted, and the Imperial Parliament implemented by enacting the Commonwealth of Australia Constitution Act 1900 (Imp) (63 & 64 Vict c 12). To disregard, or treat lightly, this manifest fundamental "policy" of the Constitution would certainly represent a departure from current orthodox purposive techniques of statutory interpretation881, 876 See, eg, (1920) 28 CLR 129 at 145. 877 Sawer, Australian Federalism in the Courts, (1967) at 130. 878 (1920) 28 CLR 129 at 141-142. 879 (1920) 28 CLR 129 at 142-143. 880 [1913] AC 107 at 118. 881 See Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304-305 per Gibbs CJ, 310-311 per Stephen J, 320 per Mason and Wilson JJ, 334 per Aickin J; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 374-375 [41] per Brennan CJ, 384 (Footnote continues on next page) Callinan especially when the text, as is the case with constitutions in general, is expressed in some instances, in other than absolute language. A constitution, it may also be accepted, is not identical to a statute, but this Court has generally tended, insofar as the sometimes less than explicit language of the Constitution permits, to claim to employ most of the usual and ordinary techniques of statutory interpretation in construing it882. The Engineers' Case overruled D'Emden v Pedder883. Those who constituted the Court when the earlier case was decided were, for the most part, closer in time, circumstances and knowledge to the Constitution, and their substantial contribution to it, than the Justices who comprised the Court in the Engineers' Case. In D'Emden v Pedder Griffith CJ found an implication in the Constitution of non-interference of the respective polities with one another by necessity884. The joint judgment in the Engineers' Case criticized that interpretation as depending upon an implication formed on the "vague, individual [78] per McHugh, Gummow, Kirby and Hayne JJ. Recent examples of purposive reasoning in the context of statutory interpretation include Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249 at 261 [25] per McHugh, Gummow, Hayne and Heydon JJ, 278-280 [88]-[92] per Kirby J; R v Lavender (2005) 222 CLR 67 at 85 [48]-[49] per Gleeson CJ, McHugh, Gummow and Hayne JJ, 106 [121] per Kirby J, 111 [139] per Callinan J, 113 [148] per Heydon J. See also Acts Interpretation Act 1901 (Cth), s 15AA; Interpretation Act 1987 (NSW), s 33; Interpretation of Legislation Act 1984 (Vic), s 35(a); Acts Interpretation Act 1915 (SA), s 22; Acts Interpretation Act 1954 (Q), s 14A; Interpretation Act 1984 (WA), s 18; Acts Interpretation Act 1931 (Tas), s 8A. 882 See Pearce and Geddes, Statutory Interpretation in Australia, 6th ed (2006) at 25 "In the Australian common law tradition there are two general approaches to the interpretation of legislation; the literal approach and the purposive approach." and at 51 [2.28]: "There has long been a controversy as to whether implying words into the text of legislation can be a legitimate interpretive technique. If it is permissible, there is also an issue as to the circumstances in which that can be done. ... [Those circumstances are usually when] the text does not give effect to the underlying purpose or object of the legislation." 883 (1904) 1 CLR 91. 884 (1904) 1 CLR 91 at 110. Callinan conception of the spirit of the compact"885. I interpolate that it is difficult to reconcile this criticism with the inference by this Court of an implication of freedom of political speech drawn by this Court many years later in Lange v Australian Broadcasting Corporation886, not from the spirit of the compact, but from the "structure"887 of the Constitution and on the basis of the judges' perceptions of contemporary society and conditions888. There are references in the joint judgment in the Engineers' Case to the desirability, in the interpretation of the Constitution, of adherence to the ordinary, or the "golden", or the "universal" rules of construction of statutes889. One such rule, to which lip service only seems to have been paid, and it may be observed, not only in that case by the Commonwealth, but also in some subsequent cases, is the necessity to read an Act of Parliament, and by analogy, a constitution890, as a whole, a matter of particular relevance to this case as I have already said. There are other aspects of the Engineers' Case which are not convincing. When Griffith CJ in D'Emden v Pedder referred to a constitutional implication arising out of necessity, he was taking account of the Constitution as a whole, and the way in which it contemplated the distribution of powers between the States and the Commonwealth. His Honour was clearly speaking in legal terms. In the Engineers' Case the views of Griffith CJ on that necessity are misrepresented in the joint judgment by its characterization as only a "political", and not a "legal" necessity891. 885 (1920) 28 CLR 129 at 145. 886 (1997) 189 CLR 520. 887 (1997) 189 CLR 520 at 566-567 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ. In the passage cited there is a reference to "text" as well as "structure" but the relevant language of the text is not identified. 888 (1997) 189 CLR 520 at 570-571, citing McHugh J in Stephens v West Australian Newspapers Ltd (1994) 182 CLR 211 at 264. 889 (1920) 28 CLR 129 at 148-150. 890 In the Engineers' Case (1920) 28 CLR 129 at 151 the joint judgment acknowledges that the ordinary meaning of the terms employed in one place may be restricted by terms used elsewhere: "that is pure legal construction", but the judges, having made that statement, do not appear to have applied it. 891 (1920) 28 CLR 129 at 151. Callinan The only dissentient in the case, Gavan Duffy J, on the other hand persuasively said this892: "But in my opinion sec 51 does not determine the persons who may be bound by the legislation which it authorizes. The words 'for the peace, order, and good government' have constantly been adopted in the Constitutions of self-governing British colonies where the power to legislate is general, and where they are used to describe the content of that power. It is not easy to give them a meaning in sec 51, which deals with enumerated powers; it is enough to say that they seem to delimit the subject matter of legislation, not to enumerate the persons whom the legislation shall bind." But even the majority in the Engineers' Case accepted that the Commonwealth Parliament is one which possesses only "enumerated or selected legislative powers"893, a proposition which cannot be doubted. And it is difficult to regard some observations made by Isaacs J, only five years after the Engineers' Case, as anything other than an expression of some repentance or revisionism of it. His Honour spoke in Pirrie v McFarlane894 of: "the natural and fundamental principle that, where by the one Constitution separate and exclusive governmental powers have been allotted to two distinct organisms, neither is intended, in the absence of distinct provision to the contrary, to destroy or weaken the capacity or functions expressly conferred on the other. Such attempted destruction or weakening is prima facie outside the respective grants of power." (original emphasis) Neither the reasoning nor the result in the Engineers' Case assists the Commonwealth here. Furthermore, it is a case which does not deserve the reverence which has been accorded to it. Despite the subsequent emergence of other candidates for the dubious honour, the joint judgment remains, as Professor Sawer said, "one of the worst written and organized in Australian judicial history"895. What I derive from the cases to which I refer in this section of my reasons is that there are no particular lodestars for Australian constitutional construction but that there should be. This section of my reasons and what follows serve to emphasize that this is so, and further, that there is no reason why 892 (1920) 28 CLR 129 at 174. 893 (1920) 28 CLR 129 at 150, cited in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 47 per Latham CJ. 894 (1925) 36 CLR 170 at 191. 895 Sawer, Australian Federalism in the Courts, (1967) at 130. Callinan I should not seek to propound them, even departing, if so minded, from previous decisions of the Court, a matter with which I will now deal. Div 1: Precedent There has often been discussion in this Court about the liberty of a Justice to depart either from settled or current doctrine of the High Court, as a final court, on a point of constitutional interpretation. Isaacs J was the first Justice of this Court to declare his freedom to do so. In Australian Agricultural Co v Federated Engine-Drivers and Firemen's Association of Australasia896 his Honour said this: "The oath of a Justice of this Court is 'to do right to all manner of people according to law.' Our sworn loyalty is to the law itself, and to the organic law of the Constitution first of all. If, then, we find the law to be plainly in conflict with what we or any of our predecessors erroneously thought it to be, we have, as I conceive, no right to choose between giving effect to the law, and maintaining an incorrect interpretation. It is not, in my opinion, better that the Court should be persistently wrong than that it should be ultimately right." (emphasis of Isaacs J) It is not surprising that his Honour should state his position so emphatically. in constitutional interpretation effected by the Engineers' Case, of which his Honour could well have been the chief proponent, have occurred? How otherwise could the radical shift In his Storrs Lectures, delivered in 1921, and published as The Nature of the Judicial Process, Benjamin Cardozo, then a Judge of the New York Court of Appeals, gave much thought to the role of a judge in a common law court and of allegiance to precedent. In his first lecture, "The Method of Philosophy" he said this897: "[T]he work of deciding cases in accordance with precedents that plainly fit them is a process similar in its nature to that of deciding cases in accordance with a statute. It is a process of search, comparison, and little more. Some judges seldom get beyond that process in any case. Their notion of their duty is to match the colors of the case at hand against the colors of many sample cases spread out upon their desk. The sample nearest in shade supplies the applicable rule. But, of course, no system of living law can be evolved by such a process, and no judge of a high court, 896 (1913) 17 CLR 261 at 278. See also at 288 per Higgins J. 897 Cardozo, The Nature of the Judicial Process, (1921) at 20-21. Callinan worthy of his office, views the function of his place so narrowly. If that were all there was to our calling, there would be little of intellectual interest about it. The man who had the best card index of the cases would also be the wisest judge." This was not however an invitation to depart from precedent at whim. At the conclusion of his third lecture, "The Method of Sociology"898, the judge said: "The judge, even when he is free, is still not wholly free. He is not to innovate at pleasure. He is not a knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness. He is to draw his inspiration from consecrated principles. He is not to yield to spasmodic sentiment, to vague and unregulated benevolence. He is to exercise a discretion informed by tradition, methodized by analogy, disciplined by system, and subordinated to 'the primordial necessity of order in the social life.' Wide enough in all conscience is the field of discretion that remains." (footnote omitted) Barwick CJ in his Lionel Cohen Lecture, given at the Hebrew University of Jerusalem in 1969, set out his views on the proper use of precedent and some peculiar difficulties encountered by Australian courts at that time. Referring to the passage of Isaacs J, which I have cited in this section of my reasons, his Honour, who was ready to disparage different views from his899, made the following observation900: "We have been through a period when the virtues (and they are no doubt virtues) of stability and predictability in the law have been paramount the considerations consideration of earlier decisions. Today many are not so enamoured of the perpetuation of error or of inappropriateness to current times of old decisions, and favour their review in proper cases by final courts of appeal." the decision of cases, and particularly Barwick CJ curially repeated this view of the earlier statement of Isaacs J some eight years later in Queensland v The Commonwealth901. He affirmed that 898 Cardozo, The Nature of the Judicial Process, (1921) at 141. 899 See [738], above, particularly fn 867. 900 Barwick, "Precedent in the Southern Hemisphere", (1970) 5 Israel Law Review 1 at 901 (1977) 139 CLR 585 at 593-594. Callinan the paramount duty of the Court is to the maintenance of the Constitution, and not of strict adherence to precedent902: "[I]t is fundamental to the work of this Court and to its function of determining, so far as it rests on judicial decision, the law of Australia appropriate to the times, that it should not be bound in point of precedent but only in point of conviction by its prior decisions. In the case of the Constitution, it is the duty, in my opinion, of each Justice, paying due regard to the opinions of other Justices past and present, to decide what in truth the Constitution provides. The area of constitutional law is pre- eminently an area where the paramount consideration is the maintenance of the Constitution itself. Of course, the fact that a particular construction has long been accepted is a potent factor for consideration: but it has not hitherto been accepted as effective to prevent the members of the Court from departing from an earlier interpretation if convinced that it does not truly represent the Constitution. There is no need to refer to the instances in which the Court has departed from earlier decisions upon the Constitution, some of long standing. The Constitution may be rigid but that does not imply or require rigidity on the part of the Court in adherence to prior decisions. No doubt to depart from them is a grave matter and a heavy responsibility. But convinced of their error, the duty to express what is the proper construction is paramount." That view seems to have won the somewhat guarded support of the Court in Lange903: "Errors in constitutional interpretation are not remediable by the legislature904, and the Court's approach to constitutional matters is not necessarily the same as in matters concerning the common law or statutes." It takes a high degree of self-assurance to denounce the opinions of earlier judges as "error". But the statement of Barwick CJ that I have quoted also, regrettably in my opinion, appears to arrogate to the Court, rather than the people voting in a referendum, the right to alter, "correct" as the Court would have it, an earlier, even oft-repeated, apparently settled constitutional interpretation. 902 (1977) 139 CLR 585 at 593. See also at 602-603 per Stephen J, 610 per Murphy J, 903 (1997) 189 CLR 520 at 554 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh, 904 Queensland v The Commonwealth (1977) 139 CLR 585 at 630; Street v Queensland Bar Association (1989) 168 CLR 461 at 588. Callinan Other cases have emphasized that the primary duty of a Justice of the High Court is to apply the language of the Constitution rather than other judicial decisions about it. For example recently, in Permanent Trustee Australia Ltd v Commissioner of State Revenue (Vict)905, Kirby J said: "There is no express foundation in the Constitution (or, so far as it would help, any legislation) to support such an impediment to argument. Indeed, the text of the Constitution is inconsistent with the requirement. This Court is the ultimate guardian of the judicial power of the Commonwealth906. It derives its existence and functions from the Constitution and owes its duty to it. If the Constitution requires a result in a relevant contested matter, no rule of practice of the Court can impede Judges of this Court have repeatedly stated that that outcome. constitutional doctrine stands on a different basis to other holdings, so far as the requirements of the law of precedent are concerned907. In part, this is because the Constitution is itself the source of legal authority and thus is placed apart. In part, it is because of a recognition (affirmed by history) that different generations read the Constitution in different ways according to the perceptions of different times908. The duty of the Justices to the Constitution is individual. No group or number of them can impede the discharge of that duty by one or a minority of them." Other examples of recognition of such a duty are Victoria v The Commonwealth ("the Payroll Tax Case")909, Buck v Bavone910, Stevens v Head911, 905 (2004) 220 CLR 388 at 452-453 [179]. 906 Constitution, s 71. 907 Australian Agricultural Co v Federated Engine-Drivers and Firemen's Association of Australasia (1913) 17 CLR 261 at 277-279; Queensland v The Commonwealth (1977) 139 CLR 585 at 592-594; Stevens v Head (1993) 176 CLR 433 at 461-462; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 562-566; Coleman v Power (2004) (2004) 220 CLR 1 at 109 [289], 112-113 [298], 114 [301] 908 Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353 at 909 (1971) 122 CLR 353 at 378 per Barwick CJ. 910 (1976) 135 CLR 110 at 137 per Murphy J. 911 (1993) 176 CLR 433 at 461-462 per Deane J. Callinan Cheng v The Queen912, Brownlee v The Queen913, Ruhani v Director of Police914 In the fourth of his Storrs Lectures, "Adherence to Precedent", Cardozo J appeared to acknowledge that a similar rule applied in the United States916: "In these days, there is a good deal of discussion whether the rule of adherence to precedent ought to be abandoned altogether. I would not go so far myself. I think adherence to precedent should be the rule and not the exception. I have already had occasion to dwell upon some of the considerations that sustain it. To these I may add that the labor of judges would be increased almost to the breaking point if every past decision could be reopened in every case, and one could not lay one's own course of bricks on the secure foundation of the courses laid by others who had gone before him. ... The situation would, however, be intolerable if the weekly changes in the composition of the court were accompanied by changes in its rulings. In such circumstances there is nothing to do except to stand by the errors of our brethren of the week before, whether we relish them or not. But I am ready to concede that the rule of adherence to precedent, though it ought not to be abandoned, ought to be in some degree relaxed. I think that when a rule, after it has been duly tested by experience, has been found to be inconsistent with the sense of justice or with the social welfare, there should be less hesitation in frank avowal and full abandonment. We have had to do this sometimes in the field of constitutional law." (emphasis added; footnote omitted) The two justifications selected for a departure from settled authority, "sense of justice" and "social welfare", are less likely to warrant a departure from accepted doctrine in constitutional cases in this country, in which the absence of a constitutional bill of rights means that it is for legislatures rather than the courts to identify and make provision for these, especially the latter. More basal considerations such as "ascertainment of founders' intent" and "maintenance of the federation established by the Constitution" are, in my opinion, safer yardsticks, and more in keeping with the proper role of a Justice of this Court. 912 (2000) 203 CLR 248 at 324-325 [227] per Kirby J. 913 (2001) 207 CLR 278 at 312-315 [100]-[108] per Kirby J. 914 (2005) 222 CLR 489 at 551 [196]-[197] per Kirby J. 915 (2006) 80 ALJR 1036 at 1055 [77] per Kirby J, 1082 [204]-[205] per Callinan and Heydon JJ; 227 ALR 495 at 517, 553-554. 916 Cardozo, The Nature of the Judicial Process, (1921) at 149-150. Callinan None of this of course is licence to a Justice of the High Court to decide a matter without due regard for, and deference to, the earlier authority of the Court. Whilst it has been accepted that the Court is not necessarily bound by its previous decisions regarding the interpretation of the Constitution, it has also been emphasized that it is only with extreme caution that the Court should exercise its power to overrule or reconsider them917. Judgments of this Court, for example of Gibbs J, reveal a great deference to earlier cases relevant to the subsequent question before the Court. In Queensland v The Commonwealth918 his Honour considered himself bound by constitutional precedent, although in his view a previous case had been wrongly decided. After citing the passage in the judgment of Isaacs J in Australian Agricultural Co, referred to earlier, his Honour said919: "But like most generalizations, this statement can be misleading. No Justice is entitled to ignore the decisions and reasoning of his predecessors, and to arrive at his own judgment as though the pages of the law reports were blank, or as though the authority of a decision did not survive beyond the rising of the Court. A Justice, unlike a legislator, cannot introduce a programme of reform which sets at nought decisions formerly made and principles formerly established. It is only after the most careful and respectful consideration of the earlier decision, and after giving due weight to all the circumstances, that a Justice may give effect to his own opinions in preference to an earlier decision of the Court." Gibbs J did not entirely shy away however from the responsibility of In The declaring earlier constitutional decisions Commonwealth v Hospital Contribution Fund920, Gibbs CJ said: incorrect. to be 917 See, eg, Hughes and Vale Pty Ltd v State of New South Wales (1953) 87 CLR 49 at 102 per Kitto J; H C Sleigh Ltd v South Australia (1977) 136 CLR 475 at 501 per Mason J; Queensland v The Commonwealth (1977) 139 CLR 585 at 599 per Gibbs J, 602-603 per Stephen J, 620 per Aickin J; Re Tyler; Ex parte Foley (1994) 181 CLR 18 at 38-39 per McHugh J; McGinty v Western Australia (1996) 186 CLR 140 at 235 per McHugh J. 918 (1977) 139 CLR 585. 919 (1977) 139 CLR 585 at 599 per Gibbs J. 920 (1982) 150 CLR 49 at 55-56. Callinan "The question then arises whether we should reconsider these decisions [Kotsis v Kotsis921 and Knight v Knight922], and refuse to follow them if we disagree with them. Clearly we have power to take that course. This Court has always claimed the power to overrule its own decisions, and has exercised that power in a number of cases of great constitutional importance. But it is a power to be exercised with restraint, and only 'after the most careful scrutiny of the precedent authority in question and after a full consideration of what may be the consequences of doing so': Queensland v The Commonwealth923 per Stephen J. The authorities that have considered the circumstances in which this Court will reconsider an earlier decision of its own were fully discussed in the judgment of Aickin J in Queensland v The Commonwealth924." After giving due consideration to the reasoning in Knight v Knight and Kotsis v Kotsis his Honour concluded that they had been incorrectly decided and proceeded to overrule them, as did a majority of the Court. It is clear therefore that there is more room for a Justice of this Court to move, and to depart from authority, whether recent or venerable, in constitutional cases than in the private law. It could hardly be otherwise. No doubt careful deference should be paid to the doctrines of the Court as and when they can be identified and can be seen to be consistent, but it is not right for a judge to seek refuge in those doctrines to avoid the undertaking of an independent analysis, informed by the past, of the Constitution. In Singh v The Commonwealth925 McHugh J and I dissented on the constitutional question whether a person born in Australia and qualified for citizenship under the Australian Citizenship Act 1948 (Cth) could be deemed an alien for the purposes of s 51(xix) of the Constitution. Recently Koroitamana v Commonwealth926 raised a similar point for determination. In that case I accepted927 that on its facts Koroitamana was not distinguishable. I therefore 921 (1970) 122 CLR 69. 922 (1971) 122 CLR 114. 923 (1977) 139 CLR 585 at 602. 924 (1977) 139 CLR 585 at 620-630. 925 (2004) 222 CLR 322. 926 (2006) 80 ALJR 1146; 227 ALR 406. 927 (2006) 80 ALJR 1146 at 1160 [86]; 227 ALR 406 at 424. Callinan joined in the orders proposed by the majority, notwithstanding my conviction that the reasoning of McHugh J and myself in Singh was correct. That does not mean however that I should retreat from what I said in Singh in relation to the Convention Debates928: "The defendants object the reception of [speeches and resolutions of the Federal Coventions]. The objection should be dismissed. There is no doubt that the common law and the founders' understanding of it heavily informed the language of the Constitution. So too of course did history and contemporary perceptions of mischiefs929 to be dealt with and objectives to be attained. The Court is not only, in my opinion, entitled, but also obliged, to have regard to the Convention Debates when, as is often the case, recourse to them is relevant and informative930. The debates are certainly relevant and informative here. There are compelling reasons why recourse to the debates is permissible and will usually be helpful. Courts and judges may speak of the changing meaning of language but in practice substantive linguistic change occurs very slowly, particularly in legal phraseology. When change does occur, it generally tends to relate to popular culture rather than to the expression of fundamental ideas, philosophies, principles and legal concepts. Judges should in my opinion be especially vigilant to recognise and eschew what is in substance a constitutional change under a false rubric of a perceived change in the meaning of a word, or an expression used in the Constitution. That power, to effect a Constitutional change, resides exclusively in the Australian people pursuant to s 128 of the Constitution and is not to be usurped by either the courts or the Parliament. In any event, I am not by any means persuaded that an actual change in the meaning of a word or a phrase, if and when it occurs, can justify a departure from its meaning at the time of Federation. The constitutional conservatism of the Australian people reflected in the 928 (2004) 222 CLR 322 at 423-425 [293]-[295]. 929 Mischief in the legal sense, for example problems to be solved and hardships to be ameliorated. 930 There is probably no legal significance in the anomaly that s 15AB of the Acts Interpretation Act 1901 (Cth) would allow recourse to explanatory memoranda and second reading speeches, yet the defendants' submissions would deny it to the foundational constitutional materials. Callinan failure of so many referenda931 cannot justify a supposed antidote of judicial 'progressivism'. This is not to say that adherence to nineteenth century meanings which have become archaic will always be obligatory. But it is to say that instruments, including constitutional ones are still basically to be construed by reference to the intentions of their makers objectively ascertained. Examination of the circumstances which formed the background to the making of the Constitution assists in this examination. In my opinion Convention materials showing what the founders deliberately discarded may be especially illuminating in the same way as evidence of what parties to a contract deliberately excluded negates the implication of a term of a contract to the effect of what was excluded932." This case is a unique one. There are neither firm authority, nor even compelling dicta, which require me to hold for the Commonwealth in it. The point of this section of my reasons is this: even if those of a different mind could, or do, point to past decisions or dicta of this Court which in their opinion might appear to compel a different conclusion from mine933, there is a clear line of thinking of members of the Court that departures may legitimately and conscientiously be made. In my view they are not merely permissible, but obligatory when the issue is, as here, as significant as the continuing role and integrity of the States. The Commonwealth has conceded that no other case governs this one. That must mean that not even that monument to the demolition of State power, the Engineers' Case, does so. If, however, I am wrong about that, the cases to which I have referred in this section of my reasons would provide precedents entitling me to depart from it. Div 2: The principle of generality of language It has been said in various cases that constitutional provisions, especially those conferring powers, should be read "with all the generality which the words used admit"934, a statement of a positive obligation somewhat more expansive 931 Since 1901, 44 proposals have been put to the Australian people and only eight have succeeded: see Blackshield and Williams, Australian Constitutional Law and Theory, 3rd ed (2002) at 1301. 932 Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 at 346 per Mason J. 933 I would note that the joint reasons have approved the dissent of Gaudron J in Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union (2000) 203 CLR 346. 934 See, eg, R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225-226; New South Wales v The (Footnote continues on next page) Callinan than the negative injunction, not to read constitutional provisions "in any narrow or pedantic manner"935. Each of these requirements, indeed something less than them, would still exceed the ambit of the power allowed to democratically elected bodies exercising defined powers such as those of local authorities to make ordinances and by-laws936. As Gibbs CJ said in R v Toohey; Ex parte Northern Land Council937, in relation to the laws (regulations) made by the executive of a self-governing territory, the Northern Territory, under legislation enacted by the Parliament of the Territory: "One thing that is clearly settled by numerous cases is that a power expressed in terms such as those of s 165 of the Planning Act does not enable the Governor-General in Council or Governor in Council to make regulations 'which go outside the field of operation which the Act marks out for itself': Morton v Union Steamship Co of New Zealand Ltd938." The regulations of subordinates and the exercise of power by public bodies are carefully scrutinized by the courts to prevent excess or abuse of power. Such a body must act both reasonably and in good faith939. No one has proposed that the same sort of scrutiny should be unqualifiedly employed in the Commonwealth ("the Seas and Submerged Lands Case") (1975) 135 CLR 337 at 470-471; The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 127-128; Polyukhovich v The Commonwealth (War Crimes Act Case) (1991) 172 CLR 501 at 528; Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 492 [16]. 935 See, eg, James v The Commonwealth (1936) 55 CLR 1 at 43; R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 at 278; Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468 at 490; Koowarta v Bjelke-Petersen (1982) 153 CLR 168 at 223-224. 936 In Baxter v Ah Way (1909) 8 CLR 626 at 643, Isaacs J saw and used an analogy between powers conferred on the Commonwealth by the Constitution and powers conferred on subordinate authorities to make regulations and by-laws by enactments. 937 (1981) 151 CLR 170 at 187. 938 (1951) 83 CLR 402 at 410. 939 Westminster Corporation v London and North Western Railway [1905] AC 426 at Callinan examination of Commonwealth powers under s 51 of the Constitution940. That does not mean, however, particularly in relation to a federation such as Australia, that interpretative rigour is not called for in a constitutional case in which the Commonwealth Parliament has enacted legislation with a real tendency to affect traditional State activities. On any view, in any event, neither the positive nor the negative injunction about generality is an unqualified principle of constitutional interpretation. The source of both propositions is almost certainly O'Connor J in Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association941, in which his Honour was still careful to make clear, a matter of which sight has at times been lost, that generality must make way to context and other limiting provisions in the Constitution: "[W]here it becomes a question of construing words used in conferring a power of that kind on the Commonwealth Parliament, it must always be remembered that we are interpreting a Constitution broad and general in its terms, intended to apply to the varying conditions which the development of our community must involve. For that reason, where the question is whether the Constitution has used an expression in the wider or in the narrower sense, the Court should, in my opinion, always lean to the broader interpretation unless there is something in the context or in the rest of the Constitution to indicate that the narrower interpretation will best carry out its object and purpose." It is of particular importance to note his Honour's reference to the necessity to give effect to the "object and purpose" of each expression in the Constitution, another matter neglected from time to time by this Court, and of some significance to this case. In Strickland v Rocla Concrete Pipes Ltd942 the Court treated the decision in Huddart, Parker & Co Pty Ltd v Moorehead943 as if every word and line of it were infected by a virus, the doctrine of reserved State 940 In Cunliffe v The Commonwealth (1994) 182 CLR 272 at 356, Dawson J said that a "test of reasonable proportionality", which "has been found useful in determining the validity of delegated legislation", may be used for "purposive" powers only. 941 (1908) 6 CLR 309 at 367-368. This case is cited in R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225-226. 942 (1971) 124 CLR 468. 943 (1909) 8 CLR 330. Callinan powers. This passage from the judgment of O'Connor J in that case reveals no such infection, rather, simply a respect for federalism944: "Where [the Constitution] confers a power in terms equally capable of a wide and of a restricted meaning, that meaning will be adopted which will best give effect to the system of distribution of powers between State and Commonwealth which the Constitution has adopted, and which is most in harmony with the general scheme of its structure." It is difficult to avoid the impression that in preferring, as it so often has, central power to State power, this Court has regarded its constitutional role as no different from the role of an umpire of a cricket match, who, by the rules of that game, is obliged to give the batsman, at the expense of the bowler, the "benefit of the doubt". I am neither bound nor prepared to take that stance. I elsewhere explain why there are other strong reasons for the construction of s 51(xviii) of the Constitution which I think correct. At this point it is sufficient to say that the submission of the Australian Workers' Union is also partly correct: 'postal, telegraphic, "[I]t is one thing to say that terms such as 'patents of inventions and designs', like services', 'corporations', or 'marriage' should be construed with all the generality that their words admit, lest the Constitution become some sort of nineteenth century fossilized relic. It is quite another, however, to say that the most general connection between a head of power and a law will be deemed sufficient." telephonic, and other The submission is correct in singling out some powers for an obviously more expansive operation than others. Patents and inventions are powers in point. So too is defence. In its terms, that is in text, placitum (v) dealing with "postal, telegraphic, telephonic, and other like services" is a very far-reaching power without any need for judicial addition to it. I am however unable to accept that the Constitution is in danger of becoming a fossilized relic of the nineteenth century. Intimations of that danger have accompanied and been falsified by every one of the many failed referenda conducted since federation, as well as, among other things, cooperation between the Commonwealth and the States when power is lacking but action truly necessary945. 944 (1909) 8 CLR 330 at 369. 945 A good example is the Corporations Act 2001 (Cth), the incorporation provisions of which rely on the reference power conferred by s 51(xxxvii) of the Constitution. That reference was made necessary, if there were to be a uniform Commonwealth law, by the decision of the Court in New South Wales v The Commonwealth (The (Footnote continues on next page) Callinan The generality doctrine is subject to another restraint or limitation, curiously enough, not by reason of anything stated in terms in the Constitution, but by reason of an only recently unearthed implication, of freedom of political speech946. In Coleman v Power947 and APLA Ltd v Legal Services Commissioner (NSW)948, McHugh J would have applied that implication to strike down State legislation. It could have, as a constitutional implication, the same operation upon relevant legislation of the Commonwealth enacted apparently otherwise validly under s 51. The generality doctrine may be carried only so far. It cannot be used in such a way as to defeat two of the most elementary principles of construction of all instruments and legislation: that effect must be given to the intention, the objects and purposes of the document, and that it must be read and construed as a whole. Div 3: Statement of the appropriate principles The cases and matters to which I have referred show that over 103 years the Justices of this Court have not adopted clear and consistent canons for the construction of the Constitution. Accusations of heresy have provoked counter- accusations of heresy. As Liddell Hart said in Why don't we learn from history?, if a person criticize an idea as "heresy" or take a particular criticism as a general depreciation, that person effectively abandons "the spirit of objective enquiry"949. The same can be said of an assertion, unsupported by considered reasoning, that another's construction according to well-accepted canons of construction is an "ill-conceived attempt"950. The doctrine of stare decisis has sometimes been applied, and at other times it has been disregarded. Judges have emphasized the need to read the Constitution as a complete document and contextually, but yet, for the expansion of Commonwealth power, have been prepared to view a section or a placitum of s 51 monocularly. Incorporation Case) (1990) 169 CLR 482. Simarly, after the decision of the Court in Re Wakim; Ex parte McNally (1999) 198 CLR 511, each State enacted a Federal Courts (State Jurisdiction) Act 1999, the validity of which was upheld in Residual Assco Group Ltd v Spalvins (2000) 202 CLR 629 and Re Macks; Ex parte Saint (2000) 204 CLR 158. 946 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520. 947 (2004) 220 CLR 1 at 53-54 [101]-[106]. 948 (2005) 79 ALJR 1620; 219 ALR 403. 949 Liddell Hart, Why don't we learn from history?, (1944) at 11. 950 New South Wales v The Commonwealth (The Incorporation Case) (1990) 169 CLR 482 at 504 per Deane J. See also Pt VI of these reasons. Callinan The principles by which I am guided in this case are these. The Constitution should be construed in the light of its history. It should be construed purposively. The founders' intentions and understandings, to the extent that they can be seen to be generally consensual, are relevant951. The evidence to be found in the Debates is valuable. The referenda, the results of them, and what was said by informed, legally qualified and knowledgeable legislators in relation to the Bills for them, are relevant in the way, and for the purposes that I have stated. The Constitution should not be construed to enable the Court to supplant the people's voice under s 128 of it. The Constitution should not in general be read as if it were intended to confer powers in duplicate. "Originalism" so-called, is no less a proper interpretative tool than any other, and will often be an appropriate one. It is useful here. The doctrines of indirect result and accidental bullseye are unlikely ones and when applied have the capacity to lead to eccentric, unforeseen, improbable and unconvincing results. The former has the further potential of encouraging an absence of candour in the legislative process. They should not be applied here. The generality doctrine may be invoked sparingly only, and cannot extend to all placita of s 51 in all circumstances. The Constitution requires that an enactment be characterized by its true nature and substance for the purpose of assessing its validity952. Sight should never be lost of the verity that the Constitution is a constitution for a federation, and that it provides for a federal balance, a topic to which I go next. It may be in any event subject to constitutional implications, and the maintenance of the federal balance is a powerful one of these, more powerful than, for example, the implication of freedom of political speech, not a word concerning which, unlike the repeated references to the States, appears in the Constitution. 951 Scalia J recently posed this question, extra-judicially (Response to comments on his Sir John Young Oration, "Mullahs of the West; Judges as Authoritative Expositors of the Natural Law?", (2005) at 21): "Would anyone vote for a constitution which said 'Those general norms set forth in this document ... do not refer to the people's current understanding of what is embraced by those terms, but rather shall bear the meaning assigned, from time to time, by unelected and life tenured committees of lawyers.'" 952 Barwick CJ said in Victoria v The Commonwealth ("the Payroll Tax Case") (1971) 122 CLR 353 at 372: "[A] law of the Commonwealth which in substance takes a State or its powers or functions of government as its subject matter is invalid because it cannot be supported upon any granted legislative power. If the subject matter of the law is in substance the States or their powers or functions of government, there is no room, in my opinion, for holding it to be at the same time and in the same respects a law upon one of the enumerated topics in s 51." (emphasis added) Callinan Application of these principles here produces the result that the challenge to the Act succeeds. BALANCE CONSTITUTIONAL IMPERATIVE OF THE FEDERAL I turn then to the question of the distribution of powers, in other words, the The Cambridge divine William Ralph Inge wrote953: federal balance. "Democracy is a form of government which may be rationally defended, not as being good, but as being less bad than any other." Sir Winston Churchill observed954: "[I]t has been said that democracy is the worst form of Government except all those other forms that have been tried from time to time". It may equally perhaps be argued that despite their faults, federations are the least undemocratic of all forms of government. The framers of the Constitution and the people who endorsed it by a popular vote could not have been unaware of the problems, and the frustrations, to which the division of powers in a federation may give rise955. Nor would they have been ignorant of the aversion that those who exercise power generally have to any sharing of it. The legislation which is in question here, if valid, would subvert the Constitution and the delicate distribution or balancing of powers which it contemplates. To say that the powers are distributed, or that they are carefully balanced, is not to suggest that they ever were, or are now, in a state of static equilibrium. In both specific and general areas, the powers of the Commonwealth obviously tend to be much larger than, or are exclusive of, those of the States. There is nothing static about the defence power (s 51(vi)) in times of national peril, or at all times, the taxation power (s 51(ii)), as to which governments and parliaments consistently exercise much ingenuity, or, as these reasons elsewhere note, the intellectual property power (s 51(xviii)), the immigration and emigration power (s 51xxvii)), or, in particular, the grants power (s 96) which legitimately all allow to the Commonwealth much room to move. The "generality doctrine" cannot be used to expand the powers of the Commonwealth in disregard of the distribution of constitutional power for which 953 Inge, Outspoken Essays, (1919) at 5. Inge (1860-1954) was a professor of divinity at Cambridge. 954 United Kingdom, House of Commons, Parliamentary Debates (Hansard), 11 November 1947 at 207. 955 It is not beyond controversy whether highly centralized or command economies function more efficiently than those in which control is dispersed. Callinan the Constitution provides, and which careful reading of it as a whole requires. The generality doctrine should only be invoked and applied to provisions which by their terms, and in the light of other language in the Constitution, can be seen to require an expansive meaning. Let me make clear what I mean by the "federal balance" before I continue. It is, essentially, a sharing of power, even of power which the Commonwealth can monopolize under a specific constitutional grant if and when it chooses to do so, and can successfully invoke s 109 of the Constitution, and the exercise of different powers of varying importance by each of the Commonwealth and the States, but not so that, relevantly for present purposes, the essential functions and institutions of the States, for example, internal law and order, their judiciaries, and their Executives are obstructed, impeded, diminished, or curtailed. Even when the Commonwealth does have the relevant power, the exercise of it may be unconstitutional. There is good reason why, in drawing the boundaries, this Court should have regard to the matters that I deal with in this section of my reasons. The text, indeed the whole structure, of the Constitution clearly mandates the co-existence of the Commonwealth and the States. Whilst Griffith CJ well understood that it was the Court's duty to construe the Constitution as a constitution for a nation and not some assemblage of minor organizations, he never lost sight of the fact that it was a "compact"956 for a federation. He and other founders also understood from their knowledge of the Constitution and history of the United States that a federation of robust components was not antithetical to nationhood. The Commonwealth is the creature of the Constitution957. Its powers are specific and enumerated958. All not so specified and enumerated are powers of the States. Those that they possessed at the establishment of the Commonwealth "continue"959. It is only in certain circumstances that the Commonwealth may act exclusively960, and in others the 956 The Federated Amalgamated Government Railway and Tramway Service Association v The New South Wales Railway Traffic Employés Association (1906) 4 CLR 488 at 534 per Griffith CJ, Barton and O'Connor JJ. See also Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087 at 1104-1105. 957 Preamble and covering cl 6. 958 See, eg, ss 51, 52, 61-70, 71-73, 76-78, 96, 105A, 121-123. 959 Section 107. 960 See, eg, ss 52, 69, 90, 111, 114 and 115. Callinan States enjoy what is in truth an immunity961, despite the distaste of the majority in the Engineers' Case for that concept. There is nothing in the text or the structure of the Constitution to suggest that the Commonwealth's powers should be enlarged, by successive decisions of this Court, so that the Parliament of each State is progressively reduced until it becomes no more than an impotent debating society. This Court too is a creature of the Constitution. Its powers are defined in Ch III, and legislation made under it. The Court goes beyond power if it reshape the federation962. By doing that it also subverts the sacred and exclusive role of the people to do so under s 128. The joint judgment states that reliance on notions of comity is apt to invoke presuppositions about allocation of legislative power between the integers of the federation that are not easily distinguished from the reserved powers doctrine963. The whole Constitution is founded upon notions of comity, comity between the States which replaced the former colonies, comity between the Commonwealth as a polity and each of the States as a polity, and comity between the Imperial power, the Commonwealth and the States. It is inevitable in a federation that the allocation of legislative power will have to be considered from time to time. Federations compel comity, that is to say, mutual respect and deference in allocated areas. There are statements in the joint judgment964, impliedly at least, disparaging, not only of the expression, "the federal balance", but also of the very concept of it. In my respectful opinion they fail to pay due regard to our predecessors on this Court who never doubted the importance of that concept. Starke J, who had joined in the joint reasons in the Engineers' Case, made clear in subsequent cases that the Court's reliance upon textualism in the Engineers' Case is qualified by the existence and need to maintain the federal balance. In South Australia v The Commonwealth965 he said: 961 See, eg, ss 91, 100, 104 and 114. 962 One, but not the only, definition of "judicial activism" is "using judicial power for a purpose other than that for which it was granted" (emphasis added): Heydon, "Judicial Activism and the Death of the Rule of Law", (2003) 23 Australian Bar Review 110 at 113. 965 (1942) 65 CLR 373 at 442. Callinan "The government of Australia is a dual system based upon a separation of organs and of powers. The maintenance of the States and their powers is as much the object of the Constitution as the maintenance of the Commonwealth and its powers. Therefore it is beyond the power of either to abolish or destroy the other. The limited grant of powers to the Commonwealth cannot be exercised for ends inconsistent with the separate existence and self-government of the States, nor for ends inconsistent with its limited grants". (emphasis added) Later, in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Victoria966, Starke J said this: "The maintenance of the States and their powers, as I have said before, is as much the object of the Constitution as the maintenance of the Commonwealth and its powers. It is inconsistent with the Federal system set up by the Constitution that the Commonwealth should enact legislation compelling the States, as such, to take or to refrain from taking any action, or to expend their revenues, in manner prescribed by the Commonwealth." in Melbourne Corporation v The Commonwealth967 in support of the proposition that "[t]he federal character of the Australian Constitution carries implications of its own" (emphasis added). two passages these The issue in Melbourne Corporation was whether s 48 of the Banking Act 1945 (Cth), which prevented banks from conducting any banking business for a State or a State authority, including a local government authority, except with the consent in writing of the Commonwealth Treasurer, was a valid constitutional enactment. Rich J said this968: "There is no general implication in the framework of the Commonwealth Constitution that the Commonwealth is restricted from exercising its defined constitutional powers to their fullest extent by a supposed reservation to the States of an undefined field of reserved powers beyond the scope of Commonwealth interference. But this is always subject to the provisions of the Commonwealth Constitution itself. That Constitution expressly provides for the continued existence of the States. Any action on the part of the Commonwealth, in purported exercise of its constitutional powers, which would prevent a State from continuing to exist and function as such is necessarily invalid because inconsistent with 966 (1942) 66 CLR 488 at 515. 967 (1947) 74 CLR 31 at 70. 968 (1947) 74 CLR 31 at 66. Callinan the express provisions of the Constitution, and it is to be noted that all the powers conferred by s 51 are conferred 'subject to this Constitution.'" It is significant that his Honour was stressing that more than mere existence was involved: rather that the States were entitled to function as polities with real powers, authorities and a constitutional role. The fears of Dixon J were of encroachments upon State constitutional powers. The States are not, as he said, to be hindered by the Commonwealth in the exercise of their powers. His Honour put it this way969: "[My] reservation relates to the use of federal legislative power to make, not a general law which governs all alike who come within the area of its operation whether they are subjects of the Crown or the agents of the Crown in right of a State, but a law which discriminates against States, or a law which places a particular disability or burden upon an operation or activity of a State, and more especially upon the execution of its constitutional powers. In support of such a use of power the Engineers' Case has nothing to say." (emphasis added; footnote omitted) Later his Honour said970: "The foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities. Among them it distributes powers of governing the country. The framers of the Constitution do not appear to have considered that power itself forms part of the conception of a government. They appear rather to have conceived the States as bodies politic whose existence and nature are independent of the powers allocated to them. The Constitution on this footing proceeds the power between State and Commonwealth and to provide for their inter-relation, tasks performed with reference to the legislative powers chiefly by ss 51, 52, 107, 108 and to distribute "[T]he Parliament of the Commonwealth is only authorized by s 51 to make laws with respect to the enumerated subjects (1) for the peace, order 969 (1947) 74 CLR 31 at 78-79. 970 (1947) 74 CLR 31 at 82. 971 (1947) 74 CLR 31 at 99. Callinan and good government of the Commonwealth, and (2) subject to the Constitution, and there arises from the very nature of the federal compact, which contemplates two independent political organisms, each supreme within its own sphere, existing side by side and exerting divided authority over the same persons and in the same territory, a necessary implication that neither the Commonwealth nor the States may exercise their respective constitutional powers for the purpose of affecting the capacity of the other to perform its essential governmental functions." (emphasis added) The emphatic reservations stated by Dixon J, with Commonwealth laws that are discriminatory or impose a special burden upon the States, have not attracted the support of all other judges. Barwick CJ and Windeyer J expressed disagreement with them in the Payroll Tax Case972, but neither denied, nor could they, that the Constitution insists upon the co-existence of State and Commonwealth power. There is discernable however in statements elsewhere by Windeyer J an unabashed preference for the Commonwealth and Commonwealth power to State power973. respect The joint reasons also cite the words of Windeyer J in the Payroll Tax Case974 in denigration of the States as polities: "The Colonies which in 1901 became States in the new Commonwealth were not before then sovereign bodies in any strict legal sense; and certainly the Constitution did not make them so. They were self- governing colonies which, when the Commonwealth came into existence as a new Dominion of the Crown, lost some of their former powers and gained no new powers. They became components of a federation, the Commonwealth of Australia. It became a nation. Its nationhood was in the course of time to be consolidated in war, by economic and commercial integration, by the unifying influence of federal law, by the decline of dependence upon British naval and military power and by a recognition and acceptance of external interests and obligations. With these developments the position of the Commonwealth, the federal government, has waxed; and that of the States has waned. In law that is a result of the paramount position of the Commonwealth Parliament in matters of concurrent power. And this legal supremacy has been reinforced in fact by financial dominance. That the Commonwealth would, as time went on, 972 (1971) 122 CLR 353 at 373 per Barwick CJ, 403 per Windeyer J. 973 See, eg, Bonser v La Macchia (1969) 122 CLR 177 at 222-224; Western Australia v Chamberlain Industries Pty Ltd (1970) 121 CLR 1 at 26-27. 974 (1971) 122 CLR 353 at 395-396. Callinan enter progressively, directly or indirectly, into fields that had formerly been occupied by the States, was from an early date seen as likely to occur. This was greatly aided after the decision in the Engineers' Case, which diverted the flow of constitutional law into new channels." (footnote omitted) I do not, with respect, regard all of his Honour's statement there as helpful for several reasons. To say that the colonies were not before federation "sovereign bodies" in any strict legal sense leads nowhere. As the history of very infrequent sovereign intervention in colonial affairs discussed in Attorney-General (WA) v Marquet975 shows, intervention by the Imperial Parliament or the Executive practically never occurred after separation of the respective colonies. The Colonial Laws Validity Act 1865 (Imp) conferred very extensive powers to legislate upon the colonies which they vigorously exercised976. Relevantly for present purposes, they legislated in all necessary detail for and in respect of companies977. Nor does it lead anywhere to say, as Windeyer J did, and the majority has approved, that the Constitution did not make the States sovereign bodies. What is of real relevance, however they may be described, was that they are, and were, polities with popularly elected governments exercising extensive powers with the capacity to affect the rights, obligations and property of people, including one of the most important powers of all, to establish and maintain Supreme Courts with the same powers as the ancient courts at Westminster and their successors. The States may not have gained any new powers at federation, but federation affirmed and enlarged them as substantial and permanent polities of a kind quite different from mere colonies. Windeyer J argues that it was seen from an early date that it was likely that the Commonwealth would "enter progressively ... [and] indirectly, into fields that had formerly been occupied by the States" and that this process was accelerated by the Engineers' Case. His Honour does not mention by whom or when this was foreseen as likely to occur, and whether the "fields" were fields delineated exclusively by s 51 or otherwise. It is important to keep in mind the three distinct types of powers exercised in a federation: exclusive Commonwealth power, concurrent federal and State power, and exclusive State power. Gibbs J, in the Payroll Tax Case, spoke in the same vein as Dixon J in Melbourne Corporation, and, when he was Chief Justice, in the later case of 975 (2003) 217 CLR 545 at 562 [36]-[38]. 976 See, eg, the grants of leases over areas of land considered in Wik Peoples v Queensland (1996) 187 CLR 1; Western Australia v Ward (2002) 213 CLR 1. 977 Companies Act 1874 (NSW); The Companies Statute 1864 (Vic); The Companies Act 1864 (SA); The Companies Act 1863 (Q); The Companies Act 1893 (WA); The Companies Act 1869 (Tas). Callinan Queensland Electricity Commission v The Commonwealth978. In the former he said979: "It is unnecessary to discuss fully the subject of the implied limitations on the power of the Commonwealth to make laws binding on the States. Such matters as the extent of the Commonwealth power to affect the prerogative, or whether the Commonwealth can compel the States to make appropriations of money in satisfaction of liabilities imposed on them, or can impair or affect the Constitution of a State, do not fall for consideration. Still less is it necessary to discuss the implications that may be made as to the immunity of the Commonwealth from action by the States. In my respectful opinion, the view of Sir Owen Dixon, that a Commonwealth law is bad if it discriminates against States, in the sense that it imposes some special burden or disability upon them, so that it may be described as a law aimed at their restriction or control, should be accepted. With all respect, however, I am not disposed to agree that a law which is not discriminatory in this sense is necessarily valid if made within one of the enumerated powers of the Commonwealth. A general law of the Commonwealth which would prevent a State from continuing to exist and function as such would in my opinion be invalid. It is true that in many cases a law which offended in this way would prove to be discriminatory, and I am conscious of the imprecision of the test so far as it applies The further formulations of the test by Rich and Starke JJ in the Melbourne Corporation Case980 are not free from difficulty. To say that what the Constitution impliedly forbids is a law which would prevent the States from performing the normal and essential functions of government or impede them in doing so is to draw a distinction between essential and inessential functions of government which is inappropriate to modern conditions and has probably never been valid (cf per Windeyer J in Ex parte Professional Engineers' Association981). To inquire whether a law curtails or interferes in a substantial manner with the exercise of constitutional power by the States leads only to the further question what is the constitutional power of the States that is protected. For the purposes of the present case it is, however, unnecessary to attempt to resolve these difficulties because the pay-roll tax in its present form would not be invalid on any view of the question." to general and non-discriminatory laws. 978 (1985) 159 CLR 192 at 205-206. 979 (1971) 122 CLR 353 at 424-425. 980 (1947) 74 CLR 31. 981 (1959) 107 CLR 208 at 274-276. In Queensland Electricity Commission, Gibbs CJ said982: Callinan that intention the power of its reveal an "It is now clear in principle, and established by authority, that the powers granted by s 51 of the Constitution are subject to certain limitations derived from the federal nature of the Constitution. The purpose of the Constitution was to establish a Federation. 'The foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities': Melbourne Corporation v The Commonwealth983. The fundamental purpose of the 'very frame' (Melbourne Corporation v The Constitution, and the Commonwealth to affect the States by its legislation must be subject to some limitation. The judgments in Melbourne Corporation v The Commonwealth were fully examined in Victoria v The Commonwealth985 and the majority of the Court in the latter case (Menzies, Windeyer and Walsh JJ and myself) held that what was decided in the earlier case was that although s 48 of the Banking Act 1945 (Cth) was, or might be, a law with respect to banking within s 51(xiii) of the Constitution, it was invalid because it exceeded the limits on the law-making power of the Commonwealth which must be implied in the Constitution. It was recognized that it is not easy to formulate exhaustively and authoritatively the limitations that must be implied, and, indeed, it is undesirable to attempt to do so in the abstract. It is clear, however, that there are two distinct rules, each based on the same principle, but dealing separately with general and discriminatory laws. A general law, made within an enumerated power of the Commonwealth, will be invalid if it would prevent a State from continuing to exist and function as such. Clearly the Act is not a law of that description and it is unnecessary to consider further that aspect of the principle. A Commonwealth law will also be invalid if it discriminates against the States in the sense that it imposes some special burden or disability on them." Mason J, Wilson J and Deane J also approved the reasoning of Dixon J986. Dawson J saw discrimination and the imposition of a special burden as two 982 (1985) 159 CLR 192 at 205-206. 983 (1947) 74 CLR 31 at 82. 984 (1947) 74 CLR 31 at 83. 985 (1971) 122 CLR 353. 986 (1985) 159 CLR 192 at 217 per Mason J, 222 per Wilson J, 248 per Deane J. Callinan examples of the broader restraint on the Commonwealth's power, that it cannot impair the States' ability "to function effectually as independent units"987. I would respectfully agree that "to function" in a real sense a polity must be able to function in a substantial and independent way. Erosion of its capacity to do so is unlikely to occur otherwise than by a series of steps, some, as here, dramatic and obvious, others small and incremental. The Court needs to be vigilant in respect of both kinds. It should ensure that the functions of the States are not reduced to trivial or subservient ones by a judicial process that makes them little more than facades of power. The force of the reasoning of Dixon J was recently acknowledged in this Court in Austin v The Commonwealth988. Gleeson CJ, after referring to Melbourne Corporation and Queensland Electricity Commission, concluded989: "It was the disabling effect on State authority that was the essence of the invalidity in those cases. It is the impairment of constitutional status, and interference with capacity to function as a government, rather than the imposition of a financial burden, that is at the heart of the matter, although there may be cases where the imposition of a financial burden has a broader significance." Gaudron, Gummow and Hayne JJ thought990 (Kirby J agreeing991) in Austin that the two reservations of Dixon J were not independent of one another: "[The] differential treatment was said, without more, to attract the Melbourne Corporation doctrine; the like was treated as the unalike and thereby the States were burdened in a 'special way'. That would appear to give 'discrimination' a standing on its own which in this field of discourse it does not have. There is, in our view, but one limitation, though the apparent expression of it varies with the form of the legislation under consideration. The question presented by the doctrine in any given case requires assessment of the impact of particular laws by such criteria as 'special burden' and 'curtailment' of 'capacity' of the States 'to function as 987 (1985) 159 CLR 192 at 260. 988 (2003) 215 CLR 185. 989 (2003) 215 CLR 185 at 217 [24]. 990 (2003) 215 CLR 185 at 249 [123]-[124]. 991 (2003) 215 CLR 185 at 301 [281]. Callinan governments'. These criteria are to be applied by consideration not only of the form but also 'the substance and actual operation' of the federal law992. Further, this inquiry inevitably turns upon matters of evaluation and degree and of 'constitutional facts' which are not readily established by objective methods in curial proceedings." "I am unable to agree with that part of the reasons of the joint judgment994 that the Melbourne Corporation principle involves only 'one limitation, though the apparent expression of it varies with the form of the legislation under consideration'. With respect, since Queensland Electricity Commission it has been settled doctrine that there are two rules arising from the necessary constitutional implication. It is true that the joint judgment of six members of this Court, including myself, in Re Australian Education Union; Ex parte Victoria995 said that it was unnecessary in that case to decide whether 'there are two implied limitations, two elements or branches of one limitation, or simply one limitation'. But that statement provides no basis for rejecting the statement of Mason J in Queensland Electricity Commission996 that 'the principle is now well established and that it consists of two elements'. Nor does it provide any basis for rejecting the statement of Gibbs CJ in the same case997 that 'it is clear, however, that there are two distinct rules, each based on the same principle, but dealing separately with general and discriminatory laws'. Perhaps nothing of substance turns on the difference between holding that there are two rules and holding that there is one limitation that must be applied by reference to 'such criteria as "special burden" and "curtailment" of "capacity" of the States "to function as governments"'998. 992 Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 at 240; Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 249-250; Industrial Relations Act Case (1996) 187 CLR 416 at 500. 993 (2003) 215 CLR 185 at 281-282 [223]-[224]. 994 Reasons of Gaudron, Gummow and Hayne JJ at 249 [124]. 995 (1995) 184 CLR 188 at 227 per Mason CJ, Brennan, Deane, Toohey, Gaudron and 996 (1985) 159 CLR 192 at 217. 997 (1985) 159 CLR 192 at 206. 998 Reasons of Gaudron, Gummow and Hayne JJ at 249 [124]. Callinan If there is a difference in content or application, it may lead to unforeseen problems in an area that is vague and difficult to apply. If there are no differences, no advantage is to be gained by jettisoning the formulation of Mason J in Queensland Electricity Commission." Regardless of the differences between the two sets of reasons, and regardless whether the two concerns of Dixon J in Melbourne Corporation should be seen as really being the one, each of the Justices clearly subscribed to the concept of a real division of power, that is to say, the realities of a federal system and the necessity of its constitutional survival. Neither Melbourne Corporation, other cases in which it has been cited with approval, nor Austin is determinative of this one. What all of those cases do however, is compel that in any constitutional contest between the Commonwealth and the States, careful regard be had, and significance attached to what I have described as the federal balance. The role of federalism was also relevant to the controversy in the Boilermakers' Case999, which concerned, principally, the question whether the Constitution required a separation of judicial and executive power. Dixon CJ, McTiernan, Fullagar and Kitto JJ said there1000: "In a federal form of government a part is necessarily assigned to the judicature which places it in a position unknown in a unitary system or under a flexible constitution where Parliament is supreme. A federal constitution must be rigid. The government it establishes must be one of defined powers; within those powers it must be paramount, but it must be incompetent to go beyond them." But what their Honours later said is of particular relevance here1001: "Probably the most striking achievement of the framers of the Australian instrument of government was the successful combination of the British system of parliamentary government containing an executive responsible to the legislature with American federalism. This meant that the distinction was perceived between the essential federal conception of a legal distribution of governmental powers among the parts of the system and what was accidental to federalism, though essential to British political conceptions of our time, namely the structure or composition of the legislative and executive arms of government and their mutual relations. 999 (1956) 94 CLR 254. 1000 (1956) 94 CLR 254 at 267. 1001 (1956) 94 CLR 254 at 275. Callinan The fact that responsible government is the central feature of the Australian constitutional system makes it correct enough to say that we have not adopted the American theory of the separation of powers. For the American theory involves the Presidential and Congressional system in which the executive is independent of Congress and office in the former is inconsistent with membership of the latter. But that is a matter of the relation between the two organs of government and the political operation of the institution. It does not affect legal powers. It was open no doubt to the framers of the Commonwealth Constitution to decide that a distribution of powers between the executive and legislature could safely be dispensed with, once they rejected the system of the independence of the executive. But it is only too evident from the text of the Constitution that that was not their decision." The joint reasons hold1002 that because the Act regulates or affects the relationship between corporations and a class of those through whom those corporations may act, it is constitutionally valid. If that is correct, the opportunities for further central control are very numerous. It is not difficult to foresee legislation seeking, for example, to control wholly or at least partly, subcontractors to corporations, or the solicitors or barristers who act for a corporation, or anyone else who deals with, purchases from or sells to a corporation, or has any form of financial, or indeed any other, relationship with a corporation, insofar as it touches or concerns a corporation. It is not unreasonable, far-fetched or indeed unorthodox to have regard to these sorts of consequences in the process of constitutional interpretation. Precisely that was done by Higgins J in Huddart Parker1003: "If the argument for the Crown is right, the results are certainly extraordinary, big with confusion. If it is right, the Federal Parliament is in a position to frame a new system of libel laws applicable to newspapers owned by corporations, while the State law of libel would have to remain applicable to newspapers owned by individuals. If it is right, the Federal Parliament is competent to enact licensing Acts, creating a new scheme of administration and of offences applicable only to hotels belonging to corporations. If it is right, the Federal Parliament may enact that no foreign or trading or financial corporation shall pay its employés less than 10s per day, or charge more than 6 per cent interest, whereas other corporations and persons would be free from such restrictions. If it is right, the Federal Parliament can enact that no officer of a corporation shall be an Atheist or a Baptist, or that all must be teetotallers. If it is 1003 (1909) 8 CLR 330 at 409-410. Callinan right, the Federal Parliament can repeal the Statute of Frauds for contracts of a corporation, or may make some new Statute of Limitations applicable only to corporations. Taking the analogous power to make laws with regard to lighthouses, if the respondent's argument is right, the Federal Parliament can license a lighthouse for the sale of beer and spirits, or may establish schools in lighthouses with distinctive doctrinal teaching, although the licensing laws and the education laws are, for ordinary purposes, left to the State legislatures." (emphasis added) And here we are today, confronted with one of the very claims, I would say, excess, of power that his Honour feared. The potential reach of the corporations power, if it is as extensive as the majority would have it, is enormous. The extent to which corporations and their activities pervade the life of the community can be gleaned from the numbers quoted in the explanatory memorandum and to which the joint judgment refers. The reach of the corporations power, as validated by the majority, has the capacity to obliterate powers of the State hitherto unquestioned. This Act is an Act of unconstitutional spoliation. It is appropriate to answer in this part of my reasons a question raised in the joint reasons1004: why should the text of the Constitution be so read as to pre- empt the exercise of other heads of legislative power to which s 51(xxxv) could not apply? The answer is that the only place in the Constitution in which the text refers to industrial matters is in that placitum; and, secondly, that if control over industrial affairs were to be imported into the subject matter of virtually every placitum of s 51, there would be little of substance left for the States in this area of importance to them. All of this is simply to say, federalism, as it is enshrined in the Constitution. It is also said in the joint reasons1005, in reliance upon Bourke v State Bank of New South Wales1006, that a law with respect to a subject matter within Commonwealth power does not cease to be valid because it affects a subject matter outside power, or can be characterized as a law with respect to a subject matter outside power, unless the second subject matter with respect to which the law can be characterized is not only outside power but also is the subject of a positive prohibition or restriction. In my respectful opinion that statement cannot be accepted in the absolute terms in which it is put. In any event, Bourke was decided before Lange, which holds that the exercise of any constitutional power 1006 (1990) 170 CLR 276 at 285. Callinan is, if relevant to it, subject, not just to a positive restriction, but to a negative one and a merely implied one at that, of freedom of political communication. The federal balance is not to be maintained as a matter of political or social preference, but as a matter of constitutional imperative. It may only yield, if it is to yield at all, to the exercise of the defence power (or perhaps, on occasions, the external affairs power) in circumstances of the gravest danger to the nation. in Australian Communist Party v The Commonwealth1007: "The Federal nature of the Constitution is not lost during a perilous war. If it is obscured, the Federal form of government must come into full view when the war ends and is wound up. The factors which give such a wide scope to the defence power in a desperate conflict are for the most part wanting." The Constitution mandates a federal balance. That this is so should be closely and carefully kept in mind when construing the Constitution. That the federal balance exists, and that it must continue to exist, and that the States must continue to exist and exercise political power and function independently both in form and substance, until the people otherwise decide in a referendum under s 128 of the Constitution, are matters that necessarily inform and influence the proper construction of the Constitution. The Act here seeks to distort that federal balance by intruding into industrial and commercial affairs of the States. PART VI. THE NECESSITY TO CONSTRUE S 51 AS A WHOLE I now turn to a consideration of s 51 of the Constitution as a whole, because it is the requirement to do this which is decisive here. Each of the placita of s 51 deals with a discrete topic. There may be, indeed there is in some cases, a clear possibility of some overlapping, but instances of it are likely to be rare and slight, and a construction which allows them should, wherever possible, be avoided, for two reasons: that it is unlikely that the authors of the Constitution intended to repeat themselves, or did so by accident; and because it is an elementary principle of construction that each word and phrase of an instrument has its own work to do. It is no answer to those fundamental propositions to say, as Deane J did in his dissenting judgment in The 1007 (1951) 83 CLR 1 at 203. 1008 New South Wales v The Commonwealth (1990) 169 CLR 482 at 504. Callinan "that the plenary grants of legislative powers which are contained in the first thirty-five paragraphs of s 51 are not to be constricted by ill- conceived attempts to prevent or confine overlapping between them." In Pt III of the joint judgment their Honours describe s 51(xx) of the Constitution as the principal issue. I have not myself chosen that as the starting point, nor indeed do I see it as an issue that can be treated at any point without close attention to s 51(xxxv). As these reasons will show, the reading of the Constitution as a whole, and in particular, of s 51 are not to be regarded as matters to which lip service only should be paid. In a number of places the joint reasons accept the necessity for a reading of the Constitution, or s 51, as a whole1009, but it is a negation of that acceptance to read each placitum, in particular placitum (xx), as broadly as possible, regardless whether it is verbally apt for the matters enacted in purported reliance upon it, or whether it is productive of a form of overlapping of a power of a kind which it is inconceivable that careful and accomplished drafters such as the founders would ever have intended or achieved. The second point can be made by a rhetorical question: "why should the focus first and almost entirely be, in assessing the constitutional validity of the Amending Act which is concerned exclusively with 'industrial matters', upon the corporations power rather than upon the industrial power?" That the Commonwealth says it is so in this Court, does not make it so. In my opinion the logical starting point is the industrial power. The joint reasons repeat1010, whether in support of validity or not, is not clear, the factual assertions made in the explanatory memorandum derived from a report of the Australian Bureau of Statistics which record that large and medium- sized businesses in Australia are almost invariably incorporated, that is to say, 85 per cent of them, and that 49 per cent of small businesses employing staff are similarly incorporated. If these assertions are true, and if the corporations power is as broad as the Commonwealth submits, the result, that the Commonwealth has power to intrude upon, indeed dominate, much of the industrial, commercial and related activities within a State, is one that was neither intended nor legislated for by the founders in the Constitution. This too should be said. Any suggestion that the founders were in some way uninformed about, or unacquainted with, the doing of business by companies, or intended when drawing the corporations power that it might and should embrace all activities of a corporation, including its arrangements with its employees, would be to do them a grave injustice. Corporate business may not have been as pervasive in the last decade of the 19th century as it is now, but the references in the Convention Debates to the activities of companies incorporated in the various colonies and 1009 See, eg, at [52], [194]. Callinan elsewhere are enough to indicate an acute awareness of their economic relevance, and the need for some national, that is federal, power, subject to other provisions in the Constitution, over, at most, their trading and financial conduct. The joint reasons also mention1011 that the corporations power had previously been relied upon by the Commonwealth as a source of industrial power, and that in the Industrial Relations Act Case1012 three of the States conceded that s 51(xx) empowered the Parliament to make industrial laws governing corporations. Whilst the joint reasons accept that the concessions do not preclude the States from challenging them now, they point out that the Amending Act is "not novel"1013. I would regard the fact that some 12 years earlier the federal Parliament enacted, and some State executives accepted as valid for purposes of argument in a particular case, provisions in purported reliance upon the corporations power as, with respect, utterly irrelevant, or, on any view, of much less relevance than the universal acceptance since 1906 until 1993, as the failed referenda show, by several parliaments of whom many eminent lawyers were members, that constitutional change would be necessary to secure the power now asserted. It is said in the joint reasons that the Constitution should be read as a whole, but that that does not provide an answer: it merely advances further enquiry as to the nature of the enquiry1014. I respectfully disagree. The answer is the objective ascertainment of the drafters' intentions by reference to the structure of the document, the interrelationship of the parts and sections of it with one another, in the setting in which it was drawn, on the basis of the assumptions underlying it, and the manifest purposes to which it was to give effect, relevantly here a new nation comprising a federation in which the States would not be deprived of powers they formerly possessed, except as identified. I venture to repeat what I said in Minister for Immigration and Multicultural and Indigenous Affairs v B1015: "With all due respect, and acknowledging that constitutionally conferred powers may overlap, I am unable to accept that the Constitution is not to be read according to one of the most elementary canons of 1012 Victoria v The Commonwealth (1996) 187 CLR 416. 1015 (2004) 219 CLR 365 at 438 [213]. Callinan construction of all relating to instruments of any kind: as a whole. Nor can I accept a proposition that the language of each part of it is incapable of having a bearing, including in some circumstances, a restrictive or limiting effect upon other parts. This Court has held that implications can be drawn from the relationships of various sections of the Constitution with one another and its structure1016. That approach is consistent only with its being read as a whole and careful regard being had to context. This means that s 51(xxi) and (xxii) not only may, but should be read together, and in consequence, having regard to their proximity, read as intended to deal with separate and quite distinct, that is to say not overlapping topics. And despite that sometimes, probably very rarely, constitutional provisions and powers may overlap, the better view is that the drafters neither engaged in a process of intentional duplication nor accidentally achieved it." It was suggested in argument1017 in this case that the challenged provisions are designed to produce and enhance a national economy. This has echoes of the lamentations of the Prime Minister, Mr Bruce, in the second reading speech1018 for the Bill for the referendum for the enlargement of Commonwealth power in 19261019, that the future happiness and prosperity of the Australian people were at risk unless the relevant powers were granted by referendum. The points that I seek to make can be made by reference to several of the placita of s 51 and a few other provisions of the Constitution. It is important to notice that s 51(i) specifically recognizes and contemplates legislation by the Commonwealth for the promotion of trade and commerce, not only with other countries but also "among the States". In doing so, it necessarily recognizes that the States have their own economies, that is, internal trade and commerce, which exist side-by-side with, but may also be part of, the national economy. The enhancement and the regulation of a State economy and industrial affairs within it could hardly be fairly described as 1016 See Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 557- 1017 [2006] HCATrans 233 at 19090. 1018 Australia, House of Representatives, Parliamentary Debates (Hansard), 20 May 1926 at 2159-2160, 2164. See also Federated State School Teachers' Association of Australia v State of Victoria (1929) 41 CLR 569 at 574 where it was said that "the Constitution is not a thesis upon economics. It is an instrument of Government". 1019 Constitution Alteration (Industry and Commerce) Bill 1926 (Cth). Callinan anything other than essential functions of a State. Some further reference to this placitum will be necessary when I discuss Rocla Pipes. Some of the other placita of s 51 have in common with s 51(xxxv) language which carefully distinguishes between what can be done legislatively by the Commonwealth independently and exclusively of the States, and what can only be done deferentially to State power or State action, for example banking and insurance. Other placita and sections of the Constitution insist upon non- discrimination. The taxation power (s 51(ii)) prevents the Commonwealth from enacting taxation laws discriminating between States or parts of States. Section 51(iii) may be contrasted with s 51(xxxv) in that the former provides that bounties shall be uniform throughout the Commonwealth, whereas the latter contemplates Commonwealth intervention, and a degree of national uniformity when there is, and only when there is, as it has inelegantly been put, the "interstateness"1020 of an industrial dispute, which as I elsewhere point out, is nonetheless an extremely wide power as it has been allowed and developed by this Court. On occasions it has been said that the Constitution is too rigid, that it requires, for its continued vitality, flexibility in its construction. The language of s 51(v) gives the lie to claims of rigidity. The reference to "other like services" was made far-sightedly and is obviously broad enough to comprehend the remarkable advances in modern communications and the technology upon which they now rely. It is sometimes forgotten that at federation the colonies maintained their own defence forces. Section 51(vi) refers, in terms, to the naval and military defence of the Commonwealth "and of the several States", making clear that defence is to be exclusively a Commonwealth activity. There is something else however that needs to be noted about this provision. It is that, literally, that is textually exclusively, it appears to contemplate the use of the military forces of the Commonwealth to execute and maintain the laws of the Commonwealth1021, 1020 See, eg, Re State Public Services Federation; Ex parte Attorney-General (WA) (1993) 178 CLR 249 at 267, 271 per Mason CJ, Deane and Gaudron JJ, 272 per Brennan J, 293, 294-295 per Toohey J. 1021 Section 51(vi) provides: "The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: (Footnote continues on next page) Callinan at any time and in any circumstances. Elsewhere I refer1022 to statements by judges of this Court to the effect that constitutional provisions should be construed with "all the generality which the words admit". The use of military forces, the imposition in effect of martial law in a democracy, except perhaps in times of external threat or civil insurrection, is anathema to democracy itself, and yet, if s 51(vi) is to be construed too generally and textually or literally, and without reference to other provisions of the Constitution, including perhaps that all of the powers are to be exercised to make laws for the good (democratic) government of the Commonwealth, that result might conceivably follow. Reliance was placed upon some remarks of Latham CJ in Pidoto v Victoria1023 for a proposition that because the defence power was not subject to any restriction imposed by s 51(xxxv), nor should the corporations power be. Pidoto was decided in 1943 when Australia was still engaged in a war that menaced the whole nation. In these circumstances it is easy to see how the regulation as it was then put of "man power" could be closely aligned with the defence of the nation. It was also a major source of food and raw materials for our armed forces and their allies. As has been said many times, the defence power waxes and wanes as the danger mounts and fades away. The remarks of Latham CJ in Pidoto were singularly his and obviously greatly influenced by the perils of the times. Decisions made in such circumstances not infrequently are products of them and cannot withstand the scrutiny of peaceful posterity1024. I next make reference to s 51(x), which is concerned with fisheries in Australia beyond territorial limits. My reference to this placitum is not so much for the language that it uses, but to show how this Court has departed, from time to time, from its earlier, and sometimes even relatively recent, decisions. In Bonser v La Macchia1025, Barwick CJ, Kitto, Menzies and Owen JJ (Windeyer J dissenting) held that the Commonwealth Parliament had no power over fisheries under s 51(x) within three nautical miles of the coast of an Australian State. In the naval and military defence of the Commonwealth and of the several States, and the control of the forces to execute and maintain the laws of the Commonwealth". 1022 See Pt IV, Div 2 of these reasons. 1023 (1943) 68 CLR 87 at 101. 1024 Another example is Sickerdick v Ashton (1918) 25 CLR 506, decided during the First World War, in relation to the vexed issue of wartime recruitment. There, legislation was held to be constitutional within the defence power in its application to a pamphleteer who published some mildly passivist statements. 1025 (1969) 122 CLR 177. Callinan the Seas and Submerged Lands Case1026 the Court, Gibbs J dissenting, decided that the boundaries of the former Australian colonies ended at the low-water mark, and that they had no sovereign or proprietary rights in respect of the subjacent land and superjacent sky1027. True it is that the latter case was decided under s 51(xxix), the external affairs power, but it is nonetheless very difficult to reconcile many of the statements in it with Bonser v La Macchia which had been decided only six years before. Nor is the Seas and Submerged Lands Case easy to reconcile with The Commonwealth v Yarmirr1028. This Court, over the hundred years or so of its existence has, it must be acknowledged, failed in many cases to distinguish, or distinguish convincingly, between its current decisions and apparently binding precedents, or to justify or explain changes in the law including constitutional law whether incremental or radical1029. Section 51(xiii) and (xiv) may, subject to one qualification, be dealt with together. They have this feature: they use relevantly similar language to s 51(xxxv), by confining Commonwealth powers, with respect to banking and insurance, to banking and insurance extending "beyond the limits of the State concerned". It seems to me to be objectively reasonable and correct to infer from s 51(xiii), (xiv) and (xxxv), that those who wrote the Constitution very carefully turned their minds to, and adopted language to mark out and distinguish, as this Court should, between federal legislative powers that could be exercised over activities conducted by or within States, and those conducted across the borders of the States. That proposition is consistent with what Latham CJ said in the Bank Nationalization Case1030 in which his Honour restated the fundamental principles of a federal balance and stressed the need to search for the true character of the legislation in question for the determination of the question whether it fell within Commonwealth power: "Another example can be found in provisions which are directly relevant to the present cases. Under s 51(xx) of the Constitution there is 1026 New South Wales v The Commonwealth (1975) 135 CLR 337. 1027 See (1975) 135 CLR 337 at 373-374 per Barwick CJ, 382 per McTiernan J, 475- 476 per Mason J, 503-504 per Murphy J. 1028 (2001) 208 CLR 1. 1029 See generally what I said in Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 320 [310]; Batistatos v Roads and Traffic Authority (NSW) (2006) 80 ALJR 1100 at 1140 [216]; 227 ALR 425 at 1030 Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 184-187. See also Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 285, 301-304. Callinan power to make laws with respect to financial corporations formed within the limits of the Commonwealth. Under s 51(xiii) there is power to make laws with respect to banking other than State banking. A State bank would almost certainly be a corporation, and, if so, it would be a financial corporation. If pl (xx) were construed to mean that the Commonwealth Parliament could pass any law whatever which touched and concerned financial corporations, then the Commonwealth Parliament could make laws controlling State banks. The result would be that the exception of State banking from the power conferred by pl (xiii) would mean nothing. When the two provisions are read together it is a reasonable conclusion that pl (xx) was not meant to reduce to complete insignificance the specific provision excluding State banking from Federal legislative power. Thus the Constitution must be read as a whole, and each power conferred upon the Federal Parliament must be read in the context of the words prescribing the other legislative powers of the Parliament. The Constitution assigns only specific legislative powers to the Commonwealth Parliament. It is a Federal Constitution, not a unitary Constitution. This has been emphasised again and again in the judgments of this Court, and in no case more clearly than in the Amalgamated Society of Engineers v Adelaide Steamship Co Ltd1031 where reference is made to the conclusion 'as to which this court has never faltered, that the Commonwealth is a government of enumerated or selected legislative powers': see also1032 : 'It is undoubted that those who maintain the authority of the Commonwealth Parliament to pass a certain law should be able to point to some enumerated power containing the requisite authority.' Accordingly, no single power should be construed in such a way as to give to the Commonwealth Parliament a universal power of legislation which would render absurd the assignment of particular carefully defined powers to that Parliament. Each provision of the Constitution should be regarded, not as operating independently, but as intended to be construed and applied in the light of other provisions of the Constitution. Thus an endeavour should be made to 'reconcile the respective powers ... and give effect to all': Citizens Insurance Co of Canada v Parsons1033. A recent application of this principle is to be found in Melbourne Corporation v The Commonwealth1034. If the fact that a 1031 (1920) 28 CLR 129 at 150. 1032 (1920) 28 CLR 129 at 154. 1033 (1881) 7 App Cas 96 at 109. 1034 (1947) 74 CLR 31. Callinan statute 'touched and concerned' a matter within the power of the Commonwealth Parliament were held to be sufficient to establish its there would be no distribution of powers between validity, Commonwealth and States – the Commonwealth would have complete power of controlling by law all persons and things in Australia, subject only to such prohibitions as the Constitution contains. For the reasons which I have stated, I am of opinion that the Commonwealth Constitution should not be construed upon the basis that any legislation is valid if it can be said to 'touch and concern' one of the subject matters assigned to the Commonwealth Parliament. Nor, on the other hand, am I of opinion that the phrase 'pith and substance,' in spite of its frequent use by high authorities, solves any difficulties. It lends itself to emphatic asseveration, but it provides but little illumination. It is a metaphorical phrase possibly derived from 'pith and marrow' in patent law. Wills J in Incandescent Gas Light Co v De Mare Incandescent Gas Light System Ltd1035, said of the latter phrase: – '"Pith" is a great deal less than the substance of the vegetable structure of which it is part, and "marrow" a great deal less than the substance of the animal structure of which it is part. Metaphors are very apt to mislead, as they are seldom close enough to the things to which they are applied.' The difference, if any, between 'pith' and 'substance' is not explained. The distinction marked by the phrase is a distinction between 'pith and substance' as representing 'primary object and effect' and incidental application to other matter: Attorney-General for Canada v Attorney- . The case of Prafulla Kumar Mukherjee v Bank of Commerce1037 shows that there is no difference between asking: 'What is the pith and substance of a statute?' and asking: 'What is its true nature and character?'1038. In Great West Saddlery Co Ltd v The King1039 it was said with respect to the construction of statutes for the purpose of determining constitutional validity: 'The only principle that can be laid down for such cases is that legislation the validity of which has to be tested must be scrutinized in its entirety in order to determine its true character.' But there is no rule which will settle all cases. A question of 1035 (1896) 13 RPC 301 at 332. 1036 [1947] AC 33 at 44. 1037 (1947) LR 74 Ind App 23. 1038 (1947) LR 74 Ind App 23 at 43. 1039 [1921] 2 AC 91 at 117. Callinan ultra vires 'must be determined in each case as it arises, for no general test applicable to all cases can safely be laid down': Attorney-General for Alberta v Attorney-General for Canada1040. A power to make laws 'with respect to' a specific subject is as wide a legislative power as can be created. No form of words has been suggested which would give a wider power. The power conferred upon a Parliament by such words in an Imperial statute is plenary – as wide as that of the Imperial Parliament itself: R v Burah1041; Hodge v The Queen1042. But the power is plenary only with respect to the specified subject. In determining the validity of a law it is in the first place obviously necessary to construe the law and to determine its operation and effect (that is, to decide what the Act actually does), and in the second place to determine the relation of that which the Act does to a subject matter in respect of which it is contended that the relevant Parliament has power to make laws. A power to make laws with respect to a subject matter is a power to make laws which in reality and substance are laws upon the subject matter. It is not enough that a law should refer to the subject matter or apply to the subject matter: for example, income tax laws apply to clergymen and to hotelkeepers as members of the public; but no-one would describe an income tax law as being, for that reason, a law with respect to clergymen or hotelkeepers. Building regulations apply to buildings erected for or by banks; but such regulations could not properly be described as laws with respect to banks or to banking. Thus when a question arises as to the validity of legislation it is the duty of the Court to determine what is the actual operation of the law in question in creating, changing, regulating or abolishing rights, duties, powers or privileges, and then to consider whether that which the enactment does falls in substance within the relevant authorized subject matter, or whether it touches it only incidentally, or whether it is really an endeavour, by purporting to use one power, to make a law upon a subject which is beyond power." (emphasis added) The search here for the true character or substance of the Act is neither elusive, arduous nor long. It appears immediately from the objects of the Act as amended, and practically every word of every section of it: industrial affairs. 1040 [1939] AC 117 at 129. 1041 (1878) 3 App Cas 889. 1042 (1883) 9 App Cas 117. Callinan The passages that I have set out above from the reasons of Latham CJ are, with respect, far more persuasive than statements to the contrary, made by Murphy J in R v Lambert; Ex parte Plummer1043: "There is no constitutional requirement for a close relationship between the subject matter of the legislative power and the challenged law. The argument for such a requirement is constitutional heresy. It disregards the words, 'with respect to' in s 51 which must not be disregarded. This phrase enables Parliament to make laws on the subjects enumerated in s 51 and s 52 which need not be 'closely' related to the subject." Placitum (xvii) is of significance in this case. Its presence and language are relevant to the construction of the corporations power. I note that matter at this point only, dealing with it in more detail when I consider the corporations power. It is appropriate to say something more about s 51(xviii) which empowers the Commonwealth to legislate with respect to copyrights, patents, designs and trademarks. It was in relation to the exercise of this head of power that the most recent statements of the Court invoking the "generality" doctrine of interpretation were made1044. It seems to me that the invocation of this doctrine in relation to this placitum is justifiable, and should be understood on the basis that, if ever amplitude and generality were called for, it was in relation to the protection and exploitation of intellectual innovation. To deny amplitude to this provision would have been to deny intelligence and its product, intellectual innovation, itself. It would be absurd for a court to say that a new type of original intellectual effort and its describable and exploitable product should not be regarded as entitled to protection because no intellect in 1901 foresaw that anybody could or would invent a particular invention, or devise a new commercially exploitable idea. In that respect s 51(xviii) and the construction that it should be given are unique. Brief reference only need be made to placitum (xxxiv). It too is a provision which reserves a right and role to the States, by requiring their consent to any construction of a railway by the Commonwealth within them, indicating thereby, in a not dissimilar way to s 51(xxxv), that the Commonwealth is not to intrude into a particular area or areas with which those placita respectively deal. 1043 (1980) 146 CLR 447 at 470. 1044 Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at Callinan Other provisions of the Constitution and their treatment by the Court are relevant. One provision which has however received little attention by the Court should first be noticed. It is s 101 which provides as follows: "There shall be an Inter-State Commission, with such powers of adjudication and administration as the Parliament deems necessary for the execution and maintenance, within the Commonwealth, of the provisions of this Constitution relating to trade and commerce, and of all laws made thereunder." The section is expressed in mandatory terms as to the establishment of a Commission, but not as to the expression of its powers. But its presence in the Constitution is a further indication of two matters: that there will continue to be State commerce as well as national commerce and that there should be a machinery, non-judicial1045, as it has been held to be, for the resolution of differences arising out of laws with respect to trade and commerce enacted by the Commonwealth1046. Section 102, which empowers the Commonwealth Parliament to make laws with respect to trade or commerce "forbid[ding], as to railways, any preference or discrimination by any State, or by any authority constituted under a State, if such preference or discrimination is undue and unreasonable, or unjust to any State", is also in point. If the corporations power is as wide as the Commonwealth contends, then does that not raise the possibility that to the extent that corporations operate State railways, the Commonwealth can control them? I doubt it. But the exercise involved in deciding whether that is so would be an exercise in reconciling apparently conflicting provisions. Other relevant provisions of the Constitution, apart from s 51, need to be noticed. Section 107 is one of these1047. Its use of language, including "power ... unless ... withdrawn from the Parliament of the State [shall] continue", cannot be airbrushed out of the Constitution by the "explosion" of the doctrine of implied 1045 The State of New South Wales v The Commonwealth (1915) 20 CLR 54. 1046 See Riverina Transport Pty Ltd v Victoria (1937) 57 CLR 327 at 353-354 per 1047 Section 107 provides: "Every power of the Parliament of a Colony which has become or becomes a State, shall, unless it is by this Constitution exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be." Callinan intergovernmental immunities or reserved powers, as Barwick CJ appears to have done in Rocla Pipes1048. Apart from citing1049 passages from the judgment of Griffith CJ in Huddart Parker1050 in which s 107 arises, Barwick CJ made no attempt in Rocla Pipes to reconcile that section with other sections of the Constitution, so as to give it real meaning and substance. Section 107 is an important one. Nothing unfavourable to the States turns upon the use of the word "continue" rather than "reserve" which is used in the Tenth Amendment of the Constitution of the United States. Indeed the contrary is the case. The Australian provision is a saving provision, thereby emphasizing the continuation of power unless "exclusively" vested in the Commonwealth. The language of s 128 of the Constitution has bearing upon the meaning of other sections of the Constitution. It places the States is a special position with respect to constitutional stability. Read with s 107 it necessarily imposes a limitation upon any expansion of central power and is not to be circumvented by judicial intervention. It is also of central importance to other matters: the federal balance and the continued existence of discrete State powers. The requirement that for constitutional change there must be a majority of votes in a majority of the States makes this clear. Section 128 is not expressed to be subject to any other provision of the Constitution. And of course it is not. It is an overarching provision. It is certainly not to be trumped by Ch III of the Constitution. If it were, the Court would be elevated above the people. The power to make laws constitutionally granted by s 76(i), which provides that the Parliament may make laws conferring original jurisdiction on the High Court in any matter arising under the Constitution or involving its interpretation, does not vest political power in the Court. Its purpose is to give the High Court, as a final court, additional, that is to say an original jurisdiction in various federal matters. It is a power to confer judicial and not political power upon the Court. Section 76(i) certainly cannot and does not "commit" political power to the Court, or, to put it another way, empower the Court to substitute itself for the people voting in a referendum. The words "involving [the Constitution's] interpretation", beyond all doubt, cannot be read as "involving its alteration". 1048 (1971) 124 CLR 468 at 485 per Barwick CJ (see also at 510 per Menzies J). 1049 (1971) 124 CLR 468 at 486. 1050 (1909) 8 CLR 330 at 352, 354. Callinan PART VII. AFFAIRS POWER THE REACH AND IMPACT OF THE INDUSTRIAL Div 1: General This brings me then to s 51(xxxv) of the Constitution, the very broad ambit of which does more than merely cast a shadow over other placita of s 51: it operates to deny their application to industrial affairs, except interstate and some other, presently irrelevant, ones. It is the natural order to deal with s 51(xxxv) before the corporations power because, from beginning to end the Act is an Act concerned with industrial matters. Only s 51(xxxv) in the whole of the Constitution refers to, and confers powers upon the Commonwealth with respect to those. It is, in my opinion, an inversion of logical order to go first to the corporations power, so as to try to find somewhere in it a power to regulate industrial affairs, and having chosen to do so, necessarily to confine or reduce the operation of s 51(xxxv). The more expansive the industrial power can be seen to be, the more likely it is that the power is the only power of the Commonwealth to legislate about industrial affairs. Div 2: Paper disputes The great reach of the industrial affairs power is nowhere better demonstrated than in its operation upon artificially created industrial differences. By reason of a rather extraordinary, but by now well-established legal fiction, entirely weighted in favour of the Commonwealth, and despite that this Court has appropriately, in the interests, among other things, of candour and transparency, turned its face against legal fictions1051, s 51(xxxv) has been construed as a vast power to legislate with respect to industrial disputes involving both juristic and natural persons throughout the Commonwealth. The legal fiction is that a "paper [interstate] dispute" should be regarded as a real dispute no matter that it may have been wholly artificially created, that is, both as to the dispute and the involvement of an out-of-State party to it. Of paper disputes, extra-curially Sir Harry Gibbs said, in my respectful view, correctly1052: 1051 See, eg, Cattanach v Melchior (2003) 215 CLR 1 at 35-36 [77]-[79] per McHugh and Gummow JJ, 52-53 [135]-[136] per Kirby J, 104-105 [292] per 1052 "Some Thoughts on the Australian Constitution", address delivered at the All Nations Club, 21 November 1985 at 8-9. Callinan "My predecessors on the High Court, by a series of decisions marked by a metaphysical subtlety of reasoning that would have delighted a medieval schoolman, invented a doctrine of paper disputes which has had the result that disputes which to the uninitiated might appear to be purely local in character have been held to extend beyond the limits of one State. The Commonwealth Conciliation and Arbitration Commission has thus acquired power to affect the wages and working conditions of most workers in Australia. It is something of a legal oddity that an instrumentality created by the Commonwealth Parliament has power to bring about economic results which the Parliament itself cannot achieve." The doctrine of paper disputes represents a departure from early decisions of the Court in which emphasis was placed upon the necessity for the existence of a real dispute in fact and, for example, a log of claims representing real (interstate) grievances1053. Convincing legal justification of the fiction is impossible to find. Statements of Windeyer J in support of it in Ex parte Professional Engineers' Association1054 read more like a political speech by a candidate at a rally for election to the federal Parliament than a statement of an orthodox, measured, rational canon of constitutional construction: "The dispute here is a 'paper dispute'. To permit the creation of a malady so that a particular brand of physic may be administered must still seem to some people a strange way to cure the ills and ensure the health of the body politic. But the expansive expositions by this Court of the meaning and effect of par (xxxv) ... have brought a great part of the reach of Australian economy directly or Commonwealth the law and of Commonwealth industrial tribunal. The artificial creation of a dispute has become the first procedural step in invoking its award-making power." indirectly within the the jurisdiction of industrial Pronouncements to a similar, or even more expansive, but, it should be said, less extravagant, effect have been made on other occasions. In Burwood Cinema Ltd v Australian Theatrical and Amusement Employees' Association1055, the applicants had been served, together with various other owners of theatres in Australia, with a demand relating to conditions of employment. One employer argued that there was no "industrial dispute" 1053 Holyman's Case (1914) 18 CLR 273 at 285-286; The Tramways Case [No 2] (1914) 19 CLR 43; R v Hibble; Ex parte Broken Hill Proprietary Co Ltd (1921) 29 CLR 290 at 299. 1054 (1959) 107 CLR 208 at 268. 1055 (1925) 35 CLR 528. Callinan because its employees "were in fact satisfied with the wages paid to them and with their conditions of employment."1056 Another said that its employees were not members of the respondent association, and therefore that there was no dispute involving them. The Court held (Isaacs J, Powers J, Rich J and Starke J, Knox CJ and Gavan Duffy J dissenting) that there were disputes in both instances. Isaacs J said this1057: "Every employer that enters the competitive field of the industry is co- operating to carry it on, in the broader sense in which the people of the Commonwealth are interested. That sense is national service and supply, the interruption of which is the evil dealt with in pl xxxv. So also is every employee a co-operator in the same sense, for his labour is not to be looked on as a mere commodity, as if he were a machine, animate like the horse or inanimate like a steam-engine. The nexus of all the co-operators is the industry itself, irrespective of how its ownership or its operative arrangements are subdivided. If we confine our attention for the moment to disputes between employers and employed, we have to visualize the disputants respectively as portions of groups representing capital and labour. 'Employer' and 'employee' are terms which denote, not individuals contracting with each other whose industrial relations arise out of and are limited by their specific contracts, but membership of a group with which the individual has identified himself in relation to a given industry." In Metal Trades Employers Association v Amalgamated Engineering "A dispute exists only between the disputants. Generally and naturally it relates to their mutual industrial relations. But there is no reason why it should not relate to the industrial relations between one set of the disputants and third persons. In actual experience preference to unionists is an industrial matter which is a common source of industrial disputes between unionists and their employers. In such disputes the contention of the disputants essentially relates to the employment or non- employment by one set of disputants of third persons who are not parties to the dispute. Such a matter is of great industrial importance alike to unionists and non-unionists (as well as to employers), but only unionists, in the case supposed, are parties to the dispute on the side of the employees. There does not appear to be any reason in principle for denying that the terms upon which non-unionists may be employed may 1056 (1925) 35 CLR 528 at 535. 1057 (1925) 35 CLR 528 at 540. 1058 (1935) 54 CLR 387 at 402. Callinan be as much the subject matter of an industrial dispute as the question whether non-unionists shall be employed at all." Rich and Evatt JJ said in that case1059: "The only question which can be raised in relation to the constitutional power to settle such a dispute as has been defined above is whether what is, ex hypothesi, a dispute between employers and employees in an industry ceases to be 'industrial' merely because the employees require that the employers shall observe certain wages and conditions in the employment not only of employees, parties to the dispute, but of employees who are not parties to the dispute, but are employed in the same industry. The practical interest of unionist employees in making such a demand is obvious. It is not made from motives of altruism, but for two important reasons of material interest. In the first place, if the employer is allowed to employ non-unionists at lower wages than in the case of unionists, there will be a direct inducement to the employer to employ the cheaper class of labour, and to dispense with, or not engage at all, the services of unionists. In the second place, the economic result of differing standards of wages for employees engaged in similar work in the same trade or industry is a powerful tendency towards the general adoption of the lower standard, because, under modern conditions of easy communication between all parts of industry, the tendency of the wages standard is to reach the lower level. Both these results of a lower wage for non-unionists are, or may be, disastrous to the union and its members, and may tend to produce great dissatisfaction and discontent. It is difficult to see why, in insisting upon the one standard throughout the industry, the unionists are not precipitating a dispute which is essentially 'industrial' in character. The demand of the unionists may be considered unreasonable by an arbitrator, but the only question for our consideration is whether the demand, being genuinely made and refused, is part of the industrial dispute. If it is, an arbitrator may either grant it in whole or in part, or refuse it altogether. If the dispute is not 'industrial,' what kind of dispute is it? It is not a dispute as to social, political, religious, moral, business, literary, artistic, scientific, domestic, or sporting matters. It arises from demands by an organization of employees in an industry upon employers in the same industry. It relates to what is to be done by such employers in reference to other employees doing similar work in the same industry. It has come into existence because the unionists either will, or suppose that they will, be adversely affected if their union wage standard is not adhered to by all the employers upon whom they are making their demands. 1059 (1935) 54 CLR 387 at 416-417. Callinan Whether such a dispute is wise or unwise in genesis, it is, in all respects, 'industrial' in nature and character." When the Court has countenanced some limitations upon the breadth of the words "industrial disputes", for example in R v Kelly; Ex parte State of Victoria1060 in which it held that there was no power to make, under s 51(xxxv) of the Constitution, a "common rule" for all industries, the Court acknowledged1061 the technicality of the distinction which its decision made between a "common rule", and a (paper) dispute drawing in the same or many of the same people. Dixon J, who had been in Metal Trades Employers in dissent Association v Amalgamated Engineering Union1062, subsequently accepted its binding force. Dixon CJ joined with Kitto, Taylor and Windeyer JJ in R v Portus; Ex parte McNeil1063 in saying this: "[I]t is said that ... there was no industrial matter in contest. ... The answer to this lies in the facts: there was a very distinct disagreement about a whole subject matter backed by a preliminary resort to or threat of industrial dislocation. An industrial dispute may exist without a formulation of a definite and clear cut demand followed by an equally definite and clear cut refusal. Familiarity with paper disputes consisting of carefully drawn logs of demand and general refusals has perhaps led to a somewhat artificial conception of what amounts to an industrial dispute. But an attempt to gain higher rewards by means first of negotiation and then of pressure and threatened dislocation is no less an industrial dispute because the exact stand taken by the respective parties may be less definite and precise than a paper log would be apt to make it." In Re Australasian Meat Industry Employees' Union; Ex parte Aberdeen Beef Co Pty Ltd1064, Mason CJ, Brennan, Deane, Dawson, Toohey and 1060 (1950) 81 CLR 64. 1061 (1950) 81 CLR 64 at 82. 1062 See in particular, (1935) 54 CLR 387 at 425-426. 1063 (1961) 105 CLR 537 at 544. See also Ex parte Professional Engineers' Association (1959) 107 CLR 208 at 239. 1064 (1993) 176 CLR 154. Callinan Gaudron JJ said that the expression "industrial disputes" was used in s 51(xxxv) "in its popular and not in any narrow sense"1065, and later said this1066: "It is not of great significance that there was no exact coincidence between the activities carried on in the respective States in respect of which demands were made. It is of greater significance that those upon whom or in respect of whom the demands were made had a community of interest. That factor may exist because of the employers' or employees' participation in a single industry and is present here. A dispute involving parties having a community of interest is likely to be a single industrial dispute despite differences between the activities of those parties. In this case a single industry can be identified in which there is a history of common industrial regulation by a single award containing the same classifications as were adopted by the log of claims." Mason CJ, Deane and Gaudron JJ said in Re State Public Services Federation; Ex parte Attorney-General (WA)1067: "It is sometimes said that a 'paper dispute' must be a 'genuine dispute'. That means no more than that written demands must be genuine demands1068. If not – if, for example, they are part of a hoax or if they are intended to dress up a purely intrastate dispute1069 – their rejection will not involve any disagreement and, thus, will not result in a dispute at all. To ascertain whether demands are 'genuine demands', it is sometimes asked whether the demands are seriously advanced1070 or, in 1065 (1993) 176 CLR 154 at 159. 1066 (1993) 176 CLR 154 at 160. 1067 (1993) 178 CLR 249 at 267-268. 1068 Australian Tramway and Motor Omnibus Employees' Association v Commissioner for Road Transport and Tramways (NSW) (1938) 58 CLR 436 at 1069 See, eg, R v Gough; Ex parte BP Refinery (Westernport) Pty Ltd (1966) 114 CLR 384. 1070 See, eg, Caledonian Collieries Ltd v Australasian Coal and Shale Employees' Federation [No 2] (1930) 42 CLR 558 at 570-571 per Isaacs J; R v Blakeley; Ex parte Association of Architects, Engineers, Surveyors and Draughtsmen of Australia (1950) 82 CLR 54 at 94 per Fullagar J; R v Ludeke; Ex parte Queensland Electricity Commission (1985) 159 CLR 178 at 181. Callinan the case of demands by or on behalf of employees, whether they are advanced with a view to 'obtaining improved terms and conditions ... within the framework of the claims made'1071. This last formulation is one that takes account of the doctrine of ambit1072 and allows that a demand may be genuine notwithstanding that neither the union making it nor its members are 'intent on obtaining forthwith every item which is mentioned in the log of claims or the particular terms and conditions of employment in the form and in the amounts in which they are expressed in the log'1073. Given the doctrine of ambit and given that there is nothing inherently artificial about written demands, or 'paper disputes', it will not often be the case that a written demand with respect to the wages or conditions of employees will be other than a genuine demand." (emphasis added) In Re Australian Education Union; Ex parte Victoria1074, in which the Court held that the States, as employers, could be subject to laws made under s 51(xxxv), Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ said1075: "The notion that interstate employers must have a common business or operate in a particular industry as a pre-condition of the existence of interstate industrial dispute has never been accepted. Although statements have been made which assert that the nexus or unifying factor which combines in a single industrial dispute a number of demands made on behalf of a number of employees is 'the industry' itself1076, the nexus may also be found in the calling or vocation in which 1071 R v Ludeke; Ex parte Queensland Electricity Commission (1985) 159 CLR 178 1072 R v Bain; Ex parte Cadbury Schweppes Australia Ltd (1984) 159 CLR 163 at 172-173 per Wilson and Dawson JJ, 176 per Brennan and Deane JJ; R v Holmes; Ex parte Victorian Employers' Federation (1980) 145 CLR 68 at 76 per 1073 R v Ludeke; Ex parte Queensland Electricity Commission (1985) 159 CLR 178 1074 (1995) 184 CLR 188. 1075 (1995) 184 CLR 188 at 236-237. 1076 Jumbunna Coal Mine, No Liability v Victorian Coal Miners' Association (1908) 6 CLR 309 at 373 per Isaacs J; R v Commonwealth Court of Conciliation and (Footnote continues on next page) Callinan the participants are engaged. ... And, in the final analysis, the adoption of the popular meaning of 'industrial dispute' and the rejection of the view that there must be a dispute in an industry, is fatal to the contention that the necessary nexus or unifying factor must be found in the industry." Despite the apparently intentionally limiting language of s 51(xxxv), the placitum has been given, not a complete but certainly an enormous national application in industrial affairs and one not confined, or indeed even referable, to constitutional or other corporations. Whatever doubts I might have about the breadth of the construction given, I will accept, as I do the Engineers' Case, that it is now so well entrenched it is not to be disregarded here. In short, s 51(xxxv) as it has been construed provides for an extremely wide power, capable of conferring, for practical purposes, an almost complete national power over industrial affairs in practice. Moreover, both the language of s 51(xxxv), in particular the word "prevention", and the generally consistent disposition of the Court to give the placitum such an expansive operation, suggest that there may as yet be unplumbed depths of the industrial power able to be exercised by the Commonwealth. The construction now accepted of s 51(xxxv) also provides an example of the Court's departure from textualism, in one instance at least1077, on the basis only of its perception of, and preference for national, centralized control of economic and other affairs. Because of the extent of the power conferred by s 51(xxxv), as repeatedly held by the Court, as well as its usage alone of all the placita, of the language of industrial affairs, it can be seen to represent the totality of the Commonwealth's powers of control of industrial affairs, and to give rise to a negative or restrictive implication of the absence of a conferral of industrial power elsewhere under s 51, except of course in relation to employees of the Commonwealth and perhaps other limited categories of employees which it is unnecessary to define in this case. I would not regard this holding, of a negative implication, as different in substance from the holding of Kirby J1078 that s 51(xx) be read down so as to exclude its application to industrial affairs. Arbitration; Ex parte Jones ("Builders' Labourers' Case") (1914) 18 CLR 224 at 1077 Ex parte Professional Engineers' Association (1959) 107 CLR 208 at 268. 1078 Reason of Kirby J at [531], [559]. Callinan PART VIII. THE REACH AND IMPACT OF THE CORPORATIONS POWER Div 1: General In general, I would accept the submissions of New South Wales with respect to the effect of the cases in which consideration has been given to the reach of the corporations power, that they do not conclude this case. It will be necessary however to give some detailed consideration to the more relevant of the authorities to which the parties have referred. I say "some detailed consideration" because none of them, as the Commonwealth correctly concedes, governs this case, that is to say, no decision of this Court directly supports the Act. Indeed, the texts approximately contemporaneous with federation are, in many respects, more illuminating than the cases. But before coming to these there is a matter about which I am compelled to express my deep concern. The matter is, to quote the majority judgment1079, "[the recognition of] the fundamental and far-reaching legal, social, and economic changes in the place now occupied by the corporation, compared with the place it occupied when the Constitution was drafted and adopted, and when s 51(xx) was first considered in Huddart Parker", as a basis apparently for the construction of the placitum which their Honours adopt. It is easy to overstate the extent of the changes. The founders would have been well aware of the capacity for causing national financial consequences, of corporations and their predecessors, various forms of partnerships1080. The collapse not just of banking corporations but also of land and pastoral corporations would have been very fresh in their minds when they wrote the Constitution. As I have said in other cases1081, judges, as unelected members of judicial institutions, should be careful about forming views about social and economic conditions. But even if they can, do or even must, in some cases for some purposes, they, including judges of this Court, should not use those views to alter the Constitution. It is unnecessary to repeat what was said in the speeches for the bills for the referenda seeking a corporations power broad enough to cover industrial affairs in the way that the Act here seeks to do. All that I need do is point out that almost invariably, the speakers and Parliament itself, repeatedly, accepted that the relevant constitutional power did not exist. 1080 Joint reasons at [96]-[108], [114]. 1081 See, eg, Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 298-299 [252]; Woods v Multi-Sport Holdings Pty Ltd (2002) 208 CLR 460 at 510-515 [162]-[169]. Callinan It is necessary to consider the Convention Debates on the topic. Div 2: Convention Debates In Sydney in 1891 one delegate, Mr Munro, said he did not see why the same provision should not be made with respect to the incorporation of corporations as in respect of banks1082: "We have agreed to sub-clause 13, dealing with the incorporation of banks, and I do not see why a similar provision should not be made in regard to the incorporation of companies. Why should they not be under the control of federal officers? At the present time the law as to incorporation is different in the different colonies, and the result is extremely unsatisfactory in many cases. I do not see why we should not make the same provision in regard to the incorporation of companies as we have made in regard to the incorporation of banks. We might introduce at the commencement of the sub-clause words to this effect: 'The registration or incorporation of companies.'" Sir Samuel Griffith expressed1083 opposition to the imposition of a uniformity of the means of incorporation, adding that it was difficult to say what a trading corporation was. He did not doubt, however, that the law should be uniform throughout the Commonwealth for the recognition of corporations. No speaker in this debate even hinted at any need for federal control over the industrial affairs of companies. There can be discerned from the later Debates in Adelaide in 1897 a concern about the activities of foreign corporations in Australia. Mr Barton was keen to ensure that the Commonwealth have power to regulate the mode in which such companies conducted their operations1084. It can be seen that the corporations power received only the most cursory of attention during the Debates1085. It is inconceivable that the founders 1082 Official Record of the Debates of the Australasian Federal Convention, (Sydney), 3 April 1891 at 685-686. 1083 Official Record of the Debates of the Australasian Federal Convention, (Sydney), 3 April 1891 at 686. 1084 Official Record of the Debates of the Australasian Federal Convention, (Adelaide), 12 April 1897 at 439. 1085 Joint reasons at [118]. Callinan visualized a power as broad as the one now asserted. Throughout the Debates, the principal preoccupation of the delegates was with the adjustment of powers between the new polity and the States, as they would become. I do not doubt that if the corporations power were intended to abrogate so much industrial power as would otherwise be within State power, as the majority hold, the possibility and desirability of that abrogation would have been of intense concern to the founders. That it was not strengthens my view that they did not so intend it. I would not myself accept that external and internal relationships of a corporation are relevant only to choice of law rules1086. There are many other reasons why such a distinction needs to be made: a director has an entirely different relationship with a corporation as a director, from his relationship with it as a shareholder; much of what a corporation does internally is of no relevance or significance to what it may and does do externally; shareholders have an entirely different relationship as shareholders from their external relationship with a company in doing, as many people do, especially in the case of a private company, business with it. The founders would have well understood by the time of the final drafting of the Constitution that a corporation and its shareholders were separate juristic personalities, so much so that they needed to make no express reference to that fact. The joint reasons say1087 that there can be "little doubt" that by 1897 the drafting committee, Mr Deakin and others, saw that a national [absolute] power was required over corporations and their status within the Commonwealth. If there is little doubt about the former then why did they not say that? I do not think it correct for this Court to make that assumption. Nor does it follow that a lack of political controversy during the Debates about the corporations power, means that the power should be regarded as practically unlimited. Furthermore, the founders were not concerned only with what was politically controversial. Indeed the words "politically controversial" are an unsatisfactory description of the matters that engaged the founders' attention. Their purpose was to write as complete and clear a constitution as possible, fully accepting that it would not eventuate without many compromises, but not compromises which it is open for this Court rather than the people under s 128 to unravel. The fact that some matters might not have been politically controversial does not mean that they were not important: there are many examples across the Debates of efforts to clarify and refine matters, but as to the principles, and the conclusions, there was obviously usually a high degree of agreement. As I read the Debates, the real purpose of s 51(xx) was to ensure uniformity of status of corporations throughout Australia, rather than to appropriate State control over them. 1086 cf joint reasons at [91]-[95]. Callinan The fact that corporations law was still developing in the last decade of the 19th century does not provide support for an unduly expansive interpretation of s 51(xx) now. The use of "corporations" in s 51(xx), rather than "companies", makes unlikely what is suggested in the joint reasons1088, that the founders understood neither the significance nor the possible consequences of their choice. Bankruptcy, companies and lunacy were jurisdictions conferred by statute on the English Courts of Chancery before federation1089, and those three jurisdictions would have been in the minds of the founders: "bankruptcy" appears in placitum (xvii), "lunacy" was suggested for placitum (xvii) but its inclusion was not accepted1090, and "corporations" appears in placitum (xx), deliberately, it would seem, in place of "companies". Given that the United Kingdom 1844 Statute 7 & 8 Vict c 111 allowed creditors to proceed against an insolvent company "in like Manner as against other Bankrupts"1091, and "in its corporate or associated Capacity"1092, I think it would be unwise to try to draw too much from the fact of the decision in Salomon v Salomon & Co Ltd1093. Corporations law is still, in any event, developing1094. It is a subject that occupies the time of the courts throughout this country daily. Developments in corporate law should, however, have no effect on the ambit of Commonwealth power under the Constitution: s 128 provides the sole mechanism for constitutional amendment. 1089 See Meagher, Heydon and Leeming, Meagher, Gummow and Lehane's Equity: Doctrines and Remedies, 4th ed (2002) at 9 [1-080]. 1090 See Official Record of the Debates of the Australasian Federal Convention, (Sydney), 22 September 1897 at 1076-1077. 1091 Section 1. 1092 Section 2. 1094 A topical debate is the extent of directors' duties, and whether the corporations law should require that principles of "corporate social responsibility" be observed by directors. See the report of the Parliamentary Joint Committee on Corporations and Financial Services (Cth), Corporate responsibility: Managing risk and creating value, (June 2006). In Austin, Ford and Ramsay, Company Directors: Principles of Law and Corporate Governance, (2005) at 6 [1.3], it is suggested that corporate governance is topical in the light of high-profile corporate collapses, shareholder activism, and executive remuneration. institutional Callinan Div 3: Texts After discussing "foreign corporations"1095, Quick and Garran turned their minds to other aspects of s 51(xx) of the Constitution. Their focus then was on those aspects of a corporation's legal personality which distinguished it from the legal personality of a natural person: incorporation, registration, security, the rights of creditors, and the powers of liquidators1096. Nowhere do they imply, let alone say, that the power extended to the regulation of, or a supervisory power of any kind over, the conditions of employment of workers for corporations. Harrison Moore appears to have anticipated the argument of the Commonwealth here1097. He resoundingly rejected it1098: "[I]t is not reasonable to suppose that the Constitution contemplated the revival of a medieval system of personal laws." He added1099: "[Section 51(xx) covers] first the recognition of foreign companies, and the definition of the conditions upon which they may be admitted to carry on business in Australia. Next, in the case of companies formed within Australia, ie (it would seem) under the laws of any State, the like definition of the conditions upon which they may carry on business throughout the Commonwealth. Thirdly, the control of the constitution and administration of corporations formed within Australia for the purpose of carrying on business in any part thereof or elsewhere. The recognition, the field of operations, and the management, the winding up and dissolution – all the inherent qualities which distinguish the juristic from the natural person, would thus be submitted to federal law. But there the Commonwealth law would leave it; and the actual carrying on of business by the corporation, and the legal relations with outsiders to which it gives rise – its property, its contracts, and its liabilities – would be under the sole control of the State laws." (emphasis added) 1095 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 604-606, §195. 1096 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 606-608, §§196-199. 1097 Moore, The Constitution of The Commonwealth of Australia, 2nd ed (1910) at 1098 Moore, The Constitution of The Commonwealth of Australia, 2nd ed (1910) at 1099 Moore, The Constitution of The Commonwealth of Australia, 2nd ed (1910) at Callinan The same author also said this1100: "The subject of 'foreign corporations' has always been of especial importance in Australia, because many of the largest companies carrying on business there had been formed in England, while of the companies formed in Australia, a large number carried on operations in several Colonies. The result was that there was much legislation in the various Colonies relating to 'foreign corporations.'" Div 4: The bankruptcy and insolvency power Also relevant to the scope of the corporations power is the bankruptcy and insolvency power, conferred by s 51(xvii) of the Constitution1101. The terms "bankruptcy" and "insolvency" had well-accepted meanings and usages at federation, to which regard should be had today for the purpose at least of deciding the limits of the power1102, and of identifying the contemporary meaning of the language used1103. Quick and Garran referred to the historical distinction between the terms "bankruptcy" and "insolvency"1104: "The historical distinction between bankruptcy and insolvency is, that insolvency laws were intended for the benefit and relief of ordinary 1100 Moore, The Constitution of The Commonwealth of Australia, 2nd ed (1910) at 1101 Section 51(xvii) provides: "The Parliament shall, subject to this Constitution, have power to make laws for the peace, order, and good government of the Commonwealth with respect to: (xvii) bankruptcy and insolvency". 1102 Singh v The Commonwealth (2004) 222 CLR 322 at 424-425 [295] per 1103 Cole v Whitfield (1988) 165 CLR 360 at 385 per Mason CJ, Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ. 1104 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 586, §188. Callinan private debtors, poor and distressed, but honest; whilst bankruptcy laws were those specially designed and passed for the protection of creditors against insolvent traders and particularly against fraudulent traders." On the other hand an English text, Fletcher's The Law of Insolvency, says that insolvency is a "factual" condition and bankruptcy a "legal" one1105. It makes the point that it would be "perfectly possible (if somewhat exceptional)" for a person to be made bankrupt, or for a company to be wound up, merely because of a "perverse refusal to pay a single debt which the debtor could perfectly well afford to discharge"1106. By 1901 the two terms, bankruptcy and insolvency, had assumed different meanings or, at least the position had been reached that "insolvency" had become the preferred term for the financial failure of a corporation1107: "[B]y the later nineteenth century, insolvency law had evolved into specialised branches – individual and corporate – whose provisions were contained in two separate collections of statutes – the Bankruptcy Acts and the Companies Acts – administered judicially by different courts under different sets of procedural rules. Although many points of resemblance existed, and in some cases entire doctrines or legislative provisions were directly duplicated from the one branch of law to the other,1108 the divergences between the two types of insolvency became, and to this day remain, substantial. This has resulted in a state of affairs, unknown to most other systems of law apart from those which have closely followed this country in the development of their company law,1109 whereby insolvent companies are not amenable to the law of bankruptcy but instead undergo the separate process known as liquidation, or winding-up, administered under separate rules by a separate branch of the courts." 1105 3rd ed (2002) at 5 [1-009]. 1106 Fletcher, The Law of Insolvency, 3rd ed (2002) at 6 [1-011]. 1107 Fletcher, The Law of Insolvency, 3rd ed (2002) at 13 [1-022]. 1108 eg the doctrine of fraudulent preference, developed under bankruptcy law, was made directly applicable in the winding up of companies by s 76 of the Companies Act 1856. The public official known as the official receiver, whose office was created by the Bankruptcy Act 1883, Pt 4, was given duties and functions in relation to company winding-up by the Companies (Winding Up) Act 1890. 1109 Examples are Australia, New Zealand, and the Republic of Ireland. Callinan In short, insolvency had truly become a concept and legal term apt for failed companies rather than persons1110. In my opinion therefore, it is likely that the term "insolvency" was used to broaden the scope of s 51(xvii) beyond natural persons. That this is so is supported by other statements in this Court. In Federal Commissioner of Taxation v Official Liquidator of E O Farley Ltd1111 the question was essentially whether in the winding-up of a company, the claims of the Crown in right of the Commonwealth ranked pari passu with those of the Crown in right of the State of New South Wales, or whether they took priority over the State's claim. In the course of his reasons Dixon J made the following observations1112: "The power given by sec 51(xvii) to make laws with respect to bankruptcy and insolvency is an example of a legislative power which ... might be interpreted as enabling the Parliament of the Commonwealth to destroy or vary the ranking of debts due to the State and Commonwealth in any administration of assets falling under the description of bankruptcy or insolvency. For it is a specific power, and priority in the distribution of assets among a bankrupt's creditors is a matter to be governed by bankruptcy legislation. ... In the United States the power of Congress to establish uniform laws on the subject of bankruptcies has been held to extend to insolvent corporations1113." (emphasis added) His Honour returned to the theme 17 years later in the Second Uniform Tax Case1114. There, in the course of considering the constitutional validity of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth), his Honour, then the Chief Justice, said1115: 1110 See Companies Act 1874 (NSW), Pt IV (ss 126-221); The Companies Statute 1864 (Vic), Pt IV (ss 68-155); The Companies Act 1864 (SA), Pt IV (ss 70-157); The Companies Act 1863 (Q), Pt IV (ss 73-171); The Companies Act 1893 (WA), Pt V (ss 100-190); The Companies Act 1869 (Tas), Pt IV (ss 106-205). 1111 (1940) 63 CLR 278. 1112 (1940) 63 CLR 278 at 313-314. 1113 Ashton v Cameron County Water Improvement District 298 US 513 at 536 1114 The State of Victoria v The Commonwealth (1957) 99 CLR 575. 1115 (1957) 99 CLR 575 at 611-612. Callinan "[Section 221] falls into two parts. The second part is comprised in par (b)(i) and (ii). Sub-paragraph (i) of par (b) is concerned only with the order of priority in which federal income tax is to be paid by a trustee in bankruptcy administering I would the estate of unhesitatingly uphold the validity of this provision as a law made in the exercise of the power conferred by s 51(xvii) of the Constitution to make laws with respect to bankruptcy and insolvency. Sub-paragraph (ii) of par (b) is concerned with a similar priority in the liquidation of a company. Probably this also is to be upheld as an exercise of the same power. For in Canada and in the Unites States the analogous power has been held to extend to liquidations of insolvent corporate trading bodies1116." the bankrupt. As is made clear by his Honour in Farley and the Second Uniform Tax Case, the equivalent power found in the constitutions of the United States and Canada has been considered sufficient for the passing of laws with respect to the winding-up of companies. That "insolvency" in placitum (xvii) means the insolvency of a corporation, and not a natural person, is also supported by Insurance Commissioner v Associated Dominions Assurance Society Pty Ltd1117 in which "It is quite true that the Parliament of the Commonwealth has no general power to make laws with respect to the creation of corporations, or the powers and capacities of corporations, or the liquidation and dissolution of corporations. The power given by s 51(xx) of the Constitution with respect to 'foreign corporations, and trading or financial corporations formed within the limits of the Commonwealth', whatever may be its true scope, does not amount to any such general power1118 ... If there is no general power to provide for the creation of corporations, it may be taken that there is no general power to wind up or dissolve corporations." Fullagar J was, with respect, right to say that s 51(xx) does not go so far as to authorize corporate windings-up. It does not need to. Section 51(xvii), in its 1116 See Shoolbred v Clarke; In re Union Fire Insurance Co (1890) 17 Can SCR 265 at 274; Re Colonial Investment Co of Winnipeg (1913) 15 DLR 634 at 642, 646; Continental Illinois National Bank & Trust Co v Chicago Rock Island & Pacific Ry Co 294 US 648 (1935). 1117 (1953) 89 CLR 78 at 86. 1118 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 349, 363, 371, Callinan reference to insolvency, I would say of corporations, marks out an area of power not covered by s 51(xx). The presence of s 51(xvii) argues against too expansive a construction of the corporations power. If that power goes as far as the majority says it does, then the word "insolvency" in s 51(xvii) is otiose. Div 5: Previous cases No majority of this Court has read s 51(xx) as extending to each and every aspect of a corporation, its activities and its employees. The first endorsement of the concept of an apparently untrammelled corporations power was given by Mason J (Aickin J agreeing) and Murphy J in Actors and Announcers Equity Association v Fontana Films Pty Ltd1119. Mason J made no explicit reference to s 51(xxxv) or to any other placitum, in making the sweeping statement that "[n]owhere in the Constitution is there to be found a secure footing for an implication that the [corporations] power is to be read down so that it relates to 'the trading corporations' and, I would suppose, correspondingly to the financial activities of financial corporations and perhaps to the foreign aspects of foreign corporations."1120 The views of Murphy J are even more expansive: he would not have hesitated to include within the power, industrial relations1121, which were not in issue in the case. trading activities of More persuasive, in my respectful opinion, is the opinion of Gibbs CJ (with whom Wilson J agreed) that the words used in s 51(xx) "suggest that the nature of the corporation to which the laws relate must be significant as an element in the nature or character of the laws, if they are to be valid"1122. The view of Brennan J was closer to that of the Chief Justice than those of a different mind. Brennan J stated that the subject matter of the power is corporate persons, not functions, activities or relationships. Nevertheless, his Honour said that "[t]he subject matter of activities or relationships which the law affects may be relevant to the question whether the law is truly to be described as a law with respect to corporations mentioned in par (xx)"1123. 1119 (1982) 150 CLR 169 at 207-208 per Mason J (Aickin J agreeing at 215), 212 per 1120 (1982) 150 CLR 169 at 207. 1121 (1982) 150 CLR 169 at 212. 1122 (1982) 150 CLR 169 at 182 (Wilson J agreeing at 215). Stephen J may be taken to have adopted a similar view to Gibbs CJ. This is so because of his Honour's focus upon the trading activities of the corporation in question, and also his statement (at 194) that "[t]o describe it [the law in question] as a law with respect to trading corporations seems entirely apt." 1123 (1982) 150 CLR 169 at 222. Callinan The balance of opinion in The Tasmanian Dam Case tilted in favour of a narrower view of s 51(xx). Mason and Murphy JJ adhered to their broad view of the power1124. Deane J, although a little Delphic perhaps, leaned towards the broader view1125. The other four members of the Court rejected or did not consider it necessary to address either view1126. In that case the Court was concerned with the validity of s 10 of the World Heritage Properties Conservation Act 1983 (Cth), in its application to the property of trading corporations declared by the Governor-General to be property to which the section applied. Under s 10(2) specified activities, for example, excavation, and interference with buildings or other structures and trees on declared property, were prohibited without the written consent of the Minister. Section 10(3) prohibited any other action which was damaging to or destructive of property to which the section applied. Section 10(4) made it unlawful for a body corporate to undertake the types of activities referred to in sub-ss (2) and (3) when done "for the purposes of its trading activities". Mason, Murphy and Deane JJ held the section to be entirely valid. Wilson and Dawson JJ held it to be entirely invalid. Gibbs CJ was prepared to accept the validity of s 10(4) but not of the remainder of the section. Brennan J held that s 10(4) was valid, and that the validity of the other sub-sections did not need to be determined. The actual decision of the Court on this issue was therefore that s 10(4) was valid, as well as the definition in sub-s (1), but that it was unnecessary to determine the validity of sub-ss (2) and (3)1127. There was a second question, whether the Hydro-Electric Commission was a trading corporation and, if s 10(4) were valid, whether it was carrying out any of the acts prohibited in sub-ss (2) or (3) of s 10 for the "purposes of its trading activities". The answer that the majority of the Court gave to this question was an affirmative one although Gibbs CJ would not have answered the question that way. The majority comprised Mason, Murphy, Brennan and Deane JJ on this issue. It follows that it is right, as the written submissions of New South Wales relevantly assert, that the ratio of the Tasmanian Dam Case with respect to the 1124 (1983) 158 CLR 1 at 148-150 per Mason J, 179-180 per Murphy J. 1125 (1983) 158 CLR 1 at 270 and 272. 1126 (1983) 158 CLR 1 at 116-119 per Gibbs CJ, 200-202 per Wilson J, 240-241 per Brennan J, 315 per Dawson J. 1127 See (1983) 158 CLR 1 at 324-326. Callinan corporations power is at most that s 10(4) of the 1983 Act was a valid exercise of the corporations power, applying as it did to specified activities undertaken by a "constitutional corporation" "for the purposes of its trading activities". That ratio self-evidently does not support the validity of the Act in question here. What also follows from that case is the proposition that the trading activities of a corporation are quite discrete activities, readily identifiable as such, and distinct from its activities as an employer. The history of industrial affairs in the colonies, as they were known and understood by the founders during the Convention Debates, and the legislation for such affairs enacted almost immediately after federation, as a special and separate enactment to deal with a special and separate subject matter, in my opinion put this issue beyond question. New South Wales is also correct in submitting that the ratio of The Tasmanian Dam Case relating to the validity of s 10(4) effectively depends upon the reasoning of only two judges, Gibbs CJ and Brennan J, Mason J, Murphy J, and probably Deane J, taking the broad view, that is of a general power. Wilson J followed the approach that he and Gibbs CJ had adopted in Fontana Films, holding that for a law to be a law with respect to trading corporations "the substance of the law must bear a sufficient relation to those characteristics of such corporations which distinguish them from corporations which cannot be so described"1128, a test that s 10 failed. Dawson J adopted a similar approach, pointing out that the section was "bereft of any attribute which connects it with corporations other than the fact that the command which it contains is directed to trading and foreign corporations"1129. As to s 10(4), Dawson J said that the attempt to bring the law within power there was "a transparent one, for even if the activities which s 10 proscribes are confined to activities for the trading purposes of a trading corporation, it is nevertheless not a law in which the character of a trading corporation has any significance"1130. Gibbs CJ, with reservations, accepted that s 10(4) did have a sufficient connexion with the head of power conferred by s 51(xx)1131. The focus, however, his Honour said, was upon the trading activities. On the particular facts Gibbs CJ did not regard the activities of the corporation as being within the scope of trading activities: s 10(4) did not therefore validly apply to it in that respect. With respect to the validity of s 10(4), Brennan J said this1132: 1128 (1983) 158 CLR 1 at 202 (emphasis added). 1129 (1983) 158 CLR 1 at 317. 1130 (1983) 158 CLR 1 at 317. 1131 (1983) 158 CLR 1 at 119. 1132 (1983) 158 CLR 1 at 241. Callinan "I should not wish to decide a question wider than the circumstances of the case require. The acts prohibited by sub-s (4) are the acts referred to in sub-ss (2) and (3), and the qualification 'for the purposes of its trading activities' results in the affection of the trading activities of trading corporations. It is clearly a law with respect to trading corporations, but can its validity be sustained without deciding the validity of sub-ss (2) and It is unnecessary to decide the validity of sub-ss (2) and (3). Even if sub-ss (2) and (3) were invalid, their invalidity would not affect sub- s (4). Sub-section (4) is not dependent upon sub-ss (2) and (3)". His Honour's answer to the factual question was that the carrying out of the scheme for the dam was a trading activity because the "dominant if not exclusive purpose of constructing the dam is to provide additional generating capacity for the [corporation's] system, an element in [its] co-ordinated activity of generation, distribution and sale of electrical energy"1133. His Honour's holding necessarily meant therefore that to be within constitutional power, under s 51(xx), the power must be confined to the trading activities of a corporation. Before leaving The Tasmanian Dam Case I should signify my respectful disagreement, for the reasons given elsewhere in this judgment1134, with much of a passage in the judgment of Mason J, relied on by the Commonwealth in its written submissions in an attempt to meet a submission by the States that the Convention Debates are supportive of their position. The passage is as follows1135: "Koowarta makes the point that the content of the external affairs power has expanded greatly in recent times along with the increase in the number of international conventions and the extended range of matters with which they deal1136. The same point had been made earlier by Latham CJ in Burgess1137. the Commonwealth an entrée into new legislative fields': see Koowarta1138. It this development 'that promises to give 1133 (1983) 158 CLR 1 at 241. 1134 At [679], above. 1135 (1983) 158 CLR 1 at 126-127. 1136 Koowarta v Bjelke-Petersen (1982) 153 CLR 168 at 216-217, 229. 1137 R v Burgess; Ex parte Henry (1936) 55 CLR 608 at 640-641. 1138 (1982) 153 CLR 168 at 228. Callinan than this development has brought about and is, of course, possible that the framers of the Constitution thought or assumed that the external affairs power would have a less extensive that operation Commonwealth legislation by way of implementation of treaty obligations would be infrequent and limited in scope. The framers of the Constitution would not have foreseen with any degree of precision, if at all, the expansion in international and regional affairs that has occurred since the turn of the century, in particular the co-operation between nations that has resulted in the formation of international and regional conventions. But it is not, and could not be, suggested that by reason of this circumstance the power should now be given an operation which conforms to expectations held in 1900. For one thing it is impossible to ascertain what those expectations may have been. For another the difference between those expectations and subsequent events as they have fallen out seems to have been a difference in the frequency and volume of external affairs rather than a difference in kind. Only if there was a difference in kind could we begin to construct an argument that the expression 'external affairs' should receive a construction which differs from the meaning that it would receive according to ordinary principles and interpretation. Even then mere expectations held in 1900 could not form a satisfactory basis for the departing from Constitution." interpretation of words used the natural I am quite unwilling to attribute to the founders the limited vision and foresight which the passage quoted attributes to them. They were greatly concerned with international affairs, including, in particular, regional affairs1139. Discourse about treaties, albeit international affairs, agreements and predominantly about mutual resistance to aggression, throughout the 19th century was intense and prolonged1140. Shifting alliances made by treaties and otherwise, and the need for international cooperation and a body such as the League of Nations were not new ideas in 19191141. The century before federation 1139 See XYZ v Commonwealth (2006) 80 ALJR 1036 at 1071-1074 [157]-[173] per Callinan and Heydon JJ; 227 ALR 495 at 538-543. 1140 See Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 631-637, §214. 1141 Sir Frederick Pollock KC wrote in The League of Nations, 2nd ed (1922) at 3-4: "From about 1500 at latest it was not only the fact, but an openly recognised fact, that Europe was divided into many kingdoms, principalities, and commonwealths, based no longer on real or fictitious kindred or on feudal allegiance, but on territorial control and jurisdiction, and that these independent units of political life did not own any common superior authority. As in theory it had always been allowed that war among civilised nations was a scandal (for (Footnote continues on next page) Callinan was a century of many wars between both large and small belligerents. In 1900 Australia aspired to be a nation of significance. The founders did not intend it to be tied to the apron strings of Britannia for ever. Otherwise there would have been no need for an external affairs power at all, or at least one as expansive as the power in terms is. The Commonwealth also relies on the passages from Mason J that I have quoted for the submission that implications may not be drawn from the "federal balance". I have rejected that submission. Much more was drawn from less by this Court in Lange1142. These further points should be made. His Honour's statement was made before Cole v Whitfield which approved recourse to the Convention Debates in the passage that I have quoted elsewhere1143. Such recourse would have revealed to his Honour the founders' concern about the matters which his Honour said they would not have foreseen. The second point is that his Honour's remarks were made before Austin v The Commonwealth1144 to which also I have referred elsewhere1145 and which, by stressing the essential and constitutional features of the States, recognizes the need for, and the constitutional requirement and reality of the federal balance. The third point is that his Honour's judgment, with respect to international affairs, in the context of a convention about heritage, mirrors, without direct advertence to it, the much criticized dissenting reasons of Latham CJ in the Communist Party Case1146, of the paradoxical position that war is rather a good thing in itself cannot vouch any ancient author to my knowledge), the question of finding some reasonable governance for the relations of independent Powers was now regarded as urgent by thinking men of divers nations. Sir Thomas More expressed the pious wish 'that, whereas the most part of Christian princes be at mortal war, they were all at universal peace.' That wish took shape in a line of speculation pursued from the sixteenth to the eighteenth centuries by several authors. Little visible fruit came of their labours at the time; nevertheless, they were the forerunners of the new movement aroused by the war of 1914, fostered by the zeal of leading publicists in Europe and in America, and at last embodied in the plan of the Paris Conference." 1142 (1997) 189 CLR 520. 1143 (1988) 165 CLR 360 at 385. See also XYZ v Commonwealth (2006) 80 ALJR 1036 at 1069-1070 [153] per Callinan and Heydon JJ; 227 ALR 495 at 536-537. 1144 (2003) 215 CLR 185. 1145 At [788]-[791], above. 1146 (1951) 83 CLR 1 at 142-149, especially 149. Callinan leaving it to the Executive or Parliament to decide a contestable matter which the rest of the Court there regarded as a matter for itself1147: "[T]he Court would undertake an invidious task if it were to decide whether the subject-matter of a convention is of international character or concern. On a question of this kind the Court cannot substitute its judgment for that of the executive government and Parliament. The fact of entry into, and of ratification of, an international convention, evidences the judgment of the executive and of Parliament that the subject-matter of the convention is of international character and concern and that its implementation will be a benefit to Australia. Whether ... the convention ... is capable of yielding ... a benefit to Australia, whether non-observance by Australia is likely to lead to adverse international action or reaction, are not questions on which the Court can readily arrive at an informed opinion." (emphasis added) The last point that I would make here regarding The Tasmanian Dam Case is that the test posed by Mason J seems to me, with respect, to lean too far in favour of the Commonwealth: that "it is not enough that Commonwealth law adversely affects the State in the exercise of some governmental function as, for instance, by affecting the State in the exercise of a prerogative. Instead, it must emerge that there is a substantial interference with the State's capacity to govern, an interference which will threaten or endanger the continued functioning of the State as an essential constituent element in the federal system."1148 The problem that I see about this formulation is that it could lead to the reduction of the States to mere facades of authority possessing parliaments and courts but little else, and lacking real power to perform the continuing functions left to them by the Constitution, of which an essential one is the internal industrial function. The next case to be considered is Re Dingjan; Ex parte Wagner1149, in which the validity of some sections (ss 127A, 127B and 127C(1)(b)) of the Those provisions Industrial Relations Act 1988 (Cth) was challenged. empowered the AIRC to renew contracts of employment on grounds of unfairness or harshness, or contrariety to the public interest, if the contract entered into by a corporation was one "relating to the business" of the corporation. Mason CJ reiterated his view that the power "must be construed as a plenary power with respect to the categories of corporations mentioned in 1147 (1983) 158 CLR 1 at 125. (1983) 158 CLR 1 at 139. 1149 (1995) 183 CLR 323. Callinan s 51(xx) of the Constitution"1150. He also agreed with the reasons given by Gaudron J, as did Deane J1151. Gaudron J did not, however, quite accept the unqualified language in which the plenary view of the power had been stated by those two judges, although her Honour was of the view that the power extended to the persons by whom corporations carry out their trading or financial, that is to say, business activities. Her Honour said this1152: "[I]t is clear that, at the very least, a law which is expressed to operate on or by reference to the business functions, activities or relationships of constitutional corporations is a law with respect to those corporations. In this regard, it is sufficient to note that, although the business activities of trading and financial corporations may be more extensive than their trading or financial activities, those corporations, nonetheless, take their character from their business activities ... As their business activities signify whether or not corporations are trading or financial corporations and the main purpose of the power to legislate with respect to foreign corporations must be directed to their business activities in Australia, it follows that the power conferred by s 51(xx) extends, at the very least, to the business functions and activities of constitutional corporations and to their business relationships. ... Once it is accepted that s 51(xx) extends to the business functions, activities and relationships of constitutional corporations, it follows that it also extends to the persons by and through whom they carry out those functions and activities and with whom those relationships." they enter into Her Honour's remarks were however directed to dealings between contractors and "constitutional corporations", and not relations between them and their employees. This appears from the emphasis that her Honour placed upon a connexion between the contractors and the business functions and activities of corporations, and their business relationships with others. Of the judges in the majority in the case, Dawson J maintained his earlier stance1153. Brennan J again set out his view that to be supported by s 51(xx) the law must discriminate between constitutional corporations and other persons. 1150 (1995) 183 CLR 323 at 333-334. 1151 (1995) 183 CLR 323 at 333 per Mason CJ, 342 per Deane J. 1152 (1995) 183 CLR 323 at 364-365. 1153 (1995) 183 CLR 323 at 344-346. Callinan The opinion of Brennan J was to an effect similar to those of Gibbs CJ and Dawson J in The Tasmanian Dam Case1154: "Though I see no error in this approach, it leaves much to judicial impression from case to case. If the constitutional character be 'significant' to the relationship with the law, it must be because the character of the corporation is the factor which attracts the operation of the law. If that be so, I perceive no distinction between that test and a test of discriminatory operation. I prefer to state the test as one of discrimination, for that test admits of an objective ascertainment of the rights, duties, powers or privileges which the law creates or affects." Toohey J was of the view that to say that a law cannot validly be based on the power "unless the fact that the corporation is a trading or financial corporation is significant in the way in which the law relates to it may be to focus too narrowly on the process of characterisation"1155. McHugh J, a member of the majority on the issue for determination, took a somewhat broader view of the corporations power. He said that for a law to be validly based upon the power1156: "it must have some significance for the activities, functions, relationships or business of the corporation. If a law regulates the activities, functions, relationships or business of a s 51(xx) corporation, no more is needed to bring the law within s 51(xx). That is because the law, by regulating the activities, etc, is regulating the conduct of the corporation or those who deal with it. Further, if, by reference to the activities or functions of s 51(xx) corporations, a law regulates the conduct of those who control, work for, or hold shares or office in those corporations, it is unlikely that any further fact will be needed to bring the law within the reach of s 51(xx)." (footnote omitted) It is important to notice that when his Honour used the words "work for ... corporations" he used them in the context of the conduct of persons in performing functions, which I would take to be the trading or financial functions of corporations, and not to embrace the conduct of corporations as employers. This view is I think confirmed by his Honour's further statement that for the law to be within power, the conduct in question must have "significance for trading, financial or foreign corporations", which would, in most cases, "mean that the 1154 (1995) 183 CLR 323 at 337. 1155 (1995) 183 CLR 323 at 352. 1156 (1995) 183 CLR 323 at 369. Callinan conduct must have some beneficial or detrimental effect on trading, financial or foreign corporations or their officers, employees or shareholders"1157. The Industrial Relations Act Case1158 is of no assistance. The issue of the scope of the corporations power did not relevantly arise because the only State to challenge the provisions in issue there, Western Australia, expressly, and I would hold, erroneously, conceded in argument "that the Parliament has power to legislate as to the industrial rights and obligations of constitutional corporations ... and their employees"1159. As I have said elsewhere1160, constitutions are not disposable property of governments of the day. Concessions of this kind are often driven by expediency and short-term aims of particular governments at particular times. They certainly say nothing helpful about the proper construction of the Constitution. Dawson J, writing separately in the Industrial Relations Act Case, found it unnecessary to consider the extent of the corporations power at all1161. The joint judgment merely noted that another part of the law being considered did operate with respect to the trading activities of corporations and was "to that extent, clearly authorised by s 51(xx) of the Constitution"1162. The case cannot therefore stand as any authority to support the broad view of the corporations power propounded by the Commonwealth. In Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union1163 the issue was as to the operation of s 51(xxxv) of the Constitution. There was little or no discussion of the corporations power in argument. Gaudron J, in the minority, taking a step beyond her position in Re Dingjan, stated, unnecessarily for the decision, that in her view the corporations power "extends to laws prescribing the industrial rights and obligations of corporations and their employees and the means by which they are to conduct 1157 (1995) 183 CLR 323 at 370. 1158 (1996) 187 CLR 416. 1159 (1996) 187 CLR 416 at 539. 1160 Sweedman v Transport Accident Commission (2006) 80 ALJR 646 at 663 [94]; 224 ALR 625 at 645. 1161 Dawson J did not address the issue, except in passing reference: see (1996) 187 CLR 416 at 566. 1162 (1996) 187 CLR 416 at 558. 1163 (2000) 203 CLR 346. Callinan their industrial relations"1164. I respectfully agree with Kirby J1165 that it is not right to seize, and to rely conclusively, upon a pronouncement made by a dissenting judge on a point not even argued, and, as Kirby J points out, also greatly qualified by other passages from her Honour's reasons in that case. Strickland v Rocla Concrete Pipes Ltd1166 will require more detailed consideration later. For now however it is important to keep in mind that several Justices there said that it was neither necessary nor appropriate to explore the outer boundaries of the corporations power1167. Barwick CJ said this1168, of the laws in question in Huddart Parker: "They were clearly laws regulating and controlling amongst other things the trading activities of foreign corporations and trading and financial corporations formed within the limits of the Commonwealth. In my opinion such laws were laws with respect to such corporations. They dealt with the very heart of the purpose for which the corporation was formed, for whether a trading or financial corporation, by assumption, its purpose is to trade, trade for constitutional purposes not being limited to dealings in goods. ... I ought to observe that it does not follow either as a logical proposition, or, if in this instance there be a difference, as a legal proposition, from the validity of those sections, that any law which in the range of its command or prohibition includes foreign corporations or trading or financial corporations formed within the limits of the Commonwealth is necessarily a law with respect to the subject matter of s 51(xx). Nor does it follow that any law which is addressed specifically to such corporations or some of them is such a law. Sections 5(1) and 8(1), in my opinion, were valid because they were regulating and controlling the trading activities of trading corporations and thus within the scope of s 51(xx). But the decision as to the validity of particular laws yet to be enacted must remain for the Court when called upon to pass upon them. No doubt, laws which may be validly made under s 51(xx) will cover a wide range of the activities of foreign corporations and trading and financial corporations: 1164 (2000) 203 CLR 346 at 375. 1165 Reasons of Kirby J at [486]-[489]. 1166 (1971) 124 CLR 468. 1167 (1971) 124 CLR 468 at 490-491 per Barwick CJ, 511 per Menzies J, 515 per Walsh J, 525 per Gibbs J. 1168 (1971) 124 CLR 468 at 489-490. Callinan perhaps in the case of foreign corporations even a wider range than that in the case of other corporations: but in any case, not necessarily limited to trading activities." Of the other judges, McTiernan J, Owen J and Walsh J, and perhaps Windeyer J, agreed with the Chief Justice on the relevant issues1169. Menzies J accepted that "a law relating to the trading of trading corporations formed within Australia" is prima facie within power1170. Gibbs J expressed a similar view1171. I agree with the written submissions of New South Wales that Rocla Pipes is authority for no more than the proposition that some regulation of trading activities is the object of s 51(xx). This is consistent in my opinion with history, the views expressed in the Convention Debates, the early text writers, and the views of Isaacs J and Higgins J in Huddart Parker (to which I will refer), all of which are to the same effect, that the power extends to no more than the business affairs of a constitutional corporation conducted with the general public. Nothing that I have said would diminish the constitutional power of the Commonwealth over accessorial liability1172 of natural persons in relation to the trading or financial activities of corporations. As I said in Andar Transport Pty Ltd v Brambles Ltd1173: "Corporations can only think, decide and act by natural persons. If as Dawson J thought correct in Nicol1174, and as the respondent here contended, the duty of an employer and employee can never be coterminous, in practice a corporate employer, obliged as it is to think and act by natural persons, would always be at risk, no matter how diligent it may have been, of being held not to have discharged its duty to its 1169 (1971) 124 CLR 468 at 499 per McTiernan J, 512 per Windeyer J, 513 per Owen J, 515 per Walsh J. 1170 (1971) 124 CLR 468 at 508. 1171 (1971) 124 CLR 468 at 525. 1172 In Fencott v Muller (1983) 152 CLR 570 at 598-589, Mason, Murphy, Brennan and Deane JJ said "that the corporations power extends to the regulation of the trading activities of trading corporations" possibly embracing thereby the notion of accessorial liability of the natural persons who undertake those activities of the corporation. 1173 (2004) 217 CLR 424 at 461-462 [103]. 1174 Nicol v Allyacht Spars Pty Ltd (1987) 163 CLR 611 at 624-625. Callinan employees. I am unable to accept that there is some robotic unidentifiable agency remote from human agency for which a company may be held to be responsible. If it were otherwise there would have been no need for the majority in Nicol to undertake the careful examination that it did of the conduct of the injured plaintiff and other directors. It was only because another human agency on behalf of the company was involved, another director or directors who participated in the devising and adoption of the unsafe method of work there, that the injured director was able to succeed in his claim against the company." A natural person conducting the company's business, can only be and act as an alter ego of the company. Accessorial liability is a recognition of that. Murphyores Incorporated Pty Ltd v The Commonwealth1175, to which I have referred elsewhere1176, is relied on by the Commonwealth as an example of the extent to which Commonwealth constitutional power may embrace practically any activity with which the power can be said to be connected, another aspect, an extreme one, of the generality doctrine. The issue, it will be recalled, was whether the Commonwealth could legislate, under the trade and commerce power, for the imposition of environmental conditions upon mining operations carried on within a State. The Court (Barwick CJ, McTiernan, Gibbs, Stephen, Mason, Jacobs, Murphy JJ) held that it could. The principal judgment, with which Gibbs and Jacobs JJ agreed, was given by Stephen J, Mason J writing an extensive judgment to a similar effect. It is something of an irony that the Court reached this conclusion even though Stephen J accepted that "the control of the plaintiffs' mining operations and of their effect upon the local environment is, no doubt, essentially a matter for the State"1177. Nonetheless it was held that because the principal markets for the ore mineral mined by the plaintiffs lay overseas, the Commonwealth's power to prohibit exports was within the competence of the Commonwealth. Two points may be made about that case. If ever the connexion, such as it was, between constitutional power and legislation were "insubstantial, tenuous or distant"1178, and therefore impermissible, it was the connexion there between the relevant impugned legislation, and the Commonwealth's power to prohibit or regulate exports. The second is that the decision is inconsistent with the 1175 (1976) 136 CLR 1. 1176 See [677]-[678], above. 1177 (1976) 136 CLR 1 at 9. 1178 Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 79 per Callinan reasoning and later decision of this Court in Austin v The Commonwealth1179, which holds that the Commonwealth may not interfere with or curtail essential State functions, even in the exercise of specific constitutional powers. I return to Rocla Pipes. In it Barwick CJ referred to the "current doctrine of this Court"1180, an expression occasionally used in argument in this Court. To the extent that it suggests that it is right for judges of this Court to take continually shifting views of the Constitution, it is an unfortunate one. It is one thing to say that constitutional expressions may have to apply to changing conditions, but entirely another, and unacceptable thing, to treat constitutional doctrine as an ever-moving feast. None of the plaintiffs here have contended, or need to contend for their argument to succeed, that the Engineers' Case should be overturned. That somewhat unsatisfactory case, an early instance of judicial activism1181, was 1179 (2003) 215 CLR 185. 1180 (1971) 124 CLR 468 at 485 (emphasis added). 1181 Sir Robert Menzies described what happened in "Growth by Judicial Interpretation of Commonwealth Powers – The Engineers' Case", the second of his seven lectures to the University of Virginia, subsequently published as Menzies, Central Power in the Australian Commonwealth, (1967) 26 at 38-39: "Well, what happened was that an hour or so after I had begun by developing this argument, distinguishing the Railway Servants' Case, doing lip service to the Doctrine [of Instrumentalities], Mr Justice Starke, who was a very distinguished Common lawyer, and whose blunt habits of expression made no exception in favour of a very young man, looking at me in a grumbling way, said, 'This argument is a lot of nonsense!' ... in what I later realized to be an inspired moment, [I] replied: 'Sir, I quite agree.' 'Well', intervened the Chief Justice, Chief Justice Knox, never the most genial of interrogators, 'why are you putting an argument which you admit is nonsense?' 'Because', said the young Menzies ... 'I am compelled by the earlier decisions of this Court. If your Honours will permit me to question all or any of these earlier decisions, I will undertake to advance a sensible argument.' I waited for the heavens to fall. Instead, the Chief Justice said: 'The Court will retire for a few minutes.' And when they came back, he said, 'This case will be adjourned for argument at Sydney. Each government will be notified so that it may apply to intervene. Counsel will be at liberty to challenge any earlier decision of this Court!'" Sir Robert's account is doubted in Blackshield, Coper and Williams (eds), The Oxford Companion to the High Court of Australia, (2001) at 237. The Commonwealth Law Reports refer to the sittings in Sydney but not to any earlier (Footnote continues on next page) Callinan concerned with, and rejected the doctrine of reserved powers which had been referred to in Huddart Parker. It does not follow that everything said in the latter ceased to have any precedential, or other persuasive value. Furthermore, whatever Isaacs J said in Huddart Parker may fairly safely be regarded as having little or no dependence upon the doctrine of reserved powers because of his subsequent participation in the joint judgment in the Engineers' Case which so strenuously disapproved it1182. In any event his Honour's actual language in Huddart Parker makes it clear that he was speaking of real powers of the State over aspects of trading and financial corporations in the sense of residual powers beyond Commonwealth power, rather than reserved powers. This follows from his reference to the relevant matters having been "left entirely to the States" in "The creation of corporations and their consequent investiture with powers and capacities was left entirely to the States. With these matters, as in the case of foreign corporations, the Commonwealth Parliament has nothing to do. It finds the artificial being in possession of its powers, just as it finds natural beings subject to its jurisdiction, and it has no more to do with the creation of the one class than with that of the other. But laying aside creative power, what is left? It cannot be merely the power to legislate for the corporations with relation to Inter-State and foreign commerce. That, as already indicated, is conferred to the fullest extent by the first sub-section, and to confine paragraph (xx) to that would give no meaning to its very definite words. Again, to restrict its operation to internal company regulation would be absurd. Apart from the inherent improbability of investing the national authority with merely subordinate functions while retaining to the State the superior power of incorporation which, effectively exercised, could go far to nullify the inferior power, there are serious practical difficulties. I am unable, therefore, to accept the argument that what the Constitution has handed over to the Federal Parliament is simply the body of company law. That would include all the prohibitory and creative provisions contained in the State Statutes; it would also include the power sittings. The Reports in those days were somewhat less meticulously compiled. So too, judges' notebooks can sometimes be more instructive for what they omit than what they note. There seems to be no good reason not to accept Sir Robert's recollection of his first, and perhaps most important, case in the High Court, as an accurate one. 1182 See (1909) 8 CLR 330 at 388. 1183 (1909) 8 CLR 330 at 394-396. Callinan to alter the conditions of a company's existence, which is equivalent to creation, and to annihilate the corporation altogether – which I think is, equally with creation, outside the region of federal competency1184. All this, I think, the language of the Constitution has left to the States. I take the power to legislate 'for the peace, order, and good government of the Commonwealth with respect to foreign corporations, and trading and financial corporations formed within the limits of the Commonwealth' to be a power to act upon certain beings, which are found and remain in actual existence, possessing a fixed identity, a defined ambit of potentiality, having certain capacities and faculties unalterable by the Commonwealth, beings ready to act within their sphere of capabilities in relation to the people of the Commonwealth. Necessarily you cannot legislate for such corporations except with respect to some extraneous circumstances or events, whether trade, or finance, or contracts, &c, and there is nothing in the Constitution which says anything about the object, primary or secondary. I adhere to my view regarding purpose, motive, and objects expressed in Barger's Case1185. The power does not look behind the charter, or concern itself with purely internal management, or mere personal preparation to act; it views the beings upon which it is to operate in their relations to outsiders, or, in other words, in the actual exercise of their corporate powers, and entrusts to the Commonwealth Parliament the regulation of the conduct of the corporations in their transactions with or as affecting the public. Many of the matters that in one aspect are internal – such as balance sheets, registers of members, payment of calls, &c – may in another aspect and in certain circumstances be important elements in connection with outward transactions, and have a direct relation to them, and so fall incidentally within the ambit of federal power. The same may be said of legal proceedings, remedies, and so on, including winding up proceedings so far as necessary to satisfy creditors, but not so far as extinction. But whether any given provision is part of the federal power or not must, as I view it, depend on whether it includes or is necessarily incidental to the control of the conduct of the corporations in relation to outside persons. This follows from the process of reasoning and elimination that the language itself forces upon us when effect is given to every word." (further emphasis added) I would not take his Honour to be saying in that passage that the "public" included a corporation's own employees, or that the relationship, or matters 1184 See Westlake, A Treatise on Private International Law, 4th ed (1905) at 359. 1185 R v Barger; The Commonwealth v McKay (1908) 6 CLR 41. Callinan affecting it, of a corporation with its employees fell within the corporations power. This view is reinforced by this other passage in his judgment1186: "This disposes of the contention that, if these sections be valid, the Commonwealth Parliament would be entirely at large, and that a schedule of wages and hours could be prescribed for these corporations, so also as to the qualifications of their directors; all that is purely internal management and equipment, and in no way directly affects the exercise of their capacities of trading or their financial operations or other public capacities, nor is it incidental to the control of their activities." If anything, the reasoning of Higgins J was even narrower and does not depend upon any view of the suitability or otherwise or existence of a doctrine of reserved powers. Higgins J said in Huddart Parker1187: "The Federal Parliament can, in my opinion, prescribe what capital must be paid up, probably even how it must have been paid up (in cash or for value, and how the value is to be ascertained), what returns must be made, what publicity must be given, what auditing must be done, what securities must be deposited. The Federal Parliament controls as it were the entrance gates, the tickets of admission, the right to do business and to continue to do business in Australia; the State Parliaments dictate what acts may be done, or may not be done, within the enclosure, prescribe laws with respect to the contracts and business within the scope of the permitted powers." Nor do I think that the judges in Huddart Parker were inappropriately distracted by the significance for the purpose of private international law only or substantially of a difference between the internal and external affairs of corporations. The difference is undoubtedly significant for that purpose and is no doubt reflected, to some extent, in the language of both placita (xvii) and (xx). Considerations of private international law are not irrelevant to constitutional law just as the common law in very many other aspects influenced the language of the Constitution and therefore influenced its interpretation. Sir Owen Dixon 1186 (1909) 8 CLR 330 at 396. 1187 (1909) 8 CLR 330 at 412-413. 1188 Dixon, "The Common Law as an Ultimate Constitutional Foundation", (1957) 31 Australian Law Journal 240 at 241. Callinan "Federalism means a rigid constitution and a rigid constitution means a written instrument. It is easy to treat the written instrument as the paramount consideration, unmindful of the part played by the general law, notwithstanding that it is the source of the legal conceptions that govern us in determining the effect of the written instrument." Before returning to Rocla Pipes there is only one other case to which I should refer in this section of my reasons: The Incorporation Case1189. The majority there did not regard the doctrine of reserved powers, which the Court in the Engineers' Case cast aside, as pervading all of the reasoning in Huddart Parker. In The Incorporation Case the majority (Mason CJ, Brennan, Dawson, Toohey, Gaudron and McHugh JJ) held, even accepting the validity of the generality doctrine, that there were limits to the reach of s 51(xx), and that it did not extend to power over the incorporation of companies. Their Honours said1190: "The subject of a valid law is restricted by that phrase to corporations which have undergone or shall have undergone the process of formation in the past, present or future. That is to say, the power is one with respect to 'formed corporations'." The submission made by New South Wales that nothing held or said in The Incorporation Case gives sustenance to any proposition that the corporations power covers what has been compendiously, and almost universally called for decades in this country, "industrial relations" or "industrial matters", is correct. The other significant matter is that although Rocla Pipes had been decided some years before The Incorporation Case, the majority in it quoted with approval1191 part of the section of the judgment of Isaacs J in Huddart Parker, which I have already set out, the effect of which is that the creation of corporations and their investiture with powers and capacities was left entirely to the States1192. A question left unanswered in this case is as to which corporations may be characterized as financial and trading corporations, a very big question indeed, and which will occupy, I believe, a deal of the time of the courts in the future. It is not answerable in this case, because of the absence of actual facts to which the decision here will apply, highlighting again the undesirability of dealing with this 1189 (1990) 169 CLR 482. 1190 (1990) 169 CLR 482 at 498. 1191 (1990) 169 CLR 482 at 499-500. 1192 (1909) 8 CLR 330 at 394. Callinan case on the basis which it has been presented to the Court. I would simply make the point that, "foreign", "trading" and "financial" are words not only descriptive of the types of corporations in respect of which the power under s 51(xx) may be exercised, they also suggest a delineation of the scope of the power itself, as a power with respect to foreign, trading and financial activities. I need reach no conclusion as to this matter however, because, whatever the extent of the power the Commonwealth may possess under s 51(xx), it does not extend to industrial matters, the power of the Commonwealth over which is measured by s 51(xxxv). The decision in Rocla Pipes does not conclude this case. And, it may be observed, not all that was said in it is unsupportive of the States' and unions' arguments. In his judgment, Menzies J spoke of "the limited power in relation to trade conferred upon [the Commonwealth] Parliament"1193. Windeyer J stated as a requirement of constitutional validity that a law "truly answers"1194 to the description of a law with respect to a given subject matter. No judge in that case suggested that s 51(xx) conferred a power over a corporation's industrial relations. The decision and the reasoning do not come to grips with the limitation upon Commonwealth power under s 51(i) to which Menzies J referred. The distinction between external and internal relationships of a corporation is not relevant only for the purposes of private international law. It is highly relevant to matters such as accessorial liability, the liability of directors, and the relationships between corporations, directors and their shareholders. At this point it is convenient to deal with a question that some of the reasoning in Rocla Pipes might appear to raise, that if s 51(xx) is not affected by the limitations in s 51(i), why is it affected by limitations inherent in s 51(xxxv)? There are several answers. The first is, as history, the Debates, the various parliaments of the Commonwealth, and the Justices of this Court have constantly treated it, the industrial affairs power in s 51(xxxv) is a discrete, unique and very great power. The analysis that Kirby J and I have separately made of it demonstrate that. The second answer is that, contrary to statements made in Rocla Pipes, particularly by Barwick CJ1195, the whole of the reasoning in Huddart Parker does not depend upon the application of the doctrine of implied immunities or reserved powers. The same decision would have been open even if such a doctrine did not hold sway. Only Griffith CJ1196 in Huddart Parker suggested that industrial affairs might be part of a corporation's trading activities. Isaacs J, the Justice most averse, it appears, to the doctrine of reserved powers 1193 (1971) 124 CLR 468 at 510 (emphasis added). 1194 (1971) 124 CLR 468 at 512 (emphasis added). 1195 (1971) 124 CLR 468 at 485. 1196 (1909) 8 CLR 330 at 348. Callinan unequivocally rejected the suggestion1197. The third reason is that if s 51(i) were to be given the same textual construction as the majority here gives to s 51(xx) Rocla Pipes would not have been decided as it was. It is also relevant that in Rocla Pipes, in common with Murphyores, mention of Melbourne Corporation is nowhere to be found in any of the judgments. That it is not raises real questions as to the persuasive value of Rocla Pipes. If it were necessary, which I do not think it is, I would in any event be prepared to depart from Rocla Pipes to decide this case as I do. No, Rocla Pipes does not stand in the way of the plaintiffs here. Assuming that the doctrine of stare decisis were inevitably and completely to govern or fetter the obligation of a judge of this Court in constitutional cases, a proposition which I elsewhere1198 demonstrate to have, at best, a fragile foundation, there is no other decision, as the Commonwealth concedes, that compels a conclusion either way here. Div 6: A consequence of the "object of command" test Although, as I have just said, the doctrine of stare decisis is not determinative in constitutional cases, I think that the Court ought, directly, in the interests of candour and certainty, to acknowledge whether it intends to overrule an earlier case or apparently settled principle. The joint reasons in the Engineers' Case did not in terms say that the doctrine of implied intergovernmental immunities or reserved powers was being set aside: instead their Honours heavily criticized it1199, noted that it had been rejected by the Privy Council in Webb v Outtrim1200 and was the subject of persistent dissents1201, and declared that the doctrine had "never been unreservedly accepted and applied"1202. In Cole v Whitfield1203, by contrast, it was reconsidering "approximately 140 decisions of this Court and of the Privy Council". Similarly, in XYZ v Commonwealth1204, Heydon J and I said that the the Court acknowledged that 1197 (1909) 8 CLR 330 at 396. 1198 See Pt IV, Div 1 of these reasons. 1199 (1920) 28 CLR 129 at 144-145, 150. 1200 (1906) 4 CLR 356; [1907] AC 81. 1201 (1920) 28 CLR 129 at 150. 1202 (1920) 28 CLR 129 at 150. 1203 (1988) 165 CLR 360 at 385. 1204 (2006) 80 ALJR 1036 at 1082 [206]; 227 ALR 495 at 554. Callinan geographic externality view of s 51(xxix) should be "rejected" and cases applying it "overruled" to that extent. In my opinion, a consequence of the apparent acceptance of the "object of command" test by the majority here1205 is that The Incorporation Case may well now be effectively overruled. In that case, Mason CJ, Brennan, Dawson, Toohey, Gaudron and McHugh JJ held that the Commonwealth lacked legislative competence for the incorporation of corporations under s 51(xx), and did so for textual, structural, doctrinal and historical reasons1206. the Commonwealth may, it seems, legislate that "a s 51(xx) corporation shall ...", or "no s 51(xx) corporation shall ...", the States' powers over incorporation may well be rendered meaningless. The Commonwealth might legislate that "no s 51(xx) corporation shall do business without a licence", and make that licence a licence, for all useful purposes, to exist. It might now seek to require, for example, that the corporation be of a certain type, that its proposed name be approved, that the name and address of each corporator and proposed director be supplied to a particular authority of the Commonwealth, and that the other sorts of requirements now found in s 117 of the Corporations Act 2001 (Cth) be satisfied. But an equivalent of s 117, along with other provisions of the Corporations Act 1989 (Cth), were held to be invalid by the majority in The Incorporation Now that "The fact that the character of a corporation may vary, so that it may be at one time a trading or financial corporation and not at another, makes it less likely at least that s 51(xx) was intended to confer power upon the Commonwealth to incorporate companies over which its power of regulation might fluctuate, possibly without knowledge upon either side." The "object of command" test is not reconcilable with the majority's holdings in The Incorporation Case, but as to this the joint reasons are silent. 1206 See (1990) 169 CLR 482 at 498 ("formed" a past participle), 499 (power of incorporation given expressly in s 51(xiii) and not in s 51(xx)), 498-503 (precedent and history indicate no power of incorporation). 1207 (1990) 169 CLR 482 at 503. As a result of The Incorporation Case, s 117 of the Corporations Act 2001 (Cth) relies on s 51(xxxvii) of the Constitution for validity. 1208 (1990) 169 CLR 482 at 503. Callinan PART IX. THE DIFFERENT POSITION OF VICTORIA Under the Commonwealth Powers (Industrial Relations) Act 1996 (Vic), the Victorian Parliament referred legislative competence over various industrial matters to the Commonwealth Parliament1209. Other matters were expressly excluded from the reference1210. The matters referred are these: Reference (1) A matter referred to the Parliament of the Commonwealth by a sub- section of this section is so referred subject to the Commonwealth of Australia Constitution Act and pursuant to section 51(xxxvii) of that Act. The matter of conciliation and arbitration for the prevention and settlement of industrial disputes within the limits of the State, to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as the day on which the reference of that matter under this Act terminates but no longer. The matter of agreements about matters pertaining to the relationship between an employer or employers in the State and an employee or employees in the State, to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as the day on which the reference of that matter under this Act terminates but no longer. The matter of minimum terms and conditions of employment for employees in the State, to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as the day on which the reference of that matter under this Act terminates but no longer. 1209 Set out in ss 4 and 4A. 1210 Set out in s 5. Callinan The matter of termination, or proposed termination, of the employment of an employee, other than a law enforcement officer, to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as the day on which the reference of that matter under this Act terminates but no longer. The matter of freedom of association, namely the rights of employees, employers and independent contractors in the State to join an industrial association of their choice, or not to join such an association, to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as the day on which the reference of that matter under this Act terminates but no longer. the State within a work classification The matter of the setting and adjusting of minimum wages for that, employees immediately before the commencement of this sub-section is a declared work classification under the Employee Relations Act 1992, or has been declared, by the Commission within the meaning of that Act, to be an interim work classification, who are not subject to an award or agreement under the Commonwealth Act, to the extent to which that matter is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as the day on which the reference of that matter under this Act terminates but no longer. The matter of attempting to settle, conciliate or arbitrate, or exercising any other power in relation to, an industrial matter or industrial dispute, being an industrial matter or industrial dispute that arose before the commencement of Part 3 and in relation to which the Employee Relations Commission of Victoria exercised, or could have exercised, powers (other than an industrial matter or industrial dispute in respect of which that Commission in Full Session had made a decision before that commencement), to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Commonwealth for a period commencing on the day on which this sub-section commences and ending on the day fixed under or by section 6 as Callinan the day on which the reference of that matter under this Act terminates but no longer. 4A. Further reference – common rules The matter of the making of an award or order as, or declaring any term of an award or order to be, a common rule in the State for an industry, but so as not to exclude or limit the concurrent operation of any law of the State, to the extent to which it is not otherwise included in the legislative powers of the Commonwealth, is referred to the Parliament of the Commonwealth for a period commencing on the day on which section 52 of the Federal Awards (Uniform System) Act 2003 commences and ending on the day fixed under sub-section (2) as the day on which the reference of that matter under this Act terminates but no longer. The Governor in Council, by proclamation published in the Government Gazette, may fix a day as the day on which the reference under sub-section (1) terminates. The matter referred to the Parliament of the Commonwealth by sub-section (1) is so referred subject to the Commonwealth of Australia Constitution Act and pursuant to section 51(xxxvii) of that Act." The matters expressly excluded from the reference are these: "5. Matters excluded from a reference (1) A matter referred by a sub-section of section 4 or 4A does not include – (a) matters pertaining to the number, identity, appointment (other than terms and conditions of appointment) or discipline (other than matters pertaining to the termination of employment) of employees, other than law enforcement officers, in the public sector; (b) matters pertaining to the number, identity, appointment (other than matters pertaining to terms and conditions of appointment not referred to in this paragraph), probation, promotion, transfer from place to place or position to position, physical or mental fitness, uniform, equipment, discipline or termination of employment of law enforcement officers; Callinan (c) matters pertaining to the number or identity of employees in the public sector dismissed or to be dismissed on grounds of redundancy; (d) matters pertaining to the following subject matters – workers' compensation; superannuation; (iii) occupational health and safety; apprenticeship; long service leave; days to be observed as public holidays; (vii) equal opportunity – but not so as to prevent the inclusion in awards or the Commonwealth Act of agreements made under provisions in relation to those matters to the extent to which the Commonwealth Act, as enacted as at 30 November 1996 (whether or not in force), allows such awards or agreements to include such provisions; (f) matters pertaining to Ministers, members of the Parliament, judicial officers or members of administrative tribunals; (g) matters pertaining to persons holding office in the public sector to which the right to appoint is vested in the Governor in Council or a Minister; (h) matters pertaining to persons holding senior executive offices in the service of a Department within the meaning of the Public Sector Management Act 1992; matters pertaining to persons employed at the higher managerial levels in the public sector; matters pertaining to persons employed as ministerial assistants or ministerial advisers in the service of Ministers; (k) matters pertaining to persons holding office Parliamentary officers; Callinan matters pertaining employees of a body as a result of a restructure by an Act; transfer or redundancy of the (m) matters pertaining to the duties of employees if a situation of emergency is declared by or under an Act or an industry or project is, by or under an Act, declared to be a vital industry or vital project and whose work is directly affected by that declaration. Insofar as a matter specified in sub-section (1) of this section does not fall within the terms of a sub-section of section 4 or 4A, sub- section (1) of this section must be taken to have been enacted for the avoidance of doubt." Section 898 of the Act provides that the Act is intended to apply to the exclusion of all Victorian laws which relate (i) to employment generally and (ii) to one or more of the matters referred to the Commonwealth by Victoria. The Commonwealth would seem to be seeking to engage s 109 of the Constitution by s 898 of the Act, which is as follows: "Additional effect of Act – exclusion of Victorian laws This Act is intended to apply to the exclusion of all the following laws of Victoria so far as they would otherwise apply in relation to an employee or employer: a law of Victoria that applies to employment generally and relates to one or more of the following matters: about matters pertaining agreements the relationship between an employer or employers in Victoria and an employee or employees in Victoria; (ii) minimum terms and conditions of employment (other than minimum wages) for employees in Victoria; (iii) setting and adjusting of minimum wages employees in Victoria within a work classification; for termination, or proposed employment of an employee in Victoria; termination, of the freedom of association; a law of Victoria that is prescribed by regulations made for the purposes of this paragraph. Callinan Victorian laws that are not excluded (2) However, subsection (1) does not apply to a law of Victoria so far the law deals with the prevention of discrimination and is neither a State or Territory industrial law nor contained in such a law; or the law is prescribed by the regulations as a law to which subsection (1) does not apply. Definitions In this section: freedom of association has the same meaning as in subsection 4(6) of the Commonwealth Powers (Industrial Relations) Act 1996 of Victoria. minimum terms and conditions of employment has the same meaning as in subsection 4(4) of the Commonwealth Powers (Industrial Relations) Act 1996 of Victoria. minimum wage has the same meaning as in subsection 4(7) of the Commonwealth Powers (Industrial Relations) Act 1996 of Victoria. work classification has the same meaning as in section 865. Note: See also clause 87 of Schedule 6 (common rules in Victoria), which has effect despite any other provision of this Act." to be referred for I have set out some of the provisions of the Victorian Act to show just how much needed the consensual enlargement of Commonwealth industrial power. That the Commonwealth appears to have accepted that Victorian legislation and s 51(xxxvii) of the Constitution were necessary to achieve this end, and that the Commonwealth did not seek to achieve it by exercising power under s 51(xx) are not matters of which very much may be made. They do, however, again provide some indication of informed legislators' and their legal advisors' thinking, both State and federal, on the topics of State and Commonwealth powers as recently as 1996. Victoria submits that if s 898 is not supported by the Commonwealth's power to make laws with respect to "matters referred to the Parliament of the Callinan Commonwealth by the Parliament or Parliaments of any State or States"1211, the section is invalid, there being no other source of power to support it. Victoria acknowledges that when a State refers power the Commonwealth, the Commonwealth and the State have concurrent power in relation to the matter1212, and, to the extent that the Commonwealth intends to "cover the field", s 109 of the Constitution will apply to render the State law or laws inoperative1213. Victoria makes the submission, however, that because its referral excluded a number of matters, the Commonwealth does not have the power to legislate comprehensively even over the matters specifically referred, because there may be some overlap. The submission is this: "In the present case, the Referral Act[1214] excludes a number of matters from the scope of the matters referred to the Parliament of the Commonwealth; the Referral Act does not refer a power to legislate comprehensively or exhaustively on the matters identified in ss 4 and 4A. It follows that it is not open to the Commonwealth Parliament to legislate comprehensively or exhaustively on those matters, or to express an intention to exclude State laws on such matters, and the expression of this intention is invalid." This submission may be correct. It is not however necessary for me to reach a concluded view about it. Victoria makes a that s 898 impermissibly curtails, or interferes with, the capacity of the State of Victoria to function as a government1215. Victoria submits that s 898 of the Act: further or alternative submission, 1211 Constitution, s 51(xxxvii). 1212 Graham v Paterson (1950) 81 CLR 1 at 19 per Latham CJ, 22 per McTiernan J, 24-25 per Williams J, 25 per Webb J, 26 per Fullagar J. Windeyer J made a similar observation in Airlines of NSW Pty Ltd v New South Wales (1964) 113 CLR 1 at 52. 1213 Wenn v Attorney-General (Vict) (1948) 77 CLR 84 at 108-110 per Latham CJ, 114 per Rich J, 120 per Dixon J, 122 per McTiernan J. ie the Commonwealth Powers (Industrial Relations) Act 1996 (Vic). 1215 Austin v The Commonwealth (2003) 215 CLR 185 at 219 [28] per Gleeson CJ, 249 [124] per Gaudron, Gummow and Hayne JJ, 281-282 [223]-[225] per McHugh J, 300-301 [280]-[281] per Kirby J. Callinan "purports to exclude laws of Victoria relating to the employment of persons at the higher levels of government, including Ministers, ministerial assistants and advisers, head of departments and high level statutory office holders, parliamentary officers and judges1216". Victoria also contends that s 898(1) would, if valid, exclude various provisions of the Juries Act 2000 (Vic), which, for example, require employers to pay make-up pay1217, and create offences for terminating or threatening to terminate employment because of jury service1218. The Commonwealth submits that s 898 has application only to the extent of the powers referred to it by Victoria. In particular, the Commonwealth points to s 859 of the Act, which provides: "Part only has effect if supported by reference A provision of this Part (other than paragraph 862(b) or Division 11 or 12) has effect only for so long, and in so far, as the Commonwealth Powers (Industrial Relations) Act 1996 of Victoria refers to the Parliament of the Commonwealth a matter or matters that result in the Parliament of the Commonwealth having sufficient legislative power for the provision so to have effect." The Commonwealth submits that s 859 ensures that s 898 does not purport to operate in relation to matters beyond the scope of powers referred to the Commonwealth. The Commonwealth's submission is this: "In this case, the Commonwealth accepts that the referral does not refer a power to legislate exhaustively in respect to the matters identified in ss 4 and 4A of the Referral Act because of the exclusions in s 5 of that Act. The Commonwealth cannot make laws with respect to the excluded matters in s 5 of the Referral Act and does not purport to do so. It can, however, legislate exhaustively with respect to the referred subject matter (the ss 4 and 4A matters read down by reference to the s 5 matters) and exclude Victorian law in that field. This is what s 898 does." The Commonwealth submits, further, that the Act does not interfere impermissibly with the essential functions of Victoria's government, principally 1216 cf Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 at 1217 Section 52. 1218 Sections 76 and 83. Callinan because the express exceptions found in Victoria's reference of power protect the essential functions of Victoria's government. To the extent that the Victorian Juries Act may be affected, the Commonwealth says: "Just because a law may pertain to the essential functions of government does not mean that it impermissibly interferes with a State government within the meaning of the Melbourne Corporation principle. ... The laws in question go only to entitlements to payment and prohibition on termination. They do not undermine the jury system or the ability of Victoria to empanel juries as necessary. Furthermore, the laws are excluded only in their application to employees in Victoria who are not covered by s 5 of the [Referral] Act." In my opinion the Act, despite the reference of power by Victoria, is invalid to the extent at least of Victoria's challenge to it. This is so for the same reasons as lead me to conclude against validity generally. PART X. THE DIFFERENT POSITION OF THE TERRITORIES I need not delay for long on the question of the validity of the Act under the territories power. It may be, as Kirby J says1219, that the power of the Commonwealth to make laws for the government of any territory, including in relation to industrial affairs, stands apart, is relevantly plenary and is not subject to any implication or limitation imposed by s 51(xxxv). Like Kirby J, however, I agree that it would be preferable to dispose of the precise scope of the territories power in relation to s 51(xxxv) in proceedings in which that question is essential for the disposition of an actual case. I would say this however. Whatever the ambit of federal power in relation to industrial affairs may be, on no view should the Act or any like Act be allowed to be used as a Trojan horse for the invasion of State industrial powers by the device of a territorial connexion by reason merely of, for example, incorporation in a Territory, or some other slight connexion of a Territory with the corporation: the reality and substance of any employment in question, both as to locality of it, and matters closely related thereto, should be determinative of the sufficiency or otherwise of territorial connexion1220. In his Honour's reasons for judgment, Kirby J poses the question whether it is feasible or necessary to dissect provisions of the Act and to judge their validity on various of the constitutional underpinnings now suggested by the Commonwealth. To do that would be to require the Court, among other things, 1219 Reasons of Kirby J at [460(2)]. 1220 See Lamshed v Lake (1958) 99 CLR 132 at 141-146 per Dixon CJ. Callinan to identify any "accidental bullseyes" that the Commonwealth may have hit, and to say whether unintended results have been achieved, that is, to hold that although the Commonwealth may have sought but failed to engage the corporations power, a section or sections of the Act could have been validly enacted under another power or powers. But as Kirby J points out, the measures were put to the Parliament and enacted as ones to be integrated with some of the preceding legislation, designed overall to change substantially the foundation and approach to federal workplace relations law1221. I agree with his Honour that it accordingly is appropriate to take "the resulting legislative 'package' at face value, and to treat it as an integrated endeavour, intended to stand or fall in its entirety"1222. The joint reasons are to that effect in invalidating no provision of As Kirby J holds1224, it is not the function of this Court to save bits and pieces of the new law. I agree generally with his Honour's reasons for rejecting the submissions of the Commonwealth that the Court may and should dissect those sections which might be valid, standing alone, or in a different context, on the basis of the injunction in s 14 of the Act itself, or s 15A of the Acts Interpretation Act 1901 (Cth), for validity under s 51(xx) of the Constitution or otherwise. There is also this, as Windeyer J said in Rocla Pipes1225: "The question whether an enactment truly answers to the description of a law with respect to a given subject matter must be decided as it arises in any particular case in reference to the facts of that case." This Court has no relevant facts before it. PART XI. SUMMARY OF CONCLUSIONS The Amending Act is invalid. The reasons in summary why this is so are these. The Constitution should be construed as a whole and according to the principles of construction that I have stated in these reasons1226. 1221 Reasons of Kirby J at [460(2)], [584]-[586]. 1222 Reasons of Kirby J at [590]. 1225 (1971) 124 CLR 468 at 512. 1226 See Pt VI of these reasons. Callinan The Amending Act was presented and enacted as a comprehensive integrated measure containing generally interdependent provisions. (iii) The substance, nature and true character of the Amending Act is of an Act with respect to industrial affairs. (iv) The power of the Commonwealth with respect to industrial affairs is a power in relation to "conciliation and arbitration for the prevention and settlement of industrial disputes extending beyond the limits of any one State" and not otherwise (except for Commonwealth employment and other presently not relevant purposes). As the jurisprudence of this Court shows, that power is a very large one. Much can properly be characterized as preventative of a relevant industrial dispute. The corporations power has nothing to say about industrial relations or their regulation by the Commonwealth. To the extent, if any, that s 51(xx) might otherwise appear to confer such power, it must be subject to the implied negative restriction imposed by s 51(xxxv). (vi) The corporations power is concerned with the foreign, trading and financial activities and aspects of corporations, the precise limits of which it is unnecessary to decide in this case. In Australia, history, the founders, until 1993 the legislators who have followed them, and this Court over 100 years, as Kirby J has pointed out1227, have treated industrial affairs as a separate and complete the Commonwealth's total measure of power over them, except in wartime. topic, and s 51(xxxv) as defining (vii) To give the Act the valid operation claimed by the Commonwealth would be to authorize it to trespass upon essential functions of the States. This may not be the decisive factor in the case but it at least serves to reinforce the construction of the Constitution which I prefer, that industrial affairs within the States, whether of corporations or of natural persons, are for the States, and are essential for their constitutional existence. (viii) The validation of the legislation would constitute an unacceptable distortion of the federal balance intended by the founders, accepted on many occasions as a relevant and vital reality by Justices of this Court, and manifested by those provisions of the Constitution to which I have referred, and its structure. I would make the same orders as Kirby J. 1227 Reasons of Kirby J at [428], [431]-[442].
HIGH COURT OF AUSTRALIA MINISTER FOR IMMIGRATION AND BORDER PROTECTION APPELLANT AND EFX17 RESPONDENT Minister for Immigration and Border Protection v EFX17 [2021] HCA 9 Date of Hearing: 4 December 2020 Date of Judgment: 10 March 2021 ORDER Appeal dismissed. On appeal from the Federal Court of Australia Representation G T Johnson SC with B D Kaplan for the appellant (instructed by Clayton Utz) A M Mitchelmore SC with D K Fuller for the respondent (instructed by Prisoners' Legal Service Inc) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Minister for Immigration and Border Protection v EFX17 Immigration – Cancellation of protection visa – Notice of cancellation – Where delegate of Minister cancelled respondent's visa under s 501(3A) of Migration Act 1958 (Cth) – Where pursuant to duties in s 501CA(3) letter from delegate and enclosures sent explaining decision to cancel respondent's visa and opportunity to make representations about revoking decision – Where letter and enclosures given to respondent by corrective services officer – Where letter incorrectly stated date on which respondent taken to have received notice – Whether Minister complied with duty to "give" written notice and particulars and "invite" representations under s 501CA(3) – Whether capacity of respondent to understand written notice, particulars, and invitation relevant to whether duties in s 501CA(3) were performed – Whether Minister or delegate required personally to perform duties in s 501CA(3) – Whether Minister failed to invite representations as letter did not specify period within which to make representations in accordance with Migration Regulations 1994 (Cth). Words and phrases – "capacity to understand", "deliver", "give", "in the way that the Minister considers appropriate in the circumstances", "incapacity", "invite", "method of delivery", "notice", "ordinary meaning", "personally to perform", "requesting formally", "service", "substantive content", "within the period and in the manner ascertained in accordance with the regulations". Migration Act 1958 (Cth), ss 496, 497, 501(3A), 501CA(3). Migration Regulations 1994 (Cth), regs 2.52, 2.55. KIEFEL CJ, GAGELER, KEANE, EDELMAN AND STEWARD JJ. Introduction This appeal concerns the meaning and operation of s 501CA(3) of the Migration Act 1958 (Cth), which requires the Minister to give a person whose visa has been cancelled particular information and an invitation to make representations within the period and in the manner ascertained in accordance with the Migration Regulations 1994 (Cth). The Minister appeals from a decision of the Full Court of the Federal Court of Australia, which held by majority that (i) the sub-section required that the recipient be capable of understanding the information and invitation and (ii) the information and invitation be given to the recipient by the Minister, or the Minister's delegate, personally. For the reasons below, the Minister's grounds of appeal on these two issues should be upheld. But the appeal should be dismissed on the basis of the respondent's notice of contention; the decision of the Full Court should be upheld because the invitation to make representations did not provide a way to ascertain the period within which the representations were required to be made by the Migration Regulations. Background The respondent to this appeal, EFX17, is a citizen of Afghanistan. He arrived in Australia in 2009, and on 16 December 2009 he was granted a protection visa. In 2016, he was convicted of the offence of committing acts intended to cause grievous bodily harm under s 317 of the Criminal Code (Qld). He was sentenced to seven years' imprisonment. On 3 January 2017, a delegate of the Minister made a decision to cancel the respondent's visa under s 501(3A) of the Migration Act. This decision was described in a four-page letter from the delegate of the Minister to the respondent together with "enclosures". The enclosures accompanying the letter included an "Important Information sheet", a "Revocation Request Form", a "Personal Circumstances Form", forms for "Advice by a migration agent/exempt person of providing immigration assistance" and "Appointment or withdrawal of an authorised recipient", information about legal aid assistance in Australia, provisions of the Migration Act and Migration Regulations, and other information. The letter from the delegate was dated 3 January 2017. In the letter, the delegate explained, among other things and by reference to various provisions of the Migration Act, that under s 501(3A) of the Migration Act the Minister was required to cancel the respondent's visa because the delegate was satisfied that the respondent had a "substantial criminal record", having satisfied the requirement of being sentenced to a term of imprisonment of 12 months or more1. In the letter, the delegate also explained that the respondent had an opportunity to make representations about revoking the decision to cancel his visa. The delegate said, further, that the representations "must be made in accordance with the instructions outlined below". Those instructions included a section entitled "Time-frame to make representations about revocation". In that section it was explained that representations must be made within the prescribed timeframe, which was said to be "within 28 days after you are taken to have received this notice". It was also said: "As this notice was transmitted to you by email, you are taken to have received it at the end of the day it was transmitted." The delegate's letter and the enclosures were sent by the delegate to the Brisbane Correctional Centre as attachments to an email sent at 2.51 pm on 3 January 2017. The body of the email emphasised the importance and urgency of providing the documents to the respondent and asked for the respondent to complete a formal notice acknowledging receipt or, alternatively, for the recipient of the email to acknowledge receipt. The letter and enclosures were handed to the respondent by an officer of the Queensland Department of Corrective Services on 4 January 2017. The case note that described the provision of the letter and enclosures to the respondent described a number of matters which the respondent was told orally, including that his visa had been cancelled due to his substantial criminal record and that he could request a revocation of the cancellation by writing to the Australian Border Force within 28 days. The author of the case note also observed that the respondent "advised that he can understand English while talking, but cannot read or write well. He also advised that he wishes to leave Australia and will not be seeking a revocation of the cancellation." The respondent signed the formal acknowledgement of receipt, and he dated that acknowledgement 4 January 2017. But although the respondent provided the formal acknowledgement of receipt of the letter and enclosures, it appears that he was confused about the contents. His native language is Hazaragi. He spoke broken English, his ability to read or write in English was limited, and See Migration Act 1958 (Cth), s 501(6)(a) read with s 501(7)(c). he had been suffering from a schizophrenic illness due to substance abuse and traumatic events at the hands of Taliban soldiers. A further case note entry on 4 January 2017 recorded that the respondent "expressed concern with reading and understanding the deportation documentation provided to him during the interview". In the further case note entry dated 4 January 2017, it was recorded that the respondent asked for assistance from another prisoner and from the Prisoners' Legal Service and requested a special phone call to enable him to speak with another prisoner. Although there is no record of whether any assistance was provided at that time, a representative from the Prisoners' Legal Service spoke with the respondent using an interpreter on 6 January 2017. The Prisoners' Legal Service was subsequently appointed to represent the respondent. On 9 June 2017, following enquiries by the Prisoners' Legal Service, and their receipt of documents relating to the respondent's application for a protection visa and the cancellation of it, the Prisoners' Legal Service wrote to the Department of Immigration and Border Protection ("the Department") requesting that the notice of cancellation of the respondent's visa be reissued because the respondent's capacity to understand the nature of the visa cancellation and revocation process was "significantly impaired". It was asserted that all the communications between the Prisoners' Legal Service and the respondent had been through the use of a Hazaragi interpreter but even with that interpreter the respondent had difficulty understanding advice and instructions on simple topics. On 15 August 2017, the Department wrote to the Prisoners' Legal Service advising that the notice of cancellation of the respondent's visa would not be reissued because it was "legally effective". Section 501CA of the Migration Act and related provisions Section 501CA(1) of the Migration Act provides that s 501CA applies if the Minister makes a decision ("the original decision") under s 501(3A) to cancel a person's visa. Section 501CA(3) provides: "As soon as practicable after making the original decision, the Minister must: give the person, in the way that the Minister considers appropriate in the circumstances: a written notice that sets out the original decision; and particulars of the relevant information; and invite the person to make representations to the Minister, within the period and in the manner ascertained in accordance with the regulations, about revocation of the original decision." Section 501CA(4) sets out conditions precedent for the Minister to revoke the original decision, including that "the person makes representations in accordance with the invitation". As s 501CA(3)(b) contemplates, the Migration Regulations provide for the period and manner in which the representations should be made. These requirements include that the representations must be made within 28 days after the person is given the written notice and the particulars2. The Migration Regulations also provide that the invitation to make representations to the Minister can be given by email3 or by handing it to the person4 and, if handed to the person, the person is taken to have received it at that time5. In relation to making a decision, s 496 of the Migration Act provides that the Minister may, by writing signed by him or her, delegate to a person any of the Minister's powers under the Migration Act. Section 497(2) confirms that if the Minister delegates the power to cancel visas, "the delegation does not require the delegate personally to perform any task in connection with the cancellation, except the taking of a decision in each case whether a visa should be cancelled". Section 497(3) relevantly provides: "Nothing in [s 497(2)] shall be taken to imply that: a person on whom a power is conferred by or under this or any other Act; or a delegate of such a person; 2 Migration Regulations 1994 (Cth), reg 2.52(2)(b). 3 Migration Regulations, reg 2.55(3)(d)(ii) read with regs 2.55(1)(a), 2.55(1)(c). 4 Migration Regulations, reg 2.55(3)(a) read with regs 2.55(1)(a), 2.55(1)(c). 5 Migration Regulations, reg 2.55(5). is required personally to perform all administrative and clerical tasks connected with the exercise of the power." The decisions of the Federal Circuit Court and the Full Court of the Federal Court The respondent commenced proceedings in the Federal Circuit Court of Australia seeking a declaration that the delivery of the letter, the written notice, did not comply with s 501CA(3) and a writ of mandamus to require the Minister to perform the duties in s 501CA(3) according to law. Before the Federal Circuit Court and before the Full Court of the Federal Court the Minister unsuccessfully contested the jurisdiction of the Federal Circuit Court to review the validity of the notice, but that issue was not raised in this Court. There was also no dispute that the delegate's letter to the respondent and its enclosures included the original decision and the particulars of the "relevant information"6. The respondent's submissions that the letter and enclosures did not comply with s 501CA(3) fell into essentially two categories. First, it was submitted that the Minister did not have regard to the facts that established the respondent's incapacity to understand the letter and enclosures. It was submitted that the Minister was required to have regard to circumstances of incapacity by the requirements in s 501CA(3) that the Minister "give" the notice to the respondent, give "particulars", and "invite" the respondent to make representations and that this was to be done "in the way that the Minister considers appropriate in the circumstances". Secondly, the respondent submitted that the delivery of the letter and enclosures to the respondent did not comply with s 501CA(3) because the person who delivered them was not a delegate of the Minister under s 496 of the Migration Act. These submissions were not accepted by the Federal Circuit Court (Judge Egan)7. But an appeal to the Full Court of the Federal Court was allowed, by majority, for both reasons8. As to the issue concerning the capacity of the respondent to understand the letter and enclosures, Greenwood J (with whom Rares J generally agreed) held that the requirement in s 501CA(3) for the Minister 6 As defined in Migration Act, s 501CA(2). 7 EFX17 v Minister for Immigration and Border Protection (2018) 341 FLR 286. 8 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508. to "give" the notice and the particulars and to "invite" the representations contrasted with mere "service" of documents and imported an "irreducible minimum standard" of "giving" to which effect must be given "in the way the Minister considers appropriate (not at large, but rather 'in the circumstances')"9. Greenwood J concluded that in all the circumstances the Minister had not met the irreducible minimum standard of giving the respondent notice of the cancellation decision and the required particulars or of inviting the respondent to make representations about revocation of the original decision10. Although Greenwood J held that a factor of "real importance"11 was that it must have been apparent to the Department that the respondent suffered special disadvantage, his Honour's reasoning about the irreducible minimum standard did not require knowledge by the Department of all the respondent's circumstances. For instance, one of the circumstances upon which his Honour relied to conclude that the irreducible minimum standard had not been met was evidence of interactions between the respondent and the Prisoners' Legal Service on 6 January 2017 and 2 February 2017, which was not before the Minister at the time of his decision to cancel the visa12. Rares J added that the strict 28-day time limit for the person to make representations and the circumstance that the person receiving the notice, particulars and invitation will be in prison made it "essential" that the invitation is "intelligible, in fact" to the person to whom it is given13. Greenwood and Rares JJ also held that there had been a failure to comply with s 501CA(3) for the further reason that the Minister, or delegate, had not personally given the respondent the required notice, particulars, and invitation. 9 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 10 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 11 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 12 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 13 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at Their Honours held to be inapplicable the provision in s 497(2) that a delegate of the Minister with power to cancel visas was not required personally to perform any task in connection with the cancellation, except to decide whether a visa should be cancelled. Their reasoning was that the obligations to give notice and particulars and to invite representations were not "tasks" because they were "substantive obligation[s]" and did not involve "ordinary administrative procedure[s] of a formal nature"14. In the course of considering this delegation issue, Rares J also reasoned that there was a third instance of non-compliance with s 501CA(3). This was that the letter and enclosures did not make clear "when the 28 day time limit begins or ends"15. This issue was mentioned, but not decided, by Greenwood J16. Logan J dissented. His Honour applied the ordinary meanings of "give" and "invite" and concluded that there was no basis in the text of s 501CA(3) to "distinguish between classes of holders of cancelled visas" on the basis of matters such as education or literacy17. Although there might be extreme cases where particular knowledge of the Minister meant that the manner of delivery of the notice that he considered "appropriate in the circumstances" was legally unreasonable, this was not such a case18. His Honour also held that giving the notice and particulars and inviting the representations were tasks which did not need to be performed personally by the Minister or his delegate19. The conclusion of Logan J on these issues was correct. However, because of the issue raised by 14 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 15 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 16 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 17 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 18 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at 19 EFX17 v Minister for Immigration and Border Protection (2019) 273 FCR 508 at Rares J concerning the beginning and end of the 28-day time limit, which is contained in a notice of contention in this Court, the appeal should be dismissed. The relevance of the respondent's capacity to understand It was, rightly, common ground on this appeal that an implication, derived from an underlying assumption in s 501CA(3), is that the written notice, the particulars, and the invitation from the Minister would be expressed in English20. The Minister's first two grounds of appeal asserted that the majority of the Full Court erred in concluding that the Minister failed to "give" the respondent the notice and particulars and to "invite" the respondent to make representations, having regard to the circumstances of the respondent's literacy, capacity to understand English, mental capacity and health, and facilities available to him in custody. The starting point is the common or ordinary meanings of the verbs "give" and "invite" in s 501CA(3). Those common meanings are, respectively, to deliver or hand over21 and to request politely or formally22. The use of "give or deliver unto" in legislation has been described as the "exact equivalent" of "has been served on" in a context where a document "had come to the hands of the applicant"23. Section 28A of the Acts Interpretation Act 1901 (Cth) is also premised upon the assumption that verbs such as "give", when used in Commonwealth legislation, are alternatives to "serve" so that one manner in which giving a document can be satisfied is "by delivering it". The verbs "give" and "invite" connote only the performance of an act rather than the consequences of that performance such as the recipient's capacity to comprehend the content of the English notice given or the English invitation made. 20 Nguyen v Refugee Review Tribunal (1997) 74 FCR 311 at 325-326. See also the express requirements for the representations in response: Migration Regulations, 21 Macquarie Dictionary, 8th ed (2020), vol 1 at 653, "give", sense 1. 22 Macquarie Dictionary, 8th ed (2020), vol 1 at 812, "invite", sense 2. 23 Ex parte Portingell [1892] 1 QB 15 at 17. See also Capper v Thorpe (1998) 194 CLR 342 at 352 [21]; In re 88 Berkeley Road, NW9 [1971] Ch 648 at 652. As Logan J observed in his dissenting reasons, the same approach was taken by this Court in relation to provisions of the Migration Act requiring the Minister to "give" a statement to an applicant and to "notify" an applicant of a decision in WACB v Minister for Immigration and Multicultural and Indigenous Affairs24. Section 430D(2), as it was then, provided that if the Tribunal gives an oral decision on an application for review by an applicant who is in immigration detention then the Tribunal must "give" the applicant and the Secretary a copy of a particular statement within 14 days. Section 478(1)(b) required that an application for judicial review had to be lodged within 28 days of the applicant being "notified of the decision". The appellant in that case had been an unaccompanied minor in immigration detention who had no education and could neither read nor write in English or in his native language. Gleeson CJ, McHugh, Gummow and Heydon JJ held that the word "give" was not defined and that it bore its ordinary meaning requiring "physical delivery, not some act of constructive delivery of possession which, at general law, may suffice to transfer property in a chattel"25. Their Honours also rejected the submission that the appellant's lack of education and illiteracy meant that he could only be "notified of the decision" by a translation of the decision into a language which the appellant could understand. They said26: "The Act does not distinguish between notification given to a person in the position of the appellant and any other visa applicant. Nor does it distinguish between applicants with differing levels of education or literacy." When "giving" and "inviting" bear their ordinary meanings – respectively, of delivering and of requesting formally – with the implication that the delivery and request will be made in English, then it follows naturally that the expression "in the way that the Minister considers appropriate in the circumstances" is only concerned with the method of delivery and request rather than the content27. As senior counsel for the respondent properly accepted, a requirement that the (2004) 79 ALJR 94; 210 ALR 190. 25 WACB v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 79 ALJR 94 at 101 [37]; 210 ALR 190 at 199. 26 WACB v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 79 ALJR 94 at 102 [43]; 210 ALR 190 at 201. 27 See also Nguyen v Refugee Review Tribunal (1997) 74 FCR 311 at 320-321, 325. Minister consider the capacity of a person to understand the written notice or invitation would require more than physical delivery. The statutory context, including other provisions of the Migration Act, reinforces the conclusions that in s 501CA(3) the verbs "give" and "invite" bear their ordinary meaning and that the expression "the way that the Minister considers appropriate in the circumstances" concerns only the method of delivery or invitation rather than the substantive content. In the context of Pt 2, Div 3 of the Migration Act, concerning visas for non-citizens, ss 57(2)(a) and 57(2)(c) provide, in similar terms to s 501CA(3), that the Minister must "give particulars of the relevant information to the applicant in the way that the Minister considers appropriate in the circumstances" and that the Minister must "invite the applicant to comment on it". The assumption that merely requiring the Minister to give these particulars and to invite comment does not require the applicant to understand their contents is reflected in s 57(2)(b), which contains an additional requirement for the Minister to "ensure, as far as is reasonably practicable, that the applicant understands why it is relevant to consideration of the application". The same structure, providing for (i) the giving of information, (ii) the inviting of comment, and (iii) ensuring understanding as far as is reasonably practicable, is adopted in ss 120(2), 359AA(1), 359A(1), 424AA(1), and 424A(1). The approach of the majority of the Full Court was not limited to an implication that the Minister ensure, as far as is reasonably practicable, that the recipient understand the content of the written notice, the particulars, and the invitation. As explained above, the Full Court reached its conclusions about the respondent's lack of understanding by considering matters subsequent to the Minister's decision and matters of which the Minister might not have been aware. But even to draw a more limited implication from s 501CA(3) in the same terms as the express provisions above would go beyond attributing legal meaning to the statutory text28. It would also require consideration of the extent of the capacity of a recipient to understand material provided, identification of how limitations could be overcome, and the taking of steps to do so. The administrative difficulties that this would introduce would be in tension with the goal expressed in the Second Reading Speech of the Bill that introduced s 501CA(3) that the "measures 28 Taylor v Owners – Strata Plan No 11564 (2014) 253 CLR 531 at 556 [65]. See also proposed will ensure that the government can move quickly to take action against noncitizens who pose a risk to the Australian community"29. The majority of the Full Court sought to support an implication that the recipient must understand the contents of the notice, particulars and invitation by drawing an analogy with the observation of Hayne, Kiefel and Bell JJ in Minister for Immigration and Citizenship v Li30 that under s 360(1) of the Migration Act an invitation must "be meaningful, in the sense that it must provide the applicant for review with a real chance to present his or her case". But that sub-section concerns an invitation to "appear before the [Administrative Appeals] Tribunal to give evidence and present arguments relating to the issues arising in relation to the decision under review", a matter concerned with the "core function"31 of the Tribunal to review the decision. As their Honours said in Li, the invitation could not be an "empty gesture" such as a hearing scheduled by the Tribunal knowing that the applicant had not recovered from an incapacity so as to permit attendance. By contrast, it would never be an "empty gesture" under s 501CA(3) for the Minister to give written notice, particulars and an invitation in English, in any reasonable way that the Minister considers appropriate in the circumstances, where the notice and particulars contain the information required and the representations are invited within the period and in the manner ascertained in accordance with the Migration Regulations. Senior counsel for the respondent also relied upon particular features of the statutory context in which s 501CA(3) appears as supporting an implication relating to capacity of a person to understand the notice, particulars and invitation, including the circumstances: that the person is in prison; that the Minister's decision to revoke a person's visa is one to which the rules of natural justice do not apply32; that the sub-section provides for the first notice of a visa cancellation decision; and that the making of representations is a condition precedent for the 29 Australia, House of Representatives, Parliamentary Debates (Hansard), 24 September 2014 at 10327. (2013) 249 CLR 332 at 362 [61]. 31 Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123 at 1127 [18]; 259 ALR 429 at 434. 32 Migration Act, s 501(5). Minister to revoke the original decision33. All of these circumstances were accurately described. They emphasise the gravity of the consequences for a person who does not understand the notice, particulars and invitation provided. But they do not provide sufficient foundation for the implication, which is contrary to the ordinary meaning of the words of s 501CA(3). For these reasons, the majority of the Full Court erred in reasoning that the capacity of a person to understand the written notice, particulars, or invitation described in s 501CA(3) was relevant to whether the written notice and particulars had been given or whether the invitation to make representations had been made. In light of this conclusion, the Minister's third ground of appeal, which was an alternative to his first two grounds, does not arise. The third ground asserted that the respondent failed to discharge his onus of proving that the Minister had knowledge of the issues affecting the respondent's understanding and had failed to act upon that knowledge. Is the Minister or delegate required personally to perform the duties in s 501CA(3)? The Minister's final, and cumulative, ground of appeal is that the Full Court erred by failing to find that s 497(2) of the Migration Act ensures that the delegate who exercised the power to cancel the respondent's visa under s 501(3A) was not required personally to give the respondent the written notice, particulars, or invitation required by s 501CA(3). The duties upon the Minister in s 501CA(3) to give a written notice and particulars and to invite representations are not duties personally to do these acts but duties to ensure that the acts are done. They are matters that fall within the usual principle, based in part on administrative necessity, that "when a Minister is entrusted with administrative functions he may, in general, act through a duly authorized officer of his department"34. In contrast with the duties in s 501CA(3) of the Migration Act, without an express power of delegation the Minister's duty to cancel a visa under s 501(3A) would require personal performance by the Minister. It was common ground on 33 Migration Act, s 501CA(4)(a). 34 O'Reilly v State Bank of Victoria Commissioners (1982) 153 CLR 1 at 11, discussing Carltona Ltd v Commissioners of Works [1943] 2 All ER 560 at 563. See also at this appeal that the general power of delegation in s 496 empowers the Minister, by writing signed by him or her, to delegate the performance of the duty in s 501CA(3), which the Minister did. But this delegation did not require the delegate personally to perform the duties to give a written notice and particulars or personally to deliver the invitation to make representations any more than it required the Minister to do so. The general principle based in part on administrative necessity is extended by s 497(2), which permits a delegate to act through a duly authorised officer of the Department in the performance of any task in connection with the cancellation of a visa other than the taking of a decision to cancel the visa. The Explanatory Memorandum to the Migration Legislation Amendment Bill 1994 (Cth), which introduced s 497(2), provided that a purpose of the amendment was to "put beyond doubt that a delegation to cancel visas does not require the delegate to personally perform any task except taking the decision as to whether the visa should be cancelled"35. The reasoning of the majority of the Full Court that the reference to a "task" in s 497(2) is not to a "substantive obligation" but only to an administrative function finds no support in the text or purpose of that sub-section. The sub-section extends to all tasks in connection with the cancellation of a visa, not merely those that might be characterised as administrative or clerical. Section 497(3) further clarifies that s 497(2) goes beyond, and does not affect, the principle based in part on administrative necessity by providing that nothing in s 497(2) "shall be taken to imply" that the delegate "is required personally to perform all administrative and clerical tasks connected with the exercise of the power". Section 497(3) would not be necessary if s 497(2) extended only to administrative and clerical tasks. The duties in s 501CA(3) were "tasks" to be performed. They were tasks concerned with whether the cancellation of the respondent's visa should be revoked. Since the wide effect intended by the words "in connection with"36 extends the application of s 497(2) more broadly than those tasks involved in the original cancellation itself, the tasks relating to revocation of the cancellation were 35 Australia, House of Representatives, Migration Legislation Amendment Bill 1994, Explanatory Memorandum at 39 [173]. 36 See Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280 at in connection with the cancellation of the visa. This ground of appeal should also be allowed. The notice of contention: the incorrect time period By notice of contention, the respondent sought to uphold the decision of the Full Court on the ground that s 501CA(3) of the Migration Act required the Minister to invite the respondent to make representations "within the period and in the manner ascertained in accordance with the regulations" and that the letter did not do so. This issue was raised by Rares J during the course of oral argument in the Full Court and the views of Rares J were adopted by counsel for the respondent. The issue was decided in the respondent's favour by Rares J and mentioned, but not decided, by Greenwood J. It was not suggested in this Court that the issue could have been affected by any additional facts or evidence. In his submissions in this Court, the Minister relied only upon the act of physically handing the letter to the respondent as the act by which the notice was "given" to the respondent. A separate submission that the email sent on 3 January 2017 to the Brisbane Correctional Centre involved "giving" the notice to the respondent was made by the Minister in the Full Court but abandoned in oral argument in that Court. It was not pressed in this Court by the Minister, who acknowledged that the email had not been sent to the email address nominated or permitted by the respondent. It was common ground that if the letter and enclosures complied with s 501CA(3) then the 28-day period would have started to run from 4 January 2017 when the letter and enclosures were delivered, and not from 3 January 2017. The obligation in s 501CA(3)(b) of the Migration Act required the Minister to invite the respondent to make representations about revocation to the Minister "within the period and in the manner ascertained in accordance with the regulations". The letter from the delegate of the Minister contained an invitation to make representations in the manner ascertained in accordance with the regulations: for instance, it provided that the representations must be in writing and in English or accompanied by an English translation, referring to reg 2.52. And it correctly referred to the 28-day timeframe for making representations, which could not be extended. But in the absence of any manner of ascertaining that 28-day period, and by incorrectly saying that the respondent was "taken to have received [the letter] at the end of the day it was transmitted [by email]" (which was 3 January 2017), the letter did not invite representations "within the period ... ascertained in accordance with the regulations". The Minister submitted that s 501CA(3)(b) did not require the Minister to specify the date by which representations must be made and he submitted that the period during which representations must be made may be left to the respondent to determine. These submissions can be accepted. But the words of s 501CA(3)(b) which require the Minister to invite a person to make representations "within the period and in the manner ascertained in accordance with the regulations" also require that there be sufficient information on the face of the invitation to permit the person to determine this period correctly. This conclusion is further supported by the condition upon the Minister's power to revoke the cancellation decision that representations be made within the prescribed time limit. It can hardly be supposed that Parliament intended that a person whose visa had been cancelled would not be given the information that would reveal the date by which representations must be made if the person is to avoid the strict consequences of failing to make representations37. For these reasons, an invitation to make representations "within the period ... ascertained in accordance with the regulations" must crystallise the period either expressly or by reference to correct objective facts from which the period can be ascertained on the face of the invitation such as "28 days from the day that you are handed this document". The invitation in the letter from the delegate of the Minister did not do so. The notice of contention should therefore be upheld. Conclusion The appeal should be dismissed. The Minister undertook to pay the costs of the respondent in this Court. 37 Public Transport Commission (NSW) v J Murray-More (NSW) Pty Ltd (1975) 132 CLR 336 at 350.
HIGH COURT OF AUSTRALIA FORREST & FORREST PTY LTD APPELLANT AND STEPHEN McKENZIE WILSON & ORS RESPONDENTS Forrest & Forrest Pty Ltd v Wilson [2017] HCA 30 17 August 2017 ORDER Appeal allowed. Set aside the orders of the Court of Appeal of the Supreme Court of Western Australia made on 7 July 2016 and 2 September 2016 and, in their place, order that: the appeal be allowed; orders 4 and 5 of Allanson J made on 4 June 2015 be set aside and, in their place, order that: it be declared that the first respondent did not have jurisdiction to hear the second respondent's application for mining lease 08/478 or the fourth respondent's application lease 08/479 as each application was not accompanied by a mineralisation report referred to in s 74(1)(ca)(ii) of the Mining Act for mining it be declared that the first respondent did not make a valid report and recommendation to the Minister under s 75(5)(c) of the Mining Act 1978 (WA) in relation to the second respondent's application for mining lease 08/478 or the fourth respondent's application for mining lease 08/479; (iii) a writ of certiorari be issued quashing the purported report and recommendation made by first respondent under s 75(5)(c) of the Mining Act 1978 (WA) in relation to the second respondent's application for mining lease 08/478 and in relation to the fourth respondent's application for mining lease 08/479; and the the second, third and fourth respondents pay the applicant's costs of the judicial review application; and the second and fourth respondents pay the appellant's costs of the appeal. The second and fourth respondents pay the appellant's costs of the appeal to this Court. On appeal from the Supreme Court of Western Australia Representation A J Myers QC with A J Papamatheos for the appellant (instructed by Submitting appearances for the respondents P D Quinlan SC, Solicitor-General for the State of Western Australia with T C Russell for the Attorney-General for the State of Western Australia, appearing as amicus curiae (instructed by State Solicitor's Office (WA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Forrest & Forrest Pty Ltd v Wilson Mining – Application for mining lease – Statutory conditions – Proper construction of s 74(1)(ca)(ii) of Mining Act 1978 (WA) – Where statutory regime conferred power on executive government of State to grant exclusive rights to exploit resources of State – Where s 74(1)(ca)(ii) provided application for mining lease "shall be accompanied by" mineralisation report – Effect of non-compliance with s 74(1)(ca)(ii) – Whether non-compliance with s 74(1)(ca)(ii) invalidated exercises of jurisdiction to progress application through to grant. Words and phrases – "condition precedent", "indefeasibility", "informality", "irregularity", "jurisdictional error", "shall be accompanied by". Mining Act 1978 (WA), ss 71, 74, 74A, 75, 116(2). KIEFEL CJ, BELL, GAGELER AND KEANE JJ. At issue in this appeal is whether non-compliance with provisions of the Mining Act 1978 (WA) ("the Act") in relation to matters preliminary to the grant of a mining lease would render invalid mining leases granted by the Minister. The Court of Appeal of the Supreme Court of Western Australia rejected the contention of the appellant ("Forrest") that the provisions in question imposed conditions precedent to the valid grant of a mining lease1. Whether the Court of Appeal was correct in this regard is an issue of statutory construction informed by this Court's decision in Project Blue Sky Inc v Australian Broadcasting Authority2. Before proceeding further, it is necessary to record that the second to fourth respondents, who made the impugned applications for mining leases, filed submitting appearances, save as to the issue of costs. The Attorney-General for Western Australia was given leave to appear as amicus curiae. Pursuant to that leave, the Solicitor-General for Western Australia appeared on behalf of the Attorney-General to put submissions contrary to those advanced on behalf of Forrest. The legislation The appeal concerns the proper construction of the Act as it stood prior to the commencement of the Mining Amendment Act 2012 (WA). It is convenient to summarise the material provisions of the Act before proceeding to a consideration of the facts of the case and the reasons of the courts below. Section 71 of the Act empowered the Minister to grant a mining lease. It was in the following terms: "Subject to this Act, the Minister may, on the application of any person, after receiving a recommendation of the mining registrar or the warden in accordance with section 75, grant to the person a lease to be known as a mining lease on such terms and conditions as the Minister considers reasonable." The Solicitor-General submitted that the only true conditions precedent to the Minister's power to make a grant under s 71 were the making of an 1 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 82 [1], 91 [45]. (1998) 194 CLR 355; [1998] HCA 28. application and the receipt by the Minister of a recommendation from the mining registrar or warden. It is to be noted, however, that the Minister's power to make a grant of a mining lease upon satisfaction of these conditions was expressed to be "[s]ubject to this Act", confirming that the Act created the regime whereby a mining lease might be granted by the Minister. There is a line of authority that has previously been applied in Western Australia3 (but which was not referred to by the Court of Appeal) which supports an approach to statutory construction whereby no effective grant of rights to exploit the mineral resources of the State may be made, except upon compliance with the statutory regime which provides for the making of the grant. In the present case, the principal elements of that regime were ss 74, 74A and 75 of the Act. Section 74 of the Act made provision for the making of an application for a mining lease. In this regard, the section began relevantly: "(1) An application for a mining lease – shall be in the prescribed form; and shall be accompanied by the amount of the prescribed rent for the first year of the term of the lease or portion thereof as prescribed; and shall be accompanied by the prescribed application fee; and shall be accompanied by – a mining proposal; or a statement in accordance with subsection (1a) and a mineralisation report prepared by a qualified person; and 3 Nicholas v Western Australia [1972] WAR 168 at 172, 174. See also Watson's Bay and South Shore Ferry Co Ltd v Whitfield (1919) 27 CLR 268; [1919] HCA 69; Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 533; Mabo v Queensland [No 2] (1992) 175 CLR 1 at 63-64; [1992] HCA 23; Wik Peoples v Queensland (1996) 187 CLR 1 at 173-174; [1996] HCA 40; Western Australia v Ward (2002) 213 CLR 1 at 121-122 [167]; [2002] HCA 28. shall be lodged in the prescribed manner. (1AA) Instead of accompanying an application for a mining lease under subsection (1)(ca), a mining proposal may be lodged within the prescribed time and in the prescribed manner and, if so lodged, is to be treated for the purposes of this Division as a mining proposal that accompanied the application for the mining lease under section While these proceedings do not involve the operation of sub-s (1AA), it may be noted that, insofar as sub-s (1AA) contemplated that the mining proposal referred to in sub-s (1)(ca)(i) need not accompany an application for a mining lease, it stands in contrast with the requirement of sub-s (1)(ca)(ii). The requirement that an application be accompanied by the statement referred to in sub-s (1)(ca)(ii) was elaborated in sub-s (1a), which was in the following terms: "The statement referred to in subsection (1)(ca)(ii) shall set out information about the mining operations that are likely to be carried out in, on or under the land to which the application relates including information as to – (a) when mining is likely to commence; the most likely method of mining; and the location, and the area, of land that is likely to be required for the operation of plant, machinery and equipment and for other activities associated with those mining operations." The material before the Court does not show that this statement (for simplicity, a "mining operations statement") was ever lodged by the applicants. Forrest did not make any complaint on this ground; the focus of its concern was upon the late lodgement of the mineralisation report referred to in s 74(1)(ca)(ii). For the purposes of s 74, and sub-s (1)(ca)(ii) in particular, sub-s (7) of s 74 provided relevantly: "mineralisation report means a report that sets out details of exploration results in respect of a deposit of minerals located in, on or under the land to which the application relates, including details of – the type of minerals located in, on or under that land; the location, depth and extent of those minerals and the way in which that extent has been determined; and analytical results obtained from samples of those minerals". Section 74(2) dealt with the provision of further information by an applicant in support of its application. Importantly, s 74 required notice of the application to be given by the applicant to the owner and occupier of the land over which the mining lease was sought, and a mineralisation report and mining operations statement to be made available for public inspection. As to the notice, s 74(3) provided: "Within the prescribed period the applicant shall serve such notice of the application as may be prescribed on the owner and occupier of the land to which the application relates and on such other persons as may be prescribed." The "prescribed period" for the service of notice of the application in conformity with s 74(3) was stated in reg 64A(1) of the Mining Regulations 1981 (WA). It required the applicant to serve notice on the owner and occupier in the prescribed form "within 14 days of the lodging of the application to which the notice relates". Section 74(5) provided for public access to information concerning the mining lease application in the following terms: "The Director General of Mines shall ensure that – any document referred to in subsection (1)(ca) that accompanies the application; and any document furnished by the applicant in response to a request under subsection (2), are made available for public inspection at reasonable times." Section 74A required the provision of a report by the Director, Geological Survey to the Minister as to whether there was significant mineralisation in, on or under the land the subject of the application. Section 74A provided: If an application for a mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii), the Director, Geological Survey shall give the Minister a report as to whether or not there is significant mineralisation in, on or under the land to which the application relates. For the purposes of preparing the report, the Director, Geological Survey may request the applicant to provide further information in relation to matters dealt with in the mineralisation report. The report shall be based solely on information contained in the mineralisation report and any further information provided by the applicant in response to a request under subsection (2). The Director, Geological Survey shall give a copy of the report to the mining registrar and the warden. The Director General of Mines shall ensure that the report is made available for public inspection at reasonable times. The regulations may require a person to pay a fee specified in the regulations – for inspecting the report; or for obtaining a copy of the report or any part of it. In this section – mineralisation report means accompanied the application." the mineralisation report that It is to be noted that the power and duty of the Director, Geological Survey to give the Minister a report on mineralisation in the subject land arose under s 74A(1) if the application was accompanied by the documentation referred to in s 74(1)(ca)(ii). The Director, Geological Survey had neither an obligation nor a power to provide the report referred to in s 74A(1) if an application for a mining lease was not accompanied by a mineralisation report. It is also pertinent to note that s 74A(5) required the report of the Director, Geological Survey to be made available for public inspection. Insofar as members of the public might be interested in the proposed grant of a mining lease, the report so made available was a vital source of information. Section 75 provided for the determination by the warden of an application for a mining lease, following the expiration of the period for the lodgement of objections. In relation to the right of objection, s 75 provided relevantly: "(1) A person who wishes to object to the granting of an application for a mining lease shall lodge a notice of objection within the prescribed time and in the prescribed manner. (1a) A person is not entitled to lodge a notice of objection if the basis for the objection is that there is no significant mineralisation in, on or under the land to which the application relates." The following six sub-sections established a two-track system for the progression of an application to the Minister: unopposed applications proceeding via the mining registrar, and opposed applications proceeding via the warden. Where no notice of objection had been lodged within the prescribed time, sub-ss (2), (2a) and (3) of s 75 made provision for the mining registrar to report to the Minister. These provisions were in the following terms: "(2) Subject to subsection (2a), if no notice of objection is lodged within the prescribed time, or any notice of objection is withdrawn, the mining registrar shall, unless subsection (4)(b) applies, forward to the Minister a report which recommends the grant or refusal of the mining lease and sets out the reasons for that recommendation. If the application for the mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii), the mining registrar shall not forward a report under subsection (2) unless – the mining registrar has received a copy of the section 74A report in relation to the application; and the section 74A report states that there is significant mineralisation in, on or under the land to which the application relates. The mining registrar shall – recommend the grant of the mining lease if satisfied that the applicant has complied in all respects with the provisions of this Act; or recommend the refusal of the mining lease if not so satisfied." It is to be noted that, in s 75(3), the question whether the applicant had "complied in all respects with the provisions of this Act" was a matter to be determined to the satisfaction of the mining registrar. In this regard, reference to the provisions of s 75 which dealt with cases where there had been an objection lodged shows that no similar provision was to be found in relation to the powers of the warden. Correspondingly, sub-ss (4), (4a) and (5) provided for a hearing by the warden where an objection had been lodged, with sub-s (4) providing: "Subject to subsection (4a), if a notice of objection – is lodged within the prescribed time; or is not lodged within the prescribed time but is lodged before the mining registrar has forwarded a report to the Minister under subsection (2) and the warden is satisfied that there are reasonable grounds for late lodgment, and the notice of objection is not withdrawn, the warden shall hear the application for the mining lease on a day appointed by the warden and may give any person who has lodged such a notice of objection an opportunity to be heard." It may be noted that s 75(4)(b) made express provision for the warden to excuse non-compliance by an objector with the time limits prescribed for the lodging of an objection. This express provision is to be contrasted with the absence of any provision authorising the warden to excuse non-compliance with any of the provisions of s 74 of the Act. It is also to be noted that the provision for a hearing made by s 75(4) was expressed to be subject to s 75(4a), which was in the following terms: "If the application for the mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii), the warden shall not hear the application unless – the warden has received a copy of the section 74A report in relation to the application; and the section 74A report states that there is significant mineralisation in, on or under the land to which the application relates." As a matter of ordinary parlance, one would understand s 75(4a) as stating, in pars (a) and (b), the conditions upon which the warden was authorised to hear an application. But the only kind of application which the warden was able to hear, if those conditions were satisfied, was an application accompanied by the documentation referred to in s 74(1)(ca)(ii). An application not so accompanied was outside the statutory regime. Section 75(5) provided for the warden to make a recommendation to the Minister. It was in the following terms: "The warden shall as soon as practicable after the hearing of the application forward to the Minister for the Minister's consideration – the notes of evidence; any maps or other documents referred to in the notes of evidence; and a report which recommends the grant or refusal of the mining lease and sets out the reasons for that recommendation." The power and duty of the warden to forward a report to the Minister pursuant to s 75(5)(c) arose after the hearing contemplated by s 75(4). Section 75 went on to make the following provisions in relation to the power of the Minister to grant a mining lease: "(6) On receipt of a report under subsection (2) or (5), the Minister may, subject to subsection (7), grant or refuse the mining lease as the Minister thinks fit, and irrespective of whether – the report recommends the grant or refusal of the mining lease; and the applicant has or has not complied in all respects with the provisions of this Act. In the case of an application for a mining lease that is accompanied by the documentation referred to in section 74(1)(ca)(ii), the Minister shall refuse to grant the mining lease if the section 74A report states that there is no significant mineralisation in, on or under the land to which the application relates. In this section – section 74A report means the report given to the Minister under section 74A." It may be noted that s 75(6), which empowered the Minister to make a grant of a lease notwithstanding non-compliance with the Act, applied only in relation to non-compliance with the Act by the applicant: it did not excuse non-compliance with the requirements of the Act on the part of those charged with administering the Act, including the warden and the Minister. Section 116 of the Act provided for the grant of an instrument of lease to a successful applicant. It was in the following terms: "(1) The holder of a mining tenement granted pursuant to this Act shall be entitled to receive an instrument of licence or lease as the case may be in such form as may be prescribed. Except in the case of fraud, a mining tenement granted or renewed under this Act shall not be impeached or defeasible by reason or on account of any informality or irregularity in the application or in the proceedings previous to the grant or renewal of that tenement and no person dealing with a registered holder of a mining tenement shall be required or in any way concerned to inquire into or ascertain the circumstances under which the registered holder or any previous holder was registered, or to see to the application of any purchase or consideration money, or be affected by notice, actual or constructive, of any unregistered trust or interest any rule of law or equity to the contrary notwithstanding, and the knowledge that any such unregistered trust or interest is in existence shall not of itself be imputed as fraud. In subsection (2) – registered, in relation to a holder or previous holder of a mining tenement, means that the name of the holder or previous holder is or was entered in the register as the holder of the mining tenement." As is apparent from the text, the first clause of s 116(2) is apt to protect the title of the grantee of a mining lease, and the second clause (commencing "and no person dealing") onwards is apt to protect the position of a transferee from that grantee. It is to be noted that the indefeasibility of title provided by the first clause of s 116(2) to a successful applicant protects only against "any informality or irregularity in the application or … proceedings previous to the grant … of that tenement". As will be explained in due course, non-compliance with the conditions in ss 74, 74A and 75 cannot sensibly be described as an "informality or irregularity in the application or … proceedings previous to the grant" of the mining lease. The facts On 28 July 2011, the second and fourth respondents to this appeal lodged applications for mining leases 08/478 ("M478") and 08/479 ("M479") respectively. No mining operations statement or mineralisation report was lodged contemporaneously with these applications4. On 1 September 2011, Forrest lodged objections to M478 and M479, which related to land within the boundaries of the Minderoo pastoral lease held by Forrest near Onslow in the Pilbara region of Western Australia5. A few months after the applications were lodged, a mineralisation report for each application was lodged6. It does not appear that mining operations statements were ever lodged. By August 2012, the Director, Geological Survey had prepared a report under s 74A of the Act for each application. In December 2012, the warden (who is the first respondent) heard the applications with the s 74A reports of the Director, Geological Survey before him7. The warden's report In a report (in the form of reasons for decision) delivered on 31 January 2014, the warden held that he had jurisdiction to hear applications M478 and 4 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 85-86 [15]. 5 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 86 [17]. 6 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 86 [17]. 7 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 86 [18]. M479 notwithstanding that they were not accompanied by a mineralisation report when the applications were made8. The warden's report reached the same conclusions in relation to a third mining lease application, 08/489 ("M489"), which was lodged by the third respondent9. The second, third and fourth respondents are related entities10. At the outset of the warden's reasons, he dealt with an objection by Forrest that he had no jurisdiction to hear the applications on the basis that they were not accompanied by mineralisation reports, as required by s 74(1)(ca)(ii), at the time of application. It was argued by Forrest that the requirement under s 74(1)(ca)(ii) that the mineralisation report be submitted contemporaneously with the application was a strict one, as indicated by the circumstance that, in contrast to the case of a mining proposal in s 74(1)(ca)(i), no provision was made for the late lodgement of a mining operations statement or a mineralisation report after the date of application11. It was argued that non-compliance with s 74(1)(ca)(ii) meant that the condition upon which the Director, Geological Survey was required to give the Minister a report under s 74A(1) was not satisfied. It was said that, by parity of reasoning, nor was the condition of the warden's power to hear the application under s 75(4a) of the Act satisfied12. Accordingly, Forrest submitted, the warden was obliged to conclude that he lacked jurisdiction to hear and determine the applications13. The warden rejected Forrest's submission, holding that an application for a mining lease that does not comply with the requirements of s 74(1)(ca)(ii) of the Act remains an application for a mining lease, albeit one that cannot be heard and determined by the warden until both a mineralisation report pursuant to s 74(1)(ca)(ii), and a report from the Director, Geological Survey stating that the land contains significant mineralisation pursuant to s 74A, have been provided14. 8 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [37]. 9 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [37]. 10 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [1]. 11 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [22]. 12 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [27]-[28]. 13 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [29]. 14 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [55]. The warden considered that it was the fact of lodgement of the mineralisation report, rather than its timeousness, that was a necessary precondition to the powers exercisable by the Director, Geological Survey and the warden under ss 74A and 75(4) respectively15. The warden considered that failure to lodge the mineralisation report on time was no more than an irregularity, which could be cured by subsequent lodgement, as well as by the wide discretion given to the Minister pursuant to s 75(6)(b) of the Act to grant an application notwithstanding non-compliance with the provisions of the Act16. After dealing with a number of other objections which are not presently relevant, the warden made a recommendation that the Minister grant applications M478, M479 and M48917. Forrest then applied to the Supreme Court of Western Australia to quash the warden's recommendation18. Before turning to consider the fate of that application, it may be noted that, in this Court, the Solicitor-General was not disposed to defend the conclusion of the warden that failure to ensure that the mineralisation report was lodged with the application for a mining lease was a mere irregularity, which could be cured by subsequent lodgement. The Solicitor-General accepted that, had Forrest commenced proceedings to prohibit the warden proceeding to determine the applications, those proceedings would have succeeded. But it was submitted that, if the Minister had proceeded to grant the mining leases sought by the applications, they would have been validly granted. The judicial review proceedings Forrest applied for the warden's decision on judicial review of 10 grounds19. The only ground which is relevant in this Court is the first, whereby Forrest contended that the warden made a jurisdictional error in holding that he had jurisdiction to hear the applications for the mining leases. 15 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [57]. 16 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [57]-[60]. 17 Yarri v Forrest & Forrest Pty Ltd [2014] WAMW 6 at [143]. 18 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 86 [20]. 19 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [4]. Allanson J concluded that the warden's hearing of the applications, despite non-compliance with s 74(1)(ca)(ii), did not amount to a jurisdictional error on the part of the warden. His Honour held that s 75(4a) stated only two preconditions to the warden hearing an application, namely that he had received a copy of the s 74A report, and that that report stated that the subject land contained significant mineralisation. His Honour considered that the expression "accompanied by the documentation referred to in section 74(1)(ca)(ii)", which appeared at several places in the Act, including s 74A(1), and s 75(4a) itself, was descriptive of the kind of application to which it related, as opposed to prescriptive of a rule that an application could not proceed unless the requirements of the relevant provision were satisfied20. Allanson J also observed that s 75(6) expressly authorised the Minister to exercise the power to grant or refuse the mining lease, irrespective of whether the applicant had complied in all respects with the provisions of the Act21. In addition, his Honour noted that s 116(2) provided that, except in the case of fraud, a mining tenement granted under the Act "shall not be impeached or defeasible by reason or on account of any informality or irregularity in the application or in the proceedings previous to the grant or renewal of that tenement". His Honour considered this provision to be particularly relevant in this case because the Minister had in fact granted M489 and the accompanying miscellaneous licence L08/7022, so that the protection of s 116(2) was available to protect the title of the successful applicant. The Court of Appeal Forrest appealed against the decision of Allanson J to the Court of Appeal of the Supreme Court of Western Australia. McLure P, with whom Newnes and Murphy JJA agreed, upheld the decision of Allanson J. McLure P accepted that the expression "shall be accompanied by" in s 74(1)(ca) of the Act gave rise to a requirement that the mineralisation report be lodged contemporaneously with the application23. Her Honour accepted that the 20 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [49]. 21 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [51]. 22 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [11], [52]. 23 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 87 [25]. text of s 74(1AA) compelled that construction24, and that that construction was consistent with the statutory purpose of ss 74(1)(ca)(ii) and 74(1AA) as confirmed by the second reading speeches and explanatory memoranda for the Amendment Bills that introduced those provisions into the Act25. Nevertheless, her Honour concluded that only a failure to provide a mineralisation report at all would prevent the satisfaction of a condition precedent to the mining registrar or warden making a recommendation to the Minister. Only in the absence of such a report would those decision-makers be without jurisdiction to hear the application (in the warden's case) and make a recommendation to the Minister (in both their cases)26. McLure P concluded that Allanson J was correct to conclude that s 74(1)(ca)(ii) did not create a condition precedent to the hearing by, and recommendation of, the warden27. Her Honour considered that this conclusion followed from the approach required by this Court's decision in Project Blue Sky28. Her Honour held that, as a matter of the construction of ss 74, 74A and 75 of the Act, non-compliance with those provisions did not prevent the Minister from granting a valid mining lease. There were four principal strands in her Honour's reasoning. First, McLure P observed that the phrase "shall be accompanied by" was used, not only in relation to the documents specified in s 74(1)(ca)(ii), but also in relation to the requirements in s 74(1)(b) (that a prescribed rent be paid), s 74(1)(c) (that a prescribed application fee be paid), and, subject to the deeming provision in s 74(1AA), s 74(1)(ca)(i) (that a mining proposal be lodged). Her Honour considered29 that this phrase must have the same significance each time it was used in s 74(1), and went on to say: "Having regard to the variety in the nature of the requirements [in s 74(1)] and the serious consequences of non-compliance however minor or 24 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 87 [25]. 25 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 87 [27]. 26 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 91 [45]. 27 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 88-89 [33]. 28 (1998) 194 CLR 355 at 388-389 [91]. 29 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 90 [40]. technical, there is no justification in principle or purpose for concluding that contemporaneous lodgment is a condition precedent to the mining registrar or the warden making a recommendation." Secondly, her Honour agreed with Allanson J that the expression "if an application for a mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii)", which is deployed at various points in the Act, is descriptive of the application to which it relates, rather than being a prescription that an application which does not satisfy s 74(1)(ca)(ii) is invalid30. Her Honour said that to adopt the opposing view would be to recast sub-ss (2a) and (4a) of s 75 such that their descriptive "if" clauses would instead become prescriptive Thirdly, McLure P noted32 that courts are reluctant to characterise a fact or legislative criterion as jurisdictional, for the reasons explained by Dixon J in Parisienne Basket Shoes Pty Ltd v Whyte33. Finally, her Honour noted that the consequences of characterising compliance with s 74(1)(ca)(ii) as setting up a condition precedent to the exercise of the powers in ss 75(4) and 75(6) would be far-reaching. To invalidate the warden's recommendation and so deprive the Minister of the power to grant or refuse the application would force the applicant to start from scratch by lodging a new application, with accompanying payments and documents, in circumstances where there had already been significant delay in the application proceeding through to completion34. McLure P considered that a flexible approach to non-compliance, which would avoid such inconvenience, was central to the scheme in s 75, and was consistent also with the text and purpose of s 116(2) of the Act35. 30 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 90 [41]. 31 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 90 [42]. 32 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 89-90 [38]. 33 (1938) 59 CLR 369 at 391; [1938] HCA 7. 34 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 89-90 [38]. 35 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 91 [44]. By grant of special leave, Forrest appealed to this Court from the decision of the Court of Appeal. The appeal to this Court It will be necessary to discuss each of the four strands in the reasoning of the Court of Appeal; but before doing so, it is desirable to summarise the broad thrust of the arguments agitated by Forrest and the Solicitor-General on appeal in order to establish the context for that discussion. lease application, with the evident purpose of ensuring Forrest submitted that ss 74(1)(ca)(ii), 74A(1) and 75(4a) of the Act expressly contemplated that a mineralisation report was to be one lodged with a mining that non-compliant applications would not proceed to a hearing by the warden or a grant by the Minister. It was said that a non-compliant application should not be allowed to progress as a burden upon the administration of the Act, or work to the disadvantage of stakeholders such as owners and occupiers of land, or miners in competition with applicants. Forrest argued that the Minister was precluded from proceeding to grant a lease where non-compliance with s 74(1)(ca)(ii) was shown because the pre-requisite to the Minister's jurisdiction under ss 71 and 75(6), being the forwarding of a recommendation from the warden after a hearing authorised by sub-ss (4) and (4a) of s 75, could not be met. The Solicitor-General submitted that whether an Act requires that a particular process be followed is an entirely different question from whether the failure to follow that process will nullify or invalidate that statutory process and the result of it. In this regard, the Solicitor-General relied upon this Court's decision in Project Blue Sky and argued that, while the language of s 74(1)(ca)(ii) may well be "precise and prescriptive", that does not assist in resolving the issue whether non-compliance results in invalidity. The Solicitor-General submitted that the question is not how clearly, precisely or unambiguously s 74(1)(ca)(ii) required contemporaneous lodgement, but rather what the language of the Act as a whole revealed about the effect of non-compliance with that requirement. And in this regard, the Solicitor-General contended that either s 75(6) or s 116(2) provided the "surest guide" to the statutory purpose in relation to all failures to comply with the requirements of the Act. In response to the Solicitor-General's contention that Forrest's approach to statutory construction had placed undue weight on the "precise and prescriptive" nature of the language of s 74(1)(ca)(ii), Forrest argued that its approach was entirely orthodox, amounting to no more than using the text of the relevant provisions to discern the statutory purpose, in order to apply the approach in Project Blue Sky36. In light of the contentions of Forrest and the Solicitor-General, one may turn to a consideration of the reasoning of the Court of Appeal. That consideration must begin with a discussion of this Court's decision in Project Blue Sky. Project Blue Sky In Project Blue Sky, the majority of the Court said37: "An act done in breach of a condition regulating the exercise of a statutory power is not necessarily invalid and of no effect. Whether it is depends upon whether there can be discerned a legislative purpose to invalidate any act that fails to comply with the condition. The existence of the purpose is ascertained by reference to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void every act done in breach of the condition. Unfortunately, a finding of purpose or no purpose in this context often reflects a contestable judgment ... There is no decisive rule that can be applied; there is not even a ranking of relevant factors or categories to give guidance on the issue." (footnote omitted) In Project Blue Sky, this Court was concerned with whether a statutory requirement that an administrative agency perform its functions in a manner consistent with Australia's obligations under any convention or international agreement to which Australia is a party was intended to invalidate an act done in breach of the requirement. The majority in Project Blue Sky were strongly influenced in reaching a conclusion in the negative by the consideration that the requirement in question regulated the exercise of functions already conferred on the agency, rather than imposed essential preliminaries to the exercise of those functions38. Their Honours were also influenced by the circumstance that the provisions did not have "a rule-like quality which [could] be easily identified and applied"39, many of the obligations relevant in that case being "expressed in 36 (1998) 194 CLR 355 at 388-389 [91], 390-391 [93]. 37 (1998) 194 CLR 355 at 388-389 [91]. 38 (1998) 194 CLR 355 at 391 [94]. 39 (1998) 194 CLR 355 at 391 [95]. indeterminate language"40. Also important to the decision was the consideration that "public inconvenience would be a result of the invalidity of the act"41, especially if those affected by non-compliance were neither responsible for, nor aware of, the non-compliance. The present case is readily distinguishable. A consideration of "the language of the statute, its subject matter and objects, and the consequences for the parties of holding void" acts done in breach of the Act, reveals that ss 74(1)(ca)(ii), 74A(1) and 75(4a) imposed essential preliminaries to the exercise of the power conferred by s 71 of the Act. That this was so was made clear by both the express terms and the structure of the provisions as sequential steps in an integrated process leading to the possibility of the grant of a mining lease by the Minister. These provisions were not expressed in indeterminate terms: they imposed rules which could be easily identified and applied. In addition, any inconvenience suffered by treating the requirements of the Act as conditions precedent to the exercise of the Minister's power would enure only to those with some responsibility for the non-observance, whereas (as will be explained) the contrary view would disadvantage both the public interest and individuals who were within the protection of the Act. Finally, and importantly, Project Blue Sky was not concerned with a statutory regime for the making of grants of rights to exploit the resources of a State. Regrettably, the Court of Appeal was not referred to, and did not consider, the line of authority42 which establishes that where a statutory regime confers power on the executive government of a State to grant exclusive rights to exploit the resources of the State, the regime will, subject to provision to the contrary, be understood as mandating compliance with the requirements of the regime as essential to the making of a valid grant. When a statute that provides for the disposition of interests in the resources of a State "prescribes a mode of exercise 40 (1998) 194 CLR 355 at 391-392 [96]. 41 (1998) 194 CLR 355 at 392 [97]-[98]. 42 Watson's Bay and South Shore Ferry Co Ltd v Whitfield (1919) 27 CLR 268; Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 533; Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54 at 76; [1977] HCA 71; Mabo v Queensland [No 2] (1992) 175 CLR 1 at 63-64; Wik Peoples v Queensland (1996) 187 CLR 1 at 173; Western Australia v Ward (2002) 213 CLR 1 at 121-122 [167]. See also New South Wales Aboriginal Land Council v Minister Administering Crown Lands Act (2016) 91 ALJR 177 at 200 [121]; 339 ALR 367 at 394-395; [2016] HCA 50. of the statutory power, that mode must be followed and observed"43. The statutory conditions regulating the making of a grant must be observed. A grant will be effective if the regime is complied with, but not otherwise44. This approach to statutory construction had its origin in colonial times in legislation which vested the disposition of land not already disposed of by the Crown in the legislatures of the Australian colonies45. Nothing said in Project Blue Sky diminished the force of the authorities which support this approach. Adherence to this approach supports parliamentary control of the disposition of lands held by the Crown in right of the State. It gives effect to an abiding is not well served by allowing appreciation non-compliance with a legislative regime to be overlooked or excused by the officers of the executive government charged with its administration. To permit such a state of affairs might imperil the honest and efficient enforcement of the statutory regime, by allowing scope for dealings between miners and officers of the executive government in relation to the relaxation of the requirements of the legislation. One can be confident that such a state of affairs was not intended by the Act. the public interest that A consideration of the language of the Act, to which one may now turn, does not reveal any intention to depart from the settled approach to the construction of such a legislative regime, save to the limited extent expressly indicated by ss 75(6)(b) and 116(2). The language of the Act Sections 74, 74A and 75 The clear meaning of s 74(1)(ca)(ii), as a matter of ordinary parlance, was that the documentation relied upon must have been lodged at the same time as the application was lodged, as each of the courts below held. The text of s 74(1)(ca) did not admit of any ambiguity or doubt on this point. The tenor of s 74(1)(ca)(ii) was both precise and prescriptive, conveying an intention not to countenance any degree of non-compliance with the requirement. 43 Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 533. 44 Nicholas v Western Australia [1972] WAR 168 at 172, 174. 45 Williams v Attorney-General for New South Wales (1913) 16 CLR 404 at 455-456; [1913] HCA 33; Wik Peoples v Queensland (1996) 187 CLR 1 at 172-174; Western Australia v Ward (2002) 213 CLR 1 at 117-122 [157]-[168]. The prefatory words of ss 74A(1), 75(2a), 75(4a) and 75(8) distinguish such applications from those where a choice was made to proceed by way of lodging a mining proposal under s 74(1)(ca)(i). It is not open to read those provisions as if they provided "if the application for the mining lease is accompanied or followed by the s 74(1)(ca)(ii) documentation". In contrast, the specific provision for late lodgement of a mining proposal in s 74(1AA) served to reinforce the requirement of contemporaneous lodgement in that it deemed a proposal lodged within the prescribed time after the application to have been a proposal that accompanied the application. This contrast confirms the ordinary meaning and prescriptive effect of the language of s 74(1)(ca). As to the point made by the Court of Appeal that a failure to comply with s 74(1)(ca)(ii) could not be regarded as having more serious consequences for an application for a mining lease than a failure to comply with par (b) or (c) of s 74(1), it may be accepted that a failure to comply with any of these provisions should attract the same consequences. But with all respect, it is not possible to accept that the legislation intended that an application for a mining lease might proceed in the case of non-compliance with par (b) or (c) of s 74(1). The executive government of Western Australia was given no warrant to allow an application for the grant of valuable rights to exploit minerals in the State, and the concomitant expense to the State and administrative burden on its officers, to proceed "on credit". The Court of Appeal erred in proceeding upon an assumption to the contrary. In addition, an applicant for a mining lease who chose to proceed by way of mineralisation report under s 74(1)(ca)(ii) engaged the powers and duties of each of the Director, Geological Survey and the warden in the process leading to the grant by the Minister. Once an application was to be pursued in that way, the Director, Geological Survey became empowered and obliged to prepare a report under s 74A(1) based on the mineralisation report that accompanied the application, and no other. The Court of Appeal erred in holding that, while it was an essential preliminary condition that the mineralisation report be lodged at "some time", the report did not have to accompany the application. In departing from the terms of the Act in this way, the Court of Appeal failed to take into account the circumstance that, as the express words of sub-ss (1) and (7) of s 74A made clear, the Director, Geological Survey was obliged to provide a s 74A report based on a mineralisation report that accompanied the relevant application, not some other mineralisation report provided at some unspecified other time. The mineralisation report that the Director, Geological Survey was required to consider in producing his or her report pursuant to s 74A was expressly defined in s 74A(7) to mean the mineralisation report that accompanied the application. No power was conferred on the Director, Geological Survey to extend time or to act upon some other document. The Director, Geological Survey was not authorised to receive or act upon a mineralisation report that prescribed. Section 74A(7) had to be allowed to work according to its express terms and ordinary meaning. in any way other than The Court of Appeal also erred in treating the opening words of ss 74A(1) and 75(4a) as referring to an application of the kind that was required to be accompanied by the documentation referred to in s 74(1)(ca)(ii) even if it was, in fact, not so accompanied. Under s 74A(1), the power and duty of the Director, Geological Survey to prepare a report arose only "[i]f an application for a mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii)". Similarly, the warden's power to hear an application was expressly conditioned by the opening words of s 75(4), "[s]ubject to subsection (4a)". Sub-section (4a) was engaged only "[i]f the application for the mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii)". As a matter of ordinary parlance, those words referred not to something that has not been done, but rather, to something that has been done. In so doing, they reinforced the express requirement of contemporaneous lodgement contained in sub-ss (1), (3) and (7) of s 74A. Further, the circumstance that s 75(4) began with the words "[s]ubject to subsection (4a)" confirmed, as clearly as words can, that the opening phrase of s 75(4a) should be understood as conveying conditionality. The phrase "[i]f the application for the mining lease is accompanied by the documentation referred to in section 74(1)(ca)(ii)" was substantially repeated in each of sub-ss (2a), (4a) and (8) of s 75. These were the three provisions that grounded the decision-making authority of the mining registrar, the warden, and the Minister respectively. These provisions left no room for the possibility that the documentation referred to in s 74(1)(ca)(ii) might be relied upon other than as an accompaniment to the application for a mining lease; on the contrary, each reinforced the essentiality of the requirement in s 74(1)(ca)(ii) itself. Sections 75(6) and 116(2) The express provision made by ss 75(6) and 116(2) in relation to the consequences of non-compliance with the requirements of the Act preliminary to the exercise of the Minister's powers under s 71 is itself an indication that matters of non-compliance with the Act outside the scope of ss 75(6) and 116(2) were fatal to the validity of a grant so affected. Section 75(6)(b) allowed the Minister to grant or refuse a mining lease notwithstanding an applicant's non-compliance in all respects with the provisions of the Act. It did not manifest an intention that any and all non-compliance with the provisions of the Act regarding applications for mining leases could be disregarded when the Minister determined whether to grant a lease. In particular, it did not purport to allow the Minister to make a grant where the warden had failed to comply with the Act, as, for example, by proceeding to a hearing under s 75(4) contrary to the requirements of s 75(4a). Section 116(2) was not cast in terms which were apt to confer indefeasibility of title in respect of any non-compliance with the requirements of the Act. Unlike s 75(6)(b), s 116(2) did not speak of a want of "compliance" with the provisions of the Act, but of "informality or irregularity" in the application or proceedings. "Informality" means a want of legal form as distinct from a want of legal substance. The term "irregularity" refers to a lack of regularity in the method or manner in which a power is exercised46: it is a term used in deliberate contrast to an act beyond power. The failure of the warden to observe the requirement of s 75(4a) cannot fairly be described as an "informality or irregularity in the application or in the proceedings previous to the grant" of the mining lease. The concern of the Court of Appeal that upsetting titles to mining leases might cause unintended hardship was misplaced. To the extent that the titles of the second and fourth respondents were liable to be set aside, it may be said that they were the authors of their own misfortune. And as to those who took a transfer of a mining lease from them, such transferees would be protected by the second clause of s 116(2). In Hunter Resources Ltd v Melville47, Toohey J, noting the differences between s 116(2) of the Act and the Torrens system statutes whereby the registered proprietor holds free of any unregistered interest other than those expressly excepted, went on to say: "It should not be assumed … that registration of the original grant cures any defects in the application leading to the grant. But it is unnecessary to express a view on that matter. Clearly enough, a person dealing with the registered holder will, in the absence of fraud, obtain the protection of 46 Davis's Tutor v Glasgow Victoria Hospitals 1950 SC 382 at 385; M'Ginty v Glasgow Victoria Hospitals 1951 SC 200 at 211. 47 (1988) 164 CLR 234 at 259; [1988] HCA 5. Parisienne Basket Shoes Pty Ltd v Whyte In Parisienne Basket Shoes Pty Ltd v Whyte48, in the passage referred to by McLure P, Dixon J said: "It cannot be denied that, if the legislature see fit to do it, any event or fact or circumstance whatever may be made a condition upon the occurrence or existence of which the jurisdiction of a court shall depend. But, if the legislature does make the jurisdiction of a court contingent upon the actual existence of a state of facts, as distinguished from the court's opinion or determination that the facts do exist, then the validity of the proceedings and orders must always remain an outstanding question until some other court or tribunal, possessing power to determine that question, decides that the requisite state of facts in truth existed and the proceedings of the court were valid. Conceding the abstract possibility of the legislature adopting such a course, nevertheless it produces so inconvenient a result that no enactment dealing with proceedings in any of the ordinary courts of justice should receive such an interpretation unless the intention is clearly expressed." The approach explained by Dixon J does not give rise to a presumption that a decision by the warden as to whether facts exist is within his or her jurisdiction: the warden is not one of the ordinary courts of justice. There is no occasion to presume that the warden is authorised by the Act to make a mistake as to the facts upon which his or her jurisdiction depends. It can also be seen that s 75(4a) stands in marked contrast to s 75(3), which was so expressed that its operation depended on the satisfaction of the mining registrar that certain facts exist. The different approach of the Act to decisions of the mining registrar is understandable given that the mining registrar is concerned only with applications which are unopposed. The Court of Appeal erred in relying on a presumption against characterising the requirements in ss 74(1)(ca), 74A(1), 75(4) and 75(4a) as steps in a sequential process prescribed for the exercise of the power to make a grant, departure from which led to legal invalidity. Effect should have been given to the text of the Act, bearing in mind that it established a regime to facilitate the grant of rights to exploit the valuable resources of the State. 48 (1938) 59 CLR 369 at 391. The objects of the regime The conclusion of the Court of Appeal that "there is no justification in principle or purpose for concluding that contemporaneous lodgment is a condition precedent the warden making a the mining registrar or recommendation" was focused upon the "delays, cost and other prejudice" already experienced by the second and fourth respondents. Quite apart from the consideration that these delays and costs resulted from those respondents' own non-compliance with the Act, this focus overlooked the consideration that non-observance of the requirements of the regime governing the grant of mining leases was apt to disadvantage both the public interest and individuals in ways that the Act did not intend. In accordance with Project Blue Sky49, the necessary inquiry is50: "as to whether the statutory purpose of the duty, when considered within the particular statutory scheme of which it forms part, would or would not be advanced by holding an exercise of decision-making power affected by breach of the duty to be invalid." (footnote omitted) Compliance with the regime established by ss 74, 74A and 75 was apt to improve administrative efficiency and to avoid backlogs by reducing the number of defective applications for mining leases that mining registrars, wardens, Directors, Geological Survey, and officers of the Department administering the Act have to manage and follow up. The Court of Appeal failed to appreciate that reduction of the problems of management of applications for mining tenements, an object of the prescriptive regime constituted by ss 74, 74A and 75 of the Act acknowledged by the Court of Appeal51, would be furthered by the Act denying validity to acts done in disregard of the statute. Compliance with the requirement that a mineralisation report accompany an application was apt to reduce the administrative burden upon the Department. Officers of the Department should not have been troubled by the uncertainty and expense of attending to an application that was not accompanied by the documentation necessary to allow it to proceed. Whether that objective might be 49 (1998) 194 CLR 355 at 390-391 [93]. 50 Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22 at 33 [26]; [2015] HCA 51. 51 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 89-90 [38]. more efficiently accomplished by relying upon those affected by non-compliance with the Act to take proceedings to halt a non-compliant decision-making process was a matter of policy for the legislature. A legislative judgment that that would be an unreliable mode of ensuring compliance with the Act is perfectly intelligible. Indeed, consistently with Project Blue Sky, where non-observance of a condition bearing upon the exercise of a statutory power would work to the material disadvantage of individuals for whose protection the condition exists, considerations of justice and convenience tell strongly in favour of holding invalid acts done in neglect of the condition52. The Act's insistence upon a mineralisation report as an accompaniment to the application also served the purpose of ensuring that owners and occupiers of subject land were not troubled unnecessarily or prematurely by half-baked proposals. The Court of Appeal did not advert to the consideration that owners and occupiers of land affected by an application might be disadvantaged by an administration of the Act which proceeded in disregard of its requirements. The Act, in requiring any objection to be lodged by an owner or occupier of land affected by an application for a mining lease within a prescribed time from the service of the application, ensured that an objection would be informed by reference to the information concerning mineralisation which accompanied the application for the mining lease. While s 75(1a) denied a right of objection if its basis was that there was no significant mineralisation in, on or under the land the subject of the application, it did not suggest that the absence of significant mineralisation was not a consideration relevant to whether the application should be granted: it simply denied a ground of objection on this basis alone. It left it open to an owner or occupier to rely upon the mineralisation report to support an objection that the mineralisation so disclosed was not such as to warrant the grant of a mining lease, having regard to, for example, the attendant adverse effects upon the rights of an owner or occupier by reason of the exploitation of that mineralisation. The provision of the informed views of those who objected to an application was apt to improve the quality of decision-making by those charged with the administration of the Act. An objection lodged before the mineralisation report was made available would necessarily be framed without the benefit of that information. A failure to comply with the requirements of s 74(1)(ca)(ii) could thus compromise the rights of objectors. Non-compliance with statutory 52 Wei v Minister for Immigration and Border Protection (2015) 257 CLR 22 at 33-34 provisions designed to ensure that a right of objection to proposed action is exercised effectively has been regarded as invalidating the decision-making process53. In addition, the relaxed view of the effect of non-compliance with the Act favoured by the Court of Appeal was apt to enure to the disadvantage of miners in competition for access to the State's resources. Compliance with the regime established by ss 74, 74A and 75 was necessary to prevent "land-banking", whereby holders of existing prospecting, retention or exploration licences that were soon to expire, who had not yet encountered a specific geological foundation for lodgement of a mineralisation report, might be minded cynically to use the mechanism of applying for a mining lease to extend their time for exploration. In introducing ss 74(1)(ca)(ii) and 74A into the Act by passage of the Mining Amendment Bill 2004 (WA), the Explanatory Memorandum for the Bill stated that the changes were to "ensure a mining lease is only applied for when accompanied by a notice of intent to commence productive mining operations or a statement that significant mineralisation exists" (emphasis added)54. Similarly, the Minister for State Development referred in his second reading speech55 to the significant problem that exploration title holders were using the mechanism of a mining lease application as a way to seek "further exploration rights rather than a title for productive mining". The Minister explained that the Bill would address this problem by "limit[ing] new applications for mining leases to those cases where significant mineralisation has been discovered or mining proposals are lodged with the application". Conclusion For these reasons, the appeal to this Court should be allowed and the relief sought by Forrest granted. In relation to the relief sought by Forrest, it may be noted that no order is sought to set aside any mining lease that might have been granted to the second and fourth respondents. It may be that Forrest is content to 53 Cf Scurr v Brisbane City Council (1973) 133 CLR 242 esp at 251-252, 258-259; [1973] HCA 39. See also at 245-246. 54 Western Australia, Legislative Assembly, Mining Amendment Bill 2004, Explanatory Memorandum at 1. 55 Western Australia, Legislative Assembly, Parliamentary Debates (Hansard), 26 August 2004 at 5728-5730. rely upon the apparent willingness of the Minister to abide the result of these proceedings56. Costs All four respondents filed submitting appearances in these proceedings. The second to fourth respondents filed and served written submissions on costs. They submitted that in the event that Forrest's appeal were to succeed, the usual order as to costs, whereby costs follow the event, should not be made. They argued that none of them played a substantive role in, or contributed significantly to, the overall costs of the proceedings. The position of the third respondent is significantly different from that of the second and fourth respondents. On Forrest's judicial review application, Allanson J upheld Forrest's challenge to the warden's recommendation in relation to the application of the third respondent. His Honour found that the warden did err in recommending the grant of M489 to the third respondent, and granted a declaration that the warden's recommendation in respect of that application was invalid57. No appeal was brought against that decision, and the third respondent played no part in Forrest's appeals to the Court of Appeal and this Court, save as to making submissions as to costs. The second and fourth respondents gave notice of their intention to take part in Forrest's appeal to the Court of Appeal, and filed written submissions and a notice of contention in that regard. Before the hearing of that appeal, the solicitors for the second and fourth respondents were granted leave to cease acting in the proceedings on their behalf. The second and fourth respondents were not represented at the hearing of the appeal. Upon dismissing the appeal, the Court of Appeal gave the second and fourth respondents liberty to apply for an order for costs, and subsequently ordered Forrest to pay their costs. When Forrest applied for special leave to appeal to this Court, the second to fourth respondents filed a submitting appearance, and when special leave was granted they filed a submitting appearance in the appeal. The second to fourth respondents argue that in these circumstances they should not be required to pay Forrest's costs of the appeal. 56 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [11]. 57 Forrest & Forrest Pty Ltd v Wilson [2015] WASC 181 at [129]. While it is true that an order for costs is compensatory and not punitive in nature58, that consideration is beside the point in the present case. Forrest was obliged to pursue its challenge to the orders of Allanson J to the Court of Appeal and to this Court in order to correct the erroneous decision of the warden. The successful participation of the second and fourth respondents in the proceedings before Allanson J necessitated Forrest's appeal to the Court of Appeal and to this Court. In addition, the second and fourth respondents resisted Forrest's appeal to the Court of Appeal and sought and recovered an order for the costs they incurred in the course of that resistance. The subsequent adoption by the second and fourth respondents of a passive role came too late to enable them to assert that justice requires that they should not be required to indemnify Forrest against the costs that it was obliged to incur in order to vindicate its rights. The responsibility of the second and fourth respondents for the costs incurred by Forrest contrasts strongly with that of the third respondent, whose responsibility for the injustice perpetrated against Forrest ceased at the judgment by Allanson J. No order for costs should be made against the third respondent in relation to the subsequent appeals. Orders The appeal should be allowed. The orders of the Court of Appeal made on 7 July 2016 and 2 September 2016 should be set aside and, in their place, it should be ordered that: the appeal be allowed; orders 4 and 5 of Allanson J made on 4 June 2015 be set aside and, in their place, order that: it be declared that the first respondent did not have jurisdiction to hear the second respondent's application for mining lease 08/478 or the fourth respondent's application for mining lease 08/479 as each application was not accompanied by a mineralisation report referred to in s 74(1)(ca)(ii) of the Mining Act 1978 (WA); it be declared that the first respondent did not make a valid report and recommendation to the Minister under s 75(5)(c) 58 Latoudis v Casey (1990) 170 CLR 534 at 543; [1990] HCA 59. of the Mining Act 1978 (WA) in relation to the second respondent's application for mining lease 08/478 or the fourth respondent's application for mining lease 08/479; (iii) a writ of certiorari be issued quashing the purported report and recommendation made by the first respondent under s 75(5)(c) of the Mining Act 1978 (WA) in relation to the second respondent's application for mining lease 08/478 and in relation to the fourth respondent's application for mining lease 08/479; and the second, third and fourth respondents pay the applicant's costs of the judicial review application; and the second and fourth respondents pay the appellant's costs of the appeal. The second and fourth respondents should pay the appellant's costs of the appeal to this Court. Nettle 101 NETTLE J. I regret that I have come to a different view from the majority. I agree that s 74(1)(ca)(ii) of the Mining Act 1978 (WA) requires that an application for a mining lease of the kind in suit be accompanied by the documentation referred to in that provision at the time of lodgement of the application. But, with respect, I do not agree that a delay between lodgement of an application and lodgement of the documentation ipso facto vitiates the Minister's power to grant a mining lease in response to the application. As the majority observe59, s 74(1)(ca)(ii) imposes a "precise and prescriptive" requirement. Accordingly, if this were a question of contractual construction, the precision and prescriptiveness of the provision could be taken to mean that the provision operates as a condition precedent of which time is of the essence60. But even then, the Court might not be too ready to construe it in that manner61. Regard would have to be had to the contract as a whole62. And, a fortiori, since this matter is one of statutory construction, regard must be had, not just to the language of the provision, but also to the scope and object of the statute as a whole63. As was submitted by the Solicitor-General for the State of Western Australia, appearing on behalf of the Attorney-General for Western Australia as amicus curiae, it is not just a matter of how clearly and precisely s 74(1)(ca)(ii) expresses the requirement that the documentation be lodged at the same time as the application. The relevant enquiry is whether the Mining Act as 59 See [67]. 60 See, for example, Bowes v Chaleyer (1923) 32 CLR 159 at 168 per Knox CJ, 188 per Higgins J, 195-197 per Starke J; [1923] HCA 15; Clifton v Coffey (1924) 34 CLR 434 at 440 per Isaacs ACJ and Gavan Duffy J; [1924] HCA 35. 61 Ankar Pty Ltd v National Westminster Finance (Australia) Ltd (1987) 162 CLR 549 at 556-557 per Mason ACJ, Wilson, Brennan and Dawson JJ; [1987] HCA 15. See also Bowes v Chaleyer (1923) 32 CLR 159 at 171, 174 per Isaacs and Rich JJ; Luna Park (NSW) Ltd v Tramways Advertising Pty Ltd (1938) 61 CLR 286 at 303-304 per Latham CJ; [1938] HCA 66. 62 Bettini v Gye (1876) 1 QBD 183 at 187-188; DTR Nominees Pty Ltd v Mona Homes Pty Ltd (1978) 138 CLR 423 at 430-431 per Stephen, Mason and Jacobs JJ (Aickin J agreeing at 437); [1978] HCA 12. 63 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 390-391 [93] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 31 [4] per French CJ, 46-47 [47] per Hayne, Heydon, Crennan and Kiefel JJ; [2009] HCA 41; Certain Lloyd's Underwriters v Cross (2012) 248 CLR 378 at 389 [24] per French CJ and Hayne J, 404-405 [68] per Crennan and Bell JJ, 411-412 [88] per Kiefel J; [2012] HCA 56. Nettle a whole reveals a statutory purpose that failure to lodge the documentation at the same time as the application ipso facto vitiates the Minister's power to grant the lease which is sought. Looking at the Mining Act as a whole, three considerations in particular lead me to conclude that it is not the purpose of this legislation to achieve that effect. First, it is readily conceivable that, in a given case, despite best efforts and without substantive fault on the part of anyone concerned, the documentation referred to in s 74(1)(ca)(ii) might not be filed until hours or even days after the application is lodged. For example, an application might be lodged by the applicant's solicitor strictly within time and yet, due to a delay in the post or corruption in email transmission, a mineralisation report on its way from the applicant's consulting geologist may not arrive until some days later. It is difficult to see how such a delay could prejudice any party concerned. Yet, if the effect of s 74(1)(ca)(ii) were as the majority have concluded, the Minister would be powerless to grant the mining lease. I consider that to be an unlikely purpose to attribute to the legislation. Secondly, s 75(6) arms the Minister with an apparently broad power to grant or refuse a mining lease as the Minister thinks fit. In particular, s 75(6)(b) expressly provides that the Minister may grant a mining lease irrespective of whether "the applicant has or has not complied in all respects with the provisions of" the Mining Act. In terms, it confers a broad-ranging discretion on the Minister to waive strict compliance by the applicant with any requirement of the Mining Act. And, although not unlimited, the apparent breadth of the discretion is emphasised by the contextual support it derives from s 75(6)(a), which empowers the Minister to grant a mining lease regardless of whether the mining registrar or the warden has recommended the grant or refusal of it64. As McLure P observed65 in the Court of Appeal of the Supreme Court of Western Australia, s 75(6) reflects a "flexible approach to non-compliance". In an Act such as the Mining Act, it is to be expected that Parliament's purpose is to arm the Minister with a broad-ranging discretionary power to deal with irregularities66. It 64 See and compare Hot Holdings Pty Ltd v Creasy (1996) 185 CLR 149 at 170-172 per Brennan CJ, Gaudron and Gummow JJ; [1996] HCA 44. 65 Forrest & Forrest Pty Ltd v Wilson (2016) 10 ARLR 81 at 90-91 [43]-[44] (Newnes JA and Murphy JA agreeing at 92 [56], [57]). 66 See generally R v Commissioner of Patents; Ex parte Martin (1953) 89 CLR 381 at 396-397, 398 per Williams ACJ, cf at 400 per Webb J, 406-407 per Fullagar J (Kitto J and Taylor J agreeing at 408); [1953] HCA 67; Associated Minerals Pty Ltd v NSW Rutile Mining Co Pty Ltd (1961) 35 ALJR 296 at 297 per Dixon CJ, Kitto, Taylor and Menzies JJ; [1962] ALR 236 at 237-238; The Commonwealth v Western Australia (1999) 196 CLR 392 at 451 [172] per Kirby J; [1999] HCA 5; (Footnote continues on next page) Nettle would severely limit the power of the Minister to deal with irregularities under s 75(6), and so, as it appears to me, run counter to Parliament's purpose, if a failure strictly to comply with provisions like s 74(1)(ca)(ii) were beyond the reach of s 75(6). I acknowledge that there are some apparent textual difficulties in construing s 75(6)(a) and (b) as apt to include a lack of strict compliance with s 74(1)(ca)(ii). In terms, the chapeau of s 75(6) conditions the Minister's power to grant a mining lease on receipt of a report under s 75(2) or (5), and I accept that a possible construction of s 75(2a) and (4a) is that the mining registrar's power to forward a report to the Minister under s 75(2) and the warden's power to forward a report to the Minister under s 75(5) are conditioned on an application for a mining lease being accompanied by the documentation referred to in s 74(1)(ca)(ii) at the time of lodgement of the application67. But, at the same time, the effects of a strict textual analysis cut both ways. There is nothing in s 75(6) which expressly conditions the Minister's power to grant a mining lease on the fact of the mining registrar or warden having acted in accordance with the requirements of the Act68. The only condition expressly imposed by s 75(6) is that the Minister has received one or other kind of report. And, as s 75(6)(a) makes plain, the report's recommendations. Accordingly, read in context, I think the better view of the effect of s 75(6) to be that it arms the Minister with power to waive both formal and substantive requirements of the objection and recommendation provisions, including provisions that regulate the mining registrar's and warden's powers to report to the Minister under s 75(2) and (5). then act notwithstanding the Minister may Thirdly, s 116(2) of the Mining Act provides that: "Except in the case of fraud, a mining tenement granted or renewed under this Act shall not be impeached or defeasible by reason or on account of any informality or irregularity in the application or in the proceedings Minister for Planning v Walker (2008) 161 LGERA 423 at 454 [53]-[55] per Hodgson JA (Campbell JA and Bell JA agreeing at 455 [65], [66]); Ilic v City of Adelaide (2010) 107 SASR 139 at 157 [60], 158 [68]-[69]; Martin v State of New South Wales (No 14) [2012] NSWCA 46 at [40]-[42]; Gold and Copper Resources Pty Ltd v Hon Chris Hartcher MP, Minister for Resources and Energy, Special Minister (No 2) [2014] NSWLEC 30 at [45]-[46]. 67 See and compare Yarri Mining Pty Ltd v Eaglefield Holdings Pty Ltd (2010) 41 WAR 134 at 144 [49] per McLure P (Owen JA and Buss JA agreeing at 147 [73], 68 See and compare Australian Broadcasting Corporation v Redmore Pty Ltd (1989) 166 CLR 454 at 457 per Mason CJ, Deane and Gaudron JJ; [1989] HCA 15. Nettle previous to the grant or renewal of that tenement and no person dealing with a registered holder of a mining tenement shall be required or in any way concerned to inquire into or ascertain the circumstances under which the registered holder or any previous holder was registered, or to see to the application of any purchase or consideration money, or be affected by notice, actual or constructive, of any unregistered trust or interest any rule of law or equity to the contrary notwithstanding, and the knowledge that any such unregistered trust or interest is in existence shall not of itself be imputed as fraud." (emphasis added) The first part of that provision is similar to the first part of s 63(1) of the Transfer of Land Act 1893 (WA)69 ("the TLA conclusive evidence provision"), which provides that: "No certificate of title created and registered upon an application to bring land under this Act or upon an application to be registered as proprietor on a transmission shall be impeached or defeasible by reason or on account of any informality or irregularity in the application or in the proceedings previous to the registration of the certificate ..." Section 116(2) of the Mining Act thus affords a mining lease a level of protection against impeachment on account of informality or irregularity in the application for the lease or proceedings previous to its grant which, in significant respects, is similar to the level of protection afforded by the first part of the TLA conclusive evidence provision to a registered Torrens title against impeachment on account of informality or irregularity in the application or proceedings previous to registration70. Section 116(2) does not protect the grant of a mining tenement to the extent that the tenement is granted over land the subject of an existing mining tenement71. But that is because s 105B renders the grant of a mining tenement subject to survey and, more particularly, because s 117(2) provides that each grant of a mining tenement shall be deemed to contain an express reservation of 69 See also comparable provisions in other States: Real Property Act 1900 (NSW), s 40; Land Title Act 1994 (Q), s 46; Real Property Act 1886 (SA), s 51A; Land Titles Act 1980 (Tas), s 39; Transfer of Land Act 1958 (Vic), s 41. 70 See Hunter Resources Ltd v Melville (1988) 164 CLR 234 at 243 per Mason CJ and Gaudron J, 246 per Wilson J, 255-256 per Dawson J, cf at 259 per Toohey J; [1988] HCA 5; Crocker Consolidated Pty Ltd v Wille [1988] WAR 187 at 191 per Burt CJ (Olney J agreeing at 191); Atkins v Minister for Mines (1996) 15 WAR 226 71 See Atkins (1996) 15 WAR 226 at 237. Nettle the rights to which the holder of the existing mining tenement is entitled. In such a case, it may accurately be said that the Minister has no power to grant a mining tenement over land the subject of an existing tenement, since, by the express terms of the legislation, each grant of a mining tenement is subject to existing grants. By contrast, there is nothing in the Mining Act that expressly or as a matter of necessary as opposed to possible implication denies power to the Minister to grant a mining lease in response to a report forwarded by the mining registrar or warden in relation to an application that was not accompanied by the documentation required by s 74(1)(ca)(ii) at the time of lodgement. Axiomatically, the word "informality" is confined to matters of form. But, subject to context, the word "irregularity" is potentially a term of wide connotation. In its natural and ordinary sense, it includes "deviation from or violation of a rule, law, or principle ... deviation from what is usual or normal"72. In the context of bankruptcy legislation, the expression "formal defect or an irregularity"73 – which is superficially not unlike "informality or irregularity" – has been more narrowly construed74. That is so, however, because, in bankruptcy legislation, a "formal defect or an irregularity" refers to a formal defect or an irregularity in a bankruptcy notice, and it is considered that the only such formal defects or irregularities that should be tolerated are those which are incapable of misleading the debtor. More pertinently, in the context of town-planning legislation, and in particular the promulgation of a planning scheme, the statutory expression "informality defect or error" – which is also not dissimilar to "informality or irregularity" – has been held to refer to "some informality, defect or error in relation to the express statutory requirements to attend on the conception or preparation of the scheme"75. As Burchall v Shire of Sherbrooke demonstrates76, the expression "informality defect or error" – and, by analogy, "informality or irregularity" – is capable of including an authority's failure to comply with statutory requirements relating to the exercise of power. 72 R v Gray; Ex parte Marsh (1985) 157 CLR 351 at 367-368 per Gibbs CJ; [1985] HCA 67 citing the Oxford English Dictionary. 73 Bankruptcy Act 1966 (Cth), s 306. 74 See, for example, James v Federal Commissioner of Taxation (1955) 93 CLR 631 at 644; [1955] HCA 75; Adams v Lambert (2006) 228 CLR 409 at 419-420 [27]-[28]; [2006] HCA 10; Re Wimborne; Ex parte The Debtor (1979) 24 ALR 494 at 498-499; Malek v Macquarie Leasing Pty Ltd (2007) 156 FCR 552 at 557-558 [21]-[23]; Snelgrove v Roskell (2007) 157 FCR 313 at 317-318 [37]-[42]. 75 Burchall v Shire of Sherbrooke (1968) 118 CLR 562 at 570 per Barwick CJ; see also at 579-580 per Owen J; [1968] HCA 69. 76 (1968) 118 CLR 562 at 570 per Barwick CJ; see also at 579-580 per Owen J. Nettle Similarly, in relation to the TLA conclusive evidence provision and like provisions, the expression "informality or irregularity" is one of potentially wide connotation, apt to include both formal defects and substantive failures to comply with mandatory requirements relating to applications for, and proceedings prior to, the grant of a registered title77. In Hunter Resources Ltd v Melville, Toohey J observed78 that: "There is no section [in the Mining Act] corresponding with the Torrens System provision whereby the registered proprietor holds free of any unregistered interest other than those expressly mentioned in the section: cf Transfer of Land Act, s 68." But, contrary to his Honour's further observation, it does not follow that: "It should not be assumed therefore that registration of the original grant cures any defects in the application leading to the grant." Paramountcy provisions of Torrens title legislation (of which s 68 is representative79) accord paramountcy to registered title over all unregistered encumbrances, estates and interests, save those specifically delineated in the provisions. Such provisions are not concerned, or at least not directly so, with protecting registered title against impeachment on account of informalities or irregularities in applications for, or in the proceedings previous to, registration. The latter role is assigned to the first part of the TLA conclusive evidence provision, and its analogues, on which the first part of s 116(2) of the Mining Act 77 See, for example, Logue v Shoalhaven Shire Council [1979] 1 NSWLR 537 at 541-543 per Hutley JA (Reynolds JA agreeing at 540); Palais Parking Station Pty Ltd v Shea (1980) 24 SASR 425 at 428, 429-430 per King CJ (Williams J agreeing at 442); Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 at 655 [27] per Ormiston JA; City of Canada Bay Council v F & D Bonaccorso Pty Ltd (2007) 71 NSWLR 424 at 446-447 [82]-[83]. See and compare Gardner and Jorek, "Dealings with Mining Titles under the Mining Act 1978 (WA): Part 2 – The Effect of Registration & Caveats", (2006) 25 Australian Resources and Energy Law Journal 41 at 42-43, 49; Skead, "The Registration and Caveat Systems under the Mining Act 1978 (WA): A Torrens Clone?", (2007) 26 Australian Resources and Energy Law Journal 185 at 188-190, 192, 200-201. 78 (1988) 164 CLR 234 at 259. 79 See also Real Property Act 1900 (NSW), s 42; Land Title Act 1994 (Q), ss 37, 184; Real Property Act 1886 (SA), s 69; Land Titles Act 1980 (Tas), s 40; Transfer of Land Act 1958 (Vic), s 42. Nettle is based. Thus, as Mason CJ and Gaudron J observed in Hunter Resources80, s 116(2) is: "designed to protect the grant [of a mining tenement] as a root of title and it gives emphasis to the statutory policy that the grant [of the mining tenement] is a root of title." Similarly, as Wilson J stated in the same case81: "Once a [mining tenement] is granted, s 116(2) has the effect of protecting the [mining inter alia, non-compliance with the marking out requirements." tenement] from attack on the basis of, It is important to observe, too, that reg 24 of the Mining Regulations 1981 (WA) requires an applicant for a mining lease to comply with the prescribed marking out requirements, and reg 64(1) provides that an application for a mining lease must be lodged within 10 days of that marking out. Consequently, when Wilson J spoke of s 116(2) protecting what in Hunter Resources was a prospecting licence from attack on account of non-compliance with marking out requirements, his Honour was speaking of an applicant's failure to comply with a statutory requirement that should have resulted in the warden rejecting the application. In essential respects, an applicant's failure strictly to comply with the requirement imposed by s 74(1)(ca)(ii) is similar82. It is something that should result in the warden rejecting the application, and yet, for the same reasons, it is aptly described as an irregularity within the meaning of s 116(2). Additionally, as was observed in Yarri Mining Pty Ltd v Eaglefield Holdings Pty Ltd83, where statutory language is equivocal or ambiguous, "public inconvenience, prejudice and uncertainty resulting from invalidity and the existence of statutory penalties for breach of the [Mining Act] are powerful and weighty considerations" in the determination of whether it is the purpose of the Act that a breach of a statutory requirement should result in such invalidity. Here, if s 116(2) did not have the effect of insulating a mining lease from impeachment on the ground of failure strictly to comply with the requirements of s 74(1)(ca)(ii), a putative lessee would be at risk of prosecution for an offence 80 (1988) 164 CLR 234 at 243. 81 Hunter Resources (1988) 164 CLR 234 at 246. See also at 255-256 per Dawson J. 82 See also Crocker Consolidated [1988] WAR 187 at 191 per Burt CJ (Olney J agreeing at 191). Cf Atkins (1996) 15 WAR 226 at 236-237. 83 (2010) 41 WAR 134 at 144 [50] per McLure P (Owen JA and Buss JA agreeing at Nettle under s 155 of the Mining Act of carrying out mining operations on the area of the putative lease while not duly authorised. Possibly, the putative lessee would have a defence of an honest claim of right under s 22 of the Criminal Code (WA)84. But even so, why should it be supposed that it is the purpose of s 116(2) to leave the putative lessee to take that chance? Furthermore, whatever be the position under the criminal law, unless s 116(2) affords the scope of protection from impeachment conceived of by the majority of this Court in Hunter Resources85, the putative lessee would be at risk of liability for trespass to land at the suit of an owner of any private land over which the lease area extended, and presumably entitled to join the Crown in right of the State of Western Australia by way of a claim for contribution or indemnity. Section 160 of the Mining Act might appear adequate to protect the Minister and any officers acting "in pursuance of any authority lawfully given under [the] Act", but it does not purport to provide the Crown as such with any degree of immunity. It is also not without relevance that mining projects in Western Australia are frequently of a type and scale that involve the investment of vast amounts of money and both human and mechanical resources, and are financed by loans secured on the faith of the title comprised of the mining lease by mortgage in accordance with reg 77 of the Mining Regulations. The second part of s 116(2) of the Mining Act may be adequate to hold a registered mortgagee safe against claims on the mining lease made by previous holders and the holders of unregistered interests. But, in terms, it says nothing about defects in the lease resulting from irregularities in the application or proceedings previous to the grant of the lease. Accordingly, if strict compliance with the requirements of s 74(1)(ca)(ii) were a condition precedent to the power of the Minister to grant a mining lease – with the result that the first part of s 116(2) was incapable of protecting a mining lease once issued against impeachment on the basis of failure by the applicant to comply with those requirements and the subsequent failure by the mining registrar or warden to comply with the provisions governing the exercise of their power – it may be that a mortgage of such a mining lease would be a mortgage over nothing86. One assumes that financiers have proceeded until 84 See Investments (WA) Pty Ltd v City of Swan (No 2) (2013) 197 LGERA 197 at 85 (1988) 164 CLR 234 at 243 per Mason CJ and Gaudron J, 246 per Wilson J. 86 Hunt, Mining Law in Western Australia, 4th ed (2009) at 278-279. See also Domansky, "Dealings and Registration", (2001) 20 Australian Mining and Petroleum Law Journal 36 at 38; cf Skead, "The Registration and Caveat Systems under the Mining Act 1978 (WA): A Torrens Clone?", (2007) 26 Australian Resources and Energy Law Journal 185 at 192-193. Nettle now upon the assumption, supported by Mason CJ, Gaudron and Wilson JJ's construction of s 116(2) in Hunter Resources and the Full Court of the Supreme Court of Western Australia's decision in Crocker Consolidated Pty Ltd v Wille87, that a mining lease cannot be impeached on account of such defects. In the absence of compelling reasons to do so, I do not consider that it should be concluded that s 116(2) lacks that effect88. So to reason does not mean that s 116(2) is a licence to ignore the requirements of the Mining Act. It remains that, until and unless a mining lease is granted, failure to comply with the requirements of the Mining Act relating to the grant of a lease will provide a basis for objection, judicial review and appropriate remedies to ensure compliance89. What it does mean, however, is that, if no effort is made to restrain the grant of a mining lease before the lease is granted, it will then be too late to impeach the lease on the basis of failure to comply with those requirements. It is consistent with the order and certainty of title that s 116(2) is designed to achieve that such attacks must be made, if at all, before grant. Finally, it is to be observed that, under what is sometimes called the Cudgen Rutile doctrine90, if a statute regulating the disposal of an interest in Crown land prescribes a mode of exercising that statutory power, it must be followed and, if it is not followed, action taken in breach of its requirements will be adjudged as beyond power. But, although the grant of a mining lease may be so affected by irregularity comprised of a lack of compliance with such a requirement, not every failure to comply with statutory requirements relating to the grant of a mining tenement goes to power. Here, for the reasons stated, the Minister's power to grant a mining lease appears to be conditioned on receipt of a report under s 75(2) or (5)91. But the Mining Act does not in terms condition the Minister's power to grant a mining lease on compliance by the mining registrar 87 [1988] WAR 187 at 191 per Burt CJ (Olney J agreeing at 191). 88 See and compare Yarri (2010) 41 WAR 134 at 145 [53]-[56] per McLure P (Owen JA and Buss JA agreeing at 147 [73], [74]). 89 See Hot Holdings (1996) 185 CLR 149 at 174-175 per Brennan CJ, Gaudron and 90 See Cudgen Rutile (No 2) Pty Ltd v Chalk [1975] AC 520 at 533. See also Ansett Transport Industries (Operations) Pty Ltd v The Commonwealth (1977) 139 CLR 54 at 76 per Mason J; [1977] HCA 71; Mabo v Queensland [No 2] (1992) 175 CLR 1 at 63 per Brennan J; [1992] HCA 23. 91 See Hot Holdings (1996) 185 CLR 149 at 166 per Brennan CJ, Gaudron and Gummow JJ, 180 per Dawson and Toohey JJ. Nettle and warden with the provisions governing the exercise of their powers. Rather, despite any failure on the part of those officers to comply with the provisions governing the exercise of their powers, I consider that, upon the proper construction of s 75(6), once the Minister receives a report under s 75(2) or (5), the Minister is empowered to grant or refuse a lease notwithstanding the recommendations of the report. Whether it would be proper for the Minister to grant a lease despite knowing of such officers' failure to comply with those provisions would depend on the facts of the case. It would be a decision for the Minister to make in the exercise of the Minister's discretion, and, like most other discretionary administrative decisions, it would be subject to judicial review92. But, if not so reviewed, by s 116(2) the Parliament has decreed that, once the mining lease is granted, it is not to be impeached on that basis. In that context, the Cudgen Rutile doctrine would not apply. Conclusion In the result, I would hold that strict compliance with the requirements of s 74(1)(ca)(ii) is not a condition precedent to the exercise of the Minister's power under s 75(6) to grant an application for a mining lease. On that basis, I would order that the appeal be dismissed. 92 Hot Holdings (1996) 185 CLR 149 at 171-172, 174-175 per Brennan CJ, Gaudron
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Hughes v The Queen [2017] HCA 20 14 June 2017 ORDER Appeal dismissed. On appeal from the Supreme Court of New South Wales Representation P R Boulten SC with K J Edwards for the appellant (instructed by Greg Walsh & Co) L A Babb SC with K N Shead SC and B K Baker for the respondent (instructed by Solicitor for Public Prosecutions (NSW)) G J C Silbert QC and N Rogers SC with B L Sonnet for the Director of Public Prosecutions (Vic), intervening (instructed by Solicitor for Public Prosecutions (Vic)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Hughes v The Queen Evidence – Admissibility – Tendency evidence – Evidence Act 1995 (NSW), s 97(1)(b) – Where appellant charged with 11 sexual offences against five female children aged under 16 years – Where prosecution permitted to adduce evidence of each complainant and other witnesses as tendency evidence – Where alleged tendencies identified as having sexual interest in underage girls and as using relationships to gain access to underage girls in order to engage in sexual activities with them – Whether tendency evidence required to display features of similarity with facts in issue in order to have "significant probative value" – Whether tendency evidence had "significant probative value". Words and phrases – "modus operandi", "pattern of conduct", "probative value", "significant probative value", "tendency evidence", "underlying unity". Evidence Act 1995 (NSW), s 97(1)(b). KIEFEL CJ, BELL, KEANE AND EDELMAN JJ. Section 97(1)(b) of the Evidence Act 1995 (NSW) excludes evidence of the character, reputation or conduct of a person to prove that the person has or had a tendency to act in a particular way or to have a particular state of mind ("tendency evidence") unless the court thinks that the tendency evidence will have "significant probative value". The provision is enacted in the same terms in the uniform evidence legislation of the Commonwealth, Tasmania, Victoria, the Australian Capital Territory and the Northern Territory ("the Evidence Act")1. The issue in the appeal is the extent to which, if at all, evidence of conduct adduced to prove a tendency is required to display features of similarity with the facts in issue before it can be assessed as having "significant probative value". The issue arises in the familiar context of the trial of counts charging an accused with sexual offences against several children at which the prosecution seeks to adduce the evidence of each complainant in support of its case on each count. The issue reduces in this case to the question of whether proof that a man of mature years has a sexual interest in female children aged under 16 years ("underage girls") and a tendency to act on that interest by engaging in sexual activity with underage girls opportunistically, notwithstanding the risk of detection, is capable of having significant probative value on his trial for a sexual offence involving an underage girl. The answer is that, in a case in which the complainant's evidence of the conduct the subject of the charge is in issue, proof of that tendency may have that capacity. Procedural history On 10 February 2014 the appellant was arraigned in the District Court of New South Wales (Zahra DCJ) on an indictment that charged him in 11 counts with sexual offences committed against five underage girls. Prior to the trial, the prosecution served the appellant with notice of its intention to adduce tendency evidence at the trial2. The evidence of each complainant and a number of other witnesses was to be adduced in the trial of each count to prove tendencies identified as "having a sexual interest in female children under 16 years of age" and using "his social and familial relationships … to obtain access to female children under 16 years of age so that he could engage in sexual activities with them". The notice particularised differing forms of sexual conduct with underage 1 Evidence Act 1995 (Cth); Evidence Act 2001 (Tas); Evidence Act 2008 (Vic); Evidence Act 2011 (ACT); Evidence (National Uniform Legislation) Act (NT). 2 Evidence Act, s 97(1)(a). Bell Edelman girls. One particular of that conduct was its occurrence within the vicinity of another adult. The complainants were aged between six and 15 years at the date of the offending. The acts charged in each count and the circumstances of their commission varied. They included digital penetration of the vagina of a girl aged 14 or 15 years; procuring a girl aged between six and eight years to masturbate him; indecently rubbing his erect penis against a nine year old girl; encouraging a 15 year old girl to touch his penis; and indecently exposing himself to girls aged nine and 12 or 13 years. The prosecution also sought to adduce tendency evidence from additional witnesses. Three were women who described occasions when they had been at the appellant's home as young girls on which he had either touched them in a sexual way or exposed his penis in their presence. Another three were women who had worked with the appellant ("the workplace tendency witnesses"). They described occasions, when they were aged in their late teens or early twenties, when the appellant had inappropriately sexually touched them or exposed himself to them. The appellant applied for severance of the counts relating to each complainant and an order for separate trials. The success of the application turned on the admissibility of the tendency evidence. The admissibility of the tendency evidence was determined before the jury was empanelled by reference to the statements of the complainants and the tendency witnesses. A summary of the evidence given at the trial, which did not materially depart from the accounts contained in the statements, is set out later in these reasons. The trial judge rejected the appellant's challenge that the evidence lacked sufficient similarity to the charged conduct to have significant probative value. His Honour said that contention focused too narrowly on the need to prove a tendency to engage in sexual activity in a particular fashion. His Honour assessed the probative value of proof of the tendencies as particularised above to be significant in circumstances in which the fact in issue in each count was the occurrence of the sexual conduct charged. His Honour held that the evidence of the workplace tendency witnesses was not admissible in support of counts one to 10. The evidence of these witnesses was found to have significant probative value with respect to proof of the offence charged in count 11. This offence occurred at the appellant's workplace and involved him exposing his penis to the complainant, who was aged 12 or 13 years. The jury was directed that the evidence of the workplace tendency witnesses was relevant to the determination of count 11. The Court of Bell Edelman Criminal Appeal held that the written and oral directions made clear that the evidence could not be used in consideration of counts 1 to 103. The correctness of that conclusion is not an issue in the appeal. On 7 April 2014, the jury returned verdicts of guilty on the first nine counts in the indictment. On 8 April 2014, the jury returned a verdict of guilty on the eleventh count. The jury was unable to agree on count 10 and was discharged without verdict. The appellant was sentenced to an aggregate sentence of 10 years and nine months' imprisonment, with a non-parole period of six years, to date from 7 April 2014. The Court of Criminal Appeal The appellant appealed against his convictions to the New South Wales Court of Criminal Appeal (Beazley P, Schmidt and Button JJ), contending that, having regard to the breadth of the tendency that it was adduced to prove, the tendency evidence did not possess significant probative value4. The appellant's argument drew support from the statement of the Court of Appeal of the Supreme Court of Victoria in Velkoski v The Queen that tendency evidence must possess "sufficient common or similar features with the conduct in the charge in issue so as to demonstrate a pattern that cogently increases the likelihood of the occurrence of that conduct"5. The Court of Criminal Appeal declined to follow Velkoski and held, consistently with a line of New South Wales authority6, that there is no requirement that the conduct evidencing the tendency display features of similarity with the charged conduct. The evidence disclosed the appellant's sexual interest in underage girls and tendency to engage in sexual activity with them opportunistically as the occasion presented in social and familial settings and the work environment. The Court of Criminal Appeal concluded that the evidence had been rightly admitted because proof of the tendency made proof of the fact of the commission of the offence charged more likely to a significant extent7. 3 Hughes v The Queen [2015] NSWCCA 330 at [233]. 4 Hughes v The Queen [2015] NSWCCA 330 at [149]. 5 Velkoski v The Queen (2014) 45 VR 680 at 682 [3]. 6 R v Ford (2009) 201 A Crim R 451; R v PWD (2010) 205 A Crim R 75; Saoud v The Queen (2014) 87 NSWLR 481. 7 Hughes v The Queen [2015] NSWCCA 330 at [188], [200]. Bell Edelman On 2 September 2016, Gageler and Gordon JJ granted the appellant special leave to appeal on two grounds. The first ground contends error in the conclusion that the tendency evidence possessed "significant probative value". The second ground contends error in the rejection of the approach adopted in Velkoski to the assessment of that question. It raises consideration of the divergence between the Court of Appeal of the Supreme Court of Victoria and the Court of Criminal Appeal of New South Wales and the courts of Tasmania and the Australian Capital Territory with respect to the admission of tendency evidence under the Evidence Act8. The Director of Public Prosecutions for Victoria ("the Victorian Director") was given leave to intervene in support of the respondent with respect to the second ground of appeal. For the reasons to be given, the Victorian Director's submission, that Velkoski evinces an unduly restrictive approach to the admission of tendency evidence, is accepted. The Court of Criminal Appeal's conclusion that the tendency evidence adduced at the appellant's trial had significant probative value in relation to proof of each count in the indictment was not attended by error and it follows that the appeal must be dismissed. The scheme of the Evidence Act governing tendency evidence Subject to the exclusionary rules in Pts 3.2 to 3.11 of the Evidence Act, evidence that is relevant in a proceeding is admissible in the proceeding9. Evidence is relevant if it could rationally affect (directly or indirectly) the assessment of the probability of the existence of a fact in issue10. Part 3.6 governs the admission of evidence of tendency and coincidence. At common law, this evidence is governed by rules concerning propensity and similar fact evidence. The intention of the Evidence Act to make substantial changes to the common law rules11 is evident in the provision for the admission of tendency and coincidence evidence. 8 Tasmania v Martin (No 2) (2011) 20 Tas R 445; Tasmania v W (No 2) (2012) 227 A Crim R 155; Tasmania v H [2015] TASSC 36; R v Lam [2014] ACTSC 49. 9 Evidence Act, s 56(1). 10 Evidence Act, s 55(1). 11 Papakosmas v The Queen (1999) 196 CLR 297 at 302 [10]; [1999] HCA 37; IMM v The Queen (2016) 257 CLR 300 at 311 [35] per French CJ, Kiefel, Bell and Keane J; [2016] HCA 14; R v Ellis (2003) 58 NSWLR 700 at 716-717 [78]. Bell Edelman That provision in respect of tendency evidence is in s 97(1): "Evidence of the character, reputation or conduct of a person, or a tendency that a person has or had, is not admissible to prove that a person has or had a tendency (whether because of the person's character or otherwise) to act in a particular way, or to have a particular state of mind unless: the party seeking to adduce the evidence gave reasonable notice in writing to each other party of the party's intention to adduce the evidence, and the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value." That provision in respect of coincidence evidence is in s 98(1): "Evidence that 2 or more events occurred is not admissible to prove that a person did a particular act or had a particular state of mind on the basis that, having regard to any similarities in the events or the circumstances in which they occurred, or any similarities in both the events and the circumstances in which they occurred, it is improbable that the events occurred coincidentally unless: the party seeking to adduce the evidence gave reasonable notice in writing to each other party of the party's intention to adduce the evidence, and the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value." The probative value of evidence is the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue12. Tendency evidence will have significant probative value if it could rationally affect the assessment of the probability of the existence of a fact in issue to a significant extent13. The trier of fact reasons from satisfaction that a 12 Evidence Act, Dictionary. The definition appears in s 3(1) of the Tasmanian Act. 13 See IMM v The Queen (2016) 257 CLR 300 at 314 [46] per French CJ, Kiefel, Bell Bell Edelman person has a tendency to have a particular state of mind, or to act in a particular way, to the likelihood that the person had the particular state of mind, or acted in the particular way, on the occasion in issue. The capacity of tendency evidence to be influential to proof of an issue on the balance of probability in civil proceedings may differ from the capacity of the same evidence to prove an issue beyond reasonable doubt in criminal proceedings. The starting point in either case requires identifying the tendency and the fact or facts in issue which it is adduced to prove. The facts in issue in a criminal proceeding are those which establish the elements of the offence. In criminal proceedings in which the prosecution seeks to adduce tendency evidence about the accused, s 101(2) of the Evidence Act imposes a further restriction on admissibility: the evidence cannot be used against the accused unless its probative value substantially outweighs any prejudicial effect that it may have on the accused. The reception of tendency evidence in a criminal trial may occasion prejudice in a number of ways. The jury may fail to allow that a person who has a tendency to have a particular state of mind, or to act in a particular way, may not have had that state of mind, or may not have acted in that way, on the occasion in issue. Or the jury may underestimate the number of persons who share the tendency to have that state of mind or to act in that way. In either case the tendency evidence may be given disproportionate weight. In addition to the risks arising from tendency reasoning, there is the risk that the assessment of whether the prosecution has discharged its onus may be clouded by the jury's emotional response to the tendency evidence. And prejudice may be occasioned by requiring an accused to answer a raft of uncharged conduct stretching back, perhaps, over many years. In a criminal proceeding, before tendency evidence may be adduced by the prosecution about the accused, the court must first ask whether the evidence has significant probative value and, if it does, the court must next ask whether that value substantially outweighs any prejudicial effect the evidence may have on the accused. The appeal is concerned with the answer to the first question. Ground two – a requirement of similarity It is convenient to address the second ground first. This ground contends that the Court of Criminal Appeal erred by holding that an "underlying unity" or "pattern of conduct" need not be established before tendency evidence is held to have significant probative value and by declining to follow Velkoski. The appellant's argument acknowledges that s 97(1) does not refer to similarity, unlike s 98(1). Nonetheless, he submits that the inferential process of reasoning from proof of tendency inherently invokes consideration of the Bell Edelman similarity between the tendency and the fact or facts in issue: tendency evidence depends for its probative value on how persuasively it can be reasoned that the person will behave in a way that is consistent with the tendency. The legislative choice to condition the admission of tendency evidence on the evidence having significant probative value, and to preclude tendency reasoning if the evidence is not admissible under Pt 3.6 even if it is relevant for another purpose14, is said to reflect long-standing scepticism of tendency reasoning and appreciation of the dangers of the unfair prejudice to which it may give rise15. The appellant refers to the interim report of the Australian Law Reform Commission ("the ALRC")16 for the proposition that the dangers of tendency reasoning are greater in cases in which the tendency does not share features of similarity with the conduct in issue. At the time the ALRC published its reports in its landmark reference on the law of evidence, the preponderance of English and Australian authority was against the admission of evidence of propensity altogether17. The ALRC considered that the rules precluding the prosecution from adducing evidence of the bad character of the accused were supported by the results of psychological research18. The research was concerned with the value of evidence of general behavioural traits such as honesty. A person's general disposition was found to 14 Evidence Act, s 95. 15 That scepticism, as Professor Tapper observes, appears to have been in decline in England and Wales before the enactment of s 101(1) of the Criminal Justice Act 2003 (UK), which allows the admission of evidence of the defendant's bad character where the evidence is relevant to an important matter in issue between the defendant and the prosecution: Tapper, Cross and Tapper on Evidence, 11th ed (2007) at 403-416; Director of Public Prosecutions v P [1991] 2 AC 447; R v H [1995] 2 AC 596; R v Z [2000] 2 AC 483; and see The Law Commission, Evidence of Bad Character in Criminal Proceedings, Law Com No 273, (2001); New Zealand Law Commission, Disclosure to Court of Defendants' Previous Convictions, Similar Offending and Bad Character, Report 103, (2008). 16 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985). 17 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 219 [400]. 18 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 460 [810]. Bell Edelman be of little value as a predictive tool, whereas a person's behaviour in similar situations might justify prediction19. The ALRC questioned the inflexible rejection of reasoning from propensity20. In cases in which it is established that the accused was responsible for other unusual acts, the ALRC pointed out, it is possible to reason to guilt via either propensity or the improbability of coincidence21. The analysis anticipated Pfennig v The Queen22. The focus of the analysis remained on the singularity of the propensity. Reflecting this thinking, in the draft Evidence Bill appended to its final report the ALRC conditioned the admission of tendency evidence on proof of substantial and relevant similarity23. The legislative history of Pt 3.6 of the Evidence Act as enacted is traced in Spigelman CJ's judgment in R v Ellis24. It suffices to observe that among the differences between the ALRC's draft and s 97, as enacted, is the omission of any requirement of similarity. The legislature's choice to reject the ALRC's recommendation in this respect is unexplained, but, as Spigelman CJ observed, it is a choice which makes the ALRC's reports less useful on this subject than on other subjects25. The Court of Appeal in Velkoski undertook a comprehensive review of the authorities touching on the admission of tendency evidence. Their Honours identified an approach in New South Wales in recent years that is less restrictive 19 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 452 [797]. 20 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 220 [400]. 21 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 220 [401]. 22 (1995) 182 CLR 461; [1995] HCA 7. 23 Australian Law Reform Commission, Evidence, Report No 38, (1987), Draft Evidence Bill, cl 87(b). 24 (2003) 58 NSWLR 700 at 714-715 [65]-[68]. 25 (2003) 58 NSWLR 700 at 714-715 [65]; and see Jacara Pty Ltd v Perpetual Trustees WA Ltd (2000) 106 FCR 51 at 64 [51]. Bell Edelman than the approach taken in Victoria, or by the Court of Criminal Appeal in earlier years26. The Court of Appeal concluded that the more recent New South Wales approach sets the threshold for the admission of tendency evidence too low27. The recent New South Wales approach was said to be exemplified by the decisions in R v Ford28 and R v PWD29. Ford and PWD were each successful prosecution appeals against a ruling excluding tendency evidence on the trial of sexual offences. In Ford, on an indictment charging the accused with sexual intercourse without consent, the prosecution sought to lead evidence of indecent assaults, committed by the accused against two other complainants, as evidence of the accused's tendency to sexually and indecently assault women who had fallen asleep at his home after drinking alcohol. The trial judge rejected the tender, holding that the differences in the nature of the sexual conduct on each occasion deprived the evidence of significant probative value30. Campbell JA, giving the leading judgment in the Court of Criminal Appeal, rejected the need for tendency evidence to prove a tendency to commit acts closely similar to the acts constituting the charged offence. His Honour observed that all "that a tendency need be, to fall within the chapeau to s 97(1), is 'a tendency to act in a particular way'"31. His Honour concluded: "[a]ll that is necessary is that the disputed evidence should make more likely, to a significant extent, the facts that make up the elements of the offence charged"32. Evidence that on three occasions the accused had sexually assaulted an intoxicated woman 26 Velkoski v The Queen (2014) 45 VR 680 at 713 [142]. 27 Velkoski v The Queen (2014) 45 VR 680 at 717 [164]. 28 Velkoski v The Queen (2014) 45 VR 680 at 716 [155], citing R v Ford (2009) 201 A Crim R 451. 29 Velkoski v The Queen (2014) 45 VR 680 at 713 [142], citing R v PWD (2010) 205 A Crim R 75. 30 R v Ford (2009) 201 A Crim R 451 at 456-458 [6]-[16], 461-465 [28]-[31]. 31 R v Ford (2009) 201 A Crim R 451 at 466 [38]. 32 R v Ford (2009) 201 A Crim R 451 at 485 [125]. Bell Edelman who had fallen asleep at his home demonstrated a tendency to act in a particular way. Proof of that tendency was found to have significant probative value in the context of the issues in the trial33. R v PWD In PWD, 10 counts charging the accused with sexual offences against four boys were joined in the same indictment. The complainants were boarders at a school of which the accused was the principal. The prosecution sought to adduce the evidence of each complainant and of two further witnesses on the trial of each count to prove the accused's tendency to be sexually interested in young male students and to use his position of authority to engage in sexual activity with them. The sexual conduct and the circumstances in which the conduct occurred varied. The trial judge considered these differences deprived the tendency evidence of significant probative value and ordered separate trials34. Allowing the appeal, the Court of Criminal Appeal followed Ford and held that the admissibility of tendency evidence does not depend upon the evidence exhibiting "striking similarities, or even closely similar behaviour"35. The tendency which the Court of Criminal Appeal identified the evidence to be capable of proving was the accused's sexual attraction to young male students and tendency to act on that attraction by engaging in various sexual acts with boarders who were vulnerable because they were homesick or otherwise unable to adjust to the normal pattern of school life36. Given that the occurrence of the offences was in issue, proof of the tendency had significant probative value, including by excluding that the accused's relationship with each student was an Velkoski v The Queen The indictment in Velkoski charged the accused with 15 counts of committing an indecent act with a child under the age of 16 years and one count 33 R v Ford (2009) 201 A Crim R 451 at 485 [126]-[127]. 34 R v PWD (2010) 205 A Crim R 75 at 77-78 [2]-[6]. 35 R v PWD (2010) 205 A Crim R 75 at 91 [79]. 36 R v PWD (2010) 205 A Crim R 75 at 92 [87]. 37 R v PWD (2010) 205 A Crim R 75 at 92 [88]. Bell Edelman of attempting to commit that offence. The offences were alleged to have been committed against three complainants while each was attending the day-care centre run by the accused's wife. The indecent acts with which the accused was charged included: touching a child's penis; encouraging a child to take hold of the accused's penis; touching a child on the vagina; and touching a child on the bottom38. The tendency notice served by the prosecution identified the tendencies that it was sought to prove as "the accused had a sexual interest in young children attending the day-care centre run by his wife" and "the accused was willing to act on that sexual interest by engaging in sexual acts with the complainants"39. The defence did not object to the reception of the tendency evidence at the trial. On appeal against conviction, the defence resiled from that The Court of Appeal commenced its analysis in Velkoski by commenting on the stringency of the common law similar fact rule in its application to the prosecution of sexual offences41: "This high threshold meant that, in many cases, juries were left to consider the evidence concerning each alleged victim in isolation, without ever being made aware of the fact that allegations of a similar kind had been made by other complainants. Such cases often involved allegations that went back many years, and sometimes came down to a consideration of oath against oath. The result, in a great many cases, was a series of acquittals, whereas, had the evidence been made available, the outcome would almost certainly have been different." The Court of Appeal correctly observed that the common law principles governing the admission of similar fact evidence have been abrogated and entirely replaced by Pt 3.6 of the Evidence Act42. Nonetheless, their Honours went on to hold that the common law concepts of "underlying unity", "pattern of conduct" and "modus operandi" continue to inform the assessment of whether 38 Velkoski v The Queen (2014) 45 VR 680 at 682 [1], 683-685 [8]-[18]. 39 Velkoski v The Queen (2014) 45 VR 680 at 685 [22]. 40 Velkoski v The Queen (2014) 45 VR 680 at 686 [23]-[24]. 41 Velkoski v The Queen (2014) 45 VR 680 at 687 [31]. 42 Velkoski v The Queen (2014) 45 VR 680 at 692 [66], 717 [162]; see also R v Ellis (2003) 58 NSWLR 700 at 717 [83]. Bell Edelman evidence is capable of supporting tendency reasoning43. The conclusion was linked to the view that the object of s 97(1)(b) is to protect against the risk of an unfair trial. Requiring significant probative value to be assessed by the criterion of similarity of operative features was said to protect against this risk44. Their Honours were critical of cases in which the prosecution adduces tendency evidence to establish "the offender's interest in particular victims and his willingness to act upon that interest" because such evidence discloses only "rank propensity". Their Honours said that once the jury is satisfied that the acts relied upon as tendency have been committed, any resort to proof of the offender's state of mind to support tendency reasoning is impermissible and highly prejudicial45. These statements, couched in the language of the common law, do not stand with the scheme of Pt 3.6. They are apt to overlook that s 97 applies to civil and criminal proceedings. In criminal proceedings, the risk that the admission of tendency evidence may work unfairness to the accused is addressed by s 101(2). Moreover, s 97(1) in terms provides for the admission of evidence of a person's tendency to have a particular state of mind. An adult's sexual interest in young children is a particular state of mind. On the trial of a sexual offence against a young child, proof of that particular state of mind may have the capacity to have significant probative value. The Court of Appeal went on to state that46: "To remove any requirement of similarity or commonality of features does not ... give effect to what is inherent in the notion of 'significant probative value.' If the evidence does no more than prove a disposition to commit crimes of the kind in question, it will not have sufficient probative force to make it admissible." This reasoning glosses the language of s 97(1)(b) of the Evidence Act; it does not explain its "inherent" meaning. The circumstance that the text of s 97(1)(b) does not include reference to similarity or to the concepts of "underlying unity", "pattern of conduct" or "modus operandi" is a clear indication that s 97(1)(b) is not to be applied as if it had been expressed in those terms. The 43 Velkoski v The Queen (2014) 45 VR 680 at 692-693 [67], 698 [82]. 44 Velkoski v The Queen (2014) 45 VR 680 at 717 [164]. 45 Velkoski v The Queen (2014) 45 VR 680 at 720 [173(f)]. 46 Velkoski v The Queen (2014) 45 VR 680 at 717-718 [164]. Bell Edelman omission of these familiar common law concepts is eloquent of the intention that evidence which may be significantly probative for the purposes of s 97(1)(b) should not be limited to evidence exhibiting the features so described. The Court of Appeal identified the following principle47: "[W]e have examined the principle which is applied in determining whether tendency evidence is admissible. The principle consistently applied in this court is that the evidence must possess sufficient common or similar features with the conduct in the charge in issue so as to demonstrate a pattern that cogently increases the likelihood of the occurrence of that conduct." Applying this principle, the Court of Appeal held that it had been open to the prosecution to adduce tendency evidence in respect of the counts which had the common feature of the accused encouraging the complainant to touch his, the accused's, penis, or exposing his penis to the complainant48. The remaining counts, however, were held to have lacked any sufficiently similar feature to permit tendency reasoning49. The convictions were set aside and a new trial was The Velkoski analysis proceeds upon the assumption that, regardless of the fact in issue, the probative value of tendency evidence lies in the degree of similarity of "operative features" of the acts that prove the tendency51. It is an analysis that treats tendency evidence as if it were confined to a tendency to perform a particular act. Depending upon the issues in the trial, however, a tendency to act in a particular way may be identified with sufficient particularity to have significant probative value notwithstanding the absence of similarity in the acts which evidence it. Velkoski is illustrative. 47 Velkoski v The Queen (2014) 45 VR 680 at 682 [3]. 48 Velkoski v The Queen (2014) 45 VR 680 at 721-722 [181]. 49 Velkoski v The Queen (2014) 45 VR 680 at 722 [184]. 50 Verdicts of acquittal were entered on two counts, which the Court of Appeal found were not supported by the evidence. 51 Velkoski v The Queen (2014) 45 VR 680 at 719 [171]. Bell Edelman The expression of the accused's sexual interest in young children was not confined to soliciting them to touch his penis: he repeatedly touched one complainant's penis and he touched other complainants on their vaginas and bottoms. Confining the tendency evidence to counts charging an occasion on which he solicited one of the complainants to touch his penis did not give the tendency evidence its relative strength52. There was no reason to find that the accused was more likely to act on his sexual interest in young children by soliciting one of the complainants to touch his penis than he was to sexually molest the complainant at the day-care centre in another way. Given that the issue in each case was the occurrence of the offence, proof of the tendencies which the prosecution identified had significant probative value. Commonly, evidence of a person's conduct adduced to prove a tendency to act in a particular way will bear similarity to the conduct in issue. Section 97(1) does not, however, condition the admission of tendency evidence on the court's assessment of operative features of similarity with the conduct in issue. The probative value of tendency evidence will vary depending upon the issue that it is adduced to prove. In criminal proceedings where it is adduced to prove the identity of the offender for a known offence, the probative value of tendency evidence will almost certainly depend upon close similarity between the conduct evidencing the tendency and the offence. Different considerations may inform the probative value of tendency evidence where the fact in issue is the occurrence of the offence. In the trial of child sexual offences, it is common for the complainant's account to be challenged on the basis that it has been fabricated or that anodyne conduct has been misinterpreted. Logic and human experience suggest proof that the accused is a person who is sexually interested in children and who has a tendency to act on that interest is likely to be influential to the determination of whether the reasonable possibility that the complainant has misconstrued innocent conduct or fabricated his or her account has been excluded. The particularity of the tendency and the capacity of its demonstration to be important to the rational assessment of whether the prosecution has discharged its onus of proof will depend upon a consideration of the circumstances of the case. The test posed by s 97(1)(b) is as stated in Ford53: "the disputed evidence should make more likely, to a significant extent, the facts that make up the elements of the offence charged". The only qualification to this is that it is not necessary that the 52 cf Velkoski v The Queen (2014) 45 VR 680 at 719 [171]. 53 (2009) 201 A Crim R 451 at 485 [125]. Bell Edelman disputed evidence has this effect by itself. It is sufficient if the disputed evidence together with other evidence makes significantly more likely any facts making up the elements of the offence charged. Of course, where there are multiple counts on an indictment, it is necessary to consider each count separately to assess whether the tendency evidence which is sought to be adduced in relation to that count is admissible. The assessment of whether evidence has significant probative value in relation to each count involves consideration of two interrelated but separate matters. The first matter is the extent to which the evidence supports the tendency. The second matter is the extent to which the tendency makes more likely the facts making up the charged offence. Where the question is not one of the identity of a known offender but is instead a question concerning whether the offence was committed, it is important to consider both matters. By seeing that there are two matters involved it is easier to appreciate the dangers in focusing on single labels such as "underlying unity", "pattern of conduct" or "modus operandi". In summary, there is likely to be a high degree of probative value where (i) the evidence, by itself or together with other evidence, strongly supports proof of a tendency, and (ii) the tendency strongly supports the proof of a fact that makes up the offence charged. Unlike the common law which preceded s 97(1)(b), the statutory words do not permit a restrictive approach to whether probative value is significant. However, the open-textured nature of an enquiry into whether "the court thinks" that the probative value of the evidence is "significant" means that it is inevitable that reasonable minds might reach different conclusions. This means that in marginal cases it might be difficult to know whether an appellate court might take a different view of the significance of the tendency evidence from a trial judge. This might result in the setting aside of any conviction and an order for a retrial. There may also be other risks for the prosecution. The admissibility of the tendency evidence is assessed based upon the evidence that witnesses are expected to give. In this case, the evidence given by the witnesses did not differ materially from their anticipated evidence. But in cases where the admissibility of tendency evidence is borderline, there may be risks if the actual evidence does not accord with the evidence as anticipated. Again, this could have consequences for any conviction. One intermediate appellate court has recently observed that the potential consequence of a new trial in cases where a conviction is overturned due to the wrongful admission of tendency evidence which was borderline should be a matter taken into account by the prosecution in assessing, perhaps conservatively, what tendency evidence it will rely upon54. In any event, the 54 DKA v The State of Western Australia [2017] WASCA 44 at [69]. Bell Edelman open-textured, evaluative task remains one for the court to undertake by application of the same well-known principles of logic and human experience as are used in an assessment of whether evidence is relevant55. Ground one This ground challenges the conclusion that the tendency evidence adduced at the appellant's trial possessed significant probative value. At the outset it is to be noted that the prosecution did not seek to rely on the improbability of the complainants falsely making allegations of sexual impropriety against the appellant, so the appeal does not invite consideration of any overlap between tendency and coincidence reasoning56. The evidence Counts one and two charged offences against JP of sexual intercourse without consent, knowing that JP was not consenting57. The offences were alleged to have occurred when JP was aged 14 or 15 years on occasions when the appellant and his wife were dinner guests at JP's home. The first count charged an occasion when the appellant entered JP's bedroom while she was asleep. JP was sharing a bed with the appellant's daughter. JP woke to find the appellant's hand inside her pyjama pants. He digitally penetrated her vagina. She pushed his hand away and he licked her cheek and left the room. The second count occurred a month or so later when the appellant again entered JP's bedroom. On this occasion JP was asleep on her own. She woke to find the appellant's hand inside her pyjama pants, he again digitally penetrated her vagina and he touched her clitoris for around 10 minutes. JP also said there were other occasions when the appellant entered her bedroom and touched her on the vagina. The third, fourth, fifth and sixth counts charged indecent assaults on SH58, which occurred on occasions when she was aged six, seven or eight years. The offences arose out of two incidents that occurred when SH was staying overnight at the appellant's home. On each occasion the appellant went into the bedroom where SH and the appellant's daughter were sleeping, wakened SH, and made her 55 Evidence Act, s 55. 56 Saoud v The Queen (2014) 87 NSWLR 481 at 490-491 [38]-[44] per Basten JA. 57 Crimes Act 1900 (NSW), s 61D(1). 58 Crimes Act 1900 (NSW), s 61E(1). Bell Edelman masturbate him. On each occasion he ejaculated and rubbed semen over the mound of SH's vagina with his penis. SH gave evidence of similar incidents that had occurred on other occasions. The seventh, eighth and ninth counts charged aggravated indecent assaults against AK59, which took place when she was aged nine years. The seventh and eighth counts charged offences that occurred on an occasion when the appellant took AK and his daughter on an outing to the beach. The appellant suggested that the girls swim between his legs. On both occasions when AK did so, the appellant pinned her between his legs, exposing his penis to her. The ninth count charged an incident that occurred on an occasion when AK was staying overnight at the appellant's home. AK had an ear infection and she lay on the appellant's lap while he put drops in her ears. AK felt the appellant's erect penis rubbing against her cheek bone as he moved her head to position it in the light. When she swapped sides so that the appellant could put drops in her other ear, AK again felt his erect penis against her face. AK gave evidence of another occasion on which she had sat on the appellant's lap and felt his penis "digging into her buttock" as he moved her legs from side to side. She said that on other occasions the appellant had exposed his penis and testicles to her. The tenth count charged the appellant with inciting EE to commit an act of indecency with him60. EE was 15 years old at the time. She had come to know the appellant when she was doing a work experience placement with his wife. The offence was alleged to have occurred on an occasion when the appellant had driven EE to her home. EE said that as they walked down the driveway at her home they had starting kissing and that she had moved her hand onto the appellant's erect penis over his clothing. EE gave evidence of another occasion in a park when she had sat leaning against the appellant and felt his erect penis against the small of her back. They had kissed and the appellant had touched her nipples and vulva through her clothing. The eleventh count charged the appellant with committing an act of indecency towards SM when SM was 12 or 13 years old61. The appellant and SM were both appearing in a television series called Hey Dad..!. The appellant came out of his dressing room, stood in front of a mirror in SM's view and undid his belt, letting his pants and underpants drop to his ankles. He wiggled his hips 59 Crimes Act 1900 (NSW), s 61E(1A). 60 Crimes Act 1900 (NSW), s 61E(2). 61 Crimes Act 1900 (NSW), s 61E(2). Bell Edelman back and forth exposing his penis as he looked at SM in the mirror. SM also gave evidence of occasions when she had sat on the appellant's lap while publicity photographs were taken. On these occasions SM said the appellant had put his hand underneath her and touched her on the chest, making her feel uncomfortable. AA, a member of the appellant's extended family, gave evidence of an occasion when she was aged between 10 and 14 years when the appellant touched her on the breast and between her legs as she was swimming. AA also gave evidence of seeing the appellant in her bedroom touching his genitals while he stood naked in front of a mirror with the bedroom door open. On another occasion, AA said the appellant had touched her breasts shortly after his daughter left the room. BB, another member of the appellant's extended family, gave evidence of an incident that occurred when she was 11 years old. She was at a birthday party at the appellant's home when he touched her breasts under her shirt and put his hand underneath the elastic of her jeans. VOD stayed overnight with SH at the appellant's home on occasions when she was aged between seven and nine years. She gave evidence that the appellant had come into the bedroom which she was sharing with SH and walked around the room naked and that she had seen his genitals. The workplace tendency witnesses all worked in the costume department of Hey Dad..!. LJ was about 24 years old at the time. She said that the appellant often slept in his dressing room during breaks and that she had to wake him. On occasions she would find him naked and uncovered. On other occasions LJ said that the appellant had made her feel uncomfortable by trying to grab her breast when hugging her and brushing past her, rubbing his genitals against her back or bottom. CS was about 19 or 20 years old when she worked on Hey Dad..!. She said the appellant had made her feel uncomfortable by, when brushing past her, making contact with her bottom or breast with his genitals or hands. On one occasion, while in his dressing room, the appellant exposed his penis to CS. VR was 18 years old when she worked on Hey Dad..!. On a couple of occasions the appellant had touched her near her breast. After the third occasion VR determined that the touching had not been accidental. She had to take clothes into the appellant's dressing room and sometimes she woke him from a nap. On one occasion the appellant was naked and she pulled up a sheet to cover Bell Edelman him. After the third occasion when she found the appellant lying naked on his bed, VR reported the matter to her supervisor. The appellant's submissions In this Court the appellant acknowledges that the evidence of JP was admissible as tendency evidence on the trial of the counts involving SH and vice versa because each involved the surreptitious sexual molestation of a child in bed notwithstanding that another child was close by. He is critical of the trial judge and the Court of Criminal Appeal for the failure to articulate how the remaining tendency evidence gained its significant probative force. He asks how satisfaction that he exposed his penis to a nine year old child swimming between his legs makes it more probable that he encouraged EE, a 15 year old girl, to put her hand over his penis as they kissed. Conclusion The focus of the appellant's submission on the dissimilarity in the acts and the circumstances in which they occurred ignores the tendency that they were adduced to prove. The particular stated in the tendency notice, that the conduct occurred in the vicinity of another adult, served to highlight the appellant's willingness to act on his sexual interest in underage girls despite the evident danger of detection. It would have been more accurate to particularise the conduct as occurring in the vicinity of another person, since on some occasions it was another child who was in the vicinity. In EE's case, there was no evidence that any person was in the vicinity. Nonetheless, the evidence in support of that count was that the appellant encouraged EE to stimulate his penis as they stood kissing in the driveway of her family home, in circumstances in which EE was fearful that they would be seen. The evidence as a whole was capable of proving that the appellant was a person with a tendency to engage in sexually predatory conduct with underage girls as and when an opportunity presented itself in order to obtain fleeting gratification, notwithstanding the high risk of detection. An inclination on the part of a mature adult to engage in sexual conduct with underage girls and a willingness to act upon that inclination are unusual as a matter of ordinary human experience. Often, evidence of such an inclination will include evidence of grooming of potential victims so as to reveal a "pattern of conduct" or a "modus operandi" which would qualify the evidence as admissible at common law. But significant probative value may be demonstrated in other ways. In this case the tendency evidence showed that the unusual interactions which the appellant was alleged to have pursued involved courting a substantial risk of discovery by friends, family members, workmates or even casual passers-by. This level of disinhibited disregard of the risk of discovery by other Bell Edelman adults is even more unusual as a matter of ordinary human experience. The evidence might not be described as involving a pattern of conduct or modus operandi – for the reason that each alleged offence involved a high degree of opportunism; but to accept that that is so is not to accept that the evidence does no more than prove a disposition to commit crimes of the kind in question. Given the complainants' ages, consent was not an issue in any of the counts. It was the defence case on each count that the complainant had fabricated her account. That the tendency evidence did more than prove a disposition to commit crimes of the kind in question, and was actually of significant value as proof of his guilt of the offences charged, can be illustrated by hypothesising separate trials in respect of each complainant with the only evidence against the appellant being the evidence of the complainant. In each such case, the jury would be presented with a prosecution case inviting it to conclude beyond reasonable doubt that the appellant had engaged in behaviour towards the complainant which involved predatory sexual activity pursued by taking opportunistic advantage of a social or family or work occasion in circumstances in which the appellant courted a real risk of discovery by other adults. Considered in isolation, JP's evidence might have seemed inherently unlikely: the appellant, a family friend, at dinner in JP's home, absented himself from the party and came into her bedroom, and without making any attempt to ensure her silence, commenced to invasively sexually assault her while his daughter lay sleeping in the same bed. The jury might well be disinclined to accept JP's evidence as satisfying it, beyond a reasonable doubt, that the appellant had, in fact, engaged in conduct which was so much at odds with the jury's experience of the probabilities of ordinary human behaviour. Proof of the in sexual activity with underage girls appellant's opportunistically, notwithstanding the evident risk, was capable of removing a doubt which the brazenness of the appellant's conduct might otherwise have raised. to engage tendency The force of the tendency evidence as significantly probative of the appellant's guilt was not that it gave rise to a likelihood that the appellant, having offended once, was likely to offend again. Rather, its force was that, in the case of this individual accused, the complaint of misconduct on his part should not be rejected as unworthy of belief because it appeared improbable having regard to ordinary human experience. As explained above, there are two matters which must be considered. The first matter, involving the extent to which the evidence supports a tendency, does not require that the evidence be considered "by itself". In the words of s 97(1), Bell Edelman the evidence of either "conduct" or "a tendency" can be used to determine the tendency relied upon by "having regard to other evidence adduced or to be adduced". In other words, evidence of a tendency might be weak by itself but its probative value can be assessed together with other evidence. This point can be illustrated by reference to an example given by the appellant in oral submissions, which was that there was a "world of difference" between the evidence concerning EE (count 10), who was 15 years old and whom the appellant encouraged to commit indecent acts in a park and in a driveway, and the evidence concerning SH (counts 3 to 6), which involved intrusive acts "in a darkened bedroom, in her bed, when she was only six, seven or eight". One problem with this comparison is that it ignores the fact that in relation to, for example, count 4, involving SH, the evidence of EE needed to be considered together with the evidence involving (i) counts 1 to 3 and counts 5 to 11, (ii) uncharged acts relating to the complainants SH, JP, AK and SM, and (iii) uncharged acts relating to the tendency witnesses VOD, AA and BB. Indeed, one of the appellant's concessions on this appeal was that the tendency evidence from counts 1 to 2 (JP) and 3 to 6 (SH) was cross-admissible. This evidence, which was conceded to be admissible, reinforced the other tendency evidence. When considered together, all the tendency evidence provided strong support to show the appellant's tendency to engage opportunistically in sexual activity with underage girls despite a high risk of detection. The probative value of the evidence of each complainant and of AA, BB and VOD lay in proof of the tendency to act on the sexual attraction to underage girls, notwithstanding the evident risks. The fact that the appellant expressed his sexual interest in underage girls in a variety of ways did not deprive proof of the tendency of its significant probative value. The assessment of the significant probative value of the proposed evidence does not conclude by assessing its strength in establishing a tendency. The second matter to consider is that the probative value of the evidence will also depend on the extent to which the tendency makes more likely the elements of the offence charged. This will necessarily involve a comparison between the tendency and the facts in issue. A tendency expressed at a high level of generality might mean that all the tendency evidence provides significant support for that tendency. But it will also mean that the tendency cannot establish anything more than relevance. In contrast, a tendency expressed at a level of particularity will be more likely to be significant. The Court of Criminal Appeal did not err in finding that the tendency evidence of each of the complainants and AA, BB and VOD met the condition imposed by s 97(1)(b) in relation to each count in the indictment. Bell Edelman It will be recalled that the evidence of the workplace tendency witnesses was confined to proof of the offence charged in count 11. Relevantly, the trial judge assessed that the evidence of the workplace tendency witnesses was capable of establishing the appellant's tendency to expose his genitalia to females. His Honour considered that the workplace tendency witnesses' evidence had significant probative value to the determination of whether the appellant had acted as SM alleged by exposing his genitals to her. In circumstances in which SM's evidence was said to have been fabricated, this conclusion did not involve error. As earlier noted, the Court of Criminal Appeal's conclusions (i) that the probative value of the tendency evidence was not substantially outweighed by any prejudicial effect it may have on the appellant, and (ii) that the directions concerning the confined use to be made of the workplace tendency witnesses' evidence were sufficient, are not the subject of the appeal in this Court. Orders For these reasons there should be the following order. Appeal dismissed. GAGELER J. One of the exclusionary rules set out in the Uniform Evidence legislation62 is labelled the "tendency rule". The tendency rule is that "[e]vidence of the character, reputation or conduct of a person, or a tendency that a person has or had, is not admissible to prove that a person has or had a tendency … to act in a particular way, or to have a particular state of mind unless … the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value"63. The probative value of evidence is "the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue"64. The effect of the tendency rule is to make evidence inadmissible to prove a tendency as a step in proving or disproving the existence of another fact, being a fact that is in issue, unless the court evaluates the extent to which the evidence could rationally affect the assessment of the probability of the existence of the fact in issue as "significant". Consideration of how high the bar of "significance" should be set in undertaking that evaluation usefully begins with a simple question. Why does the tendency rule exist? The scheme of the Uniform Evidence legislation is that no evidence is admissible at all in a civil or criminal proceeding unless it is evidence that could (if accepted) rationally affect the assessment of the probability of the existence of a fact in issue65. Tendency evidence adduced about a defendant by the prosecution in a criminal proceeding is subject to the special rule that it cannot be used against the defendant unless the probative value of the evidence substantially outweighs any prejudicial effect on the defendant66. On top of all that, a court has discretion to refuse to admit evidence the probative value of which is substantially outweighed by the danger that the evidence might be unfairly prejudicial to a party, or be misleading or confusing, or cause or result in undue waste of time67. And on top of all that again, a court in a criminal proceeding has an overriding duty to refuse to admit evidence adduced by the 62 See Evidence Act 1995 (Cth), Evidence Act 1995 (NSW) and cognate legislation in other States and Territories. 63 Section 97(1). 64 Dictionary, Pt 1, definition of "probative value". (The definition appears in s 3(1) of the Evidence Act 2001 (Tas).) 65 Sections 55 and 56. 66 Section 101. 67 Section 135. prosecution if its probative value is outweighed by the danger of unfair prejudice to the defendant68. Given all of those other potential barriers to its admissibility and use, why is there added this particular barrier to the admissibility of evidence that has the potential rationally to affect the assessment of the probability of the existence of a fact in issue by contributing to proof that a person has or had a tendency to act in a particular way or to have a particular state of mind? To answer that question, it is necessary to be clear about the problem to which the tendency rule is directed. The problem arises from the cognitive process necessarily involved in using tendency evidence to assess the probability of the existence of a fact in issue. The cognitive process is that mapped out in the statement of the tendency rule itself. Tendency evidence – be it of character or reputation or of conduct other than an occasion in issue in a proceeding – is evidence that is used to prove to the tribunal of fact that a person has or had a tendency to act in a particular way or to have a particular state of mind. The tendency so proved to the tribunal of fact is then used by the tribunal of fact to predict or (to adopt terminology which describes the process of reasoning employed more accurately) to "postdict"69 the action or state of mind of the person on the occasion or occasions in issue in the proceeding. Applied to evidence of past conduct, tendency reasoning is no more sophisticated than: he did it before; he has a propensity to do this sort of thing; the likelihood is that he did it again on the occasion in issue. Tendency reasoning, as courts have long recognised, is not deductive logic. It is a form of inferential or inductive reasoning. What it involves is "admeasuring the probability or improbability of the fact ... in issue ... given the fact or facts sought to be adduced in evidence"70. In the admeasurement of that probability or improbability, as courts have again long recognised, there inheres a very real risk of attaching "too much importance" to the tendency evidence – of giving tendency evidence "too much weight"71. The common law traditionally took an extremely conservative approach to managing that risk, at least in criminal proceedings. The problem that inheres in tendency reasoning has come to be exposed by social science research and explained in social science literature in more 68 Section 137. 69 Saks and Spellman, The Psychological Foundations of Evidence Law, (2016) at 70 Martin v Osborne (1936) 55 CLR 367 at 385; [1936] HCA 23, quoted in Hoch v The Queen (1988) 165 CLR 292 at 294; [1988] HCA 50. 71 Perry v The Queen (1982) 150 CLR 580 at 585-586; [1982] HCA 75. precise terms. The problem is one of cognitive bias, amounting to an inclination observable on the part of most persons to overvalue dispositional or personality- based explanations for another person's conduct and to undervalue situational explanations for that conduct. The bias is towards overestimating the probability of another person acting consistently with a tendency that the person is thought to have – of treating the person as more consistent than he or she actually is72. That problem of cognitive bias in tendency reasoning is separate from any added danger which might arise from the potential for a tribunal of fact to make some improper use of tendency evidence. The potential for a tribunal of fact to make improper use of tendency evidence is readily accommodated within an evaluation of the prejudicial effect of the evidence73. Cognitive bias can perhaps be thought of as a form of prejudice, but it really is a problem of a different sort from the problem of a tribunal of fact making improper use of evidence. The problem is of a different sort because it inheres in the process of reasoning involved in the tribunal of fact making entirely proper use of evidence. To recognise that the tendency rule is directed to the problem of cognitive bias is consistent with its legislative history. The legislative history is recounted in detail in the reasons for judgment of Nettle J. Enough for present purposes is to emphasise the most salient aspects. The interim report of the Australian Law Reform Commission, which preceded the enactment of the Uniform Evidence legislation, drew attention to the considerable body of psychological research which had come to bear on the topic of tendency reasoning by 1985. That research, the Commission pointed out, indicated not only that "the concept of character in the narrow sense of general disposition has little value as a predictive tool of human behaviour" but also that "there is a real danger that evidence from which a character inference can be drawn will be given disproportionate weight by the fact-finder, compared with the weight scientific studies suggest it should have"74. 72 Saks and Spellman, The Psychological Foundations of Evidence Law, (2016) at 73 HML v The Queen (2008) 235 CLR 334 at 354 [12]; [2008] HCA 16. 74 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 452 [797], 453 [799]. The Commission stated75: "Psychological studies indicate that, in the absence of detailed information on an individual's history and personality, the chances of accurate prediction are very low unless the individual is in similar situations – it is the behaviour in a similar situation rather than an inferred character trait which justifies prediction." "The research confirms the need to maintain strict controls on evidence of character or conduct and for such evidence to be admitted only in exceptional circumstances. It demonstrates, however, that the emphasis of the law should be changed. For the sake of accurate fact-finding, fairness and the saving of time and cost, the law should maximise the probative value of the evidence it receives by generally limiting it to evidence of conduct occurring in circumstances similar to those in question. Only for special policy reasons should other evidence of character or conduct be received." In its interim report, the Commission proposed a multilayered solution to the problem to which the psychological research had pointed. There should be a general statutory rule to the effect that evidence of specific conduct or a specific state of mind should not be admissible to prove that a person had a tendency to act in a particular way or to have a particular state of mind. There should be an exception from that rule in a civil or criminal proceeding only where the court was satisfied that it was reasonably open to find that the person did some other particular act or had some other particular state of mind and that the act or state of mind and the circumstances in which it was done or existed were substantially and relevantly similar to the act or state of mind and circumstances in issue in the proceeding. Even then, tendency evidence about a defendant should not be adduced by the prosecution in a criminal proceeding unless that evidence overcame the additional hurdles of being relevant to a fact in issue that was substantially in dispute in the proceeding and of having "substantial probative value"77. The matters to which the court was to have regard in determining whether the evidence had substantial probative value should include: the nature 75 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 452 [797]. 76 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 456 [800]. 77 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 2 at 47. and extent of the similarity; the extent to which the act or state of mind to which the evidence related was unusual; in the case of evidence of a state of mind, the extent to which the state of mind was unusual or occurred infrequently; and, in the case of evidence of an act, the likelihood that the defendant would have repeated the act, the number of times on which similar acts had been done, and the period that had elapsed between the time when the act was done and the time when the defendant was alleged to have done the act that the evidence was adduced to prove78. The Commission repeated that proposal in its final report79. The Australian Law Reform Commission's proposal was not taken up in the Uniform Evidence legislation. What emerged in place of the proposal in the legislation as originally enacted in 1995 was a single statutory rule applicable in civil and criminal proceedings alike. The rule was couched in terms that evidence of the character, reputation or conduct of a person, or a tendency that a person has or had, was not admissible to prove that the person had a tendency to act in a particular way, or to have a particular state of mind, if the court thought that the evidence would not have significant probative value80. To that was added the prohibition on use against a defendant in a criminal proceeding of tendency evidence adduced about the defendant by the prosecution unless the probative value of the evidence substantially outweighs any prejudicial effect on the defendant81. Exactly why the Australian Law Reform Commission's proposal was departed from does not appear from publicly available sources. The legislative choice that was made cannot be explained as a preference to adhere to the approach of the common law: the structure and language of the statutory rule differed markedly from the common law rule as it came to be definitively stated in Australia almost contemporaneously with the enactment of the Uniform Evidence legislation82. Against the background of the Commission's careful identification of the underlying problem with tendency evidence and the implicit rejection of the Commission's proposed solution, however, two aspects of the legislative choice that was made come into sharp relief. 78 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 2 at 47. 79 Australian Law Reform Commission, Evidence, Report No 38, (1987) at 101 80 Section 97. 81 Section 101(2). 82 See Pfennig v The Queen (1995) 182 CLR 461; [1995] HCA 7. First, the legislative choice was for tendency evidence to be admissible only if adjudged by a court to meet a threshold of probative value set above the minimum requirement for any evidence to be admissible, being simply that the evidence be capable of bearing on the assessment of the probability of the existence of a fact in issue. The higher threshold set for evidence used for tendency reasoning was that it be capable of bearing on the assessment of the probability of the existence of a fact in issue to a "significant" extent. The threshold of significant probative value, as was soon pointed out in the case law, is lower than that of "substantial" probative value; but, to meet the threshold of significant probative value, evidence must still be "important" or "of consequence" to the assessment of the probability of the existence of a fact in issue83. Second, the legislative choice was that a court was not to be constrained or legislatively guided as to the considerations which might be taken into account in forming the judgment that tendency evidence met that threshold. In particular, tendency evidence capable of meeting the threshold was not to be limited to evidence of an act or state of mind occurring in circumstances substantially and relevantly similar to the act or state of mind and circumstances in issue. The legislative history does not conclude with the enactment of the Uniform Evidence legislation in 1995. In 2005, the Australian Law Reform Commission, the New South Wales Law Reform Commission and the Victorian Law Reform Commission jointly conducted a review of the Uniform Evidence legislation. In the course of that review, they revisited the psychological research to which the Australian Law Reform Commission had referred in 1985. They observed in their joint report that a review of the psychological literature since 1985 and of psychological teaching current in 2005 confirmed and in some cases strengthened the Australian Law Reform Commission's previous analysis84. Tendency evidence, as the Commissions then put it by way of summary, "poses problems for the fact-finding process because the probative value of such evidence tends to be overestimated and the evidence can be highly prejudicial"85. Their joint report contains no suggestion that they saw the suite of statutory rules which had then been in operation for ten years as other than an appropriately tailored legislative response to those problems. 83 Lockyer (1996) 89 A Crim R 457 at 459. 84 Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) at 83 [3.19]. 85 Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) at 366 [11.5]. Characterising the tendency rule as "a preliminary admissibility screen which operates in both civil and criminal proceedings", and noting that "in criminal proceedings, there are other requirements that must be satisfied"86, the Australian Law Reform Commission, the New South Wales Law Reform Commission and the Victorian Law Reform Commission in their joint report in 2005 recommended no change to the formulation of the threshold for the admissibility of tendency evidence in terms of significant probative value. They rejected submissions that the threshold should be removed in civil proceedings87. They also rejected submissions that the threshold should be raised in criminal proceedings by replacing "significant" with "substantial"88. The only change they recommended to the rule was a drafting change – to remove a double negative from the text as originally enacted89. The Uniform Evidence legislation was subsequently amended to reflect that recommendation90. The result is the tendency rule in its current form. Plainly enough, the tendency rule is not an attempt entirely to remove the risk of overestimation of the probative value of tendency evidence to which attention was drawn in 1985 and again in 2005. The risk is inherent in any tendency reasoning, and the rule admits of the possibility of evidence being admitted to prove or disprove the existence of a fact in issue through a process of tendency reasoning. The tendency rule is, rather, best explained as confining the availability of tendency reasoning to evidence adjudged capable through the application of tendency reasoning of affecting the assessment of the probability of the existence 86 Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) at 379 [11.48]. 87 Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) at 375 [11.36]. 88 Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) at 379 [11.51]. 89 Australian Law Reform Commission, New South Wales Law Reform Commission and Victorian Law Reform Commission, Uniform Evidence Law, ALRC Report No 102, NSWLRC Report No 112, VLRC Final Report, (2005) at 378 Recommendation 11-3. 90 Eg, Evidence Amendment Act 2008 (Cth), Sched 1, item 42; Evidence Amendment Act 2007 (NSW), Sched 1 [38]. of a fact in issue to an extent significant enough to justify the risk of cognitive error which tendency reasoning entails. The statutory standard of "significant", and its non-statutory but helpful synonyms "important" and "of consequence", are best understood and applied purposively in that light. For a court to think that tendency evidence has significant probative value, it must be satisfied that using the evidence for tendency reasoning makes the existence of a fact in issue significantly more probable or improbable. If the question is just how much more probable or improbable, the answer is enough to justify the ever-present risk that the objective probability will be subjectively overestimated. Putting the same point more colloquially, the court must be comfortable that the evidence is of sufficient weight to justify the risk of the evidence unwittingly being given too much weight. The significance to be adjudged through the application of that standard is between the tendency evidence and the probability of the existence of a fact in issue. The connection between the two, however, lies in the particular tendency that is alleged. That is to say, whilst the focus is on the connection between the tendency evidence and the probability of the existence of the fact in issue, the particular tendency is the lens through which the focus occurs. To return to the explanation already given of the essential nature of tendency reasoning, the degree to which tendency evidence is capable of rationally affecting the assessment of the probability of the existence of the fact in issue is a function of two considerations. The first consideration is the extent to which the evidence (alone or with other evidence adduced or to be adduced by the party seeking to adduce the evidence) is capable of rationally affecting the assessment of the probability of the person having or having had a tendency to act in a particular way or to have or have had a particular state of mind. Unless the evidence as a whole is capable of establishing to the requisite standard of proof that the person has or has had the alleged tendency, tendency reasoning can go no further. Sometimes a tendency will be capable of being established to the requisite standard by evidence of how a person acted on one other occasion or on a small number of unrelated other occasions. More commonly, what will need to be shown to establish a tendency is a pattern of behaviour: the person having acted in a particular way, or in a manner which demonstrates the person to have a particular state of mind, in repeated circumstances in which common factors have been present. Courts of criminal appeal have properly pointed out that a tendency to act in a particular way or to have a particular state of mind can be established by evidence of past conduct without that evidence needing to disclose a "striking pattern of similarity between the incidents"91. That is not, however, to detract from the importance of factors indicative of some sort of pattern to inferring tendency from conduct and to assessing the strength of such tendency as might be found. In the language of Basten JA in Saoud v The Queen92, for evidence of conduct to establish that a person had a tendency to act in a particular way or to have a particular state of mind "will almost inevitably require degrees of similarity, although the nature of the similarities will depend very much on the circumstances of the case". The second consideration is the extent to which the tendency established by the evidence is (alone or with other evidence adduced or to be adduced by the party seeking to adduce the evidence) capable of rationally affecting the assessment of the probability of the person having acted in a particular way or having had the state of mind alleged on an occasion in issue in the proceeding. Important at this stage of the analysis will be the specificity of the tendency and how precisely that tendency correlates to the act or state of mind that the person having the tendency is alleged to have had on the occasion in issue. That is because, other considerations being equal, the greater is the specificity of the tendency and the greater is the correlation between the tendency and the act or state of mind in issue, the greater will be the predictive or "postdictive" value of the tendency in that the greater will be the likelihood that the person acted or thought in conformity with the tendency on the occasion in issue. Making and illustrating that point, Leeming JA said in El-Haddad v The Queen93: "[T]he specificity of the tendency directly informs the strength of the inferential mode of reasoning. It is easy to see why. It is, for example, one thing to say that a man has a tendency to steal cars; that says something, but not very much, as to whether he stole a particular car the subject of a charge. It is quite another to say that a man has a tendency to steal black European sports cars and then set them on fire, if the fact in issue is whether that man stole and burnt a black Porsche." Of course, the significance of tendency reasoning is not always as limited as that simple illustration might suggest. The Victorian Director of Public Prosecutions, intervening in the present appeal, draws attention to the circumstance that tendency reasoning assumes added significance in a typical 91 R v Ford (2009) 201 A Crim R 451 at 485 [125]. 92 (2014) 87 NSWLR 481 at 491 [44]. 93 (2015) 88 NSWLR 93 at 113 [72]. case of historic sexual assault. Typically, the defendant was an adult and the complainant was a child at the time of the sexual assault charged. The complainant gives evidence that the sexual assault occurred in a setting in which there were no witnesses to the assault. The defendant was known to the complainant. There is no issue about identity. The defendant denies any wrong- doing. Whether the defendant committed the sexual assault charged comes down to whether the complainant or the defendant is to be believed. The Victorian Director of Public Prosecutions points out that evidence of the defendant having committed other sexual assaults, contributing to proof that the defendant had a tendency to commit sexual assault, informs the assessment of the probability of the defendant having committed the sexual assault charged, not only by increasing the likelihood that the defendant acted in accordance with that tendency on the occasion to which the charge relates, but also by making more plausible the testimony of the complainant that the defendant did so act on that occasion and less plausible the testimony of the defendant that he did not. Enhancing the plausibility of the complainant's testimony enhances the significance of the tendency evidence to proof of the prosecution case94. The Victorian Director of Public Prosecutions nevertheless stops short of suggesting that the typical case of historic sexual assault is a special category in which tendency evidence of the defendant having committed other sexual assaults must have significant probative value on the basis that it makes the testimony of the complainant more plausible. For tendency evidence to have the effect of enhancing the plausibility of the complainant's testimony, it must be evidence to which tendency reasoning is applied to make the complainant's version of events more probable. Risk of cognitive error inheres in that method of reasoning, and what still needs to be evaluated in the application of the tendency rule is the extent to which the tendency evidence makes the complainant's version of events objectively more probable. Test that last point by hypothesising a case in which the defendant admits to a dozen prior sexual assaults but adamantly denies the assault with which he is charged in spite of testimony from the complainant that he did it. The probative value of the prior sexual assaults still lies in the tendency they reveal and in the extent to which the defendant can be inferred to have acted in accordance with that tendency on the occasion in question. A pertinent illustration of appropriate practical outworking of the requisite analysis is provided by the reasoning of Hoeben CJ at CL in Sokolowskyj v The 94 See Stubley v Western Australia (2011) 242 CLR 374 at 416-417 [143]; [2011] HCA 7. Queen95. In a trial of a man for an offence of indecently assaulting an eight-year- old girl known to the defendant in a toilet at a shopping centre, the prosecution relied on the facts surrounding three previous convictions for indecent exposure to young women to establish that the defendant "had a tendency at the relevant time to have sexual urges and to act on them in public in circumstances where there was a reasonable likelihood of detection". Holding that the extent to which the evidence relied on to found that tendency could rationally affect the assessment of the probability of the existence of the fact in issue was not capable of being adjudged to be significant, his Honour identified the central flaw in the prosecution case as one of reliance on "generalised sexual activity" insufficiently related to the elements of the offence charged96. Another pertinent illustration is provided by the reasoning of Maxwell P, Nettle and Beach JJA in Rapson v The Queen97. Following a trial of a teacher for having committed sexual offences against eight male pupils in his care at a secondary boarding school over a 15-year period, the prosecution on appeal conceded that the evidence of two of the pupils concerning charges of penile-anal rape involving domination and violence was not cross-admissible on the charges concerning the other six pupils, all of which involved non-violent and non- penetrative fondling. Their Honours accepted the prosecution concession, noting distinct differences in the gravity of the misconduct and in the qualitative character of the surrounding circumstances. More problematic is the reasoning in PNJ v Director of Public Prosecutions98. The Victorian Court of Appeal there took the view that a tendency cannot be inferred by reference to circumstances within which conduct occurred which were beyond the control of the person in question. The Court of Appeal acted on that view to disregard the circumstance that the evidence sought to be adduced for the purpose of tendency reasoning in that case was of sexual offences against children which occurred at the same location during the period in which the defendant was employed in a supervisory role in a youth detention centre. The correctness of the result in that case has since been doubted99, and I agree with the submission of the Victorian Director of Public Prosecutions that the approach was too blinkered. 95 (2014) 239 A Crim R 528. 96 (2014) 239 A Crim R 528 at 537-538 [40]-[44]. 99 RHB v The Queen [2011] VSCA 295 at [17]. To multiply illustrations beyond this point might distract from principled analysis rather than illuminate it. The Victorian Director of Public Prosecutions submits that the tendency rule has in practice been applied more restrictively in Victoria since the decision of the Victorian Court of Appeal in Velkoski v The Queen100 than the tendency rule has been applied in New South Wales. The ultimate aim of the present analysis being to consider how the tendency rule is best to be applied, little is gained from attempting to evaluate a submission cast in such relative terms. Even less would be gained from attempting to engage with the comment made by the Victorian Court of Appeal in Velkoski that the approach taken to tendency evidence by the New South Wales Court of Criminal Appeal up until the time when Velkoski was decided went too far in lowering the threshold to admissibility101. There is nevertheless some utility in addressing two specific statements in Velkoski. One is the statement that for tendency evidence to be admissible "evidence must possess sufficient common or similar features with the conduct in the charge in issue so as to demonstrate a pattern that cogently increases the likelihood of the occurrence of that conduct"102. The other is the statement, singled out for adverse comment by the New South Wales Court of Criminal Appeal in the decision under appeal, that "to determine whether the features of the acts relied upon permit tendency reasoning, it remains apposite and desirable to assess whether those features reveal 'underlying unity', a 'pattern of conduct', 'modus operandi', or such similarity as logically and cogently implies that the particular features of those previous acts renders the occurrence of the act to be proved more likely"103. The statements, in my opinion, are unobjectionable. The first captures, perhaps as well as any single verbal formulation could, the purposive approach to the application of the tendency rule which I consider to be appropriate. The second fairly describes the normal process of tendency reasoning where a particular tendency is sought to be proved from evidence of other conduct. It does not lay down an exhaustive test for determining when tendency evidence is admissible. Applied too rigidly, it might impede rather than assist the requisite analysis by conflating the capacity of the evidence to establish a particular tendency on the part of a person with the capacity of the particular tendency to 101 Velkoski v The Queen (2014) 45 VR 680 at 717 [164]. 102 Velkoski v The Queen (2014) 45 VR 680 at 682 [3]. 103 Velkoski v The Queen (2014) 45 VR 680 at 719 [171], quoted in Hughes v The Queen [2015] NSWCCA 330 at [187]. contribute to the probability of the person acting or thinking in the manner alleged on the occasion in issue. Making the evaluative judgment required of a court in the implementation of the tendency rule is facilitated by the procedural requirement that a party must ordinarily give notice of an intention to seek to adduce tendency evidence104. The utility of the tendency notice goes beyond providing procedural fairness to other parties. The tendency notice provides the court, at the critical time of assessing the admissibility of tendency evidence, with a statement of the particular tendency which the party seeking to adduce the tendency evidence seeks to prove by it. The importance of explicitly identifying in the notice the particular tendency that is asserted, as Howie AJ put it in Bryant v The Queen105, "should be obvious: how else is the court going to be able to make a rational decision about the probative value of the evidence". By identifying the particular tendency that the evidence is asserted to prove, the notice allows the court to evaluate the strength of the connection between the evidence and the tendency and the strength of the connection between the tendency and the fact in issue. The tendency notice given by the prosecution in the trial of the appellant on 11 counts of sexual misconduct against five female children under 16 years of age (JP, SH, AK, EE and SM) over a seven-year period relevantly gave notice of the prosecution's intention to seek to make cross-admissible, as tendency evidence relevant to proof of each charge of misconduct against each complainant, evidence of each of the other four complainants concerning the misconduct against them. The tendency notice stated in relation to the appellant: "The tendency sought to be proved is his tendency to act in a particular way, and to have a particular state of mind, namely: To having a sexual interest in female children under 16 years of age; To use his social and familial relationships with the families to obtain access to female children under 16 years of age so that he could engage in sexual activities with them; (iii) To use his daughter's relationship with female children to obtain access to them so that he could engage in sexual activities with them; 104 Section 97(1)(a) and (2). 105 (2011) 205 A Crim R 531 at 540 [50]. (iv) To use his working relationship with females to utilise an opportunity to engage in sexual activities; To engage in sexual conduct with females aged under 16 years of age by either touching in an inappropriate sexual way but maintaining the contact was inadvertent or accidental; by exposing his naked penis / genitalia; by making the child come into contact with his penis / genitalia; touching the child's vaginal area by carrying out sexual acts upon the complainants when they were within the vicinity of another adult." Elaborate as the description of the tendency asserted in the notice seems at first sight to be, counsel for the appellant fairly points out that the tendency asserted boils down to a tendency to have a sexual interest in female children less than 16 years of age and to engage in sexual activities with them by using his social, familial or working relationships to obtain access to them. The Court of Criminal Appeal acknowledged only slightly more specificity in the tendency asserted when characterising it in light of the tendency evidence sought to be adduced by the prosecution as a tendency to have a sexual interest in female children less than 16 years of age and to engage in sexual activities "opportunistically, as and when young female persons were in [his] company". Accepting it to be capable of establishing that tendency, the Court of Criminal Appeal concluded that the tendency evidence of all complainants was correctly assessed by the trial judge to have significant probative value106. A grown man does not normally have a sexual interest in female children less than 16 years of age. A tendency to have such a sexual interest and to engage in sexual activities with female children less than 16 years of age, opportunistically or at all, is so abnormal as to allow it to be said that a man shown to have such a tendency is a man who is more likely than other men to have engaged in a particular sexual activity with a particular female child on a particular occasion. Yet the problem is this: how much more likely is not easy to tell, in part because common experience provides no sure guide, and the abhorrence any normal person naturally feels for such a tendency highlights the 106 Hughes v The Queen [2015] NSWCCA 330 at [197]-[200]. risk that any subjective estimation of the likelihood will be greater than is objectively warranted. The phrase "unless … the court thinks" in the formulation of the tendency rule admits of the potential for judicial understanding of the probative value of evidence of particular tendencies to be informed by social science data and enhanced by judicial education. Judicial evaluations of the probative value of categories of tendency evidence may change as new data comes to light and as informed consensus about best practice is built and adjusted in light of improved understanding. No party or intervener in the present appeal sought to direct attention to data or scholarly work bearing on actual probabilities. In the meantime, I think it better to take a conservative approach. On the material currently available, I am unable to be satisfied that either a tendency to be sexually interested in female children, or a tendency to engage in sexual activities with female children opportunistically, bears on the probability that a man who had such a tendency engaged in a particular sexual activity with a particular female child on a particular occasion to an extent that can properly be evaluated as significant. In my opinion, it was not open to the Court of Criminal Appeal to conclude on the basis of its capacity to establish such a tendency that the evidence of all of the complainants met the tendency rule so as to be cross- admissible. Drilling down to what more specific tendency might be revealed on closer examination of the evidence of each complainant, the appellant accepts that there were sufficient similarities between the evidence of JP and SH to permit the finding of a more particular tendency so as to render the evidence of each as to the assault or assaults against her cross-admissible on the charges of assault against the other. The evidence of JP, SH and AK, if accepted, was sufficient to establish that the appellant had engaged in a pattern of conduct which involved exposing his penis to and sexually touching girls where other persons were in close proximity and where he was therefore at risk of detection. Although not fitting neatly the same pattern of conduct on the part of the appellant, because it did not occur in a familial setting, I think it open to conclude that the evidence of SM was cross-admissible on essentially the same basis. The evidence of SM was of the appellant touching her and exposing his penis to her in a work setting where he was again at risk of detection. The overall pattern of conduct revealed by the evidence of JP, SH, AK and SM is indicative of a tendency on the part of the appellant to initiate fleeting physical sexual contact with young females in circumstances in which he was at risk of detection. The evidence of EE, in my opinion, was materially different. The circumstances in which the conduct constituting the offence against EE arose were arranged with the complainant and involved an element of planning. In my view, the appellant's interactions with EE cannot be characterised as indicative of a tendency to initiate fleeting physical sexual contact in circumstances in which he was at risk of detection. I do not think that the evidence of EE (whether considered alone or with other evidence adduced by the prosecution) is of conduct capable of proving a tendency of sufficient specificity to have the effect of increasing the probability of the appellant having engaged in the conduct alleged against JP, SH, AK or SM to an extent that can be described as significant. The evidence of EE, in my opinion, was not open to be admitted as tendency evidence on any of the charges of sexual assault against JP, SH, AK or SM. The New South Wales Director of Public Prosecutions accepts that it follows from a conclusion that the evidence of any complainant was not cross- admissible against any other complainant that an error of law occurred in the conduct of the trial on all charges. He accepts that the consequence is that all of the convictions recorded must be quashed and a new trial must be ordered. He does not argue that any of the convictions can be upheld on the basis that no substantial miscarriage of justice actually occurred by reason of the wrongful admission of the evidence. In the result, I would make the orders sought by the appellant, allowing the appeal, setting aside the orders made by the Court of Criminal Appeal, quashing the convictions of the appellant on counts 1 to 9 and 11, and ordering a new trial on those counts. Nettle 117 NETTLE J. In February 2014, the appellant stood trial in the District Court of New South Wales on 11 counts of sexual misconduct against five female complainants under 16 years of age. Over objection, the Crown was permitted to adduce as tendency evidence pursuant to s 97 of the Evidence Act 1995 (NSW): in relation to each count: evidence of the charged acts committed against each other complainant; evidence of uncharged acts committed against each other complainant; (iii) evidence of uncharged acts committed against non-complainants; and three in relation to Count 11, in addition to the above, evidence of uncharged acts committed against three further non-complainants. The appellant was convicted by a jury of 12 of all counts except Count 10. The question for decision in this appeal is whether any and what part of that evidence was admissible against the appellant as tendency evidence under s 97 of the Evidence Act. As will be explained in what follows, some of the evidence was not admissible as tendency evidence in support of some of the counts because it did not have significant probative value in relation to the facts in issue on those counts. Evidence adduced against the appellant107 Counts 1 and 2 related to complainant "JP"; Counts 3, 4, 5 and 6 to complainant "SH"; Counts 7, 8 and 9 to complainant "AK"; Count 10 to complainant "EE"; and Count 11 to complainant "SM". 107 It was accepted that the summaries appearing at R v Hughes unreported, District Court of New South Wales, 14 February 2014 at 9-37 per Zahra DCJ and Hughes v The Queen [2015] NSWCCA 330 at [126]-[132] sufficiently state the evidence adduced at trial (except in one respect in relation to complainant EE which is corrected below). Nettle Evidence given by complainants of charged offences and uncharged acts admitted as tendency evidence in relation to all counts Complainant JP Counts 1 and 2 charged offences of sexual intercourse with JP between January 1984 and April 1985 without the consent of JP and knowing that JP was not consenting108. At the time of the alleged offending, JP was 14 or 15 years of age. The appellant was a friend of JP's parents and the two families socialised from time to time. JP gave evidence that the acts comprising Count 1 occurred at JP's family home during one such occasion. She said that the appellant entered her bedroom, where she and the appellant's daughter were sleeping, put his hand inside her pyjama pants causing her to wake, touched her vagina and inserted his finger into her vagina. She said that she pushed his hand away and that he then licked her cheek and left the room. JP's evidence as to Count 2 was that, a month or so later, the appellant again entered her room while she was in bed, put his hand inside her pants and rubbed her clitoris and vagina. She said that she held his wrist, trying to push his hand away. JP stated that the appellant had entered her room and touched her vagina on other occasions, and that he would touch or brush past her in ways that made her uncomfortable. (ii) Complainant SH Counts 3, 4, 5 and 6 charged offences of indecent assault against SH between March 1985 and May 1986109. At the time of the alleged offending, SH was between six and eight years old. SH lived with her family close to the appellant's home. She was a friend of the appellant's daughter and regularly visited and slept over at the appellant's home. SH gave evidence that the acts comprising Counts 3, 4, 5 and 6 occurred in the course of two separate incidents at the appellant's home when the appellant came into the bedroom in which SH and the appellant's daughter were sleeping and instructed SH to roll over in bed. He put her hand on his penis and made her masturbate him until he ejaculated. He then wiped the semen on her exposed vagina with his penis. SH gave evidence that the appellant had done the same thing on other occasions, stating that it had occurred at least five times. 108 Contrary to s 61D(1) of the Crimes Act 1900 (NSW) (as in force at the time of the alleged offending). 109 Contrary to s 61E(1) of the Crimes Act. Nettle (iii) Complainant AK Counts 7, 8 and 9 charged offences of aggravated indecent assault of AK between December 1986 and February 1987, while AK was under the authority of the appellant110. At the time of the alleged offending, AK was nine years old. AK was a school friend of the appellant's daughter and occasionally stayed over at the appellant's home. AK gave evidence that the acts comprising Counts 7 and 8 occurred during an outing to Manly Beach when the appellant encouraged his daughter and AK, who were wearing goggles, to swim between his legs. AK said that on the two occasions she did so, she saw the appellant's penis protruding from the side of his swimming togs and that he briefly pinned her between his legs as she passed between them. Her evidence of the acts comprising Count 9 was that, on another occasion when she stayed over at the appellant's home, it was necessary for the appellant to apply medicated ear drops to her ear. In order for that to occur, AK lay with her head on the appellant's lap. When she did so, she felt his erect penis through his trousers rubbing against her face. AK also gave evidence of other occasions when the appellant instructed her to sit on his lap while he had an erection and of further occasions when he exposed his penis to her. On one of the latter occasions, AK walked into the lounge room and the appellant was sitting on the sofa dressed in a sarong that was pulled up to his thighs so that she could see his groin, penis and testicles. After moving his legs open and shut, he pulled the sarong down a little and AK and the appellant's daughter sat on the sofa with him. Another such occasion occurred when the appellant, again wearing a sarong, came into the bedroom in which AK and the appellant's daughter were sleeping. He sat on his daughter's bed with his legs apart so that AK, who was sleeping on a mattress on the floor, could see his penis as he conversed with her about the day's events. (iv) Complainant EE Count 10 charged an offence of inciting EE to commit an act of indecency with the appellant between September and December 1988111. At the time of the alleged offending, EE was 15 years of age. The appellant was a friend of EE's uncle and EE had undertaken work experience with the appellant's wife. After the work experience finished, EE met the appellant several times. EE gave evidence that the acts comprising Count 10 occurred when the appellant drove her home after they had visited a harbour-side park. They walked together down the driveway of EE's parents' home and began kissing. During the kiss, the appellant pressed his erect penis into EE's hip and she moved her hand onto his penis outside his clothing. He said "that's it". EE said that the appellant told her 110 Contrary to s 61E(1A) of the Crimes Act. 111 Contrary to s 61E(2) of the Crimes Act. Nettle that she should not bother having sex with boys because they would not look after her, that she should have sex with a real man because she would have a much better time and that he could show her things that boys did not know. EE also gave evidence of uncharged acts, including that, on another occasion, she met the appellant after school and they went together into bushland adjacent to sports fields. They sat together on a rock and she leaned her back against him with his legs either side of her and his arms around her. He kissed her on the back of the neck. She turned and kissed him. At one point during the kissing, the appellant touched her vulva through her clothing. When the appellant later returned EE to her parents' home, he said to her that he thought they had taken things about as far as they could go and that he wanted her to find a place for them to have sex because he was "too old to be doing it in the bush". Complainant SM Count 11 charged an offence of committing an act of indecency towards SM between April and August 1990, when SM was 12 or 13 years old112. SM had worked with the appellant on a television series called Hey Dad..! from the time she was eight years old. She gave evidence that the acts comprising Count 11 occurred when the appellant came out of his dressing room on the Hey Dad..! set and stood in front of a mirror in view of SM. She said that he made eye contact with her, undid his belt, allowing his trousers to drop to the floor, and pulled down his underpants, thus exposing his penis in the mirror. He wiggled his hips back and forth looking at her in the mirror and then at his penis. SM also gave evidence of uncharged acts, including of occasions when she was required to sit on the appellant's lap for publicity photographs and he would pick her up with his hands on her chest and put his hand underneath her, sometimes moving it so as to touch her vagina. Evidence of uncharged acts against non-complainants ("BB", "AA" and "VOD") admitted as tendency evidence in relation to all counts BB, who was a member of the appellant's extended family, gave evidence of uncharged acts, including of an occasion when she was 11 years old and attended her grandparents' birthday party at the appellant's home. BB said that the appellant touched her breasts under her shirt and put his hand underneath the elastic of her jeans. AA, who was also a member of the appellant's extended family, gave evidence of uncharged acts, including that, when she was between 10 and 14 years of age, the appellant touched her breasts and between her legs while 112 Contrary to s 61E(2) of the Crimes Act. Nettle swimming in the pool at her home. She stated that, following the touching in the pool, she saw the appellant, who had asked to get changed in her bedroom, standing naked in front of a mirror touching his genitals with the bedroom door open113. AA further deposed that, on occasions when she had visited the appellant's home, the appellant had touched her breasts on the outside of her clothing while the appellant's daughter was out of the room and that the appellant had tried to touch her (AA's) breasts and take off her shirt while giving her a back massage. VOD, who had lived near to the appellant, gave evidence that, when she was seven to nine years old, on occasions when she and SH slept over at the appellant's house, the appellant would walk around the house, including in the bedroom where the girls were sleeping, without any clothes on. VOD said that she saw the appellant's genitals. Evidence of uncharged acts committed against non-complainants ("LJ", "CS" and "VR") admitted as tendency evidence in relation to Count 11 LJ, CS and VR each worked with the appellant on the set of Hey Dad..! and each gave evidence of uncharged acts admitted as tendency evidence in relation to Count 11 only. LJ started work as a costume designer on the Hey Dad..! set when she was about 24 years of age. She said that it was part of her responsibilities to wake the appellant when he was napping in his dressing room and that the appellant requested that she enter the room to ensure he was awake. She recalled that, although he had initially slept clothed, and then naked under a sheet, the appellant began occasionally to sleep naked and uncovered. As a result, LJ said that, when the appellant was naked, she would only call to him and leave the door open, and that he would cover himself. She also deposed that, on occasions, the appellant grabbed her breasts, and brushed past her in a way that caused his genitals to rub against her back or bottom. CS worked in the wardrobe department when she was between 19 and 20 years old. She said that the appellant would brush past her and make contact with her bottom or breasts with his genitals or hands, and that, on one occasion, he exposed his penis to her by dropping his pants in the dressing area of the set. VR worked as a wardrobe assistant when she was 18 years old. She said that, on occasion, the appellant had put his hand under her armpit near her breast and that, when she was called upon to wake him after he had been napping in his dressing room, she would see him naked. 113 Hughes unreported, District Court of New South Wales, 14 February 2014 at 31 per Zahra DCJ. Cf Hughes [2015] NSWCCA 330 at [128]. Nettle Admission of the tendency evidence The Crown sought to adduce the evidence described above (hereinafter, "the tendency evidence") to prove a tendency on the part of the appellant to act in a particular way and to have a particular state of mind. The Crown particularised that alleged tendency in the following terms: "(i) To [have] a sexual interest in female children under 16 years of age; To use his social and familial relationships with the families to obtain access to female children under 16 years of age so that he could engage in sexual activities with them; (iii) To use his daughter's relationship with female children to obtain access to them so that he could engage in sexual activities with them; (iv) To use his working relationship with females to utilise an opportunity to engage in sexual activities; To engage in sexual conduct with females aged under 16 years of age by either touching in an inappropriate sexual way but maintaining the contact was inadvertent or accidental; by exposing his naked penis / genitalia; by making penis / genitalia; the child come into contact with his touching the child's vaginal area by carrying out sexual acts upon the complainants when they were within the vicinity of another adult." The appellant sought a pre-trial ruling from the trial judge as to the admissibility of the tendency evidence. The trial judge held that114: "The fact that alleged sexual acts are not identical does not deplete the evidence of its probative value. ... The tendency which is established 114 Hughes unreported, District Court of New South Wales, 14 February 2014 at 53-54 Nettle here is a wider and more detailed pattern of behaviour or modus operandi in the accused's behaviour. In my view, that whilst there are differences in the complainant's [sic] accounts as to the nature of the acts undertaken and the circumstances in which they occur, the evidence is capable of establishing a sexual interest by the accused in young female children. In my view, the probative value of the evidence is significant. It is not the Crown case that the accused had a tendency to orchestrate or arrange the circumstances or created the environment in which the sexual activities occurred. In my view, the evidence establishes a tendency to take advantage of situations which arose where the accused came into contact with young female children. ... [T]he pattern of behaviour relied upon by the Crown is manifest, if not striking and requires little further analysis." In closing address, the Crown prosecutor put to the jury that the tendency evidence proved "that the accused has a tendency to have a sexual interest in females under 16 years of age and that he acted upon that sexual interest". The written "Tendency Direction" given and read to the jury by the trial judge in the course of summing up also provides some insight into the purpose for which the evidence was adduced and, therefore, the basis on which it was admitted. The direction was as follows: "The Crown case is that the evidence of the sexual conduct of the accused given by the complainants (both the acts the subject of a count on the indictment and other alleged acts of sexual conduct) and the evidence of the tendency witnesses is relevant to proving the accused's guilt in respect to individual counts on the indictment because the evidence of the complainants and the tendency witnesses establishes a pattern of behaviour that reveals that the accused has a tendency to act in a particular way or to have a particular state of mind. The Crown argues that the evidence establishes that the accused had a particular state of mind, that is; That the accused was a person who had a sexual interest in female children under 16 years of age; In this regard, the Crown argues that you will find from the evidence led in the trial in relation to each of the complainants and the tendency witnesses, [VOD], [AA] and [BB], that the accused had the tendency to act with a particular state of mind beyond reasonable doubt, that is the accused had a sexual interest in female children under 16 years of age. The Crown argues that having found beyond reasonable doubt the Nettle accused's sexual interest in female children under the age of 16 years, you can use that finding to prove the allegations in each of the counts on the indictment beyond reasonable doubt. The Crown argues also that the evidence of the complainants and tendency witnesses [VOD], [AA] and [BB] establishes that the accused has a tendency to act in the following particular ways: That the accused took advantage of his social and familial relationships with the families to obtain access to female children under 16 years of age so that he could engage in sexual activities with them; the accused took advantage of his daughter's That relationship with female children to obtain access to them so that he could engage in sexual activities with them; That the accused engaged in sexual conduct with females aged under 16 years of age by: inappropriate sexual way but touching maintaining the contact was inadvertent or accidental; in an by exposing his naked penis / genitalia; by making the child come into contact with his penis / genitalia; touching the child's vaginal area; by carrying out sexual acts upon the complainants when they were within the vicinity of another person. In relation to Count Eleven on the indictment, the Crown argues that the evidence of the tendency witnesses [LJ], [CS] and [VR] establishes that the accused has a tendency to act in the following particular way: That the accused took advantage of his working relationship with females to utilise an opportunity to engage in sexual activities; That the accused engaged in touching in an inappropriate sexual way but maintaining the contact was inadvertent or accidental; That the accused exposed his naked penis / genitalia. Nettle The necessary findings before the evidence can be used as establishing tendency: The evidence of the accused having the tendency to act with a particular state of mind or the evidence of the tendency to act in a particular way can only be used by you, in the way the Crown asks you to use it, if you make two findings beyond reasonable doubt. The first finding: The first finding is that you are satisfied beyond reasonable doubt that one or more of the acts relied upon by the Crown to prove the particular tendency to act with the particular state of mind, or the tendency to act in a particular way occurred. Before you can apply tendency reasoning to the counts on the indictment you must first be satisfied that the Crown has established beyond reasonable doubt that the accused did in fact commit the acts which the Crown alleges demonstrate the relevant tendency to act with the particular state of mind or the tendency to act in a particular way. In making that finding you do not consider each of the acts in isolation, but consider all the evidence and ask yourself whether you are satisfied that a particular act or acts relied upon actually took place. The second finding: You ask yourself whether, from the act or acts that you have found proved, you can conclude beyond reasonable doubt that the accused had the tendency to act with the particular state of mind or the tendency to act in a particular way that the Crown alleges. If you cannot draw that conclusion beyond reasonable doubt, then again you must put aside any suggestion that the accused had the particular tendency alleged. So, if having found one or more of the acts attributed to the accused to have been proved beyond reasonable doubt and you can, from the proved act or acts, conclude beyond reasonable doubt that the accused had the tendency to act in the particular way or have the particular state of mind that the Crown alleges, you may use the fact of that particular tendency or state of mind in considering whether the accused committed one or more of the offences charged on the indictment. That is, if you were satisfied that the accused did have the particular tendency argued by the Crown Nettle then that may lend support to the evidence of the complainants who are the subject of specific charges on the indictment. The evidence must not be used in any other way. It would be completely wrong to reason that, because the accused has committed one offence or has been guilty of one piece of misconduct, he is therefore generally a person of bad character and for that reason must have committed the offences. That is not the purpose of the evidence". When later summarising the evidence led by the Crown, the trial judge referred back to the written directions several times and reminded the jury that, before they could take into account the acts alleged as tendency evidence, they needed to be satisfied of those acts beyond reasonable doubt. Some elaboration of the directions was offered in the context of BB's evidence, as follows: "Now again ladies and gentlemen I remind you of the use that the Crown invites you to make of her evidence. The Crown argues that her evidence establishes that the accused had a tendency to act with a particular state of mind, that is that he had a sexual interest in females under the age of 16 and acted in a particular way. Here the Crown relies on her evidence of the accused touching her as she described in evidence." The reasoning of the Court of Criminal Appeal Following his conviction on Counts 1 to 9 and 11, the appellant appealed to the New South Wales Court of Criminal Appeal on a large number of grounds, including, in effect, that the trial judge had erred in admitting the tendency evidence under s 97 of the Evidence Act and, further or alternatively, that the trial judge had erred in failing to exclude the tendency evidence under s 101 in relation to all or some counts, because: the alleged tendency of having a sexual interest in female children under 16 years of age was so broad as to encompass the entirety of the evidence in relation to each complainant and, of itself, insufficient to have significant probative value115; not every tendency alleged was relevant to all counts. In particular, the alleged tendency of the appellant to take advantage of his social and familial relationships to obtain access to female children under 16 years of age for the purpose of engaging in sexual activities with them applied only to Counts 1 to 9 and was not of 115 Hughes [2015] NSWCCA 330 at [149]. Nettle significant probative value in relation to Count 10 or 11; and, conversely, the alleged tendency of utilising working relationships with females to create an opportunity to engage in sexual activities applied only to Count 11 and did not have significant probative value in relation to Counts 1 to 10116; and some of the sexual conduct relied upon as tendency evidence in relation to all counts alleged acts that were different in nature from the charged offences and therefore not significantly probative of the facts in issue. In particular117: (iii) the evidence of inappropriate touching in the course of working relationships which was given by LJ, CS and VR had no significant probative value in relation to any count other than Count 11; the evidence of SH and AK that the appellant made them come into contact with his penis did not have significant probative value in relation to Count 10 or 11; the evidence of JP, SH and AA that the appellant touched their vaginal areas did not have significant probative value in relation to Count 7, 8, 9, 10 or 11; the evidence of JP, SH and AK of the appellant committing sexual offences against them when they were in the vicinity of another person did not have significant probative value in relation to Count 11. The appellant also contended that the trial judge failed to analyse the tendency evidence to determine whether each witness's evidence had significant probative value and, if so, in relation to which counts118, and that the trial judge's directions were inadequate in failing to identify, count by count, the aspects of 116 Hughes [2015] NSWCCA 330 at [150]. In this Court, the appellant's submissions accepted that the tendency of taking advantage of social and familial relationships, and of utilising working relationships, to engage in sexual activities might also have been relevant to Count 10. 117 Hughes [2015] NSWCCA 330 at [151]-[153]. 118 Hughes [2015] NSWCCA 330 at [154]. Nettle each witness's evidence that were capable of having significant probative value in establishing the alleged tendency in relation to that count119. The Court of Criminal Appeal (Beazley P, Schmidt and Button JJ) rejected those contentions. Their Honours held120 that the trial judge was correct in his understanding of the tendency evidence and in his assessment of it as having significant probative value. They reasoned121 that, although there was "no doubt that the tendency evidence ... was admitted on a basis that allowed dissimilar circumstances and dissimilar acts to be used in respect of different counts", the fact of dissimilarity was not, of itself, determinative. In relation to the circumstances of the offences, it was said that122: "what was common to them all was that they represented occasions on which young females were present and the [appellant] used those occasions for the purpose of engaging in sexual activities with them". In relation to the various acts alleged, the Court held123: "notwithstanding the dissimilarities, the conduct alleged was sexual in nature, directed towards young females, on occasions that presented themselves to the [appellant]. Underlying the similarity was that the conduct was, in effect, referable to the circumstances as they presented to the [appellant]. In short, the conduct occurred opportunistically, as and when young female persons were in the [appellant's] company." It followed, their Honours concluded124, that all of the evidence adduced as tendency evidence was correctly assessed as having significant probative value in relation to each count. The Court also held that the trial judge had not erred in failing to exclude any of the tendency evidence under s 101 of the Evidence Act. The appellant's contentions had included125 that the trial judge had treated his rejection of the 119 Hughes [2015] NSWCCA 330 at [229]. 120 Hughes [2015] NSWCCA 330 at [200]. 121 Hughes [2015] NSWCCA 330 at [196]. 122 Hughes [2015] NSWCCA 330 at [198]. 123 Hughes [2015] NSWCCA 330 at [199]. 124 Hughes [2015] NSWCCA 330 at [200]. 125 Hughes [2015] NSWCCA 330 at [209]. Nettle possibility of concoction as determinative of the question of unfair prejudice. The Court rejected126 that contention because the appellant's case accepted that the pre-trial publicity and the risk of concoction was integral to the assessment of the probative value of the tendency evidence, and the trial judge's conclusion that there was no real risk of contamination was well based. The Court concluded127 that there was equally no deficiency in the trial judge's directions as to the use which could be made of the tendency evidence. Their Honours stated that there were two essential tendencies, "being that the [appellant] had a sexual interest in female children under the age of 16" and that he acted on that interest, albeit in various ways. The trial judge's directions to that effect were appropriate because "although it was accepted that there were some dissimilarities is not determinative". tendency evidence ... dissimilarity the The appellant's contentions Before this Court, the appellant contended, as he did below, that not all of the tendencies alleged by the Crown, as particularised in the tendency notice and set out in the trial judge's directions to the jury128, applied to every count. Those submissions are outlined above129. Counsel for the appellant further submitted that there were significant dissimilarities between the conduct charged by some counts; that the complainants varied greatly in age from six to almost 16 years of age; and that the context and circumstances varied greatly between the counts. It was also said that the alleged tendencies were expressed with such generality as to obscure the manner in which each alleged tendency was said to arise. The appellant submitted that the trial judge and the Court of Criminal Appeal failed to, or could not, identify any particular feature of the conduct alleged by the tendency evidence that supported an inferential process of reasoning which made it more likely that the appellant would have acted as alleged. The only common feature identified was that of opportunism. There was an absence of any common or unifying modus operandi or systematic approach. It was contended that the Court of Criminal Appeal erred in principle in supposing130 that it was sufficient to identify contexts in which the offending 126 Hughes [2015] NSWCCA 330 at [212], [215]. 127 Hughes [2015] NSWCCA 330 at [230]. 128 See [139], [141] above. 129 See [143] above. 130 Hughes [2015] NSWCCA 330 at [197]. Nettle occurred that were "different, but not significantly disassociated". In the result, the tendency evidence that was admitted in relation to all counts was evidence of a tendency no more specific than to have a sexual interest in, and engage in sexual conduct with, female children under 16 years of age in a wide variety of circumstances in which the appellant found himself. Counsel for the appellant accepted that the tendency evidence was capable of establishing that the appellant had a sexual interest in female children under 16 years of age, but argued that a tendency put at such a level of generality did not rise to the threshold of "significant probative value" for the purposes of s 97. It was a tendency, it was said, that went little if at all beyond a mere disposition to commit offences of the kind charged, and the suggestion that the appellant acted opportunistically added nothing of significance by way of refinement. "Significant probative value" in relation to tendency evidence Section 97 of the Evidence Act provides that evidence adduced for the purpose of proving that an accused had a tendency to act in a particular way or to have a particular state of mind is inadmissible unless: "the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value." The "probative value" of evidence means the extent to which the evidence can rationally affect the assessment of the probability of the existence of a fact in issue or, put differently, the degree of its relevance131. Because each count on a multiple count indictment must be considered separately and decided separately by reference only to so much of the evidence adduced as is relevant to that count132, the question of whether tendency evidence could have significant probative value in relation to a particular count needs to be decided individually for each count by reference to the facts in issue for that count133. It is not an 131 Evidence Act, ss 3, 55, Dictionary Pt 1 definition of "probative value". See Lockyer (1996) 89 A Crim R 457 at 459. 132 See generally KRM v The Queen (2001) 206 CLR 221 at 234 [36] per McHugh J, 257 [106], 260 [118] per Kirby J, 263-264 [132]-[133] per Hayne J; [2001] HCA 11; MFA v The Queen (2002) 213 CLR 606 at 617 [34] per Gleeson CJ, Hayne and Callinan JJ; [2002] HCA 53; R v Markuleski (2001) 52 NSWLR 82 at 92-93 [31]-[34] per Spigelman CJ (Carruthers AJ agreeing at 149 [344]), 125-126 [212]-[214] per Wood CJ at CL, 136 [271] per Grove J. 133 See Phillips v The Queen (2006) 225 CLR 303 at 317-318 [44]-[47]; [2006] HCA 4; Lockyer (1996) 89 A Crim R 457 at 459; Lock (1997) 91 A Crim R 356 at 362; SKA v The Queen [2012] NSWCCA 205 at [295] per Adams J (Hislop J agreeing at Nettle exercise that may properly be undertaken by an analysis expressed in broad generalities. It requires precise particularisation of each tendency alleged and logical analysis of why the alleged tendency, if proved, would have significant probative value in relation to a fact in issue in respect of the count under consideration134. Evidence that an accused has committed an offence is not, of itself, significantly probative of the accused having committed another offence135. Without more, it establishes only that the accused is the kind of person who has committed an offence136. To make evidence of previous offending or misconduct significantly probative of a subsequent offence there needs to be something more about the nature of the offences or the circumstances of the offending in each case, or about the victim of each offence, which rationally affects to some significant degree the assessment of the probability that the accused committed the offence, or that the complainant is telling the truth as to the commission of the offence137. 134 HML v The Queen (2008) 235 CLR 334 at 350-352 [4]-[5], 354 [11] per Gleeson CJ; [2008] HCA 16; IMM v The Queen (2016) 257 CLR 300 at 314 [46] per French CJ, Kiefel, Bell and Keane JJ; [2016] HCA 14; R v Nassif [2004] NSWCCA 433 at [51], [54] per Simpson J (Adams J and Davidson AJ agreeing at [71], [72]); El-Haddad v The Queen (2015) 88 NSWLR 93 at 113 [72] per Leeming JA (McCallum J and R A Hulme J agreeing at 124 [129], [130]); Vojneski v The Queen [2016] ACTCA 57 at [57] per Murrell CJ and Refshauge J, 135 See Jacara Pty Ltd v Auto-Bake Pty Ltd [1999] FCA 417 at [10]; GBF v The Queen [2010] VSCA 135 at [26]-[27]. See also BBH v The Queen (2012) 245 CLR 499 at 525 [70]-[71] per Hayne J (Gummow J agreeing at 522 [61]); [2012] HCA 9. 136 CGL v Director of Public Prosecutions (2010) 24 VR 486 at 495 [30]-[31], 497 [38]; CEG v The Queen [2012] VSCA 55 at [14]; Reeves v The Queen (2013) 41 VR 275 at 292 [66] per Maxwell ACJ (Coghlan JA agreeing at 301 [101]). See also Thompson and Wran v The Queen (1968) 117 CLR 313 at 316 per Barwick CJ and Menzies J (McTiernan J agreeing at 319); [1968] HCA 21; Markby v The Queen (1978) 140 CLR 108 at 116 per Gibbs ACJ (Stephen J, Jacobs J and Aickin J agreeing at 118-119); [1978] HCA 29; Pfennig v The Queen (1995) 182 CLR 461 at 483 per Mason CJ, Deane and Dawson JJ, 525 per McHugh J; [1995] HCA 7. 137 See R v Fletcher (2005) 156 A Crim R 308 at 319-320 [49]-[50] per Simpson J (McClellan CJ at CL agreeing at 310 [1]), 339-341 [157]-[166] per Rothman J; RHB v The Queen [2011] VSCA 295 at [17] per Nettle JA (Harper JA agreeing at [29]); Saoud v The Queen (2014) 87 NSWLR 481 at 487 [28] per Basten JA (Footnote continues on next page) Nettle So, for example, if the previous offence were one which involved the intentional infliction of bodily harm upon the victim, the fact of the previous offence might, as a matter of common sense and experience, rationally suggest a degree of animosity on the part of the accused towards the victim that significantly affects the assessment of the probability that the accused committed a subsequent offence involving the intentional infliction of bodily injury upon the victim138. If the previous offence were a sexual offence against one complainant, the fact of a previous offence might, as a matter of common sense and experience, rationally suggest a sexual attraction on the part of the accused to the complainant that significantly affects the assessment of the probability that the accused committed a subsequent sexual offence against or with that complainant139. If the previous offence involved aspects of offending which were unusual or distinctive for that kind of offence, and a subsequent offence involves similar features of offending, the fact of the previous offence might, as a matter of common sense and experience, rationally be seen significantly to increase the probability that the two offences were committed by the same offender and, therefore, significantly to affect the assessment of the probability that the accused committed the subsequent offence140. Equally, where a previous offence was (Fullerton J and R A Hulme J agreeing at 494 [63], [64]); Vojneski [2016] ACTCA 57 at [49], [54] per Murrell CJ and Refshauge J. 138 See for example Middendorp v The Queen (2012) 35 VR 193 at 201 [20]-[22] per Redlich JA (Mandie JA and Whelan AJA agreeing at 205-206 [40], [41]); Vojneski [2016] ACTCA 57 at [85] per Murrell CJ and Refshauge J, [157]-[162] per 139 See for example Rolfe v The Queen (2007) 173 A Crim R 168 at 188 [64] per Giles JA (James J and Harrison J agreeing at 207 [143], [144]); GBF [2010] VSCA 135 at [26]; MR v The Queen [2011] VSCA 39 at [13]-[14] per Hansen JA (Buchanan JA and Harper JA agreeing at [16], [17]); PCR v The Queen (2013) 279 FLR 257 at 262 [37] per Buchanan JA (Priest JA agreeing at 265 [61]), 265 [57]-[59] per Neave JA; Gentry v Director of Public Prosecutions (Vic) (2014) 244 A Crim R 106 at 113 [29], 115-116 [38]-[39] per Redlich JA (Tate JA and Priest JA agreeing at 118 [49], [50]); Aung Thu v The Queen [2017] VSCA 28 at [34]. See also R v Ball [1911] AC 47 at 71 per Lord Loreburn LC (the other Law Lords agreeing at 71-72); Gipp v The Queen (1998) 194 CLR 106 at 111-113 [9]-[11] per Gaudron J; [1998] HCA 21. 140 See for example R v Dupas (No 2) (2005) 12 VR 601 at 606-609 [12]-[19] per Warren CJ, 622-624 [66]-[71], 625 [75]-[76] per Nettle JA (Harper JA agreeing at 638 [114]); Smith (1915) 11 Cr App R 229. See also AE v The Queen [2008] NSWCCA 52 at [42], [45]; CGL (2010) 24 VR 486 at 495-496 [31]-[33], 496-497 [37]-[38]; PNJ v Director of Public Prosecutions (2010) 27 VR 146 at 151-152 (Footnote continues on next page) Nettle committed by an accused in circumstances which are unusual or distinctive for that kind of offence, and the subsequent offence is committed in similar circumstances, the circumstances in which the previous offence was committed might, as a matter of common sense and experience, be seen significantly to increase the probability that the accused committed the subsequent offence141. As was observed in Hoch v The Queen142, in a different but related context, the probative force of similar fact evidence lay in similarities of offending, unusual features, some underlying unity, or a system or pattern that, as a matter of common sense and experience, increased the objective improbability of some event having occurred other than as alleged. The same logic applies to the question of the admissibility of tendency evidence under s 97143. To repeat, therefore, the mere fact that an accused has committed a previous offence, although relevant, is not, without more, significantly probative of the accused having committed another offence. Assessing the probative value of the tendency evidence In this case, the tendency evidence was admitted on the basis that, when viewed in light of all of the Crown's evidence cumulatively, it could be seen to establish a tendency on the part of the appellant to have a sexual interest in female children under the age of 16 and to act on that tendency in various ways [22]-[23]; Sokolowskyj v The Queen (2014) 239 A Crim R 528 at 538 [43]-[44] per Hoeben CJ at CL (Adams J and Hall J agreeing at 542 [63], [64]). 141 See for example R v Papamitrou (2004) 7 VR 375 at 390-391 [31] per Winneke P (Ormiston JA and Buchanan JA agreeing at 396 [48], [49]); R v Ford (2009) 201 A Crim R 451 at 467 [44] per Campbell JA (Howie J and Rothman J relevantly agreeing at 489 [145], 491 [158]); O'Keefe v The Queen [2009] NSWCCA 121 at [65]-[68] per Howie J (McColl JA and Grove J agreeing at [1], [2]); GBF [2010] VSCA 135 at [29]. 142 (1988) 165 CLR 292 at 294-295 per Mason CJ, Wilson and Gaudron JJ; [1988] HCA 50. 143 See Fletcher (2005) 156 A Crim R 308 at 322 [60] per Simpson J (McClellan CJ at CL and Rothman J relevantly agreeing at 310 [1], 339-340 [157]); KJR v The Queen (2007) 173 A Crim R 226 at 229 [4] per Simpson J (McClellan CJ at CL agreeing at 228 [1]), 236 [42]-[45] per Rothman J; GBF [2010] VSCA 135 at [27]; Saoud (2014) 87 NSWLR 481 at 490 [39]-[42] per Basten JA (Fullerton J and R A Hulme J agreeing at 494 [63], [64]); El-Haddad (2015) 88 NSWLR 93 at 112-113 [66]-[70] per Leeming JA (McCallum J and R A Hulme J agreeing at 124 Nettle in a range of circumstances which presented opportunities to offend144. The need for greater specificity was rejected by the Court of Criminal Appeal145 on the basis that, notwithstanding that the tendency evidence related to "dissimilar circumstances and dissimilar acts", "what was common to [all] was that they represented occasions on which young females were present and the [appellant] used those occasions for the purpose of engaging in sexual activities with them". More specifically, it was said that "the conduct alleged was sexual in nature, directed towards young females, on occasions that presented themselves to the [appellant]"146. The Court thus perceived the underlying similarity (although their Honours shunned147 use of such expressions as "the language of the common law relating to similar fact evidence") to be that "the conduct occurred opportunistically, as and when young female persons were in the [appellant's] company"148. On that basis, their Honours held149 that the evidence adduced in support of the five tendencies alleged by the Crown "was correctly assessed as having significant probative value" in relation to each count. Inasmuch as that reasoning suggests that the commission of sexual offences against female children under the age of 16 years is so unusual that evidence of an accused having committed a sexual offence against one female child is of itself significantly probative of the accused having committed a different kind of sexual offence against another female child, it should be rejected. The commission of sexual offences by adults against children of either sex is depraved and deplorable, but, regrettably, it is anything but unusual. That reality was central to the submissions of the Victorian Director of Public Prosecutions, intervening in this Court. In truth, such offences are far more prevalent than the murder of young female children, and yet there can be no doubt that evidence that an accused had murdered a female child could not, without more, be regarded as having significant probative value in proving that the accused murdered another female child. It would require something more, 144 Hughes unreported, District Court of New South Wales, 14 February 2014 at 53-54 per Zahra DCJ; Hughes [2015] NSWCCA 330 at [198]-[199], [230]. 145 Hughes [2015] NSWCCA 330 at [196]-[199]. 146 Hughes [2015] NSWCCA 330 at [199]. 147 Hughes [2015] NSWCCA 330 at [188]. Cf Saoud (2014) 87 NSWLR 481 at 490 [39] per Basten JA (Fullerton J and R A Hulme J agreeing at 494 [63], [64]); El-Haddad (2015) 88 NSWLR 93 at 113 [69]-[70] per Leeming JA (McCallum J and R A Hulme J agreeing at 124 [129], [130]). 148 Hughes [2015] NSWCCA 330 at [199]. 149 Hughes [2015] NSWCCA 330 at [200]. Nettle such as, for example, similarities as between each child's relationship to the accused or the characteristics of each child, or the details of the actus reus or the circumstances in which the offence is alleged to have been committed, to give evidence of an accused having murdered one female child significant probative value in proving that the accused has murdered another150. Similarly, despite the disgust and loathing with which sexual offences against children are naturally to be regarded, the fact that an accused is shown to have committed a sexual offence against a female child is not, without more, significantly probative of the accused having committed a sexual offence against another female child151. For the reasons already given, something more is required, such as a logically significant degree of similarity in the relationship of the accused to each complainant; a logically significant connection between the details of each offence or the circumstances in which each offence was committed; a logically significant or recognisable modus operandi or system of offending; or, otherwise, some logically significant underlying unity or commonality, howsoever described, in order rationally to conclude that evidence of the accused having committed a sexual offence against one female child significantly increases the assessment of the probability of the accused having committed a sexual offence against another. Inasmuch as the Court of Criminal Appeal's reasoning suggests that there is something sufficient in the fact of an accused having exploited an opportunity of a female child being in his company to commit a sexual offence against that child to make evidence of that offence significantly probative of his having exploited another opportunity of another female child being in his company to commit another sexual offence, the reasoning is too broadly expressed and likely, as it did in this case, to lead to error. In the scheme of things, sexual offences 150 See for example R v Folbigg [2003] NSWCCA 17 at [32]-[34] per Hodgson JA (Sully J and Buddin J agreeing at [36], [37]); Dupas (No 2) (2005) 12 VR 601 at 606-609 [12]-[19] per Warren CJ, 622-624 [66]-[71], 625 [75]-[76] per Nettle JA (Harper AJA agreeing at 638 [114]); R v Lane (2011) 221 A Crim R 309 at 326 [62] per Simpson J (Howie J agreeing at 330 [85]). See generally Pfennig (1995) 182 CLR 461 at 488-490 per Mason CJ, Deane and Dawson JJ, 507-508 per Toohey J, 540-541 per McHugh J; Smith (1915) 11 Cr App R 229. 151 See BRS v The Queen (1997) 191 CLR 275 at 283 per Brennan CJ, 298-300 per Gaudron J, 304-305 per McHugh J, 331-332 per Kirby J; [1997] HCA 47; KRM (2001) 206 CLR 221 at 261 [120] per Kirby J; R v Milton [2004] NSWCCA 195 at [31] per Hidden J (Tobias J and Greg James J agreeing at [1], [57]); Fletcher (2005) 156 A Crim R 308 at 319-320 [49]-[50] per Simpson J (McClellan CJ at CL agreeing at 310 [1]), 341 [165]-[166] per Rothman J; CGL (2010) 24 VR 486 at 497 [39]-[40]; GBF [2010] VSCA 135 at [26]-[27]. Nettle against children are most commonly committed opportunistically against children in an offender's company. Consequently, the fact, of itself, that an accused is shown to have committed a sexual offence opportunistically against a female child in his company is not significantly probative of his having committed a sexual offence against another female child in his company on another occasion. Proof of one shows no more than that the accused is the kind of person who has committed an offence of that kind. Whether the commission of one such offence is significantly probative of an accused's commission of another will depend on the details and so, in result, on whether there is something more, such as a logically significant connection between the accused's exploitation of the various opportunities152, or, as observed above, a logically significant degree of similarity in the accused's relationship with each complainant; or a logically significant connection between the details of each offence or the circumstances in which each was committed; or some logically significant recognisable modus operandi or system of offending; or, otherwise, some logically significant underlying unity or commonality, howsoever described, that as a matter of syllogistic reasoning renders it more likely that the complainant is telling the truth or that the accused committed the second offence. The Crown's case against the appellant, as the trial judge noted153, did not identify or rely upon any particular feature of the appellant's conduct as orchestrating or manufacturing the opportunities in which the alleged offending was said to occur. The Court of Criminal Appeal reasoned, by supposed analogy to the situation in Doyle v The Queen154, that there were "two essential tendencies", that of a sexual interest in female children under 16 years of age and that of engaging in sexual conduct with female children under 16 years of age "in three different, but not significantly disassociated, contexts: of social and familial relationships; his daughter's the work environment"155. So to reason was erroneous. The second of the identified tendencies amounted to dividing up the general tendency said to be relevant to all counts (that of a sexual interest in female children under 16 years of age) into the constituent elements of that tendency and then treating each constituent element relationships with her young friends; and 152 See for example NAM v The Queen [2010] VSCA 95 at [16]-[17] per Maxwell P (Buchanan JA agreeing at [25]), [28]-[29] per Nettle JA; PNJ (2010) 27 VR 146 at 153 Hughes unreported, District Court of New South Wales, 14 February 2014 at 54 154 [2014] NSWCCA 4. 155 Hughes [2015] NSWCCA 330 at [197], [230]. Nettle as if it were a separate tendency of significant probative value in relation to all counts. It was not. The analogy to Doyle was also misplaced. In Doyle, there was a single relevant tendency on the part of the accused to exploit his position of authority over his young male employees to obtain access to them for the purpose of engaging in sexual activities and thereby gratifying his sexual interest in young male persons156. Assuming the jury were satisfied of the existence of the alleged tendency, its existence had significant probative value in proving that the accused had committed another of the charged offences against young male employees by exploiting his position of authority over the employee in order to gain access to, and thereby engage in the alleged sexual activity with, a young male employee. Essentially the same reasoning applied in R v PWD157, to which the Court of Criminal Appeal also referred158. There, the single relevant tendency was of a school music teacher to use his position as such to select and encourage school boarders, "under the guise of offering solace to boys who were vulnerable" and who reported feelings of isolation and homesickness, to engage in sexual activities with him in order to gratify his sexual interest in male children159. In effect, each of PWD and Doyle, and cases like them160, involved an underlying common course of conduct, or modus operandi, comprised of the constituent elements of (1) taking advantage of a particular position of authority or influence to obtain access to children under the accused's authority or influence in order to 156 Doyle [2014] NSWCCA 4 at [86], [141], [148] per Bathurst CJ (Price J and Campbell J agreeing at [431], [472]). 157 (2010) 205 A Crim R 75, notwithstanding the way it was characterised at 91 [79] per Beazley JA (Buddin J and Barr JA agreeing at 93 [96], [97]). 158 Hughes [2015] NSWCCA 330 at [175]. 159 PWD (2010) 205 A Crim R 75 at 82 [35], 90 [76], 91 [81], [83], 92 [87] per Beazley JA (Buddin J and Barr JA agreeing at 93 [96], [97]). See also Saoud (2014) 87 NSWLR 481 at 491 [45]-[46] per Basten JA (Fullerton J and R A Hulme J agreeing at 494 [63], [64]). 160 See for example Papamitrou (2004) 7 VR 375 at 390-391 [31] per Winneke P (Ormiston JA and Buchanan JA agreeing at 396 [48], [49]); Fletcher (2005) 156 A Crim R 308 at 321 [57] per Simpson J (McClellan CJ at CL agreeing at 310 [1]), 324-325 [67]-[70] per Rothman J; PNJ (2010) 27 VR 146 at 151 [19]-[20]; DAO v The Queen (2011) 81 NSWLR 568 at 600-601 [164]-[165], 606-607 [204]-[205] per Simpson J (Spigelman CJ, Allsop P, Kirby J and Schmidt J agreeing at 572 [1], 583 [71], 607-608 [211], 608 [212]); Rapson v The Queen (2014) 45 VR 103 at 114 Nettle gratify (2) a sexual interest on the part of the accused in children by (3) committing sexual offences against children; and, properly understood, it was the existence of that underlying course of conduct, comprised of those three elements, together with its employment in the case of each of the charged offences, that provided a logical unity to the tendency evidence which significantly affected the rational assessment of the probability that the accused was guilty of each of the alleged offences. By contrast, for an offender to have a sexual interest in children, or even to be shown to have acted on it on occasion by taking advantage of a position of authority or influence to engage in sexual activities with children under his or her authority or influence, would not, of itself, be significantly probative of another offence alleged to have been committed in different circumstances which did not involve taking advantage of a position of authority or influence. Nor would the fact that an accused had in the past selected children of some vulnerability as part of a pattern of exploiting a position of authority to engage in sexual activities with children, of itself, be significantly probative of another offence involving a child of some vulnerability where that offence did not involve taking advantage of a position of authority or influence. To allege a tendency to select victims of some vulnerability is not significantly probative of such an offence because, in one respect or another, all children are vulnerable to sexual exploitation and all sexual offences against children involve taking advantage of that vulnerability. What the foregoing serves to show, therefore, is that none of the individual constituent elements of the underlying course of conduct identified in Doyle and PWD would, if disaggregated, be of itself significantly probative of charged offences against other complainants. What made the identified modus operandi significantly probative of the alleged offences in those cases was that, assuming an absence of concoction or contamination, the fact that the accused was alleged to have committed each offence in the same or a substantially similar way made it significantly more probable that each complainant was telling the truth in alleging that the accused offended against him in the manner charged. That reasoning accords logically with the probability reasoning applied by this Court in BRS v The Queen161. The fact that an accused may have offended against one or even some children using that modus operandi would not, of itself, have made it significantly more probable that another child was telling the truth in alleging that the accused had committed a sexual offence against him or her in different circumstances involving a different modus operandi. 161 (1997) 191 CLR 275 at 283 per Brennan CJ, 298-300 per Gaudron J, 309 per Nettle Counts 1 to 6 So it is in this case. The circumstances of each complainant and the circumstances of the offending alleged in Counts 1 to 6 were such as to establish, if accepted, a tendency on the part of the appellant to take advantage of a position of custody, authority or control over female children staying in his home or where he was present in their homes to gratify his sexual interest in female children by committing essentially similar kinds of sexual offences against them. In effect, the evidence on those counts established a modus operandi which, assuming an absence of concoction or contamination between the complainants, rendered it significantly more probable that each of JP and SH was telling the truth in what she deposed as to the appellant's offending against her. Counsel for the appellant accepted in this Court that there were "operative similarities" in the offending alleged in Counts 1 to 6. Counts 7, 8 and 9 Counts 7, 8 and 9 are more problematic. Because they allege offences against the same complainant, evidence in relation to each of those counts was cross-admissible in relation to each of the other of those counts. But, although the commission of the offences comprised in Counts 1 to 6 would render it more probable that the appellant committed the offences alleged in Counts 7 to 9 − since each of Counts 1 to 9 involved taking advantage of a position of custody, authority or control for the purpose of committing sexual offences against female children − the nature and circumstances of the offending comprised in Counts 1 to 6 were significantly different from those of Counts 7 to 9. It might not be possible for this Court to identify error162 in a conclusion that there was sufficient similarity to render evidence of the former relevant to proof of the latter, and vice versa, and thereby that the evidence was not excluded by s 97. But it does not appear that there was sufficient similarity, or other underlying unity, about that evidence to conclude, for the purposes of s 101, that its probative value outweighed its potential prejudicial effect, namely, that the jury would reason impermissibly that, because the appellant was the kind of person who would commit offences of the kind alleged in Counts 1 to 6, he should be convicted of Counts 7 to 9; and vice versa163. 162 See Saoud (2014) 87 NSWLR 481 at 483-484 [5]-[6] per Basten JA (Fullerton J and R A Hulme J agreeing at 494 [63], [64]). 163 See and compare AE [2008] NSWCCA 52 at [42], [45]; Sokolowskyj (2014) 239 A Crim R 528 at 540-541 [56]-[57] per Hoeben CJ at CL (Adams J and Hall J agreeing at 542 [63], [64]). Nettle Counts 10 and 11 the offence comprised It is clear, however, that evidence that the appellant may have committed the offences comprised in Counts 1 to 6, or indeed, for that matter, in Counts 7 to 9, did not render it significantly more probable that the appellant committed offences in the very different circumstances alleged in Counts 10 and 11; and that evidence that the appellant may have committed the offences comprised in Counts 10 and 11 did not render it significantly more probable that the appellant committed the offences comprised in Counts 1 to 9. The acts alleged to comprise Count 10 occurred in the context of a reciprocated relationship, and those alleged in Count 11 were dissimilar in nature (at least in respect of Counts 1 to 6, 9 and 10) and occurred outside a domestic setting. Equally, although the evidence of LJ, CS and VR, if accepted, may have had significant probative value in the very different proving circumstances of offending, the complainants and the different nature of the offending as between Count 11 and Counts 1 to 10, the evidence of LJ, CS and VR would not have significantly increased the probability that the appellant committed any of the other offences. So much was acknowledged in the trial judge's treatment of that evidence164. For similar reasons, although the evidence of BB and AA may have had significant probative value in relation to proof of the offences comprised in Counts 1 to 9, it did not significantly increase the probability of the appellant having committed the offences comprised in Counts 10 and 11; and, although the evidence of VOD that the appellant exposed his penis may have had significant probative value in relation to proof of Count 11, it did not significantly increase the probability of the appellant having committed the offences comprised in Counts 1 to 9 or Count 10. the appellant's different relationship in Count 11, given Crown's alternative argument It was suggested by the Crown in the course of argument that, even if a sexual interest in female children under 16 years of age and a disposition to act on that interest were not significantly probative of the charged offences within the meaning of s 97, there were in fact common features of the appellant's alleged conduct that rendered the evidence relating to each count significantly probative of each other count. Those features were said to be that each offence involved risk-taking; that the offending was "brazen" in the sense that it was committed in places where there was a high risk of being caught; that, in some cases, the offending was comprised of fleeting or furtive acts of touching; and, in other cases, that the offending involved the exposure of the appellant's penis. In fact, however, the identification of those features serves further to demonstrate not 164 Hughes unreported, District Court of New South Wales, 14 February 2014 at 55 Nettle only the significant differences between the alleged acts of offending and, therefore, the consequent illogicality of conceiving of the evidence relating to each count as significantly probative of all counts, but also the difficulty faced by the jury in considering the admitted evidence and seeking to decide each count separately. Axiomatically, all criminal behaviour involves risk-taking and sexual offending in particular involves a very great degree of risk-taking. Consequently, to say that evidence of one offence is significantly probative of another simply because each involves risk-taking is facile. Granted, the alleged offending in relation to Counts 1, 3 to 8 and 11 was "brazen", but on any view it was much less so in relation to Counts 2, 9 and 10. Similarly, while Counts 7 to 9 and some of the evidence of uncharged acts involved fleeting or furtive touching, the acts alleged to comprise Counts 1 to 6 and 10 were more prolonged and Count 11 did not involve any touching at all. And while Counts 3 to 8 and 11 involved exposure of the appellant's penis, only Counts 7 and 8 (and, arguably, Count 11 also) involved exposure in a public place (therefore comprising what was described in oral argument as exhibitionist conduct), and there was no exposure of the appellant's penis alleged in relation to Count 1, 2, 9 or 10. Conclusion as to probative value It should be concluded that the trial judge and the Court of Criminal Appeal were in error in holding that: the evidence of EE and SM was admissible in proof of the offences comprised in Counts 1 to 9; the evidence of JP, SH, AK, BB and AA was admissible in proof of the offences comprised in Counts 10 and 11; and the evidence of VOD was admissible in proof of the offences comprised in Counts 1 to 10. There was further error to the extent that the jury were not directed that they could not use the evidence of LJ, CS and VR in proof of Counts 1 to 10. Directions to the jury The appellant did not contend in this Court that the directions given to the jury were inadequate, but rather that the inadmissibility of the evidence admitted as tendency evidence became apparent from the manner in which the jury were directed as to the use of that evidence. It should be observed, however, that the directions were both wrong and inadequate. They may well have followed the Criminal Trial Bench Book, as the Court of Criminal Appeal observed165, but they failed to engage with the task of explaining to the jury, in relation to each count, in terms which the jury would have been likely to understand, what use could and could not be made of each witness's evidence in relation to the proof of 165 Hughes [2015] NSWCCA 330 at [228]. Nettle each count166. Contrary to the holding of the Court of Criminal Appeal167, it was not sufficient to discharge that responsibility for the trial judge to tell the jury that they must be "concerned with the particular and precise occasions alleged by each of the complainants in relation to each count". There was, too, a further problem with the directions. Even if the jury had been properly directed as to which of each witness's evidence was admissible in proof of each count, or had gleaned as much from what they were told, it was highly likely that the jury would have been incapable of adhering to the directions. That difficulty arises from the inclusion on one indictment of a plethora of counts involving disparate sexual offences against disparate classes of complainants in disparate circumstances, with the consequence that, while some of the evidence admissible in relation to some counts was also admissible in relation to some other counts, a considerable percentage of it was not. As a result, even if the jury had been properly directed as to which parts of the evidence were admissible in relation to each count and which parts were not, the process of reasoning conscientiously in accordance with those directions would have been so complex as to result in a high probability of the jury simply dealing with all of the evidence as a job lot relevant to each and every count168; a process which in this case was likely to result in a conclusion that the appellant was, generally, a sexual deviant169. In reality, the only way in which that risk could have been avoided would have been to sever the indictment and try Counts 1 to 9 separately from Counts 10 and 11170. Even then, the evidence admissible in relation to Count 10 would not have been cross-admissible in relation to Count 11, or vice versa. But, at least, with a trial of only two counts, it might more safely have been assumed that the jury could and would comply with directions not to treat the evidence relevant to one count as relevant to the other. 166 See generally Alford v Magee (1952) 85 CLR 437 at 466; [1952] HCA 3; Hargraves v The Queen (2011) 245 CLR 257 at 275-276 [42] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2011] HCA 44. 167 Hughes [2015] NSWCCA 330 at [227]. 168 De Jesus v The Queen (1986) 61 ALJR 1 at 3-4 per Gibbs CJ; 68 ALR 1 at 4-6; [1986] HCA 65; R v TJB [1998] 4 VR 621 at 629-631 per Callaway JA (Phillips CJ and Buchanan JA agreeing at 623, 634). 169 Sokolowskyj (2014) 239 A Crim R 528 at 539 [48], 540-541 [56]-[57] per Hoeben CJ at CL (Adams J and Hall J agreeing at 542 [63], [64]). 170 Phillips (2006) 225 CLR 303 at 327-328 [78]-[79]; GBF [2010] VSCA 135 at [52]- Nettle Reasons not to depart from the orthodox approach What I have written thus far is orthodox in that it reflects the understanding and application of s 97 that until relatively recently has been followed in most decisions of Australian trial judges and courts of criminal appeal, including the New South Wales Court of Criminal Appeal in, at least, Sokolowskyj v The Queen171, Saoud v The Queen172 and El-Haddad v The Queen173. It is, however, opposed to the approach to the application of s 97 more lately preferred by some judges of the New South Wales Court of Criminal Appeal174 and by that Court in this case. Because of the fundamental importance of the issue, it is appropriate that I explain in more detail why the orthodox approach should be adhered to. Orthodox approach The orthodox approach to the application of s 97 is grounded in recognition of the dangers that attend the receipt of tendency evidence175. This is the same concern as informed the common law rules for the exclusion of similar fact and other propensity evidence176. Section 97 was enacted against the background of the common law exclusionary rules for similar fact and other 171 (2014) 239 A Crim R 528 at 537-538 [40]-[45] per Hoeben CJ at CL (Adams J and Hall J agreeing at 542 [63], [64]). 172 (2014) 87 NSWLR 481 at 491 [44]-[46], 492 [49]-[52] per Basten JA (Fullerton J and R A Hulme J agreeing at 494 [63], [64]). 173 (2015) 88 NSWLR 93 at 112-114 [65]-[76] per Leeming JA (McCallum J and R A Hulme J agreeing at 124 [129], [130]). 174 See, for example, statements to the effect that no close similarity or pattern need be established: PWD (2010) 205 A Crim R 75 at 91 [79] per Beazley JA (Buddin J and Barr AJ agreeing at 93 [96], [97]); Winter v The Queen [2013] NSWCCA 231 at [105] per Bellew J (Hoeben CJ at CL and Barr AJ agreeing at [1], [200]); AC v The Queen [2016] NSWCCA 21 at [57]-[60] per Davies J (Hidden J and Adamson J agreeing at [1], [107]). 175 Australian Competition and Consumer Commission v CC (NSW) Pty Ltd (1999) 92 FCR 375 at 401 [101]; Fletcher (2005) 156 A Crim R 308 at 322 [59]-[60] per Simpson J (McClellan CJ at CL and Rothman J relevantly agreeing at 310 [1], 339-340 [157]); GBF [2010] VSCA 135 at [27]. 176 See generally Hoch (1988) 165 CLR 292 at 297 per Mason CJ, Wilson and Gaudron JJ, 301 per Brennan and Dawson JJ; Melbourne v The Queen (1999) 198 CLR 1 at 16-19 [36]-[43] per McHugh J; [1999] HCA 32. Nettle propensity evidence and, for that reason, is to be read in light of those rules. Certainly, it must now be accepted that s 97 "manifests an intention to state the principles comprehensively and afresh" and, therefore, that it is the language of s 97 that determines the manner in which tendency evidence is to be treated177. But the process of reasoning necessary to determine whether evidence sought to be tendered as tendency evidence is capable of having significant probative value within the meaning of s 97 is, logically and necessarily, the same process of probability reasoning that was applied at common law. As Simpson J rightly said on behalf of the New South Wales Court of Criminal Appeal in R v Fletcher178: "Of course, decisions such as Hoch no longer govern the admissibility of evidence of tendency (see Ellis). But that does not necessarily render cases such as Hoch irrelevant. There is no reason why the reasoning that led the High Court to accept the admissibility of similar fact evidence in appropriate cases before the enactment of the Evidence Act should not guide the reasoning process in the evaluation of whether tendered evidence is capable of having, or would have, significant probative value." It is also to be observed that the orthodox approach to the application of in New South Wales in a series of cases s 97 was established commencing shortly after the introduction of the provision in 1995. The courts recognised179 that, in order for tendency evidence to be truly of significant probative value in proof of acts charged, it was necessary as a matter of logical similarities or other probability connections between that evidence and the acts charged. The position was complicated by the view taken by some judges180 that, in light of Pfennig v The to be able reasoning identify 177 R v Ellis (2003) 58 NSWLR 700 at 716 [74]-[75] per Spigelman CJ (Sully J, O'Keefe J, Hidden and Buddin JJ agreeing at 719 [101], [102], [103]). 178 (2005) 156 A Crim R 308 at 322 [60] (McClellan CJ at CL and Rothman J relevantly agreeing at 310 [1], 339-340 [157]). 179 See for example Lock (1997) 91 A Crim R 356 at 362-363; R v AH (1997) 42 NSWLR 702 at 709 per Ireland J (Hunt CJ at CL and Levine J agreeing at 703, 709); R v Colby [1999] NSWCCA 261 at [122]-[125] per Mason P (Grove J and Dunford J agreeing at [217], [218]); R v Martin [2000] NSWCCA 332 at [68] per Ireland AJ (Fitzgerald JA and Smart AJ agreeing at [9]-[10], [12]-[13]); Symss v The Queen [2003] NSWCCA 77 at [51] per Sheller JA (James J and Smart AJ agreeing at [121], [122]). 180 See for example Lock (1997) 91 A Crim R 356 at 363; AH (1997) 42 NSWLR 702 at 709 per Ireland J (Hunt CJ at CL and Levine J agreeing at 703, 709); WRC (2002) 130 A Crim R 89 at 101-102 [25]-[29] per Hodgson JA (Kirby J relevantly agreeing at 133 [124]). Nettle Queen181, it was necessary, at least for the purposes of s 101 of the Evidence Act, that tendency evidence be unquestionably at odds with any reasonable possibility consistent with innocence. That idea was rejected in R v Ellis182. But nothing said in Ellis altered the logic of the probability reasoning which is the raison d'être of tendency evidence183. Accordingly, judges in New South Wales rightly continued to describe the logically requisite touchstone of significant probative value in terms of similarities and other compelling connections between evidence sought to be admitted as tendency evidence and acts charged. By way of example, R v Ford184, which is sometimes, but wrongly, identified as a point of departure from the orthodox approach to the application of s 97185, accepted that evidence admitted as tendency evidence had significant probative value where that evidence showed a pattern of offending or modus operandi comprised of the accused sexually assaulting young women who: (1) had stayed over at the accused's house after attending a party there, (2) had consumed a significant amount of alcohol and (3) were asleep, in circumstances where (4) there was a risk of the accused's offending being discovered by others186. Campbell JA emphasised187 that the tendency evidence was of similar offending that was "fairly unusual". In BP v The Queen, the significant probative value of the evidence admitted as tendency evidence was found188 to inhere in the relatively unusual phenomenon of an accused committing similar sexual offences against female lineal descendants. In DAO v The Queen, Simpson J found no 181 (1995) 182 CLR 461. 182 (2003) 58 NSWLR 700 at 717-718 [88]-[94] per Spigelman CJ (Sully J, O'Keefe J, Hidden and Buddin JJ agreeing at 719 [101], [102], [103]). 183 See Ellis (2003) 58 NSWLR 700 at 719 [104]-[105] per Hidden and Buddin JJ (Spigelman CJ disagreeing at 719 [99]). 184 (2009) 201 A Crim R 451. 185 See for example Velkoski v The Queen (2014) 45 VR 680 at 699 [83]. 186 Ford (2009) 201 A Crim R 451 at 460 [25]-[27], 467 [44] per Campbell JA (Howie J and Rothman J relevantly agreeing at 489 [145], 491 [158]). 187 Ford (2009) 201 A Crim R 451 at 467 [44] per Campbell JA (Howie J and Rothman J relevantly agreeing at 489 [145], 491 [158]). See also GBF [2010] VSCA 135 at [29]. 188 [2010] NSWCCA 303 at [100], [112] per Hodgson JA (Price J and Fullerton J agreeing at [142], [143]). Nettle error in the trial judge's reasoning189 that the significant probative value of the tendency evidence admitted in that case lay in demonstrating a modus operandi or pattern engaged in by the accused, as a priest, in targeting and grooming possible victims to engage in sexual misconduct with him. Similarly, as has been seen, in PWD it was held190 that the significant probative value of evidence of a variety of different sexual offences was that each of them had been committed according to a pattern of offending that, assuming absence of concoction and contamination, made it significantly more probable that each complainant was telling the truth in what he alleged. Likewise in Doyle, which has also been referred to, the significant probative value of the evidence sought to be tendered as tendency evidence was identified191 as the pattern of behaviour, evident in each offence, that comprised the accused exploiting his position of authority over his young male employees to obtain access to them and thereby gratify his sexual interest in young males. The significant probative value of that evidence was that, assuming absence of that each complainant could concoction and contamination, independently attest to having been subjected to the same modus operandi or pattern of offending significantly increased the probability that each of them was telling the truth. These cases are, therefore, properly to be understood as specific to the particular tendency evidence in each of those cases and the probability reasoning which it supported in the particular circumstances of that case. fact the In Sokolowskyj, the Court of Criminal Appeal held that, on a charge of having indecently assaulted an eight year old complainant in the public bathroom of a shopping centre, evidence said to establish that the accused had a tendency "to have sexual urges and to act on them in public in circumstances where there was a reasonable likelihood of detection"192 was not significantly probative of the offence charged because of the large qualitative distinction between, on the one hand, the offences of exhibitionism disclosed by the tendency evidence, which involved either public masturbation or exposure of the accused's genitals, and, on the other, engaging in non-consensual, physical contact with the genitals of an 189 (2011) 81 NSWLR 568 at 599-600 [160]-[165], 606-607 [202], [204]-[205] (Spigelman CJ, Allsop P, Kirby J and Schmidt J agreeing at 572 [1], 583 [71], 190 (2010) 205 A Crim R 75 at 82 [35]-[36], 91 [81], [83] per Beazley JA (Buddin J and Barr AJ agreeing at 93 [96], [97]). 191 [2014] NSWCCA 4 at [86], [141], [147]-[148] per Bathurst CJ (Price J and Campbell J agreeing at [432], [472]). 192 (2014) 239 A Crim R 528 at 534 [29] per Hoeben CJ at CL (Adams J and Hall J agreeing at 542 [63], [64]). Nettle underage complainant. As Hoeben CJ at CL observed193, in relation to the actions on which the proffered tendency evidence was based: "[P]ublic display was an essential ingredient and the sexual gratification or thrill was apparently achieved by such public exposure of his genitals to women. The offence under consideration was very different. The appellant is said to have taken steps to prevent discovery by latching the change room door and by warning the complainant not to tell anyone, otherwise he would take retributive action against her family. ... In assessing the extent of the probative value of the evidence, the focus had to be on the fact in issue to which the evidence was said to logically relate. ... [T]he focus of the prosecution was on generalised sexual activity, which involved neither an assault nor a child. The focus of the tendency evidence should have been on the logical link to the elements of the offence charged, in this case involving both an assault and a child victim." More recently, in Saoud, Basten JA distinguished aspects of an accused's conduct disclosed by evidence sought to be tendered as tendency evidence that were "largely unremarkable" from those that were significantly probative of the tendency alleged194. Importantly, as his Honour observed195: "Tendency evidence can take various forms; it is not necessarily based on the conduct of the accused on separate occasions. On the other hand, when it is there will be an inherent element of similar behaviour in order to demonstrate a tendency, absent which the section is not engaged." And later196: "'[T]endency' evidence will usually depend upon establishing similarities in a course of conduct, even though the section does not refer (by contrast with s 98) to elements of similarity. That inference is inevitable, because 193 Sokolowskyj (2014) 239 A Crim R 528 at 538 [43]-[44] per Hoeben CJ at CL (Adams J and Hall J agreeing at 542 [63], [64]). 194 (2014) 87 NSWLR 481 at 492 [51]-[52] (Fullerton J and R A Hulme J agreeing at 195 Saoud (2014) 87 NSWLR 481 at 487 [28] (Fullerton J and R A Hulme J agreeing 196 Saoud (2014) 87 NSWLR 481 at 491 [44] (Fullerton J and R A Hulme J agreeing Nettle that which is excluded is evidence that a person has or had a tendency to act in a particular way, or to have a particular state of mind. Evidence of conduct having that effect will almost inevitably require degrees of similarity, although the nature of the similarities will depend very much on the circumstances of the case." Critics of the orthodox approach to the application of s 97 denounce it as improperly substituting the complexities of common law conceptions for the plain and ordinary terms of the provision. They say that the evident purpose of the provision is to create a simple and less demanding criterion of admissibility, and that it is the duty of the court to give the provision its full effect197. But the difficulty with shibboleths of that order is that the s 97 criterion of admissibility is not simple. Doubtless, it is the duty of the court to give effect to statutes according to their terms and not to graft on additional requirements. And, possibly, it is true to say, as Basten JA observed in Saoud198, that to continue to describe the relevant criteria of significant probative value in common law terms, such as similarity of offending or circumstances of offending, modus operandi or other underlying unity, may tend to distract some trial judges from looking for relevant indications of significant probative value. But, whatever nomenclature is considered preferable, and it is to be observed that nothing better has yet emerged, where the Parliament enacts aspirational legislation, like s 97 of the Evidence Act, in protean, open-textured terms like "significant probative value", it is up to the court to formulate rules that define its meaning and facilitate consistency in its application; and, for that purpose, it is appropriate to seek guidance in the common law199. As Leeming JA recently observed on behalf of the New South Wales Court of Criminal Appeal in El-Haddad200: 197 See for example Cossins, "The Behaviour of Serial Child Sex Offenders: Implications for the Prosecution of Child Sex Offences in Joint Trials", (2011) 35 Melbourne University Law Review 821 at 857. See also Elomar v The Queen (2014) 316 ALR 206 at 280 [371]; BC v The Queen [2015] NSWCCA 327 at [81] per Beech-Jones J (Simpson JA agreeing at [1]). 198 (2014) 87 NSWLR 481 at 490 [40] (Fullerton J and R A Hulme J agreeing at 494 [63], [64]). So much was also recognised in Director of Public Prosecutions v Boardman [1975] AC 421 at 452-453 per Lord Hailsham of St Marylebone. 199 See generally K & S Lake City Freighters Pty Ltd v Gordon & Gotch Ltd (1985) 157 CLR 309 at 315 per Mason J; [1985] HCA 48; R v Lavender (2005) 222 CLR 67 at 81-82 [36] per Gleeson CJ, McHugh, Gummow and Hayne JJ; [2005] HCA 200 (2015) 88 NSWLR 93 at 112 [66] (McCallum J and R A Hulme J agreeing at 124 Nettle "The statutory text did not emerge from a vacuum. Where as here the legislative text is patently open-textured, the immediate context − namely, its replacement of common law rules restricting the use of a particular type of evidence − is especially apt to illuminate its legal meaning." Furthermore, such rules having been propounded in the form of the orthodox approach to the application of s 97, and thereafter the legislation having been re-enacted in the same terms, as it was in New South Wales in 2007 and by the Commonwealth in 2008201, the presumption is that the Parliament expects the orthodox approach to be adhered to202. It is then the duty of the court to do just that. Legislative background Until the enactment in 1995 of the uniform evidence legislation, the principal Act governing evidence in New South Wales was the Evidence Act 1898 (NSW). The Evidence Act 1898 made no provision for tendency evidence − it left that to the common law − and, in the New South Wales Law Reform Commission's 1978 Working Paper on Evidence of Disposition, the Commission stated203, on the basis of its review of the body of common law authority relating to the admissibility of what is now known as tendency evidence, that, although it supported the incorporation of the relevant rules into statute, it did not support any reform "substantially widening or narrowing" the rules. Of the common law relating to similar fact evidence, the Commission said204: "[w]e think it is neither too inclusionary nor too exclusionary". 201 See Evidence Amendment Act 2007 (NSW), Sched 1 [38]; Evidence Amendment Act 2008 (Cth), Sched 1, item 42. 202 See Ex parte Campbell; In re Cathcart (1870) LR 5 Ch App 703 at 706 per James LJ; Platz v Osborne (1943) 68 CLR 133 at 141 per Rich J, 145-146 per McTiernan J, 146-147 per Williams J; [1943] HCA 39; Thompson v Smith (1976) 135 CLR 102 at 109 per Gibbs J (Mason J and Aickin J agreeing at 109); [1976] HCA 56. See generally Pearce and Geddes, Statutory Interpretation in Australia, 8th ed (2014) at 136-137 [3.43]. 203 New South Wales Law Reform Commission, Working Paper on Evidence of Disposition, (1978) at 74 [4.5]. 204 New South Wales Law Reform Commission, Working Paper on Evidence of Disposition, (1978) at 65 [4.1]. Nettle In July 1979, the then Commonwealth Attorney-General referred the Australian Law Reform Commission to review205: "the laws of evidence applicable in proceedings in Federal Courts and the Courts of to producing a wholly comprehensive law of evidence based on concepts appropriate to current conditions and anticipated requirements". the Territories with a view Six years later, in 1985, the Commission released its Interim Report206. Among other things, the Interim Report dealt with the common law's concern with the potential for jurors to overestimate the value of and to be improperly influenced by tendency evidence. It reprised the New South Wales Law Reform Commission's concern about substantially altering the common law rules. The Commission found that the common law's disdain of tendency evidence was supported by a substantial body of psychological research207. That research showed behaviour tends to be highly dependent on situational factors and not, as previously postulated, on personality traits, and that the ability to predict future behaviour from past behaviour, therefore, depends on the similarity of situations208. But, as the research also established, people are inclined to attribute the behaviour of others to enduring personality traits and to underestimate the role of situational factors. People also tend to infer personality traits from limited knowledge of a person (called the "halo effect") and thereafter fail to discriminate between diverse behaviours209. Jurors are, too, less reluctant to convict an accused if informed of his or her previous misconduct because they feel either that the gravity of their decision is lessened or that there is some basis 205 Australian Law Reform Commission, Evidence, Report No 38, (1987) at xi. 206 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985). As to the relevance of Law Reform Commission material, see generally Pearce and Geddes, Statutory Interpretation in Australia, 8th ed (2014) at 89-90 [3.3]-[3.4], 207 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 456 [800], 460-464 [810]. 208 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 451-452 [796]-[797]. 209 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 454 [799]. Nettle for punishment, even if it is not established that the accused committed the crime charged210. The Commission thus concluded211 that: "The research confirms the need to maintain strict controls on evidence of character or conduct and for such evidence to be admitted only in exceptional circumstances. It demonstrates, however, that the emphasis of the law should be changed. For the sake of accurate fact-finding, fairness and the saving of time and cost, the law should maximise the probative value of the evidence it receives by generally limiting it to evidence of conduct occurring in circumstances similar to those in question. Only for special policy reasons should other evidence of character or conduct be received." The draft legislation proposed by the Interim Report212 was shaped accordingly. Clause 91 relevantly provided that evidence that a person "did a particular act or had a particular state of mind" was not admissible to prove that the person has or had a tendency to do a similar act or to have a similar state of mind unless it were reasonably open to find that "all the acts or states of mind, and the circumstances in which they were done or existed, [were] substantially and relevantly similar". Clause 93 relevantly provided that, in criminal proceedings, evidence of the kind referred to in cl 91 was not admissible to prove a tendency to do a similar act or to have a particular state of mind unless the evidence had "substantial probative value". Clause 93(3) provided that the probative value of the evidence was to be determined by the court with regard to: the nature and extent of the similarity; the extent to which the act or state of mind to which the evidence relates is unusual; in the case of evidence of a state of mind − the extent to which the state of mind is unusual or occurs infrequently; and in the case of evidence of an act − 210 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 455-456 [799]. 211 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 456 [800]. 212 Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 2 Appendix A. Nettle (iii) the likelihood that the defendant would have repeated the act; the number of times on which similar acts have been done; and the period that has elapsed between the time when the act was done and the time when the defendant is alleged to have done the act that the evidence is adduced to prove." In 1987, the Australian Law Reform Commission released its final Report, to which an amended draft bill was annexed. What had appeared in cl 91 of the previous draft now appeared in cll 86 and 87 of the amended draft in the following form213: "Exclusion of tendency evidence 86. Evidence of the character, reputation or conduct of a person, or of a tendency that a person has or had, is not admissible to prove that a person has or had a tendency (whether because of the person's character or otherwise) to act in a particular way or to have a particular state of mind. Exception: conduct (including of accused) to prove tendency 87. Where there is a question whether a person did a particular act or had a particular state of mind and it is reasonably open to find that − the person did some other particular act or had some other particular state of mind, respectively; and all the acts or states of mind, respectively, and the circumstances in which they were done or existed, are substantially and relevantly similar, the tendency rule does not prevent the admission or use of evidence that the person did the other act or had the other state of mind, respectively." Clause 89 of the amended draft bill provided for "further protections" in criminal proceedings and was, in substance, expressed in identical terms to those of cl 93 in the previous draft. 213 Australian Law Reform Commission, Evidence, Report No 38, (1987), Appendix A Nettle In 1988, the New South Wales Law Reform Commission released its response to the Australian Law Reform Commission's Report and recommended the adoption of the amended draft bill, subject to minor amendments214. In March 1991, an Evidence Bill was introduced into the New South Wales Parliament ("the NSW Bill") in substantively the same form as was proposed by the New South Wales Law Reform Commission, and therefore also by the Australian Law Reform Commission. What had been cl 86 of the Australian Law Reform Commission's amended draft bill was included as cl 83 of the NSW Bill. What had been cl 87 was reproduced in cl 84 of the NSW Bill and the "further protections" of cl 89 were included in cl 86. In the second reading speech, it was said215 that the purpose of introducing the NSW Bill was "to expose it for public consideration and comment". into introduced In October 1991, an Evidence Bill was the Commonwealth Parliament ("the Commonwealth Bill") with provisions that differed in some relevant respects from those of the NSW Bill, and therefore also from the amended draft bill recommended by the Australian Law Reform Commission in 1987. Clause 103 of the Commonwealth Bill set out the exclusionary rule in similar terms to cl 83 of the NSW Bill, but eschewed any requirement that, for tendency evidence to be admissible in criminal proceedings, it must have "substantial probative value", a requirement found in cl 86(2) of the NSW Bill. Additionally, in place of the list of considerations relevant to the assessment of probative value that had appeared in cl 86(4) of the NSW Bill and cl 89(3) of the Australian Law Reform Commission's amended draft bill, cl 105 of the Commonwealth Bill provided that in criminal proceedings: "(2) ... tendency evidence is not to be adduced by the prosecution unless: the evidence tends to prove a fact in issue, otherwise than merely by tending to prove: the commission of an offence other than the offence with which the defendant is charged; or that the defendant has a predisposition to commit an offence; and 214 New South Wales Law Reform Commission, Evidence: Report, LRC 56, (1988) at 215 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 20 March 1991 at 1436. Nettle the probative value of the evidence outweighs its merely prejudicial effect on the defendant. (3) ... tendency evidence is not to be adduced by the prosecution if: the evidence concerns the occurrence of 2 or more events; and the defendant disputes the occurrence of those events; and there is a rational view of the evidence that is inconsistent with the defendant being found guilty of any offence with which he or she is charged in the proceeding." It is to be observed, however, that, far from being a fresh or novel approach to tendency evidence, cl 105(2)(b) in effect reflected the common law's Christie discretion216 and cl 105(3)(c) embodied the essence of the common law rule of exclusion of propensity evidence propounded in Pfennig217. In the second reading speech introducing the Commonwealth Bill, it was stated218 that both it and the NSW Bill would provide "a basis for consideration" of a uniform evidence law. In 1995, the Commonwealth Parliament enacted the Evidence Act 1995 (Cth) and the New South Wales Parliament enacted the Evidence Act 1995 (NSW) in the same terms. Significantly, s 97 of the Acts provided for "[t]he tendency rule" in terms which required that, to be admissible, tendency evidence must have significant probative value. The single stipulation of s 97(1)(b) was that: "the court thinks that the evidence would not, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value." (emphasis added) 216 Referring to R v Christie [1914] AC 545. See Police v Dunstall (2015) 256 CLR 403 at 416-417 [26] per French CJ, Kiefel, Bell, Gageler and Keane JJ; [2015] HCA 26. 217 (1995) 182 CLR 461 at 481-484 per Mason CJ, Deane and Dawson JJ, 506 per 218 Australia, House of Representatives, Parliamentary Debates (Hansard), 15 October Nettle Section 101 of the Acts replaced the "further restrictions" in cl 105 of the Commonwealth Bill with a single stipulation that tendency evidence would be inadmissible in criminal proceedings unless: "the probative value of the evidence substantially outweighs any prejudicial effect it may have on the defendant." (emphasis added) The change in s 97 from the list of criteria for the assessment of probative value (as had been included in cl 86 of the NSW Bill) to the test of what the court thinks would constitute significant probative value appears to have been calculated to afford the court greater scope for the development of relevant criteria. But the change in s 101, from the requirements that the probative value of the evidence exceed its prejudicial effect and that there be no rational view of the evidence consistent with innocence (as had been included in cl 105 of the Commonwealth Bill) to the requirement that the probative value of the evidence substantially outweigh any prejudicial effect, presents as having been designed to replace the combined effect of the Christie discretion and the exclusionary rule from Pfennig with something very close to the terms of the more flexible common law rule of exclusion propounded by the House of Lords in Director of Public Prosecutions v P219, advocated by McHugh J in Pfennig220, and subsequently adopted in Victoria in the form of s 398A of the Crimes Act 1958 (Vic)221. And that is hardly surprising in view of the Commissioners and consultants who were involved in the drafting of the legislation proposed by the Australian Law Reform Commission and the individuals involved with the Senate Standing Committee on Legal and Constitutional Affairs that considered the Act before its enactment222. They included eminent criminal judges and counsel who were thoroughly familiar with those developments. Moreover, at the time of enactment of the uniform legislation in 1995, there was already a body of case law in England and Australia regarding the application of those terms223. Consistently, therefore, with the precept that, where Parliament enacts 219 [1991] 2 AC 447 at 460-461 per Lord Mackay of Clashfern LC (the other Law Lords agreeing at 463). 220 (1995) 182 CLR 461 at 513-514, 516, 529-532. 221 As inserted by Crimes (Amendment) Act 1997 (Vic), s 14. 222 Australian Law Reform Commission, Evidence, Report No 38, (1987) at xii; Senate Standing Committee on Legal and Constitutional Affairs, Evidence Bill 1993, Interim Report, (1994), Appendix 1-2. 223 See discussions in R v Best [1998] 4 VR 603 at 612 per Callaway JA (Phillips CJ and Buchanan JA agreeing at 604, 620); Papamitrou (2004) 7 VR 375 at 389-390 [29]-[30] per Winneke P (Ormiston JA and Buchanan JA agreeing at 396 [48], [49]); R v EF (2008) 189 A Crim R 463 at 468 [24]-[27] per Weinberg JA (Footnote continues on next page) Nettle legislation using words that have been judicially construed224, Parliament is presumed to intend them to have that effect, the orthodox approach to the application of s 97 rightly built on that case law. In 2004, the Australian Law Reform Commission, in conjunction with the New South Wales Law Reform Commission, undertook a review of the uniform evidence legislation. In the associated Issues Paper, the Commission observed225 that the "additional requirement in criminal proceedings that the probative value of the evidence substantially outweigh the prejudicial effect it may have ... is a major impediment to the admission of tendency and coincidence evidence of child witnesses" in light of allegations of concoction. The Issues Paper posed226 the questions of whether s 101 should be amended to provide that, where the probative value of tendency evidence substantially outweighs its possible prejudicial effect, it must not be ruled inadmissible merely because it may be the result of concoction and whether there should be special provisions applying to tendency evidence where a series of sexual offences are alleged by child, or any, complainants. In the subsequent Report, the Commission reiterated concerns about tendency evidence and noted that a review of psychological research conducted since its 1985 Interim Report confirmed, and in some instances strengthened, the basis for the Commission's original recommendation that the admission of tendency evidence should be strictly controlled227. Consequently, the Commission did not recommend that any changes be made to the uniform evidence legislation in respect of tendency evidence228 and, apart from turning (Nettle JA and Mandie AJA agreeing at 464 [1], 473 [56]). See also Simpson (1994) 99 Cr App R 48 at 53-54; R v H [1995] 2 AC 596. 224 See Platz v Osborne (1943) 68 CLR 133 at 141 per Rich J, 145-146 per McTiernan J, 146-147 per Williams J; Thompson v Smith (1976) 135 CLR 102 at 109 per Gibbs J (Mason J and Aickin J agreeing at 109). See generally Pearce and Geddes, Statutory Interpretation in Australia, 8th ed (2014) at 136-137 [3.43]. 225 Australian Law Reform Commission, Review of the Evidence Act 1995, Issues Paper 28, (2004) at 124-125 [8.40]. See also Australian Law Reform Commission, Seen and heard: priority for children in the legal process, Report No 84, (1997) at 334-335 [14.89], Recommendation 103. 226 Australian Law Reform Commission, Review of the Evidence Act 1995, Issues Paper 28, (2004) at 126, Questions 8-8, 8-9. 227 Australian Law Reform Commission, Uniform Evidence Law, Report 102, (2005) at 83-85 [3.19]-[3.25]; Australian Law Reform Commission, Evidence, Report No 26 (Interim), (1985), vol 1 at 456 [800]. 228 Australian Law Reform Commission, Uniform Evidence Law, Report 102, (2005) Nettle the criteria of admissibility from a negative stipulation into a positive requirement229, none have since been made. In those circumstances, it must be taken that the established orthodox approach to s 97, which was evident in New South Wales courts particularly in the decade after the enactment of s 97, did accord with the operation of the section intended by Parliament. No justification for lowering the bar Despite the legislature's implicit approval of that orthodox approach, the decision of the Court of Criminal Appeal in this case amounts to saying that, notwithstanding the absence of any particular similarity in the offending itself or the circumstances of the offending, or any other feature of underlying unity, howsoever expressed, evidence that an accused has committed acts of sexual misconduct against females ranging in age from six years (in the case of SH) to mid-twenties (in the case of LJ) in a variety of different circumstances establishes a tendency to commit sexual offences against female children as and when an opportunity presents, and that the existence of that tendency is of such significant probative value as to make evidence of all of the alleged sexual misconduct admissible as tendency evidence in proof of each charged offence. Until now, no other Australian decision has gone so far in lowering the bar of admissibility, and, assuming it remains essential to our system of criminal justice that it is better that ten guilty persons should escape than one innocent person suffer230, there is no justification in principle or as a matter of statutory interpretation for so lowering the bar. According to the Crown, the decision of the Court of Criminal Appeal in this case derives support from an earlier decision of the New South Wales Court of Criminal Appeal in BC v The Queen231. In that case, the Court232 held that it was permissible to tender evidence of an escalating succession of sexual offences alleged to have been committed by the accused between the ages of 11 and 28 in proof of each of the alleged offences. In the Crown's submission, BC shows that it is open to the Crown to aggregate evidence of different sexual misconduct alleged to have occurred over a period of years as a pattern of behaviour which establishes a tendency to commit sexual offences and that such a tendency is of 229 See Evidence Amendment Act 2007 (NSW), Sched 1 [38]; Evidence Amendment Act 2008 (Cth), Sched 1, item 42. 230 Blackstone, Commentaries on the Laws of England, (1769), bk 4, ch 27 at 352. See R v Carroll (2002) 213 CLR 635 at 643-644 [21]-[24] per Gleeson CJ and Hayne J; [2002] HCA 55. 231 [2015] NSWCCA 327. 232 BC [2015] NSWCCA 327 at [81], [87], [101] per Beech-Jones J (Simpson JA agreeing at [1], Adams J dissenting at [70]-[71]). Nettle sufficient significant probative value to render it admissible under s 97 in proof of each alleged sexual offence. There are two difficulties with that argument. The first, which is sufficient reason in itself to reject the argument, is that, properly understood, BC was decided, according to the orthodox approach to the application of s 97, on the basis that the evidence established "a pattern of behaviour, modus operandi, system or pattern and common threads ... in the [accused's] conduct"233. As "The allegations had a number of common or similar features, namely the young age at which some of the complainants were first abused and then abused later when they were older, the complainants were each known to the [accused], the above occurred in a context where he was trusted to exercise some form of supervision of them, and he did not force himself on the complainants but sought their consent or made a request. True it is that not all features were present with all complainants but that was not necessary." The same orthodox approach leads to the conclusion expressed earlier in these reasons that the evidence relating to Counts 1 to 6, including the evidence of BB and AA, was cross-admissible as between Counts 1 to 6 and that the evidence relating to Counts 7 to 9, again including the evidence of BB and AA, was cross-admissible as between Counts 7 to 9. Non constat, however, that, in the absence of a pattern of behaviour, modus operandi or "common threads", it is permissible to aggregate a succession of disparate sexual offences alleged to have been committed over a period of years in proof of some general tendency towards sexual misconduct. As was earlier recorded234, the Crown contended that there were some common features of the appellant's offending in this case, including furtive touching of female children's breasts and vaginal areas; the exposure of his penis; the causing of contact between his penis and female children; and sexual misconduct in the vicinity of other persons. On the Crown's submission, it did not matter that these features were relevant to only some counts. It did not matter that the age of some complainants varied markedly from some of the others, or that the offences alleged to have been committed against some of the complainants were markedly different from the offences alleged to have been committed against some of the others, or that the circumstances in which some of 233 BC [2015] NSWCCA 327 at [101] per Beech-Jones J (Simpson JA agreeing at [1]). The controversy in that case related to the application of s 101: see at [70]-[71] per 234 See [168] above. Nettle the alleged offences were committed were markedly different from the circumstances of offending for some of the others. In particular, it was said, it did not matter that the alleged act of making a female child come into contact with the appellant's penis in the case of Count 10 occurred while standing kissing the 15 year old EE, but in the case of Count 9 occurred while positioning the head of the nine year old AK on his lap in order to administer medicated ear drops at her mother's request. The significance of such differences in effect evaporated, it was contended, once the evidence of each of the alleged offences and uncharged acts was aggregated. So viewed, it was submitted, the totality of the evidence established a pattern of the appellant satiating a perverted sexual interest in female children, albeit doing so by different kinds of sexual offences, at different times and places, in different circumstances, as and when opportunities arose, which the appellant neither orchestrated nor arranged235. That contention bespeaks the second difficulty with the Crown's argument, which is the profundity of its consequences. If accepted, it would mean that, whenever an accused is alleged to have committed a succession of different sexual offences against a succession of children, in different circumstances, each having no more in common with the others than that each is committed opportunistically, evidence of all of the alleged offences is admissible in proof of each of them on the basis that, while none taken alone establishes anything of significant probative value in relation to any of the others, together all of them establish a tendency to commit sexual offences against children, and that is to be taken as being of significant probative value in relation to the proof of each of the offences on the basis that a tendency to commit sexual offences makes it significantly more likely that the accused has committed the sexual offence with which he or she is charged. If that is to be regarded as acceptable, what then is to be the limit to the admission of tendency evidence? Does it, for example, follow that, where an accused is charged with a dozen counts of theft alleged to have been committed against as many female victims ranging between six and 24 years of age, each in different circumstances, by different means and for different amounts, together those allegations represent such a pattern of interconnected behaviour as to establish a tendency to commit theft from young female victims that renders the entirety of that evidence admissible in proof of each count? Presumably not, but, if not, what is the difference? The answer which the Crown and the Victorian Director of Public Prosecutions offered in the course of argument was that sexual offences of the kind in issue here are different because a tendency to commit sexual offences 235 See Hughes unreported, District Court of New South Wales, 14 February 2014 at 53-54 per Zahra DCJ. Nettle against children is such an exceptional phenomenon as to make evidence of one such offence significantly probative of an offender having committed another. That answer is not persuasive. To adopt and adapt the reasoning of Simpson J in Fletcher236: "While it may be tempting to think, for example, that evidence of a sexual attraction to [female children] has probative value in a case where the allegations are, as here, of sexual misconduct with [female children], an examination must be made of the nature of the sexual misconduct alleged and the degree to which it has similarities with the tendency evidence proffered. There will be cases where the similarities are so overwhelming as to amount to what, in pre-Evidence Act days was called 'similar fact' evidence, showing 'a striking similarity' between the acts alleged; and there will be cases where the similarities are of so little moment as to render the evidence probative of nothing." Admittedly, and obviously, the commission of sexual offences against children is unusual by the standards of ordinary decent people. But it is not unusual in comparison to other crimes. As the Victorian Director of Public Prosecutions submitted, the bulk of the work of criminal courts in this country is devoted to dealing with sexual offences and the bulk of those offences are sexual offences against children. And, as is apparent from the psychological studies which the Australia Law Reform Commission emphasised in 1985 and 2005, the fact of sexual offending is not, of itself, a sound basis for the prediction of further sexual offending237. The probability of further offending depends on circumstantial and situational considerations of the kind that inform the orthodox application of s 97. Certainly, Parliament could enact legislation that treats disparate sexual offences committed in different circumstances at different times in different places against different children as significantly probative of the commission of each other. Given the very extensive publicity and information which is nowadays devoted to sexual offences against children, it may be that Parliament will one day choose to do so. But, for the reasons already stated, it should not be thought that that was Parliament's purpose when enacting s 97. And, it is to be remembered that, despite the questions posed in the course of the Australian Law 236 (2005) 156 A Crim R 308 at 319-320 [50] (McClellan CJ at CL agreeing at 310 237 See generally Australian Law Reform Commission, Uniform Evidence Law, Report Nettle Reform Commission's review of the uniform evidence legislation238 and more recent proposals for reform239, Parliament has never made any substantive amendment to s 97 for the purpose of ensuring greater admissibility than the orthodox approach allows. Consistently, therefore, with the dialogue between the courts and Parliament that is manifest in the rules of statutory construction, it would be wrong to suppose that it had. Velkoski and the position in Victoria Finally, for the sake of completeness, it should be mentioned that, in the course of argument, counsel for the appellant called in aid comments by the Victorian Court of Appeal in Velkoski v The Queen240 that, although the New South Wales Court of Criminal Appeal and the Victorian Court of Appeal were for some time at one in following the orthodox approach to the application of s 97, the New South Wales Court of Criminal Appeal has in more recent decisions approved the admission of evidence as tendency evidence that, by the standards of the orthodox approach to the application of s 97, did not rise to the level of significant probative value. Counsel for the appellant submitted that Velkoski lends support to the contention that the Court of Criminal Appeal was in error in this case in its treatment of the tendency evidence. The Victorian Director of Public Prosecutions, in support of the Crown, submitted to the contrary that Velkoski was wrongly decided, and should not be endorsed by this Court, because it required a similarity or connection between tendency evidence and the "operative features" of the charged acts241. If Velkoski were properly to be read as requiring a similarity or connection between tendency evidence and the "operative features" of charged acts, it would go too far. As has been explained, what is required is a logically significant 238 Australian Law Reform Commission, Review of the Evidence Act 1995, Issues Paper 28, (2004) at 126, Questions 8-8, 8-9. 239 Royal Commission into Institutional Responses to Child Sexual Abuse, Evidence (Tendency and Coincidence) Model Provisions, Public Consultation Draft, (2016); Cossins, "The Behaviour of Serial Child Sex Offenders: Implications for the Prosecution of Child Sex Offences in Joint Trials", (2011) 35 Melbourne University Law Review 821 at 860-861. See also Evidence Act 1906 (WA), s 31A, which was inserted in 2004 by s 13 of the Criminal Law Amendment (Sexual Assault and Other Matters) Act 2004 (WA). 240 (2014) 45 VR 680 at 713 [142], 715 [152], 717-718 [163]-[164]. 241 That argument was based on the reasons expressed in Velkoski (2014) 45 VR 680 Nettle connection between either the acts in question, or the circumstances of the offending, or the relationship of the accused to the complainants, or some other aspect of the factual matrix that as a matter of syllogistic reasoning affects an assessment of the probability of the existence of a fact in issue. But whether or not Velkoski should be read as going too far, it does assist in illuminating the illogic of departing from the orthodox approach to the application of s 97. Velkoski emphasises that to show only that an accused has a sexual interest in a number of complainants and is willing to act upon it as occasion presents is to show no more than that the accused is the type of person who is disposed to and does commit sexual offences. That is no more than a mere propensity to commit sexual offences and, as has been shown, it would not, without more, be significantly probative of the accused having committed another sexual offence. Counsel for the Crown contended that the real error in Velkoski was that the Victorian Court of Appeal ignored the statutory language of s 97. In his submission, evidence which demonstrates that an accused has a sexual attraction to female children under 16 years of age and is disposed to act upon it as occasion presents is evidence which is highly probative of the accused having a "particular state of mind" and so, therefore, plainly admissible in accordance with the words of the section. By requiring anything more to render such evidence admissible, it was submitted, the orthodox approach is clearly opposed to the terms of s 97 and, therefore, should be rejected. It is, however, the Crown's contention which is opposed to the language of the section, for to posit that an otherwise unparticularised sexual interest in female children under 16 years of age is a "particular state of mind" is to deny the statutory requirement of particularity. As Edelman J observed in effect in the course of argument, it traduces particularity to similarity at a very high or abstract level of generality. And, at such a high or abstract level of generality, the criterion of admissibility becomes no more than, or no different from, the test of relevance under s 55. That cannot be the purpose of s 97. Conclusion and orders The admission of the tendency evidence in relation to all counts occasioned a substantial miscarriage of justice. As was conceded by the Crown, there can be no question of the application of the proviso242. Accordingly, the appeal should be allowed, the convictions quashed and the sentences passed below set aside, and it should be ordered that a new trial be had on all counts except Count 10. 242 Criminal Appeal Act 1912 (NSW), s 6(1). 210 GORDON J. This appeal concerns a question of statutory construction of s 97(1)(b) of the Evidence Act 1995 (NSW), which provides relevantly that evidence adduced for the purpose of proving that an accused has or had a tendency to act in a particular way or to have a particular state of mind is inadmissible unless "the court thinks that the evidence will, either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence, have significant probative value". The answer particularly affects the trial of a person charged with multiple sexual offences and how such a trial should be conducted. The answer is not limited to trials in New South Wales. It affects the trial of such a person, and how their trial should be conducted, under and in accordance with the Evidence Act 1995 (Cth), the Evidence Act 2001 (Tas), the Evidence Act 2008 (Vic), the Evidence Act 2011 (ACT) and the Evidence (National Uniform Legislation) Act (NT). Tendency evidence Tendency evidence provides a foundation for inferring that a person "has or had a tendency to act in [a particular] way or to have a particular state of mind, the existence of which tendency makes it more probable that the accused acted in a particular way or had a particular state of mind at the time or in the circumstances of the alleged offence"243. It follows that it is necessary to identify the tendency "to act in a particular way, or to have a particular state of mind" that is sought to be proved by the particular piece of tendency evidence, and the strength of the inference that can be drawn from that evidence. That task must be undertaken separately in relation to each piece of evidence. However, in undertaking the task, the court is not to disregard other evidence, including other tendency evidence. That is the consequence of the language of s 97(1)(b), which relevantly provides that tendency evidence may meet the significant probative value threshold "either by itself or having regard to other evidence adduced or to be adduced by the party seeking to adduce the evidence". The limitation implicit in that statutory language is that regard is not to be had to evidence adduced or sought to be adduced by another party to the proceeding. That task is not undertaken in a vacuum. Identifying the tendency said to be proved by the tendency evidence "is no more than a step on the way" in 243 IMM v The Queen (2016) 257 CLR 300 at 328 [104]; [2016] HCA 14. See also s 97(1) of the Evidence Act. reasoning to a conclusion about the ultimate question posed by s 97(1)(b)244: the extent to which the tendency evidence could rationally affect the assessment of the probability of the existence of a fact in issue. It has been said that, for evidence to have "significant" probative value, the evidence must be "important" or "of consequence"245. That is, "the evidence must be influential in the context of fact-finding"246. Substantially for the reasons given by Nettle J, I agree that: The "probative value" of evidence means the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue247. Each count on a multiple count indictment must be considered separately and questions about tendency evidence must be decided separately by reference only to the evidence adduced or sought to be adduced that is relevant to that count248. (3) Whether a piece of evidence has "significant probative value" must be considered separately in relation to each count on the indictment because the facts in issue will differ on each count249. (4) Whether tendency evidence has "significant probative value" in relation to a particular count must be decided for each count by reference to the facts in issue on that count250. 244 See Gardiner v The Queen (2006) 162 A Crim R 233 at 260 [124]. 245 IMM (2016) 257 CLR 300 at 314 [46], 327 [103]. See also Lockyer (1996) 89 A Crim R 457 at 459. 246 IMM (2016) 257 CLR 300 at 314 [46]. 247 See s 3(1) of the Evidence Act; definition of "probative value" in Pt 1 of the Dictionary to the Evidence Act. 248 See KRM v The Queen (2001) 206 CLR 221 at 234 [36], 257 [106], 260 [118], 263-264 [132]-[133]; [2001] HCA 11; MFA v The Queen (2002) 213 CLR 606 at 617 [34]; [2002] HCA 53. 249 See, eg, Rapson v The Queen (2014) 45 VR 103. 250 See, eg, Phillips v The Queen (2006) 225 CLR 303 at 317-318 [44]-[47]; [2006] HCA 4. (5) Determining whether tendency evidence has "significant probative value" requires precise particularisation of each tendency alleged as well as logical analysis of how the alleged tendency, if proved by the identified evidence, relates to the facts in issue in respect of the specific count being considered, in order to determine if the identified evidence would have significant probative value in relation to those facts in issue251. Evidence that an accused has committed an offence is not, without more, significantly probative of the accused having committed the offence in question252. Tendency evidence has "significant probative value" where, for example, that evidence provides some logically significant underlying unity or commonality which rationally permits a conclusion that evidence of the accused having committed a sexual offence against one person significantly increases the probability of the accused having committed a sexual offence against another person253. Evidence with "significant probative value" may also include, but is not limited to, evidence that there is a logically significant degree of similarity in the relationship of the accused to each complainant; a logically significant connection between the details of each offence or the circumstances in which each offence was committed; or a logically significant or recognisable modus operandi, system of offending, or pattern of conduct. That set of principles reflects three matters. First, it reflects the dangers attending the reception of tendency evidence that have long been recognised254. Those dangers were recognised, not eliminated, by the enactment of s 97. What was and remains necessary, as a matter of logical probability, are identified similarities or other logically significant connections between the evidence and the facts in issue. 251 See, eg, HML v The Queen (2008) 235 CLR 334 at 350-352 [4]-[5]; [2008] HCA 16; IMM (2016) 257 CLR 300 at 314 [46]. 252 See, eg, BBH v The Queen (2012) 245 CLR 499 at 525 [70]-[71]; see also at 522 [61]; [2012] HCA 9. 253 See, eg, Hoch v The Queen (1988) 165 CLR 292 at 294-295; [1988] HCA 50; Pfennig v The Queen (1995) 182 CLR 461 at 482; [1995] HCA 7. 254 Reasons of Gageler J at [71]-[77], [83], [85] and Nettle J at [184], [193]. Second, it reflects what Gageler J describes as a "conservative approach"255. As his Honour puts it, a tendency to be sexually interested in female children or a tendency to engage in sexual activities with female children opportunistically is insufficient to bear on the probability that a person who had such a tendency engaged in a particular sexual activity with a particular female child on a particular occasion to an extent that can properly be evaluated as significant. More is required. As already noted, that additional factor may, for example, take the form of some logically significant underlying unity or commonality which rationally permits a conclusion that evidence of the accused having committed a sexual offence against one person significantly increases the probability of the accused having committed a sexual offence against another person. Third, it reflects that, if admission of the evidence is sought to be justified by describing the "tendency" in broad terms and without the kind of logically significant similarity, connection, underlying unity or commonality referred to earlier, evidence of any sexual misconduct, whether against an adult or a child, may be admitted as tendency evidence at the trial of offences against children. That is not how s 97(1)(b) operates or was intended to operate. That third matter is illustrated here by considering how the tendency evidence of the wardrobe assistants ("LJ", "CS" and "VR") bears upon count 11 – an offence of committing an act of indecency towards "SM" when she was 12 or 13 years old. SM had worked with the appellant on a television series called Hey Dad..! from eight years of age. In relation to count 11, her evidence was that the appellant came out of his dressing room on the Hey Dad..! set and stood in front of a mirror in view of SM, made eye contact with her, undid his belt, allowed his trousers to drop to the floor, pulled down his underpants and exposed his penis in the mirror. He then wiggled his hips back and forth, looking at SM in the mirror and then at his penis. SM also gave evidence of uncharged acts, which included that, when sat on the appellant's lap for publicity photographs, he would pick her up with his hands on her chest and put his hand underneath her, sometimes moving his hands to touch her vagina. LJ, CS and VR also worked with the appellant on the set of Hey Dad..!. LJ, CS and VR were adult women. Each gave evidence of other uncharged acts256. For example, in relation to separate uncharged acts, LJ and VR gave evidence that, when they went to wake the appellant in his dressing room, he was 255 Reasons of Gageler J at [111]. 256 Reasons of Nettle J at [135]-[138]. naked. Evidence of those uncharged acts was admitted as tendency evidence in relation to count 11. The Court of Criminal Appeal upheld the trial judge's conclusion on the admissibility of the tendency evidence, including the evidence of the wardrobe assistants. Two essential tendencies were referred to, and adopted, by the Court of Criminal Appeal – a tendency to have a sexual interest in female children under 16 years of age and a tendency to engage in sexual conduct with female children under 16 years of age, where those tendencies were exhibited in three different but not significantly disassociated contexts: "of social and familial relationships; [the appellant's] daughter's relationships with her young friends; and the work environment"257. Count 11 is concerned with the last context – the work environment. The Court of Criminal Appeal's application of the "two essential tendencies" to the evidence of the wardrobe assistants meant that the evidence of the wardrobe assistants was admissible as tendency evidence notwithstanding that the wardrobe assistants were not female children under the age of 16. Aside from the fact that the evidence of the wardrobe assistants related to incidents in the "work environment", the Court of Criminal Appeal did not explain, and it is not apparent, how that evidence relates to the "two essential tendencies". That approach illustrates not only the difficulty with relying on highly generalised tendencies, but also the difficulty with not undertaking the relevant analysis separately in relation to each piece of evidence on each count on the indictment. Resolution of appeal Both Gageler J and Nettle J conclude that the evidence of "EE", the complainant in relation to count 10, was not admissible on the other counts on the indictment. I agree with that conclusion. The relationship between the appellant and EE was not and could not be consensual, but the nature of their relationship was undoubtedly different from that between the appellant and each of the other complainants. As Gageler J notes258, in light of the prosecution's concession, that conclusion is sufficient for the convictions on counts 1 to 9 and 11 to be quashed. I agree with the orders proposed by Gageler J and Nettle J. 257 Hughes v The Queen [2015] NSWCCA 330 at [197]. 258 Reasons of Gageler J at [115].
HIGH COURT OF AUSTRALIA REPUBLIC OF CROATIA APPELLANT AND RESPONDENT Republic of Croatia v Snedden [2010] HCA 14 Date of Order: 30 March 2010 Date of Publication of Reasons: 19 May 2010 ORDER Appeal allowed with costs. Set aside the orders of the Full Court of the Federal Court of Australia made on 2 September 2009 and the further orders of that Court made on 4 September 2009 and, in place of those orders, order that: In addition to the order made by Justice Cowdroy on 3 February 2009, it be ordered that the orders made by Deputy Chief Magistrate Cloran on 12 April 2007 are confirmed; Subject to paragraph (a), the appeal be dismissed with costs. On appeal from the Federal Court of Australia Representation M A Perry QC with H Younan for the appellant (instructed by Commonwealth Director of Public Prosecutions) B W Walker SC with C D Jackson for the respondent (instructed by Schreuder Partners Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Republic of Croatia v Snedden Extradition – Eligibility for extradition from Australia – Extradition objections – Whether objection established on basis that on surrender the respondent might be "punished, detained or restricted" in liberty "by reason of" his "political opinions" – Where respondent claimed prior service in Croatian armed forces was treated by Croatian courts as mitigating factor in sentencing – Where respondent alleged to have served with forces other than Croatian armed forces – Whether respondent's ineligibility for mitigating factor in sentencing was punishment – Whether such punishment was "by reason of" respondent's "political opinions". Words and phrases – "by reason of", "political opinions", "punished". Extradition Act 1988 (Cth), ss 7(c), 19(2)(d). Introduction The respondent was born in the former Yugoslavia in 1954 and migrated to Australia in 1969, taking up Australian citizenship in 1975. He was named Dragan Vasiljkovic at birth but changed his name to Daniel Snedden when assuming Australian citizenship. He is said to have been the commander of a Special Purpose Unit of Serbian paramilitary troops during the Croatian-Serbian conflict in the early 1990s following the fall of communism in Yugoslavia1. On 20 January 2006, the Republic of Croatia ("the Republic") issued a request to the Australian Government for the extradition of the respondent to Croatia. The respondent's extradition was sought so that he could be prosecuted for offences against Arts 120 and 122 of the Basic Penal Code of the Republic of Croatia. The Republic alleged, in its request, that during June and July 1991 in Knin the respondent did nothing to prevent members of the Unit who were his subordinates from mistreating captured members of the Croatian army and police and mistreated one such person himself. It also alleged that, in February 1993, he commanded subordinate members of the Unit to interrogate and then execute two Croatian prisoners of war. Those allegations formed the basis of the claimed contraventions of Art 122. In relation to the alleged offence against Art 120, he is said to have commanded members of the Special Purpose Unit and a tank unit of the Yugoslav People's Army to fire on a church and a school. In proceedings before a magistrate under s 19 of the Extradition Act 1988 (Cth) to determine his eligibility for surrender, the respondent contended, inter alia, that there were substantial grounds for believing that if surrendered to Croatia he might be punished by reason of his political opinions. That ground is a defined "extradition objection" under s 7(c) of the Extradition Act. If it is made out in proceedings under s 19, the magistrate may not determine that the person raising the objection is eligible for surrender. The respondent failed to satisfy the magistrate that there were substantial grounds for believing that any extradition objection existed. The magistrate determined that he was eligible for extradition. The respondent failed again in review proceedings before a judge of the Federal Court pursuant to s 21 of the Extradition Act2. However, on 2 September 2009 the Full Court of the Federal Court of Australia found an extradition objection made out on the basis that, in 1 For a brief review of the relevant history of the conflict see Travica v The Government of Croatia [2004] EWHC 2747 (Admin) at [7]-[10]. 2 Snedden v Republic of Croatia [2009] FCA 30. sentencing for offences of the kind alleged against the respondent, prior service in the Croatian armed forces was treated by Croatian courts as a mitigating factor and was ipso facto not available to those who had fought on the Serbian side of the conflict. It held there were therefore substantial grounds for believing that the respondent might be punished, detained or restricted in his personal liberty by reason of his political opinions3. The Full Court allowed the appeal against the decision of the primary judge of that Court and directed that the respondent be released from custody. Special leave to appeal against the decision of the Full Court of the Federal Court was granted on 12 February 2010. On 30 March 2010, following the hearing of the appeal, the appeal was allowed and the magistrate's orders confirmed. My reasons for joining in those orders follow. The reasoning of the Full Court of the Federal Court Before the magistrate the respondent pointed to uncontradicted evidence4 said to show that service in the Croatian military during the Croatian-Serbian conflict is treated in Croatian courts as a mitigating factor in the sentencing of persons for war crimes committed during the conflict5. A submission that such mitigation of sentence implied a heavier punishment for Serbian ex-servicemen by reason of their nationality and political beliefs was rejected. The submission was renewed in written submissions in reply before the primary judge in the Federal Court6, but was not mentioned in his Honour's reasons for judgment. It was, however, successful on the appeal to the Full Court of the Federal Court, which made the following findings and reached the following conclusions: Reports from the Organization for Security and Co-operation in Europe ("OSCE") published in March and September 20067, which were before the magistrate and the primary judge, indicated that the Supreme Court of 3 Snedden v Republic of Croatia (2009) 178 FCR 546 at 559 [55]. 4 See (2009) 178 FCR 546 at 557 [41]. "War crimes" is the term used in the reports of the Organization for Security and Co-operation in Europe on which the respondent relies. 6 Submissions were filed by leave after the close of the hearing. 7 Organization for Security and Co-operation in Europe, Mission to Croatia, "News in brief: 22 February–7 March 2006"; "Background Report: Domestic War Crime Trials 2005", 13 September 2006. Croatia had sanctioned lower courts taking into account, in mitigation of sentence for war crimes offences, service by the convicted person in the Croatian armed forces during the Croatian-Serbian conflict8. The County Courts of Croatia had taken the Supreme Court to have approved the practice of mitigating sentence by reference to prior service in the Croatian army. No evidence had been adduced by the Republic to contradict the inference that such a factor continued to be applied in There was no evidence that the respondent's sentence would be increased because he had fought on the Serbian side10. The evidence supported the respondent's submission that the Croatian courts take an holistic approach to sentencing11. If convicted the respondent would be "detained" and deprived of his liberty for a period longer than a Croatian counterpart12. His treatment would thus fall within s 7(c) – subject only to determination of the question whether it arose " by reason of his … race, religion, nationality or political opinions"13. 8 The relevant decision of the Supreme Court of Croatia was RH v Nikola Ivankovic ("Paulin Dvor"), I Kz 1196/04-5, 10 May 2005 (confirming the conviction by the Osijek County Court) and referred to in the judgment of the Full Court at (2009) 178 FCR 546 at 556-557 [38] and 557 [40]. (2009) 178 FCR 546 at 557 [40]-[41]. In fact only one decision of a County Court applying the mitigating factor was cited in the later OSCE report other than the decision appealed to the Supreme Court in RH v Nikola Ivankovic. 10 (2009) 178 FCR 546 at 558 [43]. 11 The word "holistic" appears to be an attempt to summarise the respondent's submission that, instead of applying a sentence and then declining to apply a mitigating factor, the Croatian courts "apply the various factors, including aggravating … and mitigating circumstances, as part of the process of deciding the sentence". The respondent submitted that "the sentencing process itself involves a balancing of factors, so that the failure to apply the mitigating factor constitutes a positive act": (2009) 178 FCR 546 at 558 [44]. 12 (2009) 178 FCR 546 at 558 [46]. 13 (2009) 178 FCR 546 at 558 [47]. The mitigating factor of prior service in the Croatian army could not be said to be based on nationality. It would apply to Serbs who fought in the Croatian army. It would not apply to Croatians who fought with the Serbian forces in support of an independent Republic of Krajina14. The mitigating factor operated by reference to political beliefs. The relevant political belief held by the respondent was described in his own statement as "the self determination of Serbian people in the Balkans in those areas where they constitute a majority", in particular in the Krajina. The respondent's political belief was that "Krajina Serbs [had] a right to return to their homeland and [were] entitled to an independent state". The extradition request itself referred to the conflict in Knin "between the armed forces of the Republic of Croatia and the armed aggressor's Serbian paramilitary troops of the anti-constitutional entity the 'Republic of Krajina'", in which the respondent was a commander15. There were substantial grounds for believing that the respondent might be "punished" or imprisoned and thereby "detained" or "restricted in his … personal liberty … by reason of his … political opinions"16. Ground of appeal There were two grounds of appeal to this Court, only one of which was pressed. Omitting particulars, it was in the following terms: "The Full Court erred in holding that the Respondent had established an extradition objection in relation to the extradition offences for the purposes of s 19(2)(d) of the Extradition Act 1988 (Cth) … on the ground that the Respondent had established substantial grounds for believing that, on surrender to the Republic of Croatia in respect of the extradition offences, he may be 'punished, detained or restricted in his … personal liberty, by reason of his … political opinions.'" (italics in original) Statutory framework The provisions of the Extradition Act most relevant for this appeal are ss 7 and 19. Section 19 provides for the determination by a magistrate17 of eligibility 14 (2009) 178 FCR 546 at 559 [52]. 15 (2009) 178 FCR 546 at 559 [53]. 16 (2009) 178 FCR 546 at 559 [55]. 17 The determination by the magistrate is an administrative and not a judicial process: Pasini v United Mexican States (2002) 209 CLR 246; [2002] HCA 3. for surrender of a person whose extradition has been requested by an extradition country18. Section 19(2) sets out the necessary conditions for eligibility for surrender and provides that: "For the purposes of subsection (1), the person is only eligible for surrender in relation to an extradition offence for which surrender of the person is sought by the extradition country if: the person does not satisfy the magistrate that there are substantial grounds for believing that there is an extradition objection in relation to the offence." "Extradition objection" is defined in s 7, which relevantly provides: "Meaning of extradition objection For the purposes of this Act, there is an extradition objection in relation to an extradition offence for which the surrender of a person is sought by an extradition country if: on surrender to the extradition country in respect of the extradition offence, the person may be prejudiced at his or her trial, or punished, detained or restricted in his or her personal liberty, by reason of his or her race, religion, nationality or political opinions; The magistrate's order in proceedings under s 19 can be reviewed upon application under s 21 by the Federal Court or the Supreme Court of a State or Territory19. Upon such an application for review the court is required to "have 18 An "extradition country" is defined under s 5 to mean, inter alia, "any country … that is declared by the regulations to be an extradition country". The Republic of Croatia is declared to be an extradition country by the Extradition (Croatia) Regulations 2004 (Cth). 19 In undertaking such review the court exercises judicial power: Pasini (2002) 209 CLR 246. regard only to the material that was before the magistrate"20. The court may by order confirm the order of the magistrate or quash it and make ancillary orders21. An appeal lies from the Federal Court or the Supreme Court to the Full Court of the Federal Court22. The political opinion objection The only extradition objection in issue in this appeal is that defined in s 7(c) by the words "punished, detained or restricted in his … personal liberty, by reason of his … political opinions". It is useful to refer briefly to the ancestry of that statutory collocation. Until 1966 the law applicable to the extradition of fugitives to and from Australia was found in the Extradition Act 1870 (Imp) ("the 1870 Act"), which applied to extradition to foreign states, and the Fugitive Offenders Act 1881 (Imp) ("the 1881 Act"), which applied to extradition between British Dominions and later the countries of the British Commonwealth. The 1870 Act was expressed to apply to British possessions, which included "any colony … within Her Majesty's dominions"23. It prohibited the surrender of a "fugitive criminal" if the offence was of "a political character" or the request for his surrender was made "with a view to try or punish him for an offence of a political character"24. The 1881 Act, applying as it did to the British Dominions, contained no such restriction25. The Imperial statutes of 1870 and 1881 were continued in force in Australia after Federation as laws in force in the States at the time of the establishment of the Commonwealth and therefore preserved by s 108 of the 20 Extradition Act, s 21(6)(d). 21 Extradition Act, s 21(2)(a) and (b). 22 Extradition Act, s 21(3). 23 1870 Act, ss 17 and 26. 24 1870 Act, s 3(1). 25 Section 10 of the 1881 Act empowered a court to discharge a fugitive whose return was sought when, inter alia, by reason of the application for return not being made "in good faith", return would be "unjust or oppressive or too severe a punishment". Constitution unless and until provision was made by the Commonwealth Parliament26. In 1957, members of the Council of Europe signed the European Convention on Extradition, which contained, in Art 3.2, a prohibition against extradition if the requested party had "substantial grounds for believing that a request for extradition for an ordinary criminal offence [had] been made for the purpose of prosecuting or punishing a person on account of his race, religion, nationality or political opinion, or that that person's position may be prejudiced for any of [those] reasons". independent members of By the early 1960s the application of Imperial statutes to former British Dominions which had become the British Commonwealth was seen as "becoming anomalous"27. As noted earlier, there was no provision for a political objection to extradition under the 1881 Act. This led to the incongruity that "a Commonwealth citizen seeking political asylum in Britain was in a worse situation than an alien"28. Following the extradition, in 1963, of Nigerian pro-democracy activist Chief Anthony Enahoro to Nigeria on a charge of treasonable felony, the British Government circulated a memorandum proposing changes to the laws relating to extradition between Commonwealth countries29. In September 1965 and April 1966 conferences of Commonwealth Law Ministers were held in Canberra and London where a "Scheme relating to the Rendition of Fugitive Offenders within the Commonwealth" was agreed30. The Scheme set out in cl 9 a number of "[c]ircumstances precluding return" including: 26 McKelvey v Meagher (1906) 4 CLR 265 at 279 per Griffith CJ, 286 per Barton J and 295 per O'Connor J; [1906] HCA 56. 27 Forde, The Law of Extradition in the United Kingdom, (1995) at 5. 28 de Smith, "Political Asylum and the Commonwealth", (1963) 16 Parliamentary Affairs 396 at 396. 29 Fugitive Offenders Bill 1967 (UK), Second Reading Speech, Lord Stonham, HL Debates, 17 April 1967, vol 282, cc 50-51. 30 A Scheme relating the Rendition of Fugitive Offenders within the Commonwealth, reproduced as Appendix XX in Hartley Booth, British Extradition Law and Procedure, (1980), vol 1 at 315. The events leading to the adoption of the Scheme were outlined in the Second Reading Debate in the House of Lords for the Bill which became the Fugitive Offenders Act 1967 (UK): HL Debates, 17 April 1967, vol 282, c 51. "(2) The return of a fugitive offender will be precluded by law if it appears to the competent judicial authority or executive authority – that he may be prejudiced at his trial or punished, detained or restricted in his personal liberty by reason of his race, religion, nationality or political opinions." Clause 9(2)(b) was originally framed in terms similar to those of s 10 of the Fugitive Offenders Act 1881. It was subsequently agreed that it should instead reflect the terms of Art 3.2 of the European Convention but that it should be varied to provide a more precise criterion than "prejudice"31. (Foreign States) Act and In 1966 the Commonwealth Parliament enacted Australia's first national legislation relating to extradition. It comprised two Acts, the Extradition (Foreign States) Act 1966 (Cth) and the Extradition (Commonwealth Countries) Act 1966 (Cth). The first of those replaced the Extradition Act 1870 and the second, the Fugitive Offenders Act 1881. The restriction on return which had appeared in cl 9(2)(b) of the agreed Scheme appeared in s 14(b) of the Extradition the Extradition (Commonwealth Countries) Act. If there were substantial grounds for believing that the fugitive would, if surrendered to the requesting country, suffer the the Attorney-General was those paragraphs, consequences described prohibited from giving a notice authorising the issue of a warrant for the apprehension of the fugitive or from otherwise informing a magistrate of the request for extradition32. The apprehension of adverse treatment set out in those paragraphs did not form a basis for objection before a magistrate in proceedings under the 1966 Acts. s 11(1)(b) of 31 The variation appears to have been urged by the Commonwealth Attorney-General, the Hon B M Snedden, who circulated at the meeting a copy of the European Convention and the Bill which was to become the Extradition (Foreign States) Act 1966 (Cth). Clause 14(b) of that Bill provided that the Attorney-General should not authorise the apprehension or order the surrender of a fugitive if the Attorney- General has "substantial grounds" for believing that the fugitive, upon return, "may be prejudiced by reason of his race, religion, nationality or political opinions": see Meeting of Commonwealth Law Ministers, London, April/May 1966, Minutes of Meetings and Memoranda at 204. 32 Extradition (Foreign States) Act, ss 14(b) and 15(1); Extradition (Commonwealth Countries) Act, ss 11(1)(b) and 12(1). A similarly worded restriction appeared in s 4(1)(c) of the Fugitive Offenders Act 1967 (UK), albeit it could be made out before the Secretary of State or the court of committal, or on an application to the High Court for habeas corpus or for review of the order of committal. The words of s 4 required that it appear that the person whose surrender was requested "might, if returned, be prejudiced at his trial or punished, detained or restricted in his personal liberty by reason of his race, religion, nationality or political opinions"33. The restrictions on surrender so imposed were described as "significantly broader than those contained in Section 3(1) of the [1870 Act], and perhaps more in tune with modern requirements"34. The Extradition Act 1988 (Cth) replaced the two 1966 statutes35. It was described in the Replacement Explanatory Memorandum to the Extradition Bill 1987 as consolidating Australia's extradition laws by combining the operation of the two repealed Acts36. Paragraphs (a), (b) and (c) of cl 7, defining extradition objections, were said to "re-enact the statutory safeguards contained in the Extradition (Foreign States) and Extradition (Commonwealth Countries) Acts 1966"37. In his Second Reading Speech for the Bill the Attorney-General said, in relation to the relevant extradition objections38: "The Bill requires extradition to be refused in any case where the surrender is sought for the purpose of prosecuting or punishing the person on account of race, religion, nationality or political opinion. It also requires refusal of extradition where any prejudice on any of those grounds may result." The antecedents of the extradition objection in s 7(c) do not suggest that it is rooted in or confined by concepts of differential treatment. Rather it is directed to protecting people from extradition to a country in which they might 33 Fugitive Offenders Act, s 4(1)(c). 34 HL Debates, 17 April 1967, vol 282, c 52. 35 The two 1966 Acts were repealed by the Extradition (Repeal and Consequential Provisions) Act 1988 (Cth). 36 Australia, House of Representatives, Extradition Bill 1987, Replacement Explanatory Memorandum at 1. 37 Australia, House of Representatives, Extradition Bill 1987, Replacement Explanatory Memorandum at 6. 38 Australia, House of Representatives, Parliamentary Debates (Hansard), 28 October be punished on account of the listed attributes including political opinion. It is not necessary, in order to invoke that objection, that it be shown that such a person is treated less favourably than some other person in similar circumstances, but lacking the requisite attribute. On the other hand, demonstrated differential treatment may support an inference and a finding of fact that the requisite causal connection exists between punishment and one of the attributes mentioned in s 7(c). The application of s 7(c) in the present case The causal connection between punishment and political opinion in s 7(c) is defined by the words "by reason of". Those words have appeared in more than one statutory setting including the definition of "refugee" in Art 1A(2) of the Refugees Convention39, effectively incorporated by reference into the criteria for the grant of protection visas under the Migration Act 1958 (Cth)40, and various anti-discrimination and equal opportunity statutes41. In those contexts and others they have been equated to terms such as "because of", "due to", "based on" and "on the ground of"42. Generally speaking "by reason of" has been held to connote a cause and effect relationship43. The words of s 7(c) require attention to be given to the existence of a causal connection between apprehended punishment and the political opinions of 39 Convention relating to the Status of Refugees done at Geneva on 28 July 1951 as amended by the Protocol relating to the Status of Refugees done at New York on 31 January 1967. The precise words used in Art 1A(2) are "for reasons of". 40 See s 36. 41 Racial Discrimination Act 1975 (Cth), s 9(1A); Sex Discrimination Act 1984 (Cth), s 5(1); Disability Discrimination Act 1992 (Cth), s 5 ("on the ground of"); Age Discrimination Act 2004 (Cth), s 14 ("on the ground of"). 42 Human Rights and Equal Opportunity Commission v Mount Isa Mines Ltd (1993) 46 FCR 301 at 321 per Lockhart J and authorities there cited; Commonwealth of Australia v Human Rights and Equal Opportunity Commission (1993) 46 FCR 191 at 204 per Lockhart J; University of Ballarat v Bridges [1995] 2 VR 418 at 424 per Tadgell J, 438 per Teague J (agreeing); Waters v Public Transport Corporation (1991) 173 CLR 349 at 359 per Mason CJ and Gaudron J; [1991] HCA 49. 43 Macedonian Teachers' Association of Victoria Inc v Human Rights and Equal Opportunity Commission (1998) 91 FCR 8 at 31 per Weinberg J, approved by the Full Court in Victoria v Macedonian Teachers' Association of Victoria Inc (1999) 91 FCR 47 at 49 [8] in which the words "by reason of" were held to be narrower than the words "based on". the respondent. It is not necessary in this case to explore the range of matters covered by the term "punishment". The apprehended risk, as asserted on behalf of the respondent, is a term of imprisonment enhanced by reference to the respondent's political opinion. Imprisonment is well within the meaning of "punishment" in s 7(c). In so saying I do not dissent from the general proposition in the joint judgment that the absence of a mitigating factor which could lead to a lesser sentence does not necessarily mean that the offender is punished or punished more because of its absence44. The respondent does not really argue to the contrary. Rather he contends that the mitigating factor of prior service in the Croatian army was so connected to his political opinions that he could be said to be at risk, because of those opinions, of a heavier punishment than he would otherwise have suffered. In considering that argument, it can be accepted that a negatively expressed mitigating factor referring to or implying the absence of some attribute could be regarded as giving rise to a risk of greater punishment on account of the presence of that attribute. This is a case in which it is said that the unavailability of the relevant mitigating factor to benefit the respondent subjects him to, or indicates that he is subject to, a risk of punishment by reason of his political opinions greater than the punishment to which he would have been subjected had he not held those political opinions. No comparators are necessary to test that proposition. In my opinion the causal connection required by the phrase "by reason of" is direct45, but even if an indirect causal connection sufficed it could not be made out in the present case. The application of the mitigating factor of service in the Croatian armed forces during the relevant conflict does not evidence any advertence by the Croatian courts to the political opinions of those who are not able to invoke its benefit. That is to say, no factual inference can be made that the non-application of the mitigating factor implies consideration by the sentencing court of the political opinions of the offender. Nor, independently of any such consideration, is there any necessary logical connection. It cannot be said that commitment to the establishment of an independent Serbian republic of Krajina was the other side of the coin of service in the Croatian armed forces. The other side of that coin is non-service in the Croatian armed forces. That does not confer the character of an aggravating factor upon service in the Serbian forces nor thereby upon a political commitment to a Serbian republic advanced by such service. The causal connection was not made out. There is no justification for the finding of the Full Court that the mitigating factor operated "by reference to" the political 44 Reasons of Gummow, Hayne, Crennan, Kiefel and Bell JJ at [81]. 45 Hempel v Attorney-General (Cth) (1987) 77 ALR 641 at 663. beliefs of the offender46. In any event the range of connections covered by the words "by reference to" is wider than those covered by the term "by reason of". The conclusions of the Full Court were factual conclusions which were not supported by the evidence. Conclusion For the preceding reasons I joined in the orders allowing the appeal. 46 (2009) 178 FCR 546 at 559 [53]. Crennan Bell GUMMOW, HAYNE, CRENNAN, KIEFEL AND BELL JJ. This appeal from the Full Court of the Federal Court of Australia (Bennett, Flick and McKerracher JJ) ("the Full Court") concerns an extradition request from the Republic of Croatia ("Croatia") in relation to the respondent, Daniel Snedden. Formerly known as Dragan Vasiljkovic, the respondent is accused of having committed criminal offences against the Basic Penal Code of the Republic of Croatia ("the Croatian Code"). Background The respondent is a citizen of the former state union of Serbia and Montenegro and of Australia. He emigrated with his family to Australia from Serbia (then part of the former Yugoslavia) as a teenager and took his current name when he became an Australian citizen. He is said to have been the military commander of a "Special Purpose Unit" of Serbian paramilitary troops which fought in the Krajina area in the periods of June and July 1991 and February On 28 November 2005 the Sibenik County Public Prosecutor's Office in Croatia submitted a request to a magistrate of the County Court in Sibenik for investigation into war crimes against prisoners of war and civilians allegedly committed by the respondent. On 12 December 2005 the County Court in Sibenik decided that there was a "well-founded suspicion" that the respondent had committed such offences. On 10 January 2006 the County Court in Sibenik ordered a warrant for the respondent's arrest to be issued. On 19 January 2006 the respondent was arrested in Sydney pursuant to a provisional arrest warrant issued under s 12(1) of the Extradition Act 1988 (Cth) ("the Extradition Act"). On 20 January 2006 he was remanded in custody pursuant to s 15 of the Extradition Act. On 17 February 2006 the Attorney-General's Department of the Commonwealth of Australia received a request dated 20 January 2006 from the Minister of Justice of Croatia seeking extradition of the respondent. That extradition was sought for the respondent's prosecution before a court in Croatia in respect of two offences of war crimes against prisoners of war pursuant to Art 122 of the Croatian Code and for one offence of a war crime against the civilian population pursuant to Art 120, pars 1 and 2, of the Croatian Code. The request enclosed a copy of the Sibenik County Court decision and order. The request set out the particulars of the offences alleged. The two Art 122 offences allegedly took place during armed conflict between the armed Crennan Bell forces of Croatia and what was described as "armed … Serbian paramilitary troops" in Knin in June and July 1991 and in the village of Bruska near Benkovac in February 1993. The Art 120 offence allegedly took place in Glina in July 1991. The armed conflict which took place in the territory of Croatia in the period from 1991 to 1995 is referred to as the "Homeland War". The Art 122 offences were particularised as the mistreatment, including torture, of Croatian prisoners of war by the respondent personally, and as a commander of a paramilitary unit of Serbian forces. The Art 120 offence was particularised as the planning and execution of an attack upon civilian objects, including a church and a school, and forcing civilians to flee their homes. The request also remarked that the Art 122 offences were contrary to Arts 3, 13 and 14 of the Geneva Convention relative to the Treatment of Prisoners of War47 and that the Art 120 offence was contrary to Arts 3, 27 and 53 of the Geneva Convention relative to the Protection of Civilian Persons in Time of War48 and Arts 4, 13 and 16 of the Protocol Additional to the Geneva Conventions of 12 August 1949, and relating to the Protection of Victims of Non-International Armed Conflicts (Protocol II)49. On 18 March 2006 a notice of receipt of the extradition request was issued pursuant to s 16 of the Extradition Act. The Attorney-General of Croatia has indicated to the Attorney-General of Australia that he will request the consent of the President of the Supreme Court of Croatia that the trial of the respondent be held before one of the four County Courts in Croatia specially designated to adjudicate alleged war crimes. The significance of that assurance is twofold. First, the evidence was that those County Courts are located in Osijek, Split, Rijeka and Zagreb, which are not regions where alleged war crimes took place, and secondly, the County Courts are staffed by professional judges. It can also be noted that Art 14 of the Croatian Constitution guarantees equality before the law. 47 Opened for signature 12 August 1949, 75 UNTS 135 (entered into force 21 October 1950). 48 Opened for signature 12 August 1949, 75 UNTS 287 (entered into force 21 October 1950). 49 Opened for signature 8 June 1977, 1125 UNTS 609 (entered into force 7 December Crennan Bell For the purposes of the Extradition Act, Croatia is declared to be an "extradition country" by reg 4 of the Extradition (Croatia) Regulations 2004 (Cth)50, the validity of which was upheld in Vasiljkovic v The Commonwealth51. As noted by the Full Court52, the process of extradition set out in the Extradition Act involves four stages, which were summarised by a Full Court of the Federal Court of Australia in Harris v Attorney-General (Cth) as follows53: "(1) Commencement; (2) Remand; (3) Determination by a magistrate of eligibility for surrender; (4) Executive determination that the person is to be surrendered. In summary form, the scheme is as follows: The commencement of proceedings is by the issue of a provisional warrant under s 12(1) or by the giving of a notice under s 16(1). Once arrested, the person is required by s 15 to be taken before a magistrate and remanded in custody or on bail for such period as may be necessary for eligibility proceedings to be taken under s 19. Where a person is on remand under s 15 and the Attorney-General has given a notice under s 16(1), provision is made under s 19 for a magistrate to conduct proceedings to determine whether the person is eligible for surrender. If eligibility is so determined by the magistrate, provision is made by s 22 for the Attorney-General to decide whether the person is to be surrendered." That approach has been confirmed by this Court54. This appeal is concerned with the third stage of the extradition process. The respondent was the plaintiff in 50 Which came into force on 8 December 2004. 51 (2006) 227 CLR 614; [2006] HCA 40. 52 Snedden v Republic of Croatia (2009) 178 FCR 546 at 550 [15]. 53 Harris v Attorney-General (Cth) (1994) 52 FCR 386 at 389. 54 Vasiljkovic v The Commonwealth (2006) 227 CLR 614 at 628 [29] per Gleeson CJ, 635-636 [55] per Gummow and Hayne JJ, 657 [144] per Kirby J. See also Director of Public Prosecutions (Cth) v Kainhofer (1995) 185 CLR 528 at 547 per Gummow J; [1995] HCA 35. Crennan Bell Vasiljkovic v The Commonwealth, which was heard after the first and second stages of the process55. The Extradition Act The scheme of the Extradition Act was considered in detail in Vasiljkovic v The Commonwealth56. Part I deals with "Preliminary" matters including definitions and Pt II deals with "Extradition from Australia to Extradition Countries". The appellant relies on s 19(2)(d) in Pt II, and s 7(c) in Pt I. Under the heading "Determination of eligibility for surrender" s 19(2)(d) relevantly provides: "For the purposes of subsection (1), the person is only eligible for surrender in relation to an extradition offence for which surrender of the person is sought by the extradition country if: the person does not satisfy the magistrate that there are substantial grounds for believing that there is an extradition objection in relation to the offence." Under the heading "Meaning of extradition objection", s 7 relevantly defines an "extradition objection" as follows: "For the purposes of this Act, there is an extradition objection in relation to an extradition offence for which the surrender of a person is sought by an extradition country if: on surrender to the extradition country in respect of the extradition offence, the person may be prejudiced at his or her trial, or punished, detained or restricted in his or her personal liberty, by reason of his or her race, religion, nationality or political opinions; 55 (2006) 227 CLR 614 at 636 [57] per Gummow and Hayne JJ. 56 (2006) 227 CLR 614 at 622-628 [16]-[29] per Gleeson CJ, 635-637 [52]-[60] per Gummow and Hayne JJ, 657-661 [143]-[155] per Kirby J. Crennan Bell It can be noted that at the fourth stage of the process, on a surrender determination by the Attorney-General, the Attorney-General must be satisfied that there is no extradition objection in relation to the offence (s 22(3)(a)). The respondent accepted that the party advancing the argument that an extradition objection exists bears the onus of establishing the existence of such The appeal in this Court The appeal raises a question as to whether there are substantial grounds for believing that an extradition objection exists for the purposes of s 19(2)(d) of the Extradition Act, such that the respondent should not be extradited. In particular, a question arises as to whether the treatment, by the Croatian courts, of service in the Croatian armed forces as a mitigating factor in the imposition of sentences ("the mitigating factor") establishes an "extradition objection" as defined in s 7(c) of the Extradition Act, for the reason that the mitigating factor is not available to persons who did not serve in the Croatian forces, which includes persons, such as the respondent, who served in the Serbian forces. The issue The issue for determination on the appeal is whether, in terms of s 7(c) of the Extradition Act, the ineligibility of the respondent for the mitigating factor meant that, on a trial after surrender to Croatia, the respondent may be punished, detained or restricted in his personal liberty, by reason of his political opinions, thereby affecting the respondent's eligibility for surrender in terms of s 19(2)(d). Because the request referred to offences in respect of which the prescribed punishment was a minimum of five years and a maximum of twenty years imprisonment, argument on the appeal inevitably concentrated on punishment by imprisonment and on the mitigating factor, in the context of sentencing to a term of imprisonment. For that reason, it is not necessary to specify, with precision, any overlap between the notions of punishment, detention or restriction in personal liberty. Nor is it necessary to explicate exhaustively the meaning of "punished" as it occurs in s 7(c). 57 Cabal v United Mexican States (2001) 108 FCR 311 at 343 [126]. Crennan Bell The proceedings below On 12 April 2007, a magistrate of the Local Court of New South Wales (Cloran DCM) determined that the respondent was eligible for surrender to Croatia pursuant to s 19(9) of the Extradition Act. The respondent applied for a review of the magistrate's decision in the Federal Court of Australia pursuant to s 21(1) of the Extradition Act. On 3 February 2009, Cowdroy J dismissed the application for review58. The respondent appealed to the Full Court, which allowed the appeal on the basis that an "extradition objection" existed in terms of s 7(c)59. The respondent relied solely on s 7(c) where previously he had relied on both ss 7(b) and 7(c)60. Before the Full Court the respondent contended that the primary judge erred in failing to consider that the application of the mitigating factor by the Croatian courts "gave rise to substantial grounds for suspecting that the [respondent] may be prejudiced [the first limb of s 7(c)], and/or detained, and/or punished [the second limb of s 7(c)] by reason of his political beliefs, nationality, or race, in relation to a portion of his sentence." The case on the appeal was confined to the second limb of s 7(c). The appeal before the Full Court proceeded on the basis that it was common ground that submissions based on evidence of such a mitigating factor were advanced by the respondent before the primary judge but not resolved and that it was appropriate for the Full Court to consider this ground. The Full Court had regard to two reports of a body described as the Organization for Security and Co-operation in Europe ("OSCE"), which the respondent contended provided evidence of this mitigating factor. Both parties accepted the independence of this body and both relied on statements in the two reports, though for different reasons. 58 Snedden v Republic of Croatia [2009] FCA 30. 59 Snedden v Republic of Croatia (2009) 178 FCR 546. 60 Snedden v Republic of Croatia (2009) 178 FCR 546 at 551 [18]. Crennan Bell The Full Court quoted the first OSCE report61, which was apparently published in March 2006, as follows: "The eight accused were sentenced to prison terms ranging from six to eight years. In setting the prison sentences, the court cited the role of the accused in defending Croatia against armed aggression as a mitigating factor. This type of mitigating factor is not applied by the ICTY [International Criminal Tribunal for the former Yugoslavia]. Not only does this politicize the verdict but it introduces a discrepancy into war crime sentencing largely correlated to national origin. Thus, the same crime committed by members of the Croatian armed forces is subject to lesser punishment than when committed by members of the former 'Krajina' or Yugoslav forces. The prosecution has indicated that it may appeal against the sentencing." The Full Court also referred to a second OSCE report62, dated 13 September 2006, the "Executive Summary" of which relevantly stated: "While diminishing in impact, ethnic origin continues to be a factor in determining against whom and what crimes are prosecuted, with discrepancies seen in the type of conduct charged and the severity of sentencing. … Service in the Croatian army continued to be used as a factor to mitigate punishment." Croatia did not lead evidence as to the present situation or to rebut or qualify the statements in the OSCE reports. There was evidence that the mitigating factor had been applied on two occasions. On one occasion the Supreme Court of Croatia disapproved of the weight given to the mitigating factor although it did not specifically disapprove of its application63. 61 Snedden v Republic of Croatia (2009) 178 FCR 546 at 556 [38]. 62 Snedden v Republic of Croatia (2009) 178 FCR 546 at 556-557 [38]. 63 It can be noted that in Spanovic v Government of Croatia [2009] EWHC 723 (Admin) at [60] it was recorded that Croatia is a signatory of the European Court of Human Rights and that any decision of a court in Croatia would be reviewable on appeal both in Croatia and, in the last resort, to the European Court in Strasbourg. Crennan Bell The Full Court observed that there was no evidence that the respondent's sentence would be increased due to the fact that he fought on the Serbian side64. It found that the available evidence showed that the Croatian courts take a "holistic" approach to sentencing65. It considered that "[f]rom the two OSCE reports, it emerges that the Supreme Court of Croatia considered that the mitigating factor should be applied in the imposition of a sentence."66 The Full Court stated that the respondent, if convicted, "will be 'detained' and deprived of his liberty for a period longer than a Croatian counterpart."67 The Full Court considered the application of the phrase "by reason of" in s 7(c), and correctly stated that s 7(c) required "some causal connection between the matters relied upon and a person's 'race, religion, nationality or political opinions'."68 Critically, the Full Court found that the mitigating factor is applied by reason of a person's "political beliefs", by reference to three factors. First, the Full Court said the respondent's political beliefs concern "'the self determination of Serbian people in the Balkans in those areas where they constitute a majority', in particular in the Krajina"69. Secondly, the Full Court stated that the respondent played a significant role as a military commander in the military conflict in the former Yugoslavia that began at Knin in June 199170. Thirdly, the Full Court noted the terms of the extradition request which referred to the armed conflict in Knin as conflict "between the armed forces of 64 Snedden v Republic of Croatia (2009) 178 FCR 546 at 558 [43]. 65 Snedden v Republic of Croatia (2009) 178 FCR 546 at 558 [45]. 66 Snedden v Republic of Croatia (2009) 178 FCR 546 at 558 [45]. 67 Snedden v Republic of Croatia (2009) 178 FCR 546 at 558 [46]. 68 Snedden v Republic of Croatia (2009) 178 FCR 546 at 558 [49]. 69 Snedden v Republic of Croatia (2009) 178 FCR 546 at 559 [53]. 70 Snedden v Republic of Croatia (2009) 178 FCR 546 at 559 [53]. Crennan Bell the Republic of Croatia and the armed aggressor's Serbian paramilitary troops of the anti-constitutional entity the 'Republic of Krajina'"71. It was said to follow from those three matters of evidence that the mitigating factor is applied by Croatian courts by reason of a person's political beliefs. Accordingly, the Full Court found that "there are substantial grounds for believing that [the respondent] may be 'punished' or imprisoned and thereby 'detained' or 'restricted in his personal liberty' and that such treatment arises 'by reason of his … nationality or political opinions'."72 On 2 September 2009 the Full Court ordered that the respondent be released from custody (Order 2). It stayed the operation of this order until 4 September 2009. On 4 September 2009 the Full Court vacated Order 2, quashed the order of the magistrate dated 12 April 2007 and directed a magistrate to order the release of the respondent pursuant to s 21(2)(b)(i) of the Extradition Act. The respondent was released from custody by order of a magistrate (Magistrate Henson) on 4 September 2009. Subsequent orders were made by consent before Gummow J on 25 February 2010, which included an order that the respondent surrender all passports and other international travel documents to the Australian Federal Police. Submissions in this Court The appellant The appellant's first submission was that the phrase "by reason of" in s 7(c) requires a direct causal connection between the prejudice, punishment, detention or restriction in personal liberty to which a person may be subject on return and the political opinions of that person. In a variation of that point, and in reliance on Hempel v Attorney-General (Cth)73, it was said that "active discrimination" was required to establish the requisite causal link. On the assumption that that construction of s 7(c) is correct, the appellant went on to contend that, on the facts, no direct causal connection could be made between the ineligibility of the respondent for the mitigating factor and his political opinions. 71 Snedden v Republic of Croatia (2009) 178 FCR 546 at 559 [53]. 72 Snedden v Republic of Croatia (2009) 178 FCR 546 at 559 [55]. 73 (1987) 77 ALR 641 at 663 per French J. Crennan Bell In particular, the appellant submitted that there was no evidence to suggest that the political opinions of those who served in the Croatian forces in the Homeland War were relevant to the question of whether the mitigating factor should be taken into account in sentencing. Further, it was submitted that no inference could be drawn as to the political opinions of those serving in the Croatian forces so as to suggest that the mitigating factor was ultimately directed at benefiting those holding a particular political opinion (assuming that this was a relevant inquiry). The appellant stated that the evidence was that anyone who did not serve in the Croatian forces was treated in the same way as the respondent, irrespective of their personal reasons for not serving and whether or not they fought with the Serbian forces. The appellant also contended that the fact that the respondent would not be entitled to a potential benefit (a discount in sentence) could not constitute punishment, detention or restriction in his personal liberty within the meaning of s 7(c) of the Extradition Act. The respondent The respondent sought to uphold the decision of the Full Court and contended that the result of a longer term of imprisonment for the respondent compared to another person alike in relevant respects (except that he served in the Croatian forces and was entitled to the mitigating factor) amounted to the respondent being "punished, detained or restricted in his … personal liberty". Next it was contended that the unavailability of the mitigating factor to the respondent meant that a differential result as to sentence between a person alike in relevant respects who served in the Croatian forces, and the respondent, would be "by reason of" the respondent's "political opinions". In support of that proposition it was contended that the length of a term of imprisonment is a reference point for determining whether one person receives a greater punishment than another. The issue of comparison was raised particularly in the context of emphasising that s 7(c) is, on one view, concerned with discrimination of the kind recognised in Art 1A(2) of the Convention relating to the Status of Refugees ("the Refugee Convention"), concerning refoulement74. 74 Convention relating to the Status of Refugees done at Geneva on 28 July 1951 as amended by the Protocol relating to the Status of Refugees done at New York on 31 January 1967. Crennan Bell It was submitted that it was sufficient for the purposes of s 7(c) that the respondent was in a worse position because of political opinions which he held and which led him to join the Serbian forces. Expressed as a syllogism, the essential argument was that the respondent joined the Serbian forces in a political conflict because of his political opinions, and those same political opinions precluded his joining the Croatian forces; he was ineligible for the benefit of the mitigating factor because he was not a member of the Croatian forces by reason of being a member of the Serbian forces; therefore, he was subjected to As these reasons punishment "by reason of" his "political opinions". demonstrate, that reasoning is flawed and the conclusion drawn from it is wrong. The respondent's counsel recognised that other persons not entitled to the mitigating factor would include people who did not share the respondent's political opinions and those who did not fight at all in the conflict. Counsel also recognised, quite properly, that in the Australian system of criminal justice it cannot be said that the absence of mitigating circumstances itself constitutes or attracts punishment. The provenance of s 7(c) Article 3.2 of the 1957 European Convention on Extradition provided that extradition was not to be granted: "if the requested Party has substantial grounds for believing that a request for extradition for an ordinary criminal offence has been made for the purpose of prosecuting or punishing a person on account of his race, religion, nationality or political opinion, or that that person's position may be prejudiced for any of these reasons." This provision informed the text of s 14(b) of the Extradition (Foreign States) Act 1966 (Cth) and s 11(1)(b) of the Extradition (Commonwealth Countries) Act 1966 (Cth) ("the 1966 Acts"). These were the immediate predecessors to s 7(c) of the Extradition Act. As explained in Vasiljkovic v The Commonwealth75, prior to the 1966 Acts extradition law in Australia was governed by the Extradition Act 1870 (Imp) for extradition to foreign states as defined, and the Fugitive Offenders Act 1881 (Imp) for extradition between countries of the British Commonwealth. 75 (2006) 227 CLR 614 at 640 [74]. Crennan Bell The inclusion in the 1966 Acts of provisions to the effect of s 7(c) of the current legislation appears to have been in response to the case of a naturalised Australian for whom Yugoslavia had sought extradition in 1956 but who alleged that the real purpose of the extradition was to extract information from him respecting his involvement in the anti-communist underground movement. Yugoslavia had sought his extradition for the offence of embezzlement of public funds, which would not attract the "political offence" exception contained in s 3(1) of the Extradition Act 1870 (Imp)76. The provisions in the 1966 Acts were proposed by the Australian Attorney-General, Mr B M Snedden, to the 1965 and 1966 conferences of Commonwealth Law Ministers held in Canberra and London respectively77. The Commonwealth Law Ministers agreed to a clause proposed by Mr Snedden in terms resembling Art 3.2 of the European Convention on Extradition78. Construction of s 7(c) There was no dispute between the parties that s 7(c) requires a causal connection between the punishment the respondent might suffer on trial, after surrender, and his political opinions. The phrase "by reason of" means that the person may be punished, detained or restricted in his or her personal liberty because of his or her political opinions. Section 7(c) relevantly requires the respondent to show that on trial, after surrender, he may be punished because of his political opinions. This construction is consistent with statements in this Court79 interpreting the similar phrase "for reasons of" in the context of the definition of a refugee in Art 1A(2) of the Refugee Convention. There, the term "refugee" applies to a person having a "well-founded fear of being persecuted for 76 Australia, House of Representatives, Parliamentary Debates (Hansard), 14 October 1966 at 1820 and 20 October 1966 at 2046-2047. 77 Australia, House of Representatives, Parliamentary Debates (Hansard), 14 October 78 A Scheme relating the Commonwealth, cl 9(2)(b), reproduced as Appendix XX in Hartley Booth, British Extradition Law and Procedure, (1980), vol 1 at 315. the Rendition of Fugitive Offenders within 79 Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 240 per Dawson J, 257 per McHugh J; [1997] HCA 4. Crennan Bell reasons of race, religion, nationality, membership of a particular social group or political opinion". As to context and purpose, the provenance of s 7(c) discussed above reveals that the intention of the predecessors to s 7(c) found in the 1966 Acts was to enlarge the "political offence" exception to extradition by reference to Art 3.2 of the European Convention on Extradition. There is nothing in the history of the current Extradition Act to suggest that any different intention applied to s 7(c)80. The express intention to enlarge the political offence objection was achieved by a requirement that a court take into account the future possibility, on trial after surrender, of prejudice, punishment, detention or restriction in personal liberty by reason of political opinions. In this case, that inevitably requires consideration, not only of a person's political opinions, as emphasised in argument by the respondent, but also of the position of the requesting State in respect of potential punishment. Political opinions may be the reason why a person refuses to serve in a particular force. However, if such a person is liable for punishment, not for political opinions, but for failure to enlist, political opinions are not the reason why they will be punished81. Is there a causal link between the respondent's political opinions and his ineligibility for the mitigating factor? The OSCE report of 13 September 2006 included a general statement: "In 2006, trial courts continued to apply this mitigating factor." The evidence supporting this general statement was slight as only one instance of its application was cited. The report referred to one other case, decided in May 2005. The OSCE report also contained figures for convictions obtained for war crimes as at the end of July 2006. This recorded four final convictions of Croats indicted for crimes against Serbs and four final convictions of Croats indicted for crimes against Croats. However, the appellant did not contest the existence of the mitigating factor. Assuming, for the purposes of this part of the argument, 80 Australia, House of Representatives, Parliamentary Debates (Hansard), 28 October 81 See, for example, Sepet v Secretary of State for the Home Department [2003] 1 WLR 856 at 873 [27] per Lord Hoffmann; [2003] 3 All ER 304 at 321. Crennan Bell that the differential application of the mitigating factor constitutes punishment, about which something will be said later, the question is whether the differential application was because of political opinions. If it was, that would lead to the further question whether, in those circumstances, the respondent may be punished for his political opinions. Acceptance that the respondent had political opinions, and acceptance that such opinions motivated him to join the Serbian forces, and precluded his joining the Croatian forces, is not enough to sustain an objection under s 7(c). It is necessary to show that the courts in Croatia apply the mitigating factor because of political opinions. The evidence supported the contrary conclusion. First, for courts to count war service as a mitigating factor is neither unknown nor uncommon and does not imply homogeneous political opinions in those rendering war service. The fact that there are different sides in a conflict does not prove that those who served on one side have different political opinions from those on the other side. There may be many reasons, including compulsion, which explain a person's service or refusal to serve in a particular force82. Secondly, those serving in the Serbian forces were not singled out as ineligible for the mitigating factor. Ineligibility applied indifferently to persons who did not serve in the Croatian forces, including persons who did not serve in any force. Thirdly, anyone who did not serve in the Croatian forces was ineligible for the mitigating factor, irrespective of their personal motives, circumstances or political opinions. Accordingly, whilst it may be accepted, for the purposes of the argument, that the respondent joined the Serbian forces because of his political opinions, the differential application of the mitigating factor by the courts of the appellant was not shown to be "by reason of" the respondent's political opinions. For these reasons the respondent failed to establish a causal link between his political opinions and the differential application of the mitigating factor. 82 Immigration and Naturalization Service v Elias-Zacarias 502 US 478 at 482-483 Crennan Bell Is ineligibility for the mitigating factor a punishment? A rational sentencing system will accommodate mitigating factors arising from the circumstances of the offender and the offence. In that context, ineligibility for a mitigating factor at the sentencing stage of a trial cannot be said to be punishment. Conceptually, the absence of a mitigating factor does not constitute or attract punishment. In particular, the absence of a mitigating factor is not an aggravating factor. Thus, while a plea of guilty is a mitigating factor, a plea of not guilty is not an aggravating factor. Mitigating factors are generally factors regarded by the courts as sufficient to reduce the sentence imposed but, as Gleeson CJ observed in Engert83: "It is … erroneous in principle to approach the law of sentencing as though automatic consequences follow from the presence or absence of particular factual circumstances." The most which can be said generally is that a person who does not qualify in respect of a recognised mitigating factor does not qualify for a reduction in sentence by reference to that factor. It cannot be said that that person is punished, or punished more, because of the absence of a mitigating factor. That general analysis is not altered by the fact that, in the circumstances here, the mitigating factor might lead to differential treatment between the respondent and a person with a similar conviction who served in the Croatian forces. It was not demonstrated on the evidence that the respondent's ineligibility for the application of the mitigating factor was a punishment. Conclusion For these reasons we joined in the orders made on 30 March 2010. 83 (1995) 84 A Crim R 67 at 68. HEYDON J. I joined in the orders made on 30 March 2010 because the factual substratum for the respondent's submissions about the "mitigating factor" was not made out. The expression "mitigating factor" was used in these proceedings to refer to an alleged practice of the Croatian courts of reducing the sentence given in relation to crimes committed during Croatia's "Homeland War" in 1991 to 1995 if the defendant had fought in the Croatian armed forces. The respondent, who had fought on the Serbian side, contended that this prejudiced him on the ground of his political opinions within the meaning of s 7(c) of the Extradition Act 1988 (Cth), and hence constituted an extradition objection. On 6-8, 11-12 and 21-22 December 2006, a magistrate heard the appellant's application to extradite the respondent. The magistrate recorded that on 22 December 2006 the appellant "sought an adjournment for the purpose of making written submissions … with the benefit of [the] transcript". The respondent consented to that course. A timetable was set which, it may be inferred, gave leave to the respondent to file written submissions in reply to those of the appellant. That timetable was later extended by three weeks because the The "mitigating factor" entered these proceedings only when the respondent's written submissions were filed in reply to those of the appellant, weeks after the hearing. It may be inferred from the magistrate's references to the respondent's written submissions that the document was very lengthy. The document dealt with the "mitigating factor" briefly. The magistrate said that he did not agree with the respondent's "submission in reply that if members of the Croatian armed forces have their sentences mitigated then clearly a Serb military commander will be punished because of his nationality and political beliefs because that mitigating factor is absent" (emphasis added). The magistrate did not make any finding that members of the Croatian armed forces actually did have their sentences mitigated in the manner described. There was no reference to the "mitigating factor" or any argument based on it in the respondent's further amended application for review to the Federal Court of Australia, filed on 5 June 2008. An agreed joint outline of issues was filed, presumably as the result of an order by the Court to do so. That was a sensible course in view of the mass of rather diffuse materials, dealing with many topics, which had been tendered to the magistrate and was before Cowdroy J in the Federal Court. That document, dated 25 August 2008, did not refer to the "mitigating factor" either. In these circumstances it is not surprising that Cowdroy J said nothing about the "mitigating factor" in his judgment. But it is surprising that the respondent's second ground of appeal to the Full Court of the Federal Court raised the "mitigating factor". It is also surprising that that ground commenced with the claim that Cowdroy J "erred in failing to consider whether evidence that service for the Croatian forces was treated as a mitigating factor … gave rise to substantial grounds for suspecting" that the respondent may be punished by reason of his political beliefs. In upholding that ground, the Full Court stated: "It was common ground that submissions based upon [evidence of the 'mitigating factor'] were advanced before the primary judge but not resolved." Although the correctness or incorrectness of that statement is not decisive for the outcome of this appeal, a significant question mark must be placed over it. The parties in this Court agreed in their written submissions that submissions about the "mitigating factor" had been put to Cowdroy J "for the first time only in written submissions in reply after the conclusion of the hearing on 10 September 2008 pursuant to leave." The parties corrected that statement in oral argument: as indicated above, reliance was first placed on the "mitigating factor" in written submissions in reply before the magistrate. If submissions of that kind had been advanced to Cowdroy J, they would have been advanced outside the parameters for argument defined by the agreed joint outline of issues, and in defiance of any order that led to that document. It is impossible to see how Cowdroy J can be said to have "erred in failing to consider" something which the agreed joint outline of issues never invited him to consider, in circumstances where the respondent has not pointed to evidence of any attempt to amend that document. It is true that the appellant's notice of appeal in this Court did not challenge the Full Court's assumption that the "mitigating factor" existed. It is also true that the appellant's written submissions to this Court did not challenge it. But it was strongly challenged in the appellant's oral argument to this Court. The appellant submitted that the Full Court had made a finding of fact not made by either the magistrate or Cowdroy J. It submitted that there was no foundation in the evidence for that finding. It submitted that the evidence in relation to the "mitigating factor" was "very flimsy" and went "nowhere … near establishing" what it was said to establish. And it also contended that these submissions were a complete answer to the respondent's case. Those four submissions are correct. The relevant ground in the respondent's notice of appeal to the Full Court referred to certain evidence. The relevant evidence is to be found in two documents emanating from the Organization for Security and Co-operation in Europe ("OSCE"). The first document is a four page document relating to the "OSCE Mission to Croatia" headed "News in brief: 22 February–7 March 2006". One section, half a page in length, discussed a re-trial which concluded on 2 March 2006 relating to incidents in the Lora military prison in Split. That section included the words: "the court cited the role of the accused in defending Croatia against armed aggression as a mitigating factor." The document also said: "The prosecution has indicated that it may appeal against the sentencing." The second document is described as being from the Headquarters of the OSCE "Mission to Croatia". It is headed "Background Report: Domestic War Crime Trials 2005" and is dated 13 September 2006. It is 54 pages in length. Its Executive Summary stated: "Service in the Croatian army continued to be used as a factor to mitigate punishment." The support for that statement rested on two cases. In relation to one, called the "Paulin Dvor" case, a defendant named Nikola Ivankovic was sentenced by the Osijek County Court to 12 years imprisonment. One of the mitigating circumstances apparently taken into account by the trial court was the "mitigating factor". On 10 May 2005, the Supreme Court found that the brutality of the crime was not properly assessed by the trial court, which, in the words of the Supreme Court, "attributed too much significance to the mitigating circumstances, while on the other hand aggravating circumstances were not appreciated sufficiently." The other was the Lora case. That case was given as the sole and exhaustive basis for the statement: "In 2006, trial courts continued to apply this mitigating factor." There are other parts of the report which repeat the portions just discussed. Those parts dealing with the "mitigating factor" are a very small fraction of the whole, which dealt with many other subjects. The evidence thus disclosed two relevant instances. The first instance is one in which the prosecution successfully appealed against a sentence by a court which gave too much weight to the "mitigating factor". The second instance is one in which the "mitigating factor" was supposedly taken into account, but the prosecution said it might appeal. Of these two incidents the Full Court said the following84: "The [appellant] submits that evidence that the Supreme Court has 'approved' this practice is limited to one appeal where the Court indicated that the mitigating circumstances had not been properly balanced against other aggravating circumstances and that the Court did not deem the mitigating factor to be inappropriate per se. The [appellant] further submits that this does not necessarily suggest positive or general approval of the practice. However, it is also apparent, and has not been contradicted, that the County Courts of Croatia have taken the Supreme Court to have approved the practice and that, in any event, they continue to apply it as a factor to be taken into account in sentencing those who served in the Homeland Army. It is worth emphasising that no evidence has been adduced by the [appellant] to contradict the inference that such a factor continues to be selectively applied in sentencing. Emphasising that the onus is on the 84 Snedden v Republic of Croatia (2009) 178 FCR 546 at 557 [40]-[41]. [respondent] to establish the extradition objection, the [appellant] has not led evidence as to the present situation, nor to rebut or qualify the statements in the OSCE reports. It is not, of course, obliged to adduce evidence, but the Court is then in a position where the only available evidence is that adduced by the [respondent]." This reasoning has the following difficulties. First, it is unclear why the Full Court said that it was "apparent" that the County Courts of Croatia had taken the Supreme Court to have approved the practice of taking into account the "mitigating factor". The scanty materials do not suggest that there is any linkage between what the trial court did in the Lora case and what the Supreme Court did in the Paulin Dvor case. Nor do they suggest that the Supreme Court "approved" taking the "mitigating factor" into account. Secondly, the assertion that the "County Courts of Croatia … continue" to apply the "mitigating factor" depends on a passage in the second OSCE report which is supported by evidence that it happened in one single case. The conduct of a single court on one occasion by itself says nothing about the practice of other courts on other occasions. Thirdly, the respondent defended the remarks of the Full Court in relation to the appellant's failure to contradict any "inference" to be drawn from the material by saying that no-one could be better placed than those representing the appellant to explain whether the "mitigating factor" exists. The respondent submitted that counsel for the respondent had put together the material relating to the two trials. It was submitted that OSCE had noted a "phenomenon" which it thought it to be worthwhile to draw attention to "as being a feature of the judicial system in Croatia which had a shortcoming systemically." This defence of the Full Court is unconvincing. If the Full Court was intending to rely on the appellant's failure to call evidence before Cowdroy J, the reasoning must be rejected. It was not possible for the appellant to call evidence to contradict the inference before Cowdroy J, because s 21(6)(d) of the Extradition Act 1988 (Cth) provided that he was to have regard only to the material that was before the magistrate. If the Full Court was intending to rely on the appellant's failure to call evidence before the magistrate, the significance of any inference to be drawn by the material depends on the time when it became known that the magistrate was to be invited to draw that inference. The procedural background described above indicates that that time was well after the time when the evidence before the magistrate had closed. It was not then possible, without leave, for the appellant to reopen its case, well after the evidence had closed and after the addresses had been completed, to adduce evidence to contradict the inference of which the Full Court spoke. If the respondent is to be taken as submitting that the material about the two cases had been specifically selected to make the point relied on by the Full Court, the submission must be rejected. The most probable inference is that that material was tendered to support various other points which the respondent was then advancing, but its use in the manner in which the Full Court used it was very much an afterthought before the magistrate. It was not revived until, at the earliest, the argument before Cowdroy J, if it was indeed revived then. Since the appellant had no reason to suppose that the point was being relied on while it was open to it to call evidence, and since it was only relied on once the opportunity to deal with it in submissions had passed, the failure of the appellant to meet the supposed inference has no significance. A failure to adduce evidence to counter a point distinctly raised at a time when the appellant still had a right to call evidence may be one thing. A failure to adduce evidence to meet a point belatedly raised is, in the circumstances of this case, quite another. Fourthly, it was suggested by the respondent that the OSCE reports had been accepted by the parties as having "authoritative status" in relation to the way in which Croatian sentencing laws were being administered. That is not so. Before the magistrate the parties agreed that OSCE was "a reliable and respected monitoring body". The Full Court recorded that the parties accepted the "independence of … OSCE". It does not follow that the parties agreed that OSCE had authoritative status in relation to Croatian sentencing practice, let alone in relation to the extremely vague, indirect and second hand statements relied on by the respondent. It is no derogation from OSCE's status as reliable, respected and independent to conclude, which it is necessary to do, that the materials relied on to prove the "mitigating factor" are no more than uncorroborated assertions by unidentified persons of unproved legal training or experience sometimes relying on unknown sources. Fifthly, in assessing the significance, such as it is, of the two cases relied on, which took place more than four years ago, it would be necessary to examine material giving reasonably clear information about what sentencing policies were followed in other trials in Croatia of persons alleged to have committed war crimes while fighting on the Croatian side. It would also be necessary to read the sentencing remarks and the statements of the Supreme Court in all relevant cases in order to have a first hand appreciation of how the Croatian courts approach sentencing. This Court was not directed to any materials of these kinds before the magistrate. The respondent's contention that his surrender might cause him to be punished for his political opinions rested on an alleged particular feature of Croatian sentencing practice. The respondent bore the burden of proving that that particular feature existed. While the conclusion that it did exist must be drawn if the evidence satisfactorily supports it, the drawing of that conclusion is not a light matter. In this particular case, the respondent's endeavour to prove that conclusion came too late, and the materials it relied on to support that conclusion were too feeble. Since the key factual substratum of the respondent's case has not been made out, it is unnecessary to deal with the legal issues which would arise if it had been made out.
HIGH COURT OF AUSTRALIA HFM045 AND APPELLANT THE REPUBLIC OF NAURU RESPONDENT HFM045 v The Republic of Nauru [2017] HCA 50 15 November 2017 ORDER Appeal allowed. Set aside the order of the Supreme Court of Nauru made on 22 February 2017, and in its place order that: the appeal be allowed; the decision of the Refugee Status Review Tribunal made on 16 January 2015 be set aside; (iii) the matter be remitted to the Refugee Status Review Tribunal for determination according to law; and the respondent pay the appellant's costs of the proceedings before the Supreme Court of Nauru and of the proceedings to date before the Refugee Status Review Tribunal. The respondent pay the appellant's costs of the appeal to this Court. On appeal from the Supreme Court of Nauru Representation P J Hanks QC with R Chaile for the appellant (instructed by Holding Redlich) G R Kennett SC with R C Knowles for the respondent (instructed by Republic of Nauru) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS HFM045 v The Republic of Nauru Migration – Refugees – Appeal from Supreme Court of Nauru – Procedural fairness – Where Refugee Status Review Tribunal must act according to principles of natural justice – Where Refugee Status Review Tribunal did not provide appellant with notice of adverse country information relevant to Tribunal's determination on which it ultimately relied – Whether failure by Tribunal to put substance of information to appellant constituted breach of requirements of procedural fairness. Words and phrases – "complementary protection", "natural justice", "procedural fairness". Appeals Act 1972 (Nr), s 44. Nauru (High Court Appeals) Act 1976 (Cth), s 5, Schedule, Art 1. Refugees Convention Act 2012 (Nr), ss 37, 40(1). Refugees Convention (Derivative Status & Other Measures) (Amendment) Act 2016 (Nr), s 24. Refugees Convention (Amendment) Act 2017 (Nr), s 4. Convention relating to the Status of Refugees (1951) as amended by the Protocol relating to the Status of Refugees (1967). BELL, KEANE AND NETTLE JJ. The appellant is a Nepalese citizen. He has spent most of his life in the Jhapa district of Nepal. He is a member of the Chhetri caste. In May 2013, the appellant left Nepal and arranged through a people smuggler to travel to Australia. He arrived at Christmas Island in September 2013. In early November 2013, he was transferred from Christmas Island to Nauru under the regional processing arrangement between Australia and Nauru. On 29 January 2014, the appellant applied for a refugee status determination. He claimed to fear persecution in Nepal from Maoists on account of his political opinion. He also claimed to fear persecution from Mongols (members of the Limbu tribe in particular) in his home district of Jhapa on account of his membership of the Chhetri caste. The Secretary of the Department of Justice and Border Control ("the Secretary") determined that the appellant is not a refugee, nor would his return to Nepal breach the Republic of Nauru's ("Nauru") international obligations ("complementary protection"). The appellant applied unsuccessfully to the Refugee Status Review Tribunal ("the Tribunal") for a merits review of the Secretary's determination. An appeal to the Supreme Court of Nauru (Crulci J) against the Tribunal's determination was dismissed. The appellant appeals to this Court. It is not in issue that the appeal is brought as of right1. The appellant contends that the Supreme Court erred in failing to find that the Tribunal denied him procedural fairness in not putting him on notice of certain information, namely: (i) the changed political circumstances in Nepal; (ii) the proportion of Chhetris in the Nepalese army; and (iii) the persons targeted by Limbuwan activists in Jhapa. The appellant's case is that the Tribunal failed to comply with the obligation of procedural fairness imposed by s 37 of the Refugees Convention Act 2012 (Nr) ("the Refugees Act") and under the common law. The appellant's second ground of challenge asserts that the Supreme Court erred in failing to find that the Tribunal applied an incorrect test to the determination of his complementary protection claim. For the reasons to be given, the second ground must be rejected but the second particular of the procedural fairness ground succeeds: the Tribunal was under a common law obligation to put the appellant on notice of the information 1 Appeals Act 1972 (Nr), s 44 and Nauru (High Court Appeals) Act 1976 (Cth), s 5 and Schedule, Art 1. See also BRF038 v The Republic of Nauru [2017] HCA 44. Bell Nettle concerning the composition of the Nepalese army and give the appellant an opportunity to respond to it. The appeal must be allowed and the appellant's application for review of the Secretary's decision must be remitted to the Tribunal to be dealt with according to law. The appellant's application for protection Section 4 of the Refugees Act provides: "(1) The Republic must not expel or return a person determined to be recognised as a refugee to the frontiers of territories where his or her life or freedom would be threatened on account of his or her race, religion, nationality, membership of a particular social group or political opinion except in accordance with the Refugees Convention as modified by the Refugees Protocol. The Republic must not expel or return any person to the frontiers of territories in breach of its international obligations." Section 5(1) of the Refugees Act provides that a person may apply to the Secretary to be recognised as a refugee. In dealing with the claim, the Secretary must determine whether the person is recognised as a refugee2 or is owed complementary protection under s 4(2)3. It is common ground that Nauru's international obligations include those assumed under the Memorandum of Understanding between Nauru and the Commonwealth of Australia, and the Convention against Torture and Other Cruel, Inhuman or Degrading Treatment or Punishment ("the CAT"). On 29 January 2014, the appellant applied for a refugee status determination. Attached to his application was a statement setting out the details of his claim. On 1 May 2014, this was supplemented by country information which was forwarded to the Secretary on the appellant's behalf by the Claims Assistance Provider. This material included information concerning the persecution of royalists and Chhetris in Nepal. 2 Section 3 of the Refugees Act defines "refugee" to mean a person who is a refugee under the Convention Relating to the Status of Refugees done at Geneva on 28 July 1951 as modified by the Protocol Relating to the Status of Refugees done at New York on 31 January 1967. 3 Refugees Act, s 6(1). Bell Nettle In his statement the appellant said that he had fled from Nepal because he feared that "I will be captured and killed by the Maoist rebels and the Maoist ruling party". He stated his opposition to the communist ideals of the Maoist party and referred to his political profile as the President of the local committee of the Rastriya Prajatantra Party Nepal ("the RPP(N)") from 2008 to May 2013. He said the Maoist party was violently opposed to the activities of the RPP(N) because of the latter's "pro-royalist views and objective to return Nepal to a Hindu State". He described Mongols as having attempted to eliminate the Chhetris in his home district of Jhapa. He claimed to have been physically assaulted in 2012 by Mongols and to have had the source of his subsistence (his cattle, buffalo and goats) stolen by them. He said that he had been unable to seek the assistance of the police because of his membership of the RPP(N) and because the police "are controlled by the Maoist Party". The appellant clarified in the course of a later interview that he had been President of the local committee of the RPP(N) for about 10 or 11 months in 2008. Thereafter he was no longer an officeholder but he continued to be a RPP(N) supporter. The Secretary's decision The Secretary found that there are two distinct racial groups in Nepal: Mongols, who make up 80 per cent of the population, and members of Hindu castes, including Chhetris, who make up the remaining 20 per cent. The Secretary noted country information that in November 2006 a comprehensive peace agreement was signed between the Nepalese Government and the Maoists, formally ending a 10 year Maoist insurgency. The Secretary was satisfied that following the agreement the Maoists had joined the political mainstream in Nepal. The Secretary noted country information that "after decades of turmoil 'Nepal remained completely free of insurgency-related violence through 2013'". The Secretary accepted that the appellant is a member of the Chhetri caste and a supporter of the RPP(N). The Secretary was dubious of the appellant's claim to have a political profile of a kind that had caused him to be harassed by Maoists to the extent that he claimed. He considered that country information did not support the appellant's claim to have suffered harm on account of being a Chhetri. The Secretary was not satisfied that the appellant would be singled out for extortion by Maoists on his return to Nepal and, in the event he was subject to extortion demands, he considered there was no reason to find that the appellant would be denied State protection. The Secretary concluded that the appellant did not have a well-founded fear of persecution, nor was there a reasonable possibility that the appellant would face harm in Nepal such as to put Nauru in breach of its international obligations were he to be returned to that country. Bell Nettle The Tribunal's determination Under s 31(1) of the Refugees Act a person has a right to apply to the Tribunal for the merits review of a determination that the person is not recognised as a refugee or that the person is not owed complementary protection. The Tribunal may affirm or vary the determination, remit the matter to the Secretary for reconsideration or set the determination aside and substitute a new determination4. On 1 October 2014, the appellant applied to the Tribunal for a review of the Secretary's determination. A solicitor acting on the appellant's behalf wrote to the Tribunal on 29 November 2014 detailing the basis of his claims and providing country information about the persecution of royalists and members of the Chhetri caste in Nepal. The material about the persecution of the latter group referenced a report by the International Crisis Group ("the ICG") dated 27 August 2012. The submission asserted that the appellant was in fear of harm from Maoists, who were said to "operate throughout Nepal with impunity", and drew the Tribunal's attention to material which was said to evidence the extent to which Maoists had infiltrated the Nepalese police and security forces. The Tribunal was required to invite the appellant to appear before it and give evidence and present arguments relating to the issues arising in respect of the determination under review5. On 2 December 2014 the appellant gave evidence at a hearing before the Tribunal. At the time of the Tribunal's review, s 37 of the Refugees Act provided: "The Tribunal must: give to the applicant, in the way that the Tribunal considers appropriate in the circumstances, clear particulars of information that the Tribunal considers would be the reason, or a part of the reason, for affirming the determination or decision that is under review; and ensure, as far as is reasonably practicable, that the applicant understands why it is relevant to the review, and the consequences of it being relied on in affirming the determination or decision that is under review; and 4 Refugees Act, s 34(2). 5 Refugees Act, s 40(1). Bell Nettle invite the applicant to comment on or respond to the information." The appellant gave evidence that he had joined the Rastriya Prajatantra Party ("the RPP") in 1990, when it was first established. Following the Maoist uprising in 1995, the RPP's activities had been subdued and the appellant had not suffered any harm. The party later split into two and in 2006 the appellant joined the RPP(N). His level of political activity increased after this. The appellant described Maoists coming to his village and demanding donations and asking people to join them. This had prompted him to leave the village and travel to India. He had worked in Calcutta as a security guard for 18 months before returning to Nepal. Some years later he had travelled to Darjeeling for a few months during another period of Maoist tension in his district. While he was in Darjeeling he heard the news of the comprehensive peace agreement and this prompted him to return to the family farm. Following his return to Nepal, the appellant described conflicts between Maoist guerrillas and the army. He said that both sides were dreadful and that each attempted to extort money or goods from the locals. He said that he had kept up his membership of the RPP(N) even though the monarch had been deposed. In early 2008, he had been asked to become the President of the local committee of the RPP(N). His duties as President required him to promote Hinduism and the RPP(N)'s platform. He claimed to have been targeted as the leader of the RPP(N). He described the "main war" as with the Limbu, an ethnic Mongol group. The Limbu were antagonistic to the appellant because he is a Chhetri and, to a lesser extent, because of their antagonism to RPP(N) members. Following the dissolution of Parliament in May 2012, the appellant said a Maoist group, the Kirat Janabadi Workers Party ("the KJWP"), had demanded money from him, warning him that there would be consequences if he did not pay. About six weeks after receiving this demand he had decided to leave his farm and go to Kathmandu. He had remained in Kathmandu for about two months before leaving Nepal and travelling to Christmas Island. The Tribunal rejected the appellant's account of having been subject to extortion demands by the KJWP as inconsistent, implausible and fabricated to assist his claims. It was not persuaded that the appellant had been targeted by the KJWP. The Tribunal referred to an ICG report dated 27 August 2012 and accepted that Limbuwan activists, including the KJWP, had been involved in the occasional targeting of government representatives. It reasoned that as the appellant is not a government representative he is unlikely to be a target for these groups. It also reasoned that the State would not be involved in the persecution of government representatives and would not be unwilling or unable to protect individuals from the activities of groups who are. Bell Nettle The Tribunal rejected the appellant's account that Maoist militia had been absorbed into the police force and army as "mere assertion". It referred to a report published on the website of the Nepalese army ("the army report") which stated that "Chhetris are heavily represented in the army, accounting for 43.64 per cent of personnel as of 2009". The Tribunal took into account country information concerning the improved political conditions in Nepal following the comprehensive peace agreement. It had reservations about the veracity of much of the appellant's evidence. It rejected his account of having fled from Nepal to India because of his political opinion. The Tribunal found that the appellant's decision to live and work in India was an economic one. The Tribunal was not satisfied that the appellant faces a real possibility of persecution for a Convention reason in the event of his return to Nepal and it was not satisfied that he was owed complementary protection by Nauru. It affirmed the determination of the Secretary in each respect. The appeal to the Supreme Court Section 43(1) of the Refugees Act confers a right of appeal on a point of law from a decision of the Tribunal to the Supreme Court of Nauru. In deciding an appeal, the Supreme Court may quash the decision and remit the matter to the Tribunal to be determined according to law6. On 20 July 2015 the appellant filed a notice of appeal in the Supreme Court. His amended notice of appeal contended, relevantly, that the Tribunal erred in law by failing to give him clear particulars of the information on which it relied concerning the changed circumstances in Nepal and the representation of Chhetris in the police force and by applying the wrong test to the determination of his claim to complementary protection. The procedural fairness challenge was particularised as a breach of the obligation imposed by s 37 of the Refugees Act and by the common law. It is evident that on the hearing of the appeal in the Supreme Court the second particular of this challenge was not concerned with the composition of the police force but with the Tribunal's use of the army report. Crulci J concluded, in light of an exchange between the appellant and the Tribunal during the course of the hearing, that the appellant had been on notice of the significance of the information which the Tribunal took into account as to the changed political circumstances in Nepal. Her Honour noted Nauru's submission that the information about the composition of the Nepalese army was factual and there was little that the appellant could have said in response to it. Her Honour concluded that the Tribunal had not denied the appellant procedural fairness 6 Refugees Act, s 44(2)(b). Bell Nettle without making any finding as to the Tribunal's use of this material. Her Honour did not advert to the obligations imposed by s 37 of the Refugees Act. Turning to the complementary protection ground, Crulci J observed that "a certain looseness of language in phrasing, 'that the appellant would be persecuted if he were to return to Nepal'" (emphasis in the original) should not lead to the conclusion that the Tribunal applied an incorrect test in determining the appellant's complementary protection claim. Her Honour went on to say7: "In relation to this ground I am satisfied that taken as a whole the Tribunal considered whether the appellant's 'life or freedom would be threatened on account of his or her race, religion, nationality, membership of a particular social group or political opinion' were he to be returned to Nepal. These considerations were continuing from the determinations in relation to whether he was recognised as a refugee for a Convention reason as to whether he would suffer such prohibited treatment if returned to Nepal. The Tribunal determined on the evidence before it that as the appellant had not been harmed previously (or 'persecuted'); nor was there anything to indicate, in all the circumstances of the situation now pertaining in the country, that such harm would befall him in the future." Crulci J held that the Tribunal's reasons when read as a whole did not reveal that a wrong, "higher" test was applied to the determination of the complementary protection claim. The appeal to this Court The complementary protection ground On the hearing of the appeal the focus of the appellant's challenge to the Tribunal's determination of his complementary protection claim was on the contention that the Tribunal wrongly applied a test of likelihood of harm. In written submissions he also asserts that the Tribunal failed to appreciate the distinction between his claim to be a refugee and his claim to engage Nauru's complementary protection obligation in that it required him to demonstrate that he was entitled to protection as a refugee before he could be considered for complementary protection. He submits that far from appreciating the Tribunal's error in each of these respects, Crulci J perpetuated it in the passage extracted above. 7 HFM045 v The Republic [2017] NRSC 12 at [57]-[58]. Bell Nettle The argument is based on the penultimate substantive paragraph of the Tribunal's reasons: "The Tribunal is not satisfied that the applicant has suffered serious harm in the past, nor is likely to in the future, for a Convention reason or any other particular reason or that he has put forward any circumstances or reasons that would engage further protection consideration." Under Art 3 of the CAT, Nauru assumes an obligation not to return a person to another State where there are "substantial grounds for believing that [the person] would be in danger of being subjected to torture". Under cl 19 of the Memorandum of Understanding with Australia, Nauru assumes an obligation not to return a person to another State where there is "a real risk" that the person will be subjected, inter alia, to torture, or to cruel, inhuman or degrading treatment. Each obligation, as the appellant observes, requires an assessment of the risk of relevant harm as distinct from the likelihood of its occurrence. Crulci J's criticism of the Tribunal's language as "loose" responded to the appellant's submission that the Tribunal's use of the phrase "would be persecuted" evidenced the application of an erroneous, overly demanding test8. Her Honour's conclusion, that the Tribunal's reasons when read as a whole do not suggest that it misapplied the law in this way, necessarily accepts that the test is not one of likelihood of relevant harm. Earlier her Honour had noted various formulations of the test given in an authoritative text: "reasonable possibility"; "real and substantial danger"; "serious possibility"; and "real chance"9. In this instance, her Honour observed, the Tribunal applied the test of "real possibility" to the determination of the appellant's claim to be a refugee10. In circumstances in which the same facts were relied upon to support the appellant's claim to complementary protection, Crulci J considered there was no reason to conclude that the Tribunal had adopted a different, higher test11. The Tribunal rejected the factual basis of the appellant's claims to be at risk of harm from Maoists or ethnic groups in Nepal. It found that he was an unreliable witness whose account was in some respects "inconsistent, implausible 8 HFM045 v The Republic [2017] NRSC 12 at [47]. 9 HFM045 v The Republic [2017] NRSC 12 at [46] citing Hathaway and Foster, The Law of Refugee Status, 2nd ed (2014) at 110-115. 10 HFM045 v The Republic [2017] NRSC 12 at [55]. 11 HFM045 v The Republic [2017] NRSC 12 at [53]-[56]. Bell Nettle and fabricated". The findings negatived the real possibility that on return to Nepal he might be persecuted for reasons of his political opinion or race. The findings also negatived the existence of a real risk that he might be subjected to torture, or to cruel, inhuman or degrading treatment or punishment, or the existence of substantial grounds for believing that he would be in danger of being subjected to torture in Nepal. It was open to the Supreme Court to find that the Tribunal's reasons read as a whole do not support a conclusion that it misapplied the law respecting Nauru's complementary protection obligations. Section 37 of the Refugees Act It will be recalled that the appellant's procedural fairness challenges are formulated under s 37 of the Refugees Act and the common law. On the hearing of the appeal the appellant faintly pressed the former. It must be rejected. Section 37 was repealed by the Refugees Convention (Derivative Status & Other Measures) (Amendment) Act 2016 (Nr) ("the 2016 Act")12, which commenced on 23 December 2016. Section 5 of the 2016 Act provides: "Validation of Tribunal decisions For the avoidance of doubt, any decision or purported decision of the Tribunal made with respect to an application to the Tribunal under section 31 of the principal act for merits review of a decision or determination of the Secretary, between 10 October 2012 and the commencement day, which would have been validly made if at the time of the application, section 37 of the principal [A]ct had not been enacted, is taken to have been validly made on the day it was in fact made." Any uncertainty as to the date on which the repeal of s 37 came into effect was addressed by the enactment of the Refugees Convention (Amendment) Act 2017 (Nr) ("the 2017 Act"), which commenced on 5 May 2017. Section 4 of the 2017 Act provides: "The repeal of section 37 of the principal [A]ct, effected by section 24 of the Refugees Convention (Derivative Status and Other Measures) (Amendment) Act 2016, is taken to have commenced on 10 October 2012." 12 2016 Act, s 24. Bell Nettle Two further provisions of the 2017 Act should be noted: Declaration of rights, liabilities, obligations and status For the avoidance of doubt, the rights, liabilities, obligations and status of all persons are, by force of this Act, declared to be the same as if section 37 of the principal [A]ct had not been enacted. For the avoidance of doubt, the rights, liabilities, obligations and status of all persons are, by force of this Act, declared always to have been the same as if section 37 of the principal Act had not been enacted. Force and effect of proceedings, matters, decrees and acts For the avoidance of doubt, all proceedings, matters, decrees, acts and things taken, made or done, or purporting to have been taken, made or done, under the principal [A]ct in relation to an application to the Tribunal under section 31 of the principal Act for merits review of a decision or determination of the Secretary are, by force of this Act, declared to have the same force and effect after the commencement of this Act, as they would have if section 37 of the principal [A]ct had not been enacted. For the avoidance of doubt, all proceedings, matters, decrees, acts and things taken, made or done, or purporting to have been taken, made or done, under the principal Act in relation to an application to the Tribunal under section 31 of the principal Act for merits review of a decision or determination by the Secretary are, by force of this Act, declared to have had the same force and effect before the commencement of this Act, as they would have had if section 37 of the principal Act had not been enacted." The appellant relies on the absence of reference to the exercise of judicial power by the Supreme Court. He argues that while the 2017 Act may have immunised the Tribunal's review of the appellant's claim if the Supreme Court were considering that review after its enactment, it cannot have this effect when the 2017 Act had not been enacted at the time the Supreme Court gave judgment. The combined effect of the 2016 Act and the 2017 Act is that the Tribunal cannot be held to have breached the obligation in s 37 of the Refugees Act because s 37 must be taken to have been repealed before the Tribunal conducted Bell Nettle the review. Nauru submits, correctly, that the circumstance that ss 5 and 6 do not address the exercise of judicial power by the Supreme Court is not to the point: s 37 formed no part of the obligations of the Tribunal and the Supreme Court's conclusion that the Tribunal did not err in law cannot be successfully challenged on the ground that it failed to consider s 37. It smacks of the absurd to contemplate allowing the appeal on the ground of the Supreme Court's failure to address s 37 in circumstances in which, on remitter, the Supreme Court would not be required to consider the provision. The focus on s 37 in the appellant's written submissions is a distraction. It is not in issue that the Tribunal was required to act according to the principles of natural justice13. Section 6 of the 2016 Act and s 7 of the 2017 Act each affirm the Tribunal's obligation under the common law to afford procedural fairness to an applicant for review. Nauru did not contest that procedural fairness in the circumstances required that the appellant be given the opportunity of ascertaining the relevant issues and commenting on any adverse information that is credible, relevant and significant14. As earlier explained, the appellant particularises three respects in which the Tribunal failed to discharge this obligation. Changed circumstances in Nepal The first respect is the Tribunal's use of country information concerning the changed political circumstances in Nepal. The Tribunal rejected the appellant's claim to fear persecution as a supporter of the RPP(N) taking into account a report published on the South Asia Terrorism Portal, which recorded, among other matters, that "[i]n a remarkable achievement after decades of turmoil, [Nepal] remained completely free of insurgency-related violence through 2013" ("the changed circumstances report"). The changed circumstances report noted that there had been incidents of political violence in which activists of political parties had clashed with each other. It concluded that the successful election of the second constituent assembly in November 2013 was a critical development which had transformed the political environment of the country. 13 Refugees Act, s 22(b). 14 Kioa v West (1985) 159 CLR 550 at 628; [1985] HCA 81; Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57 at 69 [30]-[32]; [2001] HCA 22; SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs (2006) 228 CLR 152 at 160-161 [26]; [2006] HCA 63; Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 at 256 [2], 261 [19]; [2010] HCA 23. Bell Nettle The substance of the changed circumstances report was set out in the Secretary's reasons for determining that the appellant is neither a refugee nor a person to whom Nauru owes complementary protection. The appellant was in possession of a copy of the Secretary's reasons at the time he applied to the Tribunal for a review of the determination. Nonetheless, the appellant complains that the Tribunal failed to draw to his attention the significance it was minded to attach to the changed circumstances report in the determination of his claims. That submission is to be considered in the context of the following exchange between one of the Tribunal members and the appellant at the hearing: "[TRIBUNAL MEMBER]: ... I mean, it was now, by this stage, a government of National Unity waiting for the elections. I mean, things were already changing at the time that you left. [TRIBUNAL MEMBER]: Well, I know you've been away from Nepal now for some time, but it seems to us, when we were reading information about Nepal, that there have been some very substantial changes which might – you know, which you may not have considered. You know, the elections went off quite well, the government has been formed, it seems that all the country is sick of the fighting and the political instability, and even the main Communist Party is now working in government – not in government – as the opposition, but working with the - - - THE INTERPRETER: It seems Maoist are – they are working in different way. We can find in the news that they have got – Maoist, they are not cooperating with other parties. We can find in the news also. [TRIBUNAL MEMBER]: … When we look at information, we have to use authoritative sources that we know are reliable and impartial. So, you know, our information indicates that there have been no insurgency attacks at all during last year. Now, it's not to say that there are not some little breakaway groups or some who might call themselves Maoists or even some criminal groups who might call themselves Maoist, but these are small groups. It doesn't seem to be a big insurgency any more. And, you know, I see that your parents and your brother are still on the same farm. That hasn't been harmed. Your wife and your children are not harmed. I don't know what you think is going to happen to you if you return. Do you want to take a natural justice break at this point?" Bell Nettle Following this exchange the Tribunal member raised with the appellant's lawyer the Tribunal's concern that "there is a substantial change in Nepal and, whatever has happened in the past, we think there's a substantial change of circumstances". The lawyer requested a "natural justice break" and the Tribunal agreed to adjourn the proceeding to enable the lawyer to confer with the appellant. On the resumption of the hearing the lawyer made submissions to the effect that, notwithstanding the country information, Maoists were still operating throughout Nepal and the appellant continued to fear persecution on account of his high profile in the RPP(N). The Supreme Court's conclusion that there was no denial of procedural fairness in relation to the Tribunal's consideration of the change in circumstances in Nepal was well open. Composition of the Nepalese army The second issue raised by the appellant is the Tribunal's use of the army report, describing the heavy representation of Chhetris in the army, to discount his evidence that Maoist militia have been absorbed into the army. Nauru acknowledges that the Tribunal did not put the appellant on notice of the army report or the significance it was disposed to attach to it. In written submissions, Nauru contended that this failure did not amount to a denial of procedural fairness because the information was not adverse to the appellant. The argument was not pressed on the hearing of the appeal. Nor did Nauru embrace the submission made below that there was "little that the appellant could have said other than he agreed or disagreed" with the information in the army report. Nauru acknowledges that it is not known what the appellant might have been able to say had the issue been raised with him. Nauru contends that the appellant's challenge should nonetheless be dismissed. The starting point for the submission is that the relevance of the army report was confined to Nepal's capacity to afford the appellant State protection from non-State actors. Nauru argues that the Tribunal had rejected the appellant's claim to be at risk of persecution or other significant harm in Nepal from Maoists or ethnic groups before it came to consider State protection. In light of these findings, Nauru submits that any determination of the sufficiency of State protection was unnecessary. On this analysis, it is contended either that there was no denial of procedural fairness because there was no need to put the appellant on notice of the army report or, if the appellant was denied procedural fairness, the Court should decline to grant relief because the denial could not have deprived him of a successful outcome on the review. Bell Nettle The first way in which Nauru puts the argument relies on R v The Chief Constable of the Thames Valley Police; Ex parte Cotton15. Cotton involved judicial review of a decision of the Deputy Chief Constable of the Thames Valley Police Force to dispense with Cotton's services on the ground that he was not fit physically to perform the duties of a constable. The Deputy Chief Constable had acted on the basis of the recommendation in a report, which was not shown to Cotton. Slade LJ (with whom Stocker LJ agreed) considered that, in the circumstances, the primary judge had been entirely justified in dismissing the application because "there would have been no real, no sensible, no substantial chance of any further observation on the applicant's part in any way altering the final decision in his case"16. Bingham LJ, agreeing in the result, allowed that cases may arise in which the denial of an adequate opportunity to put a person's case is not unfair, but observed that such cases may be expected to be of "great rarity"17. The appeal does not present the occasion to consider any difference between the law of England and the law of Australia respecting the content of the obligation of procedural fairness in its application in Nauru18. Cotton was decided in circumstances in which the Deputy Chief Constable's decision that Cotton was not physically fit to perform his duties could not be seen to be affected by any response Cotton might make. As the English Court of Appeal has more recently observed, the decision in Cotton was all but inevitable19. This is to be contrasted with the Tribunal's assessment of the credibility and reliability of the appellant's claims to fear persecution or other significant harm in Nepal. The Tribunal's understanding that Chhetris are heavily represented in the Nepalese army cannot be quarantined from its conclusion that the appellant is not at risk of harm on return to Nepal. Bound up in that conclusion is an assessment not only of the prospect of Maoists or ethnic groups inflicting harm on the 15 [1990] IRLR 344. 16 R v The Chief Constable of the Thames Valley Police; Ex parte Cotton [1990] IRLR 344 at 350. 17 R v The Chief Constable of the Thames Valley Police; Ex parte Cotton [1990] IRLR 344 at 352. 18 Section 4(1) of the Custom and Adopted Laws Act 1971 (Nr) provides, relevantly, that the common law and statutes of general application which were in force in England on 31 January 1968 are adopted as laws of Nauru. 19 R v Lichfield District Council [2001] EWCA Civ 304 at [23]. Bell Nettle appellant, but of the willingness and capacity of the Nepalese authorities to take action to protect the appellant from threatened harm. The point is underlined in the Tribunal's analysis of the appellant's claim to fear harm from Limbuwan activists. The Tribunal observed that persecution implies involvement of the State, or, where it occurs at the hands of a non-State actor, the unwillingness or inability of the State to protect the individual targeted. The Tribunal relied on the ICG report in finding that Limbuwan activists target "government representatives". is not a government representative, the Tribunal concluded that there is no reason to find that the State will be unwilling or unable to protect the appellant. In the succeeding paragraph, the Tribunal went on to note the heavy representation of Chhetris in the Nepalese army. the appellant The Tribunal was obliged to put the appellant on notice of the significance that it was disposed to attach to the reported level of representation of Chhetris in the Nepalese army and to give him the opportunity to address the issue. The premise for Nauru's alternative submission, that the denial of procedural fairness could not have deprived the appellant of a different outcome, is not made good. There is no reason to decline to grant the relief that the appellant claims. This conclusion makes it unnecessary to determine the appellant's third procedural fairness complaint, which, in the way it was finally distilled on the hearing, concerns the Tribunal's use of the ICG report to find that he is not at risk of being targeted by Limbuwan activists and which, over objection, is sought to be raised for the first time in this Court. Orders For these reasons there should be the following orders: Appeal allowed. Set aside the order of the Supreme Court of Nauru made on 22 February 2017, and in its place order that: the appeal be allowed; the decision of the Refugee Status Review Tribunal made on 16 January 2015 be set aside; (iii) the matter be remitted to the Refugee Status Review Tribunal for determination according to law; and Bell Nettle the respondent pay the appellant's costs of the proceedings before the Supreme Court of Nauru and of the proceedings to date before the Refugee Status Review Tribunal. The respondent pay the appellant's costs of the appeal to this Court.
HIGH COURT OF AUSTRALIA HOMAYOUN NOBARANI APPELLANT AND TERESA ANNE MARICONTE RESPONDENT [2018] HCA 36 15 August 2018 ORDER Appeal allowed. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 5 June 2017 and, in their place, order that: the appeal to the Court of Appeal of the Supreme Court of New South Wales be allowed; the orders of the Supreme Court of New South Wales made on 22 May 2015 (Slattery J) and 28 May 2015 (Senior Deputy Registrar Studdert) be set aside and, in their place, order that the plaintiff pay the second defendant's costs of the trial; the proceedings be remitted to the Equity Division of the Supreme Court of New South Wales for a new trial; and the respondent pay the appellant's costs. The respondent pay the appellant's costs of the appeal to this Court. The respondent have liberty to apply within 14 days for an order that the costs referred to in orders 2(b), 2(d) and 3 be paid out of the estate of the deceased and on a trustee basis. On appeal from the Supreme Court of New South Wales Representation M J Windsor SC with J E F Brown and M E Hall for the appellant (instructed by Remedy Legal) G O'L Reynolds SC with A E Maroya and D F Elliott for the respondent (instructed by Vizzone Ruggero Twigg Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Practice and procedure – Appeals – Denial of procedural fairness – Where appellant unrepresented – Where nature of hearing altered at short notice – Where appellant's applications for adjournments refused – Whether appellant denied procedural fairness at trial – Whether denial of procedural fairness amounted to "substantial wrong or miscarriage" – Whether appellant denied possibility of successful outcome – Whether new trial should be ordered. Succession law – Wills, probate, and administration – Grant of probate – Where appellant claimed interest in challenging will – Where respondent granted probate of will in solemn form – Whether appellant had interest in challenging will. Words and phrases – "adjournment", "caveat", "denial of procedural fairness", "possibility of a successful outcome", "probate", "procedural fairness", "substantial wrong or miscarriage". Supreme Court Act 1970 (NSW), ss 75A, 101(1)(a). Supreme Court Rules 1970 (NSW), Pt 78 rr 42, 43, 44(4), 66, 69, 71. Uniform Civil Procedure Rules 2005 (NSW), r 51.53(1). KIEFEL CJ, GAGELER, NETTLE, GORDON AND EDELMAN JJ. Introduction This appeal concerns whether a new trial should be granted to the appellant on the basis that he was denied procedural fairness in the conduct of a trial, heard on 20 and 21 May 2015, involving the respondent's claim for probate of a will in solemn form. The appellant was unrepresented. He claimed an interest in challenging a handwritten will made by the late Ms Iris McLaren in 2013 ("the 2013 Will"). He filed two caveats against a grant of probate without notice to him. The respondent brought proceedings for orders that the caveats cease to be in force. Until 14 May 2015, the appellant's preparation was essentially limited to those proceedings. The appellant had not been joined as a party to the respondent's summons for probate of the 2013 Will and was not named in her later statement of claim. No directions had been made requiring the appellant to file any evidence in the proceedings. He had, correctly, proceeded on the basis that he had not been directed to take any steps towards a trial of the claim for probate. On 23 April 2015, the appellant was told by the judge at a directions hearing that the trial on 20 and 21 May 2015 would be confined to the respondent's motion that the appellant's caveats cease to be in force ("the caveat motion"). On 14 May 2015, with three clear business days before the trial, the first directions hearing was held by the trial judge, Slattery J. For the first time, the respondent submitted that the appellant's caveats had lapsed by effluxion of time. The trial judge, with the urging of senior counsel who had appeared at the previous directions hearings, told the appellant that the trial on 20 and 21 May 2015 would be of the claim for probate. He directed that the appellant file and serve a defence to the statement of claim by 18 May 2015, that is, within one clear business day. He also directed that, within the same clear business day, the appellant should serve any supplementary evidence upon which he wished to rely in addition to the affidavits he filed in his caveat proceeding and identified during the directions hearing. The trial judge was not informed prior to making those directions that the appellant was not a party to the probate proceedings, or that the appellant's affidavits had been filed only in connection with the caveat motion. On 20 May 2015, the first day of the trial, the appellant was joined as a party to the claim. His defence was in disarray. His applications for adjournments were refused. The trial judge delivered judgment orally on 22 May Nettle Gordon Edelman 2015, granting probate of the 2013 Will in solemn form. The appellant was ordered to pay the costs of the proceedings. A majority of the Court of Appeal of the Supreme Court of New South Wales dismissed the appellant's appeal, but for different reasons. Ward JA dismissed the appeal because she concluded that, although the appellant had been denied procedural fairness, there was no possibility that the outcome would have been any different. Emmett AJA dismissed the appeal because he concluded that the appellant did not have an interest in challenging the 2013 Will. This appeal should be allowed. For the reasons below, the appellant had an interest in the 2013 Will and he was denied procedural fairness at the hearing. The denial of procedural fairness was material in the sense of a "substantial wrong or miscarriage", as required by r 51.53(1) of the Uniform Civil Procedure Rules 2005 (NSW), because he was denied the possibility of a successful outcome. The facts and course of proceedings Ms McLaren died of cancer on 12 December 2013, aged 83 years. One week earlier, on 5 December 2013, she had made the 2013 Will, naming the respondent as executrix and leaving the whole of her estate to the respondent. The 2013 Will purports to be witnessed by two people, Ms Rachel Parseghian In an earlier will of the deceased, dated 12 August 2004 ("the 2004 Will"), she had made bequests to the Animal Welfare League NSW, including money and land, reflecting what the trial judge described as her strong, lifelong interest in the welfare of animals. In the same will, she had bequeathed to the appellant shares of her jewellery and personal possessions. The caveat proceedings On 23 January and 5 February 2014, two caveats were filed against the grant of probate in the estate of the deceased without notice to the caveator1. The first of those caveats was filed by the appellant, claiming an interest based upon his rights under one or more prior wills. The second was filed by the Animal Welfare League, claiming an interest as a beneficiary under the 2004 Will. 1 Supreme Court Rules 1970 (NSW), Pt 78 r 66. Nettle Gordon Edelman On 14 February 2014, the respondent filed the caveat motion2. The appellant and the Animal Welfare League were both joined as respondents to that motion. The appellant and the respondent filed affidavits relating to the caveat motion. In one affidavit, the appellant said that he had visited the deceased on 5 December 2013, which is the date of the 2013 Will. He said that she was not alert but sleepy, and that she barely spoke. In other affidavits, the appellant doubted the veracity of the deceased's signature and stated that the address of one of the witnesses, Mr Yuanun, appeared to be a vacant building site. The appellant also annexed an affidavit of Mr Daniel Lemesle, who described himself as a close friend of the deceased who had known her for approximately 60 years. The 2013 Will has the words "Daniel Le" and the suburb in which Mr Lemesle lived below the space for a witness's signature, but those words are crossed out. In Mr Lemesle's annexed affidavit, he deposed to conversations with the deceased where she had told him of her love for animals and her intention to leave the bulk of her estate to the Animal Welfare League. He described visiting her frequently in hospital after she was admitted in October 2013 and every day after she was readmitted in November. He described the deterioration of her condition during November, including her distress, pain, inability to eat or drink, and, at times, lack of comprehension and inability to maintain a conversation. He said that he received a Christmas card in December dated 30 November 2013, purporting to be from the deceased, when, to his knowledge, she was unable to sign her name. Mr Lemesle also described the events of the day that the 2013 Will was signed, although he said that the date was Monday, 9 December 2013. He said that when he arrived at the hospital room, a man who introduced himself as the deceased's solicitor asked him to leave the room. He left for about an hour. When he returned, and was told by the respondent that he had been sought as a witness to the will of the deceased, he expressed doubt that the deceased could sign a will in her present state, given that her condition had worsened from two weeks prior, when she could not sign the Christmas card. The respondent filed an affidavit sworn by the solicitor who had prepared the 2013 Will on 5 December 2013 and read it to the deceased. The solicitor said that he knew the deceased well by the time of her death. He said that she rang him in early December 2013 and asked him to attend upon her in hospital. He said that, when he arrived, she appeared alert and interested, and she said that the 2 Supreme Court Rules 1970 (NSW), Pt 78 r 71. Nettle Gordon Edelman respondent was the only person who cared about her. He said that she understood that she had left everything to the respondent, and the 2013 Will was signed by the deceased in the presence of two witnesses. On 15 September 2014, after the appellant's first caveat had lapsed by the effluxion of its six month duration3, the appellant filed a new caveat against the grant of probate without notice to him. The claim for probate On 11 February 2014, shortly before filing the caveat motion, the respondent had filed a summons for probate of the 2013 Will. In contrast with the caveat motion, neither the appellant, nor the Animal Welfare League, was joined to the summons. The respondent's summons was to obtain a grant of probate, in chambers, in the absence of the parties. As submissions at the trial revealed, the respondent's motivation for filing the caveat motion three days later was based upon her assumption that the appellant had no interest in challenging the 2013 Will. The respondent apparently assumed that success on the motion would be an efficient way to dispose of any dispute by the appellant because she apparently thought that the appellant would be shown to have no interest in challenging the grant of probate of the 2013 Will. The respondent apparently took a different view of the interest of the Animal Welfare League. On 15 May 2014, the respondent filed a statement of claim seeking an order that she be granted probate of the 2013 Will. The Animal Welfare League was joined as a defendant. It filed a defence and a cross-claim. The respondent filed an affidavit from Ms Parseghian, a witness to the 2013 Will, who deposed that her mother had been in the same hospital ward as the deceased, and that she had spoken to the deceased, heard her speak, and did not consider the deceased to be mentally incapacitated. The appellant was not joined to the statement of claim. Although the appellant was served with the statement of claim and filed an appearance on 27 June 2014, he was not directed to take any steps in the proceedings. On 24 November 2014, Deputy Registrars made programming orders in the matter. The Animal Welfare League was given until 6 March 2015 to file 3 Supreme Court Rules 1970 (NSW), Pt 78 r 69. Nettle Gordon Edelman and serve further affidavit evidence. The respondent was given until 1 April 2015 to file and serve any evidence in reply. The trial was listed for 20 and 21 May 2015. The respondent and the Animal Welfare League reached a compromise. On 10 February 2015, consent orders were filed dismissing the Animal Welfare League's defence and cross-claim and ordering that the respondent pay the costs of the Animal Welfare League, fixed at $35,000. The appellant, who was not a party, was not named in the consent orders, nor was his signature sought on the minute. Although the respondent did not join the appellant to the proceedings, on 14 January 2015 the appellant was served with notice of the proceedings and a copy of the statement of claim, purportedly under Pt 78 r 42 of the Supreme Court Rules 1970 (NSW). It is difficult to see how that rule applied. The rule is concerned with persons whose interest may be affected by the Court's decision concerning an "informal testamentary document". Notice under the rule allowed the appellant to file an appearance4 but, by Pt 78 r 44(4), it only permitted him to take part in the proceedings as a defendant in relation to the "informal testamentary document" and any other part of the proceedings as the Court directed. No informal testamentary document was in issue and no direction was made. Nevertheless, the appellant filed another appearance in response to the notice on 28 January 2015. On 30 March 2015, the probate claim came before Hallen J for directions. The appellant was still not a named defendant. Hallen J told the appellant that the statement of claim had been served upon him and that the appellant had had 28 days to file a defence. If, as they purported to be, the notice and statement of claim were served on the appellant under Pt 78 r 42, the appellant's defence would have been limited to that based upon any interest he had under an informal testamentary document. In any event, no directions were made for the appellant to file any evidence or take any other steps. On 20 April 2015, the statement of claim came before Hallen J again for directions. Since the directions hearing on 30 March 2015, the appellant had obtained legal representation and sought to inspect the deceased's premises for one or more undisclosed, buried wills. Due to various disputes about the inspection, it never occurred, and the appellant's legal representative withdrew 4 Supreme Court Rules 1970 (NSW), Pt 78 r 43. Nettle Gordon Edelman after obtaining leave to do so at a further directions hearing on 23 April 2015. At these directions hearings, the appellant had still not been joined as a party to the statement of claim. Hallen J considered an application by the respondent for summary judgment against the appellant, but said that the application was a waste of time because the appellant had not been named as a defendant in the statement of claim. Hallen J raised two alternatives with the parties: (i) leave the issue of whether the caveats should cease to be in force for the trial on 20 and 21 May 2015; or (ii) dismiss the caveat motion and have the trial proceed on the claim for probate. The second alternative would require granting leave to the respondent to amend the statement of claim to add the appellant as a party, and making orders for a defence and evidence from the appellant. Presented with these options, senior counsel for the respondent urged Hallen J not to adopt the second alternative. He submitted that the most expeditious course would be to amend the caveat motion to address both of the appellant's caveats and to have the trial on 20 and 21 May 2015 proceed "on that issue". The likely assumption by senior counsel was that this course would be most efficient because, if the appellant were found to have an insufficient interest to support the caveats, the caveat motion would be allowed and a hearing on the statement of claim could occur without the appellant being joined as a party. Senior counsel for the respondent confirmed that all of the evidence upon which he intended to rely for the caveat motion had been filed. He accepted that if the caveats remained in force, or if there were a basis for the matter to proceed by way of pleadings, then the respondent would have to file an amended statement of claim. Hallen J accepted the submission by senior counsel for the respondent. He ordered that the caveat motion be amended by 24 April 2015 and that the trial on 20 and 21 May 2015 be limited to determination of whether the caveats should remain in force. He carefully explained to the appellant that the hearing would be limited to that issue. On 14 May 2015, less than a week before the 20 May 2015 trial date, a directions hearing was held by the trial judge, Slattery J, who had not presided over the previous directions hearings. At that directions hearing, for the first time, senior counsel for the respondent pointed out that the two caveats that had been filed by the appellant had expired by effluxion of time. The second caveat had expired on 15 March 2015. Slattery J said to senior counsel for the respondent: "The only thing I just want to understand is what the nature of the hearing is going to be ... I think we do need to work out now what both sides are going to be expecting to happen and whether there has been any Nettle Gordon Edelman misunderstanding about that. I have to say I am inclined to, in effect, let it all happen as though it were a kind of final hearing." Senior counsel for the respondent twice urged the judge in favour of the course of having the trial as a final probate hearing. Senior counsel did not mention that, on 23 April 2015, he had strongly urged Hallen J against that course. He did not mention that the appellant had only filed evidence in opposition to the caveat motion and had not been directed to take any other steps to trial other than to file a defence based only upon any interest in an informal that testamentary document. Monday, 18 May 2015, one clear business day away, would be "plenty of time" for the appellant to file a defence. the appellant denied, He submitted, but The trial judge accepted those submissions and also ordered the appellant to file any further evidence by the same date, 18 May 2015. At the very conclusion of the hearing, senior counsel for the respondent identified as a "housekeeping" matter that the appellant had not been joined as a defendant. The respondent was then directed to amend the statement of claim to join the appellant as a defendant. The trial and the trial judge's decision The respondent continued to be represented at trial by senior and junior counsel. The appellant continued to be unrepresented. At the commencement of the trial, the respondent amended her statement of claim, for the first time adding the appellant as a defendant and seeking costs against the appellant. The appellant's conduct of the proceedings was not orderly. The trial judge described the appellant's hastily prepared defence as "almost incomprehensible". During the trial, the appellant asked for adjournments to call witnesses, to read documents, and to call expert evidence. No adjournments were granted. The evidence in the appellant's case was given by him and his wife. The evidence in the respondent's case was given by the respondent, Ms Parseghian, and the solicitor for the deceased who had prepared the 2013 Will. The trial judge proceeded on the basis that the appellant had put in issue by credible evidence, placing the onus upon the respondent5: (i) questions of execution; (ii) questions of capacity; and (iii) questions of testamentary intention, 5 Timbury v Coffee (1941) 66 CLR 277 at 283; [1941] HCA 22. Nettle Gordon Edelman knowledge, and approval. The trial judge concluded that each of those was satisfied. Orders were made granting the respondent probate in solemn form of the 2013 Will and ordering the appellant to pay the respondent's costs. As to the caveat motion, this was mentioned only in the closing submissions by senior counsel for the respondent. After observing that the caveats had expired, senior counsel said that his only submission about the motion was that the appellant had no interest that could support the caveats because the 2004 Will had not been proved. However, as the trial judge pointed out during oral argument, the respondent had admitted the 2004 Will. The trial judge held that the appellant had an interest under the 2004 Will, which gave him standing to challenge the 2013 Will. The Court of Appeal decision The appellant's primary ground of appeal alleged that he had been denied procedural fairness. He had numerous sub-grounds in support of this. The sub-grounds included the following: the appellant's inability to call Mr Lemesle as a witness or to rely on Mr Lemesle's affidavit; the trial judge's failure to allow him an opportunity to cross-examine Ms Parseghian; the trial judge's failure to allow him the opportunity to call expert evidence, including his failure to allow the appellant time to issue subpoenas, with respect to the deceased's eyesight; and the trial judge's failure to give him an opportunity to be heard in relation to objections to his affidavit evidence. As Simpson JA correctly said in the Court of Appeal, apart from the last mentioned sub-ground, all of the specific complaints arose out of the last minute change to the issue to be decided at the trial on 20 and 21 May 2015. By majority (Ward JA and Emmett AJA), the Court of Appeal dismissed the appeal. Ward JA held that procedural fairness had been denied but, notwithstanding her disquiet (shared with Emmett AJA) about the way that the proceedings had been conducted, she concluded that the denial of procedural fairness did not deprive the appellant of the possibility of a successful outcome6. Emmett AJA held that the appellant appeared to have no interest in the validity of the 2013 Will7. In dissent, Simpson JA would have allowed the appeal, 6 Nobarani v Mariconte (No 2) [2017] NSWCA 124 at [2]-[4]. 7 Nobarani v Mariconte (No 2) [2017] NSWCA 124 at [124]. Nettle Gordon Edelman concluding that the appellant had been denied procedural fairness and that the denial was a substantial miscarriage of justice8. The appeal to this Court In this Court, the appellant alleged that the Court of Appeal erred in not ordering a retrial. He submitted that Ward JA erred in determining that the denial of procedural fairness could not have made a difference to the result, and that Emmett AJA erred in determining that the appellant had no interest in the estate sufficient to challenge the validity of the 2013 Will. By notice of contention, the respondent argued that the Court of Appeal erred in concluding that there was a denial of procedural fairness in any respect and, if there was a denial of procedural fairness, the Court of Appeal's decision should nonetheless be affirmed on the basis that there was no substantial miscarriage of justice by reason of any such denial. It is convenient for the purposes of these reasons to deal concurrently with the issues raised by the appeal and the notice of contention. When a new trial should be ordered Section 101(1)(a) of the Supreme Court Act 1970 (NSW) provides the circumstances in which an appeal can be brought, including, as in this case, an appeal by way of rehearing9 from a judgment of the Equity Division. Section 75A(10) provides that the powers of the Court on appeal include that the "Court may make ... any order ... which the nature of the case requires". That discretion includes an order for a new trial. Section 101(1)(a) is subject to the Uniform Civil Procedure Rules. Rule 51.53(1) provides that: "The Court must not order a new trial on any of the following grounds: (a) misdirection, non-direction or other error of law, improper admission or rejection of evidence, 8 Nobarani v Mariconte (No 2) [2017] NSWCA 124 at [55]. 9 Supreme Court Act 1970 (NSW), s 75A(5). Nettle Gordon Edelman that the verdict of the jury below was not taken on a question that the trial judge was not asked to leave to the jury, on any other ground, unless it appears to the Court that some substantial wrong or miscarriage has been thereby occasioned." The catch-all, "on any other ground", includes circumstances of a denial of procedural fairness. Those circumstances were not encompassed by the equivalent South Australian rule10 that was in force at the time of this Court's decision in Stead v State Government Insurance Commission11. Nevertheless, the common law applied in that case, and the earlier case of Balenzuela v De Gail12, contains an equivalent requirement to a "substantial wrong or miscarriage" before the power to order a new trial would arise. That requirement, reflected also in the usual requirement before an error will be considered to be jurisdictional and certiorari will lie13, is that the error must usually be material in the sense that it must deprive the party of the possibility of a successful outcome. As this Court said in Stead14: "All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result." In summary, a power under s 75A(10) to order a new trial arises where a denial of procedural fairness causes some substantial wrong or miscarriage. The denial of procedural fairness will cause a substantial wrong if it deprived the affected person of the possibility of a successful outcome. Unless the other party 10 Supreme Court Rules 1947 (SA), O 58 r 26. 11 (1986) 161 CLR 141; [1986] HCA 54. 12 (1959) 101 CLR 226; [1959] HCA 1. 13 Hossain v Minister for Immigration and Border Protection [2018] HCA 34 at [29]- 14 (1986) 161 CLR 141 at 147. Nettle Gordon Edelman can show some reason for the exercise of discretion not to order a new trial, the power will be exercised to order a new trial. One reason that might sometimes be sufficient, and upon which the respondent relied, is where no useful result could ensue because a properly conducted trial will not make a difference. The appellant was entitled to a new trial In oral submissions in this Court, senior counsel for the appellant accepted that the denial of procedural fairness was effectively encapsulated in the consequences of the failure to adjourn the proceedings. Contrary to the submissions of senior counsel for the respondent, this does not mean that the ground of appeal was concerned with a discretionary decision of the trial judge to refuse an adjournment15. Rather, the denial of procedural fairness arose from the consequences, and effect on the appellant, of altering the hearing, at short notice, from a hearing of the caveat motion to a trial of the statement of claim. The appellant's adjournment applications were attempts those consequences. to ameliorate The trial judge gave two reasons for refusing the appellant's adjournment applications. First, he said that the matter had been set down for hearing for some time and that the appellant had been warned on 14 May 2015 that he needed to have all his evidence ready for the trial on 20 and 21 May 2015. The trial judge reiterated that the appellant had "plenty of opportunity" to prepare when explaining why he had refused an adjournment to allow the appellant to call expert evidence. Secondly, the trial judge said that the vagueness with which the appellant presented many of the procedural issues, and the disorder of the appellant's case, gave the Court no confidence that an adjournment would lead to his case becoming any more precise. The trial judge was correct that the appellant had been told the previous week, on 14 May 2015, to have all his evidence ready for the trial, and that the proceedings needed to be managed in a just, quick, and cheap manner. Speed and frugality are often closely associated. But they must be consistent with justice. The trial judge erred in his statement that the appellant had had sufficient time to prepare because the matter had, for some time, been set down for trial. The trial judge did not appreciate, and was not informed, that the dates that had been set down were only to be used for the hearing of the caveat motion and that no directions had been made for the taking of any steps, or filing or service of 15 See Sali v SPC Ltd (1993) 67 ALJR 841; 116 ALR 625; [1993] HCA 47. Nettle Gordon Edelman any documents by the appellant, save for the misconceived indication on 30 March 2015 for a defence, which, under Pt 78 r 42, would have related to an informal testamentary document. As Simpson JA correctly observed in the Court of Appeal, it is apparent that the appellant had little appreciation of the appropriate court procedure or rules of evidence and his command of English was not strong. In these circumstances, it is unsurprising that the appellant's case was vague and disordered when he had only three clear business days to: (i) consider the statement of claim in a proceeding to which he had not been joined; (ii) prepare and serve a defence; (iii) issue any subpoenas, with an abbreviated return date before trial; (iv) locate any supplementary witnesses and obtain supplementary evidence from those upon whom he wished to rely; and (v) secure those witnesses for trial. The substantially abbreviated timetable to trial had consequential effects during the trial. First, Ms Parseghian was not called to give oral evidence because, in the short time between 14 May 2015 and the trial, the appellant did not give notice to the respondent that Ms Parseghian was required for cross- examination. This meant that the appellant could not cross-examine a significant witness as to the deceased's mental and physical condition. That inability to cross-examine was compounded by the inability to locate the other witness to the 2013 Will, Mr Yuanun, whose address appeared to be a vacant building site. Secondly, the trial judge refused to take account of Mr Lemesle's affidavit because, although that affidavit was annexed to the appellant's defence filed in opposition to the caveat motion, the affidavit was not read and the witness was not subpoenaed or brought before the Court. Thirdly, when, over objection from senior counsel for the respondent, the appellant was given access to the solicitor's diary from 5 and 10 December 2013, the trial judge gave the appellant only "about one minute to decide what you are going to do next", and an application to have the diary considered by an expert was refused. Each of these matters, by itself, may not have constituted a material denial of procedural fairness amounting to a substantial wrong or miscarriage. But all of the matters, in combination and together with the considerably abbreviated time for preparation, were manifestations of the material denial of procedural fairness to the appellant. The respondent submitted that the appellant had known for a long time that a hearing on the caveat motion would be held and, although unbeknownst to him the caveats had lapsed, he had had months to prepare for this caveat hearing. The difficulty with this submission is that far less preparation is required for a caveat hearing than is required for the ultimate trial. If, as all the parties had assumed until the 14 May 2015 directions hearing, the appellant's second caveat Nettle Gordon Edelman had not expired, then all the appellant needed to show was, in broad terms, that he had an interest to support the caveat and that he had a prima facie case of a ground of invalidity upon which he relied16. It was reasonable for the appellant to proceed towards the caveat hearing without completing all of the preparation that would be required for trial, on an assumption of success in the caveat motion. Indeed, at the trial itself, the respondent's submission that the caveat motion should be upheld was confined to the claim that the appellant had no interest in the 2013 Will sufficient to support the caveat. The case presented by the respondent, with the evidence of the deceased's solicitor at its heart, was strong. But a grant of probate in solemn form was not inevitable. The denial of procedural fairness to the appellant amounted to a "substantial wrong or miscarriage" in the sense that the appellant was denied the possibility of a successful outcome. This conclusion is not based upon reasoning that a litigant in person is entitled to be relieved from rules that would apply to a party who is represented. In this case, no legal representative would reasonably have been refused an adjournment if presented with only three clear business days to prepare for a trial of proceedings to which their client had not yet been joined and in which their client had not been the subject of pre-trial orders for preparing and filing a defence, preparing and filing evidence, issuing subpoenas, and locating and confirming availability of witnesses. As Samuels JA said17 in a passage that has been relied upon on many occasions18: "the absence of legal representation on one side ought not to induce a court to deprive the other side of one jot of its lawful entitlement ... An unrepresented party is as much subject to the rules as any other litigant. The court must be patient in explaining them and may be lenient in the standard of compliance which it exacts. But it must see that the rules are obeyed, subject to any proper exceptions. To do otherwise, or to regard a 16 Azzopardi v Smart (1992) 27 NSWLR 232 at 238. 17 Rajski v Scitec Corporation Pty Ltd unreported, New South Wales Court of Appeal, 16 June 1986 at 27. 18 See, eg, Minogue v Human Rights and Equal Opportunity Commission (1999) 84 FCR 438 at 446 [28]; Platcher v Joseph [2004] FCAFC 68 at [104]; Trustee for The MTGI Trust v Johnston [2016] FCAFC 140 at [104]. Nettle Gordon Edelman litigant in person as enjoying a privileged status, would be quite unfair to the represented opponent." Senior counsel for the respondent made detailed oral submissions in this Court, almost relitigating the entire case, partly in support of a submission that the Court should exercise the discretion in s 75A(10) of the Supreme Court Act not to order a new trial despite a material denial of procedural fairness. He submitted that this was because a properly conducted trial could not make a difference to the result. It will be rare that such a submission succeeds. In this case, the submission cannot be accepted because it suffers from an erroneous basic assumption. That assumption is that this Court should attempt such an assessment by, in effect, conducting a hypothetical trial including the following: (i) making suppositions about the extent to which the evidence of Mr Lemesle might be made admissible; (ii) assessing the likely evidence of Mr Lemesle in light of the evidence of the solicitor for the deceased; (iii) drawing inferences, based upon limited evidence, about other witnesses, including expert witnesses, that the appellant had indicated he might call; and (iv) speculating about the lines of cross-examination that the appellant might pursue, based upon his grounds of challenge to the 2013 Will. Finally, the respondent submitted that the appeal should be dismissed on the basis that, as Emmett AJA concluded in the Court of Appeal, the appellant had no interest in challenging the validity of the 2013 Will. That submission should not be accepted. A person will have a sufficient interest if he or she has a right "which will be affected by the grant"19. The trial judge held, correctly, that the appellant had an interest in challenging the 2013 Will as a legatee under the 2004 Will. No submission was made at trial or on appeal, and no point taken on the notice of contention filed in this Court, to suggest that the 2004 Will or the appellant's interest in it were invalid. The respondent's submission that a bequest to the appellant of a share of personal property and jewellery was too insubstantial to amount to an interest must also be rejected. That submission was based upon the factually erroneous assertion – founded only upon the lack of reference to jewellery in the deceased's inventory of property – that the bequest had no value. It is also legally erroneous to conclude that rights of low monetary value cannot amount to a legal interest. 19 In re Devoy; FitzGerald and Pender v FitzGerald [1943] St R Qd 137 at 145. Nettle Gordon Edelman Conclusion The appeal should be allowed. Orders should be made as follows: Appeal allowed. Set aside the orders of the Court of Appeal of the Supreme Court of New South Wales made on 5 June 2017 and, in their place, order that: the appeal to the Court of Appeal of the Supreme Court of New South Wales be allowed; the orders of the Supreme Court of New South Wales made on 22 May 2015 (Slattery J) and 28 May 2015 (Senior Deputy Registrar Studdert) be set aside and, in their place, order that the plaintiff pay the second defendant's costs of the trial; the proceedings be remitted to the Equity Division of the Supreme Court of New South Wales for a new trial; and the respondent pay the appellant's costs. The respondent pay the appellant's costs of the appeal to this Court. The respondent have liberty to apply within 14 days for an order that the costs referred to in orders 2(b), 2(d) and 3 be paid out of the estate of the deceased and on a trustee basis.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT [2018] HCA 13 21 March 2018 ORDER Appeal dismissed. On appeal from the Supreme Court of Queensland Representation J A Griffin QC with E P Mac Giolla Ri and K M Hillard for the appellant (instructed by Fisher Dore Lawyers) C W Heaton QC with J A Wooldridge for the respondent (instructed by Director of Public Prosecutions (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Appeal against conviction – Murder and manslaughter – Intention to kill or cause grievous bodily harm – Incorrect advice – Where appellant's case was that he had not intended to kill or cause grievous bodily harm – Where appellant incorrectly advised that giving evidence would likely lead to cross- examination on prior convictions – Where chance of cross-examination on prior convictions possible but not likely due to s 15(2) of Evidence Act 1977 (Q) – Where appellant's account of incident to his solicitor inconsistent with prior statements to police – Where appellant was correctly advised that giving evidence would likely lead to cross-examination on inconsistencies – Where appellant gave evidence on appeal that had he been physically and mentally well and absent the incorrect advice he would have given evidence at trial – Where no evidence to suggest trial would have been conducted differently absent the incorrect advice – Whether no miscarriage of justice. Words and phrases – "criminal history", "cross-examination", "decision not to give evidence", "fair trial", "inconsistent evidence", "incorrect advice", "intent", "intoxication", "miscarriage of justice", "murder", "prior convictions". Criminal Code (Q), ss 644, 668E(1). Evidence Act 1977 (Q), s 15. KIEFEL CJ, BELL, GAGELER, KEANE, NETTLE, GORDON AND EDELMAN JJ. The appellant was convicted following a trial before the Supreme Court of Queensland (Jackson J and a jury) of the murder of his partner, Kylie Anne Hitchen, by stabbing. The appellant did not give evidence at the trial. He had been advised by his counsel, incorrectly, that it was likely if he gave evidence that he would be cross-examined on his criminal history, which included a conviction for an offence involving the fatal stabbing of a man ("the incorrect advice"). The appellant also had been advised by his counsel, correctly, that if he gave evidence he was likely to be cross-examined on inconsistencies between his evidence and the account that he had given the police in a recorded interview. The appellant appealed against his conviction to the Court of Appeal of the Supreme Court of Queensland (Fraser, Gotterson and Morrison JJA) contending, among other grounds, that the conduct of his trial occasioned a miscarriage of justice. On the hearing in the Court of Appeal, this ground was particularised by reference to the incorrect advice, which it was argued effectively left the appellant without the option of giving evidence1. The Court of Appeal dismissed the appeal, holding that there was a sound forensic reason for the appellant not to testify, about which he had been correctly advised. The circumstance that the appellant had been given an additional, incorrect reason for the decision did not diminish the role of the correct advice in providing a rational reason, nor, of itself, did it give rise to a miscarriage of justice2. The appellant appeals by special leave granted by Kiefel CJ, Bell and Keane JJ on 7 April 2017 on the ground that the Court of Appeal erred in finding that the incorrect advice did not result in a miscarriage of justice. The appellant contends that an essential component of a fair trial is the accused's informed choice to give evidence and it follows that the denial of an informed choice will, at least ordinarily, be a miscarriage of justice. For the reasons to be given, the generality of this proposition cannot be accepted. Whether the receipt of incorrect legal advice bearing on the accused's choice not to give evidence is productive of a miscarriage of justice requires consideration of the effect of the 1 R v Craig [2016] QCA 166 at [20]. 2 R v Craig [2016] QCA 166 at [44]. Bell Nettle Gordon Edelman advice on the conduct of the trial. Here, that consideration does not establish that there has been a miscarriage of justice and, accordingly, the appeal must be dismissed. Procedural history and facts On 10 March 2014, the appellant was arraigned on an indictment that charged him with the murder of the deceased at Esk on or about 21 January 2011. He pleaded not guilty to murder but guilty to manslaughter. The prosecution declined to accept the plea in discharge of the indictment and the trial proceeded. It was common ground that the appellant went to the Brunswick Heads Police Station on the morning of 22 January 2011 where he reported that he had cut the deceased's neck with a kitchen knife. Following the report, Queensland police went to the appellant's home in Esk and found the body of the deceased. The deceased died from knife wounds to the throat: the left and right carotid arteries had been wholly severed. So, too, the left jugular vein had been wholly severed. The incisions penetrated to the vertebrae. There were two stab-type incised wounds to the deceased's front right shoulder. The appellant's DNA was found on the deceased's fingernails. The appellant made extensive admissions at the trial3. These included that he and the deceased had drunk alcohol heavily throughout their relationship. They also included an account of an incident in April 2010 in which the deceased had sustained a fracture to her right cheekbone. The deceased reported the incident to the police on 3 May 2010 alleging that the appellant had assaulted her. On her account, the assault occurred during the night when she had climbed over the appellant to go to the toilet. She told the police that the appellant had inquired "[w]hat's your problem bitch?" and punched her. The appellant was questioned by the police about the incident and he gave the account that the deceased's injury was sustained "when we were play wrestling". The appellant was charged with causing the injury to the deceased and released on bail that was conditioned on him not having contact with the deceased. Despite the bail condition, and the terms of a domestic violence order, the appellant and the deceased continued to have contact with each other. In 3 Criminal Code (Q), s 644. Bell Nettle Gordon Edelman mid-May 2010 the deceased asked the police to withdraw the charge. The request was refused. Several months later she renewed the request, which was refused again. The appellant described the events leading up to the death of the deceased in a recorded interview with police ("the interview"). He said that he and she were at home and that both of them were drunk. He complained that she had been forcing him to "scull" beer although he had not wanted to drink any more: "I just wanted us to go to sleep, you know, and give her a cuddle and go to bed." In the event, they had ended up fighting over the deceased's insistence that they keep drinking. The appellant had gone outside to "cool down". On his return, the deceased had accused him of having telephoned another woman. He claimed that the deceased was always accusing him, wrongly, of cheating on her. The appellant's account of the fatal incident was in these terms: "Then when I said I don't wanna drink anymore, she got real angry, and she - Kylie grabbed the knife first and I took the knife off her and she cut her, in the process of that she cut her hand. And then blood went everywhere, and then it just, it, it exploded, you know? She just lost the plot, and she's throwin stuff, and broken tv's, blood everywhere, and in the heat of the moment, I just fuckin cut her on the neck, and it was just, there was no thought, it['s] just, drunkenness you know? … And it wasn't premeditated, it was just somethin that happened, and if she didn't pick the knife up in the first place, it wouldn't have happened. [POLICE OFFICER]: Ok. Are you able to tell me how you cut her? [APPELLANT]: Oh, I disarmed her, and in the process the knife come around on her fingers and then it bled pretty seriously and obviously needed stitches. Then as soon as the blood went everywhere, she just lost it and started attackin me again, throwin stuff at me and I just tackled her into the corner, and she's just goin off and losin it. All I wanted to do was fuckin keep her quiet and fuckin calm down and clean her, clean her hand up, and get it seen to. [POLICE OFFICER]: And so, then what's happened? [APPELLANT]: [unintelligible] it was just temporarily, you know, temporarily fuckin in the heat of the moment fuckin drunk insanity, you Bell Nettle Gordon Edelman know? I just fuckin cut her fuckin throat, ya know? I'd no, no intentions of doin it, it's just somethin that just fuckin happened, ya know. We really wanted to make this fuckin relationship work, and she just wouldn't get off me back about rootin some other sheila and I never did. … And she just kept kickin me down, makin me feel like shit, every night she'd drank she made me feel like shit. And this went on for fuckin eighteen months … and I put up with her, and I loved her. She just wouldn't fuckin let it go, she wouldn't let it go … [POLICE OFFICER]: What happened after you cut her? [APPELLANT]: I sat there and fuckin cried for a fuckin hour … I couldn't believe what I saw on the kitchen floor, it was just, it's me fuckin girlfriend! [POLICE OFFICER]: Mate, when you said you cut her throat, can you say how you did that? [APPELLANT]: [unintelligible] [POLICE OFFICER]: I know that sounds like a silly question. [APPELLANT]: [unintelligible] it was a kitchen knife, I just, cut it like I was cuttin a loaf of bread, you know? I didn't even think it was her at the time, honest to god … [POLICE OFFICER]: Did she pass away soon after? [APPELLANT]: Yeah, a couple of minutes I'd say, less, probably, I heard, heard the gurgling sound, you know, from her throat." The evidence pointed to the likelihood that the deceased died sometime after 9:35pm on 20 January 2011. She had spoken by telephone with her brother at around 6:30pm that evening. Two calls were made from her mobile telephone at around 9:35pm. At 3:24am the following morning the appellant withdrew $1,000 from the deceased's bank account at an ATM in Kilcoy. Around four and a half hours later the deceased's keycard was used to make a further withdrawal of $300 from her bank account at an ATM at Kallangur. At 11:38am that morning the appellant was recorded by CCTV cameras in the bar at a Brunswick Heads hotel. He spent the night of 21-22 January at that hotel having registered under a false name. Bell Nettle Gordon Edelman It was the appellant's case at the trial that he had not intended to kill the deceased or to do her grievous bodily harm. It was a case that relied on the account in the interview to raise a doubt that in his intoxicated state it was open to draw the inference that he had formed the murderous intent. The deceased's death occurred before amendments to the Criminal Code (Q) relating to the partial defence of provocation came into effect4. Where evidence raised the issue, the onus remained on the prosecution to negative that the accused acted under provocation. The defence did not rely on provocation at the appellant's trial. Nonetheless, the judge considered that the account in the interview sufficiently raised the issue to require that the jury be directed of the necessity for the prosecution to negative that the appellant acted under provocation. The proceedings in the Court of Appeal The Court of Appeal gave leave to adduce new or fresh evidence on the hearing of the appeal in support of the ground which contended that there was a miscarriage of justice5. The appellant's handwritten instructions given to his solicitor, dated 25 September 2012, were in evidence. These contained an account that differed radically from the account the appellant had given in the interview. It was an account that raised consideration of the "defences" of accident, self-defence and provocation. In summary, the appellant described having been greatly alarmed by the deceased, who was holding the knife in front of her. He said that she had threatened to have him "knocked" and that she "came at" him leading him to throw a punch in the hope of distracting her so that he could seize the knife. He described how they had grappled for control of the knife as they stood, face to face, against the sink. He said that in the course of this struggle he had managed to position the sharp edge of the knife "very close to, if not intermittently touching" her neck. He had wanted to "shut her mouth" so the neighbours would not hear. They had lost their balance during the struggle and fallen to the floor. They were drunk, disoriented and in virtual darkness. The first incision to the deceased's neck occurred at the point of impact with the floor. Warm blood had squirted into the appellant's eyes and face. He had reacted clumsily and it was then, he believed, that the second incision was made. 4 Criminal Code (Q), s 304(1). 5 R v Craig [2016] QCA 166 at [13(3)], [19(2)], [20]. Bell Nettle Gordon Edelman Photographs of the scene taken by the police showed the deceased's handbag around her left wrist and a cigarette lighter in her left hand. A second set of handwritten instructions given to the appellant's solicitor, dated 28 September 2012, contained an emphatic assertion that the deceased's handbag had not been around her wrist nor was she holding anything in her left hand. The appellant's signed instructions given to his solicitor shortly before the commencement of the trial were also in evidence. Those instructions were, relevantly, in these terms: "I am not relying on self defence or provocation as defence for tactical or legal reasons. Firstly, I did not raise these defences in my interview to police and secondly it would require me to give further evidence if such defences were to be raised. I have already given my preliminary view that I do not wish to give evidence as I do not want to be cross-examined about my previous criminal history." The appellant's criminal history included convictions in the Northern Territory for offences arising from a "home invasion" that took place on 8 November 1995. Some of these offences involved stabbings. The victim of one offence died as the result of the stab wound. The appellant was sentenced for this offence upon acceptance that the stab wound was inflicted accidentally as he was fleeing from the premises. The incorrect advice Under s 15(2) of the Evidence Act 1977 (Q), an accused who gives evidence is not required to answer any question tending to show that he or she has been convicted of any offence. The prohibition is subject to exceptions, including under s 15(2)(c) in a case in which the accused gives evidence of his or her own good character, or where the nature or conduct of the defence involves imputations on the character of any witness for the prosecution. Questions tending to show that the accused has been convicted of any offence under the exception provided in s 15(2)(c) may only be asked with the permission of the court6. 6 Evidence Act 1977 (Q), s 15(3). Bell Nettle Gordon Edelman The appellant and trial counsel each swore affidavits in the proceedings before the Court of Appeal and each was cross-examined on his affidavit. Trial counsel acknowledged that he had advised the appellant that it was likely if he gave evidence that he would be cross-examined on his criminal history. Trial counsel also acknowledged that he had not advised the appellant that such cross-examination would only be permitted by leave of the court7. It was trial counsel's evidence that from a very early stage in their discussions the appellant had indicated a disinclination to give evidence and that the appellant had acknowledged the significant tactical merit in running a narrow defence that was not inconsistent with his initial account. Counsel's reasons for advising of the likelihood that the appellant would be cross-examined on his convictions were his assessment of the risks (i) that the appellant's evidence might convey the imputation that the police had tampered with the crime scene; (ii) that the appellant might raise his good character in evidence8; (iii) that if the deceased's statements were received in evidence she might be treated as a prosecution witness for the purposes of s 15(2)(c); and (iv) that evidence of the appellant's conviction for a fatal stabbing might be received to rebut the The appellant's evidence The appellant gave a detailed account in his first affidavit of various physical and mental health difficulties that he had suffered in the period leading up to the trial. These had culminated in his hospitalisation following an unsuccessful suicide attempt some days before the trial commenced. The appellant acknowledged that he had not been advised that he could not give evidence but, rather, that he would be in "some difficulty" in the event he chose to testify. The appellant also acknowledged that his physical and mental condition was one of the reasons for his decision not to give evidence. And he acknowledged that a matter at the forefront of his mind in making the decision was the understanding that he would be cross-examined about the significant differences between his evidence and his account in the interview. He 7 Evidence Act 1977 (Q), s 15(3). 8 Evidence Act 1977 (Q), s 15(2)(c). 9 R v Craig [2016] QCA 166 at [34]. Bell Nettle Gordon Edelman maintained that his concern about cross-examination on these inconsistences was not as important as his concern about the disclosure of his criminal history. The Court of Appeal's analysis The Court of Appeal considered that had the appellant given evidence there was a risk that permission would have been given to cross-examine him on his convictions. It was a risk raised by the first and second of counsel's reasons. Counsel's third and fourth reasons were, in the Court of Appeal's view, without legal merit10. The Court of Appeal concluded that counsel had been correct to advert to the risk of cross-examination on the appellant's criminal history but incorrect to advise that this was likely. At the highest, the Court of Appeal found that the degree of likelihood that the appellant's convictions would be disclosed to the jury was no more than a possibility11. Gotterson JA, writing the leading judgment, observed that the appellant's acknowledgment of the advice – that he would be in "some difficulty" in giving evidence that departed from the account in his interview – was consistent with written instructions in which the appellant stated his preference not to be cross-examined "about the incidents on the night"12. The critical passage in his Honour's analysis, which is the focus of the appellant's challenge, is par [44]: "There was then a sound forensic reason for the appellant not to testify. He was correctly advised about that reason [the likely damage resulting from inconsistent accounts of the circumstances of the killing]. His decision not to testify, insofar as it was justified by that advice, was not the consequence of his having been misled by incorrect advice. That he did not give evidence in these circumstances did not result in a miscarriage of justice. The fact that he was given an additional, but inaccurately expressed, reason not to testify did not diminish the role of 10 R v Craig [2016] QCA 166 at [36]. 11 R v Craig [2016] QCA 166 at [38]. 12 R v Craig [2016] QCA 166 at [33]. Bell Nettle Gordon Edelman the former as a rational reason not to testify, or, of itself, give rise to a miscarriage of justice." The appellant's submissions The appellant's complaint is with the application of an objective test drawn from the judgments in TKWJ v The Queen13 to the Court of Appeal's determination that the incorrect advice did not occasion a miscarriage of justice. As the appellant observes, the analysis in TKWJ is concerned with challenges to forensic judgments that are within counsel's remit. The objective test that TKWJ holds is to be applied to the determination of challenges of that kind takes into account the wide discretion conferred on counsel under our adversarial system of criminal justice14. A necessary consequence of that discretion is that the accused will generally be bound by counsel's forensic choices. It is only where the appellate court is persuaded that no rational forensic justification can be discerned for a challenged decision that consideration will turn to whether its making constituted a miscarriage of justice. By contrast, the appellant points out that his challenge is not to a forensic choice made by counsel but to the circumstance that counsel's incorrect advice was material to a forensic choice which was reserved for him to make personally. The appellant's argument is posited on the proposition that the accused's informed choice to give evidence is an essential condition of a fair trial according to law. At its widest, the argument is that any material error in legal advice on the accused's choice to give evidence denies that a choice not to give evidence is an informed choice and for that reason occasions a miscarriage of justice. The appellate court, on this analysis, does not stay to consider the causal relation between the incorrect advice and the conduct of the trial or its outcome. Sankar v State of Trinidad and Tobago The appellant calls in aid the statement of the Judicial Committee of the Privy Council in Sankar v State of Trinidad and Tobago15: 13 (2002) 212 CLR 124; [2002] HCA 46. 14 TKWJ v The Queen (2002) 212 CLR 124 at 128 [8]. 15 [1995] 1 WLR 194 at 201; [1995] 1 All ER 236 at 242-243. Bell Nettle Gordon Edelman "It cannot be said that, if the defendant had not been deprived of the opportunity of properly considering whether to give evidence or make a statement, he would have decided not to do so. At least if he had given evidence, it is almost certain that the judge would have been under an obligation issues of accident, self-defence and possibly provocation to the jury. What would have been the outcome, if this had happened, is pure speculation." leave It may be accepted that the choice to give evidence is ultimately for the accused to make and that in some circumstances counsel's failure to adequately advise the accused with respect to the exercise of the choice not to give evidence will occasion a miscarriage of justice16. Sankar was such a case. Sankar's counsel had not conferred with him before the trial and had not advised him of the options available in the conduct of the defence case. During the evidence of the last prosecution witness, counsel went over to the dock and told Sankar that "he was not sending me in the box because of the way the trial had gone". Sankar had understood that he would give his account of the fatal incident in evidence, an account which their Lordships found would have raised accident, self-defence and possibly provocation. Sankar did not press his wish to give evidence because he was worried that it would look bad for him if the jurors saw him arguing with his counsel. In the result, Sankar did not give evidence or make a dock statement, and in the absence of his account being placed before the jury, he had no answer to the prosecution case. In these circumstances it was held that Sankar's trial had miscarried. Sankar is not authority for the proposition that any inadequacy or error in legal advice relating to the accused's right to give evidence, without more, occasions a miscarriage of justice. Certainly where it is not in issue that the accused was aware of the right to give evidence, the contention that any material error in legal advice bearing on the exercise of the right denies an essential condition of a fair trial must be rejected. At the least, demonstration that justice will require incorrect advice has occasioned a miscarriage of 16 Sankar v State of Trinidad and Tobago [1995] 1 WLR 194; [1995] 1 All ER 236; R v McLoughlin [1985] 1 NZLR 106; Nightingale v The Queen [2010] NZCA 473; R v Szabo [2001] 2 Qd R 214 at 222-223 per Thomas JA; R v ND [2004] 2 Qd R 307 at 319-320 [36] per Holmes J. Bell Nettle Gordon Edelman consideration of the relation between the advice and the decision not to give evidence. The appellant's narrower case The appellant's narrower case seeks to demonstrate the materiality of the incorrect advice to the decision not to give evidence and the capacity of that decision to have affected the outcome of the trial. It will be recalled that the appellant acknowledged that a number of considerations bore on his decision not to testify: his physical and mental health; the disclosure that he had given inconsistent accounts of the circumstances of the deceased's death; and the concern that his criminal history would be disclosed to the jury. He argues that disclosure of his conviction for an offence involving a fatal stabbing would have done irreparable harm to his case and that, in the circumstances, the incorrect advice is to be seen as having foreclosed his choice to testify. Notwithstanding the absence of a finding, the appellant submits that the only reasonable inference is that the Court of Appeal considered that the incorrect advice was, at the very least, a material factor in his decision not to give evidence. The appellant's argument accepts that he would have been pressed hard in cross-examination on the inconsistencies between his evidence and his answers in the interview. Nonetheless, he submits that had he given evidence in line with his handwritten instructions, his evidence would have raised self-defence and laid a more comprehensive foundation for consideration of the partial defence of provocation. The prosecution would have been required to negative each beyond reasonable doubt before a verdict of guilty of murder could be returned. In the circumstances, the appellant submits, it cannot be said that his election to give evidence would have made no difference to the outcome of the trial. The last-mentioned submission may be thought to overestimate the forensic difficulty of disproving self-defence and provocation in the context of this powerful prosecution case and to underestimate the forensic advantages of not testifying. Cross-examination on the inconsistencies between the appellant's proposed evidence and his account in the interview would have destroyed his credit and resolved against him any doubt as to proof of his intent that his answers in the interview otherwise might have raised. In the event, it is unnecessary to further address the contention that the outcome of the trial might have been different had the appellant given evidence. Bell Nettle Gordon Edelman An informed decision? The extent to which, if at all, the Court of Appeal concluded that the incorrect advice was material to the appellant's decision is unclear. On one view the third sentence of par [44] of Gotterson JA's reasons, extracted above, is a finding that the decision was not informed by the incorrect advice. The alternative view, in line with the appellant's submission, is that the analysis in par [44] is wholly objective. The appeal in this Court is to be determined upon acceptance of the latter view. The onus is upon the appellant to establish that "on any ground whatsoever there was a miscarriage of justice"17. The category of miscarriage of justice that his argument seeks to engage is that the trial was not a fair trial18: the exercise of his right to give evidence in his defence was effectively foreclosed by receipt of the incorrect advice. The appellate court's assessment of whether the decision not to give evidence deprived the accused of a fair trial looks to the nature and effect of the incorrect legal advice on the accused's decision. It is not an assessment of whether an objectively rational justification for the decision can be assigned to it. The point may be illustrated by the extreme example posited by Gleeson CJ in Nudd v The Queen of the accused who fails to give evidence because counsel wrongly advises that an accused is not entitled to give evidence19. His Honour considered that it was difficult to imagine that an appellate court would not intervene in such a case. That would be so even if the appellate court considered that the accused's failure to give evidence was forensically justified: a fair trial requires that the accused be aware of the entitlement to give evidence in his or her defence notwithstanding that that choice may be unwise. Putting to one side Gleeson CJ's extreme example, the appellate court's determination of whether incorrect legal advice bearing on the accused's decision not to give evidence has occasioned a miscarriage of justice is not without difficulty. Necessarily it is a determination that will only arise following a trial 17 Criminal Code (Q), s 668E(1). 18 Ratten v The Queen (1974) 131 CLR 510 at 516 per Barwick CJ; [1974] HCA 35. 19 (2006) 80 ALJR 614 at 620-621 [17]; 225 ALR 161 at 167; [2006] HCA 9. Bell Nettle Gordon Edelman at which the accused has been convicted. It would be unrealistic not to recognise that the reliability of an accused's honest evidence on appeal, that he or she would have given evidence had the incorrect legal advice not been given, may be affected by an element of hindsight reasoning20. And, as here, the decision not to give evidence may be the product of a combination of factors, not all of which are tainted by the incorrect legal advice. The conclusion that the trial of an accused was not a fair trial requires the appellate court to be satisfied that it was the accused's wish to give evidence and that the incorrect legal advice effectively deprived the accused of the opportunity to do so. Here the appellant knew that he had the right to give evidence. He had discussed the relative merits of various defences with his counsel and solicitor at conferences before the trial commenced. He understood that his account in the interview raised an arguable "defence" that in his intoxicated state he had not formed the intent which would make his act murder. And he understood that there was significant tactical merit in not giving evidence and in having his defence conducted on the basis of that account. Nonetheless, he contends that his trial miscarried because his fear of the disclosure of his criminal convictions, about which he received the incorrect advice, was more important to the decision not to give evidence than his fear of disclosure of the inconsistencies in his accounts of how the deceased died. The error in counsel's advice was not in advising the appellant of the risk that if he gave evidence the jury might learn of his criminal convictions, but in counsel's estimate of the likelihood that that risk would come home. It is a large proposition that the appellant's decision not to give evidence was not an informed decision because a material factor in making it was his understanding, based on the incorrect advice, that the consequence that he most feared was a likely consequence of testifying and not merely a possible consequence of testifying. In the event, the appellant's case fails by reason of a more fundamental deficiency. The high point of the appellant's evidence in the Court of Appeal was his assertion that "[h]ad I felt physically and mentally well enough to give evidence" and had he not received the incorrect advice, he would have elected to give evidence. Notably, the appellant did not say, and the Court of Appeal did 20 Cf Chappel v Hart (1998) 195 CLR 232 at 246 fn 64 per McHugh J; [1998] HCA Bell Nettle Gordon Edelman not find, that absent the incorrect advice he would have given evidence. The Court of Appeal's conclusion that there was not a miscarriage of justice was correct in circumstances in which the evidence did not establish that the trial would have been conducted differently had the incorrect advice not been given. Order For these reasons the following order should be made: Appeal dismissed.
HIGH COURT OF AUSTRALIA AND THE QUEEN APPELLANT RESPONDENT [2017] HCA 37 13 September 2017 ORDER Appeal allowed in part. Set aside the order of the Court of Criminal Appeal of the Supreme Court of South Australia made on 30 September 2015 in SCCRM-15- 232, and in its place order that the appeal against sentence be allowed and the sentence be set aside. Remit the proceeding to the Court of Criminal Appeal of the Supreme Court of South Australia for the appellant to be resentenced in accordance with the reasons of this Court. Appeal otherwise dismissed. On appeal from the Supreme Court of South Australia Representation M E Shaw QC with B J Doyle for the appellant (instructed by Wallmans Lawyers) C D Bleby SC, Solicitor-General for the State of South Australia with B Lodge for the respondent (instructed by Director of Public Prosecutions Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Offence of "[p]ersistent sexual exploitation of a child" – Criminal Law Consolidation Act 1935 (SA), s 50 – Where offence comprised of two or more acts of sexual exploitation separated by not less than three days  Where jury required to be unanimous (or agreed by statutory majority) as to same two or more acts of sexual exploitation  Where alleged acts of sexual exploitation ranged from kissing in circumstances of indecency to inserting penis into complainant's mouth  Where jury returned general verdict of guilty by statutory majority  Where not known which alleged acts of sexual exploitation jury agreed had been proved by prosecution  Whether conviction uncertain  Whether judge should have requested special verdict  Whether, after general verdict returned, judge should have asked questions of jury to identify acts of sexual exploitation found to be proved  Whether appellant should have been sentenced on view of facts most favourable to appellant in circumstances where factual basis of jury's verdict unknown. Words and phrases – "acts of sexual exploitation", "actus reus", "course of conduct offence", "extended unanimity", "general verdict", "jury directions", "persistent sexual exploitation of a child", "special questions", "special verdicts". Criminal Law Consolidation Act 1935 (SA), s 50. KIEFEL CJ, KEANE AND NETTLE JJ. The principal question for decision in this appeal is whether, where an accused is tried before a judge and jury on a count of "[p]ersistent sexual exploitation of a child" contrary to s 50(1) of the Criminal Law Consolidation Act 1935 (SA) ("the CLCA"), the judge should request that the jury return a special verdict or, if the jury returns a general verdict of guilty of the offence, whether the judge should question the jury to identify the underlying acts of "sexual exploitation" which the jury found to be proved. For the reasons which follow, in such circumstances, a judge should not request the jury to return a special verdict but, if the jury returns a general verdict of guilty, the judge should request that the jury identify the underlying acts of sexual exploitation that were found to be proved unless it is otherwise apparent to the judge which acts of sexual exploitation the jury found to be proved. The facts The appellant was charged with an offence of persistent sexual exploitation of a child under s 50(1) of the CLCA. The period to which the charge related was 1 July 2008 to 19 November 2011. The appellant is a former high school teacher. From 2000, he taught at the middle-school campus of a high school in Adelaide. The complainant was a student in a class taught by the appellant and was also supervised by the appellant in the completion of a major project. Although the complainant moved to the senior-school campus of the high school in the latter part of the period to which the s 50(1) charge relates, she continued to attend at the middle-school campus ostensibly to obtain assistance from the appellant with respect to her Italian studies. The prosecution alleged that conduct of a sexual nature commenced in 2008, when the complainant was in Year 9. The conduct was alleged to have commenced with kissing, first with a "quick peck on the lips" and subsequently a "longer, open-mouthed kiss". The conduct was said to have become more intimate. It was alleged to have progressed to a point where the appellant digitally penetrated the complainant and she masturbated and fellated him. The appellant was initially charged with four separate offences, contrary to ss 49(5) (unlawful sexual intercourse), 56 (aggravated indecent assault) and 58 (procuring an act of gross indecency) of the CLCA. He was convicted by a majority verdict on one count of aggravated indecent assault but his appeal from that conviction was allowed1. At the retrial, the Director of Public Prosecutions filed a fresh information charging the appellant with one offence of persistent sexual exploitation of a child contrary to s 50(1) of the CLCA. The information 1 R v C, M (2014) 246 A Crim R 21. Nettle on which the retrial proceeded particularised the acts comprising the offence as follows: kissing [the complainant] on the lips, on more than one occasion, touching [the complainant's] vagina, on more than one occasion, touching [the complainant's] breasts, on more than one occasion, inserting his finger into [the complainant's] vagina, causing [the complainant] to touch his penis, and inserting his penis into [the complainant's] mouth." Section 50 of the CLCA The sub-section prescribing the offence of persistent sexual exploitation of a child, s 50(1), requires only two acts of sexual exploitation separated by three or more days for the offence to be complete. It provides: "An adult person who, over a period of not less than 3 days, commits more than 1 act of sexual exploitation of a particular child under the prescribed age is guilty of an offence. Maximum penalty: Imprisonment for life." The prescribed age is 18 years in the case of an accused who is in a position of authority in relation to the child; and 17 years in any other case2. A teacher is a person in a position of authority3. Section 50(2) defines an "act of sexual exploitation" for the purposes of s 50(1) as follows: "a person commits an act of sexual exploitation of a child if the person commits an act in relation to the child of a kind that could, if it were able to be properly particularised, be the subject of a charge of a sexual offence." 2 Criminal Law Consolidation Act 1935 (SA), s 50(7). 3 Criminal Law Consolidation Act, s 50(8)(a). Nettle Section 50(7) defines "sexual offence" by reference to other offence provisions contained in the CLCA, including in Pt 3, Div 11 (Rape and other sexual offences). It was the prosecution case that the acts described in Particulars 1, 2, 3 and 5 each amounted to an indecent assault, contrary to s 56 of the CLCA, and the acts described in Particulars 4 and 6 amounted to unlawful sexual intercourse, contrary to s 49 of the CLCA. An information charging an offence under s 50(1) is not required to contain the level of particularity which is demanded by the common law. Section 50(4) sets out the particulars required as follows: "Despite any other Act or rule of law, the following provisions apply in relation to the charging of a person on an information for an offence against this section: subject to this subsection, the information must allege with sufficient particularity  the period during which the acts of sexual exploitation allegedly occurred; and the alleged conduct comprising exploitation; the acts of sexual the information must allege a course of conduct consisting of acts of sexual exploitation but need not  allege particulars of each act with the degree of particularity that would be required if the act were charged as an offence under a different section of this Act; or identify particular acts of sexual exploitation or the occasions on which, places at which or order in which acts of sexual exploitation occurred; the person may, on the same information, be charged with other offences, provided that any sexual offence allegedly committed by the person  in relation to the child who is allegedly the subject of the offence against this section; and during the period during which the person is alleged to have committed the offence against this section, Nettle must be charged in the alternative." Section 50(5) provides that a person who has been tried and convicted or acquitted of an offence against s 50(1) may not be convicted of a sexual offence against the same child alleged to have been committed during the period during which the person was alleged to have committed the offence of persistent sexual exploitation of the child. The directions and verdict In the course of her summing up to the jury, the trial judge (Judge Davison) twice directed the members of the jury that it would be sufficient to prove the offence under s 50(1) if they were satisfied to the requisite standard that the appellant had kissed the complainant on more than one occasion within the relevant period in circumstances of indecency. Those directions occurred in the context of what her Honour described as the "third element" of the offence, which she explained required that the prosecution prove beyond reasonable doubt that two or more of the acts particularised in the information as acts of sexual exploitation took place over a period of not less than three days. The judge commenced her discussion of the evidence by reference to the alleged acts of kissing. She then said to the jury: "If you were satisfied that the [appellant] had kissed [the complainant] on more than one occasion separated by three days, and that these kisses amounted to indecent assaults as I have described to you, that is, assaults occurring in circumstances of indecency, having some sexual connotation, then that alone would be sufficient to prove this element of the offence." The judge thereafter pointed out that there was other conduct alleged, and her Honour proceeded to discuss the evidence relating to the other particularised acts. Towards the end of her discussion of the third element, her Honour explained that: "In order to be satisfied of this element, you must be satisfied that two or more acts contained within the particulars 1-6 have occurred and be satisfied of that beyond reasonable doubt. It may be that you are satisfied that there was an act of fellatio and an act of kissing on one or more occasions. If these two events were separated by three days and if you are satisfied that the act of kissing amounted to an act of the indecent assault and the act of fellatio the offence of unlawful sexual intercourse, then this element would be proven. Alternatively, you may be satisfied that he kissed her in a way that amounted to an indecent assault on two or more occasions separated by Nettle three days and that would suffice for proof of this element. What I am trying to illustrate is that it could be that you are all satisfied that he kissed her on more than one occasion in circumstances of indecency or that he kissed her on one occasion and caused her to touch his penis, or kissed her on one occasion and inserted his penis into her mouth. Any combination will suffice as long as you are all agreed on which acts constitute this element." In the second day of deliberations, the jury asked a question of the judge. The question was not recorded, but there is no dispute that the jury enquired whether they would be asked for a verdict on indecent assault and a verdict on unlawful sexual intercourse. When the judge then raised the issue with counsel, counsel for the appellant stated that, if the jury returned a verdict of guilty, she would ask for a special verdict. The judge responded that no special verdicts would be taken. Her Honour stated that the South Australian Court of Criminal Appeal in the case of R v N, SH4 had said that special verdicts should not be taken in relation to a charge under s 50(1) of the CLCA. The jury were thereafter directed to the effect that "there is one charge before this court, that is persistent sexual exploitation of a child. That's what you have to decide in this matter." The jury returned a verdict of guilty. Sentencing The judge rejected a submission for the appellant that he should be sentenced on the basis that the offence was made out only by the acts of kissing amounting to indecent assaults. Her Honour concluded that the appellant must be sentenced on the basis of those facts of which she was satisfied beyond reasonable doubt and which were consistent with the verdict of the jury. Her Honour stated that "[t]he very nature of the offence of persistent sexual exploitation of a child means that there has been a course of conduct of sexual abuse that has occurred over a period of time involving a range of conduct". The judge stated that she accepted the evidence of the complainant beyond reasonable doubt, rejected the appellant's denials of the alleged conduct, and considered that the appellant should be sentenced on the basis that he had committed each of the acts particularised in the information. Her Honour observed that the appellant's offending involved a range of behaviours including offences of unlawful sexual intercourse involving fellatio and digital penetration. On that basis, her Honour identified the starting point5 as a sentence of 10 years' [2010] SASCFC 74. 5 See R v D (1997) 69 SASR 413 at 424 per Doyle CJ (Bleby J agreeing at 431). Nettle imprisonment and said that she saw no reason to reduce that term. A non-parole period of six years was set. Proceedings before the Court of Criminal Appeal The Court of Criminal Appeal6 (Vanstone J, Kelly J and David AJ agreeing) dismissed the appellant's appeal against conviction and appeal against sentence. The Court rejected the appellant's contention that the trial judge had been in error in not taking a special verdict or asking questions of the jury after the general verdict was returned. The Court applied7 what it considered had been said by the Court of Criminal Appeal of the Supreme Court of New South Wales in R v Isaacs8 and by this Court in Cheung v The Queen9 as to the considerations that militate against asking "special questions" of a jury to ascertain the factual basis of a verdict. Those considerations included10: "the fact that foreshadowing a later request to be provided with the basis of the verdict might distract the jury from its task of seeking unanimity on the general verdict and might provoke unnecessary confusion and disagreement; the answers might be of themselves uncertain; in a case where a particular verdict, such as manslaughter, might be reached in different ways, different jurors might have reached the result via those different avenues; the jury might be invited to make a decision upon which there had been no thorough address by counsel; and the judge might be embarrassed if he or she did not agree with the jury's answer." The Court of Criminal Appeal noted that the plurality in Cheung had stated11 that there would be very few cases in which it would be appropriate or useful to ask a jury about the process of reasoning by which a verdict was reached. Their Honours noted, too, that the Court of Criminal Appeal was critical of the trial judge in R v N, SH12 for taking a special verdict after a trial on 6 R v Chiro (2015) 123 SASR 583. 7 Chiro (2015) 123 SASR 583 at 588 [16]. (1997) 41 NSWLR 374. (2001) 209 CLR 1; [2001] HCA 67. 10 Chiro (2015) 123 SASR 583 at 588 [16]. 11 (2001) 209 CLR 1 at 14 [18] per Gleeson CJ, Gummow and Hayne JJ. 12 [2010] SASCFC 74 at [10]-[12]. Nettle a charge against s 50(1) of the CLCA. The Court concluded13 that there was no need for a special verdict in this case. In their Honours' view, the task of sentencing was peculiarly that of the judge: it was for the judge to sentence the appellant on the basis of such facts as she found to be proved "so long as they were not inconsistent with the verdict of the jury". In their Honours' opinion, the situation facing a sentencing judge in relation to the offence of persistent sexual exploitation of a child under s 50(1) is little, if at all, different from the situation which faces a sentencing judge upon the return of a verdict of guilty of manslaughter in circumstances where multiple possible bases for the verdict were left to the jury. The Court of Criminal Appeal also rejected14 the appellant's appeal against sentence on the ground that the sentence imposed was manifestly excessive. In reaching that conclusion, the Court had regard to the judge's findings that each of the acts particularised was proved beyond reasonable doubt and, on that basis, it was held that the sentence reflected the range of conduct committed by the appellant, as a person in a position of trust15. Actus reus of the offence and the extended unanimity requirement As the South Australian Court of Criminal Appeal held in R v Little16, applying this Court's decision in KBT v The Queen17, because s 50(1) defines the offence of persistent sexual exploitation of a child to be constituted of underlying acts of sexual exploitation, in order to convict an accused of an offence against s 50(1) a jury must reach unanimous agreement (or, after four hours, must reach agreement by a requisite statutory majority18) that the Crown has proved beyond reasonable doubt that the accused committed the same two or more underlying acts of sexual exploitation separated by not less than three days. That 13 Chiro (2015) 123 SASR 583 at 588-589 [19]. 14 Chiro (2015) 123 SASR 583 at 591 [39]. 15 Chiro (2015) 123 SASR 583 at 591 [35]-[38]. 16 (2015) 123 SASR 414 at 417 [11], 420 [19]. See also R v M, BJ (2011) 110 SASR 1 at 28-30 [70], [72] per Vanstone J (Sulan J and White J agreeing at 6 [1], 41 17 (1997) 191 CLR 417 at 422 per Brennan CJ, Toohey, Gaudron and Gummow JJ, 431, 433 per Kirby J; [1997] HCA 54. 18 See Juries Act 1927 (SA), s 57. Nettle requirement was appropriately described by the Court in Little as a requirement for extended unanimity19. In KBT, this Court was concerned with an offence against s 229B(1) of the Criminal Code (Q) of maintaining "an unlawful relationship of a sexual nature with a child under the age of 16 years". Section 229B(1A) provided that a person was not to be convicted of an offence against s 229B(1) unless it was shown that the offender had, during the period in which the relationship was said to have been maintained, "done an act defined to constitute an offence of a sexual nature in relation to the child ... on 3 or more occasions" and evidence of the doing of any such act was "admissible and probative of the maintenance of the relationship notwithstanding that the evidence [did] not disclose the dates or the exact circumstances of those occasions". Hence, Brennan CJ, Toohey, Gaudron "The offence created by s 229B(1) is described in that sub-section in terms of a course of conduct and, to that extent, may be compared with offences like trafficking in drugs or keeping a disorderly house. In the case of each of those latter offences, the actus reus is the course of conduct which the offence describes. However, an examination of sub-s (1A) makes it plain that that is not the case with the offence created by s 229B(1). Rather, it is clear from the terms of sub-s (1A) that the actus reus of that offence is the doing, as an adult, of an act which constitutes an offence of a sexual nature in relation to the child concerned on three or more occasions. Once it is appreciated that the actus reus of the offence is as specified in sub-s (1A) rather than maintaining an unlawful sexual relationship, it follows, as was held by the Court of Appeal, that a person cannot be convicted under s 229B(1) unless the jury is agreed as to the commission of the same three or more illegal acts." Their Honours added that21: "it is convenient to note one other matter that arises out of the identification of the actus reus of the offence created by s 229B(1). As already indicated, sub-s (1A) of s 229B requires the doing of 'an act [which] constitute[s] an offence of a sexual nature … on 3 or more occasions', albeit that it does not require proof of 'the dates or the exact 19 (2015) 123 SASR 414 at 417 [12]. 20 KBT (1997) 191 CLR 417 at 422. 21 KBT (1997) 191 CLR 417 at 422-423. Nettle circumstances of [the] occasions' on which the acts were committed. The sub-section's dispensation with respect to proof applies only to the dates and circumstances relating to the occasions on which the acts were committed. It does not detract from the need to prove the actual commission of acts which constitute offences of a sexual nature. ... [E]vidence of a general course of sexual misconduct or of a general pattern of sexual misbehaviour is not necessarily evidence of the doing of 'an act defined to constitute an offence of a sexual nature … on 3 or more occasions' for the purposes of s 229B(1A) ... [I]f the prosecution evidence in support of a charge under s 229B(1) is simply evidence of a general course of sexual misconduct or of a general pattern of sexual misbehaviour, it is difficult to see that a jury could ever be satisfied as to the commission of the same three sexual acts as required by s 229B(1A)." In those respects, the offence of maintaining an unlawful sexual relationship with a child with which this Court was concerned in KBT is to be contrasted with the kind of offence prescribed by s 4(1) of the Protection from Harassment Act 1997 (UK), which provides as follows: "A person whose course of conduct causes another to fear, on at least two occasions, that violence will be used against him is guilty of an offence if he knows or ought to know that his course of conduct will cause the other so to fear on each of those occasions." The latter is truly a "course of conduct" offence22 akin to, for instance, an offence of unlawful stalking contrary to s 21A of the Crimes Act 1958 (Vic)23. With offences of that kind, unparticularised evidence of an accused's conduct may be relevant and admissible as establishing a connection between various acts sufficient to amount to a "course of conduct" and there is no need to show that the individual acts which comprise the course of conduct are in themselves unlawful or constitute underlying offences24. By contrast, the offence at issue in 22 See R v Curtis [2010] 1 WLR 2770 at 2775 [20]; [2010] 3 All ER 849 at 854; R v Haque [2012] 1 Cr App R 5 at 57 [33]. 23 See R v Hoang (2007) 16 VR 369 at 389-390 [107]-[113] per Neave JA (Maxwell P and Eames JA agreeing at 370 [1], [3]); Worsnop v The Queen (2010) 28 VR 187 at 200 [70] per Ashley JA (Buchanan JA and Beach AJA agreeing at 24 See, for example, Curtis [2010] 1 WLR 2770 at 2772 [4], 2774 [14]-[15], 2776 [23], 2778 [31]-[32]; [2010] 3 All ER 849 at 851, 853, 855, 856-857. Nettle KBT was not a course of conduct offence properly so called, but one comprised of discrete underlying offences, more similar to the offence of unlawful stalking contrary to Ch 33A of the Criminal Code (Q)25, and, therefore, was an offence that required unanimity by the jury as to each of the underlying offences found to have been proved. In Little, the Court of Criminal Appeal reasoned that the same approach that this Court applied to s 229B(1) in KBT applies to s 50(1) of the CLCA, and thus that where an accused is tried on a charge under s 50(1) it is an error for the trial judge to fail to direct the jury that, in order to find the accused guilty of the offence charged, they must be agreed as to the commission of the same two or more acts of sexual exploitation separated by not less than three days26. In this case, that was not disputed. Here, the trial judge directed the jury with respect to extended unanimity, and so it may be assumed that the jury reached the requisite agreement as to the commission of the same two or more acts of sexual exploitation separated by not less than three days. But, because the judge declined to ask the jury which of the acts of sexual exploitation they had so found to be proved, there was and is no way of knowing which they were. As has been recorded, her Honour took the view, consistently with what she perceived to be this Court's reasoning in Cheung, that it was her task for the purposes of sentencing to find the two or more offences that had been proved beyond reasonable doubt; and, on the basis of a very brief recitation of acceptance of the complainant's evidence as establishing guilt beyond reasonable doubt, the judge stated that she found that the appellant had committed all of the acts of sexual exploitation alleged. The appellant was sentenced accordingly. The appellant's contentions The appellant did not suggest that the plurality in Cheung was wrong to observe27 that there will be "very few cases" in which it is useful to ask questions of a jury as to the process of reasoning by which a verdict was reached. But the appellant contended, in view of the peculiar nature of the offence prescribed by s 50(1)  an offence comprised of not less than two acts of sexual exploitation separated by not less than three days  and because of the requirement of 25 See R v Conde [2016] 1 Qd R 562 at 568 [2]-[3] per McMurdo P, 578 [65]-[67] per Peter Lyons J (McMurdo P and Morrison JA agreeing at 568 [1], [5]). 26 (2015) 123 SASR 414 at 420 [19]-[20]. 27 (2001) 209 CLR 1 at 14 [18] per Gleeson CJ, Gummow and Hayne JJ. Nettle extended unanimity in respect of the underlying acts of sexual exploitation, that this case was one of the few cases in which it was necessary that the judge exercise the discretion to ask questions of the jury. More particularly, given the jury were directed that they need find no more than that the appellant committed two of the alleged acts of sexual exploitation, it was not the least improbable that the jury considered and found no more than that the appellant committed the two least serious acts of sexual exploitation alleged. It was, therefore, said to be necessary for the judge to take a special verdict, or at least to ask questions of the jury, to ascertain which of the underlying acts of sexual exploitation the jury found proved. The judge's refusal to do so had the result that it was impossible to say which of the alleged acts of sexual exploitation the jury had found to be proved and it followed, in the appellant's contention, that the verdict was uncertain and should be set aside. Alternatively, it was submitted, inasmuch as justice required that the appellant not be punished on the basis of having committed any more of the alleged acts of sexual exploitation than the jury found to be proved28, it was incumbent on the judge to ascertain which they were. But, as a result of the judge's refusal to take a special verdict or to ask questions of the jury, it was and is not known which of those offences the jury found to be proved. Consequently, there was a real chance that the appellant was sentenced on the basis of having committed a greater number of and more serious acts of sexual exploitation than the jury were satisfied were proved beyond reasonable doubt. It followed, it was contended, that the sentence should be quashed and the appellant should be resentenced on the basis of having committed no more than the two least serious alleged acts of sexual exploitation, which, in this case, were two offences of indecent assault constituted by kissing the complainant in circumstances of indecency. The Crown's contentions The Crown contended to the contrary that there was nothing uncertain about the jury's verdict and no basis for the taking of a special verdict. In the Crown's submission, it was clear from the verdict of guilty that the jury had found that not less than two of the alleged acts of sexual exploitation, separated by not less than three days, had been proved beyond reasonable doubt, and, on that basis, that the elements of the offence prescribed by s 50(1) had been proved beyond reasonable doubt. Nor was there any need or justification for the 28 See R v De Simoni (1981) 147 CLR 383 at 389, 392 per Gibbs CJ (Mason J and Murphy J agreeing at 395), 395-396 per Wilson J, 406 per Brennan J; [1981] HCA 31. Nettle purposes of sentencing for the judge to ask the jury to identify which of the alleged acts of sexual exploitation they found to be proved. Rather, it was contended, just as in any other case where it cannot be determined from a verdict whether a jury has found one way or the other as to facts that may be pertinent to sentencing, it was correct for the judge to find those facts herself, in accordance with Cheung, on a basis not inconsistent with the verdict. Special verdicts In Cunningham v Ryan29, Isaacs J stated that "in strict law  apart from any statutory provision  a jury is entitled to choose in every case, civil or criminal, whether it will give a general or a special verdict, so long as it is intelligible". As was later noticed by O'Bryan J, however, in Russell v Railways Commissioners (Vic)30, it may be that Isaacs J was using the expression "special verdict" as equivalent to a jury's answers to questions asked by the judge. Strictly speaking, mere answers to questions are not a verdict at all. Inasmuch as the trial judge and the Court of Criminal Appeal31 in this case spoke in terms of a special verdict, it assists to bear that distinction in mind. In a civil case, it is the jury's privilege to return a special verdict if in doubt as to a question of law, which is then left to the court to determine. The privilege was first conferred on juries in 1285 to alleviate the possibility of attaint for the falsity of a general verdict32. The same privilege was also accorded to criminal juries33. When formally drawn up, a special verdict should state the 29 (1919) 27 CLR 294 at 297; [1919] HCA 75. 30 [1948] VLR 118 at 131. See also at 119-121 per Gavan Duffy J. See generally R v Brown and Brian [1949] VLR 177 at 183 per Barry J; Otis Elevators Pty Ltd v Zitis (1986) 5 NSWLR 171 at 181 per Kirby P, 197-199 per McHugh JA. 31 Chiro (2015) 123 SASR 583 at 584 [1], 585 [6], 587-589 [15], [17]-[19]. 32 Statute 13 Edw I c 30. See Kennedy, A Treatise on the Law and Practice of Juries, (1826) at 32-33; Tidd, The Practice of the Courts of King's Bench, and Common Pleas, in Personal Actions; and Ejectment, 9th ed (1828), vol 2 at 896-898; Morgan, "A Brief History of Special Verdicts and Special Interrogatories", (1923) 32 Yale Law Journal 575 at 588-589. 33 See Chitty, A Practical Treatise on the Criminal Law; Comprising the Practice, Pleadings, and Evidence which Occur in the Course of Criminal Prosecutions, (1816), vol 1 at 642. See also R v Shipley (1784) 4 Dougl 73 at 119-121 [99 ER 774 at 798-799]; Hale, The History of the Pleas of the Crown, (1800), vol 2 at 301-302; Foster, A Report of Some Proceedings on the Commission for the Trial of (Footnote continues on next page) Nettle facts as found by the jury, and that the jury is in ignorance of how upon those facts the issue ought to be resolved and therefore prays the advice of the court. Isaacs J in Cunningham considered34 that it did not follow from a jury's entitlement to give a special verdict that the jury should be informed of that option. Not infrequently, in civil cases, the parties may and do agree that the jury be directed to answer specific questions35. But the jury retains the right to bring in a general verdict. Thus, as Dixon J noted in McDonnell & East Ltd v McGregor36, even where the parties are agreed as to specific questions, the proper course is to obtain a general verdict by direction in accordance with the jury's answers to the questions unless the parties are agreed that there is no objection to forgoing that formality. In Solomon and Triumph37, the Criminal Division of the Court of Appeal for England and Wales held that it is no longer possible for a jury in a criminal case to bring in a special verdict strictly so called: the only verdicts open to a jury in a criminal trial are general verdicts of guilty or not guilty of the offence charged. But it is to be observed that s 354(3) of the CLCA provides that: "Where on the conviction of the appellant the jury has found a special verdict and the Full Court considers that a wrong conclusion has been arrived at by the court before which the appellant has been convicted on the effect of that verdict, the Full Court may, instead of allowing the the Rebels in the Year 1746, in the County of Surry; and of other Crown Cases: to which are added Discourses Upon a Few Branches of the Crown Law, 3rd ed (1809) at 255-256, 279; Morgan, "A Brief History of Special Verdicts and Special Interrogatories", (1923) 32 Yale Law Journal 575 at 581, 588-590. 34 (1919) 27 CLR 294 at 297-298. 35 See generally, for example, Ryan v Ross (1916) 22 CLR 1; [1916] HCA 43; Morosi v Mirror Newspapers Ltd [1977] 2 NSWLR 749; Mourani v Jeldi Manufacturing Pty Ltd (1983) 57 ALJR 825; 50 ALR 519; Bromley v Tonkin (1987) 11 NSWLR 211; Skalkos v Assaf (2002) Aust Torts Reports ¶81-644; Law v Pinkerton [2002] VSCA 20; Nationwide News Pty Ltd v Aitken [2004] NSWCA 311; David v Abdishou [2012] NSWCA 109. 36 (1936) 56 CLR 50 at 55-56 (McTiernan J agreeing at 63); [1936] HCA 28. See also Jackson v The Queen (1976) 134 CLR 42 at 45 per Barwick CJ (Mason J agreeing at 45), 47-49 per Jacobs J; [1976] HCA 16. 37 (1984) 6 Cr App R (S) 120 at 126. See also Isaacs (1997) 41 NSWLR 374 at Nettle appeal, order such conclusion to be recorded as appears to the Court to be in law required by the verdict and pass such sentence in substitution for the sentence passed at the trial as may be warranted in law." That provision contemplates that it is possible for a jury in a criminal case in South Australia to bring in a special verdict38. If so, it remains that it is for the jury to determine whether and when to exercise the privilege to do so. It is not for a trial judge to require a jury to bring in a special verdict. Separate questions By contrast, where a jury has returned a general verdict of guilty of an offence of persistent sexual exploitation of a child, there is nothing in principle, or necessarily in practice, to prevent the trial judge asking the jury specific questions to ascertain the basis for the verdict. As Stephen J observed in Veen v The Queen39, in cases where an accused had been tried for murder and the jury returned a general verdict of guilty of manslaughter, it was the practice in England from at least 1887 for trial judges to ask specific questions of juries in order to determine the reason for their verdicts. The same applied in Queensland40. And although a trial judge's power so to question the jury is undoubtedly discretionary, Stephen J considered41 that ordinarily in such cases the discretion should be exercised in favour of asking questions. In Isaacs, the New South Wales Court of Criminal Appeal stated42 to the contrary that, although the power to question a jury as to the basis on which it returned a verdict of manslaughter had long been acknowledged, there was "disagreement" as to the wisdom of the practice. To characterise the then present 38 See R v Spanos (2007) 99 SASR 487 at 488-489 [2] per Debelle J, 496-497 [33] per Layton J (Nyland J agreeing at 492 [15]); R v Abdulla (2010) 200 A Crim R 365 at 373-374 [22] per Bleby J (Anderson J agreeing at 412 [154]), 405 [130] per 39 (1979) 143 CLR 458 at 466; [1979] HCA 7. See, for example, R v Doherty (1887) 16 Cox CC 306 at 309. See also Morgan, "A Brief History of Special Verdicts and Special Interrogatories", (1923) 32 Yale Law Journal 575 at 591-592. 40 See, for example, R v Rolph [1962] Qd R 262 at 290 per Hanger J. See also R v Schubring; Ex parte Attorney-General [2005] 1 Qd R 515. 41 Veen (1979) 143 CLR 458 at 466-467. 42 (1997) 41 NSWLR 374 at 379. Nettle state of authority as one of "disagreement" was, however, something of an exaggeration. In Petroff43, a case that is notable as much for its early recognition of the propriety of providing juries with written directions as for its recognition of the rectitude of a sentencing judge asking a jury questions to ascertain the basis on which it found an accused to be guilty of manslaughter, Nagle CJ at CL, with whom Street CJ agreed, held that it was both permissible and appropriate for a trial judge to make such enquiries of a jury. Nagle CJ at CL stated44 the position clearly as follows: "[I]t is submitted that as the question of the proper sentence to impose and the facts on which this should be based are matters for the trial judge it is wrong to seek any guidance from a jury. I cannot agree with this submission as the practice both here and in England for some years has been that juries have been asked to give the reasons for the verdict at which they arrive. But it is said that it is advisable if reasons are sought that they should be informed that they need not comply with the request. It is only necessary to refer to the judgment of Stephen J in Veen and the cases therein cited. Other illustrations of the practice are to be found in Storey [1931] NZLR 417, at p 439; and Curry [1969] NZLR 193, at p 208." Roden J dissented for reasons which his Honour stated thus45: "This requirement of the jury that they answer the manslaughter questions separately, and the terms in which the requirement was made, seem to be open to a number of objections: The requirement called for a unanimity as to grounds, which the law does not require; and could, as suggested above, have led to an inappropriate verdict, or an inappropriate failure to return a verdict. It added needlessly to what was already a difficult and complex task for the jury. It is contrary to the principle that the jury's verdict should be taken, without reason or explanation being sought. 43 (1980) 2 A Crim R 101. 44 Petroff (1980) 2 A Crim R 101 at 122 (citation omitted). 45 Petroff (1980) 2 A Crim R 101 at 135. Nettle In the terms in which the requirement was made, it improperly, in my view, suggested to the jury before verdict that it was their function, in certain circumstances, to give guidance as to sentence. In any event, it is contrary to the principle that for sentencing purposes it is for the trial judge to make his own findings of fact, consistent with the jury's verdict." His Honour added that: "There is no other field of criminal law within which judges adopt the practice of seeking the assistance of jurors in this way when it comes to establishing the appropriate factual basis for sentencing. I do not believe that manslaughter verdicts should be made an exception to this general rule. Neither Stephen J's remarks [in Veen], nor the authorities to which he referred, require this." Notwithstanding Roden J's dissent in Petroff, in Low46, Lee CJ at CL, with whom McInerney J and Sharpe J agreed, reaffirmed the appropriateness of a trial judge asking questions of a jury as to the basis on which it found an accused not guilty of murder but guilty of manslaughter. After referring to the remarks of Stephen J in Veen, Lee CJ at CL continued: "In the light of the statement which I have just read, it seems to me that the judges of this Court should adopt the practice in all cases where provocation and diminished responsibility are raised  and also, I would say in cases where manslaughter by unlawful and dangerous act and manslaughter by provocation, or manslaughter by diminished responsibility are raised  of telling juries that they will be asked upon what basis the verdict of manslaughter was found. Asking that question equips the judge with the jury's finding in cases where provocation and diminished responsibility are raised as defences, for each has the very significant legal effect of reducing a crime of murder to a crime of manslaughter." Thus stood the state of authority in New South Wales until Isaacs was decided. In that case, however, the New South Wales Court of Criminal Appeal, comprised of Gleeson CJ, Mason P, Hunt CJ at CL, Simpson and Hidden JJ, stated47, contrary to what had been held in Petroff and Low, that the following 46 (1991) 57 A Crim R 8 at 15-16 (McInerney J and Sharpe J agreeing at 19). 47 Isaacs (1997) 41 NSWLR 374 at 379-380. Nettle considerations should lead trial judges to refrain from questioning a jury as to the basis of a verdict of manslaughter save in exceptional circumstances: "First, to inform the jury, in the course of a summing-up, that they will later be invited to answer a question, or questions, as to the basis of the verdict, may distract them from their task of seeking unanimity on a general verdict, and provoke unnecessary confusion and disagreement as to the basis of the verdict. Secondly, the jury's response to any such question may be unclear. A response that indicated two grounds of decision might, depending upon the circumstances, indicate that the jury were unanimous on both grounds, or that some jurors adopted one ground, and the remainder adopted another. The response may create more uncertainty than previously existed. Thirdly, there may be various possible views of the evidence in a case; different jurors may adopt different views and yet, consistently with their directions, reach a common verdict. To invite them to refine their verdict may be productive of mischief. Fourthly, there is a substantial risk that the jury will be invited to make a decision upon which they have not been properly addressed by counsel. The present case provides a good example. Trial counsel never addressed the jury on provocation. Rarely would defence counsel's address to a jury be expressed in terms appropriate to a plea in mitigation. Fifthly, where there are two or more accused the jury might choose to answer the question with respect to one or more and not with respect to another or others. This would be invidious. Sixthly, the judge may be embarrassed if he or she does not agree with the jury's answer to the question. Seventhly, where two or more partial defences are advanced, if the jury were to come to a conclusion favourable to an accused on the first defence they considered, they might not consider the other or others; if that occurred, an answer to the question might convey a false impression of having considered and rejected the other or others." Evidently, those observations were largely based48 on Roden J's dissenting judgment in Petroff: in particular, his Honour's expressed "objections" to the 48 See Isaacs (1997) 41 NSWLR 374 at 379. Nettle practice of asking a jury to identify the basis on which it found an accused not guilty of murder but guilty of manslaughter49. But, whatever the force of those objections in relation to such a verdict, it is necessary to observe that they do not apply in the same way to a jury that returns a verdict of guilty of an offence of persistent sexual exploitation of a child contrary to s 50(1) of the CLCA. Inasmuch as the actus reus of the offence is comprised of discrete underlying acts of sexual exploitation that are defined by reference to sexual offences found in the CLCA, and inasmuch as the requirement of extended jury unanimity applies to each of those underlying acts of sexual exploitation, most of Roden J's objections adopted by the New South Wales Court of Criminal Appeal in Isaacs are in this case irrelevant. In particular, the first objection  that the questions asked in cases like Petroff called for a degree of unanimity in the jury's reasoning process which the law did not require, and thus could have led to an inappropriate verdict, or an inappropriate failure to return a verdict  does not apply to an offence of persistent sexual exploitation of a child contrary to s 50(1) because the requirement for extended unanimity, which derives from this Court's decision in KBT, necessitates that the jury be unanimous as to each of the underlying acts of sexual exploitation which they find to be proved. No prospect of distraction or inappropriate verdicts arises from questioning a jury so as to identify those acts. For that reason, the submission put on behalf of the Crown that the extended unanimity requirement is of no import in relation to how facts are to be found for the purposes of sentencing cannot be accepted. The second objection  that it would add "needlessly" to the task of the jury  is similarly inapplicable. Given that, in the case of an offence of persistent sexual exploitation of a child under s 50(1), each of the underlying acts of sexual exploitation is part of the actus reus of the offence, and that it is for the jury alone to find the actus reus of an offence alleged50, it must be for the jury, and the jury alone, to determine which of the alleged acts of sexual exploitation they find to be proved. It does not add to the jury's burden to require them to state which of the alleged acts of sexual exploitation they find to be proved. The third objection  that to ask such questions is "contrary to the principle that the jury's verdict should be taken, without reason or explanation being sought"  takes the matter no further. In effect, it simply reiterates the 49 (1980) 2 A Crim R 101 at 135. 50 See Cheung (2001) 209 CLR 1 at 9-10 [5]-[6] per Gleeson CJ, Gummow and Hayne JJ, 28-29 [76] per Gaudron J. Nettle dissenting view of Roden J in Petroff, which was adopted by the New South Wales Court of Criminal Appeal in Isaacs, that it is inappropriate for a trial judge to ask the jury the basis on which they returned a verdict of not guilty of murder but guilty of manslaughter. Contrary to that view of the matter, as has been seen, there was a substantial history51 of trial judges in England, and, until Isaacs was decided, also in this country, asking juries in such circumstances to identify the basis on which they had found the accused to be guilty of manslaughter. It was that practice of which Stephen J expressly approved in Veen52. Further, although the practice was generally confined to ascertaining the basis of a verdict in cases of manslaughter, there were instances of it being applied in cases of other offences too53. And most importantly for present purposes, whether or not the practice somehow implied that it was necessary to achieve a degree of unanimity in relation to manslaughter which the law did not require, that is not so in relation to an offence of persistent sexual exploitation of a child contrary to s 50(1): the law does require extended unanimity in relation to each of the elements which constitute the offence, and thus requires extended unanimity in relation to each of the underlying acts of sexual exploitation found to be proved. That is also the answer to the fourth objection  that to ask a jury to identify the basis on which an accused was found to be guilty of manslaughter "improperly" suggests that it is the jury's function, in certain circumstances, to give guidance as to the way in which the accused should be sentenced. For, a trial judge having directed the jury that they must be unanimous as to each of the underlying acts of sexual exploitation which they find to be proved, as a jury must be directed54, the only significance which the jury would likely attribute to being told that they would be asked to identify such of the alleged acts as they find to be proved is that, because they are required to be unanimous as to the underlying acts of sexual exploitation, they are required to state which they are. The same applies to the fifth objection  that it would be contrary to the principle that, for sentencing purposes, it is for the trial judge to make his or her 51 See, for example, R v Matheson [1958] 1 WLR 474; [1958] 2 All ER 87; R v Lipman [1970] 1 QB 152; R v Picker [1970] 2 QB 161. See and compare Cawthorne [1996] 2 Cr App R (S) 445. 52 (1979) 143 CLR 458 at 465-467. 53 See, for example, R v Warner [1967] 1 WLR 1209 at 1213-1214 per Diplock LJ; [1967] 3 All ER 93 at 96. See generally Archbold: Criminal Pleading, Evidence and Practice, (2015) at 614 [5-87]. 54 Little (2015) 123 SASR 414 at 417 [11], 420 [19]-[20]. Nettle own findings of fact consistent with the jury's verdict. As the plurality observed in KBT55, an accused cannot be convicted of an offence of this kind unless the jury are agreed as to the commission of at least the requisite number of underlying acts. Each of the underlying acts of sexual exploitation comprises an element of the actus reus of the offence prescribed by s 50(1), and it is for the jury alone, not the sentencing judge, to find the acts which constitute the actus reus56. It is therefore no answer to say, as the Crown contended in this case, that, in the absence of questions being asked of the jury, a sentencing judge's consideration of the acts of sexual exploitation that might have comprised the actus reus of the offence as found will not be inconsistent with the jury's verdict because it is not known which of the alleged acts of sexual exploitation formed the basis of the verdict. To repeat, it is for the jury alone, not the judge, to find the acts which constitute the actus reus. Judges dealing with charges under s 50(1) should bear that in mind when exercising their discretion as to whether to ask questions of the jury designed to identify which of the underlying acts of sexual exploitation they have found to be proved. It is true, as the Crown contended, that an offence under s 50(1) is but one single offence, albeit constituted of two or more underlying acts of sexual exploitation separated by not less than the requisite number of days, and it is also true that, despite the allegation of a multiplicity of alleged acts of sexual exploitation, the jury need be satisfied of no more than that the accused committed two of those acts separated by a period of three days. If the accused is convicted, however, the sentence to be imposed is to be determined by reference to each sexual offence which the alleged acts of sexual exploitation would constitute if charged separately, as if the accused had been convicted of each of those offences57. For that reason, the principle laid down in R v De Simoni is 55 (1997) 191 CLR 417 at 422-423 per Brennan CJ, Toohey, Gaudron and 56 See Kingswell v The Queen (1985) 159 CLR 264 at 274-276, 280-281 per Gibbs CJ, Wilson and Dawson JJ, 282-283 per Mason J, 287-289 per Brennan J, 321-322 per Deane J; [1985] HCA 72. See also R v Courtie [1984] AC 463 at 466-468, 472-473 per Lord Diplock (Lord Fraser of Tullybelton, Lord Scarman, Lord Roskill and Lord Bridge of Harwich agreeing at 473-474); R v Kidd [1998] 1 WLR 604 at 607; [1998] 1 All ER 42 at 44-45. 57 See D (1997) 69 SASR 413 at 420-421 per Doyle CJ, 428-429, 430 per Bleby J. See also ARS v The Queen [2011] NSWCCA 266 at [231]-[233] per Bathurst CJ (James J and Johnson J agreeing at [236], [237]). Nettle instructive58. Plainly, an accused is not to be sentenced for an offence which the jury did not find the accused to have committed. Insofar as R v N, SH59 held to the contrary, it should no longer be followed. The passage in Cheung60 to which the Court of Criminal Appeal referred61 does not gainsay that. In that case, it was noted that there had been some discussion in the course of oral argument about whether the trial judge could or should have questioned the jury as to the process of reasoning by which they came to their verdict. But the point assumed no importance in the reasoning on the appeal. The trial judge had not been asked to do so and it was not suggested that he should have done so of his own motion. Gleeson CJ, Gummow and Hayne JJ merely remarked that there would be very few cases in which it would be appropriate to do so, for the reasons given in Isaacs. So understood, Cheung does not stand as authority for the proposition that questions should not be asked of a jury and in any event Cheung did not concern an offence such as that arising under s 50(1) of the CLCA. The verdict and questions in this case In this case, the judge was right not to direct the jury to bring in a special verdict, and the jury's general verdict of guilty of the offence charged was not uncertain. This was a case, however, in which, after the jury had returned the general verdict, the judge should have exercised her discretion to ask the jury to specify which of the particularised acts of sexual exploitation they were agreed had been proved. For the reasons stated, the considerations which the Court of Criminal Appeal identified as weighing against the exercise of that discretion were inapposite in the context of an offence under s 50(1) of the CLCA62. There was also nothing to prevent the judge directing the jury before they retired to consider their verdict that, if they reached a verdict, they would be asked whether they found the accused guilty or not guilty of the offence charged and, if their verdict was guilty, they would be asked to state which of the alleged 58 (1981) 147 CLR 383 at 389 per Gibbs CJ (Mason J and Murphy J agreeing at 395), 395-396 per Wilson J, 406 per Brennan J. 59 [2010] SASCFC 74 at [11]. 60 (2001) 209 CLR 1 at 14 [18] per Gleeson CJ, Gummow and Hayne JJ. 61 Chiro (2015) 123 SASR 583 at 588 [16]. 62 Chiro (2015) 123 SASR 583 at 588 [18]. Nettle acts of sexual exploitation they were unanimously agreed (or agreed by statutory majority) had been proved. It would have been appropriate for her Honour to do so. Such an instruction would also have been aided by listing each of the acts of sexual exploitation particularised in the information on the aide memoire of the elements of the offence that was issued to the jury, so as to enable the jury, as it were, to tick off each of the alleged acts of sexual exploitation that they were agreed had been committed. Of course, in cases in which the alleged acts of sexual exploitation are not as clearly particularised as they were here, or in cases where the evidence of the complainant and the conduct of the trial involves allegations of a more general nature, a trial judge might need to adapt the form of his or her questions commensurate with the detail of the acts alleged. Counsel for the Crown submitted that so to direct the jury would or could wrongly have conveyed to the jury that they could not convict the appellant of the offence charged unless they were agreed on all of the alleged acts of sexual exploitation, or would or could have wrongly conveyed to the jury that, despite having reached agreement that the appellant had committed two or more of the alleged acts of sexual exploitation, the jury were required to persist in endeavouring to reach agreement as to the remaining allegations. And in counsel's submission, so to influence the jury would have tended to engender uncertainty amongst them and thus to dissuade them from convicting the appellant of the offence charged when the evident object of s 50(1) was to minimise uncertainty and so increase the prospects of conviction in cases in which a complainant is unable to attest to the underlying acts of sexual exploitation with the same particularity as was previously required. Those submissions should be rejected. If a judge directs a jury that, in order to convict an accused of an offence under s 50(1) of the CLCA, the jury need not be satisfied of anything more than that the accused committed at least two of the alleged acts of sexual exploitation separated by the requisite period of time, but that they cannot find that the accused committed an alleged act of sexual exploitation unless they are agreed that the commission of that act has been proved beyond reasonable doubt, the jury will be made to understand, as they should, that they cannot find that the accused committed an offence against s 50(1) unless they are satisfied that he or she committed not less than two of the alleged acts of sexual exploitation and that they cannot find that he or she committed any of the alleged acts of sexual exploitation unless they are agreed that that alleged act has been proved beyond reasonable doubt. In those circumstances, there is no reason to suppose that, by the judge then telling the jury that if they return a verdict of guilty of the offence charged they will be asked to state which of the alleged acts of sexual exploitation they are agreed have been proved, the jury would be caused to think that they could not convict the accused of the offence charged without finding that more than two of the alleged acts of sexual exploitation have been committed. And if, against the Nettle odds, a judge were to conclude that it might have that effect, the judge could rapidly dispel that possibility by repeating the admonition that, in order to convict, it is not necessary to find more than two of the alleged acts of sexual exploitation separated by the requisite period of time. Alternatively, or as well, a judge might choose to explain to the jury63 that, although any combination of two or more of the alleged acts of sexual exploitation separated by the requisite period of time would be sufficient to find the accused guilty of the offence under s 50(1), if they do find the accused guilty of that offence they will be asked which of the acts of sexual exploitation they found to be proved in order to assist the court with the sentencing process. Possibly it is true, as the Crown contended, that so to direct a jury might increase the possibility of the jury answering that they were agreed as to no more than two of the alleged acts of sexual exploitation, and, because a judge could not then make findings as to the other alleged acts, might increase the possibility of an accused being sentenced on the basis of having committed no more than two of the acts of sexual exploitation. In counsel's submission, that would be productive of injustice in a case where it was proved beyond reasonable doubt that the offender had committed more than two of the alleged acts of sexual exploitation, but the jury did not deliberate in respect of more than two of those allegations, particularly given the stipulation in s 50(5) of the CLCA that a person who has been tried and convicted or acquitted of a charge of persistent sexual exploitation of a child may not be convicted of a sexual offence against the same child alleged to have been committed during the period to which the offence of persistent sexual exploitation of that child related. That submission should also be rejected. By the adoption of the form of the offence prescribed in s 50(1), Parliament has signified that the actus reus of the offence of persistent sexual exploitation of a child is comprised of discrete underlying acts of sexual exploitation and that an accused is not to be convicted or sentenced on any basis other than having committed only those acts of sexual exploitation which the jury are agreed have been proved. Consequently, whether or not that may be productive of a risk of injustice of the kind contended for by the Crown is essentially beside the point. The risk is also overstated. It is in the hands of the Crown to avoid, or at least substantially mitigate, the risk by taking care not to allege in one information a greater number or diversity of alleged acts of sexual exploitation, or a greater period of offending, than will enable the jury effectively to concentrate on each of the alleged acts of sexual exploitation and decide upon them individually, as the legislation requires them to do, rather than 63 See, for example, Mills, Sinfield and Sinfield (1985) 17 A Crim R 411 at 415-416 per Street CJ (Mahoney JA agreeing at 429). Nettle being inclined to switch off from that task because of an overly large number of alleged acts or an overly large period of alleged offending. The sentence in this case Since Cheung, this Court has taken the view that, generally speaking, a judge is not required to sentence on a view of the facts most favourable to an offender, but should make his or her own findings as to the aggravating and mitigating circumstances of the offence of which the offender has been convicted64. But in the case of an offence under s 50(1) of the CLCA, the position is different. Where an accused stands trial before a jury for an offence of a continuing nature, such as, for example, trafficking a prohibited drug over a period of time65, the jury need not be unanimous (or agreed by statutory majority) as to each of the particular acts which are alleged to have comprised the actus reus of the offence. But, as already stated, in the case of an offence under s 50(1) of the CLCA the underlying acts of sexual exploitation are the actus reus of the offence and it is for the jury to find the acts which comprise the actus reus. Otherwise, it would not be a trial by jury66. Of course, as has been observed, a jury cannot be compelled to explain the basis of its verdict67. Consequently, where a jury returns a verdict of guilty of a charge of persistent sexual exploitation of a child contrary to s 50(1) and the judge does not or cannot get the jury then to identify which of the alleged acts of sexual exploitation the jury found to be proved, the offender will have to be sentenced on the basis most favourable to the offender. In this case, since the judge did not ascertain which of the alleged acts of sexual exploitation the jury were agreed were proved, the appellant should have been sentenced on the view of the facts most favourable to the appellant: that the jury had convicted the appellant of persistent sexual exploitation of the 64 Cheung (2001) 209 CLR 1 at 9-11 [5]-[10], 24-25 [55] per Gleeson CJ, Gummow and Hayne JJ; Filippou v The Queen (2015) 256 CLR 47 at 72 [70] per French CJ, Bell, Keane and Nettle JJ; [2015] HCA 29. 65 See Giretti (1986) 24 A Crim R 112; R v McCulloch (2009) 21 VR 340 at 345-346 [14]-[17]; Mustica v The Queen (2011) 31 VR 367 at 374-375 [30]-[33] per Ashley JA (Bongiorno JA and Hansen JA agreeing at 385 [94], [95]). See also R v Kovacs [2009] 2 Qd R 51 at 70 [40]-[41] per Muir JA (de Jersey CJ and Fraser JA agreeing at 61 [1], 85 [108]). 66 Kidd [1998] 1 WLR 604 at 607; [1998] 1 All ER 42 at 44-45. 67 See generally Otis Elevators (1986) 5 NSWLR 171 at 199-201 per McHugh JA. Nettle complainant on the basis of having committed no more than the acts of sexual exploitation alleged in Particular 1, namely, kissing the complainant on more than one occasion in circumstances of indecency. In fact, as will be recalled, the judge had expressly directed the jury that it was open to find the appellant guilty on that basis. The appellant was sentenced, however, as if he had been found to have committed all of the alleged acts of sexual exploitation. The sentence imposed was therefore not only infected by error, but also manifestly excessive. Conclusion and orders In the result, the appellant's appeal against the Court of Criminal Appeal's rejection of his appeal against conviction should be dismissed. The appellant's appeal against the rejection of his appeal against sentence should, however, be allowed. The sentence should be set aside and the matter should be remitted to the Court of Criminal Appeal for the appellant to be resentenced. Bell BELL J. The factual background and procedural history, which I am grateful to adopt, are set out in the joint reasons of Kiefel CJ, Keane and Nettle JJ. I agree with the orders that their Honours propose. The offence of persistent sexual exploitation of a child under s 50 of the Criminal Law Consolidation Act 1935 (SA) ("the CLCA") ranks among the most serious offences in the criminal calendar. It is punishable by life imprisonment. The actus reus of the offence is the commission of more than one act of sexual exploitation of the same child over a period of not less than three days. An act only qualifies as an act of sexual exploitation if it is an act that, were it able to be properly particularised, could be the subject of a charge of a sexual offence68. The inability to properly particularise is addressed in s 50(4)(b), which provides that the Information need not be pleaded with the degree of particularity that would be required if the act were charged as an offence under another section of the CLCA. It suffices if the prosecution avers with sufficient particularity the period during which the acts of sexual exploitation are alleged to have occurred and the conduct on which the prosecution relies as comprising the acts of sexual exploitation69. The latter requirement does not necessitate the identification of particular acts of sexual exploitation or the occasions on which, or places at which, or the order in which, acts of sexual exploitation occurred70. The evident purpose of the creation of the offence is to permit the prosecution of offenders in cases in which the pattern of abuse is such that the child is unable to differentiate one act of sexual exploitation from another71. The selection of the charge is within the discretion of the Director of Public Prosecutions and it is not argued that the capacity to particularise acts of sexual exploitation and charge them as discrete offences, as might have been done here, precludes the bringing of a charge under s 50(1)72. 68 Section 50(7) defines "sexual offence" as: an offence against Pt 3, Div 11 (other than ss 59 and 61) or s 63B, 66, 69 or 72; or an attempt to commit, or assault with intent to commit, any of those offences; or a substantially similar offence against a previous enactment. 69 CLCA, s 50(4)(a). 70 CLCA, s 50(4)(b)(ii). 71 South Australia, House of Assembly, Parliamentary Debates (Hansard), 25 October 2007 at 1474 (the Hon M J Atkinson, Attorney-General). 72 Maxwell v The Queen (1996) 184 CLR 501 at 534 per Gaudron and Gummow JJ; [1996] HCA 46; Likiardopoulos v The Queen (2012) 247 CLR 265 at 279-280 [37] per Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2012] HCA 37. Bell The Information charged the appellant with the sexual exploitation of AB over a period of three years and approximately four months. The acts particularised in the Information ranged from indecent kissing on the lips to more serious forms of sexual exploitation including unlawful sexual intercourse73. By his plea of not guilty the appellant joined issue as to the occurrence of each of the acts particularised as an act of sexual exploitation. The jury was correctly directed as to the elements of the offence including the necessity for it to be unanimous (or for a statutory majority to agree after a period of deliberation of four hours or more)74 as to the commission of at least the same two acts of sexual exploitation. The jury returned a majority verdict of guilty, signifying its satisfaction that at least two of the same acts of sexual exploitation were proved. I agree with the joint reasons that the circumstance of the verdict not disclosing which two or more acts of sexual exploitation were proved does not render the verdict uncertain. I also agree with the joint reasons that the trial judge did not err in refusing to invite the jury to return a special verdict. The appellant's complaint in the Court of Criminal Appeal was not so much with this refusal as with the trial judge's failure to question the jury following the return of the verdict as to the acts of sexual exploitation which the jury found proved75. Vanstone J, giving the leading judgment in the Court of Criminal Appeal, considered the trial judge was right not to do so. Her Honour referred with approval to the statement in R v 73 The Information stated: "Marco Chiro between the 1st day of July 2008 and the 19th day of November 2011 at Rostrevor, over a period of not less than 3 days, committed more than one act of sexual exploitation of [AB], a child under the prescribed age, and in relation to whom he was in a position of authority. The acts comprising the persistent sexual exploitation were: kissing [AB] on the lips, on more than one occasion, touching [AB]'s vagina, on more than one occasion, touching [AB]'s breasts, on more than one occasion, inserting his finger into [AB]'s vagina, causing [AB] to touch his penis, and inserting his penis into [AB]'s mouth." 74 Juries Act 1927 (SA), s 57(1). 75 R v Chiro (2015) 123 SASR 583 at 588 [16]. Bell Isaacs76 that, save in exceptional cases, trial judges should refrain from asking the jury the basis of a verdict of manslaughter. Her Honour considered that there is no relevant distinction between the return of a verdict of manslaughter in a case in which the verdict might have been returned on more than one basis, and the verdict in the appellant's case. The sentencing of offenders in South Australia is governed by the Criminal Law (Sentencing) Act 1988 (SA), which is expressed, subject to any contrary intention, not to displace common law sentencing principles77. The appeal raises two issues of common law principle. The first is whether the proper exercise of discretion was against asking the jury which acts of sexual exploitation it found proved. The power of the trial judge to question the jury as to the factual basis of its verdict is not in issue. Differing views have been expressed about the wisdom of doing so. The issue has tended to arise in cases in which the jury returns an alternative verdict of manslaughter. The practice was deprecated by the English Court of Criminal Appeal in R v Larkin78. A few years later, that Court modified its stance in R v Matheson79. Lord Goddard CJ proposed in Matheson that where manslaughter is left on the ground of diminished responsibility and some other ground, the trial judge should ask the jury whether the verdict is returned on diminished responsibility or on the other ground or both80. It may be, as Roden J suggested in Petroff81, that the Matheson practice reflected the availability of special sentencing orders for offenders found to be of diminished responsibility, which were not available in the Australian jurisdictions. Be that as it may, it is evident that the Matheson practice was adopted in Australia, at least on occasions. The difficulties that the Matheson practice may occasion were illustrated in Veen v The Queen82. It appears that the trial judge asked the foreman of the jury if the verdict was returned on the ground of diminished responsibility. The 76 R v Chiro (2015) 123 SASR 583 at 588 [16] citing (1997) 41 NSWLR 374 at 379. 77 Section 9E(1). 79 [1958] 1 WLR 474; [1958] 2 All ER 87. 80 [1958] 1 WLR 474 at 479-480; [1958] 2 All ER 87 at 90. 81 (1980) 2 A Crim R 101 at 138-139. 82 (1979) 143 CLR 458; [1979] HCA 7. Bell form of the question and the foreman's answer gave rise to an aspect of the sentence which troubled Stephen J: the answer did not dispose of the issue of provocation, as the trial judge appeared to have thought it did. Stephen J's consideration of the Matheson practice was focussed on the need to ensure that the foreperson is capable of answering a question as to the basis of the verdict, given the absence of necessity for unanimity on the ground on which the verdict may be returned83. Difficulties of the kind that Stephen J identified in Veen informed the analysis in Isaacs. The reasons given for the conclusion that, save in an exceptional case, a trial judge should refrain from questioning the basis of a verdict of manslaughter stem from the absence of a requirement for unanimity as to the ground on which the verdict is returned. So understood, in my view the reasons are compelling and apply with equal force to the sentencing for any offence in which individual jurors may have reasoned to the conclusion of guilt upon differing bases. The Isaacs analysis, however, has nothing to say about the desirability of asking the jury which acts of sexual exploitation it found proved following the return of a verdict of guilty on the trial of a s 50(1) offence, at which the jury is required to be agreed (either unanimously or by a statutory majority after more than four hours' deliberation) on the same two or more acts of sexual exploitation. Of the seven reasons identified in Isaacs for not questioning the jury as to the factual basis of its verdict84, the first five and the seventh have no application to the trial of a s 50(1) offence in light of this requirement. The sixth reason, that the judge may be embarrassed if he or she does not agree with the jury's answer to the question, is inapt on the trial of a s 50(1) offence for the reasons explained below in dealing with the appellant's second ground of appeal. The respondent submits that the proper exercise of discretion, including on the trial of a s 50(1) offence, is against questioning the jury following the return of the verdict. This, it is argued, is because the jury should not be vexed with the prospect of answering questions after it has discharged its constitutional function, and because that prospect may distract it from the performance of that function. Our adversarial system of criminal justice is posited upon acceptance that jurors will understand and apply the trial judge's directions. There is no reason to apprehend that a properly directed jury would feel pressure to extend its deliberations in order to answer questions which its members were not otherwise disposed to address. Nor is there reason to apprehend difficulty in the foreperson 83 Veen v The Queen (1979) 143 CLR 458 at 466-467. 84 (1997) 41 NSWLR 374 at 379-380. Bell being asked to identify those acts which the jury is satisfied (unanimously or by statutory majority after four hours' deliberation) the accused committed, in the event a verdict of guilty is returned. In my experience, jurors are mindful of the serious responsibility with which they are charged. I think it unlikely that, after attending to the evidence, and to counsel's submissions on the issue of whether the acts particularised in the Information occurred, jurors would find the prospect of being asked to inform the court of the outcome of their deliberations burdensome. At the trial of a s 50(1) offence in which acts of sexual exploitation of varying seriousness are particularised, the exercise of discretion following the return of a verdict of guilty will usually favour asking the jury to identify those acts which it finds proved. The second issue in the appeal is whether, in circumstances in which the acts of sexual exploitation which the jury found proved are unknown, it was open to the trial judge to sentence the appellant upon a view that his culpability for the offence was to be assessed on the basis that he committed all of the acts of sexual exploitation particularised in the Information. As earlier noted, the Court of Criminal Appeal considered that there was no material distinction between sentencing for a s 50(1) offence where the acts of sexual exploitation found by the jury are unknown and sentencing for manslaughter. Consistently with the principles explained in Cheung v The Queen85, the Court of Criminal Appeal said that the trial judge was right to sentence the appellant on such of the facts as she found proved so long as the findings were not inconsistent with the verdict86. The principles stated in the joint reasons in Cheung were correctly identified by the Court of Criminal Appeal: it is the role of the judge to determine the facts relevant to sentencing, subject to the constraint that the determination must be consistent with the verdict87. It is the content of the constraint that is in question here. Cheung is an illustration of a common category of case in which the jury's verdict does not imply a finding on an issue which is nonetheless highly material in sentencing88. As the joint reasons in Cheung explain, while the nature and extent of Cheung's knowing involvement in the importation of the commercial quantity of heroin may have been of significance to some, or all, of the jurors in the process of reasoning to guilt, these were not matters on which issue was joined. They were matters on which 85 (2001) 209 CLR 1; [2001] HCA 67. 86 R v Chiro (2015) 123 SASR 583 at 588 [19]. 87 (2001) 209 CLR 1 at 14 [17] per Gleeson CJ, Gummow and Hayne JJ. 88 See the discussion in Thomas, Principles of Sentencing, (1970) at 313-314. Bell the verdict was silent89. There was one importation of heroin and issue was joined on Cheung's knowing involvement in it. By contrast, the offence with which the appellant was charged was constituted by the commission of more than one act of sexual exploitation over an interval of not less than three days. The acts on which the prosecution relied to establish the offence were particularised in the Information and issue was joined as to the commission of each. The verdict establishes conclusively that the appellant engaged in the sexual exploitation of AB by the commission of at least two of the particularised acts over a period of not less than three days, and no more. To sentence the appellant on the basis that he committed all of the particularised acts upon which issue was joined is to deprive the requirement of consistency with the verdict of practical content. Gibbs CJ, with whose reasons Mason and Murphy JJ agreed, in R v De Simoni observed that "the general principle that the sentence imposed on an offender should take account of all the circumstances of the offence is subject to a more fundamental and important principle, that no one should be punished for an offence of which he has not been convicted"90. Recognition of this and the allied principle respecting proof of matters of aggravation led the plurality in Kingswell v The Queen to adopt a rule of practice requiring the factors aggravating sentence under s 235(2) of the Customs Act 1901 (Cth) to be pleaded in the indictment91. The principles enunciated in De Simoni and Kingswell cannot stand with acceptance of the respondent's submission that, absent knowing which acts of sexual exploitation were found by the jury to have been proved, it was open to the judge to sentence the appellant upon her assessment that he engaged in all of them. The respondent calls in aid s 50(5), which provides that a person who has been tried and convicted or acquitted on a charge of persistent sexual exploitation of a child may not be convicted of a sexual offence against the same child that is alleged to have been committed during the period specified in the Information. The respondent points to the risk that the jury may return a verdict based upon satisfaction of the commission of the same two acts without troubling to consider the remainder, precluding the further prosecution of the offender for those acts. So much may be allowed, but that submission provides no principled reason for authorising the sentencing of an offender for acts the occurrence of which were in issue on the trial, and which are not shown to have been found adversely to the 89 Cheung v The Queen (2001) 209 CLR 1 at 10 [6] per Gleeson CJ, Gummow and 90 (1981) 147 CLR 383 at 389; [1981] HCA 31. 91 (1985) 159 CLR 264 at 280 per Gibbs CJ, Wilson and Dawson JJ; [1985] HCA 72. Bell offender by the jury. In a case in which the complainant is able to differentiate the acts of sexual exploitation to which he or she claims to have been subject, prudence may favour charging those acts as sexual offences under other provisions of the CLCA. In circumstances in which the jury was directed, relevantly, that the appellant's guilt would be established upon proof that he kissed AB in circumstances of indecency on more than one occasion, and where the jury was not asked to identify the acts of sexual exploitation that it found proved, the trial judge was constrained to sentence upon the basis that the appellant's culpability for the offence was confined to the acts of indecent kissing averred in Particular 1 of the Information. Edelman Introduction This appeal was heard jointly with Hamra v The Queen92. Both appeals concerned an offence of persistent sexual exploitation of a child contrary to s 50(1) of the Criminal Law Consolidation Act 1935 (SA). On this appeal a central submission of the appellant was that the sentencing judge could not sentence him for the many acts of sexual exploitation that the sentencing judge was satisfied beyond reasonable doubt that the appellant had committed. Instead, the appellant submitted that the sentencing judge was required to sentence him on the basis of the facts that were the most favourable to him. He submitted that the facts upon which he was sentenced could only be found by the jury so that in the absence of findings by the jury, which could only have been elicited (if at all) by special questions of the jury, the sentencing judge was required to assume that he had committed the offence in the least culpable way. The appellant did not refer to any case in which any Australian court had ever adopted this approach. It was rejected by three judges of this Court in 2001 and, in that context, it was described as contrary to long-standing Australian sentencing authority and practice93. For a time, it appeared to be a position favoured in England in limited circumstances. But the English courts also now reject it. It is an approach which could only be taken if it were found that the common law had somehow been modified by s 50. The common law approach to sentencing permits a sentencing judge to find facts provided that the finding is not inconsistent with the verdict of the jury and provided that any facts found adversely to the accused are established beyond reasonable doubt. That approach was not modified by s 50 to require sentencing on a deemed basis, most favourable to an offender, if special questions are not asked. To the contrary, as I explain later in these reasons, the application of the deemed basis for sentencing proposed by the appellant would have peculiar consequences for s 50 offences. Whether or not the appellant's approach would be applied might depend, as it would in this case, upon the manner in which the prosecution chose to particularise the acts charged. The application of the approach might also depend upon the fortuity of the order in which the jury decided to answer the special questions or the time that the jury took to reach a decision. Further, the process by which the sentencing judge would determine the most favourable basis for sentencing the offender could be a fraught exercise which, on one view, would require sentencing on the basis of facts that do not correspond with either the way the case was run or the findings 92 [2017] HCA 38. 93 Cheung v The Queen (2001) 209 CLR 1 at 22-23 [48]; [2001] HCA 67. Edelman that were reasonably open to the jury. Yet, despite all of these peculiarities, the appellant could not subsequently be tried for any of the remaining acts94. I do not accept that s 50, properly construed, requires that approach. There is an additional dimension of concern raised by the appellant's submission. Under the guise of respecting the power of the jury, the submission actually has the effect, to paraphrase Thayer95, of taking power away from the people by effectively requiring explanations of their decisions. As a policy decision, that approach might be favoured because it would ensure that an offender would be sentenced on the most favourable basis unless told by the jury that convicted him or her of the basis for the conviction. But there are other concerns of policy involved before introducing a requirement of special questions for effective sentencing. The cost of presenting special questions to a jury might be an impairment of "the jury's power to render a general verdict without explaining itself"96. One reason why this has been said to be undesirable was expressed in United States v Spock97 by Aldrich CJ, who said that there "is no easier way to reach, and perhaps force, a verdict of guilty than to approach it step by step". It is a large change to the common law to require the balancing of these considerations in favour of requiring special questions without which, and sometimes even with which, a duty arises to sentence on a most favourable basis. That change was not made by Parliament by enacting s 50, which was described at the time of its introduction as serving the purpose of ensuring that the law would no longer inadequately punish a person who offended against a child so persistently that the child could not differentiate the occasions of abuse. The appeal should be dismissed. The issues on this appeal and the manner in which they arise The appellant was convicted after a trial before judge and jury of persistent sexual exploitation of a child contrary to s 50(1) of the Criminal Law Consolidation Act. The appellant was the child's school teacher. The sentencing judge explained that the appellant had grossly abused his position of authority as 94 Criminal Law Consolidation Act 1935 (SA), s 50(5). 95 Thayer, A Preliminary Treatise on Evidence at the Common Law, (1898) at 218- 96 Nepveu, "Beyond 'Guilty' or 'Not Guilty': Giving Special Verdicts in Criminal Jury Trials", (2003) 21 Yale Law and Policy Review 263 at 266. 97 416 F 2d 165 at 182 (1969). Edelman a school teacher to take "advantage of a young girl throughout her high school years for [his] own sexual satisfaction". For the purpose of sentencing, the judge made findings of fact, consistently with the verdict of the jury, that the acts of persistent sexual exploitation of the child fell into six categories: (i) kissing her on the lips on more than one occasion; (ii) touching her vagina on more than one occasion; (iii) touching her breasts on more than one occasion; (iv) inserting his finger into her vagina; (v) causing her to touch his penis; and (vi) inserting his penis into her mouth. Importantly, these categories were not mutually exclusive. Some of the acts alleged to fall within category (i) also fell within categories (ii), (iii), and (iv). The appellant was sentenced to a term of 10 years imprisonment with a non-parole period of six years. Appeals against conviction and sentence to the Full Court of the Supreme Court of South Australia, sitting as the Court of Criminal Appeal, were dismissed. In this Court, the appellant submitted that his conviction was uncertain because it was impossible to know which of the alleged acts of sexual exploitation had been found to be proved by the jury. I agree with the joint reasons that this submission should not be accepted. The appellant's alternative submission was that his sentence should be set aside, and that he should be resentenced on the basis that the only acts that occurred were the least serious acts of kissing because the judge should have asked the jury to answer special questions about the basis for the verdict. These are questions that at common law the judge is not required to ask and the jury is not required to answer. The ability of a sentencing judge to find facts On this appeal, the approach that the appellant submitted should be adopted in this case is very similar to the submission made, but rejected by this Court, in Cheung v The Queen98. The submission in that case was that "if a jury's verdict is consistent with two views of the facts, and it would have been possible to amend the indictment to obtain the jury's view, then a sentencing judge is obliged to sentence upon the basis of the view more favourable to the offender"99. In this case, the appellant, in essence, adapted that submission by saying that he was entitled to be sentenced on the most favourable basis because the jury should have explained its view of the facts in answer to special questions rather than (as in Cheung) by different counts in an indictment. The basis for the appellant's submission, like that in Cheung, was that a sentencing judge is precluded from making any findings of fact (i) which would constitute an element of the offence charged, or (ii) which would constitute other offences for which the offender would be sentenced but which were not shown by the jury's verdict to be proved. 98 (2001) 209 CLR 1. 99 Cheung v The Queen (2001) 209 CLR 1 at 22 [48]. Edelman I will return to the decision in Cheung below but it is necessary first to place that decision in the context of the long line of Australian authority of which it forms a part. Fifty-six years ago in R v Harris100 the Full Court of the Supreme Court of "The responsibility of awarding punishment once a jury have convicted a prisoner lies solely upon the judge. He has to form his own view of the facts and to decide how serious the crime is that has been committed, and how severely or how leniently he should deal with the offender. The learned judge in forming his view of the facts must not, of course, form a view which conflicts with the verdict of the jury, but so long as he keeps within those limits, it is for him and him alone to form his judgment of the facts. ... He has presided at the trial and he has seen the witnesses and has seen how the trial has progressed, and he can form his own judgment of the seriousness or other character of the offence." This approach has been applied many times101. Twenty-four reported cases applying this approach were cited by Callinan J in Cheung102. Subject to the requirement of consistency with the verdict of the jury, and subject to the duty of the judge to find matters adverse to the convicted person beyond reasonable doubt, a sentencing judge has long been entitled to find facts for the purpose of sentencing. The ability of a sentencing judge to find facts for the purpose of sentencing applies also to facts that might be part of the mental or physical elements of the offence. With the two standard qualifications, there is no bar to a sentencing judge finding facts for sentencing purposes where the facts constitute the actus reus of the offence but are not implicit in the verdict of the jury. The two qualifications are that the facts adverse to the offender must be found beyond reasonable doubt and the facts must be consistent with the verdict of the jury. A common example is where an accused person is convicted of manslaughter. In some circumstances a conviction for manslaughter might be given for different 100 [1961] VR 236 at 236-237. 101 For instance, R v Webb [1971] VR 147 at 152-153; R v Kane [1974] VR 759 at 762; R v Thompson (1975) 11 SASR 217 at 221 per Bray CJ; R v Isaacs (1997) 41 NSWLR 374 at 377-378 per Gleeson CJ, Mason P, Hunt CJ at CL, Simpson and Hidden JJ; Cheung v The Queen (2001) 209 CLR 1 at 12-13 [14] per Gleeson CJ, 102 (2001) 209 CLR 1 at 53 [166] fn 196. Edelman reasons. In R v Isaacs103, two of those reasons that were left to the jury were provocation and homicide by an unlawful and dangerous act. In a joint judgment, five judges of the New South Wales Court of Criminal Appeal held that the task of the sentencing judge was to "find for himself the facts material to sentencing, consistently with the jury's verdict of manslaughter, and bearing in mind that the appellant was to be given the benefit of any reasonable doubt"104. The Court of Criminal Appeal held that the trial judge was not required to ask special questions of the jury to ascertain the basis upon which the appellant had been convicted. Indeed, the Court explained that such special questions were to be discouraged. The decision in Isaacs was consistent with the decision of this Court in Savvas v The Queen105. Mr Savvas was convicted, after trial before a judge and jury, of conspiring with others to import heroin contrary to Commonwealth law and of conspiring with others to supply heroin contrary to State law. Mr Savvas was sentenced by the judge to lengthy concurrent terms of imprisonment. As part of the sentencing, the sentencing judge found beyond reasonable doubt that heroin had in fact been imported and distributed pursuant to the conspiracy and that Mr Savvas had been involved in those events. On appeal to this Court, Mr Savvas argued that the sentencing judge had gone beyond any facts that the jury must have found and had sentenced him for offences with which he had not been charged. The appeal was dismissed. In a unanimous decision, this Court held that the conspiracy was continuing during the implementation of it106 and that it is "artificial to ignore ... 'considerations which advert to the content and duration and reality of the conspiracy'"107. Although the jury's verdict did not necessarily require a conclusion that the conspiracy was implemented, this Court rejected the submission that a sentencing judge "must always sentence on the basis that the conspiracy was not implemented"108. The issue again arose in Cheung109. In that case, the appellant was tried before a judge and jury on a charge that he had been knowingly concerned in the 103 (1997) 41 NSWLR 374. 104 R v Isaacs (1997) 41 NSWLR 374 at 380. 105 (1995) 183 CLR 1; [1995] HCA 29. 106 Savvas v The Queen (1995) 183 CLR 1 at 8-9. 107 Savvas v The Queen (1995) 183 CLR 1 at 7, quoting R v Kane [1975] VR 658 at 108 Savvas v The Queen (1995) 183 CLR 1 at 8. 109 (2001) 209 CLR 1. Edelman importation of heroin, which was imported on 9 May 1989, between 1 August 1988 and 12 May 1989. The appellant was a senior Customs official. An accomplice gave evidence that the involvement of the appellant consisted of instigating, planning, co-ordinating, financing, and supervising the importation over the nine months contained in the charge. The appellant was convicted and sentenced to life imprisonment with a non-parole period of 21 years and 11 months. The sentencing judge accepted the evidence of the accomplice. On appeal to this Court the appellant submitted that he should have been sentenced on the basis most favourable to him, that, contrary to the evidence of the accomplice, the offence was committed over a period during April and May 1989. The appellant submitted that the indictment could have been framed by constructing two counts which separated the possible dates of his involvement, and that the consequential absence of any finding by the jury as to the relevant dates did not permit the sentencing judge to find those matters as facts. In Cheung, the joint judgment of Gleeson CJ, Gummow and Hayne JJ rejected the submission that the findings of the sentencing judge, which included matters going to the actus reus of the offence, "encroached upon [the appellant's] right to trial by jury"110 or that the indictment should have been framed as two different charges so that the jury's verdict could have been obtained on the different bases upon which the prosecution had presented the evidence to establish the actus reus111. Their Honours gave six reasons why it was neither necessary nor desirable for the indictment to be framed by two different charges in the manner submitted by the appellant112. Critically for present purposes, the fourth reason relied upon the English decision in Dowdall and Smith113. The decision in Dowdall and Smith concerned an indictment for theft of a pension book. The accused offered to plead guilty on one, favourable, version of the actus reus, that he had found the pension book and had decided to keep it. The Crown would not accept a plea on that basis and instead split the indictment into two counts: one count charging the accused of stealing the book by taking it from the victim's bag, and the other charging the accused of stealing the book by finding it. On appeal from conviction, Taylor LJ, delivering the decision of the Court of Appeal, held that the indictment should not have been split into two counts. Immediately prior to a passage quoted with approval by this Court in Cheung, Taylor LJ described the argument of counsel that the indictment needed to be split into two counts so that the jury could give a verdict which explained 110 Cheung v The Queen (2001) 209 CLR 1 at 18 [32]. 111 Cheung v The Queen (2001) 209 CLR 1 at 20 [40]. 112 Cheung v The Queen (2001) 209 CLR 1 at 20-22 [42]-[47]. 113 (1992) 13 Cr App R (S) 441. Edelman the actus reus that the jury had found. Then, in the passage quoted with approval by the joint judgment in Cheung114, Taylor LJ gave the following two examples115: "On a charge of burglary the Crown's case is that the defendant entered the house by night whilst an elderly occupier was asleep but the defendant asserts he entered by day when the house was empty. The actus reus was at different times in those two versions, but each version amounts to guilt of the offence charged. Likewise, where an indecent assault is alleged to have included digital penetration of a girl's vagina, an assertion by the appellant that he had only touched her breast would be taken as a plea of guilty despite the difference as to the actus reus between the two versions. In such cases, if sentence turns upon which version is right, a judge can either accept the defence account or try an issue as to the circumstances of the burglary or the nature of the assault. It would not be appropriate to proliferate alternative counts." The reference by Taylor LJ to the judge trying an issue as to the circumstances of the burglary, including the actus reus of the offence, was to a Newton hearing, by which the sentencing judge conducts a hearing for the purposes of sentencing to determine contested questions of fact116. In Cheung, the only authorities which arguably supported the appellant's submission were decisions of the English Court of Appeal in Stosiek117 and Efionayi118. The joint judgment in Cheung observed that Efionayi was decided ex tempore, without any argument from the prosecution, and without reference to the earlier decision in Dowdall and Smith (quoted above), which represents the law in Australia119. In any event, to the extent that the appellant's submission was ever the proper approach in England, the Court of Appeal has recently explained that the Stosiek line of authority has been "subsumed" within the "correct 114 (2001) 209 CLR 1 at 21-22 [45]. 115 Dowdall and Smith (1992) 13 Cr App R (S) 441 at 445. 116 Newton (1983) 77 Cr App R 13; R v Ali (Ahmed) [2011] 2 Cr App R 22 at 297 [36] 117 (1982) 4 Cr App R (S) 205. 118 (1995) 16 Cr App R (S) 380. 119 Cheung v The Queen (2001) 209 CLR 1 at 23 [49]. Edelman approach"120 and that, despite contrary suggestions, Efionayi does not provide any support for a view contrary to that correct approach. The correct approach is that where there is more than one possible interpretation of a jury's verdict then the judge must make up his or her own mind, and must do so beyond reasonable doubt where the interpretation is adverse to the offender121. Does s 50 of the Criminal Law Consolidation Act require a new sentencing approach? The appellant's submission that the terms of s 50 of the Criminal Law Consolidation Act require a new approach, departing from the established common law approach to sentencing, is curious for a number of reasons. First, the section was enacted against the background of the decision in Harris, which had stood for half a century. That decision had referred to the only constraints upon a sentencing judge as being (i) a requirement that the sentencing be consistent with the verdict of the jury, and (ii) a requirement that facts found adversely to the offender be found beyond reasonable doubt. Section 50 was also enacted a decade after the decision of the New South Wales Court of Criminal Appeal in Isaacs, a decision that had been applied on many occasions including by Gleeson CJ, Gummow and Hayne JJ in 2001 in Cheung. There was no suggestion in Harris or in Isaacs that sentencing was required to be conducted on a basis that is most favourable to the offender unless the jury answered special questions. Secondly, the rarity of special questions is a further reason why it is difficult to construe s 50 as impliedly requiring a new approach to sentencing where, without answers to special questions, the sentencing judge is required to sentence only on the most favourable basis to the offender. In Cheung, Gleeson CJ, Gummow and Hayne JJ reiterated that, for the reasons given in Isaacs, there will be "very few cases in which it is appropriate or useful" for the trial judge to question the jury members about "the process of reasoning by which they came to their verdict"122. The only instance where special questions to elucidate the basis for a verdict were once suggested to be "common practice" was in cases of a verdict of manslaughter. That suggestion originated from Diplock LJ, the progenitor of the Northern Ireland criminal courts without juries, in R v Warner123. It was repeated by the English Court of Criminal Appeal in 120 R v King [2017] 2 Cr App R (S) 6 at 36-37 [34]. See also R v Bertram [2004] 1 Cr App R (S) 27 at 190 [21]. 121 R v King [2017] 2 Cr App R (S) 6 at 36-37 [34]-[35]. 122 Cheung v The Queen (2001) 209 CLR 1 at 14 [18]. 123 [1967] 1 WLR 1209 at 1213-1214; [1967] 3 All ER 93 at 96. Edelman Solomon and Triumph124. But it might be doubted whether the practice was ever common. In Petroff125, Nagle CJ at CL, with whom Street CJ agreed, said "doubt must be expressed as to how 'common' the practice in fact was, or is, in manslaughter cases where there is no question of diminished responsibility". The same doubt had also been expressed by the Appellate Division of the Supreme Court of Hong Kong in Kwok Yau Shing v The Queen126, and Professor J C Smith in his commentary on that case127, where it was observed that there was an inconsistency between, on the one hand, any "common practice" to ask special questions in manslaughter cases and, on the other hand, the decision of the Court of Criminal Appeal in R v Larkin128. In any event, however common the use of special questions in manslaughter cases, in Isaacs the New South Wales Court of Criminal Appeal observed that the use of special questions was "a practice which was not taken up, with any degree of generality, in relation to other offences"129, and that the "wisdom of the practice" had been questioned130. Thirdly, even if s 50 could be said to have contemplated, or created the need for, the use of special questions, the accepted position was that when a special question is put to the jury, the judge is not required to accept the answer given by the jury, and is entitled to form his or her own view of the facts in the light of the evidence131. The answers to a special question are not a verdict. It is hard to see how s 50 could have required a judge to sentence on the most favourable basis to an offender unless special questions were asked where (i) the judge was not required to ask the special questions, (ii) the jury was not required to answer the special questions, and (iii) the judge was not bound by the answers to the special questions. Fourthly, and most fundamentally, s 50 creates only one offence. The general verdict of the jury is a verdict for that one offence. If s 50 created two or 124 (1984) 6 Cr App R (S) 120 at 126. 125 (1980) 2 A Crim R 101 at 137. 126 [1968] Crim LR 175. 127 Kwok Yau Shing v The Queen [1968] Crim LR 175 at 177. 129 (1997) 41 NSWLR 374 at 378. 130 (1997) 41 NSWLR 374 at 379. 131 Solomon and Triumph (1984) 6 Cr App R (S) 120 at 126; Wilcox (1984) 6 Cr App R (S) 276 at 278-279; R v Ali (Ahmed) [2011] 2 Cr App R 22 at 298 [37]. Edelman more offences then the sentencing judge could not sentence for multiple offences based on a single general verdict. But since s 50 creates only one offence, any factual issues that are not implicit within the verdict for the single offence can be found by the sentencing judge. This fourth point needs to be explained in some detail to illustrate its importance. In submissions, senior counsel for the appellant submitted, again and again, that s 50 requires proof of two or more offences. Even the appellant's description of the definition of an "act of sexual exploitation" misdescribed s 50(2) to suggest that it requires an act of sexual exploitation to be an act which amounts to a sexual offence. It does not. Section 50, unlike s 74, which preceded it, is not expressed in terms that require the acts constituting the offence of persistent sexual exploitation of a child to be separate offences. The terms of s 50(2) require only that the act "could, if it were able to be properly particularised, be the subject of a charge of a sexual offence" (emphasis added). In this respect, s 50 consciously departed from the language of its predecessor, s 74, which had required "the commission of a sexual offence against a child on at least three separate occasions" (emphasis added). The plain words, and plain meaning, of s 50 involve a focus upon particular acts of sexual exploitation, although the requirements of such acts are identified by reference to matters that could be charged as particular sexual offences if the acts could be properly particularised. The plain words of s 50 illustrate the simple point that the acts might not even be capable of being charged as other offences, still less that they would constitute other offences. The way in which s 50(2) operates is effectively to use the physical elements (but not the precise defences) of particular sexual offences as a dictionary for the purpose of the offence in s 50(1). Even if the "act" could be charged as a different offence this does not require that the other offence would be committed. Acts can be charged under a section even if there is a defence that an accused person could prove which would mean that the act is not a sexual offence under that section. A simple example of an act of sexual exploitation which could be an act charged within the meaning of s 50(2) but which would not constitute a separate offence under the section by which it is charged is an act of incest. Incest is an offence under s 72(1) of the Criminal Law Consolidation Act. It is subject to a defence under s 72(2), which is not replicated in s 50, where the accused can prove that he or she did not know and could not reasonably have known that the person with whom he or she had sexual intercourse was a close family member. If the accused could prove this then the act would not be an offence. But the act could still be one which could have been charged as an act of incest even if it would not be successfully prosecuted. The appellant's error that s 50(1) required proof of the commission of two or more sexual offences engendered a further misunderstanding. The further Edelman misunderstanding was that the process of sentencing for an offence committed under s 50(1) must be undertaken as though the offender had been tried for, and convicted of, offences constituting each of the charged acts. The authority cited for that proposition by the appellant, R v D132, does not support the proposition. Not only was that case concerned with the meaning of sub-sections in the predecessor provision to s 50 (ie s 74) that were not reproduced in s 50 but, in R v D, Doyle CJ, with whom Bleby J agreed, emphasised that it was not appropriate for him to establish "exhaustive guidelines for the imposition of sentences under The appellant's proposition had more potency in relation to the predecessor provision to s 50, namely s 74. But the two essential matters upon which Doyle CJ relied in R v D were not replicated in s 50 when it replaced s 74. The first is that s 74(2) required the offence to consist of "a course of conduct involving the commission of a sexual offence against a child on at least three separate occasions" (emphasis added). The second is that s 74(7) required the sentence to be a "term of imprisonment proportionate to the seriousness of the offender's conduct". These two features were relied upon by Doyle CJ in R v D for his reasoning that the approach to sentencing required the court to "identify the different offences involved and the maximum punishment that they attract"134. In light of a section that required the underlying offences to be proved, one can readily appreciate the premise for Doyle CJ's conclusion that s 74(7) "should be taken as a reference to the seriousness of that conduct as it would have been assessed by the court ... when dealing with distinct offences"135. But, even under s 74, the offender would not have been sentenced by reference only to the maximum punishment for the underlying offences. The maximum punishment for the offences would simply form the basis for assessing an overall sentence for the course of conduct concerned136. Importantly, unlike the process of sentencing for a particular offence, Doyle CJ said, in a passage quoted with 132 (1997) 69 SASR 413. 133 R v D (1997) 69 SASR 413 at 421. 134 R v D (1997) 69 SASR 413 at 420. 135 R v D (1997) 69 SASR 413 at 420. 136 R v D (1997) 69 SASR 413 at 420. Edelman approval by the New South Wales Court of Criminal Appeal137, that it was not necessary for sentencing to identify the number of offences with precision138. The appellant submitted that offences under s 50(1) require his proposed new approach to sentencing because, when convicting of an offence under s 50(1), the jury members are required to be unanimous, or agree by a statutory majority, in respect of the same two or more acts that constitute the offence139. The appellant's counsel submitted that it is therefore "impossible to say ... that the jury found that the appellant committed more than two acts amounting to sexual offences" and that "no one should be punished for an offence of which he has not been convicted"140. Once s 50 is understood as involving only one offence, based upon two or more acts, then as a matter of principle there should be no difference between the approach taken to sentencing for an offence under s 50 and the approach taken to sentencing for an offence of manslaughter, or for drug trafficking in cases such as Savvas and Cheung. In each case, the sentencing judge makes findings of fact as to acts, including acts that could, and sometimes must, constitute the actus reus of the single offence. The process of finding the acts that constitute the actus reus of manslaughter, drug trafficking, or sexual exploitation of a child does not involve the offender being sentenced for an offence that he or she did not commit. When the joint judgment in Cheung remarked that the decision as to the degree of culpability of the offender's conduct is a matter for the sentencing judge "save to the extent to which it constitutes an element of the offence charged"141, their Honours were not suggesting that a sentencing judge could never make findings of fact that might involve elements of the actus reus. Such a suggestion would have contradicted the conclusion that was reached in that case. It would have contradicted the approval that their Honours gave to the Dowdall and Smith decision. Rather, the statement was made in the course of explaining 137 ARS v The Queen [2011] NSWCCA 266 at [231]-[233] per Bathurst CJ, James and Johnson JJ agreeing at [236], [237]. 138 R v D (1997) 69 SASR 413 at 420. 139 R v Little (2015) 123 SASR 414 at 417 [11], 419 [15], 420 [19], applying KBT v The Queen (1997) 191 CLR 417 at 422 per Brennan CJ, Toohey, Gaudron and Gummow JJ, 431, 433 per Kirby J; [1997] HCA 54. 140 R v De Simoni (1981) 147 CLR 383 at 389 per Gibbs CJ, Mason and Murphy JJ agreeing; [1981] HCA 31. 141 Cheung v The Queen (2001) 209 CLR 1 at 9 [5]. Edelman that where an element of the offence was "reflected in an issue presented to the jury for decision by verdict" then "the sentencing judge will be bound by the manner in which the jury, by verdict, expressly or by necessary implication, decided that issue"142. Two other circumstances should also be distinguished. In Kingswell v The Queen143, this Court considered circumstances in which legislation that uses the language of a single offence might, on its proper construction, create two offences. A majority of this Court in Kingswell rejected that construction of the legislation in that case. However, where, on its proper construction, legislation creates two offences then an accused can only be sentenced for both of those offences if the jury has found the accused guilty of both. On a trial by judge and jury, it is not sufficient for the jury to find the accused guilty of one and for the judge to find the accused guilty of the other. For the reasons given above, that is not this case. Indeed, when pressed on the point in oral submissions the appellant conceded that s 50 involved a conviction of only one offence. Nor is it relevant to this case to consider the "rule of practice" about which Gibbs CJ, Wilson and Dawson JJ spoke in Kingswell, and which even in 1985 it was an "exaggeration to say ... [had] been generally applied"144; that is, where circumstances of aggravation increase the maximum punishment but do not change the offence then the circumstances should be determined by a jury. This rule of practice is not a rule of law, the contravention of which necessarily requires a sentence to be set aside145. It does not assist in determining whether facts that might constitute the actus reus of an offence must be determined by a jury. Indeed, in Kingswell, Mason J considered that the relevant legislation, which imposed the duty to be satisfied of the aggravating circumstances on "the Court", required the aggravating circumstances to be determined by the sentencing judge and not the jury146. Potential consequences of the appellant's submission Four consequences can be described, all of which illustrate difficulties for the appellant's construction of s 50 as having somehow modified the common 142 Cheung v The Queen (2001) 209 CLR 1 at 9 [5]. 143 (1985) 159 CLR 264; [1985] HCA 72. 144 Kingswell v The Queen (1985) 159 CLR 264 at 280. 145 R v Meaton (1986) 160 CLR 359 at 364-365 per Gibbs CJ, Wilson and Dawson JJ; [1986] HCA 27. 146 Kingswell v The Queen (1985) 159 CLR 264 at 282-283. Edelman law to require the judge to sentence on the most favourable basis to an offender in the absence of special questions that could reveal the acts upon which the jury's verdict was based. These four consequences militate powerfully against a conclusion that s 50 could have the effect proposed by the appellant. The first potential consequence Suppose that a jury of 12 is told before retiring, as it was in the appellant's trial, that only a unanimous verdict can be returned within four hours of deliberations. The jury members are told, correctly, that after four hours a verdict upon which 10 or 11 of them are agreed can be returned. Suppose that the jury members are also given a list of special questions to answer, to indicate which of the acts the jury has found to be proved and whether unanimously or by the statutory majority. A statutory majority of 10 or 11 jurors in a jury of 12, under s 57 of the Juries Act 1927 (SA), is permissible if the jury has been in deliberation for at least four hours and the jurors have not then reached a unanimous verdict. The following two hypothetical scenarios based upon the allegations in this case can be compared. In the first scenario, the jury returns with a verdict of guilty after only 15 minutes of deliberations. The jury answers the special questions concerning its decision by saying that the jury members are unanimous about two particular acts of kissing and that there is a statutory majority of 11 as to the remaining acts. For two reasons, it is hard to see how the existence of a provision allowing for a statutory majority for a verdict could have any legal effect on answers to special questions that are not unanimous. First, the jury decision was delivered within four hours. Secondly, the verdict delivered by the jury is a unanimous verdict so the provision concerning majority verdicts does not apply. In the second scenario, the jury returns with a verdict of guilty after 10 hours of deliberations. The jury answers the special questions concerning the verdict given by statutory majority by saying that the statutory majority of 10 jurors are agreed as to all of the alleged acts of sexual exploitation. Comparing these two scenarios, the effect of the appellant's submission is that the sentencing judge would be required (i) in the first scenario to sentence the offender on the basis that the only acts that occurred were two acts of kissing, and (ii) in the second scenario to sentence the offender on the basis that all of the alleged acts occurred. These scenarios might not be uncommon. The effect would appear to be that where some of the acts of offending are so clear that the jury is unanimous then the offender cannot be sentenced for any of the other acts even where 11 jurors agree that those acts were committed, and where the sentencing judge would conclude beyond reasonable doubt that the offender committed the remaining acts. But if none of the acts of offending are so clear, so that there is only a statutory majority for all of the acts charged, then the offender can be sentenced for all of the acts. Edelman The second potential consequence A second curious consequence of the appellant's submission could arise if the jury returned with a general verdict of guilty based upon two acts upon which the jury was unanimous without attempting to reach a conclusion, unnecessary for a verdict, on the remaining acts. Properly instructed, the jury would be aware that (i) a verdict of guilty could be returned where the members of the jury were agreed upon two acts, and (ii) the members of the jury were not required to answer any of the special questions, the function of which is to give the jury "the opportunity without any attempt to force them, of recording the actual facts as established in their finding"147. For a long time in England and Australia juries have not been able to be compelled to state the reasons for their verdict by answers to special questions148. And once the jury gave its general verdict, and limited answers, it could not deliberate further on any other answers149. If the jury properly returned a general verdict of guilty based on two acts, without the need to answer the special questions, then the particular two acts upon which the members of the jury were agreed might simply be due to the happenstance of how the members of the jury chose to deliberate. They might be the most serious. Or they might be the least serious. The offender could not be tried separately in relation to the remainder of the alleged acts150. So the happenstance of whichever acts the jury first chose to deliberate upon could determine the basis upon which the offender is sentenced with the remainder of the acts to be ignored and never to be the subject of a separate trial. The third potential consequence A third potential consequence of the appellant's approach is the extraordinary complexity for the sentencing process in many situations. Consider this case as an example. Suppose that in this case, in the course of summing up, the trial judge had told the jury that special questions would be asked at the time the verdict was taken. The jury might be given a checklist to tick each of the six categories of acts that the jury found to have been committed for the purpose of the verdict: (i) kissing the complainant on the lips on more 147 Mack v Elvy (1916) 16 SR (NSW) 313 at 319 per Cullen CJ, Street J agreeing. 148 Mayor and Burgesses of Devizes v Clark (1835) 3 Ad & E 506 at 511 per Lord Denman CJ, 511 per Patteson J [111 ER 506 at 508]; Mack v Elvy (1916) 16 SR (NSW) 313 at 319 per Cullen CJ (Street J agreeing), 322 per Gordon J. 149 Arnold v Jeffreys [1914] 1 KB 512 at 514 per Lush J; Barnes v Hill [1967] 1 QB 579 at 587-588 per Lord Denning MR, Danckwerts and Winn LJJ agreeing. 150 Criminal Law Consolidation Act 1935 (SA), s 50(5). Edelman than one occasion; (ii) touching her vagina on more than one occasion; (iii) touching her breasts on more than one occasion; (iv) inserting his finger into her vagina; (v) causing her to touch his penis; and (vi) inserting his penis into her mouth. Suppose that the jury ticked (i), but not any of the others. On what basis then would the sentencing judge pass sentence? How many acts of kissing occurred? Which acts of kissing occurred, and in which aggravating circumstances? If the appellant's submission were accepted then it should be just as impermissible for the sentencing judge to determine which of the alleged acts of kissing, including their aggravating circumstances, constituted the actus reus of the s 50(1) offence as it is for the sentencing judge to determine which of the alleged acts of kissing or other indecent assaults constituted the actus reus of the s 50(1) offence. It would seem that the only solution would be for the jury to be given special questions asking precisely which acts of kissing had been found to have been committed and in which aggravating circumstances. In many cases the answers would not be simple. If these more complicated questions were not put to the jury then other issues would arise concerning how the offender could be sentenced on the most favourable basis. As the Solicitor-General for South Australia submitted, the difficulty with sentencing on the "most favourable basis" is that the exercise is speculative. Alternatively, the exercise of determining the "most favourable basis" upon which to pass sentence would involve numerous assumptions or fictions. The circumstances of this case provide a good example of this. The following was the evidence given by the complainant of acts of sexual exploitation that fell within the category alleged for the purposes of s 50(1) of "kissing [the complainant] on the lips, on more than one occasion": There was an incident during year nine when the appellant was "leaning against the desk" in his office. The complainant "walked up to him and kissed him and he had his arms ... around [her] waist". The complainant said that this was an "open-mouth kiss" and that the appellant kissed her back. In year 10 the appellant and the complainant "would kiss a lot and there were times where he'd pull [her] against him while [they] were kissing and rub himself against [her]". The appellant would "rub his whole groin area ... side to side against [her] body". She described one example of these incidents of kissing for "a few minutes" during a lunch break where she thought the classroom doors were closed. She also said that while kissing, the appellant would put his hands up her skirt, "touch [her] butt sometimes", "touch [her] vagina" ("sometimes with the underwear there" and sometimes with "his hands under [her] underwear"), and "put his hands up [her] top" and "under [her] bra". Edelman (3) Another incident described by the complainant was "a time in the computer room where [they had] been kissing and ... were standing up". She said that the appellant put "one of his hands in [her] underwear" and put a finger in her vagina. (4) On another occasion in the computer room in year 10, the appellant and the complainant had "been kissing" when "he took out his penis and lifted up [her] skirt and pulled [her] underwear out a bit and put his penis in [her] underwear against [her] vagina". He "turned [her] around so [she] was facing away from him and he bent [her] over slightly and did the same thing from behind", namely "put his penis in [her] underwear from behind and rubbed it against [her] butt". There was a further occasion in the computer room in year 10, during which the complainant was sitting at a computer in front of the window. The appellant was kneeling down next to the complainant on her right. She said "I turned my head and we were kissing and he had a hand up my shirt, I think under my bra". There was also an incident in year 11 in the "portable room". The complainant said: "we went there once and we were kissing and he turned me around so that my back was against him and he was kissing my neck and he had one hand go up my skirt, up my underwear and the other one go into my top and touching my breast". If the sentencing judge were to sentence the appellant on the most favourable basis, how would that be determined? The evidence of act (1) is only a single act. It would not suffice to constitute two or more acts of sexual exploitation. How would the other act or acts that constitute the offence be determined? Would the "most favourable basis" require the sentencing judge to select only one other incident so that the sentencing of the appellant was conducted on the basis only of two acts of kissing? How could the second act be chosen? Could it be chosen by filleting some part of the complainant's evidence from other parts? Although the jury could, of course, have accepted only part of the complainant's evidence, would such filleting be permissible without any identified basis upon which the jury might have accepted beyond reasonable doubt only that this other single incident occurred? If not, then how would that identified basis be determined by the sentencing judge without engaging in the very process said to be prohibited involving finding facts that constitute the actus reus? If so, and if a single incident of kissing were deemed to be the "favourable basis", then would the sentencing judge also be required to fillet from the jury's finding any evidence of aggravating circumstances surrounding that incident Edelman where those circumstances could also have been charged as an indecent assault contrary to s 56(1) of the Criminal Law Consolidation Act or, in the case of (3), charged as unlawful sexual intercourse under s 49? Another view might be that the most favourable basis would be to treat the accused as if he had been convicted of all the acts in only the first category, namely all the acts of kissing in circumstances of indecency. But, as set out above, some of the circumstances of the acts in category (i) would also satisfy categories (ii), (iii), and (iv). The appellant's assumption seemed to be that those acts which could have fallen within category (ii), (iii), or (iv) would be ignored for the purposes of sentencing. That, of course, would mean that the fortuity of how a prosecution particularised an offence would determine whether the more serious acts falling within category (i) would be required to be ignored or not. It would create the anomaly that the sentencing judge would be permitted to make a finding that incidents of kissing occurred in circumstances in which the appellant touched the complainant's bottom (which was not particularised separately) but that the sentencing judge could not make a finding that incidents of kissing occurred in circumstances in which the appellant touched the complainant's breasts (which was particularised separately). There are further problems with this approach. Ignoring the acts of kissing within category (i) that also fell within category (ii), (iii), or (iv) might be contrary to the obligation upon the sentencing judge, in s 10(1) of the Criminal Law (Sentencing) Act 1988 (SA), to have regard to the circumstances of the offence when sentencing. The fourth potential consequence The fourth potential consequence is the inconsistency between, on the one hand, the appellant's approach to special questions being required to enable sentencing for all the alleged acts and, on the other hand, the situation that would exist if an offender were sentenced after a plea of guilty. If an offender pleaded guilty but contested various acts upon which the s 50(1) conviction was based then, as the appellant accepted in oral argument, the sentencing judge could conduct a trial of the issues to determine which acts were proved beyond reasonable doubt and which were not. It is a difficult construction of s 50 to conclude that the section has the effect that a sentencing judge can determine the actus reus of the offence on a plea of guilty, provided that the judge acts consistently with the plea, but not upon a verdict of guilty, even if the judge acts consistently with the verdict. The appellant attempted to deal with this anomaly, and also to avoid the absurdity of denying the sentencing judge the power to find facts on a plea of guilty in relation to s 50, by submitting that an offender who pleads guilty is no longer "in the hands of the jury". But even if the appellant's argument on the construction of s 50 were accepted, and the effect of s 50 were somehow to require that only a jury could determine any fact that might fall within the actus reus of the offence, then it is hard to see why s 50 would carve out an exception Edelman so that an accused who pleads guilty somehow gives up the right to have a jury determine disputes about the content of the actus reus. Conclusion A fiction deems to be true that which is known not to be so or that which is unproved. The purpose of a fiction is "to reconcile a specific legal result with some premise or postulate"151. That postulate is generally an unexpressed consideration of social and economic policy152. The consideration of social policy underlying the appellant's submission that the sentencing judge should have sentenced him on the basis that he committed only the most minor acts alleged must be that facts constituting the s 50 offence must be found by a jury and not by a judge. This would mean that in many cases involving offences charged under s 50(1), a general verdict of the jury would no longer be sufficient for proper sentencing. The European Court of Human Rights has held that in the absence of reasons from a jury the right to a fair trial might require safeguards, including questions to the jury, to enable an accused to understand the reasons for his conviction153. That conclusion was reached based upon provisions in the European Convention on Human Rights. Such provisions might be thought by some to be desirable. But in the Anglo-Australian legal tradition there has never been an effective duty on judges to ask special questions. Indeed, when judges have historically attempted to exercise a power to do so, there has been resistance to that power. In 1898, Thayer observed that the jury had historically withstood attempts by judges to exert pressure on juries to secure special verdicts and answers to special questions. He continued154: "Logic and neatness of legal theory have always called loud, at least in recent centuries, for special verdicts, so that the true significance of ascertained facts might be ascertained and declared by the one tribunal fitted to do this finally and with authority. But considerations of policy have called louder for leaving to the jury a freer hand. The working out of the jury system has never been shaped merely by legal or theoretical considerations. That body always represented the people, and came to 151 Fuller, Legal Fictions, (1967) at 51. 152 Fuller, Legal Fictions, (1967) at 71; Pyrenees Shire Council v Day (1998) 192 CLR 330 at 387 [163] per Gummow J; [1998] HCA 3. 153 Taxquet v Belgium (2012) 54 EHRR 26 at 956-957 [91]-[92]. 154 Thayer, A Preliminary Treatise on Evidence at the Common Law, (1898) at 218- Edelman stand as the guardian of their liberties; so that whether the court or the jury should decide a point could not be settled on merely legal grounds; it was a question deeply tinged with political considerations. While it would always have been desirable, from a legal point of view, to require from the jury special verdicts and answers to special questions, that course would have given more power to the king and less to the people. It is one of the eccentricities of legal history that we, in this country, while exalting in some ways the relative function of the jury far beyond all English precedent, are yet, in some parts of the country, greatly cutting down their powers in the particular here referred to." The same point, about history rather than logic, was made by Sir Patrick Devlin in his Hamlyn Lectures in 1956 when he spoke of the inability of the jury to give reasons as a principle that is "open to rational criticism" but one that has been "largely retained and is still an essential characteristic of the system"155. He later added that "any regular practice of interference with the generality of the criminal verdict might impair the freedom and independence of the jury, and it is therefore rarely, if ever, asked for"156. Similar concerns underlie statements that "beyond all question" it is "improper to ask the jury for the reasons for its decision"157 by asking special questions after a general verdict without notice to the jury. In Brown v The Bristol and Exeter Railway Co158, Martin B said, when refusing an application to show cause in relation to a trial he had previously conducted, that he should not have asked the jury a special question, even for the purposes of determining whether the finding was on one count or another, because "having summed up, [the judge's] duty is over, and it is for the jury to find a verdict". Parliament did not make the decision to interfere with the power of the jury in this way in legislation that was introduced for the purpose of ensuring that where persistent child abuse has occurred the law would no longer fail "to recognise or punish the full extent of the abuse"159. Contrary to the appellant's submissions, the sentencing judge was not required to sentence the appellant on 155 Devlin, Trial by Jury, 3rd ed (rev) (1966) at 14. 156 Devlin, Trial by Jury, 3rd ed (rev) (1966) at 88-89. 157 Mack v Elvy (1916) 16 SR (NSW) 313 at 319 per Cullen CJ. 158 (1861) 4 LT 830 at 832. See also Arnold v Jeffreys [1914] 1 KB 512 at 514 per Lush J; Barnes v Hill [1967] 1 QB 579 at 587-588 per Lord Denning MR, Danckwerts and Winn LJJ agreeing. 159 South Australia, House of Assembly, Parliamentary Debates (Hansard), 25 October 2007 at 1474. Edelman the "most favourable" basis to him, whatever that expression might mean. The sentencing judge was not required to disregard numerous acts of sexual exploitation. That disregard would be contrary to her findings, which (i) were made beyond reasonable doubt, and (ii) were not inconsistent with the jury verdict. The appeal should be dismissed.
HIGH COURT OF AUSTRALIA Matter No S134/2016 BYWATER INVESTMENTS LIMITED & ORS APPELLANTS AND COMMISSIONER OF TAXATION RESPONDENT Matter No S135/2016 APPELLANT AND COMMISSIONER OF TAXATION RESPONDENT Bywater Investments Limited v Commissioner of Taxation Hua Wang Bank Berhad v Commissioner of Taxation [2016] HCA 45 16 November 2016 S134/2016 & S135/2016 ORDER Matter No S134/2016 Appeal dismissed with costs. Matter No S135/2016 The respondent's summons filed on 2 June 2016 be dismissed. Appeal dismissed with costs. On appeal from the Federal Court of Australia Representation A J Myers QC and F D O'Loughlin with T L Bagley for the appellants in S134/2016 (instructed by Henry Davis York) N C Hutley SC with T H J Hyde Page for the appellant in S135/2016 (instructed by Henry Davis York) A H Slater QC with K A Stern SC and J E Jaques for the respondent in both matters (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Bywater Investments Limited v Commissioner of Taxation Hua Wang Bank Berhad v Commissioner of Taxation Taxation – Income tax – Residence of company – Income Tax Assessment Act 1936 (Cth), s 6(1) – Where directors of appellant companies resident abroad – Where meetings of directors of appellants ostensibly held abroad – Where directors acted at direction of Australian resident who controlled appellants and made decisions then implemented by directors – Whether appellants residents of Australia for income tax purposes – Whether "central management and control" of appellants located abroad in place where boards of directors met – Whether, as question of fact and degree, real business and operations of appellants controlled and directed from Australia – Whether functions of appellants' boards of directors usurped – Effect of Esquire Nominees Ltd v Federal Commissioner of Taxation (1972) 129 CLR 177. Taxation  Income tax  Residence of company  Double taxation agreements  Tie-breaker provisions  Whether appellants entitled to protection from Australian income tax under relevant double taxation agreements – Whether "place of effective management" of appellant companies other than in Australia. Words and phrases – "Australian resident", "central management and control", "company's constitutional organs", "corporate residence", "formal organs", "place of effective management", "real business", "residency", "rubber-stamp", "superior or directing authority", "usurp". Income Tax Assessment Act 1936 (Cth), ss 6(1), 25A, Pt X. Income Tax Assessment Act 1997 (Cth), ss 6-5, 995-1. International Tax Agreements Act 1953 (Cth), Scheds 1, 15. FRENCH CJ, KIEFEL, BELL AND NETTLE JJ. These are appeals from a judgment of the Full Court of the Federal Court of Australia (Robertson, Pagone and Davies JJ) upholding a decision of Perram J that the central management and control of each of the appellant companies ("Bywater", "Chemical Trustee", "Derrin" and "HWB") was exercised in Australia and, therefore, that they were each resident in Australia for income tax purposes. In substance, the appellants contend that, because Perram J found that the directors of each appellant were resident abroad, and because meetings of those directors were held abroad, Perram J and the Full Court were bound to hold that the central management and control of each company was exercised abroad, and, therefore, that the appellants were not residents of Australia for income tax purposes. For the reasons which follow, that contention should be rejected and the appeals should be dismissed. The history of the litigation Each of Bywater, Chemical Trustee and Derrin claimed that, at relevant times, its central management and control was exercised in Switzerland and, as a result, that it was not resident in Australia within the meaning of s 6(1) of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act"). It followed, it was said, that a liability to tax in Australia, within the meaning of s 6-5, read with the relevant definitions in s 995-1, of the Income Tax Assessment Act 1997 (Cth) ("the 1997 Act"), did not arise in respect of income derived from sources outside Australia, nor in respect of income derived from sources within Australia, either because of the operation of Australia's double taxation agreement with Switzerland at the relevant time1, or alternatively, in the case of Chemical Trustee and Derrin, because of the operation of Australia's double taxation agreement with the United Kingdom2, those companies having been incorporated in the United Kingdom. 1 Agreement between Australia and Switzerland for the Avoidance of Double Taxation with respect to Taxes on Income, and Protocol [1981] ATS 5; International Tax Agreements Act 1953 (Cth), Sched 15. 2 Convention between the Government of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on (Footnote continues on next page) Bell Nettle HWB contended that, at relevant times, its central management and control was exercised in Samoa and, as a result, that it was not resident in Australia within the meaning of s 6(1) of the 1936 Act. It followed, it claimed, that it was not liable to tax in Australia on income derived from sources outside Australia within the meaning of s 6-5 of the 1997 Act. HWB did not contend that it was exempt from tax in Australia on ordinary income derived from sources within Australia. In the course of argument, it was accepted that, if, in the circumstances of this case, an appellant did have its central management and control in Australia within the meaning of s 6(1) of the 1936 Act, Australia would also be the appellant's "place of effective management" within the meaning of the applicable double taxation agreement3, and, therefore, that the appellant would not be entitled to protection from Australian taxation under that agreement. As will become apparent, in view of that concession, which was properly made in the circumstances of this case, it is unnecessary to deal with any issue other than the question of whether each company had its central management and control in Australia within the meaning of s 6(1) of the 1936 Act. The facts and findings at first instance The facts emerge from the judgment of Perram J. As there appears, the positions of the appellants were not in all respects identical and to some extent require separate consideration. Chemical Trustee Limited Chemical Trustee was incorporated in the United Kingdom and adopted its present name in 19964. During the relevant years of income (2001, Income and on Capital Gains [2003] ATS 22; International Tax Agreements Act 1953 (Cth), Sched 1. 3 Agreement between Australia and Switzerland for the Avoidance of Double Taxation with respect to Taxes on Income, and Protocol [1981] ATS 5, Art 4(3); Convention between the Government of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains [2003] ATS 22, Art 4(4). 4 Hua Wang Bank Berhad v Federal Commissioner of Taxation 2014 ATC ¶20-480 Bell Nettle 2003-2004, 2006-2007), all of the issued shares in the capital of Chemical Trustee were held by Guardheath Securities Ltd ("Guardheath"). Guardheath was a nominee company owned by the partners of a London firm of accountants, Lubbock Fine. Guardheath held the shares in Chemical Trustee as nominee for JA Investments Ltd ("JA Investments"), a company incorporated in the Cayman Islands. JA Investments was described in Chemical Trustee's abbreviated accounts as Chemical Trustee's ultimate parent5. The sole recorded director and shareholder of JA Investments was Mr Peter Martin Borgas ("Borgas") and, at material times, the only recorded directors of Chemical Trustee were Borgas, his wife, Mrs Winny Borgas, and their son, Mr Timothy Borgas. Between 2001 and 2007, the minutes of the meetings of directors of Chemical Trustee recorded that such meetings as there were were held in Neuchâtel, Switzerland and were attended by Borgas and Mrs Borgas6. Chemical Trustee claimed that, because Borgas resided and operated in Switzerland, Chemical Trustee's central management and control was situated in Switzerland and, therefore, that Chemical Trustee was not resident in Australia for income tax purposes7. Consequently, Chemical Trustee did not file an Australian income tax return for any of the relevant years of income. Nevertheless, on 12 August 2010, the respondent ("the Commissioner") issued assessments (and in one case, subsequently, an amended assessment) in which he assessed Chemical Trustee as liable to tax and penalties in respect of its share trading profits8. Chemical Trustee objected to the assessments and the objections were disallowed. Chemical Trustee appealed to the Federal Court. Before Perram J, Borgas gave evidence that he was the beneficial owner of the shares in JA Investments, made all the commercial judgments on behalf of Chemical Trustee and exercised all his powers as an appointed director to decide on Chemical Trustee's actions, in Neuchâtel9. Chemical Trustee also tendered a volume of documents which were said to show that Borgas had made all commercial judgments and decisions on behalf of Chemical Trustee in 5 Hua Wang Bank 2014 ATC ¶20-480 at 16,443 [9]-[10]. 6 Hua Wang Bank 2014 ATC ¶20-480 at 16,443-16,444 [11]. 7 See Income Tax Assessment Act 1936 (Cth), s 6(1) definition of "resident or resident of Australia". 8 Hua Wang Bank 2014 ATC ¶20-480 at 16,444 [16]-[17]. 9 Hua Wang Bank 2014 ATC ¶20-480 at 16,450-16,451 [62], 16,454 [85]. Bell Nettle Neuchâtel10. Perram J, however, rejected Borgas' testimony as untruthful and found that the documents had been falsely contrived to appear to corroborate Borgas' testimony11. Contrary to Borgas' testimony, Perram J concluded12 that, throughout the relevant years of income, Mr Vanda Russell Gould of Chatswood, New South Wales ("Gould") was "the Appointor" under the articles of association of JA Investments and thus that, "as a matter of legal theory", Gould had control of the affairs of JA Investments. That control was effected by Art 3, which enabled Gould to appoint additional members of the company, Art 43, which provided that the members could remove any director, and Art 24, which enabled the members to appoint directors. The legal capacity to control the company was in turn reflected in what Perram J described as the "indisputable reality" of a deed ("Offshore executed between Gould and Offshore Nominees Limited Nominees"), a company incorporated in the Cayman Islands, which evidenced that JA Investments was Gould's company and that the shares in the company were to be registered in the name of Offshore Nominees "acting solely as Nominee" for Gould and held "together with all dividends, bonuses and interests therein on behalf of [Gould] and [dealt with] as [Gould] may from time to time direct"13. Based on a detailed analysis of the documentary and oral evidence, Perram J concluded14 that JA Investments was in truth beneficially owned and controlled by Gould; Gould "micromanaged" Chemical Trustee's reporting and banking; Gould "undertook responsibility for Chemical Trustee's compliance with ASX requirements 'respecting on-market investments'"; Gould made all other decisions of Chemical Trustee, without the involvement of Borgas; the apparent ownership and directorial structure was "fake"; and "[n]othing happened in Neuchâtel but the generation of pieces of paper". 10 Hua Wang Bank 2014 ATC ¶20-480 at 16,451 [65]-[66]. 11 Hua Wang Bank 2014 ATC ¶20-480 at 16,451 [67], 16,456 [97]-[98]. 12 Hua Wang Bank 2014 ATC ¶20-480 at 16,454 [79]-[80]. 13 Hua Wang Bank 2014 ATC ¶20-480 at 16,454 [81]-[84]. 14 Hua Wang Bank 2014 ATC ¶20-480 at 16,452 [68], 16,465 [145], 16,482-16,483 Bell Nettle Derrin Brothers Properties Limited Derrin was incorporated in the United Kingdom on 19 May 1959 and changed its name to Derrin Brothers Properties Limited on 27 October 199215. At relevant times (2003-2005), its sole shareholders were Guardheath and Lordhall Securities Limited ("Lordhall"), which was another Lubbock Fine entity. Guardheath held all its shares as nominee for JA Investments. Lordhall held 50 of its 1,050 shares as nominee for JA Investments and the remaining 1,000 for MH Investments Limited ("MH Investments")16. MH Investments was incorporated in the Cayman Islands in 1994 and, until 2012, its sole shareholder was Offshore Nominees. Thereafter, Borgas was the sole shareholder17. The only directors of Derrin were Borgas and Mrs Borgas. The secretary was a United Kingdom company, M & N Secretaries Limited. The minutes of the meetings of directors of Derrin purported to record that all meetings of directors took place in Neuchâtel and were attended only by Borgas and In each of the 2003, 2004 and 2005 years of income, Derrin made profits on the purchase and sale of shares listed on the ASX. Derrin maintained that, because Borgas resided and operated in Switzerland, Derrin's central management and control was situated in Switzerland and, therefore, that Derrin was not resident in Australia for income tax purposes19. Consequently, Derrin did not file Australian tax returns for the years 2003-2005. As with Chemical Trustee, however, on 12 August 2010, the Commissioner issued notices of assessment (and subsequently an amended assessment) to Derrin for each of those years of income20. Derrin objected and when the objections were disallowed, Derrin appealed to the Federal Court. 15 Hua Wang Bank 2014 ATC ¶20-480 at 16,444-16,445 [19]. 16 Hua Wang Bank 2014 ATC ¶20-480 at 16,445 [20]-[21]. 17 Hua Wang Bank 2014 ATC ¶20-480 at 16,445 [21]. 18 Hua Wang Bank 2014 ATC ¶20-480 at 16,445 [23]. 19 See Income Tax Assessment Act 1936, s 6(1) definition of "resident or resident of Australia". 20 Hua Wang Bank 2014 ATC ¶20-480 at 16,445-16,446 [25]-[26]. Bell Nettle Perram J found21 that the position of Derrin was largely the same as that of Chemical Trustee. Derrin's apparent beneficial owners were JA Investments and MH Investments through the nominee structure with Guardheath and Lordhall. Gould was the ultimate beneficial owner22. The ownership structure was a "ruse" to conceal the fact that Gould was in control23. Borgas was not involved in the decision-making process. His role was to transact Gould's business as if it were his own and thereby to conceal the fact that Gould was in control. Perram J concluded24 that the entire ownership and directorial structure of Derrin was "a façade to conceal Mr Gould's role". Bywater Investments Limited Bywater was incorporated in the Bahamas on 20 June 1994 with two issued shares. At relevant times (2002-2007), those shares were held by Anglore SARL (société à responsibilité limitée) ("Anglore")25. It is not clear where Anglore was incorporated but its only office holders were Borgas, Mrs Borgas and one Mr Lonsdale. Anglore was held out to be a "corporate services business" based in Neuchâtel and it marketed itself as a "discrete, low profile fiduciary and administration company" offering the services of "the incorporation of companies located in many jurisdictions throughout the western world" and "the provision of directors and other corporate officers for such companies". Anglore was the principal vehicle through which Borgas provided "corporate services"26. It held its shares in Bywater as nominee for MH Investments27. The directors of Bywater were Borgas, Mrs Borgas and a company known as NTW Directors Inc of Nassau in the Bahamas. Under the law of the Bahamas, 21 Hua Wang Bank 2014 ATC ¶20-480 at 16,488 [315], 16,492 [339]. 22 Hua Wang Bank 2014 ATC ¶20-480 at 16,488-16,489 [318]-[320]. 23 Hua Wang Bank 2014 ATC ¶20-480 at 16,488 [315]. 24 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [339]. 25 Hua Wang Bank 2014 ATC ¶20-480 at 16,446 [27]. 26 Hua Wang Bank 2014 ATC ¶20-480 at 16,446 [27]. As to Anglore's involvement with Chemical Trustee and Derrin, see Hua Wang Bank 2014 ATC ¶20-480 at 27 Hua Wang Bank 2014 ATC ¶20-480 at 16,446 [28]. Bell Nettle Bywater was not required to hold directors' meetings or annual general meetings, and it did not do so. The only corporate records of Bywater were a cashbook that recorded payments from and receipts into Bywater's bank account. The cashbook was maintained at the offices of Lubbock Fine in London28. In the years of income between 2002 and 2007, Bywater made profits from the acquisition and sale of shares listed on the ASX. On 12 August 2010, the Commissioner issued assessments to Bywater in respect of those profits and for penalties. Bywater objected on the basis that, because Borgas resided and operated in Switzerland, Bywater's central management and control was situated in Switzerland and thus that Bywater was not resident in Australia for income tax purposes29. The objections were substantially disallowed and Bywater appealed to the Federal Court30. through MH Investments and that the respective roles of Gould and Borgas in relation to Bywater were the same as in relation to Chemical Trustee and Derrin. that Bywater was owned by Gould found31 HWB was not a bank in the ordinary sense of the word. It was incorporated in Samoa on 17 January 1994 under the terms of the International Companies Act 1987 (Samoa)32. At relevant times (2004, 2006-2007), the 250,000 issued shares in the capital of HWB were held by Pacific Securities Inc ("Pacific Securities"), which was also incorporated in Samoa under the International Companies Act. Before Pacific Securities acquired the shares, HWB issued a secured bearer debenture on terms (sustained by its articles of association and ss 15 and 57 of the International Companies Act) that, so long as the debenture remained unredeemed, the rights of the members of the company to vote or demand a poll 28 Hua Wang Bank 2014 ATC ¶20-480 at 16,446 [29]. 29 See Income Tax Assessment Act 1936, s 6(1) definition of "resident or resident of Australia". 30 Hua Wang Bank 2014 ATC ¶20-480 at 16,446 [30]-[31]. 31 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [340]. 32 Hua Wang Bank 2014 ATC ¶20-480 at 16,448 [46]. Bell Nettle were suspended. The effect of that was to place control of the company in the hands of persons other than members of the company33. On 4 March 1998, Pacific Securities resolved to convert the original secured debenture to a registered secured debenture in the name of "J.A. Investments Ltd, c/- Moore Stephens', 'Cayside' ... GRAND CAYMAN, CAYMAN ISLANDS", thereby placing control in the hands of JA Investments, which was one of Borgas' companies in the Cayman Islands34. Over the period 2000 to 2007, the HWB register of directors and secretaries recorded the names of several individuals and two companies (Westco Directors Ltd and Westco Secretaries Ltd). All but one of the individuals were persons employed by another entity, Asiaciti Trust Samoa Ltd ("Asiaciti"). Asiaciti was a Samoan-based international trustee and service provider, providing similar services to Anglore, including the provision of international companies, trusts, trustee services and international tax planning. All of the persons authorised to act on behalf of Asiaciti were, or had been, employees of Asiaciti's Samoan office35. During the 2004 and 2006-2007 years of income, HWB made profits on the purchase and sale of shares listed on the ASX. On 12 August 2010, the Commissioner issued assessments (which were later varied) to HWB in respect of those profits36. HWB objected and the objection was disallowed. HWB appealed to the Federal Court. Perram J found37 that HWB was controlled by JA Investments as one of Gould's "disguised entities" and that HWB's "curious debt-capital structure" had been erected in the hope of avoiding "attribution of [HWB's] profits to the beneficial owner under Australian Controlled Foreign Corporations taxation laws". Perram J concluded that Gould had used the services of the Asiaciti group to create the impression that HWB was being managed and directed in Samoa, in the same way that Gould had used the services of Anglore to assist him in 33 Hua Wang Bank 2014 ATC ¶20-480 at 16,448 [47]. 34 Hua Wang Bank 2014 ATC ¶20-480 at 16,448 [48]-[49]. 35 Hua Wang Bank 2014 ATC ¶20-480 at 16,448 [51]. 36 Hua Wang Bank 2014 ATC ¶20-480 at 16,449 [54]. 37 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [344]. See relevantly Income Tax Assessment Act 1936, Pt X. Bell Nettle creating the impression that decisions in relation to Bywater, Chemical Trustee and Derrin were made in Switzerland38. All of the depositors in HWB were either Gould's clients or entities controlled by Gould. HWB's predominant business was receiving money from Gould or his clients and then remitting it to related entities of those clients in the form of what purported to be loans from a bank39. It was a term of HWB's licence in Samoa that it would "accept 'as depositors only those parties or entities owned or controlled by the owners or controllers of [HWB] or other connected parties and entities'". Every transaction carried out by HWB was implemented on the instructions of Gould. Although the business of HWB was formally transacted in Samoa by employees of Asiaciti stationed there for that purpose, those persons acted at the direction of Gould on every occasion. Their role was restricted to that of a "back-office" nature40. None of them "had any commercial input into the decisions" they implemented41. None of them knew anything of the entities which deposited moneys with HWB or of the entities to which HWB purported to lend the moneys. As such, none of them was the least concerned with the risk of lending to or recovering from any of the entities. All the directors provided by Asiaciti did was document exactly what Gould told them to do and direct the flow of moneys accordingly. Perram J concluded42 that Gould owned and controlled HWB and that at all times the directors of HWB acted on his instructions. They were never in a position to exercise any judgment and in fact they did not exercise any judgment43. Critical findings at first instance In summary, therefore, Perram J found as follows: (1) Chemical Trustee's real business was conducted from Sydney by Gould. Borgas' role was "fake". The evidence that Gould ran 38 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [346]. 39 Hua Wang Bank 2014 ATC ¶20-480 at 16,493 [350], [353]. 40 Hua Wang Bank 2014 ATC ¶20-480 at 16,493-16,494 [354]-[357]. 41 Hua Wang Bank 2014 ATC ¶20-480 at 16,494 [357]. 42 Hua Wang Bank 2014 ATC ¶20-480 at 16,495 [364]. 43 Hua Wang Bank 2014 ATC ¶20-480 at 16,503 [418]. Bell Nettle every aspect of Chemical Trustee's business was overwhelming, notwithstanding that Gould had gone to great lengths to conceal that fact. The place of central management and control of Chemical Trustee was in Sydney, with Gould, and nowhere else44. (2) The same applied to Derrin45. (3) The same applied to Bywater46, subject only to the slight and relevantly that Bywater was incorporated in the Bahamas and did not purport to hold any directors' meetings. inconsequential difference (4) Gould owned HWB. His elaborate but ultimately unsuccessful attempts to make it appear otherwise suggested the presence of dishonesty. Every decision of consequence was made by Gould in Sydney. There was no occasion for the directors of HWB to exercise any judgment and in fact they did not. The real business of HWB was conducted by Gould from Sydney47, where its central management and control was located. The Full Court The Full Court found48 no reason to doubt Perram J's findings of fact and held that no error had been demonstrated in his Honour's reasoning or conclusion that each of the appellants had failed to discharge the burden of proof to establish that it was not resident in Australia for income tax purposes. Like Perram J, the Full Court rejected the appellants' contention that it necessarily followed from the fact that board meetings were purportedly held abroad that central management and control was situated abroad. Based on a survey of authorities, including this Court's decisions in Esquire Nominees Ltd v Federal Commissioner of 44 Hua Wang Bank 2014 ATC ¶20-480 at 16,488 [311]-[314], 16,502 [405], [408], 45 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [339], 16,502 [410]. 46 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [340]-[343], 16,502 [411]. 47 Hua Wang Bank 2014 ATC ¶20-480 at 16,502-16,503 [415]-[419]. 48 Bywater Investments Ltd v Federal Commissioner of Taxation (2015) 236 FCR 520 Bell Nettle Taxation49, the Full Court agreed with Perram J that the question of central management and control was a question of fact and degree and that, because the non-resident directors of the appellants never did more than mechanically carry out Gould's directions, the place of central management and control was, as a matter of fact, in Sydney where Gould made the substantive decisions50. Bywater, Chemical Trustee and Derrin's contentions Before this Court, Bywater, Chemical Trustee and Derrin contended that, contrary to the Full Court's reasoning, it was evident that none of them could have entered into any of the transactions said to have generated taxable income during the relevant years unless, before entering into each such transaction, Borgas made a decision to give effect to Gould's wishes that the company do so. On that basis, it was submitted, contrary to Perram J's and the Full Court's assessment of Borgas' role as a mere formality, Borgas' decision-making was critical to the conduct of each company and, as a matter of fact, comprised the exercise of central management and control. Counsel for Bywater, Chemical Trustee and Derrin argued that the error of the courts below was to focus on the fact of decision-making, rather than directing attention to the formal organs of control. The correct approach, it was submitted, was that essayed by Dixon J in Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation51 and North Australian Pastoral Co Ltd v Federal Commissioner of Taxation52 and subsequently applied at first instance and on appeal in Esquire Nominees53. It was contended that the Full Court departed from that correct approach by failing to appreciate that references in those authorities to the "real business" of a company and to the "superior or directing authority" of the company were references to the "constitutional organs" of the company and the "lawful organs with authority to bind the company"; which, in the case of each of Bywater, Chemical Trustee and Derrin, meant the board of directors of the company. It was submitted that, with two exceptions to be mentioned later in these reasons, a person cannot be regarded as 49 (1973) 129 CLR 177; [1973] HCA 67. 50 Bywater Investments (2015) 236 FCR 520 at 525-526 [11], 527-528 [15]-[17]. 51 (1940) 64 CLR 15; [1940] HCA 33. 52 (1946) 71 CLR 623; [1946] HCA 17. 53 (1973) 129 CLR 177. Bell Nettle part of the "constitutional organs" or, therefore, part of the "real business" or "superior or directing authority" of a company, unless the person is at law a director of the company. Consequently, a person making decisions regarding the affairs of a company cannot be regarded as exercising the central management and control of that company unless the person is a director of the company. Counsel for Bywater, Chemical Trustee and Derrin further contended that the fact that the directors of a company are in the habit of acting in accordance with the directions of a person external to the company's "lawful organs of corporate control" does not mean that the central management and control of the company is exercised by that person, and that that is so even in cases where directors invariably act upon the person's directions without any thought to the efficacy or propriety of the directions or to whether the directions are bona fide in the best interests of the company as a whole54. It was submitted that there are only two exceptions, which counsel described as "exception[s] to the true rule from De Beers"55, namely: (1) where an outsider has a legally enforceable right to compel directors to act in accordance with his or her directions; and (2) where an outsider usurps the functions of the board by making and implementing central management and control decisions without going through the formality of referring such decisions to the directors for implementation as if they were decisions of the board. It followed, it was contended, that, because Gould was not part of the "lawfully appointed", "constitutional organs" of the companies, and because there was no evidence that Gould had a legally enforceable right to compel Borgas to act in accordance with his directions, the Full Court should have held that it was the lawful directors who alone controlled Bywater, Chemical Trustee and Derrin. Asked why it should be supposed that the statutory concept of residence is limited to the formality of board membership rather than focusing upon the actuality of substantive decision-making and control, counsel for Bywater, Chemical Trustee and Derrin submitted that it was apparent from this Court's decision in Federal Commissioner of Taxation v Patcorp Investments Ltd56 that 54 Peters' American Delicacy Co Ltd v Heath (1939) 61 CLR 457 at 480-482 per Latham CJ; [1939] HCA 2. 55 Referring to De Beers Consolidated Mines Ltd v Howe [1906] AC 455. 56 (1976) 140 CLR 247; [1976] HCA 67. Bell Nettle terms used in cognate or related provisions of the 1936 Act are generally to be construed formalistically. Further, in counsel's submission, it had been commonplace throughout the more than 40 years since Esquire Nominees was decided for the directors of foreign subsidiaries of Australian companies to act as they were instructed to by their Australian parent companies, without fear that the central management and control of the subsidiaries would thereby be sited in Australia. Counsel contended that if that state of affairs were now to be altered, persons who had planned their affairs on the basis of that assumption would be severely disadvantaged. The better approach, he said, was to retain a presumption, in effect, that boards of directors do the work which they are appointed to do and, consequently, that central management and control inevitably resides where the board of a company habitually meets. By contrast, if the test of residence were held to depend on the state of mind of directors, and in particular on whether the directors of a foreign subsidiary actually turn their minds to directions from an outsider and then actually decide whether the directions are proper and appropriate, there would be a lamentable degree of uncertainty as to tax liability and a greatly increased volume of litigation. HWB's contentions HWB contended to similar effect that the Full Court erred by failing to appreciate that the "real business" or "superior or directing authority" of a company must be "organic" to the company and that Gould was not "organic" to HWB. In its written submissions, HWB also argued that the correct view of the authorities, and in particular of the decision of Gibbs J in Esquire Nominees, is that a company is resident where the organs of the company meet to make decisions, even if that amounts to nothing more than "rubber-stamping decisions made elsewhere". Thus, it was contended that, even where an outsider like Gould is the most influential person in the decision-making process of a company, and the board in fact does nothing more than mechanically rubber-stamp the outsider's decisions, the company is nonetheless resident where the board meets to do the rubber-stamping, not where the influential decision- maker actually makes the decisions. Like Bywater, Chemical Trustee and Derrin, HWB accepted there would be an exception to that where a board has ceased to function as a board and the outsider completely bypasses the board and implements decisions without any involvement of the board, as was found to be the case in Unit Construction Co Ltd v Bullock57. Bell Nettle In the course of oral argument, counsel for HWB also advanced an alternative and more confined argument that, because of what he characterised as the very simple nature of HWB's business model  as he put it, simply receiving funds on deposit and lending them back to entities related to the depositors on what was de facto, if not de jure, a back-to-back basis organised by Gould  it was axiomatic that it was in the best interests of HWB to proceed with each such transaction; and, for that reason, it required no explicit thought on the part of the directors in order for them to act as directors. In counsel's submission, that was a sufficient basis to conclude that the Samoan directors of HWB did exercise the central management and control of the company and, accordingly, that it should have been held that HWB was resident in Samoa. The Commissioner's contentions The Commissioner argued that there was no error in the reasoning of Perram J or of the Full Court. The correct approach was as laid down by Lord Loreburn LC in De Beers Consolidated Mines Ltd v Howe58. On that approach, a company's central management and control is located at the place where the company's "real business" is carried on, the real business of a company is carried on at the place from where its operations are controlled and directed, and the place whence its operations are controlled and directed is invariably "a pure question of fact to be determined, not according to the construction of this or that regulation or bye-law, but upon a scrutiny of the course of business and trading"59. Nothing said by Gibbs J or the Full Court in Esquire Nominees called into question the correctness of that approach. To the contrary, Gibbs J referred to the "well settled" course of authority that the "real business [of a company] is carried on where the central management and control actually abides" and thus that "[t]he question where a company is resident is one of fact and degree"60. Each of the members of the majority of the Full Court expressly agreed with that aspect of his Honour's reasoning61. 59 De Beers [1906] AC 455 at 458 per Lord Loreburn LC (all other members of the House agreeing at 460). 60 Esquire Nominees (1972) 129 CLR 177 at 189-190 (emphasis added). 61 Esquire Nominees (1973) 129 CLR 177 at 209 per Barwick CJ, 220 per Menzies J, Bell Nettle The Commissioner acknowledged that, in the result, Gibbs J held that a corporate trustee, set up as part of a tax avoidance scheme, was resident in Norfolk Island for income tax purposes notwithstanding that Australian-based accountants formulated the scheme and communicated to the directors of the corporate trustee in Norfolk Island every detail of the manner in which the scheme was to be carried out. But, in the Commissioner's submission, it was apparent that the reason the corporate trustee was held to be resident in Norfolk Island was that the Norfolk Island directors actually exercised independent judgment as to whether to implement the steps advised by the Australian accountants. By contrast, Perram J found62 that the role of the directors in the management and control of Bywater, Chemical Trustee and Derrin was "fake" and that the Samoan directors of HWB were restricted to "back-office" functions. Central management and control Section 6(1) of the 1936 Act provides that a company is resident in Australia if it is incorporated in Australia or, if not incorporated in Australia, if it carries on business in Australia and has either its central management and control in Australia or its voting power controlled by shareholders who are residents of Australia. The latter part of that definition, first legislated in 193063, represents a statutory adoption of the test of residence, formulated by Kelly CB and Huddleston B in Cesena Sulphur Company v Nicholson64 and later affirmed by the House of Lords in De Beers65, that a company's central management and control is located at the place where the company's operations are controlled and directed and the question of where a company's operations are controlled and directed is invariably a question of fact to be determined, not according to the construction of the company's constitution, but upon a scrutiny of the course of business and trading. The test was reiterated by the House of Lords in Bullock66 62 Hua Wang Bank 2014 ATC ¶20-480 at 16,494 [357], 16,502 [405], [410]-[411]. 63 Income Tax Assessment Act 1930 (Cth), s 2(i). 64 (1876) 1 Ex D 428 at 446-447 per Kelly CB, 453-454 per Huddleston B. 65 [1906] AC 455 at 458 per Lord Loreburn LC (with whom all other members of the House agreed at 460). 66 [1960] AC 351 at 360-361 per Viscount Simonds, 365-366 per Lord Radcliffe (with whom Viscount Simonds and Lord Goddard agreed at 363, 371), 372 per Bell Nettle and has been applied in numerous other decisions67. Thus, as Gibbs J stated in Esquire Nominees68, there is a long line of authority that makes clear that, for the purposes of s 6 of the 1936 Act, a company has its central management and control where the central management and control of the company actually abides, that being a question of fact and degree to be determined according to the facts and circumstances of each case. Ordinarily, the board of directors of a company makes the higher-level decisions which set the policy and determine the direction of operations and transactions of the company. Ordinarily, therefore, it will be found that a company is resident where the meetings of its board are conducted. But, contrary to the appellants' submissions, it does not follow that the result should be the same where a board of directors abrogates its decision-making power in favour of an outsider and operates as a puppet or cypher, effectively doing no more than noting and implementing decisions made by the outsider as if they were in truth decisions of the board. Accordingly, the question in this case is whether, in view of Perram J's findings concerning the role which Gould played and the absence of substantive decision-making by the boards of the appellants, the fact that the boards of the appellants were located abroad was sufficient to locate the residence of the appellants abroad. As will be seen, the course of authority comprised of the cases leading up to Esquire Nominees and the cases in point that have since been decided is largely, if not wholly, opposed to that conclusion. Hence, as will be explained, the appellants' submissions as to the effect of those authorities should be rejected. The course of authority (i) Cesena Sulphur As was earlier noticed, the starting point is the decision of Kelly CB and Huddleston B in Cesena Sulphur69. The issue in that case was whether either of two companies, Calcutta Jute Mills Company (Limited) and Cesena Sulphur Company (Limited), was resident in England. Calcutta Jute Mills Company 67 See, for example, In re Little Olympian Each Ways Ltd [1995] 1 WLR 560 at 566-568; [1994] 4 All ER 561 at 566-569; Wood v Holden [2006] 1 WLR 1393 at 1396 [6], 1404 [15] per Chadwick LJ (with whom Moore-Bick LJ and Sir Christopher Staughton agreed at 1418 [46], 1419 [47]). 68 (1972) 129 CLR 177 at 189-190. 69 (1876) 1 Ex D 428. Bell Nettle (Limited) was incorporated in England and its board of directors met in England, but it had no property in England. All of the operations connected with its business were wholly and exclusively carried on in India and it had appointed a firm of managers as its del credere agents in India with entire control of its business and works there. All of its profits were derived in India and all its moneys were kept, received, and dealt with by the management in India. Nothing came to the English directors apart from what was remitted from Calcutta (now Kolkata) from time to time to defray their necessary expenses. Apart from its registered office in London, the company had no office or other place of business in England, and its registered office in London was in fact the office of one of the directors of the company. All of the company's books of account, papers and other documents were kept in India70. Cesena Sulphur Company (Limited) was in most respects in an analogous position71. All of its manufacturing operations were carried on in Italy but its directors met in England, where they conducted what was described as the administrative part of the company's operations. London was where officers and agents were appointed and recalled, where their powers were granted and revoked, where whatever money was sent was received, and where dividends were declared and were payable72. Kelly CB and Huddleston B held73 that both companies were resident in England because the directors who comprised the governing body of each company met in England and there actually made the decisions concerning the acts of highest importance affecting the operations of the company. (ii) De Beers In De Beers, the question was whether a company was resident in England despite having its head office in South Africa, always holding its general meetings there, deriving all its profits out of diamonds raised and sold there under annual contracts to a syndicate for delivery there, and having some 70 Cesena Sulphur (1876) 1 Ex D 428 at 437-439. 71 Cesena Sulphur (1876) 1 Ex D 428 at 430-431. 72 Cesena Sulphur (1876) 1 Ex D 428 at 455-456 per Huddleston B. 73 Cesena Sulphur (1876) 1 Ex D 428 at 445-446, 451 per Kelly CB, 455-456 per Bell Nettle directors and life governors who lived there74. Lord Loreburn LC, with whom the other Law Lords agreed75, held that the question was to be decided according to the rule affirmed in Cesena Sulphur: that a company resides for income tax purposes "where its real business is carried on"; that "the real business is carried on where the central management and control actually abides"; and that the question of where central management and control actually abides is "a pure question of fact to be determined, not according to the construction of this or that regulation or bye-law, but upon a scrutiny of the course of business and trading"76. It was held accordingly77 that the company was resident in England because the majority of directors and life governors lived in England and the real control of the company was exercised in practically all the important business of the company, except the specifics of its mining operations, at meetings of directors in London. His Lordship noted in particular that the board in London invariably controlled the negotiation of contracts with the diamond syndicates, determined policy governing the disposal of diamonds and other assets, determined the working and development of mines, decided on the application of profits and determined board appointments. The first instance decision in Koitaki78 was the first case in this Court to consider the question of corporate residence for income tax purposes, in that case in the context of dual tax residence. The taxpayer was incorporated in New South Wales and its registered office was in Sydney. Its directors resided and met in Sydney and the meetings of its shareholders also were held in Sydney79. The company's seal, minute-book, register of members and records were kept at its registered office, and it employed a practising accountant as its Sydney manager who, subject to direction of the board of directors, did the work of the company in Sydney. Consequently, there was no doubt that the company was 74 [1906] AC 455 at 458-459. 75 De Beers [1906] AC 455 at 460. 76 De Beers [1906] AC 455 at 458. 77 De Beers [1906] AC 455 at 459. 78 (1940) 64 CLR 15. 79 Koitaki (1940) 64 CLR 15 at 17. Bell Nettle resident in Australia80. The issue, however, was whether the company was also a resident of Papua (now Papua New Guinea) by virtue of the rubber plantations it maintained at Koitaki near Port Moresby. If that were so, the company contended that a provision of the income tax legislation then in force81 operated to exempt it from tax on so much of its income as was derived from sale in Australia of rubber produced in Papua. At first instance, Dixon J found that the Papuan plantations were managed by a Papuan resident officer of the company acting under a power of attorney authorising him to manage, carry on and conduct in Papua the company's property, affairs and business, and conferring on him ample powers to that end. He had an office at Koitaki which was staffed by an assistant manager and a book-keeper, and some of the company's book-keeping was necessarily done there82. Dixon J held that, although it was possible for a company to reside for tax purposes in more than one place, the better view was that such a finding should not be made unless the control of the general affairs of the company is not centred in one country, but is in fact divided or distributed among multiple countries83. His Honour added that, although the matter was always one of degree, and residence might be constituted by a combination of factors, "one factor to be looked for is the existence in the place claimed as a residence of some part of the superior or directing authority by means of which the affairs of the company are controlled"84. Dixon J concluded that the central management and control of the company was not divided between Sydney and Papua because, although the company carried on the activities of growing, treating, packing and exporting rubber in Papua, and the manager in Papua had full authority over those processes, he was subject in those matters to close supervision from Sydney and his authority did not extend to the control of the general or corporate affairs of the company or to matters of policy or finance. Control of all important matters 80 Koitaki (1940) 64 CLR 15 at 17-18. 81 Income Tax Assessment Act 1936, s 23(n). 82 Koitaki (1940) 64 CLR 15 at 17. 83 Koitaki (1940) 64 CLR 15 at 18-19. 84 Koitaki (1940) 64 CLR 15 at 19. Bell Nettle was centred in Sydney85. An appeal to the Full Court of this Court was dismissed86. (iv) North Australian Pastoral The next case in this Court to deal with the question of corporate residence was North Australian Pastoral87. Like Koitaki, it was concerned with dual tax residence, although in relation to two different places within Australia. The company was incorporated in the Northern Territory and carried on a business of breeding, purchasing, depasturing and selling cattle on and from its cattle station, Alexandria, in the Territory. At relevant times its registered office was at Alexandria but, under a power in its articles, it had established a branch office in Brisbane88. The books of account of the company were kept at Alexandria, although a duplicate accounting was carried out at the Brisbane office. Entries relating to cash, banking and dividends originated in Brisbane but other entries originated at Alexandria. The company's chief bank account was in Brisbane but there was another at Cloncurry, Queensland, for the use of the station. The issued share capital was held by about 26 persons, of whom some resided in England and some in Victoria, Tasmania and Queensland. There were seven directors, of whom five resided in Queensland, one in Tasmania and one in England, the last-mentioned being represented by an alternate who resided in Brisbane. Until May 1943, the managing director, a Mr Fraser, lived near Brisbane and the station was under the control of a non-shareholder manager, a Mr Barnes, who lived at Alexandria. In May 1943, Barnes was appointed managing director and became a shareholder, and Fraser became chairman of Business transacted on the company's behalf at Alexandria consisted of things necessarily done by an agent, such as buying a truck and a lighting plant, buying bulls, effecting insurances and interviewing authorities about renewal of 85 Koitaki (1940) 64 CLR 15 at 18. 86 Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation (1941) 64 CLR 241 at 244 per Rich ACJ, 247 per Starke J and McTiernan J, 251-252 per Williams J; [1941] HCA 13. 87 (1946) 71 CLR 623. 88 North Australian Pastoral (1946) 71 CLR 623 at 625. 89 North Australian Pastoral (1946) 71 CLR 623 at 626. Bell Nettle leases. The manager made most of the more important decisions concerning the management of the station but some of the directors made visits to Alexandria on occasion in order to make policy decisions in conjunction with the manager90. Things needing the authority of the directors  such as affixing the seal to documents, approving of transfers of shares, arranging and watching the overdraft, appointing a secretary and recommending dividends  were dealt with by the directors. During the 1940 and 1941 years of income, all of the meetings of the directors and shareholders of the company were held at the Brisbane office91. The secretary of the company resided in Brisbane and kept the common seal and share register in Brisbane at that time. Later, however, in order to improve the company's chances of qualifying for a then extant legislative exemption92 from income tax on income derived from primary production or mining in the Northern Territory by a resident of the Territory, the company began holding meetings of directors and shareholders at Alexandria and appointed a new secretary, who resided and kept the seal and share register there93. Dixon J observed that there was an increased tendency in judgments of the House of Lords to treat the question of dual tax residence as being "altogether a question of degree and of fact"94 and his Honour approached the case on that basis. He thus identified the salient facts as being that the company was incorporated in the Territory, its undertaking was wholly within the Territory and its registered office and public officer for legal and fiscal purposes were located in the Territory95. The manager's capacity for control and management was essentially localised, but he "took the initial responsibility in everything that most really affected the success or failure of the company's undertaking"96. It was also significant that, when the directors met in Brisbane, it was for their common convenience rather than to facilitate the operations of the company. Their visits 90 North Australian Pastoral (1946) 71 CLR 623 at 627. 91 North Australian Pastoral (1946) 71 CLR 623 at 633. 92 Income Tax Assessment Act 1936, s 23(m). 93 North Australian Pastoral (1946) 71 CLR 623 at 626. 94 North Australian Pastoral (1946) 71 CLR 623 at 630. 95 North Australian Pastoral (1946) 71 CLR 623 at 633. 96 North Australian Pastoral (1946) 71 CLR 623 at 633. Bell Nettle to the station were an acknowledgment of the necessity of reaching more important decisions of policy in or after consultation with the manager and of forming an opinion about them at the place where the business was conducted. Dixon J characterised97 those visits as the occasional exercise of the superior controlling authority where the business was carried on. A further consideration was the practice of keeping not merely station accounts at Alexandria but also a full set of books98. Ultimately, however, what his Honour appears to have regarded as determinative was that the company carried on its substantial business in the place of its incorporation. He noted that, up to that point, there had not been any other case where, although a company carried on its substantial business in the place of its incorporation, it had been held not to reside in that place99. In the result, his Honour held that the company was resident in the Northern Territory throughout the relevant period notwithstanding that for part of the period board meetings had been conducted in Brisbane. Counsel for HWB contended that it was significant that the company in North Australian Pastoral was held to be resident in the Northern Territory despite the fact that the company's practice of holding board meetings in the Territory was in part, if not wholly, motivated by concerns that the company might not otherwise be recognised as resident in the Territory for tax purposes. It was submitted that North Australian Pastoral marked the commencement of this Court's acceptance and approval of the idea that the location of a company's board meetings will always be the place of residence of that company, even if the only purpose for convening the meetings in that place is the gaining of a tax advantage. That submission should be rejected. Relevantly, all that North Australian Pastoral established was that, on the facts of that case100, the company was resident in the Territory. Granted, that was held to be so despite the fact that, for some of the time, the board had held its meetings in Brisbane and only later began to hold meetings in the Territory in the hope of securing a tax advantage by the company's residence in the Territory. But of itself that says nothing about 97 North Australian Pastoral (1946) 71 CLR 623 at 633-634. 98 North Australian Pastoral (1946) 71 CLR 623 at 626. 99 North Australian Pastoral (1946) 71 CLR 623 at 634. 100 See particularly (1946) 71 CLR 623 at 633. Bell Nettle what the result should be in other circumstances, and particularly whether a company should be taken to be resident outside Australia merely because what is only nominally a board of directors of the company has been set up in another country with the intention and effect that it do no more than habitually implement, without demur, instructions formulated in Australia. Waterloo Pastoral Co Ltd v Federal Commissioner of Taxation101 was also concerned with dual tax residence. As in North Australian Pastoral, the question was whether the taxpayer was resident in the Northern Territory for the purposes of the earlier-mentioned exemption from income tax. Williams J stated102 that he saw no reason to differ from what Dixon J had said on the subject of dual tax residence in Koitaki. His Honour then reiterated that the crucial test is where the real business of the company is carried on, not in the sense of where it trades, but in the sense of from where its operations are controlled and directed. He continued103: "A company can only have more than one residence where this control and direction is divided so that it is exercised to some extent from more than one place. In most instances a company resides where its board of directors habitually meets for the purpose of conducting the business of the company. But it was pointed out by Lord Loreburn LC in De Beers Consolidated Mines Ltd v Howe (where the company was incorporated and owned mines in South Africa), in a passage which has been frequently cited, that the question where the real control abides 'is a pure question of fact to be determined, not according to the construction of this or that regulation or bye-law, but upon a scrutiny of the course of business and trading.'" (footnote omitted) The company in Waterloo Pastoral was incorporated in, and operated its business from, the Northern Territory. Its managing directors were resident in Sydney and the board of directors, which was empowered by the articles of association to require that decisions be subject to its confirmation, met mostly in Sydney during the relevant period. Williams J found104, however, that the 101 (1946) 72 CLR 262; [1946] HCA 30. 102 Waterloo Pastoral (1946) 72 CLR 262 at 266. 103 Waterloo Pastoral (1946) 72 CLR 262 at 266-267. 104 Waterloo Pastoral (1946) 72 CLR 262 at 265-266, 267. Bell Nettle company was resident in the Northern Territory, whether or not it was also resident in Sydney, because the "ultimate operative decisions" were made during visits to the stations in the Northern Territory, whereby tentative decisions made in Sydney would be given effect to or modified on the basis of local conditions assessed "on the spot" at the stations. As such, effective control was exercised from the Territory. (vi) Malayan Shipping On its facts, Malayan Shipping Co Ltd v Federal Commissioner of Taxation105 comes closer to the present appeals but adds little of relevance. In that case, it was conceded that central management and control of a company incorporated in Singapore was exercised in Melbourne, where a Mr Sleigh resided. That was because, inter alia, the articles appointed Sleigh managing director; empowered him to appoint and remove other directors; provided that a resolution of directors was of no force unless first approved by Sleigh; and required that the seal of the company not be affixed without the authority of Sleigh. The only business done by the company during the relevant period was to charter a ship and to sub-charter it on a number of occasions, that charter being effected in London on instructions cabled from Sleigh in Melbourne, and the sub-charters being organised by Sleigh in Melbourne, where he prepared all the documents before sending them to Singapore for execution. It was contended that, although the central management and control of the company was located in Melbourne, upon a proper construction of the definition of "resident" in s 6 of the 1936 Act, a company should not be regarded as resident in Australia, notwithstanding that its central management and control was exercised from Australia, unless the company were also carrying on its business operations in Australia. Unsurprisingly, Williams J rejected that contention106. (vii) Bullock The decision of the House of Lords in Bullock is significant for present purposes because it expressly rejected107 the notion that a company must always be taken to be resident where its board is resident. There, three taxpayer 105 (1946) 71 CLR 156; [1946] HCA 7. 106 Malayan Shipping (1946) 71 CLR 156 at 159-160. 107 [1960] AC 351 at 362-363 per Viscount Simonds, 370 per Lord Radcliffe (with whom Viscount Simonds and Lord Goddard agreed at 363, 371), 373-374 per Lord Cohen, 375 per Lord Keith of Avonholm. Bell Nettle companies were registered in Kenya and each company had a board of directors situated in Kenya. But, as the Court of Appeal had found108: "The directors of the [Kenyan] subsidiaries did not all have access to all the documents of, or information concerning, the companies of which they were directors. The minute books of the directors' meetings of each of the [Kenyan] subsidiaries, recorded, in the main, only formal business (such as particulars of annual general meetings, appointments and retirements of the directors, secretaries and accountants, operation of banking accounts or the affixing of the companies' seals to documents and the acquisition or transfer of mineral claims or other property) at meetings held on irregular dates; in a few instances they recorded more important business, but in each such instance a decision had in fact been taken by the directors of [the parent company] in London and the record in the minute book of the [Kenyan] subsidiary merely formally records its implementation. ... resolutions concerning At all material times the whole of the trading policy of the [Kenyan] subsidiaries was dictated by the board of directors of [the parent company]". The House of Lords held that the real management and control was exercised by the directors of the parent holding company in London, despite that arrangement not being authorised by the memoranda or articles of the Kenyan companies. In rejecting the contention that the central management and control of the companies should be taken to be located in Kenya because the directors resided there, Viscount Simonds stated109: "The business is not the less managed in London because it ought to be managed in Kenya. Its residence is determined by the solid facts, not by the terms of its constitution, however imperative. ... I come, therefore, to the conclusion, though truly no precedent can be found for such a case, that it is the actual place of management, not that place in which it ought to be managed, which fixes the residence of a company. If it were not so, the result to the Revenue would be serious enough. In how many cases would a limited company register in a foreign country, 108 Bullock v Unit Construction Co Ltd [1959] Ch 315 at 320-321. 109 Bullock [1960] AC 351 at 363. Bell Nettle prescribe by its articles that its business should be carried on by its directors meeting in that country, and then claim that its residence was in that country though every act of importance was directed from the United Kingdom?" Bywater, Chemical Trustee and Derrin contended that Bullock was materially different from this case because, whereas in Bullock the formalities of the board meetings in Kenya were largely ignored and the real business of the Kenyan subsidiaries was conducted by the board of the parent holding company in London, in this case it was apparent from the minutes that the formalities of board meetings had been punctiliously observed. On that basis, it was submitted that, in contrast to Bullock, the boards of directors here had not been usurped, as all of the decisions made by Gould in Sydney were duly channelled through the boards of Bywater, Chemical Trustee and Derrin in Neuchâtel and implemented by board resolutions duly passed at meetings of the boards and that, for that reason, the central management and control of Bywater, Chemical Trustee and Derrin was exercised in Neuchâtel. That contention faces difficulties at several levels. First, as was earlier noticed, in the case of Bywater, there were no minutes and the only evidence of any meetings of directors was evidence given by Borgas, which Perram J rejected as untruthful110. In the case of Chemical Trustee and Derrin, there were minutes recording meetings of the boards but those minutes reveal that there was seldom more than one meeting of directors per year in addition to annual general meetings. The minutes refer only to formal business, such as the adoption of the annual accounts, the absence of a declaration of any dividend, directors' remuneration and auditors' remuneration. There is no written record of the boards of Chemical Trustee or Derrin ever considering any item of substantive business or corporate policy. For all that appears, such, if any, business as was implemented from Neuchâtel was implemented by Borgas, acting on the direct instructions of Gould, without consultation with the boards of directors. Relevantly, that is identical to the facts in Bullock111. Secondly, as was earlier recorded, Perram J found as a fact112 that Borgas was simply Gould's puppet or cypher; the meetings of directors in Neuchâtel 110 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [341]. 111 [1959] Ch 315 at 320-321; see [58] above. 112 Hua Wang Bank 2014 ATC ¶20-480 at 16,474 [219], 16,485 [295], 16,488 [308], Bell Nettle were mere window dressing that consisted of rubber-stamping decisions actually made by Gould in Sydney and implemented by Borgas as Gould's factotum; Borgas' role as a director was fake; and the minutes of Chemical Trustee and Derrin were contrived to make it appear otherwise. That leaves no reason to suppose that Gould and Borgas paid punctilious attention to the formal governance structure of the companies or to anything else, apart from that which was considered necessary to conceal Gould's involvement in the management and control of Bywater, Chemical Trustee and Derrin. Thirdly, even if all of the formalities had been scrupulously observed, in the sense that all decisions made by Gould in Sydney were communicated to Borgas for formal adoption at a board meeting and were in fact formally adopted at such a meeting before being implemented, there would remain Perram J's undisputed findings of fact113 that the directors acted "without thought" at those meetings because they "took no part to any extent in [the] decision-making processes". Given the "well settled" line of authority114 that the question of where the central management and control of a company actually abides is to be determined by the solid facts and not by the terms of the company's constitution, why should meetings of directors which are no more than mere window dressing, serving only to rubber-stamp decisions actually made by others in another place, be regarded as the actual exercise of central management and control? The same applies to HWB. Perram J found115 that HWB's management structure was erected to provide an "illusion" that Gould was not running HWB, whereas, in fact, Gould alone "controlled [HWB's] every move" and the directors exercised no judgment in their capacity as directors. It was submitted that control and management of HWB could not be located with Gould because effective decisions, which were ex facie profitable, were being made by the board of directors in Samoa. For the reasons given above regarding the difference between actual decision-making and rubber-stamping, and for reasons that follow116, that submission should be rejected. 113 Hua Wang Bank 2014 ATC ¶20-480 at 16,502 [406]. 114 Esquire Nominees (1972) 129 CLR 177 at 189-190 per Gibbs J. 115 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [346], 16,493 [352], 16,503 [417]. 116 See [87] below. Bell Nettle (viii) Esquire Nominees The appellants argued that, although the place where central management and control of a company actually abides is a question of fact, it is a question of which facts. It was submitted that the decision of Gibbs J in Esquire Nominees117, and the authorities on which that decision was based, mandate that the "real business" or "superior or directing authority" of a company are, as a matter of fact, to be found where the board of the company holds its meetings, even if the only thing done at those meetings is to record decisions actually made elsewhere by an outsider and the only purpose of situating the board in that place is to ground a claim that the company is not resident in Australia for tax purposes. That contention should also be rejected. The authorities on which the decision in Esquire Nominees was based included De Beers118, both the first instance119 and Full Court120 decisions in Koitaki, North Australian Pastoral121 and Bullock122. As has been explained, none of those decisions supports the idea that a company is taken to be resident where its board meetings are held even if the meetings are mere window dressing comprised of rubber-stamping decisions actually made elsewhere by others and held in that place in the hope of avoiding tax liability in the place where the decisions are actually made. It is true that Esquire Nominees involved a contrived tax avoidance scheme, and it is also true that the company in that case was held to be resident where its board chose to meet as part of that scheme. But, despite what the appellants described as factual similarities between these appeals and Esquire Nominees, and what was submitted to be the improbability that the Norfolk Island directors in Esquire Nominees exercised any independent judgment, it is clear that Gibbs J found as a fact that the board meetings were held on Norfolk Island and that substantive decisions were made by the board. Admittedly, the directors complied with the 117 (1972) 129 CLR 177. 119 (1940) 64 CLR 15. 120 (1941) 64 CLR 241. 121 (1946) 71 CLR 623. Bell Nettle advice of Australian accountants. But, as Gibbs J found123, they did so "because they accepted that it was in the interest of the beneficiaries [of the trust], having regard to the tax position, that they should give effect to the scheme" and, if they had been advised to do something "which they considered improper or inadvisable", "they would [not] have acted on the instruction". In contrast to the facts of the present appeals, Esquire Nominees was not a case of a board rubber-stamping decisions made by others. Counsel for Bywater, Chemical Trustee and Derrin submitted nonetheless that it was apparent from the reasons of Gibbs J that the fact determinative of the result in that case was that the Australian accountants did not have a legal power of control over the directors of the company, rather than that the directors actually made substantive decisions. His Honour reasoned thus124: "[I]t is obvious that what the appellant did in relation to the Manolas Trust was done in the course of carrying out a scheme formulated in Australia and that [the Australian accountants] not only communicated to the appellant particulars of the scheme but advised the appellant in detail of the manner in which it should be carried out. But if it be accepted that the appellant did what [the accountants] told it to do in the administration of the various trusts, it does not follow that the control and management of the appellant lay with [the accountants]. That firm had no power to control the directors of the appellant in the exercise of their powers or the A class shareholders in the exercise of their voting rights. Although it is doubtless true that steps could have been taken to remove the appellant from its position as trustee of one or more of the trust estates, [the accountants] could not control the appellant in the conduct of its business of a trustee company. The firm had power to exert influence, and perhaps strong influence, on the appellant, but that is all. The directors in fact complied with the wishes of [the accountants] because they accepted that it was in the interest of the beneficiaries, having regard to the tax position, that they should give effect to the scheme. If, on the other hand, [the accountants] had instructed the directors to do something which they considered improper or inadvisable, I do not believe that they would have acted on the instruction. It was apparent that it was intended that the appellant should carry on its business of trustee company on Norfolk Island. It was in my opinion managed and controlled there, none the less 123 (1972) 129 CLR 177 at 191. 124 Esquire Nominees (1972) 129 CLR 177 at 190-191. Bell Nettle because the control was exercised in a manner which accorded with the wishes of the interests in Australia. The appellant was, in my opinion, a resident of Norfolk Island." (emphasis added) Counsel's submission should be rejected. Granted, Gibbs J referred in the first of the emphasised sections of the above passage of his Honour's reasoning to the fact that the Australian accountants had no power to control the directors of the company in the exercise of their powers. It may be that his Honour had in mind, and intended to distinguish, a case like Malayan Shipping, where one of the factors that was instrumental in fixing the residence of the company in Melbourne was that the articles of association provided that a resolution of directors was of no effect unless first approved by Sleigh in Melbourne125. But nothing Gibbs J said suggests that a company must be taken to be resident where its board of directors meets unless some other person has a legally enforceable power to control the board in its decision-making. Nor can it be supposed that his Honour intended that result; for that would run counter to Bullock, and Gibbs J referred to Bullock with evident approval as part of the line of authority that informed the meaning of corporate residence126. Further, if Gibbs J had considered the lack of a legal power to control the Norfolk Island directors to be determinative, there would not have been any purpose in his Honour going on to find, in the second of the emphasised sections of the above reasoning, that the Norfolk Island directors actually made substantive decisions. That was found to be so because, critically, the directors would not have done "something which they considered improper or inadvisable" and they complied with the advice of the Australian accountants "because they accepted that it was in the interest of the beneficiaries" to do so. Plainly enough, his Honour's conclusion that the company was a resident of Norfolk Island was based squarely on those findings. Far from contradicting Bullock, Esquire Nominees recognises, as was recognised also by the House of Lords, that the absence of legal power to control a board of directors is not determinative of whether that board is actually itself exercising central management and control. Gibbs J distinguished Bullock127 on the basis that, in contrast to the Kenyan boards of directors in that case (which did not make any substantive decisions in that capacity), the board of directors in Esquire Nominees did make substantive decisions when electing to adopt the advice of the Australian accountants and it 125 Malayan Shipping (1946) 71 CLR 156 at 158. 126 Esquire Nominees (1972) 129 CLR 177 at 189. 127 Esquire Nominees (1972) 129 CLR 177 at 190-191. Bell Nettle did so on the basis that the advice was considered to be in the best interests of the company. (ix) More recent authority More recently, in the United Kingdom, in Wood v Holden128, the Court of Appeal drew a distinction between cases where central management and control is exercised through a company's constitutional organs on the basis of external advice or influence, but in fulfilment of the constitutional organ's functions, and cases where the functions of the company's constitutional organs are usurped by an outsider who dictates the decisions to be implemented, independently of or without regard to those constitutional organs129. The appellants invoked the Court of Appeal's decision as support for their contention, earlier rejected, that, provided all decisions are formally channelled through the board of a company, the "real business" or "superior or directing authority" of the company is to be taken to be located where the board of the company holds its meetings even if those meetings are perfunctory, in the sense of merely recording decisions made elsewhere by an outsider, and are convened in that location to provide a basis for claiming that the company is resident other than where the outsider resides. The appellants' submission gains no additional support from Wood v Holden. So far as appears, the reasoning of the primary judge, which was approved by the Court of Appeal130, rested heavily on the factual circumstances of the case, including that the only activities of the company in question were to enter into a contract to purchase shares from its parent company to the sum of an amount funded by an interest free loan from the parent company, and then to hold those shares. The primary judge considered that a case of that kind involved different considerations from a case involving the residence of a company with an active continuing business131. In explication of that conclusion, his Lordship 128 [2006] 1 WLR 1393. 129 Wood v Holden [2006] 1 WLR 1393 at 1410-1411 [27] per Chadwick LJ (with whom Moore-Bick LJ and Sir Christopher Staughton agreed at 1418 [46], 1419 130 Wood v Holden [2006] 1 WLR 1393 at 1410 [27] per Chadwick LJ (with whom Moore-Bick LJ and Sir Christopher Staughton agreed at 1418 [46], 1419 [47]). 131 Wood v Holden (Inspector of Taxes) [2005] EWHC 547 (Ch) at [25]. Bell Nettle referred to four cases132, of which one was Esquire Nominees, that he characterised as involving persons based in one jurisdiction (commonly, a high tax jurisdiction) causing companies to be established in other jurisdictions (commonly, low or no tax jurisdictions) in which the local boards did not take initiatives but responded to proposals presented to them. He observed that, in each of those cases, Bullock had been distinguished on the basis that, whereas in Bullock the parent company itself exercised central management and control, effectively bypassing the local boards altogether, in the four mentioned cases "the parent companies or their equivalents, while telling the local boards what they wished them to do, left it to the local boards to do it"133. In contrast to Wood v Holden, each of the appellants in the present case had an active continuing business of share trading and, in the case of HWB, money lending. And in contradistinction to Esquire Nominees, where the Norfolk Island board was found actively to have considered and approved the advice of the Australian accountants, it was not established that there were any meetings of the appellants' boards at which any part of the business of share trading or money lending was considered or approved, or at which any other of Gould's directions was considered or approved. The appellants submitted that, although that might be so, properly understood, the distinction drawn in Wood v Holden  between a parent company itself exercising central management and control, and so bypassing a local board altogether, and a parent company telling a local board what it wishes the board to do but leaving it to the board to do it  was intended to encompass within the second category of that distinction both a situation where a local board fails to give active consideration to what it is left to do and a situation where the local board actively considers what it is left to do according to the best interests of the company. That does not appear to be the case. In Wood v Holden, the primary judge spoke of the difference between "exercising management and control" and "being able to influence those who exercise management and control": a difference between "on the one hand, usurping the power of a local board to take decisions concerning the company and, on the other hand, ensuring that the local board 132 Little Olympian Each Ways [1995] 1 WLR 560; [1994] 4 All ER 561; Esquire Nominees (1973) 129 CLR 177; New Zealand Forest Products Finance NV v Commissioner of Inland Revenue [1995] 2 NZLR 357; Untelrab Ltd v McGregor [1996] STC (SCD) 1. 133 Wood v Holden [2005] EWHC 547 (Ch) at [27]. Bell Nettle knows what the parent company desires the decisions to be"134. At its base, that distinction appears to rest on whether the local board actually considers and makes a decision to adopt the parent company's recommendations as bona fide in the best interests of the subsidiary, or whether the local board just mechanically implements directions from the parent company because it is so directed. The same notion appears to be implicit in a later observation of Patten LJ (dissenting in the result) in the Court of Appeal in Revenue and Customs Commissioners v Smallwood135 that central management and control remained with a local board, notwithstanding that the directors were in the habit of acting in accordance with the advice of an outsider, because136: "they retained their right and duties as trustees to consider the matter at the time of alienation and did not ... agree merely to act on the instructions which they received". If, however, the decisions in Wood v Holden and Smallwood are properly to be understood as holding that it is sufficient, in order to locate central management and control of a company in a foreign jurisdiction, to set up there a board of directors that does no more than implement directions from outside without active consideration of the best interests of the company and without actually deciding on that basis that the directions should be implemented, then, with all respect, those decisions should not be followed. For, given that the fact that the constitution of a company requires that board meetings be held in a place is not enough of itself to locate central management and control of the company in that place137, it cannot be enough to locate the residence of a company in a place for the directors of a company to meet in that place solely for the purpose of maintaining a charade of documenting decisions made elsewhere by others. No doubt, such meetings provide an appearance of order and regularity to the affairs of the company. But, if the making of decisions by an outsider constitutes "usurpation" where there are no board meetings138, why logically is there any less 134 Wood v Holden [2005] EWHC 547 (Ch) at [25]. 135 [2010] BTC 637. 136 Smallwood [2010] BTC 637 at 660 [63]. 137 Bullock [1960] AC 351 at 363 per Viscount Simonds. 138 Bullock [1960] AC 351 at 374 per Lord Cohen. Bell Nettle "usurpation" where there are board meetings convened solely for the purpose of the directors acting out the pretence of making those decisions? To take this case as an example, Perram J found that it was intended from the outset that Gould would make all the decisions and that Borgas' only role would be to implement Gould's decisions. Hence, as his Honour concluded139, Borgas' role as a director was a "fake". There is no more support to be found, in principle or authority, for the idea that a company should be regarded as resident in the place where its "fake" board of directors is set up, than there is for the notion that a company should be regarded as resident in a place from which its board would have exercised its functions had they not been usurped by an outsider dictating the decisions to be made. In truth, in each case, the constitutional organs of the company do not, and are not intended to, exercise central management and control of the company. As a matter of long-established principle, the residence of a company is first and last a question of fact and degree to be answered according to where the central management and control of the company actually abides. As a matter of long-established authority, that is to be determined, not by reference to the constituent documents of the company, but upon a scrutiny of the course of business and trading. Accordingly, to conceive of the task in terms of identifying established exceptions to the "true rule from De Beers" (as counsel for Bywater, Chemical Trustee and Derrin suggested) is both antithetical to the profoundly factual nature of the test and unhelpful. Each case depends on its own facts and circumstances, albeit that those cases that have been decided may provide a degree of guidance in relation to those still to come. The policy arguments As was earlier noticed140, counsel for Bywater, Chemical Trustee and Derrin invoked this Court's decision in Patcorp as support for a formalistic approach to the construction of tax legislation, which it was said would provide certainty to those persons and their advisers responsible for the organisation of business structures and transactions. It was contended that, as applied to the statutory concept of residence, such an approach requires that the management and control of a company should inevitably reside with the board, and it was submitted that to hold otherwise would be productive of considerable uncertainty and increased litigation. 139 Hua Wang Bank 2014 ATC ¶20-480 at 16,488 [314], 16,502 [405]. 140 See [33] above. Bell Nettle Recourse to Patcorp is not persuasive. Relevantly, the Court in that case held141, consistently with established authority142, that a person who is a beneficial holder of shares in a company, but who is not and has not been entered in the register as the holder of those shares, cannot accurately be described as a "member" of the company or therefore as a "shareholder" within the meaning of the 1936 Act. There is nothing about that conclusion which suggests that the statutory concept of corporate residence should be approached otherwise than, as indicated in De Beers143, as "a pure question of fact to be determined, not according to the construction of this or that regulation or bye-law, but upon a scrutiny of the course of business and trading". The concerns raised by each appellant about uncertainty and the likelihood of an increase in litigation are exaggerated. There is little which is uncertain about the difference between a board of directors that actually meets and makes independent judgments, and a board whose meetings are mere window dressing comprised of rubber-stamping decisions actually made elsewhere by others. In Australia, directors of a corporation are required by law144 to inform themselves about the subject matter of decisions relating to the corporation to the extent that they reasonably believe is appropriate and to make decisions on the basis of what they rationally believe is in the best interests of the corporation. Similar obligations apply in the United Kingdom145. Experience suggests that there is no particular difficulty in determining whether or not directors have complied with those obligations, still less in determining whether a board has so abrogated its decision-making power as to become in effect a mere puppet or cypher for the implementation of instructions from another. Civil actions and prosecutions for breach of directorial duties are routinely prosecuted on that basis. Equally, Australia's income tax legislation has long contained provisions which depend on 141 Patcorp (1973) 140 CLR 247 at 273 per Mason J (decision affirmed on appeal). 142 See Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 16 per Dixon CJ; [1963] HCA 21. 143 [1906] AC 455 at 458 per Lord Loreburn LC (with whom all other members of the House agreed at 460). 144 Corporations Act 2001 (Cth), s 180. 145 Companies Act 2006 (UK), ss 172-174. Bell Nettle the ascertainment of the purpose of a taxpayer146 and there is a substantial body of jurisprudence147 devoted to how the purpose of a taxpayer is to be ascertained. Possibly, the approach favoured by the appellants would be productive of less litigation than might otherwise occur. But, as Lord Radcliffe observed in Bullock148, residence has hitherto been treated as a question of fact as to which an inquiry must be conducted. Hence, rejection of the contention that the fact of a company's board meeting being held abroad is sufficient in itself to locate the residence of a company abroad, and the consequent requirement to inquire into and investigate the actual source of control, is unlikely to add materially to the Commissioner's already heavy burden. The appellants further contended that, since Esquire Nominees was decided, there has been a generally accepted understanding in courts and within the academy that the central management and control of a company is taken to be exercised where the company's board meets to exercise its constitutional function, and therefore that a company will be taken to be resident abroad if its board meets abroad even if the board does no more than mechanically implement instructions given by residents of Australia. In the appellants' submission, it is also significant that, although the initial response to Esquire Nominees was to inquire into whether Australia should adopt a more stringent test of residence, whereby a company would be treated as an Australian resident if its board "habitually responds to instructions formulated in Australia", the Commonwealth Taxation Review Committee ("the Asprey Committee") recommended against changing the test of residence to "include the exercise of control and direction of the company's affairs otherwise than in the formal proceedings of the board- room"149. Instead, legislation was enacted150 to deal with income and profits of 146 See "profit arising from the sale by the taxpayer of any property acquired by him for the purpose of profit-making" in definition of "assessable income" of taxpayer: Income Tax Assessment Act 1936, s 26(a) (as made); Income Tax Assessment Act 1936, s 25A (in force). 147 See, for example, McClelland v Federal Commissioner of Taxation (1970) 120 CLR 487 (PC); Macmine Pty Ltd v Commissioner of Taxation (Cth) (1979) 53 ALJR 362; 24 ALR 217. 148 [1960] AC 351 at 371 (Viscount Simonds and Lord Goddard agreeing at 363, 371). 149 Taxation Review Committee, Full Report, (31 January 1975) at 255 [17.15]. 150 Taxation Laws Amendment (Foreign Income) Act 1990 (Cth). Bell Nettle companies and other entities incorporated or carrying on activities outside Australia under the control of Australian residents. The appellants submitted that these amendments represented a legislative acknowledgment that it is acceptable for foreign companies to organise their affairs in a manner consistent with the general understanding of Esquire Nominees said to have prevailed in the courts and within the academy for the last 40 years, and, consequently, that it would be inappropriate for this Court now to adopt a view of residence at odds with that understanding. Those submissions must be rejected. Whatever understanding there may have been about the effect of Esquire Nominees, for the reasons already stated, the most that can properly be drawn from the decision is that the company's activities in that case were not in reality directed from Australia because, although its Norfolk Island board habitually complied with the advice of the Australian accountants, the directors did so "because they accepted that it was in the interest of the beneficiaries [of the trust], having regard to the tax position, that they should give effect to the scheme" and their compliance with those instructions would not have extended to their doing "something which they considered improper or inadvisable". To adopt and adapt the language of Chadwick LJ in Wood v Holden151, Esquire Nominees was a case where central management and control of the company was exercised through the company's constitutional organs in accordance with external advice and influence, but still in fulfilment of the constitutional organs' functions; as opposed to one in which the functions of the company's constitutional organs were usurped by an outsider who made decisions independently of or without regard to those constitutional organs. Nothing said in Esquire Nominees, and nothing in the recommendations of the Asprey Committee or in the subsequent enactment of Pt X of the 1936 Act, implies that a company should be regarded as residing outside Australia merely because it has established a board of directors abroad to act upon the dictates of an Australian resident. Finally, in terms of the policy which underlies the statutory concept of corporate residence, the rejection of the appellants' formalistic approach, in favour of the test of fact and degree adopted in Bullock and Esquire Nominees, is fortified by the approaches adopted in other common law jurisdictions. In Fundy Settlement v Canada152, the Supreme Court of Canada applied the same test of 151 [2006] 1 WLR 1393 at 1410-1411 [27] (with whom Moore-Bick LJ and Sir Christopher Staughton agreed at 1418 [46], 1419 [47]). 152 [2012] 1 SCR 520 at 526 [15]. Bell Nettle residence to a trust as to a company, namely "where the central management and control of the trust actually takes place". Accordingly, because the non-resident corporate trustee in that case deferred to the recommendations of Canadian resident beneficiaries in the substantive decisions made regarding the trusts, it was held that the trusts were resident in Canada153. Similarly, in Hertz Corp v Friend, the Supreme Court of the United States held154 that, in determining whether a corporation is a "citizen" for federal jurisdictional purposes, the statutory criterion of "principal place of business" is: "best read as referring to the place where [the] corporation's officers direct, control, and coordinate the corporation's activities. It is the place that Courts of Appeals have called the corporation's 'nerve center'. And in practice it should normally be the place where the corporation maintains its headquarters  provided that the headquarters is the actual center of direction, control, and coordination, ie, the 'nerve center', and not simply an office where the corporation holds its board meetings (for example, attended by directors and officers who have traveled there for the occasion)." HWB's alternative argument It remains only to deal with HWB's alternative argument that, in view of its so-called very simple business model, such decisions as its Samoan directors made at board meetings are properly to be characterised as the exercise of central management and control of that business. That argument should be rejected. Possibly, difficult questions of fact and degree will sometimes arise as to whether the decision-making arrangements that apply in a given case amount to a board retaining decision-making power although subject to some greater or lesser degree of influence from an outsider, or, alternatively, constitute the abrogation of decision-making power in favour of an outsider who makes decisions independently or without regard to the board. The nature of the decision-making required of the board in the course of the company's business may inform the answers to such questions. It is, however, necessarily implicit in the reasoning of Esquire Nominees that, if the Norfolk Island directors had been so strongly inclined to act in accordance with the Australian accountants' directions that they would have they considered them to be in the best interests of the company, or despite knowing, instructions regardless of whether implemented those 153 Fundy Settlement [2012] 1 SCR 520 at 526-527 [15]. 154 559 US 77 at 92-93 (2010). Bell Nettle or believing it possible, that the instructions were unlawful, Gibbs J would have considered that the directors had abrogated their decision-making power in favour of the Australian accountants. Approaching this matter on the same basis, Perram J's findings of fact leave no room for doubt that the central management and control of HWB was in Sydney. The idea that the business model of the company was so simple that all that was required for the exercise of its central management and control was to abide by Gould's directions is untenable. HWB was not like the company in Wood v Holden that existed for the purpose of only one transaction155. It had a significant business of deposit taking and money lending, as well as share trading, and it continued for years. There were numerous transactions which had to be considered and numerous decisions of consequence which had to be made about each of them. But, as Perram J found156, it was Gould who made every one of those decisions. Gould alone organised every deposit and every loan to the related entities, and every purchase and sale of shares, and Gould alone made each decision of consequence about the transactions and about the course of the company's business generally. There was no occasion for the directors to exercise any measure of judgment in respect of the transactions or the direction and policy of the company more generally. All the directors ever did was mechanically carry out Gould's directions. In truth and substance, that was an abrogation of the powers of management of the directors and in effect usurpation by Gould of the functions of the board. Conclusion It follows that the appeals should be dismissed with costs. 155 Wood v Holden [2005] EWHC 547 (Ch) at [25], [49]. 156 Hua Wang Bank 2014 ATC ¶20-480 at 16,503 [417]-[418]. GORDON J. All deliberative decisions by each appellant company to buy and sell Australian shares on the Australian Securities Exchange ("the ASX") were made by Mr Vanda Gould, who was based in Sydney. The companies' officers were outside Australia, but they did no more than "rubber-stamp" the decisions made by Mr Gould in Australia. Is each company liable for Australian income tax because its "central management and control" or "place of effective management" is in Australia? The answer is "yes". Each appeal should be dismissed with costs. These reasons will summarise the facts relevant to the appeals, consider the decisions below and then turn to consider each appeal. Facts The following facts were found by the primary judge (Perram J) and were not contested by the companies. Mr Gould Mr Gould is an accountant based in Sydney. Mr Borgas Mr Peter Borgas conducts a corporate services business from Neuchâtel, Switzerland through Anglore SARL ("Anglore"). Mr Borgas is an office holder of Anglore, along with his wife and one other person. JA Investments Ltd and MH Investments Ltd JA Investments was incorporated in the Cayman Islands. It has only one shareholder and one director, Mr Borgas. MH Investments is another Cayman Islands entity. Since 2012, the sole shareholder in MH Investments has been Mr Gould held the position of "Appointor" under JA Investments' and MH Investments' respective articles of association. HWB was incorporated in Samoa under the International Companies Act 1987 (Samoa). Its shares are held by Pacific Securities Inc, another international company incorporated in Samoa. Before Pacific Securities became the shareholder, it issued a bearer debenture which provided that, whilst it was unredeemed, the rights of the members of Pacific Securities to vote or demand a poll were suspended. In 1998, the original secured debenture was converted to a registered secured debenture in the name of JA Investments. During the period 2000 to 2007, the register of directors and secretaries for HWB reveals that there were several individuals and two companies, Westco Directors Ltd and Westco Secretaries Ltd, on the register. All the individuals, except for one, were employed by Asiaciti Trust Samoa Ltd ("Asiaciti Samoa") in Samoa. Asiaciti Samoa is based in Apia, Samoa and one of its beneficial owners is Mr Graeme Briggs, the other individual on the register. Westco Directors was a member of the Asiaciti Group and all of the persons authorised to act on its behalf were or had been employees of Asiaciti Samoa. The directors of HWB largely met in Apia. HWB bought and sold a large number of shares on the ASX and made substantial profits from that activity in the 2004, 2006 and 2007 income years. Bywater Investments Ltd Bywater was incorporated in the Bahamas. Its two shares were held by Anglore. Anglore holds its shares in Bywater for MH Investments. Bywater had three directors: Mr Borgas, his wife and NTW Directors Inc, a company with an address in the Bahamas. Bywater's cashbook – its only corporate record – is maintained at the London offices of Lubbock Fine, a firm of accountants. Bywater is not required under the law of the Bahamas to have directors' meetings. Bywater traded a large number of shares listed on the ASX and made profits from that activity in the 2002 to 2007 income years. Chemical Trustee Ltd Chemical Trustee was incorporated in the United Kingdom. Chemical Trustee's sole shareholder was Guardheath Securities Ltd ("Guardheath"), a company owned by the partners of Lubbock Fine. Guardheath holds the shares in Chemical Trustee as nominee for JA Investments. The directors of Chemical Trustee have at all relevant times been Mr Borgas, his wife and their son. All minutes of its board meetings record that the meetings were held in Neuchâtel, Switzerland and attended by Mr Borgas and his wife. Chemical Trustee bought and sold a large number of shares on the ASX and made substantial profits from that activity in the 2001 to 2007 income years, except for the 2005 year. Derrin Brothers Properties Ltd Derrin was incorporated in the United Kingdom. Derrin's shareholders were Guardheath and another Lubbock Fine entity, Lordhall Securities Ltd ("Lordhall"). in Derrin as nominee for JA Investments. Lordhall holds 50 of its 1,050 shares in Derrin as nominee for the remaining 1,000 shares for MH Investments. JA Investments and The directors of Derrin were Mr Borgas and his wife. All minutes of its board meetings record that they were held in Neuchâtel, Switzerland and attended by the shares Mr Borgas and his wife. Derrin traded shares on the ASX and made profits from that activity in the 2003, 2004 and 2005 income years. Decisions below Before the primary judge, the Commissioner's case was that Mr Gould was running each company from Sydney and, therefore, that was where the "central management and control" of each company was located. The companies contended that, whilst the directors were "perhaps heavily influenced by Mr Gould, [they] nevertheless still applied their minds to the discharge of their respective offices"157. They contended that when this was taken together with factors such as the location of each company's incorporation, the "central management and control" (and for Bywater, Chemical Trustee and Derrin, the "place of effective management") was not in Australia. HWB In relation to HWB, the primary judge found it was controlled by JA Investments, and therefore by Mr Gould. The primary judge also found that the directors of HWB at all times acted on Mr Gould's instructions and "were never placed in a position where they had to exercise the slightest judgment"158. Although HWB's business was formally transacted by the employees of Asiaciti Samoa, every transaction it carried out was done on the instructions of Mr Gould. As a result, the primary judge concluded that HWB had its "central management and control" in Australia and was therefore an Australian resident for tax purposes. Bywater, Chemical Trustee and Derrin The primary judge found that, as Mr Gould was the beneficial owner of JA Investments and could control its affairs by appointing additional members through his position as "Appointor", he was the true owner of JA Investments and he had actual control of it. The same was true of MH Investments. His Honour also found that Mr Borgas "did nothing in relation to the affairs of JA Investments other than give effect to Mr Gould's will"159. Because of Mr Gould's ownership and control of JA Investments, the primary judge considered that it was "an inevitable consequence that [Mr Gould] owned and 157 Hua Wang Bank Berhad v Federal Commissioner of Taxation 2014 ATC ¶20-480 158 Hua Wang Bank 2014 ATC ¶20-480 at 16,495 [364]. 159 Hua Wang Bank 2014 ATC ¶20-480 at 16,458 [110]. controlled Chemical Trustee" and that the Commissioner had established "an overwhelming case" to that effect160. The primary judge concluded "that all of the decisions of Chemical Trustee were made by Mr Gould and that Mr Borgas was not involved in them in the slightest way"161. The primary judge reached the same conclusions in relation to Derrin and Bywater162. The primary judge concluded that he was "satisfied that the directors of the [companies] exercised no independent judgment in the discharge of their offices but instead merely carried into effect Mr Gould's wishes in a mechanical fashion"163. As a result, the primary judge concluded that each of Bywater, Chemical Trustee and Derrin had its "central management and control" in Australia and was therefore an Australian resident for tax purposes. The primary judge also found that each of Bywater's, Chemical Trustee's and Derrin's "place of effective management" was in Australia, as "the key management and commercial decisions were made by Mr Gould in Sydney", and that therefore international tax agreements did not relieve any of them from liability to income tax under Australian tax law164. The Full Court of the Federal Court considered there was "no reason to reject his Honour's findings on the evidence or to reject his Honour's reasons for his findings"165. HWB's appeal in this Court HWB was not incorporated in Australia, but Samoa. HWB conceded it carried on business in Australia. Australia does not have a double tax agreement with Samoa. If HWB was an "Australian resident" it was liable to pay income tax under s 6-5(2) of the Income Tax Assessment Act 1997 (Cth) ("the 1997 Act"), which provided that "your assessable income includes the *ordinary income you *derived directly or indirectly from all sources, whether in or out of Australia, 160 Hua Wang Bank 2014 ATC ¶20-480 at 16,465 [145], 16,488 [311]. 161 Hua Wang Bank 2014 ATC ¶20-480 at 16,488 [314]. 162 Hua Wang Bank 2014 ATC ¶20-480 at 16,492 [339], [343]. 163 Hua Wang Bank 2014 ATC ¶20-480 at 16,450 [60]. 164 Hua Wang Bank 2014 ATC ¶20-480 at 16,504 [430]; see also at 16,505 [440]. 165 Bywater Investments Ltd v Federal Commissioner of Taxation (2015) 236 FCR 520 during the income year". Was HWB an "Australian resident"? The answer is that it was. "Australian resident" is defined in s 995-1(1) of the 1997 Act by reference to the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act"). "Resident" is defined in s 6(1) of the 1936 Act and includes a company incorporated in Australia and, in some circumstances, a company not incorporated in Australia. Paragraph (b) of that definition provides that a company not being incorporated in Australia is a resident if it: "carries on business in Australia, and has either its central management and control in Australia, or its voting power controlled by shareholders who are residents of Australia." (emphasis added) Did HWB have its "central management and control in Australia" for the purposes of par (b)? The answer is "yes". HWB did not contest the primary judge's finding that Mr Gould was the person who "controlled" HWB. Instead, HWB contended that its "real business" was "located at the place where the organs of the company exercise legally effective authority". According to HWB, "the place where the organs of the company exercise control" will be determinative in identifying the place of "central management and control" even where those formal organs are doing "nothing more than rubber-stamping decisions made elsewhere". That contention should be rejected. It finds no support in the text of the definition of "resident" in s 6(1) of the 1936 Act, in the authorities or in commercial reality. "Resident" and s 6(1) of the 1936 Act The definition of "resident" in s 6(1) of the 1936 Act draws a distinction between companies incorporated in Australia and those incorporated elsewhere. If a company is incorporated in Australia it will be an Australian resident. Parliament has explicitly chosen one formal aspect of a company's existence – incorporation – and deemed that to be determinative of whether a company is a "resident". Notably, it has not done this for any other formal aspect of a company. HWB's contention ignores that feature of the statutory language. For example, if Parliament had intended to make the location of directors' meetings determinative, it could have done so. But Parliament did not do so. Instead, for companies not incorporated in Australia, Parliament adopted language – "central management and control" – from common law authorities concerning residency. At the time the provision was enacted, that language was well understood to involve a factual inquiry; an inquiry to which the location of the various formal aspects of a company was relevant but not determinative. The definition of "resident" in s 6(1) of the 1936 Act is multi-faceted. The definition records, and acknowledges, that a company can be incorporated outside Australia but nevertheless can have its central management and control within Australia. In its terms, it refers to "central management and control". It does not in its terms, or implicitly, seek to limit that concept to the place where the organs of the company exercise legally effective authority. That it does not do so is not surprising. The breadth of the language chosen reflects commercial reality. What constitutes central management and control is a question of fact and degree and can and does account for a broad range of complex arrangements. Authorities HWB's contention also finds no support in the authorities. The statutory language of "central management and control" derives from De Beers Consolidated Mines Ltd v Howe, where Lord Loreburn LC identified the principle "that a company resides for purposes of income tax where its real business is carried on ... and the real business is carried on where the central management and control actually abides"166 (emphasis added). The authorities confirm that the location of a company's "central management and control" is a question of fact and degree167. The question of where "central management and control" is located is answered by ascertaining "where the real business of the company is carried on, not in the sense of where it trades but in the sense of from where its operations are controlled and directed. It is the place of the personal control over and not of the physical operations of the business which counts"168. So, what circumstances are relevant to identifying the location of a company's central management and control? The circumstances include, but are not limited to169: the location of the company's registered office; 166 [1906] AC 455 at 458. 167 De Beers [1906] AC 455 at 458; North Australian Pastoral Co Ltd v Federal Commissioner of Taxation (1946) 71 CLR 623 at 630; [1946] HCA 17; Esquire Nominees Ltd v Federal Commissioner of Taxation (1972) 129 CLR 177 at 190; [1973] HCA 67. 168 Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation (1941) 64 CLR 241 at 248-249; [1941] HCA 13 citing Egyptian Delta Land and Investment Co Ltd v Todd [1929] AC 1 at 25. See also Koitaki Para Rubber Estates Ltd v Federal Commissioner of Taxation (1940) 64 CLR 15 at 19; [1940] HCA 33; Unit Construction Co Ltd v Bullock [1960] AC 351 at 365, 372. 169 See Koitaki Para Rubber (1941) 64 CLR 241 at 248; North Australian Pastoral Co (1946) 71 CLR 623 at 634; Esquire Nominees (1972) 129 CLR 177 at 190. the residency of the company's directors; the residency of the company's shareholders; (d) where the company's meetings, including its directors' meetings, are held; and (e) where the books of the company are kept. Where the formal organs of the company are located is relevant but is not, and can never be, determinative. The authorities consistently provide for and apply the test first set out in De Beers. In Esquire Nominees Ltd v Federal Commissioner of Taxation, the relevant circumstances were said to "strongly support the conclusion" that the taxpayer company was not a resident of Australia170. However, in that case, the Commissioner contended that the "central management and control" was in Australia because the directors of the company "merely carried out directions given to them" by members of a firm of accountants in Australia171. At first instance, Gibbs J accepted that the firm "not only communicated to the [company] particulars of the scheme but advised the [company] in detail of the manner in which it should be carried out"172. His Honour found that the firm had "power to exert influence, and perhaps strong influence", on the company173. But that was the limit of its control – the firm could not control the conduct of the company's business as a trustee company174. The directors of the company were in control of the company even though the decisions they made accorded with the wishes of the interests in Australia. Why? Because although the directors complied with the wishes of the Australian firm, they independently determined to implement the scheme because they assessed that the instructions were in the interests of the beneficiaries, having regard to the tax position175. The factual inquiry was directed at ascertaining the 170 (1972) 129 CLR 177 at 190. 171 Esquire Nominees (1972) 129 CLR 177 at 190. 172 Esquire Nominees (1972) 129 CLR 177 at 190. 173 Esquire Nominees (1972) 129 CLR 177 at 191. 174 Esquire Nominees (1972) 129 CLR 177 at 191. 175 Esquire Nominees (1972) 129 CLR 177 at 191. decision-making process and was not limited to, or determined by, the location of the formal organs of the company. The analysis by Gibbs J on this point was not disturbed on appeal176. Unit Construction Co Ltd v Bullock concerned subsidiary companies of an English company177. The subsidiary companies were incorporated in Kenya under Kenyan law and registered there178. The companies were placed in the hands of their directors and the articles of association "expressly provided that directors' meetings might be held anywhere outside the United Kingdom"179. The findings of fact demonstrated that "the management of the businesses of the companies was not exercised in the manner contemplated"180. All members of the House of Lords concluded that the "central management and control" of the companies was in the United Kingdom. In coming to that conclusion, Viscount Simonds observed that "residence is determined by the solid facts, not by the terms of [a company's] constitution, however imperative" and concluded that "it is the actual place of management, not that place in which it ought to be managed, which fixes the residence of a company"181. Similarly, Lord Radcliffe determined that the directors of the parent company were running the subsidiary companies from London and that that was inconsistent with the formal articles of association182. But Lord Radcliffe did not believe that the test required that "you try to ascertain what are the real facts about the seat of management and control and to put in its place what seems to be the merely formal device of studying a set of written regulations"183. Although the articles of the companies "prescribe[d] what ought to [have been] done ... 176 See Esquire Nominees (1973) 129 CLR 177 at 209, 212, 220, 225. 177 [1960] AC 351 at 359. 178 Bullock [1960] AC 351 at 362. 179 Bullock [1960] AC 351 at 362. 180 Bullock [1960] AC 351 at 362. 181 Bullock [1960] AC 351 at 363; see also at 362. 182 Bullock [1960] AC 351 at 364; see also at 369. 183 Bullock [1960] AC 351 at 370. they cannot create an actual state of control and management ... which does not exist in fact"184. In short, there is no support for the contention that a company's residency is determined merely by the location of its formal organs. The contention is contrary to the text of s 6(1) of the 1936 Act, the authorities and commercial reality. Application to HWB So, what is the position with HWB? HWB accepted it was a "captive entity" run by Asiaciti Samoa in accordance with the instructions of Mr Gould. The directors of HWB never exercised the slightest judgment. The directors had no idea of HWB's business. The directors merely did as Mr Gould instructed. There was no evidence of any transaction ever being refused by the employees of Asiaciti Samoa, who were also directors of HWB at various times, on the basis that allowing the transaction would have been a breach of their fiduciary duties to HWB. HWB contended that the reason that its directors never exercised the slightest judgment was because of the company's "childishly simple business model". The business model was said to be the entering into of "back-to-back transactions" that gave rise to few occasions when the directors were required to exercise independent judgment. The customers of HWB were all clients of Mr Gould or entities associated with him. While the business model may have comprised back-to-back transactions, the transactions were structured in that way because of the directions given by Mr Gould. Four people who had been directors of HWB at various times (who were also employees of Asiaciti Samoa) gave evidence that "they transacted the decisions of [HWB] in Apia doing so on every occasion at the direction of Mr Gould" (emphasis added). And although the primary judge accepted evidence of three of those employees who stated they would have rejected a transaction that was in breach of their fiduciary duties or otherwise unlawful, his Honour did not accept that they knew enough about the business for those statements to be "other than empty"185. The fact that the business ran in a particular way was a consequence of Mr Gould's control over the directors of HWB. HWB's contention should be rejected. 184 Bullock [1960] AC 351 at 370. 185 Hua Wang Bank 2014 ATC ¶20-480 at 16,494 [358]. Moreover, the back-to-back transactions comprised only part of the overall business of HWB and contributed, at best, little to HWB's assessable income. In the 2004, 2006 and 2007 income years, it purchased and sold a large number of shares on the ASX from which it made substantial profits. Finally, it is necessary to address the decision of the Court of Appeal of England and Wales in Wood v Holden. In that decision, Chadwick LJ drew a distinction between cases186: "where management and control of the company is exercised through its own constitutional organs (the board of directors or the general meeting) and cases where the functions of those constitutional organs are 'usurped' – in the sense that management and control is exercised independently of, or without regard to, those constitutional organs." Chadwick LJ went on to explain that187: "in cases which fall within the former class, it is essential to recognise the distinction (in concept, at least) between the role of an 'outsider' in proposing, advising and influencing the decisions which the constitutional organs take in fulfilling their functions and the role of an outsider who dictates the decisions which are to be taken. In that context an 'outsider' is a person who is not, himself, a participant in the formal process (a board meeting or a general meeting) through which the relevant constitutional organ fulfils its function." (emphasis added) Contrary to HWB's contentions, that distinction does not assist it. Mr Gould, an outsider from HWB's formal organs, dictated the decisions taken. HWB's real business was carried on in Australia by Mr Gould. Whether the board acted without exercising judgment or Mr Gould ignored the board, the answer is the same. Mr Gould did not merely influence the decisions of the board. HWB had its central management and control in Australia. HWB was a resident for Australian tax purposes and liable to tax under s 6-5(2) of the 1997 Act. The appeal should be dismissed with costs. The Commissioner's summons filed in HWB's appeal seeking revocation of special leave should also be dismissed. 186 Wood [2006] 1 WLR 1393 at 1410-1411 [27]. 187 Wood [2006] 1 WLR 1393 at 1411 [27]. Bywater, Chemical Trustee and Derrin The issues in the appeal by Bywater, Chemical Trustee and Derrin are more complicated. There was no dispute that the income earned by those companies had an Australian source. Accordingly, even if it was assumed that each was a foreign resident, unless relief was available to each of them under a double tax agreement, each of them was liable to tax on that income under s 6-5(3) of the 1997 Act. Section 6-5(3) of the 1997 Act relevantly provided: "If you are a foreign resident, your assessable income includes: the *ordinary income you *derived directly or indirectly from all *Australian sources during the income year". It is therefore necessary to consider the terms of the relevant double tax agreements. Two are relevant: the Government of Australia and the Convention between the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital Gains, as affected by the 2003 United Kingdom notes ("the 2003 UK Convention")188; and the Agreement between the Government of Australia and the Swiss Federal Council for the Avoidance of Double Taxation with respect to Taxes on Income, and the Protocol to that agreement ("the Swiss Agreement")189. An earlier agreement between Australia and the United Kingdom190 was at first also said to be relevant, but ultimately that submission was not pressed. This section of the reasons will consider the International Tax Agreements Act 1953 (Cth) ("the International Tax Agreements Act"), then the specific provisions of the 2003 UK Convention (for Chemical Trustee and Derrin) and 188 [2003] ATS 22. 189 [1981] ATS 5. 190 The Agreement between the Government of the Commonwealth of Australia and the Government of the United Kingdom of Great Britain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and Capital Gains that was signed at Canberra on 7 December 1967: [1968] ATS 9. finally the Swiss Agreement (for Bywater, Chemical Trustee and Derrin) to determine whether one or more of them provides relief from s 6-5 of the 1997 Act. As these reasons will explain, under the 2003 UK Convention and the Swiss Agreement, there are two possible avenues of relief: first, if the company is a resident only of the United Kingdom for the purposes of United Kingdom tax law (or Switzerland under the Swiss Agreement) and, second, if the company is a resident of both the United Kingdom for the purposes of United Kingdom tax law (or Switzerland) and Australia but its "place of effective management" is situated in the United Kingdom (or Switzerland). Here, the first avenue turns on whether the company was also a resident of Australia for the purposes of Australian tax law and, in particular, the meaning of "central management and control" under the 1936 Act. If the company is also a resident of Australia, then it is necessary to consider the second avenue of relief. Whether that avenue is available turns on the proper construction of the phrase "place of effective management" under the relevant agreement and, in particular, whether the "place of effective management" is in the other country – respectively, the United Kingdom or Switzerland. As the Commissioner rightly submitted, "central management and control" and "place of effective management" are different concepts in different instruments. The consideration of the second avenue is important because, if the place of effective management is in the other country, the company is entitled to relief from tax in Australia. The International Tax Agreements Act The International Tax Agreements Act is "[a]n Act to give the force of Law to certain Conventions and Agreements with respect to Taxes on Income and Fringe Benefits, and for purposes incidental thereto". Section 4 provided that the 1936 Act and the 1997 Act were incorporated into the International Tax Agreements Act and were to be "read as one" with the International Tax Agreements Act, but that the provisions of the International Tax Agreements Act "have effect notwithstanding anything inconsistent with those provisions contained" in the 1997 Act or the 1936 Act or in an Act imposing Australian tax. During the relevant period, each agreement was set out in full in Schedules to the International Tax Agreements Act and given the force of law. The 2003 UK Convention was set out in Sched 1 to the International Tax Agreements Act. Section 5 provided that, subject to the International Tax Agreements Act, "on and after the [2003 UK Convention], the provisions of the convention, so far as those provisions affect Australian tax, have the force of law according to their tenor". the date of entry into force of The Swiss Agreement was set out in Sched 15 to the International Tax Agreements Act. Section 11E(1)(b) relevantly provided that, subject to the International Tax Agreements Act, on and after the date of entry into force of the Swiss Agreement, the provisions of the Swiss Agreement, in so far as those provisions affect Australian tax, "have, and shall be deemed to have had, the force of law ... in respect of income of the year of income that commenced on 1 July 1979 and of a subsequent year of income in relation to which the agreement remains effective". How, then, is each agreement to be interpreted? "The first step is to ascertain, with precision, what the Australian law is, that is to say what and how much of an international instrument Australian law requires to be implemented, a process which will involve the ascertainment of the extent to which Australian law by constitutionally valid enactment adopts, qualifies or modifies the instrument"191. That step is critical, because, as a matter of statutory interpretation, there is a distinction between circumstances where international instruments, such as the two in issue in this matter, have been enacted into Australian law192 and circumstances where provisions of an Act draw on a treaty which has not been enacted into Australian law193. Where, as here, an instrument is set out in full in legislation and given the force of law by it (save for where the legislation indicates otherwise), it is clearly the intention of the legislature that the "transposed text should bear the same meaning in the domestic statute as it bears in the treaty"194. If the terms of an instrument enacted into Australian law were interpreted strictly in accordance with domestic principles of statutory interpretation, there would be a risk that the treaty would be interpreted differently even though other 191 NBGM v Minister for Immigration and Multicultural Affairs (2006) 231 CLR 52 at 71 [61]; [2006] HCA 54. 192 See, eg, Great China Metal Industries Co Ltd v Malaysian International Shipping Corporation Berhad (1998) 196 CLR 161 at 166 [3], 186 [70], 210 [132], 224 [163]; [1998] HCA 65; Povey v Qantas Airways Ltd (2005) 223 CLR 189 at 197 [3], 224 [107]; [2005] HCA 33. 193 See, eg, Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 CLR 1 at 14-16 [34]; [2006] HCA 53. 194 Applicant A v Minister for Immigration and Ethnic Affairs (1997) 190 CLR 225 at 230-231; [1997] HCA 4; Great China Metal Industries (1998) 196 CLR 161 at 186 [70], both citing Koowarta v Bjelke-Petersen (1982) 153 CLR 168 at 265; [1982] HCA 27. countries had adopted the same instrument195. That risk is significant with double tax agreements. The whole point of those agreements – to prevent double taxation across two jurisdictions – would be frustrated if "they were to be interpreted in a manner which would permit or foster conflicting outcomes between the two States in question"196. The principles applicable to construction of international instruments must be applied; those principles are found in the Vienna Convention on the Law of Treaties ("the VCLT")197. The VCLT largely reflects principles of customary international law198. The VCLT does not apply retrospectively and therefore does not apply in the interpretation of the Swiss Agreement, which was concluded prior to the entry into force of the VCLT for Switzerland199. It is necessary to consider each double tax agreement against that background. The 2003 UK Convention The 2003 UK Convention relevantly applied from 1 July 2004200. The assessments potentially subject to these provisions are those issued to Chemical Trustee and Derrin for the income years after that date. The 2003 UK Convention applies to "persons who are residents of one or both of the Contracting States" (being Australia and the United Kingdom)201 and, relevantly, the income taxes of those States202. Article 7(1) relevantly provides that "[t]he profits of an enterprise of a Contracting State shall be taxable only in 195 See Povey (2005) 223 CLR 189 at 202 [25], 230 [128] and the authorities cited. 196 Federal Commissioner of Taxation v SNF (Australia) Pty Ltd (2011) 193 FCR 149 197 Arts 31 and 32 of the VCLT; [1974] ATS 2. See Thiel v Federal Commissioner of Taxation (1990) 171 CLR 338 at 349-350, 356; [1990] HCA 37. 198 Thiel (1990) 171 CLR 338 at 349, 356. 199 Art 4 of the VCLT. 200 See Art 29(1) of the 2003 UK Convention. 201 Arts 1 and 3(1)(e) of the 2003 UK Convention. 202 Art 2(1)(a)(i) and (b) of the 2003 UK Convention. that State". The phrase "enterprise of a Contracting State" is defined to mean "an enterprise carried on by a resident of a Contracting State"203. Under Art 4(1)(a), a person is a resident of the United Kingdom "if the person is a resident of the United Kingdom for the purposes of United Kingdom tax". "United Kingdom tax" means tax imposed by the United Kingdom204. Under Art 4(1)(b), a person is a resident of Australia "if the person is a resident of Australia for the purposes of Australian tax". "Australian tax" means tax imposed by Australia205. Article 4(4) recognises the possibility that a company may be a resident of both Australia and the United Kingdom. In that circumstance, Art 4(4) provides that the company "shall be deemed to be a resident only of the State in which its place of effective management is situated" (emphasis added). There are two avenues open to Chemical Trustee and Derrin to rely on the 2003 UK Convention: first, if they are a resident only of the United Kingdom for the purposes of United Kingdom tax law; second, if they are a resident of both the United Kingdom and Australia under the respective domestic laws, but their "place of effective management" is situated in the United Kingdom. The primary judge proceeded upon the assumption that Chemical Trustee and Derrin were residents of the United Kingdom206. On that assumption, the first relevant question is: are Chemical Trustee and Derrin also residents of Australia for the purposes of Australian taxation law? That question directs attention to the "central management and control" question considered earlier with respect to HWB. If the answer is "yes", then the further question is: where is the "place of effective management" of Chemical Trustee and Derrin situated? If the answer to that question is "the United Kingdom", then Art 7(1) operates to relieve Chemical Trustee and Derrin from Australian income tax. Of course, Chemical Trustee and Derrin must be considered individually. Neither avenue is available to either Chemical Trustee or Derrin. The first avenue is closed because the "central management and control" of each is in Australia, making each an Australian resident. The second avenue is closed because, assuming Chemical Trustee and Derrin are also residents of the United 203 Art 3(1)(i) of the 2003 UK Convention. 204 Art 3(1)(d) of the 2003 UK Convention. 205 Art 3(1)(c) of the 2003 UK Convention. 206 Hua Wang Bank 2014 ATC ¶20-480 at 16,504 [424]. Kingdom, the "place of effective management" of each of Chemical Trustee and Derrin is in Australia and not the United Kingdom. "Central management and control" Consistent with the principles concerning "central management and control" earlier identified, the location of the formal organs of each of Chemical Trustee and Derrin is not determinative. Accordingly, on the facts found by the primary judge regarding Mr Gould's role, it is clear that, for each of Chemical Trustee and Derrin, its "central management and control" was in Australia. Chemical Trustee and Derrin submitted that "the lawfully appointed organs of the companies were not by-passed" and that the "effective decisions of the companies were made by the board or its directors albeit in many cases influenced by Mr Gould". That contention should be rejected. It is contrary to the finding of fact, not challenged on appeal, that Mr Gould was the person who controlled Chemical Trustee and Derrin. Therefore, each of Chemical Trustee and Derrin is a "resident" of Australia for the purposes of Australian taxation law because its "central management and control" was in Australia. "Place of effective management" It is then necessary to consider the second avenue. The availability of that avenue turns on the meaning of the phrase "place of effective management" in Art 4(4) of the 2003 UK Convention. Chemical Trustee and Derrin failed to substantively address this issue. As the Commissioner submitted, Chemical Trustee and Derrin did not approach the issue correctly. Chemical Trustee and Derrin focussed too closely on the concept of "central management and control" without reference to the specific provisions of the 2003 UK Convention. At the hearing, counsel for Chemical Trustee and Derrin submitted that you look to the same matters to determine the "place of effective management" as you do to determine the place of "central management and control". As the Commissioner acknowledged, in some cases, such as the present, the result may be the same. But as the Commissioner rightly submitted, they are different concepts. The meaning of each turns on the interpretation of the phrase as it appears in the relevant instrument – the 1936 Act for "central management and control" and the 2003 UK Convention for "place of effective management". Each must be examined to determine the applicability of each in any given case. It cannot be assumed that if one test is satisfied, then it will automatically follow that the other is satisfied. Once that interpretive task is undertaken in relation to "place of effective management" in the 2003 UK Convention, it is clear that the location of the formal organs of a company cannot be determinative of the "place of effective management" of that company. Article 31(1) of the VCLT provides that a "treaty shall be interpreted in good faith in accordance with the ordinary meaning to be given to the terms of the treaty in their context and in the light of its object and purpose". The ordinary meaning of the terms of the 2003 UK Convention points away from a construction that would benefit Chemical Trustee and Derrin. Significantly, Art 4(4) refers to the "place of effective management". The express terms of that phrase impose a requirement that in order to identify the place of effective management, the inquiry must go beyond the mere formalities of where the formal organs of a company might be located. That conclusion is consistent with the object and purpose of the 2003 UK Convention. As noted earlier, the purpose of double tax agreements is to avoid tax being imposed on a person twice for the same activity. Under the 2003 UK Convention, the key determinant is residency. Article 4(4) operates against that background – it is enlivened when residency is not sufficient to provide an answer to the question: in which country should the person be taxed? Article 4(4) breaks any deadlock and, depending on the domestic laws of the relevant Contracting States, its ability to break a deadlock would be seriously undermined were it construed so as to be limited to an inquiry about the location of the formal organs of a company. That construction is confirmed by Art 32 of the VCLT, which provides that "[r]ecourse may be had to supplementary means of interpretation ... in order to confirm the meaning resulting from the application of article 31". The 2003 UK Convention is based upon the Organisation for Economic Co-operation and Development's ("the OECD") Model Tax Convention on Income and on Capital. In Thiel v Federal Commissioner of Taxation, all members of the Court referred to the Commentaries on the Articles of the Model Convention in accordance with Art 32207. What does the Commentary on Art 4 provide? During the relevant period, the Commentary relevantly stated that208: 207 (1990) 171 CLR 338 at 344, 349-351, 356-358. See also Revenue and Customs Commissioners v Smallwood [2010] BTC 637 at 654 [48]. 208 OECD, Model Tax Convention on Income and on Capital, 9th ed (2015) at C(4)-8 [22] and C(4)-20 [24]. "It would not be an adequate solution to attach importance to a purely formal criterion like registration. Therefore [Art 4(4)] attaches importance to the place where the company, etc is actually managed. The place of effective management is the place where key management and commercial decisions that are necessary for the conduct of the entity's business are in substance made. The place of effective management will ordinarily be the place where the most senior person or group of persons (for example a board of directors) makes its decisions, the place where the actions to be taken by the entity as a whole are determined; however, no definitive rule can be given and all relevant facts and circumstances must be examined to determine the place of effective management." (emphasis added) As those passages of the Commentary explain, while the place of effective management may "ordinarily" be the place where the board of directors makes its decisions, "all relevant facts and circumstances must be examined to determine [where] the place of effective management" of a company is located209. So, where was the "place of effective management" for Chemical Trustee and Derrin – Australia or the United Kingdom? The answer is Australia. Indeed, at the hearing, counsel for Chemical Trustee and Derrin contended that neither company was managed or controlled in the United Kingdom but each was managed and controlled in Switzerland. The companies were incorporated in the United Kingdom, as were their ultimate shareholders (Lordhall and Guardheath). However, for both Chemical Trustee and Derrin, the board of directors exercised the lawful authority of the company in Switzerland. Critically though, Mr Gould was the person who controlled, and ultimately owned, Chemical Trustee and Derrin. The key management and commercial decisions were made by Mr Gould in Australia. It was the "place of effective management". For those reasons, Art 4(4) of the 2003 UK Convention deems each of Chemical Trustee and Derrin to be a resident of only Australia and, in accordance with Art 7(1), each is thereby taxable only in Australia. Thus, the 2003 UK Convention does not provide Chemical Trustee or Derrin any relief from s 6-5 of the 1997 Act. 209 cf Revenue and Customs Commissioners v Smallwood [2010] BTC 637 at The Swiss Agreement The assessments potentially subject to the Swiss Agreement are all those issued to Bywater, Chemical Trustee and Derrin. The Swiss Agreement applies to persons "who are residents of one or both of the Contracting States"210 (being Australia and Switzerland)211 and to "Australian income tax" and Swiss "[f]ederal, cantonal and communal taxes on income"212. Article 7(1) relevantly provides that "[t]he profits of an enterprise of one of the Contracting States shall be taxable only in that State". The phrase "enterprise of one of the Contracting States" means "an enterprise carried on by a resident of Australia or an enterprise carried on by a resident of Switzerland"213. A person is a "resident of Switzerland if the person is subject to unlimited tax liability in Switzerland"214. Under Art 4(1)(a), a person is relevantly a resident of Australia "if the person is a resident of Australia for the purposes of Australian tax". "Australian tax" means tax imposed by Australia215. Article 4(3) recognises the possibility that a company may be a resident of both Australia and Switzerland. When a company is a resident of both States, the company "shall be deemed to be a resident solely of the Contracting State in which its place of effective management is situated" (emphasis added). As with the 2003 UK Convention, there were two avenues available to obtain relief from s 6-5 of the 1997 Act. Again, neither avenue is available. First, the "central management and control" of each company is in Australia, meaning they are residents of Australia and not solely residents of Switzerland (assuming that they were also residents of Switzerland). 210 Art 1 of the Swiss Agreement. 211 Art 3(1)(c) of the Swiss Agreement. 212 Art 2(1)(a) and (b) of the Swiss Agreement. 213 Art 3(1)(f) of the Swiss Agreement. 214 Art 4(1)(b) of the Swiss Agreement. 215 Art 2(3) of the Swiss Agreement. Second, the "place of effective management" of each company is in Australia and not Switzerland. The Swiss Agreement, like the 2003 UK Convention, derives from the Model Convention. However, unlike the 2003 UK Convention, its interpretation is not governed by the VCLT. That is because Art 4 of the VCLT relevantly provides that it "applies only to treaties which are concluded by States after the entry into force of the [VCLT] with regard to such States". The VCLT did not enter into force with regard to Switzerland until after the conclusion of the Swiss Agreement216. Nevertheless, this Court has recognised217 that, consistently with international law218, Arts 31 and 32 of the VCLT reflect customary international law and it is appropriate to undertake the interpretive task by reference to those provisions. For the reasons given above, an inquiry about the "place of effective management" is not limited to or answered by identification of the location of the formal organs of each entity. Moreover, the primary judge found that, as a matter of Swiss law, a company will be subject to unlimited tax liability in Switzerland if it has its place of effective management in Switzerland219. And it was agreed that a company's place of effective management is where the day-to-day business decisions are made. It was also agreed that, in that context, strategic decisions are relevant, although not as relevant as day-to-day decisions, and administrative activities are irrelevant220. None of the companies had its "place of effective management" in Switzerland. The primary judge found that Mr Borgas' role was a "façade" and "fake"221. The primary judge found that Mr Borgas exercised no independent 216 The Swiss Agreement was signed on 28 February 1980 and entered into force on 13 February 1981. Switzerland did not accede to the VCLT until 7 May 1990. 217 Thiel (1990) 171 CLR 338 at 349, 356. 218 Sovereignty over Pulau Ligitan and Pulau Sipadan (Indonesia/Malaysia), Judgment [2002] ICJ Rep 625 at 645 [37]. See generally Gardiner, Treaty Interpretation, 2nd ed (2015) at 13-19. 219 Hua Wang Bank 2014 ATC ¶20-480 at 16,505 [438]. 220 Hua Wang Bank 2014 ATC ¶20-480 at 16,505 [439]. 221 Hua Wang Bank 2014 ATC ¶20-480 at 16,451 [67], 16,488 [312]-[314], judgment. His position was "to do as he was told by Mr Gould without thought"222. All that occurred in Switzerland was the formal implementation of decisions that, in substance, were made by Mr Gould. On that basis, it is a nonsense to say that Mr Borgas was "effectively managing" each entity from Switzerland. The "place of effective management" was with Mr Gould in Australia. For those reasons, Art 4(3) of the Swiss Agreement deems each of Bywater, Chemical Trustee and Derrin to be a resident only of Australia and, in accordance with Art 7(1), each is thereby taxable only in Australia. Thus, the Swiss Agreement does not provide Bywater, Chemical Trustee or Derrin any relief from s 6-5 of the 1997 Act. Orders Each appeal should be dismissed with costs. The Commissioner's summons filed in HWB's appeal should also be dismissed. 222 Hua Wang Bank 2014 ATC ¶20-480 at 16,502 [406].
HIGH COURT OF AUSTRALIA ZURICH AUSTRALIAN INSURANCE LTD APPELLANT AND METALS & MINERALS INSURANCE PTE LTD & ORS RESPONDENTS Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd [2009] HCA 50 2 December 2009 Appeal dismissed with costs. ORDER On appeal from the Supreme Court of Western Australia Representation J E Maconachie QC with H M O'Sullivan and J S Emmett for the appellant (instructed by SRB Legal) B W Walker QC with C A Elphick for the first and third respondents (instructed by DLA Phillips Fox) E M Corboy SC with S F Popperwell for the second respondent (instructed by Pynt & Partners) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Zurich Australian Insurance Ltd v Metals & Minerals Insurance Pte Ltd Insurance contracts – Validity of "other insurance" provision – Whether rendered void by s 45 of Insurance Contracts Act 1984 (Cth) – Where s 45 rendered void provisions in contracts of general insurance that had effect of limiting or excluding liability of insurer under the contract by reason that the insured had entered into some other contract of insurance – Whether s 45 applied to provision purporting to limit or exclude liability by reason that the insured was named as non-party beneficiary under another contract of insurance – Whether insured had "entered into" that contract within meaning of s 45. Statutes – Interpretation – Meaning of "provision" in s 45 of Insurance Contracts Act 1984 (Cth) – Where "other insurance" clause applied in two different circumstances, only one of which attracted application of s 45 – Whether clause void only to the extent that it had the impugned effect – Whether clause void as a whole – Whether s 45 rendered void words or operation of clause. Words and phrases – "double insurance", "entered into", "excess insurance", "other insurance", "provision". Insurance Contracts Act 1984 (Cth), ss 45(1), 48. FRENCH CJ, GUMMOW AND CRENNAN JJ. Introduction Section 45 of the Insurance Contracts Act 1984 (Cth) ("the Act") renders void so-called "other insurance" provisions of general insurance contracts. Such provisions limit or exclude the liability of the insurer to indemnify the insured against loss because the insured has entered into another contract of insurance in relation to the same risk. The first question in this appeal, brought by Zurich Australian Insurance Ltd ("Zurich"), is whether s 45 applies to provisions which purport to exclude or limit liability where the insured is not a party to the other contract of insurance but is named in it as an insured person. The second question is whether the section renders void an entire clause of an insurance contract which includes a provision to which the section applies notwithstanding that the clause may include other provisions to which it does not apply. The answer to both questions is in the negative. As a result the appeal must be dismissed. Factual and procedural history On 1 March 1992, Hamersley Iron Pty Ltd ("Hamersley") entered into a contract with Speno Rail Maintenance Australia Pty Ltd ("Speno") for the provision of rail grinding services ("the Speno/Hamersley Contract"). One of its terms required Speno to indemnify Hamersley and insure itself against all claims occurring as a result of anything done in the performance of the contract causing death or injury to any person1. It was also a term that Speno's insurance policy be endorsed to include Hamersley as a named insured2. Pursuant to the Speno/Hamersley Contract, Speno entered into a Combined General Liability Insurance Policy with Zurich on 12 September 1995 ("the Speno Policy"). Although not a party to the policy, Hamersley was included as a named insured under it3. 1 Clauses 37 and 38 of the Speno/Hamersley Contract. 2 Clause 38(b)(ii) of the Speno/Hamersley Contract. 3 Under an extended definition of "Insured", read with the endorsement to the Speno Policy: see Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 253 ALR 364 at 372 [36] per Beech AJA. Crennan Hamersley took out its own contract of insurance with Metals & Minerals Insurance Pte Ltd ("MMI") ("the Hamersley Policy"). That policy contained an "other insurance" clause in the following terms: "UNDERLYING INSURANCE Underwriters acknowledge that it is customary for the Insured to effect, or for other parties (including joint venture partners, contractors and the like) to effect, on behalf of the Insured, insurance coverage specific to a particular project, agreement or risk. In the event of the Insured being indemnified under such other Insurance effected by or on behalf of the Insured (not being an Insurance specifically effected as Insurance excess of this Policy) in respect of a Claim for which Indemnity is available under this Policy, such other Insurance hereinafter referred to as Underlying Insurance, the Insurance afforded by this Policy shall be Excess Insurance over the applicable Limit of Indemnity of the Underlying Insurance but subject always to the terms and conditions of this Policy. In the event of cancellation of the Underlying Insurance or reduction or exhaustion of the Limits of Indemnity thereunder, this Policy shall: in the event of reduction pay the excess of the reduced underlying limit in the event of cancellation or exhaustion continue in force as underlying insurance but subject always to the terms and Conditions of this Policy." The present litigation was preceded by an action brought in the District Court of Western Australia by two employees of Speno carrying out work under the Speno/Hamersley Contract who were injured as a result of the negligence of Hamersley. The proceedings led to judgment in favour of one of the employees against Hamersley in the amount of $1,110,186.35 and a settlement of $25,000 in favour of the other. Zurich and Speno were ordered to indemnify Hamersley in respect of the judgment sum4. Zurich paid the damages under the judgment and the settlement. 4 Nolan v Hamersley Iron Pty Ltd (1999) 22 SR (WA) 205; varied on appeal Speno Rail Maintenance Australia Pty Ltd v Hamersley Iron Pty Ltd (2000) 23 WAR 291. Crennan The present appeal arises out of contribution proceedings brought subsequently by Zurich against MMI in the Supreme Court of Western Australia in relation to MMI's liability to indemnify Hamersley under the Hamersley Policy. MMI argued that it had no coordinate liability with Zurich which would ground an equity of contribution. It relied upon the Underlying Insurance clause to reduce the extent of its liability to Hamersley to the provision of the excess insurance within the meaning of the clause. Zurich contended that s 45(1) of the Act rendered the Underlying Insurance clause void. Zurich's contention was accepted at first instance in the Supreme Court of Western Australia5, but was rejected in the Court of Appeal6. Zurich was granted special leave to appeal to this Court on 31 July 20097. Section 45 provides: "(1) Where a provision included in a contract of general insurance has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance, not being a contract required to be effected by or under a law, including a law of a State or Territory, the provision is void. Subsection (1) does not apply in relation to a contract that provides insurance cover in respect of some or all of so much of a loss as is not covered by a contract of insurance that is specified in the first- mentioned contract." The primary judge held that s 45(1) does not avoid an "other insurance" provision in an insurance policy where such provision relates to another contract of insurance to which the insured is not a party but in which it is named as a non- party beneficiary8. Her Honour nevertheless held that the Underlying Insurance clause in the Hamersley Policy was void as a whole because of that element of it which was caught by s 45(1)9. Her Honour made a declaration that Hamersley 5 Zurich Australian Insurance Ltd v Metals and Minerals Insurance Pte Ltd (2007) 209 FLR 247. 6 Speno Rail Maintenance Australia Pty Ltd v Metals & Minerals Insurance Pte Ltd (2009) 253 ALR 364. [2009] HCATrans 167. (2007) 209 FLR 247 at 278-279 [139]-[142]. (2007) 209 FLR 247 at 279-280 [143]. Crennan was doubly insured by Zurich and MMI in respect of its liability to the two injured employees and gave judgment in favour of Zurich against MMI in the sum of $869,357. The Court of Appeal held that the primary judge had erred in finding that s 45(1) applied to avoid the Underlying Insurance clause in its entirety10. It set aside the judgment and ordered that the Zurich contribution action be dismissed. The view taken by the primary judge of the construction of s 45(1), in its application to non-party beneficiaries under general insurance contracts, was not challenged in the Court of Appeal11. The grounds of appeal The grounds of appeal, amended by leave at the hearing of the appeal to include ground number 4, were as follows: The Court of Appeal erred in failing to find that section 45(1) of the Insurance Contracts Act 1984, on its true construction, renders void the whole of the relevant provision of the First Respondent's policy of insurance and not just the offending element of it. The Court of Appeal held that the 'other insurance' or 'underlying insurance' provision in the First Respondent's policy of insurance was capable of being, and should be, read distributively so as to sever elements from that provision and thereby misconstrued, or alternatively misapplied, section 45(1) of the Insurance Contracts Act 1984. The Appeal should be upheld on the ground that section 45(1) of the Insurance Contracts Act 1984 operates such that the phrase 'the insured has entered into some other contract of insurance' applies to the situation where a person has the benefit of a contract of insurance even though not a party to that contract of insurance himself or herself." 10 (2009) 253 ALR 364 at 367-368 [12] per Martin CJ, 370 [27] per McLure JA, 383 [110]-[111] per Beech AJA. 11 (2009) 253 ALR 364 at 366 [3] per Martin CJ, 369 [19] per McLure JA, 375 [63] per Beech AJA. Crennan The legislative history of s 45 Prior to the enactment of the Act insurance contracts were subject to what the Australian Law Reform Commission ("the ALRC") described in its 1982 Report on Insurance Contracts as a "bewildering variety of laws"12. These laws included the common law and Imperial13, State and Commonwealth statutes. The Act, which gave effect to recommendations made by the ALRC, repealed the Imperial Acts applicable to contracts of insurance covered by the new Act in their application to insurance contracts and in so far as they were part of the law of the Commonwealth14. A particular cause of concern expressed in the ALRC Report was the operation of terms of insurance contracts dealing with double insurance or "other insurance" taken out by the insured. Double insurance was described in Albion Insurance Co Ltd v Government Insurance Office (NSW)15 thus: "There is double insurance when an assured is insured against the same risk with two independent insurers. To insure doubly is lawful but the assured cannot recover more than the loss suffered and for which there is indemnity under each of the policies. The insured may claim indemnity from either insurer. However, as both insurers are liable, the doctrine of contribution between insurers has been evolved." The phenomenon of double insurance led to the incorporation of "other insurance" provisions in insurance policies. There were two broad classes of such provisions in contracts governed by the common law. The first class required the insured to give written notice to its insurer of other insurance which covered the same subject matter and the same risk, effected at the time the policy was issued or which might come into existence subsequently. Under this class of provision, the second insurance would only be allowed by endorsement on the first policy. It was intended to "detect possible fraud and to facilitate 12 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982) 13 For example, the Life Assurance Act 1774 (14 Geo 3 c 48); the Fires Prevention (Metropolis) Act 1774 (14 Geo 3 c 78); and the Marine Insurance Act 1788 (28 Geo 3 c 56). 14 The Act, s 3(1). 15 (1969) 121 CLR 342 at 345 per Barwick CJ, McTiernan and Menzies JJ; [1969] HCA 55. Crennan contribution between insurers."16 The second class of provision excluded the liability of the first insurer or limited it to an excess insurance cover17. Not uncommonly both policies contained "other insurance" provisions. This led to difficulties in their construction and application. After reviewing case law in the United Kingdom, Australia, New Zealand and the United States, the ALRC stated18: "The Commission is concerned with the effect of 'other insurance' clauses on the interests of the insured. Insureds are detrimentally affected by uncertainty over the effects of individual provisions and combinations of different provisions. More important is the fact that some 'other insurance' clauses have the effect of limiting the insurer's liability to its insured. In such a case, the insured's protection may be compromised or lost. While they affect the interests of insureds in this manner, 'other insurance' clauses have little independent value for insurers. To the extent that they are intended as a protection against fraud, they are ineffective. At most, such a clause might operate as a disincentive to claiming the same loss twice under different policies. The same effect could be achieved by a clear warning to the insured that he is entitled to claim, under the policy concerned and under any other insurance, no more than his actual loss. To the extent that 'other insurance' clauses are designed to ensure that an insurer becomes aware of the existence of other insurance so that it may claim contribution in the event of a loss, the same aim could be achieved by asking appropriate questions in the proposal and claim forms." The ALRC then concluded19: "There is no substantial justification for any of the various types of 'other insurance' clause. insured's reasonable they may cause expectations to be defeated, all forms of 'other insurance' provisions should be rendered ineffective. If more than one insurance is in effect in the 16 Sutton, Insurance Law in Australia, 3rd ed (1999) at 972 [12.9]. 17 Sutton, Insurance Law in Australia, 3rd ed (1999) at 972 [12.9]. 18 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982) 19 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982) Crennan respect of the same risk, the insured should be entitled to recover the whole of his loss from any one of the insurers, which should then be entitled to obtain contribution from the others." In the draft Insurance Contracts Bill which formed Appendix A to the Report, there was included a cl 4620 identical in terms to what became s 45 of the Act. The Explanatory Memorandum to the Insurance Contracts Bill set out the substance of the proposed s 45 in broad terms21: "A provision in a contract of general insurance (other than a contract providing insurance cover in respect of loss not covered by another specified contract – clause 45(2)) limiting or excluding the insurer's liability because of other insurance will be void. Insurers, however, will be able to limit or exclude liability which is also covered by a contract which the insured is obliged to enter into under another law (clause The stated rationale for the new section referred to uncertainties in the judicial interpretation of "other insurance" provisions. As the law stood, it was said, an insured might recover nothing or only part of the loss – a fact not balanced by any gains to the insurer22. Double insurance would still give rise to a contribution claim from one insurer against the other in respect of the loss23. The statutory framework A number of provisions of the Act provide part of the context in which s 45 is to be construed. The application of the Act to insurance contracts is not stated comprehensively. However, it extends to contracts whose proper law is that of a State or Territory in which the Act applies or to which it extends24 and, 20 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982) 21 Australia, House of Representatives, Insurance Contracts Bill 1984, Explanatory Memorandum at [146]. 22 Australia, House of Representatives, Insurance Contracts Bill 1984, Explanatory Memorandum at [147]. 23 Australia, House of Representatives, Insurance Contracts Bill 1984, Explanatory Memorandum at [148]. 24 The Act, s 8. Crennan as explained in Akai Pty Ltd v People's Insurance Co Ltd25, the effect of s 8(2) is that where, but for an express provision to the contrary, the proper law would be as provided by s 8(1), the contrary provision is to be disregarded. There are a number of express exclusions from the application of the Act. It does not apply in relation to contracts of insurance "entered into" before the date of its commencement26. Various classes of insurance contract are excluded from its application in s 9. These include insurance contracts "entered into" by specified classes of organisation or for specified purposes or in the course of State or Northern Territory insurance27. The term "entered into", which is critical to the first constructional question in this appeal, is defined non-exhaustively in s 11(9) in the following terms: "Subject to subsection (10), a reference in this Act to the entering into of a contract of insurance includes a reference to: in the case of a contract of life insurance – the making of an agreement by the parties to the contract to extend or vary the contract; in the case of any other contract of insurance – the making of an agreement by the parties to the contract to renew, extend or vary the contract; or the reinstatement of any previous contract of insurance." The draft Insurance Contracts Bill proposed by the ALRC included no definition of "entered into" and no equivalent of s 11(9). Nor did the Bill as introduced into the Senate28. The sub-section was introduced by amendment in the Senate. Its rationale, as set out in the relevant Explanatory Memorandum, was as follows29: 25 (1996) 188 CLR 418 at 424 per Dawson and McHugh JJ, 433 per Toohey, Gaudron and Gummow JJ; [1996] HCA 39. 26 The Act, s 4(1). 27 The Act, ss 9(1) and 9(2). 28 Insurance Contracts Bill 1983 (Cth). 29 Australia, Senate, Insurance Contracts Bill 1983 (Amendments and new clause to be moved on behalf of the Government), Explanatory Memorandum at [21]. Crennan "The effect of the amendment will be to make it clear that any obligations which the Bill imposes on the insurer and insured 'before the contract is entered into' will apply where they renew, extend, vary or reinstate an existing contract and thereby make a new contract." Section 11(10) is not material for present purposes. Section 11(11) also illuminates the sense in which the words "entered into" are used in the Act: "Where a provision of this Act requires anything to be done before a particular contract is entered into, it is sufficient compliance with that provision if that thing is done at the time when the contract is entered into." Where a person who is not a party to a contract of general insurance is specified or referred to in the contract as a person to whom the insurance cover extends, that person has a right, conferred by s 48, to recover the amount of the person's loss from the insurer in accordance with the contract. Section 48(3) provides: "The insurer has the same defences to an action under this section as the insurer would have in an action by the insured." Section 48, like s 45, was recommended for inclusion in the Act by the ALRC in its 1982 Report30. The decision of the Privy Council in Vandepitte v Preferred Accident Insurance Corporation of New York31 was long-standing authority for the proposition that the insured party to a contract of insurance had no insurable interest in the liability of a non-party insured. In the case of third party motor vehicle insurance, the effect of the decision had been overcome by legislation in the various Australian jurisdictions when the ALRC published its Report32. This 30 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982) at 75 [124] and 265. 31 [1933] AC 70 at 77-78 per Lord Wright. 32 See Australian Law Reform Commission, Insurance Contracts, Report No 20, Crennan did not prevent insurers taking the same point outside the areas of statutory "Every person who properly falls within a policy's description of the persons entitled to indemnity should be entitled to make a claim for loss covered by the policy. The fact that that person is neither a beneficiary under a trust nor a principal under a contract of agency should be irrelevant." Section 56(1) is concerned with fraudulent claims and provides: "Where a claim under a contract of insurance, or a claim made under this Act against an insurer by a person who is not the insured under a contract of insurance, is made fraudulently, the insurer may not avoid the contract but may refuse payment of the claim." (emphasis added) Finally, s 76 should be noted which preserves a right of contribution between insurers "liable under separate contracts of general insurance to the same insured in respect of the same loss"35. The construction of s 45 The "other insurance" provisions to which s 45 is directed are concerned with contracts of insurance "entered into" by the insured. The first constructional question is whether the words "entered into" limit the application of s 45 to "other insurance" provisions affecting contracts of insurance to which the insured is a party. The ordinary, relevant meaning of "enter into" is "take upon oneself (a commitment, duty, relationship, etc); bind oneself by, subscribe to, (an agreement)"36. That usage is reflected in the definition in s 11(9) of the Act which refers, albeit non-exhaustively, to "the making of an agreement by the parties to the contract". It is also reflected in the other sections of the Act referred to below. 33 Jovanovic v Broers (1979) 25 ACTR 39 at 41 per Connor J. 34 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982) 35 The Act, s 76(1). 36 Shorter Oxford English Dictionary, 6th ed (2007) at 840-841. Crennan Section 48 confers a statutory right of recovery upon a non-party referred to or specified in a general contract of insurance as a person insured or to whom cover extends. It does so directly. Its enactment predated the extension, by the decision of this Court in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd37, of common law rights of recovery for non-party insured persons under an insurance policy. Section 48 does not deem such a person to be a party to the insurance contract thus attracting the rights conferred on a party. It does not purport to confer contractual or equitable rights upon such a person. There is therefore no basis in s 48 for assimilating the position of a non-party insured to that of a person who has "entered into" a contract of insurance within the meaning of s 45(1). Section 56(1), dealing with fraudulent claims, distinguishes between such claims made "under a contract of insurance" and claims made "under this Act … by a person who is not the insured under a contract of insurance". Section 76, which is to be read with s 45, confers an entitlement upon an insured to proceed against two or more insurers who "are liable under separate contracts of general insurance to the same insured in respect of the same loss". The condition of entitlement is the liability of the insurer, which may arise as a matter of contract or pursuant to s 48. Zurich submitted that s 45(1) should be construed as if the text read: "Where a provision … has the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured [including a person entitled under s 48] has entered into [an arrangement giving it cover under] some other contract of insurance … the provision is void." That submission should not be accepted. The text of the provisions of the Act with which s 45 must be read points inexorably to the conclusion that s 45 is only concerned with "other insurance" provisions affecting double insurance where the insured is a party to the relevant contracts of insurance. It does not allow room for a construction which would include a non-party insured among the ranks of those who have "entered into" the relevant contract. The inclusion of persons not parties to the relevant contract would be inconsistent with the ordinary or any plausibly extended meaning of "entered into" in relation to contracts. In so saying, it must be acknowledged that the purpose of s 45 as appears from the ALRC Report and the relevant Explanatory Memorandum is not so confined as to indicate such a construction. There is no distinction made in the Report or the Explanatory Memorandum between "other insurance" 37 (1988) 165 CLR 107; [1988] HCA 44. Crennan provisions purporting to affect double insurance which includes non-party insurance, and double insurance where the insured is a party to the relevant contract. The most that can be said is that the Report seems to have proceeded upon the assumption that the problem of "other insurance" clauses arose in cases in which the insured was a party to both contracts. However, notwithstanding the generality of the mischief to which s 45 was directed, the words "entered into" are not capable of encompassing a non-party insured. The preceding construction was that adopted by the primary judge38. Her Honour's conclusion was not challenged in the Court of Appeal39. What was challenged was her application of s 45(1) to render void the whole of the Underlying Insurance clause. Notwithstanding the want of any challenge to the primary judge's construction, its correctness is a question of law central to the determination of this appeal. Upon that question being raised by the Court on the hearing of the appeal, counsel for Zurich applied for and was granted leave to amend the grounds of appeal to challenge her Honour's construction40. For the reasons set out above, that challenge fails. The second constructional question, which was embedded in a discussion about "severance" at first instance and in the Court of Appeal, relates to the term "provision" in s 45(1). The primary judge held that although the Underlying Insurance clause applied to two different circumstances only one of which attracted the application of s 45(1), the clause was a "provision" within the meaning of the section and was therefore void as a whole. In so holding, the primary judge adopted the approach to a similarly worded clause taken by Robin DCJ in the District Court of Queensland in Austress-PSC Pty Ltd v Zurich Australian Insurance Ltd41. His Honour's reasoning in that case did not extend beyond the proposition that he could not detect any legislative intention in s 45(1) "that the provision be saved so far as it may have other effects."42 That approach, with respect, begged the question about the proper construction of the word "provision" in s 45(1). 38 (2007) 209 FLR 247 at 279 [142]. 39 See fn 11 above. 40 [2009] HCATrans 269 at 39-41. 41 Unreported, 1 May 1992. 42 Unreported, 1 May 1992 at 9. Crennan In the Court of Appeal, Martin CJ held that s 45(1) was to be construed on the basis that it was the objective of the legislature to avoid only those provisions in insurance contracts which have the effect to which s 45(1) is directed. His Honour said43: "Against that context, it seems to me to be clear that the word 'provision' in s 45(1), means that part of the terms of a contract of insurance which would have the stipulated effect unless avoided. It would be inconsistent with the assumed objective of the legislature, and therefore contrary to established principles of statutory construction, to give the section any wider ambit of operation." Beech AJA held that s 45(1) was not to be read as "excluding severance"44. The literal reading adopted in Austress-PSC could be avoided in either of two ways. The first was to construe the word "provision" as a reference to the substance and effect of one or more clauses of the contract, rather than to the clause itself. The second was to read the section as saying that the provision, to the extent that it had the stipulated effect, was void. After referring to the similar operation of other provisions of the Act45 and to authorities relating to the operation of s 68(1) of the Trade Practices Act 1974 (Cth)46, his Honour said that47: "the purpose of s 45 is achieved by rendering a provision void to the extent and only to the extent that it has the effect stipulated in s 45(1)." 43 (2009) 253 ALR 364 at 367 [8]. 44 (2009) 253 ALR 364 at 381 [97]. 45 (2009) 253 ALR 364 at 381 [99], referring to the Act, ss 38, 43, 52 and 53. 46 (2009) 253 ALR 364 at 381-382 [100]-[102], referring to Ruaro v Ferrari [2007] FCA 2022 at [52] and [85]; Renehan v Leeuwin Ocean Adventure Foundation Ltd (2006) 17 NTLR 83 at 99-100 [81]; Qantas Airways Ltd v Aravco Ltd (1996) 185 CLR 43; [1996] HCA 12. 47 (2009) 253 ALR 364 at 382 [104]. Crennan He concluded that the language of s 45 did not reveal "an intention to exclude severance"48. McLure JA dealt separately with this question, and in substance agreed with the Chief Justice49. This question requires attention to be given to the meaning of "provision" in s 45(1). The word "provision" has been described rightly as "a word of diverse meanings which slide easily into each other." As Lord Simonds, who "It may mean a clause or proviso, a defined part of a written instrument. Or it may mean the result ensuing from, that which is provided by, a written instrument or part of it." It is clear enough that "provision" in s 45(1) is used in the former sense. The relevant definition in the Oxford English Dictionary is51: "Each of the clauses or divisions of a legal or formal statement, or such a statement itself, providing for some particular matter; also, a clause in such a statement which makes an express stipulation or condition; a proviso." The important element of that definition is that a provision provides "for some particular matter". The fact that there may be more than one provision for a particular matter in one numbered clause of a contract is an accident of drafting. The inclusion in one clause of two statements of rights or liabilities in the form "if X, then Z" and "if Y, then Z" has the same effect as the inclusion of those statements in two separate numbered clauses. Each statement is a provision of the contract. There is no requirement to construe s 45(1) so that its operation depends upon accidents of paragraphing or numbering in contracts of insurance. The Underlying Insurance clause contains two statements each specifying a circumstance in which the Hamersley Policy will be reduced to an Excess Insurance policy. Each is properly regarded as a "provision" of that insurance contract. The question whether a clause of an insurance contract may contain a "provision", within the meaning of s 45(1), with different elements so intertwined 48 (2009) 253 ALR 364 at 382 [105]. 49 (2009) 253 ALR 364 at 370 [27]. 50 Berkeley v Berkeley [1946] AC 555 at 580; see also Saunders v Inland Revenue Commissioners [1956] Ch 283 at 288-289 per Wynn-Parry J. 51 The Oxford English Dictionary, 2nd ed (1989), vol 12 at 719. Crennan that neither can be regarded as a distinct "provision", does not arise in this case. In the result, s 45(1) operates only to render void that part of the Underlying Insurance clause in the Hamersley Policy which relates to double insurance to which the insured is a party. Conclusion For the preceding reasons the appeal should be dismissed with costs. HAYNE AND HEYDON JJ. The facts and circumstances giving rise to this appeal are set out in the joint reasons of French CJ, Gummow and Crennan JJ. As is explained in those reasons, the contract of insurance relevant to this matter ("the MMI contract") made by Hamersley Iron Pty Ltd ("Hamersley") with Metals & Minerals Insurance Pte Ltd ("MMI") contained a clause in which underwriters acknowledged: "that it is customary for the Insured [Hamersley] to effect, or for other parties (including joint venture partners, contractors and the like) to effect, on behalf of the Insured, insurance coverage specific to a particular project, agreement or risk". The MMI contract went on to provide that, in the event of Hamersley being indemnified "under such other Insurance effected by or on behalf of [Hamersley] ... in respect of a Claim for which Indemnity is available under this Policy", the insurance afforded by the MMI contract was limited. These provisions of the MMI contract were headed "Underlying Insurance", and it is convenient to refer to them as the "Underlying Insurance Terms". In the present case, Speno Rail Maintenance Australia Pty Ltd ("Speno"), a contractor to Hamersley, effected insurance coverage by the appellant (Zurich Australian Insurance Ltd – "Zurich") "specific to a particular project, agreement or risk". Hamersley was not a party to that insurance contract ("the Zurich contract"). But, by operation of s 48(1) of the Insurance Contracts Act 1984 (Cth) ("the Act"), Hamersley (as a person "specified or referred to in the contract, whether by name or otherwise, as a person to whom the insurance cover provided by the contract extends") had "a right to recover the amount of [its] loss from the insurer in accordance with the contract notwithstanding that [it was] not a party to the contract". It follows that, in respect of a claim for which indemnity was available under the Zurich contract, the Underlying Insurance Terms of the MMI contract, on their face, applied. The Zurich contract was insurance effected on behalf of (but not by) Hamersley in respect of a claim for which indemnity was available under the MMI contract. Because Hamersley could be indemnified under the Zurich contract, the Underlying Insurance Terms, on their face, had the effect of limiting MMI's liability, in effect, to excess insurance. The central question in this appeal is: was s 45(1) of the Act engaged? That sub-section provides that a provision included in a contract of general insurance is void where it has the effect described in the sub-section. Subject to a qualification not relevant in this matter (about insurance required to be effected by law) the effect specified in s 45(1) is "the effect of limiting or excluding the liability of the insurer under the contract by reason that the insured has entered into some other contract of insurance". The limitation on MMI's liability provided by the Underlying Insurance Terms could apply in two different circumstances. First, the limitation could apply where Hamersley itself effected insurance coverage specific to a particular project, agreement or risk. Secondly, it could apply where another party effected insurance coverage on behalf of Hamersley. In respect of the claim now in question, the second operation of the Underlying Insurance Terms applied. The second operation of the Underlying Insurance Terms was not a limitation of MMI's liability for the reason identified in s 45(1) of the Act. It was not a limitation "by reason that [Hamersley] has entered into some other contract of insurance". Hamersley had not entered any contract of insurance with Zurich. Speno, not Hamersley, had made the Zurich contract. And as the joint reasons explain, nothing in other provisions of the Act, or in the history of the Act, provides any footing for reading the relevant expression in s 45(1) – "the insured has entered into some other contract of insurance" – otherwise than in accordance with its ordinary meaning. Section 45(1) would be engaged in respect of the operation of the Underlying Insurance Terms where Hamersley itself entered a contract of insurance, but that was not this case. Section 45(1) did not engage with the operation of the Underlying Insurance Terms that applied in the circumstances of this case. The extent of the avoidance worked by s 45(1) does not depend upon the way in which the particular insurance contract is drafted52. What s 45(1) makes void is a provision included in a contract of general insurance where it has the effect described in the sub-section. The Act's reference to a provision having a particular effect is not to be read as reference to a discrete collocation of words. Section 45(1) directs attention to a particular operation which the contract would have according to its terms. It renders that operation of the contract void. It follows that no question of severance arises. However the insurance contract may be drafted, the contract cannot be given an operation of the kind that is identified in s 45(1). That operation of the contract, which is to say, the provision made by the contract to that effect, is void. But no other operation of the contract is avoided. 52 cf Visy Paper Pty Ltd v Australian Competition and Consumer Commission (2003) 216 CLR 1 at 12 [32]; [2003] HCA 59. The appeal should be dismissed with costs.
HIGH COURT OF AUSTRALIA AND THE QUEEN APPELLANT RESPONDENT [2014] HCA 6 5 March 2014 ORDER Appeal dismissed. On appeal from the Supreme Court of Victoria Representation T Kassimatis with B J Franjic for the appellant (instructed by Valos Black & Associates) P B Kidd SC with B L Sonnet for the respondent (instructed by Solicitor for Public Prosecutions (Vic)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Appeal – Appeal against conviction – Intentionally causing serious injury – Whether failure to instruct jury as to lesser alternative verdicts occasioned substantial miscarriage of justice. Criminal law – Role of trial judge – Whether duty to secure fair trial required instruction on any lesser alternative verdicts regardless of forensic choices of counsel. Crimes Act 1958 (Vic), ss 16, 17. Criminal Procedure Act 2009 (Vic), s 239. FRENCH CJ, HAYNE, CRENNAN, KIEFEL, BELL AND KEANE JJ. The appellant was convicted following a trial in the Supreme Court of Victoria (Williams J) of intentionally causing serious injury to a man named Khadr Sleiman1. A second count, an alternative to the first, charged the appellant with recklessly causing serious injury to Mr Sleiman2. Mr Sleiman suffered multiple injuries as the result of being struck by a motor vehicle that at the time was being driven by the appellant. It was the prosecution case that the appellant deliberately struck Mr Sleiman with the vehicle intending thereby to cause him serious injury. It was the defence case that Mr Sleiman was struck accidentally while the appellant manoeuvred his vehicle in reverse in an endeavour to get away from Mr Sleiman, who was menacing him with a knife. During the course of its retirement the jury sought clarification of the distinction between an intention to cause serious injury, the mental element of the offence charged in the first count, and awareness that his acts would probably cause serious injury, the mental element of the offence charged in the second count. In the course of a discussion about how to answer the jury's question the prosecutor raised, for the first time, the question of whether the jury should be instructed of the availability of a further alternative verdict: that the appellant intentionally caused injury, as opposed to serious injury, to Mr Sleiman3. The trial judge responded that the prosecution case had not been put on this basis. Her Honour expressed the view that to leave a further alternative verdict at this stage of the trial would deprive the appellant of the possibility of acquittal4. By his silence, the appellant's counsel is to be taken to have agreed with that assessment. The jury was not instructed of the availability of the alternative verdict of intentionally causing injury to Mr Sleiman. Nor was the jury instructed of the availability of the alternative verdict of recklessly causing injury to Mr Sleiman5. 1 Crimes Act 1958 (Vic), s 16. 2 Crimes Act 1958 (Vic), s 17. 3 Crimes Act 1958 (Vic), s 18. James v The Queen [2013] VSCA 55 at [155] per Priest JA. 5 Crimes Act 1958 (Vic), s 18. Hayne Crennan Bell The jury found the appellant guilty of intentionally causing serious injury to Mr Sleiman. The appellant appealed to the Court of Appeal of the Supreme Court of Victoria (Maxwell P, Whelan and Priest JJA) against his conviction, contending that the trial judge's failure to instruct the jury of the availability of verdicts for each of the lesser offences had occasioned a substantial miscarriage of justice. By majority, the appeal was dismissed. Maxwell P and Whelan JA, applying the test formulated by the Victorian Court of Appeal in R v Saad6, held that the interests of justice had not required that the further alternative verdicts be left7. Their Honours' conclusion took into account both the trial judge's assessment that to leave them would be unfair to the appellant and defence counsel's acceptance of that assessment. It also took into account that there was little evidence which raised the alternative verdicts as a real, and not a remote or artificial, possibility8. In dissent, Priest JA held that Saad was wrongly decided9. His Honour favoured the approach of the New South Wales Court of Criminal Appeal and the South Australian Court of Criminal Appeal as to the consequences of failing to leave an alternative verdict which is open on the evidence10. This approach holds that the statements in Gilbert v The Queen11 and Gillard v The Queen12, with (2005) 156 A Crim R 533 at 567 [110] per Nettle JA. 7 The appellant's trial took place before the commencement of the Jury Directions Act 2013 (Vic) and his appeal did not raise consideration of s 16(1) of that Act, which abolishes any rule of common law under which a trial judge is required to direct the jury about any defences and alternative offences open on the evidence which have not been identified as such during the trial. James v The Queen [2013] VSCA 55 at [82] per Whelan JA, Maxwell P agreeing James v The Queen [2013] VSCA 55 at [196]. 10 James v The Queen [2013] VSCA 55 at [201]-[207], citing R v King (2004) 59 NSWLR 515 and R v Tilley (2009) 105 SASR 306. 11 (2000) 201 CLR 414; [2000] HCA 15. 12 (2003) 219 CLR 1; [2003] HCA 64. Hayne Crennan Bell respect to the failure to leave manslaughter on an indictment of murder, apply by parity of reasoning to the failure to leave any lesser offence which, expressly or by implication, is included in the allegations charged in the indictment ("an included offence"). It followed, for the reasons explained in Gillard, that the failure to leave the further alternative verdicts at the appellant's trial occasioned a substantial miscarriage of justice13. On 16 August 2013 Bell and Gageler JJ granted the appellant special leave to appeal from the orders of the Court of Appeal. The question presented by the appeal is whether, on a trial on indictment, it is the duty of the judge to leave any lesser alternative verdict that is realistically open on the evidence regardless of the forensic decisions of counsel. For the reasons to be given, the answer to that question is "no". The Court of Appeal majority was correct to conclude that the trial judge was not required to instruct the jury of the availability of further alternative verdicts. It follows that the appeal must be dismissed. The appellant's submissions The appellant's argument may be summarised in the following steps. First, s 239 of the Criminal Procedure Act 2009 (Vic), which provides for the return of alternative verdicts, confers an unqualified right on the jury to return a verdict of guilty of any included offence that is open on the evidence. Secondly, the failure to direct the jury on any included offence that is open, regardless of the conduct of the parties, is a miscarriage of justice: the jury, ignorant of the range of possible verdicts which the law allows, may be driven to convict rather than to acquit the accused outright. Thirdly, the statements in Gilbert concerning jury deliberations14 should not be understood as confined to appellate consideration of the trial of an indictment of murder at which manslaughter is not left. Their Honours' statements are equally applicable to appellate consideration of the trial of any offence on indictment. 13 Gillard v The Queen (2003) 219 CLR 1 at 14 [27] per Gleeson CJ and Callinan J, 41-42 [133] per Hayne J. 14 Gilbert v The Queen (2000) 201 CLR 414 at 420 [13], 421 [16] per Gleeson CJ and Gummow J, 441 [101] per Callinan J. Hayne Crennan Bell Fourthly, there is no principled justification for distinguishing the obligation to instruct the jury on any defence or partial defence that is open on a view of the facts15 from the proposed obligation to instruct on any alternative verdict that is open on a view of the facts. On this analysis, fairness requires that the jury is informed of any pathway to a verdict that is more favourable to the accused than conviction of the principal offence. Finally, as the jury was not informed of the availability of verdicts for the two included offences, it was not open to the appellate court to conclude that the appellant did not lose the chance of a more favourable verdict and for this reason the failure to leave the alternative verdicts was an error resulting in a substantial miscarriage of justice16. Acceptance of the appellant's argument requires the appellate court to set aside his conviction for the offence charged in count one notwithstanding that the verdict was returned following a trial at which the law governing liability for that offence, and for the lesser alternative offence charged in count two, was correctly explained to the jury. This result is required notwithstanding that the prosecution confined its case to proof of guilt of the charged offences and that the appellant chose not to invite the jury to convict him of any lesser offence should the prosecution fail in that endeavour. 15 Pemble v The Queen (1971) 124 CLR 107 at 117-118 per Barwick CJ; [1971] HCA 20; Braysich v The Queen (2011) 243 CLR 434 at 452-453 [32] per French CJ, Crennan and Kiefel JJ; [2011] HCA 14. 16 Section 276(1) of the Criminal Procedure Act 2009 (Vic) relevantly provides that: "On an appeal ... the Court of Appeal must allow the appeal against conviction if the appellant satisfies the court that – as the result of an error or an irregularity in, or in relation to, the trial there has been a substantial miscarriage of justice; or for any other reason there has been a substantial miscarriage of justice." Hayne Crennan Bell Alternative verdicts – included offences and manslaughter Section 239 of the Criminal Procedure Act 2009 (Vic) provides: "(1) On a trial on indictment for an offence other than treason or murder, if the jury finds the accused not guilty of the offence charged but the allegations in the indictment amount to or include, whether expressly or impliedly, an allegation of another offence that is within the jurisdiction of the court, the jury may find the accused guilty of that other offence. For the purposes of subsection (1), an allegation of an offence includes an allegation of an attempt to commit the offence." The provision is modelled on s 6(3) of the Criminal Law Act 1967 (UK)17. The enactment of the English provision followed the recommendation of the Criminal Law Revision Committee18. The provision served to overcome technicalities of the common law. At common law the jury could not convict of a misdemeanour if the indictment charged a felony, but was at liberty to convict of a less aggravated felony (or misdemeanour if the indictment charged a misdemeanour) provided the words of the indictment covered the lesser offence19. 17 That sub-section provides: "Where, on a person's trial on indictment for any offence except treason or murder, the jury find him not guilty of the offence specifically charged in the indictment, but the allegations in the indictment amount to or include (expressly or by implication) an allegation of another offence falling within the jurisdiction of the court of trial, the jury may find him guilty of that other offence or of an offence of which he could be found guilty on an indictment specifically charging that other offence." 18 Criminal Law Revision Committee, Felonies and Misdemeanours, Report No 7, (1965) Cmnd 2659 at 13-14 [46]. See also R v Lillis [1972] 2 QB 236. 19 Brown v The King (1913) 17 CLR 570 at 591 per Isaacs and Powers JJ; [1913] HCA 70, citing Archbold's Pleading, Evidence, and Practice in Criminal Cases, 23rd ed (1905) at 215-216 and Halsbury's Laws of England, 1st ed, vol 9 at 371. Hayne Crennan Bell Two features of the statutory scheme should be noted20. First, the power to return a verdict of guilty of an offence not charged in the indictment is conditioned upon finding that the accused is not guilty of the offence charged. It is not correct to characterise s 239, as the appellant does, as conferring "an unqualified statutory right or power to find an accused person guilty of a lesser offence". Secondly, s 239 is expressed to apply to the trial on indictment of offences other than treason or murder. Professor Williams, writing of its English counterpart, observes that manslaughter is not correctly classified as an included offence. He suggests that its separate treatment as an alternative verdict under s 6(2) of the Criminal Law Act 1967 (UK) reflects the special features of the The special features of the verdict of manslaughter on the trial of an indictment of murder are the product of the development of the law of homicide, which is detailed in a number of this Court's decisions22. It is sufficient for present purposes to observe that murder and manslaughter emerged as forms of the one felony. By statute, murder became the non-clergyable form of the felony23. Murder was distinguished from other homicides by the presence of 20 It should also be noted that Div 1 of Pt III of the Crimes Act 1958 (Vic) contains provisions dealing with alternative verdicts for particular offences, including murder (s 421(1)). Section 421(2) mirrored the provisions of s 239(1) of the Criminal Procedure Act 2009 (Vic), and was repealed by s 422(2)(c) of that Act. 21 Glanville Williams, "Included Offences", (1991) 55 Journal of Criminal Law 234 22 Parker v The Queen (1963) 111 CLR 610 at 625-628 per Dixon CJ, 650-655 per Windeyer J; [1963] HCA 14; Gammage v The Queen (1969) 122 CLR 444 at 449- 451 per Barwick CJ, 453-454 per Kitto J, 462-463 per Windeyer J; [1969] HCA 68; R v Lavender (2005) 222 CLR 67 at 77-78 [24]-[26], 82 [38], 83-84 [42]-[44] per Gleeson CJ, McHugh, Gummow and Hayne JJ; [2005] HCA 37; and see Snelling, "The Alternative Verdict of Manslaughter", (1958) 32 Australian Law Journal 137. 23 Parker v The Queen (1963) 111 CLR 610 at 650 per Windeyer J. Hayne Crennan Bell malice aforethought. It was open on the indictment to return a verdict of murder Sir Owen Dixon, writing extra-curially in 1935, explained the point of "[T]he difference between murder and manslaughter was not the difference between two distinct felonies, but the difference between two descriptions of the one felony. They were differentiated only because the consequences of a conviction had, by statute, ceased to be the same. But the fact that the two descriptions formed only one felony is reflected in one consequence which profoundly affects the practical conduct and often the result of a murder trial of today. For it is because homicide is a single felony, that, upon an indictment of murder, a verdict of manslaughter may be found." The practical conduct of the trial of an indictment of murder at the time Sir Owen Dixon was writing was understood to require a trial judge to leave manslaughter in any case in which the accused or the jury asked about the matter notwithstanding that the facts did not support it26. That understanding was corrected in Gammage v The Queen, which held that the jury did not have a right to return a "merciful" verdict of manslaughter27. The obligation to leave manslaughter in most, although not all, cases was identified by Barwick CJ as arising from the necessity to satisfy the jury of the elements of murder28. This was so whether the element in issue was proof of the intention accompanying the unlawful and dangerous act causing death or whether the prosecution had 24 Kwaku Mensah v The King [1946] AC 83 at 92. 25 Dixon, "The Development of the Law of Homicide", in Jesting Pilate, (1965) 61 at 26 Brown v The King (1913) 17 CLR 570 at 578 per Barton ACJ, 592 per Isaacs and Powers JJ; Packett v The King (1937) 58 CLR 190 at 213 per Dixon J; [1937] HCA 53; Beavan v The Queen (1954) 92 CLR 660 at 662-663; [1954] HCA 41. (1969) 122 CLR 444 at 451 per Barwick CJ, 456, 458-459 per Menzies J, 462 per Windeyer J, 464 per Owen J. 28 Gammage v The Queen (1969) 122 CLR 444 at 451. Hayne Crennan Bell negatived a partial defence. In Varley v The Queen29 his Honour explained the obligation as one that is owed to the accused and the Crown alike. In the latter connection, his Honour observed that in default of the jury's satisfaction of all the elements of murder, the Crown was not to be denied a verdict30. As will appear, there is good reason not to extend this reasoning to the trial of offences generally. While the trial of an indictment of murder required that the jury be directed on manslaughter where that verdict was open on a view of the facts, the consequences of the wrongful failure to give the direction differed. Where there was material before the jury raising the partial defence provocation, the failure to leave manslaughter was likely to constitute a substantial miscarriage of justice: the verdict of murder did not gainsay that the jury might have convicted of manslaughter had it been invited to consider the matter31. The wrongful failure to leave manslaughter in other circumstances did not necessitate the conclusion that the trial had miscarried: the verdict of murder demonstrated the jury's satisfaction of the accused's liability for that offence32. The correctness of the latter assumption was the issue in Gilbert. In Gilbert the jury was instructed that on the view of the facts for which the defence contended the accused was entitled to outright acquittal. The direction accorded with the law as it was understood at the time. The understanding proved to be wrong, as on the view of the facts for which the defence contended, it had been open to convict Gilbert of manslaughter. The question in this Court was whether the Queensland Court of Appeal erred in dismissing Gilbert's appeal against his conviction for murder under the proviso in s 668E(1A) of the Criminal Code (Q). The majority held that the verdict did not 29 (1976) 51 ALJR 243; 12 ALR 347. 30 Varley v The Queen (1976) 51 ALJR 243 at 245; 12 ALR 347 at 351. 31 Kwaku Mensah v The King [1946] AC 83 at 94; Parker v The Queen (1963) 111 CLR 610; Van Den Hoek v The Queen (1986) 161 CLR 158 at 163 per Gibbs CJ, Wilson, Brennan and Deane JJ; [1986] HCA 76. 32 Ross v The King (1922) 30 CLR 246 at 254 per Knox CJ, Gavan Duffy and Starke JJ, 274 per Higgins J; [1922] HCA 4; R v Evans [1969] VR 858 at 867-874 per O'Bryan and Little JJ; R v Iannazzone [1983] 1 VR 649 at 653-654. Hayne Crennan Bell preclude the possibility that the jury had not applied the instructions concerning proof of the elements of murder. Gleeson CJ and Gummow J disavowed that appellate courts are to assume a mechanistic approach to fact-finding on the part of the jury. In this context, their Honours observed that the jury's findings of fact are made in the context of instructions as to the consequences of the findings33. They referred with approval to statements in Mraz v The Queen concerning the "realities" of jury deliberations when murder is in issue34. In Mraz those realities were that murder was punishable with death. Gleeson CJ and Gummow J considered that an equally influential contemporary reality is that "[t]his is an age of concern for the victims of violent crime, and their relatives" (emphasis added)35. Callinan J, the other member of the majority, also reasoned that it is contrary to human experience, where there is a choice of decisions, that what is chosen will be unaffected by the variety of choices offered36. The rationale of the decision in Gilbert is discussed in Gillard. In that case manslaughter was not left when, on a view of the facts, it was an available verdict, albeit not one for which the defence contended. As Hayne J explained, the holding in Gilbert precluded the appellate court from taking into account the findings made by the jury and for this reason it could not be concluded that Gillard had not lost a chance of more favourable verdicts than those that the jury returned37. Gilbert and Gillard are concerned with the consequences of the wrongful neglect of the obligation to leave manslaughter to the jury in any circumstance in which it is open. History and recognition of the gravity of conviction for murder inform the obligation. Gilbert and Gillard do not state any wider principle respecting the obligation to leave alternative verdicts for included offences 33 Gilbert v The Queen (2000) 201 CLR 414 at 421 [16]. 34 Gilbert v The Queen (2000) 201 CLR 414 at 420-421 [14], [17], citing (1955) 93 CLR 493 at 508 per Williams, Webb and Taylor JJ; [1955] HCA 59. 35 Gilbert v The Queen (2000) 201 CLR 414 at 421 [17]. 36 Gilbert v The Queen (2000) 201 CLR 414 at 441 [101]. 37 Gillard v The Queen (2003) 219 CLR 1 at 42 [134]. Hayne Crennan Bell (including alternative verdicts for offences other than manslaughter on an indictment of murder38) or the consequences of the failure to do so. The rationale of the proposed rule In the appellant's submission, the contention that the principles in Gilbert and Gillard should be extended to the trial of all offences arises from the trial judge's obligation to ensure the fair trial of the accused. That obligation was explained by Barwick CJ in a frequently cited passage in Pemble v The Queen39: "Whatever course counsel may see fit to take, no doubt bona fide but for tactical reasons in what he considers the best interest of his client, the trial judge must be astute to secure for the accused a fair trial according to law. This involves, in my opinion, an adequate direction both as to the law and the possible use of the relevant facts upon any matter upon which the jury could in the circumstances of the case upon the material before them find or base a verdict in whole or in part." Pemble was concerned with the trial of an indictment of murder. Consistently with the submissions of defence counsel the trial judge instructed the jury that it was a case of murder or manslaughter. The trial judge did not in terms instruct the jury that it was open to acquit. No question arose in Pemble of the obligation to instruct the jury on liability for included offences. Such authority, as there was at the time, was against the existence of an obligation to leave every included offence comprised in the allegations in the indictment40. The correctness of that line of authority was later affirmed by the English Court of Appeal in R v Fairbanks, in which it was said that an obligation to leave a lesser alternative arises only if it is necessary in the interests of justice to do so41. 38 Those alternative verdicts are provided for by s 421(1) of the Crimes Act 1958 (Vic). 39 (1971) 124 CLR 107 at 117-118. 40 Vaughan (1908) 1 Cr App R 25; Naylor (1910) 5 Cr App R 19; Parrott (1913) 8 Cr App R 186 at 192-193. 41 [1986] 1 WLR 1202 at 1205-1206. Hayne Crennan Bell Plainly enough the fair trial of the accused may require that an alternative verdict be left, including in a case in which the accused disavows reliance on it. However, the proposition for which the appellant contends is the adoption of a rule requiring that every viable alternative verdict be left in every case. Reference should here be made to the decision of the House of Lords in R v Coutts42, upon which the appellant relies. Coutts, like Gillard, was concerned with a trial of murder at which, with the concurrence of the parties, manslaughter was not left although that verdict was open. Lord Bingham of Cornhill endorsed the reasoning of the majority in Gilbert43. His Lordship went on to propose that at any trial on indictment, irrespective of the wishes of trial counsel, any obvious alternative verdict for which there is evidence should be left44. Two features of the proposed rule may be noted. First, its confinement to an "obvious" alternative verdict is by way of contrast with alternative verdicts "which ingenious counsel may identify through diligent research after the trial"45. Secondly, the interest that the proposed rule serves is the public interest in the administration of justice: in some cases application of the rule would benefit the accused, protecting against an excessive conviction, and in other cases it would benefit the public, providing for the punishment of a lawbreaker who is deserving of punishment46. The rule for which the appellant contends is one of greater stringency than that proposed in Coutts. Since the elements of an included offence are expressly or impliedly encompassed in the allegations pleaded in the indictment, included offences will commonly be "viable" in the sense of being open on the evidence. The appellant's proposed rule would not allow the trial judge to omit instruction on any alternative verdict lawfully open, notwithstanding that a realistic lesser 42 [2006] 1 WLR 2154; [2006] 4 All ER 353. 43 R v Coutts [2006] 1 WLR 2154 at 2165-2166 [20], 2168 [25]; [2006] 4 All ER 353 44 R v Coutts [2006] 1 WLR 2154 at 2167 [23]; [2006] 4 All ER 353 at 367. 45 R v Coutts [2006] 1 WLR 2154 at 2167 [23] per Lord Bingham; [2006] 4 All ER 46 R v Coutts [2006] 1 WLR 2154 at 2167 [23] per Lord Bingham; [2006] 4 All ER Hayne Crennan Bell alternative offence is charged in the indictment. In some cases, irrespective of the allegations charged in the indictment and the conduct of the trial, the trial judge would be required to direct the jury on a "cascade of lesser offences"47. This lastmentioned prospect may be thought to be the antithesis of the obligation imposed on the trial judge when summing up to the jury to identify the real issues in the case and to instruct the jury on so much of the law as is necessary to decide those issues48. That is so unless the real issues at every trial encompass the accused's guilt of every included offence of which, in law, the accused could be convicted regardless of the forensic choices made by the parties. This latter contention is to be assessed in light of the essential features of our accusatorial and adversarial system of criminal justice. The starting point in this consideration is Barwick CJ's frequently cited account of the incidents of the criminal trial49: "It is a trial, not an inquisition: a trial in which the protagonists are the Crown on the one hand and the accused on the other. Each is free to decide the ground on which it or he will contest the issue, the evidence which it or he will call, and what questions whether in chief or in cross- examination shall be asked; always, of course, subject to the rules of evidence, fairness and admissibility. The judge is to take no part in that contest, having his own role to perform in ensuring the propriety and fairness of the trial and in instructing the jury in the relevant law." Discharge of the trial judge's role in ensuring fairness to the accused requires that the jury receives instruction on any defence or partial defence, provided there is material raising it, regardless of the tactical decisions of counsel50. Among other things, this recognises the forensic difficulty of relying on inconsistent defences. The tactical decision not to rely on a defence or partial 47 Elfar (2000) 115 A Crim R 64 at 73 [49] per Sperling J. 48 Alford v Magee (1952) 85 CLR 437 at 466; [1952] HCA 3; Tully v The Queen (2006) 230 CLR 234 at 257 [79] per Hayne J; [2006] HCA 56; R v Getachew (2012) 248 CLR 22 at 34-35 [29] fn 35; [2012] HCA 10. 49 Ratten v The Queen (1974) 131 CLR 510 at 517; [1974] HCA 35. 50 Pemble v The Queen (1971) 124 CLR 107 at 117-118 per Barwick CJ. Hayne Crennan Bell defence, whether objectively sound or otherwise, does not relieve the trial judge of the obligation to instruct the jury on how on a view of the facts a defence or partial defence arises. Of course, forensic considerations may equally be against defence counsel inviting the jury to consider the accused's guilt of a lesser offence. The submission may be inconsistent with the tenor of the defence case. Nonetheless fairness to the accused may require that the jury be directed of the availability of the alternative verdict. In such a case the failure to do so would be a miscarriage of justice. However, it is wrong to equate leaving a defence or partial defence with leaving alternative verdicts. The two are distinct. Where there is evidence to support a defence or partial defence it is incumbent on the prosecution to negative it. Satisfaction that the defence or partial defence has been negatived will be an issue in the trial and almost always will require the trial judge to so direct the jury51. Where the prosecution does not seek the jury's verdict for an offence not charged, the circumstance that in law the evidence may support conviction for a lesser offence does not without more make guilt of that lesser offence an issue in the trial. Fairness in such a case may favour that the accused's chances of outright acquittal on the issues joined not be jeopardised by the trial judge's decision to leave an alternative verdict. Consideration of fairness to the accused led the New South Wales Court of Criminal Appeal to hold that it was unwise for the trial judge to direct on an alternative verdict in a case in which the parties had not raised that matter52. The Queensland Court of Appeal has similarly held that fairness may require that the accused's chances of acquittal are not jeopardised by leaving an alternative verdict53. These remarks were approved by Kiefel J in R v Keenan with the 51 There may be instances in which the trial judge properly accedes to trial counsel's request not to leave variants of a defence to avoid obfuscating the real issues: see R v Willersdorf [2001] QCA 183 at [18] per Thomas JA, McPherson JA agreeing at [3], Chesterman J agreeing at [32]. 52 R v Cameron [1983] 2 NSWLR 66 at 71; R v Pureau (1990) 19 NSWLR 372 at 53 R v Willersdorf [2001] QCA 183 at [17], [20] per Thomas JA, McPherson JA agreeing at [3], Chesterman J agreeing at [32]. Hayne Crennan Bell concurrence of Hayne, Heydon and Crennan JJ54. Keenan holds that the duty to ensure a fair trial does not require that a lesser charge is left in every case: the test is what justice to the accused requires55. Statements in the authorities favouring the existence of an obligation to leave any alternative verdict open on the evidence have not been sourced in fair trial principles but in a different and wider public interest. Phillimore J distinguished the two in Parrott56. Delivering the reasons of the Court of Criminal Appeal in 1913, his Lordship allowed that there may be cases in which the interests of the accused require that a lesser verdict is left. By comparison, his Lordship considered there to be many cases in which the interests of justice will not be met unless the jurors are informed that they may convict of a lesser offence since otherwise "thinking it a case of 'neck or nothing,' they may acquit altogether"57. An accused may successfully raise a plea in bar on arraignment for an offence of which the accused might have been convicted on the allegations in the indictment at an earlier trial58. This consideration inclined King CJ to the view in Benbolt v The Queen that it was the trial judge's obligation to direct the jury on any alternative verdict, notwithstanding that the parties had made no reference to that possibility59. The failure to do so might preclude the prosecution of the accused for an offence of which he or she was guilty. Contrary to the burden of the appellant's argument, King CJ considered that the overriding fair trial 54 (2009) 236 CLR 397 at 438 [138], Hayne J agreeing at 422 [80], Heydon J agreeing at 425 [92], Crennan J agreeing at 425 [93]; [2009] HCA 1. 55 (2009) 236 CLR 397 at 438 [138] per Kiefel J, Hayne J agreeing at 422 [80], Heydon J agreeing at 425 [92], Crennan J agreeing at 425 [93]. 56 (1913) 8 Cr App R 186. 57 (1913) 8 Cr App R 186 at 193. 58 Connelly v Director of Public Prosecutions [1964] AC 1254 at 1305 per Lord Morris of Borth-y-Gest. 59 (1993) 60 SASR 7 at 15-19. Hayne Crennan Bell obligation would in an appropriate case justify the decision not to leave an alternative verdict60. The importance under Australian law of maintaining the separation between prosecutorial and judicial functions has been stated in a number of this Court's decisions since Benbolt61. The view that it is the duty of the trial judge to invite the jury to determine the accused's guilt of an included offence at a trial at which the prosecution has elected not to do so is incompatible with the separation of those functions. It is not the function of the trial judge to prevent the acquittal of the accused should the prosecution fail to prove guilt of the offence, or offences, upon which it seeks the jury's verdict. At a trial at which neither party seeks to rely on an included offence, the trial judge may rightly assess that proof of the accused's guilt of that offence is not a real issue. In such an event, it would be contrary to basic principle for the trial judge to embark on instruction respecting proof of guilt of the included offence62. The trial judge's duty with respect to instruction on alternative verdicts is to be understood as an aspect of the duty to secure the fair trial of the accused. The question of whether the failure to leave an alternative verdict has occasioned a miscarriage of justice is answered by the appellate court's assessment of what justice to the accused required in the circumstances of the particular case. That assessment takes into account the real issues in the trial and the forensic choices of counsel. As earlier noted, not infrequently defence counsel will decide not to 60 Benbolt v The Queen (1993) 60 SASR 7 at 18-19. 61 Maxwell v The Queen (1996) 184 CLR 501 at 513-514 per Dawson and McHugh JJ, 534-535 per Gaudron and Gummow JJ; [1996] HCA 46; Likiardopoulos v The Queen (2012) 247 CLR 265 at 269 [2] per French CJ, 279- 280 [37] per Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2012] HCA 37; Elias v The Queen (2013) 248 CLR 483 at 497-498 [33]-[35]; [2013] HCA 31; Magaming v The Queen (2013) 87 ALJR 1060 at 1067 [20] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; 302 ALR 461 at 466; [2013] HCA 40. 62 See above fn 48 and see also Baiada Poultry Pty Ltd v The Queen (2012) 246 CLR 92 at 106 [36] per French CJ, Gummow, Hayne and Crennan JJ; [2012] HCA 14; R v Khazaal (2012) 246 CLR 601 at 623 [73] per Gummow, Crennan and Bell JJ; [2012] HCA 26; Huynh v The Queen (2013) 87 ALJR 434 at 441 [31]; 295 ALR 624 at 631-632; [2013] HCA 6; Director of Public Prosecutions (Cth) v JM (2013) 87 ALJR 836 at 842 [28]; 298 ALR 615 at 622-623; [2013] HCA 30. Hayne Crennan Bell sully the defence case (that the only proper verdict is one of outright acquittal) by an invitation to the jury to consider the accused's guilt of a lesser offence. Such a forensic choice does not prevent counsel from submitting that the alternative verdict should nonetheless be left. Much less does it prevent counsel from making that submission where, as here, he or she is asked about the matter. It remains that the forensic choices of counsel are not determinative. The duty to secure a fair trial rests with the trial judge and on occasions its discharge will require that an alternative verdict is left despite defence counsel's objection. Did justice to the appellant require that the lesser alternative verdicts be left? It is sufficient to refer in broad outline to the evidence in order to explain why the interests of justice to the appellant did not require the further alternative verdicts to be left for the jury's consideration. The incident occurred at night time in the car park of a suburban shopping centre. There was evidence that the appellant and Mr Sleiman had arranged to meet in connection with a debt alleged to be owed by Mr Sleiman to the appellant. It appeared that Mr Sleiman had armed himself with a knife before going to the meeting. It was not in issue that Mr Sleiman was struck by the appellant's vehicle and that as a result he suffered extensive serious injuries. At the trial Mr Sleiman claimed to have no recall of the circumstances of the collision. In a statement earlier made to the police Mr Sleiman had given an account that the appellant had put his vehicle into reverse and swung the steering wheel such that the front of the vehicle struck him as it reversed. The only direct evidence of the collision was that of an eye witness, Monica Woods, a 17 year old high school student. Ms Woods described seeing the appellant's vehicle as "revving back and forth ... and then moving forward". She saw a man who was standing in front of the vehicle projected a few metres into the air. The vehicle drove over the body and away. In cross-examination Ms Woods acknowledged that she had not given an account of the vehicle driving over the body in her police statement. She also acknowledged that at the committal hearing she had said that after the vehicle hit the man she had not seen it run over him. There was expert evidence that Mr Sleiman had suffered significant and potentially life-threatening injuries. In the expert's view, these were the result of a direct or forceful blunt trauma from impact with the front or the rear of the vehicle and were unlikely to have been caused by a "glancing blow". Hayne Crennan Bell No evidence was adduced by the defence. The appellant relies on Priest JA's analysis in support of his contention that his fair trial required that each alternative verdict be left. That analysis is as follows63: "In my opinion, the jury would have been entitled to come to the conclusion that they could not reject, on the criminal standard, the thesis that [Mr Sleiman] was struck only a glancing blow; or, perhaps more importantly, that the appellant's appreciation was that he had only struck a blow less severe than what appears to have been the reality. The jury would, I think, legitimately have been entitled to conclude that [Mr Sleiman] – despite his claimed lack of recall – had accurately described to the police in his initial version of events the manner in which the vehicle struck him. … That being so, I think that it would have been open to the jury to find that the appellant did not intend to cause serious injury (or that he foresaw the probability of serious injury being caused); or, at least, to have entertained a reasonable doubt about it." It may be accepted that it was open to reject the more graphic aspects of Ms Woods' evidence and to consider that Mr Sleiman had been struck by the vehicle as it reversed. Proof of the offence charged in count one required satisfaction that the appellant intended to cause serious injury by striking Mr Sleiman with his vehicle. In the event the jury was not so satisfied it was required to consider whether at the time the appellant drove his vehicle so as to strike Mr Sleiman he was aware that he would probably cause him serious injury and with that awareness he nonetheless proceeded to hit him. The reasonable possibility that Mr Sleiman sustained his injuries as the result of being struck a glancing blow by the appellant's vehicle as he manoeuvred the vehicle in reverse was relied upon by the defence as requiring his acquittal. The elimination of that reasonable possibility was the central issue in the case. 63 James v The Queen [2013] VSCA 55 at [180]-[181]. Hayne Crennan Bell "Serious injury" need not amount to grievous bodily harm for the purposes of these offences64. Injuries consisting of the infliction of black eyes and grazes to the head and face have been held to amount to serious injury65. Logic may commend that evidence supporting an inference of an intention to cause serious injury must support an inference of intention to cause injury. In this sense it can be said that each of the alternatives was "viable". To distinguish the intention to injure from the intention to cause serious injury, as defined, in the context of giving effect to the intention by deliberately hitting a person with a motor vehicle has a degree of subtlety rightly characterised by Whelan JA as artificial66. That observation is even more apt when considering the claimed necessity to direct the jury of the availability of the alternative verdict in recklessness. Fairness to the appellant did not require that either alternative verdict be left. To have instructed the jury on the alternative verdicts at the conclusion of the trial might rightly be judged to have jeopardised the appellant's chances of acquittal. It might have done so because the central issue at trial – had the prosecution excluded the reasonable possibility that the appellant struck Mr Sleiman inadvertently as he manoeuvred the vehicle – may have been blurred in a summing-up which conviction. introduced additional, uncharged, pathways The appeal must be dismissed. 64 At the time of the relevant events, s 15 of the Crimes Act 1958 (Vic) relevantly provided that "injury" includes "unconsciousness, hysteria, pain and any substantial impairment of bodily function", and that "serious injury" includes "a combination of injuries". 65 R v Ferrari [2002] VSCA 186. 66 James v The Queen [2013] VSCA 55 at [82(2)]. Introduction This appeal turns on two distinct questions of criminal procedure which arose under the Criminal Procedure Act 2009 (Vic) before the commencement of the Jury Directions Act 2013 (Vic). When was a trial judge required to give a direction that, if a jury found an accused not guilty of the offence charged, the jury might find the accused guilty of a lesser offence included in the offence charged? When did a trial judge's failure to give such a direction result in a substantial miscarriage of justice requiring the Court of Appeal of the Supreme Court of Victoria to allow an appeal against conviction of the offence charged? My answers accord substantially with those of Priest JA, who dissented from the judgment of the Court of Appeal now under appeal to this Court67. A trial judge was required to direct that a jury might find an accused guilty of a lesser included offence, if the jury did not find the accused guilty of the offence charged, whenever it was open to the jury on the evidence adduced at the trial to find the accused not guilty of the offence charged but guilty of the lesser included offence, irrespective of any forensic choice made by or on behalf of the accused, unless giving that direction would be unfair to the accused. Failure to give such a direction where so required would result in a substantial miscarriage of justice requiring the Court of Appeal to allow an appeal against conviction of the offence charged if there was reason to consider that the jury might have entertained doubt as to guilt of the offence charged had the direction been given, unless the Court of Appeal was able to conclude from its review of the record that conviction of the offence charged was inevitable. The first question: the duty to direct as to lesser included offences Section 238 of the Criminal Procedure Act provides: "At the conclusion of the closing address of the prosecution, the closing address of the accused and any supplementary prosecution address, the trial judge must give directions to the jury so as to enable the jury to properly consider its verdict." The extent to which directions to enable the jury properly to consider its verdict might encompass directions as to offences other than those with which the accused was charged falls to be determined in light of the statutory power of the jury to find the accused guilty of lesser offences: where the offence charged 67 James v The Queen [2013] VSCA 55 at [205]-[207], [217]-[218]. is murder, as conferred by s 421(1) of the Crimes Act 1958 (Vic); and where the offence charged is other than treason or murder, as conferred by s 239 of the Criminal Procedure Act. Section 421(1) of the Crimes Act provides that "[o]n an indictment for murder a person found not guilty of murder may be found guilty of ... manslaughter", or of another of the offences specified in that section, which include "an attempt to commit murder", "but may not be found guilty of any other offence". Section 239 of the Criminal Procedure Act provides: "(1) On a trial on indictment for an offence other than treason or murder, if the jury finds the accused not guilty of the offence charged but the allegations in the indictment amount to or include, whether expressly or impliedly, an allegation of another offence that is within the jurisdiction of the court, the jury may find the accused guilty of that other offence. For the purposes of subsection (1), an allegation of an offence includes an allegation of an attempt to commit the offence." Those sections must be read with s 240 of the Criminal Procedure Act, which provides that, despite s 421(1) of the Crimes Act and s 239 of the Criminal Procedure Act, "if the trial judge considers that it is in the interests of justice to do so, the judge may order that the guilt of the accused in respect of all or any of the other offences of which the accused may be found guilty is not to be determined at the trial". Legislative history puts s 421(1) of the Crimes Act and ss 239 and 240 of the Criminal Procedure Act in an appropriate perspective. All were originally enacted by the Crimes (Classification of Offences) Act 1981 (Vic). As originally enacted, s 239(1) and (2) and s 240 of the Criminal Procedure Act formed sub- sections of the newly inserted s 421 of the Crimes Act following consecutively after what remains s 421(1). The principal purpose of the Crimes (Classification of Offences) Act was to abolish the historical distinction between felony and misdemeanour in Victoria. The Crimes (Classification of Offences) Act achieved that purpose by inserting s 322B(1) into the Crimes Act to provide in terms that "[a]ll distinctions between felony and misdemeanour are hereby abolished". The distinction between felony and misdemeanour had earlier been abolished in the United Kingdom by the identical terms of s 1(1) of the Criminal Law Act 1967 (UK). The insertion of s 421 of the Crimes Act was consequential on the abolition of the distinction between felony and misdemeanour, and s 421 was modelled in substantial part on s 6 of the Criminal Law Act. Section 6 of the Criminal Law Act had been based on recommendations contained in a report of the Criminal Law Revision Committee in 196568. The need for legislation abolishing the distinction between felony and misdemeanour in Victoria to include a provision along similar lines had been highlighted in a report of the Chief Justice's Law Reform Committee in 197369. Section 239(1) of the Criminal Procedure Act was originally enacted as s 421(2) of the Crimes Act and was modelled on s 6(3) of the Criminal Law Act. Consistent with the explanation earlier given by the Criminal Law Revision Committee for recommending the enactment of s 6(3) of the Criminal Law Act70, its purpose was explained at the time of its original enactment as being to "reproduce[] the common law rule that a person charged with an offence may be convicted of a lesser offence the ingredients of which are included in the offence with which he is charged" while removing the common law restriction that "a person charged with a felony cannot be convicted of a misdemeanour"71. The common law rule replaced in the United Kingdom by s 6(3) of the Criminal Law Act and in Victoria by s 239(1) of the Criminal Procedure Act was that "an accused might be convicted of a lesser offence than that charged, provided that the definition of the more serious offence necessarily included the definition of the lesser offence and that both offences were of the same degree, that is to say, were either felonies or misdemeanours"72. In particular73: "At common law a defendant [could] be convicted of a less aggravated indictment charging a felony or felony or misdemeanor on an misdemeanor of greater aggravation, provided that the indictment contain[ed] words apt to include both offences. In other words, it [was] not necessary to prove the offence charged in the indictment to the whole 68 United Kingdom, Criminal Law Revision Committee, Seventh Report: Felonies and Misdemeanours, (1965) Cmnd 2659 at 13-16. 69 Victoria, Chief Justice's Law Reform Committee, Abolition of the Distinction Between Felonies and Misdemeanours, (1973) at 10-11. 70 United Kingdom, Criminal Law Revision Committee, Seventh Report: Felonies and Misdemeanours, (1965) Cmnd 2659 at 13-14 [46]. 71 Victoria, Legislative Council, Parliamentary Debates (Hansard), 28 October 1980 72 Saraswati v The Queen (1991) 172 CLR 1 at 13; [1991] HCA 21. 73 O'Brien (1911) 6 Cr App R 108 at 110, quoting Archbold's Pleading, Evidence, & Practice in Criminal Cases, 24th ed (1910) at 228. extent laid, provided that the facts proved constitute[d] an offence punishable by law, of which the defendant [could] by law be convicted on the indictment." The common law rule applied to all felonies and all misdemeanours; the test for inclusion being whether proof of the lesser offence was a necessary step in proving the offence charged74. In each case, the jury could "discharge the defendant of the higher crime, and convict him of the less atrocious"75. Thus, an accused indicted for robbery might be found not guilty of the robbery but guilty of simple larceny (if the jury considered that the prosecutor failed to prove that the property was taken by violence or putting in fear) by reference to the same common law rule as that by which an accused indicted for murder might be found not guilty of murder but guilty of manslaughter (if the jury considered that the prosecutor failed to prove malice aforethought)76. The nature and extent of the general common law rule was the subject of comment in Gammage v The Queen77 in the context of considering s 370 of the Criminal Law Amendment Act 1883 (NSW), re-enacted as s 23(2) of the Crimes Act 1900 (NSW), which provided that where it appeared on a trial for murder "that the act or omission causing death does not amount to murder, but does amount to manslaughter, the jury may acquit the accused of murder, and find him guilty of manslaughter". Windeyer J observed78: "Long before 1883 the law of England, and of New South Wales, in relation to juries' verdicts in cases of homicide had become settled. The enactment of the predecessor of s 23(2) introduced no novelty into the law ... In Chitty, Criminal Law (1826), vol 1, pp 637-642, the power of a jury to find a verdict of manslaughter when acquitting of murder is given as one among a number of illustrations of the power to acquit of a part of an offence charged in an indictment, but, as it was put, to find the prisoner guilty of the residue." 74 R v Salisbury [1976] VR 452 at 454; R v Cameron [1983] 2 NSWLR 66 at 68. 75 Chitty, Criminal Law, 2nd ed (1826), vol 1 at 637. 76 Chitty, Criminal Law, 2nd ed (1826), vol 1 at 637-642; Archbold's Pleading, Evidence, & Practice in Criminal Cases, 24th ed (1910) at 228. See also Brown v The King (1913) 17 CLR 570 at 591; [1913] HCA 70, citing Archbold's Pleading, Evidence, & Practice in Criminal Cases, 23rd ed (1905) at 215-216 and Halsbury's Laws of England, 1st ed, vol 9, par 726. 77 (1969) 122 CLR 444; [1969] HCA 68. 78 (1969) 122 CLR 444 at 463. "The common law, authorizing as it did a verdict of guilty of manslaughter on an indictment for murder, always made it a condition of the validity of that verdict that the jury should first have returned a verdict of not guilty of murder." In Parker v The Queen80, Windeyer J had earlier observed that "[i]t was at common law always open to a jury who found that a killing was unlawful to refuse to find the element of malice aforethought necessary to make it murder and thus to bring in a verdict of manslaughter" and that "in relation to murder and manslaughter, the Act of 1883 was intended to be a restatement of common law doctrine, but shorn of some of the extravagances of malice aforethought and constructive malice". He continued81: "At common law murder was reduced to manslaughter by a provocation sufficient in Hales' words 'to take off the presumption of malice', that is to say to remove the implication of malice aforethought that the deed created. As the new statutory provisions supplanted the old learning concerning malice aforethought, an express preservation of the jury's right to acquit of murder and convict of manslaughter was prudent." Section 421(1) of the Crimes Act, although modelled on s 6(2) of the Criminal Law Act, emulated the New South Wales provision the subject of comment in Gammage insofar as it carved out from the general power of a jury to return a verdict of not guilty of the offence charged but guilty of a lesser included offence a specific power applicable where the offence charged was murder. Section 6(2) of the Criminal Law Act originated in a recommendation of the Criminal Law Revision Committee that, in the interests of certainty, "the alternative verdicts which should be open to the jury on a charge of murder should not depend on the general provision in [s] 6(3) but should be laid down in a special provision" which would limit the available alternative verdicts to specified offences82. The Chief Justice's Law Reform Committee recommended 79 (1969) 122 CLR 444 at 453. See also Stanton v The Queen (2003) 77 ALJR 1151 at 1155 [23]; 198 ALR 41 at 47; [2003] HCA 29. 80 (1963) 111 CLR 610 at 657; [1963] HCA 14. See also R v Lavender (2005) 222 CLR 67 at 77-78 [25]-[26]; [2005] HCA 37. 81 (1963) 111 CLR 610 at 657, citing Hale, The History of the Pleas of the Crown, (1736), vol 1 at 455. 82 United Kingdom, Criminal Law Revision Committee, Seventh Report: Felonies and Misdemeanours, (1965) Cmnd 2659 at 14 [49]. a correspondingly tailored provision "restricted to manslaughter and to any other offences of which under existing Victorian law a person [could] be convicted on a trial for murder"83. In conformity with s 9 of the Criminal Procedure Act 1851 (UK), s 421 of the Crimes Act (in the form in which it had existed before the Crimes (Classification of Offences) Act) had added to the common law rule in providing for a person charged with a felony or misdemeanour to be found guilty in the alternative of attempting to commit the felony or misdemeanour charged84. The abolition of the distinction between felony and misdemeanour necessitated reframing that pre-existing statutory provision. Section 239(2) of the Criminal Procedure Act, originally enacted by the Crimes (Classification of Offences) Act as s 421(3) of the Crimes Act and modelled on s 6(4) of the Criminal Law Act, was designed to achieve that result. Section 240 of the Criminal Procedure Act, originally enacted as s 421(4) of the Crimes Act, had no equivalent in the Criminal Law Act. It was a Victorian innovation. The Chief Justice's Law Reform Committee recommended that a provision substantially reproducing s 6(3) of the Criminal Law Act in Victoria "should expressly confer upon the Court a wide discretion not to leave an alternative verdict to the jury"85. Section 240 was explained at the time of its original enactment as a provision which "empowers a judge to decline to put to a jury some or all of the alternative offences of which the accused may be found guilty"86. Against the background of s 421(1) of the Crimes Act and ss 239 and 240 of the Criminal Procedure Act, the content of the duty imposed on the trial judge by s 238 of the Criminal Procedure Act is informed by the common law principle that "the duty of the Judge is to give a direction upon the law to the jury, so far as is necessary to make them understand the law as bearing upon the facts before them"87. What is necessary for the jury to know "is not determined exclusively by reference to the issues presented by trial counsel" but "is determined by 83 Victoria, Chief Justice's Law Reform Committee, Abolition of the Distinction Between Felonies and Misdemeanours, (1973) at 11. 84 United Kingdom, Criminal Law Revision Committee, Seventh Report: Felonies and Misdemeanours, (1965) Cmnd 2659 at 15 [50]. 85 Victoria, Chief Justice's Law Reform Committee, Abolition of the Distinction Between Felonies and Misdemeanours, (1973) at 10. 86 Victoria, Crimes (Classification of Offences) Bill, Notes on Clauses at 2. 87 Prudential Assurance Company v Edmonds (1877) 2 App Cas 487 at 507. reference to the evidence that is received in the trial, and to any legal principles which that evidence enlivens"88. Subject always to the requirement for the trial judge to ensure that the trial is procedurally fair, and subject now to the Jury Directions Act, what is required in every case is "an adequate direction both as to the law and the possible use of the relevant facts upon any matter upon which the jury could in the circumstances of the case upon the material before them find or base a verdict in whole or in part"89. Where the offence charged is murder – the circumstance covered by 421(1) of the Crimes Act – it has long been settled that the trial judge is duty- bound to direct as to manslaughter "if there [is] a basis in the evidence on which the jury, not being satisfied of all the elements of murder, could find manslaughter" and to do so irrespective of "the tactics or manoeuvring of the accused or of those representing [the accused]"90. The question is always whether there is evidence on which the jury, acting reasonably, could find manslaughter and not murder91, the trial judge not being duty-bound to direct as to manslaughter if "on no view of the evidence which might reasonably be adopted, would the crime amount to manslaughter and not murder"92. If the evidence is sufficient to enliven the duty, failure to perform the duty is an error of law93. Where the offence charged is other than treason or murder – the circumstance covered by s 239 of the Criminal Procedure Act – the outworking of the same common law principle must in my view entail that the trial judge is similarly duty-bound to direct as to the possibility of a finding of guilt of an included offence if there is a basis in the evidence on which the jury, though not satisfied of all the elements of the offence charged, might yet be satisfied of the elements of the included offence. While performance of that duty must be subject always to the requirement for the trial judge to ensure that the trial is procedurally fair, its existence and scope cannot depend on forensic choices 88 CTM v The Queen (2008) 236 CLR 440 at 476 [117]; [2008] HCA 25. 89 Pemble v The Queen (1971) 124 CLR 107 at 117-118; [1971] HCA 20, citing Mancini v Director of Public Prosecutions [1942] AC 1 at 7. 90 Varley v The Queen (1976) 51 ALJR 243 at 245; 12 ALR 347 at 351. 91 Van Den Hoek v The Queen (1986) 161 CLR 158 at 169; [1986] HCA 76, citing Parker v The Queen (1964) 111 CLR 665 at 681; [1964] AC 1369 at 1392. 92 Beavan v The Queen (1954) 92 CLR 660 at 662; [1954] HCA 41. 93 Gillard v The Queen (2003) 219 CLR 1 at 14 [26], 15 [32], 34-35 [106], 40 [129]; [2003] HCA 64; R v Nguyen (2010) 242 CLR 491 at 505 [50]; [2010] HCA 38. made by, or on behalf of, an accused as to how the defence case is to be framed. Just as the "authority and responsibility of the judge to instruct the jury on questions of law requires the judge 'to put to the jury every lawfully available defence open to the accused on the evidence even if the accused's counsel has not put that defence and even if counsel has expressly abandoned it'" 94, so too does the authority and responsibility of the judge to instruct the jury on questions of law require the trial judge to put to the jury lawfully available alternative verdicts. The course of authority in the Court of Appeal concerning the duty of a trial judge to direct that the jury may find the accused guilty of an alternative offence under s 239 of the Criminal Procedure Act, culminating in R v Nous95 and summarised by Whelan JA in the decision under appeal96, in my view proceeded wrongly in its identification of the relevant principle. In particular, it proceeded wrongly in applying a different principle from that which governs the duty of a trial judge to direct that the jury may find the accused guilty of an alternative offence under s 421(1) of the Crimes Act. The governing principle in each case is not what might be considered in all the circumstances of the trial to be "in the interests of justice" but what the jury needs to know to understand the law which bears on the facts before it. The need always to ensure that the trial is fair may in a particular case constrain the duty of a trial judge to direct that the jury may find the accused guilty of a particular alternative offence but the need for fairness is not the driver of that duty. The prospect sometimes raised "that a veritable cascade of lesser offences would have to be left to the jury"97 has been addressed within the relevant statutory scheme by the discretion of the trial judge to make an order under s 240 of the Criminal Procedure Act. Absent an order under s 240 of the Criminal Procedure Act, and before the commencement of the Jury Directions Act, a trial judge was in my view required in the performance of the duty imposed by s 238 of the Criminal Procedure Act to direct the jury in respect of alternative offences, under s 421(1) of the Crimes Act or under s 239 of the Criminal Procedure Act alike, whenever it was open on the evidence for the jury to find the accused not guilty of the offence charged but guilty of the alternative offence, unless the giving of the 94 Braysich v The Queen (2011) 243 CLR 434 at 453 [32]; [2011] HCA 14, quoting Fingleton v The Queen (2005) 227 CLR 166 at 198 [83]; [2005] HCA 34, and referring to Pemble v The Queen (1971) 124 CLR 107 at 117-118. 96 James v The Queen [2013] VSCA 55 at [80]. 97 Eg R v Doan (2001) 3 VR 349 at 359 [32], quoting Elfar (2000) 115 A Crim R 64 direction would be unfair to the accused in the particular circumstances of the case. That result accords both with the duty of a trial judge to direct in respect of included offences at common law as explained by King CJ in the Supreme Court of South Australia in Benbolt v The Queen98, and with the duty of a trial judge to direct in respect of included offences under both s 6(2) and s 6(3) of the Criminal Law Act as explained by Lord Bingham of Cornhill in the House of Lords in R v Coutts99. Whether it also accords with the position under other statutory regimes does not arise for consideration100. King CJ expressed his conclusion in Benbolt as follows101: "There are strong considerations of justice and policy in favour of the disposal of all alternatives at the trial and the judge ought not lightly to take a course which would preclude consideration of an alternative to the offence charged. … [H]is duty [is] to raise alternatives on his own initiative if there is a reasonable basis for them in the evidence, subject only to overriding considerations of fairness." The strong considerations of justice and policy to which King CJ alluded in Benbolt were best expressed by Lord Bingham in Coutts102: "The public interest is that, following a fairly conducted trial, defendants should be convicted of offences which they are proved to have committed and should not be convicted of offences which they are not proved to have committed. The interests of justice are not served if a defendant who has committed a lesser offence is either convicted of a greater offence, exposing him to greater punishment than his crime deserves, or acquitted altogether, enabling him to escape the measure of punishment which his crime deserves. The objective must be that defendants are neither over- convicted nor under-convicted, nor acquitted when they have committed a lesser offence of the type charged. The human instrument relied on to achieve this objective in cases of serious crime is of course the jury. But 98 (1993) 60 SASR 7 at 12, 19. 99 [2006] 1 WLR 2154 at 2167 [23]-[24]; [2006] 4 All ER 353 at 367-368. 100 See eg R v Keenan (2009) 236 CLR 397; [2009] HCA 1, which arose under the Criminal Code (Q). 101 (1993) 60 SASR 7 at 19. 102 [2006] 1 WLR 2154 at 2159 [12]; [2006] 4 All ER 353 at 359-360. to achieve it in some cases the jury must be alerted to the options open to it. This is not ultimately the responsibility of the prosecutor, important though his role as a minister of justice undoubtedly is. Nor is it the responsibility of defence counsel, whose proper professional concern is to serve what he and his client judge to be the best interests of the client. It is the ultimate responsibility of the trial judge". Lord Bingham added103: "A defendant may, quite reasonably from his point of view, choose to roll the dice. But the interests of society should not depend on such a contingency." The qualification that the trial judge is not to direct the jury as to its power to find the accused guilty of an included offence open on the evidence where the direction would be unfair to the accused admits of the possibility of a case where the accused may have been deprived by assumptions made in the course of the trial of a fair opportunity of meeting the included offence despite the accused having a fair opportunity of meeting the offence charged. The accused cannot in any case be "taken by surprise: he must [in every case] be given a fair opportunity of meeting the case against him"104. The qualification also admits of the possibility of a case where the included offence is sufficiently remote from, or trivial in comparison with, the offence charged that consideration of the included offence would risk distracting the jury from consideration of issues raised in respect of the offence charged105. Fairness to the accused is not, however, to be dictated by a forensic choice made by, or on behalf of, the accused to run an all-or-nothing defence calculated to maximise the chance of acquittal. Whether failure of the trial judge to perform his or her duty to direct in respect of a lesser included offence gives rise to a substantial miscarriage of justice such as to warrant allowing an appeal against conviction of the offence charged in a particular case is a question quite distinct from the existence of the duty106. To that distinct question it is now necessary to turn. 103 [2006] 1 WLR 2154 at 2167 [23]; [2006] 4 All ER 353 at 368. 104 Pantorno v The Queen (1989) 166 CLR 466 at 473; [1989] HCA 18. 105 Cf R v Maxwell [1990] 1 WLR 401 at 408; [1990] 1 All ER 801 at 807. 106 Cf Benbolt v The Queen (1993) 60 SASR 7 at 19-20; Elfar (2000) 115 A Crim R The second question: substantial miscarriage of justice Section 276(1)(b) of the Criminal Procedure Act obliges the Court of Appeal to allow an appeal against conviction if the appellant satisfies the Court of Appeal that "as the result of an error or an irregularity in … the trial there has been a substantial miscarriage of justice". Baini v The Queen107 interpreted s 276(1)(b) of the Criminal Procedure Act to encompass an appeal in which the Court of Appeal is satisfied that there has been a departure from a trial according to law108 but is not satisfied that the error or irregularity did not make a difference to the conviction109. The majority proceeded on the basis that it will ordinarily be enough for the appellant to show that, had the error or irregularity not occurred, the jury may have entertained a doubt as to guilt, following which, as a practical matter, it will be for the respondent to the appeal to articulate the reasoning by which it is sought to show that the conviction was inevitable110. The majority emphasised that the Court of Appeal will ordinarily be able to be satisfied that an error or irregularity did not make a difference to the conviction only where it is able to conclude from its review of the record that conviction was inevitable111. It was not argued in the present appeal that a different approach is warranted where the error or irregularity in a trial is a failure of the trial judge to perform a duty to direct in respect of a lesser included offence. Consistency with Baini requires, as the first step in establishing that the error or irregularity has resulted in a substantial miscarriage of justice, that an appellant convicted of the offence charged show that the jury might have entertained doubt as to guilt of the offence charged had the direction in respect of the lesser included offence been given. To discharge that burden, the appellant would ordinarily need to rely on the insight of the majority in Gilbert v The Queen112. The insight was that the making of a choice may be affected by the variety of choices offered113, and that 107 (2012) 246 CLR 469; [2012] HCA 59. 108 (2012) 246 CLR 469 at 479 [25]. 109 (2012) 246 CLR 469 at 479 [26]. 110 (2012) 246 CLR 469 at 481 [31]. 111 (2012) 246 CLR 469 at 481 [33]. 112 (2000) 201 CLR 414; [2000] HCA 15. 113 (2000) 201 CLR 414 at 421 [16]-[17], 441 [101]. juries, while they are assumed to understand and follow the directions given by trial judges, are not assumed to take "a mechanistic approach to the task of fact- finding, divorced from a consideration of the consequences", but rather to "make their findings of fact in the context of instructions as to the consequences of such findings, and for the purpose of returning a verdict which expresses those consequences"114. The insight was articulated in the context of a choice between murder and manslaughter. In respect of such a choice, it had earlier been said in Mraz v The Queen that "it would be ignoring the realities of the matter to assume" that a jury which found murder would necessarily have reached the same conclusion if properly instructed as to the availability of a finding of The Supreme Court of the United States acted on the same insight in a somewhat broader context in reasoning that116: "when the evidence unquestionably establishes that the defendant is guilty of a serious, violent offense – but leaves some doubt with respect to an element that would justify conviction of a capital offense – the failure to give the jury the 'third option' of convicting on a lesser included offense would seem inevitably to enhance the risk of an unwarranted conviction." The potential for a jury's fact-finding to be affected by the range of legally permissible verdicts of which the jury is informed is confined neither to murder cases nor to capital cases117. That is not to say, however, that the strength of the inference to be drawn from the Gilbert insight into jury decision-making might not be less in a case in which the choice between the lesser included offence and the offence of which an appellant was charged and convicted is less finely balanced, or in which the consequences of finding guilt of the lesser included offence are less stark. Whether an appellant in such a case could show that the jury might have entertained doubt as to guilt of the offence charged and whether the respondent could satisfy the Court of Appeal that conviction of the offence charged was inevitable are issues which do not lend themselves to a priori analysis. Their resolution in a particular case might depend very much on the 114 (2000) 201 CLR 414 at 421 [16]. 115 (1955) 93 CLR 493 at 508, 513; [1955] HCA 59. 116 Beck v Alabama 447 US 625 at 637 (1980). See also Spaziano v Florida 468 US 447 at 455 (1984); Bobby v Mitts 179 L Ed 2d 819 at 821-822 (2011). 117 Eg Keeble v United States 412 US 205 at 212-213 (1973). See generally Kelman, Rottenstreich and Tversky, "Context-Dependence in Legal Decision Making", (1996) 25 Journal of Legal Studies 287. Court of Appeal's assessment of the jury's actual verdict and of the overall weight of the evidence. Application The first offence of which the present appellant, Mr James, was charged was that "without lawful excuse [he] intentionally caused serious injury" contrary to s 16 of the Crimes Act. To find guilt of that offence, it was necessary for the jury to be satisfied that Mr James intended to cause serious injury, rather than merely to cause some injury118. The allegation of the offence nevertheless included that, without lawful excuse, Mr James intentionally caused injury – an offence against s 18 of the Crimes Act, in respect of which it was sufficient for the jury to be satisfied that Mr James intended to cause some injury. The offence of intentionally causing injury contrary to s 18 of the Crimes Act was therefore included within the first offence charged for the purposes of s 239(1) of the Criminal Procedure Act. The second offence of which Mr James was charged was that "without lawful excuse [he] recklessly caused serious injury" contrary to s 17 of the Crimes Act. To find guilt of that offence, it was necessary for the jury to be satisfied beyond reasonable doubt that Mr James foresaw the probability that his act would cause serious injury, rather than that he merely foresaw the probability that his act would cause some injury. The allegation of the offence nevertheless included that, without lawful excuse, Mr James recklessly caused injury – an offence against s 18 of the Crimes Act, in respect of which it was sufficient for the jury to be satisfied that Mr James foresaw the probability that his act would cause some injury. The offence of recklessly causing injury contrary to s 18 of the Crimes Act was therefore included within the second offence charged for the purposes of s 239(1) of the Criminal Procedure Act. For the reasons given by Priest JA in the Court of Appeal119, on the evidence adduced at the trial, it was open to the jury not to be satisfied that Mr James intended to cause serious injury but to be satisfied that he intended to cause some injury. Equally, it was open to the jury not to be satisfied that Mr James foresaw the probability that his act would cause serious injury but to be satisfied that he foresaw the probability that his act would cause some injury. The duty of the trial judge was therefore to direct the jury in respect of alternative offences against s 18 of the Crimes Act. The duty arose despite the fact that the possibility of an alternative verdict of guilty of such an offence was not raised in the trial until suggested by the prosecutor during the deliberations of 118 Westaway (1991) 52 A Crim R 336 at 337. 119 James v The Queen [2013] VSCA 55 at [180]-[181]. the jury. It also arose despite the fact that counsel for Mr James appears for tactical reasons to have eschewed such a direction. There is nothing to indicate that the giving of the direction, even at that late stage of the trial, would have been procedurally unfair to Mr James. Her Honour's rejection of the late suggestion by the prosecutor appears to have been based rather on the understanding that informing the jury of the possibility of the alternative verdicts would have deprived Mr James of the possibility of an acquittal on the all-or- nothing case Mr James had been prepared to run. The verdict of the jury that Mr James was guilty of the offence of intentionally causing serious injury demonstrated that the jury was not satisfied that Mr James was merely reckless. It is difficult in that circumstance to see how the jury might have entertained doubt as to the guilt which it found had the direction in respect of recklessly causing injury been given. It is not difficult, however, to see how the finding of guilt might well have been different had the direction in respect of intentionally causing injury been given. Consistent with the reasons given by Priest JA in the Court of Appeal, it is reasonable to consider that the jury may have been less inclined to be satisfied that Mr James intended to cause serious injury if presented with the alternative and the conviction of the offence of intentionally causing serious injury cannot be found to have been inevitable120. The conclusion which follows is that the failure to direct that the jury might find Mr James guilty of the alternative offence of intentionally causing injury resulted in a substantial miscarriage of justice. Orders I would allow the appeal and set aside the decision of the Court of Appeal. In its place, I would allow Mr James' appeal to the Court of Appeal, set aside his conviction, and order a new trial. 120 James v The Queen [2013] VSCA 55 at [217]-[218].
HIGH COURT OF AUSTRALIA DELIL ALEXANDER (BY HIS LITIGATION GUARDIAN PLAINTIFF AND MINISTER FOR HOME AFFAIRS & ANOR DEFENDANTS Alexander v Minister for Home Affairs [2022] HCA 19 Date of Hearing: 16 & 17 February 2022 Date of Judgment: 8 June 2022 ORDER The questions of law stated for the opinion of the Full Court in the amended special case filed on 22 October 2021 be answered as follows: Is s 36B of the Australian Citizenship Act 2007 (Cth) invalid in its operation in respect of the plaintiff because: it is not supported by a head of Commonwealth legislative power; Answer, "No". it is inconsistent with an implied limitation on Commonwealth legislative power preventing the involuntary deprivation of Australian citizenship; Answer, "Unnecessary to answer". it effects a permanent legislative disenfranchisement which is not justified by a substantial reason; Answer, "Unnecessary to answer". it effects a permanent disqualification from being chosen or from sitting as a senator or a member of the House of Representatives, otherwise the circumstances contemplated by ss 34 and 44 of the Constitution; than Answer, "Unnecessary to answer". it reposes in the Minister for Home Affairs the exclusively judicial function of punishing criminal guilt? Answer, "Yes". What, if any, relief should be granted to the plaintiff? Answer, "It should be declared that: s 36B of the Australian Citizenship Act 2007 (Cth) is invalid; and the plaintiff is an Australian citizen". Who should pay the costs of the special case? Answer, "The defendants". Representation D J Hooke SC and S H Hartford Davis with S G Lawrence and D J Reynolds for the plaintiff (instructed by Australian Criminal and Family Lawyers) the Commonwealth, and S P Donaghue QC, Solicitor-General of P D Herzfeld SC with J D Watson and L G Moretti for the defendants (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Alexander v Minister for Home Affairs Constitutional law (Cth) – Powers of Commonwealth Parliament – Power to make laws with respect to naturalisation and aliens – Cessation of Australian citizenship – Where s 36B of Australian Citizenship Act 2007 (Cth) provided Minister for Home Affairs may make determination that person ceases to be Australian citizen if satisfied, among other matters, that person engaged in specified conduct demonstrating repudiation of allegiance to Australia – Where plaintiff Australian citizen by birth and Turkish citizen by descent – Where, after departing Australia, plaintiff entered and remained in al-Raqqa Province in Syria – Where al-Raqqa Province a "declared area" for purposes of terrorism-related offence in Criminal Code (Cth) – Where Australian Security Intelligence Organisation ("ASIO") reported in June 2021 that plaintiff joined Islamic State of Iraq and the Levant ("ISIL") by August 2013 and likely engaged in foreign incursions and recruitment by entering or remaining in al-Raqqa Province – Where ISIL a designated "terrorist organisation" for purposes of terrorism-related offences in Criminal Code (Cth) – Where Minister determined pursuant to s 36B, relying in part on ASIO report, that plaintiff ceased to be Australian citizen – Whether s 36B valid exercise of legislative power under s 51(xix) of Constitution. Constitutional law (Cth) – Judicial power of Commonwealth – Where plaintiff's conduct relevant to Minister's determination under s 36B of Australian Citizenship Act 2007 (Cth) amounted to conduct element of terrorism-related offence under s 119.2 of Criminal Code (Cth) – Whether provision providing for cessation of citizenship on determination by Minister on terrorism-related grounds penal or punitive in character – Whether s 36B contrary to Ch III of Constitution for conferring upon Minister exclusively judicial function of adjudging and punishing criminal guilt. Words and phrases – "adjudging and punishing criminal guilt", "alien", "banishment", "citizen", "citizenship", "citizenship cessation", "denationalisation", "deprivation of liberty", "exercise of judicial power", "exile", "foreign incursions and recruitment", "hardship or detriment", "protective purpose", "punitive character", "reciprocal rights and obligations", "repudiation of allegiance to Australia", "retribution", "shared values of the Australian community", "terrorism", "terrorism-related grounds". Constitution, s 51(xix), Ch III. Australian Citizenship Act 2007 (Cth), ss 36A, 36B, 36D. KIEFEL CJ, KEANE AND GLEESON JJ. The plaintiff ("Mr Alexander") was born in Australia on 5 August 1986. As a result, by operation of s 10(1) of the Australian Citizenship Act 1948 (Cth) ("the 1948 Citizenship Act"), he became an Australian citizen. He also acquired Turkish citizenship by descent at birth under the law of the Republic of Turkey, as his parents were Turkish citizens. Mr Alexander remains a Turkish citizen. In July 2021, the Minister for Home Affairs ("the Minister") made a determination pursuant to s 36B of the Australian Citizenship Act 2007 (Cth) ("the Citizenship Act"), as amended by the Australian Citizenship Amendment (Citizenship Cessation) Act 2020 (Cth) ("the 2020 Amending Act"), that Mr Alexander ceased to be an Australian citizen. At that time, Mr Alexander was in prison in Syria, where he remains. In these proceedings, brought in the original jurisdiction of this Court, Mr Alexander seeks, among other relief, declarations that s 36B of the Citizenship Act is invalid and that he is an Australian citizen. Several grounds are advanced in support of Mr Alexander's challenge; but his challenge may be decided, and his rights determined, by addressing his contentions that s 36B is invalid: first, because it is not within the power of the Parliament to make laws with respect to "naturalization and aliens" under s 51(xix) of the Constitution; and, secondly, because the exercise of the power reposed in the Minister to deprive him of his citizenship is an exclusively judicial function under Ch III of the Constitution. While the first of these contentions should be rejected, the second must be accepted. Section 36B of the Citizenship Act is invalid to that extent, and Mr Alexander remains an Australian citizen. On 16 April 2013, Mr Alexander departed Australia for Turkey, indicating on his outgoing passenger card that he would be overseas for three months. He had informed his family that he intended to arrange a marriage and that he would return to Australia. Having entered Turkey, at some point Mr Alexander travelled to Syria, where he married his wife. The Australian Security Intelligence Organisation ("ASIO") reported in June 2013 that Mr Alexander's travel to Syria was facilitated through a Sydney-based network developed by Mr Alqudsi, who had previously been charged with terrorism-related offences1. Mr Alexander was reported to be part of a group that was taken to Syria by a senior Syria-based Australian member of the See R v Alqudsi (2015) 328 ALR 517 at 519 [4]; Alqudsi v The Commonwealth (2015) 91 NSWLR 92 at 95 [1]. Islamic State (also known as "ISIL" or "ISIS"). At this time, the Islamic State had been designated in the Criminal Code (Cth) (under various names) as a terrorist organisation. ASIO later reported that it was "likely" that Mr Alexander had joined ISIL by August 2013, and that he had "likely engaged" in foreign incursions and recruitment by entering or remaining in al-Raqqa Province in Syria on or after 5 December 2014. In November 2017, Mr Alexander was apprehended by Kurdish militia in the village of Ziban in Deir El-Zour Province in Syria (which was not a declared area). In March 2018, he was transferred to the custody of Syrian authorities and was subsequently charged by Syrian prosecutors with offences against the Syrian Penal Code. On 31 January 2019, Mr Alexander was convicted and sentenced by a Syrian court to a term of imprisonment for 15 years – subsequently reduced to five – on the strength of admissions he had made during an interrogation. However, Mr Alexander's sister, who appears as his litigation guardian in these proceedings, stated that Mr Alexander told her that he was tortured and forced to sign a paper while in the custody of the Kurdish militia and Syrian authorities without reading its contents. By reason of a pardon from the Syrian government, Mr Alexander's term of imprisonment has expired. However, he remains in detention for a number of reasons, including that he cannot be released into the Syrian community, nor can he be repatriated to Turkey or Australia. On 13 July 2020, Mr Alexander was moved to the prison known as Far' Falastin, or Branch 235, which is located in Damascus and operated by Syrian intelligence authorities. For the duration of the conflict in Syria, there have been reports of government forces arbitrarily detaining persons simply for being perceived to be opponents of the State, including in Kurdish territory where persons are suspected of affiliation with the Islamic State. The detention of prisoners in government-controlled prisons in Syria has been associated with serious human rights violations, including torture. Since 15 July 2021, neither Mr Alexander's family nor his lawyers have been able to contact him. Mr Alexander claims that, according to his Syrian lawyer, the fact that he is no longer an Australian citizen is a reason for his continuing detention. The Australian government's decisions about Mr Alexander Following Mr Alexander's arrival in Syria, the Australian government made several decisions in relation to him leading up to the determination of his citizenship. On 5 September 2013, the then Acting Minister for Foreign Affairs decided to cancel Mr Alexander's passport under s 22(2)(d) of the Australian Passports Act 2005 (Cth). That was on the basis that ASIO suspected on reasonable grounds that "if an Australian passport were issued to [Mr Alexander], [Mr Alexander] would be likely to engage in conduct that might prejudice the security of Australia or a foreign country"2. This decision did not affect his status as an Australian citizen, or any entitlement that he may have had to Australian citizenship or consular assistance. On 19 June 2020, the Minister made a Temporary Exclusion Order ("TEO") in respect of Mr Alexander, pursuant to the Counter-Terrorism (Temporary Exclusion Orders) Act 2019 (Cth). The effect of the TEO was to prevent Mr Alexander from entering Australia while it remained in force, which was until 30 January 2022. On 16 June 2021, the Director-General of Security at ASIO provided a Qualified Security Assessment ("QSA") of Mr Alexander to the Minister. The purpose of the QSA was to advise whether it would be consistent with the requirements of security for prescribed administrative action to be taken under the Citizenship Act in respect of Mr Alexander. Although ASIO, in the QSA, did not make any recommendation in relation to Mr Alexander's citizenship, it stated that, if the Minister were satisfied that Mr Alexander had engaged in specified conduct and that conduct demonstrated that he had repudiated his allegiance to Australia, the Minister might make a determination in writing that he ceased to be an Australian citizen. The QSA stated that, based on "substantial classified reporting and some unclassified corroborating information", ASIO assessed that Mr Alexander "likely engaged in foreign incursions and recruitment by entering or remaining in al-Raqqa Province in Syria, a declared area, on or after 5 December 2014" and "likely travelled to Syria in early-to-mid-2013, and had joined the Islamic State of Iraq and the Levant ... by August 2013". On 2 July 2021, the Minister determined, pursuant to s 36B(1) of the Citizenship Act, that Mr Alexander ceased to be an Australian citizen. The determination stated that the Minister was satisfied that: Mr Alexander had engaged in foreign incursions while outside Australia3, which demonstrated a See Australian Passports Act 2005 (Cth), s 14(1)(a)(i). s 36B(5)(h) of the Citizenship Act. repudiation of his allegiance to Australia4; that it would be contrary to the public interest for Mr Alexander to remain an Australian citizen5; and that Mr Alexander would not become stateless by reason of the determination6. In making that determination, the Minister relied, in part, on the QSA. The Minister was not required to, and did not, give a statement of reasons for the determination. The proceedings in this Court The proceedings in this Court were commenced on 13 July 2021. On 26 October 2021, Steward J made orders, including that Ms Alexander be appointed as Mr Alexander's litigation guardian pursuant to r 21.08.6 of the High Court Rules 2004 (Cth). The parties filed an amended special case pursuant to r 27.08 of the High Court Rules, in which they agreed to state a number of questions for the opinion of the Full Court of this Court. As already noted, it is not necessary to decide all those questions "in order to do justice in [this] case and to determine the rights of the parties"7. It is sufficient for the determination of Mr Alexander's challenge to the validity of s 36B to deal with the questions whether s 36B is invalid in its operation in respect of Mr Alexander because it is not supported by a head of Commonwealth legislative power, and, alternatively, whether it is invalid because it reposes in the Minister the exclusively judicial function of adjudging and punishing criminal conduct. While it will be necessary later in these reasons to notice other provisions inserted into the Citizenship Act by the 2020 Amending Act, it is sufficient, for the first of these questions, to summarise the terms of s 36B and its ancillary provisions. Section 36B Section 36B is part of a suite of provisions in Subdiv C of Div 3 of Pt 2 of the Citizenship Act which effect the "cessation of citizenship" on terrorism-related s 36B(1)(b) of the Citizenship Act. s 36E(2) of the Citizenship Act. s 36B(2) of the Citizenship Act. Lambert v Weichelt (1954) 28 ALJ 282 at 283; Mineralogy Pty Ltd v Western Australia (2021) 95 ALJR 832 at 846 [56]; 393 ALR 551 at 565. grounds. It, and its companion provisions, were introduced into the Citizenship Act by the 2020 Amending Act to replace the scheme previously enacted by the Australian Citizenship Amendment (Allegiance to Australia) Act 2015 (Cth) ("the Allegiance to Australia Act")8. It maintains the focus of the previous legislation on the notion of a repudiation of allegiance to Australia9. Section 36B provides relevantly as follows: "Cessation of citizenship on determination by Minister The Minister may determine in writing that a person aged 14 or older ceases to be an Australian citizen if the Minister is satisfied that: the person: engaged in conduct specified in subsection (5) while outside Australia; or conduct engaged paragraphs (5)(a) to (h) while in Australia, has since left Australia and has not been tried for an offence in relation to the conduct; and specified any the conduct demonstrates that the person has repudiated their allegiance to Australia; and it would be contrary to the public interest for the person to remain an Australian citizen (see section 36E). Note: A person may seek review of a determination made under this subsection in the High Court of Australia under section 75 of the Constitution, or in the Federal Court of Australia under section 39B of the Judiciary Act 1903. See also section 36H of this Act (revocation of citizenship cessation determination on application to Minister). (2) However, the Minister must not make a determination if the Minister is satisfied that the person would, if the Minister were to make the Independent National Security Legislation Monitor, Report the Attorney-General: Review of the operation, effectiveness and implications of terrorism-related citizenship loss provisions contained in the Australian Citizenship Act 2007, Report No 7 (2019) at 58 [6.90]. s 36A of the Citizenship Act. determination, become a person who is not a national or citizen of any country. The person ceases to be an Australian citizen at the time the determination is made. Subsection (1) applies to a person who is an Australian citizen regardless of how the person became an Australian citizen (including a person who became an Australian citizen upon the person's birth). For the purposes of paragraph (1)(a), the conduct is any of the following: engaging in foreign incursions and recruitment". As to s 36B(5)(h), the expression "foreign incursions and recruitment" has the same meaning as in s 119.2 of the Criminal Code (Cth) (which relevantly makes it an offence for an Australian citizen to enter, or remain in, a declared area in a foreign country), but it does not include the fault elements that apply in relation to that offence10. It should also be noted that a determination may be made in relation to conduct specified in s 36B(5) that was engaged in prior to its commencement11. The powers of the Minister under s 36B may only be exercised by the Minister personally12. The rules of natural justice do not apply in relation to making a decision or exercising a power under that section13. A determination made under s 36B(1) is not a legislative instrument14. 10 s 36B(6) of the Citizenship Act. 11 See 2020 Amending Act, Sch 1, item 18. 12 s 36B(9) of the Citizenship Act. 13 s 36B(11) of the Citizenship Act. 14 s 36B(12) of the Citizenship Act. A determination made under s 36B(1) may be revoked on application to the Minister by the person the subject of the determination15, on the Minister's own initiative16, or automatically by operation of law17. Unless a determination is revoked by one of those means, the person can never become an Australian citizen again18. In relation to the assessment of the public interest for the purposes of a determination under s 36B(1), or whether to revoke such a determination under s 36J, s 36E(2) relevantly provides: "The Minister must have regard to the following matters: in deciding whether a determination under to make subsection 36B(1) or revoke such a determination – the severity of the conduct to which the determination relates; the degree of threat posed by the person to the Australian community; the age of the person; if the person is aged under 18 – the best interests of the child as a primary consideration; a determination under to make in deciding whether subsection 36B(1) or revoke such a determination – whether the person is being or is likely to be prosecuted in relation to conduct to which the determination relates; 15 s 36H of the Citizenship Act. 16 s 36J of the Citizenship Act. 17 s 36K of the Citizenship Act. 18 s 36L of the Citizenship Act. the person's connection to the other country of which the person is a national or citizen and the availability of the rights of citizenship of that country to the person; (h) Australia's international relations; any other matters of public interest." When a determination has been made under s 36B(1), the Minister is required to give written notice of the determination to the person in accordance with the requirements in s 36F. Again, the rules of natural justice do not apply in relation to making a decision or exercising a power under that section19. The exception to the requirement to give notice is where the Minister is satisfied that giving the notice could prejudice the security, defence or international relations of Australia, or Australian law enforcement operations20. The practical effect of the exercise by the Minister of the power conferred by s 36B(1) is that the person affected has no right to return to Australia and be at liberty in this country, because the Migration Act 1958 (Cth) would require that (save in the unlikely event that the person were granted a visa) the person be taken into detention for the purposes of deportation21. Section 51(xix) of the Constitution Section 51(xix) of the Commonwealth Parliament to make laws with respect to "naturalization and aliens". The defendants confined their arguments in support of s 36B as a valid exercise of the legislative power of the Commonwealth to reliance upon s 51(xix). the Constitution empowers Mr Alexander submitted that s 36B is not supported by s 51(xix) in its application to him because, as a person who became an Australian citizen at birth by virtue of s 10 of the 1948 Citizenship Act, he could not thereafter be regarded as an "alien". Mr Alexander's contention is that once a person attains the status of an Australian citizen, the operation of s 51(xix) is "spent" so that Parliament cannot make a law that would transform a non-alien into an alien. Mr Alexander also argued that s 36B(5)(h) is invalid, because the conduct element of the offence against s 119.2 of the Criminal Code (Cth) is, of itself, 19 s 36F(7) of the Citizenship Act. 20 s 36G of the Citizenship Act. 21 Migration Act 1958 (Cth), s 189. incapable of being regarded as the repudiation of the allegiance owed by a citizen to Australia. It was said that without a mental element of intention to engage in that conduct, the mere act of entering a "declared area" was not so extreme and repugnant as to be objectively incompatible with, and capable of rupturing, the citizen-State relationship. It was also said that s 51(xix) could not support the retroactive operation of s 36B, as it had been applied to Mr Alexander. Mr Alexander's submissions on this first issue should not be accepted. Those submissions may now be addressed in turn. Citizens and aliens Citizenship, as formal membership of the national community, is a statutory concept22. It is the grant of Australian citizenship that creates the status which attracts constitutional protections and engages federal and State legislation that confers or denies rights, privileges, immunities or duties23. Relevantly for Mr Alexander, the status of Australian citizenship includes the right to enter and remain in Australia24, the entitlement to an Australian passport25, and the right and duty to vote in federal elections26. Citizenship is not a concept used in the Constitution (save for s 44(i), which is concerned with foreign citizenship). The Constitution, in contrast to the first clause of the Fourteenth Amendment to the Constitution of the United States, does not contemplate that individuals born here are citizens of Australia, much less that they are indelibly so. This Court's decisions in Singh v The Commonwealth27 and 22 Nolan v Minister for Immigration and Ethnic Affairs (1988) 165 CLR 178 at 183; Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7]; Love v The Commonwealth (2020) 270 CLR 152 at 263 [300], 264 [305]; Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 711-715 [14]-[34], [38]; 392 ALR 371 at 23 Hwang v The Commonwealth (2005) 80 ALJR 125 at 129 [13]; 222 ALR 83 at 87. 24 Potter v Minahan (1908) 7 CLR 277 at 305; Love v The Commonwealth (2020) 270 CLR 152 at 198 [95]; Migration Act 1958 (Cth), ss 4, 42. 25 Australian Passports Act 2005 (Cth), s 7 (subject to Pt 2, Div 2). 26 Commonwealth Electoral Act 1918 (Cth), s 93(1)(b)(i). (2004) 222 CLR 322. Koroitamana v The Commonwealth28 would be plainly misconceived if, as a matter of constitutional law, a person born in Australia has for that reason, and quite apart from any law of the Parliament, a right to live here. Mr Alexander's counsel made no attempt to challenge the correctness of Singh and Koroitamana. While alienage, describing a lack of formal legal relationship with the community or body politic, is a constitutional concept29, the Constitution leaves it to Parliament to decide who shall be granted the status of citizenship and what that status may mean in terms of the rights, privileges, immunities and duties of citizens. In this regard, s 51(xix) of the Constitution empowers the Parliament to "create and define the concept of Australian citizenship"30, to select or adopt the criteria for citizenship or alienage31 and to attribute to any person who lacks the qualifications prescribed for citizenship "the status of alien"32. In Chetcuti v The Commonwealth33, Kiefel CJ, Gageler, Keane and Gleeson JJ said that "the aliens power encompasses both power to determine who is and who is not to have the legal status of an alien and power to attach consequences to that status". (2006) 227 CLR 31. 29 Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 718 [53], 720 [59]; 392 ALR 30 Koroitamana v The Commonwealth (2006) 227 CLR 31 at 46 [48], citing Re Minister for Immigration and Multicultural Affairs; Ex parte Te (2002) 212 CLR 31 Singh v The Commonwealth (2004) 222 CLR 322 at 397-398 [197]; Koroitamana v The Commonwealth (2006) 227 CLR 31 at 37 [9], 46 [50], 49 [62]. 32 Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at (2021) 95 ALJR 704 at 710 [12]; 392 ALR 371 at 374. It has been said in this Court that the terms "citizen" and "alien" are antonyms34. Recently, the majority of this Court in Love v The Commonwealth35 held that Aboriginal Australians who satisfy the tripartite test in Mabo v Queensland [No 2]36 constitute a separate category of non-citizen, non-alien, and that "non-citizen" is not inevitably and always synonymous with "alien". But in Chetcuti, Kiefel CJ, Gageler, Keane and Gleeson JJ observed that this Court's decision in Shaw v Minister for Immigration and Multicultural Affairs37 (from which the holding of the majority in Love does not depart, except in respect of an Aboriginal Australian according to the tripartite test in Mabo [No 2]) establishes that the aliens power supports a law of the Commonwealth which determines who shall have the status of Australian citizenship, and which provides that persons who do not share that status are aliens38. In Pochi v Macphee39, Gibbs CJ said that "Parliament cannot, simply by giving its own definition of 'alien', expand the power under s 51(xix) to include persons who could not possibly answer the description of 'aliens' in the ordinary understanding of the word". It does not stretch the ordinary understanding of the expression "alien" to include within that category an individual who has engaged 34 See Nolan v Minister for Immigration and Ethnic Affairs (1988) 165 CLR 178; Re Patterson; Ex parte Taylor (2001) 207 CLR 391; Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 35 [2]. (2020) 270 CLR 152 at 192 [81], 244 [252], 247 [260], 253-254 [271]-[272], 261-262 [295], 263 [300], 264-266 [304]-[311], 305-308 [432]-[437]. See Pochi v Macphee (1982) 151 CLR 101 at 109; Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 54; Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 435-436 [132], 491 [300]; Re Minister for Immigration and Multicultural Affairs; Ex parte Te (2002) 212 CLR 162 at 179 [53]; Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 61 [94]; Singh v The Commonwealth (2004) 222 CLR 322 at 382 [149]- (1992) 175 CLR 1. (2003) 218 CLR 28. 38 Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 711 [14]-[17]; 392 ALR 371 (1982) 151 CLR 101 at 109, cited with approval in Singh v The Commonwealth (2004) 222 CLR 322 at 329 [4]. in conduct exhibiting such extreme enmity to Australia as to warrant being excluded from membership of the Australian community. The Parliament has the power under s 51(xix) to attribute the constitutional status of alien to a person who has lost the statutory status of citizenship. By the same power, Parliament can define the circumstances in which that occurs. There is ample support in authority for the view that the scope of s 51(xix) extends to permit Parliament to "determine the legal basis by reference to which Australia deals with matters of nationality ... to create and define the concept of Australian citizenship [and] to prescribe the conditions on which such citizenship may be acquired and lost"40. Mr Alexander's contention that a person who becomes an Australian citizen is thereby beyond the scope of the power that permits Parliament to make laws that deprive that person of citizenship is distinctly inconsistent with the following passage in Nolan v Minister for Immigration and Ethnic Affairs41, where Mason CJ, Wilson, Brennan, Deane, Dawson and "As a matter of etymology, 'alien', from the Latin alienus through old French, means belonging to another person or place. Used as a descriptive word to describe a person's lack of relationship with a country, the word means, as a matter of ordinary language, 'nothing more than a citizen or subject of a foreign state': Milne v Huber42. Thus, an 'alien' has been said to be, for the purposes of United States law, 'one born out of the United States, who has not since been naturalized under the constitution and laws'43. That definition should be expanded to include a person who has ceased to be a citizen by an act or process of denaturalization and restricted to exclude a person who, while born abroad, is a citizen by reason of parentage. Otherwise, it constitutes an acceptable general definition of the word 'alien' when that word is used with respect to an independent country with its own distinct citizenship." 40 Re Minister for Immigration and Multicultural Affairs; Ex parte Te (2002) 212 CLR 162 at 173 [31] (emphasis added), cited with approval in Koroitamana v The Commonwealth (2006) 227 CLR 31 at 46 [48]. (1988) 165 CLR 178 at 183. (1843) 17 Fed Cas 403 at 406. (1843) 17 Fed Cas 403 at 406. This passage supports the proposition that the status of alien may be attributed by the Parliament to a person who was previously an Australian citizen by a law providing for "an act or process of denaturalization". That proposition cannot stand with Mr Alexander's "once a citizen always a citizen" contention. To the extent that doubt was cast upon the decision in Nolan by the decision in Re Patterson; Ex parte Taylor44, the latter decision was itself disapproved, and the authority of Nolan affirmed, in Shaw45. One may conclude this section of the discussion by noting a fundamental difficulty in Mr Alexander's argument on this issue, which was revealed starkly in his counsel's inability, during the course of argument, to provide a satisfactory answer to the question as to the source of Parliament's power to enact s 10 of the 1948 Citizenship Act, that being the law by which Mr Alexander became an Australian citizen. As a general principle, where the Parliament may confer rights by the exercise of legislative power, it may also take them away46. Once it is accepted, as it must be, that the statute conferring citizenship is the source of Mr Alexander's rights as a citizen, it must also be accepted that (the present version of) that statute may limit those rights, including by providing for the circumstances in which they may be lost. A person who has forfeited the rights of citizenship is no less accurately described as an alien than a person who has never enjoyed those rights. "Naturalization and aliens" at Federation Events in the life of an individual and the nation may affect the relationship between the individual and the Australian body politic so as to engage the power conferred on the Parliament to make laws with respect to "naturalization and aliens". It was only upon the enactment of the Naturalization Act 1870 (UK) with its provision for "the severing of the connection of a British subject established by birth within the Crown's dominions" and the British Crown that English law acknowledged the possibility of bringing to an end the relationship between (2001) 207 CLR 391. 45 Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 45 [39], 87 [190]. See also Ruddock v Taylor (2005) 222 CLR 612 at 46 Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 355-356 [12]-[14], subject and sovereign47. Until then, under the common law, the connection between a British subject and the Crown was "indelible"48. The common law principle was abandoned by the Naturalization Act, which provided by s 4 that any person, who was a natural-born subject of the Crown and at birth became a foreign subject under the laws of another state, may make a "declaration of alienage" and thereby cease to be a British subject. Under s 6 of the Naturalization Act, a British subject who voluntarily became naturalised in a foreign state was deemed to have ceased to be a British subject and was to be regarded as an alien, as was, by virtue of s 10, a woman who, upon marriage, became a subject of the foreign state of which her husband was a subject49. There can be no doubt that the provisions of the Naturalization Act were before the framers of the Constitution when they drafted s 51(xix). As Gummow, Hayne and Heydon JJ said in Singh50: "Given the state of British law at the time of Federation, and in particular the provisions of the Naturalisation Act 1870 permitting renunciation of allegiance51, it would be surprising if the power with respect to naturalisation and aliens did not extend this far." It would be no less surprising if the power conferred by s 51(xix) did not extend to support the making of a law identifying the circumstances in which a person who is currently a citizen may become an alien by reason of the Commonwealth's response to that person's repudiation of the ties of allegiance. The people Section 7 of the Constitution provides that the Senate "shall be composed of senators for each State, directly chosen by the people of the State". Section 24 of the Constitution provides that the House of Representatives "shall be composed of members directly chosen by the people of the Commonwealth". These provisions have been said to establish for the people of the Commonwealth 47 Singh v The Commonwealth (2004) 222 CLR 322 at 389 [173]. 48 Singh v The Commonwealth (2004) 222 CLR 322 at 389-390 [173]. 49 See Romein v Advocate General for Scotland [2018] AC 585 at 590 [4]. 50 Singh v The Commonwealth (2004) 222 CLR 322 at 397 [197]. 51 Naturalization Act 1870 (UK), ss 3, 4, 6. "[e]quality of opportunity to participate in the exercise of political sovereignty [which] is an aspect of the representative democracy guaranteed by our Constitution"52. While ss 7 and 24 of the Constitution establish that it is the choice by the people of the Commonwealth that is the source of the democratic legitimacy of the Commonwealth Parliament, the Constitution does not state the qualifications for the exercise of the franchise by the "people of the Commonwealth". This responsibility was left to the Parliament. Section 51(xix) empowers the Parliament to give practical content to the expression "the people". As Gageler J said in Love, the aliens power permits Parliament to53: "bring a measure of precision to the identification of those to whom the Constitution refers as 'the people', by laying down criteria for determining with specificity which persons were and which persons were not to have the legal status of members of the body politic of the Commonwealth of Australia." Mr Alexander submitted that a limitation on the power in s 51(xix) is to be found by regarding a power to denaturalise a citizen as exercisable only for "substantial reasons". Mr Alexander submitted that the intention of the framers of the Constitution, and the existence of the "people of the State" and the "people of the Commonwealth" referred to in ss 7 and 24 of the Constitution respectively, require that there be limits on the ability of Parliament to "fracture the membership of the political community of the body politic such as by exclusion of those people who were, and remain, necessary members of the body politic"54. The references in ss 7 and 24 of the Constitution to "the people" do not support a limitation on s 51(xix) in addition to that identified by Gibbs CJ in Pochi55. As with citizenship, so the identification of those members of the people of the Commonwealth who are to be qualified as electors is the responsibility of 52 McCloy v New South Wales (2015) 257 CLR 178 at 207 [45]. 53 Love v The Commonwealth (2020) 270 CLR 152 at 197-198 [94] (footnote omitted). 54 Hocking v Director-General, National Archives of Australia (2020) 94 ALJR 569 at 614 [212]; 379 ALR 395 at 451-452. See also Love v The Commonwealth (2020) 270 CLR 152 at 311 [444]. 55 Pochi v Macphee (1982) 151 CLR 101 at 109. the Parliament56. Parliament's power in this regard is broad, but there are limits. Just as Parliament may not expand its law-making power under s 51(xix) of the Constitution by pursuing an eccentric understanding of alienage, so the Parliament cannot expand or restrict the electorate by pursuing an eccentric understanding of "the people"57. The Parliament could not, for example, limit the electorate by purporting to exclude from the people of the Commonwealth all Australian citizens of English descent. But while it may be accepted that the Parliament cannot expand the scope of s 51(xix) by adopting an understanding of the people that would also be an affront to ss 7 and 24 of the Constitution, there is nothing fanciful in classifying as an alien – separate from "the people" – an individual who, though previously a citizen, has acted so inimically to Australia's interests as to repudiate the obligations of citizenship on which membership of the people of the Commonwealth depends. Repudiation of allegiance Mr Alexander argued that it was not open to the Parliament to treat the conduct described in s 36B(5)(h) as a repudiation of his allegiance constituting sufficient reason for depriving him of his citizenship. In response, the Solicitor-General of the Commonwealth, appearing for the defendants, cited examples58 of laws, the validity of which has never been challenged, that provide for the loss of citizenship as a result of acts indicating either loyalty to a foreign state or disloyalty to Australia. It was submitted that s 36B is "of the same genus" as some of those laws59, save to the extent that s 36B encompasses disloyalty indicated by a willingness to engage in terrorist activity in a foreign state. Specifically, the conduct captured by s 36B(5)(h) was characterised 56 McCloy v New South Wales (2015) 257 CLR 178 at 206 [42]; Murphy v Electoral Commissioner (2016) 261 CLR 28 at 82 [157]-[158]. 57 McGinty v Western Australia (1996) 186 CLR 140 at 170; Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7], 182 [23], 198-199 [83], 58 Naturalization Act 1917 (Cth), s 7; Nationality Act 1920 (Cth), ss 12(1), (2)(a), 18, 21; Nationality and Citizenship Act 1948 (Cth), ss 17, 19, 21(1). 59 Naturalization Act 1917 (Cth), s 7; Nationality Act 1920 (Cth), s 12(2)(a); Nationality and Citizenship Act 1948 (Cth), ss 19, 21(1). as "inherently suggestive of the absence of a continuing commitment to the Australian body politic". There is force in the Solicitor-General's submissions. The absence of the continuing commitment that is citizenship is sensibly described as an absence of "allegiance". The utility of "allegiance" as a determinative test for non-alienage has been questioned60; and the plurality in Chetcuti held that the reach of the aliens power could be determined in that case "without need to explore common law notions of allegiance and alienage"61. But allegiance is a useful gauge of the existence of the bonds of citizenship. Section 44(i) of the Constitution itself expressly acknowledges that allegiance may be an integral aspect of citizenship. Given that citizenship is a status of reciprocal rights and obligations, it is to understand the status of citizenship in an incoherently one-sided way to say that s 51(xix) supports a law that specifies the criteria by which a citizen may voluntarily renounce Australian citizenship – as Mr Alexander accepted – but does not support a law that treats voluntary conduct demonstrating a repudiation of allegiance to Australia as an implied renunciation of citizenship. Mr Alexander argued that voluntary conduct of the kind described in s 36B(5)(h) cannot rationally be treated as a repudiation of allegiance unless it is intended to be so. The facts stated in the special case suggest that it was reasonably open to the Parliament to regard voluntary conduct, as described in s 36B(5)(h), as so reprehensible as to be incompatible with the common bonds of allegiance to the Australian community, even though the person who has engaged in that conduct did not act intentionally to repudiate the bonds of citizenship. It is convenient to turn now to refer to those agreed facts. Terrorism and the threat to Australia's security On 4 December 2014, the Minister for Foreign Affairs made a declaration pursuant to s 119.3(1) of the Criminal Code (Cth) that al-Raqqa Province in Syria was a "declared area"62, on the basis of information indicating that it was the 60 Love v The Commonwealth (2020) 270 CLR 152 at 303-305 [428]-[431]. 61 Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 714 [34]; 392 ALR 371 at 62 That declaration came into effect on 5 December 2014: Criminal Code (Foreign Incursions and Recruitment – Declared Areas) Declaration 2014 – Al-Raqqa Province, Syria (Cth). de facto capital of the Islamic State's operations and was used to engage in hostile activities. That declaration was revoked on 27 November 2017 on the basis that it was no longer confirmed that the Islamic State was engaging in hostile activity there63. It may be noted that Deir El-Zour Province in Syria (where Mr Alexander was apprehended by Kurdish militia forces) was not a declared area. The Islamic State has been listed as a "terrorist organisation" within the meaning of para (b) of the definition in s 102.1(1) of the Criminal Code (Cth) under various names since at least 2010, including "Al-Qa'ida in Iraq", "Islamic State of Iraq and the Levant" and "Islamic State"64. In 2016, it was also listed as a "declared terrorist organisation" for the purposes of former s 35AA of the Citizenship Act65. Since 2015, the terrorism threat in Australia has been assessed by ASIO as "Probable" on the National Terrorism Threat Advisory System, signifying that credible intelligence, assessed by Australia's security agencies, indicates that individuals or groups continue to possess the intent and capability to conduct a terrorist attack in Australia. The threat of religiously motivated violent extremism, 63 Criminal Code (Foreign Incursions and Recruitment – Declared Areas) Revocation Instrument 2017 – Al-Raqqa Province, Syria (Cth); Australia, Criminal Code (Foreign Incursions and Recruitment – Declared Areas) Revocation Instrument 2017 – Al-Raqqa Province, Syria, Explanatory Statement at 1. 64 Criminal Code Amendment Regulations 2010 (No 7) (Cth); Criminal Code (Terrorist Organisation – Al-Qa'ida in Iraq) Regulation 2013 (Cth); Criminal Code (Terrorist Organisation – Islamic State of Iraq and the Levant) Regulation 2013 (Cth); Criminal Code (Terrorist Organisation – Islamic State) Regulation 2014 (Cth); Criminal Code (Terrorist Organisation – Islamic State) Regulations 2017 (Cth); Criminal Code (Terrorist Organisation – Islamic State) Regulations 2020 (Cth). 65 Australian Citizenship (Declared Terrorist Organisation – Islamic State) Declaration 2016 (Cth). See also Parliamentary Joint Committee on Intelligence and Security, Review of the declaration of Islamic State as a terrorist organisation under the Australian Citizenship Act 2007 (October 2016). including from groups such as the Islamic State, was and remains the principal concern66. Since 2014, there have been at least nine attacks targeting people in Australia and 21 major counter-terrorism disruption operations in response to attacks being planned in Australia, such as the actions of Man Haron Monis in taking 18 people hostage at the Lindt Café in downtown Sydney. In March 2019, the Islamic State was ousted by the United States-led Global Coalition to Defeat Islamic State from the last of the territory it had controlled across Syria and Iraq. While ASIO reported that "ISIL's 'caliphate' has been crushed and it has lost its safe havens and organised military capability", it identified that any remnants remained dangerous and required ongoing attention, including the anticipated return to Australia of foreign fighters67. Similarly, US intelligence considered that, as at April 2021, the Islamic State remained capable of waging a prolonged insurgency in Iraq and Syria and leading its global organisation, despite compounding senior leadership losses. The risk posed by foreign fighters, defined by ASIO as "Australians who have participated in foreign conflicts or undertaken training with extremist groups overseas", is an aspect of this general threat. While relatively few returned fighters have posed a direct risk to the Australian community, those that did have been responsible for some of the most lethal terrorist attacks. ASIO has reported that, since 2012, around 230 Australians (or former Australians) have travelled to Syria or Iraq to fight with or support groups involved in the Syria-Iraq conflict. Of that, 50 are estimated to have returned to Australia, the majority before 2016. In a submission to the Parliamentary Joint Committee on Intelligence and Security's 2019 review of the Australian Citizenship Amendment (Citizenship Cessation) Bill, ASIO continued to assess that the return of Australians who have spent time with Islamist extremist groups in Syria or Iraq has the potential to 66 Australian National Security, Current National Terrorism Threat Level, available at <https://www.nationalsecurity.gov.au/national-threat-level/current-national- terrorism-threat-level> [https://perma.cc/C96K-JYH3]. 67 Australian Security Intelligence Organisation, ASIO Annual Report 2018-19 (2019) exacerbate the Australian threat environment "for many years to come"68. This is because foreign fighters can be expected to have developed characteristics such as a greater tolerance for and propensity towards violence, and to have established jihadist credentials69. Several serious terrorist plots in Australia between 2000 and 2010 each involved at least one returned foreign fighter. The "retrospective" operation of s 36B(5)(h) As to Mr Alexander's argument that he cannot be taken to have repudiated his allegiance to Australia because, at the time he travelled into Syria, s 36B(5)(h) had not been enacted, the validity of s 36B is not to be approached on the footing that it would be open to the Parliament to treat voluntary conduct of the kind described in s 36B(5)(h) as a repudiation of his allegiance to Australia only if Mr Alexander made a deliberate decision to defy Australian statute law in so conducting himself. While the suite of provisions of which s 36B is a part might broadly hint at some analogy with the principles of contract law concerning the termination of a contract by one party for repudiatory conduct by the other party, those provisions do not purport to enact the contractual model. The question is whether it was open to the Parliament to treat a person who voluntarily engaged in the conduct described in s 36B(5)(h) as having repudiated that person's allegiance to Australia, whether or not that person actually intended to defy Australian law. In that regard, it cannot be said that it was not open to Parliament to provide that such conduct voluntarily undertaken might be so incompatible with the values of the Australian people as to be seen to be incompatible with continued membership of the Australian body politic. It is a different question whether giving effect to that assessment may be done by depriving that person of his or her citizenship without regard for the requirements of a fair hearing that characteristically attend the exercise of judicial power. 68 Australian Security the Parliamentary Joint Committee on Intelligence and Security: Review of the Australian Citizenship Amendment (Citizenship Cessation) Bill 2019 (2019) at 4. Intelligence Organisation, ASIO Submission 69 Australian Security the Parliamentary Joint Committee on Intelligence and Security: Review of the Australian Citizenship Amendment (Citizenship Cessation) Bill 2019 (2019) at 4. Intelligence Organisation, ASIO Submission Summary In summary in relation to the first issue, it should be held that it is open to the Parliament under s 51(xix) to create a status of citizenship that allows for the exclusion of persons from membership of the body politic. It is not an abuse of language to say that a person whose conduct is inimical to Australia's interests may, by a law of the Commonwealth, forfeit the rights of citizenship conferred by the Parliament, and thereby become an alien. The withdrawal of citizenship from an individual who voluntarily engages in the conduct described in s 36B(5)(h) cannot be said to pursue an eccentric understanding of the meaning of "aliens" in s 51(xix) of the Constitution. The question to which attention must now turn concerns the process by which that withdrawal of citizenship may be effected. Chapter III of the Constitution Mr Alexander argued that s 36B of the Citizenship Act reposes in the Minister the power to adjudge and punish criminal conduct by involuntary denaturalisation. This was said to be an exclusively judicial function, and not one which fell within any established exception bringing it within the acknowledged remit of the executive. In support of this submission, Mr Alexander relied upon Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs70. Mr Alexander sought to characterise denaturalisation as punishment. The defendants accepted that the function of "adjudging and punishing criminal guilt" is "exclusively judicial", as this Court held in Lim71. But the defendants submitted that Lim said nothing about laws that do not impose detention in custody72, of which s 36B is one. (1992) 176 CLR 1. 71 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27. See also Falzon v Minister for Immigration and Border Protection (2018) 262 CLR 333 at 340 [15]. 72 See Thomas v Mowbray (2007) 233 CLR 307 at 330 [18], 356-357 [114]-[121], The defendants submitted that at its highest, s 36B confers a power to inflict "involuntary hardship or detriment" on a person, which, as Gleeson CJ explained in Re Woolley; Ex parte Applicants M276/200373, is "not an exclusively judicial function". Further, it was submitted that it was not necessarily the case that deprivation of Australian citizenship would inflict hardship or detriment, particularly because s 36B allowed the cessation of citizenship only in the case of a person who is also a citizen of another country. The defendants also emphasised that s 36B is a discretionary power based on three conditions: that the person has engaged in the requisite conduct (as specified by s 36B(5)); the conduct demonstrates that the person has repudiated his or her allegiance to Australia; and that it would be contrary to the public interest for the person to remain an Australian citizen. The defendants also sought to emphasise that the power was ultimately discretionary, and that a determination under s 36B, and any decision to refuse to revoke it, is subject to judicial review. The submissions of the defendants should not be accepted. The consequences of a determination under s 36B for the citizen, the legislative policy which informs the operation of s 36B, and a comparison of the operation of s 36B with the provisions of s 36D (which authorise the same consequences for the citizen only upon conviction after a trial), all point to the conclusion that the power reposed in the Minister by s 36B(1) is a power which Ch III of the Constitution requires to be exercised by a court that is part of the federal judicature. To these considerations one may now turn. Consequences for the citizen In Lim, Brennan, Deane and Dawson JJ, with whom Gaudron J relevantly agreed74, said that "the adjudgment and punishment of criminal guilt under a law of the Commonwealth" was the most important of the "functions which, by reason of their nature or because of historical considerations, have become established as essentially and exclusively judicial in character"75. (2004) 225 CLR 1 at 12 [17]. 74 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 53. 75 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27. The plurality in Lim went on to explain that the exclusive character of this judicial function is a matter of "substance and not mere form"76. In addition, their Honours explained that "putting to one side the exceptional cases" of detention, such as in "cases of mental illness or infectious disease", which can "legitimately be seen as non-punitive in character and as not necessarily involving the exercise of judicial power", detention of a person by the State is "penal or punitive in character"77. Today, detention by way of deprivation of liberty in retribution for reprehensible conduct by an individual is a familiar example of punishment by the State. Historically, of course, English law sanctioned criminal conduct by punishments other than detention: corporal and capital punishment come readily to mind. But in addition, and importantly, exile has long been regarded as punishment. In the early seventeenth century, in Hussey v Moor78, the Court of King's Bench said: "[P]enal laws are those which do inflict penalty, ... and what law can be more penal than [a] statute ... which includes [penalties being] pecuniary, corporal and exile." Today, the fundamental value accorded to the liberty of the individual provides the rationale for the strict insistence in the authorities that the liberty of the individual may be forfeited for misconduct by that person only in accordance with the safeguards against injustice that accompany the exercise of the judicial power of the Commonwealth79. The case for the strict insistence on these safeguards is, if anything, stronger where the penalty for misconduct involves not only a loss of liberty within the community, but the loss of all entitlement to be both within the community and at liberty. For an Australian citizen, his or her citizenship is an assurance that, subject only to the operation of the criminal law administered by the courts, he or she is 76 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27. 77 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27-28. (1616) 3 Bulst 275 at 280 [81 ER 232 at 236]. 79 Chief Executive Officer of Customs v Labrador Liquor Wholesale Pty Ltd (2003) 216 CLR 161 at 179 [56]; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at entitled to be at liberty in this country and to return to it as a safe haven in need80. These entitlements are not matters of private concern; they are matters of public rights of "fundamental importance"81 to the relationship between the individual and the Commonwealth. In South Australia v Totani82, Crennan and Bell JJ said: "In harmony with the Constitution, conclusions about whether legislation conflicts with constitutional requirements, which turn on the nature of judicial power, or its usurpation, or which are directed to the effect of legislation on the institutional integrity of a court, commonly subsume consideration of the effect of the legislation on personal liberty." The suite of provisions which includes s 36B may be said to pursue a purpose of protecting the Australian community from the risks to peace and security posed by returning foreign fighters. But that protective purpose is not the principal purpose of the provision so as to qualify the power conferred by s 36B as an exception to the Lim principle83. As will be seen in the next section, the principal purpose of s 36B is retribution for conduct deemed to be so reprehensible as to be "incompatible with the shared values of the Australian community"84. That characterisation of the principal purpose of s 36B as punitive accords with the long-held understanding of exile as a form of punishment. As noted above, the Solicitor-General drew attention to the observation of Gleeson CJ in Re Woolley that "[p]unishment, in the sense of the inflicting of involuntary hardship or detriment by the State, is not an exclusively judicial function"85. So in Behrooz v Secretary, Department of Immigration and 80 Potter v Minahan (1908) 7 CLR 277 at 305; Air Caledonie International v The Commonwealth (1988) 165 CLR 462 at 469. 81 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 53. (2010) 242 CLR 1 at 156 [424] (footnotes omitted). 83 cf Minister for Home Affairs v Benbrika (2021) 95 ALJR 166 at 181 [36]; 388 ALR 84 s 36A of the Citizenship Act. 85 Re Woolley; Ex parte Applicants M276/2003 (2004) 225 CLR 1 at 12 [17]. Multicultural and Indigenous Affairs86, Gleeson CJ observed that the effect of the reasons of the plurality in Lim was that "executive powers to receive, investigate and determine an application for an entry permit and, after determination, to admit or deport, is not punitive in nature, and not part of the judicial power of the Commonwealth"; but, importantly, Gleeson CJ went on to say: "In the case of a citizen, what is punitive in nature about involuntary detention (subject to a number of exceptions) is the deprivation of liberty involved ... For a citizen, that alone would ordinarily constitute punishment." Visnic v Australian Securities and Investments Commission87 and Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd88 were cited by the defendants' counsel in support of the argument that a determination under s 36B is neither an adjudgment of guilt nor an imposition of punishment. Crucially, these cases dealt with the revocation of licences or other statutory privileges, rather than citizenship. These cases are examples of the point that the hardship or detriment involved in the revocation of a statutory licence or other privilege, where the holder of the licence or privilege is shown to be not a fit and proper person to enjoy the privilege or the licence, is not "punishment", which is an exclusively judicial function. But the punishment of an individual involving the deprivation of citizenship by reason of that person's misconduct is punishment of a different order from the loss of a statutory privilege or a licence under a regulatory regime. The consequence for a person who voluntarily does the acts described in s 36B(5)(h) is no different in substance from the punishment meted out pursuant to s 36D. Such a consequence cannot be equated with the cancellation of a licence or other privilege conferred by a statute which regulates business or other activities. In Kennedy v Mendoza-Martinez89, Goldberg J, writing for the majority of the Supreme Court of the United States, held that a law depriving a citizen of the United States of his nationality for evading conscription for military service was constitutionally invalid on the basis that it imposed "the sanction of deprivation of (2004) 219 CLR 486 at 499 [20]-[21]. (2007) 231 CLR 381. (2015) 255 CLR 352. (1963) 372 US 144 at 165-166. nationality as a punishment ... without affording the procedural safeguards ... [of] trial by duly constituted courts". The majority opinion in Kennedy recognised that the deprivation of the rights of citizenship serves to "promote the traditional aims of punishment – retribution and deterrence"90. As Brennan J said in his concurring opinion91, so it may be said of s 36B(1) that the sanction of "expatriation" is "available for no higher purpose than to curb undesirable conduct, to exact retribution for it, and to stigmatize it". As was said in Lim, whether a law provides for the adjudication and punishment of criminal conduct is a matter of substance, not form92. The substantive effect of the deprivation of rights of liberty conferred by Australian citizenship is not disguised by the use of the emollient language of "citizenship cessation" to describe the effect of a determination under s 36B upon an individual. In this regard, it may be noted that s 40(2) of the British Nationality Act 1981 (UK) provides, with commendable frankness, for the "deprivation of citizenship" of an individual if the Secretary of State is satisfied that deprivation is conducive to the public good. The candid language in which this provision is expressed acknowledges the substance of the effect of the ministerial determination upon the citizen in question. This candour may owe something to the circumstance that the validity of the conferral of such a power on the executive government of the United Kingdom is not dependent on conformity with constitutional requirements such as those found in Ch III of our Constitution; but however that may be, the British Nationality Act more accurately expresses the effect upon the citizen of a determination under s 36B than "citizenship cessation". Sections 36A and 36D That s 36B facilitates punishment in the sense of retribution for the conduct described in s 36B(5)(h) is confirmed by a consideration of the terms of s 36A and a comparison of the operation of s 36B with that of s 36D, the validity of which is not in issue in this case. Section 36A is found at the beginning of Subdiv C of Div 3 of Pt 2 of the Citizenship Act. It provides: 90 Kennedy v Mendoza-Martinez (1963) 372 US 144 at 168. 91 Kennedy v Mendoza-Martinez (1963) 372 US 144 at 187-188. 92 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27. "This Subdivision is enacted because the Parliament recognises that Australian citizenship is a common bond, involving reciprocal rights and obligations, and that citizens may, through certain conduct incompatible with the shared values of the Australian community, demonstrate that they have severed that bond and repudiated their allegiance to Australia." The operative provisions which give effect to the policy stated by s 36A are a response to conduct that is conceived of as being so reprehensible that it is radically incompatible with the values of the community. The response of the Parliament to that reprehensible conduct is retribution in the form of the deprivation of the entitlement to be at liberty in Australia. Retribution is characteristic of punishment under the criminal law – it is "punishing an offender 'because he [or she] deserves it'"93 by reason of the offender's misconduct. Associated with this purpose are notions of denunciation and deterrence of conduct that is regarded as reprehensible by the community. The statement in s 36A informs both ss 36B and 36D. Section 36D provides relevantly as follows: "Cessation of citizenship on determination by Minister The Minister may determine in writing that a person ceases to be an Australian citizen if: the person has been convicted of an offence, or offences, against one or more of subsection (5); and the provisions specified the person has, in respect of the conviction or convictions, been sentenced to a period of imprisonment of at least 3 years, or to periods of imprisonment that total at least 3 years; and the Minister is satisfied that the conduct of the person to which the conviction or convictions relate demonstrates that the person has repudiated their allegiance to Australia; and the Minister is satisfied that it would be contrary to the public interest for the person to remain an Australian citizen (see section 36E). 93 Veen v The Queen [No 2] (1988) 164 CLR 465 at 473. Note: A person may seek review of a determination made under this subsection in the High Court of Australia under section 75 of the Constitution, or in the Federal Court of Australia under section 39B of the Judiciary Act 1903. See also section 36H of this Act (revocation of citizenship cessation determination on application to Minister). (2) However, the Minister must not make a determination if the Minister is satisfied that the person would, if the Minister were to make the determination, become a person who is not a national or citizen of any country. The person ceases to be an Australian citizen at the time the determination is made. Subsection (1) applies to a person who is an Australian citizen regardless of how the person became an Australian citizen (including a person who became an Australian citizen upon the person's birth). For the purposes of paragraph (1)(a), the provisions are the following: a provision of Part 5.5 of the Criminal Code (foreign incursions and recruitment)". Section 36D, like s 36B, gives practical effect to the policy stated in s 36A. Each provision serves "to shore up the convictions of the law-abiding by demonstrating that the wicked will not go unscathed"94 for the reprehensible conduct described in ss 36B(5)(h) and 36D(5)(g). The sanction of deprivation of citizenship may be imposed upon an individual by the exercise of the discretion conferred on the Minister by s 36B rather than as a consequence of a conviction after a trial under s 36D. True it is that the Minister under s 36B need not be satisfied of the same mental elements necessary to establish the commission of an offence under s 36D95, but to say this is to draw attention to the lower factual threshold required by s 36B for the exercise of the power reposed in the Minister to effect a deprivation of citizenship. It also 94 Kennedy v Mendoza-Martinez (1963) 372 US 144 at 190. 95 s 36B(6) of the Citizenship Act. highlights the absence of the procedural safeguards attending a criminal prosecution of an offence under s 36D. Both ss 36B and 36D deal with the topic of "[c]essation of citizenship on determination by [the] Minister". But in the case of s 36D, the power of the Minister arises only in relation to a person who has been convicted and sentenced of an offence or offences by a court96. In contrast, the Minister's discretion under s 36B arises upon the Minister him or herself being satisfied that the conduct elements of the offence have occurred. And the Minister may be satisfied of those matters in circumstances in which the "offender" has not had a fair hearing (or indeed any hearing at all), much less the benefit of the other safeguards of a criminal trial, including the incidence of the burden of proof. Statute law may validly regulate the incidence of the burden of proving facts without offending Ch III of the Constitution97, but s 36B contemplates a process of ministerial fact finding in relation to the grounds for the deprivation of citizenship in which the State is not required to carry the burden of proof, by contrast to the position under s 36D. Indeed, under s 36B, the Minister is not required even to proceed in accordance with the rules of procedural fairness98. And yet the process under s 36B may result in the same outcome by way of deprivation of citizenship as under s 36D, where the protections afforded by a criminal trial have been afforded to the citizen. This incongruity is not dispelled by the possibility that an application for revocation may subsequently be made under s 36H or that s 36J or s 36K may be engaged. Some reference to the evolution of s 36B is also illuminating. Provisions for the termination of citizenship on terrorism-related grounds were first introduced into the Citizenship Act by the Allegiance to Australia Act and commenced on 12 December 2015. These provisions were introduced as part of the government's response to the Review of Australia's Counter-Terrorism Machinery for a Safer Australia, and with a view to broadening powers relating to 96 s 36D(1)(a), (b) of the Citizenship Act. 97 Nicholas v The Queen (1998) 193 CLR 173 at 188-190 [23]-[24], 225 [123], 234-236 [152]-[154]; Graham v Minister for Immigration and Border Protection (2017) 263 CLR 1 at 22-23 [30]-[33]. 98 s 36B(11) of the Citizenship Act. the cessation of Australian citizenship for persons engaging in terrorism and who were a serious threat to Australia and Australia's interests99. The predecessor to s 36B was s 33AA of the Citizenship Act. It was in largely the same terms, except that it provided for a mental element100: [Section 33AA(1)] applies paragraphs [33AA](2)(a) to (h) only if the conduct is engaged in: to conduct specified in any of (a) with the intention of advancing a political, religious or ideological cause; and (b) with the intention of: influencing by coercing, or the the Commonwealth or a State, government of Territory or foreign country, or of part of a State, Territory or foreign country; or intimidation, intimidating the public or a section of the public. (4) A person is taken to have engaged in conduct with an intention referred to in subsection (3) if, when the person engaged in the conduct, the person was: a member of a declared section 35AA); or terrorist organisation (see acting on instruction of, or in cooperation with, a declared terrorist organisation. To avoid doubt, subsection (4) does not prevent the proof or establishment, by other means, that a person engaged in conduct with an intention referred to in subsection (3)." 99 Australia, Senate, Australian Citizenship Amendment (Allegiance to Australia) Bill 2015 (Cth), Revised Explanatory Memorandum at 1. 100 Australian Citizenship Amendment (Allegiance to Australia) Act 2015 (Cth), Sch 1, item 3. In 2019, a report by the Independent National Security Legislation Monitor ("the INSLM Report") reviewed the operation, effectiveness and implications of the citizenship cessation provisions, including s 33AA. The INSLM Report stated that the "main focus" of these laws was involvement with the Islamic State, although they were not so limited101. The INSLM Report considered that Australia's counter-terrorism framework required a range of mechanisms, and that "[i]n some, possibly rare cases, citizenship cessation reduces the risk of a terrorist act being undertaken by that person in Australia"102. However, the INSLM Report concluded that the citizenship cessation provisions, including s 33AA, lacked necessity, proportionality and proper protections for individual rights. The INSLM Report further identified, in addition to the risk of de facto or temporary statelessness, a denial of due process103. While s 36D affords a citizen the due process of a criminal trial before the Minister's discretion arises, a significant feature of s 36B is that it operates without due process at all. The ministerial discretion The defendants argued that a determination under s 36B(1) requires consideration of the public interest in addition to satisfaction that the conduct described in s 36B(5)(h) occurred, and that this exercise does not require a finding that an offence has been committed. It was also said that the Minister's determination will not decide a controversy as to the existence of present rights and obligations. These points highlight that, in contrast to s 36D, which contemplates an orthodox exercise of judicial power as a necessary precondition of imposing 101 Independent National Security Legislation Monitor, Report the Attorney-General: Review of the operation, effectiveness and implications of terrorism-related citizenship loss provisions contained in the Australian Citizenship Act 2007, Report No 7 (2019) at 44 [6.13]. 102 Independent National Security Legislation Monitor, Report the Attorney-General: Review of the operation, effectiveness and implications of terrorism-related citizenship loss provisions contained in the Australian Citizenship Act 2007, Report No 7 (2019) at 44 [6.10]. 103 Independent National Security Legislation Monitor, Report the Attorney-General: Review of the operation, effectiveness and implications of terrorism-related citizenship loss provisions contained in the Australian Citizenship Act 2007, Report No 7 (2019) at 57 [6.87]. relevantly the same punishment, s 36B does not contemplate an exercise of judicial power at all. But to say that is entirely beside the point. The vice of s 36B is precisely that it does not provide for the exercise of judicial power. To emphasise that this is so is simply to make Mr Alexander's case for him. Dual citizens For the defendants it was argued that the deprivation of Australian citizenship pursuant to s 36B would not necessarily mean that the former citizen would be exposed to the dangers of statelessness because, by reason of s 36B(2), the Minister's power may be exercised only in relation to an individual who is also a citizen of another country. It was said that the extent of the actual detriment to such an individual would depend upon the circumstances of that individual. On any view of the situation of such an individual, the involuntary deprivation of rights involved in Australian citizenship by way of retribution for his or her conduct is a serious punishment. The individual is stripped of the right to be at liberty in Australia, and that is so whatever rights may be conferred by citizenship of another country. Summary In summary in relation to the Ch III issue, the effect of the Minister's determination under s 36B(1) is to deprive Mr Alexander of his entitlement to enter and live at liberty in Australia. That sanction by the Parliament may be imposed only upon satisfaction of the Minister that Mr Alexander engaged in conduct that is so reprehensible as to be deserving of the dire consequence of deprivation of citizenship and the rights, privileges, immunities and duties associated with it. The power to determine the facts which enliven the power to impose such a punishment is one which, in accordance with Ch III of the Constitution, is exercisable exclusively by a court that is a part of the federal judicature. Answers and orders The questions posed by the special case should be answered as follows: Is s 36B of the Australian Citizenship Act 2007 (Cth) invalid in its operation in respect of the plaintiff because: it is not supported by a head of Commonwealth legislative power; Answer, "No". inconsistent with an limitation on Commonwealth legislative power preventing the involuntary deprivation of Australian citizenship; implied Answer, "Unnecessary to answer". it effects a permanent legislative disenfranchisement which is not justified by a substantial reason; Answer, "Unnecessary to answer". it effects a permanent disqualification from being chosen or from sitting as a senator or a member of the House of Representatives, otherwise the circumstances contemplated by ss 34 and 44 of the Constitution; than Answer, "Unnecessary to answer". it reposes in the Minister for Home Affairs the exclusively judicial function of punishing criminal guilt? Answer, "Yes". 2. What, if any, relief should be granted to the plaintiff? Answer, "It should be declared that: s 36B of the Australian Citizenship Act 2007 (Cth) is invalid; and the plaintiff is an Australian citizen". 3. Who should pay the costs of the special case? Answer, "The defendants". The conclusion reached by Kiefel CJ, Keane and Gleeson JJ is that s 36B of the Australian Citizenship Act 2007 (Cth) is a law with respect to "aliens" within the meaning of s 51(xix) of the Constitution but infringes the doctrine of separation of judicial power enshrined in Ch III of the Constitution. I agree with that conclusion and with the substance of their Honours' reasons for reaching it. My purpose in writing additionally is to respond to a particular submission put by the defendants at the forefront of their argument that s 36B does not infringe the doctrine of separation of judicial power. The submission was that someone who ceases to be an Australian citizen by operation of a ministerial determination made under s 36B is not "punished", in the sense in which that term is used to describe an exercise of judicial power consequent upon a finding of criminal guilt104, because the "purpose" of the section is to "protect the Australian community" from persons found to have engaged in terrorist conduct. My response to the submission is in two parts. The first part involves explaining why it does not help, in the context of determining whether a law infringes the doctrine of separation of judicial power enshrined in Ch III, to describe a legislative purpose at that level of generality. The second part explains how legislative purpose should be identified and, in doing so, points out what was wrong with the defendants' attempt to identify the legislative purpose through reliance on certain extrinsic material. Part I: describing a legislative purpose Constitutional analysis in a variety of contexts can be assisted by identifying the "purpose" (or "object" or "end") of a law as distinct from the "manner" (or "means" or "mechanism") by which the law is designed to achieve that purpose. Without being exhaustive, those contexts include determining whether a law is "with respect to" a designated topic of legislative power105, determining whether a law infringes the express guarantee of freedom of interstate 104 See Duncan v New South Wales (2015) 255 CLR 388 at 409 [46]; Minogue v Victoria (2019) 268 CLR 1 at 20-21 [31]. 105 See Stenhouse v Coleman (1944) 69 CLR 457 at 471-472; Murphyores Inc Pty Ltd v The Commonwealth (1976) 136 CLR 1 at 11, 19-23; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 294. trade106 or intercourse107, and determining whether a law infringes the implied guarantee of freedom of political communication108. In each context, the "purpose" is the "public interest sought to be protected and enhanced" by the law109. Expressed in more arcane terms, the "purpose" is the positive counterpart of "the mischief to redress of which [the] law is directed"110. The purpose of any law can be described at different levels of generality. At one extreme, a law made by the Commonwealth Parliament under s 51 of the Constitution can always be described in the opening words of that section as being "for the peace, order, and good government of the Commonwealth". At another extreme, the same law can be described as having the specific purpose of achieving exactly what the law does. For example, the purpose of s 36B can be described as being to cancel the Australian citizenship of a person if the statutory preconditions it specifies are met and if the ministerial discretion it confers is exercised. Neither description is incorrect. But neither is of much use in constitutional analysis. Between those two extremes will often lie other available descriptions each having a different level of generality. The selection between those other descriptions will then be functional. The level of generality at which the purpose of the law is best described will depend on what constitutional analysis is being 106 See Cole v Whitfield (1988) 165 CLR 360 at 408-409; Castlemaine Tooheys Ltd v South Australia (1990) 169 CLR 436 at 473-474; Betfair Pty Ltd v Western Australia ("Betfair No 1") (2008) 234 CLR 418 at 451 [10], 464 [47]-[48]. 107 See Palmer v Western Australia (2021) 95 ALJR 229 at 241-242 [47]-[48], [50], ALR 180 at 192-193, 201, 222-223, 225-226, 240, 243. 108 See Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 561-562; McCloy v New South Wales (2015) 257 CLR 178 at 193-195 [2], 230-231 [126], 109 Cunliffe v The Commonwealth (1994) 182 CLR 272 at 300. 110 APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 394 [178]. See McCloy v New South Wales (2015) 257 CLR 178 at 232 [132]; Brown v Tasmania (2017) 261 CLR 328 at 391-392 [208]-[210]. undertaken. That in turn will depend on what constitutional doctrine is in play and ultimately on what constitutional value is at stake111. The Supreme Court of Canada has emphasised the importance of selecting the appropriate level of generality at which to describe a legislative purpose in the context of determining whether a law is "demonstrably justified in a free and democratic society" within the meaning of the Canadian Charter of Rights and Freedoms. In R v Moriarity112, Cromwell J said: "If the purpose is articulated in too general terms, it will provide no meaningful check on the means employed to achieve it: almost any challenged provision will likely be rationally connected to a very broadly stated purpose ... On the other hand, if the identified purpose is articulated in too specific terms, then the distinction between ends and means may be lost and the statement of purpose will effectively foreclose any separate inquiry into the connection between them. The appropriate level of generality, therefore, resides between the statement of an 'animating social value' – which is too general – and a narrow articulation, which can include a virtual repetition of the challenged provision, divorced from its context – which risks being too specific". Traditionally, an analytical distinction has been drawn between a legislative purpose that is "penal or punitive" and a legislative purpose that is no more than "protective" in the context of determining whether a law infringes the doctrine of separation of judicial power by conferring on a decision-maker other than a court a power to detain – or, more broadly, a power to constrain the freedom of action or to revoke or suspend the statutory status of – a person found to have contravened a statutory norm. On the one hand, a punitive purpose will be incompatible with the doctrine. On the other hand, a protective purpose may be compatible with the doctrine113. The distinction alone cannot be determinative of the ultimate constitutional inquiry as a law with a protective purpose may still pursue that purpose in a manner incompatible with the doctrine114. 111 eg, Tajjour v New South Wales (2014) 254 CLR 508 at 584 [163]; Brown v Tasmania (2017) 261 CLR 328 at 362-363 [99]-[101], 393-394 [216]-[217], 432-433 [322]. 112 [2015] 3 SCR 485 at 498-499 [28]. 113 See Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 28, 71; Re Woolley; Ex parte Applicants M276/2003 (2004) 225 CLR 1 at 12 [17], 25-26 [60]-[61]. 114 Compare Kruger v The Commonwealth (1997) 190 CLR 1 at 162, citing Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 The distinction between a punitive purpose and a protective purpose has been said to be "elusive"115 in the context of examining the effect of an exercise of power on a person who is its object. The distinction nevertheless remains analytically useful in the context of characterising the power as judicial or non- judicial, as long as the notion of what amounts to a protective purpose is kept within bounds which make the distinction meaningful. Long recognised as protective in a constitutionally meaningful sense has been the purpose of upholding standards of integrity and competence amongst professionals and others who engage in activities involving elements of public trust116. That protective purpose has accordingly been recognised to have the potential to justify conferral of a power to revoke or suspend a statutory status of a person found to have contravened a statutory norm on a decision-maker other than a court. When undertaken as an incident of a legislative scheme designed to uphold such standards, "it is not readily to be assumed that disciplinary action, however much it may hurt the individual concerned, is personal and retributive rather than corporate and self-respecting"117. By parity of reasoning, when conferred on a decision-maker other than a court as an incident of a licensing regime designed to ensure that the content of radio or television broadcasting respects community standards118, a power to revoke or suspend a broadcasting licence where a broadcast is shown to have fallen short of those standards can meaningfully be characterised as having the purpose of protecting the Australian community. Accordingly, a decision-maker responsible for administering a licensing regime of that nature does not exercise the exclusively judicial power of adjudging and punishing criminal guilt merely by making its own inquiry and forming its own opinion that a licensee committed CLR 1 at 33, 46, 58, 65, 71; Falzon v Minister for Immigration and Border Protection (2018) 262 CLR 333 at 343 [27]. 115 Rich v Australian Securities and Investments Commission (2004) 220 CLR 129 at 116 R v White; Ex parte Byrnes (1963) 109 CLR 665; Albarran v Companies Auditors and Liquidators Disciplinary Board (2007) 231 CLR 350; Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381. 117 Albarran v Companies Auditors and Liquidators Disciplinary Board (2007) 231 CLR 350 at 358-359 [17], quoting Kariapper v Wijesinha [1968] AC 717 at 737. 118 Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd (2015) 255 CLR 352 at 362 [4]. a criminal offence in the course of determining whether that licensee has breached a condition of its licence119. The attempt by the defendants to analogise from a purpose of upholding standards to be expected of those who by choice engage in a profession or in an activity involving an element of public trust, or in radio or television broadcasting under statutory licence, to a purpose of upholding standards to be expected of all Australian citizens in virtue of them being Australian citizens must be rejected. It draws too long a bow. It stretches the concept of protection to breaking point. It deprives the distinction between "protective" and "punitive" of all utility. In the context of determining whether a law infringes the doctrine of separation of judicial power, to say no more than that the purpose of a law is to protect the Australian community from an Australian citizen found to have contravened a statutory norm is to say nothing to indicate that the law has a purpose that is "protective" in a sense meaningfully distinct from a purpose that is "penal or punitive". That is because protection of the community from a citizen found to have contravened a statutory norm is a concept of such elasticity that it is not necessarily inconsistent with the imposition on that citizen of a criminal punishment following an adjudication of criminal guilt – a function which lies in the heartland of judicial power. Indeed, "protection of society" has been identified as one of the "purposes of criminal punishment"120. In that regard, it has been said that "the protection of the community is one of the most important results that the criminal law is designed to secure"121. It has even been said that criminal law "exists for the protection of society" and that it is possible to discard the notion of punishment for punishment's sake and instead recognise that the imposition of criminal punishment pursues "the principles of rehabilitation, deterrence and, wherever necessary, the ultimate isolation from society of those individuals who have no capacity for the adjustments necessary to conform their conduct as active members of a free society to the requirements of the law"122. 119 Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd (2015) 255 CLR 352 at 371 [33], 380 [63]. 120 Veen v The Queen [No 2] (1988) 164 CLR 465 at 476. 121 Veen v The Queen [No 2] (1988) 164 CLR 465 at 475, quoting R v Pedder (unreported, Queensland Court of Criminal Appeal, 29 May 1964). 122 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 589 [11], quoting United States v Chandler (1968) 393 F 2d 920 at 929. There is a notion of criminal punishment having protection of the community from future criminal conduct as its ultimate purpose which can be traced back to the Enlightenment. There is also a notion of criminal punishment encompassing protection of the community by removing the most recalcitrant of criminal contraveners from membership of the community altogether which is of even greater antiquity. In the late 18th century, Sir William Blackstone wrote123: "As to the end ... of human punishments. This is not by way of atonement or expiation for the crime committed ... but as a precaution against future offences of the same kind. This is effected three ways: either by the amendment of the offender himself; for which purpose all corporal punishments, fines, and temporary exile or imprisonment are inflicted: or, by deterring others by the dread of his example from offending in the like way, ... or, lastly, by depriving the party injuring of the power to do future mischief; which is effected by either putting him to death, or condemning him to perpetual confinement, slavery, or exile. The same one end, of preventing future crimes, is endeavoured to be answered by each of these three species of punishment." A century later, Oliver Wendell Holmes wrote that "probably most English- speaking lawyers would accept the preventive theory without hesitation"124. Whether the notion espoused by Blackstone and Holmes continues to have the same degree of contemporary acceptance is questionable but not to the point. The longevity of the notion is enough to illustrate the difficulty with drawing a categorical distinction based on the extremely broad concept of protection which the defendants sought to invoke. Part II: identifying the legislative purpose Identifying the purpose of a law is an exercise in attributing an objective intention to the outcome of a legislative process. The exercise is similar, although not identical, to the exercise involved in construing a law by attributing meaning to legislated text. The two are informed by the same textual and contextual considerations. The main difference between them is as follows. To the extent that legislated text has operative legal effect, the operative legal effect inheres in the meaning of the text construed in the totality of its context. 123 Blackstone, Commentaries on the Laws of England (1769), bk IV, c 1 at 11-12 (emphasis in original). 124 Holmes, The Common Law (1881) at 43. The text is in that sense, and for that reason, the beginning and the end of statutory construction125. To the extent that the legislated text includes a statement of purpose, that statement of purpose can "throw light on"126 the mischief to redress of which the operative legislated text is directed. But the purpose does not inhere in the text. The text is in that sense, and for that reason, the beginning of the identification of legislative purpose but cannot be the end. A legislature of limited powers "cannot arrogate a power to itself by attaching a label to a statute"127 and cannot, merely by including a statement of purpose in legislated text128, require a court to identify the purpose of a law as something that it is not. Not unknown in our constitutional history is for a law which purports to be designed to achieve a constitutionally permissible purpose to be found on close inspection "in truth" to pursue a constitutionally impermissible purpose129. That said, the constitutional relationship between the judiciary and the legislature is such that a statement of legislative purpose must be treated by a court as a solemn and presumptively accurate declaration of why a law is enacted. The declaration is made by the legislature to itself and to the world. The legislatively declared purpose might well be elucidated with reference to other aspects of the text or context. It might need to be supplemented or qualified in order to explain some detail of the law. It might need to be translated to a level appropriate for constitutional analysis in a particular context. Absent strong reason for concluding that the stated purpose is not a true purpose, however, it must be accepted and respected. 125 Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503 at 519 [39]; Thiess v Collector of Customs (2014) 250 CLR 664 at 671 126 Wacando v The Commonwealth (1981) 148 CLR 1 at 23. 127 South Australia v The Commonwealth ("the Uniform Tax Case No 1") (1942) 65 CLR 373 at 432; Australian Communist Party v The Commonwealth (1951) 83 CLR 128 R v Credit Tribunal; Ex parte General Motors Acceptance Corporation (1977) 137 CLR 545 at 563-564; IW v City of Perth (1997) 191 CLR 1 at 11-12. 129 See Pioneer Express Pty Ltd v South Australia (1957) 99 CLR 227 at 240-241. See also Betfair Pty Ltd v Western Australia ("Betfair No 1") (2008) 234 CLR 418 at When enacting the Australian Citizenship Amendment (Citizenship Cessation) Act 2020 (Cth) ("the 2020 Amending Act"), Parliament chose to explain the purpose of the whole of the subdivision within which s 36B is included. Parliament did so in s 36A. Translated to the level appropriate for analysis of the compatibility of s 36B with Ch III of the Constitution, the purpose declared in s 36A is properly characterised as one of denunciation and exclusion from formal membership of the Australian community of persons shown by certain conduct to be unwilling to maintain or incapable of maintaining allegiance to Australia. The nature of the conduct understood by the Parliament to be capable of showing that unwillingness or incapacity is elucidated by the operative provisions of the subdivision and is limited to criminal conduct found to have been engaged in by a person in the past. Thus the purpose of denunciation and exclusion from formal membership of the Australian community is solely on the basis of past criminal conduct. That purpose can only be characterised as "punitive". The revised explanatory memorandum130 for the Bill for the 2020 Amending Act contains nothing to cast the purpose of s 36B as declared by s 36A in a different light. Nor does the second reading speech131. The Bill for the 2020 Amending Act had its origin in a report to the Attorney-General in 2019 by the Independent National Security Legislation Monitor132. The parliamentary process which resulted in the Bill's enactment included an inquiry in 2019 and report in 2020 by the Parliamentary Joint Committee on Intelligence and Security ("the PJCIS")133. The defendants did not seek to draw on anything in either of those reports to support their submission that the purpose of s 36B is appropriately identified as the protection of the Australian community. Rather, they sought to draw on a submission made to the PJCIS in the course of its inquiry. 130 Australia, Senate, Australian Citizenship Amendment (Citizenship Cessation) Bill 2020, Revised Explanatory Memorandum. 131 Australia, House of Representatives, Parliamentary Debates (Hansard), 19 September 2019 at 3602. 132 Independent National Security Legislation Monitor, Report to the Attorney- General: Review of the operation, effectiveness and implications of terrorism- related citizenship loss provisions contained in the Australian Citizenship Act 2007, Report No 7 (2019). 133 Parliamentary Joint Committee on Intelligence and Security, Advisory Report on the Australian Citizenship Amendment (Citizenship Cessation) Bill 2019 (2020). The submission was made by the Australian Security Intelligence Organisation ("ASIO")134. The thrust of that submission was that ASIO considered "citizenship cessation" to be "a legislative measure that works alongside a number of other tools to protect Australia and Australians from terrorism". The submission implied that ASIO saw those "other tools" as including prosecution for terrorism offences, which it said would sometimes result in "the better security outcome". The concept of "protection" which ASIO employed in its submission was therefore one that encompassed invocation of a judicial process by way of prosecution for an offence. The language of "security" and "protection" in which ASIO cast its submission is explicable by reference to ASIO's statutory charter. The statutory functions of ASIO centrally include obtaining, correlating, evaluating and communicating intelligence relevant to "security"135. The definition of "security" relevantly includes "the protection of, and of the people of, the Commonwealth" from politically motivated violence136. A submission made by a responsible government agency to a parliamentary inquiry cannot be dismissed as beyond the scope of the material which might properly inform judicial identification of the purpose of a law. In the context of examining the compatibility of s 36B with Ch III of the Constitution, however, the ASIO submission to the PJCIS is of no analytical utility whatsoever. ASIO's frame of reference is such that even prosecution which results in the imposition of punishment by a court for a terrorism offence is regarded as being for the protection of the Australian community. That is not the frame of reference within which determining whether a statutory purpose is "protective" needs to occur in the context of the doctrine of separation of judicial power enshrined in Ch III of the Constitution. The concept of "protection" as employed in ASIO's submission to the inquiry therefore does not assist in identifying the purpose of s 36B in the context of the constitutional inquiry. 134 Australian Security the Parliamentary Joint Committee on Intelligence and Security: Review of the Australian Citizenship Amendment (Citizenship Cessation) Bill 2019 (2019). Intelligence Organisation, ASIO submission 135 Section 17(1)(a) and (b) of the Australian Security Intelligence Organisation Act 1979 (Cth). 136 Section 4 of the Australian Security Intelligence Organisation Act 1979 (Cth) (definition of "security"). Disposition I agree with the answers proposed by Kiefel CJ, Keane and Gleeson JJ to the questions stated by the parties in the special case. 128 GORDON J. The plaintiff, Mr Alexander, conducts this litigation through a litigation guardian because his family and lawyers have not been able to contact him since 15 July 2021, shortly after he told them that he was being transferred to the Branch 235 prison in Damascus, Syria, operated by Syrian intelligence. I gratefully adopt the description of Mr Alexander's plight, the Australian Government's decisions about Mr Alexander, the nature of the proceeding in this Court and the relevant provisions of Subdiv C of Div 3 of Pt 2 of the Australian Citizenship Act 2007 (Cth) ("the Citizenship Act") set out in the reasons of Kiefel CJ, Keane and Gleeson JJ. Section 36B of the Citizenship Act confers a power on the first defendant, the Minister for Home Affairs ("the Minister"), to make a citizenship cessation determination if satisfied that: a person has engaged in specified conduct (relevantly the physical elements of certain terrorism-related offences); the conduct demonstrates that the person has repudiated their allegiance to Australia; it would be contrary to the public interest for the person to remain an Australian citizen; and the person would not become a person who is not a national or citizen of any country. identified by reference On 2 July 2021, the Minister determined that Mr Alexander "ceases to be an Australian citizen" ("the Cessation Determination"). The Cessation Determination recorded that the Minister was satisfied: "that [Mr] Alexander ... has engaged in conduct specified in [s] 36B(5) of the [Citizenship] Act, namely engaging in foreign incursion, while outside Australia"; "that the conduct of [Mr] Alexander demonstrates that he has repudiated his allegiance to Australia"; "that it would be contrary to the public interest for [Mr] Alexander to remain an Australian citizen, having had regard to the matters specified in [s] 36E(2)"; and that Mr Alexander "would not, through the making of the determination, become a person who is not a national or citizen of any country" (emphasis in original). Mr Alexander challenges the constitutional validity of s 36B on a number of grounds. These reasons address two grounds: (1) that s 36B is not supported by the "naturalization and aliens" power137; s 51(xix) of and (2) that s 36B reposes in the Minister the exclusively judicial function of punishing criminal guilt. Mr Alexander's challenge on the second ground should the Constitution, 137 The ground raised by Mr Alexander was, more broadly, that s 36B in its purported application to him is not supported by any head of Commonwealth legislative power. Ultimately, however, the defendants only relied upon s 51(xix) of the Constitution to support the validity of s 36B. be upheld. It is, therefore, neither necessary nor appropriate138 to determine whether s 36B is supported by the "naturalization and aliens" power or any of the other grounds raised by Mr Alexander139. But, given that other members of the Court do decide the question of legislative power, it is necessary to make some brief observations about the "naturalization and aliens" power. Is s 36B supported by s 51(xix)? The term "aliens" in s 51(xix) of the Constitution presupposes persons who are "non-aliens" – persons who are undoubtedly part of the Australian political community and who do not need to be formally admitted to membership. That is, there are persons who are not aliens and "who could not possibly answer the description of 'aliens' in the ordinary understanding of the word"140. These people are not aliens and could not possibly answer that description regardless of whether the Federal Parliament says that they are not aliens (or describes some or all of them as "citizens" or "nationals", or uses any other term or expression), or says that they can or must be provided with some identity document or can or must be provided with such a document if they recite or subscribe to some pledge of alliegance. The content of the constitutional word "aliens" is not and cannot be fixed by the content of laws made by the Federal Parliament. It is a necessary corollary of these propositions that "the Parliament cannot, simply by giving its own definition of 'alien', expand the power under s 51(xix) to include persons who could not possibly answer the description of 'aliens' in the ordinary understanding of the word"141. That limit on the aliens 138 See ICM Agriculture Pty Ltd v The Commonwealth (2009) 240 CLR 140 at 199 [141], citing Lambert v Weichelt (1954) 28 ALJ 282 at 283, Cheng v The Queen (2000) 203 CLR 248 at 270 [58], Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 473-474 [249]-[252], BHP Billiton Ltd v Schultz (2004) 221 CLR 400 at 443 [94], 468 [177] and Chief Executive Officer of Customs v El Hajje (2005) 224 CLR 159 at 171 [28]; Mineralogy Pty Ltd v Western Australia (2021) 95 ALJR 832 at 846 [56]; 393 ALR 551 at 565. See also Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 176. 139 Namely, that s 36B is inconsistent with an implied limitation on Commonwealth legislative power preventing the involuntary deprivation of Australian citizenship and effects a permanent legislative disenfranchisement which is not justified by a substantial reason. 140 See Pochi v Macphee (1982) 151 CLR 101 at 109. 141 Pochi (1982) 151 CLR 101 at 109. power142, commonly referred to as the "Pochi limit", has been repeatedly endorsed by this Court143 and is accepted by the defendants. Non-aliens are not and cannot conclusively or exclusively be defined as persons who hold Australian citizenship. Citizenship is a statutory concept, which is neither necessary nor sufficient to determine the boundaries of membership of the Australian political community144. Conferral of statutory citizenship is within the legislative power of the Commonwealth under different heads of power for different purposes. Persons who could not possibly answer the description of "aliens" The starting point is that a law is not ordinarily supported by s 51(xix) – the "naturalization and aliens" power – in its application to those who could not possibly answer the description of "aliens" in the ordinary understanding of the word. A law that grants statutory citizenship to those persons who could not possibly answer the description of "aliens" in the ordinary understanding of the word is not supported by the aliens power145. In respect of those persons, 142 See, by analogy, Attorney-General for NSW v Brewery Employés Union of NSW (1908) 6 CLR 469 at 513 in relation to trade marks in s 51(xviii) of the Constitution. 143 Nolan v Minister for Immigration and Ethnic Affairs (1988) 165 CLR 178 at 185-186, 192; Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 54; Re Patterson (2001) 207 CLR 391 at 410 [43], 435-436 [132], 469-470 [238], 490 [297]; see also 492 [303]; Re Minister for Immigration and Multicultural Affairs; Ex parte Te (2002) 212 CLR 162 at 173 [31], 205 [159]; see also 172 [26], 175 [39]; Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 36 [9], 61 [94]; Singh v The Commonwealth (2004) 222 CLR 322 at 329 [4]-[5], 383 [151]; see also 376 [128], 383 [153]; Koroitamana v The Commonwealth (2006) 227 CLR 31 at 38 [12], 49 [62], 54-55 [81]; Love v The Commonwealth (2020) 270 CLR 152 at 171 [7], 288 [394], 303 [427], 305 [433]; Chetcuti v The Commonwealth (2021) 95 AJLR 704 at 715 [37], 722 [66], 729 [103], 739 [145]; 392 ALR 371 at 380, 389, 398, 411. 144 Love (2020) 270 CLR 152 at 187 [64], 244 [252], 264 [304]-[305], 265-266 [308]-[310], 305-308 [432]-[437]; see also Nolan (1988) 165 CLR 178 at 186; Lim (1992) 176 CLR 1 at 54; Chetcuti (2021) 95 ALJR 704 at 715 [38], 720 [60], 729 [105]; cf 711 [16]; 392 ALR 371 at 381, 387, 399; cf 375. 145 cf Chetcuti (2021) 95 ALJR 704 at 711 [16]; 392 ALR 371 at 375. the implied nationhood power146 and, in some of its operations, the external affairs power147 support the grant of statutory citizenship. Those powers support the conferral of statutory citizenship upon persons who could not possibly answer the description of aliens because statutory citizenship is a status which facilitates the regulation of employment in the public service, pensions, passports and like matters148. Those general propositions are subject to two exceptions. Persons who could not possibly otherwise answer the description of "aliens" in the ordinary understanding of the word may, subject to issues regarding statelessness149, be denationalised pursuant to legislation supported by the aliens power in two circumstances: first, where there are changes in sovereign identity or territory150; and, second, where the person has renounced their allegiance to Australia151, expressly or impliedly, by engaging in specified conduct. It will be necessary to return to the latter exception. Persons outside the Pochi limit By contrast, the "naturalization and aliens" power (s 51(xix)) and the immigration power (s 51(xxvii)) support legislation transforming aliens into non-aliens, including by grant of statutory citizenship152. An aspect of the 146 See Victoria v The Commonwealth and Hayden ("the AAP Case") (1975) 134 CLR 338 at 397; Davis v The Commonwealth (1988) 166 CLR 79 at 93-95, 110-111; cf 103-104, 117, 119; Pape v Federal Commissioner of Taxation (2009) 238 CLR 1 at 87-88 [228]; cf 175-178 [506]-[511]. 147 Constitution, s 51(xxix). 148 See Singh (2004) 222 CLR 322 at 378 [134]; see also 328, 346 [47], 433 [318]; 149 See Convention on the Reduction of Statelessness [1975] ATS 46, Arts 7-9. See also Convention relating to the Status of Stateless Persons [1974] ATS 20, Art 31; Convention on the Rights of the Child [1991] ATS 4, Arts 7 and 8. 150 See Re Patterson (2001) 207 CLR 391 at 466 [225], 468-469 [235]-[237]; Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Ame (2005) 222 CLR 439 at 458-459 [35], 459 [37]-[38], 483 [117]. 151 See Nolan (1988) 165 CLR 178 at 192; Singh (2004) 222 CLR 322 at 397-398 [197]; Chetcuti (2021) 95 ALJR 704 at 727 [90]; 392 ALR 371 at 396. 152 Love (2020) 270 CLR 152 at 270 [325]-[326]; Chetcuti (2021) 95 ALJR 704 at 715 [37]; 392 ALR 371 at 380. The grant of statutory citizenship is not the only "naturalization and aliens" power is a power to determine how aliens lose the status of alienage, whether absolutely or upon conditions and, if the latter, on what conditions153. That aspect of the power reflects that it is a well-recognised attribute of sovereignty that every nation state is entitled to decide what aliens shall or shall not become members of its community154. As a general proposition, persons who have been naturalised or otherwise admitted to membership of the Australian community cannot subsequently be treated as or converted into "aliens" by statute supported by the aliens power because the aliens power is spent once the person is naturalised or otherwise admitted to membership of the community. But, again, that is not without exception. Persons who have been naturalised or otherwise admitted to membership of the Australian community, like persons who could not possibly answer the description of "aliens" in the ordinary understanding of the word, may lose their status of non-alienage pursuant to legislation supported by the "naturalization and aliens" power where there are changes in sovereign identity or territory155 or where the person has renounced their allegiance to Australia156, expressly or impliedly, by engaging in specified conduct. Again, that is subject to potential issues regarding statelessness. As will be apparent, to the extent that an impugned law addresses one or both of those exceptions, it is unnecessary to determine if a particular person is one who could not possibly answer the description of an "alien" in the ordinary understanding of the word or if they are a person who has been naturalised or otherwise admitted to membership of the Australian community. Whatever their possible mechanism for admitting aliens to membership of the Australian community. Indeed, there was no statutory concept of Australian "citizenship" prior to 1948: see Love (2020) 270 CLR 152 at 264 [306]. 153 See Te (2002) 212 CLR 162 at 170 [21], 171 [24], 172 [26], 173 [31], 175 [39], 179 [55]-[56], 192 [109]; Shaw (2003) 218 CLR 28 at 35 [2]; Singh (2004) 222 CLR 322 at 329 [4], 375 [126], 397 [196]; Ame (2005) 222 CLR 439 at 458-459 [35]; Chetcuti (2021) 95 ALJR 704 at 717 [48], 723 [70]; 392 ALR 371 at 383, 390. 154 Robtelmes v Brenan (1906) 4 CLR 395 at 400-401, 404; Te (2002) 212 CLR 162 at 170 [21]; Al-Kateb v Godwin (2004) 219 CLR 562 at 632 [203]; Love (2020) 270 CLR 152 at 190 [74]. 155 See Re Patterson (2001) 207 CLR 391 at 466 [225], 468-469 [235]-[237]; Ame (2005) 222 CLR 439 at 458-459 [35], 459 [37]-[38], 483 [117]. 156 See Nolan (1988) 165 CLR 178 at 192; Singh (2004) 222 CLR 322 at 397-398 [197]; Chetcuti (2021) 95 ALJR 704 at 727 [90]; 392 ALR 371 at 396. status, s 51(xix) provides support for a law which is addressed to one or both of those situations. The exceptions identified above may not be the only circumstances in which Parliament may denaturalise a person or otherwise withdraw a person's membership of the Australian community. One possible example is sufficient to illustrate the point. If a person breaches a condition validly imposed upon the grant of membership of the community157, then, absent some other reason, it would be open to Parliament to make a law permitting withdrawal of that person's membership of the community for breach of the condition. Other questions which do not require resolution in this proceeding may arise, including, first, whether conditions imposed on a person's entry into the community can be retrospectively changed to denaturalise the person or withdraw their membership of the community and thereby convert that person into an alien158 and, second, whether a point can ever be reached, regardless of the conditions imposed on entry into the Australian community, where a person has become so connected to the Australian body politic that the connection cannot unilaterally be taken away by Parliament by converting the person into an alien. As to the first matter, as Gaudron J stated in Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs159, s 51(xix) does not support laws "providing for denaturalization in the absence of some failure to observe the requirements associated with naturalization or in the absence of some relevant change in the relationship of the person or persons concerned with the community constituting the body politic". While that recognises the possibility that a person might be converted into an alien as a result of changes in sovereign identity or territory, renunciation of allegiance, or breach of conditions validly imposed upon the grant of membership of the community, it excludes the possibility that, absent such circumstances, Parliament could retrospectively impose conditions to denaturalise a person or withdraw their membership of the community. Gaudron J further relevantly observed in Re Patterson; Ex parte Taylor160 that, "[a]bsent any [relevant] change, [a] law could not be classified as a law with 157 See Nolan (1988) 165 CLR 178 at 192; Lim (1992) 176 CLR 1 at 54; Re Patterson (2001) 207 CLR 391 at 411 [47]; Te (2002) 212 CLR 162 at 179 [54]. 158 cf Meyer v Poynton (1920) 27 CLR 436 at 441; Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 87-88. 159 (1992) 176 CLR 1 at 54. See also Nolan (1988) 165 CLR 178 at 192; Re Patterson (2001) 207 CLR 391 at 411 [47]; Te (2002) 212 CLR 162 at 179 [54]. 160 (2001) 207 CLR 391 at 411 [47]. respect to naturalisation or aliens, for that power is wholly concerned with the relationship of individuals to the Australian community". As to the second matter – whether a point can ever be reached where a person is so connected to the Australian community that the connection cannot unilaterally be taken away by Parliament – it is enough, in this case, to make the following points. First, these issues were not considered or decided in either Singh v The Commonwealth161 or Koroitamana v The Commonwealth162. The facts in neither case163 provided a sufficient foundation for arguments of that kind. Second, as cases such as Sue v Hill164 and Shaw v Minister for Immigration and Multicultural Affairs165 show, the constitutional term "aliens" may have different application as national and international circumstances change166. It may be that the changes in national and international circumstances since Pochi v Macphee167 was decided 40 years ago would mean that facts of the kind considered in Pochi could be said to call for some different answer today. That is not this case and, if argument of that kind were to be made, it would need a proper factual foundation. Laws concerning matters incidental or ancillary to "naturalization and aliens" The extent to which laws affecting non-aliens are supported by the "naturalization and aliens" power must be understood as subject to the qualification that certain laws may be validly supported by that power in their application to 161 (2004) 222 CLR 322. 162 (2006) 227 CLR 31. 163 See Singh (2004) 222 CLR 322 at 328-329 [2]-[3], 342 [34], 380-381 [142]-[144]; Koroitamana (2006) 227 CLR 31 at 35 [1]-[2], 39-40 [17]-[20]. 164 (1999) 199 CLR 462. 165 (2003) 218 CLR 28. 166 Ame (2005) 222 CLR 439 at 458-459 [35]; Love (2020) 270 CLR 152 at 189 [69]; Chetcuti (2021) 95 ALJR 704 at 718 [53]; 392 ALR 371 at 384. 167 (1982) 151 CLR 101. non-aliens insofar as they govern or affect "matters that are incidental or ancillary to the subject matter"168 of the power. That is not this case. Denationalisation, denaturalisation and withdrawing membership of community the Insofar as the defendants' submission that there is no distinction between natural-born and naturalised citizens is contrary to the preceding analysis, it should be rejected. The submission is not supported by the passage in Re Canavan169 relied upon by the defendants. In Re Canavan170, the Court was addressing Deane J's reasoning in Sykes v Cleary171, where his Honour had expressed the view that the second limb of s 44(i) of the Constitution was subject to a qualifying element, which "extends not only to the acquisition of the disqualifying relationship by a person who is already an Australian citizen but also to the retention of that relationship by a person who has subsequently become an Australian citizen" (ie, a naturalised Australian citizen). The Court in Re Canavan172 held that the approach taken by Deane J drew no support from the text and structure of s 44(i). It was in that context that the Court said that, "[i]n addition, the approach of Deane J places naturalised Australian citizens in a position of disadvantage relative to natural-born Australian citizens"173. The Court emphasised that the reasons of Mason CJ, Toohey and McHugh JJ, Brennan J and Dawson J respectively in Sykes v Cleary174 did not draw any distinction between natural-born Australian citizens and naturalised Australian citizens in terms of the application 168 Grannall v Marrickville Margarine Pty Ltd (1955) 93 CLR 55 at 77. See Thoms v The Commonwealth [2022] HCA 20 at [70]. 169 (2017) 263 CLR 284 at 308-309 [53]. 170 (2017) 263 CLR 284 at 308-309 [53]. 171 (1992) 176 CLR 77 at 127-128, quoted in Re Canavan (2017) 263 CLR 284 at 172 (2017) 263 CLR 284 at 308 [52]. 173 Re Canavan (2017) 263 CLR 284 at 308 [53]. 174 (1992) 176 CLR 77. of s 44(i)175. The Court also noted that s 34 of the Constitution, unlike s 44(i), did draw a distinction between natural-born and naturalised Australians for the purpose of qualifying to be a candidate for election176. No less significantly, the Court said that the absence from the text of s 44(i) of any distinction between natural-born and naturalised Australians "cannot be attributed to inadvertence on the part of the framers, both because the concept of citizenship by descent was commonplace at the time of federation, and because of the express provision in s 34"177. Four points may be made. First, the Court's observations were concerned with a different provision in the Constitution, s 44(i), which is not a head of power. Second, s 51(xix) in its terms refers to "naturalization". Third, a basic distinction between naturalised citizens and persons who could not possibly answer the description of "aliens" in the ordinary understanding of the word is that all persons who are naturalised were once aliens. As has been explained, it is well established that it is an attribute of sovereignty that every nation state is entitled to decide what aliens shall or shall not become members of its community178 and, by a law with respect to "naturalization and aliens", the Parliament can remove the status of "alienage" absolutely or subject to conditions179. And breach of conditions validly imposed at the time a person became naturalised or was otherwise admitted to membership of the Australian community may result in denaturalisation or withdrawing that person's membership of the community. Fourth, and relatedly, it may be accepted that once a person is naturalised or otherwise admitted to membership of the Australian community (subject to any validly imposed conditions) they are in the same position as persons who could not possibly answer the description of "aliens" in the ordinary understanding of the word for the 175 Re Canavan (2017) 263 CLR 284 at 308-309 [53]. 176 Re Canavan (2017) 263 CLR 284 at 309 [53]. 177 Re Canavan (2017) 263 CLR 284 at 309 [53]. 178 See Robtelmes (1906) 4 CLR 395 at 400-401, 404; Te (2002) 212 CLR 162 at 170 [21]; Al-Kateb (2004) 219 CLR 562 at 632 [203]; Love (2020) 270 CLR 152 at 179 See Te (2002) 212 CLR 162 at 170 [21], 171 [24], 172 [26], 173 [31], 175 [39], 179 [55]-[56], 192 [109]; Shaw (2003) 218 CLR 28 at 35 [2]; Singh (2004) 222 CLR 322 at 329 [4], 375 [126], 397 [196]; Ame (2005) 222 CLR 439 at 458-459 [35]; Chetcuti (2021) 95 ALJR 704 at 717 [48], 723 [70]; 392 ALR 371 at 383, 390. purposes of s 44(i), but that does not say anything about the "naturalization and aliens" power in s 51(xix). Mr Alexander and s 36B As foreshadowed above, the defendants accept the Pochi limit. In other words, they accept that there are persons who can never be treated as aliens, subject to the exceptions identified above. However, whilst recognising that the concept of "aliens" can and should have different application with changing national and international circumstances180, the defendants' submission on what the irreducible minimum is for that category of non-alien persons has changed without explanation over at least the last two decades181. It has gone from persons who were born in Australia to Australian parents182 (and possibly persons born in Australia to permanent residents of Australia183) to, in this case, "persons who were born in Australia, to two Australian persons, who are not citizens of any other country, and who have not renounced or repudiated their allegiance to Australia". It is emphatically the province and duty of this Court to decide what is the proper construction of the Constitution184. 180 See Ame (2005) 222 CLR 439 at 458-459 [35], citing Sue v Hill (1999) 199 CLR 462, Shaw (2003) 218 CLR 28 and Singh (2004) 222 CLR 322. 181 See Singh v The Commonwealth [2004] HCATrans 5 at lines 2578-2581, 3086-3088, 3103-3105, 3308-3311; Singh v The Commonwealth [2004] HCATrans 6 at lines 4071-4078; Koroitamana (2006) 227 CLR 31 at 43 [36], 46 [51]; Love v The Commonwealth [2019] HCATrans 90 at lines 2491-2497, 2756-2758, 2779-2793; Love (2020) 270 CLR 152 at 187 [64], 288 [395], 311 [444]; see also 188 [66], 320 [466]; Chetcuti (2021) 95 ALJR 704 at 722 [67]; 392 ALR 371 at 389. 182 Singh [2004] HCATrans 5 at lines 2578-2581, 3086-3088, 3103-3105, 3308-3311; Singh [2004] HCATrans 6 at lines 4071-4078; see also Koroitamana (2006) 227 CLR 31 at 43 [36], 46 [51]. 183 Singh [2004] HCATrans 5 at lines 2554-2558, 2578-2581, 3105-3107, 3342-3345. 184 Marbury v Madison (1803) 5 US 137; Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 262-263; Harris v Caladine (1991) 172 CLR 84 at 134-135; Attorney-General (WA) v Marquet (2003) 217 CLR 545 at 570 [66]; Singh (2004) 222 CLR 322 at 330 [7]; Australian Competition and Consumer Commission v Baxter Healthcare Pty Ltd (2007) 232 CLR 1 at 48 [101]. See also R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 It is unnecessary in this case to consider the scope of the category of persons who could not possibly answer the description of "aliens" in the ordinary understanding of the word, or to decide whether Mr Alexander falls within that category of persons. That is because s 36B is a law that purports to apply only in respect of persons who have renounced their allegiance to Australia impliedly by engaging in specified conduct185. Section 36B(1)(a) In that regard it is sufficient for present purposes to refer to the first jurisdictional fact186 conditioning the exercise of power to make a citizenship cessation determination under s 36B(1), namely that the Minister is satisfied that a person has engaged in conduct specified in s 36B(5)187. The conduct specified in s 36B(5) includes, among other things, "engaging in international terrorist activities using explosive or lethal devices"188, "engaging in a terrorist act"189, "engaging in foreign incursions and recruitment"190, "fighting for, or being in the service of, a declared terrorist organisation"191, and "serving in the armed forces of a country at war with Australia"192. The words and expressions used in s 36B(5)(a)-(h) have the same meanings as they do in specified offence provisions 185 See Citizenship Act, s 36B(1)(a) and (b). 186 See Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at 651 [130]-[131]; Minister for Immigration and Multicultural and Indigenous Affairs v SGLB (2004) 78 ALJR 992 at 998 [37]-[38]; 207 ALR 12 at 20-21; Gedeon v Commissioner of New South Wales Crime Commission (2008) 236 CLR 120 at 139 [43]; Plaintiff M70/2011 v Minister for Immigration and Citizenship (2011) 244 CLR 144 at 179-180 [57]; Southern Han Breakfast Point Pty Ltd (In liq) v Lewence Construction Pty Ltd (2016) 260 CLR 340 at 357 [47]. 187 Citizenship Act, s 36B(1)(a). 188 Citizenship Act, s 36B(5)(a). 189 Citizenship Act, s 36B(5)(b). 190 Citizenship Act, s 36B(5)(h). 191 Citizenship Act, s 36B(5)(i). 192 Citizenship Act, s 36B(5)(j). of the Criminal Code (Cth), but this does not include the fault elements that apply to those offences193. It may be accepted that to the extent that s 36B(1)(a) covers the "paradigm case of implicit renunciation" of allegiance by "spying or fighting" for an enemy state declared to be at war with Australia, and the closely related category of conduct involving service in the armed forces of a declared terrorist organisation194 (namely, the conduct of persons who could be described as "foreign fighters"195), s 36B the aliens power. Indeed, Australian laws have long provided that persons who fight in a foreign army at war with Australia or assist Australia's enemies in other ways may be denaturalised or have their citizenship revoked196. And Australia is not unusual in having enacted laws of this kind. Provisions depriving persons of citizenship for the scope of is within 193 Citizenship Act, s 36B(6). 194 Commonwealth, Independent National Security Legislation Monitor, Report to the Attorney-General: Review of the Operation, Effectiveness and Implications of Terrorism-related Citizenship Loss Provisions Contained in the Australian Citizenship Act 2007, 7th Report (2019) at 43-44 [6.7]. 195 "[F]oreign fighters" is a term defined by the Australian Security Intelligence Organisation to mean "Australians who have participated in foreign conflicts or undertaken training with extremist groups overseas": see Australian Security Intelligence Organisation, ASIO Annual Report 2019-20 (2020) at 142. 196 See Nationality Act 1920 (Cth), s 12(2)(a); Nationality and Citizenship Act 1948 (Cth) (as made), ss 19, 21(1)(b); see also s 21(1)(a); Citizenship Act (as made), s 35. service in a foreign army have long existed in Canada197, France198, Germany199, Italy200, the Netherlands201 and the United States202. On the other hand, again having regard only to the conduct criterion in s 36B(1)(a), to the extent that s 36B captures conduct beyond serving in the armed forces of a country at war with Australia and conduct of foreign fighters, it might exceed the scope of the aliens power. It is unnecessary to address any other or additional basis on which s 36B is said to be supported by s 51(xix) (namely, that the Minister must be satisfied that the person's conduct demonstrates that they have repudiated their allegiance to Australia203 and that the person is a dual citizen204). While accepting that s 51(xix) supports s 36B at least insofar as it is directed at conduct which plainly constitutes renunciation of allegiance, namely, fighting for an enemy state at war with Australia and conduct of foreign fighters, it is unnecessary to determine whether 197 Canadian Citizenship Act 1946 (Can), s 17(2). See also Strengthening Canadian Citizenship Act 2014 (Can), s 8. 198 French Civil Code, Art 23-8. 199 Law on the Acquisition and Loss of Confederative and State Citizenship 1870 (North German Reichstag), §22: see extracted document titled "Law on Nationality and Citizenship (June 1, 1870)" in Retallack (ed), "Forging an Empire: Bismarckian Germany, 1866-1890", vol 4 of German Historical Institute, German History in Documents and Images. See also de Groot and Vink, A Comparative Analysis of Regulations on Involuntary Loss of Nationality in the European Union, Centre for European Policy Studies Paper No 75/December 2014 (2014) at 21 [4.1]. 200 See de Groot and Vink, A Comparative Analysis of Regulations on Involuntary Loss of Nationality in the European Union, Centre for European Policy Studies Paper No 75/December 2014 (2014) at 23, 25 [4.2]. 201 See de Groot and Vink, A Comparative Analysis of Regulations on Involuntary Loss of Nationality in the European Union, Centre for European Policy Studies Paper No 75/December 2014 (2014) at 21. See also Netherlands Nationality Act 1984, Art 14(3). 202 Nationality Act of 1940 (8 USC §§501-907), §801(c). See also Immigration and Nationality Act (8 USC §§1101-1537), §1481(a)(3). 203 Citizenship Act, s 36B(1)(b). 204 Citizenship Act, s 36B(2). s 36B is supported by s 51(xix) in all of its operations in circumstances where the law is, in any event, wholly invalid205. Chapter III of the Constitution – s 36B invalid in its entirety Section 36B is invalid in its entirety because it is contrary to Ch III of the Constitution. It confers on the Minister the power to impose a sanction upon a person (involuntary cessation of citizenship) – a punishment – for that person engaging in past conduct of a kind identified as warranting the condemnation of the Australian community. The principles are well established. The adjudgment and punishment of criminal guilt is an exclusively judicial function206. The Executive cannot "itself exercise judicial power and act as prosecutor and judge to punish breach of law by executive fiat or decree"207. The jurisprudence of this Court, to date, has been concerned foremost with executive detention, but the categories of 205 ICM Agriculture (2009) 240 CLR 140 at 199 [141], citing Lambert (1954) 28 ALJ 282 at 283, Cheng (2000) 203 CLR 248 at 270 [58], Re Patterson (2001) 207 CLR 391 at 473-474 [249]-[252], BHP Billiton (2004) 221 CLR 400 at 443 [94], 468 [177] and El Hajje (2005) 224 CLR 159 at 171 [28]; Mineralogy (2021) 95 ALJR 832 at 846 [56]; 393 ALR 551 at 565. See also Australian Capital Television (1992) 177 CLR 106 at 176. 206 See Federal Commissioner of Taxation v Munro (1926) 38 CLR 153 at 175; R v Quinn; Ex parte Consolidated Foods Corporation (1977) 138 CLR 1 at 11; Re Tracey; Ex parte Ryan (1989) 166 CLR 518 at 580; Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 536, 609-610, 612, 646, 685-686, 721; Lim (1992) 176 CLR 1 at 27; Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 at 258, 269; Attorney-General (Cth) v Breckler (1999) 197 CLR 83 at 109 [40]; Magaming v The Queen (2013) 252 CLR 381 at 396 [47], 399-400 [61]-[63]; Kuczborksi v Queensland (2014) 254 CLR 51 at 120 [233]; Duncan v New South Wales (2015) 255 CLR 388 at 407 [41]; Falzon v Minister for Immigration and Border Protection (2018) 262 CLR 333 at 340 [15]; Minister for Home Affairs v Benbrika (2021) 95 ALJR 166 at 177-178 [18]-[19], 189 [72], 202 [140], 207 [160], 218 [207]-[208]; 388 ALR 1 at 9-10, 25, 41-42, 207 Re Tracey (1989) 166 CLR 518 at 580. punishment are not closed208. And that has to be so. The concern of Ch III is with substance, not form209. Section 36B does not require any person to be detained in custody. As such, Mr Alexander does not have the assistance of any "default characterisation"210 of s 36B as being penal or punitive. The question then must be whether the involuntary cessation of citizenship effected by s 36B is a form of "punishment" of the requisite kind, that is, punishment that is penal or punitive in character. Critically, that requires considering whether, in the context of s 36B, involuntary cessation of citizenship is a measure which, "by reason of [its] nature or because of historical considerations"211, should be characterised as penal or punitive and, therefore, exclusively judicial in character. As Mr Alexander submits, the fact that denationalisation is not a "punishment" for committing a crime in any Australian statute book is not determinative; nor are capital punishment and forms of corporal punishment now forms of punishment in any Australian State or Territory, yet there can be no doubt that they are punitive. And whether s 36B has the character of a law conferring a power to punish is a question of construction212. In Re Woolley; Ex parte Applicants M276/2003213, in the context of considering executive detention, Gleeson CJ pointed out that not "all hardship or distress inflicted upon a citizen by the State constitutes a form of punishment, although colloquially that is how it may sometimes be described". His Honour went on to explain214: 208 cf Falzon (2018) 262 CLR 333 at 340 [16] ("[o]ne form of punishment is involuntary detention"). 209 Lim (1992) 176 CLR 1 at 27; Nicholas v The Queen (1998) 193 CLR 173 at 233 [148]; Re Woolley; Ex parte Applicants M276/2003 (2004) 225 CLR 1 at 35 [82]; Graham v Minister for Immigration and Border Protection (2017) 263 CLR 1 at 27 [48]; Benbrika (2021) 95 ALJR 166 at 190-191 [78], 209 [168], 217 [203]; 388 ALR 210 See North Australian Aboriginal Justice Agency Ltd v Northern Territory (2015) 256 CLR 569 at 611 [98]. See also Falzon (2018) 262 CLR 333 at 342 [24]; Benbrika (2021) 95 ALJR 166 at 182-183 [40], 189 [73]; 388 ALR 1 at 16, 25. 211 Lim (1992) 176 CLR 1 at 27 (emphasis added). 212 Falzon (2018) 262 CLR 333 at 341 [19]. 213 (2004) 225 CLR 1 at 12 [17], cited with approval in Pollentine v Bleijie (2014) 253 CLR 629 at 656 [70] and Minogue v Victoria (2019) 268 CLR 1 at 20-21 [31]. 214 Re Woolley (2004) 225 CLR 1 at 12 [17]. "Taxes are sometimes said, in political rhetoric, to be punitive. That is a loose use of the term. Punishment, in the sense of the inflicting of involuntary hardship or detriment by the State, is not an exclusively judicial function. On the other hand, the particular form of detriment constituted by the deprivation of liberty usually (although not always) follows adjudgment of criminal guilt, and the circumstances in which deprivation of liberty may be imposed upon a citizen by the State otherwise than by way of judicial punishment are limited." The defendants accept that s 36B will operate, for some individuals, to cause detriment or hardship (including by separating them from family or employment), while emphasising that other individuals may be free to reside in the country of their other citizenship without suffering any hardship or detriment as a result. They contend, however, that to the extent hardship or detriment occurs it is the result of the particular circumstances of the individual, and that "[t]he variable and idiosyncratic nature of any such hardship points against characterising that possible consequence of loss of citizenship as punishment, let alone as punishment that can be imposed only by a court following a determination of criminal guilt". It may be accepted that not every hardship or detriment that is imposed by the Executive on a person, even if they have been convicted of an offence, constitutes "punishment" of a kind that can be imposed only in the exercise of the judicial power of the Commonwealth. However, the defendants' submissions presuppose that involuntary deprivation of citizenship under s 36B is not penal or punitive; they do not say anything about why the character of the punishment is not penal or punitive and is instead simply "detriment" or "hardship". It is conclusory reasoning. Section 36B is necessary to start with the proper construction of s 36B. Properly construed, its purpose is retribution. Citizenship cessation, in the context of s 36B, is a measure "taken in the name of society to exact just retribution on those who have offended against the laws of society"215 by engaging in past conduct that is "identified and articulated wrongdoing"216. That is what s 36B does in its terms. And that construction is reinforced by s 36A, which provides that Subdiv C of Div 3 of Pt 2 of the Citizenship Act (which contains s 36B) was: 215 Falzon (2018) 262 CLR 333 at 359 [94], citing Veen v The Queen [No 2] (1988) 164 CLR 465 at 473-474, 490-491. See also Pollentine (2014) 253 CLR 629 at 650 [45]; Benbrika (2021) 95 ALJR 166 at 215 [196]; 388 ALR 1 at 58. 216 Al-Kateb (2004) 219 CLR 562 at 650 [265]. "enacted because the Parliament recognises that Australian citizenship is a common bond, involving reciprocal rights and obligations, and that citizens may, through certain conduct incompatible with the shared values of the Australian community, demonstrate that they have severed that bond and repudiated their allegiance to Australia." (emphasis added) Consistent with that purpose, in substance, s 36B authorises the Minister to impose a sanction upon a person (involuntary cessation of citizenship) for engaging in conduct of a kind identified as warranting the condemnation of the Australian community. The only point at which the protection of the Australian community is taken into account is for the purposes of assessing the third criterion in s 36B(1), namely whether it would be contrary to the public interest for the person to remain an Australian citizen217. The matters that the Minister must have regard to in considering the public interest for the purposes of deciding whether to make a determination under s 36B(1) are listed in s 36E(2). Only one of the matters listed – "the degree of threat posed by the person to the Australian community"218 – concerns protection of the Australian community. Section 36B stands very far removed from the kinds of provisions with protective purposes considered in earlier cases219. The character of citizenship cessation for the purposes of s 36B must also be considered in light of the Minister's role in adjudicating on whether a person has engaged in conduct that constitutes the physical element of identified offences220. Two matters are significant. First, s 36B operates with respect to "identified and articulated wrongdoing"221. Second, the cessation of citizenship is "a consequential step" after the Minister's adjudication that the person has engaged in "past acts" which, if accompanied by specified fault elements, would involve 217 Citizenship Act, s 36B(1)(c). 218 Citizenship Act, s 36E(2)(c). 219 See, eg, Thomas v Mowbray (2007) 233 CLR 307 at 328-330 [16]-[18], 356-357 [114]-[121], 507 [595], 526 [651]; Pollentine (2014) 253 CLR 629 at 650 [45], 654 [64]-[65], 657 [73]; Vella v Commissioner of Police (NSW) (2019) 269 CLR 219 at 257-261 [82]-[90]; cf 287 [171]; Benbrika (2021) 95 ALJR 166 at 181 [36], 210 [177], 211-212 [182]-[183], 215-216 [197]-[200], 219-220 [214]; 388 ALR 1 at 14-16; cf 29-31, 48, 52-54, 58-59, 64-65. 220 Citizenship Act, ss 36B(1)(a), 36B(5), 36B(6); Criminal Code, Div 72, Subdiv A, ss 101.1, 101.2, 102.2, 102.4, 103.1, 103.2, Div 119; see also Pt 5.1. 221 Al-Kateb (2004) 219 CLR 562 at 650 [265]. criminal guilt222. Put differently, the power to make a citizenship cessation determination under s 36B is specifically linked with conduct "for which [it] might be regarded as punishment"223. citizenship with And an exercise of power under s 36B does not simply involve "inflicting ... involuntary hardship or detriment by the State"224. The consequences of an executive citizenship cessation determination under s 36B are loss of fundamental and permanently226. rights of immediate Those consequences are significant. If the person is overseas, they will be unable to return to Australia, unless granted a visa. If the person is in Australia they will immediately become an "unlawful non-citizen" who must be taken into immigration detention and is liable to be removed from Australia as soon as reasonably practicable227. effect225, Denationalisation, banishment, exile and outlawry as punishment That a citizenship cessation determination may constitute punishment is consistent with history. "The penalty of denationalization is not of recent invention"228 (emphasis added). Historically, denationalisation, banishment, exile and outlawry have been used as punishments for criminal offending and were recognised to have a penal or punitive character. In ancient Rome, "[t]here were many ways in which a man might lose his freedom, and with his freedom he necessarily lost his citizenship also. Thus he might be sold into slavery as an insolvent debtor, or condemned to the mines for 222 cf Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 612 [80]; see also 223 cf Kariapper v Wijesinha [1968] AC 717 at 736, quoted in Duncan (2015) 255 CLR 224 cf Re Woolley (2004) 225 CLR 1 at 12 [17]. 225 Citizenship Act, s 36B(3). 226 Citizenship Act, s 36L. Subject only to revocation of a citizenship cessation determination under s 36H, 36J or 36K, or seeking judicial review of a citizenship cessation determination or non-revocation decision. 227 Migration Act 1958 (Cth), ss 13(1), 14(1), 189(1), 198. 228 Maxey, "Loss of Nationality: Individual Choice or Government Fiat?" (1962) 26 Albany Law Review 151 at 163. his crimes as servus poenae. ... Another cause of the loss of citizenship was banishment in certain of its forms"229. During feudal times, according to Maxey, "the punishment of denationalization was not known" (at least not in its modern form), but there were "analogues of denationalization" in England230. He explained that231: "[o]n the eve of the Norman conquest the decree of outlawry was the ultimate remedy of the state, even for petty offenses. A man so condemned was placed outside the law, subject, in his person and possessions, to complete destruction. Later on, outlawry adapted to the changed circumstances of a more civilized way of life and became an instrument for 'compelling the contumacious to abide the judgment of the courts'. But as long as it remained a weapon in the legal arsenal, it was adjudged a harsh punishment even by men who were accustomed to brutality in the administration of criminal justice." In 1597, the English Parliament enacted a law that provided that convicted dangerous rogues be "banyshed out of this Realme and all other the Domynions thereof"232. From that time until 1864, "Parliament at frequent intervals passed new statutes reaffirming the use of this punishment"233. In 1616 in Dr Hussey v Moor234, 229 Salmond, "Citizenship and Allegiance" (1901) 17 Law Quarterly Review 270 at 230 Maxey, "Loss of Nationality: Individual Choice or Government Fiat?" (1962) 26 Albany Law Review 151 at 163. 231 Maxey, "Loss of Nationality: Individual Choice or Government Fiat?" (1962) 26 Albany Law Review 151 at 163-164 (footnotes omitted). 232 Vagabonds Act 1597 (39 Eliz c 4), s 4. 233 Banks, "Criminal Law – Banishment" (1954) 32 North Carolina Law Review 221 at 223. See also Poor Relief Act 1662 (14 Car II c 12), s 23; Piracy Act 1717 (4 Geo I c 11) (sometimes referred to as the Transportation Act); Transportation Act 1830 (11 Geo IV & 1 Will IV, c 39). 234 (1616) 3 Bulst 275 at 280 [81 ER 232 at 236]. See also John and Magnus Arthur v Geddies and Wallets (1590) 1 Bro Sup 124 at 124; Sir Robert Murray v Murray of Bruchtoun (1672) Mor 4799 at 4810; Dr Sibbald v Lady Rosyth (1685) Mor 13976 at 13978; Stuart v Haliburton (1713) Mor 6829 at 6829; Newsome v Bowyer (1729) 3 P Wms 37 at 38 [24 ER 959 at 960]; Bontein v Bontein (1731) Mor 14043 at 14044; Procurator-Fiscal of Edinburgh v Campbell (1736) Mor 9400 at 9401; Cochran v Bar and Spence (1739) Mor 3441 at 3441; Marishal v Semple (1752) Mor 3447 at 3447; Farquhar v His Majesty's Advocate (1753) Mor 4669 at 4670; the Court of King's Bench identified the existence of three kinds of punishment: "pecuniary, corporal and exile". In respect of a statute imposing all three, it was held that "the same gives damages, corporal punishment, and exile, to lose his country, and if this be not a penal law, I do not know what law is penal" (emphasis added). In the 17th edition of Blackstone's Commentaries on the Laws of England, published in 1830, in a chapter on "judgement and its consequences", in the context of considering what he described as "the next stage of criminal prosecution, after trial and conviction are past", Blackstone said that the court must pronounce the judgment which the law has annexed to the crime235. Blackstone explained that some punishments are capital, which extend to the life of the offender, and "[s]ome punishments consist in exile or banishment, by abjuration of the realm, or transportation: others in loss of liberty, by perpetual or temporary imprisonment"236 (emphasis added). Similarly, in 1890, Craies observed that under English law "[t]he purposes for which a subject could conceivably be required to leave the realm [fell] into two main classes – public service, and punishment for crime"237 (emphasis added). In 1933, Plucknett distinguished outlawry (which involved "withdrawal by civil society of all legal rights and protection from one of its offending members") from "less serious penalties, such as exile, which was generally a voluntary loss of property or civil rights withdrawal not resulting directly it was compulsory"238 [and] banishment, which was similar save (emphasis added). that Small v Sir James Clerk of Pennycuik (1764) Mor 11782 at 11783; Dalrymple v Dalrymple (1809) 2 Hag Con (App) 1 at 120 [161 ER 802 at 863]; Macneill v Macgregor (1828) 2 Bli NS 393 at 465 [4 ER 1178 at 1203]; Newton v Rowe, Norman and Boodle (1847) 9 QB 948 at 955 [115 ER 1538 at 1541]. 235 Blackstone, Commentaries on the Laws of England, 17th ed (1830), bk 4, ch 29 236 Blackstone, Commentaries on the Laws of England, 17th ed (1830), bk 4, ch 29 237 Craies, "The Compulsion of Subjects to Leave the Realm" (1890) 6 Law Quarterly Review 388 at 390. 238 Plucknett, "Outlawry", in Seligman and Johnson (eds), Encyclopaedia of the Social Sciences (1933), vol 11, 505 at 505-506. See also Tomlins, Law-Dictionary, 3rd ed (1820), vol 1, definition of "banishment". Denationalisation, as a form of punishment, was also directly addressed by the Supreme Court of the United States in 1958 in Trop v Dulles239. Warren CJ observed of denationalisation that240: "[t]here may be involved no physical mistreatment, no primitive torture. There is instead the total destruction of the individual's status in organized society. It is a form of punishment more primitive than torture, for it destroys for the individual the political existence that was centuries in the development." Brennan J in Trop v Dulles241 also put it bluntly. Adopting and adapting what his Honour said242, "I cannot see that [denationalisation] is anything other than forcing retribution from the offender – naked vengeance". Section 36B and denationalisation as punishment Section 36B is contrary to Ch III. It confers on the Minister the power to impose a sanction upon a person (involuntary cessation of citizenship) for engaging in past conduct of a kind identified as warranting the condemnation of the Australian community. It permits the Executive to do what it cannot: to "exercise judicial power and act as prosecutor and judge to punish breach of law by executive fiat or decree"243. It is unnecessary to chart the metes and bounds of when denationalisation constitutes punishment. It is sufficient to make two general observations. First, s 36B, unlike s 36D, does not confer power to cease citizenship by reference to the "factum" of an earlier adjudication by a court of a person's criminal guilt244. It is unnecessary to consider whether s 36D authorises the imposition of a new or additional punishment for a person committing an offence. Second, the position may well be different in respect of certain laws dealing with denaturalisation. By way of example, in respect of a law conferring power on the Minister to cancel 239 (1958) 356 US 86. See also Kennedy v Mendoza-Martinez (1963) 372 US 144 240 Trop v Dulles (1958) 356 US 86 at 101. 242 Trop v Dulles (1958) 356 US 86 at 112. 243 Re Tracey (1989) 166 CLR 518 at 580. 244 cf Falzon (2018) 262 CLR 333 at 357 [89]. a person's citizenship if they obtained citizenship by making false statements or engaging in fraudulent conduct, denaturalisation might be more properly characterised as the consequence of breaching a condition imposed on the person's entry into the community, rather than punishment245. Answers For those reasons, the questions stated for the opinion of the Full Court in the amended special case should be answered as follows: Is s 36B of the [Citizenship Act] invalid in its operation in respect of the plaintiff because: it is not supported by a head of Commonwealth legislative power; Answer: Unnecessary to answer. inconsistent with an limitation on Commonwealth legislative power preventing the involuntary deprivation of Australian citizenship; implied Answer: Unnecessary to answer. it effects a permanent legislative disenfranchisement which is not justified by a substantial reason; Answer: Unnecessary to answer. it reposes in the Minister ... the exclusively judicial function of punishing criminal guilt? Answer: Yes. 2. What, if any, relief should be granted to the plaintiff? Answer: It should be declared that s 36B of the Citizenship Act is invalid. 245 cf Trop v Dulles (1958) 356 US 86 at 98-99. 3. Who should pay the costs of the special case? Answer: The defendants. Edelman The issues and the constitutional confusion Mr Alexander is an Australian-born citizen who is in a prison in Damascus operated by Syrian intelligence. In May 2021, the President of Syria decreed a general amnesty law pardoning perpetrators of a number of violations, misdemeanours, and felonies. Mr Alexander informed his family in June 2021 that he had been pardoned for his convictions under the Syrian Penal Code. Mr Alexander claims that, according to his Syrian lawyer, a reason that he remains in detention is that the Minister for Home Affairs has declared that he is no longer an Australian citizen. In his application for constitutional writs, Mr Alexander alleges that he is in danger of torture, serious bodily harm, or death. Senior counsel for Mr Alexander politely requested that this Court consider adopting the approach of pronouncing orders before reasons in order to facilitate expedition of the result of this case in light of these "parlous circumstances" of Mr Alexander. I would have readily acceded to that request. The justification for the request was significantly more compelling than many, perhaps any, other instance in which this Court has recently, and properly, taken such an approach246. There was no suggestion at the oral hearing that any circumstance pointed against that proposed course. In any event, these reasons, like those of the other members of this Court, were prepared very shortly after the hearing in order to facilitate an expeditious delivery of the orders. In these reasons, I gratefully adopt the facts, background, and statutory scheme comprehensively set out in the reasons of Steward J, and also in the reasons of Kiefel CJ, Keane and Gleeson JJ. It suffices for these reasons simply to reiterate that Mr Alexander was born in Australia in 1986 and became an Australian citizen by birth. His parents were permanent residents of the Commonwealth of Australia at the time of his birth. His mother became an Australian citizen before Mr Alexander was two years old. Like millions of Australians, Mr Alexander was born a dual citizen due to the citizenship of his parents. On 2 July 2021, the 246 See, eg, from 2019, Plaintiff M47/2018 v Minister for Home Affairs (2019) 265 CLR 285; Taylor v Attorney-General (Cth) (2019) 268 CLR 224; Spence v Queensland (2019) 268 CLR 355; Palmer v Australian Electoral Commission (2019) 269 CLR 196; Fennell v The Queen (2019) 93 ALJR 1219; 373 ALR 433; KMC v Director of Public Prosecutions (SA) (2020) 267 CLR 480; Coughlan v The Queen (2020) 267 CLR 654; Cumberland v The Queen (2020) 94 ALJR 656; 379 ALR 503; Gerner v Victoria (2020) 270 CLR 412; Minister for Immigration and Border Protection v Makasa (2021) 270 CLR 430; Palmer v Western Australia (2021) 95 ALJR 229; 388 ALR 180; Ruddick v The Commonwealth (2022) 96 ALJR 367; 399 ALR 476. Edelman Minister made a determination under s 36B of the Australian Citizenship Act 2007 (Cth) that Mr Alexander ceased to be an Australian citizen. This special case essentially asks whether Mr Alexander was always an alien within the meaning of the aliens power in s 51(xix) of the Constitution or, if not, whether Commonwealth legislation validly permitted him to be stripped of his citizenship for other reasons. Section 36B of the Australian Citizenship Act permitted the Minister to make a determination that Mr Alexander ceased to be an Australian citizen if the Minister was satisfied that: (i) Mr Alexander engaged in specified conduct while outside Australia; (ii) the conduct demonstrates that Mr Alexander has repudiated his allegiance to Australia; (iii) it would be contrary to the public interest for Mr Alexander to remain an Australian citizen; and (iv) Mr Alexander would not, if the Minister were to make the determination, become a person who is not a national or citizen of any country. This special case challenges the constitutional validity of s 36B. There are four questions raised by this special case247. First, is s 36B of the Australian Citizenship Act supported by a head of Commonwealth legislative power? Secondly and thirdly, is s 36B inconsistent with two asserted implied limitations upon the Commonwealth legislative power under s 51(xix) of the Constitution? Fourthly, does s 36B repose in the Minister "the exclusively judicial function of punishing criminal guilt"? As to the first question, the only head of power relied upon by the defendants to support s 36B is the power over "naturalization and aliens" in s 51(xix) of the Constitution. This raises the question of how the meaning of "alien" – a foreigner to the political community – is to be applied. On the approach of the defendants, all dual citizens fall within the aliens power. Therefore, there is power to pass a law such as s 36B of the Australian Citizenship Act simply because all the people to whom it applies are dual citizens. That would mean that, subject to any separate implied limits, the Commonwealth Parliament would have the power to strip persons like Mr Alexander of their citizenship solely because they are dual citizens. The defendants also argued that s 36B is a valid law because the Commonwealth has power in circumstances described as "repudiation of allegiance" to make non-aliens into aliens. The application of the essential meaning of "alien" that was urged by the defendants has the likely consequence that potentially half of the permanent population of Australia are aliens, being dual (or more) citizens, being born overseas, or having at least one parent who does not hold Australian citizenship. Almost by definition, something must have gone wrong in the application by this Court of the meaning of the Constitution for it to be concluded that the 247 In written submissions, Mr Alexander abandoned a further question concerning a limit derived from ss 34 and 44 of the Constitution. Edelman Commonwealth Parliament has power to legislate on the premise that potentially half of the people of the Commonwealth of Australia are foreigners to the political community of the Commonwealth of Australia. Nevertheless, the defendants' approach was only an incremental extension of the present state of the law concerning the application of the aliens power. That approach is the result of the compounding effect of a series of decisions of this Court. Those decisions have seen an imperial march of the application of the aliens power, extending it far beyond any ordinary understanding, capturing more and more members of the permanent population of the Commonwealth of Australia. At some point it will become necessary to confront the correctness of those decisions rather than tip-toeing around them, carefully confining them by tiny exceptions, or restricting their scope by recognising implied constitutional constraints such as those raised by the second and third questions in this special case. It is not necessary to do so in this case because none of the decisions was challenged. The compounding effect of the decisions of this Court began in 1982, when this Court first held that persons who had been unconditionally absorbed into the Australian political community were still within the reach of the aliens power. From that premise, and case by case, the application of the essential meaning of "alien" – a foreigner to the Australian political community – was extended further and further to apply to persons who had less and less "foreign" connection. It might seem like only another small, incremental step to conclude that Mr Alexander is a foreigner to the Australian political community, despite his birth in Australia to two permanent members of the Australian body politic. But, with an appreciation that the decisions of this Court may have already stretched the application of alien beyond breaking point, that is a step that should not now be taken. Although s 36B cannot validly apply to persons simply on the basis that they are dual citizens, and would not have applied to Mr Alexander at the time of his birth, the aliens power does permit the Commonwealth Parliament to legislate, as it did in s 36B of the Australian Citizenship Act, in relation to non-aliens who act in a manner that has been described as a repudiation of their allegiance to Australia. The aliens power permits the Commonwealth Parliament to legislate in relation to some people who were not aliens in extreme cases where circumstances or conduct are capable of making them into aliens. One such circumstance is where a person's conduct is so wrongful and extreme that it can be judged to be inconsistent with continuing membership of the political community. That is the effect of s 36B, so, subject to any other constitutional limits, s 36B would therefore be valid. In light of the distorted state of present authority concerning the aliens power it would not be appropriate to consider the two implied limits upon the aliens power that were the subject of Mr Alexander's submissions unless it were necessary to do so. Those limits broadly concerned the effect of being a member Edelman of the political community of the Australian body politic. It is not necessary to consider those limits because I have concluded that s 36B imposes a punishment upon those people to whom it applies. As a Commonwealth law with the purpose of punishment by the Minister as a sanction for proscribed conduct, s 36B is invalid because it is contrary to the implied constitutional proscription on the exercise of federal judicial power by a body other than a Ch III court. Was Mr Alexander always capable of being treated as an alien? Basic propositions It has been suggested248 that the aliens power resembles legislative powers conferred by the Constitution on the Commonwealth Parliament to make laws with respect to a legal status, such as bankruptcy249, trade marks250, and marriage251, rather than resembling legislative powers conferred by the Constitution with respect to physical things, like lighthouses, lightships, beacons, and buoys252. There are grave difficulties with the creation of separate constitutional principles within s 51 according to those classes concerned with physical things and those concerned with legal status on the basis that the former "are fixed by external nature" and "cannot well be extended"253. All of the powers in s 51 are expressed by words which convey meaning, with the meaning anchored in its essence, at the appropriate level of generality, by the contemporary understanding at Federation. That meaning is ideational. It is not confined to categories of physical things or legal status. Indeed, numerous powers might even derive the essence of their meaning from both. For instance, fisheries in Australian waters beyond territorial limits254 are concerned with both physical 248 Love v The Commonwealth (2020) 270 CLR 152 at 193-194 [86]. 249 Constitution, s 51(xvii). 250 Constitution, s 51(xviii). 251 Constitution, s 51(xxi). 252 Constitution, s 51(vii). 253 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 254 Constitution, s 51(x). Edelman things and legal status. So are bills of exchange or promissory notes255. The custody and guardianship of infants256 concerns both people and legal status, and so does "the influx of criminals"257. Further, just as the application of the essential meaning of words that describe a legal status can change, so too a power that appears limited to purely physical things, such as a lighthouse, lightship, beacon, or buoy, might arguably extend to things never contemplated in 1900 but which are within the same concept, fulfilling the same purpose, such as global positioning system software for seafarers. Although there is no warrant for creating new and separate constitutional categories within s 51, the character of a s 51 power can still influence the interpretation of the power258, particularly where the character reveals a purpose of the power. But one matter must be common in the interpretation of every power in s 51. It is an axiom of constitutional law in Australia that "[t]he validity of a law ... cannot be made to depend on the opinion of the law-maker": "a stream cannot rise higher than its source"259. Hence, no power in s 51 of the Constitution, whether in relation to legal status or not, is with respect to a subject matter that is determined by the opinion of the Commonwealth Parliament. The Parliament is not empowered to make laws based solely on the criterion that, in its opinion, the law is with respect to a status of bankruptcy, trade marks, or marriage. In the context of bankruptcy, the legislative power is ample but it extends only "to regulate all matters which fairly fall within that subject"260. The power is constrained by reference to the "essential feature ... that provision is made for the appropriation of the assets of the debtor and their equitable distribution amongst [their] creditors, and for the discharge of the debtor from future liability for [their] existing debts"261. 255 Constitution, s 51(xvi). 256 Constitution, s 51(xxii). 257 Constitution, s 51(xxviii). 258 See Stellios, "Constitutional Characterisation: Embedding Value Judgements About the Relationship Between the Legislature and the Judiciary" (2021) 45 Melbourne University Law Review 277. 259 Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 258. 260 R v Federal Court of Bankruptcy; Ex parte Lowenstein (1938) 59 CLR 556 at 586. 261 Storey v Lane (1981) 147 CLR 549 at 556. Edelman In the context of trade marks, it has been emphasised that "[i]f the thing is not of itself within the meaning, an Act of Parliament cannot make it so"262. If the Parliament were to enact legislation dealing with a matter which did not have the "essential qualities"263 or "common attributes"264 of a trade mark, it would not be "in essence a species within the language of the legislative powers" and would "amount to an attempt to amend the Constitution by a process not sanctioned by the Charter"265. In relation to passing laws dealing with the personal relationships that are the consequences of the marriage power, it has been observed that, "[s]o far as they can be regulated by law without impairing the essence of marriage", laws about the consequences of marriage, such as cohabitation, would "properly be called laws with respect to marriage"266. The power "does not support a law which so regulates the incidents of marriage as to impair the essence of marriage"267. In other words, "[t]he term marriage bears its own limitations and Parliament cannot enlarge its meaning"268. An exercise of "constitutional interpretation of the marriage power would be an exercise in hopeless circularity if the Parliament could itself define the nature and incidents of marriage by laws enacted in purported pursuance of the power"269. 262 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 263 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 264 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 265 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 at 522. See also at 501, 513; Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 529-530 [128]. 266 Attorney-General (Vict) v The Commonwealth (1962) 107 CLR 529 at 580. 267 In the Marriage of Cormick (1984) 156 CLR 170 at 182. 268 Attorney-General (Vict) v The Commonwealth (1962) 107 CLR 529 at 549. 269 Fisher v Fisher (1986) 161 CLR 438 at 455. Edelman The aliens power is not a unique power, the scope of which is abdicated to the Parliament to decide Like other powers conferred upon the Commonwealth Parliament by s 51 of the Constitution, and as Gummow, Hayne and Heydon JJ said in Singh v The Commonwealth270, "a power to make laws with respect to aliens does not authorise the making of a law with respect to any person who, in the opinion of the Parliament, is an alien". The Parliament cannot legislate under a power in relation to aliens to affect people who do not have the essential characteristics of aliens. As McHugh J added in Singh, "an alien is a person who can be identified by reference to some criterion or criteria that exists or exist independently of any law of the Parliament ... [T]he Parliament of the Commonwealth cannot itself define who is an alien."271 The defendants submitted in this case that one "aspect" of the power to legislate in relation to aliens concerns persons whom it is "open to Parliament to treat as an alien", but until the Parliament does so, those persons are not aliens. If this reference to persons whom it is open to treat as aliens means that such persons are aliens within the constitutional meaning, and therefore may be treated as aliens, then it is accurate. But if it suggests that such persons are not aliens within the meaning in the Constitution yet by some bootstrapping statutory fiction are capable of being treated as aliens, then it is not accurate. The constitutional meaning of "alien" must not be conflated with the statutory concept of "alien". If the statutory meaning given to "alien", namely the meaning of "alien" that is chosen by the Parliament, were to dictate the constitutional meaning then this constitutional power would be unique in s 51 as a power the scope of which had been abdicated to the Parliament to decide. In other words, consistently with orthodoxy, it is necessary that those persons whom it is open to the Parliament to treat as aliens are aliens within the meaning of s 51(xix). Avoiding absurdity In an apparently innocuous statement in the joint judgment in Chetcuti v The Commonwealth, four members of this Court272 said that it was a "settled understanding" that "the aliens power encompasses both power to determine who is and who is not to have the legal status of an alien and power to attach 270 (2004) 222 CLR 322 at 383 [153]. See also at 329 [5] per Gleeson CJ. 271 (2004) 222 CLR 322 at 343 [36]. 272 (2021) 95 ALJR 704 at 710 [12]; 392 ALR 371 at 374. Edelman consequences to that status". If read literally, that statement would be a radical new theory of interpretation of constitutional heads of power. If the statement in Chetcuti were read literally and without qualification, it might support an assumption that a constitutional alien is no more than the antonym of a statutory citizen. If that were true, then s 51(xix) would confer an unconstrained power on the Parliament to choose its own criteria for citizenship and thereby determine who is an alien and attach consequences to that alienage. Applied to other powers, this reasoning would mean that the Parliament could make laws to divest the assets of Croesus among his creditors on the basis that the Parliament determined for itself the meaning of bankruptcy, irrespective of the essential features inherent in the constitutional meaning of bankruptcy. The Parliament could "define 'trade mark' as including a will, and enact that no will shall be valid unless registered as a trade mark"273, contrary to "universal agreement in the laws of every part of the British Empire" at the time of Federation concerning "certain essentials founded in the origin and very nature of a trade mark"274. Or the Parliament could pass laws in relation to the merger of corporations, or forced, non-consensual unions, on the basis of its own determination of what a marriage is, thus enlarging that meaning beyond its constitutional essence as "a consensual union formed between natural persons in requirements" and bearing certain accordance with characteristics275. legally prescribed The statement quoted above from the joint judgment in Chetcuti should not be read as rejecting a century of hornbook constitutional law. Rather, and consistently with the acknowledgement in the previous paragraph in Chetcuti that a law of the Parliament might need to be disapplied to the extent of "constitutional overreach" by treating "all non-citizens as aliens"276, the statement in Chetcuti should be understood as saying no more than that the Commonwealth Parliament has power to set the criteria for who will, and who will not, be a statutory alien and the consequences of that, provided always that the exercise of that power is within the boundaries of the constitutional concept of "alien". In oral submissions, the defendants quite correctly accepted that position, conceding that the aliens power 273 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 274 Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 275 The Commonwealth v Australian Capital Territory (2013) 250 CLR 441 at 461 [33]. 276 (2021) 95 ALJR 704 at 710 [11]; 392 ALR 371 at 374. Edelman "cannot be used to treat, as an alien, someone who cannot answer that description on the ordinary understanding of the word"277. The ordinary understanding of the word "alien" – its essential meaning – is simple and well-established in this Court. At a reasonably high level of generality, which recognises the state of flux at lower levels of generality of the common law of alienage at the time of Federation278, an alien is a foreigner or outsider to the political community of the Australian body politic279. The difficult question is how that ordinary understanding of "alien" is to be applied. On the submission of the defendants, the application of alien extends to people who have any of the following characteristics, each of which involves some "foreign" element: (i) the person has dual citizenship; (ii) the person was not born in Australia; or (iii) at birth, the person had one or more parents who were not an Australian citizen. It is likely that these slight foreign connections describe more than half of the Australian population; the first criterion alone involves close to half of the Australian population and the second and third criteria together likely involve a similar proportion. On the defendants' submission, therefore, potentially half of the Australian population are aliens within the meaning of the Constitution and can therefore be treated in that way by legislation. It is not to the point that it might be thought to be extremely unlikely that the Parliament would ever legislate to impose the consequences of alienage, potentially including deportation, upon half of Australia's population. The identification of the extreme reach of the power on the submissions of the defendants is not to propose an absurd or distorting possibility280. Rather, the 277 See also Singh v The Commonwealth (2004) 222 CLR 322 at 329 [4]. 278 Love v The Commonwealth (2020) 270 CLR 152 at 291-292 [401]; Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 720 [61]; 392 ALR 371 at 387. 279 Nolan v Minister for Immigration and Ethnic Affairs (1988) 165 CLR 178 at 183, 189; Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 407 [33], 428 [114]; Re Minister for Immigration and Multicultural Affairs; Ex parte Te (2002) 212 CLR 162 at 185 [81], 205 [159]; Singh v The Commonwealth (2004) 222 CLR 322 at 351 [59], 395 [190]; Love v The Commonwealth (2020) 270 CLR 152 at 186-187 [61], [403]-[404], 301-302 [424], 308 [437]; Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 718 [53], 727 [89]; 392 ALR 371 at 384, 396. 280 See Western Australia v The Commonwealth (1975) 134 CLR 201 at 275; Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 380-381 [88]; Egan v Willis (1998) Edelman extreme reach of the power, over more than half of the population of Australia, and the infinite range of possible laws over those persons, or groups of them, which would be within the scope of the power illustrate the difficulties with the proposed interpretation281. The submission of the defendants was, nevertheless, a carefully devised formulation of the application of the essential meaning of "alien" which respected a line of authority in this Court since 1982. The extreme effect of the submission is only an incremental extension of a series of problematic decisions in this Court. Those decisions have developed the law to a point where the question that is asked of s 51(xix) is no longer which people are aliens. The question that is now asked is usually couched in the euphemism of "the Pochi282 limit to the aliens power". But that "limit" is not some outer extreme within which Parliament has free rein. Rather, it is an absolutely orthodox requirement that the aliens power be applied in accordance with its meaning. As the application of the aliens power has strayed further and further from its essential meaning, the question has become how to identify which categories or groups of people are not aliens. And as the groups of people who are not aliens have come to be treated as diminishingly smaller, the answer to that question has not been readily forthcoming. This case is not the appropriate vehicle to consider the extent to which it is possible to unwind some, or all, of the arguable errors in the decisions of this Court. But, in order to address the submissions of the parties on the first issue in this special case, it is necessary to identify where potential missteps may have occurred in order to explain why the aliens power should not extend any further to dual citizens born in the same circumstances as Mr Alexander. A coherent position prior to 1982 To the extent that analogies and links can be drawn between the heads of power, the best analogy for the aliens power is not the power over trade marks (a legal concept) or lighthouses (physical things). It is the power over immigration, which concerns human beings all of whom are now aliens283. Prior to the decision 195 CLR 424 at 505 [160]; Singh v The Commonwealth (2004) 222 CLR 322 at 384 [155]; XYZ v The Commonwealth (2006) 227 CLR 532 at 549 [39]. 281 See Singh v The Commonwealth (2004) 222 CLR 322 at 418 [268]-[269]. 282 Pochi v Macphee (1982) 151 CLR 101. 283 Sue v Hill (1999) 199 CLR 462. Edelman of this Court in 1982 in Pochi v Macphee284, this Court applied, in respect of permanent residents of Australia, the same approach to the immigration power in s 51(xxvii) and the aliens power in s 51(xix). Since it was assumed that a non-immigrant, permanent resident of Australia could not be deported, the power to deport depended upon the scope of the immigration power. The aliens power was not seen as supplying a different test for deportation of immigrants than the immigration power. The immigration power extended, and extends, to the deportation of alien immigrants and also those British immigrants who were then non-aliens285. Under the immigration power, it was, and is286: "within the constitutional powers of the Commonwealth Parliament ... to fix a reasonable period of probation during which immigrants who have been admitted into Australia should continue to be subject to the risk of becoming prohibited immigrants and not be allowed to acquire the rights and privileges and immunity from deportation of members of the Australian community". Beyond the reasonable period of probation and any associated reasonable conditions, once a person who came to Australia as an immigrant had been fully integrated, in other words unconditionally absorbed, into the Australian community it was assumed that the person could no longer be deported287. The validity of a law which permitted permanent residents to be deported from Australia depended upon the law not extending to "persons who had made their homes in Australia and become part of its people"288. There is much to commend about the approach, prior to 1982, which assumed that a like application, and like limits, would apply to the power to deport 284 (1982) 151 CLR 101. 285 R v Macfarlane; Ex parte O'Flanagan and O'Kelly (1923) 32 CLR 518. 286 O'Keefe v Calwell (1949) 77 CLR 261 at 294. See also R v Macfarlane; Ex parte O'Flanagan and O'Kelly (1923) 32 CLR 518 at 533; R v Director-General of Social Welfare (Vict); Ex parte Henry (1975) 133 CLR 369 at 373-374, 379-381, 385, 388. Compare Koon Wing Lau v Calwell (1949) 80 CLR 533 at 561-562. 287 Salemi v MacKellar [No 2] (1977) 137 CLR 396 at 430; Minister for Immigration and Ethnic Affairs v Pochi (1981) 149 CLR 139 at 144; Pochi v Macphee (1982) 151 CLR 101 at 110-111. 288 Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 62. See also at 137. Edelman permanent residents of Australia whether they were aliens or immigrants. That application, which involved an approach that had been used consistently for decades, asked whether a person had been unconditionally absorbed into the Australian community. There are three particularly powerful reasons in support of such an application. First, a focus upon unconditional absorption into the Australian community is an application that is consistent with the ordinary and essential meaning of "alien" and with contemporary standards. Whatever might have been the prevailing application at the time of Federation or shortly afterwards289, by contemporary social mores a person is not a foreigner or outsider to the Australian body politic once the person is unconditionally absorbed into the Australian community. Secondly, a coherent constitutional design would apply the same rules for when a person can be excluded from a political community as it does for when a person can be expelled from that community. The power to deport, whether under the aliens power or the immigration power, has been consistently recognised to be "the complement" of the power to exclude290. Put negatively, it would be a curious constitutional design that would make it easier to be expelled from a community than to be admitted to the community. It would be bizarre if s 51(xix) and s 51(xxvii) were to be applied in a manner that recognised that at the very point a permanent resident was unconditionally absorbed into the Australian political community and ceased to be an immigrant, the person became liable to be expelled from the Australian political community for any reason and at any time. Thirdly, this application of the meaning of the aliens power to facts aligns with the other aspect of s 51(xix), naturalisation, which is concerned with the formal legal recognition that a person has been absorbed into the Australian political community. As Williams J said in Australian Communist Party v The Commonwealth291, s 51(xix) extends to a person who is "in fact and law an alien". Conversely, a person can become a member of the political community – a non-alien – either as a matter of fact or as a matter of law. As a matter mainly of fact, the person can become a member of the political community at birth by powerful ties to the community beyond mere physical 289 Love v The Commonwealth (2020) 270 CLR 152 at 293-296 [404]-[409]. 290 Robtelmes v Brenan (1906) 4 CLR 395 at 415; Ah Yin v Christie (1907) 4 CLR 1428 at 1433; O'Keefe v Calwell (1949) 77 CLR 261 at 277; Koon Wing Lau v Calwell (1949) 80 CLR 533 at 555; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 31; Love v The Commonwealth (2020) 270 CLR 152 at 299 [417]; The Commonwealth v AJL20 (2021) 95 ALJR 567 at 576 [21]; 391 ALR 562 at 569. 291 (1951) 83 CLR 1 at 222. Edelman presence. Those ties can include being born in the territory of the Australian community to a parent or parents who are permanent members of the community, or having a deep and historical connection with that territory. Also as a matter mainly of fact, a permanent resident can become a permanent member of the community when the person has been unconditionally absorbed into the community. As a matter of law, a person can be unconditionally absorbed into the community. It was well recognised prior to Federation, and has been recognised ever since, that the Parliament has wide legislative powers to confer upon any person, or to empower the Executive to confer upon any person, formal legal membership of the political community. This power of the Commonwealth Parliament to decide, as a matter of law, who is to be formally naturalised is broad. In that respect, citizenship legislation is a central "norm from which a political community is determined"292. The membership might be absolute or, as in the case of a denizen293, it might be limited. And, like the power over immigration, the membership might be subject to reasonable conditions. But this Court does not countenance an application of the Constitution that "places naturalised Australian citizens in a position of disadvantage relative to natural-born Australian citizens"294. Subject to reasonable conditions that might be imposed on a person at the time of naturalisation in the same manner as reasonable conditions might be imposed on immigrants, it is difficult to see any justification for treating a power to legislate with respect to "naturalization and aliens" as permitting a person once naturalised to be treated any differently from a person who was never an alien. Confining the rot In Pochi v Macphee295, Mr Pochi was born in Italy to Italian parents. He emigrated to Australia in 1959, married an Australian woman and lived in Australia for 20 years. As Murphy J said296, apart from lack of citizenship, Mr Pochi was "in every way an Australian". He had been absorbed into the Australian community with the consequence that he was no longer able to be deported under the immigration power in s 51(xxvii). Mr Pochi argued that the power to deport him in s 12 of the Migration Act 1958 (Cth) was invalid. That 292 Love v The Commonwealth (2020) 270 CLR 152 at 308-309 [439]. 293 Love v The Commonwealth (2020) 270 CLR 152 at 307 [435]. 294 Re Canavan (2017) 263 CLR 284 at 308-309 [53]. 295 (1982) 151 CLR 101. 296 (1982) 151 CLR 101 at 113. Edelman section empowered the Minister to deport an alien who had been convicted in Australia of an offence for which they were sentenced to a term of imprisonment of one year or longer. The Migration Act "absorb[ed] the existing Aliens Deportation Act [1948 (Cth)]"297 but did not "seek greater power for the executive than exist[ed]" previously298. Mr Pochi's submission was extreme. He argued that the aliens power could not apply to any person who had been absorbed into the community299. On that view, a person who came to Australia as an alien, and was permitted to remain only for a limited period of years, could avoid deportation by becoming part of the community. This Court unanimously rejected that view. As Gibbs CJ said, it was "impossible to maintain"300. One obvious reason for that impossibility is that unconditional absorption can never occur whilst a person is in Australia on a conditional or temporary visa. The expectation of a person holding an unexpired, limited entry permit is only that they should be "allowed to stay for the permitted time"301. So too, the expectation of a person holding an entry permit subject to reasonable conditions is only that they should be allowed to stay so long as they comply with those conditions. The submission that was not made in Pochi v Macphee, and the issue which therefore cannot be taken to have been decided302, was that a permanent resident of Australia who had been fully and unconditionally integrated into the community was not an alien. Depending upon whether his residence in Australia had become unconditional or remained subject to a condition of non-commission of various crimes303, that narrower submission might arguably have applied to Mr Pochi. But, since it was not raised, it was not necessary for the Court to consider it. 297 Australia, Senate, Parliamentary Debates (Hansard), 23 September 1958 at 518. 298 Australia, Senate, Parliamentary Debates (Hansard), 23 September 1958 at 522. 299 (1982) 151 CLR 101 at 103. 300 (1982) 151 CLR 101 at 111. 301 Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648 at 659, quoting Schmidt v Secretary of State for Home Affairs [1969] 2 Ch 149 at 171. 302 CSR Ltd v Eddy (2005) 226 CLR 1 at 11 [13], referring to R v Warner (1661) 1 Keb 66 at 67 [83 ER 814 at 815]; Spence v Queensland (2019) 268 CLR 355 at 486-487 303 See Migration Act 1958 (Cth), s 12 (as enacted). Edelman In his Honour's reasons, however, Gibbs CJ, with whom Mason and Wilson JJ agreed, spoke of the limits of the application of the aliens power that are dictated by the ordinary meaning of "alien" as a foreigner to the political community304: "Clearly the Parliament cannot, simply by giving its own definition of 'alien', expand the power under s 51(xix) to include persons who could not possibly answer the description of 'aliens' in the ordinary understanding of the word. This question was not fully explored in the present case, and it is unnecessary to deal with it. However, the Parliament can in my opinion treat as an alien any person who was born outside Australia, whose parents were not Australians, and who has not been naturalized as an Australian." Without doubt, Gibbs CJ was correct to identify that the constitutional word "aliens" must bear its ordinary meaning. It would have been an abdication of this Court's constitutional duty if the Court had concluded that the Parliament could expand its own power by statutory redefinition of a constitutional term. But, at least by the values and standards of today, Gibbs CJ's application of that impeccable reasoning would be flawed if it were taken (beyond the strict ratio decidendi) as accepting the proposition that a permanent resident of Australia, fully and unconditionally absorbed into the community over a lengthy period, remained an alien within s 51(xix) of the Constitution and vulnerable to deportation. Such people are not, in any modern and ordinary application of the meaning of "alien", foreigners to the Australian political community. Even after Pochi v Macphee, the initial response of the Commonwealth Parliament was not to adopt an overly broad application of the aliens power that treated all permanent residents, even if fully and unconditionally integrated into the Australian community, as falling within the meaning of "alien" in s 51(xix). In 1983, s 10 of the Migration Amendment Act 1983 (Cth) amended the Migration Act to repeal and replace the separate powers to deport aliens and immigrants. In the second reading speech, the Minister recognised that discrimination between "permanent resident aliens" and "other immigrants" was "totally unacceptable to the Government"305. The legislation generally prevented deportation of any alien who was a permanent resident, like any immigrant, if the person had been in Australia as a permanent resident for 10 years. The Minister added that "the overwhelming majority of non-citizens who have settled in Australia and have 304 (1982) 151 CLR 101 at 109-110. 305 Australia, Senate, Parliamentary Debates (Hansard), 7 September 1983 at 373. Edelman contributed to the development of this country have a right to expect, after 10 years of lawful residence, that they will not be expelled"306. However, after the statutory 10 year period was abandoned, an overly broad application of the aliens power was adopted in decisions of this Court that, described politely, would strike an ordinary person as very curious. A majority of this Court reasoned in Shaw v Minister for Immigration and Multicultural Affairs307 that the prosecutor in Re Patterson; Ex parte Taylor308, Mr Taylor, was an alien due to his British citizenship despite having been a permanent resident in Australia for more than 30 years from the age of six and on State and federal electoral rolls since the age of 18. This Court concluded in Falzon v Minister for Immigration and Border Protection309 that Mr Falzon was an alien due to his Maltese citizenship, despite his permanent residence in Australia for 61 years after emigrating from Malta at the age of three. This Court also concluded in Chetcuti v The Commonwealth310 that Mr Chetcuti was an alien despite his permanent residence in Australia for 69 years, during which he was a voter in local, State and federal elections and a registrant for military service, having arrived from Malta at the age of two as a British subject. In the latter two of the cases above, and in the absence of any challenge to the reasoning in Pochi v Macphee311 or any argument about the scope of its ratio decidendi described above, I supported those conclusions. But, since there was no suggestion that the permanent Australian residence of Mr Taylor, Mr Falzon, or Mr Chetcuti remained conditional, it is very hard to see how those conclusions can be supported by any ordinary application, with regard to today's morals and standards, of the essential meaning of "alien" as a foreigner or outsider to the Australian political community. Any degeneration into further incoherence in the application of the aliens power could be arrested in this case, even whilst preserving the curious results in 306 Australia, Senate, Parliamentary Debates (Hansard), 7 September 1983 at 374. 307 (2003) 218 CLR 28. 308 (2001) 207 CLR 391. 309 (2018) 262 CLR 333. 310 (2021) 95 ALJR 704; 392 ALR 371. 311 See Falzon v Minister for Immigration and Border Protection (2018) 262 CLR 333 at 345 [37]; Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 718 [54]; 392 ALR 371 at 384-385. Edelman Pochi v Macphee and like cases. That arrest could occur by recognising that the application of the essential meaning of "alien" does not extend to persons who are born into the Australian community, such as by being born in Australia to a permanent member or members of the Australian community. That possibility was left open in argument by the Commonwealth in Singh v The Commonwealth312. In Singh v The Commonwealth313, Gummow, Hayne and Heydon JJ held that Ms Singh was an alien within the meaning of s 51(xix) because, despite being born in Australia, she owed "obligations to a sovereign power other than [the Commonwealth of Australia]". On their Honours' approach, Ms Singh's dual nationality was sufficient to make her an alien. But that was not a majority approach. Gleeson CJ held that Ms Singh was an alien by focusing not merely upon her dual nationality but also upon her parentage: she was "a citizen of a foreign state [and] the child of foreign citizens"314. Kirby J held that Ms Singh was an alien because she was only a "temporary member of the community" with two foreign national parents315. At the time of her birth, her parents were in Australia awaiting the review of the refusal of their application for a protection visa316. McHugh J and Callinan J, both dissenting, held that Ms Singh was not an alien because she was born in Australia and remained a member of the Australian community317. The conclusion of the majority in Singh was extended in Koroitamana v The Commonwealth318. In that case, this Court held that two children were aliens even though they were born in Australia, had lived continuously in Australia since their births in 1998 and 2000, had three siblings all of whom were Australian citizens, and did not have citizenship of any other country. Gummow, Hayne and Crennan JJ said that the statelessness of the children at birth was sufficient to make them aliens319. Importantly, however, their Honours emphasised that the 312 [2004] HCATrans 5 at lines 2554-2558, 2578-2581, 3103-3107, 3342-3345. 313 (2004) 222 CLR 322 at 383 [154]. 314 (2004) 222 CLR 322 at 342 [32]. 315 (2004) 222 CLR 322 at 419 [272]. 316 (2004) 222 CLR 322 at 420 [278]-[280]. 317 (2004) 222 CLR 322 at 380 [140], 437 [322]. 318 (2006) 227 CLR 31. 319 (2006) 227 CLR 31 at 46 [49]. Edelman statelessness of the children at the time of their birth arose in circumstances in which: (i) their parents were citizens of the Republic of the Fiji Islands and had not registered the children for citizenship, and (ii) their parents were not Australian citizens or permanent residents320. Case by case, this Court has moved the application of the essential constitutional meaning of "alien" further and further from ordinary conceptions. Until the above authorities are revisited, this Court should take great care not to extend those authorities any further lest, as would be the consequence of the defendants' submissions, potentially half of the permanent population of Australia become constitutional aliens. The word "alien" would then be so devoid of meaning in the Constitution that it would make more sense to ask which Australians are not aliens. Even now, that question is difficult to answer. Although the defendants' submissions might support such a conclusion, this Court has not yet recognised that a person born in Australia to parents of whom at least one is a permanent member of the Australian community can be a constitutional alien. At the time of Federation, such a conclusion was regarded as one which did not permit any difference of opinion. Writing in 1880, in a passage from his celebrated book, repeated in an edition published shortly before Federation321, W E Hall said322: "The persons as to whose nationality no room for difference of opinion exists are in the main those who have been born within a state territory of parents belonging to the community, and whose connection with their state has not been severed through any act done by it or by themselves." Putting to one side Aboriginal Australians, it would be remarkable if, as a nation comprised otherwise of immigrants and their descendants, the Commonwealth of Australia were to alienate persons who are born in Australia to parents belonging to the community merely because those persons have dual citizenship. No reasonable person in today's society could consider a person born in Australia to parents who are permanent members of the Australian body politic to be an alien merely because the person has dual citizenship acquired by descent from a parent or grandparent. As Kirby J said of a similar example in Singh v The 320 (2006) 227 CLR 31 at 39 [18], 41 [26]. See also at 38 [13]. 321 Hall, A Treatise on International Law, 4th ed (1895) at 234 §67. 322 Hall, International Law, 1st ed (1880) at 186 §67. Edelman Commonwealth323, "this Court can be trusted to draw the necessary constitutional line". Mr Alexander was born in Australia. His parents were permanent members of the Australian community at the time of his birth, and his mother became an Australian citizen less than two years after his birth. No authority of this Court requires Mr Alexander to be treated as an alien from birth. He was not an alien. At the time of Mr Alexander's birth, in Australia, he was not within the reach of the Commonwealth Parliament's power in s 51(xix) of the Constitution. It was open for the Parliament to legislate to treat as aliens those who repudiate allegiance to Australia In this part of the argument on this special case, there was confusion between constitutional concepts and statutory concepts. The constitutional concept of "alien" must be kept separate from the statutory concept of citizen. At the statutory level concerning citizens, the Parliament can make laws in relation to citizenship in reliance upon powers that include naturalisation and aliens, immigration, and the implied nationhood power324. The power of the Parliament to make a law also entails the power of the Parliament to repeal the law325. It is open for the Parliament to repeal any valid statutory enactment as to the criteria for statutory citizenship. Constitutional considerations operate at a different level. They constrain both the extent to which the Parliament can make laws and the scope of the application of those laws. Section 51(xix) and the implied nationhood power confer broad powers upon the Parliament to enact laws conferring citizenship on constitutional aliens and non-aliens alike. But, subject to limited exceptions discussed below, neither s 51(xix) nor the implied nationhood power permits persons to be treated as aliens if they are not aliens under the Constitution, at least where they were absorbed into the political community from birth or they were naturalised. As Gordon J expresses the point326, once a person is naturalised according to whatever might be the requirements of a Commonwealth law made under s 51(xix), the legislative power over naturalisation is "spent" in relation to 323 (2004) 222 CLR 322 at 418 [269]. 324 Hwang v The Commonwealth (2005) 80 ALJR 125 at 128 [10]; 222 ALR 83 at 325 Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 355-356 [12]-[14], 372 326 See at [138]. Edelman that person, subject to any reasonable conditions that are imposed. The naturalisation law might be amended or repealed but a person who has been naturalised is generally beyond the scope of the power. There are exceptions. As the reasons of Gordon J demonstrate, it cannot be denied that s 51(xix) supports laws that regulate some circumstances in which a person can cease to be a member of the political community of the Australian body politic327. Such circumstances include: a change in sovereign identity or territory; breach by a naturalised member of the political community of a reasonable condition upon membership; and express or implied renunciation of membership of that political community. Each of these circumstances is a natural cause of the cessation of membership of a political community: a change in the community itself; a failure of an express, and reasonable, condition subsequent to membership of the community; or voluntary abandonment of membership of the community. The premise of s 36B of the Australian Citizenship Act is that a further circumstance exists where, by s 36B(1)(b), a person has engaged in conduct which "demonstrates that the person has repudiated their allegiance to Australia". It is implicit in s 36B that the section will apply irrespective of whether the person's conduct permits an inference that the person wished to renounce their membership of the political community. In this respect, as Steward J explains328, the premise of s 36B aligns with the reasoning of Frankfurter J, who said, in delivering the opinion of the Court in Perez v Brownell329, that a person can lose their citizenship without any "intention of endangering [it] or of renouncing [their] allegiance". So, what is the meaning of the objective concept of repudiation of allegiance in s 36B? In a number of decisions of this Court330, most recently that of Kiefel CJ, Gageler, Keane and Gleeson JJ in Chetcuti v The Commonwealth331, members of 328 See at [287]-[288]. 329 (1958) 356 US 44 at 61, quoting Savorgnan v United States (1950) 338 US 491 at 330 Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 441-442 [151]; Love v The Commonwealth (2020) 270 CLR 152 at 305 [430]. 331 (2021) 95 ALJR 704 at 712 [21]; 392 ALR 371 at 377. See also (2021) 95 ALJR 704 at 721 [64]; 392 ALR 371 at 388. Edelman this Court have quoted with approval the observation of Professor Parry332 that "[t]he concept of allegiance, which had been the foundation of the status of a subject, was not imported into the rules governing local citizenship but was altogether swept away, together with all other rules of the common law respecting nationality". The statutory reintroduction of the concept in s 36B requires explanation. The terms in which Steward J explains the statutory concept of allegiance in s 36B, with which I agree, associate that concept with membership of the community of the Australian body politic333. Whatever might have been its previous force as a concept of law, allegiance remains in use here as a metaphor to describe the association or belonging that a person has as a member of a community which brings additional civic rights and duties. Section 36A confirms that the concept of allegiance, and the repudiation of it, is used in that way in s 36B: "the Parliament recognises that Australian citizenship is a common bond, involving reciprocal rights and obligations, and that citizens may, through certain conduct incompatible with the shared values of the Australian community, demonstrate that they have severed that bond and repudiated their allegiance to Australia". Renunciation of allegiance therefore arises, as Steward J explains334, irrespective of any subjective intention to sever a bond of membership, "from actions or steps that are indelibly inconsistent with ... membership of [the Australian political] community". In other words, although it is inherent in a political community's legal regulation of its membership that a person can commit wrongdoing, even extremely serious wrongdoing, whilst remaining a member of the political community, there will come a point at which the person's wrongdoing is so extreme that it can be judged to be inconsistent with continuing membership of the political community. I therefore agree with Steward J335 that the limited class of conduct which might justify loss of citizenship "might include actions which seek to destroy or gravely harm the fundamental and basal features of the nation guarded by its Constitution, such as representative democracy and the rule of law, and actions directed at overthrowing state institutions where such conduct amounts to a clear rejection of allegiance to Australia. Terrorist attacks might also be included." 332 Parry, Nationality and Citizenship Laws of The Commonwealth and of The Republic of Ireland (1957) at 92. 333 See at [257], [266]-[270], [283], [286]. 334 See at [286]. Edelman On its proper interpretation, s 36B of the Australian Citizenship Act is consistent with this reasoning. The objective conduct caught by ss 36B(1)(a) and 36B(5), involving matters related to terrorism, foreign incursions, and service in the armed forces of a country at war with Australia, provides a baseline for the extreme nature of the conduct required to establish a repudiation of allegiance, albeit divorced from any mental element that would render that conduct an offence. Plainly some objective conduct that is picked up by s 36B(1)(a) will come nowhere near the extreme, wrongful acts required to satisfy s 36B(1)(b). Mr Alexander even cited examples of such non-wrongful conduct, including a pharmacist who innocently keeps poisons. But the validity of s 36B hinges upon the extreme wrongdoing that is required by, and inherent in, the notion of repudiation of allegiance to Australia to be determined by the Minister. Section 36B purports to confer judicial power upon the Executive Punishment as an exclusively judicial power Mr Alexander's submissions in relation to this issue focused upon the constitutional implication expressed in Chu Kheng Lim v Minister for Immigration336 that laws that are "penal or punitive in character" exist under our system of government "only as an incident of the exclusively judicial function of adjudging and punishing criminal guilt". In Falzon v Minister for Immigration and Border Protection337, this Court proceeded on the basis, which was not disputed, that the reference to adjudging and punishing criminal guilt was to two alternative functions, both of which are exclusively judicial. That proposition, which has much to commend it, was also not in dispute in this special case. The exclusively judicial function of punishment is not confined to punishment for criminal guilt, and certainly not confined to criminal guilt under some offence existing independently of the impugned law. It extends to all laws that are properly characterised as punitive. For instance, in their joint judgment in Chu Kheng Lim, Brennan, Deane and Dawson JJ said that a law would be punitive and invalid if it authorised detention of an alien for a period that was not "limited to what is reasonably capable of being seen as necessary for the purposes of deportation or necessary to enable an application for an entry permit to be made 336 (1992) 176 CLR 1 at 27. 337 (2018) 262 CLR 333 at 340 [15]. 338 (1992) 176 CLR 1 at 33. Edelman Since s 36B confers power to determine that a person ceases to be a citizen upon the Minister, a member of the Executive, the power will be invalid if, on its proper characterisation, it is punitive. The nature of punishment At the core of punishment lie five elements: (i) the imposition of harsh consequences; (ii) for an offence against legal rules or, put more generally, for a purpose of sanctioning proscribed conduct; (iii) to an actual or supposed offender for that offence; (iv) intentionally administered by other human beings on the offender; and (v) imposed and administered by an authority constituted by a legal system against which the offence is committed339. These elements do not form a conclusive test for the character of a law as punitive. But they illustrate the usual characteristics of the core case of punishment. The further that a law travels from this core case, the less likely it is that the law will be properly characterised as punitive. An important aspect of the punitive character of a law will usually be that the harsh consequence is imposed, in whole or in part, as a sanction for certain proscribed conduct. A consequence that is imposed by the State does not attract a characterisation as "punishment" merely because it might be described as harsh. To adapt what was said by Gleeson CJ in Re Woolley; Ex parte Applicants M276/2003340, some general taxes might be thought to involve the imposition of harsh consequences by the State but those taxes are not punitive in a legal sense. They are not imposed as a sanction for proscribed conduct. This Court has emphasised the "purposes of punishment"341 as important to characterising a law as punitive or not. The imposition of a harsh consequence for the purpose of sanctioning conduct usually involves primary consideration of what is thought to be deserved for the conduct and secondary consideration of specific 339 See, in similar terms, Hart, Punishment and Responsibility (1968) at 4-5, approved in Al-Kateb v Godwin (2004) 219 CLR 562 at 650 [265]; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 641 [174]; Minogue v Victoria (2019) 268 CLR 1 at 26 [47]; Minister for Home Affairs v Benbrika (2021) 95 ALJR 166 at 202 [140], 217 [204]; 388 ALR 1 at 41-42, 61. 340 (2004) 225 CLR 1 at 12 [17]. 341 Plaintiff M96A/2016 v The Commonwealth (2017) 261 CLR 582 at 594 [22]. Edelman and general deterrence and rehabilitation342. All of these matters are the purposes of punishment. Whether the purpose of a law is to sanction proscribed conduct There can sometimes be a very fine line between (i) punitive laws, which have as one of their purposes sanctioning proscribed conduct by making it subject to harsh consequences, and (ii) laws which use certain conduct merely as a factum which informs a decision to impose harsh consequences for separate purposes concerning the public interest. The category that a law falls into will depend upon the identified purposes of the law. The assessment of the purpose of a law involves "ordinary processes of interpretation, including considering the meanings of statutory words in the provision, meanings of other provisions in the statute, the historical background to the provision, and any apparent social objective"343. An express statement of statutory purpose will almost always be relevant to that exercise, all the more so where the statement of purpose concerns the relevant provision rather than the entire Act, but the question for a court will always be the "characterisation of the purpose of a provision at the appropriate level of generality"344. An example of a law that imposes harsh consequences, but not for the purpose of sanctioning proscribed conduct and thus not for the purposes of punishment, is a law that permits the termination by the Commonwealth of a lease over premises which have been used for an unlawful purpose345. The purpose of the harsh consequence of termination is not to punish the unlawful conduct. It is to protect the interests of the lessor. Another example is the disqualification of a person from managing a corporation where that disqualification is "for the purpose of maintaining professional standards in the public interest" and "there is no 342 Australian Building and Construction Commissioner v Pattinson (2022) 96 ALJR 426 at 445 [88]-[89]; 399 ALR 599 at 620-621. 343 Ruddick v The Commonwealth (2022) 96 ALJR 367 at 395 [133]; 399 ALR 476 at 508, quoting Unions NSW v New South Wales (2019) 264 CLR 595 at 657 [171]. 344 Unions NSW v New South Wales (2019) 264 CLR 595 at 657 [172]. 345 Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd (2015) 255 CLR 352 at 371-372 [33]. Edelman determination of guilt with respect to any offence provision"346. Similarly, a decision to cancel a broadcasting licence for breach of licence conditions is a harsh consequence but it can be made as an administrative decision to protect the public interest even if the conduct might separately be found to be an offence347. The extent of the harshness of the consequence imposed by a law can assist in drawing a line between (i) consequences that sanction proscribed conduct and are thus for the purposes of punishment, and (ii) consequences that respond to other public interests although they rely upon a person's conduct as a factum. The harsher the consequence, the more likely it is that the law will be interpreted as a response to proscribed conduct. Extremely harsh consequences can rarely be justified, and hence are rarely imposed upon people, other than as responses to proscribed conduct. This is the reason that the imposition of the extreme consequence of detention is "likely to permit an inference to be drawn that, for some reason, the legislature wishes to punish the person to be detained"348. Nevertheless, there will be some circumstances where a law will not be characterised as punitive despite an extremely harsh consequence such as detention. As I explained in Minister for Home Affairs v Benbrika349, a person with an extreme mental or physical illness might be detained by the State in a psychiatric institution or in a quarantine facility. That detention is solely for the public purpose of protection of the person and the public. It is "purely protective"350. It is not for the purpose, in whole or in part, of sanctioning proscribed conduct. Indeed, a person detained might not have engaged in any proscribed conduct. By contrast, detention is plainly punitive when it is imposed as part of a sentence for an offence for purposes which include sanctioning an offender's conduct and preventing and deterring further offending. If that punishment is then continued, thus exceeding what the offender individually deserves for their 346 Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381 at 385 [11], 386 [16]. See also Albarran v Companies Auditors and Liquidators Disciplinary Board (2007) 231 CLR 350 at 358-359 [17]. 347 Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd (2015) 255 CLR 352. 348 Falzon v Minister for Immigration and Border Protection (2018) 262 CLR 333 at 349 (2021) 95 ALJR 166 at 215-217 [197]-[204]; 388 ALR 1 at 58-61. 350 (2021) 95 ALJR 166 at 215 [197]; 388 ALR 1 at 58. Edelman conduct, it does not cease to be punitive. Indeed, it becomes more punitive. An example is a detention order made prior to the commencement of a person's sentence of imprisonment for an offence, ordering that on the expiration of the term of imprisonment the person be detained indefinitely at the Governor's pleasure for the protection of society351. The same is true of orders for continuing detention made at the end of a person's sentence: it is a category error to assume that because those orders have a preventive or protective purpose they do not also serve, at least in part, the purpose of being a sanction for proscribed conduct352. Section 36B is punitive Ultimately, I consider that s 36B has a punitive character with a purpose to sanction particular conduct. It is not a law which could be described as having the sole purpose of being "political" or "purely protective". This conclusion is dictated by four reasons. First, the extreme consequences imposed by s 36B provide significant support for the conclusion that a purpose of the law is to sanction particular conduct. I do not accept the surprising submission of the defendants that the harshness of stripping a person of citizenship under s 36B might be better compared with the temporary disqualification of a person from managing corporations353 than with detention. The stripping of a person's citizenship, with the usual consequence of deportation or banishment, is in a wholly different league from the temporary disqualification of a person from managing corporations. It involves "the total destruction of the individual's status in organized society"354. It has been described as "a fate universally decried by civilized people"355 and as a 351 Chester v The Queen (1988) 165 CLR 611 at 619. 352 Compare Minister for Home Affairs v Benbrika (2021) 95 ALJR 166; 388 ALR 1. 353 See Visnic v Australian Securities and Investments Commission (2007) 231 CLR 354 Trop v Dulles (1958) 356 US 86 at 101. 355 Trop v Dulles (1958) 356 US 86 at 102. See also at 110-111. Edelman form of civil death356. Judge Augustus Hand thought it to be "a dreadful punishment, abandoned by the common consent of all civilized peoples"357. It must be accepted, however, that even the extreme consequence of stripping a person of their citizenship, with associated deportation or exile, does not necessarily dictate the conclusion that a law is punitive. In Ex parte Walsh and Johnson; In re Yates358, Isaacs J recognised that the power of deportation might be enacted as "a punishment for crime", in which case it would necessarily be a power to be exercised by the judiciary. But his Honour acknowledged that the power of deportation might alternatively be enacted "as a political precaution ... and possibly on considerations not susceptible of definite proof but demanding prevention or otherwise dependent on national policy". A power of that latter "political" kind was upheld in Falzon v Minister for Immigration and Border Protection359, in which this Court upheld the validity of the power of the Minister to cancel a person's visa as a step in removing the person from Australia, by reference to "a primary and characteristic factum" of previous criminal offending. The cancellation of the visa was not a sanction for the proscribed criminal offending. Rather, the criminal offending was merely a factum that demonstrated a failure to comply with express or implied conditions for remaining in Australia. Secondly, the character of a law can be informed by its historical antecedents360. Although denationalisation the Naturalization Act 1870361 recognised denationalisation for non-punitive purposes, those purposes were generally based upon consent. The long history of non- consensual citizenship stripping or banishment is one strongly associated with punishment. In Roman law, death and exile were capital punishments, with the consequence of exile being "interdiction from fire and water" – that is, deprivation of warmth and food – in the community in which the person had lived362. Exile was used as punishment in England, following the example of Rome, as well as in laws commencing with 356 Newsome v Bowyer (1729) 3 P Wms 37 at 38 [24 ER 959 at 960]; Elizabeth Farquhar v His Majesty's Advocate (1753) Mor 4669 at 4670, 4671. 357 United States ex rel Klonis v Davis (1926) 13 F 2d 630 at 630. 358 (1925) 37 CLR 36 at 96. 359 (2018) 262 CLR 333 at 347 [46]. See also at 357 [89]. 360 Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 27, 53, 66-67. 361 33 & 34 Vict c 14, ss 4, 6 and 10. Edelman ancient Babylon and Greece363. It became most prominent in England with a 1597 statute that provided for various persons classed as criminals to be punished by being "banyshed out of this Realme and all other the Domynions thereof"364. Sir Edward Coke's report of Doctor Hussey's Case365 described banishment as "so great a punishment" and equated it with perpetual imprisonment. The punishment of banishment was reaffirmed by Parliament "at frequent intervals" until 1864366. By the end of the 18th century, Hawkins had written of Parliament's prerogative to impose this extraordinary punishment, saying that "no power on earth, except the authority of parliament, can send a subject of England, not even a criminal, out of the land against [their] will"367. Thirdly, the punitive character of s 36B is also supported by the statement in s 36A of the purpose of Subdiv C of Div 3 of Pt 2 of the Australian Citizenship Act. That statement of purpose includes the recognition by the Parliament that the common bond of Australian citizenship may be severed by citizens "through certain conduct incompatible with the shared values of the Australian community". The focus upon the breach of norms of conduct shared in the community is an indication, at a lower level of generality, of a purpose of sanctioning that conduct. In particular, the statement of purpose encompasses s 36D, which permits the Minister to determine in writing that a person ceases to be an Australian citizen upon various conditions including the person being convicted of a particularly serious offence. As the defendants conceded, s 36B, like s 36D, has a purpose of deterrence of a particular category of extreme, reprehensible conduct. Fourthly, the punitive nature of the law is supported by the Minister being the person who, having decided that the conduct was extreme and reprehensible, is also the person who exercises a discretion to determine whether Australian citizenship should cease368. 363 Armstrong, "Banishment: Cruel and Unusual Punishment" (1963) 111 University of Pennsylvania Law Review 758 at 759. 364 39 Eliz c 4; see also The Poor Relief Act 1662 (14 Car II c 12), s 23, re-enacting the original statute. 365 (1611) 9 Co Rep 71b at 73a [77 ER 838 at 840]. 366 Banks, "Criminal Law – Banishment" (1954) 32 North Carolina Law Review 221 at 367 Hawkins, A Treatise of the Pleas of the Crown, 7th ed (1795), vol 4 at 297 (emphasis in original). 368 See Dr Bonham's Case (1610) 8 Co Rep 113b [77 ER 646]. Edelman Section 36B is invalid as a law that purports to confer exclusively judicial power upon the Executive. Conclusion The questions in the special case should be answered as follows: Is s 36B of the Australian Citizenship Act 2007 (Cth) invalid in its operation in respect of the plaintiff because: it is not supported by a head of Commonwealth legislative power; Answer: No. inconsistent with an limitation on Commonwealth legislative power preventing the involuntary deprivation of Australian citizenship; implied Answer: Unnecessary to answer. it effects a permanent legislative disenfranchisement which is not justified by a substantial reason; Answer: Unnecessary to answer. [(d) Not pursued] it reposes in the Minister for Home Affairs the exclusively judicial function of punishing criminal guilt? Answer: Yes. 2. What, if any, relief should be granted to the plaintiff? Answer: It should be declared that: s 36B of the Australian Citizenship Act 2007 (Cth) is invalid; and the plaintiff is an Australian citizen. 3. Who should pay the costs of the special case? Answer: The defendants. STEWARD J. The plaintiff was born in Australia in 1986. He thereby became a citizen of this country pursuant to s 10(1) of the Australian Citizenship Act 1948 (Cth) ("the 1948 Citizenship Act"). On 2 July 2021, the first defendant ("the Minister") determined, pursuant to s 36B(1) of the Australian Citizenship Act 2007 (Cth) ("the 2007 Citizenship Act"), that the plaintiff ceased to be an Australian citizen. Immediately before that determination, the plaintiff continued to satisfy the applicable requirements for Australian citizenship369. The "naturalization and aliens" head of power The plaintiff challenges the validity of s 36B of the 2007 Citizenship Act. His principal ground of attack is that s 36B is not authorised by any head of power under s 51 of the Constitution, and, in particular, is not supported by the "naturalization and aliens" head of power in s 51(xix). The defendants accepted that the only head of power that could support the validity of s 36B is s 51(xix). If it be correct to state that the antonym of a citizen for the purposes of the 2007 Citizenship Act is an alien of this country, then the plaintiff was not an alien within the meaning of s 51(xix) of the Constitution when the Minister exercised the power conferred by s 36B(1) of the 2007 Citizenship Act370. That is because he was a citizen. If it be more accurate to state that the essence of alienage is allegiance, not to Australia, but to another sovereign power371, then, based on the plaintiff's explanation for being in the Syrian Arab Republic ("Syria"), he was also no alien immediately before the Minister exercised the power under s 36B(1). That is because, as McHugh J observed in Singh v The Commonwealth, a person's allegiance to Australia (or the Crown in right of Australia) arises if the person is 369 In 2021, the Australian Citizenship Act 2007 (Cth) provided that a person born in Australia who has a parent who is an Australian citizen is a citizen of this country: s 12(1)(a). It was an agreed fact in this amended special case that the plaintiff's mother acquired Australian citizenship in 1988. 370 Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 43 [32] per Gleeson CJ, Gummow and Hayne JJ; Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 711 [15]-[17], 714 [32]-[34] per Kiefel CJ, Gageler, Keane and Gleeson JJ; 392 ALR 371 at 375-376, 379-380. 371 Singh v The Commonwealth (2004) 222 CLR 322 at 343-344 [38]-[40], 350-351 [56]-[58], 365-366 [99]-[100], 376 [129]-[130] per McHugh J, 398-399 [200]-[201] per Gummow, Hayne and Heydon JJ; Chetcuti v The Commonwealth (2021) 95 ALJR 704 at 728 [100], 729 [105], 739-740 [146] per Steward J; 392 ALR 371 at Steward born in this country372. That observation requires qualification in the case of a person born in Australia to parents who are visiting this country on a temporary basis373. In Singh, the plaintiff had been born in Australia but was the daughter of Indian citizens who arrived in Australia on "Business (Short Stay) visas"374; thus, her parents were only residing temporarily in this country. Given those facts, the plurality concluded that the plaintiff, an Indian citizen by descent, was an alien because of her allegiance to a foreign power attributed to her by the law of India375. Here, the plaintiff's parents were not residing in Australia temporarily. Contrary to the plaintiff's submissions, the issue for determination in this amended special case is not whether s 51(xix) of the Constitution authorises the Federal Parliament to pass a law that banishes a natural-born citizen. No such law may be found in the 2007 Citizenship Act. Rather, the consequences of possible deportation arise by reason of s 198(2) of the Migration Act 1958 (Cth), which obliges an officer to remove an unlawful non-citizen "as soon as reasonably practicable" from Australia. As the plurality observe376, and I accept, the practical combined effect of s 36B and the Migration Act is exclusion from this country. Even then, however, once removed the unlawful non-citizen may be eligible to re-enter Australia upon the grant of an applicable visa377. In the case of the plaintiff, no issue of deportation arises. That is because he has remained abroad since 2013. Whether a grant of a protection visa in the plaintiff's case would be an "unlikely event"378, to use the language of Kiefel CJ, Keane and Gleeson JJ, remains unknown. Certainly, if one were to accept his version of what had happened to him, he may very well be eligible for the grant of a protection visa. It follows that the issue to be determined is not whether the Federal Parliament may banish a 372 (2004) 222 CLR 322 at 344 [39]-[40], 350 [56], 365-366 [99], 377-378 [133]. 373 Another qualification may be that a person who was born overseas to parents who were only temporarily absent from this country and who were Australian citizens may not be an alien for the purposes of s 51(xix). Pochi v Macphee (1982) 151 CLR 101 does not address this issue; cf s 16 of the Australian Citizenship Act 2007 (Cth). 374 (2004) 222 CLR 322 at 401 [212] per Kirby J. 375 Singh v The Commonwealth (2004) 222 CLR 322 at 398-400 [200]-[205] per Gummow, Hayne and Heydon JJ. 376 See [26]. 377 For example, a non-citizen could conceivably apply for a protection visa: Migration Act 1958 (Cth), s 36. 378 See [26]. citizen, but rather whether it may validly pass a law that cancels the citizenship of a natural-born Australian, the concept of citizenship being "entirely statutory" in nature379. The authority to do so turns upon the extent to which s 51(xix) authorises Parliament to pass laws concerning the denationalisation or denaturalisation of its citizens. Originally, and subject to certain exceptions380, at common law the "stern rule" was that a natural-born subject could not divest herself or himself of her or his allegiance to the Crown381. Allegiance was considered to be indelible382. As Blackstone wrote383: "[I]t is a principle of universal law, that the natural-born subject of one prince cannot by any act of his own, no, not by swearing allegiance to another, put off or discharge his natural allegiance to the former: for this natural allegiance was intrinsic, and primitive, and antecedent to the other; and cannot be devested without the concurrent act of that prince to whom it was first due." (footnote omitted) Prior to Federation, the common law's "stern" view about alienage was substantially modified by statute. In 1870, the Naturalization Act 1870 (Imp) was enacted. It provided for both voluntary alienage and involuntary alienage. Section 3 provided that, in prescribed circumstances, a naturalised British subject could "make a declaration of alienage" and thereafter be "regarded as an alien". Section 4 provided that any natural-born British subject who at birth also became a subject of another state could "make a declaration of alienage" and thereafter would "cease to be a British subject". By s 6, a British subject who had become naturalised in another state was "deemed to have ceased to be a British subject and be regarded 379 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 54 per Gaudron J. 380 Singh v The Commonwealth (2004) 222 CLR 322 at 355-356 [73], 357 [75] per 381 Singh v The Commonwealth (2004) 222 CLR 322 at 356-357 [75] per McHugh J; Kenny v Minister for Immigration, Local Government and Ethnic Affairs (1993) 42 FCR 330 at 339 per Gummow J. See also Kent, Commentaries on American Law, vol 2 (1827), pt 4, lect 25 at 40-49. 382 Singh v The Commonwealth (2004) 222 CLR 322 at 356-357 [75], 361 [86] per McHugh J, 428-429 [303]-[304] per Callinan J. 383 Blackstone, Commentaries on the Laws of England (1765), bk 1, ch 10 at 358. as an alien". By s 10, a married woman, being a natural-born subject, was "deemed to be a subject of the State of which her husband [was] ... a subject". The Naturalization Act 1870 reflected the conclusions of a Royal Commission appointed in 1868, which inquired into the laws of "naturalization and allegiance"384. In his authoritative work, Sir Alexander Cockburn, summarising the findings of the Royal Commission, determined that385: "[I]t should be free to every one to expatriate and denationalize himself, and to transfer his allegiance to another country." In the United States, Thomas Jefferson considered expatriation to be a natural right. He wrote386: "I hold the right of expatriation to be inherent in every man by the laws of nature, and incapable of being rightfully taken from him even by the united will of every other person in the nation. If the laws have provided no particular mode by which the right of expatriation may be exercised, the individual may do it by any effectual and unequivocal act or declaration." In 1868, the United States Congress passed the Expatriation Act387. Consistently with the opinion of Mr Jefferson, the recital to that Act declared that the "right of expatriation" was a "natural and inherent right of all people, indispensable to the enjoyment of the rights of life, liberty, and the pursuit of happiness". Section 1 provided that "any declaration, instruction, opinion, order, or decision of any officers" of the federal government which denied, restricted, impaired or questioned "the right of expatriation" was "declared inconsistent with the fundamental principles of ... government". Based on that Act, Frankfurter J, delivering the opinion of the Supreme Court of the United States, said that "it was 384 Fraser, "Expatriation as Practised in Great Britain" (1930) 16 Transactions of the Grotius Society 73 at 83; Singh v The Commonwealth (2004) 222 CLR 322 at 363 385 Cockburn, Nationality: or the Law Relating to Subjects and Aliens, considered with a view to future legislation (1869) at 214. 386 Letter from Thomas Jefferson to the Secretary of the Treasury Albert Gallatin, 26 June 1806, in Ford (ed), The Works of Thomas Jefferson (1905), vol 10 at 273, quoted in McAdam, "An Intellectual History of Freedom of Movement in International Law: The Right to Leave as a Personal Liberty" (2011) 12 Melbourne Journal of International Law 27 at 39. 387 Act of 27 July 1868, ch 249, 15 Stat 223. the practice of the Department of State during the last third of the nineteenth century to make rulings as to forfeiture of United States citizenship" when a naturalised citizen returned to her or his country of origin and took steps, such as accepting public office or assuming political duties, to abandon American citizenship, and, generally, in the case of native-born citizens, when they acquired foreign citizenship388. In 1907, Congress passed a further Expatriation Act389. It provided, amongst other things, that an "American citizen shall be deemed to have expatriated himself when he has been naturalized in any foreign state ... or when he has taken an oath of allegiance to any foreign state", and that an "American woman who marries a foreigner shall take the nationality of her husband"390. That Act was based upon a report prepared by the Citizenship Board of 1906 which, amongst other things, had recommended that391: "[N]o man should be permitted deliberately to place himself in a position where his services may be claimed by more than one government and his allegiance be due to more than one." In Mackenzie v Hare, the Supreme Court of the United States upheld the validity of the Expatriation Act of 1907392 on the following basis393: "As a government, the United States is invested with all the attributes of sovereignty. As it has the character of nationality it has the powers of nationality, especially those which concern its relations and intercourse with other countries. We should hesitate long before limiting or embarrassing such powers." The foregoing demonstrates that around the time of Federation, both the United Kingdom and the United States recognised various forms of lawful expatriation and denationalisation. In the case of the Naturalization Act 1870, denationalisation took place where, in defined circumstances, a person acted 388 Perez v Brownell (1958) 356 US 44 at 49. 389 Act of 2 March 1907, ch 2534, 34 Stat 1228. 390 Act of 2 March 1907, ch 2534, §§2 and 3, 34 Stat 1228 at 1228. 391 Perez v Brownell (1958) 356 US 44 at 50 per Frankfurter J. 392 Act of 2 March 1907, ch 2534, 34 Stat 1228. 393 (1915) 239 US 299 at 311 per McKenna J. inconsistently with her or his status as a British subject, by, for example, making a declaration of alienage or being naturalised in a foreign state394. In the case of the Expatriation Act of 1907, citizenship was forfeited when a person acted inconsistently with being a citizen of the United States, by, for example, taking an oath of allegiance to a foreign state395. In neither jurisdiction was it necessary for the person to assent to the loss of nationality. This history supports the proposition that denationalisation may occur when a person acts inconsistently with membership of a body politic by changing her or his allegiance, whether intentionally or not, to a foreign country. The founding fathers were no doubt aware of these developments in the law396. Reflecting this history, the Naturalization Act 1903 (Cth) contained provisions that "deemed" a woman to be a British subject who, "not being a British subject", married a British subject397 and "deemed" an infant "not being a natural- born British subject" to be a British subject in defined circumstances398. It also contained a provision that conferred on the Governor-General a power to revoke a "certificate of naturalization" obtained by any "untrue statement of fact or intention"399. A similar provision was to be found in s 11 of the Naturalization Act 1903-1917 (Cth) and s 12 of the Nationality Act 1920 (Cth). That Act also provided, amongst other things, that a woman, having been a British subject, was "deemed to be an alien" if she married an alien400 and that a person was "deemed to have ceased to be a British subject" if she or he became naturalised in a foreign state401. In the foregoing examples, the assent of the person was not required. 394 Naturalization Act 1870 (Imp) (33 & 34 Vict c 14), ss 3 and 6. 395 Act of 2 March 1907, ch 2534, §2, 34 Stat 1228 at 1228. 396 Reasons of Kiefel CJ, Keane and Gleeson JJ at [41]; Singh v The Commonwealth (2004) 222 CLR 322 at 397-398 [197] per Gummow, Hayne and Heydon JJ. 397 Naturalization Act 1903 (Cth), s 9. 398 Naturalization Act 1903 (Cth), s 10. 399 Naturalization Act 1903 (Cth), s 11. 400 Nationality Act 1920 (Cth), ss 18-19. Note, when that Act was in force, the Australian body politic comprised "British subjects" and "alien" was defined in s 5(1) as "a person who is not a British subject". 401 Nationality Act 1920 (Cth), s 21. Some early authorities of this Court perhaps betray differing views about membership of the Empire, British subjecthood and race. In Potter v Minahan402, Minahan had been born in Victoria of mixed Anglo-Chinese parentage. He left Australia as a child to live in China for 26 years. He then returned to Australia. Each of Griffith CJ, Barton and O'Connor JJ decided that Minahan was not an immigrant for the purposes of the Immigration Restriction Acts 1901-1905 (Cth). Isaacs and Higgins JJ dissented. Griffith CJ said403: "[E]very person becomes at birth a member of the community into which he is born, and is entitled to remain in it until excluded by some competent authority. It follows also that every human being (unless outlawed) is a member of some community, and is entitled to regard the part of the earth occupied by that community as a place to which he may resort when he thinks fit. ... At birth he is, in general, entitled to remain in the place where he is born. (There may be some exceptions based upon artificial rules of territoriality.) If his parents are then domiciled in some other place, he perhaps acquires a right to go to and remain in that place. But, until the right to remain in or return to his place of birth is lost, it must continue, and he is entitled to regard himself as a member of the community which occupies that place. These principles are self-evident, and do not need the support of authority." "[W]here a charter of self-government, such as ours, grants the right to deal with immigration, which includes the right wholly to prohibit the landing of an immigrant, it is open to doubt whether the grant includes the right to prohibit the entry of those who are subjects of the Crown born within our bounds, and who, to adapt a phrase of Lord Watson's, may be called Australian-born subjects of the King." 402 (1908) 7 CLR 277. 403 Potter v Minahan (1908) 7 CLR 277 at 289. 404 Potter v Minahan (1908) 7 CLR 277 at 294. "A person born in Australia, and by reason of that fact a British subject owing allegiance to the Empire, becomes by reason of the same fact a member of the Australian community under obligation to obey its laws, and correlatively entitled to all the rights and benefits which membership of the community involves, amongst which is a right to depart from and re-enter Australia as he pleases without let or hindrance unless some law of the Australian community has in that respect decreed the contrary." Much of the foregoing supports the plaintiff's case. But the majority's reasoning in Minahan did not support an absolute right of abode for those born in Australia. Griffith CJ referred to exclusion "by some competent authority"406. Barton J referred to a person who intended to abandon her or his "domicil of origin"407. O'Connor J referred to a right to depart and re-enter "unless some law of the Australian community has in that respect decreed the contrary"408. His Honour also said409: "It cannot be denied that, subject to the Constitution, the Commonwealth may make such laws as it may deem necessary affecting the going and coming of members of the Australian community." In contrast, in Donohoe v Wong Sau410, this Court decided that an ethnic Chinese person, born in Australia to a naturalised parent, was an immigrant when she sought to re-enter Australia after a prolonged period living in China. Reflecting views on race that have long since been repudiated, Higgins J said411: "In the case of Potter v Minahan it will be noticed that there were some facts which were not present in this case. The father in that case took the birth certificate with him to China when leaving Australia; and the 405 Potter v Minahan (1908) 7 CLR 277 at 305. 406 Potter v Minahan (1908) 7 CLR 277 at 289. 407 Potter v Minahan (1908) 7 CLR 277 at 294. 408 Potter v Minahan (1908) 7 CLR 277 at 305. 409 Potter v Minahan (1908) 7 CLR 277 at 305. 410 (1925) 36 CLR 404. 411 Donohoe v Wong Sau (1925) 36 CLR 404 at 409. mother of the child was an Australian of European stock. In this case the mother of the respondent was Chinese, and there is not the slightest evidence of anything Australian about the respondent except her birth. She could not even speak a word of English." (footnote omitted) The preponderant opinion of this Court since Federation, nonetheless, supports the proposition that Parliament has the power to pass laws concerning when an existing subject or citizen may cease to be a member of the nation. Meyer v Poynton412 concerned the validity of s 11 of the Naturalization Act 1903-1917 (Cth), which gave the Governor-General a power to revoke the naturalisation of a person where this was "desirable for any reason". Starke J upheld the validity of this provision. His Honour said413: "It seems to me that if the power given by the Naturalization Act to admit to Australian citizenship is within the power to make laws with respect to naturalization, so must authority to withdraw that citizenship on specified conditions be also within that power." The correctness of Meyer would not appear to have since been doubted414. Analogous reasoning would apply to the power given by the 2007 Citizenship Act to admit certain Australian-born persons to Australian citizenship415; inherent in such a power must be the authority to withdraw that citizenship. Ex parte Walsh and Johnson; In re Yates416 concerned the validity of s 8AA of the Immigration Act 1901-1925 (Cth), which permitted the deportation of persons not born in Australia who had caused "a serious industrial disturbance prejudicing or threatening the peace, order or good government of the Commonwealth". A majority of this Court held that the "immigration and emigration" head of power in s 51(xxvii) supported the validity of s 8AA. Relevantly to s 51(xix), Isaacs J said417: 412 (1920) 27 CLR 436. 413 Meyer v Poynton (1920) 27 CLR 436 at 441. 414 See, eg, Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 88 per 415 Australian Citizenship Act 2007 (Cth), s 12. 416 (1925) 37 CLR 36. 417 Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 94, 97-98. "This nation cannot have less power than an ordinary body of persons, whether a State, a church, a club, or a political party who associate themselves voluntarily for mutual benefit, to eliminate from their communal society any element considered inimical to its existence or welfare. We have only to imagine, as I suggested during the argument, some individual found plotting with foreign powers against the safety of the country, or even suspected of being a spy or a traitor. It matters not, as I conceive, whether he is an alien or a fellow-subject, whether he is born in Kamtschatka or in London or in Australia, the national danger is the same. I am unable to see why Parliament could not, in protection of the Commonwealth in respect of defence, customs, coinage or immigration, for instance, enact that any person who was shown to the satisfaction of the Minister to be a spy, a traitor, a smuggler, a coiner or an importer of prostitutes, might be summarily deported. Such legislation on admitted subjects of power might be considered arbitrary and even dangerous; but those are elements entrusted to the wisdom of Parliament when weighing in its own scales of social justice the comparative claims of individuals and the nation." In Nolan v Minister for Immigration and Ethnic Affairs, the majority recognised that an "alien" included a "person who has ceased to be a citizen by an act or process of denaturalization"418. In Singh, Gleeson CJ observed that under s 51(xix) and (xxvii) of the Constitution, Parliament has the power to pass a law whereby, subject to one qualification, any form of citizenship may be acquired and lost. Thus, his Honour said419: "I have previously stated my view that, subject to a qualification, Parliament, under paras (xix) and (xxvii) of s 51, has the power to determine the legal basis by reference to which Australia deals with matters of nationality and immigration, to create and define the concept of Australian citizenship, to prescribe the conditions on which such citizenship may be 418 (1988) 165 CLR 178 at 183 per Mason CJ, Wilson, Brennan, Deane, Dawson and Toohey JJ. See also Cunliffe v The Commonwealth (1994) 182 CLR 272 at 374-375 419 Singh v The Commonwealth (2004) 222 CLR 322 at 329 [4]. See also Re Minister for Immigration and Multicultural Affairs; Ex parte Te (2002) 212 CLR 162 at 173 acquired and lost, and to link citizenship with the right of abode." (footnote omitted) The "qualification" was expressed in the following terms420: "Parliament cannot, simply by giving its own definition of 'alien', expand the power under s 51(xix) to include persons who could not possibly answer the description of 'aliens' in the Constitution. Within the class of persons who could answer that description, Parliament can determine to whom it will be applied, and with what consequences. Alienage is a status, and, subject to the qualification just mentioned, Parliament can decide who will be treated as having that status for the purposes of Australian law and, subject to any other relevant constitutional constraints, what that status will entail." (footnote omitted) It is at least implicit from the joint reasons of Gummow, Hayne and Heydon JJ in Singh that their Honours considered it would be an odd "one-way street"421 for the "naturalization and aliens" head of power to authorise only laws granting citizenship and not also laws which denied citizenship. Thus, their Honours said422: "Whatever may be the outcome of debate about the validity of laws alleged to depend upon other powers given to the federal Parliament, it is central to the plaintiff's argument that the constitutional word 'aliens' has a meaning which cannot include a person born within Australia. If that is the proper construction of 'aliens' the result would be that, through the exercise of the naturalisation aspect of the power conferred by s 51(xix), the class of persons born outside Australia who otherwise would be aliens can be altered or reduced by valid federal legislation, but the class of non-aliens contains an irreducible core. Understood in that way, the naturalisation and aliens power would provide a one-way street: empowering legislation permitting persons to become non-aliens but not empowering legislation that would affect the status of a person born in Australia, regardless of that person's ties to other sovereign powers." 420 Singh v The Commonwealth (2004) 222 CLR 322 at 329 [4] per Gleeson CJ. See further Pochi v Macphee (1982) 151 CLR 101 at 109-110 per Gibbs CJ. 421 (2004) 222 CLR 322 at 397 [195]. 422 Singh v The Commonwealth (2004) 222 CLR 322 at 397 [195]. That implication is also supported by the following course of reasoning423: Steward "Argument in the present matter proceeded on the footing that the power also extends to making a law identifying the circumstances in which, and the procedures by which, a person who is not an alien may sever the ties of allegiance to Australia. (We leave aside any examination of what assumptions may be implicit in describing that as renouncing citizenship, renouncing allegiance, or ceasing to be a national of Australia.) Given the state of British law at the time of Federation, and in particular the provisions of the Naturalisation Act 1870 permitting renunciation of allegiance, it would be surprising if the power with respect to naturalisation and aliens did not extend this far. But, if the power extends to regulating renunciation of allegiance, the power extends, at least in this respect, to altering the criteria which are to determine whether the necessary connection between the individual and (to personify the concept) the Crown exists." (footnote omitted; emphasis added) Because Gummow, Hayne and Heydon JJ went on to reject the plaintiff's case that a person born in Australia bears the unalterable status of being a non- alien, it must follow that their Honours accepted that the power conferred by s 51(xix) extends "to altering the criteria which are to determine whether the necessary connection between the individual and ... the Crown exists"424. It must also follow that the aliens power could authorise a law that denied citizenship to a person born in Australia, where that person owed allegiance to foreign power. Thus, Gummow, Hayne and Heydon JJ concluded425: "The previous decisions of the Court do not require the conclusion that those born within Australia who, having foreign nationality by descent, owe obligations to a sovereign power other than Australia are beyond the reach of the naturalisation and aliens power." This Court in Singh upheld the validity of a law that denied citizenship to a person born in Australia because that person owed allegiance to a foreign power. Implicitly, her birth in this country did not create any allegiance to Australia, in the sense described by McHugh J in Singh, as her location here was only of a temporary nature (given the temporary visa held by her parents). Such foreign allegiance may be seen, in the circumstances of that case, as necessarily 423 Singh v The Commonwealth (2004) 222 CLR 322 at 397-398 [197] per Gummow, 424 Singh v The Commonwealth (2004) 222 CLR 322 at 397-398 [197]. 425 Singh v The Commonwealth (2004) 222 CLR 322 at 399 [203]. inconsistent with allegiance to Australia, and thus with membership of the community of peoples that comprises the Australian nation. Subsequently, in Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Ame426, this Court upheld the validity of a law which revoked the citizenship of persons who had become citizens of the Independent State of Papua New Guinea upon its independence. The plurality said427: "The extent of the power of Parliament to deal with matters of nationality and immigration, to create and define the concept of Australian citizenship, to prescribe the conditions on which citizenship may be acquired and lost, and to link citizenship with the right of abode, has been considered most recently by this Court in Singh v The Commonwealth. Two points of present relevance emerge from that consideration. First, the legal status of alienage has as its defining characteristic the owing of allegiance to a foreign sovereign power. Secondly, changes in the national and international context in which s 51(xix) is to be applied may have an important bearing upon its practical operation." (footnotes omitted) The foregoing expression of the width of the aliens power does not draw any distinction, for the purposes of prescribing "the conditions on which citizenship may be acquired and lost"428, between a natural-born citizen and a naturalised citizen. Any such distinction has now been rejected by this Court429. Whilst s 51(xix) of the Constitution authorises Parliament to make laws which prescribe "the conditions on which citizenship may be acquired and lost"430, that power, consistently with the "qualification" described by Gleeson CJ in 426 (2005) 222 CLR 439. 427 Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Ame (2005) 222 CLR 439 at 458-459 [35] per Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ. 428 Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Ame (2005) 222 CLR 439 at 458 [35] per Gleeson CJ, McHugh, Gummow, Hayne, 429 Re Canavan (2017) 263 CLR 284 at 308-309 [53] per Kiefel CJ, Bell, Gageler, Keane, Nettle, Gordon and Edelman JJ. 430 Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Ame (2005) 222 CLR 439 at 458 [35] per Gleeson CJ, McHugh, Gummow, Hayne, Singh431, is not unfettered. Because membership to the Australian body politic is inextricably bound up with the concept of allegiance to this country, the power to denationalise must be limited to laws that recognise and accept a loss of citizenship arising from actions or steps that are indelibly inconsistent with that allegiance and with membership of that community. That conclusion is consistent with how the law of denationalisation had developed in the United Kingdom and the United States by the time of Federation. It explains Isaacs J's observation in Ex parte Walsh that the Federal Parliament had the power to pass a law that eliminated from "communal society" any person, whether born in Australia or not, who was "inimical" to the "existence" of that society432. His Honour referred to "plotting with foreign powers against the safety of the country" and even being "suspected of being a spy or a traitor"433. No doubt there are many ways a person may act that are enduringly antithetical to allegiance to Australia, or to membership of the "people of the Commonwealth"434 that comprise this nation. It follows that the power to pass a law of denationalisation is not to be limited to a declaration of alienage435. Nor would the validity of such a law require an actual intention to renounce citizenship. In Perez v Brownell, Frankfurter J made the following observation in support of that proposition in relation to a law that cancelled a person's citizenship upon voting in a foreign political election. His Honour said436: "Of course, Congress can attach loss of citizenship only as a consequence of conduct engaged in voluntarily. See Mackenzie v Hare, 239 US 299, 311-312. But it would be a mockery of this Court's decisions to suggest that a person, in order to lose his citizenship, must intend or desire to do so. The Court only a few years ago said of the person held to have lost her citizenship in Mackenzie v Hare, supra: 'The woman had not intended to give up her American citizenship.' Savorgnan v United States, 338 US 491, 501. And the latter case sustained the denationalization of Mrs Savorgnan although it was not disputed that she 'had no intention of 431 (2004) 222 CLR 322 at 329 [4]. See further Pochi v Macphee (1982) 151 CLR 101 at 109-110 per Gibbs CJ. 432 (1925) 37 CLR 36 at 94. 433 Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 94. 434 Constitution, s 24. 435 cf Naturalization Act 1870 (Imp) (33 & 34 Vict c 14), s 4. 436 (1958) 356 US 44 at 61. endangering her American citizenship or of renouncing her allegiance to the United States.' 338 US, at 495. What both women did do voluntarily was to engage in conduct to which Acts of Congress attached the consequence of denationalization irrespective of – and, in those cases, absolutely contrary to – the intentions and desires of the individuals. Those two cases mean nothing – indeed, they are deceptive – if their essential significance is not rejection of the notion that the power of Congress to terminate citizenship depends upon the citizen's assent." (footnote omitted) Perez was not followed by a subsequent decision of the Supreme Court of the United States437, but I nonetheless prefer Frankfurter J's opinion. The denationalisation power cannot be fettered by a requirement that the person must subjectively intend to abandon her or his citizenship in order for that power to be engaged in every case. Thus, a law that denationalises a citizen because that person took a step or steps that represented a fundamental and lasting rebuttal of allegiance to Australia would be authorised by s 51(xix), consistently with an historical consideration of the aliens power. Axiomatically, it would include waging war against this country. This has long been recognised as a justification for denationalisation. For example, when the 1948 Citizenship Act was first enacted, as the Nationality and Citizenship Act 1948 (Cth), it contained s 19 in the following terms: "An Australian citizen who, under the law of a country other than Australia, is a national or citizen of that country and serves in the armed forces of a country at war with Australia shall, upon commencing so to serve, cease to be an Australian citizen." Conduct that might also justify a law of denationalisation might include actions which seek to destroy or gravely harm the fundamental and basal features of the nation guarded by its Constitution, such as representative democracy and the rule of law, and actions directed at overthrowing state institutions where such conduct amounts to a clear rejection of allegiance to Australia. Terrorist attacks might also be included. It is otherwise unnecessary and inappropriate to define the metes and bounds of the denationalisation power conferred on the Federal Parliament by s 51(xix). 437 Afroyim v Rusk (1967) 387 US 253. The "qualification" recognised by Gleeson CJ in Singh438 and by Gibbs CJ in Pochi v Macphee439 is otherwise important for another reason, as recognised by Edelman J. It is a fetter on the legislative power to define who is an alien. As Edelman J explains, who is an alien for the purposes of s 51(xix) is ultimately a matter entrusted to this Court440. On that basis, Edelman J argues that a person who is unconditionally absorbed into the Australian community should not be considered, for the purposes of s 51(xix), to be an alien441. I respectfully agree with Edelman J's reasons. They recognise, as inevitably they must, that the "naturalization" power in s 51(xix), like the "aliens" power, has a constitutional field of application to be determined by this Court. Unconditional absorption in that respect is completion of the process of naturalisation for the purposes of s 51(xix). So construed, such a power has authorised all of the naturalisation laws enacted by Parliament since the Naturalization Act 1903 (Cth). Those laws are a recognition of the constitutional consequences for a person's status of unconditional absorption into the Australian community. Cancellation of citizenship and the 2007 Citizenship Act The 2007 Citizenship Act provides for several means by which citizenship of this country may be lost. Pursuant to s 33, a person may make an application to the Minister to renounce her or his citizenship. The Minister may approve such a renunciation if, for example, the person is aged over 18 years and is "a national or citizen of a foreign country"442. Pursuant to s 34(1), the Minister may revoke a person's citizenship if, for example, that person has been convicted of certain offences relating to her or his application for citizenship, and the Minister is satisfied that it would not be in the public interest for that person to remain a citizen. Pursuant to s 36, the children of a person who ceases to be a citizen may also cease to be citizens. Subdivision C of Div 3 of Pt 2 of the 2007 Citizenship Act is headed "Citizenship cessation determinations". One of its operative provisions is s 36B, which confers a power on the Minister to determine that a person's citizenship has ceased. This was the power exercised here. Section 36A states the purpose of Subdiv C in the following way: 438 (2004) 222 CLR 322 at 329 [4]. 439 (1982) 151 CLR 101 at 109-110. 440 See [193]-[199], [225]. 441 See [204]-[211]. 442 Australian Citizenship Act 2007 (Cth), s 33(3)(a). "This Subdivision is enacted because the Parliament recognises that Australian citizenship is a common bond, involving reciprocal rights and obligations, and that citizens may, through certain conduct incompatible with the shared values of the Australian community, demonstrate that they have severed that bond and repudiated their allegiance to Australia." Allegiance to Australia is a fundamental incident of Australian citizenship for the purposes of the 2007 Citizenship Act. That Act does not create that allegiance for natural-born Australians; rather, it recognises allegiance as an inherent feature of Australian citizenship. The preamble to that Act thus states: "The Parliament recognises that Australian citizenship represents full and formal membership of the community of the Commonwealth of Australia, and Australian citizenship is a common bond, involving reciprocal rights and obligations, uniting all Australians, while respecting their diversity. The Parliament recognises that persons conferred Australian citizenship enjoy these rights and undertake to accept these obligations: by pledging loyalty to Australia and its people; and by sharing their democratic beliefs; and by respecting their rights and liberties; and by upholding and obeying the laws of Australia." As already concluded, a law that permits the cancellation of citizenship following conduct which is so incompatible with the shared values of the Australian community that it constitutes a severance of the bond between citizens and a repudiation of allegiance is an example of a valid denationalisation law. It is valid because cancellation takes place when there exists conduct which demonstrates an indelible renunciation of membership of this nation. Section 36B of the 2007 Citizenship Act is a law of this kind. Section 36B operates when three conditions are met. First, the Minister must be satisfied that a person has engaged in certain types of "conduct"443. That "conduct" is prescribed in s 36B(5). Secondly, the Minister must be satisfied that "the conduct demonstrates that the person has repudiated their allegiance to Australia"444. Thirdly, the Minister must be satisfied that "it would be contrary to 443 Australian Citizenship Act 2007 (Cth), s 36B(1)(a). 444 Australian Citizenship Act 2007 (Cth), s 36B(1)(b). Steward the public interest for the person to remain an Australian citizen"445. Pursuant to s 36E, in considering the public interest, the Minister "must" have regard to nine matters. These include "the severity of the conduct" in question, "the degree of threat posed by the person" to the community, whether "the person is being or is likely to be prosecuted" for the conduct, and "Australia's international relations"446. The validity of this law hinges on the second condition in s 36B(1). Conduct that manifests a repudiation of allegiance to Australia is conduct that is inconsistent with continued citizenship and membership of this nation. The word "repudiated", in its statutory context, refers to a voluntary rejection or renunciation of allegiance447. Whether such a rejection or renunciation has taken place does not turn upon the subjective wishes of a person, but upon an objective consideration of the voluntary "conduct" identified in accordance with s 36B(1)(a). That conduct is examined to determine whether it "demonstrates" the presence of a repudiation of allegiance. A further element of this statutory scheme is that it only applies to individuals who have dual citizenship. Pursuant to s 36B(2), the Minister cannot determine that a person ceases to be a citizen if the Minister is also satisfied that it would result in the person becoming someone who is not a national or citizen of any country. Thus, the power to cancel citizenship cannot be exercised if it would lead to statelessness. Here, the plaintiff is a citizen of the Republic of Turkey. The "conduct", defined by s 36B(5), refers to behaviour that potentially contradicts allegiance to the bonds that constitute the nation. With the exception of s 36B(5)(j), the "conduct" listed is connected with terrorism or constitutes terrorism. Terrorism is an evil scourge, which in the 21st century has been visited on this country. It is warfare waged unconventionally448. Paragraph (a) of s 36B(5) refers to "engaging in international terrorist activities using explosive or lethal devices". Paragraph (b) refers to "engaging in a terrorist act". Paragraph (c) refers to "providing or receiving training connected with preparation for, engagement in, or assistance in a terrorist act". Paragraph (d) refers to "directing the activities of a terrorist organisation". Paragraph (e) refers to "recruiting for a terrorist organisation". Paragraph (f) refers to "financing terrorism". Paragraph (g) refers to "financing a terrorist". Paragraph (h) refers to "engaging in foreign incursions and 445 Australian Citizenship Act 2007 (Cth), s 36B(1)(c). 446 Australian Citizenship Act 2007 (Cth), s 36E(2)(a), (c), (f) and (h) respectively. 447 cf Koompahtoo Local Aboriginal Land Council v Sanpine Pty Ltd (2007) 233 CLR 115 at 135-136 [44] per Gleeson CJ, Gummow, Heydon and Crennan JJ. 448 cf Thomas v Mowbray (2007) 233 CLR 307 at 324-325 [7] per Gleeson CJ. recruitment" (addressed in greater detail below). Paragraph (i) refers to "fighting for, or being in the service of, a declared terrorist organisation"449. Paragraph (j) refers to "serving in the armed forces of a country at war with Australia". The foregoing activities are also criminal offences for the purposes of the Criminal Code (Cth), although only if the "fault element" for each offence, as prescribed by the Criminal Code, is satisfied. Thus, s 36B(6) provides that the words and expressions used in s 36(5)(a)-(h) have the same meaning as they do in the Criminal Code450; however, this does not include the "fault elements" for each offence. It is easy to accept that participation in these types of terrorist activities could amount to "conduct" that is necessarily inconsistent with allegiance to Australia or to membership of this nation. For example, s 100.1 of the Criminal Code defines the type of action that can constitute a "terrorist act", for the purposes of s 101.1, as engaged by s 36B(5)(b). It includes action that causes serious physical harm or death451, which is done with the intention of "advancing a political, religious or ideological cause", and with the intention of, amongst other things, "influencing by intimidation" the Australian government or "intimidating the public"452. Whether, by reason of s 36B(6), the intentional attributes of the definition of a "terrorist act" are included need not, for the moment, be resolved. A law that facilitates the cancellation of a person's citizenship for engaging in "terrorist acts", when that person's conduct demonstrates repudiation of allegiance to Australia, and when it is also in the public interest for that person not to remain a citizen, is authorised by s 51(xix). The same conclusion applies to the other types of conduct identified in s 36B(5)(a)-(i) that are connected to, or which further, 449 As defined by s 36C of the Australian Citizenship Act 2007 (Cth). 450 Corresponding with Subdiv A of Div 72 (International terrorist activities using explosive or lethal devices); ss 101.1 (Terrorist acts), 101.2 (Providing or receiving training connected with terrorist acts), 102.2 (Directing the activities of a terrorist organisation), 102.4 (Recruiting for a terrorist organisation), 103.1 (Financing terrorism) and 103.2 (Financing a terrorist); and Div 119 (Foreign incursions and recruitment), respectively. For the avoidance of doubt, s 5.6 of the Criminal Code (Cth) specifies that "[i]f the law creating the offence does not specify a fault element", the fault element will either be intention or recklessness depending on the type of "physical element". 451 Criminal Code (Cth), s 100.1(2)(a), (c). 452 Criminal Code (Cth), s 100.1(1) (definition of "terrorist act"). terrorism. Terrorism is manifestly antithetical to the fundamental values shared by members of the Australian nation. Foreign incursion On the agreed facts of this amended special case, the Minister was satisfied that the plaintiff had engaged in a "foreign incursion" for the purposes of s 36B(5)(h) of the 2007 Citizenship Act. The Minister was also satisfied that this conduct demonstrated that the plaintiff had "repudiated [his] allegiance to Australia" and that it was "contrary to the public interest for [the plaintiff] to remain an Australian citizen". Pursuant to s 36B(6), one turns to the Criminal Code to determine what a "foreign incursion" comprises. Pursuant to s 119.2 of the Criminal Code, an Australian citizen commits an offence if she or he enters or remains in an area of a foreign country and that area is "declared" by the Foreign Affairs Minister pursuant to s 119.3. The Foreign Affairs Minister may make that declaration if she or he is satisfied that a "listed terrorist organisation is engaging in a hostile activity in that area"453. The term "terrorist organisation" is defined to include "an organisation that is directly or indirectly engaged in, preparing, planning, assisting in or fostering the doing of a terrorist act"454. The phrase "engage in a hostile activity" refers to conduct that is engaged in with the intention of achieving objectives such as the overthrow of a government of a foreign country by force or violence, causing serious harm or death, intimidating the public, or unlawfully damaging property belonging to the government of a foreign country455. Section 119.2(3) lists a series of permitted or innocent purposes for being in such a "declared" area. These include providing humanitarian aid, performing an official governmental duty, performing an official duty for the United Nations or the Red Cross, making a bona fide visit to a family member, and making a news report. Section 119.2 was enacted in 2014. The Explanatory Memorandum to the Counter-Terrorism Legislation Amendment (Foreign Fighters) Bill 2014 (Cth) described the purpose of s 119.2 in the following terms456: 453 Criminal Code (Cth), s 119.3(1). A "listed terrorist organisation" is defined in s 100.1(1) by reference to s 102.1(1). 454 Criminal Code (Cth), s 102.1(1) (definition of "terrorist organisation"). 455 Criminal Code (Cth), s 117.1(1) (definition of "engage in a hostile activity"). 456 Australia, Senate, Counter-Terrorism Legislation Amendment (Foreign Fighters) Bill 2014, Explanatory Memorandum at 47 [225]. "The legitimate objective of the new offence is to deter Australians from travelling to areas where listed terrorist organisations are engaged in a hostile activity unless they have a legitimate purpose to do so. People who enter, or remain in, a declared area will put their own personal safety at risk. Those that travel to a declared area without a sole legitimate purpose or purposes might engage in a hostile activity with a listed terrorist organisation. These people may return from a declared area with enhanced capabilities which may be employed to facilitate terrorist or other acts in Australia. The new offence will enable the prosecution of people who intentionally enter an area in a foreign country where they know, or are aware of a substantial risk, that the Australian Government has determined that terrorist organisations are engaging in a hostile activity and the person is not able to demonstrate a sole legitimate purpose or purposes for entering, or remaining in, the area." The reference in the foregoing passage to knowledge that an area contains a terrorist organisation that is engaging in hostile activity does not apply in the case of s 36B(5)(h) of the 2007 Citizenship Act. As already mentioned, s 36B(6) excludes the "fault elements" of the criminal offences listed in s 36B(5)(a)-(h). However, the incursion must still have taken place voluntarily. That is because s 4.1(1) of the Criminal Code provides that a "physical element" of an offence may be "conduct" and s 4.2(1) provides that "conduct" can "only be a physical element if it is voluntary". Thus, s 36B(5)(h) could not be satisfied if the person in question had made an involuntary foreign incursion. In 2010, the group now known as "Islamic State" was listed as a terrorist organisation. The following was an agreed fact of this amended special case: "Islamic State is opposed to Western interests, including those of Australia. Islamic State has openly called for attacks against Australia, and Australian citizens and interests, both because of the group's anti-Western ideology and because of Australia's support of military operations against Islamic State. Islamic State has promoted its opposition to Australia through propaganda material, foreign fighter videos and vitriolic speeches by senior leadership. Official Islamic State propaganda has sought to radicalise Australian Muslims in an effort to swell Islamic State ranks and encourage domestic terror attacks." In 2014, the Foreign Affairs Minister declared al-Raqqa province in Syria to be a "declared" area for the purposes of s 119.3 of the Criminal Code457. In a 457 Criminal Code (Foreign Incursions and Recruitment – Declared Areas) Declaration 2014 – Al-Raqqa Province, Syria (4 December 2014). statement of reasons accompanying the declaration, it was observed that Islamic State was "based in the Iraqi provinces of Ninewa and al-Anbar and the Syrian province of al-Raqqa"458. It was further observed that Islamic State's activities and calls "have attracted thousands of 'foreign fighters', including Australians, who have travelled to Syria to join ISIL and engage in hostile activity"459. It was also an agreed fact of this amended special case that the plaintiff, at some point after 16 April 2013, travelled to Syria. It was not an agreed fact that he had entered into, and had remained in, al-Raqqa province after it became a "declared" area. Indeed, prior to his departure, the plaintiff informed his family that the purpose of his travel was to arrange a marriage, and that he intended to return to Australia. That marriage took place in 2013 in the Governorate of Idlib, Syria. The plaintiff's litigation guardian, his sister, claims that while in Syria (prior to his imprisonment) the plaintiff had wanted to return to Australia but was "stuck" as there was "no way to get out" because of road closures. He was subsequently detained at first by Kurdish militia and then by Syrian authorities. He claims he was tortured. He remains in custody in Syria. The Minister's determination to cancel the plaintiff's citizenship, pursuant to s 36B(1) of the 2007 Citizenship Act, followed the receipt of a Qualified Security Assessment ("QSA") from the Director-General of Security of the Australian Security Intelligence Organisation ("ASIO"). The QSA advised that ASIO had assessed that the plaintiff had "likely engaged in foreign incursions and recruitment by entering or remaining in al-Raqqa Province in Syria, a declared area, on or after 5 December 2014" and had "likely travelled to Syria in early-to- mid-2013, and had joined the Islamic State of Iraq and the Levant [('ISIL')]". ASIO indicated that the plaintiff's travel to Syria was facilitated through a Sydney-based facilitation network developed by convicted terrorist Hamdi Al Qudsi. The plaintiff is seeking review of this QSA in the Administrative Appeals Tribunal460. The correctness of the QSA and the lawfulness of the Minister's determination under s 36B(1) are not in issue before this Court. The plaintiff has also made an 458 Criminal Code (Foreign Incursions and Recruitment – Declared Areas) Declaration 2014 – Al-Raqqa Province, Syria, Explanatory Statement at 2. 459 Criminal Code (Foreign Incursions and Recruitment – Declared Areas) Declaration 2014 – Al-Raqqa Province, Syria, Explanatory Statement at 2. 460 Pursuant to the Australian Security Intelligence Organisation Act 1979 (Cth), s 54(1) and the Administrative Appeals Tribunal Act 1975 (Cth), s 27AA(1). application for revocation of the Minister's decision to cancel his citizenship461. He was also aware that he could seek judicial review of the determination. The plaintiff contended that s 36B(5)(h) is over-inclusive because it extends to conduct that would include a visit to a "declared" area that was wholly innocent. In particular, he relied upon the absence of any fault element for conduct constituting a foreign incursion. However, that submission overlooks the fact that the existence of "conduct", enlivening s 36B(1), is only the first of three tests in the applicable statutory scheme462. The second test requires the Minister to be satisfied that the conduct demonstrates that the person has "repudiated their allegiance to Australia"463. As the defendants contended, if a visit were truly innocent it would be most unlikely that the Minister would ever be satisfied that such blameless conduct constituted a rejection of allegiance to this country. This is made clear in the Revised Explanatory Memorandum to the Australian Citizenship Amendment (Citizenship Cessation) Bill 2020 (Cth) ("the Cessation EM"), which states464: "A person who, for example, unknowingly participated in conduct set out in new subsection 36B(5) is unlikely to satisfy the Minister that they have repudiated their allegiance to Australia." Nor is it likely that such innocent conduct would justify a conclusion, for the purposes of the third component, that it was not in the "public interest for the person to remain an Australian citizen"465. The plaintiff's submission also overlooks s 119.2(3) of the Criminal Code, which, as mentioned above, creates a significant number of exceptions for entry into a "declared" area for a legitimate purpose or purposes. Whilst it must be accepted that it may be possible to enter innocently into a "declared" area, it is also possible to do so with evil intention. In 2014, Islamic State's reputation for extreme violence was notorious and it had become one of the world's deadliest and most active terrorist organisations. On 4 December 2014, the Minister for Foreign Affairs issued a press release concerning the declaration of 461 Australian Citizenship Act 2007 (Cth), s 36H. 462 Australian Citizenship Act 2007 (Cth), s 36B(1)(a). 463 Australian Citizenship Act 2007 (Cth), s 36B(1)(b). 464 Australia, Senate, Australian Citizenship Amendment (Citizenship Cessation) Bill 2020, Revised Explanatory Memorandum at 8 [46]. 465 Australian Citizenship Act 2007 (Cth), s 36B(1)(c). Steward al-Raqqa province under s 119.3 of the Criminal Code, stating, amongst other things: "The ISIL terrorist organisation is engaging in significant hostile activities in Al-Raqqa ... Any Australians who are currently in Al-Raqqa province without legitimate purpose should leave immediately." Given the foregoing, one can conceive that the voluntary act of entering and remaining in al-Raqqa province in 2014 could, of itself, well justify a conclusion that the person in question had "repudiated their allegiance to Australia" and that it was in "the public interest" for that person not to remain a citizen. Incursion might also be accompanied by other conduct, such as repeatedly accessing internet sites that promote terrorism, which is not an element of the offence prescribed by s 119.2 of the Criminal Code, but which might be very relevant to the issue of repudiation. As already mentioned, whether the plaintiff ever visited al-Raqqa province, and, if he did, whether his conduct thereby demonstrated repudiation of allegiance to Australia, are not matters before this Court. It is sufficient to state that a law so designed and targeted at voluntary movement into an area in which a "listed terrorist organisation" is undertaking hostile activity is a valid law of denationalisation, authorised by s 51(xix) of the Constitution. The "people of the Commonwealth" The plaintiff advanced a number of additional grounds attacking the validity of s 36B of the 2007 Citizenship Act. The first of these was that the Court should imply from the text of the Constitution either an absolute or qualified prohibition on the removal of a person's status as a member of the "people of the Commonwealth", consistently with the use of that phrase in the Constitution466. The essence of the argument was that once it is acknowledged that the Constitution recognised the existence of the people of Australia as a distinct community, it followed that the character of that body of people was unalterable by Parliament. Parliament did not have an unfettered ability to define, for example, who were the "people" from whom senators and members of the House of Representatives were to be directly chosen for the purposes of ss 7 and 24 of the Constitution. Alternatively, it was submitted, it should be implied that any exclusion from membership of the "people of the Commonwealth" should only take place through an exercise of judicial power under Ch III of the Constitution. Neither proposition was directly supported by any authority. 466 Constitution, s 24. It is well established that implications which limit the legislative powers of the Commonwealth can only be drawn when it is necessary to do so to give effect to the text or structure of the Constitution467. Here, the suggested implication is unnecessary and conflicts with the scope of legislative authority conferred by the "naturalization and aliens" head of power in s 51(xix) of the Constitution. That head of power, for the reasons already given, authorises laws that provide for the denationalisation of an Australian citizen where that person has acted in a way, or taken a step or steps, that constitutes a permanent repudiation of her or his allegiance to Australia or of her or his membership of this nation. The existence of this legislative power is a complete answer to the implication sought to be propounded by the plaintiff. The relevance of Ch III to laws authorising the expatriation of Australian citizens is otherwise addressed below. A law cannot disenfranchise a citizen The plaintiff submitted that, as a citizen and a member of the "people" for the purposes of ss 7 and 24 of the Constitution, he had a right to vote in federal elections. He relied upon the well-established proposition that ss 7 and 24 of the Constitution mandate universal adult suffrage, exclusion from which requires a "substantial reason"468. Because the cancellation of citizenship results in automatic disenfranchisement, it was submitted that such a law required the support of a "substantial reason", and that none existed here469. There is an immediate difficulty with the plaintiff's contention. As the defendants pointed out, the plaintiff's reasoning is circular. Laws exist in this country which confer rights and duties on a person who is a citizen. One of those duties is the obligation to vote at federal elections. The existence of such rights and duties, which depend on a person's legal status as a citizen, cannot limit Parliament's power to make valid laws of denationalisation in accordance with s 51(xix) of the Constitution. If the plaintiff's citizenship has been validly cancelled, then he has forfeited his eligibility to vote, as a consequence of his new legal status as an alien. But a general implication derived from ss 7 and 24 of the Constitution concerning universal suffrage says nothing at all about who should, and who should not, be citizens of this country. That is because it is an implication 467 Gerner v Victoria (2020) 270 CLR 412 at 422 [14] per Kiefel CJ, Gageler, Keane, 468 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7] per Gleeson CJ; Rowe v Electoral Commissioner (2010) 243 CLR 1 at 48-49 [123] per Gummow 469 Commonwealth Electoral Act 1918 (Cth), s 93(1)(b), (7)(b). that takes the body politic to be that which is defined by the Parliament subject to the Constitution470. If, contrary to the foregoing, s 36B of the 2007 Citizenship Act must be justified by a "substantial reason", the defendants submitted that responding to a repudiation of membership of the Australian community and protection of that community from terror were both sufficient justifications. That submission should be accepted. In that respect, in Roach v Electoral Commissioner, Gleeson CJ observed471: "The rational connection between such exclusion and the identification of community membership for the purpose of the franchise might be found in conduct which manifests such a rejection of civic responsibility as to warrant temporary withdrawal of a civic right." Conduct of the kind identified in s 36B(5)(h) and which demonstrates a repudiation of allegiance to Australia may well constitute a "rejection of civic responsibility". The plaintiff put his case that s 36B is not supported by a "substantial reason" in several different ways. For the reasons that follow, what might constitute a valid "substantial reason" need not be articulated. That is because the plaintiff's contentions are, in any event and with respect, misconceived. The plaintiff first contended that s 36B is over-inclusive in the range of conduct it specifies and thus has no "rational connection" to any of the ends it might pursue. That submission should be rejected for the reasons already given. Secondly, the plaintiff then complained that s 36B is not a proportionate law because it deprives him of his citizenship permanently. He relied upon the decision of this Court in Roach, which decided that serious criminal offending could only ever justify a temporary withdrawal of the right to vote472. That submission is misconceived for two reasons. First, as the defendants pointed out, it overlooks s 36H, which provides that a person whose citizenship has been cancelled may apply to have that decision revoked. That provision allows the Minister to, amongst other things, revoke the decision if it be in the public interest to do so473. It also overlooks the power conferred on the Minister by s 36J(1) to revoke the cancellation of citizenship on the Minister's "own initiative" if that would be in the public interest. Secondly, because the reach of s 36B is unlikely to include wholly 470 Reasons of Kiefel CJ, Keane and Gleeson JJ at [44]. 471 (2007) 233 CLR 162 at 175 [8]. 472 (2007) 233 CLR 162 at 177 [12] per Gleeson CJ. 473 Australian Citizenship Act 2007 (Cth), s 36H(3)(b). innocent conduct and is instead directed at conduct that would justify a conclusion by the Minister that a person has repudiated her or his allegiance to Australia, permanent cancellation, subject to ss 36H and 36J, is a proportionate response to an enduring renunciation of membership of the Australian community. Finally, the plaintiff submitted that s 36B is a disproportionate law because of other laws that already exist and that achieve similar ends. For example, the Federal Parliament has passed laws addressing the risks of terror-related activities that provide for the cancellation of passports, for the making of preventative detention orders, and for the making of continuing detention orders and control orders474. The existence of these means of protecting the Australian community did not justify, it was said, what the plaintiff described as a "broad executive discretion permanently to extinguish the civic rights of any member of the Australian community, exercisable on the Minister's satisfaction that any of a wide range of 'conduct' has occurred, without assessment of any fault element". That characterisation of s 36B is a misdescription of the law. Once again, it ignores the fact that engaging in prescribed conduct is only one of three preconditions to the operation of s 36B. It also disregards the nature of the species of "conduct" listed in s 36B(5). For the reasons already given, each species of conduct is potentially repugnant to, and to that extent thereby inconsistent with, fundamental values that inhere in the community comprising the "people of the Commonwealth". Cancellation is not an exercise of judicial power The plaintiff submitted that involuntary denationalisation is a form of punishment that could only be imposed by a Ch III court following the adjudication of criminal guilt. He relied upon this Court's decision in Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs475, which established the principle that, subject to certain exceptions, the executive branch of government cannot involuntarily detain a person; detaining a person as punishment can only take place following adjudgment of guilt by a court. That is because this "function" has over time become "essentially and exclusively judicial in character"476. The plaintiff submitted that this principle is not confined to detention as a form of punishment; as a matter of logic, it extends to any form of 474 Australian Passports Act 2005 (Cth), s 22 (cancellation of passports); Criminal Code (Cth), Divs 104 (control orders), 105 (preventative detention orders), 105A (continuing detention orders). 475 (1992) 176 CLR 1. 476 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27 per Brennan, Deane and Dawson JJ. punishment for breach of the law477. So much should be accepted. Here, the plaintiff urged the Court to characterise his denationalisation as a type of punishment; he contended that it is a form of banishment. Amongst other things, he relied upon the following observation of the Supreme Court of the United States in Trop v Dulles478: "We believe, as did Chief Judge Clark in the court below, that use of denationalization as a punishment is barred by the Eighth Amendment. There may be involved no physical mistreatment, no primitive torture. There is instead the total destruction of the individual's status in organized society. It is a form of punishment more primitive than torture, for it destroys for the individual the political existence that was centuries in the development. The punishment strips the citizen of his status in the national and international political community. His very existence is at the sufferance of the country in which he happens to find himself. While any one country may accord him some rights, and presumably as long as he remained in this country he would enjoy the limited rights of an alien, no country need do so because he is stateless. Furthermore, his enjoyment of even the limited rights of an alien might be subject to termination at any time by reason of deportation. In short, the expatriate has lost the right to have rights." (footnotes omitted) There is no equivalent to the Eighth Amendment to the Constitution of the United States in Australia's Constitution. Nonetheless, the Supreme Court's observation that denationalisation could be penal in nature should be accepted. In Trop, for example, denationalisation took place because the person in question had been guilty of desertion from the United States Army479. A majority of the Supreme Court reasoned480: "The purpose of taking away citizenship from a convicted deserter is simply to punish him. There is no other legitimate purpose that the statute could serve." 477 Falzon v Minister for Immigration and Border Protection (2018) 262 CLR 333 at 340 [15] per Kiefel CJ, Bell, Keane and Edelman JJ. 478 (1958) 356 US 86 at 101-102 per Warren CJ (Black, Douglas and Whittaker JJ agreeing). 479 Nationality Act of 1940, Pub L No 76-853, §401(g), 54 Stat 1137 at 1169. 480 Trop v Dulles (1958) 356 US 86 at 97 per Warren CJ (Black, Douglas and Whittaker JJ agreeing); see also at 109-110 per Brennan J. The characterisation of a power as being either judicial or administrative in nature is often difficult. As Kitto J famously observed in R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd481: "[I]t has not been found possible to frame an exhaustive definition of judicial power. But this is not to say that the expression is meaningless. The uncertainties that are met with arise, generally if not always, from the fact that there is a 'borderland in which judicial and administrative functions overlap', so that for reasons depending upon general reasoning, analogy or history, some powers which may appropriately be treated as administrative when conferred on an administrative functionary may just as appropriately be seen in a judicial aspect and be validly conferred upon a federal court." (citation omitted) Three observations, however, should be made. First, the capacity to impose a penalty of some kind is not necessarily a power exclusively reposed in the judicial branch of government. What is so reposed is the jurisdiction to impose those types of punishment that are essentially and exclusively judicial in nature, such as punishment for breach of a law in the sense described in Lim. As Gleeson CJ observed in Re Woolley; Ex parte Applicants M276/2003482: "The proposition that, ordinarily, the involuntary detention of a citizen by the State is penal or punitive in character was not based upon the idea that all hardship or distress inflicted upon a citizen by the State constitutes a form of punishment, although colloquially that is how it may sometimes be described. Taxes are sometimes said, in political rhetoric, to be punitive. That is a loose use of the term. Punishment, in the sense of the inflicting of involuntary hardship or detriment by the State, is not an exclusively judicial function." Secondly, it is well established that the federal executive can, in some circumstances, impose detriments and penalties based upon the fact that some specific crime has been committed. Thus, in Falzon v Minister for Immigration and Border Protection483, it was held that the power reposed in the relevant Minister by s 501(3A) of the Migration Act to cancel a person's visa following conviction of a crime did not impermissibly confer upon that Minister any judicial power. It is also well established that the executive may exercise a power to impose a penalty or a detriment based upon an opinion that a crime has been committed, 481 (1970) 123 CLR 361 at 373. 482 (2004) 225 CLR 1 at 12 [17]. 483 (2018) 262 CLR 333. as distinct from any conviction for that crime. Thus, in Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd484, this Court decided that the Australian Communications and Media Authority ("the Authority") had power to determine whether a broadcaster had breached one of its licence conditions, namely not to use a broadcasting service in the commission of an offence. Making a finding that such an offence had taken place and then taking enforcement action was not an exercise of judicial power. The Authority did not need to defer the exercise of its power until conviction by a court of the offence485. The plurality observed486: "More generally, and contrary to the 'normal expectation' stated by the Full Court, it is not offensive to principle that an administrative body is empowered to determine whether a person has engaged in conduct that constitutes a criminal offence as a step in the decision to take disciplinary or other action." Here, of course, the power of denationalisation does not turn upon an opinion that any of the conduct described in s 36B(5)(a)-(h) of the 2007 Citizenship Act constitutes the commission of an offence under the Criminal Code. But the plaintiff urged that the inquiry undertaken by the Minister is closely tied to the subject matter of the conduct listed. For the reasons which follow, that contention does not justify a conclusion that the Minister exercises judicial power in making a determination pursuant to s 36B. Thirdly, in determining whether the power to punish is one which is exclusively vested in the judiciary, considerations of history may assume great importance, especially when the intrinsic nature of the power exhibits features which are consistent with an exercise of executive as well as judicial power. In Lim, McHugh J, after considering Griffith CJ's descriptions of judicial power in 484 (2015) 255 CLR 352. 485 See also Visnic v Australian Securities and Investments Commission (2007) 231 CLR 381 at 386 [16] per Gleeson CJ, Gummow, Hayne, Callinan, Heydon and 486 Australian Communications and Media Authority v Today FM (Sydney) Pty Ltd (2015) 255 CLR 352 at 371 [33] per French CJ, Hayne, Kiefel, Bell and Keane JJ. Huddart, Parker & Co Pty Ltd v Moorehead487 and those of Kitto J in Tasmanian Breweries Pty Ltd488, made the following decisive observation489: illustrate "The formulations of Griffith CJ and Kitto J the imprecision attaching to the lines between judicial power, executive power and legislative power. The line between judicial power and executive power in particular is very blurred. Prescriptively separating the three powers has proved impossible. The classification of the exercise of a power as legislative, executive or judicial frequently depends upon a value judgment as to whether the particular power, having regard to the circumstances which call for its exercise, falls into one category rather than another. The application of analytical tests and descriptions does not always determine the correct classification. Historical practice plays an important, sometimes decisive, part in determining whether the exercise of a particular power is legislative, executive or judicial in character." (footnote omitted) Here, for three reasons the power exercised by the Minister in cancelling the plaintiff's citizenship was not judicial power. First, it has never been an essentially judicial function to make orders which denationalise a person. At common law, denationalisation and expatriation were not possible. And whilst common law courts ordered transportation of convicts to British colonies throughout the 18th and 19th centuries, those convicts remained British subjects490. As explained above, the Naturalization Act 1870 changed the common law. It provided for a British subject to lose her or his status as a subject in defined circumstances. None of those circumstances involved an exercise of judicial power. Nor did they involve any form of punishment. Rather, they recognised the 487 (1909) 8 CLR 330 at 357. 488 (1970) 123 CLR 361 at 374-375. 489 (1992) 176 CLR 1 at 67. 490 This can be inferred from the absence of any reference to the loss of British subjecthood in the Piracy Act 1717 (4 Geo 1 c 11) and the Transportation Act 1785 (25 Geo 3 c 46) upon a sentence of transportation to a place within "his Majesty's colonies and plantations in America" (s 1) or "within his Majesty's dominions" (s 1), respectively. See generally Neal, The Rule of Law in a Penal Colony: Law and Power in Early New South Wales (1991) at 33, 43, where no apparent distinction is drawn between convicts, emancipists and natural-born subjects comprising the Australian population. acquisition of alien status upon, for example, a subject becoming naturalised in a foreign state. Following Federation, early enactments in Australia provided the executive, not the judiciary, with the power of denationalisation or deportation in defined circumstances. Section 11 of the Naturalization Act 1903-1917 conferred such a power on the Governor-General. Section 8AA of the Immigration Act 1901-1925 conferred a power of deportation on the Minister. Section 12 of the Nationality Act 1920 conferred a power on the Governor-General491 to revoke a certificate of naturalisation where this had been obtained, for example, by false representation or fraud, or where the person had shown herself or himself to be disaffected or disloyal to the Crown. Section 21 of the Nationality and Citizenship Act 1948, as enacted, conferred on the Minister a power of denationalisation which was similar to that conferred by s 36B. It empowered the Minister to deprive a registered or naturalised citizen of her or his citizenship where, for example, the Minister was satisfied that: the person had shown herself or himself "by act or speech to be disloyal or disaffected towards" the Crown492; the person had, during any war in which Australia had been engaged, "unlawfully traded or communicated with the enemy or been engaged on or associated with any business which was to his knowledge carried on in such a manner as to assist an enemy in that war"493; or the person was not, at the date on which she or he was registered or naturalised, "of good character"494. The Minister could not make such an order in respect of a person unless the Minister was satisfied that it was "not conducive to the public good that that person should continue to be an Australian citizen"495. Contrary to what might otherwise be thought, the 152 years of legal history since 1870 cannot be overlooked or dismissed as merely recent. Nor does it matter that many of the historical provisions were concerned with naturalised rather than natural-born citizens or subjects. As already mentioned, if denationalisation is a power that may validly be exercised in the case of a naturalised Australian by the executive in accordance with a law authorised by s 51(xix), no different outcome is justified in the case of those born in this country. Both are citizens who assume the same quality of allegiance, whether expressly in the case of naturalised citizens, or implicitly in the case of those born in Australia. 491 From 1936 this power was conferred on the Minister: see Nationality Act 1936 (Cth), Schedule. 492 Nationality and Citizenship Act 1948 (Cth), s 21(1)(a). 493 Nationality and Citizenship Act 1948 (Cth), s 21(1)(b). 494 Nationality and Citizenship Act 1948 (Cth), s 21(1)(d). 495 Nationality and Citizenship Act 1948 (Cth), s 21(2). Secondly, as already mentioned, the task of the Minister here is not to determine whether the conduct identified in s 36B(5)(a)-(h) constitutes the commission of any crime. The Minister is not determining guilt or innocence. The conduct to be examined excludes in each case the fault element provided for in the Criminal Code. Instead, the Minister is required to undertake a distinctly different task. The Minister must first determine whether "the conduct demonstrates that the person has repudiated their allegiance to Australia". That is not an inquiry mandated by any provision of the Criminal Code and it does not form part of the criteria for conviction for any of the crimes referenced in s 36B(5)-(6). The Minister must also examine, having regard to the factors listed in s 36E, whether it would be "contrary to the public interest for the person to remain an Australian citizen". What is in the public interest is a matter more usually, but not invariably, reserved to the executive branch of government496. In that respect, some of the mandatory factors to be considered pursuant to s 36E require the formation of subjective judgments497 (for example, a person's connection to the other country of which they are a national or citizen (s 36E(2)(g))), and at least one raises directly a matter more naturally reserved to the executive branch of government ("Australia's international relations" (s 36E(2)(h))). Again, consideration of the public interest in the way mandated by s 36E does not form any part of the criteria for conviction of the crimes referenced in s 36B(5)-(6). It is a consideration that is foreign to the Criminal Code. Thirdly, and in contrast to American decisions such as Trop or Kennedy v Mendoza-Martinez498, the purpose of s 36B is not to punish. If it had been, then it may not have been a valid law. Rather, s 36B serves a legitimate, non-punitive 496 R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 399-400 per Windeyer J; Attorney-General (Cth) v Alinta Ltd (2008) 233 CLR 542 at 597 [168] per Crennan and Kiefel JJ. 497 See R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 377 per Kitto J. 498 (1963) 372 US 144. In any event, the American authorities do not stand for the proposition that any law of involuntary denationalisation or expatriation is inherently punitive in nature and therefore an exclusively judicial function: Rogers v Bellei (1971) 401 US 815 at 831-836 per Blackmun J (Burger CJ, Harlan, Stewart Steward purpose499. Its object, as a matter of substance500, is not retribution; rather, it is to recognise a person's repudiation of her or his allegiance to Australia and to prescribe a consequence for this repudiation, namely denationalisation. The Cessation EM clearly states that the "purpose" of Subdiv C of Div 3 of Pt 2 of the 2007 Citizenship Act is set out in s 36A501. Section 36A makes no reference, either directly or indirectly, or indeed inferentially, to punishment or retribution. Rather, it declares what Parliament considers to be the essential aspect of citizenship: it is a "common bond" which involves reciprocal rights and obligations. It then declares that a person may, by her or his conduct, act in a manner that is incompatible with the community's "shared values". It then further declares that when a person so acts, that may justify a conclusion that the person has "severed" her or his bond with the Australian community and has repudiated her or his allegiance to this country. Cancellation of that person's citizenship, in the circumstances mandated by Subdiv C, is simply the de jure acknowledgement of something which de facto has already occurred, namely that person's rejection of the Australian body politic. The foregoing gives full recognition to the words of s 36A and to the contents of the Cessation EM. It does not promote form over substance and practical effect. Rather, it reflects the reality of the statute. It is, with very great respect, wrong to conclude that the concern of s 36B is with "retribution for conduct" which is "reprehensible"502. Not only does such a conclusion manifestly clash with the expression of purpose set out in s 36A and in the Cessation EM, it also fails to grapple with an essential aspect of s 36B, namely repudiation of allegiance to Australia. A terrorist who has left Australia and has committed a terrorist act or acts which demonstrate the required repudiation of allegiance is most unlikely to care much for Australian citizenship (save for the possibility that it might be used to further some terrorist cause). For her or him, loss of citizenship is no punishment; it might be no more than an inconvenience or an insult. That is because she or he has already abandoned Australia. In that respect, it should be steadily borne in mind that the legislative scheme comprised by s 36B is in substance targeted at those who fundamentally loathe this country and all that it stands for. Those persons are not victims who require the protection of their former 499 Minister for Home Affairs v Benbrika (2021) 95 ALJR 166 at 182-183 [40] per Kiefel CJ, Bell, Keane and Steward JJ; 388 ALR 1 at 16. 500 Chu Kheng Lim v Minister for Immigration, Local Government and Ethnic Affairs (1992) 176 CLR 1 at 27 per Brennan, Deane and Dawson JJ. 501 Australia, Senate, Australian Citizenship Amendment (Citizenship Cessation) Bill 2020, Revised Explanatory Memorandum at 7 [33]. 502 Reasons of Kiefel CJ, Keane and Gleeson JJ at [75]. country; rather, they are, in substance and as a matter of practical effect, repudiators of Australia. I otherwise agree with Kiefel CJ, Keane and Gleeson JJ503 that, in a given case, a possible consequence of an application of s 36B might be the protection of the Australian people. That might be the case where the citizenship of a "foreign fighter" is cancelled. But again, that protective, non-punitive purpose does not result in a conferral by s 36B of judicial power on the executive504. In argument it was said that s 36B operated retrospectively and that this revealed its true retributive purpose. That submission is misconceived. First, cancellation takes place with only prospective effect505. Secondly, the "conduct" which triggers its application has been unlawful since (at the latest) 1 December 2014506. Thirdly, for the reasons already given, if the plaintiff entered into and remained in a "declared" area, his conduct might well have shown a repudiation of the Australian community. For the reasons given by Frankfurter J in Perez, which I prefer, it is of no moment whether the plaintiff subjectively knew at that time that his repudiation of the body politic would lead to the cancellation of his citizenship. Finally, in support of the conclusion that the power of denationalisation conferred by s 36B does not involve the exercise by the executive of judicial power, Subdiv C expressly preserves the responsibility of the courts to ensure that the power is exercised lawfully. A "note" which appears under s 36B(1) expressly refers to a person's ability to seek review of a determination to cancel citizenship in the High Court under s 75 of the Constitution or in the Federal Court under s 39B of the Judiciary Act 1903 (Cth). The same note appears under s 36H(4) in relation to a decision to refuse an application to revoke a determination made under s 36B(1). In "proceedings under section 75 of the Constitution, or under [the 2007 Citizenship Act] or another Commonwealth Act", a determination made under s 36B(1) is taken to be revoked if a "court finds that the person did not engage in the conduct to which the determination relates" or the court finds that the person 503 See [75]. 504 See Minister for Home Affairs v Benbrika (2021) 95 ALJR 166 at 183 [41] per Kiefel CJ, Bell, Keane and Steward JJ; 388 ALR 1 at 16. 505 Australian Citizenship Act 2007 (Cth), s 36B(3). 506 On which date Div 119 of the Criminal Code (Cth) (foreign incursions and recruitment; see Australian Citizenship Act 2007 (Cth), s 36B(5)(h)) commenced: Counter-Terrorism Legislation Amendment (Foreign Fighters) Act 2014 (Cth). "was not a national or citizen of a country other than Australia"507. These provisions permit the issues of "conduct" and "dual citizenship" to be considered by a court on their merits. If a court were to find that the Minister had been mistaken in her or his satisfaction that conduct of the kind identified in s 36B(5) had taken place, or that the person in question was not a dual citizen, that person's citizenship is taken never to have ceased508. The foregoing finds some support in at least one early decision of this Court. In Ex parte Walsh, Isaacs J referred to a man who was thought "by the whole of the rest of Australia" to be of "so great a danger ... that nothing short of expulsion ... would be an adequate protection to the community"509. Isaacs J observed that Parliament could validly pass a law for that person's deportation, and that the exercise of such a power was a matter reserved to the executive branch of government, unless the deportation took place as punishment for a crime. His Honour said510: "There is nothing in the written Constitution to require the power of deportation always to be exercised through the medium of the judiciary. If it is enacted as a punishment for crime, it necessarily falls to the judicial department. The Court then determines the matter, as it does every other, upon the proved circumstances of the case. If it is enacted not as a punishment for crime, but as a political precaution, it must be exercised by the political department – the Executive – and possibly on considerations not susceptible of definite proof but demanding prevention or otherwise dependent on national policy. These principles, which are self-evident, have been abundantly recognized in America in cases of which Mahler v Eby is the latest." (footnote omitted) 507 Australian Citizenship Act 2007 (Cth), s 36K(1)(a), (c). 508 Australian Citizenship Act 2007 (Cth), s 36K(2). 509 (1925) 37 CLR 36 at 95. 510 Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36 at 95-96; see also Starke J at 132, who also accepted that both the executive and judicial powers of the Commonwealth could be used to exclude an alien as "preventive or protective measures for the peace, order and good government of the Commonwealth". However, this would not apply to "citizens of the Commonwealth" (at 138). The same analysis, with respect, applies with equal force to a power to denationalise a citizen. Section 36B was thus enacted, not as a punishment for a crime, but as a "political precaution". Because it does not, when correctly and lawfully applied, impose any punishment on a person whose citizenship is cancelled because of a repudiation of allegiance, there is no need for the "safeguard" of a "criminal trial, including the incidence of the burden of proof"511. Rather, and with great respect, curial oversight of the exercise of the power, as described above, is a sufficient safeguard. I would answer the questions of law raised by the amended special case as follows: Is s 36B of the Australian Citizenship Act 2007 (Cth) invalid in its operation in respect of the plaintiff because: it is not supported by a head of Commonwealth legislative power; Answer, "No". inconsistent with an limitation on Commonwealth legislative power preventing the involuntary deprivation of Australian citizenship; implied Answer, "No". it effects a permanent legislative disenfranchisement which is not justified by a substantial reason; Answer, "No". it effects a permanent disqualification from being chosen or from sitting as a senator or a member of the House of the circumstances Representatives, otherwise contemplated by ss 34 and 44 of the Constitution; than Answer, "Unnecessary to answer as this ground was not pressed". it reposes in the Minister for Home Affairs the exclusively judicial function of punishing criminal guilt? 511 Reasons of Kiefel CJ, Keane and Gleeson JJ at [86]. Answer, "No". 2. What, if any, relief should be granted to the plaintiff? Answer, "None". 3. Who should pay the costs of the special case? Answer, "The plaintiff".
HIGH COURT OF AUSTRALIA PERMANENT TRUSTEE AUSTRALIA LIMITED & ANOR APPELLANTS AND FAI GENERAL INSURANCE COMPANY LIMITED (IN LIQ) RESPONDENT Permanent Trustee Australia Limited v FAI General Insurance Company Limited (In Liq) [2003] HCA 25 8 May 2003 ORDER 1. Appeal allowed with costs. 2. Set aside the orders of the New South Wales Court of Appeal dated 12 March 2001 and, in place thereof, order that: (a) the appeal to that Court be allowed with costs, (b) the orders made by Hodgson CJ in Eq in proceeding No. 3032 of 1996 dated 24 April 1998, as varied on 28 May 1998, be set aside and, in (i) judgment be entered for the appellants in the sum of $211,862.82 together with interest thereon pursuant to s 57 of the Insurance Contracts Act 1984 (Cth) from the date of payment by the appellants of each component of the judgment sum; and (ii) the respondent pay the costs of the appellants at first instance; (c) the orders made by Hodgson CJ in Eq in proceeding No. 3037 of 1996 dated 24 April 1998 be set aside and, in lieu thereof, order that: (i) judgment be entered for the appellants in the sum of $9,998,137.18 together with interest thereon pursuant to s 57 of the Insurance Contracts Act 1984 (Cth) from the date of payment by the appellants of each component of the judgment sum; and (ii) the respondent pay the costs of the appellants at first instance; (d) the orders made by Hodgson CJ in Eq dated 24 April 1998 requiring the repayment by the respondent to the appellants of $4,242.22 be set aside; and (e) the orders made by Hodgson CJ in Eq dated 3 June 1998 be set aside. On appeal from the Supreme Court of New South Wales Representation: R J Ellicott QC with J T Svehla and G A Elliott for the appellants (instructed by Church & Grace) D F Jackson QC with E G Romaniuk for the respondent (instructed by Colin Biggers & Paisley) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Permanent Trustee Australia Limited v FAI General Insurance Company Limited (In Liq) Insurance – Obligations of insured to disclose to insurer – Where decision "probably not" to renew policy for following year – Whether decision was a failure to disclose a "matter relevant to the decision of the insurer whether to accept the risk" to extend policy under s 21(1)(a) of the Insurance Contracts Act 1984 (Cth) – Whether non-disclosure was a misrepresentation in breach of s 26(2) of the Act. Fraud – Whether trial judge erred in failing to consider that evidence of an alleged misrepresentation became fraudulent – Whether fraud was clearly and distinctly pleaded and put at trial – Whether appellate court was warranted in finding error on this ground. Insurance Contracts Act 1984 (Cth), ss 21(1)(a), 26(2). McHUGH, KIRBY AND CALLINAN JJ. This appeal is concerned with the proper construction of ss 21 and 26 of the Insurance Contracts Act 1984 (Cth) ("the Act") and their application to arrangements between the parties for a brief extension of a current policy of insurance. The Facts Permanent Trustee Australia Limited and Permanent Trustee Company Limited ("the appellants") effected multi-layered professional indemnity insurance cover of $70 million with a number of insurers for a period of twelve months from 1 October 1990 to 30 September 1991. The primary layer (which was held by a number of Lloyds syndicates) was for $5 million. The first excess layer was for $10 million in excess of $5 million, the second excess layer was for $20 million in excess of $15 million, and the third excess layer was for $35 million in excess of $35 million. FAI General Insurance Company Limited (In Liq) ("the respondent") was one of the insurers that provided excess cover. It was responsible for 35 percent of the first excess layer ($3.5 million of cover), and 33.5 percent of the second excess layer ($6.7 million of cover). On 18 and 19 September 1991 Mr Welsh, a junior employee of Sedgwick James Ltd ("Sedgwick") (insurance broker for the appellants), in accordance with instructions he had received from Mr Daly, who had the day to day responsibility for the appellants' account, prepared, and then sent on 19 September 1991, letters to AMP, GIO and CIC, inviting them to participate in a renewal program of insurance for the appellants. Enclosed with that letter was a copy of a proposal completed by the appellants and in a form suitable for submission to the existing insurers. Although the fourth Australian insurer on the appellants' program was the respondent, because Mr Daly instructed Mr Welsh to hold off "for now" from approaching the respondent no letter was sent to it. Sedgwick did not approach the respondent because, by then, the appellants had made at least a provisional decision not to offer any opportunity of annual renewal to the respondent, and that the respondent's share of the program should, if possible be placed elsewhere. The primary judge (Hodgson CJ in Eq) made this finding as to those matters1: "In my opinion, the true position is that the Permanent companies had, prior to 30 September 1991, decided that quotes should be obtained from insurers other than FAI, which should then be considered before any 1 Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR McHugh Kirby Callinan approach was made to FAI, and had through Sedgwick Australia actually set about doing this; the Permanent companies contemplated that, so long as the quotes from other insurers were satisfactory, then FAI would not be invited to participate; and their broker, Sedgwick Australia, had been instructed accordingly. In my opinion, it is not therefore strictly correct to say that the plaintiffs had, prior to 30 September 1991, decided that FAI was to be replaced as an insurer of the plaintiffs." The evidence of Mr Hunter, the underwriting officer of the respondent who dealt with the appellants' account was that the respondent would support the extension, if the lead underwriter were prepared to do so, on the terms proposed. The respondent considered the appellants' business to be one of its "good accounts", to be a "blue chip" and a "major account", to have had a history of notifying the respondent of claims or circumstances which might give rise to claims as and when they occurred, and not to have had a history of "claims dumping". The case for the respondent was that if it had known of the appellants' intention to seek another insurer in its place it would have rejected any extension of the existing cover, for commercial reasons associated with the breakdown of the relationship between FAI and Sedgwick, and as an emotional reaction [to the appellants' intentions] and not because the renewal was relevant to the assessment of the risk. By 28 September 1991 the commercial relationship between the respondent and Sedgwick, despite representations by the respondent, had seriously deteriorated. A Sedgwick London Security Committee had instructed Sedgwick to reduce its business with the respondent because of the latter's downgrading to a rating of BBB minus by a rating agency, Standard & Poor's. On 27 August 1991 the appellants wrote to Sedgwick to seek quotations for the existing level of cover ($70 million) for the next period of 12 months from 1 October 1991 to 30 September 1992, at the same time enclosing a completed proposal in a form provided by Sedgwick. On 20 September 1991 Sedgwick received a facsimile from an associated company in England, Sedgwick London, informing it that the lead underwriter for the primary layer required further information about the appellants' involvement in property trusts before it was prepared to finalize terms of renewal. Because the inquiry was made so close to the expiry date of the existing policies, the lead underwriter (a Lloyds syndicate) was prepared to grant the appellants an extension of 30 days of their existing insurance contract at pro rata 120 per cent of the expiring premium, "all other terms unchanged" (the "extension"). On 23 September 1991 Sedgwick wrote to the appellants informing them of the terms of the proposed extension and recommending that they agree to them. The appellants accepted the recommendation and asked Sedgwick to "complete the formalities on our behalf". In accordance with its instructions, Sedgwick set about obtaining the agreement of the four Australian insurers (including the respondent) to the extension. In consequence, on or about 24 September 1991 Mr Daly, who had already spoken to AMP, instructed Mr Welsh to contact FAI, CIC and GIO to arrange the extension. When Mr Daly gave these instructions to Mr Welsh he told him to be careful when he spoke to the respondent, because of the sensitivities involved in the proposal to exclude it from participation in the renewal. On 26 September 1991, Mr Welsh telephoned Mr Hunter, an employee of the respondent to ask whether the respondent would grant the extension. Mr Welsh prepared a contemporaneous note of the conversation. Mr Welsh did not inform Mr Hunter of the appellants' intention not to seek another renewal of its policy with the respondent. On 27 September 1991 Mr Welsh sent placing slips for the extension by facsimile to Mr Hunter. In the facsimile, Mr Welsh asked Mr Hunter to confirm the respondent's agreement to the extension, by signing and dating the placing slips and returning them, also by facsimile. When Mr Hunter agreed to the extension on behalf of FAI, he believed that the respondent would be invited to quote for participation in the renewal. The respondent would not have granted the extension had it been informed of the different intentions of the appellants. During the period of the extension the appellants became aware of circumstances which might, and did subsequently give rise to a claim arising out of their trusteeship of the Aust-Wide Property Trusts, and the development of an office block at 1 O'Connell Street, Sydney. The appellants notified the respondent of these circumstances in accordance with the terms of the insurance contract on or about 15 October 1991 when legal proceedings on behalf of unitholders were commenced for breach of trust in the Supreme Court of New South Wales. The appellants sought indemnity from their insurers, including the respondent. The proceedings came to be settled, by the payment of some McHugh Kirby Callinan $100.1 million, of which the appellants' insurers' contribution would be $38.45 million in total. The trial The respondent refused to meet its share of the money payable on the settlement. That refusal triggered proceedings by the appellants against the respondent. The respondent raised a number of defences. It succeeded at first instance on one of them, that the failure of Sedgwick to inform the respondent of the intended renewal elsewhere was a breach by the appellants of their duty of disclosure (s 21(1)(a) of the Act). The primary judge found that had the respondent been informed of the appellants' intention not to renew their policy with the respondent, it would not have granted the extension. His Honour held that in these circumstances the appropriate, and only remedy was the one for which s 28(3) of the Act provided, an order that the respondent repay the appellants the premium that it had received for the extension (some $4,242.22). His Honour held that the respondent had no other liability to the appellants, and was not obliged to pay what would otherwise be its share of the money payable to satisfy the terms of the settlement that the appellants had made of the litigation against them. The primary judge's findings as to misrepresentation by the appellants were these2: "There was no misrepresentation. Mr Welsh, in his conversation with Mr Hunter, did not withhold anything or say anything so as to convey something he did not believe. He understood Mr Daly's instruction to him to be careful as merely indicating that he should not lead Mr Hunter to believe either that FAI was to be invited or was not to be invited to renew the insurance. Mr Hunter did not raise the topic, so there was no occasion for Mr Welsh to say anything about it. Mr Hunter's reference to what should happen if renewal material was to be sent in fact indicated that FAI did not have a settled belief that it was to receive renewal material. There was no duty on Mr Welsh to say anything to Mr Hunter on this matter, nor did Mr Welsh say anything which implied the false position. Mr Hunter did not suggest that any statement had misled him, merely that he did not believe that FAI would have been asked for the extension unless the 2 Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR Permanent companies had intended to offer renewal to FAI. That was not sufficient to amount to a misrepresentation: see Kahlbetzer v Cincotta3". His Honour's conclusion was stated in this passage4: "It was relevant to FAI's decision to accept the risk of the thirty-day extension of insurance from 1 October 1991, on the terms on which it did, that the Permanent companies had decided to obtain quotes for the following insurance year from insurers excluding FAI and had actually set about doing so; and that they had decided to seek insurance from FAI only if satisfactory quotes could not be obtained from insurers excluding FAI." The appeal to the Court of Appeal The appellants appealed to the Court of Appeal (Meagher, Handley and Powell JJA). Handley JA, with whom the other members of the Court agreed, after referring to a number of cases said this5: "In my judgment s 21(1)(a) [of the Act] leaves no room for the continued operation of the previous test of materiality. The changes are too many and too substantial to allow this, and they must have been deliberate. The section appears in a code and it is not possible to construe it as codifying the previous law. It follows, in my judgment, that the appellants' submission that the relevant matter did not have to be disclosed fails." His Honour was also of the opinion that a misrepresentation by conduct, omission or silence is encompassed by the word "statement" where it appears in s 26(2) of the Act, and that Mr Welsh, as an insurance broker employed by Sedgwick, in making a statement to an underwriter of the respondent which was literally true, but incomplete, made a "statement" which was a misrepresentation for the purposes of s 26(2) of the Act. A further holding of the Court of Appeal was that the knowledge of Messrs Daly and Welsh on behalf of Sedgwick with respect to the appellants' intentions was the knowledge of the appellants for the purposes of deciding whether it had acted in breach of its duty of disclosure (1982) NSW Conv R ¶55-105 at 56,804-56,805. 4 Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR 5 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 687 [36]. McHugh Kirby Callinan the Act: therefore made a under s 21(1)(a) of misrepresentation under s 26(2) of the Act to the respondent. Furthermore, despite the trial judge's exoneration of the appellants from fraud, Handley JA held that the appellants had acted fraudulently in failing to correct a representation after they discovered that it was not true. the appellants had The applicable provisions of the Insurance Contracts Act The Act was enacted as ameliorative legislation following a report on insurance contracts by the Australian Law Reform Commission in 1982 in which the Commission said6: this7: "The duty should itself extend to facts which the insured knew, or which a reasonable person in the insured's circumstances would have known, to be relevant to the insured's assessment of the risk." (emphasis added) The Second Reading Speech of the Insurance Contracts Bill contained "At common law an insurer may avoid a contract whenever the insured fails to disclose, whether innocently or fraudulently, a fact which is material to assessing the risk and which is known to the insured … . Clause 21 both clarifies and ameliorates the existing law. It clearly states that the insured's duty is only to disclose those facts which he knew, or which a reasonable person in the circumstances could be expected to have known, to be relevant to the insurer's assessment of the risk." (emphasis added) And pars 59 to 62 (Pt IV - Disclosures and Misrepresentations) of the Explanatory Memorandum to the Insurance Contracts Bill were as follows: "59. Present Law – An insured is required to disclose to the insurer all material facts relating to the insurance he proposes to effect and which are material to the insurer's assessment of the risk he is incurring or as to the premium he should charge. At common law, some lines of authority support the proposition that the insured's obligation is to disclose every material fact known to him and which a reasonable man would realise to be material. Other authorities, and particularly more recent Australian 6 Australian Law Reform Commission, Insurance Contracts, Report No 20, 1982 at 7 Australia, House of Representatives, Parliamentary Debates (Hansard), 29 May 1984 at 2332 per Mr Lionel Bowen. cases have rejected this approach in favour of the 'prudent insurer' test ie a fact is material if it would have reasonably affected the mind of a prudent insurer in determining whether it will accept the insurance, and if so, at what premium and on what conditions. The duty exists before the contract is entered into and continues until the contract is concluded. If an insured fails to do so, the insurer may, on discovering the full facts, elect to avoid the contract of insurance ab initio and he may do so whether or not any loss has occurred. An insured need not disclose facts (1) which are known, or presumed to be known, to the insurer; (2) which are of common knowledge; (3) which tend to diminish the risk; (4) which are covered by or dispensed with by a warranty or condition; or as to which the insurer has waived the requirement. Proposed Law – An insured will have, before the contract is entered into, a duty to disclose to the insurer all material facts of which he is aware. His duty will be to disclose those facts which he knows or which a reasonable person in the circumstances could be expected to know would be relevant to the insurer in his decision to accept the risk and, if so, on what terms (clause 21(1)). The insured is not required to disclose matter that diminishes the risk; of common knowledge; that the insurer knows or in the ordinary course of his business as an insurer ought to know; or as to which compliance with the duty of disclosure is waived by the insurer. An insurer will be deemed to have waived compliance if, in response to a question in a proposal form, the insured failed to answer the question or gave an obviously incomplete or irrelevant answer to it. (clauses 21(2) and 21(3)) McHugh Kirby Callinan 62. Rationale – Clause 21 clarifies the existing law by specifying the test of materiality. It also ameliorates the existing law, particularly in so far as the 'prudent insurer' test has been applied, for this test takes no account of the insured's circumstances or the circumstances in which the contract of insurance is negotiated. Clause 21 mitigates the application of the duty by providing that the insured's duty is only to disclose those facts which he knew or a reasonable person in the circumstances would have known to be relevant to the insurer's assessment of the risk. As an examination of what a reasonable man would know cannot take place in a vacuum, a court would not be precluded from considering an insured's position and circumstances in applying the test. Clause 21 also clarifies the circumstances in which an insurer will be deemed to have waived compliance with the duty." (emphasis added) Section 21 of the Act provides as follows: "The Insured's duty of Disclosure Subject to this Act, an insured has a duty to disclose to the insurer, before the relevant contract of insurance is entered into, every matter that is known to the insured, being a matter that: the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or a reasonable person in the circumstances could be expected to know to be a matter so relevant. The duty of disclosure does not require the disclosure of a matter: that diminishes the risk; that is of common knowledge; that the insurer knows or in the ordinary course of the insurer's business as an insurer ought to know; or as to which compliance with the duty of disclosure is waived by the insurer. (3) Where a person: failed to answer; or gave an obviously incomplete or irrelevant answer to; a question included in a proposal form about a matter, the insurer shall be deemed to have waived compliance with the duty of disclosure in relation to the matter." Section 26 of the Act is as follows: "Certain Statements not Misrepresentations (1) Where a statement that was made by a person in connection with a proposed contract of insurance was in fact untrue but was made on the basis of a belief that the person held, being a belief that a reasonable person in the circumstances would have held, the statement shall not be taken to be a misrepresentation. (2) A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms. This section extends to the provision of insurance cover in respect a person who is seeking to become a member of a superannuation or retirement scheme; or a person who is a holder, or is applying to become a holder, of an RSA [Retirement Savings Account]." Matters relevant to the decision of the insurer whether to accept the risk The first and most important question raised by the appeal is what the expression "matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms" where it appears in ss 21(1)(a) and 26(2) of the Act comprehends: whether, for example, it includes considerations, commercial or otherwise which may be relevant to that insurer's assessment of the risk; and specifically, whether here the possibility or likelihood that the respondent might be replaced as an insurer of the appellants was a "matter" within the meaning of the statutory description. If the appellants succeed on this issue, it will be unnecessary to decide any of the other grounds of appeal. In applying the Act according to its proper meaning we are bound to accept the findings of the trial judge. We do so notwithstanding our reservations McHugh Kirby Callinan about the reliability of the opportunistic evidence on behalf of the respondent, after the event, that had it known of the unlikelihood of its participation in a renewal of the insurance, it would not have granted any extension8. The first matter to notice about s 21(1)(a) is that "every matter that is known to the insured" is qualified by the expression "being a matter that the insured knows …". The word "knows" is a strong word. It means considerably more than "believes" or "suspects" or even "strongly suspects". And the matter, to answer the description that par (a) of the sub-section states, must be a matter that is not only "relevant to the decision of the insurer whether to accept the risk, and if so, on what terms", but also one that the insured knows to be such a matter. The alternative for which par (b) of the sub-section provides, is also important: if the insured does not "know", the question becomes, whether a "reasonable person in the circumstances" would "know [the matter] to be a matter so relevant". It is also noteworthy, particularly if it should become necessary to deal with the other grounds of appeal, that the knowledge of which the sub-section speaks, either actual or constructive, is the knowledge of the insured, and not of any insurance intermediary, a term defined by the Act and clearly embracing an agent of the kind that Sedgwick was. This is at least to suggest that the reference to the insured is intended to be a reference to the insured personally and not to its agent or broker. However, it is not essential to our reasons to determine this point. The appellants submit that the language of s 21(1) (and of s 26(2)) derives in part at least from the common law and from s 24(2) of the Marine Insurance Act 1909 (Cth), which itself picks up the common law: and that ss 21(1)(a) and 26(2) also pick up the particular meaning which "the risk" has in insurance law9. It is right in our opinion to concentrate on the language of the Act and to derive its intended meaning and operation from that language. Approaching the issue for decision in that way, it is significant that the Act uses the words "accept the risk" in s 21(1)(a) and not a phrase such as "to enter into the contract of insurance" or, "to renew a contract of insurance" the former of which is in substance used in the introductory words to the section. The words, "accept the risk" are key words. The Second Reading Speech and the Explanatory Memorandum make it clear that they were deliberately chosen. The words may have a long settled meaning at common law. That does not however mean that 8 Rosenberg v Percival (2001) 205 CLR 434 at 485 [155], 501-502 [214]; cf Ellis v Wallsend District Hospital (1989) 17 NSWLR 553 at 560, 581. 9 Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 112 per the Act was an enactment of it. The common law was generally concerned with materiality. This Act is concerned with relevance. Another indication that the decision, whether the matter should be disclosed, is a decision about the relevant risk, rather than, for convenience, what we will call the "commerciality" of the contract of insurance, is given by the reference in s 21(2) of the Act to the "disclosure … that diminishes the risk". The focus of attention is upon the risk, ie the particular insurance hazard. It is not, as such, upon the much broader question of the commercial willingness of the insurer to accept the risk, still less emotional or individual reactions to that question. Assessment of the risk, ie the insurance hazard, is susceptible to objective ascertainment. Assessment of other considerations including commercial and emotional responses, would ordinarily be much less readily ascertained on retrospective assessment. We do not consider that there is any particular difficulty in keeping these concepts separate as the language of the Act requires. The Act focuses on the particular risk of the insurance propounded. The alternative hypothesis opens a Pandora's box involving a large range of other considerations, such as are illustrated by the facts of the present case. The legislature made no attempt to redefine "risk" itself. To require an insured to disclose to an insurer every matter known to the insured, or reasonably knowable by the insured, relevant to the decision of the insurer to enter into a contract of insurance would be to impose an extraordinarily high burden upon an insurer, indeed a burden that few insureds could ever fully discharge. Take this respondent. It is now in liquidation. The evidence, for example, of its downgrading by the rating agency at about the time of the events the subject of this case, shows that it is likely that it would have had many commercial anxieties, and that it would very much have wished to enter into any insurance contract that it could, particularly with good customers. This is a matter relevant to the respondent's decision to enter into the insurance contract. The appellants knew of the downgrading. The interpretation that the primary judge and the Court of Appeal gave to the Act could have the unlikely consequence that the appellants, knowing, or being in a position to know, that the respondent was keen or desperate to write insurance contracts, should have told the respondent that it would not be writing one with them for the next year or the year after that. Here the Court of Appeal imputed the knowledge of Sedgwick to the appellants. Let it be assumed that that imputation is correctly made. It could extend, if commercial considerations were the, or some of the relevant matters, to use the language of Handley JA in the Court of Appeal, to "[any relevant commercial] knowledge acquired … in the Australian insurance market."10 That it seems to us would be 10 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 698 [96]. McHugh Kirby Callinan not to treat the enactment as ameliorative, but to allow it to be used as a charter for avoidance of claims by insurers. The absence of misrepresentation by silence The unreality of such a requirement is further highlighted by one of the other holdings of Handley JA11: "[The respondent] undoubtedly knew, or ought to have known, that the appellants were free to place their insurance elsewhere, and were not bound to offer renewal. However it did not know that the appellants had already decided to do this, provided they could obtain satisfactory cover elsewhere at an acceptable cost. This converted the known risk into an unknown near certainty. The relevant matter was not the chance that renewal would not be offered, but the decision, albeit a qualified one, not to do so." Insurers do business in a commercially competitive world. They must know that any rational insured would look for three particular qualities in its insurer: capacity to meet a claim; diligence and expedition in its dealings with it; and, the amount and competitiveness of the premium. If there were an obligation upon the appellants here to make the disclosure of their intention not to renew, what would the position be of an insured who intends to, and expects to dispose of the insured property within a month or so of a renewal of its policy? Would not that insured be under a similar obligation of disclosure? The range of relevant commercial considerations, is, it seems to us, almost boundless. Insurers have no right to, and cannot credibly be believed to have any right to the perpetual or unchanging goodwill, and therefore custom, of each and all of its insureds. To find, as the primary judge and the Court of Appeal did, could have the consequence, that whenever there is any real chance that an insured might go into the market to seek a competitive price, the insured must, if it wishes to continue to do business with its insurer for, or over any period, disclose its intention to look for a better or different insurance contract. Speaking of intention, we cannot believe that such a result could have remotely been contemplated by the legislature. Indeed we would have thought that the real possibility of a continuing search by an insured for an insurer possessing the three particular, and perhaps other qualities in greater degree than the current insurer, would be a matter of common knowledge, or something which any 11 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 699 [101]. insurer should itself in the ordinary course of business know within the meaning of s 21(2)(b) or (c) of the Act. It is unnecessary to decide in this case whether the words "acceptance of the risk of the particular peril or perils intended to be insured against" extend to a "moral hazard" or "moral risk" recognized as relevant by the common law12. Whether the appellants did or did not intend to renew their policy beyond a month (for which they were to pay a standard commercial pro rata fee or surcharge) was most certainly not a matter relevant to the decision of the respondent whether to accept the risk. Nor was it a matter which would, or could reasonably be likely to affect the terms upon which the decision to accept the risk would be made. The appellants were not guilty therefore of any relevant non- disclosure. Nor accordingly did they make any misrepresentation, by silence or otherwise. The trial judge was correct in so holding and the Court of Appeal in error in deciding to the contrary. The erroneous appellate finding of fraud What we have said would be sufficient to dispose of the appeal in the appellants' favour but there is a further finding of the Court of Appeal, that Mr Welsh's alleged misrepresentation to Mr Hunter was fraudulent, and to be attributed to the appellants, that should be dealt with. What Handley JA did was to hold that the primary judge was in error in failing to consider that the evidence established that what was originally an innocent misrepresentation by Mr Welsh became a fraudulent one because Mr Hunter of the respondent took more from Mr Welsh's remarks than Mr Welsh had intended, and that Mr Welsh had become aware of this: his continuing silence as to Mr Hunter's misunderstanding therefore constituted fraud13. Several observations may be made about this holding. The trial judge made no such finding to ground it. The trial judge expressly found that the non-disclosure was not fraudulent14. An allegation of fraud should be clearly and 12 General Accident Insurance Co Australia Ltd v Kelaw Pty Ltd (1997) 9 ANZ Ins Cas ¶61-369; Locker and Woolf Ltd v Western Australian Insurance Co Ltd [1936] 1 KB 408; Avon House Ltd v Cornhill Insurance Company Ltd (1980) 1 ANZ Ins Cas ¶60-429. 13 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 705 [127]-[128] per Handley JA. 14 Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR McHugh Kirby Callinan distinctly pleaded and put. This one was not. The exchanges during the trial to which the respondent referred the Court fell short of what is required in that regard. They do not take proper account of a credible answer in cross- examination that Mr Welsh did not understand that he was under any obligation to send renewal information to Mr MacIver (a director of the respondent). There could in any event be no obligation "to correct" a state of mind of one party by another in respect of a matter not relevant to the risk. The principle that the maker of a representation believed to be, or actually true when made, but which the maker later discovers to be false, but refrains from correcting, well knowing that the representee is acting upon the representation, and intends the representee to do so, will be guilty of fraud, does not therefore have any application in this case. Accordingly the finding of fraud by the Court of Appeal was not open and should be overruled. The appeal should be allowed with costs. Judgment should be entered for the appellants against the respondent for $211,862.82 together with interest pursuant to s 57 of the Act. In matter number 3037 of 1996, judgment should be entered for the appellants against the respondent for $9,988,137.18 together with interest at 13 percent pursuant to s 57 of the Act from the date of the payment by the appellants of each of the components of the judgment sum. The respondent is therefore entitled to retain the premium of $4,242.22 and accordingly the orders of the trial judge and the Court of Appeal requiring repayment of that sum by the respondent to the appellants should be rescinded. The respondent should also pay the appellants' costs of the trial and the appeal to the Court of Appeal. GUMMOW AND HAYNE JJ. In 1991, the appellants ("the Permanent companies") wanted to obtain professional indemnity insurance for the year beginning on 1 October 1991. They then had insurance cover for $70 million in respect of claims made between 1 October 1990 and 30 September 1991. The existing cover was in a number of layers, and each layer was provided by a number of insurers. The respondent ("FAI") provided $3.5 million, or 35 per cent, of the first excess layer of cover, and $6.7 million, or 33.5 per cent, of the second excess layer. The Permanent companies retained Sedgwick James Ltd ("Sedgwick Australia") as its intermediary to procure cover for the 1991-92 year. Shortly before the existing cover was to expire, the lead underwriter for the primary layer of cover asked for some more information about the business of the Permanent companies. The lead underwriter, a Lloyds syndicate, offered to provide a 30 day extension of the existing cover while the necessary information was obtained. The extension was offered at a premium fixed as one-twelfth of the current year's premium, plus 20 per cent. The Permanent companies instructed Sedgwick Australia to obtain the extension that was offered by the lead underwriter. By this time, so the trial judge (Hodgson CJ in Eq) was later to find15, the Permanent companies had decided to obtain quotes, from insurers other than FAI, for the professional indemnity cover the Permanent companies required for the 1991-92 year. The Permanent companies would consider these quotes before any approach was made to FAI. They contemplated that, so long as the quotations from other insurers were satisfactory, FAI would not be invited to participate in the Permanent companies' professional indemnity insurance arrangements for 1991-92. It was against this background that, in late September 1991, Sedgwick Australia asked FAI to extend its cover for a month. FAI agreed to do so for a premium calculated in the same way as the premium fixed by the lead underwriter – one-twelfth of the existing premium, plus 20 per cent. The trial judge found16 that had FAI known that it may not be invited to participate in the renewal of the insurance, it would not have provided the one month extension. During the period of the extension, the Permanent companies notified their insurers of circumstances which may give rise to a claim on the policies. A 15 Permanent Trustee Australia v FAI General Insurance Co Ltd (1998) 44 NSWLR 16 (1998) 44 NSWLR 186 at 263-264. claim was later made. The Permanent companies sought indemnity from their insurers who, by granting the month's extension, were on risk at the time the claim was taken to have been first made and notified. Insurers other than FAI agreed to indemnify the Permanent companies. The claim was settled and the insurers, other than FAI, contributed a large amount to that settlement. The Permanent companies brought action against FAI, in the Supreme Court of New South Wales, claiming that FAI was obliged to indemnify them. Many issues were agitated in that litigation. Of those, four were argued in this Court. Three concerned the operation of ss 21 and 26 of the Insurance Contracts Act 1984 (Cth) ("the Act") (and attention can largely be confined to s 21). The fourth concerned a finding of fraudulent misrepresentation made by the Court of Appeal17, despite the trial judge having found the person, whose conduct was thus condemned, to be not a dishonest person18. The Insurance Contracts Act As its long title reveals, the Act was intended "to reform and modernise the law relating to certain contracts of insurance so that a fair balance is struck between the interests of insurers, insureds and other members of the public". It was enacted following a long and very detailed examination by the Australian Law Reform Commission of the law relating to insurance contracts19 and insurance agents and brokers20. The Act was enacted in a form which followed very closely the draft legislation which had been proposed by the Australian Law Reform Commission in its report on Insurance Contracts. Part IV of the Act deals with disclosures and misrepresentations by an insured. Division 1 (ss 21, 21A and 22) deals with the duty of disclosure, Div 2 (ss 23-27) with misrepresentations and Div 3 (ss 28-33) with the remedies for non-disclosure and misrepresentation. Section 33 of the Act provides that the provisions of Div 3 of Pt IV "are exclusive of any right that the insurer has otherwise than under this Act in respect of a failure by the insured to disclose a matter to the insurer before the contract was entered into and in respect of a misrepresentation or incorrect statement". Section 7 of the Act declares 17 Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679 at 705 [127] per Handley JA. 18 (1998) 44 NSWLR 186 at 263. 19 Australian Law Reform Commission, Insurance Contracts, Report No 20, (1982). 20 Australian Law Reform Commission, Insurance Agents and Brokers, Report Parliament's intention to be that the Act is not "except in so far as [it], either expressly or by necessary intendment, otherwise provides, to affect the operation of any other law of the Commonwealth, the operation of law of a State or Territory or the operation of any principle or rule of the common law (including the law merchant) or of equity". Whether, consonant with ss 7 and 33, there is room for the operation of Pt V of the Trade Practices Act 1974 (Cth) in relation to insurance contracts is a question that need not be considered. No claim under the Trade Practices Act was made in the present matter. As four members of the Court said in Advance (NSW) Insurance Agencies Pty Ltd v Matthews21: "The evident intention of the legislature [in enacting Pt IV of the Act] is to replace the antecedent common law regulating non-disclosure, misrepresentations and incorrect statements by insured persons before entry into a contract with the provisions of Pt IV. To that extent Pt IV is a statutory code which replaces the common law. Accordingly, the circumstances in which it is legitimate to resort to the antecedent common law for the purpose of interpreting the statute are extremely limited22." The duty of disclosure Section 21(1) of the Act provides that an insured has a duty to disclose certain matters to the insurer before the relevant contract of insurance is entered into. The matters that must be disclosed are "every matter that is known to the insured, being a matter that: the insured knows to be a matter relevant to the decision of the insurer whether to accept the risk and, if so, on what terms; or a reasonable person in the circumstances could be expected to know to be a matter so relevant". Sub-section (2) then limits that duty of disclosure. It provides that the duty of disclosure does not require the disclosure of four different kinds of matter. Those are (a) a matter that diminishes the risk; (b) a matter that is of common knowledge; (c) a matter that the insurer knows or in the ordinary course of the 21 (1989) 166 CLR 606 at 615 per Mason CJ, Dawson, Toohey and Gaudron JJ. 22 See Gamer's Motor Centre (Newcastle) Pty Ltd v Natwest Wholesale Australia Pty Ltd (1987) 163 CLR 236 at 243-244. insurer's business as an insurer ought to know; and (d) a matter as to which compliance with the duty of disclosure is waived by the insurer. Sub-section (3) then qualifies the duty of disclosure further. It provides that the insurer is deemed to have waived compliance with the duty of disclosure in relation to a matter where a person either fails to answer, or gives an obviously incomplete or irrelevant answer to, a question included in a proposal form about that matter. Misrepresentation As we have already mentioned, Div 2 of Pt IV of the Act (ss 23-27) deals in a number of ways with misrepresentations made by an insured in connection with a proposed contract of insurance. In this appeal, some attention was directed to s 26 which identifies circumstances in which statements made in connection with a proposed contract of insurance, even if untrue, are not to be taken to be misrepresentations. Section 26(2) provides that: "A statement that was made by a person in connection with a proposed contract of insurance shall not be taken to be a misrepresentation unless the person who made the statement knew, or a reasonable person in the circumstances could be expected to have known, that the statement would have been relevant to the decision of the insurer whether to accept the risk and, if so, on what terms." This provision, like s 21(1)(a), depends for its operation on the conclusion that (in the case of s 21(1)(a)) the matter or (in the case of s 26(2)) the statement is, or would have been, "relevant to the decision of the insurer whether to accept the risk". The issues in this Court The first of the issues debated in this Court invited attention to the ambit of that expression and it is convenient to examine it by reference to the operation of s 21. Was the decision of the Permanent companies to obtain and consider quotes from insurers other than FAI before making any approach to FAI, coupled with the contemplation that so long as the quotes from other insurers were satisfactory FAI would not be invited to participate in the arrangements for 1991-92, a matter "relevant to the decision" of FAI whether to accept the risk by insuring the Permanent companies for the period of the extension? The trial judge23 and the Court of Appeal24 held that the Permanent companies' intentions constituted a matter relevant to the decision of FAI whether to accept the risk 23 (1998) 44 NSWLR 186 at 260. 24 (2001) 50 NSWLR 679 at 686 [29]. and, if so, on what terms. The Permanent companies contended in this Court that this gave too broad an operation to ss 21(1)(a) and 26(2) of the Act. Matter relevant to the decision whether to accept the risk The conclusions of the trial judge and of the Court of Appeal on this issue depended, in critically important respects, on findings of fact made at trial which were not challenged in the appeal to this Court. It is necessary to identify those findings of fact before considering the competing contentions about construction of the Act. It is convenient to do that without, at this stage, seeking to distinguish between the knowledge of the Permanent companies and the knowledge of Sedgwick Australia. Distinctions of that kind will require separate consideration later in these reasons. When the Permanent companies instructed Sedgwick Australia to obtain a 30 day extension of cover from, among others, FAI, the employee of Sedgwick Australia who had the principal carriage of the matter, Mr Daly, instructed a subordinate, Mr Welsh, to contact FAI (and others) to get their agreement to a 30 day extension. Mr Daly told Mr Welsh to "be careful when speaking to FAI", an instruction which both men understood as requiring Mr Welsh not to volunteer to FAI's representatives that FAI had not been, and may well not be, invited to participate in the next year's insurance. that conversation was recorded by Mr Welsh Mr Welsh then spoke with Mr Hunter, an underwriter employed by FAI. The substance of in a contemporaneous diary note. It recorded him telling Mr Hunter that London Underwriters had not finalised renewal terms yet, but were agreeable to a 30 day extension at pro rata plus 20 per cent; that Permanent had already agreed to this extension; and that he had asked Mr Hunter whether he, Hunter, was agreeable to this. Mr Hunter replied that if the lead underwriter had approved he, too, was happy to give the extension and would support it. Mr Hunter was recorded as having gone on to say that "if we were to send renewal information, this should be sent to Angus MacIver [of FAI] to look at, as [Mr Hunter would] be out of the office from the end of next week for the rest of October". Mr Welsh did not tell Mr Hunter that FAI had not been, and may well not be, invited to participate in the 1991-92 insurance. At trial, Mr Hunter and Mr MacIver gave evidence that had FAI been told of what we will call the "conditional decision" reached by the Permanent companies, FAI would not have granted the 30 day extension, and the trial judge found as a fact that this was so25. He also found that both Mr Daly and Mr Welsh 25 (1998) 44 NSWLR 186 at 258. believed that the conditional decision of the Permanent companies was relevant to FAI's decision whether to grant the extension. Mr Daly's instruction to Mr Welsh to "be careful" about revealing this matter was at least consistent with that conclusion. There was some debate in the course of argument in this Court about the reasons that FAI may have had for refusing a 30 day extension of cover under a claims made policy if it were told when the extension was sought that it would probably not be invited to tender for future business. It is not necessary to examine whether all of the matters considered in the course of argument were considered at trial. At first sight, it may appear to be difficult to identify any sound commercial reason for FAI refusing to do business simply because it was possible, even probable, that it would, in the future, be denied the opportunity to offer to transact similar business with the insured in respect of another, later period. The difficulty of identifying any commercial reason for the refusal to grant the extension is made greater when it is recognised that FAI was then transacting less professional indemnity insurance than it wished. In particular, the amount of business placed with FAI by the Sedgwick group of companies had dropped sharply over the preceding months. Moreover, would not an insurer expect an insured to obtain competitive quotes for business? Would not an insurer recognise that securing future business from an insured depended upon the insured being willing to place its business with it? Was it not to be expected that an insurer, faced with a large claim under a short-term contract, would be likely to seize upon any matter of which it was ignorant and say that had it known that fact, the extension would never have been granted? All these and other questions were asked at the trial of the action. All of them must now be treated as having been resolved against the Permanent companies. The finding of fact, which is not challenged, is that, had FAI known of the attitude of the Permanent companies, it would not have granted the extension which was sought. That is, had it known of this matter it would not have made the contract of insurance under which indemnity was sought. In the appeal to this Court, the Permanent companies submitted that matters relevant to the decision whether to accept the risk confined attention to matters bearing upon the nature or extent of the risk which was to be the subject of the insurance contract; they did not extend to any other, broader, commercial consideration that the insurer might take into account in deciding whether to make the insurance contract. It was submitted that this construction was to be preferred because before the passing of the Act the insured would have been under no greater duty, and the Act, far from being intended to enlarge the duties of disclosure of an insured, was enacted to ameliorate the obligations imposed on an insured at common law. Further, so it was submitted, had it been intended to require disclosure of matters affecting the insurer's decision to make the contract, s 21(1) would not have referred to the decision whether to accept the risk; it would have referred to matters relevant to the insurer's decision to make any contract of insurance, or a contract on the terms of the contract that was made. Are matters relevant to the risk distinct from matters relevant to the contract? Central to the submissions of the Permanent companies was the proposition that the Act requires a distinction to be drawn between matters relevant to an insurer's decision to accept a risk, and matters which do not bear upon the risk but are relevant to whether a contract of insurance would be made. The distinction is not required by the Act and is, in any event, a distinction that cannot be drawn with any clarity. It is necessary to recall the circumstances in which s 21 will be engaged. First, it will apply only where a contract of insurance has been made. Secondly, it will be engaged only if there was a matter which was known to the insured before the contract of insurance was entered into and which the insurer did not know26. Thirdly, and most importantly, an insurer accepts a risk by making the relevant contract of insurance. Assessing the nature and extent of that risk may be an important step in deciding whether to accept the risk and, if so, on what terms. But the insurer accepts the risk when it agrees to insure the insured. An insurer may make a contract of insurance in any of a number of ways27. So, to take one obvious example, there may or may not be a cover note before the insured completes any proposal or a policy is issued. The terms which are incorporated in a cover note may or may not be the same as those recorded in a later policy. In many cases the relationship between the terms governing a cover note and the terms of a later policy may depend upon what is revealed when the insured completes the relevant proposal. The contract on which an insurer sues may be a contract that is made only after the issue of a cover note. In some cases the contract on which the insured sues will have been formed only when that policy issues, and it will be a contract that replaces any earlier contract evidenced by a cover note. 26 Section 21(2)(c) provides that the duty of disclosure does not require the disclosure of a matter that the insurer knows or ought to know in the ordinary course of that insurer's business as an insurer. 27 See, for example, Southern Cross Assurance Co Ltd v Australian Provincial Assurance Association Ltd (1939) 39 SR(NSW) 174 at 185-187 per Jordan CJ and Speaking of the insurer "accepting the risk", rather than "making the contract of insurance", embraces all of the many kinds of dealings by which an insurer agrees to insure the insured. Section 21 of the Act fixes the insured's duty of disclosure by reference to a matter's relevance to the insurer's decision to accept the risk and by reference to what is known to the insured before the relevant contract is entered into. To attempt to distinguish between matters which bear upon the risk and those which concern the making of the contract under which the risk is undertaken, but not the risk, would require a very fine distinction. If such a distinction can be drawn, it is not one which the Act requires or permits. Section 21(1) focuses upon two steps which an insurer may take in its dealings with an insured – deciding to accept the risk at all and deciding the terms upon which the risk would be accepted. The matters which an insured must disclose to the insurer are matters which are known to the insured and which are relevant to either of those steps. Section 21(1) does not require, however, the identification of the particular step in the insurer's decision-making process to which the matter in question relates. If a matter bears upon the decision to accept the risk, or bears upon the terms upon which the risk is to be accepted, or bears upon both, the matter must be disclosed. The obligation to disclose is fixed by reference to the relevance of the matter to the making of either decision by the insurer. It is the insurer's decisions, about whether to accept the risk or the terms upon which it will be accepted, that is the fulcrum about which s 21(1) turns. What the Permanent companies seek to do is to shift the focus of attention from the insurer's decisions (and the relevance that the matter in question may have to those decisions) to the subject-matter of one of those decisions (the risk against which the insurance provides). The analysis which was made in the course of argument of cases decided before the Act was passed, and references made in those cases to matters affecting the risk, must be understood in that light. Before the Act came into force, the obligation of an insured to disclose matters to an insurer was usually traced to Lord Mansfield's statement of the duty, in connection with marine insurance, in Carter v Boehm28: "Insurance is a contract upon speculation. 28 (1766) 3 Burr 1905 at 1909 [97 ER 1162 at 1164]. The special facts, upon which the contingent chance is to be computed, lie most commonly in the knowledge of the insured only: the under-writer trusts to his representation, and proceeds upon confidence that he does not keep back any circumstance in his knowledge, to mislead the under-writer into a belief that the circumstance does not exist, and to induce him to estimate the risque, as if it did not exist." (emphasis added) In marine insurance the duty to disclose was given statutory force and content29, but in general insurance it remained a creature of the common law until the Act was passed. The extent to which s 24 of the Marine Insurance Act 1909 (Cth) accurately reflected the obligation of a person seeking general insurance to disclose matters to the insurer was, in at least some respects, not free from doubt. In particular, there was doubt about whether the test of materiality that was to be applied required consideration of the judgment that a prudent insurer would make about the matter or required reference to the judgment that a reasonable insured would make30. By the mid 1970s the weight of authority in Australia might be thought to have favoured a prudent insurer test31. Reference was commonly made to the test described by Samuels J in Mayne Nickless Ltd v Pegler32 in the following terms: "The question is whether [the] information would have been relevant to the exercise of the insurer's option to accept or reject the insurance proposed. It seems to me that the test of materiality is this: a fact is material if it would have reasonably affected the mind of a prudent insurer in determining whether he will accept the insurance, and if so, at what premium and on what conditions."33 29 Marine Insurance Act 1909 (Cth), s 24. 30 Guardian Assurance Co Ltd v Condogianis (1919) 26 CLR 231 at 246-247; Joel v Law Union and Crown Insurance Company [1908] 2 KB 863 at 883-884. 31 Babatsikos v Car Owners' Mutual Insurance Co Ltd [1970] VR 297; Mayne Nickless Ltd v Pegler [1974] 1 NSWLR 228 at 238-239. 32 [1974] 1 NSWLR 228 at 239. 33 See also Marene Knitting Mills Pty Ltd v Greater Pacific General Insurance Ltd (1976) 11 ALR 167 at 172. Other features of the insured's duty of disclosure remained open to some debate. So, for example, in the view of the Australian Law Reform Commission34, an insured may also have been bound to disclose non-material facts which the insured knew to be material to the particular insurer. It is not necessary to pursue those controversies to a conclusion. The cases decided before the Act, in which questions of disclosure are discussed, refer to the materiality of some matter to an insurer "accept[ing] the risk"35, "accept[ing] the proposal"36 or "accept[ing] the insurance"37. The Permanent companies submitted that these expressions, particularly "accept[ing] the risk" and cognate phrases, should be understood as confining considerations of materiality, under the law as it stood before the Act, to matters that affected the nature or extent of the risk to be insured. They further submitted that the Act should not be understood as extending the range of material matters. All of the cases decided before the Act, or at least all to which we were taken, concerned the materiality of a particular piece of information to the nature or extent of the risk that was to be insured38. Even so, undue weight cannot be placed on the choice of particular verbal formulae in such cases when considering what the Act means when it speaks of the decision of an insurer whether to accept the risk. The expressions "accept the risk", "accept the proposal" and "accept the insurance" were used as if they were all synonymous expressions. Further, and no less importantly, they were used in the context of applying an objective test of materiality – in which the point of reference came to be understood as being the "prudent insurer". The decision of a prudent insurer to make a particular insurance contract was necessarily assumed to be a decision that would be taken on rational commercial grounds. Cases decided before the Act discussed the materiality of a particular matter in a context where it had been alleged that the prudent insurer would not have made the contract on which action had been brought, if the matter in question had been revealed. Because the test to be applied in those cases required consideration of the prudent insurer, it 34 Insurance Contracts, Report No 20, (1982) at 95 [156]. 35 For example, Barclay Holdings (Australia) Pty Ltd v British National Insurance Co Ltd (1987) 8 NSWLR 514 at 523. 36 For example, Western Australian Insurance Co Ltd v Dayton (1924) 35 CLR 355 at 37 For example, Pegler [1974] 1 NSWLR 228 at 239; Barclay Holdings (1987) 8 NSWLR 514 at 517. 38 For example, Barclay Holdings (1987) 8 NSWLR 514. was well nigh inevitable that debate about issues of this kind focused upon the one commercial consideration that was central to the business judgment of any insurer – the nature and extent of the risk to be insured. It by no means follows, however, that the focus must be so narrow when considering the Act's duty of disclosure. Under the Act, attention is shifted from the prudent insurer to the particular insurer. It is that insurer's decision which, as we have said, is the fulcrum about which the section turns. When it is then recognised that the matter must be "known to the insured", being either a matter which the insured knows or which a reasonable person in the circumstances could be expected to know to be relevant to the insurer's decisions, there is no evident reason to confine the class of matters in question to those which affect the nature and extent of the risk to be insured. That is, there is no reason to exclude from consideration matters which do not affect the nature or extent of the risk but which are known by the insured to be relevant to whether the insurer will make the contract proposed. To construe s 21(1) as being capable of application when a matter that relates to the insurer's decision whether to make the contract of insurance is not disclosed, even if it does not affect the nature or extent of the risk to be insured, does not extend an insured's obligation beyond what may have been intended by those who promoted the Act. It must be recalled that the section applies only where a matter is not only known to the insured but also is either known by the insured to be relevant to the insurer's decision, or a reasonable person could be expected to know it to be relevant. One of the principal purposes of the Act was "to reform … the law … so that a fair balance is struck between the interests of insurers [and] insureds". Taken as a whole, the changes that were effected by the Act can readily be seen to have "mitigate[d] the common law rule of duty of disclosure"39. That result was achieved by the combination of changes which the Act made to that duty and to the consequences that might follow from its breach. It is not to be assumed, however, that particular elements of the Act's statement of the duty were intended to adopt pre-existing common law concepts of materiality40 – especially when materiality was now to be judged by reference to the particular insurer rather than the prudent insurer. 39 Second Reading Speech for the Bill that became the Insurance Contracts Act: Australia, House of Representatives, Parliamentary Debates (Hansard), 29 May 40 Advance (NSW) Insurance Agencies Pty Ltd v Matthews (1989) 166 CLR 606 at Further, the duty to disclose something that is known, and which either was known to be relevant or a reasonable person could be expected to know to be relevant, is not an unduly burdensome obligation. That conclusion is reinforced when it is recalled that the duty does not require disclosure of matters of common knowledge41 or matters that the insurer knows, or in the ordinary course of its business as an insurer ought to know42. It will be rare indeed for an insured to know that an intention to seek alternative quotations for insurance, or an intention to consider placing business elsewhere, is relevant to an insurer's decision whether to accept the risk that is offered. It will be rare indeed for an insurer to be able to demonstrate that such common place commercial behaviour was not known to it. The facts in the present case are very unusual. The trial judge, having made the findings of fact which he did, was right to hold that the Permanent companies' conditional decision was a matter relevant to FAI's decision whether to accept the risk. It follows that the Court of Appeal was right to reject this aspect of the Permanent companies' arguments in the appeal to that Court. Knowledge Did the Permanent companies know that this was a matter relevant to FAI's decision? Did Mr Daly or Mr Welsh, employees of the Permanent companies' broker, Sedgwick Australia, know it to be relevant? No-one else employed or engaged by the Permanent companies was shown to have known that. Could the knowledge of Mr Daly or Mr Welsh be imputed to the Permanent companies? Were the courts below right to decide that s 21(1) was engaged? It is not always easy for a court to decide whether, at some time in the past, a person knew something. Cases like He Kaw Teh v The Queen43 and Vines v Djordjevitch44 consider some difficulties that can arise. The apparently irresistible urge to classify "knowledge" by the use of epithets like "actual", "constructive", "imputed", or by the use of metaphors like "Nelsonian knowledge"45 emphasises that the task can be difficult. When the person whose 41 s 21(2)(b). 42 s 21(2)(c). 43 (1985) 157 CLR 523. 44 (1955) 91 CLR 512. 45 Baden v Société Générale SA [1993] 1 WLR 509 at 576 per Peter Gibson J; [1992] 4 All ER 161 at 236. "knowledge" is being considered is an inanimate legal construct, like a company, the difficulties may seem to be all the greater. In the present case, Mr Daly said, in evidence, that he considered that neither the Permanent companies, nor Sedgwick Australia, had a duty to disclose the Permanent companies' conditional decision to FAI. He had told Mr Welsh, in effect, not to volunteer this information to FAI. Importantly, he agreed in cross-examination the information, he (Welsh) "would be withholding from Mr Hunter [of FAI] a piece of information relevant to Mr Hunter's consideration of whether he would grant the extension and, if so, on what terms". if Mr Welsh did refrain from volunteering that, On this evidence alone, it was well open to the trial judge to conclude, as he did46, that Mr Daly knew that the Permanent companies' conditional decision was a matter relevant to FAI's decisions whether to accept the risk and, if so, on what terms it would do so. It is, therefore, not necessary to consider whether Mr Daly held a suspicion, expectation or belief that fell short of knowledge. He acknowledged that he knew it to be relevant. Nor is it necessary to attempt some general definition of what is meant by the word "know" when it is used in the Act47. Attempting to define the boundary between "belief" and "knowledge", except by reference to the facts of a particular case, is fraught with difficulty. The substitution of one set of value laden words for the word "know" (like "informed belief … sufficient ... to induce any reasonable man"48 to adopt a course of action, or holding "a belief on which that person is prepared to act in the world of practical affairs"49) may do little more than restate the problem which the section presents. Nor is it useful to apply the words "actual" or "constructive" to the two kinds of circumstances with which pars (a) and (b) of s 21(1) deal in considering whether a matter is known to be relevant to the insurer's decision. Section 21(1) refers both to the insured knowing that a matter is relevant and to matters that a reasonable person, in the circumstances, could be expected to know to be relevant. To inject notions of "actual" and "constructive" knowledge as 46 (1998) 44 NSWLR 186 at 258. 47 cf (2001) 50 NSWLR 679 at 688-690 [40]-[52]. 48 Coastal Estates Pty Ltd v Melevende [1965] VR 433 at 451. 49 (2001) 50 NSWLR 679 at 690 [54]. descriptions of these two different kinds of case may distract attention from the words of the Act50. It is the words to which effect must be given. The critical question in this aspect of the present case was one of fact. There was evidence from which it was open to the judge to conclude that Mr Daly knew that the matter of the conditional decision of the Permanent companies was relevant to FAI's decision to accept the risk. It is, therefore, not necessary to consider Mr Welsh's state of mind. Knowledge of the Permanent companies The Permanent companies had delegated to Sedgwick Australia the task of securing an extension of the professional indemnity insurance. The trial judge found that the Permanent companies had wholly delegated to Sedgwick Australia the performance of their duty of disclosure in relation to that extension51. The Court of Appeal made the same finding52. There is no reason to disturb those findings. That being so, it follows that the knowledge of Sedgwick Australia, whether gathered in the course of acting as agent for the Permanent companies or otherwise, was to be imputed to the Permanent companies. Indeed, the Permanent companies appear to have accepted as much in the Court of Appeal53. In this Court, the Permanent companies submitted that earlier decisions of trial or intermediate courts54, to which the Court of Appeal had referred in this connection, did not establish, as a general proposition, that the knowledge of an agent (however acquired) will be imputed to an insured who has delegated to that agent performance of the insured's duty of disclosure. Rather, so it was submitted, they are properly understood as cases which depended upon the operation of s 21(1)(b) in circumstances where the agent was duty bound to 50 Lindsay v CIC Insurance Ltd (1989) 16 NSWLR 673 at 680-681 per Rogers CJ in Comm Div. 51 (1998) 44 NSWLR 186 at 262. 52 (2001) 50 NSWLR 679 at 691 [59]. 53 (2001) 50 NSWLR 679 at 690 [56]. 54 Lindsay v CIC Insurance Ltd (1989) 16 NSWLR 673; Ayoub v Lombard Insurance Co (Aust) Pty Ltd (1989) 97 FLR 284; Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543; Commercial Union Assurance Co of Australia Ltd v Beard (1999) 47 NSWLR 735. inform the insured of the matter in question. The Permanent companies submitted that, in the present case, where the immediate question concerned knowledge of the relevance of a matter to the insurer's decision, disclosure by Sedgwick Australia to the Permanent companies of its view of the relevance of the matter would have meant only that the Permanent companies had conflicting views of relevance – their own and Sedgwick's. It was therefore not established (so the argument proceeded) that the Permanent companies knew or ought to have known that their conditional decision was relevant to FAI's decision. The analysis of the matter thus advanced by the Permanent companies puts the finding about delegation of the task of disclosure on one side. It seeks to analyse the matter on the assumption that it was for the Permanent companies to decide what would be disclosed when, on the facts that were found, this was a task they had given to Sedgwick Australia. When the fact of delegation is taken into account, the conclusion that Sedgwick Australia was bound to disclose what it knew (however it acquired the knowledge) is inevitable. As Powell JA pointed out in Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd55, s 21 cannot be confined in its operation to natural persons under no legal incapacity. It must have operation in relation to persons (including corporations) who can act and who can "know" only through agents. That this is the intended operation of the Act may find some support in the reference in s 24 to statements that are made by "or attributable to" the insured. The knowledge of relevant employees and agents may, therefore, be taken into account56. Where the task assigned to the agent includes the task of making appropriate disclosures, it is not to the point to inquire whether the agent is obliged to communicate the knowledge it has of the relevant matter to its principal. It is, therefore, neither necessary nor appropriate to distinguish in such a case between information which the agent has acquired in the course of executing the agency and information acquired otherwise. As Handley JA rightly said57: "Where the agent acts within his authority with the knowledge in question present to his mind, the principal should be bound by that 55 (1996) 40 NSWLR 543 at 611. 56 Commercial Union Assurance Co of Australia v Beard (1999) 47 NSWLR 735 at 57 (2001) 50 NSWLR 679 at 697 [89]. knowledge, however acquired. I see no basis for ignoring any part of the agent's knowledge, present to his mind, when he is doing the authorised act. The source of the knowledge seems irrelevant. What must matter is the agent's state of mind when doing the authorised act." The conclusion that, in the present case, the knowledge of Sedgwick Australia, however acquired, was the knowledge of the Permanent companies, is not inconsistent with the position that obtained, before the Act, where a person was appointed, as an agent to insure, to effect insurance on another's behalf58. The conclusion about the Act's operation does not depend, however, upon deciding that this was the previous law or upon adopting it. Rather, the conclusion is rooted in the words of the Act and, in particular, a proper understanding of what is meant by "the insured knows". A corporate insured can know something only through an agent. In the context of a section governing the duty of disclosure, the knowledge of an agent to effect the insurance is the knowledge of the insured. It follows that the courts below were right to conclude that the insured (the Permanent companies) knew that their conditional decision was relevant to FAI's decision to accept the risk. This conclusion is sufficient to dispose of the appeal to this Court. It is, nevertheless, as well to go on to deal with the fourth issue which was agitated in the appeal because it concerns a finding of fraud made in the Court of Appeal. It is to be noted, however, that in the context of the amounts otherwise at stake in this litigation, this issue had only very small monetary significance. The other conclusions reached in this case sufficed to excuse FAI from its obligation to indemnify the Permanent companies. The only monetary significance of the claim that there had been a fraudulent misrepresentation was to FAI's claim to avoid the policy under s 28(2) which, if successful, would lead to the refusal of an order for repayment of the premium paid by the Permanent companies – an amount of $4,242.22. Fraudulent misrepresentation FAI alleged that the Permanent companies had represented to it that there was nothing to be disclosed which was or might be relevant to it other than what was disclosed in the communication between Sedgwick Australia and Mr Hunter of FAI. It alleged that this was a misrepresentation that was made fraudulently. The trial judge concluded that Mr Hunter took what Mr Welsh had said as indicating that the Permanent companies and Sedgwick Australia intended to 58 Blackburn, Low & Co v Vigors (1887) 12 App Cas 531. invite FAI to quote for renewal59. This, so the trial judge found, was not just a conclusion that Mr Hunter arrived at; it was asserted by implication by Mr Welsh saying what he did60. Accordingly, he found that what Mr Welsh said to Mr Hunter, in the conversation we have described above, "was enough to assert to Mr Hunter that FAI was to be invited to quote renewal terms"61. Importantly, the trial judge said62 that he did "not think an intention ha[d] been shown sufficient to justify a finding that the misrepresentation was fraudulent" and, a little later in his reasons63, that he did "not think either Mr Daly or Mr Welsh are dishonest persons; and I think they did what they thought appropriate when they had to make a quick decision in a difficult situation". His Honour was "not prepared to find that the non-disclosure was fraudulent"64. Despite these findings, the Court of Appeal concluded65 that Mr Welsh had been guilty of fraudulent misrepresentation. At the end of his conversation with Mr Welsh, Mr Hunter told him that if Sedgwick Australia were to send renewal information, it should be sent to Mr MacIver, not Mr Hunter. The Court of Appeal attached great significance to this statement. It said66 that it "made it clear that Mr Hunter had assumed from the conversation that FAI were going to be invited to renew". The Court held67 that Mr Welsh's failure to correct any impression that FAI would be invited to renew was significant and that insufficient weight had been given to Mr Welsh's acknowledgment, in answer to a question by the trial judge, that what he had done "could mislead Mr Hunter"68. 59 (1998) 44 NSWLR 186 at 263. 60 (1998) 44 NSWLR 186 at 263. 61 (1998) 44 NSWLR 186 at 263. 62 (1998) 44 NSWLR 186 at 263. 63 (1998) 44 NSWLR 186 at 263. 64 (1998) 44 NSWLR 186 at 263. 65 (2001) 50 NSWLR 679 at 705 [127]. 66 (2001) 50 NSWLR 679 at 704 [124]. 67 (2001) 50 NSWLR 679 at 705 [127]. 68 (2001) 50 NSWLR 679 at 703 [121]. Although the Court of Appeal recognised69 that an appellate court will be slow to revise the findings of a trial judge who acquits a witness of fraud70, it concluded that, in this case, the evidence of Mr Welsh was "clear on its face"71. It took that evidence as revealing72 that, in the light of the instructions Mr Welsh had received, "he felt constrained to remain silent but in doing so he knowingly allowed his deception of Mr Hunter, originally unintended, to continue to do its work". (emphasis added) That conclusion was not open to the Court of Appeal. The evidence of Mr Welsh did not reveal any knowing deception by him. Indeed, the trial judge's conclusion that Mr Welsh was not dishonest was to the contrary. The highest that the evidence given by Mr Welsh went was that he did not think he had acted reasonably and that it could have misled Mr Hunter. That may be consistent with Mr Welsh having stayed silent knowing either that what he had said had conveyed a false understanding to Mr Hunter, or reckless as to whether it had. It did not compel that conclusion. The trial judge's conclusion that Mr Welsh had not acted fraudulently should not have been disturbed. Order The appeal should be dismissed with costs. 69 (2001) 50 NSWLR 679 at 702 [118]. 70 Abalos v Australian Postal Commission (1990) 171 CLR 167; Nocton v Lord Ashburton [1914] AC 932 at 945. 71 (2001) 50 NSWLR 679 at 705 [130]. 72 (2001) 50 NSWLR 679 at 705 [130].
HIGH COURT OF AUSTRALIA Matter No S146/2011 APPELLANT AND THE QUEEN Matter No S143/2011 SHANE DARRIN QUINN AND THE QUEEN RESPONDENT APPELLANT RESPONDENT Green v The Queen Quinn v The Queen [2011] HCA 49 Date of Order: 3 August 2011 Date of Publication of Reasons: 6 December 2011 S146/2011 & S143/2011 ORDER In each matter: 1. Appeal allowed. Set aside the Order of the Court of Criminal Appeal of New South Wales of 17 December 2010 and, in its place, order that the appeal to that Court be dismissed. On appeal from the Supreme Court of New South Wales Representation J T Gleeson SC with D P Barrow for the appellant in S146/2011 (instructed by Legal Aid NSW) G A Bashir with A Betts for the appellant in S143/2011 (instructed by Ford Criminal Lawyers) C K Maxwell QC with P A Leask for the respondent in both matters (instructed by Solicitor for Public Prosecutions (NSW)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Green v The Queen Quinn v The Queen Criminal law – Appeal – Appeal against sentence – Appeal by Crown – Parity principle – Where primary judge imposed sentence having regard to parity principle as between appellants and other co-offender – Where s 5D of Criminal Appeal Act 1912 (NSW) provided that primary purpose of appeals against sentences by the Crown is "to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons" – Where appellate court increased each appellant's sentence – Whether appellate court erred in allowing Crown appeal and thereby creating disparity between sentences of appellants and other co-offender – Whether appellate court erred in finding, absent any submission from Crown, that sentence imposed on other co-offender manifestly inadequate. Words and phrases – "appeal", "Crown appeal", "parity principle", "sentencing". Criminal Appeal Act 1912 (NSW), s 5D. Drug Misuse and Trafficking Act 1985 (NSW), ss 23(2), 25(2). FRENCH CJ, CRENNAN AND KIEFEL JJ. Introduction The primary purpose of appeals against sentence by the Attorney-General or Director of Public Prosecutions ("Crown appeals") under s 5D of the Criminal Appeal Act 1912 (NSW) ("the Criminal Appeal Act") is "to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons."1 That purpose distinguishes Crown appeals from appeals against severity of sentence by convicted persons, which are concerned with the correction of judicial error in particular cases. The Court of Criminal Appeal of New South Wales, in the exercise of its jurisdiction under s 5D, has a discretion to decline to interfere with a sentence even though the sentence is erroneously lenient. That discretion is sometimes called the "residual discretion". In Crown appeals, circumstances may combine to produce the result that if the appeal is allowed the guidance provided to sentencing judges will be limited and the decision will occasion injustice. Relevant circumstances include consequential disparity relative to an unchallenged sentence imposed on a co-offender and delay in the appeal process which may be associated with disruption of the offender's progress towards rehabilitation. In such cases it may be appropriate for a court of criminal appeal, in the exercise of its residual discretion, to dismiss a Crown appeal. The Court of Criminal Appeal allowed appeals by the Crown against sentences imposed upon Shane Quinn and Brett Green2, participants in a substantial enterprise involving the cultivation of cannabis plants. The sentences imposed upon them by the primary judge were, in part, calculated by reference to the level of their involvement relative to that of Kodie Taylor, a lesser, but nevertheless significant, participant in the enterprise. He had been sentenced two and a half months earlier and his sentence was not challenged by the Crown. The decision of the Court of Criminal Appeal disturbed that relativity. It created an unjustified disparity between the punishments imposed on the co-offenders. It 1 Griffiths v The Queen (1977) 137 CLR 293 at 310 per Barwick CJ; [1977] HCA 44; Everett v The Queen (1994) 181 CLR 295 at 300 per Brennan, Deane, Dawson and Gaudron JJ; [1994] HCA 49, discussed in Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 578-584 [8]-[20] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2011] HCA 10. See also R v Borkowski (2009) 195 A Crim R 1 at 18 [70]. 2 R v Green (2010) A Crim R 148. Crennan did so, inter alia, upon the basis that Taylor's unchallenged sentence was "manifestly inadequate". No such characterisation of that sentence had been argued by the Crown, nor suggested by the Court of Criminal Appeal during the hearing of the appeals. The Court of Criminal Appeal erred in failing to give adequate weight to the purpose of Crown appeals and the importance of the parity principle. It also erred in allowing the appeals partly on a basis that was never raised in argument. The sentences imposed upon Quinn and Green were, as all of the judges who heard the appeal agreed, manifestly inadequate. They were, however, as the dissenting members of the Court (Allsop P and McCallum J) said, "not derisory" and entailed "a substantial measure of punishment by full-time imprisonment."3 The intervention of the Court, as observed by the dissenting judges, created "unacceptable disparity" between the new sentences which it imposed and the sentence that stood unchallenged in respect of the co-offender, Taylor4. The result, as their Honours said, was that the Court became "the instrument of unequal justice."5 Having regard to the disparity consequential upon allowing the appeals and the significant delays which occurred in the appellate process, the Court ought to have exercised its discretion to dismiss the appeals. On 3 August 2011, the High Court allowed the appeals against the decision of the Court of Criminal Appeal, set aside its orders and in lieu thereof ordered that the appeals to that Court be dismissed. Our reasons for joining in those orders follow. Factual and procedural background On 20 July 2009, Shane Quinn and Brett Green each pleaded guilty in the District Court of New South Wales to an indictment alleging that between July 2007 and May 2008 he cultivated a number of prohibited plants, namely 1,354 cannabis plants, which was not less than the relevant "large commercial quantity" of 1,000 applicable to cannabis plants prescribed by the Drug Misuse and Trafficking Act 1985 (NSW) ("the Drug Act")6. The offence to which they (2010) 207 A Crim R 148 at 155 [20]. (2010) 207 A Crim R 148 at 156 [23]. (2010) 207 A Crim R 148 at 156 [23]. 6 Drug Act, s 33(4) and Sched 1. Crennan pleaded guilty carries a maximum penalty of 5,000 penalty units and 20 years' imprisonment7. On 14 August 2009, Quinn was sentenced by Boulton ADCJ to six years' imprisonment, with a non-parole period of three years to commence on 30 April 2008 and expire on 29 April 2011. Green was sentenced to four years' imprisonment, with a non-parole period of two years commencing on 17 May 2009 and expiring on 16 May 2011. As appears from a statement of agreed facts before the sentencing judge, Quinn and Green took part with others, including Taylor, in a commercial enterprise for the cultivation of cannabis plants and the production of cannabis leaf for supply. One thousand three hundred and fifty four cannabis plants connected with the enterprise were seized by the police. The weight of the cannabis leaf seized exceeded 145 kilograms. Quinn was the principal of the enterprise. Green was involved "at a senior level"8, as was Taylor. Green's position was slightly more senior than Taylor's. Taylor was, however, a significant player in the organisation and administration of the enterprise. Both he and Green were active in carrying out tasks related to the enterprise and were to be paid for their work by sharing in the cannabis leaf finally produced. The cannabis was cultivated at a number of sites between late 2007 and 30 April 2008. The cultivation was sophisticated and involved the use of fertiliser, watering, cameras and observers. There were up to nine crop sites, and three sheds for drying the leaf. A vehicle pool was established for use by members of the enterprise. The crop was valued at $2.7 million and the harvested cannabis was worth between $1.33 million and $1.47 million. When he sentenced Quinn and Green, the primary judge had already sentenced eight other offenders involved in the enterprise, including Taylor. Taylor was sentenced on 2 June 2009 to three years' imprisonment with a non-parole period of 18 months for an offence relating to the supply of a commercial quantity of a prohibited drug, contrary to s 25(2) of the Drug Act. The maximum penalty applicable to that offence was 3,500 penalty units and 7 Drug Act, ss 23(2)(a) and 33(1)(a) and (3)(b). 8 R v Green (2010) 207 A Crim R 148 at 154 [14]. 9 Drug Act, s 33(1)(a) and (2)(b). Crennan On 22 September 2009, the Crown lodged appeals in the Court of Criminal Appeal against the sentences imposed on Quinn and Green. Those appeals were heard before a five-judge bench on 30 July 2010. The Court delivered judgment on 17 December 2010 allowing the appeal by a 3-2 majority (McClellan CJ at CL, Hulme and Latham JJ; Allsop P and McCallum J dissenting)10. The majority held that appropriate sentences were nine years with a non-parole period of six years for Quinn and six years with a non-parole period of four years for Green11. In the event, and without explanation of the discrepancy, the actual sentences imposed were eight years' imprisonment with a non-parole period of five years for Quinn, and five years' imprisonment with a non-parole period of three years for Green12. The discrepancy was the subject of further consideration by the Court of Criminal Appeal and on 11 March 2011 the Court indicated that it would not be varying the orders made on 17 December 2010. It published reasons for that decision on 15 April 201113. On 8 April 2011, Quinn and Green were each granted special leave to appeal to this Court against the decision of the Court of Criminal Appeal. The sole ground of each grant was that the Court of Criminal Appeal had erred in finding it appropriate to allow the Crown appeal in respect of each appellant, thereby creating a disparity between the appellants' sentences and the sentence imposed on Taylor, which had not been the subject of a Crown appeal. At the hearing of the appeals, the grant of special leave in each matter was extended to allow the addition of a second ground of appeal arising out of the finding by the Court of Criminal Appeal, absent any submission from the Crown or prior intimation by that Court, that the sentence imposed upon Taylor was manifestly inadequate. Four statutes, and the common law principles informing their construction and application, are the principal sources of the legal rules governing the disposition of these appeals. 10 R v Green (2010) 207 A Crim R 148. 11 (2010) 207 A Crim R 148 at 181 [143]. 12 These sentences corresponded with the "proposed orders" in the judgment of Hulme J: (2010) 207 A Crim R 148 at 180 [144]. 13 R v Green and Quinn [2011] NSWCCA 71. Crennan Statutory framework The first of the applicable statutes is the Drug Act. The offence to which Quinn and Green pleaded guilty is created by s 23(2) of that Act, which provides: "A person who: cultivates, or knowingly takes part in the cultivation of, a number of prohibited plants which is not less than the commercial quantity applicable to prohibited plants, is guilty of an offence." Section 33(3)(b) of the Drug Act relevantly provides that if the court is satisfied that an offence against s 23(2) involved not less than "the large commercial quantity" of the prohibited plant concerned, the maximum penalty is 5,000 penalty units and 20 years' imprisonment. The offence to which Taylor pleaded guilty is created by s 25(2) of the Drug Act: "A person who supplies, or who knowingly takes part in the supply of, an amount of a prohibited drug which is not less than the commercial quantity applicable to the prohibited drug is guilty of an offence." Although Taylor was initially charged with the supply of a large commercial quantity of the plant, the prosecution ultimately chose to proceed against him only on the basis of the lesser offence of commercial supply created by s 25(2) of the Drug Act. The lesser offence attracts a maximum penalty of 3,500 penalty units and 15 years' imprisonment. The offence initially charged would have attracted the same maximum penalty as that faced by Quinn and Green. The second statute is the Crimes (Sentencing Procedure) Act 1999 (NSW) ("the Sentencing Act"), which sets out sentencing procedures, including the fixing of non-parole periods and the application of standard non-parole periods for particular offences. The exercise of sentencing discretions by courts in New South Wales must be informed by the purposes for which, under s 3A of the Sentencing Act, a court may impose a sentence on an offender. Those purposes include "to ensure that Crennan the offender is adequately punished for the offence"14. When determining the appropriate sentence for an offence the court is required by s 21A to take into account a broad range of listed aggravating and mitigating factors and any other factors affecting the relative seriousness of the offence. These are in addition to matters that are "required or permitted to be taken into account by the court under any … rule of law."15 The last category, as explained in these reasons, includes the avoidance of unjustifiable disparity between the sentences imposed upon offenders involved in the same criminal conduct or a common criminal enterprise. When sentencing an offender to imprisonment for an offence, a court is required to set a non-parole period for the sentence16. The balance of the term of the sentence, after the expiry of the non-parole period, must not exceed one third of the non-parole period unless the court decides that there are special circumstances17. In that event, the court must make a record of its reasons for that decision18. The primary judge held that special circumstances applied to both Quinn and Green to justify balance terms which exceeded one-third of their non-parole period. The Sentencing Act also sets out standard non-parole periods applicable to offences listed in the Table included in s 54D of that Act. The standard non- parole period is that which must be set by the sentencing court unless there are reasons for setting a period that is longer or shorter19. If the court sets a different period, it must make a record of its reasons for doing so20. The allowable reasons for departing from a standard non-parole period are those referred to in s 21A of the Act21. 14 Sentencing Act, s 3A(a). 15 Sentencing Act, s 21A(1). 16 Sentencing Act, s 44(1). 17 Sentencing Act, s 44(2). 18 Sentencing Act, s 44(2). 19 Sentencing Act, s 54B(2). 20 Sentencing Act, s 54B(4). 21 Sentencing Act, ss 21A(1) and 54B(3). Crennan The standard non-parole period for an offence against s 23(2) of the Drug Act, where the offence involves not less than the large commercial quantity specified for the prohibited plant, is 10 years22. The standard non-parole period for an offence against s 25(2) of the Drug Act does not cover the case in which the relevant prohibited drug relates to cannabis leaf23. There was therefore no standard non-parole period applicable to the offence to which Taylor pleaded guilty. The third statute relevant to this appeal is that which governs Crown appeals in New South Wales. The jurisdiction of the Court of Criminal Appeal to entertain such appeals is found in s 5D(1) of the Criminal Appeal Act, which provides: "The Attorney-General or the Director of Public Prosecutions may appeal to the Court of Criminal Appeal against any sentence pronounced by the court of trial in any proceedings to which the Crown was a party and the Court of Criminal Appeal may in its discretion vary the sentence and impose such sentence as to the said court may seem proper." Section 5D was enacted in its original form in 192424. Crown appeals under s 5D and like provisions in other States and Territories have long been regarded by this Court as exceptional. That exceptional character, reflected in the primary purpose of such appeals, informs the exercise of the Court's "residual discretion" embedded in the words "may in its discretion" in s 5D(1). That "residual discretion" is a discretion to dismiss a Crown appeal notwithstanding that the sentence appealed against is shown to be erroneously lenient. Where an appeal is allowed, the powers to vary the sentence and to impose such sentence as seems proper are engaged. Those powers should be read with the general provisions of the Sentencing Act which constrain and inform their exercise. The fourth relevant statute is the Crimes (Appeal and Review) Act 2001 (NSW) ("the CAR Act"). The characterisation of Crown appeals as "exceptional" has rested in part upon long-standing judicial concern about exposing sentenced persons to double jeopardy, that is, the risk of being re- sentenced25. In New South Wales that concern must now yield to the operation 22 Sentencing Act, s 54D, Table, Item 15C. 23 Sentencing Act, s 54D, Table, Items 18 and 19. 24 Crimes (Amendment) Act 1924 (NSW), s 33. 25 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 582-583 [17]-[19] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. Crennan of s 68A of the CAR Act. That section implements part of a model agreement made in 2007 by the Council of Australian Governments ("COAG") for Double Jeopardy Law Reform26. COAG agreed, inter alia, that: "All jurisdictions should implement reforms to provide that when a court is considering a prosecution appeal against sentence, no principle of 'sentencing double jeopardy' should be taken into consideration by the court when determining whether to exercise its discretion to impose a different sentence, or in determining what sentence to impose." Provisions to give effect to that agreement with respect to Crown appeals against sentence have been introduced in all States except Queensland, and in the Northern Territory27. Those provisions have been considered in a number of recent decisions in State courts28. Section 68A provides that an appeal court must not dismiss a prosecution appeal against sentence because of any element of double jeopardy involved in the respondent being sentenced again29. It applies to appeals commenced, but not fully determined, before it was inserted in the Act30. It therefore applied to the appeals to the Court of Criminal Appeal in this case. The effect of s 68A was discussed in R v JW31 in which the Court of Criminal Appeal sat as a bench of five judges. Spigelman CJ, with whom the other members of the Court 26 Council of Australian Governments, Double Jeopardy Law Reform: Model Agreed by COAG, (2007). 27 CAR Act, s 68A; Criminal Procedure Act 2009 (Vic), s 289(2); Criminal Law Consolidation Act 1935 (SA), s 340; Criminal Appeals Act 2004 (WA), s 41(4); Criminal Code (Tas), s 402(4A); Criminal Code (NT), s 414(1A). 28 NSW: R v JW (2010) 77 NSWLR 7; Vic: Director of Public Prosecutions v Karazisis (Vic) (2010) 206 A Crim R 14; SA: R v Abdulla (2011) 109 SASR 258; R v Saunders [2011] SASCFC 37; WA: Western Australia v Atherton (2009) 197 A Crim R 119; Tas: R v Talbot [2009] TASSC 107; Director of Public Prosecutions v Chatters [2011] TASCCA 8. 29 CAR Act, s 68A(1). 30 CAR Act, Sched 1, Pt 8. Section 68A came into effect on 24 September 2009: Crimes (Appeal and Review) Amendment (Double Jeopardy) Act 2009 (NSW), s 2 – date of assent 24 September 2009. 31 (2010) 77 NSWLR 7. Crennan relevantly agreed, concluded that the section removed from consideration by the Court of Criminal Appeal the distress and anxiety to which respondents to a Crown appeal are presumed to be subject if they have to undergo sentencing for a second time32. It prevents an appellate court from basing on such distress and anxiety a decision not to intervene or to impose a sentence less than that which it otherwise believes to be appropriate33. Moreover the Court cannot, it was said, have regard to the frequency of Crown appeals as a sentencing principle. On that view, s 68A is relevant to the exercise and scope of the residual discretion, in s 5D of the Criminal Appeal Act, to dismiss a Crown appeal against sentence notwithstanding that the sentence is shown to have been erroneous. It is not necessary for this Court to review the correctness of the construction of s 68A in JW. On any view of its operation it does not extinguish the residual discretion34. The Crown, in this appeal, did not take issue with that proposition. Indeed, the Crown appeared to accept the proposition in its written submissions. The application of the four statutes to this appeal is informed by the common law norm of equal justice. That norm in its application to sentencing is considered next in these reasons. Equal justice and the parity principle "Equal justice" embodies the norm expressed in the term "equality before the law"35. It is an aspect of the rule of law36. It was characterised by Kelsen as "the principle of legality, of lawfulness, which is immanent in every legal 32 (2010) 77 NSWLR 7 at 32 [141] per Spigelman CJ, 41 [205] per Allsop P, 42 [209] per McClellan CJ at CL, Howie and Johnson JJ. 33 (2010) 77 NSWLR 7 at 19-20 [54]-[64] per Spigelman CJ. 34 A similar conclusion was reached in relation to the Victorian equivalent of s 68A in Director of Public Prosecutions v Karazisis (Vic) (2010) 206 A Crim R 14 at 39 [99] per Ashley, Redlich and Weinberg JJA, Warren CJ and Maxwell P agreeing at 35 A norm said to be traceable to Solon's "isonomia" transported to England in the 16th century as "isonomy" and displaced in the 17th century by "equality before the law", "government of laws" and "rule of law": Hayek, The Constitution of Liberty: The Definitive Edition, (2011) at 238. 36 Dicey, Introduction to the Study of the Law of the Constitution, 7th ed (1908) at 198; Holdsworth, A History of English Law, (1938), vol X at 649. Crennan order."37 It has been called "the starting point of all other liberties."38 It applies to the interpretation of statutes and thereby to the exercise of statutory powers. It requires, so far as the law permits, that like cases be treated alike. Equal justice according to law also requires, where the law permits, differential treatment of persons according to differences between them relevant to the scope, purpose and subject matter of the law. As Gaudron, Gummow and Hayne JJ said in Wong v The Queen39: "Equal justice requires identity of outcome in cases that are relevantly identical. It requires different outcomes in cases that are different in some relevant respect." (emphasis in original) Consistency in the punishment of offences against the criminal law is "a reflection of the notion of equal justice" and "is a fundamental element in any rational and fair system of criminal justice"40. It finds expression in the "parity principle" which requires that like offenders should be treated in a like manner41. As with the norm of "equal justice", which is its foundation, the parity principle allows for different sentences to be imposed upon like offenders to reflect different degrees of culpability and/or different circumstances42. General concepts of "systematic fairness" and "reasonable consistency" in sentencing, as an aspect of the administration of federal criminal justice, were 37 Kelsen, What is Justice?, (1971) at 15, cited in Sadurski, "Equality Before the Law: A Conceptual Analysis", (1986) 60 Australian Law Journal 131 at 132. The distinction between "equality before the law" and the substantive "equality in the law" is usefully described in that article. See also Bailey, The Human Rights Enterprise in Australia and Internationally, (2009) at 400-423; Bingham, The Rule of Law, (2010) at 55-59. 38 Lauterpacht, An International Bill of the Rights of Man, (1945) at 115. 39 (2001) 207 CLR 584 at 608 [65]; [2001] HCA 64. 40 Lowe v The Queen (1984) 154 CLR 606 at 610 per Mason J; [1984] HCA 46. 41 Leeth v The Commonwealth (1992) 174 CLR 455 at 470 per Mason CJ, Dawson and McHugh JJ; [1992] HCA 29. 42 Postiglione v The Queen (1997) 189 CLR 295 at 301 per Dawson and Gaudron JJ; [1997] HCA 26. Crennan discussed in Hili v The Queen43. They apply to persons charged with similar offences arising out of unrelated events. The consistency they require is "consistency in the application of the relevant legal principles, not some numerical or mathematical equivalence."44 That kind of general consistency is maintained by the decisions of intermediate courts of appeal45. The consistency required by the parity principle is focussed on the particular case. It applies to the punishment of "co-offenders", albeit the limits of that term have not been defined with precision. In Lowe v The Queen46 and in Postiglione v the Queen47, this Court was concerned with the application of the parity principle to persons charged with the same offences arising out of the same criminal conduct or enterprise. Those decisions are not authority for the proposition that the principle applies only to persons so charged. The foundation of the parity principle in the norm of equality before the law requires that its application be governed by consideration of substance rather than form. Formal identity of charges against the offenders whose sentences are compared is not a necessary condition of its application. Nevertheless, as Campbell JA recognised in Jimmy v The Queen48, there can be significant practical difficulties in comparing the sentences of participants in the same criminal enterprise who have been charged with different crimes. The greater the difference between the crimes, the greater the practical difficulties, particularly where disparity is said to arise out of a sentence imposed on a co-offender who has been charged with an offence that is less serious than that of the appellant. The existence of those difficulties may be accepted. So too may the inability of a court of criminal appeal to undertake, under the parity rubric, a de facto review of prosecutorial charging discretions. Those practical difficulties and limitations, however, do not exclude the operation of the parity principle. 43 (2010) 242 CLR 520 at 535-538 [47]-[56] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2010] HCA 45. 44 (2010) 242 CLR 520 at 527 [18] per French CJ, Gummow, Hayne, Crennan, Kiefel 45 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 595-596 [54] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. 46 (1984) 154 CLR 606. 47 (1997) 189 CLR 295. 48 (2010) 77 NSWLR 540 at 588-589 [201]-[203]. See also Farrugia v The Queen [2011] VSCA 24 at [8]-[19]. Crennan The effect given to it may vary according to the circumstances of the case, including differences between the offences with which co-offenders are charged. Because appeals are creatures of statute, the parity principle in appeals against sentence arises in a statutory context. The jurisdictions to entertain such appeals, conferred by statutes on courts of criminal appeal in Australia, are supported by powers to increase or reduce sentences affected by appealable error. In the exercise of those powers in appeals by convicted persons, and subject to the applicable sentencing statutes, a court may "reduce a sentence not in itself manifestly excessive in order to avoid a marked disparity with a sentence imposed on a co-offender."49 The exercise of the statutory discretion is informed by the common law norm. Gibbs CJ said in Lowe v The Queen50: "the reason why the court interferes in such a case is that it considers that the disparity is such as to give rise to a justifiable sense of grievance, or in other words to give the appearance that justice has not been done." The sense of grievance necessary to attract appellate intervention with respect to disparate sentences is to be assessed by objective criteria. The application of the parity principle does not involve a judgment about the feelings of the person complaining of disparity51. The court will refuse to intervene where disparity is justified by differences between co-offenders such as age, background, criminal history, general character and the part each has played in the relevant criminal A court of criminal appeal deciding an appeal against the severity of a sentence on the ground of unjustified disparity will have regard to the qualitative and discretionary judgments required of the primary judge in drawing distinctions between co-offenders. Where there is a marked disparity between sentences giving rise to the appearance of injustice, it is not a necessary condition of a court of criminal appeal's discretion to intervene that the sentence under appeal is otherwise excessive. Disparity can be an indicator of appealable 49 Lowe v The Queen (1984) 154 CLR 606 at 609-610 per Gibbs CJ. 50 (1984) 154 CLR 606 at 610. 51 Postiglione v The Queen (1997) 189 CLR 295 at 323 per Gummow J, 338 per 52 Lowe v The Queen (1984) 154 CLR 606 at 609 per Gibbs CJ. Crennan error53. It is also correct, as Mason J said in Lowe, that logic and reality combine to favour the proposition that discrepancy is a ground for intervention in itself54. Unjustifiable disparity is an infringement of the equal justice norm. It is appealable error, although it may not always lead to an appeal being allowed. If an appeal is allowed on the ground of disparity, a court of criminal appeal in re- sentencing is not required to achieve identity of punishment. It must have regard to the sentence imposed on the co-offender and give it appropriate weight55. In such a case, an appeal to this Court on the question whether a disparity identified in a court of criminal appeal was unjustifiable and called for intervention by that court would also involve review of a qualitative and discretionary judgment56. There is a question whether a sentence which would otherwise be appropriate can be reduced on the ground of disparity to a level which, had there been no disparity, would be regarded as erroneously lenient. In Lowe that question was answered explicitly in the affirmative by Mason J57 and less explicitly but to like effect by Dawson J, with whom Wilson J agreed58. It has also been answered in the affirmative in a number of cases in the Court of Criminal Appeal of New South Wales59. On the other hand, as Simpson J 53 Lowe v The Queen (1984) 154 CLR 606 at 617-618 per Brennan J; Postiglione v The Queen (1997) 189 CLR 295 at 301 per Dawson and Gaudron JJ. 54 (1984) 154 CLR 606 at 613. 55 R v Kucharski unreported, Supreme Court of Victoria Court of Appeal, 23 June 1997 at 10 per Hayne JA, Brooking JA and Ashley AJA agreeing at 11. 56 Lowe v The Queen (1984) 154 CLR 606 at 610 per Gibbs CJ, Wilson J agreeing at 57 (1984) 154 CLR 606 at 613-614. 58 (1984) 154 CLR 606 at 623 per Dawson J, Wilson J agreeing at 616. And see R v Diamond unreported, Court of Criminal Appeal of New South Wales, 18 February 1993 per Hunt CJ at CL, James J agreeing, which so interpreted the observation by 59 R v Tisalandis [1982] 2 NSWLR 430 at 435 per Street CJ; R v Anastasio unreported, 21 November 1986 at 3; R v Smith unreported, 5 December 1986; R v Draper unreported, Court of Criminal Appeal of New South Wales, 12 December 1986 at 5 per Street CJ, Hunt and Wood JJ agreeing at 5; R v Diamond unreported, Court of Criminal Appeal of New South Wales, 18 February 1993 at 5 per Hunt CJ at CL, James J agreeing at 11; Maslen (1995) 79 A Crim R 199 at 207-208 per Hunt CJ at CL, Sully and Smart JJ agreeing at 212. Crennan correctly pointed out in R v Steele60, the existence of a discretion, where unjustified disparity is shown, to reduce a co-offender's sentence to one which is inadequate does not amount to an obligation to do so. Certainly, the discretion of the Court of Criminal Appeal to reduce a sentence to a less than adequate level would not require it to consider reducing the sentence to a level which would be, as Street CJ put it in R v Draper, "an affront to the proper administration of justice."61 Moreover, if the relevant sentencing legislation, on its proper construction, does not permit an inadequate sentence to be imposed, there can be no discretion on appeal to impose one62. Whether or not the discretion to reduce a sentence to an inadequate level is available, marked and unjustified disparity may be mitigated by reduction of the sentence appealed against to a level which, although lower, is still within the range of appropriate sentences. The preceding discussion of the parity principle has been concerned with its application in appeals by offenders against the severity of their sentences. These appeals are concerned with its application in appeals by the Crown against the inadequacy of sentences. The application of the parity principle in such cases 60 Unreported, Court of Criminal Appeal of New South Wales, 17 April 1997 at 8-11, Sheller JA and Grove J agreeing. See also Pecora v The Queen [1980] VR 499 at 503; R v MacGowan (1986) 42 SASR 580 at 583 per KingCJ, Mohr and von Doussa JJ agreeing at 584; Cox (1991) 55 A Crim R 396 at 401 per Thomas J; Reardon (1996) 89 A Crim R 180 at 182 per Gleeson CJ, 183 per Sully J, cf 191 per Hulme J; R v Djukic [2001] VSCA 226 at [29]-[30] per Vincent JA, Brooking and Phillips JJA agreeing at [1] and [2]; Newburn v The Queen [2004] WASCA 108 at [44] per EM Heenan J, Templeman J agreeing at [1]; R v Hildebrandt (2008) 187 A Crim R 42 at 49-52 [51]-[65] per Dodds-Streeton JA, Ashley JA and Lasry AJA agreeing at 43 [1] and 56 [93]. 61 R v Draper unreported, Court of Criminal Appeal of New South Wales, 12 December 1986 at 5 per Street CJ, Hunt and Wood JJ agreeing at 5; R v Diamond unreported, Court of Criminal Appeal of New South Wales, 18 February 1993 at 5-6 per Hunt CJ at CL, James J agreeing at 11; R v McIvor (2002) 136 A Crim R 366 at 371 [10] per Heydon JA, Levine J and Carruthers AJ agreeing at 372 [12] and [13]. 62 That proposition seems to have been implicit in the construction placed on s 6(1) of the Sentencing Act 1995 (WA) by Murray J in Goddard v The Queen (1999) 21 WAR 541 at 562 [61]. That subsection required that "a sentence imposed on an offender must be commensurate with the seriousness of the offence". Crennan is different63. It is shaped by the content of the statutory jurisdiction and powers conferred on the court and by the purpose of Crown appeals which informs the exercise of that jurisdiction. Nevertheless, it is necessary that its application in Crown appeals not be logically inconsistent with its application in appeals by convicted persons. The parity principle in Crown appeals In a Crown appeal against sentence in New South Wales, the Court of Criminal Appeal is invariably asked to exercise its powers under s 5D of the Criminal Appeal Act to impose upon a convicted person a heavier sentence than that imposed by the primary judge64. Assuming the Court of Criminal Appeal considers the sentence under appeal to be inadequate on account of error by the primary judge, two questions arise. Their answers involve the exercise of the different discretions conferred by s 5D. They are: 1. Whether, notwithstanding the inadequacy of the sentence, the Court should decline, in the exercise of its "residual discretion" under s 5D, to allow the appeal and thereby interfere with the sentence appealed from. To what extent, if the appeal is allowed, the sentence appealed from should be varied. A primary consideration relevant to the exercise of the residual discretion is the purpose of Crown appeals under s 5D which, as observed earlier in these reasons, is "to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons."65 That is a limiting purpose. It does not extend to the general correction of errors made by sentencing judges. It provides a framework within which to assess the significance of factors relevant to the exercise of the discretion66. 63 R v Bavin [2001] NSWCCA 167 at [60] per Spigelman CJ, Wood CJ at CL and 64 The language of s 5D does not preclude the possibility that the Crown might appeal against an erroneously excessive sentence. 65 See above at [1]. 66 In Director of Public Prosecutions (Vic) v Karazisis (2010) 206 A Crim R 14 at 39- 42 [104]-[115] it was suggested that relevant factors in Victoria include delay, parity, the totality principle, the rehabilitation of the offender and the conduct of the Crown. Crennan The parity principle has been the focus of debate in these appeals. Its undisputed significance does not mean that the Court must dismiss a Crown appeal in every case in which allowing the appeal would give rise to disparity. Where disparity is apprehended, the residual discretion is enlivened67. However, a powerful consideration against allowing a Crown appeal would be the resultant creation of unjustifiable disparity between any new sentence and an unchallenged sentence previously imposed upon a co-offender. The question would then arise: would the purpose of Crown appeals under s 5D be served by allowing the appeal? If the result of doing so would be a sentence "adequate" on its face, but infected by an anomalous disparity which is an artifact of the Crown's selective invocation of the Court's jurisdiction, the extent of the guidance afforded to lower courts may be questionable68. As was said in R v Borkowski69: "the purpose of a Crown appeal is not simply to increase an erroneous sentence imposed upon a particular individual. It has a wider purpose, being to achieve consistency in sentencing and the establishment of sentencing principles. That purpose can be achieved to a very significant extent by a statement of this Court that the sentences imposed upon the respondent were wrong and why they were wrong." There was a thread in the reasons of Hulme J in the Court of Criminal Appeal which did not adequately attend to the difference between Crown appeals against sentence and appeals by sentenced persons. Hulme J observed that "a first instance judge, faced with an earlier but inadequate sentence imposed on a co-offender, is entitled to impose a sentence that is not inadequate"70. His Honour then posed the rhetorical but inapposite question: "[w]hy should the Court of Criminal Appeal not have and exercise the same freedom?"71 The answer to the rhetorical question is: because the purpose of Crown appeals 67 R v Elzakhem [2008] NSWCCA 31 at [65] per Hulme J, Beazley JA and Latham J agreeing at [1] and [72], and cases there cited. 68 The Crown's justification for such choices would not ordinarily be examinable by the Court of Criminal Appeal. Nevertheless, the effect of such choices on the utility of a Crown appeal may affect its outcome. 69 (2009) 195 A Crim R 1 at 18 [70] per Howie J, McClellan CJ at CL and Simpson J agreeing at 4 [1] and [2]. 70 (2010) 207 A Crim R 148 at 176 [122]. 71 (2010) 207 A Crim R 148 at 176 [122]. Crennan constrains the Court of Criminal Appeal in a way that a first instance judge is not constrained. Hulme J also suggested that the parity principle has less significance in Crown appeals than in appeals against severity of sentence. Hulme J paraphrased dicta in Director of Public Prosecutions v Bulfin72 as proposing that the parity principle "should be given less emphasis or more cautiously applied when considering a Crown appeal when not all offenders were brought before the appeal court."73 The proposition was based upon the former rarity of Crown appeals, derived from concerns about double jeopardy which have now been displaced by statute in New South Wales. In any event the proposition is attended with difficulty. Equal justice is not to be diminished in order to preserve an opportunity, however rare, for a court of criminal appeal to make a point of principle to sentencing judges. It may be that a Crown appeal, if allowed, would give rise to disparity between punishment imposed on an offender and a manifestly inadequate but unchallenged punishment imposed on a co-offender. As discussed earlier, there is authority for the proposition that, in appeals against severity of sentence by sentenced persons, the parity principle may support reduction of an otherwise appropriate sentence to one which, save for the application of that principle, would be erroneously lenient. However, those authorities do not mandate such a reduction. Having regard to the purpose of Crown appeals, the Court in such a case may decide not to intervene so as not to disturb parity between the sentence appealed from and that imposed on the co-offender. That proposition was accepted in R v McIvor74 and Cvitan v The Queen75. It also reflected the approach taken by the Court in Borkowski. Hulme J was critical of what was said in McIvor, Cvitan and, to a degree, in Borkowski76. With respect to his Honour, those criticisms were misplaced. Those three decisions properly reflected the considerations that arise on Crown 72 [1998] 4 VR 114 at 137 per Charles JA. 73 (2010) 207 A Crim R 148 at 175 [116]. 74 (2002) 136 A Crim R 366 at 371 [10] per Heydon JA, Levine J and Carruthers AJ agreeing at 372 [12] and [13]. 75 [2009] NSWCCA 156 at [93]-[94] per Simpson J, McClellan CJ at CL and James J agreeing at [1] and [2]. 76 (2010) 207 A Crim R 148 at 175-177 [117]-[124]. Crennan appeals and their interaction with the parity principle. McClellan CJ at CL was of the view that McIvor should not be followed77. His Honour held that disparity could only give rise to a justified sense of grievance if "defined by comparison with the sentence imposed on a co-offender who has been appropriately sentenced"78. Only then could issues of parity cause the Court to reject a Crown appeal79. Having regard to the purpose of Crown appeals, that proposition was, with respect, too absolute. A case might arise in which the Court of Criminal Appeal concludes that the inadequacy of the sentence appealed from is so marked that it amounts to "an affront to the administration of justice" which risks undermining public confidence in the criminal justice system. In such a case the Court would be justified in interfering with the sentence notwithstanding the resultant disparity with an unchallenged sentence imposed on a co-offender80. That, however, is not this case. While all the members of the Court of Criminal Appeal considered that the sentences imposed upon Quinn and Green were "manifestly inadequate" there was no suggestion that they were so inadequate as to displace other considerations and mandate the Court's intervention. Moreover, in this case the primary judge took Taylor's unchallenged sentence into account in applying the parity principle to the sentences under appeal. Notwithstanding the leniency of Taylor's sentence, the prospective creation of disparity was a factor militating against allowing the appeal. That the Crown, in submissions before the Court of Criminal Appeal, did not attack the sufficiency of the sentence imposed on Taylor, gave that prospective disparity greater weight in the circumstances. Other circumstances may combine to produce injustice if a Crown appeal is allowed. They include delay in the hearing and determination of the appeal, the imminent or past occurrence of the respondent's release on parole or unconditionally, and the effect of re-sentencing on progress towards the respondent's rehabilitation. They are relevant to the exercise of the residual discretion. The guidance afforded to sentencing judges by allowing the appeal should not come at too high a cost in terms of justice to the individual. The preceding matters are relevant to the exercise of the Court's residual discretion not to allow a Crown appeal. Also relevant is the extent to which 77 (2010) 207 A Crim R 148 at 157 [33]. 78 (2010) 207 A Crim R 148 at 157 [32]. 79 (2010) 207 A Crim R 148 at 157 [33]. 80 R v Harris (2007) 171 A Crim R 267 at 283 [83] and [86]. Crennan disparity between co-offenders is able to be mitigated in the exercise of the re-sentencing discretion81. If the Court does decide to allow an appeal under s 5D it will, in exercising its re-sentencing discretion, have regard to the matters to which it must have regard by virtue of ss 3A and 21A of the Sentencing Act. The parity principle will require the Court, if it is possible to do so, to avoid or minimise unjustified disparity between the sentence it imposes and the sentence which has been imposed on a co-offender. In so doing, the Court, like the primary judge, must have regard to differences between the person being re-sentenced and the co-offender which justify differences in the sentences imposed. It is necessary now to outline the way in which the primary judge approached the sentencing of Quinn, Green and Taylor and the reasoning of the Court of Criminal Appeal which led the Crown appeals against the sentences imposed on Quinn and Green to be allowed. The sentencing of Kodie Taylor Although Taylor was not a principal in the criminal enterprise, he was a partner. He arranged for the acquisition of motor vehicles for the vehicle pool and repairs to one of them, and was involved in the planting of seedlings at the crop sites and the purchase of equipment to dry the cannabis leaf. He communicated with the principals on operational matters. He had a close connection with senior members of the syndicate. Taylor was arrested on 25 May 2008. He was charged with offences, including supply of a "large commercial quantity" of the drug. Those charges were later withdrawn and he pleaded guilty to the offence of supply of a commercial quantity "simpliciter" under s 25(2) of the Drug Act. Taylor had a brief criminal history with no convictions for drug-related matters. He had a drug problem of long standing, had been a poly substance drug user from about age 16, and had a poor post-school work history. At the time he was sentenced he was, according to a report before the Court, continuing to struggle with drug abstinence. He turned 22 on the date on which he was sentenced. 81 See, eg, R v Guthrie [2002] NSWCCA 77 at [18] and [33] per Grove J, Simpson J agreeing at [35]; R v Harris (2007) 171 A Crim R 267 at 282 [77] and 283 [86]. Crennan A report before the Court stated that Taylor had little insight into the impact of his offending on the wider community and appeared not to have terminated his connections with his associates. The primary judge said that he could not be described as previously a person of good character. Nor was he unlikely to reoffend. He had a need for supervision for a significant period to give him some prospect of rehabilitation. The primary judge specified four years as a starting point for the term of imprisonment that should be imposed on Taylor but applied a 25 per cent discount for his guilty plea, which reduced the sentence to three years. His Honour fixed a non-parole period of 18 months, which was less than two-thirds of the total sentence, on the basis of special circumstances, two such circumstances being, in his Honour's assessment, Taylor's need for a significant period of supervision and his youth. The sentencing of Quinn and Green The primary judge rejected as "a serious understatement" a submission made on behalf of Quinn that the cannabis growing enterprise was "lacking in sophistication". He referred to its scale and nature and the respective roles of Quinn and Green in it. Matters personal to Quinn referred to in the sentencing remarks included the following: He was 32 years of age with a de facto partner and four children aged between one and nine years. (ii) His childhood had been difficult and his school performance poor – he had suffered violence from his father and lack of support from his mother because of her alcoholism. He began using cannabis at age 14, alcohol from about age 15 to 16 and amphetamines and cocaine from about age 24. (iii) His time in custody and separation from his wife and children had borne very heavily upon him. This was motivating him significantly to try to rehabilitate himself when finally released from custody. (iv) A pre-sentence report recommended that he receive treatment for alcohol and cocaine dependence while on parole. Crennan There were some relatively minor charges, which Quinn asked to be taken into account in his sentencing, including possession of small quantities of drugs and possession of two weapons, namely a baton and a paint gun82. They do not appear to have played a significant part in the sentencing disposition and no issue was raised about them on appeal to this Court. In respect of Green, the primary judge observed: He was aged 25 years and 8 months. He did not have a significant criminal history. He had a very satisfactory childhood and a very satisfactory domestic relationship with his wife and children, which boded well for his future rehabilitation. (ii) He had poor schooling because of a learning disability, which affected his reading. However, on tests of intelligence and cognitive capacity, he performed in the high average range. (iii) He had a praiseworthy work ethic which was likely to be of significant benefit to him in his rehabilitation. (iv) He did not appear to have developed any significant problem with either alcohol or cannabis. On the question of parity, the primary judge referred to the need to achieve "at least comparability between the sentences handed down to various offenders." He had imposed on Taylor a more significant sentence than had been imposed on the casual labourers in the operation. He proposed that Quinn, as the principal organiser of the enterprise, would receive a "significantly more severe sentence than Taylor" and that Green should receive a sentence that was "somewhat greater than that of Taylor in order to reflect his greater participation in the enterprise." His Honour allowed each of Quinn and Green a 20 per cent discount arising out of their pleas of guilty. The trial of either or both would have been lengthy and complex. In respect of Quinn, the primary judge took a starting point of seven and a half years' imprisonment, discounted to six years. In respect of Green, he took as a starting point five years' imprisonment, discounted to four years. 82 Division 3 of Pt 3 of the Sentencing Act provides a means by which an offender may request the sentencing court to take into account offences for which he or she has been charged but not convicted. Crennan The primary judge found special circumstances existed in respect of Quinn and Green and, on that basis, ordered that their non-parole periods be fixed at three years' imprisonment for Quinn and two years' imprisonment for Green. The appeal to the Court of Criminal Appeal The Crown appealed to the Court of Criminal Appeal against the sentences imposed on Quinn and Green on a number of grounds including: the degree of departure from the applicable standard non-parole period was so great that it manifested error; and the sentence imposed was manifestly inadequate. The Crown did not appeal against the sentence imposed upon Taylor. The decision of the Court of Criminal Appeal Hulme J wrote the principal judgment for the majority in the Court of Criminal Appeal. McClellan CJ at CL wrote a separate concurring judgment. Latham J agreed with both. Aspects of the majority's treatment of the parity principle in relation to Crown appeals have been discussed above and will not be repeated here. Hulme J held that despite subjective features favouring each of Quinn and Green, a number of matters led to the conclusion that the sentences imposed on them were manifestly inadequate83. Those matters included84: the sophistication of the growing operation, its planned deliberate criminality, the quantity of cannabis and the extent of the likely rewards from the operation; the roles of Quinn and Green in the operation; 83 (2010) 207 A Crim R 148 at 166-167 [86]-[88]. 84 (2010) 207 A Crim R 148 at 165-166 [82]-[85]. Crennan (iii) the absence of circumstances mitigating the objective criminality of Quinn's offence which lay at the "mid-point of offences of the nature charged"; and (iv) Green's offence being appreciably, though not greatly below the mid-point. Hulme J said that the sentence imposed upon Taylor did not give rise to a case of "strict parity" as Taylor was charged with a different offence carrying a different penalty. However, because of the similarity in the charges and the similarity of offending, particularly as between Taylor and Green, "relative parity" should be taken into account85. His Honour held that there was no "blanket rule that the Court could not or should not increase manifestly inadequate sentences if the result of doing so is to create disparity."86 In a Crown appeal upon the ground of manifest inadequacy of a sentence, any disparity between co-offenders that would be created by allowing the appeal and by the unexplained conduct of the Crown in permitting that situation to arise, was a factor to be taken into account in deciding whether the appeal should be allowed and the extent of any substituted sentence to be imposed87. However, neither the disparity nor the Crown's conduct should be a bar to the success of the appeal88. His Honour said89: "In the case of both offenders some allowance should be made for the fact that the sentences imposed will create disparity with the sentence imposed on Mr Taylor. Particularly relevant in that connection is that Mr Taylor's sentence was so obviously manifestly inadequate that it is prima facie extraordinary that the Crown did not appeal and the Crown provided no reason why it did not." (emphasis added) 85 (2010) 207 A Crim R 148 at 168-169 [100]. 86 (2010) 207 A Crim R 148 at 177 [126]. 87 (2010) 207 A Crim R 148 at 178-179 [133]. His Honour appropriately recognised the distinction between the "residual discretion" and the sentencing discretion under s 5D of the Criminal Appeal Act. 88 (2010) 207 A Crim R 148 at 178-179 [133]. 89 (2010) 207 A Crim R 148 at 180 [142]. Crennan As asserted in the second ground of appeal to this Court, there was no argument put to the Court of Criminal Appeal, nor any intimation made by the Court in the course of argument, to the effect that Taylor's sentence was manifestly inadequate. To the contrary, the Crown, while submitting that Taylor had been treated "leniently", sought to distinguish his position from that of Quinn and Green by reference to the different offences to which they pleaded guilty, their different levels of involvement in the enterprise and the differences in their ages – Taylor being 22 years old and Quinn and Green 32 years and 25 years of age respectively. The Crown did not submit in this Court that there had been any intimation by the Court of Criminal Appeal that Taylor's sentence should be regarded as manifestly inadequate. Hulme J concluded that Quinn should be re-sentenced to imprisonment for a total term of nine years with a non-parole period of six years, and Green for a total period of six years with a non-parole period of four years90. McClellan CJ at CL, who agreed in substance with Hulme J, accepted that where a judge was sentencing a number of offenders the sentence imposed on others involved in the criminal enterprise was a relevant circumstance, although its significance would vary from case to case91. His Honour said92: "Where one offender has received a sentence which is so inadequate as to be erroneous the community is entitled to expect that the sentence of a co-offender when reconsidered by this Court will not be fixed by using the sentence imposed by error as the appropriate comparator." Although Taylor was not sentenced for the same offence as Quinn and Green that did not mean that the sentence imposed on him was irrelevant to the sentences to be imposed on them. If it were erroneously lenient, it could not preclude the Court of Criminal Appeal from intervening to re-sentence Quinn and Green93. Allsop P and McCallum J, who dissented, did not differ materially from the majority on the principles to be applied, but rather on their application to the facts of the case before the Court. They held, inter alia: 90 (2010) 207 A Crim R 148 at 180 [143]. 91 (2010) 207 A Crim R 148 at 156 [27]. 92 (2010) 207 A Crim R 148 at 157 [33]. 93 (2010) 207 A Crim R 148 at 157-158 [34]. Crennan the sentences inadequate94; imposed upon Quinn and Green were manifestly the similarity between the charges against Taylor and those against Quinn and Green, and in the nature of the offending conduct, meant that considerations of relative parity should be taken into account95; the sentences proposed by Hulme J would create relative disparity with that imposed on Taylor. While the head sentences and non-parole periods imposed on Quinn and Green were inadequate, the degree of departure from the appropriate range was not so great that it would be an affront to justice not to intervene. To intervene would create unacceptable disparity between the sentences passed by the Court of Criminal Appeal on Quinn and Green and the sentence that stood in respect of Taylor96. Contentions The question agitated in these appeals is whether the Court of Criminal Appeal erred in failing to exercise its discretion under s 5D of the Criminal Appeal Act to dismiss the appeals. Counsel for Quinn and Green submitted, inter alia: the primary judge had sentenced Taylor two and a half months before he sentenced Quinn and Green and there had been no appeal from Taylor's sentence; the primary judge imposed sentences on Quinn and Green which had regard to the parity principle as between them and Taylor. He took into account differences of charge, prescribed standard non-parole periods, maximum penalty, role, discount for timing of the pleas, age and favourable subjective aspects of the respective offenders' cases; the parity principle, having been properly applied by the primary judge as between Quinn and Green on the one hand and Taylor on the other, the Court of Criminal Appeal should not have intervened to create disparity; 94 (2010) 207 A Crim R 148 at 154 [13]. 95 (2010) 207 A Crim R 148 at 154 [13]. 96 (2010) 207 A Crim R 148 at 156 [23]. Crennan the majority in the Court of Criminal Appeal erred in identifying consistency in sentencing generally, with consistency in punishment; the majority failed to refer to the principle of restraint and underlying considerations of fairness affecting Crown appeals; the majority adopted an approach that put the onus on Quinn and Green to persuade the Court that it should exercise the residual discretion; circumstances of delay and rehabilitation were not taken into account as relevant to the decision whether to allow the appeals; and as assessed by Allsop P and McCallum J, the degree of departure of the sentences imposed upon Quinn and Green from the appropriate range was not so great that it would be an affront to justice not to intervene having regard to considerations of equal justice and matters pertinent to Crown appeals. It was submitted for the Crown that: all members of the Court of Criminal Appeal agreed that parity was one of a number of factors to be taken into account in deciding whether to allow the appeal; there is no general rule that a manifestly inadequate sentence should not be increased where that would create disparity with the sentence of a co-offender, even where the lesser sentence was manifestly inadequate; Hulme J took into account the different considerations that apply in relation to parity in Crown appeals; the sentences imposed on Quinn and Green, as held by all members of the Court of Criminal Appeal, were manifestly wrong; parity considerations operate as a constraint on allowing a Crown appeal but that does not mean that the Crown appeal will not be allowed where to do so would create disparity with a manifestly inadequate sentence; the Court of Criminal Appeal did not fail to take into account the conduct of the Crown in not appealing against Taylor's sentence, the delay in the appellate process or the extent of Quinn and Green's rehabilitation; in any event this was not a case of parity because Taylor was not charged with the same offence as Quinn and Green; and Crennan the major difference between the majority and the minority judgments was in their assessment of the extent of the inadequacy in the sentences imposed on Quinn and Green. Disposition The point of departure in the reasoning of the majority was the conclusion of all of the members of the Court of Criminal Appeal that the sentences imposed upon Quinn and Green were manifestly inadequate. Given the limited basis of the grant of special leave to appeal to this Court, it was not open to Quinn and Green to contend otherwise. In any event, having regard to the factors referred to in the reasons for judgment of Hulme J, that characterisation of the challenged sentences was correct. The majority did not attach to the inadequacy of the sentences under appeal such epithets as "gross" or "an affront to the administration of justice". While such epithets have a visceral character which limits their utility, they are indicative of a qualitative judgment that the inadequacy of the sentences imposed is so marked that the need for its correction to maintain public confidence in the criminal justice system outweighs other considerations, including any resulting disparity with unchallenged sentences against a co-offender. A similar epithet was applied in R v Kumar and Feagaiga97. Hulme J referred to that decision and the decision of this Court refusing special leave to appeal against it as providing "substantial support for the Crown position."98 But Kumar was a case in which his Honour, writing the principal judgment, identified a "vast disparity between what Parliament has indicated is an appropriate non-parole period for the offences of the nature of those committed by the Respondents and the sentences imposed."99 In Kumar the Court relied, inter alia, upon the proposition in Lowe that where adhering to parity would result in a sentence or a second sentence which was manifestly inadequate, the Court was entitled to take a different course100. In Lowe, however, that observation was made in the context of an appeal by a convicted person against the severity of the sentence imposed upon him. The word "entitlement" in that 97 [2008] NSWCCA 328. 98 (2010) 207 A Crim R 148 at 175 [115]. 99 [2008] NSWCCA 328 at [77] (emphasis added). 100 [2008] NSWCCA 328 at [76]. Crennan context does no more than indicate the subsistence of a discretion to refuse the sentenced person's appeal. For reasons already explained, it takes on a different significance in a Crown appeal. There the discretion is informed by the particular purpose of such appeals. Neither Kumar nor the dismissal of the application for special leave to appeal against it provides support for the Crown position in this case. Whatever might be said of the inadequacies of the sentences imposed upon Quinn, Green and Taylor by the primary judge, the submissions made on behalf of Quinn and Green that his Honour applied the parity principle appropriately should be accepted. The relationship between their respective sentences at first instance was appropriate and reflected, inter alia: Their ascending levels of participation in the criminal enterprise. The different maximum penalties applicable to Quinn and Green on the one hand and Taylor on the other. 3. Matters personal to each of them. The basis of relativities between the sentences was not attacked in the Court of Criminal Appeal, nor on the appeal to this Court. Quinn's sentence was twice that imposed on Taylor. Green's was one third greater than Taylor's sentence. As a result of the increase in the sentences imposed upon Quinn and Green, the relationship between their punishments and that imposed on Taylor was significantly affected. It may be accepted that when it decided to allow the appeal, there was little that the Court of Criminal Appeal could do other than to increase the sentences to the extent that it did. Anything less would have been pointless tinkering. The disparity that emerged after re-sentencing was effectively unavoidable. If it be assumed that Taylor's sentence was not erroneously lenient then, even allowing for differences in the offences charged, the respective ages of the three co-offenders and their circumstances, all of which were taken into account by the primary judge, there was no real answer to the complaint that the justifiable disparity between them was significantly disturbed as a consequence of allowing the Crown appeal. Hulme J said that in the case of both Quinn and Green "some allowance should be made for the fact that the sentences imposed will create disparity with Crennan the sentence imposed on Mr Taylor."101 The allowance was not quantified and the relative parity devalued by his Honour's comment that it was "[p]articularly relevant … that Mr Taylor's sentence was so obviously manifestly inadequate that it is prima facie extraordinary that the Crown did not appeal and the Crown provided no reason why it did not."102 McClellan CJ at CL observed that103: "Where one offender has received a sentence which is so inadequate as to be erroneous the community is entitled to expect that the sentence of a co- offender when reconsidered by this Court will not be fixed by using the sentence imposed by error as the appropriate comparator." On that basis it is reasonable to infer that notwithstanding passing reference to the relevance of Taylor's sentence the majority, to all intents and purposes, discounted it as a comparator of any significance. Having regard to the absence of any argument put to the Court of Criminal Appeal that Taylor's sentence was manifestly inadequate and the absence of any intimation by the Court to the parties that it took that view, it was not entitled to dispose of the appeal on the basis that Taylor's sentence was manifestly inadequate. On any view the majority's approach to the parity principle in the context of Crown appeals impermissibly diminished its significance. As noted earlier in these reasons and as pointed out in the submissions made on behalf of Quinn and Green, there was a thread in the reasons of the majority with respect to the application of the parity principle which did not appear adequately to distinguish between Crown appeals against sentence and appeals by sentenced persons. This thread perhaps explains the different outcomes favoured by the majority and the minority respectively. There were practical implications arising out of the delay in the appellate process. In his reasons for judgment, Hulme J referred to affidavit evidence before the Court of Criminal Appeal which provided up to date information about the circumstances of Quinn and Green. His Honour and the majority appear to have accepted that evidence which was to the effect that: Quinn was making a serious attempt to reform. He had been working, had demonstrated a willingness to pursue drug and alcohol counselling and 101 (2010) 207 A Crim R 148 at 180 [142]. 102 (2010) 207 A Crim R 148 at 180 [142]. 103 (2010) 207 A Crim R 148 at 157 [33]. Crennan had undertaken courses to enable him to enter upon tertiary education. He had completed one such course. He was motivated and his marks had been excellent104. Green was also pursuing educational courses and was seeking to better himself. He had received a C3 classification on 13 July 2010. That classification meant he was eligible for day and later weekend release. As at the date of his affidavit he had been home on one day. He was due for another day release on 7 August 2010. If his sentence were increased he would lose that classification. He had also been working in prison105. His Honour was of the view that Quinn had good, and perhaps better than good, prospects of rehabilitation106. Green also had good prospects of rehabilitation. The effect upon him of reversion to a higher classification and removal from the day or weekend pre-release program would impose an emotional burden107. This was not a matter that came within the double jeopardy concept. It was a matter that could be taken into account108. The reference by the majority, reflected in the reasons for judgment of Hulme J, to the circumstances of Quinn and Green at the time of the appeal related to the exercise of the re-sentencing discretion. As submitted on behalf of Quinn and Green, those factors do not appear to have been taken into account as relevant to the decision whether or not to exercise the residual discretion. As pointed out in the dissenting judgment of Allsop P and McCallum J, the sentences imposed upon Quinn and Green by the primary judge were not derisory and entailed "a substantial measure of punishment by full-time imprisonment."109 There were appropriate relativities between them and the sentence imposed upon Taylor. The Court was not entitled to allow the appeal on the basis that the sentence imposed upon Taylor was manifestly inadequate. To do so involved a breach of procedural fairness. The correct approach was that taken by the dissenting judges. The appeal should be allowed. 104 (2010) 207 A Crim R 148 at 179 [136]. 105 (2010) 207 A Crim R 148 at 179 [137]. 106 (2010) 207 A Crim R 148 at 180 [139]. 107 (2010) 207 A Crim R 148 at 180 [140]. 108 (2010) 207 A Crim R 148 at 180 [141]. 109 (2010) 207 A Crim R 148 at 155 [20]. Crennan Conclusion For the preceding reasons the appeals against the decision of the Court of Criminal Appeal were allowed, the orders of that Court set aside and, in lieu thereof, orders made that the appeals to that Court be dismissed. HEYDON J. As Bell J explains, the Court of Criminal Appeal took the unusual course of sitting with five members in order to resolve an inconsistency in the authorities in relation to applying the principle of parity to prosecution appeals110. In their dissenting judgment, Allsop P and McCallum J upheld and endeavoured to apply existing authorities in that Court111. Those authorities were R v McIvor112 and R v Borkowski113, in which Howie J made a statement with which McClellan CJ at CL concurred. The approach of the majority to those authorities was as follows. R S Hulme J criticised those two cases partly as supposedly having been decided per incuriam – in ignorance of other and inconsistent authority – and partly for reasons of principle114. McClellan CJ at CL denied that the statement in R v Borkowski was to be read as the appellants in this Court submitted it should be read and said that R v McIvor should not be followed115. Latham J agreed with both McClellan CJ at CL and R S Hulme J. It is true that the Court of Criminal Appeal is not strictly speaking bound by its own earlier decisions. But whatever a later Court of Criminal Appeal thinks of one of its earlier decisions, that earlier decision is to be followed, not overruled, unless two conditions are satisfied. The first condition is that the later Court must do more than disagree with the earlier decision. The test has been put in various ways. One is that the earlier decision must be "manifestly wrong"116. Another is that the later Court entertains "a strong conviction as to the incorrectness of the earlier decision."117 Another 110 See below at [104] and [109]. 111 R v Green (2010) 207 A Crim R 148 at 152-153 [5]-[7]. 112 (2002) 136 A Crim R 366. 113 (2009) 195 A Crim R 1. 114 R v Green (2010) 207 A Crim R 148 at 175-177 [117]-[125]. 115 R v Green (2010) 207 A Crim R 148 at 156-157 [28]-[33]. 116 This is employed in decisions of the Court of Appeal, to which the same approach applies: Bennett & Wood Ltd v Orange City Council (1967) 67 SR (NSW) 426 at 432 per Walsh JA; Flanagan v H C Buckman & Son Pty Ltd [1972] 2 NSWLR 761 at 781 per Hutley AJA. 117 Clutha Developments Pty Ltd v Barry (1989) 18 NSWLR 86 at 100 per Gleeson CJ (Samuels JA, Priestley JA and Hope AJA concurring) – a Court of Appeal case followed in the Court of Criminal Appeal by R v Arnold (1993) 30 NSWLR 73 at 74-75 and 85. way of putting the test lies in the following precept: "Where a court of appeal holds itself free to depart from an earlier decision it should do so cautiously and only when compelled to the conclusion that the earlier decision is wrong."118 In the Federal Court of Australia the Full Court often uses language like "clearly erroneous"119 or "plainly wrong"120. It has been said that those expressions require "the strong conviction of the later court that the earlier judgment was erroneous and not merely the choice of an approach which was open, but no longer preferred" and that they require that the error be one "that can be demonstrated with a degree of clarity by the application of correct legal analysis."121 The second condition is that there be a consideration of various factors stated in relation to the question of this Court overruling its own authorities in John v Federal Commissioner of Taxation122. The first is "that the earlier decisions did not rest upon a principle carefully worked out in a significant succession of cases." The second is "a difference between the reasons of the justices constituting the majority in one of the earlier decisions." The third is "that the earlier decisions had achieved no useful result but on the contrary had led to considerable inconvenience". The fourth is "that the earlier decisions had not been independently acted on in a manner which militated against reconsideration". These factors are not exhaustive123. Mutatis mutandis, considerations of this kind are relevant to whether the Court of Criminal Appeal should overrule its own decisions. The majority of the Court of Criminal Appeal indicated disagreement with R v McIvor and R v Borkowski and gave detailed reasons for that disagreement. 118 Nguyen v Nguyen (1990) 169 CLR 245 at 269 per Dawson, Toohey and McHugh JJ; [1990] HCA 9. 119 Transurban City Link Ltd v Allan (1999) 95 FCR 553 at 560 [29] per Black CJ, Hill, Sundberg, Marshall and Kenny JJ. 120 New Zealand v Moloney (2006) 154 FCR 250 at 275 [138] per Black CJ, Branson, Weinberg, Bennett and Lander JJ. 121 Gett v Tabet (2009) 254 ALR 504 at 565-566 [294]-[295] per Allsop P, Beazley and Basten JJA. 122 (1989) 166 CLR 417 at 438-439 per Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ; [1989] HCA 5. 123 See Queensland v The Commonwealth (1977) 139 CLR 585 at 630; [1977] HCA Whether those reasons were sound or not, the majority did not in terms state whether either condition was satisfied. The retort might be made: "So what?" The reason for the retort lies in what might be called Lord Salmon's paradox. In Attorney-General of St Christopher, Nevis and Anguilla v Reynolds124 Lord Salmon repeated his contention in Gallie v Lee125 that what an ultimate appellate court says about the rules of precedent which an intermediate appellate court applies in relation to its own prior decisions can only be "of persuasive authority" (ie obiter dicta). That is because the point could never come before the ultimate appellate court as a material issue for decision. The material issue for decision would be the correctness in fact or law of the intermediate appellate court's order. On that question the ultimate appellate court would be free to depart from the intermediate appellate court's view whether or not the intermediate appellate court had correctly applied the rules of precedent governing it. Even if Lord Salmon is correct, a perception by an ultimate appellate court that an intermediate court had erred in applying the rules of precedent would be a ready passport to the grant of leave to appeal, or, in the case of Australia, special leave. Further, the rules of precedent in the Court of Criminal Appeal are not rules which rest only on authorities in that Court: they rest also on statements in this Court. The good sense of those rules is a matter which goes beyond the Court of Criminal Appeal itself. Non-compliance with the rules is capable of producing grave difficulties for trial judges and for those who appear in trials. That is so particularly because non-compliance increases the velocity and unpredictability of legal change. As Dawson, Toohey and McHugh JJ said, exercise of the appropriate degree of caution reduces uncertainty126: "The occasions upon which the departure from previous authority is warranted are infrequent and exceptional and pose no real threat to the doctrine of precedent and the predictability of the law". Further, the requirement to satisfy the two conditions referred to above provides an important intellectual discipline. The Court of Criminal Appeal, then, should not have overruled R v McIvor and R v Borkowski. No party invited this Court to overrule those cases. They stand as authorities binding on the Court of Criminal Appeal and other New South Wales courts until overruled by the Court of Criminal Appeal in accordance with the two conditions stated above, or until overruled by this Court. However – and this is another reason why they should not have been overruled – strictly speaking R v McIvor and R v Borkowski do not apply. Those cases 124 [1980] AC 637 at 659. 125 [1969] 2 Ch 17 at 49. 126 Nguyen v Nguyen (1990) 169 CLR 245 at 269. involve co-offenders – persons charged with the same offence and perhaps persons charged with closely similar offences – whose positions are indistinguishable. They do not deal with issues of proportionality between persons who have committed different offences as part of an overall criminal enterprise and whose antecedents may differ. The present appeal is a case of the latter kind, for there are key distinctions between the position of Taylor on the one hand and the appellants on the other. Taylor was sentenced for a different offence from the offence of which the appellants were convicted. He was convicted of knowingly taking part in the commercial supply of cannabis, an offence carrying a maximum penalty of 15 years and a fine. The offence was one for which a standard non-parole period has not been prescribed. The appellants were sentenced for cultivating a large commercial quantity of cannabis, an offence carrying a maximum sentence of 20 years' imprisonment to which a standard non-parole period of 10 years applies, and also carrying liability to a greater fine. It does not matter that the prosecution resiled from its original decision to charge Taylor with the more serious offence because that charge had problems of proof. What matters is what he was convicted of. Further, Taylor had pleaded guilty earlier than the appellants. He occupied a different position in relation to the hierarchy and the conduct it engendered. It was not the case that Green's position was slightly senior to that of Taylor: according to the sentencing judge's remarks Green's participation was "somewhat greater" than Taylor's, while Quinn was the principal organiser. At the time of the offence, Taylor was 20, while Quinn was 31 and Green 24. The culpability of Taylor was thus different from that of the appellants, and so were his antecedents. All five judges comprising the Court of Criminal Appeal held, and the appellants did not deny, that the sentences imposed by the sentencing judge on the appellants were manifestly inadequate. The argument employed in relation to the first ground of appeal which was most strongly pressed by the appellants proceeded on the assumption that Taylor's sentence was not erroneously lenient. The contention was that the proportions between the sentences for Taylor and for the appellants were correctly set by the sentencing judge. The sentence he imposed on Taylor was half, and the sentence he imposed on Green was two-thirds, of the sentence imposed on Quinn. The appellants' complaint in this Court was that the allowing of the appeal by the Court of Criminal Appeal significantly altered those proportions. However, a key reason why the sentences on the appellants were too light was because the relativities between their sentences and Taylor's were not correct. The trial judge does not refer to the fact that the appellants, unlike Taylor, were being sentenced for cultivating a large commercial quantity of cannabis, rather than knowingly taking part in the commercial supply of cannabis. It is to be inferred from this silence that he did not take that fact into account. The Court of Criminal Appeal majority accepted that "considerations of relative parity should be taken into account"127. They, unlike the sentencing judge, took account of the difference in the offences. For that reason, the Court of Criminal Appeal majority, contrary to the complaint in the first ground of appeal, did not create a relevant "disparity", and nor did their Honours create any disproportion. Their Honours did not generate unequal justice. I agree with the specific reasons given by Bell J for rejecting the first ground of appeal128. I also agree with Bell J's reasons for rejecting the second ground of appeal129. Like Bell J, I would have dismissed the appeals. 127 R v Green (2010) 207 A Crim R 148 at 169 [100]. 128 See below at [124]-[127]. 129 See below at [128]-[131]. Bell BELL J. These two appeals were heard together. On 3 August 2011, the Court made orders allowing the appeals and reinstating the sentences imposed on the appellants in the District Court of New South Wales. I did not join in the making of those orders. I would have dismissed the appeals for the reasons set out below. The appellants and a man named Kodie Taylor were convicted of offences They were sentenced by arising out of the cultivation of cannabis. Boulton ADCJ on the basis of an agreed statement of facts. The facts The cultivation was a sophisticated enterprise involving a number of cannabis plants in excess of the large commercial quantity specified in the statute130. The plants were grown at a number of crop sites in bushland surrounding Port Macquarie. The appellant Shane Quinn and his younger brother, Shannon, selected the sites, which were cleared and fertilised. Perimeter fencing and netting were installed. Irrigation piping connected to water storage bins was laid out. A sum of $39,500 in cash was expended in the early stages of the enterprise in acquiring vehicles for use in connection with it. The source of all of this money is unknown, though part of it clearly came from Shane Quinn. The plants had matured and were ready to harvest in March and April 2008. Shane Quinn organised labourers to assist with harvesting, drying and packaging the crop. The labourers were picked up from premises in Kendall belonging to a member of the Quinn family and transported to the crop sites. On at least some occasions, they were required to wear blindfolds or hoods to prevent them learning of the location of the sites. They were paid an hourly rate and their hours of work were duly recorded in timesheets. Once harvested, the crop was transported to drying sheds at three locations, Yarrowitch, Elands and Hannam Vale. Each property was privately owned. Shane Quinn arranged with the owners of the Elands and Hannam Vale properties for the use of their sheds. There was no evidence concerning the arrangements made for the use of the shed on the Yarrowitch property. The sheds at Elands and Hannam Vale were connected to permanent power supplies. Shane Quinn was involved in the purchase of a portable generator for use at the shed at Yarrowitch. The sheds were lined with insulation material and shade cloth. Gas heaters and pedestal fans were used to dry the cannabis. The police executed search warrants on premises associated with the Quinn brothers and on the Yarrowitch, Elands and Hannam Vale properties on 130 Drug Misuse and Trafficking Act 1985 (NSW) ("the Drugs Act"), Sched 1. Bell 30 April 2008. They seized 74.4 kg of cannabis leaf from the Yarrowitch shed and 67 kg of cannabis leaf from the Hannam Vale shed. Only 4 kg of cannabis was located at the Elands shed. It would seem that the bulk had been removed some time before the arrival of the police. Hydroponic equipment and $20,800 in cash was located in a spare bedroom at the Kendall premises. A further sum of $9,365 in cash was found during the search of the property at which Shane Quinn, his partner, Simone, and their children were living. The police also located topographical maps of the crop sites, several two-way radio sets and mobile telephones, a radio scanner and a diary recording the names of labourers at those premises. Shane Quinn was the principal of the enterprise. The second most senior member of the enterprise was Shannon Quinn. The third most senior member was Brett Green. Taylor and a man named Garry Mason were the two other offenders who were involved in the enterprise "at a senior level". Boulton ADCJ characterised Green, Mason and Taylor as "partners". The expression was used to distinguish their involvement from the involvement of the labourers. The labourers received an hourly rate whereas Green, Mason and Taylor were to receive a share of the harvested cannabis leaf. Garry Mason was to receive 30 lbs of cannabis leaf. Taylor's and Green's shares were likely to be the same. The nature of the partnership may be judged by a comparison between the value of Green's, Mason's and Taylor's "partnership" share and the value of the growing plants and the harvested crop. The estimated value of the harvested cannabis was between $9,500 and $10,500 per kilogram. This would suggest that 30 lbs of the cannabis leaf might have been worth as much as $142,885. The 140 kg of harvested cannabis had an estimated value of between $1.33 million and $1.47 million. The mature cannabis plants had an estimated value of $2.7 million. The sentencing of offenders connected with the cultivation Neither Shannon Quinn nor Garry Mason had been sentenced for their involvement in the enterprise at the date of the appellants' sentence hearing. Boulton ADCJ had imposed non-custodial sentences on some of the labourers before he sentenced any of the offenders who were involved in the cultivation at a senior level. The material on the appeal does not reveal the offences of which the labourers were convicted. It was not submitted that the sentencing of those offenders bears any relevant relationship to the sentencing of the appellants. Taylor pleaded guilty in the Local Court to one count of knowingly taking part in the commercial supply of cannabis131. The offence has a maximum 131 Drugs Act, s 25(2). Bell penalty of imprisonment for 15 years132. It is not an offence for which a standard non-parole period has been prescribed. Taylor had been involved in planting the seedlings. Intercepted telephone calls showed that he was in regular contact with Shane and Shannon Quinn. There was no evidence that Taylor had supplied any of the cash used to buy vehicles or other equipment. He had been involved in purchasing some equipment used for drying the cannabis. Taylor was aged 20 years at the date of offending. Boulton ADCJ took his youth into account in finding that special circumstances justified a departure from the statutory proportion between the non-parole period and the head sentence133. His Honour reduced the sentence by 25 per cent to reflect Taylor's early plea of guilty134. The appellants each pleaded guilty in the District Court of New South Wales to the offence of cultivating a large commercial quantity of cannabis135. The offence carries a maximum sentence of 20 years' imprisonment136. From 1 January 2008, a standard non-parole period of 10 years has applied to the offence137. Boulton ADCJ sentenced Quinn to a non-parole period of three years with a balance of term of three years. Green was sentenced to a non-parole period of two years with a balance of term of two years. The sentences were in each case reduced by 20 per cent to reflect the pleas of guilty. Boulton ADCJ said that he had given consideration to "achieving some level of parity or at least comparability between the sentences handed down to various offenders". Quinn, as the principal organiser of the enterprise, he said, should receive "a significantly more severe sentence than Taylor" and Green should receive a sentence that was "somewhat greater than that of Taylor" to reflect Green's greater participation in the enterprise. Quinn was aged 31 and Green was aged 24 at the date of offending. The Crown appeals The Director of Public Prosecutions ("the Director") appealed against the inadequacy of the sentences imposed on Quinn and Green. He did not appeal 132 Drugs Act, s 33(2)(b). 133 Crimes (Sentencing Procedure) Act 1999 (NSW) ("the Sentencing Act"), s 44(2). 134 Sentencing Act, s 22(1); R v Thomson (2000) 49 NSWLR 383. 135 Drugs Act, s 23(2)(a). 136 Drugs Act, s 33(3)(b). 137 Sentencing Act, s 54B and Table to Div 1A of Pt 4; Crimes (Sentencing Procedure) Amendment Act 2007 (NSW), Sched 1. Bell against the sentence imposed on Taylor. The appellants submitted that the Director's failure to appeal against the sentence imposed on Taylor was material to the proper disposition of the appeals. They relied on the statements made by Heydon JA (as he then was) in R v McIvor138 for the proposition that the Court of Criminal Appeal should not intervene on a Crown appeal and re-sentence where to do so would be to create disparity. The determination of the appeals was said to require the resolution of an inconsistency between McIvor and the later decision of the New South Wales Court of Criminal Appeal in R v Harmouche139 respecting the application of the principle of parity to the disposition of Crown appeals. The parity principle The principle of parity in sentencing, stated by this Court in Lowe v The Queen, applies to the sentencing of co-offenders whose culpability for the offence and whose antecedents are comparable140. Where there is a marked disparity in the sentences imposed on co-offenders engendering a justifiable sense of grievance, the appellate court is entitled to intervene and to reduce an otherwise appropriate sentence141. The disparity in Lowe was between sentences imposed on co-offenders for an offence of armed robbery. Their culpability and antecedents were comparable. They were sentenced by different judges. The first judge sentenced one offender to probation and the performance of community service work. The second judge sentenced the other offender to six years' imprisonment recommending that he be eligible for parole after two years. In Lowe, there was a division of opinion as to the basis for appellate intervention in cases of disparity. Four Justices said that the disparity itself entitled the appellate court to intervene in order to reduce the more severe sentence142. Brennan J did not consider that disparity alone justified intervention. His Honour considered it wrong to formulate a principle requiring the appellate court to take the lesser sentence as the norm despite the inappropriate leniency of that sentence143. Mason J appeared to accept that the reduction might lead to the 138 (2002) 136 A Crim R 366. 139 (2005) 158 A Crim R 357. 140 Lowe v The Queen (1984) 154 CLR 606 at 609 per Gibbs CJ, 611-612 per Mason J, 616 per Wilson J, 617 per Brennan J, 623 per Dawson J; [1984] HCA 46. 141 Lowe v The Queen (1984) 154 CLR 606 at 610 per Gibbs CJ, 611-614 per Mason J, 142 Lowe v The Queen (1984) 154 CLR 606 at 610 per Gibbs CJ, 611 per Mason J, 616 per Wilson J, 623 per Dawson J. 143 Lowe v The Queen (1984) 154 CLR 606 at 617-619. Bell imposition of a sentence that otherwise might be regarded as inadequate144. This was the issue on which the New South Wales Court of Criminal Appeal in the earlier decision in R v Tisalandis145 was divided. Dawson J's observations respecting the dilemma confronting an appellate court in eliminating disparity suggest that his Honour (with whom Wilson J agreed) favoured the approach apparently stated by Mason J146. However, his Honour's agreement with the statement of the principle by Moffitt P in Tisalandis147 may not suggest that. In decisions since Lowe, the New South Wales Court of Criminal Appeal has held that the elimination of disparity is not justified where it requires the reduction of an appropriate sentence to the level of an inadequate sentence imposed on a co-offender. In these circumstances, it has been said that the inadequacy of the sentence imposed on a co-offender may be of such a degree that any sense of grievance engendered in the offender sentenced to the more severe sentence can no longer be regarded as legitimate148. The correctness of the principle explained in this way was not raised by these appeals. The issue that was said to be raised was whether the reasoning justifying the rejection of parity to reduce a sentence in the case of offenders' appeals should be applied to the disposition of Crown appeals. It is this issue which is the subject of the inconsistent decisions in McIvor and Harmouche. The parity principle and Crown appeals In Harmouche, the Court of Criminal Appeal said that, in a case in which adherence to parity would result in a manifestly inadequate sentence remaining in place, the appellate court was "entitled to take a different course"149. The authorities cited in support of that conclusion were decisions involving offenders' appeals. The Court of Criminal Appeal did not address the features of Crown 144 Lowe v The Queen (1984) 154 CLR 606 at 613-614. 145 [1982] 2 NSWLR 430. 146 Lowe v The Queen (1984) 154 CLR 606 at 623. 147 Lowe v The Queen (1984) 154 CLR 606 at 624, citing R v Tisalandis [1982] 2 NSWLR 430 at 438. 148 R v Diamond unreported, New South Wales Court of Criminal Appeal, 18 February 1993; R v Steele unreported, New South Wales Court of Criminal Appeal, 17 April 1997; R v Doan (2000) 50 NSWLR 115; Chen (2002) 130 A Crim R 300 at 383-384 [289]; R v Ismunandar (2002) 136 A Crim R 206 at 214-220 [15]-[38]. 149 R v Harmouche (2005) 158 A Crim R 357 at 373 [68] per Hulme J (Sully and Bell appeals that distinguish them from offenders' appeals. It appears that the Court of Criminal Appeal in Harmouche was not referred to its earlier decision in McIvor. In McIvor, the respondent to a Crown appeal and his co-offender, Hernando, were each sentenced to almost identical sentences for two armed robbery offences committed in circumstances in which each was equally culpable. Nothing in the subjective cases distinguished either offender from the other. A Crown appeal against the inadequacy of the sentence imposed on Hernando was dismissed because of the lateness with which it was brought150. The Crown's appeal against the inadequacy of the sentence imposed on McIvor was brought in a timely fashion. Nonetheless, the dismissal of the challenge to Hernando's sentence produced the result that allowing the appeal in McIvor's case and increasing his sentence would produce disparity in the sentences of the two co-offenders. Heydon JA distinguished the authorities holding that a sentence should not be reduced to achieve parity with an inappropriately lenient sentence151. Analogous reasoning was said not to apply to the disposition of Crown appeals. In the latter, the appellate court is asked to increase a sentence, while the identical sentence imposed on the co-offender remains unchanged. His Honour observed that, in this context, questions of a justified grievance arising from a move from parity to the lack of parity possess a different quality152. The Court of Criminal Appeal The hearing of the Crown appeals was adjourned on the appellants' application to enable the Court of Criminal Appeal to be constituted by five judges (Allsop P, McClellan CJ at CL, RS Hulme, Latham and McCallum JJ) in order to resolve the inconsistency between Harmouche and McIvor. Resolution of this question was said to be a necessary step in the appellants' argument based on a concept of "relative parity". The Court was unanimous in concluding that the sentences imposed on the appellants were manifestly inadequate153. It was divided on the question of whether the appeals should be dismissed in the exercise of the residual discretion154. 150 R v Hernando (2002) 136 A Crim R 451. 151 R v McIvor (2002) 136 A Crim R 366 at 371 [10]. 152 R v McIvor (2002) 136 A Crim R 366 at 371 [10]. 153 R v Green (2010) 207 A Crim R 148 at 154 [13] per Allsop P and McCallum J, 158 [35] per McClellan CJ at CL, 164 [74], 165-168 [82]-[97] per RS Hulme J, 183 [145] per Latham J. 154 Criminal Appeal Act 1912 (NSW), s 5D. Bell The minority (Allsop P and McCallum J) said that the principle of parity operates with different effect in the determination of Crown appeals155. Their Honours referred with approval to Heydon JA's reasons in McIvor and to the remarks of Howie J dismissing the Crown appeal in R v Borkowski156. McIvor and Borkowski both involved the dismissal of Crown appeals which, if allowed, would have created disparity in the sentences imposed on co-offenders whose circumstances were relevantly similar. That was not the case with these appeals. Their Honours' reasons for dismissing the Crown appeals do not turn on the resolution of the conflict between Harmouche and McIvor. They depend upon the proposition taken from Jimmy v The Queen157 that parity is not confined to co-offenders in "the strict sense". In the Court of Criminal Appeal minority's view, the principle, whether described as parity, proportionality or relativity, is one that applies to the sentences imposed upon persons who engaged in the same criminal enterprise158. It was by reason of the application of the principle of parity understood in this wider sense that the Court of Criminal Appeal minority would have dismissed the Crown appeals. The Court of Criminal Appeal majority considered that McIvor should not be followed159. McClellan CJ at CL said that, when the Court considers it appropriate to increase a sentence, it may do so notwithstanding that a sense of grievance may result. Only if the sentence would result in a justified sense of grievance, being one defined by comparison with the sentence imposed on a co-offender who has been appropriately sentenced, could the question of parity cause the court to reject the appeal160. RS Hulme J's views were to similar effect161. 155 R v Green (2010) 207 A Crim R 148 at 152 [5]. 156 R v Green (2010) 207 A Crim R 148 at 152 [5], citing R v Borkowski (2009) 195 A Crim R 1 at 18 [69]-[70] per Howie J, and at 153 [7], citing R v McIvor (2002) 136 A Crim R 366 at 371 [10] per Heydon JA. 157 (2010) 77 NSWLR 540 at 596 [245] per Howie J. 158 R v Green (2010) 207 A Crim R 148 at 151 [2]. 159 R v Green (2010) 207 A Crim R 148 at 157 [33] per McClellan CJ at CL, 177 [126]-[127] per RS Hulme J, 183 [145] per Latham J. 160 R v Green (2010) 207 A Crim R 148 at 157 [32]. 161 R v Green (2010) 207 A Crim R 148 at 176 [122]. Bell Their Honours did not address the distinctive nature of Crown appeals, which is that they should be brought as a rarity to establish a matter of principle including, where appropriate, to redress manifest inadequacy in sentencing standards162. In a case involving co-offenders whose culpability and antecedents are comparable, in which the Crown does not appeal against the sentence imposed on one offender but appeals the sentence on the other, it is difficult to see how the appeal can be said to have been brought to establish a sentencing standard. The respondent selected by the Director in such a case to be the medium for the setting of the standard has an objectively justifiable sense of grievance. The discretionary reasons favouring dismissal of the Crown appeal in such a case, stated by Howie J in Borkowski, are cogent163. In a case in which the Crown's tardiness or other conduct is the reason for the failure to bring (or to successfully maintain) a Crown appeal against one co-offender, that circumstance is a matter properly considered by the appellate court in the exercise of the residual discretion. As McHugh J observed in Everett v The Queen, even where a sentencing judge has erred in a fundamental way, fairness to the sentenced person requires that the conduct of the Crown is weighed in the exercise of the discretion164. The circumstances in which a Crown appeal should succeed when brought against only one of two or more co-offenders whose culpability and antecedents are comparable and who have been sentenced to the same inappropriately lenient sentence are likely to be very rare. The orders of the Court of Criminal Appeal The circumstance that the Court of Criminal Appeal was specially constituted to consider the differing approaches in McIvor and Harmouche explains the analysis of those decisions notwithstanding that neither is concerned with the concept of "relative parity". McIvor correctly held that a respondent to a Crown appeal may entertain a justifiable sense of grievance in circumstances in which it is sought to increase the respondent's inadequate sentence, while leaving in place the inadequate sentence imposed on a co-offender whose culpability and antecedents are indistinguishable. That, as earlier noted, is not this case. The Court of Criminal Appeal majority rightly took into account that Taylor had not been sentenced for the same offence165. The Crown appeals were upheld and the 162 Griffiths v The Queen (1977) 137 CLR 293 at 310 per Barwick CJ; [1977] HCA 44; Everett v The Queen (1994) 181 CLR 295 at 300 per Brennan, Deane, Dawson and Gaudron JJ; [1994] HCA 49. 163 (2009) 195 A Crim R 1 at 17-19 [67]-[71]. 164 Everett v The Queen (1994) 181 CLR 295 at 307. 165 R v Green (2010) 207 A Crim R 148 at 157-158 [34] per McClellan CJ at CL, 168-169 [100] per RS Hulme J, 183 [145] per Latham J. Bell Court of Criminal Appeal re-sentenced the appellants. Quinn was sentenced to a non-parole period of five years with a balance of term of three years. Green was sentenced to a non-parole period of three years with a balance of term of two years. The first ground of challenge in this Court The appellants each appealed by special leave on the ground: "The Court of Criminal Appeal erred in finding that it was appropriate to allow the Crown appeal regarding the [appellant] and thereby create disparity between the [appellant's] new sentence and that imposed on [Taylor] who had not been the subject of a Crown appeal." The legal error for which the appellants contended was the allowing of the Crown appeals in circumstances in which the Crown did not challenge the sentence imposed on Taylor. It is a ground that invokes the principle of parity in sentencing stated in Lowe. Taylor was 20 at the date of offending and for that reason he was still entitled to have his youth taken into account as a mitigating factor justifying a more lenient sentence than would otherwise be appropriate. Taylor was convicted of a different, lesser, offence than that of which the appellants were convicted. The Crown did not appeal against the inadequacy of the sentence imposed on Taylor because the Director considered that the sentence, while "very lenient", was not manifestly inadequate. The principle of parity for which the appellants contended would produce the result that the Director's acceptance, that the sentence imposed on the youthful offender for the lesser offence is not manifestly inadequate, constrains the appellate court's discretion in the disposition of an appeal against the acknowledged inadequacy of the sentences imposed on offenders, including the principal, sentenced for the more serious offence. If the principle of parity operated with this effect, it would be necessary to review it. It does not. The appellants' argument conflates the principle of parity, which applies to co-offenders whose culpability and antecedents are comparable, with ideas of proportion or relativity in the sentencing of offenders for different offences arising out of the same overall criminal enterprise. In Lowe, the discretionary nature of appellate intervention on the ground of disparity was emphasised166. When this Court again considered parity in 166 Lowe v The Queen (1984) 154 CLR 606 at 610 per Gibbs CJ. Bell Postiglione v The Queen167, each of the Justices identified it as a principle of sentencing that, when engaged, requires the appellate court to intervene to reduce the more severe sentence168. Recognition of parity as a principle of sentencing which applies with this effect underlines the importance of distinguishing it from broader ideas of proportion in the sentencing of offenders who are convicted of different offences in connection with the same criminal enterprise. Is the parity principle confined to co-offenders? Lowe was concerned with the sentences imposed on offenders convicted of the same offence. The principle enunciated in that case was with respect to co-offenders. In neither Lowe nor Postiglione was it necessary to give consideration to the meaning of the expression "co-offenders". Co-offenders are offenders who commit the same crime. It may be accepted that the principle of parity stated in Lowe is not confined to co-offenders so defined. Two or more offenders who successively have sexual intercourse with the same unconsenting complainant on the same occasion are not co-offenders and yet it would favour formality over substance to hold that parity did not apply in sentencing them (provided that their culpability and antecedents were otherwise comparable). A different but related question was raised in Jimmy. In that case, it was held that parity applied to the sentencing of offenders for similar money laundering offences169. Each offender had deposited sums of cash just under $10,000 in various bank accounts, acting on the instructions of a man named Chen. Jimmy's culpability and subjective circumstances were comparable to another of Chen's recruits who had been convicted of the same offence. The question raised by these appeals is the application of the principle of parity stated in Lowe to the sentencing of offenders for different offences arising out of the same criminal enterprise. Although this question was not raised in Jimmy, Campbell JA's comprehensive review of the decisions of intermediate appellate courts included those in which such a question had been considered170. The clear trend of authority was against the principle applying in these 167 (1997) 189 CLR 295; [1997] HCA 26. 168 Postiglione v The Queen (1997) 189 CLR 295 at 301 per Dawson and Gaudron JJ, 309 per McHugh J, 323 per Gummow J, 338 per Kirby J. 169 Criminal Code (Cth), s 400.4(1). 170 Wurramarbra v The Queen (1979) 28 ALR 176; R v Watson unreported, New South Wales Court of Criminal Appeal, 25 February 1992; Krakouer v The Queen (1999) 107 A Crim R 408; R v Kerr [2003] NSWCCA 234; R v Formosa [2005] NSWCCA 363. Bell circumstances. However, in R v Kerr171, the New South Wales Court of Criminal Appeal had applied the principle of parity to reduce a sentence that was considered to exhibit gross disproportion to that imposed on another offender convicted of a different and lesser offence. Subsequent decisions of the New South Wales Court of Criminal Appeal had been consistently critical of the reasoning in Kerr172. In Jimmy, the Court held that Kerr should not be followed173. The statements in Jimmy on which the Court of Criminal Appeal minority relied are to be understood in the context of the reasons of their Honours in Jimmy for concluding that Kerr was wrongly decided. Kerr was an offender's appeal against a sentence imposed for the offence of aggravated robbery. Another offender, Oliver, was convicted of the offence of robbery simpliciter arising out of the same incident and received a more lenient sentence. A third offender, Tickner, who drove the vehicle in connection with the robbery, was convicted of concealing a serious indictable offence. Kerr was sentenced to 13 and a half years' imprisonment and Oliver to perform 500 hours of community service. Miles AJ, giving the leading judgment of the Court, said that the policy behind the principle of parity in sentencing was not to be avoided by the prosecuting authority charging cooperative offenders with less serious offences. Rather, the whole of the circumstances of the offence should be considered174. His Honour characterised the parity principle as one "of wide application" and said that it was "not to be applied or withheld in a technical or pedantic way"175. It was, he said, a reflection of the wider principle that consistency in sentencing is desirable in the public interest176. In the result, the Court held that the lenient sentence imposed on Oliver "should have alerted the judge sentencing the applicant to the need to avoid a sentence of gross disproportion"177. The appeal was upheld and the applicant's sentence reduced. 171 [2003] NSWCCA 234. 172 See, for example, R v Formosa [2005] NSWCCA 363; Spinks v The Queen [2007] NSWCCA 52; Pham v The Queen (2009) 193 A Crim R 190; Woodgate v The Queen (2009) 195 A Crim R 219. 173 Jimmy v The Queen (2010) 77 NSWLR 540 at 571 [130] per Campbell JA, 596 [247] per Howie J, 599 [267] per Rothman J. 174 R v Kerr [2003] NSWCCA 234 at [13]. 175 R v Kerr [2003] NSWCCA 234 at [19]. 176 R v Kerr [2003] NSWCCA 234 at [19]. 177 R v Kerr [2003] NSWCCA 234 at [26]. Bell The New South Wales Court of Criminal Appeal was correct in Jimmy to hold that Kerr was wrongly decided. As Campbell JA observed, the parity principle is not applied to correct differences in the sentences imposed on offenders involved in a common criminal enterprise who are convicted of different offences178. The selection of the charge or charges upon which offenders are brought before the court is a matter for the prosecuting authority. The justifiable sense of grievance which informs the parity principle arises from the manifest disparity in the sentences imposed by the court on offenders convicted of the same offence. As Simpson J explained in R v Formosa, where the discrepancy in sentences derives from the difference in charges between offenders, any sense of grievance is engendered in consequence of a prosecutorial decision and is not a grievance in the Lowe or Postiglione sense179. In Postiglione, Gummow J said that the parity principle only applies to co-offenders180. As explained above, since the issue was not raised in Postiglione, his Honour's statement may not have been intended to exclude persons who are not co-offenders in the strict sense. However, the extension of a principle concerned with equality of treatment to offenders charged with different offences raises distinct difficulties. In Jimmy, the Court said that significant limitations attend the application of the principle in such a case181. These limitations included the "particular difficulties" attending a disparity argument that is based upon comparison with an offender convicted of a less serious offence182. Howie J's statement that the principle should not be confined to a consideration of the sentences imposed upon co-offenders in the strict sense was subject identified by Campbell JA183. to his agreement with the significant limitations 178 Jimmy v The Queen (2010) 77 NSWLR 540 at 567 [117] per Campbell JA. 179 R v Formosa [2005] NSWCCA 363 at [50]. 180 Postiglione v The Queen (1997) 189 CLR 295 at 325, citing Lowe v The Queen (1984) 154 CLR 606 at 609 per Gibbs CJ, 611 per Mason J, 617-618 per 181 Jimmy v The Queen (2010) 77 NSWLR 540 at 589 [203] per Campbell JA, 596 [246] per Howie J, 598 [261] per Rothman J. 182 Jimmy v The Queen (2010) 77 NSWLR 540 at 589 [203] per Campbell JA. 183 Jimmy v The Queen (2010) 77 NSWLR 540 at 596 [245]-[246]. Bell Parity for offenders sentenced for different offences? In Postiglione, Dawson and Gaudron JJ said that discrepancy or disparity is not confined to the imposition of different sentences for the same offence and that the concept encompassed the existence of "due proportion" between sentences in a case in which co-offenders have differing degrees of criminality or other differing circumstances184. The Crown accepted that, in sentencing offenders for their respective roles in a criminal enterprise, it is appropriate for the judge to assess the respective levels of culpability and relevant differences in subjective cases with a view to achieving due proportion in the sentences imposed on each. The respondent did not submit that it had been an error for Boulton ADCJ to have regard to considerations of proportion in sentencing all of the offenders charged in connection with the cultivation of the cannabis at the crop sites. It is important to distinguish the principle of parity stated in Lowe from recognition that a sentencing judge may take into account consideration of the proportion or relativity between the sentences imposed on persons convicted of different offences arising out of the same criminal enterprise. One does not start in the latter case from a position of equality subject to the making of any adjustment to reflect relevant differences in the offenders' culpability and antecedents. The starting point is the different offences for which the offenders are being sentenced. Conflating the principle of parity with ideas of proportion in the sentencing of offenders for different offences arising out of the same criminal enterprise is very likely to obscure the proper consideration of the appropriate sentence for each offender. The point may be illustrated by these appeals. Taylor was originally charged with the same offence as Quinn and Green. While the proceedings were still before the Local Court, the Director withdrew the charge of cultivation of a large commercial quantity and substituted the charge for the lesser offence. Commonly, the court will not know the reasons for the decision to charge offenders with different offences arising out of the same venture. In this case, the Crown Prosecutor informed Boulton ADCJ of the reason why the Director proceeded against Taylor for the lesser offence. The Crown was unable to establish any link between Taylor and the shed at Yarrowitch. It could not prove that Taylor knew that the enterprise involved the cultivation of a large commercial quantity of cannabis. It is true that Taylor was involved in the cultivation of cannabis in the Port Macquarie area together with Quinn and Green. In this sense, the three might be said to have been involved in the same criminal enterprise. However, Taylor was not a party to an enterprise to cultivate a large commercial quantity of cannabis. There was no unfairness or 184 Postiglione v The Queen (1997) 189 CLR 295 at 301-302. Bell want of justice or equality in sentencing Taylor for the offence to which he pleaded guilty and in sentencing the appellants differently for the offences to which they pleaded guilty. The significant difference in the statutory maximum penalties for the offences required such a result. Senior counsel for the appellant Green, in oral submissions, identified as the error in the Court of Criminal Appeal majority's approach that their Honours disregarded Boulton ADCJ's assessment of the appropriate proportion in the sentences that he imposed on each of the persons involved in the enterprise. This argument accepted that the failure to appeal against the sentence imposed on Taylor was not fatal to the appeals. It relied instead on the Crown's acceptance that Boulton ADCJ was correct to take into account considerations of due proportion in the sentencing of all of the offenders involved in the enterprise. Boulton ADCJ said that Quinn should receive a "significantly more severe sentence" than Taylor since Quinn was, on the agreed facts, "the principal organiser of this enterprise" and that Green should receive a sentence "somewhat greater" than Taylor's to reflect Green's "greater participation in the enterprise". The proportion between the sentences that his Honour imposed was, in the case of Taylor, one-half of the sentence imposed on Quinn, and, in the case of Green, two-thirds of the sentence imposed on Quinn. The proportions are those that might be expected had all been sentenced for the same offence after making proper allowance for relevant differences. The proportions that his Honour fixed were with respect to relative levels of participation in "the enterprise". Nothing in his Honour's reasons suggests that he took into account that the sentence imposed on Taylor was for a different and less serious offence. In the result, he imposed sentences on the appellants which were held to be manifestly inadequate. The appellants' additional ground of appeal RS Hulme J, in a concluding paragraph of his reasons, described the sentence imposed on Taylor as being "so obviously manifestly inadequate that it is prima facie extraordinary that the Crown did not appeal and the Crown provided no reason why it did not"185. The appellants were given leave at the hearing of the appeal to add a second ground arising out of his Honour's assessment in this regard. The additional ground is framed in this way: "The Court of Criminal Appeal erred in finding, as an essential step in the reasoning that the sentence on the appellant was manifestly inadequate, that the sentence previously imposed on Taylor was also manifestly inadequate, in the circumstances where such finding was not sought by the 185 R v Green (2010) 207 A Crim R 148 at 180 [142]. Bell Crown and the Court did not give the parties an opportunity to be heard on the point before making such finding." As has been explained, the Crown did not submit that Taylor's sentence was manifestly inadequate, much less seek such a finding. It has consistently maintained that the sentence imposed on Taylor was lenient. In its written submissions in the Court of Criminal Appeal, the Crown contended that: "Although treated leniently in any event, the charge for which [Taylor] lesser maximum penalty of 15 years was sentenced carried imprisonment, and attracted no standard non-parole period." the It is correct to say that the parties were not given an opportunity to comment on RS Hulme J's view that the sentence imposed on Taylor was manifestly inadequate. Whether it is right to characterise this as a "finding" or not, it is difficult to accept that it was essential to the conclusion that the sentences imposed on the appellants were manifestly inadequate and that the Court should intervene and re-sentence. All five judges were unanimous in holding that the sentences imposed on the appellants were manifestly inadequate. The reasoning of the minority for that conclusion did not depend upon an assessment that the sentence imposed on Taylor was manifestly inadequate. There is nothing in RS Hulme J's reasons that makes the conclusion of manifest inadequacy respecting the appellants' sentences, or the conclusion that the appeals should be allowed notwithstanding the residual discretion, dependent upon the assessment of the inadequacy of Taylor's sentence. The delay in the appellate process was not due to neglect by the Crown. The appellants applied for, and the Crown opposed, the adjournment of the appeals. Nonetheless, the appellants' progress to reform and the closeness to the date of their eligibility for parole were matters that the Court of Criminal Appeal was entitled to take into account as reasons for dismissing the appeals in the exercise of the residual discretion. However, the exercise of that discretion was a matter for the Court of Criminal Appeal and was not the subject of the appellants' grounds of challenge. Since, in my opinion, neither of those grounds was established, I would have dismissed the appeals.
HIGH COURT OF AUSTRALIA PLAINTIFF S297/2013 PLAINTIFF AND MINISTER FOR IMMIGRATION AND BORDER PROTECTION & ANOR DEFENDANTS Plaintiff S297/2013 v Minister for Immigration and Border Protection [2015] HCA 3 11 February 2015 ORDER The questions asked by the parties in the special case dated 22 September 2014 and referred for consideration by the Full Court be answered as follows: Question 1 Is clause 866.226 of Sch 2 to the Migration Regulations invalid? Answer It is not necessary to answer this question. Question 2 Was the decision made by the Minister on 17 July 2014 to refuse to grant a protection visa to the plaintiff made according to law? Answer Question 3 What, if any, relief should be granted to the plaintiff? Answer A peremptory writ of mandamus should issue commanding the first defendant to grant the plaintiff a permanent protection visa forthwith. Question 4 Who should pay the costs of this special case? Answer The defendants. Representation S B Lloyd SC with J B King for the plaintiff (instructed by Fragomen) S P Donaghue QC with P D Herzfeld for the defendants (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Plaintiff S297/2013 v Minister for Immigration and Border Protection Migration – Refugees – Protection visas – Power of Minister under Sched 2, cl 866.226 of Migration Regulations 1994 (Cth) to decide application for protection visa if Minister satisfied that grant of visa "is in the national interest" – Whether cl 866.226 invalid – Whether cl 866.226 permitted Minister to refuse to grant protection visa solely on ground that application for visa made by unauthorised maritime arrival. Administrative law – Judicial review – Mandamus – Return of writ insufficient – Plaintiff sought order issuing peremptory writ of mandamus – Reg 2.08F of Migration Regulations 1994 (Cth) applied where court quashed decision of Minister in relation to application for protection visa and ordered Minister to reconsider application in accordance with law – Whether reg 2.08F applied. Words and phrases – "is in the national interest", "peremptory mandamus", "unauthorised maritime arrival". Migration Act 1958 (Cth), ss 45AA, 46A. Migration Regulations 1994 (Cth), reg 2.08F, Sched 2, cl 866.226. FRENCH CJ, HAYNE, KIEFEL, BELL, GAGELER AND KEANE JJ. The issues which this Court must now decide arise out of the return which the Minister made to a writ of mandamus directed to the Minister. The writ issued by consent after this Court's decision1 of questions which the parties had stated for the opinion of the Full Court in the form of a special case. The issues The Migration Act 1958 (Cth) ("the Act") provides2 that an unauthorised maritime arrival3 may not make a valid application for a visa but that the Minister may determine4 that it is in the public interest to lift that bar and permit an unauthorised maritime arrival to apply for a visa of a class specified in the determination. The plaintiff is an unauthorised maritime arrival. In 2012, the Minister determined that it was in the public interest that the plaintiff be permitted to make a valid application for a Protection (Class XA) visa. At relevant times, the Act and the Migration Regulations 1994 (Cth) ("the Regulations") prescribed criteria for the grant of a Protection (Class XA) visa which included5 that the Minister be satisfied that the grant of the visa "is in the national interest" ("the cl 866.226 criterion"). In 2014, in intended satisfaction of a writ of mandamus commanding the Minister "to consider and determine the Plaintiff's application for a Protection (Class XA) visa according to law or show cause why it has not been done", the Minister decided that he was not satisfied that it was in the national interest to grant the plaintiff the visa he sought. The only reason given for that conclusion was that the plaintiff was an unauthorised maritime arrival. There are three issues. On its true construction, did the cl 866.226 criterion authorise a decision made by reference only to the plaintiff being an 1 Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 88 ALJR 722; 309 ALR 209; [2014] HCA 24. s 46A(1). s 5AA. s 46A(2). 5 Regulations, Sched 2, cl 866.226. Hayne Bell unauthorised maritime arrival? If it did, is the cl 866.226 criterion valid? Does the Migration and Maritime Powers Legislation Amendment (Resolving the Asylum Legacy Caseload) Act 2014 (Cth) ("the 2014 Amendment Act") convert the plaintiff's application for a Protection (Class XA) visa into an application for a Temporary Protection (Class XD) visa? A summary of the principal conclusions The construction issue should be resolved in the plaintiff's favour. The Act prescribes consequences that follow from being an unauthorised maritime arrival. In particular, the Act provides that no unauthorised maritime arrival may make a valid application for any visa unless the Minister, acting personally, determines that it is in the public interest to permit the person to make a valid application for a visa of a class specified in the determination. The cl 866.226 criterion does not permit the Minister to attach an additional consequence to being an unauthorised maritime arrival beyond those fixed by the Act. It does not authorise application of a general rule that a valid application by an unauthorised maritime arrival for a visa of the class specified in the Minister's determination must be refused. This being so, the validity issue is not reached. The 2014 Amendment Act does not convert the plaintiff's application for a Protection (Class XA) visa to an application for a Temporary Protection (Class XD) visa. The Minister must grant the plaintiff what the Act now calls a permanent protection visa. A peremptory writ of mandamus to that effect should issue. The Minister and the Commonwealth should pay the plaintiff's costs. The facts and procedural history It is necessary to refer to the principal events in the factual and procedural history that yield the issues identified at the outset of these reasons. In May 2012, the plaintiff entered Australia by sea at Christmas Island without a visa. He was what the Act then called6 an "offshore entry person". Because he had no valid visa, he was7 an "unlawful non-citizen". With effect Hayne Bell from June 2013 the Act was amended8, and an offshore entry person became an "unauthorised maritime arrival"9. Because the plaintiff was an unlawful non-citizen and an offshore entry person (and later, was an unauthorised maritime arrival), he could not make10 a valid application for a visa. But in September 2012, the Minister determined, under s 46A(2) of the Act, that it was in the public interest that the bar to the plaintiff making a valid application for a visa should not apply to an application by the plaintiff for a protection visa. (At that time this was a reference to what the Regulations identified as a Protection (Class XA) visa.) In February 2013, a delegate of the Minister refused to grant the plaintiff a Protection (Class XA) visa. The plaintiff sought the review of that decision by the Refugee Review Tribunal. In May 2013, the Tribunal remitted the plaintiff's visa application to the Minister for reconsideration in accordance with the Tribunal's direction that the plaintiff satisfied s 36(2)(a) of the Act. That is, the Tribunal was satisfied that the plaintiff was "a non-citizen in Australia in respect of whom ... Australia has protection obligations under the Refugees Convention as amended by the Refugees Protocol". The Minister did not decide the plaintiff's application. As this Court has previously explained11, various regulatory and other steps were taken between October 2013 and March 2014 which, it may be inferred, were thought to permit the Minister not to make a decision whether to grant or refuse the application. And in December 2013 the plaintiff began proceedings, in the original jurisdiction of this Court, seeking to have some of those steps declared invalid, or at least ineffective to prevent him being granted the visa for which he had applied. In June 2014, the Court answered questions reserved for its consideration in the form of a special case in the proceedings which the plaintiff had brought. (The argument in that special case was heard at the same time as argument in a special case in another proceeding brought by another plaintiff – 8 Migration Amendment (Unauthorised Maritime Arrivals and Other Measures) Act 2013 (Cth). s 5AA(1). 10 s 46A(1). 11 Plaintiff S297/2013 v Minister for Immigration and Border Protection (2014) 88 ALJR 722 at 724 [3]-[5], 725 [10]; 309 ALR 209 at 211, 212. Hayne Bell Plaintiff M150 of 2013 – and the decisions in the two special cases were published at the same time12.) The answers to the questions asked in the special case in the plaintiff's proceedings were treated by the parties as resolving the controversy between them. No trial was had. Instead, on 1 July 2014, French CJ ordered, by consent, that a writ of mandamus issue directing the Minister to consider and determine the plaintiff's application for a Protection (Class XA) visa according to law. On 3 July 2014, French CJ ordered13 that the writ should be returnable14 by 21 July On 17 July 2014, the Minister decided to refuse to grant the plaintiff a Protection (Class XA) visa. The parties agree that the only reason the Minister refused to grant the plaintiff a protection visa was that the Minister was not satisfied that the cl 866.226 criterion was met. (It will be recalled that this criterion required the Minister to be satisfied that the grant of the visa "is in the national interest".) The Minister's decision record shows that he saw "the national interest" as requiring refusal of a Protection (Class XA) visa to any and every unauthorised maritime arrival. That is, even though the Act provided, at all times relevant to these proceedings, that the Minister could decide that it is "in the public interest" to permit an unauthorised maritime arrival to make a valid application for a permanent protection visa, the Minister's decision in this case was that the national interest required that no such application should be granted. (It will be observed that s 46A(2) referred to "the public interest" and the cl 866.226 criterion referred to "the national interest". No party suggested, however, that anything turns upon any distinction between "the public interest" and "the national interest".) On 21 July 2014, the Minister filed a certificate stating that he had "done what was commanded of [him] by the Writ of Mandamus". The plaintiff pleaded to that return alleging, among other things, that the cl 866.226 criterion is invalid 12 See Plaintiff M150 of 2013 v Minister for Immigration and Border Protection (2014) 88 ALJR 735; 309 ALR 225; [2014] HCA 25. 13 Plaintiff M150 of 2013 v Minister for Immigration and Border Protection (No 2) (2014) 88 ALJR 775; 311 ALR 154; [2014] HCA 27. 14 High Court Rules 2004 (Cth), r 25.08.3. Hayne Bell and claiming a peremptory writ of mandamus directing the Minister to grant the plaintiff the visa for which he had applied. The parties agreed in stating questions of law in the form of a special case for the opinion of the Full Court. Shortly before the special case came on for argument, the 2014 Amendment Act was passed by both Houses of the Parliament. The 2014 Amendment Act was given Royal Assent on 15 December 2014. Relevant provisions of the 2014 Amendment Act, to which it will be necessary to make further reference, came into operation15 on the day following the Royal Assent. Construing the cl 866.226 criterion Although the plaintiff commenced his argument by alleging that the cl 866.226 criterion is invalid, it is neither necessary nor desirable to enter upon that controversy. Nothing in these reasons should be understood as suggesting that the validity of the criterion is or is not open to doubt. In Hot Holdings Pty Ltd v Creasy16 three members of this Court noted that "[i]t has been said that 'the whole object' of a statutory provision placing a power into the hands of the Minister 'is that he may exercise it according to government policy'17". And where, as here, the criterion to be applied by the Minister requires the Minister to be satisfied that the grant of the visa is "in the national interest", the decision-maker "may properly have regard to a wide range of considerations of which some may be seen as bearing upon such matters as the political fortunes of the government of which the Minister is a member and, thus, affect the Minister's continuance in office"18. 16 (2002) 210 CLR 438 at 455 [50] per Gaudron, Gummow and Hayne JJ; [2002] HCA 51. 17 Wade and Forsyth, Administrative Law, 8th ed (2000) at 464. 18 Hot Holdings (2002) 210 CLR 438 at 455 [50] per Gaudron, Gummow and Hayne Bell Some of those considerations may admit of the formulation of rules of more or less general application which can be understood as expressing some aspect of the Minister's understanding of what may or may not be "in the national interest". This Court's decision in Minister for Immigration and Multicultural Affairs v Jia Legeng19 (about the Minister's application of "the character test" in the Act) illustrates how there may be "elements of the decision-making process about which a decision-maker may legitimately form and hold views before coming to consider the exercise of a power in a particular case"20. But, as was pointed out in Jia Legeng21, those views cannot proceed from, or be based in, an error of law. Hence, in the present matter, observing that the Minister applied a publicly stated government policy (that no unauthorised maritime arrival should be granted a Protection (Class XA) visa) when deciding that it was not in the national interest that the plaintiff be granted a visa of that class directs attention to how the cl 866.226 criterion should be construed. The application of the policy does not invoke, in this case, notions of prejudgment or bias22. Nor does the application of the policy invoke notions of fettering discretion23. Rather, the application of the policy directs attention to whether, in applying the cl 866.226 criterion, the Minister could attach determinative and adverse significance to the plaintiff's status as an unauthorised maritime arrival in addition to those consequences which the Act expressly attributes to that status. That is, did the criterion permit the Minister to treat the plaintiff's status as an unauthorised maritime arrival as sufficient to justify the conclusion that it was not in the national interest to grant the plaintiff the visa which he sought? The cl 866.226 criterion should not be construed as permitting that course. A criterion operating in that manner would be inconsistent with the Act and invalid, at least to the extent to which it permitted the Minister to refuse to grant 19 (2001) 205 CLR 507 at 538 [100] per Gleeson CJ and Gummow J, 565-566 [188]-[191] per Hayne J; [2001] HCA 17. 20 Jia Legeng (2001) 205 CLR 507 at 566 [192]. 21 (2001) 205 CLR 507 at 565 [188]-[189]. 22 See Jia Legeng (2001) 205 CLR 507 at 566 [190], [192]. 23 See Jia Legeng (2001) 205 CLR 507 at 566 [191]. Hayne Bell a valid application for a visa only because the applicant is an unauthorised maritime arrival. By providing in s 46A that an unauthorised maritime arrival may not make a valid application for any visa unless the Minister personally determines to lift that bar in respect of a class of visa specified in the determination, the Parliament has exhaustively prescribed the visa consequences which follow from the relevant status. Because s 46A states exhaustively what visa consequences attach to being an unauthorised maritime arrival, the general words of cl 866.226 may not be construed as permitting the Minister to add to the consequences which the Parliament has identified. The affirmative statements in s 46A of those visa consequences appoint or limit an order or form of things in a way which has a negative force24. More particularly, the status of unauthorised maritime arrival cannot be treated as a sufficient reason in itself for refusing to grant the visa which the plaintiff lawfully sought in accordance with an earlier ministerial determination under s 46A. Yet that is what the Minister did when he decided that it was not in the national interest to grant the plaintiff a Protection (Class XA) visa. The bare fact of the plaintiff being an unauthorised maritime arrival was treated as determinative of the issue. It is unnecessary to decide whether other provisions of the Act dealing with unauthorised maritime arrivals, such as the regional processing provisions of subdiv B of Div 8 of Pt 2 (ss 198AA-198AJ), support the conclusion that the cl 866.226 criterion cannot be applied by attaching determinative significance to the applicant's status as an unauthorised maritime arrival. Those other provisions of the Act are at least consistent with that conclusion and do not detract from it in any way. The issues about the validity of the cl 866.226 criterion which were agitated by the plaintiff are not reached. It is not necessary, therefore, to decide whether, as the plaintiff submitted, cl 866.226 is inconsistent with ss 501(3) and 501C of the Act. Section 501(3) permits the Minister to refuse to grant or to cancel a visa if the Minister reasonably suspects that the person does not pass the character test and the Minister is satisfied that the refusal or cancellation "is in the national interest". Section 501C provides for the revocation of certain decisions, including a decision made under s 501(3). 24 cf R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 at 270; [1956] HCA 10. Hayne Bell Nor is it necessary to decide whether, as the plaintiff submitted, cl 866.226 "varies and departs from the scheme for protection visas provided for by ss 36, 500(1)(c), 501 and other provisions of the Act". It is convenient to deal next with the 2014 Amendment Act. The 2014 Amendment Act The 2014 Amendment Act inserted25 in the Act a new s 35A, providing that there is to be a class of permanent visas to be known as "permanent protection visas" and a class of temporary visas to be known as "temporary protection visas". The notes to both the definition of "protection visa" inserted26 in s 5(1) and the newly inserted s 35A(2) record that, when those provisions commenced, permanent protection visas were classified by the Regulations as Protection (Class XA) visas. Amendments made27 to the Regulations by the 2014 Amendment Act provided that the new class of temporary protection visas was to be classified as Temporary Protection (Class XD) visas. The Regulations still provide for those classes of visa. The 2014 Amendment Act also inserted28 in the Act a new s 45AA. That section provides for certain visa applications to be taken to be applications for a different visa. In particular, s 45AA(3) provides that a regulation, referred to as a "conversion regulation", may provide that, despite anything else in the Act, a "pre-conversion application" for a "pre-conversion visa": is taken not to be, and never to have been, a valid application for the pre-conversion visa; and is taken to be, and always to have been, a valid application (a converted application) for a visa of a different class (specified by the the conversion regulation) made by pre-conversion visa." the applicant for 25 Sched 2, item 5. 26 Sched 2, item 1. 27 Sched 2, items 26, 30 and 31. 28 Sched 2, item 20. Hayne Bell The 2014 Amendment Act inserted29 in the Regulations a new reg 2.08F. Regulation 2.08F(1) is a conversion regulation of the kind provided for by s 45AA(3). Regulation 2.08F(1) provides for converting certain applications for Protection (Class XA) visas into applications for Temporary Protection (Class XD) visas. This conversion is to be made with respect to an application "made before the commencement of this regulation by an applicant prescribed by subregulation (2)". One of the classes of prescribed applicants is30 unauthorised maritime arrivals. Regulation 2.08F(3) provides for when the regulation starts to apply and it is this provision which is of central importance in the present matter. So far as relevant, it provides: "This regulation starts to apply in relation to a pre-conversion application immediately after the occurrence of whichever of the following events is applicable to the application: if, before the commencement of this regulation, the Minister had not made a decision in relation to the pre-conversion application under section 65 of the Act—the commencement of this regulation; in a case in which the Minister had made such a decision before the commencement of this regulation—one of the following events, if the event occurs on or after the commencement of this regulation: (iii) a court quashes a decision of the Minister in relation to the pre-conversion application and orders the Minister to reconsider the application in accordance with the law." The defendants submitted that, if the cl 866.226 criterion was invalid, or the Minister had made an error of law in applying the criterion, either or both of par (a) and par (b)(iii) of reg 2.08F(3) applied, and that, accordingly, the plaintiff's application for a Protection (Class XA) visa was converted to an application for a Temporary Protection (Class XD) visa. Both aspects of this 29 Sched 2, item 38. 30 reg 2.08F(2)(c). Hayne Bell submission should be rejected. Regulation 2.08F does not apply and the plaintiff's application for a Protection (Class XA) visa has not been converted to an application for a Temporary Protection (Class XD) visa. Paragraph (a) of reg 2.08F(3) is not engaged in this case. Before the commencement of the regulation, the Minister had made a decision in relation to the plaintiff's application for a visa. For the reasons which have been given, the Minister's decision to refuse to grant the plaintiff the visa which he sought was legally infirm. Because of the error of law which the Minister made, the decision involved jurisdictional error and "is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all"31. But contrary to the defendants' submission, observing that the decision was legally ineffective presents rather than concludes the question about the application of par (a) of reg 2.08F(3). The condition stated in par (a) for its application is: "if, before the commencement of this regulation, the Minister had not made a decision in relation to the pre-conversion application under section 65 of the Act" (emphasis added). The words "had not made a decision" must be read in the context provided by the whole of reg 2.08F(3). And when it is observed that par (b)(iii) deals expressly with the quashing of a legally infirm decision, it becomes evident that the phrase "if ... the Minister had not made a decision" is to be construed as referring to whether the Minister had in fact made a decision, regardless of whether what had been done was legally effective. If the words are not read in that way, reg 2.08F(3)(b)(iii) has no work to do. The regulation should be read in a way which gives work for all of its provisions. In this case, the Minister had in fact made a decision before the commencement of reg 2.08F. Paragraph (a) of reg 2.08F(3) was not engaged. The defendants then submitted that, if that were so, par (b)(iii) of reg 2.08F(3) applied. That is, the defendants submitted that the plaintiff was seeking the quashing of the decision which the Minister had made (to refuse the grant of a visa) and an order that the Minister reconsider the application in accordance with the law. To explain why this submission must be rejected, it is necessary to say a little more about the nature of the proceedings. 31 Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at 614-615 [51] per Gaudron and Gummow JJ; [2002] HCA 11. Hayne Bell It will be recalled that the plaintiff (by consent of the defendants) obtained an order for the issue of a writ of mandamus. The writ that issued commanded the Minister to consider and determine the plaintiff's application for a Protection (Class XA) visa according to law or show cause why it has not been done. The order which French CJ made by consent of the parties, that a writ of mandamus issue, finally determined the matter then before the Court. By their consent to the order, the defendants accepted that the Minister had not determined the plaintiff's application in accordance with law and that the Minister was bound to do so. In response to the writ, the Minister did consider and determine the plaintiff's application and made a return to the writ certifying that he had done what was commanded of him by the writ. But the plaintiff challenges the return and alleges that the Minister has not done what was commanded of him. And, as these reasons have shown, the plaintiff's submission should be accepted. What the plaintiff now seeks is compliance with the writ which the Court ordered to issue. If, as these reasons have shown, the Minister did not do what was commanded of him by the writ, the return to the writ is insufficient and the duty imposed by the writ remains unperformed. Performance of the writ's command at or before the time fixed for its return would have obliged the Minister to grant a Protection (Class XA) visa. The plaintiff seeks to enforce compliance with the writ by having the Court issue a peremptory mandamus. Three points must be made in that regard. First, and of critical importance to the application of reg 2.08F(3)(b)(iii), a peremptory mandamus is neither in form nor in substance an order which "quashes a decision of the Minister in relation to [the plaintiff's] pre-conversion application"32 for a Protection (Class XA) visa. Certiorari to quash the Minister's decision is not sought and is neither necessary nor appropriate. The issue of a peremptory mandamus is to enforce compliance with the writ which the Court had directed to issue in resolution of the matter then pending in the Court. A peremptory mandamus commands performance of the duty which was the subject of the writ but remains unperformed. What is important is that the Minister's return to the writ of 32 reg 2.08F(3)(b)(iii). Hayne Bell mandamus was legally insufficient. It is that insufficiency which grounds33 the peremptory mandamus. As the editors of the first edition of Halsbury's Laws of England said34: "where the applicant obtains judgment upon the argument of a point of law raised in answer to a return or other pleading or after pleading to the return, the applicant is entitled forthwith to a peremptory writ of mandamus to enforce the command contained in the original writ" (emphasis added; footnotes omitted). Second, the Minister should not be given a further opportunity to identify some reason for not granting the plaintiff the visa which is sought. In response to the writ, the Minister decided the application on the one basis that has been identified – that the national interest required that no unauthorised maritime arrival should be granted a Protection (Class XA) visa. That basis for the decision was legally wrong. No other basis for the decision having been identified, the Minister cannot, and should not, now be given any further opportunity to consider the matter afresh. It is not suggested that, in the time between the issue of the writ of mandamus and this Court's determination of the present dispute about the sufficiency of the Minister's return to that writ, there has been any relevant change in any circumstances affecting the disposition of the plaintiff's application (apart from the 2014 Amendment Act). It is, therefore, not necessary to examine what consequences might follow if it were alleged that there had been some relevant change in circumstances. Rather, it is enough to observe that only one reason was given by the Minister for refusing the plaintiff's application. That reason was legally insufficient. And in his return to the writ, the Minister had the opportunity to identify any other reason for refusing the application. None was identified. The Minister should not now be given any further opportunity to identify a reason for refusing the plaintiff's application. 33 Foot v Prowse (1726) 2 Strange 697 at 698 [93 ER 791 at 792]; R v Fall (1842) 1 QB 653 at 656 [113 ER 1282 at 1283]. 34 Halsbury's Laws of England, 1st ed, vol 10, par 245. See also Tapping, The Law and Practice of the High Prerogative Writ of Mandamus, (1853) ("Tapping") at Hayne Bell Third, nineteenth century practice required35 that a peremptory mandamus take the same form as the writ first granted, with the omission of the alternative permitting the person to whom the writ was directed to show cause why the command was not obeyed. Otherwise, the peremptory writ was not to differ from the original writ in any material particular. By directing performance of the duty in the terms of the original writ, it was made clear that the peremptory mandamus enforced36 the original writ. But the rule appears37 to have been adopted to ensure refusal of the peremptory writ in any case where the original writ was substantially defective. If the writ upon which it was founded was substantially defective a peremptory writ would be refused38; it would not be moulded to avoid the defect. In this case, there is no suggestion that the writ of mandamus which issued was defective in any way. A peremptory mandamus commanding the Minister to grant the plaintiff the visa which he seeks would not seek to mould the command of the original writ in order to alter the effect of that original writ. It would be an order directing obedience to the command of the original writ. By the end of the nineteenth century, the English practice of requiring a peremptory mandamus to follow the exact words of the original writ appears to have been treated as yielding, in at least some respects, to the provisions of the applicable rules of court39. Be this as it may, the practice to be adopted in this Court must accord with s 32 of the Judiciary Act 1903 (Cth)40 and its provision 35 See, for example, Shortt, Informations (Criminal and Quo Warranto), Mandamus and Prohibition, (1887) ("Shortt") at 422. 36 R v The Church Trustees of St Pancras (1835) 3 Ad & E 535 at 542 [111 ER 517 at 37 Tapping at 439. 38 Tapping at 439. See also R v The Church Trustees of St Pancras (1835) 3 Ad & E 535 at 542 [111 ER 517 at 520]. 39 See Crown Office Rules 1886 (Eng), r 71. See also Shortt at 422-423. 40 Derived from the Supreme Court of Judicature Act 1873 (Eng), s 24(7). See Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at 489; [1981] HCA 7; Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at 184-185 [11]-[12]; [2009] HCA 27. Hayne Bell that this Court, in the exercise of its original jurisdiction, "shall have power to grant, and shall grant, either absolutely or on such terms and conditions as are just, all such remedies whatsoever as any of the parties thereto are entitled ... so that as far as possible all matters in controversy between the parties regarding the cause of action ... may be completely and finally determined" (emphasis added). The requirement that the Court provide such remedies as will finally quell the controversy between the parties permits, and in this case requires, the issue of a peremptory mandamus that does not follow the wording of the original writ. That course is required because the Minister gave only the one (legally infirm) reason for his refusal of the visa which the plaintiff sought and it is agreed that, apart from the cl 866.226 criterion, the other criteria prescribed for the visa by the Act and the Regulations had been satisfied. Enforcement of the command made by the writ which issued on 4 July 2014 requires that the Minister now do what he should have done before making his return to the writ. That is, the Minister must grant the plaintiff a permanent protection visa. A peremptory mandamus commanding the Minister to grant the plaintiff a permanent protection visa (being the visa called, at all material times, a "Protection (Class XA) visa") should issue forthwith. The defendants should pay the plaintiff's costs of the special case. The questions asked in the special case should be answered as follows: Is clause 866.226 of Sch 2 to the Migration Regulations invalid? Answer: It is not necessary to answer this question. Was the decision made by the Minister on 17 July 2014 to refuse to grant a protection visa to the plaintiff made according to law? Answer: No. What, if any, relief should be granted to the plaintiff? A peremptory writ of mandamus should issue Answer: commanding the first defendant to grant the plaintiff a permanent protection visa forthwith. Hayne Bell Who should pay the costs of this special case? Answer: The defendants."
HIGH COURT OF AUSTRALIA PLAINTIFF AND STATE OF QUEENSLAND DEFENDANT Spence v Queensland [2019] HCA 15 Date of Order: 17 April 2019 Date of Publication of Reasons: 15 May 2019 ORDER The questions raised by the special case and the answers that must be given to them are as follows: Are the amendments made to the Electoral Act 1992 (Qld) by part 3 of the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) invalid (in whole or in part and, if in part, to what extent) because they political impermissibly communication on governmental and political matters, contrary to the Commonwealth Constitution? freedom implied burden the Answer: No. Are the amendments made to the Electoral Act 1992 (Qld) by part 3 of the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) invalid (in whole or in part and, if in part, to what extent) because they are beyond the power of the Parliament of Queensland to enact on the basis of an implied doctrine of intergovernmental immunities or on the basis that they impermissibly intrude into an area of exclusive Commonwealth legislative power? Answer: No. Are the amendments made to the Local Government Electoral Act the Local Government Electoral 2011 (Qld) by part 5 of (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) invalid (in whole or in part and, if in part, to what extent) because they are beyond the power of the Parliament of Queensland to enact on the basis of an implied doctrine of intergovernmental immunities or on the basis that they impermissibly intrude into an area of exclusive Commonwealth legislative power? Answer: No. Is section 302CA of the Commonwealth Electoral Act 1918 (Cth) invalid (in whole or in part and, if in part, to what extent) because it is beyond the Commonwealth's legislative power? Answer: The section is wholly invalid. Is section 302CA of the Commonwealth Electoral Act 1918 (Cth) invalid (in whole or in part and, if in part, to what extent) because it purports to operate in a manner that is contrary to the principle derived from Melbourne Corporation v Commonwealth (1947) 74 CLR 31? Answer: Does not arise. Is section 302CA of the Commonwealth Electoral Act 1918 (Cth) invalid (in whole or in part and, if in part, to what extent) because it purports to operate in a manner that is contrary to the principle derived from University of Wollongong v Metwally (1984) 158 CLR 447, namely that a Commonwealth law cannot override the operation of section 109 of the Constitution? Answer: Unnecessary to decide. Are the amendments made to the Electoral Act 1992 (Qld) by part 3 of the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) invalid (in whole or in part and, if in part, to what extent) pursuant to section 109 of the Commonwealth Constitution by reason of their being inconsistent with the Commonwealth Electoral Act 1918 (Cth)? Answer: No. Are the amendments made to the Local Government Electoral Act the Local Government Electoral 2011 (Qld) by part 5 of (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) invalid (in whole or in part and, if in part, to what extent) pursuant to section 109 of the Commonwealth Constitution by reason of the their being Commonwealth Electoral Act 1918 (Cth)? inconsistent with Answer: No. i) Who should pay the costs of the special case? Answer: The plaintiff. Representation J K Kirk SC and P A Hastie QC with M J Forrest for the plaintiff (instructed by ClarkeKann Lawyers) P J Dunning QC, Solicitor-General of the State of Queensland, with S J Keim SC, G J D del Villar and F J Nagorcka for the defendant (instructed by Crown Solicitor (Qld)) S P Donaghue QC, Solicitor-General of P D Herzfeld with C J Tran Commonwealth, Solicitor) the Commonwealth, and the (instructed by Australian Government the Attorney-General of intervening for M G Sexton SC, Solicitor-General for the State of New South Wales, with E S Jones for the Attorney-General for the State of New South Wales, intervening (instructed by Crown Solicitor's Office (NSW)) P J F Garrisson SC, Solicitor-General for the Australian Capital Territory, with H Younan for the Attorney-General for the Australian Capital Territory, intervening (instructed by ACT Government Solicitor) M E O'Farrell SC, Solicitor-General for the State of Tasmania, with J L Rudolf for the Attorney-General for the State of Tasmania, intervening (instructed by Solicitor-General for the State of Tasmania) C D Bleby SC, Solicitor-General for the State of South Australia, with K M Scott for the Attorney-General for the State of South Australia, intervening (instructed by Crown Solicitor's Office (SA)) K L Walker QC, Solicitor-General for the State of Victoria, with M A Hosking for the State of Victoria, intervening (instructed by Victorian Government Solicitor) the Attorney-General for J A Thomson SC, Solicitor-General for the State of Western Australia, with J M Misso for the Attorney-General for the State of Western Australia, intervening (instructed by State Solicitor's Office (WA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Spence v Queensland Constitutional law (Cth) – Powers of Commonwealth Parliament – Federal elections – Severance – Where s 51(xxxvi) in application to ss 10 and 31 of Constitution conferred legislative power on Commonwealth Parliament with respect to federal elections – Where Commonwealth Parliament enacted s 302CA within Div 3A of Pt XX of Commonwealth Electoral Act 1918 (Cth) – Where s 302CA relevantly conferred authority on person to make, and on "political entity" to receive and retain, gift not prohibited by Div 3A provided that gift or part of it was "required to be, or may be" used for certain purposes relating to federal elections – Where s 302CA provided for displacement of such authority in circumstances including where State or Territory electoral law required gift or part of it to be kept or identified separately to be used only for purpose of State, Territory or local government election – Whether Commonwealth legislative power with respect to federal elections exclusive or concurrent – Whether s 302CA within scope of Commonwealth legislative power with respect to federal elections – Whether possible to sever s 302CA to preserve part of its operation within scope of Commonwealth legislative power. Constitutional law (Cth) – Inconsistency between Commonwealth and State laws – Gifts to political parties – Where Queensland Parliament passed amendments to Electoral Act 1992 (Qld) and Local Government Electoral Act 2011 (Qld) prohibiting property developers from making gifts to political parties that endorse and promote candidates for election to Legislative Assembly and local government councils – Whether Queensland amendments inconsistent with s 302CA or framework of Pt XX of Commonwealth Electoral Act – Whether s 302CA invalid for infringing principle in University of Wollongong v Metwally (1984) 158 CLR 447; [1984] HCA 74. Constitutional law (Cth) – Implied freedom of communication about governmental and political matters – Where amendments to Electoral Act 1992 (Qld) substantially replicated provisions in Election Funding, Expenditure and Disclosures Act 1981 (NSW) upheld in McCloy v New South Wales (2015) 257 CLR 178; [2015] HCA 34 – Whether amendments invalid for infringing implied freedom. Constitutional law (Cth) – Relationship between Commonwealth and States – Doctrine of inter-governmental immunities – Whether implication expounded in Melbourne Corporation v The Commonwealth (1947) 74 CLR 31; [1947] HCA 26 operates from impermissible interference by law of one polity with operations of government in another – Whether s 302CA invalid for contravening Melbourne Corporation to protect States and Commonwealth reciprocally principle – Whether Queensland amendments Melbourne Corporation principle. invalid for contravening "federalism", Words and phrases – "bare attempt to limit or exclude State power", "concurrent power", "electoral expenditure", "electoral matter", "exclusive power", "federal elections", "incidental", "inconsistency", "inter-governmental immunities", "political entity", "political party", "required to be, or may be, used for the purposes of incurring electoral expenditure, or creating or communicating electoral matter", "severance", "State elections", "structural implication", "sufficient connection". from State "immunity laws", Constitution, ss 7, 9, 10, 29, 31, 51(xxxvi), (xxxix), 109. Acts Interpretation Act 1901 (Cth), ss 13, 15A, 15AD. Commonwealth Electoral Act 1918 (Cth), ss 4AA, 302CA, Pt XX. Election Funding, Expenditure and Disclosures Act 1981 (NSW), Pt 6, Div 4A. Electoral Act 1992 (Qld), Pt 11, Div 8, Subdiv 4. Local Government Electoral Act 2011 (Qld), Pt 6, Div 1A. Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld), Pts 3, 5. KIEFEL CJ, BELL, GAGELER AND KEANE JJ. This special case in a proceeding in the original jurisdiction of the High Court raises questions concerning the constitutional validity and operability of State and Commonwealth electoral laws each purporting to apply to the making of gifts to political parties. The impugned State and Commonwealth electoral laws are framed against the background that political parties in Australia are typically unincorporated associations organised geographically by State and Territory. The objects of a political party typically include to endorse and promote candidates for election to the Commonwealth Parliament as well as to endorse and promote candidates for election to State Parliaments and Territory legislatures and to local government councils. Because registration of a political party brings benefits, which range from identification of a candidate's party endorsement on ballot papers to having access to public funding for expenditure on elections, political parties endorsing and promoting candidates for election to the Commonwealth Parliament typically choose to be registered under Pt XI of the Commonwealth Electoral Act 1918 (Cth) ("the Commonwealth Electoral Act"), and those same political parties or State or Territory branches or divisions of them endorsing and promoting candidates for election to State Parliaments and Territory legislatures and to local government councils typically choose also to be registered under corresponding provisions of State and Territory electoral laws. The impugned State electoral laws were introduced by the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) ("the Queensland Amending Act"). They are provisions of the Electoral Act 1992 (Qld) ("the Queensland Electoral Act") and of the Local Government Electoral Act 2011 (Qld) ("the Queensland Local Government Electoral Act") framed to prohibit property developers from making gifts to political parties which endorse and promote candidates for election to the Legislative Assembly of Queensland and to local government councils in Queensland. law The is s 302CA of impugned Commonwealth electoral the Commonwealth Electoral Act, which was inserted after the Queensland Amending Act by the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018 (Cth) ("the Commonwealth Amending Act"). The section is framed to permit a person to make a gift to a political party registered under the Commonwealth Electoral Act, and to permit that political party to receive and retain that gift, despite any State or Territory electoral law, if the gift, or a part of the gift, is required to be used or might be used to incur expenditure for the dominant purpose of influencing voting in an election to the House of Representatives or to the Senate. The section, if valid, would render the impugned State electoral laws inoperative by force of s 109 of the Constitution in their application to a property developer making a gift other than for the purpose of use in a State or local government election to a political party that endorses and promotes candidates for election to the Legislative Assembly of Queensland or to a local government council in Queensland and that is also registered under the Commonwealth Electoral Act. The questions raised by the special case, and the answers to those questions, are set out at the conclusion of these reasons. The gist of those answers is as follows. The impugned Commonwealth electoral law extends beyond the reach of Commonwealth legislative power to the extent that it purports to immunise from State law the making of a gift which merely might be used to incur expenditure for the dominant purpose of influencing voting in a federal election. It is incapable of severance, and it is on that basis wholly invalid. The impugned State electoral laws are not invalid or inoperative on any of the various bases identified in the questions raised in the special case. The impugned State electoral laws, in short, stand valid and operative. Those answers are arrived at through a process of constitutional analysis which is now to be explained. In the same way as has been seen to be important in other cases1, it is important to emphasise that this process of constitutional analysis is the outworking of the conception of federalism that has prevailed since Amalgamated Society of Engineers v Adelaide Steamship Co Ltd ("the Engineers' Case")2. The Engineers' Case "exploded and unambiguously rejected"3 the doctrines of "reserved powers" and of "implied prohibitions" which had been dominant in the first two decades of our constitutional history. The conception of federalism that has prevailed throughout the century since the Engineers' Case, to use the language of its exposition by Dixon J in Melbourne Corporation v The Commonwealth ("the Melbourne Corporation Case")4, is essentially that of "a central government and a number of State governments separately organized" in which "power itself" forms no part of "the conception of a government" and in which the distribution and inter-relation of legislative eg, New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 118-120 [190]-[194]; [2006] HCA 52. (1920) 28 CLR 129; [1920] HCA 54. 3 Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468 at 485; [1971] HCA (1947) 74 CLR 31 at 82; [1947] HCA 26. power is effected chiefly through the operation of ss 51, 52, 107, 108 and 109 of the Constitution. The proceeding and the special case The plaintiff was formerly the president of the Liberal National Party of Queensland, an unincorporated association registered as a political party under both the Queensland Electoral Act and the Commonwealth Electoral Act. Members of the Liberal National Party currently sit as members of the House of Representatives, as senators, as members of the Legislative Assembly of Queensland and as councillors of the Brisbane City Council. The plaintiff commenced the proceeding against the State of Queensland by writ and statement of claim filed after the enactment but before the commencement of the relevant parts of the Queensland Amending Act. By his statement of claim, as it came to be amended following the commencement of the relevant parts of the Queensland Amending Act, the plaintiff sought declarations to the effect that the amendments introduced into the Queensland Electoral Act were invalid as infringing the implied freedom of political communication, and that the amendments introduced into both the Queensland Electoral Act and the Queensland Local Government Electoral Act were invalid as purporting to exercise power exclusively vested by the Constitution in the Commonwealth Parliament or infringing the doctrine of inter-governmental immunities or, in the alternative, were inoperative as inconsistent with certain provisions of the Commonwealth Electoral Act as it then stood. The subsequent enactment of the Commonwealth Amending Act added a new dimension to the proceeding. The plaintiff further amended his statement of claim to expand his challenge to the amendments introduced into the Queensland Electoral Act and the Queensland Local Government Electoral Act to claim that they were also inoperative by reason of inconsistency with s 302CA of the Commonwealth Electoral Act. Queensland in turn amended its defence to assert the invalidity of that section. those altered circumstances a principal protagonist. The Attorney-General of the Commonwealth, although formally no more than an intervener in the proceeding under s 78A of the Judiciary Act 1903 (Cth), became The Commonwealth supported the validity of s 302CA of the Commonwealth Electoral Act. The Commonwealth chose also to support some aspects of the plaintiff's independent challenge to the validity of the amendments introduced by the Queensland Amending Act. The Attorneys-General of each of the other States and for the Australian Capital Territory also intervened. Each provided a measure of support for the position taken by Queensland. Some advanced important arguments beyond those advanced by Queensland. The special case came to be agreed between the plaintiff and Queensland with the active participation of the Commonwealth. The numerous questions raised in the special case were no doubt formulated to accommodate the plenitude of the arguments sought to be put by them and by the State and Territory interveners. "[P]re-Engineers ghosts"5 whispered to both sides of the dispute, confusing its resolution with competing arguments of exclusive Commonwealth and State legislative powers and with exaggerated claims to the protection of the doctrine of inter-governmental immunities expounded post-Engineers in the Melbourne Corporation Case. To attempt to catalogue all of the arguments advanced on behalf of the parties and the interveners at the outset would be unrewarding. More productive is to concentrate on the principal arguments of the Commonwealth and of the plaintiff concerning the reach of and relationship between Commonwealth and State legislative powers in relation to federal and State elections. Resolution of those arguments, as will be seen, has the consequence that a number of other arguments do not need to be addressed and that some of the questions raised in the special case do not need to be answered. the Commonwealth and The structure of analysis adopted in these reasons is therefore to address in sequence arguments advanced by the plaintiff concerning the exclusivity of Commonwealth legislative power, the scope of Commonwealth legislative power, and the severability of s 302CA of the Commonwealth Electoral Act to the extent that the section travels beyond the scope of Commonwealth legislative power. Those arguments having been dealt with, most of the defensive arguments advanced by Queensland and the State interveners fall away. Remaining arguments advanced by the plaintiff alone as to the validity and operability of the amendments introduced by the Queensland Amending Act, on the basis of the implied freedom of political communication and the doctrine of inter-governmental immunities, are able to be addressed discretely and with relative brevity. 5 Attorney-General (WA) v Australian National Airlines Commission (1976) 138 CLR 492 at 530; [1976] HCA 66. To provide context for the requisite analysis, it is useful to recount a little more of the legislative history of the Queensland Amending Act and of the Commonwealth Amending Act. It is appropriate to give some further explanation of the provisions introduced into the Queensland Electoral Act and the Queensland Local Government Electoral Act by the Queensland Amending Act. And it is imperative to examine with precision the legal and practical operation of s 302CA of the Commonwealth Electoral Act. The Queensland Amending Act The Queensland Amending Act was enacted on 21 May 2018. Parts 3 and 5 of the Queensland Amending Act commenced on 2 October 20186. Part 3 inserted Subdiv 4 into Div 8 of Pt 11 of the Queensland Electoral Act. Part 5 inserted Div 1A into Pt 6 of the Queensland Local Government Electoral Act. The Queensland Electoral Act, as its name implies, makes provision in relation to elections to the Legislative Assembly of Queensland, including in Pt 6 in relation to the voluntary registration of political parties. Within the meaning of the Queensland Electoral Act, a "political party" is "an organisation whose object, or [one] of whose objects, is the promotion of the election to the Legislative Assembly of a candidate or candidates endorsed by it or by a body or organisation of which it forms a part"7. Subdivision 4 of Div 8 of Pt 11 of the Queensland Electoral Act substantially replicates Div 4A of Pt 6 of the Election Funding, Expenditure and Disclosures Act 1981 (NSW) ("the New South Wales Electoral Act"), the operation of which was considered in McCloy v New South Wales ("McCloy")8 in the context of rejecting an argument that it infringed the implied freedom of political communication. The other challenges to constitutional validity advanced in the present case were not advanced at all in McCloy. The centrally relevant operation of Subdiv 4 is to prohibit the making and receipt of a gift by a "property developer" to or for the benefit of a political party9. The subdivision similarly prohibits the making and receipt of such a gift 6 Section 2 of the Queensland Amending Act; Queensland, Proclamation, SL 2018 No 150, 20 September 2018. 7 Section 2 of the Queensland Electoral Act (definition of "political party"). (2015) 257 CLR 178; [2015] HCA 34. 9 See ss 273(1)-(2), 274(1)(a)(i) and 275(1), (3) of the Queensland Electoral Act. to or for the benefit of an elected member of the Legislative Assembly or to or for the benefit of a candidate in an election to the Legislative Assembly10. As in the legislation considered in McCloy, the expression "property developer" is defined to mean a corporation engaged in a business that regularly involves making statutory applications for planning approval in connection with residential or commercial development of land with the ultimate purpose of sale or lease of the land for profit, and to extend to a close associate of such a corporation11. The Queensland Local Government Electoral Act, as its name implies, makes provision in relation to the election of Queensland local government councillors. A "political party" within the meaning of the Queensland Local Government Electoral Act is "an organisation or group whose object or activity, or [one] of whose objects or activities, is the promotion of the election of a candidate or candidates endorsed by it, or by a body or organisation of which it forms a part, to an office of councillor of a local government"12. Division 1A of Pt 6 of the Queensland Local Government Electoral Act follows the same pattern as Subdiv 4 of Div 8 of Pt 11 of the Queensland Electoral Act and adopts an identical definition of "property developer"13. The centrally relevant operation of the Division is to prohibit the making and receipt of a gift by a property developer to or for the benefit of a political party14. The Division likewise prohibits the making and receipt of such a gift to or for the 10 Sections 273(1)-(2), 274(1)(a)(ii)-(iii) and 275(1), (3) read with ss 2 (definition of "election") and 197 (definition of "elected member") of the Queensland Electoral Act. 11 Section 273(2) read with sub-s (5) (definition of "relevant planning application") of the Queensland Electoral Act; s 96GB(1) read with sub-s (3) (definition of "relevant planning application") of the New South Wales Electoral Act. 12 Schedule to the Queensland Local Government Electoral Act (definition of "political party"). 13 Section 113(2) of the Queensland Local Government Electoral Act. 14 Sections 113(1)-(2), 113A(1)(a)(i) and 113B(1), (3) of the Queensland Local Government Electoral Act. benefit of a councillor of a local government or to or for the benefit of a candidate or group of candidates in a local government election15. The Commonwealth Amending Act The Commonwealth Amending Act was enacted on 30 November 2018. It introduced amendments to the election funding and financial disclosure regime set out in Pt XX of the Commonwealth Electoral Act, most of which commenced on 1 January 201916. The election funding and financial disclosure regime set out in Pt XX of the Commonwealth Electoral Act is framed against the background of the provision made in Pt XI of that Act for the voluntary registration of political parties, the operation and validity of which were considered in Mulholland v Australian Electoral Commission17. Within the meaning of the Act, a "political party" is "an organization the object or activity, or one of the objects or activities, of which is the promotion of the election to the Senate or to the House of Representatives of a candidate or candidates endorsed by it"18 and a "registered political party" is a party that is registered under Pt XI19. Together with a candidate for election to the Senate or to the House of Representatives and with a member of a group of candidates for election to the Senate, a registered political party in the terminology of the Act is a "political entity", as is any branch or division of the registered political party that is organised on the basis of a particular State or Territory20. Divisions 4, 5 and 5A of Pt XX of the Commonwealth Electoral Act combine to set out a financial disclosure regime applicable to all political entities 15 Sections 113(1)-(2), 113A(1)(a)(ii)-(iii) and 113B(1), (3) of the Queensland Local Government Electoral Act read with the Schedule (definition of "election"). 16 Section 2(1) of the Commonwealth Amending Act. 17 (2004) 220 CLR 181; [2004] HCA 41. 18 Section 4(1) of the Commonwealth Electoral Act (definition of "political party"). 19 Section 4(1) of the Commonwealth Electoral Act (definition of "registered political party"). 20 Section 4(1) (definition of "political entity") read with s 287(1) (definitions of "election", "group" and "State branch") of the Commonwealth Electoral Act. as well as to "political campaigners"21, "third parties"22 and "associated entities"23. In broad terms, the regime operates to compel each of them to furnish periodic returns to the Australian Electoral Commission in which they disclose gifts received by them and "electoral expenditure" made by them. In the case of registered political parties, as in the case of political campaigners and associated entities, the returns are required to be furnished annually and are to set out amounts received or paid during the year and outstanding debts incurred24. "Electoral expenditure" within the meaning of Pt XX, subject to immaterial exceptions, is "expenditure incurred for the dominant purpose of creating or communicating electoral matter"25. "Electoral matter" is defined for the purposes of the Act, subject again to immaterial exceptions, to mean "matter communicated or intended to be communicated for the dominant purpose of influencing the way electors vote in an election ... of a member of the House of Representatives or of Senators for a State or Territory"26. Division 3A of Pt XX was inserted by the Commonwealth Amending Act. The Division operates to prohibit a political entity or political campaigner from receiving a gift of at least $1,000 from a "foreign donor"27 (such as a body which is not incorporated in Australia and which does not have its principal place of activity or head office in Australia28), and to prohibit a third party from receiving from a foreign donor a gift that is of a threshold amount and that is used for the purpose of incurring electoral expenditure or for the dominant purpose of 21 See s 287(1) of the Commonwealth Electoral Act (definition of "political campaigner"). 22 See s 287(1) of the Commonwealth Electoral Act (definition of "third party"). 23 See s 287(1) of the Commonwealth Electoral Act (definition of "associated entity"). 24 Sections 314AB and 314AEA of the Commonwealth Electoral Act. 25 Section 287AB(1) of the Commonwealth Electoral Act. 26 Section 4AA(1) of the Commonwealth Electoral Act. 27 Section 302D of the Commonwealth Electoral Act. 28 Section 287AA(e) of the Commonwealth Electoral Act. creating or communicating electoral matter29. The Division also operates to prohibit a political entity, political campaigner or third party from knowingly receiving a gift of at least $100 from a foreign donor where either the recipient or the donor intends the gift to be used for the purposes of incurring electoral expenditure or for the dominant purpose of creating or communicating electoral matter30. The expressed object of the Division is "to secure and promote the actual and perceived integrity of the Australian electoral process by reducing the risk of foreign persons and entities exerting (or being perceived to exert) undue or improper influence in the outcomes of elections"31. Section 302CA is located within Div 3A of Pt XX, although that placement of the section cannot be treated as indicating that the section shares the object of the Division. The section was not included within the Bill for the Commonwealth Amending Act in the form in which it was originally introduced into the Senate32. An early version of s 302CA was contained in an exposure draft of proposed government amendments which the Minister for Finance and the Public Service provided to the Joint Standing Committee on Electoral Matters, to which the Bill had been referred for consideration33. The exposure draft of the amendments was accompanied by an exposure draft of a Supplementary Explanatory Memorandum which explained that the section "clarifies the interaction between similar State and Territory and Commonwealth electoral funding schemes" and "ensures that provisions of State and Territory laws that relate to political donations cannot restrict the making or receipt of donations that could be used for Commonwealth electoral purposes"34. The version of the section contained in the exposure draft was amended to take its final form following governmental acceptance of a recommendation of a majority 29 Section 302E read with s 287(1) (definition of "disclosure threshold") of the Commonwealth Electoral Act. 30 Section 302F(1) of the Commonwealth Electoral Act. 31 Section 302C(1) of the Commonwealth Electoral Act. 32 See Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) 33 Exposure Draft GJ160, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017 (Cth), Amendment (114). 34 Australia, Senate, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Supplementary Explanatory Memorandum Exposure Draft at 35 [121]. of the Joint Standing Committee that it be "amended to ensure that Commonwealth laws would not apply to money that is directed towards non- federal campaigns (including state, territory and local government campaigns)"35. The section in its final form was inserted into the Bill on 15 November 2018 as part of a suite of government amendments in the Senate36. The Bill as so amended was subsequently passed by the House of Representatives. The explanation given in a Supplementary Explanatory Memorandum circulated in the Senate37 and in a Revised Explanatory Memorandum in the House of Representatives38 was that the section "clarifies the interaction between similar State and Territory and Commonwealth electoral funding schemes" and "ensures that provisions of State and Territory laws that relate to political donations cannot ... restrict the use of a gift for Commonwealth electoral purposes ... or ... restrict the giving, receiving or retaining of donations that could be used for Commonwealth electoral purposes, unless the donation is directed to a purpose relating to a State, Territory or local government election". Section 302CA, including its subheadings and its internal note and example, is best set out in full. Under the heading "Relationship with State and Territory electoral laws", the section provides: "Giving, receiving or retaining gifts (1) Despite any State or Territory electoral law, a person or entity may: give a gift to, or for the benefit of, a political entity, a political campaigner or a third party (a gift recipient); or 35 Joint Standing Committee on Electoral Matters, Second advisory report on the Electoral Legislation (Electoral Funding and Disclosure Reform) Bill 2017 (2018) at 49 [4.36] (Recommendation 10). 36 Australia, Senate, Parliamentary Debates (Hansard), 15 November 2018 at 8372, 37 Australia, Senate, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Supplementary Explanatory Memorandum at 40 38 Australia, House of Representatives, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018, Revised Explanatory Memorandum at if the person or entity is a gift recipient – receive or retain a gift; or on behalf of a gift recipient, receive or retain a gift; this Division does not prohibit the giving, receiving or retaining of the gift; and the gift, or part of the gift, is required to be, or may be, used for the purposes of incurring electoral expenditure, or creating or communicating electoral matter, in accordance with subsection (2). (2) A gift, or part of a gift, is required to be, or may be, used for a incurring electoral expenditure, or creating or purpose of communicating electoral matter, if: any terms set by the person or entity providing the gift explicitly require or allow the gift or part to be used for that purpose (whether or not those terms are enforceable); or the person or entity providing the gift does not set terms relating to the purpose for which the gift or part can be used. Gifts made or retained for State or Territory electoral purposes (3) Without limiting when subsection (1) does not apply, that subsection does not apply in relation to all or part of a gift if: any terms set by the person or entity providing the gift explicitly require the gift or part to be used only for a State or Territory electoral purpose (whether or not those terms are enforceable); or either: the effect of a State or Territory electoral law is to require the gift or part to be kept or identified separately (or to require the gift or part to be kept or identified separately in order to be entitled to a benefit under that law); or the gift recipient keeps or identifies the gift or part separately; in order to be used only for a State or Territory electoral purpose. Note: For the purposes of subparagraph (3)(b)(ii), a gift recipient may identify the electoral purpose for which a gift is to be used at any time prior to using that gift. A person who gives, receives or retains a gift that is used for a State or Territory electoral purpose in contravention of a State or Territory electoral law may be liable to a penalty under the State or Territory electoral law. Example: A gift is given without expressing an intended purpose, and ultimately is used for a State or Territory electoral purpose. The giving, receipt, retention and use of that gift must comply with the State or Territory electoral law. Using gifts (4) Despite any State or Territory electoral law, a gift recipient may use, or authorise the use of, a gift for the purposes of incurring electoral expenditure, or creating or communicating electoral matter, if this Division does not prohibit the use of the gift. (5) Without limiting when subsection (4) does not apply, that subsection does not apply in relation to all or part of a gift if the effect of the State or Territory electoral law is to require the gift or part to be kept or identified separately (or to require the gift or part to be kept or identified separately in order to be entitled to a benefit under that law) in order to be used only for a State or Territory electoral purpose. When gifts are kept or identified separately (6) Without limiting paragraph (3)(b) or subsection (5), an amount that is all or part of a gift of money is kept or identified separately in order to be used only for a State or Territory electoral purpose if: the amount is kept in an account where: the only amounts deposited into the account are amounts to be used only for a State or Territory electoral purpose; and the only amounts paid out of the account are amounts incurred for a State or Territory electoral purpose; or the amount is designated as an amount that must be used only for a State or Territory electoral purpose." The expression "State or Territory electoral law", used in sub-ss (1), (3), (4) and (5), is defined for the purposes of Pt XX of the Commonwealth Electoral Act to mean "a law of a State or Territory that deals with electoral matters (within the ordinary meaning of the expression)"39. The expression "State or Territory electoral purpose", used in sub-ss (3), (5) and (6), is defined to mean "a purpose relating to a State, Territory or local government election (and, to avoid doubt, does not include the purpose of incurring electoral expenditure or creating or communicating electoral matter)"40. The construction and putative operation of s 302CA are for the most part uncontroversial. Sub-section (1) constitutes a positive conferral of authority on a person to make, and relevantly on a political entity to receive and retain, a gift that is not prohibited by Div 3A provided only that "the gift, or part of the gift, is required to be, or may be, used for the purposes of incurring electoral expenditure, or creating or communicating electoral matter". Sub-section (2) makes clear that a gift will attract that positive conferral of authority unless the person making the gift does so on terms which indicate an intention on the part of the donor that the gift or part of it is to be used for a purpose other than that of incurring electoral expenditure or creating or communicating matter intended to be communicated for the dominant purpose of influencing the way voters vote at a federal election. There can be no doubt that the positive authority conferred by sub-s (1) as amplified by sub-s (2) would, if valid, operate by force of s 109 of the Constitution to render a State electoral law inoperative to the extent that the State electoral law would impair or detract from the amplitude of the authority41. Section 302CA(3) operates to displace the authority conferred by sub-s (1) in three circumstances. The first, referred to in para (a), is where terms set by the 39 Section 287(1) of the Commonwealth Electoral Act (definition of "State or Territory electoral law"). 40 Section 287(1) of the Commonwealth Electoral Act (definition of "State or Territory electoral purpose"). 41 Botany Municipal Council v Federal Airports Corporation (1992) 175 CLR 453 at 464; [1992] HCA 52. donor of the gift explicitly require the gift or part of it to be used only for a State or Territory electoral purpose. The second, referred to in para (b)(i), is where a State or Territory electoral law requires the gift or part of it to be kept or identified separately in order to be used only for a purpose relating to a State, Territory or local government election. The third, referred to in para (b)(ii), gives rise to the only real issue of construction in the proceeding. Section 302CA(3)(b)(ii), in providing that sub-s (1) does not apply if the recipient of the gift keeps or identifies the gift or part of it separately in order to be used only for a State or Territory electoral purpose, is most naturally read as displacing the authority conferred by sub-s (1) prospectively so as to remove the authority to retain a gift only at and from the time that the recipient chooses to keep or identify the gift or part of the gift separately in order to be used only for a purpose relating to a State, Territory or local government election. However, the note and the example, each of which is to be treated as a part of the Commonwealth Electoral Act as amended42, indicate that the sub-paragraph must be read as also displacing the authority conferred by sub-s (1) retrospectively so as to remove as well the authority previously conferred by the sub-section to give and receive the gift. An effect of the sub-paragraph is that a person is not authorised to make an unconditional gift to a political entity and the political entity is not authorised to receive the gift if, sometime after the gift is made and received in fact, the entity chooses to keep or identify the gift or part of it separately in order to be used only for a purpose relating to a State, Territory or local government election. That retrospective operation of s 302CA(3)(b)(ii) gives rise to discrete issues explored in argument as to whether the sub-paragraph, if otherwise valid, would infringe the principle accepted in Western Australia v The Commonwealth (Native Title Act Case)43 to have been established by University of Wollongong v Metwally ("Metwally")44 that "a law of the Commonwealth cannot retrospectively avoid the operation of s 109 of the Constitution on a State law that was inconsistent with a law of the Commonwealth" and, if so, whether Metwally should be reopened and overruled. There is no need to resolve those issues. The retrospective operation of s 302CA(3)(b)(ii), if s 302CA were otherwise valid, can be assumed. 42 Sections 13(1) and 15AD of the Acts Interpretation Act 1901 (Cth). 43 (1995) 183 CLR 373 at 454-455; [1995] HCA 47. 44 (1984) 158 CLR 447; [1984] HCA 74. Section 302CA(4) constitutes a further positive conferral of authority relevantly on a political entity actually to use, or authorise use of, a gift received and retained in circumstances where sub-s (1) has applied to the making and receipt of the gift and where sub-s (1) has not been displaced by sub-s (3). Like sub-s (1), sub-s (4) would, if valid, operate by force of s 109 of the Constitution to render a State electoral law inoperative to the extent that the State electoral law would impair or detract from the amplitude of the authority. The overall putative operation of the section can be illustrated by postulating the circumstance of a property developer who makes an unconditional gift to a political party that endorses and promotes candidates for election to the Legislative Assembly of Queensland and that is also registered under the Commonwealth Electoral Act. The prohibition in Subdiv 4 of Div 8 of Pt 11 of the Queensland Electoral Act would be inoperative in its application to the making and receipt of the gift unless the political party at the time of the gift or at some time thereafter chose to keep or identify the gift or part of it separately, or a State or Territory electoral law requires the gift or part of it to be kept or identified separately, in order to be used only for a purpose relating to a State, Territory or local government election. Were the political party to choose to use the gift for any other purpose, the prohibition in Subdiv 4 of Div 8 of Pt 11 of the Queensland Electoral Act would remain inoperative as inconsistent with the authority conferred by s 302CA(1). The political party would be free to use the gift to fund expenditure for the purpose of creating or communicating matter aimed predominantly at influencing voters in a federal election, in which case the added authority of s 302CA(4) would render inoperable any provision of the Queensland Electoral Act which might otherwise operate to prohibit or impede that expenditure. However, the political party would also be free to use the gift to fund expenditure for any other purpose unrelated to a State, Territory or local government election. The political party might, for example, choose to use the gift to defray overheads, to fund policy development, to reduce existing indebtedness, to hold an annual conference, to finance acquisition of new party premises (otherwise than for a purpose related to a particular election), or to pay for advertising which promotes the party's views on an issue of concern to it but which does not bear on a particular election. The concurrent nature of Commonwealth legislative power The principal argument advanced by the Commonwealth and the plaintiff does not depend on s 302CA of the Commonwealth Electoral Act, or on the Commonwealth Electoral Act at all. The argument is that the amendments introduced into the Queensland Electoral Act by Pt 3 of the Queensland Amending Act and into the Queensland Local Government Electoral Act by Pt 5 of the Queensland Amending Act are invalid because they trench upon an exclusive power of the Commonwealth Parliament "to regulate federal elections". The Commonwealth and the plaintiff argue that the existence of such an exclusive area of Commonwealth legislative power is the result of a structural implication which arises from the combination of two main considerations. One is the obvious absence of any colonial legislative power over federal elections capable of being carried forward as State legislative power by s 107 of the Constitution. The other is a negative implication which they argue is to be drawn from the limited legislative powers expressly conferred on State Parliaments in ss 7, 9 and 29 of the Constitution and from ss 10 and 31 of the Constitution. The legislative powers conferred on State Parliaments by ss 7, 9 and 29, they point out, each had an entirely transitional operation with the exception of the specific enduring power conferred on a State Parliament by s 9 to "make laws for determining the times and places of elections of senators for the State". Sections 10 and 31, they also point out, had a self-executing operation which made "the laws in force in each State, for the time being, relating to elections for the more numerous House of the Parliament of the State" applicable respectively to elections in the State of senators and members of the House of Representatives only until the Commonwealth Parliament otherwise provided. In support of the structural implication for which they contend, the Commonwealth and the plaintiff rely on Smith v Oldham45. Eschewing the test that has been established for determining whether a State law trenches upon an exclusive power expressly conferred on the Commonwealth Parliament by s 52 of the Constitution (being whether the Commonwealth Parliament could itself have enacted the State law in the exercise of the exclusive power46), the Commonwealth and the plaintiff formulate their own test for determining whether a State law trenches upon what they say is the implied exclusive power of the Commonwealth Parliament to regulate federal elections. Their test involves analogising State legislative power to the express concurrent legislative powers conferred on the Commonwealth Parliament by s 51(xiii) and (xiv) to make laws with respect to "banking, other than State banking" and "insurance, other than State insurance". State Parliaments are, in effect, treated as having power to make laws with respect to "elections, other than 45 (1912) 15 CLR 355; [1912] HCA 61. 46 See Worthing v Rowell and Muston Pty Ltd (1970) 123 CLR 89 at 96, 113, 141; [1970] HCA 19; Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 638-640, 673-674; [1996] HCA 58. federal elections". Under this test, a State law would impermissibly intrude into the forbidden area of exclusive Commonwealth legislative power if it is a law "relating to elections" and if it "touches or concerns"47 federal elections, and does so more than incidentally. The artificiality of the test so posited and the difficulty of applying it can be highlighted by hypothesising a State law denying access to public schools for use as polling places in a federal election. Applying the posited test, the State law would lie beyond State legislative power if it were a law relating to elections but within State legislative power if it were a law relating to schools. The necessity to engage in just that kind of exercise in characterisation gave rise to the "increasing entanglement and uncertainty" encountered in the application of the doctrine of "reserved powers" in the era before the Engineers' Case48. law which It is true that Smith v Oldham contains statements which provide some support for the notion that the power to regulate federal elections is exclusive to the Commonwealth Parliament49. The statements were made, however, in the pre-Engineers' Case era in the course of upholding the validity of a Commonwealth in newspapers commenting on candidates or political parties during the period of a federal election to be signed by their author50, in the face of an argument that the subject matter of the law was "within the reserved powers of the States"51. To start with the proposition that plenary legislative power is located somewhere in the Constitution and then to subtract the supposed scope of State legislative power either to arrive at the scope of Commonwealth legislative power, as did Griffith CJ implicitly52 and Barton J explicitly53, or to confirm the scope of required articles appearing 47 See Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 288-289; [1990] HCA 29; Attorney-General (Vic) v Andrews (2007) 230 CLR 369 at 391- 392 [11]-[12], 406-407 [78]-[79], 423-428 [138]-[150]; [2007] HCA 9. 48 (1920) 28 CLR 129 at 142. 49 (1912) 15 CLR 355 at 358-361, 365. 50 Section 181AA(1) of the Commonwealth Electoral Act 1902 (Cth). 51 (1912) 15 CLR 355 at 356. 52 (1912) 15 CLR 355 at 358. 53 (1912) 15 CLR 355 at 361. Commonwealth legislative power, as did Isaacs J54, was to adopt a mode of reasoning which did not survive the Engineers' Case. Smith v Oldham did not raise any question as to the validity of any State law. The conclusion that the Commonwealth law in question in that case was within the reach of Commonwealth legislative power has never been questioned and was undoubtedly correct. At least since the Engineers' Case, however, the statements in Smith v Oldham about the exclusivity of Commonwealth legislative power cannot be treated as having been necessary to its conclusion. The proposition that a State law relating to elections will intrude into an area of exclusive Commonwealth legislative power merely if it touches or concerns a federal election more than incidentally was in any event contradicted even before the Engineers' Case by R v Brisbane Licensing Court; Ex parte Daniell ("Ex parte Daniell")55. There the opinion of the majority was delivered by Isaacs J, who had been party to the decision in Smith v Oldham eight years earlier and who would go on four months later to deliver the opinion of the plurality in the Engineers' Case. The State law in question in Ex parte Daniell provided for the taking of a local poll on the same day as polling for a Senate election56. The State law was held invalid, not because it intruded into an area of exclusive Commonwealth legislative power, but because it was inconsistent within the meaning of s 109 of the Constitution57 with a Commonwealth law which provided that on the appointed polling day for an election to the Senate or to the House of Representatives "no referendum or vote of the electors of any State or part of a State shall be taken under the law of a State"58. The Commonwealth law was referred to as one that was "incidental to the acknowledged power to legislate as to Commonwealth elections"59. 54 (1912) 15 CLR 355 at 365. 55 (1920) 28 CLR 23; [1920] HCA 24. 56 Sections 166 and 172 of the Liquor Act 1912 (Qld). 57 See (1920) 28 CLR 23 at 29-31. 58 Section 14 of the Commonwealth Electoral (War-time) Act 1917 (Cth). 59 (1920) 28 CLR 23 at 31. Smith v Oldham60 and Ex parte Daniell61 held, and subsequent cases have confirmed62, that the power of the Commonwealth Parliament to regulate federal elections is to be found in the express conferral of power in s 51(xxxvi) to make laws with respect to "matters in respect of which [the] Constitution makes provision until the Parliament otherwise provides", the relevant matters being elections of senators and of members of the House of Representatives in each State in respect of which provision is made in ss 10 and 31 of the Constitution, as supplemented by the express conferral of power in s 51(xxxix) to make laws with respect to "matters incidental to the execution of any power vested by [the] Constitution in the Parliament". Those conferrals of power are complemented in respect of elections of senators and of members of the House of Representatives in Territories by the express conferral of power in s 122 of the Constitution to make laws "for the government of any territory"63. Given the applicability to the regulation of federal elections of the express conferrals of power in s 51(xxxvi) and (xxxix) of the Constitution, the structural implication of exclusive Commonwealth legislative power for which the Commonwealth and the plaintiff contend cannot be drawn from the limited references to State legislative power in ss 7, 9, 10, 29 and 31 of the Constitution, and it can be justified neither textually nor structurally. In marked contradistinction to the conferrals of power in s 52 of the Constitution, the conferrals of power in s 51 are concurrent with the State legislative power referred to in s 107, any conflict between exercises of Commonwealth and State legislative power being resolved through the operation of s 109 of the immunities the doctrine of through Constitution and expounded in the Melbourne Corporation Case. inter-governmental 60 (1912) 15 CLR 355 at 359, 362. 61 (1920) 28 CLR 23 at 31. 62 Fabre v Ley (1972) 127 CLR 665 at 669; [1972] HCA 65; Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 57-58; [1975] HCA 53; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 185, 219-220, 225-226, 234; [1992] HCA 45; Langer v The Commonwealth (1996) 186 CLR 302 at 315, 317, 339, 348-349; [1996] HCA 43; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 190 [14], 202 [46], 206 63 Western Australia v The Commonwealth (1975) 134 CLR 201 at 233-234, 268-275, 287; [1975] HCA 46. Echoing the words of Griffith CJ in Smith v Oldham64, Dixon J observed in Nelungaloo Pty Ltd v The Commonwealth65 that matters encompassed within s 51(xxxvi), including matters of elections of senators and of members of the House of Representatives, are not matters with which the States could have "any concern" in the sense that, considered as discrete subject matters of legislative power, they were not within the competence of colonial legislatures and so are not within the ambit of the State legislative power that is referred to in s 107 of the Constitution. That, however, was at most an observation about State legislative competence. To recognise that there may be limits to the extent of the State legislative power that is referred to in s 107 of the Constitution is not to posit the existence of an area of exclusive Commonwealth legislative power into which an exercise of State legislative power cannot intrude. The argument of the Commonwealth and the plaintiff elides that distinction. State legislative power referred to in s 107 of the Constitution includes power to regulate State elections, just as colonial legislative power referred to in that section included power to regulate colonial elections. Whatever may be the limits of State legislative power to make laws which regulate State elections, they are not transgressed by a State law regulating State elections in a manner which merely touches and concerns federal elections more than incidentally. In particular, the limits of State legislative power are not infringed by a State electoral law which imposes obligations or prohibitions on participants in a State electoral process where performance of those obligations or observance of those prohibitions might have a practical impact on the ability of those participants also to engage in a federal electoral process. Ex parte Daniell illustrates that, if a State law regulating a State electoral process is perceived by the Commonwealth Parliament to have a materially adverse impact on a federal electoral process, the Commonwealth Parliament can protect the federal electoral process by a law enacted within the scope of s 51(xxxvi) or s 51(xxxix) which will be given paramountcy over the State law through the operation of s 109 of the Constitution. To what lengths a Commonwealth law can go in affording protection to a federal electoral process is the issue next to be addressed. The amendments introduced by Pts 3 and 5 of the Queensland Amending Act are laws regulating State elections. They may well touch and concern federal 64 (1912) 15 CLR 355 at 358. 65 (1952) 85 CLR 545 at 564; [1952] HCA 11. elections more than incidentally. They do not for that reason travel beyond State legislative competence. The scope of Commonwealth legislative power The fall-back argument of the Commonwealth and the plaintiff is that the amendments introduced by Pts 3 and 5 of the Queensland Amending Act are inoperative by force of s 109 of the Constitution to the extent of the application of s 302CA of the Commonwealth Electoral Act. the Commonwealth Electoral Act The immediate issue to which the fall-back argument gives rise is whether s 302CA of the scope of Commonwealth legislative power. Although not relied upon by Queensland (which chose to confine itself to arguments that the section infringes the doctrine of inter-governmental immunities expounded in the Melbourne Corporation Case or intrudes into what Queensland argued to be an area of exclusive State legislative power over State elections), the issue was squarely raised by some of the State interveners. is within In considering whether s 302CA of the Commonwealth Electoral Act is within the scope of Commonwealth legislative power, there is no occasion to distinguish between the legislative powers conferred by s 51(xxxvi) and (xxxix) of the Constitution. No doubt, s 51(xxxvi), along with other conferrals of legislative power in s 51 of the Constitution, "carries with it authority to legislate in relation to acts, matters and things the control of which is found necessary to effectuate its main purpose, and thus carries with it power to make laws governing or affecting many matters that are incidental or ancillary to the subject matter"66. Neither the Commonwealth nor the plaintiff argue that s 302CA could be independently supported by s 51(xxxix) to the extent that it could not be supported by s 51(xxxvi) of the Constitution. The issue can therefore be addressed by asking whether the section is within the scope of the power conferred by s 51(xxxvi) of the Constitution. Section 51(xxxix) of the Constitution does not arise for separate consideration. That the power conferred by s 51(xxxvi) of the Constitution is capable of being deployed for a protective purpose is similarly not in doubt. As Isaacs J explained in Smith v Oldham67, the power is not confined to parliamentary 66 Grannall v Marrickville Margarine Pty Ltd (1955) 93 CLR 55 at 77; [1955] HCA 67 (1912) 15 CLR 355 at 362. supervision of the "mechanical process of election"; it is a "plenary power" the limits of which "end only with the subject matter in respect of which it may be exercised"68. In exercising it, as Isaacs J went on to explain on behalf of the majority in Ex parte Daniell69, "[t]he Commonwealth Parliament clearly has power to secure, so far as legislation can secure, the fullest opportunity it thinks desirable to the people of the Commonwealth to elect their Parliamentary representatives unconfused by any other public duties required of them as citizens of a particular State". "[T]o say more on that subject", he added, "would be pedantic"70. Little analysis is accordingly required to hold that s 302CA is within the scope of the power conferred by s 51(xxxvi) of the Constitution to the extent that sub-s (1) operates to protect from any impediment arising from the operation of a State electoral law the giving, receipt and retention of a gift earmarked from the outset to be used in creating or communicating matter intended to be communicated for the dominant purpose of influencing voting at a federal election, and to the extent that sub-s (4) operates to provide similar protection in respect of the gift's subsequent use. A sufficient nexus with the power is plainly to be found in the receipt, retention and use of a gift that are the objects of the section's positive grant of authority, being by a participant in a federal electoral process for a purpose relating to a federal election. To the extent that the section so operates, its exclusion of State electoral law can be seen to give effect to a constitutionally permissible judgment on the part of the Commonwealth Parliament that the disclosure regime set out in Pt XX of the Commonwealth Electoral Act is sufficient regulation of the receipt, retention and use of the gift and should be exhaustive of the obligations of the participant relating to that receipt, retention and use. Where difficulty lies is with the breadth of the operation of s 302CA(1) insofar as it extends to protect from the operation of a State electoral law the giving, receipt and retention of a gift in circumstances where, to adopt the description used in argument by the Solicitor-General for Tasmania, the "gift (or part of it) may (or may not) be used for Commonwealth electoral expenditure" and where, at the time it is given and received, use of the gift to create or communicate matter for a purpose of influencing voting at a federal election is nothing more than a bare possibility. Consideration of whether s 302CA, to that 68 (1912) 15 CLR 355 at 363. 69 (1920) 28 CLR 23 at 31. 70 (1920) 28 CLR 23 at 31. extent of its operation, is within the scope of the power conferred by s 51(xxxvi) of the Constitution requires closer attention. The principles governing characterisation of a Commonwealth law in order to determine whether the law is within the scope of a legislative power conferred by s 51 of the Constitution have become "well settled"71 since the Engineers' Case and have even been described as "established, if not trite, constitutional law"72. In the language of Latham CJ in Bank of NSW v The Commonwealth ("the Bank Nationalisation Case")73: "In determining the validity of a law it is in the first place obviously necessary to construe the law and to determine its operation and effect (that is, to decide what the Act actually does), and in the second place to determine the relation of that which the Act does to a subject matter in respect of which it is contended that the [Commonwealth] Parliament has power to make laws. A power to make laws with respect to a subject matter is a power to make laws which in reality and substance are laws upon the subject matter." The character of the law must "be determined by reference to the rights, powers, liabilities, duties and privileges which it creates"74. The constitutional description of the subject matter of the power must "be construed with all the generality which the words used admit"75. The law will then answer the description of a law "with respect to" that subject matter if the legal or practical operation of the law is not "so insubstantial, tenuous or distant" that the law ought not be regarded as enacted with respect to that subject matter76. There is no need for the law to be shown to be connected with the subject matter of the is outside power the exclusion of some other subject matter that 71 Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 492 [16]; [2000] HCA 14; Work Choices Case (2006) 229 CLR 1 at 103 [142]. 72 Cunliffe v The Commonwealth (1994) 182 CLR 272 at 315; [1994] HCA 44. 73 (1948) 76 CLR 1 at 186; [1948] HCA 7. 74 Work Choices Case (2006) 229 CLR 1 at 103 [142]. 75 R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at 225; [1964] HCA 15. 76 Melbourne Corporation Case (1947) 74 CLR 31 at 79. Commonwealth legislative power, and "if a sufficient connection ... does exist, the justice and wisdom of the law, and the degree to which the means it adopts are necessary or desirable, are matters of legislative choice"77. The sufficiency of the connection of a Commonwealth law with the subject matter of a conferral of legislative power will appear without more if the law has a direct legal operation on the subject matter of the power. In Huddart Parker Ltd v The Commonwealth78, Dixon J, with whom Rich J agreed, explained that a law passed by the Commonwealth Parliament obtains its character as a law with respect to the subject matter of a conferral of legislative power from the circumstance that it creates rights and duties directly regulating something that forms part of that subject matter. Similarly, in Murphyores Incorporated Pty Ltd v The Commonwealth79, Mason J, with whom Gibbs and Jacobs JJ agreed, said that "it is enough that the law deals with the permitted topic" and explained in this regard that "[i]t is now far too late in the day to say that a law should be characterized by reference to the motives which inspire it or the consequences which flow from it". So also in the Work Choices Case80, this Court concluded that a law which prescribes norms regulating the relationship between the kinds of corporation described in s 51(xx) of the Constitution and their employees is a law with respect to such corporations, and was no less such a law because it prescribed the means by which such corporations and their employees are to conduct their industrial relations. It must be understood, however, that these cases were concerned with laws that operated directly on the subject matter of a Commonwealth legislative power. Implicit in the standard explanation of the principles governing the characterisation of a Commonwealth law is that the sufficiency of the connection of a Commonwealth law with the subject matter of a conferral of legislative power can turn on questions of degree. The more the legal operation of the law is removed from the subject matter of the power, the more questions of degree will become important. Not inappropriate, although not always helpful, in 77 Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 492 [16], quoted in Work Choices Case (2006) 229 CLR 1 at 104 [142]. 78 (1931) 44 CLR 492 at 515-516; [1931] HCA 1. 79 (1976) 136 CLR 1 at 20; [1976] HCA 20. 80 (2006) 229 CLR 1 at 121-122 [198], referring to Re Pacific Coal Pty Ltd; Ex parte Construction, Forestry, Mining and Energy Union (2000) 203 CLR 346 at 375 [83]; [2000] HCA 34. examining those questions of degree is to frame the enquiry in terms of whether the operation of the law is in an area that is "incidental" or penumbral or "peripheral" to the subject matter of the power81. Determining whether a law is incidental to the subject matter of a power can be assisted by examining how the purpose of the law – what the law can be seen to be designed to achieve in fact82 – might relate the operation of the law to the subject matter of the power. In the Bank Nationalisation Case83, Dixon J went so far as to say that "in all cases where it is sought to connect with a legislative power a measure which lies at the circumference of the subject or can at best be only incidental to it, the end or purpose of the provision, if discernable, will give the key". That statement of Dixon J in the Bank Nationalisation Case, Brennan J said in Cunliffe v The Commonwealth84, "is merely to point out that, by divining the purpose of a law from its effect and operation, its connexion with the subject of the power may appear more clearly". Brennan J went on to explain85: "Where this is the manner of characterization of a law, its validity is ascertained first by determining its purpose or object – a determination made by reference to what its effect and operation are 'appropriate and adapted' to achieve – and then by looking to the connexion between that purpose or object and the relevant head of power." Applying that manner of characterisation, a law the purpose or object of which is protection of something that is encompassed within the subject matter of a conferral of legislative power may yet not be a law with respect to that subject matter because the law is insufficiently adapted to achieve that purpose, having regard to the breadth and intensity of the impact of the law on other matters. Professors Zines and Stellios have commented in this respect that "the slightness 81 See Cunliffe v The Commonwealth (1994) 182 CLR 272 at 317-322; Leask v The Commonwealth (1996) 187 CLR 579 at 591, 593-594; [1996] HCA 29. 82 See Stenhouse v Coleman (1944) 69 CLR 457 at 471; [1944] HCA 36. 83 (1948) 76 CLR 1 at 354. 84 (1994) 182 CLR 272 at 319. 85 (1994) 182 CLR 272 at 319 (footnote omitted). See also Leask v The Commonwealth (1996) 187 CLR 579 at 591. of the impact on the federal subject" will often be "shown most clearly by contrasting it with a much greater effect on matters outside the subject of power"86. Thus, it was said in Davis v The Commonwealth of the protection against commercial exploitation attempted to be afforded by s 22 of the Australian Bicentennial Authority Act 1980 (Cth) to words associated with the national program of celebrations and activities to commemorate the bicentenary of European settlement in Australia that "[a]lthough the statutory regime may be related to a constitutionally legitimate end, the provisions in question reach too far" in that their "extraordinary intrusion into freedom of expression is not reasonably and appropriately adapted to achieve the ends that lie within the limits of constitutional power"87. Much the same was said in Nationwide News Pty Ltd v Wills88 of the protection attempted to be afforded by s 299 of the Industrial Relations Act 1988 (Cth) against even fair and reasonable criticism of a member of the Australian Industrial Relations Commission. While use of the concept of proportionality in this context has been criticised89, the point presently to be made is that consideration of the purposes which the law is or is not appropriate and adapted to achieve may illuminate the required connection to the relevant head of power90. Of particular relevance to the question of degree that needs to be determined in the present case are observations of Dixon J in Australian Communist Party v The Commonwealth ("the Communist Party Case")91 as well 86 Stellios, Zines's The High Court and The Constitution, 6th ed (2015) at 64. 87 (1988) 166 CLR 79 at 100; [1988] HCA 63. 88 (1992) 177 CLR 1 at 33-34, 91, 95, 103-105; [1992] HCA 46. 89 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 87-89; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 320, 359; Leask v The Commonwealth (1996) 187 CLR 579 at 591, 593, 599-605, 614-617. 90 See Plaintiff S156/2013 v Minister for Immigration and Border Protection (2014) 254 CLR 28 at 45 [36]; [2014] HCA 22. 91 (1951) 83 CLR 1; [1951] HCA 5. as aspects of the reasoning of Dixon CJ in Victoria v The Commonwealth ("the Second Uniform Tax Case")92. In the Communist Party Case, at the commencement of his Honour's reasons for holding invalid the purported dissolution of the Australian Communist Party by s 4 of the Communist Party Dissolution Act 1950 (Cth), "It is of course true, as a general statement, that the law governing the formation, existence and dissolution of voluntary associations of people falls within the province of the States. The legislative power of the Commonwealth does not extend to the subject as such, and if any part of it may be dealt with constitutionally by Federal statute it is as incidental to some matter falling within the specific powers conferred upon the Parliament of the Commonwealth. To sustain the validity of s 4, it is therefore necessary to find a subject of Federal legislative power to which the enactment of such a provision is fairly incidental." The Second Uniform Tax Case concerned the validity of s 221(1)(a) of the Income Tax and Social Services Contribution Assessment Act 1936 (Cth). Expressed to be "[f]or the better securing to the Commonwealth of the revenue required for the purposes of the Commonwealth", s 221(1)(a) operated to prohibit a taxpayer from paying State income tax until after paying federal income tax. The section was held by majority (Dixon CJ, McTiernan, Kitto and Taylor JJ; Williams, Webb and Fullagar JJ dissenting) to be invalid for want of sufficient connection with the subject matter of the power with respect to "taxation" in s 51(ii) of the Constitution. The subject matter of the power was interpreted to encompass not "the whole subject of taxation throughout Australia" but only "federal taxation for federal purposes"94. 92 (1957) 99 CLR 575; [1957] HCA 54. 93 (1951) 83 CLR 1 at 175. See also at 209-210, 226-227, 261-263. 94 (1957) 99 CLR 575 at 614, quoting The Municipal Council of Sydney v The Commonwealth (1904) 1 CLR 208 at 232; [1904] HCA 50. Dixon CJ, with whom Kitto J agreed, said95: "To support s 221(1)(a) it must be said to be incidental to the federal power of taxation to forbid the subjects of a State to pay the tax imposed by the State until that imposed upon them by the Commonwealth is paid and, moreover, to do that as a measure assisting to exclude the States from the same field of taxation. This appears to me to go beyond any true conception of what is incidental to a legislative power and, under colour of recourse to the incidents of a power expressly granted, to attempt to advance or extend the substantive power actually granted to the Commonwealth until it reaches into the exercise of the constitutional powers of the States." Specifically addressing whether a sufficient connection could be found in the legislatively identified purpose of "better securing" revenue required for the purposes of the Commonwealth, Dixon CJ continued96: "Why should not other debts be postponed too? The resources of a taxpayer are as certainly diminished by making any other payment of like amount ... Would it not strike the mind as absurd if the incidental power arising from s 51(v) and (xxxix) were treated as authorising a law forbidding a subscriber to the telephone services to pay debts or some particular debt whether to the State or to other persons until he had paid his telephone account? Another analogy would be a law as under s 51(xiii) and (xxxix) postponing the payment of the indebtedness of a person happening to be a customer of the Commonwealth Bank until he had cleared off or reduced his overdraft, indebtedness for example to another bank or to take another example, to the State, or again to all or any class of his creditors. Yet, if s 221(1)(a) is to be held valid on the ground that to insure, so far as may be, the payment of taxes is incidental to the power conferred by s 51(ii) and the paragraph contains no more than what may be properly directed to that end, then it would follow that these are examples of what may validly be enacted." In Gazzo v Comptroller of Stamps (Vict)97 Gibbs CJ referred to the Second Uniform Tax Case as amongst a number of decisions which showed "that a 95 (1957) 99 CLR 575 at 614. See also at 658. 96 (1957) 99 CLR 575 at 615. 97 (1981) 149 CLR 227 at 240; [1981] HCA 73. provision cannot be said to be incidental to the subject matter of a power simply because in a general way it facilitates the execution of the power" and "that in considering whether a law is incidental to the subject matter of a Commonwealth power it is not always irrelevant that the effect of the law is to invade State power". Although the correctness of the decision in Gazzo has been questioned98, there is no reason to doubt the veracity of those observations. Just as the subject matter of the power with respect to "taxation" conferred by s 51(ii) of the Constitution is properly identified as "federal taxation", the subject matter of the power conferred by s 51(xxxvi) in its application to ss 10 and 31 of the Constitution is properly identified not as "elections" but as "federal elections". The subject matter, specifically, is elections of senators and of members of the House of Representatives in each State. The words "relating to" in ss 10 and 31 do not have the effect of expanding the subject matter of the power. The function of the words "relating to" in ss 10 and 31 is to connote a nexus between State laws and State elections equivalent to the nexus between Commonwealth laws and federal elections connoted by the words "with respect to" in s 51(xxxvi) itself99. What then is encompassed within the subject matter of federal elections? Although his Honour may have gone too far in conceiving of the power conferred by s 51(xxxvi) in its application to ss 10 and 31 of the Constitution as "purposive"100, Dawson J was correct in Langer v The Commonwealth101 in conceiving of a federal election as a process which has as its object the ascertainment of senators and members of the House of Representatives "directly chosen by the people" within the meaning of ss 7 and 24 of the Constitution. An election is the process by which the people exercise that choice. Taking an appropriately broad view of the subject matter of federal elections, and focusing relevantly on the position of political entities, nomination and grouping of candidates for election to the Senate or to the House of Representatives can be 98 Fisher v Fisher (1986) 161 CLR 438 at 453; [1986] HCA 61. See also Stellios, Zines's The High Court and The Constitution, 6th ed (2015) at 63. 99 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 254 [211]. 100 See Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 238- 101 (1996) 186 CLR 302 at 324-325. said to form part of the electoral process102, and registration of political parties having objects of endorsing and promoting candidates can be said to be incidental to that process103. That does not mean, however, that everything done by a federally registered political party or a candidate or group of candidates for federal election can be said to form part of or be incidental to the subject matter of federal elections any more than it can be said that everything done by a federal person who is a taxpayer forms part of or is incidental to the subject matter of federal taxation. Unlike, for example, the approach which was long ago taken to registration of participants in the process of "conciliation and arbitration" referred to in s 51(xxxv) of the Constitution104, the Commonwealth Parliament has not provided for incorporation of participants in the federal election process as an incident of which it has defined and so limited their capacities, nor has it sought to confine the activities of any of those participants to activities related to the federal electoral process. The choice of the Commonwealth Parliament to permit registration as a political party under the Commonwealth Electoral Act of an unincorporated association only one of whose objects need be endorsing and promoting candidates for election the House of Representatives105 is an acknowledgement that the association and its members retain the capacity to pursue objects and to engage in activities unrelated to federal elections. the Senate or The mere circumstance that a registered political party or a candidate or group of candidates is the object of the imposition of an obligation or the conferral of an authority under a Commonwealth law must therefore be insufficient to establish the requisite nexus between the operation of the law and 102 Sykes v Cleary (1992) 176 CLR 77 at 99-100; [1992] HCA 60; Day v Australian Electoral Officer (SA) (2016) 261 CLR 1 at 13-14 [23]-[24]; [2016] HCA 20; Re Culleton [No 2] (2017) 91 ALJR 311 at 315 [13]; 341 ALR 1 at 5; [2017] HCA 4; Re Nash [No 2] (2017) 92 ALJR 23 at 28 [23]; 350 ALR 204 at 209-210; [2017] HCA 52. 103 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 205-209 104 See Jumbunna Coal Mine NL v Victorian Coal Miners' Association (1908) 6 CLR 309; [1908] HCA 95; Williams v Hursey (1959) 103 CLR 30 at 68; [1959] HCA 105 See above at [23]. the subject matter of federal elections to bring the law within the scope of s 51(xxxvi) in its application to ss 10 and 31 of the Constitution. There is a material distinction between, on the one hand, imposing an obligation or conferring an authority or immunity on a federally registered political party or a candidate for federal election in respect of what they might or might not do in their capacity as a federally registered political party or a candidate for federal election and, on the other hand, imposing an obligation or conferring an authority or immunity on a federally registered political party or a candidate for federal election in respect of what they might or might not do in some other capacity. That distinction is enough to distinguish the present case from Bayside City Council v Telstra Corporation Ltd106, on which the Commonwealth places reliance. There the law107 held to fall within the scope of the legislative power with respect to "postal, telegraphic, telephonic, and other like services", conferred on the Commonwealth Parliament by s 51(v) of the Constitution, went no further than to confer an immunity on a telecommunications carrier from the operation of a State law which discriminated against a telecommunications carrier in its capacity as a telecommunications carrier108. If s 302CA of the Commonwealth Electoral Act is to be found to have a sufficient connection with the subject matter of federal elections to bring it within the scope of s 51(xxxvi) of the Constitution insofar as it purports to immunise from State electoral law the giving, receipt and retention of a gift that might never be used for a federal electoral purpose, that connection cannot be found only in the identity of the object of the authority as a political entity. Nor can a sufficient connection be found in the subjection of the political entity, if the gift were received, to the disclosure regime set out in Pt XX of the Commonwealth Electoral Act. If s 302CA of the Commonwealth Electoral Act is to be found to have a sufficient connection with the subject matter of the power, that connection could only be found by relating the operation of the section to the purpose of the section. Exploring that possibility makes it necessary to turn to the identification of the section's purpose. 106 (2004) 216 CLR 595; [2004] HCA 19. 107 Clause 44 of Sch 3 to the Telecommunications Act 1997 (Cth). 108 (2004) 216 CLR 595 at 624 [26]. The purpose of the section postulated in argument by the Commonwealth is an extrapolation from the purpose that was identified in the Explanatory Memoranda for the Commonwealth Amending Act. The purpose there identified, as will be recalled, was bipartite. It was in part to clarify the interaction between the funding and disclosure regime in Pt XX of the Commonwealth Electoral Act and State and Territory electoral funding schemes. It was in part to ensure that State and Territory laws relating to political donations could not restrict the giving, receipt and retention of a gift "that could be used for Commonwealth electoral purposes"109, unless the gift is directed to a purpose relating to a State, Territory or local government election. The first part of the purpose so identified in the Explanatory Memoranda adds nothing to the second, and the qualification to the second part of the purpose so identified does not alter its basic thrust. The identified purpose can accordingly be restated as being to protect from impairment by a State or Territory electoral law the giving, receipt and retention of any gift to, relevantly, a political entity where that gift might, or might not, be used to create or communicate matter for the dominant purpose of influencing voting at a federal election. The ultimate purpose of the section can on that basis be generalised as being to protect a source of funds which might, but need not, be deployed by a political entity in a federal electoral process. The Solicitor-General of the Commonwealth expressed that ultimate purpose even more generally as being "to protect the federal electoral process by ensuring that participants in that process are not starved of funds that are able to be used for the dominant purpose of influencing the way electors vote in the federal elections". The difficulty with accepting the purpose so postulated by the Commonwealth lies in the disconformity between that purpose and the breadth of the operation of s 302CA, to which attention has been drawn. The section confers immunity from the application of State and Territory electoral laws that would otherwise limit the availability of funds to political entities to pursue a range of activities having no connection with federal elections. They include activities the regulation of which is within the heartland of State legislative power. The contrast between the slightness of the impact of s 302CA on the subject matter of the federal electoral process and its much greater impact on 109 See above at [28] (emphasis added). matters outside that subject matter points strongly to a purpose that cannot be said to be incidental to that subject matter. Indeed, it is difficult not to draw from the operation of s 302CA the inference that its purpose is to ensure that, save for donations earmarked for use in State, Territory or local government election campaigns, political entities may receive donations to fund any activities from any donors who would otherwise be prohibited by State or Territory electoral laws from making those donations. Ensuring the availability to political entities of funding for participation in federal elections appears to be at most an adventitious consequence of this purpose. The connection between the operation of the section and the actual deployment of funds by a political entity in a federal electoral process cannot be described as more than insubstantial, tenuous and distant. The connection between the operation of the section and the subject matter of legislative power, in other words, is at best remote. To adapt one of the examples used rhetorically by Dixon CJ in the Second Uniform Tax Case, the connection between the operation of the section and the subject matter of s 51(xxxvi) in its application to ss 10 and 31 of the Constitution is no closer than would exist between the subject matter of "telephonic" services within s 51(v) of the Constitution and a law immunising a person who is a user of a telephone service from payment of all State taxes. The fact that the immunity would serve to provide the person with a greater source of funds from which the person could choose to pay a telephone bill might be said to constitute some connection with the subject matter of the power. The connection, however, would be insubstantial and tenuous, if not unreal. Having regard then both to the tenuous connection between s 302CA of the Commonwealth Electoral Act and the federal electoral process and to the section's purpose to confer an immunity from State laws in respect of subject matters outside the subject matter of Commonwealth legislative power, the section cannot be supported as a law incidental to federal electoral processes to the extent that it authorises the giving, receipt and retention of a gift that might never be used for any federal electoral purpose. The section is to that extent beyond the scope of the power conferred by s 51(xxxvi) of the Constitution. Subject to the question of severance, next to be considered, that conclusion means that issues raised by Queensland and the State interveners as to whether s 302CA infringes the doctrine of inter-governmental immunities expounded in the Melbourne Corporation Case or intrudes into a supposed area of exclusive State legislative power over State elections do not arise for consideration. The absence of Commonwealth legislative power to sustain the section in the full amplitude of its purported exclusion of State law stems not from an implied prohibition or from an exclusion of power but from want of a sufficient connection with an affirmative grant of power. Severance The Commonwealth and the plaintiff argue that, if s 302CA of the Commonwealth Electoral Act is beyond the scope of the power conferred by s 51(xxxvi) of the Constitution insofar as the section purports to authorise the giving, receipt and retention of a gift that might never be used for a federal electoral purpose, the section is to be construed in accordance with s 15A of the Acts Interpretation Act 1901 (Cth) ("the Commonwealth Interpretation Act") so as to result in severance of that invalid operation. The principles which govern application of s 15A of the Commonwealth Interpretation Act were stated sufficiently for present purposes in Victoria v The Commonwealth (Industrial Relations Act Case)110 with reference to the reasoning of Latham CJ in Pidoto v Victoria111. The present case is not within the class of case in which the putative application of s 15A is "in relation to general words or expressions" but is rather within the class of case in which its putative application is "in relation to 'particular clauses, provisos and qualifications, separately expressed, which are beyond legislative power'"112. Adopting the language of Latham CJ in Pidoto v Victoria, the interpretative requirement of s 15A of the Commonwealth Interpretation Act can be applied to strike out the invalid parts of s 302CA of the Commonwealth Electoral Act only if two conditions are satisfied. One is that "the operation of the remaining parts of the [section] remains unchanged"113. The other is that, if the section "can be reduced to validity by adopting any one or more of a number of several possible limitations", some "reason based upon the law itself can be stated for selecting one limitation rather than another"114. Underlying the need to satisfy both of those conditions is that s 15A of the Commonwealth Interpretation 110 (1996) 187 CLR 416 at 502-503; [1996] HCA 56. 111 (1943) 68 CLR 87 at 108-111; [1943] HCA 37. 112 (1996) 187 CLR 416 at 502, quoting Re Tracey; Ex parte Ryan (1989) 166 CLR 518 at 577; [1989] HCA 12. 113 (1943) 68 CLR 87 at 108. 114 (1943) 68 CLR 87 at 111. Act is an interpretation provision to be applied strictly within the limits of judicial power. The section "does not authorize the Court, by adopting a standard criterion or test merely selected by itself, to redraft a statute or regulation so as to bring it within power and so preserve its validity"115. The immediate difficulty encountered in attempting to apply s 15A of the Commonwealth Interpretation Act to the severance of s 302CA of the Commonwealth Electoral Act is that s 302CA(1) is expressed to operate in spite of "any State or Territory electoral law". The section is framed to rely on s 51(xxxvi) of the Constitution in its application to exclude a State electoral law and on s 122 of the Constitution in its application to exclude a Territory electoral law. Although the section reaches beyond the scope of the power conferred by s 51(xxxvi) in its application to exclude a State electoral law, there is and could be no suggestion that the section reaches beyond the scope of the power conferred by s 122 in its application to exclude a Territory electoral law. The section cannot be given a distributive operation which would have it operate in one way in relation to a State electoral law and in another way in relation to a Territory electoral law116, and there is no basis in the section or elsewhere in the Commonwealth Electoral Act for interpreting it to operate in one way rather than the other. Even if that difficulty were ignored and attention were confined to s 302CA in its application in relation to a State electoral law, the work required to bring the section within the scope of s 51(xxxvi) would amount to major surgery117. The work could not simply be confined to striking out the words "or may be" from sub-s (1)(e), given that it is the composite expression "is required to be, or may be, used" that is the subject of explication in sub-s (2). The work then to be done on sub-s (2) would involve deletion of the words "or may be" in the chapeau, deletion of the words "or allow" in para (a) and deletion of the whole para (b). The result would be a different statutory definition of a different statutory expression. Sub-section (3) would become largely redundant. Sub-section (4) could perhaps be left to stand, but it would make little sense without reference to the definition of "gift recipient" in sub-s (1)(a). Sub-section (5), and with it sub-s (6), would become redundant in like manner to para (b)(i) of sub-s (3). 115 (1943) 68 CLR 87 at 111. 116 See Strickland v Rocla Concrete Pipes Ltd (1971) 124 CLR 468 at 518-519. 117 cf Bank Nationalisation Case (1948) 76 CLR 1 at 372. To mix metaphors, severance would involve separating "the woof from the warp" and manufacturing "a new web"118. That is not a result which can be achieved as an exercise in statutory interpretation. Section 302CA of the Commonwealth Electoral Act is incapable of severance under s 15A of the Commonwealth Interpretation Act. The section is wholly invalid. Implied freedom of political communication The plaintiff, but not the Commonwealth, argues that the amendments introduced by Pt 3 of the Queensland Amending Act into the Queensland Electoral Act are invalid on the basis that they impermissibly burden the constitutionally implied freedom of political communication. Tellingly, the plaintiff does not argue that the amendments introduced by Pt 5 of the Queensland Amending Act into the Queensland Local Government Electoral Act are invalid on that basis. Part 3 of the Queensland Amending Act, it will be recalled, inserted into the Queensland Electoral Act a new Subdiv 4 of Div 8 of Pt 11 which substantially replicates Div 4A of Pt 6 of the New South Wales Electoral Act. In McCloy, it was held by majority that Div 4A did not impermissibly burden the constitutionally implied freedom of political communication119. Taking account of the nature of the business activities of property developers and "the nature of the public powers which they might seek to influence in their self-interest", the burden which Div 4A placed on freedom of political communication was held to be justified as a measure which furthers the general purpose of preventing corruption and undue influence in the government of the State and is therefore "'legitimate' within the meaning given to that term in Lange, as are the means adopted to achieve it"120. Division 4A was held to be suitable and necessary to the achievement of that purpose and the burden imposed by it to be proportionate to the achievement of that purpose121. Division 4A was also held to "support and 118 cf Australian Railways Union v Victorian Railways Commissioners (1930) 44 CLR 319 at 386; [1930] HCA 52. 119 (2015) 257 CLR 178 at 221 [94], 222 [98], 274 [275]. 120 (2015) 257 CLR 178 at 208 [49], 209 [53]. See also at 220-221 [93]. 121 (2015) 257 CLR 178 at 209-210 [54]-[56], 210-212 [57]-[63]. enhance equality of access to government, and the system of representative government which the freedom protects"122. The plaintiff does not seek to reopen McCloy, but to distinguish it. The plaintiff argues that the justification for the burden that was accepted by the majority in McCloy to apply in New South Wales has no application in Queensland. The inference to be drawn from the facts agreed in the special case, the plaintiff argues, is that Queensland has not had the same recent history of corruption associated with land development applications occurring at the level of State government (as distinct from corruption associated with land development applications occurring at the level of local government) as has New South Wales. The factual basis of the plaintiff's attempt to distinguish McCloy is contested. The contest of fact, however, need not be resolved. Unlike Unions NSW v New South Wales123, this is not a case in which an adequate factual foundation for the justification advanced for the burden on freedom of communication is wanting. Apparent from the debate on the introduction and second reading of the Bill for the Queensland Amending Act124 is that the choice to insert the new Subdiv 4 of Div 8 of Pt 11 into the Queensland Electoral Act was based on lessons learned from the experience in New South Wales. As Nettle J said in McCloy itself125: "[I]t is not illogical or unprecedented for the Parliament to enact legislation in response to inferred legislative imperatives. More often than not, that is the only way in which the Parliament can deal prophylactically with matters of public concern." 122 (2015) 257 CLR 178 at 221 [93]. 123 (2019) 93 ALJR 166; 363 ALR 1; [2019] HCA 1. 124 Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 6 March 2018 at 190; Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 15 May 2018 at 1105-1106, 1114. 125 (2015) 257 CLR 178 at 262 [233]. Australian States are not so much "little laboratories"126 that each State is required to conduct its own experiments or rely on its own experiences before it can be justified in taking legislative action to address a risk of harm to its system of government highlighted by occurrences in another State. Together with Div 4A of Pt 6 of the New South Wales Electoral Act, Subdiv 4 of Div 8 of Pt 11 of the Queensland Electoral Act imposes a burden on political communication that is justified. The subdivision does not infringe the constitutionally implied freedom of political communication. Inter-governmental immunity The plaintiff, but again not the Commonwealth, argues that the amendments introduced by Pts 3 and 5 of the Queensland Amending Act infringe the doctrine of inter-governmental immunities expounded in the Melbourne Corporation Case. In a passage in the Melbourne Corporation Case to which partial reference has already been made, Dixon J said127: "The foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities." The doctrine of inter-governmental immunities expounded the Melbourne Corporation Case is a structural implication built on that conception. The implication is captured in the proposition articulated by Starke J in that case that "neither federal nor State governments may destroy the other nor curtail in any substantial manner the exercise of its powers or 'obviously interfere with one another's operations'"128. His Honour explained that "[i]t is a practical question, whether the part of a Commonwealth or of a State destroys, curtails or interferes with the operations of the other"129. The essentially practical nature of the enquiry involved in legislation or executive action thereunder on 126 See New State Ice Co v Liebmann (1932) 285 US 262 at 311. 127 (1947) 74 CLR 31 at 82. 128 (1947) 74 CLR 31 at 74, quoting Graves v New York; Ex rel O'Keefe (1939) 306 US 466 at 488. 129 (1947) 74 CLR 31 at 75. determining whether a law of one polity impermissibly interferes with the operations of government of another is borne out by subsequent cases in which Commonwealth that structural implication130. legislation has been held to contravene It might be thought that Brennan CJ took too narrow a view of the doctrine in the Melbourne Corporation Case when he observed in Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority ("Re Residential Tenancies Tribunal")131 that the doctrine "proceeds on the footing that specific legislative powers conferred on the Parliament of the Commonwealth might be exercised to affect the prerogatives of the Crown in right of a State" and "states the limitation which is to be implied from the structure of the Constitution on the scope of the specific legislative powers of the Commonwealth". However, the statement was no more than a prelude to Brennan CJ going on in Re Residential Tenancies Tribunal to observe, undoubtedly correctly, that a State law imposing a burden on the enjoyment of the Commonwealth prerogative would be offensive to s 61 of the Constitution and that a State law imposing a burden on the enjoyment of a Commonwealth statutory power would be inconsistent with the Commonwealth law conferring the power and therefore inoperative by force of s 109 of the Constitution132. Queensland and South Australia seek to take the second of those observations further. The operation of s 109 of the Constitution to give supremacy to a Commonwealth law over a State law, they say, means that there is no need for the operations of the government of the Commonwealth to be impliedly protected from interference by or under any State law. The functioning of federal government, they argue, can always be protected by Commonwealth legislation, including by appropriately tailored legislation enacted under s 51(xxxix) of the Constitution. Their argument is not wholly without precedent. It might even be thought to have some support in reasons given for rejecting the old doctrine of implied prohibitions in the Engineers' Case itself133. But it should not be accepted. 130 eg Austin v The Commonwealth (2003) 215 CLR 185 at 249 [124]; [2003] HCA 3; Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 at 298-299 [32]- [34], 305-307 [61]-[66], 312-313 [93]-[95]; [2009] HCA 33. 131 (1997) 190 CLR 410 at 425; [1997] HCA 36. 132 (1997) 190 CLR 410 at 426. 133 (1920) 28 CLR 129 at 155. The supremacy given by s 109 of the Constitution to a Commonwealth law enacted in the exercise of a legislative power conferred by s 51 of the Constitution over an inconsistent State law means that, in practical terms, there is more scope for a Commonwealth law to interfere with operations of the government of a State than there is for a State law to interfere with operations of the government of the Commonwealth. To observe that the constraint imposed by the structural implication recognised in the Melbourne Corporation Case has greater practical significance in its application to a Commonwealth law because of the force that s 109 of the Constitution gives to a Commonwealth law that is used as a sword against a State, however, is not to show that the constraint imposed by the structural implication is of no practical significance in its application to a State law that is used as a sword against the Commonwealth. The reciprocal operation of the structural implication is not displaced merely because s 109 allows a Commonwealth law to be used as a shield. The Commonwealth Parliament certainly has power to protect the functioning of the government of the Commonwealth through the enactment of appropriately tailored legislation under s 51(xxxix) of the Constitution on which s 109 of the Constitution will then operate. Hardly consistent with the conception of our federal system as involving a national government and a number of State governments separately organised, however, is the notion that the legislature of the national government should be forced to protect itself from State laws in order merely to be able to function. To take up an example given by Dixon J in West v Commissioner of Taxation (NSW)134, it should not be necessary for the Commonwealth Parliament to enact a law conferring immunity on Commonwealth public servants in order to ensure that those public servants are not subjected to State laws imposing special liabilities or burdens on them by reason of their status or activities as Commonwealth public servants. Inter-governmental immunities constitute an area of constitutional discourse in which the fundamental nature of the Constitution as an enduring framework for federal government must be constantly borne in mind. "We should avoid pedantic and narrow constructions" just as we should not be "fearful about making implications"135. Most importantly, we should avoid being driven to entrenched positions. 134 (1937) 56 CLR 657 at 681; [1937] HCA 26. 135 Australian National Airways Pty Ltd v The Commonwealth (1945) 71 CLR 29 at 85; [1945] HCA 41. There was a time, even after the Engineers' Case, when it was thought that Commonwealth immunity from State legislation was absolute. The depiction of federation portrayed by Dixon J in In re Foreman & Sons Pty Ltd; Uther v Federal Commissioner of Taxation136 – in stating that "[l]ike the goddess of wisdom the Commonwealth uno ictu sprang from the brain of its begetters armed and of full stature" at the same instant as the colonies became States lacking "the power to regulate the legal relations of this new polity with its subjects" – was taken so far by Fullagar J in The Commonwealth v Bogle137 as to imply that a State Parliament "has no power over the Commonwealth". That absolute view of Commonwealth immunity was unambiguously rejected in Re Residential Tenancies Tribunal. Part of the reason for rejecting it given by at least three members of the majority138 was that the reciprocal operation of the Melbourne Corporation doctrine afforded the operations of the government of the Commonwealth an adequate measure of protection from State legislative interference. That view of the reciprocal operation of the Melbourne Corporation doctrine accorded with earlier informed commentary139. No return to extreme and discredited notions of inter-governmental immunity is therefore involved in recognising that the Commonwealth and the States reciprocally have the benefit of the structural implication recognised in the Melbourne Corporation Case. The reciprocal application of that structural implication has been, and should remain, constitutional doctrine. inter-governmental Whilst it is one thing to acknowledge the reciprocal operation of the the Melbourne doctrine of Corporation Case as a limitation on the permissible exercise of State legislative power as well as a limitation on the permissible exercise of Commonwealth legislative power, it is quite another thing to find that limitation to have been in Fortescue Metals Group Ltd v The transgressed. Commonwealth140, insofar as it imposes a limitation on the exercise of immunities expounded As explained 136 (1947) 74 CLR 508 at 530; [1947] HCA 45. 137 (1953) 89 CLR 229 at 259; [1953] HCA 10. 138 (1997) 190 CLR 410 at 440, 443-444. See also at 509. 139 See Doyle, "1947 Revisited: The Immunity of the Commonwealth from State Law", in Lindell (ed), Future Directions in Australian Constitutional Law: Essays in honour of Professor Leslie Zines (1994) 47 at 69-70. 140 (2013) 250 CLR 548 at 609 [130]; [2013] HCA 34. legislative power, application of Commonwealth the doctrine "requires consideration of whether impugned legislation is directed at States, imposing some special disability or burden on the exercise of powers and fulfilment of functions of the States which curtails their capacity to function as governments". Reciprocally, insofar as it imposes a limitation on the exercise of State legislative power, application of the doctrine requires consideration of whether an impugned State law is directed at the Commonwealth so as to impose some special disability or burden on the exercise of powers and fulfilment of functions of the Commonwealth which curtails the capacity of the Commonwealth to function as a government. The nature of the requisite enquiry need only be stated for its non- application in the present case to be apparent. Subdivision 4 of Div 8 of Pt 11 of the Queensland Electoral Act and Div 1A of Pt 6 of the Queensland Local Government Electoral Act are not directed to the Commonwealth or to any persons or bodies who are uniquely or even primarily participants in a federal governmental process. They do not impose a special disability or burden on the Commonwealth. They do not deny to the Commonwealth the capacity to regulate its own elections. The most that can be said of them is that they deny to some persons and bodies who are participants in federal electoral processes a source of funds that would otherwise be available to be used in such a process. Inconsistency The final argument of the plaintiff is that the amendments introduced by Pts 3 and 5 of the Queensland Amending Act are inoperative by force of s 109 of the Constitution independently of s 302CA of the Commonwealth Electoral Act because they are in any event inconsistent with the broader operation of the election funding and financial disclosure regime set out in Pt XX of the Commonwealth Electoral Act. The plaintiff argues in particular that the subsidiary schemes for the prohibition of gifts by foreign donors in Div 3A and for financial disclosure in Divs 4, 5 and 5A of Pt XX are to be understood as an exhaustive legal framework. As to the plaintiff's reliance on the scheme of Div 3A of Pt XX, it need hardly be said that the Division taken as a whole cannot achieve indirectly and by implication that which s 302CA seeks and fails to achieve directly and expressly. As to the plaintiff's reliance on Divs 4, 5 and 5A of Pt XX, it is sufficient to say that the regime there set out for the disclosure of gifts received by a political entity can hardly be said to be detracted from or impaired by a State electoral law which prohibits the giving and receipt of a gift to which, if received, the disclosure regime would apply. Conclusion The questions raised by the special case and the answers to them are as follows: Are the amendments made to the Queensland Electoral Act by Pt 3 of the Queensland Amending Act invalid (in whole or in part and, if in part, to what extent) because they impermissibly burden the implied freedom of political communication on governmental and political matters, contrary to the Constitution? Answer: Are the amendments made to the Queensland Electoral Act by Pt 3 of the Queensland Amending Act invalid (in whole or in part and, if in part, to what extent) because they are beyond the power of the Parliament of Queensland to enact on the basis of an implied doctrine of inter- governmental immunities or on the basis that they impermissibly intrude into an area of exclusive Commonwealth legislative power? Answer: Are the amendments made to the Queensland Local Government Electoral Act by Pt 5 of the Queensland Amending Act invalid (in whole or in part and, if in part, to what extent) because they are beyond the power of the Parliament of Queensland to enact on the basis of an implied doctrine of inter-governmental immunities or on the basis that they impermissibly intrude into an area of exclusive Commonwealth legislative power? Answer: Is s 302CA of the Commonwealth Electoral Act invalid (in whole or in part and, if in part, to what extent) because it is beyond the Commonwealth's legislative power? Answer: The section is wholly invalid. Is s 302CA of the Commonwealth Electoral Act invalid (in whole or in part and, if in part, to what extent) because it purports to operate in a manner that is contrary to the principle derived from the Melbourne Corporation Case? Answer: Does not arise. Is s 302CA of the Commonwealth Electoral Act invalid (in whole or in part and, if in part, to what extent) because it purports to operate in a manner that is contrary to the principle derived from Metwally, namely that a Commonwealth law cannot override the operation of s 109 of the Constitution? Answer: Unnecessary to decide. Are the amendments made to the Queensland Electoral Act by Pt 3 of the Queensland Amending Act invalid (in whole or in part and, if in part, to what extent) pursuant to s 109 of the Constitution by reason of their being inconsistent with the Commonwealth Electoral Act? Answer: Are the amendments made to the Queensland Local Government Electoral Act by Pt 5 of the Queensland Amending Act invalid (in whole or in part and, if in part, to what extent) pursuant to s 109 of the Constitution by reason of their being inconsistent with the Commonwealth Electoral Act? Answer: Who should pay the costs of the special case? Answer: The plaintiff. Nettle Donations in the political sphere Parts 3 and 5 of the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) ("the impugned provisions") inserted provisions into the Electoral Act 1992 (Qld) and the Local Government Electoral Act 2011 (Qld) closely resembling Div 4A of Pt 6 of the Election Funding, Expenditure and Disclosures Act 1981 (NSW). Each Act prohibits property developers from making political donations and each thereby burdens the implied freedom of political communication. In McCloy v New South Wales141 a majority of the Court upheld the constitutional validity of Div 4A as reasonably appropriate and adapted to achieving a legitimate purpose of reducing the risk of undue or corrupt influence in an area relating to planning decisions "where such risk may be greater than in other areas of official decision-making"142. As is explained in the majority's reasons in this matter, the majority's decision in McCloy dictates that the plaintiff's challenge to the impugned provisions must be rejected. To acknowledge the inevitability of that result, however, is not to say that I agree with it. In McCloy, I dissented because I considered143 that the discriminatory nature of the prohibition could not be justified. I remain of that view. Granted, the evidence in McCloy disclosed previous instances of property developers bribing politicians in order to procure planning decisions favourable to the developers144. It was also open to infer, as it might be here, too, that, as well as or instead of paying bribes, property developers were and are sometimes disposed to make political donations to one or other political party or member of Parliament in the hope or expectation of the donee later making political decisions favourable to the developers. But the fact that property developers might make political donations in the hope or expectation of receiving political favours, exerting political influence or otherwise advancing their own interests does not mark them out as a class so different from other sections of the electorate as to warrant discriminately prohibiting them from making political donations. 141 (2015) 257 CLR 178; [2015] HCA 34. 142 (2015) 257 CLR 178 at 209 [53] per French CJ, Kiefel, Bell and Keane JJ. 143 (2015) 257 CLR 178 at 270 [257]. 144 (2015) 257 CLR 178 at 208-209 [51] per French CJ, Kiefel, Bell and Keane JJ, 250 [194] per Gageler J, 261-262 [233] per Nettle J. Nettle Plainly, there are any number of electors who make political donations in the hope or expectation of extracting political favours, exerting political influence or otherwise advancing their own interests. Large corporations which make significant political donations provide an obvious example: because the directors of a corporation cannot lawfully authorise the making of a political donation unless persuaded that it is in the best interests of the corporation. The trade union movement also serves as a clear example: because trade unions make very large political donations avowedly in the hope or expectation of influencing the donees to make political decisions which will advance the interests of the unions and their membership. No one suggests that big business or the union movement should or could be discriminately prohibited from making political donations. What compelling justification is there for the State of Queensland to treat property developers differently145? Unjustified burden are and under crimes proscribed punishable The prohibition on property developer political donations is not rationally connected to the prevention of political bribery and corruption. Bribery and corruption the Criminal Code (Qld)146. The premise of the added proscription of political donations in the impugned provisions is that the kind of political donations at which it is aimed lack one or more of the elements of the offences of bribery and corruption. Nor are the impugned provisions rationally connected to lessening the risk of property developers and politicians committing those crimes. If a property developer is prepared to risk prison in order to bribe a politician, or a politician is prepared to risk prison in order to receive a secret commission, the fact that the payment might also be prohibited as a proscribed property developer political donation under the impugned provisions can do nothing in reality further to deter the developer or politician from engaging in that conduct. It might render each of them liable to being convicted of two offences rather than one, but, perforce of the principle of totality147, the total effective sentence which they receive for the two offences should be substantially the same as for the one. Granted, prohibiting property developer political donations may reduce the risk of property developers exerting non-criminal political "undue influence". But to repeat the question posed148 in McCloy, who is to say what political 145 cf Unions NSW v New South Wales (2013) 252 CLR 530; [2013] HCA 58; Unions NSW v New South Wales (2019) 93 ALJR 166; 363 ALR 1; [2019] HCA 1. 146 Criminal Code (Qld), ss 60 and 87. 147 See Pearce v The Queen (1998) 194 CLR 610 at 623 [40] per McHugh, Hayne and Callinan JJ, 638 [92] per Kirby J; [1998] HCA 57. 148 (2015) 257 CLR 178 at 273 [267] per Nettle J. Nettle influence is undue? Most times, the assessment of political undue influence reflects a subjective political point of view. What appears to one side of the political debate as undue presents to the other side as salutary. The examples of big business and the trade union movement earlier cited attest to the point, but they are not the limit of it. For instance, it is not unreasonable to suppose that there is now a significant proportion of the Queensland electorate who believe that the State of Queensland is or would be justified in prohibiting political donations by tobacco companies, the gun lobby or fossil fuel producers, on the basis that any influence that those organisations might exert on anti-smoking or gun control or fossil fuel production policies or legislation would be "undue". There may also be a section of the Queensland electorate who believe that it would be a good thing to prevent political donations by, say, sugar producers or private health insurers or prescription drug or prosthesis manufacturers, on the basis that any influence which those organisations might have on political decisions concerning sugar consumption, the promotion of private health insurance or prescription drugs or prosthetics would be "undue". No doubt at the same time, however, there is also a sizeable section of the Queensland electorate who, rightly or wrongly, hold opposing views. And they are entitled to have their views heard. Discriminately prohibiting entities from making political donations because of the interests which they represent or the policies which they favour is calculated to deny to that part of the electorate which aligns with those interests and policies a considerable measure of the capacity that is enjoyed by their political opponents to make their views heard. As such, it materially distorts the level playing field that is said to be the raison d'être of the implied freedom and imposes a significant and potentially dangerous burden upon it149. In effect, it amounts to deploying the legislative might of the State to silence points of view which those in power do not wish to be heard. As McHugh J in effect observed150 in another context, that cannot be justified. Commonwealth exclusive power in respect of Commonwealth elections As was first held in Smith v Oldham151 and has since repeatedly been held by this Court, perforce of ss 7, 9, 10, 29, 30 and 31 in conjunction with s 51(xxxvi) of the Constitution, the Commonwealth has exclusive, plenary power 149 Unions NSW v New South Wales (2013) 252 CLR 530 at 578-579 [137] 150 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 237; [1992] HCA 45. 151 (1912) 15 CLR 355; [1912] HCA 61. Nettle to make laws "in respect of" the election of members and senators of the Commonwealth Houses of Parliament152, and, perforce of s 51(xxxix), to legislate "with respect to" all matters incidental thereto153. Some of the States intervening submitted that the Commonwealth does not have exclusive legislative power with respect to Commonwealth elections. The most far reaching of those submissions were those of the Solicitor-General for the State of Western Australia that the decision in Smith v Oldham was made "in the context of the fallacy about reserved powers". It was contended that the question for the Court in Smith v Oldham, "[a]s the headnote itself accept[ed]", was whether a Commonwealth Act was within power. As such, so it was contended, the decision said nothing binding about State power to legislate with respect to Commonwealth elections. The "real question" in Smith v Oldham, it was contended, was about characterisation: whether the Commonwealth law in issue was a law with respect to Commonwealth elections or whether it was a law with respect to the conduct and control of newspapers; for if the latter, it was within a State reserved power, but if the former it was valid. In the result, it was submitted, the question of characterisation in Smith v Oldham simply "did not go to the question of trying to analyse the constitutional basis for exclusivity of Commonwealth electoral power". Those submissions should be rejected. Smith v Oldham cannot be sloughed off as a product of the now discredited reserved powers doctrine. It had nothing to do with reserved powers. Although counsel for the appellants advanced arguments based on that doctrine154, the Court did not call on the respondent to answer them. The Court gave judgment for the respondent on the express basis that the Commonwealth has exclusive legislative power with respect to Commonwealth elections. The Court made no mention of reserved powers. Nor is it to be expected that they would do so. The reserved powers 152 Smith v Oldham (1912) 15 CLR 355 at 358 per Griffith CJ, 360-361 per Barton J, 363 per Isaacs J; R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 31 per Knox CJ, Isaacs, Gavan Duffy, Powers, Rich and Starke JJ; [1920] HCA 24; Judd v McKeon (1926) 38 CLR 380 at 383 per Knox CJ, Gavan Duffy and Starke JJ; [1926] HCA 33; Langer v The Commonwealth (1996) 186 CLR 302 at 317 per Brennan CJ; [1996] HCA 43; Abbotto v Australian Electoral Commission (1997) 71 ALJR 675 at 678-679 per Dawson J; 144 ALR 352 at 356-357; [1997] HCA 18; Rowe v Electoral Commissioner (2010) 243 CLR 1 at 14 [8] per French CJ; [2010] HCA 46; Murphy v Electoral Commissioner (2016) 261 CLR 28 at 113 [262] per Gordon J; [2016] HCA 36. 153 Grannall v Marrickville Margarine Pty Ltd (1955) 93 CLR 55 at 77 per Dixon CJ, McTiernan, Webb and Kitto JJ; [1955] HCA 6. 154 Smith v Oldham (1912) 15 CLR 355 at 356. Nettle doctrine was concerned with cutting down the scope of Commonwealth legislative power to ensure that the States retained control of their domestic affairs155. It had no application in Smith v Oldham because it was considered that Commonwealth elections had nothing to do with the domestic affairs of the States. As Griffith CJ observed156, the matter was one in which the States as such had no concern, and, as Barton J said157, no power was given to the States to the make Commonwealth Parliament otherwise provided, and, since the Commonwealth Parliament had otherwise provided, it was the only authority that could legislate on the subject. Likewise, as Isaacs J explained158, ss 10, 31 and 51(xxxvi) and (xxxix) empower the Parliament to legislate in respect of Commonwealth elections on the "vital principle" that the "vote of every elector is a matter of concern to the whole Commonwealth". to Commonwealth elections except until laws with regard Some of the States intervening referred to individual statements in Smith v Oldham as examples of what was contended to be reserved powers reasoning. For instance, the Solicitor-General for the State of South Australia referred to the observation of Barton J that the proposition that the States have, and the Commonwealth has not, power to deal with the conduct of citizens in respect of Commonwealth elections was "too grotesque to be entertained". It was submitted that this statement, read with Barton J's earlier observation that "no power was given to any State", demonstrated that his Honour approached the issue from a reserved powers perspective. Such contentions are misplaced. There is nothing about Barton J's observations, or those of the other members of the Court, which suggests reserved powers reasoning. As the Solicitor-General of the Commonwealth rightly submitted, they merely identified uniformity as a structural reason in support of the conclusion that no power was given to the States over Commonwealth elections. The constitutional basis for the exclusive power of the Commonwealth with respect to Commonwealth elections was the initial election to Parliament and franchise created by ss 7, 8, 9, 10, 24, 29, 30, 31 and 41 of the Constitution. It was never conceived of as having anything to do with reserved powers. 155 Peterswald v Bartley (1904) 1 CLR 497 at 507 per Griffith CJ; [1904] HCA 21; R v Barger (1908) 6 CLR 41 at 54 per Griffith CJ in argument; [1908] HCA 43; Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 at 502-503 per Griffith CJ; [1908] HCA 94. See also Detmold, The Australian Commonwealth: A Fundamental Analysis of its Constitution (1985) at 29 [2.6]. 156 Smith v Oldham (1912) 15 CLR 355 at 358. 157 Smith v Oldham (1912) 15 CLR 355 at 359. 158 Smith v Oldham (1912) 15 CLR 355 at 362. Nettle As Barwick CJ observed159 in King v Jones, consistently with the constitutional understanding expressed160 at the time of federation that certain matters falling within s 51(xxxvi) were ex necessitate exclusive of any concurrent power in the Parliaments of the States: "The Imperial Parliament had to provide in the Constitution for the initial election of the Parliament and for a franchise until such time as the Parliament should legislate to specify the qualifications for electors of the Parliament. This provision was effected by ss 8, 9, 10, 30 and 31 of the Constitution. Section 30 provided both for a franchise for the election of the House of Representatives in the first Parliament and a franchise for election of that House until the Parliament legislated on the matter. Section 31 utilized the colonial electoral machinery continued in force by s 108 of the Constitution as State law, for the purpose of electing the first House of Representatives and thereafter, and if subsequently amended, perhaps, as so amended, until the Parliament passed a Commonwealth electoral law. Sections 8, 9 and 10 of the Constitution made comparable provisions as to the franchise and the procedure for the election of the Senate. But clearly, in my opinion, it was contemplated from the inception of the Commonwealth that in Australia, unlike the position in relation to the Congress as I think it was thought to be in the United States, the Parliament would determine the franchise for Australia for the election of both the House of Representatives and the Senate." Queensland and Victoria sought to draw support from the decision in R v Brisbane Licensing Court; Ex parte Daniell161 for the view that the Commonwealth's legislative power with respect to Commonwealth elections is in major respects concurrent with the States. Those suggestions are also misplaced. Ex parte Daniell concerned the validity of s 14 of the Commonwealth Electoral (War-time) Act 1917 (Cth). That section provided that on the day appointed as polling day for an election of the Senate or a general election of the House of 159 (1972) 128 CLR 221 at 230; [1972] HCA 44. See also R v Pearson; Ex parte Sipka (1983) 152 CLR 254 at 260-262 per Gibbs CJ, Mason and Wilson JJ; [1983] HCA 6; Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 532-537; Moore, The Constitution of the Commonwealth of Australia, 2nd ed (1910) at 124-126. 160 See Clarke, Studies in Australian Constitutional Law (1901) at 74-75. See also Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 482-483. 161 (1920) 28 CLR 23. Nettle Representatives, no referendum or vote of the electors of any State or part of a State shall be taken under the law of a State. Counsel for the prosecutor advanced two arguments in support of validity of the provision. The first was that s 14 was within the exclusive power of the Commonwealth with respect to Commonwealth elections. The second, alternative argument was that, if the power were not exclusive, it nevertheless prevailed over s 172 of the Liquor Act 1912 (Qld) (which had appointed a particular date for a local option poll to be taken in the Local Option Area in Queensland) by reason of s 109 of the Constitution. In contrast to the prosecutor's arguments, there is no recorded submission of the respondents challenging the authority of Smith v Oldham, still less any suggestion that it should be overruled. As appears from the record of argument of the respondents' submissions, it was not concurrent power but the operation of s 9 of the Constitution, and the limited power granted to the States under that section, that was of concern to the States162: "Sec 14 of the Commonwealth Electoral (War-time) Act is invalid. The power given by sec 9 of the Constitution to a State Parliament to fix the days on which Senate elections shall be held is exclusive. Sec 14 is an attempt to cut down that power, for under that power the Parliament of Queensland might fix the day for holding an election as the day on which a local option poll was held. If it does not limit the power to fix the day for holding Senate elections, it limits the power to fix the day for holding local option polls, and so is an interference with a State instrumentality." Although the significance of the decision in Ex parte Daniell now lies in its precedential value as an example of "direct" inconsistency, its significance at the time of publication, as is explained below, was its response to the respondents' argument that, perforce of s 9 of the Constitution, determination of the times and places for the election of senators was understood to be a power "permanently and exclusively vested in the States"163. After construing the effect of s 14 of the Commonwealth Act, a majority of the Court (Knox CJ, Isaacs, Gavan Duffy, Powers, Rich and Starke JJ) rejected the Commonwealth had the power to pass s 14, it would render s 172 of the Liquor Act invalid164: respondents' contention on the assumption that, the 162 R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 26. 163 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 481. 164 R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 29. Nettle "Supposing the Commonwealth Parliament competent to enact such a prohibition, the result is not doubtful. There arises upon that construction a conflict, or inconsistency, between the State Act authorizing and commanding the vote on that day and the Commonwealth Act, assumedly competently made, forbidding the vote on that day. Then sec 109 of the Constitution enacts that in such a case the State law, to the extent of the inconsistency, is invalid." Their Honours then turned to the issue of whether the Commonwealth had power to pass s 14, and emphatically rejected any suggestion that s 14 was beyond power165: "The respondents, however, strongly contended that such an enactment was beyond the competency of the Commonwealth Parliament. They so contended on two grounds. First they argued that the prohibition of State elections on the same day was not incidental to the acknowledged power to legislate as to Commonwealth elections. We are distinctly of opinion that the argument is unsound. The Commonwealth Parliament clearly has power to secure, so far as legislation can secure, the fullest opportunity it thinks desirable to the people of the Commonwealth to elect their Parliamentary representatives unconfused by any other public duties required of them as citizens of a particular State. It would be pedantic to say more on that subject." As is apparent from their Honours' characterisation of the respondents' argument, as opposed to the way in which it is summarised in the Commonwealth Law Reports, the respondents' contention was that the power to pass laws in respect of the times and places of elections of senators was incidental to the "acknowledged power" of the Commonwealth. And as is apparent from the time and membership of the Court when Ex parte Daniell was decided, the "acknowledged power" of the Commonwealth is to be understood in light of the then recent holding in Smith v Oldham of exclusive power with respect to Commonwealth elections. The issue was whether that power extended to a law passed pursuant to ss 10 and 51(xxxvi) and (xxxix) of the Constitution in respect of a subject matter over which s 9 of the Constitution grants exclusive legislative power to the States. The description of the Commonwealth's power as "incidental" was, however, not so much a reference to the incidental power under s 51(xxxix), as to the extent to which the Commonwealth sought to legislate in respect of the times and places of elections of senators; being something lying on the periphery of the exclusive power and, in that sense, "incidental" to the "acknowledged power". The "distinct" view of their Honours was that the Commonwealth Parliament has power to "the fullest opportunity it thinks 165 R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 30-31. Nettle desirable"; thus echoing Isaacs J's statement in Smith v Oldham that the "limits of plenary power end only with the subject matter in respect of which it may be exercised"166. That is further confirmed by their Honours' rejection of the respondents' second argument: that by operation of s 9 of the Constitution the Parliament of Queensland had exercised its power as to the day of polling and that s 14 of the Commonwealth Act was a "fetter on that power". Their Honours held167 that the local option poll was not a law falling under s 9 of the Constitution, that the State of Queensland was "left absolutely unfettered as to the day of polling for Senators", and so that the passing of s 14 of the Commonwealth Act pursuant to s 10 of the Constitution, in combination with s 51(xxxvi) and (xxxix), was not incompatible with what s 9 of the Constitution prescribes168. Properly understood, the decision in Ex parte Daniell was on account of the practical overlap of Commonwealth and State laws at the periphery of the Commonwealth's exclusive power, and consequent inconsistency169. It was not in any sense an implicit or explicit holding that Commonwealth legislative power over Commonwealth elections was concurrent. Queensland's submission that this case is "not talking about the intersection of State and federal laws on the fringes" should be rejected. Queensland further encouraged this Court to understand Ex parte Daniell as a departure from Smith v Oldham and to accept that the question was whether this Court now "should or should not reject what was necessarily determined by their Honours in Daniell". Unsurprisingly, however, Queensland was unable to point to even one subsequent case or text published in the passage of almost a century since Ex parte Daniell was decided which interprets Ex parte Daniell as overruling Smith v Oldham, or as otherwise The Commonwealth Law Reports do not report the case as reversing or (re)considering Smith v Oldham and the received understanding after the decision was published was that Commonwealth power over Commonwealth elections was an exclusive power170. Queensland's argument to the contrary is without foundation. inconsistent with 166 (1912) 15 CLR 355 at 363. 167 R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 31. 168 See Knowles, The Commonwealth of Australia Constitution Act (1936) at 10. 169 See and compare Nelungaloo Pty Ltd v The Commonwealth (1952) 85 CLR 545 at 564 per Dixon J; [1952] HCA 11. 170 See, eg, Kerr, The Law of the Australian Constitution (1925) at 102 fn 5. Nettle Finally with respect to Ex parte Daniell, it is to be observed that, so far from being considered as contradictory of Smith v Oldham, the precedential value of Ex parte Daniell has long been understood as an example of "direct" inconsistency between State and Commonwealth legislative power. That is immediately apparent in West v Commissioner of Taxation (NSW)171, where Latham CJ described172 Ex parte Daniell as an example of the application of the principle that the Commonwealth Parliament can legislate so as to exclude the operation of a State law in relation to a matter controlled by federal law. Evatt J, after describing unlawful attempts by the Commonwealth "to manufacture 'inconsistency'", stated173 that the passing of the Commonwealth law in question in Ex parte Daniell in order to engage the operation of s 109 was lawful. The direct collision of laws was, in his Honour's view, acceptable because the Commonwealth's legislative power over its own electoral system was "deemed sufficient to enable it" to prevent the awkwardness and confusion which might well result from a simultaneous Commonwealth and State election. Once again, the reference to "sufficient to enable it" is to be understood in terms of the law operating at the periphery of the power for the reasons already explained. For more than a century this Court has applied Smith v Oldham without doubt as to its correctness or precedential authority. Long since the abolition of the reserved powers doctrine, this Court has repeatedly invoked174 Smith v Oldham as establishing that the legislative power of the Commonwealth with respect to Commonwealth elections is essentially exclusive. Nothing advanced by any of the States in this matter offers any reason to doubt it. The plenitude of Commonwealth power over Commonwealth elections Subject to context and contrary indication, the words "in respect of" connote "the widest possible meaning of any expression intended to convey some connexion or relation between two subject-matters"175. In s 51(xxxvi) it is apparent that they are intended to have that effect. The Commonwealth Parliament's legislative power to make laws "in respect of" Commonwealth 171 (1937) 56 CLR 657; [1937] HCA 26. 172 (1937) 56 CLR 657 at 670. 173 West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 707. 174 See fn 152 above. 175 Trustees Executors & Agency Co Ltd v Reilly [1941] VLR 110 at 111 per Mann CJ, quoted in Powers v Maher (1959) 103 CLR 478 at 484-485 per Kitto J; [1959] HCA 52. Nettle elections is wide176. It extends to enacting laws which in any way relate to Commonwealth elections provided that the connection is not so "insubstantial, tenuous or distant" that it cannot properly be described as a law with respect to that subject matter. It includes making laws which regulate the conduct of persons in relation to elections, and thus the making of laws proscribing bribery or corruption, illegal practices and undue influence in relation to elections177. And as is implicit in the Court's previous decisions concerning the legislative power of the States to cap and prohibit State electoral donations178, it extends to making laws capping and prohibiting donations for Commonwealth electoral laws have a direct and substantial connection with Such purposes. Commonwealth elections179. Limited State power over Commonwealth elections to making laws relating to Commonwealth elections until By contrast, the States have but narrowly defined specific legislative powers with respect to Commonwealth elections, which, with one exception, are the limited Commonwealth otherwise provides. The one exception occurs in s 9 of the Constitution, which, as has been seen, provides for the Parliament of a State to make laws for determining the times and places of election of senators for the State. Despite, however, the essential exclusivity of the Commonwealth's legislative power to make laws in respect of Commonwealth elections, State laws with respect to subject matters other than elections may operate on and in connection with Commonwealth laws to the extent that they are not inconsistent. Thus, although a State law properly characterisable as a law with respect to Commonwealth elections would be invalid as a State law impinging on a field of exclusive Commonwealth legislative power, a State law properly characterisable as a law with respect to a subject matter other than Commonwealth elections – for example, a State law with respect to crime, defamation, or occupational health and safety – might not be invalid despite its effect on Commonwealth elections. Whether a State law is properly characterisable as a law with respect to Commonwealth elections depends on the degree of its connectedness to 176 See Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 207-208 [66] per McHugh J; [2004] HCA 41. 177 Sue v Hill (1999) 199 CLR 462 at 473 [7] per Gleeson CJ, Gummow and Hayne JJ; [1999] HCA 30. 178 Unions NSW v New South Wales (2013) 252 CLR 530; McCloy v New South Wales (2015) 257 CLR 178; Unions NSW v New South Wales (2019) 93 ALJR 166; 363 ALR 1. 179 See and compare Victoria v The Commonwealth ("the Second Uniform Tax Case") (1957) 99 CLR 575 at 614-615 per Dixon CJ; [1957] HCA 54. Nettle Commonwealth elections: the degree to which it touches or concerns Commonwealth elections. A State law is unlikely to be a law with respect to Commonwealth elections if the degree of its connectedness to Commonwealth elections is no more than adventitious. But the scope for the States to legislate with respect to Commonwealth elections and what is incidental to them remains essentially limited. Commonwealth power to pass electoral funding laws Given the breadth of the Commonwealth's legislative power relating to Commonwealth elections, and that donations for Commonwealth electoral purposes are so closely connected to the Commonwealth electoral process, the Commonwealth's legislative power with respect to Commonwealth elections includes exclusive legislative power to enact a regime to govern and control Commonwealth election funding and financial disclosure and the giving and receipt of political donations for Commonwealth electoral purposes180. It also includes legislative power to exclude the operation of State and Territory laws from the field of operation of that regime181. As Mason J remarked182 in R v Credit Tribunal; Ex parte General Motors Acceptance Corporation: "although a provision in a Commonwealth statute which attempts to deny operational validity to a State law cannot of its own force achieve that object, it may nevertheless validly evince an intention on the part of the statute to make exhaustive or exclusive provision on the subject with which it deals, thereby bringing s 109 into play". 180 Sue v Hill (1999) 199 CLR 462 at 473 [7] per Gleeson CJ, Gummow and Hayne JJ; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 207-208 181 Wenn v Attorney-General (Vict) (1948) 77 CLR 84 at 120 per Dixon J; [1948] HCA 13; Australian Coastal Shipping Commission v O'Reilly (1962) 107 CLR 46 at 56-57 per Dixon CJ; [1962] HCA 8; Botany Municipal Council v Federal Airports Corporation (1992) 175 CLR 453 at 465 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ; [1992] HCA 52; Western Australia v The Commonwealth (1995) 183 CLR 373 at 467 per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ; [1995] HCA 47. 182 (1977) 137 CLR 545 at 563; [1977] HCA 34. Nettle There is no doubt that the Commonwealth Parliament has legislative power to exclude the application of State laws which prohibit political donations that are required to be used for Commonwealth electoral purposes183. Sufficient connection with Commonwealth power The critical issue joined in argument was whether the Commonwealth has power to regulate political donations which, although not required to be used for Commonwealth electoral purposes, may be used for those purposes. The Solicitor-General for the State of Victoria, for example, contended that s 302CA does not directly operate on the subject matter of Commonwealth elections but is supported as being incidental to that subject, that the degree of connection between such donations and Commonwealth elections is tenuous, and that where the Constitution creates or recognises a distinction between the Commonwealth and the States in a grant of power, it is necessary to "give a narrowly confined ambit to the incidental power so that that distinction is not obliterated". Reliance was placed on Gazzo v Comptroller of Stamps (Vict)184, in which Gibbs CJ stated185 that where the exercise of Commonwealth legislative power is incidental to the subject matter of the power it is not always irrelevant that the effect of the law is to invade State power. The rectitude of Gibbs CJ's reasoning in Gazzo has rightly been questioned186. As Murphy J observed187 in Gazzo: "This Court's decision to invalidate s 90 is attributable to what can fairly be described as a revival of the States' reserved powers doctrine." And similarly, as his Honour reasoned188 in Attorney-General (WA) v Australian National Airlines Commission: 183 Abbotto v Australian Electoral Commission (1997) 71 ALJR 675 at 678-679 per Dawson J; 144 ALR 352 at 356-357. 184 (1981) 149 CLR 227; [1981] HCA 73. 185 (1981) 149 CLR 227 at 240. 186 Fisher v Fisher (1986) 161 CLR 438 at 453 per Mason and Deane JJ; [1986] HCA 61; Stellios, Zines's The High Court and The Constitution, 6th ed 187 (1981) 149 CLR 227 at 261. 188 (1976) 138 CLR 492 at 530; [1976] HCA 66. Nettle "The maintenance of the supposed decision and the further insistence (see Wragg v New South Wales) that even the use of the incidental power in s 51(xxxix) cannot obliterate the division, keeps the pre-Engineers ghosts walking." (footnote omitted) Possibly Gibbs CJ was not so much suggesting a veiled recourse to reserved powers reasoning as, consistent with the Engineers Case189 and Melbourne Corporation v The Commonwealth190, an analysis directed to ensuring the independent existence of the States. But the distinction is a fine one. And where, as here, there arise questions involving the exercise of exclusive Commonwealth legislative power, it is necessary to be particularly careful in drawing conclusions about "remoteness" and "invading State power". Certainly, at the periphery, the State's concern increases by reason of the inevitable overlap of Commonwealth and State laws. But simply to decide that a Commonwealth law at the periphery may intrude into an area the subject of State law does not mean that the subject matter is not one of real and valued interest to the Commonwealth. As Deane J said191 in The Commonwealth v Tasmania: "There are, no doubt, areas within the plenitude of executive and legislative power shared between Commonwealth and States (see Colonial Sugar Refining Co Ltd v Attorney-General (Cth); Smith v Oldham) which, while not included in any express grant of legislative power, are of real interest to the Commonwealth or national government alone. Even in fields which are under active State legislative and executive control, Commonwealth legislative or executive action may involve no competition with State authority: an example is the mere appropriation and payment of money to assist what are truly national endeavours." (footnotes omitted) Arguably, a Commonwealth law which did no more than purport to exclude the application of State law to gifts that might be used for Commonwealth electoral purposes would be beyond Commonwealth legislative power. On one view of the matter, the link between the subject matter of Commonwealth elections and a mere possibility of a gift being used for Commonwealth electoral purposes, standing alone, would be too tenuous to conclude that the law was one with respect to Commonwealth elections. As was accepted by the Solicitor-General of the Commonwealth, the situation would be in some respects analogous to the examples of Commonwealth prohibitions 189 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129; [1920] HCA 54. 190 (1947) 74 CLR 31; [1947] HCA 26. 191 (1983) 158 CLR 1 at 252-253; [1983] HCA 21. Nettle adumbrated192 by Dixon CJ in the Second Uniform Tax Case in support of his Honour's conclusion that a Commonwealth law which purported to prohibit a taxpayer paying State taxation before paying Commonwealth taxation went beyond any true conception of what was incidental to the Commonwealth's power to make laws with respect to taxation. But there are dangers in analogies193, and as Dixon CJ expressly cautioned194 in the Second Uniform Tax Case: "[W]hen you are considering what is incidental to a power not only must you take into account the nature and subject of the power but you must pay regard to the context in which you find the power." Relevantly, the conclusion reached in the Second Uniform Tax Case was that the Commonwealth's taxation power could not be construed as power over the whole subject of taxation, and thus that it was to be recognised that the States had concurrent and independent taxation power. By contrast here, the context is one in which the Commonwealth has exclusive legislative power with respect to Commonwealth elections and the States have no interest in Commonwealth elections. Moreover, and more importantly, as Gordon J observes, the exclusion in s 302CA of application of State laws to donations which might be used for Commonwealth electoral purposes does not stand alone. demonstrates, it forms part of the comprehensive legislative regime enacted as Pt XX of the Commonwealth Electoral Act 1918 (Cth) for the regulation of Commonwealth election funding and financial disclosure. The scheme is analysed in full in Gordon J's judgment. It is also accurately summarised in the simplified outline of the Part which appears in s 286A. For present purposes, it suffices to say that Pt XX deals with the funding of "registered political parties, candidates and groups" and with gifts and other financial matters relating to "parties, candidates, groups, political campaigners, third parties and associated entities". Subject to some exceptions, it prohibits foreign donors from making gifts to registered political parties, candidates, Senate groups, or political campaigners of $1,000 or more for the purpose of incurring electoral expenditure or creating or communicating electoral matter. Significantly, it also imposes obligations to disclose certain gifts made to candidates and members of groups, registered political parties, State branches of registered political parties and political campaigners, and certain expenditure incurred by or with the authority 192 Victoria v The Commonwealth (1957) 99 CLR 575 at 615. 193 See Federal Commissioner of Taxation v Citylink Melbourne Ltd (2006) 228 CLR 1 at 43 [151] per Crennan J; [2006] HCA 35. 194 Victoria v The Commonwealth (1957) 99 CLR 575 at 614. Nettle of candidates and groups during an election period. And it requires that, each financial year, registered political parties, political campaigners, third parties and associated entities disclose details relating to amounts received by or paid to or incurred by them during the year. As long as a donation made to a Commonwealth electoral participant is made on terms which permit the donation to be used for Commonwealth electoral purposes, the breadth of the Commonwealth's legislative power with respect to Commonwealth elections means that, until and unless the donee determines to use the donation for purposes other than Commonwealth electoral purposes, the Commonwealth Parliament's power to make laws regulating the conduct of persons in relation to Commonwealth elections and, therefore, proscribing bribery and corruption, illegal practices and undue influence in relation to Commonwealth elections includes power to regulate the giving and receipt of the donation and to require the donee to account for it. Were it otherwise, Commonwealth control of donations for Commonwealth electoral purposes could be frustrated by the simple device of donors who intend and expect their donations to be used for Commonwealth electoral purposes stipulating that donations may be used for Commonwealth electoral purposes. And for the reasons already given, because that is so it follows that the Commonwealth has legislative power, as part of the regulatory scheme which Pt XX entails, to exclude the operation of State laws from the field of operation of that scheme in its application to donations which may be used for Commonwealth electoral purposes. Does the situation change when and if a donee determines to use such a donation for purposes other than Commonwealth electoral purposes? By its terms, s 302CA has the effect of making Pt XX cease to apply if a donee determines to apply such a donation to a State political purpose. But what if the donee determines to apply such a donation to a purpose which is neither a Commonwealth electoral purpose nor a State electoral purpose? As it appears to me, the answer to that question is that because that possibility is inherent in every donation made on terms that permit but do not require the donation to be used for Commonwealth electoral purposes, Pt XX is a law with respect to both Commonwealth purposes and purposes not within Commonwealth legislative power. But as has long been established, if a law enacted by the Commonwealth Parliament can fairly be described as a law with respect to a grant of Commonwealth legislative power as well as a law with respect to matters left to the States, that will suffice to support its validity as a law of the Commonwealth195. 195 Actors and Announcers Equity Association v Fontana Films Pty Ltd (1982) 150 CLR 169 at 192 per Stephen J; [1982] HCA 23; New South Wales v (Footnote continues on next page) Nettle In Actors and Announcers Equity Association v Fontana Films Pty Ltd Stephen J concluded196 that the question of whether a "mixed" law may fairly be described as one with respect to a head of power will depend upon the "significance" of the remaining elements: "So long as the remaining elements, which do not fall within any such grant of power, are not of such significance that the law cannot fairly be described as one with respect to one or more of such grants of power then, however else it may also be described, the law will be valid." In my view, the possible application of s 302CA to donations which may be but are not required to be used for Commonwealth electoral purposes, and are not used for Commonwealth electoral purposes, is not so significant that the law cannot fairly be described as a law with respect to Commonwealth elections. And since 302CA can thus fairly be described as a law with respect to Commonwealth elections – no matter that it might also be described in its application to donations which may be but are not required to be used for Commonwealth electoral purposes as a law with respect to purposes other than Commonwealth electoral purposes – it is a valid law of the Commonwealth which prevails over inconsistent State laws by reason of s 109 of the Constitution. University of Wollongong v Metwally Queensland contended that s 302CA was invalid as offending the conclusion reached by the majority in University of Wollongong v Metwally197 that, where a State law has been held to be invalid as inconsistent with a valid the Commonwealth Commonwealth retrospectively to enact that the Commonwealth law shall be deemed never to have been intended to exclude or to have excluded or limited the operation of the State law. legislative competence of is beyond law, the Views differ as to the extent of operation of the decision in Metwally but, whatever the correct conception of it, it does not apply to the facts of this matter. Section 302CA does not provide that it shall be deemed never to have been intended to exclude or to have excluded or limited the operation of any State law prohibiting property developer political donations. Nor is s 302CA in any respect retroactive in its operation. It provides simply that if a donation which The Commonwealth (2006) 229 CLR 1 at 103-104 [142] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ; [2006] HCA 52. 196 (1982) 150 CLR 169 at 192. 197 (1984) 158 CLR 447; [1984] HCA 74. Nettle may be but is not required to be used for Commonwealth electoral purposes is used for State electoral purposes, s 302CA shall thenceforth cease to apply. It is open to the Commonwealth Parliament to enact when and in what circumstances a provision such as s 302CA will cease to apply. With respect, I agree with what Gordon J has written on the subject. Melbourne Corporation principle the principle articulated Queensland further contended that s 302CA was "aimed at" the States and in Melbourne Corporation v thereby offended The Commonwealth198 that a Commonwealth law which, looking to its substance and operation, in a significant manner curtails or interferes with the capacity of the States to function as governments is invalid199. Attention was directed to the effect of the Revised Explanatory Memorandum to the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018 (Cth), which stated that s 302CA clarified the interaction between State and Territory and Commonwealth electoral laws and that some State and Territory laws would be invalidated to the extent they detracted from the right to give, accept or use a donation under the Commonwealth Electoral Act. It was submitted that s 302CA discriminates against the States and has the effect of denying or destroying the application of Queensland's chosen regulatory model, the result of which is that s 302CA impairs the "liberty of action of the State" in exercise of its constitutional functions. There is no merit in that submission. As has been explained, the prevention of the application of Queensland's prohibition of property developer political donations to political donations which must or may be used for Commonwealth electoral purposes in s 302CA is within the ambit of the Commonwealth's legislative power with respect to Commonwealth elections. As is apparent from the text of the provision, s 302CA is designed to ensure the effectiveness of the regime which the Commonwealth has chosen for regulating the conduct of persons in relation to Commonwealth elections. Evidently, it does so without in any significant manner curtailing or interfering with Queensland's legislative freedom. It leaves Queensland free to legislate, as it has, to criminalise corrupt political donations and, apart from prohibiting political donations to Commonwealth electoral participants that must or may be used for Commonwealth electoral purposes, leaves Queensland otherwise free to prohibit 198 (1947) 74 CLR 31. 199 Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 75 per Starke J, 81 per Dixon J; Austin v The Commonwealth (2003) 215 CLR 185 at 219 [27] per Gleeson CJ, 265 [168] per Gaudron, Gummow and Hayne JJ, 299 [275] per Kirby J; [2003] HCA 3. Nettle non-criminal property developer political donations. The exclusion of donations which may but need not be used for Commonwealth electoral purposes does not affect the capacity of Queensland to function as a government. Rather, to adopt and adapt the language in Bayside City Council v Telstra Corporation Ltd200, there is no more an attempt in s 302CA to dictate the content of Queensland's State electoral donations laws than there was an attempt in Australian Coastal Shipping Commission v O'Reilly201 or in Botany Municipal Council v Federal Airports Corporation202 to dictate the content of State laws with respect to taxation or the carrying out of relevant works. The substance of the States' submissions that s 302CA was "aimed at" the States elided with objections previously described in this Court as "a bare attempt to limit or exclude State power"203 or to "manufacture inconsistency"204. Regardless of how such objections may be described, however, this Court has repeatedly upheld Commonwealth legislation where supported by a rational policy choice in the manner of federal regulation of a federal subject matter205. 200 (2004) 216 CLR 595 at 626 [30] per Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ; [2004] HCA 19. 201 (1962) 107 CLR 46 at 56-57 per Dixon CJ. 202 (1992) 175 CLR 453 at 465 per Mason CJ, Brennan, Deane, Dawson, Toohey, 203 See, eg, Wenn v Attorney-General (Vict) (1948) 77 CLR 84 at 120 per Dixon J; New South Wales v The Commonwealth (2006) 229 CLR 1 at 166-167 [370] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. 204 See, eg, West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 707 per Evatt J; Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 627-628 [35]-[36] per Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ; New South Wales v The Commonwealth (2006) 229 CLR 1 at 164 [365] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. 205 West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 707 per Evatt J; Wenn v Attorney-General (Vict) (1948) 77 CLR 84 at 110 per Latham CJ, 120 per Dixon J; Australian Coastal Shipping Commission v O'Reilly (1962) 107 CLR 46 at 56-57 per Dixon CJ; Botany Municipal Council v Federal Airports Corporation (1992) 175 CLR 453 at 465 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ; Western Australia v The Commonwealth (1995) 183 CLR 373 at 467 per Mason CJ, Brennan, Deane, Toohey, Gaudron and McHugh JJ; Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 627-628 [35]-[36] per Gleeson CJ, Gummow, Kirby, Hayne and Heydon JJ, 644 [91] per McHugh J; New South Wales v The Commonwealth (2006) 229 CLR 1 (Footnote continues on next page) Nettle Section 302CA is so drafted, in particular by the inclusion of the three qualifications in sub-s (3), as to preserve as far as possible State legislation regulating donations and to limit the effect of inconsistency to the extent of those regulations which interfere with the policy choice sought to be achieved by the Commonwealth electoral funding regime described above. Section 302CA does not attempt to oust State laws beyond what is necessary to give effect to the policy choice reflected in the Commonwealth regime. It cannot be said that s 302CA is "aimed at" the States or is "a bare attempt to limit or exclude State power" or to "manufacture inconsistency". It is rather a provision calculated to achieve the exclusivity of Commonwealth regulation of a matter which is squarely within a head of exclusive Commonwealth legislative power. Conclusion As mine is a dissenting judgment, it is unnecessary and probably undesirable for me to say anything of other issues raised in the special case. For the reasons I have given, I would agree in the orders proposed by Gordon J. at 166-167 [370] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ. See and compare Dour and Taylor, "Manufactured Inconsistency" (2012) 39 Monash Law Review 131. 152 GORDON J. In 2018, Queensland and then the Commonwealth passed legislation seeking to regulate political donations – the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) ("the Queensland Amending Act") and the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018 (Cth) ("the Commonwealth Amending Act"). In general terms, the Queensland Amending Act inserted provisions into the Electoral Act 1992 (Qld) and the Local Government Electoral Act 2011 (Qld) prohibiting political donations by property developers. The Commonwealth Amending Act amended Pt XX of the Commonwealth Electoral Act 1918 (Cth) to the opposite effect. It inserted into Pt XX s 302CA, which provides that, subject to certain qualifications, "[d]espite any State or Territory electoral law" gifts may be given, received or retained as long as Commonwealth electoral law does not prohibit it. Both sets of provisions apply to "political donations" or "gifts" to political parties206, and define "political party"207 to include parties whose object (or object or activity), or one of whose objects (or objects or activities), is the promotion of the election of candidates, in the one case for State or local government elected office and, in the other, for election to the federal Parliament. Thus, there is potential for overlap in their application to parties with multiple objects or activities. In addition, the Commonwealth legislation applies to "State branch[es]" of Commonwealth registered political parties208. The questions stated for the Full Court are set out in the reasons of Kiefel CJ, Bell, Gageler and Keane JJ209. I would have answered them as follows: Questions (a)-(f): 206 Electoral Act, s 274(1)(a)(i); Local Government Electoral Act, s 113A(1)(a)(i); Commonwealth Electoral Act, s 302CA(1)(a), read with s 4(1) para (a) of the definition of "political entity". 207 Electoral Act, s 2 definition of "political party"; Local Government Electoral Act, s 4 and Sch definition of "political party"; Commonwealth Electoral Act, s 4(1) definitions of "political entity", "[p]olitical party" and "[r]egistered political party". 208 Commonwealth Electoral Act, s 4(1) para (b) of the definition of "political entity", read with s 287(1) definition of "State branch". 209 Reasons of Kiefel CJ, Bell, Gageler and Keane JJ at [112]. Question (g): Question (h): "Yes. Section 275 of the Electoral Act 1992 (Qld) is invalid to the extent that it applies to giving, receiving or retaining gifts where this is permitted by s 302CA(1) of the Commonwealth Electoral Act 1918 (Cth)"; "Yes. Section 113B of the Local Government Electoral Act 2011 (Qld) is invalid to the extent that it applies to giving, receiving or retaining gifts where the s 302CA(1) this Commonwealth Electoral Act 1918 (Cth)"; permitted Question (i): "The defendant should pay the costs of the special case". In short, s 302CA of the Commonwealth Electoral Act is valid: it is within power, and not otherwise invalid on any of the various bases advanced. In relation to Pts 3 and 5 of the Queensland Amending Act, although the implied freedom of political communication does not invalidate the amendments made by Pt 3 of that Act, and nor does any notion of Commonwealth exclusive power or intergovernmental immunities invalidate the amendments made by Pts 3 and 5, the amendments made by Pts 3 and 5 are inconsistent with s 302CA of the Commonwealth Electoral Act and should be held inoperative to the extent of that inconsistency. The challenge to the validity of s 302CA of the Commonwealth Electoral Act was founded on complex and elaborate arguments often expressed in terms that concluded the issue. At its core, the argument for invalidity was that s 302CA was "aimed at"210 the States and sought to give some "immunity" from the operation of State law. It is important, in these circumstances, to begin by identifying the central errors in the arguments for invalidity of s 302CA of the Commonwealth Electoral Act. Section 302CA of the Commonwealth Electoral Act is supported by s 51(xxxvi), read with ss 10 and 31, of the Constitution. It is a law with respect to matters in respect of which the Constitution makes provision until the Parliament otherwise provides: laws relating to federal elections of Senators and members of the House of Representatives211. These provisions confer on the 210 See Fortescue Metals Group Ltd v The Commonwealth (2013) 250 CLR 548 at 611 [137]; [2013] HCA 34. 211 Constitution, ss 10 and 31. federal Parliament a plenary power over federal elections for the Senate and the House of Representatives212. The Constitution does not confer on State Parliaments any power to make laws relating to federal elections, other than those powers granted by ss 7, 9 and 29 of the Constitution. If s 302CA of the Commonwealth Electoral Act is robbed of all of its context, it may appear as some attempt to limit or exclude State law in the exercise of State legislative power. But the provision is not to be robbed of its context213. It is to be read in the context of the other provisions in Pt XX that lay down positive rules about who may make contributions to entities and persons that participate in federal elections. The rules provided by the Commonwealth Electoral Act in respect of political donations differ from, and are less restrictive than, the Queensland laws. But to describe the result of that difference as giving some immunity from the operation of State law either says too much or says too little – it obscures, rather than clarifies, the interaction of the laws. inconsistency between State Section 109 of the Constitution operates according to its terms: to the extent of laws, the Commonwealth law prevails. Notions of "immunity"214 may be politically powerful but are at best distracting and may even mislead the constitutional analysis. If State and Commonwealth laws are inconsistent (and here they are), s 109 prescribes the result. "Immunity" and similar expressions assume (wrongly) that the State law operates according to its terms in relation to federal elections or imply (again wrongly) that the federal law is no more than a law with respect to State legislative power. and Commonwealth The Queensland Parliament and the federal Parliament have made different policy choices about who may contribute money that is or may be used in the elections for each respective Parliament. Put shortly, Queensland has decided that there should be no contributions by property developers. The Commonwealth has decided, first, that there should be no contributions by foreign donors above specific monetary thresholds215 but, second, that the partial ban on foreign donors is to be the only restriction on donations. 212 See Langer v The Commonwealth (1996) 186 CLR 302 at 317; [1996] HCA 43, citing Smith v Oldham (1912) 15 CLR 355 at 363; [1912] HCA 61. 213 See Australian Coastal Shipping Commission v O'Reilly (1962) 107 CLR 46 at 70-71; [1962] HCA 8. 214 Australia, House of Representatives, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018 (Cth), Revised Explanatory Memorandum at 51 [228]. 215 See Commonwealth Electoral Act, ss 302D, 302E, 302F. Victoria and Tasmania contended that the federal Parliament has no power to make a law providing that the only limit on donations with respect to federal electoral matters is to be the preclusion of foreign donors above the specific monetary thresholds. They said that the Commonwealth law is invalid because, given that political parties are organised as multi-purpose entities, the Queensland prohibition on property developer donations should have effect in any case where the donation is not earmarked or applied for federal electoral purposes. In particular, the argument was that the federal law is not valid in its application to donations that are not earmarked for State electoral purposes but could be (but may or may not be) applied to federal electoral purposes. The argument was that the federal Parliament has no power to make a law that the rules set by the federal Parliament about donations capable of being applied to federal electoral purposes are the complete and comprehensive regulation of that subject. To accept this central proposition denies the long-established doctrine of this Court about the operation of s 109. Dressing the argument, as Victoria and Tasmania did, in the clothes of an argument about legislative power seeks to divert attention from the novelty of the proposition advanced. That proposition is that the federal Parliament, making a law with respect to a subject matter within its legislative powers (here the subject of elections for the House of Representatives and the Senate), cannot provide as part of that law that the provisions made are a complete and comprehensive statement of the applicable law. There was, and could be, no dispute that the federal Parliament has the power to make a law banning foreign donors from making donations above specific monetary thresholds for federal electoral purposes. Equally, then, there can be no dispute that the federal Parliament has power to make a law that banning foreign donors above those thresholds shall operate as the only limitation on donations for federal electoral purposes. Nor can there be any dispute that the federal Parliament has power to provide, as s 302CA does, that all donations which may be applied to federal electoral purposes (except those by foreign donors above specific monetary thresholds) are to be permitted. Regulating how federal elections may be funded – for registered political parties, candidates, groups, political campaigners and third parties – is at the core of the relevant legislative power. It is not insubstantial, tenuous or distant. Commonwealth Electoral Act In 2018, the Commonwealth Electoral Act was amended by the Commonwealth Amending Act. In particular, Pt XX of the Commonwealth Electoral Act, headed "Election funding and financial disclosure", was amended. Following that amendment, Pt XX contains a simplified outline of the Part in the following terms216: "This Part deals with the funding of registered political parties, candidates and groups. It also deals with gifts and other financial matters relating to parties, candidates, groups, political campaigners, third parties and associated entities. Registered political parties, candidates and groups must have agents. Political campaigners and associated entities must nominate financial controllers. Many of the obligations in this Part are imposed on those agents and financial controllers. Registered political parties, candidates and groups may be entitled to election funding. The election funding is payable in relation to any candidate who received more than 4% of the total first preference votes cast in the election. Generally, gifts of at least $1,000 to political entities (who are registered political parties, candidates and Senate groups) and political campaigners must not be made by foreign donors (that is, persons who, broadly, do not have a connection to Australia). Broadly, gifts to political entities, political campaigners or third parties must not be made by foreign donors for the purpose of incurring electoral expenditure or creating or communicating electoral matter. There are obligations to disclose certain gifts made to: candidates and members of groups; and registered political parties, State branches and political campaigners. Certain expenditure incurred by or with the authority of candidates and groups during an election period must also be disclosed. Each financial year, registered political parties, political campaigners, third parties and associated entities are required to disclose details relating to amounts received or paid or incurred by the parties, campaigners or entities during the year." (emphasis added) 216 Commonwealth Electoral Act, s 286A. Part XX addresses these issues by creating a scheme which provides for registration of political campaigners and associated entities and a Transparency Register217; appointment of agents and nomination of financial controllers218; donations220; public disclosure obligations for donations221; disclosure obligations for electoral expenditure222; annual returns by registered political parties and other persons223; and machinery or miscellaneous provisions for the operation of the scheme224. requirements funding219; election relating Section 302CA is in Div 3A of Pt XX. Division 3A is headed "Requirements relating to donations". Section 302A explains that Div 3A "regulates gifts that are made to registered political parties, candidates, groups, political campaigners and third parties". Specifically, it notes that there are prohibitions225 on the giving of certain gifts by foreign donors. The object of Div 3A is "to secure and promote the actual and perceived integrity of the Australian electoral process by reducing the risk of foreign persons and entities exerting (or being perceived to exert) undue or improper influence in the outcomes of elections"226. The stated objective is limited. However, s 302CA, headed "Relationship with State and Territory electoral laws", is broader in its reach. For example, s 302CA(1), headed "Giving, receiving or retaining gifts", is in the following terms: "Despite any State or Territory electoral law, a person or entity may: give a gift to, or for the benefit of, a political entity, a political campaigner or a third party (a gift recipient); or 217 Commonwealth Electoral Act, Pt XX, Div 1A. 218 Commonwealth Electoral Act, Pt XX, Div 2. 219 Commonwealth Electoral Act, Pt XX, Div 3. 220 Commonwealth Electoral Act, Pt XX, Div 3A. 221 Commonwealth Electoral Act, Pt XX, Div 4. 222 Commonwealth Electoral Act, Pt XX, Div 5. 223 Commonwealth Electoral Act, Pt XX, Div 5A. 224 Commonwealth Electoral Act, Pt XX, Div 6. 225 See Commonwealth Electoral Act, ss 302D, 302E, 302F. 226 Commonwealth Electoral Act, s 302C(1). if the person or entity is a gift recipient – receive or retain a gift; or on behalf of a gift recipient, receive or retain a gift; this Division does not prohibit the giving, receiving or retaining of the gift; and the gift, or part of the gift, is required to be, or may be, used for the incurring electoral expenditure, or creating or purposes of communicating accordance with subsection (2)." (second emphasis added) electoral matter, Section 302CA(1) permits gifts to, or for the benefit of, a "gift recipient"227, the receipt or retention of those gifts228, and receipt or retention on behalf of one of the specified gift recipients229. This permission is subject to specific requirements and exceptions. In order for s 302CA(1) to apply, it is necessary that the gifts are not prohibited by Div 3A230, that the gifts are "required to be" or "may be" used for federal electoral purposes231, and that the gifts are not subject to an exception for gifts for State or Territory electoral purposes232. Each of these aspects requires further explanation. The gift recipients regulated by s 302CA Section 302CA(1)(a) seeks to regulate gifts to, or for the benefit of, "a political entity, a political campaigner or a third party", collectively referred to as a "gift recipient". The law is limited to those gift recipients. And, as will be seen, each gift recipient is tied to, and defined by reference to, its participation in federal elections. It is necessary to take each "gift recipient" in turn. 227 Commonwealth Electoral Act, s 302CA(1)(a). 228 Commonwealth Electoral Act, s 302CA(1)(b). 229 Commonwealth Electoral Act, s 302CA(1)(c). 230 Commonwealth Electoral Act, s 302CA(1)(d). 231 Commonwealth Electoral Act, s 302CA(1)(e) and (2). 232 Commonwealth Electoral Act, s 302CA(3). The phrase "political entity"233 is relevantly defined to include a registered political party and a State branch of a registered political party, as well as a candidate in a House of Representatives or Senate election, or a group of candidates for the Senate234. As is apparent, the phrase includes specific participants in federal elections. The first to be addressed are federally registered political parties235. A "[r]egistered political party"236 is defined as "a political party that is registered under Part XI". "Political party"237 is defined as "an organization the object or activity, or one of the objects or activities, of which is the promotion of the election to the Senate or to the House of Representatives of a candidate or candidates endorsed by it" (emphasis added). Section 124 in Pt XI provides for the registration, subject to that Part, of an "eligible political party", which is defined238 as "a political party that (a) either: (i) is a Parliamentary party; or (ii) has at least 500 members; and (b) is established on the basis of a written constitution (however described) that sets out the aims of the party". In the same provision, "[p]arliamentary party means a political party at least one member of which the Commonwealth". "[P]olitical entity"239 also includes a "State branch (within the meaning of Part XX) of a registered political party". "State branch"240 means "in relation to a political party ... a branch or division of the party that is organized on the basis of a particular State or Territory". the Parliament of a member of The second category of participants picked up by the definition of "political entity" is candidates. The term includes241 a "candidate (within the meaning of [Pt XX]) in an election (including a by-election)". A candidate is 233 Commonwealth Electoral Act, s 4(1) definition of "political entity". 234 See Commonwealth Electoral Act, s 287(1) definitions of "election" and "group", and s 287(9). 235 Commonwealth Electoral Act, s 4(1) para (a) of the definition of "political entity". 236 Commonwealth Electoral Act, s 4(1) definition of "[r]egistered political party". 237 Commonwealth Electoral Act, s 4(1) definition of "[p]olitical party". 238 Commonwealth Electoral Act, s 123(1). 239 Commonwealth Electoral Act, s 4(1) para (b) of the definition of "political entity". 240 Commonwealth Electoral Act, s 287(1) definition of "State branch". 241 Commonwealth Electoral Act, s 4(1) para (c) of the definition of "political entity". "taken to begin to be a candidate" on the earlier of their announcement or nomination242 in an "election", defined to mean "an election of a member of the House of Representatives or an election of senators for a State or Territory"243. Then, unsurprisingly, "political entity" includes "a member of a group (within the meaning of [Pt XX])"244 where "group" means "a group of 2 or more candidates nominated for election to the Senate who have their names grouped in the ballot papers in accordance with section 168"245. A group is "taken to begin to be a group in an election on the day the members of the group make a request under section 168 for their names to be grouped in the ballot papers for the election"246. The candidate or group ceases to be a candidate or group at the end of 30 days after the polling day in the election247. Section 302CA(1) then applies to gifts to, or for the benefit of, a "political campaigner", which is defined as "a person or entity that is registered as a political campaigner under section 287L"248. A person or entity (except a "political entity", a member of the House of Representatives or a Senator) must be registered for a specific financial year as a political campaigner, within 90 days after becoming required to be registered249, if the amount of electoral expenditure incurred by or with the authority of the person or entity during that or any one of the previous three financial years is $500,000 or more250 or the amount of electoral expenditure incurred by or with the authority of the person or entity during that financial year is $100,000 or more and during the previous financial year that amount of electoral expenditure was at least two-thirds of the revenue of the person or entity for that year251. 242 Commonwealth Electoral Act, s 287(9)(a). 243 Commonwealth Electoral Act, s 287(1) definition of "election". 244 Commonwealth Electoral Act, s 4(1) para (d) of the definition of "political entity". 245 Commonwealth Electoral Act, s 287(1) definition of "group". 246 Commonwealth Electoral Act, s 287(9)(b). 247 Commonwealth Electoral Act, s 287(9). 248 Commonwealth Electoral Act, s 287(1) definition of "political campaigner". 249 Commonwealth Electoral Act, s 287F(1) and (2). 250 Commonwealth Electoral Act, s 287F(1)(a). 251 Commonwealth Electoral Act, s 287F(1)(b). "Electoral expenditure" is relevantly defined in Pt XX252 as "expenditure incurred for the dominant purpose of creating or communicating electoral matter"253 (emphasis added). "Electoral matter" is relevantly defined254 to mean: ... matter communicated or intended to be communicated for the dominant purpose of influencing the way electors vote in an election (a federal election) of a member of the House of Representatives or of Senators for a State or Territory, including by promoting or opposing: a political entity, to the extent that the matter relates to a federal election; or a member of the House of Representatives or a Senator. For the purposes of subsection (1), each creation, recreation, communication or recommunication of matter is to be treated separately for the purposes of determining whether matter is electoral matter. …" (emphasis added) Finally, s 302CA(1) applies to gifts to or for the benefit of a "third party". A "third party" is defined in Pt XX255 as follows: "a person or entity (except a political entity or a member of the House of Representatives or the Senate) is a third party during a financial year if: the amount of electoral expenditure incurred by or with the authority of the person or entity during the financial year is more than the disclosure threshold[256]; and 252 Commonwealth Electoral Act, s 287AB(1). 253 Subject to certain exceptions which may be put to one side. 254 Commonwealth Electoral Act, s 4AA(1) and (2). 255 Commonwealth Electoral Act, s 287(1) definition of "third party". 256 "[D]isclosure threshold" is defined in s 287(1) as $13,800, which is indexed under s 321A. the person or entity is not required to be, and is not, registered as a political campaigner under the year." (second emphasis added) section 287F for As is readily apparent, the regulation of each gift recipient is tied to, and inextricably linked to, gifts to or for the benefit of that recipient, and each recipient is a participant in federal elections. Purpose for which gifts to be used That s 302CA is tied to, and inextricably linked to, federal elections and the regulation of funding for federal elections is addressed further in ss 302CA(1)(e) and 302CA(2). Section 302CA(1)(e) provides that the section regulates gifts where the gift, or part of the gift, is "required to be" or "may be" used for the purposes of incurring electoral expenditure. That condition is explained by s 302CA(2), which provides that a gift or part of a gift is required to be, or may be, used for the purposes of "incurring electoral expenditure, or creating or communicating electoral matter" if "any terms set by the person or entity providing the gift explicitly require or allow the gift or part to be used for that purpose (whether or not those terms are enforceable)"257 or "the person or entity providing the gift does not set terms relating to the purpose for which the gift or part can be used"258 (emphasis added). That the gifts are required to be or may be used for "electoral expenditure" and, thus, an "electoral matter" means not only that the gifts are tied to federal elections but, more specifically, that the gifts (either expressly or potentially) are to be used for the purpose of matters being communicated, or intended to be communicated, for the dominant purpose of influencing the way electors vote in a federal election. As seen above, s 302CA(1)(e) provides that the permission in s 302CA(1) applies where a gift or part of a gift is required to be, or may be, used for federal electoral purposes. Does this mean that the permission in s 302CA(1) attaches to a gift in its entirety if only part of that gift – potentially even a small part – is required to be, or may be, used for federal electoral purposes? The answer is no. To read the provision in that way would be to produce an irrational result259, 257 Commonwealth Electoral Act, s 302CA(2)(a). 258 Commonwealth Electoral Act, s 302CA(2)(b). 259 See Prentice v Nugan Packing Co Pty Ltd (1950) 81 CLR 558 at 564-565; [1950] HCA 51; Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 305, 320-322; [1981] HCA 26; MacAlister v The Queen (1990) 169 CLR 324 at 330; [1990] HCA 15; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2. contrary to the context and purpose of s 302CA as providing a permission in respect of gifts for federal electoral purposes. Section 302CA does not apply, and is not intended to apply, to gifts or parts of gifts that are not able to be used for such purposes. As the Commonwealth submitted, where only part of a gift is required to be or may be used for federal electoral purposes, the permission would operate "only in relation to [that] part of the gift". Exclusions and use of gifts Before turning to address the use of the gifts, it is necessary to outline three exclusions from the operation of s 302CA(1). Section 302CA(3), headed "Gifts made or retained for State or Territory electoral purposes", identifies three exclusions from the operation of s 302CA(1) in relation to gifts for State or Territory electoral purposes: first, where the terms of the gift "explicitly require the gift or part to be used only for a State or Territory electoral purpose"260; second, where a State or Territory electoral law requires the gift or part of the gift to be kept or identified separately in order to be used only for a State or Territory electoral purpose261; and, third, where the gift recipient keeps or identifies the gift or part separately in order to be used only for a State or Territory electoral purpose262. Section 302CA(3) provides: "Without limiting when subsection (1) does not apply, that subsection does not apply in relation to all or part of a gift if: any terms set by the person or entity providing the gift explicitly require the gift or part to be used only for a State or Territory electoral purpose (whether or not those terms are enforceable); or either: the effect of a State or Territory electoral law is to require the gift or part to be kept or identified separately (or to require the gift or part to be kept or identified separately in order to be entitled to a benefit under that law); or 260 Commonwealth Electoral Act, s 302CA(3)(a). 261 Commonwealth Electoral Act, s 302CA(3)(b)(i). 262 Commonwealth Electoral Act, s 302CA(3)(b)(ii). the gift recipient keeps or identifies the gift or part separately; in order to be used only for a State or Territory electoral purpose. Note: For the purposes of subparagraph (3)(b)(ii), a gift recipient may identify the electoral purpose for which a gift is to be used at any time prior to using that gift. A person who gives, receives or retains a gift that is used for a State or Territory electoral purpose in contravention of a State or Territory electoral law may be liable to a penalty under the State or Territory electoral law. Example: A gift is given without expressing an intended purpose, and ultimately is used for a State or Territory electoral purpose. The giving, receipt, retention and use of that gift must comply with the State or Territory electoral law."263 (emphasis added) Section 287(1) provides264 that a "State or Territory electoral law means a law of a State or Territory that deals with electoral matters (within the ordinary meaning of the expression)" and a "State or Territory electoral purpose means a purpose relating to a State, Territory or local government election (and, to avoid doubt, does not include the purpose of incurring electoral expenditure or creating or communicating electoral matter)". It is in that context that the use of gifts, if not prohibited by Div 3A, is then permitted by s 302CA in the following terms: "(4) Despite any State or Territory electoral law, a gift recipient may use, or authorise the use of, a gift for the purposes of incurring electoral expenditure, or creating or communicating electoral matter, if this Division does not prohibit the use of the gift. (5) Without limiting when (4) does not apply, subsection that subsection does not apply in relation to all or part of a gift if the effect of the State or Territory electoral law is to require the gift 263 If an Act includes an example of the operation of a provision, the example is not exhaustive and may extend the operation of the provision: Acts Interpretation Act 1901 (Cth), s 15AD. A note is part of an Act: see Acts Interpretation Act 1901 (Cth), s 13(1). 264 Commonwealth Electoral Act, s 287(1) definitions of "State or Territory electoral law" and "State or Territory electoral purpose". or part to be kept or identified separately (or to require the gift or part to be kept or identified separately in order to be entitled to a benefit under that law) in order to be used only for a State or Territory electoral purpose." (emphasis added) The concept of gifts "kept or identified separately" is explained in s 302CA(6) as follows: "Without limiting paragraph (3)(b) or subsection (5), an amount that is all or part of a gift of money is kept or identified separately in order to be used only for a State or Territory electoral purpose if: the amount is kept in an account where: the only amounts deposited into the account are amounts to be used only for a State or Territory electoral purpose; and the only amounts paid out of the account are amounts incurred for a State or Territory electoral purpose; or the amount is designated as an amount that must be used only for a State or Territory electoral purpose." These provisions identify a key aspect of the way the scheme operates. They recognise that it is not a bare or mere possibility that a gift may be used for federal electoral purposes that attracts the operation of s 302CA. To put it in that way overlooks both the character of the recipient as a participant in federal elections, as discussed above, and the fact that exclusions apply if the gift is allocated for State or Territory electoral purposes. The rule permitting a gift recipient, a participant in federal elections, to be funded for the defined "electoral purpose" applies when a gift is earmarked for that purpose by the donor at the time the gift is given; when it is earmarked by the recipient, at the time that it is received, that it will be used for such a purpose; or when it is subsequently earmarked by the recipient that it will be used for such a purpose. If a gift recipient, a participant in federal elections, receives a gift that is not earmarked, then, consistent with a scheme that encourages funding of participants in a federal election in the manner described, the gift is to be treated as if it is to be used for a federal purpose unless and until the gift is earmarked to be used in a way which attracts one of the exclusions from the rule. Thus, practically, the law imposes an obligation on those entities and persons who receive gifts that may be used for federal electoral purposes, as well as those who make such gifts, to identify the use for which the gift is to be allocated. This earmarking is a condition of the positive rule that those participants are entitled to receive funding for federal elections. Section 302CA(1) takes effect from the time of giving or receiving the gift. As the Commonwealth submitted, the permission granted by s 302CA(1) is contingent upon s 302CA(3)(b)(ii) – which addresses gifts kept or identified separately by the recipient in order to be used only for a State or Territory electoral purpose – not applying (or, put in different terms, s 302CA(3)(b)(ii) not applying is a condition subsequent to the permission). That s 302CA(3)(b)(ii) operates in this way is made clear from the Note and Example to the provision, taking into account that an example may extend the operation of a provision265. Practically, any issues with s 302CA(3)(b)(ii) operating in those terms can be mitigated. In relation to a gift recipient, they are in control of the way they allocate a gift. If they choose to subsequently keep or identify a gift for a State purpose, notwithstanding the fact that the State law says that they cannot receive such a gift, then the recipient bears and should bear the consequences of their own conduct. However, as the Commonwealth submitted, all a donor needs to ensure is that the recipient of a gift is directed to use the gift for a federal purpose, namely for electoral expenditure or for creating or communicating an electoral matter. If that direction is made by a donor, then s 302CA(2)(a) applies and the gift is subject to the federal regime. Donors are in a different position. If, however, a donor gives a gift to a federal participant and does not allocate the gift to federal purposes, and the gift is subsequently used by the recipient for a State purpose, thereby removing the permission in s 302CA(1) and allowing a State law to render its receipt unlawful, then whether or not the donor's conduct is criminal will depend upon the offence provisions of the relevant State law. The gift, from the time that it was given, would be regulated by any relevant State Act, not the Commonwealth scheme. However, as will be seen, in the context of the Queensland Electoral Act, a donor would not commit an offence against s 307A of the Electoral Act because an essential element of the offence would be absent, namely that the donor knew or ought reasonably to have known of the facts that resulted in the act or omission (in this case, the making of the donation under s 275) being unlawful, because when the donation was made, it was not unlawful (as it was subject to the permission in s 302CA(1) of the Commonwealth Electoral Act). Describing one or more of these circumstances as a "retrospective" application of either the federal or the State law is apt to mislead. The notion of "retrospectivity" is too broad, and imprecise, to make it a useful point from which to commence the argument266. The questions will be determined by 265 Acts Interpretation Act 1901 (Cth), s 15AD. 266 See, eg, Attorney-General (Q) v Australian Industrial Relations Commission (2002) 213 CLR 485 at 492 [6]; [2002] HCA 42. having regard to the way in which the relevant Act applies to the particular facts and circumstances in issue. Foreign donors Finally, it is necessary to refer to s 302CA(1)(d), which identifies one category of donor that is prohibited in Div 3A, namely, foreign donors who make political donations above specific monetary thresholds. That prohibition is effected by ss 302D, 302E and 302F. It is sufficient to refer, by way of example, to s 302D, which prohibits donations made to or for the benefit of an agent of a political entity or a financial controller of a political campaigner during a financial year by a foreign donor in an amount of at least $1,000 (if the gift is not returned to the donor or an equal amount transferred to the donor, or an equal to s 302CA(1)(d), amount donations prohibited by s 302D, 302E or 302F would not be subject to the permission in s 302CA(1). the Commonwealth267). transferred Due Section 302CA is within power The Commonwealth submitted that s 302CA is supported by s 51(xxxvi), read with ss 10 and 31, of the Constitution. It is a law with respect to matters in respect of which the Constitution makes provision until the Parliament otherwise provides: laws relating to elections of Senators and members of the House of Representatives268. That contention should be accepted. A law of the federal Parliament is made "with respect to" the subject matter of a power "when it relates to or affects that subject matter and the connection is not 'so insubstantial, tenuous or distant' that it cannot properly be described as a law with respect to that subject matter"269. The constitutional text is to be construed "with all the generality which the words used admit"270. 267 See Commonwealth Electoral Act, s 302B definition of "acceptable action". 268 Constitution, ss 10 and 31. 269 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 208 [66]; [2004] HCA 41, citing Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 369; [1995] HCA 16, in turn citing Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 79; [1947] HCA 26. 270 New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 103 [142]; [2006] HCA 52, citing R v Public Vehicles Licensing Appeal Tribunal (Tas); Ex parte Australian National Airways Pty Ltd (1964) 113 CLR 207 at [1964] HCA 15 and Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 492 [16]; [2000] HCA 14. The character of a law is determined by reference to "the rights, powers, liabilities, duties and privileges which it creates"; the practical as well as the legal operation of the law must be examined271. And, consistent with established principle, it is necessary to consider the law in context, as part of any wider scheme of regulation, rather than in isolation, where it might incorrectly be viewed as some bare attempt to limit or exclude State legislative power272. Here, as outlined, the wider scheme in Pt XX provides for regulation of donations in federal elections through, in particular, a disclosure regime and prohibitions of foreign donations above specific monetary thresholds273. Put in different terms, in assessing the practical as well as the legal operation of the law, it is relevant to distinguish between a law which lays down a positive rule and a law seeking to limit State power274. On its proper construction, s 302CA, as part of the scheme in Pt XX, lays down a positive rule. That is consistent with the understanding the Commonwealth chooses to enact a scheme involving a more detailed form of regulation than State law provides, where the Commonwealth creates a scheme involving less detailed regulation than State law provides, or where the Commonwealth has provided a more detailed scheme than State law in some respects and a less detailed scheme in other respects275. the Constitution may operate where that s 109 of Describing a power as "exclusive" may or may not be apt to emphasise that a State may have no power to regulate federal electoral matters. But in this case that is not a necessary point at which to begin the analysis. It is sufficient to proceed without deciding the extent to which the power may properly be described as "exclusive". And doing so avoids any unintended endorsement or revival of ideas rejected in the Engineers' Case276. 271 Work Choices (2006) 229 CLR 1 at 103 [142]. See also Re Dingjan (1995) 183 CLR 323 at 369; Grain Pool (2000) 202 CLR 479 at 492 [16]. 272 O'Reilly (1962) 107 CLR 46 at 70-71; Botany Municipal Council v Federal Airports Corporation (1992) 175 CLR 453 at 463; [1992] HCA 52; Work Choices (2006) 229 CLR 1 at 166-167 [370]. 273 See Commonwealth Electoral Act, Pt XX, Divs 3A, 4 and 5. 274 Lamshed v Lake (1958) 99 CLR 132 at 147; [1958] HCA 14, quoted in Work Choices (2006) 229 CLR 1 at 166 [370]. 275 Work Choices (2006) 229 CLR 1 at 166-167 [370]. 276 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129; [1920] HCA 54. So what is the practical and legal operation of s 302CA? As seen above, it is a provision which lays down a positive rule in the context of a scheme. It provides that "[d]espite any State or Territory electoral law", a person may give a gift "to, or for the benefit of, a political entity, a political campaigner or a third party", and those recipients can "receive or retain a gift", if two conditions are met: Div 3A does not prohibit it and the gift or part of the gift is required to be or may be used for the purposes of "incurring electoral expenditure, or creating or communicating electoral matter". Specific aspects of the law's operation establish that the connection between the law and the head of power is sufficient. Those aspects are interrelated and interconnected. The first two aspects – the character of the recipients it regulates and the purpose of the gifts – are positive links with the head of power. The second two aspects – that s 302CA excludes only State or Territory electoral laws and then, having made that exclusion, expressly leaves room for State or Territory electoral laws to operate in relation to gifts for State or Territory electoral purposes – are limitations on the scope of the law that support the law being within power. It is necessary to address each in turn. The first aspect is the character of the recipients that the law regulates. The law is directed to participants in federal elections – federally registered political parties, federal candidates or groups, federally registered political campaigners, and federal third parties – and only participants in federal elections. A law that regulates such entities and persons cannot be described as having a slight connection with federal power. It is also relevant to observe that the law affects a limited and specific class of participants, those that participate in federal elections, and not a wide section of the Australian community. That the class is limited in this way is an important consideration in finding the law within power. The effect of the law on each "political entity" is not uniform. For example, the effect of the law on a "candidate" is direct and time-limited. It applies for only so long as that individual is a "candidate" in a federal election, until 30 days after polling day277. Similar time limitations apply in relation to its application to groups of Senate candidates278. It may, indeed, be particularly hard to doubt that the law is within power to the extent that it applies to the receipt of funds by candidates or groups of Senate candidates in a federal election. Victoria and Tasmania, although contending for the invalidity of s 302CA, did not explain why the Commonwealth lacked power to regulate gifts to these persons or groups. 277 See Commonwealth Electoral Act, s 287(9)(a). 278 See Commonwealth Electoral Act, s 287(9)(b). Political parties are often organised as multi-purpose entities in the sense that they are organised, run and act in connection with both State and federal elections. They may not keep State and federal electoral activities segregated in watertight compartments. Some political parties may be constituted as unitary bodies participating in State, Territory and federal electoral activities. Some may be organised as a federation of separate State bodies. They may be, and often are, unincorporated associations. Whether or not political parties that are registered at the federal level, and accordingly are participants in federal elections, take the form of unincorporated associations does not alter their relevance to or participation in the federal electoral process. It is not as if the Commonwealth seeks to support s 302CA on the basis of the corporations power in s 51(xx) of the Constitution, and as a result must limit itself to incorporated entities. The relevant power is over federal elections. It is not the form of a political party as an entity that matters, but its participation in federal elections. Thus, when directed to political parties, the law does not impose particular operational structures on those organisations. Whatever the manner in which the party is constituted, the Commonwealth electoral law seeks to regulate how those parties federally registered as a participant in federal elections will be funded. It is therefore unsurprising that the legislation should recognise and deal with different organisational structures including, in particular, political parties constituted in one State but which seek to play a role in federal elections. Of course, the character of those to whom the law applies does not necessarily provide, in itself, a basis for any kind of regulation of those persons, without limitation. Put in different terms, it is relevant here that the law does not seek to regulate everything that is done by a federally registered political party. It seeks to address the receipt of funds, something so central to the workings of the electoral system that the Act makes provision for some element of public funding of elections279. The second aspect is the purpose for which gifts may be used. In addressing that aspect, it is important to recognise that s 302CA(1) applies where gifts are "required to be, or may be, used for the purposes of incurring electoral expenditure, or creating or communicating electoral matter"280. That the gifts are required to be or may be used for "electoral expenditure"281 and, thus, "electoral matter"282 means that the gifts not only are tied to federal elections but, 279 See Commonwealth Electoral Act, Pt XX, Div 3. 280 Commonwealth Electoral Act, s 302CA(1)(e). 281 Commonwealth Electoral Act, s 287AB(1). 282 Commonwealth Electoral Act, s 4AA. importantly, are limited to gifts that are required to be or may be used for the purpose of matters being communicated, or intended to be communicated, for the dominant purpose of influencing the way electors vote in a federal election. In this context, other aspects of the operation of s 302CA should be noted. Gifts allocated to non-electoral purposes are not regulated. For example, gifts allocated to the administrative expenses of a party, or for issue-related advertising between elections, would not be gifts that "may be" used for federal electoral purposes. That s 302CA provides that gifts will fall within the operation of the phrase "may be" used for federal electoral purposes when the gifts are made on terms that explicitly require or allow the gift or part to be used for that purpose283, or if they are provided on no terms284, does not alter or detract from that conclusion. It is not the bare or mere possibility of the use of gifts for federal electoral purposes that brings the law within power. The law does not apply to each and every gift that may be used for federal electoral purposes. There are two interconnected facts that must exist for s 302CA(1) to apply: the potential use of the gift for the dominant purpose of influencing the way electors vote in a federal election, coupled with the identity of the recipient as one of a limited set of participants in federal elections to which Pt XX and s 302CA(1) are directed. The two are inextricably interconnected. Put in different terms, those two essential aspects of s 302CA cannot be ignored. Without them, the Part and the section do not and cannot operate. The third and fourth aspects are limitations on the scope of s 302CA. The third aspect is that it confines its exclusion of State or Territory law to State or Territory electoral laws: s 302CA(1) applies "[d]espite any State or Territory electoral law", not despite any State or Territory law. Section 287 defines "State or Territory electoral law" as "a law of a State or Territory that deals with electoral matters the expression)". Thus, s 302CA(1) does not operate to exclude, and was never intended to exclude, State or Territory laws with respect to defamation, bribery or any other criminal conduct. Part XX, and s 302CA in particular, is not concerned with such matters. It is concerned only with aspects of funding of federal elections. the ordinary meaning of (within The fourth aspect is the room that s 302CA leaves open for State or Territory electoral laws to operate through s 302CA(3), which has been set out earlier285. As the Commonwealth submitted, the law operates as a kind of funnel. 283 Commonwealth Electoral Act, s 302CA(2)(a). 284 Commonwealth Electoral Act, s 302CA(2)(b). 285 See [183]-[194] above. It is a provision that starts wide in seeking to permit, and thus generate, funding for the entities and persons who participate in federal elections in order to influence the way electors vote in a federal election. The provision then narrows. One significant narrowing of the funnel is the prohibition on foreign donors above specific monetary thresholds. Another narrowing is the exclusion of any gift that has been allocated for a State or Territory purpose. As just explained, that last narrowing is effected by three distinct exceptions. First, s 302CA(1) "does not apply in relation to all or part of a gift if ... any terms set by the person or entity providing the gift explicitly require the gift or part to be used only for a State or Territory electoral purpose (whether or not those terms are enforceable)"286. Second, s 302CA(1) "does not apply in relation to all or part of a gift if ... the effect of a State or Territory electoral law is to require the gift or part to be kept or identified separately (or to require the gift or part to be kept or identified separately in order to be entitled to a benefit under that law) … in order to be used only for a State or Territory electoral purpose"287. Third, s 302CA(1) "does not apply in relation to all or part of a gift if ... the gift recipient keeps or identifies the gift or part separately … in order to be used only for a State or Territory electoral purpose"288. The substantial carve-outs in s 302CA(3), together with the fact that only State and Territory electoral laws are excluded under s 302CA(1), significantly undermine any contention that s 302CA intrudes into some "heartland" of State legislative power. The law is, if anything, carefully crafted so as to avoid interfering with State elections and State laws generally. It is incorrect, in any event, to treat a federal law's impact on some predefined concept of State power as a relevant consideration is within Commonwealth power289. in determining whether law the Thus, the Commonwealth has legislated a scheme governing political donations for federal elections that includes disclosure obligations for donations and expenditure and a prohibition on foreign donors making donations above specific monetary thresholds. Under the Commonwealth regime, foreign donors making donations above those thresholds are the only forbidden class of donor. No one challenged the power of the Commonwealth to prohibit foreign donors in that way. No one challenged that controlling donations relating to federal elections was within the relevant head of power. But the analysis does not stop 286 Commonwealth Electoral Act, s 302CA(3)(a). 287 Commonwealth Electoral Act, s 302CA(3)(b)(i). 288 Commonwealth Electoral Act, s 302CA(3)(b)(ii). 289 See Engineers' Case (1920) 28 CLR 129. there. The power of the Commonwealth to control donations relating to federal elections is more than simply prohibiting classes of donors. The law is marking out who may donate. It is marking out what money "may be ... used" for federal electoral purposes, not "must be used". The operation of the law cannot be made to depend upon tracing the activities of political parties, party organisations or participants in the federal electoral process. Participants in federal elections take many forms and the policy choice made by the Commonwealth, and reflected in the relevant provisions, is an electoral system to which all non-foreign individuals and corporations can donate without restriction. A law that regulates the method of voting in a federal election is a law with respect to federal elections290. A law that protects the electoral or voting system is a law with respect to federal elections291. A law that assists in the maintenance of the voting system and protects a particular method of voting is a law with respect to federal elections292. A law which proscribes conduct that interferes with the electoral system that Parliament has chosen is a law with respect to federal elections293. It is then unsurprising that here, a law which forms part of a scheme that, among other things, provides for registration of political campaigners and associated entities connected with federal elections294, public election funding for federal elections295, requirements relating to for donations297 and electoral donations296, and disclosure obligations 290 Mulholland (2004) 220 CLR 181 at 208 [66], citing McGinty v Western Australia (1996) 186 CLR 140 at 244; [1996] HCA 48 and Langer (1996) 186 CLR 302 at 291 Mulholland (2004) 220 CLR 181 at 208 [66], citing Langer (1996) 186 CLR 302 at 292 Mulholland (2004) 220 CLR 181 at 208 [66], citing Langer (1996) 186 CLR 302 at 293 Mulholland (2004) 220 CLR 181 at 208 [66], citing Langer (1996) 186 CLR 302 at 294 Commonwealth Electoral Act, Pt XX, Div 1A. 295 Commonwealth Electoral Act, Pt XX, Div 3. 296 Commonwealth Electoral Act, Pt XX, Div 3A. 297 Commonwealth Electoral Act, Pt XX, Div 4. expenditure298 in relation to federal elections is a law with respect to federal elections. In that context, the extension of s 302CA to gifts that "may be ... used" for federal electoral purposes in s 302CA(1)(e) is not an "insubstantial, tenuous or distant connection"299. It reflects the fact that gifts that are given to an entity engaged in the federal electoral process should be able to be used for federal electoral purposes. It is not the bare or mere possibility of use for federal electoral purposes, but, as has been seen, that possibility together with the character of the recipient as a participant in the federal electoral process, qualified by the exclusion of gifts for State or Territory electoral purposes, that brings the law within power. And, unsurprisingly, no one challenged the power of the Commonwealth to regulate participants in the federal electoral process300. Two further related and interconnected general propositions must be stated. First, as Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ stated in Work Choices301, "a law with respect to a subject matter within Commonwealth power does not cease to be valid because it affects a subject outside power or can be characterised as a law with respect to a subject matter outside power". That is not a new proposition. As Stephen J stated in Actors and Announcers Equity Association v Fontana Films Pty Ltd302, "[i]t will be enough if the law fairly answers the description of a law 'with respect to' one given subject matter appearing in s 51, regardless of whether it may equally be described as a law with respect to other subject matters. This will be so whether or not those other subject matters appear in the enumeration of heads of legislative power in s 51." 298 Commonwealth Electoral Act, Pt XX, Div 5. 299 Work Choices (2006) 229 CLR 1 at 113 [174], citing Melbourne Corporation (1947) 74 CLR 31 at 79. 300 See Langer (1996) 186 CLR 302 at 317. 301 (2006) 229 CLR 1 at 127 [219], quoting Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 285; [1990] HCA 29. 302 (1982) 150 CLR 169 at 194; [1982] HCA 23. Second, as was stated in Actors Equity303: "Once it is recognized that a law may possess several distinct characters, it follows that the fact that only some elements in the description of a law fall within one or more of the grants of power in s 51 or elsewhere in the Constitution will be in no way fatal to its validity. So long as the remaining elements, which do not fall within any such grant of power, are not of such significance that the law cannot fairly be described as one with respect to one or more of such grants of power then, however else it may also be described, the law will be valid. If a law enacted by the federal legislature can be fairly described both as a law with respect to a grant of power to it and as a law with respect to a matter or matters left to the States, that will suffice to support its validity as a law of the Commonwealth." Accordingly, so long as s 302CA fairly answers the description of a law with respect to federal elections (and it does), it does not matter that it may have other possible characterisations. In particular, it does not matter that the law may affect the legislative powers of the States304. That federal law can and does affect the exercise of legislative power of the States is a central constitutional tenet which is reflected in s 109 of the Constitution305. When a law is at the "centre or heart of the subject matter of the power", generally speaking the purpose of the law is not relevant306. As this Court said in Plaintiff S156/2013 v Minister for Immigration and Border Protection, "once a federal law has an immediate operation within a field assigned to the Commonwealth as a subject of legislative power, that is enough ... No further inquiry is necessary"307. However, when a law is not at the centre or heart of the power but you "are considering what is incidental to a power not only must you take into account the nature and subject of the power but you must pay regard to 303 (1982) 150 CLR 169 at 192, quoted in Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 625 [27]; [2004] HCA 19. 304 See also Engineers' Case (1920) 28 CLR 129. 305 See Rizeq v Western Australia (2017) 262 CLR 1 at 21 [47]; [2017] HCA 23. 306 See Stellios, Zines's The High Court and The Constitution, 6th ed (2015) at 42. 307 (2014) 254 CLR 28 at 43 [25]; [2014] HCA 22. the context in which you find the power"; that is, "you must look at the purpose disclosed by the law said to be incidental to the main power"308. Here, s 302CA is supported by s 51(xxxvi), read with ss 10 and 31, of the Constitution. But if that were not the case, the law would be supported under the implied incidental power or the express incidental power in s 51(xxxix)309. It is in that context that it is necessary to address the Revised Explanatory Memorandum to the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018, which stated that the goal of s 302CA is to partially invalidate State and Territory electoral laws in the following terms310: "New section 302CA clarifies the interaction between similar State and Territory and Commonwealth electoral funding schemes. Broadly speaking, these State and Territory electoral laws will be invalidated to the extent that they would detract from the right to give, accept or use a donation under the Electoral Act for Commonwealth electoral purposes." That approach is neither surprising nor new. There is nothing problematic about a law that excludes State laws in the context of the policy choice of the manner in which there will be federal regulation of the subject matter. The law outlined in Work Choices is just one example. In Work Choices, s 16(1) of the Workplace Relations Act 1996 (Cth), headed "Exclusion of State and Territory laws", provided that "[t]his Act is intended to apply to the exclusion of all the following laws of a State or Territory so far as they would otherwise apply in relation to an employee or employer", listing a series of laws including "a State The validity of s 16 was upheld312. or Territory The Commonwealth submitted in that case that s 109 would operate "even though the Commonwealth had not made its own detailed provisions about every matter within that field which State law dealt with, and that it sufficed for the industrial law"311. 308 Victoria v The Commonwealth ("the Second Uniform Tax Case") (1957) 99 CLR 575 at 614; [1957] HCA 54. See also Cunliffe v The Commonwealth (1994) 182 CLR 272 at 318-319; [1994] HCA 44; Leask v The Commonwealth (1996) 187 CLR 579 at 602-603; [1996] HCA 29. 309 See Smith (1912) 15 CLR 355 at 361. 310 Australia, House of Representatives, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018, Revised Explanatory Memorandum at 311 (2006) 229 CLR 1 at 159 [346]. 312 Work Choices (2006) 229 CLR 1 at 169 [377]. Commonwealth to have some provisions dealing with aspects of the field, leaving others unregulated"313. Under the heading "No bare attempt to limit or exclude State legislative power", Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ accepted the Commonwealth's submissions314. There are other examples. Wenn v Attorney-General (Vict)315 concerned Commonwealth and Victorian laws in relation to preference for ex-servicemen in employment. One difference between the Commonwealth and Victorian laws was that the Commonwealth Act required an employer to give preference to ex-servicemen in new engagements or appointments, but not in promotion, as the Victorian Act provided316. Section 24(1) of the Commonwealth Act provided that the provisions of the relevant Division would "apply to the exclusion" of State or Territory laws317. Section 24 was found to be valid318. The exclusion of State law was not any less effective because the Commonwealth Act did not cover all the areas addressed by the State Act; rather, as Dixon J wrote, there were "areas of liberty designedly left"319. In Australian Coastal Shipping Commission v O'Reilly320, the impugned law granted the Commission, a Commonwealth corporation, an exemption from State taxes. This was found to be within power321. As Dixon CJ said, "[t]he argument that under a legislative power of the Commonwealth the operation of State laws cannot be directly and expressly excluded has been used without effect in a succession of cases beginning with The Commonwealth v Queensland"322. And in The Commonwealth v Queensland323, a federal law was 313 Work Choices (2006) 229 CLR 1 at 166 [369]. 314 Work Choices (2006) 229 CLR 1 at 166 [370]. 315 (1948) 77 CLR 84; [1948] HCA 13. 316 Wenn (1948) 77 CLR 84 at 102. 317 Wenn (1948) 77 CLR 84 at 107. 318 Wenn (1948) 77 CLR 84 at 111-112, 114, 120, 122. 319 Wenn (1948) 77 CLR 84 at 120. 320 (1962) 107 CLR 46. 321 O'Reilly (1962) 107 CLR 46 at 56, 58-59, 61, 70-71. 322 O'Reilly (1962) 107 CLR 46 at 56 (footnote omitted). 323 (1920) 29 CLR 1 at 8, 11, 21-22, 26, 28; [1920] HCA 79. upheld which provided that "[t]he interest derived from stock or Treasury bonds shall not be liable to income tax under any law of the Commonwealth or a State" unless the prospectus declared otherwise. In Western Australia v The Commonwealth (Native Title Act Case)324, s 11(1) of the Native Title Act 1993 (Cth), which provided that "[n]ative title is not able to be extinguished contrary to this Act" and thus, in effect, granted an immunity from extinguishment by State laws, was upheld as valid under s 51(xxvi) of the Constitution. In Botany Municipal Council v Federal Airports Corporation325, a federal regulation authorising licensed contractors to carry out works at Sydney Airport in spite of a New South Wales law "that ... relate[d] to ... environmental assessment" was upheld as valid. The Court stated that "[t]here can be no objection to a Commonwealth law on a subject which falls within a head of Commonwealth legislative power providing that a person is authorized to undertake an activity despite a State law prohibiting, restricting, qualifying or regulating that activity. Indeed, unless the law expresses itself directly in that way, there is the possibility that it may not be understood as manifesting an intention to occupy the relevant field to the exclusion of State law"326. In Bayside City Council v Telstra Corporation Ltd327, a Commonwealth law providing that a law of a State or Territory had no effect to the extent to which the law discriminated, or would have the effect (whether direct or indirect) of discriminating, against a particular carrier, against a particular class of carriers, or against carriers generally was upheld under s 51(v) of the Constitution. As McHugh J stated, "[t]his Court has held on many occasions that, where the Commonwealth has power to regulate an area, it has power to protect entities which operate in that area from the effect of State laws"328. 324 (1995) 183 CLR 373 at 468-469; [1995] HCA 47. 325 (1992) 175 CLR 453 at 459, 464-465. 326 Botany Municipal Council (1992) 175 CLR 453 at 465. 327 (2004) 216 CLR 595 at 619-620 [13], 624 [26], 647 [101]. 328 Bayside City Council (2004) 216 CLR 595 at 644 [91]. Moreover, as a matter of fundamental principle, it does not matter whether the law "regulates" or confers a permission. As Evatt J said in Huddart Parker Ltd v The Commonwealth329: "Given the appropriate subject matter, the Commonwealth Parliament may prohibit as well as it may restrict; it may remove restrictions, alter restrictions or add restrictions; it may encourage or discourage; it may facilitate or obstruct. The phraseology is political, and question-begging terms necessarily abound." The issue is the sufficiency of connection, not the nature of the regulation. Here, there is sufficiency of connection. The policy choice made by the Commonwealth is an electoral system to which all non-foreign individuals and corporations can donate without restriction, subject to disclosure requirements. And so long as there is a sufficient connection with the head of power, the policy choice that the Commonwealth makes does not affect the question of validity330. As the Commonwealth submitted, to find s 302CA invalid entails "startling" consequences. In particular, were the Commonwealth unable to legislate to permit donations to a federally registered political party, it is hard to see how it could ban such donations or require disclosure of them. Melbourne Corporation considerations The contention that s 302CA is invalid by reference to fundamental structural The Commonwealth331 should be rejected. The heart of the contention is no more than a restatement of the argument that the law is directed only to limiting the exercise of State legislative power. For the reasons already given, that contention fails. in Melbourne Corporation identified There are other difficulties with the argument. Section 302CA applies generally to the giving, receiving or retaining of gifts in the context of political donations; it does not single out the States. At most it is noted that it applies "[d]espite" State or Territory laws, but that is because it applies generally despite those laws. Moreover, it is permissive rather than creating a burden. The only 329 (1931) 44 CLR 492 at 526; [1931] HCA 1, quoted in Work Choices (2006) 229 CLR 1 at 127 [218]. 330 See Leask (1996) 187 CLR 579 at 602; Grain Pool (2000) 202 CLR 479 at 331 (1947) 74 CLR 31. See also Austin v The Commonwealth (2003) 215 CLR 185; [2003] HCA 3; Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272; [2009] HCA 33; Fortescue Metals (2013) 250 CLR 548. "burden" is to potentially create s 109 inconsistency with State laws. But to find that s 109 inconsistency amounts to an effect on the States' capacity to exercise functions or powers would be to "subvert not only the position established by the decision in the Engineers' Case but also s 109 of the Constitution"332. There is another and no less fundamental point to be made in answer to the Melbourne Corporation argument. The Commonwealth Electoral Act, and s 302CA in particular, makes provision for how federal elections will be conducted: all except foreign donors may contribute without restriction. It does not make any provision for how State elections are to be conducted. Money earmarked for use in State elections is subject only to State law. The State determines for itself how elections for its Parliament will be conducted and funded. The fundamental constitutional assumption identified in Melbourne Corporation − that the States continue to exist as separate bodies politic having their own institutional arrangements − is neither directly nor indirectly affected by the Commonwealth Electoral Act. In short, s 302CA does not deny to the States the capacity to regulate their own elections. Melbourne Corporation is not engaged. Section 302CA gives effect to a policy choice by the federal Parliament that all except foreign donors making donations above the specific monetary thresholds may donate for federal electoral purposes. As will be seen, the prohibition created by State law is invalid insofar as it applies to donations which are earmarked for or could be applied to federal electoral purposes. The decision of University of Wollongong v Metwally333 concerned an amendment to the Racial Discrimination Act 1975 (Cth) that provided that the Act "is not intended, and shall be deemed never to have been intended, to exclude or limit the operation of a law of a State or Territory that furthers the objects of the [International] Convention [on the Elimination of All Forms of Racial Discrimination] and is capable of operating concurrently with this Act". In a previous decision of the Anti-Discrimination Act 1977 (NSW) had been found to be invalid due to s 109 inconsistency with the Anti-Discrimination Act again became operative when the federal Act was amended335. However, there was an issue about whether the amendment this Court334, certain provisions of There was no question the federal Act. that 332 Fortescue Metals (2013) 250 CLR 548 at 609 [131]. 333 (1984) 158 CLR 447 at 453; [1984] HCA 74. 334 Viskauskas v Niland (1983) 153 CLR 280; [1983] HCA 15. 335 Metwally (1984) 158 CLR 447 at 456. operated to remove the inconsistency retrospectively. By majority, the Court held that the amendment could not have such retrospective operation336. Here, Queensland contended that the principle in Metwally applies to render s 302CA(3)(b)(ii) invalid, and, by extension, the entirety of s 302CA. That was said to be because s 302CA(3)(b)(ii) may apply to remove the permission in s 302CA(1) on the basis of a later action, namely the recipient keeping or identifying a gift separately for State or Territory electoral purposes. However, in this case it is not that s 302CA(3)(b)(ii) is operating retrospectively; rather, it is that the later action determines the application of the law. As discussed above, it is that the permission in s 302CA(1) is contingent upon or subject to a condition subsequent of s 302CA(3)(b)(ii) not applying. Thus, no Metwally issue arises because s 302CA(3)(b)(ii) is not a law that seeks to remove s 109 inconsistency retrospectively in the relevant sense. Moreover, even if s 302CA(3)(b)(ii) did retrospectively remove s 109 inconsistency (and it does not), the result would be the same as in Metwally: to remove any retrospective operation. It would not render s 302CA(3)(b)(ii) invalid, let alone the entirety of s 302CA. Conclusion For these reasons, I would have answered questions (d)-(f) stated for the Full Court "No". Queensland Acts As seen earlier, Pt 3 of the Queensland Amending Act amended the Electoral Act, which relates to elections at the Queensland State government level, to introduce a prohibition on certain political donations. Part 5 of the Queensland Amending Act amended the Local Government Electoral Act, which relates to elections at the Queensland local government level. The provisions introduced by Pt 5 are, for the most part, the same as those introduced by Pt 3. Electoral Act The Electoral Act makes provision for State elections in Queensland. For example, Pt 2 creates the Electoral Commission of Queensland, Pt 3 addresses electoral districts and redistributions, Pt 4 relates to electoral rolls and enrolment, Pt 6 covers registration of political parties and Pt 7 addresses topics including the calling of elections, nomination of candidates, and who may vote. The Electoral Act does not have a relevant purposes provision. 336 Metwally (1984) 158 CLR 447 at 457, 469, 475, 479. Part 11 is headed "Election funding and financial disclosure". It makes provision for appointing and registering agents337, election funding338, disclosure of gifts339 and expenditure340, returns by registered political parties and associated entities341, and authorised officers342. Part 3 of the Queensland Amending Act inserted various provisions into the Electoral Act. One of those provisions was s 275, headed "Political donations by prohibited donors", which was inserted into Subdiv 4 of Div 8 of Pt 11, headed "Political donations from property developers"343. Section 275, one of the key provisions, makes it unlawful for a prohibited donor to make a political donation. It is in the following terms: It is unlawful for a prohibited donor to make a political donation. It is unlawful for a person to make a political donation on behalf of a prohibited donor. It is unlawful for a person to accept a political donation that was made (wholly or in part) by or on behalf of a prohibited donor. It is unlawful for a prohibited donor to solicit a person to make a political donation. It is unlawful for a person to solicit, on behalf of a prohibited donor, a political donation." to make (emphasis added) another person For the purposes of Subdiv 4, s 274(1) provides that each of the following is a "political donation": 337 Electoral Act, Pt 11, Div 2. 338 Electoral Act, Pt 11, Div 4. 339 Electoral Act, Pt 11, Div 7. 340 Electoral Act, Pt 11, Div 10. 341 Electoral Act, Pt 11, Div 11. 342 Electoral Act, Pt 11, Divs 14-19. 343 Queensland Amending Act, s 13. a gift made to or for the benefit of – a political party; or an elected member; or (iii) a candidate in an election; a gift made to or for the benefit of another entity – to enable the entity (directly or indirectly) to make a gift mentioned in paragraph (a) or to incur electoral expenditure; to reimburse the entity (directly or indirectly) for making a gift mentioned in paragraph (a) or incurring electoral expenditure; a loan from an entity other than a financial institution that, if the loan were a gift, would be a gift mentioned in paragraph (a) or (b)." Relevantly, "political party" is defined344 as "an organisation whose object, or 1 of whose objects, is the promotion of the election to the Legislative Assembly of a candidate or candidates endorsed by it or by a body or organisation of which it forms a part" (emphasis added). As seen earlier, that would include an entity or organisation that has multiple objects – for example, objects in relation to both State elections and federal elections. Certain gifts, made in a private capacity, are excluded from the definition of "political donation" in s 274 unless the gift is used for an "electoral purpose". In this respect, the section provides as follows: If a gift is made by a person in a private capacity to an individual (the recipient) for the recipient's personal use and the recipient does not intend to use the gift for an electoral purpose – the gift is not a political donation when it is made; but if any part of the gift is used for an electoral purpose, then, for the purposes of section 275(3) – that part of the gift is a political donation; and 344 Electoral Act, s 2 definition of "political party". the recipient is taken to accept that part of the gift at the time it is used for an electoral purpose. (3) A reference in subsection (2) to using a gift for an electoral purpose is a reference to using the gift to incur electoral expenditure or for the recipient's duties as an elected member." "[E]lectoral expenditure" is relevantly defined345 as "expenditure incurred for the purposes of a campaign for an election, whether or not the expenditure is incurred during the election period for the election". "[E]lection" means "an election of a member or members of the Legislative Assembly"346. On the other hand, a gift under s 274 includes certain "fundraising contribution[s]" and payments to political parties as follows: "(4) Despite section 201(4)(a) and (b), a reference in this section to a gift includes a fundraising contribution, to the extent the amount of the contribution forms part of the proceeds of the fundraising venture or function to which the contribution relates. (5) Despite section 201(4)(d), a reference in this section to a gift includes any of the following amounts paid by a person to a political party, to the extent the total amount of the person's payments in a calendar year exceeds $1,000 – an amount paid as a subscription for a person's membership of the party; an amount paid for a person's affiliation with the party." "[P]rohibited donor" is defined in s 273 to mean: a property developer; or an industry representative organisation, a majority of whose members are property developers; but 345 Electoral Act, s 197 para (b) of the definition of "electoral expenditure". 346 Electoral Act, s 2 definition of "election". does not include an entity for whom a determination is in effect under section 277. "[P]roperty developer" is in turn defined in sub-ss (2) and (3) of s 273 to mean each of the following persons: a corporation engaged in a business that regularly involves the making of relevant planning applications by or on behalf of the corporation – in connection with the residential or commercial development of land; and (ii) with the ultimate purpose of the sale or lease of the land for profit; a close associate of a corporation mentioned paragraph (a). For deciding whether a corporation is a corporation mentioned in subsection (2)(a), any activity engaged in by the corporation for the dominant purpose of providing commercial premises at which the corporation, or a related body corporate of the corporation, will carry on business is to be disregarded, unless the business involves the sale or leasing of a substantial part of the premises." "[C]lose associate", "relevant planning application" and "stapled entity" are defined in broad terms by s 273(5), and "director", "officer", "related body corporate" and "voting power" are defined in the same sub-section by reference to the Corporations Act 2001 (Cth). Under s 277, there is a process for determining that a person is not a "prohibited donor", by applying in writing to the commissioner of the Electoral Commission of Queensland. The commissioner can revoke this determination "at any time" under s 278(1) if the commissioner "ceases to be satisfied" that the entity is not a prohibited donor. Under s 279(1), "[t]he commissioner must keep a register of determinations made under section 277". The scheme includes an obligation to pay the State if a prohibited donation is accepted347. If the person "knew it was unlawful to accept the 347 Electoral Act, s 276. prohibited donation", the amount payable is "twice the amount or value of the prohibited donation"348, otherwise it is an amount equal to the amount or value of the prohibited donation349. The prohibition under s 275 is further enforced with three criminal offences. First, under s 307A, there is an offence for the breach of the prohibition: "Offence about prohibited donations (1) A person must not do an act or make an omission that is unlawful under section 275 if the person knows or ought reasonably to know of the facts that result in the act or omission being unlawful under that section. Maximum penalty – 400 penalty units or 2 years imprisonment. (2) An offence against subsection (1) is a misdemeanour." Second, a "scheme to circumvent" the prohibition is an offence under s 307B. This occurs if a person "knowingly participate[s], directly or indirectly, in a scheme to circumvent a prohibition under division 8, subdivision 4 about political donations". And, third, under s 307C, there is an offence for giving information that the person knows is "false or misleading in a material particular" to the commissioner under s 277 (relating to determinations about prohibited donors). Local Government Electoral Act The Local Government Electoral Act addresses local government elections in Queensland. For example, Pt 3 addresses voters rolls, Pt 4 makes provision for topics including candidates for local government elections, polling, and who may vote, Pt 5 relates to fresh elections, and Pt 7 provides for disputed results. Part 6 is entitled "Electoral funding and financial disclosure". Division 1A of this Part, "Political donations from property developers", contains the prohibition inserted by the Queensland Amending Act. The Part also contains provisions addressing disclosure periods350, disclosure obligations for candidates351, 348 Electoral Act, s 276(1)(a). 349 Electoral Act, s 276(1)(b). 350 Local Government Electoral Act, Pt 6, Div 2. 351 Local Government Electoral Act, Pt 6, Div 3. disclosure obligations for third parties352, the operation of dedicated accounts353 and a gifts register354. Section 113B of the Local Government Electoral Act makes unlawful certain political donations in the same terms as s 275 of the Electoral Act. The definitions are in substantially identical terms to those in s 273 of the Electoral Act. For example, "political donation" is defined in s 113A in slightly different wording from s 274 of the Electoral Act, referring to a "councillor of a local government" instead of "an elected member". And "political party" is defined355 as "an organisation or group whose object or activity, or 1 of whose objects or activities, is the promotion of the election of a candidate or candidates endorsed by it, or by a body or organisation of which it forms a part, to an office of councillor of a local government". The other provisions are the same as the corresponding provisions in the Electoral Act. Under ss 113D, 113E and 113F of the Local Government Electoral Act, there is a process, identical to ss 277, 278 and 279 of the Electoral Act, for determining that a person is not a "prohibited donor". A provision for review of decisions made under Div 1A of Pt 6 is included under s 113G "as if the decision were a decision to which section 277(4)(b) or 278(2) of [the Electoral Act] applied". The provision for recovery of prohibited donations in s 276 of the Electoral Act is replicated in substantially similar terms in s 113C, with additional provisions in sub-ss (4) and (5) noting that an action to recover an amount due to the State may be brought in the name of the Electoral Commission and a process may be served on the Electoral Commission. The offences provided for by ss 307A, 307B and 307C of the Electoral Act are reproduced as ss 194A, 194B and 194C of the Local Government Electoral Act. Rationale for the changes The Explanatory Notes accompanying the introduction of the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Bill 2018 ("the Queensland Amending Bill") stated that356: 352 Local Government Electoral Act, Pt 6, Div 4. 353 Local Government Electoral Act, Pt 6, Div 5. 354 Local Government Electoral Act, Pt 6, Div 6. 355 Local Government Electoral Act, Sch definition of "political party". 356 Queensland, Legislative Assembly, Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Bill 2018, Explanatory Notes at 1 (footnotes omitted). "The policy objective of the [Queensland Amending Bill] is to implement the Government's response to certain recommendations of the Crime and Corruption Commission's (CCC) report Operation Belcarra: A blueprint for integrity and addressing corruption risk in local government (the Belcarra Report) to: reinforce integrity and minimise corruption risk that political donations from property developers has potential to cause at both a State and local government level; improve transparency and accountability in State and local government; and strengthen the legislative requirements that regulate how a councillor must deal with a real or perceived conflict of interest or a material personal interest." Specifically, the Bill implements "recommendation 20 [of the Belcarra Report] to ban donations from property developers for candidates, third parties, political parties and councillors. This is extended to Members of State Parliament"357. The Minister for Local Government explained the Bill in the following terms358: "To implement the government's response to recommendation 20, the bill bans donations from property developers to candidates, third parties, political parties and councillors. The bill extends the ban to members of state parliament. The provisions are modelled on the New South Wales Election Funding, Expenditure and Disclosures Act 1981. The prohibition addresses the concern identified in the Belcarra report that close connections between councillors and donors can lead to a perception in the community that donors expect to, and do, receive something in return for their support. As the CCC stated, 'These perceptions alone are enough to damage public confidence in the integrity of local government.' Further, the CCC stated, '... continued public concern about the influence of property developer donations on council decision-making demands a stronger response than transparency alone.'" 357 Queensland, Legislative Assembly, Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Bill 2018, Explanatory Notes at 2. 358 Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 6 March Though there is no relevant purposes provision in the Electoral Act, s 28 of the Queensland Amending Act replaced the purposes provision of the Local Government Electoral Act with the following359: "The purposes of this Act are to – ensure the transparent conduct of elections of councillors of Queensland's local governments; and ensure and reinforce integrity in Queensland's local governments, including, for example, by minimising the risk of corruption in relation to – the election of councillors; and the good governance of, and by, local government." Constitutional challenges All sorts of constitutional issues were raised by the plaintiff and the Commonwealth to contend for the invalidity of the provisions of the Electoral Act and Local Government Electoral Act that were inserted by the Queensland Amending Act. One of the plaintiff's challenges to the prohibition in the Electoral Act – on the basis of the implied freedom of political communication – is readily disposed of because the law is indistinguishable from that upheld in McCloy v New South Wales360. The other constitutional issues are in a different category. They concern what the plaintiff asserted is constitutional invalidity because the Queensland the laws breach a reverse Melbourne Corporation principle protecting Commonwealth, as well as the Commonwealth's challenge to the Queensland law on the basis that its power over federal elections is exclusive and therefore the prohibition in the Queensland laws is invalid because it applies even to donations made for express federal electoral purposes. Neither contention should be accepted. There may be valid reasons to the consider Commonwealth, as well as the States, given that the continued existence of both the Melbourne Corporation principle should protect that 359 Local Government Electoral Act, s 3. 360 (2015) 257 CLR 178; [2015] HCA 34. levels of government is assumed in the constitutional structure361. But it is unnecessary to decide whether a reverse Melbourne Corporation principle exists, beyond that identified in The Commonwealth v Cigamatic Pty Ltd (In liq)362, because any such doctrine would not be infringed by prohibition of a limited class of political donations363. Such a prohibition cannot be described as directed at the Commonwealth, nor as imposing some special disability or burden on the the exercise of powers and Commonwealth's capacity to function364. functions which curtails fulfilment of And to say, as members of this Court have done on several occasions365, that Commonwealth power over federal elections is "exclusive" is merely to observe an absence of State power over that subject366. In this case, the Queensland laws, despite having some operation on gifts for Commonwealth electoral purposes, are laws about State elections. They are not beyond State power. For these reasons, I would have answered questions (a)-(c) stated for the Full Court "No". Inconsistency with s 302CA Queensland conceded that if s 302CA of the Commonwealth Electoral Act was valid, then there was inconsistency under s 109 of the Constitution between s 302CA of the State schemes. More particularly, s 275(1)-(3) of the Electoral Act and s 113B(1)-(3) of the the Commonwealth Electoral Act and 361 Melbourne Corporation (1947) 74 CLR 31 at 82. 362 (1962) 108 CLR 372 at 377; [1962] HCA 40. See also Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 at 438-440; [1997] HCA 36; cf In re Foreman & Sons Pty Ltd; Uther v Federal Commissioner of Taxation (1947) 74 CLR 508; [1947] HCA 45. 363 cf Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 163-164; [1992] HCA 45. 364 Fortescue Metals (2013) 250 CLR 548 at 609 [130]. 365 See Smith (1912) 15 CLR 355 at 358, 360, 365; Nelungaloo Pty Ltd v The Commonwealth (1952) 85 CLR 545 at 564; [1952] HCA 11; Rowe v Electoral Commissioner (2010) 243 CLR 1 at 14 [8]; [2010] HCA 46; Murphy v Electoral Commissioner (2016) 261 CLR 28 at 113 [261] fn 326; [2016] HCA 36. 366 See also Carter v Egg and Egg Pulp Marketing Board (Vict) (1942) 66 CLR 557 at 571; [1942] HCA 30. from" impair or detract Local Government Electoral Act "alter, the Commonwealth law. There is "direct inconsistency"367. The permission in s 302CA(1)(a) of the Commonwealth Electoral Act is directly inconsistent with the prohibitions in s 275(1)-(2) of the Electoral Act and s 113B(1)-(2) of the Local Government Electoral Act. Those prohibitions would apply to the making of a political donation by or on behalf of a prohibited donor (for example, a property developer) to a political party, within the State definitions, where the political party is registered at the federal level or is a State branch of a federally registered party. The permission in s 302CA(1)(b) or (c) is directly inconsistent with the prohibitions in s 275(3) of the Electoral Act and s 113B(3) of the Local Government Electoral Act. Those prohibitions prevent acceptance of a political donation in those circumstances. Section 275(1)-(3) of the Electoral Act and s 113B(1)-(3) of the Local Government Electoral Act are invalid to the extent of that inconsistency. The overlap is not limited to political parties. For completeness, the permission in s 302CA(1)(a) of the Commonwealth Electoral Act is directly inconsistent with the prohibitions in s 275(1)-(2) of the Electoral Act and s 113B(1)-(2) of the Local Government Electoral Act which would apply to the making of a political donation by or on behalf of a prohibited donor (for example, a property developer) to a candidate in a local government or State election, or State member or local government councillor, or to other entities, within the State definitions, if they are also a candidate or member of a group of candidates in a federal election, a federally registered political campaigner, or a third party within s 302CA(1)(b) or (c) is directly inconsistent with the prohibitions in s 275(3) of the Electoral Act and s 113B(3) of the Local Government Electoral Act, which apply to the acceptance of a political donation in those circumstances. Thus, s 275(1)-(3) of the Electoral Act and s 113B(1)-(3) of the Local Government Electoral Act are invalid to the extent of that inconsistency. federal definition. the permission Moreover, relevant the And s 275(4)-(5) of the Electoral Act and s 113B(4)-(5) of the Local Government Electoral Act "alter, impair or detract from" s 302CA(1) of the Commonwealth Electoral Act. The prohibitions in s 275(4)-(5) of the Electoral Act and s 113B(4)-(5) of the Local Government Electoral Act on soliciting of political donations from prohibited donors are directly inconsistent with the permission in s 302CA(1)(a) – the soliciting provisions directly impair the operation of the federal law providing that gifts can be given and received. The overall purpose and design of the federal law is directed to preventing only one class of political donations – donations by foreign donors that are above the 367 Work Health Authority v Outback Ballooning Pty Ltd (2019) 93 ALJR 212 at 221 [32]; 363 ALR 188 at 195-196; [2019] HCA 2. specific monetary thresholds. The ability under s 302CA(1) to receive a gift is at least made more difficult if you cannot ask people for a gift. Inconsistency with the wider Commonwealth Electoral Act The plaintiff submitted that there was inconsistency between the Queensland laws and the wider Commonwealth Electoral Act. That should not be accepted. The Queensland laws are not inconsistent with the wider Commonwealth Electoral Act. The prohibition on foreign donations above specific monetary thresholds, as well as the other rules in Pt XX of the Commonwealth Electoral Act, and the prohibitions in s 275 of the Electoral Act and s 113B of the Local Government Electoral Act are cumulative, not inconsistent. The laws can and do work together. Section 302CA does not completely exclude State laws368. It clearly indicates that the Commonwealth's intention was not to cover the field, but to manage the interaction of its regime with applicable State laws. There is no indirect inconsistency369. Conclusion It is for those reasons that I would have answered the questions stated for the Full Court as follows: Questions (a)-(f): Question (g): Question (h): "Yes. Section 275 of the Electoral Act 1992 (Qld) is invalid to the extent that it applies to giving, receiving or retaining gifts where this is permitted by s 302CA(1) of the Commonwealth Electoral Act 1918 (Cth)"; "Yes. Section 113B of the Local Government Electoral Act 2011 (Qld) is invalid to the extent that it applies to giving, receiving or retaining gifts where this the s 302CA(1) Commonwealth Electoral Act 1918 (Cth)"; permitted 368 See Commonwealth Electoral Act, s 302CA(3). 369 Ex parte McLean (1930) 43 CLR 472 at 483; [1930] HCA 12; Outback Ballooning (2019) 93 ALJR 212 at 221-222 [33]; 363 ALR 188 at 196. Question (i): "The defendant should pay the costs of the special case". Edelman Introduction When the Engineers' Case370 is "stripped of embellishment and reduced to the form of a legal proposition", it stands for the proposition that "a power to legislate with respect to a given subject enables the Parliament to make laws which, upon that subject, affect the operations of the States and their agencies"371. The decision has been criticised, sometimes trenchantly372. It has stood for nearly a century but other doctrines have been built around it, mitigating its effect. Those include constitutional implications, relied upon in this case, some of which restrict its otherwise unimpeded operation upon the States. The restrictions were relied upon in this case but they do not invalidate any of the laws in issue. The point that ultimately divides the Court in this case concerns the limit of the Commonwealth's power to make its legislative regimes exclusive of the States. If a donation is made to a political party operating at both State and federal levels, and if the donation could be used for either State or federal electoral purposes, polities at both levels of government can subject the donor or the recipient to regulation. Such untied donations, which directly attract the interests of both polities, were described by the plaintiff in this case as the "unallocated middle". At the heart of this case is the Commonwealth's legislation to make its regime exclusive in respect of that unallocated middle, whilst carving out from that exclusivity a sphere for operation of State laws affecting the interests of that State. The Commonwealth regime thus leaves unaffected in relevant respects the legislative regimes in New South Wales, Victoria, and 370 Amalgamated Society of Engineers v Adelaide Steamship Co Ltd (1920) 28 CLR 129 at 153-154; [1920] HCA 54 ("Engineers' Case"). 371 Melbourne Corporation v The Commonwealth (1947) 74 CLR 31 at 78; [1947] HCA 26 ("Melbourne Corporation"). 372 See, for instance, New South Wales v The Commonwealth (2006) 229 CLR 1 at 305-308 [740]-[747]; [2006] HCA 52; Sawer, Australian Federalism in the Courts (1967) at 130; Walker, "The Seven Pillars of Centralism: Engineers' Case and Federalism" (2002) 76 Australian Law Journal 678 at 686-687; Allan and Aroney, "An Uncommon Court: How the High Court of Australia Has Undermined Australian Federalism" (2008) 30 Sydney Law Review 245 at 288-289. Edelman South Australia, which are closely tailored to the interests of those States373. But it is inconsistent with the much broader regime in Queensland. Section 275 of the Electoral Act 1992 (Qld) ("the Queensland Electoral Act") and the equivalent provision, s 113B of the Local Government Electoral Act 2011 (Qld) ("the Queensland Local Government Electoral Act"), make it unlawful for donations to political parties to be solicited by, made by, or received from, a property developer, or on behalf of a property developer. Immediately before Federation, a colonial parliament had power to pass laws of this nature. Section 107 of the Constitution continued this power for the parliaments of the States, unless it was exclusively vested in the Commonwealth Parliament or withdrawn from the States. In this special case, the plaintiff, and the Attorney-General of the Commonwealth intervening, submitted that this power was, by implication from the Constitution, exclusively vested the Commonwealth Parliament. The plaintiff also submitted that it was withdrawn from the States either by the application of an implication necessary to preserve the functioning of the Commonwealth as a polity ("the reverse Melbourne Corporation implication") or by the implied freedom of political communication. None of these attacks on the existence or extent of State legislative power should be accepted. Part XX of the Commonwealth Electoral Act 1918 (Cth) ("the Commonwealth Electoral Act") also creates a regime to regulate, amongst other aspects of federal elections, political donations. In some respects, such as in relation to foreign donors, the Commonwealth regime is more restrictive than the Queensland regime. In other respects, it is more permissive. For example, the Commonwealth regime does not prohibit property developers from making donations to registered political parties but subjects property developers to a generally applicable regime of disclosure. Many political parties registered under the Commonwealth Electoral Act operate at both State and federal levels. Section 302CA of the Commonwealth Electoral Act, concerning exclusivity of the regulation of prohibited donors, and s 314B, concerning exclusivity of the regulation of disclosure, make exclusive the Commonwealth regime regulating donations to registered political parties. If s 275 of the Queensland Electoral Act and s 302CA of the Commonwealth Electoral Act are both valid laws then s 275 is inconsistent with s 302CA and therefore rendered inoperative by s 109 of the Constitution. The same conclusion follows for s 113B of the Queensland Local Government 373 Electoral Funding Act 2018 (NSW), ss 24(2), 37(2)(a), (7); Electoral Act 2002 (Vic), ss 207F(1), (3), 217D(4); Electoral Act 1985 (SA), ss 130C, 130K(1), 130L(b), 130M(1a). Edelman Electoral Act. However, the State of Queensland and the intervening State Attorneys-General submitted the Commonwealth Electoral Act is beyond the prima facie power of the Commonwealth Parliament or that it falls within an area of intergovernmental immunity and corresponding lack of Commonwealth power. None of the attacks on Commonwealth legislative power should be accepted. that, for various reasons, s 302CA of The particular issue that divides this Court is whether s 302CA of the Commonwealth Electoral Act is within power. Ultimately, the issue reduces to whether the Commonwealth has the power to make its own regime exclusive, albeit subject to various carve-outs for State legislation. The nature of the State law should make no difference. It would be no different if the Queensland law had sought to permit property developers to make entirely unregulated donations to political parties that may be used for State or federal electoral purposes. Such a law would also be inconsistent with a Commonwealth law that had sought to make exclusive a general regime which included regulation of donations by property developers including by disclosure requirements. In my view, the weight of precedent is too heavy, and the stream of legal development has been too clear, to conclude now that Commonwealth exclusivity provisions, tailored closely to Commonwealth interests, are invalid. Section 302CA of the Commonwealth Electoral Act is a valid law. Section 275 of the Queensland Electoral Act and s 113B of the Queensland Local Government Electoral Act are inconsistent with s 302CA of the Commonwealth Electoral Act and are therefore inoperative to the extent of that inconsistency. The validity of the amendments to the Queensland Electoral Act (i) The operation of the Queensland Electoral Act On 2 October 2018, Pts 3 and 5 of the Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Act 2018 (Qld) ("the Queensland Amending Act") came into force. The Queensland Amending Act introduced relevantly equivalent provisions into the Queensland Electoral Act, in relation to elections to the Legislative Assembly of Queensland, and the Queensland Local Government Electoral Act, in relation to elections of Queensland local government councillors. The submissions in this case focused upon the amendments to the Queensland Electoral Act on the assumption, which was not in dispute, that, apart from the plaintiff's submission based on the implied freedom of political communication, the legal position was relevantly identical in relation to the Queensland Local Government Electoral Act. The amendments to the Queensland Electoral Act relevantly introduced a new Subdiv 4 to Div 8 of Pt 11. At the heart of the Subdivision, entitled "Political donations from property developers", is s 275, which provides: Edelman "Political donations by prohibited donors It is unlawful for a prohibited donor to make a political donation. It is unlawful for a person to make a political donation on behalf of a prohibited donor. It is unlawful for a person to accept a political donation that was made (wholly or in part) by or on behalf of a prohibited donor. It is unlawful for a prohibited donor to solicit a person to make a political donation. It is unlawful for a person to solicit, on behalf of a prohibited donor, another person to make a political donation." The essence of the section is to prevent property developers374 from, directly or indirectly, making gifts for the benefit of a political party, an elected member or a candidate in an election375. By the definition in s 2, an organisation will be a political party within the scope of the prohibition provided that one of its objects is "the promotion of the election to the Legislative Assembly of a candidate or candidates endorsed by it or by a body or organisation of which it forms a part". As agreed in the special case, the Liberal National Party, the Labor Party Queensland, Katter's Australian Party, Pauline Hanson's One Nation, and the Queensland Greens hold 92 of the 93 seats in the Legislative Assembly of Queensland. Each party, either directly or through an affiliated or related party, is also represented in the House of Representatives or the Senate, or both. In prohibiting political donations from property developers to political parties with an object of promoting candidates to the Legislative Assembly of Queensland, the Queensland Electoral Act therefore has the incidental effect of removing a source of funding for those parties' activities in the federal sphere. (ii) Was power in relation to federal elections exclusively vested in the Commonwealth Parliament? With some restrictions376, colonial legislative power was generally as plenary and extensive within each colony as the power of the Imperial 374 See the definition of "prohibited donor" in s 273(1) and "property developer" in 375 See the definition of "political donation" in s 274(1). 376 Such as the Colonial Laws Validity Act 1865 (Imp) (28 & 29 Vict c 63), s 2. Edelman Parliament377. The colonies plainly had an interest in the exercise of that plenary power in many matters concerning any election held in the colony378. The many matters that a colony might have wished to regulate with respect to elections held within the territory of the colony may have included the facilities for polling places, ensuring peaceful and honest conduct during polling, or electoral advertising in the colony. Prior to Federation, some colonial parliaments had included: passed (i) restrictions on electoral expenses, including restrictions on payment of electoral expenses by third parties379; (ii) bribery, undue influence, or solicitation offences380; and (iii) requirements to include in electoral advertising the name and address of the person authorising the advertising381. the colonies which to elections in relation laws laws federal elections which did not Prior to Federation there was evidently no need for the colonies to extend then exist. their operative The Constitution conferred power upon the Commonwealth Parliament to make such laws, by ss 10, 31, and 51(xxxvi), and the incidental power in s 51(xxxix). But until these Commonwealth legislative powers were exercised there would be no laws relating to the time, place or manner of a federal election unless laws were passed by colonial or State parliaments382. anticipatory The Constitution therefore ensured that there would be no lacuna by providing in ss 10 and 31 that until the Commonwealth Parliament otherwise provided, the 377 Union Steamship Co of Australia Pty Ltd v King (1988) 166 CLR 1 at 9-10; [1988] HCA 55. See R v Burah (1878) 3 App Cas 889 at 904; Hodge v The Queen (1883) 9 App Cas 117 at 132; Powell v Apollo Candle Co (1885) 10 App Cas 282 at 289-290; Riel v The Queen (1885) 10 App Cas 675 at 678. 378 Compare Nelungaloo Pty Ltd v The Commonwealth (1952) 85 CLR 545 at 564; [1952] HCA 11. 379 The Electoral Code 1896 (SA) (59 & 60 Vict No 667), ss 146, 147; The Electoral Act 1896 (Tas) (60 Vict No 49), ss 190, 197, Sch 25. 380 The Electoral Code 1896 (SA) (59 & 60 Vict No 667), ss 155-161; The Electoral Act 1896 (Tas) (60 Vict No 49), ss 125-131; The Criminal Code Act 1899 (Qld) (63 Vict No 9), First Schedule, ss 101-103. 381 The Electoral Code 1896 (SA) (59 & 60 Vict No 667), s 160(d); The Electoral Act 1896 (Tas) (60 Vict No 49), s 142; The Criminal Code Act 1899 (Qld) (63 Vict No 9), First Schedule, s 106(2). 382 See, eg, Federal Elections Act 1900 (NSW); The Parliament of the Commonwealth Elections Act and The Elections Act 1885 to 1898 Amendment Act of 1900 (Qld) (64 Vict No 25); The Federal Elections Act 1900 (Tas) (64 Vict No 59); Federal Elections Act 1900 (Vic) (64 Vict No 1715). Edelman laws that would apply to federal elections would be those in force in each State relating to elections for the more numerous House of the Parliament of the State. This was neither a conferral of legislative power upon the State parliaments in relation to federal elections nor was it based upon an assumption of an absence of State legislative power in relation to federal elections. Rather, it was to ensure that, from the moment of Federation, there would be an extant regime for federal elections. Central to the Commonwealth's submission that the Commonwealth Parliament has exclusive legislative power concerning federal elections is the decision of this Court in Smith v Oldham383. That appeal concerned the conviction of the editors of The Argus newspaper of an offence contrary to s 181AA of the Commonwealth Electoral Act 1902 (Cth), which required that any newspaper article commenting upon a candidate, political party, or issue being submitted to the electors must be signed by the author, giving a true name and address. The offence concerned the publication of an unsigned article commenting on various candidates for election. The editors submitted that s 181AA was beyond the legislative power of the Commonwealth Parliament384. to make submissions385. The Court did not call upon Judgment was immediately delivered dismissing the appeal. Barton J, and Isaacs J all delivered reasons for decision finding that the law was within the core of the power (Barton J)386, or incidental to the core of the power (Griffith CJ and Isaacs J)387, of the Commonwealth Parliament in relation to federal elections. And each member of the Court said that the Commonwealth power was exclusive388. the respondent In this Court, Queensland and a number of interveners submitted that the decision in Smith v Oldham was based upon the doctrine that the Constitution, particularly s 107, reserved powers to the States. That doctrine has been rejected for nearly a century389. The submissions of the appellants in Smith v Oldham had certainly been put on this basis. Mitchell KC and Irvine KC submitted that the power of the Commonwealth Parliament to legislate in relation to elections must be confined to "the conduct and control of elections" so that a law such as 383 (1912) 15 CLR 355; [1912] HCA 61. 384 (1912) 15 CLR 355 at 358. 385 (1912) 15 CLR 355 at 357. 386 (1912) 15 CLR 355 at 361. 387 (1912) 15 CLR 355 at 358, 362. 388 (1912) 15 CLR 355 at 358, 360, 365. 389 Engineers' Case (1920) 28 CLR 129 at 154. Edelman s 181AA, which they contended was concerned with the "conduct and control of newspapers", was a law concerned with a matter within the reserved powers of the States390. But the Court did not rely upon that doctrine for the conclusion that there was an absence of State power. Although Griffith CJ and Barton J had the reserved powers doctrine for several years391, been supporters of their Honours' reasoning about the absence of State power was not substantially different from that of Isaacs J, who was not a supporter of the doctrine392. Indeed, the subtle antagonism towards the reserved powers doctrine that appears in the decision of Isaacs J in Smith v Oldham393 was later echoed in the joint judgments which his Honour delivered in R v Brisbane Licensing Court; Ex parte Daniell394 and the Engineers' Case395. In Smith v Oldham, the essence of the reasoning of each member of the Court concerning the absence of State legislative power was, unsurprisingly, not based upon the reserved powers doctrine. The reasoning was simply that the State had no interest in the subject matter of federal elections. Griffith CJ said that the matter was "one in which the States as such have no concern"396. Barton J said that "[n]o State has anything whatever to do with" the actions of citizens that affect the result and issues of federal elections397. And Isaacs J said that the subject matter of federal elections was "transparently beyond the competency of the State to control"398. Neither Griffith CJ nor Isaacs J provided 390 (1912) 15 CLR 355 at 356. 391 See, eg, Peterswald v Bartley (1904) 1 CLR 497 at 507; [1904] HCA 21; R v Barger (1908) 6 CLR 41 at 64, 67, 69; [1908] HCA 43; Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 at 503; [1908] HCA 94; Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 352, 354, 361; [1909] HCA 36. 392 See R v Barger (1908) 6 CLR 41 at 83-84; Attorney-General for NSW v Brewery Employes Union of NSW (1908) 6 CLR 469 at 585; Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 390-391. 393 (1912) 15 CLR 355 at 363. 394 (1920) 28 CLR 23 at 31; [1920] HCA 24. 395 (1920) 28 CLR 129 at 153-154. 396 (1912) 15 CLR 355 at 358. 397 (1912) 15 CLR 355 at 361. 398 (1912) 15 CLR 355 at 365. Edelman any further reasoning to support this assumption of an absence of State legislative power. The assumption by Griffith CJ and Isaacs J may have been based on the notion, later expressed by Latham CJ in West v Commissioner of Taxation (NSW)399, that matters specifically relating to the government of the Commonwealth are not laws for the peace, welfare and good government of a State. That reasoning was made explicit by Barton J, who said that no State constitution gave to a State parliament a power to legislate with respect to federal elections400. With respect, this reasoning confuses two separate matters. On the one hand, there was the colonial plenary legislative power, which supported laws relating to elections held in the colony. On the other hand, there are new facts and circumstances, arising after Federation, upon which that power might operate401. The colonial plenary power to make laws concerning requirements for elections included a power to make laws for federal elections to be held in the territory of the colony even though an election of that nature extended beyond the territory and had not previously been held. The existence of new facts or circumstances upon which a power might operate does not change the nature of the power. This is particularly so where, as could have been reasonably foreseen at Federation402, "[s]ocial, economic and political matters ... are increasingly integrated" and political parties operate "across the federal divide and at federal, State, Territory and local government levels"403. Political parties had begun to emerge by the 1890s404, and Deakin had observed that it was "inevitable" that 399 (1937) 56 CLR 657 at 669; [1937] HCA 26. 400 (1912) 15 CLR 355 at 360. 401 Meagher and Gummow, "Sir Owen Dixon's Heresy" (1980) 54 Australian Law Journal 25 at 28; Doyle, "1947 Revisited: The Immunity of the Commonwealth from State Law", in Lindell (ed), Future Directions in Australian Constitutional Law (1994) 47 at 62-63. 402 See Gauja, "From Hogan to Hanson: The regulation and changing legal status of Australian political parties" (2006) 17 Public Law Review 282 at 285. 403 Unions NSW v New South Wales (2013) 252 CLR 530 at 549 [22], 550 [24]; [2013] HCA 58. 404 Jupp and Sawer, "Political parties, partisanship and electoral governance", in Sawer (ed), Elections: Full, free & fair (2001) 216 at 217. Edelman political parties in the Senate would "coalesce and throw in their lot with each other ... irrespective of state boundaries altogether"405. The circumstances of this case are a good example of the underlying fallacy in the factual assumption that no State has an interest in the actions of citizens that affect the issues in federal elections. As the Attorney-General for the State of Western Australia submitted, the interests of the States may even be engaged where a donation is given to a registered political party only for federal electoral purposes. The use for federal electoral purposes might: (i) be on an issue of both federal and State concern; (ii) allow funds that would otherwise have been used for federal electoral purposes to be used for State electoral purposes; or (iii) promote the brand of the political party if it operates at both State and federal level. The more fundamental point about Smith v Oldham is that it has no precedential weight. "[Precedents], sub silentio without argument, are of no moment"406. The statement by each of Griffith CJ, Barton J, and Isaacs J that the States have no power to legislate in relation to matters incidental to federal elections was neither argued nor was it necessary for the decision. Further, a mere eight years after Smith v Oldham, the reasoning of this Court in R v Brisbane Licensing Court; Ex parte Daniell407 cast serious doubt upon the exclusivity reasoning by the Court in Smith v Oldham. The provision in question in R v Brisbane Licensing Court; Ex parte Daniell was s 14 of the Commonwealth Electoral (War-time) Act 1917 (Cth) ("the War-time Act"). That section provided that on the polling day for an election of the Senate or a general election of the House of Representatives, "no referendum or vote of the electors of any State or part of a State shall be taken under the law of a State". The issue was the validity of a local option poll 405 Gauja, "From Hogan to Hanson: The regulation and changing legal status of Australian political parties" (2006) 17 Public Law Review 282 at 285, quoting Official Record of the Debates of the Australasian Federal Convention (Sydney), 10 September 1897 at 335. See also Official Report of the National Australasian Convention Debates (Sydney), 17 March 1891 at 434 (Macrossan). 406 R v Warner (1661) 1 Keb 66 at 67 [83 ER 814 at 815]. See CSR Ltd v Eddy (2005) 226 CLR 1 at 11 [13]; [2005] HCA 64; Cross and Harris, Precedent in English Law, 4th ed (1991) at 158-161. See also Felton v Mulligan (1971) 124 CLR 367 at 413; [1971] HCA 39; Baker v The Queen [1975] AC 774 at 787-789; National Enterprises Ltd v Racal Communications Ltd [1975] Ch 397 at 406; Barrs v Bethell [1982] Ch 294 at 308; In re Hetherington [1990] Ch 1 at 10; Coleman v Power (2004) 220 CLR 1 at 44-45 [79]; [2004] HCA 39. 407 (1920) 28 CLR 23. Edelman held in Queensland, purportedly under s 172 of the Liquor Act 1912 (Qld), on the day of an election of the Senate. The prosecutor in R v Brisbane Licensing Court; Ex parte Daniell relied upon Smith v Oldham, asserting that the Commonwealth legislative power in relation to federal elections was exclusive408. Alternatively, he submitted, if the power was not exclusive, then s 14 of the War-time Act was enacted pursuant to a concurrent legislative power, based upon s 9 of the Constitution, and prevailed over s 172 of the Liquor Act due to s 109 of the Constitution409. The respondents responded by alleging that s 14 of the War-time Act was invalid either because there was no Commonwealth legislative power to pass s 14 or because it was an attempt to cut down the exclusive State legislative power conferred by s 9 of the Constitution410. The joint judgment of six members of this Court disposed of the respondents' submission rapidly, concluding that the Commonwealth had power to pass s 14 of the War-time Act under all of s 10, s 51(xxxvi), and the incidental power in s 51(xxxix) of the Constitution411. But that did not answer the questions raised by the prosecutor's submissions of whether s 172 of the Liquor Act was invalid either (i) because it trespassed upon an exclusive Commonwealth legislative power or (ii) because the War-time Act. The first submission was logically anterior to the second because s 109 operates only upon valid, albeit inconsistent, State412 and Commonwealth413 laws. The joint judgment implicitly rejected the prosecutor's first submission but accepted the second. Their Honours treated s 172 of the Liquor Act as valid but inoperative to the extent of the inconsistency with s 14 of the War-time Act414. inconsistent with s 14 of it was The distinction between the two ways in which the prosecutor had put its case was a distinction with real consequences. If the Commonwealth legislative power over federal elections was exclusive then s 172 of the Liquor Act would be 408 (1920) 28 CLR 23 at 25. 409 (1920) 28 CLR 23 at 25. 410 (1920) 28 CLR 23 at 26, 31. 411 (1920) 28 CLR 23 at 31. 412 See, eg, Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 680; [1996] HCA 58. 413 See, eg, Bayside City Council v Telstra Corporation Ltd (2004) 216 CLR 595 at 628 [37]; [2004] HCA 19. 414 (1920) 28 CLR 23 at 29; see also at 32. See also West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 670. Edelman invalid, irrespective of the existence of, or any inconsistency with, s 14 of the War-time Act. In contrast, the prosecutor's alternative submission would mean, as Higgins J observed, that s 172 "still lives, subject to the pressure of the Federal Act – like Jack-in-the-box under his lid" and the inoperability would be only to the extent of the inconsistency415. Indeed, Higgins J expressed doubt about the extent of the inconsistency expressed in the joint judgment416. Without the bedrock of Smith v Oldham, either as a precedent or as providing a coherent rationale, there remains to be considered the submission by the Commonwealth of an alternative rationale for the existence of exclusive Commonwealth legislative power over federal elections. The Commonwealth's submission was essentially that the scheme of the Constitution gives rise to a structural implication that legislative power over federal elections is exclusively a power of the Commonwealth Parliament. More precisely, the structural submission was said to be that the legislative power over federal elections is exclusively that of the Commonwealth Parliament, other than where the Constitution expressly provides for State power, such as by ss 7, 9, and 29. That submission cannot be accepted. A structural implication of exclusive Commonwealth power over federal elections generally is not "logically or practically necessary for the preservation of the integrity of [the constitutional] structure"417. An immediate problem for the submission is that such a structural implication for exclusivity of a power over federal elections is contradicted by the structural placement of a necessary component of the Commonwealth Parliament's power over federal elections, s 51(xxxvi). That source of power is located in a section concerned primarily418 with concurrent powers, and followed by a different section, s 52, setting out those matters upon which the power of the Commonwealth Parliament is exclusive. The alleged structural implication of exclusive Commonwealth legislative power is also said to operate in a manner that is fundamentally different from the exclusive powers expressly conferred on the Commonwealth Parliament by s 52 of the Constitution. That express conferral of exclusive power has the effect of 415 (1920) 28 CLR 23 at 33. 416 (1920) 28 CLR 23 at 36. 417 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 135; [1992] HCA 45; McGinty v Western Australia (1996) 186 CLR 140 at 169, 231; [1996] HCA 48; Austin v The Commonwealth (2003) 215 CLR 185 at 245 [113]; [2003] HCA 3; APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 409 [240]; [2005] HCA 44. 418 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 587 §160. Edelman invalidating any State law that is "with respect to" the subject of exclusive Commonwealth power419. In other words, a State law is invalid if it has a connection with the subject matter that is not "'so insubstantial, tenuous, or distant' that it cannot be regarded as a law with respect to the head of power"420. That is because an exclusive power of the Commonwealth Parliament necessarily excludes any State legislative power on that subject matter421. Hence, if Commonwealth legislative power in relation to federal elections were exclusive and the same approach to exclusive powers under s 52 of the Constitution were applied, then State laws concerning assault, defamation, bribery, fraud, or trespass would be invalid to the extent that they had any real connection with federal elections. Perhaps in an attempt to avoid the absurdity of this result, the Commonwealth submitted that the power over federal elections is exclusive only once the State law is characterised as one concerning elections. It was submitted that the structural implication operates as a constraint upon State power in the same way as the express constraint "other than State banking" in s 51(xiii) and "other than State insurance" in s 51(xiv) of the Constitution by limiting Commonwealth power to make laws characterised as those concerning banking and insurance422. Hence, on this submission, general State laws concerning assault, trespass, or defamation would not be invalid in their operation upon matters relating to federal elections. A State law concerning assault, trespass, or defamation that is characterised as a law in relation to an election would be 419 Attorney-General (NSW) v Stocks and Holdings (Constructors) Pty Ltd (1970) 124 CLR 262 at 269, 279, 288; [1970] HCA 58; Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 671, 676-677; see also at 644. 420 Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 642, quoting Mason J in The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 152; [1983] HCA 21, who in turn was quoting Dixon J in Melbourne Corporation (1947) 74 CLR 31 at 79. See also Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 677, citing Cunliffe v The Commonwealth (1994) 182 CLR 272 at 314; [1994] HCA 44. 421 Worthing v Rowell and Muston Pty Ltd (1970) 123 CLR 89 at 96, 112, 113, 119-120, 141; [1970] HCA 19; R v Phillips (1970) 125 CLR 93 at 129; [1970] HCA 50; Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 638, 670, 676. 422 Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 288-289; [1990] HCA 29; Attorney-General (Vic) v Andrews (2007) 230 CLR 369 at 392 [12], 406-407 [78]-[79], 428 [151]; [2007] HCA 9. Edelman invalid unless it "touched or concerned" federal elections only incidentally423. In other words, the effect of the Commonwealth's submission was not merely that the alleged structural implication is derived silently from provisions that sit alongside the expressions of exclusivity in s 52. It was that the structural implication of exclusivity operates in a fundamentally different way from the other expressions of exclusivity within the structure upon which it was said to be based. That is not a promising foundation for a structural implication. A final nail in the coffin for the structural implication submission is the lack of any logical or practical necessity for Commonwealth legislative power to be exclusive. The Commonwealth relied upon the express powers in ss 7, 9, and 29 of the Constitution, and the failure to include in s 9 the additional words "and manner" contained in cl 1 of Art I, §4 of the United States Constitution424. In essence, this was a submission that the express conferral of some powers upon State parliaments in relation to federal elections indicated the exclusion of all other power. It has been said that there are perhaps few maxims of interpretation that "have been more frequently misapplied and stretched beyond their due limits"425 than the maxim expressio unius est exclusio alterius, which treats the express mention of one thing as indicating the exclusion of another. Like all language conventions much depends upon context, including expectations based upon past experience426. The context of the conferral of power in ss 7, 9, and 29 does not imply a general exclusion of power over federal elections. Instead, each section was included for specific reasons. The power conferred upon the Queensland Parliament in the second paragraph of s 7 of the Constitution was an exemption, due to particular 423 See Bourke v State Bank of New South Wales (1990) 170 CLR 276 at 288-289; Attorney-General (Vic) v Andrews (2007) 230 CLR 369 at 407 [79], 408 [83], 424 Power to prescribe the "Times, Places and Manner of holding Elections for Senators and Representatives". Compare Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 232 [141]; [2004] HCA 41. 425 Colquhoun v Brooks (1887) 19 QBD 400 at 406, quoted in Rylands Brothers (Australia) Ltd v Morgan (1927) 27 SR (NSW) 161 at 169 and George v Federal Commissioner of Taxation (1952) 86 CLR 183 at 206; [1952] HCA 21. See, further, Pearce and Geddes, Statutory Interpretation in Australia, 8th ed 426 See also Federal Commissioner of Taxation v Tomaras (2018) 93 ALJR 118 at 137 [100]; 362 ALR 253 at 276; [2018] HCA 62. Edelman historical circumstances427 and until the Commonwealth Parliament otherwise provided, from the constitutional requirements of that section as to the State being a single Senate electorate. The scheme of setting out State legislative powers in s 9 of the Constitution operated to distinguish between the concurrent State power to make laws concerning the manner, or "method", of choosing senators and the State power to make laws for determining the times and places of elections of senators for the State428. The latter power, like the power in s 12 of the Governor of a State to cause writs to be issued for election of senators for that State, is an exclusive State power429. Section 29 of the Constitution created a concurrent power430 of the Commonwealth Parliament in relation to State divisions and the number of members chosen in each division for the House of Representatives "to meet certain contingencies", since the Constitution did not "raise any objection to the laws on this subject being made by the various states"431. The contingency for which the power was created, although it was not expected that it would be "exercised in any ordinary case", was to avoid the prospect of a "Massachusetts gerrymander"432. Both State and Commonwealth legislative power are also restricted by the final sentence, adapted from Art 73 of 427 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 473 §70. 428 Re Australian Electoral Commission; Ex parte Kelly (2003) 77 ALJR 1307 at 1309 [14]; 198 ALR 262 at 265; [2003] HCA 37, quoting Australia, Final Report of the Constitutional Commission (1988), vol 1 at 212 [4.447]-[4.448]. 429 Re Australian Electoral Commission; Ex parte Kelly (2003) 77 ALJR 1307 at 1309 [13]; 198 ALR 262 at 265; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 232 [140]; Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 481 §79, 484-485 §§81-82. 430 A proposal that the power should be exclusive to the parliaments of the States was not passed: Official Record of the Debates of the Australasian Federal Convention (Sydney), 13 September 1897 at 454; Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 530 §118. 431 Official Record of the Debates of the Australasian Federal Convention (Sydney), 13 September 1897 at 454. 432 Official Record of the Debates of the Australasian Federal Convention (Sydney), 13 September 1897 at 454. See also Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 531 §119. Edelman the Swiss Constitution, which provides that a division shall not be formed out of parts of different States433. The lack of logical or practical necessity for a structural implication of exclusivity of Commonwealth legislative power over federal elections is reinforced by s 109 of the Constitution. For instance, the Commonwealth's submission concerning the "challenge of producing a uniform federal scheme" is met by a Commonwealth law that entirely covers the "field" or subject matter of federal elections. That law would render inoperative any State law on that subject matter434. Without any exhaustive Commonwealth law, as Queensland observed, the first federal election was regulated by a diverse range of electoral laws in different States. It does not assist any further in the exercise of interpretation to use, as the Commonwealth attempted in this case, extreme and the unlikely examples, such as State Commonwealth Parliament is prorogued, in an attempt to support a different interpretation of Commonwealth power435. is passed after legislation that The submission that Commonwealth legislative power over federal elections is exclusive must be rejected. (iii) Are the amendments to the Queensland Electoral Act contrary to a reverse Melbourne Corporation implication? The plaintiff advanced a different argument for the invalidity of s 275 of the Queensland Electoral Act. In a submission that was disclaimed by the Commonwealth, the plaintiff asserted that the Constitution contains a limited structural implication of Commonwealth governmental immunity into which 433 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, rev ed (2015) at 530 §118. 434 Ex parte McLean (1930) 43 CLR 472 at 483; [1930] HCA 12; Jemena Asset Management (3) Pty Ltd v Coinvest Ltd (2011) 244 CLR 508 at 524 [40]; [2011] HCA 33. See also The Commonwealth v Australian Capital Territory (2013) 250 CLR 441 at 466 [52]; [2013] HCA 55; Work Health Authority v Outback Ballooning Pty Ltd (2019) 93 ALJR 212 at 221-222 [33], 227 [65], 236 [106]; 363 ALR 188 at 196, 203, 216; [2019] HCA 2. 435 Western Australia v The Commonwealth (1975) 134 CLR 201 at 271, 275; [1975] HCA 46; Queensland v The Commonwealth (1977) 139 CLR 585 at 604-605; [1977] HCA 60; Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 380-381 [87]-[88]; [1998] HCA 22; Sue v Hill (1999) 199 CLR 462 at 480 [26]; [1999] HCA 30; Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 43 [32]; [2003] HCA 72; XYZ v The Commonwealth (2006) 227 CLR 532 at 549 [39]; [2006] HCA 25. Edelman s 275 of the Queensland Electoral Act had trespassed. The immunity upon which the plaintiff relied was not the limited immunity from discriminatory, non-generalised laws affecting Commonwealth executive capacities436. It was an assertion of an area of immunity for the Commonwealth polity from State laws and a co-relative limitation of State legislative power. At the heart of the plaintiff's submission was the principle established by the decision of this Court in Melbourne Corporation437. That principle is a constitutional intergovernmental immunity of the States in the sense that it is co-relative to a lack of Commonwealth legal power438. It was described by Stephen J in Koowarta v Bjelke-Petersen439 as a limitation on Commonwealth legislative power derived from "the federal nature of the Constitution and which will serve to protect the structural integrity of the State components of the federal framework, State legislatures and State executives". in Fortescue Metals Group Ltd Although expressed in different ways over the years440, the Melbourne Corporation principle was described most recently in the joint judgment of Hayne, Bell The Commonwealth441 ("Fortescue") as requiring consideration of "whether impugned legislation is directed at States, imposing some special disability or burden on the exercise of powers and fulfilment of functions of the States which curtails their capacity to function as governments". This formulation of the principle in the joint judgment in Fortescue concerned only the effect of the impugned Commonwealth legislation on the States, which was the question in that case. However, in Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority442, Brennan CJ expressly confined the principle to a constraint upon Commonwealth legislative power, saying that the Melbourne 436 Established in The Commonwealth v Cigamatic Pty Ltd (In liq) (1962) 108 CLR 372 at 378; [1962] HCA 40; Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 at 427, 441-442; [1997] HCA 36. 437 (1947) 74 CLR 31. 438 See, generally, Cook, "Hohfeld's Contributions to the Science of Law" (1919) 28 Yale Law Journal 721 at 726-727. 439 (1982) 153 CLR 168 at 216; [1982] HCA 27. 440 See Austin v The Commonwealth (2003) 215 CLR 185 at 258 [145]. 441 (2013) 250 CLR 548 at 609 [130]; see also at 563 [6], 614 [145], 636-637 [229]; [2013] HCA 34. 442 (1997) 190 CLR 410 at 426. Edelman Corporation principle is "irrelevant to the scope of any State legislative power". If that were correct, it would be a sufficient basis, without more, to reject the plaintiff's submission. With respect, Brennan CJ's statement cannot be accepted. The implication established in Melbourne Corporation derives from the assumption implicit in the text and structure of the Constitution443 that the Commonwealth and State governments will continue to co-exist as separate entities. There are, therefore, statements in Melbourne Corporation that support the symmetrical application of the implication both to protect the States from laws of the Commonwealth or other States444, and to protect the Commonwealth from laws of the States. For instance, Latham CJ said that the Constitution "is based upon and provides for the continued co-existence of Commonwealth and States as separate Governments, each independent of the other within its own sphere"445. Dixon J said that the "foundation of the Constitution is the conception of a central government and a number of State governments separately organized. The Constitution predicates their continued existence as independent entities."446 Starke J said that "neither federal nor State governments may destroy the other nor curtail in any substantial manner the exercise of its powers or 'obviously interfere with one another's operations'"447. And Williams J said that there arises from the very nature of the federal compact "a necessary implication that neither the Commonwealth nor the States may exercise their respective constitutional powers for the purpose of affecting the capacity of the other to perform its The symmetry of this underlying assumption449 has been repeated in subsequent decisions in this Court450. 443 See, eg, Constitution, ss 51(xiii), (xiv), (xxxiii), (xxxiv), 100, 102, 104, 112, 123, 444 Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 25-26 [15]; [2002] HCA 27. 445 (1947) 74 CLR 31 at 55; see also at 61. 446 (1947) 74 CLR 31 at 82. 447 (1947) 74 CLR 31 at 74, quoting Graves v New York; Ex rel O'Keefe (1939) 306 US 466 at 488; see also at 70. 448 (1947) 74 CLR 31 at 99. 449 See, further, Stellios, Zines's The High Court and The Constitution, 6th ed (2015) 450 See Victoria v The Commonwealth (1971) 122 CLR 353 at 418; [1971] HCA 16; R v Coldham; Ex parte Australian Social Welfare Union (1983) 153 CLR 297 at (Footnote continues on next page) Edelman The assumption upon which the Melbourne Corporation principle is based supports an implication that constrains any State or Commonwealth power to make a law that is destructive of the continued co-existence and independence of the Commonwealth and States as separate governments. That assumption, and associated implication, of a co-existing, independent Commonwealth polity is not negated by the existence of s 109 of the Constitution451. That section, like others in the Constitution, is itself premised upon the assumption of the continued existence and independence of the Commonwealth polity. Nevertheless, the existence of s 109 may have an impact upon the magnitude of any burden that a State law imposes upon the Commonwealth polity. implication arises because neither As Kirby J observed in Austin v The Commonwealth452, "it is unlikely that a frontal attack upon the existence of the States would arise in the form of federal law". The same is true of a State law that directly attacks the existence of the Commonwealth. The real difficulty in the application of the Melbourne Corporation the assumption upon which it is based is limited to the continued existence of the States and the Commonwealth. In two respects, both the assumption and the implication extend beyond ensuring continued co-existence453: (i) the destruction of the continued co-existence of the polity extends to destruction of a capacity of the polity to function as a government; and (ii) destruction of that capacity of the polity is further extended to curtailment or weakening of the capacity of the implication nor the 313; [1983] HCA 19; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 134; New South Wales v The Commonwealth (2006) 229 CLR 1 at 119-120 [194]; Fortescue (2013) 250 CLR 548 at 609 [130]. 451 See West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 681; compare Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 at 507. 452 (2003) 215 CLR 185 at 300 [279]. 453 See Melbourne Corporation (1947) 74 CLR 31 at 66, 74; Victoria v The Commonwealth (1971) 122 CLR 353 at 411, 424-425; Victoria v Australian Building Construction Employees' and Builders Labourers' Federation (1982) 152 CLR 25 at 93; [1982] HCA 31; Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 207, 217, 226, 231, 247, 260; [1985] HCA 56; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 163, 243; Austin v The Commonwealth (2003) 215 CLR 185 at 217 [24]; Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 at 298 [32], 307 [66]; [2009] HCA 33. Edelman polity to function as a government. Sometimes this is expressed merely as an "interference" with the polity's continued functioning as a government454. the The two respects in which the assumption and the implication extend beyond a core implication of continued co-existence represent a significant inroad into the decision in the Engineers' Case. However, they were not novel the Melbourne Corporation decision. extensions even at Several years after the Engineers' Case, in his dissenting judgment in Pirrie v McFarlane455, upon which later decisions relied456, Isaacs J described the "natural and fundamental principle" restricting the scope of powers conferred by the Constitution upon distinct governmental "organisms" that "neither is intended, in the absence of distinct provision to the contrary, to destroy or weaken the capacity or functions expressly conferred on the other". time of Despite their longevity, the difficulty in defining the scope of these two broader aspects of the implication has been a substantial reason why the insusceptible of precise Melbourne Corporation principle "has proved formulation"457. Different expressions of the constraints upon the principle have been made over time. It has been said that the weakening must be of an "essential" governmental function458. It has also been said that the other polity must be subject to a "special burden" or "single[d] out" or "aimed at" by the law459 in the sense that the law's "very object is to restrict, burden or control an 454 Albrecht v Federal Commissioner of Taxation (2014) 228 FCR 177 at 182 [16]. See also Melbourne Corporation (1947) 74 CLR 31 at 75; Victoria v The Commonwealth (1971) 122 CLR 353 at 392-393; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 163, 242. 455 (1925) 36 CLR 170 at 191; [1925] HCA 30 (emphasis in original). Compare Federated State School Teachers' Association of Australia v Victoria (1929) 41 CLR 569 at 584-585; [1929] HCA 11. 456 West v Commissioner of Taxation (NSW) (1937) 56 CLR 657 at 682; Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 at 439, 451; Austin v The Commonwealth (2003) 215 CLR 185 at 278 [213]; Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 457 Austin v The Commonwealth (2003) 215 CLR 185 at 258 [145]. See also Fortescue (2013) 250 CLR 548 at 610 [134]. 458 Melbourne Corporation (1947) 74 CLR 31 at 99. 459 Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at Edelman activity of the States"460. However, such an object is a relevant but not determinative criterion461. Emphasis has instead been placed on a difference between a law that affects the capacity of a State to exercise constitutional functions and a law that affects the "ease with which those functions are exercised"462. Or, in a formulation which might amount to the same thing, it was said by three Justices in Austin v The Commonwealth463 that the curtailment or weakening must be "significant". All of these formulations can be reduced to a consideration of the magnitude of the burden upon the other polity's capacity to function as a government. That assessment will be one of "evaluation and degree"464. The magnitude of a burden has dimensions of both breadth and depth. A burden will be more deeply felt the more that it is targeted at the other polity and the more essential the governmental function that it curtails is to that other polity. For instance, in Clarke v Federal Commissioner of Taxation465, French CJ gave the example of a Commonwealth law imposing a gubernatorial privileges tax that had little financial importance to the States or their Governors but which might nonetheless involve too great a legislative intrusion into the functioning of the States. 460 Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 461 Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at 260, quoted with approval in Austin v The Commonwealth (2003) 215 CLR 185 at 217 [24], 249 [125]; see also at 249 [123]-[124], 301 [281]. See also Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 at 299 [34], 306 [65]; Fortescue (2013) 250 CLR 548 at 611 [137]. 462 Western Australia v The Commonwealth (Native Title Act Case) (1995) 183 CLR 373 at 481; [1995] HCA 47. See also Austin v The Commonwealth (2003) 215 CLR 185 at 259 [146]; Fortescue (2013) 250 CLR 548 at 610 [132]. 463 (2003) 215 CLR 185 at 265 [168]. See also Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 at 298 [32], 309 [76]. See, further, the references to "substantial" in Melbourne Corporation (1947) 74 CLR 31 at 74-75; Victoria v The Commonwealth (1971) 122 CLR 353 at 398. 464 Austin v The Commonwealth (2003) 215 CLR 185 at 249 [124], quoted by all Justices in Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 at 290 465 (2009) 240 CLR 272 at 298 [33]. Edelman A burden will be wider the more that it curtails the operation of the governmental functions of the other polity. The curtailing of the governmental functions of the other polity might arise merely by curtailing the range of legislative policy choices of the other polity. Even more significantly, it might curtail the operation of key governmental institutions of the other polity. If the magnitude of the burden on the other polity's capacity to function as a government is relevant then it should also be relevant to consider the significance of the law for the capacity of the polity enacting it to govern. Hence, in Austin v The Commonwealth466, although dissenting in the result, Kirby J took into account, for the assessment of the significance of the effect of an impugned Commonwealth law upon the States, the importance of the "effective discharge by the Commonwealth of all of its national responsibilities, as envisaged by the Constitution". The burden of the provisions of the Queensland Electoral Act and the Queensland Local Government Electoral Act was not deep. It had only an incidental effect upon a constitutional function of the Commonwealth, namely the regulation of federal elections. The interference was not specifically targeted at the Commonwealth; the "immediate object"467 of the provisions was not to regulate federal elections. Nor did the provisions of the Queensland Electoral Act and the Queensland Local Government Electoral Act impose a wide burden on the operation of the Commonwealth government. The Queensland Electoral Act imposed no restriction upon the range of Commonwealth legislative policy choices. Further, the plaintiff pointed to no constitutional fact, and made no submission, to establish that the provisions would curtail or weaken the capacity of the Commonwealth to function as a government. For instance, the provisions did not burden the capacity of the Commonwealth to determine the number and identity of, and the terms and conditions of engagement of, high-level public servants468, judges469, or politicians470. They did not constrain the ability of the 466 (2003) 215 CLR 185 at 304 [290]. 467 Compare Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 241-242. See also Melbourne Corporation (1947) 74 CLR 31 at 79. 468 Compare Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 at 232-233; [1995] HCA 71; Albrecht v Federal Commissioner of Taxation (2014) 228 FCR 177 at 184 [22]. 469 Compare Austin v The Commonwealth (2003) 215 CLR 185 at 219 [28], 260-261 [152], 263 [161]-[162], 264 [165], 283 [229]. See also Re Australian Education Union; Ex parte Victoria (1995) 184 CLR 188 at 233. Edelman Commonwealth to conduct the affairs of government through means such as borrowing from and placing funds with private banks471. Rather, a central purpose of the Queensland Amending Act was to reduce "the risk of actual or perceived corruption related to developer donations" and thus to increase "transparency and accountability" in State elections472. It is unsurprising that the plaintiff made no submission that the functioning of the Commonwealth government was curtailed or weakened by any incidental effect of reducing corruption in federal elections. Finally, the provisions of the Queensland Electoral Act and the Queensland Local Government Electoral Act had a real significance for the capacity of the State to function as a government. Although, as the plaintiff was at pains to emphasise, there were other laws that the Queensland Parliament could have passed to fulfil its legitimate purpose of regulating State elections without the Commonwealth, the choice of regime to regulate electoral donations was part of the functioning of the State as a government. the constitutional impermissibly functions of impairing The plaintiff's submission that the Queensland laws contravened the reverse Melbourne Corporation implication must be rejected. (iv) Are the amendments to the Queensland Electoral Act contrary to the constitutional implied freedom of political communication? The plaintiff's submission that the amendments to the Queensland Electoral Act, but not the equivalent amendments to the Queensland Local Government Electoral Act, are invalid by reason of the constitutional implied freedom of political communication can be dealt with briefly. Subdivision 4 of Div 8 of Pt 11 of the Queensland Electoral Act was closely modelled upon equivalent provisions in the Election Funding, Expenditure and Disclosures Act 1981 (NSW)473. It shares the same core underlying purpose of "minimising the 470 Compare Clarke v Federal Commissioner of Taxation (2009) 240 CLR 272 at 471 Compare Melbourne Corporation (1947) 74 CLR 31 at 67, 75, 84. 472 Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 6 March 2018 at 190, 192; see also Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 15 May 2018 at 1104. 473 Queensland, Legislative Assembly, Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Bill 2018, Explanatory Notes at 2, 4, 11, 14, 16. Edelman risk of corruption"474. A submission that the New South Wales legislation was contrary to the implied freedom was rejected by this Court in McCloy475. The Explanatory Notes to the Queensland Amending Act476 noted the reliance that was placed upon the decision of this Court in McCloy. The plaintiff did not challenge McCloy but, instead, sought to brush aside the decision, not yet four years old, on the basis that the legislative facts upon which that decision was based occurred in New South Wales. In Queensland, so the submission effectively went, things are done differently. The submission is in more than a little tension with the facts in the special case: (i) various findings by the Crime and Corruption Commission and its predecessors, referred to in the Explanatory Notes to the Queensland Amending Act477, in 1991 and 2006 that candidates for local government elections had received significant donations from property developers; (ii) Crime and Corruption Commission findings in 2017 that one of the key concerns about political donations, namely the increase in the risk of corruption, "is heightened when donors have business interests that are affected by government decisions" and, at local government level, is "particularly associated with property developers"478; (iii) investigations by the Fitzgerald Inquiry into a State Minister, Mr Hinze, revealing benefits he derived relating to property developments; and (iv) investigations by the Crime and Misconduct Commission between 2005 and 2010 into payments made to Mr Nuttall, a member of the Legislative Assembly, leading to conviction for offences including official corruption. Even if, as the plaintiff effectively submitted, a metaphorical corruption- proof fence existed between New South Wales and Queensland, and also between local government and State government in Queensland, the plaintiff's submission is still misconceived. A reason why parliaments make laws is to 474 Queensland, Legislative Assembly, Parliamentary Debates (Hansard), 6 March 2018 at 192. See also McCloy v New South Wales (2015) 257 CLR 178 at 209 [53], 221 [93], 241 [165], 261 [232], 291 [351]; [2015] HCA 34 ("McCloy"). 475 (2015) 257 CLR 178 at 221 [93], 222 [98], 295 [369]. 476 Queensland, Legislative Assembly, Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Bill 2018, Explanatory Notes at 4, 11. 477 Queensland, Legislative Assembly, Local Government Electoral (Implementing Stage 1 of Belcarra) and Other Legislation Amendment Bill 2018, Explanatory Notes at 3. 478 Queensland, Crime and Corruption Commission, Operation Belcarra: A blueprint for integrity and addressing corruption risk in local government (2017) at 76. Edelman shape behaviour. They can act prophylactically, by reference to possibilities and probabilities, as well as reactively479. They can shape laws by reference to circumstances overseas. And they can, and often should, shape laws by reference to circumstances and conduct in other States. And, when legislating in response to the conduct of those who are not governed, "[t]here is no doubt of it; but in this country it is found good, from time to time, ... to encourage the others"480. The plaintiff's submission really reduces to a claim that the result in McCloy does not dictate the result in this case because the circumstances underlying the same parliamentary purpose are different in Queensland from those in New South Wales. But the different underlying circumstances do not affect whether the law burdens the freedom of political communication. They do not affect the legitimacy of the law's purpose. They do not affect whether the law is suitable, in the sense of having a rational connection with its purpose. Nor do the different underlying circumstances affect whether there were alternative, reasonably practicable, means of achieving the same object but which have a less restrictive effect on the freedom. The assessment of whether the law is adequate in the balance is the only possible area where different underlying circumstances could affect the process of reasoning concerning the implied freedom of political communication. But the plaintiff did not submit, and there is no reason to conclude, that there was any difference in importance placed by the Queensland Parliament from that placed by the Parliament of New South Wales upon the core underlying purpose of removing the risk and perception of corruption481. And even if some lesser weight were placed by the Queensland Parliament upon this core purpose, once regard is had to the plurality of values that underlie the Constitution this would still be insufficient to establish such a gross or manifest lack of balance between, on the one hand, the foreseeable magnitude and likelihood of the burden upon freedom of political communication and, on the other hand, the importance of the legislative purpose482. The plaintiff's invitation to distinguish McCloy and to hold that the Queensland law infringed the implied freedom in this case is effectively an 479 See McCloy (2015) 257 CLR 178 at 262 [233]. 480 Voltaire, Candide (1759). 481 See Clubb v Edwards [2019] HCA 11 at [496]. 482 See Clubb v Edwards [2019] HCA 11 at [497]. Edelman invitation to "innovate at pleasure" as a "knight-errant roaming at will in pursuit of his own ideal of beauty or of goodness"483. It should not be accepted. The validity of s 302CA of the Commonwealth Electoral Act (i) The Commonwealth Electoral Act and s 302CA for "registered political parties"484 Part XX of the Commonwealth Electoral Act is entitled "Election funding and financial disclosure". Considered as a whole, the provisions of Pt XX create a regime for federal electoral purposes including: (i) the registration of political campaigners (Div 1A); (ii) election funding for unendorsed candidates, for unendorsed groups, and (Div 3); (iii) disclosure of donations to candidates, political parties, and political campaigners (Div 4); and (iv) disclosure of electoral expenditure (Div 5). The scheme of Pt XX involves two interrelated components: the prohibition upon certain political donations (Div 3A), and the disclosure of most other donations and electoral expenditure (Divs 4, 5, and 5A). The regime aims, by ss 302CA and 314B, to make these two components part of a single regime that regulates donations in relation to federal electoral purposes, although carving out, as far as possible, donations that are made for, or are used for, State electoral purposes. Part XX of the Commonwealth Electoral Act, in the form described above, includes amendments made by the Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Act 2018 (Cth) ("the Commonwealth Amending Act"). The Commonwealth Amending Act introduced a suite of changes to electoral funding and disclosure. The Commonwealth Amending Act was described as having an intention to effect significant "reform [of] the electoral funding and disclosure regime in the Commonwealth Electoral Act 1918"485. The changes included a new registration regime and disclosure rules for third-party campaigners, designed to achieve greater transparency, and the banning of certain gifts by foreign donors. Part of that suite of changes introduced to the Commonwealth Electoral Act by the Commonwealth Amending Act was the introduction of a new Div 3A 483 Cardozo, The Nature of the Judicial Process (1921) at 141. See also New South Wales v The Commonwealth (2006) 229 CLR 1 at 309 [751]. 484 "Registered political party" is defined in s 4(1) of the Commonwealth Electoral Act to mean a political party registered under Pt XI: see Mulholland v Australian Electoral Commission (2004) 220 CLR 181. 485 Australia, House of Representatives, Parliamentary Debates (Hansard), 27 November 2018 at 11580. Edelman to Pt XX entitled "Requirements relating to donations". Subdivision A of Div 3A is entitled "Interpretation". It provides an outline of Div 3A, in s 302A, describing the Division as "regulat[ing] gifts that are made to registered political parties, candidates, groups, political campaigners and third parties". It describes the object of Div 3A, in s 302C(1), as to "secure and promote the actual and perceived integrity of the Australian electoral process by reducing the risk of foreign persons and entities exerting (or being perceived to exert) undue or improper influence in the outcomes of elections". Most pertinently to this case, the suite of changes introduced by the Commonwealth Amending Act provides in s 302CA for the relationship between the Commonwealth prohibited donor regime and State and Territory electoral laws. The suite of changes also included the insertion in Div 6, entitled "Miscellaneous", of s 314B, which provides for the relationship between the Commonwealth disclosure regime and State and Territory electoral laws. Section 302CA, contained within the "Interpretation" subdivision of Div 3A, and s 314B provide generally for the extent to which the Commonwealth laws concerning political donations, both the prohibitions on foreign donations in Div 3A and the disclosure regime in Divs 4, 5, and 5A, are intended to regulate exhaustively the subject matter of donations to the relevant political actors. Section 302CA of the Commonwealth Electoral Act is set out in full in other judgments in this case. It suffices to make reference to several key features of the section. First, the removal of State and Territory prohibitions applies to gifts given to, or received or retained by or on behalf of, political entities, political campaigners486, or third parties487. A "political entity" is defined in s 4 to include a registered political party. In testing whether s 302CA is valid, the submissions in this case generally, and conveniently, focused upon the application of s 302CA to registered political parties. Secondly, the removal of State or Territory prohibitions or permissions on donations, and the limiting of the prohibition to those matters in Div 3A, applies only in the context of a federal election to those gifts (i) with terms that require or allow488 the gift to be used for the purposes of incurring electoral expenditure or creating or communicating electoral matter or (ii) without terms as to the 486 Defined in s 287(1) as a person or entity registered as a political campaigner under s 287L. 487 Defined in s 287(1) as a person or entity authorising or incurring "electoral expenditure" above the disclosure threshold: see the definition of "electoral expenditure" in s 287(1), read with s 287AB(1), and the definition of "electoral matter" in s 4(1), read with s 4AA. 488 Commonwealth Electoral Act, s 302CA(2)(a). Edelman purpose for which the gift may be used489. In relation to those gifts that are not prohibited by Div 3A, but about which State and Territory prohibitions are removed, they remain subject to the applicable rules in Divs 4 and 5A concerning disclosure. Thirdly, s 302CA(3) provides for three circumstances in which the State and Territory laws that would otherwise be excluded by s 302CA(1) will nevertheless operate. These carve-outs from the operation of s 302CA(1) were not included in the original version of s 302CA in the Bill that became the Commonwealth Amending Act. That original version of s 302CA was included in an exposure draft of proposed amendments by the Government to the first version of the Bill. However, the Joint Standing Committee on Electoral Matters heard evidence about the Bill, including from Professor Twomey, that although the Commonwealth Parliament can legislate to exclude State laws requiring disclosure "when the donation goes to the Commonwealth", the Commonwealth should not be "interfering with the state decisions as to how to regulate their own electoral systems"; the interference would be "inappropriate and arguably unconstitutional" if the "amount is actually used to fund state political expenditure"490. The Joint Standing Committee recommended, and the Government accepted, that the provisions should be amended expressly to "exclude the application of the Commonwealth law to any funds that are used in a state or territory election", explaining that "these provisions form an important part of the disclosure regime"491. The first of the three circumstances where State and Territory laws are left to operate, in s 302CA(3)(a), is where the terms of the gift "explicitly require the gift or part to be used only for a State or Territory electoral purpose". The second, in s 302CA(3)(b)(i), is where the State or Territory electoral law requires "the gift or part to be kept or identified separately" in order to be used only for a State or Territory electoral purpose. The third, in s 302CA(3)(b)(ii), is where "the gift recipient keeps or identifies the gift or part separately ... in order to be used only for a State or Territory electoral purpose". A note and an example accompanying s 302CA(3)(b)(ii) make clear, in the interpretation of that sub-paragraph492, that the sub-paragraph is intended to restrict the removal of 489 Commonwealth Electoral Act, s 302CA(2)(b). 490 Australia, Joint Standing Committee on Electoral Matters, Second advisory report on the Electoral Legislation (Electoral Funding and Disclosure Reform) Bill 2017 491 Australia, Joint Standing Committee on Electoral Matters, Second advisory report on the Electoral Legislation (Electoral Funding and Disclosure Reform) Bill 2017 (2018) at 48 [4.34]-[4.35]; see also Recommendation 10 at 49 [4.36]. 492 See Acts Interpretation Act 1901 (Cth), ss 13(1), 15AD. Edelman State or Territory regulation of gifts that may be used for federal electoral purposes if the gift is later kept or identified separately for use for State or Territory electoral purposes. The example concerns a circumstance where, at the time that a gift is given, there is no expressed purpose for the gift. In the example, if the gift is kept separately and ultimately used for a State or Territory electoral purpose, then both the donor and the recipient of the gift must comply with State and Territory electoral laws concerning the giving, receipt, retention, and use of the gift493. In other words, s 302CA(3)(b)(ii) has the effect of imposing a condition precedent upon State or Territory electoral laws that concern gifts that, when given, may still be used for federal electoral purposes. The condition precedent to the operation of those State or Territory electoral laws is that the gift is later kept separately for ultimate use for a State or Territory electoral purpose. At that later time of keeping it separately the condition precedent will be satisfied and the State or Territory electoral law will have retroactive operation. (ii) The purpose of s 302CA of the Commonwealth Electoral Act In Unions NSW v New South Wales494, I explained the importance of legislative effects. legislative purpose and distinguishing between a This distinction is not novel495. But it is important. A purpose is an object or aim. An effect might be foreseen, expected, or even considered inevitable. But foreseeability, or even belief in inevitability, are only factors from which an inference of purpose might be drawn. As with intention, if the inference is not drawn then, no matter how foreseeable or likely the effect, it is not the purpose of the legislation496. In Unions NSW v New South Wales497, I concluded that legislative amendments had the purpose, and not merely the effect, of quietening the voices of third-party campaigners relative to political parties and candidates. There was no other discernable reason for the change to the legislative regime. 493 See also example 2 given in Australia, House of Representatives, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018, Revised Explanatory Memorandum at 53. 494 (2019) 93 ALJR 166 at 200-201 [168]-[172]; 363 ALR 1 at 45-46; [2019] HCA 1. 495 McCloy (2015) 257 CLR 178 at 205 [40]; Brown v Tasmania (2017) 261 CLR 328 at 362 [99]-[100], 392 [209], 432-433 [322]; [2017] HCA 43. 496 See also SZTAL v Minister for Immigration and Border Protection (2017) 262 CLR 362 at 369 [16], 392-398 [92]-[103]; [2017] HCA 34. 497 (2019) 93 ALJR 166 at 211 [222]; 363 ALR 1 at 59. Edelman In this case, ss 302CA and 314B of the Commonwealth Electoral Act, as part of the substantial package of amendments to reform the electoral funding and disclosure regime in that Act, have the effect of creating an exclusive regime of Commonwealth regulation of political donations that may be used for incurring electoral expenditure or creating or communicating electoral matter. Section 302CA was inserted as part of an "Interpretation" subdivision of Div 3A. It would be absurd to try to discern its purpose, or that of s 314B, independently of the remainder of that Division, or independently of the other amendments. The interpretation subdivision and the associated amendments introduced with s 302CA are inextricably linked to the regime of regulation of political donations and electoral expenditure including disclosure requirements and positive prohibitions on foreign donors in particular circumstances. Likewise, the subject matter of s 302CA is also inextricably intertwined with the regime of regulation of political donations and electoral expenditure in federal elections. Read as a whole, the scheme of regulation reveals no basis for an inference of a purpose to impair or weaken the ability of the States and Territories to regulate their own elections. When one considers the aim, object, or purpose of the scheme of exclusive regulation, there may be a number of answers. One might have been to increase certainty by subjecting all domestic donors, but not foreign donors, to the same regime of disclosure as far as possible. Another might have been to strike a single balance between maximising the flow of funds for electoral purposes and encouraging transparency. And, in relation to s 314B, two purposes given in the extrinsic materials were to prevent discouragement of "persons or entities from making or receiving small donations for federal electoral purposes, where such donations are not required to be reported under Part XX of the Electoral Act"498, and "to ensure that ... the person or entity is not subject to duplicative reporting requirements"499. But there is no basis in the materials before this Court from which a conclusion can be drawn that the legislative purpose or aim of an exclusive scheme of regulation of Commonwealth donations, reflected in ss 302CA and 314B, was to impair or weaken the ability of the States and 498 Australia, Senate, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Supplementary Explanatory Memorandum at 63 [259]; Australia, House of Representatives, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018, Revised Explanatory Memorandum at 65 [286]. 499 Australia, Senate, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2017, Supplementary Explanatory Memorandum at 63 [259]; Australia, House of Representatives, Electoral Legislation Amendment (Electoral Funding and Disclosure Reform) Bill 2018, Revised Explanatory Memorandum at 65 [286]. Edelman Territories to regulate their own elections. That impairment was an effect of regulating the unallocated middle. But it was not a legislative purpose. Any possible inference that s 302CA had a purpose of impairment of the ability of the States and Territories to regulate their own elections is also substantially undermined by the history of the amendments to the original draft versions of s 302CA and s 314B in response to the concerns of the Joint Standing Committee on Electoral Matters about the "boundaries of [the Commonwealth] disclosure regime"500. The introduction of carve-outs for the further operation of State and Territory laws reveals an intention to reduce any restrictions upon the ability of the States and Territories to regulate their own elections, in the course of pursuing the exclusive scheme to fulfil legislative objects such as maximising the flows of funds, transparency, and certainty. (iii) The attacks on s 302CA of the Commonwealth Electoral Act For the reasons that I have explained, s 275 of the Queensland Electoral Act is a valid law. However, it is common ground that s 275, although validly made, would be inoperative by s 109 of the Constitution as it is inconsistent with s 302CA of the Commonwealth Electoral Act. Queensland sought to avoid that conclusion by submitting that s 302CA of the Commonwealth Electoral Act is invalid. Three reasons were advanced in this respect. First, it was submitted that if the Commonwealth Parliament had exclusive legislative power with respect to federal elections, then s 302CA impermissibly intruded into a corresponding area of exclusive State legislative power with respect to State elections. The premise of this submission, namely exclusive Commonwealth legislative power, has already been rejected. Secondly, it was submitted that s 302CA contravenes the Melbourne Corporation implication. Thirdly, relying upon the decision of the majority of this Court in University of Wollongong v Metwally501 ("Metwally"), it was submitted that s 302CA purports to override the temporal operation of s 109 of the Constitution and is therefore invalid. Aspects of these submissions were State Attorneys-General. supported The Attorney-General for the State of Victoria, and to some extent the Attorney- General for the State of Tasmania, sought to impugn the connection between s 302CA and federal legislative power in a different manner. First, it was submitted that s 302CA was beyond the core or incidental power of the Commonwealth Parliament. Secondly, in a related but potentially independent intervening each the 500 Australia, Joint Standing Committee on Electoral Matters, Second advisory report on the Electoral Legislation (Electoral Funding and Disclosure Reform) Bill 2017 (2018) at 48 [4.31]. See especially at 48 [4.33]. 501 (1984) 158 CLR 447; [1984] HCA 74. Edelman submission, it was suggested that the Commonwealth Parliament had an extraneous purpose in enacting s 302CA which meant that it was beyond power. (iv) Section 302CA is within the power of the Commonwealth Parliament It is necessary at the outset to explain (i) why the Commonwealth Parliament has the power to regulate donations to registered political parties which may be used, but are not required to be used, for federal electoral purposes, and (ii) the close relationship between the laws that collectively seek to make a system of regulation exclusive, which reveals the artificiality of concluding that some are beyond power but others are not. Consider the following fictitious example. Suppose that an investigation revealed widespread corruption and undue influence in federal elections associated with large donations to political parties. The Commonwealth Parliament responds to this evidence of undue influence, in the sense of corrupting influence, by a law requiring donors to disclose their donations to registered political parties of more than $1,000 of funds that are required to be used in federal elections. But the widespread corruption continues. The donors evade the Commonwealth law and make the same donations, intended for use by the same registered political parties in the same way, with the same consequences. They evade the Commonwealth law by giving their donations without restriction. That is, the donations are not tied for use only in federal elections. An amendment to the Commonwealth law, capable of reducing the size of this gaping hole in the legislation, might be to require disclosure of all donations that may be used for federal electoral purposes. In this fictitious example, the question of how far the regulation should go in order to combat the menace of corrupting influence is quintessentially a matter for political judgment. The regime hypothesised was one of disclosure only. At another extreme would be a regime of complete prohibition. An intermediate regime might be one of prohibition of some donations (foreign donors) and disclosure of others. The political judgment involved in defining the scope and boundary of the regulation might require balancing of matters such as ensuring a sufficiency of funds for political parties to promote their messages and any deterrent effect of dual systems of regulation of the same donation. The outcome of that balancing process might very well require that the Commonwealth law be made exclusive. That is hardly a judgment which courts are equipped to second- guess. The plenary power of the Commonwealth Parliament relating to federal elections502, including matters incidental or peripheral to the main subject matter, 502 See Smith v Oldham (1912) 15 CLR 355 at 363; Judd v McKeon (1926) 38 CLR 380 at 383; [1926] HCA 33; Australian Capital Television Pty Ltd v (Footnote continues on next page) Edelman plainly permits it to pass such a protective law regulating the use of funds that may be used, but are not required to be used, by political parties contesting federal elections. In Smith v Oldham503, Griffith CJ characterised the subject matter of the Commonwealth plenary legislative power deriving from ss 10, 31, and 51(xxxvi) of the Constitution in terms of the "regulation of the conduct of persons with regard to elections"504. More precisely, it might be expressed as the conduct of persons with regard to federal elections. And, as Griffith CJ also said, "[t]he main object of laws for that purpose [is] to secure freedom of choice to the electors"505. That object permits or requires laws that establish the machinery of elections and laws to prevent "intimidation and undue influence"506. In other words, the legislative power includes power to make laws that establish an electoral system and laws that regulate that electoral system by proscribing "conduct that interferes with the electoral system that Parliament has chosen"507. The power also includes laws that define the boundary or scope of the regulation, and which are therefore necessarily incidental to that regulation. That sense of "incidental" is distinct from the power in s 51(xxxix) of the Constitution, which is concerned with "incidental power" in the different sense of extending Commonwealth legislative power to matters that arise in connection with the The Commonwealth (1992) 177 CLR 106 at 220; Langer v The Commonwealth (1996) 186 CLR 302 at 317; [1996] HCA 43; Murphy v Electoral Commissioner (2016) 261 CLR 28 at 113 [262]; [2016] HCA 36. See also R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 31, 32; Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 57-58; [1975] HCA 53; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 254 503 (1912) 15 CLR 355 at 358. 504 See also R v Brisbane Licensing Court; Ex parte Daniell (1920) 28 CLR 23 at 31, 32; Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 57-58; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 220. 505 (1912) 15 CLR 355 at 358. 506 (1912) 15 CLR 355 at 358; see also at 360, 363. 507 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 208 [66]. See also Smith v Oldham (1912) 15 CLR 355 at 359-360, 362-363; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 157, 220, 225-226, 234; Langer v The Commonwealth (1996) 186 CLR 302 at 339. Edelman execution of its powers508. That "express incidental power" does not arise in this case. Subdivision B of Div 3A of Pt XX of the Commonwealth Electoral Act involves provisions that are based upon the power of the Commonwealth Parliament to pass laws concerning funds that may be used, but are not required to be used, by registered political parties for incurring electoral expenditure in relation to federal elections. It includes prohibitions upon foreign donors and recipients of foreign donations, including a prohibition on foreign donors making gifts to registered political parties509. There was no dispute that the provisions in Subdiv B are valid. And it was not suggested that those provisions are only valid because of a probability, rather than a possibility, that the foreign donor's donation would be used for the purposes of incurring electoral expenditure. that the premise is also based upon Division 4 of Pt XX the Commonwealth Parliament has power to pass laws concerning funds that may be used, but are not required to be used, by registered political parties for incurring electoral expenditure in relation to federal elections. For instance, s 305B(1) provides that if a person makes gifts above the disclosure threshold to a registered political party during a financial year, the person must provide a return to the Electoral Commission within 20 weeks after the end of the financial year, covering all the gifts that the person or entity made to that political party during the financial year. Disclosure is required irrespective of the use to which the registered political party plans to put the funds, or to which it does put the funds. Although the disclosure regime operates even in circumstances of possible use of funds by registered political parties for electoral expenditure, there was no suggestion in this case that the disclosure regime was beyond the Commonwealth power to regulate the conduct of persons with regard to federal elections. In Actors and Announcers Equity Association v Fontana Films Pty Ltd510, Mason J said that a mere "likelihood of the effect of substantial damage to the business of the corporation" would give rise to a "direct legal operation" upon a corporation sufficient to establish a connection with s 51(xx) of the Constitution. 508 Le Mesurier v Connor (1929) 42 CLR 481 at 497; [1929] HCA 41; Burton v Honan (1952) 86 CLR 169 at 177-178; [1952] HCA 30; Gazzo v Comptroller of Stamps (Vict) (1981) 149 CLR 227 at 236; [1981] HCA 73; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 26-27; [1992] HCA 46; Rizeq v Western Australia (2017) 262 CLR 1 at 68-69 [191]; [2017] HCA 23. Compare G G Crespin & Son v Colac Co-operative Farmers Ltd (1916) 21 CLR 205 at 214; [1916] HCA 13. 509 Commonwealth Electoral Act, s 302F(2). 510 (1982) 150 CLR 169 at 208; see also at 183, 195, 212, 219; [1982] HCA 23. See also New South Wales v The Commonwealth (2006) 229 CLR 1 at 121-122 Edelman The submission that the Commonwealth Parliament had no power to pass s 302CA of the Commonwealth Electoral Act is essentially a submission that although the Commonwealth Parliament can regulate the use of funds that may be used for federal electoral purposes, it cannot make that regulation exclusive. The Commonwealth submitted that if it has power to regulate that area then it must have power to make that same regulation exclusive of State and Territory The Commonwealth withdrew an initial submission that it was laws. unnecessary even to determine this question of power because any invalid part of s 302CA could be severed from the remainder and in that severed form s 302CA would nonetheless be inconsistent with the whole of s 275 of the Queensland Electoral Act. The issue is thus whether s 302CA, by defining the boundaries of the Commonwealth laws in relation to donations for federal elections, has a sufficient connection with the plenary Commonwealth power to make laws relating to federal elections. There are two steps511 involved in the question of sufficiency of connection between s 302CA of the Commonwealth Electoral Act and the subject matter of s 51(xxxvi), picking up ss 10 and 31, of the Constitution, being the regulation of the conduct of persons with regard to federal elections. The first step to determine the sufficiency of the degree of connection between the subject matter of a law and the subject matter of the head of power said to support it, is to characterise the subject matter, or essential meaning, of the law. The characterisation is ascertained by the legal relations, rights, duties, obligations, powers, and privileges that it creates512. But those legal relations will not reveal the appropriate level of generality at which the law should be characterised and at which the subject matter should thus be identified. One clear guide to the level of generality at which the subject matter or essential meaning should be characterised, particularly in relation to purposive powers, is the purpose of the legislation. Since the level of generality of characterisation will be most important when the law is likely to fall within the incidental part, or periphery, of the head of power, the identification of purpose in those cases 511 Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 368-369; [1995] HCA 16; Leask v The Commonwealth (1996) 187 CLR 579 at 601, 621; [1996] HCA 29. 512 The Tasmanian Dam Case (1983) 158 CLR 1 at 152; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 368-369; Leask v The Commonwealth (1996) 187 CLR 579 at 601-602; Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 492 [16]; [2000] HCA 14; New South Wales v The Commonwealth (2006) 229 CLR 1 at 103 [142]. Edelman might often be essential. The Commonwealth513: However, as Brennan J said in Cunliffe v "The central and peripheral aspects of a power do not evoke different tests of validity; it is simply a fact of constitutional reasoning that connexion between a law and a head of power is more frequently revealed by purpose than by effect and operation when the law is on the periphery of the power." Once the subject matter of the law has been characterised at the appropriate level of generality the second step is to assess the degree of connection which that subject matter has with the subject matter of the head of power. The required connection does not need to be strong. A connection will be sufficient if it is not "insubstantial, tenuous or distant"514. The real difficulty at this second stage lies in how to assess the sufficiency of connection. It is not necessary in this case to enter into the longstanding debate about the role of proportionality, whatever that term means in this context, in elucidating that connection515. It suffices to say that the sufficiency of connection will often be apparent once the subject matter of the law has been characterised. For instance, a law requiring payment of a deposit upon nomination would generally be characterised as a law concerned with the nomination of candidates for election and it would be a law with a clear connection with the head of power for regulating the conduct of persons in relation to federal elections. But the same characterisation of the law might not be made if the legislation prescribed such a vast sum of money as a deposit as to suggest an additional subject matter in the character of the law516. It might no longer be a law concerned with the nomination of candidates for election and might no longer have a sufficient 513 (1994) 182 CLR 272 at 321. See also Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 354; [1948] HCA 7; Leask v The Commonwealth (1996) 187 CLR 579 514 Melbourne Corporation (1947) 74 CLR 31 at 79; The Tasmanian Dam Case (1983) 158 CLR 1 at 152; Re Dingjan; Ex parte Wagner (1995) 183 CLR 323 at 369; Leask v The Commonwealth (1996) 187 CLR 579 at 601-602, 621; Re Maritime Union of Australia; Ex parte CSL Pacific Shipping Inc (2003) 214 CLR 397 at 413 [35]; [2003] HCA 43; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 208 [66]; New South Wales v The Commonwealth (2006) 229 CLR 1 at 143 [275]. 515 See the discussion in Stellios, Zines's The High Court and The Constitution, 6th ed 516 Fabre v Ley (1972) 127 CLR 665 at 669; [1972] HCA 65. Edelman connection with the head of power for regulating the conduct of persons in relation to federal elections. As to the characterisation of s 302CA of the Commonwealth Electoral Act, the provision does not have a purpose independent of the rest of Pt XX, and particularly not independent of Divs 3A and 4. As I have explained, there could have been a multitude of purposes for s 302CA, and the equivalent s 314B, in creating and defining the exclusivity of the regime of Commonwealth regulation of political donations that may be used for incurring electoral expenditure. The Commonwealth's submission was that s 302CA had three purposes, being: (i) to provide certainty to participants in the federal electoral process about the applicable regulatory rules concerning donations; (ii) to ensure that participants in the federal electoral process are not starved of funds; and (iii) to facilitate participation in public debate through the making of donations. Whether the law had all of these purposes or only some of them, I do not accept the submission of Victoria that the purpose for creating exclusivity of the Commonwealth regime was to intrude into the State sphere or to reduce State legislative power. There is no basis to suppose that this was the aim of the Commonwealth Parliament and every reason to suppose that it was not. Indeed, when the Joint Standing Committee on Electoral Matters expressed concern that the effect of the law might be seen as involving interference by the Commonwealth with State decisions as to how to regulate their own electoral systems517, three significant exceptions were carved out from the exclusivity of the Commonwealth regime of regulation of donations that may be used for Commonwealth electoral purposes518. The submission by Victoria thus impermissibly elevates an effect of the legislation to a purpose. Although it will be relevant if a law has a purpose to restrict a State governmental power, it is irrelevant if a law merely has that effect. As Professor Stellios explains519: "Clearly any law that is valid because, and only because, it is incidental to a subject of power will always invade an area that would otherwise be solely within State power, because the law, ex hypothesi, does not operate directly on the subject of the power. To bring in the notion of an 'invasion' of State power causes confusion." 517 Australia, Joint Standing Committee on Electoral Matters, Second advisory report on the Electoral Legislation (Electoral Funding and Disclosure Reform) Bill 2017 518 See Commonwealth Electoral Act, s 302CA(3). 519 Stellios, Zines's The High Court and The Constitution, 6th ed (2015) at 63. Edelman There may be laws that are passed where there is no possible purpose or object to the law other than its effect520. But that is not this case. This point can be clearly made by contrast with Victoria v The Commonwealth ("the Second Uniform Tax Case")521, upon which Victoria relied. In the Second Uniform Tax Case, a majority of this Court invalidated a provision that prohibited a taxpayer from paying State income tax in any tax year until Commonwealth income tax was paid. The majority held that the Commonwealth provision was not within, or incidental to, the Commonwealth power in s 51(ii) to make laws with respect to taxation522. In that case, the prohibition did not depend upon the amount of federal income tax for which the taxpayer was liable523. It did not depend upon any competition between claims by the State and the Commonwealth524. It was unaffected by solvency considerations525. It had no concern with payment by the taxpayer of any other State debts526. Dixon CJ thus characterised the purpose of the Commonwealth provision in that case as being "to make it more difficult for the States to impose an income tax"527, effectively by deferring the time for payment of State income tax528. With that purpose, it is unsurprising that the characterised subject matter was too remotely connected with the head of power in s 51(ii). To adapt a rhetorical question posed by Dixon CJ, a purpose to impinge upon State powers might be discerned from the purported use of the telecommunications power in s 51(v) to prohibit a customer from paying a State debt until he or she paid a telephone account529. 520 Monis v The Queen (2013) 249 CLR 92 at 133-134 [73]; [2013] HCA 4. See also Unions NSW v New South Wales (2013) 252 CLR 530 at 557-558 [51]-[52]; Unions NSW v New South Wales (2019) 93 ALJR 166 at 201-202 [174]; 363 ALR 521 (1957) 99 CLR 575; [1957] HCA 54. 522 (1957) 99 CLR 575 at 614-615, 626, 658, 661-662. 523 (1957) 99 CLR 575 at 613. 524 (1957) 99 CLR 575 at 613. 525 (1957) 99 CLR 575 at 613. 526 (1957) 99 CLR 575 at 615. 527 (1957) 99 CLR 575 at 614. 528 (1957) 99 CLR 575 at 615. 529 (1957) 99 CLR 575 at 615. Edelman The circumstances of this case, and the purpose of s 302CA, are far removed from those in the Second Uniform Tax Case. It could hardly be said of s 302CA that, as Latham CJ said in Melbourne Corporation530, "though referring to a subject of federal power", its purpose (what it "seeks" to do; what it is "aimed at or directed against"531) reveals that it is "really legislation about what is clearly a State governmental function" and unconnected to the subject matter of Commonwealth power. Provisions such as s 302CA and s 314B, with purposes that require the creation and definition of the extent of exclusivity of a Commonwealth regime which is within power, are sufficiently connected with the head of power. The purposes of the qualified exclusivity are inseparable from the purpose of the regime. Almost by definition, the exclusivity provision will be incidental to, and supported by, the head of power that supports the regime. Hence, even in the majority in the Second Uniform Tax Case, Dixon CJ (with whom Kitto J agreed) and Taylor J indicated that they would have upheld legislation by which the Commonwealth conferred priority to its own scheme for the administration of assets over the scheme of a State or Territory532. Similarly, in Bayside City Council v Telstra Corporation Ltd533, five members of this Court said that a "law conferring upon [telecommunications] carriers an immunity from all State taxes and charges would be a law with respect to telecommunications services". The immunity in that case, from discriminatory burdens imposed by State laws, had a "direct and substantial connection with the [telecommunications] power"534. As McHugh J said535, referring to some of the numerous cases in support of this proposition536: "A s 51 power also authorises a law that expressly limits the operation of a State law in relation to a subject matter authorised, regulated or prohibited under that head of power. This Court has held on many occasions that, 530 (1947) 74 CLR 31 at 61. 531 (1947) 74 CLR 31 at 62. 532 (1957) 99 CLR 575 at 611-612, 658, 659-660. 533 (2004) 216 CLR 595 at 626 [30]. 534 (2004) 216 CLR 595 at 624 [26]. 535 (2004) 216 CLR 595 at 644 [91]. 536 See also The Commonwealth v Queensland (1920) 29 CLR 1 at 11, 21-22, 26-27, 28; [1920] HCA 79; Wenn v Attorney-General (Vict) (1948) 77 CLR 84 at 111-112, 114, 120, 122; [1948] HCA 13. Edelman where the Commonwealth has power to regulate an area, it has power to protect entities which operate in that area from the effect of State laws. The cases, where the Court has so held, include Australian Coastal Shipping Commission v O'Reilly537, Botany Municipal Council v Federal Airports Corporation538 and Western Australia v The Commonwealth (the Native Title Act Case)539." Victoria submitted that the Commonwealth Parliament has no power to regulate registered political parties "in relation to every aspect of what they do". It may be accepted that such a law would be beyond power because its characterisation would be likely to be far removed from the regulation of the conduct of persons in relation to federal elections. It would be analogous to relying upon the external affairs power in s 51(xxix) to support a law requiring all sheep in Australia to be slaughtered if "some international convention ... required the taking of steps to safeguard against the spread of some obscure sheep disease which had been detected in sheep in a foreign country and which had not reached these shores"540. But that is far from the operation of s 302CA of the Commonwealth Electoral Act. Section 302CA is a law closely tailored to the subject matter of the Commonwealth prohibited donor and disclosure regime, which is itself within power. As I have explained, the Commonwealth regime extends to donations that may or may not be used for the purposes of incurring electoral expenditure or creating or communicating electoral matter. Section 302CA does not extend beyond that regime. It creates exclusivity for the regime but also narrows the exclusivity of the regime in respect of the three significant carve-outs. It is within power. (v) Section 302CA is not invalid for having an extraneous purpose As explained above, the purpose of the Commonwealth Parliament in passing a law is relevant to ascertaining the character of the law in the first step of the process of determining whether there is a sufficient connection between the in Leask v The Commonwealth541, although purpose has a role, "the test remains one of the head of power. law and 537 (1962) 107 CLR 46; [1962] HCA 8. 538 (1992) 175 CLR 453; [1992] HCA 52. 539 (1995) 183 CLR 373. 540 The Tasmanian Dam Case (1983) 158 CLR 1 at 260. 541 (1996) 187 CLR 579 at 603. Edelman sufficient connection". However, at some points in oral submissions, Victoria appeared to elevate the role of purpose, at least in relation to laws that, when characterised, do not fall within the core of a head of power. Victoria submitted that the purpose of a law might, by itself, supply a sufficient connection to a head of power or, conversely, that some purposes require "much greater scrutiny" of the purported connection of the law to the head of power. In other words, on that submission, a purpose that is extraneous to the head of power might sometimes serve a greater, and more significant, function in acting as a sufficient source of invalidity. It is unnecessary to decide this issue in this case because, as I have explained, the purpose for which the Commonwealth Parliament enacted s 302CA was not as Victoria characterised it. It suffices to make brief observations about a potentially larger invalidating role for the Parliament's purpose in enacting a law in reliance upon a head of Commonwealth legislative power. There are a number of circumstances where the use of a power for an extraneous purpose will invalidate the exercise of the power. In equity, the doctrine of fraud on a power recognises invalidity where "the power has been exercised for a purpose, or with an intention, beyond the scope of or not justified by the instrument creating the power"542. A similar doctrine is recognised in administrative law invalidating an exercise of statutory power where a substantial purpose for the exercise of a statutory power is a purpose ulterior to that for which the power was granted543. If the command in the Engineers' Case544 were followed, and the meaning of the Constitution found by reading the Constitution "naturally in the light of the circumstances in which it was made, with knowledge of the combined fabric of the common law, and the statute law which preceded it", then it might be said that this fabric includes an implied constraint upon the use for extraneous purposes of purposive constitutional powers, like the same constraint upon other purposive powers in equity and under administrative law, whether at the core of the power or in its incidental aspects. 542 Ngurli Ltd v McCann (1953) 90 CLR 425 at 438; [1953] HCA 39. See also Whitehouse v Carlton Hotel Pty Ltd (1987) 162 CLR 285 at 289-290; [1987] HCA 11; SGH Ltd v Federal Commissioner of Taxation (2002) 210 CLR 51 at 71-72 [29]; [2002] HCA 18; Australian Securities and Investments Commission v Lewski (2018) 93 ALJR 145 at 161-162 [75]; 362 ALR 286 at 305; [2018] HCA 63. 543 Enfield City Corporation v Development Assessment Commission (2000) 199 CLR 135 at 149 [30]; [2000] HCA 5. See also Thompson v Randwick Corporation (1950) 81 CLR 87 at 106; [1950] HCA 33. 544 (1920) 28 CLR 129 at 152. Edelman However, it may be that such a doctrine would have a limited operation. Such a doctrine could not arise other than in relation to purposive545 powers. And it might only apply where the predominant or only substantial purpose was the extraneous purpose546. In Melbourne Corporation547, Dixon J, although only "speaking generally", said that: "once it appears that a federal law has an actual and immediate operation within a field assigned to the Commonwealth as a subject of legislative power, that is enough. It will be held to fall within the power unless some further reason appears for excluding it. That it discloses another purpose and that the purpose lies outside the area of federal power are considerations which will not in such a case suffice to invalidate the law." In circumstances where: (i) s 302CA of the Commonwealth Electoral Act was not enacted for any improper purpose; (ii) there has been some doubt expressed about whether the power to regulate the conduct of persons with regard to federal elections is a purposive power548; and (iii) there have not been any direct submissions on a doctrine of extraneous purpose, the existence and operation of such a constitutional doctrine should be left for another case. (vi) Section 302CA does not contravene the Melbourne Corporation implication The Melbourne Corporation implication, with its symmetrical operation upon the States and the Commonwealth, has been described earlier in these reasons. The control of the electoral processes of a State is a function of the State, the interference with which could threaten the functioning of the States as independent bodies politic549. With their potential for corruption in a broad 545 On purposive powers, see Stenhouse v Coleman (1944) 69 CLR 457 at 471; [1944] HCA 36; Murphyores Incorporated Pty Ltd v The Commonwealth (1976) 136 CLR 1 at 11; [1976] HCA 20; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 353-355. Compare Grannall v Marrickville Margarine Pty Ltd (1955) 93 CLR 55 at 77; [1955] HCA 6; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 26-27. 546 Compare this approach to abuse of process: Williams v Spautz (1992) 174 CLR 509 at 529, 537; [1992] HCA 34; Walton v Gardiner (1993) 177 CLR 378 at 410; [1993] HCA 77. 547 (1947) 74 CLR 31 at 79. 548 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 238-239 [159]; compare at 267 [251], Smith v Oldham (1912) 15 CLR 355 at 358, and Langer v The Commonwealth (1996) 186 CLR 302 at 324-325. 549 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 242-243; see also at 163-164. Edelman sense, political donations can "sap the vitality, as well as the integrity, of the political branches of government"550 and "threaten the quality and integrity of governmental decision-making"551. The regime in Pt XX of the Commonwealth Electoral Act has the effect of imposing some constraints upon the ability of the States to function as governments. Section 302CA and s 314B have this effect by making exclusive the Commonwealth regime not merely in relation to donations that would most directly affect the interests of the Commonwealth but also in the unallocated middle. In the unallocated middle, the gifts may be used for the purposes of expenditure in elections of either polity, so the interests of the Commonwealth and the States are both directly engaged. Given the potential importance of this area to the functioning of States as bodies politic, it may be that a Commonwealth law would be invalid if its effect were to occupy the entirety of this area with a significant detrimental effect upon the States' ability to function as governments. Invalidity would be even more likely if one purpose of the law were to impose a burden upon the States or, in other words, if its "very object" were "to restrict, burden or control an activity of the States"552. However, there are three key reasons which, although individually insufficient, combine to prevent s 302CA from trespassing over the boundary of impermissibly impairing the capacity of States to function as governments. First, as I have explained, s 302CA is not targeted at the States. Although it has a detrimental effect on State legislative power its purpose is to ensure a single regulatory regime for donations in relation to federal electoral purposes. Whatever the purposes of that regime (whether to provide certainty, to prevent deprivation of funds to participants in the federal electoral process, or to facilitate participation in public debate through the making of donations), the purpose of s 302CA was not to restrict, to burden, or to control the States. Secondly, the effect of the amendments to the original draft that introduced the three carve-outs in s 302CA(3) from the exclusivity of the Commonwealth regime do not merely reinforce the lack of a purpose to restrict or control the States. They also permit the States a significant margin to develop 550 McCloy (2015) 257 CLR 178 at 205 [36]. 551 McCloy (2015) 257 CLR 178 at 205 [38]. 552 Queensland Electricity Commission v The Commonwealth (1985) 159 CLR 192 at Edelman their own legislative regimes concerning donations relating to State elections553. Section 302CA leaves intact the laws of New South Wales, Victoria, and South Australia554. Thirdly, there is the significance of the law for the capacity to govern by the polity enacting it, namely the Commonwealth. Just as the States have a significant interest in regulating electoral expenditure to secure the independence of their systems of government, so too does the Commonwealth. (vii) Section 302CA is not invalid by reason of the Metwally principle The next attack upon the validity of the Commonwealth legislation was the submission by Queensland that s 302CA is invalid because it seeks to override s 109 of the Constitution by purporting to give operation to State laws when s 109 had rendered them inoperative. This submission relied upon the decision of a majority of this Court in Metwally555. The background to the Metwally decision involved a decision by this Court on 18 May 1983556 that provisions of the Anti-Discrimination Act 1977 (NSW) ("the New South Wales Act") were rendered inoperative by s 109 of the Constitution due to their inconsistency with the Racial Discrimination Act 1975 (Cth). The effect of that decision was that there was no statutory foundation for an investigation under the New South Wales Act into Mr Metwally's complaints of racial discrimination against him by the University of Wollongong. However, by an amending Act that came into force on 19 June 1983 the Commonwealth Parliament amended the Racial Discrimination Act to provide that the Racial Discrimination Act "is not intended, and shall be deemed never to have been intended, to exclude or limit the operation" of a category of laws which included the New South Wales Act. Subsequently, Mr Metwally's complaints were upheld on 23 November 1983 by a tribunal established under the New South Wales Act. On the removal of the appeal by 553 Compare Austin v The Commonwealth (2003) 215 CLR 185 at 219-220 [28]-[29], 265 [170], 285 [233]; Clarke v Federal Commissioner of Taxation (2009) 240 CLR 554 See Electoral Funding Act 2018 (NSW), ss 24(2), 37(2)(a), (7); Electoral Act 2002 (Vic), ss 207F(1), (3), 217D(4); Electoral Act 1985 (SA), ss 130C, 130K(1), 130L(b), 130M(1a). 555 (1984) 158 CLR 447. 556 Viskauskas v Niland (1983) 153 CLR 280; [1983] HCA 15. Edelman the University of Wollongong, a majority of this Court held that the amending Act did not make the New South Wales Act retroactively operative557. The essential reason for the conclusion of the majority, Gibbs CJ, Murphy, Brennan and Deane JJ, was that although a Commonwealth Act can have retroactive effect, it cannot contradict s 109 of the Constitution by retroactively endowing a State law with the operative effect of which it had been deprived by s 109558. In the minority, Mason J and Dawson J (with both of whom Wilson J agreed559) also did not deny that a Commonwealth Act cannot contradict s 109560. But a reason for their dissents was that the Racial Discrimination Act had simply removed the inconsistency upon which s 109 operated561. Without any inconsistency, the condition upon which s 109 depends was not satisfied. The essential difference between the majority and the minority in Metwally is (i) whether "a law of the Commonwealth" in s 109 of the Constitution means only the content of that law at the time of the alleged inconsistency or (ii) whether it also includes content arising from subsequent, retroactive Commonwealth laws. The same issue would apply to "a law of a State". On the assumption of validity of retroactive laws, it is difficult to see why the content of laws to which s 109 refers would be confined to the first meaning if the purpose of s 109 is to resolve conflict between laws of different polities. But part of the reasoning of Gibbs CJ and Deane J in the majority was that the purpose of s 109 extends to inform the ordinary citizen which of two inconsistent laws he or she is required to observe562. That purpose might support a narrow interpretation of "law" in s 109 as an existing social construct at a particular time upon which people arrange their affairs563. The Commonwealth directly challenged Metwally, relying upon the reasoning of the minority judges. Resolution of that challenge requires consideration of whether the purpose of s 109 extends to ensure that a citizen is 557 Metwally (1984) 158 CLR 447 at 459, 469, 475, 477. 558 (1984) 158 CLR 447 at 457-458, 469, 475, 479. 559 (1984) 158 CLR 447 at 471. 560 (1984) 158 CLR 447 at 460, 485. 561 (1984) 158 CLR 447 at 461-462, 485. 562 (1984) 158 CLR 447 at 458, 477. 563 See, in a different context, Commissioner of State Revenue (Vict) v Royal Insurance Australia Ltd (1994) 182 CLR 51 at 89, 100-101; compare at 67; [1994] HCA 61. Edelman aware of the law that he or she is required to observe, or whether that is merely a consequence or effect of s 109 in the usual case, reasonably expected and therefore presumed, of non-retroactive laws564. Ultimately, that consideration is unnecessary in this case because Queensland's submission about the invalidity of s 302CA cannot succeed on either view of Metwally. s 302CA the Commonwealth regime created by Queensland relied upon the retroactive operation of the carve-out from the exclusivity of s 302CA(3)(b)(ii). As I have explained, that carve-out has the effect of imposing a condition precedent upon the operation of State or Territory electoral laws concerning gifts which may still be used for federal electoral purposes. Queensland's submission was that s 302CA(3)(b)(ii) thus creates a contingent inconsistency with State or Territory law, contrary to s 109 of the Constitution, which is concerned only with circumstances when a law of a State is actually inconsistent with a law of the Commonwealth. Unlike the answers to the questions given in the decision of the majority in Metwally565, the alleged operation of s 302CA as creating a contingent inconsistency was said to render s 302CA invalid. the Commonwealth The most basic reason Queensland's submission cannot succeed is that the condition precedent in s 302CA(3)(b)(ii) does not create or remove any retroactive inconsistency and does not conflict with s 109 of the Constitution. Unlike in Metwally, amendments s 302CA(3)(b)(ii) is not a subsequent, retroactive law that purports to "expunge the past"566. The effect of the provision is to allow State or Territory electoral laws to operate subject to a condition precedent upon gifts that, when given, may be used for federal electoral purposes. That condition precedent is that the gifts are later kept or identified separately in order to be used for a State or Territory electoral purpose. The condition precedent always applied, and applies. considered Conclusion I would have answered each of the questions in the special case as 564 See Juratowitch, Retroactivity and the Common Law (2008) at 47-48. 565 See the discussion in Metwally (1984) 158 CLR 447 at 470-471. 566 Metwally (1984) 158 CLR 447 at 478.
HIGH COURT OF AUSTRALIA SHANNEN ALYCE ROWE & ANOR PLAINTIFFS AND ELECTORAL COMMISSIONER & ANOR DEFENDANTS Rowe v Electoral Commissioner [2010] HCA 46 Date of Order: 6 August 2010 Date of Publication of Reasons and Further Order: 15 December 2010 ORDER Declare that Items 20, 24, 28, 41, 42, 43, 44, 45 and 52 of Sched 1 to the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) are invalid. The second defendant to pay the plaintiffs' costs of the Further Amended Application for an Order to Show Cause. FURTHER ORDER Dismiss so much of the plaintiffs' application as remained after the order of this Court made on 6 August 2010. Representation R Merkel QC with K L Walker, F K Forsyth and N McAteer for the plaintiffs (instructed by Mallesons Stephen Jaques) G T Johnson for the first defendant (instructed by Australian Government Solicitor) S J Gageler SC, Solicitor-General of the Commonwealth with G R Kennett and D F O'Leary for the second defendant (instructed by Australian Government Solicitor) R M Mitchell SC with C S Bydder intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor's Office) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Rowe v Electoral Commissioner Constitutional law (Cth) – Legislative power – Franchise – Constitutional limitations upon power of Parliament to regulate exercise of entitlement to enrol to vote – Date for close of Electoral Rolls in Commonwealth Electoral Act 1918 (Cth) amended – Amendments precluded consideration until after election of claims for enrolment received after 8 pm on date of writs and of claims for transfer of enrolment received after 8 pm on third working day after date of writs – Whether denial of enrolment effected by amendments contravened constitutional requirement that representatives be "directly chosen by the people" – Whether amendments operated as disqualification from entitlement to vote and, if so, whether disqualification for substantial reason – Relevance of Roach v Electoral Commissioner (2007) 233 CLR 162. Words and phrases – "directly chosen by the people", "disqualification", "substantial reason". Constitution, ss 7, 8, 9, 10, 24, 30, 31, 51(xxxvi). Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth), Sched 1 Items 20, 24, 28, 41, 42, 43, 44, 45, 52. Commonwealth Electoral Act 1918 (Cth), ss 93, 94A(4), 95(4), 96(4), 101, Introduction The Constitution requires that members of Parliament be "directly chosen by the people"1. That requirement is "constitutional bedrock"2. It confers rights on "the people of the Commonwealth" as a whole3. It follows, as Isaacs J said in 1912, that4: "The vote of every elector is a matter of concern to the whole Commonwealth". Individual voting rights and the duties to enrol and vote are created by laws made under the Constitution in aid of the requirement of direct choice by the people. An electoral law which denies enrolment and therefore the right to vote to any of the people who are qualified to be enrolled can only be justified if it serves the purpose of the constitutional mandate. If the law's adverse legal or practical effect upon the exercise of the entitlement to vote is disproportionate to its advancement of the constitutional mandate, then it may be antagonistic to that mandate. If that be so, it will be invalid. Laws regulating the conduct of elections, "being a means of protecting the franchise, must not be made an instrument to defeat it"5. As the Court said in Snowdon v Dondas6: "The importance of maintaining unimpaired the exercise of the franchise hardly need be stated." The laws under challenge in this case would have disentitled persons otherwise qualified to be enrolled as electors before the election conducted on 1 Constitution, ss 7 and 24. 2 Roach v Electoral Commissioner (2007) 233 CLR 162 at 198 [82] per Gummow, Kirby and Crennan JJ; [2007] HCA 43. 3 Langer v The Commonwealth (1996) 186 CLR 302 at 343 per McHugh J; [1996] HCA 43. 4 Smith v Oldham (1912) 15 CLR 355 at 362; [1912] HCA 61. 5 An observation made by Isaacs J about the ballot in Kean v Kerby (1920) 27 CLR 449 at 459; [1920] HCA 35. (1996) 188 CLR 48 at 71; [1996] HCA 27, immediately thereafter quoting the remark of Isaacs J in Kean v Kerby (1920) 27 CLR 449 at 459. 21 August 2010 from recording a vote at all or from recording a vote for the district in which they lived. That disentitlement would have flowed from the failure by those persons to lodge claims for enrolment before the issue of the writs or for transfer of enrolment before the close of the Rolls. A statutory grace period of seven days for claims to be made after the issue of the writs had existed since 1983. Until 1983 an effective, albeit non-statutory, grace period had existed in all elections called since the 1930s by reason of the executive practice of announcing an election some days before the issue of the writs. The statutory grace period was effectively removed for new enrolments and significantly abridged for transfers of enrolment by the impugned amendment of the Commonwealth Electoral Act 1918 (Cth) ("the CEA") in 2006. On 6 August 2010, I joined in a majority of the Court in making a declaration that the relevant provisions of the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) ("the Amendment Act") were invalid. My reasons follow. The declaration claimed and the grounds for the claim The plaintiffs claimed a declaration in the following terms: "A declaration that items 20, 24, 28, 41, 42, 43, 44, 45 and 52 of Schedule 1 of the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) are invalid and of no effect." The grounds for relief were that: "The items referred to in paragraph 1 of the prayer for relief are: contrary to ss 7 and 24 of the Constitution; beyond the legislative powers of the Commonwealth conferred by ss 51(xxxvi) and 30 of the Constitution or any other head of legislative power; and reasonably appropriate and adapted, or beyond what proportionate, to the maintenance of the constitutionally prescribed system of representative government; and are therefore invalid and of no effect." The constitutional provisions Section 7 of the Constitution of the Commonwealth requires that the senators for each State be "directly chosen by the people of the State". Section 24 requires that the members of the House of Representatives be "directly chosen by the people of the Commonwealth". When the Commonwealth Constitution came into effect in January 1901, the qualification of electors of members of the House of Representatives was, by operation of s 30, that prescribed by State law as the qualification of electors of the more numerous House of Parliament of each State. Section 8 prescribed that the qualification of electors of members of the House of Representatives was the qualification of electors of senators. There was a transitional "constitutional franchise"7. Section 30 was to apply until the Commonwealth Parliament otherwise provided. In addition, by ss 10 and 31, until the Parliament of the Commonwealth otherwise provided, the laws in force in each State relating to elections for the more numerous House of the Parliament of the State, as nearly as practicable, applied to elections of senators for the State and of members of the House of Representatives. The Parliament of the Commonwealth was also empowered to make laws prescribing the method of choosing senators, but so that such method should be uniform for all States8. The words "[u]ntil the Parliament otherwise provides" in ss 10, 30 and 31 attract the power conferred upon the Parliament by s 51(xxxvi) to make laws "with respect to … matters in respect of which this Constitution makes provision until the Parliament otherwise provides". Read with s 30, s 51(xxxvi) empowers the Parliament to make laws providing for the qualification of electors of members of the House of Representatives. By operation of s 8 those qualifications are also the qualifications of the electors of senators. Read with ss 10 and 31, s 51(xxxvi) also empowers the Parliament to make laws relating to the election of senators and members of the House of Representatives. Those powers are exclusive to the Commonwealth9. Isaacs J characterised the power to make laws with respect to elections as a "plenary power over federal elections"10. To say that of the power under s 51(xxxvi) is to say what is true of every power conferred by s 5111. It is a power subject to the limitations imposed by the Constitution. The exercise of that power is in issue in this case. Parts II and III of Ch I of the Constitution contain other provisions relating to elections for the Senate and the House of Representatives, including provision 7 R v Pearson; Ex parte Sipka (1983) 152 CLR 254 at 278 per Brennan, Deane and Dawson JJ; [1983] HCA 6. 8 Constitution, s 9. 9 Smith v Oldham (1912) 15 CLR 355 at 358 per Griffith CJ, 360 per Barton J. 10 Smith v Oldham (1912) 15 CLR 355 at 363. 11 Newcrest Mining (WA) Ltd v The Commonwealth (1997) 190 CLR 513 at 604-605 per Gummow J; [1997] HCA 38. for the issue, by the Governor-General, of writs for general elections of members of the House of Representatives12 and for the issue by State Governors of writs for elections of senators for the States13. Section 41 protected the electors for the more numerous Houses of Parliament of the States from being prevented, by any law of the Commonwealth, from voting at elections for either House of the Parliament of the Commonwealth. That provision, however, has no effect on the present case as it only protects rights to vote which were in existence at Federation14. The statutory franchise Under the Constitution, the Commonwealth Parliament was to decide whether and when to pass laws defining the qualifications of electors and the methods of election. This it did by enacting the Commonwealth Franchise Act 1902 (Cth) and the Commonwealth Electoral Act 1902 (Cth). By the former Act it created a "statutory franchise"15 which replaced the constitutional franchise. Having defined the qualifications of electors, the Parliament could validly impose conditions upon the exercise of the right to vote which were incidental to or in aid of the laws defining the qualifications or embodied in laws relating to the election of senators and members of the House of Representatives. The Commonwealth Franchise Act 1902 and the Commonwealth Electoral Act 1902 and their successor statutes were enacted against the background of colonial laws defining the franchise, identifying those entitled to exercise it and providing for the conduct of elections. Not surprisingly those laws and their provision for voter enrolment as a condition of the right to vote were inspired by the electoral laws of the United Kingdom. The registration and listing of qualified electors on an electoral roll or list, as a condition of the exercise of the right to vote, was introduced in England and Wales by the Representation of the People Act 183216. Until 1832 a person wishing to vote "appeared at the poll, tendered his vote, and then and there swore an oath prescribed by statute to the effect that he had the requisite 12 Constitution, s 32. 13 Constitution, s 12. 14 R v Pearson; Ex parte Sipka (1983) 152 CLR 254 at 261 per Gibbs CJ, Mason and Wilson JJ, 278-279 per Brennan, Deane and Dawson JJ. 15 R v Pearson; Ex parte Sipka (1983) 152 CLR 254 at 278 per Brennan, Deane and 16 2 & 3 Will IV c 45, s 26. qualification"17. The 1832 Act was also the first step in a process of simplification and extension of what was a complex and restrictive franchise18. That complexity generated delays in electoral processes caused by the need, absent an electoral roll, to verify the identity and qualification of persons claiming to be entitled to vote. The purpose of registration therefore was "not so much to prevent fraud or to secure the rights of the bona fide electors, as to decrease the expense of elections"19. Legislative changes were made after 183220. Further reform statutes were passed in 1865 and 186721. Loss of voting rights for failure to comply with registration requirements was substantial. Registration was evidently a burdensome process and from the point of view of some electors: "the privilege of voting was not worth the pains"22. A common register was established in 1878 for parliamentary and municipal electors23. By the Registration Act 188524 the process of registration in counties was assimilated to that of boroughs and a uniform system put in place25. The system operated more smoothly after that time26. As appears from the history, the purpose of registration was practical and directed to dealing with the consequences of the complicated and diverse qualifications required for a person to become an elector. The relationship of registration to the franchise and the franchise to the qualification to vote was viewed in different ways by constitutional scholars. Sir William Anson characterised registration as "a condition precedent to the 17 Maitland, The Constitutional History of England, (1908) ("Maitland") at 355. 18 There were distinct county and borough franchises: see Anson, The Law and Custom of the Constitution, 4th ed (1909), vol 1 ("Anson") at 101-103, 105-109; Maitland at 351-357. 19 Seymour, Electoral Reform in England and Wales, (1915) ("Seymour") at 107. 20 Seymour at 118. 21 County Voters Registration Act 1865 (28 & 29 Vict c 36); Representation of the People Act 1867 (30 & 31 Vict c 102); Seymour at 160. 22 Seymour at 163. 23 Seymour at 375-376. 24 48 & 49 Vict c 15. 25 Seymour at 376; Anson at 132-133. 26 Seymour at 380-381. exercise of the right to vote" and as "preliminary to the enjoyment of the franchise"27. He applied the term "the Franchise" to the right to vote for members of the House of Commons28. He acknowledged that the term was also applied to the qualification which confers the right to vote. Maitland, on the other hand, said that "the only qualification that (in strictness) entitles one to vote is the fact that one is a registered elector"29. Quick and Garran, summarising the "qualifications of electors" under State laws at Federation, applied the term primarily to requirements such as gender, age and status as a natural-born or naturalised British subject but at one point appeared to include enrolment as a qualification30. The Commonwealth Franchise Act 1902 defined the class of persons entitled to vote by reference to age, residence, status as a natural-born or naturalised British subject, and enrolment for the Electoral Roll for any Electoral District31. The proposition that a person enrolled fell within the statutory term "qualified to vote" and was thereby entitled to sign an election petition was endorsed by Brennan ACJ in Muldowney v Australian Electoral Commission32. The right to vote conferred by s 93 of the CEA was then, as it is now and has been since the Commonwealth Franchise Act 1902, dependent upon enrolment33. Mason CJ in Re Brennan; Ex parte Muldowney34 thought s 93 prescribed "qualifications to be enrolled and to vote respectively". What Brennan ACJ said in Muldowney v Australian Electoral Commission was endorsed in Snowdon v Dondas35. 27 Anson at 134. 28 Anson at 101. 29 Maitland at 355. 30 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at 469-470. The authors made a distinction between qualification and enrolment in their summary of the laws of New South Wales, Queensland and Western Australia, but elided the distinction in the summary relating to South Australia. 31 Commonwealth Franchise Act 1902, s 3. 32 (1993) 178 CLR 34 at 40; [1993] HCA 32. The term "qualified to vote" appears in s 355(c) of the CEA, which defines the entitlement to sign a petition disputing an election. 33 (1993) 178 CLR 34 at 39 per Brennan ACJ. 34 (1993) 67 ALJR 837 at 839; 116 ALR 619 at 623; [1993] HCA 53. 35 (1996) 188 CLR 48 at 72. faster colonies evolution The Australian towards enjoyed democratisation than the United Kingdom36. Universal manhood suffrage was adopted in South Australia with the introduction of responsible government37. Victoria and New South Wales followed suit in 1857 and 185838. The same franchise was introduced in Queensland in 1885 and Western Australia in 189339. Tasmania introduced it in 190140. The franchise was extended to women in South Australia in 1895 and Western Australia in 190041. Soon after Federation women The Commonwealth Franchise Act 1902 provided for universal adult franchise but excluded "aboriginal native[s] of Australia Asia Africa or the Islands of the Pacific except New Zealand", save for those entitled to vote by virtue of s 41 of the Constitution43. It also excluded persons of unsound mind, persons attainted of treason and persons under sentence or subject to be sentenced for any offence punishable by imprisonment for one year or more. the remaining States also acquired the franchise42. The electoral laws of the Australian colonies in the 19th century replicated important elements of the British system. A distinction between the qualification of electors and the requirements of listing, enrolment or registration was a common feature of such laws. The qualifications of electors were, for the most part, to be found in early colonial Constitutions, although sometimes they were 36 McMinn, A Constitutional History of Australia, (1979) at 62, cited in Roach v Electoral Commissioner (2007) 233 CLR 162 at 194-195 [69] per Gummow, Kirby 37 Constitution Act 1856 (SA), s 16. 38 Abolition of Property Qualification Act 1857 (Vic); Electoral Act 1858 (NSW), s 9. 39 Elections Act 1885 (Q), s 6; Constitution Act Amendment Act 1893 (WA), s 21. 40 Constitution Amendment Act 1900 (Tas), s 5. 41 Constitution Amendment Act 1894 (SA); Constitution Acts Amendment Act 1899 (WA), ss 15-17 and 26. 42 Women's Franchise Act 1902 (NSW); Constitution Amendment Act 1903 (Tas); Elections Acts Amendment Act 1905 (Q), s 9; Adult Suffrage Act 1908 (Vic). 43 Commonwealth Franchise Act 1902, s 4. Section 127 of the Constitution, providing that Aborigines were not to be counted in reckoning the numbers of the people of the Commonwealth, was repealed by the Constitution Alteration (Aboriginals) 1967 (Cth). repeated in electoral statutes44. Registration or enrolment requirements were found in statutes made under the Constitutions. The position at Federation was that the electoral laws of each of the Australian colonies conditioned the right to vote in an election upon enrolment on the relevant Electoral Roll45. Those electoral laws also provided for closure of the Electoral Rolls to new enrolments or transfers prior to polling day, although with variations in their cut-off dates46. Having regard to the historical origins and purpose of voter registration and the mixed usage of the term "qualification" evidenced in Quick and Garran, it might be thought that if enrolment is a qualification in the constitutional sense, it is at best ancillary to those qualifications which otherwise define the franchise. The history of registration laws in the United Kingdom and in Australia provide support for that characterisation. In any event, all laws of the Commonwealth Parliament providing for enrolment and for the conduct of elections must operate within the constitutional framework defined by the words "directly chosen by the people". Chosen by the people The content of the constitutional concept of "chosen by the people" has evolved since 1901 and is now informed by the universal adult-citizen franchise which is prescribed by Commonwealth law. The development of the franchise was authorised by ss 8 and 30 of the Constitution, read with s 51(xxxvi). Implicit in that authority was the possibility that the constitutional concept would acquire, 44 Australian Constitutions Act 1842 (Imp) (5 & 6 Vict c 76), ss 5-7; Constitutional Act 1854 (Tas), ss 6 and 17-19; New South Wales Constitution Act 1855 (Imp) (18 & 19 Vict c 54), Sched 1, s 11; Constitution Act 1855 (Vic), ss 5 and 12; Constitution Act 1856 (SA), ss 6 and 16; Constitution Act 1889 (WA), ss 39 and 53. The Constitution Act 1867 (Q) provided that members of the Legislative Assembly would be elected by inhabitants of the colony having qualifications mentioned in the Electoral Act for the time being: s 28. 45 Parliamentary Electorates and Elections Act 1893 (NSW), s 80; Constitution Act Amendment Act 1890 (Vic), s 241; Elections Act 1885 (Q), s 40; Electoral Code 1896 (SA), ss 36, 116 and 126; Electoral Act 1899 (WA), ss 21, 87 and 104; Electoral Act 1896 (Tas), s 57. 46 Parliamentary Electorates and Elections Act 1893 (NSW), ss 47-51; Constitution Act Amendment Act 1890 (Vic), ss 97 and 186; Elections Act 1885 (Q), s 40; Electoral Code 1896 (SA), ss 51, 52 and 57; Electoral Act 1899 (WA), ss 37 and 44; Electoral Act 1896 (Tas), s 57. as it did, a more democratic content than existed at Federation. That content, being constitutional in character, although it may be subject to adjustment from time to time, cannot now be diminished. In Attorney-General (Cth); Ex rel McKinlay v The Commonwealth47 its evolution was linked in the judgment of McTiernan and Jacobs JJ to "the common understanding of the time on those who must be eligible to vote before a member can be described as chosen by the people of the Commonwealth"48. Their Honours said49: "For instance, the long established universal adult suffrage may now be recognized as a fact and as a result it is doubtful whether, subject to the particular provision in s 30, anything less than this could now be described as a choice by the people." The term "common understanding", as an indication of constitutional meaning in this context, is not to be equated to judicial understanding. Durable legislative development of the franchise is a more reliable touchstone. It reflects a persistent view by the elected representatives of the people of what the term "chosen by the people" requires. Gleeson CJ adverted to the irreversible evolution of "chosen by the people" in Roach v Electoral Commissioner50 when he answered in the negative the question: "Could Parliament now legislate to remove universal adult suffrage?"51 The reason for that negative answer was to be found in ss 7 and 24 of the Constitution. Although those sections did not require universal adult suffrage in 1901, it had become, as McTiernan and Jacobs JJ had said in McKinlay, a "long established" fact52. The Chief Justice concluded that "in this respect, and to this extent, the words of ss 7 and 24, because of changed historical circumstances including legislative history, have come to be a constitutional protection of the right to vote"53. 47 (1975) 135 CLR 1; [1975] HCA 53. 48 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 49 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 50 (2007) 233 CLR 162. 51 Roach v Electoral Commissioner (2007) 233 CLR 162 at 173 [6]. 52 (1975) 135 CLR 1 at 36. 53 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7]. See also Langer v The Commonwealth (1996) 186 CLR 302 at 342 per McHugh J. It may be accepted, having regard to the narrower view of the franchise that subsisted in 1901, that the term "the people" in ss 7 and 24 of the Constitution is not limited to those who are qualified to vote. However, the adoption of universal adult-citizen franchise has caused the two concepts to converge. The people who choose are the electors. The non-inclusion of non- citizens, minors and incapable persons and persons convicted of treason or treachery, or serving sentences of imprisonment of three years or more for offences against Commonwealth, State or Territory law leaves little relevant room for distinguishing between "the people" and those entitled to become electors. While the term "directly chosen by the people" is to be viewed as a whole, the irreversibility of universal adult-citizen franchise directs attention to the concept of "the people". Analogous considerations may apply to the term "chosen" and to the means by which the people choose their members of Parliament. Where a method of choice which is long established by law affords a range of opportunities for qualified persons to enrol and vote, a narrowing of that range of opportunities, purportedly in the interests of better effecting choice by the people, will be tested against that objective. This is not to suggest that particular legislative procedures for the acquisition and exercise of the entitlement to vote can become constitutionally entrenched with the passage of time. Rather, it requires legislators to attend to the mandate of "choice by the people" to which all electoral laws must respond. In particular it requires attention to that mandate where electoral laws effect change adverse to the exercise of the entitlement to vote. In this case it is the alteration of a long- standing mechanism, providing last-minute opportunities for enrolment before an election, that is in issue. Criteria of validity The validity of a provision of the CEA disqualifying as voters persons serving any sentence of imprisonment for an offence against a Commonwealth or State law was in issue in Roach54. The section, which was held invalid, operated by way of an exception to universal adult-citizen franchise. The decision in Roach is not therefore directly applicable to this case. The general approach of the majority in Roach is, however, instructive. It informs, by close analogy, the approach which should be taken in this case to the challenged law in light of the constitutional mandate. Gleeson CJ observed in his judgment in Roach that55: 54 (2007) 233 CLR 162. 55 (2007) 233 CLR 162 at 174 [7] (footnote omitted). "Because the franchise is critical to representative government, and lies at the centre of our concept of participation in the life of the community, and of citizenship, disenfranchisement of any group of adult citizens on a basis that does not constitute a substantial reason for exclusion from such participation would not be consistent with choice by the people." Exceptions to universal adult-citizen franchise required "a rational connection with the identification of community membership or with the capacity to exercise free choice"56. Gummow, Kirby and Crennan JJ also spoke of the need for a "substantial reason" to justify an exception to universal adult-citizen franchise. That requirement would be satisfied by an exception "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government"57. That formulation, their Honours said, approached the notion of "proportionality", for58: "What upon close scrutiny is disproportionate or arbitrary may not answer to the description reasonably appropriate and adapted for an end consistent or compatible with observance of the relevant constitutional restraint upon legislative power." The present case concerns an electoral law of a procedural or machinery character. It does not in terms carve out an exception to the franchise. It does, however, have a substantive effect upon entitlements to vote and so affects the exercise of the franchise. While "common understanding" of the constitutional concept of "the people" has changed as the franchise has evolved, "the people" is not a term the content of which is shaped by laws creating procedures for enrolment and for the conduct of elections. If such a law denies the right to vote to any class of person entitled to be an elector, it denies it to that class of "the people". Such a law may be valid. But the logic of the constitutional scheme for a representative democracy requires that the validity of such a law be tested by reference to the constitutional mandate of direct choice by "the people". Where, as in the present case, the law removes a legally sanctioned opportunity for enrolment, it is the change effected by the law that must be considered. It is not necessary first to 56 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [8]. 57 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85], referring also to Gleeson CJ in Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 199-200 [39]-[40]; [2004] HCA 41. 58 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85]. determine some baseline of validity. Within the normative framework of a representative democracy based on direct choice by the people, a law effecting such a change causes a detriment. Its justification must be that it is nevertheless, on balance, beneficial because it contributes to the fulfilment of the mandate. If the detriment, in legal effect or practical operation, is disproportionate to that benefit, then the law will be invalid as inconsistent with that mandate, for its net effect will be antagonistic to it. Applying the terminology adopted in Roach, such a law would lack a substantial reason for the detriment it inflicts upon the exercise of the franchise. It is therefore not sufficient for the validity of such a law that an election conducted under its provisions nevertheless results in members of Parliament being "directly chosen by the people". The Solicitor-General of the Commonwealth drew by analogy upon a distinction, made in this Court, between laws intended to impose a direct burden upon the implied freedom of political communication and those which restricted communication as part of a broader scheme of regulation59. The plaintiffs, it was submitted, failed at the threshold because the impugned laws were directed to keeping the Electoral Rolls up to date. Save for certain exceptional cases60, persons who complied with the duties imposed under s 101 of the CEA would not need to enrol or vary their enrolment when an election was called. The submission rested upon the premise that a change in a procedural or machinery law relating to elections which removes a pre-existing opportunity for enrolment by qualified persons does not require substantial justification. The premise, for the reasons already outlined, is not accepted. The submission must be rejected. The Commonwealth, nevertheless, sought to support the amendments as procedural laws "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government". The fixing of some cut-off date for enrolment consequent upon the issue of writs for an election was appropriate and 59 Coleman v Power (2004) 220 CLR 1 at 52 [98] per McHugh J; [2004] HCA 39; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 200 [40] per Gleeson CJ, citing Levy v Victoria (1997) 189 CLR 579 at 618-619 per Gaudron J; [1997] HCA 31. 60 Persons who turn 18 between the issue of the writs and polling day who could, in any event, have applied under s 100 and have three days after the issue of the writs to enrol pursuant to s 102(4AB); persons granted citizenship between the issue of the writs and polling day who in any event may apply under ss 99B and 102(4AA) up to three days after the issue of the writs; persons who have recently moved and become entitled to transfer enrolment under s 99(2) between the close of Rolls and polling day. the imposition of the duty of enrolment; adapted to that end. The Commonwealth relied upon the legislative scheme in which the cut-off provisions find their place and which provides for: the precondition to enrolment requiring satisfaction on the part of the Electoral Commissioner that a person claiming to be entitled to be enrolled is so entitled; the elaborate procedure for the conduct of an election consequent upon the issue of the writs, which procedure is premised upon the prior closure and substantial correctness of the Rolls; and a bar on any challenge to an election based on an allegation of incorrectness of the Rolls. The Commonwealth submitted that the choice of one date rather than another as the cut-off date for enrolment following the issue of writs for an election was not something which would take the legislative scheme outside the bounds of what is appropriate and adapted to the relevant end. For the reasons already given, the characterisation of an electoral law as procedural, or in the nature of electoral machinery, does not of itself justify collateral damage to the extent of participation by qualified persons in the choice of their parliamentary representatives. The detriment, even if contributed to by the failure of those persons to fulfil their duties under the CEA, is still a detriment "of concern to the whole Commonwealth". It must be accepted, in considering the validity of the impugned laws, that Parliament has a considerable discretion as to the means which it chooses to regulate elections and to ensure that persons claiming an entitlement to be enrolled are so entitled. It is not for this Court to hold such a law invalid on the basis of some finely calibrated weighing of detriment and benefit. Nor is it the function of the Court to hold such a law beyond the power of the Parliament simply because the Court thinks there might be a better way of achieving the same beneficial purpose. What Latham CJ said in the First Uniform Tax Case is of general application and applies to this case61: "It is not for this or any court to prescribe policy or to seek to give effect to any views or opinions upon policy. We have nothing to do with the wisdom or expediency of legislation. Such questions are for Parliaments and the people." 61 South Australia v The Commonwealth (1942) 65 CLR 373 at 409; [1942] HCA 14. If a law subject to constitutional challenge is a law within the legislative competency of the Parliament that enacts it, the question whether it is a good law or a bad law is a matter for the Parliament and, ultimately, the people to whom the members of the Parliament are accountable. But where the Constitution limits the legislative power of a Parliament in any respect and where a question of the validity of a law is raised and has to be answered in order to determine a matter before the Court, then the Court must decide whether constitutional limits have been exceeded. It is necessary at this point to refer to the events which have led to these proceedings. Factual and procedural history On Saturday, 17 July 2010, the Prime Minister announced her intention to call a general election for the Senate and the House of Representatives. On the same day, her Excellency, the Governor-General, acting upon the advice of the Prime Minister, prorogued the Parliament from 4.59 pm on Monday, 19 July until Saturday, 21 August 201062. Writs were issued on 19 July for the election of members of the House of Representatives for the States and Territories and for the election of senators for the Territories by the Administrator in Council and for the election of senators for the States by their respective vice-regal representatives. The writs fixed 22 July 2010 for the closing of the Rolls, 29 July 2010 for the closing of nominations, 21 August 2010 for polling and on or before 27 October 2010 for the return of the writs. The plaintiffs are both students. Both are Australian citizens. The first plaintiff, Shannen Rowe, turned 18 on 16 June 2010. At the time the election was announced she was not enrolled to vote. A completed form was not lodged on her behalf until Friday, 23 July 2010. By operation of s 102(4) of the CEA, her claim for enrolment, having been lodged after 8 pm on the day of the issue of the writs, could not be considered until after the close of polling at the election. The second plaintiff, Douglas Thompson, was 23 years of age and was enrolled to vote for the Division of Wentworth at an address in that Division. However, in March 2010 he had moved to a new address in the Division of Sydney. Following an abortive attempt to lodge electronically a claim for transfer of his enrolment pursuant to s 101 of the CEA, he completed a form which he signed on 22 July and which was lodged by facsimile transmission with the AEC by his 62 Commonwealth of Australia Gazette, S136, 19 July 2010. solicitor. By virtue of s 102(4AA) of the CEA, however, his claim for transfer, having been lodged after 8 pm on the date of the close of the Rolls, could not be considered until after the close of polling at the election. Ms Rowe and Mr Thompson commenced proceedings in this Court on 26 July 2010 on their own behalf and as representative parties claiming a declaration that ss 102(4), 102(4AA) and 155 of the CEA are invalid. They also sought an order to show cause why writs of mandamus should not issue directed to the Electoral Commissioner in effect requiring that they be included on the Electoral Rolls for their respective Divisions. On 29 July 2010, Hayne J made an order pursuant to r 25.03.3(b) of the High Court Rules 2004 referring the proceedings for further hearing by a Full Court on Wednesday, 4 August 2010. The plaintiffs continued the proceedings on their own behalf and not in a representative capacity. They filed an amended application by leave. The parties also filed a statement of agreed facts. The Commonwealth Electoral Act 1918 The long title of the CEA is "An Act to Consolidate and Amend the Law relating to Parliamentary Elections and for other purposes". The provisions under challenge must be considered in the context of the legislative scheme of which they form part. The Act establishes the Australian Electoral Commission ("the AEC"), comprising a Chairperson, the Electoral Commissioner and one other member63. Among the functions of the AEC are64: "to provide information and advice on electoral matters to the Parliament, the Government, Departments and authorities of the Commonwealth". The AEC is required to prepare and forward to the Minister each year a report of its operations for the year ended 30 June65. Annual Reports of the AEC for the years 1998-1999 to 2008-2009 inclusive were referred to in the statement of agreed facts, which forms part of the Application Book. The AEC has also, from time to time, made submissions to the Joint Standing Committee on Electoral Matters ("the JSCEM"). A number of those submissions were also included in the Application Book in relation to inquiries conducted by the JSCEM into federal elections in 1998, 2004 and 2007. By the agreed facts, the authenticity of 63 CEA, s 6(1) and (2). 64 CEA, s 7(1)(d). 65 CEA, s 17(1). the reports and the submissions were accepted, as was, by specific agreement, the correctness of certain factual statements and tables contained in them. Reference to these reports and submissions in these reasons is made within the framework of the agreements about their use between the parties66. The Electoral Commissioner is the chief executive officer of the AEC67. There is an Australian Electoral Officer for each State68. There is a Divisional Returning Officer for each Electoral Division, whose duty it is to give effect to the Act "within or for the Division subject to the directions of the Electoral Commissioner and the Australian Electoral Officer for the State"69. Under Pt IV of the Act each State and the Australian Capital Territory are "distributed into Electoral Divisions" with one member of the House of Representatives to be chosen for each Division70. There is a provision for the redistribution of the Divisions in a State or the Territory71 and a requirement for monthly assessments of the number of persons enrolled in each Division, the average divisional enrolment and the extent to which the number of electors enrolled in each Division differs from that average72. A mini-redistribution can be undertaken after the issue of the writs for an election where the number of Divisions in a State differs from the number of members to which the State is entitled73. That process involves a consideration of the number of electors enrolled in the various Divisions within the State. The Rolls therefore have an important part to play in the redistribution process. Part VI of the CEA provides for a Roll of electors for each State and for each Territory74. Each of those Rolls is made up of the Rolls for the Divisions 66 Set out in the statement of agreed facts in the Application Book and a supplementary statement of agreed facts filed on 5 August 2010. 67 CEA, s 18. 68 CEA, s 20(1). 69 CEA, s 32(1); see also ss 18(3) and 20(3). 70 CEA, ss 56 and 57. 71 CEA, s 73. 72 CEA, s 58(1). 73 CEA, s 76. 74 CEA, s 81(1). within the State or Territory75. The Rolls are to contain the name and address of each elector and such further particulars as are prescribed76. Rolls can be inspected77 and information contained in them must be made available to specified classes of persons and organisations78. The AEC must conduct reviews of the Rolls with a view to ascertaining such information as is required for their preparation, maintenance and revision79. The AEC has, since 1999, used a process of data-matching, designated "Continuous Roll Update" ("CRU"), to maintain the Electoral Roll. By this process personal information on electors held by the AEC is matched with external data from other agencies and from some utility companies. Where data- matching indicates that an elector has become eligible or has changed his or her address, the AEC sends a letter to or visits the elector. This process can result in an enrolment or a transfer of enrolment occurring. Non-response to attempted communication can lead to the removal of the elector from the Roll under the objection process for which Pt IX provides80. The scale of the CRU undertaking is indicated by the fact that between 2000-2001 and 2004-2005 the AEC each year processed about four million records showing a change of address or likely eligibility to enrol. Targeted mail was sent to 2.8 million addresses each year. Field visits were made to 330,000 habitations annually. This activity generated about 850,000 enrolments annually. The result of the activity was more complete Electoral Rolls. There was, however, a much lower rate of return, in terms of enrolments, having regard to extra expenditure in 2007, compared with the return in 2004. During 1997, the AEC introduced enhancements to its computerised Roll Management System ("RMANS") in order to detect and deter fraudulent enrolment. The RMANS Address Register separately identifies each known 75 CEA, s 82(4). 76 CEA, s 83(1). Save for eligible overseas electors and itinerant electors, whose addresses are not required: s 83(2). 77 CEA, s 90A. 78 CEA, ss 90B-91B. 79 CEA, s 92(2). 80 The CRU process was described in a report dated 21 April 2010 prepared by the Australian National Audit Office on the AEC's preparation for, and conduct of, the 2007 federal general election. The contents of the report were agreed by the parties as an accurate statement of the AEC's CRU activities during the period described. address, based on known streets and localities, and lists a range of attributes for the address, including whether the address is habitable and valid for enrolment. The Register is then used to assess the validity of addresses listed on enrolment claims. Qualifications and disqualifications for enrolment and for voting are dealt with in Pt VII of the CEA. A key provision of Pt VII is s 93. It sets out conditions upon which persons "shall be entitled to enrolment"81. They are persons who have attained 18 years of age and who are Australian citizens82. Also entitled are non-citizens who would have been British subjects within the meaning of the relevant citizenship law had it continued in force and whose names were, before 26 January 1984, on a Roll83. An "Elector" is defined in s 4(1) as "any person whose name appears on a Roll as an elector" and whose name is on the Roll for a Division. An elector is "entitled to vote at elections of Members of the Senate for the State that includes that Division and at elections of Members of House of Representatives for that Division"84. Some classes of persons are not entitled to enrolment or to vote. The holders of temporary visas under the Migration Act 1958 (Cth) and unlawful non-citizens under that Act are not entitled to enrolment85. Persons who, by reason of being of unsound mind, are incapable of understanding the nature and significance of enrolment and voting and persons convicted of treason or treachery and not pardoned are not entitled to enrolment or to vote at any Senate election or election for the House of Representatives86. Also disqualified are persons serving a sentence of imprisonment of three years or longer87. Persons resident in Australia who are leaving Australia may be included on the Roll as eligible overseas electors88. Persons who have ceased to reside in 81 CEA, s 93(1). 82 CEA, s 93(1)(a) and (b)(i). 83 CEA, s 93(1)(b)(ii). 84 CEA, s 93(2). 85 CEA, s 93(7). 86 CEA, s 93(8). 87 CEA, s 93(8)(b) as it stood before its repeal in 2006 by amendments held invalid in Roach v Electoral Commissioner (2007) 233 CLR 162. 88 CEA, s 94. Australia and intend to resume residence within six years of ceasing may apply for enrolment and be enrolled89. Spouses, de facto partners and children of eligible overseas electors may apply for enrolment90. There is also provision for the enrolment of itinerant electors, a class which includes homeless persons91. There are cut-off provisions, preventing consideration of the enrolment of persons in some of these categories, which operate from 8 pm on the day that the writs have issued for an election92. The validity of the amendments which introduced these provisions was challenged by the plaintiffs in their further amended application. That was a necessary consequence of their challenge to the cut-off provisions affecting them, which are to be found in Pt VIII of the CEA. No objection was taken to their standing to do so. It was accepted that the cut-off provisions introduced by the Amendment Act would stand or fall together. Section 93 is made under two heads of constitutional power. The first is the power to make laws to prescribe the qualifications of electors93. The second is the power to make laws relating to the election of senators and members of the House of Representatives94. The two heads of legislative power are logically distinct. Nevertheless, laws prescribing electoral processes may validly impinge upon the entitlement to vote at an election. As already explained, the only proper purpose of such processes is to provide the means by which "the people" may choose the members of their Parliament. That statement of purpose is a generalisation of the rationale offered by Griffith CJ in Smith v Oldham for laws regulating the conduct of persons with regard to elections95: "The main object of laws for that purpose is, I suppose, to secure freedom of choice to the electors." The two heads of power was acknowledged by Gibbs CJ, Mason and Wilson JJ in R v Pearson; Ex parte logical distinction between the 89 CEA, s 94A. 90 CEA, s 95. 91 CEA, s 96. 92 CEA, ss 94A(4), 95(4) and 96(4). These cut-offs were introduced by Items 20, 24 and 28 in Sched 1 to the Amendment Act. 93 Constitution, s 51(xxxvi) read with ss 8 and 30. 94 Constitution, s 51(xxxvi) read with ss 10 and 31. 95 (1912) 15 CLR 355 at 358. Sipka96. The provision of the CEA there under consideration, to the extent that it impinged upon voting rights said to be protected by s 41 of the Constitution, was s 45(a). The latter section provided a cut-off for claims for enrolment and transfers of enrolment upon issue of the writs for an election. It was characterised by their Honours as a law relating to elections for members of the House of Representatives and senators97. It does not appear from the joint judgment of Brennan, Deane and Dawson JJ that their Honours, as the Commonwealth submitted in this case, treated s 45(a) as an aspect of the definition of The Commonwealth submitted that in any event the subject matters of qualification of electors and elections are not mutually exclusive. That may be accepted. A law may be a law with respect to both subject matters. But the class of law which defines the qualifications of electors, even if it extends to laws making enrolment a condition of entitlement to vote, does not extend to procedural laws prescribing cut-off dates for the lodgement of claims for enrolment or transfer of enrolment. the Commonwealth franchise under ss 8 and 30. Part VIII of the CEA sets up a system of compulsory enrolment. Every person who is entitled to be enrolled for any Subdivision, whether by way of enrolment or transfer of enrolment, and whose name is not on the Roll, is required to "forthwith fill in and sign a claim and send or deliver the claim to the Electoral Commissioner"98. The requirement does not apply to persons applying to be treated as eligible overseas electors under s 94 or their spouses, de facto partners or children. It does not apply to itinerant electors, nor to persons who have turned 16 and who are thereby eligible under s 100 of the CEA to lodge a claim in advance of turning 18. By operation of s 98AA99, certain classes of prospective electors, including those making claims as itinerant or overseas electors, are required to supply evidence of their identity. The methods of proof available are specified in sub-s (2) and in regs 11A and 12 of the Electoral and Referendum Regulations 1940 (Cth). Subject to an immaterial exception, a person whose name is not on the Roll on the expiration of 21 days from the date upon which the person became so 96 (1983) 152 CLR 254. 97 (1983) 152 CLR 254 at 265. 98 CEA, s 101(1). 99 Section 98AA was inserted into the CEA by the Amendment Act (Item 29 in Sched 1) but was repealed and its present form substituted by the Electoral and Referendum Amendment (Modernisation and Other Measures) Act 2010 (Cth) (Item 6 in Sched 2). entitled is guilty of an offence unless he or she proves that the non-enrolment was not the result of a failure to send a completed claim to the Electoral Commissioner100. There is also an offence committed when a person changes his or her address within a particular Subdivision and does not give notice of the new address within 21 days to the Electoral Commissioner101. Failure to comply with the obligations under s 101 constitutes an offence punishable on conviction by a fine not exceeding one penalty unit. There is, however, a saving provision in s 101(7), which provides: "Where a person sends or delivers a claim for enrolment, or for transfer of enrolment, to the Electoral Commissioner, proceedings shall not be instituted against that person for any offence against subsection (1) or (4) committed before the claim was so sent or delivered." The obligations imposed by s 101 apply to first-time claimants for enrolment on any Roll, persons effecting transfer of enrolment from one Subdivision to another and persons changing their address within one Subdivision. The offence provisions are an incentive to enrolment and to discharge of the statutory duty to enrol and ultimately to vote. Their primary character as an incentive is apparent from the immunity from prosecution conferred by s 101(7) when a person has sent or delivered a claim for enrolment or transfer of enrolment to the Electoral Commissioner. They are designed not to punish, but to encourage maximum participation by persons qualified to vote. Where the Electoral Commissioner receives a claim for enrolment or transfer of enrolment and the claim is in order, the Commissioner is required by s 102(1)(b) to enter the name of the claimant on the Roll together with other necessary particulars. The claimant is also to be notified in writing of the enrolment. Sub-sections (4) and (4AA) of s 102 apply in the present case to the first and second plaintiffs respectively. The validity of the amendments to the CEA which introduced those sub-sections is under challenge. The sub-sections are in the following terms: If a claim by a person for enrolment under section 101 … is received during the period: beginning at 8 pm on the date of the writ or writs for an election for the Division to which the claim relates; and ending at the close of the polling at the election; 100 CEA, s 101(4). 101 CEA, s 101(5) and (6). then the claim must not be considered until after the end of the period. (4AA) If a claim by a person for transfer of enrolment under section 101 … is received during the period: beginning at 8 pm on the date of the close of the Rolls for an election for the Division to which the claim relates; and ending at the close of the polling at the election; then the claim must not be considered until after the end of the period." Where a claim is delayed by reason of delay in the delivery of mail caused by an industrial dispute, then the claim shall be regarded as having been received before the commencement of the cut-off periods referred to in sub-s (4) or sub-s (4AA) as the case requires102. Sub-sections (4) and (4AA) of s 102 are to be read in the light of Pt XIII of the CEA, which is concerned, inter alia, with the issue of writs for elections, the dates for the close of the Rolls, nomination, polling and the return of the writs. The close of the Rolls is dealt with by s 155: "155 Date for close of Rolls The date fixed for the close of the Rolls is the third working day after the date of the writ. In this section: working day means any day except: a Saturday or a Sunday; or a day that is a public holiday in any State or Territory." The validity of the 2006 amendment to s 155 is challenged in these proceedings. The date fixed for nomination of the candidates is required to be not less than 10 days nor more than 27 days after the date of the writ103. The date fixed 102 CEA, s 102(4A) and (4B). 103 CEA, s 156(1). for polling is to be not less than 23 days nor more than 31 days after the date of nomination104. The date fixed for the return of the writ is to be not more than 100 days after the issue of the writ105. The effect of s 102(4) is that a person lodging a claim for enrolment cannot have the claim considered until after the election if it was lodged after 8 pm on the day that the writs issued. The effect of s 102(4AA), read with s 155, is that a person seeking transfer of enrolment because of a change of address has three days only from the date of the issue of the writs to lodge his or her claim. Part IX of the Act provides for objections to be made to the enrolment of a person on the Electoral Roll106. The Electoral Commissioner, however, cannot remove an elector's name from the Roll during the period between 8 pm on the date of issue of the writs for an election and the close of polling for that election107. The Commonwealth in its submissions pointed to the effects of the pre-amendment law on the Electoral Commissioner's ability to process objections. In this connection it should be noted that s 106 empowers the Electoral Commissioner, at any time between the date of issue of the writ for an election for a Division and before the close of polling at that election, to remove from the Roll the name of a person who secured enrolment pursuant to a claim in which the person made a false statement. That power does not depend upon the application of the objection process. It is now necessary to review briefly the history of cut-off provisions prior to the Amendment Act. Enrolment cut-offs: 1902-2006 The Commonwealth Electoral Act 1902 was described in its long title as "An Act to regulate Parliamentary Elections". It conferred the entitlement to enrolment on "[a]ll persons qualified to vote at any Election for the Senate or House of Representatives, or who would be qualified so to vote if their names were upon a Roll"108. There was a cut-off provision in s 64. Claims for enrolment and transfer of enrolment lodged before the issue of the writs for an 104 CEA, s 157. 105 CEA, s 159. 106 CEA, s 114. 107 CEA, s 118(5). This provision was altered by the Amendment Act. Prior to amendment, the period during which the removal of names from the Rolls was precluded ran from seven days after the date of the writs. 108 Commonwealth Electoral Act 1902, s 31. election could be processed after the issue of the writs but otherwise no addition or alteration was to be made to the Rolls between the issue of the writs and the close of polling. As enacted the CEA, which consolidated and amended the law relating to parliamentary elections, contained a similar although not identical cut-off provision. Claims for enrolment or transfer which were received after 6 pm on the day of the issue of the writs for an election would not be registered until after close of polling109. Until 1983 the CEA continued to provide that the Electoral Rolls closed on the date of issue of the writs. There was, however, an executive practice, which developed at least from the 1930s, of announcing the election some days before the Governor-General was asked to dissolve Parliament and issue writs for the election of the members of the House of Representatives110. The time between the announcement and the issue of the writs varied, after 1934, from a minimum of five days in 1949 to a maximum of 63 days in 1958. In 1983 there was a departure from that practice. The election was announced on the afternoon of the day before the issue of the writs. It was that late announcement, coupled with the operation of s 45(a) (the cut-off provision of the CEA then in force), that led to the litigation in this Court in R v Pearson; Ex parte Sipka111. Murphy J referred to the background in his dissenting judgment112: "The effect of the circumstances in which this election was called is that many persons who were entitled to be but were not enrolled on the Commonwealth roll by 6 pm on 4 February 1983 are, apart from s 41 of the Constitution, prevented from enrolling and voting in this election because of s 45(a) of the Commonwealth Electoral Act." The CEA was amended by the Commonwealth Electoral Legislation Amendment Act 1983 (Cth). The cut-off point for consideration of claims for enrolment or transfer of enrolment was extended beyond the date of issue of the writs to the date of close of the Rolls113. The date fixed for close of the Rolls was to be seven days after the date of issue of the writs114. The Second Reading 109 CEA, s 45(a) (as enacted in 1918). 110 Constitution, s 32. 111 (1983) 152 CLR 254. 112 (1983) 152 CLR 254 at 266-267. 113 Commonwealth Electoral Legislation Amendment Act 1983, s 29. 114 Commonwealth Electoral Legislation Amendment Act 1983, s 45. Speech for the amending legislation described one of its objectives as "to make it easier for electors to get on the rolls and stay on the rolls … For example, the Bill provides that there must be a sufficient time between the announcement of an election and the close of rolls for that election."115 The seven-day period of grace then introduced operated for eight subsequent federal elections until the amendments under challenge in these proceedings. Before it was amended in 2006, s 102 of the CEA precluded consideration, until after the close of polling, of a claim for new enrolment received after 8 pm on the day on which the Rolls for the election were to close. Section 155, as it then stood, provided that the date fixed for the close of the Rolls was seven days after the date of the writs. The effect of s 102, read with s 155, was that a person, qualified as an elector, had seven days after the issue of the writs to lodge a claim for enrolment and thus be placed on the Roll. The position of a person seeking a transfer of enrolment was the same. The challenged amendments were effected by s 3 of the Amendment Act, read with various items specified in Sched 1 to that Act. The amendment, by repeal and substitution, of s 102(4) and the insertion of s 102(4AA) were effected by Item 41 in Sched 1. The amendment of s 155 was effected by repeal and substitution under Item 52 in Sched 1. Operation of the cut-off: 1983-2006 AEC records for the period 1993-2006 show the number of new enrolments, re-enrolments and transfers of enrolment undertaken during the grace period after the issue of the writs. The number of such transactions represented well in excess of 350,000 electors in each of the 1993, 1996, 1998 and 2001 elections. For each of the 1998 and 2001 elections the number of new enrolments and re-enrolments increased daily during the seven-day period (save for Saturdays and Sundays). In 2004, the close-of-Rolls transactions represented 17.5 per cent of total enrolment activity for the 2004-2005 financial year. Of 520,086 close-of-Rolls transactions, 265,513 enrolment cards were received from voters whom the AEC had contacted in the 12 months prior to the election. Following the Amendment Act the post-announcement grace period for the 2007 election was three days for new enrolments and nine days for updating existing enrolments. those periods 279,469 enrolment transactions. Some 100,370 people lodged their claims for enrolment or transfer of enrolment after the close of the Rolls. There were 115 Australia, House of Representatives, Parliamentary Debates (Hansard), 2 November 1983 at 2216. The AEC reported to the Australian National Audit Office ("the ANAO"), following the 2007 election, that it had faced a far greater challenge in 2007 due to the shortened close of the Rolls. It was not able to rely upon its previous strategy, used in 2004, which involved advertising when the election was called and drawing attention to the seven-day close-of-Rolls period. The AEC also reported that in 2007 it had achieved "a small gain in enrolment efficiency measured by transaction". The gain was expensive. About $36 million was spent on enrolment activity, including advertising, before the 2007 election. The marginal cost of each of the net additional 118,885 enrolments in 2007 was over $216, nearly seven times the unit cost per additional enrolment in 2004. As to the problem of electoral fraud, the AEC stated, in a submission to the JSCEM in October 2000, that "identity fraud is not a significant problem in the federal electoral system". The AEC observed: "Apart from the lack of evidence available to the AEC of any widespread and organised conspiracy involving identity fraud … it must be acknowledged that there are very significant difficulties in organising an identity fraud conspiracy of sufficient magnitude to affect the result in a federal Division". In the event, it was not submitted for the Commonwealth that the justification for the amendments, so far as it was based upon the prevention of fraud, was other than prophylactic. That is to say, the amendments were not introduced as a reaction to an existing problem of identity fraud in connection with enrolments. It is apparent from the agreed facts that, as would be expected, the effect of the cut-off provisions enacted in 2006 was greater with respect to newly qualified electors than electors in older age groups. The percentage of eligible persons in the age range 18-25 who were not enrolled as at 30 June 2006 and 30 June 2007 was significantly greater than the percentage of the total number of eligible voters who were not enrolled at those dates. As at 15 April 2010, there were approximately 430,000 eligible young people who were not enrolled to vote. It was also an agreed fact that people living in remote and rural areas of Australia may have difficulty enrolling because of limited access to the facilities and services necessary for enrolment. Other agreed facts were before the Court in relation to claims for enrolment in connection with the 2010 election. They were set out in an affidavit sworn by Paul Dacey, Deputy Electoral Commissioner in the AEC: 508,000 claims for enrolment and transfer of enrolment were received after the announcement of the election and before the deadlines for enrolment claims. Those claims were processed onto the Rolls by 27 July There were estimated to be approximately 100,000 claims for enrolment received after the cut-off deadlines, but before the date for the closing of the Rolls prior to the Amendment Act. That estimate was based on preliminary advice from State Managers at close of business on 27 July 2010, albeit it was subject to a considerable margin of uncertainty. Mr Dacey indicated that if a requirement to process late claims for enrolment and transfer of enrolment were made known to the AEC by 6 August 2010, it would be able to process them. It would have to deploy additional staff and the deployment would cause some level of disruption. An electronic version of the Roll would be able to be completed by 18 August 2010. The AEC would write to electors who had made late claims once their applications had been processed onto the Roll and advise that they would be able to cast a provisional vote at a polling place on polling day. Their names would not appear on the certified lists, which are the printed lists of voters for each Division required by s 208 of the CEA. Those lists would have been finalised and sent for printing. This would not prevent electors who enrolled late from exercising their vote, nor would it interfere with processes of preliminary scrutiny of declaration votes116 as those requirements could be met by utilising the electronic Roll. The justification for the Amendment Act The Bill which became the Amendment Act was said, in the Second Reading Speech, to contain "reform measures arising from some of the government supported recommendations of the Joint Standing Committee on Electoral Matters' report on the 2004 federal election, which was tabled in the parliament in October 2005, and additional reform measures considered a priority by the government"117. The Speech did not otherwise set out the objectives or rationale of the amendment. The Explanatory Memorandum did not add anything relevant for present purposes. 116 Declaration votes comprise postal votes, pre-poll declaration votes, absent votes and provisional votes: CEA, s 4(1). 117 Australia, House of Representatives, Parliamentary Debates (Hansard), 8 December 2005 at 19. The report of the Joint Standing Committee on Electoral Matters on the 2004 federal election118 ("the JSCEM Report"), referred to in the Second Reading the Explanatory Memorandum, contained a number of Speech and recommendations. One was that s 155 be amended to provide that the date and time fixed for the close of the Rolls be 8 pm on the day of the writs119. The objective of and rationale for the amendment was set out at pars 2.112 to 2.126 of the Committee's report. In those paragraphs, the Committee made the following points: (iii) The AEC had processed approximately 17.5 per cent of enrolment transactions in 2004-2005 during the close of Rolls for the 2004 federal election, a period representing only three per cent of the available working time for the year120. The volume of transactions during the close-of-Rolls period limited the AEC's ability to conduct the thorough and appropriate checks required to ensure that the Rolls were updated with integrity121. If electors had enrolled or changed their enrolment details at the time that their entitlement changed, 60.5 per cent of enrolment transactions during the close-of-Rolls period would not have been required122. (iv) The seven-day close-of-Rolls period for federal elections actually encouraged electors and potential electors to neglect their obligations in respect of enrolment, believing they could play "catch up" during the close-of-Rolls period. It thereby decreased the accuracy of the Rolls123. (v) A significant number of electors failed to update enrolment details in the 12 months before the 2004 election writs were issued despite contact and prompting from the AEC up to 12 months before the election was announced. These electors were later responsible for a large proportion of 118 Australia, The Parliament, Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005). 119 JSCEM Report at 36 [2.127]. 120 JSCEM Report at 34 [2.112]. 121 JSCEM Report at 34 [2.113]. 122 JSCEM Report at 34 [2.114]. 123 JSCEM Report at 35 [2.116]-[2.117]. the enrolment transactions that the AEC was required to process during close of Rolls124. (vi) AEC statistics indicated that, despite AEC efforts and significant taxpayer funds expended in contacting electors prior to elections being announced, that pattern was repeated election after election125. (vii) Electors act unlawfully in not enrolling when entitled and also cause wastage of a significant amount of taxpayer funds expended on postage and other measures in repeated attempts to persuade them to update their details on the Electoral Roll126. (viii) Current close-of-Rolls arrangements present an opportunity for those who seek to manipulate the Rolls to do so at a time where little opportunity exists for the AEC to undertake the thorough checking required to ensure Roll integrity127. (ix) The fundamental issue was to prevent such fraud before it was able to occur. Failure to do so would amount to neglect128. The change, along with the introduction of proof of identity and address measures for enrolment and provisional voting would ensure the Electoral Roll retained a high degree of accuracy and integrity, while reminding electors that the responsibility for ensuring that the Electoral Roll is updated in a timely manner rests with them129. Contentions and conclusions The principal Commonwealth submissions in respect of validity, which assumed no relevant distinction between a disqualifying electoral law and a "procedural" electoral law, may be summarised as follows: 124 JSCEM Report at 35 [2.118]. 125 JSCEM Report at 35 [2.119]. 126 JSCEM Report at 35 [2.120]. 127 JSCEM Report at 35 [2.121]. 128 JSCEM Report at 35 [2.123]. 129 JSCEM Report at 36 [2.126]. The issue in relation to the validity of the impugned provisions was in substance, according to the Commonwealth, whether their effect on the ability of some persons to cast a vote in an impending election was disproportionate to the end that they served. In light of the preceding discussion that submission is not controversial. It was not a necessary condition of the validity of the impugned provisions, so the submission went, that there be evidence of a pre- existing mischief, such as electoral fraud, to which they were directed. That submission can be accepted. However the presence or absence of evidence of an existing mischief may be relevant in ascertaining whether the detriment imposed by a law which disentitles qualified persons from enrolment is disproportionate to the benefit to be derived in terms of the constitutional mandate. The benefits derived from the earlier cut-off dates were said to include the smooth and efficient conduct of elections effected by: enhancement of the accuracy of the Roll between elections by encouraging timely enrolment and updating; consequential saving of AEC resources otherwise spent on attempts to persuade people to enrol; and (iii) consequential reduction of the diversion of AEC resources into processing of late claims for enrolment and transfer. The possibility that the amendments could yield such benefits can be accepted. The Constitution, it was submitted, has always allowed the executive a degree of control over the time that elapses between the announcement of an election and the issue of the writs. The impugned provisions, it was said, do not affect that power. That submission can also be accepted. However, a key difficulty in this case is that the impugned provisions remove a statutory grace period incapable of being affected by the executive discretion as to the timing of the announcement of the election. The Commonwealth also submitted that, on the plaintiffs' argument, either the pre-1983 provisions were invalid or their validity was somehow conditioned upon executive practice. It is not clear that the plaintiffs' argument has that consequence. In any event, when attention is focussed, as it ought to be, upon the alterations effected by the law to existing opportunities to enrol and to update enrolment rather than the search for a baseline of validity, the Commonwealth's submission is beside the point. The integrity of the Rolls was said to be enhanced by the impugned provisions in two ways: ensuring that people who should be on the Roll are on it; and ensuring that people who should not be on the Roll are not included. The Commonwealth submitted that the latter aspect of the integrity of the Rolls is enhanced because the AEC would have more time to process enrolment applications before polling day. Again, these benefits may be accepted as outcomes to which the amendments are directed. The Commonwealth submitted that differential effects of the impugned provisions on different sections of the community neither affect characterisation of the impugned provisions nor indicate a purpose of disenfranchising those sections. The defining characteristic of those excluded was said to be that they failed to comply with their obligations to enrol and effect transfer of their enrolments. In my opinion there is no basis for inferring any discriminatory purpose underlying the Amendment Act. Moreover, it is not necessary to the disposition of this case to consider the significance of the differential operation of the impugned provisions upon particular groups. This does not exclude the possibility that operational discrimination, effected by an electoral law, in relation to the acquisition and exercise of voting entitlements could be relevant to the validity of such a law. The Commonwealth also contended that differential effects of the impugned provisions on people living in remote areas were simply one aspect of the difficulties that face people living in such areas and would not affect characterisation of the impugned provisions. The cut-off for itinerant and homeless people, it was said, had not been shown to impose a "significantly different burden" on them from that imposed on other persons. So much can be accepted but the effect of the earlier cut-off upon people living in remote areas and itinerant and homeless people is to be considered as one of the practical consequences of the impugned provisions. The plaintiffs in reply to the Commonwealth contended that the statements made by the JSCEM in its report were not a substitute for evidence and could not establish a legitimate end for the impugned provisions when the material from independent authorities such as the AEC and the ANAO were to the contrary. This submission must be rejected. The rationale advanced by the JSCEM for amendment to the law was, in effect, incorporated by reference into the Second Reading Speech for the Amendment Act. To the extent that the purposes identified in the report fell within the scope of the constitutional mandate, it is not a condition of the validity of the legislation that those recommendations were based upon findings or assumptions of fact. The ends identified by the JSCEM were legitimate in terms of the constitutional mandate. But for the reasons already given that conclusion does not end the inquiry as to validity. Importantly, there was nothing to support a proposition, and the Commonwealth did not submit otherwise, that the impugned provisions would avert an existing difficulty of electoral fraud. Nor was there anything to suggest that the AEC had been unable to deal with late enrolments. Indeed, it had used the announcement of an election, coupled with the existence of the statutory grace period, to encourage electors to enrol or apply for transfer of enrolment in a context in which its exhortations were more likely to be attended to and taken seriously than at a time well out from an election. The plaintiffs, in their submissions, pointed to existing mechanisms to ensure the integrity and accuracy of the Rolls. These included the CRU process, the RMANS Address Register and more stringent proof-of-identity requirements introduced in connection with the 2006 amendments and reflected in s 98AA of the CEA and regs 11A and 12 of the Electoral and Referendum Regulations The constitutional legitimacy of measures calculated to ensure that people who are not entitled to vote do not vote was, of course, accepted by the plaintiffs. They pointed, however, to the absence of any evidence of the existence prior to the Amendment Act of a significant number of persons voting who were not entitled to vote. They contrasted that absence with the evidence of the effect of the impugned provisions in preventing an estimated 100,000 citizens from being enrolled or transferring their enrolment. The legal effect of the impugned provisions is clear. They diminish the opportunities for enrolment and transfer of enrolment that existed prior to their enactment. These were opportunities that had been in place as a matter of law for eight federal elections since 1983. They were consistent with an established executive practice which provided an effective period of grace for nearly 50 years before 1983. The practical effect of the Amendment Act was that a significant number of persons claiming enrolment or transfer of enrolment after the calling of an election could not have their claims considered until after the election. That practical effect cannot be put to one side with the observation, which is undoubtedly correct, that those persons were so affected because of their own failures to claim enrolment or transfer of enrolment in accordance with their statutory obligations. The reality remains that the barring of consideration of the claims of those persons to enrolment or transfer of enrolment in time to enable them to vote at the election is a significant detriment in terms of the constitutional mandate. That detriment must be considered against the legitimate purposes of the Parliament reflected in the JSCEM Report. Those purposes addressed no compelling practical problem or difficulty in the operation of the Rather electoral system. its enhancement and they were directed improvement. In my opinion, the heavy price imposed by the Amendment Act in terms of its immediate practical impact upon the fulfilment of the constitutional mandate was disproportionate to the benefits of a smoother and more efficient electoral system to which the amendments were directed. For the preceding reasons, I joined in the order made on 6 August 2010. I agree also that the application should be otherwise dismissed. Bell GUMMOW AND BELL JJ. This proceeding in the original jurisdiction of the Court was instituted on 26 July 2010, seven days after the issue of writs for a general election to be held on Saturday 21 August 2010. The first plaintiff, Ms Rowe, is an Australian citizen who attained the age of 18 years on 16 June 2010 and desires to vote in the general election. The second plaintiff, Mr Thompson, is an Australian citizen aged 23 who was enrolled to vote at an address in the Electoral Division of Wentworth in the State of New South Wales. In March 2010 he moved to an address in the Electoral Division of Sydney but, prior to 22 July 2010, did not advise the Australian Electoral Commission ("the Commission") and seek the transfer of his enrolment. He also wishes to vote at the general election and to do so in the Electoral Division of Sydney. The second defendant is the Commonwealth of Australia and the first defendant the Electoral Commissioner, who is the chief executive officer of the Commission, pursuant to the provisions of the Commonwealth Electoral Act 1918 (Cth) ("the Electoral Act"). The Commission is established by s 6 of that statute. The term "Elector" is defined in s 4(1) as a person whose name appears as an elector on an Electoral Roll. Part VI (ss 81-92) of the Electoral Act provides that there be a Roll of electors for each State and for each of the Territories (s 81), with a Roll for each Electoral Division for the election of a member of the House of Representatives130, and for each Subdivision of an Electoral Division (s 82)131. A central feature of the system for the polling established by Pt XVI (ss 202A-245) of the Electoral Act is the receipt by the elector of a ballot paper and the marking of the vote in private (ss 231-233). The secrecy which attends this system makes the description "compulsory attendance" more appropriate than "compulsory voting", though the latter often is used. Part XVI also provides for provisional votes (s 235) and Pt XV (ss 182-200) provides for postal voting. Amendments were made to the Electoral Act by the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) ("the 2006 Act")132. Each plaintiff would be entitled to vote at the pending 130 See definition of "Division" in s 4(1). 131 There are currently no Subdivisions in use. However, s 4(4) of the Electoral Act provides that where a Division is not divided into Subdivisions, a reference in the Electoral Act to a Subdivision shall be read as a reference to a Division. 132 The 2006 Act (Sched 1, Items 102-139) also repealed and substituted or amended provisions of the Referendum (Machinery Provisions) Act 1984 (Cth). No challenge is made by the plaintiffs to the validity of any of these provisions of the 2006 Act. Bell the position by claiming enrolment and general election if named on the relevant Electoral Roll maintained under the Electoral Act (s 93(1), (2)). Neither plaintiff was so named on Monday 19 July 2010 when the writs for the general election were issued but both sought to rectify transfer of enrolment, respectively, within the seven day period after the issue of the writs. Their claims would have been well made under the provisions of the Electoral Act as the statute stood before the 2006 Act. However, the provisions of the Electoral Act as they have stood since the amendments made by the 2006 Act, if they are valid, would operate to close the Electoral Roll against the plaintiffs pending the holding of the general election on 21 August 2010. The Roll closed at 8pm on Monday 19 July for claims to new enrolments and at 8pm on Thursday 22 July for claims to transfers of enrolment. The evidence given for the Electoral Commissioner estimated that possibly as many as 100,000 claims for enrolment were in the same position as those made by the plaintiffs. In this Court the plaintiffs sought to establish the invalidity of the repeal effected by the relevant provisions of the 2006 Act. By order of a Justice of this Court made on 29 July 2010 the proceeding was referred for further hearing by the Full Court on a Statement of Agreement Facts. At the hearing on 4 and 5 August 2010 the Attorney-General for the State of Western Australia intervened in support of the validity of the legislation. At 12 noon on 6 August 2010 the Court, by majority, declared that certain Items133 of Sched 1 to the 2006 Act are invalid. These Items were expressed to repeal particular provisions of the Electoral Act then in force. The effect of the declaration of invalidity is that those Items were ineffective to achieve that repeal so that the statute, as it stood before that ineffective repeal, has remained in force134. The Court ordered that the Commonwealth pay the costs of the plaintiffs. The evidence on behalf of the Electoral Commissioner, and submissions by counsel, indicated that if the declaration were made by the Court on 6 August the expectation would be that the electronic roll referred to in s 111 of the Electoral Act would be completed by 18 August and the postal and provisional voting systems utilised as the need arose for the conduct of the polling on 133 Items 20, 24, 28, 41, 42, 43, 44, 45 and 52. 134 Roach v Electoral Commissioner (2007) 233 CLR 162 at 202-203 [96]-[97]; [2007] HCA 43. Bell 21 August. Accordingly, and the contrary was not suggested, there was utility in the Court making the declaration on 6 August. What follows are our reasons for joining in the making of that order. The electoral structure Further consideration of the circumstances giving rise to the litigation requires attention to several provisions of the Constitution and of the Electoral Act. Section 5 of the Constitution provides that by Proclamation the Governor-General may prorogue the Parliament and dissolve the House of Representatives and that after any general election the Parliament shall be summoned to meet not later than 30 days after the day appointed for the return of the writs. Section 32 is an important provision for the setting of the steps in the conduct of a general election. It states: "The Governor-General in Council may cause writs to be issued for general elections of members of the House of Representatives. After the first general election, the writs shall be issued within ten days from the expiry of a House of Representatives or from the proclamation of a dissolution thereof." Section 32 thus so operates that from one general election to another the period between the proclamation of a dissolution and the issue of the writs may vary, and with that variation, so also the period for an immediate appreciation by the public of the pendency of a general election. It appears that in 1914 the writs were issued on the same day as the proclamation of the dissolution, that this occurred again in 1983, and that on other occasions there have been longer intervals135. As will appear below, in the case of the general election called for 21 August 2010, the interval was that between Saturday 17 July and Monday 19 July. In their submissions the plaintiffs sought to attach some stigma to the exercise of power by the Governor-General in Council under s 32 to achieve a shorter rather than a longer interval between proclamation of a dissolution and the issue of writs. That which the Constitution plainly permits cannot be a subversion of its operation. Any consideration of what is required of the Parliament in enacting legislation to provide for chambers "directly chosen by the 135 See R v Pearson; Ex parte Sipka (1983) 152 CLR 254 at 266; [1983] HCA 6. Bell people" must allow for the exercise by the executive of the authority conferred by s 32 in accordance with its terms. Section 32 deals with general elections for members of the House. With respect to the Senate the issue of writs depends partly upon the Constitution and partly upon legislation. Section 12 of the Constitution relevantly states: "The Governor of any State may cause writs to be issued for elections of senators for the State." The practice is for those Governors to fix times and polling places identical with those for elections for the House of Representatives, the writs for which having the been Constitution136. in Council under s 32 of the Governor-General issued by Section 43 of the Electoral Act requires that an election for the senators for the Australian Capital Territory and for the Northern Territory ("the Territories") be held at the same time as each general election. Section 13 of the Constitution provides a system for rotation of senators for the States and requires that an election to fill vacant places be held within one year before they become vacant and that the term of service of these senators begin on 1 July following the date of the election. The term of service of a senator for the Territories commences on the day of election and expires at the close of the day immediately before the polling day for the next general election (s 42 of the Electoral Act). Section 151 of the Electoral Act states: "(1) The Governor-General may cause writs to be issued for elections of Senators for Territories. The writs for the elections of Senators for Territories in accordance with section 43 shall be issued within 10 days from the expiry of the House of Representatives or from the proclamation of a dissolution of the House of Representatives." In this way, s 151 of the Electoral Act, with respect to senators for the Territories, synchronises the system for the issue of writs with that prescribed by s 32 of the Constitution for general elections for members of the House of Representatives. 136 Odgers' Australian Senate Practice, 12th ed (2008) at 94. Bell Section 47 of the Constitution states: "Until the Parliament otherwise provides, any question respecting the qualification of a senator or of a member of the House of Representatives, or respecting a vacancy in either House of the Parliament, and any question of a disputed election to either House, shall be determined by the House in which the question arises." The Parliament makes such provision by Pt XXII (ss 352-381) of the Electoral Act, which establishes the Court of Disputed Returns. Section 361(1) requires that the Court not inquire "into the correctness of any Roll", although it may "inquire into the identity of persons, and whether their votes were improperly admitted or rejected, assuming the Roll to be correct". It is this electoral structure, created partly by the terms of the Constitution itself and partly by legislation, which provided the foundation for the taking of the steps now described for the conduct of a general election for 21 August 2010. The calling of the general election for 21 August 2010 On Saturday 17 July 2010, Her Excellency the Governor-General, acting under s 5 of the Constitution, issued a proclamation under the Great Seal of Australia, counter-signed by the Prime Minister. The proclamation prorogued the Parliament from 4.59pm on Monday 19 July 2010 until Saturday 21 August 2010 and dissolved the House of Representatives with effect at 5.00pm on Monday 19 July 2010137. On Monday 19 July 2010, Her Excellency the Governor of New South Wales, having assumed the the administration of Commonwealth under s 4 of the Constitution138 and acting as Administrator in Council pursuant to the Constitution and under the Electoral Act, issued writs for the election of members of the House of Representatives for the States and the Territories and for the election of senators for the Territories139. For the purposes of those elections Her Excellency fixed the following dates: the government of 137 Commonwealth of Australia Gazette, S136, 19 July 2010. 138 Commonwealth of Australia Gazette, S137, 19 July 2010. 139 Commonwealth of Australia Gazette, S139, 20 July 2010. Bell For the close of rolls For the nominations 22 July 2010 29 July 2010 For the polling 21 August 2010 For the return of the writs On or before 27 October 2010 Section 152(1) of the Electoral Act stipulated that the writs fix the dates for the close of the Electoral Rolls maintained under that statute, and for the nomination, the polling and the return of the writ. Succeeding provisions space the times which may be fixed for each of these steps. Item 52 of Sched 1 to the 2006 Act, the validity of which has been successfully challenged in this litigation, purported to insert a new s 155 into the Electoral Act which fixed the date for the closing of the Rolls as the third working day after the date of the relevant writ. Item 41, the validity of which also was successfully challenged, repealed s 102(4) and inserted provisions which required the deferral until after the election of claims to enrolment received during the period beginning at 8pm on the date of the writ, and of claims for transfer of enrolment received during the period beginning at 8pm on the date for the close of the Rolls. Sections 156 and 175 provide for the closing of nominations at 12 noon not less than 10 days nor more than 27 days after the date of the writ. The date of polling must be a Saturday which is not less than 23 days nor more than 31 days after the date of nomination (ss 157 and 158). The writs must be returned not more than 100 days after issue (s 159). As already indicated, s 5 of the Constitution requires that the meeting of the new Parliament must occur not later than 30 days after the day appointed for the return of writs. On 19 July 2010, that is to say on the same day as Her Excellency the Administrator issued writs for the election of members of the House of Representatives and for the Territory senators, Vice Regal representatives in each of the States fixed dates for the election of State senators140. The spacing of and the dates for the steps for each election, beginning with the issue of the writ, 140 New South Wales Government Gazette, SS93, 19 July 2010; Victoria Government Gazette, S286, 19 July 2010; Queensland Government Gazette, E101, 19 July 2010; South Australian Government Gazette, EG47, 19 July 2010; Western Australian Government Gazette, S140, 20 July 2010; Tasmanian Government Gazette, No 21 074, 19 July 2010. Bell corresponded with that already indicated for the election of members of the House of Representatives and senators for the Territories. By force of s 152(2) of the Electoral Act and s 37 of the Acts Interpretation Act 1901 (Cth), the writs issued on 19 July 2010 were deemed to have been issued on that day at 6pm on the standard or legal time in the State or part of the Commonwealth in which they were issued. The writs were addressed, as required by Sched 1 to the Electoral Act, to the Australian Electoral Officer for each State (in the case of State senators), the Australian Electoral Officer for each Territory (in the case of Territory senators) and the Electoral Commissioner (in the case of elections for the House of Representatives) and each commanded these officials to ensure that the election in question "be made according to law". Provision for the offices held by these officials is made by Pt II (ss 5-38) of the Electoral Act. There is an Australian Electoral Officer for each State (s 20), and an Australian Electoral Officer for the Australian Capital Territory appointed for the purposes of each election (s 30). The Australian Electoral Officers for each State are subject to the directions of the Electoral Commissioner (s 20(1)). There is also a Divisional Returning Officer for each Division who is subject to the directions of the Electoral Commissioner and, in the case of each State, to the directions of the Australian Electoral Officer for the State (s 32). The effect of the declaration made by this Court is that if the relevant officials are to ensure that the elections identified in the writs issued on 19 July are to "be made according to law" as the writs require, this must be on the footing that the date fixed for the close of the Rolls was not 22 July 2010, as stated in the writs, but seven days after the date of the issue of the writs. Part XIX (ss 283-286) of the Electoral Act deals with the return of the writs after the ascertainment of the result of the relevant election. Section 285 provides for the remedy by proclamation of "errors" in the preparation of rolls, writs, ballot papers and voter lists. Section 286 empowers the person causing a writ to be issued to make provisions, by notice published in the Gazette, meeting any difficulty which might otherwise interfere with the due course of the election; any provision so made shall be valid and sufficient and any date provided in lieu of a date fixed by the writ shall be deemed to be the date so fixed. Bell Direct choice by the people, qualification of electors and method of choice – the Constitution With respect to the Senate, s 7 of the Constitution stipulates that it: "shall be composed of senators for each State, directly chosen by the people of the State"141. With respect to the House, s 24 stipulates that it: "shall be composed of members directly chosen by the people of the Commonwealth". Sections 8, 30 and 51(xxxvi) of the Constitution provide, subject to the Constitution, for the making by the Parliament of laws respecting the qualification of electors in Senate and House of Representatives elections. Sections 9, 31 and 51(xxxvi) of the Constitution provide, subject to the Constitution, for the making by the Parliament of laws respecting "the method of choosing" senators and members of the House of Representatives. Part VII (ss 93-97) of the Electoral Act deals with qualifications for, and disqualifications from, enrolment and voting and Pt VIII (ss 98AA-112) with enrolment. The legislative scheme apparent in Pt VII and Pt VIII entwines the method adopted for the choice of representatives (a secret ballot of enrolled electors) with the necessary qualifications of electors with respect to such matters of status as age and citizenship. The provisions of the Electoral Act thus have a duplicate or sequential character. The plaintiffs complain of "disenfranchisement" in the sense that by reason of the provisions of the 2006 Act they have been denied what otherwise would be the effect of their status as persons qualified to vote at the election on 21 August 2010. They also complain that while legislation of this character must be directed to the selection of members and senators who are chosen by the people, the provisions of the 2006 Act adopt a method which is not reasonably appropriate and adapted to serve the making of the electoral choice of which ss 9 and 31 of the Constitution speak. The central submission by the plaintiffs is that the Parliament in choosing the means to achieve the integrity of the Roll necessary to give effect to popular 141 With senators representing the Northern Territory and the Australian Capital Territory, s 40(1) of the Electoral Act speaks of their being "directly chosen by the people of the Territory". Bell choice within the meaning of ss 7 and 24 of the Constitution must select a means which is no more than necessary to preserve that integrity and must not legislate to deny unreasonably the opportunity to enrol and vote. The requirement for enrolment has been entwined with the requirements for status since the Commonwealth Franchise Act 1902 (Cth). Section 3 provided that subject to the provisions for disqualification in s 4, adults not under 21 years of age, who were natural born or naturalised subjects of the King and had lived in Australia for six months continuously, and who were enrolled, were entitled to vote. Section 93 of the Electoral Act as it now stands selects from among the population all persons who are not disqualified and have attained 18 years of age and are either Australian citizens or members of a closed class of British subjects who were enrolled immediately before 26 January 1984; if enrolled they are entitled to vote. While the course of the legislation since 1902 has conditioned the exercise of the franchise upon enrolment in the manner described, there has been significant change in the selection by the Parliament of those among the population who are to be taken to answer the constitutional expressions in ss 7 and 24 respectively "by the people of the State" and "by the people of the Commonwealth". This reflects the development of Australian citizenship law, which in turn followed the emergence of national status with the winding-up of the Empire142. It also reflects changing views of the role in Australian society of young persons, even if still of secondary school age in many cases, who have attained the age of 18 years, in matters of the franchise as well as of testamentary and contractual competence, service in the armed forces, and the like. The constitutional setting By the tersely worded provisions of ss 7, 8, 9, 24, 30, 31 and 51(xxxvi), the Constitution was drawn with an appreciation of both past and future development of a democratic system of government representative of, and reflective of the wishes of, "the people". In the immediate past lay the development of representative government in the Australian colonies. This had 142 Sue v Hill (1999) 199 CLR 462 at 487-488 [51]-[52]; [1999] HCA 30; Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 398-401 [2]-[7], 465-468 [222]-[234]; [2001] HCA 51; Singh v The Commonwealth (2004) 222 CLR 322 at 382 [149]-[150]; [2004] HCA 43. Bell two presently relevant aspects. The first was a rapid growth in the development of universal and uniform adult male suffrage divorced from property qualifications, and direct election for the lower houses of the legislatures143. In the United Kingdom, on the other hand, at the beginning of the 20th century, it was possible to distinguish seven species of franchise, those identified as the property, freemen, university, occupation, household, lodger and service franchises144. The second striking Australian development had been the adoption of the secret ballot as the method of choice for the exercise of the franchise. Indeed, the facilitation of popular election in the Australian colonies by secret ballot had been influential in the enactment in the United Kingdom of the Ballot Act 1872 (UK), ss 4 and 20. The House of Lords had been impressed by tabled reports by the Governor of Tasmania145 and the Governor of South Australia146 as to the "perfect tranquillity" of the conduct of such elections, and the "mitigating influence" of the ballot upon "the occurrence of popular excitement and the discussion of disturbing topics"147. By 1901 the secret ballot, or "Australian ballot" as it was known, had been adopted in 40 of the then 45 States of the United States of America as a response to bribery and intimidation associated with viva voce polling methods148. Quick and Garran wrote, with respect to the Senate149: "The principle of popular election, on which the Senate of the Commonwealth is founded, is more in harmony with the progressive instincts and tendencies of the times than those according to which the 143 Roach v Electoral Commissioner (2007) 233 CLR 162 at 194-195 [69]. 144 Blewett, "The Franchise in the United Kingdom 1885-1918", (1965) 32 Past and Present 27 at 31. 145 Sir Charles Du Cane, Governor of Tasmania 1869-1874. 146 Sir James Fergusson, Governor of South Australia 1869-1873. 147 House of Lords Debates, 10 June 1872, vol 211, c1423. 148 "Elections", in Encyclopaedia Britannica, 10th ed (1902), vol XXVIII at 3. 149 The Annotated Constitution of the Australian Commonwealth, (1901) at 418. Bell Senate of the United States[150] and the Senate of Canada are called into existence. In the Convention which drafted the Constitution of the Commonwealth not a single member was found in favour of a nominated Senate. It was generally conceded, not only that a chamber so constituted would be of an obsolete type and repugnant to the drift of modern political thought, but that, as a Council of States, it would be an infirm and comparatively ineffective legislative body." This emphasis by Quick and Garran (who dedicated their work to "the people of Australia") upon the progressive instincts and tendencies of modern political thought retains deep significance for an understanding of the text and structure of the Constitution. It has been well said that one of the assumptions as to "traditional conceptions" upon which the Constitution was framed was the rule of law151. The law included not only the English common law which the colonies had received, and which, of its nature, can never be wholly static, but also the enacted law. What is of enduring and immediate significance is that, whatever else it involves, "the rule of law" posits legality as an essential presupposition for political liberty and the involvement of electors in the enactment of law. In the 19th century vast changes had been wrought by legislation influenced by the utilitarian movement associated with Jeremy Bentham, and the Constitution was framed in the belief that these "progressive instincts" would animate members of legislative chambers which were chosen by the people. By this means the body politic would embrace the popular will and bind it to the processes of legislative and executive decision making. The significance of developments in the period before the adoption of the Constitution is further considered in the reasons of Crennan J, under the headings "Britain – 'chosen by the people'" and "The Australian colonies – 'chosen by the people'". We agree that the term "chosen by the people" had come to signify the share of individual citizens in political power by the means of a democratic franchise. 150 The Senate of the United States was elected by the State legislatures until direct election was provided with the proclamation in 1913 of the 17th Amendment to the Constitution; this speaks of election "by the people" of each State. 151 Australian Communist Party v The Commonwealth (1951) 83 CLR 1 at 193; [1951] HCA 5; Plaintiff S157/2002 v The Commonwealth (2003) 211 CLR 476 at 492 [31], 513 [103]; [2003] HCA 2. Bell The Constitution (ss 8 and 30) denied plural voting; this was then a subject of continuing debate in the United Kingdom, where it has been estimated that in 1911 there were probably more than 500,000 plural voters, some seven percent of the electorate152. However, subject to s 41153, the Constitution left for provision to be made by the Parliament what were then thorny issues of the female franchise and racial disqualification154. These matters of qualification for the franchise and of the methods of choice to be made by the electors were, by s 51(xxxvi), left by the Constitution, in the phrase used by Barwick CJ in Attorney-General (Cth); Ex rel McKinlay v The Commonwealth155, to "the confidence reposed" in the Parliament. But legislative development always was to be overseen by the imperative of popular choice found in ss 7 and 24 of the Constitution. One result is explained in the following passage from the reasons of Gleeson CJ in Roach v Electoral Commissioner156: "In McKinlay157, McTiernan and Jacobs JJ said that 'the long established universal adult suffrage may now be recognised as a fact'. I take 'fact' to refer to an historical development of constitutional significance of the same kind as the developments considered in Sue v Hill. Just as the concept of a foreign power is one that is to be applied to different circumstances at different times, McTiernan and Jacobs JJ said that the words 'chosen by the people of the Commonwealth' were to be applied to different circumstances at different times. Questions of degree may be involved. They concluded that universal adult suffrage was a long established fact, and that anything less could not now be described as a choice by the people. I respectfully agree. As Gummow J said in McGinty v Western Australia158, we have reached a stage in the evolution 152 Blewett, "The Franchise in the United Kingdom 1885-1918", (1965) 32 Past and Present 27 at 46. 153 See R v Pearson; Ex parte Sipka (1983) 152 CLR 254. 154 Roach v Electoral Commissioner (2007) 233 CLR 162 at 195 [70]. 155 (1975) 135 CLR 1 at 25; [1975] HCA 53. See also Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 380-381 [88]; [1998] HCA 22. 156 (2007) 233 CLR 162 at 174 [7]. 157 (1975) 135 CLR 1 at 36. 158 (1996) 186 CLR 140 at 286-287; [1996] HCA 48. Bell of representative government which produces that consequence. I see no reason to deny that, in this respect, and to this extent, the words of ss 7 and 24, because of changed historical circumstances including legislative history, have come to be a constitutional protection of the right to vote." His Honour continued: "That, however, leaves open for debate the nature and extent of the exceptions. The Constitution leaves it to Parliament to define those exceptions, but its power to do so is not unconstrained. Because the franchise is critical to representative government, and lies at the centre of our concept of participation in the life of the community, and of citizenship, disenfranchisement of any group of adult citizens on a basis that does not constitute a substantial reason for exclusion from such participation would not be consistent with choice by the people159. To say that, of course, raises questions as to what constitutes a substantial reason, and what, if any, limits there are to Parliament's capacity to decide that matter." With respect to the provisions of the 2006 Act which were held invalid in Roach, "The step that was taken by Parliament in 2006 of abandoning any attempt to identify prisoners who have committed serious crimes by reference to either the term of imprisonment imposed or the maximum penalty for the offence broke the rational connection necessary to reconcile the disenfranchisement with the constitutional imperative of choice by the people." With respect to the method of choice adopted by the Electoral Act in its form since the 2006 Act, the statement by Isaacs J in Kean v Kerby161 is appropriate: "For centuries parliamentary elections were conducted by open voting. Freedom of election was sought to be protected against intimidation, riots, duress, bribery, and undue influence of every sort. Nevertheless it was found necessary to introduce the ballot system of voting. The essential point to bear in mind in this connection is that the ballot itself is only a 159 cf McGinty v Western Australia (1996) 186 CLR 140 at 170 per Brennan CJ. 160 (2007) 233 CLR 162 at 182 [24]. 161 (1920) 27 CLR 449 at 459; [1920] HCA 35. Bell means to an end, and not the end itself. It is a method adopted in order to guard the franchise against external influences, and the end aimed at is the free election of a representative by a majority of those entitled to vote. Secrecy is provided to guard that freedom of election." (emphasis added) Authorities including McKinlay162, McGinty v Western Australia163, Langer v The Commonwealth164 and Mulholland v Australian Electoral Commission165 indicate that the authority placed in the Parliament by s 51(xxxvi) of the Constitution carries a considerable measure of legislative freedom as to the method of choice of the members of the Parliament. The first two of these cases concerned the methods for distribution of electors between Electoral Divisions, the third the method of marking ballot papers and the proscription of the distribution of material encouraging electors to vote informally, and the fourth the naming on ballot papers of political parties only if they were registered parties. In Langer166, McHugh J observed that a member is "chosen by the people" even if elected by a system which requires electors to indicate a preference between multiple candidates or, indeed, if elected unopposed. Nevertheless, the method for the conduct of the ballot is not an end in itself but the means to the end indicated in ss 7 and 24 of the Constitution, namely the election of legislative chambers "directly chosen by the people" of the respective States (in the case of the Senate) and of the Commonwealth (in the case of the House). The secret ballot of enrolled electors is the method chosen by the Parliament to give effect to the franchise of qualified electors. Hence the statement by the Court in Snowdon v Dondas167 that the importance of maintaining unimpaired the exercise of the franchise need hardly be stated. The method of choice and the Electoral Act As noted above when outlining the relevant provisions of the Constitution, s 93 of the Electoral Act deals with the entitlement of persons to enrolment and to vote. The scheme of the section is to identify those "entitled to enrolment" 162 (1975) 135 CLR 1. 163 (1996) 186 CLR 140. 164 (1996) 186 CLR 302; [1996] HCA 43. 165 (2004) 220 CLR 181; [2004] HCA 41. 166 (1996) 186 CLR 302 at 341. 167 (1996) 188 CLR 48 at 71; [1996] HCA 27. Bell (s 93(1)). The plaintiffs are both qualified, being Australian citizens who have attained 18 years of age and are not otherwise disqualified. Entitlement to vote is then limited to electors whose names are on the relevant Roll (s 93(2)). Provision is also made for enrolment from outside Australia (s 94A) and the eligibility of spouses, de facto partners and children of eligible overseas electors (s 95), and for persons identified as itinerant electors (s 96). Section 102 prescribes the Electoral Commissioner upon receipt of a claim for enrolment or transfer of enrolment. Section 106 provides for the removal from the Roll of persons securing enrolment by a false statement; the removal may be made at any time between the date of issue of the relevant writ and the close of polling. the steps taken by to be Section 245(1) states that it "shall be the duty of every elector to vote at each election". This legislatively stated duty furthers the constitutional system of representative government by popular choice. The duty is supported by s 245(15), which renders an elector who fails to vote at an election guilty of an offence. Enrolment of qualified persons is encouraged by s 101, which deals with compulsory enrolment and compulsory transfer of enrolment. The section imposes a criminal sanction for failure to comply within 21 days of entitlement to placement upon the Roll for any Subdivision of an Electoral Division, whether by way of initial enrolment (as in the case of the first plaintiff) or by way of transfer of enrolment (as in the case of the second plaintiff). However, common experience suggests a range of causes of human conduct, beyond careless disregard of civic responsibility, which may lead to untimely enrolment or transfer of enrolment. Hence, s 101(7) is an important provision in this compulsory system. A provision to this effect was first introduced by s 28 of the Commonwealth Electoral Legislation Amendment Act 1983 (Cth) ("the 1983 Act"). Section 101(7) provides: "Where a person sends or delivers a claim for enrolment, or for transfer of enrolment, to the Electoral Commissioner, proceedings shall not be instituted against that person for any offence against subsection (1) or (4) committed before the claim was so sent or delivered." The plaintiffs are in that position, having made late claims, and proceedings may not be instituted against them for any offence under s 101. Bell The validity of the forerunner of the compulsory voting requirement in s 245168 was upheld in Judd v McKeon169. Isaacs J referred to the phrase "method of choosing" in s 9 of the Constitution and concluded that a method of choosing which involves compulsory voting is valid so long as it preserves the freedom of choice of possible candidates170. His Honour also said171: "[Parliament] may demand of a citizen his services as soldier or juror or voter. The community organized, being seised of the subject matter of parliamentary elections and finding no express restrictions in the Constitution, may properly do all it thinks necessary to make elections as expressive of the will of the community as they possibly can be." (emphasis added) The above statement by Isaacs J in Judd is consistent with the point earlier made by Isaacs J in Kean v Kerby172 and set out above, namely that the legislative selection of the ballot system of voting and provisions for the efficacy of that system is not an end in itself but the means to the end of making elections as expressive of the will of the majority of the community as proper practical considerations permit. It is that understanding which explains the force of the phrase "directly chosen by the people" in ss 7 and 24 of the Constitution, and is determinative of the issues in this litigation. That expression of community will cannot be expected to be wholly effective and the phrase "chosen by the people" in ss 7 and 24 of the Constitution must be read so as to allow for this. Where the legislatively selected method of choice is a compulsory ballot of enrolled electors it is to be expected that there will be no perfect correspondence between those enrolled and those otherwise enfranchised. Further, the efficacy of the administrative means available to facilitate the composition and accuracy of the Roll will depend upon the 168 Section 128A, added by s 2 of the Commonwealth Electoral Act 1924 (Cth). Compulsory voting had been required for the "conscription" plebiscites conducted during World War I: Wong v The Commonwealth (2009) 236 CLR 573 at 583-584 [27]-[30]; [2009] HCA 3. Compulsory enrolment had been introduced by s 7 of the Commonwealth Electoral Act 1911 (Cth). 169 (1926) 38 CLR 380; [1926] HCA 33. 170 (1926) 38 CLR 380 at 385. 171 (1926) 38 CLR 380 at 385. 172 (1920) 27 CLR 449 at 459. Bell resources made available by the legislation and the assistance given by changes in technology. Section 111 of the Electoral Act (first introduced by s 35 of the 1983 Act as s 51A and later renumbered) provides for the use by the Commission of computer records relating to the Roll. In contrast, s 33 of the Commonwealth Electoral Act 1902 (Cth) had required State police officers, among others, to furnish information for the preparation and revision of lists of all persons qualified or entitled to be enrolled; using these means, almost two million names were entered on the Roll in 1903, some 96 percent of the adult population173. Since 1999 the Commission has maintained the Roll by a process of data-matching authorised by s 92 of the Electoral Act and referred to as Continuous Roll Update or "CRU". Between June 1980 and June 2008 there was an increase in enrolments from 8.9 million persons to 13.8 million persons, and the net average increase in enrolment was 173,000 people per annum. This was significantly lower than the estimated 195,000 growth per annum in the estimated number of resident citizens based on census data. With respect to the accuracy of the entries on the Rolls, a report upon the integrity of the Electoral Roll, made in 2002 by the Australian National Audit Office under the leadership of the Auditor-General174, found that instances of opportunistic fraud (rather than systemic or widespread fraud), such as that which had occurred in a Queensland State by-election in 1996, were such as to be unlikely to affect the outcome of federal elections175. The resources of the Commission have been applied particularly in encouraging, by advertising and other methods, additional enrolments in the period immediately before general elections. The prompt processing of enrolments is assisted by a computerised Roll Management System conducted by the Commission and known as "RMANS". In 2007, by reason of the changes made by the 2006 Act shortening the period for the closing of the Rolls, the 173 Sawer, "Enrolling the People: Electoral Innovation in the New Australian Commonwealth", in Orr, Mercurio and Williams (eds), Realising Democracy, 174 Section 15 of the Auditor-General Act 1997 (Cth) provides for the conduct of performance audits of bodies including the Commission and for the tabling of the report in each House of the Parliament. 175 Commonwealth, Auditor-General, Integrity of the Electoral Roll: Australian Electoral Commission, Audit Report No 42 2001-02, 18 April 2002 at 33-34. Bell Commission could not rely on the strategic approach it had used in previous elections of starting intensive advertising once an election had been called on the basis that there was a regime for a guaranteed seven day period before the closing of the Rolls. The plaintiffs make no complaint that were it not for the changes made by the 2006 Act, the Electoral Act would not adopt means appropriate and adapted to the choice by the people of senators and members of the House. It was s 45 of the 1983 Act which introduced the provision later renumbered as s 155. The text is set out below and provided that the date fixed for the close of the Rolls was to be seven days after the date of the relevant writ. Previously, s 45 of the Electoral Act had required that claims for enrolment or transfer of enrolment received after 6pm on the day of the issue of the writ for an election were not to be registered until after the close of polling. That provision was repealed by s 29 of the 1983 Act and replaced by what was later renumbered as s 102(4), which is set out below. Two things are to be said respecting this legislative history. The first is that the plaintiffs make no challenge to the seven day period. It may be that developments in technology and availability of resources will support the closure of the Rolls at a date closer to election day. But this is a matter of speculation and inappropriate for further consideration here. An implication running through the submissions presented against the plaintiffs by the Commonwealth and Western Australia was that if the changes made by the 2006 Act which are challenged by the plaintiffs are invalid, then the same principles would require that the seven day period provisions they replaced also be invalid, and the plaintiffs must fail because they challenged only the 2006 Act changes. There is no self-evident contradiction in the plaintiffs' case. Whether the pre-2006 Act seven day system operated to disqualify substantial numbers of electors for what then was no substantial reason in the constitutional sense does not answer the claim made by the plaintiffs respecting the 2006 Act. The second point is that in the period before the 1983 Act when the legislation required early closure of the Rolls, no challenge was made to its validity. The reasons for that state of affairs again are a matter for speculation. Before further proceeding in these reasons something should be said of the facts. Late enrolments The particular operation of the enrolment provisions of the Electoral Act upon the two plaintiffs conveniently appears from pars 5-8 of the Notice dated 26 July 2010 which has been given under s 78B of the Judiciary Act 1903 (Cth): Bell The First Plaintiff was not on the roll on the date that the Writs were issued, but is entitled to enrol pursuant to ss 93 and 99(1) of the Act and required to lodge a claim to enrol pursuant to s 101 of the Act. After 8pm on Monday 19 July, but before 8pm on Monday 26 July 2010, the First Plaintiff applied to have her name added to the roll pursuant to s 101(1) of the Act. Section 102(4) of the Act has the effect that the Divisional Returning Officer, who pursuant to s 32(1) of the Act is subject to the direction of the First Defendant, cannot consider the First Plaintiff's claim to enrol to vote until after the Election. Thus the First Plaintiff cannot have her name added to the roll until after the Election. Section 102(4) will thus prevent the First Plaintiff from voting in the Election. The Second Plaintiff was on the roll for the Division of Wentworth on the date that the writs were issued, thus entitling him to vote in relation to that Division. However, on the date that the writs were issued, the Second Plaintiff resided at a different address, entitling him to be on the roll for the Division of Sydney. After 8pm on Thursday 22 July 2010, but before 8pm on Monday 26 July 2010, the Second Plaintiff applied to transfer his enrolment pursuant to s 101(1) of the Act. Sections 102(4AA) and s 155 of the Act have the effect that the Divisional Returning Officer, who pursuant to s 32(1) of the Act is subject to the direction of the First Defendant, cannot consider the Second Plaintiff's claim to transfer his enrolment until after the Election. Thus the Second Plaintiff will not have his name transferred to the roll for Sydney until after the Election. Sections 102(4AA) and 155 will thus prevent the Second Plaintiff from voting in the Election in the Subdivision in which he resides." Before the commencement of the 2006 Act, s 102(4) of the Electoral Act read: "A claim under section 101 by a person to have his or her name placed on the Roll for a Subdivision received during the period commencing at 8 pm on the day on which the Rolls for an election to be held in the Subdivision close and ending on the close of polling at the election shall not be considered until after the expiration of that period." Bell The date for the closing of the Rolls was prescribed by s 155 as follows: "The date fixed for the close of the Rolls shall be 7 days after the date of the writ." The plaintiffs asserted in particular the invalidity of the repeal of s 102(4) and s 155 by the 2006 Act: Sched 1, Items 41 and 52. Item 52 repealed s 155 and substituted: "Date for close of Rolls The date fixed for the close of the Rolls is the third working day after the date of the writ. Note: However, generally names are not added to or removed from the Rolls after the date of the writ. In this section: working day means any day except: a Saturday or a Sunday; or a day that is a public holiday in any State or Territory." Item 41 repealed s 102(4) and substituted: If a claim by a person for enrolment under section 101 (other than a claim that is taken, by subsection 99B(6), to be made under section 101) is received during the period: beginning at 8 pm on the date of the writ or writs for an election for the Division to which the claim relates; and ending at the close of the polling at the election; then the claim must not be considered until after the end of the period. If a claim by a person for transfer of enrolment under section 101, or a claim that is taken, by subsection 99B(6), to be made under section 101, is received during the period: beginning at 8 pm on the date of the close of the Rolls for an election for the Division to which the claim relates; and Bell ending at the close of the polling at the election; then the claim must not be considered until after the end of the period. A claim that is taken, by subsection 100(2), to be made under section 101: is to be treated in accordance with subsection (4AA) if the claim is made by a person who will turn 18 years old during the period: beginning at 8 pm on the date of the writ or writs for an election for the Division to which the claim relates; and ending at the end of the polling day for the election; and otherwise – is to be treated in accordance with subsection (4)." The plaintiffs complain in particular of the new ss 102(4) and 102(4AA), and of the new s 155. Items 20, 24 and 28 of Sched 1 to the 2006 Act made changes to similar effect to the provisions dealing respectively with enrolment from outside Australia (s 94A(4)), the eligibility of spouses, de facto partners and children of eligible overseas electors (s 95(4)), and itinerant electors (s 96(4)). The Commonwealth accepted that if the provisions immediately affecting the plaintiffs be invalid then the remaining Items would be invalid by parity of reasoning or as inseverable from invalid provisions. Hence attention will be directed in these reasons first to the provisions immediately affecting the plaintiffs. The agreed facts show that with respect to the general elections conducted in 1993, 1996, 1998 and 2001, the numbers of enrolments (and re-enrolments) and transfers of enrolment in the period between the issue of the writs and the closing dates for claims to enrol or transfer were, respectively, 377,769; 376,904; 355,189 and 373,732; and that the total enrolments were, respectively, 11,348,967; 11,655,190; 12,056,625 and 12,636,631. For the 2004 general election there were 423,993 enrolment transactions before the Rolls closed and 168,394 claims were lodged after they closed. For the 2007 election, when the changes made by the 2006 Act were in operation, there were 279,469 enrolment transactions before the Rolls closed and 100,370 claims lodged after they closed. Bell Day by day data on enrolment transactions in the period from the issue of the writs for the 1998 and 2001 general elections showed that the number of new claims and re-enrolments increased daily during the then applicable seven day period (except on Saturday and Sunday) and 50 percent of claims were made on the last day. With respect to the general election called for 21 August 2010, approximately 508,000 claims were received between the announcement of the election and the current deadlines of 8pm on the day of issue of the writs (for new enrolments) and 8pm on the day of the close of the Rolls (in the case of transfers and other applications). As already noted, a large number of claims were received after these deadlines but within a seven day period from the date of the writs, the date for the close of the Rolls before the 2006 Act. Validity The Commonwealth accepts, as it must, that the authority of the Parliament to make laws with respect to the qualification of electors and the conduct of elections is subject to the constraints respecting popular choice placed upon its legislative power by ss 7 and 24 of the Constitution. The Commonwealth also accepts that in assessing the validity of the provisions in the 2006 Act of which the plaintiffs complain regard is to be had not only to their legal but also to their practical operation. This, indeed, is what the authorities require176. The Commonwealth further accepts that if the legal or practical operation of a law is to disqualify adult citizens from enrolling, and thus from exercising their franchise, the consistency of that law with ss 7 and 24 of the Constitution is to be determined in accordance with the reasoning in Roach177. However, the Commonwealth submits that "viewed in context" the impugned provisions of the 2006 Act do not erect a disqualification from the franchise. To that end, the Commonwealth characterises the challenged provisions of the 2006 Act as in neither legal nor practical effect going "beyond matters of procedure". The distinction between matters of substance and those of procedure is recognised in various areas of the law, principally those concerned with the conduct of litigation, statutory interpretation, and classification for 176 Ha v New South Wales (1997) 189 CLR 465 at 498; [1997] HCA 34; New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 121 [197]; [2006] HCA 52. 177 (2007) 233 CLR 162. Bell choice of law purposes. But, as was said in John Pfeiffer Pty Ltd v Rogerson178, one of the guiding principles for any distinction between substantive and procedural matters is that: "matters that affect the existence, extent or enforceability of the rights or duties of the parties to an action are matters that, on their face, appear to be concerned with issues of substance, not with issues of procedure". The procedures in the challenged provisions of the 2006 Act apply to the ballot system, which is not an end in itself, but as stressed earlier in these reasons, the means adopted by the Parliament to make elections expressive of popular choice. Further, the Electoral Act is so drawn as to give these provisions substantive consequences for the exercise of the franchise. The interrelation, already described, between the requirements for enrolment and those for voting entitlement is such that failure to comply with the former denies the exercise of the latter by persons otherwise enfranchised. In this way, the method of choice adopted by the legislation fails as a means to what should be the end of making elections as expressive of the popular choice as practical considerations properly permit. The requirements operate to achieve disqualification in the sense used in Roach. The Commonwealth seeks to avoid this conclusion by first fixing upon the legal operation of the provisions of the 2006 Act. The Commonwealth points to the legal operation of the legislation in what it submits are but limited and exceptional cases. Persons who attain the age of 18 between the issue of the writs and polling day, or who are due to be granted citizenship in that period, will not be able to secure enrolment and entitlement to vote at the election unless they have made use of the early claim procedures in s 100 and s 99B respectively. With respect to transfers of enrolment, those who change their address in the month before the issue of writs and for whom the one month requirement (in s 99(2)) for the new residence expires between the three and seven day period will not be able to transfer their enrolment. As to the first two of these three groups, the Commonwealth submits that their disqualification is the result of their failure to use the early claim procedures. The situation of the third group is said to be the inevitable consequence of any cut-off date with respect to transfers. However, with respect to these three groups of adult citizens there will be disenfranchisement, and arguments that these groups are but limited or 178 (2000) 203 CLR 503 at 543 [99]; [2000] HCA 36. Bell exceptional cases are no answer unless the consideration upon which the Commonwealth relies supplies a substantial reason in the sense used in the reasons of the two majority judgments in Roach. It is unnecessary to decide whether a substantial (and therefore sufficient) reason for disqualification of members of the three groups by this legal operation of the 2006 Act is the placing of permissible "cut-off" points for the operation of the enrolment system. This is because of the scope of the practical operation of the legislation to disqualify the plaintiffs and large numbers of other electors. That many persons are stimulated to claim enrolment or transfer only upon awareness of the start of the particular electoral cycle is a phenomenon that was well apparent before the enactment of the 2006 Act. And, after all, there are estimated to be some 100,000 persons in the present position of the plaintiffs. The Commonwealth submits that the practical operation of the 2006 Act upon persons such as the plaintiffs is met by the existence of the prior opportunity and obligation under s 101 to claim enrolment and transfer. Western Australia also draws a distinction between those eligible but excluded, despite doing everything open to them to exercise the franchise, and those, such as the plaintiffs, who fail to comply with the prescribed method of exercising the franchise. However, as explained earlier in these reasons, with particular reference to the requirement in s 101(7) that proceedings not be instituted where a late claim for enrolment or transfer has been made, the obligation to claim enrolment and transfer is designed to facilitate maximum participation in the electoral process of to support disenfranchisement. those otherwise qualified to vote, not The position then is reached that the 2006 Act has the practical operation of effecting a legislative disqualification from what otherwise is the popular choice mandated by the Constitution. It is no sufficient answer, as Western Australia submits, that Roach is not reached because the disqualification does not apply to those who have promptly enrolled or claimed transfer of enrolment and only applies to those who have failed to do so, and this state of affairs is the product of permissible legislative choice. Rather, the relevant starting point is to ask whether, at the time when the choice is to be made by the people, persons otherwise eligible and wishing to make their choice are effectively disqualified from doing so. If so, the question then becomes whether, as Gleeson CJ put it in Roach179, there has been broken the rational connection necessary to reconcile the 179 (2007) 233 CLR 162 at 182 [24]. Bell disqualification with the constitutional imperative, and whether, as Gummow, Kirby and Crennan JJ put it in the same case180: the maintenance of is consistent or compatible with "Is the disqualification for a 'substantial' reason? A reason will answer that description if it be reasonably appropriate and adapted to serve an end the which constitutionally prescribed system of representative government. When used here the phrase 'reasonably appropriate and adapted' does not mean 'essential' or 'unavoidable'181. Rather, as remarked in Lange182, in this context there is little difference between what is conveyed by that phrase and the notion of 'proportionality'. What upon close scrutiny is disproportionate or arbitrary may not answer to the description reasonably appropriate and adapted for an end consistent or compatible with observance of the relevant constitutional restraint upon legislative power." The Commonwealth accepts that formulation of principle in the joint reasons. In doing so the Commonwealth did not seek to elevate the notion of "proportionality" to a distinct criterion of legislative validity. In his reasons in Roach183 Gleeson CJ saw a danger in uncritical translation into Australian constitutional law, as a criterion of validity, of the concept of proportionality as understood in other systems. Earlier, in the Industrial Relations Act Case184, consideration was given to the power of legislative implementation of treaties; Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ remarked185: "It has been said that a law will not be capable of being seen as appropriate and adapted in the necessary sense unless it appears that there is 'reasonable proportionality' between that purpose or object and the 180 (2007) 233 CLR 162 at 199 [85]. 181 See the discussion of the subject by Gleeson CJ in Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 199-200 [39]-[40]. 182 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567 fn 272; [1997] HCA 25. 183 (2007) 233 CLR 162 at 178-179 [17]. See also Leask v The Commonwealth (1996) 187 CLR 579 at 594-595 per Brennan CJ, 600-601 per Dawson J, 615-616 per Toohey J, 624 per Gummow J; [1996] HCA 29. 184 Victoria v The Commonwealth (1996) 187 CLR 416; [1996] HCA 56. 185 Industrial Relations Act Case (1996) 187 CLR 416 at 487-488. Bell means adapted by the law to pursue it186. The notion of 'reasonable proportionality' will not always be particularly helpful. The notion of proportion suggests a comparative relation of one thing to another as respects magnitude, quantity or degree; to ask of the legislation whether it may reasonably be seen as bearing a relationship of reasonable proportionality to the provisions of the treaty in question appears to restate the basic question. This is whether the law selects means which are reasonably capable of being considered appropriate and adapted to achieving the purpose or object of giving effect to the treaty, so that the law is one upon a subject which is an aspect of external affairs." Their Honours also noted that the legislative power conferred by s 51(xxix) had a "purposive aspect" where the validity of a law depended upon its purpose or object of treaty implementation187. So also s 51(xxxvi) may be said to be "purposive" in the sense of facilitating the method of choice by qualified electors. In neither case is the notion of proportionality a free standing criterion for assessment of validity, and the Commonwealth did not submit that it was so. The Commonwealth, however, submits that the existence of a "mischief" represented by some existing level of electoral fraud is not a prerequisite for the establishment of a "substantial" reason for disenfranchisement. This is said to be because a measure does not travel beyond that which is reasonably appropriate and adapted to serve the end of choice by the people within the meaning of ss 7 and 24 of the Constitution "merely because its motivation is prophylactic rather than reactive". With respect to that motivation, the Commonwealth refers to passages in the majority Report of the Joint Standing Committee on Electoral Matters of the Parliament188. Paragraphs 2.121-2.123 stated: The Committee also agrees that the current close of roll arrangements present an opportunity for those who seek to manipulate the roll to do so at a time where little opportunity exists for the [Commission] to undertake the thorough checking required ensuring roll integrity. 186 Richardson v Forestry Commission (1988) 164 CLR 261 at 311-312; [1988] HCA 10. 187 Industrial Relations Act Case (1996) 187 CLR 416 at 486-487. 188 Commonwealth, Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, September 2005 at 35. Bell The Committee believes that those who argue for the retention of the seven day close of rolls and who promote the argument that there is no proof that enrolment fraud is sufficiently widespread to warrant any action, have missed the point. The fundamental issue facing this Committee is to prevent any such fraud before it is able to occur. Failure to do so would amount to neglect." This majority Report was referred to in general terms in the Minister's second reading speech on the Bill for the 2006 Act189. The minority opinion in the Report included the following190: "The [Commission] has never said that it cannot handle the volume of applications received during the seven-day period before the rolls close. In fact it has said that the seven-day period does not prevent it taking adequate measures to prevent fraudulent enrolment. The [Commission] continues its checks into the integrity of the roll in the period following the closing of the rolls to ensure people are eligible to vote, and also after the rolls close (evidence of Mr Paul Dacey, 5 August 2005). The removal of the seven-day period would therefore have little qualitative impact on the integrity of the roll. More broadly, there is no evidence that fraudulent enrolment exists on any measurable scale or has ever influenced the outcome of any federal election. No witness or submission to this Inquiry produced evidence of fraudulent enrolment." It is, as Mason J emphasised in R v Toohey; Ex parte Northern Land Council191, incontestable that the motives which inspire legislators are not relevant in the determination of validity. Accordingly, the term "motivation" in the submissions by the Commonwealth is better understood as used in the sense of legislative purpose. As noted above, s 51(xxxvi) of the Constitution may be described as purposive in the sense that it is facilitative of the particular method 189 Australia, House of Representatives, Parliamentary Debates (Hansard), 8 December 2005 at 19. 190 Commonwealth, Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, September 2005 at 360-361. 191 (1981) 151 CLR 170 at 225-226; [1981] HCA 74. Bell of choice to be employed by qualified electors. Enrolment fraud is addressed by s 106 of the Electoral Act, to which reference has been made in these reasons. Whether a particular measure goes beyond the constraints which ss 7 and 24 of the Constitution place upon s 51(xxxvi) cannot depend upon the purpose attributed to the Parliament in enacting that measure. In particular, the requirement in Roach that any disqualification be for a substantial reason cannot be answered simply by what may appear to have been legislative purpose. A legislative purpose of preventing such fraud "before it is able to occur", where there has not been previous systemic fraud associated with the operation of the seven day period before the changes made by the 2006 Act, does not supply a substantial reason for the practical operation of the 2006 Act in disqualifying large numbers of electors. That practical operation goes beyond any advantage in preserving the integrity of the electoral process from a hazard which so far has not materialised to any significant degree. Conclusions The declaration made in this case on 6 August 2010 is supported by these reasons, which largely were prepared during the pendency of the general election held on 21 August 2010 and are expressed accordingly. The plaintiffs also sought mandamus. There is no requirement for such relief, given the evidence for the Commissioner to which reference has been made. The reasoning of this Court upon the issue of invalidity has binding force in the general sense described in Pape v Federal Commissioner of Taxation192. An order should now be made otherwise dismissing the application. 192 (2009) 238 CLR 1 at 69 [158]; [2009] HCA 23. Hayne 170 HAYNE J. Each plaintiff is an Australian citizen who has attained the age of 18 years. Each is entitled193 to be enrolled on an Electoral Roll under the Commonwealth Electoral Act 1918 (Cth) ("the Act"). If enrolled, each is entitled194 to vote at elections of senators for the State (or Territory195) in which she or he resides, and at elections of members of the House of Representatives for the Subdivision196 in which she or he resides. Each plaintiff is not simply entitled to be enrolled and vote. Each is bound197 to claim enrolment on the appropriate roll. If enrolled, each is bound198 to vote. Failure to perform either obligation is an offence199. Neither plaintiff made the requisite claim when obliged to do so. Neither plaintiff made that claim before the time fixed under the Act for making (in the case of the first plaintiff) a claim for new enrolment, or (in the case of the second plaintiff) a claim for transfer of enrolment, that would be given effect for the purposes of the federal election to be held on 21 August 2010. There are many who were eligible to enrol as electors but who did not make a claim for new enrolment, and many others who did not make a claim for transfer of enrolment, when they were bound to do so. On Saturday, 17 July 2010, the Prime Minister announced that an election would be held on 21 August. Writs for the election were issued on the following Monday, 19 July 2010. More than 500,000 claims for enrolment were received 193 Commonwealth Electoral Act 1918 (Cth) ("the Act"), s 93(1). 196 Section 56 of the Act provides for each State and the Australian Capital Territory to be distributed into Electoral Divisions. By operation of s 55A the reference in s 56 to a State includes a reference to the Northern Territory. Section 57 provides that one member of the House of Representatives is to be chosen for each Division. Although Pt V of the Act provides for the Electoral Commission to divide a Division into Subdivisions, that has not been done. Entitlement to enrol is, however, expressed in s 99 in terms of residence in and enrolment for a Subdivision. Section 4(4) provides that where a Division is not divided into Subdivisions, references to a Subdivision are to be read as referring to the Division. Hayne after the election announcement on 17 July and before the start of periods fixed by s 102(4) and (4AA) of the Act as periods during which applications for new enrolment or transfer of enrolment may not be considered for the purposes of that election. Many others who were eligible to enrol did not make a claim before the relevant period began but made claims within seven days after the writs had issued. The exact number of those who made claims after the cut-off dates fixed by the Act, but within seven days after the writs had issued, is not known. The evidence filed for the Electoral Commissioner suggested that the number may be about 100,000, but went on to say that there is a "considerable margin of uncertainty in that estimate". Be this as it may, it may reasonably be assumed that there are many who were eligible to enrol, or required to transfer enrolment, who made a claim after the times fixed by the Act. It also may reasonably be assumed that many of these persons are young people who have turned 18 since the last election, and that many are young people who have moved since becoming enrolled for a particular Division. But as these reasons will later show, the fact that many affected by the cut-off dates are young people is not relevant to the constitutional issues that arise. The period fixed by s 102(4) of the Act, as the period during which claims for new enrolment may not be considered, begins at 8 pm on the date of the writ or writs for an election for the Division to which the claim relates, and ends at the close of polling at the election. The period fixed by s 102(4AA) of the Act, as the period during which claims for transfer of enrolment may not be considered, begins at 8 pm on the date of the close of the rolls (fixed by s 155(1) as the third working day after the date of the writ) and ends at the close of polling at the election. For the 2010 election, the periods began at 8 pm on Monday, 19 July 2010 (in the case of claims for new enrolment), and 8 pm on 22 July 2010 (in the case of claims for transfer of enrolment). By a proceeding commenced in the original jurisdiction of this Court, claiming declaration and mandamus, the plaintiffs alleged that the provisions of the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) ("the 2006 Act"), by which what are now ss 102(4), 102(4AA) and 155 were inserted in the Act, are invalid. They alleged that an election conducted under the conditions prescribed by these provisions will not yield Houses of the Parliament that answer the description in ss 7 and 24 of the Constitution: "directly chosen by the people". The plaintiffs submitted that, the present provisions of ss 102(4), 102(4AA) and 155 being invalid, the provisions of the Act as they stood before the introduction of the impugned provisions by the 2006 Act are engaged. As the Act stood before the amendments made by the 2006 Act, s 102(4) provided that claims for enrolment (whether new enrolment or transfer of enrolment) received during the period commencing at 8 pm on the day on which the rolls for an Hayne election close, and ending on the close of polling at the election, were not to be considered until after the expiration of that period. Section 155 of the Act, as it then stood, provided that the date fixed for the close of the rolls was seven days after the date of the writs. Each plaintiff made her or his claim less than seven days after the date writs were issued for the election to be held on 21 August. Reduced to its essentials, the plaintiffs' argument was that cutting off consideration of claims for new enrolment or transfer of enrolment seven days after the date of the issue of the writs for a federal election is valid, but cutting off consideration of claims for new enrolment at 8 pm on the day the writs issue, and consideration of claims for transfer of enrolment at 8 pm on the third working day after the date of the writs, is not. An election conducted according to the former scheme was said to yield Houses of the Parliament "directly chosen by the people"; an election conducted according to the provisions introduced by the 2006 Act, it was said, will not. Accordingly, the plaintiffs claimed a declaration that the provisions of the 2006 Act which inserted ss 102(4), 102(4AA) and 155 of the Act (as now in force) are invalid, and mandamus directed to the first defendant, the Electoral Commissioner, requiring the Commissioner to consider the claim for new enrolment made by the first plaintiff and the claim for transfer of enrolment made by the second plaintiff. On it being pointed out in oral argument that the submissions made by the plaintiffs appeared to entail that other provisions of the 2006 Act are invalid and that it is evidently undesirable that the Electoral Commissioner, required to conduct the election to be held on 21 August "according to law", should be left uncertain about the validity of those other provisions, the plaintiffs, without objection from the Commonwealth or the Electoral Commissioner, amended their claim to seek a wider declaration. On 6 August, the Court made a declaration of the kind sought by the plaintiffs in their amended application. In my opinion, the proceedings should have been dismissed. What follows are my reasons for that opinion. The reasons will be seen to comprise two distinct parts: first, identification of the relevant constitutional question and consideration of why that question should be answered against the plaintiffs, and second, consideration of the questions which the plaintiffs said should be addressed and why those questions should also be answered against the plaintiffs. The first hinges about the constitutional phrase "directly chosen by the people". The second focuses upon the notion of "reasonably appropriate and adapted". Identifying the relevant question As is apparent from what has already been said in these reasons, I would describe the relevant question as: whether the impugned provisions will yield Hayne Houses of the Parliament "directly chosen by the people". That description of the question depends upon a number of intermediate steps that should be exposed. otherwise The Constitution provides for the laws in force in each State for the time being relating to elections for the more numerous House of the Parliament of the State to apply "as nearly as practicable" to elections of senators for the State (s 10) and elections in the State of members of the House of Representatives (s 31). Those provisions of ss 10 and 31 are engaged, in each case, "[u]ntil the Parliament this Constitution". but Section 51(xxxvi) gives the Parliament legislative power with respect to matters in respect of which the Constitution makes provision until the Parliament otherwise provides. That power is limited by the requirements of ss 7 and 24. Hence the question is whether the particular provisions made by ss 102(4), 102(4AA) and 155 travel beyond the limits of the power that is given by s 51(xxxvi) in its operation with respect to ss 10 and 31, because an election conducted in accordance with the Act, including those provisions, would not yield Houses that meet the constitutional description. provides, subject Much of the argument proceeded on the footing that the question just identified should be approached according to a two-stage inquiry founded on what was said in the plurality reasons in Roach v Electoral Commissioner200. The Commonwealth, in its submissions, described those two stages in the following way. First, is there a "disqualification from what otherwise is adult suffrage"? That is, does the impugned law detract in some significant way from the existence of a franchise that is held generally by adult citizens? Second, is that disqualification not "for a substantial reason"? A reason was said201 by the plurality in Roach to be "substantial" "if it be reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government". But, as the plurality further pointed out202, "reasonably appropriate and adapted", in the context then under consideration, did not mean "essential" or "unavoidable". It should be said immediately that this case is significantly different from Roach, and that there can be no automatic application of what was said in Roach to this case. Any application of what was said there must always be linked to constitutional bedrock203: the the requirement constitutional description. that each House meet 200 (2007) 233 CLR 162; [2007] HCA 43. 201 (2007) 233 CLR 162 at 199 [85]. 202 (2007) 233 CLR 162 at 199 [85]. 203 cf (2007) 233 CLR 162 at 198 [82]. Hayne The decision in Roach concerned the validity of provisions disqualifying otherwise eligible persons from voting. There being a disqualification of persons who fall within the "people" identified in ss 7 and 24, the relevant question, identified in the plurality reasons204 in Roach, was whether the disqualification was for a "substantial" reason. If there was no substantial reason for disqualifying from voting some of those who constitute "the people" by whom the two Houses of the federal Parliament are to be "directly chosen", it is evident that the law disqualifying those persons from voting went beyond the power given by s 51(xxxvi) in its operation with respect to s 30 (and thus s 8) that permits the Parliament to provide for the qualification of electors. By contrast, the present case is not concerned with the qualification of electors. The starting point for the present proceedings is that each plaintiff is entitled to enrol and, if enrolled, is entitled to vote. This case concerns whether the impugned provisions impermissibly interfere with the exercise of those entitlements. And because the focus of attention is upon what is said to be an impermissible interference with the exercise of an entitlement, it is unhelpful and distracting to pose the issue, as the plaintiffs did, by using terms like "disenfranchise", "disentitle" or "exclude". Those terms obscure the fact that the plaintiffs had the right to enrol or transfer enrolment and were bound to do so, but through their own inaction submitted their claims after the dates fixed by the impugned provisions. Question begging premises In framing the inquiries that are to be made in deciding whether an election conducted in accordance with the Act (and in particular, the impugned provisions) would not yield Houses that meet the constitutional description, care must be taken to avoid circular reasoning. Inquiries must not be framed in a way that dictates the answers that will be given to them. There are at least three different ways in which that danger emerged in this matter. The first relates to the use of what was said in Roach. If the first of the inquiries made by the plurality in Roach is to be translated and applied in this case, it is important to recognise that the immediate issue is not just: "Can the plaintiffs enrol?" The question is more complex. It has a temporal element. This case asks whether the plaintiffs, who could and should have claimed enrolment or transfer of enrolment earlier, can have their claim considered after the time fixed by the Act for the cut-off of consideration of claims. Terms like "disenfranchisement", "disentitlement" and "exclusion" mask the relevant temporal dimension to the question. 204 (2007) 233 CLR 162 at 199 [85]. Hayne Secondly, the inquiries to be made, in deciding whether an election conducted in accordance with the Act would not yield Houses that meet the constitutional description, inevitably invite comparison between the impugned provisions and the law as it stood before the 2006 Act. But it is not to be assumed that the law, as it stood before the 2006 Act, was constitutionally required. The plaintiffs contended, and neither the Commonwealth nor Western Australia intervening disputed, that the law as it stood before the 2006 Act was constitutionally valid. But that does not demonstrate that the previous law was constitutionally required. To assume that the previous law was constitutionally required would be to assume the answer to the fundamental question in issue. It would assume that answer because the law as it stood before the 2006 Act (which required the Electoral Commissioner to consider claims lodged up to seven days after the writs had issued) would be constitutionally required (as distinct from valid) only if such a system were necessary to yield Houses meeting the constitutional description. But that is the very question for decision in this case. And, of course, the same error is made if argument proceeds (as much of the plaintiffs' argument did) from the premise that the electoral legislation must permit (or may not deny or inhibit) enrolment at any time before the last reasonably available time before polling day. The premise (whether framed positively or negatively) is flawed: it assumes the answer to the question at issue in this case. Thirdly, consideration of Ch I of the Constitution, and ss 7 and 24 in particular, shows that Ch I provides for a system of representative government. It will be necessary to return in some detail to that subject. For present purposes, the point to be made is that the expression "a system of representative government" must find its relevant content in the text and structure of the Constitution. The expression (which is not used in the Constitution) is a useful description of the general nature of the form of government for which the Constitution (and Ch I in particular) provides. But the expression cannot be erected as a premise for argument about what the Constitution permits or forbids if its content is derived from sources other than the Constitution. Although, as explained earlier, the question of validity of the impugned provisions turns upon the content that is given to the expression "directly chosen by the people" it is desirable to begin by considering some of what has been said by this Court about the system of representative government established by the Constitution. Hayne Representative government In Attorney-General (Cth); Ex rel McKinlay v The Commonwealth205, the Court (by majority) held that s 24 of the Constitution does not require that the number of people or the number of electors in electoral divisions for the House of Representatives be equal. The argument that was rejected in McKinlay was founded upon the requirement of s 24 that members of the House of Representatives be "directly chosen by the people of the Commonwealth". Gibbs J said206 that "[i]f the words of s 24 are read in their natural sense, without seeking for implications or hidden meanings, they appear to have nothing whatever to do with the determination of electoral divisions within a State". In his Honour's opinion207, the Court's duty was "to declare the law as enacted in the Constitution and not to add to its provisions new doctrines which may happen to conform to our own prepossessions". He warned of the perils of circular reasoning, saying208 that: "The argument that equality of numbers within electoral divisions is an essential concomitant of a democratic system, so that in any constitution framed upon democratic principles it must have been intended to guarantee that electorates would so far as practicable contain an equal number of people or of electors, is simply incorrect – it begs the question and ignores history." (emphasis added) He continued209: "No doubt most people would agree that for the healthy functioning of a democratic system of government it is desirable that the electorate should be fairly apportioned into electoral districts whose boundaries are not gerrymandered, that the ballots should be secretly and honestly conducted, that the vote should be fairly counted and that corrupt electoral practices should be suppressed, but opinions may well differ as to how these ideals should be attained. The Constitution does not lay down particular guidance on these matters; the framers of the Constitution trusted the Parliament to legislate with respect to them if necessary, no doubt remembering that in England, from which our system of representative 205 (1975) 135 CLR 1; [1975] HCA 53. 206 (1975) 135 CLR 1 at 43. 207 (1975) 135 CLR 1 at 44. 208 (1975) 135 CLR 1 at 45. 209 (1975) 135 CLR 1 at 46. Hayne government is derived, democracy did not need the support of a written constitution." (emphasis added) Recognition that the Constitution provides for a system of representative government underpinned the series of decisions210 of the Court that culminated in Lange v Australian Broadcasting Corporation211. But in none of those cases was it necessary to examine whether the form of representative government for which the Constitution provides requires a particular form of electoral system. What was in issue in that series of decisions was the way in which the system of government worked. More particularly, did constitutional prescription of a system of representative government entail or imply a degree of freedom of communication that limited legislative power, or required some relevant development of the common law? In that context, the notion of representative government was relevantly and sufficiently expressed at a very high level of abstraction. For those purposes, its central conception is sufficiently articulated by the use of the constitutional expression "directly chosen by the people" in connection with the election of all members of both Houses of the legislature. No more particular question about the form of representative government, let alone the form of electoral system, needed to be considered in order to arrive at the conclusions expressed in that stream of authority. In McGinty v Western Australia212, this Court explored the content to be given to the term "representative government" when it is said that Ch I of the Constitution provides for such a system of government. All members of the Court concluded213 that the Constitution contained no implication affecting disparities of voting power among the holders of the franchise for the election of members of a State Parliament. Several members of the Court examined what is conveyed by reference to "representative government" in connection with the federal Constitution. 210 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1; [1992] HCA 46; Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106; [1992] HCA 45; Theophanous v Herald & Weekly Times Ltd (1994) 182 CLR 104; [1994] HCA 46; Stephens v West Australian Newspapers Ltd (1994) 182 CLR 211; [1994] HCA 45. See also Coleman v Power (2004) 220 CLR 1; [2004] HCA 39. 211 (1997) 189 CLR 520; [1997] HCA 25. 212 (1996) 186 CLR 140; [1996] HCA 48. 213 (1996) 186 CLR 140 at 175-176 per Brennan CJ, 184, 189 per Dawson J, 206-210 per Toohey J, 216 per Gaudron J, 229-230, 245, 251 per McHugh J, 293 per Hayne Three members of the majority (Brennan CJ, Dawson and McHugh JJ) expressly discountenanced214 the proposition that "representative democracy" or "representative government" is a valid premise for argument about the permissible content of the federal electoral system. The fourth member of the majority in McGinty, Gummow J, said215 that "[t]o adopt as a norm of constitutional law the conclusion that a constitution embodies a principle or a doctrine of representative democracy or representative government (a more precise and accurate term) is to adopt a category of indeterminate reference". It was accepted that the "principle" or "doctrine" identified can at best provide a premise for argument about the form of electoral system that entails216 "a wide range of variable judgment in interpretation and application". While it was said217 that, of itself, this may not be open to objection, difficulties were foreseen as arising when "the wide range for variable judgment depends upon, or at least includes as a significant element, matters primarily or significantly of political weight". One important source of the difficulty that attends using "representative government" (or "representative democracy") as a premise for reasoning in the present matter is that the Constitution says so little about the way in which representative government is to be implemented. As was observed in McGinty218, the Constitution prescribes only four elements of representative government. First, there is the requirement of s 24 that members of the House of Representatives be directly chosen by the people of the Commonwealth (and of s 7 that senators be directly chosen by the people of the relevant State). Second, s 24 ties the number of members of the House of Representatives to the number of senators. Third, s 24 relates the number of members chosen in the several States "to the respective numbers of their people". And fourth, s 24 provides that "five members at least shall be chosen in each Original State". But beyond these last three provisions, the whole notion of representative government, as it is expressed in the Constitution, is found in the use of the phrase "directly chosen by the people" in both ss 7 and 24. 214 (1996) 186 CLR 140 at 169 per Brennan CJ, 182-183 per Dawson J, 244 per 215 (1996) 186 CLR 140 at 269 (footnote omitted). 216 (1996) 186 CLR 140 at 269-270. 217 (1996) 186 CLR 140 at 270. 218 (1996) 186 CLR 140 at 275-276 per Gummow J. Hayne It follows, as Gummow J rightly pointed out in McGinty219, that "[t]he phrase in s 24 'directly chosen by the people of the Commonwealth' is a broad expression to identify the requirement of a popular vote". It also follows, as Gummow J again rightly pointed out in McGinty220, that the phrase used in s 24 (and I would add the like phrase used in s 7) is not to be dissected in a way that would give the words "chosen by the people" an operation distinct from s 24 (or s 7) as a whole221. Because the constitutional prescription of a form of representative government is as spare as it is, and so much is left for the Parliament to provide, it is inevitable that there are changes in the way in which the notion of representative government is given effect at the federal level. More particularly, the Parliament being given power to prescribe the method of choosing senators (s 9), and power to provide for electoral divisions (s 29), the qualification of electors for the House (s 30), and the law relating to elections for the Senate (s 10) and for the House (s 31), there can be change in each of those aspects of the features that go to make up a system of representative democracy. The limit on those powers lies in the overarching requirements of ss 7 and 24 that the Houses be "directly chosen by the people". But, as was said in Mulholland v Australian Electoral Commission222, "care is called for in elevating a 'direct choice' principle to a broad restraint upon legislative development of the federal system of representative government". In hindsight, the changes that have been made to the federal electoral system since federation may be described as evolutionary. It may be that hindsight would permit the observer to describe the changes as moving generally in a direction that represents a "development" of the particular form of representative government that is practised or established in Australia. It may also be observed that the trend of development has been to include more and more in the classes of persons who may, and now should, turn out to vote at federal elections. The introduction of a uniform federal franchise, the introduction of compulsory enrolment and then compulsory voting, the inclusion of Aboriginal Australians, first among those eligible and then among those bound to enrol and vote, and the lowering of the minimum age for enrolment from 21 years to 18 years, can all take their place in such an analysis. 219 (1996) 186 CLR 140 at 279. 220 (1996) 186 CLR 140 at 279. 221 cf the dissenting opinion of Murphy J in Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 68-69. 222 (2004) 220 CLR 181 at 237 [156]; [2004] HCA 41. Hayne All of the correctness of these developments demonstrate the observation223 "that representative government is a dynamic rather than a static institution and one that has developed in the course of [the twentieth] century". And it is through the Parliament's power to legislate with respect to these matters that "the Constitution continues to speak to the present and allows for development of the institution of government by changes which may not have been foreseen a century ago or, if foreseen by some, were not then acceptable generally"224. Neither of these observations, however, permits, let alone requires, the further conclusion that it is the Constitution which has "developed" or that the concept of "representative government" has developed or evolved into a constitutional norm. A conclusion of that kind could be founded only in the text or structure of the Constitution. And because the very premise for the observed processes of development is that the Constitution is silent about those matters, leaving it to the Parliament to undertake the processes of development, that further step cannot be taken. There is no textual or structural foundation for it. Rather, as Gummow J rightly said225 in McGinty: "It does not follow from the prescription by the Constitution of a system of representative government that a voting system with a particular characteristic or operation is required by the Constitution. What is necessary is the broadly identified requirement of ultimate control by the people, exercised by representatives who are elected periodically. Elements of the system of government which were consistent with, albeit not essential representative government might have been constitutionally entrenched or left by the Constitution itself to the legislature to provide and modify from time to time. This is what was done." (emphasis added) for, "Representative government" was regarded by many nineteenth century writers as "the Ideally Best Form of Government"226. Their works were familiar to the framers of the Constitution and to those in the Parliament who debated the Bill for what became the Commonwealth Electoral Act 1902 (Cth) ("the 1902 Act"). The enduring controversies about electoral systems (reflected, for example, in the application of the Hare-Clark system in Tasmania) as well as the 223 McGinty v Western Australia (1996) 186 CLR 140 at 280 per Gummow J. 224 McGinty (1996) 186 CLR 140 at 281 per Gummow J (footnote omitted). 225 (1996) 186 CLR 140 at 285. 226 Mill, Considerations on Representative Government, (1861), Ch III, "That the Ideally Best Form of Government is Representative Government". Hayne course of debates in the Parliament in connection with the Bill for the 1902 Act show, however, that no one writer's views about representative democracy were seen as commanding the field. It is not right in those circumstances to see the provisions of Ch I of the Constitution, with their important but spare specification of the system of government, as embracing the views of any one of those writers, be it John Stuart Mill or anyone else. To read Ch I in that way denies the evident constitutional intention to permit the Parliament to decide many important questions about the structure and content of the electoral system without constitutional restriction beyond the requirement that each House be directly chosen by the people. To assume otherwise is, as Gibbs J said227 in McKinlay, to beg the question and ignore history, or it is, as his Honour also said228, to add to the Constitution's provisions "new doctrines which may happen to conform to our own prepossessions". Consideration of whether each House, if elected according to mechanisms that include the impugned provisions, will meet the constitutional requirement necessitates examination of what is meant by "directly chosen by the people". It also requires consideration of the place that the relevant cut-off dates have in the whole scheme of arrangements made by the Act for enrolment and voting. It will be necessary to say something further about both of those matters. Before doing that, however, I should identify some features of the plaintiffs' arguments. The plaintiffs' arguments As already noted, the plaintiffs' argument was directed to establishing first, that the cut-off dates "disqualified" them from exercising their franchise as adult Australian citizens, and second, that the "disqualification" was for no "substantial" reason. The plaintiffs went so far as to submit that their "disqualification" was properly described as "capricious", but the weight of their argument was placed on the proposition that the "disqualification" was not reasonably appropriate and adapted to the end of yielding Houses of the Parliament that would meet the constitutional description of "directly chosen by the people". The plaintiffs accepted that the Act could prescribe a cut-off date for consideration of claims for new enrolment and for transfer of enrolment. That is, the plaintiffs accepted that prescription of a cut-off date could be a measure reasonably appropriate and adapted to the end identified, and further accepted that the particular prescriptions made after the 1983 election were of that kind. 227 (1975) 135 CLR 1 at 45. 228 (1975) 135 CLR 1 at 44. Hayne The plaintiffs' acceptance of those propositions reveals features of their arguments which should be identified. First, their claim that the cut-off provisions made by the 2006 Act are invalid does not depend upon how many are affected. The facts agreed by the parties did not establish that allowing a longer period for last minute compliance necessarily results in fewer missing the cut off, and more being correctly enrolled. At the last election before the 2006 Act introduced the impugned provisions, 168,394 people lodged claims for enrolment and transfer after the close of rolls; in 2007, the equivalent number was about one-third smaller: Secondly, prescription of any cut-off date before polling day will inevitably mean that some will miss the cut off. The Court was enjoined, more than once, to recognise that it is human nature for some (it was said especially the young) to leave compliance with obligations to the last minute. And if that is right, some, like the plaintiffs, will leave compliance until after the time appointed, whatever that time may be. It follows that, when the plaintiffs submitted that the impugned provisions are not reasonably appropriate and adapted to serve an end consistent or compatible with the maintenance of the constitutionally prescribed system of government, the "end" that the plaintiffs identified must be expressed in such a way that it connotes maximum participation in the poll by those who are eligible to be enrolled. As will be seen, however, there is no foundation for identifying maximum participation as an element of the constitutionally prescribed system of government. "Directly chosen by the people" The phrase "directly chosen by the people", when used in ss 7 and 24 of the Constitution, conveys a number of ideas. It is neither necessary nor appropriate to attempt to explore all aspects of the meaning that is to be attributed to the phrase. It is not to be doubted, however, that consideration of whether members and senators are "directly chosen by the people" requires examination of the laws that govern not just the franchise, but also enrolment to vote, and the exercise of the right of an enrolled elector to cast his or her vote. Roach was a case about the first kind of issue: laws that govern the franchise, or what s 30 of the Constitution calls "the qualification of electors". This case is not. This case concerns enrolment to vote. The members of each House of the Parliament are elected on a franchise which, subject to exceptions that are not engaged in respect of the plaintiffs, is a universal adult franchise embracing all "the people of the Commonwealth" Hayne spoken of in s 24, and all "the people of the State" referred to in s 7. That some who are enrolled to vote, and therefore entitled and bound to vote, do not cast a ballot at an election does not deny that the elected members of each House of the Parliament are "directly chosen by the people". That some who are bound to enrol do not enrol, and therefore do not vote, does not deny that the members of each House are "directly chosen by the people". The plaintiffs' argument was that the absence from the appropriate roll of some, who (belatedly) claimed their entitlement to be on that roll, does mean that the members of each House are not directly chosen by the people. Such a conclusion would be sharply at odds with the recognition that neither the failure to vote by some entitled to vote, nor the failure to claim enrolment by some entitled to enrol, leads to that conclusion. in ways History teaches that, in some countries, registration and voting systems that have systematically have been devised and administered disadvantaged particular groups in the society. But the plaintiffs' complaint in the present case was not of that kind. Rather, the plaintiffs' complaint was directed to the consequences that follow from the impartial administration of the Act in accordance with its terms. And it was a complaint that hinged about the observation that they, and others in like case, cannot cast a vote in this election, in the Division in which they live, because they have not complied with their statutory obligations. They observed that these consequences of non-compliance with the Act fall chiefly upon the young. They did not say, however, that that fact leads to any relevant constitutional consequence or engages any relevant constitutional principle. The plaintiffs' complaint directed attention to what would happen in connection with this election, as opposed to what was lawfully permitted and required to happen in connection with the election. That is, it was said to be constitutionally significant that tens of thousands of persons, who were eligible and required to enrol and vote, had not taken the steps necessary to enable them to vote, in the Division in which they reside, at the election. A necessary step in the plaintiffs' argument that the impugned provisions are invalid was to observe that they, and others in like case, had only a very short time to respond to the stimulus of an election announcement by claiming enrolment, or a transfer of enrolment. They submitted that they should have had a longer time to respond to that particular stimulus. That there were other stimuli to enrolment was dismissed as not to the point. Making it an offence not to enrol forthwith was treated as not a sufficiently effective stimulus. Recognition that few federal elections have been called without a great deal of prior media discussion and speculation about what date will be fixed was treated as irrelevant. The plaintiffs' submissions hinged about the proposition that nothing but a Prime Ministerial announcement fixing the date for an election could sufficiently stimulate those who had not enrolled or transferred enrolment to do what they were legally bound to do. Hayne What will in fact happen at this election (as distinct from what not only could but should have happened, had the Act been obeyed) bears upon whether each House is "directly chosen by the people" only if that phrase directs attention to the number of persons who actually vote at an election and requires that that number be as large as possible. Or, restating the same proposition in words used in the course of argument, what will happen at this election bears upon satisfaction of the constitutional requirements only if ss 7 and 24 at least connote, if not require, that there be "maximum participation" by the people. There are several reasons why that view of "directly chosen by the people" should not be adopted. First, it is necessary to recognise the distinction between factual participation of "the people" in an election, and the legal opportunity for "the people" to participate in an election. The former idea requires consideration only of what has occurred, or will likely occur, at one or more particular elections. It attaches no significance to the observation that the failure to enrol is an offence. By contrast, the latter requires examination of the legal framework within which those events occur. In particular, it requires examination of the legal and practical operation of the relevant statutory provisions. The former is the field of political science and behavioural analysis. The latter is the field of constitutional law. Second, it is necessary to recognise that compulsory voting was not, and was not seen as, a necessary corollary of ss 7 and 24 generally, or of the particular constitutional description of the Houses as "directly chosen by the people", when the Constitution first took effect. Compulsory voting was not introduced until 1924229. When introduced, the validity of compulsory voting was challenged but upheld by this Court in Judd v McKeon230. The introduction of compulsory voting was seen by all members of the Court in that case231 as a matter for the Parliament to decide, not as a matter of constitutional necessity. And of course none of the transitional electoral provisions picked up from the States and applied by ss 10 and 31, "[u]ntil the Parliament otherwise provide[d]", required compulsory voting or compulsory enrolment. Third, recasting the plaintiffs' argument as a complaint that the impugned provisions unreasonably deny them the opportunity to enrol and vote puts all the weight of their argument on the content that is given to the word "unreasonably". 229 Commonwealth Electoral Act 1924 (Cth), s 2, inserting s 128A in the Act. 230 (1926) 38 CLR 380; [1926] HCA 33. 231 (1926) 38 CLR 380 at 383 per Knox CJ, Gavan Duffy and Starke JJ, 385 per Isaacs J, 387 per Higgins J, 390 per Rich J. Hayne But whatever content is given to that word, the proposition assumes, without demonstration, that the electoral legislation must permit (that is, it must not deny or inhibit) enrolment at any time before the last reasonably available time. And as explained earlier in these reasons, that premise is flawed because it assumes the answer to the question at issue. Moreover, the notion that there was an "unreasonable" denial of the opportunity to enrol when the plaintiffs (and others in like case) have had not just the opportunity, but the obligation, to do so forthwith upon becoming entitled to claim enrolment or transfer of enrolment is, on its face, logically and legally unsound. It could have a legal basis only if the Constitution requires maximum participation, and there is no textual or other sufficient foundation for that conclusion. Only the system of representative government for which the Constitution provides has now changed or developed into either a system where compulsory enrolment and voting are constitutionally essential elements of the system, or a system where the Parliament must maximise the opportunity to enrol and vote, would the necessary premise of the plaintiffs' argument (that the Constitution requires that the electoral law must facilitate and promote maximum participation by the people) be made good. The only textual way in which that could be done would be by reading "directly chosen by the people" in ss 7 and 24 as now requiring maximum participation, or by drawing some wider implication from the observation that those provisions require a system of representative government. For the reasons given earlier in discussing what is meant by "representative government", that step cannot and should not be taken. What has changed and developed since federation is the way in which successive Parliaments have exercised the power given by the Constitution to give practical operation to a system of representative government of which only the broadest outlines are fixed by the Constitution. The constitutional requirements have not altered. The provisions of ss 7 and 24, whether generally or in their use of the phrase "directly chosen by the people", have not taken on any different, or more prescriptive, meaning as a result of the various steps taken by successive Parliaments to adjust the electoral system. That is not to say, of course, that maximum participation in the electoral process cannot readily be seen as a desirable civic value and as a worthy legislative objective. But whether and to what extent it is pursued is a choice which the Constitution confides to the Parliament. It is through legislation of the Parliament that the democratic system of government has developed, not by attributing a new and different meaning to the exiguous constitutional text. There is no constitutional foundation for the plaintiffs' arguments. Neither s 7 nor s 24, with their use of the expression "directly chosen by the people", requires the Parliament to establish or maintain an electoral system which will maximise the participation of eligible electors. Neither s 7 nor s 24, alone or in combination with the provisions of Ch I, or the Constitution more generally, provides for a system of representative government in which there can be no Hayne fixing of the rolls of eligible electors at, or very soon after, the issue of the writs to begin the electoral process. An election conducted in accordance with the impugned provisions would yield Houses of the Parliament "directly chosen by the people". Although these are reasons enough to conclude that the plaintiffs' proceeding failed, it is as well to go on to consider some more particular aspects of their arguments. As noted earlier in these reasons, the plaintiffs put their case by reference to the two inquiries described in Roach: is there a disqualification from what otherwise is adult suffrage; is the disqualification not for a substantial reason? As already explained, there is no disqualification from what otherwise is adult suffrage. The plaintiffs were not barred or inhibited from exercising their entitlement to enrol and vote. Through their own inaction and failure to perform their obligations they claimed enrolment or transfer of enrolment after the due date. They left their claim until after the "last minute". There being no disqualification, the second question posed in Roach, about no substantial reason, does not arise. It is, nonetheless, desirable to consider it. To do that, it is necessary to make a more detailed examination of the historical and legislative context in which the issues in the present litigation are tendered for decision. The historical and legislative context Since the enactment of s 8 of the Commonwealth Electoral Act 1911 (Cth) inserting s 61C in the 1902 Act, enrolment to vote at federal elections has been compulsory. As enacted, s 31 of the 1902 Act provided that all persons qualified to vote at a federal election were qualified to have their name on the appropriate roll. The Commonwealth Franchise Act 1902 (Cth) provided (with some exceptions that need not be considered) that all British subjects resident in Australia for six months continuously, who had attained the age of 21 years, and whose names were on an Electoral Roll, were entitled to vote. Although enrolment was not compulsory in 1902, the first federal Electoral Rolls saw more than 95 per cent of eligible voters enrol. And in some States the numbers on those first federal Electoral Rolls exceeded the numbers on the State Rolls. Compulsion to enrol necessarily has two consequences. First, a time for compliance with the obligation must be fixed. Second, consequences (usually penal) must be identified as following from failure to perform the obligation. Section 61C of the 1902 Act, as inserted by the 1911 Act, obliged every person entitled to be enrolled as an elector, and who was not so enrolled, to fill in and sign a form of claim and "forthwith" send or deliver it to the proper officer. Regulation 6B(2) of the Electoral and Referendum Regulations 1912 (Cth) provided that failure to send or deliver a claim within 21 days of becoming entitled to enrol was an offence punishable by a penalty not exceeding £2 or, in Hayne the case of a first offence, not exceeding 10 shillings. As will later be explained, the Act, as it now stands, makes generally similar provisions fixing the time by which the obligation to enrol is to be performed, and fixing a penalty for failure to comply with the obligation. The plaintiffs' case is that, despite the legislature validly obliging enrolment forthwith, and providing for penal consequences if that obligation is not performed, the legislature not only must provide a further opportunity for performance of the obligation to enrol, but also must provide for that opportunity to be taken up after an election has been announced and the writs that commence the electoral process have been issued. Since 1973232, subject to some exceptions that are not immediately relevant, all Australian citizens who have attained 18 years of age have been qualified for enrolment. If qualified for enrolment, a person who lives at (and for the preceding period of one month has lived at) an address in a Division is entitled233, in respect of residence at that address, to have his or her name placed on the roll for that Division. Special provision is made in the Act for eligible overseas electors234, the spouses and children of eligible overseas electors235, Norfolk Island electors236 and itinerant electors237, but none of those provisions need be examined here. The Act allows for provisional claims for enrolment by applicants for citizenship238 and for claims for age 16 enrolment239, but again, nothing turns directly on the detail of those provisions. A person who is entitled to enrolment for a Division is bound240 "forthwith" to fill in and sign a claim and send or deliver that claim to the Electoral Commissioner. That obligation extends to those eligible for enrolment for the first time and to those who, because of a change of residence, are bound to 232 Commonwealth Electoral Act 1973 (Cth), s 3 amending s 39(1) of the Act. See now s 93 of the Act. 234 ss 94, 94A. 236 ss 95AA, 95AB, 95AC. 238 s 99A. Hayne claim transfer of enrolment. Apart from those whom the Act describes as qualified Norfolk Islanders, every person entitled to have his or her name placed on the roll for any Division, whether by way of enrolment or transfer of enrolment, and whose name is not on the roll upon the expiration of 21 days from the date upon which that person became so entitled, is guilty of an offence241 unless he or she proves that non-enrolment is not a consequence of failure to make a claim. A person enrolled for a Division who has changed his or her place of living to another address in the same Division, and has lived at the new address for one month, but does not give written notice of the new address within 21 days of the end of the one month period, is guilty242 of an offence. Submission of a claim for enrolment or transfer precludes243 prosecution for an offence of not making a claim, if the offence was committed before the claim was made. Enrolment governs more than the entitlement of individuals to vote. Distributions of each State and Territory into Electoral Divisions are made by reference to the numbers of electors enrolled in each Division, and the average divisional enrolment in relation to the relevant State or Territory. Each month, the Electoral Commissioner must244 ascertain the number of electors enrolled in each Division, determine the average divisional enrolment in respect of each State and Territory, determine the extent to which the number of electors enrolled in each Division differs from the average divisional enrolment, and cause a statement of the matters so ascertained and determined to be published in the Gazette. Whenever it appears to the Electoral Commission, from those statements in the Gazette, that more than one-third of the Divisions in a State are, and for more than two months have been, malapportioned, a redistribution must So far as the enrolment of individual electors is concerned, several observations are to be made about the Act. First, Pt IX of the Act provides for objections to enrolment of a person, and Pt X for review of decisions to reject a claim for enrolment or to remove a person's name from a roll. A decision to 242 s 101(5) and (6). 244 ss 55A, 58. Hayne remove or omit a person's name from a roll is also amenable to judicial review under s 75(v) of the Constitution246. A decision to accept a claim for enrolment, or transfer of enrolment, cannot be challenged except by the process of objection under Pt IX of the Act. But, since the 2006 Act, the Electoral Commissioner has been forbidden247 to remove an elector's name from a roll, as a result of the objection process, during the period between 8 pm on the date of the writ for an election and the close of the polling at the election. That is the same period as is now fixed by the Act as the period during which claims for new enrolment cannot be considered. Before the 2006 Act, the prohibition on removing an elector's name was also tied to the period during which claims for new enrolment could not be considered: the period beginning seven days after the date of the writs. Further, s 361(1) of the Act provides that, on an Electoral Petition to the Court of Disputed Returns, "the Court shall not inquire into the correctness of any Roll". It follows, so the Commonwealth submitted, that alleged deficiencies in the Electoral Rolls cannot be agitated, after the election, in a challenge to the result. It also follows, however, that questions about significance of enrolment have a wider focus than the position of any particular individual. It is necessary to consider not only the effect of the Act on individuals, but also the place that the Electoral Rolls play in the conduct of an election as a definitive statement of entitlement to vote. Closing the Electoral Rolls – history Between 1902 and 1983, a person's name could not be added to an Electoral Roll (whether pursuant to a claim to new enrolment or a claim to transfer enrolment) after the writs had issued248. Until 1983, there was a practice, perhaps even a convention249, that writs for an election would not issue until at least seven days after the public announcement of an intention to call an election. Yet such a practice or convention appears not to have been always followed. The parties in the present matter agreed that, in 1931, only two days elapsed between the announcement of an election and issue of the writs and that, in 1949, only five days elapsed. And the practice, or convention, was one which depended 246 Snowdon v Dondas (1996) 188 CLR 48 at 72; [1996] HCA 27. 248 Commonwealth Electoral Act 1902 (Cth), s 64; Commonwealth Electoral Act 1918 (Cth), s 45 (as it then stood). From 1910 the writs were taken to have issued at 6 pm on the day of issue: Commonwealth Electoral Act 1909 (Cth), s 12, inserting s 64(2) in the 1902 Act. 249 See R v Pearson; Ex parte Sipka (1983) 152 CLR 254 at 266 per Murphy J; [1983] HCA 6. Hayne upon there being an announcement of intention to dissolve the Parliament (and call an election) before the tendering of advice which would lead to the Governor-General in Council causing writs to be issued for a general election of members of the House of Representatives. Section 5 of the Constitution permits the Governor-General "by Proclamation or otherwise, [to] prorogue the Parliament, and ... in like manner dissolve the House of Representatives". Section 32 of the Constitution requires that the writs issue "within ten days ... from the proclamation of a dissolution" of the House. But s 32 does not preclude issuing the writs sooner than that outer limit of 10 days. Section 12 permits the Governor of any State to cause writs to be issued for elections of senators for the State. And this was done in every State, for this election, on 19 July 2010, the same day as writs were issued for the election of members of the House of Representatives. In 1983, writs for the election were issued on the day after the election was announced. As a result, those who, at 6 pm on that day, were in default of their obligation to enrol, or seek transfer of their enrolment, could not have their claims to enrolment on the relevant federal Electoral Roll considered. Their claims to enrolment on the relevant State Roll, however, were allowed. Proceedings were brought in this Court250 claiming that because the persons concerned had the right to vote at elections for the more numerous House of the Parliament of a State, s 41 of the Constitution required that they not be prevented by any law of the Commonwealth from voting at elections for either House of the Parliament of the Commonwealth. The Court held (Murphy J dissenting) that the right to vote in s 41 was that possessed under a State law when the federal franchise was established, and that s 41 does not confer a right to vote in a federal election on any person who, from time to time, has the right to vote at a State election. Accordingly, the applications were dismissed. Arguments of the kind advanced in this matter, though available in R v Pearson; Ex parte Sipka, were not put to or considered by the Court in that case. Rather, Sipka was decided without any direct challenge to the Commonwealth's submissions that the then provisions of the Act providing for closure of the rolls on the day of issue of the writs were "authorised by ss 9, 10, 29, 31 and 51(xxxvi) of the Constitution [and] render[ed] effective those provisions of the Act providing for an electoral roll and for enrolment"251. Nor was there any direct challenge to the further argument on behalf of the Commonwealth252 that "[a] provision which closes off the roll by reference to the date of issue of the writs for an election facilitates the exercise of the franchise". 250 Sipka (1983) 152 CLR 254. 251 (1983) 152 CLR 254 at 256. 252 (1983) 152 CLR 254 at 256. Hayne Just as the decision in Sipka does not foreclose the plaintiffs' arguments in this case, the longevity of the provisions which gave rise to the litigation in Sipka does not preclude the plaintiffs from success in this litigation. Nor is it necessary for the plaintiffs to assert that the arrangements about closing of the Electoral Rolls which existed between 1902 and 1983 were constitutionally invalid. While the better view is that those arrangements were constitutionally valid, they were administered in a context where, at least for the most part, controversies of the kind that now arise could not have been tendered for consideration by this Court as a "matter". That is not to say that the constitutional validity of the arrangements that persisted during those years up to the early 1980s depended upon the existence of some imperfectly observed political practice or convention about when the proposal to hold an election would be announced. It is to observe only that the factual circumstances which underpin the claims brought by these plaintiffs did not arise, and did not arise because of the way in which electoral announcements were made. It is further to be observed, however, that, if the present election had been announced one week before it was, but writs had been issued on the day they were, the plaintiffs would presumably accept that the impugned provisions governing consideration of claims for new enrolment or transfer of enrolment would be valid in their operation. Following the 1983 election, the Act was amended253 to provide that the period in which a person's name could not be added to the roll began at 6 pm on the day the rolls close, and that the rolls closed seven days after the issue of the writs. In 1995, the cut-off time of 6 pm was changed254 to 8 pm. Between the 1983 election and the enactment of the 2006 Act there was debate, from time to time, about what provision should be made for cutting off consideration of claims for new enrolment, or claims for transfer of enrolment, once an election had been called. Participants in the debate appealed to a variety of considerations in aid of particular proposals. Those considerations included, but were not limited to, questions of the "integrity" of the rolls, the "accuracy" of the rolls and what would be the "more democratic" solution. And the proposals were politically controversial. The 2006 Act was enacted over the opposition of the then opposition party and some third party and independent senators. 253 Commonwealth Electoral Legislation Amendment Act 1983 (Cth), ss 29 and 45, inserting, among other provisions, ss 43(4) and 61A in the Act. (The Commonwealth Electoral Legislation Amendment Act 1984 (Cth) provided for the renumbering of the provisions of the Act.) 254 Electoral and Referendum Amendment Act 1995 (Cth), Sched 1, Item 17. Hayne The 2006 amendments It is not necessary, however, to trace the detail of the controversy, the arguments that were deployed in the course of the debates in the Parliament, or the extended debates that took place in Committees of the Parliament, especially the Joint Standing Committee on Electoral Matters ("JSCEM"). Nor is it useful to pause to examine the way in which words like "integrity" or "accuracy" can or should be used in describing the state of the Electoral Rolls. Two points are presently important. First, there have been essentially three different forms of statutory regulation of federal electoral enrolment since federation. From federation to 1983, and thus both before and after enrolment was made compulsory in 1911, no claim for new enrolment or transfer of enrolment could be considered if made after the writs for an election were taken to have issued. Between 1983 and 2006, claims for new enrolment and transfer of enrolment could be considered if made within seven days after the writs for an election were issued. Since 2006, claims for new enrolment could not be considered if made after the day on which the writs were issued, and claims for transfer of enrolment could not be considered if made later than the third working day after the date of the writs. Secondly, to the extent to which it is necessary or appropriate to examine why the 2006 Act, in the respects relevant to this matter, was framed in the way it was, several points are to be noticed. Because the changes made by the 2006 Act were politically controversial, debate about them tended to focus upon what was seen as politically persuasive. Issues about the "integrity" or "accuracy" of the rolls had been examined by the JSCEM in its reports on the federal elections held in 1996 and 2004 and in other more particular reports of the JSCEM published in May 2001 and October 2002. The issues were also examined in submissions and reports by the Australian National Audit Office and the Australian Electoral Commission. The central focus of much of what was said in those documents was on enrolment fraud. But reference was also often made to the costs and difficulties associated with the facts that many new and existing electors were not making enrolment claims when they should, but were delaying them to the time when an election had been announced. In the JSCEM report on the conduct of the 2004 federal election ("JSCEM 2004 Report"), published in September 2005, the Committee noted255 that 60.5 per cent of enrolment transactions that had occurred 255 Australia, The Parliament, Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal (Footnote continues on next page) Hayne during the close of rolls period would not have been required if electors had made the necessary claims when required to do so. The Committee expressed256 the belief that "the seven day close of roll period for Federal elections actually encourages electors and potential electors to neglect their obligations in respect of enrolment, believing that they can play 'catch up' during the close of rolls period". The Committee noted257, with what it described as "a high degree of concern", that "a significant number of electors" had not updated their enrolment details despite contact by the Australian Electoral Commission ("the AEC") reminding them of their obligations. The Committee continued258: Statistics provided by the AEC indicate, that despite AEC efforts and the significant amount of taxpayer funds expended by them in contacting electors prior to elections being announced, that same pattern is repeated election after election. Not only do electors act unlawfully in not enrolling when entitled, they cause the wastage of a significant amount of taxpayer funds that the AEC is obliged to expend on postage and other measures, making repeated attempts to persuade those same electors to update their details on the electoral roll." (footnote omitted) On the subject of fraud, the Committee said259: The Committee also agrees that the current close of roll arrangements present an opportunity for those who seek to manipulate the roll to do so at a time where little opportunity exists for the AEC to undertake the thorough checking required [for] ensuring roll integrity. The Committee believes that those who argue for the retention of the seven day close of rolls and who promote the argument that there is no proof that enrolment fraud is Election and Matters Related Thereto, (September 2005) ("JSCEM 2004 Report") 256 JSCEM 2004 Report at 35 [2.116]. 257 JSCEM 2004 Report at 35 [2.118]. 258 JSCEM 2004 Report at 35. 259 JSCEM 2004 Report at 35-36. Hayne sufficiently widespread to warrant any action, have missed the point. The fundamental issue facing this Committee is to prevent any such fraud before it is able to occur. Failure to do so would amount to neglect. While the risk exists that fraud sufficient to change the result of an election might occur, we are failing in our duty to protect and preserve the integrity of our electoral system and our democratic processes and principles." The Committee recommended that the rolls be closed at 8 pm on the day that the writ for an election is issued. It said260 of that change: This change, along with the introduction of proof of identity and address measures for enrolment and provisional voting, will ensure the electoral roll retains a high degree of accuracy and integrity, while reminding electors that the responsibility for ensuring that the electoral roll is updated in a timely manner rests with them." (emphasis addded) This being the history of the matter, it is not surprising that neither the Explanatory Memorandum, nor the Second Reading Speech, for the Bill that became the 2006 Act canvassed in any detail the arguments for the alterations that were to be made by the proposed law. Those arguments had already been extensively examined. Rather, the Explanatory Memorandum proceeded by reference to a Government Response to the JSCEM 2004 Report, and the Second Reading Speech said little more than that the Bill "contains reform measures arising from some of the government supported recommendations" of that report. Neither the Explanatory Memorandum nor the Second Reading Speech contains any, or at least any elaborated, discussion of the mischief to which the Bill was directed. Nonetheless, read in the context of the JSCEM 2004 Report, and the Government Response to that report, it is evident that, in respects relevant to the present matter, the Bill was intended to provide what the Commonwealth described in its submissions as "prophylactic" measures against fraud, while reminding electors, as the JSCEM 2004 Report said261, "that the responsibility for ensuring that the electoral roll is updated in a timely manner rests with them". 260 JSCEM 2004 Report at 36. Hayne The plaintiffs submitted that there was no "substantial reason for abrogating the seven day period" provided by the 1983 legislation and that there was "no evidentiary basis for what in fact occurred" (scil. the changes made by the 2006 Act). The plaintiffs necessarily stopped short of submitting that the views stated in the JSCEM report that are set out above were not held by the majority of the members of the Committee. The plaintiffs necessarily stopped short of submitting that what was said in the report masked other, ulterior, and impermissible purposes. The plaintiffs necessarily stopped short of such submissions because there was no foundation in the material for either submission. But what then was the legal proposition on which the plaintiffs relied when they spoke of no "evidentiary basis" and no "substantial reason"? Shorn of forensic flourishes, the plaintiffs' argument must be understood as being that the impugned laws were not reasonably appropriate and adapted to serving an end consistent or compatible with the maintenance of the constitutionally prescribed system of government. So understood, the plaintiffs' argument proceeded by asserting that the impugned provisions were not reasonably appropriate and adapted to preventing electoral fraud, because there was no demonstration that there had been any significant incidence of fraud before the 2006 Act, and (perhaps) because there were other means of preventing fraud that were consistent with maintaining the seven day period fixed by the 1983 Act. And the plaintiffs then coupled those assertions with the further proposition (already noticed in these reasons) that the "practical operation" of the impugned provision was to "disenfranchise" the plaintiffs and others in like case. It is convenient to consider the plaintiffs' argument in steps: first, the "practical operation" of the impugned laws; second, the question of mischief and, in particular, electoral fraud; and third, the significance of the availability of other measures. Practical operation the Identifying the practical operation of laws as disenfranchising the plaintiffs and others lay at the very centre of the plaintiffs' case. I have already pointed to the difficulties that follow from speaking of the plaintiffs as having been disenfranchised. Those same difficulties inhere in the assertion that the practical operation of the provisions cutting off consideration of claims for new enrolment and transfer of enrolment "disenfranchises" the plaintiffs. And the difficulties encountered are not just verbal, they are substantial. impugned The complaint which the plaintiffs make about the so-called "practical operation" of the impugned provisions depends upon other, related provisions of the Act having been disobeyed by the plaintiffs. If the plaintiffs had performed their obligations under the Act when they were bound to do so, the impugned provisions would not be engaged. Thus the "practical operation" of the law to which the plaintiffs point is an operation that depends upon the extent to which Hayne other provisions of the law of which the impugned provisions form a part have been disobeyed. This asserted understanding of the "practical operation" of a law is entirely novel and should not be adopted. The constitutional validity of the impugned provisions cannot turn upon the extent to which related statutory obligations have been disobeyed. No less importantly, as has already been explained, the assertion that the practical operation of the impugned provisions disenfranchises the plaintiffs necessarily depends on first adopting one, if not more than one, of the three forms of question begging premises identified earlier in these reasons. The assertion about practical operation depends (at least in part) upon masking the relevant temporal dimension of entitlement to enrol. The assertion assumes that there is a constitutional requirement that last minute enrolment be permitted. The assertion then seeks to justify that assumption by an appeal to what are assumed, rather to be constitutional norms of "representative government". The assumptions dictate the answer to the particular question that arises in the proceedings. than demonstrated, Mischief The relevant provisions of the 2006 Act were proposed in the JSCEM 2004 Report, not just to prevent fraud, but also to encourage timely observance of the obligations to enrol. It follows that to focus only on questions of fraud prevention ignores another intended purpose of the legislation. That other intended purpose cannot be discarded from consideration as irrelevant. It cannot be dismissed as an untenable view. Even if attention were to be confined to questions of fraud prevention or inhibition, the plaintiffs' argument (that because there was no demonstration of any significant incidence of fraud before the 2006 Act, the impugned provisions are not reasonably appropriate and adapted to an end of fraud prevention) is logically and legally flawed. The logical flaw is evident. The absence of proven instances of fraud does not demonstrate that no new or different step can or should be taken to prevent it. Whether any further step should be taken is a matter of judgment. Nor does pointing to the existence of other means of preventing fraud entail that no new or different step can or should be taken. Again, the question is one for judgment. The legal flaw in the reasoning is of the same kind as has already been observed in connection with the question of practical operation. The plaintiffs' arguments about what is reasonably appropriate and adapted depended upon one or more of the question begging premises that have been identified. It will be recalled that the plaintiffs' argument denied that the impugned provisions are reasonably appropriate and adapted to serving an end consistent or compatible with the maintenance of the constitutionally prescribed system of Hayne government. This was then particularised by saying that the impugned provisions were not reasonably appropriate and adapted to an end of fraud prevention and by saying that no other relevant end was demonstrated. But the plaintiffs accepted that provisions for an Electoral Roll, the details of which were to be fixed at a date before polling day, are reasonably appropriate and adapted to an end consistent with the maintenance of the constitutionally prescribed form of government. That acceptance necessarily depends on accepting the argument put by the Commonwealth in Sipka, noted earlier, that a provision which closes off the rolls by reference to the date of issue of the writs for an election facilitates (and, I would add, does not impede or detract from) the exercise of the franchise. To say, as the plaintiffs did, that a provision closing the rolls seven days after issue of the writs is valid, but a provision closing the rolls on the day of the writs (or in the case of transfers, three days after the writs) is not, necessarily proceeds from a premise that provision must be made for last minute enrolments: "last minute" not just in the sense of after the time fixed by the Act for performance of the obligation to enrol, and proximate to an election, but "last minute" in the sense of after the announcement of the election. The premise begs the question. The premise was not, and cannot be, established. Availability of other measures The plaintiffs' references to available alternative measures took two distinct forms. First, as already noted, much of the plaintiffs' argument proceeded by comparison with the system of allowing seven days for lodging claims for enrolment or transfer of enrolment that had been introduced in 1983. But, as already explained, those comparisons are significant only if the unstated premise for the argument is that there must be legislative provision enabling last minute enrolments. The second form of reference to alternative measures was made in connection with the argument that fixing cut-off times earlier than those fixed in 1983 was not necessary for elimination of fraudulent practices. In this connection, reference was made to what the Australian Electoral Commission has done in two programs: a Continuous Roll Update or "CRU" program and the development of a computerised roll management system known as "RMANS". In each year since 1999-2000, many millions of dollars have been spent by the Australian Electoral Commission on Electoral Roll Review and Continuous Roll Update activities. The latter form of activity required data matching, using RMANS, between entries on the Electoral Rolls and other data held by other government departments or agencies. No doubt processes of data matching can help to avoid registration of fraudulent enrolments. It is an altogether different question (not addressed in the evidence or in argument) whether those techniques can be usefully engaged in dealing with a large number of last minute claims for enrolment. It is this latter question which is important when considering the impugned provisions. (In that Hayne regard it must be remembered that the Commission dealt with more than 500,000 claims lodged between the announcement of the 2010 election and the cut-off dates fixed according to the impugned provisions.) To make good the plaintiffs' proposition, it would be necessary to demonstrate that allowing the Australian Electoral Commission a little more time for checking last minute enrolments than was available under the 1983 provisions would not make, and could not be supposed to make, any contribution to avoidance of fraud. The general references that the plaintiffs made to processes of continuous roll updating and the availability of data matching techniques and facilities fell well short of demonstrating that proposition. Be this as it may, it must also be recalled that the JSCEM 2004 Report made two points: one about preventing fraud and one about trying to encourage better compliance with existing requirements by shortening the time for last minute enrolments. In that latter regard it may be noted that, despite Electoral Roll Review and Continuous Roll Update activities by the Australian Electoral Commission, the estimated number of eligible persons not enrolled generally increased during the period between June 1999 and December 2009262. The parties agreed that, at the close of rolls for the 2004 federal election, about 91.5 per cent of eligible voters were enrolled. At the close of rolls for the 2007 election (after the amendments made by the 2006 Act had come into force) the proportion enrolled had risen to about 92.3 per cent of eligible voters. By 31 December 2009, that proportion had dropped to about 90.9 per cent. It was estimated that, at 31 December 2009, nearly 1.4 million eligible persons were not enrolled. For the 2001, 2004 and 2007 elections, the numbers "missing" from the rolls were about 0.9 million, 1.2 million and 1.1 million (respectively). Thus, while the particular number missing varied from election to election (and actually dropped after the amendments made by the 2006 Act) the general trend over the 10 years between 1999 and 2009 was for the number missing to increase, and for the percentage of eligible electors who were enrolled to diminish. The plaintiffs did not demonstrate that shortening the time for last minute enrolment could have no effect on the general level of compliance with the obligation to enrol, or transfer enrolment, forthwith upon becoming entitled to enrol, or required to transfer enrolment. Yet that proposition was a necessary step to making good the plaintiffs' contention that the 2006 Act, so far as now relevant, was not reasonably appropriate or adapted to serving an end consistent or compatible with the maintenance of the constitutionally prescribed system of government. 262 Australia, Australian Electoral Commission, "AEC Submission to the Joint Standing Committee on Electoral Matters Inquiry into the NSW Parliamentary Electorates and Elections Amendment (Automatic Enrolment) Bill 2009", (January 2010) at 7, Fig 2.2. Hayne 'proportionality'". The plaintiffs' appeal to the availability of other measures depended upon other, more deep-seated errors than any failure of factual demonstration. In terms, the argument was presented as being at least akin to an argument of proportionality. And it will be recalled that, in the plurality reasons in Roach, it was said263 that "as remarked in Lange264, in this context there is little difference between what is conveyed by that phrase ['reasonably appropriate and adapted'] and the notion of Whether expressed as a test of "proportionality" or as a test of "reasonably appropriate and adapted", the inquiry seeks to measure the impugned provisions against other available means of achieving an identified end. Proper identification of the relevant end is, therefore, not simply important; incorrect identification of the end will determine the result of the proportionality analysis. Identifying the intended "end" as facilitating, encouraging or not preventing any who are eligible to vote from participating in the election begs the question by defining the constitutionally mandated system of government in a manner divorced from constitutional text or structure. It dictates the result of any proportionality analysis. Conclusion The plaintiffs' case was not made good. Application of the impugned provisions does not yield Houses of the Parliament that do not satisfy ss 7 and 24 and are not "directly chosen by the people". The impugned provisions, closing off the rolls by reference to the date of issue of the writs for an election, facilitate the exercise of the franchise. Neither plaintiff (nor others in like case with either) is disenfranchised by application of the impugned provisions. The plaintiffs did not show that the alterations made to the cut-off dates by the 2006 Act were not reasonably appropriate and adapted to the ends of having Electoral Rolls that are fixed for use at a particular election and are suitable for use in distributing States into Electoral Divisions. It was for these reasons that I concluded that the application should be dismissed, with costs. Having regard to what has since been written, one further point should be made. The content of the constitutional expression "directly chosen by the people" neither depends upon, nor is informed by, what are seen from time to time to be the politically accepted or politically acceptable limits to the qualifications that may be made to what is otherwise universal adult suffrage. As 263 (2007) 233 CLR 162 at 199 [85]. 264 (1997) 189 CLR 520 at 567 fn 272. Hayne I explained in Roach265, reference to "common understanding" or "generally accepted Australian standards" does not provide a valid premise for consideration of the issues in this matter. The understanding or standards mentioned have varied, and will likely continue to vary, over time. Their content cannot be reliably determined in a way that permits their use as a criterion of constitutional validity. The ambit of the relevant constitutional powers is not set by the political mood of the time, or by what legislation may have been enacted in exercise of the powers. Political acceptance and political acceptability have no footing in established doctrines of constitutional interpretation. 265 (2007) 233 CLR 162 at 218-220 [157]-[162]. 267 HEYDON J. The reasons for judgment of Hayne J have set out the constitutional and legislative provisions, the background circumstances, and the abbreviations relevant to what follows. The victims of the impugned legislation The plaintiffs said that the impugned provisions created an "exclusion from the constitutional franchise" and "loss of the franchise". They were said to "disenfranchise" the plaintiffs, or "disentitle or exclude [them] from casting a vote". They were said "significantly [to] burden or limit the entitlement of a substantial number of adult citizens to enrol and vote". They were said to be "arbitrary" and "disproportionate". The plaintiffs also referred to a submission of the Human Rights and Equal Opportunity Commission to the Senate Finance and Public Administration Committee in 2006 which made the following claims. One was that the prohibition on accepting new enrolments after the day the writs were issued "has the potential to disadvantage young, first-time voters and new Australian citizens". Another was that a three day period for changing enrolments "disadvantages itinerant populations and people living in remote and rural areas" and "disproportionately" disadvantages "Australia's Indigenous population". Another claim was that these short periods of time "may also disadvantage people with disability who need assistance to access and complete the relevant materials." In addition, the plaintiffs referred to the difficulties young adults face in remaining correctly enrolled due to their residential and workplace mobility. The plaintiffs referred to the disproportionate impact on the homeless. The plaintiffs submitted that "the voting patterns of different age groups can differ substantially", and "a decision as to the time in which rolls will close will have recognised political consequences in relation to enrolments and transfers of the differing age groups, thereby enabling it to be a politically motivated decision." The plaintiffs did not, however, submit that the decisions of the Prime Minister in relation to the calling of the 2010 election fell into this category. The plaintiffs also submitted that "many hundreds of thousands of … young electors … rely on" the existence of a seven day period after the writs are issued for an election "as a way of updating their enrolment". There is no evidence of this reliance. The plaintiffs themselves did not give any evidence to that effect in their affidavits. It is true that many people do not enrol, or transfer their enrolment, until an election is called, but that is a different proposition. The plaintiffs' contentions thus concentrated on the supposed impact of the impugned provisions on Australia's young adults as well as its wretched of the earth – its descamisados and other victims. The plaintiffs never demonstrated that that impact had constitutional relevance, or had any point other than an appeal to pathos. Whether or not the plaintiffs' contentions are correct as a matter of fact, it may be desirable to begin by noting, first, some notorious background facts, and, secondly, the personal position of the plaintiffs. Notorious facts about Australian federal elections There are key background matters of fact which very few Australian citizens, at least those resident in Australia, can be ignorant of. Federal elections take place every two or three years. There is speculation from time to time during the period between elections, and constant speculation towards the end of it, about what date the next election will be held on, what advantages a date will bring to the party to which the Prime Minister of the day belongs, and what problems and disadvantages exist in relation to particular dates. That was certainly the case in relation to the years leading up to the 2010 election. The Prime Minister's announcement on 17 July 2010 of the election date did not come as a surprise. There had been continuous media speculation about the date when her predecessor would call an election. That speculation only intensified once she had succeeded to his office. The submissions advanced by the plaintiffs at times suggested that the realistic possibility of an election being called in the middle to late winter of 2010 did not materialise until the Prime Minister's announcement on 17 July 2010. That is not so. The personal position of each plaintiff What was the effect of the impugned legislation on the plaintiffs personally in relation to the events of this year's election? On Saturday 17 July 2010 the Prime Minister announced that there would be a federal election on Saturday 21 August 2010. Pursuant to ss 12 and 32 of the Constitution, the writs for that election were issued on Monday 19 July 2010. The consequence of the impugned provisions was that claims for new enrolments made after 8pm on Monday 19 July 2010 would not be considered until after the election, and claims for transfers of enrolment made after 8pm on Thursday 22 July 2010 would not be considered until after the election. Had the provisions which preceded the 2006 Act been in force, the electoral roll would have closed for both new enrolments and transfers at 8pm on Monday 26 July 2010. Hence, the first plaintiff, by reason of s 102(4) of the Act, had only one working day to enrol from the time when the Prime Minister announced the election date: she would have had six working days had the provisions in force before the 2006 Act remained in force. And the second plaintiff, by reason of ss 102(4AA) and 155, had only four working days to transfer his enrolment: he too would have had six working days had the provisions in force before the 2006 Act remained in force. But by reason of s 101(1) and (4), the first plaintiff had been under a statutory duty to enrol ever since she turned 18 on 16 June 2010 – more than a month before the rolls closed. It is true that the criminal sanction was small (a fine not exceeding one penalty unit): s 101(6). And it is true that s 101(7) prevented criminal proceedings from being instituted for an offence once the claim to enrolment was made. But the first plaintiff was in breach of statutory duty until then. What is more, she had had more than the five weeks since her eighteenth birthday in which to enrol. She also had had available to her a facility afforded by s 100 of the Act to make a claim to have her name placed on the roll from the time she turned 16. The first plaintiff did not avail herself of that facility. Had she done so, she would have been placed on the roll, and would have been able to vote as soon as she turned 18. The second plaintiff's position was similar. He had not been jammed between a sudden change of address and an unexpected announcement by the Prime Minister. By reason of s 101(1) and (4), the second plaintiff had been under a statutory duty, backed by the s 101(6) criminal sanction as qualified by s 101(7), to transfer his enrolment from the time when he moved to his new address in March 2010 – some four months before the Prime Minister's not unexpected announcement. Before examining the substantive arguments of the plaintiffs, it is convenient to note some difficult aspects of them. Some difficulties in the plaintiffs' arguments An unconvincing distinction between the allegedly invalid and the admittedly valid. The first plaintiff's argument was that the provisions in force before the 2006 Act that gave her five more working days to enrol than the impugned provisions introduced in 2006 were constitutionally valid, but the impugned provisions introduced in 2006 were not. And the second plaintiff's argument was that the provisions in force before the 2006 Act giving him two more working days to transfer his enrolment than the impugned provisions introduced in 2006 were constitutionally valid, but the impugned provisions introduced in 2006 were not. It is not possible to infer from the requirement in ss 7 and 24 of the Constitution that the Houses of Parliament be "chosen by the people" that these temporal differences are of such crucial decisiveness as to mark the difference between validity and invalidity. Differences of this type are in a sense arbitrary, but they are characteristic of the choices which legislatures make, and have to make. It is unlikely that the fundamental norms underlying the Constitution and reflected in its language would require the conclusion that one regime was constitutionally valid while the other was invalid. In part the unsatisfactory distinctions on which the plaintiffs relied stemmed from a reluctance to face up to the logic of their own arguments. That logic pointed at least to the conclusion there should be the widest possible participation in elections – that no person qualified to vote under s 93 should be prevented from voting under s 101 by reason of a failure to make a claim for enrolment or for transfer of enrolment. The arguments assume that all of those entitled to be on the rolls should be entitled to vote. That goal could only be achieved if the time to make claims for enrolment or for transfer of enrolment extended for the maximum amount of time before an election – perhaps right up to the moment when the polling booths closed on the day fixed for the election. An argument that ss 7 and 24 of the Constitution require electors to have the maximum amount of time to enrol before an election is more ambitious, but also more powerful, than an argument that they require a period of only one week after the day when the writs are issued. In the present case the plaintiffs selected the limited arguments they did, perhaps, so as to avoid causing alarm by deploying arguments more consistent with the underlying logic of their position. Those arguments would have had a seemingly audacious character, and perhaps a seemingly flawed nature, which would have reflected badly on the limited arguments they actually chose to advance. And the more consistent but more audacious arguments might have had a potentially annihilating effect on the course of the 2010 election: it is far from clear that the first defendant could have coped with the consequences flowing from their success so as to permit the smooth running of the election. The anomalies which result from the much more limited arguments that were offered raise grave questions about the validity of both the limited and the audacious arguments. Incidentally, so far as the logic of the plaintiffs' arguments calls for the widest possible participation in elections, that logic, arguably, points to even wider conclusions. If the words "chosen by the people" require all of those entitled to be on the rolls to be entitled to vote, why should many members of the population lack entitlement to be on the rolls? Given that an important constitutional provision like s 75(v) can be availed of not merely by Australian citizens but by anyone within the Queen's peace, and given that other sections of the Constitution (for example, ss 80 and 117) do not speak only to citizens, is it valid to exclude from the franchise permanent residents? Or people with long term visas? Or any lawful resident? Or even unlawful residents? Is it valid to exclude persons below the age of 18? Are not all these persons in a sense part of "the Australian people", "the Australian nation", "the Australian community"? If the provisions excluding them from the franchise are valid, the underlying assumptions of the plaintiffs' arguments are questionable. The plaintiffs' arguments do not remedy the problems said to make the impugned provisions invalid. So far as the plaintiffs' arguments about constitutional validity appealed to the particular circumstances of mobile young people, new citizens, itinerant persons, residents of rural and remote areas, Aboriginal persons, persons with disabilities and homeless persons, they did not demonstrate that the difficulties of all or any of these classes would be overcome to any significant degree by extending for five working days the period of enrolment and for two working days the period for transferring enrolment. The plaintiffs' arguments do not remedy wider problems. The plaintiffs contended that the pre-2006 position, giving a seven day period in which to enrol or transfer enrolment, was valid because "it has been shown not to have resulted in such substantial disenfranchisement" that the Parliament had ceased to be a legislature "yielded by the vote of the people". In so far as the plaintiffs' arguments depended on there being "substantial" numbers of voters "excluded" by the impugned provisions, they overlooked the probability that whatever legislative regime were adopted, numbers of voters which are in some sense "substantial" would be "excluded". In 2004, persons who had not enrolled or transferred their enrolment had seven days after the writs were issued to do so: 168,394 people lodged claims for enrolment or transfer after the electoral rolls closed. In 2007, persons who had not enrolled had to do so on the day the writs were issued and persons who had not transferred their enrolment had three more days: 100,370 lodged claims for enrolment or transfer after the electoral rolls closed. It was estimated that 100,000 claims for enrolment were received after the time stipulated under the 2006 amendments but before the time that applied before the 2006 amendments. There was no evidence, however, about the number of claims received outside the time that applied before the 2006 amendments. It would be naïve to suppose that there were no claims of that kind, or that there were not many people qualified to vote who did not enrol. Indeed the plaintiffs frankly conceded that about 1.4 million persons eligible to enrol and to vote are not enrolled – a figure much higher than the numbers supposedly "excluded" by the impugned legislation. Disqualification? The Solicitor-General of the Commonwealth assumed the correctness of the test advocated by the plaintiffs. It had two elements. The first turned on whether the impugned provisions amounted to legislative disqualification from adult suffrage. If so, then according to the second element, the disqualification could only be constitutionally valid if, in the words of three Justices in Roach v Electoral Commissioner, it were for a "substantial" reason, namely one which was "reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government."266 Even if the Solicitor-General was correct in assuming that the second element of this test is applicable to cases of the present kind, this is not a case of disqualification. As the Solicitor-General rightly submitted, the plaintiffs were not in the position of the plaintiff in Roach v Electoral Commissioner. Vicki Lee Roach was completely debarred from voting while she served the term of her 266 (2007) 233 CLR 162 at 199 [85] per Gummow, Kirby and Crennan JJ; [2007] HCA 43. The plaintiffs called this "the standard adopted by the majority", but the fourth member of the Court who upheld Ms Roach's claim, Gleeson CJ, did not adopt that standard, and the other two members of the Court dissented. imprisonment. It was not the case that the law qualified the manner in which she might vote, or the facilities through which she might vote. She was simply not eligible to vote. In contrast, the plaintiffs in this case were fully qualified and entitled respectively to enrol and to transfer enrolment. The impugned provisions stopped them from taking steps to exercise that entitlement over a short period of time – a relatively small fraction of the period in which it was open to the plaintiffs to protect their positions. The plaintiffs were prevented from exercising their entitlement because they failed to comply with simple obligations and procedures in relation to getting enrolled (in the case of the first plaintiff) and transferring enrolment (in the case of the second plaintiff). If the analysis is shifted from the position of the plaintiffs to the position of other persons qualified to enrol or vote, its outcome is as follows. Whether particular voters fall within the classes prevented by the impugned provisions from voting is within their control: they can enrol up to 8pm on the day when the writs are issued, and they can change their enrolment within a further three days. The impugned provisions prevent only three very limited classes of voters who are able, ready and willing to enrol or transfer enrolment from doing so. The first of these very limited classes is voters who have not enrolled because they turn 18 between the issue of the writs and polling day. Their difficulty is curable if they employ the facility available pursuant to s 100 by which persons aged 16 can make a claim to be enrolled. Further, pursuant to ss 100 and 102(4AB) if they turn 18 after the writs are issued and before the election, they can make a claim within the period of three days after the issue of the writs. The second very limited class comprises voters who are to become Australian citizens between the date of the writs and polling day. Their difficulty is curable by the facility available to them to apply for enrolment within a period up to three days after the issue of the writs: ss 99B and 102(4AA). And the third very limited class comprises those who have moved from one Division to another just before the writs are issued and will become entitled, pursuant to s 99(2), to transfer their enrolment after living at a particular address for one month. The plaintiffs did not submit that the existence of this third class rendered the legislation constitutionally invalid, and there is no material before this Court from which it can be concluded that the class is "substantial". Indeed there is nothing to suggest that the memberships of these three classes, whether taken separately or together, and even if the facilities for curing the difficulties of the first two classes are not availed of, are "substantial" in any sense which would satisfy the plaintiffs' test of "substantial disenfranchisement". These three exceptional classes would exist in slightly different forms even under the regime accepted as valid by the plaintiffs, namely the enrolment or transfer of enrolment within seven days after the issue of the writs. The fact that these three exceptional classes exist therefore cannot point to the constitutional invalidity of the impugned provisions while leaving the provisions existing before the 2006 Act valid. All other voters outside the three exceptional classes who fail to enrol or transfer enrolment are the authors of their own misfortunes. They have not taken the steps to enable them to vote which were not only available to them, but required of them by s 101. They are simple steps. It would have been very easy to take them. There was ample time to take them. Despite the prodigious efforts of the first defendant, and the criminal sanctions directed at securing a complete exercise of the franchise, large numbers of people entitled to vote may end up not voting. It was earlier noted that as many as 1.4 million people do not enrol at all, for a variety of reasons. It may be because of their inefficiency. It may be because of their apathy. It may be because they have a positive desire not to participate in the electoral process. One example is the appellant in Judd v McKeon267, which upheld the validity of the provisions making voting compulsory: all the candidates supported capitalism and he belonged to a party which opposed it and prohibited him from voting for supporters of capitalism. Another example is Evelyn Waugh, who said: "I do not aspire to advise my sovereign in her choice of servants."268 It is difficult to treat any of these circumstances as factors relevant to the invalidation on constitutional grounds of an electoral system which works satisfactorily in relation to those who are not inefficient, apathetic, or conscientiously indisposed to participate. If not, why are the much lower numbers excluded by reason of the impugned legislation relevant? Of those who are validly enrolled, some forget that the election is on and do not vote, some turn up too late to vote, some are prevented from voting by a sudden crisis, some are indifferent about voting, some cast informal votes by mistake, and some cast informal votes deliberately. It is notorious that these classes of enrolled non-voters are much more numerous than those excluded by reason of the impugned legislation. None of their members could be described as "disqualified". Nor could those who fail to take steps under s 101 which would enable them to vote. It is they who disqualify, disenfranchise, exclude or disentitle themselves, not the legislature. The conduct of all these categories of people who fail to enrol, or, being enrolled, fail to vote, does not prevent the legislature being described as "chosen by the people". The plaintiffs submitted that the impugned amendments created a "burden" on those who desired to make a claim for enrolment or for transfer of enrolment outside times stipulated – a burden which "does fall disproportionately and is known to fall disproportionately so it is a particular burden on a particular part of the people." The legislation placed no "burden", the 267 (1926) 38 CLR 380; [1926] HCA 33. 268 Gallagher (ed), The Essays, Articles and Reviews of Evelyn Waugh, (1983) at 537. and no "disproportionate" burden. If there were any burden on anyone, it was a burden which those who bore it placed on their own shoulders. Since there has been no "disqualification", it is unnecessary to consider either the formulation or the application of the test which would apply if there had been disqualification. The plaintiffs met the possibility that there was no disqualification by submitting that the Roach test extends beyond disqualification to enactments which do not involve disqualification, but which could be said to "disenfranchise any group of adult citizens or otherwise disentitle or exclude them from casting a vote". The test has verbal similarities with that employed in Lange v Australian Broadcasting Corporation269. That is a test applicable to burdens on freedom of communication about governmental and political matters. It was applied in that case in relation to qualified privilege as a defence to the tort of defamation. Even on the assumption that it operates satisfactorily in that field and in the field of disqualification from voting, it does not follow that it is the correct test in other fields, and the plaintiffs did not demonstrate that it was; indeed they did not even endeavour to do so. "Chosen by the people": the "originalist" argument The nature of "representative government" has changed in Australia in the last century. The franchise has widened in point of gender, race and age. Enrolment was made compulsory in 1911. Proportional voting was introduced for the House of Representatives in 1918. Voting was made compulsory in 1924. Proportional voting was introduced for the Senate in 1948. But it does not follow from the fact that "representative government" has changed that the meaning of the constitutional expression "chosen by the people" has similarly changed. The plaintiffs, and not only the plaintiffs, advanced submissions turning on the relationship between the forms of electoral law from time to time over the last 110 years and the meaning of the Constitution. It was submitted on behalf of the Attorney-General for Western Australia that the "common contemporary understanding of a concept invoked by the Constitution" – that is, that understanding from time to time in the last century – influences "the meaning of a constitutional term", namely, "chosen by the people". These submissions generated a congenial atmosphere. But that atmosphere was disturbed by the Solicitor-General of the Commonwealth. Stimulating as much approbation as the man who asked for a double whisky in the Grand Pump Room at Bath, he asked an "originalist" question and propounded an "originalist" answer. The question was whether, in the light of the meaning of the words "chosen by the people" in 269 (1997) 189 CLR 520 at 567; [1997] HCA 25. 1900, precluding persons not on the electoral roll after the issue of the writs from voting in the election produced a legislature not "chosen by the people". The answer was in the negative, because a system of that kind fell within the meaning of those words in 1900. That answer is correct because the first federal election, in the absence of contrary provision by the Parliament, was conducted pursuant to the State laws relating to the more numerous House of Parliament of each State: see ss 8, 10, 30 and 31 of the Constitution. The researches of the Solicitor-General of the Commonwealth and counsel appearing for the Attorney-General for Western Australia have revealed that all those State laws made the right to vote in an election conditional on being enrolled on the relevant electoral roll270. In each State there were provisions that closed off the electoral roll to new enrolments or transferred enrolments at some point before polling day, although the precise date on which the rolls became closed varied significantly from State to State. In New South Wales the general electoral roll was revised annually. The Revision Court sat in October and the roll was to be finalised in December. The Revision Court also sat in March to produce a supplementary roll in May of each year. Each roll remained in force until the coming into force of the next general roll271. Transfer of an elector's right to vote from one district to another was accomplished by placing the elector's name on an additional roll without recourse to the Revision Court272, but no entry could be made in the interval between the issue of the writ and the declaration of the poll273. In Queensland an annual electoral roll was completed each December and it was supplemented by quarterly electoral rolls274. Each roll while in force was (subject to specific exclusions) conclusive evidence of the entitlement of persons named in it to vote275. 270 Parliamentary Electorates and Elections Act 1893 (NSW), s 80; Elections Act 1885 (Q), s 40; Electoral Code 1896 (SA), ss 36, 116 and 126; Electoral Act 1896 (Tas), s 57; Constitution Act Amendment Act 1890 (Vic), s 241; Electoral Act 1899 (WA), ss 21, 87 and 104. 271 Parliamentary Electorates and Elections Act 1893 (NSW), ss 47-51. 272 Parliamentary Electorates and Elections Act Amendment Act 1896 (NSW), ss 2, 3 and 4. 273 Parliamentary Electorates and Elections Act Amendment Act 1896 (NSW), s 4(II). 274 Elections Act 1885 (Q), ss 9-37. 275 Elections Act 1885 (Q), s 40. In South Australia new rolls were to be prepared every tenth year276 with supplemental rolls printed annually277 as well as "immediately previous to a general election"278. Claims for enrolment were receivable at any time and were to be acted upon immediately279, but the rolls were not to be altered on polling day or during the four days preceding an election280. Applications for transfer were receivable at any time except on polling day or in the 10 days leading up to the election281. However, a person was not entitled to vote unless that person had been registered for six months as an elector282. In Tasmania claims for enrolment were to be made in November of each year283, with an annual revision of the rolls to be completed in April284. The roll for each Division as revised was to be used in any election taking place until the following April285. In Victoria separate processes existed for the two Houses of Parliament. For the Legislative Council, a general electoral roll was prepared annually by a process ending in February, with a supplementary roll completed each August286. For the Legislative Assembly, a general roll was prepared annually by a process ending in April, with a supplementary roll in September287. For both Houses, each roll continued in force until the completion of the next annual roll288. 276 Electoral Code 1896 (SA), s 41. 277 Electoral Code 1896 (SA), ss 43 and 60. 278 Electoral Code 1896 (SA), s 43. 279 Electoral Code 1896 (SA), ss 47-49. 280 Electoral Code 1896 (SA), s 57. 281 Electoral Code 1896 (SA), ss 51-52. 282 Electoral Code 1896 (SA), ss 14-15. 283 Electoral Act 1896 (Tas), ss 22-25. 284 Electoral Act 1896 (Tas), s 56. 285 Electoral Act 1896 (Tas), s 57. 286 Constitution Act Amendment Act 1890 (Vic), ss 77-96. 287 Constitution Act Amendment Act 1890 (Vic), ss 168-185. 288 Constitution Act Amendment Act 1890 (Vic), ss 97 and 186. In Western Australia new rolls were to be prepared in connection with each census289 with supplemental rolls printed annually290 as well as "immediately previous to a general election"291. Claims for enrolment were receivable at any time and were to be acted upon immediately292, but the rolls were not to be altered on polling day or during the four days preceding an election293. Applications for transfer could not be made between the issue of a writ for an election and polling day294. A person was not entitled to vote in an election unless that person had been registered for six months as an elector295. Some of the States having provisions preventing persons from voting unless enrolled, and not permitting enrolment after the issue of the writs, had property qualifications which were either necessary or sufficient conditions for voting. The States in question were Queensland296, Tasmania297 and Western Australia298. Some of these property qualifications were complex, and checking them in the period between the issue of the writs and polling day might have been difficult. But, as the Solicitor-General of the Commonwealth correctly submitted, this cannot explain why in those States it was not possible to alter the rolls after the issue of the writs. It follows that the contemporary understanding of the words "chosen by the people" in 1900 was consistent with the exclusion of those not on the roll when the writs were issued from voting. 289 Electoral Act 1899 (WA), s 26. 290 Electoral Act 1899 (WA), s 28. 291 Electoral Act 1899 (WA), s 28. 292 Electoral Act 1899 (WA), ss 33-34. 293 Electoral Act 1899 (WA), s 44. 294 Electoral Act 1899 (WA), s 37. 295 Constitution Acts Amendment Act 1899 (WA), s 15. 296 Elections Act 1885 (Q), s 6. 297 Constitution Amendment Act (No 2) 1896 (Tas), ss 3-5. 298 Constitution Acts Amendment Act 1899 (WA), s 15. the Those who object the Commonwealth commonly contend type of reasoning employed by that the Solicitor-General of the understanding in 1900 of appropriate electoral laws is irrelevant in that those laws were different from, and less enlightened than, our own. In those days in elections to some legislatures there were property qualifications, restrictions on Aboriginal suffrage and restrictions on female suffrage. The question, however, is not what the most enlightened possible meaning, judged by modern standards, might be borne by the words "chosen by the people". The question is what meaning skilled lawyers and other informed observers considered those words to bear in the 1890s299, and, being words used to describe processes which were evolving and subject to "dynamism"300, what meanings those observers would reasonably have considered they might bear in future301. Even though the federation age knew of property qualifications, restrictions on Aboriginal suffrage and restrictions on female suffrage, it also knew of universal manhood suffrage, Aboriginal suffrage and female suffrage, and knew of those things in the practical sense that in some parts of Australia they existed without relevant restriction. The failure of the federation age to offer universally applicable systems of suffrage conforming entirely to the most advanced modern models is not a reason to ignore what the meanings and applications of the words "chosen by the people" in the federation age were. As counsel for the Attorney-General for Western Australia correctly submitted, a person in the position of the first plaintiff, who wished to become enrolled after the issue of the writs for an election, could not have done so in the first federal election in any State. And a person in the position of the second plaintiff, who wished to transfer his enrolment after the issue of the writs, could only have done so in South Australia, and even then only in certain circumstances. Assuming that the Constitution now means what it meant then, on the plaintiffs' case, had there been a challenge to the validity of the electoral laws under which the first election was conducted, the challenge would, paradoxically, have succeeded, but for their explicit adoption by ss 10 and 31 of the Constitution. That points against the words "chosen by the people" bearing the construction for which the plaintiffs contend. 299 Cole v Whitfield (1988) 165 CLR 360 at 385; [1988] HCA 18. 300 Grain Pool of Western Australia v The Commonwealth (2000) 202 CLR 479 at 496 [23] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ; [2000] HCA 14. 301 XYZ v The Commonwealth (2006) 227 CLR 532 at 583-584 [153]; [2006] HCA 25. The validity of the electoral laws under which elections between 1902 and 1983 were conducted Further, and still assuming that the Constitution now means what it meant then, had there been challenges at the appropriate times, on the plaintiffs' case, every other election up to and including the 1983 election would have been conducted under invalid electoral laws. 1902-1918. Between 1902 and 1918 there were six elections. They were regulated by the Commonwealth Electoral Act 1902 (Cth). Section 31 relevantly provided: "All persons qualified to vote at any Election for the Senate or House of Representatives, or who would be qualified so to vote if their names were upon a Roll, shall be qualified and entitled to have their names placed upon the Electoral Roll for the Division in which they live, but no person shall be qualified or entitled to have his name placed upon more than one Roll, or upon any Roll other than the Roll for the Division in which he lives." Section 64 provided: "Claims and applications to transfer received by the Returning Officer or Registrar before the issue of the writ may be registered after the issue of the writ but otherwise no addition to or alteration of the Roll for any Division shall be made during the period between the issue of the writ for an election in the Division and the close of the polling at the election." Hence persons in the position of the plaintiffs could not have been enrolled, because they had not lodged the relevant claim or application before the issue of the writ. That state of affairs continued even after s 64(2) was added by s 12 of the Commonwealth Electoral Act 1909 (Cth): it deemed the writs to be issued at 6pm on the day on which they were issued. 1918-1983. Between 1918 and 1983 there were 26 elections. The position was governed by s 45 of the Act in its then form. Relevantly it provided: claims for enrolment or transfer of enrolment which are received by the Registrar after six o'clock in the afternoon of the day of the issue of the writ for an election shall not be registered until after the close of the polling at the election; and except by direction of the Divisional Returning Officer no name shall be removed from a Roll pursuant to a notification of transfer of enrolment received by the Registrar after six o'clock in the afternoon of the day of the issue of the writ for an election and before the close of the polling at the election." Again, in this period the plaintiffs would have been in the same position as under the 2006 amendments, save that the 2006 amendments were a little more liberal in four respects. First, s 102(4) allowed an additional two hours in which claims for enrolment could be lodged (8pm on the day of the writs, not 6pm). Secondly, s 102(4AA) read with s 155 allowed an additional three working days for claims for transfer of enrolment. Thirdly, late claims could be made by persons who turned 18 after the writs were issued under s 100. Fourthly, late claims could be made by persons becoming Australian citizens after the writs were issued by making a provisional claim for enrolment under s 99B. Between 1902 and 1983 the legislation required the electoral rolls to close on the day the writs were issued. The burden of which the plaintiffs complain would not exist in relation to elections in which the executive exercised a discretion to permit more than seven days to elapse between the calling of the election and the issue of the writs. But that cannot render electoral laws valid which would otherwise have been invalid. Legislation which is invalid if administered in one way cannot be treated as valid if it could be administered in another. The Solicitor-General of the Commonwealth was correct to submit that if the submissions of the plaintiffs were sound, all federal elections conducted up to and including 1983 have been conducted under invalid electoral laws, and that this conclusion is so highly improbable as to cast considerable doubt on the submissions of the plaintiffs which led to it. Far from being beside the point, the Solicitor-General's submission is, particularly in relation to elections conducted in the federation age, forceful. The plaintiffs parried the Solicitor-General's submission by contending that there are some developments in electoral law which the Constitution now prevents the legislature from reversing. They said that the Constitution renders it impossible now to return to an earlier stage of development, even though that stage of development would have been constitutionally valid at an earlier time. The only specific examples the plaintiffs gave were universal adult suffrage and the capacity to vote at 18. Even if those examples are correct, it does not follow that the much more general proposition of which they were said to be illustrations is correct302. And even if that much more general proposition is correct, it does not follow that the return made in the 2006 amendments to the position obtaining from 1902 to 1983 is constitutionally invalid. The plaintiffs relied on the emergence of "different circumstances (including changing 302 Roach v Electoral Commissioner (2007) 233 CLR 162 at 224 [179]. technology enabling continuous roll updating … and the processing and checking of large numbers of claims for enrolment very rapidly)". The proposition which the plaintiffs advocate does not follow from these circumstances. The proposition which the plaintiffs advocate also leads to the result that even where an election is conducted under legislative provisions which result in members of Parliament being "directly chosen by the people" – the constitutional criterion – those provisions may nonetheless be constitutionally invalid because they retreated from the position achieved by earlier legislation (or executive practice). A conclusion which rests on an asseveration that legislation meeting a constitutional criterion is constitutionally invalid is a contradiction in terms. It is a contradiction which casts in doubt the whole of the reasoning which led to it. The constitutional validity of legislation depends on compliance with the Constitution, not on compliance with "higher" standards established by the course of legislation and by the operation of executive discretion. The question is not whether an impugned legislative provision "regresses" from some "higher" standard established by the status quo. It is only whether it fails to meet a constitutional criterion. Legislative development, durable or otherwise, does not create constitutional validity or invalidity which would not otherwise exist. Otherwise the legislature could enact itself into validity. Illegality and constitutional validity Under the legislative scheme, an effective franchise system depends on an accurate electoral roll. Entitlement to vote depends on being on the roll. The legislation also seeks to ensure an approximate equality of voters in each Electoral Division. The Electoral Commissioner is obliged each month to ascertain the number of electors enrolled in each Division, determine the average divisional enrolment, determine the extent to which the number of electors enrolled in each Division differs from the average divisional enrolment, and publish a statement of the results in the Gazette: s 58(1). Sections 59-78 make provision for redistribution, where, inter alia, more than one third of the Divisions in a State are "malapportioned Divisions". These provisions depend for their effectiveness on those entitled to be enrolled becoming enrolled. They also depend for their effectiveness on persons enrolled making timely statements about a change of residence. The obligations to enrol and transfer enrolment imposed by s 101 are directed at achieving that state of affairs. The right of enrolled electors to vote could not operate optimally without citizens complying with the duties to enrol and to transfer enrolment. To ensure the accuracy of the rolls, the Electoral Commissioner has the power to reject claims to enrol or transfer enrolments which are not in order: s 102(1)(c). There are also provisions pursuant to which electors may object to the enrolment of others: Pt IX. The scheme contains an elaborate procedure for the conduct of an election after the writs have been issued which assumes that the electoral rolls are in very large measure correct. The scheme also gives the electoral rolls immunity from challenge in the Court of Disputed Returns after the election is over: s 361(1). A key element in the legislative scheme to secure largely correct electoral rolls is the use of compulsion. There is a statutory command to claim or transfer enrolment. That command is backed by a criminal sanction. The plaintiffs did not dispute the constitutional validity of either the command or the sanction. What they demand is an entitlement to continue disobeying the command and ignoring the sanction for longer periods than the impugned provisions allow. The plaintiffs say that the impugned provisions are void because they fix periods which cause a "substantial" number of persons to be disenfranchised. On the plaintiffs' arguments, the disenfranchisement only arises because a "substantial" number of people choose to disobey laws compelling them to claim or transfer enrolment, laws which the plaintiffs concede are valid. The plaintiffs' arguments could not work if it were only they who had disobeyed the laws, because two is not a sufficiently substantial number. The laws alleged to be invalid and the laws conceded to be valid are, however, part of a single integrated scheme. The constitutional validity of some laws in that scheme cannot turn on the number of people who choose to disobey other concededly valid laws enacted as part of that scheme. The validity of the impugned provisions cannot wane or wax as the number of persons who fail to comply with their statutory duties rises or falls. Substantial disobedience to laws validly enacted under a power to do so in the Constitution (in this instance s 51(xxxvi)) cannot render invalid other laws enacted under that power. So to hold would subvert not only the validly enacted laws, but also the Constitution under which they were validly enacted. Conclusion For the above reasons I opposed the orders made by the Court on 6 August 2010, and would have dismissed the proceedings with costs. Crennan CRENNAN J. In this proceeding the plaintiffs put in issue the constitutionality of amendments made to the Commonwealth Electoral Act 1918 (Cth) ("the Electoral Act") by the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth) ("the 2006 Act"). The legislative history, and a description both of the current electoral structure and of the calling of the general election for 21 August 2010, are all set out in the joint judgment of As adult Australian citizens303, able to satisfy a one month residency requirement304, each plaintiff is entitled to be on an Electoral Roll under the Electoral Act305. Ms Rowe, having turned 18 on 16 June 2010, is obliged to enrol, and Mr Thompson, having changed his address in March 2010, is obliged to transfer his enrolment306. If enrolled, each plaintiff is entitled to vote at elections of senators for the State in which each resides307 and at elections of members of the House of Representatives for the Subdivision in which each resides308. Each of the plaintiffs wished to vote at the election held on 21 August 2010 and for that purpose each sought to be enrolled on the relevant Electoral Roll within seven days after the issue of the writs. This would have been possible under the Electoral Act as it stood before the 2006 Act. However, the plaintiffs' claims were not considered because of the provisions of ss 102(4), 102(4AA) and 155 of the Electoral Act, being amendments made by the 2006 Act, expressed to repeal ss 102(4) and 155 as they previously stood. Under s 102(4), the time during which a claim for enrolment must not be considered begins at 8:00 pm on the date of the writ or writs for an election for the relevant Division and ends at the close of the polling at the election. Under s 102(4AA) the time during which a claim for transfer of enrolment must not be considered begins at 8:00 pm on the date of the close of the Rolls (fixed by s 155(1) as the third working day after the date of the relevant writ) and ends at the close of the polling at the election. 303 Electoral Act, s 93(1)(a) and (b)(i). 304 Electoral Act, s 99(1). 305 Part VI (ss 81-92). 306 Section 101(1). 307 Respectively South Australia and New South Wales. 308 See ss 82 and 93(2). Crennan The plaintiffs impugned ss 102(4), 102(4AA) and 155 of the Electoral Act, asserting in their written submissions that they are: (a) contrary to ss 7 and 24 of the Constitution; (b) beyond the legislative powers of the Commonwealth conferred by ss 51(xxxvi) and 30 of the Constitution; and/or (c) beyond what is reasonably appropriate and adapted, or proportionate, to the maintenance of the constitutionally prescribed system of representative government. During the course of oral argument the plaintiffs concentrated on ss 7 and 24 and the prescription therein for Houses of Parliament composed of members "directly chosen by the people". Their submissions did not turn on the word "directly". The impugned provisions were characterised as "disenfranchising" the plaintiffs because, although the plaintiffs were legally eligible to vote in the election in the State and Subdivision in which they reside, the provisions prevented them from doing so. Accordingly, it was contended that the impugned provisions are not reasonably adapted and appropriate to support choice by the people in elections for the Senate and the House of Representatives and that the provisions interfere, unreasonably and unnecessarily, with the opportunity to enrol and vote. The plaintiffs accepted that Parliament was entitled to prescribe a cut-off date for enrolment and transfer, and they did not attack the validity of ss 102(4) and 155 as they stood previously. Evidence from the Deputy Electoral Commissioner indicated that there were approximately 100,000 claims for enrolment received after the cut-off dates described above which would have been made within time under ss 102(4) and 155 as they stood prior to the 2006 Act309. Evidence that those claims could be processed onto an Electoral Roll within the statutory timetable set for the election was not controverted. A declaration of invalidity was made by the Court, by majority, on 6 August 2010, the effect of which is to repeal the impugned provisions and thereby restore the operation of the Electoral Act as it previously stood310. For the following reasons I joined in the making of those orders. When referring to the influence of the introduction of responsible government and its development, in The Commonwealth v Kreglinger & Fernau Ltd and Bardsley311, Isaacs J asserted the relevance "in interpreting the Australian 309 Section 155 as it stood before repeal under the 2006 Act provided that the date fixed for the close of the Rolls shall be seven days after the issue of the relevant writ. 310 Roach v Electoral Commissioner (2007) 233 CLR 162 at 182 [25] per Gleeson CJ, 202-203 [96]-[97] per Gummow, Kirby and Crennan JJ; [2007] HCA 43. 311 (1926) 37 CLR 393 at 411-412; [1926] HCA 8. Crennan Constitution, of every fundamental constitutional doctrine existing and fully recognized at the time the Constitution was passed". In Attorney-General (Cth); Ex rel McKinlay v The Commonwealth312 the text of the Constitution was construed having regard to the historical setting in which the Constitution was created, which included considering the colonial suffrages in Australia in 1900313. In establishing the Commonwealth, the Constitution directs, and gives to, a system of representative government314 (sometimes called effect representative democracy315) which involves direct popular election316. The Constitution left it to Parliament, within the limits fixed by the Constitution, to prescribe the form of representative government317. The matters of qualification for the franchise and the method of election for both the Senate and the House of Representatives are left by the Constitution to the political choice of Parliament, so long as any electoral system adopted remains within the broad range of alternatives by which provision may be made for Houses of Parliament composed of members "directly chosen by the people"318. 312 (1975) 135 CLR 1; [1975] HCA 53. 313 (1975) 135 CLR 1 at 17, 19 per Barwick CJ, 58 per Stephen J. 314 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 137-138 per Mason CJ, 150 per Brennan J, 168 per Deane and Toohey JJ, 184, 188 per Dawson J, 210-211 per Gaudron J, 230 per McHugh J; [1992] HCA 45. in Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 56-58. 316 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 56 per Stephen J; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 236 [153] per Gummow and Hayne JJ; [2004] HCA 41. 317 Roach v Electoral Commissioner (2007) 233 CLR 162 at 173 [5] per Gleeson CJ, 186-187 [45] per Gummow, Kirby and Crennan JJ. 318 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 36 per McTiernan and Jacobs J, 46 per Gibbs J, 56-57 per Stephen J; McGinty v Western Australia (1996) 186 CLR 140 at 182-184 per Dawson J, 269-270, 283-284 per Gummow J; [1996] HCA 48; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 188-189 [6]-[7], [9] per Gleeson CJ, 206-207 [61]-[65] per McHugh J, 237 [154]-[155] per Gummow and Hayne JJ, 257 [223] per Kirby J, 296 [332] per Callinan J. Crennan In Roach v Electoral Commissioner319 Gleeson CJ said: "In McKinlay320, McTiernan and Jacobs JJ said that 'the long established universal adult suffrage may now be recognised as a fact'. I take 'fact' to refer to an historical development of constitutional significance of the same kind as the developments considered in Sue v Hill[321]. Just as the concept of a foreign power is one that is to be applied to different circumstances at different times, McTiernan and Jacobs JJ said that the words 'chosen by the people of the Commonwealth' were to be applied to different circumstances at different times. Questions of degree may be involved. They concluded that universal adult suffrage was a long established fact, and that anything less could not now be described as a choice by the people. I respectfully agree. As Gummow J said in McGinty v Western Australia322, we have reached a stage in the evolution of representative government which produces that consequence. I see no reason to deny that, in this respect, and to this extent, the words of ss 7 and 24, because of changed historical circumstances including legislative history, have come to be a constitutional protection of the right to vote." The other members of the majority in Roach323 said of representative government: "In McGinty324 the Court held that what is involved here is a category of indeterminate reference, where the scope for judgment may include matters of legislative and political choice. But that does not deny the existence of a constitutional bedrock when what is at stake is legislative disqualification of some citizens from exercise of the franchise." The historical circumstances, and the stage reached in the evolution of representative government, as at the date of federation assist in exposing the bedrock and show that the relevant words of ss 7 and 24 have always constrained 319 (2007) 233 CLR 162 at 174 [7]. 320 (1975) 135 CLR 1 at 36. 321 (1999) 199 CLR 462; [1999] HCA 30. 322 (1996) 186 CLR 140 at 286-287. 323 (2007) 233 CLR 162 at 198 [82] per Gummow, Kirby and Crennan JJ. 324 (1996) 186 CLR 140 at 269-270. Crennan Parliament, in a manner congruent with Gleeson CJ's conclusion that the words of ss 7 and 24 have come to be a constitutional protection of the right to vote. Representative government is a government in which members of Parliament represent those who have voted for them in an election325. A franchise which is exclusive and undemocratic yields an oligarchic representative government326. Edmund Burke described this form of government as amounting to "virtual representation" of the people, even though the representatives "are not actually chosen by [the people]"327. The expression "chosen … by the People" occurs in Art I, §2 of the American Constitution, but it has its own distinctive history in Australia328 grounded in British constitutional history and colonial politics in the second half of the nineteenth century. In constitutional discourse over a long period, choice by the people of parliamentary representatives has signified democracy, democratic elections and a democratic franchise. The defining constitutional debate in Britain in the nineteenth century was over whether (and, if so, how) there should be a change from an oligarchic representative government to a democratic representative government. In that debate, manhood suffrage (that is, a right to vote which was not dependent on considerations of rank or class) was considered crucial to effect the change from oligarchy, "[g]overnment by the few"329, to democracy, "[g]overnment by the people"330. As a result, franchises based on residential qualifications, rather than property qualifications, came to be seen as quintessentially democratic, an important point when considering the stage in the development of representative government which had been reached in the colonies prior to federation. 325 Ashby v White (1703) 2 Ld Raym 938 [92 ER 126]. 326 John Stuart Mill, Considerations on Representative Government, 2nd ed (1861), Ch IV at 81, 83. 327 Letter to Sir Hector Langrishe, 1797, quoted in Birch, Representative and Responsible Government, (1964) at 24. 328 Cf Wesberry v Sanders 376 US 1 (1964); see also Baker v Carr 369 US 186 329 A New English Dictionary (which became the Oxford English Dictionary), (1905), vol VII, Pt I at 103. 330 A New English Dictionary (which became the Oxford English Dictionary), (1897), vol III, Pt I at 183. Crennan The Constitution emerged after debate in Britain over extending parliamentary representation by widening the franchise, in the direction of democratic representative government. Whilst framers of the Constitution "admired and respected British institutions"331, an aspect of those institutions already contested successfully in some of the Australian colonies in the middle of the nineteenth century was the franchise based on property qualifications332. Britain – "chosen by the people" The centrality of the franchise to sharing political power had caused arguments over extending parliamentary representation stretching right back to the Putney Army debates held in the period 1647 to 1649. Sustained debates over a version of manhood suffrage333 were then generated by the "Heads of the Proposals"334 and two "Agreements of the People" drawn up chiefly by the Levellers, who supported a republican democracy. Whilst the proposals for manhood suffrage were defeated, the identification of manhood suffrage as a democratic franchise by which "the people do … choose themselves a Parliament"335 distinguished it from the extant exclusive franchise based on property qualifications. 331 Roach v Electoral Commissioner (2007) 233 CLR 162 at 172 [1] per Gleeson CJ. 332 As to which see Cannon (ed), The Oxford Companion to British History, rev ed "an Act of Henry VI's reign in 1429 declared that 'great, outrageous and excessive numbers of people … of small substance and of no value' were voting at elections, and went on to limit the franchise to freeholders with land worth 40 shillings a year, free of all charges. This remained the franchise until 1832." 333 See Woodhouse (ed), Puritanism and Liberty: Being the Army Debates (1647-9) from the Clarke Manuscripts, (1938) ("Puritanism and Liberty") at 52-75, 77-83, 343, 356-363, 406-407, 433-434, 438, 445-446, 450, 454 and 462-463. See also Tuck, Philosophy and Government 1572–1651, (1993) at 245-252. 334 The "Heads of the Proposals", to be found in Puritanism and Liberty at 422, referred to "some other rule of equality or proportion, to render the House of Commons (as near as may be) an equal representative of the whole". 335 Article III of the first "Agreement of the People" (28 October 1647) proposed "[t]hat the people do, of course, choose themselves a Parliament": Gardiner, The Constitutional Documents of the Puritan Revolution 1625–1660, 3rd ed (1906) at 333-335. Article III of the second "Agreement of the People" (15 January 1649) proposed, among other matters, manhood suffrage with the exception of persons receiving alms, servants and Royalists: Gardiner at 359-371. Crennan Whilst debates over sharing political power by extending the franchise never disappeared completely in Britain, they were back on the political agenda during a significant part of the nineteenth century. The Reform Acts of 1832336, 1867337 and 1884338 provided for ever greater inclusion of electors in the franchise. The third Reform Act, which extended household suffrage, has been referred to as going "almost all the way to universal male suffrage"339. The Chartist movement emerged in 1838, after the first Reform Act340. The "People's Charter", directed to the House of Commons, had six points concerning the sharing of political power. The first, mentioned by Barwick CJ in King v Jones341, was "[a] vote for every man twenty one years of age, of sound mind, and not undergoing punishment for crime" (often referred to as universal manhood suffrage342). The second was the ballot "[t]o protect the elector in the exercise of his vote", that is, a secret ballot, which was first instituted in Victoria in 1856343. Regular and short parliaments were also advocated344. 336 Representation of the People Act 1832 (2 & 3 Will IV c 45). 337 Representation of the People Act 1867 (30 & 31 Vict c 102). 338 Representation of the People Act 1884 (48 & 49 Vict c 3). 339 Butler, The Electoral System in Britain Since 1918, 2nd ed (1963) at 5. 340 The Act widened the British electorate but it did not change its social, occupational or property-based character. However, the principle was conceded that it was the individual citizen who should be represented in Parliament. 341 (1972) 128 CLR 221 at 234; [1972] HCA 44. 342 Jeremy Bentham proposed a form of universal manhood suffrage to effect, together with other proposals, what he regarded as the right and proper end of government, namely "the greatest happiness of the greatest number, the only legitimate end of government": Bentham, "Supreme Operative", (1822), §16, in Schofield (ed), The Collected Works of Jeremy Bentham: Constitutional Code, (1989) 149 at 197-198. First Principles Preparatory 343 Electoral Act 1856 (Vic) (19 Vict No 12), s 36. 344 The other points of the Charter were that electorates should contain the same number of votes to ensure votes were of equal value, there should be no property qualification for members of parliament and members should be paid: the six points of the People's Charter are set out in Hanham, The Nineteenth Century Constitution 1815–1914: Documents and Commentary, (1969) at 270. Crennan The Australian colonies – "chosen by the people" In that historical setting, colonial franchises were developed in Australia, in the 1850s, for newly instituted bicameral legislatures, as New South Wales, Victoria and South Australia framed their own Constitutions after the passage of the Australian Constitutions Act 1850 (Imp), which granted self-government345. The first of the colonies to provide residential qualifications for voters (that is, manhood suffrage) in respect of elections for the Legislative Assembly was South Australia, with the Constitution Act (SA)346 passed in 1856. In Victoria, the second colony to introduce manhood suffrage, the discovery of major deposits of gold at Ballarat occurred shortly after the separation from New South Wales347. The Bill for the new Constitution for Victoria was laid on the table for debate by the colonial legislature in January 1854. It was noted by Colonial Secretary Foster in the prefatory report of the Select Committee on the New Constitution that "nothing could be more impolitic than to legislate against the spirit of the age" and that "the social condition of this colony renders a close assimilation to certain British institutions impossible and that an attempt to imitate them is likely, not only to fail, but to introduce the evils without the advantages experienced from them in England"348. A campaign had already begun for the enfranchisement of the diggers on the goldfields whose "property" was a tent or hut. A diggers' association called the Ballarat Reform League had a programme which was "substantially that of English Chartism adapted to local circumstances"349. 345 13 & 14 Vict c 59. See generally Lumb, The Constitutions of the Australian States, 5th ed (1991). 346 Act No 2 of 1855-6. 347 The separation of Victoria from New South Wales took effect, pursuant to the Australian Constitutions Act 1850, on 1 July 1851: Victorian Government Gazette, 9 July 1851 at 77-78. The first findings at Ballarat occurred "during the first days of September [1851]": Davison, The Discovery and Geognosy of Gold Deposits in Australia, (1860) at 120. 348 Argus, 4 January 1854. 349 Scott, A Short History of Australia, 4th ed reissue (1925) at 213. The programme included "parliamentary representation on the basis of manhood suffrage, the (Footnote continues on next page) Crennan Diggers urged that "it is the inalienable right of every citizen to have a voice in making the laws he is called upon to obey. That taxation without representation is tyranny."350 In a list of grievances they referred to "the strong conviction in the minds of the diggers that they never will have justice until they are fully and fairly represented in the Legislative Council" and urged the "giving [of] full and fair representation to the people"351. This was the language of British radicalism supporting a democratic franchise, and it echoed John Locke's insistence on the rights of the individual and the idea that good and just government should command the consent of the people352. Public discourse reflected the same themes. The campaign for digger franchise eventually succeeded in 1855, the year following the Eureka Stockade353, with the franchise following a £1 miner's payment of members of Parliament [and] the abolition of the property qualification for members of Parliament". 350 Enclosure No 2 from Sir Charles Hotham, Lieutenant-Governor of Victoria to Sir George Grey, the Colonial Secretary, in Clark (ed), Select Documents in Australian History 1851–1900, (1955) at 58. "Unfair taxation without representation" was given as one of the American colonists' reasons for the Revolutionary War, which commenced in April 1775. Thomas Paine emphasised the imbalance between taxation and the right to vote in The Rights of Man, (1791), Pt I; (1792), Pt II. The theme of "no taxation without representation" was picked up again in the early part of the nineteenth century in William Cobbett's Political Register. It was repeated by the Chartists as a way of characterising their demands as "constitutional". The expression found its way into public colonial debates on the franchise in both New South Wales and Victoria. 351 See the letter from the Ballarat Reform League to the Board of Enquiry, set out in Victoria, Riot at Ballaarat: Report of the Board Appointed to Enquire into Circumstances Connected with the Late Disturbance at Ballaarat together with the Evidence Taken by the Board, (1854), Appendix B at 20. 352 Locke said: "whenever the legislators endeavour to take away and destroy the property of the people, or to reduce them to slavery under arbitrary power, they put themselves into a state of war with the people, who are thereupon absolved from any farther obedience": Locke, The Second Treatise of Government, Gough ed (rev) (1956), Ch XIX, "Of the Dissolution of Government", §222 at 110. 353 At which both diggers and troops were killed: see Molony, Eureka, (2001) at Crennan right354. The Victoria Constitution Act 1855 (Imp)355 received the Royal Assent on 16 July 1855 and came into operation a short time thereafter, and manhood suffrage for the Legislative Assembly inevitably followed digger suffrage in 1857356. Throughout the campaign for a wide suffrage based on residential qualifications, "choice by the people" of parliamentary representatives signified democracy, which required democratic election of parliamentary representatives, which in turn required a democratic franchise. In New South Wales, the third colony to introduce manhood suffrage, there had been a public campaign, centred in Sydney, by a distinct group of self-styled democrats for some years before the passage of the New South Wales Constitution Act 1855 (Imp)357; a group, known as the Constitutional Association, in which Mr (later Sir) Henry Parkes was active, had its own newspaper, The People's Advocate and New South Wales Vindicator358. Whilst events differed markedly from those in Victoria, the same imbrication of radical ideas was advanced in support of manhood suffrage for the lower House of Parliament. Manhood suffrage and the secret ballot were introduced for the Legislative Assembly in New South Wales with the passage of the Electoral Act 1858 (NSW)359 on 24 November 1858. The conception of democracy appealed to during campaigns in the 1850s for the right to vote transcended questions of qualifications for the franchise. Democracy was seen as an active and continuing process in which all legally eligible citizens had an equal share in the political life of the community, so as to secure legislatures which were both just and representative, and which enured to the peace and good order of the polity360. To that consideration might be added 354 Victoria Constitution Act 1855 (Imp) (18 & 19 Vict c 55), Sched 1, s 5 and Gold Fields Act 1855 (Vic) (18 Vict No 37), ss 2 and 3. 355 18 & 19 Vict c 55. 356 See Abolition of Property Qualification Act 1857 (Vic) (21 Vict No 12). 357 18 & 19 Vict c 54. 358 See Cochrane, Colonial Ambition: Foundations of Australian Democracy, (2006) at 197-198; and Hirst, The Strange Birth of Colonial Democracy: New South Wales 1848–1884, (1988) at 3. 359 22 Vict No 20. 360 This conception of democracy was subsequently explicated by John Stuart Mill in his essay Considerations on Representative Government, 2nd ed (1861), Ch III. For a contemporary account of a similar conception of democracy see Sen, The Idea of Justice, (2009), Chs 15, 16. Crennan that, in its relations with other nations, a democratic nation is characterised as one in which political equality and liberty are secured, however variously, by different electoral systems. The centrality of the franchise, to a citizen's participation in the life of the community and membership of the Australian body politic, was recognised in Roach361. Whilst manhood suffrage for lower Houses of Parliament was achieved in the 1850s with relative ease in the colonies mentioned362, an immediate reaction, to halt the tide of democracy, was to institute plural voting on property qualifications in lower Houses and to ensure that upper Houses were not democratic363. At federation the most populous States were New South Wales, Victoria, Queensland (which was part of New South Wales until 1859364) and South Australia365. At the time of their preparations for the Bill for the second Reform Act, British politicians, including Benjamin Disraeli, were keen to be informed of the experience of democracy in Australia366, not least because they were interested in knowing whether plural voting successfully retarded the effects of the abovementioned colonial franchises. Whilst the Constitution does not subscribe to any political philosophy, or theory of government, "choice by the people" of parliamentary representatives is 361 (2007) 233 CLR 162 at 174 [7] per Gleeson CJ, 199 [83] per Gummow, Kirby and 362 It can be noted that the Constitutional Act 1854 (Tas) (18 Vict No 17), which was somewhat incomplete, contained property qualifications for electors of the Legislative Assembly. By 1901, residence alone was sufficient qualification. 363 For example, there was a nominee upper House in New South Wales, in which members were nominated for life: 18 & 19 Vict c 54. In Victoria there was an elected upper House, with high property qualifications for both members (at £5000) and electors (at £1000): 18 & 19 Vict c 55. For an account of the institution of the latter, see Parkinson, Sir William Stawell and the Victorian Constitution, (2004) at 23-32. 364 The separation of Queensland from New South Wales was effected by Letters Patent issued 6 June 1859. 365 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, 366 Smith, The Making of the Second Reform Bill, (1966) at 76-78, 81, 230-231. Crennan a constitutional notion signifying individual citizens having a share in political power through a democratic franchise. Sections 8, 30 and 41 of the Constitution Before turning to ss 7 and 24 of the Constitution, it is convenient to consider the qualifications in the colonial franchises picked up by ss 8, 30 and 41 for the light they throw on the constitutional imperative of choice by the people. Sections 51(xxxvi), 8 and 30 provide for the making of laws by the Parliament for the qualification of electors. Section 30 states: "Until the Parliament otherwise provides, the qualification of electors of members of the House of Representatives shall be in each State that which is prescribed by the law of the State as the qualification of electors of the more numerous House of Parliament of the State; but in the choosing of members each elector shall vote only once." Section 8 provides: "The qualification of electors of senators shall be in each State that which is prescribed by this Constitution, or by the Parliament, as the qualification for electors of members of the House of Representatives; but in the choosing of senators each elector shall vote only once." Section 41 preserves the rights of women and Aboriginal Australians to vote, to the extent that such rights existed in the colonies at the time of federation367. Section 41 provides: "No adult person who has or acquires a right to vote at elections for the more numerous House of the Parliament of a State shall, while the right continues, be prevented by any law of the Commonwealth from voting at elections for either House of the Parliament of the Commonwealth." Unlike s 51(xxxvi), none of these sections is expressed to be "subject to this Constitution". The colonial franchises picked up by these sections are colonial franchises for the lower Houses. Franchises for colonial upper Houses are not, with respect, relevant to s 30 of the Constitution368. Further, given both the reference to "the 367 R v Pearson; Ex parte Sipka (1983) 152 CLR 254; [1983] HCA 6. 368 Cf McGinty v Western Australia (1996) 186 CLR 140 at 242. See Quick and Garran, The Annotated Constitution of the Australian Commonwealth, (1901) at Crennan people" in ss 7 and 24, and the prohibition on plural voting in s 30, the Victorian franchise based on a "very small property qualification as the basis of plural enrolment"369, and property qualifications for plural voting which existed elsewhere370, do not seem to be of any abiding constitutional significance. What were well known in the majority of the colonies of Australia at federation were franchises for colonial lower Houses, based on residential qualifications. Men (generally described as natural-born or naturalised British subjects371) of 21 years of age, who were not subject to a disqualification372, and who satisfied residential qualifications, could vote for the lower Houses of Parliament in New South Wales373, Victoria374, Queensland375, South Australia376 and Western Australia377. In Tasmania, the same applied from 28 January 1901378. Aboriginal Australians were included in those franchises in New South 369 King v Jones (1972) 128 CLR 221 at 234 per Barwick CJ. The Constitution Act Amendment Act 1899 (Vic), s 4 abolished plural voting in Victoria. 370 Provisions permitting plural voting based on property qualifications existed in Queensland, Tasmania and Western Australia. 371 There were some franchises which included "denizens". 372 There were some exclusions from the franchise, such as for persons of unsound mind, in receipt of charity, or who were prisoners. 373 Parliamentary Electorates and Elections Act 1893 (NSW), s 23. 374 Constitution Act Amendment Act 1890 (Vic), s 128. Existing alongside this suffrage there was a non-resident's suffrage based on property qualifications: 375 Elections Act 1885 (Q), s 6(1) and Elections Act 1897 (Q), s 4. Existing alongside this suffrage were suffrages based on both household and property qualifications: ss 6(2) and 6(3) of the 1885 Act. Cf Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 19. 376 Electoral Code 1896 (SA), s 15. 377 Constitution Acts Amendment Act 1899 (WA), s 26. 378 The Constitution Amendment Act 1900 (Tas), s 5, which provided for manhood suffrage, was proclaimed on 28 January 1901. Prior to that date Tasmania coupled a residential qualification with a small property qualification: Constitution Amendment Act (No 2) 1896 (Tas), s 4. Crennan Wales, Victoria, South Australia and Tasmania379. It must be noted that in Queensland and Western Australia, Aboriginal persons had to satisfy a property qualification380. In the Northern Territory section of South Australia, Aboriginal Australians were excluded from the franchise381, and this is recognised in s 25 of the Constitution. Women of 21 years of age, who satisfied residential qualifications, could vote for the lower Houses in South Australia and Western Australia382. Neither enrolment nor voting was compulsory at this time. Given the ban on plural voting in ss 8 and 30 these franchises, based on residential qualifications, were the significant franchises for the referenda for the Constitution and the first Parliament383. Reflecting such matters, ss 8, 30 and 41 were described by Professor Harrison Moore in his text on the Constitution as "designed to secure the 'democratic' principle that the suffrage shall be of the widest, and that no person shall have more than one vote."384 In McKinlay385, McTiernan and Jacobs JJ said of s 24: "it would be nonsense to speak of a choice by a few who happened to be enfranchised (the foundation of an oligarchy) as a choice by the people (the foundation of a democracy)." What has occurred since federation is that a franchise which only avoids arbitrary exclusion based on class cannot possibly be described as democratic. The Constitution, and specifically ss 7 and 24, would constrain any reversion to arbitrary exclusions from the franchise, based on gender and race, of the kind 379 Parliamentary Electorates and Elections Act 1893 (NSW), s 23; Constitution Act Amendment Act 1890 (Vic), s 128; Electoral Code 1896 (SA), s 15; Constitution Amendment Act 1900 (Tas), s 5. 380 Elections Act 1885 (Q), s 6; Constitution Acts Amendment Act 1899 (WA), s 26. 381 Electoral Code 1896 (SA), s 16. 382 Electoral Code 1896 (SA), s 15; Constitution Acts Amendment Act 1899 (WA), 383 R v Pearson; Ex parte Sipka (1983) 152 CLR 254; also, see generally Twomey, "The Federal Constitutional Right to Vote in Australia", (2000) 28 Federal Law Review 125. 384 The Constitution of the Commonwealth of Australia, (1902) at 106. 385 (1975) 135 CLR 1 at 36. Crennan which occurred in one or more colonies at the time of federation386. However, the colonial franchises, based on residential qualifications, were the antithesis of an exclusive suffrage designed to yield an oligarchic representative government. They were expressly designed to yield democratic lower Houses. For both informed people in Australia at the time of federation387, and the framers of the Constitution who had experience as colonial politicians388, the state of the development of representative government which had been reached as at federation was that five of the six States had democratic (that is, not oligarchic) franchises for the lower Houses of Parliament. Tasmania followed from 28 January 1901. Thus one significance of the colonial franchises, for present purposes, is that they assist an understanding of the genesis of the constitutional protection given to the right to vote, to which I will return. Sections 7 and 24 – a drafting consideration Section 24 of the Constitution relevantly provides: "The House of Representatives shall be composed of members directly chosen by the people of the Commonwealth, and the number of such members shall be, as nearly as practicable, twice the number of the senators." The implications of the words "chosen by the people" for the federal franchise were readily understood by the "politically experienced members of the constitutional conventions"389. Workable colonial democracies, based on the colonial franchises, for lower Houses of Parliament, discussed above, must have been familiar to them. It was known, even beyond Australian shores, that plural voting in the colonial lower Houses was intended to dilute the effect of democratic colonial franchises. 386 McGinty v Western Australia (1996) 186 CLR 140 at 221 per Gaudron J, 287 per 387 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 230 per McHugh J. 388 Roach v Electoral Commissioner (2007) 233 CLR 162 at 188-189 [53] per Gummow, Kirby and Crennan JJ; see also Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 234 [150] per Gummow and Hayne JJ. 389 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 19 per Barwick CJ. Crennan At the Convention in Sydney in 1891, the delegates were considering a forerunner of s 7 (cl 9), which relevantly provided: "The senate shall be composed of eight members for each state, directly chosen by the houses of the parliament of the several states during a session thereof, and each senator shall have one vote." It was recognised by Mr Alfred Deakin that, unless the section in the Constitution governing the composition of the Senate was on the same terms as s 24, there would be different constituencies for the House of Representatives and the Senate390. As already mentioned, a number of colonial upper Houses were either nominee houses or elected on restrictive property qualifications. By the 1897 Convention there was support for popular election of the Senate391. Section 7 of the Constitution relevantly provides: "The Senate shall be composed of senators for each State, directly chosen by the people of the State, voting, until the Parliament otherwise provides, as one electorate." In a passage more fully set out in the joint judgment of Gummow and Bell JJ392, Quick and Garran described the principle of popular election for the Senate as being "in harmony with the progressive instincts and tendencies of the times"393. In McGinty394, in relation to the same period, Gummow J said: "Learned commentators observing the situation from a vantage point outside Australia wrote of the extremely 'democratic' nature of the new Constitution, 'the high-water mark of popular representing government'." (footnote omitted) 390 Official Report of the National Australasian Convention Debates, (Sydney), 2 April 1891 at 591-592. 391 Official Record of the Debates of the Australasian Federal Convention, (Sydney), 9 September 1897 at 257. 393 The Annotated Constitution of the Australian Commonwealth, (1901) at 418. 394 (1996) 186 CLR 140 at 271. Crennan In the light of the colonial franchises for lower Houses of Parliament at the time of federation (and notwithstanding their lack of uniformity and deficits in relation to gender and race), ss 7 and 24 would have constrained Parliament from instituting an exclusive federal franchise based on property qualifications, or a franchise which permitted plural voting, for the reason that at the time such franchises would have been considered conspicuously undemocratic. The correct characterisation of the legislative changes to the franchise since the Commonwealth Electoral Act 1902 (Cth) is that a democratic franchise has been widened on the journey to "representative democracy in its purest form"395, that is, universal adult suffrage, in respect of which there are no arbitrary exclusions based on class, gender or race. In McKinlay, as a prelude to treating universal adult suffrage as "an historical development of constitutional significance"396, McTiernan and "the common understanding of the time" of the words "chosen by the people of the Commonwealth"397 in order to acknowledge that common understanding varied over time, in accordance with legislative changes to the franchise. referred Recalling the remarks of Isaacs J in Kreglinger398, the constitutional principles which distinguish between oligarchic and democratic government were fully understood at the time of the commencement of the Constitution and were always in consideration in respect of the drafting of ss 7 and 24. Sections 7 and 24 of the Constitution do not prescribe any particular franchise. However, they constrain the Parliament from instituting a franchise which will result in an oligarchic representative government and mandate a franchise which will result in a democratic representative government, the preferable term used by Mason J in McKinlay399 to describe the system of government, prescribed and maintained by the Constitution. What is sufficient to constitute democratic representative government has changed over time, as conceptions of democracy have changed, to require a fully inclusive franchise – that is, a franchise free of arbitrary exclusions based on class, gender or race. To recognise that ss 7 and 24 mandate a democratic franchise, for the purposes of the popular elections which they prescribe, is to recognise the 395 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 57 per Stephen J. 396 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7] per Gleeson CJ. 397 (1975) 135 CLR 1 at 36. 398 (1926) 37 CLR 393. 399 (1975) 135 CLR 1 at 62. Crennan embedding of the right to vote in the constitutional imperative of choice by the people of parliamentary representatives. Validity The provisions for compulsory enrolment and for the imposition of a penalty for a failure to enrol, or transfer enrolment, within prescribed time limits have been set out in the reasons of others and are not repeated here. Section 101(7) of the Electoral Act provides that a penalty for late enrolment will not be imposed, once enrolment or transfer of enrolment has been attended to. Whilst it is not suggested to be relevant to the plaintiffs, illness is a simple example of a reason for late enrolment, or late transfer, which would not ordinarily be thought to be inexcusable. Examples could be multiplied. Insofar as enrolment is both a legal duty and a civic right, in its operation, s 101(7) privileges the civic right over the legal duty, which is consonant with an electoral process designed to protect the franchise by encouraging enrolment and transfer of enrolment. Provisions governing compulsory voting, upheld as constitutional in Judd v McKeon400, and their legislative history, have also been set out in the reasons of others. The plaintiffs framed their argument, that the impugned provisions were invalid, by reference to the centrality of the existence and exercise of the franchise, which is critical to democratic representative government, and which reflects a citizen's membership of, and participation in, the political life of the community401. It was emphasised in argument that the franchise in respect of parliamentary representatives for the State and Subdivision in which each of the plaintiffs resides is constitutionally protected. The plaintiffs first contended that, in their practical operation, the impugned provisions "disenfranchised" them in the sense used in Roach. The provisions operate in practice to exclude persons such as the first plaintiff from the right to vote, and persons such as the second plaintiff from the right to participate in choosing their correct parliamentary representatives402. 400 (1926) 38 CLR 380; [1926] HCA 33. 401 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7] per Gleeson CJ, 198-199 [83] per Gummow, Kirby and Crennan JJ. 402 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174-175 [8] per Gleeson CJ, 198-200 [81]-[86] per Gummow, Kirby and Crennan JJ. Crennan that Secondly, the plaintiffs submitted the disenfranchisement or exclusion, best described as a disentitlement, was not for a "substantial reason" as explained in Roach403, and that the provisions were arbitrary and disproportionate in relation to maintaining the constitutionally prescribed system of representative government. The term "disproportionate" was employed to describe provisions which were not necessary, appropriate or justifiable in terms of preserving the integrity of the Rolls. In that context, the term "necessary" is not confined to what is "essential" or "unavoidable" but encompasses what is "reasonably appropriate and adapted" to serve a legitimate end. Debate on this aspect of the case was conducted largely by reference to that familiar expression, and this avoided the danger recognised by Gleeson CJ in Mulholland and Roach of referring to proportionality, in the context of the Constitution, so as to evoke considerations relevant only to different constitutional settings404. The Commonwealth (and the Attorney-General for Western Australia, intervening in support of the Commonwealth) accepted that the power to make laws with respect to the qualification of electors, and the conduct of elections, is subject to the constraint that, by ss 7 and 24, each of the Houses of Parliament is to be "chosen by the people". The Commonwealth also accepted that if the impugned provisions, in their practical operation, created a disqualification from what otherwise is adult suffrage, the question to be asked, in terms of Roach, was whether the disqualification is for a "substantial reason". As to the plaintiffs' first argument, the Commonwealth argued that the impugned provisions did not effect a disqualification from the franchise, even though the provisions operated to prevent people from enrolling after a particular date, because s 101 of the Electoral Act imposes a duty on persons who are entitled to be enrolled to become enrolled, and to keep their addresses up to date. In respect of the plaintiffs' cases, it was asserted that they had not taken steps to enrol, or transfer, when required to do so under the Electoral Act. On the plaintiffs' second argument, the Commonwealth submitted that the impugned provisions are not directed to any purpose incompatible with ss 7 and 24. It was contended that the orderly conduct of elections, based on Electoral 403 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174-175 [7]-[8] per Gleeson CJ, 199 [85] per Gummow, Kirby and Crennan JJ. 404 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 199-200 [39]; Roach v Electoral Commissioner (2007) 233 CLR 162 at Crennan Rolls of integrity, is consistent with the constitutionally prescribed system of government, a point which was not in contention between the parties. It was submitted that it is not a prerequisite to the existence of the power to provide a relatively early cut-off date following the announcement of an election, that there be any actual electoral fraud; it is not incompatible with ss 7 and 24 if a purpose of an early cut-off date is to obviate prophylactically a risk of electoral fraud. It was also contended by the Commonwealth that the early cut-off date was directed to enhancement of the integrity of the Electoral Rolls, particularised in two distinct ways: first, it was said the impugned provisions increased the time available to the Australian Electoral Commission for processing enrolment applications before polling day, and secondly, it was said that the impugned provisions would reduce a known phenomenon of a late surge in enrolments by encouraging people not to wait until an election is called before enrolling. The conclusion said to follow was that the disentitlement or exclusion effected by the impugned provisions is appropriate and adapted to the smooth conduct of elections. It can be accepted that the impugned provisions differ from those under consideration in Roach. Nevertheless, they operate to disentitle or exclude persons (otherwise legally eligible) from the right to vote and the right to the State and participate Subdivision in which they reside. It can also be accepted that achieving and maintaining Electoral Rolls of integrity is a purpose which is compatible with ss 7 and 24. in choosing parliamentary representatives for The federal electoral process, characterised by compulsory enrolment and compulsory voting, requires comprehensive and accurate Electoral Rolls. Such Rolls will "guard" and "protect"405 the franchise by ensuring that persons eligible to vote in an election, for their parliamentary representatives, will be able to do so. The Australian Electoral Commission, the independent body charged with maintaining the Electoral Rolls406, was able to process in the usual way any late enrolments under the previous seven day cut-off period407. There was no evidence that fraudulent activity was reduced by the shortening of the seven day cut-off period, nor was there any evidence that systematic electoral fraud 405 Kean v Kerby (1920) 27 CLR 449 at 459 per Isaacs J; [1920] HCA 35. 406 See ss 6 and 7 of the Electoral Act. 407 Joint Standing Committee on Electoral Matters, Report on the Conduct of the 2007 Federal Election and Matters Related Thereto, (2009) at 44 [3.35]. Crennan exists408. The Commonwealth was careful to emphasise that, in the context of a majority of a Joint Standing Committee on Electoral Matters recommending a shortening of the cut-off period409, a concern about electoral fraud had never been put any higher than a concern about the potential for electoral fraud. The statement of agreed facts recorded that, for the general elections of 1993, 1996, 1998 and 2001, some 3.32 per cent, 3.23 per cent, 2.94 per cent and 2.96 per cent respectively of total enrolments were processed, as late enrolment transactions, during the period between the issue of the writs for each of those elections and the closure of the Rolls. In 2004, before the cut-off periods instituted by the 2006 amendments, 423,993 enrolment transactions took place in the period permitted between the issue of the writs and the closure of the Rolls. In 2007, there were 279,469 enrolment transactions between the issue of the writs and the closure of the Rolls. It has already been mentioned that there were at least 100,000 late claims for enrolment in respect of the 21 August 2010 election. In all those circumstances, the impugned provisions have not been shown to be necessary or appropriate for the protection of the integrity of the Rolls, as that object was advanced by the Commonwealth. First, this is because the Australian Electoral Commission had no difficulty in processing the volume of late enrolments which occurred with the previous seven day cut-off period. Secondly, to seek to discourage a surge of late claims for enrolment by disentitling or excluding those making them constitutes a failure to recognise the centrality of the franchise to a citizen's participation in the political life of the community410. Thirdly, the main reason put forward by the Commonwealth as the justification for the impugned provisions – namely, that they will operate to protect the Rolls from the risk of, or potential for, systematic electoral fraud – is to protect the Rolls from a risk or potential which has not been substantiated to date. Accordingly, the justification put forward to support the impugned provisions does not constitute a substantial reason, that is, a reason of real significance, for disentitling a significant number of electors from exercising their right to vote for parliamentary representatives in the State and Subdivision in which they reside. The impugned provisions cannot be reconciled with the constitutional imperative of choice by the people of those representatives. 408 Joint Standing Committee on Electoral Matters, Report on the Conduct of the 2007 Federal Election and Matters Related Thereto, (2009) at 50 [3.59]. 409 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 34-36 [2.114]-[2.125]. 410 See fn 401 above. Crennan Conclusions For these reasons I joined in the orders made on 6 August 2010. I agree with the order proposed by Gummow and Bell JJ otherwise dismissing the application. 386 KIEFEL J. It has been observed that the Constitution does not mandate any particular electoral system, but leaves the choice as to the features of that system to Parliament411. Reid and Forrest412 observed that the Constitution made provision only for the "bare foundations of the electoral law for the representative Parliament of a new nation." The "whole range of matters" which it left unspecified, or subject to change, included methods of voting to elect the members of the two Houses of Parliament, persons authorised to vote, the question of voluntary or compulsory registration of voters, voting itself and the control of Electoral Rolls413. The plaintiffs here contend that ss 7 and 24 of the Constitution effect limitations upon the exercise of legislative power with respect to the Electoral Rolls and claims by persons to be enrolled. They contend that amendments made to the Commonwealth Electoral Act 1918 (Cth) ("the Electoral Act") in 2006, which reduced the time within which persons could make a claim for enrolment to vote or for transfer of enrolment, after elections had been called, are invalid. Their argument has two strands. It is submitted that the protection extended to the franchise by ss 7 and 24 requires that Parliament ensures the maximum exercise of the franchise. And it is submitted that the provisions in question go further than is necessary and thereby impermissibly limit the exercise of the franchise. The latter contention invokes notions of proportionality. The provisions of the Electoral Act Parliament has exercised legislative power concerning elections in a number of important respects. It has extended the franchise to all Australian citizens who have attained the age of 18 years414, subject to provisions for 411 McGinty v Western Australia (1996) 186 CLR 140 at 184 per Dawson J, 284 per Gummow J; [1996] HCA 48; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 188 [6] per Gleeson CJ, 207 [64] per McHugh J, 237 [154] per Gummow and Hayne JJ; [2004] HCA 41. 412 Australia's Commonwealth Parliament: 1901-1988, (1989) at 86. 413 Reid and Forrest, Australia's Commonwealth Parliament: 1901-1988, (1989) at 414 Commonwealth Electoral Act 1918 (Cth), s 93(1)(b)(i), together with certain non- citizens whose names were on a Roll before 26 January 1984 and who would be British subjects if the relevant citizenship law had remained in force: s 93(1)(b)(ii). disqualification415. It has made voting at elections compulsory416. It has obliged persons entitled to vote to enrol417. The Electoral Act provides for a Roll of Electors for each State and Territory418. Each State and the Australian Capital Territory are distributed into Electoral Divisions419. Provision is made for a Roll for each Division and a separate Roll for each Subdivision of a Division420. The Rolls are maintained as accurate, but not only for the purpose of ascertaining the entitlement of persons to vote at elections. They are sources of information421 and are used to determine redistributions of Divisions in a State or Territory422. One of the key factors in the assessment, regularly undertaken, of the need for a redistribution, is the number of electors in fact enrolled in a Division at the relevant time423. The accuracy of the Rolls is therefore essential. As presently expressed424, a person who is entitled to be enrolled for any Division425, whether by way of enrolment or transfer of enrolment, is required "forthwith [to] fill in and sign a claim [to enrolment] and send or deliver the claim to the Electoral Commissioner." A person so enrolled is called an Elector426. Any person who is entitled to have his or her name placed on the Roll and whose name is not on the Roll upon the expiration of 21 days from becoming 415 For example, Commonwealth Electoral Act 1918, s 93(8). 416 As introduced by the Commonwealth Electoral Act 1924 (Cth), s 2. 417 Commonwealth Electoral Act 1918, s 101(1). 418 Commonwealth Electoral Act 1918, s 81(1). 419 Commonwealth Electoral Act 1918, s 56. 420 Commonwealth Electoral Act 1918, s 82. 421 Commonwealth Electoral Act 1918, ss 90A, 90B. 422 See Commonwealth Electoral Act 1918, ss 59-78. 423 See Commonwealth Electoral Act 1918, ss 66(3)(a), 73(4)(a). 424 Commonwealth Electoral Act 1918, s 101(1). 425 Section 101 refers to a Subdivision. The Act provides for both Divisions and Subdivisions, but there are no Subdivisions in use. For consistency, I refer to Divisions. 426 Commonwealth Electoral Act 1918, s 4(1), definition of "Elector". so entitled is guilty of an offence, unless he or she proves that the non-enrolment is not a consequence of his or her failure to send or deliver a claim427. This offence provision is ameliorated by a further provision: that, where a person sends or delivers a claim for enrolment, proceedings shall not be instituted against that person for an offence committed before he or she sent or delivered the claim428. Regrettably, and despite the not inconsiderable efforts of the Australian Electoral Commission ("the AEC") and the possibility of prosecution for the abovementioned offence, some persons qualified to vote do not enrol or transfer their enrolment when becoming obliged to do so. Some make their claim at the last possible moment and only when an election has been announced. This is not a new phenomenon. Records of the 2004 federal election disclose that there were 423,993 enrolment transactions (claims for enrolment and updating of existing enrolments) in the nine day period between the announcement of the election and the close of the Rolls. After the close of the Rolls, 168,394 claims were lodged. In 2007, following the amendments in question, when the post-announcement enrolment period was three days for new enrolments and nine days for updating enrolments, there were 279,469 enrolment transactions in that period and a further 100,370 after the close of the Rolls. Following the announcement of the election for the two Houses made in July 2010, some 508,000 claims for enrolment or transfer of enrolment were received and processed onto the Rolls. At the time this matter was heard, the AEC estimated that there might be another 100,000 claims which would not be considered because of the provisions in question, ss 102(4) and 102(4AA) of the Electoral Act. The first and second plaintiffs' claims, to enrolment and transfer of enrolment respectively, were amongst them. Background to the 2006 amendments The 2006 amendments followed a "Report of the Inquiry into the Conduct of the 2004 Federal Election" by the Joint Standing Committee on Electoral Matters ("the JSCEM")429. This was not the first time that the question of the closure of the Rolls had been addressed. The issue had been dealt with on a 427 Commonwealth Electoral Act 1918, s 101(4). 428 Commonwealth Electoral Act 1918, s 101(7). 429 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005). number of occasions prior to the 2004 Election Report. This may explain why the recommendations contained in that Report were not specifically mentioned in either the Explanatory Memorandum or the second reading speech to the Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Bill 2005, the Bill which introduced the provisions here in question. In the Report on the seven day period was recommended430. In another, earlier, report on the integrity of the Rolls431, the JSCEM recommended that the period be shortened so that for new enrolments, the Rolls would close on the day of issue of the writs, and for transfers of enrolment, three days later. the 2001 election, retention of In the 2004 Election Report, the JSCEM observed that the AEC processed approximately 17.5 per cent of the enrolment transactions for the whole year in the seven days before Roll closure432. It was considered that this limited the AEC's ability to conduct the thorough checks necessary to ensure the integrity of the Rolls433 and that the "period of grace", of seven days, actually encouraged electors or potential electors to neglect their obligations and attempt to "catch up" in that period434. The JSCEM had referred, in the latter regard, to the fact that 60.5 per cent of the enrolment transactions which occurred in that period would not have been necessary if electors, or potential electors, had fulfilled their statutory obligation to enrol or update their enrolment details within 21 days of becoming so 430 Joint Standing Committee on Electoral Matters, The 2001 Federal Election: Report of the Inquiry into the conduct of the 2001 Federal Election, and matters related thereto, (2003) at 63 [2.175]. 431 Joint Standing Committee on Electoral Matters, User friendly, not abuser friendly: Report of the Inquiry into the Integrity of the Electoral Roll, (2001) at 50 [2.133]. 432 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 34 [2.112]. 433 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 34 [2.113]. 434 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 35 [2.116]-[2.117]. entitled435. Because the "period of grace" encouraged reliance upon the extra time allowed, it was considered by the JSCEM to serve "to decrease the accuracy of the roll during non-election periods"436. Further, unsuccessful attempts by the AEC to maintain the Rolls as current caused a significant wastage of taxpayer funds, the JSCEM said437. The JSCEM went on to say that it "also agrees that the current close of roll arrangements present an opportunity for those who seek to manipulate the roll to do so at a time where little opportunity exists for the AEC to undertake the thorough checking required [for] ensuring roll integrity."438 Dealing with the argument that there was no proof of electoral fraud sufficiently widespread to warrant any action, the JSCEM said that that approach "missed the point"439, which was that steps should be taken to prevent fraud. Following upon the recommendations of the JSCEM, and after the further recommendation of the Senate Finance and Public Administration Committee that the Bill be passed440, amendments were effected to the Electoral Act441. Section 102(4) provides that a claim for enrolment made after 8.00 pm on the date of the writ for an election is not to be considered until after the close of 435 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 34 [2.114]. 436 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 35 [2.117]. 437 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 35 [2.120]. 438 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 35 [2.121]. 439 Joint Standing Committee on Electoral Matters, The 2004 Federal Election: Report of the Inquiry into the Conduct of the 2004 Federal Election and Matters Related Thereto, (2005) at 35 [2.122]. 440 The Senate, Standing Committee on Finance and Public Administration, Electoral and Referendum Legislation Amendment Bill 2006, (2007) at 6 [2.27]. 441 Electoral and Referendum Amendment (Electoral Integrity and Other Measures) Act 2006 (Cth). polling at the election. Section 102(4AA) provides that a claim to have an enrolment transferred made after 8.00 pm on the date of the close of the Roll for the relevant Division is not to be considered until after the close of polling at the election. According to s 155(1), for a claim to transfer enrolment, this is the third working day after the date of the writ. The plaintiffs' circumstances On Saturday, 17 July 2010 the Prime Minister announced that an election of both Houses was to be called. The writs for those elections were obtained very shortly afterwards, on Monday, 19 July 2010. The first plaintiff therefore had until 8.00 pm on 19 July 2010 to enrol for the election and the second plaintiff until 8.00 pm on Thursday, 22 July 2010 to transfer his enrolment. The first plaintiff attained the age of 18 years on 16 June 2010. When the election was announced she had not enrolled. She attempted, unsuccessfully, to do so on the day of issue of the writs, Monday, 19 July 2010. She did not lodge a claim until Friday, 23 July 2010. The second plaintiff was 23 years of age at the relevant times. He changed his address to one in another Division in March 2010. He did not advise the AEC of this, as he was required to do. He attempted to do so on the day before the election was called, but was also unsuccessful in submitting the claim. He also lodged his claim on 23 July 2010. Neither of the plaintiffs fulfilled their obligations as required by s 101 of the Electoral Act. Their failure to do so cannot be disregarded when considering the operation and effect of the provisions in question, and whether they were unreasonable or disproportionate, as the plaintiffs contend. Neither plaintiff suggested that it was not possible for them to have enrolled when required and thereby have achieved the status of Elector for their Division. It was not suggested that it was not possible for them to have done so in the time allowed after the election was called. Their case is that they should have been allowed more time. The plaintiffs' claims The plaintiffs' argument centres upon two questions, which are said to arise from the joint judgment (Gummow, Kirby and Crennan JJ) in Roach v Electoral Commissioner442, namely: 442 (2007) 233 CLR 162; [2007] HCA 43. (1) whether the impugned provisions disenfranchise any group of adult citizens or otherwise disentitle or exclude them from casting a vote for their representatives; and (2) whether the disenfranchisement, disentitlement or exclusion is for a "substantial reason" or is "disproportionate". Roach concerned the disqualification, from voting at federal elections, of all persons serving a sentence of imprisonment. The majority held that the provisions in question were invalid. It was held that ss 7 and 24 of the Constitution limit the scope of laws affecting the franchise443 and that a disqualification from the exercise of the franchise could only be made for a "substantial" reason, so as to be consistent with "choice by the people"444. The latter question, concerning the legislative disqualification, was said, in the joint reasons, to require consideration of questions of proportionality445. Gleeson CJ considered the disenfranchisement, given the constitutional imperative of "chosen by the people" appearing in ss 7 and 24446. The majority concluded that the provisions were arbitrary in their effect and therefore did not provide a sufficient reason for disenfranchisement447. rational connection was necessary to explain that a Disenfranchisement? Sections 7 and 24 commence with a statement concerning the composition of the Senate and the House of Representatives, each of which is "directly chosen by the people" of the State (s 7) and the Commonwealth (s 24). Those sections are emphatic of two factors: direct elections and a popular vote448. 443 Roach v Electoral Commissioner (2007) 233 CLR 162 at 187 [49]. 444 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7] per Gleeson CJ, 199 [85] per Gummow, Kirby and Crennan JJ. 445 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85]. 446 Roach v Electoral Commissioner (2007) 233 CLR 162 at 182 [24]. 447 Roach v Electoral Commissioner (2007) 233 CLR 162 at 182 [23] per Gleeson CJ, 200-201 [90] per Gummow, Kirby and Crennan JJ. 448 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 21 per Barwick CJ; [1975] HCA 53. See also McGinty v Western Australia (1996) 186 CLR 140 at 279 per Gummow J; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 236 [153] per Gummow and Hayne JJ. The plaintiffs did not contend that the joint reasons in Roach spoke of an individual having a right to vote protected by ss 7 and 24. The concern expressed in the joint reasons was with respect to the importance of the franchise to the maintenance of the system of government upon which the Constitution is based. The existence and exercise of the franchise were said to reflect "notions of citizenship and membership of the Australian federal body politic."449 And it was said that such notions were "not extinguished by the mere fact of imprisonment"450, as a prelude to posing the question in that case: whether the disqualification was for a substantial reason451. But nowhere was it said that what was at issue was an individual right to vote. It was expressly stated in the joint reasons in Roach that the case concerned the "denial of entitlement to cast any vote at all", not "the existence of an individual right, but rather the extent of the limitation upon legislative power derived from the text and structure of the Constitution and identified in Lange."452 In Lange v Australian Broadcasting Corporation453 it was said that ss 7 and 24 "do not confer personal rights on individuals. Rather they preclude the curtailment of the protected freedom by the exercise of legislative or executive power."454 The implied freedom there in question was that of communication on political matters. In Roach Gleeson CJ did make reference to "the right to vote". His Honour said that, having regard to what had been said in Attorney-General (Cth); Ex rel McKinlay v The Commonwealth455 by McTiernan and Jacobs JJ, he saw "no reason to deny that … the words of ss 7 and 24, because of changed historical circumstances including legislative history, have come to be a constitutional protection of the right to vote."456 McTiernan and Jacobs JJ had said that "the long established universal adult suffrage may now be recognized as 449 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [83]. 450 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [84]. 451 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85]. 452 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199-200 [86]. 453 (1997) 189 CLR 520; [1997] HCA 25. 454 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 560. 455 (1975) 135 CLR 1 at 36. 456 Roach v Electoral Commissioner (2007) 233 CLR 162 at 174 [7]. a fact"457. In context, Gleeson CJ may have been referring to what is generally described as an incident of universal adult suffrage, rather than an individualised view of "the franchise" which is protected by ss 7 and 24. His Honour had earlier referred to the dictionary definition of "universal suffrage", which, it may be expected, was given as the right of all adults to vote458. Earlier authority is expressive of those enfranchised in a collective sense. In McKinlay459 McTiernan and Jacobs JJ pointed out that it was incorrect to equate "the people" referred to in s 24 with electors, or as taking account of those enfranchised individually. Rather, the term referred to a collective body. Gibbs J compared the use of the word "electors" in other sections (s 41 being one) with the use of "the people" in s 24460. References to "the franchise" should therefore be understood to refer, collectively, to those people who are qualified to vote. Individuals cannot be selected by legislation for disqualification. Therefore disenfranchisement or exclusion from voting refers to a disqualification of a class of people. "Chosen by the people" refers to the election of a representative by all those qualified to vote, who do vote. The importance of the existence and maintenance of voting to the system of representative government upon which the Constitution is based must not be underestimated. But the provisions here in question are not directed to voting and do not disqualify any group of persons from voting. They limit the time for enrolment. They cannot be said to be so certain, and of such magnitude, in their effect as to affect the franchise, in the sense referred to above. What the plaintiffs complain of is that the provisions have the potential to render a person unable to vote, if he or she fails to comply with their obligations respecting enrolment. The provisions may therefore raise questions about proportionality, but they do not establish disentitlement, without more. The argument developed by the plaintiffs, in response to these limitations, was that the legislation must ensure the maximum participation of voters. This 457 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 458 Roach v Electoral Commissioner (2007) 233 CLR 162 at 173 [6]. 459 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 460 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 at 44. See also Langer v The Commonwealth (1996) 186 CLR 302 at 332 per Toohey and Gaudron JJ; [1996] HCA 43. was not a matter in issue, and therefore was not considered, in Roach. It is said to be required as an expression of "chosen by the people" and because a system of representative government requires such participation. The plaintiffs' argument therefore assumes a constitutional imperative. The description given by Isaacs J in Judd v McKeon461 of elections as "expressive of the will of the community", properly understood, does not support the plaintiffs' argument for a constitutional requirement regarding maximum participation. The statement was taken from the following passage of his Honour's reasons: "The community organized, being seised of the subject matter of parliamentary elections and finding no express restrictions in the Constitution, may properly do all it thinks necessary to make elections as expressive of the will of the community as they possibly can be." In Judd v McKeon the Court was concerned with the validity of provisions rendering it an offence under the Electoral Act for electors to fail to vote, consequent upon voting having been made compulsory. The Court confirmed that Parliament may prescribe compulsory voting. In context, therefore, Isaacs J was affirming parliamentary power with respect to elections in the passage quoted and the lack of restrictions evident in the Constitution upon that power. His Honour, in referring to elections being "as expressive of the will of the community as they possibly can be", was not expressing a constitutional restriction, but an ideal. to a Considerations of representative government do not point constitutionally derived requirement in the terms for which the plaintiffs contended. To the contrary, the power given to Parliament to legislate with respect to elections should not be seen as fixed by reference to a requirement that the greatest number of people as possible vote. In McGinty v Western Australia462 Gummow J cautioned that: "To adopt as a norm of constitutional law the conclusion that a constitution embodies a principle or a doctrine of representative democracy or representative government (a more precise and accurate term) is to adopt a category of indeterminate reference." (footnote omitted) 461 (1926) 38 CLR 380 at 385; [1926] HCA 33. 462 (1996) 186 CLR 140 at 269. His Honour observed that this would allow a wide range of variable judgments in these principles or doctrines463. the Brennan CJ464 said that: interpretation and application of "It is logically impermissible to treat 'representative democracy' as though it were contained in the Constitution, to attribute to the term a meaning or content derived from sources extrinsic to the Constitution and then to invalidate a law for inconsistency with the meaning or content so attributed." It is difficult to identify what is essential to representative government, not the least because ideas about it may change over time. In McKinlay Stephen J suggested that it may be possible to identify a quality which is essential to representative democracy as absent, but not possible to identify a requirement so essential as to be determinative of the existence of representative democracy465. In Mulholland v Australian Electoral Commission466 Gleeson CJ observed that a notable feature of our system of government is how little of the detail of it is to be found in the Constitution and how much is left to be filled in by Parliament467. Gummow J has explained that the Constitution allowed for further legislative evolution in the system of representative government and thereby avoided constitutional rigidity468. It was necessary to rely upon later provision by Parliament, because agreement could not be reached on many matters469. It is necessary to bear in mind that, at the time of federation, democracy was not a perfectly developed concept470. No one view prevailed. If the framers of the Constitution did have a view about what was the most appropriate electoral 463 McGinty v Western Australia (1996) 186 CLR 140 at 269-270. 464 McGinty v Western Australia (1996) 186 CLR 140 at 169. 465 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 466 (2004) 220 CLR 181. 467 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 188 [6]. 468 McGinty v Western Australia (1996) 186 CLR 140 at 269. 469 McGinty v Western Australia (1996) 186 CLR 140 at 280 per Gummow J. 470 McGinty v Western Australia (1996) 186 CLR 140 at 221 per Gaudron J. system, they did not express it in the Constitution471. Any views they may have had remain at best "unexpressed assumptions" on which the framers proceeded472. Sections 10 and 31 of the Constitution, which, together with s 51(xxxvi), provide for laws respecting elections to the Houses, commence with the words "[u]ntil the Parliament otherwise provides". The words accommodate the notion that representative government is a dynamic institution, as Gummow J observed in McGinty473. In Mulholland Gummow and Hayne JJ474 said that, because "[u]ntil the Parliament otherwise provides" allows for change, care must be taken in elevating a "direct choice" principle to a broad restraint upon legislative development. This assumes particular importance in this case. In McKinlay Stephen J475 said that the principle of representative democracy predicates the enfranchisement of electors, the existence of an electoral system capable of giving effect to the selection of representatives and the bestowal of legislative functions on the representatives selected. But, his Honour added, the quality and character of each of the three ingredients is not fixed or precise. In each there is scope for variety. In relation to the electoral system, it includes matters which may affect the significance of the vote given. The unstated, but essential, premise for the plaintiffs' argument of maximum participation in the franchise is that all those entitled to vote must vote. Compulsory voting has been required since 1924. It was recognised in Judd v McKeon as a legislative choice. It is not reflective of any constitutional requirement. To the contrary, the constitutional intendment is that such matters remain subject to the exercise of parliamentary choice, as conceptions of representative government and democracy change and adapt. 471 McGinty v Western Australia (1996) 186 CLR 140 at 184 per Dawson J. 472 Australian National Airways Pty Ltd v The Commonwealth ("the Airlines Nationalisation Case") (1945) 71 CLR 29 at 81 per Dixon J; [1945] HCA 41. 473 McGinty v Western Australia (1996) 186 CLR 140 at 280; see also at 200 per Toohey J. And see Kirk, "Constitutional Implications from Representative Democracy", (1995) 23 Federal Law Review 37 at 50; Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 237 [155] per Gummow and 474 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 237 [156]. 475 Attorney-General (Cth); Ex rel McKinlay v The Commonwealth (1975) 135 CLR 1 Parliament may consider that compulsory voting remains appropriate to Australia, to a sense of social obligation of participation in the franchise, and therefore continues that system of voting. It is not the preferred system in many other countries which have forms of representative government. It would be unwise to assume that such a system will continue to be maintained in Australia. Compulsory voting cannot be regarded as essential to our representative government here. It would be wrong to take steps towards effectively entrenching it by requiring that legislation concerning elections ensure the maximum exercise of the franchise. It would be inconsistent with the intention expressed in the Constitution: that Parliament be free to legislate in this area from time to time. Proportionality The plaintiffs' submissions also described the effect of the provisions in question as a "burden" upon their entitlement to enrol and vote, as distinct from an outright disentitlement. Consideration of the extent of the effects of legislative measures raises questions of proportionality. The term "proportionality" implies a relationship between things. A definition of "proportion", in the sense of being in or having a due or proper proportion, is given as the "[d]ue relation … between things or parts of a thing as renders the whole harmonious; balance, symmetry, agreement, harmony."476 It has been suggested that proportionality is a part of, but not a synonym for, the requirement that a law be "reasonably appropriate and adapted"477. If this is the case, notions of proportionality may be somewhat obscured by that expression. In the Australian constitutional context, proportionality may generally be said to involve considerations of the relationship between legislative means and constitutionally legitimate ends, or the effect of legislative means, or measures, upon matters the subject of constitutional protection or guarantee. The expression "reasonably appropriate and adapted" was imported into Australian constitutional law some time ago from the United States constitutional context. The term "proportionality" has its origins in Germany. It has been influential in many legal systems, in Europe and elsewhere, as a principle applied 476 The Oxford English Dictionary, 2nd ed (1989), vol 12 at 647, sense 4. 477 Cunliffe v The Commonwealth (1994) 182 CLR 272 at 321 per Brennan J; [1994] HCA 44. See also Richardson v Forestry Commission (1988) 164 CLR 261 at 311-312 per Deane J, 346 per Gaudron J; [1988] HCA 10; Zines, "Constitutionally Protected Individual Rights", in Finn (ed), Essays on Law and Government: Volume 2 – The Citizen and the State in the Courts, (1996) 136 at 156. to test the validity of legislation478, particularly where legislation effects a restriction of a protected interest. Both expressions, "proportionality" and "reasonably appropriate and adapted", are used in the joint judgment in Roach. The plaintiffs' reliance on what was said in Lange and in Roach concerning proportionality raises questions about its meaning, its use and how it might apply in the circumstances of this case. In the joint judgment in Roach it was said that a valid disqualification of prisoners required a "substantial reason". Their Honours said479: "A reason will answer that description if it be reasonably appropriate and adapted to serve an end which is consistent or compatible with the maintenance of the constitutionally prescribed system of representative government. When used here the phrase 'reasonably appropriate and adapted' does not mean 'essential' or 'unavoidable'. Rather, as remarked in Lange, in this context there is little difference between what is conveyed by that phrase and the notion of 'proportionality'. What upon close scrutiny is disproportionate or arbitrary may not answer to the description reasonably appropriate and adapted for an end consistent or compatible with observance of the relevant constitutional restraint upon legislative power." (footnotes omitted) In Lange480 the Court said that the freedom of communication which the Constitution protects is not absolute. It operates as a restriction upon legislative power, but will not invalidate a law having a legitimate object or end if the law satisfies two conditions481: "The first condition is that the object of the law is compatible with the maintenance of the constitutionally prescribed system of representative and responsible government … The second is that the law is reasonably appropriate and adapted to achieving that legitimate object or end." 478 And also administrative action, but that may be put to one side. 479 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85] per Gummow, 480 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 561. 481 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 561-562. The Court went on482: "Different formulae have been used by members of this Court in other cases to express the test whether the freedom provided by the Constitution has been infringed. Some judges have expressed the test as whether the law is reasonably appropriate and adapted to the fulfilment of a legitimate including Others have favoured different expressions, purpose. proportionality. In the context of the questions raised by the case stated, there is no need to distinguish these concepts." "Reasonably appropriate and adapted" The phrase "reasonably appropriate and adapted" (to a legitimate end) has a long history in Australian constitutional law. It derived from Marshall CJ's judgment in McCulloch v Maryland483 and was applied in Jumbunna Coal Mine NL v Victorian Coal Miners' Association484 and following cases485. In McCulloch a question with which Marshall CJ was concerned was whether Congress had the power to incorporate a bank. It was held that it was authorised by the Constitution to pass all laws "necessary and proper" to carry into execution the express powers conferred upon it486. It could therefore incorporate a bank if that was a suitable mode of executing the powers of government. The width of legislative discretion was therefore the context for the often-cited passage from his Honour's reasons487: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional." 482 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 562. 483 17 US 316 at 421 (1819). 484 (1908) 6 CLR 309; [1908] HCA 95. 485 Including Mulholland v Australian Electoral Commission (2004) 220 CLR 181. 486 McCulloch v Maryland 17 US 316 at 412 (1819). 487 McCulloch v Maryland 17 US 316 at 421 (1819). In Federated Saw Mill &c Employes of Australasia v James Moore & Son Pty Ltd488 O'Connor J described the principle enunciated in McCulloch, and followed in Jumbunna, as being: "when the object aimed at is within the limits of the power, the legislature cannot be interfered with or controlled as to the mode in which it may deem fit to exercise the power, provided that it chooses means which are appropriate and fairly adapted to the object." The enquiry whether a law is "with respect to" a constitutional head of power is, clearly enough, concerned with the law's connection to that power. In The Commonwealth v Tasmania (The Tasmanian Dam Case)489, Deane J introduced the term "proportionality" to the question whether a law could be characterised by reference to a constitutional head of power. His Honour said490: "Implicit in the requirement that a law be capable of being reasonably considered to be appropriate and adapted to achieving what is said to provide it with the character of a law with respect to external affairs is a need for there to be a reasonable proportionality between the designated purpose or object and the means which the law embodies for achieving or procuring it. … The absence of any reasonable proportionality between the law and the purpose of discharging the obligation under the convention would preclude characterization as a law with respect to external affairs". One enquiry as to proportionality therefore concerns the means or measures employed by the legislation to achieve or procure the designated purpose. There may be other approaches to it. Marshall CJ's reference to appropriateness suggests an enquiry as to the suitability of the means for the designated purpose. Any test for proportionality must then reside in the words "plainly adapted to that end". Later in his reasons, Marshall CJ referred to the "means" as being "adequate to its ends"491. This description may suggest that the operation and effect of a law must be necessary to achieve the designated purpose. A requirement of necessity suggests that the law must not stray too far from the bounds of that purpose. In Mulholland 488 (1909) 8 CLR 465 at 510; [1909] HCA 43. 489 (1983) 158 CLR 1; [1983] HCA 21. 490 The Commonwealth v Tasmania (The Tasmanian Dam Case) (1983) 158 CLR 1 at 491 McCulloch v Maryland 17 US 316 at 424 (1819). Gleeson CJ observed that there is a long history of the use, legislatively and judicially, of the term "necessary" and equated its meaning with "reasonably appropriate and adapted"492. Reasonable necessity – a test of proportionality "Reasonable necessity" has long been used as a test, or legal criterion, of the validity of legislation493. Nowhere is this clearer than in cases involving s 92 of the Constitution and the freedom of trade, commerce and intercourse among the States which is the subject of its protection. In Permewan Wright Consolidated Pty Ltd v Trewhitt494 Stephen J said that if regulations affecting interstate trade are to be valid, the restrictions which they impose must be no greater than are reasonably necessary in all the circumstances. Where the restrictions were severe in their effect, it would be important for the court to look to whether there were other means of attaining the legitimate end which were less injurious to interstate trade495. An essential qualification to the test as stated is that the identified alternative measure be "as practicable as the law in question."496 This is an important qualification. It helps to maintain legislative choice and avoids unwarranted substitution. The question whether other measures are as effective may be a question of fact497. In cases involving s 92 it may require expert economic opinion498. 492 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 199-200 493 Thomas v Mowbray (2007) 233 CLR 307 at 332 [24] per Gleeson CJ; [2007] HCA 494 (1979) 145 CLR 1 at 31; [1979] HCA 58. 495 Permewan Wright Consolidated Pty Ltd v Trewhitt (1979) 145 CLR 1 at 31. See also Uebergang v Australian Wheat Board (1980) 145 CLR 266 at 306 per Stephen and Mason JJ; [1980] HCA 40. 496 Uebergang v Australian Wheat Board (1980) 145 CLR 266 at 306 per Stephen and 497 Uebergang v Australian Wheat Board (1980) 145 CLR 266. 498 Such evidence is not usually provided – see Sir Anthony Mason, "Law and Economics", (1991) 17 Monash University Law Review 167 at 176. The approach discussed, which enquires as to the availability of alternative, practicable and less restrictive measures, finds clear expression in the judgment of Mason J in North Eastern Dairy Co Ltd v Dairy Industry Authority of NSW499, where his Honour held that the method chosen to regulate trade in milk had not been shown to be the "only practical and reasonable mode" which would achieve the objective of ensuring the high quality of the milk and protecting public health. More recently, in Betfair Pty Ltd v Western Australia500, the test of reasonable necessity propounded in North Eastern Dairy Co was accepted as a doctrine of the Court501. It was regarded as consistent with what had been said in Cole v Whitfield502, where the Court held that the provision in question was a "necessary means of enforcing the prohibition against the catching of undersized crayfish in Tasmanian waters." In Betfair the prohibitions against the use of betting exchanges in Western Australia were argued to be necessary for the protection of the racing industry in that State. However, in the joint judgment it was said503: "But, allowing for the presence to some degree of a threat of this nature, a method of countering it, which is an alternative to that offered by prohibition of betting exchanges, must be effective but non-discriminatory regulation. That was the legislative choice taken by Tasmania and it cannot be said that that taken by Western Australia is necessary for the protection of the integrity of the racing industry of that State. In other words, the prohibitory State law is not proportionate; it is not appropriate and adapted to the propounded legislative object." 499 (1975) 134 CLR 559 at 616; [1975] HCA 45. 500 (2008) 234 CLR 418; [2008] HCA 11. 501 Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 477 [103] per Gleeson CJ, Gummow, Kirby, Hayne, Crennan and Kiefel JJ. 502 (1988) 165 CLR 360 at 409; [1988] HCA 18. 503 Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 479 [110]. And it was concluded that504: "it cannot be found in this case that prohibition was necessary in the stated sense for the protection or preservation of the integrity of the racing industry." It follows that, although the expressions "appropriate and adapted" and "proportionate" were used, the test applied was that of the availability of alternative, practicable and less restrictive measures. The test has been applied in cases involving the implied freedom of communication on political matters. In Lange, reference was made to the decision of the majority in Australian Capital Television Pty Ltd v The Commonwealth ("ACTV")505, by way of explication of the second condition for validity referred to in Lange; namely, that the law be "reasonably appropriate and adapted to serve a legitimate end"506. Lange explained the majority decision in ACTV, which held invalid legislation which seriously impeded discussion during the course of a federal election, as grounded upon the fact that "there were other less drastic means by which the objectives of the law could be achieved."507 There may be other views about the ratio in ACTV, but the point to be made, for present purposes, is that Lange recognises the test of proportionality just discussed: reasonable necessity assessed by the availability of alternative measures. Cases involving s 92 proceed upon an acceptance that the freedoms guaranteed by that section are not absolute. The same may be said of other, implied, freedoms508. It has been pointed out that, once it is accepted that a guarantee is not absolute, some test of what constitutes a legitimate type or level of restriction must be developed509. This serves as a reminder of the wider concern of the test discussed, indeed of all tests of proportionality. Its concern is not just about how the objectives of the legislation in question may otherwise be 504 Betfair Pty Ltd v Western Australia (2008) 234 CLR 418 at 480 [112]. 505 (1992) 177 CLR 106; [1992] HCA 45. 506 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567. 507 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 568. 508 See Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 142 per Mason CJ. 509 Kirk, "Constitutional Implications from Representative Democracy", (1995) 23 Federal Law Review 37 at 41. fulfilled. It is used to determine the limits of legislation which restricts a freedom guaranteed by the Constitution. When alternative, practicable measures, less restrictive of a freedom, are available, it may be concluded that the measures in question are not reasonably necessary. They go too far and are disproportionate. The limits of legislative power are thereby determined. But there may be other methods of answering the question. Other tests of proportionality? A test of reasonable necessity, by reference to alternative measures, may not always be available or appropriate having regard to the nature and effect of the legislative measures in question. In Davis v The Commonwealth510, Nationwide News Pty Ltd v Wills511 and ACTV, lack of proportionality was assessed by reference to a range of factors. The legislation in Davis was seen as disproportionate, by reference to the severity of its effects upon freedom of expression and the need identified by its objects. The provisions of the Australian Bicentennial Authority Act 1980 (Cth) made it an offence for a person, without the consent of the Australian Bicentennial Authority, to use its name or any prescribed expression, such as "Bicentenary", "Expo", "Melbourne" and "Sydney", in connection with a business, trade, or the sale or supply of goods. Articles or goods used as a means by which such an offence was committed were liable to forfeiture. After some illustrations of the operation of the provisions in question it was said that512: "the effect of the provisions is to give the Authority an extraordinary power to regulate the use of expressions in everyday use in this country, though the circumstances of that use in countless situations could not conceivably prejudice the commemoration of the Bicentenary or the attainment by the Authority of its objects. In arming the Authority with this extraordinary power the Act provides for a regime of protection which is grossly disproportionate to the need to protect the commemoration and the Authority." Although the statutory regime may have been related to a legitimate end, it was said that "the provisions in question reach too far" and that "[t]his extraordinary 510 (1988) 166 CLR 79; [1988] HCA 63. 511 (1992) 177 CLR 1 at 31; [1992] HCA 46. 512 Davis v The Commonwealth (1988) 166 CLR 79 at 99-100 per Mason CJ, Deane and Gaudron JJ, Wilson and Dawson JJ agreeing at 101. intrusion into freedom of expression is not reasonably and appropriately adapted to achieve the ends that lie within the limits of constitutional power."513 The legislation in Nationwide News514 created offences for the use of words, in the nature of criticism, about the Industrial Relations Commission and its members, but it did not provide for defences usual to contempt and defamation, such as justification and fair comment. The provisions were held invalid. Mason CJ and McHugh J held that the extent of the protection provided was unnecessary and therefore disproportionate. Gaudron J agreed with this conclusion515. Mason CJ reached his conclusion by reference to the extent of the adverse impact of the provisions upon freedom of expression516. McHugh J used the same terms as had been employed in Davis – an "extraordinary intrusion" that was "grossly disproportionate to its need" – and concluded that the legislation went "well beyond" the protection required517. Deane and Toohey JJ discussed the nature of the interest sought to be protected by the legislation and held that the measures went "far beyond" what could be considered necessary in the public interest518. Mason CJ compared the measures with the level of protection under which courts function. This did not suggest that the Commission required more extrinsic powers519. Brennan J identified a lesser restriction which could have been effected520. Of the implied freedom of communication on political matters, Mason CJ said, in ACTV, that the guarantee does not postulate that it will always prevail over competing public interests521. The admission that the freedom cannot be regarded as absolute once again highlights the need for a test such as proportionality. 513 Davis v The Commonwealth (1988) 166 CLR 79 at 100. 514 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 35. 515 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 95. 516 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 34. 517 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 101, 102. 518 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 78. 519 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 33-34. 520 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 53. 521 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 Having identified the interests that the legislation sought to advance, his Honour turned his attention to the nature of the interests in question in that case, which were to be seen as protected by the implied freedom. His Honour did so through the viewpoint of the restrictive effect that laws might have upon different kinds of communication. His Honour distinguished laws effecting restrictions upon information or ideas from those which restricted an activity or mode of communication. In the case of the former, his Honour suggested that, speaking generally, it would be extremely difficult to justify such restrictions, implying that the nature of a protected interest may weigh heavily against any form of restriction. His Honour said a "compelling justification" would be required to warrant a restriction522. Even then, the measures must be no more than is reasonably necessary to achieve the public interest said to justify the restriction. His Honour added that it may be necessary to weigh the competing public interest against the restriction of freedom of communication, although, ordinarily, paramount weight would be given to the freedom523. On the other hand, his Honour considered that restrictions imposed on the mode of communication of ideas or information may be more susceptible of justification. In such a case, his Honour suggested, a balancing of interests may be necessary, as well as a determination whether the restriction is reasonably necessary to achieve the competing public interest. If the restriction is disproportionate in that regard, then its purpose may be taken to impair the freedom524. Mason CJ was alone in this approach to proportionality in ACTV. Deane and Toohey JJ approached the question of proportionality by reference to the character of the law, holding that a law with respect to the prohibition or restriction of communications would be more difficult to justify525 than others. Their Honours regarded the effect of the legislation as going beyond what was reasonably necessary in a democratic society, because it distorted the freedom of 522 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 523 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 524 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 525 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 political communication which underlies representative government. Brennan J considered the proportionality between the restriction effected by the law on the freedom and the legitimate interest the law was intended to serve526. Mason CJ's approach, of the identification of the particular interests in question which are the subject of the constitutional guarantees, has not been taken up in cases subsequent to ACTV. In Lange and Roach in particular, the interest said to be protected was stated in wide terms – as the system of government prescribed by the Constitution. Such differences of approach are important to an assessment of proportionality, for they define the relationship which is its subject. It may be said, by reference to these cases, that assessments of proportionality in Australian law involve a range of discernible tests and the identification of various factors which are relevant to the relationship of the legislation in question to its purposes or to interests the subject of constitutional protection. This invites comparison with the position in countries where tests are more clearly defined and openly stated. Proportionality – European law In Roach Gleeson CJ expressed concern about the importation of the concept of proportionality into the Australian constitutional context527. This was not the first occasion upon which concerns of this kind had been expressed528. In Mulholland Gleeson CJ had observed that the use of the term "proportionality" has the advantage that it is commonly used in other jurisdictions, in similar fields of discourse, and the disadvantage that it has there taken on different elaborations which may be imported into a different legal context without explanation529. However, despite his misgivings, his Honour said in Roach that he found aspects of the reasoning of the courts of other jurisdictions "instructive"530. Gleeson CJ's qualification in Mulholland is important. It requires that any derivation from the principle be critically analysed. 526 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 527 Roach v Electoral Commissioner (2007) 233 CLR 162 at 178 [17]. 528 See for example Leask v The Commonwealth (1996) 187 CLR 579 at 600-601 per Dawson J; [1996] HCA 29. 529 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 197-198 530 Roach v Electoral Commissioner (2007) 233 CLR 162 at 179 [17]. There is no doubt that the principle has a different status in other legal systems. In Germany and the European Community, to which I shall shortly refer, it has, respectively, the status of a constitutional principle531 and a general principle of wide application. The context in which it is applied, the extent to which account is taken of legislative discretion, and the extent to which legislation is required to conform to higher principles, may differ. Nevertheless, the question to which it is directed is common to these systems and our own. It is how to determine the limit of legislative power, where its exercise has the effect of restricting protected interests or freedoms. The methods used to test the principle of proportionality are rational and adaptable. Some bear resemblance to tests which have already been utilised in this Court. Further, proportionality is a principle having its roots in the rule of law532. That rule is reflected in the legislative judgments of disqualification as arbitrary and therefore disproportionate. in Roach, which the majority rejected the It should not be assumed that the application of identifiable tests of proportionality will lead to widening, impermissibly, the scope of review of legislation. The statement and explication of the tests employed in the assessment of proportionality should result in a more rigorous and disciplined analysis and render the process undertaken more clear. Once it is acknowledged that constitutional protections are not absolute, some test must be utilised in an assessment of proportionality, as has earlier been observed. It is preferable to identify how that assessment is undertaken in order to avoid the invocation of proportionality as a mere statement of conclusion. The principle of proportionality has its clearest expression in Germany. In its earlier form, as a principle of necessity, it appeared at the end of the 19th century, as a response to excessive police powers in Prussia, although its origins are said to be more ancient533. Its main purpose is the protection of fundamental freedoms. Professor Jürgen Schwarze explains that534: "where intervention by the public authorities is justified by reference to social objectives, such intervention must be limited by its effectiveness and consequently also by its proportionality in relation to the interest it seeks to defend." 531 Schwarze, European Administrative Law, rev ed (2006) at 688. 532 Schwarze, European Administrative Law, rev ed (2006) at 712. 533 Schwarze, European Administrative Law, rev ed (2006) at 685-686; Currie, The Constitution of the Federal Republic of Germany, (1994) at 307. 534 Schwarze, European Administrative Law, rev ed (2006) at 679. There is general agreement that proportionality is tested by reference to three factors, or sub-principles, in Germany535: "(1) First, the state measures concerned must be suitable for the purpose of facilitating or achieving the pursued objective. Second, the suitable measure must also be necessary, in the sense that the authority concerned has no other mechanism at its disposal which is less restrictive of freedom[536]. … [Third], the measure concerned may not be disproportionate to the restrictions which it involves". (emphasis in original) The Federal Constitutional Court537 of Germany has defined the principle in similar terms538. The three sub-principles, or tests, of the principle of proportionality are: (1) suitability, (2) necessity and (3) proportionality in the strict sense. The principle applied by the European Court of Justice ("the ECJ") is substantially drawn from German law539, although it may not be applied in the same way and the sub-principles may not be differentiated to the same degree540. Its principal application by the ECJ is in the sphere of freedom of economic activity541, where the second sub-principle assumes particular importance. 535 Schwarze, European Administrative Law, rev ed (2006) at 687. 536 This is further clarified in Schwarze, European Administrative Law, rev ed (2006) at 687, where it says that it is not the method used which has to be necessary, but "the excessive restriction of freedom involved in the choice of method". 537 Bundesverfassungsgericht. 538 In the decision published in vol 48 at 402, it was said that "[t]he intervention must be suitable and necessary for the achievement of its objective. It may not impose excessive burdens on the individual concerned, and must consequently be reasonable in its effect on him": see Schwarze, European Administrative Law, rev ed (2006) at 687. 539 As to its sources see Schwarze, European Administrative Law, rev ed (2006) at 540 Schwarze, European Administrative Law, rev ed (2006) at 855. 541 Schwarze, European Administrative Law, rev ed (2006) at 773. The first of the three sub-principles, suitability, looks to the probable effectiveness of the legislative measure and unsuitability is rarely established542. Another word for suitability might be "adapted"543, as earlier mentioned in connection with the phrase "reasonably appropriate and adapted"544. The test of reasonable necessity is the test more often applied by the ECJ in relation to cases involving measures which restrict the freedom of movement of goods. In a leading case, it was held that the objective of protecting consumers could have been achieved by a measure which meant a less drastic restriction of the free movement of goods545. An analogy with the test confirmed in Betfair, and in Lange, can be drawn. And it is pointed out that necessity does not involve only the fact that there may be a choice of alternative means, as that would deny legislative choice. The other measure has to be equally effective546. It is said that the sub-principle of proportionality in the strict sense is applied in a negative manner and that this serves to restrict its operation. A legislative measure will be held invalid only where it is unnecessarily harmful to the interest protected by the Constitution and is "manifestly disproportionate"547. How this is applied in particular cases may serve to further illuminate what is meant by that term. For present purposes, it may be observed that it is not dissimilar to statements made in Davis and Nationwide News, where the effects of the legislative measures on the relevant freedoms were said themselves to be too severe to qualify as proportionate. As may be expected of an enquiry of this kind, factors such as the extent or severity of the restrictions effected by the legislative measures on the freedoms, or protected interests, and the objective pursued by the legislation, have been considered relevant in decisions of the ECJ and of the Federal 542 Emiliou, The Principle of Proportionality in European Law, (1996) at 26, 29. 543 Currie, The Constitution of the Federal Republic of Germany, (1994) at 20. 544 See [435] above. 545 Rewe-Zentral AG v Bundesmonopolverwaltung für Branntwein (Case 120/78) ("the Cassis de Dijon Case") [1979] 1 ECR 649. References to "less drastic means" are also found in United States constitutional jurisprudence: see "Less Drastic Means and the First Amendment", (1969) 78 Yale Law Journal 464. 546 Emiliou, The Principle of Proportionality in European Law, (1996) at 30. 547 Emiliou, The Principle of Proportionality in European Law, (1996) at 36, 268. Constitutional Court548. The latter Court requires that the seriousness of the effect of the legislative restriction, and the importance of the reasons said to justify it, be in adequate proportion to each other549. Much is said to depend upon the nature of the legislative provision and the sphere of protection of the freedom or interest involved550. It has also been the concern of the High Court to assess the effect of the legislative measures in question, in relation to either or both of the legislative objective and the freedom protected. Less attention has been directed to the identification of the aspect of the freedom which is the subject of the protection. A freedom protected by the Constitution is generally assumed to have a status such that a significant reason is required to be given for any serious restriction of it. Roach did not concern a protected freedom, but rather a basal concept which informs the Constitution. It was that concept which was said to be relevant to an assessment of proportionality. Lange and Roach At issue in Lange was the effect of the defamation law of New South Wales on the freedom of political communication. It will be recalled that two conditions were said to be necessary if a freedom was not to invalidate a law affecting it. The first was that the object of the law had to be compatible with the maintenance of the system of representative government. The second was that the law had to be reasonably appropriate and adapted to achieve its legitimate object or end551. Later in its reasons, the Court posed two questions as the test for whether a law impermissibly infringes upon freedom of communication. The first was whether the law had the effect of burdening the freedom. The second was expressed in the language of proportionality552: 548 Tridimas, "Proportionality in European Community Law: Searching for the Appropriate Standard of Scrutiny", in Ellis (ed), The Principle of Proportionality in the Laws of Europe, (1999) 65 at 76-77; Schwarze, European Administrative Law, rev ed (2006) at 688. 549 Schwarze, European Administrative Law, rev ed (2006) at 688. 550 Emiliou, The Principle of Proportionality in European Law, (1996) at 32. 551 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 561-562. 552 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567. "Second, if the law effectively burdens that freedom, is the law reasonably appropriate and adapted to serve a legitimate end the fulfilment of which is compatible with the [system of government prescribed by the Constitution]". It may be observed that the question appears to combine the two conditions earlier stated. The law's purpose (the "legitimate end") is that which is compatible with the maintenance of the prescribed system of government. The question is whether the law is reasonably appropriate and adapted to serve that end. So understood, the test may involve whether the operation and effect of the law's measures are reasonably necessary to that legitimate purpose. Indeed this is the approach which was taken. In Lange the Court examined the common law rules of defamation in New South Wales by reference to whether there were other, less drastic measures by which the objectives of the law could be achieved, following the approach thought to have been taken by the majority in ACTV553. The Court was able to conclude that the law went no further than was necessary, for the protection of reputation, given the extended application of the law of qualified privilege554. It did so by adapting the constitutionally guaranteed freedom. the recognition of to accommodate that law A distinctive feature of Lange, so far as concerns tests of proportionality, is that the Court was able to achieve proportionality through its approach to the common law. By this means, it was able to conclude that proportionality existed based upon the test of reasonable necessity and was not required to undertake the task of assessing the extent of the effect of the defamation laws upon the freedom, as had been undertaken in some of the earlier cases involved with restrictions upon freedom of political communication. McHugh J in Coleman v Power555 considered that the fact that the Court in Lange adopted the example of ACTV was important to understanding what was intended by the second limb of the test in Lange. This must be accepted. His Honour's interpretation of what was said about ACTV led his Honour to conclude further that the test in Lange was intended to include, not only the compatibility of the law's objective, but also the compatibility of the measures undertaken to achieve the law's objective, with the prescribed system of government556. A 553 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 568. 554 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 575. 555 (2004) 220 CLR 1 at 50-51 [93]-[94]; [2004] HCA 39. 556 Coleman v Power (2004) 220 CLR 1 at 50-51 [94]; and see at 78 [196] per Gummow and Hayne JJ, 82 [213] per Kirby J. relationship between legislative measures and the maintenance of the prescribed system of government is somewhat different from the relationship involved in tests of proportionality employed in previous cases. It is not obvious that the decision in Lange was reached by an assessment involving that relationship. Nevertheless, the relationship appears to have assumed importance in Roach. The essential difficulty with the legislative disqualification in Roach, identified in the majority judgments, was that there was no evident reason or purpose beyond the obvious intention to remove a prisoner's ability to vote. It was arbitrary and did not differentiate between serious and other offences557. It may not be thought that much more was required for a finding that the law was disproportionate. Indeed, in the joint judgment it was said that what can be seen to be "disproportionate or arbitrary" may not meet the requirement that it be "reasonably appropriate and adapted for an end consistent or compatible with observance of the relevant constitutional restraint upon legislative power."558 That constitutional restraint is identified in connection with the test of proportionality, as being what is necessary to the maintenance of the prescribed system of representative government. The disqualification in question in Roach was compared, in the joint judgment, with another provided by the Electoral Act which, however, was considered to be valid. That provision disentitled persons who were incapable of understanding the nature and significance of voting, because they were of unsound mind. Although it limited the exercise of the franchise, it was held to do "for an end apt to protect the integrity of the electoral process. That end, plainly enough, is consistent and compatible with the maintenance of the system of representative government." The effect of the disqualification in Roach, on the other hand, was "further to stigmatise" prisoners by denying them the exercise of the franchise560. In the discussion which followed, it was pointed out that the disqualification operated 557 Roach v Electoral Commissioner (2007) 233 CLR 162 at 182 [23]-[24] per Gleeson CJ, 200 [90], 201 [93] per Gummow, Kirby and Crennan JJ. 558 Roach v Electoral Commissioner (2007) 233 CLR 162 at 199 [85] per Gummow, 559 Roach v Electoral Commissioner (2007) 233 CLR 162 at 200 [88] per Gummow, 560 Roach v Electoral Commissioner (2007) 233 CLR 162 at 200 [89] per Gummow, without regard to the nature of the offence committed, the length of the term of the imprisonment, sentencing policy and the offender's personal circumstances561. It was concluded that562: "The legislative pursuit of an end which stigmatises offenders by imposing a civil disability during any term of imprisonment takes s 93(8AA) beyond what is reasonably appropriate and adapted (or 'proportionate') to the maintenance of representative government. The net of disqualification is cast too wide". The last sentence in this passage reflects a view of the excessive effect of the legislative provision. It is difficult to see how it could be otherwise, absent a reason for complete disqualification. This might suffice for a conclusion that it was disproportionate. However, it was obviously considered necessary to further test proportionality. In doing so, the relationship which was identified as relevant was as between the effects of the legislative measure; namely, the further stigma of disqualification, and the "maintenance of the system of representative government". The identification of a system as the interest which is the subject of constitutional protection might raise questions about how legislative effects upon it are to be assessed, not the least because it is a concept, the essential features of which are difficult to isolate. However, the joint judgment in Roach further particularised voting as the feature with which it was concerned. It was said that voting in elections lies at the very heart of the system of government for which the Constitution provides563. The effect of disqualification from it was therefore serious and no reason was given to explain this legislative choice. It is of interest to observe that in Roach the disqualification which had been effected under the previous legislation was held to be valid. It disenfranchised prisoners who were serving sentences of three years or more. This was considered to be explicable. It reflected one electoral cycle, which had customarily formed a basis for a disqualification564, and it could be seen to 561 Roach v Electoral Commissioner (2007) 233 CLR 162 at 200-201 [90]-[93] per Gummow, Kirby and Crennan JJ. 562 Roach v Electoral Commissioner (2007) 233 CLR 162 at 202 [95] per Gummow, 563 Roach v Electoral Commissioner (2007) 233 CLR 162 at 198 [81] per Gummow, 564 Roach v Electoral Commissioner (2007) 233 CLR 162 at 203 [98] per Gummow, distinguish between serious lawlessness and less serious, yet reprehensible, conduct565. The earlier legislation could have permitted proportionality to be tested by reference to alternative, but less restrictive, measures, but it does not appear to have been approached in this way. Nevertheless, that test is one upon which the plaintiffs here rely. Proportionality applied: the plaintiffs' case The plaintiffs' challenge, at its first level, was said to draw upon Roach. It was that the provisions did not serve any legitimate end. There was no need for the provisions, because no problem had been identified by the AEC with respect to the integrity of the Electoral Rolls. This may raise a threshold question, rather than one involving any proportionality as between the legislation and its purpose. The submission overlooks the terms of the AEC's advice to the JSCEM for the purpose of its report, in 2002, on the integrity of the Electoral Roll566, namely: "With the system we have – a compulsory enrolment system – it is as open as possible, but we have never said it is not possible to defraud the system. We have always said that it has not occurred in a systematic way." The JSCEM on that occasion recommended that the AEC should further address "this potential risk to the electoral system."567 Further, the submission does not take account of the other reason given by the JSCEM for a shortening of the "period of grace". It was said that it was necessary to obtain greater compliance with enrolment obligations, not just at the time when elections were called but also in the period between elections. The JSCEM considered that the "period of grace" worked against such an objective and encouraged people to leave enrolment to the last moment. 565 Roach v Electoral Commissioner (2007) 233 CLR 162 at 204 [102] per Gummow, 566 Joint Standing Committee on Electoral Matters, The Integrity of the Electoral Roll: Review of ANAO Report No 42 2001-02, Integrity of the Electoral Roll, (2002) at 567 Joint Standing Committee on Electoral Matters, The Integrity of the Electoral Roll: Review of ANAO Report No 42 2001-02, Integrity of the Electoral Roll, (2002) at It cannot be suggested that the measures in question are without justification, in contrast to the disqualification in Roach. Both objects are not only compatible with the maintenance of an orderly and effective system of voting, as an aspect of the system of representative government, they are important to it. The principal object seeks to ensure greater compliance with electoral obligations. The point made by the plaintiffs in reply is relevant to proportionality. It was put that, accepting that there may be some concerns of the kind mentioned, less restrictive means could have been adopted to address them. Thus, the test of reasonable necessity, as assessed by alternative practicable means, is raised, as it was in Lange. Such a test assumes that the measures are sufficiently restrictive to warrant a search for alternative means. This is a matter which will require separate consideration. It was not suggested by the plaintiffs that the Electoral Act should make provision for persons to enrol or transfer enrolment at all times up to polling. Nor was it suggested that the legislation should provide that the AEC should undertake enrolments itself, which has been mooted elsewhere. The plaintiffs' case was that they should have been allowed to have their claims considered at any time during the seven days prior to closure of the Rolls, as the Act had permitted prior to the 2006 amendments. It is not sufficient, for this test of proportionality, that an alternative legislative measure be identified. The Court must be able to conclude that that alternative measure is just as effective for the legislative purpose as the measures employed. Such a conclusion is not possible here. There is nothing to suggest that allowing the longer period before the close of Rolls would be just as effective for the purpose of encouraging compliance with enrolment obligations and, therefore, nothing upon which to conclude that the opinion of the JSCEM was wrong. Attention is then directed to a consideration of the effects of the legislative measures – in the first place, in connection with the pursuit of the objectives of the legislation and, in the second, by reference to the interest identified in Roach as subject to constitutional protection. It is necessary, in this regard, to bear in mind that it is the effects of the legislation which are relevant, not a view of their importance to the electoral system, about which different views have been held. It must first be observed that what is restricted by the legislative measure is an entitlement to enrol, not an entitlement to vote. Nevertheless, voting is only possible upon enrolment and it must therefore be accepted that a possible effect of the measure is that a person's ability to vote at a particular election may be lost. But the effect is only possible and the loss is temporary. No issue is taken by the plaintiffs with the aspect of the scheme of the Electoral Act which obliges enrolment and renders it an offence to fail to do so. The provisions in question do not themselves operate to render a person unable to vote. What is necessary to bring about that result is the failure of a person to fulfil his or her obligations within a specified period, when fulfilment is not attended by any obvious difficulty. It would be a curious application of a test of proportionality if a law, otherwise valid, was invalid because Parliament should recognise that people will not fulfil their statutory obligations. It is of interest to observe that the ECJ is said to be loath to apply the principle of proportionality when it is invoked in an attempt to justify a failure to comply with Community law568. The denial of enrolment and voting for an election, for a legitimate reason, does not intrude too far upon the system of voting. It is, and has always been, a part of that system. It reinforces the requirement that persons qualified to vote enrol in a timely way, which is conducive to the effective working of the system. No denial of the franchise is involved. It is not possible, logically, for the plaintiffs to suggest that these provisions are incompatible, but those allowing for a few more days for enrolment are not. Conclusion For these reasons I did not join in the orders made on 6 August 2010. I would have dismissed the proceedings with costs. 568 Tridimas, "Proportionality in European Community Law: Searching for the Appropriate Standard of Scrutiny", in Ellis (ed), The Principle of Proportionality in the Laws of Europe, (1999) 65 at 66.
HIGH COURT OF AUSTRALIA Matter No S167/2009 JEFFERY & KATAUSKAS PTY LIMITED APPELLANT AND SST CONSULTING PTY LTD & ORS RESPONDENTS Matter No S168/2009 JEFFERY & KATAUSKAS PTY LIMITED APPELLANT AND RICKARD CONSTRUCTIONS PTY LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) & ORS RESPONDENTS Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited (Subject to deed of company arrangement) [2009] HCA 43 13 October 2009 S167/2009 & S168/2009 ORDER Matter No S167/2009 Appeal dismissed with costs. Matter No S168/2009 Appeal dismissed with costs. On appeal from the Supreme Court of New South Wales Representation D F Jackson QC with J A Steele for the appellant in both matters (instructed by Colin Biggers & Paisley) B W Walker SC with T G R Parker SC and R E Steele for the respondents in S167/2009 and for the fourth to seventh respondents in S168/2009 (instructed by No appearance for the first respondent in S168/2009 Submitting appearance for the second and third respondents in S168/2009 Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited (subject to a deed of company arrangement) Practice and procedure – Costs – Order against non-party – Where non-party, for a contingency fee, funded impecunious corporate plaintiff without providing plaintiff with indemnity against adverse costs orders – Whether power of Supreme Court of New South Wales to order costs against non-party enlivened – Whether non-party had committed abuse of process of the court within the meaning of Uniform Civil Procedure Rules 2005 (NSW), r 42.3(2)(c). Words and phrases – "abuse of process of the court", "occasioned by". Uniform Civil Procedure Rules 2005 (NSW), r 42.3. Civil Procedure Act 2005 (NSW), s 98(1). FRENCH CJ, GUMMOW, HAYNE AND CRENNAN JJ. Introduction The costs of civil proceedings in the Supreme Court of New South Wales are "in the discretion of the court". Section 98(1)(a) of the Civil Procedure Act 2005 (NSW) ("CP Act") so provides. Power expressed in those terms extends to the award of costs against non-parties1. However, the power given by s 98(1)(a) of the CP Act is expressed to be "[s]ubject to rules of court"2. One of those rules, r 42.3(1) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"), provides that "the court may not, in the exercise of its powers and discretions under section 98 of the [CP Act], make any order for costs against a person who is not a party"3. A qualification to that prohibition follows immediately in r 42.3(2), which provides: "This rule does not limit the power of the court: to make an order for payment, by a person who has committed contempt of court or an abuse of process of the court, of the whole or any part of the costs of a party to proceedings occasioned by the contempt or abuse of process …" These appeals raise the question whether the Supreme Court of New South Wales has power to order costs against a non-party which, for a contingency fee, has funded an impecunious corporate plaintiff without providing the plaintiff with an indemnity for adverse costs orders. Whether the Court has the power depends upon whether the litigation funder has "committed … an abuse of process of the Court", thus attracting the application of r 42.3(2)(c). For the reasons that follow, the power of the Court to make an order for costs against a litigation funder who is not a party to the proceedings was not enlivened in this case. 1 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 190 per Mason CJ and Deane J, 203 per Dawson J, 205 per Gaudron J, McHugh J contra at 217; [1992] HCA 28. 2 CP Act, s 98(1). 3 This is expressed to be subject to r 42.27 which is not material to this appeal. Crennan Factual and procedural history On 23 April 1998, Rickard Constructions Pty Limited ("Rickard Constructions") and SST Consulting Services Pty Ltd ("SST") (then Port Botany Container Park Pty Ltd) entered into a contract for the construction of pavement at a container terminal at Port Botany. The pavement was designed by Rickard Hails Moretti Pty Ltd. Jeffery & Katauskas Pty Ltd ("Jeffery & Katauskas") provided geotechnical services. SST assigned its interest in the contract to Mayne Nickless Ltd ("Mayne Nickless") as part of the sale of its business to Mayne Nickless and MPG Logistics Pty Limited ("MPG Logistics"). The pavement failed on 29 August 1999, three days after practical completion. On 3 May 2000, Rickard Constructions agreed to undertake rectification works in consideration of an assignment from Mayne Nickless and MPG Logistics of any rights they might have against parties involved in the design of the pavement and the supervision of its construction4. Rickard Constructions commenced proceedings against Jeffery & Katauskas and others in the Supreme Court of New South Wales on 5 September 2000. On 13 October 2000, Rickard Constructions entered into a deed of charge over all of its assets and undertaking in favour of SST. The deed recited a debt of $200,000 owed by Rickard Constructions to SST "arising from a loan to fund litigation concerning failed pavement and working capital". The loan was said to have been "on the date of this Deed". The charge nevertheless secured payment of a sum of $930,000 and interest. On 19 October 2000, an administrator was appointed to Rickard Constructions by resolution of the directors. On 22 December 2000, a deed of company arrangement into between Rickard ("DOCA") was entered two Constructions, companies together designated "the Secured Creditor", namely SST and SST Services Pty Ltd. the administrator and Upon execution of the DOCA, control of Rickard Constructions was to revert to its director5. The administrator was to establish a fund designated "the Fund"6. The administrator was to appropriate to the Fund the property of the 4 Two subsequent assignments were made in order to perfect Rickard Constructions' rights. Their efficacy is not in issue. 5 DOCA, cl 2.2. 6 DOCA, cl 4. Crennan company, defined as "the whole of the assets and undertaking"7, together with part of a sum advanced to the company by Mr Rickard and the Secured Creditor8. The administrator was also to appropriate to the Fund "the amount of any settlement or verdict obtained by [Rickard Constructions] in the Construction List proceedings in accordance with clause 15.7"9. Clause 15.1 of the DOCA provided that Mr Rickard and SST would "jointly covenant and agree to pay all legal fees and expenses incurred in the conduct of the Construction List proceedings by [Rickard Constructions]". This was expressed to be subject to a limit not defined in terms, but to be inferred from cl 15.2, which provided: "The Director and the Secured Creditor will fund the Construction List proceedings to an amount of $150,000 or until 31 March 2001, whichever first occurs. The Director and Secured Creditor may at any time source litigation insurance or other funding to further fund the continued conduct of the Construction List proceedings. Such litigation insurance or other funding shall be subject to the agreement or approval of the Administrator which shall not be unreasonably withheld. Fees and expenses incurred in consequence of an increase in the monetary limit or the extension of the period of the conduct of the Construction List proceedings will form part of the amount payable under sub-clause 6.1.2 of this Deed." In the event that the monetary or time limits prescribed in cl 15.2 were exceeded, the administrator could decide, in his "complete discretion", whether or not to accept litigation insurance "to further fund" the proceedings10. The company was to report to the administrator on the conduct of the proceedings11 and not to "capitulate in, settle or compromise" the proceedings without the prior written approval of the administrator, which was not to be unreasonably withheld12. 7 DOCA, cl 1.1. 8 DOCA, cll 4, 7. 9 DOCA, cl 4. 10 DOCA, cl 15.3. 11 DOCA, cl 15.4. 12 DOCA, cl 15.5. Crennan Mr Rickard undertook to provide all reasonable assistance to the company and to its legal advisers in prosecuting the Construction List proceedings13. Clause 15.7 provided: The Company will pay into the Fund all amounts recovered by way of settlement or a verdict in the Construction List proceedings. The Company shall only be obliged to pay into the Fund the net amount actually received by the Company after deducting: the amount of any cost order made against the Company in the Construction List proceedings the amount of any legal costs or other costs incurred in the conduct of the Construction List proceedings in addition to the funding by the Director and the Secured Creditor under clause 15.2 the amount paid to any litigation insurance funder or other funder agreed or approved by the Administrator under clause 15.3." SST was prohibited from enforcing its charge during the currency of the DOCA14. It was to surrender its security15 on the basis that it would receive payment of $350,000 in priority to unsecured creditors but after payment, inter alia, of the fees and expenses incurred in the conduct of the proceedings and the administrator's fees and expenses. Its entitlement to the further sum of $300,000 was to rank equally with other creditors. Payment of the balance secured by the charge was to be deferred until after payment of other creditors. Jeffery & Katauskas obtained orders for security for costs of the trial, as to $47,750 by order of Rolfe J on 15 December 2000 and as to $140,000 by order of the trial judge (McDougall J) made on 6 October 2004, the day after commencement of what became a 19 day trial. An order for security in the amount of $50,000 in favour of another defendant, Allianz Australia Insurance 13 DOCA, cl 15.6. 14 DOCA, cl 20.1. 15 DOCA, cl 20.2. Crennan Ltd ("Allianz Australia") had been made by McClellan J on 15 November 2002. During the trial, on 11 October 2004, the trial judge dismissed an application by Allianz Australia for further security. The action was dismissed16. The shortfall between the costs of Jeffery & Katauskas of the trial and the security provided was in excess of $450,000. Rickard Constructions appealed against the judgment dismissing its action, but the appeal was dismissed17. Orders for security for the costs of the appeal were also made. Meanwhile, the successful defendants in the proceedings sought from the trial judge, McDougall J, orders for the costs of the trial against SST and its directors under UCPR, r 42.3(2)(c). Allianz Australia also sought an order for costs against Mr Rickard. The applications were dismissed18. It is necessary to say something further about the arrangements made between SST and Rickard Constructions for the prosecution of the primary proceedings against Jeffery & Katauskas and others. It is convenient to do that by the reference to findings made by the primary judge on the applications by the successful defendants for costs orders against SST and its directors (and by Allianz Australia against Mr Rickard). The primary judge found that the principal of $930,000 referred to in the deed of charge, which SST and Rickard Constructions made soon after commencement of the primary proceedings, included advances made to the date of that deed and "a balance unexplained by any advances"19. There was evidence that the sum actually advanced by SST to Rickard Constructions was $300,000, rather than the $200,000 loan recited20. If 16 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2004) 220 ALR 17 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2006] NSWCA 18 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 19 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 20 The submissions for Jeffery & Katauskas in this Court proceeded on the basis, said to be favourable to the respondents, that the larger figure was correct. Crennan the advance was $300,000 there remained an unexplained balance of $630,000. This unexplained balance was characterised before his Honour as a "success fee"21. This characterisation reflected an arrangement that the balance of the "unadvanced principal" would be paid to SST by Rickard Constructions in the event that it was successful in the litigation. His Honour made a number of other findings of fact, not in issue on the appeals. They included the following22: 1. Mr Rickard and SST funded the proceedings until 31 March 2001 on the basis and subject to the monetary limits set out in cl 15.2 of the DOCA. SST funded the litigation thereafter. 2. Mr Rickard gave instructions on behalf of Rickard Constructions in relation to the litigation and there was no evidence that SST was involved in the decision-making in that regard. Nor was there any evidence that Mr Rickard was trammelled in giving instructions by any agreement or arrangement between him or Rickard Constructions and SST. SST could have brought the litigation to an end at any time after 31 March 2001 by ceasing to provide further funding. The decisions of the Court of Appeal Jeffery & Katauskas and the other successful defendants sought leave to appeal to the Court of Appeal of New South Wales. That Court granted leave to appeal but dismissed the appeals and also a motion by the successful defendants for an order that SST and its directors pay the costs of the appeal brought by Rickard Constructions against the substantive decision of the primary judge23. 21 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 22 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 23 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA Crennan As refined before the Court of Appeal, the submission on behalf of Jeffery & Katauskas and the other defendants in the primary proceedings was that24: "an abuse of process would occur where a non-party with a commercial interest in the fruits of the litigation funds proceedings by an insolvent plaintiff without providing the plaintiff with an indemnity against cost orders in favour of successful defendants". Gyles AJA, with whom Giles and Tobias JJA agreed, rejected this On 19 June 2009, this Court granted one of the defendants, Jeffery & Katauskas, special leave to appeal against the orders of the Court of Appeal dismissing its appeal, and against the orders dismissing its motion seeking orders in respect of the costs of the appeal against the substantive decision of the primary judge. The notices of appeal subsequently filed named "SST Consulting Pty Ltd" as first respondent in the first of these matters and fourth respondent in the second. Leave was sought, and is granted, so that the relevant respondent in each matter is SST. Allianz Australia was a respondent in the second matter but took no active part in the proceedings in this Court. The issue on the appeals In this Court the grounds of appeal identified the abuse of process which it is said ought to have been found by the Court of Appeal thus: "by funding the proceedings and/or by assisting the assignment and prosecution of invalidly assigned bare causes of action in negligence and under s 82 of the Trade Practices Act by an insolvent plaintiff without provision to the plaintiff of an indemnity against a costs order in favour of successful defendants." As presented, however, the argument on the appeals did not rely upon any alleged invalidity of the assignment to Rickard Constructions of the causes of action in respect of the pavement design and construction. The abuse of process was reformulated by reference to two elements: The success fee arrangement. 24 [2008] NSWCA 283 at [44]. 25 [2008] NSWCA 283 at [67]. Crennan The failure by SST and its directors to provide Rickard Constructions with an indemnity for the costs of any successful defendants. The questions for determination The power of the Supreme Court of New South Wales to make an order for costs against SST and its directors depended upon the answers to two questions: 1. Whether they had committed an abuse of process of the Court. 2. Whether some or all of the costs of Jeffery & Katauskas in the proceedings had been occasioned by that abuse of process. The Rules of Court The precursor of UCPR, r 42.3 was to be found in Pt 52, r 4 and later in Pt 52A, r 4 of the Supreme Court Rules 1970 (NSW). They contained provisions almost identical in terms to UCPR, r 42.3. There is a dispensing power in respect of the UCPR. Section 14 of the CP Act provides: "In relation to particular civil proceedings, the court may, by order, dispense with any requirement of rules of court if satisfied that it is appropriate to do so in the circumstances of the case." This Court raised with counsel for Jeffery & Katauskas whether the general power given by s 14 of the CP Act could not have been engaged in this case. Counsel's response made it clear that the case advanced was based entirely on UCPR, r 42.3(2)(c). It is no doubt arguable that the reference to "any requirement of rules of court" in s 14 limits its application to rules imposing some duty on parties and does not extend it to a rule imposing limitations on the power of the court to order costs. The parties did not pursue the matter in these appeals. They fall to be decided on the construction and application of UCPR, The rule-making powers conferred by the Supreme Court Act 1970 (NSW) and by the CP Act, authorised the making of rules which may limit the powers Crennan conferred by those Acts to award costs26. The purpose of Pt 52A, r 4 was the same as its precursor, Pt 52, r 4, which was introduced by amendment to the Supreme Court Rules in 199327. That purpose was "to restrict the power of the Court in making a costs order against a person who is not a party"28. It applies also to UCPR, r 42. As was said in Wentworth v Wentworth29, the effect of the amendment was "to abolish several traditional categories of jurisdiction to order costs against non-parties" which had been discussed by this Court in Knight v FP Special Assets Ltd30. Abuse of process The history of sanctions for abuse of process dates back to Anglo-Saxon times when the focus was largely on false accusations31 and the sanctions included loss of the accuser's tongue. By the time of Edward I, there was provision made by the Statute of Champerty for remedies against "Conspirators, Inventors and Maintenors of false Quarrels, and Partakers thereof, and Brokers of Debates"32. It seems that combination was not necessary to the action33. Champerty, maintenance and barratry also featured prominently as early species of abuse of process34. 26 Wentworth v Wentworth (2000) 52 NSWLR 602 at 607-608 [12] per Fitzgerald JA; see also Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 183-184 per Mason CJ and Deane J, 205 per Gaudron J. 27 Supreme Court Rules (Amendment No 274) 1993 (NSW). 28 New South Wales Government Gazette, No 65, 25 June 1993 at 3296; and see Wentworth v Wentworth (2000) 52 NSWLR 602 at 635-636 [162] per Heydon JA. 29 (2000) 52 NSWLR 602 at 635-636 [162] per Heydon JA. 30 (1992) 174 CLR 178 at 182-193 per Mason CJ and Deane J, 205 per Gaudron J. 31 Winfield, The History of Conspiracy and Abuse of Legal Procedure, (1921) at 4. 32 33 Ed I Stat 3. 33 Winfield, The History of Conspiracy and Abuse of Legal Procedure, (1921) at 60. 34 Winfield, The History of Conspiracy and Abuse of Legal Procedure, (1921) at 131. Crennan The common law offences and torts of maintenance and champerty were abolished in the United Kingdom in 196735 and in New South Wales in 199536. The New South Wales legislation expressly provides37 that the Act "does not affect any rule of law as to the cases in which a contract is to be treated as contrary to public policy or as otherwise illegal, whether the contract was made before, or is made after, the commencement of this Act". And the abolition of the offences and torts did not preclude the possibility that non-party funding of legal actions for reward or otherwise might give rise to an abuse of process. But to acknowledge that possibility is not to hold non-party funding of a litigant for reward to be an abuse of the process of the court. That proposition could not stand with the decision of this Court in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd38. An early statement of the power of any court to prevent abuse of its processes is found in an 1841 case, Cocker v Tempest39: "The power of each Court over its own process is unlimited; it is a power incident to all Courts, inferior as well as superior; were it not so, the Court would be obliged to sit still and see its own process abused for the purpose of injustice." That statement foreshadowed the contemporary approach in the United Kingdom40 and Australia41 which takes no narrow view of what can constitute 35 Criminal Law Act 1967 (UK), ss 13, 14. 36 Maintenance and Champerty Abolition Act 1993 (NSW) which came into force on 12 May 1995 and was later renamed the Maintenance, Champerty and Barratry Abolition Act 1993 (NSW). See also Abolition of Obsolete Offences Act 1969 (Vic), s 4(2); Statutes Amendment and Repeal (Public Offences) Act 1992 (SA), 37 Maintenance, Champerty and Barratry Abolition Act 1993, s 6. 38 (2006) 229 CLR 386; [2006] HCA 41. 39 (1841) 7 M & W 502 at 503-504 per Alderson B [151 ER 864 at 865]. 40 For example, in the United Kingdom, Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536; Bhamjee v Forsdick (Practice Note) [2004] 1 WLR 88 at 92-93 [11]-[15] and cases cited therein. Crennan "abuse of process". Nevertheless, certain categories of conduct attracting the intervention of the courts emerged in the 19th and 20th centuries and included42: proceedings which involve a deception on the court, or are fictitious or constitute a mere sham; proceedings where the process of the court is not being fairly or honestly used but is employed for some ulterior or improper purpose or in an improper way; proceedings which are manifestly groundless or without foundation or which serve no useful purpose; (d) multiple or successive proceedings which cause or are likely to cause improper vexation or oppression." The term "abuse of process", as used in Australia today, is not limited by the categories mentioned above or those which constitute the tort. It has been said repeatedly in the judgments of this Court that the categories of abuse of process are not closed43. In Walton v Gardiner44 the majority adopted the observation in Hunter v Chief Constable of the West Midlands Police45 that courts have an inherent power to prevent misuse of their procedures in a way which, although not inconsistent with the literal application of procedural rules of court, would nevertheless be "manifestly unfair to a party to litigation … or would otherwise bring the administration of justice into disrepute among right- thinking people". This does not mean that abuse of process is a term at large or 41 Hamilton v Oades (1989) 166 CLR 486 at 502; [1989] HCA 21; Jago v District Court of New South Wales (1989) 168 CLR 23 at 25-26; [1989] HCA 46; Walton v Gardiner (1993) 177 CLR 378 at 393-394; [1993] HCA 77; Rogers v The Queen (1994) 181 CLR 251 at 255, 286-287; [1994] HCA 42; Ridgeway v The Queen (1995) 184 CLR 19 at 74-75; [1995] HCA 66; Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at 265 [9], 266-267 [14]; [2006] HCA 27. 42 Jacob, "The Inherent Jurisdiction of the Court", (1970) 23 Current Legal Problems 43 See n 41, above. 44 (1993) 177 CLR 378 at 393. 45 [1982] AC 529 at 536. Crennan without meaning46. Nor does it mean that any conduct of a party or non-party in relation to judicial proceedings is an abuse of process if it can be characterised as in some sense unfair to a party. It is clear, however, that abuse of process extends to proceedings that are "seriously and unfairly burdensome, prejudicial or damaging" or "productive of serious and unjustified trouble and harassment"47. In Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd48, Gummow, Hayne and Crennan JJ (with whom Gleeson CJ agreed in this respect49) declined to formulate an overarching rule of public policy that would, in effect, bar the prosecution of an action involving an agreement to provide money to a party to institute or prosecute the litigation in return for a share of the proceeds of the litigation. Nor would they accept that there should be a rule which would bar the prosecution of some actions according to whether the agreement met some standards relating to the degree of control or the amount of the reward the funder might receive under the agreement50. It was not shown that apprehensions that the funder might improperly interfere with the conduct of the proceedings could not sufficiently be addressed by "existing doctrines of abuse of process and other procedural and substantive elements of the court's processes"51. It follows that an agreement by a non-party, for reward, to pay or contribute to the costs of a party in instituting and conducting proceedings is not, of itself, an abuse of the court's processes. Does the failure by a funder to provide an indemnity for the costs awarded against the party funded constitute an abuse of process? The question is not answered for present purposes by reference to cases, such as those cited by the appellant, in which orders have been made that non-party funders, who have not indemnified the funded party, pay the successful party's costs. Those cases were 46 Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247; [1988] HCA 32; Ridgeway v The Queen (1995) 184 CLR 19 at 75 per Gaudron J; Batistatos (2006) 226 CLR 256 at 267 [14]. 47 Batistatos (2006) 226 CLR 256 at 267 [14] (footnotes omitted). 48 (2006) 229 CLR 386 at 434 [91]. 49 (2006) 229 CLR 386 at 407 [1]. 50 (2006) 229 CLR 386 at 434 [91]. 51 (2006) 229 CLR 386 at 435 [93]. Crennan decided in the exercise of the general discretion of the court to award costs against non-parties which was discussed in Knight v FP Special Assets Ltd. Mason CJ and Deane J recognised a general category of case in which such "That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non- party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made." In a decision relying in part on what was said in Knight, the Privy Council in Dymocks Franchise Systems (NSW) Pty Ltd v Todd held that53: "generally speaking, where a non-party promotes and funds proceedings by an insolvent company solely or substantially for his own financial benefit, he should be liable for the costs if his claim or defence or appeal fails." These authorities and them did not require characterisation of non-party funding arrangements, which attracted the discretion to award costs against the non-party, as an abuse of process. The requirement for that characterisation in this case is imposed by UCPR, r 42.3. the cases cited It was submitted for Jeffery & Katauskas that prima facie a funding arrangement involving a "success fee" where the funder fails to provide an indemnity will constitute an abuse of process. A number of authorities were cited which did not give definitive support to the submission. They began with 19th century cases in which an impoverished nominal party was used by a non- party to bring proceedings in the non-party's interests. The cases all concerned the power of the courts to order that the "real party" pay the costs54. The only 52 (1992) 174 CLR 178 at 192-193. 53 [2004] 1 WLR 2807 at 2817 [29]; [2005] 4 All ER 195 at 206. 54 Doe Dem Masters v Gray (1830) 10 B & C 615 [109 ER 579]; R v Greene (1843) 4 QB 646 [114 ER 1042]; Hutchinson v Greenwood (1854) 4 El & Bl 324 [119 ER Crennan direct reference to the characterisation of such arrangements as an abuse of process appeared in Hutchinson v Greenwood, a case involving a nominal defendant. Lord Campbell CJ said55: "The principle is that the individuals who order an appearance to be entered in ejectment, in the names of those not really defending the suit, abuse our process, and that, as they substantially are the suitors, we have jurisdiction to make them pay the costs." Wightman J agreed. Bowen LJ also made reference to the position of the nominal plaintiff in Cowell v Taylor56 when he qualified the common law rule that poverty is no bar to a litigant referring to "an exception introduced in order to prevent abuse, that if an insolvent sues as nominal plaintiff for the benefit of somebody else, he must give security"57. He referred to the nominal plaintiff as "a mere shadow". Observations by Megarry VC in Pearson v Naydler58 and by Ipp JA in Project 28 Pty Ltd v Barr59, invoked on behalf of Jeffery & Katauskas, were to like effect. In Green v CGU Insurance Ltd, a case concerned with security for costs, "Although litigation funding is not against public policy, the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and in my opinion, courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails." (citation omitted) This does not amount to a characterisation of such arrangements or the absence of an indemnity for costs as an abuse of process. 55 (1854) 4 El & Bl 324 at 326 [119 ER 125 at 126]. 56 (1885) 31 Ch D 34. 57 (1885) 31 Ch D 34 at 38. 58 [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533. 59 [2005] NSWCA 240 at [115]. 60 (2008) 67 ACSR 105 at 120-121 [51]. Crennan Whether there was an abuse of process The aspects of the funding arrangement between SST and Rickard Constructions, said to constitute the abuse of process in this case, had no bearing on the merits of the proceedings, nor the way in which those proceedings were conducted. Rickard Constructions was not in any sense a nominal plaintiff and it was not suggested that the proceedings were conducted by or in the name of that company for any improper purpose. Rather, the abuse of process was identified in the combination of two circumstances: a plaintiff unable to meet an adverse costs order; the provision of that plaintiff with funds to litigate by a person who would not be liable to meet an adverse costs order. These circumstances were said to render the prosecution of the proceedings "seriously and unfairly burdensome, prejudicial or damaging"61. Particular emphasis was given to the notion of "unfairness". Two points may be made at once. Neither was controverted. First, the bare fact that a plaintiff may be unable (even will be unable) to meet an adverse costs order does not mean that further prosecution of proceedings by that plaintiff is an abuse of process. Secondly, the fact that, absent a finding of abuse of process or contempt of court, the funder of the litigation would not be liable to meet an adverse costs order is a product of the applicable rules of court (UCPR r 42.3) cutting down the otherwise general power given to the courts in New South Wales by s 98(1) of the CP Act. The difficulties presented for a defendant by a plaintiff's impecuniosity have led to the identification of an inherent jurisdiction62, and the development of rules of court and statutory powers, under which a plaintiff may be ordered to provide security for costs. In general, the bare fact of impecuniosity is not of itself reason to order a plaintiff who is a natural person to provide security for 61 Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247; Ridgeway v The Queen (1995) 184 CLR 19 at 75; Batistatos (2006) 226 CLR 62 See, for example, J H Billington Ltd v Billington [1907] 2 KB 106 at 109. Crennan costs63. But a corporate plaintiff may be ordered to provide security where it is shown that it will not be able to meet the defendant's costs64. It is neither necessary nor appropriate to consider the extent to which those two general propositions should be elaborated or qualified. Neither is intended as a comprehensive or definitive statement of the applicable principles. What is presently important is that by providing for security for costs65 the UCPR (and in this case the applicable provisions of the Corporations Act 2001 (Cth)66) deal directly with at least some part of the first element of what was said to be the relevant unfairness. The reference to "some part" of the first element should be explained. Because security for costs will not always be ordered against an impecunious plaintiff, it cannot be said that a defendant, faced with proceedings by such a plaintiff, can always obtain the protection of security for costs. There are cases where successful defence of an action will come at a considerable cost to the defendant. But the extent to which that possibility exists and the extent to which there is a resultant "unfairness" to a defendant is a product of the provisions and principles that govern security for costs. Neither the existence of the possibility nor its scope suggest that there is some more general rule that to prosecute proceedings without reasonable prospects of being able to meet an adverse costs order is an abuse of process. Whether or to what extent the possibility that a defendant will succeed in defending proceedings only at a cost not recoverable from the plaintiff suggests some need to revisit the provisions or the principles governing security for costs is a large question. It was not the subject of argument and is a question about which no view is expressed. The second element of the unfairness alleged in this case was that the proceedings would not have been prosecuted to trial without their being funded by a non-party on terms giving possible profit to that non-party, but without it assuming one of the central risks ordinarily attending litigation: the risk of having to meet an adverse costs order. Here the plaintiff was a corporation and security for costs could be ordered. Orders were made in the sequence described earlier in these reasons, and the defendants' inability to recover the shortfall in 63 See, for example, Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82 at 101-109 [80]-[101] per Heydon JA. 64 Corporations Act 2001 (Cth), s 1335(1). 65 UCPR, r 42.21. 66 Corporations Act, s 1335(1). Crennan costs from the plaintiff was a product of the ways in which the applicable provisions and principles governing security for costs had been engaged. Although the defendants in the proceedings pointed to the fact that the provision of funds permitted the proceedings to be prosecuted to trial when otherwise they would not, the defendants' ability to recover the costs of the successful defence of that litigation from the plaintiff was neither greater nor less than it would have been had there been no funding arrangement. Capacity to recover from the plaintiff depended upon the amount of security that was provided. And, as has already been noted, the capacity of the defendants to recover costs from the non- party was governed by the UCPR. In deciding whether there has been an abuse of process, proper weight must be given to the fact that under the UCPR the general rule is that costs are not to be ordered against a non-party. In deciding whether prosecution of the proceedings was in this case an abuse of process, it is, of course, not sufficient to point to the fact that, but for the engagement of r 42.3(2)(c) of the UCPR, costs cannot be recovered from a non-party. Nor is it sufficient to point to the fact that the plaintiff is and was impecunious. This last fact was relevant to the provision of security for costs. Once it is recognised first, that the UCPR precludes ordering costs against a non-party save in exceptional cases, and secondly, that the plaintiff's inability to pay costs goes only to questions of security, the appellant's contention that prosecution of the proceedings constituted an abuse of process can be seen to depend upon one of two propositions: a general proposition condemning the funding for reward of another's litigation; a proposition that despite the provisions and principles governing security for costs and the UCPR's general inhibition against ordering costs against non-parties, those who fund another's litigation for reward must agree to put the party who is funded in a position to meet any adverse costs order. As discussed earlier in these reasons, a general proposition of the kind first mentioned is not consistent with what was decided in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd. The second, more particular, proposition should not be accepted. The proposition that those who fund another's litigation must put the party funded in a position to meet any adverse costs order is too broad a proposition to be accepted. As stated, the proposition would apply to shareholders who support a company's claim, relatives who support an individual plaintiff's claim and Crennan banks who extend overdraft accommodation to a corporate plaintiff. But not only is the proposition too broad, it has a more fundamental difficulty. It has no doctrinal root. It seeks to take general principles about abuse of process (and in particular the notion of "unfairness"), fasten upon a particular characteristic of the funding arrangement now in question, and describe the consequence of that arrangement as "unfair" to the defendant because provisions and principles about security for costs have been engaged in the case in a particular way and the rules will not permit the ordering of costs against the funder unless the principles of abuse of process are engaged. For the reasons stated earlier, that proposition is circular. And to point to the particular feature of a funding arrangement that the funder is to receive a benefit in the form of a success fee or otherwise, adds nothing to the proposition that would break that circularity of reasoning or otherwise support the conclusion that there is an abuse of process. Conclusion SST was not shown to have committed an abuse of process of the court. The power of the Supreme Court of New South Wales to order costs against SST or its directors was not enlivened. The appeals should be dismissed with costs. HEYDON J. The circumstances are fully set out in the majority judgment. The essential facts On 5 September 2000 Rickard Constructions Pty Ltd ("the plaintiff") commenced proceedings against various defendants. The appellant was the second of these defendants ("the defendant"). Monies were advanced by SST Consulting Pty Ltd ("the funder") for the purpose, inter alia, of prosecuting those proceedings. Those advances, or some of them, took place before 13 October 2000, when a Deed of Charge was granted by the plaintiff to the funder to secure those and other advances67. At all material times, the plaintiff was unable to meet any order which might be made that it pay the defendant's costs of the proceedings68. The funder had not given any indemnity to the plaintiff against any liability that the plaintiff might come to have to the defendant under an order of that kind. The financial arrangements between the plaintiff and the funder appeared to be neither fully nor clearly evidenced before the primary judge. On one view of the murk, the funder had advanced $300,000 on terms that if the litigation succeeded it would be repaid that sum, together with a further $630,000 "success fee", to use the defendant's mild expression. On another view, the advance was only $200,000 and the success fee $730,000. The defendant succeeded in some aspects of its applications for security for costs but not in others: in total it obtained security for $187,750. The plaintiff failed at the trial. The plaintiff was ordered to pay the defendant's costs of the trial, which totalled $653,470.71. That left the defendant out-of-pocket, once the security had been realised, in an amount of over $450,000. The defendant sought an order pursuant to r 42.3(2)(c) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") that the funder pay it that shortfall69. Two errors in the Court of Appeal Mr D F Jackson QC, who appeared for the defendant in this Court, contended that there were two key errors in the reasoning of the Court of Appeal. It is desirable to deal with them at the outset. Is abuse of process limited to the actual conduct of the proceedings? The primary judge proceeded on the basis that r 42.3(2)(c) only applied to an abuse of process arising by reason of some aspect of the actual conduct of the 67 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 68 See [74]-[75] below. 69 See [1] above. proceedings. Thus he saw it as "dispositive" to inquire: "how can there be an abuse of process if there were no relevant abuse in the conduct of the proceedings?" He took as examples of relevant abuse "lack of restraint, excess in the conduct of the litigation, unscrupulous manipulation, or careless or irresponsible actions."70 The Court of Appeal shared that view. It said that the primary judge was "correct in holding that an actual abuse of process must have been committed in order for an order for costs to be made against the third party."71 Mr Jackson QC submitted that it was incorrect to hold that the defendant's application must fail merely because there had been no relevant abuse of process in the actual conduct of the proceedings. That submission is sound. No doubt r 42.3(2)(c) extends to particular instances of abuse in the actual conduct of proceedings. But it goes further. Rule 42.3(2)(c) provides that the court has power to make an order in relation to not only part of a party's costs of the proceedings, but the whole of them. As the primary judge said himself: "An abuse of process may infect the whole of proceedings, or some part only."72 The rule assumes that the institution of the proceedings and the totality of their conduct thereafter can be an abuse of process, and that "abuse of process" is not limited to particular instances of lack of restraint, excess in the conduct of the litigation, unscrupulous manipulation, or careless or irresponsible actions. Grants of power to a court are not to be construed as subject to a limitation not appearing in the words of the grant73. The funder contended that this issue only arose because, it said, the defendant had conducted its case more narrowly in the courts below. In oral argument the funder seemed to retreat from this contention. Is that contention correct? Although it is unnecessary to decide the issue, its correctness seems very doubtful. But whether or not that contention is correct, Mr Jackson QC's submission remains sound. The funder also argued that the defendant had exaggerated the distinction which it attributed to the primary judge and the Court of Appeal. To the contrary, Mr Jackson QC's construction of the reasons for judgment is correct. The error is significant because the unduly narrow approach to the construction of r 42.3(2)(c) that it explicitly betokens appears implicitly to underlie the Court of Appeal's conclusion in other ways too. 70 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 743 [94]. See also 743-744 [96] and 744 [100]. The courts below considered but rejected various allegations by one of the other persons sued by the plaintiff of particular abuses in the conduct of proceedings. These were not relied on in this Court. 71 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 72 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 73 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 205; [1992] HCA 28. Is the Campbells case fatal? The Court of Appeal stated that even if the widest view of r 42.3(2)(c) were taken, the decision of this Court in Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd74 "makes success on an argument that litigation funding with or without control constitutes an abuse of process extremely difficult if not impossible"75. That statement overlooks two things. First, the statement overlooks distinctions between particular types of litigation funding. The arrangements under which the litigation funding in the Campbells case was made available included a contractual promise by the funder to indemnify the plaintiffs against adverse costs orders; there was no reason to doubt the funder's capacity to meet the indemnity76. Further, it was not shown that the plaintiffs were insolvent. This Court in the Campbells case was not directing its attention to cases like the present, where there was no indemnity for costs should the defendant succeed, and where the plaintiff was at all times incapable of paying the defendant's costs. Secondly, the Court of Appeal's statement overlooks the express recognition by the majority in the Campbells case that misconduct by litigation funders could be met by "existing doctrines of abuse of process"77. One of those existing doctrines is found in r 42.3(2)(c). How, then, did the Court of Appeal reach its conclusion that the decision in the Campbells case made success in an argument about litigation funding in this case extremely difficult or impossible? The Court of Appeal relied on three matters. First, the Court of Appeal pointed to certain passages in the Campbells case78. But these do not support the conclusion it reached. Secondly, the Court of Appeal said that the indemnity in the Campbells case "is not referred to by any of the judges who considered the matter" in this Court79. That statement is incorrect. As Mr Jackson QC pointed out, Gummow, 74 (2006) 229 CLR 386; [2006] HCA 41. 75 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 76 Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at 216 [52], 219 [70], 235 [135] and 237 [148]. 77 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 435 [93] per Gummow, Hayne and Crennan JJ. 78 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 432-436 [83]-[95] and 451-452 [146]-[148]. 79 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA Hayne and Crennan JJ, in summarising the offer from the funder to the potential plaintiffs, said "if costs were awarded against the retailer, [the funder] would bear those costs."80 Gleeson CJ agreed with that part of their judgment81. Kirby J referred to the description given by Mason P in the Court of Appeal to the terms of funding which included reference to the costs indemnity and asserted that it was not possible to understand that Court's conclusions "without a full appreciation of the entire project, as described by Mason P". Kirby J incorporated that description in his own reasons, and said that the facts required the most careful examination82. In the dissenting judgment the indemnity was quoted in full83 and discussed84. It would have been truer for the Court of Appeal in this case to have said that the indemnity was not referred to by the majority judges as a factor central to their conclusion that the proceedings did not involve an abuse of process merely by reason of the litigation funding arrangement. It does not follow from the silence of the majority judges in that respect that the absence of an indemnity may not be significant in assessing whether there is an abuse of process in another type of case. Thirdly, the Court of Appeal in this case said of the indemnity in the Campbells case: "such an undertaking or indemnity is for the protection of the plaintiff participants not for the benefit of the defendants."85 But the protection which the indemnity gave to each plaintiff in the Campbells case as a matter of practical substance enured for the benefit of the defendants. The funder eventually accepted that the Campbells case did not produce victory for it; said that it did not enlist it in its argument; and said that what was said about it in the Court of Appeal was surplusage, was not "central" to its reasoning, was "inconclusive", was beside the point and did not matter. 80 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 413 81 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 407 82 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 439 83 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 477 84 Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 489 85 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA However, it does matter in this different sense: the Court of Appeal's error is more than a passing one, and this suggests that it had at least some influence on the erroneous conclusion to which that Court came. That remains true despite the funder's desire, by taking a blue pencil to the Campbells passages, to create a new judgment it feels it can defend in place of the actual judgment which it abjures in part. The funder advanced another flawed submission about the Campbells case: that it "contains no support for the [defendant's] contention." That is not correct. Although the present controversy did not arise in the Campbells case, Mason P (with whom Sheller and Hodgson JJA agreed) said: "Defendants … may obtain special costs orders against funders if the proceedings fail."86 The "special costs orders against funders" can only be orders under r 42.3(2)(c): Mason P is thus assuming that the stance of the defendant in these proceedings on the construction of that rule, even in cases where there is an indemnity by the funder, is correct. Entitlement to costs Some systems of law, including some common law systems, deal with questions of costs in civil proceedings differently from our own. But in our system, an "important principle" of justice between the parties in civil litigation has been stated by McHugh J in Oshlack v Richmond River Council as follows87: "subject to certain limited exceptions, a successful party in litigation is entitled to an award of costs in its favour. The principle is grounded in reasons of fairness and policy … The primary purpose of an award of costs is to indemnify the successful party. If the litigation had not been brought, or defended, by the unsuccessful party the successful party would not have incurred the expense which it did. As between the parties, fairness dictates that the unsuccessful party typically bears the liability for the costs of the unsuccessful litigation." He continued88: "As a matter of policy, one beneficial by-product of this compensatory purpose may well be to instil in a party contemplating 86 Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at 230 87 (1998) 193 CLR 72 at 97 [67]; [1998] HCA 11 (footnote omitted). McHugh J was dissenting, but not on this point. 88 Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [68]. commencing, or defending, litigation a sober realisation of the potential financial expense involved. Large scale disregard of the principle of the usual order as to costs would inevitably lead to an increase in litigation with an increased, and often unnecessary, burden on the scarce resources of the publicly funded system of justice." Abuse of process: general principles In Hunter v Chief Constable of the West Midlands Police89 Lord Diplock said that the court had inherent power "to prevent misuse of its procedure in a way which, although not inconsistent with the literal application of its procedural rules, would nevertheless be manifestly unfair to a party to litigation before it, or would otherwise bring the administration of justice into disrepute among right-thinking people." That statement has been approved in this Court by Mason CJ, Deane and Dawson JJ as stating the law "correctly"90. They also said that abuse of process arises in "all those categories of cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness."91 They quoted certain statements by Richardson J pointing to two aspects of the public interest. One was that the "public interest in the due administration of justice necessarily extends to ensuring that the Court's processes are used fairly"92. The second aspect of the public interest lay "in the maintenance of public confidence in the administration of justice. It is contrary to the public interest to allow that confidence to be eroded by a concern that the Court's processes may lend themselves to oppression and injustice."93 "Abuse of 89 [1982] AC 529 at 536. 90 Walton v Gardiner (1993) 177 CLR 378 at 393; [1993] HCA 77. See also Rogers v The Queen (1994) 181 CLR 251 at 256; [1994] HCA 42; D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1 at 28 [74]; [2005] HCA 12; Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 264 [6]; [2006] HCA 27. The last named case was one which the funder went to considerable lengths to distinguish as concerned, not with third party costs orders, but with a stay of proceedings from the outset. That there are differences between the two procedures does not negate the significance of the width given by the discussion in cases like Batistatos's case to the words "abuse of process". 91 Walton v Gardiner (1993) 177 CLR 378 at 393. 92 Moevao v Department of Labour [1980] 1 NZLR 464 at 481. 93 Moevao v Department of Labour [1980] 1 NZLR 464 at 481. This passage was quoted in Walton v Gardiner (1993) 177 CLR 378 at 394 and Jago v District Court (NSW) (1989) 168 CLR 23 at 30; [1989] HCA 46. See also Williams v Spautz (1992) 174 CLR 509 at 520; [1992] HCA 34. process" extends to proceedings that are "seriously and unfairly burdensome, prejudicial or damaging"94 or "productive of serious and unjustified trouble and harassment."95 There is a "general principle empowering a court to dismiss or stay proceedings which are … an abuse of process and the rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case."96 A stay or dismissal prevents abuse of process: "[t]he counterpart of a court's power to prevent its processes being abused is its power to protect the integrity of those processes once set in motion."97 The power of a court to deal with abuse of its process is one aspect of its more general power to control its own process. The exercise of the power to deal with abuse of process "is not restricted to defined and closed categories, but may be exercised as and when the administration of justice demands."98 Further, the power to control abuse of process by granting a permanent stay "should be seen as a power which is exercisable if the administration of justice so demands, and not one the exercise of which depends on any nice distinction between notions of unfairness or injustice, on the one hand, and abuse of process, on the other hand."99 There is no reason why any nice distinction of that kind should be drawn in relation to r 42.3(2)(c) either. 94 Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247 per Deane J; [1988] HCA 32, approved in Hamilton v Oades (1989) 166 CLR 486 at 502; [1989] HCA 21; Ridgeway v The Queen (1995) 184 CLR 19 at 75; [1995] HCA 66; and Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 267 [14]. 95 Oceanic Sun Line Special Shipping Company Inc v Fay (1988) 165 CLR 197 at 247 per Deane J, approved in Hamilton v Oades (1989) 166 CLR 486 at 502; Ridgeway v The Queen (1995) 184 CLR 19 at 75 and Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 267 [14]. 96 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 554 per Mason CJ, Deane, Dawson and Gaudron JJ; [1990] HCA 55. 97 CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 391 per Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ; [1997] HCA 33 (emphasis in original). 98 Jago v District Court of New South Wales (1989) 168 CLR 23 at 74 per Gaudron J, approved in Walton v Gardiner (1993) 177 CLR 378 at 394 per Mason CJ, Deane 99 Jago v District Court of New South Wales (1989) 168 CLR 23 at 74 per Gaudron J, approved in Walton v Gardiner (1993) 177 CLR 378 at 394. Words like "unfair", "unjust", "oppressive", "seriously and unfairly burdensome, prejudicial or damaging", "productive of serious and unjustified trouble and harassment" and "bring the administration of justice into disrepute among right-thinking people" are not words of exact meaning. Nor are the words "abuse of process" themselves. That notion is not "very precise"100. Hence it is not surprising that, as Lord Diplock said, "[t]he circumstances in which abuse of process can arise are very varied"101. "What amounts to abuse of court process is insusceptible of a formulation comprising closed categories. Development continues."102 Abuse of process: funding litigation without indemnifying the plaintiff It is convenient to turn from these general statements to examine the language used in the authorities in relation to the liability of non-parties who have supplied funds to plaintiffs for the conduct of litigation from which they hope to profit, but who have not indemnified the plaintiffs against their potential liability to pay the defendants' costs. Although only one of those authorities relates directly to r 42.3(2)(c), they all have some relevance to its construction. Non-party costs cases. There are cases in, or emanating from, the New Zealand courts which discuss the making of costs orders against non-party funders. In Arklow Investments Ltd v MacLean Fisher J, sitting in the High Court of New Zealand, said103: "[I]t is wrong to allow someone to fund litigation in the hope of gaining a benefit without a corresponding risk that that person will share in the costs of the proceedings if they ultimately fail." In Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) the Privy Council quoted that passage with approval104. The Privy Council also said, after describing instances where a costs order would not be made against a non-party, that where105: 100 Ridgeway v The Queen (1995) 184 CLR 19 at 75 per Gaudron J. See also Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 101 Hunter v Chief Constable of the West Midlands Police [1982] AC 529 at 536. 102 Batistatos v Roads and Traffic Authority of New South Wales (2006) 226 CLR 256 at 265 [9] per Gleeson CJ, Gummow, Hayne and Crennan JJ. 103 Unreported, 19 May 2000 at [21] (emphasis added). 104 [2005] 1 NZLR 145 at 157 [26]. 105 [2005] 1 NZLR 145 at 156 [25] (3) (emphasis added). "the non-party not merely funds the proceedings but … is to benefit from them, justice will ordinarily require that, if the proceedings fail, he will pay the successful party's costs. The non-party in these cases is not so much facilitating access to justice by the party funded as himself gaining access to justice for his own purposes. He himself is 'the real party' to the litigation". The defendant submitted that to be a "real party" a funder did not need to exercise exclusive control over the litigation, and that it sufficed if it had a "role as one of the actors in the scene in important and critical respects."106 The Privy Council also approved107 the following statement of Tompkins J in Carborundum Abrasives Ltd v Bank of New Zealand (No 2)108: "Where proceedings are initiated by and controlled by a person who, although not a party to the proceedings, has a direct personal financial interest in their result, such as a receiver or manager appointed by a secured creditor, a substantial unsecured creditor or a substantial shareholder, it would rarely be just for such a person pursuing his own interests, to be able to do so with no risk to himself should the proceedings fail or be discontinued." These references to wrongness and injustice suggest that the judges who used this language had abuse of process in mind. Security for costs cases. Then there are cases in which the funding of litigation by non-parties has stimulated consideration of the justice of making security for costs orders. Mr Jackson QC placed particular stress on Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd109. In relation to an application for security for costs by a defendant against a liquidator plaintiff in litigation financed by a litigation funder, Hodgson JA said: "a court should be readier to order security for costs where the non-party who stands to benefit from the proceedings is not a person interested in having rights vindicated, as would be a shareholder or creditor of a plaintiff corporation, but rather is a person whose interest is solely to make a commercial profit from funding the litigation. Although litigation 106 Citing Kebaro Pty Ltd v Saunders [2003] FCAFC 5 at [113] per Beaumont, 107 [2005] 1 NZLR 145 at 156 [25] (4). 108 [1992] 3 NZLR 757 at 765 (emphasis added). 109 (2008) 67 ACSR 105 at 120-121 [51]. funding is not against public policy …[110], the court system is primarily there to enable rights to be vindicated rather than commercial profits to be made; and … courts should be particularly concerned that persons whose involvement in litigation is purely for commercial profit should not avoid responsibility for costs if the litigation fails." The funder in this appeal attempted to distinguish this passage as being concerned with the species of which Green's case is an example – a "trafficking" case. The funder stressed the word "solely" in the first sentence. But neither that word, nor the word "purely" in the second sentence, should restrict Hodgson JA's reasoning to a point short of cases like the present. Here the funder was hazarding $300,000 (or $200,000) to gain the return of that money plus a $630,000 (or $730,000) success fee. The funder was not a professional litigation funder or a "trafficker", but the extent to which it was a creditor of the plaintiff before the litigation was not something upon which the plaintiff's evidence cast much light111. Hodgson JA's reasoning is equally applicable to cases like the present, where a non-trafficker funding an impecunious plaintiff is substantially or primarily motivated by a desire for commercial profit but has not assumed responsibility for the costs which the impecunious plaintiff is ordered to pay when the litigation fails. If the court system is "primarily there" to enable rights to be vindicated rather than to enable commercial profits to be made, it follows that a non-plaintiff who funds the plaintiff with the primary purpose of making commercial profits out of the litigation is behaving extraneously to the proper function of litigation, at least where the funder avoids responsibility for the costs of the defendant. It is behaviour outside the purpose which the process is supplied to serve. It is not making a legitimate use of that process. Rather it abuses that process. The extent to which Hodgson JA's thinking is adverse to the funder's stance in this case may be appreciated from the submission which his reasoning rejected. The submission was112: "the circumstance that someone other than a plaintiff who is a natural person stands to gain, along with the plaintiff, from success in the proceedings was not an important factor which could justify an order for security … [T]his was particularly so where this other entity had indemnified the plaintiff against costs ordered to be paid to the defendant, 110 Hodgson JA referred to Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd (2006) 229 CLR 386 at 433-436 [87]-[95]. 111 See [46] above. 112 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 120 [49]. and thus could be made liable to pay them at the instance of the defendant." Hodgson JA's rejection of that submission reveals a concern that a non-party who funded litigation purely for commercial profit, should not avoid responsibility for costs if that litigation fails, even where the litigation funder had indemnified the plaintiff against costs ordered to be paid to the defendant. Hence he ordered security for costs. That order operated as a supplement, so to speak, to the indemnity. Had there been no indemnity, the case for an order for security for costs would have been much stronger. Hodgson JA referred to Fiduciary Ltd v Morningstar Research Pty Ltd113. Austin J there said, in ordering two corporate plaintiffs to provide security for costs where they were backed by a litigation funder not shown to be incapable of providing security: "[I]t is fair for the courts to proceed on a basis which reflects the proposition that those who seek to benefit from litigation should bear the risks and burdens that the process entails." Austin J relied on, and Hodgson JA referred to114, an observation by Young CJ in Eq in Chartspike Pty Ltd (in liq) v Chahoud115. It was part of the Chief Judge's reasons for making an order that the plaintiff provide security for costs to the effect that where an insolvent corporate plaintiff had contracted to have litigation funded by a third party in return for that third party receiving a share of the verdict. He said: "it is appropriate that the third party bear part of the risk." Young CJ in Eq's evident contemplation was that the third party funder would arrange for the security to be provided. He made the order even though the funding agreement had given indemnities to the plaintiff against adverse costs orders. Similarly, the primary judge in Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd, Einstein J, spoke of "the disinclination of the Court to permit a win-win situation for an outside party: that is to say to permit a lender who stands behind the [plaintiff] awaiting to benefit from a success in the proceedings to avoid having a fair responsibility for the costs of the [plaintiff] in the event that the proceedings fail"116. 113 (2004) 208 ALR 564 at 584 [83]. 114 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 109 [7] (9). 115 [2001] NSWSC 585 at [5]. 116 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 26 ACLC 323 at 330 [26]. Orders that non-party funder indemnify plaintiff against costs payable to defendant. There are cases stating that security for costs may be ordered with a view to preventing "abuse" of process if an insolvent person sues as nominal plaintiff for the benefit of someone else117. Mr Jackson QC pointed to Project 28 Pty Ltd v Barr118, where the New South Wales Court of Appeal used those cases to go further. Hodgson JA, Ipp JA and Campbell AJA ordered a stay of proceedings until a litigation funder, which was in control of the proceedings, provided the plaintiffs in the proceedings with an indemnity against any costs they might be obliged to pay the defendant. This was not in terms an order that the plaintiffs provide security for costs, but the Court of Appeal relied on the security for costs cases based on the need to avoid abuse of process119. The Court of Appeal saw a significant difference between an order that the plaintiff provide security and the order it actually made: an order that the plaintiff provide security would not ensure the existence of the "normal checks and balances that the system would impose on [the funder], were it to be potentially liable for [the plaintiff's] costs"120. By "normal checks and balances" the Court meant121: "the discipline imposed by the knowledge that an unsuccessful party is likely to be ordered to pay the costs of the successful party. This rule provides a bridle against lack of restraint in taking points that are hardly arguable, or not arguable at all, and against other possible excesses in the conduct of litigation. It provides a measure of protection to those involved in litigation, and to the Court itself, against unscrupulous attempts to manipulate the system. It provides an incentive to act carefully in a measured way." Thus the Court of Appeal appeared to act on the view that the proceedings would have been an abuse of process unless it made the specific order that it did. In reaching that view, it relied on the analogy of cases in which abuse of process is avoided by ordering impecunious nominal plaintiffs to provide security for costs. It also relied on the potential hardship to the defendant of being faced with litigation conducted by a funder not faced with the discipline of being liable to 117 Eg Cowell v Taylor (1885) 31 Ch D 34 at 38 per Bowen LJ; Pearson v Naydler [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533 per Sir Robert 118 [2005] NSWCA 240 at [113]-[116]. 119 Cowell v Taylor (1885) 31 Ch D 34 at 38; Pearson v Naydler [1977] 1 WLR 899 at 902; [1977] 3 All ER 531 at 533. 120 Project 28 Pty Ltd v Barr [2005] NSWCA 240 at [118]. 121 Project 28 Pty Ltd v Barr [2005] NSWCA 240 at [112]. pay the costs of the plaintiff whom it controlled if the proceedings failed. That case of course differed from the present. In that case a stay was ordered at the outset pending the grant of an indemnity, in this case costs are sought at the end because there is no indemnity. In that case the funder controlled the proceedings in a full sense, in this case it had less power. But, as Mr Jackson QC submitted, the case does illustrate the proposition that there can be an abuse of process where a funder supports proceedings, seeks to gain from them, but provides no indemnity to the plaintiff in relation to costs. Authority on r 42.3(2)(c). The above decisions are not decisions specifically on the construction of r 42.3(2)(c). However, that topic was examined by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd122, a decision considered by the primary judge in these proceedings123, and mentioned by the Court of Appeal124. Einstein J pointed to English authority exemplifying the following reasoning125. The principle that in the ordinary way costs follow the event is "of fundamental importance in deterring plaintiffs from bringing and defendants from defending actions they [are] likely to lose."126 The court is entitled to protect its own procedures against abuse of process127. It can be an abuse of process justifying a stay for a third party to give financial support to one side in litigation without accepting liability for the costs of the other side if the supported party were to lose128. However, the better course in relation to that abuse of process is to let the action proceed to trial and then consider the powers of the court to make a third party costs order under the relevant statutory 122 [2004] NSWSC 695. 123 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 740 [75], 741 [81] and 742 [90]-[91]. 124 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd [2008] NSWCA 125 Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695 at [82]-[85]. 126 Roache v News Group Newspapers Ltd [1992] TLR 551 at 551 quoted by Kennedy LJ in Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 127 Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440, as explained in Abraham v Thompson [1997] 4 All ER 362 at 375. 128 Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440. power129. Underlying the reasoning in these English cases is an assumption that, even though the statutory power to make a costs order against a third party may be wider in England than under r 42.3, there is power to make a costs order in relation to that form of abuse of process which is involved in a non-party funding one party without making provision for that party's liability in costs to the other party if the funded party loses. Einstein J also pointed to the fact that in Canada maintenance has been described as an abuse of process "because a person who should be taking the risk of the lawsuit is not explicitly recognizing that it is liable for the successful party's costs, and, to the extent that it seeks to avoid that result, it seeks to avoid bringing itself within the framework of the discipline of costs."130 In the light of those authorities, the authorities in this Court on abuse of process in general131 and the principles stated by McHugh J in Oshlack v Richmond River Council as to costs132, Einstein J concluded that it was arguable that Pt 52A r 4(5)(d) of the Supreme Court Rules 1970 (NSW) (the precursor to r 42.3(2)(c)) could be construed so as to empower the making of costs orders against the funders of impecunious plaintiffs incapable of meeting a costs order made against them in favour of the defendant133. The funder's arguments in summary Some of the cases just discussed are not directly in point. Some contain no more than dicta. In many of them, the problem under debate was being viewed from a different perspective than that which the present case requires. But they offer a measure of support for the defendant's stand. It is necessary now, therefore, to consider the many arguments advanced by the funder against the defendant. They may be grouped as follows. First, there are arguments designed to support the conclusion that the appeal should be dismissed because insufficient factual findings have been made 129 As was done in McFarlane v E E Caledonia Ltd (No 2) [1995] 1 WLR 366 at 373: see Condliffe v Hislop [1996] 1 WLR 753 at 762; [1996] 1 All ER 431 at 440. 130 155569 Canada Ltd v 248524 Alberta Ltd (1999) 176 DLR (4th) 479 at 501 [50] per Veit J, sitting in the Alberta Court of Queen's Bench. 131 See above at [56]-[58]. 132 (1998) 193 CLR 72 at 97 [67]: see above at [55]. 133 Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695 at [156]. or a factual foundation for the defendant's contentions is lacking134. Secondly, there are arguments designed to reduce the contention of the defendant to absurdity135. Thirdly, there are arguments that the defendant's stance cuts across the existing principles of, and the balance of interests struck by, the current law in a manner not open to a court, but only to a legislature136. Fourthly, the funder denied that it had the necessary "control" over the litigation which it said was necessary if persons in its position were to be subject to r 42.3(2)(c)137. Fifthly, the funder said138 that r 42.3(2)(c) was to be construed as being narrower than the law as stated in Knight v FP Special Assets Ltd139. Sixthly, the funder said that recognise "contingent" or the defendant was "retrospective" abuses of process140. Seventhly, the funder contended that the defendant's argument involved circular reasoning141. These seven groups of arguments were directed to the proposition that r 42.3(2)(c) gave the court no power to make a costs order in favour of the defendant against the funder. But even if it did, the funder said, eighthly, that no order should be made as a matter of discretion142. Ninthly, the funder queried the quantum to be ordered143. incorrectly seeking First argument – deficiency in factual findings or absence of factual foundation Insolvency of the plaintiff? The funder submitted that the defendant's contention was that the liability of the funder depended on the insolvency of the plaintiff. The funder submitted that this contention raised various questions. When was the plaintiff's inability to pay the defendant's costs to be judged? Was it when the proceedings began? Was it when the funding arrangement was made? Was it when the time to pay costs arrived? Did the plaintiff's inability to 134 See below at [73]-[79]. 135 See below at [80]-[89]. 136 See below at [90]-[94]. 137 See below at [95]-[99]. 138 See below at [100]-[103]. 139 (1992) 174 CLR 178, particularly at 192-193. 140 See below at [104]-[106]. 141 See below at [107]-[108]. 142 See below at [115]-[118]. 143 See below at [119]. pay costs have to be total or only partial? If partial inability sufficed, to what degree? How much knowledge or foresight on the part of the funder of the plaintiff's inability to pay costs was required? The funder submitted: "These questions are of significance, given that the [defendant] seeks costs orders for the whole of the proceedings even though there is no evidence that the plaintiff was insolvent at the time the proceedings were commenced." Indeed the funder contended that there was no finding by the primary judge that at any relevant time the plaintiff could have been unable to meet the defendant's costs. The factual submissions in the last two sentences are of the type usually described as "bold". Even if they are formally correct, which they are not, they are wrong in substance. They did not deal with six matters. The first matter is that they contradict a correct assumption of insolvency underlying the funder's argument in another respect144. The second matter is that the Deed of Company Arrangement entered into on 22 December 2000 records that on 19 October 2000 an administrator was appointed to the plaintiff by resolution of its directors pursuant to s 436A of the Corporations Law: the directors could only have so resolved if in their opinion the plaintiff was "insolvent" or was "likely to become insolvent at some future time" (s 436A(1)(a)). The third matter is that on 15 December 2000 Rolfe J in the Supreme Court of New South Wales ordered the plaintiff to provide security for the defendant's costs pursuant to s 1335 of the Corporations Law. That order depended on there being reason to believe that the plaintiff would be unlikely to pay the defendant's costs if the claim made in the litigation failed, and Rolfe J was satisfied on that score. Indeed he said that the defendant's financial position was "parlous". The fourth matter is that the primary judge ordered the plaintiff to provide further security for the defendant's costs pursuant to s 1335 on 6 October 2004, the day after the trial commenced. That order, too, depended on there being reason to believe that the plaintiff would be unable to pay the defendant's costs if the claim failed. The fifth matter is that on 27 July 2007 a liquidator was appointed to the plaintiff. The sixth matter is that the funder admitted that the plaintiff was insolvent throughout the proceedings before the Court of Appeal (which began on 7 December 2006). In the end, however, the funder admitted in oral argument that the plaintiff had become insolvent at "some stage" – "certainly at the stage that matters for the [defendant's] capacity to be paid". It follows that while in some cases counsel may wish to argue that there is no power to make an order against a funder under r 42.3(2)(c) because the plaintiff funded was able to pay the costs at some stage but not another, there is no room for that argument here. Whatever the findings of the primary judge, it is plain from the evidence that the plaintiff had no capacity to pay the defendant's 144 See below at [81]-[85]. costs at any relevant time. Indeed, without the support of the funder, it had no capacity to pay its own costs. These incapacities were total: it never actually paid any of the defendant's costs, since all the defendant recovered comprised monies derived from the security for costs arranged by the funder, and there is no reason to suppose that the plaintiff had any capacity to pay any of the defendant's costs had it been called on to do so at an earlier time. Finally, the arrangements into which the funder entered made it plain that it knew of the plaintiff's incapacity to pay the defendant's costs at all relevant times. It follows that the questions which the funder raises in relation to the insolvency integer of the test advocated by the defendant do not arise, and there is no factual obscurity in that respect preventing acceptance of the defendant's arguments. Indemnity from funder. It was central to the defendant's case before the primary judge, and the Court of Appeal, that the funder had not provided any indemnity to the plaintiff against any liability it might have for the defendant's costs. The funder submitted in this Court that it had in fact provided an indemnity. It put the matter in two ways – one in writing, another orally. First, it relied on cl 15.2 of the Deed of Company Arrangement145. However, that clause does not create any indemnity. Even if it did, it expired on the day when $150,000 had been provided or on 31 March 2001 (whichever first occurred), and the plaintiff had been advised by its solicitors to the knowledge of the funder that the Deed did not include any "trial factor", since no trial would be held by 31 March 2001. The figure of $150,000 would be consumed well before the time for payment by the plaintiff of any of the defendant's costs. As Mr Jackson QC said, to speak of cl 15.2 giving an indemnity "seems a matter of some enthusiasm …, rather than, with respect, reality." The second way by which the funder alleged it had provided an indemnity depended on cl 15.7 of the Deed146. It dealt with the Fund composed of amounts received by the plaintiff by way of settlement or verdict in the proceedings. The plaintiff was only obliged to pay into the Fund the net amount actually received after deducting "the amount of any cost order made against" the plaintiff. Hence, said the funder, the "success fee" would only become available after payment in full of any successful opposing party's costs. This misses the defendant's essential point. That point was that if the plaintiff lost the proceedings and the defendant obtained an order that the plaintiff pay its costs, there was no indemnity to cover those costs from the funder. The point is not answered by relying on cl 15.7, which could only operate if the plaintiff won the proceedings but incidentally suffered some adverse costs order. In the end the funder conceded this. 145 See above at [7]. 146 See above at [8]. Second argument – reduction to absurdity The funder's contribution to security for costs. The funder submitted that it had a substantial exposure to the plaintiff's liability for costs payable to the defendant because it had funded the security which the Supreme Court had ordered the plaintiff to provide. The funder said that the defendant "must therefore contend for the extreme proposition that anything less than total responsibility for [the plaintiff's] costs gives rise to a liability for third party costs". This submission does not reduce the defendant's argument to absurdity. It is not necessary in this appeal to decide whether a funder failing to accept total responsibility for the costs which a plaintiff might be ordered to pay to a defendant is liable to a third party costs order: for in this appeal the plaintiff was not in a position to take up any responsibility for the costs the primary judge ordered it to pay the defendant, and the only issue is whether the liability of the funder is limited to the relatively small fraction it assumed when it procured security or whether the liability of the funder extends to the whole. Anomalous benefit in direct costs order. The funder submitted: "[I]f, in the present case, [the funder] had indemnified [the plaintiff] against [the plaintiff's] liability to the [defendant], the benefit of that indemnity would have flowed to the general body of [the plaintiff's] creditors. It would be surprising if [the funder's] failure to give a (full) indemnity resulted in the [defendant] being put in the far better position of receiving the benefit of a direct costs order against [the funder]." The assumption as to the plaintiff's insolvency which underlies this submission is inconsistent with the funder's claim, discussed earlier147, that there was no evidence of its insolvency when it commenced the proceedings, and no finding of its inability to meet the defendant's costs. It is the present assumption which is correct, not the claim rejected above. To that virtue in the submission may be added another. It casts light on what is meant by the word "indemnity" in the defendant's contention that an abuse of process takes place where a non-party with a commercial interest in the fruits of litigation funds proceedings brought by an insolvent plaintiff without giving an indemnity against costs orders in favour of a successful defendant. By "indemnity" must be meant "indemnity which is practically effective to protect the defendant". Indemnity means not merely "personal promise by the funder to the plaintiff", but also, if necessary, "promise by the funder to the plaintiff which is effective against other creditors of the plaintiff". 147 Above at [74]-[75]. If the insolvent plaintiff has no creditors or prospective creditors other than the funder, and, contingently on defeat in the proceedings, the defendant, then a personal promise by the funder to the plaintiff to indemnify the plaintiff against the plaintiff's costs liability to the defendant is likely to be an effective protection of the defendant's position. Any attempt by the funder to enforce its debts (whether they arose out of the advancing of the funds employed to conduct the litigation, or otherwise) would nullify the funder's promise to indemnify, because it would precipitate the bankruptcy or liquidation of the plaintiff, and in that collapse the defendant would not be fully paid. In a practical sense, the indemnity would be effective to protect the defendant's position. The funder, by its promise to indemnify the plaintiff, agreed by implication to do all things necessary to enable the plaintiff to have the benefit of the contract148, and one of those things was to behave in a way which would give effective precedence to the funder's rights in relation to its advances to the plaintiff over the funder's duty to the plaintiff in relation to the defendant's costs. If, on the other hand, the insolvent plaintiff has creditors other than the funder and the defendant, an indemnity will not be effective to protect the defendant's position unless some additional technique is employed, such as an undertaking to the court by the plaintiff to assign the benefit of the indemnity to the defendant or to hold it and its proceeds in trust for the defendant149. No doubt matters would become more complicated if at the time the funder supplied the plaintiff with funds to conduct the litigation the plaintiff was solvent, but the plaintiff later became insolvent as the litigation proceeded. A question would arise whether what was not originally an abuse of process from this point of view might become one. That question can be postponed to a case in which its resolution is vital. In this case the argument of the funder which is currently under consideration fails: the funder's failure to give what the argument calls "a (full) indemnity" means that since the funder has not given a practically effective indemnity, its support of the litigation involves participation in an abuse of process and gives the court power to make a r 42.3(2)(c) costs order. Funding defendants. The funder submitted that if the defendant's submission is correct in cases where a funder supports a plaintiff against a defendant, a question arises whether it is also correct where a funder supports a defendant against a plaintiff. A distinction may arguably be available between 148 Butt v M'Donald (1896) 7 QLJ 68 at 70-71. 149 As suggested by Barrett J in The Australian Derivatives Exchange Ltd v Doubell [2008] NSWSC 1174 at [24]-[25]. cases where impecunious plaintiffs are funded by funders, and cases where impecunious defendants are funded by funders, on the basis that in the latter category the plaintiff must always take a chance on the solvency of the defendant. And it is strongly arguable that r 42.3(2)(c) is not limited to abuse of process by the funding of a plaintiff, and nor is the common law150. In either event there is no absurdity. But the question need not be answered in this case. Wide impact on third party funders. The funder submitted that: "[the funder] stood to benefit in the sense that success in the litigation would have permitted [the plaintiff to repay], at least in part, … the funds it had previously lent to the plaintiff; and such repayment would have received a degree of preference over the plaintiff's ordinary unsecured creditors … The [defendant's] case must be that such a benefit is sufficient to make [the funder] amenable to a third party cost order." Hence, said the funder, anyone – financier, friend, relative, lawyer, trade union – who lent money to a litigant or supplied, or procured the supply of, legal services without charge, in order to allow the litigant to conduct litigation would become amenable to a third party costs order if repayment depended on the result of the litigation. This wide impact on third party lenders would not only affect them, but would make it harder for impecunious persons to litigate their claims. This submission overlooks the fact that the defendant's case does not rest on the capacity of the funder to be repaid monies previously lent if the litigation succeeds; it rests in part on the "success fee" – the fact that in return for advances of $300,000 (or $200,000), success in the proceedings would bring it not only repayment of that sum, but payment of a further $630,000 (or $730,000). That feature of the case distinguishes it sharply from the circumstances of lenders who advance money at no more than commercial rates of interest and lawyers who agree to provide their services on the basis that they will be paid normal professional fees if they win (or normal fees plus a relatively small "uplift"151) and nothing if they lose. To charge a fee of two or three times the amount lent is not a practice of non-commercial litigation lenders in general, or of banks in particular. And any lawyer who did so would be struck off. The funder more correctly submitted at a later stage that it is not necessary in this case to consider the operation of r 42.3(2)(c) in relation to shareholders 150 Hearsey v Pechell (1839) 5 Bing (NC) 466 at 468-469 [132 ER 1179 at 1179-1180] (where Tindal CJ noted authority to the effect that "a master was compelled to pay costs for his servant, whom he had put forward as a Defendant instead of himself"). 151 For New South Wales, see Legal Profession Act 2004, ss 323-328. supporting their companies; creditors, particularly bankers, supporting debtors; insurers supporting insured persons; partners; relatives and friends supporting a plaintiff; solicitors and their clients; trade unions and their members; and supporters of a cause aiding those who wish to vindicate that cause. Assessment of the meaning of an expression as general as "abuse of process" in r 42.3(2)(c), in this as in other respects, is a task to be undertaken from case to case in the light of specific circumstances and precisely argued concrete controversies arising from those circumstances. Third argument – cutting across existing principles and balances of interest The funder submitted that the interest of defendants in enforcing costs orders in their favour was not the only relevant interest to be considered. There was also the interest of plaintiffs in obtaining access to justice. The funder submitted that: "the law [does not] have any general policy of restricting a litigant from conducting litigation unless the litigant will be in a position to pay the other party's costs. Indeed, the general principle is that poverty is no bar to a litigant. The rules relating to security for costs are an apparent exception to this, but only to a very limited degree. Security is not available against a defendant, and even against a plaintiff it is available only in restricted circumstances. There are thus many situations where the successful party may be left with a costs order which is of no, or limited, practical value. The law tolerates this because of the need to balance a party's interest in recovering its costs (if successful) against other interests, particularly the overriding principle of open access to justice." The funder submitted that the defendant's contention would overturn this balance of interests. The funder submitted that the defendant's submission would outflank a supposed immunity of some plaintiffs from giving security. And it submitted that the defendant's submission would enable those who had failed to apply for security, or failed to get it because of their own conduct (for example, their delay), or failed to get enough security to cover the eventual costs, to escape those consequences of their failure by seeking a third party costs order against the funder, exposing the funder to potentially unlimited liability. The funder said that the defendant was impermissibly asking the court "to adopt an essentially legislative task: to introduce a new set of rules which would cut across existing principles and re-strike the balance". Finally, the funder said that it was for the legislature, not the court, to control any problem which arose from persons funding litigation in return for an excessive share of the spoils of victory or which arose from successful defendants not being able to recover costs from impecunious plaintiffs supported by funders. The first problem in these submissions is that they exaggerate the supposed immunity of impecunious litigants. Ever since the Joint Stock Companies Act 1856 (Imp), s 69, impecunious companies have had no immunity from the obligation to give security for costs: see now r 42.21(1)(d) of the UCPR and s 1335 of the Corporations Act 2001 (Cth). Persons resident outside the jurisdiction, impecunious or not, have been subjected to orders for security for costs since the late 18th century152: see now r 42.21(1)(a). Orders for security may be made against plaintiffs, whether natural persons or not, who have, with intent to deceive, failed to state or misstated their addresses in the originating process (r 42.21(1)(b)). Orders for security may be made against a plaintiff, natural person or not, who has, with a view to avoiding the consequences of the proceedings, changed his, her or its address after the proceedings have commenced (r 42.21(1)(c)). And r 42.21(1)(e) provides that where it appears to the court that a person is suing, not for his, her or its own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, the court may order the plaintiff to give security for costs. Mere impecuniosity is not an absolute barrier to ordering security for costs against a natural person, although it is a factor against doing so153. In particular, there are instances additional to those listed in r 42.21(1)(a)-(c) and (e) where it can be done. They include the vexatious conduct of litigation by a plaintiff who had failed to set aside an earlier judgment154, instances where the plaintiff has dissipated assets and/or not paid previous costs orders (particularly costs orders in favour of the defendant)155, instances where the plaintiff brings a weak case to harass the defendant156 and instances where the plaintiff brings a case for the benefit of others, but not solely for that benefit157. Hence the supposed "general principle … that poverty is no bar to a litigant" is a severely qualified one. So is the "overriding principle of open access to justice" (or, more realistically, at least access to the courts). 152 DSQ Property Co Ltd v Lotus Cars Ltd [1987] 1 WLR 127 at 129. 153 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 108 [7] (6). 154 Weger v Boola Boola Petroleum and Natural Gas Co (No Liability) [1923] VLR 570; Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). 155 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). 156 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). 157 Green (as liquidator of Arimco Mining Pty Ltd) v CGU Insurance Ltd (2008) 67 ACSR 105 at 119 [45] (3). The second problem in the funder's submissions is that they characterise litigation brought by a plaintiff which is funded by another person as a standard case of attempted enforcement of an impecunious plaintiff's rights. The plaintiff here is not a natural person; and its action is very far from having been maintained solely to enforce the plaintiff's rights, for the action would not have lasted long if the funder had not been enticed into providing the funds needed for its continuance by ensuring that it would make a large profit in the event of success. The third problem in the funder's submissions is that they assume that the facility of obtaining security for costs is the sufficient and sole remedy for this type of abuse. But it is not a sufficient remedy, and that suggests that it cannot be the sole remedy. Defendants are frequently in a dilemma. If they seek security speedily they are accused of applying too early. If they do not seek it speedily they may obtain security only for the future, not the past, and may not even obtain security for the future. Judges are reluctant to order security for costs in large amounts, perhaps fearing that this will simply prolong the litigation in an ill-disciplined way. "The amount awarded as security is no more than an estimate of the future costs and it is not reasonable to expect a defendant to make further applications to the court at every stage when it appears that costs are escalating so as to render the amount of security previously awarded insufficient."158 The lack of judicial generosity is one of several signs that applications seeking security for costs have little attraction for judges. In part that is because they are interlocutory, satellite and hypothetical. Their interlocutory character is repellent to courts eager to deal with trials but hard pressed to do so. They are satellite in character because they often involve spending significant time examining complex questions of solvency which are irrelevant to the main proceedings. They are hypothetical in character because their point depends on the hypothesis, which may or may not be realised, that the defendant will succeed, so that through them stalks the fear in many instances that they are a waste of time. They generate additional costs of their own. To treat security for costs as the exclusive remedy for what would otherwise be an abuse of process encourages this type of litigation which, even if it is thought necessary, is an evil; and it prevents a defendant who judges that the litigation funder will be solvent and good for a third party costs order at the end of the proceedings from adopting the prudent, more expeditious and more economical course of waiting until that time to utilise that remedy, should it become necessary to do so. "The availability of an order for security for costs at an earlier stage of the litigation would, in many situations, be a strong argument for 158 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 190-191 per Mason CJ and refusing to exercise a discretion to order costs against a non-party, but discretion must be distinguished from jurisdiction."159 The defendant is not asking the Court to work a legislative revolution. It is simply asking the Court to conduct the judicial task of construing the words "abuse of process" in r 42.3(2)(c). Fourth argument – control The funder submitted that no third party costs order had been made in any Australian case against a third party funder save where that funder had an "element of control" over the litigation. It was on that basis that it distinguished Knight v FP Special Assets Ltd160. By "control" the funder meant "the giving of instructions", "the considering of advice", "guiding", and taking "an active part in the conduct of the litigation." The funder said the mere capacity to "turn off the tap of money" was not enough. If an "element of control" is in any sense necessary to a finding of abuse, the funder's submissions gave that expression too narrow a meaning. Even if "abuse of process" as used in r 42.3(2)(c) in its application to litigation funding requires that the funder have an "element of control" over the litigation, that element is found here. In this regard the funder relied heavily on the primary judge's finding161 that the funder was not involved in the decision-making processes leading to the giving of instructions in relation to the litigation. That was a finding which does not sit well with the primary judge's earlier finding that one of the directors and shareholders of the funder, Mr Peter Sweeney, was present in court for most of the 19 day hearing162. That gentleman's ordinary life must have been dreary and dull indeed if time hung so heavily on his hands that he found it desirable to while away those 19 days attending litigation – admittedly litigation as full of arresting human drama as a building case about a pavement – over which neither he, nor the other controllers, nor the funder, had sufficient influence to be 159 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 191 per Mason CJ and 160 (1992) 174 CLR 178. 161 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 162 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR involved in decisions about instructions. But as the defendant did not challenge the primary judge's finding in this respect, it must be accepted. However, that, at all the primary judge did find times after 31 March 2001, the funder "had the ability to bring the litigation to an effective halt by withdrawing, or ceasing its continuation."163 The defendant rightly pointed to the trial judge's further findings that Mr Peter Sweeney "was involved in numerous conferences relating to the proceedings and was provided with copies of advices from time to time given to [the plaintiff] and of relevant correspondence. [He] was … the person who made decisions, and gave instructions, in relation to matters of funding."164 to provide further, funding for There is no reason to suppose that it is necessary to establish any control beyond the level of participation indicated. The vice in the conduct lies in the role of the funder in creating the injustice which flows from a defendant persuading a court that no breach of the law has taken place, but having to pay large legal costs because the plaintiff who is ordered to pay them cannot, and the funder who made the injustice possible has not indemnified the plaintiff in that respect. The damage to that defendant's position is causally linked to the conduct of the funder in supplying money; it is not necessary that that causal link take the form of control by the funder of the litigation. Fifth argument – the effect of r 42.3(2)(c) on Knight v FP Special Assets Ltd The funder contended that the purpose of r 42.3 was to codify the power to make third party costs orders and to abolish the power to make third party costs orders in the following "general category of case" recognised in Knight v FP Special Assets Ltd165: "where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made." 163 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 724 at 735 [49]. See also at 736 [51] (4), (7), (8) and (9). 164 Rickard Constructions Pty Ltd v Rickard Hails Moretti Pty Ltd (2006) 66 NSWLR 165 (1992) 174 CLR 178 at 193. The funder submitted that the defendant's proposition in this appeal "is even less stringent than the Knight proposition. Still less, therefore, can the [defendant's] proposition amount to an abuse of process for the purpose of the rule." 166 Underlying the funder's submission are several fallacies. The funder submitted that the common law jurisdiction asserted by the courts to make costs orders against third parties was "carefully circumscribed". That is not so167. It may be accepted that r 42.3 represents an attempt at careful circumscription or codification. It does not follow that the new code circumscribes the court's power to make third party costs orders within limits which are either narrower than what was contemplated in Knight v FP Special Assets Ltd or wider. An area can be carefully circumscribed without that area necessarily being narrow, or narrower than a less carefully circumscribed area. In particular, it does not follow that the expression "abuse of process" in r 42.3(2)(c) was used in a narrow sense. Although the test in Knight v FP Special Assets Ltd was not put in terms of "abuse of process", there are passages in authorities referred to in that case and in what Mason CJ and Deane J said about them168 which suggest that underlying the question of third party costs orders under the general law there are notions of "abuse of process". It follows that the use of the expression "abuse of process" in the rule does not necessarily point to a narrowing of the meaning of that expression, and in particular does not necessarily point to the conclusion that its meaning is narrower than the "general category of case" described in Knight v FP Special Assets Ltd. "Abuse of process" itself is not a particularly precise expression, depending as it can on the operation of indeterminate factors. For that reason the use of that expression may not have been an ideal means by which to define a jurisdiction to order costs. But its want of precision by itself points against narrowness. The crucial question is not what was said in Knight v FP Special Assets Ltd, but what "abuse of process" means in r 42.3(2)(c). In some applications r 42.3(2)(c) could have a narrower result than that which would be obtained by applying the "general category of case" test stated in Knight v FP Special Assets Ltd, with its somewhat general reference to "the interests of justice". In some it 166 The funder referred to Wentworth v Wentworth (2000) 52 NSWLR 602 at 636 [162], a case dealing not with the precursor to r 42.3(2)(c), but the precursor to r 42.3(2)(g). 167 Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 189; Burns Philp & Co Ltd v Bhagat [1993] 1 VR 203 at 217. 168 (1992) 174 CLR 178 at 187 (quoting Mobbs v Vandenbrande (1864) 33 LJQB 177 at 180), 188 (quoting Ram Coomar Coondoo v Chunder Canto Mookerjee (1876) 2 App Cas 186 at 212) and 190. could have a wider result. The "general category of case" test is not in those terms mentioned in r 42.3 and as a discrete test it has been abolished by the rule. It does not follow that what is entailed in "abuse of process" does not restore part of the "general category of case" test, and possibly widen some aspects of it. The expressions used to define the "general category of case" are different from the expression "abuse of process". The content of the expressions is overlapping but not necessarily co-extensive169. In a sub-category of the submissions it advanced in this respect, the funder submitted that the general law jurisdiction to make costs orders against third parties was limited to instances where the third party was engaged in "trafficking in litigation" and where the third party was the "real party". There is no warrant for this submission. Knight v FP Special Assets Ltd is against it. And whatever the general law jurisdiction, there is no reason to suppose that r 42.3(2)(c) is to be read in the limited manner submitted. Sixth argument – "contingent" or "retrospective" abuse of process The funder submitted that r 42.3(2)(c) required an identification of each particular occasion on which a third party committed an abuse of process and of what costs were occasioned by the abuse. Once this happened r 42.3(2)(c) gave the court immediate power to make an award of costs against the third party. The funder submitted that the defendant's argument was that there was "some sort of contingent abuse of process in the event of: (1) the [defendant] successfully defending [the plaintiff's] claim; (2) the [defendant] being awarded costs against [the plaintiff]; and (3) the [plaintiff] being unable to satisfy such an order." The funder submitted that the defendant's argument, so characterised, should not be accepted. "The third party either abuses the process of the Court by its conduct on a particular occasion or it does not. There is no room in the rule for a 'wait and see' approach which would allow conduct of the third party to be judged retrospectively as an 'abuse of process' depending upon later events in the proceedings." The funder submitted that r 42.3(2)(c) did not "enable the court, in the event of a particular outcome of to characterise retrospectively the conduct of [the] third party as an abuse of process." Finally, the funder submitted that Batistatos v Roads and Traffic Authority of New South Wales170 did not support the defendant. the proceedings, In circumstances exemplified by the present proceedings, unlike other types of abuse of process, the entitlement to an order under r 42.3(2)(c) is only 169 See Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 695 at 170 (2006) 226 CLR 256. likely to arise when an order is made against the plaintiff funded that it pay a defendant's costs, and that order is not, or is not likely to be, complied with. The rule contemplates that when the preconditions of its operation are satisfied, a defendant may apply for a third party costs order, and the court will examine the totality of the relevant circumstances at that point. Beyond the need for a costs order in favour of a defendant against a plaintiff, there is no process of judging conduct retrospectively as an abuse of process, and it is a mischaracterisation to call this a "contingent abuse of process". Finally, while it is true that Batistatos v Roads and Traffic Authority of New South Wales171 does not in its actual decision support the defendant, or damage the funder's position, that is because it concerned a stay on the ground of that form of abuse of process to be found in delay. However, the breadth of the language employed affords general support for the defendant172. Seventh argument – circularity The funder submitted that the defendant's reasoning was circular: it started from the fact that r 42.3 precluded the ordering of costs against third parties, it said that that was unfair and an abuse of process, and it said that that abuse was an exception to the general rule of preclusion. There is no circularity. The question is whether funding an impecunious plaintiff in return for a success fee without giving an effective indemnity to the plaintiff against costs, which a court may later order the plaintiff to pay the defendant, constitutes an "abuse of process" within the meaning of r 42.3(2)(c). A court seeking to answer that question must avoid assuming an answer – either that the rule does extend so far, or that it does not. But the parties submitted that the court is entitled to take into account the consequences of concluding either that the rule does extend so far, or that it does not. Thus the funder pointed to possible undesirable results if the rule does extend so far, for example, hardship for funders, a drying up for plaintiffs of funding support, and an outflanking of the security for costs rules. The defendant pointed to possible undesirable results if the rule does not extend so far, for example, injustice to defendants. The process of treating, among other considerations, the factors to which the defendant pointed as outweighing those to which the funder pointed is not, whatever other flaws it may have, to reason in a circle. 171 (2006) 226 CLR 256. 172 See above at [56]-[58]. Conclusion on the funder's seven arguments as to the power conferred by r 42.3(2)(c) Rule 42.3(2)(c) gave power to the primary judge to order the funder to pay to the defendant the difference between the costs ordered against the plaintiff and the money realised from the security provided under orders for security for costs. That is so for the following reasons. The provision by the state of courts in which subjects may conduct litigation, and of rules by which the litigation is to be conducted, is no doubt a central pillar of the rule of law. But a plaintiff who invokes the facility of litigation, even if it fails, is invoking the massive power of the state against the defendant. Unless defendants, by not appearing, are prepared to run a grave risk of letting the case go against them by default, they must comply with demands of the state, through its statutes, its rules of court and its judges, to conduct the litigation in a certain way, to produce for public scrutiny documents and transactions they may wish to keep private, and to attend hearings at which they and their witnesses may be publicly exposed to much captious and false criticism. The compliance of defendants with these state commands, on pain of punishment for contempt, can bring many costs, including the need to pay lawyers a great deal of money. Hence litigation is something capable of causing immense harm unless its use is properly controlled and unless those who institute it and prosecute it are subject to legitimate pressures generating a measure of discrimination. The liability of a plaintiff to pay the defendant's costs if the plaintiff's allegations against the defendant are rejected by the courts is one of the mechanisms for alleviating (though only partially) the harm which the plaintiff has caused the defendant by bringing litigation based on unfounded allegations. That liability is also one of the legitimate pressures generating a measure of discrimination in conducting that litigation. The court's procedure exists primarily to serve the function of enabling rights to be vindicated rather than profits to be made. Campbells Cash and Carry Pty Ltd v Fostif Pty Ltd173 recognised that it was legitimate for third parties having no prior concern with the subject of the litigation to fund that litigation in return for profit, but it dealt only with circumstances where the funder had indemnified the plaintiffs against their liability for costs to defendants in a manner that would be practically effective. Those circumstances do not exist here174. The authorities, scattered and directed to other questions though they 173 (2006) 229 CLR 386. 174 Whether, as the Court of Appeal assumed in Fostif Pty Ltd v Campbells Cash & Carry Pty Ltd (2005) 63 NSWLR 203 at 230 [120] (see [54] above), it is open to a successful defendant to obtain a costs order against a funder even where the funder (Footnote continues on next page) generally are, evince a repugnance for third party litigation funding of the type which leaves defendants at risk of not being able to enforce costs orders in their favour. As a matter of fairness and justice, the successful party to litigation is ordinarily entitled to an order for costs in its favour175. To the extent that that order is not complied with, the successful party will have been treated unfairly and unjustly. It is true that not every unfair and unjust outcome signifies an abuse of process. But the unfair and unjust outcome of these proceedings for the defendant was generated by an abuse of process: the maintaining of litigation a primary purpose of which was the gaining of a very large "success fee" for the funder without any effective indemnity from the funder for the plaintiff's liability to the defendant. The funder's "success fee" was on one view more than double the sum advanced and on another more that treble that sum. If viewed as interest on a loan to support proceedings conducted with proper expedition, it would be extortionate to a degree, beyond the dreams of the greediest usurer. If charged by a lawyer, it would cause that lawyer to be barred from practice. It is an abuse of process, in several senses, for a non-party funder to fund the plaintiff's prosecution of proceedings in which the funder has that kind of financial interest without giving a practically effective indemnity to the plaintiff against its liability to the defendant for costs in the event that the plaintiff loses. It is manifestly and grossly unfair and unjust to the defendant. It is seriously burdensome, prejudicial and damaging to the defendant. It is productive of serious and unjustified trouble and harassment: for it caused the defendant to be vexed by baseless proceedings without being indemnified against the costs of demonstrating their baselessness. It is "unjustifiably oppressive" to the defendant176. If the funder's conduct in this case became an institutionalised practice in the administration of justice, it would be an institutionalised practice by which injustice is constantly and inevitably caused. An institutionalised practice of that kind would bring the administration of justice into disrepute. Bringing the administration of justice into disrepute is a touchstone of abuse of process. The funder was telling the defendant177: has provided an indemnity to the plaintiff can be left for consideration to a case in which the issue arises. 175 See Oshlack v Richmond River Council (1998) 193 CLR 72 at 97 [67]; see [55] above. 176 Rogers v The Queen (1994) 181 CLR 251 at 286 per McHugh J. 177 Hamilton v Al Fayed (No 2) [2003] QB 1175 at 1183 [11]: the language is that of Elizabeth Gloster QC. In the case in which it was advanced, that argument failed; but in that case the funder was to receive nothing but the costs. In this case, what is (Footnote continues on next page) "[Y]ou … have no choice about whether to play this game; we are going to provide the means to start and continue it; if our side wins, you pay us; but if you win we will not pay you." The funder wished to take the chance of financial gain by backing a horse to win without being responsible for paying a component of the sum wagered if the horse lost. The funder wanted to obtain insurance monies without paying a key part of the premium. The funder wanted the palm without much of the dust. A funder who funds litigation instituted by an impecunious plaintiff for the purpose of large personal profit without giving an indemnity to that plaintiff against its liability for the defendant's costs in a manner which will protect the defendant is, in the light of our forensic mores and standards, a funder who commits an abuse of process. It is now necessary to turn to the funder's eighth and ninth arguments in relation to the r 42.3(2)(c) order sought by the defendant: an argument as to discretion and an argument as to quantum. Eighth argument – discretion The funder submitted that even if, contrary to its primary position, there was jurisdiction to make third party costs orders, those orders should not be made as a matter of discretion for the following three reasons. First, the discretion to make a third party costs order should only be exercised "in unusual circumstances". Secondly, it was said, citing Knight v FP Special Assets Ltd178, that if security for costs could be obtained against the plaintiff, that is "generally" a factor against making a costs order against a third party standing behind the plaintiff. Here the defendant was in a position to find out about the funder's role because the Deed of Company Arrangement was lodged with the Australian Securities and Investments Commission and hence was a public document, and the funder's role was made explicit in an application by another defendant for security for costs on 15 November 2002. Indeed the defendant had made a successful application for security for costs on 15 December 2000, and a partially successful one on 6 October 2004. Thirdly, the defendant did not warn the funder or its controllers that third party costs orders could be sought against them. to be paid if "our side" wins is not only the costs of "our side", but money, a large part of which was to go to the funder. 178 (1992) 174 CLR 178 at 191. As to the first submission, the general law did not suggest that third party costs orders should only be made in unusual circumstances. Nor do the terms of As to the second submission, Mason CJ and Deane J in Knight v FP Special Assets Ltd did not say that the availability of security for costs was "generally" a factor against a third party costs order. They did say that that availability "would, in many situations, be a strong argument for refusing to exercise a discretion to order costs against a non-party, but discretion must be distinguished from jurisdiction." As those words suggest, the passage concludes a paragraph rejecting an argument that the availability of security for costs deprived the court of jurisdiction to make third party costs orders. That paragraph described some of the difficulties facing claimants for orders relating to security for costs179. The reasons for judgment did not have to analyse, and did not analyse, which situations would make the argument in question "strong". It is far from clear why what was said should apply under r 42.3(2)(c). There is no reason why the remedies cannot be cumulative, and why a failure to obtain security, in view of the difficulties and unattractive consequences of seeking security, should operate as a strong discretionary factor against a costs order. Further, abuse of process causing financial loss to a victorious defendant is the type of conduct which, once found, is unlikely to be permitted lightly to go without remedy on discretionary grounds. As to the funder's third submission, there is no obligation on a defendant early in the proceedings to warn a plaintiff or the person funding the plaintiff that the defendant may apply for a third party costs order at the end of the proceedings. Ninth argument – quantum of recovery In this case it is appropriate for the whole of the costs shortfall to be paid for by the funder. That is because without the funding provided by the funder the proceedings would probably not have continued beyond a very early point. The funding agreement was entered into only five weeks after the proceedings began. The funder conceded that but for the funding the litigation would probably not have continued from that time. Costs against the directors and shareholders of the funder In view of the fact that the defendant ought to succeed in obtaining a costs order as against the funder, it would ordinarily not be necessary to consider whether one should be made against the directors and shareholders – the 179 See above at [93]. controllers – of the funder, Messrs Peter Sweeney, Paul Sweeney and Denys Truman. The need for the defendant to make an application for that order arose out of the following circumstances. The funder was a $3 company. Each controller owned one share. The funder operated as a de facto partnership between the three controllers. In the three years that ended 30 June 2004, 30 June 2005 and 30 June 2006 the funder had a deficiency of assets in relation to liabilities of $188,291, $916,112 and $864,764 respectively. In each year there were debts owed by the plaintiff to the funder of $791,594, $1,987,469 and $2,167,018 respectively. The financial position of the plaintiff at all material times meant that those debts were not recoverable by the funder180. Hence the accumulated losses each year were much greater to that extent. The defendant submitted that these considerations showed the funder to be insolvent from at least 30 June 2004. The funder and its controllers submitted "that the fact that the financial statements of [the funder] disclose an excess of liabilities over assets is not, without more, probative of (or at least sufficient to prove) [the funder's] insolvency, in accordance with the test for insolvency prescribed by section 95A of the Corporations Act 2001 (Cth)." However that may be, the asset position of the funder is so parlous as to make it necessary to consider the defendant's application for a costs order against the controllers. The primary judge found that while there was no evidence that the controllers would benefit "directly" from any success enjoyed by the plaintiff in the litigation, they had provided the funder with the funds it advanced to or on behalf of the plaintiff. He also found that any recoveries made by the funder from the litigation would have flowed back to the individuals through their loan accounts with the funder. As noted above, the primary judge additionally found that Mr Peter Sweeney spent most of the 19 day trial in court, attended numerous conferences relating to the proceedings, was provided with copies of advices from time to time given to the plaintiff and relevant correspondence, and made decisions and gave instructions on matters of funding181. In short, the controllers provided the money to the funder which it used to fund the plaintiff, they thus ensured that the proceedings would be prosecuted, and they were to receive, in substantial measure, the benefits of the litigation. The interposition of a corporate veil between them and the funder, on which the controllers relied, is in the circumstances no barrier to the making of costs orders against them pursuant to r 42.3(2)(c). The facts suggest that the responsibility for the abuse of process is to be laid primarily at their feet. 180 See [74]-[75] above. 181 See above at [97]-[98]. Costs of appeals The conclusion that third party costs orders should have been made against the funder and Messrs Sweeney, Sweeney and Truman in relation to the trial applies equally to the appeal to the Court of Appeal. Correctly, neither the funder and its controllers nor the defendant submitted otherwise. They should also be made in relation to the costs of the present appeals. Orders The appeals should be allowed with costs and consequential orders should be made.
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Gillard v The Queen [2014] HCA 16 14 May 2014 ORDER Appeal allowed. Set aside the order of the Court of Appeal of the Supreme Court of the Australian Capital Territory made on 18 April 2013 and, in its place, order that: the appeal be allowed in part; the appellant's convictions on counts 13, 14, 16 and 18 of the indictment be quashed; and a new trial on counts 13, 14, 16 and 18 be had. On appeal from the Supreme Court of the Australian Capital Territory Representation T A Game SC with J L Roy for the appellant (instructed by Kamy Saeedi Lawyers) H J Dhanji SC with M A Jones for the respondent (instructed by Director of Public Prosecutions (ACT)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Gillard v The Queen Criminal law – Appeal – Appeal against conviction – Sexual offences – Sexual intercourse without consent – Act of indecency without consent – Whether jury misdirected on mental element of offences – Whether jury misdirected on mental element of offences where statute negates consent. Statutes – Interpretation – Whether prosecution must prove accused had knowledge that consent was caused by Crimes Act 1900 (ACT) s 67(1) circumstance – Whether recklessness as to Crimes Act 1900 (ACT) s 67(1) circumstance sufficient to establish mental element of offence. Words and phrases – "consent", "recklessness". Crimes Act 1900 (ACT), ss 54, 60, 67. FRENCH CJ, CRENNAN, BELL, GAGELER AND KEANE JJ. The appellant was convicted following a trial before Higgins CJ and a jury in the Supreme Court of the Australian Capital Territory of a number of sexual offences under the Crimes Act 1900 (ACT) ("the Crimes Act"). Three of the counts on which he was convicted alleged that the appellant had sexual intercourse with DD, without DD's consent, knowing that DD was not consenting or being reckless as to DD's consent. These counts charged offences under s 92D of the Crimes Act (counts 13, 16 and 18). The appellant was also convicted on one count of committing an act of indecency in the presence of JL, without JL's consent, knowing that JL was not consenting or being reckless as to JL's consent. This count charged an offence under s 92J of the Crimes Act (count 14). The sexual offence provisions of the Crimes Act were renumbered in 20011. Section 92D became s 54(1). Section 92J became s 60(1). In these reasons, the provisions will be referred to by their present numbers in the form in which each provision stood at the date of the renumbering2. The complainants, DD and JL, are sisters. DD was born in May 1981 and JL was born in December 1982. The appellant was a friend of their father, GM. The two men had met while serving in the Army. At material times the appellant was aged in his mid-forties. He had a close relationship with DD, whom he had known since she was a young child. From 1993 until 2000, DD and JL spent some part of each January school holiday staying with the appellant at his Canberra home. The purpose of these visits was to enable DD and JL to see their brother, who was physically disabled and living in a residential care facility in Canberra. The appellant understood that DD and JL had been entrusted to his care during these visits. The indictment charged the appellant with a number of sexual offences against DD which required proof as an element of liability that DD was aged less than 16 years at the date of their commission. DD's consent was not an issue on the trial of these counts. The appellant was convicted on three of these counts and acquitted on the remaining counts. DD's evidence of the dates on which some of the offences occurred was uncertain. One explanation for the differing 1 Crimes Legislation Amendment Act 2001 (ACT), s 43. 2 Section 54(1) was amended by Sched 1 Pt 1.5 of the Justice and Community Safety Legislation Amendment Act 2008 (No 3) (ACT); s 60(1) was amended by s 5 of the Crimes Legislation Amendment Act 2011 (ACT). Crennan Bell verdicts is that the prosecution was unable to prove that the acts charged in counts five to 12 occurred before DD turned 16. The appeal is confined to the appellant's convictions for the four offences that were alleged to have occurred when DD and JL were aged 16 years or more, in which the prosecution was required to prove that sexual intercourse, or the commission of the act of indecency, was without the consent of DD or JL, as the case may be. Section 67(1) of the Crimes Act states circumstances which may negate a complainant's consent to specified sexual offences, including ss 54(1) and 60(1) offences. Relevantly, s 67(1)(h) negates consent to sexual intercourse, or an act of indecency, where that consent is caused by the abuse of a person's position of authority over, or professional or other trust in relation to, the complainant. The appeal is concerned with the relationship between s 67 and the offences created by ss 54(1) and 60(1). The prosecution case on the four counts that are the subject of the appeal was left for the jury's consideration on alternative bases: that DD and JL did not consent to sexual intercourse or the commission of the act of indecency; or that DD's and JL's consent to sexual intercourse or the act of indecency was negated because it was caused by the appellant's abuse of his position of authority over DD and JL. Satisfaction of the mental element of each offence was the subject of directions on both knowledge of non-consent and recklessness as to consent. Section 67(3) provides that if a person knows that the consent of another person has been caused by one of the s 67(1) circumstances, the person is deemed to know that the other person does not consent to the sexual intercourse or the act of indecency. Section 67(3) is silent respecting proof of recklessness as to consent. The particular issue raised by this appeal is whether, in a case in which s 67(1)(h) is engaged to negate consent, the mental element of the offence may be established by proof that the accused was reckless as to the circumstance described in that paragraph. The appellant appealed to the Court of Appeal of the Supreme Court of the Australian Capital Territory (Refshauge, Penfold and North JJ) against his convictions on a number of grounds. Only one ground is relevant to the appeal in this Court. That ground concerned the prosecution's alternative case based on abuse of the appellant's position of authority under s 67(1)(h). It was contended that the prosecution was required to prove that the appellant knew that the complainant's consent had been obtained by the abuse of his position of trust or Crennan Bell authority and that recklessness as to whether her consent had been so obtained would not suffice3. The Court of Appeal rejected the ground, holding that the trial judge had been right to leave the possibility that any consent given by DD to the acts charged in counts 13 to 18 was caused by the appellant's abuse of his position of authority over, or other trust in relation to, DD, or that the appellant was reckless as to whether DD was consenting at all4. On 8 November 2013, Hayne and Gageler JJ granted the appellant special leave to appeal from the order of the Court of Appeal dismissing the appeal against the convictions on counts 13, 14, 16 and 18. The appeal is brought on three grounds. In summary those grounds contend: first, that it was an error to direct the jury that it could convict if it was satisfied that the complainant's consent was caused by the appellant's abuse of his position of authority over the complainant and he was reckless as to that circumstance; second, that where s 67(1)(h) is relied upon to negate consent, the mental element of the offence is knowledge by virtue of s 67(3); and third, that the Court of Appeal erred in holding that consent was only an issue in respect of count 13. For the reasons to be given, the first and third grounds should be upheld and it follows that the appeal must be allowed, the appellant's convictions on counts 13, 14, 16 and 18 set aside, and a new trial had on those counts. The evidence It is sufficient to refer to the evidence of the offences charged in the four counts and an uncharged incident that is said to have occurred after DD turned 16 but before the incident charged in counts 13 and 14. Evidence of the uncharged incident was admitted to put DD's evidence of the incident charged in count 13 in context. DD gave evidence that the uncharged incident occurred on an occasion when the appellant was staying with her family in Wodonga. She and the appellant were alone in his car. The appellant demanded that DD demonstrate that she loved him, threatening that otherwise he would "start loving JL". DD was protective of JL and did not wish the appellant to turn his attentions to her, so she reassured him that she loved him. The appellant exposed his penis and forced DD to fellate him. The incident charged in counts 13 and 14 occurred in January 1999 in the lounge room of the appellant's Canberra home. DD was 17 years old and JL was 3 Gillard v The Queen (2013) 275 FLR 416 at 438 [83(c)]. 4 Gillard v The Queen (2013) 275 FLR 416 at 444 [109]. Crennan Bell 16 years old. DD said that the appellant offered to prove to JL that he and DD had "a relationship" and that DD would do whatever he wanted her to do. He instructed DD to give him a "head job". He stood up and guided DD down onto her knees. He pulled his pants down and took hold of the back of her head, pushing it forward and forcing her to fellate him. He maintained his grip so that she was unable to pull away despite her efforts to do so. The episode lasted about 30 seconds until DD was able to extricate herself (count 13). JL's account of the incident was broadly consistent with DD's account save that JL said that the appellant's hands were by his side when DD placed her mouth over the appellant's penis. JL said that she had not been asked if she was "okay" about the performance of a sexual act in her presence (count 14) and she had been shocked by it. The offences charged in counts 16 and 18 (count 17 charged an alternative offence to count 16) occurred on the one occasion in January 2000 in a bedroom at the appellant's Canberra home. DD said that the appellant had pushed her down onto the bed and inserted two of his fingers into her vagina (count 16). She protested, telling him not to touch her. The appellant proceeded to lick her vagina (count 18). DD said that she had tried to push him away but he had pinned her down with his left arm. Ultimately, DD succeeded in pushing the appellant away. He asked her if she still loved him. DD was afraid that if she said "no" the appellant would turn his attentions to JL and so she said that she loved him, before getting up and walking away. In evidence at trial, the appellant said that the only time he had sexual contact with DD was the occasion of the fellatio charged in count 13. He said that this contact had been consensual. On his account DD and he had kissed. After a time, DD had removed her clothing and he had said something along the lines of "it would be nice if you went down". DD had knelt down and performed fellatio on him. He had not told her what to do nor had he guided her in any way. He had not held the back of her head. The episode lasted for 15 to 30 seconds. He realised that "for some reason it was wrong. It just wasn't right". He put his hands on DD's shoulder and pushed her back. She looked up and he just nodded "no". The appellant agreed that the incident occurred in the lounge room on an occasion when JL was present; however, he said that JL was facing the computer and had not been in a position to see the sexual activity. DD and JL had been entrusted to the appellant's care during school holidays spent at his home from when they were in their early teenage years. On DD's account, the appellant had dealt with her sexually from when she was a child. Notwithstanding that DD was 17 years old at the date of the offence Crennan Bell charged in count 13, and 18 years old at the date of the offences charged in counts 16 and 18, it was open to find that the appellant was in a position of authority over DD at the time of the acts charged in those counts. So, too, was it open to find that the appellant was in a position of authority over JL on the occasion charged in count 14. The appellant does not submit to the contrary in this Court, nor does he maintain that the conduct charged in the four counts was not capable, without more, of constituting an abuse of that position5. The offences At the time, s 54(1) provided: "A person who engages in sexual intercourse with another person without the consent of that other person and who knows that that other person does not consent, or who is reckless as to whether that other person consents, to the sexual intercourse is guilty of an offence punishable, on conviction, by imprisonment for 12 years." And s 60(1) provided: "A person who commits an act of indecency upon, or in the presence of, another person without the consent of that person and who knows that that other person does not consent, or who is reckless as to whether that other person consents, to the committing of the act of indecency is guilty of an offence punishable, on conviction, by imprisonment for 5 years." The full terms of s 67 should be set out: "(1) For sections 54, 55(3)(b), 60 and 61(3)(b) and without limiting the grounds on which it may be established that consent is negated, the consent of a person to sexual intercourse with another person, or to the committing of an act of indecency by or with another person, is negated if that consent is caused— by the infliction of violence or force on the person, or on a third person who is present or nearby; or by a threat to inflict violence or force on the person, or on a third person who is present or nearby; or 5 Gillard v The Queen (2013) 275 FLR 416 at 439 [88]. Crennan Bell by a threat to inflict violence or force on, or to use extortion against, the person or another person; or by a threat to publicly humiliate or disgrace, or to physically or mentally harass, the person or another person; or by the effect of intoxicating liquor, a drug or an anaesthetic; by a mistaken belief as to the identity of that other person; or by a fraudulent misrepresentation of any fact made by the other person, or by a third person to the knowledge of the other person; or by the abuse by the other person of his or her position of authority over, or professional or other trust in relation to, the person; or by the person's physical helplessness or mental incapacity to understand the nature of the act in relation to which the consent is given; or by the unlawful detention of the person. (2) A person who does not offer actual physical resistance to sexual intercourse shall not, by reason only of that fact, be regarded as consenting to the sexual intercourse. If it is established that a person who knows the consent of another person to sexual intercourse or the committing of an act of indecency has been caused by any of the means set out in subsection (1)(a) to (j), the person shall be deemed to know that the other person does not consent to the sexual intercourse or the act of indecency, as the case may be." The Court of Appeal The indictment charged the appellant in counts 13, 14, 16 and 18, consistently with the terms of the statute, with "knowing that [the complainant] did not consent or being reckless as to whether she consented". In the Court of Appeal the appellant submitted that, when s 67 is invoked, the prosecution must particularise the charge in relation to the accused's state of mind by alleging that Crennan Bell the accused knew that the complainant did not consent. It could not charge only that the accused was reckless as to consent6. It would appear that his argument was that s 67(3) operates to confine the prosecution to proof of knowledge of non-consent in any case in which s 67 is invoked7. The Court of Appeal rejected this argument, observing that consent is relevant in two respects: the elements of a relevant offence include both absence of consent as a matter of fact and, with respect to the state of mind of the accused, either knowledge of the absence of consent or recklessness as to consent8. Sub-sections (1) and (2) of s 67 apply to the determination of the former and could sensibly stand alone without s 67(3)9. The Court of Appeal said that there was no reason to assume that s 67(3) is intended to exclude the application of s 67(1) and (2) to cases not covered by s 67(3)10. Applying the test of recklessness found in R v Tolmie11, their Honours saw no need for an equivalent to s 67(3) dealing with recklessness12. They observed that in a case in which it is contended that the accused has not given consideration to whether the complainant is consenting, it is unnecessary to try to "expand or narrow the particular kinds of consent issues that he or she has not considered"13. And in a case in which it is contended that the accused recognised the possibility that the complainant was not consenting and went ahead regardless, it did not seem to matter whether his or her recognition of that possibility included recognition of the reason for the non-consent14. 6 Gillard v The Queen (2013) 275 FLR 416 at 440 [94]. 7 Gillard v The Queen (2013) 275 FLR 416 at 442-443 [98]-[103]. 8 Gillard v The Queen (2013) 275 FLR 416 at 443 [102]. 9 Gillard v The Queen (2013) 275 FLR 416 at 443 [102]. 10 Gillard v The Queen (2013) 275 FLR 416 at 443 [103]. 11 (1995) 37 NSWLR 660. 12 Gillard v The Queen (2013) 275 FLR 416 at 443-444 [105]-[106]. 13 Gillard v The Queen (2013) 275 FLR 416 at 443-444 [106]. 14 Gillard v The Queen (2013) 275 FLR 416 at 444 [107]. Crennan Bell The Court of Appeal noted that if "s 67 only applies to cases involving knowledge and not to those involving recklessness" the trial judge's directions to the jury were flawed, with the consequence that the appellant "could be said to have [been] deprived ... of a chance of acquittal"15. It was not necessary for the Court of Appeal to give further consideration to this consequence given the rejection of the premise for the appellant's argument. The appellant's submissions on the construction issue The appellant's argument in this Court is narrower than the argument put below. He does not submit that recklessness as to consent can never supply the mental element of liability in a trial at which the prosecution adduces evidence of a s 67(1) circumstance. His challenge is to recklessness as to the s 67(1) circumstance supplying the mental element of liability. The appellant's analysis proceeds from the starting point that consent is to be understood as consent freely given. He acknowledges that proof of one or more s 67(1) circumstances may affect the determination of whether the complainant in fact consents to sexual intercourse, or the commission of an act of indecency, and that, in such a case, the mental element of the offence may be established by proof of either knowledge or recklessness. Correctly understood, he submits that s 67(1) is not engaged in a case in which consent is not freely given. The purpose of the provision is said to be the extension of liability to a case in which the complainant in fact consents to sexual intercourse, or the commission of an act of indecency, by making provision for consent to be negated in specified circumstances. The next step in the appellant's argument is the submission that where "actual consent" is negated by s 67(1), the mental element of the offence is not the element stated in the offence-creating provision: a person cannot know that another is not consenting to sexual intercourse or an act of indecency, when that other is, in fact, consenting. Nor can a person be reckless as to the absence of consent in such a case. Hence, the function of s 67(3) is to provide a "workable mental element" in a case of negated consent under s 67(1). The relation of s 67 to ss 54(1) and 60(1) The idea that s 67(1) extends liability (with the consequence that the mental element of the offence ceases to be found in the offence-creating 15 Gillard v The Queen (2013) 275 FLR 416 at 442-443 [99]. Crennan Bell provision) is sourced in the common law understanding of circumstances that vitiate consent to sexual conduct. To observe that proof of some s 67(1) circumstances operates to negative consent at common law and that proof of other s 67(1) circumstances does not16, fails to assist in understanding the relationship in this statutory scheme between s 67 and the offences to which it applies. Relevantly, ss 54(1) and 60(1) proscribe sexual intercourse, or the commission of an act of indecency, "without the consent of [the complainant]". Section 67(1) states some circumstances in which consent to sexual intercourse, or to the commission of an act of indecency, is negated. A consent that is negated is no consent. Section 67(1) is a non-exhaustive statement of circumstances in which, subject to proof of the causal relation, sexual intercourse, or the commission of an act of indecency, is without the consent of the complainant. The causal relation required by s 67(1) is important. The unintended consequences of the application of s 67(1) contemplated by the ACT Law Reform Commission in its Report on the Laws Relating to Sexual Assault17 may be avoided if it is understood that the causal connection between the circumstance and the complainant's consent must be sufficiently substantial to warrant the attribution of criminal responsibility18. Section 67 facilitates proof of the offences to which it applies. The elements of those offences are contained in the offence-creating provisions and do not differ in a case in which s 67(1) is engaged. The appellant's insistence on locating the mental element of the offence in s 67(3) in a case in which s 67(1) is engaged is apt to obscure the force of his essential point, which is that recklessness as to a s 67(1) circumstance does not establish the mental element of 16 Papadimitropoulos v The Queen (1957) 98 CLR 249 at 258-259; [1957] HCA 74. 17 ACT Law Reform Commission, Report on the Laws Relating to Sexual Assault, Report No 18, (2001) at 67. The authors of the Report at 69, applying a "but for" test of causation, posit the consent of a rock star to sexual intercourse with a 15 year old girl as negated in circumstances in which the girl assures the rock star that she is aged 16 (s 67(1)(g)), with the result that the 15 year old is exposed to liability for a s 54(1) offence. 18 Timbu Kolian v The Queen (1968) 119 CLR 47 at 68-69 per Windeyer J; [1968] HCA 66; Royall v The Queen (1991) 172 CLR 378 at 398 per Brennan J, 411-412 per Deane and Dawson JJ, 423 per Toohey and Gaudron JJ, 441 per McHugh J; [1991] HCA 27. Crennan Bell liability for the offences to which it applies. To explain why that is so requires consideration of what it means to be reckless as to consent. The Crimes Act does not define "reckless" for the purposes of ss 54(1) and 60(1)19. Those offences and s 67 were introduced into the Crimes Act by the Crimes (Amendment) Ordinance (No 5) 1985 (ACT). These provisions reflected the sexual offence reforms that had been introduced in New South Wales by the Crimes (Sexual Assault) Amendment Act 1981 (NSW) and recommendations of the Law Reform Commission of Tasmania20. As explained in Banditt v The Queen21, the New South Wales reforms were influenced by the decision of the House of Lords in Director of Public Prosecutions v Morgan22 and the subsequent enactment of s 1 of the Sexual Offences (Amendment) Act 1976 (UK). Morgan clarified that the mens rea of the common law offence of rape is constituted either by the accused's awareness that the woman is not consenting or by his recklessness respecting her consent. Their Lordships variously formulated the concept of recklessness as a state of mind of "at least indifference as to the woman's consent"23, or "the equivalent intention of having intercourse willy-nilly not caring whether the victim consents or no"24 and "without caring whether or not she was a consenting party"25. The joint reasons in Banditt approved each of these formulations as an appropriate means of explaining the concept of 19 The definition of recklessness contained in s 20 of the Criminal Code 2002 (ACT) ("the Code") does not apply to ss 54(1) and 60(1). Each is a non-excluded pre-2003 offence for the purpose of s 8 and neither is an immediately applied provision within s 10 of the Code. 20 Law Reform Commission of Tasmania, Report and Recommendations on Rape and Sexual Offences, Report No 31, (1982). 21 (2005) 224 CLR 262; [2005] HCA 80. 23 Director of Public Prosecutions v Morgan [1976] AC 182 at 203 per Lord Cross of Chelsea. 24 Director of Public Prosecutions v Morgan [1976] AC 182 at 215 per Lord Hailsham of St Marylebone. 25 Director of Public Prosecutions v Morgan [1976] AC 182 at 225 per Lord Edmund-Davies. Crennan Bell recklessness to a jury for the purposes of s 61R(1) of the Crimes Act 1900 (NSW)26. That observation is equally apt to proof of recklessness for the purposes of ss 54(1) and 60(1) of the Crimes Act. Whether, as the Court of Appeal assumed27, recklessness extends to a state of mind of inadvertence to consent in the way explained in R v Tolmie, is not a question raised by the appeal. It is sufficient in order to address the issues raised by the appeal to observe that recklessness is a mental state captured by the concept of indifference to the complainant's consent, as explained in the joint reasons in Banditt. Regardless of how the prosecution proves the non-consent of the complainant, the mental element of the offences is satisfied by proof of the accused's knowledge that the complainant was not consenting or proof that the accused was reckless as to the complainant's consent. Proof that a person was reckless, in the sense that he or she was heedless of the risk of the existence of a s 67(1) circumstance, or of the risk that the circumstance may have caused the complainant's consent, would not of itself establish that the person's state of mind was of indifference to consent. This is not to say that proof of a s 67(1) circumstance may not support an inference that the person had that state of mind. At a trial in which the prosecution relies on the causal relation between a s 67(1) circumstance and the complainant's consent to sexual intercourse, or the act of indecency, to establish the absence of consent, the mental element of the offence is likely to be proved by establishing that the accused had the knowledge stated in s 67(3). Putting to one side the redundant "who" in the first line, s 67(3) deems knowledge that the consent of the complainant has been caused by a s 67(1) circumstance to be knowledge that the complainant did not consent to sexual intercourse or the act of indecency. Strictly, s 67(3) is declaratory. As s 67(1) negates consent where a specified circumstance is the cause of the complainant's consent, knowledge of the circumstance and the complainant's consent is knowledge that the sexual intercourse or act of indecency was without consent. Section 67(3) serves to relation between the causal 26 (2005) 224 CLR 262 at 276 [38] per Gummow, Hayne and Heydon JJ. 27 Gillard v The Queen (2013) 275 FLR 416 at 443 [105] citing (1995) 37 NSWLR Crennan Bell remove any doubt that the knowledge of which it speaks is inconsistent with a belief that the complainant was consenting28. Proof that the appellant was heedless of the risk that he was abusing his position of authority over DD or JL and that this may have caused DD's consent to sexual intercourse or JL's consent to the commission of an act of indecency in her presence, did not establish that the appellant was reckless as to DD's or JL's consent. The respondent does not submit otherwise. The critical issue in this Court is whether, as the appellant submits, the trial judge left it open to the jury to convict if it was satisfied that the complainant's consent was caused by the appellant's abuse of his position of authority and the appellant was reckless as to that risk. The directions The jury was instructed that: "After a person turns 16 they may lawfully consent to an act that's of a sexual nature and the act of a sexual nature is not a crime unless there is no consent and there are other conditions too. There's knowledge of consent but I'll come to that in just a moment. But consent has its ordinary meaning and a state of mind that agrees with acquiescence in the act in question. That's what consent is." Next his Honour explained that apparent consent or acquiescence may not constitute "real consent" by reason of the presence of a vitiating circumstance, instancing the use or threat of force. His Honour continued: "There is a question of what is said to be a position of authority or trust occupied by the accused in respect of DD. Now, whether there was such a position is a matter for you. When the evidence is reviewed, that matter 28 The Explanatory Statement to the Crimes (Amendment) Ordinance (No 5) 1985 (ACT) stated at 7: "Sub-section (3) provides that where the Crown has proven that the person charged knew at the relevant time that the consent of the victim was caused by any of the means set out in sub-section (1) then the first-mentioned person cannot be held to have an honest belief in the consent of the victim to the act of sexual intercourse or act of indecency." Crennan Bell may become clear or less clear as the case may be but that is the accusation there. So, for example, if a person who had authority such as, I suppose, a commanding officer, commanded a subordinate to submit to something it may be that that would be an abuse of the position of authority and it may be that the apparent consent would be vitiated." His Honour next directed the jury of knowledge of lack of consent. He continued: "There is however another alternative and that is that the accused might be reckless as to whether there is consent or not and that may be constituted in one of two ways. That is the accused might be aware that there is a risk that consent is absent but proceeds nevertheless. Now, that corresponds, no doubt, with what you might well think recklessness is. That is taking an unjustified risk. There is also another category of recklessness which again might well accord with your own view of it. That is where an accused has no positive reason to assume that there is consent but proceeds without turning his mind to the question at all. An obvious example of that might be if the accused person came across a sleeping woman and proceeded to have sex with her without bothering to turn his mind to whether she might agree or not agree to that. That would be reckless." Following these directions, in the absence of the jury, defence counsel sought a direction by reference to s 67(3). After the jury returned, the trial judge gave this further direction: "However, if the accused does not know or you're not satisfied that he did know that there was no consent you would have to, by virtue of the directions I gave you concerning the onus of proof, proceed on the basis that the accused did not know there was consent because you're not satisfied beyond reasonable doubt that he did know that there was no consent. I'd say the next question's recklessness and you might be satisfied the accused was reckless or you might be satisfied that the accused knew that the apparent consent which he perceived was a result of a breach of trust or a breach of his position of authority if there was one. Now, he must, in that consequence, in that circumstance, know that the apparent consent is so procured." (emphasis added) The direction is not a model of clarity. Nonetheless, the respondent submits that it correctly distinguishes recklessness from deemed knowledge of non-consent under s 67(3). The submission attributes no small degree of Crennan Bell discernment to the jury hearing the direction for the first, and only, time. It assumes that the jurors would have understood that the conjunction "or" at the start of the emphasised passage was introducing a third question for their determination and not that everything following the words "I'd say the next question's recklessness" was an explanation of the concept of recklessness. In the context of the conduct of the trial, the direction is likely to have been understood as confirming the availability of a pathway to proof of guilt relied upon by the prosecutor in her closing submissions: "There is also recklessness. That is sufficient, that the accused may have been reckless as to the cause of any apparent consent on the part of DD, if he was reckless to the fact that that's why she was consenting because of that position of authority." The trial judge did not correct the prosecutor's statement. Indeed, his Honour commended the prosecutor's statement of the law as one that "I think you'll probably find I've virtually agreed with". The respondent submits that any error in the directions respecting recklessness only affects the conviction on count 13. This is because the conduct the subject of counts 14, 16 and 18 was denied and no issue of recklessness is said to have arisen. It may be doubted that recklessness should have been left for the jury's consideration on any of the counts. However, directions on recklessness were given. Those directions did not confine proof of recklessness to the offence charged in count 13. To the contrary, in summarising the evidence of the offences charged in counts 16 and 18, the trial judge said: "And I just remind you it has to be without consent, the accused knowing it was without consent or at least be reckless as to whether there is consent. And in considering apparent consent you also consider whether any coercion of the kind I've mentioned was used and is breach of position of authority [sic]." There can be no real question that the directions left open that the jury might reason to guilt on each of the counts in which consent was an issue upon satisfaction that the appellant was reckless as to the risk that DD's or JL's consent was occasioned by the abuse of his position of authority over her. This was a material misdirection affecting each of the counts that are the subject of the appeal. The respondent did not submit that in the event that the appellant's first and third grounds were upheld the appeal should be dismissed under s 37O(3) of Crennan Bell the Supreme Court Act 1933 (ACT)29. The appellant did not submit that there should be a consequential order other than for a new trial30. Orders The following orders should be made: Appeal allowed. Set aside the order of the Court of Appeal of the Supreme Court of the Australian Capital Territory made on 18 April 2013 and, in its place, order that: the appeal be allowed in part; the appellant's convictions on counts 13, 14, 16 and 18 of the indictment be quashed; and a new trial on counts 13, 14, 16 and 18 be had. 29 Section 37O(3) provides that the Court of Appeal may dismiss an appeal against conviction if it considers that the point raised by the appeal might be decided in favour of the appellant but no substantial miscarriage of justice has occurred. 30 Supreme Court Act 1933 (ACT), s 37O(1)(e).
HIGH COURT OF AUSTRALIA Matter No S417/2011 CERTAIN LLOYD'S UNDERWRITERS SUBSCRIBING TO CONTRACT NO IH00AAQS APPELLANT AND Matter No S418/2011 RESPONDENT CERTAIN LLOYD'S UNDERWRITERS SUBSCRIBING TO CONTRACT NO IH00AAQS APPELLANT AND RESPONDENT Matter No S419/2011 CERTAIN LLOYD'S UNDERWRITERS SUBSCRIBING TO CONTRACT NO IH00AAQS APPELLANT AND RESPONDENT Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander [2012] HCA 56 12 December 2012 S417/2011 to S419/2011 ORDER In each appeal: Appeal allowed. Set aside paragraphs 4 and 5 of the order of the Court of Appeal of the Supreme Court of New South Wales made on 1 June 2011, and, in their place, order that the appeal to that Court be dismissed. Appellants to pay the respondent's costs of the appeal to this Court. On appeal from the Supreme Court of New South Wales Representation R J H Darke SC with M J Stevens for the appellant in all matters (instructed R T McKeand SC with A C Casselden for the respondents in all matters (instructed by G H Healey & Co Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Cross Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander Certain Lloyd's Underwriters Subscribing to Contract No IH00AAQS v Thelander Costs – Limit on maximum costs in connection with claim for "personal injury damages" – Legal Profession Act 1987 (NSW), ss 198C and 198D – Where "personal injury damages" defined to have same meaning as in Civil Liability Act 2002 (NSW) – Whether maximum costs limitation applies to claims for personal injury damages resulting from intentional acts. Statutory interpretation – Principles – Reading provision in context – Whether, when operative statute adopts term in source statute, account must be taken of operation of term in source statute – Effect of amendments to statute. Words and phrases – "award of personal injury damages", "claim for personal injury damages", "maximum costs", "personal injury damages", "same meaning". Civil Liability Act 2002 (NSW), Pt 2, ss 3, 9. Legal Profession Act 1987 (NSW), Pt 11 Div 5B, ss 198C, 198D. FRENCH CJ AND HAYNE J. These three appeals were heard together with New South Wales v Williamson1. All four appeals concern the construction of provisions of New South Wales statutes that limit the costs that a court may order one party to pay another if the amount recovered on a claim for personal injury damages does not exceed a specified amount. The reasons in these appeals should be read with the reasons in New South Wales v Williamson. The issue New South Wales legislation regulated claims for "personal injury damages" and awards of "personal injury damages". The expression "personal injury damages" was defined to mean "damages that relate to the death of or injury to a person caused by the fault of another person". The respondents alleged that they had been assaulted by hotel security staff. They sued the appellants2, as the insurers of the company that employed those staff, for trespass to the person claiming damages for personal injuries allegedly inflicted intentionally and with intent to injure. Were these claims for "personal injury damages" within the meaning of the relevant New South Wales Acts? Answering this question requires consideration of Div 5B of Pt 11 (ss 198C-198I) of the Legal Profession Act 1987 (NSW) ("the 1987 Legal Profession Act") as inserted by the Civil Liability Act 2002 (NSW) ("the Liability Act")3. Later forms of the relevant legislation are discussed in New South Wales v Williamson. The relevant provisions Section 198D(1) of the 1987 Legal Profession Act fixed the maximum costs for legal services provided to a party in connection with "a claim for personal injury damages", "[i]f the amount recovered on [the claim] does not exceed $100,000". A lawyer and client could contract out of this limitation4 by a "costs agreement" complying with Div 3 of Pt 11 of the 1987 Legal Profession Act. But s 198D(4)(b) provided that, subject to some exceptions which need not be considered, when the maximum costs for legal services provided to a party were fixed by Div 5B, "a court or tribunal cannot order the payment by another [2012] HCA 57. 2 How and why the appellants were joined in the actions need not be examined. s 8, Sched 2, item 2.2[2]. s 198E. Hayne party to the claim of costs in respect of those legal services in an amount that exceeds that maximum". Section 198C(2) of the 1987 Legal Profession Act provided that Div 5B did not apply to certain costs, namely, costs payable to an applicant for compensation under Pt 2 of the Victims Support and Rehabilitation Act 1996 (NSW) and costs for legal services provided in respect of certain other identified forms of statutory claim: claims under the Motor Accidents Act 1988 (NSW) or the Motor Accidents Compensation Act 1999 (NSW), claims for work injury damages as defined in the Workplace Injury Management and Workers Compensation Act 1998 (NSW) and claims for damages for dust diseases brought under the Dust Diseases Tribunal Act 1989 (NSW). The respondents' claims did not fall within any of these expressly excluded classes of claim. Section 198C(1) defined terms used in Div 5B. In particular, it provided that "personal injury damages has the same meaning as in the Civil Liability Act The Liability Act provided5 that, in that Act, "personal injury damages means damages that relate to the death of or injury to a person caused by the fault of another person". The Liability Act further provided6 that: "injury means personal or bodily injury, and includes: pre-natal injury, and psychological or psychiatric injury, and disease." And it provided7 that "fault includes an act or omission". Read together with the definitions of "injury" and "fault", the Liability Act's definition of "personal injury damages" can thus be expressed as follows. In the Liability Act: Hayne "personal injury damages means damages that relate to the death of or personal or bodily injury (including pre-natal injury, psychological or psychiatric injury and disease) to a person caused by the fault (including an act or omission) of another person." Section 198C and the other provisions of Div 5B of Pt 11 of the 1987 Legal Profession Act were introduced by the Liability Act as amendments connected with and consequential upon the enactment of the Liability Act. The two Acts did not, however, have identical areas of operation. The costs limiting provisions of Div 5B of Pt 11 of the 1987 Legal Profession Act applied to a "claim" for personal injury damages whereas Pt 2 of the Liability Act applied to an "award" of personal injury damages. And there were some similarities, but most importantly some differences, in the exclusions that were made from the operation of each Act. Part 2 of the Liability Act regulated the amount recoverable as an "award of personal injury damages". As enacted, s 9(1) of the Liability Act provided that Pt 2 of the Act "applies to and in respect of an award of personal injury damages, except an award that is excluded from the operation of this Part". Section 9(2) excluded several kinds of awards of damages. The first of these exclusions8 was "an award where the fault concerned is an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct". Other exclusions included awards of damages for death or injury resulting from a motor accident to which either Pt 6 of the Motor Accidents Act 1988 (NSW) or Ch 5 of the Motor Accidents Compensation Act 1999 (NSW) applied9, awards of damages for death or injury to a worker to which Div 3 of Pt 5 of the Workers Compensation Act 1987 (NSW) applied10 and awards of damages for dust diseases brought under the Dust Diseases Tribunal Act 1989 (NSW)11. Some, but not all, of these excluded awards would be made following claims for personal injury damages that were expressly excluded from the operation of the costs limiting provisions of Div 5B of Pt 11 of the 1987 Legal Profession Act. Thus, particular kinds of award made under the Motor Accidents Act 1988, the Motor Accidents Compensation Act 1999 and the Dust Diseases Tribunal Act 1989 were excluded from the operation of Pt 2 of the Liability Act s 9(2)(a). s 9(2)(b). 10 s 9(2)(c). 11 s 9(2)(d). Hayne and claims for those kinds of awards were excluded by s 198C(2) from the application of Div 5B of Pt 11 of the 1987 Legal Profession Act. Likewise, an "award comprising compensation under" the Victims Support and Rehabilitation Act 1996 (NSW) was excluded12 from the operation of Pt 2 of the Liability Act and the costs payable to an applicant for compensation of that kind were excluded by s 198C(2)(a) from the operation of Div 5B of Pt 11 of the 1987 Legal Profession Act. Although there was thus some similarity in the express exclusions that were contained in the 1987 Legal Profession Act and the Liability Act, there were also some differences between them. For example, the Liability Act also excluded13 from the operation of Pt 2 of that Act awards comprising the Victims Support and compensation under certain Acts other Rehabilitation Act 1996, but none of those other Acts was mentioned in s 198C(2) of the 1987 Legal Profession Act. And, of greatest significance for the present appeals, the Liability Act excluded14 from the operation of Pt 2 "an award where the fault concerned is an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct" but there was no equivalent exclusion in Div 5B of Pt 11 of the 1987 Legal Profession Act. than The parties' arguments The central point of difference between the parties in this Court was whether the definition of "personal injury damages" in the 1987 Legal Profession Act (it "has the same meaning as in" the Liability Act) was to be construed by reference only to the words of the definition of that expression in s 3 of the Liability Act or by reference to both the words of the definition and the limited operation which the Liability Act had in respect of awards of personal injury damages as a result of the exclusions in s 9(2) of the Liability Act. The appellants submitted that s 198C(1) of the 1987 Legal Profession Act required reference only to the definition given in the Liability Act and that, as there defined, personal injury damages extended to any and every form of damages that relate to the death of or personal or bodily injury to a person caused by the fault of another person. In particular, the appellants submitted that "personal injury damages" included damages for trespass to the person and that, in the District Court, Garling DCJ had been right to declare, in effect, that s 198D of the 1987 Legal Profession Act was engaged. 12 s 9(2)(e). 13 s 9(2)(e). 14 s 9(2)(a). Hayne The respondents submitted that the costs limiting provisions of Div 5B of Pt 11 of the 1987 Legal Profession Act applied only to those claims for personal injury damages where the award of damages was regulated by Pt 2 of the Liability Act. They submitted that it follows that awards of the kind in issue in these appeals – "where the fault concerned is an intentional act that is done with intent to cause injury"15 – were not awards of personal injury damages because awards of damages resulting from an intentional act were not regulated by the Liability Act. On its face, that submission ignored the differences that have been noted between the provisions which each Act made for its own area of application. The Liability Act expressly excluded intentional torts. The 1987 Legal Profession Act did not. And yet, on the respondents' construction, the costs limiting provisions of the 1987 Legal Profession Act were not to apply to claims for personal injury damages for an intentional tort. The respondents sought to surmount the obstacle of this textual difference, and thus justify their preferred construction, by reference to notions of "context" and "purpose". The respondents submitted that it is necessary to look not only to the words of the definition of "personal injury damages" in the Liability Act but also to the "context" provided by the other provisions of the Liability Act that define the scope of that Act's application to an "award of personal injury damages". This was said to follow, in particular, from the words "meaning" and "as in" in the definition of "personal injury damages" in s 198C(1) of the 1987 Legal Profession Act (it "has the same meaning as in" the Liability Act). And they submitted that the two Acts were intended to have the same sphere of operation because the relevant provisions were made at a time when there was concern about the costs associated with claims for damages for personal injuries caused by negligence. The appeals to the Court of Appeal and this Court The Court of Appeal (Hodgson and Basten JJA and Sackville AJA) held16 unanimously that the present respondents' construction should be adopted. Sackville AJA described17 the preferred construction as being that the definition of "personal injury damages" in s 198C(1) of the 1987 Legal Profession Act "meant personal injury damages of the kind to which Part 2 of [the Liability Act] applied" (emphasis added). Basten JA, who gave the principal reasons of the Court, concluded18 that there was "no basis", either in extrinsic material or "in 15 s 9(2)(a). 16 Cross v Certain Lloyds Underwriters [2011] NSWCA 136. 17 [2011] NSWCA 136 at [71]. 18 [2011] NSWCA 136 at [49]. Hayne terms of the policy underlying the legislation, to impose the cost-capping regime on all claims for personal injury damages, however they might arise, without reference to the carefully crafted exclusions in s 9(2)" of the Liability Act. Accordingly, Basten JA decided19 that the definition of "personal injury damages" in the relevant costs limiting provisions should be construed by "reference not merely to the definition of that expression in the source statute, but also to the scope of its application in the specified Part" of the Liability Act. By special leave, the appellants appeal to this Court. These reasons will show that the appellants' construction of the costs limiting provisions should be adopted, not the construction favoured by the Court of Appeal. Which costs limiting legislation? The costs limiting provisions of the 1987 Legal Profession Act were repealed, with effect from 1 October 2005, by the Legal Profession Act 2004 (NSW) ("the 2004 Legal Profession Act"). The 2004 Legal Profession Act contained20 costs limiting provisions in generally similar, but not identical, terms to those in the 1987 Legal Profession Act. Whether the earlier or the later provisions applied to the present cases depended upon the application of transitional provisions made by the 2004 Legal Profession Act. Those transitional provisions21 provided, in effect, that the new Act applied only to "a matter" in which the client had first given instructions on or after 1 October 2005. In the Court of Appeal, some consideration was given22 to what was the relevant "matter" in these cases. Much of the reasons of Basten JA proceeded by reference to the costs limiting provisions of the 2004 Legal Profession Act rather than the 1987 Legal Profession Act because he concluded23 that the relevant "matter" was the respondents' claim for costs, not their claim for damages. There was limited argument on this issue in this Court. The appellants submitted that the relevant "matter" was the claim for damages, not the claim for costs, and that the respondents first gave instructions in that matter before 19 [2011] NSWCA 136 at [59]; see also at [1] per Hodgson JA, [79] per Sackville AJA. 20 Pt 3.2 Div 9. 21 s 737, Sched 9, cll 3 and 18. 22 [2011] NSWCA 136 at [2], [13]-[23]. 23 [2011] NSWCA 136 at [23]. Hayne 1 October 2005. The respondents submitted that the "matter" was the claim for costs. But the respondents' submissions noted that "[i]t is agreed that the question of whether the provisions of the [earlier] or the [later Act applies] does not affect the determination of the principal issue in the appeal[s]". The reasons in New South Wales v Williamson examine the differences between the costs limiting provisions of the two Acts and the amendments that had been made to the Liability Act by the time the 2004 Legal Profession Act was enacted. As those reasons show, the same answers should be given to the questions which arise about the construction of the later provisions as the answers to be given about the construction of the earlier provisions. Because no different answer should be given, the application of the transitional provisions need not be examined. Attention can and should be confined in these appeals to the resolution of the issue of construction of the 1987 Legal Profession Act that has been identified. Some basic principles It is as well to begin consideration of this issue by re-stating some basic principles. It is convenient to do that by reference to the reasons of the plurality in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue24: "This Court has stated on many occasions that the task of statutory construction must begin with a consideration of the text itself25. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text26. The language which has actually been 24 (2009) 239 CLR 27 at 46-47 [47]; [2009] HCA 41. 25 Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 77 [9] per Gaudron, Gummow, Hayne and Callinan JJ, 89 [46] per Kirby J; [2001] HCA 49; Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193 at 206 [30] per Gleeson CJ, Gummow, Hayne and Heydon JJ, 240-241 [167]-[168] per Kirby J; [2005] HCA 58; Carr v Western Australia (2007) 232 CLR 138 at 143 [6] per Gleeson CJ; [2007] HCA 47; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562 at 586 [85] per Kirby and Crennan JJ; [2007] HCA 52; Northern Territory v Collins (2008) 235 CLR 619 at 642 [99] per Crennan J; [2008] HCA 49. 26 Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529 at 538 [22] per Gleeson CJ, Gummow, Hayne and Heydon JJ, 555-556 [82]-[84] per Kirby J; [2006] HCA 11. See also Combet v The Commonwealth (2005) 224 CLR 494 at 567 [135] per Gummow, Hayne, Callinan and Heydon JJ; [2005] HCA 61; Northern Territory v Collins (2008) 235 CLR 619 at 642 [99] per Crennan J. Hayne employed in the text of legislation is the surest guide to legislative intention27. The meaning of the text may require consideration of the context, which includes the general purpose and policy of a provision28, in particular the mischief29 it is seeking to remedy." The context and purpose of a provision are important to its proper construction because, as the plurality said in Project Blue Sky Inc v Australian Broadcasting Authority30, "[t]he primary object of statutory construction is to construe the relevant provision so that it is consistent with the language and purpose of all the provisions of the statute31" (emphasis added). That is, statutory construction requires deciding what is the legal meaning of the relevant provision "by reference to the language of the instrument viewed as a whole"32, and "the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed"33. Determination of the purpose of a statute or of particular provisions in a statute may be based upon an express statement of purpose in the statute itself, inference from its text and structure and, where appropriate, reference to extrinsic materials. The purpose of a statute resides in its text and structure 34. Determination of a statutory purpose neither permits nor requires some search for 27 Hilder v Dexter [1902] AC 474 at 477-478 per Earl of Halsbury LC. 28 Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ; [1955] HCA 27, quoted with approval in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28. 29 Heydon's Case (1584) 3 Co Rep 7a at 7b [76 ER 637 at 638]. 30 (1998) 194 CLR 355 at 381 [69]. 31 See Taylor v Public Service Board (NSW) (1976) 137 CLR 208 at 213 per Barwick CJ; [1976] HCA 36. 32 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320; [1981] HCA 26; Project Blue Sky (1998) 194 CLR 355 at 381 33 Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ; Project Blue Sky (1998) 194 CLR 355 at 381 [69]. 34 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 592 [44]; [2011] HCA 10. Hayne what those who promoted or passed the legislation may have had in mind when it was enacted. It is important in this respect, as in others 35, to recognise that to speak of legislative "intention" is to use a metaphor. Use of that metaphor must not mislead. "[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have"36 (emphasis added). And as the plurality went on to say37 in Project Blue Sky: "Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction38 may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning." To similar effect, the majority in Lacey v Attorney-General (Qld)39 said: "Ascertainment of legislative intention is asserted as a statement of compliance with the rules of construction, common law and statutory, which have been applied to reach the preferred results and which are known to parliamentary drafters and the courts." (footnote omitted) The search for legal meaning involves application of the processes of statutory construction. The identification of statutory purpose and legislative intention is the product of those processes, not the discovery of some subjective purpose or intention. A second and not unrelated danger that must be avoided in identifying a statute's purpose is the making of some a priori assumption about its purpose. The purpose of legislation must be derived from what the legislation says, and 35 Zheng v Cai (2009) 239 CLR 446 at 455 [28]; [2009] HCA 52; Momcilovic v The Queen (2011) 85 ALJR 957 at 1009 [146(v)], 1028 [258], 1039 [315], 1040 [321]; 280 ALR 221 at 274, 299, 315-316; [2011] HCA 34. 36 Project Blue Sky (1998) 194 CLR 355 at 384 [78]. 37 (1998) 194 CLR 355 at 384 [78]. 38 For example, the presumption that, in the absence of unmistakable and unambiguous language, the legislature has not intended to interfere with basic rights, freedoms or immunities: Coco v The Queen (1994) 179 CLR 427 at 437; [1994] HCA 15. 39 (2011) 242 CLR 573 at 592 [43]. Hayne not from any assumption about the desired or desirable reach or operation of the relevant provisions40. As Spigelman CJ, writing extra-curially, correctly said41: "Real issues of judicial legitimacy can be raised by judges determining the purpose or purposes of Parliamentary legislation. It is all too easy for the identification of purpose to be driven by what the particular judge regards as the desirable result in a specific case." (emphasis added) And as the plurality said in Australian Education Union v Department of Education and Children's Services42: "In construing a statute it is not for a court to construct its own idea of a desirable policy, impute it to the legislature, and then characterise it as a statutory purpose." (footnote omitted) Context Because "context" loomed large in argument in this Court, particularly in the submissions of the respondents in these appeals, it is necessary to say something more about the use of "context" in statutory interpretation. It is not to be doubted43 that the relevant provisions must be construed in context, and the contrary was not suggested in argument. But there was some debate about what use could be made of provisions of the Liability Act in construing the definition of "personal injury damages" in the 1987 Legal Profession Act. In construing the definition of "personal injury damages" contained44 in the Liability Act ("damages that relate to the death of or injury to a person caused by the fault of another person") it is no doubt necessary to have regard not only 40 See Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249 at 262 [28]; [2005] HCA 28; Byrnes v Kendle (2011) 243 CLR 253 at 283 [97]; [2011] HCA 26. 41 Spigelman, "The intolerable wrestle: Developments in statutory interpretation", (2010) 84 Australian Law Journal 822 at 826. 42 (2012) 86 ALJR 217 at 224 [28]; 285 ALR 27 at 35; [2012] HCA 3. See also Miller v Miller (2011) 242 CLR 446 at 459 [29]; [2011] HCA 9. 43 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2. Hayne to the words of the definition but also to the context in which the definition was set. So much follows from what has been said about statutory construction in the cases to which reference has been made. Nothing said in The Producers' Co-operative Distributing Society Ltd v Commissioner of Taxation (NSW)45 in this Court or on appeal to the Privy Council46 denies the general proposition that regard must be had to context, or requires that a definition which is picked up from one statute (the source Act) and applied in another be construed by reference only to its words without regard to the context provided by the source Act. Indeed, in the Producers' Co-operative Case, Dixon J expressly acknowledged47 the need to consider the context provided by the other provisions of the source Act when considering a definition provided for in that Act and picked up and applied by another. It may be accepted that there are some limitations to the use that can properly be made of other provisions of the source Act when construing a definition in the source Act that is picked up and applied by another Act. As both Latham CJ48 and the Privy Council pointed out49 in the Producers' Co-operative Case, if the definition that is picked up is to be applied in the source Act only "unless the context or subject-matter otherwise indicates or requires", the particular meaning that the term in question may have in any particular provision of the source Act will not elucidate the meaning of the general definition of the term. But it by no means follows from this observation that a definition should be construed without regard to its context. That is why the Privy Council in the Producers' Co-operative Case treated50 the activities which the source Act in question permitted as explaining "the general meaning and application of the definition" in question. Resolution of these appeals ultimately does not depend upon examining when or to what extent it is necessary to consider the context of the definition of "personal injury damages" in the Liability Act in construing that expression in 45 (1944) 69 CLR 523 at 531-532 per Latham CJ, 536 per Dixon J; [1944] HCA 39. 46 Producers' Co-Operative Distributing Society Ltd v Commissioner of Taxation (NSW) (1947) 75 CLR 134 at 137; [1948] AC 210 at 213. 47 (1944) 69 CLR 523 at 536. 48 (1944) 69 CLR 523 at 531-532. 49 (1947) 75 CLR 134 at 137; [1948] AC 210 at 213. 50 (1947) 75 CLR 134 at 137; [1948] AC 210 at 213. Hayne the 1987 Legal Profession Act. Although the respondents' arguments were couched in terms of "context", upon analysis they sought to go further than elucidate the meaning of the expression "personal injury damages" as it was used in the 1987 Legal Profession Act by consideration of its statutory context in the Liability Act. Rather, they sought to treat s 198C(1) of the 1987 Legal Profession Act as providing that "personal injury damages" means personal injury damages of the kind to which Pt 2 of the Liability Act applied. It is more useful to focus attention on that proposed construction than to investigate, in the abstract, the use of "context" in statutory interpretation. The construction favoured by the Court of Appeal and supported in this Court by the respondents must be rejected. The text of the provisions at issue in these appeals readily yields the construction which the appellants urged: that the expression "personal injury damages" when used in the costs limiting provisions of Div 5B of Pt 11 of the 1987 Legal Profession Act extended to any and every form of damages that relate to the death of or personal or bodily injury to a person caused by the fault of another person. In its terms, the definition of "personal injury damages" contained in the Liability Act and picked up by the 1987 Legal Profession Act neither required nor permitted any different application according to whether the "fault" which founded the claim was a failure to take reasonable care or the commission of an intentional act with intent to injure. And s 198C(1) of the 1987 Legal Profession Act, by providing that "personal injury damages" has the same meaning as in the Liability Act, naturally and immediately directed attention to the definition of that expression in the Liability Act, which used the cognate word "means": "personal injury damages means ..." (emphasis added). It did not refer to the operation or application of the Liability Act. It did not direct attention to whatever was identified as being the legal effect or consequence which the Liability Act produced by using that defined expression in its various provisions. At least in this Court, if not also in the courts below, the respondents' argument for confining the application of the costs limiting provisions by reference to the operation or application of the Liability Act depended upon a false premise. The respondents focused attention on the expression "personal injury damages" as if that expression was the hinge on which both the 1987 Legal Profession Act and the Liability Act turned. Hence, their argument was that "personal injury damages" in the 1987 Legal Profession Act is to be confined to those "personal injury damages" regulated by the Liability Act. The premise underlying this argument is not sound. Each Act used the defined expression "personal injury damages" as part of a larger composite phrase: "award of personal injury damages" in the Liability Act and "claim for personal injury damages" in the 1987 Legal Profession Act (emphasis added). Hayne The hinge on which the relevant operation of each Act turned was the larger composite phrase and not the defined expression "personal injury damages". None of the statutory provisions that depended on the composite expressions "claim for personal injury damages" or "award of personal injury damages" affected the sense in which the defined expression "personal injury damages" was used in the relevant Acts. There is no textual reason to limit the expression "personal injury damages" in the 1987 Legal Profession Act to those claims for personal injury damages the award of which was regulated by the Liability Act. There is an additional problem with the respondents' argument. It assumed that the costs limiting provisions of the 1987 Legal Profession Act and the Liability Act were to have coextensive operation. For example, the respondents submitted that "the Civil Liability Act and the costs limitation provisions of the Legal Profession Act were introduced as a single package of reforms in the Civil Liability Act and were clearly intended to work in harmony". From this premise, the argument continued that because the Liability Act regulated some but not all forms of awards of "personal injury damages", the only claims for "personal injury damages" to which the costs limiting provisions of the 1987 Legal Profession Act applied were those claims for personal injury damages the award of which was regulated by the Liability Act. Again, the premise underpinning this argument is not right. The use of the defined expression "personal injury damages" in both composite phrases provides no textual basis for reading the defined expression (when it is used in the 1987 Legal Profession Act) as confined by reference to the Liability Act's field of operation once due regard is paid to the wider, and different, composite expressions that are central to the relevant provisions of each Act. Further, as has already been noted, the two Acts expressly identified circumstances in which their respective provisions were not to apply, some of which were the same but some of which were different. In their very terms the relevant provisions of the two Acts demonstrate that each had, and was intended to have, a different area of operation. Considerations of context do not support the conclusion that the two Acts are to be read as having coextensive fields of operation. The Liability Act's exclusion of intentional torts done with intent to injure from the application of its operative provisions (all of which were originally to be found in Pt 2 of the Act) demonstrates that the mischiefs to which that Act was directed were identified as arising in connection with claims for damages for personal injury other than claims in respect of intentional torts. It by no means follows, however, that the mischiefs to which Div 5B of Pt 11 of the 1987 Legal Profession Act was directed were confined to mischiefs arising in respect of only those classes of claims for personal injury damages the award of which was regulated by the Liability Act. Particularly is that so when intentional torts were not expressly excluded from the operation of Div 5B, as they might so easily have been. Hayne The only circumstance which can be identified as suggesting that the "purpose" or "intention" of Div 5B should be read as confined in the manner described is that it was the Liability Act which introduced the relevant provisions into the 1987 Legal Profession Act. But when it is observed that the provisions of the two Acts were not connected, as they might so easily have been, by express reference in the 1987 Legal Profession Act to the operation of the Liability Act, it is apparent that the supposed limitation by reference to "purpose" or "intention" is not soundly based. The text of the relevant provisions provides no support for confining Div 5B to those claims for personal injury damages the award of which was regulated by Pt 2 of the Liability Act. The statutory text reveals no "intention" so to confine Div 5B. The reasons of the Court of Appeal illustrate the dangers of reasoning from legislative "intention" that is not based, as it must be, in the text of the relevant legislation. The Court of Appeal stated51 that there was "no basis" in "the policy underlying the legislation" (presumably both the provisions of the Liability Act and the provisions which it introduced into the 1987 Legal Profession Act) for imposing the costs limiting provisions of the latter Act "without reference to the carefully crafted exclusions in s 9(2)" of the Liability Act. No foundation for making such an assumption about "the policy underlying the legislation" was identified, whether in the reasons of the Court of Appeal or in argument in this Court. Neither the paragraphs from extrinsic material quoted52 by the Court of Appeal nor the Court of Appeal's earlier decision in Newcastle City Council v McShane (No 3)53 founded the asserted assumption. To say, as the Court of Appeal did54, that there was "no basis" in extrinsic material or "in terms of the policy underlying the legislation" for imposing the costs limiting provisions on all claims for personal injury damages is to assume the answer to the question of construction and then ask whether the assumed answer is falsified. It is not legitimate to identify a legislative purpose not apparent from the text of the relevant provisions (or in this case even expressed in some extrinsic material), to examine extrinsic material and notice that there is nothing positively inconsistent with the identified purpose, and then to answer the question of construction by reference to the purpose that was initially assumed. That reasoning is not sound. It is reasoning of the kind of which Spigelman CJ rightly 51 [2011] NSWCA 136 at [49]. 52 [2011] NSWCA 136 at [41]-[48]. 53 (2005) 65 NSWLR 155, referred to at [2011] NSWCA 136 at [39]-[40]. 54 [2011] NSWCA 136 at [49]. Hayne disapproved in the extra-curial writing set out earlier in these reasons. Statutory "purpose" and "intention" are to be identified according to the principles that were described earlier under the heading "Some basic principles". Once that is done, it becomes apparent that the text and context of the relevant provisions point towards the construction supported by the appellants in these appeals: a claim for personal injury damages includes any and every form of claim for damages that relate to the death of or personal or bodily injury to a person caused by the fault of another person whether it be a failure to take reasonable care or the commission of an intentional act with intent to injure. Conclusion and orders The claims which the respondents made were claims for damages that related to personal or bodily injury suffered by them. Contrary to the conclusions reached by the Court of Appeal in each matter, the claims that each respondent made were "claims for personal injury damages" within the meaning of s 198D(1) of the 1987 Legal Profession Act. Each appeal should be allowed. In each appeal pars (4) and (5) of the orders of the Court of Appeal made on 1 June 2011 should be set aside and in their place there should be orders that the appeal to that Court is dismissed. In accordance with the appellants' undertaking proffered and accepted when special leave to appeal was granted, the appellants should in each case pay the respondent's costs of the appeal to this Court. CRENNAN AND BELL JJ. In New South Wales, the statute that regulates the legal profession imposes a restriction on the maximum costs that one party may recover from another in connection with a claim for personal injury damages in which the amount recovered on the claim does not exceed $100,000 ("small claims"). The scheme was introduced as Div 5B of Pt 11 of the Legal Profession Act 1987 (NSW) ("the 1987 LP Act") in a Schedule to the Civil Liability Act 2002 (NSW) ("the Liability Act"). The 1987 LP Act was repealed by the Legal Profession Act 2004 (NSW) ("the 2004 LP Act") and the costs restrictions are now found in Ch 3, Pt 3.2, Div 9 of that Act. The question raised by these appeals is whether the restrictions apply to a small claim for damages for personal injury suffered as the result of an act done with intent to cause injury or death. The answer turns on the meaning of the words "personal injury damages" contained in s 198C(1) of the 1987 LP Act (now s 337(1) of the 2004 LP Act). Factual background The respondents were assaulted at the Narrabeen Sands Hotel by security guards who had been engaged to provide security services at the hotel. The respondents brought proceedings in the District Court of New South Wales claiming damages for the injuries suffered by them in the assaults. In July 2005, AVS Australian Venue Security Services Pty Ltd ("AVS"), the employer of the security guards, was joined as a defendant to the proceedings. AVS later went into liquidation and the appellants, AVS's insurers, were joined as defendants to the proceedings. Following a trial lasting in the order of 22 days, judgment was entered for the respondents. The damages awarded in each case were for an amount less than $100,000. On 22 April 2010, Garling DCJ ordered that the appellants were to pay the respondents' costs. His Honour made a declaration that the costs were subject to s 198D of the 1987 LP Act. Division 5B of Pt 11 of the 1987 LP Act Section 198D55 is the central provision in Div 5B. Section 198D(1)(a) provides that if the amount recovered on a claim for personal injury damages does not exceed $100,000, the maximum costs for legal services provided to a plaintiff are fixed at 20% of the amount recovered or $10,000, whichever is greater. Sections 198E and 198F provide exceptions to the cap in the case of solicitor and own client costs that are the subject of an agreement that complies with the statute, and costs incurred after the date of a reasonable offer of compromise that is not accepted by the other party. Section 198G permits the court to exclude from the cap costs for legal services provided in response to 55 Section 338 of the 2004 LP Act makes provision in substantially the same terms as s 198D of the 1987 LP Act. actions taken by the other party that were not reasonably necessary for the advancement of that party's case. As noted, Div 5B is a scheme that restricts the recovery of costs in connection with claims for "personal injury damages". That expression is described for the purposes of Div 5B in s 198C(1) as follows: "personal injury damages has the same meaning as in Part 2 of the [Liability Act]." The Liability Act defines "personal injury damages" for the purposes of Pt 2 in s 11: "In this Part: injury means personal injury and includes the following: pre-natal injury, impairment of a person's physical or mental condition, disease. personal injury damages means damages that relate to the death of or injury to a person." The heading of Pt 2 is "Personal injury damages". Part 2 applies in respect of awards of personal injury damages except those that are excluded from its operation by s 3B56. Section 3B(1)(a) in Pt 1 of the Liability Act states that the provisions of the Liability Act "do not apply to or in respect of civil liability (and awards of damages in those proceedings)" in the case of liability for an intentional act done by a person with intent to cause injury or death or with respect to a sexual assault or other sexual misconduct. This is one of a number of exclusions for which s 3B(1) provides. Procedural history Garling DCJ reasoned that the respondents' claims were for "personal injury damages" for the purposes of s 198D because each was a claim for damages relating to injury to a person within the meaning of s 11 of the Liability Act, as picked up by s 198C(1). The New South Wales Court of Appeal (Hodgson and Basten JJA and Sackville AJA) allowed the respondents' appeals against that part of the costs orders which declared that the costs were subject to s 198D. The Court of 56 Liability Act, s 11A(1). Appeal interpreted the words "has the same meaning as in Part 2 of the [Liability Act]" as applying the words of the definition in s 11 by reference to their application in Pt 2 of the Liability Act57. The Court of Appeal made a declaration that the legal costs incurred by the respondents were not subject to s 198D of the 1987 LP Act, nor to s 338 of the 2004 LP Act. On 9 December 2011, the appellants were given special leave to appeal from the order of the Court of Appeal. Their appeals were heard together with the appeal in New South Wales v Williamson58, which raised the same constructional question. These reasons should be read with those in Williamson. For the reasons that follow, we would dismiss the appeal. The 1987 LP Act or the 2004 LP Act? The costs orders were made by Garling DCJ on 22 April 2010. The 1987 LP Act was repealed by the 2004 LP Act, which commenced on 1 October 2005. Transitional provisions provided for the continued application of Div 5B of Pt 11 of the 1987 LP Act to a matter if the client first instructed the law practice in the matter before 1 October 200559. Garling DCJ applied the 1987 LP Act. The appellants submitted that his Honour was correct to do so. This had been a common position below. Basten JA thought that the "matter" under the transitional provisions was the claim for party and party costs and that the 2004 LP Act applied. The respondents adopted Basten JA's analysis and in their written submissions asserted that the question should be determined by reference to the 2004 LP Act. The operative provisions of the two Acts are identical in their application to the appeals. Little attention was devoted to the operation of the transitional provisions on the hearing of the appeals. There are differences between the two schemes that are not raised by these appeals60, which make it appropriate to leave consideration of the effect of the transitional provisions to an occasion when it is in point. 57 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [49] per Basten JA (Hodgson JA agreeing at [1]), [71] per Sackville AJA. 58 [2012] HCA 57. 59 2004 LP Act, Sched 9, cl 18(1). 60 Under s 338A of the 2004 LP Act, there is provision for the maximum costs fixed under Div 9 of Pt 3.2 to be increased in the case of certain claims heard in the District Court. No equivalent provision was made under Div 5B of Pt 11 of the 1987 LP Act. The appellants' submissions were based on Div 5B of Pt 11 of the 1987 LP Act and the Liability Act as enacted. In their submission, the meaning of the expression "personal injury damages" had not been affected by later amendments including those introduced in December 2002 by the Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) ("the Personal Responsibility Act"). There is no reason to consider that the meaning of "personal injury damages" has changed as the result of any of the amendments that have been made to the Liability Act, although the relationship between the two Acts may be clearer as a result of the amendments. The legislative history Division 5B of Pt 11 was inserted into the 1987 LP Act by Sched 2 to the Liability Act. As enacted, s 198C(1) provided that "personal injury damages has the same meaning as in the [Liability Act]." At the time, the Liability Act consisted of two Parts. Part 1 was headed "Preliminary" and contained a definition section. Part 2 was headed "Personal injury damages" and contained provisions imposing restrictions of various kinds on the award of damages in claims for personal injury damages whether the claim was in tort, contract or otherwise. The expression "personal injury damages" was defined in s 3 to mean "damages that relate to the death of or injury to a person caused by the fault of another person." "Fault" was defined to include an act or omission. "Injury" was defined to mean "personal or bodily injury" and to include "pre-natal injury", "psychological or psychiatric injury" and "disease". Under s 9(2), statutory schemes governing compensation for motor accidents, work injuries, dust diseases, victims support and rehabilitation, discrimination and sporting injuries, together with sums paid under superannuation schemes or insurance policies or under the Industrial Relations Act 1996 (NSW), were excluded from the operation of Pt 2 of the Liability Act. Importantly, s 9(2)(a) excluded from the operation of Pt 2: "an award where the fault concerned is an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct". The Liability Act was assented to on 18 June 2002. It operated with retrospective effect from 20 March 200261. This was the date on which the Premier of New South Wales released a Ministerial statement, titled "Public liability insurance", announcing the measures to be enacted in the proposed civil liability legislation. An extract from the statement is set out in Basten JA's reasons. The Premier referred in the statement to "the number of small claims 61 Liability Act, s 2. that are argued in a way that drives up legal costs and makes insurance more expensive." One way to address that problem was said to be "to cap legal costs for small claims to a proportion of the claim."62 The restrictions on the recovery of party and party costs inserted into the 1987 LP Act by the Liability Act also operated with retrospective effect. They applied to legal services provided on or after 7 May 2002. On that date, the Premier announced the release of the draft Civil Liability Bill 200263 ("the Liability Bill"). In his second reading speech for the Liability Bill, the Premier described it as implementing "stage one of the Government's tort law reforms." The need for reform was said to be "vital to the survival of our community" in light of "the damage that the public liability crisis is doing to our sporting and cultural activities, small businesses and tourism operators, and our local communities." The second stage of the tort law reform program was proposed to be introduced in the next session of the Parliament and to address "broad-ranging reforms to the law of negligence."64 Reference was made to the "cap on fees" under the amendments to the 1987 LP Act. This, it was said, would "promote efficiency on the part of the legal profession and help to contain claims costs."65 In conclusion, the Liability Bill was said to "build[] on the Government's work with the insurance industry and other jurisdictions to find solutions for people affected by the public liability crisis."66 The second stage of the reforms initiated by the Liability Act was effected by the Personal Responsibility Act67. It was enacted not long after the Final 62 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [41]. 63 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2085. 64 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2085. 65 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2087. 66 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2088. 67 The relevant provisions of the Personal Responsibility Act commenced on 6 December 2002. Report of the Commonwealth committee chaired by Justice Ipp was published68. The amendments introduced by the Personal Responsibility Act included Pt 1A, which contains a statement of the principles governing the determination of civil liability for the negligent infliction of harm. Provisions were also introduced dealing with mental harm69, proportionate liability70, the liability of public and other authorities71, intoxication72, self-defence and recovery by criminals73, good Samaritans74, volunteers75 and apologies76. These provisions were not confined to civil liability for personal injury or death. The award of "personal injury damages" continued to be governed by Pt 2. The definitions of "personal injury damages" and "injury" were removed from Pt 1 and inserted into Pt 2 in s 11. The definition of "personal injury damages" no longer contained reference to fault. "Personal injury damages" was now defined to mean "damages that relate to the death of or injury to a person." The Personal Responsibility Act effected a consequential amendment to the 1987 LP Act77. The description of "personal injury damages" in s 198C(1) was omitted and a new description was inserted. Section 198C(1) now provided "personal injury damages has the same meaning as in Part 2 of the [Liability Act]." Section 9 of the Liability Act was repealed. In its place, s 3B was inserted into Pt 1. Section 3B excluded the provisions of the Liability Act from applying to or in respect of civil liability under statutory schemes for compensation which largely corresponded to the exclusions under the former s 9. Relevantly, s 3B(1)(a) excluded from the provisions of the Liability Act the civil 68 Review of the Law of Negligence: Final Report, (2002). 69 Liability Act, Pt 3. 70 Liability Act, Pt 4. 71 Liability Act, Pt 5. 72 Liability Act, Pt 6. 73 Liability Act, Pt 7. 74 Liability Act, Pt 8. 75 Liability Act, Pt 9. 76 Liability Act, Pt 10. 77 Personal Responsibility Act, Sched 4, cl 4.5. liability of a person "in respect of an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct". The Liability Act has been further amended in respects to which it is not necessary to refer, save to note the insertion in Pt 2 of s 15B and the amendment to s 18(1) in 200678. Section 15B makes provision for the award of damages for the loss of capacity to provide domestic services. The amendments made to s 18(1) were to preclude the award of interest on damages under s 15B. The exclusion of the provisions of the Liability Act with respect to the civil liability of a person for an intentional act done with intent to cause injury or death under s 3B(1)(a) was now subject to an exception in the case of s 15B and s 18(1) (in its application to the award of s 15B damages)79. The effect of the 2006 amendments is that Pt 2 now applies to the award of damages with respect to the loss of capacity to provide domestic services that relate to the death of or injury to a person arising from an intentional act done with intent to cause injury or death. The Court of Appeal Basten JA gave the leading judgment in the New South Wales Court of Appeal, with which Hodgson JA agreed. His Honour considered that the words in s 198C(1) "personal injury damages has the same meaning as in Part 2 of the [Liability Act]" admitted of a "broader inquiry" than if the provision read "personal injury damages as defined in"80. In ascertaining that meaning, his Honour took into account the context of the definition in the source statute81 and that "the cost-capping provisions were seen as part of a single package, having the same justification as the controls being imposed on awards of damages."82 The incorporation of the meaning of "personal injury damages" in the Liability Act indicated a legislative intention that the scope and operation of the expression derive from the source statute83. His Honour concluded that the description of "personal injury damages" in s 198C(1) of the 1987 LP Act picks 78 Civil Liability Amendment Act 2006 (NSW). 79 Civil Liability Amendment Act 2006 (NSW), Sched 1 [1]-[4]. 80 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [35]. 81 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [32]-[33] citing Producers' Co-Operative Distributing Society Ltd v Commissioner of Taxation (NSW) (1947) 75 CLR 134 at 137; [1948] AC 210 at 213. 82 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [49]. 83 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [59]. up the words of the definition in the Liability Act in their application under that Act84 with the result that a party injured by intentional tortious conduct is not subject to the costs cap85. Sackville AJA also concluded that the description of "personal injury damages" in s 198C(1) means personal injury damages of the kind to which Pt 2 of the Liability Act applied86. His Honour, too, took into account that Div 5B of Pt 11 of the 1987 LP Act was enacted as "part of a broader statutory scheme for limiting the costs of personal injury claims" and that the scheme did not apply to awards of damages for personal injuries caused by intentional acts87. His Honour characterised claims in negligence for personal injury as "high volume litigation conducted or capable of being conducted along largely standardised lines", and which are usually brought against insured defendants88. This was by way of contrast with claims arising from the intentional infliction of injury89. This contrast highlights a rationale for capping costs in claims in negligence for personal injury which does not readily apply to claims arising from intentional torts. Five weeks after judgment was delivered in these appeals, a differently constituted New South Wales Court of Appeal (Hodgson, Campbell and Macfarlan JJA) gave judgment in State of New South Wales v Williamson90. The claim in Williamson was for damages for personal injury sustained in an assault and damages for false imprisonment. The latter included claims for the loss of liberty, loss of dignity and exemplary damages. The claim was settled and judgment entered for the plaintiff by consent for an undifferentiated sum. Costs were to be assessed or agreed91. Resolution of the present question was not determinative on the view that any of the judges took in Williamson. However, Campbell and Macfarlan JJA both doubted the correctness of the construction 84 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [49]. 85 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [59]. 86 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [71]. 87 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [73]. 88 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [74]. 89 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [75]. 90 [2011] NSWCA 183. 91 State of New South Wales v Williamson [2011] NSWCA 183 at [16]. adopted by the Court of Appeal in these proceedings. Hodgson JA, who sat on each appeal, adhered to his earlier agreement with Basten JA92 and gave additional reasons for that conclusion. His Honour took into account that s 198C was introduced into the 1987 LP Act as part of "a single package, addressing a perceived crisis in public liability insurance". He considered that the phrase "'the same meaning as in the [Liability Act]' ... could be understood as directing attention to the meaning effectually given in the [Liability Act], and thus as incorporating the limitations" on its application93. Campbell JA made much the same point as Sackville AJA in these appeals respecting the distinction between small claims in negligence, which fit a "fairly common pattern", and small claims for damages for assault, which do not94. His Honour viewed the enactment of the costs restrictions as part of a single scheme and remarked that the imposition of a cap on costs in claims for assault did not appear to come within the mischief to which the Liability Act was principally aimed95, which he identified as the increasing costs of insurance premiums. He noted that insurance for intentional torts will usually be unprocurable96. His Honour went on to say this97: "However, it is the words of the statute that are the starting point in statutory construction. While those words are to be construed in their context (which includes the objective of the legislation in question), clear words in the statute will prevail." Macfarlan JA agreed with Campbell JA. His Honour recognised the "contextual and policy arguments" favouring the views expressed by the Court of Appeal in the present case but considered the text of the 2004 LP Act to be clear. His Honour said that the meaning of "personal injury damages" is found in the 92 State of New South Wales v Williamson [2011] NSWCA 183 at [3]. 93 State of New South Wales v Williamson [2011] NSWCA 183 at [4] (emphasis in original). 94 State of New South Wales v Williamson [2011] NSWCA 183 at [29]. 95 State of New South Wales v Williamson [2011] NSWCA 183 at [29], [79]. 96 State of New South Wales v Williamson [2011] NSWCA 183 at [29]. 97 State of New South Wales v Williamson [2011] NSWCA 183 at [29]. definition, but the scope of the application of the expression is a separate question98. His Honour considered that99: "the literal meaning of the text of a statutory provision must prevail unless it can be disregarded upon the ground that that literal meaning gives rise to an absurdity or the text is sufficiently tractable to accommodate the meaning suggested by contextual or policy considerations". The submissions The parties' submissions mirrored the differing views of the members of the Court of Appeal in these appeals and in Williamson. The appellants contended that "the ordinary meaning of [the statutory language] plainly indicated that the Legal Profession Acts were employing the meaning of an expression found (and clearly defined) in another Act." The appellants were critical of the Court of Appeal's recourse to extrinsic materials "to discern an intended meaning other than the ordinary meaning conveyed by the statutory language". The respondents contended that the Court of Appeal was correct to take into account that Div 5B of Pt 11 of the 1987 LP Act had been enacted as part of a scheme with the Liability Act and to give a purposive construction to the provision. Statutory construction involves the identification of the purpose of a statute or a statutory provision. A court undertaking that task is concerned with the assignment of the legal meaning to the words of the text, a task that will usually, but not always, correspond with the ordinary grammatical meaning of the text. In the joint reasons in Project Blue Sky Inc v Australian Broadcasting Authority100, it was said: "However, the duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond 98 State of New South Wales v Williamson [2011] NSWCA 183 at [118]. 99 State of New South Wales v Williamson [2011] NSWCA 183 at [119] citing Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 at 263-265 [27]- [33]; [2010] HCA 23; Catlow v Accident Compensation Commission (1989) 167 CLR 543 at 550; [1989] HCA 43. 100 (1998) 194 CLR 355 at 384 [78] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28 (footnote omitted). with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning." In the last-mentioned respect, their Honours referred with approval to the statement in Mr Bennion's text101: "Furthermore there needs to be brought to the grammatical meaning of an enactment due consideration of the relevant matters drawn from the context (using that term in its widest sense). Consideration of the enactment in its context may raise factors that pull in different ways. For example the desirability of applying the clear literal meaning may conflict with the fact that this does not remedy the mischief that Parliament intended to deal with." Whilst consideration of extrinsic materials should not displace the clear meaning of the text of a provision102, the purpose of a provision may be elucidated by appropriate reference to them103. It has often been said that the clear meaning of the text of a statute or a statutory provision is the surest guide to the meaning of "the intention of the legislature"104, an expression used 101 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 384 [78] per McHugh, Gummow, Kirby and Hayne JJ citing Bennion, Statutory Interpretation, 3rd ed (1997) at 343-344 (footnotes omitted). 102 Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252 at 265-266 [33]-[34] per French CJ, Gummow, Hayne, Crennan and Kiefel JJ. See also Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518 per Mason CJ, Wilson and Dawson JJ; [1987] HCA 12. 103 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 592 [44] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2011] HCA 10. 104 Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 405 per Kitto J; [1967] HCA 31; Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 459 per McHugh and Gummow JJ; [1995] HCA 24; Purvis v New South Wales (2003) 217 CLR 92 at 122-123 [92] per McHugh and Kirby JJ; [2003] HCA 62; Dossett v TKJ Nominees Pty Ltd (2003) 218 CLR 1 at 6 [10] per McHugh J; [2003] HCA 69; Singh v The Commonwealth (2004) 222 CLR 322 at 335-336 [19]-[20] per Gleeson CJ; [2004] HCA 43; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562 at 573 [29] per Gummow and Hayne JJ; [2007] HCA 52; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 47 [47] per Hayne, Heydon, Crennan and Kiefel JJ; [2009] HCA 41. metaphorically105. Nevertheless, it is uncontroversial that in determining the meaning of the text of a statute or provision a court may take into account the general purpose and policy of a provision and, in particular, the mischief that it is intended to remedy106. It was for the latter purpose that the Court of Appeal had recourse to the extrinsic materials. This did not involve error107. The extrinsic materials indicated that the Liability Act was enacted to deal with a perceived problem involving the high cost of negligence claims and the impact of such claims on the cost of insurance. This conclusion is uncontroversial108. Was it right to conclude that Div 5B of Pt 11 of the 1987 LP Act was enacted to remedy the same problem? The extrinsic materials suggest that it was. So does the retrospective operation of the Division. The latter is a strong indication that the scheme was enacted as part of the legislative response to the perceived crisis involving negligence claims. The enactment of Div 5B in a Schedule to the Liability Act and the choice to describe "personal injury damages" by reference to the meaning of the expression in the Liability Act support that conclusion. The definition of "personal injury damages" in the Liability Act is not elaborate and the scope and operation of the Liability Act is clearly stated in s 3B. Something more than economy may be discerned in the choice to incorporate the meaning of the expression in the Liability Act into Div 5B. 105 Zheng v Cai (2009) 239 CLR 446 at 455-456 [28]; [2009] HCA 52. 106 Heydon's Case (1584) 3 Co Rep 7a at 7b [76 ER 637 at 638]; Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ; [1955] HCA 27; Bropho v Western Australia (1990) 171 CLR 1 at 20 per Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ; [1990] HCA 24; CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ; [1997] HCA 2; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 47 [47] per Hayne, Heydon, Crennan and Kiefel JJ. 107 Bropho v Western Australia (1990) 171 CLR 1 at 20 per Mason CJ, Deane, Dawson, Toohey, Gaudron and McHugh JJ referring, inter alia, to s 15AB of the Acts Interpretation Act 1901 (Cth) and the equivalent provision under s 19 of the Interpretation Act 1984 (WA). The equivalent provision in New South Wales is s 34 of the Interpretation Act 1987 (NSW). See also CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ; Newcastle City Council v GIO General Ltd (1997) 191 CLR 85 at 99 per Toohey, Gaudron and Gummow JJ; [1997] HCA 53. 108 Harriton v Stephens (2006) 226 CLR 52 at 93-94 [134]-[135] per Kirby J; [2006] HCA 15; Roads and Traffic Authority (NSW) v Dederer (2007) 234 CLR 330 at 402-403 [265] per Callinan J; [2007] HCA 42; Insight Vacations Pty Ltd v Young (2011) 243 CLR 149 at 155 [14]; [2011] HCA 16. The Liability Act deals with the award of personal injury damages by courts and tribunals and Div 5B of Pt 11 of the 1987 LP Act deals with claims for personal injury damages. Observing this circumstance does not suggest a reason for concluding that each is not directed to addressing the same problem involving the reduction of the cost of negligence claims. There are features of the conduct of personal injury negligence claims which provide a rationale for the imposition of a cap on legal costs in such claims. They are the features noted by Sackville AJA and Campbell JA to which reference has been made earlier in these reasons. These features are also noted by Mason P in Newcastle City Council v McShane (No 3) with particular reference to the conduct of personal injury litigation by specialist members of the profession in New South Wales109. If, as urged by the appellants, the presumed legislative intent of Div 5B is the achievement of some wider purpose than restricting recovery of costs in small negligence claims, what sensible reason could be advanced for confining the scheme to small claims in which damages for personal injury are sought? The facts in Williamson highlight the irrationality of a cap that applies to an action based on an intentional tort in which a claim is made for personal injury but not to the same action when no such claim is made. Consideration of the mischief with which Div 5B was intended to deal and the express language of s 198C(1) weighs against interpreting that provision as merely picking up the words of the definition in s 11 of the Liability Act. The appellants' construction requires that s 198C(1) be read as if it provided "personal injury damages means 'personal injury damages' as defined in s 11 of the Liability Act". That method of expressly incorporating a definition from another Act is used in s 198C(2)(c), which provides that "work injury damages" is "as defined" in the Workplace Injury Management and Workers Compensation Act 1998 (NSW). A different formulation is employed in the same section with respect to the expression "personal injury damages". It is a formulation that expressly directs attention to the meaning of the expression as in Pt 2 of the Liability Act. In its terms, the definition in s 11 applies to Pt 2. The meaning of the expression "personal injury damages" in Pt 2 is plainly circumscribed by s 3B of the Liability Act. The clear purpose of s 198C(1), so expressed, is to confine "personal injury damages" to damages relating to the death of or injury to a person (in the extended way injury is defined) to which Pt 2 of the Liability Act applies. The rationale for such confinement has already been explained. This construction of s 198C(1) reflects the evident purpose for which Div 5B was enacted, gives full effect to the statutory language of s 198C(1) and avoids unintended, if not potentially capricious, results. 109 Newcastle City Council v McShane (No 3) (2005) 65 NSWLR 155 at 164 [28]. One further submission needs to be mentioned. Section 198C(2) of the 1987 LP Act provides that Div 5B does not apply with respect to costs under various statutory schemes: Pt 2 of the Victims Support and Rehabilitation Act 1996 (NSW); the Motor Accidents Act 1988 (NSW) or Motor Accidents Compensation Act 1999 (NSW); the Workplace Injury Management and Workers Compensation Act 1998 (NSW) and the Dust Diseases Tribunal Act 1989 (NSW). The exclusions in s 198C(2) overlap but are not co-extensive with those in s 3B(1) of the Liability Act. The appellants submit that had it been the intention to exclude small claims for personal injury damages resulting from acts done with intent to cause injury or death from the operation of Div 5B, it might be expected that an exclusion in the same terms as s 3B(1)(a) of the Liability Act would have been included in s 198C(2). The submission does not advance the argument either way. If the correct meaning of s 198C(1) is as the respondents contend, there was no occasion to expressly exclude claims involving intentional torts. What function do the exclusions serve? Division 5B applies to the recovery of party and party costs where the amount recovered on the claim does not exceed the threshold, whether the amount is recovered following trial or by way of compromise. At the time it was enacted, s 198C(2) operated to exclude from the regime of Div 5B the recovery of costs under statutory schemes that make discrete provision for the recovery of party and party costs110. The Motor Accidents Compensation Act 1999 (NSW) made such provision, although it may be noted that its predecessor did not. Basten JA's conclusion that the exclusions were provided by way of abundant caution to meet any argument of implied repeal should be accepted111. So should the Court of Appeal's conclusion that for the purposes of s 198C(1) of the 1987 LP Act (now s 337(1) of the 2004 LP Act) the meaning of "personal injury damages" in Pt 2 of the Liability Act was not 110 See s 35 of the Victims Support and Rehabilitation Act 1996 (NSW) and the Victims Support and Rehabilitation Rule 1997 (NSW); s 149 of the Motor Accidents Compensation Act 1999 (NSW) and the Motor Accidents Compensation Regulation (No 2) 1999 (NSW) (replaced in 2005 by the Motor Accidents Compensation Regulation 2005 (NSW)); s 337 of the Workplace Injury Management and Workers Compensation Act 1998 (NSW) and the Workers Compensation (General) Regulation 1995 (NSW) (now contained in the Workers Compensation Regulation 2010 (NSW)); s 29(2) of the Dust Diseases Tribunal Act 1989 (NSW) (s 29 was repealed in 2005 and the Act does not presently restrict the recovery of costs). 111 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [59]. changed by a sidewind by the 2006 amendments to that Part respecting damages for the loss of capacity to provide personal services112. Orders For the reasons given, the three appeals should be dismissed with costs. 112 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [56] per Basten JA, [80] per Sackville AJA. KIEFEL J. The facts, statutory materials and legislative history relevant to these appeals are comprehensively surveyed in the judgments of French CJ and Hayne J and of Crennan and Bell JJ and it is not necessary for me to repeat them all. Each of the respondents suffered injuries as a result of an assault. Each received an award of damages of less than $100,000. An order for costs was made in favour of each respondent on 22 April 2010 in the District Court of New South Wales. The question posed by these appeals is whether the orders for costs are subject to the limitation imposed by s 198D of the Legal Profession Act 1987 (NSW) ("the LP Act"). That question turns upon the meaning to be given to the term "personal injury damages" for the purposes of the LP Act. The legislation in summary At the outset it is necessary to mention that the LP Act was repealed by the Legal Profession Act 2004 (NSW)113, which provides for restrictions on legal costs in terms similar to the LP Act. The determination of these appeals is properly conducted by reference to the LP Act, for the reasons given in the joint judgments114. The LP Act dealt with a number of subjects affecting the conduct and the practice of legal practitioners. Part 11 dealt with legal fees and other costs. Upon its enactment115, the Civil Liability Act 2002 (NSW) ("the Liability Act") contained provisions concerning the assessment of damages in cases involving personal injuries. At the same time, the Liability Act inserted Div 5B, entitled "Maximum costs in personal injury damages matters", into Pt 11 of the LP Act116. By s 198C(2), the Division was not to apply to costs payable under or pursuant to certain specified legislation, to which reference will be made later in these reasons117. Section 198D(1) in Div 5B fixed the maximum costs for legal services provided to a party in connection with a claim for personal injury damages where the amount recovered on the claim did not exceed $100,000. The costs were fixed at 20 per cent of the amount recovered or $10,000, whichever was greater. 113 Legal Profession Act 2004 (NSW), s 735 and Sched 1, as enacted. 114 Reasons of French CJ and Hayne J at [19]-[22], reasons of Crennan and Bell JJ at 115 The Civil Liability Act 2002 (NSW) was assented to on 18 June 2002, but is taken to have commenced on 20 March 2002: s 2. 116 Civil Liability Act 2002, s 8, Sched 2, item 2.2 [2]. Sub-section (4) provided that a legal practitioner was not entitled to be paid an amount for legal services in excess of the maximum stipulated, a court or tribunal could not order the payment of costs in an amount more than the maximum, and a costs assessor could not determine an amount in excess of the maximum. By s 198E(1), Div 5B did not apply to the recovery of costs as between a solicitor or barrister and the solicitor or barrister's client, if recovery was provided for by a costs agreement which complied with Div 3 of Pt 11 of the LP Act. Section 198F(1) provided that Div 5B did not prevent an award, on an indemnity basis, of costs incurred after the date when a reasonable offer of compromise was made if the offer was not accepted. Section 198G allowed a court to order that legal services provided to a party be excluded from the operation of the Division, if they were provided in response to any action on the claim by the other party that was not reasonably necessary. For the purposes of Div 5B, the term "personal injury damages" was defined in s 198C(1) of the LP Act to have "the same meaning as in the [Liability Act]". "Personal injury damages" was defined in s 3 in Pt 1 of the Liability Act to mean "damages that relate to the death of or injury to a person caused by the fault of another person". "Injury" was further defined, as were "damages" and Part 2 of the Liability Act was entitled "Personal injury damages" and contained provisions regulating the assessment of damages associated with actions for personal injuries caused by negligence, including damages for economic and non-economic loss. By s 10, a court could not award damages, or interest on damages, to a claimant contrary to Pt 2. Section 9(1) had the effect that Pt 2 did not apply where an award of personal injury damages was excluded from the operation of the Part. The first of the eight classes of award excluded by s 9(2) was "an award where the fault concerned is an intentional act that is done with intent to cause injury or death or that is sexual assault or other sexual misconduct". The Civil Liability Amendment (Personal Responsibility) Act 2002 (NSW) ("the Personal Responsibility Act") effected substantial amendment to the Liability Act by expanding the operation of the Liability Act, although not in such a way as to affect its terms or operation so far as is relevant to these appeals. The amendments retained Pt 2 as the Part dealing with personal injury damages. The definition of "personal injury damages" was moved into Pt 2 in s 11 and amended to read "personal injury damages means damages that relate to the death of or injury to a person". The reference to fault was excluded. The definition of "injury" changed, but not in any presently material respect. Section 11A applied 118 Civil Liability Act 2002, s 3. Pt 2 to an award of personal injury damages, except where an award was excluded from the operation of Pt 2 by s 3B, which appeared in Pt 1. Section 3B(1)(a) excluded civil liability in respect of intentional acts and sexual assaults, in substantially the same terms as s 9(2)(a) had done. The Personal Responsibility Act also amended the definition of "personal injury damages" in s 198C(1) of the LP Act to read "personal injury damages has the same meaning as in Part 2 of the [Liability Act]". The issue Because the injuries suffered by the respondents were caused by intentional acts, a court's assessment of damages arising from the injuries is not subject to the Liability Act, by reason of the express exclusion in s 3B(1)(a). However, the LP Act did not expressly exclude from the application of Div 5B costs for legal services provided to a party in connection with a claim for personal injury damages in respect of intentional acts. The question is whether the LP Act may be taken, nevertheless, to have intended to exclude such costs because of its reference in the definition in s 198C(1) to personal injury damages as having "the same meaning as in" the Liability Act or, more particularly, Pt 2 thereof. "Personal injury damages" as defined in the Liability Act were damages relating to the death of or injury to a person. Without more, Div 5B of Pt 11 of the LP Act would apply to the costs for the legal services provided to the respondents in connection with their claims. So much was conceded by Basten JA in the Court of Appeal119. However, if the words in s 198C(1) of the LP Act, "the same meaning as in", encompassed the application of the Liability Act, which is to say that the Liability Act did not apply to personal injuries caused by intentional acts, then it may be that Div 5B of Pt 11 of the LP Act would not apply to limit the costs that the respondents could recover. In the Court of Appeal, Basten JA, with whom Hodgson JA and Sackville AJA agreed120, held that the definition in s 198C(1) extended beyond the definition of the expression "personal injury damages" in the Liability Act to the scope of its application in Pt 2121. The matter which appears to have been most influential to the conclusion reached by their Honours was that the costs limiting provisions of the LP Act were part of a "broader scheme"122 or a "single 119 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [25]. 120 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [1], [80]. 121 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [59]. 122 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [73] per Sackville AJA. package"123 in conjunction with the Liability Act, that scheme being directed to a perceived crisis in public liability insurance and being one from which awards of damages for personal injuries by intentional acts were excluded. Approaches to statutory construction The fundamental object of statutory construction is to ascertain legislative intention, understood as the intention that the courts will impute to the legislature by a process of construction, by reference to the language of the statute viewed as a whole124. The starting point for this process of construction is the words of the provision in question read in the context of the statute. Context is also spoken of in a broader sense as including the general purpose and policy of the legislation, in particular the mischief to which the statute is directed and which the legislature intended to remedy125. It is legitimate to resort to materials outside the statute, but it is necessary to bear in mind the purpose of doing so and the process of construction to which it is directed. That purpose is, generally speaking, to identify the policy of the statute in order to better understand the language and intended operation of the statute. An understanding of legislative policy by these means does not provide a warrant for departing from the process of statutory construction and attributing a wider operation to a statute than its language and evident operation permit. The LP Act – language, context and purpose The reference in s 198C(1) of the LP Act to the term "personal injury damages" as having the same meaning as in the Liability Act obviously directs attention to the definition of that term in the Liability Act. The words "as in" may be read as "as given in". Section 198C(1) did not refer to the "meaning and effect" of the Liability Act126, which may have encompassed the operation of that 123 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [49] per Basten JA. 124 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304 per Gibbs CJ, 320 per Mason and Wilson JJ; [1981] HCA 26; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69]; [1998] HCA 28. 125 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2; Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 46-47 [47]; [2009] HCA 41. 126 See State of New South Wales v Williamson [2011] NSWCA 183 at [4(2)] per Hodgson JA, where his Honour understood the words of s 198C(1) to direct attention to the "meaning effectually given" in the Civil Liability Act 2002. Act. Without more, the words in s 198C(1) conveyed that the term was to have the meaning given to it in the Liability Act by way of definition. A construction which is consistent with the ordinary meaning and grammatical sense of the words used in s 198C(1) has a strong advantage over other possible constructions127. The LP Act also identified the circumstances in which the fixing of maximum costs would not apply, as has been previously mentioned128. Not all legal costs payable in connection with claims for personal injury damages were subject to Div 5B. Section 198C(2) of the LP Act specifically provided that Div 5B did not apply so as to limit the costs payable under certain statutes. There were four statutes identified, including the Victims Support and Rehabilitation Act 1996 (NSW) and the Workplace Injury Management and Workers Compensation Act 1998 (NSW). The most likely explanation for the presence of the four exclusions in s 198C(2) is that they identified existing legislative costs regimes so as to avoid any doubt about whether those regimes would continue to have effect following the introduction of Div 5B129. So understood, the exclusion of legal costs associated with claims arising from intentional acts is explicable. It remains the case, however, that legal costs charged in connection with such claims have not been excluded from the operation of Div 5B. The evident purpose of the LP Act was to contain and limit the legal costs which may have been charged on recovered claims for personal injury damages. The limit imposed by Div 5B would have applied to orders for costs made by a court following upon an award of damages, but it was not limited to that circumstance. It would also have applied to legal costs associated with claims which had not been subjected to court processes. It applied to any legal costs charged for services in connection with a claim for personal injury damages where the amount recovered did not exceed $100,000. In all these instances, the amount recovered was the essential criterion. The LP Act – part of a broader scheme? The evident purpose of the Liability Act is to control, in the sense of limit, the amount of damages which may be awarded in personal injury claims. So 127 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321. 129 As Basten JA observed in the Court of Appeal: Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [59]. much was confirmed by the Second Reading Speech to the Liability Act130, to which the Court of Appeal referred131. In the Second Reading Speech, it was also pointed out that awards for personal injuries caused by intentional acts, or acts involving sexual assault, were deliberately excluded from the purview of the Liability Act because compensation for injuries arising from serious criminal acts should not be subject to limitation132. So much may be inferred from the very fact of the exclusion. The Second Reading Speech also identified a wider common purpose for the controls effected by the Liability Act and the limits placed on costs by the LP Act. The Liability Act was enacted, and the LP Act amended, in response to what was perceived to be a crisis in the affordability of public liability insurance133, which was adversely affecting many bodies and small businesses in the community. The crisis had been brought about by substantial increases in premiums charged for insurance of that kind. Premiums are directly affected by the sums insurers are required to pay by way of indemnity for awards of damages and legal costs following upon claims for personal injuries caused by negligence. The Court of Appeal clearly considered that the identification of a broader purpose meant that the two statutes formed part of a statutory scheme. In one sense that is correct, as they were both directed to that common purpose. The statutes were also connected by their terms. The drafting means chosen effected amendments to the LP Act via the medium of the Liability Act, and the LP Act referred to the Liability Act for the definition of "personal injury damages". The scheme identified by the Court of Appeal contained the particular element of excluding awards of personal injury damages for injuries resulting from an intentional act. However, that element is found only in the Liability Act. For a scheme to be identified, it must involve two statutes not just having a wider common purpose and some connection, but operating together. If the operation of each statute could be said to depend upon the other, there would be a warrant for construing them together in this way134. In that event, it might be said that the 130 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2086. 131 Cross v Certain Lloyds Underwriters [2011] NSWCA 136 at [46]-[48]. 132 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2086. 133 New South Wales, Legislative Assembly, Parliamentary Debates (Hansard), 28 May 2002 at 2085. 134 See, for example, Sweeney v Fitzhardinge (1906) 4 CLR 716 at 726; [1906] HCA definition in s 198C(1) of the LP Act should be read to encompass the operation of the Liability Act. It does not follow from the identification of a broader purpose beyond the more immediate objects of each of the two statutes, nor from the limited connection between them, that they were interdependent in any meaningful way. It is necessary to consider each of the statutes and the means by which they are intended to achieve their respective objectives, in order to determine whether they form part of a single scheme. There are a number of indicia which tell against the LP Act and the Liability Act operating in this way. When it is said that statutes form part of a legislative scheme such that they should be read together, the statutes usually deal with the same subject matter. Here the LP Act and the Liability Act each had its own sphere of operation by reference to different subject matter: the Liability Act was concerned with the calculation of awards of damages; the LP Act's concern was with legal costs associated with all claims for personal injury damages where the sum recovered was no more than $100,000. The LP Act may have operated on orders for costs made following awards assessed in accordance with the Liability Act, but it was not limited in its operation to that circumstance. The size of the sum recovered was the only criterion identified by the LP Act, apart from the existence of a claim for personal injury damages and legal costs payable in connection with it, for the application of Div 5B. That criterion was not connected with any matter in the Liability Act. Further, there was no symmetry between the exclusions effected by each of the statutes. There were many more statutes and types of awards excluded by s 3B of the Liability Act than there were statutes excluded from the costs regime of Div 5B of Pt 11 of the LP Act. In the LP Act, the evident intention was to exclude only costs provided under existing legislative costs regimes. No intention is evident to exclude costs in other areas or to align the exclusion of costs to the awards excluded by the Liability Act. These indicia confirm that the two statutes operated independently of each other and provide no warrant for reading the LP Act by reference to the application of the Liability Act. Whether a claim resulted in an award of damages which was, or was not, calculated by reference to the Liability Act had no bearing upon the operation of Div 5B of Pt 11 of the LP Act. Division 5B was concerned with the proportion between the amount of the damages recovered and the legal costs associated with the claim that resulted in recovery. Division 5B operated universally with respect to legal costs where a claim resulted in recovery of damages of no more than $100,000. The operation of Div 5B read in this way is nevertheless consistent with the broader purpose of reducing the cost of public liability insurance. Division 5B sought to achieve this purpose by means which differed from those employed by the Liability Act. Nevertheless, in so far as the two statutes were both directed to that purpose, it may be expected that they would not operate inconsistently with each other. Division 5B of Pt 11 of the LP Act, applied universally, was not inconsistent with the purpose underlying the exclusion of awards of damages for personal injuries resulting from intentional acts, namely that compensation for such damages not be limited. So far as concerns the costs of legal services in seeking an award, subject to the exceptions in Div 5B, a claimant's lawyer could not charge more than the maximum amount specified except by agreement with the claimant and the other party could not recover more than that amount in the event that the claimant was unsuccessful. There is no basis for construing the term "personal injury damages" other than by reference to the definition given in the Liability Act. I agree with the orders proposed by French CJ and Hayne J.
HIGH COURT OF AUSTRALIA SUNLAND GROUP LIMITED & ANOR APPELLANTS AND GOLD COAST CITY COUNCIL RESPONDENT Sunland Group Limited v Gold Coast City Council [2021] HCA 35 Date of Hearing: 5 August 2021 Date of Judgment: 10 November 2021 ORDER Appeal dismissed with costs. On appeal from the Supreme Court of Queensland Representation S L Doyle QC with S J Webster and C M Doyle for the appellants (instructed by Holding Redlich) G J Gibson QC with M J Batty and A G Psaltis for the respondent (instructed by HopgoodGanim Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Sunland Group Limited v Gold Coast City Council Local government – Town planning – Development approvals – Where second appellant purchased undeveloped parcel of land in 2015 – Where preliminary approval granted in 2007 for development project pursuant to Integrated Planning Act 1997 (Qld) – Where preliminary approval contained "conditions" regarding payment of infrastructure contributions by developers to respondent Council – Where development permits granted in 2016 – Where Integrated Planning Act introduced new regime permitting local governments to levy infrastructure charges by notice – Where s 6.1.31(2)(c) of Integrated Planning Act preserved as interim measure existing regime of imposing condition on development approval requiring infrastructure contributions – Where new regime maintained by Sustainable Planning Act 2009 (Qld) and Planning Act 2016 (Qld) – Where respondent Council issued infrastructure charges notices in accordance with new regime following issue of development permits – Whether conditions in preliminary approval imposed liability to pay infrastructure contributions – Whether conditions proper exercise of power in s 6.1.31(2)(c) of Integrated Planning Act. Words and phrases – "conditions", "development approval", "development permit", "future liability", "infrastructure charges", "infrastructure contributions", "notice alerting the developer to the Council's future intentions", "preliminary approval". Integrated Planning Act 1997 (Qld), ss 3.1.5, 6.1.31. Planning Act 2016 (Qld), ss 119, 121. KIEFEL CJ, KEANE AND GLEESON JJ. The issues that arise in this appeal and the arguments agitated by the parties in relation to their resolution are summarised by Steward J, with whose conclusions we agree. Gratefully adopting his Honour's summary, we can proceed directly to state our reasons for agreeing with his Honour's conclusions and the orders proposed by his Honour. Conditions 13 to 16 of the Preliminary Approval that was granted in 2007 by the Council to the second appellant's predecessors in title did not purport to be, and were not, conditions of the kind authorised by s 6.1.31(2)(c) of the Integrated Planning Act 1997 (Qld) ("the IPA"). They did not purport to "impose a condition ... requiring ... a contribution towards the cost of supplying infrastructure". On the contrary, they expressly gave notice of the Council's then intention to require contributions to infrastructure "at the time application is made for a Development Permit". The point, shortly put, is that the power conferred by s 6.1.31(2)(c) of the IPA was simply not exercised. While it may be accepted that s 6.1.31(2)(c) of the IPA contemplated that a condition requiring a contribution to infrastructure may be imposed in a preliminary approval as a species of development approval, it did not mandate such a course; and Conditions 13 to 16 simply did not "require" anything of the developer by way of contribution. As a matter of the ordinary and natural meaning of words, there is no "requirement" of a contribution where no actual liability is imposed to make the contribution. It is an abuse of language to suggest that Conditions 13 to 16 imposed a present liability to pay a contribution that would be calculated by reference to future events. As Steward J points out in his reasons1, the case of Ashtrail Pty Ltd v Gold Coast City Council2 is an example of a condition of the kind in question made in exercise of the power given under s 6.1.31(2)(c). A comparison between its terms and that in the present case is telling. Giving effect to the ordinary and natural meaning of Conditions 13 to 16 avoids the distinctly awkward aspect of the appellants' attempts to establish that a liability had been imposed in any meaningful way when the data necessary to quantify the liability were not yet available or even identified. Such data cannot be available until a development permit approves the carrying out of the works in respect of which contributions to infrastructure will be required. The evident purpose of Conditions 13 to 16 was to ensure that the developer was placed squarely on notice that contributions to infrastructure will be required and when that requirement will be imposed. The appellants argued that Conditions 13 to 16 should be understood to be conditions because they were described as "conditions" and a mere notification of something to be done in the future is not a condition authorised by s 6.1.31(2)(c) and so had no statutory foundation. The argument assumes as a premise that the Council must be taken to have entered upon an exercise of the power under s 6.1.31(2)(c). The argument that conditions should be construed to give them practical effect falls into the same category. Both arguments fail to have regard to what s 6.1.31(2)(c) requires if the power it gives is exercised. Further, the appellants' argument fails to appreciate that no specific power was necessary to include in a preliminary approval a notice alerting the developer to the Council's future intentions. Because Conditions 13 to 16 did not require a contribution towards the cost of supplying infrastructure, it is unnecessary to consider the operation of the transitional provisions of the legislation that followed the IPA. GORDON J. Sunland Developments No 22 Pty Ltd ("Sunland 22"), the second appellant, is part of a property development group of companies controlled by the first appellant, Sunland Group Limited. On 29 May 2015, Sunland 22 completed a $60 million purchase of a large parcel of undeveloped land located at Mermaid Beach on the Gold Coast ("the Land"). The Land is within the local government area of the respondent, the Gold Coast City Council ("the Council"). When Sunland 22 purchased the Land it was subject to a preliminary approval granted on 3 May 2007 by the Planning and Environment Court of Queensland under s 3.1.6 of the Integrated Planning Act 1997 (Qld) ("the IPA"), which approved a multi-stage residential development called "Lakeview at Mermaid" ("the Preliminary Approval"). The Preliminary Approval had an initial term of four years3 but has since been extended by the Council. It remains in effect until 2023. Under s 6.1.31(2)(c) of the IPA, the Council had power to impose a condition on a development approval (which included a preliminary approval4) "requiring ... a contribution towards the cost of supplying infrastructure ... under" a planning scheme policy about infrastructure. The determinative question in this appeal is whether the Council exercised that power and imposed conditions requiring infrastructure contributions in the Preliminary Approval. The answer is Sunland's appeal from the decision of the Court of Appeal of the Supreme Court of Queensland, which held that the primary judge erred in declaring, among other things, that the Council had the power to collect infrastructure contributions calculated under and the Preliminary Approval, should be dismissed with costs. in accordance with I agree with Steward J's conclusion that, if the conditions in the Preliminary Approval about contributions towards the cost of supplying infrastructure were purportedly imposed under s 6.1.31(2)(c) of the IPA, the conditions were not an effective exercise of that power; objective criteria or standards fixing such contributions were Preliminary Approval. However, unlike Steward J, I consider that the Council did purport to impose those conditions under s 6.1.31(2)(c) of the IPA. Accordingly, it is necessary to set out my own reasoning. not out the set The second question raised in the appeal – whether the Council is subject to an overriding statutory duty to issue "infrastructure charges notices" under s 119 of the Planning Act 2016 (Qld) – need not be explored. Sunland did not contend IPA, s 3.5.21(1)(a). IPA, Sch 10 para (b) of the definition of "development approval". that the Council lacked power to issue those infrastructure charges notices if the conditions in the Preliminary Approval were not validly imposed pursuant to s 6.1.31(2)(c) of the IPA. Preliminary Approval The Preliminary Approval approved "[t]he development application ... subject to the conditions of approval as contained in Schedule A". Section C of Sch A set out the conditions attached to the Preliminary Approval. This appeal is concerned with the four conditions (Conditions 13 to 16) under the heading "Infrastructure Charges", which purported to provide for contributions towards the cost of supplying infrastructure to be paid by the developer of the Land to the Council. It is sufficient for present purposes to set out Conditions 15 and 16: "15 Contributions toward Water Supply Network Infrastructure shall apply at the time application is made for a Development Permit. The contribution to be paid to Council shall be in accordance with Planning Scheme Policy 3A – Policy for Infrastructure Water Supply Network Developer Contributions. Contributions shall be calculated at rates current at due date of payment. Council acknowledges that credits exist over the site as a consequence of previous payments and that the calculation of this contribution will recognise these existing credits. Contributions toward Sewerage Network Infrastructure shall apply at the time application is made for a Development Permit. The contribution to be paid to Council shall be in accordance with Planning Scheme Policy 3B – Policy for Infrastructure Sewerage Network Developer Contributions. Contributions shall be calculated at rates current at due date of payment. Council acknowledges that credits exist over the site as a consequence of previous payments and that the calculation of this contribution will recognise these existing credits." The planning scheme policies referred to in Conditions 13 to 16 ("the Planning Scheme Policies") were made by the Council under a transitional regime set out in the IPA and had statutory effect pursuant to s 6.1.20 of the IPA. When Sunland 22 purchased the Land in 2015, there was approximately $19 million of existing infrastructure credits applicable to the development approved in the Preliminary Approval. These are the credits referred to in Conditions 15 and 16. Between 16 December 2015 and 30 September 2016, Sunland lodged a series of development applications. The Council granted development permits for each application. The Council issued infrastructure charges notices to Sunland under the then-applicable legislation, the Sustainable Planning Act 2009 (Qld), in respect of each application. The infrastructure charges notices did not assess charges or allow credits in accordance with Conditions 13 to 16 in the Preliminary Approval. Statutory interpretation, instruments and certainty What power the Council had to impose conditions requiring infrastructure contributions is a question of statutory construction. "[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have"5. That duty remains constant, regardless of whether the words of a statutory provision are uncertain or unclear6. "When inconsistencies or ambiguities appear they are dealt with by [c]ourts according to the established principles of statutory interpretation"7. There is no general principle that uncertainty in an instrument made pursuant to power given by an Act spells legal invalidity8. The instrument must, however, "be shown to be within the powers conferred by the statute" under which it purports to be made9. The fact that there is no void-for-vagueness doctrine in Australia is not inconsistent with the proposition that there may be a failure to exercise power pursuant to a statutory provision if, properly construed, the statutory provision requires that the exercise of the power possess certainty in some respect in order for there to be a valid exercise of power10. 5 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 6 Brown v Tasmania (2017) 261 CLR 328 at 373 [149], 471 [452], 487 [507]. 7 Brown (2017) 261 CLR 328 at 471 [452], quoting Kennedy v Lowe; Ex parte Lowe [1985] 1 Qd R 48 at 49. See also R v Holmes; Ex parte Altona Petrochemical Co Ltd (1972) 126 CLR 529 at 562. Television Corporation Ltd v The Commonwealth (1963) 109 CLR 59 at 71. 9 Mixnam's Properties Ltd v Chertsey Urban District Council [1964] 1 QB 214 at 237, cited with approval by Kitto J in Television Corporation (1963) 109 CLR 59 10 Television Corporation (1963) 109 CLR 59 at 71, citing King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 and Cann's Pty Ltd v The Commonwealth (1946) 71 CLR 210. The question then is whether, as a matter of statutory construction, there is a requirement of certainty inherent in the provision pursuant to which the power is exercised11. In this case, the question is whether the provision under which Conditions 13 to 16 were purportedly imposed – s 6.1.31(2)(c) of the IPA – is "to be read as 'requiring certainty of expression as a condition of [its] valid exercise' so that 'in the end, the question comes back to ultra vires'"12. Where the power is a power to impose a charge or price, an objective standard must be prescribed13. The charge or price must be "an ascertainable fact or figure"; it cannot be left as "a matter of estimate, assessment, discretionary allocation, or apportionment, resulting in the attribution of an amount or figure as a matter of judgment"14. If the result is not a charge or price that is fixed, then "the power has not been pursued and is not well exercised"15. Before turning to the proper construction of s 6.1.31(2)(c) of the IPA, it is necessary to notice but reject the approach to construction contended for by Sunland. Sunland's contention that the existence of ambiguity in the instrument does not itself result in invalidity and that, where possible, ambiguity should be resolved against the Council as the drafter of the Preliminary Approval is contrary to principle and precedent. The instrument is to be construed and its validity assessed in accordance with the principles in King Gee Clothing Co Pty Ltd v The Commonwealth16 and Cann's Pty Ltd v The Commonwealth17 and not by recourse to the principles directed at saving bargains between consensual parties18. 11 Television Corporation (1963) 109 CLR 59 at 71. 12 Re JJT; Ex parte Victoria Legal Aid (1998) 195 CLR 184 at 230 [152], quoting Cann's (1946) 71 CLR 210 at 227 and King Gee (1945) 71 CLR 184 at 196. 13 King Gee (1945) 71 CLR 184 at 197. 14 King Gee (1945) 71 CLR 184 at 197. 15 King Gee (1945) 71 CLR 184 at 197. (1945) 71 CLR 184. (1946) 71 CLR 210. 18 Westfield Management Ltd v Perpetual Trustee Co Ltd [2007] HCATrans 367 at lines 5521-5537; see also lines 4391-4398. cf Westfield Management Ltd v Perpetual Trustee Co Ltd [2006] NSWCA 245 at [40], citing Upper Hunter County District Council v Australian Chilling and Freezing Co Ltd (1968) 118 CLR 429 Where there is an exercise of power for the imposition of a charge, the very nature of the power usually necessitates certainty in the imposition of the charge. Exercise of power required certainty infrastructure Under s 6.1.31(2)(c) of the IPA, the Council had power to impose a condition on a development approval "requiring ... a contribution towards the cost of supplying ... under" a planning scheme policy about infrastructure. Under the IPA, a "preliminary approval" and a "development permit" were each types of "development approval"19. A "preliminary approval" to occur20. approved development, but did not authorise development A "development permit" authorised development to occur, relevantly subject to any preliminary approval relating to the development the permit authorised (including any conditions in the preliminary approval)21. The power under s 6.1.31(2)(c) to impose, by instrument, an obligation to make a contribution towards the cost of supplying infrastructure in accordance with a planning scheme policy required that the instrument contain the information needed to identify the amount to be paid. The amount had to be able to be objectively determined and ascertained. If, as here, the amount to be paid was to be calculated at rates applicable on a future day – the "due date of payment" – the future day had to be capable of being ascertained with certainty. The need for certainty with respect to the due date of payment is reinforced by the fact that failure to pay contributions as required by a condition imposed under s 6.1.31(2)(c) amounted to a contravention of a development approval and was, therefore, a development offence22. Proceedings could be brought by way of prosecution for the imposition of a penalty for a development offence23 or for enforcement orders to remedy or restrain the commission of a development offence24, or both25. A person subject to a condition imposed under s 6.1.31(2)(c) IPA, Sch 10 para (b) of the definition of "development approval". IPA, s 3.1.5(1). IPA, s 3.1.5(3). IPA, s 4.3.3(1), Sch 10 definition of "development offence". IPA, s 4.3.18(1). IPA, s 4.3.22(1)(a). IPA, s 4.3.25(2). "is entitled to know exactly what obligations [the condition] imposes"26. "[T]here must be sufficient specification" to enable such a person to comply with their obligations in order for a condition to be validly imposed under s 6.1.31(2)(c) of the IPA27. Power not exercised the heading to 16 under The Council purported to impose Conditions 13 to 16 pursuant to s 6.1.31(2)(c) of the IPA in the Preliminary Approval. The Council imposed "Infrastructure Charges". Conditions 13 Each of Conditions 13 to 16 purported to provide for contributions towards the cost of supplying infrastructure to be paid by the developer of the Land to the Council in accordance with an identified planning scheme policy. The language of important. the conditions (which are The first sentence – infrastructure contributions "shall apply at the time application is made for a Development Permit" – is most naturally read as purporting to impose an immediate obligation, which would crystallise when a subsequent event takes place. The second sentence – "[t]he contribution to be paid to Council shall be in accordance with" the Planning Scheme Policies – expressly identifies the method for quantifying the infrastructure contributions "to be paid"28. The third sentence – "[c]ontributions shall be calculated at rates current at due date of payment" – purports to identify the point in time for determining one necessary integer (applicable rates) for calculating infrastructure contributions. in relevantly identical terms) But the due date of payment, and hence the quantum of the contribution, is objectively unascertainable29 – indeed, it may be at the "discretion" of the Council30. Put in different terms, there is no "sufficient specification"31 nor any "objective standard"32 prescribed in Conditions 13 to 16 (when read with the 26 cf Re JJT (1998) 195 CLR 184 at 230 [155]. 27 cf Plaintiff S156/2013 v Minister for Immigration and Border Protection (2014) 254 CLR 28 at 48 [49]. 28 See IPA, s 6.1.20(2). 29 cf Cann's (1946) 71 CLR 210 at 227. 30 cf King Gee (1945) 71 CLR 184 at 197. 31 cf Plaintiff S156 (2014) 254 CLR 28 at 48 [49]. 32 King Gee (1945) 71 CLR 184 at 197. Planning Scheme Policies) which could be applied to identify the due date of payment. The earliest due date would be the date an application for a development permit is approved. But there is a range of potential due dates and it is not clear from the terms of Conditions 13 to 16 or the Planning Scheme Policies whether the due date is, for example, any of the following dates, or the last of those dates: the date a development permit is approved33; the date a development permit takes the point at which development may commence)34; effect (that being a reasonable time after a development permit is approved or takes effect; a reasonable time after the Council calculates the contribution and requests or demands payment; or as soon as possible after35 the development permit is approved, the development permit takes effect or the Council calculates the contribution and requests or demands payment. Those possibilities are not exhaustive. Indeed, some of the Planning Scheme Policies contemplate that a developer may "apply to Council for a relaxation of the yield factor" (an integer used to calculate the contribution to be paid), following which the Council would "determine if [the] policy yield factor is to be used or revised"36. The due date might be a reasonable time after, or as soon as possible after, that process is complete. Two of the Planning Scheme Policies also state, in respect of staged developments, that "[t]he assessment of the total ultimate equivalent tenement demand for the initial stage will take place at the time of building approval or reconfiguration of a lot" (which is presumably a reference to a building approval under the Building Act 1975 (Qld)37) and that "developer contributions will be payable at that time in respect of the initial stage" (emphasis added), whereas for subsequent stages "the equivalent tenement demand IPA, s 3.5.11(1)(a). IPA, ss 3.5.19, 3.5.20. The date a development approval takes effect depends on whether there was a submitter for the development application and/or any appeal regarding the development approval. 35 cf Acts Interpretation Act 1954 (Qld), s 38(4). 36 Planning Scheme Policy 3A – Policy for Infrastructure Water Supply Network Developer Contributions (20 December 2007) at 39; Planning Scheme Policy 3B – Infrastructure Sewerage Network Developer Contributions Policy (20 December 2007) at 40. See also Planning Scheme Policy 16 – Policy for Infrastructure Recreation Facilities Network Developer Contributions (February 2006) at 21-22. for 37 See IPA, s 6.1.25(1A). ... will be assessed at the time of the building approval or reconfiguration of a lot for that stage and contributions will be payable, at the rates then in force, inspection or certification of classification, prior to the whichever is earlier, or sealed reconfiguration plan for that stage"38. final plumbing The significance of the inability to ascertain the due date can be tested by reference to the enforcement regime. If the Council wished to commence proceedings to prosecute Sunland for failing to comply with Conditions 13 to 1639, how could it establish that Sunland had failed to pay contributions calculated at the rates applicable at the due date of payment? If enforcement orders were sought by the Council seeking payment of contributions required under Conditions 13 to 1640, how could a court ascertain the amount payable by reference to the rates applicable at the due date of payment? Parliament could hardly have intended that a condition could be validly imposed under s 6.1.31(2)(c) that is so uncertain that it is incapable of being properly enforced pursuant to the enforcement regime established in the IPA. The consequence of the unascertainable due date of payment is that the power to impose conditions requiring the payment of infrastructure contributions under s 6.1.31(2)(c) was not pursued or exercised41. The condition referred to in Ashtrail Pty Ltd v Gold Coast City Council42 provides an illustration of the degree of certainty that one might expect to see in a condition imposing an obligation to make infrastructure contribution payments calculated at rates applicable on a particular due date of payment. And many other conditions in the Preliminary Approval expressly identified or fixed an event or time by which an obligation was to be satisfied43. Nothing in these reasons should be read as deciding or suggesting that those conditions are not valid. 38 Planning Scheme Policy 3A – Policy for Infrastructure Water Supply Network Developer Contributions (20 December 2007) at 42; Planning Scheme Policy 3B – Infrastructure Sewerage Network Developer Contributions Policy (20 December 2007) at 42. for IPA, s 4.3.18(1). IPA, s 4.3.22(1)(a). 41 cf King Gee (1945) 71 CLR 184 at 197. (2020) 4 QR 192 at 201 [18]. 43 For example: Condition 11 required that "[a]ll works identified on the approved staging plan shall be completed by the applicant by the time specified in the staging plan"; Condition 38 required that "Oil and Grit Separators ... shall be installed in each basement carpark level ... prior to the stormwater discharging to the existing It may be accepted that preliminary approvals (including the Preliminary Approval in this case) establish the framework for future development of land. It does not follow, however, that conditions in a preliminary approval do not impose rights and obligations that govern the future development of land. Such a conclusion would be contrary to the statutory framework, which expressly provides that a preliminary approval is a type of "development approval"44; conditions attaching to a development approval are part of the approval45; a development approval attaches to land and binds the owner, the owner's successors in title and any occupier of the land46; a failure to comply with a condition in a development approval amounts to a contravention of a development approval and is, therefore, a development offence47; and proceedings may be brought by way of prosecution for the imposition of a penalty for a development offence48 or for enforcement orders to remedy or restrain the commission of a development offence49, or both50. As explained, the error here was that Conditions 13 to 16 were not drafted with the necessary certainty. In order to meet that uncertainty, the Council submitted that the lack of precision provided a basis for construing Conditions 13 to 16 so that they did not impose any enforceable obligation to make infrastructure contributions under s 6.1.31(2)(c), but nonetheless had utility by notifying the lake or Council stormwater network"; Condition 41 required that, "[p]rior to the issue of a Development Permit for Building Work, the developer shall submit a report to Council demonstrating" certain matters about stormwater, water storage and irrigation; and Conditions 43 and 52 respectively required that certain land "shall be transferred free of cost to Council" and "works identified on the approved landscape plan for the Local Parks shall be completed" prior to "the issue of a certification of classification for building works or the occupation of any building in the precinct ..., whichever occurs first". IPA, Sch 10 para (b) of the definition of "development approval". IPA, s 3.5.11(1)(a) and (b), Sch 10 definition of "development approval"; see also s 3.1.5(1) and (3). IPA, s 3.5.28(1). IPA, s 4.3.3(1), Sch 10 definition of "development offence". IPA, s 4.3.18(1). IPA, s 4.3.22(1)(a). IPA, s 4.3.25(2). developer of the Council's intention that infrastructure contributions would apply in the future. The Council submitted that the Court should construe s 6.1.31(2)(c) of the IPA as only authorising conditions to be imposed in a development permit, with the exception that infrastructure conditions might be able to be imposed in a preliminary approval "for a small or very particular type of development" (although the Council was unable to identify any example of such a circumstance). Those submissions cannot be accepted. There is nothing in the text of s 6.1.31(2)(c) or the wider statutory context to support such a construction. Section 6.1.31(2)(c) conferred a power to impose a condition on a "development approval". It did not draw a distinction between a condition imposed in a preliminary approval and a condition imposed in a subsequent development permit. There was no separate provision in the IPA expressly authorising the inclusion of a condition in a preliminary approval notifying an applicant that infrastructure contributions would be required in respect of the future approval of development permits. Instead, to ensure consistency between a preliminary approval and a subsequent development permit the IPA required that, except in limited (and presently irrelevant) circumstances51, a condition in a subsequent development permit could not be inconsistent with a condition in an existing preliminary approval with respect to the same land52. IPA, s 3.5.32(2). IPA, s 3.5.32(1)(a); see also s 3.1.5(3)(b)(ii). STEWARD J. Sunland Group Limited and Sunland Developments No 22 Pty Ltd ("the appellants") seek to enforce against Gold Coast City Council ("the Council") what they claim are certain "conditions" for the payment of infrastructure contributions in relation to the construction of a multi-staged residential development called "Lakeview at Mermaid" as contained in a preliminary approval ("the Preliminary Approval"). The Council contended that these "conditions" create no obligation to make infrastructure contributions and that, following the grant of applicable development permits to the appellants, the Council must instead levy infrastructure charges by notice, in accordance with Ch 4 of the Planning Act 2016 (Qld). The amount the appellants must pay for infrastructure under the Planning Act exceeds the amount purportedly payable under the "conditions" set out in the Preliminary Approval. For the reasons which follow, the Queensland Court of Appeal53 was correct in deciding that the appellants were obliged to pay infrastructure charges in accordance with the Planning Act. Successive regimes for infrastructure contributions In 2007, the Queensland Planning and Environment Court ordered that the future development of "Lakeview at Mermaid" be approved. At that time, the Integrated Planning Act 1997 (Qld) ("the IPA"), a predecessor to the Planning Act, provided for the issue of two types of development approvals: preliminary approvals and development permits54. A preliminary approval approved a development to the extent stated in the approval and subject to any applicable conditions55. It did not, however, authorise the development to occur56. Such authority was conferred by a development permit57. Once granted, development could then take place to the extent stated in the permit, and subject to the conditions in the permit and in any preliminary approval58. What the Court had ordered in 2007 was the issue of a preliminary approval. It manifested itself as "Schedule A" to that order. Although the IPA did not oblige a developer to obtain a preliminary approval before obtaining a development permit59, such an approval, as explained 53 Gold Coast City Council v Sunland Group Ltd [2021] QPELR 662. Integrated Planning Act 1997 (Qld), s 3.1.5. Integrated Planning Act 1997 (Qld), s 3.1.5(1)(a)-(b). Integrated Planning Act 1997 (Qld), s 3.1.5(1). Integrated Planning Act 1997 (Qld), s 3.1.5(3). Integrated Planning Act 1997 (Qld), s 3.1.5(3)(a)-(b). Integrated Planning Act 1997 (Qld), s 3.1.5(2). below, conferred certain benefits for the future development of applicable land. Preliminary approvals lasted for four years60, but their term could be extended61. This took place here on two occasions and the Preliminary Approval remains current. In 2015, one of the appellants purchased the undeveloped land the subject of the proposed "Lakeview at Mermaid" project and the appellants applied for a series of development permits. From July 2016 to December 2016, the Council resolved to grant these. Between the grant of the Preliminary Approval and the issue of the development permits, town planning law in Queensland had changed twice. In 2009, the IPA was repealed by the Sustainable Planning Act 2009 (Qld) ("the SPA") and in 2017 that Act was replaced by the Planning Act62. In 1997, the IPA introduced a new regime to permit local governments to levy infrastructure charges by notice to a developer63. However, by s 6.1.31(2)(c), the IPA also preserved, as an interim measure64, a capacity for a council to impose a condition on any development approval requiring a developer to pay various contributions for infrastructure. This had, in the past, been the means used by local governments infrastructure contributions from developers65. The appellants claim that this power was exercised in relation to "Lakeview at Mermaid" when the Preliminary Approval was obtained. in Queensland to obtain The new regime for levying infrastructure charges by notice, rather than as a condition on a development approval, was maintained by both the SPA and the Integrated Planning Act 1997 (Qld), s 3.5.21(1)(a). Integrated Planning Act 1997 (Qld), s 3.5.22. 62 The Planning Act 2016 (Qld) received assent on 25 May 2016; however, but for one provision, the Act came into force on 3 July 2017, repealing the Sustainable Planning Act 2009 (Qld). Integrated Planning Act 1997 (Qld), Div 4 of Pt 1 of Ch 5. See also Queensland, Legislative Assembly, Integrated Planning Bill 1997, Explanatory Notes at 179. Integrated Planning Act 1997 (Qld), s 6.1.31(3)(b). See also Queensland, Legislative Assembly, Integrated Planning Bill 1997, Explanatory Notes at 228- 65 Queensland, Legislative Assembly, Integrated Planning Bill 1997, Explanatory Notes at 228-229. Planning Act66. These Acts contained transitional rules, which the appellants relied upon, and which they said preserved the legal effect of the Preliminary Approval. The Council contended that those transitional rules in relation to the conditions in the Preliminary Approval which deal with infrastructure contributions no longer apply (it otherwise agreed that other parts of the Preliminary Approval still have legal effect). It submitted that it is obliged by the Planning Act to levy infrastructure charges in accordance with the new regime67. The essence of the dispute between the parties thus concerned which regime for the payment of infrastructure contributions applied following the issue of the development permits The appellants accepted that if the infrastructure contribution provisions in the Preliminary Approval did not have the effect of creating a liability to pay infrastructure contributions, and thus were not conditions of the kind authorised by s 6.1.31(2)(c) of the IPA, it would necessarily follow that the Council was correct to levy infrastructure charges pursuant to the Planning Act68. For the reasons that follow, the Preliminary Approval did not create a liability for the appellants to pay infrastructure contributions. Accordingly, it is unnecessary for this Court to consider the effect of the many transitional provisions contained in the IPA, the SPA and the Planning Act. The legal effect of the Preliminary Approval infrastructure "conditions" Division 6 of Pt 5 of Ch 3 of the IPA conferred a general power to impose conditions in a preliminary approval or development permit. Amongst other things, a condition must "be relevant to, but not an unreasonable imposition on, the development or use of premises as a consequence of the development" and must "be reasonably required"69. A condition must not, however, be "inconsistent with a condition of an earlier development approval still in effect for the development"70. That included a preliminary approval71. In addition, in a case 66 See, eg, Sustainable Planning Act 2009 (Qld), ss 635, 637; Planning Act 2016 (Qld), 67 Planning Act 2016 (Qld), s 119. 68 Pursuant to Subdiv 2 of Div 2 of Pt 2 of Ch 4. Integrated Planning Act 1997 (Qld), s 3.5.30(1). Integrated Planning Act 1997 (Qld), s 3.5.32(1)(a). 71 Schedule 10 to the Integrated Planning Act 1997 (Qld) defined "development approval" to include both a preliminary approval and a development permit. where the new regime for levying infrastructure charges applied72, a development approval could not contain a condition imposing an obligation for the payment of the "establishment, operating and maintenance costs" of money infrastructure73. However, where the new regime had yet to commence to be applied by a council, s 6.1.31(2) of the IPA authorised the inclusion of just such a condition in a development approval. That sub-section provided: for "For deciding the aspect of the application relating to the local planning policy, the planning scheme policy or planning scheme provision – chapter 5, part 1 does not apply; and section 3.5.32(1)(b) does not apply; and the local government may impose a condition on the development approval requiring land, works or a contribution towards the cost of supplying infrastructure (including parks) under a policy or provision mentioned in subsection (1)(b)." Adopting the language of s 6.1.31(2)(c), to succeed the appellants needed to demonstrate that the "conditions" in the Preliminary Approval, upon which they relied, constituted a requirement for "a contribution towards the cost of supplying infrastructure". Section 6.1.31(2)(c) was contained in Ch 6 of the IPA, which was headed "Transitional provisions". As already mentioned, impose infrastructure contribution conditions within a development approval was only ever intended to be temporary in nature. This is explained in the Explanatory Notes to the Integrated Planning Bill 1997 (Qld), which state74: the power "The provision is included to provide flexibility for local government in its transition to the new system. Without this clause local governments would be unable to charge for infrastructure unless they had infrastructure charges plans prepared under the Bill. It is recognised that the preparation of these plans will take time and that appropriate transitional provisions need to be in place to ensure the move to infrastructure charges under infrastructure charges plans occurs as smoothly as possible." Integrated Planning Act 1997 (Qld), Pt 1 of Ch 5. Integrated Planning Act 1997 (Qld), s 3.5.32(1)(b). 74 Queensland, Legislative Assembly, Integrated Planning Bill 1997, Explanatory Notes at 228-229. The "conditions" ("Conditions 13 to 16") said by the appellants to be authorised by s 6.1.31(2)(c) appeared in the Preliminary Approval under the heading "Infrastructure Charges" and were as follows: "13 Contributions toward Recreational Facilities Network Infrastructure shall apply at the time application is made for a Development Permit. The contribution to be paid to Council shall be in accordance with Planning Scheme Policy 16 – Policy for Infrastructure Recreation Facilities Network Developer Contributions. Contributions shall be calculated at rates current at due date of payment. Contributions toward Transport Network Infrastructure shall apply at the time application is made for a Development Permit. The contribution to be paid to Council shall be in accordance with Planning Scheme Policy 19 – Policy for Infrastructure Transport Network Developer Contributions. Contributions shall be calculated at rates current at due date of payment. Contributions toward Water Supply Network Infrastructure shall apply at the time application is made for a Development Permit. The contribution to be paid to Council shall be in accordance with Planning Scheme Policy 3A – Policy for Infrastructure Water Supply Network Developer Contributions. Contributions shall be calculated at rates current at due date of payment. Council acknowledges that credits exist over the site as a consequence of previous payments and that the calculation of this contribution will recognise these existing credits. Contributions toward Sewerage Network Infrastructure shall apply at the time application is made for a Development Permit. The contribution to be paid to Council shall be in accordance with Planning Scheme Policy 3B – Policy for Infrastructure Sewerage Network Developer Contributions. Contributions shall be calculated at rates current at due date of payment. Council acknowledges that credits exist over the site as a consequence of previous payments and that the calculation of this contribution will recognise these existing credits." The appellants emphasised that the Council has continued to publish up-to- date rates for the Planning Scheme Policies referred to in Conditions 13 to 16, thus permitting the correct contributions for infrastructure to be determined. The Preliminary Approval also contained clauses or conditions which dealt with other topics, such as "Assessment Framework", "Staging", "Public Access", "Water Supply", "Sewerage", "Traffic and Access", "Drainage and Filling" and "Open Space Park Dedication". Importantly, the Approval also recorded that it "shall establish the planning framework for future development on the site". It also stated that the "Preliminary Approval is not for the detailed design or layout of the development. The detailed design and layout shall be determined following the submission of additional information with future development applications." A principal purpose of obtaining a preliminary approval was that it could vary the effect of any local planning instrument when future applications for development permits were being considered75. In addition, the preliminary approval gave a developer a measure of certainty. As already mentioned, no condition in any subsequently issued development permit was permitted if it was "inconsistent" with a condition found in an earlier preliminary approval76. The "[Section 3.5.32(1)(a)] prevents a condition being imposed that is inconsistent with a condition of an earlier approval. For example, a preliminary approval is given for a change of use from rural to residential and a condition is imposed that specifies the maximum dwelling density for the land. The preliminary approval dealt with the broad conceptual aspects of the change of use and contemplated a range of dwelling types and densities up to the maximum density specified. A subsequent application is required to allocate those different dwelling types and densities around the site. Any subsequent application could not be conditioned to set a different maximum dwelling density. That has already been set and any conditioning on a subsequent application purporting to set a new limit would be inconsistent with the earlier approval." The foregoing language, with its reference to a preliminary approval the containing "broad conceptual aspects", characterisation of such an approval as being a "framework" for future development, which is then to be followed by a more detailed and specific instrument, namely a development permit or permits. is entirely consistent with If Conditions 13 to 16 are no more than a "framework" for the future imposition of a liability to pay infrastructure contributions by a development Integrated Planning Act 1997 (Qld), s 3.1.6. Integrated Planning Act 1997 (Qld), s 3.5.32(1)(a). 77 Queensland, Legislative Assembly, Integrated Planning Bill 1997, Explanatory Notes at 124. permit or permits, then the appellants' case must fail. It was not suggested that there now existed any lawful capacity to issue a development permit or permits containing infrastructure contribution conditions consistently with the Preliminary Approval; nor was it suggested that there was that capacity in 2016 when development permits were issued to the appellants by the Council. The Planning Act contains no provision equivalent to s 6.1.31(2)(c) of the IPA. The appellants' case was that there was no need for any such new conditions to be created, as the liability or liabilities for infrastructure contributions had already been created by Conditions 13 to 16. That contention suffers from two substantial flaws. First, none of Conditions 13 to 16 specified any clear date for the payment of infrastructure contributions. Each stated that contributions "shall apply at the time application is made for a Development Permit" and that they were to be calculated at the "rates current at due date of payment". However, that "due date of payment" was never set out. Secondly, whilst Conditions 13 to 16 provided that contributions "shall apply at the time application is made", the appellants conceded that the amount of the contribution could only ever be ascertained following the issue of a development permit or permits. This was because the relevant Planning Scheme Policies referred to in Conditions 13 to 16 required the number of an applicable property-based unit of measurement, called an "equivalent tenement", to be determined in order to calculate each contribution. The number of such tenements could only ever be known once the permit or permits had been issued. Moreover, it was said to be unlikely that the parties would fix the time for liability as being when permit applications were to be made, because of the "inherent unfairness to the developer" to pay money in circumstances when it was possible that no permit might ever be issued. The appellants contended that these concerns merely raised issues of construction, which the Court could resolve in their favour. The conditions were to be read, it was said, not in a "technical way", but so as to bring about a practical result and resolve any uncertainty in the language used. The appellants referred to Westfield Management Ltd v Perpetual Trustee Company Ltd, where Hodgson JA said that a development consent should be construed, like a contract, to preserve its validity and to avoid uncertainty78. Hodgson JA referred79 to Upper Hunter [2006] NSWCA 245 at [40] (Tobias and Basten JJA agreeing). 79 Westfield Management Ltd v Perpetual Trustee Company Ltd [2006] NSWCA 245 at [40] (Tobias and Basten JJA agreeing). County District Council v Australian Chilling and Freezing Co Ltd, where "But a contract of which there can be more than one possible meaning or which when construed can produce in its application more than one result is not therefore void for uncertainty. As long as it is capable of a meaning, it will ultimately bear that meaning which the courts, or in an appropriate case, an arbitrator, decides is its proper construction: and the court or arbitrator will decide its application. The question becomes one of construction, of ascertaining the intention of the parties, and of applying it. Lord Tomlin's words in this connexion in Hillas & Co Ltd v Arcos Ltd ought to be kept in mind. So long as the language employed by the parties, to use Lord Wright's words in Scammell (G) & Nephew Ltd v Ouston is not 'so obscure and so incapable of any definite or precise meaning that the Court is unable to attribute to the parties any particular contractual intention', the contract cannot be held to be void or uncertain or meaningless. In the search for that intention, no narrow or pedantic approach is warranted, particularly in the case of commercial arrangements. Thus will uncertainty of meaning, as distinct from absence of meaning or of intention, be resolved." (footnotes omitted) On this approach, the Court was urged not to scrutinise Conditions 13 to 16 "in the same way as the words used by a parliamentary [draftsperson]"81. Addressing the two flaws referred to, the appellants conceded that the conditions do not clearly stipulate what the due date for payment is to be, and that the "inelegant drafting is unfortunate". They nonetheless submitted that the conditions created obligations to pay infrastructure contributions and, for that purpose, emphasised the words in each condition that contributions "shall apply". In that context, it was submitted that the failure to choose a date was curable. Correctly construed, payment was to take place either within a reasonable time after the date when the Council was to calculate and then request or demand payment, or as soon as possible after that time in accordance with s 38(4) of the Acts Interpretation Act 1954 (Qld). That sub-section, if applicable, provides that "[i]f no time is provided or allowed for doing anything, the thing is to be done as soon as possible, and as often as the relevant occasion happens". Next, the appellants submitted that the phrase "at the time application is made" should be understood as referring to the process whereby a development application is lodged and then considered by the Council, and a development (1968) 118 CLR 429 at 436-437 (McTiernan, Kitto and Windeyer JJ agreeing). 81 Hall & Co Ltd v Shoreham-By-Sea Urban District Council [1964] 1 WLR 240 at 245 per Willmer LJ; [1964] 1 All ER 1 at 5. permit ultimately issued. Reading the phrase in this way meant that the liability to pay an infrastructure contribution only arose when a development permit was issued. This construction also resolved the difficulty concerning the ascertainment of the applicable number of "equivalent tenements"; these would be known at the time when the process of "application" would be completed with the issue of a permit or permits. The premise of the appellants' contentions concerning the construction of Conditions 13 to 16 is, with respect, mistaken. It assumed that the Conditions served the purpose of creating a future certain liability or liabilities to make payments by way of infrastructure contributions, and that each condition should thereby be construed to secure that end. But, for the reasons already given, conditions in a preliminary approval serve the task of providing a "framework" for the issue of future development permits. They do not create the final rights and duties that might govern the development of land. In that respect, the failure to specify a due date for payment, or a formula for calculating such a date, is entirely consistent with the real purpose of Conditions 13 to 16. That purpose was to prescribe and fix, in general terms, key attributes of the content of a future liability or liabilities to pay infrastructure contributions upon the issue of a development permit or permits. Until then, the occasion for the imposition of a condition requiring a "contribution towards the cost of supplying infrastructure", for the purposes of s 6.1.31(2)(c) of the IPA, could not yet have arisen and might never arise. Such development permits, if issued at a time when the power conferred by s 6.1.31(2)(c) still existed and was applicable, could not then contain an infrastructure contribution condition which would be "inconsistent" with Conditions 13 to 1682. Similarly, the use of the phrase in each Condition "[c]ontributions ... shall apply" is a reference to the future creation of a liability or liabilities to pay infrastructure contributions. Significantly, the Conditions do not employ the present tense and instead use the word "apply" rather than language more directly associated with the creation of a pecuniary liability, such as the phrase "must pay"83. In argument, the Council identified how a condition of a kind that could have been authorised by s 6.1.31(2)(c) might have been drafted and then appeared in a development permit. Ashtrail Pty Ltd v Gold Coast City Council84 concerned Integrated Planning Act 1997 (Qld), s 3.5.32(1)(a). 83 See, eg, Ashtrail Pty Ltd v Gold Coast City Council (2020) 4 QR 192 at 201 [18] per Morrison JA (Mullins JA and Callaghan J agreeing). a development approval for a material change of use in relation to land. The approval included five conditions, one of which was for the making of infrastructure contributions towards a water supply network. A comparison of the language used in that condition with the text of Conditions 13 to 16 is illuminating. The condition provided85: "5 Water Supply Network infrastructure contributions The applicant must pay to Council contributions toward Water Supply Network Infrastructure in accordance with Planning Scheme Policy 3A - Policy for Infrastructure (Water Supply Network Developer Contributions) at the rate current at the due date for payment. Payment must be made prior to the earliest of the following events: the endorsement of survey plans, the issue of a certificate of classification for building work, the carrying out of the final plumbing inspection, or the commencement of the use of the premises. The contribution current at the date of this approval is: ... [$380,639.64]. The contribution amount payable at the due date for payment will be calculated at the rates current under the Policy ... in force at the date of payment." Unlike Conditions 13 to 16, the foregoing clause precisely identifies the time for payment, as well as the means of calculating the infrastructure contribution, expressing the developer's liability with the phrase "[t]he applicant must pay to Council". The absence of equivalent language in Conditions 13 to 16 is telling. It confirms that the purpose of these Conditions was to ensure, upon the assumption the power conferred by s 6.1.31(2)(c) of the IPA continued to exist and was applicable, that the issue of any development permit in the future would involve the imposition of consistent infrastructure contribution liabilities. As such, they were not conditions authorised by s 6.1.31 of the IPA, but rather, were authorised more generally by Div 6 of Pt 5 of Ch 3. As it happens, and as already mentioned, by the time the development permits were issued to the appellants in 2016, the power to make such conditions had ceased to exist, having been replaced by the new regime for imposing infrastructure charges. 85 Ashtrail Pty Ltd v Gold Coast City Council (2020) 4 QR 192 at 201 [18] per Morrison JA (Mullins JA and Callaghan J agreeing). Steward Conditions 13 to 16 on the assumption that they were purportedly authorised by s 6.1.31(2)(c) Even if Conditions 13 to 16 did purport to create a liability to pay infrastructure contributions in accordance with s 6.1.31(2)(c) of the IPA, they were not a proper exercise of that power. In that respect, and contrary to the submissions of the appellants, Conditions 13 to 16 are not to be construed like any other contract, but rather in accordance with the rules of construction governing the interpretation of Acts of Parliament and subordinate instruments86. As this Court said in Perpetual Trustee Co Ltd v Westfield Management Ltd87 when considering a condition in a development consent: "Special condition 56 is to be construed and its validity assessed in accordance with the principles explained by Justice Dixon in King Gee Clothing Company Proprietary Limited v The Commonwealth, and Cann's Proprietary Limited v The Commonwealth, and not by recourse to those principles directed to saving bargains between consensual parties and stated by Chief Justice Barwick in Upper Hunter County District Council v Australian Chilling and Freezing Company Limited." (citations omitted) If Conditions 13 to 16 were made in an attempt to comply with s 6.1.31(2)(c) of the IPA, then, like the Prices Regulation Order considered by this Court in King Gee Clothing Co Pty Ltd v The Commonwealth, the "power has not been pursued and is not well exercised"88. In King Gee, the power was to fix and declare the maximum price at which certain goods might be sold. Notwithstanding the width of the power conferred, it was found that, at the very least, its exercise had to result in "standards or criteria from which a price may be calculated"89. It was not enough "if the price, or some element entering into its composition, [could] be obtained only by estimation or by the exercise of judgment or discretion"90. The 86 King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 at 195 per Dixon J; Cann's Pty Ltd v The Commonwealth (1946) 71 CLR 210 at 227-228 per Dixon J. See also Brown v Tasmania (2017) 261 CLR 328 at 470-471 [450]-[452] [2007] HCATrans 367 at 126-127. (1945) 71 CLR 184 at 197 per Dixon J. 89 King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 at 197 per Dixon J; see also at 190 per Rich J, 192 per Starke J. 90 King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 at 197 per Prices Regulation Order in King Gee used matters of "estimate, assessment, discretionary allocation, or apportionment" to determine, "as a matter of judgment", a fixed maximum price91. Devoid of "clear objective standards"92, it followed that the Order had been invalidly made. Here, the power in s 6.1.31(2)(c) of the IPA was to impose a condition relevantly requiring a contribution towards the cost of supplying infrastructure. Conditions 13 to 16, assuming they sought to do this, fail to specify a date or time for the making of that contribution and are therefore an improper exercise of the power. The drafters' attempt to formulate a liability has resulted in language that is too uncertain. And the appellants' efforts to save those Conditions from invalidity is too strained. The Court cannot "add that which has been omitted"93 when it is so integral to a valid exercise of the power. Nor does the appellants' attempt to fix the time of liability by reference to an implied term of "within a reasonable time" or by the statutory language of "as soon as possible" cure matters. In each case, the starting point for an application of these tests is not capable of identification from the language of the Conditions; instead, the appellants have merely assumed that it would be from the moment of the issue of development permits. Whether that assumption is correct cannot be ascertained from the language of Conditions 13 to 16. Notice of Contention The Council filed a Notice of Contention which assumed, in the alternative, that Conditions 13 to 16 did create valid liabilities pursuant to s 6.1.31(2)(c) of the IPA. The contention was that the Council's obligation to levy infrastructure charges under the Planning Act94 prevailed over any such liabilities. As the assumption upon which the Notice of Contention depended is incorrect, it is unnecessary to consider it any further. The appeal should be dismissed with costs. 91 King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 at 197 per 92 King Gee Clothing Co Pty Ltd v The Commonwealth (1945) 71 CLR 184 at 198 per 93 cf Gough and Gilmore Holdings Pty Ltd v Council of the City of Holroyd [2002] NSWLEC 108 at [19] per Talbot J; Taylor v Owners – Strata Plan No 11564 (2014) 253 CLR 531 at 548-549 [38]-[40] per French CJ, Crennan and Bell JJ; see also at 556-557 [65] per Gageler and Keane JJ. 94 See, eg, Planning Act 2016 (Qld), s 119.
HIGH COURT OF AUSTRALIA PGA AND THE QUEEN APPELLANT RESPONDENT PGA v The Queen [2012] HCA 21 30 May 2012 ORDER Appeal dismissed. On appeal from the Supreme Court of South Australia Representation D M J Bennett QC with P F Muscat SC and A L Tokley for the appellant (instructed by Legal Services Commission (SA)) M G Hinton QC, Solicitor-General for the State of South Australia with K G Lesses for the respondent and intervening on behalf of the Attorney-General for the State of South Australia (instructed by Director of Public Prosecutions S J Gageler SC, Solicitor-General of the Commonwealth with G A Hill intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) J D McKenna SC with G J D del Villar intervening on behalf of the Attorney- General of the State of Queensland (instructed by Crown Law (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS PGA v The Queen Criminal law – Rape – Husband's immunity from prosecution for rape of wife – Presumption of consent to intercourse by wife in marriage – Appellant charged in 2010 with two counts of rape contrary to s 48 of Criminal Law Consolidation Act 1935 (SA) – Alleged rapes committed in 1963 against then spouse – Legislative amendments enabled institution of proceedings despite lapse of time – Elements of offence of rape in 1963 supplied by common law – Whether in 1963 common law of Australia presumed consent by wife in marriage. Precedent – Judicial method – Development of common law – Whether presumption of consent by wife in marriage was part of common law of Australia – Whether statement of common law in R v L (1991) 174 CLR 379 applied to events alleged to have occurred in 1963. Words and phrases – "common law", "marital exemption", "marital immunity", "presumption of consent", "rape", "retrospective application". Criminal Law Consolidation Act 1935 (SA), s 48. Matrimonial Causes Act 1857 (UK) (20 & 21 Vict c 85). FRENCH CJ, GUMMOW, HAYNE, CRENNAN AND KIEFEL JJ. The appellant and his wife, the complainant, were lawfully married in South Australia on 1 September 1962. At the relevant times in 1963 they remained lawfully married and were cohabiting in South Australia as husband and wife at the house of her parents; there were in force no legal orders or undertakings of any kind which affected their matrimonial relationship. The charges On 5 July 2010, by information of the Director of Public Prosecutions of South Australia, the appellant was charged for trial in the District Court of South Australia with two counts of carnal knowledge, with four counts of assault occasioning actual bodily harm and, what is immediately relevant for this appeal, with two counts of rape (counts 3 and 5) contrary to s 48 of the Criminal Law Consolidation Act 1935 (SA) ("the CLC Act"). The particulars of count 3 were that between 22 March 1963 and 25 March 1963, at Largs Bay in South Australia, the appellant had vaginal sexual intercourse with his wife without her consent. The particulars of count 5 were that on or about 14 April 1963, also at Largs Bay, the appellant had vaginal sexual intercourse with his wife without her consent. The issue before the Court is whether the appellant is correct in his contention that, as a matter of the common law, upon their marriage in 1962 his wife had given her consent to sexual intercourse and thereafter could not retract her consent, at least while they remained lawfully married, with the result that he could not be guilty of raping her as charged by counts 3 and 5. The proposition of law upon which the appellant relies has its source in a statement in extra-judicial writings of Sir Matthew Hale, Chief Justice of the Court of King's Bench (1671-1676), which were first published in 1736 as The History of the Pleas of the Crown. The statement by Hale is more fully set out later in these reasons1, but is encapsulated in the bald proposition that a husband cannot be guilty of a rape he commits upon his wife. It was repeated in East's work A Treatise of the Pleas of the Crown, published in 18032; by Chitty in his A Practical Treatise on the Criminal Law, published in 18163; and by Russell in A 2 Volume 1, Ch 10, §8. 3 Volume 3 at 811. Crennan Treatise on Crimes and Misdemeanors, the first edition of which was published in 18194. In each case the proposition was further repeated in later 19th century editions. What, however, was lacking in all these standard texts was any statement and analysis of reasoning which might have supported the statement by Hale and its continued acceptance. Given this state of affairs, it is perhaps not surprising that the Canadian Criminal Code of 1892 (s 266) and the Criminal Code of Queensland of 1899 (s 347), in defining the crime of rape, included the phrase "not his wife"5. The provisions in the Queensland Code, and those of Western Australia and Tasmania, were to be amended in 1989, 1985 and 1987 respectively6. The attempted abstraction and statement of doctrine in provisions of a code by means of propositions which do not represent generalised deductions from particular instances in the case law occasions difficulty when the common law later is shown to be to different effect7. Justice Holmes, in his essay "Codes, and the Arrangement of the Law"8, wrote: "New cases will arise which will elude the most carefully constructed formula. The common law, proceeding, as we have pointed out, by a series of successive approximations – by a continual reconciliation of cases – is prepared for this, and simply modifies the form of its rule. But what will the court do with a code? If the code is truly law, the court is confined to a verbal construction of the rule as expressed, and must decide the case wrong. If the court, on the other hand, is at liberty to decide ex 4 Volume 1, Bk 2, Ch 6, §1. 5 By 1984 over 40 of the United States retained statute laws conferring some form of marital exemption for rape: People v Liberta 474 NE 2d 567 at 572-573 (1984). However, in that case the New York provision was held invalid as denying the the United States equal protection required by Constitution. the 14th Amendment 6 See R v L (1991) 174 CLR 379 at 402; [1991] HCA 48. 7 See Murray v The Queen (2002) 211 CLR 193 at 206-207 [40]; [2002] HCA 26; Director of Public Prosecutions (NT) v WJI (2004) 219 CLR 43 at 53-54 [30]-[31]; [2004] HCA 47. (1870) 5 American Law Review 1, reprinted in Novick (ed), The Collected Works of Justice Holmes, (1995), vol 1, 212 at 213. Crennan ratione legis, – that is, if it may take into account that the code is only intended to declare the judicial rule, and has done so defectively, and may then go on and supply the defect, – the code is not law, but a mere text-book recommended by the government as containing all at present known on the subject." Indeed, in 1888, among the 13 judges sitting in the Court for Crown Cases Reserved, on the case stated in R v Clarence9 with respect to charges of "unlawfully and maliciously inflicting grievous bodily harm" and "assault occasioning actual bodily harm", contrary to s 20 and s 47 respectively of the Offences against the Person Act 1861 (UK)10 ("the 1861 UK Act"), differing views had been expressed as to whether the consent of the wife to intercourse with her husband had been vitiated by his failure to disclose to her that he was suffering from a contagious venereal disease. Thereafter, in the annotation to s 48 of the 1861 UK Act which appeared in Halsbury's Statutes of England, published in 192911, it was said: "It is said that a husband cannot be guilty of rape upon his wife as a principal in the first degree". (emphasis added) The 28th edition of Archbold's Pleading, Evidence & Practice in Criminal Cases, published in 1931, four years before the enactment of the CLC Act, cited Hale for the proposition expressed as: "It is a general proposition that a husband cannot be guilty of a rape upon his wife ... but it would seem that the proposition does not necessarily extend to every possible case"12. In the intervening period there appears to have been no reported case in England in which a husband had been prosecuted for the rape of his wife during their (1888) 22 QBD 23. 10 24 & 25 Vict c 100. 11 Volume 4 at 615. 13 See R v R [1992] 1 AC 599 at 614. Crennan As it stood in 1963, s 48 of the CLC Act stated: "Any person convicted of rape shall be guilty of felony, and liable to be imprisoned for life, and may be whipped." It is accepted that the elements of the offence of rape identified in s 48 were supplied by the common law. Section 4 of the CLC Act had wholly repealed The Criminal Law Consolidation Act 1876 (SA). As amended by s 13 and the Schedule to the Criminal Law Amendment Act 1925 (SA), s 60 of the 1876 statute had read: "Whosoever shall be convicted of the crime of rape shall be guilty of felony, and, being convicted thereof, shall be liable to be imprisoned for life, with hard labor, and may be whipped."14 The scheme of the legislation in South Australia, in its various forms, was to classify the offence of rape as a felony and to specify the range of punishments upon conviction. This followed the pattern in s 48 of the 1861 UK Act. The legislative emphasis upon the classification of the crime and the punishments which might be inflicted, leaving the elements of the crime itself to the common law, reflected past fluctuations in the statute law. Shortly after the enactment of the 1861 UK Act, there appeared in the 5th edition (1877) of Russell's work, A Treatise on Crimes and Misdemeanors15, the following: "This offence formerly was, for many years, justly visited with capital punishment; but it does not appear to have been regarded as equally heinous at all periods of our Constitution. Anciently, indeed, it appears to have been treated as a felony, and, consequently, punishable with death; but this was afterwards thought too hard; and, in its stead, another severe but not capital punishment was inflicted by William the Conqueror, namely, castration and loss of eyes, which continued till after Bracton wrote, in the reign of Henry III. The punishment for rape was still further mitigated, in the reign of Edward I, by the statute of Westm 1, c 13, which reduced the offence to a trespass, and subjected the party to 14 The Criminal Law Amendment Act 1925 (SA) omitted the words "or any term not less than four years". 15 Volume 1 at 858 (footnote omitted). Crennan two years' imprisonment, and a fine at the King's will. This lenity, however, is said to have been productive of terrible consequences; and it was, therefore, found necessary, in about ten years afterwards, and in the same reign, again to make the offence of forcible rape a felony, by the statute of Westm 2, c 34. The punishment was still further enhanced by the 18 Eliz c 7, s 1." The lapse of time Something should be said respecting the legal significance of the length of time between the alleged conduct in 1963 and the institution of proceedings in 2010. As the CLC Act stood in 1963, it included s 76a16. The effect of s 76a was that in respect of offences, including an offence against s 48, no information was to be laid more than three years after the commission of the offence. Section 76a was repealed by the Criminal Law Consolidation Act Amendment Act 1985 (SA). However, in R v Pinder17 it was held that the repeal of s 76a did not authorise the laying of an information which would deprive a person of immunity already acquired before the repeal of s 76a. The response of the legislature was to reverse the effect of this decision by the enactment of s 72A of the CLC Act by the Criminal Law Consolidation (Abolition of Time Limit for Prosecution of Certain Sexual Offences) Amendment Act 2003 (SA). The result was that a person, such as the appellant, who had acquired immunity by reason of the operation of the repealed s 76a had lost that immunity and could now be prosecuted. Changes have been made to the elements of the offence of rape, beginning with the Criminal Law Consolidation Act Amendment Act 1976 (SA), but it has not been submitted that these changes to the elements of the offence apply retrospectively. The permanent stay application On 6 July 2010 Herriman DCJ gave reasons for dismissing an application by the appellant for a permanent stay of proceedings. His Honour's reasons included the following passage: 16 This had been added by the Criminal Law Consolidation Act Amendment Act 1952 17 (1989) 155 LSJS 65. Crennan "The complainant's evidence is that in 1960 and 1961, when she was 15 or 16, the accused was in a relationship with her and she says that at that time they were living in her parents' house, albeit that he slept in a separate room. They were ultimately married in September 1962, when she was 17, but she says that before that age she had sexual intercourse with him on two occasions. Those two occasions represent counts 1 and 2 on the information. The parties then lived as husband and wife in her parents' house until mid-1963, when they went to their own premises. They separated in The complainant says that on two occasions, in March and April 1963, which she relates to times immediately before and soon after the birth of their first child, the accused had forcible sexual intercourse with her against her will. She says that she did not, at any time during the marriage, complain of carnal knowledge or, indeed, of that forced sexual intercourse. The time for laying of any such charges was then within three years of the act, so that the time for laying a complaint with respect to the carnal knowledge counts expired in about 1964 and, with respect to rape, in about 1966. Those time limits were not abolished until the year 2003. More importantly, there was, and, indeed, there remains, a real question as to whether in 1963 an offence of rape in marriage, as it is commonly called, was then part of the common law of this State." His Honour went on to stay the trial pending the statement for the Full Court of the Supreme Court of South Australia of a case under s 350(2)(b) of the CLC Act. This dealt with the argument of the appellant that at the time of the alleged offences in 1963, he could not, as a matter of law, have committed the crime of rape upon his wife. What was said in 1991 by four of the five members of this Court in R v L18 has been treated by the parties in the present litigation at least as having the result that by 1991 it was no longer the common law in Australia that by 18 (1991) 174 CLR 379 at 390 per Mason CJ, Deane and Toohey JJ, 405 per Crennan marriage a wife gave irrevocable consent to sexual intercourse with her husband. Herriman DCJ saw the outstanding issue for determination as being "was the offence of rape by one lawful spouse of another ... an offence known to the law of South Australia as at 1963?". A question to this effect was stated for consideration by the Full Court19. The Court (Doyle CJ and White J; Gray J dissenting) ordered that the question be answered as follows: "The defendant is liable at law to be found guilty of the offences of rape charged in count 3 and count 5 of the Information, notwithstanding that at the time of the alleged offence he was married to the alleged victim and was cohabiting with her, the marriage giving rise to no presumption of consent on her part to intercourse with her husband, and giving rise to no irrebuttable presumption to that effect." Gray J was of the contrary opinion and would have answered the question in the negative and applied the presumption of irrevocable consent. The appeal to this Court By special leave the appellant appeals to this Court seeking an order setting aside the answer given by Doyle CJ and White J. By Notice of Contention the respondent submits that, regardless of what follows from the decision in R v L20, the answer by Doyle CJ and White J, the majority in the Full Court, is to be supported on the basis that: (a) "the supposed marital exemption to the offence of rape ... was never part of the common law of Australia"; or (b) "if it ever was part of the common law of Australia, it ceased to be so as at the date of the commission of the offences in this matter". For the reasons which follow, if the "marital exemption" ever was part of the common law of Australia, it had ceased to be so by the time of the enactment in 1935 of s 48 of the CLC Act and thus before the date of the commission of the alleged offences charged as count 3 and count 5. It follows that the appeal must be dismissed. That conclusion does not involve any retrospective variation or modification by this Court of a settled rule of the common law. At the time of 19 (2010) 109 SASR 1. The Full Court sat as the Court of Criminal Appeal: see Lipohar v The Queen (1999) 200 CLR 485 at 504 [41]; [1999] HCA 65. 20 (1991) 174 CLR 379. Crennan the commission of the alleged offence the common law rule for which the appellant contends did not exist. The term "the common law" The references above to "the common law" and "the common law of Australia" require further analysis before consideration of the immediate issue concerning the crime of rape upon which this appeal turns. In his contribution under the heading "common law" in The New Oxford Companion to Law21, Professor A W B Simpson distinguishes five senses in which that term is used. The primary sense is that body of non-statutory law which was common throughout the realm and so applicable to all, rather than local or personal in its application. An example of such local or personal laws is the customary mining laws which had applied in various localities in England22. The second sense of the term is institutional, to identify the body of law administered in England by the three royal courts of justice, the King's Bench, Common Pleas and Exchequer, until the third quarter of the 19th century. The third sense is a corollary of the second, the expression "the common law" differentiating the law administered by those courts from the principles of equity administered in the Court of Chancery (and, one should add, from the law applied in the ecclesiastical courts until 1857 and the law applied in courts of admiralty). In that regard, Sir George Jessel MR emphasised in In re Hallett's Estate23 that, while the rules of the common law were "supposed to have been established from time immemorial", those of equity had been invented, altered, improved, and refined by the Chancellors from time to time, and he instanced "the separate use of [ie trust for] a married woman". With the development since the second half of the 19th century of appellate structures governing all species of primary decisions, judicial reasoning has tended not to invoke time immemorial and rather to follow the course which had been taken by the Chancellors in expounding legal principle. 21 Cane and Conaghan (eds), The New Oxford Companion to Law, (2008) at 164-166. 22 See TEC Desert Pty Ltd v Commissioner of State Revenue (WA) (2010) 241 CLR 576 at 587 [30]-[31]; [2010] HCA 49. 23 (1879) 13 Ch D 696 at 710. Crennan The fourth and fifth senses of "common law" identified by Professor Simpson are as follows: "The term 'common law' came, in a fourth sense, to have the connotation of law based on cases, or law evolved through adjudication in particular cases, as opposed to law derived from the analysis and exposition of authoritative texts. Indeed sometimes 'common law' is more or less synonymous with the expression 'case law'. Since the common law was developed by the judges, interacting with barristers engaged in litigation, the expression 'common law' came, in a related fifth sense, to mean law made by judges." This draws attention to a difficulty in the appellant's reliance in this case upon a principle of the common law based upon a statement in a text published in 1736, many years after the death of the author, without citation of prior authority and lacking subsequent exposition in cases where it has been repeated. In that regard, observations by six members of the Court in the Native Title Act Case24 are significant. Their Honours noted that the term "common law" might be understood not only as a body of law created and defined by the courts in the past, but also as a body of law the content of which, having been declared by the courts at a particular time, might be developed thereafter and be declared to be different. Writing at the time of the establishment of this Court, and when he was Professor of Law at the University of Adelaide, Sir John Salmond said25: "The statement that a precedent gains in authority with age must be read subject to an important qualification. Up to a certain point a human being grows in strength as he grows in age; but this is true only within narrow limits. So with the authority of judicial decisions. A moderate 24 Western Australia v The Commonwealth (1995) 183 CLR 373 at 484-486; [1995] HCA 47. 25 Salmond, "The Theory of Judicial Precedents", (1900) 16 Law Quarterly Review 376 at 383. See also Holmes, "Codes, and the Arrangement of the Law", (1870) 5 American Law Review 1, reprinted in Novick (ed), The Collected Works of Justice Holmes, (1995), vol 1, 212 at 212-213. Crennan lapse of time will give added vigour to a precedent, but after a still longer time the opposite effect may be produced, not indeed directly, but indirectly through the accidental conflict of the ancient and perhaps partially forgotten principle with later decisions. Without having been expressly overruled or intentionally departed from, it may become in course of time no longer really consistent with the course of judicial decision. In this way the tooth of time will eat away an ancient precedent, and gradually deprive it of all authority and validity. The law becomes animated by a different spirit and assumes a different course, and the older decisions become obsolete and inoperative." The term "the common law of Australia" Finally, in his treatment of "common law", Professor Simpson refers to the expansion of British imperial power and the creation of "a common law world". The common law was received in the Province of South Australia with effect 19 February 1836, but despite the differing dates of the reception of the common law in the Australian colonies, the common law was not disintegrated into six separate bodies of law; further, what was received included the method of the common law, which in Australia involved judicial determination of particular parts of the English common law which were inapplicable to local conditions26. The "common law" which was received did not include the jurisdiction with respect to matrimonial causes (including suits for declarations of nullity of marriage, judicial separation (a mensa et thoro) and restitution of conjugal rights) which in England was exercised by the ecclesiastical courts. This exclusion appears to have been a deliberate decision by the Imperial authorities27. Further, unlike the situation in England, in the Australian colonies there was to be no 26 Commissioner of Stamps (SA) v Telegraph Investment Co Pty Ltd (1995) 184 CLR 453 at 466-467; [1995] HCA 44; Lipohar v The Queen (1999) 200 CLR 485 at 508-509 [54]-[55]; Brodie v Singleton Shire Council (2001) 206 CLR 512 at 557-558 [99]-[101], 559-560 [104], 588-589 [193]-[196]; [2001] HCA 29; R v Gardener and Yeurs (1829) NSW Sel Cas (Dowling) 108; Ex parte The Rev George King (1861) 2 Legge 1307; Campbell v Kerr (1886) 12 VLR 384. 27 Castles, An Australian Legal History, (1982) at 140-142; Bennett, "The Establishment of Divorce Laws in New South Wales", (1963) 4 Sydney Law Review 241 at 242. Crennan established religion28. The Anglican church was expressly enjoined from exercising any authority or jurisdiction in matrimonial causes29. The result was that the jurisdiction with respect to matrimonial causes, as well as divorce, which has been exercised by the colonial and State courts always has been derived from local statute law, not received "common law". Further, in Skelton v Collins30, Windeyer J said of the reception in the Australian colonies of the doctrines and principles of the common law: "To suppose that this was a body of rules waiting always to be declared and applied may be for some people satisfying as an abstract theory. But it is simply not true in fact. It overlooks the creative element in the work of courts. It would mean for example, that the principle of Donoghue v Stevenson31, decided in the House of Lords in 1932 by a majority of three to two, became law in Sydney Cove on 26th January 1788 or was in 1828 made part of the law of New South Wales by 9 Geo IV c 83, s 25. In a system based, as ours is, on case law and precedent there is both an inductive and a deductive element in judicial reasoning, especially in a court of final appeal for a particular realm or territory." Inductive and deductive reasoning This creative element of both inductive and deductive reasoning in the work of the courts in Australia includes the taking of such steps as those identified by Sir Owen Dixon in his address "Concerning Judicial Method"32. In his words, these are: (i) extending "the application of accepted principles to new 28 Wylde v Attorney-General (NSW) (at the Relation of Ashelford) (1948) 78 CLR 224 at 257, 275-276, 285-286, 298; [1948] HCA 39; Scandrett v Dowling (1992) 27 NSWLR 483 at 534-541; Shaw, The Story of Australia, (1955) at 98-100. 29 Wylde v Attorney-General (NSW) (at the Relation of Ashelford) (1948) 78 CLR 224 at 284-285; Bennett, "The Establishment of Divorce Laws in New South Wales", (1963) 4 Sydney Law Review 241 at 242. 30 (1966) 115 CLR 94 at 134; [1966] HCA 14. 32 (1956) 29 Australian Law Journal 468 at 472. Crennan cases"; (ii) reasoning "from the more fundamental of settled legal principles to new conclusions"; and (iii) deciding "that a category is not closed against unforseen instances which in reason might be subsumed thereunder". To these steps may be added one which is determinative of the present appeal. It is that where the reason or "foundation"33 of a rule of the common law depends upon another rule which, by reason of statutory intervention or a shift in the case law, is no longer maintained, the first rule has become no more than a legal fiction and is not to be maintained. An example is provided by a division of opinion in Brown v Holloway34 and Edwards v Porter35 respectively between this Court and the House of Lords, as to the consequences of the Married Women's Property Act 1882 (UK) ("the 1882 UK Act") and its Queensland counterpart36. Of those cases, it was said in Thompson v Australian Capital Television Pty Ltd37: "The issue [in Edwards v Porter] concerned the effect of the provision in [the 1882 UK Act] that married women were to be capable of suing or being sued as if each were a feme sole, the immediate issue being whether a husband remained liable at common law with his wife for a tort committed by her during joint coverture. In this Court it had previously been decided by Griffith CJ, O'Connor and Isaacs JJ that the liability of the husband was gone38. At common law the wife had been liable for her own torts but there was no way in which that liability could be enforced save by an action against her in which her spouse was joined as a party. The joinder of the husband was necessary only because the liability of the wife could not be made effective without his joinder as a party. The 33 See the statement by Lord Penzance in Holmes v Simmons (1868) LR 1 P & D 523 34 (1909) 10 CLR 89; [1909] HCA 79. 36 Married Women's Property Act 1890 (Q). 37 (1996) 186 CLR 574 at 614-615; [1996] HCA 38. See also at 584-585, 591. 38 Brown v Holloway (1909) 10 CLR 89. Crennan legislation39 removed that procedural disability and therefore the reason which had rendered the husband a necessary party. In Edwards v Porter, without consideration of the reasoning of this Court in Brown v Holloway, their Lordships divided 3:2 in favour of a decision that, notwithstanding the legislation, the husband remained liable to suit with his wife for her torts40. One of the minority, Viscount Cave 'The whole reason and justification for joining a husband in an action against his wife for her post-nuptial tort has therefore disappeared; and it would seem to follow, upon the principle "cessante ratione cessat lex," that he is no longer a necessary or proper party to such an action.'" It is with this reasoning in mind that there is to be understood the earlier statement by Dawson J in R v L42 that: "whatever may have been the position in the past, the institution of marriage in its present form provides no foundation for a presumption which has the effect of denying that consent to intercourse in marriage can, expressly or impliedly, be withdrawn. There being no longer any foundation for the presumption, it becomes nothing more than a fiction which forms no part of the common law." 39 In Brown v Holloway, the Married Women's Property Act 1890 (Q). [See also Married Women's Property Act 1883 (Tas), Married Women's Property Act 1883-4 (SA), Married Women's Property Act 1884 (Vic), Married Women's Property Act 1892 (WA), Married Women's Property Act 1893 (NSW).] 40 Later, in Ford v Ford (1947) 73 CLR 524 at 528; [1947] HCA 7, Latham CJ expressed the opinion that, in accordance with the then prevailing doctrine in Piro v W Foster & Co Ltd (1943) 68 CLR 313; [1943] HCA 32, this Court would follow the House of Lords at the expense of its own earlier decision. In any event, legislation in all States and Territories ensured that married status has no effect on the rights and liabilities of a woman in tort: Balkin and Davis, Law of Torts, 2nd ed (1996) at 836. 41 Edwards v Porter [1925] AC 1 at 10. 42 (1991) 174 CLR 379 at 405. Crennan That statement points the way to the resolution of this appeal. The common law crime of rape The point should first be made that, the issue of irrevocable consent by a wife apart, the common law with respect to the crime of rape did not remain static. Sir Edward Coke in The First Part of the Institutes of the Laws of England early in the 17th century wrote43: "'Rape.' Raptus is, when a man hath carnall knowledge of a woman by force and against her will." In 1957 in their joint reasons in Papadimitropoulos v The Queen44, Dixon CJ, McTiernan, Webb, Kitto and Taylor JJ referred to Australian decisions given in 1915, 1919 and 1947 when stating: "The modern history of the crime of rape shows a tendency to extend the application of the constituent elements of the offence. The 'violenter et felonice rapuit' of the old Latin indictment is now satisfied although there be no use of force: R v Bourke45. The 'contra voluntatem suam' requires only a negative absence of consent; (as to the need of the man's being aware of the absence of consent, see R v Lambert 46). The 'violenter et felonice carnaliter cognovit' is established if there has been some degree of penetration although slight, and no more force has been used than is required to effect it: R v Bourke47; R v Burles48." 43 (1628), Section 190. 44 (1957) 98 CLR 249 at 255; [1957] HCA 74. 45 [1915] VLR 289. 46 [1919] VLR 205 at 213. 47 [1915] VLR 289. 48 [1947] VLR 392. Crennan Their Honours added49: "To return to the central point; rape is carnal knowledge of a woman without her consent: carnal knowledge is the physical fact of penetration; it is the consent to that which is in question; such a consent demands a perception as to what is about to take place, as to the identity of the man and the character of what he is doing. But once the consent is comprehending and actual the inducing causes cannot destroy its reality and leave the man guilty of rape." The reference in Papadimitropoulos to "[t]he modern history of the crime of rape" may be seen as foreshadowing two points with respect to the development of the common law made by Dixon CJ shortly thereafter. In Commissioner for Railways (NSW) v Scott50 Dixon CJ spoke of the gradual growth of the legal system by proceeding by reasoning from accepted notions about remedies and rights to the evolution of rules "to govern new or changed situations to which an ever developing social order gives rise"; he went on to observe that "[t]he resources of the law for superseding or avoiding the obsolescent have for the most part proved sufficient". It is upon that sufficiency that the respondent relies in this appeal. The statement by Hale What now follows in these reasons emphasises that some care is required when visiting what Professor Glanville Williams described as "the museum of the English criminal law"51. The relevant passage in The History of the Pleas of the Crown appears in Ch 58, headed "Concerning felonies by act of parliament, and first concerning rape". The importance of statutory intervention in this respect may be seen from the passage from Russell's treatise set out earlier in these reasons52. 49 (1957) 98 CLR 249 at 261. 50 (1959) 102 CLR 392 at 399-400; [1959] HCA 29. 51 Williams, "The Legal Unity of Husband and Wife", (1947) 10 Modern Law Review Crennan Hale referred to the statement by Bracton that it was a good exception to an appeal (ie formal accusation) of rape that the parties were living in amicable concubinage, adding "and the reason was, because that unlawful cohabitation carried a presumption in law, that it was not against her will". Hale went on to say: "But this is no exception at this day[. I]t may be an evidence of an assent, but it is not necessary that it should be so, for the woman may forsake that unlawful course of life." (emphasis added) This is followed by the critical statement: "But the husband cannot be guilty of a rape committed by himself upon his lawful wife, for by their mutual matrimonial consent and contract the wife hath given up herself in this kind unto her husband, which she cannot retract." (emphasis added) Several points may be made immediately. First, it is apparent from Hale's treatment of Bracton's view in the 13th century of concubinage that he did not regard what had been said in past times as necessarily expressing the common law "at this day" four centuries later. Secondly, Hale gave, as the reason for the proposition that a husband cannot be guilty of a rape upon his wife, the nature in law of the matrimonial relationship. But, in that regard, it was well settled that marriage was constituted by the present consent of the parties expressed under such circumstances as the law required, but without the requirement for consummation to complete the marriage53. Further, as explained later in these reasons54, the ecclesiastical courts did not enforce any duty of sexual intercourse between husband and wife. Thirdly, Hale did not explain the character in law of the proposition respecting rape in marriage, whether it stated an element of the offence, a defence, or an immunity. Nor did Hale refer to any prior cases which might be 53 Dalrymple v Dalrymple (1811) 2 Hag Con 54 at 62-63 [161 ER 665 at 668-669]; R v Millis (1844) 10 Cl & F 534 at 719 [8 ER 844 at 913]. Crennan said to illustrate and support the proposition. From the immediately preceding treatment by Hale of Bracton it is apparent that the proposition is more than a bar to the reception of evidence by the wife or a statement of her absolute testimonial incompetence in this respect. This is further apparent from what immediately follows in Hale's text. This is a treatment of what had been decided at the trial of Lord Audley before the House of Lords in 163155 as follows: "A the husband of B intends to prostitute her to a rape by C against her will, and C accordingly doth ravish her, A being present, and assisting to this rape: in this case these points were resolved, 1. That this was a rape in C notwithstanding the husband assisted in it, for tho in marriage she hath given up her body to her husband, she is not to be by him prostituted to another. 2. That the husband being present, aiding and assisting, is also guilty as a principal in rape, and therefore, altho the wife cannot have an appeal of rape against her husband, yet he is indictable for it at the king's suit as a principal. 3. That in this case the wife may be a witness against her husband, and accordingly she was admitted, and A and C were both executed." It should be added that in the 19th century, it was held in the Supreme Judicial Court of Massachusetts56 that there should be no arrest of judgment on the ground that the indictment had not alleged that the complainant was not the wife of any of those charged with raping her. The relevant passage from Hale had been cited, but Bigelow J responded57: "Such an averment has never been deemed essential in indictments for rape, either in this country or in England. The precedents contain no such allegation. See authorities before cited. A husband may be guilty at common law as principal in the second degree of a rape on his wife by assisting another man to commit a rape upon her; Lord Audley's case, 3 Howell's State Trials, 401; and under our statutes he would be liable to be punished in the same manner as the principal felon. Rev Sts c 133, §1. An indictment charging him as principal would therefore be valid. 55 The Trial of Lord Audley (1631) 3 St Tr 401. 56 Commonwealth v Fogerty 74 Mass 489 (1857). 57 74 Mass 489 at 491 (1857). Crennan Of course, it would always be competent for a party indicted to show, in defence of a charge of rape alleged to be actually committed by himself, that the woman on whom it was charged to have been committed was his wife. But it is not necessary to negative the fact in the indictment." Thus it will be seen that whatever its character in law, Hale's proposition was not framed in absolute terms, given his treatment of Lord Audley's Case. But what is important for the present appeal is further consideration of the reason given by Hale, which was based in an understanding of the law of matrimonial status in the second half of the 17th century when he wrote. Matrimonial status and its incidents in England In the period in which Hale wrote, and until the significant legislative changes in the course of the 19th century, each of the three jurisdictions in England represented by the courts of common law, the courts of equity and the ecclesiastical courts, had distinct roles in matters affecting matrimonial status58. The law applied in the common law courts had absorbed much canon law learning and it defined basic concepts such as legitimacy, procedural rights at law between spouses, and the duties and responsibilities of husbands, including their rights and duties in respect of the contracts and torts of their wives. Marriage had important consequences in property law, for establishing and securing inheritance of legal estates in land. In such contexts a court of common law would determine whether there had been a marriage. The common law also provided forms of action such as breach of promise to marry, criminal conversation by adulterers and seduction of daughters. As already observed59 by reference to the statement of Sir George Jessel MR in In re Hallett's Estate60, equity intervened in a notable fashion by means of the trust to reserve separate property for a wife after her marriage. In his lecture entitled "Of Husband and Wife", Chancellor Kent, after referring to the incompetency at common law of a married woman to deal with her property 58 See the discussion by Professor Cornish in The Oxford History of the Laws of England, (2010), vol 13 at 724-726. 60 (1879) 13 Ch D 696 at 710. Crennan as a feme sole61, went on to contrast the position in equity and described the procedural consequences as follows62: "The wife being enabled in equity to act upon property in the hands of her trustees, she is treated in that court as having interests and obligations distinct from those of her husband. She may institute a suit, by her next friend, against him, and she may obtain an order to defend separately suits against her; and when compelled to sue her husband in equity, the court may order him to make her a reasonable allowance in money to carry on the suit." The provision in the 1882 UK Act and in the corresponding colonial married women's property legislation63 that a married woman was capable of acquiring, holding and disposing of any real or personal property as her separate property, as if she were a feme sole, "without the intervention of any trustee", represented a triumph in statutory form of the principles of equity64. However, it was not until 1862, with the decision of Lord Westbury LC in Hunt v Hunt65, that the Court of Chancery enforced a negative covenant in a deed of separation not to sue in the ecclesiastical courts (or after 1857 in the Divorce Court) for restitution of conjugal rights. Ecclesiastical courts in England had limited powers to order separation of spouses but could not order the dissolution of marriage. This required a statute. Hale wrote in a period in which Parliamentary intervention was beginning. In 1669 a private Act was granted to Lord de Roos, and in 1692 to the Duke of Norfolk; only five such divorces were granted before 1714, but between 1800 and 1850 there were 9066. (Divorce by private Act of the legislature was to be 61 Kent, Commentaries on American Law, (1827), vol 2, 109 at 136. 62 Kent, Commentaries on American Law, (1827), vol 2, 109 at 137. 63 See fn 39. 64 Yerkey v Jones (1939) 63 CLR 649 at 675-676; [1939] HCA 3. 65 (1862) 4 De G F & J 221 [45 ER 1168]; see also Fielding v Fielding [1921] NZLR 66 Sir Francis Jeune, "Divorce", Encyclopaedia Britannica, 10th ed (1902), vol 27, Crennan attempted in 1853 in New South Wales, but the Instructions issued to colonial governors required that any Bill dealing with divorce be reserved for the Queen's pleasure67 and the Royal Assent was only given to the Bill after some delay68.) However, it should be noted that in Scotland since the 16th century, provision had been made for judicial grant of divorce on grounds of adultery of either spouse or malicious desertion for at least four years69. Given the significant settlement of Scots immigrants in the Australian colonies, this element of their inheritance should not be overlooked in understanding the development of Australian institutions70. In 1891, the English Court of Appeal held that habeas corpus would issue to free a wife confined by her husband in his house in order to enforce restitution of conjugal rights71. In R v L72 Brennan J said: "The ecclesiastical courts made decrees for the restitution of conjugal rights but the decree commanded a general resumption of cohabitation and did not purport to compel a spouse to do or abstain from doing particular acts in performance of a connubial obligation73. The legal significance of connubial obligations was to be found in the making of decrees based on breaches of those obligations. Breaches were established only by proof of conduct that was a gross infringement of a connubial right or by proof of a 67 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, 68 Bennett, A History of the Supreme Court of New South Wales, (1974) at 144-145. 69 Walker, A Legal History of Scotland, (2001), vol 6 at 658, 661. 70 See generally, McPherson, "Scots Law in the Colonies", [1995] Juridical Review 191. 71 R v Jackson [1891] 1 QB 671. 72 (1991) 174 CLR 379 at 393. 73 Hunt v Hunt (1943) 62 WN (NSW) 129. Crennan continuous failure to perform a connubial obligation in satisfaction of the corresponding connubial right of the other spouse. The courts exercising jurisdiction in matrimonial causes recognized the mutual rights of husband and wife relating to sexual intercourse and, in granting or withholding their decrees, ascertained whether either party had wilfully and persistently refused to accord the right of sexual intercourse to the other party. From the days of the ecclesiastical courts, however, it was accepted that no mandatory order to compel sexual intercourse would be made." In 1933, when describing the nature and incidents of a decree for restitution of conjugal rights under the jurisdiction conferred by Pt III (ss 6-11) of the Matrimonial Causes Act 1899 (NSW), Dixon J observed in Bartlett v Bartlett74 that, so long as this remedy was retained, it must be treated as a process imposing an obligation, the performance or non-performance of which is ascertainable, and he added75: "On the one hand, it is clear that the obligation requires cohabitation, a physical dwelling together. On the other hand, it is clear that it does not require the resumption of sexual intercourse. It cannot, in fact, and in principle ought not to be understood as attempting to, control motives, feelings, emotions, sentiment or states of mind. Its operation must be limited to overt acts and conduct. ... Perhaps, all that can be said is that the decree of restitution requires the spouse against whom it is directed again to dwell with the other spouse in outward acceptance of the relationship, to act as if they were husband and wife maintaining a matrimonial home and to commence no course of conduct intended to cause a separation." Evatt J set out76 a passage from the reasons of Salmond J in Fielding v Fielding77 in which, with reference to the jurisdiction conferred by s 7 of the Divorce and Matrimonial Causes Act 1908 (NZ) for the issue of decrees for restitution of conjugal rights, Salmond J had said: 74 (1933) 50 CLR 3 at 15-16; [1933] HCA 53. 75 (1933) 50 CLR 3 at 16. 76 (1933) 50 CLR 3 at 18. 77 [1921] NZLR 1069 at 1071. Crennan "The Ecclesiastical Courts [in England] never professed or attempted by means of decrees for restitution of conjugal rights, and imprisonment for disobedience to such decrees, to enforce any duty of sexual intercourse between husband and wife. The basis of such a decree was the wrongful refusal of matrimonial cohabitation. The duty enforced was merely the duty of husband and wife to live together under the same roof in the normal relationship of husband and wife, but without reference to the question of intercourse." The divorce legislation The passage of the Matrimonial Causes Act 1857 (UK)78 ("the 1857 UK Act") later was described by Dicey as "a triumph of individualistic liberalism and of common justice"79. But it was the culmination of many years of agitation. Of the delay, Professor Cornish writes80: "It is less easy to explain why, given the long availability of judicial divorce in Scotland and its spread to other Protestant countries, the step did not come earlier. Jeremy Bentham, for instance, had been an advocate of fully consensual divorce, but subject to time delays for reflection and a bar on the re-marriage of a guilty party." (footnote omitted) The 1857 UK Act terminated the jurisdiction of the ecclesiastical courts in matrimonial matters (s 2) and vested that jurisdiction in the new Court for Divorce and Matrimonial Causes (s 6), but the Court was to act on the principles and rules which had been applied by the ecclesiastical courts (s 22). A decree dissolving marriage might be pronounced on a petition by the husband alleging adultery by the wife, and on a wife's petition, alleging adultery coupled with desertion for at least two years and without reasonable excuse, or alleging adultery with aggravated circumstances including "such Cruelty as without Adultery would have entitled her to a Divorce à Mensâ et Thoro" (ss 27 and 31). 78 20 & 21 Vict c 85. 79 Lectures on the Relation between Law and Public Opinion in England during the Nineteenth Century, 2nd ed (1914) at 347. 80 The Oxford History of the Laws of England, (2010), vol 13 at 781. Crennan In 1858 the Secretary of State for the Colonies conveyed to all colonial governors and legislatures the wish of the Imperial Government that steps be taken to introduce, "as nearly as the circumstances of the Colony will admit", the provisions of the 1857 UK Act81. The colonies acted accordingly, but at different paces: Matrimonial Causes Act 1858 (SA), Matrimonial Causes Act 1860 (Tas), Matrimonial Causes Act 1861 (Vic), Matrimonial Causes Act 1863 (WA), Matrimonial Causes Act 1865 (Q), Matrimonial Causes Act 1873 (NSW). This legislation did not need to abolish in the colonies the non-existent jurisdiction of ecclesiastical courts. Rather, it conferred jurisdiction in matrimonial causes on the Supreme Courts. The differential treatment in the 1857 UK Act between the grounds of divorce available to husbands and wives was carried into the initial colonial legislation. But there followed attempts by New South Wales and Victoria to assimilate and expand the grounds for divorce; the Governor's Instructions required these Bills to be reserved for the Royal Assent on advice of the Imperial Government and, initially, in circumstances of considerable controversy in the colonies, the Royal Pressure for reform of legislation respecting divorce was, however, maintained, particularly in the more populous colonies of New South Wales and Victoria83, and eventually succeeded. In Victoria The Divorce Act 1889 provided extended grounds for divorce84. Advocates of the women's movement in New South Wales were able to press for further liberalisation of the laws, despite the opposition of the churches85. The Divorce Amendment and Extension Act 1892 81 The Despatch by Lord Stanley to the Governor of New South Wales for presentation to both Houses of the Parliament is reproduced in Votes and Proceedings of the Parliament of New South Wales 1859-1860, vol 4 at 1169. 82 Quick and Garran, The Annotated Constitution of the Australian Commonwealth, 83 See the account given by Finlay, To Have But Not to Hold, (2005), Ch 3. 84 Which included adultery, desertion for a period of three years and upwards, habitual drunkenness, habitual cruelty to a wife, conviction for attempt to murder a wife, conviction for having assaulted a wife with intent to cause grievous bodily harm, or repeated assaults on a wife: The Divorce Act 1889 (Vic), s 11. 85 Grimshaw et al, Creating a Nation, (1994) at 172. Crennan (NSW) was expressed in terms similar to those of the Victorian Act. The extended grounds gave colonial women greater access to divorce than their contemporaries in the United Kingdom. Conclusions What was the immediate significance of these 19th century legislative measures for the continued vitality of the reasoning upon which Hale in the 17th century had based his proposition respecting "rape in marriage"? In answering that question it is convenient first to repeat what was said by the Supreme Court of New Jersey in State v Smith86 as follows: "We believe that Hale's statements concerning the common law of spousal rape derived from the nature of marriage at a particular time in history. Hale stated the rule in terms of an implied matrimonial consent to intercourse which the wife could not retract. This reasoning may have been persuasive during Hale's time, when marriages were effectively permanent, ending only by death or an act of Parliament87. Since the matrimonial vow itself was not retractable, Hale may have believed that neither was the implied consent to conjugal rights. Consequently, he stated the rule in absolute terms, as if it were applicable without exception to all marriage relationships. In the years since Hale's formulation of the rule, attitudes towards the permanency of marriage have changed and divorce has become far easier to obtain. The rule, formulated under vastly different conditions, need not prevail when those conditions have changed." To that may be added the statement in that case88: "If a wife can exercise a legal right to separate from her husband and eventually terminate the marriage 'contract', may she not also revoke a 'term' of that contract, namely, consent to intercourse?" 86 426 A 2d 38 at 42 (1981). 87 Clark, The Law of Domestic Relations in the United States, (1968) at 280-282. 88 426 A 2d 38 at 44 (1981). Crennan In similar vein is the statement made from the New South Wales Supreme Court bench by Sir William Windeyer in 1886, in which he regretted that while the State regarded marriage as a civil contract and in this case the contract had been destroyed by the husband "having done his best to degrade you", by reason of the then limited grounds of divorce then available to her in New South Wales, she had no redress89. Insofar as Hale's proposition respecting the nature of the matrimonial contract was derived from an understanding of the principles applied by the ecclesiastical courts, the following may be said. First, as Lord Brougham observed in R v Millis90: "[Marriage] was always deemed to be a contract executed without any part performance; so that the maxim was undisputed, and it was peremptory, 'Consensus, non concubitus, facit nuptias vel matrimonium.'" Secondly, with respect to the exercise of their jurisdiction in suits for restitution of conjugal rights, the ecclesiastical courts did not accept that the exercise of the mutual rights of spouses was to be an occasion of abuse and degradation. The following further remarks of Brennan J in R v L91 are in point: "To acknowledge a connubial obligation not to refuse sexual intercourse wilfully and persistently is to acknowledge that the giving of consent to acts of sexual intercourse is necessary to perform the obligation. It would have been inconsistent with such an obligation to hold that, on marriage, a wife's general consent to acts of sexual intercourse has been given once and for all. If no further consent was required on the part of a wife, how could there be a wilful and persistent refusal of sexual intercourse by her? The ecclesiastical courts never embraced the notion of a general consent to sexual intercourse given once and for all on marriage by either spouse." Thirdly, and in any event, in the Australian colonies jurisdiction with respect to matrimonial causes was not part of the general inheritance of the Supreme 89 Bennett, "The Establishment of Divorce Laws in New South Wales", (1963) 4 Sydney Law Review 241 at 248. 90 (1844) 10 Cl & F 534 at 719 [8 ER 844 at 913]. 91 (1991) 174 CLR 379 at 396. Crennan Courts. They received such jurisdiction only by local statute in the second half of the 19th century. That legislation, as interpreted in the period before the enactment of the CLC Act in 1935, did not require, for compliance with a decree for restitution of conjugal rights, more than matrimonial cohabitation; in particular the duty of matrimonial intercourse was one of imperfect legal obligation because it could not be compelled by curial decree92. Finally, although Hale did not expressly rely upon it, his proposition respecting irrevocable consent could not have retained support from any common law concept that the wife had no legal personality distinct from that of her husband. This was never wholly accepted by the Court of Chancery, given the development there of the trust. The references earlier in these reasons to the significance of the married women's property legislation93 indicate that, by statute, the attitudes of the equity jurisdiction were given effect in the latter part of the 19th century to a significant degree throughout the legal system in England and the Australian colonies. To that may be added the significance of the conferral by the Commonwealth Franchise Act 1902 (Cth) of the universal adult franchise94. It has been said that the gaining of suffrage for women in South Australia in 1894 was critical to the national suffrage movement95. At the turn of the 20th century, suffragists in England were looking to what had been achieved in Australia96. An English suffragist, Dame Millicent Garrett Fawcett, writing in 1911 when women in England had not yet been granted suffrage, observed that97: 92 Bartlett v Bartlett (1933) 50 CLR 3 at 12, 15, 18. 94 See Roach v Electoral Commissioner (2007) 233 CLR 162 at 195-196 [70]-[71]; [2007] HCA 43. 95 Oldfield, Woman Suffrage in Australia, (1992) at 213 (Western Australia followed in 1899 through the passage of the Constitution Acts Amendment Act 1899 (WA)). 96 See for example Zimmern, Women's Suffrage in Many Lands, (1909) at 160; Fawcett, Women's Suffrage: A Short History of a Great Movement, (1911) at 59. 97 Fawcett, Women's Suffrage: A Short History of a Great Movement, (1911) at 59. Crennan "In the Commonwealth of Australia almost the first Act of the first Parliament was the enfranchisement of women. The national feeling of Australia had been stimulated and the sense of national responsibility deepened by the events which led to the Federation of the Independent States of the Australian Continent." By 1930 Isaacs J was able to say that98: "women are admitted to the capacity of commercial and professional life in most of its branches, that they are received on equal terms with men as voters and legislators, that they act judicially, can hold property, may sue and be sued alone". By the time of the enactment in 1935 of the CLC Act, if not earlier (a matter which it is unnecessary to decide here), in Australia local statute law had removed any basis for continued acceptance of Hale's proposition as part of the English common law received in the Australian colonies. Thus, at all times relevant to this appeal, and contrary to Hale's proposition, at common law a husband could be guilty of a rape committed by him upon his lawful wife. Lawful marriage to a complainant provided neither a defence to, nor an immunity from, a prosecution for rape. To reach that conclusion it is unnecessary to rely in general terms upon judicial perceptions today of changes in social circumstances and attitudes which had occurred in this country by 1935, even if it were an appropriate exercise of legal technique to do so. The conclusion follows from the changes made by the statute law, as then interpreted by the courts, including this Court, before the enactment of the CLC Act. Order The appeal should be dismissed. 98 Wright v Cedzich (1930) 43 CLR 493 at 505; [1930] HCA 4. HEYDON J. The events giving rise to this appeal allegedly took place in 1963. At that time it was universally thought in Australia that a husband could not be convicted of having sexual intercourse with his wife without her consent save where a court order operated or where there were other exceptional circumstances. This immunity from conviction was thought to exist because Sir Matthew Hale, who died in 1676, had asserted its existence in The History of the Pleas of the Crown, published in 1736. The reason he assigned was that on marriage wives irrevocably consented to sexual intercourse with their husbands99. Below the immunity will be called "the immunity" or "Hale's proposition". By what warrant did the State of South Australia seek in 2010 to prosecute the appellant for allegedly having sexual intercourse with his wife without her consent more than 47 years earlier? A sufficient answer to that question would be: "It had none, for the reasons that Bell J powerfully states." However, in deference to the arguments put by South Australia, a fuller answer should be given. One matter must be put aside, though the appellant may wish to rely on it at a later stage in these proceedings. This appeal is not directly concerned with any oppressiveness that results from the delay in prosecution. But that tardiness does support the appellant's submission that in 1963 there was no crime of rape for which he could be charged. One primary explanation which South Australia gave to the District Court for its delay was that the immunity created considerable doubt as to whether the appellant was liable for rape. Yet prosecutors have to demonstrate with clarity that the crimes they charge exist. South Australia tells the District Court that the appellant's liability was thought doubtful. It tells this Court that it is certain. South Australia's stance in the District Court is inconsistent with its dogmatic and absolute submissions in this Court. The first of its submissions in this Court was that the immunity never existed100. The second, alternative, submission was that even if the immunity had existed at one time, it had ceased to exist at some indeterminate time before South Australia put only those two submissions. It did not put a third submission – that even if the immunity existed and even if it had not ceased to exist up to now, it should be abolished now. That was a course which the 99 See below at [172]. 100 The first submission is discussed below at [71]-[113]. 101 The second submission is discussed below at [114]-[161]. English courts took in 1991102. It is a course which would raise issues different in some respects from those discussed below. South Australia's first submission: the detailed contentions South Australia's first submission was that it had never been the law, in England or in Australia, that a husband was immune from prosecution for having sexual intercourse with his wife without her consent. The Commonwealth supported that submission. It was based on a number of contentions. The first group of contentions centred on the following points. Hale's work was published 60 years after he died. The relevant part had not been revised before his death. Hale had not supported his statement with any reference to authority. Standing alone his proposition would not constitute the common law. At best it reflected "his view of a custom in 17th century England." As Blackstone asserted, "judicial decisions are the principal and most authoritative evidence, that can be given, of the existence of such a custom as shall form a part of the common law."103 A second group of contentions concerned ecclesiastical law. In the ecclesiastical courts there was no support for Hale's proposition. In ecclesiastical law each spouse had a right to sexual intercourse, but it was only to be exercised reasonably and by consent. This undermined the foundation of Hale's proposition. It revealed him to be mistaken in thinking that the wife's consent was irrevocable. It caused his proposition to be affected by "frailty". South Australia then turned to the history of Hale's proposition after he had enunciated it. It relied on Lord Lowry's very extreme statement that "Hale's doctrine had not been given the stamp of legislative, judicial, governmental and academic recognition."104 So far as "academic recognition" was concerned, South Australia submitted that the only statement of support for the immunity in absolute terms was that of Hale, and that there was no support for it in Blackstone. So far as "judicial … recognition" was concerned, South Australia submitted that Hale's proposition "was never authoritatively declared as part of the common law in Australia." It also submitted that no case had Hale's 102 R v R [1992] 1 AC 599. 103 Commentaries on the Laws of England, (1765), bk 1 at 69. 104 C (A Minor) v Director of Public Prosecutions [1996] AC 1 at 38. proposition as its ratio decidendi. There were only dicta and assumptions that the proposition existed. In some of the cases stating the dicta or resting on the assumptions Hale's proposition was cut down. There were also dicta to the contrary. Hale's proposition was further said to be inconsistent with some authorities. South Australia did not advance detailed submissions about any lack of "legislative" and "governmental" recognition. Perhaps it is hard to say much in support of negative propositions. However, there is a lot to be said against those two. Finally, South Australia submitted that the immunity was completely outdated and offensive to human dignity. It is convenient to deal with South Australia's first submission under the following headings. Defects in Hale's statement of the immunity It is immaterial that Hale's work was published 60 years after his death, that the reference to the immunity appears in a part of it which Hale had not revised, and that he stated no elaborate reasons justifying the immunity. Hale's work is capable of being an accurate account of the law of his day despite these things. There is no reason to suppose that, had he revised the relevant part of his work, he would have considered it desirable to change it. South Australia is not alone in complaining about Hale's failure to cite authorities105. But it is anachronistic to do so. The modern approach to precedent was only struggling to be born in Hale's day106. Hale himself said107: "the decision of courts of justice, though by virtue of the laws of this realm they do bind, as a law between the parties thereto, as to the particular case in question, till reversed by error or attaint; yet they do not 105 Brooks, "Marital Consent in Rape", [1989] Criminal Law Review 877 at 878-883. The first maker of this criticism appears to have been Field J in R v Clarence (1888) 22 QBD 23 at 57. 106 Williams, "Early-modern judges and the practice of precedent", in Brand and Getzler (eds), Judges and Judging in the History of the Common Law and Civil Law: From Antiquity to Modern Times, (2012) 51. 107 The History of the Common Law of England, 6th ed (1820) at 89-90 (emphasis in original). make a law, properly so called; – for that only the king and parliament can do; yet they have a great weight and authority in expounding, declaring, and publishing what the law of this kingdom is; especially when such decisions hold a consonancy and congruity with resolutions and decisions of former times. And though such decisions are less than a law, yet they are a greater evidence thereof than the opinion of any private persons, AS SUCH, whatsoever". Hale's work often does not contain the dense citation of authorities characteristic of modern books. Indeed, many parts of it refer to only a few authorities. That is so of the passages in which he discusses the crime of rape. Hale did not cite direct authority for the immunity, or for his justification of the immunity. Whether there were in fact "authorities" of any kind to be cited on the present point is a matter which a 21st century court cannot easily deal with. It would need the assistance of close research into the question by modern legal historians with high expertise108. Subject to that matter, Hale did point out that there was authority for other propositions that he asserted. Those propositions were not inconsistent with the immunity. To some extent they supported it109. In view of Hale's high reputation for research into the criminal litigation of his day110, it seems likely that in practice husbands were not prosecuted for raping their wives, so that there were no authorities to cite. Even nowadays, a proposition can be correct though no precedent supports it. Ethical and tactical considerations prevent counsel from arguing what they perceive to be the unarguable. There are some propositions which seem too clear to the profession to be contradicted by argument. Propositions of that kind are widely accepted as good law. Subject to the research difficulties referred to in the previous paragraph, a lack of support from earlier authors such as Coke is, as Bell J explains, not significant and does not reveal Hale to be wrong111. Windeyer J once said: "an accepted rule of law is not to be overthrown by showing that history would not support it"112. None of the defects which 108 Australian Crime Commission v Stoddart (2011) 86 ALJR 66 at 81 [70]; 282 ALR 620 at 637; [2011] HCA 47. 109 Lanham, "Hale, Misogyny and Rape", (1983) 7 Criminal Law Journal 148 at 153-156. See also below at [208]. 110 See below at [209]. 111 See below at [200]. 112 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 447; [1959] HCA 29. supposedly existed in Hale's statement of the immunity prevented it from being an accepted rule of law. Hale and ecclesiastical law South Australia's appeal to ecclesiastical law encounters two difficulties. The first is that while the civil law of marriage was a matter for the ecclesiastical courts, the criminal law was a matter for the common law courts. Thinking in the ecclesiastical courts does not necessarily vitiate an account of the criminal law as administered in the common law courts. The second difficulty is that ecclesiastical law in the 17th century is another field not to be entered without expert assistance. In R v L113 Brennan J wrote at some length about ecclesiastical law. But the sources to which he referred were largely modern. None were contemporary with or earlier than Hale. Lord Lane CJ in R v R114 and Mason CJ, Deane and Toohey JJ in R v L115 pointed out that in Popkin v Popkin116 Sir William Scott (later Lord Stowell) stated: "The husband has a right to the person of his wife, but not if her health is endangered." Mason CJ, Deane and Toohey JJ commented that this showed that "even in the ecclesiastical courts, the obligation to consent to intercourse was not asserted in unqualified terms." If so, it also shows that Hale's proposition was not completely wrong. On the other hand, Brennan J did not think that Sir William Scott's statement showed that a husband had "a right to the person of his wife" without consent117. The submissions of the parties in this appeal did not take the matter further than Brennan J's researches took it. The parties did not cite any expert material throwing light on ecclesiastical law in or before Hale's time. For that reason, it is imprudent to examine it. 113 (1991) 174 CLR 379 at 391-402; [1991] HCA 48. 114 [1992] 1 AC 599 at 604. 115 (1991) 174 CLR 379 at 389. 116 (1794) 1 Hagg Ecc 765n [162 ER 745 at 747]. 117 R v L (1991) 174 CLR 379 at 398. Post-Hale writers South Australia submits that there is no statement of support for Hale's proposition except Hale himself, and that Hale's proposition has received no "academic recognition". That submission is extremely ambitious. It is also utterly incorrect. It is true that Hale's proposition is neither confirmed nor denied by Blackstone or Hawkins. Blackstone was writing at a considerable level of generality about much wider issues than those Hale wrote about. Whether or not it is right to describe Hawkins as "a somewhat second-rate institutional writer"118, it was not open to him to take up Hale's proposition in the first edition of his treatise. It appeared in 1716. Hale's work was not published until 1736. South Australia echoes the Crown's complaint to the House of Lords in R v R119 that the first writer to refer to the immunity after Hale was East in 1803. That is, however, less than 70 years after History of the Pleas of the Crown was published in 1736. In truth, Hale has enjoyed a great reputation. Lord Denning called him "the great Chief Justice Sir Matthew Hale"120. Hale's proposition garnered massive support from professional writers after 1803, and, as academic like too. lawyers emerged, Glanville Williams121, Smith and Hogan122 and Cross and Jones123 acknowledged the correctness of Hale's proposition. Like others who have attacked courts that relied on Hale's proposition124, South Australia failed to grapple with this uncomfortable point. Leading modern writers them from 118 Seaborne Davies, "The House of Lords and the Criminal Law", (1961) 6 Journal of the Society of Public Teachers of Law 104 at 110. 119 [1992] 1 AC 599 at 614. 120 Sykes v Director of Public Prosecutions [1962] AC 528 at 558. 121 Textbook of Criminal Law, 2nd ed (1983) at 236; "The problem of domestic rape", (1991) 141 New Law Journal 205 and 246. 122 Criminal Law, 6th ed (1988) at 430-432 (and all earlier editions). 123 Card (ed), Cross and Jones: Introduction to Criminal Law, 9th ed (1980) at 177 [9.2] (and all earlier editions). 124 For example, Brooks, "Marital Consent in Rape", [1989] Criminal Law Review 877 One source of law is "informed professional opinion"125. Where there is little authority on a question of law, the opinions of specialist writers, particularly their concurrent opinions, are very important in revealing, and indeed in establishing, the law. That is particularly true of books written by practitioners. But it has force in relation to well-respected academic writers as well126. As Lord Reid said: "Communis error facit jus may seem a paradox but it is a fact."127 Owen J put the matter with trenchant simplicity in relation to the first edition of Archbold in 1822. It said128: "A husband … cannot be guilty of a rape upon his wife." Owen J said129: "It seems to me that the consequences of that statement is this: if he was right, then practitioners would follow what he said. Equally, however, if he was wrong, practitioners would follow what he said." Hale's proposition in the courts South Australia relied on Lord Lowry's statement that Hale's proposition had not been "given the stamp of … judicial … recognition."130 South Australia greatly exaggerated the extent to which the authorities cast doubt on the immunity before 1991, when the House of Lords decided it should be abolished131, and four members of this Court said that it had ceased to represent the law132. An illustration is provided by South Australia's submission in relation to R v Clarence: 125 Jones v Secretary of State for Social Services [1972] AC 944 at 1026 per Lord Simon of Glaisdale. 126 Australian Crime Commission v Stoddart (2011) 86 ALJR 66 at 84-98 [90]-[138]; 282 ALR 620 at 641-660. 127 "The Judge as Law Maker", (1972) 12 Journal of the Society of Public Teachers of Law 22 at 25. 128 Archbold, A Summary of the Law Relative to Pleading and Evidence in Criminal Cases, (1822) at 259. 129 R v R – (rape: marital exemption) [1991] 1 All ER 747 at 748. 130 C (A Minor) v Director of Public Prosecutions [1996] AC 1 at 38. 131 R v R [1992] 1 AC 599. 132 R v L (1991) 174 CLR 379 at 390 and 405. "The exemption was first the subject of judicial comment in R v Clarence.133 In R v Clarence, seven of the thirteen judges declined to comment on the issue;134 of the six judges who did, two of them reiterated and confirmed the marital rape proposition,135 three of them questioned or qualified it,136 and another briefly adverted to it without engaging in it.137 The comments of the judges in R v Clarence were obiter dicta, however, taken as a whole they indicate that even as at 1888 there existed no settled view." It is true that the few things said about Hale's proposition in R v Clarence were dicta. The submission is otherwise very misleading. It suggests that only A L Smith J and Pollock B favoured Hale's proposition. In fact the position is as follows. Stephen J supported Hale's proposition138. The following seven judges concurred: A L Smith J139, Mathew J140, Grantham J141, Manisty J142, Wills J146, Huddleston B143, Pollock B144 and Lord Coleridge CJ145. 133 (1888) 22 QBD 23. 134 Lord Coleridge CJ, Huddleston B, Grantham, Manisty and Mathew JJ (quashing the conviction); Charles and Day JJ (dissenting because upholding the conviction). 135 A L Smith J and Pollock B (quashing the conviction). 136 Wills J (quashing the conviction) and Hawkins and Field JJ (dissenting because upholding the conviction). 137 Stephen J (quashing the conviction). 138 R v Clarence (1888) 22 QBD 23 at 46. 139 R v Clarence (1888) 22 QBD 23 at 37. 140 R v Clarence (1888) 22 QBD 23 at 38. 141 R v Clarence (1888) 22 QBD 23 at 46. 142 R v Clarence (1888) 22 QBD 23 at 55. 143 R v Clarence (1888) 22 QBD 23 at 56. 144 R v Clarence (1888) 22 QBD 23 at 61-62 and 63-64. 145 R v Clarence (1888) 22 QBD 23 at 66. 146 R v Clarence (1888) 22 QBD 23 at 33. Hawkins J147 and Field J148 each stated or left open the possibility that in some circumstances a husband could be convicted of raping his wife. But at least the latter two judges plainly thought that Hale's proposition was correct in some circumstances. Day J concurred with Hawkins J149. Charles J concurred with Field J150. its operation South Australia correctly submitted that English trial judges assumed that Hale's proposition was correct, but qualified in special circumstances. Examples of special circumstances included where there was a court non-cohabitation order151, or a decree nisi of divorce had effectively terminated the marriage152, or the husband had given an undertaking to the court not to molest the wife153, or there was an injunction restraining the husband from molesting or having sexual intercourse with the wife154, or there was an injunction and a deed of separation (even though the injunction had expired)155. The outer limit of these exceptions was unilateral withdrawal from cohabitation coupled with a clear indication that the wife's consent to sexual intercourse was On one view, each of the courts that reached these decisions was attempting to achieve justice by tailoring the absolute nature of Hale's proposition to the circumstances before it. Even if the wife could be said to have 147 R v Clarence (1888) 22 QBD 23 at 51. 148 R v Clarence (1888) 22 QBD 23 at 57-58. 149 R v Clarence (1888) 22 QBD 23 at 55. 150 R v Clarence (1888) 22 QBD 23 at 61. 151 R v Clarke [1949] 2 All ER 448. The judge was Byrne J, of whom Owen J said in R v R – (rape: marital exemption) [1991] 1 All ER 747 at 749: "Those who appeared before him will know that he was a judge of the highest repute. As a criminal lawyer, there were not many to excel him in his day." In R v Miller [1954] 2 QB 282 at 289 Lynskey J concurred with R v Clarke. 152 R v O'Brien [1974] 3 All ER 663. 153 R v Steele (1976) 65 Cr App R 22. 154 R v Steele (1976) 65 Cr App R 22 at 25; R v McMinn [1982] VR 53. 155 R v Roberts [1986] Crim LR 188. 156 R v R – (rape: marital exemption) [1991] 1 All ER 747 at 754. given consent by marriage, in those cases it had been withdrawn as a matter of practical reality either because the wife had successfully invoked court process or because the spouses had reached a formal agreement negating consent. Another view is that these cases travel down a road "potholed with ever greater illogicalities"; produce "a gaggle of technical and anomalous distinctions" and "absurdity"; and lack any "relationship to the real world."157 But even if this latter view is correct, it is adverse to South Australia's position. The cases show the enduring toughness of Hale's proposition in legal thought. To destroy Hale's proposition might eliminate formal anomalies and technicalities. But it was a course which many judges found unattractive. Instead they turned their minds to devising narrow exceptions. In two of the cases just referred to, the correctness of Hale's proposition, in the absence of special circumstances, was specifically acknowledged by quotation158. In another, Hale's proposition was thought to be correct at common law though not necessarily satisfactory159. And in R v Miller160, where the prosecution failed to prove any special circumstance and could point to no more than the wife having petitioned for divorce, Hale's proposition was applied. R v Miller renders false South Australia's submission that "no binding precedent can be found where [Hale's] principle represented the ratio decidendi." Contrary to that submission, R v Miller was an "authoritative declaration of the common law on the matter." R v Miller also demonstrates that McGarvie J was wrong to say in R v McMinn161: "There does not seem to have been any recent case in which it was considered whether [Hale's proposition] remains part of the common law." R v Miller was a binding precedent in England until 1991. A second case which applied Hale's proposition is R v J – (rape: marital exemption)162. There are numerous cases, including Australian cases, in which courts have assumed Hale's proposition to be correct at common law163. One is R v 157 Brooks, "Marital Consent in Rape", [1989] Criminal Law Review 877 at 880-882. 158 R v Clarke [1949] 2 All ER 448 at 448; R v Steele (1976) 65 Cr App R 22 at 24. 159 R v McMinn [1982] VR 53 at 55, 57-59 and 61. 160 [1954] 2 QB 282, criticised by Brooks, "Marital Consent in Rape", [1989] Criminal Law Review 877 at 882-883. 161 [1982] VR 53 at 61. 162 [1991] 1 All ER 759. 163 R v Brown (1975) 10 SASR 139 at 141 and 153; R v Cogan [1976] QB 217 at 223; R v Wozniak (1977) 16 SASR 67 at 71; R v Sherrin (No 2) (1979) 21 SASR 250 at 252; R v C (1981) 3 A Crim R 146 at 148-150; R v Caswell [1984] Crim LR 111; (Footnote continues on next page) Kowalski164, in which the English Court of Appeal described Hale's proposition as "clear, well-settled and ancient law". Another is R v Bellchambers165, in which Neasey and Everett JJ said that Hale's proposition "still expresses the common it as "archaic, unjust and they criticised discriminatory"166. A third is Brennan J's statement in R v L167: law", even though "Irrespective of the validity of Hale's reason for declaring that a husband could not be guilty as a principal in the first degree of rape of his wife, it appears that a substantive rule of the common law was established by his declaration." That statement followed more than 10 pages denouncing Hale's reasoning. Thus these last two cases, too, reveal the enduring toughness of Hale's proposition in legal thought. South Australia proffered three authorities that, in its submission, reveal that contrary to Hale's proposition, there was no irrebuttable presumption that on marriage the wife irrevocably consented to sexual intercourse with her husband. In R v Lister168, it was held that while it was lawful for a husband to restrain his wife's liberty where she was making "an undue use" of it, either by "squandering away the husband's estate, or going into lewd company", he could not do so where he had entered into a deed of separation with his wife. In R v Jackson169, the English Court of Appeal held that where a wife refused to live with her husband, he was not entitled to deprive her of liberty by kidnapping her and confining her to his house, even though he had obtained a decree for restitution R v Henry unreported, 14 March 1990 per Auld J: see R v J – (rape: marital exemption) [1991] 1 All ER 759 at 762-763 and Law Commission, Rape within Marriage, Working Paper No 116, (1990) at 97-108; R v Shaw [1991] Crim LR 301; Question of Law Reserved on Acquittal (No 1 of 1993) (1993) 59 SASR 214 at 164 (1987) 86 Cr App R 339 at 341. 165 (1982) 7 A Crim R 463 at 465. 166 (1982) 7 A Crim R 463 at 466. 167 (1991) 174 CLR 379 at 402. 168 (1721) 1 Strange 478 [93 ER 645 at 646]. of conjugal rights. In R v Reid170, that Court held that matrimonial status conferred no immunity on a husband who kidnapped his wife. These cases do not support South Australia's submission. They do not proceed on the basis that on marriage there was a presumption that the wife consented to having her liberty restrained and that she could rebut that presumption by withdrawing her consent. Indeed, in R v Reid171 the Court said of the doctrine in R v Miller that it was "impossible to stretch that doctrine to the extent of saying that on marriage a wife impliedly consents to being taken away by her husband using force or threats of force from the place where she is living." Accordingly, these cases are not inconsistent with Hale's proposition. In 1991, the English Court of Appeal and the House of Lords overturned Hale's proposition172. But it is notable that they did not accept the Crown's submission that "Hale's statement was never the law"173. The rulings of those Courts had retrospective consequences. But they did not hold that Hale's proposition had never been the law. They did not hold that the judgments which had decided, said or assumed that it was correct were wrong at the time they were handed down. Lord Lane CJ said in the Court of Appeal that Hale's proposition had been "accepted as an enduring principle of the common law."174 And the House of Lords altered the law because social conditions had changed quite recently. Hale's proposition was seen as reflecting the society of his day, and its rejection was seen as reflecting the different form which modern society had recently taken175. On that reasoning, Hale's proposition was good law in South Australia in 1963 – a matter relevant to rejection of South Australia's second submission176. 171 [1973] QB 299 at 302. 172 R v R [1992] 1 AC 599. 173 R v R [1992] 1 AC 599 at 602. 174 R v R [1992] 1 AC 599 at 604. 175 R v R [1992] 1 AC 599 at 616. 176 See below at [121]-[161]. Governmental recognition South Australia also relied on Lord Lowry's statement that Hale's proposition "had not been given the stamp of … governmental … recognition."177 That submission too must be rejected. Hale's proposition has received indirect governmental recognition – by the Executive – in two ways. One form of governmental recognition took place in a report of the Criminal Law and Penal Methods Reform Committee of South Australia published in 1976. That report acknowledged that Hale's proposition represented the common law178. It recommended that the immunity be abolished where the event charged took place while the parties were living separately179. There are several other reports before and after the South Australian report also resting on the view that Hale's proposition represented the common law180. Another form of governmental recognition has taken place. Not only in South Australia but in many other places, the authorities did not prosecute charges against husbands accused of raping their wives. This Court was not told of any prosecutions having been brought in England between Hale's time and 1949. In the second half of the 20th century, as exceptions developed to Hale's proposition, there were attempts to prosecute husbands, not for non-consensual 177 C (A Minor) v Director of Public Prosecutions [1996] AC 1 at 38. 178 Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 13 [6.2]: see below at [174]. 179 Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 15 [6.2.1]. 180 For example, Criminal Law Revision Committee, Sexual Offences, Report No 15, (1984) Cmnd 9213 at 17-18 [2.56]-[2.57]; Law Commission, Rape within Marriage, Working Paper No 116, (1990) at 9-12 [2.8]-[2.10]; American Law Institute, Model Penal Code and Commentaries (Official Draft and Revised Comments), (1980), Pt 2, Art 213 at 271-275, 341-346 and American Law Institute, Model Penal Code: Official Draft and Explanatory Notes, (1985), §213.1(1). The greatest example of this kind, which is not modern but does come from a time when, according to South Australia, legislative changes were being made which would mean that Hale's proposition "crumbled to dust", is the Royal Commission commenting on Stephen's Draft Code: see below at [219]. Sir Rupert Cross thought that Stephen had "one of the highest places" among the makers of English criminal law: "The Making of English Criminal Law: (6) Sir James Fitzjames Stephen", [1978] Criminal Law Review 652 at 661. sexual intercourse with their wives, but for crimes committed in connection with that conduct, such as assault or false imprisonment. So far as these crimes were distinct from sexual intercourse without consent, the prosecutions rested on sound legal thinking, though they were at peril of failing if there were difficulties in establishing that the husband's conduct had gone beyond sexual intercourse without consent181. What the prosecution assumes about the law is not decisive as to what the law is. But it is some guide to the thinking of experienced criminal lawyers. That thinking can be highly persuasive as to what the law is. Legislative recognition Finally, South Australia relied on Lord Lowry's statement that Hale's proposition "had not been given the stamp of legislative … recognition."182 That submission must also be rejected. Some forms of "legislative recognition" are of limited materiality. A statute expressly adopting Hale's proposition in South Australia would have superseded the common law. A statute expressly adopting it outside South Australia would have had slight relevance only to what the common law was in South Australia. Statutes rejecting it would have had little relevance to the position at common law unless they reflected a consistent legislative view of what the public interest demanded183. But there is South Australian legislation recognising Hale's proposition in the sense that it did not interfere with it when there was an occasion to do so. The South Australian Parliament did not adopt the recommendation of the Criminal Law and Penal Methods Reform Committee of South Australia to abolish the immunity when husband and wife were living separately. Instead two provisions relevant to the common law were enacted. First, s 73(3) of the Criminal Law Consolidation Act 1935 (SA) was introduced, removing any presumption that consent to sexual intercourse flowed from marriage. Secondly, s 73(5) was introduced: it prevented a spouse from being convicted not only of rape but also of indecent assault, attempted rape or indecent assault, and assault with intent to commit rape or indecent assault, unless the alleged offence was accompanied by various forms of aggravated conduct184. In substance it 181 See, for example, R v Henry unreported, 14 March 1990 per Auld J, set out in Law Commission, Rape within Marriage, Working Paper No 116, (1990) at 97-108. 182 C (A Minor) v Director of Public Prosecutions [1996] AC 1 at 38. 183 Esso Australia Resources Ltd v Federal Commissioner of Taxation (1999) 201 CLR 49 at 61-63 [23]-[28]; [1999] HCA 67. 184 See below at [175]. overlapped with the common law position precluding convictions of husbands for the conduct of sexual intercourse with their wives without consent. Thus the South Australian Parliament assumed that the immunity existed at common law, and left it in existence. It appears to have gone further in creating an immunity without any common law counterpart for non-aggravated forms of the crimes other than rape to which s 73(5) referred. That state of affairs continued until "Legislative recognition" in places other than South Australia assuming that the immunity existed at common law is relevant to the content of South Australian law – particularly Australian legislation, since there is a single common law in Australia. There are three points to be made. First, in the Code States (Queensland, Tasmania and Western Australia), the definition of rape excluded sexual intercourse by a husband with his wife. The relevant statutes assumed the correctness of Hale's proposition186. Secondly, the numerous changes in State and Territory legislation in the 1970s and 1980s indicated an assumption by each legislature (and by each Executive, which had a large measure of control over what draft legislation was introduced) that Hale's proposition was sound at common law. If not, it would not have been necessary to abolish or qualify it187. Thirdly, Canadian188 and New Zealand189 legislation assumed the correctness of Hale's proposition. An anachronistic and offensive proposition? There are no doubt many criticisms to be made of Hale's proposition if it is to be applied in the circumstances of 2012. But these criticisms do not show that his proposition was necessarily anachronistic or offensive in 17th century circumstances. That would depend on historical analysis which the parties' submissions did not perform. The criticisms therefore do not demonstrate that Hale's proposition was wrong from the outset. They are, however, appropriate arguments to consider when deciding whether Hale's proposition ought to be abandoned. It is a question which legislatures answered affirmatively from the 1980s on. It is not a question which South Australia places before this Court. Whether they are appropriate arguments to consider when deciding whether 185 See below at [176]. 186 See below at [176] n 298. 187 See below at [176]. See also Halabi v Westpac Banking Corporation (1989) 17 NSWLR 26 at 35. 188 See below at [221]. 189 See below at [233]. Hale's proposition dropped out of the law at some point before 1963 is a question which relates to South Australia's second submission. South Australia's first submission rejected It was inherent in South Australia's first submission that all the writers, all the judges, all the government officials, all the law reformers, all the public servants advising Ministers, all the prosecution authorities and all the legislatures who wrote or acted on the assumption that Hale's proposition was the law were wrong. South Australia explicitly adopted a statement to this effect in the Full Court of the Supreme Court of South Australia190. I flatly disagree. South Australia's second submission On the assumption that Hale's proposition was correct for some time after he stated it, South Australia put various contentions denying its applicability in South Australia contended that before 1963 the law had changed so as to nullify Hale's proposition, even though no case had stated this before 1991. This is an unusual invocation of the judicial process. South Australia's contention is different from a contention that this Court should now declare Hale's proposition to be wrong, and do so with effect retrospective to 1963. This latter course presents in an overt form the considerable difficulties which cluster around the making of retrospective changes to the criminal law. South Australia did not choose to tackle these difficulties head on. It did not suggest that this Court should now change the law. Rather, it submitted that the dicta of four Justices in R v L191 recognised that Hale's proposition had ceased to be the law at some time before 1991. South Australia submitted that this time was a time before 1963. In fact, nothing in R v L suggests that the demise of Hale's proposition took place at any specific time before 1991, such as 1963. South Australia's thesis that R v L bound the Full Court of the Supreme Court of South Australia to reach this conclusion must be rejected. South Australia relied on the following arguments as indications that Hale's proposition had ceased to be the law before 1963. South Australia submitted that in R v Jackson192 the denial of the husband's right to use physical coercion on his wife suggested that the immunity 190 R v P, GA (2010) 109 SASR 1 at 9 [43]. 191 (1991) 174 CLR 379 at 390 and 405. 192 [1891] 1 QB 671: see above at [101]. had disappeared from the law. But it does not follow that a husband lost the immunity where he had not employed physical coercion against his wife. South Australia also submitted that Hale's proposition was based on the doctrine of coverture – that the legal status of a wife is assimilated with that of her husband. And it submitted that by the turn of the 20th century the law had come to acknowledge the rights of married women as independent of their husbands' rights. In effect, it submitted that so many inroads had been made on the doctrine of coverture that it could no longer support Hale's proposition. This submission has the drawback that Hale did not base his proposition on the doctrine of coverture. However, the developments on which South Australia relied could be used, and to a degree were used, to support an argument that by the mid-20th century the rights and privileges of married women in Australia were inconsistent with any theory that on marriage wives gave their husbands irrevocable consent to sexual intercourse. South Australia advanced detailed submissions on the capacity of wives, gained by statute, to own property, to sue and be sued, to vote, to have custody of children, and to compel payment of and be compelled to pay child maintenance. It also relied on the termination by statute of discrimination between husbands and wives in relation to the grounds of divorce. In that way South Australia advances an argument for permitting the appellant to be prosecuted now for conduct which allegedly occurred in 1963. Whether it should be accepted depends on four matters. One is whether in fact the changes in the rights and privileges of wives by 1963 were, to use the words of South Australia's written submissions, "entirely inconsistent with the principle that a wife gave irrevocable consent to sexual intercourse with her husband upon marriage." A second concerns the need for certainty in the criminal law. A third concerns whether South Australia's argument could, in a practical sense, work a retrospective change in criminal law. A fourth is whether the task being undertaken is appropriate for the courts as distinct from the legislature. It is convenient to deal with these points in order. Is there inconsistency between the modern rights and privileges of wives and the immunity of husbands for rape? Bell J gives convincing reasons for answering this question in the negative193. Some ideas which tend to render Hale's proposition anachronistic can be discerned in 19th and early 20th century legislation. But the crucial triggers that would push Hale's proposition into disfavour arose in the 1970s. Before that decade there had been some questioning by lawyers of the stated 193 See below at [224]-[248]. justification for Hale's proposition. In that decade questioning began to grow about whether the proposition should be abolished by the legislature. The questioning grew as public concern about the law of rape in general and marital rape in particular began to rise. Law reform agencies began to examine numerous problems in detail. Legislative changes of different kinds were introduced. One trigger was the controversial decision in R v Morgan194 that a mistaken but honest belief that the victim had consented to intercourse was a defence to a rape charge, whether or not that belief was reasonable. R v Morgan was decided on 30 April 1975, seven months before the then Attorney-General for the State of South Australia requested the Criminal Law and Penal Methods Reform Committee of South Australia to report on the law relating to rape and other sexual offences. It was the very first topic the Committee dealt with195. Another trigger concerned whether warnings about the desirability of finding corroboration for the evidence of those complaining that they had been raped rested on unsatisfactory stereotyping. Another trigger was discontent about the rules relating to the cross-examination of complainants about their sexual histories. There were many other issues about which debates began to widen and intensify in those years. The immunity was only one of them. Further, the reasons underlying the legislation which has altered the status of wives over the last 150 years are not necessarily inconsistent with the immunity. To describe Hale's proposition as creating a presumption which no longer has any foundation, and as a fiction not forming part of the common law196, overlooks the fact that a common law rule can rest on a fiction, particularly when the rule in question develops a new and non-fictitious basis. As Lord Sumner observed197: "an established rule does not become questionable merely because different conjectural justifications of it have been offered, or because none is forthcoming that is not fanciful." A fortiori, an established rule does not become questionable merely because a justification which appealed to the minds of lawyers more than 300 years ago has ceased to have appeal now. In Australia, the controversy has been resolved. The resolution lies in abolition of the immunity. Abolition came by degrees. It also came from legislatures. In England, on the other hand, the first decision to abolish the immunity was made by a judge – Simon Brown J, in 1990198. Rougier J, sitting alone, at once refused 195 Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 2-8 [2]. 196 R v L (1991) 174 CLR 379 at 405. 197 Admiralty Commissioners v SS Amerika [1917] AC 38 at 56. 198 R v C – (rape: marital exemption) [1991] 1 All ER 755. This was a controversial decision. to follow it199. Then the immunity was abolished by the Court of Appeal and the House of Lords in R v R in 1991. The House of Lords decision has been supported on the ground that Hale's proposition was one which "nobody defended on the merits."200 That, however, is not true201. It is true to say, though, that R v R was based, as Lord Lowry later said, "on a very widely accepted modern view of marital rape"202. But the fact that an idea is very widely accepted does not mean that an inference from it automatically becomes a rule of law. The fact that a rule of law is disliked does not mean that it has ceased to be the law. The fact that a rule of law favourable to the accused is disliked does not mean that the courts rather than the legislature should abolish it. Indeed, after the English courts abolished the immunity, Parliament did as well203, once the matter had been considered by the Law Commission204. And the fact that very many people have disliked a rule of law favourable to the accused for a long time does not mean that it has ceased to be the law at some time in the past. The Permanent Court of International Justice said, in a somewhat different context, in Consistency of Certain Danzig 199 R v J – (rape: marital exemption) [1991] 1 All ER 759. 200 Spencer, "Criminal Law", in Blom-Cooper, Dickson and Drewry (eds), The Judicial House of Lords 1876-2009, (2009) 594 at 604. 201 See Morris and Turner, "Two Problems in the Law of Rape", (1954) 2 University of Queensland Law Journal 247 at 258-259; Howard, Australian Criminal Law, (1965) at 146; Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 14 [6.2]; American Law Institute, Model Penal Code and Commentaries (Official Draft and Revised Comments), (1980), Pt 2, Art 213 at 345; Criminal Law Revision Committee, Sexual Offences, Report No 15, (1984) Cmnd 9213 at 21 [2.69]. As late as 15 February 1991, just before the Court of Appeal decision of 14 March 1991 and the House of Lords decision of 23 October 1991 abolishing the immunity, Glanville Williams contended in "The problem of domestic rape", (1991) 141 New Law Journal 205 and 246, that husbands who had non-consensual intercourse with their wives should not be guilty of rape, but should be liable to prosecution for a new statutory crime. 202 C (A Minor) v Director of Public Prosecutions [1996] AC 1 at 38. 203 Criminal Justice and Public Order Act 1994 (UK), s 142, inserting a new s 1 of the Sexual Offences Act 1956 (UK). 204 Law Commission, Criminal Law: Rape within Marriage, Law Com No 205, Legislative Decrees with the Constitution of the Free City205, "[s]ound popular feeling is a very elusive standard." And mere popular feeling, however widespread, is a very unsafe standard to apply in relation to claims that common law rules have fallen into desuetude. Professor Robertson has contrasted R v R with C (A Minor) v Director of Public Prosecutions, in which the House of Lords declined to alter the common law rule that there is a rebuttable presumption that a child aged between 10 and 14 is doli incapax206. He correctly noted that the speeches in R v R contained "almost no argument", only "a bald statement"207. He argued that R v R rested on "the assumption, though it is an untested one, that there is wide consensus in the general public on the question of marital rape."208 He also argued that Lord Lowry's attempt to reconcile a change in the criminal law in R v R with a decision not to change it in C (A Minor) v Director of Public Prosecutions was "specious"209. He said210: "The abolition of the rule on rape, though occasioned by a rape where the man and wife were separated, would in fact apply inside an ongoing marriage. It is sociologically extremely unlikely that this view would command anything like as much support amongst the mass public as would a rule that allowed the conviction of thirteen-year-old auto-thieves. The fact that there had been several cases where judges had attempted to convict husbands for rape is on par with the attempt by the Divisional Court to change the doli incapax rule, where there was extensive quotation from judges who had wanted to but were dutiful to precedent. What is true is that liberal elite opinion was uniform in the rape context, and largely missing in the criminal capacity case. Asked how to square the two results, one Law Lord who had been a member of the bench in C but not in R v R threw his hands in the air and admitted he could not imagine how they squared it. Another though, who had heard C, indicated that his 205 Advisory Opinion, (1935) PCIJ (Ser A/B) No 65 at 53 per Sir Cecil Hurst (President), Judge Guerrero (Vice-President) and Judges Rolin-Jaequemyns, Fromageot, de Bustamante, Altamira, Urrutia, van Eysinga and Wang. 207 Judicial Discretion in the House of Lords, (1998) at 119. 208 Judicial Discretion in the House of Lords, (1998) at 120. 209 Judicial Discretion in the House of Lords, (1998) at 121. 210 Judicial Discretion in the House of Lords, (1998) at 121. decision was prompted by a desire to force the Government's hand and make it legislate." (emphasis in original) The task of assessing public opinion, or even the full range of legal opinion, whether now or in the past, is not an enterprise that is easy for courts to carry out. "The court does not, and cannot, carry out investigations or enquiries with a view to ascertaining whether particular common law rules … command popular assent."211 The question is not whether the view which the House of Lords stated in R v R about the general public's opinion is correct. The point is that if the general public's opinion is a relevant criterion, it is a criterion for the legislature to consider, not the courts212. Certainty in the criminal law Those who seek to foster the rule of law prize certainty. Ordinarily, certainty in the common law is assisted by the doctrine of precedent. Normally, a common law rule is supported by authorities. If an intermediate or ultimate appellate court decides to change the rule, it overrules the authorities and its decision creates a new binding authority. South Australia's submission is not that Hale's proposition be rejected, so that this Court's decision would be a new binding authority with retrospective effect. Instead South Australia submits that at some time which is not clearly specified, Hale's proposition ceased to be the law. At some time in the past that which had a solid existence is said to have dissolved into nothingness. In State Government Insurance Commission v Trigwell213, Gibbs J said: "Although the rules of the common law develop as conditions change, a settled rule is not abrogated because the conditions in which it was formulated no longer exist. It is now fashionable to criticize the rule in Searle v Wallbank[214] as anachronistic, inconsistent with principle and unsuitable to modern conditions, but it is by no means obvious that it would be a reasonable and just course simply to abolish the rule. The 211 State Government Insurance Commission v Trigwell (1979) 142 CLR 617 at 633 per Mason J; [1979] HCA 40. 212 See below at [128]-[129] and [146]-[150] for other arguments favouring legislative change in the criminal law over judicial change. 213 (1979) 142 CLR 617 at 627. See also Mason J at 633 (otherwise than in "a simple or clear case"). question whether the rule should be altered, and if so how, is clearly one for the legislatures concerned rather than for the courts." A fortiori, it does not follow from anachronism that a rule simply dissolves without any court ruling at the time it dissolved, leaving its dissolution to be detected by a court many years or decades later. To the extent that they may be changed retrospectively, uncertainty is inherent in common law rules. But the standard technique is to make the change in a particular case. It is announced as having happened at the time of that case. Even though it operates retrospectively, that retrospective operation tends to affect only quite recent conduct. That was so in R v R and other cases following it: the conduct charged took place only a short time before the law changed. At least in non-criminal fields, if the change is the result of altering "the law's direction of travel by a few degrees" as distinct from setting "it off in a different direction"215, no great harm may follow. Assuming it is permissible for the courts to change the substantive criminal law, R v R is an example of the standard technique. It relied on quite recent changes in the status of married women. It did not purport to announce that a change had taken place many years ago, by reason of changes in status even earlier. South Australia's urging of the latter course engenders much more uncertainty. It invites Bentham's reproach216: "Nebuchadnezzar put men to death for not finding a meaning for his dreams: but the dreams were at least dreamt first, and duly notified. English judges put men to death very coolly for not having been able to interpret their dreams, and that before they were so much as dreamt." Retrospective change in the criminal law and the appropriate institutions to effectuate it South Australia's arguments involve a retrospective change in the criminal law. Indeed, they willingly embrace it. They involve the proposition that conduct no-one saw as attracting criminal liability in 1963 in fact attracted that liability because an historical investigation in 2010-2012 is said to reveal that changes in legal and social conditions at some unspecified time before 1963 caused the conduct to become criminal. And this proposition involves a very serious crime. Rape in 1963 was punishable by life imprisonment and whipping217. 215 Bingham, "The Rule of Law", (2007) 66 Cambridge Law Journal 67 at 71. 216 Bowring (ed), The Works of Jeremy Bentham, (1843), vol IV at 315. 217 See below at [170]. The law's aversion to the judicial creation of crimes. In those circumstances, though it may be trite to do so, it is desirable to recall the law's aversion to the judicial creation or extension of crimes. In the early 17th century Bacon put the central difficulty in a retroactive criminal law thus in Aphorism 8 of his treatise De Augmentis218: "Certainty is so essential to law, that law cannot even be just without it. 'For if the trumpet give an uncertain sound, who shall prepare himself to the battle?'219 So if the law give an uncertain sound, who shall prepare to obey it? It ought therefore to warn before it strikes." And Aphorism 39 read in part220: "Let there be no authority to shed blood; nor let sentence be pronounced in any court upon capital cases, except according to a known and certain law. … Nor should a man be deprived of his life, who did not first know that he was risking it." Hobbes stated in 1651221: "harm inflicted for a fact done before there was a law that forbade it, is not punishment, but an act of hostility: for before the law, there is no transgression of the law". Hence, said Hobbes in 1681222: "A Law is the Command of him, or them that have the Soveraign Power, given to those that be his or their Subjects, declaring Publickly, and plainly what every of them may do, and what they must forbear to do." "The citizen must be able to ascertain beforehand how he stands with regard to the criminal law; otherwise to punish him for breach of that law is purposeless cruelty. Punishment in all its forms is a loss of rights or advantages consequent on a breach of law. When it loses this quality it 218 Spedding, Ellis and Heath (eds), The Works of Francis Bacon, (1877), vol V at 90. 219 1 Corinth. xiv. 8. 220 Spedding, Ellis and Heath (eds), The Works of Francis Bacon, (1877), vol V at 95. 221 Leviathan, reprinted by George Routledge and Sons, 2nd ed (1886) at 143. 222 A Dialogue Between a Philosopher and a Student of the Common Laws of England, Cropsey (ed) (1971) at 71. 223 Criminal Law: The General Part, 2nd ed (1961) at 575. degenerates into an arbitrary act of violence that can produce nothing but bad social effects." Stephen J stated in R v Price224: "the great leading rule of criminal law is that nothing is a crime unless it is plainly forbidden by law." Hence Hayek saw it as crucial to the rule of law that "the coercive power of the state … be used only in cases defined in advance by the law and in such a way that it can be foreseen how it will be used."225 Finally, as Harris said, retroactivity in criminal law is "pointless … because of the brutal absurdity of today commanding someone to do something yesterday."226 South Australia submitted, however, that the change it favoured "does not create a new offence, it merely removes a protection, arguably, formerly held by husbands." It submitted that there was no inhibition against judicial legislation which fell short of creating a new offence. South Australia relied on the following statement by the English Court of Appeal in R v R about the judicial abolition of the immunity227: "The remaining and no less difficult question is whether … this is an area where the court should step aside to leave the matter to the Parliamentary process. This is not the creation of a new offence, it is the removal of a common law fiction which has become anachronistic and offensive and we consider that it is our duty having reached that conclusion to act upon it." With respect to both South Australia and the English Court of Appeal, this is captious. The substantive effect of South Australia's argument is to expose persons to a risk of criminal prosecution for conduct which was not believed to be criminal at the time it was carried out. That is true even though South Australia sees this reasoning as doing nothing more pernicious than removing an anachronistic and offensive fiction. Sir John Smith said, correctly, "it is not clear that there is a difference in principle" between the judicial creation of a new 224 (1884) 12 QBD 247 at 256. 225 The Road to Serfdom, (1944) at 62. See generally Juratowitch, Retroactivity and the Common Law, (2008) at 43-65, 127-138 and 183-197. 226 Harris, Legal Philosophies, 2nd ed (1997) at 146. 227 R v R [1992] 1 AC 599 at 611 per Lord Lane CJ, Sir Stephen Brown P, Watkins, offence in Shaw v Director of Public Prosecutions228 and the judicial abolition of the immunity229. Zecevic v Director of Public Prosecutions (Vict). South Australia also relied on the following statement of Deane J (dissenting) in Zecevic v Director of Public Prosecutions (Vict)230: "There may be circumstances in which an ultimate appellate court is justified in overruling a previous decision of its own with the consequence that what had previously been accepted as a defence to a charge of murder is no longer, and never was, such a defence". This was a somewhat selective quotation. There are three reasons why it does not support South Australia's case. First, Deane J gave as an illustration the case of R v Shivpuri. In that case the House of Lords departed from earlier authority in order to state the true construction of a statute231. That is a very different matter from changing the common law. There are more difficulties in courts continuing to apply an erroneous construction of a statute than continuing to apply the received common law. The courts are masters of the common law, but servants of statutes. Further, the case in question was a special one. The change in construction did not cut down any "liberty" the accused had enjoyed. On the earlier and rejected construction, the accused was free to attempt to commit a crime if circumstances unknown to him made it impossible to do so. On the later and favoured construction, an attempt to commit the crime in those circumstances was criminal. The freedom arising under the earlier construction was a strange type of freedom. It was not a freedom which persons in the accused's position could be said to have been able to rely on: the relevant circumstances were unknown to them. Thus, as Juratowitch says232: "The absence of sensible reliance or liberty considerations in the case meant that the prohibition on criminal retroactivity was, without 228 [1962] AC 220: see below at [144]-[152]. 229 Commentary on R v C [1991] Crim LR 60 at 63. See also Sir John Smith's commentary on R v R [1991] Crim LR 475 at 478. 230 (1987) 162 CLR 645 at 677; [1987] HCA 26. 232 Retroactivity and the Common Law, (2008) at 195. diminishing the strength of that prohibition in general, eminently susceptible to being justifiably overcome in Shivpuri." Secondly, Deane J gave very detailed reasons for not applying his tentative observation to the case before him in Zecevic v Director of Public Prosecutions (Vict). They do not support South Australia's argument. Thirdly, Deane J made it plain that the undesirability of retroactive changes in criminal law adverse to the accused applies as much to abolishing defences as it does to creating new offences. Thus he said233: "It is simply wrong that an accused may be adjudged not guilty or guilty of murder according to the chance of whether his trial is completed before or after this Court has abolished a defence which, under the law which the Court itself had definitively settled at the time the offence was committed, reduced the offence from murder to manslaughter." He called this "a macabre lottery". The macabre character of the lottery is heightened in this case. Those who have caused the prosecution to be brought have allowed 47 years to pass before charging the appellant. Another problem with South Australia's argument is that it invites retrospective judicial legislation which collides with legal structures created by parliamentary legislation. Thus Brennan J, the only Justice in R v L not to state that Hale's proposition had ceased to exist, succinctly and correctly said234: "a mere judicial repeal of the [exception] would extend the liability for conviction of the crime of rape to cases which would be excluded from liability for conviction by s 73(5) of the Criminal Law Consolidation Act."235 Brennan J's point was that s 73(5) permitted convictions for rape in the aggravated circumstances stated in the sub-section, but otherwise preserved the common law "exception" from liability. To "repeal" the common law "exception" would expose husbands to a greater risk of prosecution for acts carried out before s 73(5) was enacted in 1976 than after it. Section 73(5) did not apply retrospectively. The greater exposure of husbands to risk of prosecution would depart significantly from the legislative scheme. It would mean that in 233 (1987) 162 CLR 645 at 677-678 (citation omitted). 234 R v L (1991) 174 CLR 379 at 402. The text has "section" instead of "exception", but this is an error. 235 See below at [175]. 1976 Parliament narrowed the scope of a husband's liability for sexual offences committed against his wife, rather than expanded it. And yet the seeming function of the legislation was to expand liability, not narrow it. Professional attitudes in 1963-1965. The retrospectivity involved in South Australia's arguments is highlighted by considering the following question. What would actually have happened if, instead of the appellant being charged with rape in 2010, he had been charged immediately after the second of the alleged offences had occurred in April 1963? the law "the is what judge says Lord Reid said: Mr Justice Holmes, as is well known, remarked that the bad man "does want to know what the Massachusetts or English courts are likely to do in fact. I am much of his mind. The prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law."237 No doubt it is often unrealistic to assume that people take account of the criminal law in deciding what conduct to engage in238. It is probably particularly unrealistic in relation to violent sexual crimes. However, people should be able to know, by recourse to a competent lawyer, what the legal consequences of a proposed course of action are before embarking on it239. What would a bad man in South Australia have learned if he had asked for a prophecy as to what the South Australian courts, and this Court, would be likely to say in the years 1963 to 1965, for example, if he had been charged in April 1963 with raping his wife in March and April and he had challenged the validity of the indictment or appealed against a conviction? There were at that time seven judges in the Supreme Court of South Australia. The Chief Justice was Sir Mellis Napier, in his 40th year of service on that Court. The senior puisne judge was Sir Herbert Mayo, in his 22nd year of service. Next in seniority came Sir Reginald Roderic St Clair Chamberlain: universally known as "Joe", he did not share the impulsiveness or the radicalism 236 "The Judge as Law Maker", (1972) 12 Journal of the Society of Public Teachers of Law 22 at 22. 237 Holmes, "The Path of the Law", (1897) 10 Harvard Law Review 457 at 461. 238 Rodger, "A Time for Everything under the Law: Some Reflections on Retrospectivity", (2005) 121 Law Quarterly Review 57 at 68. Cf Williams, Criminal Law: The General Part, 2nd ed (1961) at 601-603. 239 See Black-Clawson International Ltd v Papierwerke Waldhof-Aschaffenburg AG [1975] AC 591 at 638; Fothergill v Monarch Airlines Ltd [1981] AC 251 at 279; and R v Rimmington [2006] 1 AC 459 at 480-482 [33]. of his namesake. The other judges were Justices Millhouse, Travers, Hogarth and Bright. This Court comprised Chief Justice Dixon and Justices McTiernan, Kitto, Taylor, Menzies, Windeyer and Owen. It is hard to see where a majority of two was to be found in the Supreme Court of South Australia in favour of the view that Hale's proposition never was, or had ceased to be, the law in South Australia. It is equally hard to see where a majority of three or four in favour of that view was to be found in this Court. Indeed, it is hard to find even one vote for that proposition. This is not simply a crass piece of legal "realism". It does not rest on the personal idiosyncrasies of the individual judges. The probabilities were strongly against either majority because of the particular ideas of the time. They were universal ideas among the Australian judiciary. To overturn Hale's proposition, or to deny that it ever had been the law, or to hold that it had earlier dissolved into nothingness, was to widen the criminal law. It was a legal commonplace in the middle of the 20th century that it was wrong for judges "to declare new offences": that "should be the business of the legislature." So spoke Lord Goddard CJ, Sellers and Havers JJ in 1953, in R v Newland240. They also stated that it was wrong for241: "the judges to declare new crimes and enable them to hold anything which they considered prejudicial to the community to be a misdemeanor. However beneficial that might have been in days when Parliament met seldom or at least only at long intervals it surely is now the province of the legislature and not of the judiciary to create new criminal offences." And in Director of Public Prosecutions v Withers, in 1974, Lord Simon of Glaisdale said242 that it was an "undoubted [principle] of law" that "it is not open to the courts nowadays either to create new offences or so to widen existing offences as to make punishable conduct of a type hitherto not subject to punishment". The same view would prevent any judicial widening of so extremely serious a crime as rape. That view was well-entrenched among judges, practising lawyers and academic lawyers. Contemporary reaction to two surprising decisions of the House of Lords in 1960 and 1961 demonstrates how well-entrenched it was. Director of Public Prosecutions v Smith. The first was a murder case, Director of Public Prosecutions v Smith. The trial judge (Donovan J) directed a 240 [1954] 1 QB 158 at 165. 241 [1954] 1 QB 158 at 167. 242 [1975] AC 842 at 863. jury that if the accused, in doing what he did, must as a reasonable man have contemplated that serious harm was likely to occur to the victim, he was guilty of murder – whether or not the accused actually had that contemplation. The Court of Criminal Appeal (Byrne, Sachs and Winn JJ) allowed Smith's appeal and substituted for the verdict of capital murder a verdict of manslaughter. On 28 July 1960, the House of Lords (Viscount Kilmuir LC, Lords Goddard, Tucker, Denning and Parker of Waddington) allowed a prosecution appeal and restored the conviction for capital murder. Viscount Kilmuir LC said that an accused person who was accountable for his actions and who carried out an unlawful and voluntary act was guilty of murder if the ordinary reasonable man would, in all the circumstances of the case, have contemplated grievous bodily harm as the natural and probable result of that act243. Shaw v Director of Public Prosecutions. The second case was decided on 4 May 1961. The House of Lords (Viscount Simonds, Lords Tucker, Morris of Borth-y-Gest and Hodson; Lord Reid dissenting) held in Shaw v Director of Public Prosecutions that the courts could create new crimes. Viscount Simonds said that the courts had: "a residual power, where no statute has yet intervened to supersede the common law, to superintend those offences which are prejudicial to the public welfare. Such occasions will be rare, for Parliament has not been slow to legislate when attention has been sufficiently aroused. But gaps remain and will always remain since no one can foresee every way in which the wickedness of man may disrupt the order of society."244 Lord Reid, whose reputation, still high, was extremely high in the early 1960s, dissented. He quoted with approval the second passage from R v Newland set out above245. He said246: "the courts cannot now create a new offence". Contemporary reactions to Shaw v Director of Public Prosecutions. Shaw v Director of Public Prosecutions attracted heavy criticism247. Probably for that 243 [1961] AC 290 at 327. 244 [1962] AC 220 at 268. 245 [1962] AC 220 at 274-275. 246 [1962] AC 220 at 276. 247 For example, Hall Williams, "The Ladies' Directory and Criminal Conspiracy: The Judge as Custos Morum", (1961) 24 Modern Law Review 626; Smith, "Commentary", [1961] Criminal Law Review 470; Seaborne Davies, "The House of Lords and the Criminal Law", (1961) 6 Journal of the Society of Public Teachers (Footnote continues on next page) reason, the principle it enunciated has since been narrowed 248. The modern English view corresponds with Lord Reid's. Thus Lord Bingham of Cornhill said249: "there now exists no power in the courts to create new criminal offences". An example of the contemporary reaction to Shaw v Director of Public Prosecutions is what P J Fitzgerald, a prominent Anglo-Irish criminal lawyer, wrote in 1962250: "Few cases in recent years have been quite so disturbing as this. The resuscitation of the judicial power to create crimes runs counter to two cardinal principles of free and democratic government." Fitzgerald put the first as follows251: "[T]he idea of the rule of law … is based on the demand that the citizen should be ruled by laws and not by the whims of men. In the sphere of criminal law this idea has become crystallized as … a principle according to which only breaches of existing criminal law should be punishable. The justification of this principle, which has been adopted as an actual rule in some legal systems, though not in the English legal system, is that the citizen should be able to know beforehand what conduct is permitted and what forbidden; for only in this way can he order his affairs with certainty and avoid coming into conflict with the law. It is this demand for certainty with regard to the provisions of the criminal law that militates against retrospective criminal legislation. When Parliament creates a new crime, it almost invariably legislates for the future only. This, however, is just what the courts cannot do. Our legal system is such that a court can of Law 104; Turpin, "Criminal Law – Conspiracy to Corrupt Public Morals", [1961] Cambridge Law Journal 144. 248 Director of Public Prosecutions v Bhagwan [1972] AC 60 at 80; Knuller (Publishing, Printing and Promotions) Ltd v Director of Public Prosecutions [1973] AC 435; Director of Public Prosecutions v Withers [1975] AC 842. 249 R v Jones (Margaret) [2007] 1 AC 136 at 161-162 [28]; see also at 171 [61] per Lord Hoffmann and 179-180 [102] per Lord Mance. 250 Criminal Law and Punishment, (1962) at 9. 251 Criminal Law and Punishment, (1962) at 9-10. The passage from Bentham to which Fitzgerald refers is from "Truth versus Ashhurst", in Bowring (ed), The Works of Jeremy Bentham, (1843), vol V at 235. It is conveniently set out in R v Rimmington [2006] 1 AC 459 at 480 [33]. only decide a point of law which arises in some actual case before the court, and consequently the court's decision always relates back to the facts of this case, facts which of course precede the decision. If, therefore, a court manufactures a new crime, it thereby determines after the event that the defendant's conduct, which at the time of commission was not prohibited by law, is a criminal offence. To countenance this type of retrospective criminal legislation means that certainty and consequently freedom are at an end. Bentham long ago pointed out that when the judges make law like this, they are treating the citizen as a man treats his dog, hitting him every time he does something to which the master takes exception. Animals and young children can only be trained in this way. Sane and adult members of a free society, however, are entitled to demand first to be told what conduct is forbidden so that they may choose whether or not to keep within the law." Fitzgerald put the second objection to "the creation of new offences by the courts" thus252: "Even suppose that a court could decide that the kind of act which the defendant had done would in future, though not in the instant case, constitute a crime, there is still the objection that this type of proceeding is not consonant with democratic government. If Parliament creates a new crime, the citizens whose liberty is thereby restricted have the consolation that this was done by their elected representatives whom they chose to perform this sort of activity, and whom in due course they may re-elect or reject. The judges, on the other hand, are appointed by the Crown, virtually irremovable and in practice accountable to no one. That such a body should have the power to decree that certain acts shall constitute crimes is totally incompatible with the notion of democracy." In similar vein, Lord Reid said that judicial legislation should be avoided when "public opinion is sharply divided on any question"253. The development of the criminal law raises questions which often sharply divide public opinion. Lord Reid employed arguments similar to those of Fitzgerald in Shaw v Director of Public Prosecutions254. And twice in R v Newland255, the Court of 252 Criminal Law and Punishment, (1962) at 10. 253 "The Judge as Law Maker", (1972) 12 Journal of the Society of Public Teachers of Law 22 at 23. See also Knuller (Publishing, Printing and Promotions) Ltd v Director of Public Prosecutions [1973] AC 435 at 489. 254 [1962] AC 220 at 275. 255 [1954] 1 QB 158 at 165 and 167. Criminal Appeal referred to Sir James Fitzjames Stephen's statement of related arguments 70 years earlier256: "it is hardly probable that any attempt would be made to exercise [a power of declaring new offences] at the present day; and any such attempt would be received with great opposition, and would place the bench in an invidious position. … In times when legislation was scanty, [that power was] necessary. That the law in its earlier stages should be developed by judicial decisions from a few vague generalities was natural and inevitable. But a new state of things has come into existence. On the one hand, the courts have done their work; they have developed the law. On the other hand, parliament is regular in its sittings and active in its labours; and if the protection of society requires the enactment of additional penal laws, parliament will soon supply them. If parliament is not disposed to provide punishments for acts which are upon any ground objectionable or dangerous, the presumption is that they belong to that class of misconduct which it is not desirable to punish. Besides, there is every reason to believe that the criminal law is, and for a considerable time has been, sufficiently developed to provide all the protection for the public peace and for the property and persons of individuals which they are likely to require under almost any circumstances which can be imagined; and this is an additional reason why its further development ought to be left in the hands of parliament." Lord Diplock used similar reasoning in Knuller (Publishing, Printing and Promotions) Ltd v Director of Public Prosecutions257 to advocate a retreat from Shaw v Director of Public Prosecutions. The views of a scholar who received his legal education in Adelaide shortly before the appellant allegedly committed the conduct charged are representative of how lawyers thought at that time and in that place258: "the administration, or working-out, of the criminal law's prohibitions is permeated by rules and principles of procedural fairness ('due process of law') and substantive fairness (desert, proportionality), which very substantially modify the pursuit of the goal of eliminating or diminishing the undesired forms of conduct: such principles as nulla poena sine lege 256 A History of the Criminal Law of England, (1883), vol III at 359-360. 257 [1973] AC 435 at 473-474. See also Lord Simon of Glaisdale at 489. 258 Finnis, Natural Law and Natural Rights, (1980) at 261-262. (and rather precise leges, at that), and the principles which outlaw retroactive proscription of conduct (at the known cost of letting some dubious characters slip through the net), and restrain the process of investigation, interrogation, and trial (even at the expense of that terror which a Lenin knows is necessary for attaining definite social goals)." (emphasis in original) Ideas of this kind, though perhaps less congenial to the mentalities of recent decades, were very familiar to Australian judges in the early 1960s. They universally assented to those ideas. Contemporary reactions to Director of Public Prosecutions v Smith. Director of Public Prosecutions v Smith, too, attracted immediate criticism. In Australia it was rightly seen as an extension of the law of murder. Shortly before his death, Sir Wilfred Fullagar, then a Justice of this Court, entered Sir Owen Dixon's chambers and observed: "Well, Dixon, they're hanging men for manslaughter in England now."259 The doctrine stated in Director of Public Prosecutions v Smith was soon abolished by statute in England260. Glanville Williams called it "the most criticised judgment ever to be delivered by an English court."261 Lord Reid called it a "disaster"262. Dixon CJ, in his 35th year on the High Court and nearing the end of his eighth decade, levelled the most damaging criticism of all at it in Parker v The Queen. Judgment was delivered on 24 May 1963. That was at or shortly before the time the present appellant could have had the question of his immunity from prosecution for allegedly raping his wife in March and April 1963 considered by the courts, had the complainant, the police, the prosecuting authorities, and the courts moved expeditiously. Dixon CJ delivered a dissenting judgment. But it concluded with a passage263 with which all other members of the Court (Taylor, Menzies, Windeyer and Owen JJ) agreed264. In reading that passage, it must be remembered that up to 1963 it had been the High Court's 259 Ayres, Owen Dixon, (2003) at 276. 260 Criminal Justice Act 1967, s 8. 261 Textbook of Criminal Law, 2nd ed (1983) at 81. See also Williams, "Constructive Malice Revived", (1960) 23 Modern Law Review 605. 262 "The Judge as Law Maker", (1972) 12 Journal of the Society of Public Teachers of Law 22 at 29. 263 (1963) 111 CLR 610 at 632; [1963] HCA 14. 264 (1963) 111 CLR 610 at 633. practice to follow decisions of the House of Lords265. It had also been the Court's practice to pay great respect to the decisions of the English Court of Appeal266, and decisions of English High Court judges. That was so even though no appeal lay from any Australian court to those Courts. "In Stapleton v The Queen267 we said: 'The introduction of the maxim or statement that a man is presumed to intend the reasonable consequences of his act is seldom helpful and always dangerous'268. That was some years before the decision in Director of Public Prosecutions v Smith269, which seems only too unfortunately to confirm the observation. I say too unfortunately for I think it forces a critical situation in our (Dominion) relation to the judicial authority as precedents of decisions in England. Hitherto I have thought that we ought to follow decisions of the House of Lords, at the expense of our own opinions and cases decided here, but having carefully studied Smith's Case270 I think that we cannot adhere to that view or policy. There are propositions laid down in the judgment which I believe to be misconceived and wrong. They are fundamental and they are propositions which I could never bring myself to accept." Dixon CJ then said that Smith's case "should not be used as authority in Australia at all." Those were terrible words. They were brooding, sombre and unusually passionate. In them the aged Chief Justice revealed that at the end of his career he had plumbed the depths of an intolerable nightmare. His reaction shows the Court being provoked by a retrospective judicial expansion of criminal liability in England into a determination to preserve crucial common law principles in Australia, not applaud or foster their destruction. This Court had changed its own rules of stare decisis in order to preserve Australian law. Those rules are 265 Piro v W Foster & Co Ltd (1943) 68 CLR 313 at 320; [1943] HCA 32. See also Wright v Wright (1948) 77 CLR 191 at 210; [1948] HCA 33. There Dixon J said that diversity was "an evil", and that the "avoidance [of diversity] is more desirable than a preservation here of what we regard as sounder principle." 266 Waghorn v Waghorn (1942) 65 CLR 289 at 292; [1942] HCA 1. 267 (1952) 86 CLR 358; [1952] HCA 56. 268 (1952) 86 CLR 358 at 365. fundamental to the judicial method. The change was very substantial. Though the High Court continued to be bound by Privy Council decisions, on most points of law there was much more authority from the House of Lords and the English Court of Appeal than the Privy Council. For those reasons Parker v The Queen astonished the Australian legal profession. But its repudiation of the thinking underlying Director of Public Prosecutions v Smith accorded with the ideas of the Australian legal profession. What would the courts have done in 1963-1965? Had the appellant been charged with rape in April 1963, the immediate background to any claim by him of immunity from prosecution would have included the following elements. There was a continuing furore in which Lord Reid's dissent in Shaw v Director of Public Prosecutions was receiving overwhelming favour. There had been an explicit repudiation of English authority for the first time in Australian history271 in part because of its retrospective expansion of criminal liability. There was universal acceptance in the Australian judiciary of conceptions of the kind stated by Stephen, Lord Reid and Fitzgerald. They were conceptions ultimately rooted in the common understanding of the rule of law272. Recourse to the principal English works on criminal law which were available in 1963273 or soon to be published274 would have revealed that Hale's proposition as reflected in recent authorities was stated as the law. The same was true of Australian works 271 However, there had been a premonitory sign in Commissioner for Railways (NSW) v Cardy (1960) 104 CLR 274 at 285; [1960] HCA 45. 272 See Finnis, Natural Law and Natural Rights, (1980) at 270 (proposition (i)). 273 Fitzwalter Butler and Garsia (eds), Archbold: Pleading, Evidence & Practice in Criminal Cases, 35th ed (1962) at 1150 [2880]; Halsbury's Laws of England, 3rd ed (1955), vol 10 at 746 [1437]; Sturge (ed), Stephen's Digest of the Criminal Law (Indictable Offences), 9th ed (1950) at 263 (which includes the footnote Stephen had amended in the 4th ed (1887), the last he published in his lifetime): see below at [218]; Turner (ed), Russell on Crime, 11th ed (1958), vol 1 at 791; Turner (ed), Kenny's Outlines of Criminal Law, 18th ed (1962) at 192; Cross and Jones, An Introduction to Criminal Law, 4th ed (1959) at 76 and 160; Palmer and Palmer (eds), Harris's Criminal Law, 20th ed (1960) at 244. 274 Cross and Jones, An Introduction to Criminal Law, 5th ed (1964) at 79; Smith and Hogan, Criminal Law, (1965) at 290-292. available in 1963275 or shortly thereafter276. This Court was not taken to any works stating that Hale's proposition was not the law. The leading English and Australian academic lawyers specialising in criminal law – Professor Glanville Williams, Sir Rupert Cross, Sir John Smith, Professor Hogan, Professor Howard, Professor Brett, Professor Waller and Professor Morris – were agreed that the immunity existed. No Australian case denied Hale's proposition. A handful of English cases had qualified it, but only to a small degree277. Against that background, four questions arise. What prospect was there that the South Australian courts or the High Court would accede to an attempt by South Australia to effect a judicial extension, retrospectively, of criminal liability? What prospect was there that they would rule that the immunity had never existed? What prospect was there that they would accede to a submission that though the immunity had existed for a long time, it had disappeared some decades earlier? What prospect was there that they would accede to a submission that though the immunity had existed up to 1963, it should be abolished (necessarily with retrospective effect)? To each of those four questions the answer must be: "None". That answer is supported by the fact that once they came to consider the problem, neither the Australian nor the English courts wavered, until 1991, from the view asserted and assumed until then that Hale's proposition was substantially correct278. is necessary, with respect, emphatically to reject the statement that "in 1963, a respectable challenge to Sir Matthew Hale's opinion could have been mounted."279 To believe that is to believe that history can be rewritten in complete defiance of all contemporary evidence. It contradicts the reasoning of the House of Lords in R v R280. Foreseeability. South Australia did not rely on an argument which appealed to the European Court of Human Rights. But it is convenient to mention it. That Court held that the United Kingdom was not in contravention of 275 Weigall and McKay (eds), Hamilton and Addison: Criminal Law and Procedure, 6th ed (1956) at 88; Bourke, Sonenberg and Blomme, Criminal Law, (1959) at 43. See also Morris and Turner, "Two Problems in the Law of Rape", (1954) 2 University of Queensland Law Journal 247. 276 Brett and Waller, Cases and Materials in Criminal Law, 2nd ed (1965) at 300; Howard, Australian Criminal Law, (1965) at 145-147. 277 See above at [97]-[98]. 278 See above at [94]-[100]. 279 R v P, GA (2010) 109 SASR 1 at 13 [66] per Doyle CJ. 280 [1992] 1 AC 599: see above at [103]. Art 7 of the European Convention on Human Rights by reason of the decision in R v R because the abolition of the immunity was reasonably foreseeable281. This is a highly questionable justification for retrospective judicial change in the criminal law. But even if it is an arguable justification, it cannot apply here. It may be one thing to hold that it was reasonably foreseeable in 1990 that the immunity might be abolished in 1991. But in 1963 it was not reasonably foreseeable that if the matter came to court there would be an immediate abolition of the immunity by judicial means282. The significance of R v L. South Australia submitted that statements in R v L supported its second submission283. But it accepted that they were unnecessary to the decision in that case, and hence were dicta only. They were dicta about an aspect of the common law – a presumed incapacity to withdraw consent – which had been abolished by statute in every Australian jurisdiction. Further, they were dicta which said only that Hale's proposition was not in 1991 part of the common law of Australia. They said nothing in terms about what the position was in 1963. For the Court in this appeal the question is whether, as a matter of ratio decidendi, not obiter dicta, South Australia's second submission should be recognised as correct. An annihilatingly powerful reason for not recognising it is that it criminalises conduct which, if it took place, was lawful at the time it took place. Conclusion on South Australia's second submission. A decision by the legislature of South Australia after 1963 to enact a law retrospectively providing that the immunity was abolished with effect from a date before 1963 would have been subject to criticism from many quarters. That would have been significant, not because the critics would have been numerous, but because their criticisms would have been most trenchant284. South Australia's submission that the same result is to be achieved by a judicial decision to that effect is open to even greater criticism. The position of the judiciary in this respect is not superior to that of the legislature. For those reasons South Australia's second submission must be rejected. 281 SW v United Kingdom (1995) 21 EHRR 363 at 402 [43/41]. 282 Cf R v C [2004] 1 WLR 2098; [2004] 3 All ER 1, dealing with conduct in 1970 – a case exemplifying to a very marked degree the fallacy known to personal injury lawyers of finding foreseeability solely on the basis of hindsight. 283 (1991) 174 CLR 379 at 390 per Mason CJ, Deane and Toohey JJ and 405 per 284 See Walker, The Rule of Law, (1988) at 315-324. Issues which need not be resolved The appellant contended that a common law rule should be created by this Court to the effect that when there is a judicial change to the common law it only operates prospectively, not retrospectively. This would involve overruling prior authority285. That contention would only become a live issue if the common law as stated by Hale were held to have changed in the past (as South Australia submitted) or were to be changed now (as South Australia did not submit). It is not correct to arrive at either holding. Hence the need to consider the contention does not arise. Orders The appeal should be allowed. For the answer to the question of law given by the majority in the Full Court of the Supreme Court of South Australia there should be substituted the answer: "No". 285 Ha v New South Wales (1997) 189 CLR 465 at 503-504; [1997] HCA 34. Bell BELL J. In 2010, an Information was filed in the District Court of South Australia, charging the appellant with offences including two counts of rape. The complainant in each count was his then wife, GP, with whom he was living at the time. The offences of rape are alleged to have occurred in March and April 1963. It cannot be sensibly suggested that the appellant would have been prosecuted for those offences, had the allegations come to the attention of the authorities in 1963. This is because at that time it was understood that the crime of rape could not be committed by a husband against his wife with whom he was living ("the immunity"). A husband was amenable under the criminal law for any other offence of violence committed against his wife. The imposition of criminal liability on a person for an act or omission to which criminal liability did not attach at the date the act was done or omitted to be done is contrary to fundamental principle286. It is said that the prosecution of the appellant today for his conduct in 1963 does not offend that principle because the immunity has never formed part of the common law of Australia or, if it did, it had ceased to do so sometime before 1963. The first of these alternatives rests on demonstrating either the absence of an authoritative source for the immunity or that in R v L287 this Court declared the common law in terms that denied its existence. For the reasons that follow, neither of those propositions should be accepted. Nor should this Court now hold that, on some date before 1963, a settled rule of the common law affecting liability for a serious criminal offence ceased to exist. Procedural history The appellant was due to stand trial in the District Court of South Australia (Herriman DCJ) on 5 July 2010. On 29 June 2010, he applied to quash the counts in the Information charging him with rape contrary to s 48 of the Criminal Law Consolidation Act 1935 (SA) ("the CLC Act"). Herriman DCJ stated a case reserving a question of law for the determination of the Full Court of the Supreme Court of South Australia288. His Honour set out the following facts: each count charged an act of non-consensual penile-vaginal sexual intercourse with GP; GP and the appellant were married and cohabiting as husband and wife at the date of each alleged offence; and no legal orders or undertakings of any kind affected the marital relationship on those dates. The question of law that his Honour reserved is: 286 Nullum crimen sine lege; nulla poena sine lege (no crime or punishment without law). See Dicey, Introduction to the Study of the Law of the Constitution, 10th ed 287 (1991) 174 CLR 379; [1991] HCA 48. 288 CLC Act, s 350(2)(b). Bell "Was the offence of rape by one lawful spouse of another, in the circumstances as outlined above, an offence known to the law of South Australia as at 1963?" The Full Court, by majority (Doyle CJ and White J, Gray J dissenting), answered the question289 in this way290: "The defendant is liable at law to be found guilty of the offences of rape charged in count 3 and count 5 of the information, notwithstanding that at the time of the alleged offence he was married to the alleged victim and was cohabiting with her, the marriage giving rise to no presumption of consent on her part to intercourse with her husband, and giving rise to no irrebuttable presumption to that effect." By special leave, the appellant appeals to this Court against the answer given by the majority in the Full Court. The law of rape in South Australia Before turning to the Full Court's reasons, some reference should be made to the history of the law governing liability for rape in South Australia and to the decision in R v L. In 1963, the punishment for the offence of rape was provided by s 48 of the CLC Act: "Any person convicted of rape shall be guilty of felony, and liable to be imprisoned for life, and may be whipped." The elements of the offence of rape were supplied by the common law. The understanding that a husband could not be guilty as a principal in the first degree of the rape of his wife is traced to the statement of Sir Matthew Hale in The History of the Pleas of the Crown291: 289 Doyle CJ (White J concurring) restated the question as "whether Mr P can, as a matter of law, properly be convicted of count 3 and count 5 in the circumstances outlined": R v P, GA (2010) 109 SASR 1 at 4 [6]. 290 R v P, GA (2010) 109 SASR 1 at 19 [93] per Doyle CJ, 45 [174] per White J. 291 (1736), vol 1, c 58 at 629. Bell "But the husband cannot be guilty of a rape committed by himself upon his lawful wife, for by their mutual matrimonial consent and contract the wife hath given up herself in this kind unto her husband, which she cannot retract." There does not appear to have been a single case in which a husband had been prosecuted for the rape of his wife with whom he was living in any common law jurisdiction at the date of the conduct with which the appellant is charged. By that date, as will appear, the justification for the immunity may have come to rest more upon the notion that the criminal law ought not to intrude into the marital bedroom, than upon the fiction of the wife's irrevocable consent. By the 1970s, the idea that there could be any justification for conferring immunity on a husband for the rape of his wife was the subject of critical academic attention and pressure for reform of the law292. South Australia was the first of the Australian jurisdictions to respond to the call for reform of the law of rape. In December 1975, the Attorney-General appointed a Committee of persons distinguished for their knowledge of the criminal law to report on the law relating to sexual offences293. The Committee was chaired by Justice Roma Mitchell of the Supreme Court of South Australia. The Committee submitted its Report to the Attorney-General in March 1976294. The Report contained a summary of the law stating that a husband could not be 292 The Women's Electoral Lobby was formed in 1972. See s 2 of its "Draft Bill and Other Recommendations on Sexual Offences (Superseding Draft Bill of August 1977; plus addenda of July 1978)", in Scutt (ed), Rape Law Reform, (1980) 265 at 268. See also Scutt, "Consent in Rape: The Problem of the Marriage Contract", (1977) 3 Monash University Law Review 255; Buddin, "Revision of Sexual Offences Legislation: A Code for New South Wales?", (1977) 2 University of New South Wales Law Journal 117 at 128-130; Sallmann and Chappell, Rape Law Reform in South Australia: A Study of the Background to the Reforms of 1975 and 1976 and of their Subsequent Impact, Adelaide Law Review Research Paper No 3, (1982) at v, 1-4, 10, 19-23. See, further, LeGrand, "Rape and Rape Laws: Sexism in Society and Law", (1973) 61 California Law Review 919; Brownmiller, Against Our Will: Men, Women and Rape, (1975); Geis, "Lord Hale, Witches, and Rape", (1978) 5 British Journal of Law and Society 26. 293 The other members of the Committee were Professor Howard, Hearn Professor of Law at Melbourne University and the author of the leading text on the criminal law in Australia, and Mr David Biles, the Assistant Director (Research) at the Australian Institute of Criminology. Mr Warren Brent Fisse, then Reader in Law at the University of Adelaide, was engaged as a consultant to the Committee. 294 Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976). Bell guilty as a principal in the first degree of the rape of his wife. The Committee noted judicial development of the law in England allowing an exception to the immunity in the case of a wife who had obtained an order for separation relieving her from the obligation to cohabit with her husband295. It recommended that the immunity should be confined such that a husband should be liable to conviction for the rape of his wife whenever the act constituting the rape was committed while the two were living apart and not under the same roof296. Following receipt of the Committee's Report, the South Australian Parliament amended the CLC Act297 by introducing s 48(1), which stated the elements of the offence of rape, and s 73, which relevantly provided: "(3) No person shall, by reason only of the fact that he is married to some other person, be presumed to have consented to sexual intercourse with that other person. (5) Notwithstanding the foregoing provisions of this section, a person shall not be convicted of rape or indecent assault upon his spouse, or an attempt to commit, or assault with intent to commit, rape or indecent assault upon his spouse (except as an accessory) unless the alleged offence consisted of, was preceded or accompanied by, or was associated with – assault occasioning actual bodily harm, or threat of such an assault, upon the spouse; an act of gross indecency, or threat of such an act, against the spouse; 295 In R v Clarke [1949] 2 All ER 448, Byrne J held that, although as a general proposition of law a husband could not be guilty of rape of his wife, there was an exception where the wife was living separately and with the protection of a court order. The exception was recognised but did not apply in the circumstances in R v Miller [1954] 2 QB 282 (see fn 339 below) and it was extended in R v O'Brien [1974] 3 All ER 663. See Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 296 Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 15 [6.2.1]. 297 Criminal Law Consolidation Act Amendment Act 1976 (SA). Bell an act calculated seriously and substantially to humiliate the spouse, or threat of such an act; or threat of the commission of a criminal act against any person." In the period following the South Australian reforms, the parliaments of each of the States and Territories enacted legislation with the evident intention of modifying or abolishing the immunity. This process of reform was completed by December 1991, when R v L was decided. In the Code States, this was achieved by removing the words "not his wife" from the definition of the offence298. In the Northern Territory, it was achieved by enacting the Criminal Code (NT) in terms that did not limit rape to an offence outside marriage299. In the Australian Capital Territory and New South Wales, it was done by enacting that the fact of marriage was no bar to conviction for the offence300. In Victoria and South Australia, any presumption of spousal consent to sexual intercourse on marriage was, in terms, abolished301. South Australia was alone in providing a limited immunity for 298 The Acts Amendment (Sexual Assaults) Act 1985 (WA) repealed s 325 of the Criminal Code (WA) and introduced s 324D, which provided that "[a]ny person who sexually penetrates another person without the consent of that person is guilty of a crime". The Criminal Code Amendment (Sexual Offences) Act 1987 (Tas) substituted a new s 185(1) of the Criminal Code (Tas), providing that "[a]ny person who has sexual intercourse with another person without that person's consent is guilty of a crime". The Criminal Code, Evidence Act and other Acts Amendment Act 1989 (Q) repealed s 347 of the Criminal Code (Q) and substituted a provision defining rape as "carnal knowledge of a female without her consent". 299 Criminal Code Act 1983 (NT), incorporating the Criminal Code (NT), s 192(1). 300 The Crimes (Sexual Assault) Amendment Act 1981 (NSW) inserted s 61A(4) into the Crimes Act 1900 (NSW), which provided that the fact that a person is married to a person on whom an offence of sexual assault is alleged to have been committed is no bar to conviction for that offence. The Crimes (Amendment) Ordinance (No 5) 1985 (ACT) inserted s 92R into the Crimes Act 1900 (NSW), as it applied to the ACT, which provided that the fact that a person is married to a person upon whom an offence of sexual intercourse without consent contrary to s 92D is alleged to have been committed shall be no bar to the conviction of the first-mentioned person for the offence. 301 In Victoria, the Crimes (Amendment) Act 1985 (Vic) substituted for s 62(2) of the Crimes Act 1958 (Vic) a new sub-section providing that the existence of a marriage does not constitute, or raise any presumption of, consent by a person to a sexual penetration or indecent assault by another person. Bell husbands in the case of non-aggravated offences. Further amendments introduced into the CLC Act in 1992 removed this partial immunity302. In R v L, the validity of s 73(3) of the CLC Act was challenged on the ground of inconsistency with Commonwealth law. The claimed inconsistency was with s 114(2) of the Family Law Act 1975 (Cth), which conferred power on the Family Court of Australia to make an order relieving a party to a marriage from any obligation to perform marital services or to render conjugal rights. The Court held that there was no direct or indirect inconsistency between the State and Commonwealth laws303. Resolution of the issue presented in R v L did not require consideration of proof of the offence of rape under the common law. Among the submissions advanced on L's behalf was that s 114(2) of the Commonwealth statute preserved the common law inability of a wife to withhold her consent to sexual intercourse with her husband. In their joint reasons, Mason CJ, Deane and Toohey JJ said that, "if it was ever the common law that by marriage a wife gave irrevocable consent to sexual intercourse by her husband, it is no longer the common law"304. This statement was prominent in the respondent's submissions before the Full Court and on this appeal. The Full Court Doyle CJ, writing for the majority in the Full Court, answered the reserved question on the footing that it was likely that Hale's statement of the immunity would have been accepted as a correct statement of the common law of Australia in 1963305. Nonetheless, his Honour said the Full Court should apply the considered statement of this Court that any presumption of irrevocable consent to sexual intercourse no longer formed part of the common law306. His Honour encapsulated the operation of the declaratory theory of the common law in the following statement307: 302 Criminal Law Consolidation (Rape) Amendment Act 1992 (SA). 303 R v L (1991) 174 CLR 379 at 385. 304 R v L (1991) 174 CLR 379 at 390. 305 R v P, GA (2010) 109 SASR 1 at 13 [66]. 306 R v P, GA (2010) 109 SASR 1 at 4 [8], 17 [82]. 307 R v P, GA (2010) 109 SASR 1 at 4 [9]. Bell "Mr P is charged with offences against the then s 48 of the [CLC Act]. In 1963 the elements of that offence were determined by the common law. Today, those elements are determined by the common law as stated by the majority in R v L." Gray J dissented. His Honour considered that the majority in R v L had not declared the common law with respect to liability for rape308. He reviewed the history and concluded that the appellant could not have been convicted of the rape of GP in 1963309. His Honour would have answered the reserved question in the negative310. Developments in Scotland and England Before returning to the decision in R v L, reference should be made to judicial development of the law relating to the immunity in Scotland and England. In S v HM Advocate311, an accused was indicted in the High Court of Justiciary in Scotland for the rape of his wife, with whom he was cohabiting. He challenged the count, contending that no crime known to the law of Scotland had been committed. The motion was dismissed and the dismissal upheld on appeal. Lord Justice-General Emslie, giving the judgment of the Court, noted that there was no authority holding that a cohabiting husband could be convicted of the rape of his wife312. His Lordship considered the state of English law to be sufficiently summarised in Glanville Williams' Textbook of Criminal Law313: 308 R v P, GA (2010) 109 SASR 1 at 36 [146], 37 [148]. The reference to the majority in the context is to the joint reasons of Mason CJ, Deane and Toohey JJ and the 309 R v P, GA (2010) 109 SASR 1 at 29 [132]. 310 R v P, GA (2010) 109 SASR 1 at 45 [173]. 311 1989 SLT 469. 312 S v HM Advocate 1989 SLT 469 at 471. There had been cases in Scotland following Clarke (see fn 295 above) that allowed the conviction of a man for the rape of his wife where they were separated: HM Advocate v Duffy 1983 SLT 7; HM Advocate v Paxton 1985 SLT 96. 313 S v HM Advocate 1989 SLT 469 at 472, citing Williams, Textbook of Criminal Law, 2nd ed (1983) at 236. Bell "A husband is legally incapable of perpetrating rape upon his wife unless the parties are judicially separated, or (probably) separated by consent, or unless the court has issued an injunction forbidding the husband to interfere with his wife, or the husband has given an undertaking to the court in order to avoid the issue of the injunction." Lord Emslie referred with approval to Glanville Williams' views on the justification for the immunity314: "The reason traditionally given for the general rule is the totally unconvincing one that the wife's consent is given on marriage, and she cannot revoke it. It would be an understatement to say that this authentic example of male chauvinism fails to accord with current opinion as to the rights of husbands." The immunity in the law of Scotland was traced to the unequivocal statement of it by Baron Hume315, which, in turn, drew on Hale. The Court accepted that Hume's statement of the law may have been correct in the 18th and early 19th centuries. However, the application of the rule in the late 20th century depended on the reasons justifying it and it was said that irrevocable consent, "if it ever was a good reason, no longer applies today"316. In 1985, in R v Roberts, the Criminal Division of the Court of Appeal of England and Wales said317: "In our judgment the law is now quite plain on this topic [marital rape]. The status of marriage involves that the woman has given her consent to her husband having intercourse with her during the subsistence of the marriage. She cannot unilaterally withdraw it." 314 S v HM Advocate 1989 SLT 469 at 473-474, citing Williams, Textbook of Criminal Law, 2nd ed (1983) at 237. 315 S v HM Advocate 1989 SLT 469 at 472, citing Hume, Commentaries on the Law of Scotland Respecting Crimes, (1797), vol 1, and subsequent editions published in 1819 and 1829, and the fourth edition edited by Bell in 1844. Also cited were Burnett, Criminal Law of Scotland, (1811) and Macdonald, A Practical Treatise on the Criminal Law of Scotland, 5th ed (1948) at 119. 316 S v HM Advocate 1989 SLT 469 at 473. 317 [1986] Crim LR 188, (Transcript: Marten Walsh Cherer). Bell The decision in Roberts followed Steele318 and allowed that a husband might be convicted of the rape of his wife in circumstances in which he and she had, by mutual agreement or court order, effectively put an end to the wife's fictional consent. The enactment of s 1(1)(a) of the Sexual Offences (Amendment) Act 1976 (UK), which defined rape in terms incorporating the expression "unlawful sexual intercourse", led to conflicting decisions at the trial court level319 as to the ability to judicially develop further exceptions to the immunity. The perceived difficulty was occasioned by the recognition that the word "unlawful" in this context had always been understood to refer to sexual intercourse outside marriage320. The Court of Appeal addressed this controversy in R v R321. The accused had been convicted of the attempted rape of his wife committed on an occasion in 1989 when the two were living separately. The wife had informed the accused of her intention to petition for divorce but had not commenced proceedings before the date of the offence. Lord Lane CJ, giving the judgment of the Court, said322: "It seems to us that where the common law rule no longer even remotely represents what is the true position of a wife in present day society, the duty of the court is to take steps to alter the rule if it can legitimately do so in the light of any relevant Parliamentary enactment." It was held that the word "unlawful" in the definition was surplusage. "We take the view that the time has now arrived when the law should declare that a rapist remains a rapist subject to the criminal law, irrespective of his relationship with his victim." 318 (1976) 65 Cr App R 22. 319 R v R [1991] 1 All ER 747; R v C [1991] 1 All ER 755; R v J [1991] 1 All ER 759. 320 R v Chapman [1959] 1 QB 100 at 105. 321 R v R [1992] 1 AC 599. 322 R v R [1992] 1 AC 599 at 610. 323 R v R [1992] 1 AC 599 at 611. Bell The House of Lords affirmed the decision. Lord Keith of Kinkel (with whom the other members of the House agreed) observed324: "It may be taken that [Hale's dictum] was generally regarded as an accurate statement of the common law of England. The common law is, however, capable of evolving in the light of changing social, economic and cultural developments. Hale's proposition reflected the state of affairs in these respects at the time it was enunciated. Since then the status of women, and particularly of married women, has changed out of all recognition in various ways which are very familiar and upon which it is unnecessary to go into detail." The European Court of Human Rights dismissed an application in respect of the decision in R v R325, holding that the accused's conviction did not violate Art 7(1) of the European Convention on Human Rights326. The decision had continued a perceptible line of authority dismantling the immunity327 and the development of the law "had reached a stage where judicial recognition of the absence of immunity had become a reasonably foreseeable development of the law"328. The courts in S v HM Advocate and R v R declared the common law of Scotland, England and Wales, taking into account changes in the conditions of 324 R v R [1992] 1 AC 599 at 616. 325 SW v United Kingdom (1995) 21 EHRR 363. 326 Article 7 of the Convention for the Protection of Human Rights and Fundamental Freedoms (1950) provides: "1. No one shall be held guilty of any criminal offence on account of any act or omission which did not constitute a criminal offence under national or international law at the time when it was committed. Nor shall a heavier penalty be imposed than the one that was applicable at the time the criminal offence was committed. 2. This article shall not prejudice the trial and punishment of any person for any act or omission which, at the time when it was committed, was criminal according to the general principles of law recognised by civilised nations." 327 SW v United Kingdom (1995) 21 EHRR 363 at 402. 328 SW v United Kingdom (1995) 21 EHRR 363 at 402. Bell society. In this respect, Lord Keith adopted the following statement from S v HM Advocate329: "By the second half of the 20th century, however, the status of women, and the status of a married woman, in our law have changed quite dramatically." The decisions in S v HM Advocate and R v R necessarily operated with retrospective effect. In each case, the conduct giving rise to the charge was alleged to have occurred not long before the date of the decision. That was important to the reasoning of the European Court of Human Rights in dismissing the application in R v R. One issue raised by this appeal that was not present in S v HM Advocate or R v R concerns the imposition of criminal liability in consequence of developing the law to take account of changed social conditions, for conduct that may have occurred before those changes took place. Prospective overruling and R v L the The Attorneys-General for South Australia, Queensland and Commonwealth intervened to address a constitutional issue raised by the appellant's third ground of appeal. This ground asserts that, if the common law was capable of further development following the 1976 amendments to the CLC Act, it should only be developed on a prospective basis. The submission was argued by reference to the decision of the House of Lords in In re Spectrum Plus Ltd (in liquidation)330. It was said in that case that the flexibility inherent in the English legal system permits the prospective overruling of a previous decision in a case in which it would otherwise produce gravely unfair and disruptive consequences for past transactions or events331. However, it has been held that a constitutional limitation on the exercise of judicial power does not permit this Court flexibility of that kind332. In their joint reasons in R v L, Mason CJ, Deane and Toohey JJ discussed the content of conjugal rights in the law of marriage, rejecting the submission that the doctrine imposes a continuing obligation on the part of a spouse to 329 R v R [1992] 1 AC 599 at 617, citing S v HM Advocate 1989 SLT 469 at 473. 331 In re Spectrum Plus Ltd (in liquidation) [2005] 2 AC 680 at 699 [40] per Lord Nicholls of Birkenhead. 332 Ha v New South Wales (1997) 189 CLR 465 at 504 per Brennan CJ, McHugh, Gummow and Kirby JJ; [1997] HCA 34. Bell to sexual intercourse as a legal consequence of marriage333. consent Their Honours noted Lord Lane CJ's statement in R v R that "there can be little doubt that what [Hale] wrote was an accurate expression of the common law as it then stood"334. They went on to say335: "Without endeavouring to resolve the development of the common law in this regard, it is appropriate for this Court to reject the existence of such a rule as now part of the common law of Australia. … The notion is out of keeping also with recent changes in the criminal law of this country made by statute, which draw no distinction between a wife and other women in defining the offence of rape. It is unnecessary for the Court to do more than to say that, if it was ever the common law that by marriage a wife gave irrevocable consent to sexual intercourse by her husband, it is no longer the common law." (emphasis added; citations omitted) It was unnecessary for the Court to "resolve the development of the common law" because, as their Honours observed, the law had been changed by statute. There was no jurisdiction in Australia in which a presumption of spousal consent to sexual intercourse had any bearing on a person's liability for rape336. The answer to the question of law reserved by Herriman DCJ requires consideration of an issue that was not addressed by the joint reasons or the reasons of Dawson J in R v L, which is the liability under the common law of a cohabiting husband for the rape of his wife. Did the immunity form part of the received common law? The laws and statutes of England applicable to the Province of South Australia were received on 19 February 1836. The relevant history and principles are explained by Mason J in State Government Insurance Commission v Trigwell337. It is not in question that, if Hale's statement of the immunity was a 333 R v L (1991) 174 CLR 379 at 387. 334 R v L (1991) 174 CLR 379 at 389, citing R v R [1992] 1 AC 599 at 603-604. 335 R v L (1991) 174 CLR 379 at 389-390. 336 See above at [176]. 337 (1979) 142 CLR 617 at 634-635; [1979] HCA 40. As explained, s 3 of Act No 9 of 1872 (SA) re-enacted s 1 of Ordinance No 2 of 1843 (SA). Section 3 of the 1872 Act declared that: "In all questions as to the applicability of any laws or statutes of England to the Province of South Australia, the said Province shall be deemed to (Footnote continues on next page) Bell rule of the common law in 1836, it was part of the laws of England received in South Australia338. In light of the history leading to the enactment of s 73(3) and (5) of the CLC Act, there can be little doubt that the common law of Australia was understood as embodying a rule that a husband was not amenable to conviction for the rape of his wife. It is also evident that, by 1976, the justification for that immunity was not perceived to depend upon the concept of irrevocable consent that presumption while maintaining the immunity save for offences committed in circumstances of aggravation. the Parliament of South Australia abolished intercourse, since As will appear, the Parliament of South Australia was not alone in acting upon acceptance that a husband was immune under the common law for the rape of his wife. Nonetheless, it is said that, correctly understood, the common law has never conferred the immunity. This is because Hale did not cite any authority for it and there is no binding judicial decision confirming its existence339. These criticisms will be addressed in turn. have been established on the twenty-eighth day of December, one thousand eight hundred and thirty-six." A modified version of this declaration was enacted in s 48 of the Acts Interpretation Act 1915 (SA). That section was repealed by s 26 of the Acts Interpretation Act Amendment Act 1983 (SA), with the effect that the date of settlement of the Province of South Australia is now taken to be 19 February 1836, on which date letters patent were issued defining its borders. See Lipohar v The Queen (1999) 200 CLR 485 at 508 [54]; [1999] HCA 65, citing South Australia v Victoria (1911) 12 CLR 667 at 676-677; [1911] HCA 17. 338 See R v Brown (1975) 10 SASR 139 at 153; R v Wozniak and Pendry (1977) 16 SASR 67 at 71; Question of Law (No 1 of 1993) (1993) 59 SASR 214 at 230; Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 13 [6.2]. 339 The only decision turning directly on the immunity appears to be R v Miller [1954] 2 QB 282. In that case, the accused was tried for the rape of his wife. The prosecution was brought after the decision in Clarke (see fn 295 above). The Crown relied on the evidence that the wife had been living separately at the time of the incident and had petitioned for divorce. Lynskey J held that the presentation of the petition for dissolution of the marriage did not have any effect in law upon the existing marriage and, accordingly, that the accused had no case to answer on the count charging rape: at 290. Bell An authoritative statement of the law of rape before Hale? It would be foolish to attempt to state the elements of liability for the offence of rape in the period before Hale. Holdsworth gives an account of the development of the offence in general terms, observing that Bracton would have confined the offence to violent intercourse with a virgin340. At the time of the writings attributed to Glanvill, rape was a plea of the Crown, which could be prosecuted by private appeal or on the presentation of the jury341. It appears that, in the early period, most prosecutions were by private appeal and that an appeal could be compromised by the marriage of the victim to her assailant342. There is evidence that, before the time of Hale, it was a good defence to an appeal of rape to say that the woman was one's concubine343. Holdsworth saw the essentials of the offence of rape as having been defined sometime after the Statute of Westminster II c 34, which made all rapes punishable as felonies344. The statute was passed in 1285 in the reign of Edward I. The only authority cited in Holdsworth for the statement of the essentials of the offence is Hale345. The explanation for this gap of some 400 340 Holdsworth, A History of English Law, 3rd ed (1923), vol 3 at 316, citing Bracton f 148. The most severe punishment, it seems, was reserved for the rape of a virgin, but elsewhere Bracton refers to punishment for the forcible ravishment of various categories of women: Thorne (ed), Bracton on the Laws and Customs of England, (1968), vol 2 at 414-415. 341 Hall (ed), The treatise on the laws and customs of the realm of England commonly called Glanvill, (1965) at 3, 175-176; Holdsworth, A History of English Law, 3rd ed (1923), vol 3 at 316. 342 Hall (ed), The treatise on the laws and customs of the realm of England commonly called Glanvill, (1965) at 176; Thorne (ed), Bracton on the Laws and Customs of England, (1968), vol 2 at 417-418; Blackstone, Commentaries on the Laws of England, (1769), bk 4, c 15 at 212; Holdsworth, A History of English Law, 3rd ed (1923), vol 3 at 316. 343 Thorne (ed), Bracton on the Laws and Customs of England, (1968), vol 2 at 416; Dalton, The Country Justice, (1690), c 160 at 392; Hawkins, A Treatise of the Pleas of the Crown, (1716), bk 1, c 41 at 108. 344 Holdsworth, A History of English Law, 3rd ed (1923), vol 3 at 316. The Statute of Westminster II c 34 and its predecessor, the Statute of Westminster I c 13, also dealing with the punishment for rape, were both repealed by the Offences against the Person Act 1828 (UK) (9 Geo 4 c 31). 345 Holdsworth, A History of English Law, 3rd ed (1923), vol 3 at 316. Bell years may lie in Professor Baker's account of the development of the criminal law. In the period up to the mid-16th century, the common law comprised the "common learning" found, not only in the yearbooks, but in the oral tradition of the Inns of Court346. It was the latter that shaped the criminal law. Few criminal cases were decided in the courts at Westminster and only a small number of criminal cases "trickled into the year books"347. Much of the record of the criminal law is found in the notes made by readers348 and these, it would seem, contain little discussion of rape349. Professor Baker says that the most visible result of the body of experience of the courts disposing of criminal cases is to be found in the treatises of Crompton, Dalton and Hale, all of whom drew heavily on rulings made at gaol deliveries350. It was their selection, rather than the rulings at large, which he suggests influenced the future development of the law351. The authority of the Pleas of the Crown Hale's statement was of a negative condition of liability for rape. This circumstance tends to explain the absence of prosecutions of husbands for the offence. Consideration of whether Hale's statement of the immunity came to acquire the status of a rule of law (if it was not one in 1736) requires some account of the standing of the Pleas of the Crown among common lawyers. Sir Matthew Hale held office as Chief Baron of the Exchequer and Chief Justice of the King's Bench successively in the years 1660 to 1676. He died in 1676, leaving instructions in his will prohibiting the publication of any work 346 Baker, The Oxford History of the Laws of England, (2003), vol 6 at 486. See also at 469: "[I]t was the settled learning of the inns of court, referred to in the 1490s as the 'old learning of the court', or the 'common learning in moots'. Common learning, by its nature, did not require chapter and verse to support it. It was what the whole system of exercises was implicitly calculated to transmit, to test, and to teach" (citations omitted). 347 Baker, The Oxford History of the Laws of England, (2003), vol 6 at 471. 348 Baker, The Oxford History of the Laws of England, (2003), vol 6 at 529. 349 Baker, The Oxford History of the Laws of England, (2003), vol 6 at 562. In fn 92, Baker notes that the Statute of Westminster II c 34 was glossed "very briefly". 350 Baker, "The Refinement of English Criminal Jurisprudence, 1500-1848", in The Legal Profession and the Common Law: Historical Essays, (1986) 303 at 313. 351 Baker, "The Refinement of English Criminal Jurisprudence, 1500-1848", in The Legal Profession and the Common Law: Historical Essays, (1986) 303 at 313. Bell other than that which he had permitted to be published in his lifetime. At the time of his death, he was writing the Pleas of the Crown, which he had planned as a work in three volumes352. Only the first volume was completed. Four years after his death, the House of Commons ordered that it be printed. However, it was not until 1736 that the first edition appeared under the editorship of Sollom Emlyn, barrister of Lincoln's Inn. Sir William Blackstone acknowledged his debt to Hale353 and drew on the Pleas of the Crown in his account of felonies in the Commentaries. Sir James Fitzjames Stephen accorded the composition of the Pleas of the Crown an important place in the evolution of the criminal law in the 17th century354. It was, in his estimate, a work "of the highest authority", demonstrating both "a depth of thought and a comprehensiveness of design" that put it in "quite a different category" from Coke's Institutes355. Important principles of criminal responsibility were hardly noticed before Hale356. Stephen saw the definition of many crimes as settled in the period that separates Coke from Blackstone, and Hale and Foster as having contributed more than any other writers to that development357. Maitland said of Hale that "none had a wider or deeper knowledge of the materials; he was perhaps the last great English lawyer who habitually studied records; he studied them pen in hand and to good purpose". He was, in Maitland's estimate, "the most eminent lawyer and judge of his time"358. Holdsworth accounted Hale "the greatest historian of English law before 352 Yale, Hale as a Legal Historian, (1976) at 8; Holdsworth, "Sir Matthew Hale", (1923) 39 Law Quarterly Review 402 at 419. The second volume was intended to deal with non-capital crimes and the third with franchises and liberties. 353 Blackstone, An Analysis of the Laws of England, 3rd ed (1758) at vii. 354 Stephen, A History of the Criminal Law of England, (1883), vol 2 at 211. 355 Stephen, A History of the Criminal Law of England, (1883), vol 2 at 211. Stephen was not uncritical in his treatment of the Pleas of the Crown. He described the weight of technical detail in the chapters dealing with procedure as almost unreadable except by a very determined student: at 212. 356 Stephen, A History of the Criminal Law of England, (1883), vol 2 at 212. 357 Stephen, A History of the Criminal Law of England, (1883), vol 2 at 219. 358 Maitland, "The Materials for English Legal History", in Fisher (ed), The Collected Papers of Frederic William Maitland, (1911), vol 2, 1 at 5. Bell Maitland"359. He considered the Pleas of the Crown to have been left in the best state of any of Hale's works that had not been published at the date of his death360. Holdsworth, like Stephen, regarded the treatise highly361: "It was a branch of the law which could not then be adequately described without a very complete knowledge of the history of the law; and, partly because it contained very ancient ideas and rules, partly because it had been added to and in many details modified by a variety of statutes, it greatly needed systematic Coke and Crompton had summarized it, in a somewhat unsystematic form. Hale, because he was both a competent historian, a competent jurist, and a competent lawyer did the work which they endeavoured to do infinitely better. Ever since its first publication it has been a book of the highest authority." (citations omitted) treatment. Holdsworth saw Coke as standing midway between the medieval and the modern law, and Hale as "the first of our great modern common lawyers"362. The analysis of the offence in the Pleas of the Crown Hale described the offence of rape as "the carnal knowledge of any woman above the age of ten years against her will, and of a woman-child under the age of ten years with or against her will"363. Hale acknowledged Coke for this statement364, but proceeded to a much more detailed analysis of proof of the offence. He discussed additional elements (any degree of penetration was sufficient and it was not necessary to prove emission of semen); accessorial liability for the offence; liability in the case of infants under 14 years; liability in the case of consenting females under 12 years; and consent obtained by threat of 359 Holdsworth, "Sir Matthew Hale", (1923) 39 Law Quarterly Review 402 at 402. 360 (1923) 39 Law Quarterly Review 402 at 419-420. 361 (1923) 39 Law Quarterly Review 402 at 420. 362 (1923) 39 Law Quarterly Review 402 at 425. 363 Hale, The History of the Pleas of the Crown, (1736), vol 1, c 58 at 628. 364 Hale, The History of the Pleas of the Crown, (1736), vol 1, c 58 at 628. The fourth edition of the Third Part of Coke's Institutes, published in 1669, in fact described the offence of rape as "the unlawfull and carnal knowledge and abuse of any woman above the age of ten years against her will, or of a woman-child under the age of ten years with her will, or against her will" (emphasis added): The Third Part of the Institutes of the Laws of England, 4th ed (1669), c 11 at 60. Bell violence, among other matters. He also gave a deal of attention to the older law concerning appeals of rape, including the concubinage exception365. The account of the husband's immunity follows discussion of the latter. The relevant passage is set out below366: "It appears by Bracton ubi supra, that in an appeal of rape it was a good exception, quod ante diem & annum contentas in appello habuit eam ut concubinam & amicam, & inde ponit se super patriam, and the reason was, because that unlawful cohabitation carried a presumption in law, that it was not against her will. But this is no exception at this day, it may be an evidence of an assent, but it is not necessary that it should be so, for the woman may forsake that unlawful course of life. But the husband cannot be guilty of a rape committed by himself upon his lawful wife, for by their mutual matrimonial consent and contract the wife hath given up herself in this kind unto her husband, which she cannot retract." Writing of the criticism that Hale had conjured up the immunity without authority, one commentator has observed that it might be thought incongruous that the law allowed an exception in the case of de facto relationships (for which there is clear evidence before Hale's time) but not de jure relationships367. The writer suggests that Hale lacked authority, not for the existence of the immunity, but for confining it to marriage368. It should be noticed that Hale said the concubinage exception was no longer good law because of the recognition that a 365 Hale, The History of the Pleas of the Crown, (1736), vol 1, c 58 at 628. 366 Hale, The History of the Pleas of the Crown, (1736), vol 1, c 58 at 628-629. 367 Lanham, "Hale, Misogyny and Rape", (1983) 7 Criminal Law Journal 148 at 154, citing Dalton, Countrey Justice, (1619) at 256; R v Lord Audley (1631) 3 St Tr 401 368 Lanham, "Hale, Misogyny and Rape", (1983) 7 Criminal Law Journal 148 at 155. Professor Lanham identifies two extra-judicial supports for the existence of the immunity in Hale's time. Hale referred to Isabel Butler v William Pull, introducing the case by explaining that if A forces B to marry him and then has carnal knowledge of her against her will, he cannot be found guilty of rape during the subsistence of the voidable marriage; and Statute 6 R 2 stat 1 c 6, giving a husband a right of appeal where his wife had consented to a rape by a third party after the fact. Bell woman may forsake her unlawful way of life. This was stated by way of contrast to sexual intercourse within marriage, which was seen as lawful369. Hale had a commanding knowledge of the work of the courts administering criminal justice370. It may safely be taken that husbands were not prosecuted for rape of their wives in the period before the publication of his treatise. Given the subordinate status of married women under the law, this may not surprise371. Among the few benefits that the law conferred on the married woman was to immunise her from prosecution for a crime committed by her in her husband's presence372. The presumption of the law was that she was bound to obey her husband's command. This is not an idea that readily accommodates the prosecution of the husband for an act of non-consensual sexual intercourse with his wife. Hale is the source for locating the immunity in contract. It is a rationale that is consistent with Blackstone's treatment of the relations between husband and wife at law. The latter's celebrated account of the nature and effect of 369 See extract from Coke at fn 364 above. Similarly, Hawkins, A Treatise of the Pleas of the Crown, (1716), bk 1, c 41 at 108 described rape, relevantly, as an offence "in having unlawful and carnal Knowledge of a Woman" (emphasis added). 370 See Yale, Hale as a Legal Historian, (1976) for an account of Hale's record-searching and collecting from 1630, and his extensive knowledge of King's 371 Williams, "The Legal Unity of Husband and Wife", (1947) 10 Modern Law Review 16 at 29; Easteal, "Rape in marriage: Has the licence lapsed?", in Easteal (ed), Balancing the Scales: Rape, Law Reform and Australian Culture, (1998) 107 at 372 Hawkins, A Treatise of the Pleas of the Crown, (1716), bk 1, c 1 at 2; Hale, The History of the Pleas of the Crown, (1736), vol 1, c 7 at 44-48; Blackstone, Commentaries on the Laws of England, (1769), bk 4, c 2 at 29; J W C Turner, Russell on Crime, 12th ed (1964), vol 1 at 94-95. The presumption did not extend to treason or murder: Hale, The History of the Pleas of the Crown, (1736), vol 1, c 7 at 45. It has been abolished in all Australian jurisdictions: Crimes Act 1900 (NSW), Sched 3, cl 4(1) (originally s 407A(1)); Criminal Code (Q), s 32 (omitted in 1997); CLC Act, s 328A; Criminal Code (Tas), s 20(2); Crimes Act 1958 (Vic), s 336(1); Criminal Code (WA), s 32 (omitted in 2003); Crimes Act 1900 (ACT), s 289. It is not included in the defence of duress in the Criminal Code (NT), s 40. However, an affirmative defence of marital coercion has been retained in South Australia and Victoria: CLC Act, s 328A; Crimes Act 1958 (Vic), s 336. Bell coverture373 was prefaced by the statement: "[o]ur law considers marriage in no other light than as a civil contract"374. While "[t]he holiness of the matrimonial state" (emphasis in original) was a matter for the ecclesiastical courts, Blackstone emphasised that the temporal courts treated marriage like all other contracts, asking whether the parties were willing and able to contract375. It is an analysis which has been seen as a civilised advance on the medieval concept of the husband's natural and God-given power over his wife376. Professor Stretton suggests that, for Blackstone, the fundamental point was that married women consented to their modified legal status by their agreement to marriage377: "It was therefore the logic of contract that justified married women's particular treatment at law. However, it was a narrow concept of consent that ended abruptly at the church door, with no room for renegotiation during marriage and virtually no effective ability to escape the legal effects of marriage through separation or divorce." Blackstone's treatment of rape was largely taken from Hale378. He did not refer to the immunity, but it is evident that Hale's statement of it was not controversial. Blackstone drew attention to those occasions on which Hale's account of the law departed from the views of other writers. In Blackstone's analysis of the offence of rape, there was one such occasion. He noted that Hale considered that carnal knowledge of a girl aged under 12 years was rape regardless of consent, but that the law had in general been held only to extend to the carnal knowledge of a girl aged under 10 years379. 373 "By marriage, the husband and wife are one person in law: that is, the very being or legal existence of the woman is suspended during the marriage, or at least is incorporated and consolidated into that of the husband: under whose wing, protection, and cover, she performs every thing": Commentaries on the Laws of England, (1765), bk 1, c 15 at 430 (emphasis in original). 374 Blackstone, Commentaries on the Laws of England, (1765), bk 1, c 15 at 421. 375 Blackstone, Commentaries on the Laws of England, (1765), bk 1, c 15 at 421. 376 Stretton, "Coverture and Unity of Person in Blackstone's Commentaries", in Prest (ed), Blackstone and his Commentaries, (2009) 111 at 120-121. 377 Stretton, "Coverture and Unity of Person in Blackstone's Commentaries", in Prest (ed), Blackstone and his Commentaries, (2009) 111 at 123, citing Commentaries on the Laws of England, (1765), bk 1, c 15 at 421. 378 Blackstone, Commentaries on the Laws of England, (1769), bk 4, c 15 at 211-215. 379 Blackstone, Commentaries on the Laws of England, (1769), bk 4, c 15 at 212. Bell The operation of the immunity Hale's statement of the law may be analysed in either of two ways. First, that the offence comprises two elements: (i) carnal knowledge of a female (involving some degree of penetration); (ii) without her consent. On this analysis the immunity arises by the operation of an irrebuttable presumption of law. The alternative analysis is that the first element of the offence requires proof of the "unlawful" carnal knowledge of a female and that "unlawful" in this context means outside marriage380. The latter view accords with the treatment of the offence by text-writers, including Coke and Hawkins writing before the publication of Hale's treatise381. It is the analysis adopted by the Supreme Court of South Australia in those cases in which consideration has been given to the question. Bray CJ, discussing the elements of the offence in R v Brown382, considered that they were as stated in the 37th edition of Archbold: "Rape consists in having unlawful sexual intercourse with a woman without her consent by force, fear or fraud"383. The word "unlawful" was thought by Bray CJ to exclude intercourse between spouses384. Wells J appears to have been of the same view385. King CJ in R v Sherrin (No 2) also considered proof of the unlawfulness of the act of intercourse to have undoubtedly been an element of the offence at common law386. The resolution of the reserved question does not turn on whether the rule of law traced to Hale requires proof of the unlawfulness of the intercourse as an element, or is an irrebuttable presumption of consent. The latter, while "disguised in the language of adjective rules"387, is in truth a substantive rule of 380 R v Chapman [1959] 1 QB 100. 381 See fnn 364 and 369 above. 382 (1975) 10 SASR 139. 383 Butler and Garsia, Archbold: Pleading, Evidence & Practice in Criminal Cases, 37th ed (1969) at [2872], citing East, A Treatise of the Pleas of the Crown, (1803), vol 1 at 434 and Hale, The History of the Pleas of the Crown, (1736), vol 1 at 627 et seq (emphasis added). 384 R v Brown (1975) 10 SASR 139 at 141. 385 R v Brown (1975) 10 SASR 139 at 153. 386 (1979) 21 SASR 250 at 252. 387 J W C Turner, Kenny's Outlines of Criminal Law, 19th ed (1966) at 455 [490]. Bell law. A husband could not be convicted as principal in the first degree for the rape of his wife on either analysis. At issue is the existence of the immunity, not whether the reason given for it is flawed or has, over time, ceased to provide a principled basis for it. A number of common law rules of liability for criminal offences have their origins in discredited ideas. The definition of the offence of murder stated by Coke388, and thereafter accepted as an authoritative statement of the elements of the offence389, required that the death of the deceased take place within a year and a day of the act causing death. The reason for the rule is suggested to be the limitations of medieval medical knowledge390. If that is the reason, it must be said that the rule survived long after its justification ceased. The rule has since been abolished by statute391. In the same category is the presumption that a boy under 14 years of age is physically incapable of sexual intercourse. This, too, is traced to the statement of the law in the Pleas of the Crown392. The presumption is patently absurd. Nonetheless, it was accepted as a rule of law precluding the 388 Coke, The Third Part of the Institutes of the Laws of England, 4th ed (1669), c 7 at 389 Hawkins, A Treatise of the Pleas of the Crown, (1716), bk 1, c 31 at 79; Hale, The History of the Pleas of the Crown, (1736), vol 1, c 33 at 426; Blackstone, Commentaries on the Laws of England, (1769), bk 4, c 14 at 197-198; East, A Treatise of the Pleas of the Crown, (1803), vol 1 at 214, 343; Halsbury's Laws of England, 2nd ed, vol 9 at 428. See also R v Dyson [1908] 2 KB 454; R v Evans & Gardiner (No 2) [1976] VR 523. 390 Coke, The Third Part of the Institutes of the Laws of England, 4th ed (1669), c 7 at 53. See also Rogers v Tennessee 532 US 451 at 463 (2001); Fisse (ed), Howard's Criminal Law, 5th ed (1990) at 31; Waller and Williams, Criminal Law, 11th ed 391 Crimes Act 1900 (NSW), s 17A; CLC Act, s 18; Crimes Act 1958 (Vic), s 9AA; Crimes Act 1900 (ACT), s 11. The rule has been removed in the Code States: Penalties and Sentences Act 1992 (Q) (as enacted), s 207, Schedule, item 7 under the heading "Criminal Code"; Criminal Code Amendment (Year and a Day Rule Repeal) Act 1993 (Tas); Criminal Law Amendment Act 1991 (WA), s 6. It never formed part of the Criminal Code (NT). 392 Hale, The History of the Pleas of the Crown, (1736), vol 1, c 58 at 630 (mispaginated in the original as 730): "An infant under the age of fourteen years is presumed by law unable to commit a rape, and therefore it seems cannot be guilty of it, and tho in other felonies malitia supplet aetatem in some cases as hath been shewn, yet it seems as to this fact the law presumes him impotent, as well as wanting discretion." Bell conviction of boys for rape393 until it was abolished by statute394. It was sufficient for Lord Coleridge CJ in R v Waite to observe that the rule had been "clearly laid down by Lord Hale" and, on that authority, judges had "refused to receive evidence to shew that a particular prisoner was in fact capable of committing the offence"395. Hale's statement of the immunity was taken as an authoritative statement of the law by all the leading text-writers396. 393 See, eg, R v Eldershaw (1828) 3 Car & P 396 [172 ER 472]; R v Waite [1892] 2 QB 600; R v Williams [1893] 1 QB 320. See also Blackstone, Commentaries on the Laws of England, (1769), bk 4, c 15 at 212; Roscoe, A Digest of the Law of Evidence in Criminal Cases, 2nd ed (1840) at 797; Williams, Criminal Law: The General Part, 2nd ed (1961) at 821. 394 Crimes Act 1900 (NSW), s 61S (originally s 61A(2)); CLC Act, s 73(2); Crimes Act 1958 (Vic), s 62(1); Crimes Act 1900 (ACT), s 68; Sexual Offences Act 1993 (UK), s 1. The presumption has been removed in the Code States: Criminal Code, Evidence Act and other Acts Amendment Act 1989 (Q), s 9; Criminal Code Amendment (Sexual Offences) Act 1987 (Tas), s 5; Acts Amendment (Sexual Assaults) Act 1985 (WA), s 4. It never formed part of the Criminal Code (NT). 395 R v Waite [1892] 2 QB 600 at 601. See also R v Young [1923] SASR 35; R v Packer [1932] VLR 225. 396 East, A Treatise of the Pleas of the Crown, (1803), vol 1 at 446; Burnett, A Treatise on Various Branches of the Criminal Law of Scotland, (1811) at 102; Chitty, A Practical Treatise on the Criminal Law, (1816), vol 3 at 811; Russell, A Treatise on Crimes and Misdemeanors, (1819), vol 1, bk 3, c 6 at 802; Archbold, A Summary of the Law Relative to Pleading and Evidence in Criminal Cases, (1822) at 259; Alison, Principles of the Criminal Law of Scotland, (1832) at 215; Roscoe, A Digest of the Law of Evidence in Criminal Cases, (1835) at 708; Hume, Commentaries on the Law of Scotland, Respecting Crimes, (1844), vol 1, c 7 at 306; Macdonald, A Practical Treatise on the Criminal Law of Scotland, (1867) at 194; Stephen, A Digest of the Criminal Law (Crimes and Punishments), 4th ed (1887), c 29 at 194; Halsbury, The Laws of England, 1st ed, vol 9, par 1236; Sturge, Stephen's Digest of the Criminal Law (Indictable Offences), 9th ed (1950) at 263; Halsbury's Laws of England, 3rd ed, vol 10, par 1437; Butler and Garsia, Archbold: Pleading, Evidence & Practice in Criminal Cases, 35th ed (1962) at 1150; J W C Turner, Russell on Crime, 12th ed (1964), vol 1 at 708; Howard, Australian Criminal Law, (1965) at 135, 145-147. Bell R v Clarence The first judicial consideration of the immunity was in R v Clarence397. A bench of 13 judges was constituted to consider the question of whether the transmission of gonorrhoea by husband to wife in an act of consensual sexual intercourse could amount to the malicious infliction of grievous bodily harm. Wills, Field and Hawkins JJ each left open that circumstances may exist in which a husband could be liable for the rape of his wife. Wills J doubted that "between married persons rape is impossible"398. Field J thought that there may be cases in which a husband could be convicted of a crime arising out of forcibly imposing sexual intercourse on his wife; he did not say whether for rape or some other offence399. Hawkins J accepted that, by the marriage contract, a wife confers on her husband "an irrevocable privilege to have sexual intercourse with her during such time as the ordinary relations created by such contract subsist between them" and that a husband could not be convicted of a rape committed by him upon the person of his wife400. However, a husband was not at liberty to endanger his wife's health and cause her grievous bodily harm by the exercise of "the marital privilege" at a time when he was suffering from venereal disease and when the natural consequence of sexual intercourse would be the communication of that disease to her401. He explained the principles in this way402: "Rape consists in a man having sexual intercourse with a woman without her consent, and the marital privilege being equivalent to consent given once for all at the time of marriage, it follows that the mere act of sexual communion is lawful; but there is a wide difference between a simple act of communion which is lawful, and an act of communion combined with infectious contagion endangering health and causing harm, which is unlawful. … The wife submits to her husband's embraces because at the time of marriage she gave him an irrevocable right to her person. The intercourse which takes place between husband and wife after marriage is not by virtue of any special consent on her part, but is mere submission to an 397 (1888) 22 QBD 23. 398 R v Clarence (1888) 22 QBD 23 at 33. 399 R v Clarence (1888) 22 QBD 23 at 57. 400 R v Clarence (1888) 22 QBD 23 at 51. 401 R v Clarence (1888) 22 QBD 23 at 51. 402 R v Clarence (1888) 22 QBD 23 at 51, 54. Bell obligation imposed upon her by law. Consent is immaterial." (emphasis in original) Pollock B said403: "The husband's connection with his wife is not only lawful, but it is in accordance with the ordinary condition of married life. It is done in pursuance of the marital contract and of the status which was created by marriage, and the wife as to the connection itself is in a different position from any other woman, for she has no right or power to refuse her consent." Consideration of the immunity in Clarence appears to have been prompted by a submission based on a footnote in Stephen's Digest of the Criminal Law. The law in the first edition of the Digest was stated, relevantly, in this way404: "Rape is the act of having carnal knowledge of a woman without her conscious permission ... Provided that: – (1) A husband [it is said] cannot commit rape upon his wife by carnally knowing her himself, but he may do so if he aids another person to have carnal knowledge of her." The footnote relevantly said405: "Hale's reason is that the wife's consent at marriage is irrevocable. Surely, however, the consent is confined to the decent and proper use of marital rights. If a man used violence to his wife under circumstances in which decency or her own health or safety required or justified her in refusing her consent, I think he might be convicted of rape, notwithstanding Lord Hale's dictum. He gives no authority for it, but makes the remark only by way of introduction to the qualification contained in the latter part of clause (1), for which Lord Castlehaven's Case (3 St Tr 402) is an authority." 403 R v Clarence (1888) 22 QBD 23 at 63-64. 404 Stephen, A Digest of the Criminal Law (Crimes and Punishments), (1877), c 29 at 405 Stephen, A Digest of the Criminal Law (Crimes and Punishments), (1877), c 29 at Bell Stephen J gave the leading judgment in Clarence406. He used the occasion to draw attention to the alteration of the footnote, removing the suggestion that a man might in certain circumstances be indicted for the rape of his wife, in the most recent edition of his text407. Stephen was a great master of the criminal law408. An account of his draft criminal code and the subsequent Commission appointed to report upon it is contained in the joint reasons in Darkan v The Queen409. To the extent that the Draft Code appended to the Report of the Commissioners differed from Stephen's original draft, the differences were noted in the Report. The provisions dealing with offences against the person were said to correspond (as did the provisions in Stephen's original draft) with the Offences against the Person Act 1861 (UK)410, "supplemented by a reduction to writing of the common law doctrines and definitions"411. The Offences against the Person Act 1861 (UK) prescribed the punishment for rape but left the definition of the offence to the common law. It is apparent that the definition of rape in the Draft Code was understood by its authors412 to be a statement of the common law. Relevantly, the offence was defined as "the act of a man having carnal knowledge without her consent of a female who is not his wife"413. The Criminal Code Indictable Offences Bill 1878 (UK), on which the Commissioners' draft was based, and which defined rape in the same terms, had been circulated to the Judges, Chairmen and Deputy Chairmen of Quarter Sessions, Recorders and "many members of the bar and 406 A L Smith, Mathew and Grantham JJ, Huddleston B and Lord Coleridge CJ concurred. 407 R v Clarence (1888) 22 QBD 23 at 46. See Stephen, A Digest of the Criminal Law (Crimes and Punishments), 4th ed (1887), c 29 at 194 fn 4. 408 Radzinowicz, Sir James Fitzjames Stephen, 1829-1894, Selden Society Lecture, 409 (2006) 227 CLR 373 at 385-386 [33]-[36]; [2006] HCA 34. 410 24 & 25 Vict c 100, s 48. 411 Criminal Code Bill Commission, Report of the Royal Commission Appointed to Consider The Law Relating to Indictable Offences, (1879) [C 2345] at 22. 412 Lord Blackburn, Mr Justice Barry, Lord-Justice Lush and Sir James Fitzjames Stephen. 413 Section 207 of the Draft Code, Appendix to the Criminal Code Bill Commission, Report of the Royal Commission Appointed to Consider The Law Relating to Indictable Offences, (1879) [C 2345] at 107. Bell other gentlemen having practical experience in the administration of the criminal law"414 in England and Ireland with the invitation to comment on it. The absence of any suggestion in the Commissioners' Report that the offence of rape was to be modified under the Code is eloquent of the acceptance by those engaged in the administration of the criminal law in England and Ireland at the time that the offence could not be committed by a husband against his wife415. Sir Samuel Griffith drew on the English Draft Code in preparing his draft criminal code for Queensland416. In the latter, the offence of rape was defined, relevantly, as the "carnal knowledge of a woman, not his wife"417. The marginal notes reveal that Sir Samuel Griffith considered this definition to be a statement of the common law. In Canada, before the enactment of the Criminal Code in 1892, the offence of rape, while punishable as a felony under legislation modelled on the Offences against the Person Act 1861 (UK), depended upon the common law for its elements of proof. It is apparent that the understanding in that jurisdiction was that the offence could not be committed by a husband against his wife418. The Criminal Code defined rape as involving the "carnal knowledge of a woman who is not his wife"419. It does not appear that this was thought to involve any departure from the existing law. The absence of binding decision The absence of a binding decision does not mean that a rule stated in authoritative texts and accepted and acted upon by the legal profession over many years may not acquire status as law. The point is made by Sir John Smith 414 Criminal Code Bill Commission, Report of the Royal Commission Appointed to Consider The Law Relating to Indictable Offences, (1879) [C 2345] at 5. 415 See Criminal Code Bill Commission, Report of the Royal Commission Appointed to Consider The Law Relating to Indictable Offences, (1879) [C 2345] at 25. 416 Griffith, Draft of a Code of Criminal Law, (1897) at iv. 417 Griffith, Draft of a Code of Criminal Law, (1897), s 353 at 135. 418 Taschereau, The Criminal Statute Law of the Dominion of Canada, 2nd ed (1888) 419 Criminal Code 1892 (Can), s 266. Bell in his commentary on R v C420, by reference to Foakes v Beer421. In the latter case, the House of Lords held itself bound to follow a rule stated by Coke to have been laid down in Pinnel's Case422 in 1602, although their Lordships disliked it and there was no decision in which it had been applied. As the Earl of Selborne LC put it423: "The doctrine itself, as laid down by Sir Edward Coke, may have been criticised, as questionable in principle, by some persons whose opinions are entitled to respect, but it has never been judicially overruled; on the contrary I think it has always, since the sixteenth century, been accepted as law. If so, I cannot think that your Lordships would do right, if you were now to reverse, as erroneous, a judgment of the Court of Appeal, proceeding upon a doctrine which has been accepted as part of the law of England for 280 years." Brennan J, the only Justice in R v L to consider proof of the offence of rape under the common law, considered the elements to have been fixed by Hale's statement of them424. The evidence in favour of that conclusion is compelling. Has the immunity ceased to exist? It was submitted that legal and social changes to the status of married women had produced the result that the immunity had ceased to be a rule of law on a date before the subject events. There were differing views about when that change to the law occurred, a circumstance which tends to highlight a difficulty with accepting the underlying premise. The respondent and the Attorney- General for South Australia contended that the foundation for the immunity had "crumbled to dust" as at the "early to mid twentieth century". The Attorney- General of circumstances had occurred "by the end of the 19th century". Reference was made to the enactment of the Married Women's Property Acts; the amendment of matrimonial causes statutes removing the "double-standard" relating to adultery as a ground for dissolution of marriage; and, more generally, the extension of the the Commonwealth contended the relevant change that 420 [1991] Crim LR 62. 421 (1884) 9 App Cas 605. 422 (1602) 5 Co Rep 117a [77 ER 237]. 423 Foakes v Beer (1884) 9 App Cas 605 at 612. See also at 622-623 per Lord Blackburn, 623-624 per Lord Watson, 629-630 per Lord FitzGerald. 424 R v L (1991) 174 CLR 379 at 399. Bell franchise to women, as combining to produce a state of affairs that was inconsistent with the continued existence of the immunity. These submissions were maintained in the face of a good deal of evidence to the contrary. The one case relied on to support the submissions was R v Jackson425. In that case, Lord Halsbury LC rejected the proposition that the relation of husband and wife gave the husband "complete dominion over the wife's person"426. The holding that an order for restitution of conjugal rights did not confer on the husband a right to imprison his wife is a tenuous basis for concluding that the husband was now amenable to prosecution for having sexual intercourse with his wife without her consent. In the first edition of Halsbury, published in 1909, almost 20 years after the decision in Jackson, the law was stated as being that "[a] man cannot be guilty as a principal in the first degree of a rape upon his wife, for the wife is unable to retract the consent to cohabitation which is a part of the contract of In Tasmania, the Married Women's Property Act was enacted in 1882. Women had been granted the franchise for both federal and State parliamentary elections by 1904428. The Matrimonial Causes Act 1860 (Tas) was amended in 1919 to remove the double-standard with respect to adultery429. Nonetheless, when the Parliament enacted the Criminal Code for Tasmania in 1924, a quarter of a century after the enactment of the Queensland Criminal Code, the crime of 426 [1891] 1 QB 671 at 679. 427 Halsbury, The Laws of England, 1st ed, vol 9, par 1236. The second edition, under the editorship of Viscount Hailsham, published in 1933, stated the law in the same terms: vol 9, par 815. It was not until after Clarke (see fn 295 above), which provided a limited exception to the immunity in the case of a wife living separately under the protection of a court order, that the third edition, under the editorship of Viscount Simons, published in 1955, stated the rule in qualified terms: "[a] man cannot, as a general rule, be guilty as a principal in the first degree of a rape upon his wife" (vol 10, par 1437). 428 Commonwealth Franchise Act 1902 (Cth); Constitution Amendment Act 1903 (Tas). 429 Matrimonial Causes Amendment Act 1919 (Tas) (Royal Assent proclaimed on 17 May 1920). Bell rape was defined in the same way as under the latter430. The significant changes in the legal status of married women which had occurred by 1924 do not appear to have been viewed at the time as inconsistent with the immunity. In the same year, the House of Lords delivered judgment in G v G431. That was an appeal from the dismissal of an application for a decree of nullity of marriage brought by a husband on the ground of his wife's impotency. The appellant and his wife were married in 1913 and the evidence of their relations spanned the period from that date to 1921. The wife had evinced an hysterical reluctance to engage in sexual intercourse. The question for the court was whether this psychological obstacle to consummation amounted to incapacity, as distinct from the mere wilful refusal of conjugal rights. The court below had doubted that the husband's repeated attempts at intercourse had exhibited "a sufficient virility"432. It was in this context that Lord Dunedin observed433: "It is indeed permissible to wish that some gentle violence had been employed; if there had been it would either have resulted in success or would have precipitated a crisis so decided as to have made our task a comparatively easy one." His Lordship considered the husband's account "as to why he did not use a little more force than he did" to have been an acceptable explanation434 and the appeal was allowed. The speeches in G v G speak to another age. The decision in that case is closer to the date of the acts charged against the appellant than was the hearing of this appeal. More than a decade after the events giving rise to this appeal, in 1975, Lawton LJ, giving the judgment of the English Court of Appeal in R v Cogan, proceeded upon acceptance that it was a legal impossibility for a man to rape his wife during cohabitation435. The accused bore accessorial liability for the rape of his wife by another. In the following year, Geoffrey Lane LJ extended the exception to the immunity to allow the conviction of a husband for the rape of his 430 Criminal Code (Tas), s 185 (as enacted). Relevantly, rape was defined as involving "carnal knowledge of a female not his wife". 432 G v G [1924] AC 349 at 357. 433 G v G [1924] AC 349 at 357. 434 G v G [1924] AC 349 at 358. 435 R v Cogan [1976] QB 217 at 223. Bell wife where he had given an undertaking not to molest her436. Of present significance is his Lordship's view that, "[a]s a general principle, there is no doubt that a husband cannot be guilty of rape upon his wife"437. The undertaking given in lieu of an injunction operated in that case to eliminate the wife's matrimonial consent to intercourse. A convenient account of the law in England as it was understood in December 1983 is contained in the Report of the Criminal Law Revision Committee, which had been asked to review the law relating to, and penalties for, sexual offences438: "In defining rape the Sexual Offences (Amendment) Act 1976 uses the term 'unlawful sexual intercourse'. What is 'unlawful' is left to the common law. The general rule is that sexual intercourse is 'unlawful' if it occurs outside marriage. Sexual intercourse between husband and wife is not 'unlawful' except in a fairly narrow class of cases, which can be broadly described as cases where the parties have separated and their separation has been acknowledged by a court." The existence of the immunity was also accepted in decisions of Australian courts delivered after 1963. Reference has been made earlier in these reasons to decisions of the South Australian Supreme Court439. In New South Wales, Victoria and Tasmania, the English line of authority allowing an exception to the immunity in the case of a wife living separately and under the protection of a court order was adopted440. In R v McMinn, Starke ACJ observed441: "There can be no doubt that for centuries the law in England (and in Australia) has been that a man cannot rape his wife. That this principle of law is out of tune with modern thinking has been recognized in Victoria 436 Steele (1976) 65 Cr App R 22. 437 Steele (1976) 65 Cr App R 22 at 24. 438 Criminal Law Revision Committee, Sexual Offences, Report No 15, (1984) Cmnd 9213 at 17-18 [2.57]. 439 See above at [212]. 440 C (1981) 3 A Crim R 146; R v McMinn [1982] VR 53; Bellchambers (1982) 7 A Crim R 463. 441 [1982] VR 53 at 55. Bell by the Crimes (Sexual Offences) Act 1980 and there are similar Acts in other States." In New Zealand, a statute enacted in 1961 provided that no man could be convicted of rape of his wife unless, at the time of the intercourse, there was in force a decree nisi of divorce or nullity and the parties had not resumed cohabitation, or there was in force a decree of judicial separation or a separation order442. An amendment to the statute in 1981 maintained the immunity, save in cases where the husband and wife were living separately443. This restricted immunity was not removed until 1986444. The Model Penal Code, first published by the American Law Institute in 1962, relevantly provided that "[a] male who has sexual intercourse with a female not his wife is guilty of rape"445. In the revised commentary, published in 1980, this "traditional limitation" of the offence was maintained446. The proposition that by the mid-20th century or earlier the immunity had fallen into desuetude as the result of changes in the conditions of society is without support. In this country, as in other common law countries, the continued existence of the immunity does not appear to have been seen as inconsistent with the recognition of the equal status of married women. There is the curious spectacle in this appeal of the respondent and the Attorney-General for South Australia contending that the maintenance of the immunity by the mid- 20th century was inconsistent with the rights and privileges of married women, notwithstanding that as late as 1976 the Parliament of South Australia chose to preserve it447. 442 Crimes Act 1961 (NZ), s 128(3). 443 Family Proceedings Act 1980 (NZ), First Schedule. 444 Crimes Amendment Act (No 3) 1985 (NZ), s 2. 445 American Law Institute, Model Penal Code: Official Draft and Explanatory Notes, 446 American Law Institute, Model Penal Code and Commentaries (Official Draft and Revised Comments), (1980), Pt 2, Art 213 at 271-275, 341-346. The Comment notes that the rule existed at common law, prevailed at the time the Model Penal Code was drafted and "has been continued in most revised penal laws": at 341. 447 The original Bill introduced into Parliament, which purported to abolish the immunity completely, was rejected by the House of Assembly: Sallmann and Chappell, Rape Law Reform in South Australia: A Study of the Background to the Reforms of 1975 and 1976 and of their Subsequent Impact, Adelaide Law Review Research Paper No 3, (1982) at 20-21, 30-31. Bell By the mid-20th century, the notion that the immunity depended on the wife's irrevocable consent to intercourse may no longer have been seen as the justification for it. However, this is not to accept that the immunity had "crumbled to dust". The contemporary evidence suggests that the immunity was a recognised and accepted feature of the law of rape, albeit that the rationale supporting it may have changed. In 1954, Norval Morris and A L Turner, both then senior lecturers in law at the University of Melbourne, writing of the law respecting marital rape, were critical of irrevocable consent as the justification for the immunity448. They went on to discuss the "special position" of a married couple in law and in fact and to say449: "Intercourse then is a privilege at least and perhaps a right and a duty inherent in the matrimonial state, accepted as such by husband and wife. In the vast majority of cases the enjoyment of this privilege will simply represent the fulfilment of the natural desires of the parties and in these cases there will be no problem of refusal. There will however be some cases where, the adjustment of the parties not being so happy, the wife may consistently repel her husband's advances. If the wife is adamant in her refusal the husband must choose between letting his wife's will prevail, thus wrecking the marriage, and acting without her consent. It would be intolerable if he were to be conditioned in his course of action by the threat of criminal proceedings for rape." The leading Australian text on the criminal law published in 1965 praised the decision in R v Clarke450, which allowed an exception to the immunity; however, the author went on to observe451: "[A] husband should not walk in the shadow of the law of rape in trying to regulate his sexual relationships with his wife. If a marriage runs into difficulty, the criminal law should not give to either party to the marriage 448 Morris and Turner, "Two Problems in the Law of Rape", (1954) 2 University of Queensland Law Journal 247 at 258. 449 Morris and Turner, "Two Problems in the Law of Rape", (1954) 2 University of Queensland Law Journal 247 at 259. 450 [1949] 2 All ER 448. See fn 295 above. 451 Howard, Australian Criminal Law, (1965) at 146. Bell the power to visit more misery upon the other than is unavoidable in the nature of things." The Mitchell Committee explained its reasons for proposing to confine the immunity in this way452: "The view that the consent to sexual intercourse given upon marriage cannot be revoked during the subsistence of the marriage is not in accord with modern thinking. In this community today it is anachronistic to suggest that a wife is bound to submit to intercourse with her husband whenever he wishes it irrespective of her own wishes. Nevertheless it is only in exceptional circumstances that the criminal law should invade the bedroom. To allow a prosecution for rape by a husband upon his wife with whom he is cohabiting might put a dangerous weapon into the hands of the vindictive wife and an additional strain upon the matrimonial relationship. The wife who is subjected to force in the husband's pursuit of sexual intercourse needs, in the first instance, the protection of the family law to enable her to leave her husband and live in peace apart from him, and not the protection of the criminal law. If she has already left him and is living apart from him and not under the same roof when he forces her to have sexual intercourse with him without her consent, then we can see no reason why he should not be liable to prosecution for rape." (emphasis added) The views expressed by the Mitchell Committee were in line with those expressed by the authors of the revised commentaries to the US Model Penal Code in 1980453 and by the English Criminal Law Revision Committee in 452 Criminal Law and Penal Methods Reform Committee of South Australia, Special Report: Rape and Other Sexual Offences, (1976) at 14 [6.2]. 453 American Law Institute, Model Penal Code and Commentaries (Official Draft and Revised Comments), (1980), Pt 2, Art 213 at 345: "The problem with abandoning the immunity ... is that the law of rape, if applied to spouses, would thrust the prospect of criminal sanctions into the ongoing process of adjustment in the marital relationship." 454 Criminal Law Revision Committee, Sexual Offences, Report No 15, (1984) Cmnd 9213 at 21 [2.69]. Explaining the majority view, which was not to remove the immunity, the Committee said: "Some of us consider that the criminal law should keep out of marital relationships between cohabiting partners – especially the marriage bed – except where injury arises, when there are other offences which can be charged." Bell In R v C, the English Court of Appeal set out the advice that an imagined solicitor might have given a husband who inquired as to the legality of marital rape in 1970455. This was in the context of a submission respecting the foreseeability of further development of the law in light of decisions which had allowed exceptions to the immunity. The Commonwealth Attorney-General submitted that the hypothesised advice applied with equal force in this case. The determination of the issue raised by this appeal does not depend upon consideration of foreseeability of change to the law. Nonetheless, the opinions of the academic lawyers and the members of law reform committees set out above may suggest that the solicitor in R v C was a man in advance of his times. There is a more fundamental difficulty with the submission that the Court should hold that a substantive rule of law affecting liability for a serious criminal offence has simply disappeared because of a perception that changed conditions of society no longer provided a justification for it. The powerful reasons against an ultimate court of appeal varying or modifying a settled rule or principle of the common law456 apply with particular force to a variation or modification which has the effect of extending criminal liability. It is for the parliament to determine that a rule of exemption from criminal liability is no longer suited to the needs of the community. The respondent and the Attorney-General for South Australia submitted that it is the responsibility of this Court to modify the law to avoid the "unjust" operation of a rule of immunity respecting criminal liability457. The submission is singular, given that there is no jurisdiction in Australia in which the common law governs a husband's liability for the rape of his wife. No occasion arises to modify the law to make it "an effective instrument of doing justice according to contemporary standards in contemporary conditions"458. The law of marital rape in each Australian jurisdiction has been brought into line with contemporary 455 R v C [2004] 1 WLR 2098 at 2103-2104 [19]; [2004] 3 All ER 1 at 6-7. 456 State Government Insurance Commission v Trigwell (1979) 142 CLR 617 at 633 per Mason J (Stephen and Aickin JJ agreeing); Zecevic v Director of Public Prosecutions (Vict) (1987) 162 CLR 645 at 664 per Wilson, Dawson and Toohey JJ, 677-678 per Deane J; [1987] HCA 26; Lamb v Cotogno (1987) 164 CLR 1 at 11 per Mason CJ, Brennan, Deane, Dawson and Gaudron JJ; [1987] HCA 457 The respondent's Notice of Contention asserts that, "if [the immunity] ever was part of the common law of Australia, it ceased to be so as at the date of the commission of the offences in this matter". 458 O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 267 per Brennan J; [1991] HCA 14. Bell standards. Any statement of the common law respecting the liability of a husband for the rape of his wife with whom he was living could only apply to offences alleged to have been committed before the enactment of the statutory reforms. The declaration of the law for which the respondent contends carries with it that the parliaments of the States and Territories legislated over the course of the last century459 upon a wrong understanding of the law. That understanding was reflected in the Code States in the way in which the offence of rape was defined. In those States, the position remains that a husband is not liable to be convicted for the rape of his wife before the date on which the words "not his wife" were removed from the Criminal Code. In the jurisdictions which preserved the common law, the declaration would make it possible to reach back beyond the date on which statutory reforms were effected and attach liability to conduct occurring not less than a quarter of a century ago. In South Australia, it would be possible to successfully prosecute a man for the rape of his wife in the years up to 1976. In the more recent past, the same man would enjoy an immunity for the same conduct460. That is because the 1976 amendments enacted by the South Australian Parliament with the evident intention of limiting the immunity would now be seen to have conferred it. The fact that the parliaments of every Australian jurisdiction enacted legislation upon the understanding that the immunity was a rule of the common law provides some evidence that it was; and is a good reason for this Court not to now declare it to be otherwise. The rule of law holds that a person may be punished for a breach of the law and for nothing else461. It is abhorrent to impose criminal liability on a person for an act or omission which, at the time it was done or omitted to be done, did not subject the person to criminal punishment. Underlying the principle is the idea that the law should be known and accessible, so that those who are subject to it may conduct themselves with a view to avoiding criminal punishment if they choose462. However, its application does not turn on consideration of whether a person might be expected to have acted differently had he or she known that the proposed conduct was prohibited. Deane J's 459 In the case of Queensland, since 1899. 460 The immunity conferred by s 73(5) of the CLC Act was in force between 9 December 1976 and 16 April 1992. 461 See fn 286 above. See also Polyukhovich v The Commonwealth (1991) 172 CLR 501 at 609-611 per Deane J, 687-688 per Toohey J; [1991] HCA 32; Williams, Criminal Law: The General Part, 2nd ed (1961) at 575-576. 462 Blackstone, Commentaries on the Laws of England, (1765), bk 1 at 45-46. Bell dissenting reasons in Zecevic v Director of Public Prosecutions (Vict) explain why that is so463: "The vice of such a retrospective abolition of a defence to a charge of murder lies not in the prospect of injustice to some imaginary killer who has killed on the basis that his crime will be reduced from murder to manslaughter in the event that he was found to have been acting excessively in self-defence. It lies in the fundamental injustice of inequality under the law which is unavoidable when the administration of the criminal law is reduced to a macabre lottery by what the late Professor Stone described as flagrant violation of the 'well-established judicial policies of the criminal law in favorem libertatis, and against ex post facto punishment'464." The departure from the statement of the elements of self-defence in Viro v The Queen465, sanctioned by the majority in Zecevic, was undertaken in circumstances in which it was considered unlikely to occasion injustice and in which it was acknowledged that the endeavour to state the "defence" by reference to the onus had proved unworkable466. Nothing in the judgments in Zecevic affords support for the acceptance of the respondent's contention that this Court should restate the common law with the effect of extending criminal liability to a class of persons previously exempt from that liability. The common law was demeaning to women in its provision of the immunity. It is no answer to that recognition to permit the conviction of the appellant for an act for which he was not liable to criminal punishment at the date of its commission. For these reasons I would allow the appeal, set aside the answer to the question of law given by the majority in the Full Court and, in lieu thereof, answer that question "no". 463 (1987) 162 CLR 645 at 677-678. 464 Precedent and Law, (1985) at 190. 465 (1978) 141 CLR 88 at 146-147; [1978] HCA 9. 466 Zecevic v Director of Public Prosecutions (Vict) (1987) 162 CLR 645 at 664 per Wilson, Dawson and Toohey JJ. Bell
HIGH COURT OF AUSTRALIA Matter No S245/2016 AIR NEW ZEALAND LTD APPELLANT AND AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT Matter No S248/2016 PT GARUDA INDONESIA LTD APPELLANT AND AUSTRALIAN COMPETITION AND CONSUMER COMMISSION RESPONDENT Air New Zealand Ltd v Australian Competition and Consumer Commission PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission [2017] HCA 21 14 June 2017 S245/2016 & S248/2016 ORDER Matter No S245/2016 Appeal dismissed with costs. Matter No S248/2016 Appeal dismissed with costs. On appeal from the Federal Court of Australia Representation B W Walker SC with N J Owens SC and R A Yezerski for the appellant in S245/2016 (instructed by Norton White Lawyers) N C Hutley SC with T J Brennan and R J Scheelings for the appellant in S248/2016 (instructed by Norton White Lawyers) J C Sheahan QC and J A Halley SC with D F C Thomas and H Younan for the respondent in each matter (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Air New Zealand Ltd v Australian Competition and Consumer Commission PT Garuda Indonesia Ltd v Australian Competition and Consumer Commission Trade practices – Restrictive trade practices – Price fixing – Market identification – Location of market – Meaning of market "in Australia" – Where airlines competed to supply unidirectional air cargo services from ports of origin outside Australia to destination ports within Australia – Where airlines arrived at understanding to impose various surcharges and fees for supply of air cargo services – Whether market for air cargo services "in Australia" for purposes of Trade Practices Act 1974 (Cth). Trade practices – Restrictive trade practices – Price fixing – Foreign state compulsion – Where airlines contravened s 45 of Trade Practices Act 1974 (Cth) – Whether conduct compelled by foreign law or foreign regulator's administrative practices. Statutory interpretation – Inconsistency – Where s 13(b) of Air Navigation Act 1920 (Cth) required airlines to comply with "agreement or arrangement" – Where Australia-Indonesia Air Services Agreement "agreement or arrangement" within meaning of ss 12(2) and 13(b) of Air Navigation Act – Where Australia-Indonesia Air Services Agreement required agreement between international airlines on minimum tariffs – Where ss 45 and 45A of Trade Practices Act 1974 (Cth) prohibited arriving at understandings concerning prices with competitors – Whether ss 12 and 13 of Air Navigation Act inconsistent with ss 45 and 45A of Trade Practices Act such that latter did not apply to contravening conduct. Words and phrases – "competition", "foreign state compulsion", "market identification", "market in Australia", "otherwise competitive with", "practically and operatively "rivalrous behaviour", "price "substitutability", "supply and demand". inconsistent", fixing", Air Navigation Act 1920 (Cth), ss 12, 13. Trade Practices Act 1974 (Cth), ss 4, 4E, 45(2), 45(3), 45A. KIEFEL CJ, BELL AND KEANE JJ. The factual background and the legislative provisions relevant to the issues in these appeals are set out in full in the reasons of Gordon J. We gratefully adopt them and her Honour's summary of the decisions of the courts below. It is sufficient for the purposes of these reasons to state a few facts. Air New Zealand Ltd ("Air New Zealand") and PT Garuda Indonesia Ltd ("Garuda") were found by the primary judge to have been parties to understandings which amounted to price fixing. The understandings involved the imposition of surcharges and fees associated with the carriage of air cargo from ports in Hong Kong, Singapore and Indonesia to destination ports in Australia1. The primary judge found that this conduct would have contravened s 45(2) of the Trade Practices Act 1974 (Cth) ("the TPA"), which prohibits a corporation arriving at an understanding which has the purpose, or has or is likely to have the effect, of substantially lessening competition. The competition spoken of, other provisions explain, is competition in a market for goods and services in Australia. His Honour concluded that s 45(2) was not contravened because the competition which took place between the airlines occurred in markets in Hong Kong, Singapore and Indonesia, not in any market in Australia2. Despite the epic character of this litigation – the trial occupied 57 sitting days and the hearing of the appeal to the Full Court six days – the principal issue is within short compass. It is whether the primary judge was correct to hold that there was not a market in Australia for the air cargo services for which Air New Zealand and Garuda competed. The majority of the Full Court held that this was incorrect and allowed the appeals of the Australian Competition and Consumer Commission from that decision. In our view the findings of fact made by the primary judge lead irresistibly to the conclusion that there was a market in Australia for the airlines' air cargo services, and that the appeals of the airlines should therefore be dismissed. It may be noted that, for convenience, both the primary judge and the Full Court focused upon routes between Hong Kong and ports in Australia, but their reasoning applied equally to routes from Singapore and Indonesia to Australia. The same approach will be adopted here. 2 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 393 [20]. Bell The statutory provisions During the relevant period, s 4E of the TPA provided: "For the purposes of this Act, unless the contrary intention appears, market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services." The operative provisions of the TPA were contained in s 45(2)(a)(ii) and (b)(ii), which were relevantly in the following terms: "A corporation shall not: (a) … arrive at an understanding, if: a provision of the proposed … understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or give effect to a provision of [an] … understanding … if that provision: has the purpose, or has or is likely to have the effect, of substantially lessening competition." For the purpose of s 45 of the TPA, s 45A(1) operated to deem a provision of an understanding to have the purpose, or to have or be likely to have the effect, of substantially lessening competition "if the provision has the purpose, or has or is likely to have the effect … of fixing … the price for … services supplied … by the parties to the … understanding". For the purposes of the TPA, s 4(1) defined "price" to include "a charge of any description" and defined "services" to include "any rights … benefits, privileges or facilities that are, or are to be, provided, granted or conferred in trade or commerce". Section 45(3) of the TPA provided, for the purposes of ss 45 and 45A, that: Bell "competition, in relation to a provision of [an] … understanding … means competition in any market in which a corporation that is a party to the … understanding … supplies … or is likely to supply … services". Read epexegetically in the light of ss 4E, 45A and 45(3), s 45(2) operates where a corporation arrives at or gives effect to an understanding to fix prices in any market in Australia in which the corporation competes to supply services3. It was not in dispute that the airlines were parties to understandings that would have contravened s 45(2) of the TPA if they were in competition to supply services in a market in Australia. A market in Australia The authorities confirm that a market, within the meaning of the TPA, is a notional facility which accommodates rivalrous behaviour involving sellers and buyers4. In Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd5, Deane J, after noting that "[s]ection 4E confines 'market' for the purposes of the Act to 'a market in Australia'", went on to say that "'market' should, in the context of the Act, be understood in the sense of an area of potential close competition in particular goods and/or services and their substitutes". Dawson J agreed6 generally with Deane J, adding7: "A market is an area in which the exchange of goods or services between buyer and seller is negotiated. It is sometimes referred to as the sphere within which price is determined and that serves to focus attention upon the way in which the market facilitates exchange by employing price as the mechanism to reconcile competing demands for resources". 3 Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd (2016) 91 ALJR 143 at 156 [65]; 339 ALR 242 at 257; [2016] HCA 49. 4 Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 188, 195, 199; [1989] HCA 6; Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 454-455 [247]-[248], 455-456 [252]-[253]; [2003] HCA 5; Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd (2016) 91 ALJR 143 at 156 [66], [69], 165-166 [126]; 339 ALR 242 at 257, 258, 270. (1989) 167 CLR 177 at 195. (1989) 167 CLR 177 at 198. (1989) 167 CLR 177 at 199. Bell Similarly, in Boral Besser Masonry Ltd v Australian Competition and Consumer Commission8, McHugh J observed9: "[T]he market is the area of actual and potential, and not purely theoretical, interaction between producers and consumers where given the right incentive ... substitution will occur. That is to say, either producers will produce another similar product or consumers will purchase an alternative but similar product." Section 4E of the TPA proceeds upon the express footing that, notwithstanding the abstract nature of the concept of a market, it is possible to locate the market where the competition protected by the TPA occurs in Australia. Reconciling the abstract notion of a market with the concrete notion of location, so that they work coherently, presents something of a challenge. Particularly is this so because "competition" describes a process rather than a situation10. But given that the TPA regulates the conduct of commerce, it is tolerably clear that the task of attributing to the abstract concept of a market a geographical location in Australia is to be approached as a practical matter of business. It is important that any analysis of the competitive processes involved in the supply of a service is not divorced from the commercial context of the conduct in question11. It was common ground between the parties that a market in Australia does not cease to be so located because it encompasses other places as well. The issue then is whether the rivalrous behaviour – in the course of which suppliers and acquirers might be matched – occurred in Australia, whether or not it also occurred elsewhere. (2003) 215 CLR 374. (2003) 215 CLR 374 at 455-456 [252]. 10 Re Queensland Co-operative Milling Association Ltd – Proposed Merger (1976) 8 ALR 481 at 515. 11 Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd (2016) 91 ALJR 143 at 156 [70]; 339 ALR 242 at 258. Bell The facts about the market The primary judge found12 that the activity of flying freight to ports in Australia involved: transporting cargo from a port of origin to a port of destination; ground handling services at both origin and destination airports; inquiry services for tracing delayed or lost shipments; and dealing with issues arising from damaged cargo at destination. These services were supplied and acquired as a single package, or suite, of services13. These findings of fact were affirmed on appeal14. In providing these services, the airlines took possession of the cargo to be transported from a freight forwarder at the airport of origin. The range of airlines available to be selected to provide the service was limited by the need for any such airline to have a presence in the port of origin. The service of taking possession of the cargo in the port of origin with a view to flying it to a destination port in Australia could not be performed anywhere but in the port of origin15. The primary judge found16 that the markets in which Air New Zealand and Garuda competed were route-specific markets for the service of flying cargo from individual origin ports in Singapore, Hong Kong or Indonesia to individual destination ports in Australia. The primary judge found that the participants in these markets were the airlines, freight forwarders, and shippers – being either exporters at origin or importers at destination – whose cargo volume was sufficiently significant to motivate the airlines to pursue their custom. These shippers often, but not 12 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 445-446 [252]-[256], 459 [336]. 13 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 456 [321]. 14 Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at 201 [21]-[22], 217 [96], 275 [591]-[593], 283 [638]. 15 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 456 [319]; Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at 285-286 [650]. 16 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 445-446 [252]-[256], 459 [336]. Bell always, made decisions about the choice of airline; and where the shipper was an importer in Australia, that decision was likely to be made in Australia. Where the choice of airline was not made by a shipper, it was usually made by a freight forwarder who also provided necessary ancillary services not provided by the airlines. Smaller shippers who left the choice of carrier to their freight forwarders were not regarded as participants in any of the markets identified by the primary judge17. Apart from rare occurrences (typically involving live animals), airlines dealt directly only with freight forwarders situated in the port of origin or in nearby environs, and not with shippers18. Local cargo sales offices of the airlines, at the port of origin, published from time to time standard rates as "tariff" or "rate" sheets or schedules. Contract and other rates (as opposed to standard rates) were negotiated between freight forwarders and staff of airlines at the local sales office, at the airport of origin19. Importantly, the primary judge found that the airlines "tousled [sic] to obtain"20 the custom of those shippers in Australia who were substantial importers. His Honour said that "[a]lthough the contracts of carriage were entered into in Hong Kong by the freight forwarders … as a practical matter, substantial importers in Australia had the capacity to influence or even direct the decision as to which airline was to be used"21 to transport goods from the airport of origin to Australian airports. His Honour said that the evidence "strongly suggested" that the airlines regarded these shippers both as targets for their 17 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 454 [309]. 18 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 447 [266]; Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at 286 [650]. 19 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 412-413 [94]-[99], 414 [107]; Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at 20 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 455 [313]. 21 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 455 [314]. Bell marketing activities and as the ultimate source of this business22. A cursory examination of the cargo magazines produced by the airlines for the cargo trade showed that these larger shippers were regarded by the airlines as objects to be pursued. It was obvious, his Honour said, that the airlines would "compete for volumes of cargo directly from large shippers"23. The airlines' marketing magazines were directed to multiple markets. The marketing materials proceeded upon the basis that, regardless of the port of origin, the airlines were Were the airlines competing in Australia? The primary judge treated the place where the ultimate choice of airline was effected (referred to in the courts below as "the switching decision") as the location of the market25 and so identified Hong Kong, Singapore and Indonesia as markets, but not Australia26. In his Honour's view the decision in Re Queensland Co-operative Milling Association Ltd – Proposed Merger27 ("QCMA") and s 4E require the place where substitution between competing sources may occur to be used to determine the location of the market28. That is to say, the place where the contracts of carriage were made and where the airlines began to carry out their obligations was decisive. This approach, with respect, accords too much significance to the fact that substitution or switching may occur outside Australia. It accords too much 22 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 449 [272]. 23 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 449 [272]. 24 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 449 [277]. 25 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 447 [264]. 26 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 393 [20]. 27 (1976) 8 ALR 481. 28 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 455 [317], 456 [321]. Bell weight to what was said in QCMA about substitutability of products or services and its place in s 4E. In QCMA29 the Trade Practices Tribunal explained that a market is "the field of actual and potential transactions between buyers and sellers amongst whom there can be strong substitution … if given a sufficient price incentive". Later, in discussing the distinction between markets and sub-markets, it was said30 that: "Where the defining feature of a market is the existence of close substitutes (whether in demand or supply), the defining feature of a sub- market is the existence of still closer and more immediate substitutes." The Tribunal did not say that substitutability will be the defining feature of a market in every case. The passage takes as its premise that it is the defining feature for the question at hand. This is not to suggest that substitutability may not be an important, or even a decisive, factor in market definition in some cases, just as barriers to entry may be. It is rather that concepts such as market and cross-elasticity of supply and demand provide no complete solution to the definition of a market, as Dawson J observed in Queensland Wire Industries31. Much will depend upon the context in which the question arises. The exercise of market definition needs to take into account the conduct in question and its effects, and the statutory terms governing the question32. The market spoken of in s 4E is a market in Australia. Section 4E treats substitutability as the principal driver of the rivalrous behaviour accommodated by a market. The act of switching or substitution marks the conclusion of that rivalry: one of the rivals has prevailed. The place where that success is formalised by the signing of a contract may often, as a practical matter of business, say something significant about the location of the process of rivalry for the purposes of s 4E of the TPA. But it will not necessarily do so. 29 (1976) 8 ALR 481 at 517. 30 (1976) 8 ALR 481 at 517. 31 (1989) 167 CLR 177 at 198-199. 32 Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd (2016) 91 ALJR 143 at 156 [69]; 339 ALR 242 at 258. Bell The locations of the making of the contractual match and of the performance of the contract may be significant, not in themselves, but as (usually) reliable indicators of the location of the mechanism or facility which accommodates the process of rivalry and matching essential to the concept of a market. In this regard, it is the substitutability of services as the driver of the rivalry between competitors to which s 4E of the TPA looks to identify a market, not the circumstances of the act of substitution itself. The place where the act of substitution occurs does not necessarily locate the geographical area of the rivalry which precedes that act of substitution. Where the service being supplied is the transport of goods between two countries, the place at which the act of substitution is recorded or formalised may say little about where the interplay of supply and demand, driven by the conditions of substitutability, has occurred. Thus, for example, contracts for air freight from Hong Kong to Sydney may be signed at the head office of the airline based in Europe, but that does not locate the geographical dimension of the market in Europe. In the present case, while the circumstance that contracts for supply of air cargo services were made and the performance of those services commenced at locations outside Australia may tend to suggest that suppliers were competing in a market of which these overseas locations are a feature, it does not, of itself, accurately describe the geographical dimension of the market; much less establish that Australia was not within that market. Given that the services to be supplied by the airlines were destined for ports in Australia in answer to demand generated in Australia, it does no violence to the language of s 4E of the TPA to say that, as a matter of commerce, the geographical dimension of the market that accommodates the interplay of that supply and demand includes Australia. That having been said, too much should not be made of the circumstance that the services provided by Air New Zealand and Garuda terminated at destination ports in Australia. For the majority of the Full Court, it was important that "a significant and important part of the operation of the 'suite of services' being provided was in Australia"33. But it is not necessarily the case that the place where a freight delivery service terminates identifies the market in which the carrier competes to supply the service. The place of delivery may simply be the "end of the line" of a service supplied from a market in which the ultimate destination has little bearing on the interplay of the forces of supply and demand which generate the service and fix its price. For example, the infrequent and irregular delivery of air freight to an Australian scientific research facility in Antarctica would not be regarded as the supply of services in a market in 33 Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at 231 [164]. Bell Antarctica. In this example, the interplay of the forces of supply and demand which generate the service and fix its price would take place, geographically speaking, entirely outside Antarctica. In the present case, Australia was not merely the end of the line for services generated by an interplay of forces of supply and demand occurring outside Australia. The primary judge's findings of fact demonstrate that shippers in Australia were a substantial source of demand for the airlines' services, and that the airlines engaged in rivalrous behaviour seeking to match the supply of their services with that demand. The primary judge found that the airlines appreciated that the large shippers who required air cargo services to ports in Australia were the "economic foundation of the market"34. And importantly, the primary judge found that the airlines tussled to obtain the custom of shippers in Australia who were substantial importers35, and whom the airlines regarded as the ultimate source of their business36. To speak of suppliers tussling to obtain orders is to describe the rivalrous behaviour which is the essence of competition. The circumstance that the demand from Australian shippers was usually articulated to suppliers in Hong Kong by freight forwarders does not deny that, as a matter of commerce, the interplay of the forces of supply and demand encompassed Australia. That this was so is confirmed by the fact that, as the primary judge found, the airlines pursued sales and marketing strategies in Australia promoting their services to shippers in competition for orders to provide freight for their cargo37. As McHugh J explained in Boral Besser, 34 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 451 [287]. 35 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 455 [313]-[314]. 36 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 439 [221], 449 [272], 451-452 [291]-[292], 453 [299]. 37 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 449 [272]-[274], 452 [293]. Bell customer attitudes are relevant to market definition38 because they bear upon the substitutability of the services of a competitor39. In the present case, the primary judge's findings establish that the airlines conducted their businesses in a way which recognised the economic reality that Australia was not merely the end of the line for their air cargo services but was also a vital source of demand for those services from customers who were regarded as important to the profitability of their businesses. As a practical matter of business, the rivalrous behaviour in the course of which the matching of supply with demand occurred was in a market which, speaking geographically – as s 4E of the TPA requires – included Australia; and that was so even if the market might also have been said to be in Singapore, Hong Kong or Indonesia. As noted above, a practical focus on the issue is required because the TPA operates upon those engaged in commerce40. The airlines were actively engaged in attempting to capture the demand for services emanating from shippers in Australia as an integral part of their business. The airlines' deliberate and rivalrous pursuit of orders emanating from Australian shippers was compelling evidence that they were in competition with each other in a market that was in Australia. For these reasons, we conclude that the airlines' price fixing conduct took place in a market in Australia. The subsidiary issues We agree with the reasons given by Gordon J on the issues of foreign state compulsion and alleged inconsistency. Orders The appeals should be dismissed with costs. 38 Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 456 [253]-[254]; see also Re Queensland Co-operative Milling Association Ltd – Proposed Merger (1976) 8 ALR 481 at 517. 39 See Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 456 [253]. 40 Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 455-456 [252]. Nettle NETTLE J. I agree with Gordon J, for the reasons her Honour gives, that the appeals should be dismissed; but I wish to add the following. As the majority in the Full Court of the Federal Court (Dowsett and Edelman JJ) recognised41, market definition is a question of fact. More precisely, it involves "a fact-intensive exercise centered on the commercial realities of the market and competition"42. And, as a consequence, the definition of a market is liable to vary according to the purposes of the exercise undertaken43. In some cases, a geographic market may logically be understood as the area in which potential buyers look for sellers to supply goods and services, as opposed to the area in which sellers look for buyers to purchase goods and services44. That may be so where sellers do not "market" their goods and services, or perceive themselves to be competing45, outside the area in which they as sellers are located. The facts of Tampa Electric Co v Nashville Coal Co provide the paradigm46. By contrast, where sellers are engaged in marketing their goods and services, or perceive themselves to be competing, in areas beyond the area in which they are located, commercial reality is likely to dictate that the market includes those further areas47. 41 Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190 at 219-220 [104]-[106], [109]. 42 EI du Pont de Nemours and Co v Kolon Industries Inc 637 F 3d 435 at 442 (4th Cir, 2011). See Eastman Kodak Co v Image Technical Services Inc 504 US 451 at 481-482 (1992) per Blackmun J (Rehnquist CJ, White, Stevens, Kennedy and Souter JJ agreeing); Todd v Exxon Corporation 275 F 3d 191 at 199-200 (2nd Cir, 2001). 43 See Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 at 175, 178 per French J (Spender J and O'Loughlin J agreeing at 159, 185). 44 Tampa Electric Co v Nashville Coal Co 365 US 320 at 327, 331-333 (1961); United States v Grinnell Corp 384 US 563 at 571-573 (1966); Tunis Bros Co Inc v Ford Motor Co 952 F 2d 715 at 726 (3rd Cir, 1991). See generally Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 455-456 [252] per McHugh J; [2003] HCA 5. 45 See generally Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 78 at 107-108 [138]. 46 365 US 320 at 327, 331-333 (1961). 47 EI du Pont 637 F 3d 435 at 442-443, 444-447 (4th Cir, 2011). Nettle In cases of the latter kind, it is accepted in United States anti-trust jurisprudence that the geographic market consists of the smallest area of overlap of sellers' and buyers' locations in which sellers are able to increase prices or reduce supply without purchasers turning to alternative suppliers beyond that area48. A similar concept has been recognised in Europe49. And despite differences between competition law in the Unites States, Europe and Australia, the area of a geographic market is essentially an economic concept and therefore logically to be determined according to similar considerations in each jurisdiction50. Counsel for Air New Zealand Ltd and PT Garuda Indonesia Ltd (together, "the airlines") called in aid the idea of substitution recognised in Re Queensland Co-operative Milling Association Ltd  Proposed Merger51: "Within the bounds of a market there is substitution  substitution between one product and another, and between one source of supply and another, in response to changing prices." It was submitted that, because all of the existing suppliers of the relevant cargo services, and all of the possibilities for substitution, were located outside Australia, it necessarily followed that the market was outside Australia. So to conjecture, however, overlooks that, in these appeals, the airlines marketed their services in Australia to potential customers in Australia, and 48 In re Southeastern Milk Antitrust Litigation 739 F 3d 262 at 277 (6th Cir, 2014); Hovenkamp, Federal Antitrust Policy: The Law of Competition and its Practice, 2nd ed (1999) at 113 §3.6. 49 See Decision 1999/243/EC relating to a proceeding pursuant to Articles 85 and 86 of the EC Treaty (Case No IV/35.134) at [519]; Atlantic Container Line AB v Commission of the European Communities [2003] ECR II-3298 at II-3577-II-3578 50 See Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2006) ATPR ¶42-123 at 45,243 [429]; Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297 at 344 [244] per Yates J (Finn J agreeing at 300 [1]); ACCC v ANZ Banking Group (2015) 236 FCR 78 at 107-108 [136]-[138]; Donald and Heydon, Trade Practices Law, (1978) 51 (1976) 8 ALR 481 at 517. See also Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 188 per Mason CJ and Wilson J, 199 per Dawson J, 210 per Toohey J; [1989] HCA 6. Nettle perceived themselves to be competing for Australian customers in Australia52. Certainly, as the airlines emphasised, each contract of carriage was entered into in Singapore or Hong Kong through one or other freight forwarder acting as a principal. Hence, as was concluded53 by the primary judge, and by Yates J in the Full Court, Singapore and Hong Kong were the places where the so-called "switching decisions" (that is, decisions to choose one airline over another or to substitute one airline's service for another's) were executed or given effect. But, equally, at least in some cases, those decisions were the result of determinations previously made by Australian customers in Australia in response to the airlines' marketing activities in Australia54. Counsel for the airlines conceded that the area of a geographic market is not necessarily determined by the place where contracts for the sale of goods and services in the market are entered into. That concession was rightly made. In international commerce, the place of entry into a contract of purchase and sale may be entirely fortuitous and, hence, essentially irrelevant to the location of the geographic market in which goods and services are offered and purchased. Likewise here, at least in those instances where Australian customers were directly involved in making the so-called switching decisions, the place of execution of those decisions could not be determinative and was no more the important decision-makers were subject in Australia. the rivalrous behaviour of the airlines to which than Conclusion and orders In the result, the appeals should be dismissed with costs. 52 ACCC v Garuda (2016) 244 FCR 190 at 210-211 [59]-[63], [65] per Dowsett and Edelman JJ; Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388 at 449-451 [272]-[287], 455 [313]-[314]. 53 ACCC v Garuda (2016) 244 FCR 190 at 291 [675]; ACCC v Air NZ (2014) 319 ALR 388 at 457 [323]. 54 See ACCC v Air NZ (2014) 319 ALR 388 at 447 [263]-[264]. GORDON J. The appellants, Air New Zealand Ltd ("Air NZ") and PT Garuda Indonesia Ltd ("Garuda"), operated international air services and carried on business in Australia. Part of their business was to supply unidirectional air cargo services from ports of origin in Hong Kong, Singapore and Indonesia to destination ports in Australia ("the air cargo services"). Their conduct within and outside Australia55 was subject to Pt IV of the Trade Practices Act 1974 (Cth) ("the TPA"). At the relevant times, s 45(2) of the TPA, read with ss 4E and 45(3) of the TPA, relevantly provided that a corporation must not arrive at an understanding, or give effect to a provision of an understanding, if a provision of the proposed understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition in a market, in Australia, in which a corporation that is a party to the understanding supplies, or is likely to supply, services. that certain provisions of understandings in relation to prices were deemed, for the purposes of s 45, to have the purpose, effect or likely effect of substantially lessening competition. relevantly provided Section 45A At trial, Air NZ and Garuda were found to have arrived at, and in most cases given effect to, several understandings containing provisions to impose various surcharges and fees on the supply of the air cargo services56. For the purposes of s 45, those provisions were deemed, by s 45A of the TPA, to have the purpose, effect or likely effect of substantially lessening competition because the provisions had the purpose, effect or likely effect of controlling the price for the air cargo services, which were supplied by the airlines in competition with the other parties to the understandings. The primary judge (Perram J) found that if the airlines had competed in a market in Australia, each understanding would have contravened s 45(2)(a)(ii) (about arriving at an understanding) and most of the understandings would also have contravened s 45(2)(b)(ii) (about giving effect to a provision of an understanding). However, his Honour found that there was no contravention of s 45(2) because the purpose, effect or likely effect of each impugned provision was not to substantially lessen competition in a market in Australia within the meaning of s 4E57. 55 See s 5(1) of the TPA. Parts IVA, V (other than Div 1AA), VB and VC of the TPA also extended to their conduct outside Australia. 56 Australian Competition and Consumer Commission v Air New Zealand Ltd (2014) 319 ALR 388; [2014] FCA 1157. 57 At all relevant times, s 4E provided that "[f]or the purposes of this Act, unless the contrary intention appears, market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and (Footnote continues on next page) His Honour concluded that the market was not in Australia but in the place where the "switching decision" – the choice of airline – was given effect, and that was where the cargo was delivered to the airline at the port of origin58. That is, "[t]he competition which occurred between the airlines and which the surcharges interfered with was competition in markets in Hong Kong, Singapore and Indonesia and not competition in any market in Australia"59. In his Honour's view (which the airlines supported on appeal to this Court), a market for the purposes of s 4E of the TPA was to be defined by considerations of substitutability, and because substitution between competing sources of supply could only occur at the port of origin, the place where the complete suite of services that constituted the relevant product was acquired and obtained60, the market was at the port of origin, not in Australia. The respondent in each appeal, the Australian Competition and Consumer Commission ("the ACCC"), appealed to the Full Court of the Federal Court of Australia61, which, by majority (Dowsett and Edelman JJ, Yates J dissenting), allowed the appeal. In respect of the market issue, the majority held that defining a "market" for the purposes of the TPA involved a "flexible assessment"62 of various matters that were not limited to questions of substitutability, and that the better approach to determining whether a market was "in Australia" for the purposes of s 4E was "to 'visualise' the metaphorical market, having regard to all of its dimensions and its content, and then to consider whether it is within Australia, in the sense that at least part (perhaps a substantial or significant part) of it must be in that 'location'"63. On appeal to this Court, the principal focus of the parties' argument was upon the process of market identification and, in particular, the process of identification of a market "in Australia". The findings of the primary judge that other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services." 58 Air NZ (2014) 319 ALR 388 at 447 [264], 456-457 [321]-[323]. 59 Air NZ (2014) 319 ALR 388 at 393 [20]. 60 Air NZ (2014) 319 ALR 388 at 456-457 [319]-[323], 459 [336]-[338]. 61 Australian Competition and Consumer Commission v PT Garuda Indonesia Ltd (2016) 244 FCR 190; [2016] FCAFC 42. A full report of the case appears at (2016) 330 ALR 230. 62 Garuda (2016) 244 FCR 190 at 215 [81]. 63 Garuda (2016) 244 FCR 190 at 230 [156]. Air NZ and Garuda arrived at, and in most cases had given effect to, several understandings containing provisions that controlled the price the airlines charged for the air cargo services, and that those provisions were deemed to have the purpose, effect or likely effect of substantially lessening competition for the air cargo services, were not in dispute. The principal issue was whether the impugned provisions, which were deemed to have substantially lessened competition for the supply of the air cargo services, did so in a market "in Australia". The short answer to that question ("Issue 1 – Market in Australia") is "yes". If the answer was "yes", then the airlines submitted that they were nevertheless exculpated from liability under Pt IV of the TPA. The first basis on which Air NZ and Garuda submitted they were exculpated was that they did not arrive at, or give effect to, certain of the impugned understandings within the meaning of s 45(2) of the TPA because the Air Transport (Licensing of Air Services) Regulations (Hong Kong) ("the Hong Kong Regulations") and the administrative practices of the Hong Kong regulator, the Hong Kong Civil Aviation Department ("the HK CAD"), compelled each of them to arrive at, or give effect to, those impugned understandings ("Issue 2 – Foreign state compulsion"). That submission should be rejected. Neither foreign law nor foreign practice compelled the airlines to arrive at or give effect to the understandings to impose approved surcharges. Each airline acted in the way that contravened s 45(2) because it wanted to, and not because a foreign regulator required it to act in that way. Garuda (but not Air NZ) further submitted that if the impugned provisions substantially lessened competition for the air cargo services in a market in Australia, then ss 12 and 13 of the Air Navigation Act 1920 (Cth) – read with Art 6 of the 1969 Air Services Agreement between Australia and Indonesia64 ("the Australia-Indonesia ASA"), which provided for tariff fixing between international airlines for scheduled international air services over and into Australian territory – and the prohibition in ss 45 and 45A of the TPA on arriving at or giving effect to understandings (or both) concerning prices with competitors were practically and operatively inconsistent, so that ss 45 and 45A of the TPA "did not reach to any of Garuda's conduct" when it carried cargo into Australia in accordance with ("Issue 3 – Alleged inconsistency"). That submission should also be rejected. The alleged inconsistency between the Air Navigation Act, read with Art 6 of the Australia-Indonesia ASA, and the TPA did not arise. Article 6 was concerned the Australia-Indonesia ASA 64 Agreement between the Government of the Commonwealth of Australia and the Government of the Republic of Indonesia for Air Services Between and Beyond their Respective Territory [1969] ATS 4. with setting minimum tariffs. Unlike the TPA, it was not concerned with imposing tariffs that would be charged or with imposing fixed tariffs. Each of the three issues being answered adversely to the airlines, both appeals should be dismissed with costs. Each issue will be considered in turn. Issue 1 – Market in Australia Approach to market identification Market identification is not a task undertaken at large, or in a vacuum. The task, and the extent of the task, are tailored to the conduct at issue and the statutory terms governing the contravention65. The need to identify the market arises only in the context of determining whether the conduct constitutes a particular contravention of the TPA66. That is, the question of whether there is a market "in Australia" is to be asked and answered in the statutory context in which that question arises. It is not to be asked or answered in isolation from that context or by looking only at what appears in s 4E of the TPA. The first step is to identify "precisely what it is that is said to have been done in contravention of the section"67. As has been rightly said in the Federal Court of Australia, the court begins with the problem at hand and asks "what market identification best assists the assessment of the conduct and its asserted anti-competitive attributes"68. Identifying a market is a "focusing process"69 which is "to be undertaken with a view to assessing whether the substantive 65 Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd (2016) 91 ALJR 143 at 156 [69]; 339 ALR 242 at 258; [2016] HCA 49. See also Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd (1989) 167 CLR 177 at 195, 198; [1989] HCA 6; Australia Meat Holdings Pty Ltd v Trade Practices Commission (1989) ATPR ¶40-932 at 50,091, 50,104. 66 See Queensland Wire (1989) 167 CLR 177 at 195, 200. 67 Queensland Wire (1989) 167 CLR 177 at 195. 68 Australian Competition and Consumer Commission v Liquorland (Australia) Pty Ltd (2006) ATPR ¶42-123 at 45,244 [437]. See also Brunt, "'Market Definition' Issues in Australian and New Zealand Trade Practices Litigation", (1990) 18 Australian Business Law Review 86 at 123. 69 Flight Centre (2016) 91 ALJR 143 at 156 [69]; 339 ALR 242 at 258 quoting Singapore Airlines Ltd v Taprobane Tours WA Pty Ltd (1991) 33 FCR 158 at 178. criteria for the particular contravention in issue are satisfied, in the commercial context the subject of analysis"70 (emphasis added). That approach recognises that the concept of a "market" is "not susceptible of precise comprehensive definition"71. It recognises that market identification is an economic tool, or instrumental concept, that uses and integrates those legal and economic concepts best adapted to analyse the asserted anti-competitive conduct72. It recognises that market identification is "not an exact physical exercise to identify a physical feature of the world"73 and that there is often little or no utility in debating or identifying "the precise physical metes and bounds of a market"74. It recognises that market identification is "not a physical thing, or essence, which can be identified in a manner divorced from the relevant context"75. And it recognises that market identification depends upon the issues for determination76 – the impugned conduct and the statutory provision proscribing anti-competitive behaviour that the conduct is said to contravene. That is not to say that a market can be identified arbitrarily77. It must be based on findings of fact78. "The premise of that proposition", as the Full Court 70 Flight Centre (2016) 91 ALJR 143 at 156 [69]; 339 ALR 242 at 258 quoting Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd (2015) 236 FCR 78 at 107 [137]. 71 Queensland Wire (1989) 167 CLR 177 at 195. 72 Liquorland (2006) ATPR ¶42-123 at 45,243 [429]; Australian Competition and Consumer Commission v Metcash Trading Ltd (2011) 198 FCR 297 at 344 [244]; ANZ Banking Group (2015) 236 FCR 78 at 107 [136]. 73 Liquorland (2006) ATPR ¶42-123 at 45,243 [429]; Metcash (2011) 198 FCR 297 at 344 [244]; ANZ Banking Group (2015) 236 FCR 78 at 107 [136]. See also Breyer, "Five Questions About Australian Anti-Trust Law", (1977) 51 Australian Law Journal 28 at 34. 74 Liquorland (2006) ATPR ¶42-123 at 45,243 [430]. 75 Liquorland (2006) ATPR ¶42-123 at 45,245 [438]. 76 Liquorland (2006) ATPR ¶42-123 at 45,244 [437]. 77 See Brunt, "'Market Definition' Issues in Australian and New Zealand Trade Practices Litigation", (1990) 18 Australian Business Law Review 86 at 126. 78 ANZ Banking Group (2015) 236 FCR 78 at 107-108 [138] citing Singapore Airlines (1991) 33 FCR 158 at 174. of the Federal Court said in Australian Competition and Consumer Commission v Australia and New Zealand Banking Group Ltd, is that the identified market "has economic and commercial reality"79: "It must accordingly not be artificial or contrived. Economists frequently construct economic models to analyse complex commercial or economic events or scenarios. But a model is unlikely to be a useful analytical tool if based on unrealistic assumptions that materially depart from the real world facts and circumstances involving commercial behaviour in which the events to be analysed occur." The identification of the market must therefore "accurately [and] realistically describe and reflect the interactions between, and perceptions and actions of, the relevant actors or participants in the alleged market, that is, the commercial community involved"80. Embedded in the "focusing process" is the recognition that the substantive criteria for a particular contravention in issue will depend on the particular statutory provisions. That process "may lead to the drawing of different lines in different circumstances depending upon the purpose of the provision in question"81. In turn, that process may "lead to different market definitions in relation to the same industry"82 or even different markets within the same case. That potential was recognised more than 25 years ago by Professor Brunt, who wrote that "[t]here can be more than one 'relevant market' for a particular case, in the sense of markets that will attract liability"83. There is nothing odd about that conclusion. As Professor Brunt pointed out, it reflects the fact that market identification "is but a tool to facilitate a proper orientation for the 79 (2015) 236 FCR 78 at 108 [138]. See also Flight Centre (2016) 91 ALJR 143 at 156 [70]; 339 ALR 242 at 258. 80 ANZ Banking Group (2015) 236 FCR 78 at 108 [138]. 81 Singapore Airlines (1991) 33 FCR 158 at 175 citing Breyer, "Five Questions About Australian Anti-Trust Law", (1977) 51 Australian Law Journal 28 at 34. 82 Liquorland (2006) ATPR ¶42-123 at 45,245 [439]. 83 Brunt, "'Market Definition' Issues in Australian and New Zealand Trade Practices Litigation", (1990) 18 Australian Business Law Review 86 at 127. analysis of market power and competitive processes – and should be taken only a sufficient distance to achieve the legal decision"84. Recognising that market identification is an economic tool has other important consequences. Economics is a social science and "does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor draw correct conclusions"85. The nature of economics as a social science is often highlighted by the existence of conflicting expert opinions about the identification of a relevant market. Deane J acknowledged as much in Queensland Wire Industries Pty Ltd v Broken Hill Proprietary Co Ltd, when his Honour said86: "The economy is not divided into an identifiable number of discrete markets into one or other of which all trading activities can be neatly fitted. One overall market may overlap other markets and contain more narrowly defined markets which may, in their turn, overlap, the one with one or more others." When a court is required to draw its own conclusions about market identification, it is therefore inherent in that task – being one founded on economics as a social science – that the court will be required to make "value judgments about which there is some room for legitimate differences of opinion"87. As a result, "[m]arket identification and definition is not an exact science. It is rooted in the analysis of commerce as an aspect of human behaviour"88. This approach has been referred to as the "functional", "purposive" or "instrumental" approach to market identification. In Australian Competition and Consumer Commission v Flight Centre Travel Group Ltd, Kiefel and Gageler JJ 84 Brunt, "'Market Definition' Issues in Australian and New Zealand Trade Practices Litigation", (1990) 18 Australian Business Law Review 86 at 126-127 quoted in Arnotts Ltd v Trade Practices Commission (1990) 24 FCR 313 at 328. 85 Liquorland (2006) ATPR ¶42-123 at 45,308 [838]. 86 (1989) 167 CLR 177 at 196. 87 Queensland Wire (1989) 167 CLR 177 at 196. 88 ANZ Banking Group (2015) 236 FCR 78 at 107 [135]. noted that there are limits to this approach89. It should not be taken beyond its justification by, for example, using analysis of competitive processes "to construct, or deconstruct and reconstruct, the supply of a service in a manner divorced from the commercial context of the putative contravention which precipitates the analysis"90. Statutory framework It is therefore necessary, in these appeals, to start with the statutory terms governing the impugned conduct which was said to contravene the TPA – ss 45(2) and 45A within Pt IV. The statutorily defined object of the TPA is "to enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection"91. In other words, the purpose of the TPA is "to promote competition, not to protect the private interests of particular persons or corporations"92. It is the "flow-on result that is the key – the effect on consumers, not the effect on other competitors"93. Part IV of the TPA broadly manifests legislative concern with injury to competition by practices apt to keep up prices. And, accordingly, Pt IV of the TPA proscribes various practices in respect of pricing which merit the label "restrictive" in the heading for Pt IV94. Section 45 is concerned with contracts, arrangements or understandings that restrict dealings or affect competition. These appeals are concerned with the latter – several understandings that contained a provision which had the purpose, 89 (2016) 91 ALJR 143 at 156 [70]; see also at 165 [123], 171 [150]; 339 ALR 242 at 90 Flight Centre (2016) 91 ALJR 143 at 156 [70]; 339 ALR 242 at 258. 91 s 2 of the TPA. See also Boral Besser Masonry Ltd v Australian Competition and Consumer Commission (2003) 215 CLR 374 at 429 [159], 458-459 [260]-[261]; [2003] HCA 5. 92 Boral (2003) 215 CLR 374 at 411 [87]; see also at 429 [160]. See also Melway Publishing Pty Ltd v Robert Hicks Pty Ltd (2001) 205 CLR 1 at 13 [17]; [2001] HCA 13 citing Queensland Wire (1989) 167 CLR 177 at 191. 93 Boral (2003) 215 CLR 374 at 459 [261]; see also at 431 [164]. 94 Boral (2003) 215 CLR 374 at 428 [158]; Flight Centre (2016) 91 ALJR 143 at 175 [184]; 339 ALR 242 at 284. effect or likely effect of "substantially lessening competition" because it had the purpose, effect or likely effect of fixing prices. As in force at the relevant times, s 45(2) relevantly provided: "A corporation shall not: (a) make a contract or arrangement, or arrive at an understanding, if: a provision of the proposed contract, arrangement or understanding has the purpose, or would have or be likely to have the effect, of substantially lessening competition; or give effect understanding, … if that provision: to a provision of a contract, arrangement or has the purpose, or has or is likely to have the effect, of substantially lessening competition." (emphasis added) The ACCC relied upon the deeming provision in s 45A(1), which relevantly provided: "Without limiting the generality of section 45, a provision of [an] … understanding … shall be deemed for the purposes of that section to have the purpose, or to have or to be likely to have the effect, of substantially lessening competition if the provision has the purpose, or has or is likely to have the effect, … of … controlling … the price for … services supplied … by the parties to the … understanding … in competition with each other." (emphasis added) That is, for the purposes of s 45, s 45A(1) deemed a provision of an understanding to have the purpose, effect or likely effect of substantially lessening competition where, relevantly, two conditions were satisfied. First, the provision had the purpose, effect or likely effect of controlling the price for services supplied by one party to the understanding. Second, the services in relation to which the price was controlled were supplied "in competition" with the other party (or parties) to the understanding. There is no dispute in these appeals that both conditions were satisfied in the case of the impugned provisions of each of the several understandings. For the purposes of both s 45 and s 45A, "competition" in relation to an understanding was defined in s 45(3) relevantly to mean: "competition in any market in which a corporation that is a party to the … understanding … supplies … services." (emphasis added) For the purposes of s 45(3), the focus is on "competition in [a] market", not competition for a market, and it is not necessary for all parties to the understanding to supply services in a particular market. It is sufficient if one of them does. "Competition" was not otherwise relevantly defined in the TPA95. Like "market", "competition" is a term which is difficult, if not impossible, to define precisely or comprehensively. It is "a very rich concept and there are shades and differences of meaning in customary usage", even by economists96. However, s 45(3) does explicitly link the concept of "competition" to the concept of "market", as does the definition of "market" in s 4E when it speaks of goods and services being "otherwise competitive". "[W]hether firms compete is very much a matter of the structure of the markets in which they operate"97. One cannot be understood without reference to the other98. As Burchett J explained in News Ltd v Australian Rugby Football League Ltd99: "The term 'market' encapsulates the area within which competitive forces operate upon an undertaking (the subject of the inquiry), and its use implies the deployment of a method of economic analysis for the better understanding of those forces in order to solve the problem at hand. Just because it is of this nature, the concept can only be understood in relation to the idea of competition, itself a complex notion in this field of law and economics." 95 Section 4(1) of the TPA provided that competition "includes competition from imported goods or from services rendered by persons not resident or not carrying on business in Australia". 96 Brunt, "'Market Definition' Issues in Australian and New Zealand Trade Practices Litigation", (1990) 18 Australian Business Law Review 86 at 98-99. See also Re Queensland Co-operative Milling Association Ltd – Proposed Merger (1976) 8 ALR 481 at 514. 97 QCMA (1976) 8 ALR 481 at 516. See also Outboard Marine Australia Pty Ltd v Hecar Investments No 6 Pty Ltd (1982) 44 ALR 667 at 669-670. 98 cf Australian Gas Light Company v Australian Competition and Consumer Commission (2003) 137 FCR 317 at 417 [350]. 99 (1996) 58 FCR 447 at 477. Or, as was noted by the Trade Practices Tribunal in Re Queensland Co-operative Milling Association Ltd – Proposed Merger, competition is a dynamic process, rather than a situation, which expresses itself as "rivalrous market behaviour" – behaviour that involves "independent rivalry in all dimensions of the [service] offered to consumers"100. Competition is the means to protect the interests of consumers, not competitors. This is why it has been rightly said, in later decisions in the Federal Court, that competition may take many forms101 and that the way competitors behave is likely to tell you something of the market102. As has been explained, the functional approach to market identification requires consideration of the alleged anti-competitive conduct. Considering "competition" and identifying the "market" are thus part of the same process; "it is for the sake of simplicity of analysis that the two are separated"103. Reference should be made to two further sections of the TPA. At all relevant times, s 4E provided that: "For the purposes of this Act, unless the contrary intention appears, market means a market in Australia and, when used in relation to any goods or services, includes a market for those goods or services and other goods or services that are substitutable for, or otherwise competitive with, the first-mentioned goods or services." (emphasis in unbolded italics added) It was common ground that, for the purposes of s 4E of the TPA, the relevant market may be "in Australia" if it is wholly or partly in Australia. Section 4(1) contained two further definitions of present relevance. "[S]upply", when used as a verb in relation to services, was defined to include "provide, grant or confer"104 and "services" was relevantly defined to include any rights or benefits that are, or are to be, provided in trade or commerce including the rights or benefits that are, or are to be, provided under a contract for or in relation to the performance of work105. 100 (1976) 8 ALR 481 at 515. 101 See Seven Network Ltd v News Ltd (2009) 182 FCR 160 at 307 [670]. 102 See Liquorland (2006) ATPR ¶42-123 at 45,246 [443]-[444]. 103 Queensland Wire (1989) 167 CLR 177 at 187. 104 par (b) of the definition of "supply" in s 4(1) of the TPA. See also s 4C of the TPA. 105 par (a)(i) of the definition of "services" in s 4(1) of the TPA. The provisions in Pt IV of the TPA contain varying tests that refer to "competition" or "market power". As Professor Brunt explained, the "unifying subject-matter is market power (or 'monopoly power') and its antithesis, effective competition"106. Section 45(2) does not refer to market power or constraints on power107. It refers to competition. Thus, the present appeals were concerned with identified anti-competitive behaviour – arriving at and giving effect to understandings that fixed the price of the air cargo services – which had the deemed purpose, effect or likely effect of substantially lessening competition for those services. In these appeals, the task of the Court is to identify where at least one airline that was a party to the impugned understandings (one or more of Air NZ and Garuda) was in competition, or competed, to supply the air cargo services. In particular, did it compete to supply those services in a market in Australia? Or to ask the same questions differently – what was the "area of effective competition in which the [airline] operate[d]"108; what was the "area or space" for the occurrence of the relevant transactions109? Before turning to consider those questions, it is necessary to refer to three matters that were addressed by the parties in argument – substitutability, the ACCC's submission that market identification involved a two-stage approach and the effects doctrine in the United States. Substitutability As s 4E of the TPA relevantly provided, a market in relation to services includes a market for those services as well as other services that are substitutable for, or "otherwise competitive with", those first-mentioned services. In QCMA, the Tribunal said that "[w]here the defining feature of a market is the existence of close substitutes (whether in demand or supply), the defining feature of a sub-market is the existence of still closer and more immediate substitutes"110 (emphasis added). In Queensland Wire, Mason CJ and Wilson J 106 Brunt, "'Market Definition' Issues in Australian and New Zealand Trade Practices Litigation", (1990) 18 Australian Business Law Review 86 at 93. 107 cf s 46 of the TPA. See Queensland Wire (1989) 167 CLR 177 at 187. 108 Australia, Trade Practices Commission, First Annual Report, (1975) at 60 quoted in QIW Retailers Ltd v Davids Holdings Pty Ltd (No 3) (1993) 42 FCR 255 at 267. 109 Flight Centre (2016) 91 ALJR 143 at 156 [66]; 339 ALR 242 at 257. 110 (1976) 8 ALR 481 at 517. referred to that oft-cited passage in QCMA as explaining that "the defining feature of a market is substitution"111. There are a number of points to be made about that statement in Queensland Wire. First, as the Tribunal itself recognised in QCMA, the existence of close substitutes is not the defining feature of every market. Second, as Dawson J pointed out in Queensland Wire, "[i]mportant as they are, elasticities and the notion of substitution provide no complete solution to the definition of a market"112. Focusing too closely on the concept of substitutability can obscure the proper identification of the market and undermine the purpose of the relevant statutory provisions113. As noted earlier, s 45 is concerned to promote competition. Relevantly, it is concerned to proscribe contracts, arrangements or understandings that contain a provision which has the purpose, effect or likely effect of "substantially lessening competition" by, for example, controlling the price for services supplied by a party to that contract, arrangement or understanding. And the competition that is to be promoted is competition in any market in which a corporation that is a party to the contract, arrangement or understanding supplies those services. In that context, questions of substitutability may be relevant but are unlikely to be determinative in the process of market identification114. The proposition that questions of substitutability are not determinative is not limited to s 45. In the context of s 50 of the TPA, a substantial lessening of competition is assessed by reference to a range of matters. The extent to which substitutes are available is just one of those matters115. Other matters relevant to an assessment for the purposes of s 50 include the height of barriers to entry to the market116, the degree of countervailing power in the market117 and dynamic 111 (1989) 167 CLR 177 at 188. 112 (1989) 167 CLR 177 at 199. 113 cf Arnotts (1990) 24 FCR 313 at 329, 332. 114 See Queensland Wire (1989) 167 CLR 177 at 199. 115 s 50(3)(f) of the TPA. 116 s 50(3)(b) of the TPA. 117 s 50(3)(d) of the TPA. characteristics of differentiation118. the market such as growth, innovation and product What will be determinative are the conduct at issue and the statutory terms governing the contravention, which together provide the necessary focus for the process of market identification. Rejection of the ACCC's two-stage approach to market identification The ACCC submitted that, in identifying the market, s 4E operates only after the market identification process has occurred. That is, only when the market has been identified does one ask, for the purposes of s 4E, whether that market can be characterised as "in Australia". That submission should be rejected. First, as just noted, the process of market identification starts with the conduct at issue and the statutory terms governing the contravention. In the context of ss 45 and 45A, that necessarily requires reference to s 4E. Section 4E is not excluded, or delayed from consideration, by those sections; rather, it is included, from the outset, as a critical part of the process. Second, and in any event, s 4E offers no textual support for undertaking a two-stage analysis. In its terms, it identifies that it is part of the exercise to be undertaken in the process of market identification. Effects doctrine in the United States The "functional", "purposive" or "instrumental" approach to market identification, and, relevantly to these appeals, identifying whether the impugned provisions substantially lessened competition for the air cargo services in a market in Australia, is substantively different from the "effects doctrine" in the United States of America. No party contended that this Court should adopt any form of the effects doctrine or consider whether persons in Australia are or might be adversely affected by the impugned conduct outside Australia. That is unsurprising. The applicable statutory framework in Australia is different and, since the doctrine was first propounded by Judge Learned Hand in United States v Aluminum Co of America119, not only has the statutory framework in the United States been amended to clarify uncertainty and address divergence in the 118 s 50(3)(g) of the TPA. 119 148 F 2d 416 at 443-444 (2nd Cir 1945). application of the doctrine120, the justification for and breadth of the doctrine has been questioned121, and the courts have not consistently described or applied the doctrine122. Relevant factual findings On appeal to this Court, particular findings by the primary judge were not challenged. The facts found are considered under the following headings: (a) the air cargo services; (b) the understandings; (c) other aspects of the impugned conduct; and (d) demand in Australia for the air cargo services and the airlines' response to that demand. The air cargo services The air cargo services were unidirectional and route-specific – from specific ports of origin in Hong Kong, Singapore and Indonesia, to specific destination ports in Australia. They comprised a suite of services that included123: transport services, requirements, timetabling and also whether or not delivery was by direct or indirect flight; including special handling ground handling services at points of origin and destination; and enquiry services at airports, noting that the airlines might supply the services themselves, or contract them out to third parties, possibly using an airline based at the airport in question." For the purposes of market identification, each limb is equally significant. 120 Foreign Trade Antitrust Improvements Act of 1982, 15 USC §6a. 121 See, eg, F Hoffmann-La Roche Ltd v Empagran SA 542 US 155 at 165-167 (2004). 122 See, eg, Timberlane Lumber Co v Bank of America, NT & SA 549 F 2d 597 (9th Cir 1976); Mannington Mills Inc v Congoleum Corporation 595 F 2d 1287 (3rd Cir 1979); Hartford Fire Insurance Co v California 509 US 764 (1993); Hoffmann-La Roche 542 US 155 (2004); United States v LSL Biotechnologies 379 F 3d 672 (9th Cir 2004). 123 Garuda (2016) 244 FCR 190 at 201 [22] citing Air NZ (2014) 319 ALR 388 at 445-447 [253]-[265]. See also Air NZ (2014) 319 ALR 388 at 401 [27], 455 [313], The understandings Air NZ and Garuda were parties to several understandings containing provisions to impose surcharges and fees for carriage of air cargo from ports of origin in Hong Kong124, Singapore125 and Indonesia126 to destination ports in Australia. Four different kinds of charges were involved: a fuel surcharge, an insurance and security surcharge ("ISS"), a customs fee and a freight charge127. (c) Other aspects of the impugned conduct Air NZ and Garuda did not act alone; they acted in the company of a large number of other international airlines which carried air cargo from ports of origin in Hong Kong, Singapore and Indonesia to destination ports in Australia128. Each of those international airlines, including Air NZ and Garuda, was a member of separate industry bodies in Hong Kong, Singapore and Indonesia129. In Hong Kong, the relevant industry body was the Hong Kong Board of Airline Representatives, which established a Cargo Sub-Committee 124 2002 Hong Kong Lufthansa Methodology Understanding (Air NZ only); Hong Imposition Understanding; First Hong Kong Surcharge Extension Kong Understanding (Garuda only); October 2001 Hong Kong Insurance Surcharge Understanding; December 2002 Hong Kong Insurance Surcharge Understanding. The understandings are referred to in this footnote and elsewhere in this judgment in accordance with how they were described in pleadings and in the courts below. 125 Singapore ISS Understanding (Air NZ only). 126 October 2001 Fuel Surcharge Understanding; April 2002 Fuel Surcharge Understanding; June 2002 Fuel Surcharge Understanding; September 2002 Fuel Surcharge Understanding; January 2003 Fuel Surcharge Understanding; May 2003 Fuel Surcharge Understanding; September 2004 Fuel Surcharge Understanding; April 2005 Fuel Surcharge Understanding; July 2005 Fuel Surcharge Understanding; October 2001 Security Surcharge Understanding; January 2003 Security Surcharge Understanding; May 2003 Security Surcharge Understanding; September 2004 Security Surcharge Understanding; July 2005 Security Surcharge Understanding; October 2001 Air Freight Rate Understanding; May 2004 Customs Fee Understanding (all Garuda only). 127 Air NZ (2014) 319 ALR 388 at 391 [2], 393 [15]-[17]. 128 See Air NZ (2014) 319 ALR 388 at 391 [1], [6], 392 [8], 451 [291], 507 [559], 129 Air NZ (2014) 319 ALR 388 at 391-392 [6]-[7], 479 [429], 614 [1133]-[1134]. ("the HK CSC"). In Singapore, the industry body was the Singapore Board of Airline Representatives, which a Cargo Sub-Committee. In Indonesia, the industry body was the Air Cargo Representative Board ("the ACRB"). established Although the personnel who represented the airlines on these bodies and the internal mechanics in each jurisdiction were not identical130, the primary judge found that each industry body or its relevant sub-committee was a forum in which member airlines engaged in price fixing with respect to the imposition of surcharges and fees for the air cargo services131. In relation to the fuel surcharges, the HK CSC and the ACRB used what was referred to in the parties' pleadings as the "Lufthansa Index", which was coupled with a "methodology" as varied or adapted from time to time. The Lufthansa Index was a fuel price index, initially based on an earlier index published by the International Air Transport Association and reflecting the average of five spot prices for aviation fuel (Singapore, US Gulf, US West Coast, Rotterdam and Italy). The index level was expressed as a percentage of a specified baseline price. The accompanying methodology, which took different forms at various times, specified particular levels of fuel surcharge depending upon the level of the Lufthansa Index. The Lufthansa Index, and the methodology drawing upon it, facilitated price fixing of fuel surcharges by international carriers. In relation to fuel surcharges on air cargo routes between Hong Kong and ports in Australia, the primary judge found that Air NZ was a party, with a large number of other airlines, to an understanding reached at a meeting of the HK CSC in Hong Kong on 23 July 2002 to the effect that they would impose fuel surcharges on the supply of air cargo services from Hong Kong in accordance with the then form of the Lufthansa Index and methodology ("the 2002 Hong Kong Lufthansa Methodology Understanding"), the imposition of which had been previously approved by the HK CAD. Garuda was not a party to that understanding. The terms of the HK CAD's approval required the HK CSC (which included Air NZ and Garuda) to inform the HK CAD of each change in the fuel surcharge mechanism, which fluctuated depending on the price of aviation fuel. In the years that followed the 2002 Hong Kong Lufthansa Methodology Understanding, the HK CSC would write to the HK CAD, informing it of the 130 Air NZ (2014) 319 ALR 388 at 392 [9]; see also at 497 [508]-[510], 532-533 131 Air NZ (2014) 319 ALR 388 at 392 [8]. See also Garuda (2016) 330 ALR 230 at amount and date of imposition of the fuel surcharge, and the airlines would impose the surcharge in accordance with the amount and date as notified. This was described as the "Hong Kong Imposition Understanding" (to which both Air NZ and Garuda were parties). The primary judge and the Full Court focused their analysis on air cargo routes between Hong Kong and ports in Australia. It was common ground that the reasoning about the understanding affecting those routes applied equally to the other air cargo routes. The understandings that were made about fuel surcharges, together with the other understandings about other charges, controlled the price of the air cargo services on routes from Hong Kong, Singapore and Indonesia to destination ports in Australia. By reason of s 45A of the TPA, the impugned provisions were deemed to have the purpose, effect or likely effect of controlling the price the airlines charged for the air cargo services and thereby substantially lessened competition for those services. (d) Demand in Australia for the air cargo services and the airlines' response to that demand The primary judge concluded that freight forwarders, large importers or shippers in Australia and exporters in Hong Kong participated in or provided, and affected, the demand for the air cargo services132. The primary judge found that large importers or shippers or exporters were those whose size and volume they were "substantial economic actors"133. of cargo Indeed, his Honour concluded that the evidence "strongly suggested that airlines, in general, regarded significant importers and exporters both as targets for their marketing activities and also as the ultimate source of business"134. signified that Other characteristics of these large shippers, and the airlines' behaviour in relation to them, are relevant to the process of market identification in these appeals. There were large or substantial shippers in Australia135. Those large shippers were regarded by the airlines as not only a potential source of demand, but the ultimate source of demand, for their supply of the air cargo services from 132 Air NZ (2014) 319 ALR 388 at 447 [263]. 133 Air NZ (2014) 319 ALR 388 at 448 [270]. 134 Air NZ (2014) 319 ALR 388 at 449 [272]. 135 Air NZ (2014) 319 ALR 388 at 455 [313]-[314]. ports in Asia to ports in Australia136. Certain shippers had particular preferences and were able to influence the choice of airline and flight137. As a result, the issue of which airline to use need not have arisen at the port of origin; the decision of the large shippers in Australia was likely to be made in Australia138. Freight forwarders offered to supply and, when engaged, did supply consignors or consignees (or both) with services associated with the transport of cargo from a place of origin to a place of destination139. But, the primary judge concluded, as a matter of economic substance, the freight forwarders were intermediaries having only fluctuating control over the cargo whose carriage they arranged140. The airlines entered into tripartite arrangements with freight forwarders and shippers; typically such arrangements referred to specific products and would identify the carrier, shipper and freight forwarder, and provided for meetings between the airline and shipper and for the shipper to provide to the airline projected tonnages and frequencies141. For example, in a letter from Singapore Airlines to WDM International dated 28 September 2000, the airline said that it was "more than happy to sit down and discuss set contracts/rate with [the] shippers" and that it could "lock in said contracts for a 6 or 12 month period however this must be agreed and signed by all parties" including the shippers142. The airlines regarded the cargo as belonging to the shippers143 and considered that they were carrying loads or volumes for particular shippers144. Thus, the airlines competed for the custom of particular shippers, and the 136 Air NZ (2014) 319 ALR 388 at 450 [284]. 137 Air NZ (2014) 319 ALR 388 at 451 [290]. 138 Air NZ (2014) 319 ALR 388 at 447 [264], 454 [309]. 139 Air NZ (2014) 319 ALR 388 at 403 [38]. 140 Air NZ (2014) 319 ALR 388 at 447 [263]-[264], 451 [290], 453 [299]; Garuda (2016) 244 FCR 190 at 209 [54]. 141 Air NZ (2014) 319 ALR 388 at 452 [294]. 142 Air NZ (2014) 319 ALR 388 at 452 [296]. 143 Air NZ (2014) 319 ALR 388 at 453 [300]; Garuda (2016) 244 FCR 190 at 144 Air NZ (2014) 319 ALR 388 at 449 [274], 453 [300]. evidence led at trial included several internal reports of various airlines referring to the airline losing custom from one shipper to another airline145. In addition, the airlines designed their unidirectional air cargo services according to the demand for particular scheduling, handling and storage requirements of specified shippers146. As the primary judge found, the airlines recognised that the large shippers were the "economic foundation of the market"147. Where the shippers or importers were in Australia, the airlines took note of the shippers' businesses148. The airlines actively followed the position of shippers in various ways, including by receiving regular cargo reports and cargo information, albeit how the information was obtained was not clear on the evidence149. So, to take one example, an internal Air NZ memorandum dated 11 March 2003 from the Manager of Global Cargo Sales stated150: "Many major exporters have stated that volumes will diminish if the surcharge in [sic] instated on top of current rates ... [Air NZ] is currently viewed as playing our part and taking responsibility in assisting exporters through tough times ... Many exporters have passed comment regarding [net profit results in press] and I believe that it will be extremely difficult to justify a surcharge on the back of our half year profit statement." the Full Court, the majority considered evidence given by representatives of four market participants – Robert Bosch (Australia) Pty Ltd, Qantas, BAX Global and Toshiba (Australia) Pty Ltd – in relation to the interactions between airlines, shippers and freight forwarders. Their Honours said151: 145 Air NZ (2014) 319 ALR 388 at 452 [298]. 146 Air NZ (2014) 319 ALR 388 at 451 [289], 455 [313]. 147 Air NZ (2014) 319 ALR 388 at 451 [287]. 148 Air NZ (2014) 319 ALR 388 at 450 [283]; Garuda (2016) 244 FCR 190 at 149 Air NZ (2014) 319 ALR 388 at 450-451 [283]-[285]. 150 Air NZ (2014) 319 ALR 388 at 452 [295]. 151 Garuda (2016) 244 FCR 190 at 210-211 [60]-[63]. "There was evidence from the Customs and Shipping Manager of Robert Bosch (Australia) Pty Ltd who was responsible for monitoring the performance of Robert Bosch's freight forwarders. He said that where perishables needed to be shipped within a tight timeframe, Robert Bosch would enter into tri-partite arrangements with its freight forwarder and the airline in the form of a memorandum of understanding which would guarantee Robert Bosch its required capacity on a particular airline and priority over other shippers' cargo. The former Group General Manager (Freight) at Qantas, also described the existence of some tri-partite arrangements between Qantas, freight forwarders and shippers. These arrangements were usually recorded in memoranda of understanding after face-to-face meetings attended by all three parties. Negotiations related to price, capacity and service standards. The Group General Manager (Freight) observed that the memorandum of understanding allowed Qantas to, 'establish a relationship directly with a shipper. Qantas Freight would then be in a position to use its relationship with the shipper to reduce the risk of the freight forwarder taking the shipper's freight to another airline'. Evidence from one freight forwarder, Burlington Northern Air Freight (subsequently BAX Global), by the State Manager of its Perth, Adelaide and Sydney offices, … was also that: 'BAX Global's major multi-national customers would regularly hold meetings with employees of BAX Global and representatives of the airlines to review our performance against these KPI's and to ensure that there was sufficient airline capacity available. In order to maintain the relationship, it was necessary for there to be dialogue between all three parties, so that the airline knew when the customer was likely to require capacity and so the customer knew of any expected capacity constraints on the airline.' There was also evidence from Ms Cluff who was employed by Toshiba (Australia) Pty Ltd as a Logistics Import Specialist. … [S]he said that, 'On occasions, there have been tri-partite discussions between Toshiba Australia, the freight forwarder and Qantas'. She also said that on numerous occasions she liaised with Qantas directly." (citations omitted) In short, the evidence to which the primary judge and the majority in the Full Court referred showed that the airlines dealt directly with some shippers and sought to establish and maintain relationships with those shippers152. As the 152 Garuda (2016) 244 FCR 190 at 210 [59]. See also Air NZ (2014) 319 ALR 388 at primary judge said, "there were substantial importers in Australia whose custom the airlines [tussled] to obtain"153. The airlines physically competed in Australia to obtain the custom of these shippers154. And the airlines marketed their unidirectional air cargo services to these large shippers in Australia155. the sense that representatives of As the primary judge concluded, the airlines competed against each other in providing the air cargo services and that competition physically took place in Australia156 the airlines met with representatives of Australian users of the air cargo services to discuss the terms on which the airlines would provide the services. Although the contracts of carriage were entered into in Hong Kong by freight forwarders with a particular airline, as a practical matter substantial importers in Australia both sought, and had the capacity, to influence and in some cases direct the decision about which airline was to be used157. As a result, although the supply of the air cargo services usually involved participation by a consignor, an origin freight forwarder, an airline, a destination freight forwarder and a consignee, participation was not always vertical158. Large shippers or importers would often instigate a particular shipment and could influence or direct which airline would provide the air cargo services for that shipment159. (7) Market identification relation impugned provisions of each understanding, the questions posed by the interaction of s 45(2) with ss 4E, 45(3) and 45A are: what were the services supplied or to be supplied; and what was the market in which each airline competed to provide those services? The services have been the 153 Air NZ (2014) 319 ALR 388 at 455 [313]. 154 Air NZ (2014) 319 ALR 388 at 455 [313]. 155 Air NZ (2014) 319 ALR 388 at 449 [273], 449-450 [277]-[279], 450 [284], 452 [293], 453 [301]. See also Garuda (2016) 244 FCR 190 at 210-211 [60]-[63]. 156 Air NZ (2014) 319 ALR 388 at 455 [313]. 157 Air NZ (2014) 319 ALR 388 at 455 [314]. 158 Air NZ (2014) 319 ALR 388 at 448 [268]-[269]. 159 Air NZ (2014) 319 ALR 388 at 448 [268]-[269], 451 [290]. See also Garuda (2016) 244 FCR 190 at 211 [64]. identified – namely, as unidirectional air cargo services from ports of origin in Hong Kong, Singapore and Indonesia to destination ports in Australia160. If "competition" can be seen as the "striving or potential striving of two or more persons or organisations against one another for the same or related objects"161, did the airlines compete to supply the air cargo services in a market in Australia? The identification of a market in Australia for the supply of the air cargo services accurately and realistically describes and reflects the interactions between, and perceptions and actions of, one or more of the relevant actors and participants in the market for those services162. The interactions between, and perceptions and actions of, one or more of the relevant actors and participants in the market in Australia for the air cargo services included that: there was an economically significant demand for the air cargo services, in the form of demand from large shippers, and that demand physically existed in Australia163; the airlines met, negotiated and partnered directly with shippers in Australia164; the airlines tracked the shippers' activities in the market for provision of the air cargo services from Asia to Australia165; the airlines marketed the services to large importers in Australia (as well as to large exporters from Asia) because the airlines regarded those significant importers (and exporters) both as targets 160 Air NZ (2014) 319 ALR 388 at 455 [313], 459 [336]. 161 Australia, Independent Committee of Inquiry, National Competition Policy, (1993) at 2 quoting Dennis, 'Competition' in the History of Economic Thought, (1977). 162 See ANZ Banking Group (2015) 236 FCR 78 at 108 [138]. 163 Air NZ (2014) 319 ALR 388 at 451 [287]-[289], 453 [305], 454-455 [311], 455 [313]-[314], 457 [325]-[326]; Garuda (2016) 244 FCR 190 at 203 [28], 164 Air NZ (2014) 319 ALR 388 at 451-452 [291]-[293]. 165 Air NZ (2014) 319 ALR 388 at 449 [272], 451 [287]. for their marketing activities and also as the ultimate source of business166; and the airlines designed their products according to the demand for particular scheduling, handling and storage requirements of specified shippers167. That list is not exhaustive. But it is sufficient to demonstrate that the airlines, as parties to the several understandings, were in competition. And it is sufficient to demonstrate that they competed to supply the air cargo services in a market in Australia. Or, to put the matter differently, in relation to the air cargo services, an "area of effective competition in which [each airline] operate[d]"168 was in Australia and the airlines engaged in "rivalrous market behaviour" in Australia – behaviour that involved "independent rivalry in all dimensions of the [services] offered to consumers"169. That conclusion is unsurprising when set against the purposes of the TPA. The purpose of the TPA is to "enhance the welfare of Australians through the promotion of competition and fair trading and provision for consumer protection"170. The TPA seeks in Pt IV to protect Australian consumers from restrictive trade practices. Air NZ and Garuda carried on business in Australia and their impugned conduct substantially lessened competition for the air cargo services – services that customers in Australia (large shippers) used and paid for at a price fixed between those who would otherwise have competed on price as well as quality. Inflexible aspects of the market Air NZ and Garuda placed considerable emphasis on what they described as "inflexible aspects" of the market as found by the majority in the Full Court, in support of their submission that there was not a market in Australia for the purposes of s 4E of the TPA. Air NZ referred to the fact that "[a]ll sources of supply were located at the port of origin … [and] the only places at which substitution between competing suppliers could occur was in those places. There 166 Air NZ (2014) 319 ALR 388 at 449 [272], 451 [289], 452 [293], 453 [301]; Garuda (2016) 244 FCR 190 at 204 [31], 211 [65], 231-232 [167]-[168]. 167 Air NZ (2014) 319 ALR 388 at 451 [289]. 168 QIW (1993) 42 FCR 255 at 267. 169 QCMA (1976) 8 ALR 481 at 515. 170 s 2 of the TPA. was no place in Australia to which any person wishing to acquire relevant air cargo services could turn to acquire those services". Garuda referred to several features of the dealings between the actors: the demand from shippers was for door to door delivery; that demand was satisfied by freight forwarders, which paid the airlines for delivery whether or not the freight forwarders had been paid by the shippers; the airlines regarded the freight forwarders, not the shippers, as customers; and, finally, freight forwarders and shippers had differing roles. As the process of market identification in these appeals has revealed, the facts and matters relied on by Air NZ and Garuda are not irrelevant. But they are not determinative. Having regard to the impugned anti-competitive behaviour and the terms of ss 45(2) and 45A, the facts and matters relied on by Air NZ and Garuda do not, standing alone, "accurately or realistically describe and reflect the interactions between, and perceptions and actions of, the relevant actors or participants in the alleged market, that is, the commercial community involved"171. Once all of the facts and matters that do describe and reflect the conduct of the airlines in the air cargo services market are identified, those facts and matters demonstrate that the airlines, as parties to the several understandings, were in competition, and competed, to supply the air cargo services in a market in Australia. It is necessary to explain why that is so. (9) Other market indicia A market is commonly described by reference to four dimensions – product (here, the types of services supplied), function (where within the supply chain the services are supplied), geography (the physical area in which the services are supplied) and time (the period in which the supply occurs)172. Those dimensions, and that form of analysis, are tools. They are not the starting point of the process of market identification for the purposes of considering the application of particular provisions of the TPA. A court begins with the problem at hand (the impugned conduct) and asks: what market identification best assists in the assessment of that conduct and its asserted anti-competitive attributes? What process best assists in that assessment is determined by "the substantive 171 ANZ Banking Group (2015) 236 FCR 78 at 108 [138]. 172 Flight Centre (2016) 91 ALJR 143 at 156 [67]; 339 ALR 242 at 257. criteria for the particular contravention in issue … in the commercial context the subject of analysis"173. The significance of one or more of the four identified dimensions (product, function, geography and time) in that process of market identification will necessarily vary depending on the impugned conduct, the asserted anti-competitive attributes of that conduct, the statutory criteria for the alleged contravention and the factual and legal issues in dispute. That is shown in these appeals. For example, the services at issue in this litigation have geographical characteristics: they are the services of providing carriage of cargo by air from one place to another. Those geographical aspects of the services may suggest that there might be a market for provision of the services at either or both of the places of intended dispatch and intended receipt. But the geographical characteristics of the services did not and could not conclude the question whether, in these cases, there was a market, in Australia, for the air cargo services in Asia. to Australian destinations from one or more places That question required consideration of whether a party to the impugned understandings (a supplier of the services) competed, in Australia, to provide the services to those who wished to acquire the services. To look at the matter from another perspective, the conclusion that there was a market in Australia for the air cargo services says nothing about the metes and bounds of the market for those services, or whether there were other markets for those services. Those questions are not relevant for the purposes of s 45(2). The question posed by s 45(2) was whether one party to the impugned understandings competed to supply the air cargo services in Australia. Was there an Australian demand for the air cargo services and, if so, did one party to the impugned understandings compete to secure that Australian demand for those services? As the factual analysis above demonstrates, the answer to each of those questions is "yes". Observing that there are places outside Australia where suppliers or acquirers of the air cargo services competed to provide or acquire the services does not deny that there is a market in Australia. It shows only that there were perhaps also markets for the air cargo services in places outside Australia or that there was a market partly in and partly outside Australia. That is, contrary to a premise implicit in much of the airlines' arguments in this Court, and in the courts below, a finding that there was a market in Hong Kong (or elsewhere in Asia) in which the airlines competed for the provision of the air cargo services 173 Flight Centre (2016) 91 ALJR 143 at 156 [69]; 339 ALR 242 at 258 quoting ANZ Banking Group (2015) 236 FCR 78 at 107 [137]. from places in Asia to places in Australia does not demonstrate that there was not a market in Australia for the provision of those services. A similar limitation can be seen in the interaction of the geographical dimension with the product dimension – the air cargo services, which comprised a suite of services174. Given the nature of those services, there was no necessary direct or perfect correlation between the location of the services and the location of the buyers of those services. Demand for those services could be located anywhere around the world. And, as seen earlier, there was no necessary correlation between the location of the services and the location of the field of transactions between buyers and sellers in respect of those services175. (10) European authorities The majority in the Full Court referred to a number of European authorities176, including a decision of the Court of First Instance of the European Communities (Third Chamber) in Atlantic Container Line AB v Commission of the European Communities177 concerning sea-transport services between ports in northern Europe and ports in the United States and Canada. On appeal to this Court, the airlines and the ACCC each submitted that the decision in Atlantic Container, and in particular the following passage concerning the geographical scope of the services, supported their respective submissions as to the process of market identification178: "[The] question [of the determination of the points of origin and of destination of the transport services] is separate from the question of the definition of the relevant geographic market, ... which is intended to determine the territory on which the undertakings concerned are engaged in the supply of the services in question, on which conditions of competition are also sufficiently homogeneous and which may be distinguished from neighbouring geographical areas because, in particular, the conditions of competition there are significantly different". 174 See Section (6)(a) above at [97]. 175 See also Garuda (2016) 244 FCR 190 at 283 [637]. 176 Garuda (2016) 244 FCR 190 at 227-228 [140]-[147], 232 [169]. 177 [2003] ECR II-3298. 178 Atlantic Container [2003] ECR II-3298 at II-3576 [853]. The anti-competitive conduct and the applicable regulatory framework in Atlantic Container were different. its highest, Atlantic Container demonstrates that, not unlike the process of market identification necessary in these appeals, the question of market identification in Atlantic Container could not be concluded solely by reference to the geographical component or characteristics of the services in question. (11) Conclusion on Issue 1 For those reasons, the impugned provisions substantially lessened competition for the air cargo services in a market "in Australia". Issue 2 – Foreign state compulsion The airlines submitted that where particular conduct is compelled by a law or valid administrative practice of a foreign state, a person acting in accordance with that law or practice cannot make "a contract or arrangement", or arrive at an "understanding", having the purpose, effect or likely effect of substantially lessening competition for the purposes of s 45(2) of the TPA. In particular, the airlines submitted that they did not arrive at, or give effect to, certain impugned understandings179 within the meaning of s 45(2) of the TPA because the Hong Kong Regulations and the administrative practices of the HK CAD compelled each of them to arrive at, or give effect to, those impugned understandings. The airlines' submissions were based on the premise that establishing a contravention of s 45(2) required demonstrating that the airlines chose to engage in the impugned conduct, and that the question of compulsion had to be addressed at the point at which the airlines sought to pursue an "otherwise lawful and legitimate objective" – being the charging of a fuel surcharge calculated by reference to an index mechanism. The airlines' submission was that, at the point at which they decided to pursue the lawful objective, they did not have any choice as to whether to comply with the relevant legal obligations. Those submissions were rightly rejected by the primary judge180 and by the majority in the Full Court181. 179 2002 Hong Kong Lufthansa Methodology Understanding (Air NZ only); Hong Kong Imposition Understanding (Air NZ and Garuda); First Hong Kong Surcharge Extension Understanding (Garuda only). 180 Air NZ (2014) 319 ALR 388 at 483-484 [447]-[448]; see also at 470-483 The submissions are contrary to the unchallenged findings of the primary judge that: first, foreign law or administrative practice did not impose any requirement on the airlines to impose or agree to impose a fuel surcharge; second, foreign law or practice did not impose any requirement on the airlines to impose or agree to impose an approved fuel surcharge; and, finally, foreign law or practice did not impose any requirement on the airlines seeking approval of an index mechanism for a surcharge to file a joint application with the HK CAD182. This section of the judgment will consider the relevant foreign law (the Hong Kong Regulations) and the relevant practices of the HK CAD and address, in each context, the airlines' contentions that their conduct was not voluntary but compelled by foreign law or practice. The Hong Kong Regulations Regulation 3(1) of the Hong Kong Regulations relevantly prohibited a person from using an aircraft for the carriage of air cargo between Hong Kong and other places "except under and in accordance with" the provisions of an operating permit. Each airline's operating permit was granted subject to a condition, among others, that the airline could charge only those tariffs for which approval had been obtained from the HK CAD183. It was not in dispute at trial that "tariff" took its meaning from the relevant Air Services Agreements ("ASA")184: the Hong Kong-New Zealand ASA for Air NZ185; and the Hong Kong-Indonesia ASA186 and the Australia-Indonesia ASA187 for Garuda. On appeal to the Full Court and to this Court, it was accepted that a fuel surcharge, the subject of each of the three impugned understandings, was such a "tariff"188. 181 Garuda (2016) 244 FCR 190 at 249-250 [242]-[251]; see also at 246-249 182 Air NZ (2014) 319 ALR 388 at 483 [446]-[447]. 183 See Air NZ (2014) 319 ALR 388 at 470-471 [395]-[396]. 184 See Air NZ (2014) 319 ALR 388 at 471 [396]-[399]. 185 See Air NZ (2014) 319 ALR 388 at 471-475 [401]-[412]. 186 See Air NZ (2014) 319 ALR 388 at 475-477 [413]-[414]. 187 See Air NZ (2014) 319 ALR 388 at 477 [415]-[417]. 188 See Garuda (2016) 244 FCR 190 at 247 [236(1)]. The primary judge's findings were the Hong Kong Regulations, if the airlines were going to impose a fuel surcharge, they needed to obtain approval from the HK CAD and that the only surcharge that could be imposed would be the one approved by the HK CAD189. that, under The airlines accepted that the Hong Kong Regulations did not impose any requirement on the airlines to impose, or agree to impose, a fuel surcharge and that the Hong Kong Regulations did not impose any requirement on the airlines to impose, or agree to impose, an approved fuel surcharge. As the ACCC submitted, there was no compulsion. There could be no compulsion where the airlines could choose not to impose a fuel surcharge at all or could choose to seek approval from the HK CAD for a surcharge but choose not to impose the approved surcharge190. The airlines chose to do both – to seek approval to impose a surcharge and to impose that approved surcharge – and to do so collectively. That the only surcharges that could be imposed by an airline were those that had been approved by the HK CAD191, and that an airline that had obtained approval from the HK CAD to charge a fuel or other surcharge was required to charge the approved amount and was not permitted to charge a lesser192 or different amount, are conclusions that do not assist the airlines. They do not assist because the Hong Kong Regulations did not impose any requirement on the airlines to impose (or agree to impose) a fuel surcharge or to impose (or agree to impose) an approved fuel surcharge. The airlines' contention that an airline that had obtained approval from the HK CAD to charge a fuel or other surcharge was required to charge the approved amount specifically, and was not permitted to charge a lesser amount, proceeds on two false premises – that approval for a fuel surcharge had to be obtained and that an approved fuel surcharge had to be imposed. Both were contrary to the facts. Each airline had to decide whether to apply for approval of the surcharge and, once the surcharge was approved, to decide whether to impose the approved surcharge. At both stages, each airline decided "yes". 189 See Air NZ (2014) 319 ALR 388 at 477 [418]-[419]. See also Garuda (2016) 244 FCR 190 at 247 [236(2)-(3)]. 190 See Air NZ (2014) 319 ALR 388 at 479 [426], 511 [578], 524 [653]. 191 See Air NZ (2014) 319 ALR 388 at 477 [419]; Garuda (2016) 244 FCR 190 at 192 See Air NZ (2014) 319 ALR 388 at 478-479 [425]; Garuda (2016) 244 FCR 190 at The HK CAD's practices The airlines further contended that it was a "requirement" of the HK CAD that all airlines seeking approval of a fuel index mechanism file a joint application. That contention is incorrect. Understanding, the primary judge found that193: relation the 2002 Hong Kong Lufthansa Methodology "each airline, including Air NZ, had decided to use the ... Lufthansa methodology because they actively wished to do so; that the HK CAD approval did not require them to levy the surcharge; that the decision to do so was a collective one between the airlines; and that the approval had bound them, once that decision was made, to do no more than they wished to do. ... Firms who procure the creation of foreign legal requirements as a cloak for their own motives do not take themselves outside of s 45". In relation to the Hong Kong Imposition Understanding, the primary judge found194: "Air NZ was not compelled to do anything. It did not have to include itself within the HK CAD filing. It chose to do that because it wished to impose the surcharge using the index mechanism. The HK CAD approval thereafter merely provided it with the permission to act in accordance with its own desires. Rather than being the entity which made the arrangement, the application to the HK CAD was the device by which the airlines facilitated their own collusive behaviour." His Honour concluded195: "The process revealed by the various changes in index levels does not reveal a group of airlines slavishly obeying the dictates of a regulator. Rather, it reveals a group of airlines using the notification process as the springboard for collusive behaviour." 193 Air NZ (2014) 319 ALR 388 at 514 [598]. 194 Air NZ (2014) 319 ALR 388 at 524 [651]-[652]. 195 Air NZ (2014) 319 ALR 388 at 525 [657]. In relation to the First Hong Kong Surcharge Extension Understanding, the primary judge found196: "[T]he initial approval of the … Lufthansa methodology … expired on 19 July 2003. As the time of expiry approached it became necessary for the airlines to seek to extend its operation. … On 5 June 2003, as the end of the 1 year approval approached, the chair of [the HK CSC] wrote to the members of [the HK CSC] indicating that the approval was soon to expire and that if a justification for an extension in its duration could be worked out a meeting would be called to consider whether to apply for it. … Thereafter, on 9 June 2003, the airlines were summoned to a meeting to be held on 12 June 2003. The topics to be discussed included extending the fuel surcharge approval granted on 19 July 2002." The primary judge found that, at a meeting on 12 June 2003, the airlines that were present agreed they would submit an application to the HK CAD to extend the current fuel surcharge mechanism197. The primary judge found that Garuda was present at that meeting, but Air NZ was not198. His Honour found that the First Hong Kong Surcharge Extension Understanding was reached. His Honour concluded199: "It was an agreement to apply to the HK CAD but that was not inconsistent with also being an agreement to fix or control prices. In truth, it was both. I also conclude that Garuda gave effect to the understanding by subsequently implementing fuel surcharge increases and decreases in accordance with the ... Lufthansa methodology during the extended period." None of these findings were contested in this Court. 196 Air NZ (2014) 319 ALR 388 at 525 [659], 526 [662]. 197 Air NZ (2014) 319 ALR 388 at 526 [664]. 198 Air NZ (2014) 319 ALR 388 at 526 [664]. 199 Air NZ (2014) 319 ALR 388 at 526 [665], [667]. The airlines' contention that it was a "requirement" of the HK CAD that all airlines seeking approval of a fuel index mechanism file a joint application is inconsistent with those uncontested findings of the primary judge as well as the following uncontested findings: The HK CAD did not require the airlines to submit a joint application for any fuel index mechanism200. There was never any written requirement to do so. The HK CAD encouraged such an approach, but did not require it201. The HK CAD's processes of accepting individual applications for static surcharges and joint applications for surcharges using a fuel index mechanism were no more than a matter of convenience202 – there was never any direction to lodge joint applications but, practically, it was "ungainly" for the HK CAD "to have to deal with more than one fuel index and it would [have] perhaps promote[d] confusion among the shippers"203. (3) Although there was an informal "practice" on the part of the HK CAD to proceed on the basis of a single application submitted by all airlines in relation to a fuel index mechanism, this was an informal policy incapable of rising to the level of a mandatory requirement204 and, as the majority in the Full Court noted, there was nothing preventing the HK CAD from departing from it205. The primary judge also found that the airlines were "free to lodge individual applications albeit there may have been commercial reasons why they did not wish to"206. But, again, the fact that it might have been commercially inconvenient for each airline to individually apply to the HK CAD for approval 200 Air NZ (2014) 319 ALR 388 at 479 [428], 483 [446]. 201 Air NZ (2014) 319 ALR 388 at 483 [446]. 202 Air NZ (2014) 319 ALR 388 at 482 [443], 483 [446]. 203 Air NZ (2014) 319 ALR 388 at 482 [441]. See also Garuda (2016) 244 FCR 190 at 204 Air NZ (2014) 319 ALR 388 at 482 [443], 483 [446]. See also Garuda (2016) 244 FCR 190 at 247 [236(6)], 248 [238], 249-250 [247], 250 [250]. 205 Garuda (2016) 244 FCR 190 at 250 [248]. 206 Air NZ (2014) 319 ALR 388 at 481 [436]. cannot and does not elevate an administrative practice to a requirement that compelled an airline to do anything. As the majority in the Full Court stated207, the administrative practice of the HK CAD was not tantamount to a requirement to do anything. Rather, it was accepted, as a matter of Hong Kong domestic law, that: (a) if the airlines were going to impose a fuel or insurance surcharge or a customs fee, they needed to obtain approval; and (b) the only surcharges that could be imposed were the ones that had been approved by the regulator208. Neither of those matters imposed any requirement on an airline, in seeking approval of an index mechanism for a surcharge, to file a joint application with the HK CAD. Contrary to the submissions of the airlines, there was no point at which a requirement or compulsion to make any application, let alone a joint application, was ever imposed by the HK CAD on the airlines. Put another way, at all relevant times, each airline was able to pursue the otherwise lawful and legitimate objective of imposing a surcharge, without acting in contravention of the TPA, so long as it applied on its own to the HK CAD for approval of its own lawful and legitimate objective. Neither airline did so. Conclusion on Issue 2 Neither foreign law nor foreign regulatory practice required the conduct constituting the contraventions, namely the understandings to impose approved surcharges. Each airline acted in the way that contravened the TPA because it wanted to and not because of the requirements of a foreign regulator. Issue 3 – Alleged inconsistency At all relevant times, s 12(2) of the Air Navigation Act relevantly provided that an international airline licence could not be granted to an international airline of a country other than Australia unless that country and Australia were, among others, parties to "some other agreement or arrangement, whether bilateral or multilateral" (ie, an ASA) under which scheduled international air services of that other country could be operated over or into Australian territory. When the TPA was enacted, the Australia-Indonesia ASA was one of a number of ASAs that provided for tariff fixing between international airlines for scheduled international air services over and into Australian territory. 207 Garuda (2016) 244 FCR 190 at 249-250 [247]. 208 See Air NZ (2014) 319 ALR 388 at 477 [418]-[419]; Garuda (2016) 244 FCR 190 Garuda submitted that the TPA did not apply to the Australia-Indonesia ASA. It further contended that the Air Navigation Act and the prohibition in ss 45 and 45A of the TPA on making agreements concerning prices with competitors were practically and operatively inconsistent. As a result, it contended that ss 45 and 45A of the TPA "did not reach to any of Garuda's conduct" when it carried cargo into Australia in accordance with the Australia-Indonesia ASA209. International air transport of passengers and goods has been the subject of many international agreements over many years. Reference was made by Garuda in argument in this Court to some of these arrangements and their history210. For present purposes, it is sufficient to focus on Garuda's conduct (and that of the airlines who acted with Garuda) and the terms of the Air Navigation Act and the Australia-Indonesia ASA. It is that conduct and those instruments that are determinative of this issue. This section of the judgment will deal first with the Air Navigation Act and the Australia-Indonesia ASA, then with the decisions below and finally with the parties' arguments in this Court. The Air Navigation Act In 1974, when the TPA was enacted, the Air Navigation Act contained ss 12211 and 13 as follows: International airline licences. (1) An international airline of a country other than Australia shall not operate a scheduled international air service over or into Australian territory except in accordance with an 209 Garuda could only fly to Australia pursuant to the Australia-Indonesia ASA. When it carried cargo from Hong Kong to Australia, it flew from Hong Kong to Denpasar pursuant to the Hong Kong-Indonesia ASA, then from Denpasar to Australia pursuant to the Australia-Indonesia ASA. See also Air NZ (2014) 319 ALR 388 at 210 See, eg, Agreement between the Governments of Australia and Canada for Air Services between Australia and Canada [1951] ATS 17; Agreement between the Government of the Commonwealth of Australia and the Government of New Zealand relating to Air Services [1961] ATS 19. See also Air NZ (2014) 319 ALR 211 Subsequent amendments to s 12 are not material or relevant and may be put to one side: see, eg, Sched 1 to the Air Navigation Act 1974 (Cth). international airline licence issued by the Director-General in accordance with the regulations. (2) An international airline licence shall not be granted to an international airline of a country other than Australia unless that country and Australia are parties to the Air Transit Agreement, or to some other agreement or arrangement, whether bilateral or multilateral, under which scheduled international air services of that other country may, subject to the agreement or arrangement, be operated over or into Australian territory. Suspension or cancellation of international airline licences. The Minister may suspend or cancel an international airline licence issued to an international airline of a country other than Australia if and only if— the airline or any aircraft operated by the airline fails to comply with a provision of this Act or the regulations or the terms of its licence; or the airline fails to conform to, or comply with, any term or condition of the relevant agreement or arrangement referred to in the last preceding section." (emphasis added) The Australia-Indonesia ASA The Australia-Indonesia ASA was an "agreement or arrangement" within the meaning of ss 12(2) and 13(b) of the Air Navigation Act. The Australia-Indonesia ASA relevantly provided the rights for designated airlines (including Garuda) to make stops in cities (including Darwin, Sydney and Melbourne) for the purpose of putting down and taking on international Article 6 of the Australia-Indonesia ASA provided: "(1) The tariffs on any agreed service shall be established at reasonable levels, due regard being paid to all relevant factors including cost of operation, reasonable profit, characteristics of service (such as standards of speed and accommodation) and the tariffs of other airlines for any part of the specified route. These tariffs shall be fixed in accordance with the following provisions of this Article. 212 Art 2 of, and s II of the Annex to, the Australia-Indonesia ASA. (2) Agreement on the tariffs shall, whenever possible, be reached by the designated airlines concerned through the rate-fixing machinery of the International Air Transport Association. When this is not possible, tariffs in respect of each of the specified routes shall be agreed upon between the designated airlines concerned. In any case the tariffs shall be subject to the approval of the aeronautical authorities of both Contracting Parties. If the designated airlines concerned cannot agree on the tariffs, or if the aeronautical authorities of either Contracting Party do not approve the tariffs submitted to them in accordance with the provisions of paragraph (2) of this Article, the aeronautical authorities of the Contracting Parties shall endeavour to reach agreement on those tariffs. If agreement under paragraph (3) of this Article cannot be reached, the dispute shall be settled in accordance with the provisions of Article 9 of this Agreement. (5) No new or amended tariff shall come into effect unless it is approved by the aeronautical authorities of both Contracting Parties or is determined by a tribunal of arbitrators under Article 9 of this Agreement. Pending determination of the tariffs in accordance with the provisions of this Article, the tariffs already in force shall apply." "Tariff" was not defined in the Australia-Indonesia ASA. The primary judge's findings that "tariff" included the fuel surcharges relevant in these appeals213 and that "tariffs" are the minimum amounts that can be charged214 were not contested on appeal. Article 9 of the Australia-Indonesia ASA relevantly provided: If any dispute arises between the Contracting Parties relating to the … application of the present Agreement, the Contracting Parties shall in the first place endeavour to settle it by negotiation between themselves. 213 Air NZ (2014) 319 ALR 388 at 477 [415]-[417]. See also Garuda (2016) 244 FCR 214 Air NZ (2014) 319 ALR 388 at 477-478 [421], 478-479 [425]. See also Garuda (2016) 244 FCR 190 at 247 [236(4)]. If the Contracting Parties fail to reach a settlement by negotiation, the dispute may at the request of either Contracting Party be submitted for decision to a tribunal of three arbitrators … The Contracting Parties undertake to comply with any decision of the tribunal given under paragraph (2) of this Article." (3) Decisions below The primary judge relevantly held that the practical operation of ss 12 and 13 of the Air Navigation Act, operating with the Australia-Indonesia ASA, was to require Garuda "to comply with the terms of any relevant ASA"215 and to "require collusive behaviour by [Garuda] of the very kind prohibited by Pt IV" of the TPA216. As a result, the primary judge held that the Air Navigation Act and the prohibition in ss 45 and 45A of the TPA on arriving at understandings concerning prices with competitors were their practical operation217. That inconsistency, according to the primary judge, was to be resolved by construing s 13 of the Air Navigation Act so as not to authorise the relevant Minister to cancel or suspend an international airline licence for breach of an ASA where the conduct constituting the breach was required by Pt IV of the TPA218. inconsistent On appeal to the Full Court, the majority219 agreed with the primary judge that there was no inconsistency in the terms of the Air Navigation Act and the TPA220 but held that there was no conflict between the terms of the TPA and the effect or operation of the Air Navigation Act because of Art 6(2) of the Australia-Indonesia ASA221. the Australia-Indonesia ASA did not require the airlines to engage in price fixing, that the risk that their licences would be cancelled under s 13 of the Their Honours held that Art 6(2) of 215 Air NZ (2014) 319 ALR 388 at 424 [152]. 216 Air NZ (2014) 319 ALR 388 at 427 [165]. 217 Air NZ (2014) 319 ALR 388 at 427 [165]. 218 Air NZ (2014) 319 ALR 388 at 431 [185] citing Commissioner of Police (NSW) v Eaton (2013) 252 CLR 1 at 18-19 [45], 19-20 [48]; [2013] HCA 2. 219 Yates J did not address this issue: see Garuda (2016) 244 FCR 190 at 293 220 Garuda (2016) 244 FCR 190 at 237 [188], [191]. 221 Garuda (2016) 244 FCR 190 at 239-240 [198]-[205]. cf Air NZ (2014) 319 ALR Air Navigation Act did not arise and that, in any event, it would not be reasonable for the Minister to cancel an airline's licence under s 13 of the Air Navigation Act for failure to comply with Art 6(2) of the Australia-Indonesia ASA where the failure was required by Australian law222. Alleged inconsistency does not arise The alleged inconsistency between the Air Navigation Act, read with the Australia-Indonesia ASA, and the TPA does not arise. As has been seen, it was not contested on appeal that Art 6 of the Australia-Indonesia ASA was concerned with reaching agreement on tariffs, which included fuel surcharges, and that a tariff was the minimum amount that could be charged. Put another way, Art 6 of the Australia-Indonesia ASA was concerned with setting minimum tariffs, not imposing fixed tariffs. But that was not the conduct the subject of the contraventions under the TPA. The impugned understandings the subject of the contraventions under the TPA were understandings arrived at in Hong Kong and Indonesia containing provisions to charge specific fuel surcharges, not agreements or understandings to set tariffs by way of minima under the Australia-Indonesia ASA. So, what was the conduct and what were the relevant findings of the primary judge? They may be summarised as follows. As noted above, Garuda (along with Air NZ and other international airlines) was a member of industry representative bodies in Hong Kong and Indonesia, being the HK CSC and the ACRB respectively223. Garuda participated in various meetings of the HK CSC and the ACRB, at which Garuda and other airlines engaged in price fixing to fix fuel and other surcharges224. Next, and no less importantly, the primary judge found that the airlines did not engage in that conduct at those meetings pursuant to the tariff procedures in any ASA, but engaged in that conduct at those meetings independently of any tariff procedures or requirements. The airlines did not understand themselves to be engaged in tariff procedures under any ASA at those meetings of the HK CSC or the ACRB; rather, they understood only that they were attending meetings of 222 Garuda (2016) 244 FCR 190 at 239-240 [200]-[203]. 223 Air NZ (2014) 319 ALR 388 at 391-392 [6]-[7], 479 [429], 614 [1133]. 224 See footnotes 124 and 126 above. the HK CSC or the ACRB225. Those findings were not challenged on appeal to this Court. The conclusion that the airlines were not making tariff agreements under any ASA is fortified by another of the primary judge's findings concerning an authorisation granted by the Trade Practices Commission to Qantas226 under s 88 of the TPA, which permitted Qantas to give effect to existing tariff arrangements Qantas had reached with particular airlines and to make tariff arrangements of a like type with other airlines227. That authorisation drew a distinction between an agreement on a tariff (which was permitted) and an agreement to impose a tariff or to impose a tariff in a particular amount (which was not permitted). Qantas' authorisation was granted on condition that there was "no requirement on carriers or agents … to charge the fares (or pay the commissions) in Australia that [had] been set by the agreements" and "no requirement on carriers or agents … not to advertise in Australia tariffs they [were] actually charging"228. The alleged inconsistency between the Air Navigation Act, read with Art 6(1) of the Australia-Indonesia ASA, and the TPA does not arise. They were dealing with different subject matters. Article 6(1) was concerned with setting minimum tariffs. It was not concerned with imposing tariffs or imposing fixed tariffs. Garuda's appeal grounds should be rejected. No textual or other inconsistency Given that the alleged inconsistency does not arise, it is unnecessary to address the aspects of the parties' arguments that were predicated on this Court concluding that Art 6(1) of the Australia-Indonesia ASA was concerned with imposing fixed tariffs. Conclusion and orders For those reasons, each appeal should be dismissed with costs. 225 Air NZ (2014) 319 ALR 388 at 639 [1257], 641 [1268]. 226 Qantas Airways Ltd (1987) ATPR (Com) ¶50-056. 227 See Air NZ (2014) 319 ALR 388 at 640 [1261]-[1262]. 228 Air NZ (2014) 319 ALR 388 at 640 [1261].
HIGH COURT OF AUSTRALIA APPELLANT AND MISTFORD PTY LTD & ANOR RESPONDENT Theodore v Mistford Pty Ltd [2005] HCA 45 1 September 2005 ORDER Set aside order 2(b) of the orders of the Court of Appeal of the Supreme Court of Queensland made on 2 April 2004. Appeal otherwise dismissed with costs. On appeal from the Supreme Court of Queensland Representation: K D Dorney QC with N R Jarro for the appellant (instructed by North Coast Law) H B Fraser QC with F W Redmond for the respondents (instructed by Klar and Klar) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Theodore v Mistford Pty Ltd Mortgages – Equitable mortgage by deposit of a certificate of title – Third party security – Contract provided for sale of business by respondents to third party guaranteed by appellant's son – Sale contract provided for deposit by guarantor with vendors' solicitors of instrument of mortgage of certain land owned by appellant together with duplicate certificate of title – Guarantor obtained appellant's authority to release duplicate certificate of title as security for purchase – Guarantor deposited duplicate certificate of title with vendors' solicitors four days prior to settlement – No insistence by vendors upon provision of instrument of mortgage – Whether equitable mortgage created by deposit of duplicate certificate of title – Whether duplicate certificate of title held by vendors' solicitors on account of purchaser or on account of vendor – Whether Land Title Act 1994 (Q), s 75 precludes creation of third party securities by way of deposit of a certificate of title – Whether deposit of a certificate of title must be made contemporaneously with the advance to be secured. Land Title Act 1994 (Q), s 75. Property Law Act 1974 (Q), ss 5, 11, 59. GLEESON CJ, McHUGH, GUMMOW, CALLINAN AND HEYDON JJ. This appeal requires some consideration of the principles governing equitable mortgages by deposit of a duplicate certificate of title. The principles governing the creation of an equitable mortgage by deposit of title deeds were developed by the English courts of equity with respect to old system conveyancing. This appeal concerns their application in the Torrens system, in particular to the deposit of the duplicate certificate of title to land under the provisions of the Land Title Act 1994 (Q) ("the Act"). Section 75 of the Act states: "(1) An equitable mortgage of a lot may be created by leaving a certificate of title with the mortgagee. Subsection (1) does not affect the ways in which an equitable mortgage may be created." The statute law in Queensland thus stands in marked contrast to the present position in England established by the decision in United Bank of Kuwait plc v Sahib1. In that case, the Court of Appeal held that the principles respecting the creation of an equitable security by deposit of title deeds were inconsistent with the requirements which had been introduced by the Law of Property (Miscellaneous Provisions) Act 1989 (UK)2. In Queensland, the predecessor of s 75 of the Act, s 30 of The Real Property Act 1877 (Q) had declared that: "an equitable mortgage or lien upon land or any estate or interest in or security upon land under the provisions of this Act or any instrument affecting any such land may be created by deposit of the instrument of title and such deposit shall subject to the provisions hereinafter contained have the same effect on the estate interest or security sought to be charged as a deposit of title deeds would have had before the passing of this Act". Before the enactment of s 30, the Supreme Court of Queensland held in In re Wildash and Kenneth Hutchison, Ex parte Miskin3 that an equitable mortgage 2 Section 2 provides that a contract for sale or other disposition of an interest in land "can only be made in writing and only by incorporating all the terms which the parties have expressly agreed in one document or, where contracts are exchanged, in each". Previously, s 13 of the Law of Property Act 1925 (UK) had affirmed "the right or interest of any person arising out of or consequent on the possession by him of any documents relating to a legal estate in land". See White and Tudor's Leading Cases in Equity, 9th ed (1928), vol 2 at 70. (1877) 5 QSCR 46. McHugh Callinan might be created by deposit of the duplicate certificate of title, although, as Lilley J put it4, unless protected by caveat "its practical value as a security is very doubtful, and it is not to be commended as a mode of investment". That warning notwithstanding, the subsequent legislation in Queensland and decisions in Victoria5 confirmed the adaptation of this species of equitable security to Australian conditions. It should be added that the Property Law Act 1974 (Q) ("the Property Law Act") applies to land under the provisions of the Act. Section 5(1)(b) of the Property Law Act so provides. The Property Law Act contains various provisions whose origins may be traced to the Statute of Frauds 1677 (Eng)6. Two are presently significant. Section 11(1)(a) of the Property Law Act provides that subject to that statute, with respect to the creation of interests in land by parol: "no interest in land can be created or disposed of except by writing signed by the person creating or conveying the same, or by the person's agent lawfully authorised in writing, or by will, or by operation of law". Section 59 states: "No action may be brought upon any contract for the sale or other disposition of land or any interest in land unless the contract upon which such action is brought, or some memorandum or note of the contract, is in writing, and signed by the party to be charged, or by some person by the party lawfully authorised." It will be necessary to refer to s 11 and to s 59 later in these reasons. (1877) 5 QSCR 46 at 50; cf Breskvar v Wall (1971) 126 CLR 376. 5 See Tolley and Co Ltd v Byrne (1902) 28 VLR 95 at 100-101; Ryan v O'Sullivan [1956] VLR 99 at 100; Re Nairn's Application [1961] VR 26 at 28. 6 29 Car 2 c 3. McHugh Callinan The Litigation By majority (McMurdo P and Philippides J; Jerrard JA dissenting), the Queensland Court of Appeal7 made a declaration (order 2(a)) to the effect that Mr Glen Theodore, with the authorisation of his mother, Mrs Marie Theodore, on 18 July 1996 had deposited the duplicate certificate of title to a parcel of land at Buderim ("the Buderim land") with Klar and Klar, the solicitors to the respondents (Mistford Pty Ltd and Mr and Mrs Vines) and thereby secured by equitable mortgage the amount owing under a contract of sale dated 22 July 1996 ("the Sale Contract"). The parties to the Sale Contract were the respondents as vendors, Mobile Lab Pty Ltd ("Mobile Lab") as purchaser and Mr Glen Theodore as guarantor. Mobile Lab was a shelf company acquired by Mr Theodore. The Sale Contract was in a standard form with schedules containing details and special conditions. Clause 37 of the standard conditions set out the terms of the guarantee deemed to have been given by Mr Theodore. The subject-matter of the transaction was a business conducted under the name "Air Monitoring Services", together with certain plant and equipment. The Sale Contract stipulated that the purchase price was $66,500. The deposit was $100, and the balance, as to $19,900, was payable on completion. The remaining $46,500 was payable by three instalments over two years with interest at 8 per cent per annum. Clause 4.3 of the special conditions obliged the purchaser, Mobile Lab, in support of the guarantee by Mr Theodore, to procure on or before completion the lodgment with the respondents' solicitors of the duplicate certificate of title to the Buderim land and an instrument of mortgage thereof in favour of the respondents, to be unregistered while Mobile Lab complied with its obligations under the Sale Contract. The Sale Contract was completed on the date it bears, 22 July 1996, and a bank cheque for $20,000, described by the parties as a deposit, was provided by Mr Theodore from moneys furnished to him by Mrs Theodore. As Jerrard JA pointed out, cl 4.3 contained no reference to the provision of a guarantee by Mrs Theodore. However, at the settlement at the offices of Klar and Klar, Mr Theodore was furnished by Mr Peter Klar with and took away a draft guarantee by his mother in favour of the respondents of the balance of the purchase moneys owing by Mobile Lab under the Sale Contract and a draft 7 Theodore v Mistford Pty Ltd [2004] QCA 90. McHugh Callinan mortgage of the Buderim land by Mrs Theodore in support of that guarantee. Mr Klar requested that Mr Theodore have these instruments signed by his mother and returned for holding without registration provided the terms of the Sale Contract were complied with. On 9 August 1996, Mrs Theodore took these draft instruments to her solicitor and received advice as to her position. She never executed the guarantee and mortgage. Hence the reliance by the respondents upon the alleged equitable mortgage by reason of the deposit of the duplicate certificate of title on 18 July 1996, several days before completion of the Sale Contract. By the time the Court of Appeal made its orders, Mrs Theodore had sold the Buderim land and the proceeds of sale had been deposited in the trust account of the solicitors for the respondents. The Court of Appeal held that the respondents were entitled to have paid to them from those proceeds the amount owing to them under the equitable mortgage, with the balance, if any, returned to The reduction of the Buderim land to a fund held pending the outcome of the litigation has a further significance. There is no occasion now to consider questions considered by Dean J in Ryan v O'Sullivan8 respecting the adaptation to equitable mortgages of Torrens title land of the remedies of foreclosure and sale. In this Court, Mrs Theodore seeks the setting aside of the orders of the Court of Appeal and a declaration that no equitable mortgage was created by the deposit of the duplicate certificate of title to the Buderim land. The litigation commenced with a claim instituted by Mrs Theodore in the District Court of Queensland in which she sought a declaration that the respondents held the duplicate certificate of title "as constructive trustees" and for her benefit. By counterclaim, the respondents sought against Mrs Theodore orders giving effect to their contention that an equitable mortgage had been created over the Buderim land in their favour. At trial before Robertson DCJ, Mrs Theodore's claim was dismissed and relief was given to the respondents on their counterclaim. That relief then was varied on appeal by Mrs Theodore to the Court of Appeal to achieve the outcome described above. [1956] VLR 99. See also the remarks of Kitto J in Latec Investments Ltd v Hotel Terrigal Pty Ltd (In liquidation) (1965) 113 CLR 265 at 274-275. McHugh Callinan The Factual Findings The primary judge found that on 12 July 1996 Mr Glen Theodore had advised Mr Peter Klar that he was ready to proceed with the purchase of the Air Monitoring Services business. He said that he had borrowed $30,000 from his mother and that he wanted to utilise $20,000 of that money for a deposit. Mr Klar told Mr Theodore that there would be a requirement by the respondents that the duplicate certificate of title to the Buderim land be deposited with his firm. Mr Theodore told him that, while the Buderim land was in the name of his mother, he was the beneficial owner. That was untrue. On 18 July 1996, Mr Theodore attended the offices of Allan Taylor & Associates, Mrs Theodore's solicitors. He produced to them a handwritten authority evidently composed by him. It had been signed by Mrs Theodore and authorised her solicitors to release to Mr Glen Theodore the duplicate certificate of title to the Buderim land. On the same day, Mr Glen Theodore obtained possession of the duplicate certificate of title, deposited it with the respondents' solicitors and obtained their letter of acknowledgment addressed to him. This stated that the certificate of title was "to be held in safe custody on your behalf as security on account of the purchase from M & V Vines of the business, Air Monitoring Services". Up to the time of the settlement of the Sale Contract on 22 July 1996, neither the respondents nor their solicitors had any direct dealings with Mrs Theodore. Before the settlement, Mr Klar advised his clients that the holding of the certificate of title was insufficient security for payment of the balance of the purchase price without the support of an executed guarantee and mortgage. Notwithstanding that advice, the respondents, who wished urgently to settle, instructed Mr Klar to proceed. As a result, there was no insistence upon full compliance with the requirements of cl 4.3 of the Sale Contract. Those requirements had included provision on or before settlement not only of the duplicate certificate of title but also of a mortgage of the Buderim land in favour of the respondents. The primary judge commenced his consideration of the evidence given by "Her evidence is in short compass. She said that she was aware in 1996 of the son's interest in the business. She authorised the son to obtain the title deed from Mr Taylor. I find that this occurred on the 18th July 1996. This is the date of the hand written authority signed by her and is the same the son. date title deed was delivered to Mr Klar by that the McHugh Callinan [Mrs Theodore] strenuously denies any prior knowledge that her son was going to deliver the deed to Mr Klar, or any authority from her for him to deal with the deed in this way. This is the essential factual issue in the case." At the time of the trial, Mrs Theodore was aged 71 years. She had been a widow for 10 years. Her husband had been an Area Manager with the ANZ Bank and she said that her "whole life [had] been tied up with the ANZ Bank". Her husband had told her never to give a guarantee and she was adamant in refusing to do so. Mr Glen Theodore was one of her four children. Mr Glen Theodore had been divorced in 1992 and, at the relevant time, was living at home with his mother. Mrs Theodore's case was that she had agreed only to the delivery of the deed to the ANZ Bank at Maroochydore as security for a loan which Mr Glen Theodore proposed to obtain from that Bank. Mr Theodore had sought unsuccessfully to arrange finance from the ANZ Bank. On 18 July, he had attended the Maroochydore branch with Mrs Theodore but the Bank declined his application for an advance of $60,000. Mrs Theodore had already received advice from her accountant that a purchase of the respondents' business at that price was not a viable proposition. Mrs Theodore's evidence was that she had decided not to assist her son at all in the matter but that she relented and lent him $30,000, of which $20,000 was for the initial payment under the Sale Contract and $10,000 for his purchase of a van. The primary judge introduced his conclusions respecting the credibility of Mrs Theodore by saying that she had impressed him as a highly intelligent, astute and alert witness. His Honour continued: "She was not in the least overborne by cross-examination despite her obvious physical difficulties resulting from her distressing condition. I do not think she is a liar, however I regret to say that on the balance of probabilities, I do not accept her evidence that she did not know of her son's plans to deal with the deed as he did on the 18th July 1996. I think it more probable than not that at the time of purchase of the business by the son, she did act with her heart and not her head; and that she has now convinced herself that she did not give him authority to deal with the deed, when in fact she did. ... In my opinion, it is more probable than not that she was aware, after the failure to obtain finance, that the son was going to hand over the deed as security to enable him to complete the sale of the business." McHugh Callinan His Honour added that, although Mr Glen Theodore had not given evidence, he was satisfied that he was manipulative and probably dishonest. General Principles The respondents support the declaratory relief in their favour given by the Court of Appeal by reliance upon a basic proposition. This may be stated in the terms used by Maitland in the thirteenth of his "Lectures on Equity". He said that the Court of Chancery had enabled people to create equitable mortgages without any writing at all and added9: "An equitable mortgage (enforceable by an order for foreclosure or for sale) can be made by a deposit of title deeds if they were deposited with intent that the land which they concern shall be security for the payment of a debt." In the present case, there were no direct dealings between the appellant and the respondents but, the respondents submit, this provides no fatal objection to their case. They say the findings of fact establish two sufficient planks for their case. First, Mrs Theodore had the necessary intention to deposit the duplicate certificate of title as security for her son's indebtedness under the Sale Contract and, secondly, to effectuate that intention she conferred an actual authority on her son, in broad terms encompassing his subsequent dealing with the duplicate certificate of title to procure settlement of the Sale Contract. These submissions should be accepted and the appeal dismissed. We turn to explain why this is so. Several preliminary matters are to be noted. First, given the findings as to the intention of Mrs Theodore, this is not a case which tests the proposition in some of the leading English texts10 that from a relationship of debtor and creditor and the delivery of title deeds the court will presume an intention to create a security, a presumption to be rebutted only by proof that the deposit was made on 9 Maitland, Equity, rev by Brunyate, (1949) at 198. 10 Coote, A Treatise on the Law of Mortgages, 9th ed (1927), vol 1 at 86; Waldock, The Law of Mortgages, 2nd ed (rev) (1950) at 51. See also In re Wallis and Simmonds (Builders) Ltd [1974] 1 WLR 391 at 395; [1974] 1 All ER 561 at 564 and cf Sun Tai Cheung Credits Ltd v Attorney-General of Hong Kong [1987] 1 WLR 948 at 950. McHugh Callinan other grounds. However, it may be noted that this proposition does have the formidable support of Lord Macnaghten. In delivering the reasons of the Privy Council in Bank of New South Wales v O'Connor11 Lord Macnaghten said: "It is a well established rule of equity that a deposit of a document of title without either writing or word of mouth will create in equity a charge upon the property to which the document relates to the extent of the interest of the person who makes the deposit. In the absence of consent that charge can only be displaced by actual payment of the amount secured. Before the fusion of law and equity a Court of Equity would undoubtedly have restrained the legal owner of the property from recovering his title deeds at law so long as the charge continued, and now when law and equity are both administered by the same Court if there be any conflict the rules of equity must prevail." Secondly, the term "equitable mortgage" is not used in the texts and the authorities with any single denotation. The nature of the security created must turn upon the intention of the party dealing with the assets to be subjected to the security and the nature of those assets. So it is accepted that a mortgage of an equitable interest, being an equity of redemption, can only be by way of an equitable mortgage, although described as a second mortgage of the land in question. In respect of a legal interest, under the general law an agreement to give a legal mortgage is described as an equitable mortgage. Subject to compliance with any statutory formalities, it may be treated in equity as if a legal mortgage had been granted and therefore as carrying with it the remedies, including foreclosure, incident to a legal mortgage12. Hence the statement that while in theory the equitable mortgagee may call for a legal mortgage, in the great majority of cases the mortgagee rests upon its equitable rights13. Lord Eldon LC said of the Court of Chancery that "an equitable title to a mortgage is here as 11 (1889) 14 App Cas 273 at 282-283; cf the treatment of the above situation as "the most extreme case" by Phillips LJ in United Bank of Kuwait plc v Sahib [1997] Ch 107 at 143. 12 Carter v Wake (1877) 4 Ch D 605 at 606 per Jessel MR. 13 Megarry and Wade, The Law of Real Property, 6th ed (2000) §19-039. McHugh Callinan good as a legal title"14. In this way, by looking at the intent rather than the form, equity is able to treat as done that which in good conscience ought to be done15. However, in the present appeal, debate as to whether the factual findings were consistent with an agreement between the appellant and the respondents that she would execute a legal mortgage (ie, a memorandum of mortgage in registrable form) would have been misplaced. The trial judge found that authority had been given by Mrs Theodore for her son to furnish the duplicate certificate of title as the immediately effective security required by the respondents for their completion of the Sale Contract on 22 July 1996. Their case thus is not to be approached as one of an agreement, supported by deposit of the title deeds, to give a legal mortgage. It was a transaction of this nature which was discussed by Knox CJ in Cooney v Burns16, to which reference was made in argument. Further, the respondents accept that, there being no such agreement and no personal covenant by the appellant, their remedy is limited to recoupment from the sale proceeds, with no judgment against the appellant upon a personal liability to pay moneys. The principles respecting part performance developed in cases where s 4 of the Statute of Frauds was pleaded in answer to a suit for specific performance of an oral land sale contract. These principles were treated, at least by analogy, as applying to the enforcement of agreements to create legal and equitable securities17. The analogy was imperfect for at least two reasons. First, as Lord Eldon LC complained, the deposit of title deeds by itself was an equivocal act, being referable also, for example, to a pledge only of those chattels18. Secondly, as Higgins J later explained in Cooney v Burns19, the nature of the acts 14 Ex parte Wright (1812) 19 Ves Jun 256 at 258 [34 ER 513 at 514]. 15 Pomeroy, A Treatise on Equity Jurisprudence, 5th ed (1941) vol 2, §378. 16 (1922) 30 CLR 216 at 224-225. See also World Tech Pty Ltd v Yellowin Holdings Pty Ltd (1992) 5 BPR 11,729 at 11,732. 17 Maddison v Alderson (1883) 8 App Cas 467 at 480. 18 Ex parte Whitbread (1812) 19 Ves Jun 209 at 212 [34 ER 496 at 497]. See, more recently, the remarks of Bryson J in Arnick Holdings Ltd v Australian Bank Ltd, unreported, New South Wales Supreme Court, Equity Division, 4 December 1987. 19 (1922) 30 CLR 216 at 242-243. McHugh Callinan which suffice for part performance differ in the two situations. Given the nature of the respondents' case which does not found upon an executory agreement by the appellant to provide security, the matter of part performance need not further be considered. The appellant correctly submitted that a consequence of the respondents' fixing upon her intention to create a security immediately effective upon completion is that attention is required not to s 59 but to s 11(1)(a) of the Property Law Act. Section 59 is concerned with contracts, and s 11(1)(a) with dispositions. Here, there was no writing satisfying par (a) of s 11(1)20. The Issues on the Appeal The appellant did not select as a battleground for the appeal the general assertion that in the face of s 11(1)(a), the provision respecting dispositions rather than contracts, there was no scope for equity to effectuate an intention to create an equitable mortgage of the Buderim land. The ultimate question, rather, was whether in the circumstances as found at trial, the respondents having completed the Sale Contract on the faith of the provision of the duplicate certificate of title, the appellant had been entitled in equity to the return of that instrument (or, as it happened, to the full proceeds of sale) without satisfying the secured indebtedness. This approach to s 11 of the Property Law Act and other Statute of Frauds descendants is consistent with what was said by Hope J in Last v Rosenfeld21. His Honour observed: "No sooner had the Statute of Frauds been enacted in 1677 than the courts set about relieving persons of its effect in cases where it was thought that the legislation could not have been intended to apply. In general terms, it was said that the courts would not allow the Statute of Frauds to be made an instrument of fraud, and that it did not prevent the proof of the fraud. No doubt, as was said by Selborne LC in Maddison v Alderson22 in relation to one of the principles that was developed in this 20 cf Re Nairn's Application [1961] VR 26. 21 [1972] 2 NSWLR 923 at 927. 22 (1883) 8 App Cas 467 at 474. McHugh Callinan way, namely, the doctrine of part performance, this summary way of stating the principle, however true it may be when properly understood, is not an adequate explanation, either of the precise grounds, or of the established limits, of the relevant doctrine. The general approach indicated by this summary statement did, however, spread into a number of fields where a statute requires writing". Counsel for the appellant pointed to features of the evidence which might have supported findings other than those adverse to the appellant which were made at trial but, in the end, did not challenge that outcome. However, counsel submitted that several aspects of the law respecting this species of equitable mortgage dictated the conclusion that no such security had been created here. Counsel for the appellant emphasised the circumstance that the deposit of the duplicate certificate of title with Klar and Klar on 18 July 1996 (a Thursday) was made in advance of the completion of the Sale Contract on the following Monday, 22 July. At the time of that deposit the purchaser, Mobile Lab, had incurred no indebtedness to the respondents for the balance of the purchase moneys. The appellant thus relied upon authorities suggesting that the deposit must be to secure an advance made at that time, or in some circumstances made antecedently23, and upon general propositions that equity does not order specific performance of a contract to make or take a loan of money, whether the loan is to be on security or not24. The unpaid balance of the purchase price under the Sale Contract for this purpose is treated as if it were a loan at an interest rate of 8 per cent per annum. There is no occasion to consider the implications of these submissions. The distinction between 18 and 22 July is indecisive of any issue in favour of the appellant. There was but one business day between the receipt of the duplicate certificate of title by Klar and Klar on 18 July and settlement on 22 July. The respondents correctly submit that there was a change in the nature of the dominion over the duplicate certificate of title on 22 July. Before settlement the solicitors held it in safe custody on account of the appellant; thereafter, in effectuation of the appellant's intention found at trial, the duplicate certificate of title was held as security for the balance of the purchase moneys. 23 See White and Tudor's Leading Cases in Equity, 9th ed (1928), vol 2 at 83. 24 Western Wagon and Property Company v West [1892] 1 Ch 271 at 275; but cf the judgment of Kearney J in Wight v Haberdan Pty Ltd [1984] 2 NSWLR 280. McHugh Callinan The presumption described above and said to arise from the delivery of title deeds may not readily accommodate what thereafter is alleged to be a third party security where the depositor is not the principal debtor. The present appeal concerns a third party security. But the respondents do not rely solely upon any such presumption in their favour. There thus is no occasion here to decide whether, as Templeman J considered in In re Wallis and Simmonds (Builders) Ltd25, such a "general rule" or "general presumption" applies to a deposit of title deeds securing debt owing by a third party. itself Templeman J said in Wallis and Simmonds26 that in logic there could be no distinction between deposits to secure a first and third party indebtedness. The appellant criticised that statement. But, putting aside the question of a presumption, evidence of the dealings between the parties may lead to the conclusion that, as in this case, a third party security was provided. In Wallis and Simmonds the evidence and there was detailed consideration of Templeman J relied upon the presumption he favoured in order to resolve the issue of intention in favour of the giving of security. In the present case, no such reliance is necessary for the respondents to succeed. On the other hand, the close analysis by Bryson J of the evidence in Arnick Holdings Ltd v Australian Bank Ltd27 led him to conclude that the delivery of the title documents to the bank was for the limited purpose of an overall credit assessment of the account of the third party customer. Finally on this point, the terms of s 75 of the Act do not foreclose the possibility of the provision of third party security by deposit of title deeds. It was accepted in the nineteenth century that a surety might take security for its obligations to the principal creditor, by deposit with the surety of title deeds by the party for whose benefit the guarantee was given28. There is nothing in the terms of s 75 to limit the nature of the obligations secured by an equitable mortgage by deposit of a certificate of title. 25 [1974] 1 WLR 391 at 398, 401; [1974] 1 All ER 561 at 567, 569-570. 26 [1974] 1 WLR 391 at 398; [1974] 1 All ER 561 at 567. 27 Unreported, New South Wales Supreme Court, Equity Division, 4 December 1987. 28 Sporle v Whayman (1855) 20 Beav 607 [52 ER 738]. McHugh Callinan It should also be noted that s 75(2) indicates that there is no limitation placed by s 75 upon the creation of equitable mortgages other than by deposit of a certificate of title. One such species of equitable mortgage is that considered in J & H Just (Holdings) Pty Ltd v Bank of New South Wales29, where an overdraft was continued on the security of the provision of an unregistered memorandum of mortgage accompanied by deposit of the duplicate certificate of title. The memorandum of mortgage, even while it remains unregistered, gives the equitable mortgagee the benefit of a personal covenant to pay and other contractual rights30. Such an arrangement was proposed by Mr Klar in the present case, but, as has been noted, not perfected. Two points remain among those argued by the appellant. First, it is not critical that the deposit was made when Mr Theodore rather than his mother dealt with Klar and Klar. The express authority which Mrs Theodore conferred upon her son was in terms apt to permit that step being taken on her behalf. Secondly, the circumstance that had the respondents relied only upon a presumption, there would have been credible evidence to rebut it, is not determinative. The critical findings, detailed earlier in these reasons, were adverse to the appellant, without any need to rely upon a presumption. Orders Order 2(b) of the orders made by the Court of Appeal fixed an interest rate of 5 per cent per annum. This order may have reflected an implied obligation to pay interest where there was no agreement on the point and to have thus fixed upon 5 per cent31. But the Sale Contract stipulated 8 per cent. Further, in any event, the terms of the declaration in order 2(a), described earlier in these reasons, are, the respondents accept, apt to include within the moneys secured the interest obligation of Mobile Lab under the Sale Contract. Order 2(b) of the orders of the Court of Appeal should be set aside. Otherwise, the appeal should be dismissed with costs. 29 (1971) 125 CLR 546 at 549. 30 Weaver and Craigie, The Law Relating to Banker and Customer in Australia 31 Ryan v O'Sullivan [1956] VLR 99 at 101.
HIGH COURT OF AUSTRALIA MINISTER FOR IMMIGRATION AND MULTICULTURAL AND INDIGENOUS AFFAIRS APPELLANT AND B & ANOR RESPONDENTS Minister for Immigration and Multicultural and Indigenous Affairs v B [2004] HCA 20 29 April 2004 1. Appeal allowed. ORDER 2. Set aside the orders of the Full Court of the Family Court of Australia made on 19 June 2003 and, in their place, order that the appeal to the Full Court of the Family Court be dismissed. On appeal from the Family Court of Australia Representation: D M J Bennett QC, Solicitor-General of the Commonwealth with G R Kennett for the appellant and intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) S W Tilmouth QC with S C Churches and S D Ower for the first respondents (instructed by Jeremy Moore & Associates) D F Jackson QC with B W McQuade for the second respondent (instructed by Boylan & Co) F P Hampel SC with K L Eastman appearing as amicus curiae on behalf of Amnesty International Australia (instructed by Public Interest Advocacy Centre) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Minister for Immigration and Multicultural and Indigenous Affairs v B Courts and judicial system – Family Court – Jurisdiction – Scope of welfare jurisdiction – Constitutional basis of welfare jurisdiction – Whether conferral of jurisdiction in relation to a "matter" – Children in immigration detention – Whether welfare jurisdiction extends to children of marriages of parents in immigration detention – Whether Family Court in exercising welfare jurisdiction can make orders directed at third parties – Whether Family Court has power to order release from detention – Whether any general welfare jurisdiction and powers of Family Court authorises orders inconsistent with specific obligations imposed on federal officers under Migration Act. Family law – Children – Children in immigration detention – Welfare jurisdiction – Scope of welfare jurisdiction – Whether welfare jurisdiction extends to children of marriages of persons in immigration detention – Whether court has power to order release from detention. Family Court of Australia – Jurisdiction – Scope of welfare jurisdiction – Whether welfare jurisdiction extends to children of marriages of parents in immigration detention. Family Court of Australia – Order – Certificate granting leave to appeal to High Court of Australia – Relevant considerations governing grant of such certificate. Migration – Detention – Unlawful non-citizens – Children in immigration detention – Whether Family Court has power to make orders releasing children from detention. International law – Interpretation of legislation in conformity with treaty obligations – Relevance and effect of provisions of treaties to which Australia is a party – Obligation to give effect to clear provisions of valid Australian statutory law notwithstanding alleged breaches of international law. Words and phrases – "jurisdiction", "matter". Constitution, covering cl 5, ss 51(xxi), 51(xxii), 73, 74, 75, 76, 77. Family Law Act 1975 (Cth), Pt VII, ss 60B, 67ZC, 68B, 69H, 69ZH, 95(b). Migration Act 1958 (Cth), ss 189, 196. GLEESON CJ AND McHUGH J. The question in this appeal is whether the Family Court of Australia has jurisdiction to order the Minister for Immigration and Multicultural and Indigenous Affairs to release children who are detained in an immigration detention centre in accordance with the Migration Act 1958 (Cth) ("the Migration Act"). In our opinion, the Family Court has no jurisdiction to make such an order. Nor has it any jurisdiction to make orders concerning the welfare of children who are held in immigration detention. The principal difficulty in the appeal arises out of the complexity of the legislative scheme contained in Pt VII of the Family Law Act 1975 (Cth) ("the Act") dealing with children, a complexity that is not reduced by a form of drafting that is sometimes used in federal legislation. This form of drafting commences with the enactment of a provision that, standing alone, suggests an absence of constitutional constraints on the federal Parliament. Other sections of the legislation, however, then operate to confine the primary provision and bring its content within one or more heads of federal constitutional power. No doubt the drafters of legislation in this form can defend it as being no more than a logical set of propositions that conduce to clarity of meaning. Nevertheless, in the present case it appears that this form of drafting does not convey clearly to the reader the object of the legislation. What is clear to the drafter is not necessarily clear to the reader. The drafter has the advantage of knowing the object that he or she is seeking to achieve. As the argument in this appeal and the division of opinion in the Family Court indicates, however, the object of the drafter may not be as clear to those whose task is to read and interpret the legislation. We think that it may also fairly be said that the drafter of significant parts of Pt VII has not always kept in mind the constitutional requirements of ss 75, 76 and 77 of the Constitution. Section 77 confines the jurisdiction of federal courts to the "matters" mentioned in ss 75 and 76 of the Constitution. In turn, this requires that the conferral of jurisdiction identify – expressly or inferentially – the substantive legal rights, privileges, liabilities or duties of persons who are the subject of the conferral or investing of federal jurisdiction for the purposes of assessing whether jurisdiction has been conferred in respect of a constitutional "matter". Statement of the case The children concerned in this appeal are two sons and three daughters of persons who, like the children, are unlawful non-citizens within the meaning of ss 4 and 14 of the Migration Act. In July 2002, the children and their mother were being held at an immigration detention centre at Woomera in South Australia, a centre established under that Act. At the time this appeal was heard, but not in July 2002, the father of the children was detained in an immigration detention centre. In July 2002, the two sons commenced proceedings by their mother as their next friend in the Family Court of Australia in its South Australian registry. Later, the mother was given leave to join the three female McHugh children as parties to the proceedings. Among the orders sought by the male children was a mandatory order under s 67ZC of the Act that the Minister "be required to release [the children] from detention at the Woomera Immigration Reception Processing Centre." The father intervened in the proceedings on behalf of all five children and also sought various orders against the Minister. In October 2002, Dawe J dismissed both the applications by the two male children (the three female children had not yet been joined as parties to the proceedings) and by the father. Her Honour held that the Family Court did not have jurisdiction in South Australia to make the orders sought. However, an appeal to the Full Court of the Family Court succeeded, and the matter was remitted for rehearing before another judge, who dismissed the applications. After another appeal, the Full Court ordered that the children be released from immigration detention until the final hearing of their applications. In the first appeal the majority of the Full Court, Nicholson CJ and O'Ryan J, said that the provisions of subdiv F of Div 12 of Pt VII of the Act "assume the conferring of jurisdiction upon the court in respect of children of marriages without limitation."1 Their Honours held that the welfare jurisdiction of the Family Court in respect of children was not limited to disputes between parents concerning custody and access to children. The majority said that, when the welfare of children requires it, the Court could make orders against third parties2. The majority was also of the view that s 67ZC of the Act gave effect to the United Nations Convention on the Rights of the Child3, and that the constitutionality of s 67ZC was not confined by the marriage and divorce powers conferred on the federal Parliament by s 51(xxi) and (xxii) of the Constitution4. After the hearing of the first appeal to the Full Court of the Family Court, that Court granted a certificate under s 95(b) of the Act, giving the Minister a right of appeal to this Court on the ground that the case involved "an important question of law or of public interest". The Full Court certified that four such questions were involved in this case. In the view we take of this appeal, 1 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 627. 2 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 639-640, 645, 655. 3 Opened for signature 20 November 1989, [1991] ATS 4 (entered into force 2 September 1990; entered into force for Australia 16 January 1991). 4 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 650-651. McHugh however, it is necessary to refer only to question 1, which raises the following issue for determination: "The scope of the 'welfare' jurisdiction of the Family Court under s 67ZC and/or s 68B of the Family Law Act 1975, in particular whether that jurisdiction extends to: determining the validity of the detention of a non-citizen child (who is the child of a marriage) under s 196 of the Migration Act 1958, and (ii) making orders directing officers in the performance of their functions under the Migration Act in relation to such a child." Jurisdiction As the above question indicates, a central question in the appeal concerns the jurisdiction of the Family Court. Jurisdiction is a term used with a variety of meanings. It is often used to describe the amenability of the defendant to the reach of a court's process5, which may be limited to certain subject matters or geographical locations. In a legal context the primary meaning of jurisdiction is "authority to decide"6. It is to be distinguished from the powers that a court may use in the exercise of its jurisdiction7. Because the Family Court is a federal court created by the Parliament of the Commonwealth8, its jurisdiction – its authority to decide – must be defined in accordance with ss 75, 76 and 77 of the Constitution. Section 77 empowers the Parliament of the Commonwealth to define the jurisdiction of a federal court with respect to any of the matters mentioned in ss 75 and 76 of the Constitution. One of the matters mentioned in s 76 is a matter "arising under any laws made by the Parliament". "Matter" in ss 75, 76 and 77 does not mean a legal proceeding between parties or a bare description of some subject matter that falls within a head of federal legislative power. In 5 Laurie v Carroll (1958) 98 CLR 310 at 331. 6 See Ah Yick v Lehmert (1905) 2 CLR 593 at 603; Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087 at 1142. 7 Harris v Caladine (1991) 172 CLR 84 at 136. 8 Family Law Act 1975 (Cth), s 21. McHugh In re Judiciary and Navigation Acts, Knox CJ, Gavan Duffy, Powers, Rich and "[W]e do not think that the word 'matter' in s 76 means a legal proceeding, but rather the subject matter for determination in a legal proceeding. In our opinion there can be no matter within the meaning of the section unless there is some immediate right, duty or liability to be established by the determination of the Court." A "right or privilege or protection given by law"10 may give rise to a "matter" within the meaning of ss 75 and 76. Likewise, an existing claim of right11 or any criminal liability or civil duty imposed by federal legislation may also give rise to a "matter" within the meaning of ss 75 and 7612. However, there can be no "matter" for the purpose of ss 75, 76 and 77 of the Constitution unless the relevant legislation identifies – expressly or inferentially – some right that may be determined or privilege that may be granted by a court, or some duty or liability that is enforceable against a person by another person. Most "matters" involve the determination of a duty or liability in one party and a correlative right or standing in another person to enforce the duty or liability. In some exceptional cases, however, a court may be given jurisdiction to make an order on the application of a person that will constitute a "matter" even though there is no lis inter partes or adjudication of rights. Orders concerning judicial advice to trustees or company liquidators, the administration of assets or the giving of consent to the marriage of a ward of the court are well-known exercises of judicial power13 and are therefore "matters" in this exceptional sense. The jurisdiction of the Family Court is confined constitutionally to "matters" in the senses described above. Despite the requirements of Ch III of the Constitution, namely, that the Commonwealth Parliament may invest federal courts only with jurisdiction in respect of the matters set out in ss 75 and 76, some provisions of the Act which use the term "jurisdiction" can only loosely – or at all events inferentially – be (1921) 29 CLR 257 at 265. 10 In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 266. 11 In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 266. 12 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 166. 13 See, eg, R v Davison (1954) 90 CLR 353 at 368. McHugh regarded as defining the jurisdiction of the Family Court with respect to such "matters". Thus, s 67ZC, a key provision in this appeal, declares: In addition to the jurisdiction that a court has under this Part in relation to children, the court also has jurisdiction to make orders relating to the welfare of children. In deciding whether to make an order under subsection (1) in relation to a child, a court must regard the best interests of the child as the paramount consideration." Under the Constitution, the Family Court, as a federal court, may only be invested with jurisdiction that the Parliament has defined by a law with respect to one of the "matters" mentioned in s 75 or s 76 of the Constitution. In this case, the only relevant "matter" is a "matter ... arising under any laws made by the Parliament"14. The "welfare of children" is not a matter mentioned in s 75 or s 76 of the Constitution. Indeed, it is not a matter mentioned in s 51 of the Constitution, the chief provision which invests the federal Parliament with legislative power. Section 67ZC also does not itself expressly give jurisdiction in respect of a "matter": it does not refer to any substantive rights, privileges, duties or liabilities or the persons who can apply for or be made subject to an order under the section. However, this Court has long recognised that the requirements of s 77 of the Constitution may be satisfied even though jurisdiction in respect of a matter is defined or invested only inferentially. The inference may be drawn from the nature of a remedy granted15 or from other provisions in the legislation that confer rights or impose duties or liabilities on persons16. Thus, in Hooper v Hooper17, this Court held that federal jurisdiction was invested in the Supreme Courts of the States by a combination of two sections of the Matrimonial Causes Act 1945 (Cth), namely ss 10 and 11. The first section, s 10, authorised a person domiciled in one State but resident in another State to commence proceedings in respect of a "matrimonial cause", as defined, in the Supreme Court of the State of residence. The second section, s 11, gave that person the rights that he or she had 14 Constitution, s 76(ii). 15 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141. 16 Hooper v Hooper (1955) 91 CLR 529. 17 (1955) 91 CLR 529. McHugh under the law of the State of domicile. In a unanimous judgment, this Court stated18: "A substantive 'law of the Commonwealth' is thus enacted, and, whenever a 'matrimonial cause' is instituted putting any of those rights in suit, there is a 'matter' which 'arises' under that law of the Commonwealth. And 'with respect to' that 'matter' State courts may be lawfully invested with federal jurisdiction under s 77(iii) of the Constitution." Similarly, in R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett19, this Court held that inferentially Parliament had conferred jurisdiction with respect to a "matter" mentioned in ss 75 and 76. In Barrett, s 58E of the Commonwealth Conciliation and Arbitration Act 1904 (Cth) empowered the Commonwealth Court of Conciliation and Arbitration to "make an order giving directions for the performance or observance of any of the rules of an organization by any person who is under an obligation to perform or observe those rules." The prosecutor objected that, although s 58E defined the jurisdiction of a federal court, it did not do so "with respect to" any of the matters mentioned in ss 75 and 76 of the Constitution. This Court unanimously rejected that objection. Dixon J said20 that s 58E "must be taken to perform a double function, namely to deal with substantive liabilities or substantive legal relations and to give jurisdiction with reference to them." After referring to two forms that legislation may take, his Honour said21: "But, under either form of legislation, it is quite clear that a liability is imposed and that the liability accordingly supplies an appropriate subject or 'matter' upon which 'judicial power' or 'jurisdiction' may operate, whether the same breath or quite independently." jurisdiction is given the In contrast, s 67ZC does not itself impose any substantive liabilities or duties or confer rights or privileges on any person. Standing alone, therefore, s 67ZC does not confer jurisdiction in respect of a "matter" arising under a law of the Parliament because it does not confer rights or impose duties on anyone. The 18 Hooper v Hooper (1955) 91 CLR 529 at 536. 19 (1945) 70 CLR 141. 20 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 165. 21 R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett (1945) 70 CLR 141 at 166. McHugh "jurisdiction" conferred by s 67ZC is therefore not comparable with those provisions considered by this Court in Barrett and Hooper. Moreover, unless it were supported by the external affairs power22 or a reference from the States23 or was read down to refer to the parties to a marriage24, it could not constitutionally confer any rights or impose any duties in respect of the welfare of children. Despite some similarities to this case, the principal judgment of Mason CJ, Dawson, Toohey and Gaudron JJ in this Court in Marion's Case25 does not support a finding that s 67ZC is a source of power and also operates to confer jurisdiction for the purpose of Ch III of the Constitution. In Marion's Case, this Court held that the Family Court had jurisdiction under its "welfare jurisdiction" to authorise the carrying out of a sterilisation procedure upon a child of a marriage. Marion's Case arose out of a claim by the parents of the child for an order authorising the sterilisation. In the alternative, the parents sought a declaration that it was lawful for them to consent to the performance of those procedures26. The Secretary of the Department of Health and Community Services of the Northern Territory represented the child in the proceedings. The parents' claim gave rise to two main questions: Could the parents lawfully authorise the sterilisation without an order of a court? If not, did the Family Court have jurisdiction to give consent to the sterilisation? This Court held that the Family Court had jurisdiction to give consent to the sterilisation. In their joint judgment, Mason CJ, Dawson, Toohey and Gaudron JJ said27, in a passage with which McHugh J agreed28: 22 Constitution, s 51(xxix). 23 Constitution, s 51(xxxvii). 24 Secretary, Department of Health and Community Services v JWB and SMB (Marion's Case) (1992) 175 CLR 218 at 257. 25 (1992) 175 CLR 218. 26 Marion's Case (1992) 175 CLR 218 at 221. 27 Marion's Case (1992) 175 CLR 218 at 257. 28 Marion's Case (1992) 175 CLR 218 at 318. McHugh "As the Family Law Act now stands, s 63(1) confers jurisdiction on the Family Court 'in relation to matters arising under this Part'. Section 64(1) of the Act provides: 'In proceedings with respect to the custody, guardianship or welfare of, or access to, a child – ... the court may make such order in respect of those matters as it considers proper, including an order until further order.' The sub-section does not in terms confer jurisdiction on the Court but it confers power to make orders and presupposes jurisdiction. Whether the source of jurisdiction is to be found primarily in s 64 along with s 63(1) as the appellant argued, or in a much wider range of sections in Pt VII as the Commonwealth argued, it is clear that the welfare of a child of a marriage is a 'matter' which arises under Pt VII for the purposes of s 63(1) and is, therefore, an independent subject which may support proceedings before the Family Court. Although there are limits the it encompasses is no doubt circumstances of the present case." (emphasis added, footnote omitted) jurisdiction, there that that Section 63E of the Act, as it then provided, gave the parents, as guardians of the child, responsibility for the long-term welfare of the child and all the powers, rights and duties that, apart from the Act, vested by law or custom in a guardian. Because the Act vested those rights, powers and duties and that responsibility in the parents, a controversy between the parents and the Secretary, as the child's representative, concerning the right of the parents to authorise her sterilisation gave rise to a "matter" for the purpose of Ch III of the Constitution. Hence, the first of the two main questions gave rise to a "matter" within the meaning of s 77 of the Constitution. The second question also gave rise to such a "matter". Section 63E made the parents responsible for the long-term welfare of the child, and s 64 authorised the Family Court to make orders for the welfare of the child. At least by implication, Pt VII of the Act gave the parents the right to seek an order to advance or protect the welfare of the child. Accordingly, the second question in Marion's Case concerned a "right or privilege or protection given by law"29. It was analogous to those "matters" concerning children over which the Court of Chancery has long exercised parens patriae jurisdiction. 29 In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 266. McHugh It is beside the point whether an application for such an order is or is not opposed, or involves or does not involve a lis inter partes in an application, such as that involved in Marion's Case. As Dixon CJ and McTiernan J pointed out in R v Davison30, courts make many judicial orders that involve no lis inter partes or adjudication of rights, yet they exercise judicial power. Further, any "matter" that involves the exercise of judicial power and answers one or more of the subject matters described in s 75 or s 76 of the Constitution is necessarily a "matter" for the purpose of s 77 of the Constitution. After referring to many well-known definitions of judicial power, Dixon CJ and McTiernan J said31: "It may be said of each of these various elements that it is entirely lacking from many proceedings falling within the jurisdiction of various courts of justice in English law. In the administration of assets or of trusts the Court of Chancery made many orders involving no lis inter partes, no adjudication of rights and sometimes self-executing. Orders relating to the maintenance and guardianship of infants, the exercise of a power of sale by way of family arrangement and the consent to the marriage of a ward of court are all conceived as forming part of the exercise of judicial power as understood in the tradition of English law. Recently courts have been called upon to administer enemy property. In England declarations of legitimacy may be made. To wind up companies may involve many orders that have none of the elements upon which these definitions insist. Yet all these things have long fallen to the courts of justice. To grant probate of a will or letters of administration is a judicial function and could not be excluded from the judicial power of a country governed by English law." The joint judgment in Marion's Case regarded the application in that case as being analogous to some of the applications for orders traditionally made to the Court of Chancery. Their Honours stated that the "welfare jurisdiction" was "similar to the parens patriae jurisdiction"32 of the Court of Chancery. They stated further33: "No doubt the jurisdiction over infants is for the most part supervisory in the sense that the courts are supervising the exercise of care 30 (1954) 90 CLR 353 at 368. 31 R v Davison (1954) 90 CLR 353 at 368. 32 Marion's Case (1992) 175 CLR 218 at 258. 33 Marion's Case (1992) 175 CLR 218 at 258-259. McHugh and control of infants by parents and guardians. However, to say this is not to assert that the jurisdiction is essentially supervisory or that the courts are merely supervising or reviewing parental or guardian care and control. As already explained, the parens patriae jurisdiction springs from the direct responsibility of the Crown for those who cannot look after themselves; it includes infants as well as those of unsound mind. So the courts can exercise jurisdiction in cases where parents have no power to consent to an operation, as well as cases in which they have the power." (footnote omitted) This passage, and the last sentence in particular, should not be read, however, as suggesting that the Family Court had a welfare jurisdiction that was at large. Earlier, the joint judgment recognised this when their Honours said that "there are limits on that jurisdiction"34. The above passage should not be read, therefore, as suggesting that the Family Court's welfare jurisdiction authorises orders that are divorced from the determination of "some immediate right, duty or liability"35 of the parties to a controversy or that are not analogous to those exceptional orders traditionally made by courts exercising judicial power. Their Honours are hardly likely to have overlooked that there can be no conferral of federal jurisdiction unless there is a "matter" within the meaning of ss 75 and 76 of the Constitution. It was common ground in Marion's Case that the Family Court had jurisdiction to authorise the sterilisation of a child36. As a result, this Court was not concerned to articulate definitively the jurisdiction of the Family Court in respect of the welfare of a child. However, the effect of s 77 of the Constitution is that, for federal courts, the jurisdiction must be defined with respect to a right, privilege, duty or liability. Ordinarily, this means that the law defining jurisdiction must identify the person or persons who have the benefit or burden of the right, privilege, duty or liability. In some cases, the law defining jurisdiction may grant a right or privilege without imposing any corresponding duty or liability on another person. The holding of the Court in Marion's Case is an example. Such cases are nevertheless rare and are recognised only for historical reasons. Accordingly, the failure of s 67ZC, standing alone, to define the Family Court's jurisdiction with respect to a s 75 or s 76 matter is not itself decisive against the respondents' contention that the Family Court had jurisdiction in the 34 Marion's Case (1992) 175 CLR 218 at 257. 35 In re Judiciary and Navigation Acts (1921) 29 CLR 257 at 265. 36 (1992) 175 CLR 218 at 254. McHugh present matter. Other provisions of the Act may supply the elements of a "matter". The ultimate question then is whether, read as a whole, the Act defines the jurisdiction of and thereby – for constitutional purposes – confers jurisdiction on the Family Court to determine the present dispute between the respondent children and the Minister. The question may be posed in two different ways: (1) Does the Act confer jurisdiction on the Family Court to decide that the children have a right as against the Minister to be released from immigration detention? (2) Does the Act confer jurisdiction on the Family Court to determine that the children have a right to require the Minister to act in their best interests while they are in immigration detention? The valid application of s 67ZC, therefore, is dependent upon some other provision in Pt VII of the Act creating a "matter" within the meaning of s 75 or s 76 of the Constitution to which the jurisdiction conferred by s 67ZC can attach. Consequently, it is necessary to turn to other provisions in the Act – particularly Pt VII – to determine the jurisdiction, if any, that s 67ZC validly confers. This step is required in order to ascertain whether one or more provisions enacts substantive rights or privileges or imposes substantive duties which constitute a "matter" under s 75 or s 76 of the Constitution and which can be inferentially linked to s 67ZC. If this step is not taken, it is impossible to identify the "matters" concerning "the welfare of children" which arise under a law of the Parliament for the purpose of s 76(ii) of the Constitution and the jurisdiction of the Family Court that the Parliament has defined in respect of those matters for the purpose of s 77(i) of the Constitution. Relevant provisions of the Act Section 21 of the Act creates the Family Court of Australia and declares it to be a superior court of record. Sections 31 and 33 set out the original jurisdiction of the Family Court. Section 31(1)(a) confers jurisdiction on the Family Court with respect to "matters arising under this Act or under the repealed Act in respect of which matrimonial causes are instituted or continued under this Act". Section 31(1)(c) confers jurisdiction in respect of matters arising under a law of the Parliament of a Territory other than the Northern Territory. Section 31(1)(d) confers jurisdiction on the Family Court in relation to matters in respect of which proceedings may be instituted in that Court. Section 33 confers jurisdiction on the Court in respect of matters associated with matters in which the jurisdiction of the Court is invoked. Section 40(1) declares that "[t]he jurisdiction of the Family Court under this Act shall not be exercised except in accordance with Proclamations under this section." McHugh Part V of the Act is concerned with applications relating to matrimonial causes. Despite the conferral of jurisdiction in respect of such matters by s 31, s 39 confers jurisdiction on the Family Court inter alia "with respect to matters arising under this Act in respect of which ... matrimonial causes are instituted under this Act [or] ... continued in accordance with section 9"37. Section 4 of the Act contains a definition of "matrimonial cause"; it does not extend to disputes concerning the welfare of children. Part VI is concerned with applications for the dissolution and nullity of marriage. Unlike Pt V, Pt VI does not contain an express grant of jurisdiction. Nothing in any of Pts I to VI of the Act, with the exception of s 31 in Pt IV, throws any light on the question of the Family Court's jurisdiction in this case. As we have already indicated, Pt VII is concerned with children. Like Pt V, and despite the terms of s 31, Pt VII contains a number of conferrals of jurisdiction. None of them expressly indicates or inferentially suggests that the Family Court has jurisdiction to make orders against the Minister. On the contrary, the various Divisions and subdivisions of Pt VII show that the main object of the Part is to require parents to act in ways that will advance the best interests of their children. Indeed, s 60B(1) declares that the object of the Part is "ensure that children receive adequate and proper parenting to help them achieve their full potential, and to ensure that parents fulfil their duties, the care, welfare and and meet development of their children." their responsibilities concerning Nor, when construed as a whole, does anything in Pt VII suggest that the Part was intended to give the Family Court a general jurisdiction over children with the power to make an order against individuals whenever the best interests of a child require such an order to be made. It is appropriate to consider each Division in turn. Division 1 of Pt VII is introductory. It contains s 60F, which extends, for the purpose of the Act, the meaning of "a child of a marriage". The term includes a reference to a child adopted since the marriage by the husband and wife, a child 37 Section 39(5). McHugh of the husband and wife born before the marriage and a child of the husband and wife who is born as a result of artificial conception procedures38. Division 2 is concerned with parental responsibility. It contains s 61B, which defines "parental responsibility" in relation to a child to mean "all the duties, powers, responsibilities and authority which, by law, parents have in relation to children." Division 3 deals with the counselling of people in relation to matters affecting children. Its chief concern is with the duties and powers of the Family Court and its officers in respect of counselling those who are involved in proceedings under Pt VII. Division 4 is concerned with parenting plans. Section 63B states that the parents of a child are encouraged to agree about matters concerning the child rather than seeking a court order and, in reaching an agreement, to regard the best interests of the child as the paramount consideration. Division 5 addresses parenting orders. Section 64B(2) defines a parenting order as one that deals with the person or persons with whom a child is to live, the contact between a child and another person or persons, the maintenance of a child or any other aspect of parental responsibility for a child. Section 64B into residence orders, contact orders, child subdivides parenting orders maintenance orders39 and specific issues orders depending upon the subject matter of the particular order. Division 6 is concerned with parenting orders other than child maintenance orders. Section 65C permits either or both of the child's parents, the child, a grandparent of the child or any other person concerned with the care, welfare or development of the child to apply for a parenting order. Such orders include orders concerning residence, contact and taking and sending children from Australia. Sections 65M, 65N and 65P oblige persons not to act contrary to, or hinder or impair, such orders. Division 7 is concerned with child maintenance orders. Section 66B(1) declares that the principal object of the Division "is to ensure that children receive a proper level of financial support from their parents." Section 66F states that either or both of the child's parents, the child, a grandparent of the child or 38 Section 60H(1). 39 A child maintenance order is a parenting order that deals with the maintenance of a child: s 64B(5). McHugh any other person concerned with the care, welfare or development of the child may apply to a court for a child maintenance order. Division 8 is concerned with other matters relating to children, including the liability of an unmarried father to contribute towards child bearing expenses, orders concerning the location and recovery of children and the reporting of alleged acts of child abuse. Section 67ZC – which is the key section in this case – is contained in this Division and, as we have said, gives the Family Court "jurisdiction" to make orders relating to the welfare of children. In deciding whether to make an order under that section, "a court must regard the best interests of the child as the paramount consideration."40 Subdivision B of Div 10 of Pt VII prescribes rules for determining what is in a child's best interests. Division 9 is concerned with the institution of proceedings for injunctions in relation to children. Division 10 also addresses separate representation of children in curial proceedings. Division 11 is concerned with the relationship between contact orders and family violence orders. Thus, the object of Pt VII and the contents of Divs 1 to 11 read as a whole suggest that, except where expressly mentioned, Pt VII is concerned with proceedings between the parents of children and also with the obligations of parents to children. Division 12 of Pt VII (ss 69A-69ZK) is headed "Proceedings and jurisdiction". Subdivision B of that Division regulates the institution of legal proceedings under Pt VII. Subdivision C confers jurisdiction on the Family Court, each State Family Court and the Supreme Court of the Northern Territory in relation to matters arising under Pt VII. Section 69H(1), which is in subdiv C, specifically confers jurisdiction "on the Family Court in relation to matters arising under this Part." Section 69M declares that the "jurisdiction conferred on or invested in a court by this Division is in addition to any jurisdiction conferred on or invested in the court apart from this Division." Subdivision D is concerned with presumptions of parentage. Subdivision E is concerned with evidence concerning the parentage of a child. Subdivision F is concerned with the application of Pt VII to the States and Territories and is headed "Extension, application and additional operation of Part". The subdivision contains six sections, ss 69ZE-69ZK. Subject to the terms of the section and s 69ZF, s 69ZE extends the operation of Pt VII to New South Wales, Victoria, Queensland, South Australia and Tasmania41. Subject to 40 Section 67ZC(2). 41 Section 69ZE(1). McHugh the same provisions, s 69ZE also extends the operation of Pt VII to Western Australia if the Parliament of that State refers to the Parliament of the Commonwealth certain matters concerning children or if it adopts Pt VII42. Those matters are: (1) "the maintenance of children and the payment of expenses in relation to children or childbearing"; and (2) "parental responsibility for children". Western Australia has not made such a referral. Part VII extends to a State only if an Act of the Parliament of the State either refers to the Parliament of the Commonwealth those matters or "matters that include, or are included in, those matters" or adopts Pt VII43. Further, the Part extends to a State only in so far as it makes provision with respect to the matters that are referred to the Parliament of the Commonwealth or matters that are incidental to the execution of any power vested in the Commonwealth Parliament in relation to those matters44. South Australia has not referred the matter of the welfare of children to the Parliament of the Commonwealth. Section 69ZG applies Pt VII to the Territories. Section 69ZF, which empowers the Governor-General by proclamation to "declare that all the child welfare law provisions of this Part extend to a specified State"45, has no application in the present case. Section 69ZJ confers jurisdiction on courts where jurisdiction pursuant to Pt VII has been invested in or conferred on the court in matters between residents of different States with respect to the maintenance of children, the payment of expenses in relation to children or child bearing, or parental responsibility in relation to children. Section 69ZH provides: "Additional application of Part (1) Without prejudice to its effect apart from this section, this Part also has effect as provided by this section. By virtue of this subsection, Divisions 2 to 7 (inclusive) (other than Subdivisions C, D and E of Division 6 and sections 66D, 66M and 42 Section 69ZE(2). 43 Section 69ZE(3). 44 Section 69ZE(4). 45 Section 69ZF(1). McHugh 66N), Subdivisions C and E of Division 8, Divisions 9, 10 and 11 and Subdivisions B and C of Division 12 (other than section 69D) have the effect, subject to subsection (3), that they would have if: each reference to a child were, by express provision, confined to a child of a marriage; and each reference to the parents of the child were, by express provision, confined to the parties to the marriage. The provisions mentioned in subsection (2) only have effect as mentioned in that subsection so far as they make provision with respect to the parental responsibility of the parties to a marriage for a child of the marriage, including (but not being limited to): the duties, powers, responsibilities and authority of those parties in relation to: the maintenance of the child and the payment of expenses in relation to the child; or the residence of the child, contact between the child and other persons and other aspects of the care, welfare and development of the child; and other aspects of duties, powers, responsibilities and authority in relation to the child: arising out of the marital relationship; or (iii) in relation to concurrent, pending or completed proceedings between those parties for principal relief; in relation to a dissolution or annulment of that marriage, or a legal separation of the parties to the marriage, that is effected in accordance with the law of an overseas jurisdiction and that is recognised as valid in Australia under section 104. By virtue of this subsection, Division 1, Subdivisions C, D and E of Division 6, section 69D, Subdivisions D and E of Division 12 and Divisions 13 and 14 and this Subdivision, have effect according to their tenor." Section 67ZC is contained in subdiv E of Div 8. Thus, s 69ZH gives s 67ZC an "effect" as if the references to "children" and "child" in that section McHugh were "confined to a child of a marriage"46 and the section made "provision with respect to the parental responsibility of the parties to a marriage for a child of the marriage"47. However, s 69ZH(1) declares: "Without prejudice to its effect apart from this section, this Part also has effect as provided by this section." The terms of s 69ZH(1) suggest, therefore, that the "jurisdiction" and powers conferred by s 67ZC are not necessarily restricted to those situations contemplated by sub-ss (2) and (3) of s 69ZH. Hence, the jurisdiction and powers conferred by s 67ZC may have two operations: the restrictive operation given to them by those sub-sections and such wider operation as it is possible to deduce from provisions of Pt VII other than s 69ZH. The majority of the Full Court held that s 67ZC had the wider operation. Nicholson CJ and O'Ryan J stated48 that "the source of power for the court to exercise its jurisdiction over children of a marriage ... is to be found in subdiv C of Pt VII and particularly in ss 69H(1) and 69M." In our view, however, ss 69H(1) and 69M, even when read together, do not operate to confer jurisdiction on the Court in respect of "matters" for the purpose of s 77 of the Constitution. As we have indicated, s 69H(1) confers jurisdiction on the Family Court "in relation to matters arising under this Part." However, s 69H(1) is not a self-contained conferral of federal jurisdiction: the "matters" over which the Court has jurisdiction can be identified only by reference to other provisions of Pt VII. Thus, s 69H requires a search for a relevant "matter" arising under Pt VII. It no more determines the question of the Family Court's jurisdiction in respect of children than does the reference to "jurisdiction" in s 67ZC. Section 69M, to which the majority also referred as giving jurisdiction, does not take the position any further. It simply declares that the jurisdiction conferred or invested by Div 12 "is in addition to any jurisdiction conferred on or invested in the court apart from this Division." The Minister contends that the source of the relevant jurisdiction of the Family Court in the present case is Div 12 and not Div 8 (s 67ZC) or Div 9 (s 68B) as the respondents contend. In our opinion, the Minister is correct in asserting that on their face neither Div 8 nor Div 9 confers any relevant jurisdiction in this case – relevant in the sense that they give jurisdiction with respect to a matter "mentioned" in s 76 of the Constitution. The Minister is also almost certainly right in contending that it is Div 12 that confers the relevant 46 Section 69ZH(2). 47 Section 69ZH(3). 48 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 623. McHugh jurisdiction. This contention of the Minister does not sit well with the declaration in s 69ZH(1), however, if s 67ZC, for example, has "effect" independently of s 69ZH. Nor does it sit well with the statement in par 319 of the Explanatory Memorandum to the Family Law Reform Bill 1994 (Cth) which inserted s 67ZC into the Act. That paragraph provided49: "The new section 67ZC provides the court with jurisdiction relating to the welfare of children in addition to the jurisdiction that the court has under Part VII in relation to children. This jurisdiction is the parens patriae jurisdiction explained by the High Court in [Marion's Case]." (emphasis added) On the other hand, despite s 69ZH(1), the terms of sub-ss (2), (3) and particularly (4) of s 69ZH suggest that s 67ZC is confined by the terms of s 69ZH(2) and (3). Section 69ZH(4) declares that various provisions of Pt VII have effect according to their tenor. If the provisions identified in s 69ZH(2) and (3) operated independently of Div 12, this declaration would be superfluous. Importantly, the terms of s 69ZH(4) also necessarily imply that the various provisions named in s 69ZH(2) – including s 67ZC – do not operate according to their tenor. If they did, Parliament's enactment of s 69ZG and s 69ZH would be unnecessary. Ultimately, though, in the view that we take of Pt VII, it does not matter whether one accepts the Minister's or the Full Court's construction of s 69ZH. Even if s 67ZC has an operation independently of the terms of s 69ZH(2) and (3), the terms of Pt VII, read as a whole, and the constitutional imperatives of Ch III confine the Family Court's jurisdiction and powers with respect to the welfare of the children in this case in the same way as do s 69ZH(2) and (3). By necessary implication, the parents of a child may seek an order under s 67ZC whether the operation of that section is confined by s 69ZH(2) and (3) or whether it has an operation independently of those sub-sections. The right to seek that order arises from various provisions in Pt VII, but particularly from ss 60B, 61B and 61C. Section 60B(1) declares that the object of Pt VII: "is to ensure that children receive adequate and proper parenting to help them achieve their full potential, and to ensure that parents fulfil their duties, and meet their responsibilities, concerning the care, welfare and development of their children." 49 Family Law Reform Bill 1994 (Cth) Explanatory Memorandum at [319]. McHugh Section 61C(1) declares that "[e]ach of the parents of a child who is not 18 has parental responsibility for the child." Section 61B defines this parental responsibility in Pt VII to mean "all the duties, powers, responsibilities and authority which, by law, parents have in relation to children." The provisions of these three sections provide ample support for an application by a parent for an order under s 67ZC, whether the source of the jurisdiction is Div 12 generally or s 69H in particular. By necessary implication, the Family Court may also make an order under s 67ZC that is binding on a parent. Under that section it may also make orders such as those made in Marion's Case or those analogous to orders traditionally made by courts exercising the parens patriae jurisdiction. Nothing in that section or in the rest of Pt VII, however, suggests that the Family Court has jurisdiction to make orders binding on third parties whenever it would advance the welfare of a child to do so. Nothing in s 67ZC, or in Pt VII generally, imposes – expressly or inferentially – any duty or liability on third parties to act in the best interests of or to advance the welfare of a child. Except where Pt VII expressly imposes obligations on third parties – for example, ss 65M, 65N and 65P – that Part is concerned with the relationship between parents and children and parents' duties in respect of their children. We have already set out s 60B(1), which states the object of Pt VII. Section 60B(2) declares: "The principles underlying these objects are that, except when it is or would be contrary to a child's best interests: children have the right to know and be cared for by both their parents, regardless of whether their parents are married, separated, have never married or have never lived together; and children have a right of contact, on a regular basis, with both their parents and with other people significant to their care, welfare and development; and parents share duties and responsibilities concerning the care, welfare and development of their children; and parents should agree about the future parenting of their children." The orders sought in the present case are not concerned with the relationship between the parents of the children. They do not seek to enforce duties or obligations owed by the parents to the children. They are not analogous to the orders sought in Marion's Case, which did not impose any duty or liability on a third party. The object of the orders in the present case is to require the Minister to take or to refrain from taking action in respect of the children. Nothing in Pt VII gives any support for the making of such an order or orders against the Minister. Consequently, no provision or combination of provisions in McHugh Pt VII defines the jurisdiction of the Family Court with respect to a matter involving the Minister. So far as the Minister is concerned, the Act has not defined any jurisdiction of the Family Court with respect to a matter mentioned in s 75 or s 76 of the Constitution. It follows that neither s 67ZC nor s 68B of the Act – alone or in combination with s 69H or s 69ZH – gave the Family Court jurisdiction to: determine the validity of the detention of an unlawful non-citizen child (who was the child of a marriage) under s 196 of the Migration Act; or (ii) make orders directing officers in the performance of their functions under the Migration Act in relation to such a child. Orders The appeal should be allowed. The orders of the Full Court of the Family Court made on 19 June 2003 should be set aside. In place of those orders, there should be substituted an order that the appeal to the Full Court be dismissed. There should be no order in relation to the costs of the appeal to this Court. It was a condition of the grant of the certificate under s 95(b) of the Act that the Minister should pay the reasonable costs of the respondent children and the respondent intervener of and incidental to the appeal to this Court. GUMMOW, HAYNE AND HEYDON JJ. The Family Court proceedings On 31 July 2002, two boys identified as A and M and who were then aged approximately 12 and 14 years, instituted a proceeding in the Family Court of Australia by their mother as their next friend. There were three female siblings, then aged approximately 11, nine and six years. The father was granted leave to intervene and sought orders respecting the five children. It has not been disputed that the children are children of the marriage of the father and the mother. The children and their parents are unlawful non-citizens within the meaning of s 14 of the Migration Act 1958 (Cth) ("the Migration Act"). At the time of the institution of the proceeding in the Family Court, the children and their mother were detained at an immigration "detention centre" at Woomera in South Australia which was established under the Migration Act; the father then was living in the general community. By the time of the appeal to the Full Court of the Family Court giving rise to the litigation in this Court, the mother and the children had been transferred to another detention centre in South Australia known as the Baxter Immigration Detention Facility ("Baxter") and the father also was detained at Baxter. The claims for relief made in the application to the Family Court illuminated the scope of the controversy which constituted the matter in respect of which the Family Court was said to have the necessary federal jurisdiction; if the Family Court had jurisdiction to determine the controversy it would have power in the exercise of that jurisdiction to give the remedies sought50. Interim and final orders were sought in the application by A and M that the Minister for Immigration and Multicultural and Indigenous Affairs ("the Minister") release them from the Woomera detention centre on the ground that, broadly speaking, their continued detention was harmful to their welfare. The orders sought were described by reference to s 68B and s 67ZC of the Family Law Act 1975 (Cth) ("the Family Law Act"). Both provisions appear in Pt VII (ss 60A-70Q). Part VII, which is headed "Children", comprises 14 Divisions. It was introduced by s 31 of the Family Law Reform Act 1995 (Cth) ("the 1995 50 Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 590 [65]. Act") and since has been amended. The structure of Pt VII was described in Northern Territory v GPAO51 and U v U52. The father sought interim and final orders that the five children reside with him or, in the alternative, that orders be made protective of the children whilst they remained in detention. No particular provisions of Pt VII were identified in his application, but in argument in this Court counsel relied principally upon s 67ZC, which was said both to deal with subject-matter and to confer jurisdiction on the Family Court. On application by the Minister, a judge of the Family Court (Dawe J) dismissed the applications by A and M and by the father. Her Honour did so on the ground that the Family Court did not have any jurisdiction to make any of the orders sought against the Minister. Appeals to the Full Court of the Family Court succeeded53. On 19 June 2003, the Full Court (Nicholson CJ and O'Ryan J; Ellis J dissenting) set aside the orders made by Dawe J and ordered that the applications be remitted for rehearing. Thereafter, and following another successful Full Court appeal, the children were, by order made by the Full Court on 25 August 2003, released from immigration detention pending the final hearing of the applications. The authority of the Family Court The Family Court of Australia is established by s 21 of the Family Law Act as a superior court of record. It follows from the reasoning of this Court in Re Macks; Ex parte Saint54 that, like the Federal Court of Australia, the Family Court has authority to make decisions as to the existence of its jurisdiction in a matter and that its orders in relation thereto are final and binding unless and until set aside on appeal or pursuant to s 75(v) of the Constitution. The primary questions on this appeal by the Minister thus concern the existence and content of the jurisdiction of the Family Court to entertain the applications made to it. That 51 (1999) 196 CLR 553 at 571-573 [20]-[26], 594-596 [103]-[106]. 52 (2002) 211 CLR 238 at 250-251 [53]-[55]. 53 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604. In that appeal, the mother was given leave to add the three daughters as parties. 54 (2000) 204 CLR 158. requires consideration, in particular, of various provisions of Pt VII of the Family Law Act. The s 95(b) certificate The Minister appeals to this Court not upon a grant of special leave made by this Court pursuant to s 95(a) of the Family Law Act but upon a certificate granted by the Full Court of the Family Court under s 95(b) upon application by the Minister. The anomalous nature of s 95(b) and the difficulties to which certificates thereunder may give rise were considered in detail in the joint judgment of five members of this Court in DJL v The Central Authority55. That anomaly is the more apparent in the present case, given the remedies available in this Court under s 75(v) of the Constitution for jurisdictional error in the Family Court and the avenues for removal under s 40 of the Judiciary Act 1903 (Cth) upon application by the Attorney-General of the Commonwealth. The Full Court gave reasons upon the application by the Minister for the certificate. Their Honours said: "We accept that were we to grant such a certificate, the appeal may be considered by the High Court earlier than if we refuse to do so." However, the Court also noted: "[The submission for the Minister was that] it is almost inconceivable that the High Court would not grant Special Leave." The order of business in this Court is not for the presumption of any intermediate appellate court. There was no good ground for the supposition that s 95(b) confers a power to be exercised by reference to a consideration, false in the event, that, by the grant of a certificate in the place of an application under s 75(v) of the Constitution or an application for removal or a grant of special leave, particular litigation displaces or obtains a priority over consideration by this Court of the many matters of urgent and general public importance that at any time stand in its list. The appeal to this Court In this Court no challenge is made to the issue or terms of the s 95(b) certificate and the appeal must be determined upon its merits. Those merits are 55 (2000) 201 CLR 226 at 236-240 [12]-[23]. that the decision of Dawe J as to the absence of jurisdiction in the Family Court was correct and the consequential orders that her Honour made should not have been set aside. Accordingly, the appeal to this Court should be allowed and the orders of Dawe J reinstated. We turn to explain why this is so. The jurisdiction of the Family Court It is necessary to begin with the term "jurisdiction", of which it was said in the joint judgment in Lipohar v The Queen56: "It is a generic term, a point made by Isaacs J in Baxter v Commissioners of Taxation (NSW)57. It is used in a variety of senses, some relating to geography, some to persons and procedures, others to constitutional and judicial structures and powers. Thus, 'federal jurisdiction' is 'the authority to adjudicate derived from the Commonwealth Constitution and laws'58 whereas the phrase 'inherent jurisdiction', used in relation to such things as the granting of permanent stays for abuse of process, identifies the power of a court to make orders of a particular description59. 'Jurisdiction' may be used (i) to describe the amenability of a defendant to the court's writ and the geographical reach of that writ, or (ii) rather differently, to identify the subject matter of those actions entertained by a particular court, or, finally (iii) to locate a particular territorial or 'law area'60 or 'law district'61." 56 (1999) 200 CLR 485 at 516-517 [78]-[79]. 57 (1907) 4 CLR 1087 at 1142. In United States v Vanness 85 F 3d 661 at 663(n) (1996), 'jurisdiction' was said to be 'a word of many, too many, meanings'. 58 Baxter v Commissioners of Taxation (NSW) (1907) 4 CLR 1087 at 1142. See also Ah Yick v Lehmert (1905) 2 CLR 593 at 603; Gould v Brown (1998) 193 CLR 346 59 Williams v Spautz (1992) 174 CLR 509 at 518-519; Pelechowski v Registrar, Court of Appeal (1999) 198 CLR 435 at 450-453. 60 An expression used by the Court in Laurie v Carroll (1958) 98 CLR 310 at 331, with respect to New South Wales and Victoria. See also Breavington v Godleman (1988) 169 CLR 41 at 77, 97, 107. 61 An expression used by Wilson and Gaudron JJ in Breavington v Godleman (1988) 169 CLR 41 at 87. Further, the categories listed in ss 75 and 76 of the Constitution identify the existence of "federal jurisdiction" by a range of characteristics including the character of parties (s 75(iii), (iv)) and the source of the rights and liabilities in contention (s 75(i), s 76(iii)). In Harris v Caladine62, Toohey J distinguished between "jurisdiction" in the sense of authority to decide the range of matters which may be litigated before a court and the powers expressly or impliedly conferred by the legislation governing the court. His Honour added63 that this distinction between jurisdiction and power could not be applied neatly to the notion of the judicial power of the Commonwealth in Ch III of the Constitution. Of that notion, "[I]t is not concerned with the jurisdiction of particular courts and is broader than the particular powers that courts have in the exercise of their jurisdiction." The determination of the issues which arise on this appeal requires analysis of statute law. That analysis is not assisted by the use of general expressions such as "the welfare jurisdiction" or "the parens patriae jurisdiction" as an encouragement to subside from consideration of the statutory construction question affecting Ch III courts into the broad waters of the general law. It should be added immediately that in the text of Pt VII itself the various senses of the term "jurisdiction" are not clearly marked. This appeal turns upon the conferral upon the Family Court of the federal jurisdiction for it to adjudicate the controversy with the Minister. However, as will appear, the term "jurisdiction" is used in some provisions of Pt VII more loosely, and to identify the nature of disputed rights and liabilities (eg "the welfare of children") which, by the exercise of legislative power under s 51 of the Constitution, may provide the subject for adjudication, rather than the conferral of federal jurisdiction by a law made in exercise of the legislative power conferred by s 77 of the Constitution. The institution of the present proceedings invited two inquiries. The first was the source in federal law of the rights and liabilities presented for 62 (1991) 172 CLR 84 at 136. See also Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 590 [64]. 63 (1991) 172 CLR 84 at 137. 64 (1991) 172 CLR 84 at 137. adjudication. The second was the identification of the federal law made under s 77 which conferred jurisdiction upon the Family Court. The distinction is explained in various authorities, including Hooper v Hooper65, where the validity of the Matrimonial Causes Act 1945 (Cth) was upheld. In its initial form, the Family Law Act was drawn in a fashion which obscured the distinction between these two steps, namely the identification of a "matter" and the law conferring jurisdiction with respect to it. At bottom, the issues on this appeal require consideration of the text and structure of what is now Pt VII to ascertain whether, as the Minister submits, it is in Div 12 (ss 69A-69ZK), headed "Proceedings and jurisdiction", rather than in the earlier provisions of Div 8 (ss 67A-67ZD), headed "Other matters relating to children", and Div 9 (ss 68A-68C), headed "Injunctions", and containing respectively s 67ZC and s 68B, that the relevant (and limited) conferral of jurisdiction upon the Family Court is to be found. It is desirable to approach consideration of the text and structure of what is now Pt VII by first referring to some earlier decisions of this Court about the Family Law Act. Those decisions illustrate how that Act, in its earlier forms, has been held to operate in identifying matters and in conferring jurisdiction with respect to them. From there it is convenient to go to the examination of a number of the provisions of Pt VII in order to reveal the place occupied by the particular provisions which are in issue in this appeal. That examination will reveal that the Minister's submission is correct. It is Div 12 which provides the relevant conferral of jurisdiction on the Family Court. The jurisdiction conferred is limited. Neither s 69ZE nor s 69ZH conferred jurisdiction to decide either of the applications which gave rise to this appeal. Section 69ZE confers jurisdiction on the Family Court in matters the subject of a reference by a State of power, and matters incidental to the execution of a power vested by the Constitution in the federal Parliament in relation to those matters. Neither of the applications which give rise to this appeal was such a matter, the reference by South Australia being limited to matters of maintenance, custody, guardianship and access. Section 69ZH confines the operation of s 67ZC to the parental responsibilities of the parties to a marriage for a child of the marriage. 65 (1955) 91 CLR 529 at 535-536. Dowal v Murray66 It is convenient first to consider some aspects of the Family Law Act in its pre-1995 form. The difficulties referred to above appeared shortly after the commencement of the Family Law Act with such decisions as Russell v Russell67 and Dowal v Murray, which were discussed in argument on the present appeal. Dowal decided that s 61(4), as it appeared in the Family Law Act as first enacted, was a valid exercise of the power conferred by s 51(xxi) of the Constitution to make laws with respect to marriage. Section 61(1) stated the general proposition: "Subject to any order of a court for the time being in force, each of the parties to a marriage is a guardian of any child of the marriage who has not attained the age of 18 years and those parties have the joint custody of the child." This was followed by s 61(4) which provided: "On the death of a party to a marriage in whose favour a custody order has been made in respect of a child of the marriage, the other party to the marriage is entitled to the custody of the child only if the court so orders on application by that other party and, upon such an application, any other person who had the care and control of the child at the time of the application is entitled to be a party to the proceedings." One argument for the Commonwealth was that s 61(4) both created the relevant rights and obligations and conferred jurisdiction on the Family Court to give effect to them68. Murphy J appears to have accepted that construction69, but Gibbs ACJ and Jacobs J70 located the conferral of jurisdiction in s 39, which provided for the institution of a "matrimonial cause" in the Family Court, and in par (f) of the definition of that expression then appearing in s 4(1). 66 (1978) 143 CLR 410. 67 (1976) 134 CLR 495. 68 See Dowal v Murray (1978) 143 CLR 410 at 413, 437. 69 (1978) 143 CLR 410 at 428-429. 70 (1978) 143 CLR 410 at 417, 427 respectively. Marion's Case71 Further questions of construction appeared in Marion's Case. The structure of the legislation considered in Marion's Case sufficiently resembles the present Pt VII to merit close consideration. The Family Law Act then was in the form taken after the Family Law Amendment Act 1983 (Cth) and the further amendments by the Family Law Amendment Act 1987 (Cth) ("the 1987 Act"). The 1987 Act had gathered in Pt VII most of the provisions of the statute respecting children. In particular, the Parliament exercised under s 51(xxxvii) of the Constitution the power with respect to the references which then had been made in like terms by the Parliaments of four States, New South Wales, Victoria, South Australia and Tasmania. A law made pursuant to a reference shall, in the words of par (xxxvii), "extend only to States by whose Parliaments the matter is referred, or which afterwards adopt the law". The references in question here commonly were understood as dealing with ex-nuptial children, but in truth were drawn in broader terms to overcome some of the limitations and uncertainties respecting the scope of the marriage power in s 51(xxi). These had been revealed in a series of decisions in this Court, perhaps beginning with R v Lambert; Ex parte Plummer72 and Vitzdamm-Jones v Vitzdamm-Jones73 and culminating in Re F; Ex parte F74. For example, s 3(1) of the Commonwealth Powers (Family Law) Act 1986 (SA) ("the SA Act") had referred "to the extent to which they are not otherwise included in the legislative powers of the Parliament of the Commonwealth" matters being: the maintenance of children and the payment of expenses in relation to children or child bearing; the custody and guardianship of, and access to, children". (emphasis added) 71 Secretary, Department of Health and Community Services v JWB and SMB (1992) 175 CLR 218. 72 (1980) 146 CLR 447. 73 (1981) 148 CLR 383. 74 (1986) 161 CLR 376. Part VII, as then introduced in the 1987 Act, comprised 14 Divisions. Division 2 (ss 60E-60H) was headed "Extension, application and additional operation of Part". Section 60E reflected the terms of the references of power by the States, but also provided (s 60E(3)) that "[t]his Part applies in and in relation to the Territories". Section 60G applied the terms of the references to actions in diversity jurisdiction between residents of different States. Section 60F invoked the legislative powers of the Parliament with respect both to marriage and to divorce and matrimonial causes (s 51(xxii)). In so doing, the Parliament took perhaps a cautious view of the extent of the marriage power, in particular by limiting the effect of other Divisions (including Div 4) so that they applied "only in so far as they make provision with respect to the rights and duties of the parties to the marriage in relation to the child" (s 60F(2)). Division 4 (ss 63-63D) was headed "Jurisdiction of Courts". It conferred federal jurisdiction on the Family Court (among other courts) in relation to "matters arising under this Part" (s 63(1)); that is to say, matters arising in the light of the limitations spelled out in Div 2. In Marion's Case, these limitations were of no great moment. This was because the parents who instituted the proceeding and their infant child all resided in the Northern Territory75, and, as indicated, Pt VII applied there (s 60E(3)). It no doubt was for that reason that, in the judgments in this Court, attention focused upon s 63(1) in its operation, not with Div 2, but with the provisions of Div 5 (ss 63E-66), headed "Custody and guardianship of children", and, in particular, s 64. In general outline, the scheme of Pt VII as it now stands resembles that of Pt VII introduced by the 1987 Act. Subdivision F of Div 12 resembles the previous Div 2 and subdiv C of Div 12 resembles the previous Div 4. Section 67ZC, upon which much reliance was placed in this Court by the respondents, is found in one of the Divisions descending from the previous Div 5. That had included s 64, to which reference was made in Marion's Case. The Court concluded in Marion's Case that what had been achieved "was a vesting in the Family Court of the substance of the parens patriae jurisdiction, of which one aspect is the wardship jurisdiction"76. That statement in the joint judgment of Mason CJ, Dawson, Toohey and Gaudron JJ was preceded by the passage77: 75 (1992) 175 CLR 218 at 229. 76 (1992) 175 CLR 218 at 257. 77 (1992) 175 CLR 218 at 257. "As the Family Law Act now stands, s 63(1) confers jurisdiction on the Family Court 'in relation to matters arising under this Part'. Section 64(1) of the Act provides: 'In proceedings with respect to the custody, guardianship or welfare of, or access to, a child – ... the court may make such order in respect of those matters as it considers proper, including an order until further order.' The sub-section does not in terms confer jurisdiction on the Court but it confers power to make orders and presupposes jurisdiction. Whether the source of jurisdiction is to be found primarily in s 64 along with s 63(1) as the appellant argued, or in a much wider range of sections in Pt VII as the Commonwealth argued78, it is clear that the welfare of a child of a marriage is a 'matter' which arises under Pt VII for the purposes of s 63(1) and is, therefore, an independent subject which may support proceedings before the Family Court. Although there are limits on that jurisdiction, there is no doubt that it encompasses the circumstances of the present case." (emphasis added) Their Honours went on to say that what they had identified as "the welfare jurisdiction" conferred in this way upon the Family Court was "similar to the parens patriae jurisdiction"79. P v P80 This case also was decided when Pt VII was in the form taken after the 1987 Act. In the joint judgment, Mason CJ, Deane, Toohey and Gaudron JJ said that Marion's Case established that Pt VII81: 78 See, eg, ss 64(1B), 65, 70C. 79 (1992) 175 CLR 218 at 258. 80 (1994) 181 CLR 583. 81 (1994) 181 CLR 583 at 598. "has invested the Family Court with a welfare jurisdiction in respect of a child of a marriage which encompasses the substance of the traditional parens patriae jurisdiction freed from the preliminary requirement of a wardship order82". Their Honours referred to s 63(1) and s 64(1)(c) of the Family Law Act and, in passing, to s 60F. That latter provision was the only section in Div 2 to which reference was made. Unlike the circumstances in Marion's Case, the general provision with respect to the Territories made elsewhere in Div 2 (in s 60E(3)) was not attracted. The child in question in P v P resided in New South Wales, as did the applicant mother83. The father was a respondent, but supported the application; the marriage of the parents had been dissolved by Family Court order in 1990, three years before the application84. In those circumstances, this Court appears to have proceeded on the footing that, by virtue of s 60F(2), s 64(1)(c) had effect with reference to a child of a marriage in so far as, among other things, it made provision with respect to the rights and duties of the parties to the marriage in relation to the welfare of the child. That this is so is confirmed by later remarks of their Honours concerning the scope of the marriage power as having supplied (with s 122) an additional basis for the decision in Marion's Case85. AMS v AIF86 The subsequent decision of this Court in AMS v AIF involved consideration of the structure of the Family Law Act following its amendment by the 1987 Act. The significance of what was then Div 2 of Pt VII, including s 60E(3) which dealt with the Territories, for the construction of the general custody and guardianship provisions of Div 5 was stressed in the judgments87. As will appear, comparable considerations apply to Pt VII in its post-1995 form. 82 (1992) 175 CLR 218 at 256, 294, 318. 83 (1994) 181 CLR 583 at 591. 84 (1994) 181 CLR 583 at 591. 85 (1994) 181 CLR 583 at 599-600. 86 (1999) 199 CLR 160. 87 (1999) 199 CLR 160 at 170-171 [14]-[18], 242 [250]-[251]. In both its manifestations, Pt VII reflects a pattern in federal legislation88 whereby provisions terms, apparently unconfined by constitutional limitations upon legislative power, are given specific and limited (but perhaps overlapping) operation by reference to identifiable heads of power. in comprehensive The Act in its present form Divisions 5, 6 and 7 of Pt VII deal with what are identified as parenting orders, including child maintenance orders. Division 8 (ss 67A-67ZD) is headed "Other matters relating to children" and contains subdivs A-E. Subdivision A comprises s 67A, which states: "This Division deals with: the liability of a father to contribute towards child bearing expenses if he is not married to the child's mother (Subdivision B); and orders for (Subdivision C); and the location and recovery of children the reporting of allegations of child abuse (Subdivision D); and other orders about children (Subdivision E)." It is subdiv E, comprising ss 67ZC and 67ZD, which is of particular importance. Section 67ZC has a heading, "Orders relating to welfare of children", and states: In addition to the jurisdiction that a court has under this Part in relation to children, the court also has jurisdiction to make orders relating to the welfare of children. In deciding whether to make an order under subsection (1) in relation to a child, a court must regard the best interests of the child as the paramount consideration." (Division 10, subdiv B (ss 68E-68K) makes detailed provision for ascertainment of the "best interests" of children.) the 88 Another instance is the Disability Discrimination Act 1992 (Cth), s 12. In par 319 of the Explanatory Memorandum on what was the Family Law Reform Bill 1994, it was said: "The new section 67ZC provides the court with jurisdiction relating to the welfare of children in addition to the jurisdiction that the court has under Part VII in relation to children. This jurisdiction is the parens patriae jurisdiction explained by the High Court in [Marion's Case]." Shortly after that statement was made, the Court determined in the Native Title Act Case89 that s 12 of the Native Title Act 1993 (Cth) was invalid. Section 12 gave to the common law of Australia in respect of native title "the force of a law of the Commonwealth". One of the grounds upon which the provision was held invalid was that if the "common law" referred to in s 12 was understood as the body of law which is created and defined by the courts, the section attempted to confer legislative power upon the judicial branch of government90. In recent times, the parens patriae jurisdiction referred to in Marion's Case has, at least in the exercise of the "inherent" jurisdiction inherited by the High Court of Justice in England and Wales, not been treated as static or frozen91. In AMS v AIF, Gleeson CJ, McHugh and Gummow JJ observed92: "Chancery asserted its authority with respect to infants upon various grounds. These included (a) the ordinary residence of the child within the territorial jurisdiction; (b) allegiance to the Crown and (c) physical presence, even falling short of residence, if protection of the Court were needed93. Further, as Mason J put it in Carseldine v Director of Department of Children's Services94: 89 Western Australia v The Commonwealth (1995) 183 CLR 373 at 484-488. 90 (1995) 183 CLR 373 at 485. 91 Cretney and Masson, Principles of Family Law, 6th ed (1997) at 703-712; Seymour, "Parens Patriae and Wardship Powers: Their Nature and Origins", (1994) 14 Oxford Journal of Legal Studies 159 at 178-187. 92 (1999) 199 CLR 160 at 168-169 [11]. 93 Holden v Holden [1968] VR 334; McM v C [No 2] [1980] 1 NSWLR 27; In re D (an Infant) [1943] Ch 305. 94 (1974) 133 CLR 345 at 366. 'The courts have always been prepared, when the welfare of the child requires it, to divorce custody from guardianship; the existence of guardianship in one person is not a bar to the making of an order for custody in favour of another.'" On the present appeal the Court was referred to a number of modern decisions of the English courts dealing with the extent of this jurisdiction. They included In re B (Infants)95, In re Mohamed Arif (An Infant)96, In re X (A Minor)97 and In re F (A Minor)98. Nevertheless, no attempt has been made to treat s 67ZC as invalid by parity of reasoning with that in the Native Title Act Case. Accordingly, we say no more upon the subject. Division 9 (ss 68A-68C) is headed "Injunctions". Section 68B applies where "proceedings are instituted in a court having jurisdiction under this Part for an injunction in relation to a child" (s 68B(1)). It details a range of injunctive relief which may be considered appropriate for the welfare of the child in question. Section 68B was not a new provision. It appears largely to have re-enacted what was s 70C previously appearing in Pt VII, Div 13, then headed "Injunctions". Division 12 (ss 69A-69ZK) of Pt VII controls and limits the operation of the balance of Pt VII. This is indicated by the heading of Div 12, "Proceedings and jurisdiction", and the statement in the first section, s 69A: "This Division deals with: institution the (Subdivision B); and proceedings and procedure jurisdiction of courts (Subdivision C); and presumptions of parentage (Subdivision D); and parentage evidence (Subdivision E); and 97 [1975] Fam 47. 98 [1990] Fam 125. the places and people to which this Part extends and applies (Subdivision F)." Turning first to subdiv B (ss 69B-69F), the effect of s 69B is to render the provisions of Pt VII imperative; proceedings that may be instituted under Pt VII are not to be instituted otherwise than under that Part. Section 69C(2) identifies those who may institute proceedings including those proceedings identified in s 67ZC and s 68B. The sub-section states: "Any other kind of proceedings under this Act in relation to a child may, unless a contrary intention appears, be instituted by: either or both of the child's parents; or the child; or a grandparent of the child; or any other person concerned with the care, welfare or development of the child." In the circumstances of the present case, the presence of the children in Australia was a necessary condition to the institution of the proceedings (s 69E(1)(a)). Subdivisions C and F work together. They confer jurisdiction upon certain courts and do so within selected limits of federal authority concerning both "matters" for the conferral of federal jurisdiction and the creation of rights and liabilities in the exercise of legislative powers found in s 51 of the Constitution. It is convenient to begin with subdiv C (ss 69G-69N). Jurisdiction is conferred by s 69H(1) on the Family Court "in relation to matters arising under [Pt VII]". That expression includes proceedings under the injunction provisions of Div 9, including s 68B (s 69G). However, looking outside subdiv C, par (d) of s 31(1) states that jurisdiction is conferred with respect to "matters ... with respect to which proceedings may be instituted in the Family Court under this Act". Further, s 33 confers jurisdiction in respect of matters which are "associated" with those in which the jurisdiction of the Family Court is invoked or with those arising in proceedings before it. These "associated matters" are limited to categories of "matter" of federal jurisdiction listed in ss 75 and 76 of the Constitution99. These provisions are to be read together with s 69H. This follows from s 69M. That states: "The jurisdiction conferred on or invested in a court by this Division is in addition to any jurisdiction conferred on or invested in the court apart from this Division." Subdivision F (ss 69ZE-69ZK) is headed "Extension, application and additional operation of Part". This may be compared with the heading to Div 2 of the previous Pt VII, to which reference has been made earlier in these reasons. Likewise, the identical heading to Div 4 of the previous Pt VII, "Jurisdiction of courts", anticipated the heading to subdiv C of Div 12 of the present Pt VII. Section 69ZE again reflects the terms of the references by the States to matters being: the maintenance of children and the payment of expenses in relation to children or child bearing; parental responsibility for children" (s 69ZE(2)(a)). Section 69ZJ again enlivens the diversity jurisdiction. Section 69ZG, the counterpart of which was important in Marion's Case but which is not important in the present case, again states that the Part "applies in and in relation to the Territories". Section 69ZK is a limitation upon the exercise of jurisdiction otherwise exercised under the Family Law Act. It is designed to give some measure of insulation to the operation of the child welfare laws of the States and Territories. A "child welfare law" is a State or Territory law or class of such laws prescribed under the Family Law Act (s 60D(1)). Section 69ZH Greatest attention was given in argument to s 69ZH. Sub-sections (1)-(3) thereof so far as relevant provide: "(1) Without prejudice to its effect apart from this section, this Part also has effect as provided by this section. By virtue of this subsection, [s 67ZC and s 68B] have the effect, subject to subsection (3), that they would have if: 99 Philip Morris Inc v Adam P Brown Male Fashions Pty Ltd (1981) 148 CLR 457 at each reference to a child were, by express provision, confined to a child of a marriage; and each reference to the parents of the child were, by express provision, confined to the parties to the marriage. The provisions mentioned in subsection (2) only have effect as mentioned in that subsection so far as they make provision with respect to the parental responsibility of the parties to a marriage for a child of the marriage, including (but not being limited to): the duties, powers, responsibilities and authority of those parties in relation to: the maintenance of the child and the payment of expenses in relation to the child; or the residence of the child, contact between the child and other persons and other aspects of the care, welfare and development of the child; and other aspects of duties, powers, responsibilities and authority in relation to the child: arising out of the marital relationship; or (iii) in relation to concurrent, pending or completed proceedings between those parties for principal relief; in relation to a dissolution or annulment of that marriage, or a legal separation of the parties to the marriage, that is effected in accordance with the law of an overseas jurisdiction and that is recognised as valid in Australia under section 104." (emphasis added) The paramountcy of s 69ZH(2) in its operation upon provisions such as s 67ZC and s 68B is emphasised by s 69ZH(4). By "virtue of [that] subsection", the provisions of subdiv F (including, of course, the earlier parts of s 69ZH) "have effect according to their tenor". Section 104 deals with the recognition in Australia of dissolutions or annulments of marriages and the legal separation of parties to marriages, which are effected in accordance with the law of an overseas jurisdiction. It would appear to be supported both by the power with respect to divorce and matrimonial causes and by the power with respect to external affairs; so also sub-par (iii) of sub-s (3)(b) of s 69ZH. Sub-paragraph (ii) of par (b) invokes the power with respect to divorce and matrimonial causes, whilst sub-par (i) depends upon the marriage power, as does par (a). Both pars (a) and (b) are species of the genus identified in s 69ZH(3), namely "provision with respect to the parental responsibility of the parties to a marriage for a child of the marriage". Conclusions The Minister submits that there were two potential applications of Div 12 of Pt VII to the children in South Australia. The first was found in s 69ZE. That represents a continued exercise of the federal legislative power consequent upon the State references. Those references, as indicated in s 3(1) of the SA Act, which has been set out, were limited by referring the subject-matter only to the extent to which it was not otherwise within federal legislative power. That would include the marriage and divorce powers and the Territories powers which underpin, but may not be exhausted by, other particular provisions in Div 12. In any event, the references were limited to matters of maintenance, custody, guardianship and access. In Marion's Case100, Mason CJ, Dawson, Toohey and Gaudron JJ indicated that orders of that description were of a narrower genus than those relating to the welfare of a child. The second potential application was in the combination of s 69ZH and s 67ZC. However, in its terms, s 69ZH confines the operation of s 67ZC to the parental responsibilities of the parties to a marriage for a child of the marriage. The result, the Minister submits, is that neither of these potential applications of Div 12 of Pt VII could be supported in the present litigation. That submission should be accepted. The same is to be said of reliance upon the injunction provision in s 68B in conjunction with s 69ZH. In response, the respondents submit that s 67ZC and s 68B are to be given effect according to their terms. That effect is said to be, by reason of the use in the sections of the slippery term "jurisdiction", both to create subject-matter for adjudication and to provide curial authority to determine the relevant rights and obligations. Particularly with respect to s 67ZC, it is submitted that if the phrase "relating to the welfare of children" be read down to identify children of a 100 (1992) 175 CLR 218 at 255. marriage, then the section is supported by the marriage power. That power is said to extend to the protection of children from any interference or risk of interference with their welfare, direct or indirect, and to support orders against third parties. Analogy is drawn with decisions such as In re X (A Minor)101 given in the parens patriae jurisdiction of other courts. Alternatively, it is submitted that s 67ZC is supported as an exercise of the power with respect to external affairs. Reliance is placed upon provisions of the Convention on the Rights of the Child, which entered into force for Australia on 16 January 1991102. In response, the Minister emphasises the statement in the joint judgment in the Industrial Relations Act Case103 that, particularly in the implementation of treaty obligations, the external affairs power has a purposive aspect. The Minister refers to the legislative history in the Parliament of the Bill for what became the 1995 Act as indicative of the absence of any such legislative will. Those references to legislative history in turn give rise to a further In Newcrest Mining (WA) Ltd v The Commonwealth104, consideration. "So long as the Parliament has power to enact a law, from whatever provision of the Constitution that power be derived, the law is valid. As Starke J said in Ex parte Walsh and Johnson; In re Yates105: 'A law enacted by a Parliament with power to enact it, cannot be unlawful. The question is not one of intention but of power, from whatever source derived. [The section under challenge] can be justified, in my opinion, if it is competent under any of the powers vested in Parliament, whatever the title of the Act, and whatever indications there are in the Act as to the precise power under which it may be suggested that Parliament purported to act.' (Emphasis added.)" 101 [1975] Fam 47. 102 [1991] Australian Treaty Series, No 4. 103 Victoria v The Commonwealth (1996) 187 CLR 416 at 487. 104 (1997) 190 CLR 513 at 534. See also Spratt v Hermes (1965) 114 CLR 226 at 278; R v Hughes (2000) 202 CLR 535 at 548 [15]. 105 (1925) 37 CLR 36 at 135. There may be a question as to whether those remarks have general application to instances of asserted exercise of the power with respect to external affairs in the implementation of treaty obligations. It is unnecessary and would be inappropriate to embark upon further consideration of these various matters. This is because the submissions by the respondents fail at the threshold. The submission that s 67ZC and s 68B are to be given effect according to their terms should be rejected. Section 67ZC, which appears in Div 8, and s 68B, which appears in Div 9, must be read in the manner indicated earlier in these reasons, with the provisions of Div 12, in particular s 69ZH. It may be that s 69ZH does not represent an exhaustive exercise of the marriage power and that the marriage power may extend to authorise laws respecting the welfare of children of a marriage in the fashion urged by the respondents. However, given the complex adjudicative history of the exercises of the marriage power in the past, it is perhaps not surprising that some caution is manifest in the terms of s 69ZH. At all events, the terms of that provision are limiting and decisive. The provisions of subdiv F of Div 12, including ss 69ZE, 69ZG, 69ZH and 69ZJ, control the application of the preceding provisions of Pt VII. They do not merely add something onto an operation which those earlier provisions have in their own right. They consist of a complete and exclusive statement of the application of the earlier provisions. That this is so follows from s 69A(e), which provides that subdiv F of Div 12 (not any earlier provision) deals with the places and people to which Pt VII extends and applies. It follows from the form of s 69ZE, and s 69ZG, neither of which, unlike a section which operates in supplementation of some provisions having independent application106, is expressed to be "without prejudice to" the effect of those provisions. It follows from s 69ZH(1), which provides that Pt VII has effect as provided by s 69ZH without prejudice to its effect apart from "this section" – not "this subdivision"; if the latter word had been used, it would point against the construction being advanced, and use of the former word favours it. It follows from s 69ZH(4), which provides that certain miscellaneous provisions of Pt VII which are not those described in s 69ZH(2) have effect according to their tenor: for this would be unnecessary if the provisions had effect according to their tenor in any event, and implies that the provisions of Pt VII which are described in s 69ZH(2) do not have effect according to their tenor at all, but only according to the terms of s 69ZH(2) and (3). It follows from the fact that, if the provisions of Pt VII described in s 69ZH(2) did apply according to their tenor, s 69ZG and s 69ZH would have been unnecessary. 106 eg Trade Practices Act 1974 (Cth), s 6(1). The respondents rely on the expression "extends" in s 69ZE and on the word "Extension" in the heading to subdiv F and in the heading to s 69ZE. This language does not imply that there was some independent operation of earlier provisions which is being enlarged; it means only that, if the conditions provided for in s 69ZE are satisfied, Pt VII extends, in the sense of applies, to particular States. This construction of Pt VII is consistent with and reflects the reasoning in Northern Territory v GPAO107. That conclusion makes it unnecessary to consider the further questions that would arise upon the construction advanced by the respondents respecting the intersection between the operation of the Family Law Act and the Migration Act. Nor is it appropriate here to embark upon a consideration of any remedy which might be available in a court of broader jurisdiction in respect of the wrongful or illegal detention of children108 and others, and which was focused more sharply upon the legality of the detention itself than upon the adverse effects of the detention upon the welfare of the detainees109. Orders The appeal to this Court should be allowed. The orders of the Full Court of the Family Court made on 19 June 2003 should be set aside and in place thereof it should be ordered that the appeal to the Full Court be dismissed. There should be no order for the costs of the appeal to this Court. It was a condition of the grant of the certificate under s 95(b) of the Family Law Act that the Minister pay the reasonable costs of the respondent infants and the respondent intervener of and incidental to the appeal to this Court, irrespective of the outcome of such appeal. 107 (1999) 196 CLR 553 at 573 [25], 595 [104]-[105], 611 [157], 650 [254]. 108 Simpson, A Treatise on the Law and Practice relating to Infants, (1875) at 104; Truth About Motorways Pty Ltd v Macquarie Infrastructure Investment Management Ltd (2000) 200 CLR 591 at 627 [94]; Barnardo v McHugh [1891] AC 388; Clarke v McInnes [1978] 1 NSWLR 598; In re Mohamed Arif (An Infant) [1968] Ch 643; In re F (A Minor) [1990] Fam 125. 109 cf Ex parte Walsh and Johnson; In re Yates (1925) 37 CLR 36; R v Carter; Ex parte Kisch (1934) 52 CLR 221; R v Davey; Ex parte Freer (1936) 56 CLR 381; R v Green; Ex parte Cheung Cheuk To (1965) 113 CLR 506; R v Forbes; Ex parte Kwok Kwan Lee (1971) 124 CLR 168. At the time of the grant of the certificate under s 95(b) of the Family Law Act, which founds the appeal in this Court, the Full Court had made no costs orders respecting the proceedings before Dawe J and the Full Court. This Court reserved its decision on the appeal on 30 September 2003. Thereafter, on 13 April 2004, the Full Court made a costs order and delivered supporting reasons, with reference to the special costs provisions in s 117 of the Family Law Act. The Full Court made a costs order against the Minister. Given the order of events just described, no question respecting that costs order has arisen in this Court. Kirby 116 KIRBY J. On the face of things, it appears doubtful that the Family Court of Australia, exercising jurisdiction under the Family Law Act 1975 (Cth) ("the FLA"), would have jurisdiction to decide the validity of the detention of alien children under the Migration Act 1958 (Cth) ("the MA") and the power to make orders directing the Minister for Immigration and Multicultural and Indigenous Affairs ("the Minister") and federal officials, required under the MA to detain the children, to release them for reasons of their welfare. This intuitive response to the central problem in this appeal is not shaken by demonstration of the fact that the children in question are children of a "marriage", a relationship attracting relevant constitutional powers110 to the Federal Parliament upon the basis of which, in part, the FLA was enacted. On the contrary, the instinctive conclusion is reinforced by the knowledge that the "marriage" in question is uncontested; that it is the subject of no procedures for divorce nor any other matrimonial cause in the Family Court; and that, to this extent, the invocation of the jurisdiction of the Family Court seems contrived. The MA establishes a highly detailed and complex scheme for the determination of the rights and obligations of constitutional aliens111 (called "non-citizens" in the MA) present in Australia. It makes no relevant distinction between those who are adults and those who are children. It would therefore appear odd for the Family Court, established by the FLA112, to have the jurisdiction and power to make orders intruding into the implementation and administration of the MA. The oddity springs essentially from the functions, jurisdiction and powers of the Family Court. Although a superior court of record113, it is a court of defined, specialised jurisdiction. One would not, therefore, normally expect it to concern itself with the validity or duration of detention, or other acts done, under the MA. Normally, one would expect any such challenges to be initiated in the original jurisdiction of this Court114 or in the Federal Court of Australia115. 110 Constitution, s 51(xxi) ("marriage"), s 51(xxii) ("divorce and matrimonial causes; and in relation thereto, parental rights, and the custody and guardianship of infants"). 111 Constitution, s 51(xix) ("naturalization and aliens"). 112 FLA, s 21. See reasons of Gummow, Hayne and Heydon JJ at [63]. 113 FLA, s 21(2). 114 eg under the Constitution, s 75(iii) or s 75(v). 115 eg under the Federal Court of Australia Act 1976 (Cth), ss 19, 21, 22, 23 or in proceedings for judicial review of relevant tribunals. See MA, ss 475A, 476. Kirby The suggestion of a general, even comprehensive116, child welfare jurisdiction in the Family Court following the passage of the Family Law Reform Act 1995 (Cth) ("the FLRA") does not allay the foregoing doubts. Notwithstanding the FLRA, it would not normally be expected that the Family Court would enjoy jurisdiction, or exercise powers, in relation to a teenage child committed to serve a term of imprisonment in a civil custodial institution, on the ground that orders on its part were necessary and appropriate for that child's welfare. On the face of things, any such orders would appear to involve the Family Court intruding beyond its proper functions, such functions being understood having regard to the context in which its powers are granted to it. If the Family Court could not direct orders to the lawful custodian of a child prisoner serving a criminal sentence, how could it enjoy the power to make orders directed to the Minister or the officers of the Minister's department with respect to the detention of a child under the MA? How could the Family Court do so requiring conduct on the part of the Minister and federal officers apparently different from the obligations expressly imposed on them by the MA? These are the questions that lie at the threshold of the determination of the many legal issues that were argued in this appeal117. Intuition can be a useful check where the law appears to have taken a wrong turning118. In the courts, it is commonly based on long years of experience in the law, even if the exact reasoning is not at first consciously identified. On the other hand, intuition can sometimes be misleading or wrong119. Where the rights of vulnerable persons under valid legislation are in question, it is often necessary to keep judicial intuition in check "for sometimes it will be based unconsciously on the very attitudes that the law is designed to correct and redress"120. In the end, in cases of contest such as this, there is no substitute for legal analysis. The analysis must be addressed to the detailed provisions of the law in 116 cf Northern Territory v GPAO (1999) 196 CLR 553 at 647 [243]. 117 From orders of the Full Court of the Family Court of Australia: B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604. 118 Dow Jones & Co Inc v Gutnick (2002) 210 CLR 575 at 642 [164]; Gibbs v Mercantile Mutual Insurance (Australia) Ltd (2003) 77 ALJR 1396 at 1421 [137]; 199 ALR 497 at 531. 119 Purvis v New South Wales (Department of Education and Training) (2003) 78 ALJR 1 at 6-7 [19]; 202 ALR 133 at 139-140. 120 Purvis v New South Wales (Department of Education and Training) (2003) 78 ALJR 1 at 7 [19]; 202 ALR 133 at 140 (footnote omitted). Kirby question, not to generalities which may be displaced, or reversed, by new legislation or by new insights about the old law. The facts, legislation and issues The facts and litigation: The history of these proceedings is set out in other reasons121. It is there explained how the primary judge in the Family Court (Dawe J) originally dismissed the application for relief directed to the lawfulness of the detention of the respondent children, including relief claimed in the form of orders obliging their release from immigration detention. The primary judge concluded that the welfare jurisdiction of the Family Court, on the basis of which the relief was claimed, had to be "exercised within the usual field of family law". That jurisdiction did not "extend to a power to override the exercise of any statutory power [belonging to the Minister under the MA] merely because that exercise of power may impact upon the best interests of children"122. Against this rejection of relief, on the stated jurisdictional grounds, an appeal was taken to the Full Court of the Family Court. That Court ("the first Full Court") divided123. As the findings of the first Full Court are fully explained elsewhere, I will not repeat them124. That Court allowed the appeal. Following the first Full Court's orders the proceedings resumed at first instance in the Family Court. Once again they reached a Full Court125 ("the second Full Court"). It is unnecessary to detail these developments. Suffice it to say that, consistently with the reasoning of the majority of the first Full Court, the second Full Court ordered the release from immigration detention of the respondent children. It did so under conditions of reporting expressed in its orders. This Court was informed that, pursuant to those orders, the children were released. The central issue in the Minister's appeal to this Court is whether the Family Court had the 121 Reasons of Gleeson CJ and McHugh J at [3]-[5]; reasons of Gummow, Hayne and Heydon JJ at [56]-[62]; reasons of Callinan J at [181]-[197]. 122 See reasons of Callinan J at [187]. 123 Nicholson CJ and O'Ryan J; Ellis J dissenting in part. See B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604. 124 Reasons of Gleeson CJ and McHugh J at [4]; reasons of Gummow, Hayne and Heydon JJ at [62]; reasons of Callinan J at [192], [197]. 125 Reasons of Callinan J at [194]. The second Full Court was constituted by Kay, Coleman and Collier JJ: see B and B v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FamCA 621. Kirby jurisdiction and power to determine in this way the applications brought on behalf of the children. The certificate under FLA s 95(b): Following the orders of the first Full Court, the Minister applied to that Court for a certificate pursuant to s 95(b) of the FLA, in order to permit the Minister to appeal to this Court without further application. In the exercise of the jurisdiction conferred by the Parliament, the first Full Court granted such a certificate126. That certificate thereby invoked the appellate jurisdiction of this Court, to be exercised in accordance with the Constitution127. The reasons of Gummow, Hayne and Heydon JJ criticise the provision of the certificate and the reasons given by the first Full Court for granting it. The latter are described as exhibiting a "presumption"128 on the part of an intermediate appellate court. I disassociate myself from both of these criticisms. No party to this appeal submitted that the provision in s 95(b) of the FLA for a certificate to be granted by the Full Court of the Family Court was beyond the constitutional powers of the Parliament. The language of s 73 of the Constitution states that the appellate jurisdiction of this Court is subject to "such exceptions and … regulations as the Parliament prescribes"129. It cannot be said that the prescription by the Parliament, in terms of s 95(b) of the FLA, was ill- considered. On the contrary, the broad scope of the power to "prescribe" has been upheld by this Court in a case where that power was used to enlarge this Court's control over its own business130. Just as the Parliament can enlarge the Court's power by prescription it can, in a particular case, diminish it. It can do so as long as what it prescribes amounts to an "exception" or "regulation" of the constitutional facility to hear and determine appeals as envisaged by the Constitution – in this case an appeal 126 Minister for Immigration and Multicultural and Indigenous Affairs v B (Infants) [No 2] (2003) 175 FLR 426 at 437 [43]. 127 Constitution, s 73. 128 Reasons of Gummow, Hayne and Heydon JJ at [66]. 129 The power of a court a quo to grant a certificate for an appeal is not uncommon. In the case of the Judicial Committee of the Privy Council, a power of certification was granted to this Court by s 74 of the Constitution in respect of inter se questions, as there defined. It was only exercised once: Colonial Sugar Refining Co Ltd v Attorney-General for the Commonwealth (1912) 15 CLR 182. 130 Carson v John Fairfax & Sons Ltd (1991) 173 CLR 194 at 208-216. Kirby to this Court from an "other federal court". There may well be good reasons why, in the context of family law, the Parliament afforded the power of certification to the Full Court of the Family Court. In some legal circles, family law is not regarded as having the importance of, say, commercial law. If the Parliament, acting under the Constitution, decides otherwise, it is not for this Court to call its decision "anomalous"131. To do so risks the accusation of a presumption on our part132. Nor were the reasons given by the judges of the Full Court irrelevant to the exercise of the power granted to them in the form of s 95(b) of the FLA. If the power is valid (as was not challenged) the duty of the judges was to consider all matters relevant to the exercise of that power133. They were not excused from doing so because some might wish that the power did not exist or prefer that this Court should enjoy exclusive control of its own business, which by s 95(b) of the FLA it does not. It would have been an unlawful abdication of a jurisdiction conferred on the Family Court by the Parliament for the Full Court to adopt such a posture. Respect for judicial hierarchy necessarily adjusts to the provisions of valid federal law imposing lawful judicial powers. As Callinan J remarks, the questions of law raised in the application for a certificate were undoubtedly important for the jurisdiction of the Family Court134. Potentially, the first Full Court's decision had implications for hundreds of other children held in immigration detention. The earliest possible hearing of an appeal by this Court was therefore a proper and responsible matter to be considered by the Full Court. The obligations of a Minister were involved. Arguably, the repeatedly expressed will of the Parliament concerning the detention of unlawful non-citizens had been breached. Certainly, a clash between two federal laws (the FLA and the MA) was presented for resolution. Status and liberty were at stake. The grant of the certificate would save the time and cost otherwise inevitably incurred in requiring the Minister to proceed by a separate application to this Court for special leave to appeal. So much was no more than common sense. To ignore the consideration of additional delay would have been to ignore a relevant matter. I do not accept that events have shown that the assumption of the Full Court that time would be saved by granting a certificate to the Minister was false. So long as the certification provision remains part of the law, it is quite wrong to 131 Reasons of Gummow, Hayne and Heydon JJ at [64]. 132 cf DJL v Central Authority (2000) 201 CLR 226 at 259 [80]. 133 cf Gerlach v Clifton Bricks Pty Ltd (2002) 209 CLR 478 at 504-507 [72]-[79]. 134 Reasons of Callinan J at [195]. Kirby criticise the Full Court for referring to a consideration plainly relevant to its exercise. If this Court desires the repeal of the certification facility in s 95(b) of the FLA, there are ways to express that desire that do not involve criticising judges for doing no more than their duty in response to an application before them pursuant to a valid federal law. The legislation and issues: The relevant provisions of the FLA135 and the MA136 respectively are set out, or described, in the reasons of the other members of this Court. So are the questions raised by the Full Court's certificate, so far as it concerns the first issue "of law and of public interest"137 identified by that However, three other issues were isolated by the first Full Court in the certificate that it issued139. The second issue concerned whether the provisions of Pt VII of the FLA were supported by s 51(xxix) of the Constitution as implementing the United Nations Convention on the Rights of the Child ("the UNCROC")140 or have only a more limited operation141. The third issue concerned "[w]hether the detention of a child who is an 'unlawful non-citizen' within the meaning of the Migration Act is beyond the authority conferred by that Act when that detention extends over a lengthy period or its duration is indefinite". The fourth and connected issue was "whether the detention of a child is 'indefinite' if the child lacks capacity to make a request under s 198(1) of that Act". 135 Reasons of Gleeson CJ and McHugh J at [24]-[46]; reasons of Gummow, Hayne and Heydon JJ at [90]-[102]; reasons of Callinan J at [199]-[203]. 136 Reasons of Callinan J at [217]. 137 Minister for Immigration and Multicultural and Indigenous Affairs v B (Infants) [No 2] (2003) 175 FLR 426 at 437 [43]. 138 Reasons of Gleeson CJ and McHugh J at [5]; reasons of Gummow, Hayne and 139 Minister for Immigration and Multicultural and Indigenous Affairs v B (Infants) [No 2] (2003) 175 FLR 426 at 437 [43]. 140 Adopted and open for signature on 20 November 1989; entered into force 2 September 1990 in accordance with Art 49; entered into force for Australia 16 January 1991: [1991] Australian Treaty Series No 4. 141 As provided for in subdiv F of Div 12 of Pt VII of the FLA. Kirby The intersection of the MA and the FLA: I state the additional questions contained in the Full Court's certificate because, in my opinion, the resolution of this appeal is to be found in a reflection on the answers to the third and fourth questions. It is those questions that present the issues essential for the intersection of the FLA and the MA in these proceedings. If, as I believe, they must be resolved in favour of the Minister, it is unnecessary to decide the ambit, scope and even validity of the provisions for the welfare jurisdiction of the Family Court under the FLA. Such jurisdiction, and the powers that accompany it in respect of the welfare of children, can be assumed to exist and to be valid for the purposes of the appeal. However, if, as I would conclude, those powers do not permit the Family Court to exercise its welfare jurisdiction and powers in the manner attempted in relation to children in immigration detention under the MA, elaboration of the welfare jurisdiction and powers under the FLA is irrelevant for immediate purposes. It can be left to another case on another day. I prefer to chart the metes and bounds of the jurisdiction and powers of the Family Court in welfare cases in a more normal case where the welfare of children is invoked without the complications presented in this case by the detention of the respondent children under the MA. As will be shown, that detention is part of a deliberate policy of the Australian Parliament, applicable without differentiation between alien adults and children. So long as it is constitutionally valid, it must be given effect by Australian courts. This is so, despite general provisions for child welfare in other legislation, including the FLA. It is so even if it brings Australia into contravention of its obligations under international law. A deliberate statutory policy of mandatory detention Narrowing the essential issues: It is convenient to start by addressing the critical issue in this appeal by reference to what I regard as the crux of the respondents' submissions about the illegality of the detention of the children under the MA. The first Full Court accepted that, if the children's detention was lawful, the Family Court would have no jurisdiction or power under the FLA to make orders addressed to the Minister or other officials concerning the release of the children142. The key that was propounded to authorise that Court, as a matter of law, to intrude upon the powers of the Minister and migration officials to detain the children under the MA143, had to be found by superimposing the general provisions of the FLA upon the particular provisions of the MA. Hence, various 142 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 668-669 [400]. 143 Especially MA, ss 5(1) (definition of "immigration detention"), 189, 196 and 273. Kirby attempts were made to undermine the lawfulness of the "detention" of the children under the MA. If a flaw could be established in the lawfulness of the children's detention by reference to the Constitution, the MA or some other law, interpreted in the light of Australia's international obligations, the first hurdle for the respondents might be passed. There would remain other hurdles. These would relate to: children, like the respondent children, present in South Australia; incidental powers in the Constitution was sufficient to enable the Family Court to make orders under the FLA against third parties for the protection of such children; . Whether the welfare jurisdiction contained in the FLA144 applied to . Whether the basis for the FLA provided by the marriage, divorce and . Whether, alternatively, the external affairs power in the Constitution . Whether the welfare jurisdiction of the Family Court was to be equated to sustained the welfare jurisdiction on the basis that the relevant provisions of the FLA were intended to implement the UNCROC; and the parens patriae jurisdiction of the general courts of law and whether, on that basis, it extended to making orders against third parties for the protection of such children145. The critical point upon which the members of the first Full Court divided, therefore, concerned the conclusion reached by the majority that the continued detention of the respondent children was unlawful. Upon this issue, the dissenting judge (Ellis J) did not agree with the majority (Nicholson CJ and O'Ryan J)146. This was so although, in the resolution of most of the other issues before the Full Court, Ellis J expressed concurrence with the majority's conclusions147. 144 s 67ZC. 145 The issues are stated by the first Full Court: B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 607 [12] per Nicholson CJ and O'Ryan J. 146 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 673 [426]. 147 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 671 [412], [414], [416], 672-673 [425]. See however at 672 [420], Kirby It is therefore sensible, and prudent, to start with these points of difference (or at least so many as are essential to reaching a dispositive order). Doing so reduces unnecessary obiter dicta. It also conforms with this Court's usual practice to put challenges to constitutional validity of legislation to one side, where possible, and to start legal analysis with arguments addressed to questions of statutory construction148. The relevant point of construction concerns whether the MA permits the "detention" of the respondent children for the period proved in the evidence in this case. This was not a case where the evidence showed that a fundamental postulate of the statutory purpose of detention in default of the grant of a visa (namely removal or deportation from Australia)149 could not be fulfilled. A factual conclusion had been reached that the parents were nationals of Pakistan. Although the parents disputed that finding of fact, it was one not open to correction in these proceedings. Upon that basis, the respondent children, like their parents, were not stateless persons. Thus, the situation that arose in Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri150 was not presented in this case. In Al Masri, the Full Court of the Federal Court concluded that s 196 of the MA should be read, so far as its language permitted, to ensure conformity with Australia's treaty obligations151. The first Full Court in the present case unanimously agreed with that approach152. So would I. Whatever controversies may exist in respect of the interpretation of the Constitution and whatever difficulties may sometimes arise in the expression of the common law, the interpretation of federal statutes in Australia, to conform wherever possible to accepted obligations of international law, has long been a principle upheld by this 148 Bank of NSW v The Commonwealth (1948) 76 CLR 1 at 187; see also Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 473-474 [248]-[252] and the authorities there mentioned; cf Motomura, "Immigration Law After a Century of Plenary Power: Phantom Constitutional Norms and Statutory Interpretation", (1990) 100 Yale Law Journal 545 at 560-561. 149 MA, s 196(1). 150 (2003) 197 ALR 241. 151 Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri (2003) 197 ALR 241 at 276-277 [155]. 152 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 666 [385]-[388] per Nicholson CJ and O'Ryan J, 672-673 [425] per Kirby Court153. The first Full Court was correct to seek the meaning of the MA in conformity with this approach. An arguable breach of international obligations: The respondents invoked identified requirements of international law, binding on Australia. They did so not only to support their contention that the welfare jurisdiction conferred on the Family Court under the FLA was designed to give effect to international obligations154; but also to support the submission that the MA, construed in the light of those obligations, did not sustain the detention of the respondent children proved in the evidence. It is with the latter submission that I am immediately concerned. The first Full Court referred, in particular, to Art 37 of the UNCROC, drawing attention to pars (b), (c) and (d) of that article155. The article provides: "States Parties shall ensure that: (a) No child shall be subjected to … cruel, inhuman or degrading treatment or punishment … (b) No child shall be deprived of his or her liberty unlawfully or arbitrarily. The … detention … of a child shall be in conformity with the law and shall be used only as a measure of last resort and for the shortest appropriate period of time; Every child deprived of liberty shall be treated with humanity … and in a manner which takes into account the needs of persons of his or her age … Every child deprived of his or her liberty shall have the right … to challenge the legality of the deprivation of … liberty before a court 153 Jumbunna Coal Mine NL v Victorian Coal Miners' Association (1908) 6 CLR 309 at 363 per O'Connor J; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 38 per Brennan, Deane and Dawson JJ; Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 at 287 per Mason CJ and Deane J; Kartinyeri v Commonwealth (1998) 195 CLR 337 at 384 [97] per Gummow and Hayne JJ; Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476 at 492 [29] per 154 See B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 645-651 [248]-[288]; cf at 672 [424]. 155 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 666 [387]. Kirby or other competent, independent and impartial authority, and to a prompt decision on any such action." (emphasis added) Parallel to the foregoing provisions of the UNCROC, and to others mentioned by the first Full Court156, are provisions expressed in somewhat more general terms by the International Covenant on Civil and Political Rights157 ("the ICCPR"). That treaty overlaps the UNCROC to some extent158. Australia is a party to each of these international instruments. In the case of the ICCPR, Australia is also a party to the First Optional Protocol159. Communication to the UNHRC: Pursuant to the First Optional Protocol to the ICCPR, the parents of the respondent children lodged a communication with the United Nations Human Rights Committee ("the UNHRC") set up by Pt IV of the ICCPR160. Their communication related, amongst other things, to the rights of the children in accordance with international law. They complained, relevantly, that Australia was in breach of the requirements of the ICCPR with respect to the children up to the time that they were released from immigration detention by the order of the second Full Court, the validity of which order the Minister challenges in these proceedings. This Court has held, correctly in my view, that the signature by Australia to the ICCPR and to the First Optional Protocol, inevitably brings to bear on the exposition of Australian law the influence of the universal principles of 156 See B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 666 [386]. It also cited Arts 2.1, 3.1, 3.2, 7.1, 9.3, 18.1, 19: see at 157 Adopted and open for signature on 19 December 1966; entered into force 23 March 1976 in accordance with Art 49: 999 United Nations Treaty Series 171; entered into force for Australia 13 November 1980: [1980] Australian Treaty Series No 158 esp ICCPR, Arts 9.1, 9.4 and 24.1. 159 Adopted and open for signature on 19 December 1966; entered into force 23 March 1976 in accordance with Art 9: 999 United Nations Treaty Series 302; entered into force with respect to Australia on 25 December 1991: [1991] Australian Treaty Series No 39. 160 UNHRC, Views, Communication UN Doc CCPR/C/79/D/1069/2002 (29 October 2003) ("UNHRC decision"). This Communication was adopted after both of the Full Courts had delivered their judgments. Kirby international law stated in the ICCPR161. In ascertaining the meaning of the ICCPR, and thereby elucidating the extent of that "influence", it is permissible, and appropriate, to pay regard to the views of the UNHRC162. Such views do not constitute legally binding rulings for the purposes of international law163. However, they are available to municipal courts, such as this, as the opinions of independent experts in international law, to assist in the understanding of the requirements of that law for whatever weight the municipal legal system accords to it. In Australia, that is the weight of persuasive influence. No more; but no less. After hearing the arguments of both sides, the UNHRC rejected objections raised by Australia to the admissibility of the communication164. Relevant to the position of the respondent children, the UNHRC noted that they had "remained in immigration detention for two years and eight months until their release". It went on165: "Whatever justification there may have been for an initial detention for the purposes of ascertaining identity and other issues, the State party has not, in the Committee's view, demonstrated that their detention was justified for such an extended period. … [It] has not demonstrated that other, less intrusive, measures could not have achieved the same end of compliance with the State party's immigration policies by, for example, imposition of reporting obligations, sureties or other conditions which would take into account the family's particular circumstances." In the result, the UNHRC concluded that the mandatory detention of the respondent children (and of their mother as their carer) was contrary to Art 9.1 of the ICCPR166. The UNHRC also concluded that the period of detention of the children, disclosed by the evidence, and the inability judicially to challenge the mandatory character and duration of the detention "was, or had become, contrary 161 Mabo v Queensland [No 2] (1992) 175 CLR 1 at 42 per Brennan J (Mason CJ and McHugh J concurring at 15). 162 cf Tangiora v Wellington District Legal Services Committee [2000] 1 WLR 240 at 163 McGoldrick, The Human Rights Committee: Its Role in the Development of the International Covenant on Civil and Political Rights, (1994) at 151 [4.39]. 164 UNHRC decision at [8.3]. 165 UNHRC decision at [9.3]. 166 UNHRC decision at [9.3]. Kirby to article 9, paragraph 1" and "constitutes a violation of article 9, paragraph 4"167. Various other breaches or possible breaches of articles of the ICCPR were referred to168. The UNHRC concluded169: "[T]he Committee considers that the measures taken by the State party had not, until the Full Bench of the Family Court determined it had welfare jurisdiction with respect to the children, been guided by the best interests of the children, and thus revealed a violation of article 24, paragraph 1, of the [ICCPR], that is, of the children's right to such measures of protection as required by their status as minors up [to] that point in time." If it is the case, as decided by the UNHRC, that articles of the ICCPR, namely Art 9.1 (prohibiting subjection to arbitrary detention), Art 9.4 (requiring access to a review with power to order release if the detention is not lawful) and Art 24 (measures of protection for every child), were breached by Australia in the detention of the respondent children, it appears even more arguable (as the majority in the first Full Court concluded) that the requirements of the UNCROC were breached170. The provisions of the UNCROC were considered by the first Full Court in the context of its examination of the validity, under the external affairs power, of the provisions of the FLA affording the Family Court its general welfare jurisdiction and powers. However, the same analysis is available in deciding the construction argument, considered at the close of the majority's reasons in the first Full Court171. Upon the basis of the majority's view that the respondent children were being held indefinitely in immigration detention the first Full Court concluded that this was contrary to Art 37 of the UNCROC, thereby suggesting that the continued detention of the children was not the obligation imposed by the MA, properly construed, when read with the FLA172. It was on that footing that the majority in the first Full Court concluded that s 196(3) of the MA, purporting 167 UNHRC decision at [9.4]. 168 UNHRC decision at [9.6], including references to ICCPR, Arts 17 and 23. 169 UNHRC decision at [9.7]. 170 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 647 [263], 648-649 [273], 651 [285]-[286]. 171 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 665-666 [383]-[384]. 172 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 666-667 [387]-[390]. Kirby to prevent "the release, even by a court, of an unlawful non-citizen from detention (otherwise than for removal or deportation) unless the non-citizen has been granted a visa" did not apply to the ordering of the release of children from detention173. Only if the Family Court had the power to order release, in the specific case of children, would the disconformity between Australian federal law and Australia's obligations under the UNCROC (specifically Art 37) be avoided. Effectively, this conclusion of the first Full Court meant a reading down of the general language of ss 189 and 196 of the MA, so as to avoid infraction otherwise of the obligations Australia had freely assumed under international law. For its part, the UNHRC acknowledged that it had no authority to reach conclusions about the alleged breaches of the UNCROC, its mandate being confined to the ICCPR174. The UNHRC thus confined its attention to the alleged breaches of the latter instrument. Nevertheless, given the stronger and more specific language of the UNCROC, relevant to the detention of children such as the respondent children, it was strongly arguable that the mandatory obligation to detain such children for very long periods whilst the cases of their parents were winding their way through the primary decision-making processes, the Federal Court and this Court, constituted a breach of Australia's duties under international law. In reaching that conclusion as a first step in its reasoning, the first Full Court did not, therefore, err. Indeed, it was not a novel conclusion, as I shall show. It was the starting point for the consideration of the element of the suggested unlawfulness of the respondent children's detention. It was upon this basis that the majority judges in the first Full Court concluded that they were permitted to override the provisions of the MA. These provisions otherwise appeared to apply to the children to oblige their continued immigration detention and to forbid any court ordering their release without a relevant visa. The relevance of any such breach: Acting on the hypothesis sufficiently established by the foregoing analysis, that there was a breach of obligations imposed on Australia by international law, the critical question is reached. Does any such breach of international law sustain a reading down of the language of the detention provisions of the MA? In other words, within the authorities, would such a reading of the MA, viewed in the context of the welfare provisions of the FLA, amount to a construction "so far as the language of the legislation 173 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 666-667 [389]. 174 UNHRC decision at [5.15] referring to KL v Denmark, Case No 59/1979, decision adopted 26 March 1980. Kirby permits"? Or would it involve an impermissible defiance by the courts of the clear requirements of valid Australian federal law? Mandatory detention is clear, valid and applicable The language of the sections: Two indications demonstrate, in my view beyond doubt, that the purpose of the Australian Parliament in enacting laws for the mandatory detention of aliens arriving in Australia as "unlawful non-citizens" was to include children, such as the respondent children. requiring The first indication appears in the text of the MA. There is no hint in the provision the "detention of unlawful non-citizens" of any differentiation between the treatment of adults and children175. The definition of "non-citizen" in the MA176 is simply "a person who is not an Australian citizen". Self-evidently, a child is a "person". If the child is not an Australian citizen, it is therefore a "non-citizen" as defined by the MA. If the child is an alien within the Australian Constitution, who has arrived in this country as a "non-citizen", it is clearly competent for the Parliament under the Constitution to enact a law with respect to the detention of such a child177. So much is not in doubt or contest. Generally, children at birth derive their nationality status from their parents. Unless the child is stateless on arrival in Australia, it ordinarily qualifies as a "non-citizen", taking its own citizenship in accordance with the law of the nationality of its parents. It is not an Australian citizen merely because of its arrival at, or presence in, Australia. It is a national of a foreign country. Such was the case with the respondent children. The obligation to detain unlawful non-citizens, known or reasonably suspected to be in the "migration zone", is imposed by the MA on specified officers178. There is no hint in the obligation, so expressed, of any differentiated treatment in respect of unlawful non-citizens who are children. In practical terms, where children, because of age and dependency, arrive in Australia with their parents illegally, the adults and children are taken into custody together. Although the MA does contain some provisions specific to the status of 175 MA, s 189. 176 MA, s 5(1). 177 Constitution, s 51(xix) ("aliens"). See also s 51(xxvii) ("immigration and emigration"). 178 "Officer" is defined broadly in s 5(1) of the MA. The word includes officers of Customs, Protective Services officers, members of the Federal Police and of the police of external territories and other designated persons. Kirby relation children179, particularly to bridging visas180, such express differentiation appears neither in s 189 nor in s 196. On the contrary, the generality of the language, the stringency of its provisions and the apparent policy which the sections on their face are designed to implement, contradict any suggestion that the Parliament intended to provide only for the detention – even extended detention – of adults and not of children. In terms of the MA, mandatory detention was required of all "persons" arriving in Australia as "unlawful non-citizens"181. The provisions therefore include, and apply to, children as well as adults. The language of the MA is intractable. It cannot be "read down" to avoid any problems created by obligations derived from international law. The effect of ss 189 and 196 is that no decision under the MA is required as a precondition to the existence of the power and duty of "officers" to detain an unlawful non- citizen, adult or child. Detention depends solely upon the status of that person as an unlawful non-citizen. The duration of detention is governed by the provisions of the Act182. An alien child, as much as an alien adult, falls within the designated status. The provisions of the MA are susceptible to no other construction. Parliamentary reports on such detention: That this is so is put beyond any residual doubt by reference to a series of public reports, tabled in the Australian Parliament, which address the suggested defects of the system of 179 eg MA, ss 211-212 (recovery of costs of detained spouses and dependants). As to the position of children under the MA see Chen Shi Hai v Minister for Immigration and Multicultural Affairs (2000) 201 CLR 293 at 318-320 [75]-[81]. 180 MA, ss 31(3), 37, 72, 73 and Migration Regulations 1994 (Cth), reg 2.20. However, these visas are rarely granted as they depend upon the granting of the visa being in the best interests of the non-citizen. Some authors suggest that the government holds the view that the best interests of the child are protected by keeping the child and parent together: Poynder, "A (name deleted) v Australia: A Milestone for Asylum Seekers", (1997) 4 Australian Journal of Human Rights 155 at 166-167; Mares, Borderline: Australia's treatment of refugees and asylum seekers, (2001) at 65. 181 See also MA, s 192 where officers have the power to detain a non-citizen whose visa may be cancelled. This power is subject to s 192(2) which provides that officers cannot detain the non-citizen unless they reasonably suspect that the non- citizen will attempt to evade officers or otherwise not co-operate. 182 MA, s 196; cf Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri (2003) 197 ALR 241 at 249 [31]. Kirby mandatory immigration detention followed in Australia, and specifically as such detention affects children. Three reports in particular can be mentioned. They indicate that the Australian Parliament has had its attention directed expressly to the issue of universal mandatory detention of unlawful non-citizens and specifically to the case of children. Notwithstanding these reports, many subsequent amendments to the Act and an intervening change of government, no alteration of the legislation requiring mandatory detention has been adopted differentiating between adult and children non-citizens. The first such report, Asylum, Border Control and Detention, responded to the terms of reference of the Parliamentary Committee on Migration183. The report contains an extensive review of the rationale accepted by the majority of the Committee for the detention of unlawful border arrivals in Australia184. The report notes the submission of the Department of Immigration and Ethnic Affairs that detention was an instrument to achieve administrative ends and was not, as such, punitive185. That department conceded, however, that "incidental to [the] universal visa system is deterrence"186. That "deterrence" arose from the detention of unauthorised border arrivals. The department acknowledged concerns, raised by the Attorney-General's Department, "regarding long term detention and detention of children"187. The latter department is recorded as observing that "the circumstances of particular cases may lead to breaches of international law"188. In this regard, particular concern was expressed about "the lack of discretion to release persons subject to long term detention, and the detention of children"189. The Attorney-General's Department's submission, summarised in the report, drew special attention to the requirements of the UNCROC in respect of the detention of children with, or separately from, their parents. It was the 183 Australian Parliament, Joint Standing Committee on Migration J McKiernan, Chairman), February 1994 ("Border Control Report"). (Senator 184 Border Control Report at 108-111 [4.8]-[4.19]. 185 Border Control Report at 109 [4.11]. 186 Border Control Report at 109 [4.12]. 187 Border Control Report at 111 [4.18]. 188 Border Control Report at 115 [4.36]. 189 Border Control Report at 115 [4.36]. Kirby opinion of that department that "the power to release children from detention, if that was in the best interests of the child, would ensure that any criticism relating to the Convention on the Rights of the Child could be overcome"190. the The Parliamentary Committee recommended consideration of inclusion of a "prescribed class" of detainees, eligible for release from detention on a bridging visa where this was appropriate having regard to considerations such as "special need based on age" and "Australia's international obligations"191. A dissenting report went even further and questioned the requirement of mandatory detention, pointing to alternative overseas procedures. That report drew special attention to the "particularly worrying" effects of prolonged detention of children192. The dissenting report proposed that the MA be amended "so as to end the system of mandatory detention of unlawful non-citizens … save for the limited purposes of preliminary checks on identity, security and health"193. Although the foregoing Committee report was tabled in the Australian Parliament, no change to the system of mandatory detention provided in the Act has been introduced. Specifically, no amendments have been enacted providing particular rights for the release from detention of "unlawful non-citizens" who are children. In May 1998, the Australian Human Rights and Equal Opportunity Commission ("the HREOC") presented its report to the Attorney-General, Those who've come across the seas194. This report also recommended modification of the MA. Specifically, the HREOC concluded that "[t]he detention of asylum seekers for any other purpose [than to verify identity, to determine the elements of the claim, to deal with cases of destroyed documents or to protect national security or public order] is contrary to the principles of international protection and should not be permitted under Australian law"195. The report recommended that "[d]etention is especially undesirable for vulnerable people such as single 190 Border Control Report at 117 [4.41]. 191 Border Control Report at xv [Rec 11]. 192 Dissenting report of Senator C Chamarette: Border Control Report 201 at 207. 193 Dissenting report of Senator C Chamarette: Border Control Report 201 at 212 [Rec 1]. 194 Australia, Human Rights and Equal Opportunity Commission, Those who've come across the seas: Detention of unauthorised arrivals, (1998) ("HREOC Report"). 195 HREOC Report at vii [R3.2]. Kirby women, children, unaccompanied minors". It called particular attention to the UNCROC, Art 37(b)196. Although the HREOC report was also tabled in the Parliament, no relevant amendments followed its recommendations, whether generally or specifically concerning children. In September 2000, the Parliamentary Committee on Migration delivered a further report, Not the Hilton: Immigration Detention Centres: Inspection Report197. The Committee's terms of reference were confined on this occasion to inspection of the conditions of Australia's immigration detention facilities. They did not address larger policy issues. The report made no recommendations for change in the mandatory detention system. None have been enacted. From the foregoing it must be inferred that the Australian Parliament was fully aware of the operation of mandatory detention of unlawful non-citizens arriving in Australia; of its particular application to the children of unlawful non- citizens; of the special problems that prolonged detention of children in such detention centres occasions; and of the concerns expressed by departmental officers and individual committee members about breach of the requirements of international law, specifically of the UNCROC, Art 37(b). In effect, the position of the Parliament has not altered since the view expressed a decade ago in the first of the above reports198: "[T]he Committee is of the view that those who arrive in Australia without authorisation or with invalid authorisation should be detained upon arrival. To do otherwise would compromise Australia's system of immigration control. In addition, detention of unauthorised arrivals ensures that the community is not exposed to unknown or undetected health or security risks. In the Committee's view, Australia's immigration control system must be upheld. It is important to ensure that immigration to Australia cannot be achieved simply by arrival." Mandatory detention is confirmed: In the light of the foregoing history, it is impossible to draw any inference other than that the Australian Parliament intends a system of universal mandatory detention of unlawful non-citizen arrivals to remain in force, including in respect of children. In the face of the evidence, appearing as it does in the public record supplied to this Court, readily 196 HREOC Report at vii [R3.3]. 197 Australian Parliament, Joint Standing Committee on Migration (Mrs Chris Gallus MP, Chair), September 2000. 198 Border Control Report at 149 [4.153]. Kirby available to all, it is impossible to construe the MA otherwise than in accordance with its terms. It follows that it is impossible to accept that a significant alteration of the MA was introduced, by an undetected, unannounced, unnoticed side-wind, such as the enactment of the FLRA or the amendment of the FLA. Mandatory detention of unlawful non-citizens who are children is the will of the Parliament of Australia. It is expressed in clear terms in ss 189 and 196 of the MA. Those sections are constitutionally valid. In the face of such clear provisions, the requirements of international law (assuming it to be as the respondents assert and as the UNHRC, in part, has found) cannot be given effect by a court such as this199. This Court can note and call attention to the issue. However, it cannot invoke international law to override clear and valid provisions of Australian national law. The Court owes its duty to the Constitution under which it is established. Pursuant to the Constitution, all laws made by the Parliament of the Commonwealth are "binding on the courts, judges, and people of every State and of every part of the Commonwealth"200. Those laws must be obeyed and enforced, whenever they are valid and their obligations are clear and applicable. They cannot be ignored or overridden, least of all by this Court. I do not regard it as arguable that the detention of the respondent children under the MA was permanent or indefinite. True, it lasted a long time before their release by order of the second Full Court. However, under the MA, the period of detention had a clear terminus. This (putting it broadly) is the voluntary election of the children (through their parents) to leave Australia or the completion of the legal proceedings brought by the parents on the children's behalf, with necessary consequences for the status of the children. The case of the respondent children is to be distinguished from other recent proceedings. It cannot be said that the MA is inapplicable to them because they are stateless. Nor is the MA inapplicable because the conditions of detention have been shown, arguably, to fall outside the statutory conditions required by the MA. In this appeal, the attack was directed to the power of detention, as such, and its duration. With the dissenting judge in the first Full Court, in my opinion "it cannot be said that there is no real likelihood or prospect 199 Re Kavanagh's Application (2003) 78 ALJR 305 at 308-309 [14]-[20]; 204 ALR 1 at 5-6; cf Young v Registrar, Court of Appeal [No 3] (1993) 32 NSWLR 262 at 200 Constitution, covering cl 5. Kirby in the reasonably foreseeable future of the children being removed and thus released from detention"201. Conclusions and orders So far as Australian law was concerned, the respondent children were therefore lawfully detained under the MA. In such circumstances, by the language of that Act, they had to be detained until one of the provisions in s 196(1) was fulfilled, ie until removal or deportation from Australia or the grant of a visa. Even if a point might ultimately be reached where the loss of liberty of an "unlawful non-citizen" in proved conditions falls outside the statutory expression "immigration detention" (or would invite constitutional invalidity as amounting to unauthorised punishment), that point had not been reached in the case of the respondent children at the time of their release. If there was protracted duration of the detention of the respondent children, as there clearly was, it was solely because of the operation of the MA upon the challenges mounted seriatim before the successive Australian decision- makers by the children's parents severally and then together. The confinement of the children was not only lawful under the MA. It was obligatory in terms of the provisions of that Act. And, as I have shown, those provisions represent the deliberate and repeatedly reaffirmed will of the Australian Parliament, acting in this case within its constitutional powers. It follows that it is impossible to interpret the general powers and jurisdiction enjoyed by the Family Court under the FLA as authorising intrusion into the fulfilment of the clear and specific obligations of detention imposed on the Minister and federal officers by the MA. In the face of the specificity, particularity and universality of the application of the MA, requiring detention of persons such as the respondent children, any general powers and jurisdiction enjoyed by the Family Court under the FLA can have no operation to require or permit their release from detention202. Given the express command of the Federal Parliament to designated officers to detain the children, it was not 201 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604 at 673 [426]. 202 cf Phillips v Lynch (1907) 5 CLR 12 at 28-29; Goodwin v Phillips (1908) 7 CLR 1 at 7; Maybury v Plowman (1913) 16 CLR 468 at 474-476; Lukey v Edmunds (1916) 21 CLR 336 at 346-347, 348-349; Bank Officials' Association (South Australian Branch) v Savings Bank of South Australia (1923) 32 CLR 276 at 282-283, 289, 294, 297; Victorian Railways Commissioners v Speed (1928) 40 CLR 434 at 439; Butler v Attorney-General (Vict) (1961) 106 CLR 268 at 276, 280, 290; Saraswati v The Queen (1991) 172 CLR 1 at 17, 23. Kirby permissible for the Family Court, under generally expressed powers, to give the Minister and such officers orders involving contradictory or inconsistent instructions203. invoked they cannot be to oblige contravention of Whatever powers are enjoyed by the Family Court under its welfare jurisdiction, the constitutionally valid legislative scheme of mandatory detention contained in the MA. It is unnecessary in this appeal to consider whether such powers would extend, in some exceptional circumstances, to require the alteration of the conditions of the respondent children whilst in immigration detention. Given that the children are not presently within such detention, that issue is theoretical in this case. On the face of things, however, the general responsibility for such detention is reposed in the Minister and the officers named in the MA. It is not placed in the hands of the judges of the Family Court. I prefer to rest my conclusion on the foregoing approach to the intersection of the FLA and the MA rather than the approaches adopted by the other members of this Court reaching the same result. In light of my conclusion, it is unnecessary in this appeal for me to decide whether the purported exclusion of the powers of a court to release an unlawful non-citizen, in terms of s 196(3) of the MA, is constitutionally invalid as an over- broad provision204. Because, as a matter of construction, the MA excludes the possibility of orders by the Family Court under the FLA in this case, an order for release of the respondent children from detention would travel beyond the jurisdiction and powers of the Family Court. It is for that reason, not because of the terms of s 196(3) of the MA, that I would set aside the orders of the first Full Court. On all other matters argued in the appeal, I would reserve my opinion. The orders proposed in the reasons of Gummow, Hayne and Heydon JJ should be made. 203 MA, s 196(3); cf Immigration and Naturalization Service v St Cyr 533 US 289 (2001); Neuman, "The Habeas Corpus Suspension Clause After INS v St Cyr", (2002) 33 Columbia Human Rights Law Review 555; Crock, "'You have to be stronger than razor wire': Legal issues relating to the detention of Refugees and asylum seekers", (2002) 10 Australian Journal of Administrative Law 33 at 53-54. 204 cf HR & DR and Minister for Immigration & Multicultural & Indigenous Affairs (2003) FLC ¶93-156 at 78,569-78,571 [151]-[171]. See Chisholm, "The immigration cases", (2003) 17 Australian Journal of Family Law 219 at 220-221; cf NAFC v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 126 FCR 99 at 105 [21]-[22]. Callinan CALLINAN J. Collectively, the family of whom the respondents are members, have, since their arrival in this country, litigated in many of its tribunals and courts in attempts to obtain lawful residential status in it. On 22 October 1999, the father arrived in Australia unlawfully and was taken into immigration detention. He claimed that he was a refugee from the Taliban regime in Afghanistan. He was granted a temporary visa (sub-class 785) on 3 August 2000 upon the basis of this claim. Four days later he applied for a protection visa. On 1 January 2001, the mother and the infant first respondents ("the children") arrived in Australia unlawfully, and were taken into immigration detention. Seven weeks later the mother and the children applied for protection visas, upon the basis that they too were refugees from the Taliban regime in Afghanistan. On 22 May 2001, the delegate of the Minister refused the application for protection visas by the mother and the children, and on 26 July 2001 the Refugee Review Tribunal affirmed the delegate's decision not to grant visas to the mother and the children because they were not nationals of Afghanistan but of Pakistan. Two of the children on 27 June 2002 escaped from the Woomera Immigration Reception Processing Centre. They were found in Melbourne and returned to immigration detention on 19 July 2002. The present proceeding was commenced in the Family Court at Adelaide205. The relief there sought was as follows: "1. An injunction pursuant to section 68B of the Family Law Act that the [appellant], whether by himself, his servants or his agents, be required to release the [children] from detention at the Woomera Immigration Reception Processing Centre. An injunction pursuant to section 68B of the Family Law Act that the [appellant], whether by himself, his servants or his agents, be restrained from detaining the [children] pursuant to section 189 of the Migration Act. Alternatively, an order pursuant to section 67ZC of the Family Law Act that the [appellant], whether by himself, his servants or his 205 The initial application to the Family Court was made by two of the children, A and M. Subsequently, upon appeal to the Full Court of the Family Court, leave was granted to join the other three children. Callinan agents, be required to release the [children] from detention at the Woomera Immigration Reception Processing Centre. An order pursuant to section 67ZC of the Family Law Act that the [appellant], whether by himself, his servants or his agents, be restrained from detaining the [children] pursuant to section 189 of the Migration Act. A declaration pursuant to section 68B and/or section 67ZC of the Family Law Act that the detention of the [children] pursuant to section 189 of the Migration Act is contrary to the welfare of the [children]. Such further or other orders as this Honourable Court deems fit. Costs." On 9 October 2002 Dawe J dismissed the application. Her Honour concluded as follows: "Summary The provisions relating to welfare of children in the Family Law Act fall readily into the category of a statutory power of general the specific application which should be read subject unambiguous terms of the Migration Act. This court cannot order the release of the children. The Family Court of Australia does not have jurisdiction in South Australia to make the orders sought to bind the Minister because of the provisions of s 69ZE and s 69ZH. The welfare jurisdiction to be exercised must be exercised within the usual field of family law. It does not extend to a power to override the exercise of any statutory power merely because that exercise of power may impact upon the best interests of children. There is nothing in the Family Law Act or implied by its provisions which can give control over the Minister's behaviour or that of his officers to the Family Court even if the behaviour which it is sought to control were found to be contrary to the best interests of a child. Even if the welfare jurisdiction granted by the Family Law Act is not restricted by the Migration Act or ss 69ZE and 69ZH (as I assert it is) that welfare jurisdiction is not wide enough to make orders binding on the Minister. Callinan The existence of a power to make laws in relation to external affairs does not mean that Parliament has used the Family Law Act to implement the provisions of UNCROC to extend the welfare jurisdiction of the Family Court. Conclusion The applications by A and M and the father are misconceived and fatally flawed. The applications of A and M and the father fail on the grounds set out above. The Family Court does not have any jurisdiction to make any of the orders sought against the Minister. The other matters raised in paragraph 11 of the father's submission cannot overcome these serious basic defects." The next relevant event was the cancellation of the father's visa on 4 December 2002. The delegate found that he was from Pakistan, not Afghanistan. In consequence he was taken into immigration detention at Villawood (Sydney). In January 2003 the mother and the children were transferred from the Woomera Immigration Reception Processing Centre to the Baxter Immigration Reception Processing Centre to which the father was also shortly thereafter transferred. In the next month this Court dismissed an application for judicial review of the Refugee Review Tribunal's decision by the mother and the children206, and on 4 March 2003 the Refugee Review Tribunal affirmed the cancellation of the father's visa. The father then unsuccessfully applied to the Federal Court (Selway J) for judicial review of the Tribunal's decision to cancel his visa. He appealed to the Full Court of the Federal Court against the decision of Selway J. On 11 June 2003 the mother and three of the children (the daughters) were transferred from Baxter to the Woomera Residential Housing Project. The two elder boys remained at Baxter with their father. About a week later the Full Court of the Family Court (Nicholson CJ and O'Ryan J, Ellis J dissenting) allowed an appeal against the judgment of Dawe J, and remitted the matter for rehearing207. 206 Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Applicants S134/2002 (2003) 211 CLR 441. 207 B v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 199 ALR 604. Callinan It appears that the claim for relief (or the perception of it) may have assumed a different form at some stage during or after the hearing in the Full Court of the Family Court, perhaps because changes had occurred in the meantime to the situation of the children and the parents. Those were narrated in the judgment relating to the application for a certificate and a stay208 to which I refer below: "In October 2002, the trial judge found that the Family Court had no jurisdiction to make orders in respect of children held in immigration detention, and accordingly dismissed the application. The appeal to the Full Court was initially brought on behalf of the two boys and the father as appellant intervener. Although not parties to the original application, the mother was also given leave to add A and M's three younger sisters aged 11, nine and six as appellants (together, 'the children'). At the time of the trial, the children and their mother were detained at one particular immigration detention centre and the father was living in the general community. However, by the date of the hearing of the appeal, the mother and children had been transferred to another detention centre, and the father was detained in the same facility. All family members are unlawful non-citizens within the meaning of s 14 of the Migration Act 1958 (Cth)." The Full Court of the Family Court refused an application by the appellant for a stay. A single judge of the Family Court, Strickland J, on 5 August 2003 dismissed an application for interlocutory release of the children from immigration detention. The Full Court of the Family Court (Kay, Coleman and Collier JJ) on 25 August 2003 allowed an appeal against the judgment of Strickland J, and ordered the release of the children from immigration detention on an interlocutory basis209. The Full Court of the Family Court, in the due exercise of its jurisdiction under s 95(b) of the Family Law Act 1975 (Cth) ("the Family Act"), granted a certificate to enable an appeal to be brought directly to this Court. The question of law involved, essentially of the limits of the jurisdiction of the Family Court, is undoubtedly an important one. 208 Minister for Immigration and Multicultural and Indigenous Affairs v B (Infants) [No 2] (2003) 175 FLR 426 at 427-428. 209 B and B v Minister for Immigration and Multicultural and Indigenous Affairs [2003] FamCA 621. Callinan It had been the respondents' contention in the Family Court that the orders sought could be made by that Court pursuant to ss 67ZC and 68B of the Family Act. The response of Dawe J at first instance to that contention sufficiently appears from her Honour's conclusions which I have already quoted. The reasoning of the Full Court of the Family Court The different opinion of the majority in the Full Court of the Family Court was founded largely upon its view of s 67ZC of the Family Act, that the provisions of subdiv F of Div 12 of Pt VII of that Act do not relevantly limit its scope, indeed, they "assume the conferring of jurisdiction upon the court in respect of children of marriages without limitation"210. The Court had a general welfare jurisdiction over children. There is no necessity to limit that jurisdiction to disputes between parents: orders could properly be made against third parties to promote the welfare of children211. The orders sought were sufficiently related to the parents' marriage to bring them within the marriage power in s 51(xxi) of the Constitution212. Furthermore, s 67ZC of the Family Act gives effect to the United Nations Convention on the Rights of the Child and is, accordingly, supported by the external affairs power within s 51(xxix) of the Constitution213. The Full Court was prepared to accept that s 196 of the Migration Act 1958 (Cth) ("the Migration Act") could prevent the release of children in detention, but only in circumstances in which it could validly operate214; here, because the detention of a child was unlawful the Court had jurisdiction to order the child's release215. The appeal to this Court this Court the appellant and the Attorney-General of the Commonwealth challenge every one of the Full Court's holdings. Part VII of the Family Act is concerned entirely with children. Section 60B(1) states its object, to ensure that parents fulfil their duties and meet their responsibilities concerning the care, welfare and development of their children. The whole of s 60B(1) is taken up with references to the relationship between 210 (2003) 199 ALR 604 at 627 per Nicholson CJ and O'Ryan J. 211 (2003) 199 ALR 604 at 639-640 per Nicholson CJ and O'Ryan J. 212 (2003) 199 ALR 604 at 644-645 per Nicholson CJ and O'Ryan J. 213 (2003) 199 ALR 604 at 651 per Nicholson CJ and O'Ryan J. 214 (2003) 199 ALR 604 at 663 per Nicholson CJ and O'Ryan J. 215 (2003) 199 ALR 604 at 656 per Nicholson CJ and O'Ryan J. Callinan children and their parents and incidents of that relationship. Division 2 of Pt VII of the Family Act elaborates upon the concept of parental responsibility and reinforces the notion that both parents owe it. Divisions 4 and 5 of Pt VII make provision for "parenting plans" and their registration in the Family Court. Section 64C provides that a parenting order may be made in favour of a parent of a child, or some other person. Subsequent provisions deal with financial obligations of parents and related matters. Section 67ZC, which is in Div 8 of Pt VII is expressed in very general terms. It is as follows: Orders relating to welfare of children In addition to the jurisdiction that a court has under this Part in relation to children, the court also has jurisdiction to make orders relating to the welfare of children. In deciding whether to make an order under subsection (1) in relation to a child, a court must regard the best interests of the child as the paramount consideration." Subdivision F of Div 12 of Pt VII of the Family Act makes provision for the extension of the Part to the States. Section 69ZE is as follows: Extension of Part to the States Subject to this section and section 69ZF, this Part extends to New South Wales, Victoria, Queensland, South Australia and Tasmania. Subject to this section and section 69ZF, this Part extends to Western Australia if: the Parliament of Western Australia refers to the Parliament of the Commonwealth the following matters or matters that include, or are included in, the following matters: the maintenance of children and the payment of expenses in relation to children or child bearing; parental responsibility for children; or (b) Western Australia adopts this Part. This Part extends to a State under subsection (1) or (2) only for so long as there is in force: an Act of the Parliament of the State by which there is referred to the Parliament of the Commonwealth: Callinan the matters referred to in subparagraphs (2)(a)(i) and (ii); or (ii) matters that include, or are included in, those matters; a law of the State adopting this Part. This Part extends to a State at any time under subsection (1) or paragraph (2)(a) only in so far as it makes provision with respect the matters that are at that time referred to the Parliament of the Commonwealth by the Parliament of the State; or (b) matters incidental to the execution of any power vested by the Constitution in the Parliament of the Commonwealth in relation to those matters." Section 69ZF then provides as follows: Unless declaration in force, Part's extension to a State has effect subject to modifications The Governor-General may, by Proclamation, declare that all the child welfare law provisions of this Part extend to a specified State. (2) Despite anything in section 69ZE, if no declaration under subsection (1) is in force in relation to a particular State, this Part, as it extends to that State because of section 69ZE, has effect as if: subsection 66F(2) were omitted; and subsections 69ZE(1) and (2) were amended by omitting 'and section 69ZF'; and section 69ZF were omitted; and paragraph 69ZK(1)(b) were omitted; and subsection 69ZK(2) were amended by adding at the end the following word and paragraphs: '; or (d) the jurisdiction of a court under a child welfare law to make an order in relation to the maintenance of the child; or (e) an order of the kind referred to in paragraph (d).'. Callinan (3) A Proclamation that was in force in relation to a State under subsection 60E(6) of this Act as in force before the commencement of this section has effect, after that commencement, as if it were a Proclamation under subsection (1) of this section." Section 69ZH should also be noted: Additional application of Part (1) Without prejudice to its effect apart from this section, this Part also has effect as provided by this section. By virtue of this subsection, Divisions 2 to 7 (inclusive) (other than Subdivisions C, D and E of Division 6 and sections 66D, 66M and 66N), Subdivisions C and E of Division 8, Divisions 9, 10 and 11 and Subdivisions B and C of Division 12 (other than section 69D) have the effect, subject to subsection (3), that they would have if: each reference to a child were, by express provision, confined to a child of a marriage; and each reference to the parents of the child were, by express provision, confined to the parties to the marriage. The provisions mentioned in subsection (2) only have effect as mentioned in that subsection so far as they make provision with respect to the parental responsibility of the parties to a marriage for a child of the marriage, including (but not being limited to): the duties, powers, responsibilities and authority of those parties in relation to: the maintenance of the child and the payment of expenses in relation to the child; or the residence of the child, contact between the child and other persons and other aspects of the care, welfare and development of the child; and other aspects of duties, powers, responsibilities and authority in relation to the child: arising out of the marital relationship; or in relation to concurrent, pending or completed proceedings between those parties for principal relief; Callinan (iii) in relation to a dissolution or annulment of that marriage, or a legal separation of the parties to the marriage, that is effected in accordance with the law of an overseas jurisdiction and that is recognised as valid in Australia under section 104. By virtue of this subsection, Division 1, Subdivisions C, D and E of Division 6, section 69D, Subdivisions D and E of Division 12 and Divisions 13 and 14 and this Subdivision, have effect according to their tenor." In my opinion the appellant's first submission is correct, that the jurisdiction conferred by s 67ZC of the Family Act does not, as a matter of statutory construction, extend to a jurisdiction to order the children to be released from detention. The only jurisdiction which the relevant States, including South Australia, sought to transfer and transferred to the Family Court for exercise under the Family Act pursuant to s 69ZE(3) and (4) was relevantly, the parental responsibility for, and the parental maintenance of children. Clearly, the orders sought by the respondents in this case are not orders with respect to any of these matters. The reference by the States in the terms that it was made is consistent with these propositions: the Commonwealth has power to make laws with respect to marriage under s 51(xxi) and s 51(xxii) of the Constitution; power in relation to ex-nuptial children resides in the States; and the whole thrust of the Family Act so far as children are concerned is to deal with children of marriages and the obligations of their parents to them. That last appears (inter alia) from those provisions of the Family Act in Pt VII to which I have referred, including s 69ZH, in which the notion of, and obligations attached to "parenting", that is to say, parents within, or who have been in a marriage, are set out. It was with "parenting" and its obligations not otherwise the subject of the Family Act that the States were concerned, and some powers with respect thereto that they sought to, and did in terms transfer to federal courts, the Family Court, and, by s 69H(4), the Federal Magistrates Court. Sections 69ZE to 69ZH are central to, and govern the application of the provisions of Pt VII. It is not only unlikely that a State would seek to confer a power upon the Commonwealth that the latter already possessed, but it also would be constitutionally unable to do so. What the States have done is simply to confer a jurisdiction with respect to parental obligations owed to children, not already possessed by the Commonwealth. Furthermore, the power or jurisdiction conferred is neither in terms nor by implication a general welfare jurisdiction over children. What I have said is, I believe, in conformity with the recent Callinan approach of the Court generally to a reference of a State power to be exercised in conjunction with a constitutionally confined Commonwealth power216. It is also right, as the appellant and the Attorney-General of the Commonwealth submit, that the acceptance of their arguments so far is sufficient to dispose of this appeal in their favour. Nonetheless, in due deference to the extensive argument on the other issues determined by the Full Court of the Family Court, I propose to say something about them. The majority of the Full Court purported also to exercise a parens patriae jurisdiction. That it was entitled to do so is met by the conclusion that I have already reached. But there is also this, the States did not purport to confer it. If it may be exercised by the Family Court, it can only owe its existence therefore to a parens patriae power residing in the Commonwealth. The Family Act cannot in my opinion be read as intended to confer it except to the extent that its provisions can constitutionally, and do replicate it. The Commonwealth Parliament's power to legislate is governed by ss 51(xxi) and 51(xxii) of the Constitution. The combined effect, and the influence of each upon the meaning of the other, and in consequence, the limitations upon Commonwealth power with respect to children, were the subject of some considerable discussion in Russell v Russell217 in which Barwick CJ said218: "Whilst each topic referred to in s 51 is an independent subject matter and some overlapping is possible, cognate topics and the terms in which they are expressed cannot be and never have been ignored in deciding the content and ambit of a topic described in s 51. In the present instance, the presence and the terms of par (xxii) may be related to the content and ambit of par (xxi) and may be regarded, as I would regard them, as limiting that content and ambit, particularly with respect to proceedings in relation to parental rights, custody and guardianship of infants. As I shall later point out, par (xxii) covers 'matrimonial causes' as a specific head of power. In specifying that topic, the Constitution 216 Northern Territory v GPAO (1999) 196 CLR 553 at 573 [25] per Gleeson CJ and Gummow J, 594-595 [103]-[104] per Gaudron J, 611 [157] per McHugh and Callinan JJ; AMS v AIF (1999) 199 CLR 160 at 170-172 [14]-[21] per Gleeson CJ, McHugh and Gummow JJ, 181-184 [54]-[64] per Gaudron J, 242-244 [249]-[258] 217 (1976) 134 CLR 495. 218 (1976) 134 CLR 495 at 508-509. Callinan expressly provides the extent to which parental rights, custody and guardianship of infants fall within the area of matrimonial causes. It seems to me to be implicit in the topic of 'divorce and matrimonial causes' that proceedings incidental to a proceeding for divorce or nullity of marriage are matrimonial causes within the subject matter of par (xxii) and that it is not necessary to resort to s 51(xxxix) in order to find power to create a jurisdiction with respect to such proceedings. These undoubted consequences of par (xxii) are pertinent, in my opinion, to any consideration of the content or ambit of the power granted by par (xxi)." Later his Honour said219: "In my opinion, however, it is one thing to specify the consequences of the act of marriage, including a specification of the mutual rights and duties of the spouses, both towards each other and towards their children: it is quite another thing to erect a jurisdiction to enforce those rights and duties. Though in relation to some topics of legislation powers of adjudication and enforcement may be seen as no more than incidental to the topic or to the execution of the law made under it, it seems to me that the creation of such a jurisdiction, as that with which I am dealing, is not incidental within the meaning of par (xxxix) of s 51 to the declaration of the consequences of marriage: nor is it wrapt up as an incident of and contained within the constitutional topic of 'marriage' itself. It is, indeed, quite a disparate matter to determine how and by whom the particular consequences of the existence or exercise or non- performance of the rights or duties derived from the marriage may be determined and enforced. Hence the need for a specific topic of divorce and a specific topic of matrimonial causes, expressed in the terms of par (xxii) of s 51." "However, par (xxii) of s 51 expressly gives the Parliament power to legislate with respect to divorce and matrimonial causes. The latter expression, if widely understood, would refer to any controversy between the parties to a marriage as to a matter which pertained to the marriage relationship. It would indeed include divorce itself. If it were not for the concluding words of par (xxii), that paragraph could without difficulty be read as supplementing and amplifying, so far as necessary, the power 219 (1976) 134 CLR 495 at 510. 220 (1976) 134 CLR 495 at 525. Callinan given by par (xxi); together the two paragraphs would give the fullest power to legislate with respect to proceedings brought by one spouse against another to enforce any rights which had their source in the matrimonial relationship. However, the concluding words of par (xxii), by giving a power to make laws with respect to parental rights and the custody and guardianship of infants in relation to divorce and matrimonial causes, indicate a clear intention that the power given by par (xxii) should not authorize legislation with respect to those questions unless they arise as an incident to proceedings for divorce or some other matrimonial cause. Under par (xxii) the Parliament has power to deal with proceedings for custody which are brought as ancillary to proceedings for divorce or some other matrimonial cause, but has no power to deal with custody proceedings brought independently of any other claim to relief." On this point Gibbs J reached this conclusion221: "In my opinion it is not proper in the construction of par (xxi) to ignore the restrictions on power contained in par (xxii). To do so would in effect make the concluding words of par (xxii) quite ineffective. Paragraph (xxii) resembles par (xxxi) in that in each case there is an express indication of an intention that the power of the Parliament should be subject to a specified limitation. It would in my opinion give altogether too little weight to the words of par (xxii) to regard par (xxi) as granting a power to make laws with respect to parental rights and the guardianship and custody of infants even when those matters had no relation to divorce or any other matrimonial cause." However, those views did not prevail in that case or subsequently. To the contrary, in the joint judgment of Mason CJ, Deane, Toohey and Gaudron JJ in P v P222, this appears: "The grants of legislative power contained in pars (xxi) and (xxii) of s 51 of the Constitution are cumulative. Each must be given its full scope and effect. Neither is to be read down by reference to the other223. Paragraph (xxi)'s grant of legislative power with respect to 'Marriage' encompasses laws dealing with the protection or welfare of children of a marriage in so far as the occasion for such protection or welfare arises out 221 (1976) 134 CLR 495 at 527. 222 (1994) 181 CLR 583 at 600-601. 223 See Attorney-General (Vict) v The Commonwealth ("the Marriage Act Case") (1962) 107 CLR 529 at 560, 572; Russell v Russell (1976) 134 CLR 495 at 539; Re F; Ex parte F (1986) 161 CLR 376 at 387. Callinan of, or is sufficiently connected with, the marriage relationship224. To a significant extent, that operation of par (xxi) overlaps par (xxii)'s express conferral of legislative power with respect to 'parental rights, and the custody and guardianship of infants' in relation to 'Divorce and matrimonial causes'. The authorization of medical treatment of an incapable child of a marriage, including medical treatment of the kind involved in Marion's Case and in this case, is something which is directly related to the protection and welfare of the particular child and which arises out of, and is itself an aspect of, the relevant marriage relationship. To the extent that the relevant provisions of Pt VII of the Family Law Act confer jurisdiction to give or withhold such authorization, they are a law with respect to marriage within s 51(xxi). Moreover, the relevant provisions of Pt VII are, in the context of that conferral of jurisdiction upon the Family Court, directly concerned with parental rights and the custody and guardianship of infants in relation to divorce or matrimonial causes and are accordingly within the grant of legislative power contained in s 51(xxii)." With all due respect, and acknowledging that constitutionally conferred powers may overlap, I am unable to accept that the Constitution is not to be read according to one of the most elementary canons of construction of all relating to instruments of any kind: as a whole. Nor can I accept a proposition that the language of each part of it is incapable of having a bearing, including in some circumstances, a restrictive or limiting effect upon other parts. This Court has held that implications can be drawn from the relationships of various sections of the Constitution with one another and its structure225. That approach is consistent only with its being read as a whole and careful regard being had to context. This means that ss 51(xxi) and 51(xxii) not only may, but should be read together, and in consequence, having regard to their proximity, read as intended to deal with separate and quite distinct, that is to say not overlapping topics. And despite that sometimes, probably very rarely, constitutional provisions and powers may overlap, the better view is that the drafters neither engaged in a process of intentional duplication nor accidentally achieved it. 224 See, eg, R v Lambert; Ex parte Plummer (1980) 146 CLR 447 at 456; Gazzo v Comptroller of Stamps (Vict) (1981) 149 CLR 227 at 234-235, 247-248; Fountain v Alexander (1982) 150 CLR 615 at 632; In the Marriage of Cormick (1984) 156 CLR 170 at 175-176; Re F; Ex parte F (1986) 161 CLR 376 at 382, 389-390. 225 See Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 557- Callinan Earlier, their Honours in P v P226 had explained the reasoning of the Court in Secretary, Department of Health and Community Services v JWB and SMB (Marion's Case)227. They were at some pains to say that the issue there, of sterilisation of a child, arose out of the custody or guardianship of a child of a marriage. It is unnecessary, for the purposes of this case to revisit Marion's Case. On no view are the statements made there likely to throw any light on the entirely different situation here. No matter how extensive the powers conferred by ss 51(xxi) and 51(xxii) may be, the powers of the Family Court with respect to children are powers in relation to, or arising out of married (either currently or previously) parentage of children, or of unmarried parentage of them on a reference by the States. Those powers do not comprehend a general discretionary welfare power over any or all children, whether of a marriage or not, exercisable in such a way as to override any or all other powers over children, such as to detain them in immigration detention, or rehabilitative, reformative, or penal institutions. The Family Court may no more do this than it could exercise a jurisdiction in tort or contract in order to advance the welfare of a child. The respondents' proposition that s 51(xxi) of the Constitution provides a power on the part of the Commonwealth to legislate, and that by the Family Act it has legislated pursuant to it, to confer a power upon the Family Court to make all such orders as it thinks appropriate and may make under Pt VII of the Family Act, in cases in which the obligations and rights of parents are in no way in issue, so long as children of a marriage are concerned, should be rejected. The appellant's and the Attorney-General of the Commonwealth's third response was that whatever the extent of the jurisdiction of the Family Court, it had no power to contradict or interfere with the statutory directions for the detention of unlawful non-citizens whether or not they were children pursuant to ss 189 and 196 of the Migration Act. The point is certainly arguable. Before saying why that is so I should set out the two sections of the Migration Act: "189 Detention of unlawful non-citizens If an officer knows or reasonably suspects that a person in the migration zone (other than an excised offshore place) is an unlawful non-citizen, the officer must detain the person. If an officer reasonably suspects that a person in Australia but outside the migration zone: 226 (1994) 181 CLR 583 at 599-600. 227 (1992) 175 CLR 218. Callinan is seeking to enter the migration zone (other than an excised offshore place); and (b) would, if in the migration zone, be an unlawful non-citizen; the officer must detain the person. If an officer knows or reasonably suspects that a person in an excised offshore place is an unlawful non-citizen, the officer may detain the person. If an officer reasonably suspects that a person in Australia but outside the migration zone: is seeking to enter an excised offshore place; and (b) would, if in the migration zone, be an unlawful non-citizen; the officer may detain the person. In subsections (3) and (4) and any other provisions of this Act that relate to those subsections, officer means an officer within the meaning of section 5, and includes a member of the Australian Defence Force. 196 Period of detention (1) An unlawful non-citizen detained under section 189 must be kept in immigration detention until he or she is: removed from Australia under section 198 or 199; or deported under section 200; or granted a visa. To avoid doubt, subsection (1) does not prevent the release from immigration detention of a citizen or a lawful non-citizen. To avoid doubt, subsection (1) prevents the release, even by a court, of an unlawful non-citizen from detention (otherwise than for removal or deportation) unless the non-citizen has been granted a visa." The Migration Act, as appears inter alia, from the unmistakable language of those sections, is a very specific enactment apparently designed to deal with Callinan all relevant matters in relation to the entry, departure and residence of unlawful non-citizens which these respondents undoubtedly are. No relevant exceptions are made by the Migration Act in relation to children as to the jurisdiction that courts, whether State or federal, might or might not otherwise have in relation to them. The appellant and the Attorney-General of the Commonwealth accept that detention under the Migration Act is subject to the general law and in that sense to the supervision of the courts. Officials administering the Migration Act may, for example, be liable criminally or in tort. The Migration Act, however, confers upon the officials the duty to decide where a detainee resides and the conditions of residence. These are administrative decisions. They are likely to be affected by considerations of policy to the extent that discretions have to be exercised, and with respect to priorities of allocation of public resources. Some of the orders sought in the Family Court could well require the responsible Minister to exercise statutory powers under the Migration Act in a particular way, for example, to approve a particular place for the purposes of par (b)(v) of the definition of "immigration detention" in s 5(1) of the Migration Act. Section 474 of the Migration Act would appear to stand as an obstacle to the making of orders of the kind sought228. The respondents sought to rely on the United Nations Convention on the Rights of the Child. For present purposes I will proceed upon the basis that the welfare of children in this country can truly be an external affair. In enacting Pt VII of the Family Act the Parliament chose to rely on particular heads of power. Express references or indications of those heads of power will usually provide fairly sure pointers to the boundaries within which the Parliament was intending to legislate and has legislated. Here, those indicators are to be found in the long title to the Family Act and the reference to parentage and marriage in Pt VII of the Act. The Convention cannot expand the intended and clearly identified scope of Pt VII of the Family Act. Australia's treaty obligations do not form part of Australian domestic law unless incorporated by statute229. Whatever relevance the Convention may have as a declared instrument under the Human Rights and Equal Opportunity Commission Act 1986 (Cth), it has not actually been incorporated into the domestic law relating to the detention of unlawful non-citizens which is the subject of express provision under the Migration Act. Nor does Pt VII purport to incorporate the Convention into domestic law as an exercise of any legislative power with respect to external affairs, assuming that 228 Compare the reasoning of Chisholm J in HR & DR and Minister for Immigration & Multicultural & Indigenous Affairs (2003) FLC ¶93-156 at 78,569-78,571 [151]- 229 Victoria v The Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416 at 480-482 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ. Callinan the relevant matters could be external affairs. To do so the demonstration of a clear connexion between the law and the treaty would be necessary: the law must truly have the "purpose or object" of implementing the treaty230. Part VII manifests no such purpose, even though it may not be inconsistent with the Convention. The language of Pt VII and the parliamentary history of the Family Law Reform Act 1995 (Cth) (which inserted Pt VII in its current form) make it clear that Parliament was not intending in enacting that Part to implement the Convention for these reasons. The changes introduced by the 1995 amendments were directed at the reinforcement of parental responsibility for children. Section 67ZC reproduced the earlier welfare jurisdiction, arguably in clearer terms but with no suggestion of any resort to the Convention which is nowhere mentioned in the Family Act. Section 60B is a direct indication of reliance upon the marriage power. In explaining the amendments directed at parental responsibility, the Explanatory Memorandum to the Bill for the 1995 amendments noted that the object of Pt VII was "based [not on the reception of the Convention into the Family Act, but] on principles which are consistent with" the Convention231. The second reading speech noted Australia's ratification of the Convention and said that the objects clause in Pt VII gave "recognition" to the rights contained in that instrument "by specifying a number of such rights that should be observed"232 (emphasis added). It is possible therefore that some Articles of the Convention may have influenced the drafting of sections of Pt VII. The Parliament did not however intend to implement the Convention by, in some way enlarging or creating an all-embracing welfare jurisdiction. The strong possibility in any event is that the Convention may be aspirational only. None of its provisions on any view require that the rights of children be protected or advanced by a conferral of jurisdiction upon the Family Court. Furthermore, the substantive Articles of the Convention set out rights which States are to ensure that children and parents should enjoy, but leave the selection of "appropriate legislative, administrative, and other measures"233 to State parties. 230 Victoria v The Commonwealth (Industrial Relations Act Case) (1996) 187 CLR 416 at 487 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ, citing Brennan J in Cunliffe v The Commonwealth (1994) 182 CLR 272 at 322. 231 Explanatory Memorandum to the Family Law Reform Bill 1994 at 2 [4]. 232 Australia, House of Representatives, Parliamentary Debates (Hansard), 8 November 1994 at 2759. 233 United Nations Convention on the Rights of the Child, Art 4. Callinan Something need only briefly be said about the fourth matter, the Full Court's reliance on the reasoning of the Full Court of the Federal Court in Minister for Immigration and Multicultural and Indigenous Affairs v Al Masri234. The applicant there failed to obtain a protection visa. He asked to be removed from Australia under s 198(1) of the Migration Act but (at the time of the decision at first instance at least) that removal could not be effected. The Full Federal Court held that the primary judge had been correct to regard Mr Al Masri's continued detention as falling outside the authority of s 196 of the Migration Act because, as a matter of construction, s 196 did not authorise the detention of a non-citizen for the purpose of removing him or her from Australia unless there was a real likelihood of removal in the reasonably foreseeable future. For the reasons that I have given it is unnecessary to explore the correctness of that proposition in this appeal. The judges in the majority in the Full Court also embarked upon a long discussion of authority and academic writing about the "capacity" of children to make decisions235. The significance of "capacity" was that, in their Honours' view, "if the children or any of them are unable to bring their detention to an end [by making a request under s 198(1)], therefore, like Mr Al Masri, their continued detention is unlawful"236. They expressed the view, despite the absence of any evidence about capacity, that the children were unlawfully detained237. The Full Court heard no argument that, as with Mr Al Masri, the children here had failed in their visa application and had exhausted all avenues of appeal and that it was therefore the duty of every "officer" under s 198(6) of the Migration Act to remove them from Australia as soon as "reasonably practicable". If the reasoning in Al Masri was correct, the lawfulness of their detention depended on the prospects of that removal being achieved in the reasonably foreseeable future. Whether they had any capacity to request their own removal under s 198(1) would then have no relevance. It is unnecessary to reach any conclusion on this last matter. Conclusions For the other reasons I have given the appeal must be allowed. 234 (2003) 197 ALR 241. 235 (2003) 199 ALR 604 at 663-665 per Nicholson CJ and O'Ryan J. 236 (2003) 199 ALR 604 at 665 per Nicholson CJ and O'Ryan J. 237 (2003) 199 ALR 604 at 665 per Nicholson CJ and O'Ryan J. Callinan The effect of the orders of the Full Court was that the primary judge rehear the applications which were made at first instance. Those orders should be set aside. The judgment and orders of the primary judge should be restored. In consequence, the interlocutory orders in purported exercise of the jurisdiction which the Family Court has now been held not to have, can have no operation. The appellant accepts and accordingly it should be ordered that the appellant pay the respondents' costs of the appeal. Callinan
HIGH COURT OF AUSTRALIA Matter No P55/2011 AND APPELLANT ALEC PENBERTHY & ORS RESPONDENTS Matter No P57/2011 ALEC PENBERTHY & ANOR APPELLANTS AND AARON BARCLAY & ORS RESPONDENTS Barclay v Penberthy Penberthy v Barclay [2012] HCA 40 2 October 2012 P55/2011 & P57/2011 ORDER In Matter No P55/2011 Subject to orders 4 and 5, appeal dismissed. Special leave be granted to the third respondents to cross-appeal, the cross-appeal be treated as instituted and heard instanter and dismissed. The appellant pay the costs of the third respondents of the appeal, and the third respondents pay the costs of the appellant of the cross-appeal, the costs to be set-off. The appellant and the first and second respondents, and the third respondents have leave, within 21 days of the date of these orders, to bring in agreed draft orders finally disposing of the appeal, including consequential orders dealing with the orders made in the Court of Appeal and with the further conduct of the trial in the Supreme Court. In the absence of agreed draft orders as provided in order 4, the appellant and the first and second respondents, and the third respondents have leave, within 28 days of the date of these orders, to file written submissions as to the appropriate orders finally disposing of the appeal as indicated in order 4. In Matter No P57/2011 Subject to orders 4 and 5, appeal dismissed. Special leave be granted to the second respondents to cross-appeal, the cross-appeal be treated as instituted and heard instanter and dismissed. The appellants pay the costs of the second respondents of the appeal, and the second respondents pay the costs of the appellants of the cross-appeal, the costs to be set-off. The appellants and the first respondent, and the second respondents have leave, within 21 days of the date of these orders, to bring in agreed draft orders finally disposing of the appeal, including consequential orders dealing with the orders made in the Court of Appeal and with the further conduct of the trial in the Supreme Court. In the absence of agreed draft orders as provided in order 4, the appellants and the first respondent, and the second respondents have leave, within 28 days of the date of these orders, to file written submissions as to the appropriate orders finally disposing of the appeal as indicated in order 4. On appeal from the Supreme Court of Western Australia Representation B W Walker QC with H J Langmead SC and M D Rush for the appellant in P55/2011 and the first respondent in P57/2011 (instructed by DLA Piper Australia) D J Fagan SC with S A Richards for the first and second respondents in P55/2011 and the appellants in P57/2011 (instructed by SRB Legal) W A Harris SC with A Golem for the third respondents in P55/2011 and the second respondents in P57/2011 (instructed by Herbert Smith Freehills) Submitting appearance for the fourth to eighth respondents in P55/2011 Submitting appearance for the third to seventh respondents in P57/2011 Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Barclay v Penberthy Penberthy v Barclay Negligence – Pure economic loss – Plane crash caused by engine failure and negligent response of pilot – Whether damages recoverable for pure economic loss suffered by employer due to injury to employees. Tort – Action per quod servitium amisit – Whether absorbed into tort of negligence – Whether action per quod servitium amisit exists under common law of Australia. Tort – Action per quod servitium amisit – Measure of damages – Remoteness – Whether damages recoverable calculated by price of substitute less wages no longer paid to injured employee. Tort – Rule in Baker v Bolton – Whether employer can recover for death of employee. Words and phrases – "per quod servitium amisit", "pure economic loss", "vulnerability". FRENCH CJ, GUMMOW, HAYNE, CRENNAN AND BELL JJ. These appeals from the Court of Appeal of the Supreme Court of Western Australia1 were heard together. They arise from litigation instituted in the Supreme Court in 2008 after the crash of an aircraft in 2003. The issues in this Court turn upon liability in negligence for "pure economic loss", the action per quod servitium amisit ("per quod") and the retention of what is known as the rule in Baker v Bolton2, namely that the death of a person cannot constitute a cause of action giving rise to a claim for damages3. Something first should be said respecting the circumstances giving rise to the litigation. The facts Fugro Spatial Solutions Pty Ltd ("Fugro") was the holder of an Air Operator's Certificate issued by the Civil Aviation Safety Authority ("CASA") pursuant to the Civil Aviation Act 1988 (Cth) ("the Act") in respect of a Cessna 404 Titan Twin Engine Aircraft with the registration number VH-ANV ("the Plane"). The certificate authorised the conduct of activities including aerial survey work. There has been no issue as to whether the flight in which the Plane crashed was authorised by that certificate. Fugro was a member of an international corporate group and was ultimately owned by a company in the Netherlands. Fugro carried on the business of providing air charter services for commercial purposes, including the testing and development of technology, from premises it occupied at Jandakot Airport, near Perth. Mr Alec Penberthy was employed by Fugro as a commercial pilot. Mr Aaron Barclay was an aeronautical engineer employed by Aeronautical Engineers Australia Pty Ltd ("AEA") and was an authorised person, within the meaning of the Civil Aviation Regulations 1988 made under the Act, 1 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 (Martin CJ, McLure P and Mazza J). (1808) 1 Camp 493 [170 ER 1033]. 3 Crotty v Woolworths Ltd (1942) 43 SR (NSW) 133 at 135 per Jordan CJ; affd Woolworths Ltd v Crotty (1942) 66 CLR 603; [1942] HCA 35; Swan v Williams (Demolition) Pty Ltd (1987) 9 NSWLR 172 at 191 per Priestley JA. Crennan Bell to approve the design for a modification to or repair of an aircraft component. In July 2000, AEA was engaged to advise whether a sleeve bearing within an engine driven fuel pump in the Plane could be replaced locally. Mr Barclay advised that this could be done and he drafted the design drawing for the local manufacturer of the sleeve bearing, using an aluminium bronze alloy. The bearing was then manufactured and on 18 October 2000 was installed in the right engine of the Plane. The Plane then went back into service. Nautronix (Holdings) Pty Ltd ("Nautronix Holdings") held the whole of the issued share capital of Nautronix Limited ("Nautronix")4. These companies have related corporations in the United States. By assignment from Nautronix made in July 2006, Nautronix Holdings sued in the Supreme Court upon relevant claims of Nautronix. In 2003, Nautronix carried on the business of researching and developing marine technology, in particular, acoustic technology for subsea communications used in defence, oil and gas, and related industries. At its premises on Marine Terrace in Fremantle, Nautronix had about 100 employees. These included the Engineering Director, Mr Harry Protoolis; the Project Manager, Mr Steven Warriner; the software team leader, Mr Malcolm Cifuentes; the Project Manager, Mr Michael Knubley; and Mr Ozan Perincek, who was the Systems Engineer. Mr Protoolis was killed instantly in the crash and Mr Warriner died several months thereafter from his injuries. Messrs Cifuentes, Knubley and Perincek were on the flight and were injured but, with the pilot, Mr Penberthy, they survived. Nautronix was testing equipment of its design which was intended to indicate from aircraft the position of submarines and to provide communications with them. This was being done with a view to Nautronix selling the equipment to the Royal Australian Navy and the United States Navy. The testing involved flying the Plane, as modified by Fugro to accommodate the equipment and its operation, to a destination in the Indian Ocean west of Rottnest Island where there was a naval support surface vessel. Nautronix understood that there also was a submarine on the flight path of the Plane. On Thursday 7 August 2003, Mr Warriner as Project Manager for Nautronix sent an e-mail to two officers of Fugro confirming, "Following discussions this morning", what were "the following requirements": 4 Now named L-3 Communications Nautronix Limited. Crennan Bell "1. Aircraft Mobilisation 10:00 – 15:00 Friday 8th August 2003 Participation in Pre-flight briefing HMAS Stirling 10th August 2003 15:00 (we are currently seeing if they can pickup there passes on Sunday vs Friday) a. Pilots are to go to the Submarine Training Centre (Theater) Acoustic Telemetry trial – VH-ANV 15:00 - 19:00 11th August Antisubmarine warfare activity with RAAF 0700 – 14:00 13th August 2003 Antisubmarine 13th August, 2003 [warfare] activity with RAAF 17:00–24:00 Demobilization aircraft 09:00–11:00 14th Aug 2003". Earlier, on 4 February 2003, Mr Penberthy had signed a document headed "Undertaking of Security by a Consultant" which had been required by the Defence Security Authority for him to be engaged as a pilot on these activities. As indicated in point 1 of the e-mail, on Friday 8 August modifications to mobilise the Plane were carried out by Fugro at the hangar at Jandakot Airport. The modifications included the provision of a sonobuoy launching chute or tube, the installation of two antennae, and the addition of boxes for attachment inside of the Plane to hold the Nautronix equipment which was to be in operation during the flight. the At about 3.30pm on Monday 11 August 2003 the Plane took off, piloted five passengers, Mr Protoolis, Mr Warriner, by Mr Penberthy with Mr Cifuentes, Mr Knubley and Mr Perincek. About two minutes after take-off the Plane crashed near the airport and was immediately engulfed in fire. As noted above, the result was the death of Mr Protoolis and, later, Mr Warriner; the other three passengers and the pilot were injured but survived. The equipment of Nautronix was damaged or destroyed. The accident was caused by the failure of the right-hand engine during take-off and by the negligent handling of the aircraft by Mr Penberthy in response to that engine failure. The ultimate source of the loss of power to the right-hand engine was the failure of the substitute sleeve bearing which had been designed by Mr Barclay with the specification of an unsuitable aluminium bronze Crennan Bell alloy. The bearing failed after 1353 flying hours; it should have had a minimum operation of 1600 hours. The trial In the Supreme Court, proceedings CIV 1312/08 were commenced by the two Nautronix companies, the three surviving passengers and the spouses of the passengers who had died. The claims of the spouses were brought under s 4(1) of the Fatal Accidents Act 1959 (WA), the descendant in Western Australia of Lord Campbell's Act5. At a trial before Murray J, which it should be emphasised was limited to issues of liability, all the plaintiffs, including Nautronix, succeeded in their claim for negligence against Mr Penberthy. Fugro was held to be vicariously liable for the negligence of Mr Penberthy. The claims against Mr Barclay of the other plaintiffs succeeded but that by Nautronix against Mr Barclay was dismissed6. The success of the claims in negligence by the employees against Mr Penberthy and against Mr Barclay is important in considering any action against them by Nautronix for loss of the services of its employees. For its part, Fugro also sued Mr Barclay, in proceedings CIV 2279/09, among other things, for an indemnity for the loss suffered by the plaintiffs in CIV 1312/08. The issues of liability in this proceeding were tried together with those in the other action. Murray J ordered that Mr Barclay pay Fugro one-third of the damages to be assessed against Fugro in the action for pure economic loss against Fugro by Nautronix. Proceedings CIV 2279/09 also included a claim by Fugro against CASA in negligence, but that claim was not before Murray J and appears to have been stood over. In dealing with the issues as to whether Nautronix should succeed against the designer and the pilot, Messrs Barclay and Penberthy respectively, Murray J emphasised that the replacement sleeve had been designed some three years before the date of the accident and that there was no evidence suggesting that Mr Barclay had known of the use by Nautronix of the Plane for its highly specialised work7. In contrast, his Honour emphasised that Mr Penberthy knew 5 Fatal Accidents Act 1846 (UK) (9 & 10 Vict c 93). 6 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [433]. [2009] WASC 316 at [349]-[351]. Crennan Bell of the purpose of the flight, that it was for a commercial purpose and that the passengers were Nautronix employees8. The Court of Appeal On the appeal by Fugro and Mr Penberthy, and cross-appeals by Mr Barclay and Nautronix, the issues included not only whether Murray J had erred in finding in favour of Nautronix on its negligence claim against Mr Penberthy and Fugro, but also whether his Honour had erred in holding that Mr Barclay owed no duty of care to Nautronix for pure economic loss. The Court of Appeal held that both Mr Penberthy and Mr Barclay had owed Nautronix a duty to exercise reasonable care and were liable in negligence for any economic loss suffered as a result of the deprivation to Nautronix of the services of the three injured employees. But the Court of Appeal held that Nautronix could not base any claim upon the loss of services suffered as a result of the deaths of the two employees. This was because "[t]he rule in Baker v Bolton applies to both an action for loss of services and an action in negligence"9. As regards the claim by Nautronix in respect of its injured employees, McLure P, who gave the principal reasons, said10: "[T]he existence of this common law action [for per quod] is directly relevant to whether it is reasonable to impose a duty of care in negligence. Consistency between closely related common law actions is a legitimate expectation. Whilst the action for loss of services remains part of the common law of Australia, it is difficult to avoid the conclusion that a negligent defendant must owe to an employer a common law duty to take reasonable care to avoid causing pure economic loss by injuring its employees. That conclusion is applicable to both Mr Penberthy and Mr Barclay." Significantly, her Honour added that "[b]ut for the existence of the common law [per quod action] and the significance there attached to the employer/employee relationship" she "would have concluded that neither Mr Penberthy nor [2009] WASC 316 at [346]. (2011) Aust Torts Reports ¶82-087 at 64,884 [112]. 10 (2011) Aust Torts Reports ¶82-087 at 64,884 [110]. Crennan Bell Mr Barclay owed Nautronix a duty of care to avoid the pure economic loss the subject of the claim"11. The issues in this Court There are appeals by Mr Barclay and by Mr Penberthy and Fugro. The appeals are resisted by Nautronix, which also seeks special leave to cross-appeal on the issue concerning the rule in Baker v Bolton. In this Court, Nautronix does not seek to support the reasoning of the Court of Appeal which founded its success against both Mr Penberthy and Mr Barclay on the claims of negligently inflicted economic loss upon the significance of the action per quod. Rather, as against Mr Penberthy, Nautronix seeks to base its case upon the reasoning of Murray J on the negligence claims, and also upon the action per quod in respect of the employees who had been passengers on the plane and had been killed or injured by the negligence of Mr Penberthy. As against Mr Barclay, Nautronix bases its case in this Court upon the action per quod alone. Nautronix challenges the holding in the Court of Appeal that the rule in Baker v Bolton denied any action in respect of the loss of services of the two deceased employees. The issues argued before this Court fall under six heads as follows: Does the rule in Baker v Bolton no longer form part of the common law of Australia so that it cannot prevent recovery by Nautronix in respect of the deaths of its two employees? This should be answered to the effect that the rule does form part of the common law of Australia. Does the action per quod exist under the common law of Australia? This should be answered in the affirmative. Irrespective of the reliance by the Court of Appeal on the action per quod, did Mr Penberthy owe Nautronix a duty of care at common law to avoid "pure economic loss" to Nautronix flowing from loss of services of its injured employees? This should be answered in the affirmative. 11 (2011) Aust Torts Reports ¶82-087 at 64,885 [125]. Crennan Bell If "yes" to 2, having regard to the pleadings and the conduct of the litigation, is it open to Nautronix in this Court to rely upon an action per quod? This should be answered in the affirmative. If "yes" to 4, were Mr Barclay and Mr Penberthy liable to Nautronix on such an action? This also should be answered "yes". If "yes" to 5, what is the measure of damages in such an action? The measure of damages is that which compensates for the interference with the right to the services of the employee. The assessment of the quantum of damages in this case will depend upon the evidence received at the further conduct of the trial. Issue 1 – the rule in Baker v Bolton Nautronix seeks special leave to cross-appeal from so much of the decision of the Court of Appeal as held that the rule in Baker v Bolton applies in Australia to causes of action in negligence and per quod. Nautronix points to the criticism of the rule expressed in the dictum that the rule makes it "cheaper to kill than to maim". In Osborn v Gillett, no less an authority than Bramwell B said12 "This is only a nisi prius case, the plaintiff got 100£, and probably was content. No argument is stated, no authority cited, and I cannot set a high value on that case, great as is the weight of the considered and accurately reported opinions of Lord Ellenborough after argument." However, in 1916, in Admiralty Commissioners v SS Amerika13, the House of Lords declined to disturb the rule in Baker v Bolton, however anomalous, as Lord Parker of Waddington put it, "it may appear to the scientific jurist"14. For his part, Lord Sumner emphasised that it was abundantly plain that the rule had received statutory recognition; the preamble to s 1 of Lord Campbell's Act, passed in 1846, was a response to a particular defect in the existing law, namely the disadvantageous position of widows and children, not to any legislatively perceived defects in the limited rights of masters and employees. Speaking of 12 Osborn v Gillett (1873) LR 8 Ex 88 at 96. 14 [1917] AC 38 at 50. Crennan Bell Osborn v Gillett, Lord Sumner referred to "Bramwell B's intrepid In these reasons reference has been made above16 to the provenance in Lord Campbell's Act of the Western Australian legislation under which the claims of the spouses were brought in the present litigation. Lord Campbell's Act has been adopted in all other Australian jurisdictions17. However, in its other applications, particularly to the actions in negligence and per quod upon which Nautronix relies in respect of the deaths of Mr Protoolis and Mr Warriner, the rule in Baker v Bolton has remained unchanged. One qualification is found in s 58(1)(a) of the Civil Liability Act 2003 (Q), which appears to provide that damages (limited as provided in that section) may be awarded for loss of servitium if "the injured person died as a result of injuries suffered". In Swan v Williams (Demolition) Pty Ltd18 Samuels JA observed that the only continuing influence of the rule in Baker v Bolton in New South Wales was to exclude actions at the suit of an employer for damages for loss of services occasioned by the death of an employee. In New South Wales, the Law Reform (Marital Consortium) Act 1984 (NSW) had abolished liability in tort for loss or impairment of consortium, an action that, at common law in any event, had been denied for loss of consortium to a wife. The pattern of Australian legislation is a pointer towards the continued existence of the rule in Baker v Bolton as a matter of common law19. In Swan20, the New South Wales Court of Appeal rejected submissions that the rule in Baker v Bolton should be discarded. Their Honours did say that the decision of this 15 [1917] AC 38 at 51. 17 Compensation to Relatives Act 1897 (NSW); Common Law Practice Act 1867 (Q); Fatal Accidents Act 1934 (Tas); Wrongs Act 1936 (SA); Wrongs Act 1958 (Vic); Compensation (Fatal Injuries) Act 1968 (ACT); Compensation (Fatal Injuries) Act 18 (1987) 9 NSWLR 172 at 176-177. 19 CSR Ltd v Eddy (2005) 226 CLR 1 at 25 [51], 27 [54]; [2005] HCA 64. 20 (1987) 9 NSWLR 172 at 190. Crennan Bell Court in Woolworths Ltd v Crotty21 was authority for the proposition that the rule in Baker v Bolton remained part of the common law in Australia. The better understanding is that the assumption made by both parties in Crotty was that the rule did apply unless the term "wrongful act" in Lord Campbell's Act, as was held to be the case, included contractual as well as tortious wrongs. Any further contraction in the scope of the rule in Baker v Bolton is a matter for Australian legislatures. Issue 2 – the action per quod in Australia The appellants submitted that the action per quod upon which Nautronix relies should be accepted no longer as part of the common law in Australia. It was said, (a) that the action should now be regarded as "absorbed into" and "subsumed by" the tort of negligence, which had so developed as to have "overtaken the subject matter which gave rise to the old cause of action", and (b) that there was no basis to rationalise the action per quod "in the setting of modern social and economic relations". These submissions call for attention first to some general considerations respecting the action per quod. As Professor Fridman has emphasised22, the "essential idea" behind this action is that to cause loss to the master of a servant by rendering his servant incapable of performing the services for which the servant was engaged or hired is an actionable wrong, as long as the defendant either intentionally or negligently acted in such a way as to bring about the deprivation of the services. Professor Fridman and other writers also make the point that it no longer can be said that the master has any "property" in a servant, the master now having "only contractual rights"23. Thus it may be said that the development in England of this action marched with the progression of the master-servant relationship from a matter of status to one of modern contract. However, in 21 (1942) 66 CLR 603. 22 The Law of Torts in Canada, 2nd ed (2002) at 733. 23 The Law of Torts in Canada, 2nd ed (2002) at 734; Balkin and Davis, Law of Torts, 4th ed (2009) at [20.22]. Crennan Bell Commissioner for Railways (NSW) v Scott24, Windeyer J made three relevant observations. These were that times change and with them the meanings of words, that the Middle Ages were not a time when society or law were static, and that, as a consequence, it is necessary to exercise care "in leapfrogging through the centuries" when seeking to discover the remote antecedents of a rule of contemporary common law. Also in Scott, Dixon CJ remarked that to him it seemed far from the truth that the action per quod was to be condemned as being "out of keeping with modern social ideas and incongruous with the principles of our law as now understood"25. The relationship between the tort of negligence and the action per quod, as these appeals demonstrate, gives rise to particular conceptual difficulties. In a passage subsequently approved by Fullagar J in Attorney-General for NSW v Perpetual Trustee Co (Ltd)26 as "very important and obviously very carefully considered", Rich J in The Commonwealth v Quince27 said: "As a general rule, a person is liable for damage caused to another by his carelessness only when it amounts to negligence, that is, when he owed a duty to the other to be careful and the damage was the proximate result of failure to perform the duty; and the mere fact that the injury prevents a third party from getting a benefit from the person injured which, but for the injury, he would have obtained does not invest the third party with a right of action against the wrongdoer (La Société Anonyme de Remorquage à Hélice v Bennetts28; Admiralty Commissioners v SS Amerika29; Wright v Cedzich30). But to the latter rule there is an exception." (emphasis added) 24 (1959) 102 CLR 392 at 447-448; [1959] HCA 29. 25 (1959) 102 CLR 392 at 403. 26 (1952) 85 CLR 237 at 275-276; [1952] HCA 2. 27 (1944) 68 CLR 227 at 240-241; [1944] HCA 1. 29 [1917] AC 38 at 43, 45. 30 (1930) 43 CLR 493; [1930] HCA 4. Crennan Bell His Honour then explained the "exception" as follows: "If a person is in fact rendering service to another of a kind that is performed under a contract of service, and sustains injury, through the negligence of a third party, which prevents him from continuing to render the service, the person whom he was serving may recover from the wrongdoer compensation for the damage which he has sustained through the loss of service. ... The exception is of great antiquity in English law. It became established at a time when the head of a household was regarded as having a quasi-proprietary interest in the members of his family, his apprentices, his hired servants, and their services". There are, however, several difficulties with the treatment of the action per quod as an "exception" to the subsequently developed tort of negligence. They were explained by Kitto J in Perpetual, in a passage later adopted by Menzies J in Scott31. Kitto J32, without in terms identifying what had been said in Quince, observed: "The principle [of the action per quod] has sometimes been referred to as if it formed an exception to the rule that no liability arises for breach of a duty of care unless damage to the person to whom the duty was owed is the proximate result of the breach; but it is not a principle which is directed to questions of proximity or remoteness of damage resulting from breach of a duty of care. It provides a remedy for the wrongful invasion of a quasi-proprietary right which a master is considered to possess in respect of the services which his servant is under an obligation to render him." Rather, Kitto J went on to explain, with the action per quod33: "the law has perpetuated a notion which originally was a corollary of the ancient conception of the relationship of master and servant as one of status (Mankin v Scala Theodrome Co Ltd34). That conception has gone, 31 (1959) 102 CLR 392 at 434-435. 32 (1952) 85 CLR 237 at 294. 33 (1952) 85 CLR 237 at 295. Crennan Bell but the notion of a right in the master, as a species of property, that others shall not, by their wrongful acts, deprive him of the benefit of the relation between himself and his servant has not been abandoned. infringement of that right entitles the master to recover damages." If that right be invaded by a wrongful injury to the servant which disables him from providing his due service, then, as Kitto J put it, "the injuria to the master is collateral to, and not consequent upon, the injuria to the servant"35. The injury to the servant must be wrongful. It may be wrongful because it was inflicted intentionally or because it was inflicted in breach of a duty of care that the wrongdoer owed the servant. What is presently important is that the injury is "wrongful" because it is a wrong done to the servant not because there was any breach of a duty of care owed to the master. Once it is observed that the action per quod depends upon demonstration of a wrong having been done to the servant (as a result of which the master is deprived of the service of the servant) and that the wrongful injury to the servant may be either intentional or negligent, it is evident that the action per quod does not constitute any exception to or variation of the law of negligence. The action per quod will lie where the wrongdoer's conduct towards the servant was not negligent but was intentional. It does not depend on demonstrating any breach of a duty of care owed by the wrongdoer to the master. From the appreciation that the action per quod is not directed to the consequences of breach of a duty of care owed by the wrongdoer to the master, four consequences follow for these appeals. The first is that McLure P erred in the passage set out above36 when treating the existence of a claim against a defendant on the action per quod as indicative of an action for negligently inflicted economic loss against that defendant. In this Court Nautronix is correct not to rely upon that reasoning. The second consequence is that it would be wrong to have this Court conclude, as the appellants propose, that the action per quod, like the special rules once concerning the duties of occupiers to categories of entrants37, is 35 (1952) 85 CLR 237 at 295. 37 cf Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520 at 547-550; [1994] HCA 13. Crennan Bell readily "absorbed" into the modern tort of negligence by removal of what is no more than an "exception" to principles of proximity and remoteness. The "absorption" would be the destruction of a distinct cause of action, an activity best left to legislatures. In that regard, it should be noted that legislative modifications have been made in several States38 although none were indicated in Western Australia. The third consequence concerns the further arguments by the appellants that the action per quod is outmoded because rooted in notions of status and proprietary interest, from which the modern law of contract, including contracts of employment, has escaped. The doctrinal position is more complex, and to this we now turn. Zhu v Treasurer of New South Wales39 concerned the action for wrongful interference with a contract of which the defendant has knowledge, or has knowledge at least of the facts from which it arises, with particular reference to the alleged justification of a superior legal right. Detailed reference40 was made in the joint reasons of Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ to what had been said by Kitto J in Perpetual with respect to the action for loss of services and to his use there41 of the term "quasi-proprietary" to describe contractual rights against tortious interference by third parties, being rights of a different order to those between the contracting parties themselves. In Zhu42, the Court referred to the reasons of Erle J in the landmark decision of Lumley v Gye43 as significant support for what had been said by Kitto J in Perpetual. Erle J considered that the procurement of the violation of a right is a cause of action in 38 Employees Liability Act 1991 (NSW), s 4; Motor Accidents Compensation Act 1999 (NSW), s 142; Civil Liability Act 2003 (Q), s 58. See, further, Scott v Bowyer [1998] 1 VR 207 at 219, Balkin and Davis, Law of Torts, 4th ed (2009) at [20.10] with respect to road and industrial accident legislation in Victoria and the Northern Territory. 39 (2004) 218 CLR 530; [2004] HCA 56. 40 (2004) 218 CLR 530 at 572-577 [123]-[134]. 41 (1952) 85 CLR 237 at 294. 42 (2004) 218 CLR 530 at 573-574 [126]. 43 (1853) 2 El & Bl 216 at 232 [118 ER 749 at 755]. Crennan Bell all instances where the violation is an actionable wrong, "as in violations of a right to property, whether real or personal". This Court in Zhu remarked44: "The distinction seems to rest on the view that proprietary rights are stronger than quasi-proprietary rights in that while the former are marked by a combination of characteristics like alienability of benefit and burden and a right to exclusive possession or use enforceable against the world (for example, the rights of the owner of land in fee simple absolute in possession, or of the absolute owner of a chattel or a share or a patent), quasi-proprietary rights do not have the totality of those characteristics. Their principal, but not always sole, characteristic is that they are protected from third party interference." To this it may be added that while the benefit of a contract involving personal skill or confidence may not be assigned45, assignability is not in all circumstances an essential characteristic of a proprietary right46. It also should be noted that since Lumley v Gye decisions in the United States have emphasised the existence of a contract "as something in the nature of a property interest in the plaintiff"47. The upshot is that the present understanding of the tort for loss of services as an action protective of contractual interests differentiates it from its origins. The present case thereby is marked off from those cases, such as PGA v The Queen48, in which a rule of the common law has become a legal fiction because it depends upon another rule which is no longer maintained. 44 (2004) 218 CLR 530 at 573 [125]; see also at 577 [135]. 45 Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014. 46 Georgiadis v Australian and Overseas Telecommunications Corporation (1994) 179 CLR 297 at 311-312; [1994] HCA 6. 47 Prosser and Keeton on the Law of Torts, 5th ed (1984) at 981. See also Cunnington, "Contract Rights as Property Rights", in Robertson (ed), The Law of Obligations: Connections and Boundaries, (2004) 169 at 182-184. 48 (2012) 86 ALJR 641 at 651-652 [29]-[32]; 287 ALR 599 at 607-608; [2012] HCA 21. Crennan Bell A further consequence of an understanding of the distinction between the action in negligence and that per quod concerns the measure of damages for the injury, being the loss of services. This is the subject of Issue 6. Issue 3 – did Mr Penberthy owe Nautronix a duty of care to avoid the "pure economic loss" Nautronix sought to recover? The relevant principles were most recently considered in Woolcock Street Investments Pty Ltd v CDG Pty Ltd49 and are not in dispute. The facts outlined earlier in these reasons50, particularly the e-mail of Thursday 7 August 2003, show an awareness by Fugro of the special nature of the charter services to be supplied to Nautronix by use of the Plane, identified therein by its registration number VH-ANV, for the "Acoustic Telemetry trial" to begin at 1500 hours on the following Monday. In pre-flight preparations, the Plane was to be modified and the pilots were to attend the Submarine Training Centre. Mr Penberthy had been required to have a security clearance. These considerations strengthen the findings made by Murray J in the "[Mr Penberthy] knew the purpose of the flight. He knew that it was a commercial purpose. He knew that the company who employed his passengers was Nautronix. Mr Penberthy knew, therefore, not only that Nautronix was a member of an ascertainable class of commercial users of the aircraft, but that Nautronix was the particular commercial entity which depended upon the exercise of his professional skill as a pilot for the successful performance of the service for which the aircraft was chartered. Of course, it was the case that if Penberthy failed, as he did, to discharge that duty of care, Nautronix was vulnerable in the sense that they were unable to protect themselves from the foreseeable harm of an economic nature caused, in part, by Penberthy's negligence. There are no other circumstances specially affecting the existence of a duty of care owed by Penberthy, and vicariously by [Fugro], to Nautronix in relation to economic loss suffered by that plaintiff." 49 (2004) 216 CLR 515 at 529-531 [19]-[24], 547-550 [74]-[87]; [2004] HCA 16. 51 [2009] WASC 316 at [346]. Crennan Bell Counsel for Fugro and Mr Penberthy submitted that the conclusion of the Court of Appeal that, without the assistance it derived from the action per quod, Murray J's conclusions were not to be supported, did not warrant intervention by this Court. The Court of Appeal proceeded on the footing that Nautronix could have protected itself from the pure economic loss, which it suffered from the injury to its employees, by appropriate terms in its charter contract with Fugro52. An express term presumably would have gone further than an implied term in the charter contract that Fugro would exercise reasonable care and skill in the performance of the charter contract, and would have required Fugro to accept liability to Nautronix for pure economic loss suffered by Nautronix from injury to its employees. In response, counsel for Nautronix pointed to the absence of evidence that it could have negotiated successfully for the inclusion of such a term in the charter agreement. Further, in order to establish the existence of a duty of care owed to Nautronix for which Fugro was vicariously liable, it was not incumbent upon Nautronix to establish that it could not have bargained with Fugro for a particular contractual provision. The presence or absence of a claim in contract would not be determinative of a claim in tort53. McLure P also considered that the claim by Nautronix depended upon Mr Penberthy having known, or it having been reasonable that he ought to have known, of the risk that Nautronix would suffer economic loss were its employees to be injured by a crash of the Plane54. But given the highly specialised nature of the testing program in which they were engaged, that appreciation of the risk may readily be inferred. The result is that the Court of Appeal erred in displacing the reasoning on this issue of the trial judge. 52 (2011) Aust Torts Reports ¶82-087 at 64,885 [118]. 53 Astley v Austrust Ltd (1999) 197 CLR 1 at 20-23 [44]-[48]; [1999] HCA 6; Fleming's The Law of Torts, 10th ed (2011) at [8.350]. 54 (2011) Aust Torts Reports ¶82-087 at 64,885 [121]. Crennan Bell Issue 4 – reliance by Nautronix on the action per quod It follows from what has been said when dealing with Issues 1 and 2 that the action per quod against Mr Penberthy and Mr Barclay existed in respect of the three injured employees. However, counsel for Mr Barclay submitted that at trial the claim by Nautronix against his client was pleaded and conducted solely on a claim in negligence. Notwithstanding this submission, as is apparent from the reasoning of McLure P, the Court of Appeal appears to have treated the existence of the action per quod and its attraction by the facts of the case as presenting live, albeit subsidiary, issues. Further, in this Court counsel properly accepted that there was difficulty in seeing factual matters which would have received treatment at trial which was materially different had there been a direct case on a per quod claim55. Nor was counsel able to point to any specific injustice in the matter being ventilated in this Court56. There is no sufficient objection to Nautronix now relying on the action per quod to found liability against both Mr Barclay and Mr Penberthy. Issue 5 – were Mr Barclay and Mr Penberthy liable to Nautronix on an action per It follows from what has been said above that this action lay against the appellants in respect of the three injured Nautronix employees. But the measure of damages will be a matter for the trial of the remaining issues in the litigation. So also will be the measure of damages in the negligence action by Nautronix against Mr Penberthy and any questions of election to avoid double recovery by Nautronix. Issue 6 – the measure of damages in the action per quod Nautronix alleged interruptions and delays in the development and testing of its marine technology and testing system and the loss of intellectual property and corporate knowledge. But so far Nautronix has provided no more specific 55 cf Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 437-438; [1950] HCA 35. 56 cf Coulton v Holcombe (1986) 162 CLR 1 at 7-9; [1986] HCA 33; Allders International Pty Ltd v Commissioner of State Revenue (Vict) (1996) 186 CLR 630 at 666; [1996] HCA 58. Crennan Bell particulars of loss and damage sustained as a result of the injuries to Messrs Cifuentes (software team leader), Knubley (Project Manager) and Perincek (Systems Engineer). The assessment of damages in the per quod action will fall for determination at the trial of remaining issues in the litigation. That assessment should be guided by the governing principles considered below. The basic proposition is that stated in Attorney-General v Wilson and Horton Ltd57. After a full consideration of Quince, Perpetual and Scott, Richmond J said that "as the wrong done to the master is [an] interference with his right to the services of his servant, the damages recoverable should be measured exclusively by the consequences which follow from that interference", and "should not be widened to include all consequences which follow merely from the fact that the servant was injured". In the last edition of McGregor on Damages to deal with the matter58 it was said that the basic measure of damages "should be the market value of the services, which will generally be calculated by the price of a substitute less the wages which the master is no longer required to pay to the injured servant" (emphasis added). In its written submissions, Nautronix challenges that statement, but, subject to what appears below, it should be accepted. If the employer employs numerous staff which can take up the duties of the injured employee, the prima facie measure of the employer's loss may be any extra payments by way of overtime and the like which the employer has to make to secure the performance of these additional duties59. Where a replacement employee has to be engaged, but this is achieved on terms more favourable to the employer, no loss will have been suffered. If it were possible to engage a substitute, at or as near as practicable to the level of skill of the injured employee, but this is not done by the employer, then the employer fails to mitigate the loss. The essential point is that like any plaintiff the employer is obliged to take 57 [1973] 2 NZLR 238 at 256. 58 13th ed (1972) at [1167]. 59 Attorney-General v Wilson and Horton Ltd [1973] 2 NZLR 238 at 258. Crennan Bell reasonable steps to mitigate the loss occasioned by the defendant's interference with the provision of services by the injured employee60. If by statute, industrial award, or the terms of employment, the employer is required to pay to the injured employee sick pay or medical expenses, these outgoings should be ascribed to that anterior obligation of the employer. They are not consequences which flow merely from the injury to the servant and should not be ascribed to the tortfeasor. In Perpetual, Fullagar J considered that pensions constituted deferred payments for services already rendered61, and reserved the question whether the recovery of medical expenses paid by the employer was too remote62. Fullagar J went on to emphasise in Scott63: "wages paid to the injured person himself are paid not because of the injury to the servant but because of the antecedent obligation to pay them. The same considerations apply, of course, to sick pay and pensions." In Genereux v Peterson Howell & Heather (Canada) Ltd64, the Ontario Court of Appeal considered the measure of damages to be awarded to a solicitor, a sole practitioner, for the loss of the services of a law clerk injured as a result of the negligent operation of a motor vehicle for which the defendants were liable. The law clerk was the wife of the solicitor and received no remuneration for her work in the office. The law clerk had attended to conveyancing and estate matters and the solicitor had attended mainly to litigious matters. After the injury to the law clerk, the solicitor engaged staff to perform her duties but referred some litigious matters to other firms. The solicitor recovered the wages of the substitute employees but not the loss of profit on matters he had referred on to other firms. Kelly JA said65: 60 Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571 at 582. 61 (1952) 85 CLR 237 at 293. 62 (1952) 85 CLR 237 at 291. In Scott, Dixon CJ appears to have approved these reasons of Fullagar J: (1959) 102 CLR 392 at 403; cf at 462-463 per Windeyer J. 63 (1959) 102 CLR 392 at 409. 65 [1973] 2 OR 558 at 571. See also McElwee v Ansett Transport Industries (Operations) Pty Ltd (1997) 140 IR 14 at 26 per Williams J. Crennan Bell "My conclusion is that while the Canadian cases have extended the action per quod to situations other than that of the loss of service of a domestic or menial servant, they have observed caution in dealing with the scope of the recoverable damages and have disapproved any extension of the basis of assessing the amount recoverable beyond the actual value of the services lost." That passage should be accepted as applicable in Australia. Particular difficulties may arise where the plaintiff is a "one-man company", controlled by the injured party. The better view is that, even here, the measure of damages does not include a loss of profits suffered by the company. This is so unless the plaintiff satisfies the court that the loss is attributable to the loss of services and no other likely cause has been identified66. Such a case was Argent Pty Ltd v Huxley67, where the findings of fact by Hoare J survived appeal to this Court: Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd68. Mr Arthur Box, who had been injured by a car driven by the defendant, was the operative force in the conduct by a group of family companies of the business of manufacturing and selling footwear. Hoare J found that it was necessary to have as manager "a man of both experience and considerable acumen", and that it had been necessary for his family to dispose of the business following his injuries; but the business was sold without the benefit of an efficient manager and this had depressed the price obtained69. Hoare J assessed damages by reference to the probable time Mr Box would have continued in the business had it not been for his injuries. 66 See Tippett v Fraser (1999) 74 SASR 522 at 533; Kneeshaw and Spawton's Crumpet Co Ltd v Latendorff (1965) 54 DLR (2d) 84 at 89-90. 67 [1971] Qd R 331. 68 (1972) 46 ALJR 432. 69 [1971] Qd R 331 at 337. Crennan Bell "In my opinion if these companies can establish that their earnings have diminished to the extent of $X due to their having lost the services of the plaintiff Box, then subject to the limitations of foreseeability71 prima facie they are entitled to damages for that amount. It does not appear to me that the principle of foreseeability prevents recovery of proved damage in these circumstances." With respect to the prospect of mitigation Hoare J said72: "As some 29 footwear businesses have closed in New South Wales in more recent times, it is possible that it would not be quite as difficult to obtain a manager today as it would have been at the time Box decided to dispose of his business but even so the problem of finding a suitable manager would be most formidable. I am well satisfied that while ordinary business experience may well be sufficient to enable a capable man to manage many types of businesses this would not be the case in one such as that under consideration." In dismissing the appeal, Walsh J rejected a challenge to these findings73 and added74: "If a finding could properly be made that as a matter of fact [the companies] would have probably made from the carrying on of the business greater profits, during a period of some years, than they did make or could reasonably have made from the use of the proceeds of sale received by them and that they could have obtained after that period from the sale of the assets a capital return no less than that which they obtained from the earlier sale, this being found to be a consequence of the loss of the services of Mr Box, there is no principle by which the companies must 70 [1971] Qd R 331 at 339. 71 The Wagon Mound [1961] AC 388. 72 [1971] Qd R 331 at 337. 73 (1972) 46 ALJR 432 at 434. 74 (1972) 46 ALJR 432 at 435. Crennan Bell be held disentitled to receive as compensation a sum assessed by reference to their diminished profits during that period. In my opinion, the learned judge was not obliged to reject a claim for damages upon that basis, either for the reason that the price obtained from the business as conducted by the companies when it was sold 'without the benefit of an efficient manager' was, as his Honour found, 'the full market value at the time', or for the reason that such damages ought to have been regarded as too remote." The result in Argent may be compared with that of the trial in Vaccaro v Giruzzi75. A company sought to recover damages for loss of services when its sole shareholder was injured in an automobile accident occasioned by the negligence of the defendant. As a result of the accident, the sole shareholder had required the services of an employee of the company, Mr Cava, for a period of three months to act as driver and assistant. Potts J rejected the submission that because this was a one-man company, the measure of damages included a loss of profits suffered by the company. Potts J held that this circumstance did not qualify the general rule which denied recovery of loss of profits as too remote, "If great profits were to be made because of the servant's services, the loss could have been avoided by the employment of a substitute (as was the case here, where Mr Cava was employed). If it is argued that the services of the injured servant were so specialized (and this, I assume, is the basis of counsel for the plaintiff's emphasis on a one-man company) that no substitute would have sufficed (which is not the case here), then the loss is too remote, as Genereux makes clear." The result in Vaccaro was that in the action by the company for damages for loss of services it was entitled to recover the amount of wages paid to the employee for the services over the period of three months but was not entitled to damages for loss of profits. 75 (1992) 93 DLR (4th) 180. 76 (1992) 93 DLR (4th) 180 at 186. Crennan Bell Conclusions and orders Special leave should be granted to Nautronix to cross-appeal in each appeal against the holding of the Court of Appeal respecting the rule in Baker v Bolton. But each cross-appeal should be dismissed with costs. The result in this Court is that Mr Penberthy and Fugro remain liable in negligence to Nautronix and are liable also in the action per quod. Mr Barclay succeeds, without opposition, in displacing the holding against him on the negligence claim, but is liable on the per quod action. The appellants should pay the costs of Nautronix of the appeals in this Court, to be set-off against the orders on the cross-appeals. This outcome requires some complexity in the further orders to be made on the appeals. The appropriate parties should have 21 days within which to agree and bring in draft orders fully disposing of the appeals, including consequential orders dealing with the orders made in the Court of Appeal and with the further conduct of the trial in the Supreme Court. In the absence of agreement, written submissions as to the appropriate orders should be filed within 28 days. In each appeal, the orders now to be made should be as follows: In appeal No P55 of 2011 Subject to orders 4 and 5, appeal dismissed. Special leave be granted to the third respondents to cross-appeal, the cross-appeal be treated as instituted and heard instanter and dismissed. The appellant pay the costs of the third respondents of the appeal, and the third respondents pay the costs of the appellant of the cross-appeal, the costs to be set-off. The appellant and the first and second respondents, and the third respondents have leave, within 21 days of the date of these orders, to bring in agreed draft orders finally disposing of the appeal, including consequential orders dealing with the orders made in the Court of Appeal and with the further conduct of the trial in the Supreme Court. Crennan Bell In the absence of agreed draft orders as provided in order 4, the appellant and the first and second respondents, and the third respondents have leave, within 28 days of the date of these orders, to file written submissions as to the appropriate orders finally disposing of the appeal as indicated in order 4. In appeal No P57 of 2011 Subject to orders 4 and 5, appeal dismissed. Special leave be granted to the second respondents to cross-appeal, the cross-appeal be treated as instituted and heard instanter and dismissed. The appellants pay the costs of the second respondents of the appeal, and the second respondents pay the costs of the appellants of the cross-appeal, the costs to be set-off. The appellants and the first respondent, and the second respondents have leave, within 21 days of the date of these orders, to bring in agreed draft orders finally disposing of the appeal, including consequential orders dealing with the orders made in the Court of Appeal and with the further conduct of the trial in the Supreme Court. In the absence of agreed draft orders as provided in order 4, the appellants and the first respondent, and the second respondents have leave, within 28 days of the date of these orders, to file written submissions as to the appropriate orders finally disposing of the appeal as indicated in order 4. HEYDON J. It is convenient to adopt the statement of facts and procedural background in the plurality judgment, as well as its abbreviations of personal and The structure of the appeals It is not always easy to keep clearly in mind what issues are raised by the parties' appeals, applications for special leave to cross-appeal, notices of contention and failures to support aspects of the Court of Appeal's reasoning. The factual position so far as is relevant to these appeals is simple. A plane took off. It had been chartered by Nautronix from Fugro. The purpose of the flight was that Nautronix personnel should test technology and systems which Nautronix hoped to develop commercially. The plane crashed. Two Nautronix personnel were killed. Three were badly injured. Two possible causes of action remain alive in this Court. Nautronix sues the pilot, Mr Penberthy (and hence his employer, Fugro), on two causes of action. It sues the designer of an engine part, Mr Barclay, on one of those causes of action. The first cause of action seeks to recover for negligently caused "pure economic loss" to Nautronix's business suffered in consequence of the deaths and injuries. In relation to this cause of action Mr Penberthy seeks to raise two bars to recovery. One bar is that the action so far as the two deceased personnel are concerned is forestalled by the rule in Baker v Bolton78. That rule holds that in a civil court the death of a human being cannot be complained of as an injury. Nautronix's riposte is that that rule should be abolished by this Court. The second bar to Nautronix's recovery which Mr Penberthy seeks to raise is non- compliance with the rules for recovery of negligently caused pure economic loss, particularly the requirement that Nautronix be "vulnerable". The second cause of action is the actio per quod servitium amisit. Nautronix alleges that the negligence of Mr Penberthy and Mr Barclay towards personnel said to be its employees has caused it to lose the services those employees would have rendered under their contracts of employment. To this cause of action Mr Penberthy and Mr Barclay seek to raise five bars to recovery. The first bar is that the actio per quod servitium amisit was not pleaded and that it is not open to Nautronix to raise it belatedly in this Court. The second bar is that the actio per quod servitium amisit should be abolished by this Court. The third bar is that even if the actio per quod servitium amisit is not abolished and is 77 See above at [1]-[13]. 78 (1808) 1 Camp 493 [170 ER 1033]. available in this Court, Mr Penberthy and Mr Barclay are not liable under it. The fourth bar is that even if Mr Penberthy and Mr Barclay are liable in relation to the injured employees, they are not liable in relation to the deceased employees because of the rule in Baker v Bolton. The fifth bar is a partial bar only, relating to the quantum of damages. It is convenient to deal first with the two issues in relation to the "pure economic loss" claim, and then to deal with the five issues in relation to the actio per quod servitium amisit. First issue: should the rule in Baker v Bolton continue to form part of the common law of Australia? Some consider that Baker v Bolton79 should be overruled on the ground that Lord Ellenborough's statement of the rule in that case was not a correct statement of the law at the time the case was decided. Others think that changed conditions justify its overruling. Nautronix's preferred course was the latter one. To take either step would effect a significant change to the law of tort. It would be an act in the nature of legislation. Changes to the common law in the nature of legislation should not be made by the courts, only by the legislature80. Earl Loreburn said that to disturb the rule in Baker v Bolton "would be legislation pure and simple"81. He said that when the House of Lords, consisting of himself, Lord Parker of Waddington and Lord Sumner, unanimously and emphatically approved Baker v Bolton in Admiralty Commissioners v S S Amerika82. That case was decided after and in the face of W S Holdsworth's trenchant attack on the reasoning in Baker v Bolton83. Although, in accordance with the customs of the time, the report does not point to that attack as having been referred to in oral argument or in the speeches, Lord Sumner alluded to it and quoted it, albeit inaccurately84. As Lord Sumner added: "[A]n established rule does not become 79 (1808) 1 Camp 493 [170 ER 1033]. 80 State Government Insurance Commission v Trigwell (1979) 142 CLR 617 at 623, 628-629 and 633-634; [1979] HCA 40. 81 Admiralty Commissioners v S S Amerika [1917] AC 38 at 41. 82 [1917] AC 38 at 41 per Earl Loreburn, 42-50 per Lord Parker of Waddington and 50-60 per Lord Sumner. 83 "The Origin of the Rule in Baker v Bolton", (1916) 32 Law Quarterly Review 431. 84 Admiralty Commissioners v S S Amerika [1917] AC 38 at 53, where Lord Sumner said: "It has been even suggested that Lord Ellenborough was 'the victim of a confusion of ideas'." That a confusion of ideas of the kind Lord Sumner referred to (Footnote continues on next page) questionable merely because different conjectural justifications of it have been offered, or because none is forthcoming that is not fanciful."85 Both Lord Parker of Waddington and Lord Sumner referred to a considerable amount of English, Canadian and United States authority in support of the rule in Baker v Bolton86. The correctness of Baker v Bolton has been assumed in the House of Lords subsequently87. There are statutes resting on an assumption that the rule in Baker v Bolton exists88. Further, it would be a serious step to overrule Baker v Bolton in view of this Court's decision in Woolworths Ltd v Crotty89. It is true that in that case the parties were not at issue about whether Baker v Bolton was good law. That in itself is not without some significance given that the appellant was represented by R G Menzies KC and the respondent by G E J Barwick KC. More significantly, Latham CJ and McTiernan J, making up a majority of the Court, were plainly of the undoubted view that the rule in Baker v Bolton existed. It is not necessary to consider whether that view was part of the ratio decidendi. Latham CJ uttered what is at least a strong dictum to the effect that the rule "must now be taken to be thoroughly established"90. And McTiernan J uttered what is at least another strong dictum in stating the rule without casting any doubt on it91. In these circumstances, there is no point in analysing the criticisms of Baker v Bolton or the defences which have been made of it as a decision which had taken place is Holdsworth's thesis in (1916) 32 Law Quarterly Review 431, and after describing it he said (at 435) that Lord Ellenborough "was the victim of the same confusion of ideas." 85 Admiralty Commissioners v S S Amerika [1917] AC 38 at 56. 86 Admiralty Commissioners v S S Amerika [1917] AC 38 at 47-50 and 51-53. 87 Rose v Ford [1937] AC 826 at 833, 839 and 850-852. 88 For example, Fatal Accidents Act 1846 (commonly known as Lord Campbell's Act 1846) and its Australian equivalents, as well as Civil Liability Act 2003 (Q), s 58(1)(a). 89 (1942) 66 CLR 603; [1942] HCA 35. 90 (1942) 66 CLR 603 at 615. 91 (1942) 66 CLR 603 at 621-622. correctly reflected the contemporary common law92. It would not be right to hold either that Baker v Bolton was incorrectly decided at the time or that, though correctly decided originally, it has been superseded by changing conditions. It follows that even if Mr Penberthy is liable for negligently causing pure economic loss, his liability does not extend to loss flowing from the loss of the two deceased employees' services. Second issue: did Mr Penberthy owe Nautronix a common law duty of care to avoid causing "pure economic loss" to Nautronix flowing from loss of the services of its injured employees? It is true that some of the criteria to be satisfied for Nautronix to recover from Mr Penberthy for negligently caused pure economic loss were satisfied93. The pleadings contain admissions that Mr Penberthy knew or ought to have known that the flight had a commercial purpose; that the passengers were Nautronix employees; that Nautronix equipment was to be on board; that Nautronix's purpose in engaging Fugro to provide the plane was to enable it, by its employees, to undertake surveillance, survey and aerial work operations west of Rottnest Island in order to test, research and develop marine technology and communications systems for the purpose of commercial exploitation and/or sale to users of such technology in the defence, and oil and gas industries, and related enterprises; that failure to exercise reasonable care in flying the plane was likely to result in injury, perhaps fatal injury, to those employees; and that an employee's death or injury would cause Nautronix economic loss. The trial judge found that Mr Penberthy knew of Nautronix's purpose in broad terms. The flight involved the use of sonar buoys. It also involved liaison with a naval support surface vessel and a submarine. For that reason, Mr Penberthy had to receive a security clearance. To that end, he signed a security undertaking. At the request of Nautronix, the plane was modified to accommodate special Nautronix equipment to be used during the flight. Thus Mr Penberthy's potential liability was not indeterminate. Imposition of a duty on Mr Penberthy to avoid economic loss to Nautronix would not have impaired Mr Penberthy in the legitimate pursuit 92 For example, Finkelstein, "The Goring Ox: Some Historical Perspectives on Deodands, Forfeitures, Wrongful Death and the Western Notion of Sovereignty", (1973) 46 Temple Law Quarterly 169 at 178-196. At 196, the author said that Lord Ellenborough "created no new precedent, nor was he the victim of any confusion." 93 See Caltex Oil (Aust) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529; [1976] HCA 65; Perre v Apand Pty Ltd (1999) 198 CLR 180; [1999] HCA 36; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515; [2004] HCA 16. of his interests unreasonably94 since he already owed a duty of care to the individual passengers. However, this is a case in which it was necessary for Nautronix to prove that it was "vulnerable" – unable to protect itself from the consequences of the defendants' want of reasonable care, either entirely or in a way which would cast the consequences of loss on the defendants95. The sole submission of Mr Penberthy was that Nautronix had failed to establish "what could have been negotiated in terms of a distribution of risk as between Nautronix and Fugro in undertaking the air charter." The sole answer of Nautronix was that there was no evidence that it could have negotiated for itself "a watertight contractual warranty" from Fugro. But that impermissibly reverses the burden of proof. The correct question was: was there evidence that it could not have negotiated a warranty? On that question the evidence was silent. Fugro had standard terms excluding liability. But there was no evidence about whether they were open to change after negotiation. The case resembles Woolcock Street Investments Pty Ltd v CDG Pty Ltd96 in its paucity of factual material. The consequence is that Mr Penberthy is not liable for the tort of negligently causing pure economic loss to Nautronix. Third issue: was it open to Nautronix to rely in this Court on the actio per quod servitium amisit? Counsel for Mr Barclay accepted that the facts which might make out the ingredients of the actio per quod servitium amisit had been pleaded. But he pointed out that the headings and text of the substituted statement of claim contained expressions descriptive of particular causes of action – for example, "damages for negligence" and "contract claim". This language negated the idea that the actio per quod servitium amisit was being pleaded. Thus the substituted statement of claim pleaded not only material facts, but legal conclusions. Nautronix was bound to plead material facts. It was not bound to plead legal conclusions. It was not foreclosed from pleading legal conclusions. But once it had decided to plead some legal conclusions, its failure to plead the legal conclusion that the actio per quod servitium amisit lay had the result of impliedly excluding that plea. 94 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 258 [211]. 95 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 530- 531 [23] and 533 [31]. See also Perre v Apand Pty Ltd (1999) 198 CLR 180 at 96 (2003) 216 CLR 515 at 533 [31] and 550 [84]. In answer to this argument, Nautronix relied on par 44 of Mr Barclay's defence. It read: "To the extent that [Nautronix] in sub-paragraph 23.2, paragraph 42 or elsewhere seek[s] to rely on the action per quod servitium amisit in respect of the consequences of the [deaths of the deceased personnel], such claim is not available at common law and is misconceived." Neither par 23.2 nor par 42 of the substituted statement of claim in terms relied on the actio per quod servitium amisit. Nor did any part of the substituted statement of claim. Paragraph 44 appears to be attempting to deal with a possible argument by Nautronix that while the rule in Baker v Bolton might debar recovery in respect of the deceased personnel in relation to negligently caused pure economic loss, there could be recovery in the actio per quod servitium amisit. Paragraph 44 seeks to rebut that possible Nautronix argument by saying that the rule in Baker v Bolton would debar the claim in relation to those two deceased personnel even if it were founded on the actio per quod servitium amisit. Paragraph 44 does not establish that there was a plea in the substituted statement of claim based on the actio per quod servitium amisit. It establishes that the substituted statement of claim, perhaps, was vexatious and embarrassing because it raised an unresolved doubt on that issue. implied statutory warranties, In its closing written submissions to the trial judge, Nautronix submitted that "one or more of the defendants … are liable, by reason of negligence, breach to compensate of contract or breach of [Nautronix]". Nautronix did not say that any defendant was liable in the actio per quod servitium amisit. Indeed, those submissions said that it was "not necessary … to resolve the arguments raised by the defendants, namely that … part of [the Nautronix] damages claim would be defeated by the common law principles relating to the action 'per quod servitium amisit'." The next paragraph of the written submissions said: "Nevertheless, out of an abundance of caution, these submissions will address those questions." Under the heading "'Per Quod Servitium Amisit'" the written submissions purported to deal with par 44 of Mr Barclay's defence. In fact they dealt with the rule in Baker v Bolton in its application to the negligently caused pure economic loss claim. They said: "the defendants breached their duty of care to Nautronix" (emphasis added). The actio per quod servitium amisit does not depend on a breach by the defendant of a duty of care to the plaintiff, but on breach by the defendant of a duty to the plaintiff's employees. The trial judge did not deal with the actio per quod servitium amisit. It may be inferred that it had not been run at the trial. The trial judge's discussion of par 44 of Mr Barclay's defence centred on the rule in Baker v Bolton in relation to the negligently caused pure economic loss claim against Mr Barclay (which he rejected). Nautronix did not agitate any claim based on the actio per quod servitium amisit in the Court of Appeal, whether by way of notice of contention, cross-appeal or argument. Counsel for Nautronix in this Court accepted that neither at the trial nor in the Court of Appeal was the case run as a claim based on the actio per quod servitium amisit. She also accepted that the trial judge did not understand the case as being so put. The case involved numerous parties, complicated causes of action and potentially large sums of damages. In those circumstances, there was a need for some clarity in the pleadings if they were to be viewed as raising particular causes of action. This messy background supports the contention that the application of the actio per quod servitium amisit was distinctly raised for the first time only in this Court. Can it be raised legitimately in this Court? That depends on whether "evidence could have been given [at the trial] which by any possibility could have prevented" the actio per quod servitium amisit from succeeding there97. Counsel for Mr Barclay pointed to a fragment of evidence given by Mr Cifuentes in answer to the third question in chief, a leading question, that he was "working on a subcontract basis". This was strictly irrelevant, since Mr Barclay and Mr Penberthy had each admitted on the pleadings that Mr Cifuentes and the other Nautronix personnel were employees. Counsel suggested that the actio per quod servitium amisit might not apply in relation to subcontracting. The authorities discuss it in terms of master and servant and contracts of service, not principal and independent contractor or subcontractor. Indeed, Fullagar J expressly denied that the actio per quod servitium amisit applied in relation to independent contractors98. The courts might well be disinclined to widen the tort to extend to independent contractors or subcontractors. It would be desirable that any attempt to widen it should take place against the background of a full examination of what sort of subcontract basis applied to Mr Cifuentes and his colleagues. Counsel for Mr Barclay submitted that had Nautronix distinctly indicated in the pleadings that it was relying on the actio per quod servitium amisit, it would have been open to Mr Barclay to apply for leave to withdraw the admission of employment, examine what precisely the relationship was between Nautronix personnel and Nautronix, and perhaps defeat the actio per quod servitium amisit in that way. Counsel for Mr Penberthy allied himself with that submission. There is force in counsel's submission. Evidence could have been 97 Suttor v Gundowda Pty Ltd (1950) 81 CLR 418 at 438; [1950] HCA 35. 98 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 407; [1959] HCA 29. given at the trial which could possibly have prevented the actio per quod servitium amisit from succeeding there. Nautronix is thus debarred from relying on the actio per quod servitium amisit in this Court. Fourth issue: does the actio per quod servitium amisit exist under the common law of Australia? Strictly speaking this question does not arise, but in deference to the parties' submissions it should be dealt with briefly. The rule in Baker v Bolton is in a somewhat different position from the actio per quod servitium amisit. It could not be and was not submitted that the actio per quod servitium amisit had been erroneously devised from its inception. Its origins are too obscure for that. As Lord Sumner said99: "I do not know, and doubt if it can now be ascertained, when or pursuant to what theory this special right of the master in relation to his servant was first established. The inquiry belongs to history rather than to positive law." But Mr Barclay argued that the actio per quod servitium amisit was "the product of an earlier age" and "should no longer stand apart from, but rather be absorbed into and form part of, the general law of negligence." Mr Barclay said that for this Court the "appropriate response is for the action to [be] absorbed back into the general law of negligence." Mr Penberthy put it somewhat differently. He pointed out that this Court had affirmed the actio per quod servitium amisit in Commissioner for Railways (NSW) v Scott in 1959100. He submitted that since then there had been a widening of recovery for pure economic loss. The widening had been accompanied by the devising of control mechanisms against unduly extensive recovery. He submitted that that widening was "inconsistent" with the actio per quod servitium amisit. It should therefore be "extinguished". Mr Penberthy accepted that this argument left standing the actio per quod servitium amisit so far as non-negligent torts committed against employees of the plaintiff were concerned. But he submitted that that "remnant of an historical remnant" should go as well. These arguments should not be accepted, for reasons similar but not identical to those which apply to the rule in Baker v Bolton. To speak of the actio per quod servitium amisit being "absorbed back" into negligence is a malapropism. It did not come from the much younger tort of negligence; it cannot go "back" into it. Further, "absorption" is a euphemism for abolition. In 99 Admiralty Commissioners v S S Amerika [1917] AC 38 at 54. 100 (1959) 102 CLR 392. this respect, Mr Penberthy's arguments were franker than Mr Barclay's. To abolish this cause of action would be a significant change to the law of tort. If the actio per quod servitium amisit is "anomalous"101 or "inappropriate to present-day conditions"102 or "plainly offensive in today's society"103 or "antique"104, any problems caused by these qualities are problems to be remedied by the legislature. They are not problems to be remedied by the courts. The submission that the actio per quod servitium amisit should be absorbed into the tort of negligence is based on the desire to remove what Lord Sumner called rules which are "insensible", "arbitrary" and "highly technical"105. He said correctly that it does not follow in common law legal systems "that a principle can be said to be truly a part of the law merely because it would be a more perfect expression of imperfect rules, which, though imperfect, are well established and well defined"106. There is, incidentally, reason to doubt the view that the actio per quod servitium amisit is "inappropriate". As Dixon CJ pointed out in Commissioner for Railways (NSW) v Scott107, it is common for employers to be liable to keep paying their employees even though they cannot work, thus necessitating the engagement of new substitute employees or getting existing employees to work overtime, in each case at additional cost. That state of affairs has become even more common since 1959. To abolish the actio per quod servitium amisit would involve overruling a decision of this Court, Commissioner for Railways (NSW) v Scott108. The correctness of that decision has been assumed in this Court, both as a matter of application109 and as a matter of dictum110. The appellants contended that the 101 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 406 per 102 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 406 per 103 R v Buchinsky [1983] 1 SCR 481 at 490 per Dickson J. 104 Burnicle v Cutelli [1982] 2 NSWLR 26 at 31 per Glass JA. 105 Admiralty Commissioners v S S Amerika [1917] AC 38 at 56. 106 Admiralty Commissioners v S S Amerika [1917] AC 38 at 56. 107 (1959) 102 CLR 392 at 403. 108 (1959) 102 CLR 392. 109 Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd (1972) 46 ALJR 432. Court could conduct, in Brennan J's words, "a review of doctrines which were the product of and suited to an earlier age but which work injustice or inconvenience in contemporary conditions."111 Shortly after the passage just quoted, Brennan J said112: "Judicial preference logically satisfying for a more elegant or jurisprudence is insufficient to warrant a change in settled doctrine which works satisfactorily in conjunction with other legal principles." The appellants did not point to any "injustice" or "inconvenience". They did not explain how the actio per quod servitium amisit works unsatisfactorily in conjunction with other legal principles. It happened to suit Mr Barclay's interests for his counsel to advocate "a more elegant or logically satisfying jurisprudence", but a search for that is not enough. Brennan J also said after the last sentence quoted113: "And if a change in settled doctrine is contemplated, a substitutionary doctrine sufficiently precise to admit of practical application must be at hand." Whatever else can be said of the tort of negligence, it is not precise. It is true that the decision of this Court in Commissioner for Railways (NSW) v Scott to retain the actio per quod servitium amisit was arrived at by bare majority. But that does not affect its status as an authority. Its status as an authority is supported by the decision a few years earlier of the then ultimate court of appeal, the Privy Council, in Attorney-General for New South Wales v Perpetual Trustee Co (Ltd)114. In that decision it was assumed that the actio per quod servitium amisit existed. Nothing in Cook v Cook115 undercuts the 110 For example, Northern Territory v Mengel (1995) 185 CLR 307 at 342 n 237; [1995] HCA 65; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2003) 216 CLR 515 at 537 [47]; CSR Ltd v Eddy (2005) 226 CLR 1 at 22-23 [44]; [2005] HCA 64. 111 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 131; [1988] HCA 44. 112 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 113 Trident General Insurance Co Ltd v McNiece Bros Pty Ltd (1988) 165 CLR 107 at 114 (1955) 92 CLR 113; [1955] AC 457, dismissing an appeal from Attorney-General for New South Wales v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237; [1952] HCA 2. 115 (1986) 162 CLR 376 at 389-390; [1986] HCA 73. present status as authorities in Australian courts of Privy Council decisions before 1986, until they are overruled by this Court. Further, it is necessary to reject submissions advanced by Mr Penberthy that the action is "little litigated", "is very, very rare", and "is in virtual disuse." The actio per quod servitium amisit has in fact been employed recently in many intermediate appellate and trial courts116. As a matter of precedent, this is of little moment in view of how the authorities in this Court stand. But it does reveal that the actio per quod servitium amisit is not drifting into desuetude. It retains utility for plaintiffs in a variety of practical circumstances. Some legislatures have abolished117 or significantly limited118 the actio per quod servitium amisit. This legislation reveals an assumption that the actio per quod servitium amisit exists at common law. Other legislatures have assumed its existence while modifying its application without abolishing it119. Thus legislatures habitually amend the actio per quod servitium amisit while permitting it to survive to a larger or smaller extent. The actio per quod servitium amisit is a common law cause of action. The intervention of statute has caused it to operate in different ways in different jurisdictions. These phenomena make it difficult for courts administering the common law of Australia to abolish the common law actio per quod servitium amisit. There are two further arguments against abolishing the actio per quod servitium amisit in these proceedings. One is that it is not open to Nautronix to rely on it120, and hence to discuss its abolition is to deal with a hypothetical question. The other is that even if it were open to Nautronix to rely upon it, no evidence on damage has been called. It is difficult to deal in detail with Mr Penberthy's arguments that there are inconsistencies between it and the action 116 For example, Sydney City Council v Bosnich [1968] 3 NSWR 725; Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571; GIO Australia Ltd v Robson (1997) 42 NSWLR 439. 117 CSR Ltd v Eddy (2005) 226 CLR 1 at 23 [44] n 167. 118 CSR Ltd v Eddy (2005) 226 CLR 1 at 23 [44] nn 168 and 169. See also Motor Accidents Compensation Act 1999 (NSW), s 142(1) and (on Transport Accident Act 1986 (Vic), s 93(1) and (2)) Doughty v Martino Developments Pty Ltd (2010) 119 For example, Civil Liability Act 2002 (NSW), s 12, discussed in Chaina v The Presbyterian Church (NSW) Property Trust (2007) 69 NSWLR 533; Civil Liability Act 2003 (Q), s 58. 120 See above at [89]-[97]. for negligently caused pure economic loss without it having been decided, in concrete circumstances, what the measure of damages in the actio per quod servitium amisit is121. Fifth issue: were Mr Barclay and Mr Penberthy liable to Nautronix on the actio per quod servitium amisit? If the actio per quod servitium amisit can now be relied on in this Court in these proceedings, both Mr Barclay and Mr Penberthy were liable under it. The trial judge found that each was in breach of a duty of care towards Nautronix's injured employees, if that is what they were. Sixth issue: if Mr Barclay and Mr Penberthy were liable to Nautronix in relation to the actio per quod servitium amisit, does that liability extend to the deceased employees? The answer is "No". The rule in Baker v Bolton precludes an affirmative answer. For reasons given above122, that rule should not be abolished. Seventh issue: what is the measure of damages in the actio per quod servitium amisit against Mr Penberthy and Mr Barclay? Since Nautronix is precluded from relying on the actio per quod servitium amisit in this Court, this issue does not arise. If it did, even in the light of the majority conclusions, it should not be dealt with. The Nautronix case, so far, has been put very vaguely on this issue. By some means, the formal basis of which is not clear, the trial was conducted on separated issues. One of the issues which the learned trial judge did not have to decide was the amount of any economic loss which Nautronix may have suffered. That amount relates to the measure of damages in both Nautronix's claim against Mr Penberthy for pure economic loss as a result of negligence, and Nautronix's reliance on the actio per quod servitium amisit. The evidence on the issue of economic loss may therefore be very far from complete. Nautronix's substituted statement of claim alleged that "the … injury of its personnel would cause loss of intellectual property and corporate knowledge concerning the marine technology and communications systems being developed and tested, and cause loss and damage to Nautronix … in the conduct of its business." The particulars alleged that each of the injured personnel "was integral to, and had particular expertise in respect of, [Nautronix's] development of technology and services, in particular in projects known as the Nautronix Acoustic Sub-sea 121 See further below at [109]-[114]. 122 See above at [80]-[84]. Positioning and Navigation System … and the Acoustic Measurement Range". The particulars then alleged the position and responsibility of each of the injured personnel. This matter only came under close attention late in the hearing. Counsel for Mr Barclay referred in a footnote of his written submissions to a New Zealand case about damages123. But no specific submission about damages was put in the initial written submissions, and little was said in oral argument. Further written submissions were filed after the close of oral argument. Those further written submissions invite the Court to offer an opinion about the measure of damages in an appeal arising out of proceedings that did not concern the measure of damages. The opinion is requested with a view to assisting the parties in the conduct of future proceedings in which, for the first time, the measure of damages will be considered. That is a very unusual invitation. It is an invitation to deliver an advisory opinion. It should not be accepted on general grounds. Further, the invitation is particularly unattractive in view of the lack of detail in Nautronix's damages case and the lack of any evidence specifically directed to that case which has been called so far. Why should it be decided, for example, that Nautronix's claim to damages be limited to the actual value of the services lost without its having had a chance to establish what greater losses it may have suffered? The measure of damages question raises, potentially, significant questions of principle. In general controversial questions of legal principle are resolved only in the context of concrete factual circumstances. That is why decisions on strike out applications, on demurrer, on agreed facts and on separate questions often produce unsatisfactory consequences. So far as the existing authorities are binding on the judge who is to conduct the balance of the trial, they are to be followed. So far as they are not binding, they need not be followed, but will have the force that the reasoning underpinning them intrinsically possesses. Those authorities were decided as a means of resolving actual controversies in the light of evidence which had been tendered and received. It is undesirable to fetter the judge at this stage with additional opinions about what should be done in the light of evidence before it has even been tendered. The course of having a separate trial on some issues is often a dangerous one. It may have already caused difficulties in this litigation. To deal with one of these issues on appeal before any trial judge has spoken seems even more dangerous than usual. Further, there is no advantage in terms of saving trial time in giving preliminary advice on the measure of damages in relation to the actio per quod servitium amisit. Nautronix will be entitled to call evidence on 123 Attorney-General v Wilson and Horton Ltd [1973] 2 NZLR 238 at 252-258. economic loss arising from Mr Penberthy's negligence. That evidence may go further on that issue than it legitimately can in relation to the actio per quod servitium amisit. What the correct limits of the measure of damages for the latter cause of action are is better determined after the evidence is received, not before. Orders The appeals should be allowed with costs. The orders of the Court of Appeal should be set aside. In their place there should be orders that the appeals to that Court should be allowed with costs and that the proceedings brought by Nautronix against Mr Barclay, Mr Penberthy and Fugro be dismissed with costs so far as they relate to the negligently caused pure economic loss claim and the actio per quod servitium amisit. The applications for special leave to cross-appeal should be dismissed with costs. 116 KIEFEL J. On 11 August 2003, a twin-engine aircraft crashed near Jandakot Airport in Western Australia, killing two passengers, and injuring the pilot and the remaining three passengers. According to the pleadings at trial, all five passengers were employees of L-3 Communications Nautronix Limited (which was at the relevant time known as Nautronix Limited), which had chartered the aircraft from Fugro Spatial Solutions Pty Ltd ("Fugro"). Fugro employed the pilot, Mr Alec Penberthy. The flight was for the purpose of testing and developing marine technology and underwater communication systems which Nautronix Limited hoped to exploit commercially as valuable to the defence and oil and gas industries. The aircraft was specially adapted for this purpose. Nautronix Limited had contracted with Fugro for a program of flights to take place in the period 8 to 14 August 2003. The flight on 11 August 2003 was described as an "Acoustic Telemetry trial". The employees of Nautronix Limited who were passengers on the aircraft were directly involved in the creation of the technology, experts or specialists in fields necessary for its development, or managers of the project. The proceedings below Proceedings were brought in the Supreme Court of Western Australia by the three surviving passengers, the spouses of the deceased passengers, Nautronix (Holdings) Pty Ltd and Nautronix Limited. Nautronix (Holdings) Pty Ltd was the assignee of Nautronix Limited's right of action. In these reasons, I will refer to the Nautronix companies collectively as "Nautronix". The proceedings were brought against Fugro, Mr Penberthy and Mr Aaron Barclay, an aeronautical engineer who was responsible for the design of a replacement sleeve bearing in the fuel pump of the aircraft. Nautronix' action was pleaded in both tort and contract and the loss claimed was in the nature of pure economic loss, "pure" because it did not follow upon any claim by Nautronix for damages to person or property. It was pleaded generally that Fugro and Mr Penberthy were aware, or should have been aware, that Nautronix would suffer economic loss as a result of the death of or injury to its employees who were passengers on the aircraft. Further detail of Fugro's alleged knowledge of Nautronix' project was provided in the claim for damages for breach of the aircraft charter agreement. Fugro and Mr Penberthy were said to have known that Nautronix would suffer interruption and delays in the development and testing of its systems and the commercial exploitation of them if its employees were killed or injured. The claim in negligence against Mr Barclay was framed somewhat differently, but it is not necessary presently to refer to it. The cause of the failure of the right-hand fuel pump and resultant shut down of the right-hand engine, which was the direct cause of the crash, was the fracture of a drive pin in the sleeve bearing of the fuel pump. Murray J found that this had been caused or contributed to by Mr Barclay's negligent specification of an unsuitable alloy for the sleeve bearing124 and his negligent failure to specify a particular finish to the internal surface of the sleeve bearing125. His Honour found Mr Penberthy to have been negligent in the manner in which he dealt with the emergency that arose when the engine failed almost immediately after the aircraft became airborne126. Murray J took Fugro and Mr Penberthy to admit the existence of a duty of care towards Nautronix127. They had admitted knowledge of the potential economic loss which would be caused to Nautronix in the event of the death of or injury to its employees, and Mr Penberthy had admitted owing a duty to use reasonable care and skill in the piloting of the aircraft. Fugro was vicariously liable for Mr Penberthy's actions. His Honour found that Nautronix was vulnerable in the sense that it was unable to protect itself from foreseeable harm of an economic nature caused by Mr Penberthy's negligence128, although his Honour appears also to have accepted a submission by Mr Barclay that Nautronix had the capacity to protect itself by the terms of its contract with Fugro129. His Honour did not consider that Mr Barclay could be said to have owed a duty of care to Nautronix. The "crucial difficulty" in this regard, his Honour held, was that the class of persons at risk of foreseeable harm from Mr Barclay's actions was an "essentially indeterminate" class of persons: any user of the aircraft who might suffer loss of a purely financial kind if the aircraft crashed130. Moreover, his Honour found that there was no evidence that Mr Barclay had known of the use to which the aircraft was to be put by Nautronix131. 124 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [289]. 125 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [292]. 126 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [307], [365]- 127 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [272]. 128 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [346]. 129 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [354]-[355]. 130 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [351]-[353]. 131 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [349]-[351]. Murray J accepted that it was an implied term of the charter agreement that Fugro exercise reasonable care in the performance of the agreement, but did not consider that the evidence established that Fugro had breached that term132. This may seem an odd result, given the finding of negligence against Mr Penberthy. In any event, the claim in contract has not been pursued on appeal to this Court. His Honour considered that an issue was joined by Mr Barclay in his defence as to whether an action per quod servitium amisit was available to Nautronix133. Such an action provides a remedy to an employer by way of compensation for the loss of services of an employee who is injured as a result of another's negligence. His Honour did not reach a conclusion as to the issue of liability under this head, seemingly because he took the view that the claim made by Nautronix went further and extended to all damage to its financial interests134. Only the question of liability was determined in the proceedings before Murray J. Liability was apportioned on the basis that Fugro was liable for two- thirds of Nautronix' damages and Mr Barclay one-third135. In the Court of Appeal, McLure P, with whom Martin CJ and Mazza J agreed, held that both Mr Barclay and Mr Penberthy owed a duty of care to Nautronix to take reasonable care to avoid pure economic loss by injuring its employees136. Her Honour observed that the common law continues to recognise the action per quod servitium amisit. Her Honour considered that that action was relevant to the enquiry whether a duty of care was owed to Nautronix. Whilst the action per quod servitium amisit remained part of the common law of Australia, it would be difficult to avoid the conclusion that a duty of care existed, because "[c]onsistency between closely related common law actions is a legitimate expectation"137, her Honour held. Her Honour said that, had the common law action for loss of services not survived, she would not have concluded that Nautronix could succeed in its claim. No duty of care could have been said to 132 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [427]-[428]. 133 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [327], [356]. 134 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [359]. 135 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [366], [434]. 136 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at 137 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at have been owed to Nautronix by either defendant138. In her Honour's view139, Nautronix was not vulnerable in the sense referred to in Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad"140 and Perre v Apand Pty Ltd141. Mr Penberthy's knowledge of the commercial purpose of the flight and that his passengers were Nautronix employees was not sufficient to found a duty. Further, Nautronix was at no greater risk of harm from a crash than any other potential charterer of the aircraft142. McLure P confirmed that neither action, for breach of duty or per quod servitium amisit, was available in relation to the services lost by reason of the death of the two employees. This followed the rule, so-called, in Baker v Bolton143 that "[i]n a civil Court, the death of a human being could not be complained of as an injury"144. The issues The appeals by Mr Barclay, Fugro and Mr Penberthy, the cross-appeals by Nautronix and Nautronix' Notices of Contention raise the following issues: (a) whether the action per quod servitium amisit remains part of the common law of Australia and if so: the measure of damages available under it; the liability of Mr Barclay, Mr Penberthy and Fugro to Nautronix pursuant to it; 138 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at 139 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at 140 (1976) 136 CLR 529; [1976] HCA 65. 141 (1999) 198 CLR 180; [1999] HCA 36. 142 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at 143 (1808) 1 Camp 493 [170 ER 1033]. 144 Baker v Bolton (1808) 1 Camp 493 at 493 [170 ER 1033 at 1033], cited in Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at 64,884 if the action forms part of the common law of Australia, whether it informs the action for breach of duty of care in tort in cases which involve claims for pure economic loss; (c) whether Mr Penberthy and Fugro owed Nautronix a duty to take reasonable care to avoid causing it economic loss; and (d) whether the rule in Baker v Bolton remains part of the common law of Australia and prevents recovery by Nautronix of damages in tort arising from the deaths of its two employees. So far as concerns the issue referred to in (b), Nautronix does not seek to support the reasoning of the Court of Appeal that the action per quod servitium amisit is relevant to a claim for breach of a duty of care. For their part Fugro, Mr Penberthy and Mr Barclay contend that that action should no longer be permitted to stand apart from the law of negligence and should be treated as absorbed into it. It is necessary to explain (c) further. Mr Barclay's appeal includes a challenge to the finding that he owed Nautronix a duty to take reasonable care to avoid economic loss. Nautronix does not now seek to maintain that finding. The action for negligence per quod servitium amisit The availability of a writ in trespass (later in case) to a master for the loss of the services of a servant caused by the negligence of a defendant can be traced to medieval times145. It was connected to the idea of the status of a servant, which originated in laws relating to the status of a villein146. It was based upon the master having an interest which has been described as quasi-proprietary. This might suggest an analogy with the property a master formerly had in a slave147. However, it has been pointed out148 that both Sir William Holdsworth and Sir William Blackstone refer, not to the master having a proprietary interest in the servant, but rather in his or her services. It was the loss of services for 145 Holdsworth, A History of English Law, 2nd ed (1937), vol 8 at 427. 146 Holdsworth, A History of English Law, 2nd ed (1937), vol 8 at 429. 147 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 287 per Fullagar J; [1952] HCA 2. (Under Roman law and the Lex Aquilia, the master of a slave had an action for harm negligently caused to a slave: Mommsen, Krueger and Watson, The Digest of Justinian, (1985), vol 1, bk 9, title 2 at 277- 148 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 450 per Windeyer J; [1959] HCA 29. which a remedy was provided by way of the action. The loss of the employee's services was regarded as the gist of the action149. The action per quod servitium amisit was not based upon a wrong having been committed. It was the consequence of the employee's injury for the employer, the loss of services, for which an action in trespass lay150. For the purposes of the action it did not matter how the injury was caused, whether by assault, battery, negligence, or otherwise151. Nor did it depend on the breach of any contract of service; the action was not analysed in contractual terms152. The action extended to both unintentional and intentional acts of negligence. There was no limitation on the class of services for which an employer could sue. All that was required was that the relation of master and servant exist153. The interest of the master of the household, which the action protected, extended to the services of members of his family, apprentices and servants154. Analogous writs lay in trespass for taking away or injuring a wife, child or servant where the result was that their services were denied to the master155. The remedy provided by the action was clearly of some social importance at the time it was first made available. It has been observed156 that, since that time, there may have been particular periods where the employer's loss could be regarded as real, actionable loss. In Commissioner for Railways (NSW) v 149 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 452 per 150 Blackstone, Commentaries on the Laws of England, 5th ed (1773), bk 1 at 429, referred to by Dixon CJ in Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 401. 151 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 246 152 Jones, "Per Quod Servitium Amisit", (1958) 74 Law Quarterly Review 39 at 50-51. 153 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 248 154 The Commonwealth v Quince (1944) 68 CLR 227 at 241 per Rich J; [1944] HCA 1. 155 Holdsworth, A History of English Law, 2nd ed (1937), vol 8 at 428-430. 156 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 402 per Scott157, decided in 1959, Dixon CJ and Windeyer J considered that the obligations then cast upon employers by statute meant that the action had once again assumed some economic importance. Many employers were required to make payments to injured workers and to pay for any medical expenses associated with their injuries, without receiving the benefit of their services. Although the action per quod servitium amisit continued to be recognised by courts, questions arose as to the extent of its application. This Court considered whether the action lay at the suit of the Crown, where a member of the Royal Australian Air Force had been injured by another's negligent driving, in The Commonwealth v Quince158, and held that it did not. That decision was applied in Attorney-General for NSW v Perpetual Trustee Co (Ltd)159 where it was held that the Crown could not recover for the loss of the services of a member of the police force. At around the same time, the courts in England were concerned to limit the action even further, in line with its origins. Viscount Simonds, giving the advice of the Privy Council on the dismissal of the appeal in Attorney-General for New South Wales v Perpetual Trustee Company (Ltd), said, "this form of action should not be extended beyond the limits to which it has been carried by binding authority or at least by authority long recognized as stating the law."160 Those limits were to be found in the fact that the action originated at a time when service was a status. That status lay "in the realm of domestic relations" and the action was to be limited accordingly161. The following year, in Inland Revenue Commissioners v Hambrook162, the Court of Appeal held that the action lay only where a servant could be said to be a member of the master's domestic household. Commissioner for Railways (NSW) v Scott163 was decided by this Court three years later. A majority (Kitto, Taylor, Menzies and Windeyer JJ; Dixon CJ, 157 (1959) 102 CLR 392 at 403 per Dixon CJ, 439-440 per Windeyer J. 158 (1944) 68 CLR 227. 159 (1952) 85 CLR 237. 160 Attorney-General for New South Wales v Perpetual Trustee Company (Ltd) (1955) 92 CLR 113 at 129-130; [1955] AC 457 at 490. 161 Attorney-General for New South Wales v Perpetual Trustee Company (Ltd) (1955) 92 CLR 113 at 130; [1955] AC 457 at 490. 163 (1959) 102 CLR 392. McTiernan and Fullagar JJ dissenting) declined to follow Inland Revenue Commissioners v Hambrook. But the decision in Attorney-General for New South Wales v Perpetual Trustee Company (Ltd) was a decision of the Privy Council, which then bound this Court. Dixon CJ considered himself to be bound to accept that the action per quod servitium amisit did not extend beyond domestic servants, although his Honour's preferred position was to allow the Commissioner, as employer, to recover damages, "appropriately measured", with respect to the loss of services of the injured employee164. Other members of the Court were inclined to think that the words "domestic relations", which had been used by Viscount Simonds in Attorney-General for New South Wales v Perpetual Trustee Company (Ltd), were not so limited in their meaning as Inland Revenue Commissioners v Hambrook had held them to be165, and distinguished the decision of the Privy Council on that basis. Other actions analogous to that of per quod servitium amisit continued to be recognised at this time. McTiernan J, in Attorney-General for NSW v Perpetual Trustee Co (Ltd), considered that the action for the loss of services of a daughter as a result of her seduction had utility166. The action for the loss of the services of a wife (per quod consortium amisit), through the negligent infliction of injury upon her, remained available to her husband167. No similar action was available to a wife168. However, by the time of the decision in CSR Ltd v Eddy169, the observation could be made that the action per quod consortium amisit had been abolished170 or radically limited171 in most jurisdictions. The 164 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 397-398. 165 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 413-418 per Kitto J, 424-425 per Taylor J, 434-437 per Menzies J, 439, 443 per Windeyer J. 166 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 167 Toohey v Hollier (1955) 92 CLR 618; [1955] HCA 3; and see Brett, "Consortium and Servitium: A History and Some Proposals", (1955) 29 Australian Law Journal 168 Wright v Cedzich (1930) 43 CLR 493, Isaacs J dissenting; [1930] HCA 4. 169 (2005) 226 CLR 1 at 23 [44]; [2005] HCA 64. 170 Law Reform (Marital Consortium) Act 1984 (NSW), s 3; Common Law (Miscellaneous Actions) Act 1986 (Tas), s 3; Acts Amendment (Actions for Damages) Act 1986 (WA), s 4; Law Reform (Miscellaneous Provisions) (Amendment) Act (No 2) 1991 (ACT), s 5; Administration of Justice Act 1982 (UK), s 2(a). torts of seduction, enticement and harbouring had been abolished in South Australia, the Australian Capital Territory and England172, and had not been relied upon for decades elsewhere. The action per quod servitium amisit has been abolished in England173 and in large measure in Victoria174 and the Northern Territory175. Despite Fullagar J calling for its abolition in Attorney-General for NSW v Perpetual Trustee Co (Ltd)176 and in Commissioner for Railways (NSW) v Scott177 and references to the action as being "anomalous or anachronistic"178 and antique179, its existence and continued application have not otherwise been questioned. Should the action per quod servitium amisit be retained? The appellants' submission that the action per quod servitium amisit should be regarded as "absorbed" into the mainstream law of tort, relevant to recovery of economic loss, invites comparison between tort law and the character of the action. 171 Transport Accident Act 1986 (Vic), s 93; Motor Accidents (Compensation) Act (NT), s 5; Work Health Act (NT), s 52. The exceptions are South Australia, where it has been extended – Civil Liability Act 1936 (SA), s 65 (formerly Wrongs Act 1936 (SA), s 33); and Queensland, where it has been modified – Law Reform Act 1995 (Q), s 13, and Civil Liability Act 2003 (Q), s 58. 172 Civil Liability Act 1936 (SA), s 68; Civil Law (Wrongs) Act 2002 (ACT), s 210; Administration of Justice Act 1982 (UK), s 2(c)(ii)-(iii). 173 Administration of Justice Act 1982 (UK), s 2(b), (c)(i). 174 Transport Accident Act 1986 (Vic), s 93A. 175 Motor Accidents (Compensation) Act (NT), s 5; Workers Rehabilitation and Compensation Act (NT), s 52. 176 (1952) 85 CLR 237 at 288. 177 (1959) 102 CLR 392 at 406-407. 178 Griffiths v Kerkemeyer (1977) 139 CLR 161 at 177; [1977] HCA 45, quoting Donnelly v Joyce [1974] QB 454 at 462. 179 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 245 [178] per Gummow J; CSR Ltd v Eddy (2005) 226 CLR 1 at 23 [44] per Gleeson CJ, Gummow and Heydon JJ. Kitto J in Attorney-General for NSW v Perpetual Trustee Co (Ltd)180 referred to the action per quod servitium amisit as an exception to the common law rule which operates such that "where A is prevented from fulfilling his obligations to B by reason of an injury wrongfully inflicted upon him by C, B has no right of action against C in respect of his loss". His Honour went on to explain181 that the principle upon which the exception rested was that it provided a remedy for the wrongful invasion of a quasi-proprietary right which a master, or employer, is considered to possess in respect of an employee's services. The nature of the right has been discussed earlier in these reasons. It is the infringement of that right which entitles the employer to recover damages. The action per quod servitium amisit has nothing in common with an action for breach of duty of care in tort, save that an act of negligence may be involved. The tort of interfering with contractual rights182 may be thought to provide a closer analogy; however, that action may owe more to the old action for wrongful procurement of the services of a servant, which was considered to be based in contract. The action per quod servitium amisit was not subjected to contractual analysis183. What these actions do have in common is that they developed by reference to proprietary, or quasi-proprietary, rights: the attribution of a quasi-proprietary right to the service due to the employer, in the action per quod servitium amisit; and in the treatment of contractual rights as analogous to property rights, in the action for wrongful interference with contractual rights184. Another distinction between the action per quod servitium amisit and that for breach of duty of care is in the damages which may be recovered. Further attention will be directed to the question of the measure of those damages later in these reasons. For present purposes it may be observed that the conceptual principle underlying the action is liability for the employer's loss of services, not the employer's economic loss as such185. This follows from the action being 180 (1952) 85 CLR 237 at 294. 181 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 294, cited in Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at 572 [123]; [2004] HCA 56. 182 Lumley v Gye (1853) 2 El & Bl 216 [118 ER 749]. 183 Jones, "Per Quod Servitium Amisit", (1958) 74 Law Quarterly Review 39 at 50-51. 184 Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at 574 [126]. 185 Marshall, "Liability for Pure Economic Loss Negligently Caused – French and English Law Compared", (1975) 24 International and Comparative Law Quarterly based on a proprietary interest, or something analogous to it, in the victim's services. The view that the action is for the invasion of an employer's right to services may also account for a defendant's inability to rely upon the employee's contributory negligence186. This inability serves to further distinguish the action from that for breach of duty of care. The above discussion permits a conclusion that the action per quod servitium amisit has no affinity with an action for breach of duty of care. The historical origins of the action per quod servitium amisit, though adapted somewhat to modern conceptions of the relationship of employer and employee, set it apart from actions in tort. It follows that the Court of Appeal was wrong to suggest that this action could inform the question of whether a duty of care arose. It also follows that the action for breach of duty of care cannot "absorb" the action per quod servitium amisit, contrary to what was submitted by the appellants in each of the proceedings presently at hand. This is not to say that an action for breach of duty of care against Fugro and Mr Penberthy is not open to Nautronix. As these reasons will show, the trial judge was correct to conclude that they are liable in damages on that account. The circumstances relating to these parties, and the knowledge that Fugro and Mr Penberthy had concerning Nautronix' project, permit such a conclusion. The position of Nautronix in this case vis-à-vis those parties cannot, however, be taken as descriptive of the position in which other employers will find themselves. It therefore does not follow that employers' claims for the loss of an employee's services should be left to be dealt with exclusively in an action for breach of a duty of care. Many employers would not be able to establish that a duty of care was owed to them by a tortfeasor. Unless and until the principles respecting recovery of economic loss in tort are further extended, the action per quod servitium amisit may be the only avenue for the recovery of damages for the loss of services for some employers. The abolition of the action per quod servitium amisit in England followed upon a recommendation by the Law Reform Committee187 that employers instead be given a right to recover from a tortfeasor wages paid to the employee, and medical and other expenses incurred by the employer on behalf of the injured 186 The fact that contributory negligence affords no defence to an action per quod servitium amisit was cited by Fullagar J in Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 408 as a reason for confining the scope of the action. 187 Law Reform Committee, Eleventh Report (Loss of Services, etc), (1963) Cmnd 2017 at 11 [24(1)]. employee, by way of subrogation188. A similar right of subrogation is available in some European countries, in aid of the recovery of wages paid to an injured employee189. in Commissioner for Railways (NSW) v Scott191 The provision of such a right may be thought to recognise that employers should be afforded an avenue for compensation, which the action per quod servitium amisit would otherwise provide. It also brings into focus rights given under workers' compensation legislation in Australia190 and the observation of the Commissioner could have recovered in any event, had the engine driver concerned brought proceedings under the Workers' Compensation Act 1926-1954 (NSW) rather than the Government Railways Act 1912-1955 (NSW). The operation of the relevant workers' compensation legislation did not receive the attention abovementioned reference by Windeyer J. In that case, an engine driver in the employ of the Commissioner suffered a breakdown after a level crossing accident and was unable to work. The circumstances would appear to have come within the ambit of the Workers' Compensation Act 1926-1954 (NSW). for Railways (NSW) v Scott, save for in Commissioner that Under that legislation an employer was entitled to be indemnified, for the compensation paid to an injured employee, by a third party who was liable to pay damages to a worker in proceedings brought for the recovery of such damages192. This has the effect of vesting a statutory cause of action in the employer193. 188 See McGregor, McGregor on Damages, 13th ed (1972) at 783-784 [1156]. 189 In Germany by the Pay Continuation Statute (Entgeltfortzahlungsgesetz (EFZG)) of 1994: see Markesinis and Unberath, The German Law of Torts: A Comparative Treatise, 4th ed (2002) at 910; in France by the Loi Badinter of 1985: see Bussani and Palmer, "The case studies", in Bussani and Palmer (eds), Pure Economic Loss in Europe, (2003) 171 at 222-223. Belgium, Italy and the Netherlands provide a similar right of recovery: Bussani and Palmer at 223-224, 233-234. 190 For example the Workers' Compensation and Injury Management Act 1981 (WA), s 93(5) and the Workers' Compensation and Rehabilitation Act 2003 (Q), s 207B(7)(b) provide the employer or the employer's insurer with a right of subrogation, as well as indemnity, although such a provision is not uniform in similar legislation throughout Australia. 191 (1959) 102 CLR 392 at 440. 192 Workers' Compensation Act 1926-1954 (NSW), s 64. 193 See also WorkCover Queensland v Amaca Pty Ltd (2010) 241 CLR 420 at 430 [19]; [2010] HCA 34, discussing s 207B(7) of the Workers' Compensation and Rehabilitation Act 2003 (Q). A provision in the Workers' Compensation and Injury Management Act 1981 (WA)194 expressly entitles an employer to bring proceedings in the name of the worker against a third party defendant. Under workers' compensation legislation, the liability of an employer to pay compensation is generally limited to injury arising out of or in the course of a worker's employment195. But the obligation to continue to pay an injured worker might also arise pursuant to an industrial award or an agreement with the employee, which may not provide for reimbursement to an employer of monies paid or the means to achieve such reimbursement. The action per quod servitium amisit continues to have relevance to such situations. The fact that the action per quod servitium amisit continues to have some utility to some employers answers in large part the more direct contention of the appellants that the action should no longer be permitted to continue. It was submitted by the appellants that the action per quod servitium amisit is a product of another age, an historically based rule which can no longer be supported as an exception to the principles which have developed concerning recovery of economic loss. The submission brings to mind the criticism by Fullagar J of the action's continued recognition. In Attorney-General for NSW v Perpetual Trustee Co (Ltd)196 Fullagar J suggested that the action should be abolished as an "illogical and unreasonable" exception to the general rule that a person is liable for damage caused by his or her negligence only if he or she is found to owe a duty of care197. His Honour thought the action antiquated and attributable to perceptions which had no place in a modern society198. Kitto J, however, said that although conceptions of status had not survived, the notion of a right of a master to the benefit of his or her servant's services had not been abandoned199. Dixon J clearly considered the 194 Section 93(5). 195 See, for example, Workers' Compensation and Injury Management Act 1981 (WA), ss 5(1) (definition of "injury"), 18, 19. 196 (1952) 85 CLR 237 at 288. 197 See also The Commonwealth v Quince (1944) 68 CLR 227 at 240-241 per Rich J. 198 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 199 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at action to have utility and observed that "[t]he remedy has followed the relation of master and servant unaffected by the changes that have taken place in the social and economic purposes for which the relation has been used."200 His Honour did not consider that the essential character of the action had been altered by the extent to which employment was by then the result of free agreement. In PGA v The Queen201, it was pointed out that common law courts can decide to no longer maintain a rule of law which has become no more than a legal fiction because the reason or foundation for it no longer exists202. There, Australian statute law concerning marriage had removed any basis for accepting Hale's proposition that the immunity of a husband from a charge of rape formed part of the common law203. However, the courts will not readily depart from a settled rule of law204. So far as concerns the action per quod servitium amisit, it is a remedy which has been adapted, for the most part, in a manner consistent with its origins. It cannot be said of it that the present basis for it, the compensation of employers who have suffered loss but who may not have a right of recovery against the person who injured their employee, has been removed or that it no longer has any utility. The action per quod servitium amisit has been referred to in numerous decisions of this Court205 and has readily been applied in the sphere of employer 200 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 201 (2012) 86 ALJR 641 at 651 [30]; 287 ALR 599 at 607; [2012] HCA 21. 202 See also R v L (1991) 174 CLR 379 at 389-390, 405; [1991] HCA 48. 203 The proposition was stated in the extra-judicial writings of Sir Matthew Hale, Lord Chief Justice of the Court of King's Bench, published as The History of the Pleas of the Crown, (1736), vol 1, c 58 at 629. 204 State Government Insurance Commission v Trigwell (1979) 142 CLR 617 at 633- 634; [1979] HCA 40. 205 Treloar v Wickham (1961) 105 CLR 102 at 122 per Menzies J; [1961] HCA 11; Paff v Speed (1961) 105 CLR 549 at 566 per Windeyer J; [1961] HCA 14; R W Miller & Co Pty Ltd v Australian Oil Refining Pty Ltd (1967) 117 CLR 288 at 297 per Windeyer J; [1967] HCA 50; Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad" (1976) 136 CLR 529 at 546-547 per Gibbs J, 598 per Jacobs J; Groves v The Commonwealth (1982) 150 CLR 113 at 124 per Stephen, Mason, Aickin and Wilson JJ; [1982] HCA 21; Northern Territory v Mengel (1995) 185 CLR 307 at 342 per Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ; [1995] HCA 65; Perre v Apand Pty Ltd (1999) 198 CLR 180 at 245 [178] per Gummow J; Cattanach v Melchior (2003) 215 CLR 1 at 32 [67] per McHugh and Gummow JJ; (Footnote continues on next page) and employee. In Zhu v Treasurer of New South Wales206, Kitto J's analysis in Attorney-General for NSW v Perpetual Trustee Co (Ltd)207 of an employer's rights in the services of a servant as quasi-proprietary was said to have "significant support". Most recently, in CSR Ltd v Eddy208, the action was recognised as one of a very few limited, direct avenues of recovery available to those who have lost the benefit of an injured person's services. In consequence of this Court's continued acceptance of the existence of the action, the courts of the States and Territories have continued to award damages in such an action209. There is no basis shown for a refusal to continue to recognise it. The measure of damages It is the loss of an employee's services which is the gist of the action per quod servitium amisit210. It is that loss for which the remedy is provided and which is the employer's cause of action211. In Attorney-General for NSW v Perpetual Trustee Co (Ltd), Fullagar J212 said that damages are "strictly limited to pecuniary loss actually sustained through the loss of the services of the servant and … expenditure necessarily incurred in consequence of the injury to the servant." Dixon CJ213 and Taylor J214, in Commissioner for Railways (NSW) v [2003] HCA 38; Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 537 [47] per McHugh J; [2004] HCA 16; Cole v South Tweed Heads Rugby League Football Club Ltd (2004) 217 CLR 469 at 480 [29] per McHugh J; [2004] HCA 29; Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at 572- 573 [123]-[125] per Gleeson CJ, Gummow, Kirby, Callinan and Heydon JJ; Jarratt v Commissioner of Police (NSW) (2005) 224 CLR 44 at 66 [70] per McHugh, Gummow and Hayne JJ; [2005] HCA 50; CSR Ltd v Eddy (2005) 226 CLR 1 at 22 [44] per Gleeson CJ, Gummow and Heydon JJ, 42-43 [102]-[103] per McHugh J. 206 (2004) 218 CLR 530 at 572-573 [123]-[125]. 207 (1952) 85 CLR 237 at 294. 208 (2005) 226 CLR 1 at 22-23 [44]. 209 Sydney City Council v Bosnich [1968] 3 NSWR 725; Argent Pty Ltd v Huxley [1971] Qd R 331; John Holland (Constructions) Pty Ltd v Jordin (1985) 36 NTR 1; Evans v Port of Brisbane Authority (1992) Aust Torts Reports ¶81-169. 210 Admiralty Commissioners v SS Amerika [1917] AC 38 at 55 per Lord Sumner. 211 Pollock, The Law of Torts, 13th ed (1929) at 233; Smith, A Treatise on the Law of Master and Servant, 8th ed (1931) at 107. 212 (1952) 85 CLR 237 at 289-290. Scott, agreed with what his Honour had said on the subject of damages. As the wrong done to the employer is the interference with the right to the employee's services, it follows that the damages recoverable are to be measured by reference to the consequences of that interference. They do not extend to all consequences which flow from the fact that the employee has been injured215. The point of Fullagar J's reference to the measure of damages was to correct an assumption that wages paid to an employee during the employee's incapacity represented the loss suffered. His Honour said that this was not strictly correct, since an obligation to continue to pay might arise by reason of an antecedent obligation and not because of the injury to the employee216. Elsewhere it has been explained that the market value of the services lost will generally be calculated by reference to the price of substitute labour217. Questions such as this do not arise in the present case. I do not understand Nautronix to have as yet formulated a claim based upon recovery of the cost of replacement labour. Its claim is much broader than the value of the services lost and extends, so far as may presently be seen by reference to the pleadings, to claims arising from delay, which may encompass profits lost. Nautronix claims that an employer is entitled to recover all damage which is a direct consequence of the loss of an employee's services. It relies in particular upon references in Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd218 to lost profits being a "consequence" and a "result" of the loss of services of a managing director of three companies219, and upon the decision of the Court 213 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 403. 214 Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 427. 215 Attorney-General v Wilson and Horton Ltd [1973] 2 NZLR 238 at 256 per Richmond J, referring to Fullagar J in Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 and Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392. 216 Attorney-General for NSW v Perpetual Trustee Co (Ltd) (1952) 85 CLR 237 at 290; Commissioner for Railways (NSW) v Scott (1959) 102 CLR 392 at 408-409; hence the approach taken to the assessment of damages in The Commonwealth v Quince (1944) 68 CLR 227 was questionable. 217 McGregor, McGregor on Damages, 13th ed (1972) at 788 [1167]. 218 (1972) 46 ALJR 432. 219 Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd (1972) 46 ALJR 432 at 435 per Walsh J; see also at 434 per Menzies J, Barwick CJ agreeing. of Appeal of the Supreme Court of New South Wales in Marinovski v Zutti Pty Ltd220. Reliance was also placed upon the approach taken to the recovery of damages in an action based upon the tort of inducing a breach of contract221, which Nautronix described as closely related to the approach taken in an action per quod servitium amisit because both actions involve quasi-proprietary rights of an employer with respect to the services of an employee222. It is the loss resulting from invasion of the right which falls to be assessed. The quasi- proprietary nature of the right provides no warrant for economic loss of every kind being recoverable. In Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd223, the trial judge awarded damages to family companies arising from injuries to the family member who managed the companies. The damages allowed were for profits lost by reason of the sale of the companies at an earlier time than would have been the case had the manager not been incapacitated by his injuries. The issue before this Court was whether the awards were excessive. No attention was directed to the nature of the action per quod servitium amisit and whether it necessitated a restriction upon the measure of any damage. The decision cannot, therefore, be regarded as pronouncing upon the questions which arise in this case. Mercantile Mutual Insurance Co Ltd v Argent Pty Ltd was followed in Marinovski v Zutti Pty Ltd224, where damages were awarded for the loss of the service of the managing director of a company, the interests of which had been so seriously harmed by his absence due to injuries that, by the time of the appeal, a receiver had been appointed to it. Hutley JA said225 that there is no single test for the measure of damages recoverable by an employer in an action per quod servitium amisit. In the case of an ordinary employee the measure would be the cost of replacing the employee, plus any expenses properly incurred in mitigation of the loss such as medical, hospital and other expenses. But in that case, the 220 [1984] 2 NSWLR 571 at 574-575, 585-586. 221 Lumley v Gye (1853) 2 El & Bl 216 [118 ER 749]. 222 Referring to Zhu v Treasurer of New South Wales (2004) 218 CLR 530 at 572-577 223 (1972) 46 ALJR 432. 224 [1984] 2 NSWLR 571. 225 Marinovski v Zutti Pty Ltd [1984] 2 NSWLR 571 at 575. special feature was that the employee had unique skills necessary for the survival of the company. Legal systems respond differently to claims of economic loss of this kind. French law permits recovery for all loss an enterprise suffers because a key employee is hurt226. In a well-known decision227, a football club was held entitled to damages for economic loss consequent upon the death of one of its leading players. Such damages would not be recoverable in Germany228. And it has been pointed out in Canada that if a servant is particularly specialised, the damages may be regarded as too remote229. Consistency with the purpose and scope of the action per quod servitium amisit requires that damages be limited to the cost of substitute labour. In Cattanach v Melchior230, it was observed that the employer suffers damage only when it is forced to pay a salary or wages to its injured employee when it is, at the same time, deprived of the employee's services. To permit recovery on any wider basis, including for profits lost, would be to transform an exceptional remedy for a particular type of loss into a substantial exception to the general principles which have developed concerning recovery of economic loss in tort. In terms of the coherence of the law, that would be undesirable. Recovery of economic loss Policy choices have featured strongly in the disinclination of the common law to allow recovery for pure economic loss in tort for breach of duty. As Gibbs J observed in Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad"231, to allow such claims might expose a defendant guilty of an act of careless inadvertence to claims "unlimited in number and crippling in amount." Other legal systems have made similar decisions about where the line is to be drawn. 226 Code Civil, Arts 1382-1383; Gordley, "Contract and Delict: Toward a Unified Law of Obligations", (1997) 1 Edinburgh Law Review 345 at 356. 227 Football Club de Metz c Wiroth, Cour d'appel de Colmar, 20 April 1955, D 1956.723, discussed in Markesinis and Unberath, The German Law of Torts: A Comparative Treatise, 4th ed (2002) at 248. 228 Markesinis and Unberath, The German Law of Torts: A Comparative Treatise, 4th ed (2002) at 56. 229 Vaccaro v Giruzzi (1992) 93 DLR (4th) 180 at 186. 230 (2003) 215 CLR 1 at 32 [67]. 231 (1976) 136 CLR 529 at 551. As was observed in Perre v Apand Pty Ltd232, in this area German law displays an ideological affinity with the common law. In Germany it is said that the rule against recovery of economic loss is a guarantee of freedom in the market233. A similar imperative, encouraging competitive conduct, underlies the policy of the common law234. One difference between these systems lies in how control is effected upon claims for economic loss. In the common law, an abstract concept of duty of care is employed. The German Civil Code235 ("the BGB") specifies which legal interests are to be the subject of protection. In German law, only the enumerated legal interests of life, body, health, freedom, property and "other right[s]" are protected236. Economic loss can be recovered only if one of these interests is interfered with237. A person's estate or a company's business undertaking is not an "other right". Other, apparently liberal, systems such as France, Belgium, Greece, Italy and Spain, do not screen out economic loss238. Liability under the French Civil Code239 is stated as being for all damage caused. However, it has been said240 that the courts in these systems have a policy of restraining recovery for economic loss and of achieving such restraint by other means, such as requiring 232 (1999) 198 CLR 180 at 249-250 [188] per Gummow J, referring to Markesinis, A Comparative Introduction to the German Law of Torts, 3rd ed (1994) at 43. 233 Markesinis and Unberath, The German Law of Torts: A Comparative Treatise, 4th ed (2002) at 53. 234 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 246 [181]-[182] per Gummow J. 235 Bürgerliches Gesetzbuch. 236 Bürgerliches Gesetzbuch, §823(1). 237 A similar approach is taken in Austria, Finland, Portugal and Sweden: Bussani and Palmer, "The liability regimes of Europe – their façades and interiors", in Bussani and Palmer (eds), Pure Economic Loss in Europe, (2003) 120 at 152-158. 238 Bussani and Palmer, "The liability regimes of Europe – their façades and interiors", in Bussani and Palmer (eds), Pure Economic Loss in Europe, (2003) 120 at 123. 239 Code Civil, Arts 1382-1383. 240 Zweigert and Kötz, Introduction to Comparative Law, 3rd ed (1998) at 627-628; Bussani and Palmer, "The liability regimes of Europe – their façades and interiors", in Bussani and Palmer (eds), Pure Economic Loss in Europe, (2003) 120 at 124. that the harm be certain, immediate and direct, or refusing to qualify the defendant's conduct as "faute", that is, conduct a reasonable person would not engage in241. The style of judgments of the courts in these countries and the limited reasoning provided can make it difficult to discern the true grounds on which claims are accepted or rejected242. The German legal system, like the common law, has for a long time been under pressure to enlarge the areas where recovery for economic loss is available243. The response of its courts has been to accept a "right to an established and operative business" as coming within the term "other right" in BGB §823(1). The courts allow recovery for economic loss where that right is invaded, but recovery requires that the defendant's conduct be directed at the business as such244, rather than merely affecting interests separable from the business. Analogous to the present case, a company would have no claim for loss arising from delay in performance of a contract because one of its staff was hospitalised with injuries caused by a defendant's bad driving245. The other avenue for relief in German law is contract law, which, together with tort, is regarded as a species of the law of obligations. Where a solution cannot be found in tort, German lawyers and the courts often cross over into contract246. For example, claims for negligent misstatement are dealt with in contract law247, under which contracts do not require consideration. A party to a contract is considered to be under a general duty, not only to perform a contract 241 Herbots, "Economic loss in the legal systems of the continent", in Furmston (ed), The Law of Tort: Policies and Trends in Liability for Damage to Property and Economic Loss, (1986) 137 at 138-139. 242 Zweigert and Kötz, Introduction to Comparative Law, 3rd ed (1998) at 627. 243 Kötz, "The Doctrine of Privity of Contract in the Context of Contracts Protecting the Interests of Third Parties", (1990) 10 Tel Aviv University Studies in Law 195 at 244 Deutsch, "Compensation for Pure Economic Loss in German Law", Banakas (ed), Civil Liability for Pure Economic Loss, (1996) 73 at 80. 245 Zweigert and Kötz, Introduction to Comparative Law, 3rd ed (1998) at 604. 246 Markesinis and Unberath, The German Law of Torts: A Comparative Treatise, 4th ed (2002) at 58. 247 Herbots, "Economic loss in the legal systems of the continent", in Furmston (ed), The Law of Tort: Policies and Trends in Liability for Damage to Property and Economic Loss, (1986) 137 at 150. in a proper fashion, but also not to cause injury to persons or harm to property248. The courts in Germany extend that protection to a third party plaintiff if the promisee had a clear interest in bringing them within the ambit of the contractual protections and the defendant, the promisor, had some knowledge of the likelihood of harm to the plaintiff. Duty under a contract arises where there is a close relationship between the plaintiff and the promisee and the promisor could foresee that the plaintiff might suffer damage249. In the latter respect, this approach bears some similarity to the approach taken by the common law to identifying a duty of care. It has been pointed out, in the context of negligent misstatement, that German and English law both raise questions as to the identity of the plaintiff and how definite that identity was when the defendant prepared the statement250. In Astley v Austrust Ltd251, this Court held that a contract for services contains an implied promise to exercise reasonable care and skill in the performance of those services. Liability is regarded as concurrent in contract and in tort252 so that a plaintiff may select the most advantageous action. Where there is a direct relationship established between the parties, by reason of their agreement, it may not be necessary to resort to tort law in order to recover economic loss. It is difficult to conceive of a liability in tort, arising from the negligent provision of services, which would not also follow upon breach of the implied term. Moreover, the knowledge which may be attributed to a contracting party may permit recovery of losses in contract similar in extent to those recoverable in tort. So far as concerns a person who is not a party to a contract, but who suffers loss as a result of its negligent performance, Australian law seeks a 248 Kötz, "The Doctrine of Privity of Contract in the Context of Contracts Protecting the Interests of Third Parties", (1990) 10 Tel Aviv University Studies in Law 195 at 249 Markesinis and Unberath, The German Law of Torts: A Comparative Treatise, 4th ed (2002) at 207. 250 Gordley, "Contract and Delict: Toward a Unified Law of Obligations", (1997) 1 Edinburgh Law Review 345 at 358. 251 (1999) 197 CLR 1 at 22 [47]; [1999] HCA 6, approving Henderson v Merrett Syndicates Ltd [1995] 2 AC 145 and referring to Weir, "Complex Liabilities", in Tunc (ed), International Encyclopedia of Comparative Law, (1986), vol 11, Ch 12 252 Astley v Austrust Ltd (1999) 197 CLR 1 at 20 [44]. solution in tort law to the problem of recoverability253. This may be contrasted with the approach of the German law. That said, there is something of a connection between the two areas of contract and tort. By way of example, the terms of a contract between an original owner of a building and a builder who builds it negligently may be relevant to the duty owed by the builder to a subsequent owner254. The duty owed to a third party may be "equivalent to contract"255. Nautronix pleaded an alternative claim in contract based upon breach of an implied term such as that described. However, it chose not to pursue liability on that basis on appeal. Consideration of the liability of Mr Penberthy and Fugro is limited to the action in tort. Nevertheless, the contractual relationship between Fugro and Nautronix and the terms of the charter agreement, express and implied, are clearly relevant to the question whether a duty of care was owed to Nautronix. Was a duty of care owed to Nautronix? In Perre v Apand Pty Ltd256, the defendant's knowledge of the risk associated with its activities and of the consequences for an individual, or a class of persons, was identified as being of importance to the question of whether a duty of care could be said to arise. In Woolcock Street Investments Pty Ltd v CDG Pty Ltd257, reference was made to one of the "salient features" identified by Stephen J in Caltex Oil (Australia) Pty Ltd v The Dredge "Willemstad"258, namely, the defendant's knowledge that to damage the pipeline was inherently likely to produce economic loss. It was this feature which constituted the close relationship between plaintiff and defendant, sufficient to give rise to a duty of care in that case. 253 Hill v Van Erp (1997) 188 CLR 159; [1997] HCA 9; see also Scott v Davis (2000) 204 CLR 333 at 423-424 [273]; [2000] HCA 52. 254 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515 at 532 255 Hedley Byrne & Co Ltd v Heller & Partners Ltd [1964] AC 465 at 528-529; Hill v Van Erp (1997) 188 CLR 159 at 233; Kenny & Good Pty Ltd v MGICA (1992) Ltd (1999) 199 CLR 413 at 434 [44], 446 [80]; [1999] HCA 25. 256 (1999) 198 CLR 180 at 230-231 [132], 236 [150]-[151]. 257 (2004) 216 CLR 515 at 530 [22]. 258 (1976) 136 CLR 529 at 576. A tortfeasor may know that a person is reliant upon them. Such is usually the case in the giving of advice. As Gleeson CJ observed in Perre v Apand Pty Ltd259, reliance and actual foresight are closely related. Knowledge of an individual who is reliant, and therefore vulnerable, is a significant factor in establishing a duty of care, although vulnerability can arise otherwise than by reliance260. In Perre v Apand Pty Ltd, the defendant's internal communications showed that it had actual foresight of harm and knowledge of a class of people who were vulnerable to the threat of harm261. Vulnerability was said in Woolcock Street Investments Pty Ltd v CDG Pty Ltd262 to have become an important requirement in cases where a duty of care has been found to have been owed. Vulnerability is not to be understood as meaning only that the plaintiff was likely to suffer damage if reasonable care was not taken, but rather as referring to the plaintiff's inability to protect itself from the consequence of a defendant's want of reasonable care, either entirely or at least in a way which would cast the burden of the loss upon the defendant. In the present case, whilst Mr Barclay could not be said to have had knowledge of Nautronix and its interests, Fugro and Mr Penberthy clearly did. The contractual relationship between Fugro and Nautronix, and the part Mr Penberthy had in piloting the specially adapted charter flights, provided Fugro with knowledge of Nautronix' project, its commercial purposes and the importance of the employees to the achievement of those purposes. As Murray J observed263, Fugro and Mr Penberthy largely admitted that any failure on their part to exercise reasonable care and skill in the piloting of the plane was likely to result in economic loss to Nautronix, consequent upon injury to its employees. Even without that admission, a duty to take care is evident not the least because the law would imply a term to that effect in the performance of the charter agreement. On the view of the Court of Appeal, Nautronix could have gone further and negotiated terms with Fugro to protect itself from the effects of economic loss, and Nautronix could not, therefore, be said to be vulnerable264. Presumably 259 (1999) 198 CLR 180 at 194 [10]. 260 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 194 [11]. 261 Perre v Apand Pty Ltd (1999) 198 CLR 180 at 194-195 [13]. 262 (2004) 216 CLR 515 at 530 [23]. 263 Cifuentes v Fugro Spatial Solutions Pty Ltd [2009] WASC 316 at [272]. 264 Fugro Spatial Solutions Pty Ltd v Cifuentes (2011) Aust Torts Reports ¶82-087 at the Court of Appeal had in mind Fugro accepting liability for such loss in the event of negligence. A conclusion that Fugro would have agreed to such a term is not open. In any event, Nautronix had the protection of the implied term to take reasonable care, which, combined with Fugro's knowledge, was sufficient to give rise to a duty of care. The rule in Baker v Bolton I agree with the joint reasons that no basis has been shown for the contention that the rule in Baker v Bolton265 is no longer part of the common law of Australia or that it should be discarded. As the joint reasons explain266, the rule remains applicable to an action for breach of duty and to an action per quod servitium amisit. Conclusion and orders In summary: the action per quod servitium amisit continues in existence as part of the common law of Australia and as a remedy for particular loss. Each of Mr Barclay, Mr Penberthy and Fugro is liable in that action. The damages to be assessed pursuant to such liability are limited to the value of the services lost and do not extend to claims of economic loss of the kind presently brought by Nautronix. Mr Penberthy and Fugro remain liable to Nautronix for breach of their respective duties of care on the findings of negligence made by the trial judge. Mr Barclay is not so liable. I agree that Nautronix should be granted special leave to cross-appeal in each proceeding against the Court of Appeal's finding as to the rule in Baker v Bolton, but that each cross-appeal should be dismissed. I agree with the joint reasons that, subject to the directions concerning the formulation of further orders, each appeal should be dismissed. I also agree with the orders for costs proposed in the joint reasons. 265 (1808) 1 Camp 493 [170 ER 1033]. 266 Reasons of French CJ, Gummow, Hayne, Crennan and Bell JJ at [22]-[27].
HIGH COURT OF AUSTRALIA APPELLANT AND CESSNOCK CITY COUNCIL RESPONDENT Suvaal v Cessnock City Council [2003] HCA 41 6 August 2003 ORDER Appeal dismissed with costs. On appeal from the Supreme Court of New South Wales Representation: G O'L Reynolds SC with D R Conti for the appellant (instructed by McClellands) D F Jackson QC with D T Miller for the respondent (instructed by Moray & Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Suvaal v Cessnock City Council Negligence – Causation – Appellant suffered injury in bicycle accident – Factual finding that appellant was injured as result of bicycle coming into contact with potholes following loss of concentration – Version of events not advanced by either party – Whether sufficient evidence for trier of fact to make that finding – Whether trier of fact can decline to accept the versions of events advanced by the parties – Whether trier of fact can adopt a version of events not advanced or tested by either party – Whether rejecting a plaintiff's version of events amounts to a finding of credibility – Whether trier of fact entitled to consider alternative case, in drawing inferences and reaching conclusions, where alternative case open on the pleadings and evidence – Whether consideration of alternative case amounts in the circumstances to procedural unfairness. Appeal – Powers of appellate court – Restrictions on disturbance of findings and conclusions of trier of fact dependent on impressions of the credibility of witnesses and consideration of the entirety of the evidence – Whether entitled to intervene in conclusion reached by trier of fact contrary to evidence of plaintiff – Whether trier of fact precluded from reaching her own conclusion as to probable facts different from that asserted by plaintiff based on other evidence – Relevant appellate principles. Supreme Court Act 1970 (NSW), s 75A. GLEESON CJ AND HEYDON J. The appeal in this unusual case must be dismissed with costs for the reasons given by Callinan J, together with the following reasons. Despite an ambiguous passage in the primary judge's reasons, it became common ground, at least in argument before the Court of Appeal, that there were no potholes in the intended path of the plaintiff as he travelled along the road, and if he hit potholes, this can only have been because his bicycle moved to the left, perhaps only to a small degree, and encountered potholes at the left hand edge of the road surface. The plaintiff's case, rejected by the primary judge, was that a motor vehicle forced him to the left. The primary judge, to the contrary, found that he moved left because of a loss of concentration on his part. The Council contended that his leftward movement could have been caused by a failure in the integrity of the handlebars in normal use on the road before he ran into the potholes at the left side of the road. The case presented numerous difficulties for the plaintiff and for the primary judge. There was only one eye-witness, the plaintiff, and he was obviously an interested witness. He was giving evidence at a trial conducted six years after the events in issue. He gave numerous out-of-court versions of events, some of which were inconsistent with others, and some of which were less complete than was desirable from his point of view, given the nature of the case presented at the trial. The pain and shock of the accident may well have deleteriously affected his powers of memory and narration in its immediate aftermath. The continuing pain of the plaintiff's injuries and the medication he was given may well have similarly affected his powers of memory thereafter. The evidence of numerous other witnesses also was in conflict. Since the plaintiff was travelling at 25 miles per hour, ie about 40 kilometres per hour, which is more than 11 metres per second, the intervals of time within which the relevant events were happening were extremely small. If the handlebars failed in normal use on the road without the bicycle striking a pothole first, it might have hit a pothole a metre or two later – one or two tenths of a second later. This posed a difficulty for the primary judge when determining the precise order of events as it might not have been prudent to rely on the plaintiff's account of the order of events. The difficulties any witness in the plaintiff's position might have in perceiving whether the handlebars failed just before the potholes were struck or simultaneously with them being struck are obvious. During the examination in chief the plaintiff said that a station wagon brushed his right leg, hit his right hand and forced him "into the pot holes and the rough edge of the road". The evidence continued: "Q. What happened to you? A. I bounced into a couple of pot holes and then I went into the rough edge of the road and bounced a couple more times and my handle bars went around like that. I had them like that and on the handle bars and after I hit a couple of pot holes and then I bounced into the rough edge of the road and then they went around like that. Q. You are doing an anti-clockwise motion? A. Yes, they were like that and I bounced a couple of times and then went on the rough edge of the road and it just went around like that. (Demonstrated swerving anti-clockwise to 90 degrees.) Q. When that happened were you able to steer the bike? A. No. I had balanced but I could not steer it. Q. And what happened? A. It went on to the dirt and to the left and it went straight across to the right hand side of the road." In cross-examination the plaintiff said: "Q. When you say the car forced you off the road can you just tell us a little more about that. Are you saying that you felt some contact with some type of car on your right side? A. Brushed up on my thigh. Q. Are you then saying that you moved your bike to the left or was it forced to the left? A. No, the car forced me to the left. Q. So you didn't alter your steering direction, the car forced the steering direction to be altered? A. Yes. Q. Are you sure of that? A. Yes. Q. When that happened what is the first thing that you became aware of from the point of view of feeling roughness? A. I hit some pot holes. Q. Were the pot holes that you hit not filled in with tar or – A. Yes. Q. So they were actually holes not filled in holes? A. It happened that quick, how could I estimate. Q. I am asking, if you can't you can't? A. They might have had tar but sunken in, but I know I hit pot holes. Q. How many? A. I remember bouncing two or three times and my handle bars coming around." Later the plaintiff said, while drawing a sketch on a piece of paper: "Q. … I want to see what your direction was? A. If I went into the rough here I bounced a couple of times. Q. When you say rough, you mean the edge of the bitumen and the pot hole? A. Yes, and the patches. Q. And the patches after patches? A. Yes, my handle bars went around like that. Q. Did you hear a snap? A. No, it just went around. Q. The handle bars suddenly went around and you are indicating an anti clockwise direction to a 90 degrees, approximately? A. Whether it was right at that time, I don't know. That's after bouncing in the holes I went on to the dirt a bit, out on to the dirt a bit. I went out on to the dirt and back across. I don't know if I went that way, that way or that way." The primary judge found: "it was not the presence of a motor vehicle which caused the plaintiff to veer and change the direction of his steering of the bicycle. Nor did the motor vehicle hit or brush against his right thigh or right hand." This finding must have had a significant effect on the plaintiff's credibility, at least as a reliable narrator of events. That was not the only flaw the primary judge identified. The primary judge also found that the plaintiff had given contradictory evidence about whether he could remember anything in the period 3-16 February 1993, immediately after the accident. In addition, the primary judge referred to variations in the plaintiff's evidence about the potholes and patches in the road and the difficulties he would have had in observing them at the moment he lost control of the bicycle. The primary judge then stated: "These factors do not mean that I find the plaintiff an untruthful witness. However, it has meant that I have examined his evidence with caution." In setting out these general conclusions, the primary judge did not mention that she also later recorded her rejection of the plaintiff's denial that he had adjusted the handlebar on his bicycle to a point higher than the recommended maximum, and her rejection of a further denial by him that he had filed the lower part of the handlebar. However, even if the primary judge formed the opinion that the plaintiff was, these instances apart, sincere, honest and reliable, the fact remains that she did not accept a fundamental element of his version of the events just before he was injured, even though it was an element to which he had stubbornly adhered. Many, but not all, of the arguments advanced by the plaintiff in criticism of the Court of Appeal's conclusions rely on the proposition that the key findings of the primary judge were credit-based. The question as to whether these findings were credit-based or not is important for two reasons. First, if those findings were not credit-based, these arguments do not arise. Secondly, and more crucially, the question whether the relevant findings were credit-based or not casts light on the nature of the trial and the question whether any of the plaintiff's arguments can be entertained. In submitting that the primary judge's finding that the plaintiff hit potholes on the left hand side of the road was credit-based, counsel for the plaintiff relied on two passages in the primary judge's reasons. One was: "the plaintiff hit potholes which caused a change in the direction of the steering of the plaintiff's bicycle. … [A]fter the plaintiff hit the potholes he went onto the rough edge of the road. In the accounts given by the plaintiff of how the accident occurred he consistently mentioned the loss of control of his bicycle, the handlebars collapsing and the steering giving way. I accept the plaintiff's account that he caused his bicycle to go into potholes or hit patches and the rough edge of the road. His bicycle bounced two or three times. The tar in the potholes may have sunken in but he knows that he hit potholes. The handlebars of his bicycle turned anti-clockwise and at that point he lost control of the steering." If this passage is to be construed as containing credit-based findings, the key element in it is: "I accept the plaintiff's account that he caused his bicycle to go into potholes". The difficulty, however, is that it is erroneous to say that the plaintiff gave an "account" that "he caused his bicycle to go into potholes". His only account was that the unidentified motor vehicle caused his bicycle to do that. A finding that he hit the potholes before the steering collapsed might or might not be defensible by resort to other evidence and other reasoning, but it is not a finding based on the plaintiff's "account", which was to an entirely different effect. The other passage which the plaintiff relied on as containing credit-based findings was: "The plaintiff, for reasons other than the presence of a motor vehicle, lost concentration when he allowed the steering of the bicycle to put him into the potholes and rough edge of the road." This does not sit well with the first passage. It is difficult to reconcile the statement that the plaintiff "caused his bicycle to go into potholes" with the statement that the plaintiff "allowed the steering of the bicycle to put him into the potholes". But whether or not the second passage is reconcilable with the first, it too cannot be a credit-based finding sourced in an acceptance of the plaintiff's testimony. He never testified to any loss of concentration. Nor did he testify that "he allowed the steering of the bicycle to put him into the potholes", as though he was capable of exercising some choice in the matter: again, his testimony was to the opposite effect, namely that the motor vehicle forced him into the potholes against his will. If the only eye-witness to an accident, like the plaintiff in this case, says: "A car brushed my leg and hit my hand, forcing me onto the side of the road where I hit potholes, the steering collapsed and I was injured", and a judge rejects either the existence or the causative role of the car, while it may in some circumstances be open to the judge to seek to account for the witness's injuries by recourse to inferences from other evidence in the case, and while it may be possible to conclude that the witness did hit potholes at the side of the road, it cannot be said that that is a credit-based conclusion. The plaintiff's account of the accident was a single account, which if accepted would have rendered the Nominal Defendant liable. To reject the assigned role of the car is to reject the propositions which the plaintiff was communicating, and is not to base the element relating to the potholes on acceptance of the witness's credit. It is highly artificial and impermissible to engage in a process of parsing and analysing the plaintiff's testimony before severing particular words from it, purportedly leaving the balance as a free-standing proposition. It distorts the substance of what he was saying. The fact that the primary judge's conclusion was not credit-based renders irrelevant some of the plaintiff's arguments to this Court, but leaves some available. However, there is a more fundamental weakness in the plaintiff's position. Because of the way the proceedings were conducted and because of the primary judge's rejection of the plaintiff's evidence that a car forced him off the road, it was not open to the primary judge in this particular case to conclude that the plaintiff hit the potholes at the side of the road by reason of a loss of concentration1. It is necessary at the outset to deal specifically with the following submission of the plaintiff: "It is not the plaintiff's fault that the full ramifications of a finding of loss of concentration were not fully explored by the Council at the trial." In view of the plaintiff's conduct in the witness box, that is a wholly baseless submission. That is because the possibility that the plaintiff suffered a loss of concentration was a proposition which the plaintiff refused to let the Council explore. Counsel for the Nominal Defendant, and then counsel for the Council, with considerable fairness, endeavoured, in the course of testing the plaintiff's account, to open up the possibility of some cause of the accident other than a car forcing the plaintiff off the road. As the quotations from the plaintiff's cross-examination by those two counsel, which are set out in 1 There was debate about whether the Council ought to have filed a Notice of Contention in relation to its argument that it had no opportunity to deal with the loss of concentration case. It is not necessary to resolve that debate. Even if the plaintiff was not on notice of the point until the Council's written submissions were served, or even until the oral argument on this appeal – and the high degree of preparedness of the plaintiff's counsel by the time of the oral hearing suggests he was certainly on notice by then – an opportunity was given to file written submissions on whether loss of concentration was in issue at the trial. That opportunity was taken up by both parties. Even if there ought to have been a Notice of Contention, which it is not necessary to decide, any prejudice occasioned by the failure to file it has been cured and there can be no objection to considering the arguments advanced. Callinan J's reasons for judgment2, show, the plaintiff refused to contemplate the existence of that possibility, and repeatedly refused to answer questions on any assumption other than that a car forced him off the road. Those refusals meant that the plaintiff precluded examination by counsel for the Nominal Defendant and the Council of the factual rationalisation at which the primary judge eventually arrived in finding the Council liable. For the primary judge to reach conclusions about the cause of the accident which the plaintiff had rejected and which the plaintiff had prevented the Council from testing was in itself impermissible. The truth is that the key finding of the primary judge that the plaintiff veered left into the potholes because of a loss of concentration was never mentioned by him to any of the numerous witnesses who reported to the court what the plaintiff said in the period beginning immediately after he was found injured beside the road and in the following months; was not specifically raised in the pleas of contributory negligence in the defences of the Nominal Defendant and the Council; was never asserted in the plaintiff's testimony; was a proposition which, by reason of the plaintiff's stance in cross-examination, could not be tested; was never advanced by his counsel in argument before the primary judge; was not advanced by any other party; and was a proposition rejected in the plaintiff's Notice of Cross-Appeal to the Court of Appeal3. Before this Court, counsel for the plaintiff submitted that a case alternative to the theory of being forced off the road had been pleaded and that the loss of concentration case was in issue at the trial. Any contention that the loss of concentration theory was pleaded must be rejected. 2 At [134] below. 3 That document complained about the primary judge's finding of 20 percent contributory negligence on the part of the plaintiff. Ground 1(a) stated that the primary judge erred in finding that the plaintiff "lost concentration when he allowed the steering of the bicycle to put him into the potholes and rough edge of the road". Ground 2 said: "There was no evidence given by the [plaintiff] to support a finding that he lost concentration when he allowed the steering of the bicycle to put him in the potholes and rough edge of the road." Indeed there was not. Counsel for the plaintiff abandoned the cross-appeal at the start of oral argument in the Court of Appeal, but the Notice of Cross-Appeal does further illustrate how radically inconsistent the primary judge's findings were with the assumptions of the parties, and in particular the plaintiff, as revealed by examining the course of the trial. The plaintiff pointed to paragraph 9 of the Statement of Claim4. However, it says nothing about going off the road because of a momentary loss of concentration. The plaintiff submitted that to plead that his injuries were "caused by the negligence" of the Council is a sufficient pleading of the case found by the primary judge, and that to plead a "loss of concentration" was not a necessary averment. That submission is unsound. The plaintiff was entitled to make a claim against the Council in the alternative to that which he made against the Nominal Defendant5. But he was obliged to plead specifically any matter which, if not pleaded specifically, might have taken the Council by surprise6. The plaintiff pleaded the manner in which he came to be on the edges of the road in paragraph 6 of the Statement of Claim, namely being forced onto the edges by the unidentified motor vehicle. In that early part of the Statement of Claim the plaintiff also pleaded that the Council had designed, constructed and maintained the road (paragraph 3), and was responsible for maintaining its edges (paragraph 4), which were rough and uneven (paragraph 5). The Council would reasonably have read the case against it as picking up not only the allegations about the road and its edges in paragraphs 3-5, but also the allegation in paragraph 6 about how the plaintiff came to be on those edges. It would have been possible for the plaintiff, in the case against the Council, to make some allegation about how he came to be on the edges which was alternative to the allegation on that subject made against the Nominal Defendant – possible, though perhaps very damaging to the overall credibility of the plaintiff's case. The failure of the plaintiff to plead specifically any other cause explaining his presence on the road edges meant that the Council may have been taken by surprise by the primary judge's reliance on loss of concentration. The defences of the Nominal Defendant and the Council do not plead loss of concentration either. They each said only that the plaintiff had failed to keep a proper lookout (which does not specifically allege a loss of concentration) and that he failed to ride on the bitumen surface (which asserts a neutral fact calling for an explanation rather than offering an explanation). 4 Quoted below by Callinan J at [126]. The Statement of Claim was amended on 29 November 1999, long after the trial had started and the plaintiff had left the witness box. However, the parts relevant to the present debate were not amended. 5 Supreme Court Rules 1970 (NSW), Pt 15 r 17(2). 6 Supreme Court Rules 1970 (NSW), Pt 15 r 13(1). Hence the alternative explanation for the plaintiff's presence on the road edges was outside the pleadings. It was thus not open to the primary judge to adopt it unless the course of the trial made that permissible. The plaintiff did contend in this Court that an alternative case based on a loss of concentration was in issue at the trial. That contention, which was put in several ways, must also fail. The plaintiff submitted in this Court that the case found by the primary judge was "covered by the plaintiff's submissions at trial". That is wholly incorrect. The plaintiff also submitted in this Court that "it was a matter for the defendants to agitate the issue of 'loss of concentration'." That, too, is incorrect. However, whether or not it was for the defendants to agitate the issue of loss of concentration, the plaintiff submitted in this Court that the Council and the Nominal Defendant had in fact done so. That is unsound. The Council submitted to the primary judge: "You cannot speculate upon loss of attention, tiredness, misjudgment etc for the [reason] that he has given you his only reason – a motor vehicle. If this is a lie and is rejected, then to embrace any other reason is speculation." The fact that one party rules a matter out as not in issue does not make it an issue unless an opposing party contends that it is an issue. The Council also submitted that if the plaintiff was not forced off the road by a motor vehicle, the most probable explanation for the accident was that the handlebars failed in normal road use without hitting a pothole. The plaintiff did not file any written submission in response to the quoted passage controverting it and contending that loss of concentration was an issue, nor did he file any written submission contending that the plaintiff's injuries could be explained otherwise than by the unidentified motor vehicle or by failure of the handlebars in normal road use. The plaintiff did not establish that any relevant oral submission had been made on his behalf. The Council's exclusion of loss of concentration as an issue was thus accepted. The Nominal Defendant filed two sets of written submissions. The first related to the plaintiff's claim against the Nominal Defendant and the Council and the second related to the Nominal Defendant's cross-claim against the Council. In the first set of submissions the Nominal Defendant recorded an understanding that the plaintiff's case was that a motor vehicle forced him off the road – an understanding shared by the primary judge and by the Council. The Nominal Defendant submitted that that contention was wrong, and that the accident was caused by a failure of the handlebars in normal use. The Nominal Defendant did raise the possibility that the plaintiff's attention may have been distracted by the presence of another car on the road which, without negligence, caused him to take his eyes off the road or move left to permit overtaking. But the Nominal Defendant submitted that the primary judge did not have to speculate about this. Obviously this possibility was inconsistent with the plaintiff's case and the plaintiff did not adopt it. A little later, the Nominal Defendant contended that one respect in which the plaintiff had been guilty of contributory negligence was in "[n]ot looking or concentrating [on] where he was going, thereby resulting in running into potholes in the road." The theory that the plaintiff was not looking or concentrating on where he was going was probably only a re-statement of the possibility that another car distracted the plaintiff; was unsupported by evidence pointed to by the Nominal Defendant or otherwise; was contradicted by the plaintiff's testimony; and was not part of the plaintiff's case until oral submissions before the Court of Appeal began. The final occasion on which it was submitted that the Nominal Defendant referred to the subject of loss of concentration was in the Nominal Defendant's submissions on the cross-claim against the Council. The Nominal Defendant submitted that the plaintiff's case was that the final fracture of the head stem occurred when the bicycle struck potholes "whether this was caused by being forced into that place by a motor vehicle or otherwise". In fact the plaintiff's case excluded any possibility falling within the words "or otherwise". And, as counsel for the plaintiff who appeared in the Court of Appeal conceded to that Court, neither the Nominal Defendant, nor the Council, nor the plaintiff's own counsel, had put any specific questions to the plaintiff about losing concentration. Further, the Nominal Defendant's submission did not go on to contend that the plaintiff had lost concentration. These passing allusions scarcely made the possibility of a loss of concentration a fact in issue. The plaintiff did not raise it as an issue, the Council denied that it was an issue, and the only specificity to which the Nominal Defendant condescended was the possibility that the plaintiff's attention was distracted by a car, which the primary judge did not accept. Even if the primary judge's finding could be said to have been foreshadowed in final address by these fleeting references after the evidence had closed, it was too late for the Council to deal with the matter in evidence. After the primary judge made her unrequested and unexpected finding about a loss of concentration, the plaintiff's first response was to challenge it in the Notice of Cross-Appeal filed on 15 December 2000. But on 24 April 2001 the plaintiff filed written submissions for use in the Court of Appeal which adopted a different tack, foreshadowing the plaintiff's eventual abandonment of the Notice of Cross-Appeal at the hearing on 22 October 2001. The plaintiff submitted that the primary judge was entitled to infer some momentary loss of concentration; that she did not make a finding excluding the existence of a motor car; and that the plaintiff was riding along the road "believing that a motor vehicle was travelling behind him". The fact is, however, the primary judge never made a distinct finding either that there was a motor vehicle or that the plaintiff believed there was a motor vehicle. But, untenable though that part of the written submissions was, its narrow form highlights the fact that it had not been put at trial. A further retreat took place in oral argument before the Court of Appeal. Counsel for the plaintiff did not argue there that the presence of a motor vehicle distracted the plaintiff or that he believed there was a motor vehicle. Counsel for the plaintiff, while accepting that a loss of concentration had been denied by the plaintiff, submitted that the primary judge was entitled to infer its existence. Hence the primary judge's theory of a loss of concentration was never in issue before the close of the evidence at the trial; was rejected at all material times by the plaintiff; was, if raised in address at all, at most raised faintly and briefly in voluminous written submissions by the Nominal Defendant at a time too late to affect the evidence; and was never adopted by the plaintiff until oral argument began in the Court of Appeal. The plaintiff's contention that it was in issue at the trial is not correct. In these circumstances it cannot be relied on now. A trier of fact, confronted with divergent cases being advanced by the parties, may decline to accept either case and may proceed to make findings not exactly representing what either party said7. But that does not justify the creation of an entirely new case with which the losing party had no testimonial or other evidentiary opportunity to deal. In Anchor Products Ltd v Hedges8 Windeyer J said: "[I]f a plaintiff builds his case entirely upon allegations in the pleadings of particular acts or omissions on the part of the defendant, he may be confined to the issue he has thus chosen, unless at the trial he be allowed to amend". The present case is one in which the plaintiff not only pleaded a particular case, but emphatically denied the possibility of any other case throughout his testimony. Not surprisingly, the plaintiff never sought leave to amend. Windeyer J continued: "On the other hand, if [a plaintiff] has made a general allegation of negligence, his alleging particular faults does not necessarily prevent his relying upon an inference to be drawn from the fact that the accident happened." Windeyer J was referring to the doctrines surrounding the maxim res ipsa loquitur. But the present case was very 7 Williams v Smith (1960) 103 CLR 539 at 545. (1966) 115 CLR 493 at 499. far from being a case where, to use his words, "the accident spoke for itself." Windeyer J also said that it was permissible for the trial judge in that case to allow, and indeed to suggest, an amendment along res ipsa loquitur lines, because it met "matters that emerged in the course of the trial"9. Here nothing emerged in the course of the trial to match any amendment which might have been proposed by way of foreshadowing the primary judge's finding. The primary judge rationalised the circumstances so as to generate a possible explanation for the accident which was not directly supported by any matter that emerged in the course of the trial. It was not an explanation which the Council had any opportunity to deal with while the plaintiff was in the witness box or at any time before the evidence closed. Counsel for the plaintiff joined issue with the Council's argument that it had had no opportunity to deal with the loss of concentration theory at the trial by submitting that if there had been anything in the point, it would have been propounded by the senior counsel who represented the Council in the Court of Appeal: that senior counsel also appeared at the trial, but not in this Court. Counsel for the plaintiff said that that particular senior counsel would certainly have taken the point, if it had been available, that there had been a prejudicial breach of the rules of natural justice, but he did not. In fact the senior counsel in question did take the point. Of the proposition that the plaintiff "suddenly lost concentration", he said "no-one had a chance to ask him that or test him on that because he wouldn't agree to assume anything except this is what happened". That stand had been foreshadowed in the Further Amended Notice of Appeal, paragraph 1(d), which contended that the primary judge erred in finding that the plaintiff had, for reasons other than the presence of a motor vehicle, lost concentration, and one of the circumstances said to give rise to that error was that the plaintiff had "refused in cross-examination to countenance questions which proceeded on the assumption that there was no motor vehicle which forced him off the road". Further, even if senior counsel did not take the point in the Court of Appeal, that did not debar his successor from doing so in this Court. (1966) 115 CLR 493 at 499. 40 McHUGH AND KIRBY JJ. This appeal10 is one of several11 in which this Court has been asked to intervene, to correct appellate interference with a conclusion at trial said to have depended, in whole or part, upon an assessment of the credibility of key witnesses. The approach of appellate courts to this question is crucial for the performance of their statutory functions. So much has been recognised since the earliest years of this Court12. The question has repeatedly engaged the attention of this and other final courts, including recently13. Upon one view, there is nothing new to be said concerning the proper approach of appellate courts to their functions14, especially because the issues have been visited by this Court recently on a number of occasions15. Nevertheless, special leave to appeal having been granted, it is necessary once again to embark upon the application of the established rules. Their application is invoked by a party rendered quadriplegic in the incident out of which this litigation arose. Self-evidently, the reversal by the New South Wales Court of Appeal of the judgment at trial in his favour enlarged the tragedy of a profoundly injured person. But it would be impermissible to allow a tragic case, or the natural sympathy engendered by the circumstances, to distort the application of the relevant legal doctrine16. The facts Mr Anthony Suvaal ("the appellant") was injured on 2 February 1993 whilst riding a bicycle on a road near Cessnock in New South Wales, called in 10 From a judgment of the New South Wales Court of Appeal: Cessnock City Council v Suvaal [2001] NSWCA 428. 11 See eg Fox v Percy (2003) 77 ALJR 989; 197 ALR 201; Shorey v PT Ltd (2003) 77 ALJR 1104; 197 ALR 410; Joslyn v Berryman (2003) 198 ALR 137. 12 See eg McLaughlin v Daily Telegraph Newspaper Co Ltd [No 2] (1904) 1 CLR 243 at 277 and Dearman v Dearman (1908) 7 CLR 549. 13 eg Housen v Nikolaisen (2002) 211 DLR (4th) 577. 14 cf State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 326 [85]; 160 ALR 588 at 614 ("SRA"). 15 Most comprehensively in SRA (1999) 73 ALJR 306; 160 ALR 588 and Fox v Percy (2003) 77 ALJR 989; 197 ALR 201. 16 cf Northern Sandblasting Pty Ltd v Harris (1997) 188 CLR 313 at 386 noted by Master Harrison in Suvaal v Nominal Defendant [2000] NSWSC 1043 at [269]. McHugh Kirby that section of its length Quorrobolong Road. The appellant was a cycling enthusiast. He lived in the district. At one stage he had competed professionally as a cyclist. Although by 1993 he was 35 years of age, he was hoping to make a comeback. When injured, he was in training for a circuit that was to commence about two or three months later. He was well familiar with the road and with the bicycle he was riding, which belonged to him. The appellant's particular purpose was to time his speed over a segment of about 15 kilometres of the journey. This comprised a flat portion of the road called the "speed section" reached on the return journey from the town of Heaton to the appellant's home. On the "speed section" the appellant travelled at about 25 miles per hour (about 40 kilometres per hour). The critical events happened when he was about 1.5 kilometres from the end of the "speed section". He was travelling in a northerly direction. In the distance, the road veered to the left. At a point near a house occupied by the Barber family something happened that resulted in the appellant's losing control of the bicycle, veering off the road on the incorrect side and being propelled over the handlebars to land heavily in a nearby gully. As a result of his fall (or the impact of his body on a hard object (tree or boulder)) the appellant's helmet was smashed. His spinal cord was severed by a fracture at the C6-C7 level producing quadriplegia. The appellant was eventually discovered by Mrs Barber when she heard his cries of help. She summoned assistance. Soon two officers of police arrived, namely Senior Constable Campbell and Senior Constable Barber, the latter being Mrs Barber's husband. An ambulance arrived. A helicopter was summoned to take the appellant to hospital. Mrs Barber, the police officers, the ambulance travelling with the helicopter gave evidence attendants and paramedics concerning conversations they had with the appellant about what had happened to him. Senior Constable Campbell prepared a report in a police notebook. This was lost, but its substance was transcribed in a police occurrence pad which survived. Similarly, the ambulance officers and the paramedics immediately recorded reports, as did Dr Stephen Ruff under whose care the appellant came the day after his injury. In September 1994 the appellant commenced proceedings in the Supreme Court of New South Wales in respect of his damage and loss. He sued the Nominal Defendant, established by the Motor Accidents Act 1988 (NSW), and the Cessnock City Council ("the Council") on the basis of negligence for which each of those parties was alleged to be liable. The Nominal Defendant was sued on the footing that the appellant had been "brushed" by an unidentified motor vehicle that overtook him on his right-hand side, forcing him off the sealed bitumen surface of Quorrobolong Road onto the rough edges of the road whereby the handlebar assembly of the appellant's bicycle broke causing him to lose control and to crash in a way that occasioned his injuries. Alternatively, or additionally, the appellant sued the Council. The claim against the Council rested on the allegation that it had failed to design and construct the bitumen surface of the road properly, and to repair the edges carefully, against the possibility that a person such as the appellant would suffer the loss of control of a bicycle as, it was claimed, had happened in this case. The trial of the appellant's action was heard by Master Harrison. The trial lasted some 24 days, spread over the space of a year. It was hotly contested by both defendants, each of whom denied negligence, asserted contributory negligence on the part of the appellant and cross-claimed against the other. In the course of the trial four hypotheses emerged to explain the critical incidents that led to the appellant's injuries. These were: That he had been forced off the road by an unidentified vehicle, resulting in impact with potholes that caused the handlebars of his bicycle to turn suddenly anti-clockwise, resulting in the snapping of the metal stem supporting the handlebars, loss of control, and veering off the road on the opposite side with consequent injuries. (The unidentified vehicle hypothesis); That he had no impact with potholes but, proceeding in the normal way along the road surface, the repeated trauma of normal road use caused a "final overload" to the metal stem of the bicycle weakened by defects revealed in post-accident examinations of the metal and by the adjustment of the handlebars to an unsafe position or by filing repairs allegedly performed upon the bicycle frame by the appellant weakening it and rendering it susceptible to fracture. (The normal riding hypothesis); That he had simply driven off the wrong side of the road because of his own negligence in controlling the bicycle, resulting in trauma to the bicycle frame at the point at which both the cycle and the appellant came to rest. (The wrong side hypothesis); and That, whatever caused the appellant to leave the road surface whilst travelling on the correct side (inferentially a temporary lapse of concentration), he there hit potholes that occasioned the sudden anti- clockwise movement of the handlebars resulting in the snapping of the metal stem, loss of control of the cycle's direction, the veering movement to the opposite side of the road and the consequent crash. (The pothole hypothesis). The Council contested that the pothole hypothesis was ever in issue at the trial, except as an incident of the unidentified vehicle hypothesis. It will be necessary to return to that question. McHugh Kirby The decision of the Master The pleading of the case, its presentation at trial and the appellant's own testimony, make clear that the appellant's essential claim involved an assertion that he was forced off the road by an unidentified overtaking vehicle that brushed or actually touched him: propelling him into potholes to his left. Not only was that the way the appellant himself said the critical events were initiated. He also called a number of witnesses, mostly from his family, to give evidence that that was what he had told them a week or so after the incident. The difficulty for the appellant with the unidentified vehicle hypothesis was that it was inconsistent with the recollection, and recorded reports, of those who had had immediate contact with the appellant after he was injured, most especially Senior Constables Barber and Campbell. After an analysis of the evidence, the Master rejected this first hypothesis17: "The preponderance of credible evidence establishes on the balance of probabilities that it was not the presence of a motor vehicle which caused the plaintiff to veer and change the direction of his steering of the bicycle. Nor did the motor vehicle hit or brush against his right thigh or right hand … [I]t is implausible that he did not mention it to any of the people who attended the scene, even when directly asked about the presence of a motor vehicle … It was one week after the accident that the plaintiff is reported to have said that he was hit by a brownish coloured station wagon and that something went past but he could not recall much after that." The Master was not convinced that the appellant was an untruthful witness18. However, she did not accept his evidence that a motor vehicle had caused him to leave the road surface. As was later to be observed in the Court of Appeal19, the Master's reasons do not contain an opinion that there was no motor vehicle. But they "acquitted any motor vehicle, assuming one was there, of any 'involvement' in the accident"20. This conclusion inevitably led to the dismissal of the Nominal Defendant from the proceedings. There was no cross-appeal by the appellant against the Master's judgment in favour of the Nominal Defendant. The unidentified vehicle hypothesis is therefore excluded. 17 [2000] NSWSC 1043 at [112]-[113]. 18 [2000] NSWSC 1043 at [17]. 19 [2001] NSWCA 428 at [26]. 20 [2001] NSWCA 428 at [27]. The Master did not trouble long over the wrong side hypothesis. Given such an experienced cyclist, familiar with the road and with his bicycle, her conclusion in this respect was unsurprising. That left the normal riding hypothesis or some other explanation derived from all of the facts in the Master's capacity as the tribunal of fact21. In the end, the Master accepted part of the appellant's evidence that concerned the causative element of the potholes on the left-hand side of the road. In the absence of an unidentified motor vehicle to explain how he would have strayed from the bitumen surface onto the uneven rough section on the side containing the potholes, the Master inferred a momentary lapse of concentration on the appellant's part. She concluded that "for reasons other than the presence of a motor vehicle, [he] lost concentration when he allowed the steering of the bicycle to put him into the potholes and rough edge of the road"22. The critical findings were expressed in these words23: "It is my view, and contrary to the [Council's] submissions, that the preponderance of credible evidence establishes on the balance of probabilities that the plaintiff hit potholes which caused a change in the direction of the steering of the plaintiff's bicycle. I also accept that after the plaintiff hit the potholes he went onto the rough edge of the road. In the accounts given by the plaintiff of how the accident occurred he consistently mentioned the loss of control of his bicycle, the handlebars collapsing and the steering giving way. I accept the plaintiff's account that he caused his bicycle to go into potholes or hit patches and the rough edge of the road. His bicycle bounced two or three times. The tar in the potholes may have sunken in but he knows that he hit potholes. The handlebars of his bicycle turned anti-clockwise and at that point he lost control of the steering. The bike went straight across the bitumen onto the right hand side of the road. He was heading towards two trees, he leant his left leg on the frame of the bicycle to steer between two trees. He then fell in the manner he described". These findings were sufficient to establish that the presence of the potholes on the side of the road, for which the Council was responsible, were a relevant immediate cause of the appellant's injuries. It remained for the appellant to show that the Council was negligent in causing or permitting the potholes to 21 cf Williams v Smith (1960) 103 CLR 539 at 545. 22 [2000] NSWSC 1043 at [309]. 23 [2000] NSWSC 1043 at [167]. McHugh Kirby be there, although the road in question was a relatively minor country road24. On this point, the Master concluded that the Council had been negligent in discharging its duty of care to the appellant for the misfeasance which she found in the manner in which the Council had carried out its repairs and upkeep of the road25. In reaching the foregoing conclusions, the Master rejected the normal riding hypothesis. The Master specifically rejected the Council's contention that the real cause of the snapping of the central metal frame upon which the bicycle handlebars rested (or whatever else caused the handlebar assembly to come free with resulting loss of steering) was the last event in a fatigue fracture of the metal stem or the imprudent adjustment by the appellant of the position of the head stem above the maximum marking recommended by the manufacturer26. These were amongst the hypotheses that the Council had pressed on the Master to permit an explanation of the cause of the critical events leading to the crash that involved no connection between the bicycle and potholes and simply blamed the sudden loss of control over the bicycle's trajectory upon defects in the bicycle itself, for which the Council was blameless. At the trial, the parties called metallurgical engineers to support their respective cases. The Master accepted that the appellant was unaware of any fatigue cracks in the central head stem, such as had been found by microscopic examination of its metal components after the crash. Despite the appellant's denial, the Master accepted that he had adjusted the handlebars to a higher level than the recommended maximum fixed by the bicycle manufacturer27. She did not accept that this adjustment, or any filing of the metal stem, was a significant cause leading to the severance that resulted in the sudden loss of rider control over the direction of the bicycle. She explained (and the bicycle was in evidence) that the filing of the head stem involved only "shallow superficial abrasion marks" that "did not look rotational"28. In essence, the undetectable fatigue fractures would continue to be aggravated by the bumps occasioned to the head stem in ordinary passage of the bicycle over the road surface. Only "very 24 The action was tried before the decision of this Court in Brodie v Singleton Shire Council (2001) 206 CLR 512. 25 [2000] NSWSC 1043 at [305]. 26 [2000] NSWSC 1043 at [288]-[289], [309]. 27 [2000] NSWSC 1043 at [291]. 28 [2000] NSWSC 1043 at [292]. minimal force [was] required to cause a final fracture"29. Specifically, the Master accepted the evidence of the appellant's metallurgist, Dr Thompson, that "the bicycle coming into contact with rough road edges would have been a sufficient shock load to produce the final fracture [making it] possible that the final fracture occurred when the plaintiff hit the potholes and the rough edge of the road"30. In support of the last-mentioned conclusion, the Master quoted the following evidence of Dr Thompson31: "A: … I would have expected if the bicycle had been used in that condition with the 50 per cent fatigue crack and then the two sub- critical overload impositions – if the bicycle had been used for a few hours or for a period of time and received a sufficient number of cycles of stress or load, then I would expect to have seen evidence of fatigue cracking similar to what accounted for 50 per cent of the cross-sectional area reduction. Did you see that? No, I didn't. Are you able to make upon the balance of probabilities a deduction from your failure to see that? A: My failure to see that, having known that the bicycle had been in use that morning, sways my balance of probability to the fact that the two sub-critical overload impositions were not there prior to the final overload. They would have occurred at a similar time as the final overload fracture." There was alternative metallurgical evidence before the Master to posit, as a cause of the "final overload fracture", innocent traumas on the mid-road surface accumulating upon the pre-existing metal fatigue in the head stem tube of the bicycle. However, the Master preferred the opinion of Dr Thompson. She reduced the appellant's damages by 20% for contributory negligence. This included the appellant's adjustment of the head stem that had exposed "the weaker part of the head stem causing the crack to accelerate" and the appellant's riding of the bicycle at so high a speed in conditions where it was possible for a 29 [2000] NSWSC 1043 at [298]. 30 [2000] NSWSC 1043 at [298]. 31 [2000] NSWSC 1043 at [300]. McHugh Kirby loss of concentration to occur with consequent divergence to the rough surface with its potholes32. It was in this way that the Master came to her conclusion that the Council was responsible for the cause that had occasioned the crash of the bicycle. Having found the remaining issues of negligence in favour of the appellant, the Master concluded that the appellant was entitled to recover a substantial judgment against the Council and it alone33. The decision of the Court of Appeal The Council appealed to the New South Wales Court of Appeal against the judgment. The appellant cross-appealed. The Council's appeal challenged numerous aspects of the Master's reasoning including on the cause of the accident; the liability of the Council in negligence; the findings of fact upon which such liability had been determined; the conclusion as to the extent of the appellant's contributory negligence; and the costs orders. The appellant's cross- appeal contested the Master's conclusions on contributory negligence and on the refusal to award interest on the agreed damages. In this Court, the Council drew attention to the fact that, amongst the complaints concerning the Master's finding of contributory negligence, was one whereby the appellant said that "[t]here was no evidence given by [the appellant] to support a finding that he lost concentration when he allowed the steering of the bicycle to put him in the potholes and rough edge of the road". The cross-appeal was not pursued in oral argument before the Court of Appeal. When the appeal was heard by the Court of Appeal, the issue of causation was severed and dealt with first. At the conclusion of argument, the Court unanimously upheld the appeal. It set aside the judgment in favour of the appellant. The other issues were not considered. The principal reasons of the Court of Appeal were given by Giles JA. Addressing the Master's acceptance of the pothole hypothesis, Giles JA rejected the finding that the divergence into potholes was "due to lapse in concentration"34. He stated that this finding was "quite contrary to the 32 [2000] NSWSC 1043 at [309]. 33 Judgment was entered in favour of the appellant in the sum of $2,240,000. This represented the damages agreed in the event of the appellant's recovery of judgment against the Council. The appellant was ordered to pay part of the Nominal Defendant's costs. 34 [2001] NSWCA 428 at [9]-[10]. [appellant's] evidence". It had "no foundation in the evidence" being no more than a "rationalisation of what occurred, without due consideration of whether the loss of steering control was from final overload before the [appellant] went into the potholes"35. Giles JA pointed out that the Master had accepted the evidence of both metallurgists, Dr Thompson and Mr Robinson. The former, he said, whilst supporting a pothole hypothesis, had done so only on the basis of consistency with hypothesised facts including the presence of an overtaking motor vehicle. Mr Robinson had expressed the opinion that the "final overload fracture could have been caused by a light impact such as running over a small rock or a branch on the surface of the roadway"36. Because it was common ground that the main surface of the roadway did not contain potholes, to succeed it was necessary for the appellant to establish that it was more probable than not that he had come into contact with potholes on the left-hand side of the road before the final overload fracture and the loss of steering control. The Council submitted that once the hypothesis of an unidentified vehicle was excluded by the Master's finding, an impact with potholes prior to the final overload fracture could not be shown as more probable than not. It conflicted with the appellant's version of events, which provided no support for a divergence into the potholes other than by reason of being forced there by an overtaking vehicle. It therefore had no foundation in the evidence. The conflicting inferences were of "equal degrees of probability so that the choice between them is a mere matter of conjecture"37. Relying on what was said in Holloway v McFeeters38, Giles JA accepted these submissions. He rejected the Master's conclusion. He expressed the view that the more probable explanation of the accident was that the final overload fracture of the head stem occurred in accordance with the normal riding hypothesis39. The other judges constituting the Court of Appeal agreed with Giles JA's analysis. Powell JA did so without separate reasons40. Rolfe AJA added some reasons of his own (with which Giles JA in a postscript expressed agreement41). 35 [2001] NSWCA 428 at [10]. 36 [2001] NSWCA 428 at [12]. 37 [2001] NSWCA 428 at [16]. 38 (1956) 94 CLR 470 at 480. 39 [2001] NSWCA 428 at [16]. 40 [2001] NSWCA 428 at [1]. 41 [2001] NSWCA 428 at [17]. McHugh Kirby In those reasons, Rolfe AJA emphasised that the appellant had not, at trial, sought to make out a case that he had moved to his left merely to allow the unidentified vehicle to pass or because of a disturbance in the air occasioned by the supposed car's motion42. The likelihood that a highly experienced cyclist, aware of the road and of the dangers, would otherwise move onto the rough side portion of the road, so as to come into contact with potholes, was, in Rolfe AJA's opinion, "totally improbable"43. It was on this basis that the Court of Appeal reversed the judgment for the appellant. By special leave, the appellant has appealed to this Court. The Council brought no cross-appeal. It filed no notice of contention. The issues Three issues were argued in the appeal to this Court: The appellant's submission that the Court of Appeal erred in disturbing the judgment of the Master having regard to the fact that that judgment rested, in material respects, upon advantages enjoyed by the Master and not by the Court of Appeal. Such advantages were said to include the assessment of the credibility and acceptability of the testimony of witnesses who gave oral evidence that had not been seen and heard by the appellate court. (The appellate principles issue); The Council's submission that the Master's conclusion in favour of the appellant, based on the pothole hypothesis, was unavailable in the circumstances, being a conclusion different from that pleaded by the appellant, asserted in his evidence and presented at trial. The appellant contested the entitlement of the Council to raise this point in the absence of a notice of contention. Alternatively, he argued that the point was unavailable in the way the case and the appeal had been conducted. (The procedural fairness issue); and The appellant's submission that the costs of the appeal to date should be borne by the Council having regard to the course that the appeal to the Court of Appeal had taken. (The appellate costs issue). We shall address these issues in turn. 42 [2001] NSWCA 428 at [28]. 43 [2001] NSWCA 428 at [30]. Appellate review and credibility assessments The starting point of analysis of the first issue is an appreciation of the nature, and incidents, of an appeal. It is not a common law procedure44. It is an invention of statute45. Within different statutes, appeal takes different forms46. Plainly, an appellate court must conform to its statutory function. As a repository of statutory power, it must discharge those powers fairly, reasonably and in accordance with law. In the present case, the powers of the Court of Appeal were those stated in s 75A of the Supreme Court Act 1970 (NSW). That section provides for an appeal "by way of rehearing"47 in which the Court of Appeal has the powers and duties of the court at first instance, including in "the drawing of inferences and the making of findings of fact"48. The character of the appeal is indicated by the fact that the Court "may receive further evidence"49, although usually only "on special grounds"50. It is specifically empowered to "make any finding" and "give any judgment" that "ought to have been given … which the nature of the case requires"51. Unarguably, this is a large mandate. Being expressed in legislation, it may not be diminished by judicial exegesis that denies the statutory text. Being powers conferred, in this case, upon a superior court of record, ordinary principles would require that they be afforded a large ambit to be applicable to the many cases that come before the Court of Appeal. Nevertheless, from the start, appellate judges have been alert to the realities of the ways in which they perform their duties. These have necessitated that they make allowance for the differences between trial and appellate 44 Fox v Percy (2003) 77 ALJR 989 at 993 [20]; 197 ALR 201 at 206 and cases there cited. 45 SRA (1999) 73 ALJR 306 at 322 [72]; 160 ALR 588 at 609. 46 Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 619-622; cf Eastman v The Queen (2000) 203 CLR 1 at 40-41 [130]. 47 s 75A(5). 48 s 75A(6)(b). 49 s 75A(7). 50 s 75A(8). 51 s 75A(10). See Warren v Coombes (1979) 142 CLR 531 at 545. McHugh Kirby functions. The most important differences are two. Appellate judges do not normally see or hear witnesses give their testimony. Typically, they read the record of the trial appearing in print. Communication is a complex process. It can be achieved by words but also by looks, gestures and body language, by pause, hesitation and interruption that may not be reflected adequately, or at all, in print52. The standard of court records, including transcript, has improved and may now sometimes be supplemented by visual recordings53. Contemporary judges54 are aware of the limitations inherent in credibility assessment based on appearances55. But these considerations have not eliminated the necessity for appellate courts to give weight to the primary decision-maker's advantages in seeing and hearing significant witnesses. A trilogy of cases in this Court56 and many decisions before57 and since58 have insisted that where the primary decision depends, to any significant extent, upon the assessment of the credibility of important evidence, the appellate court's entitlement to draw contradictory inferences, make conflicting findings of fact and reach different assessments is constrained. This is not, as such, to curtail the discharge of the appellate court's statutory powers. It is simply to explain the 52 Coghlan v Cumberland [1898] 1 Ch 704 at 705; Dearman v Dearman (1908) 7 CLR 549 at 561; SRA (1999) 73 ALJR 306 at 324 [78]; 160 ALR 588 at 612. 53 SRA (1999) 73 ALJR 306 at 327-328 [88]; 160 ALR 588 at 616-617. 54 And not only contemporary cases: see Societe D'Avances Commerciales (Societe Anonyme Egyptienne) v Merchants' Marine Insurance Co (The "Palitana") (1924) 20 Lloyds L Rep 140 at 152. 55 Scientific evidence throws doubt on this capacity: see eg Trawl Industries of Australia Pty Ltd v Effem Foods Pty Ltd (1992) 27 NSWLR 326 at 348 per Samuels JA. 56 Jones v Hyde (1989) 63 ALJR 349 at 351-352; 85 ALR 23 at 27-28; Abalos v Australian Postal Commission (1990) 171 CLR 167 at 179; Devries v Australian National Railways Commission (1993) 137 CLR 472 at 479, 482-483. 57 eg Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 at 844; 62 ALR 53 at 56-57. 58 eg Fox v Percy (2003) 77 ALJR 989 at 994-995 [26]-[31]; 197 ALR 201 at 208- 210; Shorey v PT Ltd (2003) 77 ALJR 1104 at 1107 [16]; 197 ALR 410 at 413; Joslyn v Berryman (2003) 198 ALR 137 at 167-168 [119]-[120]. ways in which such powers will be exercised, given a relevant differentiation in the significant data available to the appellate court when compared with that available to the primary decision-maker. It is probably true to say that at different times in legal history, the weight given to credibility assessment and the impediment it presents to the exercise of an appellate rehearing have changed, influenced by the quality of the record available for scrutiny; the consciousness of the imperfections of credibility assessment; and a heightened appreciation of the benefits of appellate correction of error, including factual error59. But these considerations have not eliminated the appellate obligation to respect the advantages which the primary decision-maker has that are denied to the appellate court. As a matter of logic, experience and legal authority, it cannot be otherwise. the growing knowledge of psychology and An appellate "rehearing", as applicable in the Court of Appeal in this case, is not, and cannot be, a hearing de novo. It is a rehearing on a record that omits data potentially influential upon the primary decision-maker. Nevertheless, there will be appeals in which the inhibitions upon disturbance of assessments influenced by credibility evaluation may be expressly or impliedly made inapplicable by judicial reasoning in the particular case60. Where the result reached is contrary to "extreme and overwhelming pressure"61 or "glaringly improbable"62 or "contrary to the compelling inferences of the case"63, an appellate court will be authorised to substitute its conclusion for that reached by the decision-maker at trial. The second consideration that reinforces appellate restraint is one that derives from another difference in the character of trials and appeals. It confirms the maintenance of a distinction between them. It strengthens the respect that appellate courts must pay to the decisions at trial. At trial the decision-maker has the advantage of hearing and seeing the evidence in its entirety, presented generally in an orderly and comprehensive fashion. By way of contrast, appellate 59 SRA (1999) 73 ALJR 306; 160 ALR 588. 60 SRA (1999) 73 ALJR 306 at 331-332 [93]; 160 ALR 588 at 620-622. 61 The Glannibanta (1876) 1 PD 283 at 287; see also Paterson v Paterson (1953) 89 CLR 212 at 219. 62 Brunskill v Sovereign Marine & General Insurance Co Ltd (1985) 59 ALJR 842 at 844; 62 ALR 53 at 57. 63 SRA (1999) 73 ALJR 306 at 332 [93]; 160 ALR 588 at 621. McHugh Kirby courts are typically taken to selected passages in the trial record, chosen by the parties to support their respective arguments64. As the joint reasons in this Court in Fox v Percy65 put it, the way appeals are usually conducted sometimes impedes an appreciation: "of the 'feeling' of a case which an appellate court, reading the transcript, cannot always fully share66. Furthermore, the appellate court does not typically get taken to, or read, all of the evidence taken at the trial. Commonly, the trial judge therefore has advantages that derive from the obligation at trial to receive and consider the entirety of the evidence and the opportunity, normally over a longer interval, to reflect upon that evidence and to draw conclusions from it, viewed as a whole67." If the foregoing limitations, established by authority, are recognised and given due weight and if, those considerations notwithstanding, the decision at trial is still considered "compellingly" or "palpably" erroneous, the appellate court may, in such an extreme case, be entitled to substitute its own conclusions on the facts. So much was acknowledged in State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In Liq)68. The task of appellate courts, including the Court of Appeal in the present case, is to give effect to these important, and sometimes competing, considerations, and all of them. The Court of Appeal erred in this case When regard is had to the foregoing principles it is impossible to avoid the conclusion that the Court of Appeal erred in disturbing the Master's conclusion about the issue fought at trial concerning the cause of the severance of the metal stem of the appellant's bicycle that, she found, was the reason why such an 64 SRA (1999) 73 ALJR 306 at 330 [90]-[91]; 160 ALR 588 at 619-620. 65 (2003) 77 ALJR 989 at 993-994 [23]; 197 ALR 201 at 207. 66 Maynard v West Midlands Regional Health Authority [1984] 1 WLR 634 at 637 per Lord Scarman; [1985] 1 All ER 635 at 637. See also Chambers v Jobling (1986) 7 NSWLR 1 at 25. 67 SRA (1999) 73 ALJR 306 at 330 [89]-[91]; 160 ALR 588 at 619-620 citing Lend Lease Development Pty Ltd v Zemlicka (1985) 3 NSWLR 207 at 209-210; Jones v The Queen (1997) 191 CLR 439 at 466-467. 68 (1999) 73 ALJR 306 at 321 [63] per Gaudron, Gummow and Hayne JJ, 331-332 [93] per Kirby J; and compare at 338 [139] per Callinan J; 160 ALR 588 at 607, experienced cyclist had left the road, veered to the incorrect side, and suffered injuries. First, it was important to acknowledge (as the Master certainly did) that the task in hand was one of drawing inferences concerning what happened, effectively within a matter of seconds, immediately before the crash occurred. The appellant was present. He did not suffer brain injury. He was conscious for at least part of the time following the crash, calling for help which ultimately attracted the attention of Mrs Barber69. But for one and a half hours before she arrived and thereafter, he was in great pain, lapsing in and out of consciousness. Once taken to hospital, he was sedated. His recollection of a vehicle that bumped, brushed or passed him, was not recorded in an objective form for more than a week after the crash. The rejection of that version of events did not mean that the appellant was untruthful. The Master avoided that logical fallacy70. However, because the primary version of the appellant was unproved, as inconsistent with contemporary oral and written records of what the appellant had said about the cause of his crash, it remained necessary for the Master to consider such alternative inferences as were available to her in the evidence. True, the Master was required to avoid speculation and to keep in mind the fact that it was for the appellant to prove his case affirmatively. An equality of available hypotheses would not achieve a balance of persuasion. But one thing was clear from established authority in this Court. In deriving any likely conclusion from the facts, the Court of Appeal was obliged to give weight to the advantage which the Master enjoyed in having heard and seen all of the evidence of the witnesses over the lengthy hearing. That was a significant advantage when compared to a hearing before the Court of Appeal that was already abbreviated and lasted less than a day. The reasons given by the Master could only ever express in words the conclusions derived from the mass of evidence, partly by logical deduction and partly by intuition71. It was essential that the Court of Appeal pay close regard to the Master's conclusion. It was not to be brushed aside without full allowance for the advantages that she had enjoyed. 69 [2000] NSWSC 1043 at [90]. 70 [2000] NSWSC 1043 at [17]. 71 Biogen Inc v Medeva Plc [1997] RPC 1 at 45 per Lord Hoffmann; cf Aktiebolaget Hässle v Alphapharm Pty Ltd (2002) 77 ALJR 398 at 416 [90], 417 [97]; 194 ALR McHugh Kirby Secondly, upon the rejection, as unproved, of the unidentified vehicle hypothesis, it remained the duty of the Master to consider any alternative hypothesis that was open on the evidence in the way that it had been contested at trial. We shall turn shortly to consider the Council's complaint that the pothole hypothesis, involving the postulated lapse of concentration, was not in contest at the trial. But if it was in contest, it does not follow from a rejection of the appellant's recollection of the intervention of a motor vehicle that some other consideration did not result in the chain of events leading to the crash. Clearly, the bicycle crash occurred. It was therefore proper for the Master to evaluate competing hypotheses, so long as she remained within the evidence, addressed the issues litigated and acted with procedural fairness to all the parties72. Common experience teaches that elements in the recall of past events can be accurate even if elaboration (prompted perhaps by subconscious desires or interests) adds detail that is unreliable, incorrect or unprovable. There may remain at the heart of the matters recalled a core of truth that is accurate and sufficiently established. Clearly, this is what the Master considered had happened in this case. She rejected the intervening motor vehicle as unproved. But she accepted the other elements of the appellant's testimony. These included his moving to the left side of the road surface and hitting the potholes; the anti- clockwise motion of the handlebars of his bicycle; the fracture of the central metal stem; the immediate loss of control; and the veering motion to the opposite side of the road with the consequent crash. Once the unidentified motor vehicle was eliminated as unproved, it remained for the Master to decide whether the remainder of the appellant's evidence proved this element of his case, that is, whether the rest of the evidence should be accepted as true or rejected. Thirdly, it was here that the assessment of two key witnesses in the trial became critical. The first was the appellant himself. He gave evidence of how the crash had happened. After the appellant had referred to the motor vehicle the following exchange occurred: "Q: What happened to you? I bounced into a couple of pot holes and then I went into the rough edge of the road and bounced a couple more times and my handle bars went around like that. I had them like that and on the handle bars and after I hit a couple of pot holes and then I bounced into the rough edge of the road and then they went around like that. You are doing an anti-clockwise motion? 72 Williams v Smith (1960) 103 CLR 539 at 545-546. Yes, they were like that … (Demonstrated swerving anti-clockwise to 90 degrees.) Q: When that happened were you able to steer the bike? No. I had balanced but I could not steer it … it went straight across to the right hand side of the road." The quoted passage illustrates the importance of gestures and courtroom behaviour, unavailable in a printed record. It was open to the Master to reject the causative agency of the motor vehicle but to accept as truthful the description of the critical events expressed in such a manner and illustrated with gestures and hand movements. Fourthly, whilst it is true that the contemporary witnesses (and records) contained no reference to the presence of another motor vehicle (which Senior Constable Campbell at least, recording the occurrence in a police report, would almost certainly have noted) it is also true that Senior Constable Barber had no doubt that the appellant had told him at the scene of the crash that he had hit the potholes and that it was following this that he lost control. Senior Constable Barber is the second critical witness whom the Master saw and heard. His evidence was vital to her conclusion. The Master's opinion that the pothole hypothesis was established by the evidence necessarily rested on her acceptance of Senior Constable Barber's recall of the appellant's contemporary complaint. That witness adhered to this recall. True, he did not record it in writing at the time. But it would have had no police significance. It did not inculpate another road user in responsibility for the crash. The absence of a written record was therefore inconclusive. Because the Court of Appeal did not see or hear either the appellant or this police officer give evidence, it was bound to approach a conclusion based on the acceptance of that evidence with the caution required by authority. There is no doubt that the Master ultimately embraced the pothole hypothesis. She said specifically that she accepted the appellant's account that "he caused his bicycle to go into potholes or hit patches and the rough edge of the road"73. She accepted that it was this action that caused the handlebars of the bicycle to turn anti- clockwise and that "at that point he lost control of the steering"74. The Master remarked on her close observance of the appellant during his testimony75. She 73 [2000] NSWSC 1043 at [167]. 74 [2000] NSWSC 1043 at [167]. 75 [2000] NSWSC 1043 at [16]. McHugh Kirby said expressly that, having rejected the unidentified motor vehicle hypothesis, she "examined his evidence with caution"76. Similarly, the Master expressed herself as satisfied that the appellant had "told Constable Barber that he hit a couple of potholes, the handlebars of the bike came away and he hit a tree"77. In these circumstances, there was evidence before the Master, which she accepted, that sustained the pothole hypothesis. The Court of Appeal, with respect, did not confront the obstacle which the Master's findings in this regard presented to its substituting a different, and contrary, conclusion on the facts. Fifthly, that obstacle obliged the Court of Appeal, in accordance with authority, to consider whether, notwithstanding the recorded findings at the trial, the conclusion stated was undermined by objective, contemporaneous or other evidence, testimony not referred to78 or some other feature of the case that made the stated conclusion "palpably" wrong or "glaringly improbable". Whilst it was not obligatory for the Court of Appeal to use a particular verbal formula, the absence of reference in the reasons of Giles JA to such considerations suggests that the correct approach to appellate review may not have been taken in this instance. It is true that, in his reasons, Rolfe AJA concluded that "intentional or unintentional divergence into the potholes … was totally improbable"79. Giles JA, after writing his reasons, adopted what Rolfe AJA had said80. But if this post scriptum overcame the appellant's technical complaint concerning the language of the reasoning of Giles JA, it left in an unsatisfactory state the Court of Appeal's explanation of why, notwithstanding the acceptance of the appellant and Senior Constable Barber by the Master, it was authorised to come to the opposite conclusion on key findings that accepted both that potholes had initiated the events leading to the crash and that the appellant had mentioned them immediately after the crash to Senior Constable Barber. All that is proffered to render this evidence "palpably" or "totally" unacceptable is that it was not recorded in the contemporary notes, nor was specific evidence given by the appellant of a lapse of concentration. 76 [2000] NSWSC 1043 at [17]. 77 [2000] NSWSC 1043 at [160]. 78 As in SRA (1999) 73 ALJR 306 at 331-332 [93]; 160 ALR 588 at 620-622. 79 [2001] NSWCA 428 at [30]. 80 [2001] NSWCA 428 at [17]. Sixthly, in our view, the considerations just mentioned fall far short of overcoming the Master's conclusion based on the evidence that she identified and accepted. The other contemporary reports do not contradict that finding. Senior Constable Campbell said that the appellant had claimed the "bike just collapsed underneath me"81 and the P4 Accident Report filled out by him recorded that the "[h]andlebar of push bike may have snapped … Driver ejected and unable to account for crash. Nil witnesses."82 There was a similar report by the ambulance officers83. The paramedics with the helicopter recorded the history that the appellant "was a rider of a push bike whose steering failed and crashed"84. Dr Ruff took a history the day after the accident that "the handlebars failed"85. None of these brief histories is inconsistent with the pothole hypothesis. None of the historians had an interest or duty to elicit from the appellant the anterior facts that caused the "collapse" and "failure" of the handlebars in the event of a motor vehicle being excluded. In judging the acceptability of the pothole hypothesis the Master had the advantage of assessing what the appellant and Senior Constable Barber told her in their evidence. She approached her functions in an apparently correct and suitably cautious, even sceptical, way. The evidence of Senior Constable Barber was more convincing because whilst he affirmed the impact with potholes he did not affirm any reference to a motor vehicle. The Master also had the advantage of expert evidence concerning the susceptibility of the metal stem to fracture given pre-existing metal fatigue and adjustment and photographs and descriptions of the road surface and of the edges at the point near where the crash happened. In our opinion, the Court of Appeal erred in concluding that it was entitled to reverse the Master's acceptance that an impact with potholes on the side of the road had triggered the chain of events that led to the crash. Nor was it erroneous for the Master to infer a temporary lapse of concentration as the occasion for the appellant's coming into contact with the potholes. Once the motor vehicle hypothesis was excluded, momentary inattention (or put another way, a temporary lapse of concentration) was an available inference to explain contact between the appellant's bicycle and the potholes off the main surface to the left-hand side of the road. Considerations 81 [2000] NSWSC 1043 at [36]. 82 [2000] NSWSC 1043 at [37]. 83 [2000] NSWSC 1043 at [42]. 84 [2000] NSWSC 1043 at [44]. 85 [2000] NSWSC 1043 at [59]. See also at [67], [78]. McHugh Kirby that supported that inference included the established existence of potholes in a relevant place on the edge of the sealed roadway; the appellant's evidence that he was riding "as close as possible but out a bit to avoid the potholes at the edge"; the fact that the appellant was travelling very fast, timing himself for a race; that he was nearing the end of the "speed section" when at least some degree of extra fatigue must be normal; that the road edges were very rough with extensive edge breaks and frequent edge drops; that the appellant had been riding his bicycle for about one and a half hours when the crash happened; and that the road in that section contained a bend to the left. To reject a finding that inculpated the potholes and that rested, in part, upon acceptance of the credibility of two key witnesses, more was required than appears in the Court of Appeal's analysis of the evidence. The credibility-based conclusion of the Master was not undermined. The appellate court's reasons did not demonstrate a sufficient foundation for its intervention to give effect to a contrary factual conclusion. In short, those reasons did not conform to established authority that required the Court of Appeal to defer to such findings, out of recognition of the two important advantages that the Master enjoyed in this case. They did not demonstrate the very strong grounds necessary to permit the substitution of different findings. Seventhly, at the conclusion of her reasons, having reviewed the evidence, the Master expressed her opinion that "to cause the final fracture there needed to be two single overloads and a final overload fracture"86. She stated that "[i]t was more probable than not that these overloads occurred when the [appellant's] bicycle hit the potholes and the rough edge of the western side of the road. The [appellant's] bicycle hitting uneven potholes and the rough edge of the road caused the final fatigue fracture in the head stem and the consequence was that the [appellant] lost control of the steering mechanism of the bicycle, and fell suffering … injuries"87. In the Court of Appeal, as Giles JA noted88, the appellant submitted that the evidence of Dr Thompson, the expert metallurgist, was consistent with a breakage of the bicycle stem as a result of the bicycle's hitting potholes. However, Giles JA remarked that "Dr Thompson's evidence … did not rise above consistency, and could not do so". In a sense, that was true. Any opinion stated by Dr Thompson (who was obviously not present when the critical events 86 [2000] NSWSC 1043 at [304]. 87 [2000] NSWSC 1043 at [304]. 88 [2001] NSWCA 428 at [12]. occurred) was bound to depend upon his acceptance of the factual premises upon which his opinion was based. However, during cross-examination, Dr Thompson was pressed by the questioner. In response to a question asked for the Council, the following exchange took place: I am putting to you – and I hope I am putting it as fairly as I can – that really on the material that you have and the tests you have done and the assumptions you have made as to what happened, you cannot say one way or the other that it is more probable than not that the sub-critical fracture was caused at the time of the assumed going into the pothole? I can say it is more probable than not". In light of this critical passage, not mentioned in the reasons of the Court of Appeal, the statement that Dr Thompson's evidence "did not rise above consistency" was erroneous and misleading. Once the pothole hypothesis was even tentatively accepted (as the Master did), the expert provided the linkage between the metal fracture and the instantaneous erratic movement of the appellant's bicycle. The fact that Dr Thompson placed it as a more probable explanation of the cause of the fracture became another evidentiary foundation for the overall conclusion reached by the Master. On the basis of Dr Thompson's answer it was open to the Master to consider that the expert evidence favoured the pothole hypothesis as more likely than the normal riding hypothesis – the hypothesis urged by the Council. Each was, to some extent, a viable explanation. But, according to Dr Thompson's answer, the pothole hypothesis was "more probable than not". That answer reinforced the conclusion reached by the Master based on her acceptance of the appellant's evidence of what had happened, to the extent that such evidence was confirmed by Senior Constable Barber. Subject to what follows, these conclusions require that the appeal be allowed. The argument of procedural unfairness fails During argument before this Court the suggestion was raised that the pothole hypothesis amounted to a case quite different from that pleaded and presented by the appellant at trial. That suggestion poses the issue as to whether, by embracing that hypothesis, the Master had departed from the requirements of procedural fairness, in effect, by adopting a view of the evidence contrary to the case of the appellant and without affording the Council a proper opportunity to meet and respond to such a case. McHugh Kirby It is true, as the Council pointed out, that the appellant's own evidence was that he had been forced off the road by a motor vehicle and that this is what had caused the contact of his bicycle with the potholes, posited as the event that occasioned the fracture to the bicycle stem, loss of control over the bike and subsequent crash. The appellant steadfastly resisted suggestions put to him during his evidence that might have been consistent with the pothole hypothesis, absent the offending vehicle. He repeatedly rejected assertions that there was "no such car". He accepted that he was a skilful rider familiar with the flat road section who had never previously driven off the road into potholes on the side. His case also accepted that there were no relevant potholes in the road surface proper and that the relevant section of the road was itself "perfectly safe" so long as a cyclist kept off the edges. The appellant himself never said that he had "lost concentration". According to the Council, such an hypothesis was therefore incompatible with the appellant's professed level of experience, care and attention. The motor vehicle hypothesis having been rejected by the Master, the Council submitted to this Court that the appellant's case had failed. But, in the way the trial was pleaded and conducted, was the Master forbidden to accept the pothole hypothesis, with the explanation of loss of concentration, as she ultimately concluded? In favour of this argument, which the Council embraced during the hearing in this Court, is the proposition that the introduction of contact between the appellant's bicycle and potholes on the left-hand side of the road was strictly incidental to the motor vehicle hypothesis and not a separate hypothesis, because the appellant repeatedly rejected it. At least in the absence of an amendment to the statement of claim, which specifically recounted the presence of an unidentified motor vehicle to explain the appellant's contact with the potholes, it was suggested that the Master should not have "invented" the pothole hypothesis for herself. Still less should she have based her judgment in favour of the appellant upon it. If a party participates in a trial to meet a particular case which that party has pleaded and presented in only one way, it would be unfair to the other party to decide the case on a different basis of which the losing party had no fair notice and which it had no proper opportunity to defend89. Although rigid adherence to 89 cf Gould and Birbeck and Bacon v Mount Oxide Mines Ltd (In Liq) (1916) 22 CLR 490 at 517; Mummery v Irvings Pty Ltd (1956) 96 CLR 99 at 110; Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd (1986) 160 CLR 626 at 659; Water Board v Moustakas (1988) 180 CLR 491 at 497; Banque Commerciale SA (In Liq) v Akhil Holdings Ltd (1990) 169 CLR 279 at 286-287. pleadings is no longer uniformly practised and not a few cases stray from the pleadings without consequential amendment90, such practices cannot excuse procedural injustice. It is elementary that a party is entitled to know the issues of fact that are to be decided in a trial where these are determinative of its success or failure91. The appellant submitted that, in so far as the Council sought to rely on such a complaint, it should not be heard in this Court. He pointed out that no such objection had been made in the Council's grounds of appeal to the Court of Appeal which were otherwise most detailed. Nor was the point raised by way of a notice of contention in this Court. The Council relied upon the terms of O 70 r 6(5) of the High Court Rules providing for the filing of a "notice of contention". That sub-rule excuses a party from giving a notice of cross-appeal if it "contends that some matter of fact or law has been erroneously decided and does not seek a discharge or variation of a part of the judgment". The Council affirmed that it was not contending that the Court of Appeal had erroneously decided a point of fact or law. The form of a notice of contention in this Court92 is not confined to cases of such erroneous decisions. It extends to circumstances where "the decision of the Court below should be affirmed but on grounds other than those relied upon by the Court below". This accords with the common experience of appellate courts today, including this Court. In practice, notices of contention usually refer to arguments supplementary to, and not necessarily inconsistent with, the reasoning of the intermediate court. This Court has made it clear that, as a general rule, a respondent to an appeal is entitled to support a judgment of an intermediate court by reliance on an argument not presented below, so long as the argument does not depend on an issue of fact not litigated in the courts below and "so long as it is open to the respondent on the pleadings and having regard to the way in which the case has been conducted"93. If, therefore, the stated preconditions are met, it would be open to this Court to permit the Council to raise the point about a suggested 90 Queensland v J L Holdings Pty Ltd (1997) 189 CLR 146 at 154, 164-167; see also Jackamarra v Krakouer (1998) 195 CLR 516 at 521 [7], 541-542 [66]. 91 cf Coulton v Holcombe (1986) 162 CLR 1 at 7-8; cf at 16-17. 92 High Court Rules, First Schedule, Form 67. 93 Owners "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 68 ALJR 311 at 313; 120 ALR 12 at 14. McHugh Kirby procedural unfairness in the course that the Master had taken. But are those preconditions met? Each side criticised the other for failing to conform to proper pleading rules. The Council attacked the appellant's departure from his amended statement of claim which to the very end contained as the primary allegation (as the appellant himself said in his testimony) that an unidentified motor vehicle had initiated the contact with the potholes on the side of the road. The appellant attacked a belated attempt of the Council to rely on a point of procedural fairness. The appellant asserted that, if the procedures were as unfair as the Council now suggested, such unfairness should have stood out as an issue long before the appeal reached this Court. When we turn to the written submissions that were filed by the parties before the Master, it is clear enough as to how the issues were addressed at trial. The written submissions took on an added significance in this case because of the intermittent hearing of the evidence over such a long interval. The Nominal Defendant's submissions to the Master included extensive argument on that party's cross-claim against the Council. In those arguments the Nominal Defendant addressed the causation of the accident "be it whether this was caused by being forced into [the edge of the bitumen surface] by a motor vehicle or otherwise". Indeed, it is in that submission that the Nominal Defendant placed emphasis on the appellant's extended conversation with Senior Constable Barber (a person whom he knew on a first name basis). The submission continued: "After telling him that there was no vehicle involved and that he was certain about that he then said to Senior Constable Barber that when he was travelling along the road he 'hit a couple of potholes and the handlebars of the pushbike came away and he hit a tree'". On this basis the Master was urged to accept the initial statement by the appellant to this police officer, unelaborated by statements made a week and more later concerning a motor vehicle. The same point was repeated in further submissions for the Nominal Defendant. The Council's written submissions at trial also addressed what the Council there called the "fallback" findings urged by the Nominal Defendant. The Council, for detailed reasons, submitted that such a "fallback" conclusion was not open to the Master. In short, the Council urged that the choice was a black and white one – either the appellant was telling the truth about the motor car or he was fabricating his evidence, including so far as his evidence involved hitting "a couple of potholes" as stated by Senior Constable Barber. However, such "fabrication" would have involved not only the appellant but also Senior Constable Barber. That witness had denied the proposition that the appellant had mentioned the involvement of a motor vehicle. The Master inferentially rejected the suggestion that the police officer was fabricating the potholes recollection. Certainly, Senior Constable Barber adhered to it. The contest on this score sharpened the significance of the Master's conclusion. It plainly rested on the acceptance of Senior Constable Barber's contested oral testimony. On the basis of these written submissions, received by this Court without objection, there can be no doubt that the Master and the parties were fully aware at the trial of the pothole hypothesis. Whilst there were difficulties for the appellant's representatives to embrace it, given the testimony of their client, it was certainly "in play". There was no procedural unfairness in the Master's accepting it, as she did. It was compatible with Senior Constable Barber's evidence whereas the appellant's recollection of a passing motor vehicle was not. These facts explain why there was no ground of complaint on this issue before the matter reached its hearing in this Court. There was no error of law or of fair procedure in the Master's accepting part of the appellant's evidence as confirmed by Senior Constable Barber's testimony and rejecting other parts not so confirmed. The complaint of the procedural fairness issue is without merit. It is rejected. The proper order for costs Finally, the appellant submitted that, in the event of his success in this appeal, the Council should be ordered to pay his costs of the first hearing before the Court of Appeal, including the costs thrown away as a result of that Court's not dealing with all of the grounds of appeal. It was common ground that both sides appeared in the Court of Appeal prepared to argue all issues in the appeal. It was that Court that isolated the issue of causation for separate treatment and, having reached a conclusion upon it adverse to the appellant, decided the appeal solely on that footing, concluding its hearing in half a day. In view of the conclusion reached by the majority in this Court, the costs issue does not arise for decision. It suffices to say that in our view the costs in the Court of Appeal were costs incidental to the disposal of the proceedings. We would have made an order providing that such costs abide the ultimate outcome of the proceedings. The points of difference in the appeal Ultimately, there are two substantial points of divergence between the majority's approach to this appeal and our own. The first is explained by the McHugh Kirby view of Callinan J94 (in which the other members of the majority agree95) that the success or failure of the appellant at trial turned inexorably upon the acceptance or rejection of the way the appellant himself explained how he came into contact with potholes, namely by being "brushed by", or steering to avoid, an unidentified motor vehicle. With respect, this misunderstands and misstates the case, particularly as it developed at trial. The pleadings96 make it clear that the appellant's claim against the Council was expressed "in the alternative" to the claim against the Nominal Defendant. As pleaded, it was only in the claim against the Nominal Defendant that the alleged presence of an unidentified motor vehicle was legally essential. By way of contrast, the claim pleaded, and the particulars of negligence given, against the Council were directed to the condition of the road surface, that is, to the pothole problem. That alternative claim remained to be decided by the Master, whatever conclusion she reached about the unidentified motor vehicle. The claim against the Council had its own separate legal and factual foundation. After rejecting the causative agency of a motor vehicle, the Master was bound to resolve it. She was entitled on the pleadings to uphold it. The evidence that she saw and heard sustained the conclusion that she reached. Any doubt that this is so is resolved by an examination of the evidence called and the written arguments of the parties concerning the issue of the Council's liability. Of course, the appellant's representatives were obliged to endeavour to uphold their client's belief and evidence about the motor vehicle. But the appellant was not imprisoned in that claim, as the majority seem to think. When it failed, it was not because the Master concluded that the appellant was a deliberate liar. In effect, she concluded that, upon this point, the appellant had not established the presence of a motor vehicle or was mistaken. She then did what was appropriate and certainly open to her. She turned back to the remaining evidence and the inferences arising from it. This included the suggested causative agency of the potholes, the expert evidence inculpating the potholes in the crash and the oral testimony of the police officer who was on the scene immediately after the accident and gave evidence of the appellant's complaint about hitting the potholes. Parties at trial are entitled to present alternative cases. They often do. Sometimes, the alternatives contradict each other. This can occasionally present 94 Reasons of Callinan J at [123], [144]. 95 Reasons of Gleeson CJ and Heydon J at [1]. 96 Set out in the reasons of Callinan J at [126]. forensic problems. But it does not give rise to legal or logical problems. As this Court said in Williams v Smith97: "[T]he jury … might work out for themselves a view of the case which did not exactly represent what either party said. That is a possibility in such cases as this which every court of appeal must contemplate, and although there is no reason to suppose that is what they did in this case, it should not be excluded from the general view of the court." The same principle applies in a case where the decision-maker on the facts is a judicial officer. The only difference is that he or she must, by reasons, explain the way in which important conclusions are arrived at. Those reasons reduce the need for speculation. But the drawing of inferences and deductions is not limited by what "either party said". Subject to the state of the evidence and requirements of procedural fairness, the Master was in the same position as a jury in deciding the facts of this case. The evidence at trial supported the Master's conclusion and there was no procedural unfairness or irregularity98. The attempt to lock the appellant into a single case is not sustained by law nor by the record. That record, the cases of the parties and the entirety of the evidence are more likely to have been appreciated by a judicial officer who sat through the entire hearing than by a busy appellate court attracted to a suggestion of procedural unfairness not pleaded, nor even pressed, at trial, although occasion arose to do so if there was a genuine complaint of surprise. Secondly, it is not the case that the Master artificially set out to "parse" and "analyse" the appellant's testimony, overlooking the way in which the appellant had blamed a motor vehicle99. The Master's reasons show that she was very conscious of the significance of her rejection of his recollection of events. But when she put his recollection to one side, she still declined to uphold the Council's submission, which was that the appellant was a liar100. She then considered whether, notwithstanding her conclusion that an unidentified motor vehicle had not been proved, the causative agency of the potholes left the appellant's claim against the Council standing. 97 (1960) 103 CLR 539 at 545 per Dixon CJ, McTiernan, Fullagar, Kitto and 98 These reasons at [110]. 99 Reasons of Gleeson CJ and Heydon J at [14]. 100 An indication of the Council's submission appears in the reasons of Gleeson CJ and McHugh Kirby With all respect, the Master was not precluded from considering this alternative case101. It had been made completely clear at trial, especially in the Nominal Defendant's written submissions. But it was also plainly raised by the appellant's claim as pleaded against the Council. That pleading, and the particulars supporting it, did not have to descend to evidentiary detail about the available inferences concerning the exact way the appellant came into contact with the potholes. Only a most rigid approach to pleading and to the elucidation of the facts at trial would forbid the Master from addressing this alternative case and giving effect to the inferences that she drew from the whole of the evidence. The complaint about surprise and the now suggested inadequacy of the appellant's pleading and particularisation of his case against the Council would be more convincing if they had been raised by the Council itself in a notice of contention in this Court instead of by appellate judges. Appellate courts have undoubted functions of fact-finding and of drawing their own inferences, as we have acknowledged. But in a case of the present kind, appellate judges should approach their functions with proper modesty. The Master, with the advantages that she enjoyed, was entitled as a fact-finder to draw her own inferences and to reach her own conclusions, as she did. No error has been shown to warrant the Court of Appeal, in a hearing of half a day, substituting its factual conclusions for those of the Master reached after a hearing over 24 days. The result, in our view, is a serious appellate error with very serious consequences for the appellant. It should be reversed. Orders The appeal should be allowed with costs. The orders of the Court of Appeal of the Supreme Court of New South Wales should be set aside. It should be ordered that the proceedings be remitted to the Court of Appeal for determination of the remaining issues raised by the respondent's further amended notice of appeal to that Court. The costs in the Court of Appeal should be determined by that Court. 101 Reasons of Gleeson CJ and Heydon J at [16], [23]. Callinan CALLINAN J. The principal question which this appeal raises is whether a primary judge is entitled to find a case in negligence in favour of a plaintiff on the basis of a version of events which the plaintiff not only failed to advance, but which he also expressly rejected. The facts The appellant, who was 35 years of age at the time of the accident giving rise to this appeal, had earlier been a professional cyclist competing in long distance, endurance and other competitions. At 5.30pm on 2 February 1993 he was training with a view to returning to professional racing, by riding his bicycle along Quorrobolong Road in the municipality of the respondent, as he had done in the past "at least a couple of hundred" times, in the previous two years or, as he also put it, several times a week during the preceding 15 to 18 years. Immediately before he was dislodged from his seat and fell heavily to the ground, he had been travelling at about 25 miles an hour some two feet or so inside the edge of the bitumen surface of the roadway. His claim was that he had been "brushed" by an unidentified motor vehicle on to the potholed left shoulder, and then, his wheels having come into contact with the potholes there, had crossed to the equally potholed right shoulder, with his bicycle out of control throughout. The appellant had chosen that stretch of road because it was the best of the worst roads in Cessnock. He suffered very severe injuries in the fall. The appellant's bicycle was eight to ten years old. Its handlebars had been acquired separately from its frame. The appellant personally maintained the bicycle. He had made adjustments to its steering system and had dismantled the steering assembly some three to six months before the accident. The case at first instance The appellant sued the Nominal Defendant (as the legal alter ego of the driver of an unidentified motor vehicle) and the respondent in negligence and nuisance in the Supreme Court of New South Wales. This was the appellant's case on his pleading: "4. At all material times, the [respondent] was responsible for carrying out maintenance and repairs on the said road and, in particular, the edges of the road alongside the sealed bitumen surface. At all material times the said edges of the road contained fragmented and broken bitumen or tar pieces, the surface of which was rough and uneven. On 2 February 1993, the [appellant] was riding his bicycle in a westerly direction along Quorrobolong Road, Kitchener, when an unidentified motor vehicle proceeding in the same direction Callinan brushed against the [appellant] on his right side, forcing him off the sealed bitumen surface onto the said edges of the road whereupon the handle bar assembly of his bicycle broke, causing the [appellant] to lose control of his bicycle, leading him to crash into a ditch on the opposite side of the road, in consequence whereof he sustained severe injuries, loss and damage. The identity of the said motor vehicle, after due search and inquiry, cannot be established. The said injuries, loss and damage occasioned by the [appellant] was caused by the said unidentified motor vehicle which was driven negligently. Further or in the alternative, the said injuries, loss and damage occasioned to the [appellant] was caused by the negligence of the [respondent]. PARTICULARS OF NEGLIGENCE Failing to design and construct the bitumen surface so as to prevent the development of fragmented and broken pieces on the edge of the road. (b) Designing and constructing the bitumen surface in such a the development of way fragmented and broken pieces on the said edges. it was susceptible that Failing to design and construct the roadway so as to provide uniformity in the width of the bitumen surface. Failing to repair the broken pieces on the said edges. Failing to ensure that the said edges of the road were completely and evenly covered by a sealed bitumen surface. Allowing or permitting repairing or patching of the road surface on the said edges that was inadequate and unsafe for traffic users. Permitting or allowing the break-up of the bitumen surface to occur on the edges of the road. Failing to inspect or check the road in order to properly repair the edges of the bitumen surface. Callinan Failing to maintain the road in a proper condition. Failing to erect a sign, notice or other warning indicating to users of the roadway that the edge of the road contained fragmented and broken pieces and that the road surface was rough and uneven. 10. Alternatively, the said injuries, loss and damage were caused by the nuisance in the roadway created by the [respondent], by leaving the said edges of the said road in a dangerous condition for persons lawfully using the same." (emphasis added) It should be pointed out that there was evidence adduced at the trial which at least suggested, that despite the precise location by the pleading of the potholes, "alongside the sealed bitumen surface", potholes and other surface irregularities may have intruded on to the bitumen surface itself. These were not however matters of significance in the appellant's explanation for the accident, which from beginning to end in his evidence, required for its operative cause that there be a negligent driver of an unidentified motor vehicle. That that is so emerges not only explicitly from the appellant's evidence of the accident but also from his safe passage along this roadway on a couple of hundred previous occasions in the previous two years and on many more occasions in the 13 to 15 years before that. The case was pleaded and decided before the decision of this Court in Brodie v Singleton Shire Council102. The action was tried by Master Harrison. The only issue that she had to decide was of liability. Expert evidence was given at the trial. I adopt as a correct, if not quite complete summary of it, part of a passage from the judgment of Giles JA in the Court of Appeal to which the respondent appealed from the judgment of the Master103: "Could the final fracture have occurred as the [appellant] was following his safe course along the roadway? Quorrobolong Road was not a smooth road, and the [appellant] was riding fast at about 25 miles per hour. Both Dr Thompson, a metallurgist called for the [appellant], and Mr Robinson, a metallurgist called for the Nominal Defendant, said that the final overload fracture could have been caused by the loads generated by encountering potholes, but that it could also have been caused by the loads arising from normal riding on the roadway. Mr Robinson said, for 102 (2001) 206 CLR 512. 103 Cessnock City Council v Suvaal [2001] NSWCA 428 at [12]. Callinan example, that the final overload fracture could have been caused by a light impact such as running over a small rock or a branch on the surface of the roadway. Dr Thompson expressed a view, based on sub-critical fractures visible on microscopic examination of the head stem tube, that the sub-critical overloads probably occurred at a similar time to the final overload fracture, which the [appellant] said was consistent with rapid sequential loads from encountering potholes." The appellant contends that the summary of Giles JA overlooks this important exchange in the re-examination of Dr Thompson: "Q. When Mr Rofe cross-examined you he asked you a series of questions and the Master asked you to assume a series of things based upon the assumption that the sub-critical cracks were already extant an hour or so before the ultimate overload. Do you remember those questions? I do remember those questions, yes. You then gave some evidence to say that if that had been the case, you would expect to have found something about the pre-existing fatigue cracks? Yes, I would have expected if the bicycle had been used in that condition with the 50 per cent fatigue crack and then the two sub- critical overload impositions – if the bicycle had been used for a few hours or for a period of time and received a sufficient number of cycles of stress or load, then I would expect to have seen evidence of fatigue cracking similar to what accounted for 50 per cent of the cross-sectional area reduction. Did you see that? No, I didn't. Are you able to make upon the balance of probabilities a deduction from your failure to see that? A. My failure to see that, having known that the bicycle had been in use that morning, sways my balance of probability to the fact that the two sub-critical overload impositions were not there prior to the final overload. They would have occurred at a similar time as the final overload fracture." The importance, the appellant submits, of this passage, is that if, as it suggests, there were three fractures in rapid, almost instantaneous succession, much of the criticism of the Master's decision made by Giles JA is unwarranted. Callinan A police officer who investigated the accident gave evidence at the trial. He said that the appellant told him that he had been travelling along the road, as he always did, "when he hit a couple of potholes and the handlebars of the push bike came away and he hit a tree". The appellant's first claim, that another, an unidentified motor vehicle had brushed against him and it was this that caused him to lose control was made about two weeks after the accident. The appellant was consistently emphatic throughout the trial that the driver of an unidentified motor vehicle caused the accident. This was, despite his allegation in the alternative in paragraph 10 of his statement of claim, his case, and indeed his only case at the trial. He did not offer any other hypothesis for the accident, indeed he expressly rejected that any other explanation was open. The following exchanges which occurred between the appellant and counsel for the Nominal Defendant and counsel for the respondent in cross- examination make that clear beyond argument. They also make it clear that the potholes which affected the bicycle's stability were either on the edge of the bitumen surface or beside it. I am suggesting the real reason: You knew all along that there was no motor vehicle involved in this accident? There was a motor vehicle, sir. And that the reason the accident happened: You went over a rough section of the road and the handlebars collapsed? No, there was a car. Your case in this court is that an unknown car coming up behind you brushed or hit you and forced you off a safe position on this roadway into the rough edges? Into the pot holes. And into the pot holes? Yes. If there had been no car you would not have got on to the rough edges and into the pot holes? It was the car that forced you into that situation? Callinan Yes. Let's assume for the moment there was no such car. Can you give this court any other explanation as to how this accident happened, if there was no such car that forced you off the road? No, there was a car that forced me off the road. Let[']s assume – I am not assuming anything. The car hit me and that's what happened. So you didn't alter your steering direction, the car forced the steering direction to be altered? Yes. Are you sure of that? Yes. Q. What you say is that could not possibly have happened unless there was this car that hit you? That's what caused it, it forced me off the edge." (emphasis added) In order to exculpate itself, and to inculpate the other defendant, the respondent, the Nominal Defendant made these submissions through its counsel: "The position of the ... Nominal Defendant is that the statements made by the [appellant] immediately after the accident when the ramifications of any personal injuries claim would not have been apparent to him and at a time when it would be expected that he had no reason to other than tell the truth should be relied upon, not his oral evidence in these proceedings or alleged statements or allegations made much later. ... After telling him that there was no vehicle involved and that he was certain about that he then said to Senior Constable Barber that when he was travelling along the road he 'hit a couple of potholes and the handlebars of the pushbike came away and he hit a tree' ... Callinan It is the Nominal Defendant's position, therefore, that such a statement can be accepted (as distinct from his oral and other evidence as to that matter in the hearing) as to the truth of that issue which on the balance of probabilities would cause the Master to find that the [appellant] did hit a couple of potholes which in turn resulted in the final fracture and the handlebars of the bike collapsing, the [appellant] losing control of the bike and suffering his injury." That submission does not suggest that a sudden loss of concentration was the operative cause of the accident. The most that the Nominal Defendant submitted on the appellant's attentiveness or otherwise was that the appellant was "not looking or concentrating on where he was going", that is to say that the appellant was not keeping a proper lookout. The Master found that no motor vehicle was involved in the accident and entered a verdict in favour of the Nominal Defendant. This finding was made despite the appellant's determined refusal at the trial to countenance the possibility that his loss of control of his bicycle had occurred for reasons other than the presence of a car. His evidence descended to a detail that the car that had forced him off the bitumen carriageway was a station wagon. He stated that he had seen it "for a couple of seconds" before it struck or brushed him. The Master held that the respondent was negligent. She found that the accident occurred because the appellant "lost concentration": that "he caused his bicycle" to change direction towards the left side edge of the road where it struck "uneven potholes and the rough edge of the road". The handlebars then fractured at the head stem and turned anti-clockwise. The bicycle careered to the other, eastern side of the road whereupon the appellant fell and suffered injuries causing quadriplegia. The Master was of the opinion that the appellant was guilty of contributory negligence of which she said: "There is evidence to suggest that there is nothing wrong with building a bitza bicycle. The [appellant] was not obliged to make enquiries with qualified persons. He had been riding bikes for many years and was experience[d] in assembling the various components. However the [appellant] should have taken more care when adjusting the head stem to ensure that he did not adjust the head stem above the maximum marking as this added stress to the weaker part of the head stem causing the crack to accelerate. It is my view that the [appellant] was entitled to ride his bicycle at a speed of 25 miles per hour on this narrow road provided he kept away from the potholes, patches and edge breaks at the outer edge of the sealed roadway. The [appellant], for reasons other than the presence of a motor vehicle, lost concentration when he allowed the steering of the bicycle to put him into the potholes and rough edge of the road. I apportion contributory negligence at 20%." Callinan The appeal to the Court of Appeal The respondent appealed to the Court of Appeal of New South Wales on numerous grounds, including that there was no proper basis for a finding of negligence against it and that, alternatively, the appellant should have been held to have been guilty of contributory negligence to a greater extent than the Master found. The Court of Appeal (Powell JA, Giles JA and Rolfe AJA) was of the opinion that the appeal could be disposed of in the respondent's favour on the ground that the Master had no proper basis for a finding in favour of the appellant following her rejection of his pleaded, and repeated, assertion that it was contact with him by, or the proximity of an unidentified motor vehicle to him that caused the marked and sudden deviation of his bicycle into the potholes beside the road, the fracture in the steering mechanism and the fall. The leading judgment of the Court of Appeal was given by Giles JA with whom Powell JA and Rolfe AJA agreed, the last adding some brief observations of his own. Giles JA summed up the respondent's submission to the Court of Appeal104: "The [respondent] submitted that, if a motor vehicle was not involved and the [appellant] did not alter his steering direction, the more probable explanation for the [appellant] going into the potholes was that the final fracture of the head stem [of the handlebars] occurred as the [appellant] was following his safe course along the roadway, thus steering control was lost, and going into the potholes and all that followed was due to the prior loss of steering control. If so, it said, the accident was not attributable to any negligence on its part." As the appellant submits, in dealing with the expert evidence there was some evidence given in re-examination by Dr Thompson, which Giles JA may have overlooked, or to which his Honour's attention might not have been drawn, for his Honour said this following the passage from his summary of the expert evidence to which I have already referred105: "Dr Thompson's evidence, however, did not rise above consistency, and could not do so. The Master accepted the evidence of Dr Thompson and Mr Robinson. In my view this included acceptance that the final overload 104 Cessnock City Council v Suvaal [2001] NSWCA 428 at [11]. 105 Cessnock City Council v Suvaal [2001] NSWCA 428 at [12]. Callinan fracture could have been caused by the loads arising from normal riding on the roadway." The appeal to this Court I do not think that the omission to which I have just referred is a matter of any significance in this appeal. Dr Thompson's evidence was still to the effect that a very minor force would not have caused the final rapid overload fracture, although it was possible that the final rapid overload fracture could have occurred if the bicycle had been travelling along a smooth road at 25 miles per hour. Furthermore, as will also appear, I do not think that the outcome of this case should depend upon any close consideration of the number, age and severity of the fractures, latent or otherwise in the metal of the steering apparatus of the bicycle. These matters really only assumed a significance because of the Master's search for some other hypothesis for the cause of the accident on her rejection of the appellant's only, and repeated, version of it in evidence. In my opinion the Court of Appeal had no option but to allow the appeal. The approach of the Master was an incorrect one. She seemed to think that, rather than decide whether the appellant had proved the case that he sought repeatedly to make at the trial and which she concluded she was bound to reject, she was obliged to find some other explanation for the accident. This was to misunderstand the nature of the task she had to perform. It was not open to the Master to find that a momentary lapse in concentration caused the appellant to deviate from the bitumen surface and into the potholes. That was something that the appellant had not claimed, and which as between him and the respondent, the latter was not required to answer. Even the appellant's first version of the accident, the one that he gave to the police officer at the scene, made no reference to a momentary or any lapse in attention. It was not pleaded in paragraph 10 of the statement of claim, and was not even submitted to be so by the other defendant, the Nominal Defendant. It was, in short, not an issue in the case, and certainly was not an issue between the appellant and the respondent. As an operative cause, momentary inattention seems to have been entirely the invention of the Master. There is a further difficulty about the Master's finding in respect of it. It is that she failed to give any, or any proper, consideration to the question of how the inadvertent nature of the lapse which she purported to identify actually caused the degree of deviation which occurred, and why it should be regarded as amounting to contributory negligence of 20% in the circumstances of the case106. She gave no consideration, for example, to the question of the complexity of the appellant's 106 cf Sungravure Pty Ltd v Meani (1964) 110 CLR 24 at 33 per Kitto, Menzies and Callinan activity in riding the bicycle, or the need for him, if any, to determine in advance what he would be required to do107, or the need for the respondent to take account of these matters, which might have a bearing on the appellant's contributory negligence or otherwise. The appellant argued that the submission of the other defendant, that the respondent had negligently allowed potholes in the shoulders of the roadway to develop, put the respondent "in the frame" and argued that the Master's reasoning was within that submission. That is not the position so far as the issues between the appellant and the respondent were concerned. The frame upon which the appellant was, and remained exclusively focussed, always had in it the driver of an unidentified motor vehicle as the cause of the accident. And in any event, there was certainly no clear focus by any party upon a momentary lapse of concentration. Furthermore the appellant was not entitled to succeed on a case not put by him, and indeed one which he dared not put, either in the alternative or otherwise, because it starkly contradicted his true case. The finding by the Master distorted the issues joined between the appellant and the respondent. The latter was not to know, or indeed even to suspect, that a deviation as a result of momentary inattention might be found as the cause of the accident. If it had, then it would no doubt have cross-examined about it. The appellant having asserted and reasserted one cause only of the accident, the respondent was not bound to go on an excursion in cross- examination to identify and refute a version not even hinted at by the appellant. The finding by the Master of a version not advanced by the appellant also inevitably affected the resolution of the issue of contributory negligence on the part of the appellant. If there were no unidentified motor vehicle and he was only momentarily inattentive, why was it that his deviation was so great as to take him to the side of the roadway? Was he not aware of the potholes there? Why did he not correct the deviation before he reached them? Was he not aware of the final fracture of the steering apparatus? What part did it play in his fall? The appellant had no opportunity of exploring cross-examination, or of making submissions about them and their relevance to an accident in which no car was involved and which was precipitated by a momentary lapse in concentration. The presence of the potholes on the edges of the road only becomes significant if the appellant, as he alleged, was brushed into them. A finding that he was not, but that a momentary lapse in concentration took him into them, is a quite different matter. It gives rise to a question not addressed by anyone at the trial, indeed, not even by the Master, and that is, how it could reasonably be expected that the respondent might and should guard against momentary inattention by eliminating potholes of which the appellant these crucial matters 107 This is an adaptation of language used by Gibbs J in Commissioner of Railways v Ruprecht (1979) 142 CLR 563 at 567, a master and servant case. Callinan was well aware, and which were on the edges of a roadway, the characteristics of which were well known to him. Had the respondent contemplated the case found against it, no doubt it would also have wished to make different submissions with respect to the fragility of the bicycle and the part played by that in this changed scenario of the accident. The appellant expressly denied the absence of an unidentified motor vehicle at the relevant time. That denial was rejected by the Master. Its rejection had nothing whatsoever to say about any other cause of the accident. It was probative of nothing and certainly not of any other affirmative cause108. I agree with Giles JA that the Master's explanation of the accident was no more than "a rationalisation of what occurred ... from final overload before the [appellant] went into the potholes."109 The principle that findings by judges of first instance are owed much deference because of the judge's advantage over appellate courts by reason of seeing and hearing the witnesses can have little useful application to a case in which the judge has found in favour of a party who was a witness, a version which he has not only not given but which he has also resolutely and repeatedly rejected. The appellant's so-called alternative case in paragraphs 9 and 10 of the statement of claim was not in truth an alternative case at all. For it to have any credibility, or indeed even relevance, required first the essential presence of a carelessly driven motor vehicle. A further submission that the appellant made was that it was not his fault that the respondent did not explore at the trial the ramifications of a finding of loss of concentration by the appellant. The submission must be rejected. It was precisely because the appellant did not claim, indeed because he asserted the contrary of, a loss of concentration, that these were not explored. There may be multi-party cases in which an issue not initially raised between two of the parties, does become an issue between one or more of them and another party who raises it. This is not such a case however. As between the respondent and the appellant the issue that was critical was the one to which the appellant irrevocably committed himself, negligence by a motorist, and uncontrollable propulsion by that negligence on to a section of the roadway which he well knew was not nearly as even as the bitumen surface upon which he was riding. The appeal should be dismissed with costs. 108 cf Hobbs v Tinling [1929] 2 KB 1 at 19-20 per Scrutton LJ. 109 Cessnock City Council v Suvaal [2001] NSWCA 428 at [10].
HIGH COURT OF AUSTRALIA TRAVELEX LTD AND APPELLANT COMMISSIONER OF TAXATION RESPONDENT Travelex Ltd v Commissioner of Taxation [2010] HCA 33 29 September 2010 ORDER Appeal allowed with costs. Set aside the order of the Full Court of the Federal Court of Australia made on 29 September 2009, and in its place order that: the appeal to that Court be allowed with costs; and the order of Emmett J made on 19 December 2008 be set aside, and in its place: there be a declaration that the sale by Travelex Ltd of 400 Fijian dollars to Geoffrey Urquhart on 25 November 2007 on the departures side of the Customs barrier at Sydney International Airport was a supply of or in relation to rights and a GST-free supply by reason of item 4(a) of the table in s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth); and it be ordered that the Commissioner of Taxation pay Travelex Ltd's costs of the proceedings. On appeal from the Federal Court of Australia Representation R C Cordara SC with J O Hmelnitsky and P P Parisi for the appellant (instructed S J Gageler SC, Solicitor-General of the Commonwealth with B C Kasep for the respondent (instructed by Australian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Travelex Ltd v Commissioner of Taxation Taxes and duties – GST – Whether supply "GST-free" under s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth) – Foreign currency sold on departures side of customs barrier at Australian international airport – Acquired for use outside Australia – Whether an input taxed financial supply or a supply in relation to rights. Words and phrases – "financial supply", "supply in relation to rights". A New Tax System (Goods and Services Tax) Act 1999 (Cth), ss 9-5, 9-10, 9-30, Div 38. A New Tax System (Goods and Services Tax) Regulations 1999 (Cth), Div 40. FRENCH CJ AND HAYNE J. The appellant ("Travelex") buys and sells foreign currency. One of the places Travelex does that is on the departures side of the Customs barrier at Sydney International Airport. When Travelex sells foreign currency there, to a traveller who intends to use the currency overseas, is the supply "GST-free"? The answer to that question depends upon the application of a number of interrelated provisions of A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the Act") and Regulations made under the Act: A New Tax System (Goods and Services Tax) Regulations 1999 (Cth) ("the Regulations"). It is necessary to ask whether the supply is "GST-free" because Travelex submitted that, if the supply is GST-free, it could claim associated input tax credits which it could not claim if the supply is input taxed. (The validity of this submission was not in issue in the appeal.) A supply is GST-free if it is (among other things) GST-free under Div 38 of the Act1. A supply is input taxed if it is (again, among other things) input taxed under Div 40 of the Act2. To the extent that a supply would, apart from s 9-30(3), be both GST-free and input taxed, it is treated3 as GST-free and not input taxed. Although the determinative issue in the appeal depends upon the construction and application of Div 38 (and, in particular, s 38-190(1))4, it is 1 A New Tax System (Goods and Services Tax) Act 1999 (Cth), s 9-30(1). s 9-30(3). The provision is subject to a qualification which was not said to be engaged in the circumstances under consideration in this case. 4 Section 38-190(1), so far as presently relevant, provides: (Footnote continues on next page) Hayne important to begin by examining why the sale of foreign currency constitutes a supply. That examination shows that there is a supply because there is a transfer of ownership, the subject of which is money. Both of those observations are important in deciding the central question in the appeal: whether there is a supply "in relation to" rights. The chain of provisions engaged in this matter is very long. It is desirable, therefore, to identify important links in that chain. When Travelex sells foreign currency, there is a species of what the Act refers to as a "supply". There is a "supply" because the sale of foreign currency is a "financial supply". There is a "financial supply" because there is a disposal (by Travelex) of an interest in the currency of a foreign country. There being a supply of the kind identified, the question which determines whether the supply is GST-free is posed by s 38-190. More particularly, in respect of a foreign currency transaction of the kind identified, does the supply have three characteristics: (a) it is not a supply of goods or real property; (b) it is a supply made "in relation to rights"; and (c) "the rights are for use outside Australia"? Argument in this Court was directed "Supplies of things, other than goods or real property, for consumption outside Australia (1) The third column of this table sets out supplies that are GST-free (except to the extent that they are supplies of goods or real property): Supplies of things, other than goods or real property, for consumption outside Australia Item Topic These supplies are GST-free (except to the extent that they are supplies of goods or real property) ... Rights a supply that is made in relation to rights if: the rights are for use outside Australia; or the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done." Hayne principally to the second of those three characteristics. The Commissioner did not contend that the sale was a supply of goods. The Commissioner accepted that the currency sold was for use outside Australia. These reasons will show that the supply which is identified by the Act (the disposal of an interest in foreign currency) is a supply "in relation to" rights for use outside Australia. Before setting out, and then examining, the relevant provisions of the Act and Regulations, it is as well to say something briefly about the proceedings and how they come to this Court. Proceedings in the Federal Court Travelex commenced proceedings in the Federal Court of Australia seeking a declaration about the application of the Act to "any sale of foreign currency by [Travelex] on the departures side of the Customs barrier at Australian international airports". Alternatively, Travelex sought a declaration in relation to a particular sale of Fijian currency which had been made on the departures side of the Customs barrier at Sydney International Airport to Mr Geoffrey Urquhart, the tax manager of the group of companies which includes Travelex. In this Court, Travelex did not pursue the wider declaration. It sought a declaration that the particular sale of Fijian currency was not subject to GST. At first instance, Emmett J rejected Travelex's arguments and dismissed5 the proceeding. Emmett J concluded6 that there could be a supply "in relation to rights" only "if the essential character or substance of the supply, or of a separately identifiable part of the supply, is one of rights". There is not a supply "in relation to rights" "where the supply of rights is merely integral, ancillary or incidental to another dominant part of the supply, the supply being characterised by the dominant part"7. Travelex appealed to the Full Court of the Federal Court of Australia. That Court, by majority (Stone and Edmonds JJ, Mansfield J dissenting), dismissed8 the appeal. The majority agreed9 with the primary judge that the 5 Travelex Ltd v Federal Commissioner of Taxation (2008) 71 ATR 216. (2008) 71 ATR 216 at 226-227 [49]-[50]. (2008) 71 ATR 216 at 226 [49]. 8 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434. (2009) 178 FCR 434 at 445 [51]-[54] per Stone J, Edmonds J agreeing at 446 [57]. Hayne relevant inquiry required identification of the "predominant" aspect of the supply as distinct from any rights "incidental to the supply of the bank notes". In dissent, Mansfield J made a number of references to the policy and purpose of the Act10, with which the Commissioner took issue in this Court. Having regard to what he identified as the purpose of the Act, to tax consumption within Australia, Mansfield J concluded11 that the relationship between the rights to use the Fijian bank notes as legal tender in Fiji, and the supply of the notes, was sufficient to constitute a supply "in relation to" those rights. By special leave, Travelex now appeals to this Court. The appeal should be allowed. The Act Part 1-2 of the Act tells the reader how to use the Act. As s 2-1 says, the Act "begins (in Chapter 2) with the basic rules about the GST, and then sets out in Chapter 3 the exemptions from the GST and in Chapter 4 the special rules that can apply in particular cases". Section 2-1 points out that the Act "concludes with definitions and other interpretative material". As s 3-1(1) says, "[m]any of the terms used in the law relating to the GST are defined". Definition of a term used in the Act is often identified in the text of the Act by printing an asterisk before the term that is defined, but those marks are not reproduced in these reasons. What the Act identifies as its "central provisions" are set out in ss 7-1 to 7-15. Section 7-1(1) provides that GST is payable on "taxable supplies" and "taxable importations". What is a taxable supply is stated in s 9-5. That provides: "You make a taxable supply if: you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with Australia; and you are registered, or required to be registered. 10 For example, (2009) 178 FCR 434 at 439 [23], 440 [26]. 11 (2009) 178 FCR 434 at 440 [26]. Hayne However, the supply is not a taxable supply to the extent that it is GST- free or input taxed." Supply Section 9-10(1) provides is any form of supply whatsoever". Section 9-10(2) amplifies the already general provision of s 9-10(1) by providing that "[w]ithout limiting subsection (1), supply includes" any of a number of specified matters, including "(f) a financial supply". that a "supply Section 9-10(4) deals separately with a supply of money. It provides that: "However, a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money." "[M]oney" is defined in s 195-1 as including "currency (whether of Australia or of any other country)" and "any negotiable instrument used or circulated, or intended for use or circulation, as currency (whether of Australia or of any other country)". The exceptions to the definition of "money" (which include such things as collectors' pieces, investment articles and items of numismatic interest) may be put aside as irrelevant for present purposes. A sale of foreign currency falls within the "unless" clause in s 9-10(4). In such a sale money is provided as consideration for a supply that is a supply of money (the foreign currency). Financial supply As has already been noted, a "financial supply" is a species of supply. "[F]inancial supply" is defined in s 195-1 as having "the meaning given by the regulations made for the purposes of subsection 40-5(2)". Section 40-5(1) provides that a "financial supply is input taxed", and sub-s (2) provides that "[f]inancial supply has the meaning given by the regulations". Division 40 of the Regulations deals with input taxed supplies, and subdiv 40-A deals particularly with financial supplies. Regulation 40-5.01 identifies the object of subdiv 40-A as being "to identify a supply that is or is not a financial supply". Regulation 40-5.09 states what supplies are financial supplies. It does that by requiring the identification of the "provision, acquisition or disposal" of certain interests. Regulation 40-5.02 provides that an "interest is anything that is recognised at law or in equity as property in any form". Regulation 40-5.09(1) provides that "[t]he provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply" if certain conditions are met. There being no dispute that those conditions were met when Travelex sold foreign currency to a traveller on the departures side of the Customs barrier at an Australian international airport, it is not necessary to set them out here. For present purposes, what is important is that reg 40-5.09(3) identifies a number of interests, the provision, acquisition or disposal of which Hayne may constitute a financial supply. So far as presently relevant, reg 40-5.09(3) provides that: "For subregulation (1), the interest is an interest in or under the matter mentioned in an item in the following table: Item An interest in or under ... Australian currency, the currency of a foreign country, or an agreement to buy or sell currency of either kind". Regulation 40-5.11 provides that examples of the financial supplies identified in items of the table in reg 40-5.09 are given in Sched 7. One example given for item 9 of the table in reg 40-5.09 is "[c]onversion of Australian currency into foreign currency and conversion of foreign currency into Australian currency". Applying this chain of provisions to a sale of foreign currency, it can be seen that the sale is a "financial supply". It is a financial supply because there is a disposal (by Travelex) of an interest in (the ownership of) the currency of a foreign country. And neither Travelex nor the Commissioner contended to the contrary. Rather, as explained at the outset of these reasons, the debate in this appeal focused upon whether s 38-190 of the Act was engaged. It is important to approach that question with a clear recognition of why a foreign currency sale is a financial supply. It is a financial supply because there is a transfer of title to the subject matter of the sale: the foreign currency. Section 38-190 Section 38-190 of the Act deals with what its heading describes as "[s]upplies of things, other than goods or real property, for consumption outside Australia"12. Sub-section (1) of that section contains a table of supplies that are GST-free. The table appears under the chapeau: "The third column of this table sets out supplies that are GST-free (except to the extent that they are supplies of goods or real property)". The columns in the table are headed, respectively, "Item", "Topic" and "These supplies are GST-free (except to the extent that they are supplies of goods or real property) ...". Item 4 of that table states, as its "Topic", "Rights". Against that entry the third column of the table says: 12 The reference to "things", in the heading to s 38-190, must be read with reference to the definition given in s 195-1 of "thing" as "anything that can be supplied or imported". Hayne "a supply that is made in relation to rights if: the rights are for use outside Australia; or the supply is to an entity that is not an Australian resident and is outside Australia when the thing supplied is done." It is important to observe that s 38-190(1) is concerned to identify supplies as GST-free "except to the extent that they are supplies of goods or real property". Thus, when the section speaks of "supplies of things" it must be understood as using the defined word "thing" as at least including, perhaps as distinct from, what the Act treats as "goods or real property". More particularly, although the sale of foreign currency to an intending traveller will be completed by delivery to the traveller of whatever physical tokens constitute the relevant currency, the supply that is at issue in the present case is the financial supply constituted by the disposal to the traveller of an interest in (here, the ownership of) the currency of the foreign country. Is that "a supply that is made in relation to rights ... for use outside Australia"? Supply "in relation to rights"? At first instance, Emmett J concluded13 that the rights which are the incidents of being the holder or owner of bank notes issued by a foreign country "are not relevantly connected with the supply constituted by the ... currency transaction, such that it can be said that the supply of the bank notes was a supply made in relation to those so-called rights". Rather, as noted earlier, Emmett J identified14 the supply as "a supply of the physical notes", and concluded that "[t]he incidents of being the holder or owner of those bank notes were simply the consequences of becoming holder or owner". The majority in the Full Court substantially agreed with this analysis of the matter. As Stone J said15: "Accepting that the ... bank notes are not goods avoids the express exclusion of supplies of goods from Item 4 of the table in s 38-190, however it does not avoid the conclusion that the rights consequent upon the bank notes being legal tender in [the country of issue] were incidental to the supply of the bank notes." 13 (2008) 71 ATR 216 at 226 [48]. 14 (2008) 71 ATR 216 at 226 [48]. 15 (2009) 178 FCR 434 at 445 [53]. Hayne the reasons of Stone J but added some supplementary observations. His Honour rejected16 the proposition that "from a practical and business point of view the transaction is to be characterised as a supply in relation to the right to use the currency as legal tender" because that characterisation involved "a juristic disaggregation and classification of rights inherent in the currency supplied which does not reflect the practical reality of what is in fact supplied". In that respect, Edmonds J placed some emphasis17 upon what his Honour identified as "a quarantined status under the GST Act" given to a supply or acquisition of money. So much followed, in his Honour's opinion, from the fact that there was, in the circumstances of the transaction in question, a supply by Travelex only "by force of s 9-10(4) of the GST Act"18. As is apparent from what was said in the reasons of the Full Court, both parties had appealed in argument to the need to approach the Act from a "practical and business point of view"19. And although those arguments were not repeated in this Court, the Solicitor-General of the Commonwealth submitted on behalf of the Commissioner that it was necessary to consider the legislative scheme that emerges from reading the Act with the Regulations. More particularly, the Solicitor-General submitted that it was important to recognise that a supply, wholly in Australia, of "money" (a term that, as earlier noted, includes foreign currency) is specifically treated within the legislative scheme as a financial supply which the Solicitor-General also acknowledged, the fact that a supply is input taxed does not mean that it cannot also be GST-free. And if a supply would be both GST-free and input taxed, it is treated20 as GST-free and not input taxed. taxed under Div 40. But as input It may readily be accepted that "in relation to" is a phrase that can be used in a variety of contexts, in which the degree of connection that must be shown between the two subject matters joined by the expression may differ21. It may 16 (2009) 178 FCR 434 at 446 [59]. 17 (2009) 178 FCR 434 at 447 [61]. 18 (2009) 178 FCR 434 at 447 [61]. 19 (2009) 178 FCR 434 at 443 [45], 444 [47]. See also, for example, Sterling Guardian Pty Ltd v Commissioner of Taxation (2005) 220 ALR 550 at 562-563 [39]; Saga Holidays Ltd v Commissioner of Taxation (2006) 156 FCR 256 at 264 21 HP Mercantile Pty Ltd v Commissioner of Taxation (2005) 143 FCR 553 at 563 Hayne also be accepted that "the subject matter of the enquiry, the legislative history, and the facts of the case"22 are all matters that will bear upon the judgment of what relationship must be shown in order to conclude that there is a supply "in relation to" rights. By the supply which is constituted by the sale and delivery of the foreign currency, the supplier supplies to the acquirer the rights that attach to the tokens (be they notes or coins) that are the foreign currency. The supply (by sale) is not sufficiently described as a sale of the particular tokens. Those tokens are valuable because they are currency in at least the country or area of issue. Because the tokens are currency, the holder of the tokens can use them as a medium of exchange and as a store of economic value23. Currency has value only because of the rights that attach to it. When the supplier sells the foreign currency to the acquirer, the acquirer obtains the rights that attach to, or are constituted by, the ability to use the currency. Because the supply is a supply of property in the currency, the supply is a supply "in relation to" the rights that attach to the currency, without which property in the currency would be worthless. At first instance, Emmett J distinguished between rights that are "the essential character or substance of the supply, or of a separately identifiable part of the supply" and those that are "merely integral, ancillary or incidental to another dominant part of the supply"24. The key to the distinction was identified by Emmett J as being whether the supply "binds" the parties in some way. A supply that does not bind the parties in some way was said25 to be "not a supply that is made in relation to rights". Two preliminary points may be made about this distinction. First, if the distinction is to be drawn, it is one which must be applied to the particular supply in question: the identified "financial supply" of disposing of an interest in the currency of a foreign country. Secondly, if the distinction is to be drawn, it is not one whose application would be confined to financial supplies. If a distinction is to be made between supplies which "bind" the parties and those that do not, much turns upon what is meant in this context by saying 22 (2005) 143 FCR 553 at 563 [35] per Hill J. 23 Fox, Property Rights in Money, (2008) at 6 [1.19]. 24 (2008) 71 ATR 216 at 226 [49]. 25 (2008) 71 ATR 216 at 226-227 [49]. Hayne that a supply "binds" the parties. The consequence of the distinction would appear to be that there could be a supply "in relation to" rights only where the supplier can, and does, transfer the rights in question to the acquirer. It is a distinction that might be made more readily if the requirement was that there be a supply "of" rights, as distinct from a supply "in relation to" rights. Whether a distinction of the kind posited must always be made in deciding whether there is a supply "in relation to" rights may be a large question, but it is not one which must be decided in the present case. For present purposes, it is sufficient to observe that, when a seller of foreign currency transfers the currency to the acquirer, the seller transfers (that is, "disposes" of or "supplies") title to the currency tokens to the acquirer by delivering the tokens (be they notes or coins) to the acquirer. And the seller disposes of the rights that attach to the currency by transferring those rights to the acquirer. At least in that sense, the supply "binds" the parties. That the supplier does not create the rights that are transferred to the acquirer is not to the point, any more than that the rights in question are capable of best exploitation in a country that treats the particular currency as a form of legal tender. The sale and transfer is legally effective. By the supply (constituted by sale and delivery of currency) the supplier supplies to the acquirer the rights that attach to the currency tokens. And that conclusion is not denied by describing the rights which attach to bank notes and other forms of currency, as the Solicitor-General did in argument in this Court, as "at most, incidents of possession ... not separately capable of 'creation, grant, transfer, assignment or surrender'". Describing the rights which attach to currency as "incidents of possession" is a description of the negotiable characteristics of the tokens; it does not deny that rights attach to currency and are passed upon negotiation of the currency by delivery. Observing that rights attach to currency, and pass upon negotiation of the currency by delivery, does not constitute any "juristic disaggregation and classification of rights" that fails to reflect "the practical reality of what is in fact supplied"26. On the contrary, recognising that a sale of foreign currency transfers to the purchaser the rights that attach to the notes does no more than recognise the evident purpose of the transaction. Further classification or identification of the rights that pass, whether as rights against an issuing central bank, or as rights akin to those of the holder of a promissory note, is not necessary. What the Act requires is that there be a supply "in relation to" rights; the operation of the Act does not call for attention to be given to the particular content of the rights. 26 (2009) 178 FCR 434 at 446 [59]. Hayne It will be recalled that, in his concurring reasons in the Full Court, Edmonds J spoke27 of supply of money as having "a quarantined status under the GST Act". As is apparent from the several provisions to which reference has been made earlier in these reasons, sale of foreign currency is a subject for distinct treatment in the Act. It by no means follows, however, that the transaction is properly identified as somehow "quarantined" from the application of other provisions of the Act, in accordance with their terms. More particularly, the application of s 38-190(1) must be approached on the understanding that a sale of foreign currency is a financial supply of a kind specifically identified in the Act. That being so, the separate treatment of money transactions in s 9-10(4) neither permits, nor requires, a different or narrower engagement of s 38-190(1) than its terms would otherwise require. Contrary to the conclusions reached at first instance and on appeal in the Federal Court of Australia, it should be held that a supply constituted by a sale of foreign currency is a supply in relation to the rights that attend upon ownership of that currency. Supply "made in relation to rights ... for use outside Australia" Where it is evident that the currency is to be used overseas, the rights that attach to the currency are for use outside Australia. It may be accepted that, as the Solicitor-General submitted, there may be practical difficulties in administering the relevant provisions of the Act where the use to be made of the rights turns on the recipient's intention. Those difficulties, however, do not provide any basis for reading down those provisions, or for reading the connecting expression "in relation to" in a way that departs from the construction which has been identified. Difficulties in deciding whether the supply is "for use outside Australia" do not bear upon what is meant by a supply "in relation to" rights. It may also be observed that, as the Solicitor-General pointed out, the Act and Regulations contain elaborate provisions that deal with the circumstances in which a supply of goods becomes GST-free, when a traveller is seeking to take those goods out of Australia. But again, the absence of equivalent provisions in respect of the supply of rights for use outside Australia does not provide a basis for confining the operation that is to be given to the expression "in relation to". 27 (2009) 178 FCR 434 at 447 [61]. Hayne Conclusion and orders The appeal to this Court should be allowed with costs. The orders of the Full Court of the Federal Court of Australia made on 29 September 2009 should be set aside, and in their place the appeal to that Court should be allowed with costs. The orders of Emmett J made on 19 December 2008 should be set aside, and in their place there should be: a declaration that the sale by Travelex Ltd of 400 Fijian dollars to Geoffrey Urquhart on 25 November 2007 on the departures side of the Customs barrier at Sydney International Airport was a supply of or in relation to rights and a GST-free supply by reason of item 4(a) of the table in s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth); and an order that the Commissioner of Taxation pay Travelex Ltd's costs of the proceedings. HEYDON J. Was the sale of Fijian currency by Travelex Ltd to Mr Urquhart on the departures side of a Customs barrier at Sydney International Airport GST-free pursuant to item 4(a) of the table in s 38-190(1) of A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the Act")28? That provision raises five questions. First, if there was a supply, was it a supply of goods? Secondly, if there was a supply, was it a supply of real property? If the answer to both those questions is "No", the third question is: was there a supply? If so, fourthly, was the supply made in relation to rights? If so, fifthly, were those rights for use outside Australia? The submissions of the parties were very sophisticated and extensive, and it is desirable to decide only those issues which have to be decided, leaving others for later occasions. The questions are to be answered as follows. First, the parties agreed that the answer to the first question is "No". The sale of Fijian currency was not a supply of goods. Secondly, the answer to the second question is "No". The sale of Fijian currency was obviously not a supply of real property. Turning to the third question, the parties agreed that the supply of foreign currency was a supply as defined in s 9-10 of the Act, being a financial supply as referred to in s 9-10(2)(f). But the third question is interlinked with the fourth question. The answers to both questions depend on the legal nature of the bank notes. "A bank note is a promissory note issued by a bank payable on demand." So spoke Lord Atkin in Banco de Portugal v Waterlow and Sons Ltd29. One submission by the appellant was that the purchase by Mr Urquhart of the Fijian currency was the purchase of promissory notes. The rights represented by each promissory note included a chose in action – a right to proceed against the issuer of the currency for its face value – as well as a right to negotiate it as legal tender, whether simultaneously with and in return for the acquisition of goods or services, in payment of pre-existing debts which Mr Urquhart owed, or as a means of creating debts to Mr Urquhart by depositing or lending it. The Solicitor-General of the Commonwealth emphatically denied the validity of that argument. The appellant, however, put an alternative submission: that whether or not the Fijian bank notes had the characteristics of promissory notes, the Reserve 28 The text is set out at [4] n 4 above. 29 [1932] AC 452 at 487. Bank of Fiji Act 1983 (Fiji), ss 22, 24, 26 and 27, endowed their possessors with equivalent rights30. The latter submission is correct. When Mr Urquhart acquired the currency from Travelex, he acquired an interest in property (namely ownership of those statutory rights of action and negotiation). That interest in property was identical with, evidenced by, and not capable of disaggregation from, an "interest in or under … the currency of a foreign country": reg 40-5.09(3)31. To acquire an interest in the currency was to acquire an interest in the intangible rights connected with it, and vice versa. Hence what was acquired was an interest within the meaning of reg 40-5.09(3). The acquisition was therefore a "financial supply" within the meaning of reg 40-5.09(1) and ss 40-5(2) and 195-1 of the Act. It was thus a "supply" within the meaning of s 9-10(2)(f)32 and the parties' agreement in relation to the third question was correct. Fourthly, the transfer of each Fijian bank note was a supply in relation to rights. The relevant question is one of characterisation. Questions of characterisation, like questions of construction, with which they are closely linked, can readily strike different minds differently. The trial judge and the majority in the Full Court of the Federal Court treated the supply of the pieces of paper as being "the supply", and the rights as being merely a consequence or incident of that supply. The transaction should be characterised differently. The legal substance of the transaction was the supply of rights. The rights supplied were the rights enjoyed by the holder of the currency as created by the statute law of Fiji. The handing over of the pieces of paper constituted, evidenced, and was not capable of disaggregation from, the supply of rights. Apart from those rights, the pieces of paper had little value. They might have been used to stop an uneven table wobbling, or to jam shut a loose door, or to amuse small children, or to light a cigar. If the currency included coins, the coins might have been used to turn stiff screws or to lay on railway lines for the purpose of being flattened. But uses of that kind, which are very remote from their real purpose, would not prevent both the pieces of paper and the coins from being almost worthless. The supply of the currency was a 30 See Emmett J's account in Travelex Ltd v Federal Commissioner of Taxation (2008) 71 ATR 216 at 223 [29], and see also reasons of Crennan and Bell JJ at [83] below. 31 References to regulations are references to A New Tax System (Goods and Services Tax) Regulations 1999 (Cth). 32 These provisions are set out above at [14]-[17]. supply in relation to the rights it gave because these rights constituted the pith and substance of the transaction. The Solicitor-General of the Commonwealth referred to s 9-10(2)(e) of the Act. It provides that "supply" includes "a creation, grant, transfer, assignment or surrender of any right". He submitted that unless "a supply is one which involves the creation, grant, transfer, assignment or surrender of any right it is not one which is made in relation to rights for the purpose of item 4(a) of the table in s 38-190." He submitted that any supply of rights was incidental to the supply of the bank notes. This submission appealed to the trial judge, who said that the rights which the holder of the Fijian bank notes had could not be said33: "to be the subject of any transfer or assignment by Travelex, merely because they are incidents that pass with ownership or possession of the bank notes. As the owner of a chattel, such as a book, a person is entitled to handle, read and deal with the book, something that the person, if not the owner, could not do without the consent or licence of the owner. A supply of a book would not be a supply that was made in relation to the right to handle or read the book. It would be a supply of goods. A supply in relation to rights must be something more than the supply of goods the ownership of which has incidents that might in some senses be described as rights. An incident that is the consequence of a supply, whether or not that incident can fairly be characterised as a right, is not something in relation to which the supply is made." The majority in the Full Court accepted the conclusion, but not every step in the reasoning34. This state of affairs has the following difficulties. One difficulty, as Mansfield J, dissenting in the Full Court, pointed out, with some force, is that the analysis based on the book example is not of much assistance because a book is goods, and the parties agreed that the bank notes There is another difficulty in the book analogy. To transfer a book transfers no more than a right of ownership. But to transfer currency does more than transfer the right of ownership of the pieces of paper: it transfers the rights 33 Travelex Ltd v Federal Commissioner of Taxation (2008) 71 ATR 216 at 226 [46] (emphasis in original). 34 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 444-446 [49]-[54] per Stone J (Edmonds J concurring). 35 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 439-440 associated with legal tender. To use currency is to employ it in discharging debts, acquiring goods or services, and creating new debts. For the transferee to "use" the legal tender is to exercise those rights – it is to discharge obligations owed by the transferee or create new obligations in others. To use a book is to read it and keep it without altering the owner's legal relations with anyone else. To use currency is to spend it or transfer it to others as a means of altering the owner's legal relations with others. Another difficulty is that the majority in the Full Court considered that an assignment of the copyright in a book would be a supply "in relation to rights irrespective of whether ownership of the book had also been transferred to the assignee of the copyright."36 Indeed, it is a supply that is made of rights. The transfer of bank notes is a supply of rights – and hence it falls within the wider expression "supply that is made in relation to rights". A further difficulty is that it is not clear why recourse is had to s 9-10(2)(e) of the definition of "supply" when it is common ground that s 9-10(2)(f) of the definition applies, since the supply here was financial supply. There is no reason to narrow one limb of that definition by reference to another, or to narrow the meaning of "supply that is made in relation to rights" in item 4(a) of the table in s 38-190(1) by reference to one limb of the definition of "supply" when it is agreed that the supply in question falls within another. Finally, Mansfield J correctly pointed out that the Solicitor-General's argument is flawed in that, if the argument were sound, the language of item 4(a) would have reflected the language of s 9-10(2)(e); but it does not37. The Solicitor-General of the Commonwealth also submitted that a supply wholly of foreign currency was a financial supply which was input taxed under Div 40. However, this does not prevent the supply being GST-free, and a supply which is both GST-free and input taxed is treated as GST-free by reason of s 9-30(3). From one angle, the point of the Solicitor-General's submission was to illuminate policy aspects of the legislation. However, policy considerations, except so far as they emerge from the statutory language, must give way to the clear words of the Act discussed above. And if policy questions raised by the statutory language are to be considered, there is force in what Mansfield J, dissenting in the Full Court, said. He pointed out that if the bank notes had been goods, they would have been GST-exempt by reason of s 38-185(1), and asked rhetorically what legislative policy could be "behind a supply of bank notes in the 36 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 445 [51]. 37 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 439 [20]. circumstances not being GST-free, when exported goods and services generally are GST-free."38 But from another angle the Solicitor-General's submission went further. The submission was that the supply of money was "an input taxed financial supply and not one capable of being transformed into a 'supply that is made in relation to rights'" within the meaning of item 4(a) of the table in s 38-190(1). The submission did not satisfactorily explain why this conclusion followed. Fifthly, the rights evidenced by the currency were for use outside Australia: Mr Urquhart acquired the currency with the intention of spending it in Fiji, and that intention was confirmed by the fact that he did spend it there. The appeal should be allowed, the orders made in the courts below should be set aside, the declaration sought by the appellant should be made, and the respondent should pay the appellant's costs in all courts. 38 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 439 [23]. CRENNAN AND BELL JJ. The issue before the Court is whether a supply of Fijian bank notes, by the appellant to a customer, on the departures side of the Customs barrier at Sydney International Airport was GST-free under A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("the GST Act"). A majority of the Full Court of the Federal Court of Australia (Stone and Edmonds JJ, Mansfield J dissenting) found that the supply was not GST-free. The facts The relevant facts in this matter are not in dispute. The appellant is engaged in the business of foreign exchange transactions. It leases premises in the secure departures area of Sydney International Airport from Sydney Airport Corporation Limited and operates a currency exchange business there ("the Travelex counter"). Only people who have a valid boarding pass for an outgoing international flight and who have cleared the Customs barrier, or people who have arrived in Australia on an international flight and are awaiting an outward international flight, can have access to the Travelex counter. On 25 November 2007 Mr Geoffrey Urquhart, an employee of the appellant, flew from Sydney to Fiji. After checking in with the airline with which he was flying to Fiji, he continued on to the secure area of the departures side of Sydney International Airport. After showing his departure form, boarding pass and passport at the Customs barrier, and following luggage inspection, he was allowed to go to the secure departures area to wait for his flight. Having entered the departures area, Mr Urquhart went to the Travelex counter to purchase Fijian currency to use in Fiji. He purchased 400 Fijian dollars in bank notes for which he paid AU$339.65, which included eight Australian dollars as commission. At the time of purchasing the Fijian bank notes, it was Mr Urquhart's intention to have adequate Fijian cash on hand at the end of his visit to Fiji so that he could pay cash for a taxi to the airport and could make other purchases in the event that his flight was delayed. Mr Urquhart flew from Australia to Fiji shortly after purchasing the Fijian dollars at the Travelex counter. He carried the Fijian bank notes with him. While in Fiji, Mr Urquhart used the Fijian bank notes to pay for taxis, lunch, water and pre-dinner drinks, and to purchase office materials which he needed for the work that he was undertaking while he was in Fiji. The GST Act In Federal Commissioner of Taxation v Reliance Carpet Co Pty Ltd39, this Court approved the statement that under the GST Act "what generates the tax liability (and the obligations of recording and reporting), is not consumption but a particular form of transaction, namely supply"40. Section 7-1 of the GST Act provides that GST is payable on taxable supplies. A supply takes "any form of supply whatsoever" (s 9-10(1)) and relevantly includes "a creation, grant, transfer, assignment or surrender of any right" (s 9-10(2)(e)) and "a financial supply" (s 9-10(2)(f)). A New Tax System (Goods and Services Tax) Regulations 1999 (Cth) ("the GST Regulations") set out the requirements for a financial supply (discussed below). Section 9-10(4) of the GST Act provides that "a supply does not include a supply of money unless the money is provided as consideration for a supply that is a supply of money". "Money" is defined in s 195-1 to include "currency (whether of Australia or of any other country)". Section 9-5 of the GST Act, under the heading "Taxable supplies", provides: "You make a taxable supply if: you make the supply for *consideration; and the supply is made in the course or furtherance of an *enterprise that you *carry on; and the supply is *connected with Australia; and you are *registered, or *required to be registered. However, the supply is not a *taxable supply to the extent that it is *GST- free or *input taxed."41 39 (2008) 236 CLR 342 at 346 [3] per Gleeson CJ, Gummow, Heydon, Crennan and Kiefel JJ; [2008] HCA 22. 40 Sterling Guardian Pty Ltd v Commissioner of Taxation (2006) 149 FCR 255 at 258 [15] per Heerey, Dowsett and Conti JJ. 41 Asterisked terms are defined in the Dictionary in s 195-1. The exception in the final sentence of s 9-5 is of particular relevance in this appeal because, as explained below, a "financial supply" is input taxed. It was common ground that the supply of foreign currency was a "supply" under s 9-10 of the GST Act, being a "financial supply", and that there was consideration in respect of that supply. Section 9-30 sets out when a supply is GST-free or is input taxed. An input taxed supply carries no entitlement to an input tax credit on the part of the supplier for things acquired or imported to make the supply (ss 11-15(2)(a) and 15-10(2)(a)). Section 9-30(1)(a) relevantly states that a supply is GST-free if it falls under Div 38 of the GST Act. Section 9-30(2)(a) relevantly provides that a supply is input taxed if it is input taxed under Div 40. If a supply would be both GST-free and input taxed it is treated as GST-free (s 9-30(3)). Section 38-1, under the heading "What this Division is about", indicates that a supply that is GST-free attracts no GST but that an entitlement to an input tax credit for anything acquired to make the supply is not affected. Similarly, s 40-1 indicates that a supply that is input taxed is free of any obligation to pay GST but that there is no entitlement to any input tax credit for anything acquired or imported to make the supply. Section 40-5(1) provides that a "financial supply" is "input taxed" and sub-s (2) provides that "Financial supply has the meaning given by the regulations." However, by virtue of s 9-30(3)(a), referred to above, a "financial supply" would not be input taxed to the extent that it is also GST-free. The rationale for and the effect of treating financial supplies as input taxed supplies have both been explained by Hill J in HP Mercantile Pty Ltd v Commissioner of Taxation42. Regulation 40-5.02 provides that: "An interest is anything that is recognised at law or in equity as property in any form." Under the heading "Financial supply providers", reg 40-5.06 relevantly provides: "(1) An entity, in relation to the supply of an interest that was: immediately before the supply, the property of the entity; or created by the entity in making the supply; is the financial supply provider of the interest." 42 (2005) 143 FCR 553 at 558 [16]-[17]. Relevantly, reg 40-5.09, under the heading "What supplies are financial supplies", provides: "(1) The provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4) is a financial supply if: the provision, acquisition or disposal is: for consideration; and For the purpose of sub-reg (1) of reg 40-5.09, under item 9 of a table set out in sub-reg (3), an interest includes an interest in or under "Australian currency, the currency of a foreign country, or an agreement to buy or sell currency of either kind". Division 38, subdiv 38-E of the GST Act deals with "Exports and other supplies for consumption outside Australia". Of particular relevance is s 38-190, which deals with "Supplies of things, other than goods or real property, for consumption outside Australia". A "thing" is defined in s 195-1 as meaning "anything that can be supplied or imported", thus the expression is not confined to tangible objects. References to a thing or things in these reasons follow that definition. Section 38-190(1) provides that items listed in the third column of the table set out in s 38-190(1) are GST-free "except to the extent that they are supplies of goods or real property". There are five "Items" and "Topics" addressed in s 38-190(1). Item 4 of the table in s 38-190(1), which is the "Topic" with which this matter is concerned, deals with "Rights". The GST-free supplies covered in the third column of item 4 relevantly include: "a supply that is made in relation to rights if: the rights are for use outside Australia; or The question The question, posed at each level of the proceedings, is whether the supply of Fijian bank notes, in the circumstances of this case, was "a supply that is made in relation to rights" within the meaning of item 4(a) of the table in s 38-190(1) of the GST Act. It was common ground that the supply of bank notes was for use outside Australia and that that supply was not "a supply of goods" within the meaning of the GST Act. The primary judge (Emmett J) refused to order a declaration that the Fijian currency transaction was "a supply that is made in relation to rights" within the meaning of item 4(a). After expressing the view that the transaction did not involve a right within the meaning of s 9-10(2)(e), his Honour then considered that, before a supply can be said to be made in relation to rights within item 4(a), "the right must bind the parties in some way."43 In the Full Court, Stone J and Edmonds J, for reasons which differed in some respects, agreed generally with the primary judge. Edmonds J essayed a view that a supply or acquisition of money is to be given "quarantined status under the GST Act"44. This view was not embraced by the Commissioner in this Court. in Australia45. In particular, his Honour Mansfield J would have allowed the appeal. His Honour said that he attached significance to the fact that the purpose of the GST Act is to tax consumption the Commissioner's contention that the phrase "supply that is made in relation to rights" should be construed by reference to the supply referred to in s 9-10(2)(e), so that item 4(a) of the table in s 38-190(1) could apply only if the particular supply fell within the terms of s 9-10(2)(e)46. His Honour asked rhetorically what would be the legislative policy behind a supply of bank notes in the circumstances not being GST-free when exported goods and services generally are GST-free47. rejected Although we do not agree with everything said by the majority members of the Full Court, for the reasons which follow, the majority was correct to uphold the primary judge in finding that the supply of Fijian bank notes made by the appellant was not "a supply that is made in relation to rights" within item 4(a). The appellant contended that the first step for determining whether the supply of the Fijian bank notes was a "supply that is made in relation to rights" was to analyse the legal nature of a transaction in which bank notes were 43 Travelex Ltd v Federal Commissioner of Taxation (2008) 71 ATR 216 at 226 [49]. 44 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 447 [61]. 45 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 436-437 46 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 438 [19]. 47 Travelex Ltd v Federal Commissioner of Taxation (2009) 178 FCR 434 at 439 [23]. negotiated and the rights of a holder of a bank note. Negotiability and the ability to use money as a medium of exchange were characterised as central to the value of a bank note and legal tender was described as an enhanced level of negotiability supported by the State. It was contended that, as a matter of law, bank notes and dealings with them involve or affect rights. The second step in the appellant's argument was to observe that item 4(a) neither defines nor confines the kind of rights to which it refers. It followed, it was submitted, that item 4(a) can include public and private law rights as well as legal or equitable rights and rights arising under overseas legal systems. As a third step in the argument, the appellant relied on policy considerations evidenced by the aim of subdiv 38-E (ss 38-185 to 38-190) to provide relief from both output and input taxation of supplies which are made in Australia, but consumed overseas. The Commissioner relied on an affinity between item 4(a) and s 9-10(2)(e) of the GST Act and contended that, unless a supply is one which involves "a creation, grant, transfer, assignment or surrender of any right", it is not one made in relation to rights for the purposes of item 4(a). It was contended that the rights identified by the appellant in relation to bank notes are not rights for the purposes of item 4(a) because negotiability is a functional attribute of a bank note rather than a right and legal tender is an incident of the sovereignty of Fiji to regulate its own currency. Alternatively, it was contended that such rights in respect of bank notes as were identified by the appellant were incidental to the actual supply of the bank notes. Finally, it was submitted that the appellant's supply to its customer was a supply of money as defined by s 195-1 of the GST Act, which, by virtue of ss 9-10(2)(f), 9-10(4) and 9-5 and item 9 of the table in reg 40-5.09(3), was an input taxed financial supply not capable of being transformed into a "supply that is made in relation to rights" for the purposes of item 4(a). Determining the question essentially the construction of item 4(a). As observed by this Court48, the surest guide to legislative intention is the language which has actually been employed in the text of the legislation. A decision on the meaning of the language employed must begin by examining the involves 48 Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27 at 47 [47] per Hayne, Heydon, Crennan and Kiefel JJ; [2009] HCA 41. context49, considered in its widest sense50, which will include the general purpose and policy of the provision51. Bank notes and rights Fijian bank notes are issued under the power conferred on the Reserve Bank of Fiji by s 22 of the Reserve Bank of Fiji Act 1983 (Fiji)52 to issue currency in Fiji which, in the case of notes, "shall be legal tender in Fiji" under s 24 of that Act "for the payment of any amount". Under s 27, the Reserve Bank is required to issue, reissue and exchange on demand, without charge, currency which it has issued. Money in the form of bank notes is essentially a medium of exchange whatever the currency in which it is circulated53. The Commissioner did not contend that the Fijian currency should be treated as a commodity. Legal tender is concerned with "the prescription of that which is, at any particular time, to be a lawful mode of payment within a polity."54 The Fijian bank notes had the characteristic of negotiability and the status of legal tender in Fiji. There is no doubt that the bank notes issued to Mr Urquhart by the appellant could be used by him to discharge debts incurred in Fiji. Leaving aside the possibility of tracing money received in bad faith or for no consideration, possession of money denotes ownership of money and a person 49 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28. 50 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ; [1997] HCA 2. 51 Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ; [1955] HCA 27, quoted with approval in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ. 52 Cf s 44 of the Reserve Bank Act 1959 (Cth). 53 Camdex International Ltd v Bank of Zambia [1997] CLC 714 at 732 per Phillips LJ. See also Proctor, Mann on the Legal Aspect of Money, 6th ed (2005) at 44-45 [1.61]. Cf Caltex Ltd v Federal Commissioner of Taxation (1960) 106 CLR 205 at 220 per Dixon CJ; [1960] HCA 17. 54 Watson v Lee (1979) 144 CLR 374 at 398 per Stephen J; [1979] HCA 53. receiving money is under no duty to inquire into title55. The common law approach to title exemplified in the maxim nemo dat quod non habet does not apply to negotiable chattels and securities, as first recognised in respect of money and bank notes56. It is possible to speak of a person having a proprietary right in money, as a medium of exchange, whether the money is in the form of coins, bank notes or an incorporeal bank balance57. In describing the distinguishing characteristics of money and negotiable instruments, as personal property, Sir Roy Goode has stated58: "[P]ersonal property divides broadly into two groups: tangible movables (goods and money), and intangibles, often termed 'choses in action'. However, some intangibles are more concrete than others. These are rights to money, goods or securities which are locked up in a document to the extent that the document is considered to represent the right, which thus becomes transferable by transfer of the document itself. Rights so embodied may conveniently be termed 'documentary intangibles', and their significance lies in the fact that the document which manifests them is to most intents and purposes equated with goods and is susceptible to the same remedies of specific delivery, damages for conversion and the like." The phrase "documentary intangible" encompasses the idea that the holder or owner of a bank note not only has a chattel but also has "rights of enforcement" which can include enforcing "its character as a chose in action by suing on the legal obligation which the note embodies."59 As with a bond, property in bank notes passes by delivery so that "[w]hoever owns the paper owns the obligation"60 embodied in the paper. Contemporary electronic arrangements are such that a transfer of money occurs with the entry of a credit 55 Sinclair v Brougham [1914] AC 398 at 418 per Viscount Haldane LC. 56 Miller v Race (1758) 1 Burr 452 [97 ER 398]. See also Banque Belge v Hambrouck [1921] 1 KB 321 at 329 per Scrutton LJ. 57 Fox, Property Rights in Money, (2008) at 7 and 23. 58 Goode on Commercial Law, 4th ed (2009) at 32. 59 Fox, Property Rights in Money, (2008) at 23. 60 Perpetual Trustee Co (Ltd) v Federal Commissioner of Taxation (1932) 47 CLR 402 at 414 per Dixon J; [1932] HCA 19. in the payee's account and the entry of a corresponding debit in the payor's account61. The appellant is correct in the first step in its argument, namely in characterising the holder or the owner of the bank notes issued by the Reserve Bank of Fiji as having certain rights generally of the kind described above. In particular, the holder or owner of a Fijian bank note has an entitlement to negotiate the bank note and to rely on its status as legal tender in Fiji. It is not necessary to determine a disputed issue as to whether the Fijian bank notes were promissory notes separately giving rise to rights in that capacity62. They were not in evidence, therefore the Court was not in a position to know precisely what appears on them. The appellant's position was that its case did not depend on any decision about whether the bank notes have the characteristics of promissory notes. In any event, there was the statutory obligation under s 27 of the Reserve Bank of Fiji Act. The Commissioner's description of the negotiability of bank notes and the ability to deploy them as legal tender in Fiji as functional attributes of a bank note rather than rights focuses insufficiently on the holder's or owner's entitlement to enforce obligations embodied in the bank notes. Such entitlements are accurately described as rights. However, that does not conclude the question of whether such rights are rights for the purposes of item 4(a). Before turning to consider what is covered by the expression "a supply that is made in relation to rights" under item 4(a), it needs to be noted that the expression "made in relation to" is a wide one denoting a connection between "a supply" and the "rights". The precise relationship between the two will be governed by the context in which the expression is used. The critical issue as framed by the parties is whether the expression "a supply that is made in relation to rights" is to be construed widely as a supply made in relation to any public or private law rights or legal or equitable rights or rights arising under an overseas legal system (the appellant's construction), or to be construed more narrowly as a supply made in relation to the "creation, grant, transfer, assignment or surrender of any right", which is the language of s 9-10(2)(e) (the Commissioner's construction). 61 Customs and Excise Commissioners v FDR Ltd [2000] STC 672 at 686-687 [36] per Laws LJ. See also Momm v Barclays Bank International Ltd [1977] QB 790. 62 As to which see Banco de Portugal v Waterlow & Sons Ltd [1932] AC 452. See also Bank of Canada v Bank of Montreal [1978] 1 SCR 1148. Sections 9-10(2) and 38-190(1) Because the GST Act imposes tax on taxable supplies, it is essential that liability be determined by reference to a clear intention to impose the tax63. It is just as important to determine a clear legislative intention to exempt a supply from taxation as it is to determine a clear intention to impose tax. The table in s 38-190(1) refers at various points to "goods" (item 1), "real property" (item 1), "rights" (item 4(a)), and "services" (item 5). Elsewhere in the legislation each of those terms is deployed in the context of determining the meaning of supply (s 9-10(2)) and the meaning of acquisition (s 11-10). It is convenient to now set out fully s 9-10(1) and (2), which deal with the meaning of supply: "(1) A supply is any form of supply whatsoever. (2) Without limiting subsection (1), supply includes any of these: a supply of goods; a supply of services; a provision of advice or information; a grant, assignment or surrender of *real property; a creation, grant, transfer, assignment or surrender of any right; a *financial supply; an entry into, or release from, an obligation: to do anything; or to refrain from an act; or (iii) to tolerate and act or situation; any combination of any 2 or more of the matters referred to in paragraphs (a) to (g)." 63 Hepples v Commissioner of Taxation (1990) 22 FCR 1 at 22 per Gummow J and the cases there referred to. Reading s 9-5 (set out earlier) and s 9-10(1) and (2) together indicates that the meaning of supply in s 9-10 is relevant for the purposes of identifying a taxable supply, a GST-free supply or an input taxed supply. Understanding the use of each of the terms "goods", "real property", "rights" and "services", in the table in s 38-190(1), requires consideration of the use of those same terms as set out in s 9-10(2), and consideration of any relevant statutory definitions in s 195-1. Both sections are contextually important for construing s 38-190. If the terms "goods", "real property", "rights" and "services" were to have different meanings in the legislation, depending on whether they were being used in the context of imposing tax, or in the context of indicating GST-free status, that fact would need to emerge clearly from the legislation. The overall structure of the legislation, in the absence of indications to the contrary, favours construing consistently terms which are repeated in the legislation. The expression "rights" is not defined in the GST Act. The word "right", and its plural, "rights", are familiar in legal discourse and are capable of wide application. It is possible to speak of "the right to vote" or "the right of free speech". Such rights exist by operation of, or under, the law. No transaction is required for the bestowal or enjoyment of such rights. Well-understood distinctions are made between proprietary rights and personal rights, and between legal and equitable rights. Many rights are transmissible from one person to another. Generally speaking, for legal purposes, a right is an entitlement supported by the law. The formula in s 9-10(2)(e) indicates that the supplier involved in such a supply has the legal capacity to "create, grant, transfer, assign or surrender" a right alone or, as provided in s 9-10(2)(h), in combination with other things. Therefore, to fall within s 9-10(2)(e) a right, whether it be legal or equitable, or could be otherwise described, must be transmissible by the supplier. Section 9-10(2)(e) operates to distinguish a supply of any right from a supply of goods (s 9-10(2)(a)), or a supply of services (s 9-10(2)(b)), or a supply by provision of advice or information (s 9-10(2)(c)), or a supply by a grant, assignment or surrender of real property (s 9-10(2)(d)). A supply of any right under s 9-10(2)(e) is also distinguished from a financial supply under s 9-10(2)(f), which, by reference to the definition of financial supply in reg 40-5.09 (relevantly extracted above), covers "[t]he provision, acquisition or disposal of an interest mentioned in subregulation (3) or (4)" of reg 40-5.09 (reg 40-5.09(1)). That a supply under s 9-10(2) can include a combination of two or more matters distinguished in pars (a) to (g) of s 9-10(2) (s 9-10(2)(h)) does not rob the individual examples of supply of their distinctiveness. From both the language of s 9-10(2)(e) and its placement in s 9-10(2), it is clear that a "right" for the purposes of the GST Act can exist independently of goods, services or other things or forms of supply. A right can be a "thing" within the meaning of the legislation and must itself be capable of "creation, grant, transfer, assignment or surrender". The language of s 9-10(2)(e) also indicates that a right which is created, granted, transferred, assigned or surrendered by a supplier is the direct object of the supply. A paradigm example of "the supply of a right" as covered by s 9-10(2)(e) would be the supply of a right to credit. A right to credit might be regarded as a supply of a service. It is a particular service being a financial supply, included in item 2 of the table in sub-reg (3) of reg 40-5.09. It is a financial supply of a right. The supplier in that context must have the legal capacity to create or grant, or for that matter to transfer or assign, a right to credit. A right to credit can be the direct object of a supply. A right to credit is capable of existing as a thing for the purposes of the GST Act, independently of other things or forms of supply, and is capable of transfer or assignment alone or in combination with other things. Such a right, for use overseas, is capable of falling within item 4(a) of the table in s 38-190(1). Not all rights can exist independently of other forms of supply. Just as a holder or owner of bank notes can be described as having certain rights, an owner of goods equally can be described as having certain rights. These include not only passive rights of ownership to enjoy or sell or give away the goods but also other rights. An owner and claimant in respect of goods may recover their value as damages, and an owner and claimant in respect of very special goods may obtain an order for specific delivery64. An owner of defective goods may have a right of action against a manufacturer. However, none of the rights that an owner of goods has converts "a supply of goods" under the GST Act into "a supply of rights", as identified in s 9-10(2)(e). In each case, the holder or owner of bank notes, and the owner of goods, has certain rights which are the incidents of ownership of the corporeal item – the bank notes, the money, on the one hand, and the goods on the other. A supplier of such corporeal items will not necessarily know what incidents of ownership an acquirer will exercise. Rights which are the incidents of ownership of a thing are not themselves separate things, within the meaning of the GST Act, which can be transmitted independently of the supply of the thing owned. 64 Doulton Potteries Ltd v Bronotte [1971] 1 NSWLR 591. The construction of s 9-10(2)(e) explained above is fortified by noting some similarity of phrasing in s 9-10(2)(d), which covers "a grant, assignment or surrender of real property". "Real property" is defined in s 195-1 as including: any interest in or right over land; or a personal right to call for or be granted any interest in or right over land; or a licence to occupy land or any other contractual right exercisable over or in relation to land." Insofar as rights are covered and distinguished from interests, it is plain that a supplier in respect of s 9-10(2)(d) must have the legal capacity to grant, assign or surrender the rights encompassed by the expression "real property" and such rights would necessarily be the direct object of the supply. The word "rights" in the item 4(a) expression "a supply that is made in relation to rights" is capable of meaning public and private law rights, legal or equitable rights, or rights arising under overseas legal systems, as contended by the appellant in the second step in the argument. However, a "supply of rights" encompassed by s 9-10(2)(e), as construed above, would not include the right to negotiate bank notes or a right to rely on their status as legal tender in Fiji. These were described by the appellant as "the two core legal rights which holders of the notes possess." Both rights are incidents of ownership capable of transfer by delivery of the notes, but they are not rights which, for the purposes of the GST Act, can exist independently of the supply of bank notes and which themselves are separately capable of "creation, grant, transfer, assignment or surrender". In the item 4(a) expression under consideration, "rights" means rights which can exist independently of goods, services or other things or forms of supply and which are separately capable of "creation, grant, transfer, assignment or surrender". Such rights are capable of being the direct object of a supply. In our view the expression "made in relation to" does not broaden the meaning of "rights" for the purposes of item 4(a), beyond what is encompassed by the words used in s 9-10(2)(e). Applying the reasoning above to this case, the fact that there are rights which are the incidents of ownership of bank notes does not convert a financial supply of foreign currency into a financial supply made in relation to rights. Accordingly, the supply of Fijian bank notes is an input taxed financial supply which does not fall within item 4(a) of the table in s 38-190(1). It should be mentioned that the third point relied upon by the appellant, namely policy considerations which, it was argued, could be expected to lead to the equivalent treatment of goods for use overseas and bank notes for use overseas, is answered in part by the distinction between taxable supplies, which includes supplies of goods, and input taxed supplies, which includes financial supplies. It also has to be noted that the export of financial supplies of rights, such as a right to credit, would be GST-free. The appeal should be dismissed with costs.
HIGH COURT OF AUSTRALIA RCB AS LITIGATION GUARDIAN OF EKV, CEV, CIV AND LRV PLAINTIFF AND THE HONOURABLE JUSTICE COLIN JAMES FORREST, ONE OF THE JUDGES OF THE FAMILY COURT OF AUSTRALIA & ORS DEFENDANTS RCB as litigation guardian of EKV, CEV, CIV and LRV v The Honourable [2012] HCA 47 Date of Order: 7 August 2012 Date of Publication of Reasons: 7 November 2012 ORDER The proceedings be dismissed. RCB, as litigation guardian, pay the costs of the fourth defendant. Representation A J H Morris QC with S J Williams for the plaintiff (instructed by Nicholes Family Lawyers) Submitting appearance for the first defendant W Sofronoff QC, Solicitor-General of the State of Queensland with G J D del Villar and M R Green for the second defendant (instructed by Crown Law (Qld)) J Brasch with R J Lyons for the third defendant (instructed by Barry Nilsson Lawyers) P J Doherty SC with J P Lo Schiavo for the fourth defendant (instructed by Donnelly Lawyers) Interveners S J Gageler SC, Solicitor-General of the Commonwealth with R Graycar and B K Lim intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) M G Hinton QC, Solicitor-General for the State of South Australia with M J Wait intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor SA)) G R Donaldson SC, Solicitor-General for the State of Western Australia with C S Bydder intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor (WA)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS RCB as litigation guardian of EKV, CEV, CIV and LRV v The Honourable Family law – Children – Family Law Act 1975 (Cth) – Family Law (Child Abduction Convention) Regulations (Cth) – Convention on the Civil Aspects of International Child Abduction – Wrongful removal – Order for return to country of habitual residence – Discretion to refuse to make return order – Objection of child to return – Ascertaining child's views and interests – Appointment of family consultant. Practice and procedure – Procedural fairness – Mother removed children from country of habitual residence in Italy – Father sought children's return – Family Court has discretion not to make return order if person opposing return establishes child objects to being returned with strength of feeling beyond mere preference or ordinary wish and child has attained appropriate age and maturity – Family Court made return order notwithstanding children objected to their return – Family Court received evidence and report by family consultant about children's views – Children unsuccessfully applied at late stage to intervene by case guardian in proceedings between mother and father – No evidence of exceptional circumstances to suggest Family Court should have ordered independent representation for children under s 68L of Family Law Act 1975 (Cth) – Whether children denied procedural fairness in making of return order – Whether procedural fairness required children to have independent legal representation. Words and phrases – "family consultant", "independent representation", "return order". Family Law Act 1975 (Cth), ss 62G, 68L, 68LA, 69ZT, 92, 111B. Family Law (Child Abduction Convention) Regulations (Cth), regs 14, 16, 19A, FRENCH CJ, HAYNE, CRENNAN, KIEFEL AND BELL JJ. Introduction Australia is a party to the Convention on the Civil Aspects of International Child Abduction ("the Convention") concluded at The Hague on 25 October 19801. The objects of that Convention are2: to secure the prompt return of children wrongfully removed to or retained in any Contracting State; and to ensure that rights of custody and of access under the law of one Contracting State are effectively respected in the other Contracting States." The Contracting States agree in Art 11 of the Convention that their judicial and administrative authorities "shall act expeditiously in proceedings for the return of children." In De L v Director-General, NSW Department of Community Services3, the plurality said: "the Convention is concerned with reserving to the jurisdiction of the habitual residence of the child in a Contracting State the determination of rights of custody and of access. This entails preparedness on the part of each Contracting State to exercise a degree of self-denial with respect to 'its natural inclination to make its own assessment about the interests of children who are currently in its jurisdiction by investigating the facts of each individual case'4. A decision under the Convention concerning the return of a child is not to be taken as a determination on the merits of any custody issue". (emphasis added) [1987] ATS 2. 2 Convention, Art 1. (1996) 187 CLR 640 at 648-649; [1996] HCA 5. 4 Eekelaar, "International Child Abduction by Parents", (1982) 32 University of Toronto Law Journal 281 at 305. Hayne Crennan Bell Nevertheless there is provision in the Convention for consideration of the interests and views of a child who may be returned from one Contracting State to another. Australia has enacted laws to enable it to give effect to its obligations under the Convention. They are to be found primarily in s 111B of the Family Law Act 1975 (Cth) ("the Family Law Act") and in the Family Law (Child Abduction Convention) Regulations ("the Regulations"). Those laws govern the outcome of this case. In so far as they provide for judicial proceedings to determine whether or not a return order should be made or if made should stand, they attract the requirements of procedural fairness which are an essential characteristic of any judicial proceeding. The question in this case is whether procedural fairness required that the children the subject of the proceedings be parties to them, or that their interests be otherwise legally represented. On 23 June 2010, four sisters, all below the age of 16, were removed from their place of habitual residence in Italy. Their mother took them to Australia for what was said to be a one month holiday. Their father, from whom their mother is divorced, resides in Italy. By a consensual separation agreement which was made in Italy in November 2008, the parents had agreed to have joint custody of their four daughters. The sisters have remained in Australia since June 2010. At the request of their father, the Director-General of the former Queensland Department of Communities (Child Safety Services) made an application to the Family Court of Australia on 18 February 2011 for orders for the return of the children under reg 15 of the Regulations5. The Director-General is a "Central Authority" designated for that purpose pursuant to reg 8 of the Regulations. Protracted original and appellate proceedings followed in the Family Court. An order for the return of the children to Italy was made on 23 June 2011 and stands. The proceedings in this Court were brought by the maternal aunt of the children as litigation guardian. The application invoked the jurisdiction conferred upon this Court by s 75(v) of the Constitution. The proceeding sought prohibition, certiorari and injunction: prohibition directed to the Judge of the Family Court who made the return order and who later refused to discharge it or to permit the children to intervene, through a litigation guardian, as parties in the discharge application; certiorari to quash the return order and certain other orders made in the course of the proceedings; and an injunction to restrain the Director- 5 The relevant department is now called the Department of Communities, Child Safety and Disability Services. Hayne Crennan Bell General and the children's parents from giving effect to the challenged order. The grounds upon which the relief was sought included: "the First Defendant failed and refused to afford the affected children an opportunity to have separate and independent representation; failed and refused to take into account the interests of the affected children; and (iii) otherwise acted contrary to the rules and principles of natural justice with respect to the affected children". It was alleged that s 68L(3) of the Family Law Act, which conditions a judge's power to order independent legal representation for the children's interests on there being exceptional circumstances, is unconstitutional. This Court dismissed the application after hearing oral argument. We joined in the orders for dismissal for the reasons which follow. Procedural history On 23 June 2011, Forrest J made an order for the return of the children from Australia to Italy. The order was made pursuant to reg 15 of the Regulations. That order was varied by discharge and replacement of one paragraph pursuant to a consent order made on 24 June 2011. An appeal against the order was dismissed by the Full Court of the Family Court on 9 March 2012. Further orders were made on 4 May 2012 requiring the children's mother to deliver the children to the Brisbane International Airport not before 16 May 2012 for return to Italy. On 14 May 2012, his Honour ordered the issue of a warrant under the Regulations authorising the delivery of the children to an officer of the Department of Communities, Child Safety and Disability Services. On 16 May 2012, the mother made an application for the discharge of the return order6. On the same day EKV, the eldest of the children, made an application seeking leave to intervene in the proceedings and for the appointment of the children's maternal aunt as case guardian for them. As the mother had 6 Pursuant to reg 19A(1) of the Regulations. Hayne Crennan Bell failed to comply with the Court's previous orders, Forrest J refused to hear her application. His Honour gave leave for the discharge application to be filed and ordered that it be dismissed at the invitation of the mother's counsel and to facilitate the lodgement of an appeal. It also appears, although it is not clear from the record, that the application by EKV was dismissed. On 21 May 2012, the children's maternal aunt, acting as their litigation guardian, filed an application in this Court which initiated the present proceedings. An amended application was filed on 28 May 2012 and a further amended application on 31 July 2012. On 25 May 2012, Kiefel J made an order that the show cause application be referred to a Full Court of this Court. Subsequently, further proceedings were initiated in the Family Court. On 6 June 2012, the mother filed a fresh application for discharge of the return order, a course which is permitted by reg 19A. The plaintiff in these proceedings filed an application for an order that she be appointed as case guardian for the children and that the children, by their case guardian, be granted leave to intervene in the discharge proceedings brought by the mother. On 6 July 2012, Murphy J dismissed the applications by the mother and by the plaintiff as well as other related applications. In the course of doing so, his Honour considered the question of whether the children's views had been adequately conveyed to the Family Court. A notice of appeal against that decision was filed in the Family Court on 3 August 2012. The appeal is still pending. It was suggested by the Solicitor-General for Queensland, representing the Director-General, that the fresh proceedings and the pending appeal deprived the application presently before this Court of any utility. The pendency of the appeal proceedings in the Family Court might have been a matter going to the discretion to grant or withhold relief in this case if grounds for relief had been established. However, it is not necessary, having regard to the disposition of this case, to decide that question. The statutory framework – return orders Section 111B of the Family Law Act provides that the Regulations may include such provisions as are necessary or convenient to enable the performance of the obligations of Australia under the Convention. Hayne Crennan Bell The purpose of the Regulations is to give effect to s 111B of the Family Law Act7. They provide for the making of a "return order" which is defined as "an order under Part 3 for the return, under the Convention, of a child who has been removed to, or retained in, Australia."8 They are intended to be construed by reference to the principles and objects of the Convention9 and "recognising, in accordance with the Convention, that the appropriate forum for resolving disputes relating to a child's care, welfare and development is ordinarily the child's country of habitual residence"10. They are also intended to be construed "recognising that the effective implementation of the Convention depends on the reciprocity and mutual respect between judicial or administrative authorities (as the case may be) of convention countries."11 The Convention requires Contracting States to designate a "Central Authority" to discharge the duties imposed by the Convention upon such authorities. Federal States may appoint more than one Central Authority and specify the territorial extent of their respective powers12. The Regulations empower the Attorney-General to appoint a person to be the Central Authority of a State or Territory for the purpose of the Regulations13. A State Central Authority has all the duties and may exercise all the powers and may perform all the functions of the Commonwealth Central Authority14. The relevant Central Authority in this case is the second defendant, the Director-General of the former Department of Communities (Child Safety and Disability Services) of Queensland. 7 Regulations, reg 1A(1). 8 Regulations, reg 2(1). Part 3 refers to Pt 3 of the Regulations, comprising regs 14-21 inclusive. 9 Regulations, reg 1A(2)(a). 10 Regulations, reg 1A(2)(b). 11 Regulations, reg 1A(2)(c). 12 Convention, Art 6. 13 Regulations, reg 8. 14 Regulations, reg 9. Hayne Crennan Bell The Central Authority must take action to secure the return of a child under the Convention if it receives a request from a person "that claims to have rights of custody in relation to the child who, in breach of those rights, has been removed from a convention country to Australia or has been retained in Australia", and "it is satisfied that the request is in accordance with the Convention."15 The action taken by the Central Authority may include applying for an order under Pt 3 of the Regulations16. The application to the court for a return order for the child may be made under reg 14(1)17. The court is given power, by reg 15, to make orders of the kind mentioned in reg 14 and "any other order that the court considers to be appropriate to give effect to the Convention"18. Under reg 16, if an application for a return order for a child is made within one year after the child's removal or retention and the Central Authority satisfies the court that the child's removal or retention was "wrongful" under reg 16(1A), the court must, subject to reg 16(3), make the order19. The court in which an application is brought under reg 14, must, so far as is practicable, give to the application such priority as will ensure that it is dealt with as quickly as a proper consideration of each matter relating to the application allows20. If the court does not determine the application within 42 days from its filing, the responsible Central Authority may ask the Registrar of the court to state in writing the reasons for the application not having been determined within that period21. That requirement gives effect to Art 11 of the Convention. It reflects the purpose of the Convention as embodied in the Regulations "to provide a simple and summary procedure for returning to their country of habitual residence children who have been wrongfully removed from it."22 It also underlines the proposition that "[t]he courts would not be true to the 15 Regulations, reg 13(1), Convention, Arts 7 and 10. 16 Regulations, reg 13(4)(d). 17 "[C]ourt" is defined in reg 2(1) as "a court having jurisdiction under paragraph 39(5)(d), 39(5A)(a) or 39(6)(d) of the Act." 18 Regulations, reg 15(1)(b). 19 Convention, Art 12. 20 Regulations, reg 15(2). 21 Regulations, reg 15(4)(a). Hayne Crennan Bell letter or the spirit of the Convention if they allowed applications to become bogged down in protracted hearings and investigations."23 A child's removal is "wrongful" if the child is under 16, habitually resided in a convention country immediately before the removal and the person seeking the child's return had rights of custody in relation to the child under the law of the country in which the child habitually resided before removal24. For the removal of a child to be characterised as "wrongful" the removal must also have been in breach of the rights of custody of the person seeking the child's return25. It is also necessary that at the time of the removal the person seeking the child's return was actually exercising the rights of custody or would have exercised those rights if the child had not been removed26. It is not suggested in these proceedings that any of these criteria of "wrongful removal" were not satisfied. The court may refuse to make a return order if "a person opposing return" establishes that the person seeking the child's return was not actually exercising rights of custody when the child was removed, or has consented or subsequently acquiesced in the child being removed, or there is a grave risk that the return of the child would expose the child to physical or psychological harm or otherwise place the child in an intolerable situation27. The court may also refuse to make a return order if a person opposing return establishes that the child objects to being returned, that the objection shows a strength of feeling beyond a mere expression of a preference or of ordinary wishes and that the child has attained an age and a degree of maturity at which it is appropriate to take account of his or her views28, or that the return of the child would not be permitted by the fundamental 22 Re M (A Minor) (Child Abduction) [1994] 1 FLR 390 at 397 per Bingham MR. 23 Re M (A Minor) (Child Abduction) [1994] 1 FLR 390 at 397 per Bingham MR. 24 Regulations, reg 16(1A)(a)-(c). 25 Regulations, reg 16(1A)(d); Convention, Art 3(a). As to "rights of custody" see DP v Commonwealth Central Authority (2001) 206 CLR 401 at 412 [26]-[27] per Gaudron, Gummow and Hayne JJ; [2001] HCA 39. 26 Regulations, reg 16(1A)(e). 27 Regulations, reg 16(3)(a), (b). 28 Regulations, reg 16(3)(c). Hayne Crennan Bell principles of Australia relating to the protection of human rights and fundamental freedoms29. The criteria for the exercise of the court's discretion to refuse to make a return order reflect Arts 13 and 20 of the Convention. They "represent important qualifications to the general rule for returning a child to the place of its habitual residence."30 It is in this context that the issue of procedural fairness and participation of the children in the proceedings in the Family Court arises. The discretion to refuse a return is enlivened by satisfaction of one or more of the criteria in reg 16(3), the onus of proof of which lies on the person opposing the return. Once it is enlivened "[t]here may be many matters that bear upon the exercise of that discretion."31 If a court makes a return order, the relevant Central Authority, the person whose rights of custody have been breached by the wrongful removal of the children, or a respondent to the proceeding can apply to the court for the discharge of the return order32. The criteria upon which a return order may be discharged are limited in their scope. The court must be satisfied that all the parties have consented to the return order being discharged33, or that since the order was made circumstances have arisen that make it impracticable for it to be carried out34, or that exceptional circumstances exist that justify the return order being discharged35. The order may also be discharged if the day on which the application for the discharge of the return order was made is more than one year 29 Regulations, reg 16(3)(d). 30 DP v Commonwealth Central Authority (2001) 206 CLR 401 at 416 [36] per Gaudron, Gummow and Hayne JJ. 31 DP v Commonwealth Central Authority (2001) 206 CLR 401 at 417 [40] per Gaudron, Gummow and Hayne JJ. 32 Regulations, reg 19A(1). 33 Regulations, reg 19A(2)(a). 34 Regulations, reg 19A(2)(b). 35 Regulations, reg 19A(2)(c). Hayne Crennan Bell after the return order was made or after any appeal in relation to the return order Ascertaining children's views and interests Regulation 14 provides for the responsible Central Authority to apply to the court for orders including a return order for a child removed from a convention country. There is no provision in reg 14 for any other person to make such an application. The Regulations require the application to be served on the person who it is alleged has wrongfully removed or retained the child the subject of the application37. The child the subject of the application is not a necessary party to it. Australia is, apparently, the only Contracting State under the Convention in which the Central Authority applies for a return order38. The function of the Central Authority has been described in the Family Court as that of an "honest broker" whose obligation is "not to secure the return of the child but to implement the requirements of [the Convention]"39. That characterisation is appropriate. An application under reg 14 is not brought to resolve, in an adversarial setting between parties in conflict, questions about the care and custody of a child. It is brought to determine whether Australia's obligation under the Convention, to return a child wrongfully removed from a country of habitual residence, is engaged. If it is engaged, disputed questions of care and custody fall to be resolved in accordance with the laws of the country from which the child has been removed. That being said, the interests and views of the child are relevant to the existence of the obligation. As set out above, there are criteria in reg 16(3), including grave risk of psychological harm to the child and the child's objections to return, which, if established by a person opposing the return, will enliven a discretion on the part of the court to refuse to make a return order. It is the objections of the children in the present case and the conveyance of those objections to the Court which 36 Regulations, reg 19A(2)(d). 37 Regulations, reg 27(1)(a). 38 Harris v Harris (2010) 245 FLR 172 at 181 [27], citing Lowe, Everall and Nicholls, International Movement of Children: Law Practice and Procedure, 39 Laing v Central Authority (1999) 151 FLR 416 at 481 [300] per Kay J, quoted in Harris v Harris (2010) 245 FLR 172 at 181 [28]. Hayne Crennan Bell assumes relevance in these proceedings. There are a number of mechanisms by which the court can be informed of matters relevant to these criteria and by which children may participate in so informing the court. A party adduces evidence A party to the proceedings may provide evidence to the court of the child's views. Evidence of those views was adduced by the mother in the proceedings before Forrest J. The evidence took the form of a report prepared by a psychologist who had been commissioned by the mother and interviewed the children in three separate sessions. The report elicited that three of the children wished to remain in Australia and to return to Italy for holidays. The fourth child was content to return to Italy. Importantly, the psychologist observed: "This difference in choices has been influenced by the fact that [EKV, CEV and CIV] took into consideration also their mother [sic] wellbeing based on their knowledge of how she felt living in Italy and how she is feeling now living in Australia, while [LRV's] choice was based solely on her personal preferences related to her memories of her childhood in [P]." As to the admissibility of such evidence, s 69ZT of the Family Law Act disapplies provisions of the Evidence Act 1995 (Cth) ("the Evidence Act") dealing, inter alia, with hearsay evidence40. The Court has a discretion to apply such provisions41. Even if the Evidence Act does apply, that Act provides for exceptions to the rule against hearsay. Evidence of a child's previous representation may be admissible under one of the general exceptions covering first-hand hearsay42. In the case of a child lacking capacity, such evidence may be admissible as a contemporaneous representation of the child's feelings43. Family consultant The court may also, as Forrest J did, direct a family consultant to report on such matters as are relevant to the proceedings and as the court considers to be 40 Family Law Act, s 69ZT(1)(c). 41 Family Law Act, s 69ZT(3). 42 Evidence Act, Pt 3.2, Div 2. 43 Evidence Act, s 66A. Hayne Crennan Bell appropriate. Regulation 26 authorises the court to do so44. The family consultant may include, in addition to the matters required to be included in the report, any other matter relating to the care, welfare or development of the child45. The power thus conferred on the court is similar in terms to the general power conferred on the court by s 62G(2) of the Family Law Act, to direct a family consultant to give the court a report on matters relevant to proceedings before it as the court thinks desirable. Plainly enough the views of a child and, in particular, objections he or she may have to returning to the country from which he or she was removed, are matters which a family consultant can consider in the preparation of his or her report. In some (perhaps many) cases, obtaining the report of a family consultant would avoid the difficulties and limitations inherent in receiving evidence of the children's views from one or both of the disputing parents. And in a case such as this, where it is suggested that one or more of the children objects to returning, it may be expected that a family consultant's report would ordinarily be obtained. In the present case a report was prepared by family consultant Margaret Egan who swore an affidavit that the facts stated in her report were true and that the opinions expressed were her honestly held opinions. A section of the report was entitled: "The views of the children as to whether: The children object to returning to Italy." Ms Egan said she had explained the Convention to the children, who appeared to understand that they might be required to return to Italy while a decision was made with regard to parenting arrangements under Italian law. All of the children expressed a wish to remain living in Australia with their mother. They objected to returning to Italy on the basis that their father had perpetrated violence against their mother and had subjected each of them to inappropriate physical disciplining. They said they were happy in Australia, enjoyed their schools and were making friends. They said that if the Court ordered that they return to Italy for a decision about parenting issues to be made in the Italian jurisdiction, they did not want to live with their father in the paternal family villa. They said they would accept return if their mother accompanied them. Ms Egan took the view that the children's objections were age-appropriate and based on their own views. She went on to say, however, that the younger 44 Regulations, reg 26(1)(a). Hayne Crennan Bell children, CIV and LRV, lacked cognitive sophistication for their views to be taken into consideration fully. The two older sisters, EKV and CEV, had reached a more advanced degree of maturity. Nevertheless Ms Egan was of the opinion that their ability for abstract thought and future forecasting would not have been fully formed. They would lack the ability to truly predict what impact their choices or views would have for their future relationship with their father. Intervention Section 92(1) of the Family Law Act provides that in proceedings, other than divorce or validity of marriage proceedings, any person may apply for leave to intervene in the proceedings and the court may make an order entitling that person to intervene. Section 92(3) provides: "Where a person intervenes in any proceedings by leave of the court the person shall, unless the court otherwise orders, be deemed to be a party to the proceedings with all the rights, duties and liabilities of a party." In cases involving allegations of child abuse or the risk of child abuse certain parties are entitled to intervene. They include parents and guardians and the alleged abuser. They do not include the child46. Under the Family Law Rules a child may seek to intervene in a case only by a "case guardian"47 unless the court is satisfied "that a child understands the nature and possible consequences of the case and is capable of conducting the case."48 When a child starts a case without a case guardian the court may appoint a case guardian to continue the case49. The case guardian must be an adult with no interest in the case adverse to those of the child and must be able fairly and competently to conduct the case for the child. The person so appointed must consent to act as case guardian50. The Family Law Rules contemplate, without expressly so providing, that the court may order a case guardian to pay costs51. Prior to 46 Family Law Act, s 92A. 47 Family Law Rules, r 6.08(1). 48 Family Law Rules, r 6.08(2). 49 Family Law Rules, r 6.08, note 2. 50 Family Law Rules, r 6.09. 51 Family Law Rules, r 6.13, note 1. Hayne Crennan Bell 16 May 2012 there was no application by any of the children, by case guardian or otherwise, to intervene in the proceedings. Independent children's lawyer Another mechanism which is relevant for present purposes is the power conferred on the court under s 68L(2) of the Family Law Act to order that the child's interests in the proceedings be independently represented by a lawyer. When the proceedings arise under regulations made for the purpose of s 111B, the court may make such an order "only if the court considers there are exceptional circumstances that justify doing so"52. The court must specify the circumstances in making the order53. Prior to the decision of this Court in De L54, s 68L provided for a court to order that a child be separately represented in proceedings under the Family Law Act "in which a child's best interests are, or a child's welfare is, the paramount, or a relevant, consideration." This Court held that proceedings under the Regulations did not attract the requirement in s 64(1)(a) of the Family Law Act, as it then stood, that the welfare of the child was the paramount consideration in proceedings under the Act. Nevertheless, the welfare of the child was "a relevant consideration" such that separate representation could be ordered. On that basis the plurality observed that where issues of the child's wishes arose with respect to a child of the age and degree of maturity spoken of in reg 16(3)(c) "there ordinarily should be separate representation."55 The plurality further observed56: "The presence of separate representation should not hinder, and indeed should assist, the prompt disposition of Convention applications." 52 Family Law Act, s 68L(3)(a). 53 Family Law Act, s 68L(3)(b). 54 (1996) 187 CLR 640. 55 (1996) 187 CLR 640 at 660 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh 56 (1996) 187 CLR 640 at 660 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh Hayne Crennan Bell It should be noted however that the plurality did not discount other methods by which the court could inform itself as to the wishes of a child. In conclusion their Honours said that it was to be expected that the Family Court would exercise its powers to obtain a report by a family and child counsellor or welfare officer and further that the Court would also give serious consideration to the exercise of its powers conferred by s 68L57. Section 68L was amended by the Family Law Amendment Act 2000 (Cth) by the enactment of s 68L(2A). That subsection applied specifically to proceedings arising under regulations made for the purposes of s 111B, and introduced the requirement that an order for separate representation in such proceedings could only be made in exceptional circumstances. The purpose of the amendment was to overcome the effect of the decision in De L and "restrict the availability of separate representation in these proceedings to exceptional cases."58 By the Family Law Amendment (Shared Parental Responsibility) Act 2006 (Cth) s 68L was repealed and re-enacted in an amended form providing for a court to order independent representation of a child's interests, rather than representation of the child. Where the proceedings arose under regulations made for the purpose of s 111B, such an order could only be made in exceptional circumstances. A new section 68LA set out the role of the independent lawyer which is referred to below. No order was made under s 68L in this case. Nor was it suggested that there were, disclosed on the materials before the Family Court, circumstances which, in the context of proceedings under reg 14, might properly be characterised as exceptional. The plaintiff's further amended application set out as a ground for relief that s 68L(3) is "unconstitutional". As appeared from the plaintiff's written submissions the validity of the provision was challenged on the basis that the "exceptional circumstances" the procedural fairness "that must otherwise inure to a child who is the subject of the proceedings." limitation constituted an abrogation of 57 (1996) 187 CLR 640 at 663. 58 Family Law Amendment Bill 2000, Further Revised Explanatory Memorandum, pars 291-294. Hayne Crennan Bell In proceedings for a return order under reg 14, s 68L provides a specific but limited statutory mechanism by which the court can be assisted in ensuring that the interests of the child the subject of the proposed order are properly taken into account where they are relevant to the criteria for the making of the order or the exercise of the discretion to refuse to make the order. While the child's views (if the child be competent to express them) may be relevant to its interests, the statutory criteria and the court's discretion to refuse to make a return order, the independent representative must, according to s 68LA, form his or her own independent view of what is in the best interests of the child59 and act accordingly60. He or she is not the child's legal representative61 and is not obliged to act on the child's instructions62. What was said in this Court in De L about the former s 68L cannot be applied to s 68L as amended and read with s 68LA. The section has now been cast into a form in which orders for separate representation cannot be made on the basis set out in De L. The evident purpose of the section is to ensure, where exceptional circumstances exist, that the court is properly assisted and informed in the discharge of its tasks which are defined by the Regulations read with s 111B of the Family Law Act. Debate about s 68L fell away early in the oral argument when it became clear that the plaintiff did not maintain her attack upon its validity. That is not surprising. The attack was untenable. Its outcome, if successful, would have been one of two absurd results. The first would be to invalidate a statutory mechanism for interests. independent representation of Alternatively, on the plaintiff's submissions, s 68L(3) could only have been salvaged by deleting the limiting condition of exceptional circumstances, that is to say reading up the subsection to avoid invalidity. the child's the The question in these proceedings reduced to whether or not there had been a denial of procedural fairness to the children. 59 Family Law Act, s 68LA(2)(a). 60 Family Law Act, s 68LA(2)(b). 61 Family Law Act, s 68LA(4)(a). 62 Family Law Act, s 68LA(4)(b). Hayne Crennan Bell Whether the children were denied procedural fairness Procedural fairness is an essential characteristic of judicial proceedings. However, its content is dependent upon the nature of the proceedings and the persons claiming its benefit. The present proceedings are not a contest between the father and the mother about the custody of the children. Even litigation between parents about parenting orders, while judicial in nature, is not entirely inter partes because in such cases, as s 60CA of the Family Law Act provides, the paramount consideration is the best interests of the child. The procedure available in such cases, pursuant to s 62A, for reports to be provided by family consultants at the direction of the court "demonstrates the special nature of the jurisdiction arising from the purpose of the inquiry undertaken by the court."63 The proceedings seeking a return order do not decide with whom a child will live. If a return order is made, disputed questions of custody of and access to the child are to be decided by the courts of the country of habitual residence. In a case such as the present, where there is evidence or other material suggesting that one or more of the children whose return is sought objects to being returned, the Regulations require the court to assess the strength of the objection and to decide whether the child is of an age and maturity "at which it is appropriate to take account of his or her views"64. That does not determine any legal right or duty of the child. In the present case there was no suggestion that the children wished to advocate any legal proposition different from those advanced on behalf of the Central Authority or either parent65. Determination of an application for a return order and, in particular, determination of any issues about the strength of a child's objection to return and the maturity of that child will affect the child's interests. Deciding issues about strength of objection and maturity of the child in a way that is procedurally fair to all who are interested in or affected by their decision – the parents, the child or children concerned and the Central Authority – presents an essentially practical 63 Re JRL; Ex parte CJL (1986) 161 CLR 342 at 373-374 per Dawson J in dissent in the result but a dissent not dependent upon the cited observation. See also at 363 per Wilson J; [1986] HCA 39. 64 Regulations, reg 16(3)(c)(ii) and (iii). 65 Cf In re D (Abduction: Rights of Custody) [2007] 1 AC 619 at 642 [60]. See also In re E (Children) [2012] 1 AC 144. Hayne Crennan Bell issue. How is the court to be sufficiently and fairly apprised of what the child concerned wants, how strongly that view is held, and how mature the child is? The need for the court to be sufficiently and fairly apprised of these matters can be, and in this case was, sufficiently met by the Court's appointment of a family consultant. As counsel for the Central Authority pointed out, a family consultant is an officer of the Family Court66 and is skilled in advising the Court and others about questions of the kind that have been described. A child's views can be, and in this case were, heard and assessed by the family consultant and reported to the Court and to the parties. Contrary to the plaintiff's central submission, resolution of questions about a child's objection to return does not in every case require that the child or children concerned be separately represented by a lawyer. A universal proposition of that kind may be thought to assume, wrongly, that the child whose maturity is at issue in the proceeding can nonetheless instruct lawyers to advocate a particular position. And to the extent to which the proposition depended upon the lawyer for the child making his or her own independent assessment of the child's views, it was a proposition which assumed, again wrongly, that only a lawyer could sufficiently and fairly determine the child's views and transmit that opinion to the court for the court to take into account in deciding, on the whole of the material before it, whether the requirements of There was no suggestion of any practical unfairness resulting to the children from their non-intervention as parties in the proceeding. Until 16 May 2011 they had made no application to do so. There was no occasion for the primary judge to raise the issue. As to s 68L, questions of validity apart, the plaintiff said in oral submissions that it was no part of her case that Forrest J should have made an order for the appointment of an independent children's lawyer. Nor was it part of her case that the children should have been represented by such a person at public expense. Having regard to the nature and purpose of the proceedings in the Family Court and the steps taken by the primary judge in obtaining a report from a family consultant, and by the children's mother in adducing evidence from a psychologist, there was no procedural unfairness to the children. 66 Family Law Act, s 38N(1)(d). Hayne Crennan Bell Conclusion For the above reasons the application was dismissed and the plaintiff ordered to pay the costs of the fourth defendant. HEYDON J. These proceedings concern an application under the Family Law (Child Abduction Convention) Regulations 1986 (Cth) ("the Regulations"). The Regulations were made under s 111B of the Family Law Act 1975 (Cth) ("the Act"). Their function is to enable Australia to perform its treaty obligations in relation to international child abduction. The application arose out of a claim that a mother took her four children from their ordinary residence in Italy to Australia and then unlawfully refused to return them to their father in Italy. The application was made by the Director-General, Department of Communities (Child Safety and Disability Services), as the office was styled in these proceedings. The application was made to the Family Court of Australia under reg 16 of the Regulations. It sought orders that the mother return the children to Italy. The Family Court of Australia (Forrest J) made those return orders. An appeal by the mother to the Full Court of the Family Court of Australia failed. An application for special leave to appeal to this Court was discontinued. The proceedings in this Court were brought by the children's maternal aunt as litigation guardian. She made but later abandoned various allegations. Three allegations remain. Underlying those allegations is a contention the plaintiff advanced in written submissions concerning natural justice. She contended that natural justice would not have been afforded to any of the children involved in this case unless they were represented by "an independent legal practitioner" who was "under [an] obligation … to act on the particular child's instructions, … to pursue the outcome which the particular child desires[,] to challenge evidence and submissions advanced against the child's preferred outcome, [and] to advance evidence and submissions in favour of the child's preferred outcome." This contention assumes that each child can be equated with a capable adult. It assumes that each child was capable of giving instructions to the ends described in the contention. These assumptions are factually false in respect of many children. And they are legally incoherent in respect of most children. Contrary to the assumptions, unlike most capable adults, a child is almost invariably under the control of other people who owe the child legal duties. Inevitably, that child is vulnerable to their influence. Further, the assumptions do not fit in with the conceptions which underlie the Act and the Regulations. Under those enactments, even children whose capacity can be equated with that of a capable adult are not generally to be treated as persons who can become conventional parties to litigation between their parents. Some specific provisions in the Act reinforce that conclusion. One example is s 60CE of the Act. It provides that children cannot be compelled to express their views, whether by being called as witnesses or otherwise. Another example is s 100B of the Act. It provides that children are not to be called as witnesses, or to be present in court, unless the Court makes an order permitting it. So far as the present type of litigation, litigation under the Regulations, is concerned, neither the Act nor the Regulations provide affected children with an absolute right to be represented by "an independent legal practitioner" in the manner advocated by the plaintiff. But there are mechanisms for the Court to ascertain the content, materiality and weight of a child's views. One mechanism is intervention by an affected child through a "case guardian" under s 92 of the Act and r 6.08(1) of the Family Law Rules. In the initial proceedings before Forrest J, no application by the children to intervene was made. At a later stage, on 16 May 2012, an application to intervene on their behalf was made and rejected. Section 68L of the Act affords another mechanism. That section applies, inter alia, to proceedings under the Act in which a child's welfare is a relevant consideration. Sub-sections (1) and (3) of s 68L suggest that the expression "proceedings under the Act" includes proceedings under regulations made pursuant to s 111B of the Act. And reg 16(3)(b) requires the Court to consider the welfare of an affected child when determining whether to make a return order. Accordingly, s 68L applies to the Director-General's application to have the children returned to Italy. Section 68L(2) gives the Court power to order that a lawyer independently represent a child's interests in the proceedings. However, s 68L(3) provides that if, as here, the proceedings arise under regulations made pursuant to s 111B, a s 68L(2) order can only be made in exceptional circumstances. No application for a s 68L(2) order was made at any stage in this case. In any event, a s 68L lawyer would not answer the claim made on behalf of the children in this Court. That is because a s 68L lawyer is not the legal representative of the relevant child, and is not obliged to act on the instructions of the relevant child (s 68LA(4)). A third mechanism arises under reg 26 of the Regulations. Regulation 26(1)(a) provides that the Court may direct a family consultant to report to the Court on such matters as are relevant to the proceedings as the Court considers to be appropriate. Regulation 26(3) provides that the Court may make orders in relation to the attendance on the family consultant of the child. Under s 38N(1)(d) and (2) of the Act, family consultants are officers of the Court. In this case, the third mechanism was employed. On the application of the Director-General, Forrest J made an order under reg 26. The application specifically requested a report as to whether the children objected to being returned to Italy, as to their reasons for any objection to being returned to Italy, as to their maturity and as to whether it would be appropriate to take account of their views. Under reg 16(3)(c), the Court can refuse to make a return order if it is satisfied that the relevant child objects to being returned, the objection shows a strength of feeling beyond the mere expression of a preference or of ordinary wishes, and the child has attained an age and a degree of maturity at which it is appropriate to take account of his or her views. Thus these matters were plainly relevant to the proceedings. A family consultant provided a report. It revealed that she had interviewed the children. It set out their views. In addition, although the mother did not appear before Forrest J, a psychological assessment procured by her was tendered. Its author interviewed the children. He stated and took into account their views. Forrest J considered these reports. His Honour concluded that the children had not reached an age and a degree of maturity which would render it appropriate to take account of their views. In consequence, reg 16(3)(c)(iii) of the Regulations was not satisfied. That defeated one ground on which the mother had attempted to resist the making of a return order. No submission was made to Forrest J that the method adopted to obtain the children's views was wrong. No submission was made that one or more independent legal practitioners be appointed to represent the children or present their views. If the mother had attended the proceedings before Forrest J, she could have advanced that submission. In her unsuccessful appeal to the Full Court of the Family Court of Australia, the mother did not rely on the contention which the maternal aunt advanced in this Court. It is necessary now to turn to the three allegations made against Forrest J in these proceedings. separate and The first allegation was that Forrest J "failed and refused to afford the affected children an opportunity independent to have representation". The form in which this allegation was made underwent variations at different stages of the proceedings before this Court. There was the ambitious contention already recorded that an independent legal practitioner should have been appointed to represent the children. The allegation later metamorphosed through a series of increasingly less extreme positions. However, in all its forms, the allegation must be rejected. So far as the initial proceedings before Forrest J are concerned, his Honour did not refuse to afford the children an opportunity to have separate and independent representation: he was not asked to afford it. What Forrest J did was set in place a regime by which an expert who was an officer of the Court ascertained the affected children's views. The maternal aunt described this as "fatuous". It was not fatuous. It was, with respect, an entirely sensible course. In oral argument in this Court, the maternal aunt submitted that Forrest J should have allowed the children to be represented by a "litigation guardian". The precise meaning of this expression was not elucidated, though on 16 May 2012 application was made for the appointment of a case guardian. As the maternal aunt acknowledged, Forrest J was not asked to appoint a case guardian in the initial proceedings. The furthest of the fall-back positions advocated was that Forrest J should have "informed" the children "of the right and opportunity to apply to be represented by a litigation guardian." The maternal aunt did not demonstrate why, in the circumstances of this case, Forrest J should have done this. So far as later proceedings in which the appointment of a case guardian was requested and refused are concerned, there was no reason why Forrest J should have acceded to that application in view of the careful conclusions his Honour had reached in the initial proceedings. The second allegation was that Forrest J "failed and refused to take into account the interests of the affected children". This allegation must be rejected. His Honour did take account of their interests, but decided, in a manner about which no complaint is made, that their age and immaturity made it inappropriate to take into account their views. The third allegation was that Forrest J "otherwise acted contrary to the rules and principles of natural justice with respect to the affected children". This allegation too must be rejected. Forrest J accorded the affected children a measure of natural justice which was appropriate to the circumstances. For those reasons I agree with the orders made on 7 August 2012. Notices were issued under s 78B of the Judiciary Act 1903 (Cth) ("the Judiciary Act") foreshadowing a challenge to the constitutional validity of s 68L(3) of the Act. That challenge caused the Solicitors-General of the Commonwealth, South Australia and Western Australia to intervene. It also caused the matter to be set down for two days. The Solicitors-General filed very detailed written submissions on the constitutional challenge. They attended the oral hearing fully prepared to present oral argument about it. But at the start of the hearing the challenge was abandoned. The challenge was hastily made. It was lightly dropped. Thus the 78B notices caused the valuable time of busy people to be wasted. They caused costs to be thrown away. Half a day turned out to be sufficient for oral argument. No intervener applied for a costs order. But nothing in ss 78A or 78B of the Judiciary Act prevents an intervener from seeking a costs order in the circumstances of this case. That is to be borne in mind by those minded to issue s 78B notices.
HIGH COURT OF AUSTRALIA NEAT DOMESTIC TRADING PTY LIMITED APPELLANT AND AWB LIMITED & ANOR RESPONDENTS NEAT Domestic Trading Pty Limited v AWB Limited [2003] HCA 35 19 June 2003 ORDER Appeal dismissed with costs. On appeal from the Federal Court of Australia Representation: S J Gageler SC with J K Kirk for the appellant (instructed by Withnell Hetherington) A Robertson SC with A I Tonking for the respondents (instructed by Allens Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS NEAT Domestic Trading Pty Limited v AWB Limited Administrative law – Judicial review – Statutory scheme regulating export of wheat – Consent of statutory authority required for export – Authority precluded from giving consent without approval of nominated company incorporated under Corporations Law – Whether company's withholding of approval was decision of an administrative character made under an enactment – Whether in withholding approval nominated company exercised discretionary power in accordance with a rule or policy without regard to merits of particular case. Administrative Decisions (Judicial Review) Act 1977 (Cth), ss 3(1), 5(2)(f), Trade Practices Act 1974 (Cth), s 51(1). Wheat Marketing Act 1989 (Cth), ss 57(1), (1A), (3A), (3B), (6), (7). GLEESON CJ. This appeal concerns a statutory scheme regulating the export of wheat, and the administrative law principles governing the role in that scheme of a corporation representing growers' interests. The regulatory scheme took effect from 1 July 1999. The background, and the government policy, were set out in an Explanatory Memorandum relating to the Wheat Marketing Legislation Amendment Act 1998 (Cth), which amended the Wheat Marketing Act 1989 (Cth) ("the Act"). The Explanatory Memorandum stated: "17. The AWB was established in 1939 to control the marketing of wheat in Australia. It has operated under various Commonwealth statutes with details of wheat marketing changing over time, including deregulation of the domestic market in 1989. The most recent legislation is the Wheat Marketing Act 1989. Under that Act, the AWB has the sole right to export wheat. It also has responsibility for the commercial aspects of wheat marketing through operating wheat pools. Following lengthy discussion, Government and industry have agreed that from 1 July 1999 responsibility for all commercial aspects of wheat marketing will be taken over by a new grower owned and controlled Corporations Law company structure. Consequently, from 1 July 1999, the only ongoing Government involvement (and therefore regulatory impact) in wheat marketing will be in relation to the export monopoly on wheat which will be managed, from that time, by a small independent statutory body. for wheat international market The the interventionist policies of other grain producing countries such as the US and EU which use varying forms of domestic support and export subsidy programs. Aggressive use of these programs can substantially reduce international wheat prices. is distorted by The export monopoly, therefore, provides a tool to conduct the export marketing of Australian wheat to maximise the net returns to growers. It is also considered that the export monopoly provides a net benefit to the wider Australian community. The most appropriate option is to legislate the export monopoly on wheat to an independent statutory body to be known as the Wheat Export Authority (WEA). For an initial period of five years the legislation will provide that the new grower company pool subsidiary has an automatic right to export wheat. Requests to export wheat from other than the grower company (as currently happens) would be managed by the WEA to separate regulatory and commercial functions. The WEA would be formed by retaining the 'shell' of the existing statutory AWB as a suitably renamed and reshaped independent body. Its functions would be limited to: managing and approving requests to export wheat from organisations other than the pool subsidiary; monitoring the use of the monopoly; and accounting to Government and industry as required on performance of its functions. The WEA would monitor and assess the pool subsidiary's use of its wheat export rights to ensure that the company was using them in accordance with the intentions of Parliament. The WEA must consult Company B about all requests for consent to export wheat. In the case of proposed exports in bulk, ie other than by means of bags or containers, a consent may not be given unless nominated company B has first approved the export. This requirement supports the automatic right given by the Bill to Company B to export wheat and reflects the importance of bulk exports in the overall marketing arrangements." The policy of the legislation appears from par 18. The reason for the policy is stated in pars 19 and 20. Surveillance of the administration of the policy is contemplated in par 34. In the above paragraphs, AWB is the Australian Wheat Board. The "new grower company pool subsidiary" referred to in par 32, which is also "nominated company B" referred to in par 98, is AWB (International) Limited ("AWBI"), which is, in turn, a wholly owned subsidiary of AWB Limited. Both are companies limited by shares, and incorporated under the Corporations Law of Victoria. The shares in AWB are divided into classes. One class of shares, whose holders control the board of directors, and which carry voting rights, but not the right to receive dividends, can only be held by wheat growers. AWB and AWBI together make up the "new grower owned and controlled Corporations Law company structure" referred to in par 18. The statutory provision enacted to give effect to the policy explained above is s 57 of the Act, which is as follows: "57 Control of export of wheat A person shall not export wheat unless: the [Wheat Export] Authority has given its written consent to the export of the wheat; and the export of the wheat is in accordance with the terms of that consent. Penalty: in the case of a natural person - $60,000; or in the case of a body corporate - $300,000. (1A) The prohibition in subsection (1) does not apply to nominated company B. An offence against subsection (1) is an indictable offence. The Authority's consent to the export of wheat may be limited in specified circumstances, in accordance with specified requirements or by a specified person. the export of the wheat (3A) Before giving a consent, the Authority must consult nominated company B. (3B) The Authority must not give a bulk-export consent without the prior approval in writing of nominated company B. For this purpose a consent is a bulk-export consent unless it is limited to export in bags or containers. (3D) An application for a consent under this section must be accompanied by such fee (if any) as is prescribed by the regulations. The fee is payable to the Authority. (3E) The Authority must issue guidelines about the matters it will take into account in exercising its powers under this section. In proceedings for an offence against subsection (1), a certificate signed by the Chairperson and: stating that the Authority did not consent to the export of particular wheat; or (b) setting out the terms of a consent given by the Authority; is prima facie evidence of the matters set out in the certificate. The prohibition in subsection (1) is in addition to, and not in substitution for, any prohibition by or under the Customs Act 1901 or the Export Control Act 1982. For the purposes of subsection 51(1) of the Trade Practices Act 1974, the following things are to be regarded as specified in this section and specifically authorised by this section: the export of wheat by nominated company B; (b) anything that is done by nominated company B under this section or for the purposes of this section. Before the end of 2004, the Authority must conduct a review of the following matters, and give the Minister a report on the review: the operation of subsection (1A) in relation to nominated company B; the conduct of nominated company B in relation to: consultations for the purposes of subsection (3A); and the granting or withholding of approvals for the purposes of subsection (3B)." Section 57(7) reflects the reference in par 32 of the Explanatory Memorandum to "an initial period of five years". Of course, the review and report might not result in any alteration of the scheme, but in considering the meaning and effect of s 57, it is material to note that the conduct of AWBI (nominated company B) in the granting or withholding of approvals for the purposes of sub-s (3B) is to be the subject of political review and accountability. Sub-sections (3A), (3B) and (6) are of direct relevance to this appeal. The appellant is a domestic and international grain trader. On a number of occasions before 1 July 1999 the appellant was granted permits for the bulk export of wheat. On six occasions between November 1999 and January 2000 the appellant sought the consent of the Wheat Export Authority to the bulk export of durum wheat. In five cases, the proposed destination was Italy; in one case it was Morocco. In each case AWBI declined to give its approval, and the Authority was obliged to withhold consent. The appellant, being a competitor of AWBI in relation to the export of wheat, complained that AWBI was contravening the Trade Practices Act 1974 (Cth). It was confronted with the problem of s 57(6) of the Act, which refers to s 51(1) of the Trade Practices Act. That section provides that, in determining whether there has been a contravention of the Trade Practices Act of a kind of possible relevance to the present case, anything specifically authorised by legislation must be disregarded. The appellant endeavoured to overcome that obstacle by claiming relief under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the Judicial Review Act"), contending that the refusal of AWBI to give approval was a decision of an administrative character under an enactment (Judicial Review Act, s 3(1)), and that it involved an improper exercise of power, being an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the case (Judicial Review Act, ss 5(2)(f) and 6(2)(f)). The appellant commenced proceedings in the Federal Court. Those proceedings failed at first instance before Mathews J1, and again on appeal to the Full Court (Heerey, Mansfield and Gyles JJ)2. There is some difficulty in relating the conduct of AWBI, and the complaint of the appellant, to the context of administrative law. AWB and AWBI are trading corporations, operated for the benefit of their corporators. However, the Act gives each a statutory role which may affect the interests of members of the public, such as the appellant. A question arises as to the extent to which that role is circumscribed. When a statute confers a discretionary power which is capable of affecting rights or interests, the identity and nature of the repository of the power may be a factor to be taken into account in deciding what are intended to be matters that must necessarily, or might properly, be considered in decision-making or whether it is intended that the power is at large3. It is important to note provisions of the corporate constitutions of AWB and AWBI, and to relate them, in turn, to the commercial and regulatory context in which s 57 operates. Article 3.1(b) of the constitution of AWB is as follows: 1 Neat Domestic Trading Pty Ltd v Wheat Export Authority (2000) 64 ALD 29. 2 Neat Domestic Trading Pty Ltd v AWB Ltd (2001) 114 FCR 1. 3 R v Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 177. In the exercise of their powers the Directors must ensure that: the business of the Pool [sic] Subsidiary is managed with the objective of: maximising the net pool return for Growers who sell wheat into the pools run by the Pools Subsidiary by securing, developing and maintaining markets for wheat and by minimising costs as far as practicable; distributing the net pool return to Growers who have sold wheat into the relevant pool". Article 13.2 of the constitution of AWBI provides that, in the exercise of their powers, the directors of AWBI must ensure that the business of AWBI is managed in a manner which complies with Art 3.1(b) of the constitution of AWB. Thus the businesses of AWB, and AWBI, are to be conducted in the interests of maximising returns to growers who sell wheat into the pools. That is part of the background to s 57(3B). The consent of the Wheat Export Authority (the "small independent statutory body" referred to in par 18 of the Explanatory Memorandum) is necessary for anyone, except AWBI, wanting to export bulk wheat. The Wheat Export Authority must not give that consent unless it has the prior written approval of AWBI. The guidelines which the Authority will take into account under s 57(3E) are not said to be binding on AWBI. There is nothing in the legislation to indicate what, apart from the matters it is required by its own constitution to consider, AWBI may or may not take into account in giving, or declining to give, approval. The constitution of AWBI requires its directors, in the exercise of their powers, to have regard to the maximising of returns to growers who sell into the pools. Behind all this is what was described in evidence as the single desk system of export marketing. Mathews J explained the system, and the marketing policy which it reflected, by quoting from a document of 31 March 2000 addressed to the Wheat Export Authority by AWBI, commenting on "issues surrounding bulk permit applications": "The document commented on a number of 'broader Single Desk issues in relation to the impact of bulk permits' which it said needed to be taken into consideration. It was pointed out that AWBI undertakes an annual export marketing program of many million tonnes. Its marketing programs and strategies are based on being the sole exporter of Australia's wheat crop in order to maximise returns to some 45,000 growers. The issuing of bulk permits, the document said, would lead AWBI to lose control of a number of advantages provided under the single desk system with consequent negative impact on growers who deliver to the National Pool. These advantages were described as follows: . Strength of Unity - Branding and Product Differentiation . Strategic Marketing and Price Discrimination Under this head the document made the following points: 'As the operator of the single desk, AWB(I) maintains control over the export of Australia's entire bulk export program. Because this situation also affords AWB(I) a level of control over the price expectation for Australian wheat in each of our individual markets (by limiting buyers' ability to "shop around" between different suppliers), this allows AWB(I) to price discriminate across markets thereby maximising returns which necessarily are passed onto growers who deliver to the National Pool. The issuing of a bulk permit may breakdown this advantage by allowing other players into the market and reducing the ability of AWB(I) to price discriminate because it cannot be guaranteed of its pricing strategy in other markets.' . Perception of Sole Exporter Under this head, AWBI commented that the fact that all bulk exports are conducted by the one body removes the ability for buyers to 'play' Australian parties off against each other. . AWBI's Charter to Maximise Return to Growers Under this head, it was pointed out that issuing of bulk permits would generally run counter to this charter as it would provide returns to a select group of growers to the detriment of those growers who delivered their grain to the national pool. . Quality Reputation . AWBI's R & D Investment Under this head, it was pointed out that AWBI had undertaken significant research and development programs across numerous overseas markets, thereby increasing the market for Australian wheat in those countries. This had been possible only because of AWBI's position as the sole supplier of Australian wheat to these markets. The above material sets out the course of dealings between NEAT and AWBI over the relevant period, and AWBI's stated attitudes towards its single desk policy." The appellant's complaint about AWBI's withholding of approval of the bulk-export consents sought by it from the Wheat Export Authority is that AWBI was acting in accordance with a rule or policy without regard to the merits of the case. In putting its case in that way, the appellant was invoking ss 5(2)(f) and 6(2)(f) of the Judicial Review Act. The language of those provisions reflects established principles of administrative law expressed, for example, by Lord Browne-Wilkinson in R v Secretary of State for the Home Department; Ex parte Venables4: "When Parliament confers a discretionary power exercisable from time to time over a period, such power must be exercised on each occasion in the light of the circumstances at that time. In consequence, the person on whom the power is conferred cannot fetter the future exercise of his discretion by committing himself now as to the way in which he will exercise his power in the future ... By the same token, the person on whom the power has been conferred cannot fetter the way he will use that power by ruling out of consideration on the future exercise of that power factors which may then be relevant to such exercise. These considerations do not preclude the person on whom the power is conferred from developing and applying a policy as to the approach which he will adopt in the generality of cases ... But the position is different if the policy adopted is such as to preclude the person on whom the power is conferred from departing from the policy or from taking into account circumstances which are relevant to the particular case in relation to which the discretion is being exercised. If such an inflexible and invariable policy is adopted, both the policy and the decisions taken pursuant to it will be unlawful." It will be necessary to return to the question whether what is here involved is a decision of an administrative character, being an exercise of a discretionary power, to which those principles apply. Let it be assumed, for the moment, that this is so. The reference in the appellant's submissions to the merits of its applications for bulk-export consent requires further analysis. The information provided by the appellant to the Wheat Export Authority in support of each application for consent was relatively sparse. It amounted to little more than information that there was a purchaser in a certain country for a certain quantity [1998] AC 407 at 496-497. of durum wheat, which the appellant had available for export. Bearing in mind that the appellant and AWBI were competitors, it may not be surprising that further information was not provided. What, exactly, does it mean to speak of the "merits" of such an application? Presumably, it was self-evident that the proposed transaction would be in the financial interests of the appellant, and its suppliers; if it were otherwise, it would not be proposed. Is that a consideration to which AWBI was bound to pay regard? Section 57 plainly envisaged that AWBI would be, if not the sole, at least the principal, exporter of Australian wheat. It conferred on AWBI what was, in effect, a capacity to veto bulk exports by any potential competitor. This reflected the single desk system of export marketing; a system described in the Explanatory Memorandum as a monopoly. In this context, a reference to "merits" cannot sensibly be a reference to the financial interests of the appellant. The legislation gave AWBI a power to veto any application. That would always be adverse to the interests of an applicant. Where a statute confers a monopoly on X, and then gives Y power to relax the monopoly, but only if X approves, then it is not easy to give practical content to a suggested legislative requirement that X consider on its merits each proposal for a relaxation of X's monopoly. But it can hardly mean that X is required to have regard to the financial interests of its would-be competitor. In such a context, where there is at least a potential conflict between the interests of the exporter seeking approval and the interests AWBI is required by its constitution to pursue, the concept of the merits of an application for approval must be related to considerations, if any, that AWBI is required or entitled to take into account, or considerations that are extraneous to its decision. It is to the provisions of the Act that one must look for some warrant for concluding that a particular consideration is obligatory, or available, or extraneous5. Judicial review is not an invitation to judges to decide what they would consider fair or reasonable if they were given the function conferred upon AWBI. The appellant might genuinely believe that the system itself is unfair. A judge might share that opinion. Nothing follows from that. The question is what, if anything, the Act requires, or permits, or forbids AWBI to take into account in giving effect to its role in the system. It is possible that, in a given case, an exporter, applying for consent from the Wheat Export Authority, might seek to make out a case to show that the granting of the consent could not possibly have any adverse effect upon the single desk system of marketing, or upon AWBI, or the growers whose interests it represented. Given that AWBI was entitled, indeed bound, to pursue grower interests, an exporter might seek to show that a particular application promoted those interests, or was at least incapable of affecting them adversely, either 5 Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J. directly or indirectly. That is not the present case. As noted above, the appellant provided little information in support of each application. It did not present information or argument in support of a change of the single desk policy, or seek to show that the policy was irrelevant to its particular proposals. It may also be accepted that personal animosity towards an applicant, or a desire to confer a personal benefit upon a particular grower or exporter, would be extraneous considerations; and others may be imagined. But they have nothing to do with the present appeal. The sole complaint is that AWBI adhered to a policy; and that, in its adherence to the policy, it failed to take account, or foreclosed consideration, of matters it was either required or entitled to take into account. The policy manifested in s 57 itself is not difficult to discern. It is to be understood in the light of the history of wheat marketing, the exigencies of the international market, and the single desk system. Section 57(7) suggests that the policy is open to legislative review, but, in its present form, it involves conferring on AWBI a right to export, and requiring that any other potential bulk exporter must obtain the consent of the Wheat Export Authority, which must, in turn, have the approval of AWBI. The legislation confers upon AWBI a practical monopoly on the bulk export of wheat, save to the extent to which the Authority (which is to issue guidelines) and AWBI (which is not bound by the guidelines, but whose conduct is subject to review and report) are prepared to relax the monopoly. There is nothing inherently wrong in an administrative decision-maker pursuing a policy, provided the policy is consistent with the statute under which the relevant power is conferred, and provided also that the policy is not, either in its nature or in its application, such as to preclude the decision-maker from taking into account relevant considerations, or such as to involve the decision-maker in taking into account irrelevant considerations. The policy, and its application, must be measured against those requirements, having regard to the matter presented for decision, and the information and arguments, if any, advanced for or against a particular outcome. Mathews J found that, in withholding approval in respect of the appellant's applications for bulk-export consent, AWBI had determined to pursue a policy that would be maintained "under current market conditions". She described that policy as follows: "[The] material shows that AWBI's reason for maintaining its policy against bulk export permits can be encapsulated into a very simple proposition, which is this: the grant of bulk export permits might well benefit individual growers who sell their wheat under the permits, but this will be at the likely expense of growers who deliver their wheat to the National Pool. It is against AWBI's constitutional mandate to prefer individual growers who are outside the pool system to growers who are within it. Therefore bulk export permits should not be approved." Mathews J considered, and I agree, that there is nothing about such a policy that is inconsistent with the Act, or with the role it assigned to AWB. Furthermore, there was nothing about the particular circumstances of any of the appellant's applications that required re-consideration of the policy, or that rendered the policy irrelevant, or potentially irrelevant, to those applications. The policy was a proper policy, available to AWBI consistently with the legislative scheme, and there was nothing in the circumstances of the case that demonstrated a refusal to entertain the possibility that a particular case might fall outside the policy, or require its re-consideration6. No such case was advanced on behalf of the appellant, either to the Wheat Export Authority, or to AWBI, or in this Court. There was nothing contrary to the Act in the adoption by AWBI of a general policy; a policy which so closely reflected the legislative purpose. The complaint that the policy was administered in an unduly inflexible manner was rejected by Mathews J. It is entirely theoretical, no reason having been advanced as to why the policy should have been relaxed in the case of the appellant other than that it would have been in the interests of the appellant, and its suppliers, for that to be done. As Mathews J found, "no material was put before AWBI which could be expected to persuade it to deviate from its policy." Mathews J was right to reject the appellant's case on what might be termed the administrative law merits. That makes it strictly unnecessary to decide whether the withholding of an approval by AWBI was a decision of an administrative character made under an enactment. I should indicate, however, that my preference is for the view (accepted by Mathews J) that it was. While AWBI is not a statutory authority, it represents and pursues the interests of a large class of primary producers. It holds what amounts, in practical effect, to a virtual or at least potential statutory monopoly in the bulk export of wheat; a monopoly which is seen as being not only in the interests of wheat growers generally, but also in the national interest. To describe it as representing purely private interests is inaccurate. It exercises an effective veto over decisions of the statutory authority established to manage the export monopoly in wheat; or, in legal terms, it has power to withhold approval which is a condition precedent to a decision in favour of an applicant for consent. Its conduct in the exercise of that power is taken outside the purview of the Trade Practices Act. In Burns v Australian National University7, Ellicott J said, in relation to the meaning of "administrative" in the context of s 3 of the Judicial Review Act: 6 British Oxygen Co Ltd v Minister of Technology [1971] AC 610 at 624-625. (1982) 40 ALR 707 at 714. "It is obviously unwise to attempt a comprehensive definition but, in my opinion, it is at least apt to describe all those decisions, neither judicial nor legislative in character, which Ministers, public servants, government agencies and others make in the exercise of statutory power conferred on them, whether by Act of the Parliament or by delegated legislation. In other words it at least covers the decisions made in executing or carrying into effect the laws of the Commonwealth. Such decisions, as the definition indicates, may or [may] not require the exercise of a discretion. Usually they will." The argument that what is involved is not a decision of an administrative character under an enactment takes as its focus the private interests represented, and pursued, by AWBI, as distinct from the public character of the Wheat Export Authority. That appears to me to involve an incomplete view of the interests represented by AWBI, and also to leave out of account the character of what it does, which is, in substance, the exercise of a statutory power to deprive the Wheat Export Authority of the capacity to consent to the bulk export of wheat in a given case. Conclusion The appeal should be dismissed with costs. McHugh 31 McHUGH, HAYNE AND CALLINAN JJ. Over the years, Australia has had many different marketing schemes for its primary products. Some8 have been established by State legislation; some9 have been established by federal legislation. This appeal relates to the federal regulation of some aspects of the export marketing of wheat. The particular questions raised concern the operation of s 57 of the Wheat Marketing Act 1989 (Cth) ("the 1989 Act"). At the times relevant to these proceedings, s 57(1) of the 1989 Act prohibited the export of wheat unless the Wheat Export Authority ("the Authority"), established by the 1989 Act, (a) had given its written consent to the export of the wheat and (b) the export of the wheat was in accordance with the terms of that consent. Sub-section (1A) of that section provided that this prohibition did not apply to what the Act refers to as "nominated company B": AWB (International) Limited ("AWBI"). AWBI is a company limited by shares, incorporated under the Corporations Law of Victoria. At the times relevant to these proceedings it was a wholly owned subsidiary of AWB Limited ("AWB"), another company limited by shares, also incorporated under the Corporations Law of Victoria. There were two classes of shares in AWB: A Class and B Class. A Class shares could be issued only to "Growers" – persons producing an annual average of at least 331/3 tonnes of wheat per year. Each Grower could hold only one A Class share. The holder of A Class shares had voting rights, and the number of votes depended upon the average annual tonnage of wheat delivered by that shareholder to the AWB Group. Holders of A Class shares were not entitled to dividends. A Class shares were redeemable preference shares. B Class shares were intended to be capable of being traded on the Australian Stock Exchange Ltd and carried the right to participate in dividends. Holders of A Class shares controlled the board of AWB. The object of AWB, stated in its constituent document, was "to be primarily involved in the business of Grain Trading". This was further defined as the undertaking of grain trading activities and investments with a view, among other things: "in relation to wheat growers who sell pool return wheat to the company or its subsidiaries, to maximise their net returns from the pools by securing, developing and maintaining markets for wheat and wheat products and by minimising costs as far as practicable". 8 See, for example, Dried Fruits Act 1958 (Vic). 9 See, for example, Apple and Pear Organization Act 1938 (Cth); Dairy Produce Export Control Act 1924 (Cth). McHugh The reference to "pool return wheat" was a reference to arrangements by which Growers and others sold wheat to a single purchaser which would then negotiate the sale of that wheat overseas. At the times relevant to these proceedings that purchaser, or pool company, was AWBI10. The pool company would take the amounts it received from sales of wheat of a particular type or grade and divide the returns (net of costs) rateably among those who had supplied the grain that was sold. These arrangements were often referred to as "Single Desk" selling arrangements. There was to be a single seller of Australian wheat in overseas markets and thus no competition between sellers of Australian wheat in those markets. Before giving a consent to the export of wheat, s 57(3A) obliged the Authority to consult AWBI. Sub-section (3B) then provided that: "The Authority must not give a bulk-export consent without the prior approval in writing of [AWBI]. For this purpose a consent is a bulk-export consent unless it is limited to export in bags or containers." Between November 1999 and February 2000 the appellant made six applications to the Authority for its consent to the export of durum wheat in bulk. In each case the Authority refused its consent because AWBI did not give its approval in writing. The central question in this appeal is whether AWBI's failure to give approval was legally infirm. The appellant brought proceedings in the Federal Court of Australia seeking, among other things, declarations that the Authority's refusals of bulk-export consents were unlawful and void. It further alleged that AWBI had not consulted with the Authority and that AWBI's refusal to consult with the Authority, and its refusal to approve the exports was, in each case, a decision of an administrative character made under s 57 of the 1989 Act, or conduct engaged in for the purpose of making such a decision. The appellant alleged (among other things) that AWBI had failed to take account of all relevant considerations, had taken into account irrelevant considerations, and had applied a policy without regard to the merits of the particular application. It claimed a declaration that AWBI's decision or conduct was unlawful and void. Other allegations were made, and other relief was claimed, under the Trade Practices Act 1974 (Cth). Those other claims do not fall to be considered in this appeal. 10 Wheat Marketing Act 1989 (Cth), s 84. McHugh The proceedings below At first instance, the primary judge (Mathews J) dismissed the appellant's proceeding11. The primary judge found12 that "the effective reason" for AWBI's refusal to approve the application for the consents the appellant sought was, in each case, the existence of its policy that "in the current market environment" no bulk-export consents would be approved. Her Honour further found that AWBI had arrived at this policy because to approve bulk-export consents would not be consistent with the obligation, imposed on AWBI by its constituent document, to maximise returns to growers who sold wheat into AWBI wheat marketing pools13. That being so, her Honour found14 that AWBI, in making its decisions to refuse approval, did not fail to take account of relevant considerations. The appellant appealed to the Full Court of the Federal Court. That Court (Heerey, Mansfield and Gyles JJ) dismissed the appeal15. Heerey J concluded16 that AWBI's decisions were "outside the province of administrative law". Because AWBI was a company incorporated under the Corporations Law, engaged in trade and commerce, it "must be free as a matter of commercial judgment to adopt what might be regarded in administrative law terms as an inflexible policy"17. There was, in his Honour's view18, "no breach of any rule or principle of administrative law which had the effect that AWBI was acting outside s 57(3B)" in refusing its approval. 11 Neat Domestic Trading Pty Ltd v Wheat Export Authority (2000) 64 ALD 29. 12 (2000) 64 ALD 29 at 56 [119]-[120]. 13 (2000) 64 ALD 29 at 58 [131], 62-63 [154], 63 [158]. 14 (2000) 64 ALD 29 at 63 [158]. 15 Neat Domestic Trading Pty Ltd v AWB Ltd (2001) 114 FCR 1. 16 (2001) 114 FCR 1 at 8 [26]. 17 (2001) 114 FCR 1 at 9 [30]. 18 (2001) 114 FCR 1 at 9 [32]. McHugh Neither Mansfield J19 nor Gyles J20 considered it necessary to decide whether decisions to grant or withhold approval for the purposes of s 57(3B) were decisions of an administrative character made under an enactment, or were beyond the reach of administrative law. Their Honours preferred to rest their conclusion on the proposition that, as a commercial entity, AWBI could lawfully consult only its own interests in deciding whether to grant approval21. The appellant contended that, to understand the way in which the 1989 Act's marketing scheme operated, it was necessary to consider not only the scheme of the 1989 Act as a whole, but also the historical background against which the scheme was enacted. It is as well, therefore, to say something about that history. Regulation of wheat marketing Since the end of World War 2 there has been a series of federal Acts dealing with aspects of the marketing of wheat22. (There had been earlier federal legislation affecting the wheat industry23 but the War of 1939-45 marks a convenient point at which to begin reference to past legislation.) As originally enacted, the 1989 Act provided a very different regime for the marketing of wheat from that provided by it at the times relevant to this matter. The Australian Wheat Board, a statutory corporation tracing its roots to the Wheat Industry Stabilization Act 1948 (Cth)24, played a central role in the marketing scheme for which the 1989 Act originally provided. As enacted, the 1989 Act 19 (2001) 114 FCR 1 at 10 [38]. 20 (2001) 114 FCR 1 at 13 [53]. 21 (2001) 114 FCR 1 at 11 [43] per Mansfield J, 12-13 [52] per Gyles J. 22 Wheat Industry Stabilization Act 1946 (Cth); Wheat Industry Stabilization Act 1948 (Cth); Wheat Industry Stabilization Act 1954 (Cth); Wheat Industry Stabilization Act 1958 (Cth); Wheat Industry Stabilization Act 1963 (Cth); Wheat Industry Stabilization Act 1974 (Cth); Wheat Marketing Act 1979 (Cth); Wheat Marketing Act 1984 (Cth). 23 See, for example, Wheat Industry Assistance Act 1938 (Cth); Wheat Industry (War-time Control) Act 1939 (Cth). 24 The Board of the same name created by the Wheat Industry Stabilization Act 1946 (Cth) was not continued in existence by the 1948 Act. The latter Act created a new Board. McHugh provided for the Australian Wheat Board to control the export of wheat. By s 57, as it then stood, export of wheat, without the Board's consent, was forbidden. In 1997 and 1998, significant changes were made to the 1989 Act and the scheme for which it provided. The Explanatory Memorandum for the Wheat Marketing Legislation Amendment Bill 1998 (by which the second part of these changes were made) described their purpose as being to "restructure" the Australian Wheat Board "from a statutory marketing authority to a grower owned company". From 1 July 1999, there were to be three grower-owned companies involved in the marketing of wheat – AWB, AWBI and a third company undertaking domestic trading of grains and other non-pool commercial activities not handled by AWB. A Wheat Export Authority was to control exports of wheat and to monitor the performance of AWBI in relation to the export of wheat. As amended by the 1998 Bill, the 1989 Act provided (in s 5(1)) that the Wheat Export Authority had the functions: to control the export of wheat from Australia; to monitor [AWBI's] performance in relation to the export of wheat and examine and report on the benefits to growers that result from that performance". The Explanatory Memorandum for the 1998 Bill noted that there was to be a National Competition Policy review of wheat legislation in 1999-2000 and that what it described as AWBI's "export monopoly" would expire in 2004. The export monopoly was said to provide "a tool to conduct the export marketing of Australian wheat to maximise the net returns to growers". The Explanatory Memorandum also recorded that options considered for providing that export monopoly had included: legislating the monopoly for all wheat exports to the grower company [AWBI]; legislating the monopoly for bulk wheat exports to that company with a separate mechanism to manage exports by other than "Legislat[ing] the monopoly to an independent statutory body to manage, with a legislative requirement that wheat export rights reside with the new grower company [AWBI] for a prescribed period." It was said that this third option had been chosen. The apparent complexity of this history may be contrasted with the brevity of the legislative expression of the scheme that was introduced in 1997 and 1998. The central provisions of that legislation have already been mentioned. They are McHugh the prohibition on export of wheat without the Authority's consent25, the exemption of AWBI from that prohibition26, and the provisions of s 57(3A) and (3B) that required the Authority, before giving a consent to export, to consult with AWBI, and provided that the Authority not give a bulk-export consent without AWBI's prior approval in writing. To those provisions there may be added reference to s 57(3E) which required the Authority to "issue guidelines about the matters it will take into account in exercising its powers" under s 57, and reference to s 57(7) requiring the Authority, before the end of 2004, to conduct a review, and report to the Minister about, among other things, AWBI's conduct in relation to consultations for the purposes of s 57(3A) and the granting or withholding of approvals for the purposes of s 57(3B). Reference should also be made to s 57(6) which provided that: "For the purposes of subsection 51(1) of the Trade Practices Act 1974, the following things are to be regarded as specified in this section and specifically authorised by this section: the export of wheat by [AWBI]; anything that is done by [AWBI] under this section or for the purposes of this section." The appellant's contentions The appellant had contended at trial that, because AWBI had not acted lawfully in failing or refusing to give its written approval, s 57(6) did not apply and that the appellant could, therefore, maintain claims that AWBI had contravened the Trade Practices Act. That issue may, however, be put aside. Although put in a number of different ways, central to the appellant's contentions was the proposition that AWBI did not consider, but should have considered, "the merits" of each application which the appellant had made to the Authority for a bulk-export consent. It was said that, had the merits been considered, AWBI could have, indeed should have, concluded that to approve the giving of consent would not have detracted from the "single desk" selling arrangements or the pursuit of AWBI's legitimate commercial objectives. In the language of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the Judicial Review Act") it was said that there had been "an exercise of a 26 s 57(1A). McHugh discretionary power in accordance with a rule or policy without regard to the merits of the particular case"27. These contentions proceeded from the premise that AWBI's decision to give or not give approval to the grant of an authority to export was regulated by the 1989 Act. Again, to adopt the language of the Judicial Review Act, the appellant's contentions were premised on the proposition that to give or not give approval in writing was "a decision of an administrative character made ... (whether in the exercise of a discretion or not) under an enactment"28. The validity of this premise must be examined. AWBI does not owe its existence to the Act; it is a company limited by shares incorporated under the Corporations Law. To a very great extent, its powers, and the powers and obligations of its organs, are regulated by the applicable companies legislation. So, for example, at the time of the events giving rise to this appeal, its board of directors owed duties to its sole shareholder, AWB. The content of those duties was to be found in the Corporations Law of Victoria and the considerable body of judge-made law affecting directors' duties. The central duty of the board of AWBI was to observe its constitution and to pursue the interests of the company as expressed in that document. As a wholly owned subsidiary of AWB those duties would, no doubt, have required the board of AWBI to pursue the interests of its parent (and thus, its parent's shareholders) to the extent that those interests were compatible with other obligations of AWBI. In fact the interests of the two companies coincided. The constituent documents of both AWB and AWBI required that AWBI seek to maximise returns to those who sold wheat into AWB wheat marketing pools. If AWBI gave its approval to the Authority giving a bulk-export consent it may not be entirely clear whether the Authority had a discretion to refuse consent. For present purposes, it is convenient to consider both possible constructions. On one construction of the 1989 Act the Authority would retain no discretion to refuse a consent once AWBI had given its approval in writing. If that were so, it would be evident that AWBI's decision to give, or not give, approval would be determinative. The competing view is that the Authority retained a discretion to refuse a bulk-export consent, even if AWBI had given its approval to it. On that view AWBI's role might better be described as exercising 27 s 5(2)(f) and s 6(2)(f). 28 s 3(1), definition of "decision to which this Act applies". McHugh a power of veto. No matter which construction is correct, it is necessary to recognise that, under s 57 of the 1989 Act, a company incorporated under ordinary companies legislation for the pursuit of commercial purposes is given a role to play in connection with permitting what otherwise is conduct (exporting wheat) forbidden by federal statute on pain of penalty. And the company given this role is itself exempted from the operation of this prohibition. At the least, then, there is an intersection between the private and the public. A private corporation is given a role in a scheme of public regulation. The parties could point to no other federal legislation in which there was a similar intersection. If processes of privatisation and corporatisation continue, it may be that an intersection of this kind will be encountered more frequently29. At its most general this presents the question whether public law remedies may be granted against private bodies. More particularly, do public law remedies lie where AWBI fulfils the role which it plays under the 1989 Act? We would answer this second, more particular question, "No". That answer depends in important respects upon the particular structure of the legislation in question. It is not to be understood as an answer to the more general question we identified. There are three related considerations which lead us to give that answer. First, there is the structure of s 57 and the roles which the 1989 Act gives to the two principal actors – the Authority and AWBI. Secondly, there is the "private" character of AWBI as a company incorporated under companies legislation for the pursuit of the objectives stated in its constituent document: here, maximising returns to those who sold wheat through the pool arrangements. Thirdly, it is not possible to impose public law obligations on AWBI while at the same time accommodating pursuit of its private interests. The roles of the Authority and AWBI Section 57 gives the Authority, not AWBI, the power to give the consent to export without which an offence is committed. It is the Authority's decision to give its consent which is the operative and determinative decision which the 1989 Act requires or authorises30. 29 Beermann, "Administrative-Law-Like Obligations on Private[Ized] Entities", (2002) 49 UCLA Law Review 1717. 30 Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 336-337 per McHugh The Authority is created by the 1989 Act and derives its functions and powers entirely from that Act. In that sense it is a creature of the 1989 Act. The Authority may not give consent without AWBI's prior approval in writing. That approval was a condition which must be satisfied before the Authority might give its consent. It was, in that sense, a condition precedent which had to be met before the Authority could lawfully exercise the power which the 1989 Act conferred on it to give its consent to the proposed export31. Unlike the Authority, AWBI needed no statutory power to give it capacity to provide an approval in writing. As a company, AWBI had power to create such a document. No doubt the production of such a document was given statutory significance by s 57(3B) but that sub-section did not, by implication, confer statutory authority on AWBI to make the decision to give its approval or to express that decision in writing. Power, both to make the decision, and to express it in writing, derived from AWBI's incorporation and the applicable companies legislation32. Unlike a statutory corporation, or an office holder such as a Minister33, it was neither necessary nor appropriate to read s 57(3B) as impliedly conferring those powers on AWBI. On that understanding of s 57(3B) AWBI's determination to approve the Authority's giving consent was not a decision under an enactment for the purposes of the Judicial Review Act. The approval was a condition precedent to the Authority considering whether to give its consent to export. If the Authority had any discretion about giving a consent once AWBI had given its approval, the Authority would have had to exercise that discretion having regard to the nature, scope and purpose of the power and the context in which it is found34. It is those matters which would be relevant for the decision-maker to take into account. It is in these "public" considerations that the "merits" which the appellant said had not been considered would be found. 31 cf Attorney-General (Cth) v Oates (1999) 198 CLR 162 at 171-172 [16] and Byrne v Garrisson [1965] VR 523 at 532. 32 Corporations Law of Victoria, s 124. 33 Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 at 301. See also Attorney-General (Cth) v Oates (1999) 198 CLR 162 at 171-172 [16]. 34 Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 38-40 McHugh The two other considerations we have mentioned (the "private" character of AWBI and accommodating public law obligations with AWBI's private interests) are conveniently dealt with together. AWBI, not only does not owe its existence to the 1989 Act, it, and its organs, had the various obligations we have mentioned earlier. Chief among those was, and is, the pursuit of its private objectives. So far as its constituent documents and applicable companies law principles are concerned, reference to any wider "public" considerations would be irrelevant. Because the 1989 Act did not expressly or impliedly require or authorise AWBI to decide whether to approve the issue of a bulk-export permit, AWBI could not be compelled, by mandamus or otherwise, to decide whether to grant or not grant its approval. It was under no statutory, or other, obligation to consider that question. It follows that s 57(3B) is not to be read as imposing on AWBI a duty to consider those matters that we have described as "public" considerations when deciding whether or not to grant approval. That is, s 57(3B) is not to be read as requiring AWBI to consider matters of the kind which the Authority should take into account in forming its decision whether to grant its consent. Nor should it be read as shifting to AWBI the obligation to take account of matters derived from the subject-matter, scope or purpose of the Act which bear upon a decision whether a particular export should be permitted. The sub-section did not require AWBI to consider those matters to the exclusion of consideration of its own commercial interests; it did not require AWBI to give preference to those matters over its own commercial interests. Section 57(3B) neither modified nor supplanted the obligations which AWBI and its organs had under its constituent documents and applicable companies law principles. The appellant did not contend, whether in this Court or in the courts below, that AWBI was not entitled to take its own interests into account in deciding whether to give its approval to the Authority's grant of consent. But once it is accepted that AWBI may consider its own commercial interests, a distinction between those interests, and what were said to be the "merits" of an individual application for approval, cannot be drawn. As pointed out earlier, the "merits" of an individual application are, for present purposes, those matters derived from the context of the 1989 Act and the subject-matter, scope or purpose of the Act which are identified as bearing upon the decision. We have referred to these as "public" considerations. Under the 1989 Act AWBI could export without consent. It could, indeed it should, have been seeking to maximise returns to those who sold wheat McHugh through the pool arrangements. One way of doing that was to remain the sole bulk exporter of wheat. Remaining the sole bulk exporter was consistent with the form of export monopoly preferred in the Explanatory Memorandum to the 1998 Bill – a monopoly managed by the Authority but possessed by AWBI ("the new grower company") pursuant to its "wheat export rights". If remaining the sole bulk exporter of wheat was a consideration that might legitimately be taken into account by AWBI when deciding whether to give approval to the Authority consenting to bulk export of wheat (and the appellant did not submit to the contrary) it is a consideration which could outweigh any countervailing consideration which an applicant for consent could advance. It could outweigh any countervailing consideration derived from the context of the 1989 Act, or from the nature, scope or purpose of the 1989 Act's provision that AWBI's prior written approval was a necessary condition for the Authority's giving its consent. That being so, there is no sensible accommodation that could be made between the public and the private considerations which would have had to be taken to account if the 1989 Act were read as obliging AWBI to take account of public considerations. For these reasons, neither a decision of AWBI not to give approval to a consent to export, nor a failure to consider whether to give that approval, was open to judicial review under the Judicial Review Act or to the grant of relief in the nature of prohibition, certiorari or mandamus. The appeal should be dismissed with costs. Kirby KIRBY J. In Gerlach v Clifton Bricks Pty Ltd35, Callinan J and I said: "All repositories of public power in Australia, certainly those exercising such power under laws made by an Australian legislature, are confined in the performance of their functions to achieving the objects for which they have been afforded such power. No Parliament of Australia could confer absolute power on anyone ... [T]here are legal controls which it is the duty of courts to uphold when their jurisdiction is invoked for that purpose." Although we were in dissent as to its application to the circumstances of that case, the general principle so stated was not questioned. This appeal36 presents an opportunity for this Court to reaffirm that principle in circumstances, now increasingly common, where the exercise of public power, contemplated by legislation, is "outsourced" to a body having the features of a private sector corporation. The question of principle presented is whether, in the performance of a function provided to it by federal legislation, a private corporation is accountable according to the norms and values of public law or is cut adrift from such mechanisms of accountability and is answerable only to its shareholders and to the requirements of corporations law or like rules. Given the changes in the delivery of governmental services in recent times, performed earlier and elsewhere by ministries and public agencies, this question could scarcely be more important for the future of administrative law37. It is a question upon which this Court should not take a wrong turning38. 35 (2002) 209 CLR 478 at 503-504 [70]; cf Hot Holdings Pty Ltd v Creasy (2002) 77 ALJR 70 at 85-86 [94]-[96]; 193 ALR 90 at 111-112. 36 From the Full Court of the Federal Court of Australia: Neat Domestic Trading Pty Ltd v AWB Ltd (2001) 114 FCR 1. 37 Administrative Review Council, The Scope of Judicial Review, Discussion Paper, 38 cf R v Panel on Take-overs and Mergers, Ex parte Datafin Plc [1987] QB 815 at 838-839. See also Mason, "Australian Administrative Law Compared with Overseas Models of Administrative Law", (2001) 31 AIAL Forum 45 at 59-60. Kirby The facts Wheat export arrangements: Most of the relevant facts are set out in other reasons39. The necessary background includes the history of governmental regulation of the marketing of wheat in and from Australia. That cereal, from earliest colonial times, has been the most important crop grown in (and one of the chief exports from) Australia40. Australian durum wheat is a special variety of wheat, mainly grown in northern New South Wales. Its characteristics make it suitable for the production of semolina-based products such as macaroni, spaghetti and vermicelli41. It is graded in quality from ADR1 (prime quality grain) to ADR6 and then to ADRF (or ADR Feed) at the lowest end of the quality scale42. NEAT Domestic Trading Pty Limited ("NEAT"), the appellant in this Court, has for many years been involved in marketing durum within Australia and overseas. In this regard, it participates in a specialist market. Before the coming into effect of the present statutory arrangements for the marketing of export wheat, the Australian Wheat Board ("the Board") had control over the wheat export monopoly under the Wheat Marketing Act 1989 (Cth) ("the Act"). Within its sole right to control the export of wheat, the Board had given consent to NEAT on a number of occasions to export large quantities of durum to Libya, Morocco and Turkey (1996), Tunisia and Morocco (1998) and Italy (1999). Such approvals were inferentially to the advantage of NEAT, the wheat growers who dealt with it, as well as the Australian national interest, without adversely affecting the monopoly marketing of wheat exports from Australia by the Board. The 1998 amending Act: On 1 July 1999 the Wheat Marketing Legislation Amendment Act 1998 (Cth) came into effect. That statute amended the Act to substitute a new scheme of wheat marketing that envisaged a public body, the Wheat Export Authority ("the Authority"), and three companies incorporated under corporations law replacing the Board. The purpose of the restructure was not to alter the wheat export arrangements in a fundamental way. The export 39 Reasons of Gleeson CJ at [8]-[16]; reasons of McHugh, Hayne and Callinan JJ ("joint reasons") at [32]-[35]. 40 Dunsdorfs, The Australian Wheat-growing Industry 1788-1948, (1956). 41 Neat Domestic Trading Pty Ltd v Wheat Export Authority (2000) 64 ALD 29 at 43 42 (2000) 64 ALD 29 at 43 [53]. Kirby monopoly was to be maintained43. The aim was to reduce the government's involvement to the regulatory aspects of the monopoly through the Authority, while the responsibility for the marketing and commercial aspects of the scheme was to rest with a private company, owned, at least in part, by growers. However, as will become apparent, this separation of the regulatory and commercial aspects of the scheme was not complete. AWBI44, a wholly owned subsidiary of AWB, was the only supplier that did not require the Authority's consent to export wheat from Australia45. In key aspects, AWBI remained intimately involved in the regulatory scheme established by the Act. Not only did the Authority have to consult AWBI in the process of evaluating an application for export consent46, but the "prior approval in writing" of AWBI was required before the Authority could grant such a consent to any other supplier47. On 14 July 1999, after the commencement of the legislative amendments and following approval for such export granted by AWBI, the Authority gave consent for a proposed bulk export of wheat to India by a company other than NEAT. However, so far as the evidence disclosed, that was the end of the individual consideration by AWBI of applications for the bulk export of wheat. Thereafter, no approvals whatever for bulk export of wheat were given. On the contrary, a minute to the Board of AWBI, only a week after the above instance of consent, recorded that "[t]he existence of a bulk permit is in direct contravention of AWB's current policy not There ensued correspondence between AWB and the Authority seeking revocation of the Authority's consent for the proposed export to India. The Authority asserted that the consent could not be revoked. An information paper was prepared for the AWBI Board discussing the case, asserting that the issuance of the "permit" had been "erroneous" and proposing guidelines and protocols to ensure that "it does not happen again". issue such permits". It is against the background of this dispute within the successor bodies to the Board that NEAT's subsequent applications to continue its specialised export of durum to willing overseas buyers must be understood. 43 Explanatory Memorandum at [20]. 44 This is "nominated company B". The same descriptions are used to refer to the respondent companies as are used in the reasons of Gleeson CJ at [4]. 45 See the Act, ss 57(1) and (1A). 46 The Act, s 57(3A). 47 The Act, s 57(3B). Kirby NEAT's applications: Six of NEAT's applications for the bulk export of durum were the subject of these proceedings. The first two of those were made on 4 November 1999. NEAT wrote to the Authority for consent to export quantities of ADR3 respectively to Italy and Morocco. The Authority forwarded the request to AWBI. AWBI refused to give approval and the Authority immediately signified its refusal of consent. There followed two similar requests on 9 December 1999 for the export of ADR Feed and ADR6 to a buyer in Italy. These were rejected by AWBI which again refused to give its approval. A facsimile from AWB to NEAT stated in general terms that "AWB will not be issuing export permits for bulk wheat shipments". In consequence of AWBI's refusal of approval, the Authority refused to give its consent to the proposed export. The identical outcome ensued with a fifth application by NEAT in January 2000. There were written exchanges evidencing heightened frustration on the part of NEAT over the apparent intransigence of AWB acting on behalf of AWBI. NEAT explained to AWB that its grower clients had been "unable to obtain a satisfactory price from AWB Limited and … want[ed] NEAT to immediately conclude this business". According to the evidence, in the midst of the consideration of this application, AWB's Chairman, Mr Flügge, on 24 January 2000, told a meeting of local durum growers at Gunnedah chaired by the Deputy Prime Minister: "I have two things to say to you, the first is good afternoon and the second is there will be no permits granted for the bulk export of any types of wheat." Mr Flügge later wrote in similar terms to the Deputy Prime Minister stating that AWBI "will not approve the issue of a permit for the bulk export of durum, or any other wheat at this time". He insisted that this was "our responsibility under legislation" (emphasis added). He justified this approach as necessary "to preserve the integrity of the single desk", that is a single market control over the sale of wheat of all types exported from Australia. Putting it bluntly, the searching out of specialist, niche markets for the sale of particular varieties of wheat, to particular countries, for particular uses, at particular times was not open to consideration by AWBI "at this time". To those who wanted to submit otherwise, all that AWB and AWBI would say, in effect, was "Good afternoon", and then "Good-bye". In this Court, NEAT went in some detail through the circumstances of the fifth application as disclosed in the evidence. It involved a proposal to sell 50,000 tonnes of ADR Feed to a buyer in Italy. As indicated, ADR Feed is at the lowest end of the scale of durum quality. However, apparently, NEAT had found a particular purchaser in Italy willing to accept Australian ADR Feed not for animal consumption but to make pasta for human consumption. The wheat in question was available for sale in what NEAT regarded as outside the ordinary Kirby AWBI markets for the sale of ADR Feed. In a letter to the Authority, in support of the fifth application, NEAT pointed out that the wheat in question was "stored on the ground in uncovered stacks" because local silos were full or shut. NEAT could offer a significantly higher price to growers than was available from the domestic company (AWB) for ADR Feed quality wheat. The price differential was about $35 per tonne. However, it required prompt action and segregation of the ADR Feed to meet the buyer's requirements. The letter pointed out that the buyer "currently has US Feed durum offered to it and it will buy US Feed durum unless NEAT can confirm it has obtained a permit for ADR Feed in the very near future". On the face of things, this application therefore presented a particular deal, not in competition with AWBI or other Australian wheat exports to Italy or other Australian exports of ADR Feed. However, as on the previous occasions (save for the one case in July 1999 that was "never to be repeated") AWBI refused to give its approval. The Authority, as it was bound, declined to give its consent to the export bid. NEAT's final attempt to obtain approval for export of durum was at the end of January 2000. This was a proposed sale of 25,000 tonnes of ADR Feed to Italy. It was essentially a repetition of the previous application, but with a considerably lower tonnage. As with the prior applications, within two days AWBI sent a letter to the Authority withholding approval and, as required, the Authority refused its consent. It was in those circumstances that NEAT commenced its proceedings in the Federal Court. Before closing this chronicle, it is worth referring to the communications by AWBI informing the Authority of its refusal to approve the export applications. The letters by AWBI refusing NEAT's first five applications were in identical terms, stating as the only reason for refusal: "Approval is not granted on the basis that the issuing of the permit would jeopardise [AWBI's] marketing strategy and adversely impact on the net returns received by growers who deliver to the National Pool." Applications for bulk export of durum or any other types of wheat by other traders were treated in the same way. AWBI would refuse approval in virtually identical terms to those set out above, regardless of the nominated export destination, and regardless of the type of wheat proposed for export, or other special circumstances. The findings of the primary judge In the Federal Court, before the primary judge (Mathews J), AWB and AWBI attempted to present a case that, in refusing to give approval, AWBI, in every instance, had examined carefully the individual merits of the application. Indeed, Mr Gomersall and Mr Richardson, the officers who had made the decisions to refuse approval for NEAT's applications, gave oral evidence stating Kirby that they had taken into account various considerations special to each request. It was suggested that five or six considerations had been carefully weighed by AWB and AWBI in reaching each decision. Reference was also made to the statement in the internal records of AWBI limiting the refusal of export approval to "the current market environment" and the claim made that each request for approval would be dealt with on a "case by case" basis. The primary judge rejected the assertions of individualised decision- making. Her Honour regarded the suggested qualification that the policy would be maintained in current market conditions as being of "little relevance"48. She categorised the assurance that each application was considered individually as a "hollow one"49 which, in the light of all the evidence, represented "a meaningless exercise"50. She rejected the evidence of the respondents' witnesses about other factors that they allegedly took into account51: "I have difficulty in accepting that they played any realistic part in the rejection of the applications. The evidence indicates that these factors probably did exist. If considered, they would no doubt have provided further grounds for declining to approve the applications. But I cannot accept that they were in fact given any realistic consideration at that stage. The applications were bound to be rejected in any event in pursuance of the overall policy [of AWBI]." The primary judge accepted that some of the general considerations postulated by the AWB and AWBI witnesses may have played a part in the formulation of the "policy". But it was the "policy" that caused the rejection of "AWBI was, as Mr Gomersall conceded, concerned more with its overall marketing strategy than with the merits of individual cases. Its decisions in this case were clearly made in the inflexible application of its policy against bulk export permits." In this Court, by a notice of contention, AWB and AWBI sought to uphold the Full Court's decision on the basis that that Court should have held that each of 48 (2000) 64 ALD 29 at 60 [140]. 49 (2000) 64 ALD 29 at 57 [122]. 50 (2000) 64 ALD 29 at 57 [122]. 51 (2000) 64 ALD 29 at 56-57 [121] (emphasis added). 52 (2000) 64 ALD 29 at 63 [157]. Kirby the decisions made by AWBI, not to give approval for NEAT's application to the Authority, did not involve the exercise of a discretionary power in accordance with a policy without regard to the merits of the particular applications. However, in the light of the primary judge's conclusions, and having regard to the advantages which she enjoyed in reaching those conclusions, this contention fails. It would be impermissible for this Court to reopen the issue, determined as it was by the factual findings at trial. The primary judge's conclusion was based in part on her assessment of the credibility of the oral evidence of the officers and, more importantly, it is reinforced by the contemporary records from which her Honour quoted. Far from being palpably erroneous or contrary to incontrovertible facts53, her Honour's findings in this regard were fully consistent with the contemporary evidence. The lawfulness of what the respondents did must therefore be judged in accordance with the terms of the "policy" that AWB and AWBI were found to have adopted and applied. The legislation and common ground The relevant provisions of the Act and of the Trade Practices Act 1974 (Cth) ("the TPA") are set out, or sufficiently referred to, in other reasons54. Because NEAT had, by the time the matter was argued in the Full Court (as in this Court), abandoned the application for various remedies under s 16 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act"), the real question litigated was whether AWBI's actions left it exposed to NEAT's proceeding for breach of s 46 of the TPA55. As a defence to the suggested contravention of the TPA, AWB and AWBI invoked s 57(6) of the Act. This refers to s 51(1) of the TPA. That provision exempts anything specified or specifically authorised by the provisions of the Act from founding a contravention of the TPA. In the Full Court, and by notice of contention in this Court, AWB and AWBI asserted that s 57(6) covered any of their actions pursuant to or broadly referable to the functions specified for them in the Act. However, such an argument cannot succeed, stated so broadly. When the Act refers to "things ... to be regarded as specified ... and specifically authorised by this section" (including "anything that is done by [AWBI] under this section or for the purposes of this 53 State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (In Liq) (1999) 73 ALJR 306 at 321 [63], 331-332 [93], 338 [139]; 160 ALR 588 at 607, 620-622, 630; Fox v Percy (2003) 197 ALR 201 at 209 [29], 225 [96]-[97]. 54 Reasons of Gleeson CJ at [5], [9]; joint reasons at [42]-[43]. 55 (2001) 114 FCR 1 at 9-10 [37]. Kirby section")56 such references are obviously confined to things done validly; not merely purported to be so done57. It follows that the second contention of the respondents also fails. NEAT argued that AWBI's successive refusals to approve its bulk export applications were not done validly under s 57(6) of the Act or for the purposes of that section. It invoked ss 5(1)(e) and 5(2)(f) of the ADJR Act. Section 5(1)(e) provides that an application for an order of review of a decision pursuant to the ADJR Act can be made where "the making of the decision was an improper exercise of the power conferred … in pursuance of which it was purported to be made". Section 5(2)(f) provides that the reference to an "improper exercise of a power" includes "an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case". It was in this roundabout way that an important issue of principle was tendered to the Federal Court. It was whether the decisions to withhold approval, made by AWBI, were reviewable under the ADJR Act. If they were, NEAT pressed its argument that the ground of invalidity referred to in s 5(2)(f) of the ADJR Act was established and that, on that basis, the Federal Court should have set aside the purported decisions so as to leave AWBI bereft of the immunity it claimed from the operation of the TPA. The issues It is appropriate to note that some of NEAT's arguments in the courts below were not pressed on this Court. One was NEAT's argument that AWBI had impermissibly delegated its functions under the statute to AWB. The primary judge rejected that suggestion and it was likewise dismissed in the Full Court58. Similarly, by the time the matter reached this Court, any complaints against the validity of the decisions of the Authority were also abandoned. In effect, this course of argument left the focus exclusively upon AWBI's decisions. AWBI sought to have this Court consider the application of the TPA, on the assumption that NEAT could make good its administrative law complaints. However, that contention must also be rejected. Given the course that the 56 The Act, s 57(6). 57 Darling Casino Ltd v NSW Casino Control Authority (1997) 191 CLR 602 at 635. See also Little v The Commonwealth (1947) 75 CLR 94 at 108, 110, 112; Australian National Airlines Commission v Newman (1987) 162 CLR 466 at 471; G Scammell & Nephew Ltd v Hurley [1929] 1 KB 419 at 427-429. 58 (2001) 114 FCR 1 at 9 [33], 12 [47], 13 [54]. Kirby proceedings followed in the Federal Court, AWBI's arguments based on the TPA were not resolved. It would be inappropriate for this Court to consider them, effectively for the first time. If NEAT were to succeed in this Court, the proceedings would have to be returned to the Full Court for the determination of the outstanding issues under the TPA. Two remaining issues are therefore now presented for decision by this Court. They are: (1) Were AWBI's refusals to give its approval for NEAT's applications as stipulated in s 57(3B) of the Act, administrative decisions that fall within the scope of the ADJR Act? ("The nature of the decision" issue) (2) If so, given the findings of the primary judge, undisturbed on appeal, and the evidence adduced at trial, were the decisions an "improper exercise of the power" conferred by the Act in accordance with ss 5(1)(e) and 5(2)(f) of the ADJR Act? ("The exercise of power" issue) The nature of the decision: context It is impossible to approach the classification of the contested decisions of AWBI to refuse to give approval to NEAT's requests addressed to the Authority, without considering the constitutional and statutory context in which such decisions were made. It is the context that helps to resolve the question whether AWBI's decisions were purely acts of a private corporation, pursuing its own commercial interests in accordance with corporations law, or were decisions of a public, administrative character, rendering them amenable to review under the ADJR Act. As with so many legal questions in Australia, the starting point for analysis must be the Constitution59. It sets the ultimate boundaries within which the exercise of public or governmental power must take place in this country. As in Airservices Australia v Canadian Airlines International Ltd60, the character of the provisions of an Act designed to involve private sector bodies in the "exercise [of] what once may have been and elsewhere may be regarded as governmental functions" is to be determined by reference to the operation of such provisions. They must also be read in the context of the constitutional features of "the nature of responsible government, in particular with respect to the position of the Minister charged with the 59 Roberts v Bass (2002) 77 ALJR 292 at 320-321 [143]-[146]; 194 ALR 161 at 199- 60 (1999) 202 CLR 133 at 261 [374]-[375]. Kirby administration of the statute constituting the entity in question"61. His Honour referred to certain "significant fissures in Australian jurisprudence", including62: to which the manner of scrutiny of "the extent the formally 'non-governmental' action of a statutory corporation (that is, entering into a 'commercial' contract) can or should be affected by the considerations that it nonetheless is a public body that is so acting and that in so doing it is exercising a public function." The character of the decisions of bodies assigned important public functions is not determined conclusively by the structure of such bodies (for instance as private or statutory corporations), still less by arguments about the merits or demerits, advantages or disadvantages of privatisation or private sector management63. In so far as such decisions derive their necessity or effectiveness, and the bodies making them derive their existence or particular functions, from federal legislation, they may involve the exercise of public power. In so far as they do this, under the Constitution, a Minister must be accountable to the Parliament in respect of such exercise. In turn, through the Parliament, the Minister, and the government of which he or she is part, are responsible to the electors. This appeal was argued as if the Constitution was silent on the issues for decision. In my view, the Constitution cannot be ignored in resolving the first issue. It is a critical matter of context. The nature of the decision: the ADJR Act The statutory foundation: In order to invoke the grounds of review in s 5 of the ADJR Act, an applicant must be "a person aggrieved by a decision to which this Act applies"64. In s 3(1) of the ADJR Act a "decision to which this Act applies" is defined as: 61 (1999) 202 CLR 133 at 262 [376] with reference to Egan v Willis (1998) 195 CLR 62 (1999) 202 CLR 133 at 262 [377] citing Hughes Aircraft Systems International v Airservices Australia (1997) 76 FCR 151 at 179-180 per Finn J. See also Finn, "A Sovereign People, A Public Trust", in Finn (ed), Essays on Law and Government, vol 1 (1995) 1 at 12-13. 63 Freeman, "Extending Public Law Norms Through Privatization", (2003) 116 Harvard Law Review 1285 at 1302-1303. 64 ADJR Act, s 5(1). Kirby "a decision of an administrative character made ... or required to be made ... (whether in the exercise of a discretion or not) under an enactment, other than a decision ... included in any of the classes of decisions set out in Schedule 1." The decisions made under the Act in question here are not listed in Sched 1 of the ADJR Act. They are thus not expressly exempted from the operation of that Act. It was not disputed that NEAT was a "person aggrieved" by AWBI's refusals to approve its applications. Further, there was no challenge to the holding of the primary judge that AWBI's approval determinations were "substantive, final and determinative of the issues falling for consideration" and were therefore to be characterised as "decisions" for the purposes of the ADJR Act65. But before this Court, AWBI disputed that such decisions were either to be classified as "administrative", or "made … under an enactment". Different, though related, questions may arise where review of such decisions is sought under the common law. Before turning to examine the issues in dispute, I pause to make reference to a point that is easy to overlook. The focus of s 5(1) of the ADJR Act is upon a given "decision". It is the "decision" that must be characterised by reference to whether, within s 3(1) of the ADJR Act, it is of "an administrative character" and one made or required to be made "under an enactment". The question is not whether AWBI, as the decision-maker, is a body of a particular character66, including whether generally speaking it performs its functions as a private corporation conforming to corporations law or otherwise and is committed to maximising its profits. Whilst such features of AWBI may be relevant to the character of particular decisions that it makes, they are not determinative. In a particular case, a statutory scheme may have entrusted decisions of a public, governmental or regulatory character to a private corporation, involving that body, to that extent, in the exercise of public power. In my view, the primary judge was correct to conclude that a decision made by AWBI for the purposes of s 57(3B) of the Act was of an administrative character67. She was also correct to conclude that such a decision was made 65 (2000) 64 ALD 29 at 35 [23] with reference to Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 ("Bond"). 66 cf Administrative Procedure Act 1946 (US): 5 USC §551(1) and the definition of "agency" to mean "each authority of the Government of the United States". 67 (2000) 64 ALD 29 at 38 [33]. Kirby under an enactment68. I shall address these characterisations in turn, although clearly neither is wholly divorced from the other. The decisions were administrative: In reaching her conclusion about the character of the impugned decisions, the primary judge took into account the width of the expression "administrative" in this context. Given the remedial character of the ADJR Act, a broad criterion was selected to attract that Act's application to a vast range of decisions made in the deployment of federal governmental power69. It is obviously inappropriate to construe such a criterion narrowly, and in a way that would remove from the purview of the ADJR Act decisions that might otherwise be reviewable under the common law. That would defeat the purpose of that Act. The primary judge acknowledged that the concept of an "administrative" decision was not susceptible to a comprehensive and universal definition70. In that regard, her Honour71 referred to the observation by Ellicott J in Burns v Australian National University72 that administrative decisions include at least those "made in executing or carrying into effect the laws of the Commonwealth". By that criterion, the decision concerning the grant or refusal of "prior approval in writing" of AWBI, as sought by the Authority following NEAT's request, is one made in carrying into effect a public law of the Commonwealth, namely the Act. Section 57(3A) of the Act makes it a precondition for the Authority to "consult" AWBI before it gives consent for the bulk export of wheat. Without the Authority's written consent, wheat may not lawfully be exported from Australia, under sanction of a substantial penalty73. If AWBI does not give approval, the Authority "must not give a bulk-export consent"74. AWBI's approval decision is fully integrated into the regulatory scheme created by the statute. AWBI holds, in effect, a veto over the statutory consent of the Authority, 68 (2000) 64 ALD 29 at 40 [44]. 69 (2000) 64 ALD 29 at 36 [27]-[28] with reference to Bond (1990) 170 CLR 321 at 335-336 and Evans v Friemann (1981) 35 ALR 428 at 434. 70 (2000) 64 ALD 29 at 37 [29] citing Hamblin v Duffy (1981) 34 ALR 333. 71 (2000) 64 ALD 29 at 37 [30]. 72 (1982) 40 ALR 707 at 714. 73 The Act, s 57(1)(a). 74 The Act, s 57(3B). Kirby which is without doubt a public body. To that extent, a private corporation to a large degree controls the conduct of an independent statutory agency of the Commonwealth made up of officers of the Commonwealth answerable to this Court, amongst other ways, under the Constitution75. That constitutionally entrenched power of judicial review is one of the limits on the extent to which corporatisation and privatisation of federal administrative action in Australia may escape the disciplines of judicial scrutiny76. Further, the interests involved in and affected by AWBI's decisions to grant or withhold the approval required by the Act are much wider than the private interests of an ordinary corporation. The Act not only grants AWBI the privileged position of a statutory monopoly, but it involves that corporation in the scheme of regulation established. The presence of either, and certainly of both of those elements imposes upon AWBI obligations in the proper exercise of those of its functions that were relevant to the operation of the statutory regulatory scheme, and that had a substantial effect on growers. Some of those growers were not shareholders of AWB and were therefore not represented in the internal deliberations of AWB or AWBI. In characterising the decisions to grant, or withhold, approval for bulk export of wheat, the relationship between AWBI and the applicant traders (and growers) seeking such approval is therefore also relevant. Grain traders seeking the Authority's, and consequently AWBI's, agreement for the export of wheat, are not in a contractual relationship with AWBI. Further, in a letter to the Authority, Mr David Mailler, the Chairman of the Durum Wheatgrowers Association (NSW), also pointed out that those growers who had not exported in the past or who joined the industry later were not shareholders of AWB. Remedies under the TPA were also foreclosed. As such, the only way that the decisions of AWBI, with their wide and significant impact, could be exposed to legal scrutiny or accountability was by way of administrative review. If such review were unavailable, AWB and AWBI, at least in this respect, would come close to possessing absolute legal power. In his letter to the Authority, Mr Mailler recorded the disenchantment of many growers with AWBI's conduct and the need for transparency and accountability in the decision-making process. An internal AWB memorandum to Mr Flügge also noted the hostility of durum growers towards the conduct of 75 Constitution, s 75(v). 76 cf Administrative Review Council, Government Business Enterprises and Commonwealth Administrative Law, Report No 38, (1995); Taggart, "The Impact of Corporatisation and Privatisation on Administrative Law", (1992) 51 Australian Journal of Public Administration 368. Kirby AWB and AWBI. Apart from any hope that such disenchantment would result in legislative action at some point in the future, for the time being at least, in the absence of administrative review, the growers affected could not even get AWBI to listen to them. the Authority the consent decision of is characterised as "administrative" (a proposition which was not in dispute), AWBI's decision to give approval for such an application must surely be characterised in the same way77. Both the decision of the Authority and that of AWBI are made pursuant to the same provision in the Act regulating the export monopoly. They each relate to the same applications for bulk export. They have the same purpose and substantive effect. They interact with one another. In the letters informing NEAT of its refusal of consent for the respective applications, the Authority in each case explained that such refusal followed the withholding of approval by AWBI. Those letters also referred to the rights that NEAT had under the ADJR Act to obtain a "statement of the reasons" and to "challenge the decision". However, even if asserted against the Authority, such rights would be reduced to nought if the same obligations and scrutiny mechanisms under the ADJR Act did not extend to AWBI as well. It is true that different considerations might guide the Authority and AWBI in reaching their respective decisions. This was, to some extent, the object of converting the Board into different bodies. AWBI, for instance, may legitimately consider the effects of a proposed export on its own commercial interests and the returns of growers who are shareholders of AWB. The Authority may also take into account broader considerations of the public or national interest. However, judicial review, whether under the common law or under the ADJR Act, is not concerned with the decision-maker's conclusions on the merits. It is the legality of such decisions that is examined, rather than the correctness or otherwise of the considerations that guided such conclusions. To determine the availability of judicial review of decisions at common law, courts have looked to the nature of the power exercised by the body in question. In Forbes v New South Wales Trotting Club Ltd78, the respondent was a private club with "no statutory power or recognition" but which "controlled trotting in New South Wales by the consent of the government and all of the trotting clubs of that State". Yet for the purposes of its decisions in exercise of a power to warn off persons from courses under its control, it was held that the club was required to observe the rules of natural justice. This was because 77 Sinclair v Maryborough Mining Warden (1975) 132 CLR 473 at 481. 78 (1979) 143 CLR 242 ("Forbes") at 262. Kirby trotting was a "public activity in which … large numbers of people take part" and "[m]embers of the public have the legitimate expectation" to be admitted upon paying the stated charge79. Gibbs J thought that it was relevant that, at least in some situations, "the person warned off might thereby be prevented from carrying on his occupation or performing the duties of his employment"80. Accordingly, a private club owner implementing the rules of trotting, such as the respondent in that case, could not exclude members of the public "arbitrarily and capriciously"81. Murphy J said expressly that the nature of the power exercised can be public, even if the decision-maker is a private body82: "There is a difference between public and private power but … one may shade into the other. When rights are exercised directly by the government or by some agency or body vested with statutory authority, public power is obviously being exercised, but it may be exercised in ways which are not so obvious. … [A] body … which conducts a public racecourse at which betting is permitted under statutory authority, to which it admits members of the public on payment of a fee, is exercising public power." A similar focus on the nature of the power exercised by a decision-making body, in order to determine whether or not it was subject to judicial review, was adopted by the English Court of Appeal in R v Panel on Take-overs and Mergers, Ex parte Datafin83. The decision-making body in that case was the Panel of Take-overs and Mergers. The panel was a non-statutory, unincorporated association, without statutory, or common law prerogative powers. However, it regulated an important part of the financial market in the City of London. Despite the fact that the Panel did not owe its existence to a statute, and that its decisions were not required by, or made pursuant to, a power conferred by a statute, the Court of Appeal held that it was amenable to public law review. Lloyd LJ expressed the opinion that where the source of the power was a statute or subordinate legislation, the body was subject to judicial review, but not where the source of the power was contractual. However, between those 79 (1979) 143 CLR 242 at 264. 80 (1979) 143 CLR 242 at 264. 81 (1979) 143 CLR 242 at 269. 82 (1979) 143 CLR 242 at 275. 83 [1987] QB 815 ("Datafin"). Kirby extremes, a court would look more closely to the nature of the power that was exercised84. For the members of the Court of Appeal there were a number of features of the Panel and its decisions that brought it within the purview of public law. These included the fact that there had been an "implied devolution of power" to the Panel by the government whereby at least some legislation assumed its existence85. Its chairman and deputy chairman were appointed by the Governor of the Bank of England86. The Panel was used by the government as one of the central features of the regulation of the financial market87. Its decisions had a significant effect on a great number of citizens, many of whom had not consented to its exercise of power88. Importantly, although the Panel as such was a "private" body, its functions and decisions could have significant consequences through the Council of the Stock Exchange, which was a public body. Such consequences could include the exclusion or suspension of a listed company from the Stock Exchange89. Finally, it was also considered relevant that those affected by the Panel's exercise of power had no other private law remedies for scrutiny or control90. It is useful to have regard to these Australian and English decisions in approaching the first issue presented in this appeal. As I remarked in Re Minister for Immigration and Multicultural Affairs; Ex parte Applicant S20/200291: "Where a decision is reviewed on grounds that are contained in an enactment, such as the [ADJR Act], … determining the content of those grounds and the availability of relief requires an interpretation of the statutory the background of administrative law principles that have developed (and that continue to develop) under the common law." language and purpose, read against 84 [1987] QB 815 at 847. 85 [1987] QB 815 at 849. 86 [1987] QB 815 at 849. 87 [1987] QB 815 at 838. 88 [1987] QB 815 at 838. 89 [1987] QB 815 at 838, 851-852. 90 [1987] QB 815 at 839. 91 [2003] HCA 30 at [155]. Kirby Whether or not the criterion of the exercise of "public power" is sufficiently precise to be accepted as the basis for review of decisions under the common law92, the observations about the nature of the power identified in cases such as Forbes and Datafin are helpful in analysing whether particular decisions are of an "administrative character". When applied to the circumstances of the present appeal, all the criteria identified in those cases point towards the conclusion governmental or statutory authority. Indeed, the position of AWBI with its statutory veto on the decisions of a public authority is a much stronger instance than that presented by a private trotting club or a private industry panel. It is therefore unsurprising that AWBI's decisions should be classified as "administrative" and rendered subject to public law scrutiny. impugned decisions were made pursuant The decisions were made under an enactment: In Australian Broadcasting Tribunal v Bond, Mason CJ held that the phrase "decision of an administrative character made … under an enactment", read as a whole, indicated that a decision "which a statute requires or authorizes"93 or "for which provision is made by or under a statute"94 is reviewable under the ADJR Act. That approach recognises that the elements of "decision", "administrative character" and "under an enactment" in the definition cannot be construed in isolation. They are inter-related. Each informs the meaning and content of the others. The primary judge95 made reference to the decision in Glasson v Parkes Rural Distributions Pty Ltd96. In that case this Court held that where a statute was not "the source of the power to appoint the decision-maker, or the source of his power to make the decision, or the source of the decision's legal effect", the decision could not be said to have been made "under an enactment". During argument, reference was also made to Federal Court decisions interpreting the phrase "decision … made … under an enactment". However, most of the cited exegesis related to corporations or authorities created by statute, and decisions of such bodies to enter contracts97 or decisions pursuant to existing 92 Craig, "Public Law and Control over Private Power", in Taggart (ed), The Province of Administrative Law, (1997) 196 at 198-199. 93 (1990) 170 CLR 321 at 336. 94 (1990) 170 CLR 321 at 337. 95 (2000) 64 ALD 29 at 38-39 [36]. 96 (1984) 155 CLR 234 at 241. 97 eg James Richardson Corporation Pty Ltd v Federal Airports Corporation (1992) 117 ALR 277; General Newspapers Pty Ltd v Telstra Corp (1993) 45 FCR 164. (Footnote continues on next page) Kirby contracts98. As such, they raise different issues. They are not apposite to the circumstances of the present appeal. Approached in the broad way that the composite phrase in the ADJR Act suggests, it follows that the notion of a "decision … made … under an enactment" is not to be construed narrowly. Whether or not the source of the decision-maker's power to act derives from a statute is not the determinative criterion for the purposes of characterising the impugned decision as reviewable under the ADJR Act. However, while cases such as Forbes or Datafin illustrate that a statutory origin is not essential to invoke the supervisory jurisdiction of a court at common law, for a decision to come within the ADJR Act, it must have some appropriate nexus to a federal enactment, given the specific reference to a decision "made … under an enactment" in s 3(1). In this regard, the fact that AWBI was a private company, incorporated under corporations law, does not have any immediate legal consequence. While it is true that AWBI as an entity does not owe its existence to the Act, focusing on the terms of the Act it is equally clear that AWBI is not just an ordinary private corporation. AWBI is specifically named in the Act (as "nominated company B")99. The Act confers on AWBI the privileged position of being the only person who can export wheat from Australia without approval from the regulating Authority100. The Authority had to consult AWBI in performing its key regulatory function101. Moreover, the Authority could not give consent for an export by another trader without obtaining AWBI's prior approval102. Through the statutory requirement for the prior approval of "nominated company B", AWBI had conferred upon it the power to exercise a key influence on the regulatory process and the conduct of a public authority. The notion that a private corporation, as such, could, by its decision, control the consent-making processes of the Authority (and thereby effectively control the occasions and terms on which other traders would be allowed to participate in its market) is unthinkable without the support of valid legislation. The only way that AWBI's See Allars, "Private Law But Public Power: Removing Administrative Law Review From Government Business Enterprises", (1995) 6 Public Law Review 44. 98 Australian National University v Burns (1982) 43 ALR 25. 99 The Act, ss 3, 57, 84. 100 The Act, ss 57(1) and (1A). 101 The Act, s 57(3A). 102 The Act, s 57(3B). Kirby "decision" could take on a legal character affecting the conduct of the Authority, and the economic rights of NEAT (and its growers) and of other Australian growers who wished to export wheat to the world market, is by force of the Act. And then only if the Act gives such authority in clear and unmistakable terms103. The submission that AWBI was under no duty to make a decision as envisaged by s 57(3B) of the Act, should also be rejected104. AWBI was an identified repository of a power conferred upon it by an Act of the Parliament. As the primary judge found, without a decision by AWBI "a large part of the scheme created under s 57 would become unworkable"105. In the Full Court, Gyles J, who otherwise would have withheld relief, expressed a view accepting that s 57(3B) may impose "an enforceable duty upon [AWBI] to give an answer when requested"106. I regard it as unthinkable that AWBI could simply ignore, or unduly delay, a consultation that the Authority was obliged by the Act to conduct with it upon receiving an application for consent to the export of wheat. In the result, AWBI did not do either of those things. In each case it acted with a speed made possible by its inflexible and publicly stated approach to all such applications. It follows that it is the Act that provides for, requires, and gives legal force to, AWBI's "decisions" relevant to NEAT's applications. It is the role performed for the purposes of the Act, and not the corporate structure of AWBI, that determines the character of the "decisions" in question in this appeal. Other decisions made by AWBI may indeed have the character of decisions by a private corporation operating within the private sphere. But, at least in so far as its decisions have the consequences provided for in s 57(3B) of the Act, they are decisions outside the private curtain. They are subject to public scrutiny. They are decisions of an administrative character made under an enactment, as that expression is used in the ADJR Act. Two further provisions in s 57 of the Act reinforce this conclusion. The first, in s 57(6), is the immunity provided from the operation of another public regulatory law, namely the TPA, for AWBI's decisions "under and for the purposes of" s 57 of the Act107. The second is the provision in s 57(7) obliging 103 cf Australian National Airlines Commission v Newman (1987) 162 CLR 466 at 471, 476; Suatu Holdings Pty Ltd v Australian Postal Corporation (1989) 86 ALR 532 at 541 per Gummow J. 104 cf joint reasons at [58]. 105 (2000) 64 ALD 29 at 40 [42]. 106 (2001) 114 FCR 1 at 13 [53]. 107 cf Richardson v McKnight 521 US 399 at 412 (1997). Kirby the Authority, by the end of 2004, to conduct a review and report to the Minister on the conduct of AWBI, including in relation to "the granting or withholding of approvals for the purposes" of s 57(3B). If all that AWBI were doing, in providing and withholding approval under s 57(3B), were the severable conduct of a private corporation acting under corporations law (and amenable only to corporate disciplines) the last two sub- sections of s 57 would not appear. Those provisions confirm that the "decisions" made by AWBI, as contemplated by s 57(3B), are decisions that assume special public law characteristics. In light of the foregoing analysis, the conclusion of the primary judge that AWBI's export approval decisions were "expressly or impliedly authorised" by the Act and that s 57(3B) gave legal "force or effect" to such decisions108, was correct. This appeal does not present some of the more difficult problems that can arise at the intersection of regulation and commerce, and the exercise of public and private power109. The errors of the Full Court: The judges in the Full Court adopted a different approach. Heerey J concluded that, in making its decisions to refuse approval to the Authority's consent to NEAT's applications, "AWBI was outside the province of administrative law"110. His Honour reached this view on the basis of the suggested legislative intention that AWBI should be "a vigorous, monopolistic participant in the Australian wheat export market"111. Mansfield J112 and Gyles J did not find it necessary to express a concluded view on this point. However, in his reasons, Gyles J expressed the opinion that, in acting as it did in pursuit of its "commercial interests", AWBI was outside the ambit of s 5(2)(f) of the ADJR Act or the common law principle reflected in that provision113. In his view, the "reach of administrative law" could extend to decisions made by AWBI for the purposes of s 57(3B) in some circumstances, including where it could be shown that the decision was "not bona fide"114. But, 108 (2000) 64 ALD 29 at 40 [42]. 109 cf Yarmirr v Australian Telecommunications Corporation (1990) 96 ALR 739. 110 (2001) 114 FCR 1 at 8 [26]. 111 (2001) 114 FCR 1 at 9 [31]. 112 (2001) 114 FCR 1 at 10 [38]. 113 (2001) 114 FCR 1 at 12-13 [52]. 114 (2001) 114 FCR 1 at 13 [53]. Kirby on his Honour's approach, the present was not such a case. This seems to suggest that Gyles J considered that the decision could be "administrative" in character and subject to review for some purposes, but not for others. With respect, this is an approach difficult to reconcile with the terms of the ADJR Act. The approaches adopted by the Full Court are vitiated by a number of errors. First, as I have pointed out, it is the "decision" that needs to be characterised in order to determine if it falls within the scope of the ADJR Act, not its maker. For the purposes of characterising the decision, it is erroneous to focus on the formal character of AWBI as a private corporation, to the exclusion of all the other considerations. It is also inappropriate to fix upon the "commercial" nature of the approval decisions, without recognising the exceptional character of those decisions and the role that they played in the regulatory scheme. Ordinarily, a private corporation cannot make decisions that have an effective power of veto over the entitlement of competitors, or potential competitors, to participate in a given market. No provision of corporations law gave AWBI such a power. The only source of such power was s 57(3B) of the Act. To say that an approval decision by AWBI is made in the exercise of its general powers and pursuant to its corporate constitution does not advance the analysis. It frames the question in a way that makes it simpler to answer, but it strips the problem of its inherent complexity115. For the board of a private corporation to adopt a resolution restricting the right of a competitor to participate in its market would be a meaningless exercise. Without s 57(3A) of the Act and particularly s 57(3B), any such "decision" by AWBI would be legally impotent. Even if a corporation were able to give force or effect to a resolution to exclude a competitor from its market by wielding its sheer economic power, any such action would be likely to run afoul of the TPA. Commercial considerations may indeed have guided the decision of AWBI as to whether to give or refuse approval to the Authority's consent to the bulk export of wheat by NEAT. They could properly do so. So much was never denied by NEAT. However, the reason that the Act required such a "decision" on the part of AWBI was for the purposes of the administration of a statutory scheme for a form of export marketing monopoly as enacted by the Federal Parliament. That was also why the Act provided immunity from the application of statutory regimes (such as the TPA) that would otherwise apply to "commercial decisions" of a private corporation. 115 cf Australian Competition and Consumer Commission v C G Berbatis Holdings Pty Ltd (2003) 197 ALR 153 at 179 [96]. Kirby In so far as private corporations are entrusted under a statute with public functions affecting others, they are thereby rendered liable to administrative law remedies and, depending upon the terms of the legislation, quite possibly to the writs provided by the Constitution116. The mere fact that such a decision may be affected, or guided, by considerations of a commercial nature will not take it outside the ambit of such judicial review. It may be that the statutory conferral of monopoly status on AWBI as a private corporation, in itself (particularly when viewed with the added fact that it was formed from what was once a public body) could impose obligations to observe the norms and values of public law, adapted by analogy, in particular instances of its decision-making117. In such circumstances, quite apart from administrative law, it has sometimes been viewed as appropriate to impose duties to the community upon such corporations out of recognition of the particular powers they enjoy118. In light of my conclusions about the special statutory position of AWBI, and the fact that the impugned decisions were both required and made effective by the Act, elements sufficient to make them fall within the scope of the ADJR Act, it is unnecessary for me to rely on any broader principle. The exercise of power: principles The blanket approach: The determination of the character of the "decision" made by AWBI logically comes first. If AWBI's "decision" is not characterised as falling within the ambit of the ADJR Act, NEAT's endeavour to attack the validity of the "decision" in accordance with that Act would fail at the threshold. No question would then arise as to whether the impugned "decisions" involved an improper exercise of power, and if so, what are the consequences. That was the approach of Heerey J in the Full Court119. That approach has now been adopted in the joint reasons in this Court. But once it is decided, as I think it should, that the "decision" of AWBI to grant, or withhold, approval in accordance with s 57(3B) of the Act is administrative in character and made under the Act, it is my view that the 116 Constitution, ss 75(iii) and 75(v). 117 cf Gay Law Students Association v Pacific Telephone And Telegraph Company 595 P 2d 592 at 597-602 (1979). See also West v Atkins 487 US 42 at 54-57 (1988). 118 See Whincop and Keyes, "Corporation, Contract, Community: An Analysis of Governance in the Privatisation of Public Enterprise and the Publicisation of Private Corporate Law", (1997) 25 Federal Law Review 51. 119 (2001) 114 FCR 1 at 9 [30]; cf at 12-13 [52]. Kirby successive decisions to refuse approval to NEAT's applications made pursuant to the policy of blanket refusal were invalid. Discretionary decisions and policy: It is not unlawful for a repository of statutory power to adopt a general policy for the purposes of dealing with numerous cases or applications, to ensure that the power is consistently exercised by reference to relevant considerations120. A policy that structures the discretion and provides guidance for its exercise will usually be lawful and can often be desirable. Additionally, a decision-maker upon whom is reposed a discretion, such as that reposed in AWBI, would also be entitled to adapt and change the policy from time to time121, so long as it remains within the strictures of the relevant enactment. However, adopting any method for making a discretionary decision, including the use of a legally permissible policy, does not relieve the decision- maker of the need to consider the individual circumstances of each application that comes before it. The reasons that lie behind this requirement of individual decision-making are clear. If the Parliament had intended a common rule to apply, it would have said so to the extent that that would be constitutionally valid. By reposing a discretionary power, and duty, upon a decision-maker to make individual assessments, the legislature contemplated the possibility that those affected might make representations concerning decisions potentially having important consequences for them. It recognised (as common experience also teaches) that exceptional cases can arise so as to warrant special or particular treatment. Unthinking, inflexible administration can be an instrument of oppression and abuse of power, taking the decision-maker outside the purpose for which the power was granted122. The essence of lawful public administration in the exercise of a discretion (as of good decision-making generally) is to keep an open mind concerning the justice, reasonableness and lawfulness in the 120 eg Green v Daniels (1977) 51 ALJR 463 at 467; 13 ALR 1 at 8-9; Rendell v Release on Licence Board (1987) 10 NSWLR 499 at 503-504; Carroll v Sydney City Council (1989) 15 NSWLR 541 at 550; British Oxygen Co Ltd v Minister of Technology [1971] AC 610 at 625; R v Secretary of State for the Home Department, Ex parte Venables [1998] AC 407 at 496-497; cf Bread Manufacturers of NSW v Evans (1981) 180 CLR 404 at 418. 121 Peninsula Anglican Boys' School v Ryan (1985) 7 FCR 415. 122 cf Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 504-505; R v Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 177 Kirby particular case, even if this sometimes involves a departure from a general policy123. AWBI's policy and the Act: AWBI's policy was not one that sought to structure the discretion conferred under the Act, so as to indicate the criteria that would be taken into account, or the circumstances in which it was likely to grant or withhold approval. Rather, it was a policy to refuse all applications for approval. A number of elements in s 57 indicate that the Parliament contemplated that AWBI would engage in individualised rather than "blanket" decision-making for the purposes of giving or withholding its approval. The Act requires the consent of the Authority for each proposed export of wheat by a trader other than AWBI. It obliges the Authority to consult AWBI. If there were no point in doing so, the Parliament would not have so enacted. It should not be imputed that it set about enshrining in the Act a charade, having the appearance of consultation but no substance because the decision of AWBI was already cut and dried. Similarly, the fact that the approval of AWBI is required in each case of an application to the Authority, as a precondition to the Authority's own consent power, signifies that a decision is contemplated case by case. As well, the obligation to accompany the application with a fee124, payable to the Authority, is another indication that the Parliament envisaged a real process having a true utility to the applicant; not a futility doomed from the outset to fail. It would be truly malign to design a statutory scheme whereby an applicant would have to pay a fee in order to receive a predetermined, unvarying rejection of the application. That may happen in Kafka's works but not, at least so far, in Australian public administration. This conclusion is still further reinforced by the statutory obligation of the Authority to issue guidelines about the matters that it would take into account in granting consent. If the Authority's consent is subject to an individualised decision, in accordance with its guidelines, it is hard to imagine that AWBI, having the power of effective veto on such decisions, could act on the basis of a blanket prohibition of granting approval, whatever the circumstances of the individual application, thereby rendering the Authority's consent process superfluous. The requirement of a review and report to the Minister on the conduct of AWBI125 is yet a further indication that individualised conduct was expected by the Parliament. Had it been intended to condone an unyielding monopoly in favour of AWBI, irrespective of particular circumstances, ordinary 123 cf Evans v Donaldson (1909) 9 CLR 140 at 152-153. 124 The Act, s 57(3D). 125 The Act, s 57(7). Kirby principles of construction would require that this be spelt out in the legislation in plain terms126. It is not. The foregoing reasoning explains my conclusion that it was not permissible for AWBI to adopt a blanket policy of refusing approval in exercising its function under s 57(3B) of the Act. The Act sought to establish a "single desk" for the marketing of export wheat, whereby one company, namely AWBI, would hold the right to export wheat from Australia. However, the Parliament left open the possibility of individual traders being allowed to export outside of AWBI's pools. It did not consider that such an approach would undermine the "single desk". That approach simply continued the arrangements that had been in place before the restructure of the Board. It involved a particular accommodation of the "public" and "private" interests involved in exporting wheat from Australia, in turn reflecting the realities of the international markets for that cereal. The single-desk selling arrangement has been maintained for the export of wheat because of the interventionist policies of the United States of America and the European Union that "can substantially reduce international wheat prices" through "varying forms of domestic support and export subsidy programs"127. The Parliament recognised that Australian wheat growers were unable to set or control such international prices. The statutory purpose was to "maximise the net returns to growers", through avoiding situations where Australian wheat traders were competing with other Australian wheat traders128. This explains why AWBI was given such a key role in the regulation of exports by other traders (who were otherwise its competitors). That role extended beyond consultation, to a power of effective veto. But the price of such veto power was that AWBI would assess the impact of any proposed export upon its own commercial interests, before such export could be allowed to go ahead. The blanket policy of refusal adopted by AWBI amounted, in effect, to the rewriting of the legislation by the decision of a private company. One of the options canvassed in the Explanatory Memorandum prepared for the amendment of the Act was to grant the monopoly for all wheat exports to the grower company. However, that option was eventually not chosen129. Nor did the Parliament decide to simply legislate the monopoly for all bulk exports to the 126 cf Puntoriero v Water Administration Ministerial Corporation (1999) 199 CLR 127 Explanatory Memorandum at [19]. 128 Explanatory Memorandum at [20]. 129 Joint reasons at [42]. Kirby grower company. If it be needed, that is yet a further indication that the stance taken by AWBI is quite contrary to the purpose of the Parliament. The provision in the Act for a case by case consideration of applications for proposed bulk export illustrates why it is incorrect to say, as officers of AWB and AWBI asserted on many occasions, that the grant of approvals by AWBI, that may result in bulk export consent from the Authority, would undermine the single-desk selling arrangements. The grant of approval by AWBI in a particular case and its fact-specific circumstances did not establish any precedent for the grant of future approvals – either for the same trader or type of wheat, or for the same destination. The legislation did not provide for approvals that would cover particular growers or traders, periods of time, or export destinations. In fact, AWBI was free, and was required, to reassess the impact of each application on its own activities individually. In a real sense, the general principle would be reinforced by occasional and particular exceptions permitted on their special individual merits as the Act envisaged. It is an old adage that the exception proves the rule. Where a decision is subject to judicial review, the grounds of review that would be available and appropriate will depend upon the statutory and decision- making context. It follows from the foregoing analysis that the ground of review contained in s 5(2)(f) of the ADJR Act, invoked by NEAT, was applicable to the "decision" of AWBI to grant or withhold approval by reference to the legislative language and purpose130. The exercise of power: unlawful inflexibility The primary judge found that "AWBI had a policy against approving the bulk export of wheat"131; that it was "this policy, and this policy alone, which dictated the rejection of each of NEAT's applications"132; and that AWBI's "decisions in this case were clearly made in the inflexible application of its policy against bulk export permits"133. In the light of that finding, and the proper application of the Act and of the ADJR Act, it is my opinion that the primary judge, and the Full Court, erred in failing to provide relief to NEAT. The primary judge justified withholding relief on the basis that AWBI's policy and its adherence to that policy were consistent with its constitutional 130 cf Shergold v Tanner (2002) 209 CLR 126 at 135 [27], 136-137 [34]-[35]. 131 (2000) 64 ALD 29 at 56 [119]. 132 (2000) 64 ALD 29 at 56 [121]. 133 (2000) 64 ALD 29 at 63 [157]. Kirby charter and that NEAT did not provide any information or reasons for AWBI to depart from that policy. Her Honour explained134: "No material was put before AWBI which challenged the legitimacy of those considerations, or which provided any argument to the effect that the bulk export permits which were sought could be granted in a manner that was consistent with AWBI's constitutional mandate. In other words, no material was put before AWBI which could be expected to persuade it to deviate from its policy." In the Full Court, Mansfield J adopted a similar approach135. With respect, these considerations did not afford a ground for denying relief. The departure by AWBI from the Act was not, as the primary judge thought, excused or permitted because of the general character of AWBI as a private corporation; the terms of its corporate constitution; its general commercial purposes; or the adoption of a general policy in favour of the single- desk sale of overseas wheat. The fact that the blanket refusal of approval may have been consistent with the constitutional charter of AWBI and AWB is to a large extent irrelevant. Where the Federal Parliament has validly spoken in the terms that it did in the Act, no instrument or action under the Corporations Law of Victoria could give any foundation for a departure from the obligations imposed by the federal legislation. Repositories of statutory functions and powers must keep their minds open for the exceptional case136. They must not disable themselves from exercising their discretion by adopting a rule "not to hear any application of a particular character by whomsoever made"137. At least they must not do so without clear authority of law permitting that course. There was no such clear authority in the present case. The postulated excuses connected with AWBI's general corporate character did not relieve that body of its duty under the Act to consider a request for its approval as the Act contemplated: judging each of NEAT's applications by reference to its peculiar features as they were put before it and by the way each affected (or did not affect) its own commercial interests. 134 (2000) 64 ALD 29 at 63 [157]. 135 (2001) 114 FCR 1 at 12 [46]. 136 R v Port of London Authority; Ex parte Kynoch Ltd [1919] 1 KB 176 at 184; Green v Daniels (1977) 51 ALJR 463 at 467; 13 ALR 1 at 9; Kioa v West (1985) 159 CLR 550 at 632-633; Howells v Nagrad Nominees Pty Ltd (1982) 43 ALR 283 at 306-307; Khan v Minister for Immigration and Ethnic Affairs (1987) 14 ALD 137 R v Port of London Authority; Ex parte Kynoch Ltd [1919] 1 KB 176 at 184. Kirby Nor, with respect, was it correct to say that NEAT did not make out a case for relief. The objective and largely uncontested documentary evidence denies that conclusion. For example, in an e-mail sent by NEAT to the Authority in support of its first two applications, involving the export of ADR3 to Italy and Morocco, it was noted that the Italian buyers were "being offered low quality durum from the USA" and that at that point AWB was "not quoting a price for ADR3 to Australian farmers". A number of communications were sent in support of the fifth application for export, also to Italy. The documentation referred to ADR Feed for use by a particular Italian importer for human consumption as pasta. It was pointed out that NEAT's buyer wanted to conclude the deal quickly and did not wish "to buy commingled stocks". Apart from offers from US sellers, in an e-mail to AWBI, NEAT pointed out that while it was waiting for consent, the buyer purchased "two cargoes of low quality Turkish durum" and "another Turkish tender" was due in the following week. The wheat was otherwise exposed to the risk of rotting in Australia unless it was quickly sold. If it were not sold it would be of little or no value to anyone. Clearly what was advanced was a highly fact-specific case. Conscious of AWB and AWBI's interests, NEAT went on to point out that it was simply holding a specific bid, and "has not made any offers to Italy". In a passage cited earlier in these reasons, the primary judge found that given AWBI's approach to its functions, NEAT's "applications were bound to be rejected in any event" given the unyielding nature of AWBI's policy. Any other individual considerations or arguments were not taken into account. It is apparent that at least some of NEAT's applications were rejected by AWBI without regard to the evidence of their individual merits (including the possible effects on AWBI's commercial interests). Once that conclusion is reached, it is not the role of a supervising court to form its own view about the way in which a repository of power would have assessed the merits of the case put before it, if it had considered the application properly. At least on the face of things, some of the applications did not appear to affect AWB and AWBI's commercial interests. Whether or not AWBI would have reached that conclusion, we cannot know. What we do know is that AWBI was not even prepared to listen. The assessment of each individual application and the supporting documentation enlivened a role that AWBI was obliged by law to perform. True, its own commercial interests and the returns to the growers who were shareholders of AWB were accorded primacy under the regulatory scheme. But by law, AWBI still had to turn its mind and genuinely consider the effect on those interests of each application that was put before it. It could not shut its ears. To adopt such an approach to making the decisions required, before the Authority could give its own consent, was a small price to be paid for the extensive powers conferred by the Act on AWBI. AWBI refused to pay that price. The primary judge and the Full Court therefore erred in withholding the Kirby relief to which the reasoning correctly adopted by the primary judge otherwise inexorably pointed. The provision of relief was not futile It was not futile for NEAT to seek relief under the ADJR Act. Had its original application to the Federal Court succeeded promptly, as that Act envisages, AWBI would not have been required to grant the approval. In proceedings under the ADJR Act, the Federal Court does not give a decision on the merits. AWBI would simply have been required to consider the sought-for "approval" on the individual merits of each application rather than pursuant to the blanket refusal that it had adopted. In the Full Court, and in this Court, NEAT acknowledged that such a course was no longer feasible given the passage of time. However, the application under the ADJR Act remained relevant to NEAT's contention that AWBI's purported conduct was not done "under" s 57(3B) of the Act or "for the purposes" of that section138. The determination of the point against AWBI would leave it exposed to proceedings by NEAT pursuant to the TPA, deprived of immunity under that Act. It was therefore relevant to those proceedings. Those proceedings should continue. NEAT is entitled to have its consequential rights under the TPA determined according to law. Orders No separate submissions were received about the form of the orders suggested by NEAT in the event that it succeeded in this Court. This Court should make orders in that form. The appeal should be allowed with costs. The judgment of the Full Court of the Federal Court of Australia should be set aside. In lieu thereof, it should be ordered that the appeal to that Court be allowed; the judgment of the primary judge should be set aside so far as it related to the appellant's claims against AWB and AWBI. In place thereof, this Court should: (1) Declare that the decisions of AWBI refusing to give approval to the bulk export of wheat the subject of the applications referred to in par 8 of the amended statement of claim: involved the application without regard to the merits of the individual case of a policy against the approval of the export of wheat in bulk; and 138 The Act, s 57(6). Kirby for that reason, were not done under s 57 of the Wheat Marketing Act 1989 (Cth) or for the purposes of that section within the meaning of s 57(6) of that Act; (2) Declare that each of the purported decisions was unlawful and void; (3) Order that each of the purported decisions be set aside; (4) Order that the proceedings be returned to the Federal Court for the determination of outstanding issues; and (5) Order that AWB and AWBI pay the appellant's costs in the Federal Court.
HIGH COURT OF AUSTRALIA MARION ANTOINETTE WIGMANS APPELLANT AND AMP LIMITED & ORS RESPONDENTS Wigmans v AMP Limited [2021] HCA 7 Date of Hearing: 10 November 2020 Date of Judgment: 10 March 2021 ORDER Appeal dismissed. The appellant pay the respondents' costs of the appeal to this Court. On appeal from the Supreme Court of New South Wales Representation J T Gleeson SC with A M Hochroth and P A Meagher for the appellant (instructed by Quinn Emanuel Urquhart and Sullivan) E A Collins SC with I J M Ahmed for the first respondent (instructed by C A Moore SC with G A Donnellan and J Entwisle for the second and third respondents (instructed by Maurice Blackburn Lawyers) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Wigmans v AMP Limited Practice and procedure – Representative action – Stay – Where five open class representative actions commenced against same defendant in relation to same controversy – Where considerable overlap between claims made in proceedings – Where representative plaintiff in four proceedings filed notice of motion in Supreme Court of New South Wales seeking orders that each other proceeding be permanently stayed – Whether Supreme Court's power to grant stay is confined by rule or presumption that representative proceeding issued first in time is to be preferred – Whether litigation funding arrangements can be relevant consideration under s 67 of Civil Procedure Act 2005 (NSW) – Whether Supreme Court erred in considering litigation funding arrangements. Words and phrases – "abuse of process", "auction process", "certification and carriage motion procedures", "class actions", "competing funding proposals, costs estimates and net hypothetical return to members", "competing representative proceedings", "conflicts of interest", "contradictor", "duplicative proceedings", "equitable principles concerning test actions", "first-in-time rule or presumption", "funding model", "litigation funding arrangements", "multifactorial approach", "multiplicity", "one size fits all", "power to grant a stay", "prima facie vexatious and oppressive", "representative proceedings", "special referee". Civil Procedure Act 2005 (NSW), ss 56, 57, 58, 67, Pt 10. KIEFEL CJ AND KEANE J. On 16 and 17 April 2018, executives of the first respondent ("AMP") gave testimony to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry to the effect that AMP had deliberately charged some of its clients fees for no service, and that it had misled the Australian Securities and Investments Commission as to the extent of this conduct. Following this testimony, there was a sharp fall in the price at which shares in AMP traded on the Australian Securities Exchange ("the ASX"). Shortly thereafter, five open class representative proceedings were commenced in quick succession on behalf of shareholders in AMP who had made investments during periods of time in which the representative parties allege AMP ought to have disclosed to the market the information that emerged during the Royal Commission. All the representative parties sought compensation for loss caused by AMP's alleged breach of the continuous disclosure obligations imposed on it by the Corporations Act 2001 (Cth) together with the ASX Listing Rules. Misleading and deceptive conduct and statutory unconscionable conduct claims were also advanced. The appellant, Ms Marion Wigmans, was first off the mark. On 9 May 2018, proceedings on her behalf were commenced in the Supreme Court of New South Wales. Seven hours later, Wileypark Pty Ltd ("Wileypark") commenced proceedings in the Federal Court of Australia. Mr Andrew Georgiou did likewise on 25 May 2018, as did the third respondent ("Fernbrook") on 6 June 2018 and the second respondent ("Komlotex") on 7 June 2018. Each lead plaintiff or applicant was a group member in each of the other proceedings. The different proceedings were brought by a different lead plaintiff or applicant because different arrangements were made for the sponsorship of the proceedings by litigation funders or solicitors willing to act on a "no-win, no-fee" basis. The proceedings that had been commenced in the Federal Court were transferred to the Supreme Court1. The Fernbrook proceedings were consolidated with the Komlotex proceedings ("the Komlotex/Fernbrook proceedings")2. Each of Ms Wigmans, Wileypark, Mr Georgiou and Komlotex applied to the Supreme Court for a stay of the proceedings in which the others were plaintiffs. AMP, in the courts below and in this Court, was relevantly neutral as between the competing representative proceedings. Not surprisingly, however, it 1 Wileypark Pty Ltd v AMP Ltd (2018) 265 FCR 1. 2 Wigmans v AMP Ltd [2019] NSWSC 603 at [112]. supported an outcome in which it would face only one set of proceedings. The issue before this Court is as to the basis on which that outcome should be achieved. The primary judge The primary judge (Ward CJ in Eq) ordered, ostensibly pursuant to ss 67 and 183 of the Civil Procedure Act 2005 (NSW) ("the CPA") and the inherent power of the Supreme Court, that the proceedings of Ms Wigmans, Wileypark and Mr Georgiou be permanently stayed3. While the primary judge exercised the power to stay proceedings conferred by s 67 of the CPA, the issue resolved by that order was as to which of the proceedings should be allowed to proceed. The answer to that question was ultimately found, not in the identification of a deficiency in each of the proceedings ordered to be stayed as a vehicle for the doing of justice between the plaintiffs and the defendant, but by an assessment as to which sponsor offered the prospect of the highest return to group members. Accordingly, the purpose and effect of the order made by the primary judge was to afford the solicitors acting for Komlotex and Fernbrook the exclusive opportunity to continue their proceedings for the benefit of group members. The primary judge approached the determination of the four stay applications by an assessment of the relative potential benefits expected to flow to group members from each of the competing representative proceedings. Her Honour proceeded by reference to "case management principles" derived from the "overriding purpose" in s 56 of the CPA4 using a "multi-factorial analysis" of the kind endorsed by the Full Court of the Federal Court in Perera v GetSwift Ltd5. The primary judge identified as relevant the following eight factors drawn from the judgment of the Full Court in GetSwift6 as well as that of Lee J at first instance in that case7. They were8: 3 Wigmans v AMP Ltd [2019] NSWSC 603 at [358]. 4 Wigmans v AMP Ltd [2019] NSWSC 603 at [104]. (2018) 263 FCR 92 at 136 [195]; Wigmans v AMP Ltd [2019] NSWSC 603 at [113]. 6 Perera v GetSwift Ltd (2018) 263 FCR 92 at 135-136 [188]-[197]. 7 Perera v GetSwift Ltd (2018) 263 FCR 1 at 48-50 [169], itself referring to McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd [2017] FCA 947 at [71]. 8 Wigmans v AMP Ltd [2019] NSWSC 603 at [126]; see also at [121], [124]. the competing funding proposals, costs estimates and net hypothetical return to group members (assessed "having regard to standardised assumptions such as the likely length of trial"9); the proposals for security for AMP's costs; the nature and scope of the causes of action advanced; the size of the respective classes; the extent of any bookbuild; the experience of the legal practitioners (and funders) and availability of resources; the state of progress of the proceedings; and the conduct of the representative plaintiffs to date. The primary judge concluded that Ms Wigmans' proceedings and the Komlotex/Fernbrook proceedings ought to be preferred to the proceedings of Wileypark and Mr Georgiou because of their superior proposal with respect to the provision of security for AMP's costs10. Her Honour went on to hold that it was decisive as between the remaining two proceedings that the Komlotex/Fernbrook proceedings were to be "funded" by the solicitors acting for Komlotex and Fernbrook, Maurice Blackburn, on a "no-win, no-fee" basis with a 25 per cent uplift on professional fees if the resolution sum exceeded $80 million11. This funding model was expected to produce a better net return for group members than that proposed for Ms Wigmans' proceedings. Ms Wigmans' proceedings, in which the solicitors Quinn Emanuel act for her, were to be funded by a commercial litigation funder on terms pursuant to which the funder stood to recover up to 20 per cent of any recovery12. 9 Wigmans v AMP Ltd [2019] NSWSC 603 at [212]. 10 Wigmans v AMP Ltd [2019] NSWSC 603 at [220]-[222], [228], [233], [354]. 11 Wigmans v AMP Ltd [2019] NSWSC 603 at [57]-[58], [350]-[354]. 12 Wigmans v AMP Ltd [2019] NSWSC 603 at [55]-[56], [354]. The Court of Appeal The Court of Appeal of the Supreme Court of New South Wales (Bell P, Macfarlan, Meagher, Payne and White JJA) dismissed Ms Wigmans' appeal13. The Court of Appeal found no error in the reasons of the primary judge. The "only real point of difference" in reasoning between Bell P (with whom Macfarlan, Meagher, Payne and White JJA agreed) and the primary judge was that Bell P considered that, because a stay application ultimately turns on whether the ends of justice require such a remedy, it cannot aptly be said to be dictated by "case management principles"14. In the Court of Appeal, Bell P found particular guidance in McHenry v Lewis15, a case concerned with two "representative proceedings" of the kind permitted by the Court of Chancery where more than one person had the same interest in a claim16. Bell P considered that McHenry v Lewis anticipated the solution offered by GetSwift to the problem of modern competing representative proceedings with "remarkabl[e] similar[ity]"17. It will be necessary to consider more closely the considerations said by Jessel MR in McHenry v Lewis to be relevant to the solution of the problem posed by the pendency of multiple proceedings against the same defendant. For the moment, it is sufficient to observe that Bell P was clearly right to conclude that the order made by the primary judge was not supportable as an exercise in case management. The appeal to this Court Ms Wigmans submitted that the order made by the primary judge in accordance with the "multi-factorial analysis" endorsed in GetSwift was not authorised by s 67 or s 183 of the CPA or by the inherent power of the Supreme Court. Ms Wigmans urged instead that, where later-in-time proceedings have no discernible juridical advantage over the proceedings first commenced, the later proceedings should be stayed as vexatious in accordance with the settled approach 13 Wigmans v AMP Ltd (2019) 373 ALR 323. 14 Wigmans v AMP Ltd (2019) 373 ALR 323 at 344 [95]. (1882) 22 Ch D 397. The case also considered whether to stay one or both of the English proceedings in favour of a third proceeding brought in the United States in respect of the same events. 16 Wigmans v AMP Ltd (2019) 373 ALR 323 at 335-336 [55], 341-342 [84]. 17 Wigmans v AMP Ltd (2019) 373 ALR 323 at 341-342 [84]. of the courts to the problem of multiple proceedings by the same plaintiffs seeking the same relief against the same defendant. On that basis, the Komlotex/Fernbrook proceedings, rather than Ms Wigmans' proceedings, should have been stayed. Komlotex and Fernbrook submitted that s 67 of the CPA expressly conferred on the primary judge the power to stay proceedings. Komlotex and Fernbrook argued that the effect of s 58 is that the s 67 power must be exercised to further the dictates of justice, which themselves turn, in part, on the objectives of case management set out in s 57 and the overriding purpose of the CPA appearing in s 56. It was said that the "multi-factorial analysis" applied by the primary judge went to the just determination of the proceedings, the efficient disposal of the business of the court and use of judicial resources, the timely disposal of the proceedings at a cost affordable by the parties and such other matters as the court considers relevant. In considering the arguments advanced by the parties, it must be appreciated that the issues presented by this case arise because the prospect of the profits to be made from the maintenance of representative proceedings by third party funders or by solicitors willing to act on a "no-win, no-fee" basis is apt to spawn multiple proceedings. Would-be sponsors of representative proceedings compete for what are called, in the United States of America, "carriage rights" in respect of the proceedings. In the United States, the competition to exploit the opportunity to control a class action is regulated by legislation, whereby the courts are specifically tasked with the selection of the sponsor of representative proceedings from the available candidates. By that legislation, the courts are required to make an evaluation of the competing claims of prospective sponsors in order to select the sponsor judged best able to maximise the return to class members. The CPA contains no equivalent provision. The power to order a stay provided by s 67 of the CPA is available as a tool to resolve the problem presented by multiple proceedings. The problem of multiple proceedings is not novel. Indeed, the remedy of a stay of proceedings has long been recognised as an available means to protect a defendant vexed by multiple proceedings. But the power to grant a stay to end such vexation is exercisable by the courts according to principles concerned to do justice between plaintiffs and defendants. The first of these is that "a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise"18. Secondly, "the rationale for the exercise of the power to stay is the avoidance of 18 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 554. injustice between parties in the particular case"19. Accordingly, where multiple proceedings are brought by the same plaintiffs seeking the same relief against the same defendants, if the plaintiffs do not make an election as to which action should proceed, the court will stay all but one proceeding20. Where the plaintiffs do not make the election, the court will stay the proceedings brought later in time unless they offer some legitimate juridical advantage for the plaintiffs or the defendants over the proceedings brought earlier in time21. The point is that these principles are concerned with the doing of justice between plaintiffs and defendants; they are not concerned to determine the competing claims of financiers and lawyers to sponsorship of the proceedings on behalf of those on the plaintiffs' side of the record. Legislative direction is required to enlist the courts to determine matters of that kind. The courts may mould their established procedures to do justice between the parties to litigation, but the court must proceed by reference to settled principles and bearing in mind that the parties cannot invest a court with a jurisdiction it does not have. Neither the CPA nor the Supreme Court's inherent power to prevent abuse of its processes authorises the Supreme Court to make a selection of the sponsor of representative proceedings. That is emphatically so where the proceedings to be so sponsored are to be determined by the same court22. The Supreme Court's fundamental function as the independent arbiter of the merits of the group members' claims as between them and the defendant sits awkwardly with the assumption, without legislative direction, of a role whereby the Court makes a reputational investment in the choice of sponsor. The courts below erred in failing to give effect to the prima facie entitlement of Ms Wigmans to insist upon the determination of her proceedings. The proceedings brought later in time offered no legitimate juridical advantage to group members or to the defendant. That being so, Ms Wigmans' appeal should be allowed and the later-in-time proceedings stayed. 19 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 554. 20 Carron Iron Co v Maclaren (1855) 5 HLC 416 at 437-439 [10 ER 961 at 970-971]; McHenry v Lewis (1882) 22 Ch D 397 at 404; Henry v Henry (1996) 185 CLR 571 at 591; CSR Ltd v Cigna Insurance Australia Ltd (1997) 189 CLR 345 at 390-394. 21 McHenry v Lewis (1882) 22 Ch D 397 at 404. 22 See Re Perrot Mill Pty Ltd [No 1] (2013) 11 ASTLR 125 at 127 [4]. The CPA It is necessary to refer at some length to the provisions of the CPA that deal both with case management and with representative proceedings. This comprehensive review is necessary in order to demonstrate that the CPA does not contemplate the exercise performed by the primary judge. Case management Section 67 of the CPA, appearing in Pt 6 "Case management and interlocutory matters", provides that: "Subject to rules of court, the court may at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day." Section 58(1) provides that, in exercising this power, the Supreme Court23 must follow the "dictates of justice". It provides: "In deciding – (a) whether to make any order or direction for the management of proceedings, including – any order for the amendment of a document, and any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and any direction under Division 2, and the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice." Section 58(2) provides guidance as to "the dictates of justice", stating that: "For the purpose of determining what are the dictates of justice in a particular case, the court – (a) must have regard to the provisions of sections 56 and 57, and 23 See Civil Procedure Act 2005 (NSW), s 4(1), Sch 1. (b) may have regard to the following matters to the extent to which it considers them relevant – (iii) the degree of difficulty or complexity to which the issues in the proceedings give rise, the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, the degree to which the respective parties have fulfilled their duties under section 56(3), the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case." Section 56, referred to in s 58(2)(a), sets out the "overriding purpose" of the CPA, to be furthered by the Supreme Court with the assistance of persons involved in proceedings. It provides: "(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule. (3) A party to civil proceedings is under a duty to assist the court to further the overriding purpose and, to that effect, to participate in the processes of the court and to comply with directions and orders of the court. Each of the following persons must not, by their conduct, cause a party to civil proceedings to be put in breach of a duty identified in subsection (3) – any solicitor or barrister representing the party in the proceedings, any person with a relevant interest in the proceedings commenced by the party. The court may take into account any failure to comply with subsection (3) or (4) in exercising a discretion with respect to costs. For the purposes of this section, a person has a relevant interest in civil proceedings if the person – provides financial assistance or other assistance to any party to the proceedings, and exercises any direct or indirect control, or any influence, over the conduct of the proceedings or the conduct of a party in respect of the proceedings." Section 57, also referred to in s 58(2)(a), sets out the objects with regard to which the Supreme Court's case management is to be exercised. It provides that: "(1) For the purpose of furthering the overriding purpose referred to in section 56(1), proceedings in any court are to be managed having regard to the following objects – the just determination of the proceedings, the efficient disposal of the business of the court, the efficient use of available judicial and administrative resources, the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1)." It is to be noted that these "case management" provisions are not in any way directed to the making of a choice as to which of the sponsors of multiple proceedings should have the exclusive carriage of the proceeding allowed to progress to a determination by the court. None of these provisions contemplates a comparison between sponsors of proceedings with a view to determining which is likely to afford the greatest measure of relief to those on whose behalf the proceedings are brought. That this is so is hardly surprising, given that the focus of these provisions of the CPA is, consistently with the context in which they appear, upon the steps that need to be taken to achieve justice quickly and cheaply between plaintiffs and defendants, and not upon the respective strengths and weaknesses of the candidates for the sponsorship of the proceedings on the plaintiffs' side of the record. Representative proceedings Part 10 of the CPA permits, and regulates the conduct of, representative proceedings in the Supreme Court. Part IVA of the Federal Court of Australia Act 1976 (Cth) ("the FCA") is its federal analogue. The material provisions of Pt 10 of the CPA appear in a context concerned with the resolution of proceedings between plaintiffs and defendant. A selection of the best candidate as sponsor of group members' claims against the defendant is not within the contemplation of Pt 10. Part 10 of the CPA contains no provision that purports to enlist the Supreme Court in the performance of that function, much less does it contain any guide to the Supreme Court in relation to the performance of that function. It is not necessary for present purposes to determine whether such a role is so inimical to the judicial function that a Ch III court might not be tasked with such a role by the legislature. It is sufficient to say that the tasks contemplated by Pt 10 of the CPA24 do not include, as one of the functions of the Supreme Court under that Part, the selection of the sponsor most likely to enhance the recovery of those on the plaintiffs' side of the record. Section 157(1) provides that where seven or more persons have claims against the same person, the claims are in respect of the same or similar circumstances and the claims give rise to a substantial common question of law or fact, proceedings may be commenced by one or more of those persons as representing some or all of them. Section 158(1) provides that a person has a 24 BMW Australia Ltd v Brewster (2019) 94 ALJR 51 at 68 [69]; 374 ALR 627 at 643. sufficient interest to commence such proceedings if the person has standing to commence proceedings on their own behalf. Section 159(1) provides that the consent of a person to be a group member, being a person on whose behalf representative proceedings have been commenced25, is not required. Section 162 provides that a group member may opt out of the representative proceedings before the date fixed for opting out by the Supreme Court. Section 171(1) provides that: "If, on application by a group member, it appears to the Court that a representative party is not able adequately to represent the interests of the group members, the Court may substitute another group member as representative party and make such other orders as it thinks fit." Importantly, s 171(1) is the only provision in Pt 10 of the CPA that contemplates intervention by the Supreme Court to alter the manner in which a proceeding is constituted on the plaintiffs' side of the record. It is addressed to the concern that representation of group members by a representative plaintiff may be "inadequate". As a matter of the ordinary meaning of language, s 171 presents a binary question: is a representative plaintiff able adequately to represent the interests of group members or is it not? Section 171 does not contemplate an inquiry as to whether more effective representation may be available to group members by some other representative plaintiff by reason of that person's association with a different sponsor. In Mobil Oil Australia Pty Ltd v Victoria26, in the course of summarising the features of the Victorian equivalent of Pt 10, Gleeson CJ stated in reference to the equivalent to s 171 that: "The Court has power to substitute another group member for the plaintiff if it appears that the plaintiff is not able adequately to represent the interests of the group members. This is not a mechanism for the plaintiff to be replaced on the application of group members who disagree with the way the case is being run." The text of s 171 does not contemplate a contest between the would-be sponsors of representative proceedings. The context in which s 171 appears is concerned with the doing of justice between the plaintiffs and the defendant. Whether one sponsor might be likely to secure a greater level of recovery than another because it is more experienced or better resourced or more highly 25 See Civil Procedure Act 2005 (NSW), s 155. (2002) 211 CLR 1 at 21 [5(8)]. incentivised financially is no doubt a matter of lively interest to those on the plaintiffs' side of the record; but it has nothing to do with the doing of justice between the plaintiffs and the defendant according to their respective merits in relation to the dispute to be resolved by the Supreme Court. It is noteworthy that, even on the argument advanced by Komlotex and Fernbrook, it was not said that s 171 provided a "remedy" for a person in the position of Komlotex or Fernbrook. Komlotex and Fernbrook accepted, and indeed argued, that the power to replace a representative plaintiff under that provision is limited to cases where the plaintiff ceases to have sufficient interest in the dispute to bring a claim or is otherwise incapable of performing or refuses to perform the role of representative plaintiff27; the power does not extend to cases where another proceeding is simply "better" or where group members disagree with the way the proceeding is being run. Section 183 permits the Supreme Court to make any order, of its own motion or on application by a party or group member, in a representative proceeding it "thinks appropriate or necessary to ensure that justice is done in the proceedings". Once again, it is important to appreciate that this provision is concerned with the doing of justice as between the parties on either side of the record28. Whether those on the plaintiffs' side of the record might be better served by proceedings sponsored by another funder is not a question as to whether "justice is done in the proceedings" as between the plaintiffs and the defendant. The observations of the plurality in BMW Australia Ltd v Brewster29 are applicable here: "It is reasonably to be expected that legislation intended to enlist the court in a task of this kind would make specific provision in that regard. That it has not done so is itself some contextual indication that the power to make such an order is not to be discerned in 'gap‑filling' provisions such as s 33ZF [of the FCA] or s 183 [of the CPA]." (footnote omitted) It may readily be acknowledged that the power conferred on the Supreme Court by s 183 is wide, but as the plurality observed in BMW Australia Ltd v 27 See Revian v Dasford Holdings Pty Ltd [2002] FCA 1119 at [8], [14], [23]; Tongue v Tamworth City Council (2004) 141 FCR 233 at 235 [11], 240 [52]; see also Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 21 [5(8)]. 28 Compare BMW Australia Ltd v Brewster (2019) 94 ALJR 51 at 58 [3], 65 [50]; 374 ALR 627 at 630, 639. (2019) 94 ALJR 51 at 68 [69]; 374 ALR 627 at 643. Brewster, s 183 is a "supplementary or gap-filling provision"30 which does not authorise the Court to rewrite Pt 10 of the CPA in order to pursue objectives outside the scope of the provisions31. The selection of the best sponsor for representative proceedings is a matter quite outside the concerns of Pt 10 in general and of s 183 in particular. In this regard, it is readily apparent that the CPA does not follow the United States model, which does address that concern. Carriage motions and the CPA The "multi-factorial analysis" applied by the primary judge is appropriate to "carriage" and "certification" motions under United States law32. The difference between the provisions of the CPA and United States law pertaining to "carriage" and "certification" motions, from which the "multi-factorial analysis" applied by the primary judge was drawn, is instructive. Carriage motions are heard by United States courts under statutory provisions regulating the choice of persons to be tasked with the commencement and prosecution of representative proceedings33. In particular, in the United States, the Federal Rules of Civil Procedure provide by r 23(g) that the court must "appoint class counsel" to control the prospective proceeding on the plaintiffs' side of the record. Rule 23(g)(2) specifies that "[w]hen one applicant seeks appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4)", before providing that "[i]f more than one adequate applicant seeks appointment, the court must appoint the applicant best able to represent the interests of the class". Rules 23(g)(1) and 23(g)(2) provide: "(g) Class Counsel Appointing Class Counsel. Unless a statute provides otherwise, a court that certifies a class must appoint class counsel. In appointing class counsel, the court: (A) must consider: (2019) 94 ALJR 51 at 68 [70]; 374 ALR 627 at 643. (2019) 94 ALJR 51 at 70-71 [82]; 374 ALR 627 at 647. 32 Noting the reliance placed on United States cases in Perera v GetSwift Ltd (2018) 263 FCR 92 at 136-137 [193]-[196] and Perera v GetSwift Ltd (2018) 263 FCR 1 33 See Federal Rules of Civil Procedure (US), r 23; see also Class Proceedings Act 1992 (Ont), ss 5, 8. the work counsel has done in identifying or investigating potential claims in the action; counsel's experience in handling class actions, other complex litigation, and the types of claims asserted in the action; (iii) counsel's knowledge of the applicable law; and the resources that counsel will commit to representing the class; (B) may consider any other matter pertinent to counsel's ability to fairly and adequately represent the interests of the class; to provide (C) may order potential class counsel information on any subject pertinent to the appointment and to propose terms for attorney's fees and nontaxable costs; (D) may include in the appointing order provisions about the award of attorney's fees or nontaxable costs under Rule 23(h); and (E) may make further orders in connection with the appointment. Standard for Appointing Class Counsel. When one applicant seeks appointment as class counsel, the court may appoint that applicant only if the applicant is adequate under Rule 23(g)(1) and (4). If more than one adequate applicant seeks appointment, the court must appoint the applicant best able to represent the interests of the class." These provisions stand in stark contrast to Pt 10 of the CPA. It is telling that, when the CPA was enacted, the Parliament of New South Wales had before it the example of the legislative regime that operates in the United States to facilitate the determination by the courts of the competition between would-be sponsors of class actions, but did not adopt that example or any relevant aspect of A "multi-factorial analysis" of the kind conducted under a carriage motion is addressed to the interests of those on the plaintiffs' side of the record. So was the "multi-factorial analysis" applied by the courts below. Their analysis was not directed to "the just, quick and cheap" resolution of proceedings between parties to litigation as contemplated by s 56 of the CPA or to ensuring that justice is done in them as contemplated by s 183. The stay order made by the primary judge did not involve the doing of justice in the proceedings, and nor was it a step towards a just, quick and cheap conclusion, as between plaintiffs and defendant. Rather it was an order the purpose and effect of which was to allow a different proceeding under the control of a different sponsor to go forward on the basis that control by that sponsor might produce the best recovery for group members. It is some indication of the alien quality of the process that the basis of the decision was a prediction by the Supreme Court, which is obliged ultimately to decide the case, that the worst possible outcome for the defendant would be achieved by the Court's preferred sponsor. The inherent jurisdiction Komlotex and Fernbrook submitted that McHenry v Lewis contemplates that, as Bell P held34, the powers conferred by the CPA or the Supreme Court's inherent power to stay proceedings might be exercised by reference to matters of the kind set out in GetSwift as opposed to "traditional stay jurisprudence". But contrary to the view of Bell P, the approach was not justified by the principles stated in McHenry v Lewis. In McHenry v Lewis35, Jessel MR said: "In this country, where ... two actions are [brought] by the same [plaintiff] in Courts governed by the same procedure, and where the judgments are followed by the same remedies, it is primâ facie vexatious to bring two actions where one will do." His Lordship recognised that this prima facie position may be displaced, and went on to speak of the well-settled "course of the Court" in the exercise of the power to stop all but one of several actions brought by representative plaintiffs36: "The defendants take out a summons to stay the actions which have been previously transferred of course to the same Judge or Court, and then the Court decides which of the actions is to go on as a test action, and which are to be stayed. You cannot tell until you have all the plaintiffs before you the right course to be taken. The first action may be a collusive action, one action may embrace further relief than another, one action may be better 34 See [9] above. (1882) 22 Ch D 397 at 400. 36 McHenry v Lewis (1882) 22 Ch D 397 at 404. framed than another to raise the questions in dispute, one action may be more perfect as to parties than another, in one action the plaintiff may be a solvent person, and able to answer costs, and in the other the plaintiff may be a pauper. Various considerations may arise, and until you get the whole of the actions before the Court the Court cannot decide which is to be allowed to proceed, or on what terms. It sometimes happens that we allow one action to proceed for one purpose and another for another purpose – that is that we excise from one action so much of the relief as can properly be attributed to an earlier plaintiff, and allow the second or third action to go on for the additional relief; but all that can only be discussed in the presence of all parties." The considerations mentioned by Jessel MR relate to whether any of the proceedings against the defendant enjoys a juridical advantage over the others. So, for example, an action by a plaintiff who is unable to provide security for costs may be stayed even though it was brought first in time. None of these considerations mentioned by Jessel MR are concerned with whether one proceeding should be preferred over another upon an assessment of which promoter is likely to produce the best outcome for group members. Rather, the considerations mentioned by Jessel MR are entirely consistent with "traditional stay jurisprudence". In Voth v Manildra Flour Mills Pty Ltd37, Mason CJ, Deane, Dawson and Gaudron JJ said that "a plaintiff who has regularly invoked the jurisdiction of a court has a prima facie right to insist upon its exercise". Their Honours went on to identify the general principle empowering a court to dismiss or stay proceedings which are vexatious and to say that the "rationale for the exercise of the power to stay is the avoidance of injustice between parties in the particular case"38. In Moore v Inglis39, Mason J approved the statement of Lord Esher MR in The Christiansborg40 that where an action is prima facie vexatious "it would lie on the party who brings the second action to [show] that it was not so". As explained in Voth, that may be done by showing that the second action offers some (1990) 171 CLR 538 at 554. 38 Voth v Manildra Flour Mills Pty Ltd (1990) 171 CLR 538 at 554. (1976) 50 ALJR 589 at 592; 9 ALR 509 at 514. (1885) 10 PD 141 at 148. "legitimate ... juridical advantage" over the first41. By "legitimate juridical advantages", one refers to the advantages arising from the processes and remedies available in the courts. In Spiliada Maritime Corporation v Cansulex Ltd42, Lord Goff of Chieveley instanced as examples of such advantage cases where "damages [are] awarded on a higher scale; a more complete procedure of discovery [is available]; a power to award interest [is available]; [or] a more generous limitation period [applies]". Lord Goff qualified the relevance of such factors with the statement that "the underlying principle requires that regard must be had to the interests of all the parties and the ends of justice"43. The stay and cross-stay applications in the present case ought to have been determined, not by the "multi-factorial analysis", but by reference to the principle that it is prima facie vexatious to commence an action if an action is already pending in respect of the same controversy in which the same relief is available. This position may be displaced by some juridical advantage in the later-in-time proceeding. If the proceeding first in time is deficient in any of the respects noted by Jessel MR in McHenry v Lewis, then it will be stayed in deference to the later- in-time proceeding. The conclusion that it was no part of the inherent jurisdiction to make a selection between the representative plaintiffs and their sponsors by way of the "multi-factorial analysis" is reinforced by reference to the recognised limits on the procedure whereby trustees are able to seek guidance from a court of equity in relation to the proper discharge of their trust44. If the representative plaintiffs in each of the proceedings had sought such guidance from the Supreme Court, those applications would not have been entertained. That would not have been because of any difficulty in ascribing to a representative plaintiff obligations to group members of a fiduciary character; nor would the problem have been that, historically, the courts of equity never resolved competing claims to engage in what were, until relatively recently, the torts of champerty or maintenance. Rather, a court of equity, presented with a request for guidance by the representative plaintiffs in the representative proceedings here in question, would not have acceded to a request to endorse one sponsor over another. Absent legislative (1990) 171 CLR 538 at 564-565. [1987] AC 460 at 482-484. 43 Spiliada Maritime Corporation v Cansulex Ltd [1987] AC 460 at 483. 44 See Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66. direction, the courts do not provide such endorsements, nor do they give such guidance to potential litigants. The form of direction usually given upon an application by a trustee for the advice of a court of equity is that the trustee is justified in taking or abstaining from legal action. The court does not direct that the trustee "should" or "must" take or defend an action45. Quite apart from the practical difficulties involved in performing such an exercise at the outset of proceedings, it is no part of the jurisdiction of a court of equity to offer encouragement (or discouragement) to those who seek to submit their claims against others to the independent and impartial determination of a court. A court does not make a reputational investment in the outcome of the proceeding; it has never been accepted as an aspect of the inherent jurisdiction that a court should take on a role indistinguishable from that of counsel advising a trustee46. Komlotex and Fernbrook argued that the first-in-time presumption of "traditional stay jurisprudence" would encourage a "race to the courthouse" and inadequate preparation. It was also said that it would encourage overly broad framing of claims to avoid the identity of "complete relief" in competing proceedings. These outcomes were said to run contrary to the "overriding purpose" in s 56 of the CPA. Similarly, the primary judge noted47 the concern expressed by the Full Court in GetSwift that48: "The Court must strongly discourage a rush to the Court in large and complex class proceedings, carrying as it does the consequent risks of insufficient due diligence and the commencement of unmeritorious, or at least weak, cases. Unless the hasty filing of such cases is effectively discouraged even those solicitors or funders who wish to take an appropriately cautious approach are likely to be dragged into the same practice. That is so because the first action filed is likely to obtain a 'first mover' advantage in terms of book building and, once one action is filed, other solicitors or funders are pressed to speedily follow or they may not be included in the mix when the Court considers the competing proceedings." 45 Plan B Trustees Ltd v Parker [No 2] (2013) 11 ASTLR 242 at 253 [47]. In the Application of NSW Trustee and Guardian (2014) 12 ASTLR 513 at 519 47 Wigmans v AMP Ltd [2019] NSWSC 603 at [53], [82]. (2018) 263 FCR 92 at 153 [279]. In truth, concern as to the unseemliness of a "race to the courthouse" is an irrelevant distraction. In this case, the proceedings brought by Ms Wigmans did not exhibit any juridical deficiency or disadvantage in comparison with the competing proceedings, whether because of the haste with which her proceedings were commenced or otherwise. More generally, it is ironic that the alacrity with which Ms Wigmans' proceedings were brought should be thought to be a matter of criticism, given the terms of s 56 of the CPA. Mindful that s 56 of the CPA regards speed in litigation as a positive virtue, it seems distinctly odd to regard the winning of the "race to the courthouse" as a negative factor in a case where no specific criticism can be made of the proceedings that have actually been brought by the winner. The inconsistency is troubling. Further, to object to the alacrity with which otherwise unobjectionable proceedings are commenced under the aegis of one sponsor, while accepting responsibility for choosing between competing would-be sponsors in terms of their likely efficiency and efficacy, is to "strain [out] a gnat, and swallow a camel"49. Komlotex and Fernbrook were unable to establish that their later-in-time proceedings offered any legitimate juridical advantage over Ms Wigmans' proceedings. On that footing, Komlotex and Fernbrook were unable to establish that their later proceedings were not vexatious. The Komlotex/Fernbrook proceedings should therefore have been stayed. Orders The appeal should be allowed. Orders 2 to 4 of the Court of Appeal should be set aside and, in their place, it should be ordered that: Leave to appeal be granted in respect of grounds 2 and 3(a) and (b) of the draft notice of appeal. The appeal be allowed. (3) Order 6(i) of the orders made by the primary judge be set aside and in its place order that: the consolidated proceeding comprising 2018/310118 (Komlotex Pty Ltd v AMP Limited) and 2018/309329 (Fernbrook (Aust) Investments Pty Ltd v AMP Limited) be permanently stayed; and (b) Ms Wigmans' costs of the hearing on 6 and 7 December 2018 before the primary judge be costs in the proceedings below. 49 Matthew 23:24. (4) Komlotex Pty Ltd and Fernbrook (Aust) Investments Pty Ltd pay Ms Wigmans' costs of the application for leave to appeal and the appeal. Komlotex Pty Ltd and Fernbrook (Aust) Investments Pty Ltd should pay Ms Wigmans' costs of the appeal to this Court. There should be no order as to the costs of AMP Limited in this Court. GAGELER, GORDON AND EDELMAN JJ. This appeal concerns the manner in which a court should respond to competing applications to stay one or more open class representative proceedings commenced under Pt 10 of the Civil Procedure Act 2005 (NSW) ("the CPA")50 in relation to the same controversy. As will be explained, adopting the language of Bell P in the decision under appeal, there can be no "one size fits all" approach. There is no rule or presumption that the representative proceeding commenced first in time should prevail. In matters involving competing open class representative proceedings with several firms of solicitors and different funding models, where the interests of the defendant are not differentially affected, it is necessary for the court to determine which proceeding going ahead would be in the best interests of group members. The factors that might be relevant cannot be exhaustively listed and will vary from case to case. In this matter, the primary judge's exercise of the power to stay proceedings did not miscarry. The appeal should be dismissed. Facts Evidence given by executives of AMP Limited ("AMP") at the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry on 16 and 17 April 2018 gave rise to allegations that AMP failed to disclose to the market that it had deliberately charged its customers fees for ongoing financial services that were not provided. The evidence also gave rise to allegations that AMP misled the Australian Securities and Investments Commission as to the nature and extent of that conduct over an extended period, and improperly inflated the price of its shares. It was alleged that this conduct contravened the continuous disclosure obligations51, the statutory prohibitions on 50 Similar schemes are in the Federal Court of Australia Act 1976 (Cth), Pt IVA; Supreme Court Act 1986 (Vic), Pt 4A; Civil Proceedings Act 2011 (Qld), Pt 13A; Supreme Court Civil Procedure Act 1932 (Tas), Pt VII. See also Uniform Civil Rules 2020 (SA), Ch 3, Pt 4; Rules of the Supreme Court 1971 (WA), O 18, r 12; Supreme Court Rules 1987 (NT), O 18; Court Procedures Rules 2006 (ACT), rr 265-270. 51 Corporations Act 2001 (Cth), s 674(2); ASX Listing Rules, r 3.1. misleading and deceptive conduct52 and the statutory prohibitions on In relation to these allegations, five open class representative actions were commenced against AMP within five weeks of each other. The first proceeding was commenced in the Supreme Court of New South Wales on 9 May 2018 by Ms Wigmans (represented by Quinn Emanuel). The second proceeding was commenced in the Victorian Registry of the Federal Court of Australia also on 9 May 2018, but about seven hours after the Wigmans proceeding, by Wileypark Pty Ltd ("Wileypark") (represented by Phi Finney McDonald). The third proceeding was commenced in the New South Wales Registry of the Federal Court on 25 May 2018 by Mr Georgiou (represented by Shine Lawyers). The fourth proceeding was commenced in the Victorian Registry of the Federal Court on 6 June 2018 by Fernbrook (Aust) Investments Pty Ltd ("Fernbrook") (represented by Slater & Gordon). And the fifth proceeding was commenced in the Victorian Registry of the Federal Court on 7 June 2018 by Komlotex Pty Ltd ("Komlotex") (represented by Maurice Blackburn). There is considerable overlap between the claims made in the various proceedings, although they are not identical. There are differences in the relevant claim periods and, arguably, in the factual allegations made. There are also some differences in the causes of action brought: the inclusion of an unconscionable conduct claim in the Wigmans proceeding (but not in any other proceeding); the inclusion of a claim in respect of shares acquired off-market or the acquisition of American Depository Receipts ("ADRs") in the Fernbrook proceeding (but not in any other proceeding); and the inclusion of a claim arising out of the receipt by AMP of legal advice to the effect that its conduct was unlawful in the Wileypark proceeding (but not in any other proceeding). Ms Wigmans, however, contends that her existing claim encompasses the latter two causes of action. In June 2018, the four Federal Court applicants approached the Commercial List of the Supreme Court of New South Wales seeking to transfer the Wigmans proceeding to the Federal Court. That application was ultimately refused54. 52 Corporations Act, s 1041H; Australian Securities and Investments Commission Act 2001 (Cth), s 12DA(1); Competition and Consumer Act 2010 (Cth), Sch 2 ("Australian Consumer Law"), s 18. 53 Australian Securities and Investments Commission Act, ss 12CA and 12CB; Australian Consumer Law, ss 20 and 21. 54 Wigmans v AMP Ltd (2018) 128 ACSR 534 at 536-537 [10]-[11]. AMP had earlier applied in the Federal Court to have the four Federal Court proceedings transferred to the Supreme Court of New South Wales. On 29 August 2018, the Federal Court granted that application and ordered that each of the Federal Court proceedings be transferred to the Supreme Court55. Between 29 August 2018 and 9 November 2018, the representative plaintiff in four of the proceedings (but not the Fernbrook proceeding) filed a notice of motion in the Supreme Court seeking orders that each other proceeding be permanently stayed. AMP took no position on these applications other than to argue that only one proceeding should be permitted to continue. At the same time, an application was made (and ultimately granted) for the Fernbrook proceeding and the Komlotex proceeding to be consolidated ("consolidated Komlotex proceedings"). Decisions below The primary judge took the view that the consolidated Komlotex proceedings, which offered a "no win, no fee" funding model, should proceed, and the other proceedings should be stayed. Because none of the competing representative plaintiffs could be said to be parties to the Wigmans proceeding before the opt-out process56 concluded, and because apparently they were not aware of the way in which the Wigmans claim was put, her Honour found that there was no abuse of process. By reference to the submissions of the parties, the primary judge identified eight matters relevant to resolving the competing stay applications, consideration of which was described as a "multifactorial approach"57. They were: the competing funding proposals, costs estimates and net hypothetical return to members; the proposals for security; the nature and scope of the causes of action advanced (and relevant case theories); 55 Wileypark Pty Ltd v AMP Ltd (2018) 265 FCR 1 at 15 [56], 16 [58], 17 [65]. 56 CPA, s 162. 57 See McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd [2017] FCA 947 at [71]; Perera v GetSwift Ltd (2018) 263 FCR 1 at 48-49 [169] ("GetSwift First Instance"). ... the size of the respective classes; the extent of any bookbuild; the experience of the legal practitioners (and funders, where applicable) and availability of resources; the state of progress of the proceedings; and, the conduct of the representative plaintiffs to date." Her Honour gave most weight to the first consideration – a comparison of "competing funding proposals, costs estimates and net hypothetical return to members". That comparison was based on comparative tables provided by Komlotex that modelled the expected return to group members for each proceeding. The primary judge found that Komlotex's funding model was likely to provide the best return for group members taking into account the combination of: the absence of a separate funding commission; the incentive created by an uplift in fees only once a specified resolution sum is achieved; the comparable return based on some standardised assumptions; and the fact that no common fund order was being sought by Komlotex58. Her Honour said she considered that "there [was] no sensible basis for differentiation between the experience or abilities of the respective legal/funding teams". Ms Wigmans had submitted before the primary judge that the firms of solicitors and counsel each party had retained were highly experienced and that there was no reason to doubt that any of the firms would have any difficulty in running the litigation on behalf of the class. Ms Wigmans further submitted that the experience of legal practitioners (and funders where applicable) and the availability of resources was a neutral factor. The case being conducted on this basis, it is unsurprising that her Honour assumed that the solicitors in each proceeding were of equal experience and ability, that each of them would take the same number of hours of work to reach settlement or judgment, and, at least implicitly, that each of them had the same chance of achieving each given settlement or judgment sum. In relation to funding arrangements, her Honour assumed that the litigation funders were similarly equal and that each funding model provided incentives and disincentives to achieving the best outcome for group members. 58 But see BMW Australia Ltd v Brewster (2019) 94 ALJR 51; 374 ALR 627. In relation to the second consideration, proposals for security for costs, the primary judge identified the key difference as being that the Wileypark and Georgiou proceedings relied on "after the event" or "ATE" insurance policies of which the provisions were not disclosed. Her Honour concluded that this favoured the Wigmans and consolidated Komlotex proceedings, in which $5 million in security for costs either had been or would be paid into court. Her Honour found the other factors were neutral59 or of little or no weight60. The "first mover advantage" was given no weight. The primary judge thus dismissed the application to stay the consolidated Komlotex proceedings and ordered that the three other proceedings be stayed. Ms Wigmans appealed to the Court of Appeal of the Supreme Court of New South Wales on grounds that the consolidated Komlotex proceedings were an abuse of process and otherwise generally reagitating the submissions she had made before the primary judge. The Court of Appeal (Bell P, Macfarlan, Meagher, Payne and White JJA agreeing) held that the consolidated Komlotex proceedings were not an abuse of process because Komlotex was not a party to the Wigmans proceeding and only the defendant, AMP, could have been vexed by the subsequent proceedings. Their Honours upheld the primary judge's multifactorial approach and analysis. Ms Wigmans' submissions In this Court, Ms Wigmans' central complaint was that the Court of Appeal erred in failing to apply a rule or presumption that it is prima facie vexatious and oppressive to commence an action if an action is already pending in respect of the same controversy. She submitted that the onus is on the party that commences the action second in time to show that its action is not vexatious and oppressive, and that to discharge the onus the second-in-time party must point to some legitimate juridical advantage that its proceeding offers over and above the first proceeding. And she argued that Komlotex had not discharged that onus. Ms Wigmans identified several separate lines of authority that she submitted supported, or at least were not inconsistent with, the alleged first-in-time 59 The nature and scope of the causes of action advanced and relevant case theories. 60 The size of the respective classes, the extent of any bookbuild, the experience of legal practitioners and funders and availability of resources, the state of progress of the proceedings, and the conduct of the representative plaintiffs to date. rule or presumption – common law principles arising from McHenry v Lewis61; the inherent power to grant a stay; abuse of process principles from Henry v Henry62 and Moore v Inglis63; and equitable principles concerning test actions. Ms Wigmans contended that the "multifactorial approach" adopted by the primary judge improperly departed from the first-in-time rule or presumption and improperly imported a "carriage" or "certification" procedure from the United States and Canada that Pt 10 of the CPA does not authorise. Ms Wigmans further submitted that the primary judge erred in acting upon the assumption that the proceedings brought by each of Ms Wigmans and Komlotex against AMP had an equal probability of achieving a possible settlement or judgment outcome within the range of possible outcomes. Power to grant a stay The source of the Supreme Court's power to grant a stay is found in s 67 in Pt 6 of the CPA. It is a power to "at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day"64. It encompasses, and overlaps with, the Supreme Court's inherent power to stay a proceeding to prevent abuse of its processes65, which extends to staying proceedings that are frivolous, vexatious or oppressive66. The scope of the power is to be determined by considering the text of s 67 in its context. Section 67 confers a broad power on the Supreme Court to stay proceedings; it is a means by which that Court can regulate its processes and manage cases before it in accordance with the principles set out in Pt 6 of the CPA. (1882) 22 Ch D 397. (1996) 185 CLR 571. (1976) 50 ALJR 589; 9 ALR 509. 64 The power in s 67 of the CPA is expressed to be subject to the rules of the court. 65 See, eg, Moubarak by his tutor Coorey v Holt (2019) 100 NSWLR 218 at 233 [69]-[70], quoting New South Wales v Plaintiff A [2012] NSWCA 248 at [15]. 66 Jago v District Court (NSW) (1989) 168 CLR 23 at 74; Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256 at 266-267 [14]-[15]. Section 67 does not provide for any particular criteria relevant to the exercise of the power67. But the power is not unconstrained. Some considerations are mandated by other provisions in Pt 6 of the CPA. Section 58(1) provides that in making any order or direction for the management of proceedings (including the grant of a stay), the court must seek to act in accordance with the dictates of justice. Section 58(2) provides that, in doing so, the court must have regard to s 56 (the overriding purpose of the CPA and the rules of court, being to facilitate the just, quick and cheap resolution of the real issues in the proceedings) and to s 57 (the objects of case management, including the just determination of the proceedings and the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties). Part 6 of the CPA also provides that for the purpose of determining the dictates of justice in a particular case, the court may have regard, among other things, to the complexity of the issues68, the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction69 and "such other matters as the court considers relevant in the circumstances of the case"70. There is, however, nothing in s 67, read with Pt 6, that supports Ms Wigmans' contention that the considerations to which a court might have regard in exercising the power in s 67 are to be confined, or that the statutorily identified considerations (both mandatory and discretionary) applying to the exercise of the power are to be displaced, by reference to a first-in-time rule or presumption71. The provisions of Pt 6 do not disclose any legislative intent that the court must give predominant (or indeed any) weight to the order in which competing proceedings were filed. 67 Mao v AMP Superannuation Ltd [2016] NSWSC 722 at [43]; Moubarak (2019) 100 NSWLR 218 at 233 [69], quoting Plaintiff A [2012] NSWCA 248 at [15]; South Eastern Sydney Local Health District v Lazarus [2019] NSWSC 649 at [14]. 68 CPA, s 58(2)(b)(i). 69 CPA, s 58(2)(b)(vi). 70 CPA, s 58(2)(b)(vii). 71 Owners of "Shin Kobe Maru" v Empire Shipping Co Inc (1994) 181 CLR 404 at The conclusion that there is no first-in-time rule or presumption is reinforced by the scheme of Pt 1072. There is nothing in Pt 10 that expressly cuts down or is inconsistent with the broad power of stay under s 67 and, in particular, there is no provision in Pt 10 that expressly or impliedly prevents the filing of a second representative proceeding against a defendant in relation to a controversy. To the contrary, where seven or more persons have claims against the same person73, and the conditions in s 157(1)(b) and (c) are met74, s 157 permits "one or more" of those persons to commence proceedings representing some or all of them. "[t]he representative proceeding may represent some or all of those who have such a claim. The claims of the applicant and the group members must give rise to a substantial common issue of law or fact, but the group members need not necessarily share a common interest. Indeed, the claims need not be based on the same conduct." (emphasis added) Moreover, Pt 10 forms part of the CPA and, like any other Act, the CPA must be read as a harmonious whole76. The introduction of Pt 10 into the CPA in 2010 did not remove or dilute the Supreme Court's existing powers, but provided 72 See generally Brewster (2019) 94 ALJR 51 at 66-70 [60]-[81], 80-82 [136]-[145]; 374 ALR 627 at 641-646, 660-663. 73 CPA, s 157(1)(a). 74 "[T]he claims of all those persons are in respect of, or arise out of, the same, similar or related circumstances" and "the claims of all those persons give rise to a substantial common question of law or fact". 75 Brewster (2019) 94 ALJR 51 at 80 [136]; 374 ALR 627 at 660 (footnotes omitted). 76 Johns v Australian Securities Commission (1993) 178 CLR 408 at 452; Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381-382 a more detailed regime77 compared with the pre-existing rules of civil procedure78 that provided for representative proceedings79. Contrary to Ms Wigmans' submission, recognition that there may be multiple representative proceedings which overlap in various ways is not inconsistent with one objective of Pt 10 being "to increase the efficiency of the administration of justice by allowing a common binding decision to be made in one proceeding rather than multiple suits"80. That objective poses the question of how to resolve multiplicity when it arises. It does not answer it. Nor does anything in Pt 10 evince an intention that a party to a representative proceeding (including a representative plaintiff) or a group member must use and only use the provisions of Pt 10 if dissatisfied with the conduct of an existing representative proceeding. Provisions in Pt 10, such as ss 171 and 162, do not detract from the Supreme Court's power to stay competing representative proceedings or impose any limitation of the kind contended for by Ms Wigmans. Section 171 permits a group member to apply to replace a representative plaintiff where the existing plaintiff is "not able adequately to represent the interests of the group members". It is not concerned with, and does not address, a circumstance where competing representative plaintiffs believe they are able to more adequately represent the interests of all or some group members. Section 162 provides that a group member may opt out of representative proceedings81 and that, except with leave, the hearing of representative 77 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 24 November 2010 at 28066. Part 10 of the CPA was substantially modelled on Pt IVA of the Federal Court of Australia Act, which was in turn introduced following Report 46 of the Australian Law Reform Commission ("ALRC"): ALRC, Grouped Proceedings in the Federal Court, Report No 46 (1988). See also Australia, Senate, Parliamentary Debates (Hansard), 12 September 1991 at 1448; Brewster (2019) 94 ALJR 51 at 70-71 [82]; 374 ALR 627 at 647. 78 Uniform Civil Procedure Rules 2005 (NSW), rr 7.4 and 7.5 as in force on 3 March 2011 ("UCPR"). 79 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 24 November 2010 at 20866-20867. 80 Brewster (2019) 94 ALJR 51 at 70-71 [82]; 374 ALR 627 at 647. 81 CPA, s 162(2). proceedings must not commence earlier than the date before which a group member may opt out of the proceedings82. The right to opt out preserves to the group member the ability to individually pursue proceedings outside the representative proceeding regime in Pt 10, to choose between representative proceedings or, for whatever reason, not to seek relief under Pt 10 or otherwise. Part 10 also identifies other considerations which may be relevant in dealing with competing representative proceedings. Section 162, which has been addressed, provides one of them. Whether the date before which a group member may opt out of the proceeding has passed may be relevant. Section 166 provides another example. It stipulates that the Supreme Court may, on application by a defendant, or of its own motion, order that proceedings no longer continue under Pt 10 if satisfied that it is in the interests of justice to do so for one of a number of reasons. Those reasons include that: the costs that would be incurred if the proceedings were to continue as representative proceedings are likely to exceed the costs that would be incurred if each group member conducted a separate proceeding83; the representative proceedings will not provide an efficient and effective means of dealing with the claims of group members84; a representative party is not able to adequately represent the interests of the group members85; and it is otherwise inappropriate that the claims be pursued by means of representative proceedings86. In relation to the last of those matters, s 166(2) provides that it is not inappropriate for claims to be pursued by means of representative proceedings merely because the persons identified as group members in relation to the proceedings do not include all persons on whose behalf those proceedings might have been brought87 or are aggregated together for a particular purpose such as a 82 CPA, s 162(4). 83 CPA, s 166(1)(a). 84 CPA, s 166(1)(c). 85 CPA, s 166(1)(d). 86 CPA, s 166(1)(e). 87 CPA, s 166(2)(a). 88 CPA, s 166(2)(b). The phrase "litigation funding arrangement" is not defined. Section 166 also thereby recognises important aspects of Pt 10: that in relation to representative proceedings there are group members who are not parties to the proceeding until after the opt-out process; that litigation funding arrangements are accommodated within the regime; and, consistent with principle, that in the exercise of its powers under the CPA, the Supreme Court must be mindful not only of the existence of group members but of what is in their best interests89. That is particularly the case where those interests may be prejudiced or, as Komlotex and Fernbrook submitted, "where there is a real risk – as [here] – that those interests may diverge from the interests of the representative party"90. Although strictly unnecessary to support the power to grant a stay, the general power of the Supreme Court under s 183 to make any order that it thinks "appropriate or necessary to ensure that justice is done in the proceedings" also shows that the overall concern of Pt 10 is the "just and effective resolution" of the issues in the proceeding91. In the context of competing representative proceedings, the grant of a stay may be necessary or desirable to achieve the just and effective resolution of the issues. Unlike the United States and some Canadian provinces, which have adopted certification and carriage motion procedures to resolve multiplicity in class actions92, Australian legislatures deliberately chose not to adopt such procedures93. That choice reflected a view that the proposed class actions scheme was adequate 89 Carnie v Esanda Finance Corporation Ltd (1995) 182 CLR 398 at 408; Mobil Oil Australia Pty Ltd v Victoria (2002) 211 CLR 1 at 27 [21]; Australian Securities and Investments Commission v Richards [2013] FCAFC 89 at [8]. 90 Lopez v Star World Enterprises Pty Ltd (1999) ATPR ¶41-678 at 42,670 [16]; Kelly v Willmott Forests Ltd (In liq) [No 4] (2016) 335 ALR 439 at 454 [63]. 91 Brewster (2019) 94 ALJR 51 at 65 [51]; 374 ALR 627 at 639. 92 See, eg, Federal Rules of Civil Procedure (US), r 23; Class Proceedings Act 1992 (Ont), ss 12 and 13. See also Competition Act 1998 (UK), ss 47A and 47B and Competition Appeal Tribunal Rules 2015 (UK), Pt 5, considered in Merricks v Mastercard Inc [2021] Bus LR 25. 93 ALRC, Grouped Proceedings in the Federal Court, Report No 46 (1988) at 63-64 [147]. See Bellamy's [2017] FCA 947 at [54]; Perera v GetSwift Ltd (2018) 263 FCR to protect group members' interests94 or, perhaps, competing class actions were not But the decision not to adopt the United States or Canadian procedures in Australia does not end, or dictate the outcome of, the process of identifying the relevant considerations for the Supreme Court in deciding which of the competing representative proceedings to proceed. For as has been explained, the representative proceedings scheme in Pt 10 does not stand alone. It forms part of the CPA and it operates in conjunction with the CPA and the Supreme Court's inherent powers. A first-in-time approach of the kind for which Ms Wigmans contended would also be unworkable. To adopt and adapt what Lord Templeman said in The Abidin Daver96, a concern with avoiding or limiting a multiplicity of representative proceedings ought not be replaced by a presumption – a first-in-time criterion – that leads to an "ugly rush" to the court door, including but not limited to the framing of causes of action and claims for relief as broadly as possible to gain so-called "juridical advantages". And as the facts of this appeal demonstrate, multiple representative proceedings in respect of the same controversy are not necessarily "duplicitous". Here, there was overlap between the representative proceedings but the overlap was not complete. And, no less significantly, Ms Wigmans failed below to establish that the commencement of any of the later filed proceedings was an abuse of process, a finding from which she did not seek leave to appeal. Authorities on which Ms Wigmans relied It remains to address the several lines of authority on which Ms Wigmans relied in support of her contention that there is a rule or presumption that the representative proceeding issued first in time is to be preferred and that, 94 ALRC, Grouped Proceedings in the Federal Court, Report No 46 (1988) at 63-64 95 ALRC, Integrity, Fairness and Efficiency – An Inquiry into Class Action Proceedings and Third-Party Litigation Funders, Report No 134 (2018) at 102 [1984] AC 398 at 426. See also EI Du Pont de Nemours & Co v Agnew [1987] 2 Lloyd's Rep 585 at 593; GetSwift (2018) 263 FCR 92 at 153 [279]; Wileypark (2018) 265 FCR 1 at 8 [18]. absent some other juridical advantage, any later proceedings should be stayed. As presented, there were five steps to the argument: at common law, it is, prima facie, vexatious and oppressive to commence an action if an action is already pending in respect of the same controversy and in which action complete relief is available, citing Carron Iron Co v Maclaren97, CSR Ltd v Cigna Insurance Australia Ltd98 and Henry99; the relevant authorities are those relating to "duplicative" proceedings; authorities relating to proceedings which are "merely overlapping", such as McHenry100, are not applicable; the onus is on the party commencing the second action to show that it is not vexatious and oppressive, citing Moore101; the onus is typically discharged by establishing that the second action offers some legitimate juridical advantage over the first action, citing Voth v Manildra Flour Mills Pty Ltd102; and the fact that the parties to the second action are not identical to the parties to the first does not displace the presumption, citing Moore103 and Perera v GetSwift Ltd104. Two points may be made at the outset. Ms Wigmans' argument is impermissibly selective and at various points merges different ideas from areas (1855) 5 HLC 416 at 437-439 [10 ER 961 at 970-971]. (1997) 189 CLR 345 at 393-394. (1996) 185 CLR 571 at 591. 100 (1882) 22 Ch D 397. 101 (1976) 50 ALJR 589 at 592; 9 ALR 509 at 514. 102 (1990) 171 CLR 538 at 564-565. 103 (1976) 50 ALJR 589; 9 ALR 509. 104 (2018) 263 FCR 92 at 127 [155]. with different jurisprudential foundations. And, as will be seen, the authorities cited do not support a first-in-time rule or presumption. Common law principles Ms Wigmans' argument assumed that there is a common law principle that, if complete relief is available in a proceeding on foot, it is prima facie vexatious and oppressive to commence a second proceeding dealing with the same controversy. That proposition was rightly rejected by both the primary judge and the Court of Appeal. By no later than 1589, the general "rule of law" was that "a man shall not be twice vexed for one and the same cause"105. Thus, at common law, an award of damages was said to be once-and-for-all106 and even the pendency of an action for certain relief was a good plea in abatement to another action for the same relief in a court of concurrent jurisdiction107. By contrast, as Lord Hardwicke LC remarked in Foster v Vassall108, although courts of equity adopted the same "general rule" at an early point, they applied it "with a more liberal discretion". Prior to the Judicature Acts, a plaintiff who brought an action at law and a suit in equity for like remedies was ordinarily put to their election. But the earlier proceedings did not bar the later109. This principle of election was then extended 105 Sparry's Case (1589) 5 Co Rep 61a at 61a [77 ER 148 at 148] (footnote omitted). 106 See Fitter v Veal (1701) 12 Mod 542 [88 ER 1506]. cf Burrows, Remedies for Torts, Breach of Contract, and Equitable Wrongs, 4th ed (2019) at 163-164. 107 Moyle v West (1553) 1 Dyer 92b at 93a [73 ER 201 at 202]; White v Willis (1759) 2 Wils KB 87 at 87-88 [95 ER 701 at 701]; Harley v Greenwood (1821) 5 B & Ald 95 at 101-102 [106 ER 1128 at 1131]; Ostell v Lepage (1851) 5 De G & Sm 95 at 105 [64 ER 1034 at 1038]. See Bullen and Leake, Precedents of Pleadings in Personal Actions in The Superior Courts of Common Law, 3rd ed (1868) at 473-474. 108 (1747) 3 Atk 587 at 589 [26 ER 1138 at 1140]. 109 Beames, The General Orders of the High Court of Chancery: From the Year 1600 to the Present Period (1815) at 11-12, O 18; Bohun, Cursus Cancellariae; Or, the Course of Proceedings In the High Court of Chancery, 2nd ed (1723) at 349; Jones v Earl of Strafford (1730) 3 P Wms 79 at 90 [24 ER 977 at 980-981]; Carwick v Young (1818) 2 Swans 239 at 243-244 [36 ER 606 at 608]; Ostell (1851) 5 De G & Sm 95 at 105 [64 ER 1034 at 1038]. to cases where proceedings were pending in the English Court of Chancery and a foreign court110, subject to recognition that differences of procedure and remedy, and the location of assets, might justify concurrent proceedings111. After a decree was made in the English proceedings, however – even one requiring further steps, such as an inquiry or accounting – the plaintiff was taken to have "already made his election"112, and hence the defendant's only remedy was an injunction against the foreign proceedings. As Lord Cranworth LC observed in Carron Iron113, "[w]here ... pending a litigation here, in which complete relief may be had, a party to the suit institutes proceedings abroad, the Court of Chancery in general considers that act as a vexatious harassing of the opposite party, and restrains the foreign proceedings". Within a decade of the Judicature Acts, these equitable principles were adapted by courts jointly administering law and equity. In the seminal case of McHenry, the Master of the Rolls, Sir George Jessel, cited114 the practice of the old Court of Chancery, of putting a plaintiff to their election by an order of course if they were suing for the same cause of action both at law and in equity, in support of the principle that, within England, "where the two actions are by the same man in Courts governed by the same procedure, and where the judgments are followed by the same remedies, it is primâ facie vexatious to bring two actions where one will do". His Lordship concluded115 that the court had power to prevent improper vexation by concurrent local and foreign proceedings and that no "inference" of "primâ facie vexation" could be drawn from the multiplicity of proceedings where "[n]ot only is the procedure different, but the remedy is different" as between the courts. 110 Pieters v Thompson (1815) G Coop 294 at 294 [35 ER 563 at 563]. 111 Wedderburn v Wedderburn (1840) 2 Beav 208 at 213-214 [48 ER 1159 at 112 Wedderburn (1840) 2 Beav 208 at 210 [48 ER 1159 at 1160]. See also Harrison v Gurney (1821) 2 Jac & W 563 at 564-565 [37 ER 743 at 744]; Booth v Leycester (1837) 1 Keen 579 at 580 [48 ER 430 at 431]. 113 (1855) 5 HLC 416 at 437 [10 ER 961 at 970]. 114 (1882) 22 Ch D 397 at 400. 115 McHenry (1882) 22 Ch D 397 at 399-400. See also Peruvian Guano Co v Bockwoldt (1883) 23 Ch D 225 at 232. Shortly thereafter, in The Christiansborg, the Court of Appeal reiterated116 the principles in McHenry but divided as to the proper remedy: whereas Lord Esher MR in dissent would have put the plaintiff to election and relied117 on the absence of any "case in which the Court has stayed the second action without giving the plaintiff at least the right of election", Baggallay LJ concluded118 that "the circumstances of the case may be such that instead of putting the plaintiff to his election the Court will stay one of the two actions". The latter view ultimately prevailed and, thereafter, the proper remedy was regarded as a matter within the court's discretion119. The principles stated in McHenry have previously been accepted in this Court120. The general law principles concerning multiple suits do not support the first-in-time rule or presumption. Multiple suits were and remain to be resolved by the exercise of discretion informed by all the relevant circumstances. Inherent power to grant a stay on grounds of forum non conveniens Ms Wigmans also sought to rely on cases concerning a court's power to stay proceedings on grounds of forum non conveniens. In CSR, six judges of this Court explained the nature of the power to stay proceedings on grounds of forum non conveniens121: "It is clear from the rationale for the exercise of the power to stay proceedings and, also, from the words 'oppressive', 'vexatious' and 'abuse of process' in Voth, in Oceanic Sun [Line Special Shipping Co Inc v Fay122] and in the earlier cases considered in Oceanic Sun ... that the power to stay 116 (1885) 10 PD 141 at 145-147, 153. 117 (1885) 10 PD 141 at 148. 118 (1885) 10 PD 141 at 153. 119 See, eg, The "Hartlepool" (1950) 84 Ll L Rep 145 at 146; The Soya Margareta [1961] 1 WLR 709 at 716-717; [1960] 2 All ER 756 at 762. 120 See, eg, Henry (1996) 185 CLR 571 at 591; CSR (1997) 189 CLR 345 at 393, quoting Carron Iron (1855) 5 HLC 416 at 437 [10 ER 961 at 970]. 121 (1997) 189 CLR 345 at 391. 122 (1988) 165 CLR 197. proceedings on grounds of forum non conveniens is an aspect of the inherent or implied power which, in the absence of some statutory provision to the same effect, every court must have to prevent its own processes being used to bring about injustice". In Oceanic Sun, Deane J explained that test in the following terms123: "[The] power [to dismiss or stay proceedings within jurisdiction on inappropriate forum grounds] is a discretionary one in the sense that its exercise involves a subjective balancing process in which the relevant factors will vary and in which both the question of the comparative weight to be given to particular factors in the circumstances of a particular case and the decision whether the power should be exercised are matters for individual judgment and, to a significant extent, matters of impression. The power should only be exercised in a clear case and the onus lies upon the defendant to satisfy the local court in which the particular proceedings have been instituted that it is so inappropriate a forum for their determination that their continuation would be oppressive and vexatious to him." (emphasis added) Contrary to Ms Wigmans' contention, those statements of principle do not suggest there is a first-in-time rule or presumption in the forum non conveniens context. Deane J's approach in Oceanic Sun was adopted in Voth124 and applied in Henry125 and CSR126. Reliance on Henry and Moore Ms Wigmans emphasised the statement of four members of this Court in Henry that: "[i]t is prima facie vexatious and oppressive, in the strict sense of those terms, to commence a second or subsequent action in the courts of this country if an action is already pending with respect to the matter in issue"127 (emphasis added). The authority cited for the proposition applying to two proceedings in the 123 (1988) 165 CLR 197 at 247-248. 124 (1990) 171 CLR 538 at 564-565. 125 (1996) 185 CLR 571 at 587, 592-593. 126 (1997) 189 CLR 345 at 390-391, 400-401. 127 (1996) 185 CLR 571 at 591. same country was Moore. But Moore, like Henry, concerned whether a second or subsequent action may be considered vexatious or oppressive in what their Honours in Henry referred to as the "strict sense"128, of an abuse of process. The considerations involved in resolving a competition between representative proceedings are not so confined. Here, there was no abuse of process: the primary judge's finding that the consolidated Komlotex proceedings were not an abuse of process was upheld on appeal. And, even in the context of abuse of process, the time of filing is not determinative but one of a range of factors, personal to the parties, that are considered by a court129. Equity's approach to test actions By contrast to the principles applicable to forum non conveniens cases, equitable principles concerning test actions do assist in identifying how a court should approach the issue of multiple representative proceedings. Those principles date back at least to Amos v Chadwick130, where Jessel MR explained the court's approach to resolving 78 actions brought by shareholders of the Blochairn Iron Company against the company's promoters for fraudulent misrepresentation in these terms: "All the actions raise substantially the same question. Of course it would have been a scandal to the administration of justice if all the seventy-eight actions had been allowed to proceed, and in some way or other provision ought to have been made for the trial of the real question between the parties in a single action, if that was possible. Sometimes such a course is not possible, because people will not be reasonable and will not consent. In that case, I take it, the Court could stay the proceedings in all the actions but one, and see what becomes of that one." The procedure anticipated by the Master of the Rolls was later applied in Bennett v Lord Bury by Field J, staying 37 of 38 shareholder actions against directors of the Colonial Trusts Corporation Limited131. In upholding that order on 128 (1996) 185 CLR 571 at 591. 129 Henry (1996) 185 CLR 571 at 592-593. See also De Dampierre v De Dampierre [1988] AC 92 at 108. 130 (1878) 9 Ch D 459 at 462-463. 131 (1880) 5 CPD 339 at 340, 342. appeal, Lord Coleridge CJ observed132 that "the gist of the charge [was] the same in all" of the actions. Lindley J agreed with Lord Coleridge CJ and said133 that: "the order prevents the defendants from being subjected to the unnecessary burden of the costs of thirty-eight actions, when the whole matter in controversy may be settled in one. As to our power to do what is done by this order, if authority were needed, Amos v Chadwick supplies it. I must confess I should have thought without that case that there was abundant power to make such an order. It comes therefore to a question of discretion; and I think my Brother Field has properly exercised his discretion in what he has done." This approach was then explained by Jessel MR in McHenry134, in a passage in part quoted by Bell P in the Court of Appeal in this matter: "You might have a hundred actions brought upon the same act or alleged breach of trust, and therefore of course the Court has power to stop all but one of the actions if they are all for exactly the same thing. But the course of the Court is well settled. The defendants take out a summons to stay the actions which have been previously transferred of course to the same Judge or Court, and then the Court decides which of the actions is to go on as a test action, and which are to be stayed. You cannot tell until you have all the plaintiffs before you the right course to be taken. The first action may be a collusive action, one action may embrace further relief than another, one action may be better framed than another to raise the questions in dispute, one action may be more perfect as to parties than another, in one action the plaintiff may be a solvent person, and able to answer costs, and in the other the plaintiff may be a pauper. Various considerations may arise, and until you get the whole of the actions before the Court the Court cannot decide which is to be allowed to proceed, or on what terms. It sometimes happens that we allow one action to proceed for one purpose and another for another purpose – that is that we excise from one action so much of the relief as can properly be attributed to an earlier plaintiff, and allow the 132 Bennett (1880) 5 CPD 339 at 341. 133 Bennett (1880) 5 CPD 339 at 344 (footnote omitted). 134 (1882) 22 Ch D 397 at 404. See also Commissioners of Sewers of the City of London v Gellatly (1876) 3 Ch D 610 at 615; Templeton v Leviathan Pty Ltd (1921) 30 CLR 34 at 76. cf Reynolds v Reynolds [1977] 2 NSWLR 295 at 307. second or third action to go on for the additional relief; but all that can only be discussed in the presence of all parties." (emphasis added) Unlike the position in McHenry135, the applications for stay in this matter were not filed by the defendant, AMP – they were filed by the representative plaintiffs. But the principles in McHenry are instructive; they reflect the approach earlier taken in Amos and Bennett, which concerned applications by plaintiffs136. And Ms Wigmans' contention that these principles apply to multiple but not duplicative suits is misplaced. As has been observed, Bennett was a case where "the gist of the charge [was] the same in all" and the multiple actions were to be resolved in the court's discretion137. In McHenry, Jessel MR's approach was stated to apply where there are multiple actions which are "all for exactly the same thing"138. As these authorities demonstrate, the principles apply to proceedings that might be characterised as duplicative. No doubt one reason for this is that there can be no clear line between duplicative proceedings and those which overlap. Further, the multiple representative proceedings in issue in this appeal were not duplicative. Likewise, the principle from Carron Iron provides guidance as to how a court should approach multiple representative proceedings. As will be recalled139, in that case the Lord Chancellor stated that "[w]here ... pending a litigation here, in which complete relief may be had, a party to the suit institutes proceedings abroad, the Court of Chancery in general considers that act as a vexatious harassing of the opposite party, and restrains the foreign proceedings"140. This principle was understood to match the applicable law where the second proceedings were instituted in the same jurisdiction141. But importantly, it was subject to the 135 (1882) 22 Ch D 397 at 401. 136 Amos v Chadwick (1877) 4 Ch D 869 at 872; Bennett (1880) 5 CPD 339 at 342. 137 (1880) 5 CPD 339 at 341, 344. 138 (1882) 22 Ch D 397 at 404. 139 See [91] above. 140 Carron Iron (1855) 5 HLC 416 at 437 [10 ER 961 at 970]. See also McHenry (1882) 22 Ch D 397 at 405. 141 Carron Iron (1855) 5 HLC 416 at 439 [10 ER 961 at 971]. qualification that it is not "the duty of the Court so to act [to restrain the second proceedings], if from any cause it appears likely to be more conducive to substantial justice that the [second] proceedings should be left to take their course"142. In other words, a court of equity would not restrain the second proceeding if that course would be "ill calculated to answer the ends of justice"143 or "ill adapted to secure complete justice"144. Contrary to Ms Wigmans' submission, Carron Iron does not hold that, where proceedings are pending is available, any subsequent proceeding in respect of the same controversy is vexatious and should therefore be restrained or that, absent some other juridical basis, the first in time prevails. It directs attention to the need to consider what resolution of the competing proceedings will do justice. in which complete relief Considerations relevant to the exercise of the power to grant a stay Having thus rejected Ms Wigmans' contention that the breadth of the power to grant a stay of competing representative proceedings under the CPA is subject to a first-in-time rule or presumption, it remains to identify the considerations that are relevant to the exercise of the power. The starting point is that multiplicity of proceedings is not to be encouraged and that competing representative proceedings run by different firms of solicitors, with different funders, may in principle be inimical to the administration of justice145. But, as was earlier stated, there is no "one size fits all" approach. Multiplicity may be addressed by a variety of means instead of, or in addition to, staying one or more of the proceedings146. 142 Carron Iron (1855) 5 HLC 416 at 439 [10 ER 961 at 971]. 143 Carron Iron (1855) 5 HLC 416 at 437-438 [10 ER 961 at 970]. 144 Carron Iron (1855) 5 HLC 416 at 438 [10 ER 961 at 971]. 145 See, eg, Johnson Tiles Pty Ltd v Esso Australia Ltd (1999) ATPR ¶41-679; Kirby v Centro Properties Ltd (2008) 253 ALR 65; Smith v Australian Executor Trustees Ltd [2016] NSWSC 17; Bellamy's [2017] FCA 947; Cantor v Audi Australia Pty Ltd [No 2] [2017] FCA 1042; GetSwift (2018) 263 FCR 92; Wileypark (2018) 265 FCR 146 These include: consolidating the proceedings; de-classing one or more of the proceedings; holding a joint trial of all proceedings with each left constituted as open Second, while a first-in-time rule or presumption has never been favoured as a means of resolving which of the competing proceedings should proceed at all, the order of filing has been and remains a relevant consideration, although less relevant in cases like this where the competing proceedings have been commenced within a short time of each other147. As the Full Court of the Federal Court said in GetSwift, the commencement of a subsequent bona fide set of representative proceedings prior to the court giving substantive directions in existing but overlapping representative proceedings148: "does not of itself establish any vexation, oppression or an abuse of process. Such is not established for the representative applicant in each of the proceedings, for they are different. And in respect of the group members in each of the proceedings in relation to the overlap, those overlapping group members are not parties as such. They have not engaged in any conduct with respect to their rights that could sensibly be characterised as amounting to vexation, oppression or an abuse of process." By contrast, "the greater the gap in time between commencement of the sets of representative proceedings perhaps the stronger the case for a stay of the subsequent set of proceedings, all other matters being equal"149. Third, given the breadth of the mandatory and discretionary considerations in Pt 6 of the CPA informing the power to grant a stay, the relevant point in time is not limited to the time of filing and may, and often will, extend to facts and matters arising after filing. In the case of representative proceedings, the actions (or inaction) of group members, and, more generally, the degree of expedition with which the respective parties have approached the proceeding, including the degree class proceedings; and closing the classes in one or more of the proceedings but leaving one of the proceedings as an open class proceeding, with a joint trial of all: see, eg, Bellamy's [2017] FCA 947 at [9]; Cantor [2017] FCA 1042 at [75]; GetSwift (2018) 263 FCR 92 at 105-110 [44]-[70]; Southernwood v Brambles Ltd (2019) 137 ACSR 540 at 545 [20]; Wigmans v AMP Ltd (2019) 373 ALR 323 at 326 [7]. 147 Union Steamship Co of New Zealand Ltd v The Caradale (1937) 56 CLR 277 at 281. 148 (2018) 263 FCR 92 at 126 [150]. 149 Wigmans (2019) 373 ALR 323 at 341 [83]. to which they have been timely in their interlocutory activities150, are likely to be relevant. Fourth, the factors that might be relevant cannot be exhaustively listed. They will vary from case to case151. In matters involving competing open class representative proceedings with several firms of solicitors and different funding models, it is necessary for the court to determine, by reference to all relevant considerations, which proceeding going ahead would be in the best interests of group members. In the present appeal, no party suggested that the second to eighth considerations identified by the primary judge were irrelevant152. Ms Wigmans' argument focussed primarily on the first consideration – the competing funding proposals, costs estimates and net hypothetical return to members. She challenged the power of the Supreme Court under s 67 to consider differing litigation funding arrangements, either alone or in conjunction with the identity of the solicitors and their relative experience, the estimated legal costs for the conduct of the respective proceedings and the likely return to group members. Litigation funding arrangements are not a mandatory consideration under s 67, but they are not irrelevant. It would be inappropriate to read s 67 with Pt 10 as conferring jurisdiction or granting power subject to limitations not found in their express words153. Before the primary judge, litigation funding arrangements were raised directly by each representative plaintiff as a significant fact or matter. Part 10 recognises that litigation funding arrangements are a distinct feature of representative proceedings154, and, evidently, there will be cases where the difference between litigation funding arrangements is so stark that to exclude it from consideration in determining whether to exercise the stay power would not be consistent with the court seeking to act in accordance with the dictates of justice 150 CPA, s 58(2)(b)(ii). 151 See, eg, GetSwift First Instance (2018) 263 FCR 1 at 48-49 [169]; GetSwift (2018) 263 FCR 92 at 136 [195]. 152 See [60] above. 153 Shin Kobe Maru (1994) 181 CLR 404 at 421; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2018) 262 CLR 157 at 190-191 [103]; Brewster (2019) 94 ALJR 51 at 64 [43]; 374 ALR 627 at 637, quoting Wong v Silkfield Pty Ltd (1999) 199 CLR 255 at 261 [12]. 154 CPA, s 166(2)(b). under s 58. But that is not to say that litigation funding arrangements must always be relevant, still less determinative. likely success There is nothing foreign to the judicial process for a court to take into in proceedings or quantum of recovery. Those account considerations, as well as preferences expressed by adult beneficiaries, are well established as potentially relevant matters when a court addresses whether bringing or defending litigation by trustees is proper or can be justified having regard to the best interests of those to whom fiduciary duties are owed155. Similar principles apply to liquidators seeking advice156 or seeking approval to settle a proceeding or enter a funding agreement157. Those principles also apply to attorneys158. And they are centrally important when a court approves a compromise of a claim made by a person under disability159. Litigation funding arrangements may affect the likely success of representative proceedings commenced under Pt 10. They will directly affect the quantum of recovery. There is no reason to exclude those considerations 155 Macedonian Orthodox Community Church St Petka Inc v His Eminence Petar Diocesan Bishop of Macedonian Orthodox Diocese of Australia and New Zealand (2008) 237 CLR 66 at 85-86 [44]-[45]. See In re Dallaway [1982] 1 WLR 756 at 759; [1982] 3 All ER 118 at 121; In re Evans [1986] 1 WLR 101 at 107; [1985] 3 All ER 289 at 293. See also Alsop Wilkinson v Neary [1996] 1 WLR 1220 at 1224-1225; [1995] 1 All ER 431 at 434-435; Application of Macedonian Orthodox Community Church St Petka Inc [No 3] [2006] NSWSC 1247 at [62]. 156 Corporations Act, Sch 2, ss 90-15 and 90-20. See Re Great Southern Managers Australia Ltd (In liq); Ex parte Jones (2014) 9 BFRA 555 at 568-569 [63]; Re McDermott and Potts [2019] VSCA 23 at [90]. 157 Leigh re King Bros [2006] NSWSC 315 at [25]; Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2011) 281 ALR 38 at 43 [24]; Deputy Commissioner of Taxation, in the matter of ACN 154 520 199 Pty Ltd (In liq) v ACN 154 520 199 Pty Ltd (In liq) [No 2] [2017] FCA 755 at [26]. 158 Application by Beaumont [2018] NSWSC 1705 at [13]-[18]. 159 See, eg, Permanent Trustee Co Ltd v Mills (2007) 71 NSWLR 1 at 5 [29]; Fisher by her tutor Fisher v Marin [2008] NSWSC 1357 at [29]; Elderfield (by her litigation guardian Visentin) v Transport Accident Commission (2010) 55 MVR 206 at 209 [20]; Stephens-Sidebottom v Victoria (Department of Education and Early Childhood Development) [2011] FCA 893 at [12]; Fairhurst (bht NSW Trustee and Guardian) v Fairhurst [2012] NSWSC 388 at [30]-[38]. in exercising the power under s 67 to stay one or more of representative proceedings in relation to the same controversy. Court's approach to competing litigation funding arrangements Ms Wigmans' alternative argument was that if competing litigation funding arrangements was a relevant factor, either alone or in conjunction with other considerations (the identity of the solicitors and their relative experience, the estimated legal costs for the conduct of the respective proceedings and the likely return to group members), the primary judge erred in her consideration of those factors by acting upon certain assumptions. As has been seen160, the primary judge did approach the issue by making assumptions. She assumed that the solicitors engaged were of equal experience and ability; that each of them would take the same number of hours of work to reach settlement or judgment; at least implicitly, that each of them had the same chance of achieving each given settlement or judgment sum; that the litigation funders were similarly equal; and that each funding model provided incentives and disincentives to achieving the best outcome for group members. But, as noted earlier, Ms Wigmans had submitted before the primary judge that there was no basis for distinguishing between the competence or experience of the legal teams retained in each matter, and that the experience of the legal teams and funders and the availability of resources was a neutral factor. As Meagher and Payne JJA rightly said in the Court of Appeal, the primary judge was then entitled to test the likelihood of achieving particular results by applying the common assumptions to each case. Ms Wigmans' case having been conducted in the way it was, her submission that the primary judge should not have made the assumptions her Honour did should be rejected. The task undertaken by the primary judge was not a judgment regarding a matter of "mere" case management161 but a larger task of ensuring that justice is done in the competing representative proceedings which have been commenced 160 See [63] above. 161 Wigmans (2019) 373 ALR 323 at 344 [95]. See also Wileypark (2018) 265 FCR 1 under Pt 10 of the CPA where all courts must be astute to protect the best interests of group members162. in each action In undertaking that task the court must recognise that the representative typically undertakes fiduciary obligations of a plaintiff representative party to the members of the group163, some of which obligations arise from contractual obligations which directly or indirectly give a significant measure of control over the action to the person funding the litigation, be it a litigation funder or firm of solicitors. Here, there is nothing in the record to suggest that any of the representative plaintiffs even raised the possibility of, let alone addressed, the recognised conflicts of interest between the group members and the competing litigation funders or the representative plaintiff and a given litigation funder164. Thus, a court must be mindful of the existence of such conflicts of interest and bring them to account in assessing what is in the best interests of group members. As explained, Ms Wigmans' case having been conducted in the way it was, there was no error in the primary judge's approach. However, that is not to say that the primary judge's approach was the only manner in which a court, faced with competing open class representative proceedings with several firms of solicitors and different funding models, might determine which proceeding going ahead would be in the best interests of group members. Is the court to act as inquisitor and as such investigate itself how choosing to stay one or more of the actions might affect group members, or should it use existing procedures, methods, steps and mechanisms to identify and resolve such issues on an adversarial basis? The answer to that question will invariably depend on the nature of the case in hand. But where there are complex and interrelated considerations and real potential for conflicts of interest, an adversarial approach is to be preferred. 162 Wileypark (2018) 265 FCR 1 at 8 [18]; Kelly v Scenic Tours Pty Ltd [2019] NSWSC 1266 at [97]; Wigmans (2019) 373 ALR 323 at 337 [62]; Stallard v Treasury Wine Estates Ltd [2020] VSC 679 at [20]. 163 See Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507 at 524 [40]; Dyczynski v Gibson (2020) 381 ALR 1 at 50 [209]. 164 Kirby (2008) 253 ALR 65 at 67 [4]-[6], 68 [9], 72 [30], [32]; Wileypark (2018) 265 FCR 1 at 4 [2], 8 [15]. See also GetSwift (2018) 263 FCR 92 at 120-121 [119]; Impiombato v BHP Billiton Ltd [No 2] (2018) 364 ALR 162 at 186 [111]; Wigmans v AMP Ltd [2019] NSWSC 603 at [335]; Stallard [2020] VSC 679 at [5]; Merricks [2021] Bus LR 25 at 57 [98]. A possible approach, not explored in argument on appeal, could be for the court to appoint a special referee to inquire into the litigation funding arrangements and the more particular questions the primary judge dealt with on the basis of assumptions. At any stage of the proceedings, the court may make orders for reference to a referee appointed by the court "for inquiry and report by the referee"165, on "any question or issue arising ... whether of fact or law, or both, and whether raised by pleadings, agreement of parties or otherwise"166. And upon receipt of the referee's written report, the court may, among other things, "adopt, vary or reject the report in whole or in part"167. The use of special referees in representative proceedings is not new. They have frequently been used to ensure that group members' interests are best protected at the settlement approval stage of representative proceedings168. Alternatively, the court could require the parties making the applications to engage and fund a contradictor. That could be done by identifying and appointing a person who is a common group member of each proceeding to represent the interests of other common group members. If there were more than one candidate for the role of representative, the court would need to decide which common group member should be appointed169. The representative would ordinarily be appointed for the limited purpose of assisting in the determination of the stay applications and would not play a further role in the proceedings following that determination. The representative, after making necessary inquiries, could make submissions to the court recommending a particular course of action and giving the reasons for 165 UCPR, rr 20.14 and 20.17. 167 UCPR, rr 20.23 and 20.24. See also Super Pty Ltd v SJP Formwork (Aust) Pty Ltd (1992) 29 NSWLR 549 at 563-564; Wenco Industrial Pty Ltd v W W Industries Pty Ltd (2009) 25 VR 119 at 126-127 [17]; Illawarra Hotel Co Pty Ltd v Walton Construction Pty Ltd (2013) 84 NSWLR 410 at 412-414 [15]-[16]. 168 See, eg, Matthews v AusNet Electricity Services Pty Ltd (Ruling No 40) [2015] VSC 131 at [29]; Downie v Spiral Foods Pty Ltd [2016] VSC 411 at [20]; Dillon v RBS Group (Australia) Pty Ltd [No 2] [2018] FCA 395 at [66]; Caason Investments Pty Ltd v Cao [No 2] [2018] FCA 527 at [122]-[123]; Money Max Int Pty Ltd v QBE Insurance Group Ltd (2018) 358 ALR 382 at 416 [156]. 169 See Kirk, "The Case for Contradictors in Approving Class Action Settlements" (2018) 92 Australian Law Journal 716 at 728. that recommendation170. If necessary, the representative could adduce evidence to substantiate the recommendation. The representative could engage independent solicitors and counsel with the costs of the solicitors and counsel funded by the competing firms of solicitors and funders, limited to solicitor–own client costs for work which is fair and reasonable171. The appointment of such a representative would be consistent with Pt 10, which has a statutory design protective of group members' interests172. In other cases, other steps might serve to meet the underlying difficulties that: the competition between funders is pursued in the name of the representative plaintiff; the interests of funders are not identical to the interests of group members; the inquiry into litigation funding arrangements is necessarily predictive; and the material before the court is chosen by the funders and the firms of solicitors they have retained173. Whatever procedure is adopted, however, notice may need to be given to affected group members under s 175(5) of the CPA, which relevantly provides for the court, "at any stage", to "order that notice of any matter be given to a group member or group members". Such notices, usually placed on relevant public websites and in newspapers174, are not infrequently used to advise group members of a specific step, question or issue in relation to the proceedings and, on occasion, 170 For examples of the appointment of contradictors to protect the interests of group members in representative proceedings, see King v AG Australia Holdings Ltd [2003] FCA 1420 at [15]; Dorajay Pty Ltd v Aristocrat Leisure Ltd (2008) 67 ACSR 569 at 574 [11]; Kelly v Willmott Forests (2016) 335 ALR 439 at 443-444 [4]. 171 Legal Profession Uniform Law (NSW), ss 199 and 200. See, eg, Kelly v Willmott Forests (2016) 335 ALR 439 at 443-444 [4]. 172 See, eg, CPA, ss 162, 171, 173, 175, 176. See also fn 89 above. 173 See Kirby (2008) 253 ALR 65 at 67 [6], 72 [30], [32]; Wileypark (2018) 265 FCR 1 174 See, eg, Darwalla Milling Co Pty Ltd v F Hoffman-La Roche Ltd [No 2] (2006) 236 ALR 322 at 329-331 [20]-[24]; Collin v Aspen Pharmacare Australia Pty Ltd [2013] FCA 952 at [3]; Inabu Pty Ltd v Leighton Holdings Ltd [2014] FCA 622; Brett Cattle Co Pty Ltd v Minister for Agriculture [No 3] [2020] FCA 1628. See also Lenthall v Westpac Banking Corporation [No 2] (2020) 144 ACSR 573 at 588 to seek group members' response. Closing the class175 and approval of a settlement proposal176 are two examples of procedures requiring notice to group members. Adopting one or more of these approaches, the court's task could not be characterised as an "auction process"177. It would instead be more akin to that used when considering the position of trustees, liquidators, attorneys or persons under disability and would include considerations such as prospects of success and cost of the proceedings178. No less significantly, it would allow for conflicts of interest and the best interests of the group members to be neutrally and squarely addressed. Conclusion and orders For those reasons, the appeal should be dismissed with costs. 175 CPA, s 175(1)(a). 176 CPA, s 175(4). 177 Kirby (2008) 253 ALR 65 at 73 [34]; Bellamy's [2017] FCA 947 at [23]; GetSwift (2018) 263 FCR 92 at 102 [32(d)]. 178 See [112] above.
HIGH COURT OF AUSTRALIA GUMMOW ACJ, NORTHERN TERRITORY OF AUSTRALIA APPELLANT AND VINCENT COLLINS & ANOR RESPONDENTS Northern Territory v Collins [2008] HCA 49 16 October 2008 ORDER Appeal allowed with costs. Set aside the order of the Full Court of the Federal Court of Australia made on 20 September 2007 and in its place order that the appeal to that Court be dismissed with costs. On appeal from the Federal Court of Australia Representation S J Gageler SC with G R Nicholson for the appellant (instructed by Clayton Utz Lawyers) G O'L Reynolds SC with N R Murray and R C A Higgins for the respondents (instructed by De Silva Hebron) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Northern Territory v Collins Intellectual property – Patents – Infringement – Contributory infringement – Respondents owned patent for methods of producing oils from species of a particular genus of tree – Appellant Territory licensed third party ("ACOC") to enter Crown land and remove timber from trees of this species – Patents Act 1990 (Cth), s 117(1) provided that, if "use of a product by a person" would infringe a patent, "supply" of that product by one person to another was an infringement by supplier – Respondents alleged Territory infringed patent by supply of timber to ACOC – Relationship between exclusive rights to exploit patent and s 117 – Meaning of "product" in s 117 where patent said to be infringed is for method or process – Whether "product" confined to product that itself results from use of a patented method or process. Intellectual property – Patents – Infringement – Contributory infringement – Meaning of "supply" in s 117 – Whether grant of licences to sever and take timber from Crown land constituted "supply" of timber by Territory for purposes of s 117(1) – Relevance of classification of interest of ACOC as realty or personalty. Intellectual property – Patents – Infringement – Contributory infringement – Section 117(2)(b) provided that "use of a product by a person" in s 117(1) meant "any use" if product was not a "staple commercial product" – Meaning of "staple commercial product" – Whether timber taken by ACOC under licences a "staple commercial product". Words and phrases – "exploit", "method or process", "product", "staple commercial product", "supply", "use of a product by a person". Patents Act 1990 (Cth), ss 13, 117 and Sched 1. GUMMOW ACJ AND KIRBY J. To assist in appreciation of the issues which arise on this appeal from the Full Court of the Federal Court of Australia (Branson and Sundberg JJ; French J dissenting)1 it is appropriate first to describe the structure and conduct of the litigation which gave rise to the appeal to the Full Court. The structure and conduct of the litigation By their amended statement of claim in the Federal Court Mr and Mrs Collins ("the respondents") sued the Northern Territory of Australia ("the Territory") alleging infringement by the Territory of Australian Standard Patent No 742711 ("the Patent") granted pursuant to the Patents Act 1990 (Cth) ("the Act"). The respondents are the registered owners of the Patent. The respondents alleged that the Territory had "supplied" to Australian Cypress Oil Company Pty Ltd ("ACOC") certain timber from trees of species of the genus Callitris and that ACOC had used that timber to produce an oil called "blue cypress oil" by means of a process claimed by the Patent. The alleged "supply" was said to be found in statutory licences granted to ACOC to take timber from certain Crown lands in the Territory. The terms of the licences and the circumstances in which they were granted are explained in the reasons of The respondents did not join ACOC as a party in the action although against the Territory they pleaded in general terms that the activities of ACOC had amounted to infringement. However, the respondents alleged that the supply by the Territory of the timber to ACOC was an infringement by reason of s 117 of the Act. Section 117 is headed "Infringement by supply of products" and deals with what is known as "contributory infringement", although that expression is not used in the section or elsewhere in the Act. Section 117(1) states: "If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent." The reference in s 117(1) to "the use of a product by a person" is, among other things, a reference to "any use of the product, if the supplier had reason to believe 1 Collins v Northern Territory (2007) 161 FCR 549. Gummow ACJ Kirby that the person would put it to that use"; but this is so only "if the product is not a staple commercial product". That is the effect of par (b) of s 117(2). The title given to the invention in the Patent is "Methods of producing essential oils from species of the genus callitris" and there are 20 claims. All but claim 12 are claims to a method; claim 12 is a claim to a blue oil containing guaiazulene when produced by a method according to any of claims 1-11. The statement of claim did not identify any particular claim or claims which ACOC was said to have infringed. The primary judge (Mansfield J) on 6 February 2006 directed that there be a separate trial on certain issues. His Honour later explained that the order was made to deal with the alleged contributory infringement by the Territory without extending the hearing into issues of validity of the Patent and infringement by ACOC. The validity of the Patent and infringement by the alleged actions of ACOC were assumed at the separate trial. In many cases the formulation of specific questions to be tried separately from, and in advance of, other issues assists in the more efficient resolution of litigation, but where, as appears to have been the case here, preliminary questions are of mixed fact and law there is a particular need for precision both in formulating the questions and in specifying the facts upon which they are to be decided2. At the trial of the separate issues the parties agreed to a reformulation of issues on the footing that, if Mansfield J decided any of the issues adversely to the interests of the respondents, the action itself must be dismissed. His Honour proceeded accordingly and the upshot was that the action was dismissed on 8 December 2006. The respondents' appeal to the Full Court was successful. The decisive holding by the majority was that there was no "staple commercial product" within the meaning of par (b) of s 117(2); French J was of the contrary view. The order of the Full Court set aside the order of the primary judge dismissing the action and remitted the matter to his Honour for such further hearing as was necessary in the light of the joint reasons of the majority of the Full Court. In this Court the ultimate issue must be whether the decision of the Full Court is shown to be erroneous. However, the Territory, as appellant, in its 2 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 357-358 [51]-[53]; [1999] HCA 9; cf X v Australian Prudential Regulation Authority (2007) 226 CLR 630 at 658 [99]-[102]; [2007] HCA 4. Gummow ACJ Kirby written submissions and their development in oral argument, tended to obscure the matter by identifying the ultimate issue as being: "[W]hether the grant of a statutory licence to 'go upon Crown lands and take ... timber' can amount by force of s 117 of [the Act] to an infringement of a patent for a method or process (or a product resulting from a method or process) into which the timber is to be used by the licensee as an input." The Territory submits that, in addressing that ultimate issue, three questions arise. They are said to be: Is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act? Is the grant of such a statutory licence the 'supply' of a 'product' within the meaning [of] s 117(1) of the Act? Is the timber to be taken under the statutory licence a 'staple commercial product' within the meaning of s 117(2)(b) of the Act?" The first question With respect to the first question identified by the Territory, we agree with Hayne J that the variety of quite different cases that may arise for consideration under s 117 provides a powerful reason not to attempt some singular answer to a general question as framed by the Territory. In the Full Court, the majority emphasised, correctly, that there fell outside the scope of the separate questions any enquiry as to infringement of claims of the Patent3 by ACOC. The primary judge had decided the issues as follows4: "[T]he grant of the licences to ACOC in their terms, and in their context, did not amount to the supply of the timber to ACOC so as to expose [the Territory] to liability as a contributory infringer of the patent under s 117(1) of the Act, even if – contrary to my conclusion – the conduct amounted to the use of the timber within s 117(2)(b) of the Act, and even (2007) 161 FCR 549 at 600. 4 Collins v Northern Territory (2006) 70 IPR 614 at 619. Gummow ACJ Kirby assuming on the Collins' favour that the timber was used by ACOC so as to infringe the patent". We would elaborate the analysis in the reasons of Hayne J with four observations. The first stresses what has been said in this Court on several occasions in recent years, to the effect that the fundamental duty of the Court is to give meaning to the legislative command according to the terms in which it has been expressed; legislative history and references to the pre-existing law should not deflect the Court from its duty in resolving an issue of statutory construction which ultimately is always a text based activity5. The second observation is that in numerous and significant provisions of the Act, which operate in a wide range of circumstances, a distinction is drawn between an invention which is a product and an invention which is a method or process. Examples include s 13 and the definition of "exploit" (content of patent monopoly), s 16 (co-ownership of patents), s 18(4) (microbiological processes and products), s 70 (pharmaceutical substance claims), s 119 (prior use), s 121A (burden of proof of infringement of a process patent), s 123(2) (innocent infringement), s 133 and the definition of "work" (compulsory licences), s 135 (reasonable requirements of the public), ss 144 and 146 (void licence conditions) and ss 167 and 168 (Crown use). The third observation is that the drawing of the present legislation in this way reflects the understanding of the principles of patent law expounded by this Court in National Research Development Corporation v Commissioner of Patents ("NRDC")6. The Court emphasised that over time the expression "manner of manufacture" in the Statute of Monopolies of 16237 had been construed so as to include a practice of making, as well as the means of making and the product of making; there was, however, no necessity for the derivation of a "vendible product" in the literal sense, so that an artificially created state of 5 The authorities include Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518, 523, 532, 547; [1987] HCA 12; Mann v Carnell (1999) 201 CLR 1 at 45 [143]; [1999] HCA 66; Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57 at 95 [132]; [2001] HCA 22; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 at 359 [111]; [2001] HCA 30; Dossett v TKJ Nominees Pty Ltd (2003) 218 CLR 1 at 6 [10], 17-18 [57]; [2003] HCA 69; Truong v The Queen (2004) 223 CLR 122 at 160 [92], 174 [144]; [2004] HCA 10; R v Lavender (2005) 222 CLR 67 at 102 [108]; [2005] HCA 37; X v Australian Prudential Regulation Authority (2007) 226 CLR 630 at 662 [112]. (1959) 102 CLR 252; [1959] HCA 67. 7 21 Jac 1, c 3. Gummow ACJ Kirby affairs, such as (in NRDC itself) the inhibition in the growth of weeds by application of a selective herbicide, would suffice. Hence the distinction now drawn in the definition of "exploit" in the Act between an invention which is a product, and an invention which is a method or process which may or may not yield a product. The definition of "exploit" in the dictionary in Sched 1 to the Act is as follows: "exploit, in relation to an invention, includes: (a) where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use." The final observation concerns the position of s 117 in the statutory scheme as a whole. Subject to the Act, a patent gives the patentee the exclusive rights to exploit the invention for the term of the patent (s 13). Infringement proceedings may be brought to enforce those rights (s 120) and relief granted by way of injunction, damages or an account of profits (s 122). While the Act establishes some exceptions to infringement (ss 118-119A) and offers protection for innocent infringement (s 123), no definition is given for what constitutes an "infringement"8. The statutory scheme instead fixes attention on the exclusive rights given by the patent, as illuminated by the definition of "exploit" found in the dictionary to the Act. Section 117 does not itself speak to the exclusive rights given by the patent. Rather, the provision identifies conduct and prescribes conditions in which that conduct will be an infringement of the patent. The conduct is the "supply of [a] product" by one person to another. The critical condition for the imposition of liability for infringement is that which is stated first. This is that "the use of [the] product" by the person to whom it is supplied "would infringe [the] patent" (s 117(1)). As the reasons of Hayne J demonstrate, this is informed by the application of s 117(2) and consideration of the exclusive rights given by the patent. cf Patents Act 1977 (UK), s 60(1) and in the United States, 35 USC §271. Gummow ACJ Kirby The second question The second question identified by the Territory concerns the treatment of the licences conferred upon ACOC by the Territory under the Crown Lands Act (NT) which permitted the licensee to sever and take the timber. This being so, and as Hayne J explains, there was a "supply" of timber within the meaning of s 117(1) of the Act. The result is that the majority of the Full Court correctly held that "the Territory provided or furnished the timber to ACOC, and thus supplied it to ACOC"9. This conclusion is not, with respect, to be answered by reference to the classification of the interest granted as one in real property or personal property or as involving the sale of a chattel10. The Act itself affords the applicable classification and invoking others is likely to mislead. The third question The remaining question is whether the timber taken under the statutory licences was a "staple commercial product" within the meaning of s 117(2)(b) of the Act. We agree that the question should be answered in the affirmative and thus in favour of the Territory, with the result that the appeal to this Court must succeed. In his dissenting reasons French J referred11 both to the adoption in earlier legislation of other jurisdictions, particularly in the United States and the United Kingdom, of expressions with an affinity to, but not identity with, the expression "not a staple commercial product" now found in par (b) of s 117(2) of the Act and to the relatively brief treatment of that expression in the report of the Industrial Property Advisory Committee12 which preceded the enactment of s 117. French J referred, in particular, to the enactment of §271 of the Patent Act of 195213 which introduced into the statute law of the United States the expression "not a staple article or commodity of commerce suitable for substantial noninfringing use". Contemporary discussion in the United States (2007) 161 FCR 549 at 587. 10 cf (2007) 161 FCR 549 at 578. 11 (2007) 161 FCR 549 at 564-570. 12 Published in 1984 and entitled Patents, Innovation and Competition in Australia. See reasons of Hayne J at [44]-[45]. See also reasons of Crennan J at [106], [108], 13 35 USC, ch 28. Gummow ACJ Kirby indicates that in legislating in that way the Congress may have proceeded on the footing that the interest in the free flow of commercial goods justified "a flat exclusion of staple articles"14. When used as an adjective, the word "staple" as then understood in the United States15 was given the following meanings: "(1) Pertaining to, or being a market or staple for, commodities; as, a staple town. Now Rare. Established in commerce; occupying the markets; settled; as, a staple trade. Fit to be sold; marketable. Rare. Regularly produced or made in large quantities; belonging to wholesale traffic; hence, principal; chief 'Wool, the great staple commodity of England'." (italics in original) Of course, the word "staple" has found its way into the language of a contemporary Australian statute designed to apply to modern conditions in this country. However, when the standard local dictionaries are consulted, they do not yield a meaning different from that in the United States. Thus the word has a principal commodity grown or manufactured in a locality. a principal commodity in a mercantile field; goods in steady demand; goods of known or recognised quality. a principal item, thing, feature, element, or part. the fibre of wool, cotton, flax, rayon, etc, considered with reference to length and fineness." 14 Notes, "Contributory Infringement and Misuse – The Effect of Section 271 of the Patent Act of 1952", (1953) 66 Harvard Law Review 909 at 915. 15 Webster's New International Dictionary of the English Language, 2nd ed (1957), vol II at 2457. 16 The Macquarie Dictionary, Federation edition (2001), vol II at 1834. Gummow ACJ Kirby French J expressed his conclusions upon this aspect of the case in terms with which we respectfully agree. His Honour said17: "There is a preliminary question about the classification of what was supplied for the purpose of determining whether it was, at the time of supply, a staple commercial product. That translates, in the present case, to the question whether the relevant class is unmilled timber or unmilled timber of the species Callitris Intratropica. If the product class were rightly described as unmilled timber there would be no debate. The Court could take judicial notice of the fact that unmilled timber is a staple commercial product. Millable timber in the form of standing trees is not a product manufactured to a particular use. The evidence is clear that in the case of Callitris Intratropica its timber is suitable for use in a variety of applications for which timber generally is used. This was the evidence of Mr Brocklehurst and it was not contested. There was evidence to like effect provided from Mr Collins' side of the debate in the submission made on his behalf by his accountant, Mr Cavanagh, in June 1995. The relevant product class to which it belonged, for the purposes of s 117(2)(b) was 'millable timber'. For the preceding reasons the timber taken by ACOC from the Howard Springs Plantation area pursuant to the licences granted to it by [the Territory] was a staple commercial product for the purposes of s 117 of the Act." As a result, while by reason of the grant of the licences by the Territory there was a supply of timber within the meaning of s 117(1), that supply could not constitute contributory infringement by the Territory, even if (as was not established but was assumed) there were an infringement by ACOC of valid claims of the Patent. It follows that, like Hayne J, Heydon J and Crennan J, we answer the third question in favour of the Territory and this is the sole ground upon which we would allow the appeal. The conclusion that the timber in question is a staple commercial product is, as Hayne J and Heydon J emphasise, determinative of the present matter. 17 (2007) 161 FCR 549 at 582-583. Gummow ACJ Kirby Orders It follows from the structure in which the litigation has been cast, that the appeal to this Court should be allowed with costs, the order of the Full Court of the Federal Court set aside and in its place the appeal to that Court should be dismissed with costs. The result will be that the order of the primary judge dismissing the action against the Territory is reinstated. Hayne HAYNE J. The facts and circumstances giving rise to this appeal are set out in the reasons of other members of the Court and need not be repeated here. The disposition of the appeal depends upon the proper construction of s 117 of the Patents Act 1990 (Cth) ("the Act"). Although the text of the section appears in the reasons of other members of the Court, it is as well to set it out. It provides: If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent. (2) A reference in subsection (1) to the use of a product by a person is a reference to: if the product is capable of only one reasonable use, having regard to its nature or design – that use; or if the product is not a staple commercial product – any use of the product, if the supplier had reason to believe that the person would put it to that use; or in any case – the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier." The appellant identified three questions of construction of this section: Is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act? Is the grant of ... a statutory licence [to 'go upon Crown lands and take ... timber'] the 'supply' of a 'product' within the meaning [of] s 117(1) of the Act? Is the timber to be taken under the statutory licence a 'staple commercial product' within the meaning of s 117(2)(b) of the Act?" The first of those questions is cast in general terms not taken from the text of s 117, and divorced from the particular facts of this case. The generality of its expression must not be allowed to direct attention away from some important features of s 117(1). Hayne Engaging s 117 Section 117(1) is engaged where there is "the supply of [a] product by one person to another". At the relevant time, the dictionary in Sched 1 to the Act provided that "supply" includes "supply by way of sale, exchange, lease, hire or hire-purchase". The dictionary did not (and does not) contain any definition of "product" but the dictionary's treatment of the word "exploit" distinguishes between "where the invention is a product" and "where the invention is a method or process". Read as a whole, s 117 can be seen to proceed on the footing that the word "product" has its ordinary meaning and is not confined to a patented product or a product that is itself the result of applying a patented method or process. Although s 117(1) is engaged only where there is "the supply of [a] product by one person to another", s 117 is directed to an identified sub-set of such transactions. That sub-set is identified first by the introductory words of s 117(1) – "[i]f the use of a product [the product that is supplied] by a person would infringe a patent" – and second by the amplification in s 117(2) of what is meant by "the use of a product by a person". At the risk of undue abbreviation the amplification provided by s 117(2) can be described as inviting attention, in the particular cases identified in each paragraph of the sub-section, to "only use" (s 117(2)(a)), "known use" (s 117(2)(b)) and "instructed use" (s 117(2)(c)). In many, perhaps most, cases a convenient point at which to begin consideration of an issue about the application of s 117(1) will be to examine what is said to be the use of the product that is alleged to engage the provision. It is that use which must be identified as the use which would infringe the patent because the hinge about which s 117 turns is its introductory words: "[i]f the use of a product by a person would infringe a patent". When the question is approached in that way, it will be observed that to ask whether supply of an input for a patented method or process (or resulting product) is capable of attracting s 117(1) may direct attention away from the relevant statutory questions. Those questions are: is there a supply of a product; what is the use of the product (as use is elucidated in s 117(2)); and does that use infringe the patent? The answer that is to be given to the last of the three questions just identified will, of course, turn upon whether the use in question contravenes the patentee's exclusive rights under s 13 of the Act, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention. And that requires close attention to what is meant by "exploit". In particular, it requires close attention to what is said in the dictionary in Sched 1 to the Act about "exploit", namely that: Hayne "exploit, in relation to an invention, includes: (a) where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use." The question which the appellant submitted arose in this matter – is the supply of an input for a patented method or process (or resulting product) capable of attracting the operation of s 117(1) of the Act? – was framed as it was in the expectation that it could and should be answered in the negative. When the questions presented by s 117 are identified in the manner set out earlier in these reasons it is apparent that a variety of quite different cases may arise for consideration under s 117. In particular, the different kinds of use that are identified in s 117(2) may present radically different issues about the relationship between the relevant use and the patentee's exclusive rights to exploit the relevant invention. That is reason enough not to attempt some singular answer to a general question about when s 117 may be engaged. It is also reason enough to doubt that differences which may be identified in what was said by Gummow J in Rescare Ltd v Anaesthetic Supplies Pty Ltd18 and Black CJ and Lehane J in Bristol-Myers Squibb Co v F H Faulding & Co Ltd19 are usefully expressed in terms of the kind that the appellant's first question employed. Rather, questions about the application of s 117 must be approached with a close focus upon the relevant statutory language. That will require identification of the relevant use of the product and the relevant exclusive rights of the patentee. It is not useful, and may be misleading, to proceed by first seeking to establish a singular and all-embracing explanation of the operation of s 117 by excluding certain types of patent or certain types of product from any possible operation of the section. For the reasons that have been given, it is convenient to deal next with the third of the questions posed by the appellant – is the timber a "staple commercial product"? That question should be examined now because it bears upon whether there was a relevant "use" within s 117(2) and, as indicated earlier in these reasons, s 117 is hinged about the identification of "the use of a product by a person [which] would infringe a patent". 18 (1992) 111 ALR 205 at 242-243. 19 (2000) 97 FCR 524 at 556-559 [87]-[97]. Hayne Staple commercial product I agree with Crennan J that a staple commercial product is one that is supplied commercially for various uses. While I agree with her Honour that this does not mandate an inquiry into whether there is "an established wholesale or retail market"20, I greatly doubt that a product could be described as a "staple commercial product" if there were not some market for its sale for various uses. The doubt lies in the fact that the product must be a commercial product and that, to be a "staple commercial product", it must be an article of commerce that not only can be used in a variety of ways but also is traded for use in various ways. But no question of that kind arises here. As Crennan J points out, leaving aside any supply to Australian Cypress Oil Company Pty Ltd ("ACOC"), timber of the kind at issue in this case was supplied to various licensees for a variety of uses. Those transactions were not so few or infrequent as to deny the existence of a market for the supply of that kind of timber for a variety of different uses. The phrase "staple commercial product" must be read as a whole and it must take its meaning from the context in which it sits. In particular, it is to be recalled21 that s 117 creates a liability in a supplier of a product where the act of supply would otherwise not infringe a patentee's rights. Section 117 imposes liability on the supplier if use of the product supplied by the person to whom it is supplied would infringe. In this setting "staple commercial product" should not be given a narrow meaning. To do so would expand the classes of supply which are reached by s 117, thus expanding the rights of the patentee where, by hypothesis, the act of supply is not otherwise an infringement of the patentee's monopoly. Further, the meaning given to "staple commercial product" must recognise that the central focus of s 117 falls upon the use of a product. The construction of the section must be approached with these two matters at the forefront of consideration. The drafting history of the provision is also important. The 1984 report of the Industrial Property Advisory Committee22 recognised that each of patent law and competition law must, "so far as practical, accommodate the legitimate operation of the other". The need to resolve the tension between inhibiting 20 Collins v Northern Territory (2007) 161 FCR 549 at 595 [156]. 21 See Walker v Alemite Corporation (1933) 49 CLR 643 at 658 per Dixon J; [1933] HCA 39. 22 Australia, Industrial Property Advisory Committee, Patents, Innovation and Competition in Australia, 29 August 1984 at 23 [3.2]. Hayne competition and providing sufficient protection for the monopoly rights of patentees can be seen as informing the recommendation of that Committee23 that: "in general the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe a patent, should itself be an infringement of the patent". The government's published response to the Committee's report24 and, more immediately, the Explanatory Memorandum to the Patents Bill 1990 (Cth)25, both stated an intention to implement this recommendation of the Committee. It will be recalled that the Industrial Property Advisory Committee referred to "the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe" (emphasis added). The Committee's reference to the supply of goods whose only use would infringe is evidently taken up in s 117(2)(a). Likewise, the reference to supply accompanied by a positive inducement finds reflection in s 117(2)(c). But the Explanatory Memorandum to the 1990 Bill saw no incongruity between the Committee's recommendations and the addition of reference to "any use of a non-staple commercial product to which the supplier had reason to believe that the receiver would put it"26. And it is this reference which is reflected in s 117(2)(b). This third kind of supply and use may not fit so easily in the class of supplies accompanied by a positive inducement as the kinds of "instructed use" with which s 117(2)(c) deals. But having regard to the text of s 117(2)(b), and to what was said in the Explanatory Memorandum, it appears that s 117(2)(b) was seen as cognate with, if not a species of, supply accompanied by "a positive inducement … to perform actions which would innocently or knowingly infringe"27. This points against reading s 117(2)(b) as having extended or expansive reach. 23 Recommendation 33: Australia, Industrial Property Advisory Committee, Patents, Innovation and Competition in Australia, 29 August 1984 at 67. 24 "Government Response to the Report of the Industrial Property Advisory Committee, 'Patents, Innovation and Competition in Australia'", Official Journal of Patents, Trade Marks and Designs, vol 56, no 47, 18 December 1986, 1462 at 25 Explanatory Memorandum to the Patents Bill 1990 (Cth) at 28. 26 Explanatory Memorandum to the Patents Bill 1990 at 28. 27 Explanatory Memorandum to the Patents Bill 1990 at 28. Hayne Section 117(2)(b) cannot be read as dealing only with products that have no more than one reasonable use. Section 117(2)(a) deals with those cases. It follows, therefore, that the cases with which s 117(2)(b) deals at least include the supply of a product which can have more than "one reasonable use". It is then to be observed that the supplier's having reason to believe that the product would be put to an infringing use is not sufficient to engage the provision – the product must be "not a staple commercial product". What meaning is to be given to that phrase? To read "staple commercial product" as identifying a product that is supplied commercially for various uses does not reflect the notion of principal or chief importance sometimes conveyed by the adjective "staple". But as Crennan J concludes, "staple", used adjectivally in the compound expression "staple commercial product", should not be read as directing attention to the economic significance of the product concerned. Rather, it should be read as inviting attention to the variety of uses to which the product both can be, and is in fact, put. It is that variety of uses which, when the product is supplied commercially, makes the product a staple commercial product. As the reasons of Crennan J show, this construction of the provision is not inconsistent with the desire, expressed28 in the government's published response to the report of the Industrial Property Advisory Committee, to harmonise Australian patent law with the laws of Australia's major trading partners. But, as those reasons also show, the laws of the United States of America and the United Kingdom relating to indirect infringement are each expressed in terms that differ in important respects from s 117. There is, therefore, only limited assistance to be gained from considering the expressed desire for harmony with major trading partners. It may be thought that to read "staple commercial product" as identifying a product that is supplied commercially for various uses leaves little effective work to be done by s 117(2)(b). In particular it can be observed that cases of "only one reasonable use" are dealt with in s 117(2)(a), and yet many cases in which a product has various uses will not fall within s 117(2)(b). The resolution of this apparent tension between the two provisions lies in the recognition that s 117(2)(a) is concerned with a product capable of only one reasonable use, whereas "staple commercial product" takes its operation from what is seen to occur in the market-place. The two paragraphs pose radically different questions. 28 "Government Response to the Report of the Industrial Property Advisory Committee, 'Patents, Innovation and Competition in Australia'", Official Journal of Patents, Trade Marks and Designs, vol 56, no 47, 18 December 1986, 1462 at Hayne The question posed in s 117(2)(a) is: For what can the product be used? By contrast, the question posed in s 117(2)(b) is: To what uses is the product in fact put? If it is in fact supplied commercially for various uses, it is a staple commercial product and the supplier of such a product is not to be held liable as an infringer because the person to whom the product is supplied uses it in a way that infringes, even if the supplier has reason to believe that it may be used in that way. Reading the provision on this basis would bring within the reach of s 117(2)(b) the supply, for example, of a product previously traded for only one use where the supplier has reason to believe that it will be used for a new and infringing use. It would leave beyond the reach of s 117 the supply of a product that has previously been traded for various uses unless the supply falls within s 117(2)(c) – where the supplier instructs or induces a particular use which infringes, or advertises the product for that use. Once the product in question in this case is identified as a staple commercial product, it is evident that none of the three kinds of case identified in s 117(2) is engaged. Identification of the product as a staple commercial product takes the case outside s 117(2)(b) and, because the product has more than "one reasonable use", s 117(2)(a) is not engaged. It was not suggested that the case of "instructed use", for which s 117(2)(c) provides, applies in this case. Although the conclusion that the timber in question is a staple commercial product is determinative of the present matter, it is as well to add something shortly about the question of "supply". Supply The provisions of the dictionary in Sched 1 to the Act dealing with "supply" are referred to earlier in these reasons. It is evident that the word is used in the Act with a large operation. The licences granted to ACOC permitted that company to "go upon Crown Lands and take ... timber". No doubt those licences permitted the licensee to sever standing trees and take the severed timber. And for that permission the licensee was bound to pay royalties fixed by reference to what was taken. Was there a "supply" of the timber? Or was there, as the appellant submitted, no more than the supply of permission to enter and take? Whether there was a supply of timber is not to be answered by attempting to classify what was granted as an interest in realty or personalty29. Nor is it to be answered by asking whether there was a sale of a chattel30 or by asking, as the 29 cf (2007) 161 FCR 549 at 577 [80] per French J. 30 cf (2007) 161 FCR 549 at 577-578 [81]-[82]. Hayne appellant submitted, whether the conditions of the licence were enforceable only by forfeiture. Rather, it is to be observed that the licences permitted the licensee to sever and take the timber. That being so there was a supply of the timber. The appellant supplied the licensee with the timber by granting the licences it did. Conclusion and order For these reasons, I agree that the appeal should be allowed with costs and that consequential orders should be made in the form proposed by Crennan J. HEYDON J. I agree with Crennan J's conclusion that the Northern Territory is protected by s 117(2)(b) of the Patents Act 1990 (Cth), and with the reasons she has given for that conclusion. That conclusion is a sufficient basis for allowing the appeal and for making the other orders she proposes. It is therefore not necessary to consider the other two bases which the Northern Territory urged in support of an order allowing its appeal. Crennan CRENNAN J. Since 21 January 1999 the respondents, Vincent and Maryann Collins, have been the registered proprietors of standard patent No 742711 for an invention entitled "Methods of producing essential oils from species of the genus callitris" ("the patent"). The essential oil relevant to the appeal is said to be useful in aroma therapy, and in the manufacture of cosmetics and body care products; it may also possess anti-microbial properties and preservative qualities in the treatment of wood. It appears that an appealing feature of the oil is its azure colour. Claim 1 of the patent describes "[a] method of producing a blue, guaiazulene-containing oil comprising the step of obtaining the oil from a mixture of the bark and wood of Callitris intratropica". Claims 2 to 11 (inclusive) deal with method claims. Whilst the emphasis in the proceedings was on method claims, claim 12 was a product claim for "[a] blue, guaiazulene- containing oil when produced by a method according to any one of" the preceding claims. This appeal from a decision of a Full Court of the Federal Court of Australia31 (the "Full Court") concerns the allegation by Mr and Mrs Collins that the appellant, the Northern Territory of Australia (the "Northern Territory"), is liable under s 11732 of the Patents Act 1990 (Cth) (the "Act") for infringement by supply of timber from trees of species of the genus Callitris to Australian Cypress Oil Company Pty Ltd ("ACOC"). It is alleged that ACOC, which was licensed by the Northern Territory to take timber from one of its plantations, used the bark and wood of the timber to produce infringing oil by use of one of the methods claimed in the patent. The allegedly infringing oil was also said to have been sold and offered for sale by ACOC. The facts Species of the genus Callitris include Callitris intratropica, commonly known as the cypress pine, which can be found in the wild and in plantations in the Northern Territory, including at the Howard Springs Plantation which is situated on Crown lands under the Crown Lands Act (NT) (the "Crown Lands Act"). The Northern Territory government invested in planting cypress pine at various sites within the Northern Territory during the 1960s in the expectation that it would be a commercial timber producing crop. The evidence disclosed that by November 1995 this expectation had been disappointed and the timber from the cypress pine plantations was no longer considered to be of suitable 31 Collins v Northern Territory (2007) 161 FCR 549. 32 Set out later in these reasons at [72]. Crennan commercial quality for the original purposes for which the trees had been planted33. On 30 April 1993 Mr Collins was granted a permit from the Conservation Commission of the Northern Territory (then responsible for the administration of the Howard Springs Plantation) to undertake "Crop thinning of Callitris Intratropica" for a term of 12 months. That permit required the payment of a royalty of 20 cents per stem felled. There was a dispute (which is not relevant to the present appeal) as to whether Mr Collins had been issued with a second permit to fell the cypress pine for the period 18 October 1994 to 17 October 1999. At some point after 1993, the precise date of which is not clear, the Howard Springs Plantation ceased to be part of a reserve, and reverted to Crown lands within the meaning of the Crown Lands Act34. From 1998 until 2001 the government of the Northern Territory granted to ACOC four miscellaneous licences, pursuant to s 91 of the Crown Lands Act, to enter and take the stems of the cypress pine35 from various areas within the Howard Springs Plantation. Those licences were subject to terms and conditions prescribed in the Crown Lands Regulations as provided by s 94(2) of the Crown Lands Act, and reg 46 provided that the Minister "may determine a royalty on the material removed from the land". It was not in contest that although original plans for exploitation of the various cypress pine plantations were shelved, there remained several commercial uses which could be made of the timber harvested or collected from the Howard Springs Plantation. These were milling, producing woodchip mulch from surplus materials, oil extraction, and producing potting mix and firewood. A forester from the Department of Natural Resources, Environment and the Arts amplified that information by deposing that he was aware that the trees in question have been used and were still being used (at the time of swearing his affidavit) as a constituent element in poles, fence posts and rails, flooring, light construction, oil extraction, mulch and certain traditional indigenous uses. In turn, these indigenous uses were confirmed and clarified in an expert's report. 33 Collins v Northern Territory (2006) 70 IPR 614 at 620 [30]. 34 The definition of "Crown lands" in s 3 encompassed land formerly of the Commonwealth which became vested in the Northern Territory under s 69(2) of the Northern Territory (Self-Government) Act 1978 (Cth). 35 An activity which was subject to penalty if conducted without a lease, licence or lawful authority, as to which see s 102 of the Crown Lands Act. Crennan Reasons for which licensees, other than ACOC, sought permission from the Northern Territory to harvest the trees included the production of sawdust, woodchipping and making golf club poles. ACOC's licences The first licence granted to ACOC was Miscellaneous Licence No 1858, granted on 3 July 1998, pursuant to a competitive tender process. It was a "Licence to go upon Crown Lands and take there from timber". The licence defined the areas of land covered by it and contained a condition requiring payment of "royalties of $2.50 … per tree". The licence ran from 6 July 1998 to 6 August 1998 and contained the following terms: "14. The licensee will, in respect of the licenced land, ensure that all plantation trees including stumps are removed. 15. The licensee acknowledges that after extraction of the stumps, that he is responsible for rehabilitation of the site to a standard which allows reasonable access by a tractor/slasher. All holes and other safety hazards shall be smoothed out (flatblading standard is envisaged) to the satisfaction of the Assistant Secretary, Land Administration, Department of Lands, Planning and Environment. The licensee acknowledges that Conditions 14 & 15 above will be undertaken to the satisfaction of the Department of Lands, Planning and Environment, at nil cost to the Territory. If the licensee fails to observe and carry out or cause to be carried out the conditions outlined in Conditions 14 & 15 above of the licence on his part, the Territory will have a right to enter onto the licenced land and do all things necessary to that end and the expense and costs thereof, as determined by the Minister, will be borne and payable by the licensee on demand." The second, third and fourth licences (Miscellaneous Licences Nos 1863, 1869 and 1875) ran, in succession, from 1 April 1999 to 30 June 2001. Unlike the first licence, each of these licences required a royalty fixed at 5% of the "'FOB' price"36 of the essential oil and any other products derived from the timber harvested in accordance with the licence. 36 Defined as the "Free on Board price at Darwin received by the licensee for its products" in accordance with "documentation submitted to the Department, Lands, Planning and Environment". Crennan The second, third and fourth licences contained terms relevantly the same as Conditions 14, 15 and 17 extracted above from the first licence. In addition, they contained terms relevantly identical to the following terms which appeared in the second licence: It will be a condition of the licence that all works carried out are in accordance with an approved Site Management Plan (Attachment A) agreed by [ACOC] and the Department Lands, Planning and Environment. 22. The licensee acknowledges that Condition 20 & 21[37] above will be undertaken in accordance with the Site Management Plan submitted to the Department of Lands, Planning & Environment, at nil cost to the Territory." The litigation The application for the patent was filed on 8 July 1998 and Mr and Mrs Collins were entered on the Register of Patents as proprietors on 21 January 1999. They commenced proceedings in the Federal Court of Australia alleging infringement of the patent by the Northern Territory under s 117 of the Act. The Northern Territory's liability was said to derive from its supply of timber (alleged not to be a staple commercial product) to ACOC, from which timber ACOC, without the licence of Mr and Mrs Collins, would extract blue cypress oil by means of a process (application of steam distillation to the bark and wood of the timber) said to be protected by the patent. In its Defence, the Northern Territory denied the validity of the patent and did not admit that ACOC used the timber to produce blue cypress oil by a process protected by the patent. As well, the Northern Territory denied that s 117 was engaged by the grant of the licences, irrespective of whether the patent was valid or whether ACOC used the timber to produce blue cypress oil by a process which infringed the patent. Separate trial of issues The issues which were the subject of a separate trial38 are best understood by reference to s 117 and the definition of "supply" in Sched 1 to the Act. 37 Conditions 20 and 21 were substantively the same as Conditions 14 and 15 of the first licence, set out above. 38 Under O 29 r 2 of the Federal Court Rules. Crennan Section 117 of the Act deals with "Infringement by supply of products" and provides: If the use of a product by a person would infringe a patent, the supply of that product by one person to another is an infringement of the patent by the supplier unless the supplier is the patentee or licensee of the patent. (2) A reference in subsection (1) to the use of a product by a person is a reference to: if the product is capable of only one reasonable use, having regard to its nature or design – that use; or if the product is not a staple commercial product – any use of the product, if the supplier had reason to believe that the person would put it to that use; or in any case – the use of the product in accordance with any instructions for the use of the product, or any inducement to use the product, given to the person by the supplier or contained in an advertisement published by or with the authority of the supplier." At the time the licences were entered into, Sched 1 to the Act defined "supply" to include "supply by way of sale, exchange, lease, hire or hire-purchase". The primary judge (Mansfield J) directed that there be a separate trial of issues as to whether39: the [Northern Territory] has supplied a product to [ACOC] the use of which would infringe the patent; the product supplied by the [Northern Territory] … is not a staple commercial product and its use is one which the [Northern Territory] had reason to believe would be used to produce a blue coloured oil by a process protected by the patent." 39 The excised part of the question concerned an issue under s 117(2)(a) which was not pressed by Mr and Mrs Collins at trial: Collins v Northern Territory (2006) 70 IPR 614 at 616 [10]. Crennan The first issue addressed s 117(1) of the Act and the second issue concerned s 117(2)(b). At trial Mr and Mrs Collins contended that an infringement by supply would be established by a "use" which met the description set out in s 117(2)(b). They accepted that the timber in question is capable of more than one reasonable use and they did not rely upon pars (a) or (c) of the sub-section. Something more needs to be said about the relevant method claims of the patent and the use which ACOC made of the timber which it harvested under the licences. It is stated in the body of the patent that: "[t]he oil will typically be obtained from the bark and wood by distillation and usually by a hydro-distillation or steam distillation method". Claim 3 covers "[a] method according to any one of claims 1 to 3 wherein the oil is obtained from the bark and wood by distillation". Claim 4 claims "[a] method according to claim 4 wherein the distillation is hydro-distillation or steam distillation". Whilst the validity of the patent remains in issue on the pleadings, it is important to note that validity was assumed by the primary judge for the purposes of testing whether the acts of the Northern Territory constituted infringement by supply under s 117 of the Act. His Honour also assumed for those purposes "that ACOC's alleged actions have infringed [the patent]"40. Decision of the primary judge The primary judge determined the separate issues adversely to Mr and Mrs Collins, and dismissed their application. Mansfield J considered that what had been supplied by the Northern Territory to ACOC was the timber, and ACOC then took the bark and wood of the timber and produced blue cypress oil from them41. His Honour noted the timber, or the bark and wood from the timber, is "but an input into the process by which" the oil was produced42. 40 Collins v Northern Territory (2006) 70 IPR 614 at 616 [9]. 41 Collins v Northern Territory (2006) 70 IPR 614 at 617 [15]. 42 Collins v Northern Territory (2006) 70 IPR 614 at 617 [16]. Crennan However, the main basis for his Honour's conclusion, that there was no "supply" within the meaning of s 117, was his finding that the licences were merely "permissive"43. His Honour said the word "supply" does44 "not readily accommodate a licence which merely enabled ACOC to go upon the territory's land at Howard Springs and to harvest the trees there and to remove the timber so harvested. There is no positive act of the territory which, in terms of the definition of 'supply', amounted to the 'sale, exchange, lease, hire or hire-purchase' or the offer to supply by way of sale etc of the timber." His Honour then considered, if he were wrong on the "supply" question, whether what had been supplied was a "staple commercial product". Mr and Mrs Collins had accepted that, but for the fact that the Northern Territory had "written off" the Howard Springs Plantation as a commercial crop for use as timber, the timber in question would have been a "staple commercial product"45. The primary judge found that the trees and timber retained commercial value to the Northern Territory, and that there were residual commercial uses for them, for example, use as milled timber, woodchip mulch, pine oil extraction, potting mix and firewood46. His Honour concluded that the decision of the Northern Territory "not to maintain the plan to allow further growth of the trees on the Howard Springs land for harvesting for timber"47 did not deprive the timber of its character as a "staple commercial product". His Honour also made a finding of fact that the Northern Territory had reason to believe that ACOC would use the bark and wood from the timber in combination for the purpose of producing blue cypress oil48. 43 Collins v Northern Territory (2006) 70 IPR 614 at 619 [25]. 44 Collins v Northern Territory (2006) 70 IPR 614 at 619 [26]. 45 Collins v Northern Territory (2006) 70 IPR 614 at 620 [30]. The appeal to the Full Court was conducted on the assumption that this concession had not been made: Collins v Northern Territory (2007) 161 FCR 549 at 558 [21]. 46 Collins v Northern Territory (2006) 70 IPR 614 at 621 [34]. 47 Collins v Northern Territory (2006) 70 IPR 614 at 621 [39]. 48 Collins v Northern Territory (2006) 70 IPR 614 at 622 [45]. Crennan Decision of the Full Court The appeal of Mr and Mrs Collins to the Full Court was allowed by a majority (Branson and Sundberg JJ, French J dissenting). The majority considered that the primary judge had erred in characterising the licences to ACOC as merely "permissive". Condition 14 of the first licence, and its successors in subsequent licences, were considered by the majority as plainly requiring that all plantation trees be removed, and that ACOC was obliged to harvest the trees and remove the timber from the land49. In all the circumstances their Honours concluded that the Northern Territory had supplied the timber to ACOC, and the "timber so supplied was felled but unmilled trees of Whilst not attempting to state a comprehensive test for determining what constitutes a "staple commercial product", Branson and Sundberg JJ considered "that a quality of such a product is that it is an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product"51. On all the evidence, including that of the difficulty of obtaining licences for harvesting cypress pine from the Department of Lands, Planning and Environment, their Honours were satisfied that the timber in question was not a staple commercial product52. In dissent, French J considered that the concept of "supply of a product" in s 117 did not extend to "the conveyance of interests in land"53 such as grants in the nature of a profit à prendre54 which his Honour considered described the licences. 49 Collins v Northern Territory (2007) 161 FCR 549 at 586 [119]. 50 Collins v Northern Territory (2007) 161 FCR 549 at 587 [124]. 51 Collins v Northern Territory (2007) 161 FCR 549 at 596 [158]. 52 Collins v Northern Territory (2007) 161 FCR 549 at 596 [159]. 53 Collins v Northern Territory (2007) 161 FCR 549 at 576 [76]. 54 Collins v Northern Territory (2007) 161 FCR 549 at 582 [95] following Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex rel Corporate Affairs Commission (1981) 148 CLR 121; [1981] HCA 49; Vanstone v Malura Pty Ltd (1988) 50 SASR 110; Corporate Affairs Commission v ASC Timber Pty Ltd (1989) 18 NSWLR 577; Permanent Trustee Australia Ltd v Shand (1992) 27 NSWLR Crennan After construing the collocation "staple commercial product", his Honour also held that the timber, being millable timber in the form of standing trees, was such a product and accordingly Mr and Mrs Collins could not rely upon s 117(2)(b) to establish infringement by supply55. All members of the Full Court rejected the Northern Territory's contention (by way of a notice of contention) that the supplied product (the timber) and the product said to have been used for infringement (the milled wood and stripped bark) were relevantly different for the purposes of s 11756. Relevant provisions of the Act Section 117 and the definition of "supply" in Sched 1 to the Act have been set out above57. A number of other related provisions in the Act are also relevant. Section 13(1) of the Act grants, to an owner of a patent, "exclusive rights, during the term of the patent, to exploit the invention and to authorise another person to exploit the invention". The term "exploit" in relation to an invention is defined in Sched 1 to the Act to include: "(a) where the invention is a product – make, hire, sell or otherwise dispose of the product, offer to make, sell, hire or otherwise dispose of it, use or import it, or keep it for the purpose of doing any of those things; or (b) where the invention is a method or process – use the method or process or do any act mentioned in paragraph (a) in respect of a product resulting from such use." An "invention" is defined in Sched 1 to the Act to mean: "any manner of new manufacture the subject of letters patent and grant of privilege within section 6 of the Statute of Monopolies, and includes an alleged invention". 55 Collins v Northern Territory (2007) 161 FCR 549 at 582-583 [99]. 56 Collins v Northern Territory (2007) 161 FCR 549 at 583 [101] per French J, 596-597 [163] per Branson and Sundberg JJ. Crennan This definition has been a constant throughout Australia's patents legislation58 and can be traced back to the patents legislation of the United Kingdom59. The definition inevitably directs attention to the patentee's rights under s 6 of the Statute of Monopolies of 1623 which included the right to the "sole working or making of any manner of new manufactures" which others "shall not use"60. There is no definition of "product" or "staple commercial product" in the Act. Questions Three questions arose on this appeal concerning the interpretation of s 117 of the Act. First, whether the literal meaning of s 117(1) has the consequence that supply of an "input" into a patented method or process (or an input into a resulting product) is incapable of engaging the operation of s 117(1) of the Act. Second, whether the grant of statutory licences to ACOC under the Crown Lands Act constituted a "supply" of a "product" within the meaning of s 117(1). Third, whether the "product", the supply of which was alleged to breach s 117, namely timber, was a "staple commercial product" within the meaning of s 117(2)(b). The reasons which follow explain why the Northern Territory succeeds on the appeal but only in relation to the third question. Applicable principles The outcome of the appeal turns on the proper construction of s 117. The applicable principles of construction can be shortly stated. Construction must begin with a consideration of the text itself61. The meaning of the text cannot always be determined in isolation from its context, which includes the general 58 Patents Act 1903 (Cth), s 4; Patents Act 1952 (Cth), s 6. 59 See for example Patents, Designs, and Trade Marks Act 1883 (UK), s 46 and Patents and Designs Act 1907 (UK), s 93. 60 21 Jac I c 3. 61 Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 77 [9] per Gaudron, Gummow, Hayne and Callinan JJ, 89 [46] per Kirby J; [2001] HCA 49; Stevens v Kabushiki Kaisha Sony Computer Entertainment (2005) 224 CLR 193 at 206 [30] per Gleeson CJ, Gummow, Hayne and Heydon JJ, 240-241 [167]-[168] per Kirby J; [2005] HCA 58; Director of Public Prosecutions (Vic) v Le (2007) 232 CLR 562 at 586 [85] per Kirby and Crennan JJ; [2007] HCA 52. Crennan purpose and policy of the provision62, in particular the mischief63 which the statute was designed to remedy64. Secondary material seeking to explain the words of a statute cannot displace the clear meaning of the text of a provision65, not least because such material may confuse what was "intended … with the effect of the language which in fact has been employed"66. Indirect infringement It is convenient to consider the legislative history of s 117 of the Act and comparative provisions in the United States of America and the United Kingdom before turning to competing submissions on the construction of s 117 which raised both historical and comparative considerations. Section 117 covers infringement by supplying another person with a product, the other person being the direct infringer. Such an act has been referred to over time as "indirect", "contributory", "participatory" or "secondary" infringement. Indirect infringement was referred to in the Royal Grant67, once part of the words of grant of Letters Patent deriving from the Statute of Monopolies. The patentee received the "especial licence, full power, sole privilege, and authority … [to] make, use, exercise and vend the … invention". It was for the patentee alone to "have and enjoy the sole use and exercise and the full benefit of the … invention"; relevantly, others were commanded "that they do not … either directly or indirectly make use of or put in practice the … invention, nor in anywise imitate the same" (emphasis added). 62 Commissioner for Railways (NSW) v Agalianos (1955) 92 CLR 390 at 397 per Dixon CJ; [1955] HCA 27, quoted with approval in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] per McHugh, Gummow, Kirby and Hayne JJ; [1998] HCA 28; see also Acts Interpretation Act 1901 (Cth), ss 15AA and 15AB. 63 Heydon's Case (1584) 3 Co Rep 7a at 7b [76 ER 637 at 638]. 64 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ; [1997] HCA 2. 65 Nominal Defendant v GLG Australia Pty Ltd (2006) 228 CLR 529 at 538 [22] per Gleeson CJ, Gummow, Hayne and Heydon JJ; [2006] HCA 11. 66 Hilder v Dexter [1902] AC 474 at 477 per Earl of Halsbury LC. 67 Blanco White, Patents for Inventions, 4th ed (1974) at 591-592 [14-38]. See also Aldous, Falconer and Aldous, Terrell on the Law of Patents, 11th ed (1965) at Crennan Notwithstanding that reference, the precise boundaries of "indirect" infringement at common law proved elusive. In particular, the sale or supply of an article, including material "produced by nature" (such as timber), which could in any way be used in the making of an article covered by a patent was not an infringement68. There were, however, some acts of indirect infringement which could give rise to remedies at the patentee's suit. These included the separate tort of knowingly inducing or persuading another to infringe69, acting as a joint tortfeasor in a conspiracy or common design to directly infringe70 and ordering another, for example an agent, to do an infringing act71. In each of these examples the availability of remedies turned on the indirect infringer being a "contributor" or "party" to the direct infringement72. The limitations of the common law position are stated in Blanco White, Patents for Inventions73: 68 Townsend v Haworth (1875) 12 Ch D 831(n); Briggs & Co v Lardeur and Lambert (1884) 1 RPC 126; Dunlop Pneumatic Tyre Co Ltd v David Moseley & Sons Ltd [1904] 1 Ch 612; Sarason v Frénay [1914] 2 Ch 474 at 480-481 per Warrington J; Cincinnati Grinders Inc v BSA Tools Ltd (1930) 48 RPC 33; Walker v Alemite Corporation (1933) 49 CLR 643; [1933] HCA 39; Firth Industries Ltd v Polyglas Engineering Pty Ltd (1975) 132 CLR 489 at 497 per Stephen J; [1975] HCA 25; Ramset Fasteners (Aust) Pty Ltd v Advanced Building Systems Pty Ltd (1999) 164 ALR 239; cf Windsurfing International Inc v Petit [1984] 2 NSWLR 196 at 207 per Waddell J (the sale of a complete set of parts in kit form which when assembled came within the claims of the patent). 69 Innes v Short and Beal (1898) 15 RPC 449; Belegging-en Exploitatiemaatschappij Lavender BV v Whitten Industrial Diamonds Ltd [1979] FSR 59 at 66-67 per Buckley LJ. 70 Incandescent Gas Light Co Ltd v New Incandescent Mantle Co (1898) 15 RPC 81; Morton-Norwich Products Inc v Intercen Ltd [1976] FSR 513 at 521, 524-526 per Graham J; Belegging-en Exploitatiemaatschappij Lavender BV v Whitten Industrial Diamonds Ltd [1979] FSR 59 at 64 per Buckley LJ; Rotocrop International Ltd v Genbourne Ltd [1982] FSR 241. 71 Sykes v Howarth (1879) 12 Ch D 826. 72 See, for example, Dunlop Pneumatic Tyre Co Ltd v David Moseley & Sons Ltd [1904] 1 Ch 612 at 618 per Vaughan Williams LJ. 73 4th ed (1974) at 99 [3-210]; see also Cornish and Llewelyn, Intellectual Property: Patents, Copyright, Trade Marks and Allied Rights, 6th ed (2007) at 260 [6-17]; Dufty and Lahore, Lahore Patents, Trade Marks and Related Rights, vol 1 at Crennan "The sale of materials for, or apparatus for carrying out, a patented process, does not infringe a claim to the process, even though it be intended that the purchaser should infringe, and probably even though what is sold is an apparatus that could be used in no other way. If … such materials, be in fact used, the use is of course an infringement" (footnotes omitted). The rationale behind the narrow common law view of what constituted participation in infringement was explained by Dixon J in Walker v Alemite Corporation74: "The basis upon which these rules rest is that whatever is not included in the monopoly granted is publici juris and may be freely used as of common right." The legislatures of Australia, the United States of America and the United Kingdom all considered it necessary to intervene to modify the common law position. Australia The difficulties of enforcing patents against indirect or contributory infringers at common law were considered by the Industrial Property Advisory Committee ("IPAC") in its report of 29 August 198475 (the "IPAC Report"). Central to the endeavours of IPAC was consideration, and proper management, of the tensions between patent law and competition law76, a tension familiar to intellectual property lawyers in the United States of America since the passing of the Sherman Act 189077 and the Clayton Act 191478. An account of relevant developments in respect of patents can be found in a decision of the Supreme Court of the United States Dawson Chemical Co v Rohm & Haas Co79 ("Dawson"). 74 (1933) 49 CLR 643 at 658. 75 Industrial Property Advisory Committee, Patents, Innovation and Competition in Australia, 29 August 1984. 76 IPAC Report at 12-14 [1.2], 22-27 [3.1]-[3.5]. 77 15 USC §§1-7. 78 15 USC §§12-27. Crennan The patentee in Dawson owned a patented method for using an unpatented product, propanil, to inhibit the growth of certain weeds. The defendant supplied propanil to farmers (which was not a direct infringement of the method patent), with instructions to persons receiving a supply, to apply propanil in accordance with the patented method. A majority of the Supreme Court of the United States found that the defendant's conduct was an indirect or contributory infringement of the patented method under cognate statutory provisions about which more will be said later. It is sufficient for present purposes to note that IPAC referred to the facts of Dawson to illustrate the mischief which it was addressing in its report, namely that "[a] patentee may encounter serious difficulty in enforcing his patent where it is prone to infringement by an eventual consumer who is supplied by an unauthorised person with the means to infringe"80. IPAC then explained its support for legislation which provided a discrete action for "infringement by supply" directed at suppliers of "goods, materials or parts" to direct infringers81: "We believe that it would be more effective, realistic and just for the patentee to be able to take action against the supplier or middleman who facilitates the commission of the infringing act by the ultimate consumer. The most common example of indirect, secondary or contributory infringement is where goods, materials or parts are supplied to a consumer with the intention that they be used, consumed or assembled in a way which constitutes an infringement of a patent." (footnote omitted) Recommendation 33 of the IPAC Report, subsequently endorsed82 and implemented by the government83, stated: "that in general the supply of goods whose only use would infringe a patent, or which are accompanied by a positive inducement for the ultimate consumer to perform actions which would innocently or knowingly infringe a patent, should itself be an infringement of the patent". 80 IPAC Report at 66 [14.2]. 81 IPAC Report at 67 [14.2]. 82 "Government Response to the Report of the Industrial Property Advisory Committee, 'Patents, Innovation and Competition in Australia'", Official Journal of Patents, Trade Marks and Designs, 18 December 1986, Vol 56, No 47, 1462. 83 Explanatory Memorandum to the Patents Bill 1990 (Cth) at 28 [170]. Crennan One of the reasons given by the government for accepting the recommendation and introducing s 117 was said to be to "harmonise [Australian patent law] with the laws of Australia's major trading partners"84. United States of America One of those major trading partners, the United States of America, had introduced a statutory provision governing "indirect" or "contributory" infringement in the Patent Act 1952 codified at 35 USC §271, which currently relevantly provides as follows: "(b) Whoever actively induces infringement of a patent shall be liable as an infringer. (c) Whoever offers to sell or sells within the United States or imports into the United States a component of a patented machine, manufacture, combination or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial noninfringing use, shall be liable as a contributory infringer." In Dawson Blackmun J, delivering remarked85: the opinion of the majority, "[T]he language of §271 is generic and freighted with a meaning derived from the decisional history that preceded it." His Honour summarised that decisional history86 and recognised, as Dixon J had done in Walker v Alemite Corporation, that "an inevitable concomitant of the right to enjoin another from contributory infringement is the capacity to suppress competition in an unpatented article"87. 84 "Government Response to the Report of the Industrial Property Advisory Committee, 'Patents, Innovation and Competition in Australia'", Official Journal of Patents, Trade Marks and Designs, 18 December 1986, Vol 56, No 47, 1462 at 85 448 US 176 at 187 (1980). 86 448 US 176 at 187-197 (1980). 87 448 US 176 at 197 (1980). Crennan United Kingdom Following the Declaration on the Adjustment of National Patent Law annexed to the Convention for the European Patent for the Common Market (the "Community Patent Convention") of 197588, a statutory provision specifically aimed at "infringement by supply" was introduced into the Patents Act 1977 (UK). The need for a provision governing indirect infringement had been canvassed by the Banks Committee89 and the Department of Trade in the United Kingdom90, both of which recommended that infringement should encompass some acts referred to at common law as acts of indirect or contributory infringement. In particular, the Department of Trade White Paper recommended that a patentee should have a right to a remedy "if an essential element of [a patentee's] invention is supplied … with the intention that it should be used to carry out the patented invention"91. Section 60 of the Patents Act 1977 (UK) defines infringement and relevantly provides: "(2) Subject to the following provisions of this section, a person (other than the proprietor of the patent) also infringes a patent for an invention if, while the patent is in force and without the consent of the proprietor, he supplies or offers to supply in the United Kingdom a person other than a licensee or other person entitled to work the invention with any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances, that those means are suitable for putting, and are intended to put, the invention into effect in the United Kingdom. Subsection (2) above shall not apply to the supply or offer of a staple commercial product unless the supply or the offer is made for the purpose of inducing the person supplied or, as the case may be, 88 Article 26 of the Community Patent Convention covered "indirect infringement" and is set out by French J in Collins v Northern Territory (2007) 161 FCR 549 at 89 Great Britain, The British Patent System: Report of the Committee to Examine the Patent System and Patent Law, (1970) Cmnd 4407. 90 Department of Trade, Patent Law Reform, (1975) Cmnd 6000. 91 Department of Trade, Patent Law Reform, (1975) Cmnd 6000 at 5 [18]. Crennan the person to whom the offer is made to do an act which constitutes an infringement of the patent by virtue of subsection (1) above." It is now convenient to turn to the questions raised in the appeal. Question 1: Does s 117 cover supply of an "input" into a process (or resulting product)? The Northern Territory contended that the resolution of this first question turned on resolving the correctness of the supposedly competing views of s 117(1) evinced by Gummow J in Rescare Ltd v Anaesthetic Supplies Pty Ltd ("Rescare")92 and Black CJ and Lehane J in Bristol-Myers Squibb Co v F H Faulding & Co Ltd ("Bristol-Myers")93. Rescare mainly concerned allegations of infringement of a product patent. The question arose whether s 117 operated to render the direct infringer of the product patent also an "infringer by supply" under s 117 in circumstances where the infringing product was sold or offered for sale with instructions to use the infringing product in accordance with a related patented method. In Rescare Gummow J said94: "[A] pre-condition to the operation of s 117 in relation to a method claim … is that there is a product the use of which by the [supplier] would infringe [the method claim]. In other words, that user would have to amount an 'exploitation' within the monopoly conferred by s 13, which is to be read with para (b) of the definition of 'exploit'. … [W]here the invention relevantly claims a method or process, exploitation occurs, other than by use of the method or process, only by the doing of an act mentioned in para (a) of the definition of 'exploit'. There must be an act done 'in respect of a product resulting from such use'." (emphasis added) 92 (1992) 111 ALR 205. 93 (2000) 97 FCR 524. 94 (1992) 111 ALR 205 at 242-243. Crennan This reasoning was upheld on appeal by Lockhart J (with whom Wilcox J agreed) in Anaesthetic Supplies Pty Ltd v Rescare Ltd95 and subsequently followed in Sartas No 1 Pty Ltd v Koukourou & Partners Pty Ltd96. Relying on Gummow J in Rescare and s 13 of the Act, the Northern Territory urged that the expression "use of a product [which] would infringe" in s 117(1) must be limited to the circumstance where the product supplied results from the use of the patented method. The argument assumes that Gummow J's reasoning in Rescare applied to exploitation "by use of the method or process". This argument was also supported by a detailed comparison of s 117 with cognate provisions in the United States of America and the United Kingdom set out above. It was submitted that the words used in each of the cognate provisions were substantially different and apt to include products supplied preparatory to the use of a patented method, whereas the words used in s 117 were not apt to include such products. Adopting the reasoning of Black CJ and Lehane J in Bristol-Myers97, Mr and Mrs Collins countered that such a construction of s 117 would give it a very limited operation and result in considerable overlap between "infringement by supply" covered by s 117 and acts of direct infringement. They supported the construction of s 117 advanced by Ann Monotti98, which found favour with Black CJ and Lehane J in Bristol-Myers99. Their Honours rejected the proposition that where an invention is a method or process, use of a product exploits the invention only if the product is one which results from use of the method or process100. Section 13, and the definition of "exploit" in Sched 1, were intended to define the exclusive rights to exploit the invention, given by a patent, in clear terms, so as to avoid any obscurities in the previous language of "make, use, 95 (1994) 50 FCR 1 at 24. 96 (1994) 30 IPR 479 at 495 per Gummow J. 97 (2000) 97 FCR 524 at 556-559 [87]-[97]. 98 Monotti, "Contributory Infringement of a Process Patent under the Patents Act 1990: Does it Exist after Rescare?", (1995) 6 Australian Intellectual Property Journal 217 at 226-228. 99 (2000) 97 FCR 524 at 556-559 [87]-[97]. 100 (2000) 97 FCR 524 at 558-559 [95]. The decision has been followed in Leonardis v Theta Developments Pty Ltd (2000) 78 SASR 376. Crennan exercise and vend" in s 69 of the Patents Act 1952 (Cth)101. However, there is nothing in the new text or elsewhere in the Act to suggest that the monopoly in respect of an invention is more restricted than it was before. Paragraph (b) of the definition of "exploit", critical to the reasoning of Gummow J in Rescare, defines two aspects of the exclusive rights to exploit a method or process patent, only one of which was explicated by his Honour. The first aspect is the exclusive right to "use the method or process" per se. Nothing significant was said about this expression in Rescare because it was put to one side by the primary judge and it was not overtly considered in the appeal to the Full Court. There was never any doubt that carrying out a patented method or process was an exercise of the invention: "[w]here the claim is for a process, any carrying out of the process is, of course, an exercise of the invention, unless purely experimental" (emphasis added)102. Accordingly, carrying out a patented method or process could constitute infringement of a patented method. The second aspect of the exclusive right to exploit a method or process patent is the exclusive right to do all the acts listed in par (a) of the definition of "exploit" in respect of "a product resulting from … use" of "a method or process". In the absence of a product claim coupled with a method claim, there was often far less certainty about whether such acts would constitute an infringement of a patented method103. The insertion of the second aspect into the statutory definition of "exploit" resolves such uncertainty104. In this case, unlike Rescare, there is a product, the oil (alleged to infringe the product claim), which is a product for the purposes of the second aspect of the monopoly in respect of a method or process patent. As a practical matter, it may often be easier to prove acts of infringement of a patented method by leading evidence of acts in respect of a product which 101 Explanatory Memorandum to the Patents Bill 1990 (Cth) at 5 [23]. 102 Blanco White, Patents for Inventions, 4th ed (1974) at 96 [3-207]. 103 See generally Blanco White, Patents for Inventions, 4th ed (1974) at 96-98 [3-208] and Walton and Laddie, Patent Law of Europe and the United Kingdom, (1983), vol 1 at II [2060]. 104 As do ss 60(1)(c) and 100(1) of the Patents Act 1977 (UK). See also Thorley, Miller, Burkill, Birss and Campbell, Terrell on the Law of Patents, 16th ed (2006) Crennan results from use of a patented method, rather than seeking to prove use of the method per se105. Leaving aside practicalities of proof, if a product is in fact used for carrying out the patented process, an infringement occurs106. In terms of s 6 of the Statute of Monopolies referred to in the Act's definition of "invention" in Sched 1, such an act is a "working" of the invention107; in terms of the definition of "exploit" in Sched 1 to the Act, the conduct is a "use [of] the method or process". Although acts in respect of a product resulting from a patented method which infringe the monopoly will commonly be acts of direct infringement, there is no reason to doubt that s 117(1) applies to a product resulting from a use of a patented method. However, equally, a consideration of the complete definition of "exploit" in respect of a method or process indicates that there is no reason to deny the application of s 117 to a product (including, as here, an unpatented product) supplied by the supplier, preparatory to any carrying out of the patented method by a person to whom the product is supplied. The secondary materials referred to above show that the latter type of product was the main target of the legislation. The word "product" in s 117 is not confined to a product resulting from the use of a patented method or process108. Furthermore, a consideration of the whole of s 117, including s 117(2), indicates that the expression "the use of a product by a person" in s 117(1) refers to a use of a product by a person to whom the product is supplied; the use of the word "supply" suggests a third party109. The precondition to engagement of s 117 in relation to a patented method is not a use of a product by the supplier of the product, but rather a use of the product by the person to whom the product is supplied110. 105 It can be noted that O 17 r 1 of the Federal Court Rules permits the Court to make orders for inspection of property including orders for "the observation of any process". 106 See the quotation from Blanco White at [103]. 107 Under s 6 of the Statute of Monopolies it was "the true and first inventor" who was entitled to "the sole working or making of any manner of new manufactures" which "others … shall not use". 108 See also reasons of Hayne J at [34]. 109 Thorley, Miller, Burkill, Birss and Campbell, Terrell on the Law of Patents, 16th ed (2006) at 315 [8-32]. 110 Cf Rescare (1992) 111 ALR 205 at 242-243 per Gummow J. Crennan Section 117(2) follows and qualifies s 117(1). It contains a set of limitations which clarify and limit the availability of remedies for a patentee in respect of an "infringement by supply". Section 117(2)(a) expressly provides that facts resembling those of Dawson111 constitute an infringement by supply. Section 117(2)(b) is a limitation which operates to protect suppliers of "staple commercial products" from liability even if a use of a staple commercial product by a person supplied "would infringe" in terms of s 117(1). Section 117(2)(c) provides that contributory infringement by inducement (considered a separate tort at common law) is an infringement by supply. It is clear from the limitations on "use" in s 117(2) that the product supplied may be unpatented and may include raw materials. The limitations in s 117(2) can be understood as operating to ensure that infringement by supply does not inhibit lawful competition in unpatented products. Consideration of the entire definition of "exploit" in respect of a method or process patent and of the whole of s 117 confirms that s 117 can be engaged in respect of a supply of a raw material for carrying out a patented method. That construction applies s 117 according to its terms and promotes the objectives of the legislation which can be gleaned from the secondary materials. Whether a particular use of an input into a method (or an input into a resulting product) "would infringe" in terms of s 117 will turn on the claims. In terms of the claims in this case, and the assumption made by the primary judge that ACOC infringed the patent, the alleged use which ACOC makes of the bark and wood of the trees (the "supplied" product) is making, selling and offering for sale, the oil (the "infringing" product) extracted from the supplied product by steam distillation (the patented method). Nothing more needs to be said in the context of determining separate issues other than that the Northern Territory fails in respect of its submission on the first question that s 117 has no application to the timber supplied to ACOC. Question 2: Did the statutory licences constitute a "supply"? On the second question, it was submitted for the Northern Territory that the licences were, in form and substance, grants of permission to enter Crown lands, enforceable by forfeiture, and subject to royalty obligations and therefore not a "supply" as defined in the Act. Mr and Mrs Collins contended that the statutory licence in essence amounted to sale of the timber. It was not disputed that the definition of "supply" in Sched 1 to the Act is not exhaustive and in its ordinary meaning it encompasses any means by which Crennan something is passed from one person to another. It is therefore not necessary to characterise the relevant royalty payments as equivalent to payments pursuant to a contract for the sale of the timber. The licences to ACOC were undoubtedly in the form of statutory permissions to take timber, as contended by the Northern Territory. As the judgment of French J demonstrates, through the comprehensive consideration of numerous authorities, whether a contract to take timber is a sale of goods, or an interest in realty, depends on the context in which the characterisation is considered, then on a number of factors112. Relevant statutory provisions affect the characterisation of an interest113. Some simple distinctions which affected rights as between a life tenant and a remainderman are not without interest. A tree severed from the land was personalty114, whereas a tree attached to the land was realty115. Trees containing a useable quantity of wood were "timber" trees, distinguishable from trees which do not bear timber116. However, as part of a statutory regime concerning Crown land, the licences need to be characterised "in the light of the relevant statutory provisions without attaching too much significance to similarities … with the creation of particular interests by the common law owner of land"117. The licences, when considered in the light of the provisions of the Crown Lands Act and the Crown Lands Regulations referred to above118, grant to licensees a personal rather than a proprietary interest in the timber of the plantation. It has already been explained that the intention of the Northern Territory when setting up the Howard Springs Plantation was cultivation of the trees for the production of commercial (ie saleable) timber. In the context of argument 112 See also Butt, Land Law, 5th ed (2006) at 61-62 [336]. 113 Asciano Services Pty Ltd v Chief Commissioner of State Revenue [2008] HCA 46. 114 In re Ainslie; Swinburn v Ainslie (1885) 30 Ch D 485; In re Llewellin; Llewellin v Williams (1887) 37 Ch D 317 at 324 per Stirling J. 115 This was an application of the maxim quicquid plantatur solo, solo cedit. 116 Dashwood v Magniac [1891] 3 Ch 306 at 352 per Lindley LJ, 358-359 per Bowen LJ. 117 R v Toohey; Ex parte Meneling Station Pty Ltd (1982) 158 CLR 327 at 344 per Mason J; [1982] HCA 69. Crennan concerning the expression "staple commercial product" the Northern Territory relies, correctly, on numerous commercial uses of the timber in question. The licences are a means of passing, to ACOC, for commercial exploitation by ACOC, quantities of timber from trees cultivated by the Northern Territory to produce timber. The fact that an ad valorem royalty is charged in respect of the timber taken only serves to emphasise the fact that the interest granted under the licences involved commercial terms. The licences constitute a "supply" of raw materials for commercial use; this is a "supply" for the purposes of s 117. Accordingly, the Northern Territory fails in respect of its submissions on the second question. Question 3: Is the timber taken under the licences a "staple commercial product"? Because, contrary to the Northern Territory's submissions on questions 1 and 2, s 117(1) is capable of applying to the supply of the product here, it is necessary to answer question 3. On that question, the Northern Territory contended that the expression "staple commercial product" in s 117(2)(b) should be construed as referring to any product supplied commercially which has substantial (ie not de minimis) non-infringing uses, this being an exception to contributory infringement recognised in both the United States of America and the United Kingdom. Mr and Mrs Collins sought to uphold the decision of the majority in the Full Court that a "staple commercial product" is "an item of commerce in the sense that it is ordinarily available for purchase from an entity that trades in that product"119. In particular, it was submitted that the Australian legislature has not incorporated the United States provisions with their reference to "substantial noninfringing use". It was contended that the conception of "staple commercial product" favoured in the United Kingdom and Europe, namely that such products were "generally available"120, should be preferred as the correct construction of the expression in s 117(2)(b). Timber is a naturally occurring raw material whether deliberately cultivated or not. Timber of Callitris intratropica has a number of commercial 119 (2007) 161 FCR 549 at 596 [158] per Branson and Sundberg JJ. 120 J B van Benthem, "The Rights conferred by a Community Patent under the Community Patent Convention", in Pennington (ed), European Patents at the Crossroads, (1976) 119 at 132; Savignon, "Report on the Results of the Luxembourg Convention", the Crossroads, (1976) 9 at 14. in Pennington (ed), European Patents at Crennan uses. The primary judge was correct in his conclusion that the abandonment of original plans for the commercial exploitation of the plantation did not alter the character of the timber. The phrase "staple commercial product" derives from the statutory language in the United Kingdom. The cognate provisions in the United States of America refer to "a staple article or commodity of commerce suitable for substantial noninfringing use". The precise scope of the expression "staple commercial product" is not clear. One ordinary adjectival use of "staple", applied to raw materials, conveys the meaning that the material is capable of being used as a constituent element in a number of other products121. That focuses on the inherent qualities of the product. Another equally well-known ordinary adjectival use of "staple" conveys the meaning that a product has a foremost place among products, for example, in a particular location122. That focuses on the distribution of a product rather than upon its inherent capacity to be a constituent in a number of other products and overlaps with the idea that the product be a "commercial" product. It has been suggested by at least one writer in respect of European rights that a "staple commercial product" has two main qualities: first, it must be "[a] basic product commonly used for various purposes", and secondly, it must be "[g]enerally available on the market"123. Raw materials such as wool or timber undoubtedly have the first quality. As to the second quality, it is necessary to recognise that s 117(2)(b) operates to limit liability for contributory infringement. Policy arguments in favour of imposing liability for contributory infringement are much weaker with a product 121 Oxford English Dictionary, 2nd ed, vol XVI at 522. See also Thorley, Miller, Burkill, Birss and Campbell, Terrell on the Law of Patents, 16th ed (2006) at 122 Oxford English Dictionary, 2nd ed, vol XVI at 522 and Macquarie Dictionary, Federation ed, vol II at 1834. 123 Benyamini, Patent Infringement the European Community, (1993) at 234-235 [9.8.3]. As already noted, Art 26 of the Community Patent Convention and s 60(3) of the Patents Act 1977 (UK) refer to a "staple commercial product"; Art L613-4 of the French Intellectual Property Code refers to "produits qui se trouvent couramment dans le commerce", as to which see Regicentre v Isoka, International Celomer et al (1989) 20 IIC 217; Art 10(2) of the German Patent Law (as translated by the World Intellectual Property Organisation ("WIPO")) refers to "staple commercial products"; Art 73(2) of the Netherlands Patents Act (as translated by WIPO) refers to "products which are generally available in commerce". Crennan that has significant non-infringing uses124. The legislative intention evinced in the statutory language, and apparent also from the relevant secondary materials, is to except from liability, the supply of products with significant non-infringing uses, or as it has been put in relation to the American provisions, products with "lawful as well as unlawful uses"125. A preference for such a construction has also been essayed in respect of s 60(3) of the Patents Act 1977 (UK) by a writer who states126 "the intention is to stop material particularly adapted to the use of an invention being made available to a putative infringer, but that material which has and, importantly, had, a general purpose of more than de minimis utility, falls within the [UK] exception". The phrase "staple commercial product" means a product supplied commercially for various uses. This does not mandate an enquiry into whether there is "an established wholesale or retail market"127 or into whether the product is "generally available" even though evidence of such matters may well be sufficient to show that a product is a "staple commercial product". The relevant enquiry is into whether the supply of the product is commercial and whether the product has various uses. Leaving aside the supply to ACOC, the timber here was supplied on commercial terms to various licensees for a variety of non-infringing uses. Accordingly, the Northern Territory is protected by the limitation in s 117(2)(b). Orders The appeal should be allowed with costs. The order of the Full Court of the Federal Court made on 20 September 2007 should be set aside and in its place it should be ordered that the appeal to that Court be dismissed with costs. 124 See Moy, Moy's Walker on Patents, 4th ed, vol 5, §15:23 at 15-143. 125 See Metro-Goldwyn-Mayer Studios Inc v Grokster Ltd 545 US 913 at 932 (2005) 126 Roughton, "Infringement", in Fysh et al (eds), The Modern Law of Patents, (2005) 17 at 26 [2.11]. See also Thorley, Miller, Burkill, Birss and Campbell, Terrell on the Law of Patents, 16th ed (2006) at 317 [8-37]. 127 Cf Collins v Northern Territory (2007) 161 FCR 549 at 595 [156] per Branson and
HIGH COURT OF AUSTRALIA Matter No S208/2006 SONS OF GWALIA LTD (SUBJECT TO DEED OF COMPANY ARRANGEMENT) APPELLANT AND LUKA MARGARETIC & ANOR RESPONDENTS Matter No S209/2006 ING INVESTMENT MANAGEMENT LLC APPELLANT AND LUKA MARGARETIC & ANOR RESPONDENTS Sons of Gwalia Ltd v Margaretic ING Investment Management LLC v Margaretic [2007] HCA 1 31 January 2007 S208/2006 & S209/2006 ORDER In each matter, the appeal is dismissed with costs. On appeal from the Federal Court of Australia Representation B W Walker SC with K J Mony De Kerloy for the appellant in Matter No S208/2006 and the second respondent in Matter No S209/2006 (instructed by Freehills) T F Bathurst QC with P D Crutchfield for the appellant in Matter No S209/2006 and for the second respondent in Matter No S208/2006 (instructed by Arnold B A J Coles QC with K M Richardson for the first respondent in both matters Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Sons of Gwalia Ltd v Margaretic ING Investment Management LLC v Margaretic Companies – Winding-up – Proof and ranking of claims – Claim by member against company for damages for misleading or deceptive conduct inducing purchase of shares – Relevance of Houldsworth v City of Glasgow Bank (1880) 5 App Cas 317 ("Houldsworth") – Whether Houldsworth established a principle of common law precluding a member from proving in the winding-up of a company for damages for misrepresentation inducing the acquisition of shares where the member has not rescinded the contract pursuant to which the shares were purchased and where rescission is no longer available by reason of the company's insolvency – Whether any such common law principle is part of Australian law. Companies – Winding-up – Proof and ranking of claims – Claim by member against company for damages for misleading or deceptive conduct inducing purchase of shares – Whether claim admissible to proof under s 553(1) of the Corporations Act 2001 (Cth) ("the Act") – Whether circumstances giving rise to claim occurred before the "relevant date". Companies – Winding-up – Proof and ranking of claims – Claim by member against company for damages for misleading or deceptive conduct inducing purchase of shares – Whether claim postponed by s 563A of the Act as a debt owed by the company to the member in that person's "capacity as a member". Statutes – Construction – Section 563A of the Act – Whether claim postponed as a debt owed by the company to a member in that person's "capacity as a member" – Relevance of history of previous statutory provisions – Relevance of apparent purpose and policy of the Act – Relevance of context of contested provision – Relevance of alternative and foreign statutory provisions – Relevance of coherent approach to construction of corporate insolvency provisions. Words and phrases – "capacity as a member". Corporations Act 2001 (Cth), ss 553(1), 563A. GLEESON CJ. These appeals raise an issue concerning the subordination of what are sometimes called "shareholder claims" to claims of other creditors in the application of the insolvency provisions of the Corporations Act 2001 (Cth) ("the Act"). The resolution of the issue turns upon the meaning and effect of s 563A of the Act, which is in Div 6 (concerning proof and ranking of claims) of Pt 5.6 (concerning winding-up). That section provides: "Payment of a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied." Section 553, which is also contained in Div 6 of Pt 5.6, provides that, subject to the Division, in every winding-up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages) are admissible to proof against the company. It is obvious that there are debts that may be owed by a company to a person who is a member of the company which are not owed to the person in the person's capacity as a member. It is equally obvious that, whatever be the precise test according to which the distinction is to be drawn, the subordination effected by s 563A is limited to debts owed to a member as a member, and does not apply to debts owed to a person otherwise than as a member. Debts owed by way of dividends, profits or otherwise to a person in the person's capacity as a member are contrasted with debts owed to, or claims made by, a person otherwise than as a member. The language of s 563A has a long history; a history that goes back before the decision in Salomon v Salomon & Co Ltd1, to a time when the separateness of a corporation from its members had not been fully recognised, and when the difference between corporations and partnerships was not as distinct as it later became. Subject to certain exceptions, it was an established rule of partnership law that a partner in a bankrupt firm could not prove in competition with the debts of outside creditors upon a dissolution2. Lord Lindley explained the rule as follows3: "[The creditors of the firm] are, in fact, his own creditors, and he cannot be permitted to diminish the partnership assets to the prejudice of those who are not only creditors of the firm, but also of himself. If, therefore, a 2 Soden v British & Commonwealth Holdings Plc [1998] AC 298 at 308. 3 Quoted in Lindley & Banks on Partnership, 18th ed (2002) at 818. partner is a creditor of the firm, neither he nor his separate creditors (for they are in no better position than himself) can compete with the joint creditors as against the joint estate." Once it became accepted that a company formed under the applicable companies legislation is a corporate entity with a legal existence distinct from that of its members, it followed that the creditors of a company were not also creditors of the members either collectively or individually. That is an essential aspect of the difference between an ordinary trading company formed with limited liability, and a partnership. There was another, more enduring, influence in company law, reflected in certain decisions said to apply to the present case. It concerns the law relating to the raising and maintenance of share capital. Companies Acts, in a variety of ways, have given effect to the principle, also established before Salomon v Salomon & Co Ltd, that the creditors of a company which is being wound up have a right to look to the paid-up capital as the fund out of which their debts are to be discharged4. Statutory manifestations of that principle have been modified over the years, and it may be doubted that it reflects the reality of modern commercial conditions, where assets and liabilities usually are more significant for creditors than paid-up capital. As Lord Browne-Wilkinson said in Soden v British & Commonwealth Holdings Plc5, it is "wholly irrelevant" to the position of a member who has acquired fully paid shares on the market. To return to s 563A, it assumes that a person's claim, constituting a debt, is admissible to proof against the company. The existence of a liability is the hypothesis upon which the section proceeds. It subordinates that claim if, but only if, the debt is owed to the person in the person's capacity as a member of the company. The principal issue in these appeals is whether the (assumed) liability of the appellant in the first appeal ("the first appellant") to the first respondent in both matters, Mr Margaretic ("the respondent"), is a liability to him in his capacity as a member of that appellant. The appellant in the second appeal ("the second appellant") is a general creditor of the first appellant. Both appellants argued that the liability to the respondent is a liability to him in his capacity as a member of the first appellant. That issue was resolved adversely to the appellants by Emmett J at first instance in the Federal Court of Australia6, and by the Full Court of the Federal Court (Finkelstein, Gyles and Jacobson JJ) on 4 Trevor v Whitworth (1887) 12 App Cas 409 at 414. [1998] AC 298 at 326. (2005) 55 ACSR 365; (2006) 24 ACLC 244. appeal7. Substantially the same issue, arising under a similar statutory provision, was resolved in the same way in the United Kingdom by Robert Walker J8, the Court of Appeal, and the House of Lords9, in Soden. The respondent's claim Sons of Gwalia Ltd, the first appellant, was a publicly listed gold mining company. On 29 August 2004, administrators were appointed pursuant to s 436A of the Act. It now appears that, at the time, the shares in the company were worthless. On 18 August 2004, the respondent had bought 20,000 shares in the first appellant at a cost of $26,200. The respondent alleges that, in breach of the stock exchange listing rules, the first appellant had failed to notify the Australian Stock Exchange that its gold reserves were insufficient to meet its gold delivery contracts and that it could not continue as a going concern. The respondent says that he was a victim of misleading and deceptive conduct and that the first appellant contravened s 52 of the Trade Practices Act 1974 (Cth), s 1041H of the Act and s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth). He claims to be entitled to compensation, his claim being for the difference between the cost of his shares and their value (nil). There are many other shareholders with similar claims. The proceedings have been brought to test the entitlement of shareholders in the position of the respondent to claim, in competition with other creditors, under a deed of arrangement under Div 10 of Pt 5.3A of the Act which includes a provision which, by reference, incorporates s 563A. The case has been argued on the assumption that the respondent can show one or more of the alleged contraventions of statute, and the consequential damage asserted. Section 563A, like some other provisions of the Act, uses the expressions "debt" and "claim" interchangeably, and argument proceeded upon the basis that a liability for unliquidated damages may be a debt within the meaning of the section. This is a topic that was dealt with in some detail by Emmett J, but it is unnecessary to pursue the matter. Three aspects of the respondent's claim should be noted. First, the amount of the claim is not based on the amount of capital paid up on the shares which the respondent purchased. It is based on the market price of the shares. The company's capital structure, and the paid-up value of its shares, may have had some indirect bearing on the market value of the shares, but (2006) 149 FCR 227. 8 Soden v British and Commonwealth Holdings plc [1995] 1 BCLC 686; [1995] BCC the amount paid up on the shares is not an integer in his claim for damages. Secondly, there was no contract between the first appellant and the respondent concerning the purchase of the shares. The claim arises out of harm suffered by reason of conduct of the company that was in contravention of certain statutory norms of behaviour. Thirdly, while the appellants acknowledge that the fact that the respondent was a member of the first appellant at the time he made his claim is essential to their argument concerning the suggested operation of s 563A, that fact is not essential to his claim. His claim would have been the same if he had sold his shares (for example, to crystallise his loss for tax purposes) before he made the claim, or if for some reason his name had never been entered on the company's register of members. The appellants accept that if the respondent had sold his shares before he made his claim, the first appellant's debt would not be owed to him in his capacity as a member. In other words, they accept that s 563A has a temporal aspect. A preliminary question Both appellants submitted that principles reflected in the decision of the House of Lords in Houldsworth v City of Glasgow Bank10 supported their construction of s 563A, but the second appellant also relied upon an argument said to be independent of that section. If the argument is correct, s 563A would have no application to the case, for it only applies where there is a debt owed by a company to a person, and then requires a decision as to whether the debt is owed to the person in the person's capacity as a member. The history of s 563A is set out in the reasons of Hayne J. The section had its origins in s 38(7) of the Companies Act 1862 (UK). In that Act, and in subsequent United Kingdom and Australian legislation, until relatively recently, it took the form of a qualification (or, perhaps, a qualification upon a qualification) to a general provision concerning the liability of members to contribute in a winding-up. Broadly stated, the 1862 Act provided that in the event of a winding-up members were liable to contribute to the assets in order to meet the company's liabilities. In the case of a limited company, no contribution was required beyond the amount, if any, unpaid on the shares. However, no sum due to any member, in his character of a member, by way of dividends, profits, or otherwise, would be deemed to be a debt of the company payable in competition with general creditors, but such sum might be taken into account in making adjustments as between contributories. That was still the general scheme of s 360(1) of the Companies (Victoria) Code that was considered and applied by this Court in Webb Distributors (Aust) Pty Ltd v Victoria11, and of the United 10 (1880) 5 App Cas 317. 11 (1993) 179 CLR 15. Kingdom legislation considered by the House of Lords in Soden. In the Act, s 563A appears in a somewhat different context, and its effect of subordination rather than denial is clearer, but its origins are unmistakable. Section 360(1)(k) provided that "a sum due to a member in his capacity as a member by way of dividends, profits or otherwise shall not be treated as a debt of the company payable to that member in a case of competition between himself and any other creditor who is not a member" but may be taken into account in a final adjustment of rights among contributions. The provision that a sum due was not to be treated as a debt in a case of competition between the member-creditor and other creditors might account for some elision of the issue whether a debt is provable and the issue of its ranking in terms of priorities. However that may be, s 563A clearly distinguishes those issues. It assumes that a certain debt is provable in a winding-up, and postpones it to certain other claims. According to the second appellant's argument, there is a principle of common law, emerging from Houldsworth, which precludes a shareholder from proving in a winding-up (or under a deed of company arrangement) for damages for misrepresentation inducing any acquisition of shares unless the shareholder has first rescinded "the membership contract". Once the company has become insolvent or has gone into liquidation or voluntary administration, rescission is not available. If that argument were correct, s 563A could not apply, because it assumes, and subordinates, a liability of the kind which, according to this argument, does not exist. The submission did not make clear what was said to be involved in the notion of the rescission of the membership contract. The respondent in the present case was not a party to any contract with the first appellant providing for the acquisition of the shares in question. The principle in Houldsworth is famously elusive12. For present purposes, it is sufficient to observe that, in Webb Distributors, this Court referred to a "proposition which the House of Lords distilled ... from the provisions of the Companies Act 1862" and held that it had "received statutory recognition in s 360(1) of the Code"13. There is a chronological curiosity here. The language of s 360 of the Victorian Code reflected the language of s 38(7) of the 1862 Act. Houldsworth did not apply that statutory language (of subordination) but turned on a wider principle, and produced a different result, although one that also was unfavourable to the claimant. Houldsworth was decided in 1880. The statutory language can hardly be said to reflect the decision in Houldsworth. It is older than the decision, and it produces a different result. 12 See Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 32-33. 13 (1993) 179 CLR 15 at 33. The difference between denial and postponement or subordination of a claim is not merely technical. At first sight it may appear puzzling that the majority in Webb Distributors held that s 360(1)(k) of the Victorian Code applied14, and yet approved a holding "that the shareholders could not prove in the liquidation because they were precluded both from rescinding their contracts and from maintaining actions for damages in respect of their acquisition of the shares"15. If there were such a preclusion, then s 360(1)(k) would not have applied. Presumably, "prove" was taken to mean "prove in competition", but it is not easy to explain the concept of preclusion in the application of s 360(1)(k). Some of the reasoning in Webb Distributors may have prompted the second appellant's preliminary point. The majority were not disposed to decide "whether Houldsworth is right or wrong"16, identifying the critical question as being "whether the proposition which the House of Lords distilled in the case from the provisions of the Companies Act 1862 [was] incorporated in the provisions of the Code"17. They answered that question: yes, in part18. The scheme of the Act in relation to raising and maintenance of share capital is somewhat different from that of earlier legislation, and very different from that of the 1862 Act. As will appear, Houldsworth was never authority for a principle as wide as that asserted by the second appellant. The refusal of the majority in Webb Distributors to consider whether the decision in Houldsworth was right or wrong shows that they decided that case by applying s 360(1)(k) of the Code. They regarded some of the considerations underlying Houldsworth as relevant to the interpretation of s 360(1)(k), operating in addition to the Code. The issue in this case is to be decided upon the true construction of the provisions of the Act and, in particular, s 563A. Section 563A The appellants submit that the respondent's claim is for a debt owed to him in his capacity as a member of the first appellant. In support of that submission they rely both upon arguments of policy related to modern circumstances and upon arguments of historical context. They also submit that this Court's decision in Webb Distributors requires, or at least supports, that conclusion. 14 (1993) 179 CLR 15 at 35. 15 (1993) 179 CLR 15 at 18, 39. 16 (1993) 179 CLR 15 at 33. 17 (1993) 179 CLR 15 at 33. 18 (1993) 179 CLR 15 at 33. As to the first matter, modern legislation, such as that invoked by the respondent in this case, has extended greatly the scope for "shareholder claims" against corporations, with consequences for ordinary creditors who may find themselves, in an insolvency, proving in competition with members now armed with statutory rights. Corporate regulation has become more intensive, and legislatures have imposed on companies and their officers obligations, breach of which may sound in damages, for the protection of members of the public who deal in shares and other securities. This raises issues of legislative policy. On the one hand, extending the range of claims by shareholders is likely to be at the expense of ordinary creditors. The spectre of insolvency stands behind corporate regulation. Legislation that confers rights of damages upon shareholders necessarily increases the number of potential creditors in a winding-up. Such an increase normally will be at the expense of those who previously would have shared in the available assets. On the other hand, since the need for protection of investors often arises only in the event of insolvency, such protection may be illusory if the claims of those who are given the apparent benefit of the protection are subordinated to the claims of ordinary creditors. There is ample precedent for legislative resolution of this policy issue in a manner different from s 563A. For example, in the United States, §510(b) of the Bankruptcy Code provides: "510 Subordination For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock." (emphasis added) No such provision is to be found in the Act. The contrast between §510(b) and s 563A is obvious. If Parliament were to introduce such a provision, it would need to consider what would be the practical effect upon the rights conferred upon people who deal in shares and securities by legislation of the kind relied upon by the respondent. One thing is clear. Section 563A does not embody a general policy that, in an insolvency, "members come last". On the contrary, by distinguishing between debts owed to a member in the capacity as a member and debts owed to a member otherwise than in such a capacity, it rejects such a general policy. If there ought to be such a rule, it is not to be found in s 563A. The construction argument based on history, and, in particular, "the principle in Houldsworth", overstates the width of that decision, and of others that have followed. At the commencement of these reasons, reference was made to two possible sources of influence, one relating to partnership law, the other relating to the raising and maintenance of share capital, that might have been at work in Houldsworth. The case was brought by an investor who acquired from a bank, which was an unlimited company registered under the 1862 Act, an amount of its stock. The company went into liquidation. Since it was an unlimited company, the investor became liable to pay calls as a contributory, and the liability was unlimited. The investor claimed he had been induced by fraud to take up the stock. Because the winding-up had commenced, he could not claim rescission of the contract of allotment. He claimed damages against the company for fraud, the damages including his liability on past and future calls. The claim failed. It is to be noted that what the investor was attempting to do was, in effect, to obtain from the company reimbursement in respect of his liability to pay calls in the winding-up of the company, in circumstances where he could no longer obtain rescission of the contract of allotment pursuant to which he acquired the shares which exposed him to the liability to pay calls. In In re Addlestone Linoleum Co19, Lindley LJ said: "The principle on which the House of Lords decided Houldsworth v City of Glasgow Bank was that a shareholder contracts to contribute a certain amount to be applied in payment of the debts and liabilities of the company, and that it is inconsistent with his position as a shareholder, while he remains such, to claim back any of that money – he must not directly or indirectly receive back any part of it". In Addlestone, a company issued, as fully paid, shares which were in truth not fully paid, and a liquidator made a call for the unpaid balance. The shareholders sought to prove in the winding-up for damages measured by their liability on the call. Kay J held that the statutory equivalent of s 563A applied because the shareholders were making their claims in the character of members of the company. Their contracts of subscription for the shares obliged them to pay the money the subject of the call, and they were seeking to neutralise their obligations under those contracts. The Court of Appeal upheld the decision of Kay J adverse to the shareholders, but on the basis of the Houldsworth principle, as explained by Lindley LJ. That explanation turned upon the inconsistency between the contract of subscription (which could not now be rescinded) and the claim to recover capital which, under the contract of subscription, the claimant remained liable to pay. It is not fruitful to speculate about the extent to which that perception of inconsistency was affected by either or both of the influences mentioned at the commencement of these reasons. 19 (1887) 37 Ch D 191 at 205-206. Webb Distributors concerned non-withdrawable shares in a building society which were issued by the building society with certain representations as to the rights attaching to them. The building society was being wound up. The people to whom the shares were issued claimed that they were entitled to damages for misrepresentation, their claims being based on s 52 of the Trade Practices Act 1974 (Cth). For reasons explained by the Court, provisions of the Companies (Victoria) Code were imported into the winding-up. The Court treated the non-withdrawable shares as though they were shares in a limited company, and the holders as though they had subscribed for such shares. The damages claimed were based upon the amounts subscribed for the shares. Section 360(1) of the Code provided that on the winding-up of a company members were liable to contribute to the company's debt, subject to certain qualifications including: "(e) in the case of a company limited by shares, no contribution is required from a member exceeding the amount (if any) unpaid on the shares in respect of which he is liable as a present or past member; (k) a sum due to a member in his capacity as a member by way of dividends, profits or otherwise shall not be treated as a debt of the company payable to that member in a case of competition between himself and any other creditor who is not a member, but any such sum may be taken into account for the purpose of the final adjustment of the rights of the contributories among themselves." Paragraph (k) is the counterpart of s 563A of the Act, although s 563A uses the language of subordination more clearly. The majority in Webb Distributors treated the rationale of Houldsworth, as identified by Lindley LJ in Addlestone, as relevant to the interpretation of s 360(1)(k). They considered that the claim in the case before them was covered by s 360(1)(k) for the same reasons as Kay J had concluded in Addlestone that the claimants there were subordinated by the corresponding statutory provision20. Mason CJ, Deane, Dawson and Toohey JJ said21: "Paragraph (k) of s 360(1) will not prevent claims by members for damages flowing from a breach of a contract separate from the contract to subscribe for the shares. But, in the present case, the members seek to 20 (1993) 179 CLR 15 at 34. 21 (1993) 179 CLR 15 at 35. prove in the liquidation damages which amount to the purchase price of their shares, which is a sum directly related to their shareholding. Moreover, they sue as members, retaining the shares to which they were entitled by virtue of entry into the agreement and they seek to recover damages because the shares are not what they were represented to be. Accordingly, the claim falls within the area which s 360(1)(k) seeks to regulate: the protection of creditors by maintaining the capital of the company." The first sentence in the above paragraph is relied upon by the respondent. He says it covers the present case. As to the second sentence, it is important to bear in mind that what was referred to as "the purchase price" of the shares was money paid to the building society which issued the non-withdrawable shares as the consideration for the issue: in effect, the subscription price. The hypothesis of s 360(1)(k) was that there was a sum due to a member. The issue was whether the sum was due to the member in his capacity as a member. It is difficult to reconcile the acceptance of the hypothesis with a proposition that there was a fatal inconsistency between the nature of the claims being made in Webb Distributors and the claimants' position as shareholders. The approval given by the majority in Webb Distributors to the reasoning of Kay J in Addlestone suggests that, on the issue of the capacity in which sums were due to the claimants, the conclusion that the sums were due to them in their capacity as shareholders was regarded as being reinforced by the idea that they were in substance seeking to recover capital they had subscribed, which was comparable to the attempt by the claimants in Addlestone to avoid paying capital they were liable to contribute. In Soden22 the House of Lords treated Addlestone and Webb Distributors as standing "on exactly the same footing", that is to say, the protection of creditors from indirect reductions of capital, a consideration relevant to cases of subscription for shares but irrelevant to purchases from third parties of previously issued shares. Soden raised the same problem as the present case, and the House of Lords reached the same conclusion as the Federal Court in this case. It is argued for the appellants that, in the application of s 563A of the Act, no valid distinction can be made between the position of a shareholder who claims to have subscribed for shares in a company in consequence of the misleading or deceptive conduct of the company, and that of a shareholder who claims to have purchased shares on the market (or, perhaps, retained shares) in consequence of such conduct. The appellants, it has been noted, accept as valid a distinction 22 [1998] AC 298 at 326. between a purchaser who buys shares on the market and then sells them before making a claim against the company, and a purchaser who retains them and makes a shareholder claim. That shows that what is or is not a valid distinction is not to be decided in terms of broad economic equivalence, but must be founded on the terms of the statute. From an economic point of view, there is little difference between the distinction which the appellants accept and the distinction which they reject. However, s 563A requires a line to be drawn between a shareholder claiming in the capacity of a member and a shareholder claiming otherwise than in the capacity of a member. To draw that line it is necessary to analyse the nature of a claim; it is not sufficient to describe its effect on other creditors. In a passage from Webb Distributors quoted above, the majority said that s 360(1)(k) would not prevent claims by members for damages flowing from a breach of a contract separate from the contract to subscribe for shares. In a footnote, they gave two examples. The first, In re Dale and Plant Ltd23, concerned a claim by a managing director, who was obliged by the company's articles of association to be a shareholder, for arrears of salary and breach of his contract of employment. Kay J thought it "very clear" that s 38(7) of the 1862 Act did not apply24. He rejected an argument that s 38(7) was intended to introduce into company law the principle of partnership law referred to at the commencement of these reasons. The second, In re Harlou Pty Ltd25, concerned a contract of service which required an employee to purchase shares in a company, and required the company to find a purchaser for the shares on termination of service. In both of those cases, a member of a company was claiming damages for breach of contract by the company. In the second case, the contract related to the member's shares in the company. Debts owed to a member by way of dividends or profits are given in s 563A, as in its predecessors, as examples of debts owed by a company to a person in the person's capacity as a member. The claim made in Addlestone has been treated as an example of what is embraced by the term "otherwise". In Soden, Lord Browne-Wilkinson referred to "the statutory contract" by which he meant the rights and obligations flowing from the United Kingdom counterpart of s 140 of the Act, together with the rights and liabilities conferred and imposed by other provisions of the Act. Section 140 provides that a company's constitution has effect as a contract between the company and each member and between a member and each other member. The concept of statutory contract 23 (1889) 43 Ch D 255. 24 (1889) 43 Ch D 255 at 257. 25 [1950] VLR 449. was discussed by McHugh and Gummow JJ in Bailey v New South Wales Medical Defence Union Ltd26. Lord Browne-Wilkinson concluded that an amount owing to a member in the character (capacity) of a member was an amount falling due under and by virtue of what he described as the statutory contract. To that his Lordship added "claims based upon having paid money to the company under the statutory contract which the member says that he is entitled to have refunded by way of compensation for misrepresentation or breach of contract"27. He appears also to have had in mind claims based upon liabilities incurred (even if not discharged) under the statutory contract, and claims (when capable of giving rise to debts within s 563A) advanced by way of relief from obligations imposed by the statutory contract. What determines the present case is that the claim made by the respondent is not founded upon any rights he obtained or any obligations he incurred by virtue of his membership of the first appellant. He does not seek to recover any paid-up capital, or to avoid any liability to make a contribution to the company's capital. His claim would be no different if he had ceased to be a member at the time it was made, or if his name had never been entered on the register of members. The respondent's membership of the company was not definitive of the capacity in which he made his claim. The obligations he sought to enforce arose, by virtue of the first appellant's conduct, under one or more of the statutes mentioned in the earlier description of the respondent's claim. The decision in Webb Distributors neither requires nor supports any different outcome. Principles concerning the raising and maintenance of share capital led this Court to conclude that, on the true construction of s 360(1)(k) of the Victorian Code, the claims in that case should be treated as claims for sums due to members in their capacity as members. For the reasons already given it would be wrong to conclude that, on the true construction of s 563A of the Act, the debt owed to the respondent is owed to him in his capacity as a member of the first appellant. Conclusion Each appeal should be dismissed with costs. 26 (1995) 184 CLR 399 at 433-440. 27 [1998] AC 298 at 325. GUMMOW J. The resolution of the issues in these appeals turns upon the construction of certain provisions of the Corporations Act 2001 (Cth) ("the Act") incorporated in a Deed of Arrangement to which Sons of Gwalia Ltd ("Gwalia") is subject. There is a dispute respecting the application of those provisions to "shareholder claims" by Mr Margaretic, the first respondent. The expression "shareholder claims" is used here to identify claims for damages against a company by a subscriber for, or purchaser of, its shares, where the claimant asserts reliance upon misleading or deceptive conduct of the company or other wrongful act or omission on its part which was causative of that shareholder's loss. ING Investment Management LLC ("ING") is a creditor of Gwalia which is not a shareholder and its interests are adverse to those of Mr Margaretic. The apparently seamless continuity in the reception and development of the common law in Australia is apt to distract attention from the supreme importance of statute law. In this vein, the submissions presented on these appeals to varying degrees proceeded from an implicit premise which is false. There are no "general principles of company law" applicable in a winding up and to which there must be reconciled those provisions of the Act and its predecessors (beginning with the Companies Act 1862 (UK) ("the 1862 UK Act")28) which stipulate a particular system of proof of debts and the ranking of debts and the placement of "shareholder claims" in that system. Further, in any quest to locate such general principles, the older case law is not always a satisfactory guide. Excessive significance should not be attributed to statements in nineteenth century British cases, decided at a time of endeavours to "flesh out" the developing body of statute law29 by use of principles derived from a range of sources in the general law. These sources included the law of agency, partnership, bankruptcy, and trusts. It later was recognised that some of those endeavours miscarried. One was the attribution to directors of the character of trustees of the assets of the company, and another the treatment of a company in liquidation as trustee of its assets for distribution among creditors30. 28 25 & 26 Vict c 89. 29 See Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 609-611 [39]-[49]; New South Wales v Commonwealth (2006) 81 ALJR 34 at 72-77 [96]-[124]; 231 ALR 1 at 34-41. 30 See, respectively, Clay v Clay (2001) 202 CLR 410 at 430-431 [41]; Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR In his elaborate judgment in Australasian Temperance and General Mutual Life Assurance Society Ltd v Howe31, Isaacs J referred both to the gradual development, culminating in Salomon v Salomon & Co32, of the doctrine that the corporation has a distinct legal personality, and to various arguments which had rested upon the want in a corporation of physical personality. Isaacs J noted33 that as counsel Willes J had argued (unsuccessfully) in 1851 that an action for trespass for assault and battery did not lie against a corporation aggregate because a corporation could neither beat nor be beaten in its body politic34 but that, in 1867, as Willes J he had held in Barwick v English Joint Stock Bank35 that the fraud of the agent of a corporation was properly described in law as the fraud of the corporation. Differing legislative schemes Legislative schemes may vary in the allocation of risk between investors and creditors and the priorities between them upon insolvency. Two contrasting examples with respect to "shareholder claims" may be given. First, the Federal Bankruptcy Code of the United States implements a policy which subordinates claims made by shareholders which arise from the purchase of shares. It provides (11 USC §510(b)): "For the purpose of distribution under this title, a claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security ... shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock." 31 (1922) 31 CLR 290 at 308-312. Isaacs J concluded, in dissent, that a corporation might be a "resident" of a State for s 75(iv) of the Constitution: (1922) 31 CLR 32 [1897] AC 22. See Rubin, "Aron Salomon And His Circle", in Adams (ed), Essays for Clive Schmitthoff, (1983) 99 at 99. 33 (1922) 31 CLR 290 at 311. 34 The Eastern Counties Railway Company v Broom (1851) 6 Ex 314 at 320 [155 ER 562 at 564]. The Court of Exchequer Chamber disagreed ((1851) 6 Ex 314 at 325 [155 ER 562 at 566-567]) but held that the action failed for want of evidence of prior direction or subsequent ratification of the acts of the servants of the railway company of which the plaintiff passenger complained. 35 (1867) LR 2 Ex 259. In In re Telegroup, Inc36, the Court of Appeals for the Third Circuit said that, in enacting this provision in 1978, the Congress adjudged that, as between shareholders and general unsecured creditors, it is the former who should bear the risk of any illegality in the issue of their stock, should the corporation enter bankruptcy, and that disappointed shareholders should not be able to use fraud and other such claims "to bootstrap their way to parity with general unsecured creditors"37. The Court accepted the proposition that38: "because equity owners stand to gain the most when a business succeeds, they should absorb the costs of the business's collapse – up to the full amount of their investment". Hence §510(b) "effectively precludes an equity holder with a securities fraud claim from recovering damages from the debtor's estate for that claim"39. On the other hand, s 111A of the Companies Act 1985 (UK) appears40 to reflect a policy which is to the contrary of that in the United States, and which denies any such subordination of shareholder claims. Section 111A provides: "A person is not debarred from obtaining damages or other compensation from a company by reason only of his holding or having held shares in the company or any right to apply or subscribe for shares or to be included in the company's register in respect of shares." The principal provisions of the present Australian legislation in play in these appeals are s 553(1) (describing the debts and claims which may be proved in a winding up), s 555 (providing as the general rule for the equal ranking of proved debts and claims), and s 563A. This states: 36 281 F 3d 133 at 141-142 (2002). 37 281 F 3d 133 at 142 (2002). 38 281 F 3d 133 at 140 (2002). See Slain and Kripke, "The Interface Between Securities Regulation and Bankruptcy – Allocating the Risk of Illegal Securities Issuance Between Securityholders and the Issuer's Creditors", (1973) 48 New York University Law Review 261 at 286-287, 294. 39 Christensen, "The Fair Funds for Investors Provision of Sarbanes-Oxley: Is it Unfair to the Creditors of a Bankrupt Debtor?", (2005) University of Illinois Law Review 339 at 348-349. 40 cf Soden v British & Commonwealth Holdings Plc [1998] AC 298 at 326-327. "Payment of a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied." The provisions of s 563A do not manifest any clear legislative policy seen in the modern legislation in the United States and the United Kingdom. Rather, as Hayne J explains in his reasons, while to some extent s 563A may derive from s 38(7) of the 1862 UK Act, the present legislation has not been marked by any close legislative consideration of the ends sought to be achieved by a provision in the terms of s 563A. To some degree, the submissions on the appeals sought to put in two camps the interests of investors and creditors, in particular the trade creditors who are unsecured. Those with "shareholder claims" may be seen as in the camp of the shareholders. But such division into such discrete categories is not fully satisfactory. For example, while creditors have their own special position in insolvent administrations, large institutional lending may be made, at least in contemporary circumstances, without taking security in its traditional forms. The reasons for this may reflect the market strength of corporate borrowers at any one period, stamp duty considerations and other matters peculiar to the nature of the project to be funded41. However that may be, it would be an oversight to see the issues at stake as no more than attempted "boot strapping" by shareholder claimants to attain parity with the general body of unsecured creditors as understood in the past. The present appeals The central issues on the appeals should be resolved in favour of Mr Margaretic and the appeals dismissed. First, upon a proper construction of the Act, Mr Margaretic's claims may be proved in a company winding up pursuant to s 553(1) of the Act. The terms of that provision remove any impediment to claims of this kind. Secondly, Mr Margaretic's claim is not a debt owed to him in his "capacity as a member" of Gwalia, whether by way of dividends, profits or otherwise; the claim is not to be postponed by s 563A of the Act to claims made by "persons otherwise than as members of the company". 41 See, for example, the financing structure considered in Federal Commissioner of Taxation v Citylink Melbourne Ltd (2006) 80 ALJR 1282 at 1302 [111]-[118]; 228 ALR 301 at 325-326. I agree generally with the reasons given by Hayne J. What is said in these reasons assumes a reading of what is said by his Honour. In what follows, I deal further with two additional and related points. The first is the adequacy of the reasons given in Webb Distributors (Aust) Pty Ltd v Victoria42 and the second is the dependence upon that reasoning of a principle said to be derived from the speeches in the House of Lords in Houldsworth v City It also is appropriate to deal in some detail with Houldsworth for a particular reason which emerges from the way in which ING put its case on what would be a threshold issue. In its written submissions, ING submitted that "the principle in Houldsworth" prevented, as a matter of common law, a shareholder claim such as that of Mr Margaretic arising in the first place, irrespective of statutory issues respecting admission to proof and ranking of claims. In the course of oral argument, counsel appeared to shift ground but, however that may be, in subsequent supplementary written submissions ING again invoked "the rule in Houldsworth" and its significance for Webb, upon which decision ING relied. As these reasons will seek to demonstrate, in Australia the existence of any such common law "principle" of company law based upon Houldsworth should be rejected. Further, Houldsworth did not supply the support relied upon for the reasoning in Webb. Webb's Case Webb concerned admission to proof, not ranking of claims admitted to proof44. However, Gwalia and ING submitted that the reasoning in Webb was determinative of the issues of statutory construction upon which the appeals turned. Mr Margaretic challenged the applicability of the reasoning in Webb and, alternatively, its correctness. Gwalia and ING submitted that leave should not be given to re-open Webb. The facts of Webb are described in the judgment of Hayne J; it is not necessary to repeat them here. There is a question whether Webb may be 42 (1993) 179 CLR 15. 43 (1880) 5 App Cas 317. 44 See questions (a) and (b) answered by the Appeal Division of the Supreme Court: State of Victoria v Hodgson [1992] 2 VR 613 at 616, 631. The appeal to this Court was dismissed: (1993) 179 CLR 15 at 43. distinguished on the basis that it concerned only claims by shareholders who acquired their shares by subscription, whereas Mr Margaretic purchased his shares from a third party on the market conducted by the Australian Stock Exchange. A distinction of this nature was drawn by the House of Lords in Soden v British & Commonwealth Holdings Plc45, and Webb was distinguished on this ground. Both Gwalia and ING submitted that the distinction was without substance because the reasoning in Webb was equally applicable to claims by "transferee shareholders" as to claims by subscribers, and was intended by the Court to apply to all claims by members. Mr Margaretic supported the distinction but, as previously indicated, did not shrink from seeking leave to argue the correctness of Webb. It is fruitless to pursue narrow factual distinctions of the kind adverted to above. Section 563A of the Act is expressed in terms of the postponement of certain debts. Unless the means by which a person became a member (that is, by acquiring shares by subscription or by transfer) is relevant to the characterisation of the "debt" owed by the company to the person as one owed to the person in his or her capacity as a member or not, the distinction is difficult to maintain as a matter of principle. This especially is so in a context where s 231 of the Act defines "member" without making any distinction of that kind. Therefore, alleged deficiencies in the reasoning in Webb should be grappled with; the decision cannot be put to one side on the basis of factual distinctions of the kind mentioned above. In their joint judgment, the majority in Webb (Mason CJ, Deane, Dawson and Toohey JJ) concluded that the holders of non-withdrawable shares were not entitled to prove in the winding up of the building societies in respect of their claims in deceit and for misleading and deceptive conduct under s 52 of the Trade Practices Act 1974 (Cth) ("the TP Act"). This conclusion rested upon four related propositions. The first was that the "principle" on which Houldsworth was decided was that the share capital represents a "guarantee fund" and "protection" to creditors which should not be returned to shareholders other than on a permissible reduction of capital46. The second was that this "principle" received statutory recognition in s 360(1) of the Companies (Victoria) Code ("the Code")47. The third proposition48 was that par (k) of s 360(1) of the Code bore the same interpretation as that ascribed to s 38(7) of the 1862 UK Act in In re 45 [1998] AC 298 at 326-327. 46 (1993) 179 CLR 15 at 32-33. 47 (1993) 179 CLR 15 at 33. 48 (1993) 179 CLR 15 at 34. Addlestone Linoleum Co49 by Kay J50. Those sections were respectively the immediate forebear and the first progenitor of s 563A. The fourth proposition, which depended on the first three, was that51: "[The TP Act] is not to be seen as eliminating, 'by a side-wind'52, the detailed provisions established for more than a hundred years to govern the winding up of a company." Rescission Before turning to examine these propositions, some reference should be made to a proposition which was said in the joint reasons in Webb not to be in issue53. It was common ground in Webb that the holder of shares ordinarily loses any right to rescission on winding up. In Houldsworth itself, Earl Cairns LC had noted that it was admitted and could not have been denied that, after the commencement of the winding up, it was too late for rescission54. Shortly before Houldsworth, the Lord Chancellor had emphasised, with reference to Oakes v Turquand and Harding55, that upon the commencement of winding up "innocent third parties [would] have acquired rights which would be defeated by the rescission"56. Later, in Civil Service Co-operative Society v 49 (1887) 37 Ch D 191. 50 The joint judgment continued ((1993) 179 CLR 15 at 34): "The Court of Appeal dismissed an appeal from the decision of Kay J, principally by reference to the decision in Houldsworth. However, Lopes LJ agreed [(1887) 37 Ch D 191 at 206] with the construction placed upon s 38(7) by Kay J. And Cotton LJ, with reference to the applicants, stated [(1887) 37 Ch D 191 at 205] that 'now they come here as shareholders, and in substance retain their shares, and seek to sue the company for breach of the contract under which they took them'." 51 (1993) 179 CLR 15 at 37. 52 See Parkdale Custom Built Furniture Pty Ltd v Puxu Pty Ltd (1982) 149 CLR 191 at 224 per Brennan J. 53 (1993) 179 CLR 15 at 31. 54 (1880) 5 App Cas 317 at 322. 55 (1867) LR 2 HL 325. 56 Tennent v City of Glasgow Bank (1879) 4 App Cas 615 at 621. Blyth57, Isaacs J repeated the fuller explanation by Fry LJ of the attitude of equity which he gave in 1883 as follows58: "Now the general principle is that no contract can be rescinded so as to affect rights acquired bonâ fide by third parties under it. It is true that the creditors and the other shareholders have not acquired direct interests under the contract, but they have acquired an indirect interest. The shareholders have got a co-contributory, the creditors have got another person liable to contribute to the assets of the concern." Isaacs J also emphasised that, in the case of a contract to take shares, equitable relief was essential and that such a contract was not of a character "that at common law ... is rescindable by the act of the party, that is, by mere repudiation ... [which] itself works avoidance"59. In Webb, reference was made60 to the explanation given by Jessel MR of the unavailability of a remedy of rescission after a company is wound up. In argument, the Master of the Rolls stated61 as "doctrine" the proposition that rescission must be impossible after a company is wound up because the company "ceases to exist"; further, he said that this was the meaning of observations by Earl Cairns LC in the then recent decision in Houldsworth. Several points should be made here. The first is that it since has become clear that a winding up has no immediate effect upon the corporate existence or personality, or upon the powers of the company62. Secondly, it is not readily apparent that, when explaining in Houldsworth why the remedy for damages in deceit was not available, Earl Cairns LC relied upon any non-existence of the corporation. 57 (1914) 17 CLR 601 at 613. 58 In re Scottish Petroleum Co (1883) 23 Ch D 413 at 439. 59 Civil Service Co-operative Society v Blyth (1914) 17 CLR 601 at 613. As to the distinction between rescission as understood at common law and as an equitable remedy, see Alati v Kruger (1955) 94 CLR 216 at 223-224. 60 (1993) 179 CLR 15 at 30. 61 In re Hull and County Bank (Burgess's Case) (1880) 15 Ch D 507 at 509-510. 62 Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 598-600 [3]-[11], 611 [49]; Keay, McPherson's The Law of Company Liquidation, 4th ed (1999) at 218-219. Thirdly, however, in administering an equitable remedy such as that of rescission, it is proper to take into account both the supervening, albeit indirect, interests of the shareholders and creditors referred to by Isaacs J in Blyth63, and the changes brought about in the enjoyment of the rights of shareholders and creditors by the administration required by a winding up, even where the claims of creditors will be satisfied. It is in this context that one may agree with the view of Dixon J in Southern British National Trust Ltd v Pither64 that the denial of equitable relief to rescind the contract of membership after winding up was inevitable. However, it is difficult in this area to state propositions in absolute terms. Shortly after Pither, in Elder's Trustee and Executor Co Ltd v Commonwealth Homes and Investment Co Ltd65, Rich ACJ, Dixon and McTiernan JJ held that the plaintiff was entitled to an order for rectification of the register of members and stayed an order for repayment of subscription moneys with interest to enable the plaintiff to prove in the winding up of the company for those moneys. The proceedings had been instituted six weeks before the lodgment of the winding-up petition, but at a time when the company was in a hopeless financial position. Whatever be the basis in principle for the rescission cases, they do not dictate any particular conclusion respecting the denial in Houldsworth of the existence of any remedy in damages. Something more now should be said respecting that case. Houldsworth's Case As noted above, the "principle" derived by the majority in Webb from Houldsworth they identified as being that "a shareholder may not, directly or indirectly, receive back any part of his or her contribution to the capital of the company"66. The majority had earlier in their reasons set out67 a passage from the judgment of Lindley LJ in Addlestone68 in which he stated in similar terms "the principle" on which Houldsworth was decided. The majority in Webb also accepted the thesis to similar effect advanced by Professor Gower, to which further reference will be made. 63 (1914) 17 CLR 601 at 613. 64 (1937) 57 CLR 89 at 114. 65 (1941) 65 CLR 603 at 619-620. 66 (1993) 179 CLR 15 at 33. 67 (1993) 179 CLR 15 at 31. 68 (1887) 37 Ch D 191 at 205-206. Their Honours in Webb acknowledged that the above "principle" could no longer be supported in absolute terms, given provisions in the Code permitting authorised reductions of share capital. These provisions had their origin in the Companies Act 1867 (UK)69, s 9 of which had conferred an express power for a company to include in its Memorandum of Association a power to reduce its capital, although subject to confirmation by the court70. Prior to the enactment of these provisions, the effect of ss 8 and 12 of the 1862 UK Act appears to have been, in the case of a limited company, to prohibit reductions of capital71. In the opinion of the majority in Webb, the statutory provisions for the reduction of capital were "not inconsistent with the Houldsworth proposition" because they proceeded on an acceptance of the reasoning underlying that case; this was that "subscribed capital [is] a protection to creditors"72. However, Houldsworth terms. cannot be Rather, it is the gradual development of legal thought respecting the nature of corporate personality which Isaacs J later traced in Howe73 and the use of inapt analogy drawn from established areas of the law which is manifested in Houldsworth. explained those Houldsworth was an appeal from Scotland in a proceeding on an interlocutory plea by the defenders as to the relevancy of the pursuer's action against the City of Glasgow Bank, in liquidation, for damages caused by fraudulent representations which allegedly induced him to take up stock in the Bank. The procedure adopted in Scotland appears to have been similar to a demurrer. The Bank had been incorporated under the 1862 UK Act as an unlimited joint stock company, but Houldsworth was not decided upon s 38 of the 1862 UK Act, dealing with the liability of members for contributions on a winding up, or upon principles concerning the reduction of capital. Moreover, Houldsworth was decided at a time when the 1862 UK Act was relatively new and when other 69 30 & 31 Vict c 131. 70 See now Div 1 of Pt 2J.1 of the Act, where authorisation by the court is no longer required. 71 See the remarks of Lord Herschell in Trevor v Whitworth (1887) 12 App Cas 409 at 72 (1993) 179 CLR 15 at 33. 73 (1922) 31 CLR 290 at 308-312. areas of law applicable to the relations between members, directors and the company were in a state of fluidity. The Bank had stopped payment on 2 October 1878 and, at an extraordinary general meeting held on 22 October, resolutions were passed for a voluntary winding up; there was a deficiency of some £5 million and this would fall to be made up by calls on shareholders74. Houldsworth claimed against the Bank and the liquidators damages in sums representing the price paid for his shares, a call already made and the anticipated amount of further calls to meet the above deficiency in assets. In that respect, his claim was "for a total relief and indemnification, after the creditors have been fully paid, out of the surplus assets of the company, or out of the private estates of those of his fellow-partners who then remain solvent"75. The Court of Session accepted the Bank's submissions that, while an action for damages might lie against the fraudulent officials of the Bank, the Bank itself had not authorised their actions, nor had it adopted them except in the sense of getting the benefit of the resulting contract; all the company could be asked to do was to give up the contract76. Neither in the Court of Session nor in the House of Lords was the litigation determined by reference to the law respecting admission or ranking of claims in a winding up conducted in accordance with s 38 of the 1862 UK Act. It is incorrect to say, as was remarked in Webb, that the House of Lords "distilled" a proposition for which Houldsworth is authority "from the provisions of the [1862 UK Act]"77. Rather, Houldsworth failed at the threshold; his action in damages did not lie against the Bank. Two issues were considered by the House of Lords in Houldsworth. One, emphasised particularly by Earl Cairns LC78, concerned the existence of a qualification to what he stated as the general rule that a purchaser of goods who bought under a fraudulent misrepresentation may retain the goods and recover any damages sustained by reason of the fraud79. His Lordship held that there was 74 Houldsworth v City of Glasgow Bank (1879) 6 R (Ct of Sess) 1164 at 1170; 16 Sc LR 700 at 704. 75 Houldsworth v City of Glasgow Bank (1879) 6 R (Ct of Sess) 1164 at 1167-1168; 16 Sc LR 700 at 703. 76 See the report of argument in (1879) 6 R (Ct of Sess) 1164 at 1167. 77 (1993) 179 CLR 15 at 33. 78 (1880) 5 App Cas 317 at 323-324. 79 See Clarke v Dickson (1858) El Bl & El 148 [120 ER 463]; Alati v Kruger (1955) 94 CLR 216 at 222. an exception where the plaintiff is a shareholder who retains the shares acquired by reason of the fraud of the agents of the company, but seeks damages against the company. Such a claim was said by the Lord Chancellor to be80: "inconsistent with the contract into which he has entered, and by which he wishes to abide; in other words, he is in substance, if not in form, taking the course which is described as approbating and reprobating, a course which is not allowed either in Scotch or English law". In one part of his speech, Lord Hatherley spoke in similar terms81. In Addlestone, Lindley LJ appeared to regard this as the sole principle for which Houldsworth stood82. References here to inconsistent positions and approbating and reprobating appear to be to the common law rules requiring choice between alternative remedies, for example, between affirming or avoiding a contract induced by fraud83. No such choice was required where the contract for sale of goods was affirmed and damages sought in deceit. The reason given by Earl Cairns LC for a different principle where shares had been acquired was that recovery of damages would be "inconsistent" with the contract, affirmed by the shareholder. Analogies with what were seen as principles of partnership law were relied on by the Lord Chancellor as follows84: "It is clear that among the debts and liabilities of the company to which the assets of the company and the contributions of the shareholders are thus dedicated by the contract of the partners, a demand that the company, that is to say, those same assets and contributions, shall pay the new partner damages for a fraud committed on himself by the company, that is, by himself and his co-partners, in inducing him to enter into the contract which alone could make him liable for that fraud, cannot be intended to be included. Any such application of the assets and contributions would not be in accordance but at variance with the contract into which the new partner has entered." 80 (1880) 5 App Cas 317 at 325. 81 (1880) 5 App Cas 317 at 333. 82 (1887) 37 Ch D 191 at 205-206. 83 See the discussion by Viscount Maugham in Lissenden v CAV Bosch Ltd [1940] AC 412 at 417-418. 84 (1880) 5 App Cas 317 at 325. That reasoning bears the marks of its time. So, also, does the ground upon which Lord Selborne and Lord Blackburn particularly relied. This concerned the extent to which the law of agency rendered a company liable for the fraud of its directors. An appreciation of what was involved on this branch of the reasoning is assisted by looking to the course of the litigation in Houldsworth. The Lord Ordinary assoilzied (ie, set free or absolved) the defenders85 on the basis that the case was governed by the decision of the House of Lords in another appeal from Scotland, Western Bank of Scotland v Addie; Addie v Western Bank of Scotland86. The pursuer then appealed to the Inner House of the Court of Session87. By majority88, the Inner House dismissed the appeal89. Addie was expressly relied upon by two members of the majority90. Likewise, all members of the House of Lords relied upon Addie in determining the appeal91, Lords Selborne and Blackburn very clearly so. Addie's Case In Addie, a shareholder had claimed that he had been induced to purchase shares in the bank92 by false and fraudulent representations of the directors and sought reduction of the deeds of transference of the shares and restitutio in integrum (that is, rescission) or, alternatively, damages. As later in Houldsworth, the defenders pleaded relevancy. In the House of Lords, a distinction was drawn 85 See Houldsworth v City of Glasgow Bank (1879) 6 R (Ct of Sess) 1164 at 1166; 16 Sc LR 700 at 702. 86 (1867) LR 1 Sc & Div 145. 87 By a reclaiming note, a procedure described in Walker, A Legal History of Scotland, vol 6 (2001) at 534-535. 88 Lord President Inglis, Lord Deas, Lord Mure; Lord Shand dissenting. 89 Houldsworth v City of Glasgow Bank (1879) 6 R (Ct of Sess) 1164; 16 Sc LR 700. 90 Houldsworth v City of Glasgow Bank (1879) 6 R (Ct of Sess) 1164 at 1175 per Lord Deas, 1177 per Lord Mure; 16 Sc LR 700 at 707, 708. 91 (1880) 5 App Cas 317 at 326 per Earl Cairns LC, 330 per Lord Selborne, 332 per Lord Hatherley, 337 per Lord Blackburn. 92 The bank had been established as an unincorporated banking co-partnership but, for the purposes of a voluntary winding up, had been incorporated and registered under the Joint Stock Companies Act 1856 (UK) (19 & 20 Vict c 47), as amended by the Joint Stock Companies Act 1857 (UK) (20 & 21 Vict c 14) and 20 & 21 Vict c 80. between the claim for rescission (from which on the facts the pursuer was disqualified by lapse of time and intervening events93) and the action for deceit, which did not lie in any circumstances. Lord Chelmsford LC said94: to rescind the contract on "Where a person has been drawn into a contract to purchase shares belonging to a company by fraudulent misrepresentations of the directors, and the directors, in the name of the company, seek to enforce that contract, or the person who has been deceived institutes a suit against the company the misrepresentations are imputable to the company, and the purchaser cannot be held to his contract, because a company cannot retain any benefit which they have obtained through the fraud of their agents. But if the person who has been induced to purchase shares by the fraud of the directors, instead of seeking to set aside the contract, prefers to bring an action for damages for the deceit, such an action cannot be maintained against the company, but only against the directors personally." (emphasis added) the ground of fraud, Lord Cranworth was more explicit. He said95: "[T]he true principle is, that these corporate bodies, through whose agents so large a portion of the business of the country is now carried on, may be made responsible for the frauds of those agents to the extent to which the companies have profited from these frauds; but that they cannot be sued as wrong-doers, by imputing to them the misconduct of those whom they have employed. A person defrauded by directors, if the subsequent acts and dealings of the parties have been such as to leave him no remedy but an action for the fraud, must seek his remedy against the directors personally." (emphasis added) Similar opinions had earlier been expressed by each of their Lordships in New Brunswick and Canada Railway and Land Co v Conybeare96. That appeal arose from a Chancery suit to rescind for misrepresentation a contract to take up shares. The suit failed on the facts, but it was said that, if the charge of equitable fraud 93 Addie was decided on 20 May 1867, Oakes v Turquand and Harding (1867) LR 2 HL 325, which in turn was followed by Tennent v City of Glasgow Bank (1879) 4 App Cas 615, was to be decided on 15 August 1867. These cases largely ruled out the rescission remedy in a winding up, as noted earlier in these reasons. 94 (1867) LR 1 Sc & Div 145 at 157-158. 95 (1867) LR 1 Sc & Div 145 at 167. 96 (1862) 9 HLC 711 at 740, 749 [11 ER 907 at 919, 922]. had been sustainable against the directors, the company would not have been liable for their acts unless it had adopted them. At the time New Brunswick and Addie were decided, there was considerable uncertainty as to whether a principal could be rendered liable in deceit for the fraudulent misrepresentations of an agent when the principal neither knew of nor authorised the fraud. The Court of Exchequer Chamber had divided equally on the question in Udell v Atherton97. The Exchequer Chamber subsequently distinguished Udell in Barwick v English Joint Stock Bank98, where Willes J delivered the sole reasons for himself, Blackburn, Keating, Mellor, Montague Smith and Lush JJ. In New South Wales v Lepore99, Gummow and Hayne JJ said of Barwick and its later adoption in Lloyd v Grace, Smith & Co100, that it was thereby established that: "the circumstance that the employee who practises a fraud upon a third party does so for the benefit of the employee not the employer, is no answer to the liability of the employer if the employer, whilst not authorising 'the particular act', has placed the employee in a position 'to do that class of acts'; the employer then 'must be answerable for the manner in which that [employee] has conducted himself'101". Houldsworth and Addie Barwick was decided on 18 May 1867, after argument in Addie had concluded, and two days before the House of Lords delivered judgment on that appeal. The matter seems to have been regarded as still unsettled when Houldsworth came before the House of Lords a decade later, as the observations 97 (1861) 7 H & N 172 [158 ER 437]. Pollock CB and Wilde B were in favour of the principal's liability, whereas Bramwell B and Martin B were in favour of the principal's immunity. 98 (1867) LR 2 Ex 259. 99 (2003) 212 CLR 511 at 590 [228]. See also at 613 [304] per Kirby J. 101 Lloyd v Grace, Smith & Co [1912] AC 716 at 733 per Lord Macnaghten, adopting the statement of Willes J in Barwick v English Joint Stock Bank (1867) LR 2 Ex of Lord Blackburn reveal102. However, in Houldsworth, the House of Lords is to be regarded as having rationalised Barwick and Addie by confining Addie to the case of persons who had been induced by the directors to subscribe for shares in a corporation. Ashburner, writing in 1902, considered Houldsworth as establishing the "one exception to the rule that the principal is liable for the frauds of his agent committed in the matter of his agency and for the principal's benefit"103. Houldsworth was treated in similar terms in the third edition of Kerr's Treatise on the Law of Fraud and Mistake, which also appeared in 1902104. But was this "exception" soundly based? The better view is that it was not. Houldsworth sustained the outcome in Addie in the case of these transactions with subscribers by reference to the "contract" into which the shareholder had entered, and which the shareholder must affirm in order to sustain the action. Mention has already been made of the approach taken, particularly by Earl Cairns LC, in relation to this contract. It was characterised variously by their Lordships as requiring that the assets of the company should be applied in paying its "antecedent debts and liabilities"105, that shareholders "should all contribute equally to the payment of all the company's debts and liabilities"106, and that shareholders should "contribute to make good all liabilities of the co-partnership as if this incoming partner had been a member of the partnership from the beginning"107. It is not easy to discern why an action for damages was inconsistent with the features of the contract whereby shares were taken up. Nor is it clear why this inconsistency should have prevented the shareholder from claiming that the fraud of the directors was imputable to the company. Accordingly, Houldsworth should not be regarded in Australia as establishing any principle based upon the above reasoning; nor does it establish 102 (1880) 5 App Cas 317 at 339; Lord Blackburn treated Barwick as overruled by Addie. 103 Principles of Equity, (1902) at 404. 104 At 86. The same passage appeared at 102 of the sixth edition, Kerr on Fraud and Mistake, published in 1929. 105 (1880) 5 App Cas 317 at 325 per Earl Cairns LC. 106 (1880) 5 App Cas 317 at 329 per Lord Selborne; cf at 333 per Lord Hatherley. 107 (1880) 5 App Cas 317 at 337 per Lord Blackburn. any exception respecting the responsibility of a principal for the frauds of an agent, stated by Ashburner in the passage referred to above. It is true that acceptance of the doctrine associated with the subsequent decision in Salomon108 of the endowment of the corporation with a distinct legal personality has not gone without modern criticism. In a revenue case, Gorton v Federal Commissioner of Taxation109, Windeyer J remarked upon "the unreality and formalism" engendered in the law by Salomon. The facts considered in Halloran v Minister Administering National Parks and Wildlife Act 1974110 were dictated by fiscal considerations111, and may be a recent example of that tendency, although the steps taken nevertheless had legal efficacy112. The propositions that a corporation has no hands save those of its officers and agents and no mind save the mind of those who guide its activities, and cannot be subjected to the range of punishments visited upon a natural person, in general has not, as Brennan J explained in Environment Protection Authority v Caltex Refining Co Pty Ltd113, relieved corporations from the attribution of criminal guilt. However, as Caltex decided, the considerations which supported the privilege of individuals against self-incrimination did not sustain the extension of the privilege to corporations. They cannot be witnesses or swear or affirm an affidavit. Nor may the commercial interests of a corporation suffice for protection by a tort based on protection of privacy114. But considerations of that nature do not support the outcome in Houldsworth. 108 [1897] AC 22. Professor Sealy writes that the contemporary significance of Salomon lay in the endorsement of the right to claim the benefit of limited liability by what was essentially a single-member company, some years before the private company was accorded formal recognition by the Companies (Consolidation) Act 1908 (UK): "Modern Insolvency Laws and Mr Salomon", (1998) 16 Company and Securities Law Journal 176 at 176. 109 (1965) 113 CLR 604 at 627. 110 (2006) 80 ALJR 519; 224 ALR 79. 111 (2006) 80 ALJR 519 at 523-524 [18]-[19]; 224 ALR 79 at 84-85. 112 (2006) 80 ALJR 519 at 530 [56]; 224 ALR 79 at 93-94. 113 (1993) 178 CLR 477 at 514-515. 114 See Australian Broadcasting Corporation v Lenah Game Meats Pty Ltd (2001) 208 CLR 199 at 226 [43], 231 [58], 256-258 [126]-[132], 279 [190]-[191], 326-327 Webb and Houldsworth Reference already has been made to the reliance upon the thesis of Professor Gower to the effect that the decision in Houldsworth is explicable by the notion that share capital is a "guarantee fund" for creditors115. He sought to rationalise what was described as the "anomalous rule" in Houldsworth by reference to later conceptions as to the nature of share capital explained in Trevor v Whitworth116 and its sequelae. Section 13 of the Limited Liability Act 1855 (UK)117 had provided that a company should be wound up once three quarters of its subscribed capital stock had been lost. But the validity of a proposition such as that of Professor Gower could not have been sustained once the point was reached after the 1862 UK Act that there was no impediment to a company carrying on business even once it had exhausted its original capital through trading. In any event, there is much to be said for the view that a company satisfying its liability in tort to a member should not be characterised as attempting an unauthorised reduction of capital. The award of damages is not charged upon any fund representing capital. Large awards may adversely affect the market value of shares in the company, but they do not require any return of capital. What this discussion reveals is that the "principle" attributed by the majority in Webb to Houldsworth, as the first step in their reasoning, reflects the attempt to rationalise that case which is discussed above. Further, as to the second step in Webb, that concerned with s 360(1) of the Code, this provision did not embody that "principle", any more than it embodied the decision in Houldsworth. That case, as I have explained, must be understood in the milieu of developing doctrine applicable to company law. Neither the "principle" attributed to Houldsworth, nor Houldsworth itself, had anything to do with the presently relevant provisions of the Act and the Code. Section 360(1)(k) of the Code cannot have been enacted on the basis that Houldsworth represents an "entrenched rule of company law" which must be regarded as having been 115 The Principles of Modern Company Law, (1954) at 314-315. 116 (1887) 12 App Cas 409. 117 18 & 19 Vict c 133. "expressly considered and approved" by the legislature118. The origins of s 360(1)(k) may be traced to the 1862 UK Act, which preceded Houldsworth. The construction proffered by Kay J in Addlestone The third proposition upon which the majority judgment in Webb proceeded was that par (k) of s 360(1) of the Code bore the same meaning as that ascribed to s 38(7) of the 1862 UK Act by Kay J in Addlestone119. Indeed, it may be said that it was only by the efforts of Kay J in that case that the section was explicitly related to Houldsworth, because Kay J referred to it to bolster his conclusion that the statute barred the claim120. In Addlestone, existing shareholders were given the opportunity to take up new £10 preference shares at a discount of 25 per cent to par value, the share certificates reciting that the shares were fully paid-up. However, no contract was registered in accordance with s 25 of the Companies Act 1867 (UK)121. As a result, the preference shareholders were included in the list of contributories in the winding up of the company. A call was ordered that they make up the 25 per cent discount in cash. Having paid the call, the shareholders sought to prove in the winding up for damages "for breach of contract or otherwise" on the basis that the company had failed to issue fully paid-up shares as promised. The action apparently proceeded as one for breach of contract, the breach being failure by the company to meet its promise to provide fully paid-up shares. The application to have the proof admitted failed. Kay J held that the claim was "unquestionably" made by the applicants in the character of members of the company, and that therefore the question was whether it was also for sums due "by way of dividends, profits, or otherwise" for 118 cf Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 at 40 per 119 (1887) 37 Ch D 191. 120 Earlier in his career, Kay J had been counsel for the successful respondents in Houldsworth itself, although the respondents had not been called upon by the House of Lords in that case: (1880) 5 App Cas 317 at 322. 121 30 & 31 Vict c 131. Section 25 stated: "Every Share in any Company shall be deemed and taken to have been issued and to be held subject to the Payment of the whole Amount thereof in Cash, unless the same shall have been otherwise determined by a Contract duly made in Writing, and filed with the Registrar of Joint Stock Companies at or before the Issue of such Shares." the purposes of s 38(7) of the 1862 UK Act122. In this respect, his Lordship said123: "To determine that it is necessary to consider the scope and intent of [s 38(7)] in the statute. The obvious analogy is the case of a partner attempting to prove in bankruptcy in competition with the creditors of the firm. But whether this section is intended to have entirely the same effect or not, it is quite clear from the language of it that a debt due to a member in that character, such as for dividends, directors' fees, or the like, could not be so proved." Notwithstanding that, it is not clear that the partnership analogy remains an "obvious" one. The analogy had suggested itself to Earl Cairns LC in Houldsworth124, and that case did concern an unlimited company. References to partnership indicate an incomplete understanding of the separate nature of the personality of the corporate entity from those of the corporators. At the time Addlestone was decided, partnership law and company law were not distinctly regarded; Lindley's Treatise on the Law of Partnership, including its application to Companies was then in its fourth edition125. The applicable English rule in partnership to which Kay J was referring was that regarded by Lord Eldon as "settled law", namely that a partner "shall not prove in competition with the creditors of the firm, who are in fact his own creditors"126. However, the 1862 UK Act was designed as a general statute applicable in England and Scotland, unlike some of the earlier legislation in the field127, and the law of partnership significantly differed in a relevant respect. 122 (1887) 37 Ch D 191 at 197-198. 123 (1887) 37 Ch D 191 at 198. 124 (1880) 5 App Cas 317 at 325. 125 The treatise was divided into two parts "each of which should be complete without the other" in the fifth edition, published in 1888: see Lindley, A Treatise on the Law of Partnership, 6th ed (1893) at v. 126 Ex parte Sillitoe; In the matter of Goodchilds and Co (1824) 1 Gl & J 374 at 382; see Lindley, A Treatise on the Law of Partnership, including its application to Companies, 4th ed (1878) at 1187ff. 127 A point made in 1867 by Lord Colonsay in Oakes v Turquand and Harding (1867) LR 2 HL 325 at 377. In Oakes v Turquand and Harding128, Lord Colonsay had remarked129: "Your Lordships know that the law of Scotland in regard to partnerships was not the same as the law of England – that in Scotland, as in some other countries, the separate persona of an unincorporated trading company was fully recognised, and that joint stock share companies for trading existed there at common law, and that the country had derived great advantage from them, as is recorded in a statute passed in the reign of George IV. There were other differences also." Lord Colonsay then turned his attention to the 1862 UK Act, saying130: "Now, I apprehend that the [1862 UK Act] was intended to establish a uniform system of law in both ends of the island in regard to such companies. But if, in reference to joint stock companies in England, the provisions of the statute are not to be read in a literal or obvious sense, but are to be overridden, and qualified, and controlled by implications and inferences deduced from rules of the law of England applicable to a state of things antecedent to the existence of any such companies, then, by parity of reasoning in reference to joint stock companies in Scotland, the statute would be qualified and controlled by implications and inferences deduced from the different principles that had prevailed in Scotland; and thus there would be again produced a diversity instead of the uniformity which it was the object of the statute to establish." Nevertheless, in Addlestone, having posed the question, and the (inadequate) analogy with partnership, Kay J continued131: "Now, is the mischief against which [s 38(7)] is intended to provide the same in the case before me? Practically, what these Applicants are seeking to recover by their proof is a dividend in respect of the £2 10s per share which they have been compelled to pay in the winding-up. But as shareholders they have contracted that they will pay this money, and that it shall be first applied in payment of the creditors whose debts are not due to them as members of the company – that is, they are practically admitting their liability to pay the £2 10s per share to such other creditors and yet seeking to get part of it back out of the pockets of those very 128 (1867) LR 2 HL 325. 129 (1867) LR 2 HL 325 at 377 (original emphasis). 130 (1867) LR 2 HL 325 at 377-378 (original emphasis). 131 (1887) 37 Ch D 191 at 198. creditors themselves. I confess it seems to me that the money so claimed is not only claimed in the character of members but that the claim is just as unreasonable as if it were a claim of dividends or profits, and that, accordingly, it comes within the words "or otherwise", which I have read from s 38." When referring to the shareholders having entered into a contract, Kay J would have been mindful of those principles relating to deeds of co-partnership which established and governed the relations between partners. These were the forebears of the memoranda and articles of association of companies, which, however, acquired statutory force. The body of shareholders does not comprise a company in the same sense as partners constitute their partnership. To say that a shareholder has "contracted" to contribute money to pay the company's creditors does not answer the question as to whether that shareholder is a creditor whose debt is not due to him as a member of the company. That is the key question required to be answered by s 563A of the Act. It is reasonably clear from the foregoing that Kay J was construing s 38(7) as if it were the statutory equivalent for companies of the rule applicable on the bankruptcy of a partnership. The "construction" of the section proffered by Kay J (which the majority in Webb adopted) was not so much an analysis and construction of the statutory provision as an assimilation of the statutory provision with the prior learning applicable to the law of partnership. That is not to say his Lordship was wrong so to do at the time, but doubt must be entertained as to the appropriateness of perpetuating this construction with respect to modern statutes such as the Code and the Act. The statutory cause of action The fourth proposition upon which the majority in Webb proceeded was that the TP Act could not eliminate the long-established "detailed provisions" governing the winding up of a company by a "side-wind"132. It was upon this point that McHugh J, in dissent, departed from the majority133. Those "detailed provisions" were the subject of the first two propositions upon which the majority reasoned. Given the foregoing discussion, this final conclusion is also open to question in so far as it proceeds from unsound premises. Whatever may be said of the TP Act, the causes of action relied upon by Mr Margaretic in these appeals include those conferred by the Act itself. Those causes of action are likely to be relied upon where, under other provisions of the 132 (1993) 179 CLR 15 at 37. 133 (1993) 179 CLR 15 at 41. Act, there is an insolvent administration of the company in question. The claims in this case include a claim for compensation pursuant to s 1325 of the Act, for breach by the company of its obligations of continuous disclosure under s 674 or, alternatively, misleading and deceptive conduct in relation to a financial product in contravention of s 1041H of the Act. Section 1325(2) confers the right to claim compensation on any person. There is no warrant for reading down that right by reference to the provisions of Div 6 of Pt 5.6, in which s 563A is found. Conclusion The foregoing reveals that the validity of the four key propositions upon which the decision of the majority in Webb depended is open to question. In my view, they should not be accepted as correct in so far as they relate to the Act. In Webb the majority concluded, on the basis of those propositions, that the claims by the holders of the non-withdrawable shares were not debts to be admitted to proof in the winding up of the building society, but were sums owed by the company to them in their capacity as members of the company by way of dividends, profits, or otherwise. Webb concerned the Code where, as Hayne J indicates, claims of the kind now brought by Mr Margaretic (not arising from a contract with the company) would not have been admissible to proof. Nevertheless, it must be doubted whether the result reached by the majority in Webb was correct. However, there is no point in further consideration of that matter here. It suffices to observe that, as a matter of principle, the reliance by Gwalia and ING on Webb does not assist their case. To that it should be added that the reliance by ING upon Houldsworth for a threshold principle of the kind discussed earlier in these reasons should be rejected. I agree in the orders proposed by Hayne J. Kirby 100 KIRBY J. Two appeals are before this Court. They come from a judgment of the Full Court of the Federal Court of Australia, constituted by Finkelstein, Gyles and Jacobson JJ134. That judgment affirmed a decision reached, adversely to the appellants, by the primary judge in the Federal Court (Emmett J)135. The essential issue presented by each appeal concerns the operation of insolvency provisions in the Corporations Act 2001 (Cth) ("the Act"). In effect, it relates to the proof and ranking of claims against an insolvent company as between the general creditors (represented by the appellant in the second appeal ("the second appellant")) and shareholders in the company having claims against the company for alleged misleading and deceptive conduct contrary to other federal legislation (represented by the first respondent in each matter ("the respondent"))136. The general creditors assert that the shareholders' claims are postponed so that they rank after the satisfaction of those creditors' claims. The shareholder claimant asserts that, in this respect, shareholders' claims for damages against the company rank equally with the claims of the general creditors and are not subordinate to them. The resolution of the difference between the parties depends on the meaning and operation of s 563A of the Act. More particularly, it depends on whether, in the facts and circumstances of this case (and upon the assumptions on which the respective arguments of the parties have been litigated), any "debt" owed by the insolvent company to the claimant shareholder, if the claims are proved, is one owed in that person's "capacity as a member of the company". The general creditors say that it is and is thereby postponed. The claimant shareholder says that it is not and asserts that his membership of the company is, in respect of the "debt owed", immaterial both to the "debt" itself and to the reasons why it is "owed". 134 Sons of Gwalia Ltd v Margaretic (2006) 149 FCR 227. 135 (2005) 55 ACSR 365; (2006) 24 ACLC 244. 136 Trade Practices Act 1974 (Cth), s 52; Australian Securities and Investments Commission Act 2001 (Cth), s 12DA; the Act, s 1041H. See also reasons of Kirby A surprising result? A counter-intuitive outcome: The other members of the majority137 have concluded, alike with the judges of the Federal Court138, that the arguments of the general creditors fail. In the result, upon the assumptions on which the proceedings have been conducted, any "debt" later demonstrated to be "owed" by the company to the respondent will not be postponed until all debts139 owed to general creditors have been satisfied, but will rank with them in the distribution of the assets of the company. This enhances significantly the claimant shareholder's prospects of recovery. On the face of things, this conclusion seems to be counter-intuitive. It appears somewhat difficult to reconcile with the main thrust of this Court's reasoning and conclusion in Webb Distributors (Aust) Pty Ltd v Victoria140. I am inclined to agree with the analysis of that decision contained in the reasons of Gummow J141. In light of the present legislation, specifically s 563A, there would appear to be no foundation for the operation of the distinction drawn in that case. Webb Distributors is proof once again (if further proof is needed) of the dangers of attributing undue weight to what was said in England in the 19th century when attempting to construe contemporary Australian legislation142. The counter-intuitive impression arises in this way. The respondent's claim is made against the company of which he was, and still is, a member. His claim concerns the value of the very shares by which his membership of that company was procured, that is, by the acquisition on the Australian Stock Exchange of the shares in the company at the then market rate for such shares. 137 Reasons of Gleeson CJ at [31]-[32]; reasons of Gummow J at [44]-[49]; reasons of Hayne J at [206]-[207]; reasons of Heydon J at [261]-[262]; reasons of Crennan J at [265], [273]; cf reasons of Callinan J at [251]-[259]. 138 (2006) 149 FCR 227 at 240-243 [44]-[51] per Finkelstein J, 244-245 [61]-[62] per Gyles J, 251-254 [116]-[135] per Jacobson J. 139 Note that "debt" and "claim" are used interchangeably in the Act, including s 563A. See reasons of Gleeson CJ at [10]. 140 (1993) 179 CLR 15. 141 Reasons of Gummow J at [50]-[98]. 142 cf Coventry v Charter Pacific Corporation Ltd (2005) 80 ALJR 132 at 148 [76]-[77]; 222 ALR 202 at 220-221; Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 80 ALJR 1509 at 1527-1528 [77]- [84]; 229 ALR 1 at 21-23. Kirby The foundation of the respondent's complaint against the company is that it did not conform to the applicable federal legislation requiring disclosures to be made, and obliging the avoidance of misleading and deceptive conduct, which could deceive the very persons, that is, potential shareholders, who were contemplating the acquisition of shares in, and membership of, the company. Continuous disclosure to shareholders: The respondent was, it is true, not seeking to recover any paid-up capital or to avoid any liability to make contribution to the company's capital. In this sense, his membership of the company was not, as such, definitive of the capacity in which he made his claim against the company when it suddenly appeared that the shares in the company, just acquired, were worthless143. However, one of the principal reasons for the enactment of the federal legislation, invoked by the respondent to establish his claim against the company, was the provision of protection, in circumstances such as arose in his case, to persons like him. The obligation of continuous disclosure, introduced by the Act144, was specifically designed and enacted to protect shareholders and potential shareholders from losses that might be suffered from undisclosed facts and to afford a foundation that would prevent, compensate for and reduce the incidence of such losses145. In these circumstances, the type of claim brought by the respondent is not atypical or unexpected. It is a claim by a shareholder for deceptive and misleading conduct, so far as it affected potential shareholders for which the Federal Parliament, by its enactment, has provided for new remedies that are designed, ultimately, to improve the protection of (and remedies available to) Australian shareholders as such. This might not be the only purpose of the legislation or the sole circumstance in which it applies. But it certainly is a typical circumstance and, one might say, a usual and predictable one. This fact gives rise to an arguable foundation for a submission, on the part of the general creditors represented by the second appellant, that the claim made by the respondent against the company whose shares he has acquired is to be characterised as one made in respect of an alleged "debt owed by a company to a person in the person's capacity as a member of the company". A purposive approach: The ultimate duty of a court in a case of this kind is to give effect to the meaning of the law as expressed by the Parliament. That meaning is ascertained from the language of the enactment. But it is also ascertained by reference to the context in which the provision in question appears 143 cf reasons of Gleeson CJ at [31]. 144 Reasons of Hayne J at [141] referring to the Act, ss 674 and 675. 145 The Act, s 1325, particularly s 1325(5)(e). Kirby and by perceptions that may be derived from that context, the legislative history and the apparent policy of the Act, as to the respective rankings of claims against a company, which has become insolvent, of general creditors as a class and disaffected shareholders, represented by persons such as the respondent. One can readily conceive why, as a matter of policy, strong arguments can be mounted that claims by persons such as the respondent should be postponed to claims made by the general creditors of the insolvent company. Putting it broadly, most general creditors, although not all, will be innocent of the business and entrepreneurial decisions of the company that led to its insolvency. Most will have dealt with the company as outsiders in good faith on the basis of its incorporation and, where applicable, its listing on the Stock Exchange and its subjection to regular and rigorous legal obligations. On the other hand, persons such as the respondent are investors. As such, they are not involved in the provision of goods and services to the company, as ordinary creditors generally are. Their interest in membership of the company is with a view to their own individual profit. Necessarily, their investment in the company involves risks, albeit risks increasingly informed by mandatory disclosures. In particular, where, as here, the company was involved in the extraction of gold, the acquisition of which notoriously and historically involves substantial risks and a significant degree of chance, the purchase of shares will commonly entail a measure – even a high measure – of speculation. Such speculation would ordinarily be expected to fall on the shareholders themselves, not shared with general creditors who would thereby end up underwriting the investors' speculative risks. The policy of the Act: If, therefore, one were to approach the meaning of s 563A of the Act, in proceedings such as the present, with an object to give effect to a presumed general policy of the Act, it would by no means be surprising if a textual and contextual analysis of the Act had the consequence of postponing the claims against the company of investors, such as the respondent, to those of the general creditors. To the claim that he was the victim of misleading and deceptive conduct, the answer of the general creditors would inferentially be to the effect: "By purchasing your shares in a gold mining venture, you engaged in an inescapably risky and speculative operation. Now you claim to have been deceived. But that kind of risk is one that is inherent in the very acquisition of shares in a company by which you become a member of it. You can make your claim for deception; but it ranks after the general creditors have recovered their proved losses. Your claim or 'debt', if owed at all, is owed to you in your capacity as a member of the company." Whilst the interpretation to be given to s 563A of the Act cannot be confined to the circumstances of gold mining companies or the investment decisions of persons such as the respondent, his case and its circumstances are by no means unique. Nor is his claim singular or atypical. One can thus acknowledge significant policy reasons, arguably consistent with the language, Kirby purpose and design of the Act, that would postpone the respondent's entitlement to the recovery of his "debt owed by [the] company" to the debts that the company owed as a result of its operations to the general creditors, whose involvement with the company is typically not, as such, risky or speculative in character. Compatibility with past authority: The previous decision of this Court in Webb Distributors is described elsewhere as proceeding upon a "chronological curiosity"146 and resting uneasily on a questionable interpretation of the "elusive"147 principle purportedly derived from Houldsworth v City of Glasgow Bank148. On the other hand, the result in Webb Distributors is not so puzzling if the approach taken to the statutory issue presented is informed by the type of considerations just mentioned. I have explained those considerations because they make me more sympathetic to the arguments of the second appellant than might otherwise appear. Those considerations rest, ultimately, on the perceived claims to priority respectively of general creditors and investing shareholders, the latter of whom become members of a company that fails and who then seek to recoup their resulting losses from the assets of the company itself. In such a conflict, it is not difficult (at least for me) to feel a greater sympathy for the general creditors and their claim to priority in the recovery of their claims149. Nevertheless, in the end, alike with the other members of the majority, I have concluded that a correct analysis of the statutory provisions in issue in these appeals does not sustain the arguments of the general creditors. I will briefly say why. Rejecting general postponement of members' claims A statutory question: The starting point for the answer is a clear appreciation that the issue presented for decision is, from first to last, one of statutory interpretation. Relevantly, it is presented by the terms of s 563A of the Act. It is not concerned with the application of common law principles which anticipated, or would circumvent the application of, the enacted statutory criteria150. 146 Reasons of Gleeson CJ at [14]. 147 Reasons of Gleeson CJ at [14]. 148 (1880) 5 App Cas 317. See also reasons of Gleeson CJ at [13]-[16], [20]-[32]; reasons of Gummow J at [47]-[49], [53]-[79], [83]-[86], [98]. 149 See also reasons of Callinan J at [241]. 150 cf reasons of Gleeson CJ at [11]; reasons of Gummow J at [35]-[37]; reasons of Kirby A study of past decisions, in this country, in England and elsewhere, may be helpful, by analogy, to a court applying the relevant statutory provisions to the case in hand. This is so because of the long history of statutory provisions like s 563A of the Act, detailed by Hayne J in his reasons151. However, in the end, the duty of this Court, in disposing of the appeals, is to give effect to the provisions of s 563A itself152. Having regard to the limited question which the parties to the appeals chose to contest, the question presented for analysis effectively comes down to the interpretation of the phrase "in the person's capacity as a member of the company". It is of the nature of contestable statutory provisions (such as this one) that persuasive arguments can commonly be mounted in support of the alternative interpretations153. This is why, in cases such as the present, it is impossible to be dogmatic about the way in which a provision such as s 563A operates. Nonetheless, this Court has the obligation to state, and explain, why it chooses one interpretation rather than another. That interpretation, once adopted, becomes the correct and only interpretation to be applied – at least until the Parliament amends the provision or this Court changes its mind. In repeated decisions of the Court in recent years, where a statutory problem is proffered for resolution, the Court has insisted, with a very high degree of uniformity154, that analysis must commence and finish with the text of the legislation155. The analysis must proceed, not only by reference to the words of the statutory provision but also by reference to the object and purpose of those words156. 151 Reasons of Hayne J at [149]-[167]. 152 cf Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 80 ALJR 1509 at 1527-1528 [77]-[84]; 229 ALR 1 at 21-23. 153 Federal Commissioner of Taxation v Scully (2000) 201 CLR 148 at 175-176 [54]; News Ltd v South Sydney District Rugby League Football Club Ltd (2003) 215 CLR 563 at 580 [42] per McHugh J. 154 But cf Palgo Holdings Pty Ltd v Gowans (2005) 221 CLR 249 at 264-266 [35]- 155 Central Bayside General Practice Association Ltd v Commissioner of State Revenue (2006) 80 ALJR 1509 at 1528 [84] fn 64; 229 ALR 1 at 22-23, where the line of authority is collected. 156 Kingston v Keprose Pty Ltd (1987) 11 NSWLR 404 at 423 per McHugh JA approved Bropho v Western Australia (1990) 171 CLR 1 at 20. See also Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 321; Acts Interpretation Act 1901 (Cth), s 15AA. Kirby It follows that any presumed general subordination of shareholder claims on the assets of an insolvent company to the claims of general creditors, must give way to the true meaning of the legislation that actually governs the case. In this instance, that involves unpacking the meaning of s 563A of the Act and, in the end, nothing else. If any general presumptions do not accord with the legislation, properly construed, it is the legislation that must prevail for it expresses the parliamentary command. Statutory interpretation is ultimately, A nuanced command: Starting from this vantage point, it is evident that s 563A of the Act does not adopt a general policy (as it might have done) of "members come last"158 in a corporate insolvency, as Gleeson CJ puts it in his reasons. To the contrary, the terms of s 563A of the Act, reflecting a very long legislative history, adopt a less absolute, and more nuanced criterion. Thus, it is not every "debt" (which it was agreed159 included a "claim" for unliquidated damages) owed by the company to a person who is a member of the company that is postponed. Instead, it is only such "debts" as are owed "in the person's capacity as a member of the company". This more limited ambit of postponement is clearly deliberate. Its exact boundaries may be disputable. But they are different from a simple postponement by reference to the fact that the claim is made by "a member of the company". The identity of the claimant is not the chosen criterion for postponement. Instead, the criterion is addressed to the character and incidents of the "debt", that is, the claim. It would have been easy for the Parliament, if that had been its purpose, to make the identity of the claimant the relevant test for postponement. However, that course was not chosen. Instead, a more difficult and contestable criterion was enacted. It is the duty of courts to give effect to the criterion chosen; not some other criterion which a judge might consider to be more appropriate or more just to the respective claims of general creditors, on the one hand, and disappointed investors who have acquired the company's shares, on the other. 157 Trust Company of Australia Ltd v Commissioner of State Revenue (2003) 77 ALJR 1019 at 1029 [68]; 197 ALR 297 at 310; Network Ten Pty Ltd v TCN Channel Nine Pty Ltd (2004) 218 CLR 273 at 305-306 [87]. 158 Reasons of Gleeson CJ at [19]. 159 Reasons of Gleeson CJ at [10]. Kirby It is true that the application of the criterion, so explained, depends in every case on the facts and circumstances of the "debt" in question160. It is also true that these appeals have been conducted upon various assumptions which may, or may not, be borne out if ever a trial court comes to consider whether the respondent can establish a "debt" of the kind he asserts161. Nevertheless, it is proper to proceed upon those assumptions and upon the understanding of the facts and circumstances accepted in the Federal Court. When this is done, the focus for decision, so as to resolve the issues in the appeals, is upon the character of the "debt" allegedly owed to the respondent. That question is not decided by the simple fact that the "debt" is allegedly owed by the company to a person who is a "member of the company". This is why it is unhelpful, in construing s 563A, to distinguish between shares acquired by subscription, and those acquired by transfer162. Moreover, the alleged failure of the company to comply with duties of disclosure does not, without more, render the consequent "debt" one owed in the member's capacity as a member of the company. The disclosure requirements have been adopted by the Parliament for the protection of persons other than members of the company – including the investing public more generally. The requirements are of concern to corporate regulators, media, industry and university observers, macro-economists and bankers as well as employees and the general public having an interest in corporate disclosures. At the time of the alleged non-disclosures, the respondent was not a member of the company at all. In this sense, the disclosures were not then received in that capacity but as a consumer of corporate information and as an investor. Examples of "debts": A third consideration is that s 563A of the Act gives specific examples of the type of "debt" which is "owed by a company to a person in the person's capacity as a member of the company". It is such "debts" that will be "postponed until all debts owed to, or claims made by, persons otherwise" have been satisfied. The examples are stated to be "dividends, profits or otherwise". It is true that the phrase "or otherwise" in this formulation is expressed in language of complete generality. Standing alone, it would be broad enough to include a "debt" owed by a company pursuant to a claim for unliquidated damages for proof of misleading and deceptive conduct giving rise to remedies 160 Reasons of Hayne J at [201], [205]. 161 Reasons of Gleeson CJ at [9]. 162 See reasons of Gleeson CJ at [28]-[32]; reasons of Gummow J at [51]-[52]; reasons of Hayne J at [205]. Kirby under the specified federal legislation. This point is not conclusive. However, to the extent that the Parliament has identified the kind of "debts" owed by a company to a person "as a member of the company", the specification of "dividends" and "profits" suggests that what is involved in the postponement are sums constituting the ordinary revenue (and possibly the capital) of the company and not claims of an extraordinary and exceptional kind for false and misleading conduct. So far as the Parliament has given an explicit indication, by the specified examples, of the claims that will be postponed ("dividends, profits"), these are apt to exclude claims such as those made by the respondent. Therefore, if the phrase "or otherwise" is construed ejusdem generis with the immediately preceding words, unliquidated claims for damages for misleading and deceptive conduct do not fit comfortably with debts such as "dividends" and "profits" which normally inhere in the ordinary operation of the company as such. Earlier judicial conclusions: Given that statutory language such as that now under scrutiny is often disputable, it is not without significance that, upon the problem presented by the present appeals, all of the judges of the Federal Court have reached the same conclusion, adversely to the appellants163. Similarly, when a like problem arose in England, under legislation bearing much similarity to that applicable in Australia, all of the judges in that country reached an identical conclusion164. In the face of this unanimity of judicial opinion, it is reasonable to infer that no deep or fundamental impediment to the conclusion argued for by the respondent has been perceived by the experienced decision- makers who have examined this issue. In the United States of America, special legislation governs the point and directly subordinates claims made by shareholders arising out of the purchase of shares165. The hypothesis upon which that legislation is expressed, viewed against the absence of a similar provision in the Act and the contrasting text of s 563A, is also favourable to the respondent's arguments166. In the face of this understanding of a basic, and not atypical, issue of admitting and ranking of claims against insolvent companies, the general approach of the law in this and other similar jurisdictions is a reassurance that the conclusion arrived at by the 163 Reasons of Gleeson CJ at [7]. 164 Soden v British and Commonwealth Holdings plc [1995] 1 BCLC 686; [1995] BCC 531 per Robert Walker J, affd Soden v British & Commonwealth Holdings Plc [1998] AC 298 at 304 (CA), 321 (HL). 165 Bankruptcy Code, 11 USC §510(b). 166 See also reasons of Gleeson CJ at [17]-[19]; reasons of Gummow J at [39]-[42]. Kirby Federal Court is not out of harmony with basic legal principle as it has been perceived elsewhere. In matters of basic principle in the law of corporate insolvency it is increasingly important to consider the legal provisions applicable in the major countries with which Australia conducts its trade. Absent particular legislative variations, it will ordinarily be expected that basic legal problems will be addressed in basically similar ways167. In the present appeals, this consideration favours the respondent. Uncopied precedents: Related to this last point is the fact that, had it been the purpose of the Parliament in Australia to adopt a general principle postponing, to the claims of general creditors, claims by disappointed shareholders against a company which becomes insolvent, it would have been relatively easy for that purpose to be given effect in the Act. One way would have been simply to delete from s 563A of the Act the words "a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise" and substitute "a debt owed by a company to a person who is a member of the company". This was not done. Alternatively, the Parliament could have copied a form of drafting that followed the provisions of §510(b) of the Bankruptcy Code of the United States168. Claims by members of a company "for damages arising from the purchase or sale of … a security" might have been expressly identified and, as such, postponed to the claims of the general creditors. After all, the cases show that claims of this kind are not unusual. Shareholders have been making them for many years, certainly before the enactment of the present Act169. The problem presented by the present appeals was not therefore unknown when s 563A was included in the present Act. It would have been open to the 167 This is also relevant to areas of law where international treaties are applied: Minister for Immigration and Multicultural and Indigenous Affairs v QAAH of 2004 (2006) 231 ALR 340; NBGM v Minister for Immigration and Multicultural Affairs (2006) 231 ALR 380. 168 See reasons of Gleeson CJ at [19]. 169 See eg Webb Distributors (Aust) Pty Ltd v Victoria (1993) 179 CLR 15 where the holders of non-withdrawable shares offered by building societies to the public under the Building Societies Act 1986 (Vic), s 122 complained of being misled ("tricked") about the nature of the shares and led to believe the shares were redeemable and "like a deposit". See (1993) 179 CLR 15 at 16-17; reasons of Gleeson CJ at [22]; reasons of Hayne J at [180]-[190]. Kirby drafters, and the Parliament, at the time of adopting s 563A, to deal expressly with the claims of disappointed shareholders if that had been its purpose. The occasion was not availed of. Instead, a more limited criterion for postponement was adopted. Availability of amendment: The Act is a major statute of the Federal Parliament. The sources of the constitutional power to sustain it are large. They may possibly be greater than was formerly assumed170. The Act is constantly being amended and fine-tuned, to deal with problems that arise in its operation and perceived defects that require particular attention. Further, related aspects of corporate insolvency were the subject of the report of the Australian Law Reform Commission, referred to by Hayne J in his reasons171. If the Parliament concludes that the interpretation adopted by the Federal Court in these appeals, now confirmed by this Court, strikes the wrong balance between the rights of general creditors and the claims of disaffected shareholders, it can easily repair the defect by amending s 563A of the Act. Although some elements of bankruptcy law reform have not attracted timely attention from the Parliament172, corporate insolvency seems to have gained at least some degree of priority. It should not therefore be assumed that the inclusion of shareholder claims, such as those of the respondent, with the debts of general creditors is contrary to the will of the Parliament or the result of a slip or oversight requiring a measure of judicial inventiveness and surgery. By sticking to a variation of a time-honoured173 statutory phrase, it can be assumed that the Act was intended to effect only a limited subordination of claims brought by people who happen to be shareholders. Conclusion and orders It follows from these reasons that the preferable construction of s 563A of the Act is that adopted by Gleeson CJ174. In the result, the judges of the Federal 170 New South Wales v Commonwealth (2006) 81 ALJR 34 at 91 [197]-[198], 95 [221], 143 [481]; 231 ALR 1 at 60, 65, 130. 171 Reasons of Hayne J at [172]; Australian Law Reform Commission, General Insolvency Inquiry, Report No 45, (1988), vol 1 at 315 [774]. See also reasons of 172 Coventry v Charter Pacific Corporation Ltd (2005) 80 ALJR 132 at 158 [141]; 222 ALR 202 at 234. 173 See reasons of Hayne J at [149]-[167]. 174 Reasons of Gleeson CJ at [31]-[32]. Kirby Court came to the correct conclusion. The appeals to this Court should be dismissed with costs. Hayne 135 HAYNE J. A person who buys, or subscribes for, shares in a company, relying upon misleading or deceptive information from the company, or misled as to the company's worth by its failure to make disclosures required by law, may have a claim for damages against the company. That claim may be framed in the tort of deceit but, more probably than not, will now be framed as a claim under consumer protection provisions of the Trade Practices Act 1974 (Cth)175 or investor protection provisions of the Corporations Act 2001 (Cth)176 ("the 2001 Act") or the Australian Securities and Investments Commission Act 2001 (Cth)177 ("the ASIC Act"). If the company comes under external administration before it has satisfied the shareholder's claim, and the company's affairs are to be administered as on a winding up, does the shareholder's claim rank with the claims of other creditors, or is it postponed? If, as is agreed to be the case here, the shares become worthless when into external administration, is the shareholder's claim one the circumstances giving rise to which occurred before "the relevant date" (fixed by the 2001 Act as the commencement of that administration)? the company goes These questions are to be answered by reference to the applicable statutory regime: in particular, the provisions of Pt 5.6 of the 2001 Act. In construing those statutory provisions, it will be necessary to take account of their long legislative history. The answer to the questions that arise in this case do not depend upon any principle of judge-made law. In particular, they do not depend upon the application, or the identification of the content, of what is sometimes called "the rule in Houldsworth's Case" (Houldsworth v City of Glasgow Bank178). The central statutory provisions in issue are s 553 and s 563A of the 2001 Act. Section 553(1) provides: "Subject to this Division, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company." Section 563A provides: 175 ss 52 and 82. 176 For example, ss 1041H, 1041I and 1325. 177 For example, ss 12DA, 12GF and 12GM. 178 (1880) 5 App Cas 317. Hayne "Payment of a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied." What is meant in s 563A by "a debt owed by a company to a person in the person's capacity as a member of the company"? Is a claim by a shareholder for damages assessed as the loss sustained as a result of the shareholder's acquisition of the shares, when the shares were less valuable than was represented, or would have been revealed to be the case had proper disclosure been made, a claim in the capacity of shareholder? Does the answer to that question differ according to whether the shareholder acquired the shares by subscription and allotment by the company, or acquired them by transfer from an existing shareholder? The facts and the proceedings In August 1981, Sons of Gwalia Ltd ("SOG") was incorporated (as Hawk Mining NL) under the Companies Act 1961 (WA). It was incorporated as a no liability company. In July 1992, SOG converted179 to a company limited by shares. Its shares were first listed on the official list of the Australian Stock Exchange Ltd ("ASX") in December 1991. insolvent or was In August 2004, the directors of SOG, being of the opinion that the insolvent, appointed likely company was administrators of the company180. The company later made a deed of company arrangement under Div 10 of Pt 5.3A of the 2001 Act. Under that deed a fund was to be set aside by the Deed Administrators from identified sources and distributed (subject to some immaterial exceptions) in the same order of priority as would apply if SOG were being wound up. Clause 4.2(d) of the deed provided that: to become "For the avoidance of doubt, payment of any debts or liabilities owed by the Company to Members in the Members' capacity as a member of the Company, whether by way of dividends, profits or otherwise are, to the extent contemplated by Section 563A of the [2001 Act] and the general law, to be postponed until all debts owed to, or claims made by, Creditors have been satisfied." 179 Pursuant to the then applicable provisions of s 167 of the Corporations Law of Western Australia. 180 s 436A(1). Hayne It may be noted that, unlike s 563A, this clause spoke of "debts or liabilities owed by the Company to Members", not just of "debts". But no party to the appeals to this Court sought to make any point based upon that difference. Argument proceeded on the footing that the issue to be decided turned upon the proper construction of s 563A. In August 2004, the first respondent in both proceedings, Mr Margaretic, bought 20,000 fully paid ordinary shares in the capital of SOG. He made that purchase on the market conducted by the ASX. He was entered on the register of members of SOG soon after the purchase, but only a few days before administrators were appointed to the company. It is an agreed fact that upon the appointment of administrators "the value of the SOG shares purchased by Mr Margaretic became zero ... and has remained and will remain zero". Mr Margaretic claims that, when he bought the shares, SOG was in breach of its obligations under s 674 of the 2001 Act. To explain what is meant by that claim it is necessary to say a little about the "continuous disclosure" requirements of the 2001 Act. A company, whose securities are included in the official list of a prescribed financial market such as the ASX and that is a "disclosing entity"181, may be subject182 to the continuous disclosure requirements of ss 674 and 675 of the 2001 Act. If a disclosing entity does not notify the market operator of information that is not generally available, but which a reasonable person would expect, if it were generally available, to have a material effect on the price or value of the securities183, a person who has suffered, or is likely to suffer, loss or damage because of that failure, may obtain184 orders against the company, and against any person who was involved in the contravention. The orders that may be made are orders that will compensate for, prevent or reduce, that loss or damage. They include an order to pay the person who suffered the loss or damage the amount of that loss or damage185. Mr Margaretic claims that he lost the whole of the amount he paid to buy the shares as a result of SOG's breach of the continuous disclosure provisions. Alternatively, he claims to recover that sum on the basis that SOG engaged in 181 Division 2 of Pt 1.2A of the Corporations Act 2001 (Cth) ("the 2001 Act") (ss 111AB-111AM) contains definitions relevant to identifying a "disclosing entity". 182 s 111AP. 185 s 1325(5)(e). Hayne misleading or deceptive conduct in contravention of s 52 of the Trade Practices Act, s 1041H of the 2001 Act and s 12DA of the ASIC Act, and that he is thus entitled to compensation under the relevant provisions186 of those Acts. It was an agreed fact that Mr Margaretic had made a claim against SOG for damages or compensation under statute, or at common law or in equity, in respect of fraud, misrepresentation, or other acts or omissions of SOG. It was further agreed that Mr Margaretic was intending to submit his claim for proof in the deed of company arrangement of SOG. There was evidence that other shareholders made or intended to make like claims. The Deed Administrators applied to the Federal Court of Australia for a declaration that Mr Margaretic's claim is not provable in the deed of company arrangement or, alternatively, a declaration that payment of that claim will be postponed until all debts owed to, or claims made by, persons otherwise than in their capacity as members of SOG have been met. ING Investment Management LLC ("ING"), a company which was not a shareholder but was a creditor of SOG, was named as second respondent to that application. Mr Margaretic cross-claimed for a declaration that he is a creditor of SOG and is entitled to all the rights of a creditor under Pt 5.3A of the 2001 Act, including the right to attend and vote at creditors' meetings and the right to receive information and circulars sent to creditors. At first instance, Emmett J made a declaration187 that, in respect of Mr Margaretic's claim, he is a creditor of SOG within the meaning of Pt 5.3A of the 2001 Act for such amount as the Administrators may admit to proof, or be ordered to admit to proof, and that he is entitled to all the rights of a creditor under that Part. His Honour further declared that the claim is not postponed until debts owed to, or claims made by, persons other than Mr Margaretic (or, it may be assumed, others in like case) have been satisfied. Both SOG and ING appealed to the Full Court of the Federal Court. Those appeals were dismissed188. By special leave, both SOG and ING appeal to this Court. The only issue initially agitated in this Court was whether Mr Margaretic's claim is postponed to the claims of other creditors. That issue was argued on the footing that there was no question that Mr Margaretic's claim 186 Trade Practices Act 1974 (Cth), s 82; the 2001 Act, ss 1041I and 1325; the Australian Securities and Investments Commission Act 2001 (Cth) ("the ASIC Act"), ss 12GF and 12GM. 187 Sons of Gwalia Ltd v Margaretic (2005) 55 ACSR 365; 24 ACLC 244. 188 Sons of Gwalia Ltd v Margaretic (2006) 149 FCR 227. Hayne is a provable debt and that the relevant question was in what order does the claim rank for payment: with creditors of the company who are not shareholders, or after those creditors have been satisfied? After the conclusion of oral argument the parties were asked to make submissions about whether Mr Margaretic's claim was a provable debt. In particular was it a claim the circumstances giving rise to which occurred before "the relevant date"? As stated at the outset of these reasons the questions that must be considered in these matters are questions of statutory construction. They do not present any question of developing or applying judge-made law. The task of construing both s 553 and s 563A requires attention to the context provided by other provisions of the 2001 Act, but it also requires an understanding of the legislative history that lies behind the particular provisions and the other provisions which together form its context. It is convenient to begin by examining that history. The legislative history The legislative origins of many provisions of modern company legislation can be traced to The Companies Act 1862 (UK) ("the 1862 UK Act"). It is to be recalled that the 1862 UK Act hinged about the prohibition, in s 4, against any "company, association, or partnership" consisting of more than a specified number of persons being formed after the commencement of the Act for the purpose of carrying on the business of banking or "any other business that has for its object the acquisition of gain by the company, association, or partnership, or by the individual members thereof" unless incorporated. And it was against this understanding of the corporation (as a company, association, or partnership of persons, formed for the purpose of carrying on a business) that s 38 of the 1862 UK Act dealt with the liability of members of the company on winding up. It provided that: "In the event of a company formed under this Act being wound up, every present and past member of such company shall be liable to contribute to the assets of the company to an amount sufficient for payment of the debts and liabilities of the company, and the costs, charges, and expenses of the winding-up, and for the payment of such sums as may be required for the adjustment of the rights of the contributories amongst themselves, with the qualifications following ..." There then followed seven qualifications. Of these it is important to notice only two. Sub-section (4) provided that: Hayne "In the case of a company limited by shares, no contribution shall be required from any member exceeding the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member". Sub-section (7) provided: "No sum due to any member of a company, in his character of a member, by way of dividends, profits, or otherwise, shall be deemed to be a debt of the company, payable to such member in a case of competition between himself and any other creditor not being a member of the company; but any such sum may be taken into account, for the purposes of the final adjustment of the rights of the contributories amongst themselves." Several aspects of the provisions of s 38(7) of the 1862 UK Act are noteworthy. First, there is where it fitted in the Act as a whole: as a qualification to the general obligation of past and present members to contribute to the assets of the company sufficient not only for payment of the debts and liabilities of the company but also for the "payment of such sums as may be required for the adjustment of the rights of the contributories amongst themselves". Of course, that liability could be limited. Section 38(4) limited the contribution required of a member of a company limited by shares to "the amount, if any, unpaid on the shares in respect of which he is liable as a present or past member". The second aspect of note about s 38(7) is that it spoke of a "sum due to any member of a company, in his character of a member". It said that no sum of that kind "shall be deemed to be a debt of the company, payable to such member in a case of competition between himself and any other creditor not being a member of the company". In modern terms it was a provision that is best understood, when applied in an insolvent winding up, as regulating the ability of a member to prove in the winding up rather than as a provision regulating priority of payment. If the company was insolvent there would inevitably be competition between the member and other creditors, and the sum due to a member "in his character of a member" was not to be deemed to be a debt. Only if the company was solvent could there be no competition of the kind identified and only then could there be any "final adjustment of the rights of the contributories amongst themselves". The third matter to note is that the reference in s 38(7) to "profits" makes greater sense when it is recalled that, at the time of the 1862 UK Act, the corporation was understood as a company, association or partnership of persons, and when it is also recalled that early forms of articles of association sometimes obliged the directors to divide and distribute the profits of the company189. The 189 Bishop v Smyrna and Cassaba Railway Co [1895] 2 Ch 265. Hayne reference is not to be seen only through the prism provided by judicial decisions about members' entitlements to dividends depending upon declaration190 or statutory provisions191 obliging a company to declare dividends only out of profits. In 1981, when SOG was first incorporated, as a no liability company, the then applicable companies legislation, the Companies Act 1961 (WA) ("the 1961 WA Act"), contained a number of provisions evidently based on the 1862 UK Act. The Companies Acts of other States (the so-called "Uniform Acts") contained generally similar provisions. In particular, s 218 of the 1961 WA Act (and equivalent sections in the other Uniform Acts) largely reproduced what was found in s 38 of the 1862 UK Act. But as SOG was a no liability company, s 218 would not have applied192 had SOG then been wound up. The several Companies Codes of the States, enacted in the early 1980s under what was known as the "co-operative scheme", replaced the so-called Uniform Acts and made provision in s 360 for the liability of contributories in terms not substantially different from the provisions of s 38 of the 1862 UK Act. There were some minor textual differences but they were of no moment. By the time SOG converted from a no liability company to a company limited by shares, however, the relevant provisions regulating the winding up of such a company were to be found in the Corporations Law of Western Australia enacted in the late 1980s as part of what was described as the "national scheme" replacing the former "co-operative scheme"193. The provisions of Pt 5.6 of the Corporations Law differed from the 1862 UK Act in several ways. First, the content of s 38 of the 1862 UK Act was dealt with in a number of separate provisions. Section 515 prescribed the general liability of a contributory, but s 525 dealt with what the heading to the section described as "debts to a member". The text of s 525 was substantially the same as the text of 190 cf Bishop v Smyrna and Cassaba Railway Co [1895] 2 Ch 265; Bond v Barrow Haematite Steel Co [1902] 1 Ch 353 and Evling v Israel & Oppenheimer [1918] 1 Ch 101. See also Re Buck [1964] VR 284 at 290. 191 For example, Corporations Law, s 201 (until repealed by Company Law Review Act 1998 (Cth)). 192 Companies Act 1961 (WA) ("the 1961 WA Act"), s 319. 193 The origin of the national scheme and the way in which it operated are described in Gould v Brown (1998) 193 CLR 346 at 393-394 [43]-[44], 413-416 [98]-[105], 433-437 [151]-[166] and R v Hughes (2000) 202 CLR 535 at 544 [1]. Hayne s 38(7) of the 1862 UK Act194, but it was not cast as one of several qualifications to a general imposition of liability on past and present members to contribute sufficient to meet both the debts of the company and the adjustment of rights between contributories. This process of legislative disassembling of what had been s 38 of the 1862 UK Act, which was begun in the Corporations Law by dividing the provisions into separate sections, was continued by the Corporate Law Reform Act 1992 (Cth) ("the 1992 Act"). The 1992 Act made substantial alterations to the legislative provisions governing external administration of companies. It introduced administration and deed of company arrangement provisions of the kind to which SOG was later to resort. But for present purposes, it is the changes to the winding up provisions which are of most importance. Section 10 of the Supreme Court of Judicature Act 1875 (UK) had provided that, in the winding up of any company under the 1862 UK Act or The Companies Act 1867 (UK) "whose assets may prove to be insufficient for the payment of its debts and liabilities and the costs of winding up, the same rules shall prevail and be observed ... as to debts and liabilities provable ... as may be in force for the time being under the Law of Bankruptcy". Australian company law followed this model. Thus, until the 1992 Act, subject to some qualifications that are presently irrelevant, the same rules were to be observed in the winding up of an insolvent company "with regard to the respective rights of secured and unsecured creditors and debts provable ... as are in force for the time being under the Bankruptcy Act 1966 [Cth], in relation to the estates of bankrupt persons"195 (emphasis added). It followed that claims of the kind encompassed by s 82(2) of the Bankruptcy Act 1966 and its legislative predecessors – "[d]emands in the nature of unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust" – were not provable in a winding up. As this Court held in Coventry v Charter Pacific Corporation Ltd196, s 82(2) of the Bankruptcy Act has 194 Section 525 provided: "A sum due to a member in that capacity, whether by way of dividends, profits or otherwise, shall not be treated as a debt of the company payable to that member in a case of competition between the member and a creditor who is not a member, but may be taken into account for the purposes of the final adjustment of the rights of the contributories among themselves." 195 Corporations Law, s 553(2); cf Companies Code, s 438(2); the 1961 WA Act, 196 (2005) 80 ALJR 132; 222 ALR 202. Hayne the consequence that a statutory claim for unliquidated damages, for misleading or deceptive conduct which induced the claimant to make a contract with a third party, is not a debt provable in bankruptcy. For the same reason, a claim for damages for fraudulent misrepresentation inducing the claimant to enter a contract with a third party is not provable in bankruptcy197. It follows that, under the provisions of the Corporations Law as they stood before the 1992 Act, the claims now made by Mr Margaretic would not have been admissible to proof in the winding up of SOG. The 1992 Act severed the connection between the statutory identification of debts and claims admissible to proof in a winding up, and the classes of debts admissible to proof in bankruptcy. (Other connections with Bankruptcy Act provisions remained in the Corporations Law, particularly in relation to identifying the effect of winding up on other transactions198.) The 1992 Act repealed s 553 and enacted a new s 553. The text of sub-s (1) of the new s 553 is set out earlier in these reasons. The former rules excluding some claims for unliquidated damages from proof in a winding up were thus removed. What mattered under the new s 553 was whether "the circumstances giving rise to [the debt or claim in question] occurred before the relevant date". Section 553 of the 2001 Act specifies the debts and claims that are admissible to proof in a winding up in terms identical to those introduced into the Corporations Law by the 1992 Act. It will be necessary to return, at a later point in these reasons, to consider the application of s 553 of the 2001 Act. The 1992 Act also repealed s 525, the provision derived from s 38(7) of the 1862 UK Act dealing with sums "due to a member in that capacity". The 1992 Act inserted two provisions concerning what it identified as "debt[s] owed by a company to a person in the person's capacity as a member of the company". First, s 553A provided that: "A debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise, is not admissible to proof against the company unless the 197 Coventry v Charter Pacific Corporation Ltd (2005) 80 ALJR 132 at 146 [62]; 222 ALR 202 at 217-218. 198 In particular, s 565 identified certain kinds of transaction as being void against the liquidator, if the transaction, had it been made or incurred by a natural person, would, in the event of bankruptcy, have been void against that person's trustee in bankruptcy. Hayne person has paid to the company or the liquidator all amounts that the person is liable to pay as a member of the company." Secondly, s 563A provided that: "Payment of a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied." The two provisions appeared in separate subdivisions of Div 6 of Pt 5.6, the division which dealt with proof and ranking of claims in winding up, but it may be doubted that anything turns on that fact. For present purposes, what is to be noted is first, that s 553A assumed that a "debt owed by a company to a person in the person's capacity as a member of the company" could be admitted to proof. Section 553A provided only that payment of "all amounts that the person is liable to pay as a member of the company" was a condition for admission to proof. The section thus excluded the operation of the mutual credit and set-off provisions of s 553C, which applied in the winding up of insolvent companies. Secondly, the other provision introduced by the 1992 Act to deal with members' debts, s 563A, was evidently directed to the question of priority of payment of the debts with which it dealt. In terms, that section said nothing at all about what kinds of claim a member might make against the company of which that person was a member. That subject, of what debts or claims were to be admissible to proof, was dealt with comprehensively by s 553. The provisions of the 1992 Act dealing with members' debts thus took a very different form from the provisions of s 38 of the 1862 UK Act. Members' debts were no longer dealt with as a qualification to an otherwise general obligation to contribute sufficient to meet the company's debts and liabilities, the costs and expenses of the winding up and the payment of sums required for the adjustment of the rights of the contributories amongst themselves. Against a background where former rules limiting the kinds of claims that were admissible to proof were removed, and the class of admissible claims thus extended, provision was made by the 1992 Act for the condition on which such a debt might be admitted to proof (the previous payment of sums due to the company in the capacity of member) and provision was also made for the priority to be afforded to the satisfaction of such debts. And finally, whereas s 38(7) of the 1862 UK Act (and all subsequent forms of Australian companies legislation down to the Corporations Law as it stood before the 1992 Act) had dealt with any sum due to any member in his character of a member, and provided that no sum of that kind "shall be deemed to be a debt of the company", the 1992 Act dealt with "[p]ayment of a debt owed by a company". Hayne The Explanatory Memorandum for the Bill that became the 1992 Act asserted199 that s 563A was intended to have the same effect as the then current s 525, and argument of the present matters proceeded on the footing that the 1992 Act should not be understood as failing to achieve that end. It is not necessary to examine the correctness of this assumption. In particular, it will not be necessary to consider whether some distinction could or should be drawn in the operation of s 563A according to whether a member has a claim for unliquidated damages against the company as distinct from a claim for a debt. The 2001 Act followed the drafting pattern set by the 1992 Act, not only in relation to the prescription of the debts and claims admissible to proof in winding up, but also in relation to the separate provisions made in respect of a debt due to a person in that person's capacity as a member of the company. Thus, s 553(1) of the 2001 Act is in the same terms as the 1992 Act; ss 553A and 563A dealing with debts to members are also in the same terms as the 1992 Act. The application of s 553(1) Although not put directly in issue in the courts below, SOG's claims for declaratory orders, concerning the admissibility of Mr Margaretic's claim to proof, necessarily required consideration of whether the circumstances giving rise to that claim occurred before "the relevant date". Only claims meeting that criterion (whether the claims were present or future, certain or contingent, ascertained or sounding only in damages) were admissible to proof. In the administration of SOG, "the relevant date" was the day on which the directors appointed administrators to the company under Pt 5.3A200. It was on that day that the administration began. It was the fact that administrators were appointed to SOG which was agreed to have rendered Mr Margaretic's shares in the company worthless. Until that event, the shares had been traded on the ASX. Mr Margaretic would now say that the market was ill-informed but, whether or not that was so, when Mr Margaretic bought his shares, he paid the then prevailing market price for them. And there was a market for those shares up to the time when trading was suspended, upon the directors' resolving to appoint administrators. At least some of the circumstances giving rise to Mr Margaretic's claim (in particular, the events and circumstances alleged to constitute SOG's failure to comply with the disclosure requirements of s 674 or alleged to constitute the 199 Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth) at [957]. 200 2001 Act, ss 435C and 513C. Hayne misleading or deceptive conduct relied on) occurred before the appointment of administrators, and thus occurred before "the relevant date". But the loss or damage of which Mr Margaretic now complains was not apparent to him before the appointment of administrators. The extinction of value could be said to have arisen because of the administrators' appointment. What is meant, in s 553, by "debts or claims the circumstances giving rise to which occurred before the relevant date"? How does that expression apply in the present matters? Those questions have not previously been considered by this Court, or by any Australian intermediate court201. In construing the temporal limit that is imposed by s 553, it is important to recognise the generality of other expressions used in s 553 in defining what debts and claims are to be admissible to proof. The section speaks of "all debts payable by, and all claims against, the company". It amplifies those expressions by the parenthetical reference: "present or future, certain or contingent, ascertained or sounding only in damages". If the words of the section were not wholly sufficient (as they are) to indicate an intention to define provable claims very widely, the Report of the Australian Law Reform Commission on the General Insolvency Inquiry ("the Harmer Report"), read with the Explanatory Memorandum for the Bill that became the 1992 Act, puts the point beyond any doubt. The Harmer Report202 identified a basic aim of insolvency laws as being "to deal comprehensively with all of the debts and liabilities of the insolvent" and said that, "[i]n the case of a company, the aim is to deal with all the claims against a company so that its affairs can be fully wound up or so that it can resume trading" (emphasis added). The Harmer Report concluded203 that "[t]he categories of claims which are admissible should be as wide as possible so that the financial affairs of the insolvent are dealt with comprehensively". Otherwise, as the Harmer Report pointed out204, "if the creditors are unable to make their claims in the insolvency, they are unable to recover at all (unless they have a basis for action against either directors of the company or a guarantor of the company's debts or unless the winding up is stayed)". The Explanatory Memorandum205 for the Bill that became the 1992 Act said that the reforms 201 But see McDonald v Commissioner of Taxation (2005) 187 FLR 461; Environmental & Earth Sciences Pty Ltd v Vouris (2006) 152 FCR 510. 202 Australia, The Law Reform Commission, General Insolvency Inquiry, Report No 45, (1988), vol 1 at 315 [774]. 203 Report No 45, (1988), vol 1 at 315 [777]. 204 Report No 45, (1988), vol 1 at 315 [777]. 205 Explanatory Memorandum, Corporate Law Reform Bill 1992 (Cth) at [849]. Hayne embodied recommendations of the Harmer Report". the new provisions of ss 553 to 553E "reflect[ed] the Is Mr Margaretic's claim one the circumstances giving rise to which occurred before the administration began? This temporal limit to s 553 is to be approached with these considerations of legislative intention well in view. What are the relevant "circumstances"? It is important to begin by recognising that Mr Margaretic's claim is not a future or contingent206 claim or debt. It is a present and, he would say, a certain claim. If not ascertained, and the better view may well be that his claim is now ascertained, it is a claim sounding in damages. The claims which Mr Margaretic makes under the 2001 Act that are founded on a breach of the continuous disclosure requirements, and the claims he makes under that and other Acts which are founded on allegations of misleading or deceptive conduct, are claims for damages. But had Mr Margaretic known what he now says are the relevant facts before SOG appointed administrators (assuming for the purposes of argument that his allegations are true) he would have had complete causes of action against SOG for identical relief under the various statutory provisions upon which he now relies. And the claims he could then have made would not have been contingent or future claims; they would have been present claims for damages representing the difference between what he had outlaid in buying the shares and the true value of what he bought as determined by a properly informed market. The appointment of administrators so soon after Mr Margaretic bought his shares reveals that the shares he bought would have been judged by a properly informed market to be worthless when he bought them and accordingly, he suffered loss when he bought the shares207. Contrary to the submissions of ING, renouncing his shareholding, whether by selling the shares to a third party or rescinding the contract with the vendor, was not a necessary step in his claiming that loss. It follows that, although the agreed facts demonstrate that the appointment of administrators reduced the value of Mr Margaretic's shares to zero, his claim is one the circumstances giving rise to which occurred before the administrators' appointment. Had the facts upon which Mr Margaretic now relies been known then, they would have been known to the whole market, not just him, and he 206 Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 at 459 per Kitto J; National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 at 200 per Barwick CJ. 207 HTW Valuers (Central Qld) Pty Ltd v Astonland Pty Ltd (2004) 217 CLR 640 at Hayne would have had the same claim he now makes208. His knowledge of the relevant facts bears only upon whether he makes a claim; his knowledge of those facts does not bear upon whether he has a claim. His claim is of a kind that is within s 553 of the 2001 Act. In the person's capacity as a member – framing the issue As noted at the outset of these reasons, the other central question in the present appeals is whether the claim by Mr Margaretic is a debt owed by SOG to him in his capacity as a member. That is not how that question was identified in the Full Court of the Federal Court. It is convenient to examine the way in which this aspect of the problem was identified in the Full Court, and then deal with the several aspects of the matter that are thus presented. In the Full Court, the central question was said209 to be "whether a purchaser (as opposed to an allottee) of shares can in a winding up prove for damages against the company for the misrepresentation which induced the purchase". This issue was seen as turning on the proper understanding of this Court's decision in Webb Distributors (Aust) Pty Ltd v Victoria210 and, if the point that arises in the present matters was not decided in Webb Distributors, as requiring consideration of the decision of the House of Lords in Soden v British & Commonwealth Holdings plc211. At once it can be seen that the way in which the issue was framed in the Full Court does not direct attention immediately to either s 553, and its identification of what debts or claims are provable, or s 563A, and its special provision for members' debts. It is, nonetheless, convenient to say something at this point about both Webb Distributors and Soden. Webb Distributors (Aust) Pty Ltd v Victoria Webb Distributors concerned questions that had arisen in the winding up of three insolvent Victorian building societies. The litigation proceeded on the footing that the winding up of each of the societies was to be treated as though it were the voluntary winding up of a company under the then provisions of the Companies (Victoria) Code212. The liquidator of the three societies sought 208 HTW Valuers (2004) 217 CLR 640 at 657-658 [37]. 209 (2006) 149 FCR 227 at 228 [1] per Finkelstein J. 210 (1993) 179 CLR 15. 212 State of Victoria v Hodgson [1992] 2 VR 613 at 615 per Tadgell J. Hayne directions from the Supreme Court of Victoria about the treatment to be accorded in the winding up to persons who had subscribed for shares in the societies known as "non-withdrawable investing shares". Some of those persons claimed that they had been tricked into subscribing for their shares, and they alleged that they had claims for damages for deceit and claims for damages and other relief under the Trade Practices Act213. The liquidator applied to the Supreme Court for directions upon a number of questions, of which two are now relevant: first, whether the shareholders' claims for unliquidated damages were provable in the winding up of the societies, and second, whether the shareholders were precluded from rescinding the contracts pursuant to which they purchased their shares and were "thereby precluded from maintaining an action or claim against the [societies] for damages"214. At first instance, Vincent J held215 that the shareholders' claims were admissible to proof, that the shareholders were precluded from rescinding the contracts pursuant to which they acquired the shares, but that they were not precluded from maintaining actions against the societies for damages. On appeal, the Appeal Division of the Supreme Court held216 that the claims of the shareholders were not admissible to proof, and that the shareholders were both precluded from rescinding the contracts pursuant to which they had acquired their shares and from maintaining the foreshadowed claims for damages against the societies. In Webb Distributors this Court dismissed an appeal against the orders of the Appeal Division. It is of the first importance to recognise that Webb Distributors concerned whether the claims which the shareholders sought to make against the societies were admissible to proof in the winding up. The arguments that the parties in that litigation advanced in support of, or in opposition to, the admissibility of such claims to proof were based on what was said to be the "common law rule in Houldsworth v City of Glasgow Bank217" and whether that "rule" had received statutory recognition in the Companies (Victoria) Code. In particular, the arguments of the parties in Webb Distributors, both in this Court and in the courts below, laid heavy emphasis upon principles of maintenance of capital218, 213 [1992] 2 VR 613 at 616 per Tadgell J. 214 [1992] 2 VR 613 at 616 per Tadgell J. 215 Re Pyramid Building Society (in liq) (1991) 6 ACSR 405; 10 ACLC 110. 216 State of Victoria v Hodgson [1992] 2 VR 613. 217 (1880) 5 App Cas 317. 218 See, for example, the argument of counsel for the State of Victoria recorded at (1993) 179 CLR 15 at 20. Hayne and upon the issues presented by the second of the questions identified earlier, namely, whether the shareholders could rescind the contracts pursuant to which they became members and could sue the societies. The Court's reasons are to be understood as responding to these arguments of the parties. The decision in Houldsworth concerned an unlimited company. It was decided before Salomon v Salomon & Co219 revealed what is now accepted to be one of the axiomatic consequences of incorporation – the separate legal personalities of the corporation and its corporators. It has been said220 to be a decision that is anomalous because it shows confusion between the corporation and legendary impenetrability"222. It is, as Tadgell J said in State of Victoria v Hodgson223, a decision that "no doubt bears the stamp of its era". All this notwithstanding, the parties in Webb Distributors placed Houldsworth, not the applicable statutory provisions, at the forefront of their arguments. It has been described as being "of its members221. There are at least two explanations for the approach that was taken in argument in Webb Distributors. First, the central question in the case was whether the shareholders had claims that could be proved in the winding up. The question was not, as here, what priority is a claim that is admissible to proof to be afforded in the application of the assets of the company in winding up. Secondly, decisions after Houldsworth, especially In re Addlestone Linoleum Co224, explained Houldsworth as depending upon the application of s 38(7) of the 1862 UK Act. Claims by shareholders for damages for misrepresentation were said225 to be claims in the character of members to recover a dividend in respect of the share of capital which they were bound to pay on a winding up. The 220 Gower, The Principles of Modern Company Law, (1954) at 63-64, 279 and 221 Gower, "Notes of Cases", (1950) 13 Modern Law Review 362 at 367. See also Hornby, "Houldsworth v City of Glasgow Bank", (1956) 19 Modern Law Review 54, the response by Professor Gower at 19 Modern Law Review 61, and the rejoinder by Mr Hornby at 19 Modern Law Review 185. 222 Soden v British & Commonwealth Holdings plc [1995] 1 BCLC 686 at 695; [1995] BCC 531 at 537. 223 [1992] 2 VR 613 at 625. 224 (1887) 37 Ch D 191. 225 (1887) 37 Ch D 191 at 197-198 per Kay J. Hayne claims were thus characterised as sums allegedly due to members, in their character of member, by way of dividends, and for that reason were not to be deemed to be debts of the company payable to those members in a case of competition between the members and other creditors not being members. The conclusion that members' claims for damages for misrepresentations are to be excluded from proof on this basis assumed that the claims were otherwise of a kind that would be admissible to proof. Under the provisions then specifying the debts admissible to proof in a winding up226, claims for unliquidated damages arising otherwise than by reason of a contract, promise or breach of trust were excluded from proof as claims not admissible to proof in the bankruptcy of a natural person. Claims for unliquidated damages for deceit by the company causing a person to acquire shares from a third party were therefore excluded from proof, but claims for damages for deceit causing a person to subscribe for shares would not have been excluded. The latter form of claim would be a claim arising by reason of a contract or promise227. On this basis a line might have been drawn dividing claims for deceit made by subscribers for shares and claims for deceit made by those who acquired their shares by transfer. But no such line was drawn. Rather, the question, that appears to have been seen in Houldsworth as calling for examination, was whether a subscribing shareholder could retain the shares which had been issued while, at the same time, maintaining an action for damages to recover the damage suffered by reason of the subscription for shares. This question was addressed in Houldsworth as though its answer depended wholly upon the general law of deceit and, in particular, what remedies were to be available for deceit where the property acquired in consequence of the deceit had not been given up or returned to the party making the fraudulent misrepresentation upon which the acquirer had relied. Not until In re Addlestone Linoleum Co was there any attempt to relate the conclusion reached in Houldsworth to the relevant provisions of the 1862 UK Act228. This course of decision, coupled with the various criticisms that have been levelled at the decision in Houldsworth, reveals the difficulties implicit in taking the state of judge-made law in the field as the starting point for consideration of issues of the kind considered in Webb Distributors. Yet that was the premise for 226 Supreme Court of Judicature Act 1875 (UK), s 10. 227 Jack v Kipping (1882) 9 QBD 113. 228 cf In re Hull and County Bank (Burgess's Case) (1880) 15 Ch D 507 at 511-513. Hayne the parties' arguments in that case and, not surprisingly, the Court's reasons reflect those arguments. The Court held in Webb Distributors that the provisions of s 360 of the Companies (Victoria) Code (the provisions of the Code that were based on s 38 of the 1862 UK Act) precluded the shareholders from rescinding the contracts under which they acquired their shares and precluded them from maintaining an action for damages in respect of that acquisition. The proposition that a shareholder could not, either directly or indirectly, receive back any part of the amount contributed by that shareholder to the capital of the company was said to have received statutory recognition in that provision of the Code (s 360(1)(k)) which was the then equivalent of s 38(7) of the 1862 UK Act. It followed that the shareholders could not prove in the liquidation of the societies. The conclusion reached in Webb Distributors concerned, and concerned only, the rights of a member who had subscribed for shares, as distinct from having acquired shares by contract from a person other than the company itself. Maintenance of capital may be relevant to a shareholder's entitlement to recover from the company amounts that the shareholder subscribed as capital, but it has no direct relevance to the recovery from the company of damages for loss occasioned by the making of a contract to acquire existing shares in the company from a third party. It has no direct relevance to that second kind of case because the shareholder does not seek the return of what was subscribed as capital when the shares were allotted. Whether, in the first kind of case, it is right to describe the claim as one which seeks the return of what was subscribed is a question that need not be answered here. Even if it were right, it would provide no reason for concluding that a shareholder like Mr Margaretic, who was not a subscriber, has no claim against the company under the consumer and investor protection provisions mentioned at the start of these reasons. Nor would it provide a reason for concluding that such a shareholder had no claim for deceit. Neither Webb Distributors nor Houldsworth established any common law "principle" that no shareholder, no matter how the shares were acquired, can have a claim of the kind now in issue against a company whose assets were to be administered as on a liquidation. The reasoning in those cases, because it was founded in important respects upon considerations of preservation of capital, can have no direct application when the plaintiff shareholder did not subscribe capital. But whether or not that is so, the asserted common law "principle" could not deny the operation of the relevant consumer protection and investor protection provisions. Finally, the conclusion reached in Webb Distributors, like the conclusion reached in Houldsworth, turned, in important respects, upon whether the shareholder could rescind the contract with the company for subscription for shares. None of these considerations is relevant to the present matters where there was no contract for the shareholder, Mr Margaretic, and the company, SOG. the acquisition of shares made between Hayne Soden v British & Commonwealth Holdings plc The decision in Webb Distributors may be compared with the decision of the House of Lords in Soden. The latter decision focused upon what is meant by a sum due to a person in his character as a member. The House of Lords held229 that "in the absence of any contrary indication sums due to a member 'in his character of a member' are only those sums the right to which is based by way of cause of action on the statutory contract". The statutory contract was said230 to be constituted by the bundle of rights and liabilities created by the constituent documents of the company231, and the rights and obligations conferred and imposed on members by the applicable company legislation. Accordingly, the House of Lords held that the only claims that fell within the reach of the legislative successor to s 38(7) of the 1862 UK Act were claims "based upon the statutory contract between the member and the company" and "claims based upon having paid money to the company under the statutory contract which the member says that he is entitled to have refunded by way of compensation for misrepresentation or breach of contract"232. Because the legislature had intervened233 and provided that a person is not debarred from obtaining damages or other compensation from a company by reason only of his holding or having held shares in the company, it was not necessary for the House of Lords to express any view about the conclusion reached in Webb Distributors concerning the admissibility to proof in a winding up of a claim for damages brought against the company by a subscriber for shares234. In the person's capacity as a member – reframing the issue The claim which Mr Margaretic makes against SOG is, for the most part, framed as a claim under statute. It was not, and could not be, suggested that the statutes which permitted the making of such a claim could not be engaged by 229 [1998] AC 298 at 323. 230 [1998] AC 298 at 323 per Lord Browne-Wilkinson. 231 Section 140 of the 2001 Act provides that a company's constitution and any replaceable rules have effect as a contract between (among others) the company and each member. See Bailey v New South Wales Medical Defence Union Ltd (1995) 184 CLR 399 at 434-438. 232 [1998] AC 298 at 325. 233 Companies Act 1985 (UK), s 111A, as inserted by the Companies Act 1989 (UK), 234 [1998] AC 298 at 326. Hayne Mr Margaretic. He thus has a claim against SOG. Whether that claim is admissible to proof in the winding up of SOG depends, and depends only, upon the relevant provisions of the 2001 Act. Because the statutory definition of claims admissible to proof on a winding up was changed in 1992, the decision reached in Webb Distributors does not dictate the outcome in the present case or in a case where the shareholder who makes the claim acquired the shares by subscription rather than transfer. Nor is the question to be framed, at least in the first instance, by assuming that a different answer may be given according to whether the shares were acquired by subscription rather than transfer. Rather, the question is, as it was in Soden, whether there is "a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise". That question should be answered "no". that Mr Margaretic's claim falls within the expression "a debt owed by a company" his claim is not one "owed by a company to a person in the person's capacity as a member of the company". Even assuming In the person's capacity as a member What was meant by the legislative predecessor of the expression now found in s 563A of the 2001 Act ("sum due to any member of a company, in his character of a member, by way of dividends, profits, or otherwise") has been considered in a number of decisions other than In re Addlestone Linoleum Co, the case which, so often, is treated as relating the decision in Houldsworth to s 38(7) of the 1862 UK Act. In this Court, in King v Tait, Dixon J referred235 to what had been said in Lock v Queensland Investment and Land Mortgage Co, both in the House of Lords236 and in the Court of Appeal237, about that expression. Both King v Tait and Lock concerned advances made to a company by the holder of partly paid shares in anticipation of later calls. Is the interest payable by the company on that advance a debt owing to the shareholder in his character of member? As Dixon J recorded in King v Tait238: "Lord Herschell and Lord Macnaghten said [in Lock] that it [the interest payable under such an agreement] was a debt which could not be properly 235 (1936) 57 CLR 715 at 758-759. 238 (1936) 57 CLR 715 at 758-759. Hayne described as owing to the shareholder in his character of member ... But Lindley LJ239 expressly said that the shareholder could not rank with creditors in respect of any capital whether prepaid or not; and Kay LJ240 said that the effect of the transaction was that the company borrows money from the shareholders which it need not repay." A distinction can be drawn between the character of the interest paid to a member in these circumstances, and the advance whose making is recompensed by the payment of interest, only if the expression "in his character of member" is given a narrow reach. In particular, no such distinction can be maintained if a line is drawn according only to whether the fact of membership is a necessary allegation in pleading the relevant claims. The meaning attributed to the expression in Lock is apparent from the speech of Lord Herschell. His Lordship said241: "I think it is a fallacy to speak of this payment of interest as being a payment made to a member in his character of member. As member he has no right to have that interest paid to him: he could not claim it. As member he was under no obligation consideration of which the company undertook to pay the interest. When, therefore, the company, although they received the money from a member, received it from him without any obligation upon him as a member to pay it, and undertook to make a payment to him in consideration of it which they were not under any obligation to make to him as a member, it seems to me that it is manifestly erroneous to describe this as a payment made to a member in his character of member." (emphasis added) the payments to make That is, "in his character of member" was understood as requiring the identification of the right to receive the sum as a right which attached to membership of the company. A generally similar approach to the problem can be seen as underpinning the decision in In re New Chile Gold Mining Co242. There a claim by a former member, for damages suffered in consequence of the forfeiture of his shares 239 [1896] 1 Ch 397 at 405. 240 [1896] 1 Ch 397 at 407. 241 [1896] AC 461 at 468. 242 (1890) 45 Ch D 598. Hayne without giving notice as required by the articles of association, was held243 not to be a sum due to him in his character of a member but "on the contrary, due to him in the character of non-member". It was said244 that what was claimed was "not any sum which is payable to a member, but damages payable to him by reason of his having been deprived of the rights of a member by an irregular act on the part of the company in respect of which the contract, contained in the articles of association, entitles him to damages". And the like approach can also be seen in In re Harlou Pty Ltd (In Liq)245 where an employee of the company claimed damages for breach of the company's obligation, undertaken in his employment contract, to find a purchaser for shares issued to him when he took up employment, if that employment was terminated. As O'Bryan J said246, the amount claimed was "not due to him in his character of a member at all. It is not because he is a shareholder that he is entitled to these damages, but it is because he has made a contract with the company ... which contract the company has broken" (emphasis added). Because the question that must be answered is one of statutory construction, little or no assistance is to be had from considering the way in which other forms of statutory schemes, ordering the priorities for meeting an insolvent company's obligations, have been held to operate. And while it may be observed that each particular statutory scheme allocates the risks of insolvency between investors and creditors in a specific order, that is, in each case, an observation about the proper construction of the relevant statute, not an observation about some that "shareholders come last"247 or that "stockholders seeking to recover their investments cannot be paid before provable creditor claims have been satisfied in full"248 is no more than an observation about how the relevant statute has been, or should be, construed. immutable policy. In particular, to say 243 (1890) 45 Ch D 598 at 605. 244 (1890) 45 Ch D 598 at 605. 245 [1950] VLR 449. 246 [1950] VLR 449 at 454. 247 cf In re Geneva Steel Co 281 F 3d 1173 at 1179 (2002) citing In re Granite Partners LP 208 BR 332 at 344 (1997). 248 Slain and Kripke, "The Interface between Securities Regulation and Bankruptcy – Allocating the Risk of Illegal Securities Issuance between Securityholders and the Issuer's Creditors", (1973) 48 New York University Law Review 261 at 261. Hayne The expression now found in s 563A, "in the person's capacity as a member of the company" (like its legislative ancestor, "in his character of a member") must, of course, be given work to do in the provision. The expression defines (and confines) the particular kinds of obligations that are to be postponed. That is, it identifies the particular kinds of "debt owed by a company" (formerly, "sum due to any member of a company") to which particular consequences are attached. These consequences are now identified as postponement until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied; they were formerly identified as not being "deemed to be a debt of the company, payable to such member in a case of competition between himself and any other creditor not being a member of the company". And once it is recognised that the provision, both in its present and in its historical form, singles out particular obligations for the specified consequences, two observations may be made. First, the words "by way of dividends, profits or otherwise" can more readily be seen as examples of the kinds of obligation in question, rather than as words limiting or defining the obligations with which the provision deals. Secondly, the need to connect the obligation with membership is more apparent. the attachment of "Membership" of a company is a statutory concept. That is why the connection between obligation and membership that must be shown, if the obligation is to fall within s 563A, will find its ultimate foundation in the relevant legislation, now the 2001 Act. It is the legislation which defines the obligations owed by and to the members of a company. That definition of obligations will often require resort to the company's constituent documents to flesh out the content of the relevant obligation. It is on that basis that reference is often made to "the statutory contract", but it is the statute (now s 140 of the 2001 Act) which gives those documents their particular legal effect. And in other cases, it will not be necessary to look beyond the four corners of the statute to conclude that the obligation which the member seeks to enforce is an obligation owed to members. It will be noted that these conclusions about the operation of s 563A are not expressed in the terms used in Soden. In particular, it is to be observed that there is no reference to what Lord Browne-Wilkinson, speaking for the House of Lords, called249 "negative claims; claims based upon having paid money to the company under the statutory contract which the member says that he is entitled to have refunded by way of compensation for misrepresentation or breach of contract". These were said to be "claims necessarily made in his character as a member". 249 [1998] AC 298 at 325. Hayne If money is paid to the company under the statutory contract, there may be cases in which it may be said that the obligation which it is then sought to enforce is one whose ultimate foundation is the legislative prescription of the rights of members. Whether that is so would depend entirely upon the facts and circumstances of the particular case and, very probably, would be much affected by the provisions of the company's constituent documents. But if money is paid to the company to create the relationship of member (as will be the case when a person subscribes for shares) the company's obligation to pay damages for fraudulent misrepresentation inducing that subscription, or to pay damages because loss was occasioned by the company's misleading or deceptive conduct, will not, in the absence of specific legislative provision to the contrary, be an obligation whose foundation can be found in the legislative prescription of the rights and duties of members. In this respect, absent specific legislation giving subscribing members particular remedies as members, no distinction is to be drawn between shareholders who complain that a company's deceit or misleading or deceptive conduct induced them to acquire shares in the company according to whether that acquisition was by subscription or transfer. In the present case, the obligation which Mr Margaretic seeks to enforce is not an obligation which the 2001 Act creates in favour of a company's members. The obligation Mr Margaretic seeks to enforce, in so far as it is based in statutory causes of action, is rooted in the company's contravention of the prohibition against engaging in misleading or deceptive conduct and the company's liability to suffer an order for damages or other relief at the suit of any person who has suffered, or is likely to suffer, loss and damage as a result of the contravention. In so far as the claim is put forward in the tort of deceit, it is a claim that stands altogether apart from any obligation created by the 2001 Act and owed by the company to its members. Those claims are not claims "owed by a company to a person in the person's capacity as a member of the company". For these reasons, s 563A does not apply to the claim made by Mr Margaretic. Each appeal should be dismissed with costs. Callinan CALLINAN J. Mr Margaretic is not the first person, and will certainly not be the last to suffer the misfortune of buying shares in a terminally ailing gold mining company. Indeed, he has as fellow sufferers thousands of investors over the years who have chosen to invest in various kinds of joint enterprises of which, in modern times, companies are the most common, and which will almost always involve the divestment of personal management of the investment to others. Different people will have different subsidiary reasons to invest in this way: because they lack entrepreneurial flair and skills; because they perceive that a large concentration of capital can be more productive than a portion of it; because they are disabled in some way from managing investments; because they have insufficient money to fund a business; or perhaps because they wish to participate in a variety of businesses in the hope of insulating themselves from the vagaries of one business or market. All of these, and no doubt others, may operate on the minds of shareholders, but there can be no question that all are principally impelled by a wish to make as much money by way of income, capital gain, or both, as possible. No one investing in shares in a corporation could, however, be unaware that there will always be a risk of reverses, and that a shareholder alone, or indeed even a substantial body of shareholders, may not be able to manage or control that risk. Indeed, the risk itself may be uncontrollable by human agency, even the agency of a very cautious board of directors. Risk averse people, on the other hand, may choose to buy lower yielding government bonds, or, for example, shares in regulated utilities, understanding that by doing so they may forego a chance of greater financial rewards. None of this is to suggest that directors and officers of corporations should not adhere to proper standards, or that there should not be as strict a regime as reasonably possible to ensure efficiency, diligence and probity, whilst at the same time not stifling ingenuity and enterprise. There have been many corporations which have produced, and continue to produce, for their shareholders, much wealth. Sometimes, that result has been achieved by undertaking financially risky activities without in any way infringing any written or other rules of law. On other occasions, again without infringing any relevant law, the risk has materialized and the corporation has failed. Despite looking for the potential benefits had the corporation Sons of Gwalia Ltd ("SOG") succeeded250, and enjoying the benefit of limited liability on its failure, Mr Margaretic, as a shareholder, now wants to be heard to say that he should be in exactly the same position to share equally in the remains of the corporation as its unpaid unsecured creditors, who, unlike shareholders, had the misfortune of being injured by the company simply by dealing with it in the entirely reasonable expectation that it could and would pay its debts to them, but not of course, any share of its profits if it were to make them. 250 The extent to which SOG may have rewarded its shareholders in past years was not canvassed. Callinan The principal question in this case is whether Mr Margaretic can be heard to say this, and accordingly whether the decision of the Full Court of the Federal Court, which said he could, should be reversed by this Court. That question need only be answered if, as other members of the Court hold, another and less difficult question, whether Mr Margaretic should be entitled to claim as a creditor at all in the administration, is answerable in the affirmative. As to that, because I agree with the answer given by Hayne J, I need only deal in detail with the more difficult question. The course of proceedings so far, and the issues, are described in the reasons for judgment of other members of the Court. It may be useful however to set out a short summary of Mr Margaretic's claim251: "[Mr Margaretic] alleges that on 18 August 2004 he purchased 20,000 fully paid ordinary shares in SOG on market for $1.31 per share with a brokerage of $81.21 and GST of $7.38 and that at the time that he purchased his shares: SOG failed to notify the [Australian Stock Exchange ('ASX')] and the market of changes to SOG's estimated gold resources and reserves, and of the significance of this given SOG's gold delivery commitments ('Disclosures') and was thereby in breach of its disclosure obligations under section 674 of the [Corporations Act 2001 (Cth) ('the Act')] and Rule 3.1 of the ASX Listing Rules; alternatively, by its failure to make the Disclosures, SOG engaged in misleading and deceptive conduct in breach of: section 52 of the Trade Practices Act 1974 ('TPA'); section 1041H of the Act; or section 12DA of the Australian Securities and Investments Commission Act 2001 ('ASIC Act'); and he claims compensation from SOG in the amount of $26,288.59 pursuant to section 1325 of the Act, section 82 of the TPA, sections 1041I 251 Taken from the affidavit of Mr Darren Gordon Weaver, one of the voluntary administrators of SOG, sworn 1 July 2005. The affidavit was sworn and filed in support of SOG's application for a declaration that Mr Margaretic's claim was not provable in the deed of company arrangement or, alternatively, that it was subordinated to all other debts or claims owed otherwise than in the claimants' capacity as members of SOG. Callinan and 1325 of the Act, or sections 12GF and 12GM of the ASIC Act, respectively." The legislation Reference to the legislation upon which Mr Margaretic relies for his claims is necessary. Section 674 of the Act is found in Ch 6CA ("Continuous disclosure"). Its effect is to create criminal and civil penalties for non-compliance with r 3.1 of the ASX Listing Rules, but only if the information not disclosed is not generally available (s 674(2)(c)(i)), and, in the event of a criminal offence, if mens rea can be established252. Rule 3.1 of the ASX Listing Rules provides that an "entity" (a term defined to include a listed company253), once aware of any information concerning it that a reasonable person would expect to have a material effect on the price or value of its securities, must immediately disclose that information to the ASX. Disclosure is not required, however, if a reasonable person would not expect the information to be disclosed (r 3.1A.1); where the information is confidential and the ASX has not formed the view that the information has ceased to be confidential (r 3.1A.2); or, where it would be a breach of a law to disclose, if the information concerns an incomplete proposal or negotiation, if the information comprises matters of supposition, or, is insufficiently definite to warrant disclosure, where the information is generated for internal management purposes, or where the information is a trade secret (r 3.1A.3). It should be noted that the obligation of disclosure is imposed on the "entity" itself, that is, the company. A company, an artificial legal personality, of course may only function by its directors and officers. In practice it is they who will be making relevant disclosures, and who in consequence of any failure to do so will also be liable. One section upon which Mr Margaretic relies is s 52 of the TPA, which provides as follows: "Misleading or deceptive conduct (1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive. 252 For a civil penalty, s 674(2), s 1317E and s 1317G of the Act. For a criminal offence, s 1311 of the Act and the Criminal Code, s 3.2. Callinan (2) Nothing in the succeeding provisions of this Division shall be taken as limiting by implication the generality of subsection (1)." Section 1041H of the Act is in relevantly similar terms to s 52 of the TPA: "Misleading or deceptive conduct (civil liability only) (1) A person must not, in this jurisdiction, engage in conduct, in relation to a financial product or a financial service, that is misleading or deceptive or is likely to mislead or deceive. Note 1: Failure to comply with this subsection is not an offence. Note 2: Failure to comply with this subsection may lead to civil liability under section 1041I. For limits on, and relief from, liability under that section, see Division 4." There then follow a number of provisions identifying, without limiting sub-s (1), specific instances of "conduct": Conduct: that contravenes: section 670A (misleading or deceptive document); or takeover section 728 (misleading or deceptive fundraising document); or in relation to a disclosure document or statement within the meaning of section 953A; or in relation to a disclosure document or statement within the meaning of section 1022A; does not contravene subsection (1). For this purpose, conduct contravenes the provision even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence." Reliance is also placed upon s 12DA of the ASIC Act: Callinan "Misleading or deceptive conduct (1) A corporation must not, in trade or commerce, engage in conduct in relation to financial services that is misleading or deceptive or is likely to mislead or deceive. (1A) Conduct: that contravenes: section 670A of the Corporations Act (misleading or deceptive takeover document); or section 728 of the Corporations Act (misleading or deceptive fundraising document); or in relation to a disclosure document or statement within the meaning of section 953A of the Corporations Act; or in relation to a disclosure document or statement within the meaning of section 1022A of the Corporations Act; does not contravene subsection (1). For this purpose, conduct contravenes the provision even if the conduct does not constitute an offence, or does not lead to any liability, because of the availability of a defence. (2) Nothing in sections 12DB to 12DN limits by implication the generality of subsection (1)." Mr Margaretic claims relief under various provisions. One is s 82 of the TPA, which enables a person who has suffered loss or damage by conduct in contravention of s 52 of that Act, to recover the amount of the loss or damage suffered (s 82(1)). A court may, however, reduce the amount recovered to the extent it thinks just and equitable, where a claimant has contributed to the loss or damage and if the defendant neither intended nor fraudulently caused the loss or damage (s 82(1B)). As with ss 82 and 87 of the TPA, s 1325 of the Act, which is primarily concerned with accessorial liability, allows a degree of flexibility to the court in granting appropriate relief to compensate a person adversely affected by relevant conduct: "Other orders (1) Where, in a proceeding instituted under, or for a contravention of, Chapter 5C, 6CA or 6D or Part 7.10, the Court finds that a person who is a party to the proceeding has suffered, or is likely to suffer, Callinan loss or damage because of conduct of another person that was engaged in in contravention of Chapter 5C, 6CA or 6D or Part 7.10, the Court may, whether or not it grants an injunction, or makes an order, under any other provision of this Act, make such order or orders as it thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the first-mentioned person in whole or in part for the loss or damage or will prevent or reduce the loss or damage. The Court may, on the application of a person who has suffered, or is likely to suffer, loss or damage because of conduct of another person that was engaged in in contravention of Chapter 5C, 6CA or 6D or Part 7.10, or on the application of [the Australian Securities in accordance with and Investments Commission ('ASIC')] subsection (3) on behalf of such a person or 2 or more such persons, make such order or orders as the Court thinks appropriate against the person who engaged in the conduct or a person who was involved in the contravention (including all or any of the orders mentioned in subsection (5)) if the Court considers that the order or orders concerned will compensate the person who made the application, or the person or any of the persons on whose behalf the application was made, in whole or in part for the loss or damage, or will prevent or reduce the loss or damage suffered, or likely to be suffered, by such a person. (3) Where, in a proceeding instituted for a contravention of Chapter 5C, 6CA or 6D or Part 7.10 or instituted by ASIC under section 1324, a person is found to have engaged in conduct in contravention of Chapter 5C, 6CA or 6D or Part 7.10, ASIC may make an application under subsection (2) on behalf of one or more persons identified in the application who have suffered, or are likely to suffer, loss or damage by the conduct, but ASIC must not make such an application except with the consent in writing given before the application is made by the person, or by each of the persons, on whose behalf the application is made. (4) An application under subsection (2) may be made within 6 years after the day on which the cause of action arose. The orders referred to in subsections (1) and (2) are: an order declaring the whole or any part of a contract made between the person who suffered, or is likely to suffer, the loss or damage and the person who engaged in the conduct Callinan or a person who was involved in the contravention constituted by the conduct, or of a collateral arrangement relating to such a contract, to be void and, if the Court thinks fit, to have been void ab initio or at all times on and after a specified day before the order is made; and an order varying such a contract or arrangement in such manner as is specified in the order and, if the Court thinks fit, declaring the contract or arrangement to have had effect as so varied on and after a specified day before the order is made; and an order refusing to enforce any or all of the provisions of such a contract; and an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to refund money or return property to the person who suffered the loss or damage; and an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct to pay to the person who suffered the loss or damage the amount of the loss or damage; and an order directing the person who engaged in the conduct or a person who was involved in the contravention constituted by the conduct, at the person's own expense, to supply specified services to the person who suffered, or is likely to suffer, the loss or damage. (5A) Subsections (1) and (2) have effect subject to section 1044B. Note: Section 1044B may limit liability, under an order under subsection (1) or (2) of this section, of a person for his or her contravention of section 1041H (Misleading or deceptive conduct) or involvement in such a contravention. the (6) Where an application is made for an order under this section against a person, the Court may make an order under section 1323 in respect of the person." It is unnecessary to set out s 1041I of the Act. Among other things, it makes provision for the apportionment of responsibility as between participatory wrongdoers. Nor is it necessary to quote any of ss 12GF and 12GM of the ASIC Act. Both make provision for claims of the type that Mr Margaretic makes and allow some flexibility in the granting of relief by the court. Callinan All of Mr Margaretic's causes of action have in common reliance upon deceptive conduct consisting in a failure on the part of SOG to keep the market fully informed about matters relevant to its financial capacity and prospects. The "market" can be a very broad concept, capable of including within it virtually everyone with an interest, actual or potential, in the activities of a relevant company, including brokers, bankers and financiers, and shareholders, past, present and potential. It is on the rights of the last category that these appeals focus, but it is important in doing so not to lose sight of the interests that those others, and other categories such as general creditors may have in a corporation's trading and prospects. Returning however to the category of shareholders, past, present and prospective, I would make the point, the significance of which will become apparent later, that there is no reason why a shareholder, who, unlike Mr Margaretic, has subscribed for, or bought shares in SOG in earlier, seemingly happier, times and has been induced to hold them on the faith of the deceptive conduct constituted by non-compliance with the continuous disclosure rules, could not frame a claim in almost identical terms to that of Mr Margaretic. It cannot be seriously argued here that the particular provision to be construed, s 563A is unambiguous, or, to use the language of Kirby J254, not "contestable". Its meaning could not otherwise have demanded the time and attention that the Federal Court and other members of this Court have been obliged to give it. It provides: "Member's debts to be postponed until other debts and claims satisfied Payment of a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits or otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied." That it may contemplate, in its terms, an equal ranking of members of a company with other creditors in a case of a claim for compensation of the kind brought here, is no more natural a reading, than that it is intended to postpone comprehensively, a claim by a member of a company arising in any way out of the fact of, or the necessity for the purposes of the claim, a member's membership of the company. Indeed, there are I think, some internal indications arguing in favour of the second of these possible constructions. First, there is the use of the word "capacity". The Shorter Oxford English Dictionary gives as its Callinan first meaning the "[a]bility to take in or hold"255. That meaning attaches importance to the taking or holding of something, relevantly here a share. The second internal indication is the use of the expression of comprehensiveness, "or otherwise". These however are merely indications giving rise to no more than an impression, insufficient in itself to resolve the ambiguity. Resort must accordingly be had to the fundamental tenets of construction, the ones which I take to be most relevant here being: first, the ascertainment of the scope, objects and purposes of the Act; secondly, the need to construe the Act as a whole, which is perhaps merely another way of saying that each section of it must be put in context; thirdly, the importance of paying due regard to relevant history; and, fourthly, the desirability of giving effect to a construction, if it is reasonably available, which will better maintain coherence in the law and promote fairness. The scope, objects and purposes of the Act Some provisions of the Act have already been noticed. It is a very large and complex piece of legislation. Its long title describes it as "An Act to make provision in relation to corporations and financial products and services, and for other purposes". Those purposes include the regulation of corporations, their directors and other officers and the rights and obligations of, among others, shareholders and creditors. It is important to keep in mind that the Act is intended however to cover not only large, apparently highly capitalized, listed corporations but also proprietary companies both small and large256. Context Even though, indeed perhaps because members of companies necessarily entrust their investment to the management of others, and thereby accordingly run the risks that that necessarily involves, the Act confers very valuable rights, whilst the company remains afloat, upon members over and above those enjoyed by creditors, in relation to the control, the conduct of the affairs of, and access to the profits of a company. Before coming to those statutory rights, s 140(1) which is concerned with the "statutory contract" should be noticed: "A company's constitution (if any) and any replaceable rules that apply to the company have effect as a contract: 255 3rd ed (1973), vol 1 at 280. 256 s 45A. Callinan between the company and each member; and between the company and each director and company secretary; and between a member and each other member; under which each person agrees to observe and perform the constitution and rules so far as they apply to that person." That the section provides that the constitution is to have effect as a contract between the company and each director of it, and between a member and each other member, highlights the close legal relationship, indeed the interdependence, and consequentially a degree of reliance, of each of these with and upon the others. And although the section acknowledges the replaceability of the rules of the constitution of a company, shareholders can move to prevent changes in the event that any can be shown to be a fraud on a power according to conventional equitable doctrine. As Dixon J said in Peters' American Delicacy Co Ltd v Heath257: "If no restraint were laid upon the power of altering articles of association, it would be possible for a shareholder controlling the necessary voting power so to mould the regulations of a company that its operations would be conducted or its property used so that he would profit either in some other capacity than that of member of the company or, if as member, in a special and peculiar way inconsistent with conceptions of honesty so widely held or professed that departure from them is described, without further analysis, as fraud. For example, it would be possible to adopt articles requiring that the company should supply him with goods below cost or pay him ninety-nine per cent of its profits for some real or imaginary services or submit to his own determination the question whether he was liable to account to the company for secret profits as a director. The chief reason for denying an unlimited effect to widely expressed powers such as that of altering a company's articles is the fear or knowledge that an apparently regular exercise of the power may in truth be but a means of securing some personal or particular gain, whether pecuniary or otherwise, which does not fairly arise out of the subjects dealt with by the power and is outside and even inconsistent with the contemplated objects of the power." 257 (1939) 61 CLR 457 at 511. Callinan It is also relevant that the constitution of a company may be amended to allow expropriation of shares only if the amendment is to be made for a proper purpose, and is fair in all of the circumstances, both procedurally and substantively258. One of the powerful rights of members is the appointment of directors. It is unnecessary to go into the detail of the provision for this, which is contained in Pt 2D.3 of the Act, or the sections which deal with the effectiveness of acts done by directors and other officers, but this can be said: by electing the directors, the members choose the persons to conduct the affairs of the company and to use the members' funds and equity in it for that purpose. The directors are in a real, if not a necessarily technically legal sense, not just the instruments of the company, but are also the instruments and agents of the members in the use of the members' funds. By contrast, creditors have no such rights. In no sense do the directors act on their behalf. The Act imposes many duties upon directors. Section 180 expressly requires that they act as carefully and diligently as a reasonable person would in the circumstances of the corporation and its business. An (exculpatory) "business judgment" will be taken to have been made not improperly if it is made in good faith for a proper purpose on a properly informed basis rationally in the best interests of a company, and without consideration of material personal interest. It is unnecessary to refer in detail to directors' other obligations. The point can be made however that directors can be rendered personally liable, certainly at the suit of a liquidator or administrator259, but not directly, except in certain circumstances, the creditors, for what may well have occurred here, insolvent trading. Part 2F.1 of the Act confers important rights on members to prevent, or remedy the oppressive conduct of the affairs of companies. Section 232 provides as follows: "Grounds for Court order The Court may make an order under section 233 if: the conduct of a company's affairs; or an actual or proposed act or omission by or on behalf of a company; or 258 Gambotto v WCP Ltd (1995) 182 CLR 432 at 446-447 per Mason CJ, Brennan, 259 See Pt 5.7B, Div 4 of the Act. Callinan a resolution, or a proposed resolution, of members or a class of members of a company; is either: contrary to the interests of the members as a whole; or oppressive to, unfairly prejudicial to, or unfairly discriminatory against, a member or members whether in that capacity or in any other capacity. For the purposes of this Part, a person to whom a share in the company has been transmitted by will or by operation of law is taken to be a member of the company." Courts are empowered by s 233(1) of the Act to make various orders, where oppressive conduct is established: "(1) The Court can make any order under this section that it considers appropriate in relation to the company, including an order: that the company be wound up; that the company's existing constitution be modified or repealed; regulating the conduct of the company's affairs in the future; for the purchase of any shares by any member or person to whom a share in the company has been transmitted by will or by operation of law; for the purchase of shares with an appropriate reduction of the company's share capital; the company for discontinue specified proceedings; institute, prosecute, defend or authorising a member, or a person to whom a share in the company has been transmitted by will or by operation of law, to institute, prosecute, defend or discontinue specified proceedings in the name and on behalf of the company; appointing a receiver or a receiver and manager of any or all of the company's property; restraining a person from engaging in specified conduct or from doing a specified act; Callinan requiring a person to do a specified act." Standing to apply for an order is the subject of s 234, which provides that an application may be made by a member, a person who has been removed from a register of members because of a selective reduction, a person who has ceased to be a member, a transmitee by will or operation of law of a share, or a person whom the regulator, ASIC thinks appropriate, but not a creditor. Interestingly, s 234 is another section which refers to a "member in their capacity as a member" and a related phrase, a "member in a capacity other than as a member". Expressions used more than once in legislation should be given the same meaning throughout in most, if not all, conceivable circumstances. It is possible however to give the expression "member in their capacity as a member" the meaning advanced by either side as to the like phrase in 563A without doing injury to either s 234 or s 563A. Another important right that members now enjoy under the Act is to bring or intervene in proceedings on behalf of a company. Until the introduction of provision for this, the rule in Foss v Harbottle260 operated, that only the company could be a proper plaintiff in respect of wrongs done to it, members having no personal rights to interfere in the management of the company unless they did so in general meeting, and even then subject to a rule that they not attempt to invalidate otherwise apparently valid actions of directors before a resolution at such a meeting. Subject to some presently non-relevant qualifications, a member, a former member, or a person entitled to be registered as a member, has a right to apply to intervene under s 236 of the Act where they do so with the leave of the court under s 237. That section also provides that an officer or a former officer of the company, with leave, might have the same right, but it can be seen that, in general, the rights conferred are primarily intended as rights of members. Part 2F.2 is concerned with "class rights". It provides261 that if members of a class do not agree to a variation or cancellation of their rights, the holders of no fewer than 10 per cent of the votes in the class may apply to the court to set aside a variation or cancellation of their rights. Earlier I referred to limited liability. Provision for that is made by ss 515 and 516 of the Act. Section 515 provides: 260 (1843) 2 Hare 461 [67 ER 189]. 261 s 246D. See also, for deemed variations of class rights, s 246C. Callinan "General liability of contributory Subject to this Division, a present or past member is liable to contribute to the company's property to an amount sufficient: to pay the company's debts and liabilities and the costs, charges and expenses of the winding up; and to adjust the rights of the contributories among themselves." Section 516 states that "if the company is a company limited by shares, a member need not contribute more than the amount (if any) unpaid on the shares in respect of which the member is liable as a present or past member". It is also relevant that dividends may only be paid out of profits262. That this is so serves to emphasize the continuing importance, relevance, indeed sanctity, of the capital, as opposed to any clearly ascertainable profits generated by it. It is in the context in particular of the provisions to which I have so far referred that s 563A must be read. What can fairly clearly be discerned from that context is that, up to the point of insolvency, liquidation or administration of a company, its members enjoy superior opportunities, rights and advantages to creditors, yet the latter are no less likely to be disadvantaged by deceptive conduct of a company lying in a failure to comply with the continuous disclosure rules. There can be no doubt that the financial capacity of a company to satisfy its obligations to all of those who deal with or rely on it, is a matter of continuing interest and concern to them. That being so, it seems intuitively, as Kirby J points out263, to be a more likely construction of s 563A that it means what SOG, rather than Mr Margaretic contends it to mean. It does appear to me then that the contextual indications are more than mere straws in a breeze sighing in SOG's direction. Shareholders' ample and superior statutory rights, their voluntary abdication of control over their investment in favour of their appointees, the directors, who have large statutory and constitutional discretions and obligations in the application of it, their rights of intervention, their rights to proceed against the directors personally as well as the company in some circumstances, their statutorily mandated limited liability, especially that, and their rights to participate in the bounty of any successes, sit uncomfortably with the notion that s 563A gives them equal billing, on the failure of the company, with ordinary creditors. 262 s 254T. Callinan History The history of the Act has been traced by Hayne J264 and accordingly little of it needs repetition by me. I would make some observations about it, however. I do not think that anything turns upon the relocation of s 563A in a different part of the Act from the location of its precursors in the Acts in which they appeared. And whilst it is certainly true that Salomon v Salomon & Co Ltd265 did put beyond all dispute the proposition that a company was a different and separate personality from the members of it, the attainment of limited liability had been an object of legislators and the commercial community long before that case. The United Kingdom 1844 Statute 7 & 8 Vict c 111 did not achieve it, but did lay a foundation for it by drawing, as it did, a distinction between joint stock companies and private partnerships, incorporation by registration rather than by legislation or charter, and establishment of a registrar of companies with whom companies' constitutions and returns were filed so as to become accessible to the public. That Act did, however, provide that the liability of members should cease three years after transfer of their shares and that creditors must proceed first against the assets of the company266. According to Gower's Principles of Modern Company Law, public opinion hardened in favour of the extension of limited liability, "particularly when the slump of 1845-1848 drew poignant attention to the consequences of its absence"267. The Joint Stock Companies Act 1856 (UK) provided that a company of limited liability could be registered and could operate if seven or more persons signed and registered a memorandum of association. The use of the word "limited" was required and was regarded as a clear indication of any risk that might attach to dealing with this new form of legal personality. Perhaps the better way to regard Salomon v Salomon & Co Ltd is not as establishing unarguably merely "limited liability", but, as Gower puts it268, as bringing home its "implications" in New South Wales v Commonwealth269: As I said the courts. 266 Gower's Principles of Modern Company Law, 4th ed (1979) at 41. 267 4th ed (1979) at 43. 268 Gower's Principles of Modern Company Law, 4th ed (1979) at 97. 269 (2006) 81 ALJR 34 at 234 [843]; 231 ALR 1 at 250-251. Callinan "Given that the United Kingdom 1844 Statute 7 & 8 Vict c 111 allowed creditors to proceed against an insolvent company 'in like Manner as against other Bankrupts'270, and 'in its corporate or associated Capacity'271, I think it would be unwise to try to draw too much from the fact of the decision in Salomon v Salomon & Co Ltd272." One particularly relevant change which occurred in Australia was that effected by the Corporate Law Reform Act 1992 (Cth) which, for the first time in this country, made provision for proof of "all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), ... the circumstances giving rise to which occurred before the relevant date", thereby enabling members of companies to prove in respect of debts or claims of the kind made here. Section 553 reflected the recommendations which had been made in the Australian Law Reform Commission's General Insolvency Inquiry ("the Harmer Report")273. The Explanatory Memorandum for the Act of 1992 said this274: "Section 553 of the Corporations Law will be repealed and replaced and proposed sections 553, 553A to 553E and 554A through to 554J inserted into Division 6 of Part 5.6. These sections constitute three Subdivisions: Subdivision A – Admission to proof of debts or claims; Subdivision B – Computation of debts and claims; and Subdivision C – Special provisions relating to secured creditors of insolvent companies. The reforms embodied the recommendations of the Harmer Report in relation to the making of claims in insolvency. As the reforms relate to matters which under the current law are dealt with under the Bankruptcy Act, and incorporated into the Corporations Law by reference under section 553, the implementation these provisions reflect 270 Section 1. 271 Section 2. 273 (1988), vol 1 at 315 [774]. Callinan of these reforms has necessitated the incorporation in the Corporations Law of provisions modelled on sections in the Bankruptcy Act. This is in line with the general policy implicit in the Harmer Report that the provisions dealing with insolvency of companies should, as far as practicable, be located within the Corporations Law rather than included by reference. As the result of the current application of the Bankruptcy Act provisions, demands in the nature of damages arising otherwise than by reason of contract, promise or breach of trust are not provable in the winding up of a company (Bankruptcy Act, subsection 82(2)). The Harmer Report noted that this could result in a number of anomalies, not the least of which is that a set of circumstances can produce both a claim in tort and in contract. The right to make a claim under the present law may depend merely on a technical distinction between framing the claim in contract or framing it in tort. The Harmer Report made the point that there was no justification for such a distinction and noted that this could result in significant injustice where a claim could only be framed in tort. In such cases the claimant would make no recovery at all. The Harmer Report noted that the only substantial argument against permitting claims for unliquidated damages in tort was the problem of quantification. The Report noted too that this had not prevented claims for unliquidated damages arising from contract being made. The claiming of unliquidated damages in tort may presently be made in other jurisdictions (under the Insolvency Act 1967 (NZ) and under the Insolvency Act 1986 (UK)). The Harmer Report recommended that claims for unliquidated damages arising from tort should be admissible. The Report also recommended that to the extent that there may be practical problems in estimating the amount of such claims, the Court be expressly empowered to direct that the quantification be determined in such manner as the Court specifies (by, for example, referring the claim to a specialist tribunal). The operation of proposed sections 553 and 554A overcome the effect of subsection 82(2) of the Bankruptcy Act and thereby permit claims in tort which are unliquidated at the time of the winding up to be admissible in the winding up. Proposed section 554A provides for the determination of the value of debts and claims of uncertain value." The Explanatory Memorandum and the Harmer Report, which recommended275 the relocation of s 563A in the Act, throw no light upon the Callinan meaning to be given to the section, merely stating that the provision should be relocated to that part of the law which deals with priority of creditors. To make provision by legislation for new rights of proof is not necessarily to say anything about the ranking of the debts or claims the subject of them. That provision represented a marked departure from more than 100 years of legislation which consistently denied such a right. To provide it, clear and unmistakable language was required and used. Equally, I would have thought that if the departure and the right said to be conferred by it, for which Mr Margaretic contends, and which the majority and the Full Court of the Federal Court say he should have, were intended by the legislature, it would have used the same sort of clear and unmistakable language as is deployed in s 553, for it is at least as remarkable a departure as that effected by s 553 to promote shareholders, including those with unliquidated claims, to the same rank as ordinary creditors in place of their long-standing position below them. This is so even though, as Kirby J has demonstrated, a verbal formula, much clearer in its terms, to give effect to the result for which SOG contends, could fairly easily be devised276. But as is the case with most of the ambiguous provisions in enactments which come to the courts, it is possible to devise, in the course of, and following exhaustive argument and scrutiny by several judges, a better formula to support the meaning contended for by either side. As I have already pointed out, "or otherwise" is an expression of very wide import. The case for Mr Margaretic would be stronger if, for example, s 563A provided as follows: "Payment of a debt owed by a company to a person in the person's capacity as a member of the company, whether by way of dividends, profits, or other benefits arising directly out of the statutory contract between the member of the company and the company, and not otherwise, is to be postponed until all debts owed to, or claims made by, persons otherwise than as members of the company have been satisfied." 276 Reasons of Kirby J at [129]-[130]. In the United States of America, the Bankruptcy Code relevantly provides (11 USC §510(b)): "[A] claim arising from rescission of a purchase or sale of a security of the debtor or of an affiliate of the debtor, for damages arising from the purchase or sale of such a security, or for reimbursement or contribution allowed under section 502 on account of such a claim, shall be subordinated to all claims or interests that are senior to or equal the claim or interest represented by such security, except that if such security is common stock, such claim has the same priority as common stock." Callinan Relevant cases The history includes the relevant case law. Other members of the Court have discussed that. With respect, I do not entirely agree, however, with the complexion that has been placed upon some of it by the majority. It is said that one factor which influenced, either unnecessarily or excessively, certainly for modern purposes, the courts in Houldsworth v City of Glasgow Bank277, In re Addlestone Linoleum Company278 and latterly in Webb Distributors (Aust) Pty Ltd v Victoria279 was a preoccupation with the amount and maintenance of paid up capital280. It is also suggested that "assets and liabilities" are matters of more significance to creditors than paid up capital281, and that paid up capital is "wholly irrelevant"282 to a purchaser of fully paid shares on the market. The assets and liabilities of a company will, it is true, be matters of the greatest concern both to creditors and acquirers of shares. But what, it may be asked, is the connexion between those two, other than that the latter is the product at any time of the use of the other, the paid up capital of the company? The difference between liabilities and assets, members' equity, is the product of, and stands in place of, and assumes the importance of paid up capital, and is the real measure of the worth of the company. It is unnecessary to go into the detail of the provisions for it here, but the law, that is the Act, continues to make elaborate provision for, and limits the circumstances, being circumstances in general of clear solvency only, in which funds may be returned to shareholders, and the company's worth reduced, that is, its paid up capital, sometimes enlarged by capitalization of profits283, may be returned or reduced284. For these reasons, I cannot dismiss as irrelevant the discussion of the courts on paid and unpaid shares in past cases which were concerned primarily with questions relating to access by members to capital, and returns of capital to members of a company. Whatever criticisms may be made of Houldsworth, this Court accepted in Webb that it did stand for a proposition which the House of Lords had distilled from the 277 (1880) 5 App Cas 317. 278 (1887) 37 Ch D 191. 279 (1993) 179 CLR 15. 280 Reasons of Gleeson CJ at [5]. 281 Reasons of Gleeson CJ at [5]. 282 Soden v British & Commonwealth Holdings Plc [1998] AC 298 at 326. 283 s 254S. 284 See Ch 2J of the Act. Callinan provisions of the Companies Act 1862 (UK), and that it had "received statutory recognition in s 360(1) of the [Victorian Companies] Code"285. It is true, as the Chief Justice points out286, that there is a chronological disconformity contained in this statement by some members of this Court in Webb. But even so, the fact remains that Houldsworth has stood as the law, as to the effect of relevant parts of companies legislation in a relevantly unchanged form from 1880. As McHugh J said in Webb287, it must have been applied hundreds of times. And as the majority put it in Webb288: "However, the critical question is not whether Houldsworth is right or wrong but whether the proposition which the House of Lords distilled in the case from the provisions of the Companies Act 1862 is incorporated in the provisions of the Code. That proposition, namely, that a shareholder may not, directly or indirectly, receive back any part of his or her contribution to the capital of the company, cannot now be supported in absolute terms. A direct return of capital may be effected with the approval of the court having regard, inter alia, to the interests of creditors289. The statutory provisions authorizing the return of capital are not inconsistent with the Houldsworth proposition. Indeed, they proceed on an acceptance of part of the reasoning which underpinned the decision in that case. They permit a return of capital to shareholders when it is established to the satisfaction of the court that the return of capital will not prejudice the interests of creditors or when it is consented to by creditors. Hence, the statutory provisions treat the subscribed capital as a protection to creditors and accept that the capital should not be returned directly to shareholders otherwise than pursuant to a permissible reduction of capital. Tadgell J concluded that the principle in Houldsworth received statutory recognition in s 360(1) of the Code and was therefore imported into the windings up of the three building societies by s 121(4) of the Act. In our view, the conclusion reached by his Honour was correct and it draws support from the provisions of s 360(1)(k). 285 (1993) 179 CLR 15 at 33. 287 (1993) 179 CLR 15 at 39-40. 288 (1993) 179 CLR 15 at 33. 289 See s 123 of the Code; s 195 of the Corporations Law. Callinan Section 360 imposes an obligation on members to contribute to the payment of all liquidation. liabilities of a company on Paragraph (e) limits that obligation to the amount unpaid on the members' shares. Paragraph (k) subordinates sums due to a member in his or her capacity as a member to sums due to non-members." (original emphasis) the its Those provisions concerning reduction of capital referred to in Webb in the joint judgment appear now in a somewhat different form in the Act290. But the general proposition that financial capacity and absence of prejudice to creditors are necessary conditions precedent for reduction or return of capital holds true under the Act as it currently reads291. Thirteen years have now passed since Webb was decided, yet there have been no relevant statutory interventions to correct or change what it stands for. I do not think that anything turns upon whether the "purchase price" of shares was subscribed to the company or paid to a third party. The claim in either case is for damages because the underlying circumstances, and therefore the value of the shares were not what they were represented to be. In each case a claim by a subscriber or transferee still falls within areas of intense concern to creditors, the solvency and the maintenance of the capital of the company, whether in an enhanced or diminished form. Any participation by members in the funds of a company not postponed to ordinary creditors will inevitably effect a major reduction in the nett funds of the company, however they be described, whether capital, paid up capital, or owners' equity. Owners' equity is a matter of considerable relevance to both a subscriber and a purchaser of shares from third parties because it is difficult to imagine any prudent purchaser being guided by other than what that appeared to be. This then can be said of the relevant case law. Apart from Soden v British & Commonwealth Holdings Plc292, it does not support the position of Mr Margaretic. Soden itself is in my view open to the criticism that it fails to take due account of the importance of the maintenance of both paid up capital and owners' equity, and therefore the continuing solvency of the company. On the other hand, Webb does so, and tends to support SOG's position. In my view therefore, the history, overall, including the absence of relevant legislation to effect a change to render Webb irrelevant or otherwise not binding, favours SOG's position. 290 ss 256B to 256E. 291 See, eg, s 256B(1). Callinan Coherence in the law It is desirable that an Act be read so as to maintain coherence in the law and promote fairness, if a construction to achieve those ends is reasonably available. The construction contended for by Mr Margaretic does not in my opinion achieve those ends, indeed the contrary. Purchasers in Mr Margaretic's position are not the only ones who have suffered by reason of the failure to disclose by the company. In addition to creditors, all of the shareholders at the time of the placing of SOG in administration have a fair claim to say that they have been equally wronged. Most could fairly and honestly say that they decided to hold on to their shares by, and on the faith of the deceptive conduct alleged. In his Honour's reasons for judgment, Hayne J says293 that the measure of Mr Margaretic's damages is the difference between the amount that he paid for his shares and the value of the shares on a properly informed market, which is nil. On that analysis, a longer standing shareholder than Mr Margaretic who has held on to his shares might arguably fail because he could not establish any loss. In a properly informed market his shares would also have been valueless: nobody would have wanted to have had any part of them. The consequence of all of that could be a very unfair and incoherent result, although one not stemming directly from the priority provisions of s 563A. It would give only recent purchasers such as Mr Margaretic a very large advantage over other equally wronged, longer term members. It may however be possible to devise a different basis or measure of claim for those members who had held the shares for some time before administration (or liquidation) by resort to the provisions of the Act to which I have referred, and perhaps s 87 of the TPA, which allow courts greater flexibility in framing relief than at common law for deceit or negligent misstatement. Assume that to be so: the result produced could still be quite unfair to creditors for it would mean that most, perhaps all, of the shareholders at the time of the the same claim for compensation as administration would have much Mr Margaretic, thereby placing all, or practically all of the shareholders at that time in competition with the ordinary creditors, a consequence which can be seen to flow from the ranking provisions of s 563A. It is not difficult to imagine a situation in which claims of a large body of shareholders, perhaps most of them, would dilute the creditors' rights to less than a trickle. This tendency, of unfairness and legal incoherence, of the construction contended for by Mr Margaretic provides further reason therefore to reject it. Callinan Other matters and conclusion The language of s 563A has, as the Chief Justice in his reasons points out294, a long history. In my view, that language could and would have been changed if it were intended that creditors should be left to scramble, in competition with the shareholders who paid too much for their shares, for the remains of a company. It is no answer to SOG's arguments that Mr Margaretic's claim is said not to be based on the amount of capital paid up on the shares which he purchased but rather upon the market price of them. The market price of the shares depended entirely upon the wrongly induced perception that the paid up capital of the company had produced a position in which the market price of the shares was their true value. SOG's capital structure in its current form did therefore have the most direct bearing on the apparent market value of the shares. The fact that Mr Margaretic needed to plead that he was a member of the company may not be decisively against him, but it is a fact that cannot be dismissed as irrelevant. In that sense, membership of the company does have essentiality to his claim. Even if he could have found a buyer for his shares in the event, for example, of his wishing to crystallize a loss for tax purposes, he would still have had to have pleaded that he had been a member of the company. So too, an attempt to become a "member of the company" by acquiring shares not as yet registered in his name, would need to be pleaded and would have been a fact essential to a claim of the kind now made by Mr Margaretic. It is unnecessary for me here to form a concluded view about the correctness of SOG's concession, that s 563A has a relevant temporal aspect. Suffice to say, I doubt whether that is so, or so in all relevant circumstances295. In conclusion then, having regard to the scope and objects of the Act, the language used in s 563A itself, the context in which that section appears, the history of the Act, the relevant case law, and the desirability of maintaining coherence and fairness in the law, the construction to be preferred is that advanced by SOG. I would accordingly make the following orders: The appeals in matters no S208 of 2006 and no S209 of 2006 be allowed with costs. Set aside the orders of the Full Court of the Federal Court of Australia made on 27 February 2006 and, in their place, order: appeals allowed with costs; 295 cf reasons of Gleeson CJ at [10]. Callinan that orders 2, 4 and 5 made by Emmett J in the Federal Court of Australia on 27 September 2005 be set aside; and in lieu thereof, order: that there be a declaration that payment of the claim of the first respondent in each of the matters, being the claim more particularly described in the Agreed Statement of Facts, pursuant to the deed of company arrangement of the appellant in matter no S208 of 2006, dated 30 August 2005, be postponed until all debts owed to, or claims made by, persons otherwise than in their capacity as members of the appellant in matter no S208 of 2006, have been satisfied in full; and that Mr Margaretic pay the costs in the Federal Court of Australia. 260 HEYDON J. I agree with the orders proposed by Hayne J. Mr Margaretic's claim falls within the expression in s 553 "debts or claims the circumstances giving rise to which occurred before the relevant date" for the reasons given by Hayne J296. Mr Margaretic's claim is not a claim for payment of "a debt owed by a company to a person in [his] capacity as a member of the company" within the meaning of s 563A for the reasons given by Hayne J297. So far as Webb Distributors (Aust) Pty Ltd v Victoria298 and Houldsworth v City of Glasgow Bank299 were relied on by SOG and ING in relation to the construction of s 563A, it is not necessary to say more about them than that which Hayne J has said in explaining why they are not determinative300. Further, the issue on which the Webb case was decided was whether a claim was provable, whereas the issue on which the SOG appeal is to be decided in relation to s 563A turns on whether a provable claim ranks after or alongside the claims of general creditors. So far as those cases were relied on by ING in its written submissions in chief in support of a contention that Mr Margaretic's claim was not provable, by reason of a principle which, it contended, had been stated in Houldsworth's case and approved by this Court in the Webb case, it is not necessary to deal with them. That is because both at the start and at the close of his final address, counsel for ING abandoned that contention. If that contention was not abandoned, I agree with Hayne J's reasons for rejecting it301. 296 Reasons of Hayne J at [168]-[176]. 297 Reasons of Hayne J at [201]-[206]. 298 (1993) 179 CLR 15. 299 (1880) 5 App Cas 317. 300 Reasons of Hayne J at [180]-[190]. 301 Reasons of Hayne J at [180]-[190]. Crennan CRENNAN J. I have had the advantage of reading in draft form the reasons of each of Gleeson CJ and Hayne J. I agree with their conclusions and with their reasons. I have also had the advantage of reading in draft form the additional reasons of Gummow J and I agree generally with his Honour's reasons and analysis of what was referred to in argument as a "principle" said to be derived from Houldsworth v City of Glasgow Bank302. Prior to the Companies Act 1862 (UK) ("the 1862 Act") creditors were not entitled to apply for an order for winding up, but they were not restricted from pursuing legal remedies against individual shareholders303. In the same period, shareholders induced to take shares by fraud, imputable to the company, were entitled to repudiate their shares, were not liable to be contributories in a winding up304 and could, as creditors, pursue remedies against individual shareholders. These possibilities did not continue after the consolidation and reforms305 encapsulated in s 38 of the 1862 Act ("s 38"). It was decided in Oakes v Turquand and Harding306 that a shareholder induced to take shares by fraud, imputable to the company, giving rights to rescission and indemnity against the company could not avoid being on the list of contributories by exercising those rights once a winding up had commenced. This was because s 38 imposed a "statutable liability"307 on shareholders in respect of creditors, who were not able to pursue remedies against individual shareholders under the 1862 Act. In Tennent v City of Glasgow Bank308, Earl Cairns LC considered that the rationale of Oakes v Turquand applied as soon as a company became insolvent, and before a winding up, because of the assumption at that point of "new liabilities" to creditors309. In Houldsworth's Case, Houldsworth accepted that winding up precluded rescission, as decided in Oakes v Turquand. He then unsuccessfully sought 302 (1880) 5 App Cas 317. 303 Lindley, A Treatise on the Law of Companies, 5th ed (1889) at 612. 304 Lindley, A Treatise on the Law of Companies, 5th ed (1889) at 79-81. 305 Discussed in the reasons of Hayne J at [149]-[167]. 306 (1867) LR 2 HL 325. 307 (1867) LR 2 HL 325 at 350 per Lord Chelmsford LC. 308 (1879) 4 App Cas 615. 309 (1879) 4 App Cas 615 at 622. Crennan damages in respect of an inducement by fraud to take up shares, such damages to be paid after the creditors were paid, either from the company's surplus or by solvent co-contributories. It is not clear why Earl Cairns LC decided that £4000 paid by Houldsworth for the stock could not form part of "the debts and liabilities of the company"310. However, it is clear at several points that when Earl Cairns LC speaks of Houldsworth's claim as "inconsistent with the contract into which he has entered"311, he is referring to Houldsworth's contract "as between himself and those with whom he becomes a partner"312, ie other shareholders. It is also clear that Lord Selborne's reasons concerned the "contract between the shareholders"313 and Lord Selborne regarded the action as being, in truth, an action against co-contributories314, innocent of any fraud. Three months after Houldsworth's Case was decided, Burgess's Case315 came before Sir George Jessel MR. There, assets in the hands of a liquidator were sufficient to pay creditors and the costs of the winding up. In resisting being listed by the liquidator as a contributory, Burgess contended that as all creditors' claims had been met, he was entitled to rescind as against other contributories, notwithstanding the winding up order. The liquidator met that contention with the submission that the decision in Houldsworth's Case barred an action for damages in respect of fraud inducing the purchase of shares, to which the Master of the Rolls responded thus316: "The doctrine is that after the company is wound up it ceases to exist, and rescission is impossible. There are then only creditors and co- contributories and no company, and that is the meaning of Lord Cairns' observations in Houldsworth v City of Glasgow Bank." He then said in his reasons for judgment317: 310 (1880) 5 App Cas 317 at 325. 311 (1880) 5 App Cas 317 at 325. 312 (1880) 5 App Cas 317 at 324. 313 (1880) 5 App Cas 317 at 329. 314 (1880) 5 App Cas 317 at 329. 315 In re Hull and County Bank (Burgess's Case) (1880) 15 Ch D 507. 316 (1880) 15 Ch D 507 at 509-510 (footnote omitted). 317 (1880) 15 Ch D 507 at 511 (footnote omitted). Crennan "It has been decided by a series of decisions in the House of Lords, commencing with Webb v Whiffin, that the 38th section of the Companies Act is not to be read otherwise than literally, and it is not to be read with reference to the previous liabilities of the shareholders or by analogy to the law of partnership whether of a limited or unlimited character, but it is to be read as imposing new liabilities on the members of the company – liabilities imposed and defined by that section. The result, therefore, is this, that the member is liable to contribute to the assets of the company, not only to an amount sufficient for the payment of the debts and liabilities and the costs, but to the payment of such sums as may be required for the adjustment of the rights of the contributories amongst themselves." (emphasis added) Sir George Jessel MR relied on Oakes v Turquand and Tennent v City of Glasgow Bank as relevant to the first "new liability" as both cases turned on the consideration that it is too late to rescind where innocent third parties after a winding up had acquired rights as creditors under s 38; and he relied on Houldsworth's Case as relevant to the second "new liability" turning on the consideration that it is too late to rescind after a winding up when the rights of contributories inter se fell to be dealt with under s 38318. In Southern British National Trust Ltd v Pither319 Dixon J pointed out that both those considerations influenced the adoption of "the well known rule that a member of a company loses on the commencement of a winding up any right he might otherwise have had to the rescission of his contract of membership". Citing Burgess's Case, Dixon J regarded the rule as the inevitable result of the legislative provision that on a liquidation "an entire change took place in the relation of creditors and shareholders to the assets and of shareholders inter se"320. The notion that the "inconsistency" in Houldsworth's position as a shareholder turned on an implied term in the contract between the shareholder and the company, or a "principle" that capital could not be returned to a shareholder, seems to have first been suggested by Kay J in In re Addlestone Linoleum Company321. On appeal, it was then repeated by Lindley LJ322: 318 Sir George Jessel MR's explication of Houldsworth's Case is supported by s 101 of the 1862 Act as it applies to contributories of an unlimited liability company. 319 (1937) 57 CLR 89 at 113. 320 (1937) 57 CLR 89 at 114. 321 (1887) 37 Ch D 191 at 200. 322 (1887) 37 Ch D 191 at 206. Crennan "[A] shareholder contracts to contribute a certain amount to be applied in payment of the debts and liabilities of the company, and … it is inconsistent with his position as a shareholder, while he remains such, to claim back any of that money". If, however, the "inconsistency" in Houldsworth's position in fact had nothing to do with analogy to the law of partnership on a bankruptcy, but is explicable by reference to the specific provisions of s 38 affecting shareholders inter se, as explained by Sir George Jessel MR, two points, at least, can be made. First, Salomon v Salomon and Co323 disposes of the conception that an action by a shareholder against a company in respect of fraud inducing the taking up of the shares is, in effect, an action against individual innocent co- contributories. Secondly, if the significance of Houldsworth's Case for s 38, including s 38(7), was as explained almost contemporaneously by Sir George Jessel MR in Burgess's Case, namely that the legislation "imposed and defined" obligations of and to shareholders, it is difficult to understand why its significance for s 38 was characterised much more widely as turning on a "principle" that share capital represents a "guarantee fund" for creditors which should not be returned to shareholders other than in a lawful reduction of capital. In any event, the idea that it is "the legislation which defines the obligations owed by and to the members of a company"324 has remained a constant, notwithstanding critical legislative changes dealing with members' debts which have been described in the reasons of Hayne J. The claims Mr Margaretic makes are not founded on any obligations owed by or to him as a member. He relies on statutory causes of action not confined to members which are available to "a person who has suffered, or is likely to suffer, loss or damage"325, as a consequence of conduct in contravention of certain provisions of the Corporations Act 2001 (Cth), such as s 674 and s 1041H. Any obligation on the company to pay compensation to Mr Margaretic for fraudulent misrepresentation inducing him to become a member and occasioning him loss does not answer the description of being owed to Mr Margaretic "in [his] capacity as a member of the company". Conclusion In my opinion also, each of the appeals should be dismissed with costs. 324 Reasons of Hayne J at [202]. 325 Corporations Act 2001 (Cth), s 1325(2).
HIGH COURT OF AUSTRALIA METAL MANUFACTURES PTY LIMITED APPELLANT AND GAVIN MORTON AS LIQUIDATOR OF MJ WOODMAN ELECTRICAL CONTRACTORS PTY LTD (IN LIQUIDATION) & ANOR RESPONDENTS Metal Manufactures Pty Limited v Morton [2023] HCA 1 Date of Hearing: 12 October 2022 Date of Judgment: 8 February 2023 ORDER Appeal dismissed. The costs of this appeal be costs in the cause. On appeal from the Federal Court of Australia Representation J T Gleeson SC with G P McNally SC and J W Pokoney for the appellant (instructed by Breene & Breene Solicitors) J D McKenna KC with P E O'Brien for the respondents (instructed by Taylor Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Metal Manufactures Pty Limited v Morton Corporations – Winding up – Insolvency – Set-off – Unfair preferences – Where appellant received payments from company within six-month period prior to winding up – Where liquidator of company sought to recover payments from appellant under s 588FF(1)(a) of Corporations Act 2001 (Cth) ("Act") as unfair preferences under s 588FA of Act – Where appellant owed separate and distinct debt by company – Whether set-off under s 553C(1) of Act available to appellant against liquidator's claim for recovery of unfair preferences. Words and phrases – "commencement of the winding up", "contingent right", "insolvency", "insolvent transaction", "liquidation", "liquidator's duties and powers", "mutual dealing", "mutuality", "pari passu principle", "set-off", "statutory scheme of liquidation", "unfair preference", "voidable transaction", "winding up". Corporations Act 2001 (Cth), ss 474, 477, 478, 553, 553C, 555, 556, 588FA, 588FC, 588FE, 588FF, 588FI. KIEFEL CJ, GORDON, EDELMAN AND STEWARD JJ. Metal Manufactures Pty Limited ("the appellant") was paid $50,000 and $140,000 by MJ Woodman Electrical Contractors Pty Ltd, a company now in liquidation ("MJ Woodman"). Both payments were made within the six-month period prior to the winding up of MJ Woodman ("the relation-back period"). The liquidator of MJ Woodman ("the first respondent") sought to recover both payments from the appellant under s 588FF(1)(a) of the Corporations Act 2001 (Cth) ("the Act") on the basis that each was an unfair preference under s 588FA of the Act. The appellant alleges, and the respondents concede, that MJ Woodman owes the appellant $194,727.23. This is a separate and distinct debt from the liability which is said to arise under s 588FF(1)(a). The appellant contends that it has, pursuant to s 553C of the Act, a right to set off its potential liability to repay the alleged unfair preferences against the separate debt owed to it. Given that the separate debt exceeds the amount of the alleged unfair preferences, if the appellant could set off that debt under s 553C(1), the first respondent would not obtain an order for payment under s 588FF(1)(a). Accordingly, by an Amended Special Case, Derrington J reserved for consideration by the Full Court of the Federal Court the following question: "Is statutory set-off, under s 553C(1) of the Corporations Act 2001 (Cth) ("Act"), available to the [appellant] in this proceeding against the [first respondent's] claim as liquidator for the recovery of an unfair preference under s 588FA of the Act?" In a comprehensive set of reasons, the Full Court said that the question posed should be answered "No"1. In separate reasons, the Full Court also ordered that the issue of costs in the special case be remitted for determination by the docket judge2. For the reasons which follow, the answer given by the Full Court was correct, the costs order should not be disturbed, and the costs of this appeal should be costs in the cause. 1 Morton v Metal Manufactures Pty Ltd (2021) 289 FCR 556 at 560 [5] per Allsop CJ (Middleton and Derrington JJ agreeing). 2 Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Ltd [No 2] [2022] FCAFC 1. Gordon Edelman Steward The statutory scheme Whether a right of set-off is available requires consideration of the applicable statutory scheme. Liquidator's duties and powers The survey commences with Div 2 of Pt 5.4B of Ch 5 of the Act3. Chapter 5 addresses the various forms of external administration of a company, and Div 2 of Pt 5.4B deals with an instance of such administration, namely the appointment of a liquidator by a Court following the making of an order for the winding up of a company4. Pursuant to s 474 of the Act, relevantly the liquidator must take into his or her custody, or under his or her control, all of the property which is, or appears to be, the property of the company being wound up. Unlike the case of a person who becomes a bankrupt, where the property of the bankrupt vests in the Official Trustee5, the property of the company does not vest in the liquidator6. Thereafter, pursuant to s 477 of the Act, the liquidator is empowered, amongst other things: to carry on the business of the company7; to pay any class of creditors subject to s 556 of the Act (as to which see below)8; to make any compromise or arrangement with the creditors of the company9; to compromise any calls, liabilities and debts subsisting between the company and a contributory or other debtor10; to bring or defend proceedings in the name and on behalf of the company11; to sell all or any 3 Whilst not part of the Amended Special Case, this Court has assumed that MJ Woodman was placed into liquidation by Court order pursuant to s 472 of the Act. That assumption does not affect the outcome of this appeal. See s 472 of the Act. See s 58 of the Bankruptcy Act 1966 (Cth). Pursuant to s 474(2) of the Act, a Court may order, on the application of a liquidator, the vesting of all or part of the property of the company in that liquidator. Sub-section (1)(a). Sub-section (1)(b). Sub-section (1)(c). 10 Sub-section (1)(d). 11 Sub-section (2)(a). Gordon Edelman Steward part of the property of the company12; to do all acts and execute in the name and on behalf of the company all deeds, receipts and other documents13; and otherwise to do all things as are necessary for winding up the affairs of the company and distributing its property14. Generally, in exercising these powers, the liquidator must use his or her own discretion in the management of the affairs and property of the company and the distribution of its property15. As soon as practicable after the company is ordered to be wound up, a liquidator must cause the property of the company to be collected and applied in discharging the company's liabilities16. The company, whilst being wound up, does not hold its property on trust for creditors and members. The statutory regime for the administration of a company in liquidation is both an exhaustive and sufficient measure for the distribution of the company's property which does not necessitate or justify the intervention of equity. As Menzies J observed in Franklin's Selfserve Pty Ltd v Federal Commissioner of Taxation17: "It seems to me, however, that once a company is in liquidation the statutory provisions apply whether it be solvent or insolvent and it is not an easy distinction to say that if a company is insolvent it has ceased to have a beneficial interest in its assets, but, if it is not, it continues to do so. In each case it is for the liquidator to carry out the statutory scheme of liquidation, to pay creditors and to divide any surplus that there may be among contributories. Whether or not there may be a surplus hardly seems to me to bear upon the relationship between the company in liquidation and its assets." (emphasis added) A plurality of this Court referred to the foregoing passage in Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq)18. Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ said that although the appointment of 12 Sub-section (2)(c). 13 Sub-section (2)(d). 14 Sub-section (2)(m). 15 Sub-section (6). 16 Section 478(1)(a) of the Act. (1970) 125 CLR 52 at 70. (2005) 220 CLR 592 at 608 [38]. Gordon Edelman Steward the liquidator circumscribed or suspended the exercise of the incidents of ownership of assets by the usual organs of the company, that did not mean that the company held its assets on trust19. Nor does the liquidator hold any of the property that he or she gathers in and controls on trust for the creditors and members of the company20. It follows from acceptance of the proposition that the company remains the beneficial owner of all the property gathered in and controlled by the liquidator that it also is the beneficial owner of all payments received by it during the course of the winding up. This includes payments made to the company by order of a court pursuant to s 588FF(1) of the Act. That is not to deny, however, that the property of the company and any payments or transfers of property made to the company during the process of winding up are subject to the "statutory scheme of liquidation". In that respect, it has been recognised that creditors of a company in liquidation enjoy a "special interest" – namely to have the assets of the company gathered together and then distributed21. Proof and ranking of claims Division 6 of Pt 5.6 of Ch 5 of the Act deals with the proof and ranking of claims against the company. Section 553(1) is a key provision and is as follows: "Subject to this Division and Division 8, in every winding up, all debts payable by, and all claims against, the company (present or future, certain or contingent, ascertained or sounding only in damages), being debts or claims the circumstances giving rise to which occurred before the relevant date, are admissible to proof against the company." (2005) 220 CLR 592 at 613 [55]. 20 Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 608 [35] per Gleeson CJ, Gummow, Hayne, Callinan and 21 Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 612 [54] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ, citing Ford and Austin's Principles of Corporations Law, 7th ed (1995) Gordon Edelman Steward Section 553 creates an important cut-off date to determine what debts and claims are provable in the winding up. As Allsop CJ observed below, a critical feature of this provision is that it addresses only debts and claims against the company arising from "circumstances" which had occurred "before the relevant date"22. Here, the "relevant date" is the date when the winding up of a company is taken because of Div 1A of Pt 5.6 of the Act to have begun23. The breadth of the language of s 553 is noteworthy24. It extends to all debts payable by and all claims against the company, whether "present or future, certain or contingent, ascertained or sounding only in damages", which arise from "circumstances" before the commencement of the winding up. In contrast, s 82 of the Bankruptcy Act 1966 (Cth), which addresses debts provable in bankruptcy, is limited to debts to which the bankrupt was subject as at the date of bankruptcy, or to which he or she may become subject "by reason of an obligation incurred before the date of the bankruptcy". The purpose of s 553 is important. As Campbell JA observed in BE Aust WD Pty Ltd v Sutton25, s 553 ensures that all legal obligations to which a company is subject are ascertained and then valued "at a common date", so that they can be taken into account in the winding up. Critically, and subject to one possible exception26, no debt or claim arising from circumstances arising after the commencement of the winding up of the company is admissible to proof against the company in the liquidation. Section 555 of the Act provides for the distribution of the assets of the company in accordance with the pari passu principle. It provides that, except as otherwise provided, all debts and claims proved in a winding up rank equally, and that if the property of the company is insufficient to meet such debts and claims, they must be paid proportionately. Many of the exceptions to this principle are set out in s 556 of the Act, which lists a series of payments to be made in priority to all unsecured debts and claims. These include: certain of the liquidator's 22 Morton v Metal Manufactures Pty Ltd (2021) 289 FCR 556 at 574 [60]. See also Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 at 223 [168] per Hayne J. 23 See definition of "relevant date" in s 9 of the Act. 24 See, eg, Sons of Gwalia Ltd v Margaretic (2007) 231 CLR 160 at 224 [172] per (2011) 82 NSWLR 336 at 363 [105]. 26 See s 588FI of the Act, discussed at [29]. Gordon Edelman Steward expenses27; the costs of the application for the winding up order28; certain amounts owing to employees of the company before the date of winding up29; and certain retrenchment payments payable to employees of the company30. Set-off Section 553C of the Act confers the right of set-off relied upon by the appellant. It should be set out in full: "Insolvent companies – mutual credit and set-off Subject to subsection (2), where there have been mutual credits, mutual debts or other mutual dealings between an insolvent company that is being wound up and a person who wants to have a debt or claim admitted against the company: an account is to be taken of what is due from the one party to the other in respect of those mutual dealings; and the sum due from the one party is to be set off against any sum due from the other party; and only the balance of the account is admissible to proof against the company, or is payable to the company, as the case may (2) A person is not entitled under this section to claim the benefit of a set-off if, at the time of giving credit to the company, or at the time of receiving credit from the company, the person had notice of the fact that the company was insolvent." It might be thought that s 553C offends the pari passu principle because it gives the creditor a complete discharge of what it is owed, dollar for dollar. Such an observation is mistaken. The purpose of s 553C is to ascertain what is available for distribution on a pari passu basis. It is only the balance of any set-off (when it 27 Sub-sections (1)(a) and (dd). 28 Sub-section (1)(b). 29 Sub-sections (1)(g) and (1B); see also s 558 of the Act. 30 Sub-sections (1)(h) and (1C). Gordon Edelman Steward favours the creditor) which is then admissible to proof against the company for the purposes of s 553. Before then, the law permits a set-off of mutually incurred credits, debts or dealings because that is a just outcome chosen by Parliament. As this Court observed in Gye v McIntyre31, when considering the equivalent right of set-off conferred by s 86 of the Bankruptcy Act32: "It has often been pointed out that the object of set-off in bankruptcy is, in the words of Parke B in Forster v Wilson, 'to do substantial justice between the parties, where a debt is really due from the bankrupt to the debtor to his estate'. Where there are genuine mutual debts, credits or other dealings, it would be unjust if the trustee in bankruptcy could insist upon having 100 cents in the dollar upon the whole of the debt owed to the bankrupt but at the same time insist that the bankrupt's debtor must be satisfied with a dividend of some few cents in the dollar on the whole of the debt owed by the bankrupt to him. It was to prevent such injustice that the 'mutual credits' and 'mutual debts', and later 'mutual dealings', provisions were introduced into bankruptcy legislation". (footnote omitted) Two key features of the set-off provision should be noted at this point. First, s 553C has a temporal element. As has been explained, s 553 circumscribes the pool of claims which are provable in a winding up to those debts payable by and claims against the company "the circumstances giving rise to which occurred before the [winding up]" (emphasis added). The operation of s 553 informs the availability of set-off because after set-off under s 553C(1)(c) the balance of an account is admissible to proof – being proof admissible against the company under s 553. Accordingly, for the purposes of assessing whether there is mutuality, the rights of the parties are to be taken and ascertained as at the time of winding up33; the important factor is whether there is an obligation or liability prior to liquidation which might mature into a debt owing34. Thus, any acquisition by a (1991) 171 CLR 609. (1991) 171 CLR 609 at 618-619 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. See also Morton v Metal Manufactures Pty Ltd (2021) 289 FCR 556 at 588-589 [109] per Allsop CJ. 33 Hiley v Peoples Prudential Assurance Co Ltd (1938) 60 CLR 468 at 480 per Latham CJ, 495-496, 499 per Dixon J. 34 Day & Dent Constructions Pty Ltd v North Australian Properties Pty Ltd (1982) 150 CLR 85 at 91 per Gibbs CJ, 109 per Mason J. Gordon Edelman Steward liquidator of new claims on behalf of a company cannot vary the parties' antecedent rights such as to be available for set-off35. And, secondly, as this Court explained in Gye, there are three aspects to a "mutual dealing"36: "The first is that the credits, the debts, or the claims arising from other dealings be between the same persons. The second is that the benefit or burden of them lie in the same interests. In determining whether credits, debts or claims arising from other dealings are between the same persons and in the same interests, it is the equitable or beneficial interests of the parties which must be considered: see, eg, Hiley. The third requirement of mutuality is that the credits, debts, or claims arising from other dealings must be commensurable for the purposes of set-off under the section. That means that they must ultimately sound in money." It will be necessary to return to these features below. Voidable transactions Division 2 of Pt 5.7B of Ch 5 of the Act deals with voidable transactions. The relevant operative provision is s 588FF when read with a series of definitional provisions. It relevantly provides as follows: "Courts may make orders about voidable transactions (1) Where, on the application of a company's liquidator, a court is satisfied that a transaction of the company is voidable because of section 588FE, the court may make one or more of the following orders: an order directing a person to pay to the company an amount equal to some or all of the money that the company has paid under the transaction; 35 Hiley v Peoples Prudential Assurance Co Ltd (1938) 60 CLR 468 at 487 per Rich J; see also at 491 per Starke J. (1991) 171 CLR 609 at 623 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gordon Edelman Steward (3) An application under subsection (1) may only be made: during the period beginning on the relation‑back day and ending: 3 years after the relation‑back day; or 12 months after the first appointment of a liquidator in relation to the winding up of the company; whichever is the later; or (b) within such longer period as the Court orders on an application under this paragraph made by the liquidator during the paragraph (a) period. The liquidator's right to seek recovery pursuant to s 588FF of an unfair preference is part of the statutory scheme of liquidation concerned with maximising the distributable pool of assets. It is thus "in the nature of a corollary" to that scheme, including the provisions which prescribe the order of priorities to be observed by the liquidator in the application of the company's property37. It is directed at ensuring that the administration of the company is not distorted by putting a debt "ahead of the place appropriate to it in the prescribed order"38. In this way, the provision achieves its primary objective of "securing equality of distribution amongst creditors of the same class"39. The nature of the liability created by an order for the payment of money under s 588FF(1)(a) of the Act was disputed in this appeal. The appellant emphasised that the liability was one owed to the company, and that when discharged, the payment was received beneficially by the company in accordance with the principle established by Linter Textiles. As such, it was available to be 37 Federal Commissioner of Taxation v Jaques (1956) 95 CLR 223 at 229 per Dixon CJ, Fullagar, Kitto and Taylor JJ. 38 Federal Commissioner of Taxation v Jaques (1956) 95 CLR 223 at 229-230 per Dixon CJ, Fullagar, Kitto and Taylor JJ. 39 G & M Aldridge Pty Ltd v Walsh (2001) 203 CLR 662 at [30] per Gleeson CJ, Gaudron, Gummow, Hayne and Callinan JJ; Union Bank v Wolas (1991) 502 US Gordon Edelman Steward applied in making priority payments and in making payments to creditors and contributories. It was not destined, as a legal necessity, to be distributed to creditors. Reference was made to s 482 of the Act40, which, it was said, indicates that in the event of the termination of a liquidation under that section, a payment made pursuant to an order under s 588FF(1)(a) could conceivably be available to be deployed for the purposes of the company's ongoing business. In contrast, the respondents emphasised that the cause of action created by s 588FF was one conferred upon the liquidator and not the company. Contrary to the contention of the appellant, they submitted that the cause of action conferred by s 588FF was not one exercisable by the liquidator as agent of the company41, but rather as an officer of the court. That submission should be accepted. When deciding to institute proceedings pursuant to s 588FF, the liquidator acts as an officer of the court charged with the duties and responsibilities created by the statutory scheme of liquidation. It follows that whilst the liquidator might in other situations be characterised as an agent of the company, for the purposes of s 588FF no reason exists to characterise the liquidator as acting in such a capacity. But amounts recovered by action under s 588FF are then to be dealt with according to the statutory scheme of liquidation. The foregoing is consistent with history. Originally preferences were "void as against the assignee or trustee of the insolvent"42, rather than the company. But 40 Section 482(1) of the Act relevantly empowers the Court to stay a winding up indefinitely or for a limited time, or to terminate a winding up. Pursuant to s 482(3), where the Court has made an order terminating the winding up, the Court may give directions for the resumption of the management and control of the company by its officers. An order made pursuant to s 482 will have the effect of liberating whatever remains of the property of the company from the "statutory scheme of liquidation": see Krextile Holdings Pty Ltd v Widdows; Re Brush Fabrics Pty Ltd [1974] VR 689 at 695 per Gillard J. See also Hughes, in the matter of Substar Holdings Pty Ltd (In liq) [No 2] [2021] FCA 658 at [18]-[20] per McKerracher J and the authorities cited therein. 41 cf Thomas Franklin & Sons Ltd v Cameron (1935) 36 SR (NSW) 286 at 296 per Davidson J (Street and Maxwell JJ agreeing). 42 See, eg, s 73 of the Insolvency Act 1890 (Vic). Gordon Edelman Steward "void" in this sense meant only that preferences were voidable at the instance or election of the trustee or the liquidator43. Section 588FE defines what is a "voidable transaction". It only applies where a company "is being wound up". Relevantly here, s 588FE(2) provides that a transaction is voidable if it is an "insolvent transaction" of the company and it was entered into during the six months ending on the "relation-back day", which here was the day the winding up of MJ Woodman commenced44. It was an agreed fact in the Amended Special Case that the relation-back period for the purposes of s 588FE(2) ran from 13 August 2018 to 12 February 2019. Section 588FC defines what is an "insolvent transaction". Relevantly, a transaction is an "insolvent transaction" if it is an "unfair preference" given by the company and, at a time when the transaction was entered into, or when an act was done, or omission was made, for the purpose of giving effect to the transaction, the company was insolvent. The Amended Special Case does not state when MJ Woodman became insolvent. However, for the purposes of assessing whether set-off is available, this Court was asked to assume that this provision was satisfied in relation to each of the two payments in the sum of $50,000 and $140,000. Section 588FA defines what is an "unfair preference". A transaction will relevantly be an unfair preference if: the company and the creditor are parties to it; and it results in the creditor receiving from the company more than the creditor would receive in respect of an unsecured debt if the transaction were set aside and the creditor "were to prove for the debt in a winding up of the company"45. Two observations should be made. The Amended Special Case does not concede that any payments made to the appellant are unfair preferences. Rather, this again has been assumed for the purposes of answering the question reserved for consideration by the Full Court. Secondly, s 588FA is directed at what might have been provable in the winding up. Of necessity, for the reasons already given, that means that it is concerned with a transaction that is an unfair preference entered into before the commencement of the winding up. Section 588FI applies where a creditor receives an unfair preference from a company and at the request of the company's liquidator, because of an order under 43 Williams v Lloyd (1934) 50 CLR 341 at 373-374 per Dixon J; Brady v Stapleton (1952) 88 CLR 322 at 333 per Dixon CJ and Fullagar J. 44 See the definition of "relation-back day" in ss 9, 91. 45 Section 588FA(1) of the Act. Gordon Edelman Steward s 588FF, or for any other reason, the creditor has put the company in the same position as if the transaction had not been entered into. Where s 588FI is engaged, the "creditor may prove in the winding up as if the transaction had not been entered into"46. This section reflects the well-established position under the former companies legislation that a creditor who receives an unfair preference cannot prove in the winding up of a company until it has repaid the amount preferentially paid to it in full47. It is also an exception to the principle enshrined in s 553 that only debts and claims which existed before the commencement of the winding up are provable. Key features of the statutory scheme Five features of the foregoing statutory scheme of liquidation should be emphasised. First, the liquidator is given power and responsibility to identify and gather in the assets of the company for distribution to creditors and contributories. Secondly, the liquidator is also obliged to distribute those assets by the making of priority payments and then on a pari passu basis by paying creditors and contributories. Thirdly, a bright line is drawn to enable the liquidator to determine what debts are payable by the company and what claims must be met against it; here it is those arising from "circumstances" which existed "before" the date of winding up. Fourthly, in aid of the duty to gather in the assets of the company, the liquidator may recover preference payments as a debt owed to the company. Finally, in determining what debts are payable and what claims must be met, a set- off must take place between what is due as between the company and another person arising from "mutual credits, mutual debts or other mutual dealings". The appellant's case The appellant submitted that it was entitled to set off its potential liability said to arise under s 588FF(1)(a) against amounts owing to it by MJ Woodman because there had been a mutual dealing between it and that company. That mutual dealing was said to include the trading transactions which had taken place during the relation-back period for which the appellant had been paid by MJ Woodman – the alleged unfair preferences. The liability under s 588FF(1)(a) will arise because 46 Section 588FI(3) of the Act. 47 N A Kratzmann Pty Ltd (In liq) v Tucker [No 2] (1968) 123 CLR 295 at 297 per McTiernan, Taylor and Menzies JJ. See also Re Force Corp Pty Ltd (In liq) (2020) 149 ACSR 451 at 474 [95] per Gleeson J. Gordon Edelman Steward of those voidable transactions; when this liability crystallises, it was said, an account will therefore need to be taken of it as against the remaining amount owed to the appellant for the purposes of s 553C(1). The appellant, in that respect, emphasised that its future liability under s 588FF(1)(a) was no different to any other claim owed to the company precisely because, for the reasons given in Linter Textiles, when it is paid, the company will receive it beneficially. It was said that it did not matter that, as at the date of the commencement of the winding up, that liability had not yet sprung into existence. It was sufficient, the appellant submitted, that it existed as a contingent liability which might in the future mature into an actual present liability. Relevantly, the essential contingencies were said to be the bringing of an action by the liquidator under s 588FF(1) and the court's satisfaction that there had been a voidable transaction for the purposes of s 588FE of the Act which justified an order obliging the appellant to pay MJ Woodman. All of the facts necessary to make good those contingencies, including satisfaction of ss 588FE, 588FC and 588FA, existed as at the date the company was wound up. The appellant relevantly relied upon three authorities of this Court in support of the foregoing submissions. The first was Gye48, which, as mentioned above, concerned the equivalent right of set-off conferred by s 86 of the Bankruptcy Act. That provision, like s 553C(1), required the existence of "mutual credits, mutual debts or other mutual dealings" between a bankrupt and a creditor. This Court emphasised that in order to do "substantial justice" it was necessary to give s 86 the "widest possible scope"49. Consistently with this, the term "mutual dealings" was introduced into the Bankruptcy Act to avoid merely technical "The introduction of the reference to 'other mutual dealings' in bankruptcy set-off provisions such as s 86 was intended both to give a more extended right of set-off and to ensure that the intended scope of such (1991) 171 CLR 609. (1991) 171 CLR 609 at 619 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ, quoting Day & Dent Constructions Pty Ltd v North Australian Properties Pty Ltd (1982) 150 CLR 85 at 108 per Mason J, in turn quoting Eberle's Hotels and Restaurant Company v Jonas (1887) 18 QBD 459 at 465 per Lord Esher MR. (1991) 171 CLR 609 at 623 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gordon Edelman Steward provisions was not frustrated by a narrow or technical approach to what constituted 'credits' or 'debts'". The word "dealings" thus extended to "matters having a commercial or business flavour"51. Its meaning extended to "the communings, the negotiations, verbal and by correspondence, and other relations which occur or exist in" any commercial or business setting52. No reason existed, the appellant said, for the adoption of a different approach when applying s 553C(1). The appellant submitted that it was important that, in Gye, this Court also recognised that it was sufficient if the mutual dealing was one which was "capable of giving rise to" claims in the future which might be eligible to be set off53. The word "mutual", in that respect, conveyed the notion of "reciprocity rather than that of correspondence"54. Here, it was submitted by the appellant that each of the three aspects required by Gye, referred to above55, was satisfied. First, the transactions which had taken place during the relation-back period were between the same parties. Secondly, the benefit or burden of the dealings lay in the same interests because the company and the creditor are owed monies which, when paid, will be received beneficially. This aspect of the requirement of mutuality was limited, it was contended, to asking whether the parties would receive the benefit of any payment beneficially or in the capacity of a trustee. This aspect of the requirement of mutuality will need to be revisited. Thirdly, the liability of MJ Woodman and that which will arise under s 588FF(1)(a) both sound in money. (1991) 171 CLR 609 at 625 per Mason CJ, Brennan, Deane, Dawson, Toohey, (1991) 171 CLR 609 at 625 per Mason CJ, Brennan, Deane, Dawson, Toohey, (1991) 171 CLR 609 at 623 per Mason CJ, Brennan, Deane, Dawson, Toohey, (1991) 171 CLR 609 at 623 per Mason CJ, Brennan, Deane, Dawson, Toohey, 55 See [19]. Gordon Edelman Steward The second case relied upon by the appellant was Hiley v Peoples Prudential Assurance Co Ltd56. The majority decided that the appellant (Mr Hiley) was entitled – pursuant to s 82 of the Bankruptcy Act 1924 (Cth), as applied to companies at that time by s 264 of the Companies Act 1899 (NSW) – to set off an amount, payable by way of damages to him by the respondent company in liquidation, against amounts previously owing by him to the company which had been secured by a mortgage. For the purposes of deciding whether there have been mutual debts, mutual credits or mutual dealings, Dixon J said that "the decisive date is that of the commencement of the winding up"57. This proposition was critical to the appellant's case that one is not confined to looking at claims arising before the start of a winding up. His Honour explained why the commencement date was decisive in the following terms58: "At that date the assets of the company, including the choses of actions or claims of the company, become a fund in the hands of a liquidator, and the liabilities of the company are converted into claims upon that fund. The rights and liabilities of the persons liable to contribute to the fund and of those entitled to share in its distribution are to be ascertained as at that time." The foregoing explanation, however, demonstrates that when Dixon J referred to the "commencement" of the winding up, his Honour in fact was referring to the moment immediately before the commencement of the winding up. That is made even more clear in the following passage in which Dixon J observed that new claims for and against a company, arising after the start of winding up, could not be the subject of any set-off against previous claims. His Honour said59: "In the course of administering the assets, the liquidator may find it necessary to create new claims upon the fund which thus may chance to be depleted. But liabilities incurred by the liquidator on behalf of the company are of a different order and they in no way disturb the mode or proportion in which the claims of the creditors existing at the date of liquidation share in the assets remaining available to answer their claims. In the same way, (1938) 60 CLR 468. (1938) 60 CLR 468 at 495-496. (1938) 60 CLR 468 at 496. (1938) 60 CLR 468 at 496. Gordon Edelman Steward the acquisition by the liquidator on behalf of the company of new claims against others cannot vary the rights of creditors antecedently existing. If a liquidator in the course of the winding up sells assets of the company to a purchaser, who happens also to be a proving creditor, the purchaser cannot set off the purchase price against the debt for which he is entitled to prove." The parts of Hiley relied upon by the appellant must be considered in light of the foregoing reasoning. Dixon J decided that the liabilities in Hiley were not "new" because they each arose out of "rights or claims subsisting at the commencement of the winding up"60. That was sufficient. As his Honour said61: "[T]he general rule does not require that at the moment when the winding up commences there shall be two enforceable debts, a debt provable in the liquidation and a debt enforceable by the liquidator against the creditor claiming to prove. It is enough that at the commencement of the winding up mutual dealings exist which involve rights and obligations whether absolute or contingent of such a nature that afterwards in the events that happen they mature or develop into pecuniary demands capable of set off. If the end contemplated by the transaction is a claim sounding in money so that, in the phrase employed in the cases, it is commensurable with the cross-demand, no more is required than that at the commencement of the winding up liabilities shall have been contracted by the company and the other party respectively from which cross money claims accrue during the course of the winding up". (emphasis added) Relying on the foregoing reasons, the appellant contended that as at the commencement of the winding up here, it was contingently liable to MJ Woodman under s 588FF(1)(a), in the sense described above. Just like the causes of action in Hiley, it was submitted, the liquidator's contingent right to sue under s 588FF(1)(a) was one which over time would "grow" or "mature" into a money claim or pecuniary demand62. Critically, it was accepted that no such contingent right or obligation could have existed before the commencement of the winding up. (1938) 60 CLR 468 at 499. (1938) 60 CLR 468 at 496-497; see also at 487 per Rich J, 491 per Starke J. (1938) 60 CLR 468 at 487 per Rich J, 497 per Dixon J. Gordon Edelman Steward The third authority relied upon by the appellant was Day & Dent Constructions Pty Ltd v North Australian Properties Pty Ltd63. In that case, one of the liabilities to be set off comprised, as at the commencement of the winding up, a guarantee which thereafter might or might not have been called upon. It was said that there was only a possibility that the guarantee might need to be performed. But that was sufficient. Mason J (with whom Stephen J and Aickin J agreed) said64: "After default, the possibility remains that the principal debtor may himself discharge his liability to the principal creditor. Until the surety makes payment he (the surety) is owed no debt at all. But this does not matter. The important factor is that, by virtue of a guarantee given before bankruptcy or liquidation as the case may be, the surety has undertaken an obligation which on payment to the principal creditor will result in a debt owing to him (the surety) by the principal debtor. There is no reason why the liability thus undertaken, once payment is made, should not ground the right to set off the debt created by the payment." Finally, the appellant also relied upon the Australian Law Reform Commission's 1988 report entitled "General Insolvency Inquiry" (more commonly known as the "Harmer Report"). It was common ground that the Harmer Report led to the introduction of s 553C65. Amongst other things, it recommended that the "situations for excluding a right of set-off should correspond to the situations where a transaction may be avoided on the basis that it is preferential"66. Yet, no such simple exclusion for liabilities that arise because a transaction was voidable for the purposes of s 588FF was ever enacted. This Court was asked to infer from this omission that a legislative choice had been made to permit a set-off where, as here, liability arises under s 588FF(1)(a). It was then said that Parliament had considered the possibility of the right of set-off being abused but had chosen to address that concern only by the enactment of s 553C(2) and nothing else. That provision denies a set-off where at the time of the mutual dealing the creditor had "notice of the fact that the company was insolvent". (1982) 150 CLR 85. (1982) 150 CLR 85 at 108-109; see also at 95-96 per Gibbs CJ, 109 per Murphy J. 65 See Corporate Law Reform Act 1992 (Cth), s 92. 66 Australian Law Reform Commission, General Insolvency Inquiry, Report No 45 Gordon Edelman Steward Mutual credits, mutual debts and mutual dealings The appellant's case turned upon the presence as at the date of the commencement of the winding up of an inchoate or contingent right to sue under s 588FF(1) which was capable of growing or maturing into a money claim that could then be set off against the amount owed by MJ Woodman to it. That proposition suffers from a fatal flaw. Construed in the context of the statutory scheme of liquidation, s 553C(1) requires that the mutual credits, mutual debts or other mutual dealings be credits, debts or dealings arising from circumstances that subsisted in some way or form before the commencement of the winding up. That is because under that statutory scheme, s 553C exists in aid of s 553, which is concerned with debts and claims, whether "present or future, certain or contingent, ascertained or sounding only in damages", arising from "circumstances" that had occurred before the commencement of the winding up. That is why s 553C(1) refers to a "person who wants to have a debt or claim admitted against the company" and then provides that only the balance of any set-off is "admissible to proof against the company, or is payable to the company, as the case may be". As such, the function and purpose of s 553C is to permit a reckoning of amounts owing to and by the company during the relation-back period prior to the appointment of the liquidator. Here, immediately before the commencement of the winding up there was nothing to set off as between the appellant and MJ Woodman; the company owed money to the appellant, but the appellant owed nothing to the company. Moreover, the inchoate or contingent capacity held by the liquidator to sue under s 588FF could not and did not exist before then67. It could only be made following the commencement of the winding up. It was wholly "new" in the sense described by Dixon J in Hiley. It sprang into existence as a specific statutory right held by the liquidator for the purposes of recovering preference payments to secure the equitable distribution of assets amongst creditors. As such, it was not eligible to be set off against the pre-existing amount owed to the appellant. It follows that the appellant could not identify a relevant mutual dealing. Contrary to its contentions, neither the trade transactions which were undischarged by MJ Woodman during the relation-back period nor, for the reasons already expressed, the discharged trade transactions (giving rise to the liabilities of $50,000 and $140,000), together with the liability which may arise under s 588FF(1)(a), were mutual dealings. Section 553C(1), correctly construed, does 67 See s 588FF(3) of the Act. Gordon Edelman Steward not address dealings which straddle the period before and after the commencement of the winding up. Contrary to the appellant's submissions, Hiley does not otherwise assist it. What existed before the winding up in that case was the cause of action for the re- transfer of the mortgage over Mr Hiley's land and Mr Hiley's rights under his contract of life assurance, the latter of which, when repudiated upon the making of the winding up order, gave rise to a provable claim for unliquidated damages68. In contrast, here the liquidator's right to sue for an order under s 588FF(1), arising from the commencement of the winding up, was not, and never could be, "payable to the company" for the purposes of s 553C(1) and s 553 more generally, for the reasons set out above. Moreover, as at the date of the commencement of the winding up, the liquidator did not hold any vested or contingent "right" and the appellant owed no "obligation", in the sense in which those words were used in Hiley (as set out in the passage above69), which together might have constituted a mutual dealing of some kind. In order that a liability be characterised as contingent, there must be, at the time of winding up, an existing obligation out of which, on the happening of a future event, an obligation to pay a sum of money will arise70. At most, the liquidator held an expectancy, unsupported by any underlying right or obligation which pre-existed the liquidation, which might at some point grow into a money claim of some kind71. In that respect, this case is unlike that of Day & Dent where, as at the commencement of the winding up, vested rights existed under a guarantee given previously. By reason of the guarantee, the surety, to use the language of Mason J, had "undertaken an obligation" which on payment to the principal creditor would result in a debt owing to the surety by the principal debtor. The 68 Hiley v Peoples Prudential Assurance Co Ltd (1938) 60 CLR 468 at 493 per 69 See [41]. 70 Community Development Pty Ltd v Engwirda Construction Co (1969) 120 CLR 455 at 459 per Kitto J, quoting In re William Hockley Ltd [1962] 1 WLR 555 at 558 per Pennycuick J; [1962] 2 All ER 111 at 113; National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 at 200-201 per Barwick CJ. See also Derham, "Set-off against statutory avoidance and insolvent trading claims in company liquidation" (2015) 89 Australian Law Journal 459 at 480. 71 cf National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 at 200-201 per Gordon Edelman Steward ability to sue for an order under s 588FF conferred no equivalent "right" or "obligation"; rather, conditioned as it was on both the liquidator's decision to sue and the court's satisfaction that the elements of s 588FE(2) had been satisfied, it rose no higher, as at the commencement of the winding up, than a mere possibility without more72. That is not sufficient73. It follows that under the statutory scheme of liquidation, any liability arising from the making of an order by a court under s 588FF(1)(a) cannot form part of the process for the identification of provable debts and claims for the purposes of s 553, and thus cannot be the subject of a valid set-off against pre-existing amounts owed by the company to the preferred creditor for the purposes of s 553C. The foregoing is consistent with the function and purpose of the regime for dealing with voidable transactions in Div 2 of Pt 5.7B of the Act and the regime for the proof and ranking of claims in Div 6 of Pt 5.6 of the Act. The former is directed at the liquidator's duty and capacity to recover preferential payments and at the need to ensure equality in the making of distributions to the same class of creditors. In contrast, the latter is directed at the identification of which debts and claims must be addressed by the liquidator. It would be a gross distortion of the statutory scheme of liquidation if a creditor could, in effect, avoid the consequences of having received a preferential payment by the happenstance that it was also owed money by the company in liquidation. Such an outcome would diminish the pool of assets available for priority payments and rateable distribution. It would permit a preferred creditor to use each dollar owed to it by the company to set off in full each dollar of liability arising from receipt of an unfair preference. In any event, any such liability could not constitute a mutual credit, mutual debt or mutual dealing with the pre-existing amount owed by the company for two further reasons. First, there had been no dealing between the same persons74. The alleged unfair preferences were paid during the relation-back period by MJ Woodman to the appellant. The liability created by s 588FF(1)(a), whilst owed to the company (which will receive it beneficially), is nonetheless one that arises 72 cf Norman v Federal Commissioner of Taxation (1963) 109 CLR 9 at 16 per Dixon CJ, 18-19 per McTiernan J, 20-21 per Menzies J, 26 and 40 per Windeyer J. 73 National Bank of Australasia Ltd v Mason (1975) 133 CLR 191 at 200-201 per 74 cf Gye v McIntyre (1991) 171 CLR 609 at 623 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. Gordon Edelman Steward upon the application of the liquidator, who, for the reasons given above, does not do so as an agent of the company but rather in his or her own right as an officer of the court75. Secondly, there is no mutuality of interest76. Contrary to the contentions of the appellant, that consideration is not confined to determining whether both parties are beneficially or legally entitled to what they are owed. As the Court of Appeal of the Supreme Court of Western Australia recently observed, a consideration of the benefit of equitable interests in a transaction is but an example of when two parties can enjoy mutuality of interest77. Here, on no view can it be said that the entire amount which the liquidator will recover under s 588FF(1)(a) will be "for his own benefit" or indeed for the benefit of MJ Woodman. That is because, for the reasons expressed above, that amount must be applied under the statutory scheme of liquidation and be made available, amongst other things, for the making of priority payments and for distribution to creditors in accordance with the pari passu principle. Given the obligations and duties imposed by the statutory scheme, it cannot be said that the interest the appellant has in being paid by MJ Woodman is the same as the interest of both the liquidator and the company in recovering the preferential payment. The liquidator's right of recovery is not comparable to a trading transaction whereby goods or services have been previously supplied to a company; it is a unique statutory ability to recover the proceeds of a voidable transaction. Moreover, the fact that the statutory scheme of liquidation sufficiently provides for the winding up of a company without the need for equitable intervention does not support a conclusion that the interest of the company in receipt of a s 588FF(1)(a) payment is the same as that of the preferred creditor. To the contrary, it is precisely the presence of that detailed scheme that denies mutuality of interest. 75 cf Lister v Hooson [1908] 1 KB 174. 76 cf Gye v McIntyre (1991) 171 CLR 609 at 623 per Mason CJ, Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. 77 Hamersley Iron Pty Ltd v Forge Group Power Pty Ltd (In liq) (Receivers and Managers Appointed) (2018) 53 WAR 325 at 351-352 [84] per Murphy and Mitchell JJA and Allanson J. Gordon Edelman Steward To the extent that the cases of Re Parker78, Buzzle Operations Pty Ltd (In liq) v Apple Computer Australia Pty Ltd79, Shirlaw v Lewis80, Hall v Poolman81 and Stone v Melrose Cranes & Rigging Pty Ltd [No 2]82 are inconsistent with the above analysis, they should now be considered to be wrongly decided. Nor, again, does the appellant's reliance upon the Harmer Report assist it. The decision said inferentially to have been made by Parliament not to enact, as part of s 553C, an express exclusion for voidable transactions may have taken place because, for the reasons set out in this judgment, no such exclusion was ever needed. The presence of s 588FI within the statutory scheme of liquidation supports the outcome here. It will be recalled that this section applies when a creditor who has received an unfair preference has "put the company in the same position as if the transaction had not been entered into"83. The creditor may then prove in the winding up as if the transaction had not been entered into84. Permitting a preferred creditor to set off its liability under s 588FF(1)(a) with the liability owed to it by the company would undermine a purpose of the recovery of unfair preferences, revealed by this section, which is to restore to the pool of distributable assets those payments made under voidable transactions. A set-off, in contrast, would leave that pool diminished, for the reasons already expressed. Such an outcome can hardly have been intended. The appeal should be dismissed. (1997) 80 FCR 1. (2011) 81 NSWLR 47 at 81 [278] per Young JA; see also at 50 [2] per Hodgson JA, 81 [287] per Whealy JA. (1993) 10 ACSR 288 at 295-296 per Hodgson J. (2007) 65 ACSR 123 at 215-217 [415]-[431] per Palmer J. (2018) 125 ACSR 406 at 479-481 [279]-[283] per Markovic J. 83 Sub-section (1)(b). 84 Sub-section (3). Gordon Edelman Steward Costs As mentioned above, the Full Court of the Federal Court ordered that the costs of the Amended Special Case be reserved for determination by the docket judge upon the resolution of all of the outstanding issues between the parties. That was because the appellant had two further defences which have yet to be resolved. If those defences are successful, then, as the Full Court acknowledged, "the special case, while fully argued, may be of no moment as between the parties (though of in Australia)"85. In such significance circumstances, the Full Court recognised that the success or failure of those further defences would bear upon the issue of costs. That conclusion should not be disturbed. Moreover, it also justifies an order that the costs of this appeal should be costs in the cause so that the costs can follow resolution of all yet to be determined questions, including whether the litigation should be treated as public interest litigation. insolvency practice generally Conclusion For these reasons, the appeal should be dismissed, with costs in the cause. 85 Morton as Liquidator of MJ Woodman Electrical Contractors Pty Ltd v Metal Manufactures Pty Ltd [No 2] [2022] FCAFC 1 at [8] per Allsop CJ, Middleton and The question reserved for the consideration of the Full Court of the Federal Court of Australia was properly framed by reference to rights in issue in the ongoing proceeding in the Federal Court in which a liquidator (the first respondent in this Court) claims against a creditor (the appellant in this Court) an order, under s 588FF(1)(a) of the Corporations Act 2001 (Cth) ("the Act"), directing the creditor to repay to a company in liquidation (the second respondent in this Court) an amount equal to amounts that the company paid to the creditor in transactions which the liquidator claims to have been voidable because of s 588FE of the Act on the basis of those payments having been unfair preferences and insolvent transactions within the meanings of s 588FA and s 588FC of the Act. Informing the answer to that question about specific rights in issue in the ongoing proceeding is an examination of the general question of statutory construction on which the outcome of this appeal turns. Does s 553C of the Act entitle a creditor to set off an amount equivalent to that received as an unfair preference in repayment of a debt, which the creditor is ordered under s 588FF(1)(a) of the Act to repay to a company in liquidation, against the amount of another debt which the creditor can prove in the winding up of the company? To be observed at the outset is that the consequence of the creditor being entitled to set off the two amounts would be at odds with the scheme of Pt 5.6 of the Act, of which s 553C forms part. Within a system of winding up in which unsecured creditors of an insolvent company in liquidation generally rank pari passu in the distribution of the property of the company86, an unfairly preferred creditor – who has by definition engaged in a transaction by which the creditor has received from the company more than the creditor would receive if the transaction were set aside and the creditor were to prove for the debt in the winding up of the company87 – would be entitled to rely on the unfair preference to improve that creditor's position in relation to other creditors. In the Full Court88, Allsop CJ illustrated that consequence through a simple hypothetical example. The example assumes a creditor who has two debts each of $100 and who is unfairly preferred as to one in full. If the creditor is obliged by an order under s 588FF(1)(a) of the Act to repay the amount of the preferred debt in full, the property of the company available for distribution amongst all creditors is increased by $100. Upon repayment, the creditor can prove in the distribution for $200 as if the unfair preference had not occurred89. If, however, s 553C of the Act 86 See s 555 of the Act. 87 See s 588FA(1)(b) of the Act. 88 See Morton v Metal Manufactures Pty Ltd (2021) 289 FCR 556 at 565-566 [31]. 89 See s 588FI of the Act. entitles the creditor to set off the amount ordered to be repaid under s 588FF(1)(a), the creditor automatically receives the functional equivalent of 50 cents in the dollar. Given that s 553C is self-executing90, that occurs without the creditor needing to prove in the liquidation at all. I agree with the joint reasons for judgment that the correct answer to the question of statutory construction is that s 553C of the Act does not entitle the creditor to such a set-off, that the Full Court accordingly gave the right answer to the question reserved for its consideration, that this appeal must therefore be dismissed, and that the costs of this appeal should be costs in the ongoing proceeding in the Federal Court. I write to address an aspect of the concept of mutuality which is employed in the references to "mutual credits, mutual debts or other mutual dealings" in s 553C of the Act. The concept was central to the reasoning of the Full Court. Though ancient, the concept of mutuality employed in those references is statutory. The concept must be understood purposively within the statutory context in which it is employed. The purpose of s 553C of the Act, like that of s 86 of the Bankruptcy Act 1966 (Cth) on which it is modelled, is to prevent a creditor of an insolvent company who is also a debtor of that company being required to pay the full amount of the debt owed to the company and yet being entitled to receive only a fraction of the credit due from the company where that would result in substantial injustice91. With the object of confining the availability of set-off to circumstances where payment of the full amount of the debt without entitlement to the full amount of the credit would result in substantial injustice to a creditor, as distinct from unfairness to other creditors, the concept of mutuality has long been understood to entail that the burden of the debt and the benefit of the credit must lie in the same At the core of the argument of the appellant before the Full Court and in this appeal was the proposition that the analysis of interests in the context of 90 Re Hawden Property Group Pty Ltd (In liq) (2018) 125 ACSR 355 at 360-361 [29]. 91 Gye v McIntyre (1991) 171 CLR 609 at 618-619. 92 Gye v McIntyre (1991) 171 CLR 609 at 623. See also Coventry v Charter Pacific Corporation Ltd (2005) 227 CLR 234 at 254-255 [56]. See earlier Hiley v Peoples Prudential Assurance Co Ltd (1938) 60 CLR 468 at 497; Forster v Wilson (1843) 12 M & W 191 at 203-204 [152 ER 1165 at 1170-1171]. assessing mutuality must be confined to a consideration of interests enforceable in equity. The proposition was correctly rejected by Allsop CJ in the Full Court93. To confine the analysis to a consideration of interests enforceable in equity would be to adopt an unduly narrow conception of "beneficial interests" which would divorce the statutory inquiry into mutuality from the statutory object of avoiding substantial injustice. Just as it is important always to recognise that an interest of a beneficiary of a trust "is not carved out of a legal estate but impressed upon it"94, as a restriction on the manner in which the trustee may deal with trust property95, it is important to recognise that legislation can impose restrictions on dealings with property for the benefit of persons other than the legal owner without occasion arising for any intervention of equity at all. Whilst the making of an order for the winding up of a company in insolvency under Div 1 of Pt 5.4 of the Act does not result in property of the company becoming held on trust96, it does result in dealings with property of the company thereafter being restricted by the scheme of Div 6 of Pt 5.6 of the Act to dealings for the purposes of the winding up97. Section 588FF(1)(a) is located within Pt 5.7B of the Act, which is accordingly described in its heading as being concerned with "[r]ecovering property or compensation for the benefit of creditors of insolvent company". An order under s 588FF(1)(a) of the Act can only be sought by a liquidator in the context and for the purposes of the winding up, and an amount to be paid pursuant to such an order must be paid to the company to be dealt with as property of the company in the winding up as governed by Div 6 of Pt 5.6 of the Act. The amount is not one which is or ever could be recovered by the company itself, or which is or ever could be paid to the company for the benefit of the company alone. 93 Morton v Metal Manufactures Pty Ltd (2021) 289 FCR 556 at 572 [55], 598-599 [147]-[151], 600 [153]. See also Derham, "Set-off against statutory avoidance and insolvent trading claims in company liquidation" (2015) 89 Australian Law Journal 94 DKLR Holding Co (No 2) Pty Ltd v Commissioner of Stamp Duties (NSW) (1982) 149 CLR 431 at 474; Boensch v Pascoe (2019) 268 CLR 593 at 599 [4]. 95 Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth (2019) 268 CLR 524 at 560-561 [82]. See also Equity Trust (Jersey) Ltd v Halabi [2022] UKPC 36 at [58]. 96 Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 612-613 [54]-[55], 634 [127]. 97 cf Federal Commissioner of Taxation v Linter Textiles Australia Ltd (In liq) (2005) 220 CLR 592 at 614 [58]. Hence, the right conferred on the liquidator to apply for an order under s 588FF(1)(a) of the Act is a statutory right "given for the benefit of the general body of creditors"98 and recovery of an amount pursuant to such an order, if made, "inures wholly for the benefit of the persons who will participate under the winding-up"99. There is accordingly no mutuality of interest between an amount of an unfair preference which a creditor is ordered under s 588FF(1)(a) of the Act to repay to a company in liquidation and a debt incurred by the company provable by the creditor in the winding up of the company. 98 Sheahan v Carrier Air Conditioning Pty Ltd (1997) 189 CLR 407 at 428. 99 Morton v Metal Manufactures Pty Ltd (2021) 289 FCR 556 at 595-599 [143]-[151], quoting Fortress Credit Corporation (Australia) II Pty Ltd v Fletcher (2014) 87 NSWLR 728 at 749 [128].
HIGH COURT OF AUSTRALIA COMCARE AND APPELLANT RESPONDENT Comcare v Banerji [2019] HCA 23 7 August 2019 ORDER Appeal allowed. Set aside the decision of the Administrative Appeals Tribunal made on 16 April 2018 and, in its place, order that the reviewable decision of 1 August 2014 be affirmed. The respondent pay the appellant's costs of the appeal. Representation B J Tronson for the appellant (instructed by Australian Government Solicitor) R Merkel QC with C G Winnett and C J Tran for the respondent (instructed by Lander & Co) S P Donaghue QC, Solicitor-General of C L Lenehan with J D Watson for Commonwealth, Solicitor) the Commonwealth, and the (instructed by Australian Government the Attorney-General of intervening M G Sexton SC, Solicitor-General for the State of New South Wales, with F I Gordon for the Attorney-General for the State of New South Wales, intervening (instructed by Crown Solicitor's Office (NSW)) C D Bleby SC, Solicitor-General for the State of South Australia, with L Gavranich for the Attorney-General for the State of South Australia, intervening (instructed by Crown Solicitor's Office (SA)) J A Thomson SC, Solicitor-General for the State of Western Australia, with N T L John for the Attorney-General for the State of Western Australia, intervening (instructed by State Solicitor's Office (WA)) Australian Human Rights Commission appearing as amicus curiae, limited to its written submissions Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Comcare v Banerji Constitutional law (Cth) – Implied freedom of communication on governmental and political matters – Where Australian Public Service ("APS") Code of Conduct ("Code") included requirement in s 13(11) of Public Service Act 1999 (Cth) that employees behave in way that upholds APS Values and integrity and good reputation of APS – Where APS Values in s 10(1) of that Act included that APS is apolitical, performing functions in impartial and professional manner – Where Agency Head empowered by s 15(1) of that Act to impose sanctions on employee found to have breached Code, including termination of employment – Where employee of government Department published tweets critical of Department, its employees, policies and administration, Government and Opposition immigration policies, and members of Parliament – Where employment with Commonwealth terminated for breach of Code – Where employee claimed compensation under Safety, Rehabilitation and Compensation Act 1988 (Cth) for "injury", defined to exclude injury suffered as result of reasonable administrative action taken in reasonable manner in respect of employee's employment – Whether ss 10(1), 13(11) and 15(1) of Public Service Act impose effective burden on implied freedom – Whether burden on implied freedom justified – Whether impugned provisions for legitimate purpose – Whether provisions suitable, necessary and adequate in balance. Words and phrases – "adequate in its balance", "anonymous", "apolitical", "APS Code of Conduct", "effective burden", "impartial", "implied freedom of political communication", "integrity", "legitimate purpose", "necessary", "public servants", "public service", "reasonably appropriate and adapted", "suitable", "system of representative and responsible government", "tweets", "unjustified burden". Fair Work Act 2009 (Cth), Pt 3.2. Public Service Act 1999 (Cth), ss 10(1), 13(11), 15(1), 33(1). Safety, Rehabilitation and Compensation Act 1988 (Cth), ss 5A(1), 14. KIEFEL CJ, BELL, KEANE AND NETTLE JJ. This is an appeal from a decision of the Administrative Appeals Tribunal ("the Tribunal") removed into this Court pursuant to s 40(1) of the Judiciary Act 1903 (Cth) on the application of the Attorney-General of the Commonwealth (intervening). The question for decision is whether, as the Tribunal held1, ss 10(1), 13(11) and 15(1) of the Public Service Act 1999 (Cth) as at 15 October 2012 ("the impugned provisions") freedom of political imposed an unjustified burden on communication, with the result that the termination of the respondent's employment with the Commonwealth for breaching the Australian Public Service ("APS") Code of Conduct was not reasonable administrative action taken in a reasonable manner with respect to her employment within the exclusion in s 5A(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) ("the Compensation Act"). For the reasons which follow, the impugned provisions did not impose an unjustified burden on the implied freedom of political communication, and the termination of the respondent's employment with the Commonwealth was not unlawful. implied the The facts The uncontroversial facts of the matter were as follows. On 10 April 2006, the respondent was offered and accepted employment as an ongoing APS 6 employee within the Ombudsman and Human Rights and Equal Opportunity Commission Section of what became the Department of Immigration and Citizenship ("the Department")2. She commenced work in that position on 29 May 20063. At some time prior to 7 March 2012, she began broadcasting tweets on matters relevant to the Department, using the Twitter handle "@LaLegale"4. There were more than 9,000 such tweets, at least one of which was broadcast during the respondent's working hours5, and many of which were variously critical of the Department, other employees of the Department, departmental policies and administration, Government and Opposition immigration policies, and Government and Opposition members of Parliament6. 1 Banerji and Comcare (Compensation) [2018] AATA 892 at [67], [119], [128]. 2 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(3)]. 3 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(4)]. 4 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(13)]. 5 Banerji and Comcare (Compensation) [2018] AATA 892 at [26]-[27]. 6 Banerji and Comcare (Compensation) [2018] AATA 892 at [8], [40] fn 3. Bell Nettle The Tribunal found7 that "[s]ome of the tweets are reasonably characterised as intemperate, even vituperative, in mounting personal attacks on government and opposition figures". On 7 March 2012, the Workplace Relations and Conduct Section of the Department ("the WRCS") received a complaint from one of its employees, which was copied to the National Communications Manager, alleging that the respondent was inappropriately using social media in contravention of the APS Code of Conduct8. After reviewing the complaint, the Director, WRCS determined that the complaint did not contain sufficient material to proceed with a formal APS Code of Conduct investigation, and advised the complainant of his determination9. On 9 May 2012, the WRCS received a second, more detailed complaint regarding the respondent's conduct10. On the basis of that complaint, on or around 15 May 2012, the Director determined to initiate an investigation into whether the respondent's conduct gave rise to possible breaches of the APS Code of Conduct, and, on 23 July 2012, the WRCS informed the respondent of the Director's determination11. Between 15 May 2012 and 13 September 2012, the Assistant Director, WRCS conducted the investigation into whether the respondent's conduct gave rise to possible breaches of the APS Code of Conduct and prepared an investigation report dated 13 September 201212. On 20 September 2012, the Director, Workforce Design and Strategy, being an authorised delegate of the Secretary of the Department, sent a letter to the respondent setting out a proposed determination of breach of the APS Code of Conduct and inviting the respondent to provide a response13. On the same day, the respondent sent an email to the 7 Banerji and Comcare (Compensation) [2018] AATA 892 at [109] (emphasis added). 8 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(14)]. 9 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(15)]. 10 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(16)]. 11 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(16)-(17)]. 12 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(18)]. 13 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(19)], [12]. Bell Nettle WRCS responding to the proposed determination of breach14. On 15 October 2012, the delegate determined that the respondent had breached the APS Code of Conduct and proposed a sanction of termination of employment15. The respondent was provided with the determination and given seven days to provide a response16. On 19 October 2012, the Director, WRCS and the delegate met the respondent and her union representative at the respondent's request17. During that meeting, the respondent admitted to having broadcast tweets under the handle @LaLegale in which she criticised Government immigration policy and her direct departmental supervisor, and, on the same day, the respondent sent an email to the complainant offering an "unreserved" apology18. Thereafter, she sought and was granted a number of extensions of time in which to provide a response to the proposed determination of sanction19. The last extension granted was until 2 November 201220. On 1 November 2012, the respondent instituted proceedings in the Federal Magistrates Court of Australia (now the Federal Circuit Court of Australia) seeking interim and final injunctions to restrain the Department from proceeding with the proposed sanction of termination of her employment21. On 2 November 2012, the respondent submitted a response to the proposed sanction of termination of employment22. On the same day, her representative, the Media, Entertainment and Arts Alliance, also submitted a written response to the proposed determination of sanction, and, on 9 November 14 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(20)]. 15 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(21)]. 16 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(21)]. 17 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(22)]. 18 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(22)-(23)]. 19 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(24)]. 20 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(24)]. 21 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(25)]. 22 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(26)]. Bell Nettle 2012, submitted a further response23. On 11 November 2012, the respondent submitted another response dated 9 November 201224. On 17 November 2012, she sent an email to the Director, WRCS withdrawing her admission and apology and alleging that the process underlying the APS Code of Conduct investigation and termination decision was flawed25. On 9 August 2013, the Federal Circuit Court rejected the respondent's claim for interim injunction26. On 15 August 2013, the Director, WRCS wrote to the respondent setting out the steps which the Department proposed to take to finalise the process relating to the respondent's breaches of the APS Code of Conduct27. The letter stated that the delegate would consider all of the information provided by and on behalf of the respondent in response to the 15 October 2012 determination, that the delegate would then write to the respondent advising her of the proposed sanction (if any) and inviting her to make any further submissions she may wish to make concerning it, and that the delegate would thereafter complete the review process and make a final determination as to the sanction to be imposed. The letter also stated that any sanction would not be implemented until 14 days after the delegate had made the determination. On 26 August 2013, the delegate provided the respondent with a further opportunity to respond to the proposed sanction of termination in line with the process set out in the letter of 15 August 2013, and, on 30 August 2013, the respondent provided a further response28. On 12 September 2013, the delegate wrote to the respondent setting out the delegate's decision to impose a sanction of termination of employment under s 15 of the Public Service Act29. On 13 September 2013, the Director, WRCS (who at that time was acting as the Assistant Secretary, People Services and Systems Branch, and held a delegation under s 78(7) of the Public Service Act to exercise the power to make 23 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(27)-(28)]. 24 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(29)]. 25 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(30)]. 26 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(31)]. 27 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(32)-(33)]. 28 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(33)-(34)]. 29 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(35)]. Bell Nettle decisions under s 29(1)) wrote to the respondent providing her with notice of termination of employment to take effect from close of business on 27 September 201330. On 28 March 2014, the respondent entered into a Deed of Agreement with the Commonwealth of Australia represented by the Department to settle the proceedings in the Federal Circuit Court31. On 18 October 2013, the respondent lodged a claim for compensation under s 14 of the Compensation Act for an "injury" within the meaning of s 5A(1) of the Compensation Act, said to be comprised of an "adjustment disorder characterised by depression and anxiety" being an aggravation of an underlying psychological condition arising out of termination of the respondent's employment32. On 24 February 2014, a delegate of the appellant rejected the claim for compensation, and, on 1 August 2014, another delegate of the appellant affirmed that determination, on the basis that the termination of the respondent's employment was reasonable administrative action taken in a reasonable manner in respect of the respondent's employment, within the meaning of s 5A(1) of the Compensation Act, and, consequently, that such injury as the respondent may have suffered (if any) was not an "injury" within the meaning of that section33. Relevant statutory provisions Section 14 of the Compensation Act provided, so far as is relevant, that the appellant is liable to pay compensation in accordance with the Compensation Act in respect of an "injury" suffered by an employee if the injury results in death, incapacity for work, or impairment. Section 5A(1) of the Compensation Act defined "injury" as including, in substance, an aggravation of a mental injury that arose out of, or in the course of, employment, but as excluding any such aggravation as is suffered as a result of reasonable administrative action taken in a reasonable manner in respect of an employee's employment. 30 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(36)]. 31 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(37)]. 32 Banerji and Comcare (Compensation) [2018] AATA 892 at [2], [3(5)-(10)]. 33 Banerji and Comcare (Compensation) [2018] AATA 892 at [2], [3(12)]. Bell Nettle Section 10 of the Public Service Act defined the APS Values, so far as is relevant, as follows: "(1) The APS Values are as follows: the APS is apolitical, performing its functions in an impartial and professional manner; the APS delivers services fairly, effectively, impartially and courteously to the Australian public and is sensitive to the diversity of the Australian public". Section 13 of the Public Service Act set out the APS Code of Conduct, so far as is relevant, as follows: "(1) An APS employee must behave honestly and with integrity in the course of APS employment. (7) An APS employee must disclose, and take reasonable steps to avoid, any conflict of interest (real or apparent) in connection with APS employment. (11) An APS employee must at all times behave in a way that upholds the APS Values and the integrity and good reputation of the APS." Section 15 of the Public Service Act provided for the establishment of procedures for the determination of breach, in sub-s (3), and prescribed the sanctions available, subject to any limitations in the regulations, as follows: "(1) An Agency Head may impose the following sanctions on an APS employee in the Agency who is found (under procedures established under subsection (3)) to have breached the Code of Conduct: termination of employment; reduction in classification; Bell Nettle re-assignment of duties; reduction in salary; deductions from salary, by way of fine; a reprimand." Departmental and APS guidelines Both the Public Service Commissioner and the Department promulgated guidelines to assist employees in complying with their obligations under the Public Service Act34. At relevant times, the departmental guidelines explained that "[p]ublic comment, in its broadest sense, includes comment made on political or social issues at public speaking engagements, during radio or television interviews, [and] on the internet", and cautioned that it was not appropriate for a Department employee to make unofficial public comment that is, or is perceived as, compromising the employee's ability to fulfil his or her duties professionally in an unbiased manner (particularly where comment is made about Department policy and programmes); so harsh or extreme in its criticism of the Government, a member of Parliament or other political party and their respective policies that it calls into question the employee's ability to work professionally, efficiently or impartially; so strongly critical of departmental administration that it could disrupt the workplace; or unreasonably or harshly critical of departmental stakeholders, their clients or staff35. Similar, more extensive guidance was provided in Australian Public Service Commission Circular 2012/1 ("the APS Guidelines"), which recorded that, "[a]s a rule of thumb, irrespective of the forum, anyone who posts material online should make an assumption that at some point their identity and the nature of their employment will be revealed"36. In turn, the tenor of the APS Guidelines was further reiterated for employees of the Department in a document entitled "'What is Public Comment?' Workplace Relations and Conduct Section Fact Sheet"37. 34 Banerji and Comcare (Compensation) [2018] AATA 892 at [35]. 35 Banerji and Comcare (Compensation) [2018] AATA 892 at [36]. 36 Banerji and Comcare (Compensation) [2018] AATA 892 at [37]. 37 Banerji and Comcare (Compensation) [2018] AATA 892 at [38]. Bell Nettle The proceedings before the Tribunal Before the Tribunal, the parties were agreed that the only issue for the Tribunal was: "whether or not the termination of the [respondent's] employment with the Commonwealth falls outside the exclusion in s 5A(1) of the Act, having regard to the implied freedom of political communication."38 It is unfortunate that the issue was framed in those terms for it appears to have led the Tribunal to approach the matter, wrongly, as if the implied freedom of political communication were a personal right like the freedom of expression guaranteed by ss 1 and 2(b) of the Canadian Charter of Rights and Freedoms or the freedom of speech guaranteed by the First Amendment to the Constitution of the United States. Thus, in their reasons for decision, the Tribunal spoke39 in terms of the impugned provisions imposing a "serious impingement on Ms Banerji's implied freedom", and stated40 that "[t]he burden of the Code on Ms Banerji's freedom was indeed heavy". The Tribunal reasoned41 that Canadian jurisprudence as to the balance to be struck between an individual government employee's "duty of fidelity and loyalty" and the "countervailing rights of public servants to take part in a democratic society" was "illuminative of the appropriate balance to be struck between the implied freedom and the fostering of an apolitical [Australian] public service". And, ultimately, the Tribunal decided42 the matter, erroneously, on the basis "that the use of the Code as the basis for the termination of Ms Banerji's employment impermissibly trespassed upon her implied freedom of political communication". 38 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(38)]. 39 Banerji and Comcare (Compensation) [2018] AATA 892 at [117] (emphasis added). 40 Banerji and Comcare (Compensation) [2018] AATA 892 at [119] (emphasis added). 41 Banerji and Comcare (Compensation) [2018] AATA 892 at [89], [104]. 42 Banerji and Comcare (Compensation) [2018] AATA 892 at [120] (emphasis added). Bell Nettle As has been emphasised by this Court repeatedly, most recently before the Tribunal's decision in this matter in Brown v Tasmania43, the implied freedom of political communication is not a personal right of free speech. It is a restriction on legislative power which arises as a necessary implication from ss 7, 24, 64 and 128 and related sections of the Constitution and, as such, extends only so far as is necessary to preserve and protect the system of representative and responsible government mandated by the Constitution44. Accordingly, although the effect of a law on an individual's or a group's ability to participate in political communication is relevant to the assessment of the law's effect on the implied freedom, the question of whether the law imposes an unjustified burden on the implied freedom of political communication is a question of the law's effect on political communication as a whole45. More specifically, even if a law significantly restricts the ability of an individual or a group of persons to engage in political communication, the law will not infringe the implied freedom of political communication unless it has a material unjustified effect on political communication as a whole. For that reason, the way in which the Tribunal decided the matter was misconceived and the Tribunal's decision must be set aside. The respondent's contentions Before this Court, the respondent did not contend that the question of whether the impugned provisions impose a burden on the implied freedom of political communication should be decided on any basis other than the effect of the impugned provisions on political communication as a whole. Instead, she sought to argue that, upon their proper construction, the impugned provisions did not apply to what she characterised as "anonymous" communications – being 43 (2017) 261 CLR 328 at 360 [90], 374 [150] per Kiefel CJ, Bell and Keane JJ, 398 [237], 407 [258], 410 [262] per Nettle J, 430 [313], 466 [433], 475 [465], 476 [469] per Gordon J, 503 [559] per Edelman J; [2017] HCA 43. 44 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 567 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ; [1997] HCA 25. 45 Wotton v Queensland (2012) 246 CLR 1 at 31 [80] per Kiefel J; [2012] HCA 2; Unions NSW v New South Wales (2013) 252 CLR 530 at 553-554 [35]-[36] per French CJ, Hayne, Crennan, Kiefel and Bell JJ, 574 [119] per Keane J; [2013] HCA 58; Brown v Tasmania (2017) 261 CLR 328 at 360 [90], 374 [150] per Kiefel CJ, Bell and Keane JJ. Bell Nettle "communications whose immediate context evinces no connection to the speaker's status as an APS employee (eg by giving her or his name, or position as a public servant)" – and that, because the tweets which she broadcast did not ex facie disclose her true name or the fact of her being an employee of the APS, they were "anonymous" communications to which the impugned provisions did not apply. In the alternative, the respondent contended that, insofar as the impugned provisions purported to authorise sanctions against an APS employee for "anonymous" communications, they imposed an unjustified burden on the implied freedom of political communication and were for that reason invalid. In the further alternative, the respondent argued that, if the impugned provisions did not of themselves impose an unjustified burden on the implied freedom, the decision to terminate the respondent's employment as an employee of the APS on the basis of her "anonymous" communications was vitiated by the decision maker's failure explicitly to take into account the effect of the implied freedom. The construction argument For reasons given in the course of the hearing, the Court declined to entertain the respondent's argument that the impugned provisions did not extend to "anonymous" communications. The Court did so because the argument differed fundamentally from the way in which the respondent put her case before the Tribunal and because, if she had put it that way before the Tribunal, it is not improbable that the appellant would have called evidence illustrative of the damage to reputation and integrity of the APS likely to have been caused by so-called anonymous tweets of the kind broadcast by the respondent. Lest it be thought, however, that the respondent was thereby deprived of a real chance of demonstrating that her employment was not lawfully terminated, there is no reason to suppose that "anonymous" communications cannot fail to uphold the integrity and good reputation of the APS within the meaning of the impugned provisions. As was explained in detail in the guidelines to APS employees earlier set out46 (which were before the Tribunal), as a rule of thumb, anyone who posts material online, particularly on social media websites, should assume that, at some point, his or her identity and the nature of his or her employment will be revealed. The risk of identification which justifies that rule of thumb is obvious, and it is borne out by the facts of this case. Further, as was also explained in the guidelines to APS employees, and, too, is obvious, where an APS employee broadcasts tweets which are harsh or extreme in their criticism of the 46 See [17] above. Bell Nettle Government or Opposition or their respective policies, or of individual members of Parliament whatever their political persuasion, and the nature of the author's employment is later discovered, as it was in this case, the fact that an employee of the APS is then seen to have engaged in conduct of that kind is bound to raise questions about the employee's capacity to work professionally, efficiently and impartially; is likely seriously to disrupt the workplace; and, for those reasons, is calculated to damage the integrity and good reputation of the APS. And, where the employee broadcasts tweets commenting on policies and programmes of the employee's Department or which are critical of the Department's administration, damage to the good reputation of the APS is apt to occur even if the author's identity and employment are never discovered. In light of these considerations, it would be facile to suppose a parliamentary intention to exclude communications of the kind broadcast by the respondent. The implied freedom argument The respondent's first alternative implied freedom argument also faces difficulties at a number of levels. To begin with, contrary to the assumption which is implicit in the argument, s 13(11) does not purport to proscribe all forms of "anonymous" communications: only those which fail to "uphold" the APS Values and the integrity and good reputation of the APS within the meaning of s 13(11) of the Public Service Act. some (intervening), there are undoubtedly Secondly, as was observed by the Solicitor-General of the Attorney-General of the the Commonwealth, appearing on behalf of Commonwealth forms of "anonymous" communication that would so damage the integrity and good reputation of the APS that, on any view of the matter, their proscription would be An example would be a Permanent Secretary broadcasting justified. "anonymous" tweets which are highly disparaging of the Minister, the Government or Opposition, Government or Opposition policy, departmental administration or implementation of policy, or departmental staff, where the identity of the author is later discovered. As that example demonstrates, it is in each case a question of fact and degree whether or not a given "anonymous" communication infringes s 13(11) by failing to uphold the APS Values and the integrity of the APS. Thirdly, and critically, the respondent did not contend before the Tribunal or before this Court that, apart from the implied freedom, it would not be within the legislative competence of the Commonwealth Parliament to enact legislation in the form of s 13(11) of the Public Service Act requiring APS employees at all times to behave in a way that upholds the APS Values and the integrity and good reputation of the APS. Nor did the respondent contend before the Tribunal or Bell Nettle before this Court that, apart from the implied freedom, the sanction of dismissal imposed on her under s 15 of the Public Service Act for her contravention of s 13(11) of that Act would not be a lawful, proportionate response to the nature and gravity of her misconduct. Consequently, as the matter was presented to the Tribunal and this Court, the respondent must be taken to have accepted that her conduct in broadcasting the "anonymous" tweets was conduct which failed to uphold the APS Values and the integrity and good reputation of the APS within the meaning of s 13(11) and that, but for the implied freedom, the sanction of dismissal was warranted. In the result, the respondent's implied freedom argument amounts in effect to saying that, despite the fact that her conduct in broadcasting the "anonymous" tweets was conduct which failed to uphold the APS Values and the integrity and good reputation of the APS, Parliament was precluded from proscribing the conduct because its proscription imposed an unjustified burden on the implied freedom of political communication. To say the least, that is a remarkable proposition. No unjustified burden on the implied freedom Effective burden A law which prohibits or limits political communication to any extent will generally be found to impose an effective burden on the implied freedom of political communication47. The appellant, before the Tribunal and again before this Court, and the Attorney-General of the Commonwealth (intervening) accepted that s 10(1) in combination with s 13(11) imposes an effective burden on the implied freedom. That concession was rightly made. The restrictions which s 10(1) in conjunction with s 13(11) imposes on the ability of employees of the APS to engage in public comment on government and political matters must have a material effect on the totality of political communication. The question is whether that burden is justified according to the two part test of whether the impugned law is for a legitimate purpose consistent with the system 47 See, eg, APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 351 [28] per Gleeson CJ and Heydon J; [2005] HCA 44; Wotton (2012) 246 CLR 1 at 24 [54] per Heydon J; Monis v The Queen (2013) 249 CLR 92 at 142-146 [108]-[122] per Hayne J; [2013] HCA 4; Unions NSW (2013) 252 CLR 530 at 555 [40] per French CJ, Hayne, Crennan, Kiefel and Bell JJ; Tajjour v New South Wales (2014) 254 CLR 508 at 578-579 [145]-[146], 582 [155]-[156] per Gageler J; [2014] HCA 35. Bell Nettle of representative and responsible government mandated by the Constitution and, if so, whether that law is reasonably appropriate and adapted to the achievement of that objective48. Legitimate purpose Section 3 of the Public Service Act proclaims the "main objects" of the Act, which include establishing "an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public", providing "a legal framework for the effective and fair employment, management and leadership of APS employees", and establishing "rights and obligations of APS employees". As appears from the text and context of ss 10(1), 13(11) and 15(1), the legislative purpose of those provisions is to ensure that employees of the APS at all times behave in a way that upholds the APS Values and the integrity and good reputation of the APS. And as has been seen, the APS Values are attuned to the maintenance and protection of an apolitical public service that is skilled and efficient in serving the national interest. There can be no doubt that the maintenance and protection of an apolitical and professional public service is a significant purpose consistent with the system of representative and responsible government mandated by the Constitution. Section 64 of the Constitution, which provides for the establishment of departments of state49, and s 67, which provides for the appointment and removal of officers of the Executive Government other than Ministers50, attest to the significance of the APS as a constituent part of the system of representative and 48 Lange (1997) 189 CLR 520 at 561-562 per Brennan CJ, Dawson, Toohey, Gaudron, McHugh, Gummow and Kirby JJ; McCloy v New South Wales (2015) 257 CLR 178 at 194 [2(B)] per French CJ, Kiefel, Bell and Keane JJ; [2015] HCA 34; Brown v Tasmania (2017) 261 CLR 328 at 363-364 [102]-[104] per Kiefel CJ, Bell and Keane JJ, 413 [271], 416 [277] per Nettle J. 49 See Re Residential Tenancies Tribunal (NSW); Ex parte Defence Housing Authority (1997) 190 CLR 410 at 435-436 per Dawson, Toohey and Gaudron JJ; [1997] HCA 36; Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 402-403 [13]-[15] per Gleeson CJ, 459-460 [210]-[212] per Gummow and Hayne JJ; [2001] HCA 51; McCloy (2015) 257 CLR 178 at 224 [105] per 50 See Bradshaw v The Commonwealth (1925) 36 CLR 585 at 589-590 per Knox CJ; [1925] HCA 42; Edwards v The Commonwealth (1935) 54 CLR 313 at 323-324 per Dixon J; [1935] HCA 84; Plaintiff M68/2015 v Minister for Immigration and Border Protection (2016) 257 CLR 42 at 92-93 [120] per Gageler J; [2016] HCA 1. Bell Nettle is also the APS to be understood responsible government mandated by the Constitution. The constitutional light of significance of the Northcote-Trevelyan British civil service reforms of the mid-nineteenth century51, which had been adopted by some of the Australian colonies by the time of Federation52 and which were almost immediately after Federation adopted by the Commonwealth53. Thus, as was observed in Federal Commissioner of Taxation v Futuris Corporation Ltd54, apolitical, skilled and efficient service of the national interest has been the ethos of the APS throughout the whole period of the public administration of the laws of the Commonwealth. Appropriate and adapted A law may be regarded as reasonably appropriate and adapted or proportionate to the achievement of a legitimate purpose consistent with the system of representative and responsible government if the law is suitable, necessary and adequate in its balance55. 51 See Northcote and Trevelyan, Report on the Organisation of the Permanent Civil Service (1854) at 3, 6-7, 18-20. See also Carltona Ltd v Commissioners of Works [1943] 2 All ER 560 at 563 per Lord Greene MR. 52 See, eg, Board Appointed to Enquire into the Arrangements for the Better Organization of the Civil Service of the Colony, Civil Service of the Colony of Victoria (1856); Civil Service Act 1862 (Vic); Civil Service Act 1874 (SA). See also McManus v Scott-Charlton (1996) 70 FCR 16 at 24-25 per Finn J; Bennett v President, Human Rights and Equal Opportunity Commission (2003) 134 FCR 334 at 348-349 [54] per Finn J. 53 Commonwealth Public Service Act 1902 (Cth). 54 (2008) 237 CLR 146 at 164 [55] per Gummow, Hayne, Heydon and Crennan JJ; [2008] HCA 32. 55 McCloy (2015) 257 CLR 178 at 194-196 [2(B)(3)]-[4] per French CJ, Kiefel, Bell and Keane JJ; Brown v Tasmania (2017) 261 CLR 328 at 368 [123] per Kiefel CJ, Bell and Keane JJ, 376 [158] per Gageler J, 416-417 [278]-[280] per Nettle J, 476-477 [473] per Gordon J; Clubb v Edwards (2019) 93 ALJR 448 at 462 [6], 470-471 [70]-[74] per Kiefel CJ, Bell and Keane JJ, 506-507 [266] per Nettle J, 533 [408], 544 [463] per Edelman J; 366 ALR 1 at 10, 21-22, 70, 105, 121; [2019] HCA 11. Bell Nettle (i) Suitability A law is suitable in that sense if it exhibits a rational connection to its purpose, and a law exhibits such a connection if the means for which it provides are capable of realising that purpose56. Regardless of the political complexion of the government of the day, or its policies, it is highly desirable if not essential to the proper functioning of the system of representative and responsible government that the government have confidence in the ability of the APS to provide high quality, impartial, professional advice, and that the APS will faithfully and professionally implement accepted government policy, irrespective of APS employees' individual personal political beliefs and predilections57. To the same end, it is most desirable if not essential that management and staffing decisions within the APS be capable of being made on a basis that is independent of the party political system, free from political bias, and uninfluenced by individual employees' political beliefs. The requirement imposed on employees of the APS by ss 10(1) and 13(11) of the Public Service Act at all times to behave in a way that upholds the APS Values and the integrity and good reputation of the APS represents a rational means of realising those objectives and thus of maintaining and protecting an apolitical and professional public service. The impugned provisions are suitable in the necessary sense. (ii) Necessity Where, as here, a law has a significant purpose consistent with the system of representative and responsible government mandated by the Constitution and it is suitable for the achievement of that purpose in the sense described, such a law is not ordinarily to be regarded as lacking in necessity unless there is an obvious and compelling alternative which is equally practicable and available 56 Tajjour (2014) 254 CLR 508 at 563 [81]-[82] per Hayne J; McCloy (2015) 257 CLR 178 at 217 [80] per French CJ, Kiefel, Bell and Keane JJ, 232-233 [132]-[133] per Gageler J, 262 [234] per Nettle J; Brown v Tasmania (2017) 261 CLR 328 at 370 [132]-[133] per Kiefel CJ, Bell and Keane JJ, 418 [281] per Nettle J; Clubb (2019) 93 ALJR 448 at 462 [6] per Kiefel CJ, Bell and Keane JJ, 507 [266(2)] per Nettle J, 544 [463] per Edelman J; 366 ALR 1 at 10, 70, 121. 57 See and compare McManus v Scott-Charlton (1996) 70 FCR 16 at 25-26 per Finn J; Federal Commissioner of Taxation v Day (2008) 236 CLR 163 at 180-181 [34] per Gummow, Hayne, Heydon and Kiefel JJ; [2008] HCA 53. Bell Nettle and would result in a significantly lesser burden on the implied freedom58. Here, the respondent's argument that the impugned provisions impose an unjustified burden on the implied freedom of political communication by proscribing "anonymous" communications thus reduces in effect to a submission that an obvious and compelling alternative to the impugned provisions would be to exclude "anonymous" communications from their scope of application. The argument must be rejected. For the reasons earlier given59, "anonymous" communications are at risk of ceasing to be anonymous, and thereby damaging the integrity and good reputation of the APS as an apolitical and professional public service. Further, as has been explained, depending on the circumstances and content of an the communication may damage the good reputation of the APS even while it remains anonymous. Consequently, if the impugned provisions were restricted in their operation to communications other than "anonymous" communications, the impugned provisions would cease to operate as a deterrent against a significant potential source of damage to the integrity and good reputation of the APS. Restricting their operation to communications other than "anonymous" communications is for that reason not an obvious and compelling alternative to their present form60. "anonymous" communication, In addition, it is to be observed for the sake of completeness that, to the extent that the respondent's argument proceeds upon an assumption that "anonymous" communications are more deserving of protection by the implied speaker acknowledges freedom responsibility, that assumption is not necessarily sound61. than communications for which the 58 Monis (2013) 249 CLR 92 at 214 [347] per Crennan, Kiefel and Bell JJ; Tajjour (2014) 254 CLR 508 at 550 [36] per French CJ; McCloy (2015) 257 CLR 178 at 210-211 [57]-[58] per French CJ, Kiefel, Bell and Keane JJ; Brown v Tasmania (2017) 261 CLR 328 at 371-372 [139] per Kiefel CJ, Bell and Keane JJ, 418-419 [282] per Nettle J; Clubb (2019) 93 ALJR 448 at 462 [6] per Kiefel CJ, Bell and Keane JJ, 505 [263], 507-508 [266(3)], [267]-[268], 509-510 [277] per Nettle J, 548 [478]-[480] per Edelman J; 366 ALR 1 at 10, 68, 70-71, 74, 125-126. 59 See [24] above. 60 See and compare Tajjour (2014) 254 CLR 508 at 565-566 [90] per Hayne J. 61 See Smith v Oldham (1912) 15 CLR 355 at 358-359 per Griffith CJ, 362-363 per Isaacs J; [1912] HCA 61. Bell Nettle (iii) Adequacy in balance If a law presents as suitable and necessary in the senses described, it is regarded as adequate in its balance unless the benefit sought to be achieved by the law is manifestly outweighed by its adverse effect on the implied freedom62. In this case, that directs attention to the quantitative extent of the burden and the importance of the impugned provisions to the preservation and protection of the system of representative and responsible government mandated by the Constitution63. In the course of argument, reference was made to the question of whether the quantitative extent of the burden imposed by the impugned provisions was affected by the range of sanctions capable of being imposed under s 15. On one view of the matter, the issue of penalty is beside the point. If a law prohibits an employee of the APS from commenting publicly in a manner which fails to uphold the integrity and reputation of the APS, the law restricts the ability of the APS employee lawfully to engage in governmental and political communication regardless of whether the penalty for contravention is large or small64. On another view of the matter, however, penalty is relevant because the question of whether a law imposes a burden on the implied freedom is to be assessed according to the terms and practical effect of the law and the greater the penalty the more likely it will be that the law operates as a significant deterrent to political communication65. A third possibility is that the relevance of penalty will 62 Clubb (2019) 93 ALJR 448 at 462 [6], 470 [66]-[69], 475 [102] per Kiefel CJ, Bell and Keane JJ, 508-509 [270]-[275] per Nettle J, 552 [497]-[498] per Edelman J; 366 ALR 1 at 10, 20-21, 28, 72-73, 131. See also Davis v The Commonwealth (1988) 166 CLR 79 at 99-100 per Mason CJ, Deane and Gaudron JJ (Wilson and Dawson JJ agreeing at 101); [1988] HCA 63; Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 30-31, 34 per Mason CJ, 78 per Deane and Toohey JJ, 94-95 per Gaudron J, 101-102 per McHugh J; [1992] HCA 46; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 324 per Brennan J; [1994] HCA 44; McCloy (2015) 257 CLR 178 at 219 [87], 220 [91] per French CJ, Kiefel, Bell and Keane JJ; Brown v Tasmania (2017) 261 CLR 328 at 422-423 [290] per Nettle J. 63 See McCloy (2015) 257 CLR 178 at 195 [2(B)(3)], 218 [84]-[86] per French CJ, Kiefel, Bell and Keane JJ. 64 See Brown v Tasmania (2017) 261 CLR 328 at 410 [262] per Nettle J. 65 See Brown v Tasmania (2017) 261 CLR 328 at 357-358 [81], 359 [87] per Kiefel CJ, Bell and Keane JJ. Bell Nettle depend on the particular circumstances of a case. Here, it may be assumed that the extent of penalty is relevant. But for reasons to be explained, the penalties that may be imposed under s 15 do not suggest that the impugned provisions are not adequate in their balance. Section 15 of the Public Service Act provides for a range of penalties and for the selection and imposition of the appropriate penalty by the Agency Head in the exercise of discretion. As a matter of law, that discretion must be exercised reasonably66 and, therefore, according to the nature and gravity of the subject contravention67. As with other civil penalties, the essence of the task is to put a price on the contravention sufficiently high to deter repetition by the contravenor and others who might be tempted to contravene68, but bearing in mind that a penalty of dismissal must not be "harsh, unjust or unreasonable"69. Unquestionably, there are cases of breach of s 13(11) that are so serious in the damage done to the integrity and good reputation of the APS that the only appropriate penalty is termination of employment. The instance earlier cited of a Permanent Secretary who publicly engages in trenchant criticism of the Secretary's Minister, Government policy or departmental administration is an obvious example. By contrast, in other cases the level of the employee involved and the nature of the conduct in issue may be such that nothing more than a reprimand is warranted. And of course between those two extremes lies a range of possible situations warranting the imposition in the reasonable exercise of discretion of differing penalties according the particular facts and circumstances of the matter. It is not the case that every employee of the APS who commits a breach of s 13(11) by broadcasting public "anonymous" 66 Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at 348-349 [23]-[24] per French CJ, 362 [63] per Hayne, Kiefel and Bell JJ, 370-371 [88]-[90] per Gageler J; [2013] HCA 18. 67 Li (2013) 249 CLR 332 at 352 [30] per French CJ, 366-367 [74]-[76] per Hayne, Kiefel and Bell JJ. See and compare House v The King (1936) 55 CLR 499 at 504-505 per Dixon, Evatt and McTiernan JJ; [1936] HCA 40; Veen v The Queen [No 2] (1988) 164 CLR 465 at 472 per Mason CJ, Brennan, Dawson and Toohey JJ; [1988] HCA 14. 68 The Commonwealth v Director, Fair Work Building Industry Inspectorate (2015) 258 CLR 482 at 506 [55] per French CJ, Kiefel, Bell, Nettle and Gordon JJ; [2015] HCA 46, quoting Trade Practices Commission v CSR Ltd (1991) ATPR ¶41-076 at 69 See Fair Work Act 2009 (Cth), Pt 3.2. Bell Nettle communications is liable to be dismissed. Nor is it the case that the impugned provisions provide for the imposition of a penalty which is not proportionate to the contravention. Breach of the impugned provisions renders an employee of the APS liable to no greater penalty than is proportionate to the nature and gravity of the employee's misconduct. Section 15(3) provides for the establishment of procedures that comply with basic procedural requirements set out in Commissioner's Directions, have due regard to procedural fairness, and may differ for different categories of APS employee. An Agency Head is required to take reasonable steps to ensure that every APS employee in the Agency has ready access to the documents that set out these procedures70. The assessment of whether there has been a breach of s 13(11) must be undertaken in accordance with those published procedures, and, if the relevant employee is dissatisfied with the determination, the employee has a right of internal review, a further right of Tribunal merits review under s 33 – except in the case of termination of employment, in which event the employee has rights under Pt 3.2 of the Fair Work Act 2009 (Cth) for redress for unfair dismissal on the ground of it being "harsh, unjust or unreasonable" – and a right of judicial review. Given the impugned provisions have a significant purpose consistent with the system of representative and responsible government mandated by the Constitution, and are necessary in the sense that there is no obvious and compelling alternative, there is nothing about the procedures for the assessment of the nature and gravity of contravention of s 13(11) or the imposition of the appropriate penalty in accordance with the procedures for which s 15 provides that at all supports the idea that the benefit sought to be achieved by the impugned provisions is manifestly outweighed by their effect on the implied freedom. To the contrary, the impugned provisions, including their prescription of the range of penalties and the procedures for the assessment of breach and the imposition of penalty and review, present as a plainly reasoned and focussed response to the need to ensure that the requirement of upholding the APS Values and the integrity and good reputation of the APS trespasses no further upon the implied freedom than is reasonably justified71. 70 Public Service Act, s 15(5). 71 Chief of Defence Force v Gaynor (2017) 246 FCR 298 at 324 [112] per Perram, Bell Nettle Exercise of discretion under s 15 It remains to deal with the respondent's further alternative contention that the decision to terminate her employment as an employee of the APS was vitiated by the decision maker's failure to take the implied freedom into account in determining the sanction to be imposed under s 15 for breach of s 13(11). Counsel submitted that the implied freedom is an essential mandatory consideration in the exercise of the discretion and, therefore, that a decision maker's failure to consider the implied freedom constitutes a jurisdictional error which vitiates the decision72. Alternatively, it was submitted that, even if that were not so, the implied freedom operates as an outer limit on the range of penalties open to be imposed in exercise of the decision maker's discretion, and that, in this case, the decision maker imposed an excessive penalty of dismissal which lay beyond the boundary of the implied freedom. The first of those submissions must be rejected. No doubt in one sense the implied freedom imposes a limit on the sanctions that may be imposed for a breach of s 13(11) constituted of a failure to uphold the APS Values prescribed in s 10(1). If s 15(1) provided for sanctions that were not reasonably justified having regard to the implied freedom of political communication, it may be accepted that s 15(1) would be invalid and any penalty imposed under it would be unlawful, or at least unlawful to the extent that the penalty went further than was warranted by the implied freedom73. But as has been explained, the prohibitions imposed by s 13(11) operating in conjunction with s 10(1) are proportionate to achieving the significant purpose of maintaining and protecting an apolitical public service skilled and efficient in serving the national interest, and the prescription of sanctions in s 15(1) that may be imposed according to law for a contravention of s 13(11) trespasses no further upon the implied freedom than is reasonably justified. Consequently, provided a decision maker imposing a penalty under s 15 acts reasonably, and so in accordance with the legal requirement that the penalty be proportionate to the nature and gravity of the contravention and the personal circumstances of the employee, there can be no risk of infringement of the implied freedom. If a decision maker imposes a manifestly excessive penalty, it will be unlawful because the decision maker has 72 See and compare Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39 per Mason J; [1986] HCA 40. 73 See Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556 at 612-614 per Brennan J; [1986] HCA 60; Wotton (2012) 246 CLR 1 at 13-14 [21] per French CJ, Gummow, Hayne, Crennan and Bell JJ, 34 [91] per Kiefel J. Bell Nettle acted unreasonably74, not because of the decision maker's failure to turn his or her mind to, or failure expressly to mention, the implied freedom. So to conclude does not mean that the implied freedom may not be a relevant consideration in the exercise of different discretions under other legislation75. Whether it is may depend on the terms of the legislation and the nature and scope of the discretion. But for the reasons stated, it is no part of a decision maker's function in imposing penalty under s 15 to take the implied freedom into account. The task is to impose a penalty which accords to the nature and gravity of the subject breach and the personal circumstances of the employee in question. For similar reasons, the remainder of the respondent's further alternative contention should be rejected. As has been observed76, due to the way in which the respondent conducted her case before the Tribunal, the respondent must be taken to have accepted that her conduct in broadcasting the "anonymous" tweets was conduct which failed to uphold the APS Values and the integrity and good reputation of the APS within the meaning of s 13(11), and that, but for the implied freedom, the sanction of dismissal was warranted. It is too late now for the respondent to be permitted to contend for the first time, as it were on ultimate appeal, that the penalty imposed on her did not accord to the nature and gravity of her contraventions of ss 10(1) and 13(11) or her personal circumstances. She must be taken to have accepted that they did and, consequently, that the penalty imposed was in accordance with those provisions and so within the limits set by the implied freedom. Conclusion It follows that the appeal should be allowed. The decision of the Tribunal should be set aside. In its place, the reviewable decision of 1 August 2014 should be affirmed. The respondent should pay the appellant's costs of the appeal. 74 Li (2013) 249 CLR 332 at 348-349 [23] per French CJ. See also Swan Hill Corporation v Bradbury (1937) 56 CLR 746 at 757-758 per Dixon J; [1937] HCA 15; Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J; [1947] HCA 21. 75 cf Wotton (2012) 246 CLR 1 at 16 [31]-[32] per French CJ, Gummow, Hayne, 76 See [27] above. This proceeding, styled as an appeal on a question of law from a decision of the Administrative Appeals Tribunal, was commenced in the original jurisdiction of the Federal Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) and was removed into the High Court under s 40 of the Judiciary Act 1903 (Cth). The background is fully described in the reasons for judgment of the plurality. Comcare and Ms Banerji agreed before the Tribunal that the termination of Ms Banerji's employment within the Department of Immigration and Border Protection was "reasonable administrative action taken in a reasonable manner in respect of [her] employment" within the meaning of s 5A(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth) unless she could establish that the termination fell outside that description "having regard to the implied freedom of political communication"77. That agreement meant that the only question raised for the consideration of the Tribunal in reviewing the decision of the Comcare Review Officer, which had affirmed the denial of her claim for compensation under s 14 of that Act for mental injury arising out of her employment, was whether the provisions of ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the Public Service Act 1999 (Cth) ("the PSA") operated to infringe the constitutionally implied freedom of political communication to the extent that those provisions purported to authorise the termination of her employment. The decision of the Tribunal, to set aside the decision under review and to determine instead that Ms Banerji was entitled to compensation, followed from its conclusion that the implied freedom of political communication was so infringed. The question of constitutional law which now arises for the determination of the High Court is essentially the same as the question which was raised for the consideration of the Tribunal. For reasons to be explained, however, there is no occasion to confine the question to the particular circumstances of the termination of Ms Banerji's employment. Whether ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the PSA operated to infringe the implied freedom of political communication to the extent that those provisions purported to authorise the termination of Ms Banerji's employment can and should be addressed by asking whether those provisions operate to infringe the implied freedom of political communication across the range of their potential operations. Contrary to an argument put on behalf of the Australian Human Rights Commission, which was granted leave to make written submissions as amicus curiae, the proceeding raises no distinct question concerning the application of the implied freedom of political communication to an exercise of executive power. As Basten JA pointed out in A v Independent Commission Against 77 Banerji and Comcare (Compensation) [2018] AATA 892 at [12]. Corruption78, "[w]hile it is true that the implied freedom of political communication will limit the scope of executive power, it does so, at least in the case of a [repository] exercising statutory powers, by limiting the scope of legislative power". And contrary to an argument put on behalf of Ms Banerji, the proceeding raises no separate question of administrative law as to whether the implied freedom of political communication was a consideration which needed to be, and was not, taken into account in the making of the administrative decisions which resulted in the termination of her employment. As Basten JA also pointed out in A v Independent Commission Against Corruption79, "there is an element of conceptual confusion in the suggestion that the constitutional limit on the scope of a power is a factor which must be taken into account by [an] authority in the course of exercising the power" in that "[t]he reason why the authority does not have the power cannot sensibly be described as a condition of its exercise". implied infringe the constitutionally The answer to whether ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the PSA operate freedom of political communication across the range of their potential operations turns on whether the burden which those provisions operate to impose on freedom of political communication is a burden that is justified. The burden is justified if two conditions are satisfied. One is that the object of the impugned provisions, identified in s 3(a) of the PSA, is consistent with the constitutionally prescribed system of representative and responsible government. The other is that the impugned provisions are reasonably appropriate and adapted to achieve that identified object in a manner consistent with that constitutionally prescribed system of government. The impugned provisions, in my opinion, satisfy both conditions. The object identified in s 3(a) of the PSA not only is consistent with the constitutionally prescribed system of representative government but serves positively to promote the constitutionally prescribed system of responsible government. Sections 10(1)(a), 13(11) and 15(1)(a) and (3) are narrowly tailored to achieve that object in a manner which minimally impairs freedom of political communication. The burden which the impugned provisions impose on freedom of political communication is therefore justified. To explain that answer, it is necessary to start with the constitutional context within which the PSA is enacted and operates. 78 (2014) 88 NSWLR 240 at 256 [56]. 79 (2014) 88 NSWLR 240 at 256-257 [56]. Constitutional context The PSA is enacted under s 51(xxxvi) of the Constitution as a law with respect to the matter referred to in s 67 as "the appointment and removal of all other officers of the Executive Government of the Commonwealth" and under s 51(xxxix) as a law with respect to "matters incidental to the execution of any power vested by this Constitution in ... the Government of the Commonwealth ... or in any department or officer of the Commonwealth". The "other officers" to whom s 67 refers are officers of the Commonwealth other than Ministers of State for the Commonwealth, for whom provision is made in s 64. To appreciate the special constitutional position of those other officers, it is necessary first to understand the peculiar constitutional position of Ministers. the Executive Government of Section 61 of the Constitution vests the executive power of the Commonwealth in the Queen and makes it exercisable by the Governor-General. Section 62 mandates establishment of a Federal Executive Council to advise the Governor-General, and s 63 provides that references to the Governor-General in the Constitution are to be construed as references to the Governor-General acting on the advice of the Federal Executive Council. Section 64 of the Constitution requires Ministers to be appointed by the Governor-General "to administer the Commonwealth as the Governor-General in Council may establish". The Ministers so appointed are required by that section to be members of the Federal Executive Council. They hold office during the pleasure of the Governor- General and they cannot hold office for more than three months unless they become senators or members of the House of Representatives. such departments of State of Combined with the requirements of s 6 of the Constitution that there must be a session of Parliament at least once in every year and of ss 7, 9, 13, 24, 28 and 32 that senators and members of the House of Representatives be "directly chosen by the people" in elections held at least once every three years, the requirement of s 64 that Ministers be or within three months of appointment become senators or members of the House of Representatives facilitates the political accountability of Ministers to the House of Representatives and to the Senate. Through the House of Representatives and the Senate, Ministers are made politically accountable to electors. The result is "that the actual government of the [Commonwealth] is conducted by officers who enjoy the confidence of the people"80, which is the essence of the system of responsible government for which the Constitution makes provision81. The political accountability of Ministers, Mason J observed in FAI Insurances Ltd v Winneke82, has two elements. Each is facilitated by a different aspect of the operation of s 64 of the Constitution. One element, corresponding to the requirement of the section that Ministers be members of the Federal Executive Council, is the "collective responsibility" of Ministers to the Parliament and to electors for the whole conduct of the Executive Government of the Commonwealth. The other element, corresponding to the requirement of the section that Ministers be appointed to administer departments established by the Governor-General on the advice of the Federal Executive Council, is the "individual responsibility of Ministers to Parliament for the administration of their departments". Enhancing the political accountability of Ministers facilitated by s 64, ss 65 and 66 of the Constitution make provision for the Parliament to have legislative control over the number and salaries of Ministers. Against the background of the provision made in respect of the Federal Executive Council and of Ministers in ss 62 to 66, s 67 of the Constitution provides: "Until the Parliament otherwise provides, the appointment and removal of all other officers of the Executive Government of the Commonwealth shall be vested the appointment is delegated by the Governor-General in Council or by a law of the Commonwealth to some other authority." the Governor-General in Council, unless It is the opening words of the section which invoke the power conferred on the Commonwealth Parliament by s 51(xxxvi) of the Constitution to make laws with respect to matters in respect of which the Constitution makes provision until the Parliament otherwise provides. 80 Griffith, Notes on Australian Federation: Its Nature and Probable Effects (1896) at 17, quoted in Quick and Garran, The Annotated Constitution of the Australian Commonwealth (1901) at 704. 81 Egan v Willis (1998) 195 CLR 424 at 451 [42]; [1998] HCA 71, quoted in Re Patterson; Ex parte Taylor (2001) 207 CLR 391 at 463-464 [217]; [2001] HCA 51. See also McCloy v New South Wales (2015) 257 CLR 178 at 223-225 [103]-[108]; [2015] HCA 34. 82 (1982) 151 CLR 342 at 364; [1982] HCA 26. The other officers of the Executive Government of the Commonwealth referred to in s 67 of the Constitution encompass, although are not limited to, all who might be involved in the exercise of executive power within such departments as the Governor-General in Council might from time to time establish under s 64. The ongoing conferral by s 64 of executive power on the Governor-General in Council to establish departments and the ongoing conferral by s 51(xxxvi) of legislative power with respect to the appointment and removal of officers within departments were supplemented within the scheme of the Constitution by the making of transitional provision for the transfer to the Commonwealth of "departments of the public service in each State" specified in s 69 of the Constitution. The consequence of transfer of such a department was that "all officers of the department" became by force of s 84 of the Constitution "subject to the control of the Executive Government of the Commonwealth" and that the transferred department itself came within the subject matter of the exclusive legislative power conferred on the Commonwealth Parliament by s 52(ii) of the Constitution with respect to "matters relating to any department of the public service the control of which is by this Constitution transferred to the Executive Government of the Commonwealth". But officers of transferred departments also met the description of other officers of the Executive Government of the Commonwealth capable of removal under s 67, and they too were therefore within the scope of s 51(xxxvi), subject to certain rights vested in or accruing to them under State law at the time of transfer which were preserved to them by s 8483. Section 44(iv) of the Constitution renders all of the other officers of the Executive Government of the Commonwealth to whom s 67 of the Constitution refers, to the extent that they are holders of "office[s] of profit under the Crown", incapable of being chosen or of sitting as senators or as members of the House of Representatives. Officers of the Executive Government of the Commonwealth who are not Ministers are in that way disqualified from taking part in the Parliament to which Ministers are politically accountable. Their disqualification from participation in the Parliament, as was noted in Sykes v Cleary84, "contributes to their exclusion from active and public participation in party politics" and, in the result, has "played an important part in the development of the old tradition of a politically neutral public service". More will be said of the development and continuation of that tradition in due course. 83 Bradshaw v The Commonwealth (1925) 36 CLR 585 at 591, 595, 597-598; [1925] HCA 42; Edwards v The Commonwealth (1935) 54 CLR 313 at 323; [1935] HCA 84 (1992) 176 CLR 77 at 96; [1992] HCA 60. See also Re Lambie (2018) 92 ALJR 285 at 291 [26]; 351 ALR 559 at 566; [2018] HCA 6. The overall constitutional context within which the PSA is enacted and operates is accordingly of: the administrative responsibility of Ministers for departments in which other officers of the Executive Government of the Commonwealth are involved in the exercise of executive power; the political accountability of Ministers for the administration of their departments to the House of Representatives and to the Senate; and the exclusion of those other officers from participation in the House of Representatives and in the Senate. That constitutional context informs the structure of the PSA and permeates its ethos. Structure and ethos of the PSA Like its predecessors, the Commonwealth Public Service Act 1902 (Cth) and the Public Service Act 1922 (Cth), the PSA is not "a law having general operation over all the members of the community". It is a law concerned exclusively with "the regulation of what is, no doubt, a very large body of people with respect to their work for and their relations with the Commonwealth", a component of which regulation involves subjecting them to a code of discipline Again like its predecessors, the PSA "serves public and constitutional purposes as well as those of employment"86. Providing as it does for "the marshalling of the human machinery to implement the exercise of executive power constitutionally vested in the Crown"87 against the background of the inherent political accountability of Ministers for the administration of their departments to the House of Representatives and to the Senate, the PSA imposes on other officers of the Executive Government of the Commonwealth who are engaged as employees for the purposes of those departments "a number of strictures and limitations which go beyond the implied contractual duty that would be owed to an employer by many employees"88. For each department that the Governor-General in Council establishes under s 64 of the Constitution, the PSA establishes an office of Secretary of the department89. It imposes on the holder of that office responsibility for managing 85 R v White; Ex parte Byrnes (1963) 109 CLR 665 at 670-671; [1963] HCA 58. 86 Federal Commissioner of Taxation v Day (2008) 236 CLR 163 at 180-181 [34]; [2008] HCA 53, citing McManus v Scott-Charlton (1996) 70 FCR 16 at 24. 87 McManus v Scott-Charlton (1996) 70 FCR 16 at 24. 88 Federal Commissioner of Taxation v Day (2008) 236 CLR 163 at 181 [34]. 89 Section 56(1) of the PSA. the department and advising the Minister administering the department in matters relating to the department90. It also imposes on the holder of that office responsibility for assisting the Minister to fulfil what the PSA acknowledges to be the "Minister's accountability obligations to the Parliament to provide factual information, as required by the Parliament, in relation to the operation and administration of the Department"91. The PSA mandates that all persons engaged as employees to perform functions in a department must be engaged under the PSA or under the authority of another Act92. It empowers the Secretary of a department, on behalf of the Commonwealth, to engage persons as employees for the purpose of the department93. Persons so engaged are referred to in the PSA as "APS employees"94. Together with Secretaries of departments, APS employees form part of the "Australian Public Service" ("the APS") which the PSA establishes95. The objects of the PSA and the manner in which the PSA regulates the APS continue a long tradition of professionalism and political neutrality of officers within departments of State for the administration of which Ministers of State are constitutionally responsible and politically accountable96. The tradition can be traced through the predecessors of the PSA to a process of public sector reform which began in the second half of the nineteenth century following recommendations in the Report on the Organisation of the Civil Service in the United Kingdom97 for an end to ministerial patronage and for the creation of a permanent professional public service based on competitive recruitment and promotion processes, which were taken up and implemented by legislation after 90 Section 57(1) of the PSA. 91 Section 57(2) of the PSA. 92 Section 6(1) of the PSA. 93 Section 22(1) of the PSA. 94 Section 7 of the PSA (definition of "APS employee"). 95 Section 9 of the PSA. 96 See de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at 75-76. 97 Northcote and Trevelyan, Report on the Organisation of the Permanent Civil Service (1854) at 3, 9, 18-20, 22-23. the advent of responsible government in the Australian colonies98 and which contributed to its development99. The ethos which then emerged, and which has prevailed throughout the history of the Commonwealth, has been that of "an apolitical public service which is skilled and efficient in serving the national interest"100. Professor W E Hearn, who had earlier chaired a Board of Inquiry101 and participated in a Royal Commission102 the recommendations of which had resulted in the enactment of the first legislation for the establishment and regulation of a permanent civil service in Victoria103, gave a useful if somewhat idealised account of the emergence of an apolitical public service and of its relationship to ministerial accountability in his treatise entitled The Government of England, published in Melbourne in 1867. Having stated in relation to Ministers that "[i]t is an essential part of our political system that the heads of the great executive departments, those officers who direct these departments and determine their policy, should be present in Parliament" on the basis that "[t]heir presence there is required to give due effect to the principle of parliamentary control", Professor Hearn made the point that "Parliamentary Government would soon become an intolerable nuisance" in the absence of a permanent civil service104. 98 Civil Service Act 1862 (Vic); Civil Service Act 1874 (SA); Civil Service Act 1884 (NSW); Civil Service Act 1889 (Qld); Civil Service Act 1900 (Tas); Public Service Act 1900 (WA). 99 See Finn, Law and Government in Colonial Australia (1987) at 61-67, 102-108, 100 Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at 164 [55]; [2008] HCA 32. 101 Victoria, Civil Service of the Colony of Victoria, Report of the Board Appointed to Enquire into the Arrangements for the Better Organization of the Civil Service of the Colony (1856). 102 Victoria, Civil Service Commission, Report of the Commissioners Appointed to Inquire into and Report upon the Civil Service of the Colony (1859). 103 Civil Service Act 1862 (Vic). 104 Hearn, The Government of England: Its Structure and Its Development (1867) at Of the officers of the permanent civil service, Professor Hearn wrote105: "They are the depositaries of official traditions and the custodians of official records. It is to them that the minister must look for information, and it is to them that he must trust the execution of his designs. But these gentlemen are the servants of the Queen. It is their duty and their point of honour to give to their official superior true information, faithful advice, and loyal cooperation. It matters not to them who that superior may be, or how frequently he may be changed. Their position is the same. They are still the Queen's servants, and are bound to do the Queen's business under the orders of any officer that may in that behalf be honoured with Her Majesty's commands. Whatever may be their personal feelings or their political sympathies, all the servants of the Queen are in their official relations bound, whether individually or in concert with others, to promote to the utmost of their several powers the service to which they belong." "Such is the theory of the Constitution, and it is not contradicted by the practice. ... The Heads of Departments in all their fluctuations never abuse Her Majesty's confidence by advising the dismission of a meritorious officer on the sole ground of his political opinions. The subordinate officers are careful to avoid such an expression of their political feelings as might bring them into collision with any of their chiefs for the time being; and honourably fulfil without respect to persons their duties towards their official superior. So well is the practice now understood that scarcely has a complaint been heard for many years; and the control of the vessel of the State passes from hand to hand, as the exigencies of political affairs require, with perfect ease and with no appreciable inconvenience. The commander may be often changed, and the direction of the good ship may be altered; but the crew remains the same, equally prompt to obey every varying order, and equally skilful to carry it into execution." How maintenance of a culture of political neutrality tends to support maintenance of a permanent professional public service within a system in which Ministers are constitutionally responsible and politically accountable for the administration of their departments was further explained by the Royal Commission on the Civil Service in the United Kingdom in 1915 by reference to 105 Hearn, The Government of England: Its Structure and Its Development (1867) at 106 Hearn, The Government of England: Its Structure and Its Development (1867) at how the system might be expected to unravel were restrictions on political activities of public servants withdrawn. The explanation was as follows107: "Speaking generally, we think that if restrictions on the political activities of public servants were withdrawn two results would probably follow. The public might cease to believe, as we think they do now with reason believe, in the impartiality of the permanent Civil Service; and Ministers might cease to feel the well-merited confidence which they possess at present in the loyal and faithful support of their official subordinates; indeed they might be led to scrutinise the utterances or writings of such subordinates, and to select for positions of confidence only those whose sentiments were known to be in political sympathy with their own. If this were so, the system of recruitment by open competition would prove but a frail barrier against Ministerial patronage in all but the earlier years of service; the Civil Service would cease to be in fact an impartial non-political body, capable of loyal service to all Ministers and parties alike; the change would soon affect the public estimation of the Service, and the result would be destructive of what undoubtedly is at present one of the greatest advantages of our administrative system and one of the most honourable traditions of our public life." Drawing attention both to the genuineness and to the amorphousness of the continuing ethos of political neutrality amongst officers of the Executive Government of the Commonwealth appointed under the predecessors of the PSA, Professor R N Spann wrote in a paper provided to the Royal Commission on Australian Government Administration in 1974108: "The permanent head and his subordinates are trained to think of themselves as implementing policies ultimately determined by their political masters, on which they have offered advice, and which may leave much scope for discretion and feedback, but which they should not consciously distort in response to other viewpoints and pressures, including their own personal preferences. This doctrine is nowhere fully defined in statutes or regulations, nor could it be effectively enforced by outside sanctions – there are too 107 Great Britain, Royal Commission on the Civil Service, Fourth Report of the Commissioners (1914) [Cd 7338] at 97 [11], quoted in Fraser v Public Service Staff Relations Board [1985] 2 SCR 455 at 471. 108 Australia, Royal Commission on Australian Government Administration, Appendixes to Report (1976), vol 1 at 227 (Appendix 1.I). many subtle ways of hindering, or not fully backing, a policy one dislikes. It is part of the 'culture', or tradition, of the public service, a tradition whose force should not be under-estimated." Giving contemporary expression to that longstanding culture or tradition, s 3(a) of the PSA states as the first of the main objects of the PSA "to establish an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public". The other main objects of the PSA can each be seen to be designed to complement the first. They are expressed as being "to provide a legal framework for the effective and fair employment, management and leadership of APS employees"109, "to establish rights and obligations of APS employees"110, and to define the powers, functions and responsibilities of Secretaries (and other "Agency Heads") as well as of the Public Service Commissioner and the Merit Protection Commissioner111, both of whom are appointed to an independent office under the PSA112. The principal method of regulation of the APS which the PSA adopts in pursuit of the object of establishing an apolitical public service is to be found in the combined operation of ss 10, 11, 12, 13 and 15. Section 10 of the PSA specifies the "APS Values". The value specified in s 10(1)(a), that "the APS is apolitical, performing its functions in an impartial and professional manner", is intrinsically related to other values articulated in s 10. Those other values are respectively that the APS "is openly accountable for its actions, within the framework of Ministerial responsibility to the Government, the Parliament and the Australian public"113, "is responsive to the Government in providing frank, honest, comprehensive, accurate and timely advice and in implementing the Government's policies and programs"114, "delivers services fairly, effectively, impartially and courteously to the Australian public and is sensitive to the diversity of the Australian public"115 and "is a career-based 109 Section 3(b) of the PSA. 110 Section 3(d) of the PSA. 111 Section 3(c) of the PSA. 112 See Pts 5 and 6 of the PSA. 113 Section 10(1)(e) of the PSA. 114 Section 10(1)(f) of the PSA. 115 Section 10(1)(g) of the PSA. service to enhance the effectiveness and cohesion of Australia's democratic system of government"116. Section 11(1) of the PSA requires the Public Service Commissioner to issue directions in writing in relation to each of the APS Values for the purposes of ensuring that the APS incorporates and upholds those values and determining where necessary the scope or application of the values. By force of s 11(2), the APS Values have effect for the purposes of the PSA "subject to the restrictions (if any)" in directions made under s 11(1). Directions that have in fact been made by the Public Service Commissioner under s 11(1) have the effect of requiring each Secretary of a department to put in place measures directed to ensuring, and of requiring each APS employee to help to ensure, that "management and staffing decisions" in a department "are made on a basis that is independent from the political party system, political bias and political influence", and that "the same high standard of policy advice and implementation, and the same high quality professional support, is provided to the elected Government, irrespective of which political party is in power and irrespective of the [Secretary's or APS employee's] political beliefs"117. Section 12 of the PSA obliges Secretaries of departments to uphold and promote the APS Values, and s 35(2)(c) makes it a function of APS employees within the "Senior Executive Service" to promote the APS Values "by personal example and other appropriate means". Section 13 of the PSA prescribes the "APS Code of Conduct", which is made applicable by force of that section to all APS employees, and which s 14(1) makes applicable in the same way to Secretaries of departments. One of the requirements of the APS Code of Conduct, prescribed in s 13(11), is that "[a]n APS employee must at all times behave in a way that upholds the APS Values and the integrity and good reputation of the APS". Section 15 of the PSA provides for the sole means by which the APS Code of Conduct is enforced against an APS employee. The question of whether or not an APS employee has breached the APS Code of Conduct is a question for administrative determination under procedures which the Secretary of each department must establish under s 15(3). The procedures which must be established by the Secretary must "have due regard to procedural fairness" and 116 Section 10(1)(n) of the PSA. 117 Clause 2.2 of the Public Service Commissioner's Directions 1999 (Cth), read with s 42(2) of the PSA. must comply with basic procedural requirements set out in directions issued by the Public Service Commissioner under s 15(4). Only where an APS employee is found under procedures established under s 15(3) to have breached the APS Code of Conduct can the Secretary of a department exercise discretion under s 15(1) to impose a sanction for breach. The range of sanctions for which provision is made in s 15(1) is limited to those connected with employment. Termination of employment, for which provision is made in s 15(1)(a), is the most severe. The other sanctions are reduction in classification, re-assignment of duties, reduction in salary, deductions from salary by way of fine, and a reprimand. The discretion to impose a sanction from within that range is subject to the usual implied conditions of a statutory conferral of discretionary power that it can be exercised only in compliance with the principles of procedural fairness and only within the bounds of reasonableness118. The reasonableness or unreasonableness of the imposition of any particular sanction from within the range necessarily falls to be determined in that context by reference to considerations which include whether, and if so to what extent, the sanction can be seen to be proportionate to the severity of the breach that has been found119. A finding under procedures established under s 15(3) of the PSA that an APS employee has breached the APS Code of Conduct is, in accordance with regulations made to give effect to an entitlement for which s 33(1) of the PSA provides120, subject to merits review by the Merit Protection Commissioner. So too is a decision by a Secretary under s 15(1) to impose a sanction other than termination of employment on an APS employee who has been found to have breached the APS Code of Conduct121. The Merit Protection Commissioner lacks power to make a binding decision as a result of a review either of a finding under procedures established under s 15(3) or of a decision under s 15(1). The Merit Protection Commissioner must, however, make recommendations in a report of the review which the 118 See, eg, Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at 348- 349 [23]-[25], 362 [63], 370-371 [88]-[92]; [2013] HCA 18. 119 See, eg, Wotton v Queensland (2012) 246 CLR 1 at 34 [91]; [2012] HCA 2; Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 at 352 [30]. 120 Regulations 5.24(2)(a) and 5.28 of the Public Service Regulations 1999 (Cth). 121 Regulations 5.24(2)(b) and 5.28 of the Public Service Regulations 1999 (Cth). Secretary is obliged to consider122. Having considered those recommendations, the Secretary must make a further decision confirming or varying the action that has been reviewed or setting that action aside and substituting new action123. The Merit Protection Commissioner, if not satisfied with the response of the Secretary, is empowered to report the matter to the Minister administering the relevant department as well as to the Prime Minister and to the President of the Senate and the Speaker of the House of Representatives for presentation to the Parliament124. A decision made by a Secretary under s 15(1) of the PSA to terminate the employment of an APS employee who has been found to have breached the APS Code of Conduct is excluded from the entitlement to review for which s 33 of the PSA provides. However, the former employee is entitled to apply to the Fair Work Commission for a remedy for unfair dismissal under Pt 3-2 of the Fair Work Act 2009 (Cth)125. If the Fair Work Commission finds the termination to have been "harsh, unjust or unreasonable"126, it can order either reinstatement or the payment of compensation127. Termination of employment can be found by the Fair Work Commission to be "harsh", even if it is not "unjust" or "unreasonable", "because it is disproportionate to the gravity of the misconduct in respect of which the employer acted"128. Moreover, the Fair Work Commission can, in the application of those statutory criteria, inquire into whether s 13(11) has been breached at all129. A decision of a Secretary to impose a sanction under s 15(1) of the PSA is also subject to judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth), as is a decision of the Secretary on review of a finding of breach of the APS Code of Conduct made under procedures established under s 15(3) of the PSA. Those decisions and decisions of the Fair Work Commission 122 Regulations 5.28(3)(b) and 5.32(1)(a) of the Public Service Regulations 1999 (Cth); s 33(5) of the PSA. 123 Regulation 5.32(1) and (2) of the Public Service Regulations 1999 (Cth). 124 Section 33(6) of the PSA, read with s 7 (definition of "Presiding Officer"). 125 See s 8(1) of the PSA; s 394 of the Fair Work Act 2009 (Cth). 126 Section 385(b) of the Fair Work Act 2009 (Cth). 127 Section 390 of the Fair Work Act 2009 (Cth). 128 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 465; [1995] HCA 24. 129 See Cooper v Australian Taxation Office [2015] FWCFB 868 at [18], [22]. are, of course, also subject to judicial review under s 75(v) of the Constitution as well as under s 39B of the Judiciary Act. Burden imposed by the impugned provisions The burden which any law operates to impose on freedom of political communication lies in its incremental effect on the ability of a person or persons to make or to receive communications capable of bearing on electoral choice130. The burden which ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the PSA operate to impose on freedom of political communication is a constraint on the scope of political communication permitted to be made by a person who is an APS employee for so long as he or she remains an APS employee. It is not a "blanket restraint on all civil servants from communicating to anyone any expression of view on any matter of political controversy"131. The constraint which ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the PSA operate to impose on political communication by an APS employee is both substantial and directly targeted at political communication. It operates on persons within a specified class, but does not discriminate on the basis of any particular viewpoint. Although a statutory incident of the relationship of employment, the constraint is not limited to a communication in which the APS employee might engage in his or her capacity as an APS employee or in the course of or for the purposes of his or her APS employment. Ms Banerji's own circumstances well enough illustrate how the constraint can extend to communications undertaken in a private capacity and which are not directly and immediately attributable to an APS employee. The constraint, however, cannot be equated with a statutory prohibition enforceable in civil or criminal proceedings in a court. There are two important points of distinction. First, the requirement of s 13(11) that an APS employee must at all times "behave in a way" that "upholds" the APS Value identified in s 10(1)(a) is a requirement to observe a professional standard. What it demands of a person who is an APS employee is observance of a measure of restraint or moderation in the expression of a political opinion. The precise measure is highly situation- specific and cannot readily be reduced to a set of prescriptive rules of behaviour. The level of circumspection in the expression of a political opinion that might 130 Brown v Tasmania (2017) 261 CLR 328 at 386 [188]; [2017] HCA 43. 131 de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at 77. properly be expected of an APS employee in a discussion with a journalist or a member of the public, for example, might not properly be expected of that same APS employee in a discussion with a close friend or relative. Likewise, the level of circumspection that might properly be expected may depend on the APS employee's level of seniority and responsibility. Second, s 13(11) in its application to s 10(1)(a) is not self-executing. Whether or not an APS employee has failed to behave in a way that upholds the APS Value identified in s 10(1)(a) is not a question that can arise for determination by a court. It is a question that has been committed to administrative determination in accordance with established procedures. What if anything flows from an administrative determination that there has been a failure to uphold that APS Value, as has already been observed, is then committed to the further administrative determination of the Secretary in the exercise of the discretion conferred by s 15(1) to impose sanctions from within the range set out in that sub-section. Hence, the burden which the impugned provisions operate in practice to impose on freedom of political communication is to require a person who is an APS employee to exercise restraint and moderation in the expression of political opinion for so long as he or she chooses to remain an APS employee in order to avoid the prospect of administrative sanction which can result at worst in the person ceasing to be an APS employee. Level and intensity of the requisite scrutiny Wotton v Queensland132 establishes that the validity of a law which burdens freedom of political communication by empowering an exercise of an administrative discretion is to be determined by asking in the first instance whether the burden is justified across the range of potential outcomes of the exercise of that discretion. If the burden is justified across the range of potential outcomes, that is the end of the constitutional inquiry. The law is valid and the validity of any particular outcome of the exercise of discretion is to be gauged by reference solely to the statutory limits of the discretion. There is no occasion to consider whether the scope of the discretion might be read down in order to ensure that the law is within constitutional power133. There is in consequence no occasion to consider whether a particular outcome might fall within the scope of the discretion as so read down, and there is accordingly no occasion to consider 132 (2012) 246 CLR 1 at 14 [22]-[23]. 133 cf Wotton v Queensland (2012) 246 CLR 1 at 9-10 [10], 13-14 [21], citing Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556 at 613-614; [1986] HCA 60. whether a particular outcome falls within the scope of the discretion having regard to the implied freedom134. For reasons I have sufficiently explained in the past135, a law which confers discretion capable of being exercised to impose a direct and substantial burden on political communication is a law that requires close scrutiny corresponding to a compelling justification if it is not to infringe the implied freedom of political communication. That is the approach which, in my opinion, is properly brought to bear in considering the justification for the burden on freedom of political communication which ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the PSA operate in combination to impose. That requirement for close scrutiny accords with the approach adopted by the Supreme Court of Canada in Osborne v Canada (Treasury Board). There the Supreme Court held that a law which banned "all partisan-related work by all public servants, without distinction either as to the type of work, or as to their relative role, level or importance in the hierarchy of the public servant" was not "demonstrably justified in a free and democratic society" within the meaning of s 1 of the Canadian Charter of Rights and Freedoms on the basis that "[t]he restrictions on freedom of expression [were] over-inclusive and [went] beyond what [was] necessary to achieve the objective of an impartial and loyal civil service"136. The approach has since been explained as involving adoption of a "strict" test of "minimum impairment" of freedom of expression guaranteed by s 2(b) of the Canadian Charter137. As reference is made in the submissions of Ms Banerji and the Australian Human Rights Commission to the position under the First Amendment to the Constitution of the United States, I add for completeness that the case law in which the Supreme Court has there balanced freedom of speech of public servants against governmental in creating and maintaining a interests professional and efficient public service138 is of marginal analogical assistance in 134 cf Wainohu v New South Wales (2011) 243 CLR 181 at 231 [113]; [2011] HCA 24. 135 Brown v Tasmania (2017) 261 CLR 328 at 389-391 [200]-[204]; Clubb v Edwards (2019) 93 ALJR 448 at 486-488 [175]-[185]; 366 ALR 1 at 43-46; [2019] HCA 11. 136 [1991] 2 SCR 69 at 100. 137 Dunmore v Ontario (Attorney General) [2001] 3 SCR 1016 at 1070-1074 [56]- 138 See United Public Workers of America (CIO) v Mitchell (1947) 330 US 75; United States Civil Service Commission v National Association of Letter Carriers (1973) 413 US 548; United States v National Treasury Employees Union (1995) 513 US 454; Lane v Franks (2014) 573 US 228. light of the marked differences between the structure and history of executive government in Australia and in the United States. The impugned provisions are justified The object identified in the expression of the main object in s 3(a) of the PSA – "to establish an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public" – is unquestionably legitimate in the minimally required sense that the object is consistent with the constitutionally prescribed system of representative and responsible government. Much more than that, the object is framed to enhance the practical operation of the constitutionally prescribed system of responsible government by perpetuating the ethos traditionally expected of officers of the Executive Government involved in the exercise of the executive power of the Commonwealth within departments administered by Ministers politically accountable to the Parliament. The time-honoured ethos of those officers standing aside from politics enhances both the exercise of the executive power of the Commonwealth and the political accountability of Ministers for the exercise of the executive power of the Commonwealth. It does so by ensuring that the Government, the Parliament and the Australian public can have confidence that Ministers will receive from those officers what is aptly described in the Directions made by the Public Service Commissioner under s 11(1), to which reference has already been made, as "the same high standard of policy advice and implementation, and the same high quality professional support ... irrespective of which political party is in power and irrespective of [any APS employee's] political beliefs"139. Three considerations then combine to support the conclusion that ss 10(1)(a), 13(11) and 15(1)(a) and (3) of the PSA are reasonably appropriate and adapted to achieve the identified object of establishing an apolitical public service in a manner that involves minimal impairment of freedom of political communication and that is for that reason consistent with the constitutionally prescribed system of representative and responsible government. First, the requirement of s 13(11) for a person who is an APS employee to uphold the APS Values is no more than a statutory incident of a relationship of employment. It is applicable only for so long as he or she remains an APS employee and non-observance of the requirement can lead only to administrative action, the most extreme outcome of which is that the person ceases to be an APS employee by operation of an exercise of discretion under s 15(1)(a), following a finding of breach made in accordance with s 15(3). 139 Clause 2.2(2)(b) of the Public Service Commissioner's Directions 1999 (Cth). Second, the content of the particular APS Value spelt out in s 10(1)(a) – that "the APS is apolitical, performing its functions in an impartial and professional manner" – is tailor-made to the object in s 3(a). The vagueness in the expression of that APS Value and the intrusion of the requirement of s 13(11) to uphold it into the private life of a person who is an APS employee are unavoidable in, and no more than commensurate with, achievement of that object. The vagueness and the extent of the intrusion are both ameliorated by the requirement of s 11(1) that the Public Service Commissioner issue directions in writing in relation to each APS Value, by the requirement of s 12 that each Secretary promote the APS Values, and by the function of APS employees within the Senior Executive Service under s 35(2)(c) to promote the APS Values by personal example and other appropriate means. The Tribunal was persuaded to the view that s 13(11) is overbroad in its application to s 10(1)(a) in so far as it extends to "anonymous comment" on the basis that "[a] comment made anonymously cannot rationally be used to draw conclusions about the professionalism or impartiality of the public service"140. That view, in my opinion, is erroneous. The error is that it focuses only on the importance of the appearance of impartiality and ignores the even greater importance of the actual observance of impartiality. Confidence cannot exist without trust, and trust cannot exist without assurance that partisan political positions incapable of being communicated with attribution will not be communicated anyhow under the cloak of anonymity. That is so irrespective of whether a particular comment made anonymously might or might not end up being attributed to its maker. The confidence of the Government, the Parliament and the Australian public in the APS as an apolitical and professional organisation would be undermined without more were an APS employee free to engage with impunity in clandestine publication of praise for or criticism of a political policy of the Government of the day or of a political party which might then or later be represented in the Parliament. Third, the procedural mechanism provided in s 15(1)(a) and (3) for the administrative determination and sanctioning of a breach of the APS Code of Conduct is conditioned by requirements for the administrative decision-makers to act reasonably and to observe procedural fairness, capable of being enforced by judicial review, and is subject as well to a comprehensive system of merits review. Not only is a finding of breach in accordance with procedures established under s 15(3) subject to review and recommendation by the Merit Protection Commissioner, but termination of employment under s 15(1)(a) can result in an order for compensation or reinstatement if found by the Fair Work Commission to have been "harsh, unjust or unreasonable", including for reasons 140 Banerji and Comcare (Compensation) [2018] AATA 892 at [116]. that the finding of breach in accordance with s 15(3) was not warranted or that termination under s 15(1)(a) was disproportionate to the gravity of the breach. Disposition For these reasons, I agree with the orders proposed by the plurality. 108 GORDON J. The respondent, Ms Banerji, commenced employment in the Australian Public Service ("the APS") with the then Department of Immigration and Citizenship141 ("the Department") on 29 May 2006. Between, relevantly, January and July 2012, she posted on Twitter under the handle "@LaLegale". Her employment was terminated on the basis that the Twitter posts were considered to be harsh and extreme in their criticism of the government and the Department's administration. As a result of the termination of her employment, Ms Banerji applied for compensation under the Safety, Rehabilitation and Compensation Act 1988 (Cth) ("the Compensation Act"). That Act does not permit compensation for injuries suffered "as a result of reasonable administrative action taken in a reasonable manner in respect of the employee's employment"142. Ms Banerji accepted that her anonymous posts constituted conduct that failed to uphold the APS Values143 and the integrity and good reputation of the APS within the meaning of s 13(11) of the Public Service Act 1999 (Cth) and that, but for the implied freedom of political communication, the termination of her employment under s 15(1)(a) of that Act did constitute reasonable administrative action within the meaning of s 5A of the Compensation Act. Thus, unless Ms Banerji could establish that ss 10(1)(a) and 13(11) of the Public Service Act ("the impugned provisions"), read with s 15(1) of that Act, imposed an unjustified burden on freedom of political communication, she had no right to compensation under the Compensation Act. implied the The impugned provisions, read in the context of the Public Service Act as a whole, require members of the APS, on pain of sanction, to behave at all times in a way that upholds the values of political neutrality, impartiality and professionalism, while being openly accountable the government, the Parliament and the Australian public within the framework of ministerial responsibility144. The requirement to uphold the apolitical nature, integrity and good reputation of the APS not only is consistent with, but is a defining characteristic of, the constitutionally prescribed system of representative and, in particular, responsible government. Such values directly promote the internal character and functioning of the APS and public confidence in its capacity to serve the government of the day. They do not impose an unjustified burden on the implied freedom of political communication. 141 Now the Department of Home Affairs. 142 Compensation Act, s 5A(1) read with s 14(1). 143 Defined in Public Service Act 1999 (Cth), s 10; see in particular s 10(1)(a). 144 See Public Service Act, s 10(1)(a), (e). The facts are set out in the reasons of Kiefel CJ, Bell, Keane and Nettle JJ. Public Service Act the Governor-General By the Constitution, the appointment and removal of civil servants is vested in Council until Parliament otherwise provides145. And Parliament has otherwise provided by the enactment of the Commonwealth Public Service Act 1902 (Cth), the Commonwealth Public Service Act 1922 (Cth) and, then, the Public Service Act 1999. This matter is concerned with the last of these Acts − the Public Service Act 1999146 − by its full title, "[a]n Act to provide for the establishment and management of the Australian Public Service, and for other purposes". The "main objects" of the Public Service Act are147: to establish an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public; and to provide a legal framework for the effective and fair employment, management and leadership of APS employees; and to define the powers, functions and responsibilities of Agency Heads, the Public Service Commissioner and the Merit Protection Commissioner; and to establish rights and obligations of APS employees." Of particular significance to the resolution of this appeal is the interaction between certain of these stated objects: namely, establishing an apolitical public service that is efficient and effective in serving the government, the Parliament and the Australian public and, at the same time, providing a legal framework for the effective and fair employment, management and leadership of APS employees as well as establishing rights and obligations of APS employees. The objects of the Public Service Act find further reflection in a set of provisions described as the "APS Values" for the APS. APS employees are 145 Constitution, s 67. 146 Version compiled on 21 March 2012. 147 Public Service Act, s 3. required to uphold those values148. The APS Values, set out in s 10(1), include that: the APS is apolitical, performing its functions in an impartial and professional manner; the APS has the highest ethical standards; the APS is openly accountable for its actions, within the framework of Ministerial responsibility to the Government, the Parliament and the Australian public; the APS is responsive to the Government in providing frank, honest, comprehensive, accurate and implementing the Government's policies and programs; timely advice and the APS delivers services fairly, effectively, impartially and courteously to the Australian public …" (emphasis added) The Public Service Commissioner appointed under the Public Service Act149 ("the Commissioner") must issue directions in writing in relation to each of the APS Values for the purpose of, relevantly, ensuring that the APS incorporates and upholds the APS Values150. The directions may qualify the scope or application of the APS Values151. Thus, the APS Values have effect subject to any restrictions in the directions issued by the Commissioner152. At the relevant time, in accordance with s 11(1) of the Public Service Act, the Commissioner had issued binding directions about the impugned provisions with the stated purposes of, among other things, ensuring that APS employees understood their responsibilities in relation to the APS Values as well as setting out the minimum requirements that APS employees were to meet in upholding them153. Such directions are binding on APS employees; APS employees are 148 Public Service Act, s 13(11). 149 Public Service Act, s 40(1). 150 Public Service Act, s 11(1)(a). 151 See Public Service Act, s 11(1)(b). 152 Public Service Act, s 11(2). 153 Public Service Commissioner's Directions 1999, cl 2.1. required not only to inform themselves of the directions154, but to comply with all of the directions155. In relation to upholding the APS Value in s 10(1)(a), the Public Service Commissioner's Directions 1999 relevantly provided that156: "an APS employee must, taking into account the employee's duties and responsibilities in the Agency, help to ensure that: (a) management and staffing decisions in the Agency are made on a the political party system, independent from that basis political bias and political influence; and the same high standard of policy advice and implementation, and the same high quality professional support, is provided to the elected Government, irrespective of which political party is in power and irrespective of the employee's political beliefs." As just observed, APS employees are required to uphold the APS Values. That obligation is imposed by the "APS Code of Conduct" which is set out in s 13 of the Public Service Act and, specifically, by s 13(11), which provides that: "An APS employee must at all times behave in a way that upholds the APS Values and the integrity and good reputation of the APS." (emphasis added) Other obligations under the APS Code of Conduct are imposed on an APS employee "in the course of APS employment", including that: "(1) An APS employee must behave honestly and with integrity in the course of APS employment. (2) An APS employee must act with care and diligence in the course of APS employment. (3) An APS employee, when acting in the course of APS employment, must treat everyone with respect and courtesy, and without harassment. 154 Public Service Regulations 1999 (Cth), reg 3.16. 155 Public Service Act, s 42(2) read with s 7 definition of "Commissioner's Directions". 156 Public Service Commissioner's Directions 1999, cl 2.2(2). (4) An APS employee, when acting in the course of APS employment, laws." applicable Australian comply with all must (emphasis added) As is evident, the extent to which an APS employee must comply with the APS Code of Conduct varies. An APS employee must at all times behave in a way that upholds the APS Values and the integrity and good reputation of the APS under s 13(11), whereas the obligations in s 13(1)-(4) apply "in the course of APS employment". To ensure APS employees comply with the APS Code of Conduct, APS employees may be sanctioned for breaches of that Code157. There is a range of sanctions, including termination of employment, reduction in classification, re-assignment of duties, reduction in salary and a reprimand158. Procedures for determining whether an APS employee has breached the APS Code of Conduct are required to be established159. Reasonable steps must be taken to ensure that every APS employee has ready access to the documents that set out those procedures160. And the procedures must comply with basic procedural requirements set out in the Commissioner's directions and must have due regard to procedural fairness161. If action is taken against an APS employee in relation to their employment (described as an "APS action"), the APS employee is entitled to seek review of that action162. However, where the sanction is termination of employment, the review procedure is not found in the Public Service Act163 but in the Fair Work Act 2009 (Cth). Under the Fair Work Act, the Fair Work Commission must assess whether the termination was "harsh, unjust or unreasonable"164. 157 Public Service Act, s 15. 158 Public Service Act, s 15(1). 159 Public Service Act, s 15(3), (4). 160 Public Service Act, s 15(5). 161 Public Service Act, s 15(3)(a), (b). 162 Public Service Act, s 33(1) read with s 33(7) definition of "APS action". 163 Public Service Act, s 33(1). 164 Fair Work Act, ss 385(b) and 387. Guidelines Guidelines, in the form of non-binding rules or standards165 to guide the conduct or actions of public servants, including on participation in public debate, were published by the Public Service Board or Commission in 1979, 1987, 1995 and 2003166. From 2008, the Australian Public Service Commission published specific guidance with respect to online media participation167. Each Guideline stated that either it did not have the force of law or it was a set of principles or guidance168. However, the Guidelines are instructive in demonstrating that, 165 See Norbis v Norbis (1986) 161 CLR 513 at 520; [1986] HCA 17. 166 Public Service Board, Guidelines on Official Conduct of Commonwealth Public Servants, Personnel Management Series No 1 (1979) ("1979 Guidelines"); Public Service Board, Guidelines on Official Conduct of Commonwealth Public Servants, Personnel Management Manual Series ISSN 0810-4794 (1987) ("1987 Guidelines"); Public Service Commission, Guidelines on Official Conduct of Commonwealth Public Servants (1995) ("1995 Guidelines"); Australian Public Service Commission, APS Values and Code of Conduct in Practice: A Guide to Official Conduct for APS Employees and Agency Heads (2003) at 7. available December 167 Australian Public Service Commission, Circular 2008/8 − Interim protocols for participation, online media <https://www.apsc.gov.au/circular-20088-interim-protocols-online-media- participation> ("Circular 2008/8"); Australian Public Service Commission, Circular 2009/6: Protocols for online media participation (social media), 18 November 2009, available at <https://www.apsc.gov.au/circular-20096-protocols-online- media-participation-social-media> ("Circular 2009/6"); Australian Public Service Commission, Circular 2012/1: Revisions to the Commission's guidance on making public comment and participating online (social media), January 2012, available at <https://www.apsc.gov.au/circular-20121-revisions-commissions-guidance- making-public-comment-and-participating-online-social> Australian Public Service Commission, Making Public Comment on Social Media: A Guide for APS Employees (2017). See also Australian Public Service Commission, Values and Code of Conduct in Practice (2017) at 53-55 ("Circular 168 1979 Guidelines at v; 1987 Guidelines at 14 [6.1]; 1995 Guidelines at iii; Australian Public Service Commission, APS Values and Code of Conduct in Practice: A Guide to Official Conduct for APS Employees and Agency Heads (2003) at 7; Circular 2008/8 at [3]; Circular 2009/6 at [4]; Circular 2012/1 referring to "general principles"; Australian Public Service Commission, Making Public Comment on Social Media: A Guide for APS Employees (2017) at 2; Australian Public Service Commission, Values and Code of Conduct in Practice (2017) at 4, cf at 10 [1.4.2]. for decades, the regulation of public comment by public servants has been undertaken for the purpose of maintaining an apolitical and impartial public service. The Guidelines on Official Conduct of Commonwealth Public Servants published in 1979 ("the 1979 Guidelines") described the "starting point" for establishing guidelines on public comment by public servants as "the need to preserve the neutrality of the public service"169 (emphasis added). It was in that context that the 1979 Guidelines later said170: "5.1 The political framework in Australia assumes the existence and continued maintenance of a non-partisan Public Service capable of serving a government of any political colour with impartiality and loyalty. In this context, there has been some uncertainty in the past as to the legitimate scope of political activity by public servants. Typical situations in which the question has arisen have involved public in elections, the wearing of badges and other items of political propaganda, the use of government property to display political material, and the entering into public debate on party political issues. servants campaigning for candidates It is recognised that public servants should not be precluded from participating, as citizens in a democratic society, in the political life of the community. Indeed it would be inappropriate to deprive the political process of the talent, expertise and experience of certain individuals simply because they are employed in the public sector. 5.4 At the same time, it is necessary to safeguard the political neutrality of the Public Service. Public servants have the same political rights as other citizens but the special character of the Public Service imposes particular obligations on public servants to avoid becoming personally associated with particular political stances. In particular, public servants should not use official positions to propagate political views, and their conduct should not impair the non-partisan nature and reputation of the Service. This is particularly applicable when the performance of their duties brings them into contact with members of the public or other individuals or organisations outside government employment. 169 1979 Guidelines at 34 [4.26]. 170 1979 Guidelines at 47-50. ... [S]taff should avoid becoming involved in public controversy where this could prejudice the identity of a politically impartial career public service. 5.21 As in other situations, the 'improper conduct' provision of section 55 of the Public Service Act could be used in serious cases. However, it could be expected that counselling, rather than disciplinary action, would normally suffice." (emphasis added) The updated Guidelines on Official Conduct of Commonwealth Public Servants published in 1987 ("the 1987 Guidelines") referred to the "right of public servants as members of the community to make public comment and enter into public debate on [political] issues"; however, the type of public comment envisaged was "[r]easoned public discussion on the factual technical background to policies and administration" which could "lead to better public understanding of the processes and objectives of government"171. The 1987 Guidelines acknowledged that, "because of the nature of public service employment and the relationship between the public service and the elected Government, there [were] inappropriate"172 some circumstances (emphasis added). in which public comment [was] Ultimately, the Public Service Board's views on "the propriety of public comment derive[d] from ... the need to preserve a public service based on professionalism and integrity capable of efficiently serving the government of the day and the need to maintain public confidence that this [was] the case"; and it stated that public servants "should refrain from those sorts of public comments which [were] in conflict with those duties"173. The updated Guidelines on Official Conduct of Commonwealth Public Servants published in 1995 ("the 1995 Guidelines") were in similar terms to the 1987 Guidelines and acknowledged that, "because of the nature of public service employment and the working relationship with the elected government", inappropriate public comment would include a comment that was "so harsh or extreme in its criticism of the government or its policies that it indicate[d] that 171 1987 Guidelines at 14 [6.2]. 172 1987 Guidelines at 14 [6.3]. 173 1987 Guidelines at 15 [6.5]. the public servant concerned [was] incapable of professionally, efficiently or impartially performing his or her official duties"174 (emphasis added). In 2003, the Australian Public Service Commission published APS Values and Code of Conduct in Practice: A Guide to Official Conduct for APS Employees and Agency Heads. This Guide stated that175: principles apoliticism, impartiality, the APS and "[t]he professionalism, responsiveness and accountability are at the heart of strong, productive the elected government … relationships between APS employees, Ministers and Parliamentarians operate under the law within a democratic political system is ultimate accountability of governments to the Australian people through the Ministers and governments as the elected electoral process … representatives of the Australian people determine and define the public interest. Public servants advise and implement − assisting governments to deliver their policy agenda and priorities." in which there Its guidance on making public comment was in similar terms to the 1995 Guidance published by the Australian Public Service Commission from 2008 reinforced and applied the same principles to participation in online media177. Initially, the Commission's interim position was that "it would be harder to make a case for a breach of [the APS Code of Conduct]" for anonymous participation in online communication forums or if the APS employee used a nom de plume178. However, the Commission maintained that the issue "would need to be considered on a case by case basis" and that, ultimately, APS employees were required to avoid comment that might 174 1995 Guidelines at 34-35. 175 Australian Public Service Commission, APS Values and Code of Conduct in Practice: A Guide to Official Conduct for APS Employees and Agency Heads 176 See Australian Public Service Commission, APS Values and Code of Conduct in Practice: A Guide to Official Conduct for APS Employees and Agency Heads 177 See Circular 2008/8; Circular 2009/6; Circular 2012/1; Australian Public Service Commission, Making Public Comment on Social Media: A Guide for APS Employees (2017). 178 Circular 2008/8, "Private use of online media". "compromise[] perceptions of the employee's ability to do his/her job in an unbiased or professional manner"179. In 2009, the Commission replaced this interim guidance with an updated guidance that set out "ground rules" for online media participation, which impartial and professional"180. included being "apolitical, A further updated guidance applied to Ms Banerji from January 2012181, including at the time of the internal investigation into her conduct. It clarified that "APS employees must still uphold the APS Values and Code of Conduct even when material is posted anonymously" and that "[a]s a rule of thumb, irrespective of the forum, anyone who posts material online should make an assumption that at some point their identity and the nature of their employment will be revealed"182. Even in an unofficial capacity, it was not appropriate to "make comment that is, or could be perceived to be … compromising the APS employee's capacity to fulfil their duties in an unbiased manner"; "so harsh or extreme in its criticism of the Government … that it raises questions about the APS employee's capacity to work professionally, efficiently or impartially"; or "compromising public confidence in the agency or the APS"183. Implied freedom of political communication It is against that background that the contention that the impugned provisions, read with s 15(1) of the Public Service Act, imposed an unjustified burden on the implied freedom of political communication is to be assessed. The implied freedom of political communication is a limit on legislative and executive power184. 179 Circular 2008/8, "Private use of online media". 180 Circular 2009/6, "Attachment A". 181 Circular 2012/1. 182 Circular 2012/1, "Commenting online in an unofficial capacity". 183 Circular 2012/1, "Making public comment in an unofficial capacity − general principles". 184 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 560, 567; [1997] HCA 25; Hogan v Hinch (2011) 243 CLR 506 at 554 [92]; [2011] HCA 4; Unions NSW v New South Wales (2013) 252 CLR 530 at 554 [36]; [2013] HCA 58; Tajjour v New South Wales (2014) 254 CLR 508 at 558 [59], 577 [140]; [2014] HCA 35; Brown v Tasmania (2017) 261 CLR 328 at 359 [88], 407 [258], 430 [313]; [2017] HCA 43. Burden It is necessary to begin consideration of the argument that the implied freedom is infringed by the impugned provisions by understanding what is said to be beyond power. In the case of legislation, it is necessary to begin with the proper construction and application of the impugned provisions to identify, and understand, what is said to be the nature and extent of the asserted burden185. Here, the appellant and the Attorney-General of the Commonwealth correctly accepted that s 13(11), read with s 10(1)(a), of the Public Service Act effectively burdens the implied freedom of political communication because together they restrict the capacity of APS employees to engage in political communication186. It is, however, necessary to identify the legal and practical operation and effect of those provisions within the framework of the relevant statutory scheme. First, the impugned provisions cannot be read in isolation. In understanding the legal and practical operation of the provisions, the content and process of the statutory scheme, including s 15 of the Public Service Act, must be considered. In particular, ss 13(11) and 10(1)(a) are not self-executing. They are only given legal "teeth" through determination of breach. Second, the impugned provisions are directed to a specific group of people, "APS employees". The provisions are targeted. They do not apply to the public at large. Third, the impugned provisions do not, in their terms, directly target political communication. The provisions are directed at the conduct of APS employees "at all times", not just in the course of employment, but not all conduct. A "nexus" is required: the conduct must fail to uphold the APS Values and, further or alternatively, the integrity and good reputation of the APS. Whether the specific conduct is caught will necessarily require an evaluative judgment the APS employee, when, where and how any public comment is made, and the language and tone of the comment. Specifically, not all public comment by a public servant will be found to be in breach of the statutory scheme – only those comments that fail to uphold the APS Values or the integrity and good reputation of the APS and, thus, fail to uphold an essential part of what is necessary for responsible that will depend on the seniority of 185 Brown (2017) 261 CLR 328 at 433-434 [325]-[326], citing Coleman v Power (2004) 220 CLR 1 at 21 [3], 68 [158]; [2004] HCA 39 and Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 553 [11]; [2008] HCA 4. 186 See Unions NSW (2013) 252 CLR 530 at 555 [40]. government. It will be necessary to return to address the role of the APS in the constitutionally prescribed system of responsible government. Fourth, the content of the burden is transparent. The scheme of the Public Service Act imposes distinct procedures for determination of breach187, which include merits review as well as independent assessment of the appropriateness of the sanction. Legitimate end or purpose The task of deciding whether the impugned provisions are appropriate and adapted to a legitimate end or purpose requires identification of that end or purpose. Here, as will be seen, the purpose of the impugned provisions (and of the action taken against Ms Banerji) was to maintain an apolitical public service of integrity and good reputation. Identification of the purpose of the impugned provisions requires an examination of the text of the Public Service Act, construed as a whole, in the context of the historical and constitutional importance of that purpose. It is necessary, therefore, to say something further about the objective of establishing an apolitical public service that is efficient and effective in serving the government, the Parliament and the Australian public, a main object of the Public Service Act, found in s 3(a) of that Act. That object is given further and specific content in the APS Values set out in s 10(1) of the Public Service Act. Section 10(1)(a) provides that "the APS is apolitical, performing its functions in an impartial and professional manner" and, as noted, cl 2.2 of the Public Service Commissioner's Directions 1999 requires that the same high standard of policy advice and implementation be provided to the elected government irrespective of which political party is in power and irrespective of the public servant's political beliefs188. Section 10(1)(e) provides that "the APS is openly accountable for its actions, within the framework of Ministerial responsibility to the Government, the Parliament and the Australian public". It explains that the object in s 3(a) of being "an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public" is secured, at least in part, by the APS being openly accountable for its actions within the framework of ministerial responsibility. 187 See [124]-[125] above. 188 Public Service Commissioner's Directions 1999, cl 2.2(2)(b). Securing accountability of government activity is the very essence of "responsible government" − the system of government by which the executive is responsible to the legislature. Responsible government is "the means by which Parliament brings the Executive to account" so that "the Executive's primary responsibility in its prosecution of government is owed to Parliament"189. The concept of responsible government has several aspects. One aspect is that "the ministry must command the support of the lower House of a bicameral legislature upon confidence motions"190. This establishes a mechanism by which the executive government is responsible to Parliament. Specifically, at the Commonwealth level, the government requires the ongoing support of the House of Representatives. Another aspect of responsible government is that in general the Governor or Governor-General defers to, or acts upon, the advice of his or her Ministers and not otherwise191. Mason J described this aspect in FAI Insurances Ltd v Winneke as "a convention, compliance with which enables the doctrine of ministerial responsibility to come into play so that a Minister or Ministers become responsible to Parliament for the decision made by the Governor in Council, thereby contributing to the concept of responsible government"192. However, his Honour noted that the Governor or Governor-General might in particular instances question the advice, suggest modifications or ask the ministry to reconsider it193. Equally important to responsible government is the concept of ministerial responsibility. Ministerial responsibility means "the individual responsibility of Ministers to Parliament for the administration of their departments, and ... the collective responsibility of Cabinet to Parliament (and the public) for the whole conduct of administration"194. "through ministers that the whole of the administration − departments, statutory bodies and agencies of one kind and another − is responsible to the Parliament in different terms, Put 189 Egan v Willis (1998) 195 CLR 424 at 451 [42]; [1998] HCA 71, quoting Kinley, "Governmental Accountability the United Kingdom: A Conceptual Analysis of the Role of Non-Parliamentary Institutions and Devices" (1995) 18 University of New South Wales Law Journal 409 at 411. in Australia and 190 Egan (1998) 195 CLR 424 at 453 [45]. 191 FAI Insurances Ltd v Winneke (1982) 151 CLR 342 at 364-365; [1982] HCA 26. 192 (1982) 151 CLR 342 at 364. 193 FAI Insurances (1982) 151 CLR 342 at 365. 194 FAI Insurances (1982) 151 CLR 342 at 364. and thus, ultimately, to the people"195. Ministerial responsibility is achieved because Ministers sit in, and are answerable to, Parliament. As Gaudron, Gummow and Hayne JJ explained in Egan v Willis196: "Ministers may be members of either House of a bicameral legislature and liable to the scrutiny of that chamber in respect of the conduct of the executive branch of government. ... The circumstance that Ministers are not members of a chamber in which the fate of administration is determined [through confidence motions] does not have the consequence that [this] aspect of responsible government ... does not apply to them." And the principle of responsible government is an integral element of the Constitution. It is sourced, and finds reflection, in several provisions. In particular, s 64 of the Constitution – providing that Ministers, appointed by the Governor-General, must be senators or members of the House of Representatives if they serve longer than three months – makes plain that the intended system is one of responsible government197. Features of responsible government have also been discerned in ss 6, 49, 62 and 83198. The significance of responsible government text. implicit Responsible government has been described as part of the fabric on which the written words of the Constitution are superimposed199. It is among the "constitutional imperatives which are intended – albeit the intention is imperfectly effected – to make both the legislative and executive branches of the government of the Commonwealth ultimately answerable to the Australian people"200. is, moreover, constitutional the Within this system of responsible government, public servants work for Ministers, who are in turn responsible to Parliament. That work includes, implementing ministerial decisions – for example, advising upon and 195 Australia, Royal Commission on Australian Government Administration, Report (1976) at 59 [4.2.1]. 196 (1998) 195 CLR 424 at 453 [45]. 197 See McCloy v New South Wales (2015) 257 CLR 178 at 224 [106]; [2015] HCA 198 Lange (1997) 189 CLR 520 at 558-559. 199 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 135; [1992] HCA 45, quoting The Commonwealth v Kreglinger & Fernau Ltd and Bardsley (1926) 37 CLR 393 at 413; [1926] HCA 8. 200 Nationwide News Pty Ltd v Wills (1992) 177 CLR 1 at 47; [1992] HCA 46. government201. regardless of which parties Ministerial responsibility to Parliament necessarily entails "loyalty of civil servants to Ministers, and by the same token their anonymity and neutrality"202. formed party have times, must behave Thus, the object in s 3(a) of the Public Service Act involves being accountable to the government, the Parliament and the Australian public as understood by the constitutional concept of "responsible government". It is in that context that s 13(11) expressly connects the APS Values with the conduct of an APS employee. Section 13(11) specifically states that an APS employee, the APS Values. at all That requirement is not limited to the APS Value in s 10(1)(a); in its terms, the requirement extends to and includes the APS Value in s 10(1)(e), relevant to the further requirement in s 13(11) of requiring an APS employee to behave in a way that upholds the integrity and good reputation of the APS. That is, upholding both the internal character and functioning of the APS (relevant to upholding "integrity") and the public perception of the APS (relevant to upholding "reputation") is necessary for the proper functioning of responsible government. that upholds in a way The need for an apolitical APS is also specifically addressed in s 32 of the Public Service Act. An APS employee has a "[r]ight of return" to employment with the APS if they decide to contest an election and are unsuccessful; however, the APS employee must resign to contest the election and, once the person is re-employed, they again become subject to the APS Code of Conduct. Thus, the Public Service Act in its terms regulates the conduct of APS employees so as to enhance the effective functioning of the APS as an apolitical organisation of integrity and good reputation in furtherance of the structure of responsible government established by the Constitution. And, in doing so, the Public Service Act requires APS employees to behave in a way that upholds both the internal character and functioning of the APS and the public perception of the APS. 201 See [118]-[119] above. 202 Parker, "Official Neutrality and the Right of Public Comment: I. The Implications of the Bazeley Case" (1961) 20 Australian Journal of Public Administration 291 at That objective has a long, and important, history203. The way in which it has been implemented by the various iterations of the Public Service Act has varied204. But its importance cannot be overstated. The need for, and importance of, an apolitical public service is not limited to the internal character and functioning of the APS. It is essential to upholding the constitutionally prescribed system of representative and responsible government and, no less importantly, the public's perception of that system. It is a defining characteristic of the system of responsible (and representative) government for which the Constitution provides. Accordingly, maintenance of an apolitical public service is a legitimate end or purpose. Justification Thus, the impugned provisions and the associated executive action are directed wholly to maintenance of an apolitical public service, a defining characteristic of responsible government. The impugned provisions and the executive action taken in relation to Ms Banerji have no other purpose or effect. the constitutionally prescribed system of 203 See, eg, Northcote and Trevelyan, Report on the Organisation of the Permanent Civil Service (1854) at 3; Victoria, Civil Service of the Colony of Victoria: Report of the Board Appointed to Enquire into the Arrangements for the Better Organization of the Civil Service of the Colony (1856) at 4-5, 13; Civil Service Regulations 1861 (SA), regs 1 and 2 (South Australian Government Gazette, 5 December 1861 at 1024); Civil Service Act 1862 (Vic), ss 28 and 29; Earl Grey, Parliamentary Government Considered with Reference to Reform, new ed (1864) at 235, 329-332; Regulations for the Civil Service of Victoria 1866 (Vic), regs 21, 23, 32 (Victoria Government Gazette, No 2, 8 January 1867 at 38-39); General Regulations for the Conduct of Officers of the Civil Service 1874 (SA), regs 17, 18, 28 (South Australian Government Gazette, No 35, 27 August 1874 at 1712-1714); Australia, House of Representatives, Parliamentary Debates (Hansard), 13 June 1901 at 1080, 1093, 1112; Commonwealth Public Service Act 1902, ss 46(1) and 79(1)(a); Regulations made under the Provisions of the Commonwealth Public Service Act 1902 (Cth), reg 41 (Commonwealth of Australia Gazette, No 60, 23 December 1902 at 630); McLachlan, First Annual Report on the Public Service by the Public Service Commissioner (1904) at 65; Regulations under the Commonwealth Public Service Act 1902 (Cth), reg 41, inserted by SR 1909 No 50; Victoria, Final Report of the Royal Commission on the State Public Service (1917) at 6-10; Commonwealth Public Service Act 1922, ss 55(1)(e), 66, 91(1)(a); Commonwealth Public Service Regulations 1923 (Cth), regs 34 and 204 See, eg, [126]-[133] above. Moreover, the scope and application of the impugned provisions are both tailored and limited. The impugned provisions apply only to those who are members of the APS and only for so long as they are employed by the APS205. The impugned provisions do not directly target political communication. The provisions target only that conduct of APS employees that is capable of failing to uphold the APS Values and, further or alternatively, the integrity and good reputation of the APS. And APS employees do not act in a vacuum. APS employees are provided with binding directions206, and guidance207, in relation to the scope and application of the impugned provisions. And, as has been explained, impugned provisions are not self-executing208. The impugned provisions provide for both a just and appropriate sanction and transparency209 in that their application requires procedural fairness and is subject to review. the Given the closeness of the means to the legitimate end or purpose, those observations conclude the issue. Attempts to carve out some subset of "anonymous" political interventions or communications create an illusory category. It is illusory because it focuses on the instant at which the communication is made without regard to the fact that anonymity can and often eventually will be lost. And when it is lost, the damage done is that it is then seen that the member of the APS was not apolitical. That causes harm to the internal functioning of the APS and the public's perception of the APS as an apolitical, impartial and professional part of the executive government and, the constitutionally prescribed system of government. to a defining characteristic of thus, I have said elsewhere that consideration of the application of the implied freedom should be approached on a case-by-case basis and that, consistent with the common law method of adjudication, there can be no "one size fits all" approach210. This appeal illustrates why. Determination of the nature and extent 205 See [139]-[140] above. 206 See [117]-[118] above. 207 See [132]-[133] above. 208 See [138] above. 209 See [141] above. 210 See McCloy (2015) 257 CLR 178 at 280-282 [306]-[311], 287-289 [336]-[339]; Brown (2017) 261 CLR 328 at 477 [476]; Clubb v Edwards (2019) 93 ALJR 448 at 530 [391], 531 [399]; 366 ALR 1 at 101, 103; [2019] HCA 11. of the burden cannot be left to the end of the analysis. In this appeal, upon the proper construction and operation of the impugned provisions, and the executive action taken under the Public Service Act, the only purpose, operation or effect of the impugned provisions is to preserve a defining characteristic of responsible government. The connection between those provisions and that executive action and the maintenance of the constitutionally prescribed system of representative and responsible government is immediate and direct. Section 15(1) of the Public Service Act and the associated mechanisms for the application of the impugned provisions ensure that the impugned provisions have no operation beyond preservation of a defining characteristic of responsible government. No greater justification is required. Conclusion and orders For those reasons, I agree with the orders proposed by Kiefel CJ, Bell, Keane and Nettle JJ. Edelman Introduction imposing legislation In Clubb v Edwards211, this Court unanimously upheld the validity of Tasmanian restrictions upon political swingeing communication by persons seeking to protest in relation to pregnancy terminations. The "appeal" on a question of law212 from the Administrative Appeals Tribunal ("the Tribunal") in this case, removed into this Court from the Federal Court of Australia, involves restrictions upon political communication that have historically been even further reaching. Those restrictions are now embodied in sub-s (11) of the Australian Public Service ("APS") Code of Conduct ("the Code") contained in s 13 of the Public Service Act 1999 (Cth). Section 13(11) requires public servants in the APS to behave in a way that upholds "the APS Values"213, which include the APS being "apolitical"214. One of the possible sanctions provided in s 15(1) for breach of the Code by a public servant is termination of employment. That sanction was imposed on Ms Banerji on 13 September 2013215. But the Tribunal held that the act of termination was unlawful because freedom of political communication"216. it "trespassed on implied the For much of the century since Federation, any public expression of political opinion by a Commonwealth public servant could be grounds for termination of employment. However, the absolute ban on public political communication by public servants has been tempered. When considered in light of its history and context, the Code that now regulates their behaviour no longer 211 (2019) 93 ALJR 448; 366 ALR 1; [2019] HCA 11. 212 Administrative Appeals Tribunal Act 1975 (Cth), s 44. See Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 79- 80 [15]; [2001] HCA 49; Osland v Secretary to Department of Justice [No 2] (2010) 241 CLR 320 at 331-332 [18]; [2010] HCA 24. 213 See Public Service Act 1999 (Cth), s 10. 214 See, at the relevant time, Public Service Act, s 10(1)(a). See, now, s 10(5). 215 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(36)]. 216 Banerji and Comcare (Compensation) [2018] AATA 892 at [7]; see also at [120], Edelman turns public servants into lonely ghosts217. But, properly interpreted, it still casts a powerful chill over political communication. In the United States, where "citizens do not surrender their First Amendment rights by accepting public employment"218, legislative restrictions of the nature adopted historically in Australia would be struck down as unconstitutional in a heartbeat219. But, unlike the United States, in Australia the boundaries of freedom of speech are generally the province of parliament; the judiciary can constrain the choices of a parliament only at the outer margins for reasons of systemic protection. The freedom of political communication that is implied in the Commonwealth Constitution is highly constrained. It is not an individual freedom. It is an implied constraint that operates directly upon legislative power. It does so by restricting that power only so far as necessary for the effective functioning of the system of representative and responsible government manifested in the structure and text of the Constitution, particularly ss 7, 24, and 128, as well as ss 62 and 64. This requirement of necessity that constrains the implied freedom of political communication means that freedom of political communication is not a trump over other values that are sought to be implemented in legislation that gives effect to government policy. It is also necessary for the effective functioning of representative and responsible government for parliament to make, and the executive to implement, policy decisions that promote other values. The need to respect parliamentary policy is reflected in the proper application of the adequacy in the balance stage of structured proportionality testing, which requires great latitude in the assessment of whether the implied freedom has been contravened by laws that implement important parliamentary policy220. This case is an illustration of this point. Despite the deep and broad constraints on freedom of political communication imposed by s 13(11), in the context of the APS Values and with the sanctions in s 15(1) of the Public Service Act, the law is reasonably necessary and adequately balanced given the place of its legitimate policy purpose in Australia's constitutional tradition and the importance of that purpose to 217 See also de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing [1999] 1 AC 69 at 76, quoting Fraser v Public Service Staff Relations Board [1985] 2 SCR 455 at 466-467. 218 Lane v Franks (2014) 573 US 228 at 231. 219 See Pickering v Board of Education (1968) 391 US 563; Lane v Franks (2014) 573 220 Clubb v Edwards (2019) 93 ALJR 448 at 551-552 [495]-[498]; 366 ALR 1 at 130- Edelman responsible government. The legislation is valid in all of its applications. The appeal should be allowed and orders made as proposed in the joint judgment. The primary issue on this appeal: constitutional validity of ss 13(11) and 15 I gratefully adopt the facts relevant to this appeal as set out in the joint judgment. As the joint judgment explains, the Tribunal concluded that the decision to terminate Ms Banerji's employment pursuant to ss 13(11) and 15(1) of the Public Service Act was not "reasonable administrative action" within s 5A(1) of the Safety, Rehabilitation and Compensation Act 1988 (Cth). The only issue raised by the questions removed into this Court from the Federal Court, which was also the only issue raised before the Tribunal221, is the impact of the implied freedom of political communication upon ss 13(11) and 15 of the Public Service Act. The questions before this Court reduce to whether those provisions, as they were on 15 October 2012, are consistent with the implied freedom of political communication and, if not, then whether the exercise of discretion under those provisions must occur consistently with the implied freedom of political communication. The questions before this Court, like the issues before the Tribunal, are not concerned with whether ss 13(11) and 15, properly interpreted and applied, would lead to the conclusion that the decision to terminate Ms Banerji's employment was not "reasonable administrative action taken in a reasonable manner"222. Although Ms Banerji's primary submission in this Court effectively sought to agitate such a ground, by arguing that s 13(11) does not apply to anonymous communications, this Court, as the joint judgment explains, declined to entertain that submission. It is, however, essential to interpret s 13(11) in order to assess whether, together with the sanctions for its breach in s 15(1), it contravenes the implied freedom of political communication. The implied freedom of political communication does not operate in a vacuum. It operates upon the meaning of legislation. The first of Ms Banerji's alternative submissions was that if ss 13(11) and 15(1) apply to anonymous communications then they impose an unjustified burden on the implied freedom of political communication. In contrast, the primary submission of the Attorney-General of the Commonwealth (whose submissions were adopted by Comcare) was that ss 13(11) and 15(1) of the Public Service Act can apply to anonymous communications and that they are valid in all of their applications. 221 Banerji and Comcare (Compensation) [2018] AATA 892 at [3(38)]. 222 Safety, Rehabilitation and Compensation Act 1988 (Cth), s 5A. Edelman The meaning of s 13(11) and the APS Values For nearly three-quarters of a century, a rule was maintained in Australia prohibiting public servants from making public comment on political matters. A regulation made under the authority of the Commonwealth Public Service Act 1902 (Cth)223 provided that public servants "are expressly forbidden to publicly discuss or in any way promote political movements". In 1909, the prohibition was amended to prohibit public comment "upon the administration of any Department of the Commonwealth"224. In 1923, the prohibition was again included in part of the scheme, in regs 32 and 34 of the Commonwealth Public Service Regulations225. Regulation 32 provided for general duties of public service officers, including: devoting themselves exclusively and zealously to the discharge of public duties during the hours of official business; behaving at all times with courtesy to the public, giving prompt attention to all reasonable requirements; and obeying promptly all instructions given to them by officers under whose control or supervision they are placed. Regulation 34 then provided: "An officer shall not – publicly comment upon any administrative action or upon the administration of any Department; or use for any purpose, other than for the discharge of his official duties, information gained by or conveyed to him through his connexion with the Service." The prohibition upon public comment remained broadly in this form until 1974226. But the introduction of the modern behavioural duty of public servants 223 Regulations made under the provisions of the Commonwealth Public Service Act 1902 (Cth), reg 41 (Commonwealth of Australia Gazette, No 60, 23 December 224 See Provisional Regulation under the Commonwealth Public Service Act 1902 (Cth) Statutory Rule No 6 of 1909; Regulations under the Commonwealth Public Service Act 1902 (Cth) Statutory Rule No 50 of 1909. 225 Statutory Rule No 93 of 1923. 226 See Commonwealth Public Service Regulations (Cth) Statutory Rule No 18 of 1935, reg 34; Regulations made under the Commonwealth Public Service Act 1922-1947 (Cth) Statutory Rule No 146 of 1947; Regulations under the Public Service Act 1922-1973 (Cth) Statutory Rule No 15 of 1974, reg 3; Regulation under the Public Service Act 1922-1973 (Cth) Statutory Rule No 98 of 1974. Edelman broke from that historical prohibition. The modern expression of the duty owes much to the Royal Commission on Australian Government Administration, which, in 1976, recommended that "except as expressly provided by an Act or regulation ..., a government employee should be free to exercise the civil and political rights, liberties and privileges generally enjoyed by citizens"227. This recommendation was seen as necessary to discourage impediments being placed in the way of staff who, amongst other things, "wish to make some public comment"228. The Royal Commission also recommended the creation of specific statutory duties, including a duty that "a person employed shall not behave in his official capacity When discussing whether the duty should extend to "improper conduct" outside the performance of professional duties, the Royal Commission decided against such inclusion, saying that behaviour in a public servant's private life "is relevant only in so far as it bears generally or specifically upon the performance of official duties"230. Further, the Royal Commission considered that "matters such as degrees of political activity ... are best left to the discipline of social pressure by the relevant peer groups, including consideration by any collective departmental management arrangements"231. in a manner amounting In response to the recommendations of the Royal Commission and a report of a sub-committee of the Joint Council of the Australian Public Service232, a new reg 8A was introduced in 1987233. The Explanatory Statement to the 1987 legislation quoted from that report, which had described reg 32 as "antiquated", and said that the new reg 8A took into account the recommendation of the Royal Commission "so as to provide a modern and clearly expressed 227 Australia, Royal Commission on Australian Government Administration, Report (1976) at 233 [8.5.55], recommendation 197. 228 Australia, Royal Commission on Australian Government Administration, Report 229 Australia, Royal Commission on Australian Government Administration, Report (1976) at 235 [8.5.64(g)], recommendation 199. 230 Australia, Royal Commission on Australian Government Administration, Report 231 Australia, Royal Commission on Australian Government Administration, Report 232 Public Service Regulations (Amendment) Statutory Rule No 137 of 1987, Explanatory Statement at 1. 233 Public Service Regulations (Amendment) (Cth) Statutory Rule No 137 of 1987. Edelman statement of principles about the duties and conduct of officers"234. The Explanatory Statement said that reg 34 had "restricted officers from making public comment except in the discharge of their official duties", but that the sub-committee had recommended that the emphasis be changed from a restriction on public comment to the imposition of a duty on officers not to misuse official information gained in the course of employment235. Regulation 8A(i) provided for a new duty requiring that: "[a]n officer shall ... at all times behave in a manner that maintains or enhances the reputation of the Service". It was against this background that the Public Service Act was enacted a little more than a decade later. The Explanatory Memorandum to the Public Service Bill 1999 (Cth) explained that it was "intended to replace the current legislative framework for the establishment and management of the Australian Public Service"236. An element of the reform agenda was "modernising the APS legislative framework" by "a careful balance between devolved responsibility and improved accountability"237. The Code was included as part of the modernisation in the Public Service Act. It included, in s 13(11): "An APS employee must at all times behave in a way that upholds the APS Values and the integrity and good reputation of the APS." While s 13(11) was modelled on reg 8A(i), it was wider than its predecessor238 because APS employees, by their behaviour, were not merely required to uphold the reputation of the APS. APS employees were also required to uphold the APS Values and the integrity of the APS. In other words, rather than being only an outward facing test for behaviour that focused upon the reputation of the APS, the test was also inward facing with independent focus upon the APS Values and the integrity of the APS. However, the requirement to 234 Public Service Regulations (Amendment) Statutory Rule No 137 of 1987, Explanatory Statement at 1. 235 Public Service Regulations (Amendment) Statutory Rule No 137 of 1987, Explanatory Statement at 1. 236 Australia, House of Representatives, Public Service Bill 1999, Explanatory Memorandum at 1 [1]. 237 Australia, House of Representatives, Public Service Bill 1999, Explanatory Memorandum at 1 [2]. 238 Australia, House of Representatives, Public Service Bill 1999, Explanatory Memorandum at 25 [3.14.14]. Edelman "uphold" the APS Values was only a requirement not to act inconsistently with them. It contrasted with the obligation upon an Agency Head in s 12 of the Public Service Act to "uphold and promote" the APS Values (emphasis added). The APS Value that is directly relevant to this appeal was contained in s 10(1)(a), which provided, as at 15 October 2012, that "the APS is apolitical, performing its functions in an impartial and professional manner". Two points must immediately be made about the impact of this "value" upon the general behaviour obligation in s 13(11). First, although, like reg 8A(i), the behaviour obligation in s 13(11) was expressed to apply "at all times", the Explanatory Memorandum reiterated, consistently with the intention behind reg 8A, the "fundamental" point that "there should be no unnecessary concern with the private lives of staff members"239. It would be remarkable if, despite the remarks in the Explanatory Memorandum, and despite the intention to "modernise" the obligations of public servants by the statement of broad values, the sub-section had somehow reinstated the very principle of absolute prohibition that had been repealed in 1974 and that reg 8A(i) had rejected. Regulation 8A(i) had embraced the notion that, subject to express provision otherwise, a government employee should be free to exercise the civil and political rights, liberties and privileges generally enjoyed by citizens and should be able to make public comment. The Code did not generally depart from that notion. Secondly, by adding the additional inward facing focus on the APS Values to the outward facing focus on "reputation" in reg 8A, s 13(11) extended the indirect constraint upon the content of public communication by public servants. However, although inward facing, the APS Value in s 10(1)(a) did not require that an employee be absolutely "apolitical". Section 13(11) was concerned with behaviour, not thought, and designed to minimise intrusion into private life. Moreover, the APS Value in s 10(1)(a) was only one of the APS Values, or inputs, giving content to the behaviour required by s 13(11). The extent to which the behaviour of the public servant required by s 13(11) should avoid being "politicised" will be affected by the reason that the value exists and will be informed by the other APS Values. The reason for the existence of values of being apolitical, impartial, and professional is to enable a trusted relationship between, on the one hand, the public service and, on the other hand, Parliament, the executive government, which implements its statutes and policies, and the public, who are subject to the administration of those statutes. One of the main objects of the Public Service 239 Australia, House of Representatives, Public Service Bill 1999, Explanatory Memorandum at 26 [3.17.2]. Edelman Act is "to establish an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public"240. This basis for the requirements of being apolitical, impartial and professional is also illustrated by the other APS Values, which at the time included that: the APS is "openly accountable for its actions, within the framework of Ministerial responsibility to the Government, the Parliament and the Australian public"241; in implementing the Government's policies and programs, the APS provides the Government with "frank, honest, comprehensive, accurate and timely advice"242; the APS "delivers services fairly, effectively, impartially and courteously to the Australian public and is sensitive to the diversity of the Australian public"243; and the APS "is a career-based service to enhance the effectiveness and cohesion of Australia's democratic system of government"244. The degree to which the behaviour of a public servant should avoid being politicised will also be affected by other APS Values because s 13(11) requires consideration of all values relevant to the public servant's behaviour. The other APS Values include an emphasis on diversity, which is expressed in abstract terms that include recognising diversity of opinions: the APS "recognises and utilises the diversity of the Australian community it serves"245 and the APS "is sensitive to the diversity of the Australian public"246. The APS Values also include values that "the APS provides a fair ... workplace"247 and that the APS "has the highest ethical standards"248. The APS Values of fairness and ethics in the workplace are relevant to the s 13(11) behaviour obligation in relation to public comment by employees because the APS Commission and the Department of Immigration and Citizenship had themselves issued guidelines about such comment. It would, to say the least, strain the insistence upon the highest ethical 240 Public Service Act, s 3(a). 241 Public Service Act, s 10(1)(e). 242 Public Service Act, s 10(1)(f). 243 Public Service Act, s 10(1)(g). 244 Public Service Act, s 10(1)(n). 245 Public Service Act, s 10(1)(c). 246 Public Service Act, s 10(1)(g). 247 Public Service Act, s 10(1)(j). 248 Public Service Act, s 10(1)(d). Edelman standards and a fair workplace if a public servant were sanctioned despite complying with APS guidelines. As the Tribunal observed249, the departmental guidelines and an APS Commission Circular250 offered guidance to public servants concerning the use of social media. Both of them contained statements to the effect that public servants can make public comments in a private capacity and the further remark that251: "[i]t is quite acceptable for APS employees to take part in the political life of their communities. The APS Values stipulate that the APS is, among other things, 'apolitical, performing its functions in an impartial and professional manner', but this does not mean that APS employees must be apolitical in their private affairs. Rather, it means that employees should avoid behaving in a way that suggests they cannot act apolitically or impartially in their work." Given this history and context, s 13(11), when read with s 10(1)(a) and the other APS Values, does not impose behavioural obligations that preclude a public servant from making political comment on social media. Rather, they support an interpretation of s 13(11) that creates a boundary, albeit ill-defined, between acceptable expression of political opinions and unacceptable expression of political opinions. Taking into account that a public servant is intended to be able to take part in their political community, that boundary will only be crossed when comments sufficiently imperil the trust between, on the one hand, the APS and, on the other, Parliament, the executive government, or the public. An assessment of when that trust will be sufficiently imperilled will depend upon all the circumstances. Although all circumstances are relevant, there are six factors of particular significance to any assessment of whether the relevant trust is sufficiently imperilled: (i) the seniority of the public servant within the APS; (ii) whether the comment concerns matters for which the person has direct duties or responsibilities, and how the comment might impact upon those duties or responsibilities; (iii) the location of the content of the communication upon a spectrum that ranges from vitriolic criticism to objective and informative policy 249 Banerji and Comcare (Compensation) [2018] AATA 892 at [36], [37]. 250 Australian Public Service Commission, Circular 2012/1: Revisions to the Commission's guidance on making public comment and participating online (social media) (2012). 251 See Banerji and Comcare (Compensation) [2018] AATA 892 at [37]; see also at Edelman discussion; (iv) whether the public servant intended, or could reasonably have foreseen, that the communication would be disseminated broadly; (v) whether the the public servant communication would be associated with the APS; and (vi) if so, what the public servant expected, or could reasonably have expected, an ordinary member of the public to conclude about the effect of the comment upon the public servant's duties or responsibilities. intended, or could reasonably have foreseen, that In some cases, all six factors could point strongly towards a breach of s 13(11) by behaviour that imperils the trust protected by that sub-section, despite the communication being anonymous. An extreme example might be if a senior public servant makes an anonymous tweet to a large number of people where his identity is easily ascertainable and intended to be ascertained, and in the tweet he makes vituperative criticisms of government policy in his department and represents that he and others should aim to frustrate that government policy. This example is sufficient to reject Ms Banerji's submission that, on the proper interpretation of s 13(11), anonymous public communications can never lead to a contravention of s 13(11). However, I do not accept the Attorney-General of the Commonwealth's submission that a public servant's attempt at anonymity could only be relevant, if at all, to determining the appropriate sanction. A hypothetical example, adapted from oral submissions, involving an intended private communication can be used as an analogy to illustrate why intended anonymity is a relevant matter in determining breach of s 13(11). Suppose that a public servant, even an extremely senior public servant such as a Departmental Secretary, expressed vitriolic but cogent criticism of government policy implemented by her department. The criticism is expressed privately to her spouse after work. She might be aware of a reasonable possibility that her spouse might subsequently tweet that criticism. And there might also be a possibility that members of the public would associate the criticism with the Departmental Secretary. But despite these possibilities, it is hardly conceivable that the private communication could have sufficient impact upon the APS Values to amount to a contravention of s 13(11). It is highly unlikely that unintended public repetition of the private comment, even if public repetition were known to be a reasonable possibility, could have a major impact upon any aspects of the trust that underlies the value in s 10(1)(a) concerning the apolitical, impartial and professional nature of the APS. The intended anonymity of a public communication on social media can militate against the impairment of trust in the same way as the intended private nature of the communication, at least where anonymity is intended to avoid attribution to the APS and where the statement does not otherwise impair accountability. In other words, just as it is relevant that political comment that is later publicly attributed to a public servant was made privately, so too it can be relevant that political comment made in a more public forum was made anonymously so as not to be associated with the public service. To reiterate Edelman though, anonymity is only one factor to be considered in the context of the APS Value in s 10(1)(a). The substance of the comment might be such as to imperil the relationships of trust even if there is only a remote possibility of it being generally attributed to the public servant or the public service. A comment might also require assessment of other APS Values such as the sensitivity of the APS "to the diversity of the Australian public"252. This analysis has concerned the interpretation of s 13(11) in light of the APS Values in s 10(1). However, as explained earlier, no issue arises on this appeal, and it is unnecessary to consider, whether the application of this interpretation to Ms Banerji's anonymous communications could support a conclusion that the decision to terminate her employment was not reasonable administrative action. It suffices to say that such an issue would require a close examination of all of the facts and circumstances. By itself, the fact that Ms Banerji sent more than 9,000 tweets253 is neutral. It would be necessary to examine closely the content and all the circumstances of those tweets that were said to involve behaviour in breach of s 13(11)254, singularly or in combination. The primary issue on this appeal is instead whether s 13(11), read with the APS Values including s 10(1)(a), and with s 15, is consistent with the implied freedom of political communication. Are ss 13(11) and 15 consistent with the implied freedom of political communication? Having performed the interpretation exercise, which is a pre-requisite to consideration of constitutional validity255, it is possible to turn to an analysis of whether ss 13(11) and 15 are consistent with the implied freedom of political structured communication. proportionality in the manner broadly taken by a majority of this Court in McCloy v New South Wales256, Brown v Tasmania257, Unions NSW v New South requires consideration of That analysis 252 Public Service Act, s 10(1)(g). 253 Banerji and Comcare (Compensation) [2018] AATA 892 at [26]. 254 Some of which were set out by the Tribunal: Banerji and Comcare (Compensation) [2018] AATA 892 at [9]. 255 See the authorities referred to in Brown v Tasmania (2017) 261 CLR 328 at 479- 480 [485]; [2017] HCA 43. See also Clubb v Edwards (2019) 93 ALJR 448 at 534 [411]; 366 ALR 1 at 106. 256 (2015) 257 CLR 178 at 194-195 [2]-[3]; [2015] HCA 34. 257 (2017) 261 CLR 328 at 368-369 [123]-[127], 416-417 [278]. Edelman Wales258, and Clubb v Edwards259. Structured proportionality testing promotes transparent reasoning in the application of an abstract constitutional implication. It requires the court to confront directly the suitability, reasonable necessity, and adequacy in the balance of laws that impose a burden upon political communication. A question that is anterior to the structured proportionality assessment is whether the purpose of ss 13(11) and 15 is legitimate260. The Public Service Act is a law in respect of the appointment and removal of all other officers of the executive government and the execution of that power261. The general objects of the Public Service Act, set out in s 3, include "to establish an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public"262. The behavioural obligation in s 13(11), as affected by the APS Values, including s 10(1)(a), and as enforced through s 15(1), has that purpose. Ms Banerji correctly accepted that this is a legitimate purpose. As the Privy Council said in de Freitas v Permanent Secretary of Ministry of Agriculture, Fisheries, Lands and Housing263: "The preservation of the impartiality and neutrality of civil servants has long been recognised in democratic societies as of importance in the preservation of public confidence in the conduct of public affairs ... Along with these elements of neutrality and impartiality [of the public service] their Lordships would associate an element of loyalty, in particular to the minister whom the civil servant has been appointed to serve. The importance of these characteristics lies in the necessity of preserving public confidence in the conduct of public affairs. That is at least one justification for some restraint on the freedom of civil servants to 258 (2019) 93 ALJR 166 at 177 [42], 190 [110]; 363 ALR 1 at 13-14, 31; [2019] HCA 259 (2019) 93 ALJR 448 at 462 [5]-[6], 506-507 [266], 544 [462]-[463]; 366 ALR 1 at 260 See Unions NSW v New South Wales (2019) 93 ALJR 166 at 200 [166]; 363 ALR 1 261 Constitution, s 51(xxxvi) with ss 67 and 51(xxxix). 262 Public Service Act, s 3(a). 263 [1999] 1 AC 69 at 75-76. Edelman participate in political matters and is properly to be regarded as an important element in the proper performance of their functions." Contrary to Ms Banerji's submissions, ss 13(11) and 15 do not have the purpose, to use the words of Ms Banerji, of "cleansing APS employees of political opinions" or preventing them from expressing opinions "in ways that do not have a bearing upon the APS as an institution". As Ms Banerji submitted, those purposes would be illegitimate. They would involve a purpose, not merely a consequence or effect of pursuing some other aim, of silencing political communication264. (1) Suitability or rational connection of ss 13(11) and 15 Ms Banerji submitted that ss 13(11) and 15 lacked a rational connection to the legislative purpose of establishing an apolitical public service for a single reason. The reason was that anonymous comment has no connection with a person's status as an APS employee. Ms Banerji submitted that "[s]ingling out APS employees in the conduct of their private lives in this way lacks a rational explanation". One difficulty with this submission is that its focus is not upon rational connection. If the operation of a law purports to further its legitimate purpose by means that are more extreme than would rationally be expected, then this does not break the rational connection between the means adopted by the law and its purpose, although it might support a submission at the next stage that the burden imposed by the law was not reasonably necessary. In any event, a further obstacle to the submission is that, as explained earlier, the proper interpretation of s 13(11) treats the anonymity of a public communication as a relevant factor to consider in the assessment of a public servant's behaviour for compliance with s 13(11). (2) Reasonable necessity of the burden is whether The next question there were alternative, reasonably practicable, means that would achieve the same object to the same extent but with a less restrictive effect on freedom of political communication. This requires consideration of whether another law presented an alternative that could reasonably have been expected, in an "obvious and compelling"265 sense, to 264 See Unions NSW v New South Wales (2019) 93 ALJR 166 at 201-203 [173]-[178]; 363 ALR 1 at 46-48. 265 McCloy v New South Wales (2015) 257 CLR 178 at 195 [2], 211 [58], 217 [81], 270 [258]; Brown v Tasmania (2017) 261 CLR 328 at 372 [139], 418 [282]; Clubb v Edwards (2019) 93 ALJR 448 at 462 [6], 507 [266]-[268], 510 [277], 548 [478]; 366 ALR 1 at 10, 70-71, 74, 126. Edelman have (i) imposed a significantly lesser burden upon freedom of political communication, and (ii) achieved Parliament's purpose to the same or a similar extent266. The extent of the burden upon freedom of political communication can be assessed by reference to the "depth" and "width" of the burden267. The burden imposed by ss 13(11) and 15 is deep. Of its very nature, s 13(11) requires consideration of the APS Value of being apolitical and thus targets political communications. The burden is made deeper by the fact that the comments it targets are from the particular class of persons who are "uniquely qualified to comment"268. The nature and extent of the punishment or sanction for a breach is also relevant to the depth of the burden269. Here, the most serious consequence of a breach of s 13(11) is termination of employment under s 15(1). That sanction is civil, not criminal. And the scheme of s 15(1) is that it should only be imposed for behaviour that involves the most serious breaches of s 13(11). But that should not downplay the depth of the burden imposed by the potential sanction. A person's employment can be fundamental to him or her. The person's entire life might be built around it. The consequences of a loss of employment, particularly as a disciplinary penalty, could be catastrophic. The burden imposed by ss 13(11) and 15 is also wide. The provisions burden political communication in the workplace as well as outside the workplace. They apply "at all times" and not merely in the course of APS employment. They affect thousands of people; in oral submissions reference was made to evidence that there are nearly a quarter of a million public servants in the APS. The provisions restrict public communications more than private communications, but the impact upon public communications is potentially very broad. The width is extended by the evaluative nature of the discretion as to (i) findings of breach of s 13(11) and (ii) the penalty to be imposed by the Agency Head as a consequence of the breach. The uncertainty arising from the evaluative nature of those discretions is not the result of vagueness in the meaning of s 13(11) or s 15. Such lack of clarity can be, and must be, resolved by judicial exegesis270. Instead, the uncertainty lies in the application of ss 13(11) and 15, as properly interpreted. That application leaves a wide discretion to the Agency Head. 266 Clubb v Edwards (2019) 93 ALJR 448 at 548 [479]; 366 ALR 1 at 126. 267 Clubb v Edwards (2019) 93 ALJR 448 at 548 [480]; 366 ALR 1 at 126. 268 San Diego v Roe (2004) 543 US 77 at 80. 269 Clubb v Edwards (2019) 93 ALJR 448 at 548 [480]; 366 ALR 1 at 126. 270 Brown v Tasmania (2017) 261 CLR 328 at 471 [452]-[453], 486-488 [506]-[508]; compare at 357 [78]. Edelman Although the burden is deep and wide, it is shallower and narrower than the burden that existed for the better part of a century, being the outright prohibition upon public political comment by public servants. For instance, the second factor in the evaluative consideration discussed above – whether the comment concerns matters for which the person has direct duties or responsibilities and how the comment might impact upon those duties or responsibilities – illustrates that there could be many matters upon which even senior public servants can express political opinions in public. As the Attorney-General for the State of Western Australia submitted, a health department official might make public comment about the defence department that would not contravene s 13(11) although it might have been a breach if it were a comment about the health department. The breadth of a law's constraint upon freedom of political communication, particularly by a broad evaluative discretion, can be mitigated by mechanisms that permit review of any sanction271. It is mitigated in this case by various review mechanisms available to an employee who has been sanctioned under s 15(1) of the Public Service Act. Section 15(3) requires an Agency Head to establish procedures for determining whether an APS employee has committed any breach of the Code in s 13. Those procedures must have due regard for procedural fairness272 and they may be different for different categories of APS employees273. For sanctions other than termination, an employee has a right of internal merits review under s 33 of the Public Service Act274. A termination of employment can be reviewed by the Fair Work Commission under the Fair Work Act 2009 (Cth)275. If the dismissal meets various conditions, including that it was "harsh, unjust or unreasonable"276, then reinstatement or compensation can be ordered for that unfair dismissal277. Termination could be unjust if the Fair Work Commission determined that the employee had not contravened s 13(11); it could be unreasonable if inferences were drawn by the Agency Head that could not reasonably have been drawn from the material before that person in any review or hearing; and it may be harsh if its personal and economic consequences 271 See Wotton v Queensland (2012) 246 CLR 1 at 16 [32]; [2012] HCA 2. 272 Public Service Act, s 15(3)(b). 273 Public Service Act, s 15(3)(c). 274 See also Public Service Regulations 1999 (Cth), Div 5.3. 275 See Public Service Act, s 8(1); Fair Work Act 2009 (Cth), s 394. 276 Fair Work Act, s 385(b); see also s 387. 277 Fair Work Act, s 390(1). Edelman are disproportionate to the gravity of the misconduct upon which the Agency Head acted278. Despite the depth and breadth of the burden on political communication imposed by ss 13(11) and 15, Ms Banerji pointed only to one alternative law by which she submitted the Commonwealth Parliament might have expected to achieve its legitimate purpose to the same extent but with a lesser effect on the implied freedom of political communication. That law was said to be one that excluded anonymous communication from s 13(11). Ms Banerji thus submitted that the law would be more tailored if it restricted only public communication that identified the speaker as a public servant. The terms in which such a hypothetical law might be expressed are unclear. This is an early indication that the law is not an obvious and compelling alternative that would impose a significantly lesser burden upon the freedom of political communication. When would a communication be sufficiently widespread to be "public"? When would a communication be anonymous? How many identifying features, short of a name or signature, would disqualify a communication from being anonymous? Would anonymous communications be carved out only from the APS Value in s 10(1)(a) or from other values as well? that More significantly, it is not obvious that a law which excludes anonymous communication, however law might be expressed, would achieve Parliament's purpose to the same extent as, or a similar extent to, s 13(11). Rather, the natural expectation would be that an exception for anonymous communications, however defined, could substantially undermine Parliament's purpose of an apolitical public service. Political communications by public servants would be permissible, no matter how widespread the audience and no matter how corrosive of the trust underlying the APS as an institution, provided that the public servant is not identified or, on another variant of the law, not easily identifiable. (3) Adequacy in the balance The relevant object of the Public Service Act in s 3(a), to establish an apolitical public service that is efficient and effective in serving the Government, the Parliament and the Australian public, is an object of great importance. It is part of the constitutional conception of responsible government. This notion of responsible government is reflected in the provisions of the Constitution creating power for the appointment and removal of civil servants, namely s 51(xxxvi) read with ss 67 and 51(xxxix), which empowered the enactment of the Public Service Act. Those civil servants are responsible to Ministers, whose 278 Byrne v Australian Airlines Ltd (1995) 185 CLR 410 at 465; [1995] HCA 24. Edelman appointment is provided for in s 64 of the Constitution. Section 44(iv) of the Constitution reflects the importance of these civil servants remaining apolitical by making any person who holds any "office of profit under the Crown" incapable of being chosen or of sitting as a senator or a member of the House of Representatives. In Sykes v Cleary279 this incapacity was held to extend to all public servants, namely all those persons who are permanently employed by the executive government. It extended in that case to Mr Cleary, who held an "office of profit" by reason of being a teacher who, although appointed by an independent statutory tribunal, was a permanent officer "employed by Her Majesty in the teaching service"280. The notion of an apolitical public service, which is one foundation of the constitutional scheme of responsible government, had a strong pre-Federation history. As Sir William Anson observed, the English provisions of the late nineteenth century requiring the disqualification of civil servants from election to the House of Commons were "for the most part imposed to secure the undivided attention of officials to the business of their departments, and the advantage of a permanent civil service unaffected by changes of ministry or by considerations of party politics"281. The English view, which developed from the Report on the Organisation of the Permanent Civil Service282 in 1854, was rapidly adopted in 1856 by a Board in the colony of Victoria, which recommended the establishment of a permanent non-political public service, saying283: "It will be impossible to prevent confusion and public inconvenience, if the orderly working of the Civil Service is interrupted by frequent Ministerial changes. We therefore submit to your Excellency the propriety of following the English precedent, and of appointing non-political and permanent officers to carry into execution the policy which the Ministry of the day may originate." 279 (1992) 176 CLR 77 at 95-96; [1992] HCA 60. See also at 108, 130, 132; Re Lambie (2018) 92 ALJR 285 at 302-303 [78]-[79]; 351 ALR 559 at 582; [2018] HCA 6. 280 Re Lambie (2018) 92 ALJR 285 at 303 [79]; 351 ALR 559 at 582. 281 Anson, The Law and Custom of the Constitution (1886), pt 1 at 290. See Re Lambie (2018) 92 ALJR 285 at 300-301 [71]; 351 ALR 559 at 579. 282 Northcote and Trevelyan, Report on the Organisation of the Permanent Civil Service (1854). 283 Civil Service of the Colony of Victoria, Report of the Board Appointed to Enquire into the Arrangements for the Better Organization of the Civil Service of the Colony (1856) at 13. Edelman included the progenitor of The Report on the Organisation of the Permanent Civil Service was the foundation for legislation in the colony of Victoria in 1862 that established a permanent civil service284. Regulations made under the Civil Service Act 1862 (Vic)285 the Commonwealth Public Service Act 1902 (Cth)286, which provided that public servants "are expressly forbidden to publicly discuss or in any way promote political movements". The Victorian progenitor provision, with sanctions including dismissal287, contained a broad proscription including prohibiting civil servants from taking "any part in political affairs otherwise than by recording their votes for the election of members of parliament"288. regulation made under the This background is one reason why the Public Service Act is aptly described as serving "public and constitutional purposes as well as those of employment"289. As McHugh J said in Mulholland v Australian Electoral Commission290, "[c]ommunications between the executive government and public servants and the people are as necessary to the effective working of those their elected institutions as communications between representatives". the people and In Australian Capital Television Pty Ltd v The Commonwealth291, Mason CJ described the "fundamental importance, indeed the essentiality, of freedom of communication, including freedom to criticize government action, in the system of modern representative government". That may be so, but it is also fundamentally important, and indeed essential, that in a system of modern representative government a parliament has freedom to make laws that implement the policy decisions it makes for the welfare of the governed. Where 284 Civil Service Act 1862 (Vic). 285 Regulations for the Civil Service of Victoria 1866 (Vic), reg 23 (Victoria Government Gazette, No 2, 8 January 1867 at 38). 286 Regulations made under the provisions of the Commonwealth Public Service Act 1902 (Cth), reg 41. 287 Regulations for the Civil Service of Victoria 1866 (Vic), reg 32. 288 Regulations for the Civil Service of Victoria 1866 (Vic), reg 23. 289 Federal Commissioner of Taxation v Day (2008) 236 CLR 163 at 180 [34]; [2008] HCA 53. 290 (2004) 220 CLR 181 at 219 [94]; [2004] HCA 41. 291 (1992) 177 CLR 106 at 140; [1992] HCA 45. Edelman a law impairs freedom of political communication in a reasonably necessary manner in pursuit of another legitimate object, the law should only be held unconstitutional if there is such a gross imbalance between, on the one hand, the importance of that legitimate object to the parliament, and, on the other hand, the magnitude of the burden that the law places on the implied freedom of political communication, so as to pose a threat to the integrity of the constitutionally prescribed system of representative and responsible government292. Section 13(11), in light of the APS Values, including s 10(1)(a), and the sanctions in s 15(1), is far from exhibiting this lack of balance. Although the burden on the implied freedom of political communication is deep and vast, that burden is imposed in the pursuit, by reasonably necessary means, of a purpose of embedded and long-standing constitutional significance, an apolitical public service. The law is not inadequate in its balance. The alternative submissions: disapplication and constraints on executive power Each of Ms Banerji and the Attorney-General of the Commonwealth had submissions alternative to the challenge to constitutional validity of the legislative provisions. Ms Banerji submitted that the executive decision under s 15(1) to terminate her employment was vitiated because the decision maker did not take into account the implied freedom of political communication or because the decision itself contravened the implied freedom of political communication. The Attorney-General of the Commonwealth submitted that if any constitutional invalidity would otherwise arise then s 15(1) should be treated as authorising only an exercise of power consistent with constitutional limits. Ms Banerji's alternative submissions should not be accepted. There is nothing in s 15 from which an implication could be made requiring a decision maker to take into account the implied freedom of political communication as a mandatory relevant consideration when making a decision under that section. If the operation of ss 13(11) and 15 would otherwise contravene the implied freedom of political communication then the implied freedom would not operate as a mandatory relevant consideration for the decision maker. Nor could the implied freedom operate directly upon an executive act to invalidate an executive decision that is authorised by legislation. It is necessary to explain why, contrary to Ms Banerji's submission, the implied freedom operates directly upon the legislation rather than upon the exercise of executive power that has its source in that legislation. 292 See Clubb v Edwards (2019) 93 ALJR 448 at 552 [496]-[497]; 366 ALR 1 at 130- Edelman The Attorney-General of the Commonwealth submitted that if the generality of the terms of the statutory power in s 15(1) would otherwise permit action that would be contrary to the implied freedom of political communication then, despite the generality of the terms of the legislative provision, and despite an inability to ascribe a meaning to the words of the provision which would proscribe those exercises of power that are beyond constitutional limits, each exercise of executive power could be treated as subject to a statutory requirement that limits. That submission is correct. The constitutional constraint does not operate directly upon the exercise of executive power. It invalidates the executive act only by operating upon the legislation, disapplying the legislative authority for the executive act if the legislation would otherwise trespass against the constitutional limits upon legislative power. in accordance with constitutional the power be exercised This was effectively the approach taken by Brennan J in dissent in Miller v TCN Channel Nine Pty Ltd293 and by French CJ, Gummow, Hayne, Crennan and Bell JJ in Wotton v Queensland294. But it is also much older than that295 and derives from a statutory mandate296. That mandate permits and requires an approach that constrains the manner in which the statute can be applied even if the statutory discretion is "not confined by statutory criteria"297. The disapplication of legislation from part of its sphere of operation in this manner has sometimes been described as "reading down" and sometimes described as "severance". However, as I explained in Clubb v Edwards298, neither of these labels is apt. Although those labels are more familiar, the technique here, as in Wotton v Queensland299, involves "[n]o question" of severance or reading down of the legislation. The best description is "disapplication", although the process could be described as part of an exercise of 293 (1986) 161 CLR 556 at 612-614; [1986] HCA 60. See also Wilcox Mofflin Ltd v New South Wales (1952) 85 CLR 488 at 522; [1952] HCA 17. 294 (2012) 246 CLR 1 at 14 [23]. 295 See Newcastle and Hunter River Steamship Co Ltd v Attorney-General for the Commonwealth (1921) 29 CLR 357; [1921] HCA 31. 296 Now contained generally in Acts Interpretation Act 1901 (Cth), s 15A. 297 Miller v TCN Channel Nine Pty Ltd (1986) 161 CLR 556 at 613. 298 (2019) 93 ALJR 448 at 534-540 [415]-[433]; 366 ALR 1 at 107-114. 299 (2012) 246 CLR 1 at 14 [23]. Edelman "construction" only if that term is used, in contradistinction to "interpretation"300, to describe the manner in which the essential meaning of legislation is applied to particular facts. As the Attorney-General of the Commonwealth observed, this approach of "construction" avoids the "element of conceptual confusion"301 involved in treating the constitutional limit as a constraint upon executive power when a constitutional limit on power cannot "sensibly be described as a mandatory consideration" for the exercise of executive power302. Conclusion Orders should be made as proposed in the joint judgment. 300 Clubb v Edwards (2019) 93 ALJR 448 at 537 [425]; 366 ALR 1 at 111. 301 A v Independent Commission Against Corruption (2014) 88 NSWLR 240 at 257 302 Walker and Hume, "Broadly Framed Powers and the Constitution", in Williams (ed), Key Issues in Public Law (2017) 144 at 157. Compare Charter of Human Rights and Responsibilities Act 2006 (Vic), s 38(1); Human Rights Act 2004 (ACT), s 40B(1)(b).
HIGH COURT OF AUSTRALIA DETECTIVE SENIOR CONSTABLE HOGAN INFORMANT AND DERRYN HINCH DEFENDANT Hogan v Hinch [2011] HCA 4 10 March 2011 ORDER Declare that s 42 of the Serious Sex Offenders Monitoring Act 2005 (Vic) is not invalid upon any of the grounds asserted in submissions to this Court. Representation G J C Silbert SC with B L Sonnet and P D Herzfeld for the informant (instructed by Solicitor for Public Prosecutions Victoria) D M J Bennett QC with G Slater for the defendant (instructed by HWL Ebsworth Lawyers) Interveners S J Gageler SC, Solicitor-General of the Commonwealth with A M Dinelli intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) R J Meadows QC, Solicitor-General for the State of Western Australia with R M Mitchell SC and A J Sefton intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor Western Australia) R J Meadows QC, Solicitor-General for the State of Western Australia with S A McDonald intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor for South Australia) M G Sexton SC, Solicitor-General for the State of New South Wales with J K Kirk intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor (NSW)) W Sofronoff QC, Solicitor-General of the State of Queensland with G J D del Villar intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Law (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Hogan v Hinch Constitutional law (Cth) – Judicial power of Commonwealth – Constitution, Ch III – Institutional integrity of State courts vested with federal jurisdiction – Section 42(1) of Serious Sex Offenders Monitoring Act 2005 (Vic) ("Act") allowed court to make "suppression order" preventing publication of evidence given, contents of documents adduced or information that might enable identification of offender in proceedings under Act, if court satisfied it is "in the public interest" to make order – Section 42(3) made publishing material in contravention of suppression order an offence – Defendant charged with publishing material identifying offenders in proceedings subject to suppression orders – Whether power conferred by s 42(1) impermissibly diminishes institutional integrity of State courts – Whether and to what extent there exists implication derived from Ch III that State and federal courts must be open to public and carry out activities in public. Constitutional law (Cth) – Implied freedom of political communication – Whether s 42 of Act impermissibly burdens implied freedom of political communication – Whether communication by defendant was communication about government or political matters – Whether implied freedom limited to communications about government or political matters at Commonwealth level – Whether s 42 reasonably appropriate and adapted to serve legitimate end in manner compatible with maintenance of representative and responsible government. Statutory interpretation – Principle of legality – Charter of Human Rights and Responsibilities Act 2006 (Vic) ("Charter") – Interpretation of s 42 of Act in manner compatible with civil and political rights in Charter. Words and phrases – "open justice", "political communication". Constitution, Ch III. Serious Sex Offenders Monitoring Act 2005 (Vic), s 42. Introduction Derryn Hinch is a radio broadcaster and is responsible for a website designated "HINCH.net". In September 2008 he was charged in the Magistrates' Court of Victoria with five counts of contravening suppression orders made under s 42 of the Serious Sex Offenders Monitoring Act 2005 (Vic) ("the Act") in the County Court at Melbourne. The suppression orders prohibited publication of any information that might enable the identification of certain persons, convicted of sex offences, who were the subject of post-custodial extended supervision orders under the Act. Mr Hinch's offences were said to have been committed when he named the persons on his website and at a public rally in Melbourne. By way of defence to the charges, Mr Hinch raised a constitutional challenge to the validity of s 42 based, inter alia, upon the propositions that the section: impermissibly confers upon the courts to which it applies a function which distorts their institutional integrity contrary to the implied requirements of Ch III of the Constitution; is contrary to an implication in Ch III of the Constitution that all State and federal courts must be open to the public and carry out their activities in public; and infringes the implied freedom of political communication by inhibiting the ability: to criticise legislation and its application in the courts; and to seek legislative and constitutional changes and changes in court practice by public assembly and protest, and the dissemination of factual data concerning court proceedings. On 30 July 2010, Hayne, Crennan and Bell JJ ordered, pursuant to s 40(1) of the Judiciary Act 1903 (Cth), that so much of the cause pending in the Magistrates' Court of Victoria as concerned the validity of s 42 be removed into this Court. In my opinion, for the reasons that follow, s 42 did not offend against any implication derived from Ch III of the Constitution. Nor did it infringe the implied freedom of political communication. The challenge to its validity must fail. The first question in considering Mr Hinch's challenge is: What is the correct construction of s 42? It is only when that question is answered that validity can be determined. Construction begins with the words of the section1. It requires reference to their ordinary meaning, their context, the purpose of the Act and the purpose of the section. The principle of legality will favour a construction which, consistently with the statutory scheme, has the least adverse impact upon the open justice principle and common law freedom of speech2. The Charter of Human Rights and Responsibilities Act 2006 (Vic) ("the Charter") also imposes an interpretive requirement that, so far as it is possible to do so consistently with their purpose, all statutory provisions must be interpreted in a way that is compatible with human rights3. An outline of the Act The Act, which was repealed with effect from 1 January 20104, authorised the Supreme Court and the County Court of Victoria to make extended supervision orders whereby persons convicted of certain sexual offences for which custodial sentences have been imposed could be subject to post-custodial supervision. Section 42 empowers those courts to make suppression orders in connection with proceedings under the Act. The stated main purpose of the Act is5: "to enhance the protection of the community by requiring offenders who have served custodial sentences for certain sexual offences and who are a serious danger to the community to be subject to ongoing supervision while in the community." 1 Section 42 is set out in the joint reasons at [67]. 2 As to which see eg Attorney-General v Guardian Newspapers Ltd (No 2) [1990] 1 AC 109 at 283; Pervan v North Queensland Newspaper Co Ltd (1993) 178 CLR 309 at 328 per Mason CJ, Brennan, Deane, Dawson, Toohey and Gaudron JJ; [1993] HCA 64; Cunliffe v The Commonwealth (1994) 182 CLR 272 at 363 per Dawson J; [1994] HCA 44; Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 564; [1997] HCA 25; Coleman v Power (2004) 220 CLR 1 at 97 [253] per Kirby J; [2004] HCA 39. 3 Charter, s 32(1). 4 Replaced by the Serious Sex Offenders (Detention and Supervision) Act 2009 (Vic). For ease of reference, the present tense is used throughout to describe the operation of the Act. 5 Act, s 1(1). The purposes governing the conditions which can be attached to an extended supervision order are6: to ensure that the community is adequately protected by monitoring the offender; to promote the rehabilitation, and the care and treatment, of the offender." The Act empowers the Secretary to the Department of Justice to apply to a court for an extended supervision order in respect of an "eligible offender"7. An "eligible offender" is defined, inter alia, as any person who is serving a custodial sentence in respect of a "relevant offence"8. "Relevant offences" are those listed in the Schedule to the Act9. Applications for such orders can be made to the Supreme Court or to the County Court, depending on which of them was the original sentencing court10. At least one assessment report made by a psychologist, psychiatrist or other prescribed health service provider, after a personal examination of the offender, is required to accompany an application11. Section 11(1) provides that a court can only make an extended supervision order in respect of an offender if satisfied: "to a high degree of probability, that the offender is likely to commit a relevant offence if released in the community on completion of the service of any custodial sentence that he or she is serving, or was serving at the time at which the application was made, and not made subject to an extended supervision order." 6 Act, s 15(2). 7 Act, s 5(1). 8 Act, s 4(1). Section 4(2) provides that a person is not an eligible offender if, inter alia, the relevant conviction has been quashed or set aside. 9 Act, s 3(1). 10 Act, s 5(2). If the Magistrates' Court was the original sentencing court, the application is to be made to the County Court. 11 Act, ss 6 and 7. In RJE v Secretary to the Department of Justice12 it was held that "likely to commit" means "more likely than not to commit". The Act was amended in 2009 to provide that a court could be satisfied that an offender was "likely to commit" a relevant offence on the lower threshold of a risk which is "real and ongoing" and "cannot sensibly be ignored"13. The order commences when the offender has completed the service of his or her custodial sentence14, including any period served on parole15. The nature and purpose of an extended supervision order suggests that an application for such an order will be made as the offender's custodial sentence draws to a close. Mandatory conditions which attach to every extended supervision order16 include requirements that the offender attend at any place as directed by the Secretary or the Adult Parole Board17 for supervision, assessment or monitoring and not commit any relevant offence. The offender is required to give the Secretary prior notice of any proposed change of name or employment, and must not move to a new address without the prior written consent of the Secretary. Part 4A of the Act prohibits an offender from making a change of name application in Victoria or elsewhere in Australia without the prior written approval of the Adult Parole Board18. The offender cannot leave Victoria without the permission of the Secretary. The offender is required to obey all lawful instructions and directions of the Secretary and of the Adult Parole Board 12 (2008) 21 VR 526 at 533 [21]. See also ARM v Secretary to the Department of Justice [2008] VSCA 266. 13 Act, s 11(2A) and (2B), inserted by Serious Sex Offenders Monitoring Amendment Act 2009 (Vic), which also provided (in s 6) that s 11 is to be taken always to have permitted a determination on the basis of the lower threshold. 14 Act, s 13(1) – "custodial sentence" is defined in s 3(1) as a court order sentencing an offender to be imprisoned or detained in respect of an offence. It covers a hospital security order under s 93A of the Sentencing Act 1991 (Vic). 15 Section 76 of the Corrections Act 1986 (Vic) provides that a sentenced prisoner is "to be regarded as being still under sentence" when serving parole. When the parole period expires, the prisoner is regarded as having served a prison sentence and "wholly discharged". 16 Act, s 15(3). 17 The Adult Parole Board is established by s 61 of the Corrections Act. Its functions, set out in s 69 of that Act, include the functions conferred on it by the Act. 18 Act, s 41C(2). given pursuant to s 16 of the Act. Non-compliance by an offender with an extended supervision order, without reasonable excuse, is an indictable offence19. The court determining an application for an extended supervision order must state the reasons for its decision, cause them to be entered into the records of the court and cause a copy of the order to be served on the Secretary and on the offender20. The proceedings are "criminal in nature"21. An extended supervision order imposes significant restrictions upon the liberty and privacy of the offender. It is not one of its purposes to impose further punishment. Court-ordered restrictions upon liberty are not invariably imposed as a punishment22. The fact that an adjudication of guilt and punishment is a condition of the power to make a post-punishment order does not make the post- punishment order punitive. The nature and purpose of an extended supervision order is protective, not punitive23. That characterisation informs the range of purposes for which a suppression order may be made in connection with an extended supervision order. A suppression order is made in aid of the statutory purpose. It is not a mitigation of punishment. The orders The suppression orders said to have been contravened by Mr Hinch were made on 20 December 2007, 21 April 2008 and 4 July 2008. The offences with which he has been charged were said to have been committed on 5 and 21 May 2008, 1 June 2008 (two counts) and 7 July 2008. The first order in issue was made on 20 December 2007 by her Honour Judge Millane in the County Court at Melbourne as part of an extended supervision order. Paragraph 4 of the extended supervision order provided, in part: Until the issue of any further order, pursuant to section 42 of the Serious Sex Offenders Monitoring Act 2005 the Court orders that: 19 Act, s 40(1). 20 Act, s 35. 21 Act, s 26. 22 Thomas v Mowbray (2007) 233 CLR 307 at 330 [18] per Gleeson CJ; [2007] HCA 23 Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 597 [34] per McHugh J, 610 [73] per Gummow J, 658 [234] per Callinan and Heydon JJ; [2004] HCA 46. Except where deemed by the Secretary necessary to promote the care, treatment and rehabilitation of the Respondent and in the manner and to the extent specified in 4.2 and 4.3, any information that might enable the Respondent or his whereabouts to be identified must not be published." Judge Millane also prohibited the publication of testimonial and documentary evidence received in the proceeding and the content of the application. Paragraphs 4.2, 4.3 and 4.4 authorised publication of information about the order by the Secretary to the Chief Commissioner of Police and by the Chief Commissioner to CrimTrac for entry on the Australian National Child Offender Register24. The Chief Commissioner was also authorised to use the information in the course of law enforcement functions and in monitoring the offender's compliance with the Act. The term of the extended supervision order, including the suppression order, was specified as 15 years. On 21 April 2008, her Honour Judge Hannan made an interim suppression order which commenced: "5. Until the issue of any further order, pursuant to section 42 of the Serious Sex Offenders Monitoring Act 2005 (Vic), the Court orders: Except in the manner and to the extent specified in 5.2, 5.3 and 5.4 no information that might enable the respondent to be identified is to be published." Paragraphs 5.2, 5.3 and 5.4 authorised publication by the Secretary and by the Chief Commissioner of Victoria Police. On 4 July 2008, her Honour Judge Rizkalla made an extended supervision order under the Act, including a suppression order in terms very similar to those set out in the order made by Judge Hannan. There were qualifications similar to those in the orders made by Judge Hannan and Judge Millane and a non- publication order in respect of testimonial and documentary evidence given at the hearing of the application and the content of the application. The orders, so far as they related to identification of offenders, were expressed as broadly as s 42(1)(c) itself. That is the only form of order, in relation to an offender, that is authorised by s 42(1)(c), albeit there is provision 24 The Register is administered by the CrimTrac Agency, a body set up under the Intergovernmental Agreement: CrimTrac Agency (made 1 July 2000) between the Commonwealth, State and Territory governments to enhance Australian law enforcement with an emphasis on "information-based policing". for a carve out of permitted publication "in the manner and to the extent (if any) specified in the order." The orders made therefore unavoidably presented the problems of construction raised by the section. They purported to bind the world at large. An injunction between private parties is required to speak in "clear and unambiguous terms which leave no room for the persons to whom they are directed to wonder whether or not their future conduct falls within the scope or boundaries of the injunction."25 The time at which contempt proceedings are brought is not the time to resolve difficult questions of construction26. A fortiori, a court order addressed to the world at large, contravention of which is a criminal offence, should not have to be the subject of a significant constructional debate on a prosecution for its contravention. The orders represented an infringement upon the open-court principle and it is in part on that basis that their validity and that of s 42 is attacked. It is necessary, therefore, to consider the nature and scope of the open-court principle. The open-court principle An essential characteristic of courts is that they sit in public27. That principle is a means to an end, and not an end in itself. Its rationale is the benefit that flows from subjecting court proceedings to public and professional scrutiny28. It is also critical to the maintenance of public confidence in the courts. Under the Constitution courts capable of exercising the judicial power of the Commonwealth must at all times be and appear to be independent and impartial tribunals. The open-court principle serves to maintain that standard29. However, it is not absolute30. 25 ICI Australia Operations Pty Ltd v Trade Practices Commission (1992) 38 FCR 248 at 259 per Lockhart J, Gummow J agreeing at 263, French J agreeing at 268. 26 (1992) 38 FCR 248 at 259 per Lockhart J. 27 Daubney v Cooper (1829) 10 B & C 237 at 240 [109 ER 438 at 440]; Dickason v Dickason (1913) 17 CLR 50; [1913] HCA 77; Scott v Scott [1913] AC 417; Russell v Russell (1976) 134 CLR 495 at 520 per Gibbs J; [1976] HCA 23. 28 Russell v Russell (1976) 134 CLR 495 at 520 per Gibbs J. 29 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 76 [64], 81 [78] per Gummow, Hayne and Crennan JJ; [2006] HCA 44. 30 Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 359 [56] per Gleeson CJ, Gaudron, McHugh, Gummow, Hayne and Callinan JJ; [1999] HCA 9, adopting the remarks of Gaudron J in Harris v Caladine (1991) 172 CLR 84 at 150; [1991] HCA 9, referring to "limited exceptions" to the open and public inquiry involved in the exercise of judicial power. It has long been accepted at common law that the application of the open justice principle may be limited in the exercise of a superior court's inherent jurisdiction or an inferior court's implied powers31. This may be done where it is necessary to secure the proper administration of justice32. In a proceeding involving a secret technical process, a public hearing of evidence of the secret process could "cause an entire destruction of the whole matter in dispute"33. Similar considerations inform restrictions on the disclosure in open court of evidence in an action for injunctive relief against an anticipated breach of confidence. In the prosecution of a blackmailer, the name of the blackmailer's victim, called as a prosecution witness, may be suppressed because of the "keen public interest in getting blackmailers convicted and sentenced" and the difficulties that may be encountered in getting complainants to come forward "unless they are given this kind of protection."34 So too, in particular circumstances, may the name of a police informant or the identity of an undercover police officer35. The categories of case are not closed, although they 31 Inferior courts lack the "inherent jurisdiction" of superior courts, but have analogous implied powers: Grassby v The Queen (1989) 168 CLR 1 at 15-17 per Dawson J; [1989] HCA 45; John Fairfax Publications Pty Ltd v District Court (NSW) (2004) 61 NSWLR 344 at 354 [28] per Spigelman CJ, Handley JA and M W Campbell A-JA agreeing at 368. In federal courts created by statute implied incidental powers also take the place of "inherent jurisdiction": DJL v Central Authority (2000) 201 CLR 226 at 240-241 [25] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; [2000] HCA 17; Jackson v Sterling Industries Ltd (1987) 162 CLR 612 at 618-619 per Wilson and Dawson JJ, 623-624 per Deane J, Mason CJ agreeing at 616, 630-631 per Toohey J; [1987] HCA 23. 32 John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 476-477 per McHugh JA, Glass JA agreeing at 467. 33 Andrew v Raeburn (1874) LR 9 Ch 522 at 523. See also Nagle-Gillman v Christopher (1876) 4 Ch D 173 at 174 per Jessel MR; Mellor v Thompson (1885) 31 Ch D 55; Scott v Scott [1913] AC 417 at 436-437 per Viscount Haldane LC, 443 per Earl of Halsbury, 445 per Earl Loreburn, 450-451 per Lord Atkinson, 482-483 per Lord Shaw of Dunfermline. 34 R v Socialist Worker Printers and Publishers Ltd; Ex parte Attorney-General [1975] QB 637 at 644 per Lord Widgery CJ, Milmo and Ackner JJ agreeing at 653, referred to with apparent approval in Attorney-General v Leveller Magazine Ltd [1979] AC 440 at 452 per Lord Diplock, 458 per Viscount Dilhorne, 471 per Lord Scarman. See also John Fairfax Group Pty Ltd v Local Court (NSW) (1991) 26 NSWLR 131 at 141 per Kirby P. 35 Cain v Glass (No 2) (1985) 3 NSWLR 230 at 246 per McHugh JA; John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 472 per Mahoney JA, (Footnote continues on next page) lightly be extended36. will not Where "exceptional and compelling considerations going to national security" require that the confidentiality of certain materials be preserved, a departure from the ordinary open justice principle may be justified37. The character of the proceedings and the nature of the function conferred upon the court may also qualify the application of the open-court principle. The jurisdiction of courts in relation to wards of the State and mentally ill people was historically an exception to the general rule that proceedings should be held in public because the jurisdiction exercised in such cases was "parental and administrative, and the disposal of controverted questions … an incident only in the jurisdiction."38 Proceedings not "in the ordinary course of litigation", such as applications for leave to appeal, can also be determined without a public hearing39. It is a common law corollary of the open-court principle that, absent any restriction ordered by the court, anybody may publish a fair and accurate report of the proceedings, including the names of the parties and witnesses, and the evidence, testimonial, documentary or physical, that has been given in the proceedings40. 480 per McHugh JA, Glass JA agreeing at 467; John Fairfax Group Pty Ltd v Local Court (NSW) (1991) 26 NSWLR 131 at 141 per Kirby P, 159 per Mahoney JA, Hope A-JA agreeing at 169; Herald & Weekly Times Ltd v Medical Practitioners Board (Vic) [1999] 1 VR 267 at 293 [85]; R v Lodhi (2006) 65 NSWLR 573 at 584 [25]-[26] per McClellan CJ at CL. 36 R v Kwok (2005) 64 NSWLR 335 at 340-341 [12]-[14] per Hodgson JA, 343-344 [29]-[31] per Howie J, 345-346 [38]-[39] per Rothman J; Commissioner of Police (NSW) v Nationwide News Pty Ltd (2008) 70 NSWLR 643 at 648 [32]-[38] per Mason P, Ipp JA agreeing at 657, 658 [90]-[91] per Basten J; P v D1 [No 3] [2010] NSWSC 644 at [11]-[20]. 37 A v Hayden (1984) 156 CLR 532 at 599 per Deane J; [1984] HCA 67; John Fairfax Group Pty Ltd v Local Court (NSW) (1991) 26 NSWLR 131 at 141 per Kirby P; R v Lodhi (2006) 65 NSWLR 573 at 584-585 [26] per McClellan CJ at CL; R v Governor of Lewes Prison; Ex parte Doyle [1917] 2 KB 254 at 271-272 per Viscount Reading CJ; Taylor v Attorney-General [1975] 2 NZLR 675. 38 Scott v Scott [1913] AC 417 at 437 per Viscount Haldane LC. See also John Fairfax Publications Pty Ltd v Attorney-General (NSW) (2000) 181 ALR 694 at 723 [165] per Meagher JA. 39 Coulter v The Queen (1988) 164 CLR 350 at 356 per Mason CJ, Wilson and Brennan JJ; [1988] HCA 3. 40 Attorney-General v Leveller Magazine Ltd [1979] AC 440 at 450 per Lord Diplock, 459 per Lord Edmund-Davies, 469 per Lord Scarman; Raybos Australia Pty Ltd v (Footnote continues on next page) The existence and nature of the common law or implied power in a court to make orders restricting the publication of proceedings in open court has been the subject of considerable judicial exegesis. The question whether the power extends to orders purporting to bind the world at large is contentious. As the Law Reform Commission of New South Wales said in 200041: "the common law regarding suppression orders is relatively unclear and unsettled." However unsettled it may be, a consideration of the common law position with respect to suppression orders is relevant to the question whether s 42 confers a function on courts of the State of Victoria which is inconsistent with the essential characteristics of a court. On one view courts have no general authority to make orders binding non- parties in their conduct outside the courtroom42. It has nevertheless been accepted that conduct outside the courtroom deliberately frustrating the effect of an order made to enable a court to act effectively within its jurisdiction can constitute a contempt of court43. Jones (1985) 2 NSWLR 47 at 55 per Kirby P, 61 per Samuels JA; John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 476-477 per McHugh JA, Glass JA agreeing at 467; Esso Australia Resources Ltd v Plowman (1995) 183 CLR 10 at 43 per Toohey J; [1995] HCA 19; J v L & A Services Pty Ltd (No 2) [1995] 2 Qd R 10 at 44 per Fitzgerald P and Lee J; Rogers v Nationwide News Pty Ltd (2003) 216 CLR 327 at 335 [15] per Gleeson CJ and Gummow J; [2003] HCA 52; John Fairfax Publications Pty Ltd v District Court (NSW) (2004) 61 NSWLR 344 at 353 [20] per Spigelman CJ, Handley JA and M W Campbell A-JA agreeing at 368. 41 New South Wales Law Reform Commission, Contempt by publication, Discussion Paper No 43, (2000) at [10.20]. 42 Raybos Australia Pty Ltd v Jones (1985) 2 NSWLR 47 at 55, 57 per Kirby P; John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 477 per McHugh JA, Glass JA agreeing at 467; "Mr C" (1993) 67 A Crim R 562 at 563 per Hunt CJ at CL, Smart and James JJ agreeing at 566. 43 John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 477 per McHugh JA, Glass JA agreeing at 467; Attorney-General (NSW) v Mayas Pty Ltd (1988) 14 NSWLR 342 at 355-356 per McHugh JA, Hope JA agreeing at 344; Savvas (1989) 43 A Crim R 331 at 334 per Hunt J; United Telecasters Sydney Ltd v Hardy (1991) 23 NSWLR 323 at 333-334 per Samuels AP, Clarke and Meagher JJA agreeing at 348. In 2004 the Privy Council held that there is no common law power to make orders against the public at large prohibiting the reporting of open court proceedings. Such a power, it was said, must be conferred by legislation44. On the other hand, it has been said in Australia that there is at common law a limited power to prohibit publication of proceedings conducted in open court. In Ex parte The Queensland Law Society Inc45, McPherson J, after reviewing the authorities, said: "the power of the court under general law to prohibit publication of proceedings conducted in open court has been recognized and does exist as an aspect of the inherent power. That does not mean that it is an unlimited power. The only inherent power that a court possesses is power to regulate its own proceedings for the purpose of administering justice; and, apart from securing that purpose in proceedings before it, there is no power to prohibit publication of an accurate report of those proceedings if they are conducted in open court, as in all but exceptional cases they must That statement was quoted with apparent approval by McHugh JA in John Fairfax & Sons Ltd v Police Tribunal (NSW)46. It was also approved in John Fairfax Publications Pty Ltd v District Court (NSW)47. Doubts about the existence of such a power as an element of the inherent jurisdiction or implied powers of courts have been expressed in Victoria48. In my opinion the better view is that there is inherent jurisdiction or implied power in limited circumstances to restrict the publication of proceedings conducted in open court. The exercise of the power must be justified by reference to the necessity of such orders in the interests of the administration of justice. Such an order may be made to and bind the parties, witnesses, counsel, 44 Independent Publishing Co Ltd v Attorney-General of Trinidad and Tobago [2005] 1 AC 190 at 216 [67]. 45 [1984] 1 Qd R 166 at 170. 46 (1986) 5 NSWLR 465 at 479. 47 (2004) 61 NSWLR 344 at 357 [42] per Spigelman CJ, Handley JA and M W Campbell A-JA agreeing at 368. 48 Re Applications by Chief Commissioner of Police (Vic) (2004) 9 VR 275 at 288 [29]; General Television Corporation Pty Ltd v Director of Public Prosecutions (2008) 19 VR 68 at 77 [29]; Herald and Weekly Times Pty Ltd v A (2005) 160 A Crim R 299 at 305-306 [27]-[29]. solicitors and, if relevant, jurors and media representatives, or other persons present in court when the order is made, or to whom the order is specifically directed. It is not necessary for present purposes to reach a concluded view on the full extent of the power in relation to the general public. Beyond the common law, it lies within the power of parliaments, by statute, to authorise courts to exclude the public from some part of a hearing or to make orders preventing or restricting publication of parts of the proceeding or of the evidence adduced49. An example of such a law in the federal context is s 50 of the Federal Court of Australia Act 1976 (Cth), recently considered by this Court in Hogan v Australian Crime Commission50. Specific powers to make suppression orders or orders for the exclusion of the public, where such orders are in the interest of security or defence of the Commonwealth, can be found in the Crimes Act 1914 (Cth)51 and the Criminal Code (Cth)52. There are many other examples of such provisions enacted by State parliaments53. Where it is left by statute to a court's discretion to determine whether or not to make an order closing part of a hearing or restricting the publication of evidence or the names of parties or witnesses, such provisions are unlikely to be characterised as depriving the court of an essential characteristic of a court and thereby rendering it an unfit repository for federal jurisdiction54. Nevertheless, a statute which affects the 49 Russell v Russell (1976) 134 CLR 495 at 520 per Gibbs J. 50 (2010) 240 CLR 651; [2010] HCA 21. 51 Crimes Act 1914 (Cth), s 85B. 52 Criminal Code (Cth), s 93.2. 53 Court Suppression and Non-publication Orders Act 2010 (NSW), ss 7, 8 (yet to commence); Civil Procedure Act 2005 (NSW), s 72; Witness Protection Act 1995 (NSW), s 26; Supreme Court Act 1986 (Vic), s 18; County Court Act 1958 (Vic), s 80; Magistrates' Court Act 1989 (Vic), s 126; Evidence Act 1929 (SA), ss 69, 69A; Witness Protection Act 1996 (SA), s 25; Children's Protection Act 1993 (SA), s 59A; Supreme Court of Queensland Act 1991 (Q), s 128; Child Protection Act 1999 (Q), ss 99ZG, 192, 193; Criminal Procedure Act 2004 (WA), s 171; Children's Court of Western Australia Act 1988 (WA), s 35; Family Court Act 1997 (WA), s 243; Evidence Act 1906 (WA), s 36C; Justices Act 1959 (Tas), s 106K; Terrorism (Preventative Detention) Act 2005 (Tas), s 50; Evidence Act 2001 (Tas), s 194J. 54 See however, John Fairfax Publications Pty Ltd v Attorney-General (NSW) (2000) 181 ALR 694 in which the Court of Appeal held that a provision of the Supreme Court Act 1970 (NSW) mandating in-camera hearings of appeals against acquittals for contempt was consistent with the principles enunciated in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51; [1996] HCA 24, but infringed the (Footnote continues on next page) open-court principle, even on a discretionary basis, should generally be construed, where constructional choices are open, so as to minimise its intrusion upon that principle. That approach, which accords with the principle of legality, informs the construction of s 42 in this case. The section must also be construed so as to minimise its intrusion upon common law freedom of speech. The Charter requires that so far as it is possible to do so consistently with their purpose, such provisions "must be interpreted in a way that is compatible with human rights."55 Relevant human rights set out in Pt 2 of the Charter include the right to freedom of expression56 and the right to participate in public life57. There are other rights which may be affected by a suppression order. They include the right of children to be protected58 and the right of privacy59. The construction of s 42 As appears from the location of s 42 in Pt 5 of the Act, entitled "Miscellaneous", and as appears from the content of the section, its function in the scheme of the Act is ancillary. It operates in connection with proceedings in the court under other provisions of the Act. Such proceedings include applications for extended supervision orders60, for the review61 and renewal62 of such orders, and for interim extended supervision orders63 and their extension64. There is also provision for appeals to be made to the Court of Appeal65. implied freedom of political communication. The question whether such a provision could survive Ch III scrutiny today may be regarded as open. 55 Charter, s 32(1). 56 Charter, s 15(2). 57 Charter, s 18(1). 58 Charter, s 17(2). 59 Charter, s 13(a). 60 Act, s 5. 61 Act, s 21. 62 Act, s 24. 63 Act, s 25A. 64 Act, s 25N. 65 Act, ss 36-39. The power conferred upon the court by s 42(1) is a power to make an order that prohibits, conditionally or otherwise, the publication of specified classes of information. The first two classes are well defined. They comprise the "evidence given in the proceeding" and "the content of any report or other document put before the court in the proceeding". No clear definition applies to "information" the subject of an order under s 42(1)(c). However, the term "information" as used in s 42(1)(c) should only be taken as referring to information before the court in the proceedings relevant to the offender or to other persons as participants in those proceedings. Absent clear words, the Parliament should not be taken to have conferred power on the courts to prohibit public dissemination of information in the public domain which is not derived from the proceedings in which the suppression order is made. So much is required by the principle of legality and, in my opinion, by s 32(1) of the Charter. Written submissions filed on behalf of Mr Hinch included the proposition that the purpose of s 42 was "[t]o allow government to contain and/or silence any community discussion and/or protests about the sentencing and release back into the community of serious sex offenders". Another purpose attributed to the section was facilitation of the covert release of serious offenders into the community. Febrile rhetoric of that kind is of no assistance. Section 42 confers the power to make suppression orders on the Supreme and County Courts of Victoria. Those courts cannot constitutionally be placed at the behest of the Executive Government or be directed by it as to the way in which the power is to be exercised in any particular case66. Section 42 does not offend against that principle. Section 42 requires that the court, before making an order under that section, be satisfied that "it is in the public interest to do so". The term "public interest" and its analogues have long informed judicial discretions and evaluative judgments at common law. Examples include the enforceability of covenants in restraint of trade67, claims for the exclusion of evidence on grounds of public interest immunity68, governmental claims for confidentiality at 66 South Australia v Totani (2010) 85 ALJR 19; 271 ALR 662; [2010] HCA 39. 67 Nordenfelt v Maxim Nordenfelt Guns and Ammunition Company [1894] AC 535 at 565; Esso Petroleum Co Ltd v Harper's Garage (Stourport) Ltd [1968] AC 269; Lindner v Murdock's Garage (1950) 83 CLR 628 at 653; [1950] HCA 48; Peters (WA) Ltd v Petersville Ltd (2001) 205 CLR 126 at 139 per Gleeson CJ, Gummow, Kirby and Hayne JJ; [2001] HCA 45. 68 The Commonwealth v Northern Land Council (1993) 176 CLR 604 at 614-619; [1993] HCA 24. equity69, the release from the implied obligation relating to the use of documents obtained in the course of proceedings70, and in the application of the law of contempt71. When used in a statute, the term derives its content from "the subject matter and the scope and purpose" of the enactment in which it appears72. The court is not free to apply idiosyncratic notions of public interest. In exercising its powers under s 42, the court must assess public interest by reference to the place of the section in the statutory scheme, the purpose of the Act as a whole and the purposes of extended supervision orders. In determining whether to make a suppression order with respect to identification of an offender, the court must consider the extent, if any, to which the order would enhance the protection of the community. It must also consider its effect upon the offender's prospects of rehabilitation. Rehabilitation, if it can be achieved, is likely to be the most durable guarantor of community protection and is clearly in the public interest. A court considering such an order must also look to the larger constitutional and legal context which informs the interpretation of the statute, having regard to the effect of the order upon the open justice principle, on common law freedom of speech, and on the human rights guaranteed by the Charter. The application of a public interest criterion may require a balancing of competing interests and "be very much a question of fact and degree."73 Having referred to the purposes for which suppression orders may be made under s 42 and factors which may be relevant to those purposes, it is necessary to give closer consideration to the scope of the prohibition authorised by s 42(1)(c). 69 The Commonwealth v John Fairfax & Sons Ltd (1980) 147 CLR 39 at 51-53; [1980] HCA 44. 70 Bailey v Australian Broadcasting Corporation [1995] 1 Qd R 476. 71 Ex parte Bread Manufacturers Ltd; Re Truth and Sportsman Ltd (1937) 37 SR (NSW) 242 at 249-250 per Jordan CJ. 72 O'Sullivan v Farrer (1989) 168 CLR 210 at 216 per Mason CJ, Brennan, Dawson and Gaudron JJ; [1989] HCA 61, citing Water Conservation and Irrigation Commission (NSW) v Browning (1947) 74 CLR 492 at 505 per Dixon J; [1947] HCA 21; Osland v Secretary, Department of Justice (2010) 84 ALJR 528 at 533-534 [13] per French CJ, Gummow and Bell JJ; 267 ALR 231 at 236; [2010] HCA 24. 73 Re Queensland Electricity Commission; Ex parte Electrical Trades Union of Australia (1987) 61 ALJR 393 at 395 per Mason CJ, Wilson and Dawson JJ; 72 ALR 1 at 5; [1987] HCA 27. As already explained, the information covered by s 42(1)(c) is information derived from the proceedings in respect of which the order is made. It must be information relating to the offender or other persons as participants in those proceedings. It is necessarily related to the kind of identification that the suppression order can legitimately seek to prevent. The word "identify" has a number of shades of meaning. In s 42(1)(c) it bears its ordinary meaning, namely to ascertain or establish that a given person is an offender or is a person who has appeared or given evidence in a proceeding under the Act74. That is the outcome which a prohibition under s 42(1)(c) seeks to prevent. That object informs the construction of the provision. The informant argued that the prohibition authorised by s 42(1)(c) in respect of offenders extended to the publication of any information which might enable a person to be identified as an offender, including information already published and in the public domain. The Attorney-General for New South Wales, on the other hand, submitted that the natural construction of s 42(1)(c) limited its application to information enabling an offender or another person to The Attorney-General of Queensland found a via media and proposed that s 42(1)(c) authorises a court to prohibit the publication of information that might cause a given person to be recognised as an offender. It would not necessarily prohibit publication of the fact that a person of a stated name had committed an offence or even that such a person had been the subject of an extended supervision order. in connection with a proceeding under identified the Act. The submissions made on behalf of the Attorney-General of Queensland showed the way to a construction of s 42(1)(c) consistent with its character as an ancillary provision and consistent with the context and purpose of the Act. It is also consistent with an application of the principle of legality and s 32 of the Charter, which will limit the scope of the power to the minimum interference with freedom of expression. Section 42(1)(c) applies to the identification of a particular person as an offender where that person has been a party to proceedings under the Act. It also applies to the identification of a particular person, such as a witness, who appeared in, or gave evidence in, such a proceeding. On the preferred construction, a suppression order under s 42(1)(c) will prohibit publication of information derived from the proceeding that might enable a member of the public to conclude that a particular person falls into one or other of those categories. It will prohibit publication of information which might enable a 74 See Oxford English Dictionary, 2nd ed (1989), vol VII at 619, defining "identify" as "to ascertain or establish what a given thing or who a given person is". To like effect, the Macquarie Concise Dictionary, revised 3rd ed (2004) at 586 defines "identify" as "to recognise or establish as being a particular person or thing". particular person to be identified as an offender who is the subject of an extended supervision order or of proceedings under the Act, or as a person who has appeared in, or given evidence in, proceedings under the Act. The identification of such a person, contrary to the suppression order, might, for example, be done stating that such a person is employed in a specified capacity by a named employer at specified premises. stating that such a person resides at a particular address; or More than one means of identification would be caught by a suppression order. An order under s 42(1)(c) would not necessarily prevent the publication of information that a person of a stated name had been convicted of a serious sexual offence and sentenced to a specified term of imprisonment, and had completed the parole term at a specified date. If, however, the circumstances of the publication might enable a particular person to be identified as an offender subject to an extended supervision order, or as one who had been the subject of proceedings under the Act, then the publication would fall within the prohibition notwithstanding that the information published could be obtained in the public domain. As to s 42(1)(a) and (b) relating to evidence, reports or documents before the court in the proceeding, those paragraphs are not amenable to a narrower construction than the ordinary meaning of their words suggests. As is pointed out in the joint reasons, there is no provision in the Act requiring that the terms of a suppression order be brought to public notice75. There is a presumption that knowledge of the wrongfulness of an act is an essential ingredient in every offence. That presumption may be displaced by the language of the statute creating the offence76. That the offence furthers the object of suppression orders, the making of which represents a departure from the norm of open justice, strengthens the presumption of mens rea77. Members of the public (including, but not limited to, media organisations and broadcasters) should not be expected, absent a clear indication from the language of the statute, to watch what they say because of the possibility that a suppression order may 75 Joint reasons at [76]. 76 He Kaw Teh v The Queen (1985) 157 CLR 523 at 528-529 per Gibbs CJ, Mason J agreeing at 546; see also at 565-566 per Brennan J, 594 per Dawson J; [1985] HCA 77 He Kaw Teh v The Queen (1985) 157 CLR 523 at 529-530 per Gibbs CJ, Mason J agreeing at 546, 594-595 per Dawson J. apply to the subject matter of their speech. Two of the cases relied upon by the informant concerned s 80 of the County Court Act 1958 (Vic), as it stood in 1988 and 2007 respectively78. The other authorities were concerned with the provisions of the Evidence Act 1929 (SA)79. The language of the provisions considered in those cases differed from that of s 42. Whatever the correctness of those decisions, as to which I express no view, the words of s 42(3) "must not publish or cause to be published any material in contravention of an order" do not displace the presumption that the alleged contravenor must know of the existence of the suppression order which he or she is said to be contravening. The proposition that the offence is a strict liability offence is singularly unattractive. I do not accept that s 42, properly construed, reflects any legislative intention to give effect to that proposition. Whether s 42 offends Ch III of the Constitution It was submitted for Mr Hinch that s 42 conferred a function upon the Supreme and County Courts incompatible with their character as courts capable of exercising the judicial power of the Commonwealth pursuant to Ch III of the Constitution. His specific complaints in summary were: The section empowers a court, without any limitations or safeguards, to abrogate the open justice principle. The section empowers a court to make decisions having a bearing on public safety, without providing reasons. There is no mechanism for appeal or review of a suppression order under The complaints are not sustainable. There are limitations upon the power to make suppression orders under s 42. Such orders must be made according to law. Their operation does not extend beyond what s 42, properly construed, permits. They cannot impose a general prohibition on the publication of material in the public domain unless that publication might have the prescribed effect of enabling a given person to be "identified" in the limited sense already explained. The "public interest" consideration does not authorise the court to act upon its 78 Bailey v Hinch [1989] VR 78 at 86 per Gobbo J; R v Australian Broadcasting Corporation [2007] VSC 498 at [38]-[44] per Harper J. 79 Nationwide News Pty Ltd v Bitter (1985) 38 SASR 390 at 393-397 per Olsson J; South Australian Telecasters Ltd v Director of Public Prosecutions (1996) 188 LSJS 42 at 52 per Lander J; Registrar of the Supreme Court v Herald & Weekly Times Ltd (2004) 233 LSJS 473 at 484-488 [40]-[53] per Gray J. whim. It directs the court to attend to the main purpose of the legislation and the stated purposes of extended supervision orders. It necessarily requires attention to be directed to the open justice principle and the common law freedom of speech as well as the Charter. The Act does not expressly require the court making a suppression order to give reasons for doing so. Not every judicial decision attracts a duty to give reasons. Nevertheless, as McHugh JA said in Soulemezis v Dudley (Holdings) Pty Ltd80: "when the decision constitutes what is in fact or in substance a final order, the case must be exceptional for a judge not to have a duty to state reasons." The making of an order under s 42 is a judicial function. It is a significant decision which must be made having regard to the public interest. It imposes restrictions upon freedom of speech and infringes the open-court principle. As appears below, it is amenable to review or appeal. In the ordinary course a judge making such an order, other than a short-term "holding" order, should give reasons for so doing. A suppression order made in association with an extended supervision order, even if, as in this case, qualified by words such as "until further order", cannot thereby be immunised from any obligation to explain it on the basis that it is merely interlocutory. There is an express requirement that a court making a decision in relation to an extended supervision order must state the reasons for its decision and cause them to be entered into the records of the court81. Reasons for making the extended supervision order should ordinarily incorporate the reasons for any associated suppression order. There is nothing in the Act which authorises or requires an application for an extended supervision order to be conducted in camera. Any order to that effect would have to be an exercise of inherent jurisdiction, implied power or a general statutory power outside the Act. There is nothing in the Act to prevent media organisations seeking, in the ordinary way, to apply to be heard in proceedings under the Act in relation to any proposed suppression order. If the proceedings are conducted in the County Court, then they are subject to review for jurisdictional error or error of law on the face of the record82. A media organisation affected by a suppression order would have standing to seek such 80 (1987) 10 NSWLR 247 at 279. 81 Act, s 35. 82 Supreme Court (General Civil Procedure) Rules 2005 (Vic), O 56. review in the Supreme Court83. It is true that a media organisation given leave to intervene in extended supervision order proceedings in the Supreme Court is not granted any right of appeal under Pt 3 of the Act. That Part only provides for appeals by offenders and by the Secretary against the making, or refusal to make, an extended supervision order84. However, an appeal lies to the Court of Appeal from any determination of the Trial Division of the Supreme Court constituted by a judge of the Court unless otherwise expressly provided by any Act85. That a media organisation affected by a suppression order will generally have standing in an appellate court to challenge that order by way of appeal, does not seem to be in doubt86. None of the specific complaints advanced on behalf of Mr Hinch relating to the operation of s 42 are made out. It remains to consider the general question of the effect of s 42 upon the open justice principle and whether that offends Ch III of the Constitution. The power conferred by s 42 to make suppression orders is conferred upon the Supreme and County Courts of Victoria. They are, pursuant to Ch III of the Constitution and laws made under it, part of a national integrated court system. They cannot validly be empowered or required to do things which are "repugnant the to or the exercise of Commonwealth."87 That broad criterion of invalidity encompasses functions which would be inconsistent with or inimical to the defining characteristics of a court, or which deprive a court of one or other of those defining characteristics. A law which deprives a court of the capacity to accord procedural fairness would judicial power of incompatible with the 83 John Fairfax & Sons Ltd v Police Tribunal (NSW) (1986) 5 NSWLR 465 at 468-470 per Mahoney JA, 482 per McHugh JA, Glass JA agreeing at 467; John Fairfax Group Pty Ltd v Local Court (NSW) (1991) 26 NSWLR 131 at 151, 156 per Kirby P, 169 per Mahoney JA, Hope A-JA agreeing at 169; Herald and Weekly Times Ltd v Braun [1994] 1 VR 705 at 711 per Beach J; Nationwide News Pty Ltd v District Court (NSW) (1996) 40 NSWLR 486 at 498 per Meagher JA, see also at 489-490 per Mahoney P. 84 Act, ss 36-39. 85 Supreme Court Act 1986 (Vic), ss 10(1)(a) and 17(2). See also Herald and Weekly Times Pty Ltd v A (2005) 160 A Crim R 299 at 303 [14] per Maxwell P and Nettle JA. 86 Herald & Weekly Times Ltd v Williams (2003) 130 FCR 435 at 440 [17]. 87 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 104 per Gaudron J, quoted with approval in Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617 [101] per Gummow J, Hayne J agreeing at 648 [198]. fall into that category88. So too would a law which places the court at the behest of the executive or recruits the judicial function of the court to an essentially The open hearing is an essential characteristic of courts, which supports the reality and appearance of independence and impartiality. Its corollary is the freedom to make a fair and accurate report of what transpires in court proceedings, including the orders made by the court. However, at common law the open justice principle has, consistently with the judicial function, long been subject to qualifications reflected in the inherent jurisdiction of courts or their implied incidental power to hear part of their proceedings in camera and to restrict the publication of evidence or the names of witnesses. Chapter III does not impose on federal courts or the courts of the States a more stringent application of the open justice principle than that described above. The extent at common law of a power to prohibit publication of evidence or information disclosed in proceedings in open court may be contentious. The existence of a power to make such orders to bind the world at large is doubtful. Debate on that issue goes to the common law and implied powers of courts. Its resolution does not conclude the question whether such a power is one which cannot be conferred by statute. Having regard to the existence of analogous common law powers, albeit powers not as far reaching as s 42, it cannot be said that that section confers upon the court functions inconsistent with its essential curial characteristics or deprives it of those characteristics. Importantly, the section confers a discretion on the court to decide whether or not to prohibit publication of certain information derived from proceedings before it. It requires the court to apply familiar criteria in reaching that decision. There is nothing in the nature of the power conferred upon the court by s 42, properly construed, which is repugnant to or incompatible with the judicial function or otherwise incompatible with any implication derived from Ch III. 88 Leeth v The Commonwealth (1992) 174 CLR 455 at 470; [1992] HCA 29; International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 355 [55] per French CJ, 366-367 [97]-[98] per Gummow and Bell JJ; [2009] HCA 49. 89 South Australia v Totani (2010) 85 ALJR 19; 271 ALR 662. The implied freedom of political communication The test adopted by this Court in Lange v Australian Broadcasting Corporation90, as modified in Coleman v Power91, to determine whether a law offends against the implied freedom of communication involves the application of two questions: Does the law effectively burden freedom of communication about government or political matters in its terms, operation or effect? If the law effectively burdens that freedom, is the law reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the maintenance of the constitutionally prescribed system the procedure of representative and responsible government and prescribed by s 128 of the Constitution for submitting a proposed amendment of the Constitution to the informed decision of the people? If the first question is answered yes, and the second answered no, the law will be invalid92. It was submitted on behalf of Mr Hinch that s 42 authorises prohibition of the publication of information which may be necessary to communicate a view upon the operation of the legislation with reference to the effectiveness of the rehabilitation of specific offenders and/or the circumstances under which specific offenders may have re-offended or breached extended supervision orders. Such information, it was submitted, is critical to any meaningful discussion of the Act and of the government's performance in respect of a key policy issue. in relation to politics or government at It was submitted for the Commonwealth that the implied freedom applies the to communications only Commonwealth level. That limitation may be a logical consequence of the source of the implied freedom. That source is to be found in the scheme adopted by the Commonwealth Constitution for a representative democracy and for the amendment of the Constitution by referendum. The limit propounded, despite its logical attraction, is not of great practical assistance. There is today significant interaction between the different levels of government in Australia. The use of cooperative executive and legislative arrangements between Commonwealth and State and Territory governments through the Council of Australian Governments, Ministerial Councils and otherwise, makes it difficult to identify subjects not 90 (1997) 189 CLR 520. 91 (2004) 220 CLR 1 at 51 [95]-[96] per McHugh J, 78 [196] per Gummow and Hayne JJ, 82 [211] per Kirby J. 92 (1997) 189 CLR 520 at 567-568. capable or potentially capable of discussion as matters which are or should be or could be of concern to the national government. The supervision and rehabilitation of serious sex offenders, for example, may raise questions about the adequacy of Commonwealth funding of State and Territory services and cooperative arrangements between the Commonwealth and the States and Territories. It is notable that the suppression orders made in the present case authorised the entry of the offenders' names on the Australian National Child Offender Register. The Register is the product of an Intergovernmental Agreement to which the Commonwealth is a party93. The generality of this Court's statement in Lange about the scope of the communications covered by the freedom tends to bear out these observations94: "this Court should now declare that each member of the Australian community has an interest in disseminating and receiving information, opinions and arguments concerning government and political matters that affect the people of Australia." "the discussion of matters at State, Territory or local level might bear on the choice that the people have to make in federal elections or in voting to amend the Constitution, and on their evaluation of the performance of federal Ministers and their departments. The existence of national political parties operating at federal, State, Territory and local government levels, the financial dependence of State, Territory and local governments on federal funding and policies, and the increasing integration of social, economic and political matters in Australia make this conclusion inevitable." The range of matters that may be characterised as "governmental and political matters" for the purpose of the implied freedom is broad. They are not limited to matters concerning the current functioning of government. They arguably include social and economic features of Australian society. For these are, at the very least, matters potentially within the purview of government. It is conceivable that a suppression order, authorised under s 42, could have the effect of preventing or restricting public discussion of the supervision or treatment by government agencies of a particular offender whose identity and 93 See fn 24. 94 (1997) 189 CLR 520 at 571. 95 (1997) 189 CLR 520 at 571-572. personal history is relevant to that discussion. On the other hand, as Hayne J observed in APLA Ltd v Legal Services Commissioner (NSW)96: "in deciding whether the freedom has been infringed, the central question is what the impugned law does, not how an individual might want to construct a particular communication". That observation may indeed be an answer to the submissions made on this issue on behalf of Mr Hinch in so far as the identification of offenders might be used as a rhetorical device. It may be, however, that there are occasions on which the use of the offender's identity is directly relevant to a point to be made about public administration in relation to serious sex offenders generally. On that basis it may be accepted that s 42 has the capacity to burden political communication. Properly construed, however, the section is, in my opinion, reasonably appropriate and adapted to serve a legitimate end in a manner compatible with the maintenance of representative and responsible government provided for in the Constitution. Its objects are the protection of the community and the rehabilitation of serious sex offenders who are at risk of re-offending after they have completed their sentences. Having regard to the limits on the application of s 42, properly construed, and its relationship to long-established common law and implied powers, it is a reasonable means of achieving those objects. It is not applied absolutely. The making of orders under s 42 requires consideration by the court of the public interest in light of the purposes of the Act, the open-court principle, the common law freedom of speech and the freedom of expression referred to in the Charter. In my opinion the provision satisfies the second limb of the Lange test. Conclusion For the preceding reasons, the challenge to the validity of s 42 fails. I agree with the order proposed in the joint reasons. 96 (2005) 224 CLR 322 at 451 [381]; [2005] HCA 44. Crennan Bell GUMMOW, HAYNE, HEYDON, CRENNAN, KIEFEL AND BELL JJ. Section 1(1) of the Serious Sex Offenders Monitoring Act 2005 (Vic) ("the Act") states the "main purpose" of the statute. It is: "to enhance the protection of the community by requiring offenders who have served custodial sentences for certain sexual offences and who are a serious danger to the community to be subject to ongoing supervision while in the community." Section 1(2) of the Act states: "In outline this Act – defines the class of sex offender to whom it applies; and empowers the Supreme Court or County Court to make an extended supervision order of up to 15 years in respect of an eligible offender on the application of the Secretary to the Department of Justice; and gives functions to the Adult Parole Board in relation to giving instructions or directions in respect of an extended supervision order and supervising offenders who are subject to such an order; and provides for the suspension, review and renewal of extended supervision orders." Content is given to par (a) of s 1(2) by the definition of "eligible offender" in s 4. In particular, at the time at which an application is made for an "extended supervision order" under Pt 2 (ss 5-35) the offender must be serving a custodial sentence, and must be a person sentenced for a "relevant offence". This is one of the 44 offences listed in the Schedule to the Act. Contrary to the tenor of the speech of the responsible Minister on the Second Reading in the Legislative Assembly of the Bill for the Act97, the offenders are not limited to what may be called "child-sex offenders". 97 Victoria, Legislative Assembly, Parliamentary Debates (Hansard), 22 February Crennan Bell The court proceedings under the Act include not only those in the Supreme Court or the County Court under Pt 2 with respect to extended supervision orders and interim extended supervision orders, but appeals under Pt 3 (ss 36-39A)98 to the Court of Appeal. Breach by an offender of an extended supervision order or an interim extended supervision order is an offence (s 40), and according to the circumstances may be heard in the Supreme Court, the County Court or the Magistrates' Court (s 41). Thus these prosecutions also give rise to court proceedings under the Act. It is the validity of s 42 which is challenged in this Court. The section has two sequential operations. First, sub-ss (1) and (2) of s 42 empower a court in any proceeding under the Act, on its own initiative or on the application of a party, to make an order that certain matters not be published except in the manner and to the extent (if any) specified in the order. Secondly, s 42(3) makes it an offence for a person to publish or cause to be published any material in contravention of such an order. The litigation On 29 September 2008, the defendant was charged with contraventions of orders which had been made in Pt 2 proceedings by the County Court under s 42 of the Act. The contraventions alleged were of two descriptions. One concerned the publication on the website "www.hinch.net" of articles which identified an offender, and the other was the stating by the defendant of the name of an offender at a public protest rally in Melbourne on 1 June 2008. The County Court orders were made on 20 December 2007, 21 April 2008 and 4 July 2008. They were expressed as made until further order and pursuant to s 42 of the Act. The first order relevantly stated that "any information that might enable [the offender] or his whereabouts to be identified must not be published". The second and third orders were in like form, stating "no information that might enable [the offender] to be identified is to be published". The orders were so drawn as to do no more than restate the terms of par (c) of s 42(1), "any information that might enable an offender or another person who has appeared or given evidence in the proceeding to be identified". 98 The Act was repealed by s 200 of the Serious Sex Offenders (Detention and Supervision) Act 2009 (Vic), but the previous legislation continues to apply to the present litigation: Interpretation of Legislation Act 1984 (Vic), s 14(2). Crennan Bell The making of orders in the terms of par (c) was not beyond the power conferred by s 42(1) but was an undesirable practice. The authorities discussed in ICI Australia Operations Pty Ltd v Trade Practices Commission99 indicate that an injunction should not be framed in terms which do no more than reproduce the text of a statutory prohibition; rather, the injunction should indicate the conduct which is enjoined or commanded to be performed, so that the defendant knows what is expected on its part. Further, Lockhart J added in ICI100: "It is not only parties who are answerable for contempt of order of courts. As mentioned earlier, persons who counsel, procure or induce parties to breach injunctions are directly responsible for those breaches. Hence, it is desirable that the terms of the injunctions be readily available to all persons who may be affected by them." This reasoning is particularly applicable to the framing of orders made under s 42 of the Act. The sanction of contempt is supplemented by the offence provision in s 42(3) and the orders are addressed not merely to designated parties, but to the world at large. The defendant was summoned to appear at the Magistrates' Court of Victoria on 29 October 2008. Thereafter, while that cause was still pending, by order made under s 40(1) of the Judiciary Act 1903 (Cth) on 30 July 2010, there was removed into this Court so much of the cause as concerns the validity of s 42 of the Act. The Attorneys-General for the Commonwealth, New South Wales, Queensland, South Australia and Western Australia intervened under s 78A of the Judiciary Act. For the reasons which follow s 42 is valid. The submissions The defendant makes three principal submissions. The first concerns the jurisdiction or power conferred by s 42(1), to make what are called "suppression orders". The submission is that the jurisdiction or power conferred by s 42, and exercised by the County Court in making its orders on 20 December 2007, 21 April 2008 and 4 July 2008, impermissibly diminishes the institutional 99 (1992) 38 FCR 248 at 259-262. 100 (1992) 38 FCR 248 at 262. Crennan Bell integrity of the courts of Victoria in the sense explained by this Court most recently in International Finance Trust Co Ltd v New South Wales Crime Commission101 and South Australia v Totani102. The second submission is that the prohibitions imposed by those County Court orders were contrary to an implication derived from Ch III of the Constitution that all State and federal courts must be open to the public and carry out their activities in public. The third submission is that the statutory prohibition upon publication which is imposed by s 42(3), and founds the charges against the defendant, has an operation which is at odds with the implied freedom of political communication considered in Lange v Australian Broadcasting Corporation103; in particular, it is said that s 42(3) inhibits the ability of the defendant and others to criticise the Act itself and to seek legislative changes by public assembly, protest and dissemination of "factual data concerning court proceedings as a means of seeking such changes". The defendant, in elaboration of the third submission and in reliance upon a passage in the reasons of Mason CJ, Toohey and Gaudron JJ in Stephens v West Australian Newspapers Ltd104, also contended that the implication considered in Lange had its counterpart in the Constitution of the State of Victoria. The submission was not developed, but if the third submission fails it also must fail in any event. In response to the third submission, New South Wales and Queensland contended that any exercise of executive or judicial authority under the Act was well removed from any "federal issue" and thus from the scope of the Lange implication. 101 (2009) 240 CLR 319; [2009] HCA 49. 102 (2010) 85 ALJR 19; 271 ALR 662; [2010] HCA 39. 103 (1997) 189 CLR 520; [1997] HCA 25. 104 (1994) 182 CLR 211 at 232-234; [1994] HCA 45. Crennan Bell Section 42 of the Act Before turning to consider the submissions, the text of s 42 should be set out. This presents several questions of construction to be answered before embarking upon the issues of validity. Section 42 (which is headed "Suppression orders") reads: In any proceeding before a court under this Act, the court, if satisfied that it is in the public interest to do so, may order – that any evidence given in the proceeding; or that the content of any report or other document put before the court in the proceeding; or that any information that might enable an offender or another person who has appeared or given evidence in the proceeding to be identified – must not be published except in the manner and to the extent (if any) specified in the order. (2) An order under this section may be made on the application of a party or on the court's own initiative. (3) A person must not publish or cause to be published any material in contravention of an order under this section. Penalty: 500 penalty units in the case of a body corporate; 120 penalty units or imprisonment for 1 year or both in any other case." (emphasis added) The exercise of the power conferred by s 42(1) is conditioned upon the satisfaction of the court that it is in the public interest to make an order of the description in pars (a), (b) or (c). If the court attains that satisfaction then, for reasons of the kind explained in Hogan v Australian Crime Commission105, the 105 (2010) 240 CLR 651 at 664 [32]-[33]; [2010] HCA 21. Crennan Bell court is to implement that satisfaction by making the order. The phrase "the court ... may order" is to be read accordingly. The expression "that it is in the public interest" imports a judgment to be made by reference to the subject, scope and purpose of the Act106. The main purpose of the Act disclosed by s 1(1) is enhancement of community protection by supervision of certain offenders who have served custodial sentences. But, as will now appear, the question of what is in the public interest has more than one dimension107. That additional dimension is supplied by the requirement that the Act, "[s]o far as it is possible to do so consistently with [its] purpose", must be interpreted in a way that is compatible with the civil and political rights set out in Pt 2 (ss 7-27) of the Charter of Human Rights and Responsibilities Act 2006 (Vic) ("the Human Rights Act"). This method of interpretation is enjoined by s 32(1) of the Human Rights Act. Section 6(1) of the Human Rights Act states that "[a]ll persons have the human rights set out in [Pt] 2". The rights listed in Pt 2 relevantly include that of offenders the subject of supervision orders not to have their privacy arbitrarily interfered with (s 13), and the right of the defendant to freedom of expression in any chosen medium, but subject to lawful restrictions "reasonably necessary" to respect the rights and reputation of other persons (s 15). Those rights of other persons include those of offenders identified in s 13. The phrase "reasonably necessary", which is used in s 15 of the Human Rights Act, supplies a criterion for judicial evaluation and decision-making in many fields. Examples from the common law, statute law and Australian constitutional law were collected and discussed by Gleeson CJ in Thomas v Mowbray108. In an earlier decision, his Honour had pointed out that "necessary" 106 O'Sullivan v Farrer (1989) 168 CLR 210 at 216-217; [1989] HCA 61. 107 McKinnon v Secretary, Department of Treasury (2006) 228 CLR 423 at 443-444 [55]; [2006] HCA 45; Osland v Secretary, Department of Justice (2008) 234 CLR 275 at 323 [137]; [2008] HCA 37. 108 (2007) 233 CLR 307 at 331-333 [20]-[27]; [2007] HCA 33. Crennan Bell does not always mean "essential" or "unavoidable"109. He also observed that, particularly in the field of human rights legislation, the term "proportionality" might be used to indicate what was involved in the judicial evaluation of competing interests which were rarely expressed in absolute terms110. Paragraphs (a) and (b) of s 42(1) of the Act are concerned with material identified with some specificity, being evidence in the proceeding and the content of any report or other document "put before the court in the proceeding". This last expression is apt to catch such things as assessment reports by which an application for an extended supervision order must be accompanied (ss 6, 8) and instructions and directions with respect to an extended supervision order given to the offender by the Secretary to the Department of Justice (s 16). Those instructions or directions may concern the offender's place of residence and the times at which the offender must be at home (pars (a) and (b) of s 16(3)). Paragraph (c) of s 42(1) is concerned with "any information" which might enable "to be identified" either an offender or another person who has appeared or given evidence in the proceeding in question. In the setting provided by s 42 and the Act as a whole, the prohibition is concerned with information which might enable those in possession of it to recognise, ascertain or establish that a given person is an offender or a witness or other person who has appeared at the proceeding in question. The focus is not upon naming a particular person as having committed or having been convicted of an offence. The focus of s 42 (and s 42(1) in particular) is upon the conduct of the subsequent proceeding under the Act111. Whether publishing a person's name is to publish information which might enable to be identified an offender or a witness or other person who has given evidence at the proceeding in question would be an issue of fact to be decided by reference to the whole of the relevant publication and any other relevant evidence. The provision in par (c) of s 42(1), like those in pars (a) and (b), is directed in aid of the efficacy of the proceeding under the Act which is before the court. 109 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 199-200 [39]; [2004] HCA 41. 110 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 198-199 [36]-[37]. See also In re British Broadcasting Corporation [2010] 1 AC 145; In re Guardian News and Media Ltd [2010] 2 AC 697. 111 See Bailey v Hinch [1989] VR 78 at 93. Crennan Bell The submission of the Queensland Attorney-General in this respect should be accepted. The Act provides for a regime under which, after release, an eligible offender may be subjected to an intrusive monitoring regime which requires an identified and fixed place of residence. This is done in aid of the main purpose of the Act spelled out in s 1(1). The orders establishing this regime may be frustrated by such steps as identification of the offender as living in a particular area or publication of photographs showing a distinctive appearance. The power conferred by s 42(1) is designed to protect against frustration of the processes of the court in the proceeding in question. With this construction of s 42(1) in mind, the offence created by s 42(3) of the Act falls for consideration. Several things should be remarked here. The first is that proceedings for contempt of an order made under s 42, whether in the Supreme Court or the County Court, would require personal service on the person bound of a copy of the judgment indorsed with a notice naming the person served and requiring compliance: Supreme Court (General Civil Procedure) Rules 2005 (Vic), r 66.10; County Court Civil Procedure Rules 2008 (Vic), r 66.10. The power to dispense with service under such provisions is sparingly exercised112. The second is that, by way of contrast, there is no provision in the Act for publication of orders made under s 42, although they may be addressed to the world at large and the existence of the order is the factum upon which the offence provision in s 42(3) operates. The third consideration is that the first two considerations point away from the submission for the informant based upon the decision of Gobbo J in Bailey v Hinch113, which considered the differently constructed provision in s 80 of the County Court Act 1958 (Vic). The submission is that s 42(3) creates an offence of "strict liability", and that neither knowledge of the order nor any further mens rea is required to complete the offence, although a defence of honest and reasonable mistake of fact may be permitted. To the contrary of the informant's submission, the phrase in s 42(3) "publish or cause to be published ... in contravention of an order" indicates a requirement of knowledge of that order in contravention of which the publication 112 Drummoyne Municipal Council v Lewis [1974] 1 NSWLR 655 at 658. Crennan Bell is made. "Contravention" is used in the sense of disputation or denial rather than mere failure to comply with an unknown requirement. Such a construction of s 42(3) also better accommodates the provision in s 15(3) of the Human Rights Act respecting reasonably necessary restrictions upon the right to freedom of expression. It is convenient now to come to the defendant's three submissions asserting invalidity. As will appear, the second is a cognate of the first, and both concern the power conferred by s 42 upon the Supreme Court and the County Court to make "suppression orders". Institutional integrity As indicated earlier in these reasons, the power to make a "suppression order" is enlivened by the satisfaction of the court that it is "in the public interest" to do so. That expression derives content from the main purpose of the Act, which is identified in s 1(1). Section 42(1) does not present to the court a criterion which is "so indefinite as to be insusceptible of strictly judicial application"114. Examples of criteria for the exercise of the judicial power of the Commonwealth which have been stated in broad terms and held valid are collected in Thomas v Mowbray115. The criterion for the exercise of power under s 42 is not such as to impair impermissibly the character of the State courts as independent and impartial tribunals and thus to render them inappropriate repositories of federal jurisdiction. Nor is there substance in the submission by the defendant that there is no appellate avenue to challenge an unreasoned decision to make an order under The three orders made by the County Court on 20 December 2007, 21 April 2008 and 4 July 2008 were authorised by s 42, if made "[i]n any proceeding [which was before the County Court] under [the] Act". If that proceeding, as appears to be the case here, related to an extended supervision order under Pt 2, then in determining the application s 42 operated as an adjunct 114 R v Commonwealth Industrial Court; Ex parte The Amalgamated Engineering Union, Australian Section (1960) 103 CLR 368 at 383 per Kitto J; [1960] HCA 46. 115 (2007) 233 CLR 307 at 344-348 [71]-[79], 509 [600], 526 [651]. Crennan Bell to Pt 2. Section 35 required the court to "state the reasons for its decision" and decisions under Pt 2 attracted the provisions of Pt 3 for appeals to the Court of Appeal. Those reasons should include reasons for making an order under s 42(1) and it would therefore ordinarily be expected that there would be identified why it was judged to be in the public interest to make an order preventing publication of particular information. Part 4 (ss 40-41) stands apart. It creates an offence of breach of an extended or interim extended supervision order, and provides the procedure for dealing with those offences. To the conduct of those proceedings, s 42(1) would attach. There is nothing in the Act to deny the operation of ordinary appellate and review structures in Victoria with respect to convictions of an offence under The complaint of the defendant with respect to these aspects of s 42 appeared to be that he had had no right thereunder to be notified and to be heard before the orders in question had been made. But, as already indicated, no contempt proceeding could advance in the absence of personal service of the order. Further, the right to freedom of expression under s 15 of the Human Rights Act may be subject to lawful restrictions reasonably necessary to respect the rights of other persons to privacy provided by s 13. The construction of the offence provision in s 42(3) given earlier in these reasons accommodates those interests to the main purpose of the legislation stated in s 1(1). Open justice However, the defendant then contends in his second submission that the restrictions imposed by the three County Court orders could not be supported by s 42 because that law empowered the court acting thereunder to act contrary to a requirement derived from Ch III that "all Federal and State Courts must be open to the public". 116 See Mansfield v Director of Public Prosecutions (WA) (2006) 226 CLR 486 at 491 [7]; [2006] HCA 38; Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 555 [19]; [2008] HCA 4. Crennan Bell In Dupas v The Queen117 the Court observed: "Having regard both to the antiquity of the power and its institutional importance, there is much to be said for the view that in Australia the inherent power to control abuse of process should be seen, along with the contempt power, as an attribute of the judicial power provided for in Ch III of the Constitution." An understanding of those and other attributes of the federal judicial power may be assisted by the remarks of Isaacs J in R v Macfarlane; Ex parte "The final and paramount consideration in all cases is that emphasized in Scott v Scott119, namely, 'to do justice' (Viscount Haldane LC). All other considerations are means to that end. They are ancillary principles and rules. Some of them are so deeply embedded in our law as to be elementary and axiomatic, others closely approach that position. Of the latter class is publicity, which can only be disregarded where necessity compels departure, for otherwise justice would be denied to those whom Earl Loreburn120 termed 'the parties entitled to justice.'" Some care is required here. First, the present issue does not concern the authority of the courts by further decision to add to those situations where the necessity spoken of by Isaacs J compels departure from the requirement that justice be administered publicly. In Scott v Scott121, Viscount Haldane LC recognised the diverse and special cases which arose in the wardship and lunacy jurisdictions and in disputes respecting trade secrets. Secondly, there are to be distinguished from the power of courts to close their proceedings, rules of evidence which confer an immunity against disclosure in court of certain 117 (2010) 241 CLR 237 at 243 [15]; [2010] HCA 20. 118 (1923) 32 CLR 518 at 549; [1923] HCA 39. See also Bass v Permanent Trustee Co Ltd (1999) 198 CLR 334 at 359 [56]; [1999] HCA 9. 119 [1913] AC 417 at 437. 120 [1913] AC 417 at 446. 121 [1913] AC 417 at 437-438. Crennan Bell communications made in the public interest122. Thirdly, in order to resolve the present issue it is unnecessary to accept that there is an inherent jurisdiction or implied power in some circumstances to restrict the publication of proceedings conducted in open court. Fourthly, the focus of the present case is not upon the inherent powers of the courts or exclusionary rules of evidence, but upon the competence of the Victorian legislature to confer upon Victorian courts the power provided in s 42 of the Act. It is here that the argument by the defendant breaks down. The powers of the Parliament of the Commonwealth are conferred by the Constitution subject to Ch III. They extend to furnishing courts exercising federal jurisdiction with authorities incidental to the exercise of the judicial power123. Thus, while s 17 of the Federal Court of Australia Act 1976 (Cth) requires the jurisdiction of that Court to be exercised in open court, that is qualified by s 50, which empowers the Court in certain circumstances to forbid or restrict the publication of evidence124. A further example of federal legislation of that character was s 97(1) of the Family Law Act 1975 (Cth) ("the Family Law Act"), held invalid in Russell v Russell125. The sub-section required the hearing in closed court of all proceedings under that statute, whether in the Family Court of Australia or the Supreme Court of a State or Territory. The High Court was dealing with pending causes removed from the Supreme Courts of Victoria and South Australia. Gibbs J said that to require a court invariably to sit in closed court was to alter an essential aspect of its character126. But his Honour added127: 122 See Cain v Glass (No 2) (1985) 3 NSWLR 230 at 246-248 per McHugh JA. 123 R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254 at 269-270; [1956] HCA 10; APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 407-408 [234]-[235]; [2005] HCA 44. 124 See Hogan v Australian Crime Commission (2010) 240 CLR 651. 125 (1976) 134 CLR 495; [1976] HCA 23. 126 (1976) 134 CLR 495 at 520. 127 (1976) 134 CLR 495 at 520. Crennan Bell "Of course there are established exceptions to the general rule that judicial proceedings shall be conducted in public; and the category of such exceptions is not closed to the Parliament. The need to maintain secrecy or confidentiality, or the interests of privacy or delicacy, may in some cases be thought to render it desirable for a matter, or part of it, to be held in closed court. If the [Family Law Act] had empowered the Supreme Courts when exercising matrimonial jurisdiction to sit in closed court in appropriate cases I should not have thought that the provision went beyond the power of the Parliament. In requiring them to sit in closed court in all cases – even proceedings for contempt – the Parliament has attempted to obliterate one of their most important attributes. This it cannot do." This reasoning should be followed here and has three consequences. First, it denies any restriction drawn from Ch III which in absolute terms limits the exercise of the legislative power of the Parliament. Secondly, it indicates that a federal law to the effect of s 42 would be valid and would not deny an essential characteristic of a court exercising federal jurisdiction. Thirdly, this being so, as a State law s 42 does not attack the institutional integrity of the State courts as independent and impartial tribunals in the sense discussed in International Finance Trust and Totani. Freedom of political communication There remains the defendant's third submission. It is made clear in Lange128 and Coleman v Power129 that the implied freedom of political communication operates as a constraint upon legislative power in a particular sense. Communications concerning the exercise of judicial power stand apart in the sense discussed in detail by McHugh J in APLA Ltd v Legal Services Commissioner (NSW)130. In the course of that discussion of principle in APLA, McHugh J remarked131: 128 (1997) 189 CLR 520 at 567-568. 129 (2004) 220 CLR 1 at 50-51 [92]-[96], 77-78 [196], 82 [211]; [2004] HCA 39. 130 (2005) 224 CLR 322 at 361 [65]-[66]. 131 (2005) 224 CLR 322 at 361 [66]. Crennan Bell "The Lange freedom arises from the necessity to promote and protect representative and responsible government. Because it arises by necessity, the freedom is limited to 'the extent of the need'132. Courts and judges and the exercise of judicial power are not themselves subjects that are the involved constitutional sense." in representative or responsible government His Honour also said133: "There is a difference between a communication concerning the legislative and executive acts or omissions concerned with administration of justice and communications concerning that subject that do not involve, expressly or inferentially, acts or omissions of the legislature or the Executive Government. Discussion of the appointment or removal of judges, the prosecution of offences, the withdrawal of charges, the provision of legal aid and the funding of courts, for example, are communications that attract the Lange freedom. That is because they concern, expressly or inferentially, acts or omissions of the legislature or the Executive Government. They do not lose the freedom recognised in Lange because they also deal with the administration of justice in federal jurisdiction. However, communications concerning the results of cases or the reasoning or conduct of the judges who decide them are not ordinarily within the Lange freedom. In some exceptional cases, they may be. But when they are, it will be because in some way such communications also concern the acts or omissions of the legislature or the Executive Government." The defendant submits that the communications by him which found the charges laid by the informant under s 42(3) concern acts or omissions of the legislative and executive branches of the government of Victoria. He seeks the repeal of the Act, in particular of s 42 itself, and contends that his communications do not lose protection of the freedom recognised in Lange because they also deal with the administration of justice by the courts of a State, 132 Board of Fire Commissioners (NSW) v Ardouin (1961) 109 CLR 105 at 118 per Kitto J; [1961] HCA 71. 133 (2005) 224 CLR 322 at 361 [65]. Crennan Bell within the meaning of s 77(iii) of the Constitution. Accordingly, the defendant says that an affirmative answer must be given to the first Lange question134: "does the law [s 42(3)] effectively burden freedom of communication about government or political matters either in its terms, operation or effect?" It may be accepted that an affirmative answer should be given to this question. But s 42(3) does not display a "direct" rather than "incidental" burden upon that communication. The distinction was explained as follows by Gleeson CJ in Mulholland v Australian Electoral Commission135. After pointing out that there are many laws (and s 42 of the Act is one such law) which affect freedom to communicate, his Honour continued: "Some such laws have only an indirect or incidental effect upon communication about matters of government and politics. Others have a direct and substantial effect. Some may themselves be characterised as laws with respect to communication about such matters. In Australian Capital Television Pty Ltd v The Commonwealth136, Deane and Toohey JJ said that 'a law whose character is that of a law with respect to the prohibition or restriction of [political] communications ... will be much more difficult to justify ... than will a law whose character is that of a law to some other subject and whose effect on such with respect communications is unrelated to their nature as political communications'. The passage was cited by Gaudron J in Levy v Victoria137." Earlier, in Cunliffe v The Commonwealth138, Deane J spoke of cases where the law in question involved no significant curtailment of the freedom of political communication and discussion, and continued: 134 (1997) 189 CLR 520 at 567. 135 (2004) 220 CLR 181 at 200 [40]. 136 (1992) 177 CLR 106 at 169; [1992] HCA 45. 137 (1997) 189 CLR 579 at 618-619; [1997] HCA 31. 138 (1994) 182 CLR 272 at 339; [1994] HCA 44; see also Levy v Victoria (1997) 189 CLR 579 at 614 per Toohey and Gummow JJ. Crennan Bell its nature nor a necessary "That may even be so in a case where the law prohibits or regulates a particular type of communication or discussion which is neither inherently political ingredient of political communication or discussion (eg incitement or conspiracy to commit a serious criminal offence). In such cases, any incidental curtailment of freedom of political communication and discussion will be consistent with the constitutional implication if it is reasonably capable of being seen as necessary or appropriate and adapted to the legitimate legislative aim being pursued by the Parliament." The second question posed by Lange (as reformulated in Coleman) asks whether s 42(3) of the Act is reasonably appropriate and adapted to serve a legitimate end in a manner which is compatible with the maintenance of the constitutionally prescribed responsible government139. representative system of and The provisions of s 42, given the construction placed upon them earlier in these reasons, operate in aid of the scheme embodied in the Act, particularly that respecting extended or interim extended supervision orders. The burden upon political communication in any particular case will vary and depend upon the scope of the orders which the court makes under s 42(1), having regard to the circumstances. The offence created by s 42(3) is not one of strict liability. The answer to the second Lange question must be answered "yes" and thus in favour of the validity of s 42. This makes it unnecessary to pursue the question whether there is an insufficient connection with any "federal issue" to attract the implied freedom of political communication. Order This Court should make a declaration that s 42 of the Serious Sex Offenders Monitoring Act 2005 (Vic) is not invalid upon any of the grounds asserted in submissions to this Court. There remains in the State court so much of the cause as was not removed into this Court. 139 See APLA Ltd v Legal Services Commissioner (NSW) (2005) 224 CLR 322 at 402 Crennan Bell
HIGH COURT OF AUSTRALIA PHILIP CHEE MING NG APPLICANT AND THE QUEEN RESPONDENT Ng v The Queen [2003] HCA 20 Date of Order: 13 February 2003 Date of Publication of Reasons: 10 April 2003 ORDER Application dismissed. On appeal from the Supreme Court of Victoria Representation: A W Street SC with G D Wendler for the applicant (instructed by Allan McMonnies) D J Bugg QC with N T Robinson for the respondent (instructed by Director of Public Prosecutions (Commonwealth)) Interveners: D M J Bennett QC, Solicitor-General of the Commonwealth with C J Horan intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) T I Pauling QC, Solicitor-General for the Northern Territory with N Rogers intervening on behalf of the Attorney-General for the Northern Territory (instructed by Director of Public Prosecutions (Northern Territory)) R J Meadows QC, Solicitor-General for the State of Western Australia and J C Pritchard intervening on behalf of the Attorney-General for the State of Western Australia (instructed by Crown Solicitor for the State of Western Australia) R A Pepper intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor for the State of New South Wales) S M Crennan QC with R M Doyle intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Ng v The Queen Constitutional law (Cth) – Law of the Commonwealth – Indictable offence – Trial by jury – Whether State law requiring, by ballot, a reduction in the number of jurors from 15 to 12 prior to commencement of jury deliberations contravenes s 80 of the Constitution – Whether State law exempting foreperson from removal from jury by ballot contravenes s 80 of the Constitution. Constitution, s 80. Judiciary Act 1903 (Cth), s 68. Juries Act 1967 (Vic), ss 14, 14A, 48A. GLEESON CJ, GUMMOW, HAYNE, CALLINAN AND HEYDON JJ. The applicant was charged with conspiracy to import into Australia a commercial quantity of heroin contrary to s 233B(1)(cb) of the Customs Act 1901 (Cth) ("the Customs Act"). He was tried on indictment in the County Court of Victoria. Section 80 of the Constitution was engaged. The County Court was invested with federal jurisdiction by virtue of s 68(2) of the Judiciary Act 1903 (Cth) ("the Judiciary Act"). That investment of jurisdiction is stated in s 68(2) to be subject both to the other provisions of s 68 and to s 80 of the Constitution. Section 68(1) authorised the County Court to apply the laws of Victoria but only "so far as they are applicable to persons who are charged with offences against the laws of the Commonwealth". The applicant pleaded not guilty. The effect of s 14(2) of the Juries Act 1967 (Vic) ("the Juries Act") was that the applicant was to be tried by a jury of 12 or, if the County Court made an order in accordance with s 14A of the Juries Act, by a jury of not more than 15. An order for 15 jurors was made under s 14A. That section stated: "A court before which a criminal inquest is to be heard may order the impanelment of up to 3 additional jurors in that inquest before the jury is impanelled for any reason that appears to the court to be good and sufficient." The making of the order under s 14A in due course attracted the operation of s 48A. The trial lasted nearly four months and the 15 jurors impanelled had remained, none having died or been discharged for cause. Following the summing up by the trial judge, a ballot to reduce the number of jurors to 12 was conducted pursuant to s 48A. This required the conduct of a ballot, to reduce the number to 12 before the jury retired to consider its verdict, by drawing at random the number of juror cards necessary to achieve that result. If the card of the foreperson was drawn, that card was to be kept apart and another card drawn (s 48A(4)). As it happened, the card of the foreperson was the first drawn. That was set aside and three other cards were drawn. The jury of 12, including the foreperson, retired to consider its verdict. The applicant was convicted and sentenced. The applicant applied to the Court of Appeal (Winneke P, Batt and Eames JJA)1 for leave to appeal against both conviction and sentence. The Court of Appeal dismissed both applications. In this Court, the applicant sought special leave substantially on two grounds. The first was that the Court of Appeal had erred in holding that his sentence was not infected by appealable error. In so far as it turned upon that ground, the application was dismissed in the course of oral argument on 13 February 2003, the Court being of the view that there were insufficient prospects of success to warrant a grant of special leave on that point. The Court then proceeded with oral argument on the balance of the application and at the conclusion of the argument ordered that the application be dismissed. What follows are the reasons for that dismissal. The applicant was tried on indictment for an offence against a law of the Commonwealth, namely the provision of the Customs Act to which reference has been made. The remaining ground of the application for special leave is that the trial had not been "by jury" as mandated by s 80 of the Constitution. Whilst the complaint is put in various ways, its substance is that s 68 of the Judiciary Act, operating according to its terms, did not "pick up" the provisions of s 48A of the Juries Act whereby the jury was reduced from 15 to 12 and the foreperson was "immunised" from that process of reduction. Of its own force, s 48A could not, and did not purport to, apply in the exercise of federal jurisdiction2. Section 68 of the Judiciary Act contains internal limitations to deny to it any operation the validity of which would be impeached by s 80 of the Constitution3. The result is that the applicant did not attack the validity of any legislation. Rather, the complaint, as in Brownlee v The Queen4 and Katsuno v The Queen5, was that, in the events that happened, the trial process [2002] VSCA 108. 2 Australian Securities and Investments Commission v Edensor Nominees Pty Ltd (2001) 204 CLR 559 at 588 [59], 611 [134]; Macleod v Australian Securities and Investments Commission (2002) 76 ALJR 1445 at 1447 [10]; 191 ALR 543 at 546; cf Byrnes v The Queen (1999) 199 CLR 1 at 31-32 [70]-[72]. 3 Brown v The Queen (1986) 160 CLR 171 at 178, 200, 218. (2001) 207 CLR 278 at 296 [50]. (1999) 199 CLR 40 at 63 [48]. miscarried because it was not conducted in accordance with the constitutional command in s 80 that it be "by jury". Brownlee establishes that, whilst the requirement in s 80 of a trial "by jury" is referable to that institution as understood at common law at the time of federation6, it is the essential features of that institution which have what might be called a constitutionally entrenched status. Further, Brownlee also indicates that those essential features are to be discerned with regard to the purpose which s 80 was intended to serve7 and to the constant evolution, before and since federation, of the characteristics and incidents of jury trial8. Accordingly, the circumstance that provisions such as those in ss 14A and 48A of the Juries Act respecting additional jurors were not found in pre-federation legislation is not determinative. In Brownlee9, Kirby J pointed out that it was beyond doubt that in comparison with earlier times criminal trials today typically last longer, are more expensive and involve more complex issues than previously was the case. The applicant's lengthy trial is an example. The trial judge's remarks on sentence concluded on p 5697 of the transcript. Provisions such as those of the Juries Act which the applicant impugns are designed to meet exigencies that may arise in such circumstances. Brownlee determined that a trial on indictment for an offence against a law of the Commonwealth which was conducted in accordance with a provision of New South Wales law which permitted the reduction in number of jurors to not below 10 was not at odds with the meaning of trial "by jury" in s 80 of the Constitution. The applicant does not argue for the proscription of a trial by a jury where more than 12 jurors are impanelled. The complaint concerns the operation of the provisions respecting reduction in numbers to 12 before the jury retired to consider its verdict. However, by parity of reasoning, the conclusions which led 6 Cheatle v The Queen (1993) 177 CLR 541 at 549. 7 Brownlee v The Queen (2001) 207 CLR 278 at 284-285 [7], 288-289 [21]-[22], 298 8 Brownlee v The Queen (2001) 207 CLR 278 at 284-285 [6]-[7], 287 [17], 291-292 (2001) 207 CLR 278 at 330-331 [148]. to the outcome in Brownlee militate in favour of the dismissal of the present application. The applicant referred to the requirement of unanimity. But in Cheatle this was expressed as a requirement that "all the persons constituting the jury at the time the verdict is pronounced"10 return a unanimous verdict. There is no prejudice to that principle where there is a discharge by reason of death or incapacity or the excusing of jurors who are ballotted out under the procedures specified in s 48A of the Juries Act. In all these cases, the change in jury composition comes about for reasons unrelated to any view of any of the jurors. Nor, any more than is the case when a juror is removed by death or on account of incapacity, are the remaining jurors "contaminated" in any constitutionally offensive sense. Further, there is no substance in the applicant's contention that there is any "right" enjoyed by each of the 15 jurors impanelled to participate in determination of the verdict. The continued participation in the process of any juror after impanelment is at all times conditional upon the juror remaining qualified and of capacity and on the operation of any relevant laws, such as s 48A of the Juries Act. The applicant directed particular attention to the position under the Juries Act of the foreperson. In particular, the operation in this case of s 48A(4) was said to indicate that the legislation placed the foreperson in a special and protected position not enjoyed by the other 14 jurors who had been impanelled. The selection of that person, in circumstances where he or she cannot be ballotted out under s 48A, does not produce inconsistency with the underlying objective of the requirement that the panel of jurors be randomly or impartially selected rather than chosen by the prosecution or the State11. The principle of randomness of selection permits peremptory challenges to potential jurors, consistently with s 8012, as it does the subjection of all of the panel of 15, apart from the foreperson, to the process of ballotting out under s 48A of the Juries Act. When the jury in the present case retired, it claimed the character of a panel randomly or impartially selected rather than one chosen by the prosecution or by the State. 10 (1993) 177 CLR 541 at 548 (emphasis added). 11 Cheatle v The Queen (1993) 177 CLR 541 at 560; Katsuno v The Queen (1999) 199 CLR 40 at 64 [50]. 12 Katsuno v The Queen (1999) 199 CLR 40 at 50 [4], 65 [51]. The Court of Appeal gave detailed consideration of the matter and correctly concluded that the grounds containing submissions respecting the requirements of s 80 of the Constitution should be rejected13. There are no prospects of success of an appeal to this Court and accordingly we joined in the order dismissing the application for special leave. 13 [2002] VSCA 108 at [16]-[30]. McHugh 16 McHUGH J. I joined in the order dismissing this application for special leave to appeal because an appeal would have had no prospect of success, if leave were granted. Subject to one matter, my reasons for refusing leave are essentially the same as those that caused me to refuse leave in Fittock v The Queen14. In the present case, the applicant relied on a ground not present in Fittock. He contended that s 48A(4) of the Juries Act 1967 (Vic) gave the foreperson of the selected jurors a privileged position that undermined the constitutional requirement that the panel be selected at random from the community15. Under s 48A(4), the foreperson remains a juror even though his or her name is drawn from the ballot held to reduce the number of jurors to 12. The policy behind this immunity is not clear. Ordinarily, the foreperson does no more than pronounce the jury's verdict and regularise the jury's discussion of the issues. There is nothing to stop the jurors changing their foreperson as often as they like. But whatever the policy behind the immunity, the immunity does not affect the randomness of the jury that the Constitution requires. The jurors are selected randomly when their names are drawn by ballot from a list that is representative of the community. The randomness of the panel is no more affected by the foreperson being exempted from the ballot than it is by the order of the judge directing that a particular panel member be discharged for incapacity or other reason. In each case, the requirements of s 80 are met by the selection of the jury by ballot from a list of names that is representative of the community. The random selection of the panel is not affected by a subsequent judicial order discharging a juror or by a statutory command that a juror who has been randomly selected and elected as foreperson is to remain a member of the jury that determines the case. 14 [2003] HCA 19. 15 Cheatle v The Queen (1993) 177 CLR 541 at 560. Kirby KIRBY J. This is one of two applications for special leave to appeal referred to the Full Court16. Because the applications raised common issues, they were heard together. The common issues concerned the requirements of s 80 of the Constitution which governs jury trial of indictable offences against a law of the Commonwealth. The scope and course of the hearing One aspect of this application involved a challenge to sentence. Mr Philip Chee Ming Ng ("the applicant") submitted that he had been wrongly penalised in sentence for having defended a criminal charge. That question is potentially an important one17. However, neither the sentence imposed on the applicant nor the language employed by the sentencing judge in passing sentence, made this an appropriate occasion to explore that point. The challenge to sentence was therefore dismissed by the Full Court during the hearing. A second preliminary point was also cleared away. At one stage it was thought that this application might provide a suitable vehicle to allow reconsideration of the decision in Brown v The Queen18. This Court there held that the language and purpose of s 80 of the Constitution precludes an accused person from waiving the right to trial by jury where that section applies. Since Brown (in which the Court was divided19), doubts have been expressed about the correctness of such a prohibition on waiver20. However, in the event, it was accepted by the respondent that waiver could not be raised on the facts of this case. The challenge to Brown must therefore await another day. These developments confined the application to the complaint that the provisions of State law allowing "additional" jurors to be empanelled in the applicant's trial were invalid or inapplicable having regard to s 80 of the Constitution. There was no dispute that the applicant's trial in the County Court of Victoria was obliged to conform to the requirements of s 80. Accordingly, the residual question, fully argued, was what s 80 required in the circumstances. 16 The other application was Fittock v The Queen [2003] HCA 19. 17 cf Cameron v The Queen (2002) 76 ALJR 382 at 384 [12], 390 [47], 399-400 [93]- [95]; 187 ALR 65 at 68, 76, 88-89. 18 (1986) 160 CLR 171. 19 Brennan, Deane and Dawson JJ; Gibbs CJ and Wilson J dissenting. 20 Brownlee v The Queen (2001) 207 CLR 278 at 319-320 [120]-[121]. Kirby At the end of argument, the Court announced that the application was dismissed. So was the application in the companion proceedings. I agreed in those dispositions. In my view, the Court should explain its reasons by addressing the submissions placed before it. Detailed written and oral argument was received. The representatives of the parties and of several governments appeared. Substantial costs were incurred. The applicant has been sentenced to a significant term of imprisonment. The parties should therefore have the response of the Court to their arguments21. Additionally, the issue decided concerns the constitutional law of the nation. It involves part of a mosaic of law by which the requirements of s 80 of the Constitution are explained. Apart from the parties and the participating governments, the citizens should know not only what the Court holds, but its reasons for doing so – that being the means by which this Court is rendered accountable to the parties and to the community in such matters22. The facts The applicant was charged with conspiracy to import a commercial quantity of heroin into Australia contrary to the Customs Act 1901 (Cth), s 233B(1)(cb). He was tried on indictment in the Victorian County Court. The trial attracted federal jurisdiction in accordance with the Judiciary Act 1903 (Cth)23. Pursuant to that Act, the County Court was empowered to apply to the trial and conviction of the applicant the laws of the State of Victoria so far as they were applicable to the trial of a federal offender24. However, a law that contravened s 80 of the Constitution would be inapplicable to such application. It could not be "picked up" by the Judiciary Act. At the outset of the applicant's trial, in April 2000, fifteen persons were empanelled to serve as the jury. The jury thus included three "additional" jurors. A challenge to the constitutional validity of this procedure was reserved by the applicant's counsel. The trial proceeded until July 2000 when the summing up of the presiding judge was completed. At that stage a ballot was conducted of all the jurors to reduce their number from fifteen to twelve. The first card drawn in the ballot bore the name of the member of the jury who, at the outset of the trial, had been elected the jury foreperson. In 21 Heron v The Queen [2003] HCA 17 at [23]. 22 Gleeson, "Judicial legitimacy", (2000) 20 Australian Bar Review 4 at 10. 24 s 68(2)(c). Kirby accordance with the Victorian law, the card bearing his name was put aside. Three further draws were made to eliminate the three "additional" jurors and so to produce the final jury of twelve. So derived, the jury included the foreperson. It was that jury that then retired to consider their verdict. After deliberations of four days, the jury announced their verdict of guilty. In August 2000 the applicant was convicted and sentenced to twenty-five years imprisonment with a non-parole period of twenty years. He sought leave to appeal to the Court of Appeal of the Supreme Court of Victoria. His grounds of appeal included relying on the constitutional issue now before this Court. The Court of Appeal dismissed the application25. It rejected the constitutional arguments26. The issues The issues arising on the application for special leave were: issue: jury definition The include "additional" jurors, the applicant's "jury" comprised a number greater than twelve, entitling him to the verdict of that enlarged "jury", not the verdict of a smaller number of jurors comprising some only of his "jury"; Whether once constituted The unanimous verdict issue: Whether the impugned law of Victoria involved taking the verdict of some only of the applicant's jurors and, in that way, the acceptance of a non-unanimous jury verdict contrary to the decision of this Court in Cheatle v The Queen27; The jury contamination issue: Whether, if the applicant's "jury" were properly reduced to the twelve jurors from whom the verdict was taken, this meant that persons who were not ultimately members of the "jury", had been permitted to participate in the jury's deliberations although strangers to the jury, thereby offending "essential characteristics" of jury trial, namely jury secrecy and privacy; and The random selection issue: Whether the provisions requiring the participation of the jury foreperson in the verdict of the jury offended against the constitutional requirements of randomness in the selection of the jury and equality of the jurors as between themselves or otherwise infringed the applicant's right to a fair trial. 25 R v Ng [2002] VSCA 108. 26 R v Ng [2002] VSCA 108 at [16]-[30]. 27 (1993) 177 CLR 541. Kirby Essential and inessential requirements of jury trial Jury trial in history: The requirements of s 80 of the Constitution28 have been considered in many cases decided since the earliest days of this Court. In 1909, O'Connor J29 adopted for the purpose of explaining s 80 a definition approved by Samuel F Miller in a lecture on the Constitution of the United States from whose provisions s 80 was taken30. Relying on Miller's definition, O'Connor J described trial by jury as "the method of trial in which laymen selected by lot ascertain under the guidance of a Judge the truth in questions of fact arising either in a civil litigation or in a criminal process"31. Although this definition was advanced as representing "the essential features" of trial by jury, it was not "an exhaustive statement"32. Thus this Court in Cheatle33 held that unanimity in a jury's verdict is an essential characteristic. That decision rendered inapplicable in a trial to which s 80 of the Constitution applies State laws providing for majority jury verdicts. In the course of decisions over nearly a century the elaboration of s 80 has given rise to some of the "sharpest divisions of opinion"34 in this Court about the meaning of the Constitution. Some members of the Court have considered that s 80 is little more than a procedural provision, easily circumvented by the expedient of excluding the crime in question from the requirement of trial on indictment or by exempting aggravating features of the crime from the definition of the "offence", trial of which alone must take place "on indictment"35. On the 28 Section 80 of the Constitution provides: "The trial on indictment of any offence against any law of the Commonwealth shall be by jury, and every such trial shall be held in the State where the offence was committed, and if the offence was not committed within any State the trial shall be held at such place or places as the Parliament prescribes." 29 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 375. 30 United States Constitution, Art III, s 2, cl 3 and Seventh Amendment. See Patton v United States 281 US 276 at 288 (1930). 31 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 375. 32 Brownlee (2001) 207 CLR 278 at 287 [17]. 33 (1993) 177 CLR 541. 34 Cheng v The Queen (2000) 203 CLR 248 at 306 [173]. 35 Kingswell v The Queen (1985) 159 CLR 264; cf Cheng (2000) 203 CLR 248 at 307 Kirby other hand, other members of the Court have regarded s 80 as a "fundamental law"36 or as a constitutional "guarantee"37. I am of the latter persuasion38. Doubtless the conception of the character of s 80, its role in Ch III of the Constitution and its function as a safeguard of basic rights, has influenced the approaches taken by successive judges to the requirements of the section in respect of what trial by jury means in a given case. Because trial by jury connotes a particular kind of legal proceeding, known to the common law of England and in the Australian colonies before the adoption of the federal Constitution, the expression is not at large. At least for the purposes of s 80, it cannot mean anything that a legislature, federal, State or Territory, chooses to enact under the label of "trial … by jury"39. Clearly, historical considerations will help to mark out the boundaries of the proceeding which s 80 permits. Nevertheless, from past decisions it is also clear that s 80 does not require the conduct of criminal trials to comply with every feature of that mode of trial as it existed in 1900. To this extent, the incidents of jury trial are not immutable. Some may change to meet contemporary needs and to adapt to modern circumstances and conditions40. The decisions of this Court deny the adoption of an "originalist" approach to the construction of s 80 of the Constitution, whether categorised as "enthusiastic", or "reluctant", "faithful" or "faint-hearted"41. It is important to adopt a consistent methodology of interpretation so as to avoid the justifiable criticism that a judicial decision in a particular case amounts to nothing more than a statement of the judge's whims or intuition, disguising unarticulated value judgments42. The provision of reasons that respond to the 36 R v Snow (1915) 20 CLR 315 at 323 per Griffith CJ. 37 Brown (1986) 160 CLR 171 at 201 per Deane J. 38 cf Simpson and Wood, "'A puny thing indeed' – Cheng v The Queen and the Constitutional Right to Trial by Jury", (2001) 29 Federal Law Review 95. 39 Brownlee (2001) 207 CLR 278 at 284 [6], 317-318 [115], 321 [125]. 40 Brownlee (2001) 207 CLR 278 at 286-287 [12]-[17], 291 [33]. 41 Eastman v The Queen (2000) 203 CLR 1 at 44 [140] per McHugh J referring to an expression ("faint-hearted" originalism) used by Scalia J of the Supreme Court of the United States; cf Brownlee (2001) 207 CLR 278 at 327 [138]. 42 Simpson and Wood, "'A puny thing indeed' – Cheng v The Queen and the Constitutional Right to Trial by Jury", (2001) 29 Federal Law Review 95 at 107. Kirby arguments of the parties, however irksome, is a discipline protecting parties, and the public, from ill-considered or merely instinctive responses. Convenience in the conduct of trials or the disturbance of settled expectations cannot ultimately decide large constitutional conflicts. Least of all can such considerations govern provisions such as s 80 which appear in Ch III regulating the Judicature of the nation in identified matters of federal concern43. In recent decisions addressing s 80, this Court has focussed upon a functional analysis of the jury rather than an historical scrutiny of what the founders of the Commonwealth expected or intended jury trial to involve44. In my view, this is the correct way to go about giving meaning to s 80. It is the one I adopted in approaching the present application. Inessential characteristics: What then is the contemporary answer to the question posed by O'Connor J in 1909 concerning the "essential features of a trial by jury"45? Some features that may have been regarded as essential or invariable in 1900 can now be treated as inessential. They include: Juries no longer need to be constituted exclusively by men46; Jurors no longer have to qualify for service by having minimum property holdings47; Jurors no longer need to be segregated in every case during the trial or from the moment when they are charged to consider their verdict48; 43 cf Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1; Re Wakim; Ex parte McNally (1999) 198 CLR 511. 44 But cf Cheng (2000) 203 CLR 248 at 268-269 [53]-[54], 293-294 [133]-[137]. See Simpson and Wood, "'A puny thing indeed' – Cheng v The Queen and the Constitutional Right to Trial by Jury", (2001) 29 Federal Law Review 95 at 107- 45 Huddart, Parker & Co Pty Ltd v Moorehead (1909) 8 CLR 330 at 375. 46 Cheatle (1993) 177 CLR 541 at 560. 47 Jurors and Juries Consolidation Act 1847 (NSW), s 1; see Cheatle (1993) 177 CLR 541 at 560. 48 Brownlee (2001) 207 CLR 278 at 290-291 [27]-[30], 301-302 [64]-[67], 331-333 Kirby (4) When a juror dies or is discharged the trial need no longer be abandoned49; (5) A juror in waiting may be removed from the jury upon a prosecution challenge based upon the supply to the prosecution alone of information concerning a non-disqualifying criminal conviction50; It is not every serious offence against federal law resulting in imprisonment that attracts s 8051; and (7) A preliminary determination, at first instance and on appeal, of questions of law or issues governing the admissibility of evidence before the jury are empanelled is not incompatible with trial by jury complying with the Constitution52. Essential characteristics: Certain features of jury trial have been held to be essential. Where s 80 applies, such features must be observed if the trial is to conform to the Constitution: The jury must deliver a unanimous verdict53. The verdict of guilty must be reached by the agreement of all persons constituting the jury at the time the verdict is pronounced54. (The requirement of unanimity may also extend to a jury verdict of not guilty55); (2) Where jury numbers have been reduced before the verdict is given, the trial can still be accepted as a trial by jury. The jury must still be of a 49 Brownlee (2001) 207 CLR 278 at 288 [20], 303-304 [71]-[72], 331 [149], 341 50 Katsuno v The Queen (1999) 199 CLR 40 at 65 [52]; cf at 97 [137]. 51 Re Colina; Ex parte Torney (1999) 200 CLR 386 at 396-397 [24]-[25], 405 [50]; cf at 427 [105]; see also R v Federal Court of Bankruptcy; Ex parte Lowenstein (1938) 59 CLR 556. 52 R v Gee [2003] HCA 12 at [140]-[142]. 53 Cheatle (1993) 177 CLR 541 at 548, 550, 552, 562; Brownlee (2001) 207 CLR 278 54 Cheatle (1993) 177 CLR 541 at 548. 55 R v Glynn (2002) 82 SASR 426 at 444-445 [95]-[105]; cf at 433-434 [45]-[51]. Kirby sufficient number to be representative of the community and capable of performing the group deliberation inherent in jury trial56; The jury must be randomly and impartially selected, not chosen by the prosecution or the state57; and The jury must be comprised of lay decision-makers who are impartial as to the issues in contest58. The norm of twelve: This Court has not held that twelve jurors ("neither more nor less"59) is an inherent requirement of trial by jury that conforms to s 80. On the contrary, it has decided that, although the jury number may fall below twelve, at least to ten, the trial can still answer to the constitutional description. However, until this case, this Court has not had to consider the validity of an expansion of juror numbers to allow for supplementary jurors in trials to which s 80 applies. That issue did not arise in Brownlee v The Queen60. True, three members of the Court made it clear in Brownlee that they were not calling into question the use of reserve jurors applicable in that case61. In support of that comment they cited the decision in Ah Poh Wai v The Queen where, as they pointed out, the reserve juror system, applicable in Western Australian trials, had been considered and upheld as constitutionally valid by the Court of Criminal Appeal of that State62. Special leave to appeal to this Court from that decision was refused by a majority63. The present application re-submitted some of the questions raised in Ah Poh Wai. 56 Brownlee (2001) 207 CLR 278 at 288-289 [20]-[21], 303-304 [71]-[72], 331 [149], 57 Cheatle (1993) 177 CLR 541 at 560-561; Katsuno (1999) 199 CLR 40 at 64-65 58 Cheatle (1993) 177 CLR 541 at 549, 560; Brownlee (2001) 207 CLR 278 at 289 59 Patton v United States 281 US 276 at 288 (1930). 60 (2001) 207 CLR 278. 61 (2001) 207 CLR 278 at 304 [73] per Gaudron, Gummow and Hayne JJ. Their Honours referred to "reserved" jurors. 62 (1995) 15 WAR 404 at 415-423, 423-428. 63 Ah Poh Wai v The Queen (1996) 14 LegRep C24. The Court was constituted by Dawson and McHugh JJ and myself. Kirby As it seems to me, it is one thing to accept twelve jurors as the norm and to provide, exceptionally, for the validity of their verdict where their number is reduced by death, illness or other excuse. It is another to enlarge jury numbers from the outset of a trial against the risk that the trial might otherwise miscarry for a later want of an adequate number of jurors. Accordingly, the issue raised by this application was not determined by the decision of the Court in Brownlee either as a matter of authority or as a matter of legal principle. Different considerations are involved. They need to be considered and decided. It is not true to say that juries have always been constituted by twelve persons (until quite recently twelve men). Grand juries, special juries and civil juries were commonly constituted by different numbers. In Scotland juries are now, and have for a long time been, comprised of fifteen persons. Exceptional circumstances have summoned forth exceptional arrangements. Thus, Charles I was tried in a "High Court of Justice" that comprised 62 Commissioners as a kind of national jury64. Nevertheless, before the Australian colonies were founded, the ordinary jury for the trial of indictable offences according to the common law of England was undoubtedly a jury of twelve. Indeed, until legislation altered that requirement in England there was ordinarily no jurisdiction to try such a case otherwise than with a jury of that number65. Initially in the Australian colonies jury trial was conducted before seven commissioned naval or army officers66. The colonists insistently demanded jury trial in accordance with the common law67. By the Jury Trials Act 1832 (NSW) provision was made for trial by "twelve persons" and civilian jurors replaced military juries completely. That Act was consolidated in later legislation and 64 Nalson, Trial of Charles I (1684) reported (1649) 4 St Tr 1045; Wedgwood, The Trial of Charles I, (1964) at 107; Kirby, "Trial of King Charles I: Defining Moment for our Constitutional Liberties", (1999) 73 Australian Law Journal 577 at 65 R v Hambery [1977] QB 924 at 928. 66 Wu v The Queen (1999) 199 CLR 99 at 112 [42]. 67 Kingswell (1985) 159 CLR 264 at 298-299. Kirby copied elsewhere in the Australian colonies68. Under such legislation "all crimes and misdemeanors" were to be "tried by a jury consisting of twelve men"69. Historically, therefore, both for the common law of England and in early Australian legislation, a jury of twelve was undoubtedly the norm. In a sense, the legislation under consideration in this application accepts that norm. Provision is made for the removal from the ultimate jury of any supplementary jurors in excess of that number. So can it be said The applicant's case: like unanimity, representativity, random and impartial selection and a lay character, the maximum number of twelve jurors should be taken as an "essential" or "inherent" characteristic of "trial … by jury" within s 80 of the Constitution70? The applicant did not so submit. He was content to accept as constitutionally valid a jury of more than twelve. Obviously, the larger the jury, the greater the chance that one or more jurors might be persuaded to hold out for a not guilty verdict. that, This Court is not bound by concessions or arguments of the parties where it concludes that they are legally erroneous71. Even without much knowledge of the history of the jury at common law or the adoption of a 1900 criterion for the meaning of jury trial in s 80, a respectable argument exists that the "jury" contemplated by s 80, is one of no more than twelve persons. On this view, a jury might validly fall below that number, as in Brownlee. But to the extent that a jury goes above, does it amount to a "jury" at all? Or is it some new hybrid tribunal, different from that for which the Constitution provides? Although it has some support in older cases in the Supreme Court of the United States, the view that twelve jurors is the maximum should not be adopted. Once a functional approach to jury trial is embraced, as it has been by this Court, the argument that twelve is the maximum number of jurors for a trial conforming to s 80 of the Constitution is undermined. If fewer than twelve jurors is acknowledged as conformable to the constitutional "jury", the validity of a provision allowing for more than twelve, so as to ensure that the function of the jury is fulfilled, becomes difficult to resist. Once a criterion is adopted by 68 Jurors and Juries Consolidation Act 1847 (NSW). See Woods, A History of Criminal Law in New South Wales: The Colonial Period, 1788-1900, (2002). 69 Jurors and Juries Consolidation Act 1847 (NSW), s 17. 70 Cheatle (1993) 177 CLR 541 at 560. 71 Roberts v Bass (2002) 77 ALJR 292 at 320 [142]-[143]; 194 ALR 161 at 199; cf Banbury v Bank of Montreal [1918] AC 626 at 661-662; Burchett v Kane [1980] 2 NSWLR 266 at 269. Kirby reference to considerations of community representativity and effective deliberations, legislative measures aimed at ensuring the retention of those qualities become constitutionally permissible. This is especially so today, as jury trials typically last longer than was the case in 1900 or, indeed, until the latter part of the twentieth century. In Brownlee72 I observed that: "contemporary trials, particularly of federal offences, can be extremely complex and lengthy73, the inconvenience to the community, to jurors and the cost to parties should not needlessly be incurred by unnecessary termination and re-litigation of jury trials where (as will inevitably happen from time to time) jurors die, fall ill or are otherwise incapable of continuing to act74". If it is acceptable to treat a jury of fewer than twelve as constitutionally valid in order to sustain the system of jury trial and the continued "involvement of the public" and "societal trust"75 implied in the mode of trial referred to in s 80, it is also acceptable, exceptionally, for supplementary jurors to be introduced to the jury to guard against a failure of the trial caused by the death, illness or absence of jurors. These conclusions leave to be determined the validity and applicability of the Victorian legislative provisions that were invoked in the trial of the applicant. However, the logical extension of the principle adopted in Brownlee (including in my own opinion in that case) results in the conclusion that the reference in s 80 to a "jury", and to the procedure of trial by a jury, does not forbid the enlargement of jury numbers. At least this is so in relation to the time before the retirement of the jury to consider their verdict and where the membership of the jury is supplemented by the small numbers involved in the present case. These general conclusions bring me to the question of whether any feature of the State law invoked in this application is such as to indicate direct inconsistency with an essential characteristic of trial by jury conforming to s 80 and thus to prevent the application of the State law in such a trial by virtue of the provisions of the Judiciary Act76. 72 (2001) 207 CLR 278 at 330 [147]. See also Gee [2003] HCA 12 at [142]. 73 Australian Institute of Judicial Administration, Report on Criminal Trials, Report No 48 (1985) at 5-8. 74 Wu (1999) 199 CLR 99 at 106-107 [21]. 75 R v Sherratt [1991] 1 SCR 509 at 524. 76 s 68(2)(c). Kirby The legislation The Victorian Juries Act: By s 14A of the Juries Act 1967 (Vic) it is provided: "A court before which a criminal inquest is to be heard may order the impanelment of up to 3 additional jurors in that inquest before the jury is impanelled for any reason that appears to the court to be good and sufficient." By s 48A of the same Act it is provided, relevantly: "(1) Where more than 12 jurors have been impanelled and remain at any time at which the jury is required to retire to consider its verdict a ballot must be held in accordance with sub-section (2) to reduce the number to 12 before the jury retires to consider its verdict. (2) A ballot referred to in sub-section (1), must be conducted by drawing at random the number of cards necessary to reduce the number of jurors to 12 from those cards kept apart in accordance with section 48(1). Subject to sub-section (4) and unless the juror or jurors are, in accordance with sub-section (3A), to return to the jury, and continue as part of it, for the continuation of the trial, the juror or jurors whose cards are drawn must be excused and their cards returned to the box for further use unless the court otherwise orders. If the card of the foreperson is drawn, that card is to be kept apart and another card drawn. The cards of the 12 jurors including the card of the foreperson must be kept apart until a verdict has been given or until the jurors are discharged." The foregoing law contemplates a jury that may initially comprise more than twelve jurors but not more than fifteen. Indeed, such a jury may operate with up to "three additional jurors" until virtually the end of the trial: to the point immediately before the jury are required to retire to consider their verdict. At that stage a ballot is conducted of all of the jurors. But whatever the outcome of that ballot, the foreperson must remain a juror until the jury deliver their verdict. Kirby Overseas legislation: Legislation providing for supplementary jurors has been enacted in various overseas countries where jury trial exists. Thus in Canada, provision is made both for the continuation of a trial with ten or more jurors where a juror originally empanelled dies or is discharged77 and for the selection of up to two "alternate" jurors78. In Canada, the alternative jurors participate as jurors until the commencement of the trial when any "alternate" jurors who have not been substituted by that time are excused79. In the United States of America provision is made, in the trial of federal offences, for continuance of the trial with fewer than twelve jurors80 and for the initial empanelment of up to six alternate jurors81. Such alternate jurors participate in the trial in the same way as other jurors82. Those who do not replace jurors who are unable to perform or who are disqualified from performing their duties may be retained and may replace such jurors, even, where necessary, after the jury's deliberations have commenced83. In the event of such replacement, the judge is obliged to direct the jury to begin their deliberations anew84. Many court decisions have considered the application of the United States Rules85, including one that reached the Supreme Court86. The position is differentiated from that in Australia by the fact that, in the United States, judges typically instruct juries to refrain from discussing a case not only with strangers but also amongst themselves "until the end of the case when you go to the jury 77 Criminal Code 1985 (Can), s 644(2). 78 Criminal Code 1985 (Can), s 631(2.1). 79 Criminal Code 1985 (Can), ss 642.1(1) and (2). 80 Federal Rules of Criminal Procedure, r 23(b). 81 Federal Rules of Criminal Procedure, r 24(c)(1). 82 Federal Rules of Criminal Procedure, r 24(c)(1) and (2). 83 Federal Rules of Criminal Procedure, r 24(c)(3). 84 Federal Rules of Criminal Procedure, r 24(c)(3). 85 eg United States v Houlihan 92 F 3d 1271 (1st Cir 1996). 86 United States v Olano 507 US 725 at 737 (1993). Kirby room to decide on your verdict"87. Such instruction has been justified as upholding the integrity, secrecy and privacy of jury deliberations88. On the assumption that such instructions are obeyed, alternate jurors may usually be permitted to remain with other jurors during the trial. They separate finally when the jury are instructed to consider their verdict. In most other common law countries where jury trials occur, provision is made for the discharge of jurors and the continuance of the trial89 but without a law for supplementary jurors. In New South Wales, as in the United Kingdom, that remains the position. In England, legislation to permit the participation of supplementary jurors has been recommended but not yet enacted90. Australian legislation: Save for New South Wales, the legislatures of each of the States and self-governing Territories of Australia have enacted a law providing for supplementary jurors. Putting the position generally, the law in Queensland91, Western Australia92 and Tasmania93 follows the "reserve" juror model illustrated by the law of the Northern Territory described in Fittock v The Queen94. The laws in South Australia95 and the Australian Capital Territory96 follow the model of "additional" jurors enacted in Victoria. As in Victoria, the 87 8th Circuit Jury Instructions, par 1.08; cf United States v Virginia Erection Corporation 335 F 2d 868 at 872 (1964). 88 United States v Beasley 464 F 2d 468 (1972). 89 Juries Act 1974 (UK), s 16(1); Juries Act 1976 (Ir), ss 23, 24; Crimes Act 1961 (NZ), s 374(3); Criminal Procedure (Scotland) Act 1995 (UK), s 90(1); Jury Ordinance (HK), s 25. 90 United Kingdom, A Review of the Criminal Courts of England and Wales, Lord Justice Auld, (2001), Ch 5 at [20]. 91 Jury Act 1995 (Q), ss 34(1) and (5), 56(1). 92 Juries Act 1957 (WA), ss 18(2) and (7) and Criminal Code (WA), s 646. 93 Jury Act 1899 (Tas), ss 39(2), (6A) and (7). In Tasmania, "reserve" jurors may replace other jurors after the jury's final deliberations have commenced: s 39(4). 94 [2003] HCA 19. 95 Juries Act 1927 (SA), ss 6A, 56. 96 Juries Act 1967 (ACT), ss 8(2) and (3), 31A(1), (4) and (5). Kirby foreperson is exempted from exclusion from the final jury in South Australia97. In the Australian Capital Territory, the foreperson, like any other juror, may be balloted off. The "jury" definition was not unchangeable It will now be apparent why the applicant did not argue that it was contrary to s 80 to increase the jury numbers beyond the norm of twelve. Rather, he contended that the enlarged jury represented a redefinition of his "jury" within s 80 and, once empanelled, could not be reduced in number. Some of the applicant's arguments under this head can be disposed of quite easily. A submission that, once empanelled, jurors have a "right" to participate in the verdict is misconceived. The participation of a juror is at all times conditional upon the operation of relevant laws so long as such laws are constitutionally valid98. For example, without contradicting the constitutional provision, a juror discharged for misconduct has no "right" of continued participation. Legislation can provide for discharge, and it invariably does. Applying the test of functionality to the Victorian law99, its purpose is clearly to protect and uphold the jury's function. Its design is intended to prevent the failure of a trial. Such failure can work hardship on the accused, on witnesses, on jurors and on the community100. What is involved in a jury trial today is in some ways different from what was involved when the Constitution was written. The word ("jury") remains the same. But the concept adapts to the contemporary features of jury trial101. The applicant's first point of objection therefore failed. The jury verdict was unanimous In an extension of the first argument, the applicant complained that the verdict in his case was that of the smaller number of jurors who remained after 97 Juries Act 1927 (SA), s 6A(4). 98 cf Spratt v Hermes (1965) 114 CLR 226 at 244; Cheng (2000) 203 CLR 248 at 291 99 Brownlee (2001) 207 CLR 278. 100 Wu (1999) 199 CLR 99 at 106 [19], 107-108 [27]; Brownlee (2001) 207 CLR 278 at 303 [70], 330 [147]; cf Ah Poh Wai (1995) 15 WAR 404 at 415-423. 101 Gee [2003] HCA 12 at [113]. Kirby the "additional" jurors were balloted off and excused. Because this Court has insisted that unanimity is an "essential characteristic" of the "jury" provided in s 80 of the Constitution, it followed, according to this argument, that a kind of "majority" jury verdict had been taken. This was constitutionally impermissible. This argument likewise had no merit. Where a juror is removed from the jury by death (or discharged for incapacity or on any other ground provided by law), this does not mean that the resulting jury returns a non-unanimous verdict. As the Court of Appeal held102, the time that is critical for observing the requirement of unanimity is the time when the verdict is pronounced. The applicant's jury were unanimous in the verdict that they returned at that time. There is no functional distinction between the discharge of a juror for reasons of incapacity or other like cause and discharge of an "additional" juror whose service is in excess of the ultimate needs of the trial. In each case, discharge happens according to law, for reasons unrelated to any views that the juror may have, or may have expressed to other jurors. The possibility that a juror, excluded from participation in the verdict, might have held out in favour of acquitting the accused is entirely speculative. The procedure for selection of the jurors who take part in deciding the verdict, and those who do not, is governed by ballot at all stages. It ensures that the purpose of jury trial is fulfilled: resting as it does substantially upon selection by chance, not selection upon the basis of any opinions that an excluded juror might hold. The applicant's second point of objection also failed. The jury were not "contaminated" The applicant thirdly complained that the Constitution contemplated a single "jury", not one of variable numbers. Once he was put in the charge of that "jury" he was, as it was expressed, "entitled" to their verdict. To the extent that persons, at one stage part of the "jury", were later excluded from participating in the essential reason for the jury's existence (namely to return a verdict) the characteristics of secrecy, confidentiality and integrity of the jury's deliberations were undermined. "Strangers" who were not, in the end, participating jurors had taken part in the early stage of the jury's deliberations. Especially in a long trial, the excluded jurors might through discussion have had a significant impact on the verdict although they ultimately did not participate in deciding the verdict. The applicant submitted that this possibility was incompatible with an essential characteristic of joint responsibility of all jurors for the verdict pronounced by them. jury deliberation hitherto observed, namely, the 102 R v Ng [2002] VSCA 108 at [28]. Kirby This argument likewise fails. The "additional" jurors were not "strangers" to the jury. Their participation in the jury does not violate the principles governing the secrecy and privacy of such deliberations. From a functional point of view, the purpose of those principles is to protect the jury from outside influence or pressure. Nothing in the Victorian law endangers those objectives103. The possibility that one or more empanelled jurors will be balloted off the jury that retires to consider their verdict is no different from the possibility that one or more jurors might be discharged or excused for cause before the end of the trial. The earlier participation of that person in the jury's deliberations has not hitherto been regarded as impermissibly "contaminating" the jury process or undermining the integrity of the jury's verdict. All persons engaged in the jury function are bound by obligations of secrecy and privacy. Such obligations are accepted by a public undertaking in the form of an oath or affirmation administered as they are empanelled. The joint responsibility of the jury that ultimately decides upon the verdict remains unaffected by the removal of "additional" jurors. The applicant submitted that the model observed in the United States Rules conformed more closely to the requirements of s 80 of our Constitution. That model involves the possibility of the separation of the additional jurors from the primary panel, instructions to all jurors not to discuss the case with each other before beginning deliberations on a verdict and explicit directions where an additional juror replaces an original juror of the duty of the jury to commence their deliberations anew104. Care must be taken in considering United States decisions on this point. They are influenced by legal doctrine in that country that is, in turn, enlivened in federal cases by the constitutional requirements of due process. That doctrine has no exact equivalent in Australian constitutional law. The instruction to jurors to refrain from discussing together a case that might last weeks or months, before commencing deliberations on their verdict, appears to Australian eyes somewhat unrealistic and even undesirable having regard to the functions of the jury and the vagaries of human memory and impressions, especially over a long trial. Once a functional approach is adopted, as Brownlee requires105, the Victorian law providing for supplementary jurors may be seen as compatible 103 cf R v Pan [2001] 2 SCR 344; United States v Houlihan 92 F 3d 1271 at 1287-1288 (1st Cir 1996). 104 Federal Rules of Criminal Procedure, r 24(c)(3). 105 (2001) 207 CLR 278 at 289 [22], 298 [53]-[54], 329 [145]-[146]. Kirby with the functions of the jury as envisaged by s 80 of the Constitution. Accordingly, the third challenge also failed. Random selection and the jury foreperson The fourth argument was put in various ways. It was said that the special status accorded by Victorian law to the juror elected as foreperson amounted, in effect, to constituting the applicant's jury of the foreperson and eleven other jurors, not of a single jury comprising jurors of exactly equal status as s 80 contemplated. It was also argued that the Victorian law departed from the essential constitutional requirement of random selection. By entrenching the participation of the foreperson in the jury, that law gave a special status to one juror who, at the time of selection, may have impressed other jurors with qualities of assertiveness and leadership that could tend to favour one side in the trial. It was complained that only in South Australia and Victoria was this departure from wholly random selection of the ultimate jury enacted. None of these complaints had merit. From ancient times a jury has been expected to make corporate decisions for which all participating jurors are told they must accept responsibility106. To communicate with the judge and, at the end of the deliberation, to announce the verdict, it is necessary to have a chosen foreperson who, otherwise, has no higher status or function different from that of the other jurors107. Under the Victorian legislation the foreperson may be changed by the jury. They may decide to select a replacement during the course of a trial108. The process of selection and change being private to the jury, the reasons behind it are unknown to the judge, the parties and the community. Likewise, they will know nothing of any views that the foreperson might have, or have expressed, concerning the verdict in the matter. It is speculative to assume that a juror, initially chosen as foreperson, would necessarily favour the prosecution or defence. The obvious reason for retaining the foreperson on the jury was that this would obviate the necessity of making a fresh choice at a very late stage in the trial. There is therefore nothing in the Victorian law that is sinister or incompatible with the essential element of randomness in the constitution of the 106 Turner, "Polling the Jurors", (1979) New Zealand Law Journal 155 at 156; cf R v Cefia (1979) 21 SASR 171 at 173-175. 107 R v Fowler [2000] NSWCCA 352 at [47]. 108 R v Lonsdale [1915] VLR 269. Kirby jury. The legislative provisions concerning the foreperson, in that State and in South Australia, are by no means essential to a valid scheme for supplementary jurors. But neither are they incompatible with the composition of a jury as contemplated by s 80. Accordingly, there is no reason why the Victorian provisions might not be picked up pursuant to the Judiciary Act and applied to a trial on indictment in Victoria of an offence against a law of the Commonwealth. The fourth argument, therefore, likewise failed. There was nothing separate or additional in the submission of the applicant that the composition of his jury involved a departure from the requirement of "fair trial" said to be implied in Ch III of the Constitution. Assuming that such an implication exists109, nothing in the arrangements for Mr Ng's jury enlivened it. Orders In this application, as it was confined during the hearing before this Court, the challenge to the jury's verdict based on s 80 of the Constitution failed. It was for these reasons that I joined in the dismissal of the application pronounced on 13 February 2003. 109 cf Harris v Caladine (1991) 172 CLR 84 at 150; Polyukhovich v The Commonwealth (War Crimes Act Case) (1991) 172 CLR 501 at 703-704; Nicholas v The Queen (1998) 193 CLR 173 at 207-208 [70]-[72]; Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 362 [80], 373 [116].
HIGH COURT OF AUSTRALIA AMIRAM DAVID WEINSTOCK & ANOR APPELLANTS AND TAMAR RIVQA BECK & ANOR RESPONDENTS Weinstock v Beck [2013] HCA 14 1 May 2013 ORDER Appeal allowed with costs. Set aside orders 3 and 5 of the Court of Appeal of the Supreme Court of New South Wales made on 5 April 2012 and, in their place, order that: the matter be remitted to the primary judge, or such other judge as the Chief Judge in Equity might decide, to determine: whether an order should be made under s 1322(4)(a) of the Corporations Act 2001 (Cth) validating the purported appointment of Helen Weinstock as a director of LW Furniture Consolidated (Aust) Pty Ltd ("the Company") by Amiram Weinstock on 30 July 2003; and whether the Company should be wound up; and the appellants pay 80 per cent of the costs of the appeal and cross-appeal to the Court of Appeal. On appeal from the Supreme Court of New South Wales Representation D F Jackson QC with J O Hmelnitsky for the appellants (instructed by Baker & McKenzie Solicitors) R G McHugh SC with D J Barnett for the first respondent (instructed by McCabes Lawyers Pty Limited) No appearance for the second respondent Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Weinstock v Beck Corporations law – Management and administration – Directors and other officers – Appointment, removal and retirement of directors – Whether director validly appointed – Whether invalid appointment was "contravention" of company's constitution under s 1322(4) of the Corporations Act 2001 (Cth). Words and phrases – "appointment of director", "contravention of the constitution", "invalid appointment". Corporations Act 2001 (Cth), ss 1322(4), 1322(6). Introduction There are decisions made and actions taken by directors, officers and members of corporations that depend for their legal effect upon powers conferred by the Corporations Act 2001 (Cth) ("the Corporations Act") or by the constitutions of the corporations or both. Sometimes, by reason of error or circumstance, a condition for the validity of such a decision or action is not met. Australian courts have long been empowered by companies legislation to make orders to overcome some of the inconvenient invalidities which can arise in such cases. The present appeal concerns the appointment, on 30 July 2003, of Mrs Helen Weinstock ("Helen") as an additional director of LW Furniture Consolidated (Aust) Pty Ltd ("LWC"). The appointment was made pursuant to Art 87 of the articles of the company. It was made by Helen's husband, Amiram Weinstock ("Amiram"), acting as the sole director of the company. As it turned out, although he had acted as a director for some thirty years, his appointment as a director had lapsed by operation of the articles at the annual general meeting on 31 December 1973. In proceedings in the Supreme Court of New South Wales, Tamar Beck ("Tamar"), Amiram's sister, who had been appointed a director at the same time as Amiram, sought an order for the winding up of the company on the basis that it was just and equitable to do so because it had no directors and no means of validly appointing directors. Barrett J held that because Amiram was not a director validly in office when he had purported to appoint Helen as a director, Helen's appointment was ineffective. His Honour, however, used the power conferred upon the Court by s 1322(4) of the Corporations Act to, in effect, declare that Helen's appointment as a director was not invalid by reason of the fact that Amiram did not hold office as a director at the time of appointment1. Tamar appealed to the New South Wales Court of Appeal against the decision of Barrett J. The Court by majority (Young JA and Sackville AJA, Campbell JA dissenting) allowed that appeal, set aside the declaration made by the primary judge and remitted the matter to the Equity Division to determine whether the company should be wound up2. On 7 September 2012, Amiram and Helen were granted special leave to appeal to this Court from the judgment and orders of the New South Wales Court of Appeal which had been made on 5 April 2012. 1 Beck v LW Furniture Consolidated (Aust) Pty Ltd [2011] NSWSC 235 at [175]. 2 Beck v LW Furniture Consolidated (Aust) Pty Ltd (2012) 265 FLR 60. For the reasons that follow their appeal should be allowed. Section 1322(4)—history and construction The declaration made by the primary judge was made under s 1322(4) of the Corporations Act. That provision appears in Pt 9.5 of that Act, which is entitled "Powers of Courts". There is a range of disparate powers created by the provisions of that Part. Section 1322 is entitled "Irregularities". It applies, inter alia, to proceedings answering the description "a proceeding under this Act", a term which is defined in s 1322(1)(a) as "a reference to any proceeding whether a legal proceeding or not"3. The term "procedural irregularity", which also appears in the section, is defined non-exhaustively and includes the absence of a quorum at a meeting of a corporation or of its directors4 as well as a defect, irregularity or deficiency of notice or time5. Section 1322(2) provides: "A proceeding under this Act is not invalidated because of any procedural irregularity unless the Court is of the opinion that the irregularity has caused or may cause substantial injustice that cannot be remedied by any order of the Court and by order declares the proceeding to be invalid." The effect of the sub-section is automatic validation subject to a court order to the contrary. In that respect, the sub-section is modelled on precursors which date back to s 3 of the Companies Act 1893 (Q) and the Companies Acts of the States after federation6. Similar saving mechanisms are found in other sub- sections of s 1322 with respect to meetings held for the purposes of the Act where there have been deficiencies in notice or access to notice of the meeting7 or where a member has not had a reasonable opportunity to participate in multi- 3 Early validating provisions in State companies legislation, including s 366 of the Uniform Companies Acts 1961, were limited to the validation of proceedings in a court: Re Liege Investments Pty Ltd [1940] VLR 448 at 454 per O'Bryan J. See also Companies Act 1936 (NSW), s 357(1). 4 Corporations Act, s 1322(1)(b)(i). 5 Corporations Act, s 1322(1)(b)(ii). 6 For example, Companies Act 1910 (Vic), s 293; Companies Act 1920 (Tas), s 284; Companies Act 1931 (Q), s 374; Companies Act 1934 (SA), s 380; Companies Act 1936 (NSW), s 357; Companies Act 1943 (WA), s 415; see also Companies Act 1896 (Vic), s 165. 7 Corporations Act, s 1322(3). venue meetings8. Meetings or resolutions based on the exercise of voting rights in contravention of s 259D(3), where a company controls the entity that holds shares in it, are also validated subject to court order9. Provisions validating the decisions of persons acting as directors whose appointments were defective or who were disqualified from office date back to the first half of the nineteenth century in the United Kingdom10. Such a provision appeared in the Companies Act 1862 (UK)11. It also appeared in Australian colonial statutes modelled on that Act12 and, in later statutes, survived the introduction of more general provisions of the nature of s 132213. Section 1322(4) provides: "Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; an order directing the rectification of any register kept by ASIC under this Act; 8 Corporations Act, s 1322(3A). 9 Corporations Act, s 1322(3B). 10 Companies Clauses Consolidation Act 1845 (UK), s 99; Companies Clauses Consolidation (Scotland) Act 1845 (UK), s 102. 11 Companies Act 1862 (UK), s 67; see also Companies (Consolidation) Act 1908 (UK), First Schedule, Table A, reg 94. 12 Companies Act 1863 (Q), s 67; Companies Act 1864 (SA), s 66; Companies Act 1864 (Vic), s 64; Companies Act 1869 (Tas), s 73; Companies Act 1874 (NSW), s 98; Companies Act 1893 (WA), s 62. 13 Companies Act 1920 (Tas), s 81; Companies Act 1931 (Q), s 153; Companies Act 1934 (SA), s 164; Companies Act 1936 (NSW), s 124; Companies Act 1938 (Vic), s 143; Companies Act 1943 (WA), s 149. an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); an order extending the period for doing any act, matter or thing or instituting or taking any proceeding under this Act or in relation to a corporation (including an order extending a period where the period concerned ended before the application for the order was made) or abridging the period for doing such an act, matter or thing or instituting or taking such a proceeding; and may make such consequential or ancillary orders as the Court thinks fit." Orders may be made under s 1322(4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence14. Section 1322(6) imposes constraints on the power conferred by s 1322(4) in the following terms: "The Court must not make an order under this section unless it is satisfied: in the case of an order referred to in paragraph (4)(a): that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature; that the person or persons concerned in or party to the contravention or failure acted honestly; or (iii) that it is just and equitable that the order be made; and in every case—that no substantial injustice has been or is likely to be caused to any person." It is not in dispute that the satisfaction of any one of the conditions set out in par (a)(i)–(iii) will meet the requirements of par (a), a proposition now well 14 Corporations Act, s 1322(5). supported by authority. In particular, the power under s 1322(4)(a) is not limited to cases of procedural irregularity15. Section 1322(4) is descended from s 366(3) of the Uniform Companies Acts 196116. Section 366 was the successor to validating provisions which had appeared in more or less common form in various State Companies Acts before 196117. Section 366(3) introduced a mechanism for judicial validation which could be invoked in a wider range of circumstances than those covered by the automatic validation mechanisms of its predecessors. It empowered the court to make such order as it thought fit to rectify, negative or modify the consequences in law of any omission, defect, error or irregularity in the management or administration of the company whereby: any breach of any of the provisions of the Act had occurred; there had been default in the observance of the memorandum or articles of the company; or any proceedings at or in connection with any meeting of the company or of the directors thereof or any assemblage purporting to be such a meeting had been rendered ineffective. The power conferred on the court was constrained by the requirement that a court order would not do injustice to the company or a member or creditor thereof18. Early in the life of s 366(3) it was held, by Else-Mitchell J in Omega Estates Pty Ltd v Ganke, to apply to "much more than mere irregularities or defects of a 15 Jordan v Avram (1997) 141 FLR 275 at 279 per Gillard J; Re Westpac Banking Corporation (2004) 53 ACSR 288 at 293 [26]–[27] per Emmett J; Cordiant Communications (Australia) Pty Ltd v Communications Group Holdings Pty Ltd (2005) 194 FLR 322 at 345 [97], 350 [134] per Palmer J; Re MLC Ltd (2006) 60 ACSR 187 at 189 [10] per Gyles J; Re Golden Gate Petroleum Ltd (2010) 77 ACSR 17 at 29 [40] per McKerracher J; Re Elemental Minerals Ltd (2010) 79 ACSR 277 at 281 [30] per Gilmour J. 16 Adopted by the States as a uniform law, a mechanism first recommended in the Report of the Royal Commission on the Constitution (1929) at 208 and revisited in the Report from the Joint Committee on Constitutional Review (1959) at 110–113 albeit that Committee recommended a single federal companies law. 17 For example, Companies Act 1931 (Q), s 374; Companies Act 1934 (SA), s 380; Companies Act 1936 (NSW), s 357; Companies Act 1943 (WA), s 415; Companies Act 1958 (Vic), s 256; Companies Act 1959 (Tas), s 310. 18 Uniform Companies Acts 1961, s 366(3)(b). procedural character."19 It covered cases in which non-compliance with company articles had resulted in doubts as to the constitution of the board of directors and the validity of the appointment of persons who had purported to act as directors20. Although Else-Mitchell J said that the section would not authorise the court to override articles of association21, that proposition did not survive subsequent interpretations of s 366 and its successors. A contrary and wider construction was adopted by Bowen CJ in Eq in Re Compaction Systems Pty Ltd22, holding that s 366(3) conferred power to disregard the articles even to the extent of disregarding prohibitions in the articles23. As to the constraint that an order under s 366(3) not do injustice to the company or any members or creditors thereof, Bowen CJ in Eq observed in terms relevant to the application of s 1322(6)(c)24: "the word 'injustice' in this provision requires the Court to consider any real, and not merely insubstantial or theoretical, prejudice ... it is insufficient to show that there may be some prejudice to a member if, on a consideration of the whole matter, the overwhelming weight of justice, as it were, is in favour of making the order". Unlike s 366(3), s 1322(6)(c) requires consideration of substantial injustice to "any person" but the general approach enunciated in Re Compaction Systems remains valid. The remedial scope of s 1322(4) is no less than that of s 366(3) insofar as the latter authorised orders which would override the effects of provisions of a company's constitution. 19 Omega Estates Pty Ltd v Ganke [1963] NSWR 1416 at 1424. 20 Omega Estates Pty Ltd v Ganke [1963] NSWR 1416 at 1424 per Else-Mitchell J. 21 Omega Estates Pty Ltd v Ganke [1963] NSWR 1416 at 1423. 22 [1976] 2 NSWLR 477. 23 [1976] 2 NSWLR 477 at 492; cf Re Australian Continental Resources Ltd (1975) 10 ACTR 19 at 31 per Blackburn J; Jordan v Avram (1997) 141 FLR 275 at 279 24 [1976] 2 NSWLR 477 at 493, citing Re Castlereagh Securities Ltd [1973] 1 NSWLR 624; see also Brown v Health Services Union (2012) 205 FCR 548 at 591 [133] per Flick J; Chalet Nominees (1999) Pty Ltd v Murray (2012) 30 ACLC ¶12-017 at 254 [27] per Le Miere J. Section 539(4)(a) of the Companies Code 198125, adopted by each of the States and Territories, conferred a remedial power in terms which were to be replicated in s 1322(4)(a) of the Corporations Act 1989 (Cth). The provision retained its numbering, and its text remained unchanged, in the Corporations Law enacted in 199126 following the decision of this Court in the Incorporation Case27. The provision was replicated in the Corporations Act 2001 (Cth). The word "contravention" both in s 539(4)(a) of the Companies Code and in s 1322(4)(a) of the Corporations Act and its immediate predecessors has been interpreted broadly and as encompassing a failure to comply with a condition precedent to the exercise of a power28. In NRMA Ltd v Gould29, Young J said that "'contravention' … had to be read in a very wide sense."30 His Honour, in that case, declared valid the nomination of a person for election as a director of a company notwithstanding that the person lacked the requisite qualification of membership of the company at the time of nomination. That approach was expressly adopted by Gillard J in Jordan v Avram31. In Nece Pty Ltd v Ritek Incorporation32, Lehane J also gave a broad meaning to "contravention". His Honour acknowledged that earlier cases had proceeded on the basis that if 25 Adopted by the States and Territories pursuant intergovernmental Commonwealth–State agreement made in December 1978 for a co-operative scheme for uniform companies and securities laws. to an 26 Corporations Act 1989 (Cth) as amended by the Corporations Legislation Amendment Act 1990 (Cth) and applied by the Corporations (New South Wales) Act 1990 (NSW), Corporations (Victoria) Act 1990 (Vic), Corporations (South Australia) Act 1990 (SA), Corporations (Queensland) Act 1990 (Q), Corporations (Western Australia) Act 1990 (WA), Corporations (Tasmania) Act 1990 (Tas) and Corporations (Northern Territory) Act 1990 (NT). 27 New South Wales v The Commonwealth (1990) 169 CLR 482; [1990] HCA 2. 28 North Sydney Brick & Tile Co Ltd v Darvall (1989) 17 NSWLR 327 at 341 per Clarke JA, Samuels AP and Mahoney JA agreeing at 328; Winpar Holdings Ltd v Goldfields Kalgoorlie Ltd (2001) 166 FLR 144 at 164 [65] per Giles JA, Beazley JA agreeing at 145 [1], cf at 177–178 [120] per Davies AJA; Re Westpac Banking Corporation (2004) 53 ACSR 288 at 292–293 [23]–[24] per Emmett J; Re Centennial Coal Co Ltd (2006) 226 ALR 341 at 346 [15] per Barrett J. 29 (1995) 18 ACSR 290. 30 (1995) 18 ACSR 290 at 293. 31 (1997) 141 FLR 275 at 276, 279. 32 (1997) 24 ACSR 38. something was done which had not been properly authorised because, for example, appropriate resolutions had not been passed, or because there was in office no validly elected board of directors, the doing of that thing without authority could be regarded as a "contravention" of the articles of association. That situation did not arise on the facts in Nece. The problem in that case was one of a deadlock preventing authority being given to enable solicitors to be validly instructed by the company33. In Sheahan v Londish34, Young JA, with whom Lindgren AJA agreed in this respect35, reiterated the approach he had taken in NRMA v Gould to be the meaning of "contravention"36. Section 1322(4)(a) applies to acts done in contravention of a company's constitution. That is the application principally in issue in this appeal. It directs attention to the provisions of LWC's constitution. The constitution of the company LWC was incorporated on 30 April 1971 under the provisions of the Companies Act 1961 (NSW). Its founding directors were Leo Weinstock ("Leo") and his wife, Hedy Weinstock ("Hedy"). The constitution of LWC consists of its memorandum of association and its articles of association, which have to be read in light of the relevant corporations legislation. The share capital of the company when it was incorporated was $20,000.00 divided into twenty thousand shares of one dollar each in fourteen classes designated by the letters "A" to "N"37. Classes "A" to "D" were expressed not to confer "any right to vote at any general meeting of the Company" but entitled their holders to receive notice of and to attend such meetings38. The voting disability did not attach to classes "E" to "N". The specific voting disabilities attached to share classes "A" to "D" displaced a 33 (1997) 24 ACSR 38 at 41–44. 34 (2010) 244 FLR 64. 35 (2010) 244 FLR 64 at 95 [233]. 36 (2010) 244 FLR 64 at 84 [162]. 37 Section 1427(1) of the Corporations Law, inserted by Company Law Review Act 1998 (Cth), Sched 1, item 11, repealed provisions of company constitutions setting out share capital and dividing it into shares of a fixed amount. Its application to the constitution of LWC was considered by Campbell JA in the Court of Appeal as outlined at [36] of these reasons and is not in issue in this appeal. 38 Articles 3(2)(a), 3(3)(b), 3(4)(a) and 3(5)(a). general voting right conferred by Art 56 on any shareholder present at a general meeting of the company to have one vote on a show of hands and one vote per share on a poll. The articles, as construed by Barrett J, provided for the company to hold annual general meetings in accordance with the provisions of the Companies Act 1961. That construction was not in dispute39. Barrett J held that after 1 July 1982, when the Companies (New South Wales) Code came into effect to the exclusion of the Companies Act 196140, annual general meetings held pursuant to the requirements of the Code and its successor, the Corporations Law of New South Wales, were not annual general meetings for the purposes of the articles41. That construction is not in question in this appeal. In any event, the First Corporate Law Simplification Act 1995 (Cth), which commenced on 9 December 1995, removed any statutory obligation on proprietary companies to hold an annual general meeting42. Article 46 empowers a director whenever he or she thinks fit to convene an extraordinary general meeting. Under Art 49 a quorum for a general meeting is two members of the company. The appointment of a director is covered by Arts 65 to 74 inclusive. Article 66 requires that: "At every annual general meeting each director shall retire from office and be eligible for re-election. Retiring directors shall act as directors throughout the meeting at which they retire." Article 67 provides: "The Company at the meeting at which a director so retires may fill the vacated office by electing a person thereto, and in default the retiring director shall if offering himself for re-election and not being disqualified under the Act from holding office as a director be deemed to have been re- elected, unless at that meeting it is expressly resolved not to fill the 39 A requirement imposed by Art 45 read with Art 1, requiring that words or expressions in the articles be interpreted in accordance with the Interpretation Act 1897 (NSW) and the Companies Act 1961. 40 Companies (Application of Laws) Act 1981 (NSW), ss 2, 18(1); New South Wales Government Gazette, No 90, 30 June 1982 at 2959. 41 [2011] NSWSC 235 at [83]. 42 Section 245(2A) of the Corporations Law, inserted by First Corporate Law Simplification Act 1995 (Cth), Sched 4, item 35. vacated office or unless a resolution for the re-election of that director is put to the meeting and lost." Article 69 confers power on the directors at any time to appoint any person to be a director either to fill a casual vacancy or as an addition to the existing directors. It provides: "Any director so appointed shall hold office only until the next following annual general meeting and shall then be eligible for re-election but shall not be taken into account in determining the directors who are to retire by rotation at that meeting." As construed by Barrett J the qualification "only until the next following annual general meeting" has the effect that a director appointed under Art 69 ceases to be a director at the commencement of the next annual general meeting43. That construction was not in issue in this appeal. Article 86 provides that the quorum necessary for the transaction of the business of the directors may be fixed by the directors and unless so fixed shall be two. No quorum was ever fixed by the directors for LWC directors' meetings, so the default quorum was two. In appointing Helen, however, Amiram purported to act under Art 87, which provides: "The continuing directors may act notwithstanding any vacancy in their body, but if and so long as their number is reduced below the number fixed by or pursuant to the Articles of the Company as the necessary quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the Company, but for no other purpose." The factual background It was common ground that upon LWC's incorporation on 30 April 1971, its issued share capital consisted of five "A" class shares, four of which were held by Leo and one by Mr Nagel, a solicitor who held it in trust for Leo. It was also common ground that on or about 1 April 1972 three "C" class shares were issued, one of them to Hedy, one to Tamar and one to Amiram44. 43 [2011] NSWSC 235 at [96]–[103]. 44 The share register showed eight "C" class shares allotted to Hedy in 1992. There was no minuted record of an allotment resolution. The precise number of "C" class shares allotted to Hedy was not in issue in this appeal. The cognate appeal in Beck v Weinstock [2013] HCA 15 proceeded on the basis that eight "C" class shares were held by Hedy at the time of her death. Leo and Hedy continued in office beyond the first annual general meeting, which was held on 30 October 1972, and were in office as directors on 29 June 1973. The minutes of LWC record a meeting, held on that date, designated as an "extraordinary general meeting of shareholders", at which Leo and Hedy were present. The minutes record the passing of a special resolution: "That Tamar Beck and Amiram David Weinstock be appointed Directors and they shall hold office until the holding of the next Annual General Meeting of the Company." In the winding-up application Tamar challenged the competency of the meeting of 29 June 1973 on the basis that the only relevant power of appointment rested with the directors under Art 69. Barrett J held, and it is not now in dispute, that although Leo and Hedy chose, perhaps on the basis of wrong advice, to depict their decision as effected by a special resolution at an extraordinary general meeting, it was effective under Art 69 as a decision made by them as directors45. Tamar and Amiram thereby became directors on the basis stated in that Article—that is to say that they were to hold office "only until the next following annual general meeting". The next annual general meeting was on 31 December 1973. As Barrett J found, Art 69 had the effect that neither Tamar nor Amiram continued as a director beyond the time at which that annual general meeting commenced46. According to the minutes of the meeting of 31 December 1973 all five shareholders of LWC—Leo, Hedy, Mr Nagel, Tamar and Amiram—were present. They purported to pass a resolution that: "any director retiring in accordance with the provisions of the Company's Articles of Association be re-appointed." None of the shareholders held shares which conferred a right to vote. The resolution was therefore ineffective. So too were resolutions passed at subsequent annual general meetings reappointing Tamar and Amiram as directors. Tamar purportedly resigned as a director on 8 January 1982. Amiram continued to act as a director. On 29 July 2003 Leo died. Hedy, who had contracted Alzheimer's disease, was incapable of performing the duties of a director of the company. It was not in dispute that she had ceased to be a director 45 [2011] NSWSC 235 at [51]–[54]. 46 [2011] NSWSC 235 at [103]. by operation of the articles47. On 30 July 2003 Amiram decided to appoint Helen "as an additional director" pursuant to Art 87. His "resolution", said to have been passed at a "meeting of director" consisting of himself, was in the following terms: "It was RESOLVED in accordance with clause 87 of the Articles of Association of the company which states; 'if and so long as their number is reduced below the number fixed by or pursuant to the Articles of the Company as quorum of directors, the continuing directors or director may act for the purpose of increasing the number of directors to that number or of summoning a general meeting of the company, but for no other purpose.' that Amiram David Weinstock being the sole remaining director of the company appoint Helen Weinstock as an additional director." In the Originating Process filed on 30 September 2010, Tamar sought orders, pursuant to s 461(1)(k) and alternatively s 233 of the Corporations Act, that LWC be wound up and a liquidator appointed to it. She sought a declaration that there were no validly appointed directors of LWC and that none of the issued shares carried voting rights. She also sought interlocutory and final injunctive orders which are not material for present purposes. In Points of Claim filed in support of the Originating Process she asserted that it was just and equitable that the company be wound up on the basis that it had no directors, that Amiram and Helen had purported to act as directors despite not being directors, that there was no mechanism for directors to be appointed to the company, that members of the company had no voting entitlements at a general meeting and that the power to remove directors at an annual general meeting could not be exercised. On 10 December 2010 LWC, Amiram and Helen filed an application in the proceedings commenced by Tamar seeking, inter alia, an order declaring that Amiram's purported resolution of 30 July 2003 appointing Helen as a director was not invalid by reason of any contravention of any provision of the Corporations Act or the constitution of LWC48. It was that aspect of the application by LWC, Amiram and Helen that was successful before Barrett J and in respect of which they were unsuccessful in the Court of Appeal. 47 Article 73(d) provides: "The office of director shall become vacant if the director … becomes of unsound mind". 48 The resolution was identified in the application by reference to par 20 of the Points of Claim filed by Tamar on 28 October 2010. The appeal to this Court was heard immediately before an appeal arising out of earlier but related proceedings in the Supreme Court of New South Wales49. In 2007 Tamar had commenced proceedings in that Court challenging the purported redemption by the "directors" of LWC of the "C" class shares held by Hedy at the time of her death. Hamilton AJ50 held that the shares were not preference shares and therefore not redeemable preference shares and not amenable to redemption. His Honour made declarations accordingly. An appeal to the Court of Appeal by Amiram, Helen and LWC succeeded51. Special leave to appeal to this Court was granted on 10 February 2012 by Gummow and Heydon JJ. That appeal is the subject of a separate judgment. The decision of the primary judge The reasons of Barrett J involved the following steps: Amiram, who purported to appoint Helen as a director of LWC, did not hold the office of director when he did so. It was necessary that he hold that office in order that the appointment be valid. The situation was equivalent to one in which the company did not have a validly elected board of directors52. Amiram was a member of the company and a former director, and had acted as a de facto director for 30 years53. The appointment of Helen involved a "contravention" in accordance with the construction of that term adopted by Lehane J in Nece54. To do something in relation to a company which is not authorised for want of a requisite resolution or a validly elected board of directors may be regarded as a contravention of the articles55. 49 Beck v Weinstock [2013] HCA 15. 50 (2010) 241 FLR 235. 51 (2011) 252 FLR 462. 52 [2011] NSWSC 235 at [150]–[152]. 53 [2011] NSWSC 235 at [150]. 54 [2011] NSWSC 235 at [151]. 55 [2011] NSWSC 235 at [152]. The contravention in this case was a matter of substance rather than one of form or procedure56. Section 1322(6)(a) did not preclude the making of an order under s 1322(4)(a) as it was just and equitable that such an order be made. The condition in s 1322(6)(a)(iii) was therefore satisfied57. There was no substantial injustice, within the meaning of s 1322(6)(c), to any person arising from the appointment of Helen as a director58. His Honour observed that as a validly appointed director Helen could appoint an additional director under Arts 87 and 69 to bring the number of directors up to two to meet the quorum requirements for a functioning board. The board so constituted could issue shares in any of the classes "E" to "N" with voting rights attached so that members could vote at a general meeting. The existence of those mechanisms for returning LWC to a functioning corporation was sufficient to dispose of the winding-up application. His Honour made a declaration that: "the proceeding purporting to have been taken on 30 July 2003 by which Amiram David Weinstock purported to act as a director of LW Furniture Consolidated (Aust) Pty Ltd and in that capacity to appoint Helen Weinstock to be a director of that company is not invalid by reason of the contravention of the provision of the constitution of that company consisting of non-observance of the requirement that such proceeding be taken only by a person in office as a director by virtue of valid appointment or election as such." The decision of the Court of Appeal The majority judgments in the Court of Appeal concerning the application of s 1322(4)(a) were delivered by Young JA and Sackville AJA. Young JA held that in order for s 1322(4)(a) to apply there must be a contravention of the constitution of the company done either by infringing or failing to take advantage of one of its provisions59. Section 1322(4)(a) could 56 [2011] NSWSC 235 at [153]. 57 [2011] NSWSC 235 at [165]–[168]. 58 [2011] NSWSC 235 at [169]–[171]. 59 (2012) 265 FLR 60 at 110 [222]. only apply to validate an impugned action which could be done validly under the Corporations Act or under the constitution of the company60. Sackville AJA accepted that the term "contravention" was not limited to its orthodox meaning of "infringement"61. A failure to comply with the articles in taking steps that the company was not obliged to take could constitute a contravention62. However, Amiram's appointment of Helen as a director was not such a contravention63. There was no provision in the articles of LWC of which Amiram could have taken advantage in order to appoint Helen as a director64. Section 1322(4)(a) could not be applied to the purported act of someone who had never been validly appointed as a director and could not be so appointed65. His Honour said that none of the reported cases to which reference had been made involved an act by a person who, although a de facto director, could not be appointed as a director because there was no mechanism available to the company to achieve that result66. Campbell JA in dissent observed that s 1322(4)(a) was wider than the preceding sub-sections of s 132267. All that was required for there to be a contravention of the constitution was "that something ha[d] happened that is different to what the constitution of the corporation requires."68 His Honour held that the appointment of Helen was an act purported to have been done in relation to the company69. That characterisation was supported by the fact that Amiram had been a de facto director of the company within the meaning of s 9 of the Corporations Act70. As explained below, his Honour's approach was correct. 60 (2012) 265 FLR 60 at 110 [223]. 61 (2012) 265 FLR 60 at 111–112 [232]. 62 (2012) 265 FLR 60 at 112 [232]. 63 (2012) 265 FLR 60 at 112 [233]. 64 (2012) 265 FLR 60 at 112 [236]. 65 (2012) 265 FLR 60 at 113 [239]. 66 (2012) 265 FLR 60 at 115 [249]. 67 (2012) 265 FLR 60 at 92 [139]. 68 (2012) 265 FLR 60 at 92 [139]. 69 (2012) 265 FLR 60 at 93–94 [147]–[148]. 70 (2012) 265 FLR 60 at 94 [150]. Campbell JA also dealt with a submission by Tamar that Art 3, which created the various share classes, had been repealed by operation of s 1427(1) of the Corporations Law, inserted by item 11 of Sched 1 to the Company Law Review Act 1998 (Cth)71. That provision abolished the concepts of the share capital of a company and par value by repealing the provisions of company constitutions setting out the amount of their share capital and dividing it into shares of a fixed amount. Campbell JA held that s 1427(1) had the effect of rewriting Art 3 to delete the reference to the capital of the company and the value of the shares as a money sum72. Article 4, the mechanism for issuing ordinary shares in the classes "E" to "N", therefore survived the 1998 legislation73. That finding is not in issue in this appeal. The ground of appeal The single ground of appeal was: "The Court below erred in holding that the power under section 1322(4) of the Corporations Act 2001 (Cth) was not exercisable in relation to the purported appointment of the second appellant as a director of LW Furniture Consolidated (Aust) Pty Limited … on 30 July 2003 by the first appellant". Consideration The outcome of this appeal is dictated by the construction of s 1322(4)(a), discussed earlier in these reasons, the constitution of LWC including its articles of association, also discussed earlier, and the basis of the invalidity attaching to Amiram's appointment of Helen as a director of LWC. Corporations, in contemporary Australian society, serve the purposes of enterprises, large and small, owned and operated by men and women, some of whom are sophisticated, knowledgeable and well-advised on matters of corporate governance and some, perhaps many, of whom are not. Section 1322(4) and related provisions reflect a long-standing legislative recognition that mistakes will happen in corporate governance and that it is not in the public interest that the validity of decisions made in relation to corporations be unduly vulnerable to innocent errors which may be corrected without substantial injustice to third parties. In accordance with its evident purpose, s 1322(4)(a) is to be construed 71 (2012) 265 FLR 60 at 96–97 [161]. 72 (2012) 265 FLR 60 at 100 [174]. 73 (2012) 265 FLR 60 at 100 [175]. broadly and applied pragmatically, principally by reference to considerations of substance rather than those of form. The dispensing power conferred on the Court by s 1322(4)(a) is not in the nature of a general absolution for all past errors. It does not authorise the making of an order declaring that an impugned act, matter or thing is valid. It allows a determination by the Court that the act, matter or thing done "is not invalid" by reason of a provision of the Corporations Act or a provision of the constitution of a corporation. The remedy may be sought by a party fearing or suspecting invalidity on such a ground or, as in the present case, to meet a contention of invalidity advanced by another party in adversarial proceedings. The effect of a declaration under the provision is limited to overcoming invalidity flowing from a particular contravention or contraventions. It could not be otherwise. It is only with respect to particular contraventions that the Court can reach the state of satisfaction required by s 1322(6). The term "contravention" is defined in the Macquarie Dictionary as74: "the act of contravening; action counter to something". It defines "contravene" as75: "1. to come or be in conflict with; go or act counter to; oppose. 2. to violate, infringe, or transgress". Constitutions—including The notions of "conflict", "counter to" and "oppose" are broad. It is not only the evident purpose of s 1322(4)(a) but its field of operation which requires the broadest available construction of "contravention". It applies not only to contraventions of the Corporations Act but also to contraventions of company constitutions. the Corporations Act, which may be or form part of a company constitution—are typically concerned with membership rights, the establishment, operation, powers and procedures of governance structures, particularly general meetings and board of directors, and the qualifications, appointment, retirement and removal of directors. These are not generally provisions expressed in terms of obligation or prohibition. That is not to say that a company constitution may not impose obligations upon company officers to do certain things or require that they do not do other things. But the requirement that a contravention of a the "replaceable rules"76 74 Federation ed (2001), vol 1 at 421. 75 Federation ed (2001), vol 1 at 421. 76 Contained in a number of provisions of the Corporations Act set out in s 141 of that Act. company constitution involve disobedience of a prohibition or non-compliance with an obligation would amount to an inexplicable limitation of the evident purpose of s 1322(4)(a). that construction. It was submitted on behalf of Tamar that the ordinary meaning of contravention is an "infringement", "violation" or "transgression" of some negative prohibition or positive requirement. Section 1322(4)(c) was said to reinforce That proposition should not be accepted. Section 1322(4)(c) empowers the Court to relieve a person from civil liability by reason of a contravention or failure of a kind referred to in s 1322(4)(a). There is no reason to limit the construction of the term "contravention" by reference to a subset of contraventions which attract civil liability nor by reference to that subset which can be characterised as a "failure" to do something. Somewhat in tension with the preceding submission, Tamar accepted that "contravention" in s 1322(4)(a) encompasses a failure to comply with a condition of a power. That much was common ground and accorded with judicial decisions which have been referred to earlier in these reasons. However, Tamar sought to distinguish non- compliance with a necessary condition for the exercise of a power from the case in which a person purported to "exercise a power which he simply does not have". She contended that Amiram, purporting to appoint Helen as a director, was in that category. That submission should not be accepted. The proffered distinction, which is at best difficult, would require finegrained analysis quite at odds with the remedial and practical purpose of the provision. It is also at odds with the legislative history. The nineteenth century precursors of s 1322 in the United Kingdom and the Australian colonies, and State companies legislation after federation, provided for the validation of acts done by persons acting as directors notwithstanding that their appointments were defective or that they were disqualified. It is not appropriate to torture a limit out of the language of s 1322(4)(a) against the extreme case of a stranger to the company purporting to make a decision appointing another stranger as a director. Extreme cases are amply covered by the discretionary nature of the power and the constraints upon its exercise imposed by s 1322(6). The present case was not an extreme case. Amiram was not a stranger to the company. He had discharged the functions of a director for thirty years owing, as an officer of the company, the obligations that were imposed upon him notwithstanding the cessation in December 1973 of his appointment as a director, a cessation of which he was evidently unaware. This was a case falling within the scope and purpose of s 1322(4)(a). Conclusion Amiram's appointment of Helen as a director was within the scope of the remedial power conferred by s 1322(4)(a). The appeal should be allowed. I agree with the orders proposed in the joint judgment. HAYNE, CRENNAN AND KIEFEL JJ. A company77, incorporated in 1971 under the Companies Act 1961 (NSW), had two directors, who were husband and wife: Leo and Hedy Weinstock. All the issued shares in the company were held by or on behalf of the husband. In 1972, three further shares were issued: one each to the wife, the first appellant (Mr A D Weinstock) and the first respondent (Mrs T R Beck). (Mr A D Weinstock and Mrs Beck are children of Leo and Hedy Weinstock.) In 1973, Mr A D Weinstock and Mrs Beck were appointed as additional directors of the company to hold office until the next annual general meeting of the company. At subsequent annual general meetings, resolutions were passed resolving to reappoint directors retiring in accordance with the provisions of the company's articles of association. It is now accepted that none of those resolutions had the effect of appointing either Mr A D Weinstock or Mrs Beck as a director because, under the company's articles, the initial appointment of each as a director came to an end at the start of the next annual general meeting. It followed that neither was a director who retired at that meeting or at any subsequent meeting. In fact, however, each acted as if he or she had been validly appointed as a director until Mrs Beck gave notice of resignation from office in 1982. Mr A D Weinstock continued to act as a director of the company. only therefore, incompetent. There was, On 29 July 2003, Mr Leo Weinstock died. His wife, Hedy, had become person mentally (Mr A D Weinstock) who claimed to be a director of the company. The company's articles required that there be no fewer than two directors unless otherwise determined by a general meeting and that the quorum for a meeting of directors be, unless otherwise fixed by the directors, two. The articles provided that, if the number of directors was reduced below the number fixed as the necessary quorum of directors, "the continuing directors or director may act for the purpose of increasing the number of directors to that number". In purported exercise of that power, Mr A D Weinstock appointed the second appellant, his wife, Helen, as a director of the company. one It is not disputed that the purported appointment of Mrs Helen Weinstock was invalid. 77 The company was named as second respondent to the appeal to this Court but it took no part in the proceedings. At first instance, Barrett J made78 an order under s 1322(4)(a) of the Corporations Act 2001 (Cth) ("the Act") declaring the appointment of Mrs Helen Weinstock not invalid. The Court of Appeal (Young JA and Sackville AJA, Campbell JA dissenting) set aside79 leave, Mr A D Weinstock and Mrs Helen Weinstock appeal to this Court. By special this order. There is only one issue in the appeal. Section 1322(4)(a) of the Act gave the "Court"80, "on application by any interested person", power to make, "either unconditionally or subject to such conditions as the Court imposes", "an order declaring that any act, matter or thing purporting to have been done ... under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation". The appointment of Mrs Helen Weinstock as a director was invalid because Mr A D Weinstock was not authorised to appoint her. Could an order be made under s 1322(4)(a)81 declaring the appointment to be not invalid? In the Court of Appeal, and again in this Court, Mrs Beck submitted that Mr A D Weinstock's purported appointment of Mrs Helen Weinstock was not a "contravention of ... a provision of the constitution" of the company. Mrs Beck's argument proceeded by three steps. First, she submitted that "contravention" in s 1322(4)(a) means "an 'infringement', 'violation' or 'transgression' of some negative prohibition or positive requirement" of the Act or of the constitution of the company. Second, she submitted that to determine whether there was an infringement, violation or transgression of the constitution of the company, it was 78 Beck v L W Furniture Consolidated (Aust) Pty Ltd [2011] NSWSC 235; Beck v L W Furniture Consolidated (NSW) Pty Ltd [2011] NSWSC 405. 79 Beck v LW Furniture Consolidated (Aust) Pty Ltd (2012) 265 FLR 60. 80 Defined in s 58AA(1) as any of (a) the Federal Court of Australia; (b) the Supreme Court of a State or Territory; (c) the Family Court of Australia; and (d) "a court to which section 41 of the Family Law Act 1975 applies because of a Proclamation made under subsection 41(2) of that Act". 81 There was no dispute that the company, incorporated under the Companies Act 1961 (NSW), was a "corporation" to which s 1322(4)(a) of the Act applied. See ss 20-21 of the Companies (Application of Laws) Act 1981 (NSW), s 126 of the Corporations Law of New South Wales (being s 82 of the Corporations Act 1989 (Cth) as given effect by the Corporations (New South Wales) Act 1990 (NSW)) and, following the amendments made by the Company Law Review Act 1998 (Cth), ss 1362CA-1362CB of the Corporations Law of New South Wales together with ss 57A(1), 1378(1) and 1408 of the Act. necessary to ask why the appointment of Mrs Helen Weinstock was invalid. Third, she submitted that the purported appointment of Mrs Helen Weinstock was invalid because Mr A D Weinstock had no power to make the appointment. He had no power to make the appointment because he had not been, and at the time of the purported appointment could not have been, appointed to the office of director of the company. It followed, so Mrs Beck submitted, and as a majority of the Court of Appeal accepted82, that the appointment was not made in contravention of the constitution of the company. In the Court of Appeal, it was said83 to be "stretching language to breaking point to suggest that [Mr A D Weinstock's] act was ineffective (or invalid) because he contravened or failed to take advantage of a provision in the Articles or the Act". This conclusion was evidently founded in the observation84 that Mr A D Weinstock had no power to appoint Mrs Helen Weinstock as a director of the company. A distinction was drawn85 between invalid actions "able to be achieved under the Act or constitution" and actions which "it is not possible to attain ... under the Act or constitution". But how or why the observation that the appointor had, and could have had, no power to make the purported appointment bears upon whether the appointment was made in contravention of the company's constitution was not further spelled out in the reasons of the majority in the Court of Appeal or in argument in this Court. Contrary to Mrs Beck's central submission in this Court, the words "by reason of any contravention" provide no basis for drawing a distinction between what cannot be done at all under the Act or under the constitution of a company and what can be done but has not been done validly. In both cases the action taken was invalid. The supposed distinction cannot be drawn when the very premise for the application of s 1322(4)(a) was that what has been done was invalid. Section 1322(4)(a) of the Act was cast in very broad terms. It dealt with "any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken", whether done, instituted or taken under the Act or in relation to a corporation. The power given to the Court was to declare the act, matter or thing, or the proceeding, not invalid. The Court could do that either unconditionally or subject to such conditions as the Court 82 (2012) 265 FLR 60 at 110 [223] per Young JA, 113 [239] per Sackville AJA. 83 (2012) 265 FLR 60 at 113 [236] per Sackville AJA. 84 (2012) 265 FLR 60 at 112 [235] per Sackville AJA. 85 (2012) 265 FLR 60 at 110 [223] per Young JA, 113 [239] per Sackville AJA. imposed. The Court was given86 power to "make such consequential or ancillary orders as the Court thinks fit". Section 1322(6) prescribed pre-conditions to making an order under s 1322(4)(a) but the detail of those pre-conditions need not be examined. Mr A D Weinstock purported to appoint Mrs Helen Weinstock as a director. That appointment was not made by a continuing director for the purpose of increasing the number of directors to the number fixed as the quorum for a meeting of directors. It was, therefore, not made in accordance with the requirements of the company's articles. Because the appointment was not made in accordance with those requirements, it was made in contravention of the company's constitution. Observing that Mr A D Weinstock did not have power to make the appointment reveals how the contravention came about. That Mr A D Weinstock not only did not have power but could not have validly been given the power to make the appointment neither adds to nor subtracts from the conclusion that Mrs Helen Weinstock's appointment was not made in accordance with the company's constitution. The appointment was invalid and it was invalid by reason of a contravention of the company's constitution. Only if s 1322(4)(a) is to be read otherwise than according to its terms could it be said that the Court did not have power in these proceedings to make an order under that provision. But the power given to the Court by s 1322(4)(a) is not to be hedged about by any implied limitation. As this Court said in Owners of "Shin Kobe Maru" v Empire Shipping Co Inc87, "[i]t is quite inappropriate to read provisions conferring jurisdiction or granting powers to a court by making implications or imposing limitations which are not found in the express words88". The construction urged by Mrs Beck and adopted by the Court of Appeal necessarily depended upon implying some limitation on the power given to the Court by s 1322(4)(a). No basis for making any such implication was identified 87 (1994) 181 CLR 404 at 421; [1994] HCA 54. See also, for example, The Commonwealth v SCI Operations Pty Ltd (1998) 192 CLR 285 at 301 [26]; [1998] HCA 20; Australasian Memory Pty Ltd v Brien (2000) 200 CLR 270 at 279 [17]; [2000] HCA 30; Campbell v Backoffice Investments Pty Ltd (2009) 238 CLR 304 at 361 [178]; [2009] HCA 25. 88 See FAI General Insurance Co Ltd v Southern Cross Exploration NL (1988) 165 CLR 268 at 283-284, 290; [1988] HCA 13. See also Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 185, 202-203, 205; [1992] HCA 28. and that is reason enough to reject it89. Section 1322 conferred jurisdiction on and granted powers to a court. The provision is not to be read "by making implications or imposing limitations which are not found in the express words"90. Conclusion and orders The appeal to this Court should be allowed with costs. The appellants submitted that orders 3 and 5 made by the Court of Appeal of the Supreme Court of New South Wales on 5 April 2012 should be set aside and in their place there should be an order remitting to the Equity Division of the Supreme Court of New South Wales the determination of whether an order should be made under s 1322(4)(a) in addition to the question whether the company should be wound up, which order 3 of the Court of Appeal's orders already provided should be remitted to the Equity Division for further consideration. The appellants accepted that it was appropriate that, for the reasons given91 by Campbell JA, they should pay 80 per cent of the costs of the appeal and cross-appeal to the Court of Appeal. The consequential orders proposed by the appellants should be made. 89 cf David Grant & Co Pty Ltd v Westpac Banking Corporation (1995) 184 CLR 265 at 275-276; [1995] HCA 43. 90 Owners of "Shin Kobe Maru" (1994) 181 CLR 404 at 421. 91 (2012) 265 FLR 60 at 108 [209]-[210]. This appeal from the Court of Appeal of the Supreme Court of New South Wales (Young JA and Sackville AJA, Campbell JA dissenting)92 concerns the scope of the power conferred by s 1322(4)(a) of the Corporations Act 2001 (Cth). The facts and procedural history are set out by French CJ, whose abbreviations I adopt, and by Hayne, Crennan and Kiefel JJ, with whose proposed orders I agree. Section 1322 provides in part: "(4) Subject to the following provisions of this section but without limiting the generality of any other provision of this Act, the Court may, on application by any interested person, make all or any of the following orders, either unconditionally or subject to such conditions as the Court imposes: an order declaring that any act, matter or thing purporting to have been done, or any proceeding purporting to have been instituted or taken, under this Act or in relation to a corporation is not invalid by reason of any contravention of a provision of this Act or a provision of the constitution of a corporation; an order relieving a person in whole or in part from any civil liability in respect of a contravention or failure of a kind referred to in paragraph (a); and may make such consequential or ancillary orders as the Court thinks fit. (5) An order may be made under paragraph (4)(a) or (c) notwithstanding that the contravention or failure referred to in the paragraph concerned resulted in the commission of an offence. The Court must not make an order under this section unless it is satisfied: in the case of an order referred to in paragraph (4)(a): 92 Beck v LW Furniture Consolidated (Aust) Pty Ltd (2012) 265 FLR 60. that the act, matter or thing, or the proceeding, referred to in that paragraph is essentially of a procedural nature; that the person or persons concerned in or party to the contravention or failure acted honestly; or (iii) that it is just and equitable that the order be made; and in the case of an order referred to in paragraph (4)(c)—that the person subject to the civil liability concerned acted honestly; and in every case—that no substantial injustice has been or is likely to be caused to any person." The "Court" in this context means the Federal Court of Australia, the Supreme Court of a State or Territory, the Family Court of Australia or the Family Court of Western Australia93. Section 1322(4)(a) confers a remedial power on a superior court the exercise of which is conditioned always on satisfaction by that court that no substantial injustice has been or is likely to be caused to any person. The Court of Appeal was agreed that it is therefore to be construed with all the liberality that The difference between Young JA and Sackville AJA in the majority and Campbell JA in dissent turned on how far a liberal construction of the word "contravention" could be taken. its Was the purported appointment by Amiram of Helen as a director invalid "by reason of [a] contravention of … a provision of the constitution of a corporation" in circumstances where Amiram purported to act under a provision of the constitution of LWC that allowed an existing director to appoint a new director but where Amiram did not and could not have power to act under that provision because Amiram was not an existing director and could not be appointed as a director by any procedure available under the constitution of LWC? The negative answer of Young JA and Sackville AJA was on the basis, as summarised by Young JA, that, while "action … performed in [an] invalid way … may be validated under the section", "if it is not possible to attain the result 93 Section 58AA(1) of the Corporations Act. 94 (2012) 265 FLR 60 at 90 [130]-[131], 111 [232], 113 [240]. under the … constitution, the section cannot assist"95. The positive answer of Campbell JA was on the basis that "[a]ll that is required for there to be a 'contravention' of the constitution is that something have happened that is different to what the constitution of the corporation requires": "[f]or [Amiram] to appoint Helen as director, when he had no power to do so, is a contravention in this sense"96. The answer of Campbell JA is, in my view, to be preferred. The answer adopts an available construction of the word "contravention" that fulfils the remedial purpose of s 1322(4)(a), that fits with the text of s 1322 and that conforms to the preferred construction of the same word in its relevantly identical predecessor, s 1322(4)(a) of the Corporations Law. The specification in s 1322(6)(a) of s 1322(6)(a)(i) as one of three alternative means of fulfilling a precondition to the making of an order under s 1322(4)(a) shows that an act, matter, thing or proceeding declared not invalid by reason of a contravention need not be "essentially of a procedural nature". The repeated references (in ss 1322(4)(c), 1322(5) and 1322(6)(a)(ii)) to a "contravention or failure" referred that "contravention" is used in s 1322(4)(a) in a sense interchangeable with "failure": as connoting an absence of compliance with a requirement necessary for validity. in s 1322(4)(a) also show An order under s 1322(4)(a) goes no further than to declare an act, matter, thing or proceeding not invalid by reason of a relevant contravention. The order does no more than to remove the invalidating effect of contravention so as to make valid what would have been valid without contravention. It is therefore true that s 1322(4)(a) cannot assist to achieve a result that could never be attained under the constitution of a corporation. However, s 1322(4)(a) can assist in achieving a result that could in some circumstances be attained under the constitution of a corporation by removing the invalidating effect of any absence of compliance with a requirement necessary for validity in the circumstances that in fact occurred. Campbell JA said97 that Lehane J "was, as usual, right" when he had said of s 1322(4)(a) of the Corporations Law98: 95 (2012) 265 FLR 60 at 110 [223]. 96 (2012) 265 FLR 60 at 92 [139]. 97 (2012) 265 FLR 60 at 91 [137]. 98 Nece Pty Ltd v Ritek Incorporation (1997) 24 ACSR 38 at 46. "if something is done which has not been properly authorised because, for example, appropriate resolutions have not been passed or because there is in office no validly elected board of directors, the doing of it without authority may be regarded as a contravention". In my view, Campbell JA was right, as Lehane J was right. The provision of the constitution of LWC under which Amiram purported to act allowed for the appointment of a new director by an existing director. The purported act of Amiram, when he was not an existing director, was a contravention in the sense in which that term is used in s 1322(4)(a). The fact that Amiram could not then be appointed as a director by any procedure available under the constitution of LWC makes no difference to that conclusion. For these reasons, I agree with the orders proposed by Hayne, Crennan
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT [2005] HCA 49 8 September 2005 ORDER Appeal dismissed. On appeal from the Supreme Court of Western Australia Representation: D Grace QC with M E Marich for the appellant (instructed by Laurie Levy & Associates) R E Cock QC for the respondent (instructed by Director of Public Prosecutions for Western Australia) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Criminal law – Evidence – Directions to jury – Appellant convicted of having in his possession a prohibited drug with intent to sell or supply it to another – Videotape of police interview with appellant admitted in evidence in which certain admissions were made – Trial judge directed that exculpatory statements were not supported by evidence on oath and did not have the same weight as admissions – Whether the trial judge's direction to the jury as to the weight to be accorded to the statements was correct. Criminal law and procedure – Right to silence – Appellant did not give evidence at trial – Whether summing-up of the trial judge undermined the appellant's right to remain silent at trial. Words and phrases – "admissions", "right to silence". The Criminal Code (WA), Pt VIII, s 638. GLEESON CJ, McHUGH, GUMMOW, HAYNE AND HEYDON JJ. Following a trial in the District Court of Western Australia before Judge Fenbury and a jury, the appellant was convicted of having in his possession a prohibited drug with intent to sell or supply it to another. The common name of the drug is ecstasy. The drug was in the form of 27 tablets, with a total weight of 5.5 grams. The appellant, described by the judge on sentencing as a 40 year old man with an extensive criminal history, was sentenced to a term of imprisonment. The evidence at the trial was brief. The prosecution called a police officer, who gave substantially unchallenged evidence about a videotaped search of the appellant's home during which the ecstasy tablets and other items were found, about certain intercepted telephone conversations to which the appellant was a party during and just after that search, and about an interview with the appellant and his solicitor. The interview, which took place four days after the search, was conducted and recorded pursuant to Pt VIII of the Schedule to the Criminal Code Act Compilation Act 1913 (WA) ("the Criminal Code"). The videotape of the search and the transcripts of the intercepted telephone conversations were received in evidence without objection. The videotape of the interview was also admitted without objection but, with the agreement of counsel, certain parts of it were excised. In the interview, the appellant, and his solicitor, admitted that the tablets were ecstasy tablets and that they belonged to the appellant, but asserted that they were for the appellant's use. The appellant gave no evidence at his trial. In his summing-up to the jury, the trial judge referred to the use that the jury could make of the evidence of what was said in the interview. In the course of doing so, he contrasted the admissions made by the appellant with the exculpatory assertions of the appellant and his solicitor. What he said in that respect did not lead to any complaint, or request for re-direction, by senior counsel for the appellant at trial. Nevertheless, it became the subject of the sole ground of an appeal against conviction. The Court of Criminal Appeal (Templeman, Wheeler and McLure JJ) dismissed the appeal1. The appellant now appeals to this Court. 1 Mule v The Queen [2004] WASCA 7. The relevant legislation Section 6 of the Misuse of Drugs Act 1981 (WA) creates the offence of having in possession a prohibited drug with intent to supply it to another, except pursuant to authority. The exception is presently irrelevant. Section 11 provides that, for the purposes of s 6, a person shall, unless the contrary is proved, be deemed to have in his possession a prohibited drug with intent to supply it to another if he has in his possession more than a specified quantity of the drug. That provision applied in the present case. In Singh v The Queen2, the Court of Criminal Appeal of Western Australia held that the effect of that section is not to cast an onus of proof upon an accused person, but, rather, that proof of possession of the specified quantity is adequate proof of intention to supply unless the jury concludes upon the whole of the evidence that it is more probable than not that the accused did not have that intention. The jury in the present case was directed accordingly, and there is no issue as about that matter. Reference has already been made to Pt VIII of the Criminal Code, relating to videotaped interviews. It was common ground that, subject to the excision of matter which was irrelevant (which happened here), matter the prejudicial effect of which outweighed its probative value, or matter that on some other sufficient ground should have been excluded, if the prosecution wished to tender the videotape it was obliged to tender the whole videotape. (That was argued to be the effect of s 570D(2) of the Criminal Code, and the argument was not controverted.) If there were further exceptions or qualifications to that proposition, there was no suggestion that they applied in the circumstances of this case, and they were not explored. The same practical result may have followed from what was said by Griffith CJ in Jack v Smail3. In any event, there was no attempt by the prosecution at trial to tender only those portions of the videotape that recorded the appellant's admissions of possession, and to refrain from tendering those portions which recorded the appellant's assertions as to his purpose of personal use. No question of severance arose and, subject to the agreed excisions, the whole videotape was tendered. It recorded, amongst much else, both the inculpatory statements acknowledging possession, and the exculpatory statements about personal use. At the time of the tender of the videotape, the trial judge and the prosecution would not have known what course the appellant intended to take with respect to calling, or giving, evidence. It is 2 Unreported, Court of Criminal Appeal of Western Australia, 18 September 1985. (1905) 2 CLR 684 at 695. possible that, at that stage, no final decision on that matter had been made. The line taken in cross-examination of the police officer who conducted the search, and who also conducted the interview, suggested that there was no challenge to his evidence, but it would not then have been clear that the defence intended to add nothing to what was said in the interview. By the time the trial judge came to sum up to the jury, however, it was apparent that there was no issue as to the appellant's possession of the tablets, and that the appellant was relying on what was said in the interview, and on the surrounding circumstances, together with the arguments of his counsel at trial, as his answer to the deeming effect of s 11 of the Misuse of Drugs Act. Section 638 of the Criminal Code provided: "After the evidence is concluded and the counsel or the accused person or persons, as the case may be, have addressed the jury, it is the duty of the court to instruct the jury as to the law applicable to the case, with such observations upon the evidence as the court thinks fit to make. After the court has instructed the jury they are to consider their verdict." That provision distinguished between instructions as to the law applicable to the case, which were mandatory, and observations upon the evidence, which were discretionary. The discretion, of course, was to be exercised in accordance with established principles. One of those principles is that observations upon the evidence must be fair and balanced, but a judge is not prohibited from making an observation which is favourable to one side or the other if it is made clear that it is for the jury, and the jury alone, to decide the facts. Trial judges commonly make observations, sometimes forcefully, about the strength or weakness of particular aspects of the evidence in a case, but they should also make it clear that those observations are not intended to bind the jury, that the jury may or may not agree with them, and that the jurors are the sole judges of all factual issues bearing upon the ultimate verdict. The videotaped interview The background to the interview was as follows. The appellant was married. He and his wife had a number of children. There was a side issue as to whether they were living together on a permanent basis, but that has no bearing on this appeal. On 9 August 2001, the police searched the family home at Ballajura. At the time, the appellant was absent in Broome. The police dealt with the appellant's wife. She telephoned the appellant while the police were there. The telephone conversations, partly in English and partly in Italian, were intercepted. There was material in those and certain other intercepted conversations which took place just after the search which tended to inculpate the appellant. In particular, those conversations suggested strongly that the ecstasy found by the police belonged to the appellant. Two safes were opened by the police. In one safe there were the 27 ecstasy tablets, a loaded pistol, a stun gun, and $27,000 in cash. In another safe there was $5,750 in cash. The prosecution invited the jury to infer that the weapons and the cash indicated the commercial nature of the possession of drugs. In one of the telephone conversations, the appellant said (in Italian) that he had a particular reason for not wanting to be arrested in Broome, and that he would come back to Ballajura. The evidence does not show what went on between 9 August and 13 August. On 13 August 2001, the appellant and his solicitor arrived at a police station at or near Ballajura for the purpose of a formal interview. The appellant's solicitor did most of the talking. At times, the interview took the form of an examination-in-chief by the solicitor of his client, mainly by way of leading questions. From time to time, there was a pause in the proceedings to enable the solicitor to consult with the appellant. Such statements as the appellant had the opportunity to make were brief. For example, when the matter of the 27 tablets was raised, the appellant at first said he had no comment. Then he said: "That's that personal use." The solicitor intervened and sought a suspension of the interview to talk to his client. When the interview resumed, the solicitor said: "The ... instructions I received earlier are confirmed, that they are ecstasy tablets for his own personal use." The police officer repeated that statement, and the appellant said: "Yep." The police officer then attempted to press the question of ownership. The solicitor said to the appellant: "Well, for your own personal use they'd be yours, yeah." The appellant said: "That's right, personal use." When asked about the weapons, the appellant said: "No comment." Much of the interview was taken up with an explanation of the presence of the cash, mainly in the form of statements by the solicitor followed by brief indications of assent by the appellant. A later garbled answer by the appellant to an unrecorded question was "Because – because I take steroids I like to make ... (indistinct) ... with ecstasy, that's ... ." It can be seen that, apart from the last answer, all the exculpatory statements about the ecstasy were closely bound up with inculpatory statements. The summing-up Before the commencement of the evidence, the trial judge made an introductory statement to the jurors about the respective functions of judge and jury. In the course of doing so, he said: "Then at the end of the case it's my job to sum up the law to you, to tell you what the law is that you must apply, and my task there is to try and do that in as intelligible a way as possible and what I tell you about the law you must accept. You also as a group are judges, but of an entirely different issue. It's for you to judge the facts. It's for you to decide what the facts are and you listen to the evidence and you will be required to do that. It is important to realise your power in that regard. It's entirely up to you what you make of the facts and what facts you decide exist in the case, so we are each judges but in different areas. We each have exclusive power, in a sense, in the area of our involvement." It could scarcely have been made more clear that the jurors were the sole judges of the facts, to the exclusion of the trial judge. In his introductory statement, the trial judge also stressed that the onus of proof lay on the prosecution. He repeated, and elaborated upon, that when he came to sum up at the end of the trial. In his summing-up, the trial judge reminded the jury of the evidence called by the prosecution, and then went on to deal with the circumstance that the appellant did not give evidence, and with the use that could be made of the evidence of the videotaped interview. He said: "It is important that I tell you that his silence in this case is not evidence against him and does not amount to an admission by him and it cannot be used to fill in any gaps in the evidence tendered by the prosecution if you feel there are some. It may not be used as a makeweight in assessing whether the prosecution has proved its case beyond reasonable doubt. The exercise of a right to silence cannot be held against a person and if you think about it it would be bizarre if the law gave a person a right and then permitted the exercise of the right to be held against the person. However, you also know that the accused did not totally exercise his right to remain silent when he was interviewed by the police. He could have, if he had wished, not said a word during that process and he did say some things. He had a lawyer there and on occasions he said, 'No comment,' but on other occasions either personally or through his lawyer he said things to police and you have the video of the interview. He chose to, in a sense, speak to the police on the occasions that he did and that interview has been put before you as evidence by the prosecution as part of the prosecution case. In a nutshell that evidence was put before you to prove possession, that is, to prove what occurred, basically, to prove the finding of things, to prove – basically to prove possession because in relation to that you will be aware the accused person admits that the drugs were his so it proves that because the accused admitted it. He admits it. He made what the lawyers called admissions and they are obviously against his interests, in other words he confessed. An admission is a confession. He confessed that he was in possession and as is, I think, pointed out by one of the counsel that was an admission against interest and it is given weight in the system. It is not disputed, of course, that he did possess those drugs. Now, the video cassette of the interview, given that it has been tendered by the prosecution for the purpose I have just explained, it also, however, becomes material, evidence, for the accused as well as against him; in other words, once it goes in, it can be used for all purposes, legitimate purposes. Those parts of the interview that are relied on by the prosecution you can accept as being not disputed by the accused and they are, as I have said, admissions, concessions, if you like, made by the accused person, in the sense that I have just explained, against his interests. But the video also contains other matters that the accused person relies on in his case and he relies on his denials of police allegations and also his assertions, for example, his assertion that he intended only personal use. He relies on those statements in the video. Of course, his denials of police allegations and his assertions, such as his assertion of intending personal use, are disputed by the prosecution. The denial – his denials and the assertions that he makes, are not supported by evidence from him on oath in the witness box and therefore those matters do not have the same weight as evidence, as his admissions or confession, if you like, of possession, for example, against interest, doesn't have the same evidential weight, but the accused's denials and his assertions are still matters for you to consider. They are before you and you give them what weight you see fit." (emphasis added) It is the italicised sentence of which the appellant complains in this appeal. In order to put it into context, however, it should be mentioned that, further on in the summing-up, before reminding the jury of the arguments of opposing counsel, the judge said: "As I mentioned at the beginning of the trial, ladies and gentlemen, and I just realised I didn't emphasise perhaps again as I should have at the beginning of this address, it's entirely up to you what you make of the facts. It's entirely up to you how you view the evidence. The findings that you make about the facts are entirely your business and each of the counsel has put a point of view to you that you can either accept or not. It's up to you what you make of the facts and what you decide the facts to be, so if you get any impression from me that I'm subtly suggesting you go one way or the other, put it out of your mind. It has nothing to do with me. It's your business entirely and I will be doing my best to be right down the middle. If I leave out bits of what the counsel said, that doesn't mean they are not important. What's important is what you think is important." One further part of the context should be noted. As has been mentioned already, by the end of the evidence and the addresses of counsel, it was plain that there was no issue as to the possession by the appellant of the ecstasy tablets. They were found in a safe at his home. What he said on the telephone when his wife rang him at Broome made it clear that the drugs were his. In his interview, he did not suggest that they belonged to anybody else. Strictly speaking, there was no question of the jury having to decide the weight to be given to the admissions, at the interview, that the tablets were ecstasy or that they were his. By the time of the summing-up, as the trial judge pointed out, those questions were not a matter of contest. The only live issue concerned what the jury might make of the out of court assertions of the appellant, mainly through his solicitor, that the tablets were for his personal use. This is not a case where the exculpatory statements cast doubt upon, or qualified the meaning of, the admissions. The admissions were of possession and, at trial, that fact was not disputed. As appears from what is set out above, the trial judge instructed the jury, as a matter of law, that the video cassette, having been tendered by the prosecution and admitted into evidence, became evidence "for the [appellant] as well as against him" and could be used for all legitimate purposes. The trial judge said that the appellant relied upon the assertions about intended use recorded in the videotape and it was made clear to the jury that, as a matter of law, he was entitled to do so. Again, the proposition that the whole of the recorded matter was available as evidence for the consideration of the jury was not in contest in this appeal. It reflects the accepted view of the law in this country, and it accords with the current state of the law in the United Kingdom4. Where evidence is given of out of court statements made by an accused person, there may be no clear distinction between matter that is inculpatory and matter that is exculpatory. A dividing line between incriminating admissions and self-serving assertions may sometimes be difficult, or impossible, to draw. There was, however, no such problem in the present case. The appellant's solicitor made certain that the record of the police interview with his client would show that his client maintained that the ecstasy tablets were for his personal use. By the end of the trial, it was clear that this was the defence case. Possession was not disputed. There was no testimony from the appellant. The defence case was that, having regard to the whole of the evidence, including the evidence tendered by the prosecution showing what was said in the interview, and even allowing for the effect of s 11 of the Misuse of Drugs Act, the prosecution had not established the alleged purpose of supply. The decision of the Court of Criminal Appeal The ground of appeal to the Court of Criminal Appeal was that the passage identified above, of which complaint is now made, involved error which undermined the appellant's right to remain silent at trial, and caused a substantial miscarriage of justice. Templeman J, with whom Wheeler J agreed, found no error in what the trial judge said. He considered it "appropriate to direct the jury that any exculpatory statements made by an accused person in the same interview do not have the same weight as admissions ... [because] ... the exculpatory statements have not been made on oath and have not been tested by cross-examination". He supported this conclusion by reference to the judgment of Cox J, with which White and Perry JJ agreed, in the South Australian case of Spence v Demasi5. Cox J, in turn, had referred to the decision of the English Court of Appeal in Duncan6, which was approved by the House of Lords in R v Sharp7. 4 Lopes v Taylor (1970) 44 ALJR 412; R v Cox [1986] 2 Qd R 55; Spence v Demasi (1988) 48 SASR 536; R v Aziz [1996] AC 41. (1988) 48 SASR 536 at 540. (1981) 73 Cr App R 359 at 365. McLure J also referred to R v Sharp, and pointed out that it was later followed by the House of Lords in R v Aziz8. She distinguished between directions on law and comments on the facts. She said the English authorities established that, in the case of what is sometimes called a "mixed" out of court statement which is tendered by the prosecution, while the whole statement should be left to the jury as evidence of the facts, the judge may draw attention, where appropriate, to the different weight they might see fit to give to the exculpatory statements as compared to the admissions. McLure J considered, however, that if the passage complained of were considered in isolation it may have created an erroneous understanding on the part of the jury that, as a matter of law, they were bound to give less weight to the assertions than the admissions. However, she also considered that any such false impression was immediately corrected by the next sentence, and would also have been inconsistent with the wider context of the summing-up. She was satisfied that the jury would not have been left with any impression that they were bound to accord less weight to the self-serving out of court exculpatory statements. The arguments in this Court In this Court, senior counsel for the appellant argued that it was impermissible for the trial judge to make any observations to the jury about the weight they might attach to the exculpatory assertions in the videotaped interview or to refer, in that connection, to the fact that they were not supported by the appellant's oath. In the alternative to that primary argument, he argued that any observations made should have been, and were not, qualified by a statement that it was ultimately a matter for the decision of the jury, and that what was actually said, particularly the words "these matters do not have the same weight", amounted to an erroneous instruction of law about how the jury was obliged to reason towards a conclusion of guilt. Was it impermissible to make any observations at all? The primary argument must be rejected. The Criminal Code, in s 638, empowered the trial judge to make such observations on the evidence as he might think fit to make. The prosecution tendered (relevantly) the whole of the [1988] 1 WLR 7; [1988] 1 All ER 65. videotape of the police interview. On it, the jurors saw and heard the appellant's solicitor, with occasional support from the appellant himself, assert that the drugs were for personal use. They heard no sworn testimony from the appellant. What were they to make of that? The judge was bound to instruct them (as he did, in orthodox fashion) about the appellant's right to silence. He also instructed them that the whole of the contents of the interview amounted to evidence to which they could pay regard. It was legally correct for him to tell them that they were not obliged to give the same weight to everything that was said in the interview. Indeed, if he had not told them that, it is possible that they might have assumed the contrary, or at least they might have been left uncertain as to their capacity to discriminate between different parts of the evidence. Jurors are commonly told that they may approach the evidence selectively and in a discriminating fashion, that it is for them to decide what evidence they accept and what evidence they reject, and that the law does not require them to give all evidence the same weight. An instruction of that kind, put as an abstract proposition, is an instruction of law. When related to the facts of a particular case, it may have the character both of an instruction of law and of an observation upon the facts. It is the duty of a trial judge to relate instructions of law to the facts, and, in the result, what is said to a jury may involve both instruction and observation. An observation by the trial judge that the appellant's out of court assertions, although disclosed in evidence by the prosecution's tender of the videotape, were not sworn testimony, that, unlike the admissions, they were not against the appellant's interests, and that the jury could give them less weight than the admissions, was proper. To a lawyer, it might seem to be a statement of the obvious, but it is understandable that a trial judge might make it. Some jurors could have been puzzled about the consequences of the prosecution having, in effect, put the defence case before the jury. In the circumstances of this trial, if the judge had not explained to the jurors that they were entitled to attach different weight to different things that were said during the interview, they might have felt obliged to give everything that was said in the interview equal value. It was not a derogation from the appellant's right to silence for the trial judge to point out that the statements made in the course of the interview were not on oath. The expression "right to silence" is used to refer to a number of distinct legal rules. It is a useful shorthand expression but it is a general description which does not always provide a safe basis for reasoning to a conclusion9. In the present case what is important is that the appellant did not give evidence at his trial. In the days when, in most Australian jurisdictions, accused persons were entitled to make unsworn statements in court, it was not regarded as a derogation from their rights for judges to direct juries that what an accused said in these circumstances was to be regarded as "a possible version of the facts" and that jurors should "consider it with the sworn evidence, giving it such weight as it appears to be entitled to in comparison with the facts clearly established by evidence"10. Nor was it regarded as such a derogation for a judge to comment that a statement was not on oath, and was not tested in cross- examination, and might not be considered as weighty as the evidence of witnesses under oath11. The trial judge had already, uncontroversially, referred to the fact that the appellant had elected not to give evidence in court. It is difficult to explain the right to silence without drawing attention to the silence. Furthermore, as the judge pointed out, the appellant's silence was not complete. Having referred to the fact that the appellant did not testify on oath in court, having explained that it was his right to remain silent in court, and having warned the jury against inappropriate reasoning, the judge, when he came to deal with the out of court statements made by or on behalf of the appellant, could well have thought it proper to tell the jurors that it was open to them to evaluate those statements in that light. They could also evaluate those statements in the light of the fact that they were self-serving. As a matter of law, it was correct to tell the members of the jury that they were not obliged to attach the same weight to all the statements made in the interview, and that it was for them to decide the weight to be given to particular statements. As an observation on the facts, in the circumstances of this case, it was not inappropriate to point out that, while the admissions of possession were accepted by both sides at the trial to be true, the assertions about purpose were in dispute, that they were not supported by any sworn testimony and that they were self-serving. It would also not have been inappropriate to point out that the jury might think them to be of less weight than the admissions. 9 RPS v The Queen (2000) 199 CLR 620 at 630 [22]; R v Director of Serious Fraud Office; Ex parte Smith [1993] AC 1 at 30. 10 Peacock v The King (1911) 13 CLR 619 at 641. 11 Bataillard v The King (1907) 4 CLR 1282 at 1291; Jackson v The King (1918) 25 CLR 113; Bridge v The Queen (1964) 118 CLR 600 at 605. As has been noted, many cases involving evidence of out of court "mixed" statements by an accused person are more complex than the present. In R v inappropriate generalisations concerning the difference between inculpatory and exculpatory parts of a statement: a difference that in some cases (not including the present) might be difficult to discern. He said, in a passage quoted by McLure J in her reasons: rightly cautioned against "With respect, it seems to me to be undesirable that juries be given general a priori directions as to what sorts of evidence are likely to be true, or as to the weight which should be accorded to different parts of the one statement. The matter of weight is for them, and the weight of each part of the statement should be determined in the light of the whole of the evidence. There is, of course, no reason why the trial judge should not point out that such statements have not been made on oath and (where appropriate) that they have not been tested by cross-examination. He may explain the traditional reasons why admissions against interest are commonly regarded as reliable evidence, and make any appropriate comments about particular parts of the evidence. The weight which may fairly be accorded to a self-serving statement varies so much from case to case that it is unwise to lay down any general disparaging directions concerning such statements, although of course, critical comments may be made in appropriate cases." (emphasis added) Apart from the words emphasised in that passage, it is a sound guide to jury direction. In view of the long-standing controversies about why admissions are received, and in view of the fact that an admission need not have been against interest at the time it was made, it is undesirable to direct juries along the lines suggested by the words emphasised. Were the observations an erroneous instruction of law? The appellant's alternative submission to this Court is that, in the present case, what the trial judge said in the paragraph in question amounted to an erroneous instruction of law. The paragraph contains some obvious hesitations, and some internal corrections. It is wrong to read it by overemphasising one fragment of it. It is necessary to read it as a whole and in context. If so read, it had conveyed to the jurors that, as a matter of law, they were bound to give less weight to some parts of what was said to the police than to others, then it would 12 [1986] 2 Qd R 55 at 65. have been a misdirection. (Whether it would have involved a miscarriage of justice is another matter. In this case no jury, acting reasonably, could have failed to discriminate, in terms of weight, between the admissions as to the identity of the tablets and as to possession and the assertions as to purpose.) As the judge said in the same paragraph, as he told the jury at the commencement of the trial, and as he said again later in his summing-up, it was for the jury, and the jury alone, to decide what weight to give particular parts of the evidence. There is some internal inconsistency in the paragraph, but it is impossible to accept that the jury would have been left with the erroneous impression claimed by the appellant. This conclusion is reinforced by the consideration that experienced trial counsel made no complaint at the end of the summing-up. In the circumstances of this case, it was appropriate for the trial judge to tell the jury that they were entitled to give less weight to the assertions of purpose than to the admissions of possession, and to explain why that was so. The summing-up, considered as a whole, made it sufficiently clear that ultimately, this was a question for the jury, and the jury alone. The appeal should be dismissed.
HIGH COURT OF AUSTRALIA Matter No S110/2010 WESTPORT INSURANCE CORPORATION & ORS APPLICANTS AND GORDIAN RUNOFF LIMITED RESPONDENT Matter No S219/2010 WESTPORT INSURANCE CORPORATION & ORS APPELLANTS AND GORDIAN RUNOFF LIMITED RESPONDENT Westport Insurance Corporation v Gordian Runoff Limited [2011] HCA 37 5 October 2011 S110/2010 & S219/2010 Matter No S110/2010 ORDER Grant special leave to include, as a further ground of appeal in Matter No S219/2010, ground 5 of the applicants' draft notice of appeal. The respondent pay the applicants' costs. Matter No S219/2010 Appeal allowed. Set aside orders 2, 3 and 4 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 1 April 2010 and, in place thereof, order that the appeal to that Court be dismissed with costs. The respondent pay the appellants' costs of the appeal to this Court. On appeal from the Supreme Court of New South Wales Representation B W Walker SC with T M Mehigan for the applicants/appellants (instructed by I M Jackman SC with T M Faulkner for the respondent (instructed by Mallesons S J Gageler SC, Solicitor-General of the Commonwealth with M J O'Meara appearing as amicus curiae on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) D F Jackson QC with M F Holmes QC and J A Redwood appearing as amici curiae on behalf of the Australian Centre for International Commercial Arbitration Limited & Ors (instructed by Corrs Chambers Westgarth) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Westport Insurance Corporation v Gordian Runoff Limited Arbitration – Judicial review of awards – Section 38(5) of Commercial Arbitration Act 1984 (NSW) ("Arbitration Act") provided that the Supreme Court shall not grant leave to appeal on any question of law unless it considers that, having regard to all the circumstances, the determination of the question of law could substantially affect the rights of a party to the arbitration agreement (par (a)), and there is a "manifest error of law on the face of the award" (par (b)(i)) – Reinsurance treaties between respondent and appellants included arbitration agreement which required that any dispute arising thereunder be referred to arbitration to be held in accordance with and subject to Arbitration Act – Appellants appealed to Supreme Court on questions of law arising out of award – Whether leave to appeal should have been granted – Whether error of law manifest on face of award. Arbitration – Reasons for award – Section 29(1)(c) of Arbitration Act required arbitrator to include in award a statement of reasons for making award, unless parties otherwise agreed in writing – Arbitrators delivered written award accompanied by "Reasons for Award" comprising 96 paragraphs – Nature and extent of reasons for award required by s 29(1)(c) of Arbitration Act – Whether reasons for award must be same standard as judicial reasons – Whether nature and extent of reasons for award depends upon circumstances of particular dispute. Insurance – Statutory construction – Statutory limitation on exclusion clauses – Section 18B of Insurance Act 1902 (NSW) prevented insurer from avoiding liability by relying upon exclusion clause in contract of insurance where operation of exclusion clause was triggered by event with no relationship to cause of event giving rise to particular loss and claim, unless in all the circumstances it was not reasonable for insurer to be bound to indemnify insured – Respondent sought to rely on s 18B to overcome finding by arbitrators that reinsurance treaties between respondent and appellants did not respond to certain policies of insurance underwritten by respondent – Whether s 18B applicable to reinsurance treaties between respondent and appellants. Words and phrases – "appeal", "arbitration agreement", "award", "considerations of general justice and fairness", "exclusion clause", "judicial standard", "manifest error of law on the face of the award", "question of law", "reasons", "reinsurance treaty". Commercial Arbitration Act 1984 (NSW), ss 22, 29, 38-40. Insurance Act 1902 (NSW), s 18B. FRENCH CJ, GUMMOW, CRENNAN AND BELL JJ. This appeal and application for special leave reaches this Court from the decision of the New South Wales Court of Appeal (Spigelman CJ, Allsop P and Macfarlan JA)1, allowing an appeal against the order of the primary judge (Einstein J) setting aside an arbitral award2. The essential narrative commences on 10 October 2008, when, in an arbitration conducted under the Commercial Arbitration Act 1984 (NSW) ("the Arbitration Act")3, the arbitrators delivered their written award in favour of the respondent ("Gordian"). This comprised three paragraphs. It was accompanied by "Reasons for Award" comprising 96 paragraphs ("the Reasons"). Section 29(1)(c) of the Arbitration Act required the giving of reasons. One of the issues in this matter is whether the Reasons were inadequate. The arbitration The arbitrators found that at all material times Gordian underwrote professional indemnity ("PI") insurance and directors and officers liability ("D and O") insurance. Both categories of insurance customarily were written to cover the insured with respect to claims alleging prior wrongful acts, being claims made and notified to Gordian during the period of the policy. The Reasons identified a series of steps whereby Gordian (and a Lloyd's syndicate ("R E Brown")) wrote for FAI Insurance Limited ("FAI") a seven year D and O runoff policy ("the FAI policy"). Gordian's share of risk was 60 percent and R E Brown's 40 percent. The FAI policy applied to wrongful acts occurring before 31 May 1999 and allowed for claims to be made and notified for seven years thereafter. A number of claims in respect of alleged wrongful acts prior to 31 May 1999 were made and notified to Gordian under the FAI policy within seven years, that is to say, by 31 May 2006. All but one of these claims were made and notified within three years. At all material times Gordian's PI portfolio and D and O portfolio were at least partially reinsured. The dispute between the parties to the arbitration turned upon the issue whether the liabilities of Gordian in respect of claims under the 1 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74. 2 Westport Insurance Corporation v Gordian Runoff Ltd (2009) 15 ANZ Insurance Cases ¶61-798. 3 The Arbitration Act was repealed by s 42 of the Commercial Arbitration Act 2010 (NSW) with effect 1 October 2010, but still applies to this litigation: Interpretation Act 1987 (NSW), s 30. Crennan Bell FAI policy were reinsured under reinsurance treaties between Gordian and the appellants ("the reinsurers"). The primary question was whether any of the reinsurance treaties covered the FAI policy given that it covered claims made and notified to Gordian within an extended period of seven years from 31 May 1999 rather than a period of three years. The reinsurers had not been aware of the existence of the FAI policy until after 23 February 2001. On that date Gordian had been notified of circumstances which could give rise to a claim under the FAI policy and the reinsurers then were informed of this. The reinsurers contended that they had conducted their dealings with Gordian on the basis that Gordian would not change the classes of business to which the reinsurance applied without the prior approval of the reinsurers. It was common ground that the reinsurance treaties required the dispute to be decided by arbitration. The reinsurance treaties appear to have selected the law in force in New South Wales as their proper law and required any arbitration thereunder to be held in accordance with and subject to the Arbitration Act. Further, in accordance with ordinary principles of statutory construction, the Arbitration Act applied to arbitration agreements which selected New South Wales as their governing law4. The arbitration proceeded before a panel of three arbitrators upon a set of detailed pleadings which extended to more than 60 pages. The hearing commenced on 14 July 2008 and continued until 22 July, with representation by senior counsel, witnesses being sworn and cross-examined on their written statements, many documents being in evidence and a full transcript provided. In many respects, therefore, the arbitration proceeded along the lines of the conduct of a commercial cause in a superior court. This complexity of the arbitration will be relevant when considering the content of the requirement in s 29(1)(c) of the Arbitration Act that the arbitrators provide a statement of the reasons for the making of the award. The reinsurers resisted the claims made by Gordian on the grounds that the class of business they had agreed with Gordian to cover was limited to underlying policies with a term not exceeding three years, which excluded a seven year policy, so that the reinsurers had no liability to Gordian even upon 4 Wanganui-Rangitikei Electric Power Board v Australian Mutual Provident Society (1934) 50 CLR 581 at 601; [1934] HCA 3; Kay's Leasing Corporation Pty Ltd v Fletcher (1964) 116 CLR 124 at 142-143; [1964] HCA 79; Insight Vacations Pty Ltd v Young (2011) 85 ALJR 629 at 635 [30]; 276 ALR 497 at 504-505; [2011] HCA 16. Crennan Bell claims made and notified within three years under a seven year policy. Gordian responded by relying upon s 18B of the Insurance Act 1902 (NSW) ("the Insurance Act"). The rejoinder pleaded by the reinsurers was that the effect of relief to Gordian under s 18B would be that they were obliged to indemnify Gordian without any additional premium for coverage of a seven year policy, which, in any event, they would have refused. In the Reasons, the arbitrators noted that the reinsurers accepted that by the reinsurance treaties they agreed to cover D and O policies limited to claims made and notified to Gordian within a period of three years but not thereafter. But the arbitrators were not persuaded that the FAI policy, which extended to claims made and notified to Gordian within the seven year period from 31 May 1999, was covered by the reinsurance treaties. Section 18B However, as indicated above, Gordian had contended that, even if the reinsurance treaties did not cover the FAI policy, provisions of the Insurance Act applied to contracts of reinsurance5 and saved the position of Gordian by producing the result that the reinsurance treaties did cover Gordian's liability under the seven year policy, if any, in respect of the claims made and notified to Gordian within the three year period. The arbitrators accepted that submission insofar as it relied upon s 18B of the Insurance Act. Section 18B, titled "Limitation on exclusion clauses", provides: "(1) Where by or under the provisions of a contract of insurance entered into, reinstated or renewed after the commencement of this section: the circumstances in which the insurer is bound to indemnify the insured are so defined as to exclude or limit the liability of the insurer to indemnify the insured on the happening of particular events or on the existence of particular circumstances, and the liability of the insurer has been so defined because the happening of those events or the existence of those 5 These provisions no longer apply to reinsurance: Insurance Regulation 2009, cl 4(b). Crennan Bell circumstances was in the view of the insurer likely to increase the risk of loss occurring, the insured shall not be disentitled to be indemnified by the insurer by reason only of those provisions of the contract of insurance if, on the balance of probability, the loss in respect of which the insured seeks to be indemnified was not caused or contributed to by the happening of those circumstances, unless in all the circumstances it is not reasonable for the insurer to be bound to indemnify the insured. the existence of those events or The onus of proving for the purposes of subsection (1) that, on the balance of probability, loss in respect of which an insured seeks to be indemnified was not caused or contributed to by the happening of particular events or the existence of particular circumstances is on the insured." (emphasis added) the Insurance Act by Section 18B was added the Insurance (Amendment) Act 1983 (NSW). It appears to have been assumed by the parties that s 18B applies not only to contracts entered into in New South Wales (as the opening words of s 18B(1) suggest) but to contracts the governing law of which is that of New South Wales, so that it applied to the reinsurance treaties in question. The perceived mischief which s 18B was designed to remedy was the avoidance by insurers of liability by reliance upon exclusions or terms contained in the contract of insurance, the operation of which was triggered by events with no relationship to the cause of the event giving rise to the particular loss and claim in question; no consideration, as Allsop P pointed out in giving the leading judgment in the Court of Appeal6, appears to have been given by the legislature to the application of s 18B to contracts of reinsurance. The reinsurers had submitted to the arbitrators that a provision which identifies the scope of coverage does not impose a term or condition which can attract the operation of s 18B. In the Court of Appeal, Allsop P went on to indicate a critical difficulty in the construction of s 18B which had been presented to the arbitrators, by asking whether, as Gordian contended (and the arbitrators accepted)7: (2010) 267 ALR 74 at 102 [150]. (2010) 267 ALR 74 at 104 [160]. Crennan Bell "s 18B can operate to extend beyond its effect on so-called exclusion and limitation clauses leaving the so-called true scope of cover to operate and to have an effect on clauses that truly reflect the so-called scope of cover, thereby extending the intended substantive reach of the policy". Further consideration of the point made by Allsop P will be necessary later in these reasons and will be of decisive importance for the outcome of this matter. The Reasons In the Reasons the arbitrators extracted the text of s 18B(1), including the concluding words. The arbitrators said (par 88): "The reinsurers submitted that ss 18B(1) has no material operation. However, we see no reason to doubt that s 18B applies in relation to the 3-year claims if the requirements of ss 18B(1)(a) are met. In particular, we are comfortably satisfied that it would be reasonable within the meaning of s 18B(1), and entirely consistent with 'considerations of general justice and fairness' within the meaning of the reinsurance treaties, for the reinsurance treaties to apply in relation to the 3-year claims." In pars 92, 93 and 94 the arbitrators then wrote: "The reinsurance treaties do not cover the 3-year claims under the FAI D&O run-off policy although they were made within 3 years from the inception of that policy because the policy covered claims which were made and notified to Gordian within 7 years from its inception and the reinsurance treaties were limited to policies which covered claims which were made and notified to Gordian within 3 years from inception and/or excluded policies which covered claims which were made and notified to Gordian more than 3 years from inception. Subsection 18B(1)(a) operates in relation to the 3-year claims if, but only if, that exclusion or limitation on the liability of the reinsurers to indemnify Gordian in respect of the 3-year claims under the FAI D&O run-off policy is an exclusion or limitation that is based 'on the existence of particular circumstances'. The 'particular circumstance' for this purpose can only be that the FAI D&O run-off policy covered claims which were made and notified to Gordian more than 3 years from the inception of the FAI D&O run-off policy. The 'loss in respect of which [Gordian] seeks to be indemnified', namely, its liability on the 3-year claims, 'was not caused or contributed to by ... the existence of [that] circumstance' because the 3-year claims were made and Crennan Bell notified to Gordian within 3 years of the inception of the FAI D&O run-off policy. Consistently with the remedial character of ss 18B(1) and in compliance with the obligation to construe its language so as to give the most complete remedy which is consistent with the actual language employed and to which the words are fairly open, we have concluded that the exclusion and/or limitation on the 'liability of the [reinsurers] to indemnify [Gordian]' in respect of the 3-year claims made under the FAI D&O run-off policy is based 'on the existence of [the] particular circumstance' that the FAI D&O run-off policy covered claims which were made and notified to Gordian more than 3 years from the inception of the FAI D&O run-off policy. If at large, 'considerations of general justice and fairness' would produce the same result. Accordingly, we have determined that reinsurance treaties cover Gordian's liability, if any, in respect of the 3-year claims." The reference by the arbitrators to "considerations of general justice and fairness" repeats words in s 22(2) of the Arbitration Act. This sub-section states: "If the parties to an arbitration agreement so agree in writing, the arbitrator or umpire may determine any question that arises for determination in the course of proceedings under the agreement by reference to considerations of general justice and fairness." The arbitration clause in the reinsurance treaties provided that s 22(2) apply to the arbitration. The reinsurers complain that in the Reasons the arbitrators did not explain why, by reason of the concluding words in the sub-section, s 18B(1) should still be held to apply; the reinsurers assert an absence of explanation as to why in all the circumstances it was reasonable for them to be bound to indemnify Gordian. The Arbitration Act and the Supreme Court An award, subject to the Arbitration Act and to any contrary criterion in the arbitration agreement, is final and binding on the parties to the agreement (s 28). The award may order specific performance of a contract if the Supreme Court would have power to decree specific performance (s 24). By leave of the Supreme Court, judgment may be entered in terms of an award and an award may be enforced in the same manner as a curial judgment or order to the same effect (s 33). The Supreme Court is empowered by s 44 to remove an arbitrator Crennan Bell who has misconducted the proceedings or who is incompetent or unsuitable to deal with the particular dispute. These statutory provisions indicate that the making of an award in arbitration proceedings is more than the performance of private contractual arrangements between the parties which yields an outcome which rests purely in contract. They also suggest the importance which the provision of reasons by arbitrators has for the operation of the statutory regime. That statutory regime involves the exercise of public authority, whether by force of the statute itself or by enlistment of the jurisdiction of the Supreme Court. It also, as explained later in these reasons, displays a legislative concern that the jurisdiction of the courts to develop commercial law not be restricted by the complete insulation of private commercial arbitration. No doubt it is true to say that the provision of an award under the Arbitration Act lacks distinctive hallmarks of the exercise of judicial power, namely the maintenance of public confidence in the manner of its exercise and in the cogency or rationality of its outcomes, and the operation of the appellate structure and of the case law system. However, it is going too far to conclude that performance of the arbitral function is purely a private matter of contract, in which the parties have given up their rights to engage judicial power8, and is wholly divorced from the exercise of public authority. The federal scheme appeared The Commonwealth Solicitor-General, who the Attorney-General as amicus curiae, sought to distinguish provisions of the Arbitration Act with respect to the giving of reasons from the state of affairs obtaining under Pt III (ss 15-30A) of the International Arbitration Act 1974 (Cth) ("the federal Act"), after amendment by the International Arbitration Amendment Act 2010 (Cth). The Attorney-General was moved to do so in the light of the treatment by the Court of Appeal of the Supreme Court of Victoria in Oil Basins Ltd v BHP Billiton Ltd9 of the provision under the new federal scheme for the giving of reasons as in pari materia with the provision in the Victorian legislation equivalent to s 29(1)(c) of the Arbitration Act. for 8 Cf Melbourne Harbour Trust Commissioners v Hancock (1927) 39 CLR 570 at 585-586, 590-591; [1927] HCA 26. (2007) 18 VR 346 at 364-365 [51]. Crennan Bell Section 16 of the federal Act gives the force of law in Australia to the UNCITRAL Model Law on International Commercial Arbitration ("the Model Law"), the English text of which is set out in Sched 2 to the federal Act. If the Model Law applies to an arbitration, State or Territory law relating to arbitration does not apply to it (s 21). In exercising a power to recognise and enforce an arbitral award under the Model Law, a federal, State or Territory court must have regard to the objects of the federal Act and the circumstance that awards are intended to provide "certainty and finality" (ss 39(1)(a)(iii), 39(2)(b)(ii)). The federal Act in this way enlists the judicial power of the Commonwealth in aid of the operation of the arbitration system established by s 16 and the Model Law. Article 31(2) of the Model Law requires that an award "shall state the reasons upon which it is based". However, the Solicitor-General submitted that this appears in a context where Art 5 provides that "no court shall intervene except where so provided in this Law", and there is no provision for appeal on a question of law. An award may be set aside only under Art 34 and relevantly only on the ground of a breach of the rules of natural justice. The Solicitor-General contended that here these rules require no more than a statement of reasons to demonstrate whether the arbitrators have addressed the dispute referred for determination. Whether this is the proper construction of the federal Act and the Model Law may be left for determination on another occasion. The provisions of the federal scheme may be put to one side in construing the Arbitration Act, upon which this litigation turns. Statements of reasons and errors of law Section 29(1) of the Arbitration Act required the arbitrators in the present case to: "(a) make the award in writing, sign the award, and include in the award a statement of the reasons for making the award." Succeeding provisions of the Arbitration Act employ the term "award" to identify in some provisions the award in the strict sense of the outcome of the arbitration which then may be enforced by the Supreme Court, and in others to identify the inclusion of a statement of reasons in the written instrument containing the award which is the outcome of that reasoning. Crennan Bell The term "the Court" is relevantly defined by s 4(1) as meaning the Supreme Court of New South Wales. Part 5 (ss 38-49) is headed "Powers of the Court". In the circumstances detailed in ss 39 and 40, the Supreme Court may determine any question of law arising in the course of an arbitration. However, s 38(1) denies to the Supreme Court "jurisdiction to set aside or remit an award on the ground of error of fact or law on the face of the award"; the face of the award would include the statement of reasons. The denial of that jurisdiction by s 38(1) is qualified by s 38(2) and (4). With the consent of the parties to the arbitration agreement (s 38(4)(a)) or (subject to s 40, which permits "exclusion agreements" but is not presently material) with the leave of the Supreme Court (s 38(4)(b)), a proceeding described in s 38(2) as "an appeal" lies to the Supreme Court "on any question of law arising out of an award". These provisions thus have a dual function. They both create a new head of justiciable subject matter and confer jurisdiction on the Supreme Court to determine whether to grant leave, and, if this is given, to entertain the "appeal". The subject matter of this "appeal" is confined to questions of law10; the scheme of the legislation is to hold the parties to their agreement to accept factual findings by arbitrators. Leave of the Supreme Court is not to be granted pursuant to s 38(4) unless the Supreme Court considers that the applicant for leave has satisfied the criteria specified in pars (a) and (b) of s 38(5). These paragraphs state: having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement, and there is: a manifest error of law on the face of the award, or strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law." Section 38(5) specifies conditions which must be satisfied before the power under s 38(4)(b) to grant leave is enlivened. The statute does not provide 10 See the remarks of Brennan J in Waterford v The Commonwealth (1987) 163 CLR 54 at 77-78; [1987] HCA 25. Crennan Bell that if s 38(5) is satisfied, then leave must be given. The distinction was explained by Sheller JA in Promenade Investments Pty Ltd v New South Wales11, and in Qantas Airways Ltd v Joseland & Gilling12 McHugh JA, giving the judgment of himself, Glass and Priestley JJA, emphasised that the discretion to grant leave is "to be exercised after considering all the circumstances of the case". The Arbitration Act13 repealed the Arbitration Act 1902 (NSW) ("the 1902 Act"). However, the provisions of the Arbitration Act just described, in particular s 38(1), are best understood in the light of the system under the 1902 Act which they replaced. A starting point for that understanding is provided by the following statement by Lord Diplock when delivering the reasons of the Privy Council in Max Cooper & Sons Pty Ltd v University of New South Wales14: jurisdictions, "One of the principal attractions of arbitration as a means of resolving disputes arising out of business transactions is that finality can be obtained without publicity or unnecessary formality, by submitting the dispute to a decision maker of the parties' own choice. From the arbitrator's award there is no appeal as of right; it is only exceptionally that it does not put an end to the dispute. England and those other Commonwealth including New South Wales, whose arbitration statutes have followed the English model are exceptional when compared with most other countries, in providing procedural means whereby the finality of an arbitrator's award may be upset, if it can be demonstrated to a court of law that his decision resulted from his applying faulty legal reasoning to the facts as he found them. Two of these procedural means, the statement by the arbitrator of his award or of a question of law in the form of a special case for the opinion of the court, are statutory in origin; the third, setting aside an arbitrator's award for error of law upon its face, originated in the common law. It is as the result of an anomaly of legal history that it still survives in New South Wales 11 (1992) 26 NSWLR 203 at 225-226. 12 (1986) 6 NSWLR 327 at 333. 13 Section 3(1) and Sched 1. 14 [1979] 2 NSWLR 257 at 260-261. Crennan Bell and, until the passing of the Arbitration Act 1979 [(UK) ('the 1979 UK Act')], survived in England." The concept of an error of law appearing, or manifest, upon the face of an award, thus has a long history. His Lordship went on15 to describe the jurisdiction exercised by the Court of King's Bench as analogous to that asserted over inferior tribunals by the writ of certiorari and as one whereby awards were set aside for errors of law apparent on their face, and added: "This jurisdiction operated haphazardly, because the ability of the court to exercise it depended upon whether or not the arbitrator had chosen to set out in the award itself the legal reasoning on which he had based it. If he had not, the court was powerless to intervene but, if he had and his legal reasoning so set out in the award itself was erroneous, the court could quash the award." It is to the removal of this jurisdiction that s 38(1) is directed; it had persisted despite the provision of statutory means of review, in particular by ss 9 and 19 of the 1902 Act. These provisions had empowered arbitrators to state an award as to the whole or part thereof in the form of a special case for the opinion of the court, and also had empowered the court to compel an arbitrator to state a special case for its opinion on any question of law arising in the course of the arbitration16. The decisions of English courts on cases stated by arbitrators under this system was said by Lord Diplock in The Nema17 to have made an important contribution to "the comprehensiveness and certainty" of English commercial law, which in turn makes it "a favoured choice as the 'proper law' of contracts ... and London arbitration as the favoured curial law for the resolution of disputes arising under them". That concern with the certainty of commercial law as is apparent enhanced by curial particularly from the terms of par (b)(ii) of s 38(5) of the Arbitration Act. in arbitration proceedings involvement However, as Lord Diplock explained in Max Cooper18, before the repeal of the 1902 Act: 15 [1979] 2 NSWLR 257 at 261. 16 See the discussion by Sheller JA in Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 at 216. 17 Pioneer Shipping Ltd v BTP Tioxide Ltd ("The Nema") [1982] AC 724 at 741. 18 [1979] 2 NSWLR 257 at 262. Crennan Bell "Unless an arbitrator is required under s 19 of the [1902 Act] to state in the form of a special case for the opinion of the court a question of law arising in the course of the reference, he is not under any obligation in law to give his reasons for what he has decided. Indeed, to do so in the award itself may undermine its finality by exposing the party in whose favour it is given to the risk of the expense and delay involved in what in effect is an appeal on a point of law from his decision that may be taken as far as the highest court in the land, and the possibility that at the end of it all, the award may be set aside and a new reference held. On the other hand, if he wants to inform the parties of his reasons without making the award vulnerable, all he has to do is to put them down on a separate piece of paper which, he makes it unequivocally clear, is not intended to form part of his award." The scheme adopted by the Arbitration Act was described by Giles J in R P Robson Constructions Pty Ltd v D & M Williams19. After indicating that the encouragement otherwise offered for unreasoned awards was radically altered by the new legislation, his Honour went on: "The jurisdiction to set aside or remit an award on the ground of error of law on its face was abolished (s 38(1)). In lieu thereof, an appeal was to lie to this Court on any question of law arising out of the award, which appeal might be brought by any of the parties to the arbitration agreement with the consent of all other parties thereto or, subject to an exclusion agreement, with the leave of the Court (s 38(2) and (4)). Leave was not to be granted unless the Court considered that the determination of the question of law could substantially affect the rights of one or more of the parties (s 38(5)(a)). Necessarily, in order that a dissatisfied party could effectively appeal, s 29 of the Act provided for the award to be in writing and, as has been seen, for the arbitrator to include a statement of the reasons for making the award. The statement of reasons is necessary in order that it can be seen whether or not the arbitrator was in error on any question of law arising out of the award." From that last sentence it follows that failure to provide a statement of the reasons for the making of the award, as required by s 29(1)(c), may itself amount to a manifest error of law on the face of the award within the meaning of 19 (1989) 6 BCL 219 at 221. Crennan Bell s 38(5)(b)(i) of the Arbitration Act20. The reasons, for this purpose, are part of the award. The submission to the contrary by Mr Jackson QC for one set of amici curiae should not be accepted. The 1979 UK Act The enactment of the Arbitration Act had been preceded by the 1979 UK Act. Like s 38(1) of the Arbitration Act, s 1(1) of the 1979 UK Act removed the jurisdiction with respect to errors on the face of an award. However, the jurisdiction then created by the balance of s 1 for an "appeal ... on any question of law arising out of an award" was expressed in terms which did not correspond with the balance of s 38. In particular, the provision in s 1 of the 1979 UK Act with respect to the grant of leave (s 1(4)) did not contain the detailed statement in s 38(5)(b) of the Arbitration Act set out earlier in these reasons. In its original form, s 38 was closer to the terms of the 1979 UK Act, as Sheller JA pointed out in Promenade Investments21, but this litigation concerns s 38 in the form taken after the Commercial Arbitration (Amendment) Act 1990 (NSW). Some caution thus is required in applying to the leave requirements in s 38(5) remarks made in United Kingdom decisions dealing with s 1 of the 1979 UK Act. However, some assistance in considering the operation of the leave requirement in s 38 is provided by Lord Diplock in The Nema22. Having described the power to refuse leave in the 1979 UK Act as conferring an "unfettered" judicial discretion, he added: "[T]his, in the case of a dispute that parties have agreed to submit to arbitration, involves deciding between the rival merits of assured finality on the one hand and upon the other the resolution of doubts as to the accuracy of the legal reasoning followed by the arbitrator in the course of arriving at his award, having regard in that assessment to the nature and circumstances of the particular dispute." The litigation in the Supreme Court and the Court of Appeal The primary judge in the one proceeding dealt both with the application by the reinsurers for leave to "appeal" and with the "appeal" itself. By orders 20 Ridler v Walter [2001] TASSC 98 at [9]. 21 (1992) 26 NSWLR 203 at 217. 22 [1982] AC 724 at 739. Crennan Bell entered 23 April 2009 his Honour granted the reinsurers leave to appeal and allowed the appeal, set aside the award and in place thereof dismissed the claim of Gordian in the arbitration. What his Honour described as the "primary error of law" was the failure of the arbitrators to recognise that an agreement made at the request of Gordian to extend cover to include D and O policies issued for up to three years was not a "limitation" or "exclusion" in the sense contemplated by s 18B(1) of the Insurance Act. Such an error, in his Honour's view, made inappropriate a remitter to the arbitrators. The Court of Appeal23 discountenanced the procedure adopted by the primary judge in which, over the opposition of Gordian, his Honour had heard concurrently the application for leave and the "appeal" itself. The Court of Appeal granted Gordian leave to appeal from the decision of the primary judge, allowed the appeal, and made an order refusing leave to the reinsurers under s 38(4)(b) to "appeal" in respect of the award dated 10 October 200824. If they are to have any measure of success in this Court the reinsurers must show that the Court of Appeal erred in that refusal of leave. This requires particular attention to the construction and operation of pars (a) and (b) of s 38(5). In submissions to this Court rather too much attention was diverted away from the threshold issues and to the very fully argued question of whether the arbitrators erred in the engagement and construction of s 18B of the Insurance Act. Paragraph (b) of s 38(5) of the Arbitration Act Paragraph (b)(i) of s 38(5) may be awkwardly expressed, but the words "a manifest error of law on the face of the award" comprise a phrase which is to be read and understood as expressing the one idea. An error of law either exists or does not exist; there is no twilight zone between the two possibilities. But what is required here is that the existence of error be manifest on the face of the award, including the reasons given by the arbitrator, in the sense of apparent to that understanding by the reader of the award. If that error is manifest and its determination could substantially affect the rights of at least one of the parties, as specified in par (a) of s 38(5), then the Supreme Court may go on to decide to grant or refuse leave in the exercise of the power conferred by s 38(4)(b). 23 (2010) 267 ALR 74 at 92-95 [102]-[113]. 24 (2010) 267 ALR 74 at 126 [304]. Crennan Bell If there be no such manifest error on the face of the award but there is presented to the Supreme Court on the leave application "strong evidence" that an error of law was made, and its determination may add, or be likely to add, substantially to the certainty of commercial law (par (b)(ii) of s 38(5)) and also may substantially affect the rights of at least one of the parties (par (a) of s 38(5)), then leave may be granted. If either s 38(5)(b)(i) or s 38(5)(b)(ii) has been engaged to enliven the power to grant leave, then, upon the grant of leave, a "question of law arising out of an award" is presented to provide the subject matter of the appeal which lies to the Supreme Court under s 38(2). Much difficulty in the operation of these provisions has been occasioned by the majority decision of the New South Wales Court of Appeal in Natoli v Walker (Kirby P and Mahoney JA; Meagher JA dissenting)25. The majority appear to have treated the use of "manifest" in par (b)(i) of s 38(5) not as directed to what is presented upon the face of the award but as requiring the error of law itself to have a particular quality or character so as to include within par (b)(i) facile errors and to exclude those of complexity. This would exclude from par (b)(i), for example, an error in the construction of a complex law such as s 18B of the Insurance Act. Yet, as par (b)(ii) indicates, the policy of the statute is not to leave entirely to the operation of the arbitration agreement questions of law the determination of which may be likely to add to the certainty of commercial law. In an age when much commercial activity is regulated by statute, such questions are likely to be matters of statutory interpretation. It would be incongruous to favour judicial determination merely of egregious error apparent on the face of the award. In the present case, counsel then appearing for the reinsurers in the Court of Appeal, no doubt aware of what had been said in Natoli by the Court of Appeal, conceded that he did not press a case of manifest error of law on the face of the award. However, in his reasons, Allsop P said that he did not take the concession as going beyond the particular point of construction of s 18B upon which the primary judge had based his decision26. Nevertheless, his Honour applied Natoli to the construction of par (b)(i) of s 38(5)27, so that answers given 25 (1994) 217 ALR 201 at 215-217, 223. 26 (2010) 267 ALR 74 at 106 [178]. 27 (2010) 267 ALR 74 at 95 [116]. Crennan Bell by arbitrators upon difficult questions of law, which had been open to competing arguments, did not qualify as errors of law. In this Court the reinsurers relied upon par (b)(i) as well as par (b)(ii) of s 38(5) and were at liberty to do so. Natoli should not be accepted in this Court as correctly construing s 38(5)(b)(i) of the Arbitration Act. The character or quality of the error of law falls for consideration, if relied upon, at the next stage, namely when the Supreme Court is considering under s 38(4)(b) whether to grant leave. In the Court of Appeal counsel for the reinsurers based the case upon par (b)(ii) of s 38(5). This is expressed disjunctively from par (b)(i), but the same circumstances may attract both paragraphs. The correct construction of s 18B of the Insurance Act, as Allsop P indicated28, would be likely in the sense of par (b)(ii) to add substantially to the certainty of commercial law, and the "strong evidence" of error would appear from the Reasons themselves. So also the question of the content of the requirement in s 29(1)(c) that there be included a statement of the reasons for making the award. Inadequate reasons? The Court of Appeal rejected the submission by the reinsurers that there had been an error of law in the failure of the arbitrators to give adequate reasons for their conclusion respecting the application of the proviso in the concluding words of s 18B(1) of the Insurance Act29. The reinsurers had submitted that the findings by the arbitrators had compelled the contrary conclusion, namely, that it was not reasonable for them to be bound to indemnify Gordian. The reinsurers had supported their submission as to the inadequacy of reasons by reference to what they saw as having been decided by the Court of Appeal of Victoria in Oil Basins30. The relevant proposition from Oil Basins upon which the reinsurers relied before the Court of Appeal was that the requirement for reasons specified in par (c) of s 29(1) of the Arbitration Act was a statutory importation of the same standard as applies in Australia to the giving of reasons by judges. 28 (2010) 267 ALR 74 at 106 [173]. 29 (2010) 267 ALR 74 at 107-108 [186]. Crennan Bell Allsop P considered31 that the applicable standard was that stated by Donaldson LJ when giving the judgment of the English Court of Appeal in Bremer Handelsgesellschaft mbH v Westzucker GmbH (No 2)32. As his Lordship had said: "All that is necessary is that the arbitrators should set out what, on their view of the evidence, did or did not happen and should explain succinctly why, in the light of what happened, they have reached their decision and what that decision is. This is all that is meant by a 'reasoned award' [in s 1(6) of the 1979 UK Act]." It may be noted that immediately following this passage Donaldson LJ had gone on to distinguish a reasoned award from reasons for judgment. This Court granted special leave to appeal on the ground that the Court of Appeal had erred in not concluding that the arbitrators had failed to give reasons as required by par (c) of s 29(1) of the Arbitration Act for their conclusion that it was reasonable for the reinsurers to be required to indemnify Gordian within the meaning of the proviso to s 18B(1) of the Insurance Act, and for their conclusion that considerations of general justice and fairness did not compel the conclusion that the reinsurers should not be required to indemnify Gordian within the meaning and on the proper construction of s 22(2) of the Arbitration Act. In the circumstances of this matter the considerations of general justice and fairness spoken of in s 22(2) are encompassed within the alleged failure to give reasons for the applicability of s 18B(1) of the Insurance Act, as required by s 29(1)(c) of the Arbitration Act. This ground of appeal is subsumed within the first ground. The reference in Oil Basins to the giving by the arbitrators in that dispute of reasons to a "judicial standard"33 and cognate expressions34 placed an unfortunate gloss upon the terms of s 29(1)(c). More to the point were observations in Oil Basins to the effect that what is required to satisfy that 31 (2010) 267 ALR 74 at 114 [220]. 32 [1981] 2 Lloyd's Rep 130 at 132-133. 33 (2007) 18 VR 346 at 366 [54]. 34 (2007) 18 VR 346 at 364 [50], 367 [56]. Crennan Bell provision will depend upon the nature of the dispute and the particular circumstances of the case35. Their Honours illustrated the point by saying36: "If a dispute turns on a single short issue of fact, and it is apparent that the arbitrator has been chosen for his or her expertise in the trade or calling with which the dispute is concerned, a court might well not expect anything more than rudimentary identification of the issues, evidence and reasoning from the evidence to the facts and from the facts to the conclusion37." But in Oil Basins itself, the central issue in dispute in the hard-fought and lengthy arbitration38: "was whether the expression 'overriding royalty' in the royalty agreement was used as a term of art, as the respondents contended (with the result that any right to royalty ceased upon surrender of the tenement to which it related (a 'title based' royalty)), or whether the expression meant simply an additional royalty, as the appellant argued (with the result that royalty was payable in respect of production derived by the respondents from within the area regardless of surrenders (an 'area based' royalty))." The primary judge in Oil Basins had, as the Court of Appeal put it, properly39: "held that, in order to provide reasons of the standard required by s 29(1)(c), it was necessary for the arbitrators to decide and give reasons for deciding whether 'overriding royalty' was a technical term with a meaning usually understood by persons in the oil and gas industry and, if so, whether the context of the royalty agreement or the surrounding circumstances implied that the parties intended a different meaning from the technical meaning." 35 (2007) 18 VR 346 at 367-368 [57]-[58]. 36 (2007) 18 VR 346 at 367 [57]. 37 Mustill and Boyd, The Law and Practice of Commercial Arbitration in England, 38 (2007) 18 VR 346 at 353 [28]. 39 (2007) 18 VR 346 at 353-354 [29]. Crennan Bell This the arbitrators in Oil Basins had failed to do. In the present case, the reinsurers correctly submit that no wholly satisfactory formula can be found to flesh out the requirement in s 29(1)(c). Both Gordian and the reinsurers are content in this Court to rest, like Allsop P, upon what was set out above from the reasons of Donaldson LJ in Bremer. But the parties differ respecting the outcome of applying Bremer to the Reasons. The submissions of the reinsurers on this point should be accepted. Treating s 18B of the Insurance Act as a critical element in reaching their award, the arbitrators were obliged to explain succinctly why the various integers in that complex statutory provision were satisfied. Those integers included the proviso. There is no indication of factual findings in the Reasons which supported the inapplicability of the proviso, nor, indeed, of those considerations tending to support its application. In particular, there was no apparent attention to the contention that Gordian could have sought a special acceptance with respect to the FAI policy but had not done so, and if Gordian had done so it was at best conjectural that the reinsurers would have accepted. Nor was there consideration of the reinsurers' rejoinder pleading concerning the adjustment in premium. Nor was there any apparent consideration that the proviso in s 18B(1) was designed to guard against a strained application of the sub-section. Conclusions respecting inadequacy of reasons The result is that in this respect there was both a manifest error of law on the face of the award (s 38(5)(b)(i)), and strong evidence that the arbitrators made an error of law, the determination of which may add substantially to the certainty of commercial law (s 38(5)(b)(ii)). Sub-sections (3) and (7) of s 38 of the Arbitration Act state: "(3) On the determination of an appeal under subsection (2) the Supreme Court may by order: confirm, vary or set aside the award, or remit the award, together with the Supreme Court's opinion on the question of law which was the subject of the appeal, to the arbitrator or umpire for reconsideration or, where a new arbitrator or umpire has been appointed, to that arbitrator or umpire for consideration, Crennan Bell and where the award is remitted under paragraph (b) the arbitrator or umpire shall, unless the order otherwise directs, make the award within 3 months after the date of the order. (7) Where the award of an arbitrator or umpire is varied on an appeal under subsection (2), the award as varied shall have effect (except for the purposes of this section) as if it were the award of the arbitrator or umpire." The remedy in respect of the inadequacy of reasons which then would be appropriate would be an order for remitter to the arbitrators for reconsideration pursuant to s 38(3)(b). However, the reinsurers contend that if they succeed in obtaining special leave on either of the remaining grounds respecting the operation of s 18B of the Insurance Act which were referred to the Full Court and extensively argued, and they succeed on those grounds, they should obtain a more drastic remedy. This would be the setting aside of the award by order under s 38(3)(a) by the restoration of the order to that effect made by the primary judge. Section 18B special leave grounds Critical to the outcome favoured by the arbitrators was the application by them of s 18B of the Insurance Act, and the reinsurers complain that in doing so the arbitrators misconstrued and misapplied s 18B in two respects. These are grounds 5 and 6 in the draft Notice of Appeal. The starting point for consideration of ground 5 is the finding by the arbitrators that the FAI policy was outside the terms of the reinsurance treaties. The reinsurers then submit that there could be no three year claims within the terms of the reinsurance treaties if they were made under a policy to which the treaties had no application. The stipulation in the reinsurance treaties that they speak only to D and O policies limited to reporting periods of less than three years is then said by the reinsurers to render those treaties inapt to attract s 18B at all. A policy which is limited to three year reporting periods is not a policy with a seven year period, as was the situation with the FAI policy. It is no answer that three year claims might fall within both policies. The exclusion upon which the treaties operated was in respect of "policies issued for periods longer than 36 months". There was in the provisions of the treaties no stipulation by or under which (in the terms of s 18B) the reinsurers excluded or limited their liability to Crennan Bell indemnify Gordian by reason of the circumstance that the FAI policy had the seven year period, so that Gordian thereby was disentitled to what otherwise would have been its right to indemnity under the treaties. The words in s 18B(1)(a), "on the happening of particular events or on the existence of particular circumstances", mark off exclusions and limitations from the content of the "contract of insurance" identified in the opening words of the sub-section. Accordingly, s 18B was never engaged. These submissions should be accepted and special leave granted accordingly with respect to ground 5 in the draft Notice of Appeal and this ground should be upheld. The second ground referred for consideration by the Full Court, ground 6, concerns the construction of the phrase in s 18B(1) "if ... the loss in respect of which [Gordian] seeks to be indemnified was not caused or contributed to by ... the existence of those circumstances [identified in par (a)]". Contrary to the submissions by Gordian, this presented a question of law for decision by the arbitrators40. The error of which the reinsurers complain is readily conveyed by repeating what was said by the Court of Appeal41: "There was an underlying policy; it provided for more than a 3 year reporting period; it can be said that the existence of such a policy was the relevant circumstance; the claims to be met by the reinsurance came from that policy, irrespective of whether they were reported within 3 years. In that sense, the loss in respect of which Gordian sought to be indemnified might be seen to be caused or contributed to by the existence of the circumstance – the policy with a reporting period of more than 3 years. But for the existence of the policy (with a 7 year reporting period) there would have been no claims on the reinsurers. That is not how the arbitrators approached the question. They viewed the relevant aspect of the FAI policy as creating the risk, as the existence of the extended reporting period in the fourth to seventh years. That circumstance, which increased the risk of loss occurring, did not cause the loss, because all the claims were within 3 years. This approach 40 See Roncevich v Repatriation Commission (2005) 222 CLR 115 at 126 [27]-[28], 139-142 [76]-[82]; [2005] HCA 40. 41 (2010) 267 ALR 74 at 106-107 [180]-[181]. Crennan Bell tended to emphasise the relevance of the underlying claims against FAI within the 3 years, rather than the connection between the existence of the (7 year) policy and (any) claims under it." The Court of Appeal saw merit in the approach contrary to that of the arbitrators in the Reasons. Allsop P said42 that he would not have reached the same conclusion as the arbitrators and went on43: "Looking at the facts, the definition of cover was excluded or limited by reference to the circumstances of underlying policies of insurance with reporting periods of more than 3 years. That limitation was inserted because the circumstance, in the view of reinsurers, was likely to increase the risk. There was a policy of such a description. That policy gave rise to the claims. In that sense the loss can be seen to be caused by the circumstance: the existence of an underlying policy with an extended reporting period. This way of looking at the matter can be seen to reflect the sensible operation of s 18B in a [manner] which relevantly takes into account the safeguards built into s 18B by the legislature. This would also be the case if a policy excluded fire caused by arson. No operation of s 18B could require an underwriter to pay if the fire was caused by arson; this would be so not because of some notion of essential scope of cover, but because the event or circumstance caused the loss." However, the Court of Appeal desisted from concluding that there was a manifest error of law upon the face of the award partly on the ground that a contrary argument to that put by the reinsurers had been tenable. But, as indicated earlier in these reasons, this was not to deny, as the Court of Appeal should have determined, that, complex though s 18B might be, there had been manifest an error of law to attract s 38(5)(b)(i) and the grant of leave. Should special leave now be granted with respect to ground 6 as well as ground 5? Each ground would lead to an order restoring that of the primary judge to set aside the award. But ground 5 is logically anterior to ground 6. If s 18B was never engaged (ground 5), the causation issue does not arise and there would be no utility in a grant on ground 6. Accordingly, because in our view ground 5 succeeds, special leave should be refused with respect to ground 6. It 42 (2010) 267 ALR 74 at 119 [257]. 43 (2010) 267 ALR 74 at 119 [258]-[259]. Crennan Bell should, however, be observed that, in a sense, the cogency of the reasoning by Allsop P upon the ground 6 issue supports the threshold denial of any application of s 18B to the reinsurance treaties with Gordian. Remaining matters Gordian relies upon a Notice of Contention, in effect to support on additional grounds the decision of the Court of Appeal. This decision was to allow the appeal by Gordian and, in place of the decision of the primary judge, refuse leave to the reinsurers to "appeal" on a question of law arising out of the award, within the meaning of s 38(2) and (4) of the Arbitration Act. In oral submissions the range of grounds in the Notice of Contention was reduced. Counsel for Gordian relied upon remarks of Lord Steyn when construing s 1 of the 1979 UK Act in The Santa Clara44 that under that statute a respondent to an award itself did not require leave to appeal in order to sustain before the court an award on a ground not relied upon by the arbitrator. However, as explained earlier in these reasons45, under the Arbitration Act the subject matter of the "appeal" to the Supreme Court in the present case comprised the errors of law of which the reinsurers complained. At the earlier stage of the consideration by the Supreme Court of an application for a grant of leave under the Arbitration Act it may be open to a respondent to resist the grant of leave on the footing that the award is to be sustained on other grounds. If so, it also may be that the respondent may rely upon those other grounds even if they concern no more than matters of fact. Were that approach upon an application to grant leave permissible, which it is unnecessary to decide here given our agreement in the next paragraph with the reasons of Kiefel J, caution would be required of the Supreme Court lest there be defeated the policy of the Arbitration Act that the parties be held to their bargain to accept the findings of fact by the arbitrator. In the present case, Gordian sought to draw this Court into consideration of the treatment by the arbitrators of questions of fact respecting the relations between Gordian and the reinsurers, independently of any reliance upon s 18B of the Insurance Act. In particular, Gordian sought to agitate questions respecting the existence and extent of the three year limit in the reinsurance treaties as 44 Vitol SA v Norelf Ltd [1996] AC 800 at 813-814. Crennan Bell disclosed by the documents passing between the relevant actors, in particular the letter of 15 December 1998. We agree with what Kiefel J has written on this subject, leading her Honour to the conclusion that it cannot be said that the arbitrators erred in their conclusion. Orders The grant of special leave should be expanded to include ground 5 but not ground 6. The appeal should be allowed with costs. The decisions of the primary judge to grant leave and allow the "appeal" under the Arbitration Act should not have been set aside by the Court of Appeal. The orders of the primary judge will be restored if orders 2, 3 and 4 of the orders of the Court of Appeal entered 29 April 2010 are set aside, and in place thereof the appeal to that Court is dismissed with costs. HEYDON J. The proceedings in this Court raise many issues46. The anterior issue But there is one issue which is anterior to the rest. That issue is thrown up by ground 8 of Gordian's Notice of Contention. Gordian there indicated that it wished to contend that the decision of the Court of Appeal should be affirmed, but on the grounds that the Court of Appeal erroneously failed to decide that the arbitrators "erred in law by construing the contracts of reinsurance so that they only applied to D&O policies which provided cover for a period of three years." Below this will be called "the construction point". If the arbitrators did commit that error in relation to the construction point, and if the Court of Appeal erred in failing to deal with it, then the trial judge's order setting aside the award would be incorrect, and the Court of Appeal's order allowing Gordian's appeal from the trial judge's order would be correct. The issues which the reinsurers raise about s 18B of the Insurance Act would not arise. Nor would the issues about inadequate reasons which Gordian raises, for the alleged inadequacy related only to s 18B. Nor would issues of causation. Nor would various issues which Gordian raises in the Notice of Contention. Nor would various issues agitated by the amici curiae. Two preliminary points Except in two particular respects, the reinsurers did not advance any substantive argument against what Gordian urged in relation to the merits of the construction point. But the reinsurers relied on two preliminary points as absolute bars to consideration of Gordian's construction point arguments on their merits. Is leave to raise the construction point necessary? Gordian raised the construction point before the Court of Appeal, in which it was the appellant. The Court of Appeal's reasons for not dealing with the point proceeded in three steps. First, had an application been made for leave to appeal under s 38(4)-(5) of the Arbitration Act on this ground, it would not have been granted. Secondly, to deal with the point would call for a factual examination of the dealings between the parties in great detail. Thirdly, to deal with the point would reveal that the Arbitration Act had failed in its role of limiting review of 46 The facts, circumstances and relevant legislation are set out in the plurality judgment. The abbreviations it employs are employed below. arbitration awards. Hence "parties who wish to complain about questions of law arising out of an award must obtain leave to appeal."47 The reasons for judgment of the Court of Appeal spoke twice of "complaints" about an award, twice of "complaints" about questions of law arising out of an award, and once of "complaints" about the reasons for an award48. They did so as if each of these propositions were identical. There is a distinction between an "appeal" against an order and a "complaint" about the reasoning which led to that order. Appeals lie only against orders, not against the reasoning which led to them49. An order is the outcome of legal proceedings; it is distinct from the process which led to that outcome. Similarly, an award is the outcome of an arbitration; it is distinct from the process which led to that outcome. In s 38, the word "award" is used several times to mean "outcome". Section 38(1) denies the Supreme Court jurisdiction "to set aside or remit an award" on certain grounds. When a s 38(2) appeal has been determined, one power of the Supreme Court is to confirm, vary or set aside the award (s 38(3)(a)). Another is to remit the award for further consideration (s 38(3)(b)), in which case the arbitrator or umpire to whom the award has been remitted is to make another award within three months. Where the award of an arbitrator or umpire is varied in an appeal under s 38(2), the award as varied is to have effect as if it were the award of the arbitrator or umpire (s 38(7)). An award shall, unless otherwise agreed in writing by the parties, have included in it a statement of the reasons for making the award (s 29(1)(c)), but the reasons do not constitute the award. The Court of Appeal erred in equating appeals against awards with complaints about the reasons for, or questions of law arising out of, awards. Section 38 is in terms directed only to challenges to the award – the orders made by arbitrators – even though the challenges may raise questions of law about the reasoning that led to those orders. Section 38 does not apply to attempts, not to challenge awards, but to sustain them by raising another question of law urging a particular answer. It was not procedurally open to Gordian to seek leave from Einstein J under s 38(4)-(5). Section 38(2) provides that an appeal shall lie to the Supreme Court on any question of law arising out of an award. Gordian was not the party which desired to appeal, for the award gave it a substantial measure of success; it 47 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 123 [280] per Allsop P, Spigelman CJ and Macfarlan JA concurring. 48 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 122 [274]-[275] and 123 [280] and [282]. 49 Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45 at 64; [1968] HCA 91. was the reinsurers which sought leave to appeal. Hence the question whether leave would be granted, or would have been granted, if it had been sought, is beside the point. Where a party contends that an award is correct because of a question of law which the arbitrators either decided correctly, or failed to decide correctly, the Arbitration Act imposes no express requirement on that party to seek and obtain leave to raise that question. It only imposes on an appellant a requirement to obtain leave to appeal against the award. The Arbitration Act is not to be presumed to alter the conventional processes of appeal in a manner about which its terms are silent. To treat the Arbitration Act as requiring leave on points of contention as well as points of appeal is to assume a particular construction. And assuming that particular construction as an answer to the question how far the Arbitration Act limits review is to assume the answer to the question posed. It may be accepted that, as the Court of Appeal said, a function of the Arbitration Act is to limit appeals against awards. But that function is served by the requirement that there be a grant of leave for the appeal. To permit the party which is not appealing to raise other questions as a means of sustaining the award does not undermine the finality of awards. To permit questions of law to be raised by way of contention is a means of ensuring the defeat of applications for the review of arbitration awards which are unsatisfactory applications in the sense that the award is entirely sound, though not necessarily for the reasons given by the arbitrators. It does not expand the scope for reviewing arbitration awards. In Vitol SA v Norelf Ltd50 Lord Steyn gave reasons supportive of that conclusion, with which Lord Mackay of Clashfern LC, Lord Griffiths, Lord Nolan and Lord Hoffmann agreed. The context was not identical to the present, but it was similar. The House of Lords was considering whether s 1(7) of the Arbitration Act 1979 (UK) applied to respondents. Section 1(7) provided: "No appeal shall lie to the Court of Appeal from a decision of the High Court on an appeal under this section unless – the High Court or the Court of Appeal gives leave; and it is certified by the High Court that the question of law to which its decision relates either is one of general public importance or is one which for some other special reason should be considered by the Court of Appeal." Lord Steyn said51: "Under the stated case procedure, which existed before the Act of 1979, a respondent who wished to argue that the award should be sustained for reasons not expressed or fully expressed in the award or not considered or upheld at first instance did not have to obtain a certificate of the type envisaged by section 1(7). The idea that in 1979 the legislature intended to make the position of a respondent, who had won an arbitration, more difficult by requiring him to obtain a certificate under section 1(7) before he would be permitted on appeal to the Court of Appeal to defend the award on other grounds is convincingly refuted by the history and policy of the Act of 1979. The primary purpose of the Act of 1979 was to reduce the extent of the court's supervisory jurisdiction over arbitration awards. It did so by substituting for the special case procedure a limited system of filtered appeals on questions of law. The change was intended to tilt the balance toward greater emphasis on the finality of arbitration awards. Now postulate a respondent in the Court of Appeal who at first instance won on the main point but lost on a sound alternative argument. He loses on the main point on appeal. If he requires a certificate to argue the alternative case there is a risk that he may not obtain a certificate. A perfectly good award may then be set aside. In a very relevant sense such a risk would imperil the finality of arbitration awards. It would also be a manifestly unfair consequence in cases when the respondent has a good alternative argument which does not pass the test of being a question of general public importance, eg the construction of a 'one off' exception clause. And it is no answer to say that in some cases a judge may grant a certificate for some other special reasons." Lord Steyn described the view he rejected as "indefensible"52. He went on: "It militates against the finality of arbitration awards, it would cause injustice and, if adopted, would be perceived to be a serious flaw in our arbitration system." The same is true of the view that a respondent requires leave under s 38. The reinsurers submitted that if Gordian was correct in arguing that a respondent to an appeal could rely on points of law without obtaining leave, there was no textual reason why it could not also rely on points of fact without obtaining leave, and that was so "rebarbatively unattractive [a] possibility" as to suggest some error in Gordian's construction. This Court, however, for example, often puts up with just such possibilities in many appeals. It is commonplace for special leave to be granted on a short, interesting and important point of law 51 [1996] AC 800 at 813-814. 52 [1996] AC 800 at 814. which, if it is a good one, leaves the Court obliged to listen to arguments raised by notice of contention and addressed to it as of right which are long, boring and unimportant. This can be necessary if the curial function is to attain just outcomes, rather than simply to enjoy interesting journeys. The attainment of just outcomes is often accompanied by boredom. The function of arbitration, as much as that of conventional litigation, is the attainment of just outcomes. If the issue whether leave to appeal would have been granted to debate the construction point is material, it should be noted that the construction point involves questions of law. It involves a question of law in the mundane sense that the interpretation of a written agreement between private parties is a question of law53. But beyond that mundane question of law there may be two specific but important errors of law. The arbitrators may have erred in their use of the phrase "common understanding and intention of the parties". That suggests that they erred in searching for the subjective intentions of the parties. That is an extremely important matter, not always well understood54. It is very well established in this Court, and indeed in other ultimate appellate courts55, that the question is not what contracting parties subjectively intended, believed or understood. The question is, subject to special common law or equitable rules usually based on error or disadvantage56, what each party by words or conduct would have led a reasonable person in the position of the other party to believe57. A departure from these principles by arbitrators is a serious matter. They are not principles merely reflective of some quaint minor guide to construction. They go to central substantive conceptions of the law of contract in the Anglo-Australian common law. A second respect in which the arbitrators may have erred is their seeming reliance on post-contractual events as a guide to contractual interpretation. Some see that as more controversial, but it is a very important question of law. 53 Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 at 736. See also Pilgrim Shipping Co Ltd v The State Trading Corporation of India Ltd (The "Hadjitsakos") [1975] 1 Lloyd's Rep 356 at 361 per Roskill LJ and 366 per Sir John Pennycuick. 54 On a closely related question – the role of intention in determining whether trusts have been created – compare Saunders v Deputy Commissioner of Taxation [2010] WASC 261 at [22] with Byrnes v Kendle (2011) 85 ALJR 798; 279 ALR 212; [2011] HCA 26. 55 For example, the House of Lords: Pioneer Shipping Ltd v BTP Tioxide Ltd [1982] AC 724 at 736. 56 Byrnes v Kendle (2011) 85 ALJR 798 at 820 [101]; 279 ALR 212 at 238. 57 Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451 at 461-462 [22]; [2004] HCA 35; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165 at 179 [40]; [2004] HCA 52. That deals with the first and third of the Court of Appeal's points. The merit of the second point in this particular case depends on considering what is actually involved in Gordian's argument. As will be seen, it is not necessary to examine a mass of detailed evidence. The relevant materials comprise only a few pages. Does s 22(2) of the Arbitration Act defeat Gordian? The reinsurers put the second preliminary point thus. They submitted, in answer not only to ground 8, but also to grounds 5-7 and 9-12, in the Notice of Contention that those grounds "ignore the fact that, under s 22(2) of the [Arbitration Act], the arbitrators were not bound to observe the strict rules of evidence and procedure or common law rules of construction of contracts". For this proposition they gave four citations, to be analysed below. The reinsurers also submitted: "the parties had expressly permitted the arbitrators to rely on their own knowledge and expertise". For this they gave two references to the transcript of argument before the arbitrators. The reinsurers then submitted: "All of the criticisms of the arbitrators' methodology fall away once these points are recognised." These points may answer some aspects of grounds 5-7 and 9-12. They do not answer ground 8. Section 22 of the Arbitration Act provides: "(1) Unless otherwise agreed in writing by the parties to the arbitration agreement, any question that arises for determination in the course of proceedings under the agreement shall be determined according to law. If the parties to an arbitration agreement so agree in writing, the arbitrator or umpire may determine any question that arises for determination in the course of proceedings under the agreement by reference to considerations of general justice and fairness." According to the arbitrators, the reinsurance treaties contained an agreement attracting s 22(2). But what does the expression "considerations of general justice and fairness" mean? One of the citations to which the reinsurers referred was Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd58. The English Court of Appeal had 58 [1978] 1 Lloyd's Rep 357. under consideration a clause providing that the arbitrators were not bound by the strict rules of law, and enjoining them to decide "according to an equitable rather than a strictly legal interpretation of the provisions of" the agreement. It was submitted that the clause was void as ousting the jurisdiction of the courts. The Court of Appeal, in ex tempore judgments, rejected that submission, but did not specifically propound any construction supporting the reinsurers in this appeal. Lord Denning MR said that the clause "only ousts technicalities and strict constructions."59 Goff LJ said that the clause rendered the arbitrators "able to view the matter more leniently and having regard more generally to commercial considerations than would be done if the matter were heard in Court"60. On that point Shaw LJ agreed with both judgments. Their Lordships did not say whether the clause rendered the interpretation inquiry "objective" or "subjective". In any event the relevant clause was different from s 22(2). The second citation to which the reinsurers referred was a passage in Mustill and Boyd61. The passage referred to treated Eagle Star Insurance Co Ltd v Yuval Insurance Co Ltd as offering a narrow interpretation – the second narrowest out of seven – of a particular type of provision. The learned authors gave two instances of that type of provision62. One was: "The arbitrator shall be entitled to decide according to equity and good conscience and shall not be obliged to follow the strict rules of law". The other was: "The arbitrator shall be entitled to act as amiable compositeur." Again, the clauses are different from s 22(2); and, again, the learned authors, in their discussion of the seven interpretations, did not offer any opinion about whether the objective rule of contractual interpretation or the rule against taking into account post-contractual events were to be abandoned. The third citation referred to by the reinsurers was a passage from O'Neill and Woloniecki63. That passage discussed s 33(1) of the Arbitration Act 1996 (UK), which provided that an arbitral tribunal is obliged to: 59 [1978] 1 Lloyd's Rep 357 at 362. 60 [1978] 1 Lloyd's Rep 357 at 363-364. 61 The Law and Practice of Commercial Arbitration in England, 2nd ed (1989) at 82. 62 Mustill and Boyd, The Law and Practice of Commercial Arbitration in England, 2nd ed (1989) at 74. 63 The Law of Reinsurance in England and Bermuda, 2nd ed (2004) at 762-763 act fairly and impartially as between the parties, giving each party a reasonable opportunity of putting his case and dealing with that of his opponent, and adopt procedures suitable to the circumstances of the particular case, avoiding unnecessary delay or expense, so as to provide a fair means for the resolution of the matters falling to be determined." The learned authors say nothing to suggest that the legislation empowers an arbitrator to depart from the common law rules of contractual interpretation. The fourth citation referred to by the reinsurers was a discussion by Young J on the meaning of s 22(2) in Woodbud Pty Ltd v Warea Pty Ltd64. Young J treated s 22 as deriving from "the conception of an amiable compositeur." He uttered the following tentative remarks: "Probably the clause goes further than evidentiary and procedural problems and permits an amiable compositeur to disregard such rules as the parol evidence rule, the rule that contracts by specialty cannot be varied by oral contract … and the rule that one cannot look to subsequent conduct to construe a contract … The amiable compositeur may also disregard the rule that collateral contracts cannot be inconsistent with the main contract, he or she may apply principles of rectification and perhaps may also supplement the contract by filling out the contractual regime in areas where the parties have not thought it through. It is uncertain how far, if at all, the amiable compositeur can go beyond this." Of course, to apply principles of rectification is not to depart from legal principle. These remarks were not only tentative, but also were obiter dicta, because Young J held that for various procedural reasons s 22 did not apply. Even if this passage is correct about the subsequent conduct rule, which is, with respect, to be doubted, it is silent about subjective/objective interpretation. Like the other three citations, the passage is not strongly persuasive against permitting Gordian's construction argument to be considered. It is to be noted that the reinsurers did not contend that s 22(2) was supportive of any particular step in the detailed reasoning of the arbitrators on construction. The reinsurers' submission that "the parties had expressly permitted the arbitrators to rely on their own knowledge and expertise" does not seem to apply to ground 8 of the Notice of Contention, whatever its application to other grounds. In construing the contract the arbitrators did not purport to rely on any 64 (1995) 125 FLR 346 at 355-356. knowledge and expertise distinct from their skills in contractual construction. The transcript passages relied on are irrelevant to the construction point. The construction point The arbitrators saw the question as being whether any of the reinsurance treaties covered the FAI policy. The FAI policy covered claims made and notified to Gordian within a period of seven years from 31 May 1999. The arbitrators saw that question as turning on the ambit of the 1999 reinsurance treaty. The documentary arrangements between the reinsurers and Gordian were, characteristically for this industry, disorganised and casual to a degree. But the parties do agree that there was a contract. Gordian contended, and the reinsurers did not deny, but on occasion seemed positively to accept, that the contractual documents are to be found in "reinsurance placing slip No. 99AX4050", which each of the reinsurers stamped and signed on various dates between 23 and 31 December 1998, and documents attached to that document, particularly a letter of 15 December 1998 also stamped and signed by each reinsurer on those dates. The serious, precise, decorous, methodical and regular solemnity of this conduct, giving the relevant documents special significance in a sea of chaos, strongly supports Gordian's contention. It also strongly suggests that while anything that happened later may have been an attempt to negotiate a variation of the contract, it was not part of the contract as initially formed. The arbitrators noted that the: "1998 reinsurance treaty did not expressly include, limit or exclude cover in respect of run-off policies or policies for extended periods or with extended reporting periods other than by a Professional Indemnity North America ('PINA') clause which excluded claims which arose in the United States of America or Canada out of policies with reporting periods exceeding 36 months beyond the expiry of the policy unless specially accepted (exclusion (iii)) or which were issued for periods longer than 12 months plus 'odd time' not exceeding 18 months in all unless specially accepted (exclusion (v))." This "PINA clause", dealing with North American risk, was not applicable to the claims in issue in the arbitration. Later the arbitrators said: "Apart from the PINA clause, neither the 1998 reinsurance treaty nor the slips signed and stamped by the reinsurers in late 1998 expressly included, excluded or limited cover for policies for extended periods or with extended reporting periods." The arbitrators then proceeded to make a series of findings. They said: "According to the reinsurers, the context for Gordian's request in its letter of 15 December 1998 for 'multi year' reinsurance cover was that, in accordance with general industry practice, the then current 1998 reinsurance treaty applied to D&O policies which provided cover for a period of 12 months plus odd time not exceeding 18 months in all." Why did the reinsurers make that submission? The "period of 12 months plus odd time not exceeding 18 months in all" corresponded with exclusion (v) of the PINA clause, but that only applied to North America. The arbitrators said: "Gordian disputed that premise. However, it did not offer any plausible alternative. It was effectively left with the unattractive proposition that the 1998 reinsurance treaty covered every Gordian D&O policy irrespective of the period of cover for which it provided, even policies which were for an unlimited period, at least if such policies were within Gordian's 'established acceptance and underwriting policy in respect of' D&O policies." The quoted words come from Art 16 of the 1998 treaty, which provided: "The Reinsured undertakes not to introduce any change in its established acceptance and underwriting policy in respect of the class or classes of business to which this Agreement applies without prior approval of the Reinsurers, and any reinsurance arrangements relating thereto shall be maintained or be deemed to be maintained unaltered for the purpose of this Agreement." In the reinsurance placing slip issued in December 1998 and signed by the four reinsurers, opposite the word "CLASS" appeared the following: "Business underwritten by the Reinsured and classified by them as Professional Indemnity, Directors and Officers Liability Insurance (which term includes Company Reimbursement Insurance) and Superannuation Trustee Liability." Opposite the word "WORDING" appeared the words: "As expiring as far as applicable, amendments to be agreed by Reinsurers." Hence, contrary to what the arbitrators said, Gordian did have a "plausible alternative" to the reinsurers' argument that their reinsurance obligations only applied to D and O policies providing cover for "12 months plus odd time not exceeding 18 months in all". The "plausible alternative" – which is not an "unattractive proposition" – was that the reinsurers were protected by the obligation on Gordian not to change its "established acceptance and underwriting policy", about which the reinsurers had full knowledge from disclosures made to them. If that policy was to issue cover for long periods, nothing stopped the 1998 reinsurance treaty applying. But if that policy was to issue cover for short periods, they could not be lengthened unless Art 16 was complied with. The protection for the reinsurers – the "plausible alternative" – did not lie in specific short time periods, but in adherence to Gordian's established acceptance and underwriting policy. Gordian's submission that this was true for both the 1998 and the 1999 years is sound. After the arbitrators stated a step in their reasoning to which it will be necessary to return below, they said: "[W]e are satisfied that the 1998 reinsurance treaty applied to D&O policies which provided cover for a period of 12 months plus odd time not exceeding 18 months in all." They gave no explanation for this conclusion other than the following: "That was plainly the common understanding and intention of the parties when the 1999 reinsurance treaty was arranged at the end of 1998 and Gordian's letter of 15 December 1998 was initialled and stamped by all reinsurers which signed and stamped the slip for the 1999 reinsurance treaty." The arbitrators did not explain why the period fixed by exclusion (v) of the PINA clause should apply rather than any other period. They did not explain how the "common understanding and intention of the parties" not referred to in any contractual document or conversation was material in law. Nor did the reinsurers65. The arbitrators then said: "The reinsurers accept that they agreed by the reinsurance treaties to cover D&O policies which covered claims which were made and notified to Gordian within an extended period of three years and that the reinsurance treaties should be regarded as having that extended operation although it might not have been satisfactorily recorded." But was the acceptance soundly based? And what is the relationship between the "extended period of three years" and "12 months plus odd time not exceeding 18 months in all"? Why did the arbitrators select that three year period? 65 Cf the authorities cited at [82] fn 55-57. The arbitrators continued: "Gordian's subsequent communications with Aon Re and internal memoranda confirmed that the reinsurance which it had sought and obtained covered claims which were made and notified to Gordian within an extended period of 3 years. Nothing in the subsequent events, including the reinsurers' attempts to have that position formally recorded in the documentation, causes us to doubt that the reinsurance treaties did not cover the FAI D&O run-off policy which covered claims which were made and notified to Gordian within the much longer period permitted by that policy of 7 years." The arbitrators did not explain how "subsequent communications", "internal memoranda" and "subsequent events", to which they had also referred earlier, could be material in law to the issue of construing a contract complete before they happened. Nor did the reinsurers66. Underlying the arbitrators' reasoning may be the circumstance that exclusion (v) in the PINA clause, which spoke of "policies issued for periods longer than 12 months plus 'odd time' not exceeding 18 months in all", was omitted after 1998. The new PINA clause, however, retained exclusion (iii), dealing with "claims made coverages with an extended reporting period obligation exceeding 36 months beyond the expiry of the policy unless specially accepted." This may explain the shift from references to the shorter period to references to a three year period – but not convincingly, since it does not explain why the PINA clause, relating only to North American risk, was relevant at all. The reinsurers described what was said by the arbitrators in these passages as "factual findings". So far as they are factual findings, they are factual findings relevant only to a question of law, the interpretation of the reinsurance contract, and factual findings themselves affected by errors of law. Success for Gordian on the construction point will not flow merely from destructive criticisms of the arbitrators' reasoning. What was Gordian's positive case on construction? Gordian argued that the key terms of the contract for present purposes were to be found in the letter of 15 December 1998 from Gordian to Gordian's broker dealing with the "$10M XS $10M" treaty. That letter was attached to the reinsurance placing slip and, like that slip, stamped by all reinsurers by 31 December 1998. In par 4.0, the letter said: "For 1999 we seek the following". Among the matters then listed were: "multi year cover (see paragraph 6.0)" and "equivalent cover to 1998 (or better)". Gordian argued that 66 Cf Administration of Papua and New Guinea v Daera Guba (1973) 130 CLR 353 at 405, 446 and 459; [1973] HCA 59. the specification that cover was to be equivalent to 1998 or better was a stipulation that there was to be no exclusion of or limit on multi year cover, because there had been none in the expiring reinsurance contract for 1998. Gordian also argued that the reference to "multi year cover" indicates that there was to be no limitation to any particular time frame for the contracts in relation to which reinsurance was to be provided such as three years. Are those arguments invalidated by par 6.0 of the letter? It said: "As I mentioned earlier, we do not have the treaty contracts for 1998, nor on checking, do we appear to have the wordings for 1997 or 1996 and will follow up with Flemings, however, I recall that there was a limit on the treaty that it would cover original contracts issued for 12 months plus odd term but not to exceed 18 months in all. This is certainly the case pertaining to USA/Canada risks as set out in the 'PINA Special Clause.'" Gordian argued that the writer's recollection was correct for USA/Canada risks, to which the PINA clause in its 1998 form applied, but not for other risks, for in relation to them there was no limitation for 1998. Paragraph 6.0 continued: "Multi year contracts have gained popularity in recent years and we are frequently asked to write for periods of two to three years, usually as a stretched aggregate over the terms or on annual limits basis. In some cases, we are asked after the first year of a multi year contract to 'roll forward' the contract for another year so that a new (2 or 3 year) period commences. Our competitors are able to offer this and we have been offering it within our retention but need to obtain reinsurers agreement to use the treaty capacity to write multi year contracts and would appreciate the Everest's comments on this issue, including under the 'PINA Special Risks Clause.'" Gordian accepted that this language proceeded from the erroneous assumption that the 1998 treaties did not apply to multi year contracts – ie those extending for any period beyond the year of the reinsurance treaty, whether for "12 months plus odd term but not to exceed 18 months in all", or longer. But Gordian submitted nonetheless that the language was stipulating multi year cover, as distinct from multi year cover but only up to a three year limit, which the reinsurers contended for. Gordian submitted that when all four reinsurers stamped the reinsurance placing slip and also stamped the 15 December 1998 letter attached to it, they accepted that stipulation. The reinsurers did not respond to Gordian's submission. That submission is correct. It is appropriate to read cl 6.0 in that way so as to make it harmonious with cl 4.0, and that clearly refers to unconditional and unlimited multi year cover. What about a letter from one of the reinsurers to Gordian's broker on 22 December 1998? It confirms a quote and says, inter alia: "Original contracts: Up to three years is acceptable. PINA Clause to be amended." Gordian submitted that on its true construction, this statement related only to the PINA clause. That is correct. Even if that is not so, as the arbitrators found, the 22 December 1998 letter did not go to two of the reinsurers; it was, unlike the 15 December 1998 letter, not affixed to the reinsurance placing slip; and hence it is at most an item of pre-contractual negotiation not reflected in the contract itself. The reinsurers did not respond to Gordian's submission. Gordian's submission is correct. The assent by all four reinsurers to the 15 December 1998 letter was manifested in solemn formalities – their stamping of it and its attachment to the reinsurance placing slip, also stamped by them on various dates from 23 to 31 December 1998. This solemnly formalised assent demonstrates that Gordian's submissions on the construction point are correct. However, the arbitrators made a finding which, although it was stated as part of the arbitrators' reasoning quoted at some length above67, is conveniently to be dealt with now. "We are not persuaded that the FAI D&O run-off policy, which covered claims which were made and notified to Gordian within the extended period permitted by that policy of 7 years from 31 May 1999, was within its then 'established acceptance and underwriting policy in respect of' D&O policies." It is necessary to deal with this finding because, if it had been open to the arbitrators, it would have created an obstacle to Gordian's success. Indeed Gordian conceded that that finding was "utterly fatal" to it, if it were properly made. But by ground 7 of the Notice of Contention, Gordian contended that the finding had not been properly made. That was because the issue had been expressly withdrawn by the reinsurers on the first day of the arbitration. The withdrawal arose as a consequence of amending the reinsurers' cross-claim to delete an allegation that the underwriting "represented a change to the established underwriting policy of the claimant". The contention which Gordian put to this Court was also put to the Court of Appeal. It said68: 67 See above at [96]-[101]. 68 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 125 "There are powerful considerations in support of this contention: the pleading of the point appears to have been abandoned, no evidence was led by the reinsurers on the question and the hearing otherwise appears to have been so conducted." With respect, these points are sound, and Gordian's argument must be accepted. The reinsurers argued in this Court that some written submissions on both sides addressed the question, that Gordian's established acceptance and underwriting policy was part of the factual controversy, and thus that the arbitrators were entitled to make the finding of which Gordian complains. One difficulty is that the written submissions in question were lodged with the arbitrators and exchanged between the parties before the amendment to the cross-claim dropped the issue: when it was silently dropped, so were the corresponding parts of the written submissions. A further difficulty is that the arbitrators were reminded, in Gordian's closing written submissions, that the issue had been abandoned. This Court was taken to no denial by the reinsurers of that assertion. The reinsurers also argued that they had cross-examined one of Gordian's witnesses on the issue. In fact the cross-examination was on another point. Gordian's construction of the reinsurance contract is correct. No claim for rectification was made in this Court. No other issue arises. The merits of arbitration The arbitration proceedings began on 15 October 2004 when Gordian served points of claim. This appeal comes to a close seven years later. The attractions of arbitration are said to lie in speed, cheapness, expertise and secrecy. It is not intended to make any criticisms in these respects of the arbitrators, of Einstein J, or of the Court of Appeal, for on the material in the appeal books none are fairly open. But it must be said that speed and cheapness are not manifest in the process to which the parties agreed. A commercial trial judge would have ensured more speed and less expense. On the construction point it is unlikely that the arbitrators had any greater relevant expertise than a commercial trial judge. Secrecy was lost once the reinsurers exercised their right to seek leave to appeal. The proceedings reveal no other point of superiority over conventional litigation. One point of inferiority they reveal is that there have been four tiers of adjudication, not three. Comment on these melancholy facts would be superfluous. Orders It follows that the appeal and the balance of the application for special leave to appeal must be dismissed with costs. 113 KIEFEL J. These proceedings concern an Award of arbitration which determined the rights of the parties to treaties for reinsurance and the effect of s 18B(1) of the Insurance Act 1902 (NSW) upon the obligation of the appellant reinsurers under the treaties to indemnify the respondent, Gordian Runoff Limited ("Gordian"). The New South Wales Court of Appeal held that leave should not have been granted by the primary judge, under s 38(4)(b) of the Commercial Arbitration Act 1984 (NSW), to the reinsurers to bring an appeal with respect to that Award. Gordian was an underwriter of professional indemnity ("PI") insurance and directors and officers liability ("D&O") insurance. Prior to December 1998 its PI and D&O portfolio was partially reinsured under a treaty for reinsurance whereby it was agreed that risks underwritten by Gordian with respect to those classes of insurance would be the subject of excess of loss reinsurance. The reinsurers included the first and second appellants, Westport Insurance Corporation ("Westport") and Assetinsure Pty Limited ("Assetinsure"). That treaty ("the 1998 reinsurance treaty") was due to expire on 31 December 1998. Gordian, together with a Lloyd's syndicate, had previously written a D&O policy for FAI Insurance Limited ("FAI"). In the latter part of 1998 a takeover of FAI by HIH Winterthur International Holdings Limited was imminent and FAI's broker negotiated with Gordian for a run-off policy. Those negotiations culminated in an agreement, on 23 December 1998, that Gordian would indemnify FAI for claims in respect of wrongful acts occurring before the effective date, later agreed to be 31 May 1999, which were made and notified to Gordian within seven years of that date ("the FAI policy"). On 17 December 1998 Gordian's broker approached Westport for reinsurance of a part, or layer, of Gordian's PI and D&O portfolio for the 1999 calendar year ("the $10 million in excess of $10 million layer"). One of the matters discussed by the broker with Westport was the prospect of "multi year covers". In that regard a copy of Gordian's letter to the broker of 15 December 1998 was forwarded to Westport. The letter did not mention Gordian's proposal with respect to the FAI policy or its term, but it stated that Gordian had often been asked by clients to write insurance for periods of two to three years and that it wished to seek "reinsurers [sic] agreement to use the treaty capacity to write multi year contracts". Gordian asked the broker to seek comments from the lead reinsurer (who did not, however, participate in the 1999 reinsurance treaty). Westport's quotation on its proportion of the layer, of 22 December 1998, included the statement: "Original contracts: Up to three years is acceptable. PINA Clause[69] to be amended." 69 Professional Indemnity North American clause. On 23 December 1998, the day on which the agreement between Gordian and FAI was struck, a placing slip was signed and stamped by Westport, Assetinsure and the third appellant, Munich Reinsurance Company of Australasia Limited, with respect to the $10 million in excess of $10 million layer. The latter signed again on 29 December 1998. NAC Reinsurance International Limited ("NAC") signed on 31 December 1998 (NAC's reinsurance liabilities were subsequently acquired by the fourth appellant, XL Re Limited). Each of the reinsurers initialled and stamped a copy of Gordian's letter of 15 December 1998. Only one reinsurer sighted Westport's quotation of 22 December 1998, but it was conceded by all reinsurers in the later arbitration proceedings that the relevant reinsurance treaties covered "D&O policies which covered claims which were made and notified to Gordian within an extended period of three years". treaties were Westport, Assetinsure, Zurich Other reinsurance treaties were effected in 1999 with respect to the lower layers of Gordian's portfolio – the $5 million in excess of $5 million layer and the $3 million in excess of $2 million layer. The reinsurers signing placing slips for Insurance Company these Reinsurance (the reinsurance liabilities of which were acquired by the fifth appellant, Scor Switzerland Ltd) and Copenhagen Reinsurance Company Ltd. The arbitrators found that the terms applying to the treaty for the $10 million in excess of $10 million layer were not materially different from the terms of the treaties for the lower layers. In these reasons "the 1999 reinsurance treaty" refers to the treaty for the higher layer and also to the terms of the other treaties. The placing slip for the 1999 reinsurance treaty was expressed to apply to "[c]laims made on policies attaching during the period 1 January 1999 to 31 March 2000"70. The type of reinsurance was confirmed to be "[e]xcess of loss" and the "class" to be "[b]usiness underwritten by the Reinsured and classified by them as Professional Indemnity, Directors and Officers Liability Insurance". It did not contain further terms but rather the statement that "wording" was "[a]s expiring as far as applicable", a reference to the 1998 reinsurance treaty, and "amendments to be agreed by Reinsurers." The placing slip was also stamped "all terms, wordings, special acceptances [or agreements] and amendments to be agreed by [the relevant reinsurer]." All but XL Re Limited provided for a warranty by Gordian of "no more favourable terms". The 1998 reinsurance treaty was expressed to apply to claims made on policies attaching during the period 1 January 1998 to 31 December 1998. The class of business covered was business underwritten by Gordian and classified by it as PI and D&O insurance. The treaty contained one clause, the PINA clause, which excluded claims arising in the United States of America or Canada out of policies having reporting periods in excess of 36 months after the expiry of the 70 The period was later extended to 30 June 2000. policy, or which were issued for periods longer than 12 months plus "odd" time not exceeding 18 months, unless specially accepted. It did not otherwise include or exclude policies having an extended reporting period, which is to say the period within which claims were to be made or notified. No other wording of the 1999 reinsurance treaty was the subject of further agreement between the parties. On 20 January 1999 Gordian's broker sent draft wording to Gordian and Westport. Gordian advised that it was in order, but asked for confirmation that cover would extend "for policies that are issued for terms in excess of 12 months (provided of course that the original policy incepts between 01/01/99 and 31/03/00)." Westport agreed with the proposed wording, but not until shortly prior to the expiry of the 1999 reinsurance treaty. In 2001 and 2002, after Gordian was notified of circumstances which could give rise to a claim under the FAI policy and the reinsurers were so advised, further attention was directed to revised wording for the 1999 reinsurance treaty. In particular, it appears that two of the reinsurers raised the issue of an exclusion of policies issued for periods longer than three years, but the addition of such an exclusion was never agreed upon. Dispute and arbitration The reinsurers did not accept that claims made under the FAI policy were properly the subject of the 1999 reinsurance treaty. They contended that the treaty did not respond to that policy because the policy covered claims made or notified within seven years from its inception, not three. The parties submitted their dispute to arbitration in accordance with the terms of the 1999 reinsurance treaty and appointed three arbitrators. The Award of the arbitrators, expressed with respect to the $10 million in excess of $10 million layer, was that the 1999 reinsurance treaty applied to claims which were made under the FAI policy "within 3 years from the inception of that policy but no other claims". The process of reasoning by which that conclusion was reached was not one simply of the construction of the terms of the 1999 reinsurance treaty. Indeed, the arbitrators' view of the treaty terms favoured the reinsurers. It was reached by the arbitrators applying s 18B(1) of the Insurance Act to the treaty. The arbitrators' findings with respect to the indemnity provided by the 1999 reinsurance treaty may be summarised as follows. The nature of the FAI policy, as a run-off policy, did not assume importance. The issue was whether the treaty "covered claims which were made and notified to Gordian within the extended period permitted by that policy of 7 years from 31 May 1999." When the 1999 reinsurance treaty was arranged the common understanding of the parties was that the indemnity provided by the 1998 reinsurance treaty would apply, namely that it would apply to D&O policies which provided cover for a period of 12 months, plus odd time not exceeding 18 months in all. The arbitrators accepted the reinsurers' contention that this cover accorded with the general industry practice at the time for this type of insurance and that it explained Gordian's request for "multi year" reinsurance. Although disputing this, Gordian's alternative proposition, that the 1998 reinsurance treaty covered every D&O policy written by Gordian irrespective of the period of cover the policy provided, did not commend itself to the arbitrators. To these findings the arbitrators were able to add that the reinsurers accepted that they had agreed, by the 1999 reinsurance treaty, to cover D&O policies which covered claims which were made and notified to Gordian within an extended reporting period of three years, although this may not have been satisfactorily recorded. The reinsurers sought rectification of the treaties, if necessary. The conclusion expressed by the arbitrators was that the 1999 reinsurance treaty "do[es] not cover the 3-year claims under the FAI D&O run-off policy although they were made within 3 years from the inception of that policy because the policy covered claims which were made and notified to Gordian within 7 years from its inception". The arbitrators, however, went on to apply s 18B(1) to reach their ultimate conclusion, that the 1999 reinsurance treaty applied to claims made within three years of the inception of the FAI policy. Section 18B(1) provides: "Where by or under the provisions of a contract of insurance entered into, reinstated or renewed after the commencement of this section: the circumstances in which the insurer is bound to indemnify the insured are so defined as to exclude or limit the liability of the insurer to indemnify the insured on the happening of particular events or on the existence of particular circumstances, and the liability of the insurer has been so defined because the happening of those events or the existence of those circumstances was in the view of the insurer likely to increase the risk of loss occurring, the insured shall not be disentitled to be indemnified by the insurer by reason only of those provisions of the contract of insurance if, on the balance of probability, the loss in respect of which the insured seeks to be indemnified was not caused or contributed to by the happening of those events or the existence of those circumstances, unless in all the circumstances it is not reasonable for the insurer to be bound to indemnify the insured." The sub-section is not without difficulty in its application, as will be discussed later in these reasons. However, its purpose is clear enough. It was drawn from s 138 of the Consumer Credit Act 1981 (NSW). The concern of s 138, as the New South Wales Law Reform Commission observed71, was with the unfair practice of some insurers who relied upon exclusion or limitation clauses otherwise than "where the loss is caused or contributed to by the happening of the events or circumstances to which the clauses are directed." Where the event or circumstance has a "true nexus with the loss", the clauses could properly be invoked. Where it does not, it would not ordinarily be unreasonable to require the insurer to provide the indemnity. However, the Commission also recommended that a proviso be added, which allowed consideration as to whether it was not reasonable for the insurer to be bound to do so72. An example given by the New South Wales Law Reform Commission of an exclusion to which the provision was directed, was one which denied an indemnity under a motor vehicle policy where the driver was unlicensed or disqualified. A vehicle driven by such a driver may be involved in an accident in circumstances entirely due to the fault of another driver. In such a case it is unlikely that the absence of a licence could be shown to have "caused or contributed to" the loss73. It may also be observed that the sub-section is not expressed to apply to reinsurance. Its evident purpose is the protection of consumers of insurance services, whose bargaining position might not be thought to be analogous to that of insurer and reinsurer. Contracts of reinsurance are now exempt from the operation of the sub-section74. But at the time of the arbitration there was authority for the view that "insurance" in the Insurance Act included reinsurance75 and the parties conducted the arbitration on the basis that s 18B(1) 71 New South Wales Law Reform Commission, Community Law Reform Program: First Report – Insurance Contracts: Non-Disclosure and Misrepresentation, Report No 34, (1983) at 31 [4.17]. 72 New South Wales Law Reform Commission, Community Law Reform Program: First Report – Insurance Contracts: Non-Disclosure and Misrepresentation, Report No 34, (1983) at 53 [7.34]. 73 New South Wales Law Reform Commission, Community Law Reform Program: First Report – Insurance Contracts: Non-Disclosure and Misrepresentation, Report No 34, (1983) at 52 [7.33]. 74 Insurance Regulation 2009 (NSW), cl 4(b). 75 HIH Casualty & General Insurance Ltd (In Liq) v R J Wallace (2006) 68 NSWLR applied to the 1999 reinsurance treaty. For that reason the Court of Appeal did not allow the reinsurers to adopt a different course on the appeal, to deny the application of the sub-section to reinsurance contracts altogether76. That approach was clearly correct. The position adopted by the parties should continue to be maintained. But that does not deny the relevance of the operation and effect of the 1999 reinsurance treaty as a contract of reinsurance when s 18B(1) comes to be applied to it. Before the arbitrators the reinsurers contended that the concern of s 18B(1) is with exclusions or limitations upon what is otherwise provided as the scope of cover. They contended that the language of the provision implies that there be a prima facie liability to indemnify against which a disentitlement, by way of exclusion or limitation by reason of some event or circumstance, operates. In the case of the 1999 reinsurance treaty, there was no liability to indemnify in the first place and questions of exclusions or limitations upon it did not arise. The scope of the cover, the reinsurers submitted, did not include the FAI policy. "It was the wrong sort of policy." The arbitrators did not agree. They said that the reinsurers had "agreed to indemnify Gordian in respect of losses under D&O policies underwritten by Gordian" and that the "reason why the reinsurance treaties did not cover D&O policies which did not require that claims be made and notified to Gordian within 3 years from inception was that such D&O policies were excluded or because the D&O policies which were covered by the reinsurance treaties were limited." The arbitrators pointed to the wording some of the reinsurers had sought to add to the 1999 reinsurance treaty, to effect an exclusion of policies issued for periods longer than three years. Additionally, the reinsurers had sought rectification of the 1999 reinsurance treaty terms, to limit the class of business covered to underlying policies having a term not exceeding three years. The arbitrators had not considered rectification to be necessary, given the conclusion they reached as to the cover given by the 1999 reinsurance treaty. But in connection with the application of s 18B(1) the arbitrators said the "formulation [the reinsurers] initially proposed was an exclusion, the latter a limitation." The arbitrators proceeded to address the text of s 18B(1) and its requirements. In relation to the first part of par (a) of the sub-section, they said that the 1999 reinsurance treaty "do[es] not cover the 3-year claims" under the FAI policy, because the treaty was limited to policies where claims must be made or notified within three, not seven, years. They turned to consider whether that exclusion or limitation was based "on the existence of particular circumstances" and determined that the "particular circumstance" must be that the FAI policy 76 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 116 allowed for claims to be made more than three years after the inception of that policy. The arbitrators then identified the "loss in respect of which [Gordian] seeks to be indemnified" as "its liability on the 3-year claims" and concluded that it was not caused or contributed to by that circumstance "because the 3-year claims were made and notified to Gordian within 3 years of the inception of the FAI D&O run-off policy." On this approach s 18B(1) operated upon the treaty for reinsurance. The only matter remaining for the arbitrators' consideration was the proviso expressed in s 18B(1), to the obligation cast by the sub-section upon an insurer to provide indemnity despite it being excluded or limited, namely "unless in all the circumstances it is not reasonable for the insurer to be bound to indemnify the insured." The arbitrators had expressed the view, earlier in their reasons, that "we are comfortably satisfied that it would be reasonable within the meaning of s18B(1), and entirely consistent with 'considerations of general justice and fairness' within the meaning of the reinsurance treaties, for the reinsurance treaties to apply in relation to the 3-year claims." At the conclusion of their reasons they explained that they had construed s 18B(1) consistently with its remedial character in reaching their conclusion and that "[i]f at large, 'considerations of general justice and fairness' would produce the same result." The considerations mentioned by the arbitrators are contained in s 22(2) of the Commercial Arbitration Act 1984 (NSW)77, which provides that where the parties to an arbitration agreement agree, in writing, the arbitrator "may determine any question that arises for determination in the course of proceedings under the agreement by reference to considerations of general justice and fairness." The Supreme Court appeals Section 38(2) of the Commercial Arbitration Act provides that, subject to sub-s (4), an appeal shall lie to the Supreme Court of New South Wales "on any question of law arising out of an award." Sub-section (3) provides that on the determination of such an appeal the Supreme Court may confirm, vary or set aside the award or remit the award together with the Supreme Court's opinion on the question of law. Sub-section (4) requires that unless all other parties to the arbitration agreement consent to an appeal being brought, an appeal under sub-s (2) may only be brought with the leave of the Supreme Court. The grant of leave is conditioned by sub-s (5), which provides: "The Supreme Court shall not grant leave under subsection (4)(b) unless it considers that: 77 This Act has been repealed by the Commercial Arbitration Act 2010 (NSW), s 42. having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more parties to the arbitration agreement, and there is: a manifest error of law on the face of the award, or strong evidence that the arbitrator or umpire made an error of law and that the determination of the question may add, or may be likely to add, substantially to the certainty of commercial law." In the Supreme Court, the primary judge (Einstein J) determined both the question of leave and the substantive appeal at the same time, an approach which was considered by the Court of Appeal to be incorrect78. The error of law identified by Einstein J was the failure by the arbitrators to recognise that the agreement by the reinsurers, to extend cover under the 1999 reinsurance treaty to include Gordian's D&O policies issued for up to three years, was not a limitation or exclusion in the sense contemplated by s 18B(1)79. His Honour granted leave, allowed the appeal, set aside the Award and ordered in lieu that Gordian's claim be dismissed, and made orders for costs. The Court of Appeal allowed Gordian's appeal from those orders and did so by reference to the requirements of s 18B(1) of the Insurance Act and s 38(5)(b) of the Commercial Arbitration Act. Allsop P, with whom the other members of the Court (Spigelman CJ and Macfarlan JA) agreed, did not revisit the arbitrators' findings on the construction of the 1999 reinsurance treaty. His Honour held that leave should not have been given by the primary judge on the ground that there was an error of law on the face of the Award, concerning the application of s 18B(1), which was manifest within the meaning of s 38(5)(b)(i). His Honour was assisted to this conclusion by a concession made by the reinsurers on the appeal80. His Honour further held that there was not strong evidence of error as required by s 38(5)(b)(ii)81. 78 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 95 79 Westport Insurance Corporation v Gordian Runoff Ltd (2009) 15 ANZ Insurance Cases ¶61-798 at 77,418. 80 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 95 81 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 106 Two matters not dealt with by the primary judge, but which were raised by the reinsurers on the appeal before him, were considered by Allsop P. The first related to the requirement in s 18B(1) that the loss in respect of which indemnity was sought was not caused or contributed to by the circumstance giving rise to the exclusion or limitation; the second related to the sufficiency of the reasons given with respect to the proviso to the sub-section. Allsop P considered that there may have been an error in the reasoning of the arbitrators on the firstmentioned point, in the way in which they dealt with the loss suffered by Gordian82. This assumes some importance in these proceedings. However, his Honour did not consider that it qualified as an error for the purpose of s 38(5)(b)(i) or (ii) of the Commercial Arbitration Act. The question of causation of loss was not a question of law, in his Honour's view83. If there was an error of law, his Honour considered that it was neither manifest nor strongly arguable as such84. The arbitrators' reasoning, whilst not following a conventional approach, was nevertheless defensible85. On the second question, the reinsurers had argued that the reasons given by the arbitrators were inadequate for they had not dealt with the inquiry in the proviso, and nor had they explained why it was reasonable in all the circumstances to hold the reinsurers bound to indemnify Gordian. However, Allsop P considered that the proviso involved an "ultimately evaluative task after all relevant facts had been found", and that no further explanation was required86. That conclusion was reached by his Honour after consideration87 of cases and materials concerned with the provision of reasons by arbitrators and, in 82 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 106- 83 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 107 84 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 107 85 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 107 86 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 109 87 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 109- particular, what had been said in that regard in Oil Basins Ltd v BHP Billiton Ltd88 and Bremer Handelsgesellschaft mbH v Westzucker GmbH (No 2)89. The issues in these proceedings Section 29(1) of the Commercial Arbitration Act requires that, unless otherwise agreed in writing by the parties to the arbitration, an arbitrator make an award in writing, sign it and include in the award "a statement of the reasons for making the award." The reinsurers have been granted special leave to appeal to this Court concerning the sufficiency of the arbitrators' reasons as to the proviso in s 18B(1). The reinsurers also seek special leave to appeal concerning the question whether the arbitrators were wrong to conclude that s 18B(1) applied given (i) the terms of the 1999 reinsurance treaty and (ii) the requirements of causation in s 18B(1), namely whether the loss in respect of which indemnity is sought was caused by the event or circumstance in which the liability to indemnify was limited or excluded (grounds 5 and 6). If this leave were granted, Gordian would contend that the arbitrators should not have found that the 1999 reinsurance treaty, in its own terms, operated only to give cover to policies having a three year limit. Logically the starting point is the construction of the treaty. It is anterior, and essential, to any consideration of s 18B(1). The second question is whether s 18B(1) applies. The answer to these questions may determine whether that as to the sufficiency of reasons concerning the proviso is reached. The 1999 reinsurance treaty – its operation Gordian no longer seeks to challenge the Award on the basis of an error concerning the arbitrators' understanding of the general industry practice of providing cover for a period of 12 months for this type of insurance. The concession is well made. The error to which Gordian points concerns what was actually agreed between the parties. But this may not involve a question of law. Gordian contends that its letter of 15 December 1998 to its broker requested multi-year cover and this was understood and accepted by the reinsurers. This follows, it is put, because the letter was attached to the placing slip. The letter was also initialled and stamped by each reinsurer. Thus, on Gordian's argument, what was agreed was not just multi-year cover to a 89 [1981] 2 Lloyd's Rep 130. three year limit, but extended to policies written by Gordian for any number of years beyond one year. In the letter of 15 December 1998 it was said that the writer did not have a copy of the 1998 treaty to hand, but recalled that: "there was a limit on the treaty that it would cover original contracts issued for 12 months plus odd term [sic] but not to exceed 18 months in all. This is certainly the case pertaining to USA/Canada risks as set out in the 'PINA Special Clause.'" The letter clearly enough concerned Gordian's wish to write D&O policies of up to two to three years, for it said: "Multi year contracts have gained popularity in recent years and we are frequently asked to write for periods of two to three years, usually as a stretched aggregate over the terms or on annual limits basis. In some cases, we are asked after the first year of a multi year contract to 'roll forward' the contract for another year so that a new (2 or 3 year) period commences." And it said that Gordian's competitors were able to offer such policies and that Gordian had been offering such policies "within [its] retention". It was in this connection that Gordian said that it needed to "obtain reinsurers [sic] agreement to use the treaty capacity to write multi year contracts and would appreciate [the then lead reinsurer's] comments on this issue, including under the 'PINA Special Risks Clause.'" The letter does not suggest, in terms, that Gordian was seeking reinsurance on policies it wrote which had a reporting period of longer than two to three years. Policies having longer terms may well have been relevant to the reinsurer's premiums and would have been likely therefore to have generated correspondence on that topic. Westport's quotation one week later stated that original policies "[u]p to three years is acceptable. PINA Clause to be amended." Gordian's submission that the maximum of three years was referable only to the PINA clause is not supported by the construction of the statement nor by the terms of the letter of 15 December 1998 to which the quotation was responsive. Clearly enough what was sought was to amend both the terms of the policies Gordian might write and the PINA clause. It cannot be said that the arbitrators were in error in the conclusion they reached. The application of s 18B(1) Because the construction and application of s 18B(1) are attended with some difficulty, it is necessary to have regard not only to the language of the sub-section but to its context, general purpose and policy90. "Context" here is used in its widest sense, to include the mischief to which the provision is directed91. As Dixon CJ observed in Commissioner for Railways (NSW) v Agalianos92, matters such as general purpose and policy, and the consistency and fairness of operation of a provision, are surer guides to its meaning than the logic with which it is constructed. These observations are apposite to any formulaic application of the words of s 18B(1), without regard to its intended purpose. Section 18B(1) is directed to the indemnity provided by an insurer and to the circumstances in which any exclusion or limitation affects that indemnity. Its language does not suggest any concern with the means by which the exclusion or limitation is achieved. It extends to any means by which the indemnity is "so defined". This presents something of a difficulty for the reinsurers' argument that the sub-section requires that there be a liability to indemnify in the first place, which is then made the subject of an exclusion or limitation. Within the terms of the sub-section, the exclusion or limitation may be provided within the definition of the cover, or indemnity. As Allsop P observed, these are largely matters of drafting. If a circumstance is perceived to increase a risk, it can be dealt with by a wide insuring clause combined with a limitation or exclusion clause or the insuring clause can itself be framed to exclude the risk93. The reinsurers' further contention, that the sub-section is intended to regulate provisions that operate by reason of events occurring after the entry into a binding contract of indemnity, also encounters difficulties. It relies upon the exclusion or limitation being expressed as dependent upon events or circumstances happening in the future. But an exclusion or limitation may itself operate differentially. A limitation may operate after an insurer's obligation to 90 Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69]; [1998] HCA 28. 91 CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408; [1997] HCA 2. 92 (1955) 92 CLR 390 at 397; [1955] HCA 27 (referred to with approval in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 93 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 104 [163]; see also Clarke, The Law of Insurance Contracts, 6th ed (2009) at 584 indemnify has arisen; an exclusion operating by way of exception may prevent the obligation to indemnify from arising at all94. More important, to the operation of s 18B(1), is the event or circumstance which gives rise to the exclusion or limitation, and the relationship between that event or circumstance and the loss which would otherwise be the subject of the indemnity. The purpose of the sub-section is to prevent unfairness to an insured by the denial by an insurer of an indemnity, where there is no real connection between the loss which would otherwise be the subject of the indemnity and the circumstance giving rise to the exclusion or limitation. It achieves that object in those circumstances by negating the exclusion or limitation so that the indemnity operates. The indemnity provided by the 1999 reinsurance treaty was with respect to policies yet to be written by Gordian, as is often the case with modern contracts for reinsurance95. The treaty could be described as "an antecedent contract for the reinsurance of a defined portion of risks of a specified kind to be undertaken in the future by the reassured."96 The treaty provided indemnity to Gordian, but only with respect to D&O policies which conformed to the requirement that claims made under them were to be made and notified to Gordian within three years of their inception. Conformable policies would automatically be ceded to the treaty. In the language of the placing slip, they would attach if made during the period of the reinsurance. The only circumstance that could qualify as a limitation or exclusion on that indemnity was the existence of a D&O policy written by Gordian which did not conform to the requirement of a reporting period of three years. Such was the case with the FAI policy. It could be said of the 1999 reinsurance treaty that it had the effect of excluding such a policy from the indemnity it offered or that its indemnity was limited, with the same result. Thus the 1999 reinsurance treaty defined the obligation to indemnify in the terms of s 18B(1)(a). The purpose of s 18B(1) is to assess the relationship, or causal connection, between the circumstance so identified and the loss in respect of which indemnity is sought. Gordian sought indemnity under the 1999 reinsurance 94 Wallaby Grip Ltd v QBE Insurance (Australia) Ltd (2010) 240 CLR 444 at 459 [35]; [2010] HCA 9. 95 Colinvaux's Law of Insurance, 9th ed (2010) at 739 [17-005]; Edelman et al, The Law of Reinsurance, (2005) at 6 [1.15]. 96 Tariff Reinsurances Ltd v Commissioner of Taxes (Vict) (1938) 59 CLR 194 at 215; [1938] HCA 21. treaty with respect to the losses arising under the FAI policy. But that policy is also the source of the circumstance which gives rise to the exclusion or limitation upon the indemnity. It follows, on this analysis, that the connection of which the sub-section speaks is present and the sub-section does not apply. The reinsurers cannot be required to indemnify Gordian. This was not the approach adopted by the arbitrators. The arbitrators did identify the relevant circumstance as the existence of a D&O policy with a seven year reporting period. But when they came to discuss the "loss" suffered by Gordian, they directed their attention to "its liability on the 3-year claims", thereby reaching the conclusion that there was no causal connection between that loss and the circumstance giving rise to the exclusion or limitation. There are a number of problems with this approach. It is elementary that a reinsurer is not liable unless the loss falls within the cover of the underlying contract of insurance and within the cover created by the reinsurance97. It is the FAI policy which is the source of Gordian's loss and therefore the basis for its claim to indemnity under the 1999 reinsurance treaty. But, without more, this does not make claims made under the policy the subject of and within the indemnity provided by the treaty. Gordian's loss for the purpose of the treaty is not to be equated with its liability under the FAI policy. As Dixon J explained in Australian Provincial Assurance Association Ltd v Producers and Citizens Co-operative Assurance Co of Australia Ltd98, the liability of a reinsurer does not follow from the mere existence of a primary liability in the reinsured. "It arises from the provisions of the contract of reinsurance, and depends entirely upon the conditions which that contract contains. In this sense the liability is independent." In identifying Gordian's loss as its liability with respect to claims made within three years, the arbitrators have effectively rewritten the 1999 reinsurance treaty and the indemnity it provided, so as to extend the risk which the reinsurers assumed. Section 18B(1) does not warrant such an approach. Its remedy does operate upon the contractual rights of the parties to a contract of reinsurance. It is limited to removing the effect of an exclusion or limitation upon an indemnity. That indemnity and the exclusion or limitation are to be found in the contract of insurance. The remedy is not to be provided upon an initial readjustment of the 97 Hill v Mercantile and General Reinsurance Co Plc [1996] 1 WLR 1239 at 1251; [1996] 3 All ER 865 at 878; Wasa International Insurance Co Ltd v Lexington Insurance Co [2010] 1 AC 180 at 199 [35] per Lord Mance, 209-210 [59] per Lord Collins of Mapesbury. 98 (1932) 48 CLR 341 at 363; [1932] HCA 34. terms of the parties' agreement and in particular of the indemnity provided for loss. Allsop P recognised something of an error in the arbitrators' approach, but did not consider that it was manifest or otherwise came within s 38(5) of the Commercial Arbitration Act such that it might warrant consideration of whether leave to appeal should be granted. Whether leave should have been granted The question respecting the application of s 18B(1) concerned its construction and that of the 1999 reinsurance treaty. It therefore concerned questions of law, regardless of whether the sub-section involved an inquiry as to the circumstance giving rise to a limitation or exclusion upon the indemnity under the treaty and the connection of that circumstance to the indemnity for loss. I agree with French CJ, Gummow, Crennan and Bell JJ99 that manifest error of law requires that the error appear on the face of the Award, which includes the reasons for it, and that the error be apparent to the understanding of the reader. Such is the case here. It does not require that the error be of a particular quality or that errors involving complex questions be disqualified100. The reinsurers' concession in the Court of Appeal, that the error could not be said to be manifest, is likely to have been based upon the decision in Natoli v Walker101. But for that decision the concession was certainly not called for. The error in the reasons of the Award concerning the application of s 18B(1) to the 1999 reinsurance treaty qualified as an error within the meaning of s 38(5)(b)(i). The identification of manifest error on the face of the Award does not conclude the question of whether leave should be given under s 38(5). The statutory scheme is that error of the kind there referred to is a necessary, but not itself sufficient, condition for the grant of leave. It remains in the discretion of the court whether leave should be granted102. The other question necessary to be addressed under s 38(5)(a), namely whether the rights of the parties to the arbitration agreement are substantially affected by the determination of the 100 At [45] citing Natoli v Walker (1994) 217 ALR 201 at 215-217, 223. 101 (1994) 217 ALR 201. 102 Promenade Investments Pty Ltd v New South Wales (1992) 26 NSWLR 203 at 225- 226 per Sheller JA. question of law, and the question of leave generally, fall to be determined by reference to all the circumstances pertaining to the case. The primary judge's approach to the question of leave elided the question of leave with the ultimate question under s 38(2) and was therefore incorrect. Nevertheless, there was error manifest on the face of the Award, on a question of law which was determinative of the reinsurers' obligation to indemnify under the 1999 reinsurance treaty and contrary to the terms of the treaty. Thus the decision to grant leave was correct, as was that which followed, that the Award should be set aside for error of law. The special leave ground Section 18B(1) did not apply to the 1999 reinsurance treaty. No question as to the application of the proviso to the sub-section arises. It is therefore strictly unnecessary to consider whether the arbitrators provided adequate reasons on that question. The rights of the parties fell to be determined by reference to the 1999 reinsurance treaty. However, special leave was granted on this ground and argument advanced. It is therefore necessary to say something about the requirement of reasons. The Commercial Arbitration Act does not bind the parties to an arbitration to the outcome of the arbitration they have agreed will take place. It allows for an appeal, albeit one limited to a question of law and one subject to conditions for the grant of leave to appeal. The Act therefore comprehends something of a public, as well as a private, element in the making of an award of arbitration. It is in this context that an arbitrator's "reasons for making the award" are required, by s 29(1)(c). There is nothing in the Commercial Arbitration Act, specifically in the language of s 29(1)(c), or in the nature of arbitrations subject to the Act, which suggests as necessary that those reasons be to a judicial standard. But the requirement in s 29(1)(c) cannot be devoid of content, particularly given the context for it. Allsop P considered103, correctly in my view, that a statement in Bremer104 is apt to apply to s 29(1)(c). There Donaldson LJ said that a "reasoned 103 Gordian Runoff Ltd v Westport Insurance Corporation (2010) 267 ALR 74 at 114 104 [1981] 2 Lloyd's Rep 130. award"105 requires arbitrators to "explain succinctly why, in the light of what happened, they have reached their decision and what that decision is."106 I agree with French CJ, Gummow, Crennan and Bell JJ that what is required by way of reasons in a given case will depend upon the circumstances of that case107. In this case the arbitrators could not apply s 18B(1) without determining whether it was reasonable to hold the reinsurers bound to indemnify Gordian in all the circumstances. More was therefore required than a statement of conclusion. It was necessary that they say why it was reasonable to do so, in order to fulfil the requirement of s 29(1)(c). The failure to do so constituted an error of law. Conclusion and orders Special leave should be granted with respect to grounds 5 and 6, the appeal allowed with costs and the orders of the primary judge restored. In these two latter respects I agree with the orders proposed by French CJ, Gummow, 105 See Arbitration Act 1979 (UK), s 1(5). 106 Bremer Handelsgesellschaft mbH v Westzucker GmbH (No 2) [1981] 2 Lloyd's Rep
HIGH COURT OF AUSTRALIA McHUGH ACJ, VICTIMS COMPENSATION FUND CORPORATION APPELLANT AND SCOTT BROWN & ORS RESPONDENTS Victims Compensation Fund Corporation v Brown [2003] HCA 54 30 September 2003 ORDER Appeal allowed. Set aside paragraphs 1 and 2 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 28 May 2002 and, in lieu thereof, order that: the record of the proceedings in the District Court be removed into the Court of Appeal; and the orders of Phelan DCJ made on 19 March 2001 in proceedings Nos 317/00 and 318/00 be quashed and, in lieu thereof, the determination of the Victims Compensation Tribunal made on 16 May 2000 be affirmed. On appeal from Supreme Court of New South Wales Representation: M G Sexton SC, Solicitor-General for the State of New South Wales with C L Lonergan for the appellant (instructed by Crown Solicitor for New South Wales) A J Bellanto QC with G C Halsall for the first and second respondents (instructed by Hilton King Solicitors) No appearance for the third respondent Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Victims Compensation Fund Corporation v Brown Criminal law – Victims compensation – Shock – When compensable – Eligibility for compensation only if victim suffers "symptoms and disability" – Whether "and" conjunctive or disjunctive. Statutes – Interpretation – "Symptoms and disability" – Whether "and" conjunctive or disjunctive. Words and phrases – "and". Victims Support and Rehabilitation Act 1996 (NSW), Sched 1, cl 5(a). McHUGH ACJ. I agree that the appeal should be allowed for the reasons given by Heydon J. I also agree with the orders that his Honour proposes. GUMMOW J. I agree with the reasons of Heydon J and the orders his Honour proposes. KIRBY J. I agree in the orders proposed by Heydon J and with his reasons. Kirby Hayne HAYNE J. I agree with Heydon J. The background On 15 March 1998 the first respondent answered a knock at his front door. He was violently attacked and during a lengthy struggle he was punched, kicked and stabbed in the stomach area with a broken bottle. The second respondent witnessed the attack. The assailant was later convicted of malicious wounding. The first and second respondents claimed compensation pursuant to legislation now known as the Victims Support and Rehabilitation Act 1996 (NSW) ("the Act")1. The first respondent claimed as a primary victim pursuant to s 7(1) of the Act2. He claimed compensation not only for his physical injuries but for "shock". The second respondent claimed as a secondary victim under s 8(1) of the Act3. She claimed only for "shock". Section 6 provided that primary and secondary victims of an act of violence were eligible for "statutory compensation". One of the forms of "statutory compensation" for which both primary and secondary victims of an act of violence were eligible was "compensation for compensable injuries received by the victim"4. "Compensable injuries" were specified in considerable detail in a Table set out in Sched 15. 1 At the time they made their claim the Act was known as the Victims Compensation Act 1996 (NSW). 2 Section 7(1) provided: "A primary victim of an act of violence is a person who receives a compensable injury, or dies, as a direct result of that act." 3 Section 8(1) provided: "A secondary victim of an act of violence is a person who receives a compensable injury as a direct result of witnessing the act of violence that resulted in the compensable injury to, or death of, the primary victim of that act." 4 See s 14(1) of the Act in relation to primary victims and s 15 in relation to secondary victims. 5 Section 10 provided: "(1) The schedule of compensable injuries is set out in Schedule 1. (2) The schedule specifies those injuries that are compensable injuries for the purposes of this Act. (Footnote continues on next page) That Table identified a standard amount or a range of amounts payable for various classes of compensable injury. Clause 5 of Sched 1 provided: "The following applies to the compensable injury of shock: Compensation is payable only if the symptoms and disability persist for more than 6 weeks. The injury comprises conditions attributed to post traumatic stress disorder, depression and similar conditions. The psychological symptoms include anxiety, tension, insomnia, irritability, loss of confidence, agoraphobia and pre-occupation with thoughts of self-harm or guilt. The physical symptoms include alopecia, asthma, eczema, enuresis and psoriasis. Relevant disabilities include impaired work or school or other educational performance, significant adverse effects on social relationships and sexual dysfunction."6 (3) The schedule specifies, as the standard amount of compensation for a compensable injury, a specified amount or an amount within a range of specified amounts." Section 17 provided: "(1) Compensation for compensable injuries is payable in accordance with the schedule of compensable injuries. (2) Unless the amount of compensation is required or authorised to be reduced by this Act, the amount of compensation payable is the standard amount calculated in accordance with the schedule." Schedule 1, cl 1 provided: "The injuries specified in column 1 of the table to this Schedule are compensable injuries for the purposes of this Act." 6 This was the applicable provision, since though cl 5 of Sched 1 was omitted by the Victims Compensation Amendment Act 1998 (NSW), s 3, Sched 1, cl 19, which came into force on 7 April 1999, by reason of Sched 1, cl 26, which inserted Sched 3, Pt 2, cl 12 into the Act, cl 5 continued to have effect in the case of any person who applied for statutory compensation for the compensable injury of shock (Footnote continues on next page) The first and second respondents each had "symptoms" of shock which persisted for six weeks, but neither had a "disability". Their entitlement to claim for shock thus rested on the answer to a single question. In cl 5(a), did "and" mean "and" or "or"? The question is posed for this Court in an appeal by the Victims Compensation Fund Corporation ("the appellant") against orders of the New South Wales Court of Appeal7 (Mason P and McClellan J; Spigelman CJ dissenting). The jurisdiction of the Court of Appeal was that conferred by the Supreme Court Act 1970 (NSW)8 to remove and quash for error of law determinations made by the District Court. The view that "and" meant "and" was taken by a compensation assessor who declined to award the first and second respondents compensation for shock, apparently by the Victims Compensation Tribunal ("the Tribunal") which dismissed an appeal from the assessor and by Spigelman CJ (dissenting from the orders of the Court of Appeal under challenge in this appeal)9. The view that "and" meant "or" was taken by Phelan DCJ (who allowed appeals against the Tribunal's order) and by a majority of the Court of Appeal, Mason P and McClellan J, who in large measure dismissed a summons by the appellant seeking review of Phelan DCJ's orders10. It is, of course, common for seemingly small points of construction to generate such sharp and evenly held differences of opinion in this manner. Though cl 5(a) of Sched 1 has been repealed and replaced, there are, according to the appellant, many claims turning on the correctness of the answer to the above question. The conjunctive meaning is preferable Correctness of the dissenting view. The question is a narrow one and it is possible to answer it briefly. It could be answered very briefly, merely by stating that the answer propounded by Spigelman CJ was correct for the reasons he before that date. The first and second respondents so applied on 5 May 1998 and those applications were received on 13 May 1998. 7 Victims Compensation Fund v Brown (2002) 54 NSWLR 668. 8 Sections 48(1)(iv), 48(2)(d), 69(3), 69(4). 9 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 673-674 [26]. 10 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 682 [73] and 688- advanced11. In deference to the extremely careful judgments of the majority in the Court of Appeal, however, a longer answer is called for. In the expression "symptoms and disability" the word "and" should be construed conjunctively for the following reasons. Ordinary meaning. The ordinary meaning of "and" is conjunctive. On grounds given below, there is no occasion to depart from the ordinary meaning here. Textual aspects of the rest of the Act. There is no convincing textual reason emerging from the rest of the Act for departing from the ordinary meaning. The entry in the Table in Sched 1 relating to the relevant injury was: "Shock Lasting 6 to 13 weeks Lasting 14 to 28 weeks Lasting over 28 weeks (but not permanent) Permanent symptoms and disability It is true that in the last line the use of the word "and" is capable of founding an argument that in the first three lines symptoms without disability, or vice versa, might suffice. That shows only that the drafting has not perhaps been uniform or flawless throughout. But to interpret "and" as having a conjunctive meaning in that context is not inconsistent with the same reading in cl 5(a); the word "and" in the last line does serve to emphasise the need, in the case of permanent shock, for concurrence of both symptoms and disability. And, on the argument advanced for the first and second respondents, it would be necessary to depart from the normal meaning of "and" by reading "and" as "or" at that point as well as in cl 5(a). Further, there are strong indications that the legislation employs the word "or" when it is desired to convey a disjunctive meaning. One example is cl 5(e) of Sched 1, set out above. Another is cl 8 of Sched 1 which provided: "An injury not specifically mentioned in Column 1 of the table to this Schedule is a compensable injury if, in the opinion of the Tribunal or compensation assessor dealing with the application for statutory compensation: 11 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 672-674 [10]-[27]. the injury is similar to an injury specifically mentioned in the table, and the injury has caused symptoms or disability lasting for at least 6 weeks. The standard amount of compensation for the injury is the standard amount for that similar injury." It may be inferred that when the legislature uses "and" it wishes to convey a conjunctive meaning. After analysing the lengthy Table in Sched 1, Spigelman CJ pointed out12: "Every reference to an injury in the Table is capable of being characterised as a reference to either a physical symptom alone or a physical symptom together with a disability. There is no reference in the Table to recovery for disability alone. There is no reference in the schedule to recovery for either symptoms or disabilities. All of the references I have set out above require both a symptom and a disability wherever there is any reference to disability. I see no difficulty in this context, in allowing the word 'and' in cl 5(a) to mean what it says. The distinction between these two kinds of line items, explains the use of the word 'or' in cl 8(b). That section, quoted above, applies only to an injury that is 'similar to an injury specifically mentioned in the table'. There are injuries in which the symptoms for an injury, to which the injury under consideration must be 'similar', are stated unadorned by any reference to disability. In other cases, both symptoms and disability appear in the relevant line item to which the injury under consideration must be 'similar'. There will, accordingly, be cases in which there need only be 'symptoms' for the purpose of the relevant analogy. There are other cases in which there has to be both a symptom and also a disability. The use of the word 'or' in cl 8(b) is a recognition that there are cases in which no disability is required at all. It is an inelegant shorthand for the phrase 'and if required at all'." That reasoning is sound. Background to the legislation. There is no reason to be found in the background to the Act or in the Second Reading Speech for departing from the ordinary meaning of the word "and" in cl 5(a). 12 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 673-674 [26]-[27] (original emphasis). The relevant statute immediately preceding the Act was the Victims Compensation Act 1987 (NSW) ("the 1987 Act"). It was modelled on the Criminal Injuries Compensation Act 1972 (Vic). Before the enactment of the 1987 Act there had been limited power since 1900, which widened by degrees over time, to compensate the victims of crime. The Crimes Act 1900 (NSW), s 437, as enacted in 1900, provided: "Where a person is convicted of any felony the Court in which he was tried, or any Judge thereof, may, on such conviction or at any time thereafter, direct that a sum not exceeding five hundred pounds be paid out of the property of the offender to any aggrieved person, by way of compensation for injury, or loss, sustained through, or by reason of, such felony." Section 437 was amended several times between its enactment and its ultimate repeal in 1987. Among the more important amendments are these. In 1924, it was extended to misdemeanours13. In 1951, the maximum amount of compensation payable was increased from £500 to £1,00014. It was increased again in 1974 to $4,00015. It was further increased in 1979 to $10,00016. Section 8(a) of the Criminal Injuries Compensation Act 1967 (NSW) ("the 1967 Act") inserted the following new sub-sections at the end of s 437: "(2) A direction given under subsection one of this section shall specify the sum, if any, to be paid by way of compensation for injury and the sum, if any, to be paid by way of compensation for loss. In determining whether or not to give a direction pursuant to subsection one of this section, the Court or Judge shall have regard to any behaviour of the aggrieved person which directly or indirectly contributed to the injury or loss sustained by him, and to such other circumstances as it or he considers relevant (including whether the aggrieved person is or was a relative of the convicted person or was, at the time of the commission of the felony or misdemeanour, living with the convicted person as his wife or her 13 Crimes (Amendment) Act 1924 (NSW), s 21(b). 14 Motor Traffic (Amendment) Act 1951 (NSW), s 4(a). 15 Crimes and Other Acts (Amendment) Act 1974 (NSW), s 9(c)(i). 16 Crimes (Compensation) Amendment Act 1979 (NSW), Sched 1, cl (1)(a). husband or as a member of the convicted person's household) and shall also have regard to the provisions of the Criminal Injuries Compensation Act, 1967. In this section – 'Injury' means bodily harm and includes pregnancy, mental shock and nervous shock. 'Loss' does not include injury." The 1967 Act made two other important alterations. First, s 3 provided that if a direction is made under s 437(1) for payment of "a sum in excess of one hundred dollars to be paid by way of compensation for injury", "the aggrieved person in whose favour the direction has been given may make application to the Under Secretary [of the Department of the Attorney-General and of Justice] for payment to him from the Consolidated Revenue Fund of the sum so directed to be paid". Secondly, s 4 provided: "(1) On the acquittal of, or dismissal of an information against, a person accused of any felony, misdemeanour or other offence, the Court or Judge before whom that person was tried may, on application by a person aggrieved by reason of the commission of the offence, grant a certificate stating the sum which they or he would have directed to be paid to the aggrieved person by way of compensation for injury had the accused person been convicted of the felony, misdemeanour or other offence and had the application been an application made by the aggrieved person under ... section four hundred and thirty-seven ... of the Crimes Act 1900 ... for the payment of that compensation. (2) A certificate shall not be granted under subsection one of this section where the sum referred to in that subsection amounts to one hundred dollars or less. (3) An aggrieved person to whom a certificate under subsection one of this section has been granted may make application to the Under Secretary [of the Department of the Attorney-General and of Justice] for payment to him from the Consolidated Revenue Fund of the sum specified in the certificate." In 1984, s 437 was replaced by a new s 437 which set out the compensation regime in substantially greater detail (Crimes (Compensation) Amendment Act 1984 (NSW), Sched 1 cl 1). That tendency to ever more refinement is also illustrated both by the 1987 Act, and the Act itself17. The 1987 Act established a Victims Compensation Tribunal. The 1987 Act made four classes of victim eligible to receive "compensation for injury" and other forms of compensation (ss 11-14). "Compensation for injury" in relation to primary or secondary victims meant, inter alia, compensation for pain and suffering and compensation for loss of enjoyment of life (s 10(1)). The 1987 Act, s 19(1)(a), gave that Tribunal power to make "an award of compensation" at large, subject to a threshold limit of $200 (s 19(2)(b)) and a maximum of $40,000 by way of compensation for injury, $50,000 by way of compensation for expenses and $1,000 by way of compensation for loss of personal effects, with the maximum total amount not to exceed $50,000 (s 16). Payments were financed largely from consolidated revenue. The 1987 Act did not adopt the technique of setting out a long list of dollar figures or ranges of dollar figures in relation to specifically described injuries in the manner appearing in the Table contained in Sched 1 of the Act. In that respect the 1996 Act is quite different. There was thus no equivalent to cl 5 in the 1987 Act. According to the Second Reading Speech of the Minister responsible for the Bill which became the Act18: "[T]he Auditor-General in recent annual reports to Parliament raised serious concerns about the financial viability of the current compensation scheme. The Auditor-General considers that the scheme is presently compensating only a small proportion of eligible victims, and estimates that, given the potential for substantial increases in the number of claims, compensation totalling $2.5 billion could potentially be paid out in victims compensation over the next five years. In the Auditor-General's 1994 report to Parliament the Auditor-General concluded that reform of the current victims compensation scheme needed to be urgently considered if the compensation scheme was to remain financially viable and future compensation payments not cause an unaffordable drain on public funds." In March 1993, Mr C Brahe, Deputy Chief Magistrate, published The Review of the Victims Compensation Act ("the Brahe Review"). The principal relevant recommendation of the Brahe Review was that common law principles 17 For an examination of the earlier legislation in New South Wales and other States, see Westling, "Some Aspects of the Judicial Determination of Compensation Payable to Victims of Crime", (1974) 48 Australian Law Journal 428. 18 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 15 May 1996 at 974. of assessing compensation should not apply. Rather there should be a scale, by which the victims of minor injuries would receive $1,000-$5,000, the victims of moderate injuries $5,001-$15,000 and the victims of major injuries $15,001- $50,00019. The Brahe Review said nothing about shock. The Table in Sched 1 of the Act as enacted adopted a technique employing much greater detail than the Brahe Review had contemplated. The 1996 legislation. In 1995 an election led to a change of government in the State. According to the Second Reading Speech of the Minister responsible for the Bill which became the Act, the government had three matters in mind. One related to the doubts raised in the reports of the Auditor-General in relation to the financial viability of the scheme in force under the 1987 Act. The second was the Brahe Review, which had made many recommendations for changes in the law. The third was an election promise20: "The Government, in its election policy platform, proposed an overhaul of the victims compensation system to ensure that the genuine needs of victims are met at reasonable cost to the community. It also promised to ensure that offenders pay restitution and to speed the payment of compensation to victims. The Government's election policy platform also indicated its intention to abolish compensation for injuries sustained by a criminal during a crime, to legislate to prevent double dipping in compensation matters, to allow a victim to choose to claim compensation either under the statutory scheme or as part of the sentencing process, to formulate a schedule to set maximum amounts payable for certain injuries and to enable restitution payments to be deducted from an offender's wages." This "schedule to set maximum amounts payable for certain injuries" was explained in more detail a little later21: law principles of compensation should not apply "Both the Brahe review and the Auditor-General have recommended that common determination of awards under the statutory victims compensation scheme. Experience with the present scheme illustrates that common law principles for assessing compensation cannot be properly and evenly 19 Brahe, The Review of the Victims Compensation Act (1993) at 38. 20 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 15 May 1996 at 974. 21 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 15 May 1996 at 975-976. applied. Significant variations in awards apply and the present regime of awarding compensation lacks consistency and equity. Victims of crime and the community have a right to expect that victims compensation awards be consistent and equitable. The Government considers that this can most appropriately be achieved by standardising the amounts to be awarded for similar injuries. The reform proposal provides for compensation to a comprehensive injury and award schedule. An applicant will receive an award based on the severity of the injury suffered. The schedule of awards published in the bill lists specific categories of injuries to which are assigned specific award amounts." to be determined according injury for The Minister then said, in a passage relied on by the appellant22: "The schedule is structured to ensure that compensation is directed toward those victims suffering the most serious injuries. The award amounts proposed in the injury schedule also give greater recognition to the length of time an injury may be suffered and to those injuries where there is continuing disability." The last sentence does not point decisively towards either of the two possible constructions of cl 5(a) under debate. The Minister proceeded to set out various other advantages perceived by the government in the Table of injuries, but said nothing about shock. The appellant referred to some general remarks by the Minister about the need to direct compensation towards victims suffering from those serious injuries and the importance of addressing the escalating cost of the scheme and of ensuring that the genuine needs of victims were met at a reasonable cost to the community23. These remarks shed no real light on cl 5. However, it can be said that the Act as a whole, and its background, point more to a conjunctive construction than a disjunctive construction. The conjunctive construction does have the effect of limiting eligibility to recover compensation for claims which, though they arise from what may have been extremely alarming experiences, are nevertheless relevantly less significant than other claims. Thus, unless particular symptoms are disabilities in themselves, there is no eligibility: 22 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 15 May 1996 at 976. 23 New South Wales, Legislative Council, Parliamentary Debates (Hansard), 15 May 1996 at 974. if a claimant suffers symptoms for four weeks and then disabilities for a further two weeks; if a claimant suffers symptoms for a long time but experiences no disabilities (or vice versa); if a claimant suffers symptoms and disabilities for five weeks and then symptoms only for three weeks. But other parts of the Act make it plain that an element in the statutory machinery permitting recovery was to limit recovery for both relevantly insignificant and very significant injuries. Section 19 of the Act created a cap of $50,000 in relation to any one act of violence. Section 20(1) created a monetary threshold for recovery ($2,400). That threshold was a considerable increase on the $200 of the 1987 Act. Schedule 1 cl 4 provided that standard amounts of compensation were to be reduced because of existing conditions. Compensation was not payable for scarring unless it was permanent, and it was not payable for both burns and scarring caused by those burns to a particular part of the body24. irrational, anomalous or harsh. It is accordingly not a decisive argument against the conjunctive construction that it is possible to point to various outcomes of it which might be thought legislation which grants compensation, but subjects the grant to numerous restrictions, including restrictions of a threshold character, it is not remarkable that, in the case of shock, compensation can be denied on the ground that symptoms and disability did not coexist for six weeks. The idea that symptoms alone are not enough to attract compensation for shock but must be accompanied by disability, is not harsh, irrational or, in a scheme creating thresholds, anomalous, particularly since non-medical opinion is often very suspicious about claims that shock is causing the degree of harm alleged, and this suspicion has had some influence on the common law25. Even if it were considered harsh or anomalous, it could not be said that this would be fatal to the construction urged by the appellant if the text otherwise required that construction. The introduction of caps and limitations upon recovery, usually justified by reference to supposed affordability, has been a relatively common feature of Australian compensation legislation in recent times. 24 Schedule 1, cl 7(a) and (b). 25 Tame v New South Wales (2002) 76 ALJR 1348 at 1381-1382 [192]-[196], 1385 [207]-[210]; 191 ALR 449 at 495-496, 500-501; Tennant, "Definition of psychological trauma: Psychiatric and legal approaches", (2003) 77 Australian Law Journal 369. In any case, the legislation contained a mechanism which could limit some of the injustices alleged by the first and second respondents to flow from the conjunctive construction. The Dictionary defined "injury" as meaning: actual physical bodily harm, nervous shock, (c) mental illness or disorder (whether or not arising from nervous shock) …" An injury in the form of a mental illness or disorder could generate the psychological symptoms described in cl 5(c) and the physical symptoms described in cl 5(d) without generating the disabilities described in cl 5(e). On the other hand, it could generate the disabilities without the symptoms. In either case, the injury would be similar to, but not identical with, the injury described as "shock" in the Table. If it caused symptoms lasting for at least six weeks, or if it caused a disability lasting for at least six weeks, cl 8 would permit the Tribunal or a compensation assessor to conclude that it was a compensable injury and award as the standard amount of compensation the standard amount for shock. The reasoning of the majority in the Court of Appeal The principal argument in favour of the disjunctive construction which attracted the majority of the Court of Appeal was that the legislation had remedial and beneficial objectives, one of which was, as stated in s 3(a) of the Act, "to give effect to a statutory scheme of compensation for victims of crimes of violence". It may be accepted at once that the legislation did have remedial and beneficial objectives. While at common law the victim of a criminal act of violence can sue the perpetrator for the tort of battery, and, depending on the circumstances, other torts, commonly the criminal will have vanished, or will lack any assets with which to satisfy a judgment. The majority considered it to follow that the legislation should be construed by taking "a liberal approach"26. The "injury of shock" comprised "conditions attributed to post traumatic stress disorder, depression and similar conditions" having psychological and physical symptoms and leading to disabilities. This, it was said, supported the interdependence of the five parts of cl 5. Since it would only be a rare case in which symptoms and disabilities did not coexist, there was no reason to construe cl 5(a) as creating "a mandatory cumulative requirement" because this would not "promote the broad and 26 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 681 [67]. beneficial legislative purpose"27. It was also said that "symptoms and disability" was a "composite or portmanteau phrase in its context"28. The "remedial and beneficial objectives" argument To begin consideration of issues of construction by positing that a "liberal", "broad", or "narrow" construction will be given tends to obscure the essential question, that of determining the meaning the relevant words used require29. Although the purpose of the Act is beneficial, it does not follow that recovery is contemplated for every act of violence or every consequence that could be described as an injury. The numerous injuries set out in the Table to Sched 1 (which extends over twelve pages) are identified with considerable precision. The clauses in Sched 1 which precede the Table, too, are drafted with some attempt at precision. The legislation confers benefits, and no doubt it should not be construed restrictively, but in dealing with specific limited words like those of cl 5, it is not open to apply much liberality of construction. It is difficult to state the legislative purpose except at such extreme levels of generality that it is not useful in construing particular parts of the legislative language. As Spigelman CJ said30: "The issue before the Court is the determination of the circumstances in which compensation is payable." The legislation has endeavoured to define these circumstances in precise language which does not permit universal recovery; and hence "[t]he Court is not required to give the most expansive possible interpretation of such circumstances"31. The "composite or portmanteau phrase" argument The contention that "symptoms and disability" could be treated as being "a composite or portmanteau phrase" is reminiscent of, though perhaps not identical with, a method of avoiding collisions between conjunctive constructions and disjunctive constructions which was raised in oral argument as a possible solution to the present problem. That method turned on construing the expression "symptoms and disability" as a hendiadys — an expression in which a single idea is conveyed by two words connected by a conjunction, like "law and heraldry" to mean "heraldic law". Thus the expression "shall promptly co- 27 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 682 [73]. 28 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 685 [73]. 29 See DP v Commonwealth Central Authority (2001) 206 CLR 401 at 407-408 [9], 30 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 672 [11]. 31 Victims Compensation Fund v Brown (2002) 54 NSWLR 668 at 672 [11]. operate with the Committee and assist to carry out its duties" has been construed to create an obligation of prompt co-operation with the Committee in the area of carrying out its duties32. For the first and second respondents the advantage of that approach would be that it would not render fatal the fact that, approaching any limb independently, they had symptoms but no disability. However, sub- cll (c) and (e) of cl 5 proceed on the assumption that "symptoms" and "disability" are distinct entities, not linked integers or elements in a single idea more complex than each taken singly. A composite expression is one which is a compound created out of at least two elements or integers which is different from each of them. A portmanteau expression combines the meanings of two distinct words to create a new expression. The characterisation of "symptoms and disability" as "a composite or portmanteau phrase" did not explain how, short of bluntly reading "and" as "or", the two elements or integers worked together to create a new composite or portmanteau result. The requirement in cl 5(a) that "symptoms and disability" must persist for six weeks is, on the true construction of these words, that both must persist, and that it is not enough that symptoms do but not disability, or that disability does but not symptoms, or that symptoms do for part of the six week period and disability for the rest. Orders The appellant informed the Court that by arrangement between the parties the appellant would pay the first and second respondents' costs of the appeal. It was appropriate for this position to have been taken up by a party of substance seeking an answer from this Court on a point which may arise on many other occasions affecting that party, but which happens to arise in a particular piece of litigation affecting an opposing litigant without significant means who is unlikely to be affected by it on any other occasion. The appellant sought no order as to costs. The appellant also did not seek to disturb the order of the Court of Appeal that it pay the costs of the first and second respondents in the Court of Appeal. In light of that fact and the reasons set out above, the following orders should be made. The appeal is allowed. Orders 1 and 2 of the Court of Appeal of the Supreme Court of New South Wales made on 28 May 2002 are set aside; in lieu thereof, it is ordered that the record of the proceedings in the District Court be removed into the 32 Traders Prudent Insurance Co Ltd v The Registrar of the Workers' Compensation Commission of New South Wales [1971] 2 NSWLR 513 at 521. Court of Appeal and the orders of Phelan DCJ made on 19 March 2001 in District Court proceedings Nos 317/00 and 318/00 be quashed and in their place there be substituted an order affirming the determination of the Tribunal.
HIGH COURT OF AUSTRALIA WELLINGTON CAPITAL LIMITED APPELLANT AND AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION & ANOR RESPONDENTS Wellington Capital Limited v Australian Securities and Investments Commission [2014] HCA 43 5 November 2014 ORDER Appeal dismissed with costs. On appeal from the Federal Court of Australia Representation B W Walker SC with N M Bender for the appellant (instructed by McCullough Robertson Lawyers) J T Gleeson SC, Solicitor-General of the Commonwealth with J A Halley SC and D F C Thomas for the first respondent (instructed by Australian Securities and Investments Commission) Submitting appearance for the second respondent Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Wellington Capital Limited v Australian Securities and Investments Commission Corporations – Managed investment schemes – Role of responsible entity under Ch 5C of Corporations Act 2001 (Cth) – Construction of scheme constitution – Where responsible entity granted all powers "legally possible" for person or corporation to have – Where responsible entity made in specie distribution of scheme property to unit holders – Whether distribution beyond responsible entity's powers under scheme constitution. Trusts – Managed investment schemes – Responsible entity as statutory trustee – Whether general principles of law relating to trusts apply to responsible entity's functions under scheme constitution. Practice and procedure – Federal Court of Australia – Where Federal Court made declaration that responsible entity had no power under scheme constitution to distribute scheme property to unit holders – Where unit holders not represented in appeal – Whether Federal Court erred in exercising discretion to make declaration. Words and phrases – "in specie distribution", "managed investment scheme", "responsible entity", "return of capital". Corporations Act 2001 (Cth), ss 9, 124, 231, 601FB(1), 601FC, Ch 5C. Federal Court of Australia Act 1976 (Cth), ss 21–23. Trusts Act 1973 (Q), s 33(1)(l). FRENCH CJ, CRENNAN, KIEFEL AND BELL JJ. Introduction This appeal concerns the power of the responsible entity of a managed investment scheme to distribute a part of the scheme property in specie to scheme members. It requires consideration of the provisions of the Corporations Act 2001 (Cth) ("the Corporations Act") governing managed investment schemes and of the scheme constitution. Wellington Capital Ltd ("Wellington") is the responsible entity of a managed investment scheme, now known as the Premium Income Fund ("the Scheme")1. The Scheme came into existence under a Deed Poll dated 20 November 1999, which, as amended from time to time, comprised its constitution ("the Scheme Constitution"). Perpetual Nominees Ltd ("Perpetual") is the custodian of the Scheme, appointed by Wellington as its agent to hold "Scheme Property" on its behalf2. The members of the Scheme are its unit holders, each of whom has an undivided interest in the "Scheme Fund" and the Scheme Property3. Wellington's principal activities have been to invest the Scheme Fund in mortgages, equities, debt instruments and cash. On 4 September 2012, Wellington sold assets of the Scheme to Asset Resolution Ltd ("ARL") in consideration of the issue of 830,532,768 shares in ARL to Perpetual. ARL was a special purpose unlisted public company. The assets thus disposed of had a publicly stated value of $90.75 million and represented about 41% by value of the assets comprising the Scheme Property. On the same day, Wellington instructed Perpetual to transfer the ARL shares held by Perpetual to the unit holders in the Scheme in proportion to the number of units held by each unit holder. That transfer was effected on the following day. 1 The Scheme was originally constituted as the MFS Capital Insured Income Fund. 2 Scheme Constitution, cl 1.4. Section 601FB(2) of the Corporations Act provides that the responsible entity of a managed investment scheme has power to appoint an agent to do anything that it is authorised to do in connection with the scheme. "Scheme Property" is defined in cl 1 of Sched 1 to the Scheme Constitution to mean all the cash, mortgages and other investments of the Scheme for the time being held by the responsible entity for the unit holders. 3 Scheme Constitution, cl 2.2.1. The "Scheme Fund" is defined in cl 1 of Sched 1 to the Scheme Constitution to mean all of the Scheme Property, subject to the liabilities at that time of the Scheme. Crennan Bell The Australian Securities and Investments Commission ("ASIC") commenced proceedings in the Federal Court of Australia in October 2012 challenging the validity of the transfer. Its application was dismissed by Jagot J, who delivered an ex tempore judgment on 17 October 20124. On 28 May 2013, the Full Court of the Federal Court allowed an appeal from that decision and made declarations that the in specie distribution was beyond the power of Wellington under the Scheme Constitution and that, by making the distribution, Wellington had contravened s 601FB(1) of the Corporations Act5. Section 601FB(1) required Wellington to operate the Scheme and perform the functions conferred on it by the Scheme Constitution and by the Corporations Act. The appeal to this Court from the decision of the Full Court should be dismissed. The Full Court was correct to hold that the distribution of the ARL shares to Scheme members was beyond power. The Scheme Constitution, properly construed in the light of the relevant provisions of the Corporations Act, confined the return of capital to the winding up process and to cash payments annexed to the periodic distribution of income. Statutory framework Managed the Corporations Act6. The term "managed investment scheme" is defined in s 9 of the Corporations Act. The relevant part of the definition is in par (a): investment schemes are regulated under Ch 5C of "a scheme that has the following features: 4 Australian Securities and Investments Commission v Wellington Capital Ltd (2012) 91 ACSR 514. 5 Australian Securities and Investments Commission v Wellington Capital Ltd (2013) 94 ACSR 293. 6 Chapter 5C was introduced into the Corporations Law, the predecessor of the Corporations Act, by the Managed Investments Act 1998 (Cth). It replaced provisions dealing with the regulation of prescribed interests and gave effect to recommendations made by a joint report of the Australian Law Reform Commission and the Companies and Securities Advisory Committee: Collective Investments: Other People's Money, Report No 65, (1993). See Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 at 135–136 [10]–[12] per French CJ, Crennan, Kiefel and Bell JJ; [2012] HCA 54. Crennan Bell people contribute money or money's worth as consideration to acquire rights (interests) to benefits produced by the scheme (whether the rights are actual, prospective or contingent and whether they are enforceable or not); any of the contributions are to be pooled, or used in a common enterprise, to produce financial benefits, or benefits consisting of rights or interests in property, for the people (the members) who hold interests in the scheme (whether as contributors to the scheme or as people who have acquired interests from holders); (iii) the members do not have day-to-day control over the operation of the scheme (whether or not they have the right to be consulted or to give directions)"7. The term "member" is also defined in s 9: "member: in relation to a managed investment scheme—means a person who holds an interest in the scheme; or in relation to a company—a person who is a member under section The Full Court relied upon that definition in rejecting an argument by Wellington based on s 124 of the Corporations Act. Section 124(1)(d) provides that a company has the power to distribute any of the company's property among the members, in kind or otherwise. Clause 13.1 of the Scheme Constitution conferred upon Wellington "all the powers in respect of the Scheme that is legally possible for a natural person or corporation to have" and was held by the primary judge to pick up that power8. That proposition was rejected by the Full Court on the basis that the statutory definition of "member" distinguishes between membership of a company and membership of a managed investment 7 Paragraph (b) of the definition picks up time-sharing schemes and pars (c)–(n) set out a number of exclusions from the definition, none of which are relevant for present purposes. (2012) 91 ACSR 514 at 527 [58]–[59]. The full text of cl 13.1 of the Scheme Constitution appears in the section of these Reasons outlining that document. Crennan Bell scheme9. That conclusion was correct. It accords with the limits of Wellington's powers under cl 13.1, discussed later in these Reasons, to deal with Scheme Property, having regard to the purpose of those powers in facilitating extramural dealings with the Scheme Property. The term "scheme property" is widely defined in s 9 of the Corporations Act. The definition includes property acquired, directly or indirectly, with, or with the proceeds of, contributions of money or money's worth to the scheme, money that forms part of the scheme property under the provisions of the Corporations Act or the Australian Securities and Investments Commission Act 2001 (Cth) and money borrowed or raised by the responsible entity for the purposes of the scheme. It was not in dispute that the ARL shares formed part of the Scheme Property prior to their transfer to the unit holders. Part 5C.1 of Ch 5C requires that, subject to irrelevant exceptions, managed investment schemes must be registered with ASIC10. Part 5C.2 concerns the "responsible entity" of a registered scheme, a term defined in s 9 as the company named in ASIC's record of the scheme's registration as the responsible entity or temporary responsible entity of the scheme. Section 601FB(1) sets out in broad terms the functions imposed by the Corporations Act on the responsible entity: "The responsible entity of a registered scheme is to operate the scheme and perform the functions conferred on it by the scheme's constitution and this Act." The Full Court declared, in the exercise of its general powers to make declarations11, that Wellington had "contravened" that provision12. The term "contravene" is used in the Corporations Act, although not exhaustively, to (2013) 94 ACSR 293 at 303 [59]–[60]. 10 Corporations Act, s 601ED read with s 601EB. By s 601ED(5), a person must not operate in this jurisdiction a managed investment scheme that s 601ED requires to be registered under s 601EB unless the scheme is so registered. 11 Federal Court of Australia Act 1976 (Cth), ss 21–23. 12 (2013) 94 ACSR 293 at 306–307 [88]–[90]. Crennan Bell designate non-compliance with civil penalty provisions13. The court is required to make "a declaration of contravention" if it is satisfied that a person has contravened one of them14. Such a declaration, which must specify certain matters15, is a necessary condition of the imposition of a pecuniary penalty16. Initially, ASIC sought a declaration that Wellington had contravened s 601FC(1)(c). Section 601FC(1) sets out specific duties of a responsible entity. A contravention of s 601FC(1)(c) is a contravention of s 601FC(5), which is a civil penalty provision. later abandoned. Section 601FB(1) is not a civil penalty provision. The declaration that it was contravened by Wellington had no statutory consequences under the Corporations Act. The Full Court justified that declaration as "an appropriate way of marking the court's disapproval of the contravening conduct"17 and held that the declaration was in the public interest as the Scheme Constitution was in a That claim for relief was Although the declaration made by the Full Court did not involve any finding of a breach of the duties imposed upon Wellington by s 601FC(1), those duties are relevant. They place constraints upon the exercise of the powers conferred upon the responsible entity to deal with scheme property under a scheme constitution. They include a duty to act honestly19, a duty of care and 13 Corporations Act, s 1317E(1) read with the cross-referencing definition of "civil penalty provision" in s 9. The Corporations Act also refers in places to contravention of provisions which are not civil penalty provisions. For example, s 1101B(1) provides that a court may make such orders as it thinks fit on the application of ASIC if it appears to the court that a person has contravened a provision of Ch 7 or any other law relating to dealing in financial products or providing financial services. Such orders would presumably include declarations of such contraventions. However, the Corporations Act does not use the term "contravene" in relation to s 601FB(1). 14 Corporations Act, s 1317E(1). 15 Corporations Act, s 1317E(2). 16 Corporations Act, s 1317G(1)(a). 17 (2013) 94 ACSR 293 at 306 [89] citing Re McDougall; Australian Securities and Investments Commission v McDougall (2006) 229 ALR 158 at 170 [55]. 18 (2013) 94 ACSR 293 at 306 [88]. 19 Corporations Act, s 601FC(1)(a). Crennan Bell diligence20, and a duty to act in the best interests of the members21. The powers conferred by cl 13 of the Scheme Constitution to deal with Scheme Property, while very broad on a literal reading, are to be construed by reference to those duties and other aspects of the statutory scheme. Those powers are also constrained by Pt 5C.7, which applies Ch 2E of the Corporations Act, dealing with related party transactions, to schemes. The purpose of that Part, as set out in s 207 which applies to schemes pursuant to s 601LB, is to protect the interests of the scheme's members as a whole. Of significance in the reasoning of the Full Court was s 601FC(2), which provides that "[t]he responsible entity holds scheme property on trust for scheme members." It underpinned the starting point in the Full Court's reasoning that provisions of the Scheme Constitution conferring wide powers on the responsible entity to deal with Scheme Property must be approached "through the prism of trust law."22 However, the extent to which general principles of the law relating to trusts apply to a responsible entity's functions under a scheme constitution depends upon the purpose of the statutory trust, other provisions of the Corporations Act and the terms of the scheme constitution. The trust relationship which is imposed by s 601FC(2) expressly attaches to a responsible entity by reason of its office23. No occasion arises for imposition of a trust by operation of the general law24. The trust imposed does not arise from gratuitous transfer of assets by a settlor to a trustee, to be held on behalf of beneficiaries, who may become transferees. Save for its imposed statutory character, it bears a resemblance to trusts created as incidents of business 20 Corporations Act, s 601FC(1)(b). 21 Corporations Act, s 601FC(1)(c). 22 (2013) 94 ACSR 293 at 303 [51]. 23 Re Investa Properties Ltd (2001) 187 ALR 462 at 466 [14] per Barrett J. 24 cf Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation (1993) 178 CLR 145 at 165–168 per Mason CJ, Deane, Toohey and Gaudron JJ; [1993] HCA 1. transactions, Lord Browne-Wilkinson said of such trusts that26: sometimes described Crennan Bell "commercial trusts"25. "it is important, if the trust is not to be rendered commercially useless, to distinguish between the basic principles of trust law and those specialist rules developed in relation to traditional trusts which are applicable only to such trusts and the rationale of which has no application to trusts of quite a different kind." The same caution applies in relation to public unit trusts, which may operate under principles of both contract and trust law. To the extent that the relationship between the responsible entity and the members is governed by contract, the content of the powers and duties of the responsible entity will be determined by reference to the contract27 and its statutory setting. This Court has said of the use of trust concepts in revenue statutes28: "the degree to which a revenue statute adopts or qualifies or supplants the general understanding of terms with a particular application in property law will be a matter of statutory construction". What is true for revenue statutes is true for statutes generally and, in particular, for the use of the term "trust" in s 601FC(2). Section 601FC(2) reflects, albeit in truncated form, a recommended draft provision set out in the joint report of the Australian Law Reform Commission 25 Langbein, "The Secret Life of the Trust: The Trust as an Instrument of Commerce", (1997) 107 Yale Law Journal 165 at 167–168. 26 Target Holdings Ltd v Redferns [1996] AC 421 at 435 and see Bryan, "Reflections on Some Commercial Applications of the Trust", in Ramsay (ed), Key Developments in Corporate Law and Trusts Law: Essays in Honour of Professor Harold Ford, (2002) 205 at 205–206. 27 Hanrahan, "The Responsible Entity as Trustee", in Ramsay (ed), Key Developments in Corporate Law and Trusts Law: Essays in Honour of Professor Harold Ford, 28 Federal Commissioner of Taxation v Bamford (2010) 240 CLR 481 at 501 [17]; [2010] HCA 10. Crennan Bell and the Companies and Securities Advisory Committee in 199329. The provision was proposed in part as a protective set-off against the decision not to recommend that the appointment of a custodian of scheme property, separate from the manager, be mandatory. The protection of the trust relationship was to be maintained even in the case in which the responsible entity decided to appoint a custodian30: "Where an operator engages a custodian to hold the legal title to scheme assets, the operator should hold on trust for the investors the equitable interest arising under that arrangement." The report proposed that "because of the nature of the activity undertaken, this trust relationship should exist in all collective investment schemes, even those based on contract."31 The purpose of s 601FC(2) is indicated by that aspect of its ancestry and by its place in the statutory scheme. It creates a layer of fiduciary protection for scheme members in addition to the express duties and protections otherwise created by the Corporations Act and the minimum statutory requirements of a scheme constitution. Part 5C.3 imposes various requirements in relation to the constitutions of registered schemes. Such constitutions must make adequate provision for the powers of the responsible entity in relation to making investments of, or otherwise dealing with, scheme property32 and also for winding up the scheme33. Moreover, the constitution of a registered scheme must be contained in a 29 Australian Law Reform Commission and Companies and Securities Advisory Committee, Collective Investments: Other People's Money, Report No 65, (1993), vol 2 at 146. 30 Australian Law Reform Commission and Companies and Securities Advisory Committee, Collective Investments: Other People's Money, Report No 65, (1993), vol 1 at [9.14]. 31 Australian Law Reform Commission and Companies and Securities Advisory Committee, Collective Investments: Other People's Money, Report No 65, (1993), vol 1 at [9.14]. 32 Corporations Act, s 601GA(1)(b). 33 Corporations Act, s 601GA(1)(d). Crennan Bell document that is legally enforceable as between the members and the responsible entity34. Part 5C.9 provides for the winding up of a registered scheme. It authorises provisions to be included in a scheme's constitution for the winding up of the scheme at a specified time, in specified circumstances, or on the happening of a specified event35. It provides for winding up by an extraordinary resolution at a members' meeting36. It also authorises a responsible entity to take steps to wind up a scheme where it considers that its purpose has been accomplished or cannot be accomplished37. There is provision for a court-ordered winding up where it is just and equitable to do so38 or on the application of an unsatisfied judgment creditor39. The scheme must be wound up in accordance with its constitution and any court orders40. Another section of the Corporations Act said to interact with the powers conferred on Wellington under the Scheme Constitution was s 231, which sets out sufficient conditions for a person to be a member of a company. One of those conditions is that the person41: "agree[s] to become a member of the company after its registration and their name is entered on the register of members". Wellington contended that the unit holders were to be taken as having agreed to the transfer of the ARL shares, and thereby to membership of ARL, by reason of joining the Scheme under a constitution which gave powers to Wellington as responsible entity to effect such a transaction. As appears below, however, the 34 Corporations Act, s 601GB. 35 Corporations Act, s 601NA. 36 Corporations Act, s 601NB. 37 Corporations Act, s 601NC(1). 38 Corporations Act, s 601ND(1)(a). 39 Corporations Act, s 601ND(1)(b) and (3). 40 Corporations Act, s 601NE(1). 41 Corporations Act, s 231(b). Crennan Bell Scheme Constitution, properly construed, did not authorise the transaction and therefore did not give rise to the imputed agreement. Wellington had its office in Brisbane. Reference was made in ASIC's written submissions to the Trusts Act 1973 (Q) ("the Trusts Act") as part of the relevant statutory framework. Section 33(1)(l) of the Trusts Act confers a general power on a trustee to appropriate any part of the trust property towards satisfaction of any share of the trust property (whether settled, contingent or absolute) to which any person is entitled. ASIC submitted, correctly, that the power is only enlivened where the relevant beneficiary is entitled to a particular share of the trust property and notice of the intended appropriation has been given to other beneficiaries. Neither condition was satisfied in this case. In any event, the provisions of the Trusts Act in their application to a responsible entity would have to be considered in the light of the provisions of Ch 5C of the Corporations Act. It is unnecessary in this case to further consider how the Trusts Act interacts with the Corporations Act and, indeed, the Scheme Constitution. Wellington did not rely upon the Trusts Act. The Scheme Constitution The Scheme Constitution which was before the primary judge, the Full Federal Court and this Court, was misleadingly described on its cover sheet as a "Consolidated Constitution". The document attached to the cover sheet was entitled "PREMIUM INCOME FUND SUPPLEMENTARY DEED POLL Made on 5 September 2011". The Court was told that the Supplementary Deed Poll was the document presently held on the ASIC Register as the Scheme Constitution. It was incomplete42. However, the case was argued on the common assumption, at first instance and on appeal, that the document contained all that was necessary for the proper construction of its relevant provisions. The Supplementary Deed set out, in a schedule, amendments to the Scheme Constitution. Covering cl 2(a) of the Deed provided that nothing expressly or impliedly contained in it was effective to "confirm, declare or otherwise acknowledge the trust declared under the original constitution, or to impress any new or additional trusts upon property held on trust as at the date of this supplemental deed." Covering cl 2(b) further provided: 42 The document contained some numbered clauses, the texts of which were not set out, which evidently formed continuing parts of the Scheme Constitution as it stood before its amendment by the Supplementary Deed. Crennan Bell "Nothing in this supplemental deed should be interpreted as creating any new or further trust and at all times, the Scheme remains a simple trust." Covering cl 2 was not the subject of any submission by the parties. The trust relationship in issue was that created by s 601FC(2). Under the Scheme Constitution, Wellington, as responsible entity, was empowered to issue units in accordance with the provisions of the Corporations Act and the Scheme Constitution43. Members of the Scheme were the registered holders of units in the Scheme44. A unit conferred on its holder an undivided interest in the Scheme Fund and Scheme Property as a whole45. A unit holder had no interest in any particular part of the Scheme Fund or in any Scheme Property46. Clause 13.1 of the Scheme Constitution provided expansively that the responsible entity should have: "all the powers in respect of the Scheme that is legally possible for a natural person or corporation to have and as though it were the absolute owner of the Scheme Property and acting in its personal capacity." Clause 13.2 conferred specific powers on the responsible entity, including the power, by cl 13.2.5, to deal with Scheme Property: "In the administration of the provisions of this Constitution, and the Corporations Act, in relation to the Scheme and the Scheme Property, the Responsible Entity shall have the following powers. These powers shall be in addition to the powers, authorities and discretions vested in it by any other provision of this Constitution or by the Corporations Act and which shall not limit or be limited by, or be construed so as to limit or be limited by the powers, authorities and discretions otherwise by this Constitution or by the Corporations Act vested in the Responsible Entity, that is to say: 43 Scheme Constitution, cl 3.1. 44 Scheme Constitution, Sched 1, cl 1. 45 Scheme Constitution, cl 2.2.1 — subject to variances between any classes of units that may exist. 46 Scheme Constitution, cl 2.2.2. Crennan Bell 13.2.5 acquire, dispose of, exchange, mortgage, sub-mortgage, lease, sub- lease, let, grant, release or vary any right or easement or otherwise deal with Scheme Property as if the Responsible Entity were the absolute and beneficial owner". The responsible entity was required, by cl 14.3, to manage the Scheme and Scheme Property in accordance with the provisions of the Scheme Constitution "with full and complete powers of management including all powers reasonably necessary or incidental to the performance by the Responsible Entity of its obligations and the observance by the Responsible Entity of all the terms and conditions of this Constitution." The powers and functions of the responsible entity were to be exercised "in the best interest of all Unit Holders and not in the interests of the Responsible Entity if those interests are not the same as those of Unit Holders generally"47. Subject to cl 14.7.1, unit holders of the same class were to be treated "equally" and unit holders of different classes were to be treated "fairly"48. There was no contention advanced in this Court that those duties had been breached. Clause 16 dealt with the ascertainment of the income of the Scheme and its distribution to Scheme members and included a power to distribute a part of the capital. Clause 16.1 provided: "The Responsible Entity is to determine, according to generally accepted accounting principles and practices which apply to trusts: 16.1.1 the Income of the Scheme, and in particular, whether any receipts or outgoings of the Responsible Entity are on income account or capital account; and 16.1.2 the extent to which the Scheme needs to make reserves or provisions." Clause 16.2 described the process for calculating periodic entitlements under the Scheme and distributing them to unit holders. That process required the calculation of each unit holder's Distribution Entitlement, the determination of 47 Scheme Constitution, cl 14.7.1. 48 Scheme Constitution, cl 14.7.2. Crennan Bell each unit holder presently entitled, and the payment of the entitlement to a person entitled to it. Clause 16.3 explained how the Distribution Entitlement was to be calculated: Calculation of Distributable Amount The 'Distributable Amount' for a Distribution Period is to be determined in accordance with the following formula: DA = I+C Where: is the amount of Distributable Amount; is the Income of the Scheme for the Distribution Period minus any amount of the Income that is set aside during the Distribution Period as reserves or provisions under sub-clause 16.1; and is any additional amount (including capital, previous reserves or previous provisions) that the Responsible Entity has determined during the Distribution Period is to be distributed. Calculation of Distributable Entitlement The Distributable Entitlement of each Distribution Recipient is the total of the Unit Entitlement in relation to each Unit held by the Distribution Recipient at the end of the day on the Distribution Calculation Date, as determined accordance with paragraph 16.3.3. Calculation of Unit Entitlement The Unit Entitlement in relation to a Unit is to be determined in accordance with the following formula: UE=DA Crennan Bell Where: is the Unit Entitlement is the Distributable Amount is the total number of Units on issue in the Scheme Clause 16.4 provided for payment of the Distributable Amount to a unit holder by depositing it into an account with a bank or other financial institution nominated by the unit holder and approved by the responsible entity. Alternatively, payment could be made by reinvestment in the Scheme or otherwise as directed by the unit holder. It was not in dispute that, as a consequence of the definition of the variable "C" in cl 16.3.1, the responsible entity was accorded a power to determine an amount of capital additional to the income of the Scheme forming part of the Distributable Amount upon the basis of which the Distributable Entitlement of each unit holder was to be calculated. The Full Court held correctly, however, that cl 16 was not the source of a general power to distribute Scheme Property to unit holders49. The formula in cl 16.3.3 for distribution of the Unit Entitlements indicated that the payments made under cl 16 were to be in cash50. The power under cl 16 to determine an amount of capital to be distributed was parasitic upon the periodic obligation to distribute income. It was embedded in the determination of an "additional amount". It was not indicative of any implied general power to distribute capital at any time and, a fortiori, was not indicative of a power to make a distribution of Scheme Property in specie. That conclusion is reinforced by the provision for return of capital in the context of a winding up under cl 26. Clause 26.1 provided that the responsible entity must not resolve to wind up the Scheme unless the responsible entity had complied with the provisions of s 601NC(2) of the Corporations Act. Winding up was mandatory upon the happening of any one of a number of Termination Events set out in cl 26.2. As soon as practicable after a Termination Event, the responsible entity was to realise the Scheme Property and satisfy the liabilities of the Scheme pursuant to cl 26.3. Clause 26.4 dealt with final distribution to unit holders: 49 (2013) 94 ACSR 293 at 305 [80]. 50 (2013) 94 ACSR 293 at 305 [80]. Crennan Bell "Only after all Liabilities have been discharged, and all expenses of termination – including anticipated expenses – have been met or accounted for, is the net proceeds of realisation to be distributed to the Unit Holders in proportion to the paid up value of the Units they hold. The net proceeds of realisation may be distributed in instalments. The final distribution to Unit Holders must occur prior to the 80th anniversary of the date of this Constitution." Clause 26.7 provided for unclaimed money to be returned to ASIC: "If, on completion of the winding up of a registered scheme, the Person who has been winding up the Scheme has in their possession or under their control any unclaimed or undistributed money or other property that was part of the Scheme Property, the Person must, as soon as practicable, pay the money or transfer the property to the ASIC to be dealt with under Part 9.7 of the Corporations Act." That provision reflected the requirements of s 601NG of the Corporations Act. Wellington submitted that cl 26.7 assumed that the responsible entity had the power to make an in specie distribution of property other than cash to unit holders. As a textual indicator in support of a general power to distribute property other than cash to unit holders, cl 26.7, confined as it was to the winding up process, did not support the construction of scheme powers generally for which Wellington contended. The procedural history The shape of the proceedings in the Federal Court changed between their commencement and the final orders of the Full Court. At trial, ASIC sought a declaration that Wellington had acted beyond power in distributing the ARL shares and that the purported transfers to the unit holders were "thereby invalid". It also sought a declaration that Wellington had contravened s 601FB(1) on the basis that, by making an in specie distribution of the ARL shares to the unit holders, Wellington did not operate the Scheme and perform the functions conferred on it by the Scheme Constitution and by the Corporations Act. That claim replaced an earlier claim for a declaration of a contravention of a civil penalty provision, s 601FC(5), enlivened by a purported contravention of s 601FC(1)(c). ASIC also sought orders requiring Wellington to take steps to correct the ARL share register and to disclose the judgments and orders of the Crennan Bell Court to the unit holders51. In its appeal to the Full Court, ASIC sought a declaration that the transfer was beyond power, dispensing with the element of the declaration previously sought that the transfer was "thereby invalid". It pursued the claim for a declaration of contravention of s 601FB(1) and for a mandatory disclosure order under s 1324B(a). The decision of the primary judge The application was expedited at first instance. It was heard on 17 October 2012 and Jagot J delivered a comprehensive ex tempore judgment. Her Honour's reasoning involved the following steps: The ARL shares distributed in specie to unit holders constituted Scheme The general powers conferred on Wellington by cl 13 picked up the powers conferred on corporations by s 124 of the Corporations Act, which included the power to distribute any of the company's property among members, in kind or otherwise53. Those powers were not qualified expressly or by necessary implication by the specific provisions of cl 1654. The powers conferred on Wellington by the Scheme Constitution gave rise to a corresponding duty on the unit holders to accept the exercise of those powers in relation to the transfer of the ARL shares55. The unit holders must also be taken to have consented, upon the in specie distribution, to becoming members of ARL for the purposes of s 231 of the Corporations Act56. 51 The amended originating process at trial was annexed to the primary judge's final orders as Annexure B. 52 (2012) 91 ACSR 514 at 518 [7]. 53 (2012) 91 ACSR 514 at 527–528 [58]–[59]. 54 (2012) 91 ACSR 514 at 527 [54]. 55 (2012) 91 ACSR 514 at 528 [60]. 56 (2012) 91 ACSR 514 at 528 [63]. Crennan Bell Wellington did not act in contravention of the Scheme Constitution and therefore did not contravene s 601FB(1)57. The attribution to Wellington of powers with respect to Scheme Property analogous to those conferred on a company by s 124 of the Corporations Act was critical to the primary judge's conclusion that the distribution of the ARL shares was within power. Her Honour's conclusion in that respect relied upon a reading of cl 13.1 of the Scheme Constitution which, having regard to its facultative purpose in relation to extramural dealings with Scheme Property, was overbroad. The Full Court decision The Full Court's reasoning in allowing the appeal emphasised the trustee capacity in which Wellington held the Scheme Property by reason of s 601FC(2). Their Honours held: Clause 13.1 must be approached through the prism of trust law and must be construed as a whole58. Clause 13.1 is a saving provision which enabled Wellington, as a trustee, to deal with the Scheme Property as though it were the absolute owner59. Clause 13.1 was not concerned with the powers of Wellington in relation to the unit holders60. Absent the consent of the beneficiaries, it is not open to a trustee simply to transfer the trust property to the beneficiaries61. No prior consent to the transfer was obtained from the unit holders62. The incorporation, by indirect reference in cl 13.1, of the powers conferred on a corporation by s 124 did not thereby confer a power to 57 (2012) 91 ACSR 514 at 528 [62]. 58 (2013) 94 ACSR 293 at 303 [51]–[52]. 59 (2013) 94 ACSR 293 at 303 [53]. 60 (2013) 94 ACSR 293 at 303 [54]. 61 (2013) 94 ACSR 293 at 303 [55]. 62 (2013) 94 ACSR 293 at 303 [56]. Crennan Bell distribute Scheme Property to members of the Scheme without their consent. Nor did cl 13.2.5 confer such powers on Wellington63. In any event, s 124, properly construed, referred to distribution of company property to members of a company and not to members of a managed investment scheme64. The distribution of the ARL shares, which constituted 41% of the Scheme Property, amounted to a partial retirement from office65 and might also have amounted to a partial winding up66. The Full Court approached the construction of the powers conferred on Wellington by the Scheme Constitution on the basis that those powers were constrained by Wellington's statutory capacity as trustee of the Scheme Property. However, as shown earlier in these Reasons, a responsible entity's powers in relation to the disposition of scheme property are determined by the terms of the scheme constitution in light of such enhancements or constraints as are provided by statute and, subject to statute, the general law relating to trusts to the extent that it is applicable. Whether the distribution of the ARL shares was beyond power Wellington submitted that the legal title to the shares, prior to their transfer, resided in it and the beneficial title in the unit holders. It relied upon cll 13.1 and 13.2.5 as authorising its transfer of the legal title to the unit holders. That submission depended upon its characterisation of cl 13.1 as amounting to a "grant of power in the broadest terms possible". A similar submission was made in respect of cl 13.2.5. Those submissions detached cll 13.1 and 13.2.5 from their context. Constraints upon the power in cl 13 derived, in part, from the statutory duties imposed upon the responsible entity by s 601FC(1) and the fiduciary obligations derived from the statutory trust imposed by s 601FC(2). Controls on related party transactions imposed by Pt 5C.7 also constrained the responsible 63 (2013) 94 ACSR 293 at 305 [72]. 64 (2013) 94 ACSR 293 at 303 [59]. 65 (2013) 94 ACSR 293 at 306 [83]. 66 (2013) 94 ACSR 293 at 306 [86]. Crennan Bell entity's power to deal with the scheme property as though it were its owner. There was no suggestion in this appeal that Wellington breached any of the duties imposed upon it by s 601FC. However, the existence of those duties, and other duties imposed upon the responsible entity, suggests a characterisation of cll 13.1 and 13.2.5 as enabling provisions. A reading of cll 13.1 and 13.2.5, in the context of the Scheme Constitution as a whole, leads to the conclusion that they had nothing to do with the circumstances in which assets or capital forming part of the Scheme Property could be returned to unit holders. They were facultative. They equipped Wellington to deal with the Scheme Property, in accordance with its duties, in the interests of the Scheme members. As ASIC submitted, cl 13.1 allowed third parties to have confidence that things done by the responsible entity with respect to the Scheme Property were within power and authorised by the Scheme Constitution. The conferral upon the responsible entity of power to act "as though" it was the absolute owner of the property facilitated extramural dealings, which might have been by way of sale, purchase of property or investment of Scheme Funds. It did not authorise the responsible entity to undertake intramural dealings involving non-consensual transfers of Scheme Property to unit holders. Internal support for a purposive, and thereby limiting, characterisation of cll 13.1 and 13.2.5 is derived from cll 16 and 26 of the Scheme Constitution. Clause 16 made express provision for the return of capital which the responsible entity had decided should form part of the Distribution Entitlement. It did not contemplate the transfer of assets in specie. It provided for payment in cash. It is no answer to submit that the absence of a power to transfer Scheme Property in specie to unit holders could leave the responsible entity burdened with illiquid assets which, it was said, could not be distributed to unit holders even in a winding up of the Scheme. That is a contingency which, if it arose, might warrant an appropriate amendment to the Scheme Constitution or even a winding up of the Scheme pursuant to s 601NC(1) on the basis that its purpose could not be accomplished. The only other mechanism for return of Scheme Property by way of capital is upon a winding up, which may be effected pursuant to cl 26 or otherwise under the provisions of Pt 5C.9. The Scheme Constitution, on its proper construction, did not authorise the in specie distribution of the ARL shares. The proposition propounded by the Full Court that "absent the consent of all beneficiaries it is not open to a trustee simply to transfer the trust property to Crennan Bell the beneficiaries"67 was too broad in the context of this case68. There has been consideration in some cases of the question whether there is a constraint upon reduction of the capital of a managed investment fund analogous to the principle of the maintenance of capital in relation to corporations. The answer to that question has tended to be in the negative69. It is not necessary to explore the matter further as the outcome of the present appeal is to be determined by reference to the Scheme Constitution construed in its statutory setting. The parties and the relief The defendants to the proceedings commenced by ASIC were Wellington, ARL and Perpetual. The unit holders were not named as parties. However, when the primary judge delivered her ex tempore judgment on 17 October 2012, she made orders appointing two representatives who had been the subject of applications for their appointment on 12 October. Both had agreed to accept appointment. One, Charles Hodges, was appointed to represent persons who purchased ARL shares after 5 September 2012, and persons who were unit holders as at 5 September 2012 and who became shareholders of ARL after 4 September 2012 or who sold ARL shares on or after 5 September 2012. The other, IOOF Investment Management Ltd, was appointed to represent all persons who were unit holders as at 4 September 2012 and who had, since that date, sold units in the Scheme. The representative defendants did not participate in the substantive proceedings. Wellington submitted that because of the potential for a conflict of interest between the classes of persons represented by Mr Hodges and the absence of any representation for persons who had sold both units and ARL shares, the proceedings were improperly constituted. On that basis, it was submitted that the Full Court ought not to have granted any relief. This argument was advanced in support of the third ground of appeal, namely that the Full Court erred in 67 (2013) 94 ACSR 293 at 303 [55] citing Jacobs' Law of Trusts in Australia, 7th ed 68 The paragraphs cited from Jacobs' Law of Trusts in Australia, 7th ed (2006) did not support that proposition. 69 Centro Properties Ltd v PricewaterhouseCoopers (2011) 86 ACSR 584 at 597–598 [55]–[58] per Barrett J. See also Mercedes Holdings Pty Ltd v Waters (No 2) (2010) 186 FCR 450 at 476 [111] per Perram J; Brisconnections Management Co Ltd v Australian Style Investments Pty Ltd (2009) 23 VR 253 at 286 [182] per Crennan Bell exercising its discretion to grant relief. ASIC submitted that the question whether or not a person ought to have been joined in the proceedings was a matter of judgment and degree. In the end, no orders were made with operative effects upon the rights of the unit holders. Wellington's submissions did not demonstrate any representation, relevant concern arising out of non-participation and non-joinder of various categories of unit holders that would support an order setting aside the declarations. the The Full Court declared, in effect, that Wellington did not have authority to transfer the ARL shares to the unit holders. It was left to each unit holder to determine whether it would take any action in relation to the transfer to it of ARL shares, or whether it would accept that transfer. Potentially difficult questions could arise as between particular unit holders or categories of unit holders and Wellington in this context. Those questions cannot be resolved on this appeal, which is concerned with whether the transfers were within power and whether the declarations made by the Full Court should be set aside. The declarations were a correct statement of the legal position. They were appropriate for the reasons given by the Full Court. This Court should not interfere with them. Conclusion For the preceding reasons, the appeal should be dismissed with costs. GAGELER J. This appeal turns on two questions: one substantive, one procedural. The substantive question is whether the Full Court of the Federal Court was correct to conclude that Wellington Capital Ltd, the responsible entity of a public unit trust constituted as a managed investment scheme registered under Pt 5C.1 of the Corporations Act 2001 (Cth), had no power under the constitution of that scheme to make an in specie distribution of scheme property to holders of units in that trust. The procedural question is whether it was open to the Full Court to embody that conclusion in a declaration made under s 21 of the Federal Court of Australia Act 1976 (Cth). For reasons which follow, I answer both questions in the affirmative and therefore join in the dismissal of the appeal. In setting out those reasons, I adopt without repetition the statement of facts and procedural history, as well as the abbreviations, in the joint reasons for judgment. The substantive question The regime for the regulation of managed investment schemes set out in Ch 5C of the Corporations Act has been summarised in two recent decisions of this Court70. For present purposes it is sufficient to recall two features of that regime in its application to registered schemes. First, the constitution of a registered scheme: must be contained in a document that is legally enforceable as between the members and the responsible entity71; and must make adequate provision for the powers of the responsible entity in relation to making investments of, or otherwise dealing with, scheme property72. Second, the responsible entity of a registered scheme, by force of the Corporations Act operating on its status as the responsible entity: holds scheme property on trust for scheme members73; is obliged to operate the scheme and to perform the functions conferred on it not only by the Corporations Act itself but also by the constitution74; and in exercising its powers and carrying out its duties, 70 Westfield Management Ltd v AMP Capital Property Nominees Ltd (2012) 247 CLR 129 at 135-137 [10]-[15]; [2012] HCA 54; MacarthurCook Fund Management Ltd v TFML Ltd (2014) 88 ALJR 616 at 617-619 [2]-[6]; 308 ALR 202 at 204-205; [2014] HCA 17. 71 Section 601GB. 72 Section 601GA(1)(b). 73 Section 601FC(2). 74 Section 601FB(1). is obliged (amongst other things) to act in the best interests of members75, to treat members who hold interests of the same class equally76, and to ensure that all payments out of scheme property are made in accordance with the constitution and the Corporations Act77. Subject to the Corporations Act, and to other applicable legislation, the powers of Wellington to deal with Scheme Property as responsible entity are therefore powers to deal with Scheme Property as trustee for unit holders and are to be found in the Scheme Constitution. The substantive question is whether those powers include a power to make an in specie distribution of Scheme Property to unit holders. Answering that question requires close attention to the terms of the Scheme Constitution; it is not assisted by "a priori assumptions as to the nature of unit trusts under the general law"78. Wellington's argument is that the power to make an in specie distribution of Scheme Property to unit holders is to be found in either or both cl 13.1 and cl 13.2.5 of the Scheme Constitution. Wellington argues that, on a literal construction, each of those clauses confers power on it as responsible entity to deal with Scheme Property, which encompasses transferring at least part of the Scheme Property to unit holders. That construction is not inconsistent with the trust relationship established by the Corporations Act, Wellington argues, once it is recognised that the responsible entity must always act in the best interests of unit holders and treat unit holders equally. Wellington further argues that its construction is consistent with cl 16 and cl 26 of the Scheme Constitution. Clause 16, it argues, is directed only to obligations as distinct from powers of the responsible entity. Clause 26, it argues, is directed only to termination of the trust. Wellington's argument has the superficial attraction of literalism, but it breaks down on a close textual and contextual analysis of cl 13.1 and cl 13.2.5 of the Scheme Constitution. Clause 13.1 and cl 13.2.5 each explain the scope of the power conferred by hypothesising the responsible entity to be that which it emphatically is not: the absolute owner of Scheme Property. Clause 13.1 refers to the responsible entity having power to deal with Scheme Property "as though it were the absolute 75 Section 601FC(1)(c). 76 Section 601FC(1)(d). 77 Section 601FC(1)(k). 78 Cf CPT Custodian Pty Ltd v Commissioner of State Revenue (Vic) (2005) 224 CLR 98 at 109 [15]; [2005] HCA 53. owner of the Scheme Property and acting in its personal capacity" (emphasis added). Clause 13.2.5 uses similar language in referring to the responsible entity having power to deal with Scheme Property "as if [it] were the absolute and beneficial owner" (emphasis added). That is the language of a legal fiction79. Ordinarily, a legal fiction is not construed to have a legal operation beyond that required to achieve the object of its incorporation. That general observation applies as much to the construction of a deed of trust80, as it does to the construction of a statute81. The object of the incorporation of the fictional language into cl 13.1 and cl 13.2.5 is plainly to confer powers on the responsible entity to deal with Scheme Property in terms sufficiently broad to ensure that the responsible entity is not confined in the subject-matter of those dealings. Clause 13.1 is the lead provision, spelling out that the responsible entity is to have all of the powers of a natural person. Clause 13.2.5 is a provision which spells out additional specific powers complementary to that general conferral of power. The fictional language in each clause serves to emphasise the amplitude of those powers. That the language is expressly fictional serves equally to acknowledge the legal truth: that the responsible entity is not the beneficial owner of the Scheme Property. The fictional language applies well enough to empower the responsible entity to engage in dealings with Scheme Property with persons other than unit holders. Given that the responsible entity holds the Scheme Property on trust for the unit holders, however, the language would be an extremely awkward way of empowering the responsible entity to engage in dealings with unit holders as unit holders. It makes no sense to refer to a trustee, when distributing trust property to a beneficiary, acting as though the trustee were the absolute owner of property and in a personal capacity, or as if the trustee were the absolute and beneficial owner. The hypothesis defining the scope of the power (that is, absolute and beneficial ownership) would be contradicted by the occasion for its exercise (that is, the existence of the trust relationship itself). There is no warrant for contorting the language of cl 13.1 and cl 13.2.5 to that extent. That is because, within the context of the Scheme Constitution, there is no reason to consider that the objects of the incorporation of that language into cl 13.1 and cl 13.2.5 extend to the conferral of power on the responsible entity to engage in dealings with Scheme Property with unit holders as unit holders. The 79 Re Macks; Ex parte Saint (2000) 204 CLR 158 at 203 [115]; [2000] HCA 62. 80 Federal Commissioner of Taxation v Bargwanna (2012) 244 CLR 655 at 662 [13], 673 [61]; [2012] HCA 11. 81 Muller v Dalgety & Co Ltd (1909) 9 CLR 693 at 696; [1909] HCA 67. powers of the responsible entity to engage in dealings of that nature are the subject-matter of cl 16, during the period of operation of the unit trust, and of cl 26, on its winding up. It is unnecessary for present purposes to address the precise scope of cl 26. It is necessary to address the scope of cl 16 to the extent of observing that cl 16 is directed to the power, as much as to the obligation, of the responsible entity to make distributions of Scheme Property to unit holders. Three features of cl 16 make that plain. The first is the required frequency of distribution; under cl 16.2 the distribution entitlement of unit holders must be calculated and paid quarterly. The second is the required method of calculation of that quarterly distribution entitlement; under cl 16.3 the distribution entitlement is to include any amount of capital that the responsible entity has determined during the applicable quarter is to be distributed. The third is the required means of payment; the mandatory terms of cl 16.4 contemplate only payment into a unit holder's bank account or reinvestment in the Scheme or otherwise as directed by a unit holder. Wellington's argument gives insufficient weight to the second of those features. Construed in the context of cl 16 and cl 26 of the Scheme Constitution, cl 13.1 and cl 13.2.5 have no application to dealings between the responsible entity and unit holders as unit holders. The Full Court was correct to conclude that neither is a source of power for the responsible entity to make an in specie distribution to unit holders. It follows that the Full Court was correct to conclude that Wellington made an in specie distribution of Scheme Property which Wellington as responsible entity had no power to make under the Scheme Constitution. The procedural question No issue is taken in the appeal with the jurisdiction of the Full Court to embody its conclusion in the declaration it made under s 21 of the Federal Court of Australia Act. No occasion therefore arises to consider whether the same or a similar declaration might have been made under one or more provisions of the Corporations Act82. Nor is any issue taken as to the form of the declaration. Wellington's argument is that the Full Court erred in exercising its discretion to make the declaration, which it says "casts a cloud on title" to the transferred property in circumstances where unit holders to whom Scheme Property was transferred in specie were not represented in the appeal and were not otherwise given an opportunity to be heard. 82 Eg s 1101B(1)(a)(i) and s 1317E(1)(f) read with s 601FC(1)(k) and (m) and s 601FC(5). The applicable principle is that a declaration which directly affects a person's rights or liabilities should not be made under s 21 of the Federal Court of Australia Act unless that person is joined as a party. The application of that principle involves "matters of degree, and ultimately judgment"83. The judgment made in the present case was open to the Full Court. It is important in this respect to recognise that the reference in the declaration which the Full Court made to the in specie transfer to unit holders having been "beyond the power" of Wellington under the Scheme Constitution reflects the sense in which the word "power" is used in the Scheme Constitution and in the relevant provisions of the Corporations Act. The reference in the declaration is not to an absence of legal capacity, but to the breach by Wellington of a legal norm which governed the exercise of Wellington's legal capacity as legal owner of the property transferred. To declare that the transfer was beyond the power of Wellington under the Scheme Constitution is not thereby to impugn the validity of the transfer of legal title84, but merely solemnly to record that Wellington breached that legal norm in making that transfer. 83 News Ltd v Australian Rugby Football League Ltd (1996) 64 FCR 410 at 524-525. 84 Cf Rolled Steel Products (Holdings) Ltd v British Steel Corporation [1986] Ch 246
HIGH COURT OF AUSTRALIA APPELLANT AND THE QUEEN RESPONDENT Smith v The Queen [2015] HCA 27 5 August 2015 ORDER Appeal dismissed. On appeal from the Supreme Court of Queensland Representation A Boe with P Morreau and S McGee for the appellant (instructed by Biggs Fitzgerald Pike Solicitors) A W Moynihan QC with S J Hedge for the respondent (instructed by Director of Public Prosecutions (Qld)) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Smith v The Queen Criminal law – Appeal – Appeal against conviction – Fair trial – Procedural fairness – Jury disclosed interim votes and interim voting patterns to judge – Judge did not disclose jury's interim votes or voting patterns to counsel – Judge's obligation to inform counsel of precise terms of jury's questions – Whether appellant denied procedural fairness by non-disclosure of jury's interim votes and voting patterns – Whether jury's interim votes and voting patterns relevant consideration to issue before court – Whether jury's interim votes and voting patterns relevant to discretion to permit majority verdict or discharge jury – Whether disclosure of jury's interim votes and voting patterns necessary for proper performance of jury's functions. Criminal law – Confidentiality of jury deliberations – Directions to jury – Directions not to communicate or reveal interim votes or interim voting patterns to court – Whether appropriate for trial judge to inquire of jury as to interim votes or voting patterns. Words and phrases – "capacity to influence the trial judge's exercise of discretion", "confidentiality of jury deliberations", "interim votes", "interim voting patterns", "necessary for the proper performance of the jury's functions", "procedural fairness". Jury Act 1995 (Q), ss 50, 59A, 60(1), 70. FRENCH CJ. I agree with Gordon J. KIEFEL J. I agree with Gordon J. BELL J. I agree with Gordon J. Bell I agree with Gordon J. GORDON J. The appellant was charged with one count of rape. He was tried in the District Court of Queensland by judge and jury. After the jury retired to consider its verdict, the trial judge received a note from the jury which disclosed interim votes of the jury and the voting pattern for each disclosed interim vote. The trial judge told counsel that the note indicated that the jury was not in total agreement but the trial judge did not disclose to counsel those interim votes or interim voting patterns. Did the failure of the trial judge to inform counsel of those interim votes and interim voting patterns constitute a denial of procedural fairness? The answer to that question is no. There was no denial of procedural fairness. The interim votes and interim voting patterns of the jury were not relevant to the future conduct of the trial. What was relevant to the issue before the court about the future conduct of the trial were the jury speaker's answers, given in open court, to the trial judge's direct questions about whether allowing a majority verdict might resolve the situation and whether the jury wanted more time to consider its verdict. The appeal should be dismissed. The facts The appellant's trial began on Tuesday, 18 February 2014. There was no dispute that the appellant had sexual intercourse with the complainant. The issues for the jury were whether that intercourse was by consent and, if not, whether the appellant had an honest and reasonable, but mistaken, belief as to consent. The jury retired to consider its verdict at 11.14 am on Friday, 21 February 2014. No direction was given to the jury concerning any prohibition or restriction upon the disclosure of jury deliberations to the court. The jury was told: "If you need any further directions on the law, again, all you need to do is ask. I ask if you have any requests that you reduce them to writing so that they can be considered before you are brought back in the court room." At 3.09 pm that day, the jury was permitted to disperse and return the following Monday to resume deliberations. The trial judge said, in part: "You shouldn't talk to anyone at all about the case or any of the decisions you've got to make or any thoughts you've got about the case, and that also includes any one of your number, at this stage. You should only deliberate when all 12 of you are together, so, when I allow you to separate now and go home, you can't even talk about it between yourselves, all right? So simply put the case aside. Obviously, you can think about it over the weekend, but you shouldn't discuss it with anyone else." On Monday, 24 February 2014, the jury resumed deliberations. The jury sent the trial judge a note. The jury sought further direction on the term "beyond reasonable doubt", the reading of part of a witness' statement and a definition of "consent". Following consultation with counsel, the trial judge dealt with those matters at 12.31 pm. At 2.31 pm that day, the trial judge read to counsel a further note sent to him by the jury. The note read "[t]his jury cannot reach a consensus of opinion. Please advise." At 2.33 pm, the jury was given a Black1 direction and asked to consider the matter anew. At 4.20 pm, the trial judge told counsel that the jury had sent him a third note. The third note read: "To His Honour, The jury is still not in total agreeance. - First formal vote was [redacted] for [redacted] against (Guilty) - Second formal vote was [redacted] for [redacted] against Thank you." The trial judge informed counsel that the note read "[t]he jury is still not in total agreement." The trial judge told counsel that the note disclosed the jury's voting patterns, which he did not intend to publish further. The trial judge also stated that the jury had been deliberating for more than eight hours. Counsel did not disagree with that calculation or disagree with the trial judge's declaration that he did not intend to disclose the jury's voting patterns. To understand why it is relevant that the jury had deliberated for more than eight hours and what the trial judge next told counsel, it is necessary to refer to some provisions of the Jury Act 1995 (Q) ("the Jury Act"), which governs juries in Queensland. 1 Black v The Queen (1993) 179 CLR 44; [1993] HCA 71. For certain criminal trials, s 59A(2) of the Jury Act permits a trial judge to ask a jury to reach a "majority verdict" if, after the "prescribed period", the judge is satisfied that the jury is unlikely to reach a unanimous verdict after further deliberation. A "majority verdict", if the jury consists of 12 jurors, is a verdict on which at least 11 jurors agree2. "Prescribed period" is defined in s 59A(6) to mean: a period of at least 8 hours after the jury retires to consider its verdict, not including any of the following periods – a period allowed for meals or refreshments; (iii) a period during which the judge allows the jury to separate, or an individual juror to separate from the jury; a period provided for the purpose of the jury being accommodated overnight; or the further period the judge considers reasonable having regard to the complexity of the trial." After discussing the calculation of the eight hours, the trial judge told counsel of his intention to question the jury members on whether they could reach a majority verdict: "[I]t's open to give them the majority verdict direction. What I propose to do is to ask them whether an 11:1 vote would resolve the issue and see what their answer is to that. It may be that it won't. This is the second note I've got that they're deadlocked. … What I intend to do is tell them that there's a majority verdict option open to them now, that it is 11:1 and will that resolve the situation." Neither counsel made an application for the jury to be discharged. The jury returned at 4.25 pm. The trial judge said: "Ladies and gentlemen, because a certain period of time has passed without your ability to reach a unanimous verdict, the law now allows a majority verdict to be taken in a case like this. The majority, however, is 11:1. So I need to know, I suppose, from you whether that might resolve the situation and whether you want further time to consider, because now I can take a verdict of 11 of you. It must be an agreed verdict between 11 of you. That's the extent of the majority verdict I can take." Jury Act, s 59A(6). After identifying the jury speaker, the trial judge then said: "Do you want more time to consider that, or – I've got the contents of your note. I haven't disclosed it, because really your voting is a matter for yourself. So the parties aren't aware of your voting, but if you want some more time, then you can have it, certainly." The jury speaker responded saying "[y]ou could probably give us about half an hour and we can [indistinct]." The trial judge asked the jury to retire again. He reminded the jury that a majority verdict had to be an 11:1 verdict and that that required agreement between 11 of them. The jury retired at 4.26 pm. The third note was placed in an envelope and sealed. The jury returned at 4.44 pm. The jury convicted the appellant by a majority of 11:1. The Jury Act – other relevant provisions Section 70 of the Jury Act, entitled "Confidentiality of jury deliberations", provides that a person must not publish to the public "jury information": s 70(2). "Jury information" is defined in s 70(17) to mean: information about statements made, opinions expressed, arguments advanced, or votes cast, in the course of a jury's deliberations; or information identifying or likely to identify a person as, or as having been, a juror in a particular proceeding." (emphasis added) Section 70(3) prohibits a person from seeking from a juror or former juror the disclosure of jury information. Section 70(4) prohibits a juror or former juror from disclosing jury information if the juror or former juror has reason to believe any of the information is likely to be, or will be, published to the public. Sub-sections (2)-(4) of s 70 are subject to sub-ss (6)-(17)3. Section 70(6) is important. It provides that "[i]nformation may be sought by, and disclosed to, the court to the extent necessary for the proper performance of the jury's functions." Section 50 requires members of the jury to "be sworn to give a true verdict, according to the evidence, on the issues to be tried, and not to disclose Jury Act, s 70(5). anything about the jury's deliberations except as allowed or required by law" (emphasis added). Section 70(6) is such a law. Section 60(1) provides that "[i]f a jury can not agree on a verdict, or the judge considers there are other proper reasons for discharging the jury without giving a verdict, the judge may discharge the jury without giving a verdict." A decision of a judge under s 60 is not subject to appeal4. The Court of Appeal The appellant appealed to the Court of Appeal of the Supreme Court of Queensland against his conviction. He alleged, among other things, that the trial judge should have disclosed the precise contents of the third note from the jury (including what that note said about interim votes and interim voting patterns of the jury). The Court of Appeal (Holmes JA, Philippides and Dalton JJ)5 relevantly concluded that (1) the information about interim votes and interim voting patterns in the jury's third note was neither relevant nor capable of influencing the trial judge's exercise of discretion to permit a majority verdict6; (2) there was no denial of procedural fairness to the appellant when the trial judge did not disclose to counsel the interim votes and interim voting patterns recorded in the third note before exercising the discretion to ask the jury to reach a majority verdict7; and (3) there was no need for the trial judge to discharge the jury simply because he did not propose to disclose the interim votes and interim voting patterns recorded in the third note8. Jury Act, s 60(3). 5 R v Smith [2014] QCA 277. 6 R v Smith [2014] QCA 277 at [88]. 7 R v Smith [2014] QCA 277 at [89]. 8 R v Smith [2014] QCA 277 at [89]. In reaching those conclusions, the Court of Appeal declined9 to follow a unanimous decision of the Victorian Court of Appeal in LLW v The Queen10 and a majority decision of that Court in HM v The Queen11. Jury votes or voting patterns should not be disclosed Jury deliberations should, so far as possible, remain confidential12. That is a principle of the highest significance in the criminal justice system13. When conveying to a trial judge that they are having difficulty in reaching a verdict, juries should not reveal their votes or voting patterns14. It would be a sensible measure for trial judges to give a direction to juries that they should not communicate or reveal to the court their votes or voting patterns in favour of conviction or acquittal, to lessen the risk of any such disclosure before delivery of a verdict15. And in that connection a trial judge should not inquire of a jury as to its votes or voting patterns16. The purpose of the confidentiality of jury votes or voting patterns is twofold. First, it maintains confidence in the jury system. It enables jurors to approach their task through frank and open discussion knowing that what is said in the jury room remains in that room17. It permits the exchange of views which contributes to the development, over time, of the individual and collective views of the jurors. That process is fluid, not static. 9 R v Smith [2014] QCA 277 at [85]-[87]. 11 (2013) 231 A Crim R 349. 12 Jury Act, ss 50 and 70; HM v The Queen (2013) 231 A Crim R 349 at 352 [5]. See also Minarowska (1995) 83 A Crim R 78 at 84. 13 HM v The Queen (2013) 231 A Crim R 349 at 352 [5]. See also Re Portillo [1997] 2 VR 723 at 726; R v Smith [2005] 1 WLR 704 at 707 [7]; [2005] 2 All ER 29 at 14 R v Gorman [1987] 1 WLR 545 at 551; [1987] 2 All ER 435 at 439. 15 MJR v The Queen (2011) 33 VR 306 at 319 [74]-[75]; LLW v The Queen (2012) 35 VR 372 at 386 [70]; R v Smith [2014] QCA 277 at [101]. 16 R v Rose [1982] 1 WLR 614 at 621; [1982] 2 All ER 536 at 541; MJR v The Queen (2011) 33 VR 306 at 313 [41]; Nguyen v The Queen [2013] VSCA 65 at [25]. 17 Smith v Western Australia (2014) 250 CLR 473 at 481 [31]; [2014] HCA 3. The fluidity arises because the process is a human endeavour. The development of each juror's assessment and understanding of the questions to be answered is necessarily unique. It does not happen at the same time and in the same manner. The fluidity in the process also arises because of the nature of the jury's task. A jury is usually required to consider not only the ultimate question of whether guilt has been established beyond reasonable doubt, but also particular questions that are steps along the way to the final conclusion reflected in a verdict, or the inability to reach a verdict. As a juror's understanding of one question changes, so might their understanding of others. Indeed, until the final verdict, each juror is entitled to change their mind18 and they do19. The second purpose of the confidentiality of jury votes or voting patterns, directly related to the first purpose, is that it protects the finality of the verdict20. The process by which the jury reached its verdict is not relevant21. It is the final verdict of the jury, or the inability of the jury to reach a verdict, that is relevant. In the present appeal, the appellant submitted that he was denied a fair trial in accordance with law because procedural fairness required that the interim votes and interim voting patterns of the jury set out in the third jury note be disclosed to counsel and this was not done. The balance of these reasons will consider the appellant's entitlement to a fair trial in accordance with law and then explain why the non-disclosure of the interim votes and interim voting patterns of the jury did not give rise to a denial of procedural fairness. Accused entitled to a fair trial in accordance with law An accused is entitled to a fair trial in accordance with law22. An accused's right to a fair trial in accordance with law is ensured, and informed, by 18 Black v The Queen (1993) 179 CLR 44 at 51. 19 See, eg, Burrell v The Queen (2007) 190 A Crim R 148 at 218-219 [290]-[294]; LLW v The Queen (2012) 35 VR 372 at 378 [24]-[25], 381 [32], 383 [50], 385 [63]. 20 Smith v Western Australia (2014) 250 CLR 473 at 481 [31]. 21 Unless an exception applies: see Smith v Western Australia (2014) 250 CLR 473 at 480-485 [27]-[48]. Those exceptions do not arise here. 22 Wilde v The Queen (1988) 164 CLR 365 at 375; [1988] HCA 6; Lee v The Queen (2014) 88 ALJR 656 at 665 [47]; 308 ALR 252 at 263; [2014] HCA 20. "rules of law and of practice designed to regulate the course of the trial"23. As stated by Mason CJ and McHugh J in Dietrich v The Queen24: "There has been no judicial attempt to list exhaustively the attributes of a fair trial. That is because, in the ordinary course of the criminal appellate process, an appellate court is generally called upon to determine, as here, whether something that was done or said in the course of the trial, or less usually before trial, resulted in the accused being deprived of a fair trial and led to a miscarriage of justice." (footnote omitted) One of the requirements of a fair trial is that the accused be accorded procedural fairness. In R v Wise25 Ormiston JA (with whom Brooking and Chernov JJA agreed) explained one part of procedural fairness in these terms: "It is an elementary rule, whether in relation to civil or criminal proceedings, that a judge shall not determine any question without affording counsel for each party an opportunity to see and comment upon any material relevant to the issue before the court which is available to the judge and known not to be available to counsel". (emphasis added) There are two related aspects of this rule. First, information relevant to issues before the court which is available to the judge and known not to be available to counsel must be disclosed to counsel. The second aspect is that the accused and the prosecution must be afforded an opportunity to make submissions which bear upon questions about the future conduct of the trial. For these reasons, as Chernov JA rightly said in Ucar v Nylex Industrial Products Pty Ltd26: "[T]he general rule [is] that a party should be given the opportunity to respond to matters prejudicial to its interests that are known only to the 23 Dietrich v The Queen (1992) 177 CLR 292 at 299-300; [1992] HCA 57, citing Bunning v Cross (1978) 141 CLR 54; [1978] HCA 22, R v Sang [1980] AC 402 and Jago v District Court (NSW) (1989) 168 CLR 23 at 29; [1989] HCA 46. 24 (1992) 177 CLR 292 at 300. 25 (2000) 2 VR 287 at 294 [20]. 26 (2007) 17 VR 492 at 503 [27]. The general rule might be affected by specific legislative provisions: see, eg, Condon v Pompano Pty Ltd (2013) 252 CLR 38; [2013] HCA 7. court and which might be taken into account in the determination of issues that may affect the party's property, rights or legitimate expectations." It follows that if information made available to a judge is not relevant to an issue before the court, nor regarded by the judge as relevant, then its non- disclosure to counsel cannot be a denial of procedural fairness. Issue and analysis At least until the jury withdrew to consider its verdict, there is no suggestion that the appellant's trial was other than according to law. Did the appellant have a fair trial according to law after the point at which the jury retired to consider its verdict? In particular, did the appellant have a fair trial according to law after the trial judge received the third note from the jury (which set out interim votes and interim voting patterns of the jury) but decided not to disclose the precise contents of that note to counsel? The answer is yes. Or to put the same question another way, when the trial judge received the third note from the jury, was the trial judge obliged, before determining whether to permit a majority verdict or to discharge the jury27, to disclose to counsel the precise contents of that note? The answer to that question is no. Why must the questions be answered this way? First, the general principle that interim votes and interim voting patterns of a jury should not be disclosed was not displaced by the Jury Act. Neither party submitted to the contrary. The Jury Act contains a number of express restrictions on the disclosure of jury deliberations and "jury information". Each juror swears an oath or affirmation "not to disclose anything about the jury's deliberations except as allowed or required by law."28 Section 70(2) prohibits publication of "jury information" to the public. "Jury information" includes information about the votes cast in the course of a jury's deliberations29. And it is an offence for a 27 Section 60(1) of the Jury Act provides the judge with a discretion to discharge the jury. That discretion is not subject to any temporal limitation. Therefore, if the prescribed period in s 59A has elapsed, the judge could consider a majority verdict or discharge of the jury: cf R v Smith [2014] QCA 277 at [62]. 28 Jury Act, s 50. 29 Jury Act, s 70(17). juror to disclose jury information if the juror has reason to believe any of the information is likely to be, or will be, published to the public30. Section 70(6) provides that "[i]nformation may be sought by, and disclosed to, the court to the extent necessary for the proper performance of the jury's functions" (emphasis added). Disclosure to the court of interim votes and interim voting patterns of the jury is not necessary for the proper performance of the jury's functions. Disclosure is not necessary to enable the jury to perform its role of determining whether the prosecution has established the guilt of the accused beyond reasonable doubt. Disclosure is not necessary to enable a judge to reach a view on whether to ask the jury to consider a majority verdict under s 59A(2) or to discharge the jury under s 60(1). Neither s 59A(2) nor s 60(1) contemplates disclosure of the interim votes or interim voting patterns of the jury to the trial judge in the exercise of the discretion. The Jury Act seeks to maintain the confidentiality of a jury's interim votes and interim voting patterns, notwithstanding the availability of the judicial discretions that exist in ss 59A(2) and 60(1). Second, the general principle that a jury's interim votes or interim voting patterns are not to be disclosed was not displaced by the accused's right to a fair trial in accordance with law31, ensured and informed by principles of procedural fairness. In considering procedural fairness in this appeal, the question to be asked and answered is whether the material – here, information about interim votes and interim voting patterns of the jury at a time prior to verdict which was available to the trial judge and known not to be available to counsel – was relevant to an issue before the court. That information was not made relevant by the Jury Act32. And because of the protean and changeable character of the jury's deliberations, it was not otherwise relevant. As this Court said in Black v The Queen33, it is "proper to remind the jurors that they should listen to each other's views, weigh them objectively and that an individual juror can change his or her mind if honestly persuaded that his or her preliminary view is not well founded." Precisely because a jury's votes can and do change, a statement of what a jury's votes were 30 Jury Act, s 70(4). 31 See [38]-[42] above. 32 See [47]-[49] above. 33 (1993) 179 CLR 44 at 51. at a time prior to verdict is not relevant. It is a statement which adds nothing to the knowledge that the jury is deadlocked or has not yet reached a verdict. Indeed, as Philippides J said in the Court of Appeal below34: "[O]ne may question the extent to which the precise voting figures may provide a useful basis for submissions. Individual jurors do not necessarily reach a particular conclusion by the same route and thus the jury figures may present a misleading picture of the extent and nature of the division of the jury. They may not reflect the true complexity of the jury's reasoning and lead to a type of second-guessing of the jury's deliberations." After the delivery of the third note, what was relevant were the jury speaker's responses to the trial judge's questions, asked in open court and set out at [18]-[20] above, about whether allowing a majority verdict might resolve the situation and whether the jury wanted more time to consider its verdict. The length and complexity of the trial, as well as the time the jury had already spent deliberating, were also relevant considerations. Information as to interim votes or interim voting patterns of the jury prior to verdict was not relevant. Counsel were therefore not denied any opportunity to make any submission about any relevant matter. Capacity of voting patterns to influence a trial judge The appellant submitted that the information about interim votes or interim voting patterns of the jury at a time prior to verdict had a capacity to influence the trial judge's exercise of discretion to either allow a majority verdict or to discharge the jury. That submission should be rejected. The trial judge knew that the jury was deadlocked. When the trial judge asked the jury whether allowing a majority verdict might resolve the situation and whether the jury wanted more time to consider its verdict, the trial judge did not know what the result was going to be. At that point in time, the conduct of the trial judge and counsel was dependent on the jury speaker's response to those questions and to the other jurors' reactions to the jury speaker's responses. It was not dependent on, or affected by, what had been disclosed in the third note. Moreover, in this appeal, information as to interim votes or interim voting patterns of the jury prior to verdict – information which, as has been explained, was not relevant to the exercise of the discretion – was not taken into account by the trial judge. The trial judge told the jury that he had not disclosed the precise contents of the note containing that information, "because really your voting is a matter for yourself." From this statement it should be inferred that the trial judge 34 R v Smith [2014] QCA 277 at [99]. rightly disregarded the information that the jury had given as to its votes or voting patterns prior to verdict. There was no denial of procedural fairness. Extent of numerical split The redactions to the third jury note mean that the extent of the numerical split disclosed to the trial judge is not known. However, the extent of the numerical split disclosed does not and cannot alter these conclusions. Even if disclosure of interim votes or interim voting patterns of a jury prior to verdict indicated that, at some point in its deliberations, the jury was split 11:1, that fact (and its disclosure) would not be relevant to and would not have the capacity to influence any decision the judge has to make about the future conduct of the trial. Without much further and more detailed information about the state of the jury's deliberations (which it is impermissible to seek), the note tells the judge no more than that, at some point in its deliberations, the jury was not in unanimous agreement. It says nothing about the question of whether further deliberation might lead to a verdict that can be taken. To the extent that decisions of intermediate courts35 suggest that a trial judge is required to disclose interim voting patterns in the event of an 11:1 split, those decisions are incorrect and should not be followed. Other matters In LLW v The Queen36 and a majority decision in HM v The Queen37, the Victorian Court of Appeal reached conclusions contrary to that reached in these reasons. The Court of Appeal's conclusions did not depend upon any relevant difference between the applicable legislative provisions. It follows from what has been said earlier that the decision in LLW v The Queen and the majority decision in HM v The Queen should not be followed. None of the preceding analysis should be understood as detracting from the proposition that a trial judge must disclose to counsel the precise terms of any questions asked by a jury38. The precise questions asked by a jury will be material relevant to an issue before the court, and the accused and the prosecution should be afforded an opportunity to make submissions on any issues raised by those questions. 35 See, eg, MJR v The Queen (2011) 33 VR 306 at 316 [56]-[59]; Nguyen v The Queen [2013] VSCA 65 at [17], [19], [78]. 37 (2013) 231 A Crim R 349. 38 R v Black (2007) 15 VR 551 at 555 [16]. The questions from the jury in this appeal demonstrate the point. The jury asked the trial judge questions concerning the term "beyond reasonable doubt" and access to part of the evidence, and a further question of law39. Those questions were material relevant to an issue before the court. Some questions from a jury are directed at the ultimate question of whether guilt has been established beyond reasonable doubt, the final conclusion being reflected in a verdict or the inability to reach a verdict. Other questions from a jury are steps along the way to that final conclusion. It is for those reasons that the precise questions are disclosed and the accused and the prosecution are afforded an opportunity to make submissions. Conclusion and orders The failure of the trial judge to inform counsel of the interim votes and interim voting patterns of the jury did not constitute a denial of procedural fairness. The central question to be answered in reaching that conclusion was whether the material – the information about the interim votes and interim voting patterns of the jury – was relevant to an issue before the court. Neither the interim votes of the jury nor the interim voting patterns of the jury were relevant to any issue before the court or regarded as such by the trial judge. The appeal should be dismissed. 39 See [10] above.
HIGH COURT OF AUSTRALIA PLAINTIFF AND THE STATE OF NEW SOUTH WALES DEFENDANT Wainohu v New South Wales [2011] HCA 24 23 June 2011 ORDER Order that the questions stated in the special case be answered as follows: Question 1: Is the Crimes (Criminal Organisations Control) Act 2009 (NSW) or any provision or part of it invalid on the grounds that: a. it undermines the institutional integrity of the Supreme Court of New South Wales; or b. it is outside the legislative powers of the Parliament of the defendant? Answer: The Crimes (Criminal Organisations Control) Act 2009 (NSW) is invalid. Question 2: Who should pay the costs of the special case and/or of the proceedings? Answer: The defendant is to pay the costs of the plaintiff of the special case. Representation M A Robinson with W Baffsky and B J Tronson for the plaintiff (instructed by Hardinlaw Solicitors) M G Sexton SC, Solicitor-General for the State of New South Wales and L A Babb SC with J G Renwick for the defendant and intervening on behalf of the Attorney-General for the State of New South Wales (instructed by Crown Solicitor (NSW)) S J Gageler SC, Solicitor-General of the Commonwealth with C C Spruce intervening on behalf of the Attorney-General of the Commonwealth (instructed by Australian Government Solicitor) R J Meadows QC, Solicitor-General for the State of Western Australia and R M Mitchell SC with C S Bydder intervening on behalf of the Attorney-General for the State of Western Australia (instructed by State Solicitor (WA)) W Sofronoff QC, Solicitor-General of the State of Queensland with G P Sammon and A D Scott intervening on behalf of the Attorney-General of the State of Queensland (instructed by Crown Law (Qld)) M G Hinton QC, Solicitor-General for the State of South Australia with L K Byers intervening on behalf of the Attorney-General for the State of South Australia (instructed by Crown Solicitor (SA)) P J Hanks QC with K E Foley intervening on behalf of the Attorney-General for the State of Victoria (instructed by Victorian Government Solicitor) S L Brownhill intervening on behalf of the Attorney-General for the Northern Territory (instructed by Solicitor for the Northern Territory) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Wainohu v New South Wales Constitutional law (Cth) – Judicial power of Commonwealth – Constitution, Ch III – Institutional integrity of State courts – Non-judicial functions conferred upon judges of State courts – Section 5 of Crimes (Criminal Organisations Control) Act 2009 (NSW) ("Act") provided that Attorney-General may, with consent of judge, declare judge of Supreme Court to be an "eligible Judge" for purposes of Act – Section 6(1) provided that Commissioner of Police ("Commissioner") may apply to eligible Judge for declaration that particular organisation is a "declared organisation" for purposes of Act – Section 9(1) provided that eligible Judge may make declaration if satisfied members of particular organisation "associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity", and that organisation "represents a risk to public safety and order" – Section 13(2) relevantly provided that eligible Judge not required to provide "any grounds or reasons" for making declaration – Part 3 of Act empowered Supreme Court to make, on application by Commissioner, control order against member of particular "declared organisation" – Whether function conferred by Act upon eligible Judge to make declaration without requirement to provide grounds or reasons repugnant to or incompatible with institutional integrity of Supreme Court – Whether substantial impairment of institutional integrity of Supreme Court. Words and phrases – "incompatibility", "institutional integrity", "persona designata", "reasons". Constitution, Ch III. Crimes (Criminal Organisations Control) Act 2009 (NSW), ss 5, 6(1), 9(1), 12, FRENCH CJ AND KIEFEL J. Introduction On 6 July 2010, the Acting Commissioner of Police for New South Wales applied to a judge of the Supreme Court of New South Wales for a declaration under Pt 2 of the Crimes (Criminal Organisations Control) Act 2009 (NSW) ("the Act") in respect of the Hells Angels Motorcycle Club of New South Wales ("the Club"). The declaration sought is an administrative, not a judicial act. The judge from whom it is sought is an "eligible judge" so designated under the Act by the Attorney-General of New South Wales. If the eligible judge makes the declaration which is sought then, under Pt 3 of the Act, the Supreme Court will be empowered, on the application of the Commissioner of Police, to make control orders against individual members of the Club1. A member against whom such an order is made is called a "controlled member"2. It is an offence for controlled members to associate with one another3. They are also barred from certain classes of business and occupation4. The plaintiff, Derek Wainohu, is a member of the Club and has been a member for 20 years. If the Club is declared as an organisation under the Act, he is at risk of being made subject to a control order. He has commenced proceedings in this Court seeking a declaration that the Act is, or particular provisions of it are, invalid. He challenges the Act's validity on the basis that it confers functions upon eligible judges and upon the Supreme Court which undermine the institutional integrity of that Court in a way that is inconsistent with the national integrated judicial system for which Ch III of the Constitution of the Commonwealth provides. He also contends that the Act infringes the freedom of political communication and political association implied from the Constitution. The State of New South Wales filed a defence to the claim. The parties agreed a special case pursuant to r 27.08.1 of the High Court Rules. On 15 October 2010, Heydon J referred the special case to the Full Court. 1 The Act provides for "interim control orders" and "control orders": ss 14 and 19. 2 Act, s 3(1). 3 Act, s 26(1). 4 Act, s 27. The Act creates two important functions, both of which are exercised by judges of the Supreme Court of New South Wales. It was not in dispute that a declaration under Pt 2 made by an eligible judge is an administrative act. Nor was it disputed that a control order under Pt 3 is a judicial act. Although the two functions are linked as part of the one statutory scheme, the making of a declaration under Pt 2 is neither an incident nor an element of the judicial function of making a control order under Pt 3. An eligible judge may make a determination under Pt 2 upon information and submissions, without regard to the rules of evidence5, partly based on information and submissions not able to be disclosed to the organisation or its members6, and with no obligation to provide reasons for the determination which is made7. The Act thus provides for the enlistment of judges of the Supreme Court to determine applications for declarations using processes which, if adopted by the Court itself, would be repugnant to the judicial function. The making of a declaration by an eligible judge is a necessary condition for the exercise by the Court of its jurisdiction to make a control order. It is well established that a State legislature, untrammelled by a doctrine of separation of powers derived from the Constitution of the State, can confer administrative functions on a court of the State or on judges of the court. It cannot confer administrative functions on a court which are incompatible with the court's essential and defining characteristics as a court and thereby with its place in the national integrated judicial system for which Ch III of the Constitution provides. Nor, as is explained in these reasons, can a State legislature confer upon judges of a State court administrative functions which substantially impair its essential and defining characteristics as a court. The Act effects such an impairment. It does so because it provides, in effect, that the jurisdiction of the Supreme Court to make control orders against members of an organisation will be enlivened by a decision of a judge of the Court, after an adversarial proceeding, on complex and important matters of fact, for which the Act provides that no reasons need be given. The Act also creates an impression of a connection between the performance of a non-judicial function and the following exercise of judicial power, such that the performance of that function may affect perceptions of the judge, and of the court of which he or she is a member, to the detriment of that court. The plaintiff's challenge to the validity of the Act should succeed. 5 Act, s 13(1). 6 Act, ss 8, 28 and 29. 7 Act, s 13(2). An overview of the Act The object of the Act, as appears from its long title, is "to provide for the making of declarations and orders for the purpose of disrupting and restricting the activities of criminal organisations and their members". It is an object which has been pursued in the long history of laws restricting the freedom of association of certain classes, groups or organisations of persons involved or likely to be involved in the planning and execution of criminal activities8. It is an object legitimised by the incidence and sophistication of what is generally called "organised crime". It is nevertheless an object which must be pursued within the framework of the Constitution so as to maintain the integrity, independence and authority of the courts that may be required to determine whether persons charged with offences under federal, State or Territory laws are guilty of those offences, and to punish them if they are. Under Pt 2 of the Act the Attorney-General may declare judges of the Supreme Court of New South Wales, who give their prior written consent, to be eligible judges for the purposes of Pt 29. The Commissioner may apply in writing10 to an eligible judge for a declaration under Pt 2 that an organisation is a declared organisation for the purposes of the Act11. The application must specify, inter alia, the names of any persons that the Commissioner has reasonable grounds to believe are members of the organisation12. It must set out the grounds upon which the declaration is sought and the information supporting those grounds13. The application must be supported by an affidavit from the Commissioner, or affidavits from senior police officers, verifying its contents14. Members of an organisation the subject of an application for a declaration, and other persons who may be directly affected by its outcome, must be invited, by public notice, to make submissions to the eligible judge at a hearing to be held 8 South Australia v Totani (2010) 242 CLR 1 at 30-35 [32]-[41] per French CJ; [2010] HCA 39. 9 Act, ss 5(2) and 5(3). 10 Act, s 6(2)(a). 11 Act, s 6(1). 12 Act, s 6(2)(d). 13 Act, s 6(2)(e) and (f). The term "information" is not defined. 14 Act, s 6(2)(h). on a date determined by the eligible judge and specified in the notice15. Members of the organisation who are specified in the application16 have a right to make submissions at the hearing. Other members, and persons who may be directly affected by the outcome of the application, may also be present and make submissions with the leave of the eligible judge17. The Commissioner can object to persons being present during any part of the hearing in which information classified by the Commissioner as "criminal intelligence" is disclosed18. The eligible judge must take steps to maintain the confidentiality of information that he or she considers to be properly classified by the Commissioner as criminal intelligence19. They include receiving evidence and hearing argument about the information in private, in the absence of the parties to the proceedings, their representatives and the public20. A member of the organisation or any other person who may be directly affected by the outcome of the application, and who has reasonable grounds to believe that he or she may be subjected to action comprising or involving injury, damage, loss, intimidation or harassment in reprisal for making a submission, 15 Act, s 7. Notice of the application must be published in the Gazette and in a newspaper circulating in the State of New South Wales. 16 Act, s 8(1). 17 Act, s 8(2). Neither of the terms "directly affected" and "submission" is defined. 18 Act, s 8(3). "Criminal intelligence" is defined in s 3(1) as information relating to actual or suspected criminal activity (whether in the State or elsewhere) the to prejudice criminal disclosure of which could reasonably be expected investigations, to enable the discovery of the existence or identity of a confidential source of information relevant to law enforcement, or to endanger a person's life or physical safety. 19 Act, s 8(5) read with s 28. The terms of s 28 and the definition of "criminal intelligence" are similar to provisions of the Liquor Licensing Act 1997 (SA) considered in K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501; [2009] HCA 4. If the judge considers the information cannot properly be classed as criminal intelligence, he or she must ask the Commissioner whether the Commissioner wishes to withdraw the information from consideration – see Act, 20 Act, s 28(3). may make a "protected submission"21. An eligible judge is required to take steps to maintain the confidentiality of a protected submission22. The power of the eligible judge to make a declaration in relation to a particular organisation is conferred by s 9(1): "If, on the making of an application by the Commissioner under this Part in relation to a particular organisation, the eligible Judge is satisfied that: (a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, and the organisation represents a risk to public safety and order in this State, the eligible Judge may make a declaration under this Part that the particular organisation is a declared organisation for the purposes of this Act." "Serious criminal activity" is a defined term. It extends to obtaining material benefits from conduct that constitutes a serious indictable offence, or from conduct engaged in outside New South Wales that, if it occurred in that State, would constitute a serious indictable offence. It includes committing a "serious violence offence". That term is defined as an offence punishable by imprisonment for life or a term of 10 years or more, where the conduct constituting the offence involved loss or serious risk of loss of a person's life, serious injury or serious risk of serious injury to a person, or serious damage to property in circumstances endangering the safety of any person, or perverting the course of justice in relation to conduct that, if proved, would otherwise constitute The eligible judge may make a declaration if satisfied that only some of the members of the organisation associate for the purpose of serious criminal activity provided he or she is satisfied that they constitute a significant group within the organisation in terms of their numbers or their capacity to influence the organisation or its members24. A declaration remains in force for three years 21 Act, ss 8(4) and 8(7). 22 Act, s 8(6) read with s 29. 23 Act, s 3(1). 24 Act, s 9(4)(a). unless sooner revoked or renewed25. It may be revoked by an eligible judge on the request, in writing, of the Commissioner or on application by a member of the organisation26. A declaration creates no rights or liabilities. It is, however, a necessary condition for the exercise by the Supreme Court of the jurisdiction conferred on it by Pt 3 of the Act to determine applications for control orders against members of a declared organisation. The rules of evidence do not apply to the hearing of an application for a declaration27. The eligible judge in making a declaration or a decision under Pt 2 is not required to provide any grounds or reasons for the declaration or decision28. There is no appeal from the judge's decision. A broadly expressed privative clause purports to prevent a decision by an eligible judge from being challenged in any proceedings, including proceedings for prerogative relief29. It was not in dispute, however, that the decision of this Court in Kirk v Industrial Court (NSW)30 has the effect that the section would not prevent a person from seeking prerogative relief in the Supreme Court of New South Wales on the ground of jurisdictional error31. Part 3 of the Act deals with the control of members of declared organisations. It empowers the Supreme Court to make interim control orders and control orders against such persons. The Act provides for an appeal to the Court of Appeal by the Commissioner or by a member to whom a control order applies32. The appeal lies as of right on a question of law and with leave on a 25 Act, s 11(2). 26 Act, s 12(1). 27 Act, s 13(1). 28 Act, s 13(2). The eligible judge is nevertheless subject to an obligation to provide reasons, upon request, to a person conducting a review under s 39 of the Act. Section 39, as amended in December 2010, requires the Ombudsman to report four years after the commencement of the Act on the exercise of powers by police officers under it. The section does not use the word "review". 29 Act, s 35. 30 (2010) 239 CLR 531; [2010] HCA 1. 31 (2010) 239 CLR 531 at 580-581 [98]-[99] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ. 32 Act, s 24(1). question of fact33. The Court of Appeal may confirm, vary or reverse the decision the subject of the appeal and make any consequential or ancillary order34. A person to whom a control order or interim control order applies is referred to in the Act as a "controlled member". Section 26 of the Act makes it an offence for controlled members of a declared organisation to associate with each other. A controlled member must not recruit another person to become a member of the declared organisation35. Controlled members are barred from applying for, or holding, authorisation to conduct certain kinds of businesses or activities36. Any question of fact to be decided in proceedings under the Act is to be decided on the balance of probabilities37. That standard of proof does not apply in relation to proceedings for an offence against the Act38. The Act purports to have effect beyond the limits of New South Wales39. The question whether the Supreme Court of New South Wales would be exercising federal jurisdiction pursuant to s 39 of the Judiciary Act 1903 (Cth) in the event that a control order was sought against a person resident in another State was not explored by the parties or the interveners. 33 Act, s 24(2). 34 Act, s 24(5). 35 Act, s 26A. 36 Act, s 27. Relevant authorisations include those of casino operators and certain casino employees, pawnbrokers, commercial agents, private inquiry agents, tow truck operators, motor dealers, motor repairers and bookmakers. The prohibition extends to security activities under the Security Industry Act 1997 (NSW), carrying on certain activities in connection with the racing industry, selling or supplying liquor, and possessing or using firearms and carrying on business as a firearms dealer. 37 Act, s 32(1). 38 Act, s 32(2). 39 Act, s 4. The challenge to validity The plaintiff attacks the validity of the Act by reference, inter alia, to: the functions it confers on eligible judges including the provisions for private hearings in relation to criminal intelligence and protected submissions; and the functions it confers on the Supreme Court in relation to the making of interim control orders and control orders and particularly the obligation to maintain, as against the person affected by such applications, the confidentiality of criminal intelligence and protected submissions. Those functions are said integrity and independence of the Court. The plaintiff also claims that the Act infringes implied constitutional freedoms of political communication and political association. to undermine institutional the Judges exercising administrative functions – historical context There is no general constitutional prohibition against the appointment of judges to non-judicial offices or to carry out non-judicial functions. As an extensive literature on the subject demonstrates, there is a considerable history of such appointments in Australia40. There has nevertheless long been debate about whether it is appropriate for judges to engage in such activities and, if so, under what circumstances and conditions41. The same debate has taken place in other 40 eg Hallett, Royal Commissions and Boards of Inquiry, (1982) at 57-74; McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non- Judicial Tribunals, (1985); Brown, "The Wig or the Sword? Separation of Powers and the Plight of the Australian Judge", (1992) 21 Federal Law Review 48; Wheeler, "Federal Judges as Holders of Non-judicial Office", in Opeskin and Wheeler (eds), The Australian Federal Judicial System, (2000) 442. 41 An historical overview of the debate appears in McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985). See also Holmes, "Royal Commissions", (1955) 29 Australian Law Journal 253 and comments thereon especially by Menzies QC at 264-267, Sir John Latham at 267-268 and Sir Owen Dixon at 272; Connor, "The Use of Judges in Non-Judicial Roles", (1978) 52 Australian Law Journal 482; McInerney, "The Appointment of Judges to Commissions of Inquiry and Other Extra-Judicial Activities", (1978) 52 Australian Law Journal 540; Brennan, "Limits on the Use of Judges", (1978) 9 Federal Law Review 1; Reid, "The Changing Political Framework", (1980) 24 (January-February) Quadrant 5; Winterton, "Judges as (Footnote continues on next page) common law countries42. The question whether such activities are appropriate for a judge to undertake is not the same as the question whether they fall within limits imposed by the Constitution. Nevertheless, the existence of the debate and the historical practice are consistent with the absence of bright-line rules defining those limits. The involvement of judges in non-judicial activities in or on behalf of the executive government was an unremarkable feature of government in the Australian colonies prior to Federation. The constitutions under which colonial legislatures, executives and judiciaries were established, and which continued and evolved as the Constitutions of the States, did not require separation of judicial from legislative and executive powers43. What Dr Twomey has written of New South Wales is generally true for other Australian States44: "From the very beginning of responsible government in New South Wales, it was not considered inappropriate for judges to perform non- judicial tasks or offices." Evatt J said in Medical Board of Victoria v Meyer45: "Under the State Constitutions, where there is no provision which suggests any separation of powers between executive and judiciary, there is no reason why judges of the Supreme Court or any other court cannot be employed for the purpose of exercising administrative functions although such judges usually exercise judicial power." Royal Commissioners", (1987) 10 University of New South Wales Law Journal 108; Sherman, "Should Judges Conduct Royal Commissions?", (1997) 8 Public Law Review 5. 42 See McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985) at 34-50 in relation to the United Kingdom, New Zealand, Canada and the United States; Mason, "Extra-Judicial Work for Judges: The Views of Chief Justice Stone", (1953) 67 Harvard Law Review 193; Calabresi and Larsen, "One Person, One Office: Separation of Powers or Separation of Personnel?", (1994) 79 Cornell Law Review 1045. 43 See generally Carney, The Constitutional Systems of the Australian States and Territories, (2006) at 344-349. A durable example is the appointment from time to time of Chief Justices of the States as Lieutenant-Governors. 44 Twomey, The Constitution of New South Wales, (2004) at 747. 45 (1937) 58 CLR 62 at 106; [1937] HCA 47. A long-standing example, the use of State magistrates to carry out administrative functions, is "one of the best-known features of Australian legal history"46, although it must be viewed in light of the evolution of the magistracy from functionaries subject independent the executive government into an Judges of federal and State courts have from time to time been appointed by executive governments, sometimes acting pursuant to specific legislation, to conduct Royal Commissions48. Principled opposition to such appointments was expressed by the Chief Justice of Victoria, Sir William Irvine, in a letter sent to the Attorney-General of Victoria in 192349. The focus of the letter was upon the limits of the judicial function and the risk to the Bench of "being drawn into the region of political controversy." While successive Chief Justices of Victoria generally adhered to that position, occasionally judges of the Supreme Court did accept appointment as Royal Commissioners in areas of inquiry calculated to give rise to political debate50. The practice in other States varied, but over the 46 O'Donoghue v Ireland (2008) 234 CLR 599 at 616 [18] per Gleeson CJ; [2008] HCA 14. 47 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 82 [82] per Gummow, Hayne and Crennan JJ; [2006] HCA 44 and see generally South Australia v Totani (2010) 242 CLR 1 at 39-41 [53]-[57] per French CJ. 48 Such Commissions, established by executive governments, whether under prerogative or by statutory authority to inquire and to report to government, are non-judicial in character: Clough v Leahy (1904) 2 CLR 139; [1904] HCA 38; McGuinness v Attorney-General (Vict) (1940) 63 CLR 73 at 84 per Latham CJ, 100-101 per Dixon J; [1940] HCA 6; Lockwood v The Commonwealth (1954) 90 CLR 177 at 180-181 per Fullagar J; [1954] HCA 31; Victoria v Australian Building Construction Employees' and Builders Labourers' Federation (1982) 152 CLR 25 at 147-158 per Brennan J; [1982] HCA 31; X v Australian Prudential Regulation Authority (2007) 226 CLR 630 at 642-643 [43] per Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ; [2007] HCA 4. 49 The text of the letter, often referred to as the "Irvine Memorandum", appears in McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985) at 11. 50 Sir Charles Lowe was appointed as a Royal Commissioner pursuant to the Royal Commission (Communist Party) Act 1949 (Vic), requiring him to inquire into the activities of the Communist Party in Victoria. Herring CJ, Gavan Duffy J and Martin J sat briefly as the Royal Commission into Allegations of Improper Conduct in respect of a No Confidence Motion moved in the Victorian Legislative Assembly in September 1952: McInerney, Moloney and McGregor, Judges as (Footnote continues on next page) past 100 years or so there have been a significant number of cases in which serving judges have sat as Royal Commissioners51. Striking examples of the use of judges for executive functions requiring their fulltime absence from judicial duties included the wartime ambassadorial appointments of Sir John Latham and Sir Owen Dixon52. Sir Owen also acted during the war as Chairman of the Central Wool Committee, the Australian Shipping Control Board and the Marine War Risks Insurance Board53. These might be regarded as anomalous occurrences in unusual circumstances54. Nevertheless, there have been a number of judges, particularly in the second half of the 20th century, appointed to fulltime executive offices while continuing in Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985) at 13-17. Barber J was appointed Chairman of the West Gate Bridge Royal Commission pursuant to the West Gate Bridge Royal Commission Act 1970 (Vic): McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non- Judicial Tribunals, (1985) at 18-19. 51 See Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1 at 31-34 per Kirby J; [1996] HCA 18. 52 Sir John was appointed as Minister Plenipotentiary for the Commonwealth to Japan in 1940 and Sir Owen to the United States in 1942. These appointments were supported by statute: Judiciary Act 1940 (Cth), Judiciary (Diplomatic Representation) Act 1942 (Cth). See generally Connor, "The Use of Judges in Non-Judicial Roles", (1978) 52 Australian Law Journal 482. 53 McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985) at 33. 54 Under the designation "Australian Minister to the United States", Sir Owen Dixon addressed the American Foreign Law Association in 1942 on "The Separation of Powers in the Australian Constitution", (1942) 24 American Foreign Law Association Proceedings 3. Many years later he said "I do not wish it to be thought that, looking in retrospect, I altogether approve of what I myself did": (1955) 29 Australian Law Journal 272. judicial office55. In 1977, Fox J of the Federal Court was appointed as Ambassador-at-Large to promote the cause of nuclear non-proliferation56. Statutes establishing administrative tribunals in four of the States provide for their presidencies to be held by, and their membership to include, judges of the Supreme, District or County Courts57. Similar provisions require the presidencies of the Administrative Appeals Tribunal, the Australian Competition Tribunal, the Copyright Tribunal and the Defence Force Discipline Appeal Tribunal to be held by judges58. Each of these offices is currently held by a serving Federal Court judge. It is perhaps salutary in this context to recall the observation made by Sir Owen Dixon at his swearing in as Chief Justice of this Court in 195259: "There is in Australia a large number of jurisdictions and a confusion in the public mind as to the functions the jurisdictions possess. The character of the functions is misunderstood and the public do not maintain the distinction between the administration of justice according to law and the very important functions of industrial tribunals." Relevantly to the present case, judges on federal, State and Territory courts have for many years undertaken executive functions in relation to the issue of an array of statutory warrants or authorities60. A significant number of the 55 Prominent examples included the appointments of serving judges to the office of Director-General of Security in 1949 and 1976, and as Chairman of the National Crime Authority in 1984 and 1990. 56 An appointment supported by the Judiciary (Diplomatic Representation) Act 1977 (Cth): McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985) at 33. 57 Administrative Decisions Tribunal Act 1997 (NSW), ss 4(1), 12(1) and 17(1); Victorian Civil and Administrative Tribunal Act 1998 (Vic), ss 3, 10(1) and 11(2); Queensland Civil and Administrative Tribunal Act 2009 (Q), ss 175(1) and 176(1); State Administrative Tribunal Act 2004 (WA), ss 107, 108(3) and 112(3). 58 Administrative Appeals Tribunal Act 1975 (Cth), s 7(1); Competition and Consumer Act 2010 (Cth), s 31(1); Copyright Act 1968 (Cth), s 140(1); Defence Force Discipline Appeals Act 1955 (Cth), s 8(1). 59 (1952) 85 CLR xi at xvi. 60 Relevant federal statutes include: Australian Security Intelligence Organisation Act 1979 (Cth), s 34AB; Criminal Code (Cth), s 105.2; Customs Act 1901 (Cth), (Footnote continues on next page) judges of the Supreme Court of New South Wales have been appointed, with their consent, as "eligible" judges to carry out such functions under State laws61. In November 2010, 31 of the judges (including two acting judges) were eligible judges under the Act62. Debate about the desirability of conferring administrative functions on serving judges has more than one dimension. There are questions of principle relating to the independence and impartiality of the courts and the need for an appropriate distance from executive government, even if that distance only accords with convention and falls short of a separation of powers in the constitutional sense. Concerns have been expressed about embroiling judges in political controversies63. A practical consideration is the extent to which a judge discharging extraneous administrative duties (even if only on a part-time basis) is diverted from judicial work. Some functions, such as those relating to the issue of statutory warrants, may involve only a minor imposition on judicial time. Others may be considerably more burdensome. The issues to be determined on an application for a declaration under Pt 2 of the Act indicate that it falls into the latter category. The application to the eligible judge in the present case was accompanied by 35 volumes of material, some of which was said to be "criminal intelligence". A closed preliminary hearing was held before his Honour in the absence of any representative of the Club, in order that his Honour could determine whether the asserted criminal intelligence was "properly classified" as such within the meaning of s 28 of the Act. That hearing concluded on 27 September 2010 and was adjourned for further mention. It is clear that if the application proceeds it will occupy a significant amount of the judge's time. ss 183UD and 219RA; Telecommunications (Interception and Access) Act 1979 (Cth), s 6D. 61 See eg Law Enforcement and National Security (Assumed Identities) Act 2010 (NSW), ss 11(1), 12 and 14(1); Law Enforcement (Powers and Responsibilities) Act 2002 (NSW), ss 46B, 46C(2), 46D(2) and 48; Surveillance Devices Act 2007 (NSW), ss 5, 16(1), 30, 33 and 35; Terrorism (Police Powers) Act 2002 (NSW), ss 27B and 27K. 62 As appears from a list of eligible judges provided to the Court by the State of New South Wales. 63 See eg the Irvine Memorandum, in McInerney, Moloney and McGregor, Judges as Royal Commissioners and Chairmen of Non-Judicial Tribunals, (1985) at 11. Professor Gordon Reid, writing in 1978 about the use of judges in "Modern developments in Australian national government give the impression that the conventional political institutions – Parliament, Executive and Judiciary – are being treated by policy-makers as inconvenient differentiations of a single activity – government." His comment concerned trends in government at the Commonwealth level in the 1970s, but has contemporary relevance. By way of contrast, the opinion has been expressed that an unduly restrictive approach to the functions which it is appropriate for judges to undertake outside the judicial role carries with it a risk of loss of institutional "relevance" for the judiciary. In the same year that Professor Reid wrote, Brennan J, who was then a judge of the Federal Court of Australia and President of the Administrative Appeals Tribunal, acknowledged that there was a risk of a loss of public confidence in the judiciary proportionate to the disparity between functions proposed for performance by a judge and the functions traditionally performed by the courts. He said, however65: "But the risks must be run, or the institution of the judiciary may lose its relevance or, at the least, fall short of discharging fully the functions which the community would commit to it." One of the risks to be balanced against apprehended loss of "relevance" is the erosion of the "inconvenient differentiation" between the judiciary and other branches of government, and relegation of the judicial branch to the status of one among a number of agencies charged with governmental functions. Debates about the appropriateness of conferring non-judicial functions on judges do not directly engage the constitutional question whether such offices and activities are compatible with the judicial functions of federal, State and Territory courts under Ch III of the Constitution. What the debates indicate is that questions of compatibility which require evaluative judgments are unlikely to be answered by the application of precisely stated verbal tests. As Gummow J said in Fardon v Attorney-General (Qld)66: 64 Reid, "The Changing Political Framework", (1980) 24 (January-February) Quadrant 5 at 14. 65 Brennan, "Limits on the Use of Judges", (1978) 9 Federal Law Review 1 at 14. 66 (2004) 223 CLR 575 at 618 [104]; [2004] HCA 46. "the critical notions of repugnancy and incompatibility are insusceptible of further definition in terms which necessarily dictate future outcomes." That conclusion is consistent with the imprecise scope of the judicial power67, which historically was not limited to the determination of existing rights and liabilities in the resolution of controversies between subject and subject, or between subject and the Crown68. It is also consistent with the shifting characterisation of the so-called "chameleon" functions as administrative or judicial according to whether they are conferred upon an authority acting administratively or upon a court69. Assessments of constitutional compatibility between administrative and judicial functions are not to be answered by the application of a Montesquieuan fundamentalism. As Cardozo CJ said in this context70: "The exigencies of government have made it necessary to relax a merely doctrinaire adherence to a principle so flexible and practical, so largely a matter of sensible approximation, as that of the separation of powers. Elasticity has not meant that what is of the essence of the judicial function may be destroyed". Consideration by this Court of the constitutional validity of laws conferring non-judicial functions on designated serving judges has been confined 67 Precision Data Holdings Ltd v Wills (1991) 173 CLR 167 at 188-189; [1991] HCA 58; Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245 at 267 per Deane, Dawson, Gaudron and McHugh JJ; [1995] HCA 10. 68 R v Davison (1954) 90 CLR 353 at 368-369 per Dixon CJ and McTiernan J, Fullagar J agreeing at 375, 382 per Kitto J, 387-388 per Taylor J; [1954] HCA 46; Gould v Brown (1998) 193 CLR 346 at 385-386 [28]-[29] per Brennan CJ and Toohey J; [1998] HCA 6; Dalton v New South Wales Crime Commission (2006) 227 CLR 490 at 505-508 [37]-[46] per Gleeson CJ, Gummow, Hayne, Callinan, Heydon and Crennan JJ; [2006] HCA 17. 69 Pasini v United Mexican States (2002) 209 CLR 246 at 253-254 [12] per Gleeson CJ, Gaudron, McHugh and Gummow JJ; [2002] HCA 3; Thomas v Mowbray (2007) 233 CLR 307 at 326-327 [10]-[12] per Gleeson CJ; [2007] HCA 70 In re Richardson 160 NE 655 at 657 (1928) quoted in Hilton v Wells (1985) 157 CLR 57 at 82 per Mason and Deane JJ; [1985] HCA 16 and in Grollo v Palmer (1995) 184 CLR 348 at 364 per Brennan CJ, Deane, Dawson and Toohey JJ; [1995] HCA 26. to cases involving federal judges71. Apart from dicta, it has not extended to a consideration of State laws conferring administrative functions on the judges of State courts. Before embarking upon that consideration, it is necessary to refer to the principles enunciated by this Court in relation to the use of federal judges for such purposes. Non-judicial appointments of federal judges The decisions of this Court in relation to the extent of Commonwealth legislative power to confer non-judicial functions on federal judges require compatibility between those non-judicial functions and the functions of the courts of which the judges are members. That requirement was engendered by the decision of this Court in R v Kirby; Ex parte Boilermakers' Society of Australia72. The majority in that case held that the judicial power of the Commonwealth could not be conferred on a "body established for purposes foreign to the judicial power, notwithstanding that it is organized as a court and in a manner which might otherwise satisfy ss 71 and 72"73. Their Honours also held that "Ch III does not allow a combination with judicial power of functions which are not ancillary or incidental to its exercise but are foreign to it."74 A mechanism adopted to avoid the stringency of that constraint was the appointment of judges in a non-judicial capacity as "personae designatae" to carry out non-judicial functions not ancillary or incidental to the exercise of the judicial power of the court of which they were members. The incompatibility condition was attached to that mechanism. The idea that a non-judicial function could be conferred on a judge persona designata emerged early in the judgments of this Court75. Dixon J 71 Hilton v Wells (1985) 157 CLR 57; Grollo v Palmer (1995) 184 CLR 348; Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1. 72 (1956) 94 CLR 254; [1956] HCA 10. 73 (1956) 94 CLR 254 at 296 per Dixon CJ, McTiernan, Fullagar and Kitto JJ. 74 (1956) 94 CLR 254 at 296 per Dixon CJ, McTiernan, Fullagar and Kitto JJ, a proposition foreshadowed in obiter remarks of Latham CJ in R v Federal Court of Bankruptcy; Ex parte Lowenstein (1938) 59 CLR 556 at 566-567, Rich J agreeing at 573; [1938] HCA 10, and reproduced in the majority judgment in the Boilermakers' Case at 293-294. 75 Holmes v Angwin (1906) 4 CLR 297; [1906] HCA 64; C A MacDonald Ltd v South Australian Railways Commissioner (1911) 12 CLR 221 at 230 per Griffith CJ, 236 per O'Connor J; [1911] HCA 14. considered the distinctions which that idea imported to be "distinctions without differences."76 Nevertheless he did not reject the idea. The device that followed from it became entrenched77. The term "persona designata" means "[a] person pointed out or described as an individual, as opposed to a person ascertained as a member of a class, or as filling a particular character."78 Its use in England in connection with judicial power developed significantly in the second half of the 19th century. That development was attributed by D M Gordon to "the building of railways, and the consequent creation of new statutory tribunals to deal with compensation claims."79 It was used to characterise the capacity in which taxing masters of the Court of Exchequer exercised specific statutory functions in relation to costs assessed by non-judicial bodies80. It was also used in cases concerned with the construction of wills81. The concept did not put down roots in many common law jurisdictions. It flourished for a time in Canada. However, the terminology, along with the distinction it conveyed, was academically denounced82 and twice judicially interred83 many years ago. The concept found new life in Australia at about the time it was first dispatched in Canada. That new life corresponded with the growth in the 1970s in the use of judges of the Federal Court of Australia in administrative roles. It was invoked in 1979 to answer a challenge to the appointment of a judge of the Federal Court as a member of the Administrative Appeals Tribunal. The 76 Medical Board of Victoria v Meyer (1937) 58 CLR 62 at 97 per Dixon J. 77 (1937) 58 CLR 62 at 72 per Latham CJ, Starke J agreeing at 81, 80-81 per Rich J, 104-105 per Evatt J; Queen Victoria Memorial Hospital v Thornton (1953) 87 CLR 144; [1953] HCA 11. 78 Jowitt's Dictionary of English Law, 3rd ed (2010) at 1700. 79 Gordon, "Persona Designata", (1927) 5 Canadian Bar Review 174 at 178. 80 Re Sheffield Waterworks Act 1864 (1865) LR 1 Ex 54. 81 eg Dimond v Bostock (1875) LR 10 Ch App 358; In re Stansfield (1880) 15 Ch D 84. 82 Gordon, "Persona Designata", (1927) 5 Canadian Bar Review 174 at 184-185. 83 Herman v Deputy Attorney General (Canada) [1979] 1 SCR 729; Minister of Indian Affairs and Northern Development v Ranville [1982] 2 SCR 518. challenge was rejected in Drake v Minister for Immigration and Ethnic Affairs84. The Full Court of the Federal Court held that the judge was appointed persona designata. Bowen CJ and Deane J, with whom Smithers J agreed, found nothing in the Constitution to preclude a judge of a federal court "from, in his personal capacity, being appointed the performance of administrative or executive functions including functions which are quasi judicial in their nature."85 No suggestion was made in that case of a limiting principle based upon a requirement that any such appointment of a federal judge be compatible with the judge's judicial office. to an office involving The challenge rejected in Drake was revisited in 1985 in relation to the Telecommunications (Interception) Act 1979 (Cth) in Hilton v Wells86 with the same result. That Act, as it then stood, conferred on all Federal Court judges the power to issue warrants authorising interception of telephonic communications. It was common ground that the function was administrative. The majority held that the power was conferred "on the judges individually as designated persons" and was therefore validly conferred87. The minority, Mason and Deane JJ, based their dissent on the interpretation of the statute. They required "a clear expression of legislative intention" that the functions conferred were to be exercised by the judges in their personal capacities, detached from the court of which they were members88. They found that "clear expression" to be wanting. An important point made by their Honours related to the appearance of the connection between a judge on whom a non-judicial function is conferred and the court of which that judge is a member. They said89: 84 (1979) 24 ALR 577. 85 (1979) 24 ALR 577 at 584 per Bowen CJ and Deane J, Smithers J agreeing at 592. 86 (1985) 157 CLR 57. 87 (1985) 157 CLR 57 at 69-73 per Gibbs CJ, Wilson and Dawson JJ. 88 (1985) 157 CLR 57 at 81-82. 89 (1985) 157 CLR 57 at 83-84. Leave to argue that Hilton v Wells was wrongly decided was refused by six members of the Court in Jones v The Commonwealth (1987) 61 ALJR 348; 71 ALR 497 on the basis, inter alia, that the relevant legislation had been amended to provide that the judges authorised to issue warrants were designated judges who had consented to that designation. The authority of Hilton v Wells was therefore confined to the provisions with which it had been concerned. "Another reason for adhering to a strict application of settled principle is that when a function is entrusted to a judge by reference to his judicial office the legislators and the community are entitled to expect that he will perform the function in that capacity. To the intelligent observer, unversed in what Dixon J accurately described – and emphatically rejected – as 'distinctions without differences', it would come as a surprise to learn that a judge, who is appointed to carry out a function by reference to his judicial office and who carries it out in his court with the assistance of its staff, services and facilities, is not acting as a judge at all, but as a private individual. Such an observer might well think, with some degree of justification, that it is all an elaborate charade." (reference omitted) The point made by Mason and Deane JJ translates to this case. An eligible judge under the Act is appointed to discharge a substantial non-judicial function. An application for a declaration in relation to an organisation will ordinarily require that there be placed before him or her an extensive array of "information" and "submissions", none of which need be admissible in a court of law. The hearing of the application will yield a decision which is closely linked to the exercise of jurisdiction conferred on the Supreme Court by the Act. It is very likely to involve the use of the facilities and services of that Court. No argument was advanced in Hilton v Wells that the use of the "persona designata" mechanism was subject to a limitation based upon a requirement that non-judicial functions be compatible with the judge's office. Nevertheless, the majority considered the possibility of incompatibility. They said90: "If the nature or extent of the functions cast upon judges were such as to prejudice their independence or to conflict with the proper performance of their judicial functions, the principle underlying the Boilermakers' Case would doubtless render the legislation invalid." The applicability of the persona designata mechanism to federal judges was accepted in Grollo v Palmer91. The Justices in the plurality used the term92: "as a shorthand expression of a the principle of Boilermakers, acknowledging that there is no necessary inconsistency with the separation of powers mandated by Ch III of the Constitution if limitation on 90 (1985) 157 CLR 57 at 73-74 per Gibbs CJ, Wilson and Dawson JJ. 91 (1995) 184 CLR 348. 92 (1995) 184 CLR 348 at 363 per Brennan CJ, Deane, Dawson and Toohey JJ. non-judicial power is vested in individual judges detached from the court they constitute." Their Honours, however, identified two necessary conditions, derived from the judgments in Hilton v Wells, on the use of the mechanism93: "no non-judicial function that is not incidental to a judicial function can be conferred without the judge's consent"; and "no function can be conferred that is incompatible either with the judge's performance of his or her judicial functions or with the proper discharge by the judiciary of its responsibilities as an institution exercising judicial power". latter condition was designated The Incompatibility was said to arise if94: the "incompatibility condition". the commitment to the performance of non-judicial functions were "so permanent and complete" that further performance by the judge of his or her judicial functions would not be practicable; the non-judicial function were such that the capacity of the judge to perform his or her judicial functions with integrity would be compromised or impaired; or the non-judicial function were of such a nature that public confidence in the integrity of the judiciary as an institution or in the capacity of the judge to perform his or her judicial functions with integrity would be diminished. In the event, their Honours rejected the submission that the conferring of power upon designated judges of the Federal Court to issue warrants under the Telecommunications (Interception) Act infringed the incompatibility condition. McHugh J, who dissented in the result, described the incompatibility condition as a "necessity"95. He said96: 93 (1995) 184 CLR 348 at 364-365. 94 (1995) 184 CLR 348 at 365. 95 (1995) 184 CLR 348 at 376. 96 (1995) 184 CLR 348 at 377. "In determining whether incompatibility exists, the appearance of independence and impartiality is as important as its existence … The greater the association between the judicial status of the persona designata and the executive functions that he or she performs, the greater is the likelihood that the judicial and non-judicial functions of that person will seem to be fused. In that situation, it is likely that members of the public will fail to distinguish between the judicial functions of the judge and the executive functions of that person as persona designata and will conclude that the judge is neither independent of the executive government nor impartial when dealing with actions between the citizen and the government and its agencies." That reasoning was unaffected by the differences between his Honour and the majority judges. Although applied to federal judges and federal courts, it is apposite in the determination of the question whether a non-judicial function conferred on a State judge impairs the institutional integrity of the court of which that judge is a member by impairing the reality or appearance of its independence and impartiality. In Hilton v Wells and Grollo, the judicial office of the persons empowered to issue interception warrants was a necessary qualification of their authority, albeit that authority was conferred upon them as personae designatae. The incompatibility condition applies also to a non-judicial function conferred upon someone who is a federal judge even though that person's judicial office is not a qualification for the exercise of the function. That was the case in Wilson v Minister for Aboriginal and Torres Strait Islander Affairs97. In Wilson, a judge of the Federal Court was nominated by the Minister under s 10 of the Aboriginal and Torres Strait Islander Heritage Protection Act 1984 (Cth) to prepare a report in relation to an area for which a group of Aboriginal people was seeking statutory protection by way of ministerial declaration. In their joint judgment, Brennan CJ, Dawson, Toohey, McHugh and Gummow JJ pointed to features of the role of the nominated judge which led them to conclude that her appointment was incompatible with her work as a federal judge. They included: the report prepared by the judge was no more than a condition precedent to the exercise of ministerial power and was an integral part of the process of its exercise98; 97 (1996) 189 CLR 1. 98 (1996) 189 CLR 1 at 18. the reporter lacked the usual judicial protections and was in a position equivalent to a ministerial advisor99; there was nothing to prevent the Minister giving directions to the reporter and the reporter deciding to comply with those directions100; and the report involved the preparation of an advisory opinion on questions of law, a function alien to the exercise of the judicial power of the Commonwealth101. The particular procedures adopted by the judge to reflect her independence from the executive were held to be irrelevant to the question of the validity of her appointment102: "The Constitution is concerned not with the conduct of a judge who exercises his or her discretion to maintain independence from the Legislature or the Executive Government but with the limits on legislative and executive power that might be exercised to confer a function bridging the separation of the Judiciary from the Legislature and the Executive Government." That is to say, the way in which a judge chooses to exercise a non-judicial function does not determine whether that function complies with the standard set by the constitutional incompatibility condition. The Court in Grollo and Wilson was concerned with the application of the incompatibility condition to the appointment of a federal judge to carry out a non-judicial function. That condition is derived from the separation of powers doctrine. The incompatibility condition has been said to indicate standards which may be sufficient to ensure that a State law conferring a non-judicial function on State judges is consistent with the requirements of Ch III103. As will be 99 (1996) 189 CLR 1 at 19. 100 (1996) 189 CLR 1 at 19. 101 (1996) 189 CLR 1 at 19-20. 102 (1996) 189 CLR 1 at 20. 103 Consistently with the reasoning of the plurality in relation to functions conferred upon State courts in Baker v The Queen (2004) 223 CLR 513 at 534 [51] per (Footnote continues on next page) discussed, requirements of compatibility may also be seen as present in the Kable104 doctrine, although the source of that doctrine is not the separation of powers. Of the Kable doctrine, the plurality in Baker v The Queen said105: "The doctrine in Kable is expressed to be protective of the institutional integrity of the State courts as recipients and potential recipients of federal jurisdiction. If the State law in question confers jurisdiction of a nature which would meet the more stringent requirements for the exercise by the Supreme Court of judicial power under investment by federal law, there is no occasion to enter upon the question of whether the less stringent requirements of Kable are met." (footnote omitted) State courts and the national integrated court system impairs Decisions of this Court, commencing with Kable, establish the principle that a State legislature cannot confer upon a State court a function which substantially therefore incompatible with its role, under Ch III of the Constitution, as a repository of federal jurisdiction and as a part of the integrated Australian court system106. The term "institutional integrity", applied to a court, refers to its possession of the defining or essential characteristics of a court. Those characteristics include the reality and appearance of the court's independence and its impartiality107. Other integrity, and which institutional its McHugh, Gummow, Hayne and Heydon JJ; [2004] HCA 45. See also HA Bachrach Pty Ltd v Queensland (1998) 195 CLR 547 at 561-562 [14] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; [1998] HCA 54; Silbert v Director of Public Prosecutions (WA) (2004) 217 CLR 181 at 186 [10] per Gleeson CJ, McHugh, Gummow, Hayne, Callinan and Heydon JJ; [2004] HCA 9. 104 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51; [1996] HCA 105 (2004) 223 CLR 513 at 534 [51]. 106 (1996) 189 CLR 51 at 96 per Toohey J, 103 per Gaudron J, 116-119 per McHugh J, 127-128 per Gummow J; HA Bachrach Pty Ltd v Queensland (1998) 195 CLR 547 at 561-562 [14]; Baker v The Queen (2004) 223 CLR 513 at 519 [5] per Gleeson CJ; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 591 [15] per 107 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 77 [66] per Gummow, Hayne and Crennan JJ. defining characteristics are the application of procedural fairness108 and adherence, as a general rule, to the open court principle109. As explained later, it is also a defining characteristic of a court that it generally gives reasons for its decisions. In the case of the Supreme Courts of the States, that characteristic has a constitutional dimension by reason of the appellate jurisdiction conferred on this Court by s 73 of the Constitution. The principle was described by Kirby J in Baker v The Queen as110: "one of general operation, derived from the Constitution; from the integrated character of the Judicature, federal and State; from the peculiar arrangement for the vesting of federal jurisdiction in State courts; and from the role of this Court at the apex of the entire system." (footnote omitted) It is not within the power of a State legislature to enact a law conferring upon courts which have or can have federal jurisdiction conferred upon them functions incompatible with the role of such courts under Ch III of the Constitution as repositories of federal jurisdiction111. A function conferred upon a court which substantially impairs the institutional integrity of the court has that effect. In Kable112, Gaudron J reasoned that: there is nothing anywhere in the Constitution to suggest that it permits different grades or qualities of justice depending on whether judicial power is exercised by State courts or federal courts created by the Parliament; and State courts, when exercising federal jurisdiction, "are part of the Australian judicial system created by Ch III of the Constitution and, in 108 Leeth v The Commonwealth (1992) 174 CLR 455 at 469-470 per Mason CJ, Dawson and McHugh JJ; [1992] HCA 29; International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 354-355 [55] per French CJ, 379-380 [141] per Heydon J; [2009] HCA 49. 109 Dickason v Dickason (1913) 17 CLR 50; [1913] HCA 77; Russell v Russell (1976) 134 CLR 495 at 520 per Gibbs J; [1976] HCA 23. 110 (2004) 223 CLR 513 at 543 [82]. 111 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 102 per 112 (1996) 189 CLR 51 at 103. that sense and on that account, they have a role and existence which transcends their status as courts of the States"113. Gummow J applied Gaudron J's rationale in Fardon v Attorney-General (Qld)114. The Kable principle does not have its source in the doctrine of the separation of powers. Hayne J made the same point in South Australia v Totani115: "Kable dealt with one respect in which the Constitutions of the States are affected by the federal Constitution: the legislative powers of the States are not unlimited. The relevant limitation is not one which follows from any separation of judicial and legislative functions under the Constitutions of the States. Rather, it is a consequence that follows from Ch III establishing, in Australia, 'an integrated Australian legal system, with, at its apex, the exercise by this Court of the judicial power of the Commonwealth'." (footnotes omitted) A State legislature cannot, consistent with Ch III, enact a law which purports to abolish the Supreme Court of a State116 or which excludes any class of official decision, made under a law of the State, from judicial review for jurisdictional error by the Supreme Court of the State117. Application of the Kable principle has the result that the State legislatures cannot validly enact a law which would effect an impermissible executive intrusion into the processes or decisions of a court118; which would authorise the executive to enlist a court to implement decisions of the executive in a manner incompatible with that court's 113 The quoted words were taken from Leeth v The Commonwealth (1992) 174 CLR 114 (2004) 223 CLR 575 at 617 [101]. 115 (2010) 242 CLR 1 at 81 [201]. 116 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 103 per Gaudron J, 111 per McHugh J, 139 per Gummow J; K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 543-544 [151]-[153] per Gummow, Hayne, Heydon, Crennan and Kiefel JJ. 117 Kirk v Industrial Court (NSW) (2010) 239 CLR 531. 118 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319. institutional integrity119; or which would confer upon any court a function (judicial or otherwise) incompatible with the role of that court as a repository of federal jurisdiction120. The principle in Kable also leads to the conclusion that a State legislature cannot enact a law conferring upon a judge of a State court a non-judicial function which is substantially incompatible with the functions of the court of which the judge is a member. Although the function may be conferred upon the judge in his or her capacity as an individual, the statute may create a close connection and therefore an association with the person's role as a judge. Where this is the case, the potential for incompatibility of the non-judicial function is brought more sharply into focus. The question which then arises is whether the performance of that function would impair the defining characteristics of that court. It is that question with which the Court is concerned in this case. The existence of a limitation on the extent of the power of State legislatures to confer executive functions on State judges was foreshadowed by McHugh J in his judgment in Kable121: "although nothing in Ch III prevents a State from conferring executive government functions on a State court judge as persona designata, if the appointment of a judge as persona designata gave the appearance that the court as an institution was not independent of the executive government of the State, it would be invalid. No doubt there are few appointments of a judge as persona designata in the State sphere that could give rise to the conclusion that the court of which the judge was a member was not independent of the executive government." The incompatibility to which those obiter remarks were directed may arise where there is a substantial impairment of the essential curial characteristics of the executive independence and government. independence from the appearance of It is not necessary, in order to support the validity of a law conferring administrative functions (not incidental to judicial functions) on State judges, that 119 South Australia v Totani (2010) 242 CLR 1 at 52 [82] per French CJ, 67 [149] per Gummow J, 160 [436] per Crennan and Bell JJ, 173 [481] per Kiefel J. See also at 92-93 [236] per Hayne J. 120 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51. 121 (1996) 189 CLR 51 at 117-118. they be conferred persona designata. There is much to be said against the invocation of that device in the State sphere if it be unnecessary. Sir Anthony Mason, reflecting the sentiments expressed by Dixon J in Meyer122, wrote in 1996 that123: "The concept of persona designata has a distinctly artificial flavour about it. The concept, which would have appealed to mediaeval schoolmen, has been criticised on the ground that it contemplates the judge acting in his character at large, detached from the court of which he is a member. The concept has little to commend it. Rationality would be advanced the incompatibility test." (footnote omitted) the concept were jettisoned and replaced by A legislatively prescribed detachment of a State judge from his or her court when performing a non-judicial function may weigh in the balance against a finding of impairment of the institutional integrity of the court. Such a detachment may make it less likely that the exercise of the non-judicial function undermines the reality or the appearance of the court as an institution independent of the executive government of the State. But so long as that function is conferred upon the judge by virtue of his or her office as a judge, the distinction is difficult to grasp and the fact that the function is conferred persona designata should not be given great weight. It would generally not be determinative of the question of compatibility124. 122 (1937) 58 CLR 62 at 97. 123 Mason, "A New Perspective on Separation of Powers", (1996) 82 Canberra Bulletin of Public Administration 1 at 5. For arguments tending to favour a more formalist and less functionalist approach see Walker, "Persona Designata, Incompatibility and the Separation of Powers", (1997) 8 Public Law Review 153. See also Campbell, "An Examination of the Doctrine of Persona Designata in Australian Law", (2000) 7 Australian Journal of Administrative Law 109; Wheeler, "The rise and rise of judicial power under Chapter III of the Constitution: A decade in overview", (2001) 20 Australian Bar Review 283; Meyerson, "Extra- Judicial Service on the Part of Judges: Constitutional Impediments in Australia and South Africa", (2003) 3 Oxford University Commonwealth Law Journal 181. 124 See eg Love v Attorney-General (NSW) (1990) 169 CLR 307; [1990] HCA 4, which concerned a power to issue warrants conferred on a State court which was neither ancillary to the exercise of its judicial power, nor conferred upon its judges as personae designatae. The Court in that case held that the power conferred upon the Supreme Court of New South Wales to issue warrants to the Australian Federal Police under the Listening Devices Act 1984 (NSW) was not inconsistent, under (Footnote continues on next page) It was submitted for the State of Victoria that State legislatures are not limited in the functions which they can confer on judicial officers as personae designatae. A function conferred on a judge, other than in that person's capacity as a State judge, would not, it was submitted, affect the State court of which that judge is a member. That submission should be rejected. The fact that a judge discharges a statutory function as a persona designata does not logically exclude the possibility, which may arise in a variety of ways, that the exercise of that function substantially impairs the institutional integrity of the court by impairing, for example, the reality or appearance of its independence from the executive government. Victoria's alternative submission was that the principle derived from Kable only prevents a State legislature from conferring a function on a State judge as a persona designata if the function is incompatible with the exercise by the judge's court of the judicial power of the Commonwealth. That submission can only be accepted if it is understood to mean that the enactment of any State law which is incompatible with the role of the State court as a repository or potential repository of federal jurisdiction is precluded. Laws precluded by that principle, as explained earlier, extend to laws which substantially impair the institutional integrity of the State court. It is a logical extension of the remarks of McHugh J in Kable, quoted above, that a function conferred upon a judge of a State court is incompatible with the role of the court under Ch III if the conferral and exercise of the function substantially impairs the institutional integrity of the court. It is, however, important that the requirement of compatibility within the Kable doctrine, which is functionalist rather than formalist in character, be approached with restraint. The principle does not apply so as to infringe the freedom that State legislatures enjoy with respect to the organisation and arrangements of their courts125. It is not a surrogate for the application of a separation of powers doctrine to the States. Allowance must be made in assessing incompatibility for the long history in the States of the appointments of judges to extra-judicial roles, a history which predates Federation. It is necessary to bear in mind the caution issued by the late s 109 of the Constitution, with a statutory prohibition under the Customs Act 1901 (Cth). 125 South Australia v Totani (2010) 242 CLR 1 at 46 [67]-[68] per French CJ. 126 "Constitutional Protection of State Courts and Judges", (1997) 23 Monash University Law Review 397 at 421. "While the incompatibility doctrine is meant to be protective of judicial institutions, it has the potential of being applied by courts in ways that some might regard as over-protective of those institutions and insufficiently attentive to the assessments of elected parliaments about what functions are appropriate for courts to perform." Before considering the effects of the functions conferred on the eligible judge under the Act, it is necessary to have regard to the express exclusion by s 13(2) of any obligation on the judge to give reasons for a declaration decision. A declaration decision, as appears from s 9 of the Act, requires factual findings of a wide-ranging and complex nature, as well as the important evaluative judgment that the organisation "represents a risk to public safety and order". There is also a discretion to be exercised in the light of such findings. The jurisdiction of the Supreme Court that can be invoked after a declaration has been made can lead to the imposition of significant restrictions on the freedoms of individuals, including individuals who have not engaged in any criminal activity, and are not likely to do so. The statutory exclusion of a duty on the part of the eligible judge to provide reasons for his or her decisions under Pt 2 contrasts sharply with the general duty of judges of the Supreme Court to give reasons for their judicial decisions. It also means that the basis of the eligible judge's satisfaction as to a necessary condition for the exercise by the Supreme Court of its jurisdiction to make a control order or interim control order may be unexplained to that Court or to anybody else. Reasons for decision and the essential characteristics of a court The centrality, to the judicial function, of a public explanation of reasons for final decisions and important interlocutory rulings has long been recognised. In a passage from the first edition of Broom's Constitutional Law, published in 1866, the author said127: "A public statement of the reasons for a judgment is due to the suitors and to the community at large – is essential to the establishment of fixed intelligible rules and for the development of law as a science … A judgment once delivered becomes the property of the profession and of the public; it ought not, therefore, to be subsequently moulded in accordance with the vacillating opinions of the judge who first pronounced it." 127 As quoted in De Iacovo v Lacanale [1957] VR 553 at 557-558 per Monahan J. That passage was said in the Supreme Court of Victoria to have "general application to all persons exercising judicial functions."128 Its universality was qualified in Public Service Board of New South Wales v Osmond129 by Gibbs CJ, who said that there was no "inflexible rule of universal application" that reasons be given for judicial decisions. His Honour, however, accepted that the requirement to give reasons is "an incident of the judicial process"130. The duty upon judges to give reasons for their decisions has often been linked to the availability of rights of appeal against those decisions131. A wider rationale, foreshadowed in the passage quoted from Broom, can be derived from the nature of the judicial function. In Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd132, Mahoney JA, after referring to the importance of reasons for decision to the effective exercise of appeal rights, said133: "But, in my opinion, the requirement that reasons be given should not be limited to cases where there is an appeal. There is as yet no finally authoritative decision on this question. I think that the requirement should be seen as an incident of the judicial process." The proposition that the provision of reasons for decision is an aspect of the judicial function has been supported by other decisions of the Supreme Courts of New South Wales, Victoria and Queensland134. 128 [1957] VR 553 at 558 per Monahan J. 129 (1986) 159 CLR 656; [1986] HCA 7. 130 (1986) 159 CLR 656 at 666-667, quoting Mahoney JA in Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386. 131 Pettitt v Dunkley [1971] 1 NSWLR 376 at 382 per Asprey JA, 388 per Moffitt JA, Manning JA agreeing at 384; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257-258 per Kirby P, 268-273 per Mahoney JA, 277-281 per McHugh JA; Fox v Percy (2003) 214 CLR 118 at 126 [23]-[24] per Gleeson CJ, Gummow and Kirby JJ; [2003] HCA 22. 132 [1983] 3 NSWLR 378. 133 [1983] 3 NSWLR 378 at 386. 134 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 269 per Mahoney JA, 278-279 per McHugh JA; Sun Alliance Insurance Ltd v Massoud [1989] VR 8 at 19 per Gray J; Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156 at 170 per Mahoney JA, 186 per Handley JA; Cypressvale Pty Ltd v Retail Shop Lease Tribunal [1996] 2 Qd R (Footnote continues on next page) Gummow J in Grollo described the essential attributes of the judicial power of the Commonwealth in familiar terms by reference to the resolution of justiciable controversies by ascertainment of the facts, application of the law and the exercise where appropriate of judicial discretion, adding "which are delivered in public after a public hearing, and, where a judge is the tribunal of fact as well as law, are preceded by grounds for decision which are animated by reasoning."135 Heydon J in AK v Western Australia136 described the duty of judges to give reasons for their decisions after trials and in important interlocutory proceedings as "well-established". His Honour adopted as a summary of the objectives underlying that duty an extra-curial statement by Gleeson CJ137: "First, the existence of an obligation to give reasons promotes good decision making. As a general rule, people who know that their decisions are open to scrutiny, and who are obliged to explain them, are more likely to make reasonable decisions. Secondly, the general acceptability of judicial decisions is promoted by the obligation to explain them. Thirdly, it is consistent with the idea of democratic institutional responsibility to the public that those who are entrusted with the power to make decisions, affecting the lives and property of their fellow citizens, should be required to give, in public, an account of the reasoning by which they came to those decisions." The duty does not apply to every interlocutory decision, however minor. Its content – that is, the content and detail of the reasons to be provided – will vary according to the nature of the jurisdiction which the court is exercising and the particular matter the subject of the decision. The connection between the duty to give reasons and the nature of the judicial power enunciated in Grollo, and the objectives which that duty serves, explained in AK, marks the duty as an incident of the judicial function whether or not the court making the relevant decision is subject to appeal. In the case of the Supreme Court of a State, the duty has a constitutional character. That 462 at 483 per McPherson and Davies JJA; Crystal Dawn Pty Ltd v Redruth Pty Ltd [1998] QCA 373. 135 (1995) 184 CLR 348 at 394. 136 (2008) 232 CLR 438; [2008] HCA 8. 137 (2008) 232 CLR 438 at 470 [89], citing Gleeson, "Judicial Accountability", (1995) 2 The Judicial Review 117 at 122. constitutional character derives from the jurisdiction of this Court under s 73 of the Constitution to hear appeals from all judgments, decrees, orders and sentences of the Supreme Courts of the States. The provision of reasons for decision is also an expression of the open court principle, which is an essential incident of the judicial function. A court which does not give reasons for a final decision or for important interlocutory decisions withholds from public scrutiny that which is at the heart of the judicial function: the judicial ascertainment of facts, identification of the rules of law, the application of those rules to the facts and the exercise of any relevant judicial discretion. Section 13(2) of the Act exempts an eligible judge from any duty to give reasons for making or refusing to make a declaration, save for the purposes of a review by the Ombudsman under s 39 of the Act138. That exemption marks a significant difference, among a number of significant differences, between the functions conferred upon the judge and those conferred on the court of which he or she is a member. The existence of that difference and the statutory context in which it arises are relevant to the question whether the function conferred upon the eligible judge impairs the institutional integrity of the Supreme Court of New South Wales. The functions of the eligible judge under the Act The plaintiff's submissions require a consideration of the nature of the functions conferred on an eligible judge under Pt 2 of the Act. A general overview of those functions has been provided earlier in these reasons. Attention should now be directed to particular aspects, including provisions of Pt 2, relevant to the independence of such judges. The parties differed on whether the appointment of a judge of the Supreme Court as an "eligible judge" was an appointment of the judge as a persona designata. The plaintiff contended that persons appointed as eligible judges are simply judges of the Supreme Court who have agreed to perform additional executive functions under a statute. The submissions by the State of Victoria were directed largely to that question. They were linked to its proposition, discussed and rejected above, that State parliaments are not limited in their power to confer functions on judicial officers as personae designatae because a function conferred on a person in that way "does not affect the State court of which the 138 We agree for the reasons given in the judgment of Gummow, Hayne, Crennan and Bell JJ that s 13(2) cannot be construed pursuant to s 31 of the Interpretation Act 1987 (NSW) to abrogate that exemption. person is a member." Once that submission is rejected, the significance of the classification of an eligible judge's appointment as a persona designata is diminished. Whether or not an eligible judge acts persona designata under Pt 2 or as a member of the Supreme Court, requirements of compatibility direct attention to the functions conferred upon the judge, the extent to which they are connected to or integrated with the exercise of the Court's jurisdiction, and the degree of decisional independence enjoyed by the judge in the exercise of those functions. It is necessary now to turn to the substantive, as distinct from taxonomical, aspects of the functions conferred upon the eligible judge. A starting point is the judge's decisional independence from the executive government. The declaration of a judge as an eligible judge attracts statutory protections. An eligible judge cannot be removed from that office by the Attorney-General. The office ends when the judge ceases to be a judge of the Supreme Court of New South Wales. Otherwise it can only be ended by the judge's revocation of his or her consent to be an eligible judge, or by a notification from the Chief Justice of New South Wales to the Attorney-General that the judge should not continue to be an eligible judge139. A particular judge cannot be selected by the Attorney-General or by any Minister to carry out a particular function under Pt 2. Nor can any eligible judge be controlled and directed by the Attorney-General or any other Minister in the discharge of a function under Pt 2140. The eligible judge has, in relation to the exercise of his or her functions, the same protection and immunity as a judge of the Supreme Court has in relation to proceedings in the Court141. The position of the judge in these respects differs significantly from the position of the Federal Court judge in Wilson. There are obvious analogies between the statutory mechanisms supportive of the decisional independence of an eligible judge under the Act and those protective of the independence of a judge of the Supreme Court. Those mechanisms are compatible with the role of an eligible judge as a judge of the Supreme Court142. Their absence would be indicators of incompatibility – if, for 139 Act, s 5(6). 140 Act, s 5(7). 141 Act, s 5(4). 142 See the reference in Wilson to the independence of federal judges appointed as Royal Commissioners or as part-time Presidential Members of the Administrative Appeals Tribunal: Wilson v Minister for Aboriginal and Torres Strait Islander (Footnote continues on next page) example, they left the Attorney-General free to revoke the appointment of an eligible judge at will, or to direct that a particular eligible judge hear a particular application. Their presence, however, is not determinative. These proceedings will be determined upon a consideration of the nature of the functions conferred on eligible judges and the relationship of those functions to the exercise of the jurisdiction and powers of the Supreme Court. The principal function of an eligible judge is to hear and determine applications for declarations under Pt 2 of the Act. Such hearings have the following important features: the requirement of public notice to members of the organisation, together with the provision for submissions to be made by members and by other persons who may be directly affected by an application for a declaration, mark the hearing as an adversarial proceeding involving the determination of issues of law and fact, likely to be contested; the nature of the proceedings on an application for a declaration indicates, as evidenced by the application presently pending before the eligible judge, that such applications are likely to involve lengthy hearings which, subject to certain exceptions, will be conducted in public; the rules of evidence do not apply143; the judge may "have regard to" a number of matters including information suggestive of a link between the organisation the subject of the application and serious criminal activity144, the criminal convictions of current or former members of the organisation145 and any information "suggesting" that current or former members of the organisation have been, or are, involved in serious criminal activity (whether directly or indirectly and in any criminal whether or not such convictions)146; involvement has resulted Affairs (1996) 189 CLR 1 at 17-18 per Brennan CJ, Dawson, Toohey, McHugh and 143 Act, s 13(1). 144 Act, s 9(2)(a). 145 Act, s 9(2)(b). 146 Act, s 9(2)(c). the judge may "have regard to" submissions made by the Attorney- General or others in accordance with the Act, and any other matter the judge considers relevant147; information constituting criminal intelligence and protected submissions may have to be received in private and in the absence of parties to the proceedings148; the judge is not required to provide any grounds or reasons for his or her decision149; a declaration may be made whether or not any members of the organisation specified in the application or any other persons are present or make submissions150; a declaration can only be revoked upon application to the eligible judge who made it or to any other eligible judge if the judge who made the declaration has died, has ceased to be an eligible judge, or is absent151; and there is no appeal against the judge's decision152 although it is amenable to judicial review for jurisdictional error. Underlying the "persona designata" characterisation discussed earlier in these reasons is the idea of detachment of a judge from the court of which the judge is a member. That detachment enables non-judicial functions conferred on 147 Act, s 9(2)(e) and (f). 148 Act, ss 8, 28 and 29. 149 Act, s 13(2) – although there is nothing to prevent the judge from providing reasons. As noted earlier, the eligible judge is subject to an obligation to provide reasons, upon request, to a person conducting a review under s 39 of the Act. 150 Act, s 9(3). 151 Act, s 12. A declaration may be revoked on the Commissioner's written request, or on application by a member of the organisation. The eligible judge may only accede to a member's application if satisfied that there has been such a substantial change in the nature or membership of the organisation that the members no longer associate for listed purposes related to criminal activity, and that the organisation no longer represents a risk to the State. 152 Act, ss 24 and 35. a federal judge to be exercised by that judge without infringing the separation of powers doctrine. The separation of powers doctrine does not prevent non- judicial functions from being conferred on a State judge. In this case, however, the non-judicial function conferred by the Act on the eligible judge is closely connected to the exercise of the jurisdiction conferred by the Act on the Supreme Court. A declaration under Pt 2 is a condition precedent to the exercise of the Court's jurisdiction to make control orders and interim control orders under Pt 3. If attention is directed to matters of substance rather than form, the appearance of the eligible judge would differ little from that of a judge of the Court exercising precisely the same function under Pt 2 in his or her capacity as a judge. Under the scheme of the Act, a judge of the Supreme Court of New South Wales, appearing to all the world as a judge of the Court sitting as such, hears and determines a substantial, contested application on "information" and "submissions" the nature and provenance of which is not limited by any statutory definition. If a declaration is made under Pt 2 by the eligible judge, it must reflect his or her satisfaction that: (a) members of the organisation the subject of the application associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity; and the organisation represents a risk to public safety and order in the State of New South Wales. Such findings are of major adverse significance to any organisation and its members. The members of the organisation are thereafter exposed to the possibility that applications will be made to the Supreme Court of New South Wales to seek the imposition of significant restrictions upon their liberties, and specifically their freedom of association and their entitlement to engage in a variety of lawful occupations. No reasons are required to explain what "information" or "submissions" the judge relied upon or rejected, how he or she used or relied upon them to arrive at the requisite findings of fact or, in particular, how the judge arrived at a conclusion on the question whether the organisation the subject of the application represented a risk to public safety and order in the State. The question whether, absent the exclusion by s 13(2) of any obligation to provide grounds or reasons for the eligible judge's decision, the common law would supply such obligation, or whether it might otherwise be implied from the Act, does not have to be answered for present purposes. To the extent that the statute effectively immunises the eligible judge from any obligation to provide such reasons, it marks the function which that judge carries out as lacking an essential incident of the judicial function. At the same time, however, the Act creates a connection between the non-judicial function conferred upon an eligible judge by Pt 2 of the Act and the exercise of jurisdiction by the Supreme Court under Pt 3 of the Act. This has the consequence that a judge of the Court performs a function integral to the exercise of jurisdiction by the Court, by making the declaration, but lacks the duty to provide reasons for that decision. The appearance of a judge making a declaration is thereby created whilst the giving of reasons, a hallmark of that office, is denied. These features cannot but affect perceptions of the role of a judge of the Court, to the detriment of the Court. The declaration which may result from an application is a necessary foundation for an application in the Supreme Court for a control order under Pt 3 of the Act. Subject to the limited scope for judicial review on the grounds of jurisdictional error, significantly narrowed by the absence of reasons for decision they are not provided), the declaration itself would be effectively unexaminable in the proceedings in the Supreme Court. A critical element of the Court's power to make an interim control order or a control order would necessarily be unexplained and unable to be explained by the Court. The fact that the eligible judge might choose to provide reasons for his or her decision to make a declaration does not answer the constitutional question raised by the Act. To apply what five Justices of this Court said in Wilson to the circumstances of this case, the Court is not concerned with the conduct of the judge, but with the limits on legislative power153. The provisions of Pt 2 whose validity is directly affected by these conclusions are s 9, relating to the making of declarations, and s 13, relating to the conduct of hearings of applications for declarations. The vice of s 13(2) in relation to the provision of reasons is not to be assessed in isolation from the other provisions of Pt 2 to which attention has been directed. No question of severance arises. Nevertheless, the problem to which s 13 gives rise may, as suggested in the reasons of Gummow, Hayne, Crennan and Bell JJ, be overcome by the imposition of an obligation on an eligible judge to provide reasons for the decision to make or refuse to make a declaration, or to revoke a declaration. As stated in the judgment of Gummow, Hayne, Crennan and Bell JJ154, the operation of Pt 3 assumes the valid operation of Pt 2. The other parts of the Act necessarily fall with the substantive provisions in Pts 2 and 3. 153 (1996) 189 CLR 1 at 20 per Brennan CJ, Dawson, Toohey, McHugh and 154 Reasons of Gummow, Hayne, Crennan and Bell JJ at [115]. For the reasons set out in the judgment of Gummow, Hayne, Crennan and Bell JJ155, we agree that other arguments advanced by the plaintiff attacking the validity of the Act on the basis of the provisions of Pt 3 and the nature of the jurisdiction they confer on the Supreme Court should not be accepted. We agree also that the challenge to the validity of control orders, on the basis that they exceed the constraint upon State legislative power derived from the implied freedom of political communication and freedom of association, should not succeed. Conclusion We agree with the orders proposed in the judgment of Gummow, Hayne, 155 Reasons of Gummow, Hayne, Crennan and Bell JJ at [110]-[111]. Crennan Bell GUMMOW, HAYNE, CRENNAN AND BELL JJ. The plaintiff was born in 1957. He is a member of an unincorporated association known as the "Hells Angels Motorcycle Club in New South Wales" ("the Club"), which he joined as a full member on 3 November 1989. He has been a member since that date and is a former President of the Sydney Chapter of the Club. The plaintiff regularly associates with other members and supporters of the Club. By action commenced in the original jurisdiction of this Court, the plaintiff seeks a declaration that the Crimes (Criminal Organisations Control) Act 2009 (NSW) ("the Act") is invalid. The long title to the Act is: "An Act to provide for the making of declarations and orders for the purpose of disrupting and restricting the activities of criminal organisations and their members; to make related amendments to various Acts; and for other purposes." The Act has been amended on several occasions, most recently with effect 7 December There is before the Full Court a special case pursuant to r 27.08 of the High Court Rules 2004 filed on 5 October 2010. The special case poses the question whether the Act or any part of it is invalid on the grounds that it undermines the institutional integrity of the Supreme Court of New South Wales or otherwise is beyond the legislative power of that State. The submissions of the State in support of validity were accompanied by those made upon interventions by the Commonwealth, Victoria, South Australia, Queensland, Western Australia and the Northern Territory. Appointment of a judicial officer persona designata In significant respects the Act relies for its operation upon the exercise by a Judge of the Supreme Court of powers conferred persona designata and without the conferral of jurisdiction in that regard upon the Supreme Court itself. In Hussain v Minister for Foreign Affairs157 the Full Court of the Federal Court referred to criticism of such use of judicial personae designatae as a device and a fiction, whilst acknowledging its acceptance, with limitations, in numerous authorities. The question here, as in earlier authorities, turns upon those limitations but in the context of a State court, not a court created by the Parliament. The limitations which do appear from the authorities considered later in these reasons suggest that there remain unsettled matters of constitutional 156 Courts and Crimes Legislation Further Amendment Act 2010 (NSW). 157 (2008) 169 FCR 241 at 279. Crennan Bell doctrine concerning the consequences of appointments of judicial officers to offices (albeit not offices of profit) under the Crown and provided for by statute. In Hilton v Wells158, Mason and Deane JJ, when considering the position of judges of federal courts, said: "There are compelling reasons why the Court should strictly maintain and apply established principle by insisting upon a clear expression of legislative intention before holding that functions entrusted to a judge of a federal court are exercisable by him personally. The ability of Parliament to confer non-judicial power on a judge of a Ch III court, as distinct from the court to which he belongs, has the potential, if it is not kept within precise limits, to undermine the doctrine in the Boilermakers' Case159. One may ask: what is the point of our insisting, in conformity with the dictates of the Boilermakers' Case, that non-judicial functions shall not be given to a Ch III court, if it is legitimate for Parliament to adopt the expedient of entrusting these functions to judges personally in lieu of pursuing the proscribed alternative of giving the functions to the court to which the judges belong?" In Medical Board of Victoria v Meyer160, Evatt J observed: "Often the State Parliaments select a judge as a special tribunal only because they repose confidence in the individual holding the office and not at all because they are intending to resort to the court as the executants of judicial power so as to lay the ground for permitting further appeal and the delay and possible mischief thereby occasioned." (emphasis added) The emphasised passage invites attention to the causes for that reposing of confidence in judges and the limits upon the uses to which it may be utilised by provisions such as those now challenged in this Court. 158 (1985) 157 CLR 57 at 81-82; [1985] HCA 16. 159 R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254; [1956] the Commonwealth v The Queen HCA 10; Attorney-General of 95 CLR 529; [1957] AC 288. 160 (1937) 58 CLR 62 at 106; [1937] HCA 47. Crennan Bell The "eligible Judge" Part 2 (ss 5-13) of the Act is headed "Declared organisations" and makes provision respecting certain Judges of the Supreme Court. Section 6 of the Act provides that the Commissioner of Police ("the Commissioner") may apply to an "eligible Judge" of the Supreme Court for a declaration that a particular organisation is a "declared organisation" for the purposes of the Act. Section 5(2) provides that by instrument in writing a Judge of the Supreme Court may consent to be the subject of a declaration by the Attorney-General under sub-s (3) that the Judge is an "eligible Judge" for the purposes of Pt 2. That consent may be revoked by the Judge (s 5(5)). Section 5(7) states: "To avoid doubt, the selection of the eligible Judge to exercise any particular function conferred on eligible Judges is not to be made by the Attorney General or other Minister of the Crown, and the exercise of that particular function is not subject to the control and direction of the Attorney General or other Minister of the Crown." The eligible Judge, in the exercise of functions conferred by Pt 2, has the same protection and immunity as that Judge has in relation to Supreme Court proceedings (s 5(4)). Part 3 (ss 14-27) of the Act is headed "Control of members of declared organisations". It provides for the making of "interim control orders" in Div 1 (ss 14-18) and "control orders" in Div 2 (ss 19-25). In both cases jurisdiction to make the orders is conferred upon the Supreme Court. This distinguishes Pt 3 from Pt 2 of the Act. Interim control orders and control orders are made under Pt 3, upon application by the Commissioner, with respect to persons that the Supreme Court is satisfied are members of a particular declared organisation, or former members with ongoing involvement in the organisation and its activities. Interim control orders take effect when notice thereof is personally served (s 15) and the notice must state the date, fixed by the Court under s 14(5), for the hearing of an application for a control order (s 16(2)(e)). Section 26 is directed to "a controlled member" (being a person to whom either a current interim control order or control order applies (s 3(1))); it creates offences with respect to association with another controlled member. The Part 2 application On 6 July 2010 the New South Wales Crown Solicitor, on behalf of the Acting Commissioner, filed, apparently in the registry of the Supreme Court, a Crennan Bell document instituting an application under Pt 2. It was entitled "Application to an eligible Judge for a declaration under [the Act]". The application lists 47 members of the Club (including the plaintiff), their criminal records and their asserted involvement in serious criminal activity within the meaning of s 3(1) of the Act. The application was supported by an affidavit of a senior police officer and by 35 volumes of material. These set out information as to the nature of the Club and its distinguishing characteristics, and information evidencing alleged serious and other criminal activity that some members are alleged to have planned, facilitated, supported or engaged in, together with similar information relating to members of interstate or overseas chapters or branches of the "Hells Angels". Section 31 of the Act obliges the Attorney-General of any application made under Pt 2 (or Pt 3) and the Attorney-General "is entitled to be present and to make submissions at the hearing of the application". the Commissioner to notify The present application under Pt 2 was listed before an eligible Judge and two hearings were conducted in an open court room in the Supreme Court premises in Sydney before that eligible Judge. Further hearings took place in closed session on 5 August 2010 and again on 27 September 2010, whereupon the matter was adjourned for further mention at a date after the hearing of this special case. The rules of evidence do not apply to the hearing of an application for a declaration under Pt 2 (s 13(1)). A member of the organisation specified in a Pt 2 application may be present at the hearing of the application and make submissions in relation to the application (s 8(1)); so also (but only with leave of the eligible Judge) may any other person who may be directly affected (whether or not adversely) by the outcome of the application (s 8(2)). However, in either situation the Commissioner may object to the presence of the person in question during any part of the hearing in which information classified by the Commissioner as "criminal intelligence" is disclosed (s 8(3)), and the eligible Judge is to take steps to maintain the confidentiality of information the eligible Judge considers to be properly classified by the Commissioner as "criminal intelligence" (s 28(3)). A declaration may be made whether or not any persons referred to in s 8 are present or make submissions (s 9(3)). A declaration remains in force for three years unless sooner revoked or renewed (s 11(2)). Section 12 empowers an eligible Judge, on request by the Commissioner or on application by a member of the organisation the subject of the declaration, to revoke the declaration. Crennan Bell Section 9(1) provides that the eligible Judge may make a declaration if satisfied that: "(a) members of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, and the organisation represents a risk to public safety and order in this State". In considering whether to make a declaration under s 9(1), the eligible Judge may have regard to any of the matters in pars (a)-(f) of s 9(2). These are: any information suggesting that a link exists between the organisation and serious criminal activity, any criminal convictions recorded in relation to current or former members of the organisation, any information suggesting that current or former members of the organisation have been, or are, involved in serious criminal activity (whether directly or indirectly and whether or not such involvement has resulted in any criminal convictions), any information suggesting that members of an interstate or overseas chapter or branch of the organisation associate for the purpose of organising, planning, facilitating, supporting or engaging in serious criminal activity, any submissions made in relation to the application by the Attorney General or as referred to in section 8, any other matter the eligible Judge considers relevant." The structure of Part 2 Section 35 of the Act purports to exclude the jurisdiction of the Supreme Court in respect of judicial review of declarations made by an eligible Judge under Pt 2. The effectiveness of that exclusion is denied by the decision in Kirk v Industrial Court (NSW)161. 161 (2010) 239 CLR 531; [2010] HCA 1. Crennan Bell Several further points respecting the structure of Pt 2 should be made here. The first is that the subsistence of a declaration under Pt 2 of an organisation is the factum upon which are engaged the provisions in Pt 3 for the making by the Supreme Court of interim control orders and control orders against particular persons. Secondly, as the Solicitor-General of the Commonwealth submitted, similar functions to those of the eligible Judge under Pt 2 could be susceptible of exercise under federal law by a Ch III court162. Thirdly, were that the case, the Ch III court would quell the controversy by the giving of reasons, this being a hallmark distinguishing substantive judicial decisions from arbitrary decisions; the same would be so had Pt 2 conferred jurisdiction upon the Supreme Court, as has been done with Pt 3163. In preparing its reasons, the Supreme Court, as indicated in Gypsy Jokers Motorcycle Club Inc v Commissioner of Police164, could take steps to maintain the confidentiality of what had been properly classified as "criminal intelligence". Further, even if Pt 2 had entrusted the hearing and determination of applications thereunder to an administrator who was not a judge, there would be much to be said for the view that, in the absence of a contrary provision in Pt 2, this was one of those instances identified by Deane J in Public Service Board of NSW v Osmond165 where there was to be discerned a statutory intent that the decision-maker was obliged to give reasons. Fourthly, the provision made by par (b) of s 5(6) should be noted. This revokes the declaration of a Judge as an eligible Judge upon notification by the Chief Justice of the Supreme Court to the Attorney-General "that the Judge should not continue to be an eligible Judge". This may meet the point made in the joint reasons in Grollo v Palmer166 that incompatibility might arise from "so 162 Pasini v United Mexican States (2002) 209 CLR 246 at 253-254 [12]; [2002] HCA 3. 163 See Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 279-280; Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vict) (2001) 207 CLR 72 at 83-84 [25]-[26]; [2001] HCA 49. 164 (2008) 234 CLR 532 at 560-561 [40]-[44], 596-597 [183]-[191]; [2008] HCA 4. 165 (1986) 159 CLR 656 at 676; [1986] HCA 7. 166 (1995) 184 CLR 348 at 365; [1995] HCA 26. Crennan Bell permanent and complete a commitment to the performance of non-judicial functions by a judge that the further performance of substantial judicial functions by that judge is not practicable". Finally, in Wilson v Minister for Aboriginal and Torres Strait Islander Affairs167, Gaudron J made three relevant statements of principle, with which we agree. Her Honour resolved the issues posed earlier in these reasons by reference to the statement of Evatt J in Meyer, by saying168 that the confidence reposed in judicial officers "depends on their acting openly, impartially and in accordance with fair and proper procedures for the purpose of determining the matter in issue by ascertaining the facts and the law and applying the law as it is to the facts as they are169. And, just as importantly, it depends on the reputation of the courts for acting in accordance with that process." "In general terms, a function which is carried out in public, save to the extent that general considerations of justice otherwise require, [and which is] manifestly free of outside influence and which results in a report or other outcome which can be assessed according to its own terms, will not be one that gives the appearance of an unacceptable relationship between the judiciary and the other branches of government." (emphasis added) Her Honour added that "there may be functions (for example, the issuing of warrants such as those considered in Hilton v Wells171 and in Grollo) which do not satisfy these criteria but which, historically, have been vested in judges in their 167 (1996) 189 CLR 1; [1996] HCA 18. 168 (1996) 189 CLR 1 at 22. 169 See R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 374; [1970] HCA 8. 170 (1996) 189 CLR 1 at 25-26. 171 (1985) 157 CLR 57. Crennan Bell capacity as individuals and which, on that account, can be performed without risk to public confidence. However, history cannot justify the conferral of new functions on judges in their capacity as individuals if their performance would diminish public confidence in the particular judges concerned or in the judiciary generally." These statements of principle are determinative of the issue of the validity of s 13(2), the provision of the Act which is of critical importance. Section 13(2) The plaintiff submits that the language in which s 13(2) is expressed is intractable and its invalidity brings down Pt 2 and therefore Pt 3 of the Act. Section 13(2) states: "If an eligible Judge makes a declaration or decision under this Part [ie Pt 2], the eligible Judge is not required to provide any grounds or reasons for the declaration or decision (other than to a person conducting a review under section 39 if that person so requests)." Section 39 provides for the Ombudsman to scrutinise the exercise of powers conferred on police officers under the Act and to furnish reports to the Attorney-General and the Commissioner. Counsel for the Northern Territory correctly urged upon the Court in its consideration of the validity of s 13(2) what was said in the joint reasons of six members of the Court in Residual Assco Group Ltd v Spalvins172: "Moreover, legislation 'must not be read in a spirit of mutilating narrowness'173. If the choice is between reading a statutory provision in a way that will invalidate it and reading it in a way that will not, a court must always choose the latter course when it is reasonably open. Courts in a federation should approach issues of statutory construction on the basis that it is a fundamental rule of construction that the legislatures of the federation intend to enact legislation that is valid and not legislation 172 (2000) 202 CLR 629 at 644 [28]; [2000] HCA 33. See also Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 553 [11]. 173 United States v Hutcheson 312 US 219 at 235 (1941) per Frankfurter J. Crennan Bell that is invalid174. Here there are two competing constructions – one spells invalidity, one does not. That being so, we should adopt the construction that saves the section and reject the construction upon which the defendants rely." Section 13(2) is addressed to a "declaration" and a "decision" of an eligible Judge under Pt 2. The term "declaration" is used in s 9, the terms of which have been given above. The Act also provides for other decision-making activities by an eligible Judge. Some will be made in the course of a hearing, such as decisions under s 8(2) to grant leave to be present and make submissions, decisions upon objections by the Commissioner under s 8(3), and decisions under s 28 to receive evidence and hear argument in private respecting "criminal intelligence". It may be accepted that, if given by a court, not all of such decisions would require the giving of reasons175. However, other decisions – declarations under s 9 and decisions upon applications to revoke a declaration under s 12 – are substantive rather than procedural in nature. Section 13(2) is readily construed as conferring a power upon an eligible Judge to provide grounds or reasons in respect generally of decisions and declarations under Pt 2. However, the sub-section goes further by denying any requirement to provide any grounds or reasons. There is one exception. This is to provide grounds or reasons for a declaration or decision if requested to do so by a person acting pursuant to s 39. The New South Wales Solicitor-General, in the course of oral argument, was prepared to accept that, in the case of a contested application for a declaration, s 13(2) effectively gave rise to a duty to provide some reasons. That concession would, however, appear not to extend to applications where there was no effective contest, but the eligible Judge nevertheless was required to reach the stage of satisfaction stated in s 9(1) upon the information accompanying the application by the Commissioner under s 6(2). 174 Davies and Jones v The State of Western Australia (1904) 2 CLR 29 at 43; [1904] HCA 46; Federal Commissioner of Taxation v Munro; British Imperial Oil Co Ltd v Federal Commissioner of Taxation (1926) 38 CLR 153 at 180; [1926] HCA 58; Attorney-General (Vict) v The Commonwealth ("the Pharmaceutical Benefits Case") (1945) 71 CLR 237 at 267; [1945] HCA 30; Chu Kheng Lim v Minister for Immigration (1992) 176 CLR 1 at 14; [1992] HCA 64. 175 See Evans v The Queen (2007) 235 CLR 521 at 595-596 [246]; [2007] HCA 59. Crennan Bell In any event, the terms in which s 13(2) is expressed ("is not required ... other than") are too intractable to accommodate as reasonably open a reading which couples the power to provide grounds or reasons, with a duty to do so in an instance other than that arising under s 39. The question then is whether s 13(2) may be read down, pursuant to s 31 of the Interpretation Act 1987 (NSW) ("the Interpretation Act"), in effect by extending the obligation to provide grounds or reasons beyond response to a request pursuant to s 39. To do so would be beyond the operation of s 31 of the Interpretation Act; it would expand the provision in s 13(2) of the Act rather than limit it to one or more of various operations otherwise encompassed by general words176, and would involve rewriting the sub-section. Further, in the joint reasons in the Industrial Relations Act Case177 reference was made to authorities indicating that an invalid provision is not to be read down unless the remaining parts of the law remain unchanged, and the provision is not to be read down if it appears that the law is intended to operate fully according to its terms or not at all. The evident legislative intention is that s 13(2) play a central part in the scheme of Pt 2, and that there be only the specified, limited requirement for the eligible Judge to provide reasons. The significance to be attached to the Act's denial of a duty to give reasons for deciding whether to make or revoke a declaration is not reduced by attempting some prediction of whether, despite the language of s 13(2), judges would nonetheless be likely to give reasons. Because there is no duty to do so, the possibility that a declaration would be made or revoked and no reasons given for the decision is not to be dismissed from consideration as some remote or fanciful possibility. Conclusions respecting s 13(2) The result is that the Act imposes no duty upon the eligible Judge to provide reasons or grounds when deciding applications to make or revoke a 176 Smith v The Queen (1994) 181 CLR 338 at 346-347; [1994] HCA 60; Coleman v Power (2004) 220 CLR 1 at 55-56 [108]-[110]; [2004] HCA 39; Pape v Federal Commissioner of Taxation (2009) 238 CLR 1 at 93-94 [248]-[251]; [2009] HCA 23. 177 Victoria v The Commonwealth (1996) 187 CLR 416 at 502 per Brennan CJ, Toohey, Gaudron, McHugh and Gummow JJ; [1996] HCA 56. Crennan Bell declaration under Pt 2, and for that reason Pt 2 is invalid. We turn to explain why this is so. The Commonwealth Solicitor-General correctly submitted that the reasoning in the decisions in Wilson178 and Kable v Director of Public Prosecutions (NSW)179, delivered respectively on 6 and 9 September 1996, share a common foundation in constitutional principle. That constitutional principle has as its touchstone protection against legislative or executive intrusion upon the institutional integrity of the courts, whether federal or State. The principle applies throughout the Australian integrated court system because it has been appreciated since federation that the Constitution does not permit of different grades or qualities of justice180. It follows that repugnancy to or incompatibility with that institutional integrity may be manifested by State (and Territory)181, as well as federal, legislation which provides for the conferral of functions upon a judicial officer persona designata. The submissions by Victoria to the contrary should be rejected. In Hilton v Wells182, Mason and Deane JJ observed that: "when a function is entrusted to a judge by reference to his judicial office the legislators and the community are entitled to expect that he will perform the function in that capacity. To the intelligent observer, unversed in what Dixon J accurately described – and emphatically rejected – as 'distinctions without differences' (Meyer183), it would come as a surprise to learn that a judge, who is appointed to carry out a function by reference to his judicial office and who carries it out in his court with the 178 (1996) 189 CLR 1. 179 (1996) 189 CLR 51; [1996] HCA 24. 180 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 103; Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617-618 [101]-[102]; [2004] HCA 46; South Australia v Totani (2010) 242 CLR 1 at 37-39 [48]-[51]; [2010] HCA 39. 181 North Australian Aboriginal Legal Aid Service Inc v Bradley (2004) 218 CLR 146 at 163 [28]-[29]; [2004] HCA 31. 182 (1985) 157 CLR 57 at 83-84. 183 (1937) 58 CLR 62 at 97. Crennan Bell assistance of its staff, services and facilities, is not acting as a judge at all, but as a private individual. Such an observer might well think, with some degree of justification, that it is all an elaborate charade." With those words in mind, the immediate question is whether s 13(2) displays in its practical operation within the scheme of the Act repugnancy to or incompatibility with the institutional integrity of the Supreme Court. Such questions, as Gleeson CJ emphasised in North Australian Aboriginal Legal Aid Service Inc v Bradley184, do not arise in the abstract; they present concrete, practical issues, resolution of which may be assisted by regard to what other course was available to the legislature. Another course readily available in the present case would be to cast s 13(2) in a form which, at least with respect to declarations under s 9 and revocations under s 12, required as well as permitted the provision of grounds or reasons. As indicated earlier in these reasons with reference to what was said in Gypsy Jokers, in the preparation of reasons for decisions under s 9 and s 12 of the Act, steps could be taken to maintain the confidentiality of material properly classified as "criminal intelligence" within the meaning of s 3(1) of the Act. The vice in s 13(2) as it presently stands is that s 9 and s 12 confer new functions on Supreme Court Judges in their capacity as individuals with the result that an outcome of what may have been a contested application cannot be assessed according to the terms in which it is expressed. This is unlike the outcome under Pt 3 of the Act. The opaque nature of these outcomes under Pt 2 also makes more difficult any collateral attack on the decision, and any application for judicial review for jurisdictional error. The effect of Pt 2 is to utilise confidence in impartial, reasoned and public decision-making of eligible Judges in the daily performance of their offices as members of the Supreme Court to support inscrutable decision-making under s 9 and s 12. Other submissions by the plaintiff The plaintiff submitted a range of further arguments as to why the Act was invalid, in particular by reference to the provisions of Pt 3 and the exercise of jurisdiction thereunder by the Supreme Court. These submissions should not be accepted, noting in particular the following. 184 (2004) 218 CLR 146 at 158 [14]. Crennan Bell First, the conferral of jurisdiction on the Supreme Court under Pt 3 by ss 14(1) and 14(3) is to be understood as bringing with it the usual incidents of the exercise of jurisdiction by the Supreme Court185 and these are not excluded by a "distinct regime" of the nature considered in International Finance Trust Co Ltd v New South Wales Crime Commission186. Secondly, an eligible Judge who has made a declaration under Pt 2 may be recused from the subsequent exercise of the jurisdiction of the Supreme Court under Pt 3. Thirdly, while the Act does not attempt to prescribe what might be "sufficient grounds" for the making of a control order (s 19(1)(b)), these must be ascertained by regard to the subject, scope and purpose of the Act including the consequences of the making of an interim control order or control order; there are numerous authorities establishing that the conferral of curial powers by reference to such criteria nevertheless may be susceptible to the exercise of judicial power187. Fourthly, the regime created by Div 2 of Pt 3 for the making of control orders significantly differs from the provision in s 14(1) of the South Australian legislation held invalid in South Australia v Totani188: there is no obligation imposed upon the Supreme Court to make an order upon the basis of the anterior declaration made by an eligible Judge. The plaintiff also attacked the validity of the Act for exceeding the constraint upon State legislative power said to be derived from implications in the Constitution respecting political communication and freedom of association. Any freedom of association implied by the Constitution would exist only as a corollary to the implied freedom of political communication and the same test of infringement and validity would apply189. 185 Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 186 (2009) 240 CLR 319 at 350 [44], 360-361 [79]-[80], 387-388 [162]-[165]; [2009] HCA 49. 187 Baker v The Queen (2004) 223 CLR 513 at 532 [42]; [2004] HCA 45; Thomas v Mowbray (2007) 233 CLR 307 at 331-334 [20]-[28], 344-348 [71]-[82], 350-351 [88]-[92], 507-508 [596]; [2007] HCA 33. 188 (2010) 242 CLR 1. 189 Mulholland v Australian Electoral Commission (2004) 220 CLR 181 at 234 [148]; [2004] HCA 41. Crennan Bell Further, the Act is not directed at political communication or association. With respect to control orders, special provision for exemption is made by the Act. If in the opinion of the Supreme Court the circumstances of the case require, a person may be exempted from the prohibition upon association imposed by s 26 to the extent and subject to the conditions specified in the control order pursuant to s 19(7). The provision in s 19(7) permits the restriction of control orders so as not unreasonably to burden freedom of political communication; the power of the Supreme Court to make a control order should be construed conformably with the implied freedom so as to render reviewable for error any particular order which exceeded the limit of the implied freedom. No provision for exemption is made for interim control orders; but, as the Commonwealth submitted, even if the result was in some circumstances to burden the implied freedom, the question would then be whether the Act nevertheless in this respect served a legitimate end of protection against the activities of criminal organisations and their members. These conclusions make it unnecessary to enter here upon consideration of the submission by the Commonwealth and Western Australia that the implied freedom applies as a restraint upon legislative power only with respect to communication in relation to politics or government "at the Commonwealth level". Order As indicated earlier in these reasons, the operation of Pt 3 assumes the valid operation of Pt 2. Part 1 (ss 1-4) is headed "Preliminary" and Pt 4 (ss 28-40) "Miscellaneous". These parts must fall if the substantive provisions in Pts 2 and 3 are invalid. The effect of invalidity of s 13(2) cannot be avoided by severance, as explained earlier in these reasons. The result is that the first question presented in the special case should be answered: "The Crimes (Criminal Organisations Control) Act 2009 (NSW) is invalid". The second question should be answered: "The defendant is to pay the costs of the plaintiff of the special case". 117 HEYDON J. The questions in the special case should be answered adversely to the plaintiff and the proceedings should be dismissed with costs. The structure of the issues Two principal questions arise about the Crimes (Criminal Organisations Control) Act 2009 (NSW) ("the Act"). The first is whether it is constitutionally invalid on any ground advanced by the plaintiff. The second is whether the fact that s 13(2) absolves an eligible Judge from any obligation to give any reasons for making a Pt 2 declaration, whether taken alone or in combination with other factors, brings about invalidity. The plaintiff's written submissions mentioned s 13(2) occasionally, but usually only as part of a compendious reference to the powers and functions of eligible Judges provided for in Pt 2 (ss 5-13). The plaintiff contended that any or all of ss 9, 14, 19 and 26 were invalid, and that the rest of the Act was invalid because the remaining provisions had no work to do. The plaintiff did not, however, advance any argument that s 13(2) considered by itself was invalid, or that any invalidity in s 13(2) caused the entire Act to be invalid. In oral argument, after s 13 had been drawn to his attention, counsel for the plaintiff said that the absence of a duty to give reasons, "which is the antithesis of what judges do", was "the smallest reason … to regard this work of an eligible [Judge as] not something that a Supreme Court justice ought to be engaged in." But he also said: "[w]e certainly do not challenge [the] validity" of s 13. He did not contend that s 13 brought down Pt 2 and therefore Pt 3 of the Act. Apart from counsel for the Attorneys-General for the Commonwealth, New South Wales and Queensland, the primary efforts of the many counsel who opposed the plaintiff were not directed to explicit refutation of the plaintiff's submissions. Instead they took the understandable course of attacking objections to validity other than those formulated by the plaintiff – objections, perhaps, which they anticipated might be raised by the Court. Very little attention was paid to difficulties associated with s 13(2). Observations indicating concern about s 13(2) were made by members of the Court during argument. But those supporting validity, apart from the Attorney-General for the State of Western Australia, cannot be said to have revealed a consciousness that s 13(2) might be the crucial part of the battlefield, to which all intellectual forces should be rushed. There is thus incomplete contact between the grounds on which the plaintiff is to succeed, the arguments which he advanced and the arguments which his opponents advanced. The plaintiff's submissions: the Kable doctrine The plaintiff's submissions: general. The plaintiff submitted that the Act was invalid because its key provisions undermined the institutional integrity and independence of the Supreme Court of New South Wales. He stressed various features of the Act which operated onerously against persons in the position of the plaintiff. He stressed, in particular, features which were said to make it even more onerous from that point of view than the legislation struck down in South Australia v Totani190. Thus, he said, the Act had no equivalent to the objects provision in s 4(2) of the Totani legislation191: "[I]t is not the intention of the Parliament that the powers in this Act be used in a manner that would diminish the freedom of persons in this State to participate in advocacy, protest, dissent or industrial action." He pointed out that the Act omitted a provision in the Totani legislation permitting persons who were the subject of control orders to associate, if they were members of a registered political party, at an official meeting of the party or a branch of the party (Serious and Organised Crime (Control) Regulations 2008 (SA), reg 6(3)(b)). And he complained that while the Totani legislation was to expire after five years, the Act has no expiry date. These complaints are unconvincing. The first two are matters of legislative choice, insubstantial and innocuous in themselves. The third could not invalidate legislation which was otherwise valid. Some of the plaintiff's submissions centred on ss 6-13, dealing with what eligible Judges could do. Thus it was said that ss 6-13 required the eligible Judge "to undertake the work of the executive in a court room and in secret session with regard to 'criminal intelligence' and 'protected submissions' of third parties not available to the organisation concerned and in the presence of the Commissioner of Police and the Attorney General of New South Wales." A second group of submissions centred on ss 14-23, dealing with the role of a member of the Supreme Court (not sitting as an eligible Judge) in determining applications for interim control orders and control orders. Those provisions, it was said, enabled the Supreme Court to sit "in secret session with regard to 'criminal intelligence' not available to the person to be the subject of the interim control order or the control order." This was said to restrict "civil 190 (2010) 242 CLR 1; [2010] HCA 39. 191 Serious and Organised Crime (Control) Act 2008 (SA). liberties and freedom of movement of Australians in a fashion not appropriate to a constitutional Court that is part of the Federal judicial system of courts." These somewhat generalised submissions were backed up by more The two groups of criticisms are best considered detailed arguments. successively. The plaintiff's submissions: eligible Judges. The plaintiff's first criticism was that while there was a right for a member of the organisation to appear on any hearing of the Commissioner's application, it was only a limited right to "be present and make submissions in relation to the application" (s 8(1)): no right to be legally represented or to adduce evidence was expressly granted. But s 8 does give a right to a hearing, subject to the need to protect criminal intelligence. There is nothing to exclude, and no reason to suppose that eligible Judges will hamper, either legal representation or the capacity to adduce evidence. Then it was said that the definition of "member" in s 3(1), which was similar to that appearing in the legislation struck down in South Australia v Totani, was "impossibly wide", so that a Pt 2 declaration might affect a large number of people. But why the width was impermissible was not developed. The plaintiff then advanced submissions centring on the provisions which attempt to protect criminal intelligence. Section 8(3) gives the Commissioner power to object to the presence of members of an organisation, or any person who had been given leave to be present and make submissions, and, subject to s 28, the eligible Judge is obliged to uphold the objection. The eligible Judge is forbidden to release various types of confidential material. The plaintiff complained of the confidentiality surrounding protected submissions. However, given the subject with which the Act deals, the provisions relating to criminal intelligence do not affect validity, and similar provisions have already been held valid by this Court192. The plaintiff then complained about various provisions relating to evidence. The plaintiff pointed out that the rules of evidence do not apply to a hearing before an eligible Judge (s 13(1)). The plaintiff said that the eligible Judge, in deciding whether or not to make a declaration pursuant to s 9, was required to have regard to "information suggesting" certain things, as opposed to having regard to evidence that established conclusions. The plaintiff contrasted the standard of proof under the Act generally – the balance of probabilities (s 32) – with s 9, and suggested that this resulted in a lower standard of proof in relation to the making of declarations. 192 K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 539-543 [135]-[149]; [2009] HCA 4. The answer to these submissions is as follows. While it is difficult to exaggerate the value and utility of the rules of evidence in preserving the rule of law so far as it is enforced in litigation, many statutes modify or limit the application of the rules of evidence without being at risk under the Kable doctrine. And it is common for the rules of evidence not to apply where a member of the judiciary is performing an administrative function as a designated person. For example, judges of the Federal Court of Australia can be members of the Administrative Appeals Tribunal193, and it is not bound by the rules of evidence. Further, s 13(1) does not forbid application of the rules of evidence. Eligible Judges are likely to apply them, since they are familiar tools of their daily trade. Section 9(2) operates in a fashion similar to much circumstantial evidence, for while individual items of circumstantial evidence may only "suggest" certain conclusions, taken together they can establish matters of fact on either the balance of probabilities or beyond reasonable doubt. Finally, the plaintiff complained that s 9(2) required the eligible Judge to take into account several matters that were said to be plainly irrelevant to the core determination in s 9(1). These matters were: criminal convictions relating to former members of the organisation (s 9(2)(b)); information suggesting that former members had been involved in serious criminal activity (s 9(2)(c)); and information suggesting that members of an interstate or overseas chapter or branch of the organisation associate for the purposes of organising, planning, facilitating, supporting or engaging in serious criminal activity (s 9(2)(d)). It is not, however, true that s 9(2) requires the eligible Judge to have regard to irrelevant matters. Section 9(2) does no more than entitle the eligible Judge to take them into account. It does not require that they be taken into account. Sometimes they may be irrelevant, sometimes relevant. The plaintiff's submissions: interim control orders and control orders. The plaintiff submitted, first, that there was a risk that the eligible Judge could also be the member of the Supreme Court allocated to hear the application for an interim control order. The answer to this submission is that the Supreme Court can adopt a practice minimising the risk194. If, despite that practice, the risk materialises, it would be open to a person against whom an application for an interim control order is made to seek the disqualification of the member of the Supreme Court to whom the application was made, and the circumstances would support the conclusion that there was an appearance of bias. 193 Hilton v Wells (1985) 157 CLR 57 at 68-69; [1985] HCA 16. 194 Grollo v Palmer (1995) 184 CLR 348 at 366; [1995] HCA 26. The plaintiff next submitted that the Act permitted the making of an interim control order in the absence of, and without prior notice to, the member of the organisation (s 14(4)), did not provide for prior service of an application for an interim control order, and did not provide for any right on the part of the person against whom the application was made to advance submissions or adduce evidence at the hearing of the application. However, the making of an interim control order ex parte is permissible – not compulsory. An interim control order, even if made ex parte, does not take effect until service (s 15), must be served within 28 days (s 16(1)), and can be revoked (s 19(2)). It is the general duty of the Supreme Court to ensure that all persons against whom relief is sought may call evidence and make submissions after receiving proper notice of the evidence and submissions of other parties. Nothing in the Act excludes that duty. Then the plaintiff complained that, while the member against whom an application for an interim control order is made is to be given a statement of grounds and a supporting affidavit, these documents are not to contain criminal intelligence, and this is a factor tending to render the legislation invalid. This submission is inconsistent with prior authority195. The plaintiff contended that an interim control order or control order might last forever. There is no statutory basis for this. The plaintiff relied on s 23, but that provides only that a control order remains in force until it is revoked, and s 25 provides for revocation on proof of a substantial change in the relevant circumstances. The hearing of an application for a control order confirming the interim control order can be expedited on the application of the person against whom the interim control order has been made (s 18). On that hearing, the Supreme Court may either make the control order or revoke the interim control order (s 19(2)). In addition, if a declaration made under Pt 2 is revoked (s 12) or ceases to have effect because three years have passed since it took effect (s 11(2)), any interim control order or control order founded on that declaration will necessarily also cease to have effect (s 12(6)). That is so, inter alia, because the orders only prohibit or render criminal the conduct of a "controlled member of a declared organisation" (s 26(1) and (1A), s 26A(1) and s 27(1) and (4)) and a "declared organisation" is an organisation in respect of which a declaration is in force (s 3(1)). Once the declaration ceases to be in force, ss 26-27 cannot operate. 195 K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 539-543 [135]-[149]; South Australia v Totani (2010) 242 CLR 1 at 36 [44], 60-61 [121]-[125] and 153 [416]. See also Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2008) 234 CLR 532 at 551-552 [7], 558-561 [30]-[44] and 597-598 [192]; [2008] HCA 4. The plaintiff then submitted that the material before the Supreme Court was likely to consist only of the material supplied by the Commissioner, particularly material that was before the eligible Judge; that the Pt 2 declaration meant that "most of the work [had] already been done by the eligible Judge"; that accordingly the Supreme Court could give no meaningful consideration to the requirement in s 19(1)(b) that "sufficient grounds exist" for the making of a control order; and that an application for an interim control order was "almost certain to have a predestined result" because of the "steering" of the Supreme Court to a certain outcome. Those submissions are radically flawed. There is no reason why an application inter partes for an interim control order cannot be adjourned if the person against whom it is sought seeks an adjournment to prepare evidence or submissions. It follows that whether the evidence before the Supreme Court is entirely or largely that tendered by the Commissioner depends on the steps which the person against whom the application is made wishes to take. The Supreme Court is not precluded from giving meaningful consideration to whether sufficient grounds exist for making the control order. The result is not predestined. The expression "sufficient grounds" in s 19(1)(b) is undefined, but its meaning may be inferred from the structure and functions of the Act and from The the serious consequences which can flow from control orders. Solicitor-General of the Commonwealth correctly submitted that the factors relevant to what were "sufficient grounds" included any involvement by the defendant in any past criminal conduct; the likelihood of the defendant engaging in criminal conduct in the future; any past or present association between the defendant and any person who has engaged in criminal conduct; the effect that the making of an interim control order or control order would have on the defendant, including the effect on the social and economic wellbeing of the defendant; and the degree to which that effect is outweighed by the benefit to public safety in making the order. The Supreme Court's independence from the Executive is not impaired. The plaintiff submitted that the goal of the Act was to ensure fulfilment of the Executive's desire that interim control orders be made, and that this gave rise to an appearance of the Supreme Court acting as an instrument of the political arm of government. This is fallacious. The Executive commonly desires to prevent or punish crime: the conduct by the courts of criminal trials does not cause them to act as instruments of the political arm of government. The plaintiff submitted that the provisions for making control orders led to constitutional invalidity because the orders could be made where an interim control order had not been physically served on the relevant member of a declared organisation, where there was no provision for the original application seeking a declaration against the organisation to be put before the Supreme Court, where the hearing seeking a control order could be conducted in the absence of the person against whom the application for it was made, where that person bore the onus of proof of establishing "a good reason" as to why he or she should be allowed to associate with a particular controlled member, and where the material put before the Supreme Court might include criminal intelligence that had never been seen by the person against whom the application for a control order was made. It is true that a control order may be made even though an interim control order has not been physically served, but only in the sense that orders for substituted service may be made under s 16A. But the goal of those orders is to bring what is served to the attention of affected persons, and those orders can only be made after "all reasonable steps possible" to effect personal service have been taken: s 16A(2). Substituted service is a common feature of procedure in conventional litigation. So is the conduct of the hearing in the absence of the person in relation to whom substituted service has been effected. And it is possible – undesirable and exceptional though this may be – for ordinary litigation to be conducted without one party being able to see some of the material relied on. Further, the reversal of burdens of proof is also both possible and common in conventional litigation. None of these features is fatal to constitutional validity. Nor is the absence of a provision requiring the application for a Pt 2 declaration to be placed before the Supreme Court when an application for a control order is made. The meaning of s 13(2) It is necessary now to turn to s 13(2). The Solicitor-General for the State of New South Wales submitted, and thus purported to concede, that at least in contested applications, s 13(2) "effectively gives rise to a duty" to give reasons for a declaration made under It is not possible to construe s 13(2) as creating a duty to give reasons. Nor is it possible to find that there is any duty to give reasons independently of s 13(2). First, there is a key linguistic contrast. On the one hand, there are the words of s 13(2): "the eligible Judge is not required to provide any grounds or reasons for the declaration or decision" (emphasis added). On the other hand, there are the words of s 39(2), which operates as an express exception to s 13(2): for the purpose of keeping under scrutiny the exercise of powers conferred on police officers under the Act, "the Ombudsman may require [an eligible Judge] to provide information about the exercise of those powers" (emphasis added). Secondly, even if independently of s 13(2) the circumstances of a particular hearing could be described as "special" or "exceptional" within the doctrine described by Deane J in Public Service Board of New South Wales v Osmond196, 196 (1986) 159 CLR 656 at 676; [1986] HCA 7. and even if that doctrine is correct, the implied statutory duty to which the doctrine refers is excluded by s 13(2). Those conclusions involve rejecting the purported concession of the Solicitor-General for the State of New South Wales that s 13(2) created a duty to give reasons in relation to a contested application for a declaration. A legislature cannot recite itself into validity. And an executive cannot, so to speak, "concede into validity" the legislation it has introduced into the legislature. Legislation means what its words say. It does not mean what legal representatives "concede" it means as they seek to steer their vessels so as to avoid a constitutional shipwreck, or as they search for life-belts which will help them save something from that shipwreck. No doubt a construction of legislation which is favourable to validity can be preferred to a construction which would produce invalidity, but only if the former construction is open on the language and not inconsistent with Section 13(2) and invalidity: the likely behaviour of eligible Judges Relevant factors. Statute apart, administrators have no duty to give reasons for their decisions197. And there are many judicial orders that may not have to be supported by reasons. Some are very important and highly contested – rulings on the admissibility of evidence, rulings on interlocutory procedural applications, decisions to grant or refuse interlocutory injunctions, decisions to stay or not to stay final orders. But where reasons are requested on very important and highly contested matters, and even where they are not, they will in the ordinary course be provided unless the court thinks that the course of argument has made the reasons for the order sufficiently clear, unless considerations of urgency preclude this, or unless there is no possibility of an appeal and hence no point in providing reasons so as to enable proper appellate consideration of the order to be given. Thus members of the Supreme Court tend to give reasons habitually and routinely. Alexis de Tocqueville observed that lawyers "if they prize freedom much … they generally value legality still more"198. He also spoke of the judge as "a lawyer who [has] the taste for regularity and order that he has contracted in the study of law"199. The eligible Judges to whom the Act applies – members of the Supreme Court of New South Wales – certainly have a long experience of seeking to vindicate legality, regularity and order. That experience enables them 197 Public Service Board of New South Wales v Osmond (1986) 159 CLR 656. 198 Democracy in America, Bradley ed (1945), vol 1 at 275. 199 Democracy in America, Bradley ed (1945), vol 1 at 278. to exercise a sound judgment about when to give reasons and when not. Their actual impartiality as between the government and the governed has never been questioned – not even by the plaintiff. In that respect they have the touchy pride of Castilian aristocrats. Their whole professional life, before and after appointment to the bench, has been spent in arguing, in seeking to persuade, in giving reasons why some things should be done and other things should not be done, in explaining why some conclusions follow and others do not. And commonly they find it impossible to reach clear conclusions without assembling, often on paper, particular chains of detailed reasoning. In this respect, if they err, they tend to err by being garrulous, not taciturn. The conduct of eligible Judges is open to judicial review. In Public Service Board of New South Wales v Osmond200 Deane J said: "There was a time when the ordinary prescript of prudence for an administrative decision-maker who was anxious to avoid litigation was to decline to give reasons for the discretionary exercise of a statutory power in a manner which would adversely affect the property or rights of another." Even if some public officials who are members of the Executive may still share that thinking, to the extent that modern legislation permits it, it is doubtful whether eligible Judges do. The conduct of an eligible Judge will be examined on judicial review by another member of the Supreme Court. Eligible Judges will appreciate that to take refuge in silence will not increase the esteem in which other members of the Supreme Court – not to mention the profession – hold them. They will also appreciate that the silence of an eligible Judge is likely to strengthen the determination of the Supreme Court judge in conducting the judicial review to scrutinise what has happened with the greatest possible intensity. Power, not duty, to withhold reasons. Let it be assumed for present purposes that Gaudron J's three statements of principle, quoted in the reasons for judgment of Gummow, Hayne, Crennan and Bell JJ201 from Wilson v Minister for Aboriginal and Torres Strait Islander Affairs202, are correct, and applicable to State judges who are designated persons. A provision which compelled eligible Judges not to give reasons for the declarations and decisions they might make under Pt 2 might well fall within her Honour's language. The function performed, it might be said, would not be one which "results in [an] outcome 200 (1986) 159 CLR 656 at 675. 201 See [94]. 202 (1996) 189 CLR 1 at 22 and 25-26; [1996] HCA 18. which can be assessed according to its own terms"203. The provision might also be described as one which prevented them from "acting openly" and "in accordance with fair and proper procedures"204. But s 13(2) does not compel eligible Judges not to give reasons. A key question is how far it will result in them not giving reasons. Exclusion of extreme possibilities. The breadth of a constitutional power is not to be restricted by hypothesising a reprehensible law and concluding that the power cannot be construed as permitting the enactment of that law205. Thus it is wrong to take into account any "grim spectre conjured up"206, any mere "exercise in imagination"207, any "preposterous suggestion"208, any "absurd possibility"209, any "distorting possibility"210, any "distorting or alarming possibility"211, or any "extreme examples"212. Arguments which are no more than "in terrorem" are to be rejected213. It is wrong to "postulate a chamber of legislative horrors, unlikely to be enacted"214. 203 (1996) 189 CLR 1 at 26. 204 (1996) 189 CLR 1 at 22. 205 New South Wales v The Commonwealth (Work Choices Case) (2006) 229 CLR 1 at 117-118 [187]-[188]; [2006] HCA 52. 206 Western Australia v The Commonwealth (1975) 134 CLR 201 at 271 per Mason J; [1975] HCA 46. 207 Western Australia v The Commonwealth (1975) 134 CLR 201 at 271 per Mason J. 208 Western Australia v The Commonwealth (1975) 134 CLR 201 at 275 per Jacobs J. 209 Western Australia v The Commonwealth (1975) 134 CLR 201 at 275 per Jacobs J. 210 Western Australia v The Commonwealth (1975) 134 CLR 201 at 275 per Jacobs J. 211 XYZ v The Commonwealth (2006) 227 CLR 532 at 549 [39] per Gummow, Hayne and Crennan JJ; [2006] HCA 25. 212 Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at 43 [32] per Gleeson CJ, Gummow and Hayne JJ; [2003] HCA 72. See also Kartinyeri v The Commonwealth (1998) 195 CLR 337 at 380 [87] per Gummow and Hayne JJ; [1998] HCA 22. 213 Sue v Hill (1999) 199 CLR 462 at 480 [26] per Gleeson CJ, Gummow and Hayne JJ; [1999] HCA 30. 214 MZXOT v Minister for Immigration and Citizenship (2008) 233 CLR 601 at 646 [128] per Kirby J; [2008] HCA 28. Similarly, it is wrong to approach an allegation that a particular legislative provision is invalid by identifying an operation of that legislative provision which may be theoretically possible but in fact is extremely unlikely. An example is a provision which is innocuous if not abused, but dangerous if abused: it is not to be assumed that the holder of a power "will act improperly or venally."215 Another example relates to the power to appoint Acting Judges to the Supreme Court of New South Wales216: "It is possible to imagine extreme cases in which abuse of the power … could so affect the character of the Supreme Court that it no longer answered the description of a court or satisfied the minimum requirements of independence and impartiality. It is, however, a basic constitutional principle that the validity of the conferral of a statutory power is not to be tested by reference to 'extreme examples and distorting possibilities'217. Possible abuse of power is rarely a convincing reason for denying its existence." That reasoning extends a principle developed in relation to express constitutional powers, and the validity of legislation examined against express constitutional powers, to constitutional doctrines not resting directly and explicitly on the ipsissima verba of the Constitution. It is constitutional doctrines of the latter kind to which the plaintiff appeals. It is clear, then, that the validity of s 13(2) is to be assessed bearing in mind practical realities and likelihoods, not remote or fanciful possibilities. The likely effect of s 13(2). Section 13(2) does not prohibit eligible Judges from giving reasons. It only denies a duty on them to do so. In view of their traditions, customs and habits, there is every reason to suppose that they will give reasons wherever the interests of justice require it, and thus act "openly" and "in accordance with fair and proper procedures" in arriving at an "outcome which can be assessed according to its own terms". Unlike, perhaps, public officials who form part of the Executive, and who have been moulded by different traditions, there is no reason to believe that, except in isolated instances, eligible Judges will preserve secrecy about their reasoning processes in cases where they 215 Egan v Willis (1998) 195 CLR 424 at 505 [160] per Kirby J; [1998] HCA 71 (discussing a standing order of the New South Wales Legislative Council). 216 Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 69 [46] per Gleeson CJ; [2006] HCA 44. 217 Shaw v Minister for Immigration and Multicultural Affairs (2003) 218 CLR 28 at ought to be revealed. The risk that there will be isolated instances of secrecy is insufficient to invalidate the legislation. That is one reason why s 13(2) is valid. Section 13(2) and invalidity: non-derogation from the common law The Solicitor-General of the Commonwealth submitted: "There is no general rule of the common law or principle of natural justice that requires reasons to be given for administrative decisions, even those made in exercise of a statutory discretion and liable to affect adversely the interests of others218." The submission is sound. The decision of an eligible Judge as a designated person is an administrative decision. Section 13(2) thus does no more than reflect the common law. That is another reason why s 13(2) is valid. Section 13(2) and invalidity: Gaudron J's tests There is a third reason why s 13(2) is valid. In one of her three statements of principle in Wilson's case Gaudron J said219: "In general terms, a function which is carried out in public, save to the extent that general considerations of justice otherwise require, which is and which is manifestly free of outside influence and which results in a report or other outcome which can be assessed according to its own terms, will not be one that gives the appearance of an unacceptable relationship between the judiciary and the other branches of government." In another, her Honour said of the designated person's duty to report in that case220: "As the report need not be made public, it cannot be judged according to its own terms." The Attorney-General for the State of Western Australia submitted that those statements were not advancing a criterion of validity. Rather they were pointing to elements in her Honour's conclusion that the role of the designated person in that case generated a perception that she lacked independence from the Executive. That perception arose from her duty to report in secret and her lack of control over whether the report would be carried into effect. These matters caused the designated person to have the appearance of acting as the servant or agent of the relevant Minister. It was the impact on the perception of independence, not secrecy in itself, which was the criterion of validity. 218 Public Service Board of New South Wales v Osmond (1986) 159 CLR 656. 219 (1996) 189 CLR 1 at 25-26 (emphasis added). 220 (1996) 189 CLR 1 at 26 (emphasis added). The submission of the Attorney-General for the State of Western Australia is correct. Gaudron J's approach was similar to that of the plurality, who said221: "The separation of the Ch III judge acting as reporter from the Minister has been breached." In contrast to the position in Wilson's case, here there is no duty to report only in secret (ie no duty not to give reasons), and the outcome is not in the hands of a Minister. What the eligible Judge does cannot be controlled by a Minister, and the making of an interim control order or control order, though the Commissioner applies for it, depends on the view of a Supreme Court judge. In Fardon v Attorney-General (Qld)222, McHugh J said that the relevant question in relation to State legislation investing a State court with particular powers is whether those powers compromise the institutional integrity of the court to the extent that they affect the court's capacity to administer federal jurisdiction impartially and according to federal law. He also said that State legislation requiring the courts to act in ways "inconsistent with the traditional judicial process" is only invalid if in all the circumstances "the State court might not be an impartial tribunal that is independent of the legislative and the executive arms of government." The present case does not concern State legislation investing a State court with particular powers, but legislation designating a person who is a member of the Supreme Court as the holder of particular powers. The plurality in Wilson's case said that several questions had to be asked about legislation of that kind in relation to a federal judge. Analogous questions arise in the present case. The first question is "whether the function is an integral part of, or is closely connected with, the functions of the Legislature or the Executive Government."223 That question here must be answered in the negative. As the Attorney-General for the State of Western Australia submitted, unlike the position in Wilson's case, the making of a declaration by an eligible Judge is not a step in an administrative process of the Executive Government. The making of a declaration is a first step which may lead to the making of a control order by the Supreme Court and the prosecution of a defendant by a court exercising criminal jurisdiction under s 36. While the Executive may instigate the later processes by making an application for a control order or initiating a prosecution, it is the courts which determine the outcome of those proceedings. 221 (1996) 189 CLR 1 at 20. 222 (2004) 223 CLR 575 at 600-601 [41]-[42]; [2004] HCA 46. 223 (1996) 189 CLR 1 at 17. In Gypsy Jokers Motorcycle Club Inc v Commissioner of Police (2007) 33 WAR 245 at 285 [145]-[146] Wheeler JA (dissenting) raised an issue, which need not be decided now, whether a negative answer to the first question was determinative. The second question is: "whether the function is required to be performed independently of any instruction, advice or wish of the Executive Government, other than a law or an instrument made under a law … If an affirmative answer does not appear, it is clear that the separation has been breached."224 the Legislature or The answer here is affirmative. Section 5(6) provides that the Attorney-General, having declared a judge to be an eligible Judge under s 5(3), cannot revoke the declaration. And s 5(7) provides: "To avoid doubt, the selection of the eligible Judge to exercise any particular function conferred on eligible Judges is not to be made by the Attorney General or other Minister of the Crown, and the exercise of that particular function is not subject to the control and direction of the Attorney General or other Minister of the Crown." As the Attorney-General for the State of Western Australia submitted, the function of making a declaration is required to be performed independently of any instruction, advice or wish of the legislature or the Executive Government, other than a law or an instrument made under a law. The third question is: "Is any discretion purportedly possessed by the Ch III judge to be exercised on political grounds – that is, on grounds that are not confined by factors expressly or impliedly prescribed by law?"225 The answer is in the negative. As the Attorney-General for the State of Western Australia submitted, the function of the eligible Judge is not carried out on political grounds, but rather depends on the eligible Judge's satisfaction of the matters prescribed by s 9(1). Finally, the plurality in Wilson's case said226: "In considering these questions, it will often be relevant to note whether the function to be performed must be performed judicially, that is, without bias and by a procedure that gives each interested person an opportunity to be heard and to deal with any case presented by those with opposing interests." 224 (1996) 189 CLR 1 at 17 (footnote omitted). 225 (1996) 189 CLR 1 at 17. 226 (1996) 189 CLR 1 at 17. As the Attorney-General for the State of Western Australia submitted, the eligible Judge is required to act in accordance with the requirements of procedural fairness, except so far as those requirements are validly qualified by ss 8(5) and (6), 28 and 29. There has not been any suggestion of bias on the part of eligible Judges. In short, since the crucial issue is the independence and impartiality of the judges who act as designated persons, the question is whether the absence of a duty to give reasons impairs it. Taken with other factors, that absence did lead to invalidity in Wilson's case. But an exclusion of any duty to give reasons is not determinative, for in Grollo v Palmer227 legislation was upheld despite the fact that no reasons were given for the conduct of federal judges in issuing telecommunication interception warrants. Further, the failure to give reasons for making Pt 2 declarations, even after a hard-fought contested application, is a matter of considerably less significance than failing to give reasons for the result of a trial affecting the rights of litigants. A Pt 2 declaration does not affect rights. It does no more than leave a person who is a member of a declared organisation open to an application being made for that person to be the subject of an interim control order and a control order. As the Attorney-General for the State of Western Australia submitted, it is merely a precondition to the making of those orders. The probative significance of the declaration in relation to Pt 3 is nil, unless it is supported by admissible evidence, and even then it is the evidence which matters, not the mere fact of the declaration. As stated above228, the factors which the Supreme Court judge takes into account in assessing whether there are "sufficient grounds" under s 19(1)(b) to make a control order concentrate on a wide range of matters turning on substantive factual detail about the organisation and the member. The making of a declaration by itself says nothing about the details of the organisation or the member. A failure to give reasons for making a declaration with that limited significance is not a ground of invalidity. Section 13(2) and invalidity: does the Kable doctrine apply to the appointment of State judges as designated persons? A fourth reason for the validity of s 13(2) arises from a submission advanced on behalf of the Attorney-General for the State of Victoria. It was contended that the Kable doctrine had never been applied, and ought not to be applied, to the appointment of State judges as designated persons. 227 (1995) 184 CLR 348. 228 See [139]. Are eligible Judges appointed as designated persons? So far it has been assumed that eligible Judges are appointed as designated persons. It is now necessary to decide the correctness of that assumption. The distinction is between the conferral of power on a judge as a judge, and the conferral of power on a judge "as an individual who, because he is a judge, possesses the necessary qualifications to exercise it."229 There is authority230 for the distinction predating the Boilermakers' case231. The plaintiff submitted that eligible Judges were not designated persons but were appointed as members of the Supreme Court who agreed to perform particular additional executive functions under the Act. The submission is not correct for the following reasons. The powers granted under Pt 2 are granted to an "eligible Judge", not to the "Supreme Court" or "the Court". In the Act the terms "eligible Judge" and "the Court" are not used interchangeably. They are used in distinct senses. Thus Pt 2 confers functions on eligible Judges, while Pt 3 confers other functions on the Court. The Pt 2 procedures of eligible Judges are in certain respects not the procedures ordinarily followed by the Supreme Court. Some members of the Supreme Court may not be appointed as eligible Judges. Although appointment as an eligible Judge depends on the consent of the appointee (s 5(2)), the appointee can revoke that consent (s 5(5)). The powers conferred by Pt 2 of the Act are conferred only on select judges who consent, not on all the judges as judges by virtue of their judicial offices. Those powers are administrative; they are not incidental to the exercise of judicial power; and this points to their recipients as being designated persons232. Victoria's argument. Victoria's argument was as follows. The Kable doctrine is that State legislation cannot confer on a State court a function (or require the exercise by a State court of a function in a manner) that is incompatible with that State court's status as a recipient of the judicial power of the Commonwealth, or would otherwise impair the State court's integrity or independence233. 229 Hilton v Wells (1985) 157 CLR 57 at 72 per Gibbs CJ, Wilson and Dawson JJ. 230 Queen Victoria Memorial Hospital v Thornton (1953) 87 CLR 144 at 152; [1953] HCA 11. 231 R v Kirby; Ex parte Boilermakers' Society of Australia (1956) 94 CLR 254; [1956] HCA 10. 232 Hilton v Wells (1985) 157 CLR 57 at 73. 233 Counsel cited Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 103, 109, 116 and 127-128; [1996] HCA 24. The Kable doctrine is concerned primarily with the conferral of functions on State courts as institutions, not the conferral of functions on persons who happen to be members of State courts234. Chapter III of the Constitution requires the separation of judicial power from other powers at the Commonwealth level. That separation of powers is why Ch III prevents the Commonwealth Parliament from conferring on federal judges as designated persons functions inconsistent with the exercise of judicial power, such as executive functions. Thus Gaudron J said in Kable v Director of Public Prosecutions (NSW)235: "The prohibition on State legislative power which derives from Ch III is not at all comparable with the limitation on the legislative power of the Commonwealth enunciated in R v Kirby; Ex parte Boilermakers' Society of Australia236. The Boilermakers' doctrine, as it is sometimes called, prevents the Parliament of the Commonwealth from conferring judicial power on bodies other than courts and prevents it from conferring any power that is not judicial power or a power incidental thereto on the courts specified in s 71 of the Constitution. It also prevents the Parliament from conferring functions on judges in their individual capacity if the functions are inconsistent with the exercise of judicial power in the sense explained in Grollo v Palmer237. The limitation on State legislative power is more closely confined and relates to powers or functions imposed on a State court, rather than its judges in their capacity as individuals, and is concerned with powers or functions that are repugnant to or incompatible with the exercise of the judicial power of the Commonwealth." And Gibbs CJ, Wilson and Dawson JJ said in Hilton v Wells238 that, in the case of federal judges, the Boilermakers' doctrine would apply to render 234 Counsel cited Queen Victoria Memorial Hospital v Thornton (1953) 87 CLR 144 at 152; Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 103-104; South Australia v Totani (2010) 242 CLR 1 at 47-48 [69] and 82 [205] (citing Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617 [101]). 235 (1996) 189 CLR 51 at 103-104. 236 (1956) 94 CLR 254. 237 (1995) 184 CLR 348. 238 (1985) 157 CLR 57 at 73-74. See also at 81 per Mason and Deane JJ. See further Grollo v Palmer (1995) 184 CLR 348 at 365 and 392. invalid legislation if "the nature or extent of the functions cast upon judges were such as to prejudice their independence or to conflict with the proper performance of their judicial functions". But, unlike the Commonwealth Constitution, the constitutions of the Australian States do not require the separation of judicial power239. The Kable doctrine does not import a separation of judicial power into the State judicial systems240. The limitation on State legislative power that flows from the Kable doctrine does not flow from any separation of judicial function under the State constitutions preventing individual judges acting as members of the Executive – only from the establishment by Ch III of an integrated court system. Therefore it does not follow from the application of the Kable doctrine to State courts that it applies to State judges when they are not acting as members of State courts, but as designated persons. (h) No decision of this Court has held that it does follow. All the authorities on designated persons relate to federal judges241. None of the authorities in which the Kable doctrine has been successfully invoked in relation to State judges were designated persons cases242, although there are dicta of Gaudron J opposing the extension to designated persons and of McHugh J favouring it243. To decide for the plaintiff would involve a new step – a merger between the Grollo v Palmer principle limiting the activities of federal judges as 239 Counsel cited Love v Attorney-General (NSW) (1990) 169 CLR 307 at 319; [1990] HCA 4; South Australia v Totani (2010) 242 CLR 1 at 86 [221]. 240 Counsel cited Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 598 [37], 614 [86] and 655-656 [219]. 241 Grollo v Palmer (1995) 184 CLR 348; Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1. 242 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51; International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319; [2009] HCA 49; South Australia v Totani (2010) 242 CLR 1. 243 Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51 at 104 and 117-118 respectively. designated persons, and the Kable doctrine limiting the functions of State courts, and an extension of it to State judges as designed persons. The Attorney-General for the State of Victoria also advanced a submission that, if there were any limit on the validity of legislation providing for the appointment of State judges as designated persons, it was a narrower one which the Act did not offend. The Commonwealth's argument. The Solicitor-General of the Commonwealth put the following submissions. Chapter III of the Constitution did not admit of different grades or qualities of justice depending on whether judicial power was being administered in a State court or a federal court244. It followed that Ch III did not admit of two grades or standards of independence and impartiality. To confer a function on a judge as a designated person would be invalid if it "undermines the integrity of the Judicial Branch"245. That principle was merely an application of the Kable doctrine. It therefore applied to State judges as much as federal judges. The application of the Kable doctrine. These submissions of the Solicitor-General of the Commonwealth do not explain how the carrying out by persons who are judges of State courts of non-judicial functions would cause the justice administered in those courts to be of inferior grade or quality, or would entail lower standards of independence and impartiality, or would undermine integrity. Nor do they deal with the submission advanced on behalf of the Attorney-General for the State of Victoria to the effect that a stricter doctrine applies to federal judges appointed as designated persons because of the federal separation of powers, which does not exist at State level. To take the step which the Commonwealth's submissions entail is not to apply the Kable doctrine, but to move a step beyond it. They do not explain why that step should be taken, or how it could be taken. The submissions advanced on behalf of the Attorney-General for the State of Victoria are correct. So far as the opinion of 244 He cited Fardon v Attorney-General (Qld) (2004) 223 CLR 575 at 617 [101]. 245 Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 189 CLR 1 at 9, quoting Mistretta v United States 488 US 361 at 404 (1989). Mason and Deane JJ in Hilton v Wells246 may be to the contrary, it was a dissenting opinion; the case is an authority for what the majority said, not the minority; no application was made to overrule the case; and no suggestion arose in argument that it should be overruled. "Public confidence" In Wilson's case Gaudron J said247 that "the effective resolution of controversies which call for the exercise of the judicial power of the Commonwealth depends on public confidence in the courts", and said that that depends on the matters listed in the first passage quoted in the reasons for judgment of Gummow, Hayne, Crennan and Bell JJ. She also spoke in the third passage of what was a "risk to public confidence" and what "would diminish public confidence"248. The existence and meaning of tests turning on "public confidence"249 depend in part on what the "public" is. One is reminded of William F Buckley's statement: "a huge swell of public opinion is developing – I think he's an Assistant Professor at Berkeley." Are selected journalists the public? Those who speak for trade unions and trade associations? Politicians? Lord Denning MR's "silent majority of good people who say little but view a lot"250? Or is it the case that to say of a provision that "it will damage public confidence in the courts" is merely a veiled way of saying "I dislike it", and that it must therefore be 246 (1985) 157 CLR 57 at 83-84. 247 (1996) 189 CLR 1 at 22. 248 See above at [94]. 249 Was what Gaudron J said in Wilson's case an aspect of the doctrine emanating from Kable's case? Kable's case was argued five months after Wilson's case and decided three days after it. Wilson's case did not mention Kable's case, but Kable's case mentioned Wilson's case. In particular, in Kable's case Gaudron J (at 107 and 108) referred to the "maintenance of public confidence" in the courts, citing Wilson's case. If what was said in Wilson's case is an aspect of the Kable doctrine, the references to damaging "public confidence" must not now be seen as a criterion of invalidity, merely an indication of it: see South Australia v Totani (2010) 242 CLR 250 Attorney-General ex rel McWhirter v Independent Broadcasting Authority [1973] QB 629 at 652. constitutionally invalid? Does "public confidence" have any more meaning than expressions like "social justice" or "value to society"251? Another difficulty is that some are types of confidence which sections of the public have in public institutions which reflect credit neither on the sections of the public nor on the public institutions252. And it is often the duty of courts to resist conduct which would increase the confidence in them of some sections of the public. That is true of the courts in both their non-constitutional roles and their roles in administering constitutions. The function of the courts is often to protect individuals and minorities against the larger public. Assuming these difficulties are put aside, what generates public confidence? What is a risk to public confidence? What diminishes public confidence? Each of these questions is an empirical question. It has not been empirically demonstrated that the possibility of an occasional failure of eligible Judges to give reasons for their decisions and declarations in Pt 2 proceedings would result in unsatisfactory answers to these questions. Invalidation of the Act on the ground that Pt 2 is to be administered by eligible Judges from whom the obligation to give reasons cannot be removed may be compared with legislation in which the place of eligible Judges is taken by personages who are much less "impartial", much less "accustomed to the dispassionate assessment of evidence" and much less independent of the enforcement agencies of the Executive253. Of course it is necessary to put up with any inconvenience which the Constitution causes. But which model is more damaging to public confidence? Other aspects of the Kable doctrine Does the Act enlist Supreme Court judges to determine applications for Pt 2 declarations using processes containing three integers which, if adopted by the Supreme Court itself, would be repugnant to the judicial function, namely processes (a) not involving the rules of evidence, (b) requiring certain information to be kept secret from the organisation or its members, and (c) not requiring reasons for the determination? If so, is it invalid on that ground? 251 Hayek, Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice, 252 South Australia v Totani (2010) 242 CLR 1 at 95-96 [245] n 391. 253 Grollo v Palmer (1995) 184 CLR 348 at 367 per Brennan CJ, Deane, Dawson and Judges commonly think that the conduct of court proceedings is a matter best left to the courts and not to the legislature. It is certainly true that legislatures do not often make provision for the conduct of court proceedings except through delegated legislation in the form of rules of court, over which judges as a group have considerable control, and except through aspirational statements about speed and cost. But that legislative abstention rests on prudence, not on a fear of invalidity. Sometimes legislatures think that court conduct is too important a matter to be left to the courts. The legislative abolition of the rules of evidence in curial proceedings is very unlikely to be invalid. Rules of evidence can be, and over the last 200 years have been, radically modified by statute both for interlocutory hearings and for trials. A few thinkers have advocated their complete abolition. But it has never been suggested, however unsatisfactory it would be to abolish them, that it would be impossible to do so on constitutional grounds. Turning to the second integer, the restrictions in relation to criminal information apply as much to Pt 3 hearings in the Supreme Court as to Pt 2 hearings before an eligible Judge (see ss 16(3)-(5), 21(2)-(4), 28, 29 and 31), but the authority of this Court is that that alone does not affect validity254. What of the third integer – the absence of an obligation to give reasons? It is at least arguable that legislative abolition of the common law "duty" for courts to give reasons would be constitutionally valid even though it might be foolish. The "duty" is important. But it has only been closely examined in recent years. Its precise formulation is diffuse and controversial. It is riddled by exceptions. Whether it exists, or has been breached, in a particular case depends on many factors, including the nature of the proceedings, the extent to which there was full argument extensively participated in by the court, and any need for urgency. There are other rules affecting the conduct of trials – for example, rules relating to the burden and standard of proof in criminal prosecutions – which are even more important than the duty to give reasons. The authority of this Court is against any suggestion that a reversal of the burden of proof is constitutionally impossible255. If a change of that significance can validly be made, why not the lesser change in relation to the duty to give reasons? If it is constitutionally impossible to abolish a duty to give reasons, is it constitutionally impossible for the legislature to regulate other aspects of the 254 K-Generation Pty Ltd v Liquor Licensing Court (2009) 237 CLR 501 at 539-543 255 See the cases cited in South Australia v Totani (2010) 242 CLR 1 at 107-108 [277] judicial task? Is it precluded from forbidding dissenting judgments? Or requiring that judgments be delivered within a certain period? Or requiring that they be delivered ex tempore? Or requiring that they not exceed a certain length? Could legislation abolishing the duty of a court to give reasons be said to prevent it from answering the description of "Supreme Court" and "court" in s 73 of the Constitution as those expressions were understood in 1900? To compel a Supreme Court to make only ex parte orders is inconsistent with its description in 1900 (and indeed at all later times), because the role of a Supreme Court is to decide disputes between litigants, and, ex hypothesi, that can only be performed in inter partes hearings256. In 1900 the duty to give reasons may have been different from what it is now. Reasons were almost always much briefer than they are now. They were much more often delivered ex tempore. In the case of the Privy Council, it was forbidden to give reasons in support of dissenting opinions. So much for the three integers in conventional litigation. What is their application when judges are acting as designated persons? It was concluded above257 that s 13(1), rendering the rules of evidence inapplicable in Pt 2 hearings, is not damaging to validity. It was also concluded above258 that the criminal information provisions are not damaging to validity. And it was concluded above259 that s 13(2), denying any duty to give reasons for Pt 2 declarations, is not fatal to validity. Even if a combination of those three integers – no rules of evidence, secrecy of criminal information and no duty to give reasons – or any of them taken singly is repugnant to the judicial function in conventional litigation, why would it render invalid legislation providing not for the exercise of a judicial function in conventional litigation, but for designated persons to carry out an administrative function independently of the Executive in accordance with procedures having those three integers? Implied right to political association The plaintiff also submitted that there was in the Constitution an implied right to political association, or an implied right to association for the purpose of political communication. For that submission many authorities were cited. None of them supported it. There is no general freedom of political communication in 256 International Finance Trust Co Ltd v New South Wales Crime Commission (2009) 240 CLR 319 at 379-388 [141]-[165]. the Constitution beyond that necessary for the effective operation of the system of representative and responsible government provided for in ss 7, 24, 64 and 128 of the Constitution260. That qualification was present in statements on which the plaintiff relied261. The Act is not concerned with political communication, but with preventing serious criminal activity. Even if the rights claimed by the plaintiff to exist did exist, there is no necessary impairment of them because s 19(7)(a) permits the Supreme Court, on making a control order, to make an order permitting the person against whom the order is made to associate with a controlled member of a declared organisation where there is "good reason" for this. And s 25 permits the Supreme Court to vary a control order. 260 Lange v Australian Broadcasting Corporation (1997) 189 CLR 520 at 561, 567 and 571; [1997] HCA 25. 261 Australian Capital Television Pty Ltd v The Commonwealth (1992) 177 CLR 106 at 232; [1992] HCA 45; Kruger v The Commonwealth (1997) 190 CLR 1 at 115; [1997] HCA 27.
HIGH COURT OF AUSTRALIA ERNEST MUNDA AND APPELLANT THE STATE OF WESTERN AUSTRALIA RESPONDENT Munda v Western Australia [2013] HCA 38 2 October 2013 ORDER Appeal dismissed. On appeal from the Supreme Court of Western Australia Representation A Boe with D D Brunello for the appellant (instructed by Aboriginal Legal Service of Western Australia (Inc)) J McGrath SC with L M Fox for the respondent (instructed by Director of Public Prosecutions) Notice: This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports. CATCHWORDS Munda v Western Australia Criminal law – Appeal – Prosecution appeal against sentence – Where appellant pleaded guilty to manslaughter of de facto spouse – Where appellate court resentenced appellant on ground that original sentence manifestly inadequate – Whether appellate court failed to correctly apply principles attending disposition of prosecution appeal against sentence on ground of manifest inadequacy – Whether finding of manifest inadequacy open if similar sentences imposed for comparable offences – Whether appellate court erred in failing to exercise residual discretion. Criminal law – Sentence – Principles – Relevance of deprived background of Aboriginal offender – Whether appellate court gave appropriate regard to appellant's antecedents and personal circumstances. Words and phrases – "aggravating factors", "antecedents and personal circumstances", "manifestly factors", "residual discretion", "social disadvantage". inadequate", "mitigating Criminal Appeals Act 2004 (WA), ss 24(1), 31, 41(4). Sentencing Act 1995 (WA), ss 6, 8(1). FRENCH CJ, HAYNE, CRENNAN, KIEFEL, GAGELER AND KEANE JJ. The appellant was convicted on his plea of guilty to the manslaughter of his de facto spouse, contrary to s 280 of the Criminal Code (WA). The appellant was sentenced by Commissioner Sleight in the Supreme Court of Western Australia to a term of imprisonment of five years and three months, with a non-parole period of three years and three months1. The respondent appealed against this sentence on the ground that it was manifestly inadequate. The Court of Appeal of the Supreme Court of Western Australia allowed the appeal, and resentenced the appellant to seven years and nine months imprisonment. He remained eligible for parole in accordance with the order of Commissioner Sleight2. In this Court, the appellant submitted that the Court of Appeal erred in failing to appreciate that there was no sufficient ground for interference by it in the sentence imposed by Commissioner Sleight, and in failing to have proper regard to the appellant's personal circumstances as an Aboriginal man. In particular, it is said that systemic deprivation and disadvantage, including an environment in which the abuse of alcohol is endemic in indigenous communities, should have been, but was not, taken into account by the Court of Appeal. For the reasons that follow, the appellant's submissions should be rejected and his appeal dismissed. Factual background At the time the deceased was killed, the appellant and the deceased were staying at the Mindi Rardi community near Fitzroy Crossing. They had been in a relationship for approximately 16 years and had four children together. They attended a local tavern on the afternoon of 12 July 2010. Both became intoxicated and the appellant used some cannabis. When the pair returned to their house an argument developed. Each accused the other of being unfaithful. The appellant punched the deceased on numerous occasions, threw 1 The State of Western Australia v Munda [2011] WASCSR 87 at [33], [37]. 2 Western Australia v Munda (2012) 43 WAR 137 at 153 [68] per McLure P, 185 [260] per Mazza JA. Hayne Crennan her about their bedroom and repeatedly rammed her head into the walls. During the attack the deceased repeatedly screamed at the appellant, telling him to leave her alone. At one stage, the appellant caused the deceased to fall onto a bed mattress. He then stood over her and repeatedly punched her in the face. After the appellant had finished assaulting the deceased, they both went to sleep. The next morning, the appellant had sexual intercourse with the deceased. He then left the house to get some tea. When the appellant returned, he noticed that the deceased had stopped breathing. He called for medical assistance and attempted first aid. The deceased was transported to Fitzroy Crossing Hospital and was pronounced dead on arrival. A post-mortem examination confirmed that she had died from traumatic brain injury. She also had a fracture to her left jaw and a number of broken ribs. It is not disputed that all of her injuries were caused by the appellant. The appellant's previous history of domestic violence Previously, on 4 May 2009, the appellant had been sentenced to 12 months imprisonment, conditionally suspended for 12 months, for the offence of unlawfully doing grievous bodily harm to the deceased on 23 October 2008. On that occasion the injuries inflicted on the deceased included a fractured femur, tibia and right radius as well as deep lacerations to her forehead inflicted by the use of a metal shovel. The injuries to the deceased's leg were sufficiently serious to require her to be transferred from Broome Hospital to Royal Perth Hospital for treatment3. On 4 May 2009, the appellant was also sentenced to six months imprisonment, conditionally suspended for 12 months, for two offences of common assault upon his 13 year old niece and the ex-partner of the appellant's sister4. The appellant killed the deceased a little more than two months after the expiration of the conditionally suspended imprisonment order5. (2012) 43 WAR 137 at 154 [78], [80]-[81]. (2012) 43 WAR 137 at 154 [78]. (2012) 43 WAR 137 at 154 [79]. Hayne Crennan At the time of the deceased's death, the appellant was subject to a lifetime violence restraining order in relation to the deceased. This order prohibited the appellant from having any contact with the deceased. It had evidently been ignored by both the appellant and the deceased in that they had continued their domestic relationship6. The sentence at first instance The respondent submitted before Commissioner Sleight that "for this particular offence … a sentence in the range of seven to nine years' imprisonment would not be inappropriate". Section 6 of the Sentencing Act 1995 (WA) ("the Sentencing Act") provides relevantly that: "(1) A sentence imposed on an offender must be commensurate with the seriousness of the offence. (2) The seriousness of an offence must be determined by taking into account – the statutory penalty for the offence; and the circumstances of the commission of the offence, including the vulnerability of any victim of the offence; and any aggravating factors; and any mitigating factors." By s 8(1) of the Sentencing Act "mitigating factors" are "factors which, in the court's opinion, decrease the culpability of the offender or decrease the extent to which the offender should be punished." As to the seriousness of the offence, the maximum penalty was 20 years imprisonment. Commissioner Sleight referred to three features of the offence committed by the appellant which he regarded as aggravating factors7. First, his (2012) 43 WAR 137 at 154 [79]. [2011] WASCSR 87 at [9]-[11]. Hayne Crennan Honour referred to the earlier offence against the deceased and the violence restraining order in relation to her. Secondly, his Honour noted that the appellant was in a domestic relationship with the deceased, which should have provided her with protection. Thirdly, the attack was sustained and involved considerable violence. The Commissioner concluded that, within the broad range of offending punishable as manslaughter, the offending in this case did not fall within the "worst category of offences of this type" but was nonetheless "towards the upper end of the range of seriousness."8 The Commissioner then turned to the appellant's personal circumstances, noting that he was a traditional Aboriginal man and that as a child he was exposed to the "negative influences of alcohol and family violence."9 His Honour noted that the appellant had a long history of alcohol and cannabis abuse10. The appellant had attended school until year 10 and went on to hold various jobs. However, he had been unemployed for about four years when he committed the offence11. The appellant also had a long history of offending dating back to 199712. Some of the offences involved violence, such that the Commissioner concluded that the offence for which he was to be sentenced could not be considered uncharacteristic13. Commissioner Sleight accepted that he was obliged to take the appellant's circumstances of disadvantage into account as mitigatory factors14: [2011] WASCSR 87 at [12]. [2011] WASCSR 87 at [13]. 10 [2011] WASCSR 87 at [15]. 11 [2011] WASCSR 87 at [14]. 12 [2011] WASCSR 87 at [16]. 13 [2011] WASCSR 87 at [18]. 14 [2011] WASCSR 87 at [22]-[23]. Hayne Crennan "The sentencing of Aboriginal people can present unique problems which must be addressed. Firstly, it should be stated that the same sentencing principles apply in every case, irrespective of the [identity] of an offender within a particular ethnic group. Secondly, it is proper for a court to recognise the problems of alcohol abuse and violence which exist in many Aboriginal communities and the social disadvantages that they create. These social disadvantages often create a conditioning within the community to accept as normal alcohol abuse and violence, as if it were a way of life. In such circumstances, there needs to be a recognition that, although punishment plays a role in personal and general deterrence, to change such behaviour requires a change in the social circumstances. However, notwithstanding these considerations, the seriousness of an offence must always be given proper weight. Like in all communities, the sentences imposed play a role in trying to protect the vulnerable. This includes, in Aboriginal communities, Aboriginal women, who are frequently subject to violence." His Honour also took account of the prospect of the appellant suffering traditional payback in the form of severe corporal punishment, but gave "limited [weight] to it."15 The appeal to the Court of Appeal Section 24 of the Criminal Appeals Act 2004 (WA) ("the Criminal Appeals Act") authorises an appeal by a prosecutor to the Court of Appeal against the sentence imposed on a convicted person. Sub-sections (1) and (4) of s 31 of the Criminal Appeals Act provide relevantly that, in the case of an appeal by a prosecutor under s 24(1) against sentence, the Court of Appeal may allow the appeal if, in its opinion, a different sentence should have been imposed. In such a case, by virtue of s 31(5), where the Court of Appeal allows an appeal, the Court must set aside the sentence and may instead impose a sentence that is more or less severe, or send the matter back to the court that imposed the sentence to be further dealt with. The respondent appealed against the sentence imposed by Commissioner Sleight on the ground that it was manifestly inadequate. 15 [2011] WASCSR 87 at [24]-[27]. Hayne Crennan McLure P, with whom Mazza JA agreed, concluded that the offending was high on the scale of seriousness for that offence, and held that the sentence imposed by Commissioner Sleight was manifestly inadequate16. Buss JA, in a separate judgment, reached the same conclusion, observing that "the sentence of five years three months' imprisonment … failed properly to recognise the very serious offence committed by the [appellant]"17. The appeal to this Court The appellant argued that the Court of Appeal erred in three separate ways. First, it was said that it failed to apply "the principles that attend the disposition of a State appeal brought on the basis of alleged manifest inadequacy." Secondly, the appellant argued that the Court of Appeal did not appropriately determine "the scope and regard that should be given to the appellant's antecedents and personal circumstances." Finally, it was argued that the Court erred in the "identification and exercise of its discretion not to set aside the original sentence, even if sufficient error was found." In the interests of coherence, each of the grounds of appeal will be discussed separately. Ground 1 – Manifest inadequacy In order to appreciate the first ground of the appellant's challenge to the decision of the Court of Appeal, it is necessary to note the following observations of McLure P18: "It is clear from the State's written submissions that the gravamen of its complaint concerns weighting errors; in particular, that the sentencing judge gave too little weight to deterrence, personal and general." 16 (2012) 43 WAR 137 at 150 [50]. 17 (2012) 43 WAR 137 at 165 [142]. 18 (2012) 43 WAR 137 at 152 [63]. Hayne Crennan McLure P also said that19: "It is the experience of judicial officers in this jurisdiction that the gross over-representation of Aboriginal people in this State's criminal justice system … is directly related to alcohol abuse and, more recently, often in combination with illicit drug abuse. As those working in the criminal law in this State would know, a grossly disproportionate number of offenders convicted and sentenced for manslaughter in the Supreme Court in recent years are Aboriginal, as are most of their victims." The appellant argued that the Court of Appeal did not proceed by reference to standards of sentencing customarily observed, and did not assess the seriousness of the appellant's offending by a comparison with similar cases. That being so, the Court of Appeal could not have been, as it was required to be, "convinced that the sentence [was] definitely outside the appropriate range"20 so as to be satisfied that it was manifestly inadequate. In addition, the appellant argued that the Court of Appeal approached the appeal before it as raising specific "weighting errors"21. This approach was said to undermine the competency of the appeal itself because the only ground of appeal was manifest inadequacy of the sentence. The appellant also seized upon the comment by McLure P22 concerning the "grossly disproportionate number of offenders convicted and sentenced for manslaughter … in recent years [who] are Aboriginal, as are most of their victims", to mount an argument that McLure P and Mazza JA had proceeded upon a consideration of the prevalence of the kind of offending with which this case is concerned. That was said to be an error, given that no ground of error in this regard had been raised by the respondent's appeal. 19 (2012) 43 WAR 137 at 152 [64]. 20 Everett v The Queen (1994) 181 CLR 295 at 306; [1994] HCA 49. 21 (2012) 43 WAR 137 at 152 [63]. 22 (2012) 43 WAR 137 at 152 [64]. Hayne Crennan "Weighting errors" There was nothing unorthodox in the Court of Appeal's approach to the question of manifest inadequacy. Its view in that respect was properly informed and explained by having regard to the maximum sentence for the offence, the gravity of the offending conduct on the scale of seriousness, and the personal circumstances of the offender23. House v The King established that appealable error in the exercise of a discretionary judgment may be established by demonstration of specific error of fact or principle apparent from the primary judge's reasons or because24: "the result embodied in [the primary judge's] order … is unreasonable or plainly unjust, [such that] the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance." That is the approach which McLure P expressly adopted25. Her Honour's reference to "weighting errors" does not suggest that her Honour proceeded to decide the appeal on a ground different from that urged by the respondent. Although McLure P used the phrase "weighting errors", it is clear from the context of her remarks that her Honour was not using the phrase to introduce a discussion of specific error but to expose the reasoning by which she reached a conclusion of manifest inadequacy. The considerations to which her Honour referred serve to explain why the sentence imposed at first instance was so unreasonable and plainly unjust as to manifest the error of inadequacy. Prevalence As to prevalence, there was some discussion in this regard in the Court of Appeal during oral argument, but ultimately no reliance was placed on it by the 23 (2012) 43 WAR 137 at 151 [57]. 24 (1936) 55 CLR 499 at 505; [1936] HCA 40. 25 (2012) 43 WAR 137 at 151 [56]. Hayne Crennan Court of Appeal. McLure P did not mention it as a factor material to her conclusion, and Buss JA expressly disavowed any reliance upon prevalence26. McLure P did not alter the ground on which the appeal was fought by referring to the gravity of the offence of alcohol-fuelled domestic violence by indigenous men against indigenous women. The point of her Honour's reference to the nature and scale of the problem was not to justify a review of sentence range to prescribe future guidelines27. Rather, as is apparent on a fair reading of her Honour's reasons, her Honour was proceeding to make the point that, even in the context of the circumstances of social disadvantage in which domestic violence commonly occurs, the seriousness of the offence is such as to make a compelling claim on the sentencing discretion. And that is so notwithstanding that is "grossly disproportionate". the number of Aboriginal offenders (and victims) Comparable sentences The appellant argued that the sentence imposed by Commissioner Sleight was not markedly different from that imposed in cases which were "most closely comparable" with the present case28. As part of that argument, the appellant contended that, absent a yardstick by reference to which the sentence imposed at first instance could be seen to be inadequate, there was no basis for the Court of Appeal to allow the appeal. Further, the appellant noted that the sentence imposed by the Court of Appeal was higher than the most comparable case placed before Commissioner Sleight, R v Gordon29, where an appeal by the prosecution against a sentence of seven years imprisonment for manslaughter was dismissed. This aspect of the appellant's argument should be rejected for three reasons. First, the appellant's argument assumes that only "closely comparable" cases can provide a yardstick with which to judge the adequacy of a sentence. In this regard, the appellant invoked this Court's decision in Hili v The Queen in 26 (2012) 43 WAR 137 at 184 [256]. 27 cf Sentencing Act 1995 (WA), s 143. 28 Hili v The Queen (2010) 242 CLR 520 at 539-540 [62]; [2010] HCA 45. 29 [2000] WASCA 401. Hayne Crennan support of the proposition that, absent a marked departure by Commissioner Sleight from closely comparable cases, the Court of Appeal could not conclude that the original sentence was manifestly inadequate. But in Hili it was distinctly not said that a yardstick derived by reference to comparable cases was an essential precondition of a conclusion that a sentence was manifestly inadequate. It was acknowledged that such a disparity is one pointer towards inadequacy; but French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ expressly approved30 the statement of Simpson J in Director of Public Prosecutions (Cth) v De La Rosa31 that previous sentences may be used to establish a range of sentences that have been imposed but not that the range is correct. In particular, the range of sentences that have been imposed in the past does not fix "the boundaries within which future judges must, or even ought, to sentence."32 Secondly, as Gleeson CJ, Gummow, Hayne and Callinan JJ said in Markarian v The Queen33, the maximum penalty fixed by the legislature for the offence provides, "taken and balanced with all of the other relevant factors, a yardstick." The maximum penalty for manslaughter was 20 years imprisonment, and, as the Court of Appeal noted, this case was a serious example of that offence34. Thirdly, the decision in Gordon, delivered in 2000, was, as counsel for the respondent pointed out to Commissioner Sleight, a Crown appeal which was decided by reference to considerations of double jeopardy35 which are no longer material36. As a result, as McLure P noted, the decision in Gordon afforded "[l]ittle guidance"37 in relation to this case. It may also be noted that, in Gordon, 30 (2010) 242 CLR 520 at 537 [54]. 31 (2010) 79 NSWLR 1 at 70-71 [303]-[305]. 32 (2010) 79 NSWLR 1 at 70 [304]. 33 (2005) 228 CLR 357 at 372 [31]; [2005] HCA 25. 34 (2012) 43 WAR 137 at 151 [58], 185 [259]. 35 [2000] WASCA 401 at [16]. 36 Criminal Appeals Act 2004 (WA), s 41(4)(b). 37 (2012) 43 WAR 137 at 151 [61]. Hayne Crennan Wheeler J delivered a powerful dissenting judgment. Her Honour would have allowed the State's appeal and substituted a sentence of nine years imprisonment without eligibility for parole. Her Honour said38: "In this case, the offence is one of the most serious known to the law. The maintenance of adequate standards of punishment for a crime involving the taking of human life is an important consideration. While the role of the criminal law in deterring the commission of violent acts is problematic, and particularly so in relation to Aboriginal communities, it is important to indicate very clearly that drunken violence against Aboriginal women is viewed very seriously". The passage of time has not lessened the force of that statement. While the appellant's offence may not have been in the very worst category of offences of manslaughter, it is not easy to think of worse examples. Given that the maximum available sentence was 20 years imprisonment, and given the prolonged and brutal beating administered by the appellant upon his de facto spouse, a conclusion that the sentence imposed at first instance was manifestly inadequate cannot be said to have been wrong. Ground 2 – Antecedents and personal circumstances It is relevant to the second aspect of the appellant's challenge to the decision of the Court of Appeal to note that McLure P observed that39: "Even if it is established that a person's addiction to alcohol and/or drugs is mitigatory because of events in their formative childhood years or otherwise, that does not inevitably reduce the weight to be given to personal deterrence. Indeed, addictions ordinarily increase the weight to be given to personal deterrence (and/or community protection) because of the associated increase in the risk of reoffending. ... Further, the courts must exercise caution in characterising or treating an offender as a 'victim' because it can lead adult perpetrators to wrongly believe that they are not truly responsible and accountable for their conduct, leading to a failure to properly protect the community. … 38 [2000] WASCA 401 at [35]. 39 (2012) 43 WAR 137 at 152-153 [65]-[66]. Hayne Crennan Moreover, it is wrong in principle to reduce the weight to be given to general deterrence in circumstances where alcohol-fuelled violence is endemic in the community generally, even if not sufficiently deterred in fact by the prospect of imprisonment". Further, as to the appellant's personal circumstances, McLure P said40: "The evidence in this case did not establish that the [appellant] was raised in circumstances of such deprivation and difficulty as to render his addictions mitigatory. It is the case that the [appellant] will be separated from his family and country for the term of his imprisonment. However, as he is able to communicate in English and has had prior experience in the prison system, it cannot be said that imprisonment would bear particularly harshly upon him. A sentence of five years and three months' imprisonment for the offence committed by the [appellant] is, having regard to all relevant circumstances, manifestly inadequate and should be set aside. It fails to give due recognition to the seriousness of the offence, the seriousness of the circumstances in which it was committed and the need for both personal and general deterrence. I would impose a sentence of seven years and nine months' imprisonment. The [appellant] will remain eligible for parole." Buss JA considered the appellant's personal circumstances and held that they "were of limited relevance and had little weight."41 As to those considerations, Buss JA said42: "[T]o the extent they were relevant, [they] were decisively outweighed by other sentencing factors (namely, the protection of vulnerable women, personal deterrence and general deterrence) in the context of the very serious nature of the offending and the [appellant's] previous convictions for violent offending against the deceased and other women." 40 (2012) 43 WAR 137 at 153 [67]-[68]. 41 (2012) 43 WAR 137 at 164 [134]. 42 (2012) 43 WAR 137 at 164 [134]. Hayne Crennan Buss JA concluded43: "I am satisfied that upon all relevant facts and circumstances, and all relevant sentencing considerations, being evaluated and weighed, the sentence of five years three months' imprisonment was manifestly inadequate. This is apparent when that sentencing outcome is viewed from the perspective of the maximum available penalty (20 years' imprisonment); the seriousness of the offending; the importance of the protection of vulnerable women, personal deterrence and general deterrence as prominent sentencing considerations; and after taking into account the general standards of sentencing applicable to the offence of manslaughter (bearing in mind that, as I have mentioned, there is no sentencing tariff for manslaughter and each case must be decided on its own facts), the value of human life and the [appellant's] personal circumstances." The appellant contended that the Court of Appeal erred in principle in treating his personal circumstances as having little, if any, mitigatory effect. The appellant disclaimed any contention that Aboriginality per se warrants leniency. Rather, the appellant's submission was that the disadvantage associated with the social and economic problems that commonly attend Aboriginal communities affected the appellant and that his antecedent circumstances should be treated as mitigatory, notwithstanding the weight to be given to considerations such as deterrence. Finally, it was said that both the sentencing judge and the Court of Appeal failed to give appropriate weight to the consideration that the appellant will likely suffer traditional punishment, namely being struck with nulla nullas by the family of the deceased, when released from gaol. It was submitted that the Court of Appeal did not have any regard to this factor. The appellant is said to be willing, and indeed anxious, to subject himself to traditional payback. His anxiety is said to be an aspect of what should have been given greater significance as a mitigating factor. 43 (2012) 43 WAR 137 at 165 [143]. Hayne Crennan Circumstances of social disadvantage In the absence of specific legislative direction of the kind discussed in the Canadian decisions of R v Gladue44 and R v Ipeelee45, the starting point for discussion of this ground of appeal is the statement of Brennan J in Neal v The Queen46: "The same sentencing principles are to be applied … in every case, irrespective of the identity of a particular offender or his membership of an ethnic or other group. But in imposing sentences courts are bound to take into account, in accordance with those principles, all material facts including those facts which exist only by reason of the offender's membership of an ethnic or other group. So much is essential to the even administration of criminal justice. That done, however, the weight to be attributed to the factors material in a particular case, whether of aggravation or mitigation, is ordinarily a matter for the court exercising the sentencing discretion of first instance or for the Court of Criminal Appeal." The statement by Brennan J in Neal has consistently been applied in this country by intermediate appellate courts47. Thus in Fernando, Wood J said48: "[I]n sentencing persons of Aboriginal descent the court must avoid any hint of racism, paternalism or collective guilt yet must nevertheless assess realistically the objective seriousness of the crime within its local setting 44 [1999] 1 SCR 688. 45 [2012] 1 SCR 433. For a discussion of Gladue and Ipeelee see Bugmy v The Queen [2013] HCA 37 at [28]-[34]. 46 (1982) 149 CLR 305 at 326; [1982] HCA 55. 47 Rogers (1989) 44 A Crim R 301 at 306-307; Fernando (1992) 76 A Crim R 58 at 62; R v Fuller-Cust (2002) 6 VR 496 at 520 [80]-[81]; Western Australia v Richards (2008) 37 WAR 229 at 232-233 [6], 241 [44]; R v KU; Ex parte Attorney-General (No 2) [2011] 1 Qd R 439 at 474-476 [129]-[135]. 48 (1992) 76 A Crim R 58 at 63. Hayne Crennan and by reference to the particular subjective circumstances of the offender." In R v Fuller-Cust49, Eames JA observed that, in the application of the principle stated by Brennan J, regard to an offender's Aboriginality serves to ensure that a factor relevant to sentencing which arises from the offender's Aboriginality is not "overlooked by a simplistic assumption that equal treatment of offenders means that differences in their individual circumstances related to their race should be ignored." Moreover, the personal disadvantages affecting an individual offender may be, because of the circumstances in which they were engendered, so deep and so broad that they serve to shed light on matters such as, for example, an offender's recidivism. Mitigating factors must be given appropriate weight, but they must not be allowed "to lead to the imposition of a penalty which is disproportionate to the gravity of the instant offence."50 It would be contrary to the principle stated by Brennan J in Neal to accept that Aboriginal offending is to be viewed systemically as less serious than offending by persons of other ethnicities. To accept that Aboriginal offenders are in general less responsible for their actions than other persons would be to deny Aboriginal people their full measure of human dignity. It would be quite inconsistent with the statement of principle in Neal to act upon a kind of racial stereotyping which diminishes the dignity of individual offenders by consigning them, by reason of their race and place of residence, to a category of persons who are less capable than others of decent behaviour51. Further, it would be wrong to accept that a victim of violence by an Aboriginal offender is somehow less in need, or deserving, of such protection and vindication as the criminal law can provide. It may be argued that general deterrence has little rational claim upon the sentencing discretion in relation to crimes which are not premeditated. That argument has special force where prolonged and widespread social disadvantage has produced communities so demoralised or alienated that it is unreasonable to expect the conduct of individuals within those communities to be controlled by rational calculation of the consequences of misconduct. In such cases it may be 49 (2002) 6 VR 496 at 520 [80]. 50 Veen v The Queen [No 2] (1988) 164 CLR 465 at 477; [1988] HCA 14. 51 R v KU; Ex parte Attorney-General (No 2) [2011] 1 Qd R 439 at 475-476 [133]. Hayne Crennan said that heavy sentences are likely to be of little utility in reducing the general incidence of crimes, especially crimes of passion. That having been said, there are three points to be made in response. First, the proper role of the criminal law is not limited to the utilitarian value of general deterrence. The criminal law is more than a mode of social engineering which operates by providing disincentives directed to reducing unacceptably deviant behaviour within the community. To view the criminal law exclusively, or even principally, as a mechanism for the regulation of the risks of deviant behaviour is to fail to recognise the long-standing obligation of the state to vindicate the dignity of each victim of violence, to express the community's disapproval of that offending, and to afford such protection as can be afforded by the state to the vulnerable against repetition of violence. Further, one of the historical functions of the criminal law has been to discourage victims and their friends and families from resorting to self-help, and the consequent escalation of violent vendettas between members of the community. A consideration with a very powerful claim on the sentencing discretion in this case is the need to recognise that the appellant, by his violent conduct, took a human life, and, indeed, the life of his de facto spouse. A just sentence must accord due recognition to the human dignity of the victim of domestic violence and the legitimate interest of the general community in the denunciation and punishment of a brutal, alcohol-fuelled destruction of a woman by her partner. A failure on the part of the state to mete out a just punishment of violent offending may be seen as a failure by the state to vindicate the human dignity of the victim; and to impose a lesser punishment by reason of the identity of the victim is to create a group of second-class citizens, a state of affairs entirely at odds with the fundamental idea of equality before the law. The second point to be made here is that, as McLure P noted52: "[A]ddictions ordinarily increase the weight to be given to personal deterrence (and/or community protection) because of the associated increase in the risk of reoffending." This observation by McLure P is particularly poignant in this case, given the very lenient sentence imposed on the appellant in May 2009 and its evident insufficiency to deter the appellant from the repetition of alcohol-fuelled violence 52 (2012) 43 WAR 137 at 152 [65]. Hayne Crennan against his de facto spouse, or to afford her protection from such violence. The circumstance that the appellant has been affected by an environment in which the abuse of alcohol is common must be taken into account in assessing his personal moral culpability, but that consideration must be balanced with the seriousness of the appellant's offending. It is also important to say that it should not be thought that indulging in drunken bouts of domestic violence is not an example of moral culpability to a very serious degree. The third point to be made here is related to the first two. As Gleeson CJ "[T]he interplay of the considerations relevant to sentencing may be complex … In a given case, facts which point in one direction in relation to one of the considerations to be taken into account may point in a different direction in relation to some other consideration. For example, in the case of a particular offender, an aspect of the case which might mean that deterrence of others is of lesser importance, might, at the same time, mean that the protection of society is of greater importance. … It is therefore erroneous in principle to approach the law of sentencing as though automatic consequences follow from the presence or absence of particular factual circumstances." In Markarian54, Gleeson CJ, Gummow, Hayne and Callinan JJ adopted the explanation of the sentencing discretion given by Gaudron, Gummow and Hayne JJ in Wong v The Queen55 that the description of the balance struck by a sentence as an "instinctive synthesis" is not used "to cloak the task of the sentencer in some mystery, but to make plain that the sentencer is called on to reach a single sentence which, in the case of an offence like the one now under discussion, balances many different and conflicting features." As to the balancing by the Court of Appeal of competing considerations in fixing upon a just sentence, it is important to bear in mind that, as Brennan J 53 (1995) 84 A Crim R 67 at 68. 54 (2005) 228 CLR 357 at 373-374 [37]. 55 (2001) 207 CLR 584 at 611-612 [74]-[76]; [2001] HCA 64. Hayne Crennan observed in Neal56, "this Court is not regularly engaged in reviewing the merits of sentences in particular cases", and that the "weighing of relevant factors in the exercise of a sentencing discretion is best left to" the courts of criminal appeal of the States or the Full Court of the Federal Court, who have the benefit of "contemporary knowledge of sentences imposed in comparable cases and of local factors affecting the level of sentences". As to the sentence finally imposed by the Court of Appeal, it is not possible to say that the Court of Appeal's synthesis of competing considerations was affected by error. Traditional punishment There is something to be said for the view that the circumstance that the appellant is willing to submit to traditional punishment, and is anxious that this should happen, is not a consideration material to the fixing of a proper sentence. Punishment for crime is meted out by the state: offenders do not have a choice as to the mode of their punishment. The possibility that the appellant may, at some time in the future, face corporal punishment by way of payback was taken into account in his favour by the sentencing judge57. The respondent accepted that that possibility is a factor relevant to sentencing. The Court of Appeal did not take a different view; and the respondent did not argue that this Court should take a different view. In these circumstances, this case does not afford an occasion to express a concluded view on the question whether the prospect of such punishment is a consideration relevant to the imposition of a proper sentence, given that the courts should not condone the commission of an offence or the pursuit of vendettas, which are an affront and a challenge to the due administration of justice. It is sufficient to say that the appellant did not suffer any injustice by reason of the circumstance that the prospect of payback was given only limited weight in his favour by the courts below. Ground 3 – Residual discretion It is relevant to the third ground of the appeal to note that, before the Court of Appeal, the appellant conceded that the common law principle of double 56 (1982) 149 CLR 305 at 323. 57 [2011] WASCSR 87 at [24]-[27]. Hayne Crennan jeopardy, the application of which moderated sentences imposed by the Court in successful State appeals against sentence, had been abrogated by s 41(4) of the Criminal Appeals Act, which provides: "The appeal court deciding an appeal that does or may require it to impose a sentence, or to vary a sentence imposed, on a person for an offence (whether the appeal was commenced by the person or by the prosecutor) – (a) may take into account any matter, including any material change to the person's circumstances, relevant to the sentence that has occurred between when the lower court dealt with the person and when the appeal is heard; but despite paragraph (a), must not take into account the fact that the court's decision may mean that the person is again sentenced for the offence." The appellant did, however, raise an issue as to whether s 41(4) altered the prevailing principles concerning the exercise of a court's power in relation to State appeals against sentence. All members of the Court of Appeal either accepted or were prepared to assume that, notwithstanding s 41(4), the Court of Appeal retained a residual discretion under s 31 of the Criminal Appeals Act to decline to allow an appeal against a sentence that is erroneously lenient58. McLure P noted that the purpose of an appeal by the prosecution was "to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons."59 As to the existence and nature of the residual "I will assume in the [appellant's] favour that there is a residual discretion to dismiss a State appeal against a sentence that is manifestly inadequate at the time of the appeal. However, such an outcome would be rare. With one possible exception, the residual discretionary considerations are themselves relevant to an assessment of whether a sentence is manifestly 58 (2012) 43 WAR 137 at 146 [26], 183 [251], 185 [260]. 59 (2012) 43 WAR 137 at 147 [31]. 60 (2012) 43 WAR 137 at 147 [33]. Hayne Crennan inadequate as at the date of the hearing of the appeal. Questions of parity (and disparity) may not inform such an assessment." McLure P concluded that there were no facts or circumstances which would justify or require the Court to exercise the residual discretion in this case61. Buss JA gave extensive consideration to the nature and scope of the residual discretion, concluding after careful analysis that there was indeed a discretion to be exercised but that none of the discretionary factors agitated by the appellant warranted the exercise of the Court's discretion in his favour62. The appellant relied, in particular, on the remarks made by French CJ, Crennan and Kiefel JJ in Green v The Queen concerning the purpose of a prosecution appeal under s 5D of the Criminal Appeal Act 1912 (NSW). Their Honours observed that the purpose is63: "'to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons'. That is a limiting purpose. It does not extend to the general correction of errors made by sentencing judges." (footnote omitted) The remarks harked back to a comment of Barwick CJ in Griffiths v The Queen64 which, as explained in Everett v The Queen65, must be understood as encompassing within its reference to "principles" the avoidance of manifest inadequacy or inconsistency in sentencing standards. They introduced a discussion of the residual discretion conferred by s 5D which included the statement that, despite there being a finding that a sentence is manifestly 61 (2012) 43 WAR 137 at 149 [42]. 62 (2012) 43 WAR 137 at 165-185 [145]-[257]. 63 (2011) 244 CLR 462 at 477 [36]; [2011] HCA 49. 64 (1977) 137 CLR 293 at 310; [1977] HCA 44. 65 (1994) 181 CLR 295 at 300. Hayne Crennan inadequate, an appellate court "may decide not to intervene so as not to disturb parity"66. The appellant argued that McLure P misinterpreted whatever was said in Green in remarking that "[s]ave where parity considerations arise, the residual discretion is only likely to be exercised if the error has not resulted in a manifestly inadequate sentence."67 The appellant argued that McLure P misapplied Green, pointing to the comments made by her Honour set out above68. In addition, the appellant argued that, although McLure P held69 that there was "nothing in the facts and circumstances … that would require or justify this court exercising the residual discretion", her Honour gave no explanation as to why this was the case. It is to be noted that in Green70 French CJ, Crennan and Kiefel JJ referred to circumstances in addition to considerations of parity which might create injustice if a State appeal against sentence is allowed. Those circumstances were said to include "delay in the hearing and determination of the appeal, the imminent or past occurrence of the respondent's release on parole or unconditionally, and the effect of re-sentencing on progress towards the respondent's rehabilitation." The conduct of the Crown might also be relevant71, for example, if the Crown were to seek on appeal a higher sentence than it had successfully sought at first instance. To the extent that McLure P's observations suggest a more confined view of the scope of the discretion, they are unduly narrow. That having been said, 66 (2011) 244 CLR 462 at 478 [40]. 67 (2012) 43 WAR 137 at 149 [41]. 68 (2012) 43 WAR 137 at 147 [33]. 69 (2012) 43 WAR 137 at 149 [42]. 70 (2011) 244 CLR 462 at 479-480 [43]. 71 Director of Public Prosecutions v Karazisis (2010) 31 VR 634 at 658-660 [104]- Hayne Crennan none of the matters urged by the appellant was apt to exert a claim upon the residual discretion to dismiss the respondent's appeal. The first of these matters was that the grounds on which the Court of Appeal held that the initial sentence was manifestly inadequate had not been raised before Commissioner Sleight. That contention is, for the reasons already given, without substance. The second discretionary factor agitated by the appellant was that, having seen the accused, a sentencing judge is uniquely well placed to exercise the discretion72. But to say this is merely to repeat an aspect of the argument, which has also been rejected, that the Court of Appeal was wrong to conclude that the initial sentence was manifestly inadequate. The third discretionary consideration relied upon by the appellant was that no error of principle was corrected by the Court of Appeal. This was not a case of mere leniency reflecting error: the Court of Appeal came to the conclusion that the sentence imposed was manifestly inadequate. That was sufficient to justify intervention given that to decline to intervene would have been to perpetuate a manifest injustice. The fourth consideration was that there was nearly one year delay in the hearing and determination of the appeal, and that under the original sentence the appellant was to become eligible for parole on 13 October 2013. McLure P specifically acknowledged that one of the circumstances "relevant to the exercise of the residual discretion include[s] delay in the hearing and determination of the appeal"73. But there was no evidence of any tardiness by the respondent in the prosecution of its appeal to the Court of Appeal. Significantly, the appellant's release on parole was not imminent when the Court of Appeal delivered its judgment on 22 August 2012. The fifth discretionary factor urged by the appellant was that his children will be affected by the delayed release of their father in circumstances where they have already lost their mother. This consideration was not advanced before the Court of Appeal. Given the circumstances in which the appellant's children lost 72 Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 588 [34]; [2011] HCA 10. 73 (2012) 43 WAR 137 at 144 [14]. Hayne Crennan their mother, that is perhaps unsurprising. It was not a consideration with any claim upon the discretion of the Court of Appeal. Conclusion and order The appellant's grounds of challenge to the decision of the Court of Appeal are not made out. The appeal should be dismissed. Bell BELL J. The appellant pleaded guilty in the Supreme Court of Western Australia (Commissioner Sleight) on 4 July 2011 to the manslaughter of his de facto wife. The appellant is a traditional Walmajarri man and the deceased was a Walmajarri woman. They had lived together as husband and wife for 16 years. At the time of the fatal assault they were living in an Aboriginal community near Fitzroy Crossing. They had spent the afternoon at the local tavern and both were intoxicated. After returning home they argued and the appellant assaulted the deceased. It was a prolonged and brutal assault during which the appellant threw the deceased about the room ramming her head into the fibro walls. He repeatedly punched her about the face and head. The cause of death was traumatic brain injury. Among other injuries sustained by the deceased in the course of the assault were a fractured jaw and five fractured ribs. The appellant was 32 years of age at the date of the killing. As a child he had led a traditional life with his extended family. He had hunted with his father and participated in the traditional ceremonies of his people. He spoke the language of the Walmajarri and other Aboriginal languages. He attended school to year 10 and he has a good ability to communicate orally in English. His upbringing exposed him to the negative influences of alcohol and family violence. He started drinking alcohol at the age of 17 and he has a history of alcohol and cannabis abuse. At the time of the killing, he was intoxicated by alcohol and cannabis. He has a lengthy criminal record for offences of violence. In May 2009 he was sentenced to 12 months' imprisonment, wholly suspended, for the infliction of grievous bodily harm on the deceased. That, too, was a brutal assault. At the time of the killing he was subject to a "lifetime violence restraining order" prohibiting him from contact with the deceased74. It appears that they had both chosen to ignore the order by living together. The killing took place a little over two months after he completed the suspended sentence for the earlier assault. The maximum penalty for manslaughter at the time was 20 years' imprisonment75. The primary judge assessed that, taking into account all of the relevant factors save for the appellant's plea of guilty, the appropriate sentence for the offence was seven years and six months' imprisonment. After making allowance for the appellant's plea of guilty, his Honour imposed a sentence of five years and three months' imprisonment and made a parole eligibility order76. The appellant will be eligible for parole after serving three years and three months of the sentence. 74 Western Australia v Munda (2012) 43 WAR 137 at 150 [50] per McLure P. 75 Criminal Code (WA), s 280. The maximum penalty has since been increased to imprisonment for life: Manslaughter Legislation Amendment Act 2011 (WA), s 4. 76 Sentencing Act 1995 (WA), s 89(1). Bell The Director of Public Prosecutions ("the Director") appealed to the Court of Appeal of Western Australia against the sentence on the ground that it was manifestly inadequate. The Court of Appeal (McLure P, Buss and Mazza JJA) allowed the appeal and re-sentenced the appellant to a term of seven years and nine months' imprisonment. The Court of Appeal did not interfere with the parole eligibility order. The appellant appeals by special leave, contending that the Court of Appeal erred in its application of the principles governing prosecution appeals against sentence. The determination of the appeal requires consideration of those principles. In particular, it requires consideration of the significance of the standard which is customarily applied in sentencing offenders for similar offences to an appellate court's conclusion that a sentence is manifestly inadequate. The principles governing prosecution appeals The Court of Appeal's jurisdiction to entertain an appeal by the prosecution against a sentence imposed as the result of conviction on indictment is conferred by s 24(1) of the Criminal Appeals Act 2004 (WA) ("the CAA"). Section 31 governs the determination of appeals against sentence whether commenced by the offender or the prosecutor77. The Court of Appeal may allow the appeal if, in its opinion, a different sentence should have been imposed78. If the Court of Appeal allows the appeal it must set aside the sentence and may either impose a new sentence that is more or less severe or send the charge back to the court that imposed the sentence to be dealt with further79. The principles governing the determination of prosecution appeals against sentence were stated by Barwick CJ in Griffiths v The Queen80. Prosecution appeals are brought to establish some matter of principle and to allow the appellate court to lay down principles for the governance and guidance of sentencing courts81. Griffiths was an appeal under s 5D of the Criminal Appeal 77 CAA, s 31(1). 78 CAA, s 31(4)(a). 79 CAA, s 31(5). 80 (1977) 137 CLR 293 at 310; [1977] HCA 44. 81 Griffiths v The Queen (1977) 137 CLR 293 at 310; Everett v The Queen (1994) 181 CLR 295 at 300 per Brennan, Deane, Dawson and Gaudron JJ; [1994] HCA 49; Lacey v Attorney-General (Qld) (2011) 242 CLR 573 at 581 [16] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2011] HCA 10; Green v The (Footnote continues on next page) Bell Act 1912 (NSW). Prosecution and offender appeals against sentence are dealt with separately under that Act82. However, these principles, affirmed by the Court in Lowndes v The Queen83, are not confined to appeals under the New South Wales statute. The Court in that case endorsed Charles JA's summary of the principles in R v Clarke84. His Honour identified the following six occasions for the bringing of a prosecution appeal85: "(a) where a sentence reveals such manifest inadequacy or inconsistency in sentencing standards as to constitute error in principle; (b) where it is necessary for a court of criminal appeal to lay down principles for the governance and guidance of courts having the duty of sentencing convicted persons; (c) to enable the courts to establish and maintain adequate standards of punishment for crime; (d) to enable idiosyncratic views of individual judges as to particular crimes or types of crimes to be corrected; (e) to correct a sentence which is so disproportionate to the seriousness of the crime as to shock the public conscience; (f) to ensure, so far as the subject matter permits, that there will be uniformity in sentencing." (citations omitted) The residual discretion This Court has said that the bringing of prosecution appeals should be a rarity86. This reflected, at least in part, the view that the jurisdiction is contrary to Queen (2011) 244 CLR 462 at 465 [1] per French CJ, Crennan and Kiefel JJ; [2011] HCA 49. 82 Section 5D(1) provides that "[t]he Attorney-General or the Director of Public Prosecutions may appeal to the Court of Criminal Appeal against any sentence pronounced by the court of trial in any proceedings to which the Crown was a party and the Court of Criminal Appeal may in its discretion vary the sentence and impose such sentence as to the said court may seem proper." Section 6(3) provides: "On an appeal [by a person convicted on indictment] under section 5(1) against a sentence, the court, if it is of opinion that some other sentence, whether more or less severe is warranted in law and should have been passed, shall quash the sentence and pass such other sentence in substitution therefor, and in any other case shall dismiss the appeal." 83 (1999) 195 CLR 665 at 671 [15]; [1999] HCA 29. 84 (1999) 195 CLR 665 at 671 [15], citing [1996] 2 VR 520. 85 [1996] 2 VR 520 at 522. 86 Griffiths v The Queen (1977) 137 CLR 293 at 310 per Barwick CJ. Bell "deep-rooted notions of fairness and decency which underlie the common law principle against double jeopardy"87. In 2007 the Council of Australian Governments ("COAG") reached an agreement that each of the jurisdictions should enact legislation to remove consideration of the element of double jeopardy from the determination of prosecution appeals88. Western Australia's response to the agreement was to repeal s 41(4) of the CAA and to insert a new s 41(4) in these terms89: "The appeal court deciding an appeal that does or may require it to impose a sentence, or to vary a sentence imposed, on a person for an offence (whether the prosecutor)— the appeal was commenced by the person or by (a) may take into account any matter, including any material change to the person's circumstances, relevant to the sentence that has occurred between when the lower court dealt with the person and when the appeal is heard; but despite paragraph (a), must not take into account the fact that the court's decision may mean that the person is again sentenced for the offence." The effect of the New South Wales provision implementing the COAG agreement on double jeopardy90 was discussed in the joint reasons in Green v The Queen91. Their Honours pointed out that the purpose of prosecution appeals distinguishes them from offender appeals, the latter being concerned with the correction of error in particular cases92. They said that the residual discretion to 87 Malvaso v The Queen (1989) 168 CLR 227 at 234 per Deane and McHugh JJ; [1989] HCA 58. 88 Council of Australian Governments, Double Jeopardy Law Reform: Model Agreed by COAG, (2007), discussed in Green v The Queen (2011) 244 CLR 462 at 471 [25] per French CJ, Crennan and Kiefel JJ. 89 Criminal Law and Evidence Amendment Act 2008 (WA), s 39, which commenced on 27 April 2008. 90 Crimes (Appeal and Review) Act 2001 (NSW), s 68A. 91 (2011) 244 CLR 462. 92 Green v The Queen (2011) 244 CLR 462 at 465-466 [1] per French CJ, Crennan Bell decline to interfere with an "erroneously lenient" sentence had not been extinguished by removal of the consideration of double jeopardy93. The Court of Appeal proceeded upon the assumption that the statements in Green applied to the determination of prosecution appeals under the CAA94. McLure P (with whose reasons Mazza JA agreed) said that, save in a case in which parity considerations were raised, the residual discretion is only likely to be exercised if the error has not resulted in a manifestly inadequate sentence95. I agree with the joint reasons that this is an unduly narrow statement of the scope of the discretion96. Delay in bringing the appeal and, more generally, the conduct of the prosecution are among the considerations which may lead the appellate court to dismiss a prosecution appeal notwithstanding that the sentence is manifestly inadequate. The ground of appeal – manifest inadequacy The Director's appeal was brought on the sole ground that the sentence imposed on the appellant was manifestly inadequate. Five considerations were particularised as supporting that conclusion: the maximum penalty prescribed by law; the standards of sentencing customarily observed for such offences; the serious nature of the offending; the need for the sentence to reflect the importance of general deterrence; and the personal circumstances of the [appellant]." Everett v The Queen clarified that manifest inadequacy or inconsistency in sentencing standards is a matter of principle that is properly the subject of 93 Green v The Queen (2011) 244 CLR 462 at 466 [1], 472 [26] per French CJ, 94 Western Australia v Munda (2012) 43 WAR 137 at 145 [16]-[19] per McLure P, 181-182 [240]-[241] per Buss JA. 95 Western Australia v Munda (2012) 43 WAR 137 at 149 [41(4)]. 96 Reasons of French CJ, Hayne, Crennan, Kiefel, Gageler and Keane JJ at [73]. Bell correction on a prosecution appeal97. McHugh J linked the jurisdiction to correct manifestly inadequate sentences to the need for uniformity of sentencing98. His Honour said that it is only when the appellate court is convinced that the sentence imposed by the sentencing judge is "definitely outside the appropriate range" that it is ever justified in granting leave to the prosecution to appeal against the inadequacy of a sentence99. Everett was concerned with a prosecution appeal brought under the Criminal Code (Tas), for which leave was required. However, his Honour's remarks were of general application. He said that if a judge imposes a sentence that is "definitely below the range of sentences appropriate for the particular offence" the case could be regarded as sufficiently exceptional to warrant leave to appeal100. He cautioned that such cases are likely to be rare, noting that "[d]efining the limits of the range of appropriate sentences with respect to a particular offence is a difficult task"101. The need for reasonable consistency in sentencing was prominent in Gleeson CJ's discussion of the principles in Wong v The Queen102: "The outcome of discretionary decision-making can never be uniform, but it ought to depend as little as possible upon the identity of the judge who happens to hear the case. Like cases should be treated in like manner. The administration of criminal justice works as a system; not merely as a multiplicity of unconnected single instances. It should be systematically fair, and that involves, amongst other things, reasonable consistency." His Honour pointed out that day by day, sentencing judges and appellate courts are referred to sentences imposed in what are said to be comparable cases. He acknowledged that there will often be room for argument about comparability and the conclusions to be drawn from comparisons103. Nonetheless, as his 97 (1994) 181 CLR 295 at 300 per Brennan, Deane, Dawson and Gaudron JJ, 306-307 98 Everett v The Queen (1994) 181 CLR 295 at 306. 99 Everett v The Queen (1994) 181 CLR 295 at 306. 100 Everett v The Queen (1994) 181 CLR 295 at 306. 101 Everett v The Queen (1994) 181 CLR 295 at 306. 102 (2001) 207 CLR 584 at 591 [6]; [2001] HCA 64. 103 (2001) 207 CLR 584 at 591 [7]. Bell Honour observed, "inadequacy or excessiveness is often demonstrated by a process of comparison"104. Past sentencing decisions are sometimes described as evidencing "the range" of sentences for an offence. This is a misleading description because the pattern of sentences imposed in past cases does not define the limits of the sentencing discretion105. To speak of the range of sentences for an offence is a shorthand way of acknowledging that there is no one correct sentence for an offence and an offender106. It follows that the correct application of sentencing principles may result in a range of sentences, all of which are correct. Nonetheless, information about sentences imposed in comparable cases, where available, is relevant to the exercise of the sentencing discretion and to an appellate court's conclusion of manifest excess or inadequacy. A sentence that is in line with sentences that have been imposed in relevantly similar cases has the virtue of consistency and is unlikely to impress as unreasonable or plainly unjust. At least that will be so unless the past decisions reflect a standard of punishment for a crime that is unreasonable or plainly unjust. As will appear, the question of whether the sentences customarily imposed in Western Australia on Aboriginal men for the drunken, brutal manslaughter of their wives are unreasonably low was raised in the Court of Appeal. In the event, the appeal was determined without addressing that question. The prosecution annexed a Schedule to its written submissions in the Court of Appeal, "Attachment 'A'", in support of particular (b) of its ground of appeal, that the sentence imposed by the primary judge was manifestly inadequate when measured by the standards of sentencing customarily observed for such offences. Attachment "A" contained details of 10 manslaughter sentences reviewed by the Court of Appeal in the period since 1995. Of these, only three were relied upon by the prosecution as relevantly comparable: Luff v The State of Western Australia107; The State of Western Australia v Walley108; and R v Gordon109. The appellant also annexed a Schedule to his written submissions 104 (2001) 207 CLR 584 ar 593 [12]. 105 Hili v The Queen (2010) 242 CLR 520 at 537 [54]-[55] per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ; [2010] HCA 45. 106 Pearce v The Queen (1998) 194 CLR 610 at 624 [46] per McHugh, Hayne and Callinan JJ; [1998] HCA 57. 107 [2008] WASCA 89. 108 [2008] WASCA 12. 109 [2000] WASCA 401. Bell containing particulars of 16 sentences imposed at first instance in the period 1998 to 2011 that were relied on as comparable to the circumstances of the appellant's offending. On the hearing in the Court of Appeal the prosecutor submitted: "to the extent that there could be said to be a range, this case obviously falls somewhere in that range. Our submission is that it's falling at the bottom end of the range or possibly outside of or at the very bottom end. It's a lenient sentence and we say too lenient a sentence for the serious nature of this particular offence." The Court of Appeal raised with the parties the question of whether, if the sentence was within the range of sentences customarily imposed for such offences, the range should be reviewed because the incidence of violent behaviour of this description appeared to be increasing. The prosecution had not advanced a case of increased prevalence at the sentence hearing. It disavowed reliance on increased prevalence in the Court of Appeal. The appellant submits that McLure P wrongly took judicial notice of the increased prevalence of offences of this description in her determination of the Director's appeal. The submission is based on her Honour's statement110: "It is the experience of judicial officers in this jurisdiction that the gross over-representation of Aboriginal people in this State's criminal justice system referred to in Richards[111] is directly related to alcohol abuse and, more recently, often in combination with illicit drug abuse. As those working in the criminal law in this State would know, a grossly disproportionate number of offenders convicted and sentenced for manslaughter in the Supreme Court in recent years are Aboriginal, as are most of their victims." Her Honour's observation is a statement of the experience of judges of appeal in Western Australia. It is not a finding of increased prevalence of alcohol-related manslaughter offences. McLure P applied the same test as Buss JA to the determination of the Director's appeal. Each of their Honours said that the conclusion of manifest inadequacy required consideration of the maximum penalty for the offence, the standards of sentencing customarily 110 Western Australia v Munda (2012) 43 WAR 137 at 152 [64]. 111 Western Australia v Richards (2008) 37 WAR 229. Bell observed, the place which the criminal conduct occupied on the scale of seriousness and the personal circumstances of the offender112. The appellant's complaint is not with McLure P's statement of the test but with her Honour's application of it. He submits that her Honour failed to identify the standards of sentencing customarily observed or the place which his conduct occupied in the scale of seriousness in reasoning to her conclusion. He complains of the absence of consideration of the material filed by both parties respecting past sentences, which, he submits, provides a relevant yardstick. Gordon and Walley were prosecution appeals that were determined when double jeopardy was a relevant consideration. McLure P said that they provided little guidance113. Her Honour went on to say114: "Sentences of immediate imprisonment imposed for manslaughter (for a plea of guilty with the 20-year maximum penalty) range between two years four months and 12 years. The fact that the sentence imposed on the [appellant] falls within that range does not prevent a conclusion that it is, in all the circumstances of this case, manifestly inadequate. As noted in Walley, manslaughter is by its very nature an offence in respect of which the facts and circumstances differ widely in every case and sentences for the offence should reflect the value placed upon human life by the legislature". Buss JA said that the decisions in Gordon, Walley and Luff had "some features comparable to the [appellant's] offending"115. His Honour detailed the circumstances of each. He observed, without further elaboration, that he had examined other of the sentencing dispositions to which the parties had referred the Court116. Buss JA approached consideration of the standard of sentencing customarily observed in the same way as McLure P. His Honour said that the great variation in the circumstances of offending and offenders in manslaughter 112 Western Australia v Munda (2012) 43 WAR 137 at 151 [57] per McLure P, 157- 158 [103] per Buss JA; and see R v Morse (1979) 23 SASR 98 at 99 per King CJ; Chan (1989) 38 A Crim R 337 at 342 per Malcolm CJ. 113 Western Australia v Munda (2012) 43 WAR 137 at 151-152 [61]. 114 Western Australia v Munda (2012) 43 WAR 137 at 152 [62]. 115 Western Australia v Munda (2012) 43 WAR 137 at 158 [109]. 116 Western Australia v Munda (2012) 43 WAR 137 at 161 [123]. Bell is such that there is no "tariff" for the offence117. Each case, he said, must be decided on its own facts118. The latter observation is true with respect to every sentencing determination. It explains why a sentencing judge may properly impose a sentence markedly greater or lesser than past sentences. However, in issue here was the conclusion of manifest inadequacy. A consideration of whether the sentence imposed on the appellant was consistent with sentences imposed in relevantly similar cases was material to whether that conclusion should be drawn. The appellant advanced a positive case that a sentence of five years and three months' imprisonment was not "unreasonable or plainly unjust"119 when assessed against sentences imposed in relevantly like cases. The Court of Appeal did not address the material relied on in support of that case. Before turning to that material, there should be mention of changes in the scheme for the sentencing of offenders in the period that it covers. Changes to the statutory scheme for sentencing Before 31 August 2003 sentences of imprisonment were subject to automatic remission after the offender had served two-thirds of the term120. The automatic remission of sentences was abolished with effect from 31 August 2003121. The object of this amendment, implementing the concept of "truth in sentencing", was not to increase the length of sentences but rather to make the sentence reflective of the time actually spent in prison122. The transitional provisions provided that a court sentencing an offender to imprisonment was to impose a term that was two-thirds of the term that the court would have imposed under the former regime123. The transitional provisions were repealed with effect 117 Western Australia v Munda (2012) 43 WAR 137 at 158 [106], citing Wicks v The Queen (1989) 3 WAR 372 at 379-380 per Malcolm CJ and Colledge v The State of Western Australia [2007] WASCA 211 at [17] per Wheeler JA, Owen and Miller JJA agreeing. 118 Western Australia v Munda (2012) 43 WAR 137 at 158 [106]. 119 House v The King (1936) 55 CLR 499 at 505 per Dixon, Evatt and McTiernan JJ; [1936] HCA 40. 120 Sentencing Act 1995 (WA), s 95. 121 Sentencing Legislation Amendment and Repeal Act 2003 (WA), s 20. 122 Yates v The State of Western Australia [2008] WASCA 144. 123 Sentencing Legislation Amendment and Repeal Act 2003 (WA), Sched 1, cl 2. Bell from 14 January 2009124. However, since the appellant's case was conceded not to fall into the category of the "worst" case125, it was accepted that the sentencing range established while the transitional provisions applied remained relevant126. Comparable sentences? The 16 decisions particularised in the appellant's Schedule are not reported. Each is a sentence imposed at first instance which appears not to have been the subject of appellate challenge. The only material before the Court of Appeal concerning those decisions appears to be that contained in the Schedule. This comprises a summary of the offender's antecedents and the facts together with details of the sentence. It is sufficient to enable an assessment of comparability with the appellant's antecedents and offending. The accuracy of the Schedule was not challenged. Two sentences may be immediately put to one side127. Each was imposed for the offence of unlawful assault causing death, which has a maximum penalty of 10 years' imprisonment. Sentences imposed for this offence do not bear on sentencing for manslaughter. Four other sentences in the Schedule were imposed for offences that are too far removed from the appellant's offence to be informative: two were offences arising out of a violent group brawl128, one involved the sustained beating of the infant child of the offender's partner129, and another involved the reckless misuse of a dangerous weapon130. 124 Sentencing Legislation (Transitional Provisions) Amendment Act 2008 (WA). 125 Western Australia v BLM (2009) 40 WAR 414 at 430-431 [43] per Wheeler and 126 Western Australia v Munda (2012) 43 WAR 137 at 151 [60] per McLure P. 127 The State of Western Australia v Indich unreported, Supreme Court of Western Australia, 13 January 2010; The State of Western Australia v Robinson unreported, Supreme Court of Western Australia, 20 May 2011. 128 The State of Western Australia v McDonald unreported, Supreme Court of Western Australia, 2 December 2008; The State of Western Australia v Tyson unreported, Supreme Court of Western Australia, 28 August 2009. 129 The State of Western Australia v Farmer unreported, Supreme Court of Western Australia, 10 June 2008. 130 The State of Western Australia v Stumpagee unreported, District Court of Western Australia, 24 July 2006. Bell The remaining 10 decisions are broadly comparable to the circumstances of the appellant's offending. Of these, Njana131, Cox132, Richards133, Wallalgie134, Gordon135, Brooks136 and Frazer137 were sentences imposed following the Aboriginal offender's conviction for the manslaughter of his partner. The offences in each instance exhibited considerable brutality and were committed when the offender was intoxicated. In each case the offender had a history of alcohol or substance abuse. In four instances there was evidence that the offender faced the prospect of tribal punishment138. In one instance tribal punishment had been administered139. Five of the seven offenders had criminal records for offences of violence140. 131 R v Njana unreported, Supreme Court of Western Australia, 13 March 1998. 132 R v Cox unreported, Supreme Court of Western Australia, 30 November 1999. 133 R v Richards unreported, Supreme Court of Western Australia, 5 March 2003. 134 The State of Western Australia v Wallalgie unreported, Supreme Court of Western Australia, 3 April 2007. 135 The State of Western Australia v Gordon unreported, Supreme Court of Western Australia, 7 April 2008. 136 The State of Western Australia v Brooks unreported, Supreme Court of Western Australia, 9 October 2008. 137 The State of Western Australia v Frazer unreported, Supreme Court of Western Australia, 2 November 2009. 138 R v Cox unreported, Supreme Court of Western Australia, 30 November 1999; R v Richards unreported, Supreme Court of Western Australia, 5 March 2003; The State of Western Australia v Brooks unreported, Supreme Court of Western Australia, 9 October 2008; The State of Western Australia v Frazer unreported, Supreme Court of Western Australia, 2 November 2009. 139 R v Njana unreported, Supreme Court of Western Australia, 13 March 1998. 140 R v Cox unreported, Supreme Court of Western Australia, 30 November 1999; R v Richards unreported, Supreme Court of Western Australia, 5 March 2003; The State of Western Australia v Wallalgie unreported, Supreme Court of Western Australia, 3 April 2007; The State of Western Australia v Brooks unreported, Supreme Court of Western Australia, 9 October 2008; The State of Western Australia v Frazer unreported, Supreme Court of Western Australia, 2 November Bell Despite not involving the manslaughter of the offenders' partners, the other three relevant sentences in the Schedule also have some features in common with the appellant's offending. Qualla141, Rictor142 and Meeway143 involved the manslaughter of a relative or friend of the offender. The offender in each instance was an Aboriginal man who was intoxicated at the time of the offence and who had a history of alcohol abuse. Two of the three had convictions for offences of violence144. Two faced the prospect of tribal punishment145 and in one instance tribal punishment had been administered146. All but one of the sentences in the Schedule was imposed following the offender's plea of guilty147. In each case a parole eligibility order was made. Five of the 10 relevant decisions are sentences of imprisonment imposed after the transitional provisions came into effect. The length of these sentences was: three years and four months in Meeway; four years in Wallalgie; three years in Gordon; three years in Brooks; and four years in Frazer. The other five decisions are sentences imposed when the automatic remission of sentence by one-third applied. After adjustment to bring them into line with sentences imposed under the transitional provisions, the length of these sentences was: two years and eight months in Njana; two years and eight months in Cox; four years and eight months in Qualla; three years and four months in Rictor; and four years and eight months in Richards. Of course, no two cases involve the same combination of aggravating and mitigating factors. A few of the relevant cases in the Schedule involved 141 R v Qualla unreported, Supreme Court of Western Australia, 1 March 2002. 142 R v Rictor unreported, Supreme Court of Western Australia, 30 April 2002. 143 The State of Western Australia v Meeway unreported, Supreme Court of Western Australia, 8 October 2007. 144 R v Qualla unreported, Supreme Court of Western Australia, 1 March 2002; The State of Western Australia v Meeway unreported, Supreme Court of Western Australia, 8 October 2007. 145 R v Qualla unreported, Supreme Court of Western Australia, 1 March 2002; The State of Western Australia v Meeway unreported, Supreme Court of Western Australia, 8 October 2007. 146 R v Rictor unreported, Supreme Court of Western Australia, 30 April 2002. 147 R v Njana unreported, Supreme Court of Western Australia, 13 March 1998. Bell offenders who did not have records for violence148. In this respect, they may be distinguished from the appellant's case. Four offences were aggravated by the fact that the fatal assault was carried out with the use of a tree branch149. In this respect, the appellant's case may also be distinguished. Nonetheless, in my opinion the decisions are informative of the pattern of sentencing for an offence comparable to the appellant's offence committed by an offender having a comparable background. Some reference should also be made to the cases in the Director's Attachment "A". The first, Gordon150, bears marked similarity to the present case. The offender, a mature Aboriginal man, subjected his de facto wife to a protracted, brutal and fatal flogging. It was likely that he inflicted some injuries on his victim with a piece of angle iron. She bled to death internally. The offender did not seek medical assistance for her. He lied to the police in an attempt to avoid responsibility for his offence. The prosecution accepted a plea of guilty to manslaughter in discharge of an indictment that charged the offender with murder. He had multiple convictions for assault and assault occasioning actual bodily harm. He had killed his former de facto wife in "alarmingly similar circumstances" for which offence he had been sentenced to three years' imprisonment151. He was on parole at the date of the subject offence. He was sentenced to seven years' imprisonment, which was subject to automatic remission. After adjustment, the sentence would have been four years and eight months. It was accumulated on 500 days, which remained on the offender's cancelled parole order. The sentencing judge declined to make a parole eligibility order but noted that the possibility remained of the offender's release on parole having regard to the period already "owed" to the Parole Board152. 148 R v Njana unreported, Supreme Court of Western Australia, 13 March 1998; R v Rictor unreported, Supreme Court of Western Australia, 30 April 2002; The State of Western Australia v Gordon unreported, Supreme Court of Western Australia, 7 April 2008. 149 R v Rictor unreported, Supreme Court of Western Australia, 30 April 2002; R v Richards unreported, Supreme Court of Western Australia, 5 March 2003; The State of Western Australia v Meeway unreported, Supreme Court of Western Australia, 8 October 2007; The State of Western Australia v Frazer unreported, Supreme Court of Western Australia, 2 November 2009. 150 [2000] WASCA 401. 151 R v Gordon [2000] WASCA 401 at [6] per Kennedy J. 152 R v Gordon [2000] WASCA 401 at [9] per Kennedy J. Bell A State appeal against inadequacy of sentence was dismissed by majority in Gordon. As McLure P noted, Gordon was decided at a time when State appeals were subject to considerations of double jeopardy153. The joint reasons refer to Wheeler J's powerful dissent154. It remains that while Kennedy and Anderson JJ each considered the sentence was lenient, neither found that it was outside the range of discretion155. The relevance of Luff is not apparent. In that case, the offender's plea of guilty to manslaughter was accepted in satisfaction of an indictment charging him with the murder of an associate. He was sentenced under the transitional provisions to a term of seven years and four months' imprisonment. His appeal against the severity of the sentence was dismissed. He killed the deceased with repeated punches and kicks to the head delivered with a steel-capped boot. It is notable that while the victim was intoxicated, the offender was not156. In Walley the offender, an Aboriginal woman, was convicted of the manslaughter of her partner. She and the deceased had spent the day drinking and both had consumed amphetamines. They argued and the offender, who was behaving in a generally aggressive way, armed herself with several knives. These were removed by a family member. The offender and the deceased continued to argue. She armed herself with another knife and fatally stabbed the deceased in the neck. She had been raised in a household in which the abuse of alcohol was commonplace. She had been the victim of sexual and domestic violence in past relationships. The sentencing judge imposed a sentence of one year and eight months' imprisonment. The prosecution's appeal against the manifest inadequacy of the sentence was allowed157. The offender was re-sentenced to a term of three years' imprisonment. The appeal was decided when considerations of double jeopardy informed re-sentencing on a prosecution appeal. The sentence of three years' imprisonment is to be understood as a 153 Western Australia v Munda (2012) 43 WAR 137 at 151 [61]. 154 Reasons of French CJ, Hayne, Crennan, Kiefel, Gageler and Keane JJ at [41]-[42]. 155 R v Gordon [2000] WASCA 401 at [17] per Kennedy J, [19] per Anderson J. 156 Luff v The State of Western Australia [2008] WASCA 89 at [14]. 157 The State of Western Australia v Walley [2008] WASCA 12 at [33]-[35] per Wheeler and Miller JJA. Bell sentence at the "lower end of the range"158 of appropriate sentences for the offence. It will be recalled that McLure P said that the range of past sentences for manslaughter was between two years and four months and 12 years. None of the sentences to which the parties referred the Court of Appeal was of 12 years159. The adjusted sentences for the offences in Attachment "A" in the period before the introduction of the transitional legislation were six years in Pryor160, five years and four months in Haworth161, two years and four months in Churchill162, two years and four months with a period of suspension in McDonald163 and four years and eight months in Nguyen164. The sentences imposed under the transitional provisions in Attachment "A" were five years' imprisonment in Bell165 and 10 years' imprisonment in Colledge166. The material before the Court of Appeal did not support the Director's contention that the appellant's sentence was manifestly inadequate given the standards of sentences customarily observed for an offence of this kind (particular (b) of the ground of appeal). This was not determinative of the Director's challenge. However, the circumstance that the primary judge's 158 Dinsdale v The Queen (2000) 202 CLR 321 at 341 [62] per Kirby J; [2000] HCA 54, citing R v Peterson [1984] WAR 329 at 330-331 per Burt CJ and R v Clarke [1996] 2 VR 520 at 522. 159 Attachment "A" referred to Nguyen v The Queen [2001] WASCA 176, which was described as a decision in which a total effective sentence of 12 years was imposed on the offender. This was in consequence of the partial accumulation of sentences for three offences including manslaughter. The sentence imposed for the manslaughter was seven years. The sentences were imposed at a time when the scheme of automatic remission of sentence applied. 160 Pryor v The Queen unreported, Supreme Court of Western Australia, 12 December 161 Haworth v The Queen [2000] WASCA 175. 162 R v Churchill [2000] WASCA 230. 163 R v McDonald [2000] WASCA 336. 164 Nguyen v The Queen [2001] WASCA 176. 165 Bell v The Queen [2003] WASCA 216. 166 Colledge v The State of Western Australia [2007] WASCA 211. Bell sentence was consistent with sentences imposed in comparable cases, and that his Honour's reasons did not disclose any patent error, invites careful attention to the basis on which the conclusion of manifest inadequacy was reached. Before turning to the Court of Appeal's reasons in this respect, there should be reference to the statutory principles that govern the sentencing of offenders and to the approach that the primary judge took to the application of those principles in the appellant's case. The Sentencing Act principles Section 6(1) of the Sentencing Act 1995 (WA) ("the Sentencing Act") states that a sentence imposed on an offender must be commensurate with the seriousness of the offence. The seriousness of an offence must be determined by taking into account the statutory penalty for the offence; the circumstances of the commission of the offence, including the vulnerability of any victim of the offence; and any aggravating and mitigating factors167. Aggravating factors are factors which, in the court's opinion, increase the culpability of the offender168. An offence is not aggravated by the fact that the offender has a criminal record or that a previous sentence has not achieved the purpose for which it was imposed169. The mandate of s 6(1) does not prevent the reduction of a sentence because of any mitigating factors170. Mitigating factors are factors which, in the court's opinion, decrease the culpability of the offender or decrease the extent to which the offender should be punished171. If, because of a mitigating factor, a court reduces the sentence it would otherwise have imposed on an offender, the court must state that fact in open court172. The primary judge's reasons The primary judge identified as aggravating factors: that the appellant was subject to a lifetime violence restraining order which prohibited him from 167 Sentencing Act, s 6(2). 168 Sentencing Act, s 7(1). 169 Sentencing Act, s 7(2)(b) and (c). 170 Sentencing Act, s 6(3). 171 Sentencing Act, s 8(1). 172 Sentencing Act, s 8(4). Bell having contact with the deceased; that the intimacy of the relationship ought to have provided the deceased with protection; and that the attack on the deceased was sustained and involved considerable violence. His Honour concluded that the offence was "a serious offence towards the upper end of the range of seriousness"173. The mitigating factors which the primary judge took into account included the appellant's cooperation with the police, plea of guilty and remorse174. The primary judge also took into account that the appellant is a traditional Aboriginal, which served to mitigate the sentence in three ways. First, his Honour noted that any term of imprisonment was likely to be served in a prison distant from the appellant's community175. Secondly, he also took into account that the social disadvantage in some Aboriginal communities serves to condition members of the community to accept the abuse of alcohol and violence as if it were a way of life176. In this respect he said177: "In such circumstances, there needs to be a recognition that, although punishment plays a role in personal and general deterrence, to change such behaviour requires a change in the social circumstances." The observation echoes a proposition stated in Fernando178, a decision which is discussed in Bugmy v The Queen179. His Honour immediately went on to advert to another of the propositions stated in Fernando180. He said181: "However, notwithstanding these considerations, the seriousness of an offence must always be given proper weight. Like in all communities, the sentences imposed play a role in trying to protect the vulnerable. This 173 The State of Western Australia v Munda [2011] WASCSR 87 at [9]-[12]. 174 The State of Western Australia v Munda [2011] WASCSR 87 at [20]-[21]. 175 The State of Western Australia v Munda [2011] WASCSR 87 at [22]. 176 The State of Western Australia v Munda [2011] WASCSR 87 at [23]. 177 The State of Western Australia v Munda [2011] WASCSR 87 at [23]. 178 (1992) 76 A Crim R 58 at 62 (C) per Wood J. 179 [2013] HCA 37. 180 (1992) 76 A Crim R 58 at 62 (D) per Wood J. 181 The State of Western Australia v Munda [2011] WASCSR 87 at [23]. Bell includes, in Aboriginal communities, Aboriginal women, who are frequently subject to violence." Thirdly, his Honour took account of a letter signed by a number of senior men from the Walmajarri, Wangkatjungka and Gooniyandi people of the Fitzroy Valley, which explained that the appellant will undergo traditional punishment on his release. The appellant will be flogged by "families of his wife who passed away". The beating will be administered with sticks and nulla nullas. People who have been drinking will not be allowed to take part. His Honour commented on the dilemma that is presented to the court by evidence of the likelihood that an Aboriginal offender will suffer payback on release from prison182. He observed that there was no certainty that payback would take place or as to its severity if it did occur. Nonetheless, he said that he would take it into account and give it limited weight183. The Director submitted in the Court of Appeal that his Honour was correct to do so. The question of whether the occurrence or prospect of traditional punishment is a material factor in sentencing was not in issue in the Court of Appeal or in this Court. The conclusion of manifest inadequacy – the Court of Appeal McLure P concluded that the sentence was manifestly inadequate because it failed to recognise the seriousness of the offence, the seriousness of the circumstances in which it was committed and the need for both personal and general deterrence184. Relevant to the conclusion was her Honour's view that the evidence fell short of demonstrating that the appellant had been raised in circumstances of such deprivation as would allow his addiction to alcohol to mitigate his offence185. The fact that the appellant can communicate in English and has experience of prison life meant that imprisonment would not bear particularly harshly on him186. Buss JA's conclusion of manifest inadequacy was based on essentially the same reasoning. His Honour acknowledged that the offence was alcohol-related and that alcohol abuse had been rife in the appellant's extended family when he was a child187. He pointed out that the appellant had demonstrated the capacity to 182 The State of Western Australia v Munda [2011] WASCSR 87 at [26]. 183 The State of Western Australia v Munda [2011] WASCSR 87 at [27]. 184 Western Australia v Munda (2012) 43 WAR 137 at 153 [68]. 185 Western Australia v Munda (2012) 43 WAR 137 at 153 [67]. 186 Western Australia v Munda (2012) 43 WAR 137 at 153 [67]. 187 Western Australia v Munda (2012) 43 WAR 137 at 164 [134]. Bell abstain from alcohol when working at cattle stations for long periods188. His Honour also considered that the fact that the appellant had previously been imprisoned and had obtained some education meant that the experience of lengthy imprisonment would not be unduly harsh189. He said that to the extent that the "Fernando propositions" were relevant, they were decisively outweighed by other sentencing factors, which he identified as the protection of vulnerable women and personal and general deterrence 190. Conclusion The Court of Appeal considered that the killing of a defenceless Aboriginal woman by her drunken partner in a sustained, brutal assault was a serious offence requiring a sentence with a significant deterrent component. The primary judge assessed the offence as a serious one and determined that a sentence of five years and three months' imprisonment appropriately served the ends of punishment, including deterrence. It is accepted that in arriving at the sentence, the primary judge correctly made a reduction to take into account the appellant's fast-track plea of guilty. The maximum penalty for manslaughter is 20 years' imprisonment. Absent the plea of guilty, was the Court of Appeal correct to conclude that a sentence of seven years and six months' imprisonment is manifestly inadequate to meet the purposes of punishment in the appellant's case? The joint reasons in Markarian v The Queen recognised that while careful attention to the maximum penalty will almost always be required, the relevance of this consideration is not uniform191. The great variety of circumstances which may result in a conviction for manslaughter explains why the range of sentences for the offence is notoriously wide192. This recognition carries with it the consequence that the maximum penalty for manslaughter will often be of limited relevance. The determination of a sentence falling well short of half the maximum sentence for the offence does not of itself necessitate the conclusion of error. 188 Western Australia v Munda (2012) 43 WAR 137 at 164 [134]. 189 Western Australia v Munda (2012) 43 WAR 137 at 164 [134]. 190 Western Australia v Munda (2012) 43 WAR 137 at 164 [134]. 191 (2005) 228 CLR 357 at 372 [30]-[31] per Gleeson CJ, Gummow, Hayne and Callinan JJ; [2005] HCA 25. 192 Wicks v The Queen (1989) 3 WAR 372 at 385 per Malcolm CJ, 390 per Wallace J, 393 per Brinsden J; R v Isaacs (1997) 41 NSWLR 374 at 381 per Gleeson CJ, Mason P, Hunt CJ at CL, Simpson and Hidden JJ. Bell Central to the Court of Appeal's conclusion of implicit error was consideration of the seriousness of the offence in the circumstances in which it was committed. Material to that assessment is the role played by alcohol in its commission. The circumstance that the appellant was very intoxicated at the time he carried out this sustained assault ordinarily would not be a mitigating factor. The analysis in Fernando, to which the primary judge obliquely referred, was directed to the significance of intoxication to the sentencing of an Aboriginal offender raised in a community that is demoralised by social and economic disadvantage and in which the abuse of alcohol and alcohol-fuelled violence are endemic. It is recognised that a background of profound disadvantage of this description may be taken into account in mitigation of drunken offending193. A second proposition stated in Fernando has particular application to traditional Aboriginal offenders: that the court may take into account in mitigation of sentence that a lengthy term of imprisonment served in a facility distant from the offender's community may be particularly harsh194. The "Fernando propositions" do not all favour mitigation of sentence. They contemplate the necessity to ensure that Aboriginal Australians are not deprived of the protection which it is assumed punishment provides and to avoid the perception that serious violence in Aboriginal communities will be treated by the law as a matter of little moment195. The propositions have internal tensions which fall to be weighed by the sentencing judge along with all of the other factors that bear on the ultimate discretionary determination. The law confers a wide discretion on the sentencing judge196. It is trite to observe that inadequacy of sentence is not established by mere disagreement by the appellate court with the sentence imposed by the sentencing judge197. It was open to the primary judge to take into account the isolation that the appellant, a traditional Aboriginal man, would experience in a prison distant from his 193 Bugmy v The Queen [2013] HCA 37 at [38]-[40], [43] per French CJ, Hayne, Crennan, Kiefel, Bell and Keane JJ. 194 See Bugmy v The Queen [2013] HCA 37 at [39] per French CJ, Hayne, Crennan, Kiefel, Bell and Keane JJ. 195 Fernando (1992) 76 A Crim R 58 at 62 (D). 196 Griffiths v The Queen (1977) 137 CLR 293 at 327 per Jacobs J. 197 House v The King (1936) 55 CLR 499 at 504-505 per Dixon, Evatt and McTiernan JJ; Griffiths v The Queen (1977) 137 CLR 293 at 310 per Barwick CJ; Lowndes v The Queen (1999) 195 CLR 665 at 671-672 [15]. Bell community. So, too, was it open to his Honour to take into account the social disadvantages within the appellant's community, which had led to an acceptance of alcohol abuse and violence as normal198. His Honour recognised that these factors were to be weighed against the need to structure a sentence that would play a role in protecting vulnerable Aboriginal women, who are frequently subject to abuse199. In question is not the principles applied but whether, in the result, a sentence of five years and three months' imprisonment is eloquent of error. The mandate of s 6(1) of the Sentencing Act required the imposition of a sentence commensurate with the seriousness of the offence. But this did not prevent the reduction of the sentence by reason of any mitigating factors. The fact that the Court of Appeal did not find that features of the appellant's background and circumstances were mitigating factors does not make the primary judge's contrary conclusion wrong. In circumstances which include that the sentence was consistent with sentences imposed for comparable offences, I consider that the Court of Appeal was not justified in the conclusion that it fell definitely below the range of discretion. I would allow the appeal, set aside the orders of the Court of Appeal and, in lieu thereof, dismiss the Director's appeal to that Court. 198 The State of Western Australia v Munda [2011] WASCSR 87 at [23]. 199 The State of Western Australia v Munda [2011] WASCSR 87 at [23].